when the grantee is a Federal agency, foreign government or organization, international organization such as the United Nations, or individual. (2) For grants which are subject to 45 CFR part 92, only the following provisions of this part apply: (i) Section 74.62(a); (ii) Section 74.173; (iii) Section 74.174(b); (v) Section 74.710; and (b) Subgrants. For each substantive provision in this part, either the language of the provision itself or other text in the same subpart will indicate whether the provision affects only grants, only subgrants, or both. Use of the term "recipient" (as defined in §74.3) in a provision shall be taken as referring equally to grantees and subgrantees. Similarly, use of the term "awarding party" (as defined in §74.3) shall be taken as referring equally to granting agencies and to grantees awarding subgrants. However, unless expressly made applicable by the granting agency, this part need not be applied by the grantee to a subgrant if the subgrantee is a Federal agency, foreign government or organization, international organization such as the United Nations, or individual. (c) Public institutions of higher education and hospitals. Grants and subgrants to institutions of higher education and hospitals operated by a government shall be subject only to provisions of this subpart that apply to nongovernmental organizations. (d) For-profit organizations. The attention of for-profit organizations is directed to subpart AA of this part. The special provisions in that subpart for grants and subgrants to those organizations contain exceptions to other portions of this part. [47 FR 53013, Nov. 24, 1982, as amended at 53 FR 8079, Mar. 11, 1988] 874.5 Appeals. In accordance with parts 16 and 75 of this title, grantees may appeal certain postaward administrative decisions made by HHS officials. $74.6 Deviations. (a) Except as provided in §74.7, a deviation is any exception to this part not required by Federal statute without allowance of agency discretion. A deviation may be either: (1) Use of any policy, procedure, form, standard, or grant or subgrant term which is inconsistent with an applicable provision of this part, or (2) Failure to use any applicable policy, procedure, form, standard, or grant or subgrant term which is required by this part. (b) In order to maintain uniformity to the greatest extent feasible, deviations shall be kept to a minimum. A deviation, whether proposed by an applicant, a recipient, or an official of the granting agency, may be authorized only when it is necessary to meet programmatic objectives, or to conserve grant funds, or when it is otherwise essential in the public interest. (c) Except as provided in paragraph (d) of this section, a deviation from this part may be made only when authorized by both: (1) The head of the granting agency or other officials if designated in or pursuant to formal deviation control procedures established by the agency, and (b) When special conditions are imposed under paragraph (a) of this section, the grantee will be notified in writing: (1) Why the special conditions were imposed and (2) What corrective action is needed. Furthermore, in accordance with OMB Circulars A-102 and A-110, OMB and other Federal agencies in a granting relationship with the grantee will be provided copies of the notice to the grantee. (c) Grantees may apply the provisions of paragraphs (a) and (b) of this section to their subgrantees. Whenever they do so, a copy of the notice to the subgrantee shall be furnished to the granting agency. Subpart B-Cash Depositories 874.10 Physical segregation and eligibility. Except as provided in §74.11, awarding parties shall not impose grant or subgrant terms which: (a) Require the recipient to use a separate bank account for the deposit of grant or subgrant funds, or (b) Establish any eligibility requirements for banks or other financial institutions in which recipients deposit grant or subgrant funds. 874.11 Checks-paid basis letter of credit. A separate bank account shall be used when payments under letter of credit are made on a "checks-paid" basis. A checks-paid basis letter of credit is one under which funds are not drawn until the recipient's checks have been presented to its bank for payment. (See subpart K for definition of "letter of credit.") $74.12 Minority-owned banks. Consistent with the national goal of expanding opportunities for minority business enterprises, grantees and subgrantees are encouraged to use minority-owned banks. Upon request, OPAL will furnish a list of minorityowned banks. [45 FR 22576, Apr. 3, 1980, as amended at 47 FR 53013, Nov. 24, 1982] (a) Scope of this section. This section covers requirements for bid guarantees, performance bonds, and payments bonds when the recipient will contract for construction or facility improvement (including alterations and renovations of real property) under a grant or subgrant. (b) Definitions. (1) Bid guarantee means a firm commitment such as a bid bond, certified check, or other negotiable instrument accompanying a bid as assurance that the bidder will, if its bid is accepted, execute the required contractual documents within the time specified. (2) Performance bond means a bond executed in connection with a contract to secure fulfillment of all the contractor's obligations under the contract. (3) Payment bond means a bond executed in connection with a contract to assure payment as required by law of all persons supplying labor and material in the execution of the work provided for in the contract. (c) Bids and contacts of $100,000 or less. The recipient shall follow its own requirements and practices relating to bid guarantees, performance bonds, and payment bonds. (d) Bids and contracts exceeding $100,000. The recipient may follow its own regular policy and requirements if the HHS granting agency has determined that the Federal Government's interest will be adequately protected. If this determination has not been made, the minimum requirements shall be as follows: (1) A bid guarantee from each bidder equivalent to 5 percent of the bid price; (2) A performance bond on the part of the contractor for 100 percent of the contract price; and (3) A payment bond on the part of the contractor for 100 percent of the contract price. $74.17 Fidelity bonds. (a) If the grantee is not a government, the granting agency may require it to carry adequate fidelity bond coverage where the absence of coverage for the grant-supported activity is considered as creating an unacceptable risk. (b) If the subgrantee is not a government, the granting agency or the grantee may require that it carry adequate fidelity bond coverage where the absence of coverage for the subgrantsupported activity is considered as creating an unacceptable risk. (c) A fidelity bond is a bond indemnifying the recipient against losses resulting from the fraud or lack of integrity, honesty or fidelity of one or more employees, officers or other persons holding a position of trust. $74.18 Source of bonds. Any bonds required under §74.16(d)(1) through (3) or 74.17 shall be obtained from companies holding certificates of authority as acceptable sureties (31 CFR part 223). A list of these companies is published annually by the Department of the Treasury in its Circular 570. Subpart D-Retention and Access Requirements for Records § 74.20 Applicability. (a) This subpart applies to all financial and programmatic records, supporting documents, statistical records, and other records of recipients, which are: (1) Required to be maintained by the terms of an HHS grant, or (2) Otherwise reasonably considered as pertinent to an HHS grant. (b) This subpart does not apply to the records of contractors and subcontractors under grants and subgrants. For a requirement to place a provision concerning those records in certain kinds of contracts, see subpart P and appendices G and H of this part. [45 FR 37667, June 3, 1980] $74.21 Length of retention period. (a) Except as provided in paragraphs (b) and (c) of this section, records shall be retained for 3-years from the starting date specified in § 74.22. (b) If any litigation, claim, negotiation, audit or other action involving the records has been started before the expiration of the 3-year period, the records shall be retained until completion of the action and resolution of all issues which arise from it, or until the end of the regular 3-year period, whichever is later. (c) In order to avoid duplicate recordkeeping, awarding parties may make special arrangements with recipients to retain any records which are continuously needed for joint use. The awarding party will request transfer of records to its custody when it determines that the records possess longterm retention value. When the records are transferred to or maintained by the awarding party the 3-year retention requirement is not applicable to the recipient. §74.22 Starting date of retention period. (a) General. (1) Where HHS grant support is continued or renewed at annual or other intervals, the retention period for the records of each funding period starts on the day the grantee submits to HHS its single or last expenditure report for that period. However, if HHS grant support is continued or renewed quarterly, the retention period for each year's records starts on the day the grantee submits to HHS its expenditure report for the last quarter of the Federal fiscal year. In all other cases, the retention period starts on the day the grantee submits its final expenditure report to HHS. If an expenditure report has been waived, the retention period starts on the day the report would have been due. "Expenditure report" is defined in § 74.3. (2) Exceptions to this paragraph are contained in paragraphs (b) through (d) of this section. (b) Equipment records. The retention period for the equipment records required by §74.140(a) starts from the date of the equipment's disposition (§74.139) or replacement (§74.138) or transfer at the direction of the awarding party (§74.136). (c) Records for income transactions after grant or subgrant support. (1) In some cases an HHS requirement concerning the disposition of program income, as defined in subpart F of this part, will be satisfied by applying the income to costs incurred after expiration or termination of grant or subgrant support for the activity giving rise to the income. In such a case, the retention period for the records pertaining to the costs starts from the end of the recipient's fiscal year in which the costs are incurred. (2) In some cases, there may be an HHS requirement concerning the disposition of copyright royalties or other program income which is earned after expiration or termination of grant or subgrant support. Where there is such a requirement, the retention period for the records pertaining to the earning of the income starts from the end of the recipient's fiscal year in which the income is earned. (See Subpart F of this part.) (d) Indirect cost rate proposals, cost allocation plans, etc.-(1) Applicability. This paragraph applies to the following types of documents, and their supporting records: (i) Indirect cost rate computations or proposals; (ii) Cost allocation plans under Appendix C to this part; (iii) Hospital patient care rate computations or proposals; and (iv) Any similar accounting computations of the rate at which a particular group of costs is chargeable (such as computer usage chargeback rates or composite fringe benefit rates). (2) If submitted for negotiation. If the proposal, plan, or other computation is required to be submitted to the Federal Government (or to the grantee) to form the basis for negotiation of the rate, then the 3-year retention period for its supporting records starts from the date of such submission. (3) If not submitted for negotiation. If the proposal, plan, or other computation is not required to be submitted to the Federal Government (or to the grantee) for negotiation purposes, then the 3-year retention period for the pro posal, plan, or computation and its supporting records starts from the end of the fiscal year (or other accounting period) covered by the proposal, plan, or other computation. $74.23 Substitution of microfilm. Copies made by microfilming, photocopying, or similar methods may be substituted for the original records. $74.24 Access to records. (a) Records of grantees. HHS and the Comptroller General of the United States, or any of their authorized representatives, shall have the right of access to any books, documents, papers, or other records of the grantee which are pertinent to the HHS grant, in order to make audit, examination, excerpts, and transcripts. (b) Records of subgrantees. HHS, the Comptroller General of the United States, and the grantee, or any of their authorized representatives, shall have the right of access to any books, documents, papers, or other records of the subgrantee which are pertinent to the HHS grant, in order to make audit, examination, excerpts, and transcripts. (c) [Reserved] (d) Expiration of right of access. The rights of access in this section shall not be limited to the required retention period but shall last as long as the records are retained. [45 FR 22576, Apr. 3, 1980, as amended at 45 FR 37667, June 3, 1980] $74.25 Restrictions on public access. Unless required by Federal statutes, awarding parties may not impose grant or subgrant terms which limit public access to records covered by this subpart except after a determination by the granting agency that the records must be kept confidential and would have been excepted from disclosure under HHS's "Freedom of Information" regulation (Part 5 of this title) if the records had belonged to HHS. This section does not require recipients to permit public access to their records. [45 FR 22576, Apr. 3, 1980, as amended at 45 FR 37667, June 3, 1980] Subpart E-Waiver of Single State Agency Requirements $74.30 Policy. Requests to HHS from Governors, or other duly constituted State authorities, for waiver of single State agency requirements in accordance with section 204 of the Intergovernmental Cooperation Act of 1968 will be given expeditious handling. Whenever possible, such requests will be granted. Subpart F-Grant-Related Income $74.40 Scope of subpart. This subpart contains policies and requirements relating to (a) program income and (b) interest and other investment income earned on advances of grant funds. § 74.41 Meaning of program income. (a) Except as explained in paragraphs (b) and (c) of this section, program income means gross income earned by a recipient from activities part or all of the cost of which is either borne as a direct cost by a grant or counted as a direct cost towards meeting a cost sharing or matching requirement of a grant. It includes but is not limited to such income in the form of fees for services performed during the grant or subgrant period, proceeds from sale of tangible personal or real property, usage or rental fees, and patent or copyright royalties. If income meets this definition, it shall be considered program income regardless of the method used to calculate the amount paid to the recipient-whether, for example, by a cost-reimbursement method or fixed price arrangement. Nor will the fact that the income is earned by the recipient from a Federal procurement contract or from a procurement contract under a Federal grant awarded to another party affect the income's classification as program income. (b) For research grants that are subject to an institutional cost-sharing agreement, income shall be considered program income only if it is earned from an activity part or all of the cost of which is borne as a direct cost by the Federal grant funds. An institutional cost-sharing agreement is one entered into between HHS and a grantee covering all of HHS's research project grants to the grantee in the aggregate. (c) The following shall not be considered program income: (1) Revenues raised by a government recipient under its governing powers, such as taxes, special assessments, levies, and fines. (However, the receipt and expenditure of such revenues shall be recorded as a part of grant or subgrant project transactions when such revenues are specifically earmarked for the project in accordance with the terms of the grant or subgrant.) (2) Tuition and related fees received by an institution of higher education for a regularly offered course taught by an employee performing under a grant or subgrant. (d) For the purposes of this subpart, program income is divided into several categories. Each category is treated in a separate section of this subpart. § 74.42 General program income. (a) Definition. General program income means all program income accruing to a grantee during the period of grant support or to a subgrantee during the period of subgrant support, other than the special categories of such income treated in §§ 74.43 through 74.45. (b) Use. (1) General program income shall be retained by the recipient and used in accordance with one or a combination of the alternatives in paragraphs (c), (d), and (e) of this section, as follows: The alternative in paragraph (c) of this section may always be used by recipients and must be used if neither of the other two alternatives is permitted by the terms of the grant. The alternatives in paragraph (d) or (e) may be used only if expressly permitted by the terms of the grant. In specifying alternatives that may be used, the terms of the grant may distinguish between income earned by the grantee and income earned by subgrantees and between the sources, kinds, or amounts of income. (2) The terms of a subgrant may restrict the use of general program income earned by the subgrantee to only one or some of the alternatives permitted by the terms of the grant, but |