[Code of Federal Regulations]
[Title 45, Volume 4]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 45CFR1235.3]

[Page 142-143]
 
                        TITLE 45--PUBLIC WELFARE
 
       CHAPTER XII--CORPORATION FOR NATIONAL AND COMMUNITY SERVICE
 
PART 1235--LOCALLY GENERATED CONTRIBUTIONS IN OLDER AMERICAN VOLUNTEER PROGRAMS--Table of Contents
 
Sec. 1235.3  Statement of policy.

    (a) Expenditures of locally generated non-Federal contributions 
required by the Director as matching funds must meet the requirements 
specified in ACTION's Grant Management and Program Operations Handbook, 
ACTION Order 2650.2, as amended, and the Domestic Volunteer Service Act 
of 1973, as amended. Copies of ACTION's Grants Management and Program 
Operations Handbook, ACTION Order 2650.2, as amended, are available at 
ACTION, 1100 Vermont Avenue, NW., Room 9200, Washington, DC 20525.
    (b) All expenditures by the grantee of Federal and non-Federal funds 
(including expenditures from excess locally generated contributions) in 
support of the grant are subject to ACTION authorized audits.
    (c) ACTION will not restrict the manner in which locally generated 
contributions in excess of the required match are expended if these 
expenditures are not inconsistent with the Domestic Volunteer Service 
Act of 1973, as amended.

      Appendix to Part 1235--Procedures To Resolve Questioned Costs

    I. Because implementation of section 224 may impact on how 
questioned costs are treated when raised in the context of an audit or 
program monitoring exercise, this appendix explains how questioned costs 
will be resolved. This part does not create any new auditing 
requirements.
    II. All expenditures in support of a federal grant may be reviewed 
by an authorized audit or program monitoring review. Adequate financial 
records and supporting documentation must be maintained for both cash 
and in-kind contributions. (See ACTION's Grants Management Handbook for 
Grantees, ACTION Order 2650.2)
    III. Three definitions are important to understand in relation to 
resolution of questioned costs:
    (a) The term ``questioned cost'', pursuant to the Inspector General 
Act of 1978, as amended, 5 U.S.C. Appendix 3, means an expenditure of 
grant funds that is questioned because of:
    (1) An alleged violation of a provision of the Domestic Volunteer 
Service Act of 1973, as amended, or other law, regulation, or grant 
governing the expenditure of funds by the grantee;
    (2) A finding that at the time of an audit or program review the 
cost is not supported by adequate documentation; or
    (3) A finding that the expenditure of funds for the intended purpose 
is unnecessary or unreasonable.
    (b) The term ``disallowed cost'' means a questioned cost related to 
federal or local match expenditures that ACTION management, in a 
management decision, has sustained or agreed should not be charged to 
the Government.
    (c) The term ``program finding'' means a questioned cost identified 
as from the grantee's excess locally generated contributions which is 
referred to ACTION program management for consideration.
    IV. When costs are questioned from locally generated contributions, 
a distinction will be made between costs as part of the local match and 
costs as part of the excess contribution.
    V. Normally, when expenditures of Federal or non-Federal local match 
funds are questioned, a management decision is made to either allow or 
disallow the costs. When an expenditure of excess locally generated 
funds is questioned, however, it will not be treated as a potential 
disallowed cost but identified as a program finding and referred to 
ACTION program management for resolution.
    VI. Program findings may include, but are not limited to:
    (a) Inadequate records to document the expenditures and provide 
assurance of the grantee's internal controls over the use of its cash 
and in-kind contributions; and

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    (b) Evidence that expenditures were made that are inconsistent with 
the Domestic Volunteer Service Act of 1973, as amended.
    VII. Once program findings are determined by ACTION program 
management, decisions may be made to take corrective steps, including 
but not limited to:
    (a) Requiring the grantee to adhere to stated program goals and 
objectives as a condition for future funding;
    (b) Requiring the grantee to adopt a stronger financial management 
and control system.

Based on past experience, it is expected that corrective steps will be 
needed only in rare instances.
    VIII. If the grantee has raised locally generated contributions in 
excess of the matching requirement and those expenditures are not 
questioned, and are consistent with the DVSA of 1973, as amended, for 
local match expenditures, they may be substituted for any disallowed 
portion of local match costs in order for the grantee to meet its 
matching requirement.

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