[Code of Federal Regulations]
[Title 7, Volume 4]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR277.13]

[Page 921-923]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 277_PAYMENTS OF CERTAIN ADMINISTRATIVE COSTS OF STATE AGENCIES--Table of 
 
Sec.  277.13  Property.

    (a) General. This section prescribes policies and procedures 
governing title, use, disposition of real and personal property for 
which acquisition costs were borne, in whole or in part, as a direct 
charge to FNS funds, and ownership rights or intangible personal 
property developed, in whole or in part, with FNS funds. State agencies 
may follow their own property management policies and procedures 
provided they observe the requirements of this section. With respect to 
property covered by this section, FNS may not impose on State agencies 
any requirement (including property reporting requirements) not 
authorized by this section unless specifically required by Federal laws.
    (b) Nonexpendable personal property--(1) Title. Title to 
nonexpendable personal property whose acquisition cost is borne, in 
whole or in part, by FNS shall vest in the State agency upon 
acquisition, and shall be subject to the restrictions on use and 
dispositions set forth in this section.
    (2) Use. (i) The State agency shall use the property in the program 
as long as there is a need for such property to accomplish the purpose 
of the program.
    (ii) When there is no longer a need for the property to accomplish 
the purpose of the program, the State agency shall use the property 
where needed in administration of other programs in the following order 
of priority:
    (A) Other federally-funded programs of FNS.
    (B) Other federally-funded programs of USDA.
    (C) Other federally-funded programs.
    (iii) When the State agency no longer has need for such property in 
any of its federally financed activities, the property may be used for 
the State agency's own official activities in accordance with the 
following standards:
    (A) If the property had a total acquisition cost of less than 
$1,000, the State agency may use the property without reimbursement to 
FNS.
    (B) For all such property not covered under paragraph (b)(2)(iii)(A) 
of this section, the State agency may retain the property for its own 
use, provided a fair compensation is made to FNS for the FNS share of 
the property. The amount of compensation shall be computed by applying 
the percentage of FNS participation in the cost of the property to the 
current fair market value of the property.
    (3) Disposition. If the State agency has no need for the property, 
disposition of the property shall be made as follows:
    (i) If the property had a total acquisition cost of less than $1,000 
per unit,

[[Page 922]]

the State agency may sell the property and retain the proceeds.
    (ii) If the property had an acquisition cost of $1,000 or more per 
unit, the State agency shall:
    (A) If instructed to ship the property elsewhere, the State agency 
shall be reimbursed with an amount which is computed by applying the 
percentage of the State agency's participation in the cost of the 
property to the current fair market value of the property, plus any 
shipping or interim storage costs incurred.
    (B) If instructed to otherwise dispose of the property, the State 
agency shall be reimbursed by FNS for the cost incurred in such 
disposition.
    (C) If disposition or other instructions are not issued by FNS 
within 120 days of a request from the State agency, the State agency 
shall sell the property and reimburse FNS an amount which is computed by 
applying the percentage of FNS participation in the cost of the property 
to the sales proceeds. The State agency may, however, deduct and retain 
from FNS's share $100 or 10 percent of the proceeds, whichever is 
greater, for the State agency selling and handling expenses.
    (c) Transfer of title to certain property. (1) Where FNS determines 
that an item of nonexpendable personal property with an acquisition cost 
of $1,000 or more which is to be wholly borne by FNS is unique, 
difficult, or costly to replace, FNS may reserve the right to require 
the State agency to transfer title of the property to the Federal 
Government or to a third party named by FNS.
    (2) Such reservation shall be subject to the following:
    (i) The right to require transfer of title may be reserved only by 
means of an expressed special condition under which funds were 
authorized for acquisition of the property, or, if approval for the 
acquisition of the property is given after the funds are awarded, by 
means of a written stipulation at the time such approval is given.
    (ii) The property must be sufficiently described to enable the State 
agency to determine exactly what property is involved.
    (3) FNS may not exercise the right to reserve until the State agency 
no longer needs the property in the activity for which it was acquired. 
Such need shall be assumed to end with termination of the activity in 
which the property was used unless the State agency continues to use the 
property in other program-related activities after the termination date 
and demonstrates to FNS a continued need for such use in the program.
    (4) To exercise the right, FNS must issue disposition instructions 
to the State agency not later than 120 days after the State agency no 
longer needs the property in the activity for which it was acquired. If 
instructions are not issued within that time, FNS's right shall lapse, 
and the State agency shall act in accordance with the applicable 
standards in paragraphs (b)(2) and (b)(3) of this section.
    (5) The State agency shall be entitled to reimbursement with an 
amount which is computed by applying the percentages of the State 
agency's participation in the acquisition cost of the property to the 
current fair market value of the property, and for any reasonable 
shipping and interim storage costs it incurs pursuant to FNS's 
disposition instructions.
    (d) Property management standards. State agencies' property 
management standards for nonexpendable personal property covered by this 
section shall include the following procedural requirements:
    (1) Property records shall be maintained accurately and provide for:
    (i) A description of the property.
    (ii) Manufacturer's serial number or other identification number.
    (iii) Acquisition date and cost.
    (iv) Source of the property.
    (v) Percentage of FNS funds used in the acquisition of the property, 
or sufficient information to be able to compute the percentage, if and 
when the property is disposed of.
    (vi) Location, use and condition of the property.
    (vii) Ultimate disposition data including sales price or the method 
used to determine current fair market value if the State agency 
reimburses FNS for its share.
    (viii) Trade-in value of any property purchased with Federal funds 
where

[[Page 923]]

their trade-in value reduces the acquisition cost of new property.
    (2) A physical inventory of property shall be taken and the results 
reconciled with the property records at least once every two years to 
verify the existence, current utilization, and continued need for the 
property.
    (3) A control system shall be in effect to ensure adequate 
safeguards to prevent loss, damage, or theft to the property. Any loss, 
damage, or theft of nonexpendable personal property shall be 
investigated and properly documented.
    (4) Adequate maintenance procedures shall be implemented to keep the 
property in good condition.
    (5) Proper sales procedures shall be implemented to keep the 
property in good condition.
    (e) Expendable personal property--(1) Title. Title to expendable 
personal property, whose acquisition cost was borne in whole or in part 
by FNS, shall vest in the State agency.
    (2) Use. The State agency shall use the property in the program as 
long as there is a need for such property to accomplish the purpose of 
the program.
    (3) Disposition. When there is no longer a need for the property in 
the program and there is a residual inventory exceeding $1,000 the State 
agency shall:
    (i) Use the property in other federally sponsored projects or 
programs;
    (ii) Retain the property for use on non-federally sponsored 
activities; or,
    (iii) Sell it.
    (4) Compensation. FNS must be compensated for its share if the 
alternative in paragraph (e)(3)(i) of this section is not followed. The 
amount of compensation shall be computed in the same manner as for 
nonexpendable personal property.
    (f) Patents and inventions. If any program activity produced 
patents, patent rights, processes or inventions in the course of work 
aided by FNS, such fact shall be promptly and fully reported to FNS. 
Unless there is prior agreement between the State agency and FNS on 
disposition of such items, FNS shall determine whether protection on 
such invention or discovery shall be sought and how the rights in the 
invention or discovery--including rights under any patent issued 
thereon--shall be disposed of and administered in order to protect the 
public interest consistent with ``Government Patent Policy'' 
(President's Memorandum for Heads of Excecutive Departments and 
Agencies, August 23, 1971), and State of Government Patent Policy as 
printed in title 37 CFR, chapters I and II.
    (g) Copyrights. When a program activity results in a book or other 
copyrightable materials, the author or State agency is free to copyright 
the work, but FNS reserves a royalty-free, nonexclusive and irrevocable 
right to reproduce, publish or otherwise use and to authorize others to 
use the work for government purposes. This includes copyrights on ADP 
software as specified in appendix A.