[Code of Federal Regulations]
[Title 32, Volume 1]
[Revised as of January 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 32CFR34.11]

[Page 185-186]
 
                       TITLE 32--NATIONAL DEFENSE
 
              CHAPTER I--OFFICE OF THE SECRETARY OF DEFENSE
 
PART 34_ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH FOR-PROFIT ORGANIZATIONS--Table of Contents
 
                    Subpart B_Post-award Requirements
 
Sec.  34.11  Standards for financial management systems.

    (a) Recipients shall be allowed and encouraged to use existing 
financial management systems established for doing business in the 
commercial marketplace, to the extent that the systems comply with 
Generally Accepted Accounting Principles (GAAP) and the minimum 
standards in this section. As a minimum, a recipient's financial 
management system shall provide:
    (1) Effective control of all funds. Control systems must be adequate 
to ensure that costs charged to Federal funds and those counted as the 
recipient's cost share or match are consistent with requirements for 
cost reasonableness, allowability, and allocability in the applicable 
cost principles (see Sec.  34.17) and in the terms and conditions of the 
award.
    (2) Accurate, current and complete records that document for each 
project funded wholly or in part with Federal funds the source and 
application of the Federal funds and the recipient's required cost share 
or match. These records shall:
    (i) Contain information about receipts, authorizations, assets, 
expenditures, program income, and interest.
    (ii) Be adequate to make comparisons of outlays with budgeted 
amounts for each award (as required for programmatic and financial 
reporting under Sec.  34.41. Where appropriate, financial information 
should be related to performance and unit cost data. Note that unit cost 
data are generally not appropriate for awards that support research.
    (3) To the extent that advance payments are authorized under Sec.  
34.12, procedures that minimize the time elapsing between the transfer 
of funds to the recipient from the Government and the recipient's 
disbursement of the funds for program purposes.
    (4) The recipient shall have a system to support charges to Federal 
awards for salaries and wages, whether treated as direct or indirect 
costs. Where employees work on multiple activities or cost objectives, a 
distribution of their salaries and wages will be supported by personnel 
activity reports which must:
    (i) Reflect an after the fact distribution of the actual activity of 
each employee.
    (ii) Account for the total activity for which each employee is 
compensated.
    (iii) Be prepared at least monthly, and coincide with one or more 
pay periods.
    (b) Where the Federal Government guarantees or insures the repayment 
of money borrowed by the recipient, the DoD Component, at its 
discretion, may require adequate bonding and insurance if the bonding 
and insurance requirements of the recipient are not deemed adequate to 
protect the interest of the Federal Government.
    (c) The DoD Component may require adequate fidelity bond coverage 
where the recipient lacks sufficient coverage to protect the Federal 
Government's interest.

[[Page 186]]

    (d) Where bonds are required in the situations described above, the 
bonds shall be obtained from companies holding certificates of authority 
as acceptable sureties, as prescribed in 31 CFR part 223, ``Surety 
Companies Doing Business with the United States.''