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PHMSA Guidance, 2024 Guidelines for States Participating in the Pipeline Safety Program
2024 Guidelines for States Participating in the Pipeline Safety Program
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Portal detail 12024 Guidelines for States Participating in the Pipeline Safety Program 2024-State-Guidelines-with-Appendices-2023-12-18.pdf (22.89 MB) 2024 Guidelines for States Participating in the Pipeline Safety Program PDF Effective Date: Wednesday, June 26, 2024#
Attachment 1, passage 1Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024#
Attachment 1, passage 2T ABLE OF CONT ENT S GLOSSARY v __________________________________________________________________ ACRONYMS x _________________________________________________________________ Preface _____________________________________________________________________ 1 1 The Federal/State Partnership ______________________________________________ 3 1.1 Congressional Intent _________________________________________________________ 3 1.2 Federal Role and Organizational Structure _______________________________________ 3 1.3 State Role and Organizational Structure _________________________________________ 4 1.4 Related Organizations ________________________________________________________ 1.4.1 NAPSR 1.4.2 NARUC ___________________________________________________________________________ 4 4 5 ___________________________________________________________________________ 1.5 Invitational Travel 5 ___________________________________________________________ 1.6 Mutual Aid 6 _________________________________________________________________ 2 State Participation Requirements ____________________________________________ 8 2.1 Section 60105 Certification 8 ____________________________________________________ 2.2 Section 60106 Agreement ______________________________________________________ 9 2.3 Interstate Agent Agreement __________________________________________________ 10 2.4 Time Defined Agreement _____________________________________________________ 10 2.5 Joint Inspection of an Interstate Operator _______________________________________ 11 2.6 Certification/Agreement Forms _______________________________________________ 12 2.7 Progress Report ____________________________________________________________ 12 2.7.1 Attachment #1: State Jurisdiction and Interstate Agent Status ________________________________ 12 2.7.2 Attachment #2: Total State Field Inspection Activity _______________________________________ 13 2.7.3 Attachment #3: Facilities Subject to State Safety Jurisdiction ________________________________ 13 2.7.4 Attachment #4: Pipeline Incidents/Accidents 14 _____________________________________________ 2.7.5 Attachment #5: State Compliance Actions _______________________________________________ 14 2.7.6 Attachment #6: State Record Maintenance and Reporting ___________________________________ 14 2.7.7 Attachment #7: State Employees Directly Involved in the Pipeline Safety Program _______________ 14 2.7.8 Attachment #8: State Compliance with Federal Requirements ________________________________ 14 2.7.9 [RESERVED] _____________________________________________________________________ 15 2.7.10 Attachment #10: Performance and Damage Prevention Questions ___________________________ 15 2.8 Responsibility to Assist OPS in the Work Management System _____________________ 15 3 State Regulatory Responsibility _____________________________________________ 17 3.1 Adoption of Federal Regulations and Requirements ______________________________ 17 3.2 WinDOT 17 __________________________________________________________________ 3.3 Waiver of Federal Regulations ________________________________________________ 17 3.3.1 Interstate Pipelines __________________________________________________________________ 17 3.3.2 Intrastate Pipelines __________________________________________________________________ 18 4 Personnel 20 ______________________________________________________________ 4.1 State Agency Minimum Required Inspection Activity _____________________________ 20 Guidelines for States Participating in the Pipeline Safety Program i Revised January 1, 2024#
Attachment 1, passage 3T ABLE OF CONT ENT S 4.1.1 Determination of Inspection Activity ___________________________________________________ 20 4.1.2 Peer Review 23 _______________________________________________________________________ 4.1.3 Inspection Activity Examples _________________________________________________________ 24 4.1.4 Updates to SICT ___________________________________________________________________ 24 4.2 Allocation of Effort 30 __________________________________________________________ 4.3 Training ___________________________________________________________________ 30 4.3.1 Required Training __________________________________________________________________ 30 4.3.2 Course Re-Testing __________________________________________________________________ 33 4.3.3 Waivers from Training ______________________________________________________________ 33 4.3.4 Procedures for Requesting a Training Waiver _____________________________________________ 34 4.4 Continuing Education and State Inspector Mentoring ProgramError! Bookmark not defined. 4.5 Changes in State Agency Personnel ____________________________________________ 36 4.6 Individual Qualifications _______________________________ Error! Bookmark not defined. 4.7 Program Manager/Supervisor Training ________________________________________ 37 4.8 New Program Manager Orientation ____________________________________________ 37 5 Inspection and Compliance Program ________________________________________ 38 5.1 Inspection _________________________________________________________________ 38 5.2 Compliance ________________________________________________________________ 51 5.2.1 Procedures for State Agencies with a Section 60105 Certification _____________________________ 51 5.2.2 Procedures for State Agencies with a Section 60106 Agreement or Interstate Agents ______________ 51 5.2.3 PHMSA Orders to Intrastate Operators __________________________________________________ 52 5.2.4 Referring Concerns of Possible Criminal Activity to the Office of Inspector General (OIG): ________ 52 6 Incident/Accident Investigation and Safety-Related Conditions 53 ___________________ 6.1 Investigation of Pipeline Incidents/Accidents 53 ____________________________________ 6.2 On-scene investigations ______________________________________________________ 54 6.3 Basic Investigative Procedures ________________________________________________ 57 6.4 Incident Investigation Procedures _____________________________________________ 57 6.5 PHMSA AID Daily Telephonic Investigation Report ______________________________ 57 6.6 Access to NRC Reports ______________________________________________________ 58 6.7 Safety-Related Conditions 59 ____________________________________________________ 7 Damage Prevention Program and One Call Notification ________________________ 60 7.1 Damage Prevention _________________________________________________________ 60 7.2 One Call Notification 61 ________________________________________________________ 7.3 Damage Prevention and One-Call Grants 63 _______________________________________ 8 State Agency Program Performance _________________________________________ 64 8.1 Annual Program Evaluation __________________________________________________ 64 8.2 Compliance with Program Requirements _______________________________________ 66 8.3 Recordkeeping _____________________________________________________________ 67 Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 ii#
Attachment 1, passage 4T ABLE OF CONT ENT S 8.4 Attendance at NAPSR Meetings _______________________________________________ 67 8.5 State Pipeline Safety Training and/or Seminars __________________________________ 68 9 DOT Grant-in-Aid Program _______________________________________________ 69 9.1 Scope of Grant _____________________________________________________________ 69 9.2 Address 69 ___________________________________________________________________ 9.3 Eligibility __________________________________________________________________ 69 9.4 Assistance Listing Information ________________________________________________ 69 9.5 General Obligations _________________________________________________________ 70 9.6 Grant Application ___________________________________________________________ 70 9.6.1 Attachment #1: Description of State Pipeline Safety Program. ________________________________ 70 9.6.2 Attachment #2: Pipeline Safety Program Estimated Budget. _________________________________ 72 9.7 Annual Funding Level _______________________________________________________ 72 9.8 Grant Allocation and Percentage of Funding ____________________________________ 9.8.1 Initial Allocation vs. Final Allocation ___________________________________________________ 9.8.2 Grant Allocation Formula for Grant Award ______________________________________________ 9.8.3 State Performance Score 72 73 74 74 _____________________________________________________________ 9.9 Payment Agreement (Notice of Grant Award) ___________________________________ 77 9.10 Certification Regarding Lobbying and Disclosure of Lobbying Activities _____________ 78 9.11 Mid-Year Request for Reimbursement _________________________________________ 78 9.12 Year-end Request for Reimbursement and Cost Summary _________________________ 78 9.13 Special Initiatives _____________________________________ Error! Bookmark not defined. 9.14 Withholding of Grant Funds - Suspension and/or Termination of Grants _____________ 79 9.15 Deposit of Grant Funds ______________________________________________________ 80 9.16 Eligibility of Program Costs __________________________________________________ 80 9.16.1 Direct Costs 80 _____________________________________________________________________ 9.16.2 Indirect Costs 83 ____________________________________________________________________ 9.16.3 Standards for Documentation of Personnel Expenses _____________________________________ 84 9.16.4 Unallowable Costs 84 ________________________________________________________________ 9.17 Pipeline Safety Grant Program Financial Review _________________________________ 85 9.17.1 Pre-Review 85 ______________________________________________________________________ 9.17.2 Grant Review 85 ____________________________________________________________________ 9.17.3 Post-Review 86 _____________________________________________________________________ 9.17.4 Adjustments and Penalties 86 __________________________________________________________ 9.17.5 Appeal of Findings ________________________________________________________________ 86 9.18 Procurement Standards 86 ______________________________________________________ 9.19 Procurement Procedures 86 _____________________________________________________ 9.20 Contracts Management ______________________________________________________ 87 9.21 Internal Controls 87 ___________________________________________________________ 9.22 Real Property ______________________________________________________________ 87 9.23 Personal Property ___________________________________________________________ 87 Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 iii#
Attachment 1, passage 5T ABLE OF CONT ENT S 9.24 Code of Conduct ____________________________________________________________ 9.25 Conflict of Interest and Mandatory Disclosures __________________________________ 9.26 Audit Requirements (2 CFR 200 Subpart F) _____________________________________ 9.27 PHMSA Office of Civil Rights Review – Title VI _________________________________ 9.28 Grant-in-Aid Program Calendar of Events ______________________________________ 10 FedSTAR ______________________________________________________________ 10.1 Purpose ___________________________________________________________________ 10.2 Location and Procedures _____________________________________________________ 10.3 Facilitating Various Program Documentation ____________________________________ 10.4 Facilitating Grant Financials __________________________________________________ 10.5 Other FedSTAR Functions ___________________________________________________ Appendix Summary __________________________________________________________ Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 iv 87 88 88 88 90 91 91 91 92 92 94 95#
Attachment 1, passage 6Glossary GLOSSARY Agreement The State Agency assumes inspection responsibility for facilities and reports Probable Violations to PHMSA for enforcement actions. Certification The State Agency assumes inspection and enforcement responsibility with respect to intrastate facilities over which it has jurisdiction under State law. Chapter 601, Title 49 of the U.S. Code Throughout this manual, Sections 60101 – 60140 refer to Chapter 601, Title 49 of the United States Code Chapter 601 is the recodification of the Natural Gas Pipeline Safety Act of 1968, as amended (49 U.S.C. app 1671 et seq.), and the Hazardous Liquids Pipeline Safety Act of 1979, as amended (49 U.S.C. app 2001 et seq.). Code of Federal Regulations, Title 49 (49 CFR)-Pipeline Safety Part 40 Procedures for Transportation Workplace Drug Testing Programs Part 190 Pipeline Safety Programs and Rulemaking Procedures Part 191 Transportation of Natural and Other Gas by Pipeline: Annual Reports Incident Reports, and Safety-Related Condition Reports Part 192 Transportation of Natural and Other Gas by Pipeline: Minimum Federal Safety Standards Part 193 Liquefied Natural Gas Facilities: Federal Safety Standards Part 194 Response Plans for Onshore Oil Pipelines Part 195 Transportation of Hazardous Liquids by Pipeline Part 196 Protection of Underground Pipelines from Excavation Activity Part 198 Regulations for Grants to Aid State Pipeline Safety Programs Part 199 Drug and Alcohol Testing Compliance Action A Compliance Action is an action or series of sequential actions taken to enforce federal or state pipeline regulations. One Compliance Action can cover multiple Probable Violations. A Compliance Action may take the form of a letter warning of future penalties for continued violation, an administratively imposed monetary sanction or order directing compliance with the regulations, an order directing corrective action under hazardous Guidelines for States Participating in the Pipeline Safety Program v Revised January 1, 2024#
Attachment 1, passage 7Glossary Department of Transportation (DOT) conditions, a show-cause order, a criminal sanction, a court injunction, or a similar formal action. The United States Department of Transportation (DOT) is a federal Cabinet department of the U.S. government concerned with transportation. It was established by the Department of Transportation Act of Congress on October 15,1966 and began operation on April 1, 1967. The Secretary of Transportation is the head of DOT. This is the computer application available over the internet which is used by State Agencies to enter the required federal documentation and information. Federal State Tracking and Reporting (FedSTAR) Grant Funds or aid in kind to carry out specified programs, services, or activities. Grant Program Those activities and operations of the State Agency which are necessary to carry out the purposes of the grant, including any portion of the program financed by the grantee. This technical usage of the phrase should not be confused with the Pipeline Safety Grant Program (sometimes shortened to “Grant Program”), which is the Federal assistance program in support of the State Agency’s pipeline safety program. Inspection Person-Day All or part of a day spent by State Agency Inspectors)/Investigator(s) (including travel) in on-site or virtual evaluation of an operator’s system to determine compliance with Federal or State pipeline safety regulations; or in on-site investigation of a pipeline incident; or in job-site training of an operator. (See section 5.1 for description of inspection types) Time counted for such activities should be reported as a maximum of one Inspection Person-Day per inspector present for each day devoted to safety issues, regardless of the number of operators visited during that day. (e.g., You may evaluate two operators in the same day and record each inspection visit as 0.5 person-day, or actual fraction of a day, for each operator provided the total does not exceed 1.0 person-day). Non-qualified inspectors present assisting a qualified inspector can be included in the inspection day count. On a limited basis, the inspector may count in-office inspection time to review operator written plans, procedures, programs, and records to effectively use on-site inspection time, as approved by the Program Manager, and as noted in the annual progress report. In-office inspection time must be adequately documented and made part of the State Agency’s inspection records. Inspection Unit All or part of an operator’s pipeline facilities under the control of an administrative unit that provides sufficient communication and controls to ensure uniform design, construction, operation, and maintenance procedures for the facilities. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 vi#
Attachment 1, passage 8Glossary • Privately Owned Distribution System • Gas Transmission and Hazardous Liquid Pipeline System (including Ethanol) • Liquefied Natural Gas (LNG) Facility • Master Meter System The application of the Inspection Unit concept will ensure inspection coverage of an operator’s entire system and enhance Federal/State management of workload and program evaluation. Determination of inspections will be based on the following guidelines, but where unique situations exist, good logic and judgment must be exercised when identifying the parameters of the Inspection Unit. The Inspection Unit could be an operating area such as a specific city or metropolitan area, a group of towns, or other geographic area, and would include all distribution facilities in the defined area. However, because of the greater number of pipeline facilities in some large metropolitan distribution areas, multiple Inspection Units may be appropriate. In selecting the Inspection Unit, consideration should be given to the size of the area covered, work location, record location, and line of supervision. If the distribution system contains transmission lines where transmission integrity management plans are required, those system(s) should be considered separate intrastate transmission Inspection Unit(s). The Inspection Unit should include up to 500 miles of pipeline right-of-way including any compressor stations or pumping facilities within the designated limits. In some circumstances, such as densely populated areas and/or environmentally sensitive areas, and/or where judged necessary based on local conditions, a separate Inspection Unit can be established. Each LNG facility should be considered a single Inspection Unit. • Municipal • Petroleum Gas System Each Master Meter System should be considered a single Inspection Unit. However, more than one Master Meter System should be considered a single Inspection Unit if all facilities involved are owned, operated, and maintained under common supervisory control. Each Municipal operator should be considered a single Inspection Unit unless its system, similar to privately owned distribution systems, contains transmission lines where transmission integrity management inspections are done in which case the transmission system should be a separate Inspection Unit. Also operating conditions/characteristics could suggest additional Inspection Units be considered. Each system should be considered a single Inspection Unit. However, more than one petroleum gas system should be considered a single Inspection Unit if all facilities involved are Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 vii#
Attachment 1, passage 9Glossary • Regulated Gathering Pipeline System Interstate Agent owned, operated, and maintained under common supervisory control. Each regulated gathering pipeline system can be considered as a single Inspection Unit. Circumstances may exist when an operator has more than one regulated gathering system separated into individual Inspection Units. The State Agency assumes inspection responsibility for interstate facilities and reports Probable Violations to PHMSA for enforcement actions. National Response Center (NRC) (1-800- 424-8802) National Transportation Safety Board (NTSB) Non-compliance The federal government’s national communications center, which is staffed 24 hours a day by U.S. Coast Guard officers and marine science technicians. The NRC receives all reports of releases as required by 49 CFR 191 and 49 CFR 195, Subpart B. This “telephonic” report data is shared with PHMSA as well as other federal agencies such as Homeland Security, EPS, NTSB via an information system. This Federal agency was created by Congress in the DOT Act of 1966. Although NTSB’s authority is limited to transportation failure investigations, its mission relating to pipeline safety is to: 1. Investigate significant failures and report the circumstances relating to each failure and its probable cause. 2. Make recommendations to the Secretary, the pipeline operators, manufacturers, associations, and interested parties to minimize the possibility of recurrence of similar failures. 3. Release reports deemed to be in the public interest. 4. Conduct special studies and investigations on matters regarding safety in pipeline transportation and failure prevention. A violation or Probable Violation of any Federal or State pipeline safety regulations. OPS is the office that handles pipeline safety for PHMSA Office of Pipeline Safety (OPS) Pipeline and Hazardous Materials Safety Administration (PHMSA) PHMSA is the agency under DOT that is responsible for pipeline safety oversight. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 viii#
Attachment 1, passage 10Glossary OPS Inspector Training and Qualifications Division (TQ) Probable Violation The safety training organization operated by OPS located at 3700 S. MacArthur Blvd, Suite B, Oklahoma City, OK 73179-7612. The contact telephone number is 405-686-2310. Program Manager Region Director Region Office A Probable Violation is a potential Non-compliance with any Title 49, Chapter 601section or, where a section is divided into subsections (a), (b), (c), etc., any subsection of federal or state pipeline regulations. Each numbered section should be counted separately. Multiple Non-compliances of a numbered section discovered on the same inspection should be counted as one Probable Violation with multiple pieces of evidence (i.e., during a unit inspection it was discovered that an operator failed to check and service 6 distribution valves, in reference to 49 CFR 192.747 Valve maintenance: Distribution systems, this is one Probable Violation of 192.747(a) with six pieces of evidence and not six Probable Violations). The person designated by the State Agency as responsible for all activities of the pipeline safety program The individual responsible for all activities of the designated OPS region One of five offices delegated the authority to carry out the field activities for OPS A tool used to determine the required number of annual Inspection Person-Days for a State Agency. State Inspection Calculation Tool (SICT) Special Initiatives State Agency PHMSA State Programs Supervisor Initiatives occasionally issued by PHMSA for a limited purpose. The division of each State, including the District of Columbia and Puerto Rico, authorized through a Certification or Agreement with PHMSA to administer a pipeline safety program. Also referred to as “grantee” or “recipient.” The OPS division that provides technical assistance, support and evaluates State Agency programs. Individual in a State Agency supervising pipeline safety inspectors/investigators as designated in Attachment 7 of the annual Progress Report. This does not include individuals solely supervising damage prevention/technical staff. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 ix#
Attachment 1, passage 11Acronyms ACRONYMS AID Accident Investigation Division CFR Code of Federal Regulations LPG Liquefied Petroleum Gas NAPSR National Association of Pipeline Safety Representatives NARUC National Association of Regulatory Utility Commissioners OMB Office of Management and Budget PDM Pipeline Data Mart RCFA Root Cause Failure Analysis U.S.C. United States Code Guidelines for States Participating in the Pipeline Safety Program x Revised January 1, 2024#
Attachment 1, passage 12The Federal/State Partnership Preface The Guidelines for States Participating in the Pipeline Safety Program (Guidelines) contain guidance for how State Agencies must conduct and execute their responsibilities delegated through Certification or Agreement by the Secretary of Transportation pursuant to Title 49 of the U.S.C. The Secretary of Transportation has delegated the administration of the Certifications and Agreements to PHMSA. These Guidelines are not regulations or rules promulgated by PHMSA. This Guidelines are provided to promote consistency among the many State Agencies that participate under Certifications and/or Agreements. The guidance contains expectations for the execution of a State Agency’s responsibilities which are evaluated annually. The performance evaluation results are utilized to determine continued Certification/Agreement with a State Agency and annual grant funding amounts to the State Agency. The Guidelines and performance of expectations are administered by PHMSA State Programs. The Guidelines are typically reviewed and revised annually. The process for the annual review and revision are as follows: 1. PHMSA State Programs creates a copy of the recent edition of the Guidelines in MS Word. “Track Changes” option is turned on in the document to illustrate the revisions (redline copy). 2. Starting January 1, a listing of proposed changes is maintained by PHMSA State Programs. Changes are typically proposed by members of the PHMSA State Programs, Regional Directors, TQ and NAPSR. 3. During a meeting of the NAPSR Grant Allocation Committee (GAC), the listing of revisions and the markup copy is presented by PHMSA State Programs. A draft is provided to the GAC members and NAPSR’s Administrative Manager. 4. NAPSR’s Administrative Manager distributes the listing and markup copy to NAPSR Board Members. 5. The listing and markup copy is provided to all PHMSA State Programs staff for review and comments. 6. During the GAC’s October Meeting PHMSA State Programs makes another presentation which includes the additional changes received. Discussion and editing are completed during the meeting. Guidelines for States Participating in the Pipeline Safety Program 1 Revised January 1, 2024#
Attachment 1, passage 13The Federal/State Partnership 7. Following the GAC October Meeting, PHMSA State Programs distributes the listing and markup copy to all members of NAPSR, all Regional Directors and TQ for review and comments (at least 30 days is given for review). 8. PHMSA State Programs compiles and reviews all comments. Comments usually result in further edits or if not, the commenter is provided with reasons why it was not accepted for inclusion. Upon completion of this step the document is prepared for publication and distribution. The updated Guidelines are distributed by December 31st for the upcoming year. Guidelines for States Participating in the Pipeline Safety Program 2 Revised January 1, 2024#
Attachment 1, passage 14The Federal/State Partnership 1 The Federal/State Partnership 1.1 Congressional Intent 49 U.S.C. Chapter 601 provides the statutory basis for the pipeline safety program and establishes a framework for promoting pipeline safety through exclusive Federal authority for regulation of interstate pipeline facilities and State authority for all or part of the intrastate pipeline facilities under annual Certification or Agreement. 49 U.S.C. 60107(a) authorizes Federal grants-in- aid of not more than 80 percent of a State Agency’s personnel, equipment, activities, and other allowable costs for its pipeline safety program. The resulting Federal/State partnership is the cornerstone for ensuring uniform implementation of the pipeline safety program nationwide. 49 U.S.C.Chapter 601 can be found in Appendix A. 1.2 Federal Role and Organizational Structure PHMSA’s mission is to protect people and the environment from the risks inherent in transportation of hazardous materials - by pipeline and other modes of transportation. The agency’s goals are: • Safety: To reduce the risk of harm to people due to the transportation of hazardous materials by pipelines and other modes. • Environmental Stewardship: To reduce the risk of harm to the environment due to the transportation of oil and hazardous materials by pipeline and other modes. • Reliability: To help maintain and improve the reliability of systems that deliver energy products and other hazardous materials. • Global Connectivity: To harmonize and standardize the requirements for pipeline and hazardous materials transportation internationally, to facilitate efficient and safe transportation through ports of entry and through the supply chain. • Preparedness and Response: To reduce the consequences (harm to people, environment, and economy) after a pipeline or hazmat failure has occurred. Under delegation from the Secretary of DOT, OPS directly administers the program and develops issues and enforces minimum safety regulations for interstate and intrastate pipelines. These regulations are written to ensure safety in (1) the design, construction, testing, operation, and maintenance of Guidelines for States Participating in the Pipeline Safety Program 3 Revised January 1, 2024#
Attachment 1, passage 15The Federal/State Partnership gas and hazardous liquid pipeline facilities and in (2) the siting, construction, operation, and maintenance of LNG facilities. OPS ensures compliance with regulations through operator inspections, enforcement actions, and accident investigations. In addition, TQ conducts training in application of the regulations. PHMSA also administers grant-in-aid funding to State Agencies, conducts research, and collects and analyzes safety data. PHMSA State Programs administers the grant-in-aid program to support State Agencies conducting gas and hazardous liquid pipeline safety programs. The OPS Region Offices serve as the focal point for interstate pipeline compliance activities and intrastate facilities not under state jurisdiction. The region staff provides technical assistance and support to State Agency programs. State Agencies are encouraged to contact their respective State Liaison or Region Director if they have any questions about technical or other inspection issues. The PHMSA Director of State Programs should be contacted if the State Liaison or Region Director cannot be reached. 1.3 State Role and Organizational Structure A State delegates responsibility for pipeline safety to a State Agency. The State Agency may be a public utility commission, a state fire marshal, a public service commission, or other state authority or office. State Agencies under existing law have jurisdiction over most intrastate gas, LNG, and hazardous liquid facilities within their respective States. State Agency duties normally consist of operator inspections, compliance and enforcement, safety programs, accident investigations, pipeline design, testing and construction inspections, and record maintenance and reporting. 1.4 Related Organizations 1.4.1 NAPSR NAPSR, established in 1982, is an organization of State Agency pipeline safety managers, inspectors, and technical personnel who support, encourage, develop, and enhance pipeline safety. NAPSR provides an effective mechanism for fostering the Federal/State partnership. The NAPSR Articles of Association set forth the purpose and objectives of the organization and the procedures for electing national and region officers. The Articles of Association establish the steps for adopting resolutions to raise pipeline safety concerns of national scope for PHMSA consideration in regulatory and enforcement activities. Guidelines for States Participating in the Pipeline Safety Program 4 Revised January 1, 2024#
Attachment 1, passage 16The Federal/State Partnership 1.4.2 NARUC NARUC is an organization of Federal and State agencies engaged in the regulation of utilities and carriers. Its chief objective is to improve the quality and effectiveness of utility regulation in the United States. Through its Staff Subcommittee on Pipeline Safety under the Committee on Gas, NARUC provides a communication channel among State public utility agencies, Program Managers, and Federal agencies. Like NAPSR, the NARUC Staff Subcommittee on Pipeline Safety holds regular meetings, issues resolutions, and establishes working groups to deal with safety issues. 1.5 Invitational Travel In support of NAPSR and NARUC initiatives, PHMSA may provide invitational travel (100% funding) for the following: 1. The current NAPSR Chair and/or Vice-Chair to attend the NAPSR National meeting and five NAPSR region meetings excluding the meeting(s) held in their respective region. In the absence of the Chair or Vice Chair, the Secretary may attend under Invitational Travel. 2. GAC: The current NAPSR Chair, Vice-Chair, Secretary, Past Chair and five State Agency representatives (one from each region). An alternate representative may attend in the absence of the region representative provided the NAPSR Chair consults with PHMSA Director of State Programs on the appointment and notifies the PHMSA State Programs point of contact (POC) about the selection. 3. NARUC Staff Subcommittee on Pipeline Safety: Five State Agency representatives (one from each NAPSR Region) as designated by the NAPSR Chair may receive Invitational Travel to attend NARUC Staff Subcommittee on Pipeline Safety functions. 4. NAPSR Committees, Task Groups, and or other special projects: As deemed necessary and agreed to by PHMSA Director of State Programs in concurrence with NAPSR Chair. Each NAPSR/NARUC committee representative that has not traveled under federal invitational travel orders shall complete the E-2 User Profile Request form. The form shall be completed prior to submitting the PHP Travel Request Form. All travel requests will need to be submitted at least one month prior to each tentative meeting. All Travel Requests and Travel Vouchers are submitted using the following e-mail address: PHMSAStateInvitationalTravel@dot.gov. Guidelines for States Participating in the Pipeline Safety Program 5 Revised January 1, 2024#
Attachment 1, passage 17The Federal/State Partnership All forms are available on NAPSR website, by contacting the NAPSR Administrative Manager or by contacting PHMSA State Programs Point of Contact (POC). Once the POC has reviewed and concurs with the request, each committee member will be provided additional details on travel arrangements. Requests may be denied if not submitted within the time frame mentioned above or prior travel reimbursement voucher has not been submitted by the representative to PHMSA Headquarters for process. In general, PHMSA will provide airline tickets for the approved travel and reimburse the traveler (not the State Agency) for other expenses at the standard government per diem rates. The federal lodging and per diem rates are located at: http://www.gsa.gov/portal/category/21287 and Airline City Pairs at: https://www.gsa.gov/plan-book/transportation-airfare-pov-etc/airfare-rates- city-pair-program (Rental car transportation is not typically a reimbursable expense.) To ensure invitational travel voucher requests are processed in a proper and timely manner, committee members need to submit the PHP Invitational Voucher Form as soon as they return from the meeting. The individual traveler, or group/committee designee, shall also submit a written summary of the meeting events within 30 days after the meeting to the NAPSR Administrative Manager and PHMSA Director of State Programs. 1.6 Mutual Aid Just like natural gas utilities that rely on mutual aid provided by other gas companies during certain events, a State Agency may need support from OPS or other State Agencies during large incidents, outages, or restorations. Any need for OPS support shall be requested through PHMSA State Programs. Any need for other State Agency support must be requested through the requesting State’s department that handles the Emergency Management Assistance Compact (EMAC). The EMAC process details the needs of the requesting State Agency, the process for responding State Agencies to estimate their available resources including costs and the process for responding State Agencies to be reimbursed by the requesting State Agency. In addition to the EMAC process, PHMSA State Programs must be consulted to ensure that State Agencies proposing to provide mutual aid are suitable to provide assistance. The following conditions apply to mutual aid: Inspection days can only be counted for inspecting facilities in accordance with the State Certification and therefore NO inspection days can be counted by the responding State Agency performing inspections on behalf of the requesting State Agency. Guidelines for States Participating in the Pipeline Safety Program 6 Revised January 1, 2024#
Attachment 1, passage 18The Federal/State Partnership State Agencies that do not meet their required number of inspection days will lose points on the Progress Report score unless waived by the PHMSA Director of State Programs for good cause. Although a responding State Agency could request a waiver for failing to meet the required number of inspection days, there is no guarantee that the waiver would be approved. The number of days spent supporting a State Agency in need of mutual aid would be a consideration for waiving the points for the required number of inspection days. A simple spreadsheet documenting the inspector’s name and dates providing support to the requesting State Agency would be necessary to consider the waiver of required inspection days. A State Agency should consider the impact to safety in their home state before rendering aid to another state. Costs for the responding State Agency CANNOT be charged to the Base Grant by the responding State Agency. Costs for the responding State Agency can be reimbursed by the requesting State Agency through the EMAC process. Costs reimbursed to responding State Agencies by the requesting State Agency can be charged to the Base Grant by the requesting State Agency. Guidelines for States Participating in the Pipeline Safety Program 7 Revised January 1, 2024#
Attachment 1, passage 19State Participation Requirements 2 State Participation Requirements State Agency participation in the pipeline safety program is based on voluntary submission of a Certification pursuant to 49 U.S.C. 60105, or of an Agreement pursuant to 49 U.S.C. 60106. State Agency participation may also include acting as an Interstate Agent on behalf of PHMSA. Under a 60105 Certification, the State Agency assumes inspection and enforcement responsibility with respect to intrastate facilities over which it has jurisdiction under State law. With a Certification, the State Agency may adopt additional or more stringent standards for intrastate pipeline facilities provided such standards are compatible with Federal regulations. Under a60106 Agreement or an Interstate Agent Agreement, the State Agency assumes inspection responsibility for facilities and reports Probable Violations to PHMSA for enforcement. Under a Certification, Agreement, or Interstate Agent Agreement, the State Agency may not subcontract pipeline safety-related work activities without prior approval from PHMSA. If the State Agency does not apply for annual Certification or Agreement, all intrastate facilities remain the responsibility of PHMSA. 2.1 Section 60105 Certification To qualify for 49 U.SC. 60105 gas or hazardous liquid Certification, the State Agency must meet the following requirements. Separate Certification is necessary for gas and hazardous liquid programs. PHMSA’s procedures to monitor, evaluate and reject a State Agency’s Certification are described in Appendix P. 1. The State Agency must have adopted each Federal safety standard applicable to intrastate pipelines under its jurisdiction as of the date of the Certification. When a federal standard is established within 120 days before the date of Certification, the State Agency must be taking steps pursuant to State law to adopt the standard. If the State Agency is not eligible to submit a Certification at the beginning of a calendar year because it has not adopted or is not seeking adoption of a federal safety standard, the State Agency may continue its program (including its eligibility for Federal payments under 49 U.S.C. 60107) by entering a 49 U.S.C. 60106 Agreement. 2. The State Agency must be enforcing each standard. The laws of the State Agency must provide for the enforcement of the safety standards by injunctive and monetary sanctions that are substantially the same as those provided by 49 U.S.C. 60120 (Enforcement) and 60122 (Civil penalties. At a minimum, each State Agency must have Penalty Amounts of $100,000 per day up to a maximum of $1,000,000 for a related series of violations as set out under 49 CFR 190.223 Maximum Penalties. Guidelines for States Participating in the Pipeline Safety Program 8 Revised January 1, 2024#
Attachment 1, passage 20State Participation Requirements 3. The State Agency must have substantially the same authority as that provided PHMSA under 49 U.S.C. 60108 (Inspection and maintenance) and 49 U.S.C. 60117 (Administrative). Thus, each person who owns or operates pipeline facilities subject to the State Agency’s jurisdiction must establish and maintain records, make reports, provide information, conduct inspections, and prepare and have on file plans for inspection and maintenance. 4. The State must encourage and promote the establishment of a program designed to prevent damage by demolition, excavation, tunneling, or construction activity to the pipeline facilities to which the Certification applies that subjects’ persons who violate the applicable requirements of that program to civil penalties and other enforcement actions, and addresses the elements in 49 U.S.C. 60134(b). 5. The State Agency must cooperate fully in a system of Federal monitoring of each State program to ensure compliance with the Certification. 6. The State Agency annual progress report must be accompanied by the following: a. A list of the types of intrastate facilities under the State Agency’s jurisdiction. b. The name and official mailing address of each pipeline operator. c. A summary of each investigation and a statement of all jurisdictional incidents/accidents reported to it during the preceding calendar year by an operator involving (1) personal injury requiring hospitalization, (2) fatality, or (3) property damage in the amount as specified by DOT in 49 CFR 191.3. d. A summary of the State Agency’s inspection and Compliance Actions taken in the preceding calendar year. e. A list of the records the State Agency maintained pertaining to its program during the preceding calendar year. f. The name, title, qualifications (training), and approximate percentage of time devoted to pipeline safety of each State Agency employee involved in the program. g. A list of reports the State Agency required from each pipeline operator during the preceding calendar year. 2.2 Section 60106 Agreement By mutual agreement between the Secretary and the State Agency, 49 U.S.C. 60106 Agreement permits the State Agency to undertake safety activities concerning intrastate pipelines when the State Agency does not qualify for 49 U.S.C. 60105 Certification. A State Agency conducting a pipeline safety program under a 49 U.S.C. 60106 Agreement inspects intrastate operators for compliance with safety standards. Under such an Agreement, the State Agency will conduct all pipeline safety program activities that the State Agency can conduct under 49 U.S.C. 60105 Guidelines for States Participating in the Pipeline Safety Program 9 Revised January 1, 2024#
Attachment 1, passage 21State Participation Requirements Certification except that, in the event of a Probable Violation of the pipeline safety standards, the State Agency must notify PHMSA. PHMSA remains the authority having enforcement jurisdiction over all Compliance Actions. To qualify for a 49 U.S.C. 60106 Agreement, the State Agency must: 1. Establish an adequate program for record maintenance, reporting, and inspection of pipeline facilities in accordance with the OPS approved state inspection plan. 2. Prescribe procedures for the approval of plans of inspection and maintenance that are substantially the same as required under 49 U.S.C. 60108. 3. Notify PHMSA of any Probable Violation of a Federal safety standard. 4. Cooperate fully in a system of Federal monitoring of the State Agency’s program. 5. Submit annual reports concerning the implementation of the program with information required in Section 2.1 (6) (a-g). 2.3 Interstate Agent Agreement As demonstrated by its participation allowed in 49 U.S.C. 60106, an Interstate Agent agrees to follow the practices and procedures in this manual and cooperate fully in the Federal evaluation of the State Agency’s pipeline safety program. The Interstate Agent must meet the training requirements for State Agency inspection personnel as outlined in Chapter 4. Interstate Agents must ensure that, unless waived by PHMSA, State Agency employees involved in conducting (including supervising the conduct of) inspections under an Interstate Agent Agreement do not have financial interests in any of the pipelines they inspect. Interstate Agents must obtain PHMSA approval prior to assuming responsibilities under an Interstate Agent Agreement. They are required to investigate reported safety-related conditions, monitor operator actions to remedy such conditions, and provide status reports to OPS. In addition, Interstate Agents agree to assume responsibility for and carry out inspections as mutually agreed with Region Director, follow OPS guidelines on incident coordination and investigation; follow requirements and formats for reports; maintain inspection and accident records; and, in consultation with PHMSA, handle inquiries and release information. Copies of the Interstate Agent Agreement and guidance document on the interstate program are in Appendix B. 2.4 Time Defined Agreement PHMSA may need to call upon the State Agency to assist in performing a variety of duties on an ad hoc basis. This assistance may include inspection of Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 10#
Attachment 1, passage 22State Participation Requirements specific operators, inspection of construction, witness to repairs or testing, or investigation of incidents/accidents. In some cases, PHMSA’s request may involve immediate deployment of State Agency staff. To expedite the process, the Region Director will call the Program Manager to request that the State Agency act on behalf of PHMSA. The call will be followed by a letter formalizing the details of the arrangement complying with applicable parts of the Interstate Agent Agreement. 2.5 Joint Inspection of an Interstate Operator At the request of a State Agency, PHMSA shall allow for a certified State Agency under 49 U.S.C. 60105 to participate in the inspection of an interstate pipeline facility. This does not apply to joint inspections where the State Agency is inspecting Operator assets that are under the State Agency’s jurisdiction as part of the inspection. Guidelines for the State Agency’s participation is as follows: • The State Agency must have a 60105(a) Certification – • The State Agency must make a formal request to the following email address: PHMSAInterstateInspections@dot.gov. The State Agency should list the Interstate Operator(s) they wish to participate in the inspection(s) with PHMSA. The State Agency may obtain a list of interstate pipeline operators in the state through the “Inspection Coordination” Tool in the Pipeline Data Mart. The State Agency should make the request by September 30th prior to the coming inspection year (October 1 - September 30). • When the interstate operator is scheduled for inspection, the OPS Lead Inspector will contact the Program Manager to coordinate the State Participation. If the State Agency cannot make the inspection dates, OPS does not have to reschedule the inspection to accommodate the State Agency. • The Lead Inspector will communicate with the Program Manager when communicating to the other inspection team members regarding the inspection dates. • The State Agency must have accomplished all required minimum inspection days for the previous Calendar Year. • No Inspection Person–Days are counted for these inspections. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 11#
Attachment 1, passage 23State Participation Requirements • No travel or inspection time will be covered by the State Base Grant for these inspections. • State Agency Inspectors must take direction from OPS Lead Inspector. • The State Agency may use the Inspection Assistant (IA) program to participate in the inspection or follow along with federal inspector using IA for the inspection. • The State Agency may not retain inspection documents due to FOIA issues. 2.6 Certification/Agreement Forms In September of each year, PHMSA makes available appropriate forms to each State Agency which is included with the annual grant program application. These forms are provided electronically on FedSTAR (See Chapter 10). The electronic application is available over the internet to approved state personnel in the direct support of that State’s Pipeline Safety program. Certification and Agreement forms will be completed online in FedSTAR, hardcopy documents printed from the FedSTAR system, signed by the appropriate State official and then emailed to the PHMSA State Programs grant point of contact. 2.7 Progress Report In February of each year, the State Agency must submit a completed progress report and attachments for each gas and/or hazardous liquid program for the previous calendar year. This report must be submitted to PHMSA electronically through FedSTAR and a signed copy sent via email to the PHMSA State Programs grant point of contact (electronic signature is available). The attachments to the progress report will be used in assessing State Agency program performance in conjunction with the results of the OPS annual evaluation. A brief description of the progress report attachments follows: 2.7.1 Attachment #1: State Jurisdiction and Interstate Agent Status This attachment requires the State Agency to indicate those pipeline operator types over which the State Agency has jurisdiction under existing law. If a State Agency has LPG operators which are a combination of private, Municipal or Master Meter operators, a note should be made in comments section on this attachment. (e.g., 4 LPG Private, 5 LPG Master Meter) If the State Agency holds Interstate Agent status from PHMSA or was a temporary Interstate Agent during the calendar year, the form also requires Interstate Agent status, the number of interstate operators and the number of interstate Inspection Units. If an operator has multiple types of system (i.e., gas distribution and intrastate Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 12#
Attachment 1, passage 24State Participation Requirements transmission, gas gathering and transmission), each type should be counted in corresponding category. Total operator count listed in Attachment 3 may not match Attachment 1 totals due to multiple types of systems per operator. 2.7.2 Attachment #2: Total State Field Inspection Activity This attachment requires the State Agency to indicate by operator type, and inspection type as outlined in section 5.1, the number of Inspection Person- Days spent during the previous calendar year. Time counted for such activities (including damage prevention enforcement or investigation only for pipeline facilities subject to Part 192, Part 193 and Part 195 regulations and performed by an individual listed as Inspector/Investigator only on Attachment 7) should be reported as a maximum of one Inspection Person-Day for each day devoted to safety issues, regardless of the number of operators visited during that day (e.g. you may evaluate two operators in the same day and record each inspection visit as 0.5 person-day, or actual fraction of a day, for each operator provided the total does not exceed 1.0 person-day). Design, testing and construction inspection activities are sometimes conducted in conjunction with Standard Inspections and the associated Inspection Person- Days are accounted for in the Standard Inspections column of Attachment 2. To more accurately reflect time spent on Design, Testing and Construction Inspections, these Inspection Person-Days (or a portion thereof if less than a full Inspection Person-Day) should be included in the Design, Testing and Construction Inspections column of Attachment 2 and not in the Standard Inspections column. Design, Testing and Construction is not limited to new construction activity, but can also be the inspection of repairs, upgrades, and replacement of pipeline facilities. If the State Agency holds Interstate Agent status from PHMSA or was a temporary Interstate Agent during the calendar year Inspection Person-Days for those activities should be included for the appropriate interstate operator type. The total number of completed Drug and Alcohol inspections described in Section 5.1 (4 (j) shall be entered in the Total Count of Drug and Alcohol Inspections on Attachment 2. Inspection Person-Days for Drug and Alcohol and Control Room Management inspections should be included in the Standard Inspections column of Attachment 2. 2.7.3 Attachment #3: Facilities Subject to State Safety Jurisdiction This attachment requires the business name, OPID and address of each pipeline operator subject to State Agency’s jurisdiction as of December 31 of the previous year. If the State Agency holds Interstate Agent status from Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 13#
Attachment 1, passage 25State Participation Requirements PHMSA or was a temporary Interstate Agent during the calendar year, the form also requires a list of interstate operators inspected, operator type, and number of Inspection Units for each operator. The operators and Inspection Units listed should only include those as defined by federal pipeline regulations and should not include extended jurisdiction by state regulation. Notes should be included as needed to explain the information. 2.7.4 Attachment #4: Pipeline Incidents/Accidents This attachment requires a summary or report of incidents/accidents as defined in 49 CFR Part 191 for gas or in 49 CFR Part 195 for hazardous liquid. Incident and accident information will be loaded from PDM, and each State Agency shall verify the information and enter their cause code. 2.7.5 Attachment #5: State Compliance Actions This attachment provides a summary of Probable Violations of pipeline safety regulations, Compliance Actions and civil penalties initiated by the State Agency during the previous calendar year. The summary should not include counts for Probable Violations, Compliance Actions, and civil penalties of State damage prevention laws/regulations. 2.7.6 Attachment #6: State Record Maintenance and Reporting This attachment requires a list of records and reports maintained and required by the State Agency. (See Section 8.3 for minimum requirements) 2.7.7 Attachment #7: State Employees Directly Involved in the Pipeline Safety Program This attachment requires a list by name, title, percent of time, months in program and qualification category of each inspector or Supervisor directly involved in the pipeline safety program during the prior year. Furthermore, it requires a summary of the number of all staff (managers/Supervisors, inspectors/investigators, damage prevention/technical and administrative) working on the pipeline safety program and the person-years devoted to the program during the prior year. If a person listed as a Supervisor in Attachment 7 conducts inspection duties for which Inspection Person-Days are included in Attachment 2, time spent as a Supervisor and Inspector/Investigator should be apportioned accordingly in Attachment 7. Individuals with no time spent in the program should not be listed. (See Table 4.2 for State Inspector Qualification Categories) 2.7.8 Attachment #8: State Compliance with Federal Requirements This attachment requires that the State Agency indicate whether it is in compliance with applicable Federal pipeline safety requirements. It also Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 14#
Attachment 1, passage 26State Participation Requirements requests that the State Agency indicate the frequency its Legislature meets in general session. This information is used by OPS to determine whether applicable Federal regulations have been adopted within 24 months of the effective date or two general sessions of the State Legislature, whichever is longer. 2.7.9 [RESERVED] 2.7.10 Attachment #10: Performance and Damage Prevention Questions This attachment asks each State Agency to outline any planned performance goals along with stating what accomplishments the state has made on damage prevention efforts. Various state damage prevention efforts can be viewed at the links below. https://primis.phmsa.dot.gov/comm/DamagePrevention.htm?nocache=9815 https://primis.phmsa.dot.gov/comm/publications/DPAP-Guide-FirstEdition- 20080911.pdf 2.8 Responsibility to Assist OPS in the Work Management System OPS utilizes the Work Management System (WMS) to generate tasks to create, update and process certain pipeline operator data and to manage intrastate Inspection Units. The pipeline operator data includes both interstate and intrastate pipeline facilities. OPS is dependent on state pipeline safety programs to manage the required tasks for intrastate pipeline facilities. State Agencies can access WMS through OPS’s Off-Network Portal at https://portal.phmsa.dot.gov/PHMSAPortal2. When using the Off-Network Portal, a Network/Portal Username and Password must be entered. The PHMSA contact for WMS is Crystal Stewart who can be reached at crystal.stewart@dot.gov. The tasks assigned to State Agencies are as follows: 1. Managing intrastate Inspection Units, if applicable. 2. Managing (addressing and follow-up) Notifications from Operators for: • Integrity Management (IM) required by 49 C.F.R. 192 and 195. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 15#
Attachment 1, passage 27State Participation Requirements • National Registry required by 49 C.F.R. 191 and 195. • Operator ID Assignment Requests required by 49 C.F.R. 191 and 195. • Safety Related Condition Reports required by 49 CFR 191.23 and 195.55 • Notifications from Operators for 49 CFR § 192.18 More information related to these tasks can be found in Appendix L. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 16#
Attachment 1, passage 28State Regulatory Responsibility 3 State Regulatory Responsibility 3.1 Adoption of Federal Regulations and Requirements A State Agency participating in the pipeline safety program under a Certification is required to adopt Federal pipeline safety regulations or take steps to adopt such regulations. Adoption of applicable Federal regulations may be automatic, require State rulemaking actions, or necessitate State legislative action, and should be adopted within 24 months of the effective date or two general sessions of the State Legislature, whichever is longer. In addition, a state agency may issue additional or more stringent standards concerning intrastate pipelines if they are compatible with Federal regulations. Any interpretation of a regulation adopted by a State Agency must not conflict with any opinion/interpretation issued by PHMSA. Federal pipeline safety regulations incorporate by reference certain Industry Standards. Some standards are available through TechStreet. For standards that cannot be found in Techstreet, contact Jill Nelson – Jill.Nelson@dot.gov for assistance. New requests shall be evaluated on a one-on-one basis in accordance with the PHMSA policy (see Appendix K). Based on an approved request the requester shall obtain either a paper copy of a standard or access to an electronic copy whichever is more cost and/or mission efficient. Incorporated by reference documents may also be available for review on the organization website. 3.2 WinDOT OPS maintains subscriptions through ViaData LP. ViaData has created a new automated system for processing inspector subscriptions to WinDOT. Please visit the following webpage to submit requests: (https://www.viadata.com/government). Users can also make requests through Blackboard or by emailing PHMSA TQ at sharon.webb@dot.gov. Software issues and problems should be addressed directly to sharon.webb@dot.gov. ViaData can be reached at support@viadata.com, at (800) 817-6649, or on the contact page: https://www.viadata.com/contact. 3.3 Waiver of Federal Regulations 3.3.1 Interstate Pipelines Waivers of Federal regulations concerning interstate facilities may be considered only by PHMSA. Interstate agents may not consider such waivers. PHMSA will consult with the interstate agent when an interstate operator requests a waiver. PHMSA currently refers to a waiver as a Special Permit. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 17#
Attachment 1, passage 29State Regulatory Responsibility 3.3.2 Intrastate Pipelines Upon application by an operator, a State Agency may consider a waiver of pipeline safety requirements subject to PHMSA concurrence. Waiver applications for state pipeline safety requirements that are more stringent than the federal minimum pipeline safety standards are not subject to PHMSA concurrence. A waiver may be granted when it is not practical for an operator to comply with a regulation of general applicability. The information found in 49 CFR 190.341(c) provides basic information that should be included in the waiver request. The State Agency is encouraged to consult with OPS on the appropriateness of granting a waiver before formal action is taken. The State Agency should send the proposed waiver request and the contact information for the State Agency technical expert assigned to the waiver review to the following group email: PHMSAOPSStateWaivers@dot.gov. OPS will assign a technical point of contact for the State Agency to work with the State Agency’s technical expert throughout the State Agency’s waiver review process. PHMSA may require additional considerations or conditions to be included in the State Agency’s approval of the waiver. The inclusion of these considerations or conditions in the State Agency’s written approval could avoid PHMSA’s objection to the waiver during PHMSA’s 60-day deliberative process. If a State Agency finds that a waiver request is consistent with pipeline safety and is justified, it may issue written approval under such terms and conditions as are appropriate. Written approval should include a statement of reasons for granting the waiver. If a State Agency finds that a waiver request is not consistent with pipeline safety or is not otherwise justified, it must issue written denial of the request. Written denial should include a statement of reasons. A State Agency must notify PHMSA in writing by registered or certified mail of each waiver granted by the State Agency. Each notice must provide the following information: 1. The name, address, and telephone number of the applicant 2. The safety regulation involved 3. A description of the pipeline facilities involved 4. The justification for approving the waiver, including the reasons why the regulations are not appropriate and why the waiver is consistent with pipeline safety 5. A copy of the State Agency’s order or letter to the applicant 6. All correspondence concerning waivers should be addressed to: Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 18#
Attachment 1, passage 30State Regulatory Responsibility Associate Administrator for Pipeline Safety U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration 1200 New Jersey Avenue, SE Second Floor, East Building Washington, DC 20590 PHMSA will acknowledge receipt of each notice and consider each in the order it was received. PHMSA may provide further opportunity for public comment. If PHMSA does not object to the waiver, it will so notify the State Agency. The waiver is effective upon approval by PHMSA or if there is no action by PHMSA 60 days after the receipt of waiver from State Agency. If, before a waiver is to become effective, PHMSA notifies the State Agency that it objects to the waiver, the action granting the waiver will be stayed. PHMSA will then allow the State Agency an opportunity to present its arguments with opportunity for a hearing. Thereafter, PHMSA will make the final determination whether the waiver may be granted and will notify the State Agency of its decision. In the event of an emergency waiver, the PHMSA written notice and hearing requirements may be omitted if the State Agency finds that notice is impracticable, unnecessary, or not in the public interest. However, the State Agency must immediately notify the PHMSA Director of State Programs of its decision to grant the emergency waiver and follow up with written notification to the Director with 48 hours. After granting the emergency waiver, the State Agency must investigate the circumstances causing the specific emergency and require the operator to act to prevent its reoccurrence in the future. Each State Agency should follow the emergency waiver methods prescribed in 49 U.S.C. 60118(c) (2) of the Pipeline Safety Act (See Appendix A). For all waivers in effect, State Agencies are required to verify that the conditions of those waivers are being met. This includes having the operator amend procedures. Where appropriate, State Agencies must terminate a waiver if it is no longer valid. For all waivers that are no longer in effect (e.g., project is completed, time frame has expired, State Agency termination, code change), State Agencies must notify PHMSAOPSStateWaivers@dot.gov that the waiver is no longer in effect. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 19#
Attachment 1, passage 31Personnel 4 Personnel 4.1 State Agency Minimum Required Inspection Activity As outlined in 49 U.S.C. 60105 (b), each program must have a sufficient number of qualified employees to ensure safe operations of pipeline facilities and take into account factors including – A. The number of miles of natural gas and/or hazardous liquid pipelines in the State, including the number of miles of cast iron and bare steel pipelines. B. The number of services in the State. C. The age of the gas distribution system in the State; and D. Environmental factors that could impact the integrity of the pipeline, including relevant geological issues. 4.1.1 Determination of Inspection Activity To meet the State Agency’s commitment to pipeline safety, each State Agency must maintain an adequate, base-level number of pipeline safety inspection activity days. The inspection activity level is arrived at by each State Agency conducting an operator-by-operator analysis using the SICT. The basis of the inspection activities will include the following inspection types, as applicable. • Standard - Procedures • Standard - Records • Standard – Field • Distribution Integrity Management (DIMP) - program • Distribution Integrity Management (DIMP) – implementation review • Gas Transmission Integrity Management (TIMP) – program • Gas Transmission Integrity Management (TIMP) – field • Hazardous Liquid Integrity Management (LIMP) – program • Hazardous Liquid Integrity Management (LIMP) - field Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 20#
Attachment 1, passage 32Personnel • Operator Qualification (OQ) – program (Prot. 1-8) • Operator Qualification (OQ) – field (Prot. 9) • Design, testing and construction • Investigating Incidents and Accidents • Damage Prevention Activities • On-site Operator Training • Compliance Follow-up • Control Room Management (CRM) • Public Awareness Inspections (PAP) • Drug and Alcohol In addition, the inspection activity analysis will include a notation of any risk factors and other considerations applicable to the operator. Those factors should include, but are not limited to, the following: 1. Material composition of pipelines and various risks associated with those materials (cast iron, unprotected bare steel, etc.) 2. High Consequence Areas (HCA) (transmission lines only) 3. Environmentally sensitive areas (e.g., water supply and crossings) (this is a hazardous liquid issue) 4. Outside force considerations such as hurricanes, seismic activity, landslides, and sinkholes 5. Travel (large geographic area to cover) 6. Damage prevention considerations 7. New or replacement construction activity 8. Compliance issues Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 21#
Attachment 1, passage 33Personnel 9. Mergers, acquisitions, divestitures, name changes, new operators, and changes in operator personnel 10. Shared procedures or programs 11. Safety culture The inspection activity level derived pertains only to the minimum level of pipeline safety inspection activity. The level does not include supervisory or clerical personnel, nor does it include staff requirements for inspection of pipeline facilities that are not covered by Chapter 601. Each State Agency will perform an inspection activity needs analysis on each operator using the “Inspection Activity Analysis” forms shown in section 4.1.5. Results will be summarized in a standard format so that a national analysis of the data may be conducted and tracked. This data will be entered into the SICT located in PHMSA’s database portal at the following link - http://portal.phmsa.dot.gov/PHMSAPortal2. The inspection activity needed for each operator will be developed by analyzing each applicable type of inspection and applying the following criteria: • Determination of inspection duration and frequency based on experience with the operator provided the frequency meets the intervals in Section 5.1. • Answering the number of inspection days needed to complete each inspection activity. • Answering the optimum intended inspection interval based on the need and experience. This interval will consider any known risks and any other relevant factors. • Inspection activity should include all the individuals performing the inspection (e.g., if you send 2 inspectors for 5 days of inspection each, the total would be 10 Inspection Person-Days). • Only include applicable inspections (an LDC with no transmission will not have TIMP as a type of inspection). • Inspections can be listed as fractions, for example if you spend 1 hour out of an 8-hour inspection, it would be appropriate to show 0.125 days. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 22#
Attachment 1, passage 34Personnel • Each State Agency will provide a risk ranking of system pipe for each operator for informational purposes. The ranking will be on a scale of 1- 10 (a score of 10 equals the highest risk). The risk ranking will be low for operators that have modern piping (e.g., coated and cathodically protected steel and polyethylene plastic) and high for operators that have leak-prone piping (e.g., cast iron and bare steel). • Each State Agency will provide a listing of any concerns taken into consideration for the operator being analyzed. (As noted above such as miles of cast iron, miles of unprotected steel, damage prevention concerns, etc.). • Each State Agency will also list any unique considerations valid to the operator which may not be risk related. (Such as travel distance to conduct inspections, etc.). • Similar operators (Master Meter and Municipal, etc.) can be summarized in groups. • For Interstate Agent States, Interstate Operators are not included in this effort. The State Agency should refer to their Interstate Agent inspection plan. 4.1.2 Peer Review Each State Agency’s inspection activity level will be evaluated by a peer-review group made up of the GAC and PHMSA State Programs. The task group will meet and evaluate each State Agency’s inspection activity plan and develop a consensus agreement on the proposed level of inspection activity needed. The peer-review group will examine the recommended inspection activity for the following elements: • Reasonableness of inspection activity based on peer-review group’s knowledge in performing inspections • Reasonableness of inspection activity in comparison to similar operators with similar risks • Whether all inspection elements are being met with respect to the operator’s risks • Has the State Agency considered reasonably known risk? Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 23#
Attachment 1, passage 35Personnel • State Agency input of unique situations in that State • State Agency input of unique attributes of any operator When the peer-review process is completed, final minimum inspection days will be recommended to OPS. OPS will provide written feedback to each State Agency when issues are found, or further explanation of the data is needed. OPS will then communicate final minimum inspection days to each program to be used in performance scoring. 4.1.3 Inspection Activity Examples Each State Agency will provide individual operator assessments for all types of operators under its program jurisdiction. Examples of operator types are as follows with various examples shown below: • Local Distribution Companies (LDC) • Municipal Gas Operators • Master Meter Operators • LPG Operators • Gas Transmission Operators • LNG Operators • Hazardous Liquid Operators – including gathering • Gas Gathering Operators – Offshore, Onshore Type A, B and C • All other jurisdictional operators – (Anhydrous, Carbon Dioxide, Ammonia, etc.) 4.1.4 Updates to SICT The SICT will be updated annually by each program by July 31st each year. Only operators that exist at the time of the update shall be included in the SICT. The results will be subject to peer-review (Section 4.1.2) and OPS consultation with program as needed. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 24#
Attachment 1, passage 36Personnel 4.1.5 SICT Examples Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 25 Personnel LDC Example Company: Number of Service Lines: Number of Inspection Units: LDC Gas Company 625698 20 Type of inspection (1) Total Number of Person-Days to do each type of Inspection by inspector(s) What is your intended (optimum) inspection interval by type of inspection Total Person-Days per Year Standard - Procedures Standard - Records Standard - Field DIMP program DIMP implementation review TIMP program TIMP implementation review TIMP field OQ program (Prot. 1-8) OQ field (Prot. 9) Design, testing & construction Investigating Incidents/Accidents Damage Prevention Activities On-Site Operator Training Compliance Follow-ups CRM PAP Drug and Alcohol 13 1.5 8.666666667 13 1.5 8.666666667 13 1.5 8.666666667 6 5 1.2 13 1.5 8.666666667 4 5 0.8 2 1 2 1 1 1 6 5 1.2 13 1.5 8.666666667 70 1 70 6 2 3 54 1 54 4 1 4 2 1 2 3 5 0.6 13 1.5 8.666666667 2 5 0.4 238 192.2 High Risk Pipe - Ranking* 8 *On a scale of 1-10 - does the company have high risk pipe concerns - 10 is highest concern. If inspect all Inspection Units every year "N/A" is an acceptable answer with explanation below. Listing of risk concerns taken into consideration of inspection intervals - 83 miles cast iron; 283 miles’ bare steel unprotected mains; 1847 miles protected bare steel mains 1079 miles of unprotected bare steel service/yard lines Other Unique Considerations (Travel, Certain Inspection Unit issues, etc.) This LDC has non-HCA transmission mileage Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 26#
Attachment 1, passage 37Personnel Municipal Gas Co. 1058 Municipal Company Example: Number of Service Lines: Number of Inspection Units: 1 Type of inspection (1) Total Number of Person-Days to do each type of Inspection by inspector(s) What is your intended (optimum) inspection interval by type of inspection Total Person-Days per Year Standard - Procedures Standard - Records Standard - Field DIMP program DIMP implementation review TIMP program TIMP implementation review TIMP field OQ program (Prot. 1-8) OQ field (Prot. 9) Design, testing & construction Investigating Incidents/Accidents Damage Prevention Activities On-Site Operator Training Compliance Follow-ups CRM PAP Drug and Alcohol 0.25 2 0.125 0.25 2 0.125 0.25 2 0.125 1 5 0.2 0.25 2 0.125 0 1 0 0 1 0 0 1 0 0.5 5 0.1 0.25 2 0.125 1 1 1 0 1 0 0 1 0 0.25 5 0.05 0 1 0 0 1 0 0.25 2 0.125 0.1 5 0.02 4.35 2.12 High Risk Pipe - Ranking* 2 *On a scale of 1-10 - does the company have high risk pipe concerns - 10 is highest concern. If inspect all Inspection Units every year "N/A" is an acceptable answer with explanation below. Listing of risk concerns taken into consideration of inspection intervals - 0 miles of bare steel main 2 miles of bare unprotected steel service/yard lines Other Unique Considerations (Travel, Certain Inspection Unit issues, etc.) No unusual considerations Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 27#
Attachment 1, passage 38Personnel Transmission Co. 1551 Transmission Company Example: Miles of Transmission Lines: Number of Inspection Units: 3 Type of inspection (1) Total Number of Person-Days to do each type of Inspection by inspector(s) What is your intended (optimum) inspection interval by type of inspection Total Person-Days per Year Standard - Procedures Standard - Records Standard - Field DIMP program DIMP implementation review TIMP program TIMP implementation review TIMP field OQ program (Prot. 1-8) OQ field (Prot. 9) Design, testing & construction Investigating Incidents/Accidents Damage Prevention Activities On-Site Operator Training Compliance Follow-ups CRM PAP Drug and Alcohol 1.7 1 1.7 1.7 1 1.7 1.7 1 1.7 n/a n/a 4 5 0.8 2 2 1 1.7 1 1.7 4 5 0.8 1.7 1 1.7 4 1 4 1 10 0.1 1 5 0.2 0 1 0 1 3 0.333333333 3 5 0.6 1.7 1 1.7 2 5 0.4 32.2 18.43333333 High Risk Pipe - Ranking* 2 *On a scale of 1-10 - does the company have high risk pipe concerns - 10 is highest concern. If inspect all Inspection Units every year "N/A" is an acceptable answer with explanation below. Listing of risk concerns taken into consideration of inspection intervals - 53 miles of bare protected steel, 3% of system Other Unique Considerations (Travel, Certain Inspection Unit issues, etc.) No unusual considerations Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 28#
Attachment 1, passage 39Personnel Hazard Liquid Co. 37 Hazardous Liquid Pipeline Miles of Trunk lines: Number of Inspection Units: 1 Type of inspection (1) Total Number of Person-Days to do each type of Inspection by inspector(s) What is your intended (optimum) inspection interval by type of inspection Total Person-Days per Year Standard - Procedures Standard - Records Standard - Field DIMP program DIMP implementation review LIMP program LIMP implementation review LIMP field OQ program (Prot. 1-8) OQ field (Prot. 9) Design, testing & construction Investigating Incidents/Accidents Damage Prevention Activities On-Site Operator Training Compliance Follow-ups CRM PAP Drug and Alcohol 0.41 2 0.205 0.41 2 0.205 0.41 2 0.205 N/A N/A N/A N/A 0.1 5 0.02 0 1 0 0 1 0 0.5 5 0.1 0.41 2 0.205 1 1 1 0 1 0 0 1 0 0.41 5 0.082 0 1 0 0 1 0 0.41 2 0.205 0.1 5 0.02 4.16 2.247 High Risk Pipe - Ranking* 1 *On a scale of 1-10 - does the company have high risk pipe concerns - 10 is highest concern. If inspect all Inspection Units every year "N/A" is an acceptable answer with explanation below. Listing of risk concerns taken into consideration of inspection intervals - new coated protected steel pipe and Class 1 area Other Unique Considerations (Travel, Certain Inspection Unit issues, etc.) No unusual considerations - No USA's Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 29#
Attachment 1, passage 40Personnel 4.2 Allocation of Effort For each full-time equivalent (FTE), pipeline safety inspector position, the State Agency must devote a minimum of 85 Inspection Person-Days (see Glossary) to pipeline safety compliance activities each calendar year. Staff that devotes only a portion of their time to compliance activities should produce a corresponding percentage of Inspection Person-Days. The level of inspection effort reported by the State Agency will be scored by OPS during the annual review of the State Agency’s Progress Report. 4.3 Training TQ provides nationwide training and technical assistance in support of OPS, and their efforts to assure safety in the transportation of gas and hazardous liquids in the nation's pipelines. TQ develops and delivers many training courses that are directly related to the determination of an operator’s compliance with the various pipeline safety regulations. Instructors for these courses are permanent TQ employees as well as federal, state, and contract associate staff. TQ’s pipeline safety training is performance-oriented and consists of web- based training (WBTs), lectures, written material, demonstrations, practical exercises, group discussion, and video presentations. Each course focuses on a specific area of pipeline safety regulations. Students apply classroom instruction to practical scenarios by participating in group and individual “hands- on” lab exercises. Some courses may be taught virtually. These are referred to as Virtual Instructor Led Training (VILT) courses. To attend certain courses, the student must complete self-paced training. To facilitate this process, TQ automatically enrolls students in online self-paced WBT courses that must be completed before attending these courses. It is important to note that failure to complete the required WBT training by the specified deadline will result in removal from the roster and placement back on the waitlist. 4.3.1 Required Training TQ offers several training programs described as learning paths (outlined in Appendix C). Each learning path identifies the required courses for completion. The paths also show the prerequisite relationship of courses: all course prerequisites must be completed successfully before a student can attend subsequent training. Requirements for successful completion are covered in the TQ documents for each class. The Gas and Liquid Inspector paths, commonly referred to as the “core courses,” are the foundation for more advanced paths. For example, a gas inspector’s training begins with the Gas Inspector Path. Then, if their Program Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 30#
Attachment 1, passage 41Personnel Manager approves, the inspector can continue their training with an advanced path such as the Gas Integrity Management path. Beginning with the completion date of the first instructor or virtual instructor-led training course, an inspector has three years to attempt all training unique to the core Gas Inspector and Liquid Inspector learning paths. The 3-year time-to-completion period may be extended to 5-years if students are required to retake courses to successfully meet academic standards. The required core learning path courses should be requested as soon as practical after employment of the inspector. In the event a required course is not scheduled by TQ within the 3-year completion period, an inspector will not be deemed unqualified if they are registered or waitlisted for the course(s). If a new course is added to a path, an inspector has an additional three years to attempt it (five years to successfully complete). If the new course is replacing an existing course, students do not have to return to TQ to retake the newer class. However, TQ strongly recommends that experienced students return and take the newer courses to enhance their knowledge. Lead inspectors on Standard Inspections must meet the necessary qualifications as described in Table 4-1. Lead inspectors on specialty inspections must complete all mandatory training for that inspection type prior to leading that type of inspection. For example, OQ lead inspectors must successfully complete the OQ course before conducting an OQ inspection. In addition, at least one inspector/Program Manager from each State Agency must successfully complete the TQ sponsored Root Cause/Incident Investigation course. Damage Prevention technicians/engineers or other agency personnel may attend TQ courses on a space available basis. The purpose in attendance of the course(s) is for personal safety and to gain knowledge in recognizing possible pipeline safety violations. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 31#
Attachment 1, passage 42Category Engineering Degree Significant Experience Limited Experience Personnel Table 4-1 - Guidelines for Determining Minimum Qualifications of State Agency Lead Inspectors to Conduct Standard Inspections Qualification Guidelines May lead an inspection if they have: • An engineering degree from an accredited engineering college or university and / or is a registered professional engineer and • An EEE* in gas or liquid pipeline engineering, enforcement, construction, inspection, or other related job functions; or • Completed appropriate TQ and / or State Agency training as determined by the Program Manager. May lead an inspection if they have: • A minimum of 5 years of EEE* in gas or liquid pipeline engineering, enforcement, construction, inspection, or other related job functions and • Completed appropriate TQ and / or State Agency training as determined by the Program Manager. May lead an inspection if they have: • Less than 5 years of EEE* in gas or liquid pipeline engineering, enforcement, construction, inspection, or other related job functions and • Completed the Gas Inspector or Liquid Inspector core learning path requirements and / or • Completed State Agency training as determined by the Program Manager. * Equivalent Education/Experience (EEE) - A combination of college level (degree or non-degree) education or training and technical experience that has furnished the inspector with the knowledge, skills, and abilities to conduct independent pipeline safety inspections and investigations. • Using an on-the-job evaluation process/procedure developed by the State Agency, each Program Manager shall have the option of considering the needs of the State Agency, size of the inspection staff and other factors in deciding whether an inspector is qualified to be a lead inspector on Standard Inspections prior to completion of the full required TQ learning path. • Evaluation processes/procedures used to qualify inspectors as lead inspectors prior to the completion of training shall contain the qualifying criteria, factors, and steps necessary to achieve qualification for each Standard Inspection activity. The processes/procedures shall be documented by the Program Manager on appropriate State Agency evaluation forms noting the dates that each step of the process was completed by the inspector and signed off by the Program Manager. If Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 32#
Attachment 1, passage 43Personnel the Program Manager is not available or does not have pipeline safety inspection experience, the State Agency may request PHMSA State Programs Director to conduct the evaluation of the inspector using these guidelines. 4.3.2 Course Re-Testing If a student fails a course, TQ recommends they retake the course in its entirety and will automatically waitlist the student for the subject course. However, at the program manager’s request, TQ will consider allowing a student who failed a course to retake the course final exam in lieu of repeating the course if the following conditions are met: 1. The student’s initial overall score was within ten percent of mastery level (the minimum passing score). 2. Achievement of a higher retest score will raise the overall grade to the required minimum passing score. If either of the conditions are not met, the student is required to reenroll and complete the failed course in its entirety. If a Program Manager retest request is approved, the retest must be taken within sixty days of the failure. IMPORTANT NOTE: PHMSA- PL1250 Safety Evaluation of Gas Pipeline Systems Course and PHMSA-PL2258 Safety Evaluation of Hazardous Liquid Pipeline Systems Course are not approved for retesting and must be retaken in their entirety. 4.3.3 Training Waivers OPS will consider granting a waiver from the recommended 3-year training period or from initial attendance at individual TQ courses on a case-by-case basis. Descriptions of waivers follow. • Extension of Time Waiver - A State Agency may request an extension of time waiver if an inspector cannot complete a required course within the 3-year period because of serious illness, maternity leave, or uncontrollable workload demands (e.g., involvement in accident investigation). If an inspector cannot complete a required course within the 3-year period because class slots are not available, the State Agency must include TQ verification of the class status and the date of the State Agency’s registration submittal. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 33#
Attachment 1, passage 44Personnel • Permanent Waiver - A State Agency may request a permanent waiver if an inspector has had previous training, education, or on-the-job experience that provides an equivalent level of knowledge presented in the course. The State Agency must clearly demonstrate that the inspector’s training is equivalent to the required TQ training. If an inspector takes a similar job in another State Agency’s pipeline safety program, TQ training credits will be transferred to the new State Agency. 4.3.4 Procedures for Requesting a Training Waiver • The Program Manager petitions the PHMSA Director of State Programs requesting waiver of the requirements. This request includes justification and must specify whether it is for an extension of time or permanent waiver. An extension of time waiver should not be requested sooner than the calendar year within which the 3-year grace period ends. An extension of time waiver request should include the proposed date to which the training requirement would be extended. • The PHMSA Director of State Programs reviews the package, with concurrence of the Director of TQ, and decides on whether to grant the waiver. Written approval or denial is sent to the requesting State Agency. A copy of this response is sent to TQ. If denied an appeal may be submitted to the PHMSA Associate Administrator of Pipeline Safety for further consideration. 4.4 Individual Qualifications Each State Agency should be staffed with qualified personnel who are experienced in pipeline operations, pipeline safety operations and/or have an educational background in engineering or related technical fields. Personnel with less than these minimum qualifications may be hired provided the State Agency takes immediate steps (scheduling TQ classes as available) to provide training opportunities to meet the required level of competency. Staff should not be permitted to conduct independent activities until it is determined that they have demonstrated the ability and proficiency to perform their duties satisfactorily. OPS has defined five qualifications categories for program staff. (See Table 4-2) Table 4-2 - Categories and Qualifications for State Agency Inspectors Category Qualifications Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 34#
Attachment 1, passage 45Personnel I • Has an engineering degree from an accredited engineering school or is a registered professional engineer and • Has a minimum of 3 years’ experience in gas or liquid pipelines or the enforcement of pipeline safety regulations at the Federal or State level and • Has received completion certificates or waivers for all applicable Gas Inspector or Liquid Inspector core learning path requirements A • Has an engineering degree from an accredited engineering school and • Has received completion certificates or waivers for all applicable Gas Inspector or Liquid Inspector core learning path requirements B • Is a registered professional engineer and • Has received completion certificates or waivers for all applicable Gas Inspector or Liquid Inspector core learning path requirements II C • Has a minimum of 5 years of experience in gas or liquid pipelines or the enforcement of pipeline safety regulations at the Federal or State level and • Has received completion certificates or waivers for all applicable Gas Inspector or Liquid Inspector core learning path requirements D III • Has a minimum of 10 years of experience in gas or liquid pipelines or the enforcement of pipeline safety regulations at the Federal or State level and • Has received completion certificates or waivers for half of the applicable Gas Inspector or Liquid Inspector core learning path requirements • Has a college degree or • Has a minimum or 5 years of experience in gas or liquid pipelines or the enforcement of pipeline safety regulations at the Federal or State level IV • Has less than 5 years of experience in gas or liquid pipelines or the enforcement of pipeline safety regulations at the Federal or State level V • Has less than 1 year of experience in gas or liquid pipelines or the enforcement of pipeline safety regulations at the Federal or State level Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 35#
Attachment 1, passage 46Personnel 4.5 Continuing Education and State Inspector Mentoring Program In addition to the required TQ pipeline safety courses, the State Agency is encouraged to continue to send its safety inspectors to TQ classes, industry- sponsored seminars, and other pipeline safety courses. Such a continuing education program will provide for a well-rounded, technically up-to-date training experience. Costs of such outside training may be charged to Base Grant in accordance with Training and Education in Section 9.15.1. In coordination between OPS and NAPSR a mentoring program for State Agency inspectors is established to provide additional training opportunities. The program is described in Appendix H. The program described in Appendix H allows for an individual to customize the additional training to meet their development needs. To initiate the process, the application in Appendix H can be completed by the Program Manager requesting training through mentoring for an individual(s) and submitted to the PHMSA Director of State Programs for approval. 4.6 Changes in State Agency Personnel Any official change in the Program Manager shall be communicated immediately to PHMSA Director of State Programs and respective OPS Region Director. Any contact information, names of personnel affected, and transition plan shall be communicated, if known. This notification shall be in writing and from the head of the State Agency. As a courtesy, written communication or an email should be provided to PHMSA Director of State Programs regarding any change in the head of a State Agency. In addition, each State Agency shall notify TQ and PHMSA Director of State Programs as soon as practical of any changes to their pipeline inspection staff so training records and database(s) access may be updated accordingly. Training requests for inspectors should be added immediately into the TQ training database so enrollments can be made into required TQ training courses and resources are made available to accommodate the needs of all State Agencies. The PHMSA Director of State Programs will request the appropriate database administrator to remove access for any departed inspection staff member(s). State Agencies can obtain a form to complete by navigating to the User Access Forms on the NAPSR private site. Once in User Access Forms click through the following links in sequence: - NAPSR Team Site, Home Page, left side Quick Link, PHMSA User Request Access Forms link/folder. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 36#
Attachment 1, passage 47Personnel - Fill in the appropriate information to add, delete, or update an employee. Email the form to UserAccessRequest@napsr.net. The email must come from the Program Manager for internal control purposes. 4.7 Program Manager/Supervisor Training Each State Agency shall ensure the Program Manager or Supervisor is knowledgeable of pipeline safety technology, enforcement applications, and administrative procedures (i.e., PHMSA Grant-in-aid process, etc.). Each Program Manager or Supervisor shall obtain the necessary knowledge by completing the mandatory TQ learning paths listed below. The Gas Inspector Path or Liquid Inspector Path is not required if the State Agency does not have a Gas or Liquid Program. If Program Managers or Supervisors also perform inspections, they must meet the requirements for inspectors contained in Section 4.3.1. Program Managers or Supervisors will have a period of five years from the date of their appointment to complete the required training courses. Supervisor means those individuals as defined in the Glossary. Refer to 4.3.2 for failure and retesting. Course prerequisites must also be met before attending the training class. • Gas Inspector Path • Liquid Inspector Path • Failure Path 49 U.S.C. 60124 requires that DOT report the qualifications and number of State Agency pipeline safety staff in its bi-annual report to Congress. This information is provided by TQ. Inspector qualifications are used as a metric for scoring a State Agency’s performance for grant funding. 4.8 New Program Manager Orientation PHMSA State Programs provides an orientation session for newly appointed Program Managers. PHMSA State Programs may also conduct an orientation session for existing Program Managers upon request. Requests for orientation sessions must be provided to the PHMSA Director of State Programs. Orientation sessions will be scheduled upon the availability of resources. NAPSR also provides new Program Manager training during the annual NAPSR National Meeting. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 37#
Attachment 1, passage 48Inspection and Compliance Program 5 Inspection and Compliance Program 5.1 Inspection Inspections of pipeline operators must be made in a positive, constructive, and comprehensive manner. State Agencies may obtain technical support for addressing any inspection related issues by contacting your State Liaison, Region Director, or PHMSA Director of State Programs. The effectiveness of the State Agency’s pipeline safety efforts depends on information obtained through inspections and evaluation of operator compliance. Each State Agency must, therefore, have a current written plan for its pipeline safety program. At a minimum, the plan should include the following eight elements: 1. Operator data - Each State Agency must maintain a list of the name and mailing address of each jurisdictional operator. The official address for each operator should be the one to which all pipeline- safety-related correspondence is sent and considered the official notice to the operator. In addition, information about the pipeline location and/or service areas should be maintained. 2. Procedures for determining inspection priorities - Each State Agency must develop a risk-based procedure for scheduling when an Inspection Unit is to be evaluated unless it can demonstrate the inspection interval it utilizes eliminates the need for a risk-based approach and all Inspection Units are inspected annually. The inspection intervals in 5.1.2 a. will begin on December 31st of the year a new operator or unit is added to Attachment 3 of the Progress Report. Appendix S contains a sample risk prioritization model that can be followed to incorporate a risk-based procedure into a written plan. This procedure should provide for the establishment of an inspection priority list and consider the following data-driven criteria: a. The length of time since the last inspection. i. Standard Inspections (General Code Compliance) as defined in Section 5.1 4. a. A State Agency must complete a Standard Inspection of each operator’s Inspection Units within a five-year time interval as defined in Section 5.1 2. a. iv. Beginning in calendar year 2019, a State Agency must complete a Standard Inspection of each LNG operator’s Inspection Units within a three-year time interval, except for Drug and Alcohol which remains on a five-year interval, as Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 38#
Attachment 1, passage 49Inspection and Compliance Program defined in Section 5.1 2. a. v. A change in operator does not alter the five-year or three-year time intervals. ii. Program Inspections (Operator Qualification, Gas Transmission Integrity Management, Gas Distribution Integrity Management or Hazardous Liquid Integrity Management) A State Agency must complete all applicable Program Inspections of each operator’s Inspection Units within a five-year time interval. A change in operator does not alter the five-year time interval. iii. At least 20% of Inspection Person-Days each year must be spent on Design, Testing and Construction Inspections. The 20% will be applied to the SICT minimum requirement which is communicated to each State Agency by July 31st of the previous year. This requirement does not apply to hazardous liquids programs. iv. A State Agency can meet the five-year interval requirement as follows: 1. Date-to-Date Planning Approach: A State Agency may choose to track and plan their inspections on a date-to-date approach. Under this methodology from the completion date of inspection as stated in Section 5.1(5), for example March 15, 2020, to the beginning date of the next inspection, March 15, 2025, would not exceed five 365-day periods between the inspection dates. 2. Calendar Year Planning without Grace Period Approach: A State Agency may choose to plan and track inspections on a calendar year basis but not to exceed the five-year date-to-date goal. In this approach a State Agency would conduct the initial inspection in Calendar Year One and the re-inspection in Calendar Year Five. An example of this would be: CY 2020 date of inspection falls within this calendar year (Calendar Year One) Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 39#
Attachment 1, passage 50Inspection and Compliance Program CY 2021 skip CY 2022 skip CY 2023 skip CY 2024 – date of reinspection falls within this calendar year and starts cycle again with the reinspection date (Calendar Year Five/Calendar Year One for next cycle) CY 2025 skip CY 2026 skip CY 2027 skip CY 2028 – reinspection date falls within this calendar year and start cycle again with the reinspection date (Calendar Year Five/Calendar Year One for next cycle) 3. Calendar Year Planning with Grace Period Approach: A State Agency may schedule inspections as noted below which provides for a grace period of up to a year in the most extreme circumstance beyond the five-year period between inspections. CY 2020 – inspection date occurs within calendar year CY 2021 – skip CY 2022 – skip CY 2023 – skip CY 2024 – skip CY 2025 – reinspection date occurs within calendar year (Will not meet requirements if Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 40#
Attachment 1, passage 51Inspection and Compliance Program reinspection does not occur in this calendar year and occurs in calendar years CY2026 or later) CY 2026 – skip CY 2027 – skip CY 2028 – skip CY 2029 – skip CY 2030 – reinspection date occurs within calendar year (Will not meet requirements if reinspection does not occur in this calendar year and occurs in calendar years CY2031 or later) v. A State Agency can meet the three-year interval requirement for Standard Inspection of each operator’s LNG Inspection units as follows: 1. Date-to-Date Planning Approach: A State Agency may choose to track and plan their inspections on a date-to-date approach. Under this methodology from the completion date of inspection as stated in Section 5.1(5), for example March 15, 2020, to the beginning date of the next inspection, March 15, 2023, would not exceed three 365-day periods between the inspection dates. 2. Calendar Year Planning without Grace Period Approach: A State Agency may choose to plan and track inspections on a calendar year basis but not to exceed the three-year date-to-date goal. In this approach a State Agency would conduct the initial inspection in Calendar Year One and the re-inspection in Calendar Year Three. An example of this would be: CY 2020 date of inspection falls within this calendar year (Calendar Year One) CY 2021 skip Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 41#
Attachment 1, passage 52Inspection and Compliance Program CY 2022 – date of reinspection falls within this calendar year and starts cycle again with the reinspection date (Calendar Year Three/Calendar Year One for next cycle) CY 2023 skip CY 2024 – reinspection date falls within this calendar year and start cycle again with the reinspection date (Calendar Year Three/Calendar Year One for next cycle) 3. Calendar Year Planning with Grace Period Approach: A State Agency may schedule inspections as noted below which provides for a grace period of up to a year in the most extreme circumstance beyond the three-year period between inspections. CY 2020 – inspection date occurs within calendar year CY 2021 – skip CY 2022 – skip CY 2023 – reinspection date occurs within calendar year (Will not meet requirements if reinspection does not occur in this calendar year and occurs in calendar years CY2024 or later) CY 2024 – skip CY 2025 – skip CY 2026 – reinspection date occurs within calendar year (Will not meet requirements if reinspection does not occur in this calendar year and occurs in calendar years CY2027 or later) b. The history of the Inspection Unit (leak history, prior Non- compliance, accident/incident history, excavation damage trends and any other information available from the operator’s annual reports, etc.) Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 42#
Attachment 1, passage 53Inspection and Compliance Program c. Internal and external events affecting the Inspection Unit (construction, recent changes in operator personnel or operating procedures, etc.) d. For large operators, rotation of locations inspected 3. Written procedures/guidelines for Inspectors covering each type of required inspection. To ensure the efficient, effective, and consistent completion of State Agency conducted inspection activities the State Agency must develop detailed written procedures for reviewing operator compliance with the State and Federal pipeline safety regulations. The procedures must provide detailed guidance for inspectors conducting each type of inspection and when appropriate cover the following key inspection activities: a. Pre-Inspection Planning: Those activities conducted by the inspector prior to conducting a quality in-depth inspection. Pre-Inspection Planning should include: 1) Directions for acquiring the appropriate documents, forms, equipment, and personal protection equipment needed for the type of inspection being conducted; 2) Directions for reviewing the operator’s available information in state files and state/federal databases to become familiar with the operator’s system and inspection issues; 3) Conduct a review of previous inspection reports including violations cited to identify past inspection issues; the review may require additional follow-up actions; and 4) Directions for providing operator notification of the inspection, coordinating expectations with the operator, and scheduling the inspection visit. At times, there may be opportunities for a State Agency to collectively conduct an inspection with OPS and/or other State Agencies when regulated assets are covered under the same operator programs such as OQ, CRM, Drug/Alcohol, or IM. In this situation, OPS encourages State Agencies and/or OPS Regions to coordinate to conduct joint inspections when possible. A State Agency wanting to conduct a joint inspection with OPS or other State Agency that occurs within or outside of their home state can contact the regional PHMSA State Programs Liaisons to assist with any coordination activities. Although conducted as a joint inspection, each State Agency must follow their State Agency specific inspection procedures Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 43#
Attachment 1, passage 54Inspection and Compliance Program and provide at least one inspector qualified for the type of inspection being performed. b. Inspection Activities: Those activities required for conducting a thorough and comprehensive inspection. Inspection Activities should include: 1) Directions for conducting an opening interview with the operators’ representatives present at the inspection visit; 2) Directions for reviewing operator procedures, records, and pipeline facilities in the field; 3) Directions for completing inspection documentation; 4) Directions for conducting an exit interview with the operator’s representatives; 5) Instructions for documenting the potential enforcement issues found during the inspection and discussion with the operator’s representatives on the findings, and; 6) Directions on access to operator’s records, pipeline facilities or requesting from the operator clarification on documentation. c. Post Inspection Activities: Those activities required after an inspection is completed. Post Inspection Activities should include: 1) Verification all required data points are uploaded or entered into the proper state and federal data bases within a reasonable time; 2) Instructions for the gathering and updating new information concerning the operator; 3) Detailed instructions for completion and filing all necessary paperwork as a result of the inspection, including time limits for processing probable compliance/enforcement action; 4) Detailed instructions for the retention of inspection records and documents including date of destruction if required. 4. Written procedures that provide for methodical, systematic, comprehensive, and consistent inspections. To properly conduct an inspection of an operator’s facilities, an inspector shall utilize an inspection form or checklist referenced to the applicable Federal and/or State regulations. IA and Federal Inspection forms will be updated at times when PHMSA issues regulatory changes. The most recent inspection form revision can be accessed in the PHMSA Common Forms section of FedSTAR. IA Desktop and IA Mobile applications may be downloaded at https://primis.phmsa.dot.gov/IA-Releases/IA-D/. State Agencies are not precluded from using their own forms if the State Agency’s forms cover all applicable code requirements addressed on Federal Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 44#
Attachment 1, passage 55Inspection and Compliance Program Inspection forms. At a minimum, an inspection plan should cover the following types of inspections: a. Standard (General Code Compliance) – a comprehensive and thorough review of an operator’s compliance records, operations and maintenance plans including reviews required by 49 U.S.C. § 60108(a) (Section 114 of the Pipes Act of 2020), emergency procedures, public awareness plans, control room management, drug and alcohol programs and pipeline facilities. This would include, at a minimum, an evaluation of such items as corrosion control, leakage surveys, overpressure protection and pressure regulating equipment, odorization levels and equipment, repaired and/or active leaks, emergency valves, emergency response etc. This includes: i. Any field verification of an operator’s compliance records and activities relating to LNG facilities. ii. Individual day(s) exclusively inspecting any specific item under a Standard Inspection. For example, exclusive day(s) inspecting/evaluating specific items such as regulator stations, valves, odorization, leak surveys, corrosion, etc. iii. A comprehensive review of all components should be completed within a time specified by the State Agency’s procedure manual. A comprehensive review includes both records and field verification of compliance items. iv. Control Room Management – inspections of requirements of 49 CFR 192.631 or 49 CFR 195.446. Inspection Person-Days should be included in the Standard Inspections column of Attachment 2 of the annual Progress Report(s) until the Progress Report is revised to include a column for Control Room Management inspections. v. Drug and Alcohol – these inspections are conducted using PHMSA Anti-Drug and Alcohol Misuse Programs Inspection Protocol Form (Form 4.1) and completing Protocol Areas A through E, IA, or an equivalent form. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 45#
Attachment 1, passage 56Inspection and Compliance Program A State Agency may choose to utilize the Drug and Alcohol inspection results of another State Agency or PHMSA to meet its inspection requirements. Drug and Alcohol inspection results may be found using IA, PDM or by contacting the other State Agency. The year in which the inspection was performed by the other State Agency will be considered the year in which the inspection was performed for determining the inspection frequency in Section 5.1 2. a. i. There is no interval requirement if a state chooses to utilize PHMSA Drug and Alcohol inspections. A State Agency shall perform and document the following to utilize another State Agency’s or PHMSA’s Drug and Alcohol inspection results: i. obtains written permission from the other State Agency (no permission is required from PHMSA). ii. confirm that non-compliances that affect your State have been corrected. iii. review any changes to the operator’s plan that have occurred since the other State Agency’s or PHMSA’s inspection was performed. iv. review records specific to your State; and notify the other State Agency and/or PHMSA of any issues found. vi. Any inspection would be considered a Standard Inspection unless otherwise noted in b. through h. below: b. Design, Testing and Construction – this includes construction activities, evaluation of design and the integrity testing of new or replacement facilities. Review of construction documentation may be included as part of construction inspection days; however, the majority of inspection time should be in the field inspecting construction. c. Operator Training –this would include a supervisor/inspector /investigator, damage prevention/technical staff member making a requested and announced presentation at an operators’ training/safety meeting, gas/liquid association seminar/conference, damage prevention conferences or TQ Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 46#
Attachment 1, passage 57Inspection and Compliance Program seminar pertaining to the Pipeline Safety Regulations that are enforced by your State Agency. Training may be conducted on location or a common site for multiple operators. d. IMP - Integrity Management Program – these are inspections involving integrity management inspections on Hazardous Liquid, Gas Transmission and Gas Distribution lines. Program procedures need to ensure all programs are up to date along with monitoring progress on operator tests and remedial actions. An annual review is necessary on the implementation of integrity management programs of large operators. IM Guidance is available on the OPS web site in the Technical resources page https://primis.phmsa.dot.gov/ as well as the enforcement guidance located in the PHMSA Electronic Reading Room at http://www.phmsa.dot.gov/foia/e-reading-room. Technical support for inspectors conducting IM inspections is available by initiating contact with the designated region OPS State Program Liaison. Subject matter experts for the specific topic will be identified and made available for consultation and support. e. OQ - Operator Qualification – these are inspections of an operator’s plans using Form 14 OQ Plan Review, IA, or an equivalent form. If the inspection is spent primarily doing OQ field validation activities, the time should be reported in this category, otherwise report time in the respective category for the primary scope of the inspection. f. Investigating Incidents/Accidents – this would include any potential Incident/Accident activities and failure investigations, including any pertinent follow-up investigative activities. g. Damage Prevention Activities – Inspection and enforcement activities related to inspections and enforcement of 49 CFR 192.614 or 49 CFR195.442. h. Compliance Follow-up – inspections or evaluations to see if actions are completed as requested to an operator from a previous inspection or Compliance Action. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 47#
Attachment 1, passage 58Inspection and Compliance Program 5. Procedures for notifying an operator when Non-compliance is identified. Upon completion of an inspection, other than incident investigations, the State Agency shall: (1) within 30 days, conduct a post-inspection briefing with the owner or operator of the gas or hazardous liquid pipeline facility inspected outlining any concerns; and (2) within 90 days, to the extent practicable, provide the owner or operator with written preliminary findings of the inspection (Inspection findings are defined as being any Non-compliance found after the investigation is complete). An inspection, where a Non- compliance is found, is considered complete as soon as practical after all data or necessary information is reviewed and/or gathered to substantiate whether compliance requirements have been met. This may be prior to the completion of the review of all compliance requirements of an operator and the State Agency should ensure findings are issued promptly after the review of any individual items is complete. In the event there are no findings associated with an operator inspection, the State Agency should refer to its procedure on inspection closure. State Agencies will be required to report the number of days they have exceeded the 30- or 90-day requirements for an individual operator when requested by OPS. In addition to the 30- and 90-day requirements above, a written Compliance Action detailing the Probable Violations shall be sent with the Program Manager’s signature (or higher-level State Agency official) to a company officer if the operator is a private corporation or to the chief executive officer of a locality (e.g. – mayor of a municipality, chairman of the board of a quasi-governmental unit such as a utility district). The written Compliance Action should also include applicable civil penalties in which the operator may be subject to for failure to comply with regulations. If this written Compliance Action is sent within 90 days of the completion of the inspection, then this written Compliance Action shall be considered as meeting the 90-day requirement as well. The operator shall be notified immediately of any hazardous or unsafe situation discovered during the inspection. The State Agency’s compliance procedures must include that the operator provide a written response within a specified time for correcting Probable Violations. The procedures shall include the types of Compliance Actions available to the State Agency. Examples of Compliance Actions may include, but are not limited to, Warning Letters, Notice of Probable Violation, and Compliance Orders. Each Compliance Action will have a brief description of the process and when it will be recommended for use. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 48#
Attachment 1, passage 59Inspection and Compliance Program Each State Agency participating in any joint inspection, with OPS and/or other State Agencies, must follow its own procedures for enforcement of any Probable Violations found to be affecting facilities under the State’s jurisdiction. 6. Procedures for follow-up activities to ensure that proper corrective action has been taken by the operator within a specific time frame after notification of Non-compliance. Depending on the seriousness of the Non-compliance and the circumstances involved, a written response from the operator documenting the corrective actions taken may be sufficient. The State Agency must conduct follow-up actions when Non-compliance is discovered during an inspection. The determination of the appropriate procedure for ensuring that all Non-compliance is corrected is the responsibility of the State Agency. However, the State Agency must maintain a complete record of each Non- compliance found and have a review procedure that will ensure that proper and timely follow-up activity has been completed for each Non-compliance. Procedures should outline when the program considers Probable Violations are closed. This information will be reported on Attachment 5 of progress report. Probable Violations still pending at end of each calendar year will be reported as carryover Probable Violations on the progress report Attachment 5. 7. Recordkeeping procedures to document the results of inspection, follow-up, and Compliance Actions taken. The State Agency must keep records of all pipeline safety inspections and follow-up activities. Inspection records should include the inspection dates, the operator/Inspection Unit, the name of the inspector, the location and type of facilities inspected, the names and titles of operator staff contacted at the Inspection Unit, the regulation sections checked for compliance, and the resulting evaluation conclusions. Follow-up records should include all correspondence or other contact between the State Agency and the operator, the results of follow-up inspections, and other information necessary to demonstrate that the Non-compliance has been corrected. 8. NTSB Recommendations. Each inspection plan should include provisions to ensure any applicable safety recommendations developed by NTSB, and accepted by the Secretary, are followed by pipeline operators under each state jurisdiction. OPS expects that each State Agency will ensure operators follow these recommendations and may be included in their annual evaluation in accordance with 49 CFR 198.13 (b) (2). Each plan should confirm Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 49#
Attachment 1, passage 60Inspection and Compliance Program that all operators are addressing the following NTSB recommendations (if applicable): • Did the state review operator procedures for determining if exposed cast iron pipe was examined for evidence of graphitization and if necessary remedial action was taken? • Did the state review operator procedures for surveillance of cast iron pipelines, including appropriate action resulting from tracking circumferential cracking failures, study of leakage history, or other unusual operating maintenance condition? (Note: See Gas Piping Technology Committee’s ANSI Z380.1, Guide for Gas Transmission, Distribution and Gathering Piping Systems which can be obtained through the American Gas Association • Did the state review operator emergency response procedures for leaks caused by excavation damage near buildings and determine whether the procedures adequately address the possibility of multiple leaks and underground migration of gas into nearby buildings Refer to 4/12/01 letter from PHMSA in response to NTSB recommendation P-00-20 and P-00-21? • Did the state review operator records of previous accidents and failures including reported third-party damage and leak response to ensure appropriate operator response as required by 49 CFR 192.617 or 49 CFR 195.402(c)(5)? • Did the state review operator procedures for determining areas of active corrosion on liquid lines in sufficient detail? • Did the state adequately review for compliance operator procedures for abandoning pipeline facilities and analyzing pipeline accidents to determine their causes? • Is the state aware of environmentally sensitive areas traversed by or adjacent to hazardous liquid pipelines? • Ensure that gas distribution pipeline operators are using best practices recommended by the manufacturer in their operations and maintenance manuals and/or distribution integrity management programs, including using the specified tools and methods, to correctly install PermaLock mechanical tapping tee assemblies. • Did the state verify operators that operate low pressure distribution systems enhanced processes and procedures to include the failure modes and effects analysis, or equivalent structured and systematic methods, to identify and mitigate possible over pressure failure events? Did the state verify these operators developed and implemented procedures for construction-related work specific to low-pressure distribution systems, such as repairs, uprates in pressure or replacement of pipeline or pressure regulation facilities? Refer to NTSB Recommendations P-19-14 and P-19-15 and PHMSA’s response to the recommendations. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 50#
Attachment 1, passage 61Inspection and Compliance Program Note: A complete list of components of an operating plan is contained in the Pipeline Safety Program Evaluation form used by OPS during the annual evaluation of the State Agency’s program. 9. Advisory Bulletins Issued By PHMSA Each inspection plan should include provisions to ensure any applicable Advisory Bulletins issued by PHMSA are acted upon by pipeline operators under each state jurisdiction. State Agencies must verify Operators took appropriate action regarding advisory bulletins issued since the calendar year of the previous program evaluation. 5.2 Compliance An important aspect of any State Agency’s compliance program involves the gathering of the necessary evidence for documenting Non-compliance. After each inspection, the findings should be documented and include an account of the situations encountered during the inspection and a copy of the inspection checklist. The documentation must identify and describe each regulation with which the operator is believed to be in Non-compliance. Copies of relevant operator records, statements from operator personnel, photographs, calculations, and all other data pertaining to each issue of Non-compliance should be made a part of the documentation. 5.2.1 Procedures for State Agencies with a Section 60105 Certification Compliance Actions should contain a statement of the Agency’s enforcement authority and authorized civil penalty amounts provided by state statute. Because of the wide variation in State laws and administrative procedures, each State Agency must summarize its formal compliance process in the State Agency’s written program procedures. PHMSA may issue a Stay of Enforcement of a federal minimum pipeline safety standard (regulation) for a defined time period. This Stay of Enforcement does not affect a State Agency ability to enforce the regulation. PHMSA may ask State Agencies to voluntarily follow the Stay of Enforcement, but they are not obligated to do so. A State Agency may stay enforcement of any of its regulatory requirements that are more stringent than PHMSA requirements. 5.2.2 Procedures for State Agencies with a Section 60106 Agreement or Interstate Agents A State Agency operating under the authority of the 49 U.S.C. 60106is a limited representative of PHMSA. A copy of the inspection documentation identifying Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 51#
Attachment 1, passage 62Inspection and Compliance Program a Non-compliance in a format acceptable to the RD must be submitted within 60 days to the appropriate Region Office. The State Agency should also advise the operator that there is a reason to believe that a Non-compliance exists and that this issue has been referred to the OPS Region Office for further action. If, after reviewing the available information, the RD determines that a Non- compliance does exist, the RD will notify the operator in writing and proceed with appropriate Compliance Action. The State Agency will be sent a copy of the notice letter and will be kept informed of the case progress and resolution. 5.2.3 PHMSA Orders to Intrastate Operators If PHMSA decides that a pipeline facility is hazardous, PHMSA can order the operator to take necessary action. On occasion, PHMSA will waive the requirements for notice and a hearing and will immediately issue a corrective action order. This action is taken when PHMSA decides that failure to issue an order expeditiously would result in serious harm to life, property, and/or the environment. After the order is issued, the operator will have an opportunity for a hearing. 5.2.4 Referring Concerns of Possible Criminal Activity to the Office of Inspector General (OIG): It is a federal crime for any “person,” including any company, pipeline owner, pipeline operator, contractor, or agent of such person, to willfully and knowingly violate a provision of the Federal Pipeline Safety Regulations (49 C.F.R. Parts 190-199). The term “willfully” generally means that a person’s actions are voluntary and deliberate, not accidental, or simply negligent. The term “knowingly’ generally means that an individual simply knows or is aware of what he is doing, not that he knows his actions are illegal. In many cases, such conduct may also constitute a crime under applicable state law. If a State Agency becomes aware of any actual or possible criminal activity, they should report it the DOT OIG and/or to state criminal authorities, for example the state Attorney General’s office. The DOT OIG operates a telephone hotline (1-800- 424-9071) to receive complaints of alleged criminal violations that affect regulated pipelines. Complaints may also be emailed to hotline@oig.dot.gov. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 52#
Attachment 1, passage 63Incident/Accident Investigation and Safety-Related Conditions 6 Incident/Accident Investigation and Safety- Related Conditions 6.1 Investigation of Pipeline Incidents/Accidents Pursuant to Federal/State regulations, a State Agency shall conduct a telephonic investigation of each NRC report related to gas, and hazardous liquid pipelines and LNG facilities subject to PHMSA regulations where the State has a 60105 Certification or 60106 Agreement. When the incident occurs on interstate facilities, a State Agency with an Interstate Agent Agreement typically will be the lead investigator, but it is ultimately for the AID Director to determine if the State Agency or OPS will continue as the lead regulator. The Region manages all enforcement actions for interstate facilities. The primary objective of the investigation activities is to identify the probable cause, minimize the possibility of recurrence of this operator and other operators in the state’s jurisdiction and to institute enforcement action where Non-compliance with the safety standards has occurred. At a minimum, an Investigation Report must be completed which includes Observations, Contributing Factors and if applicable recommendations to prevent reoccurrence. A template for this report can be found in Appendix E. If Non-compliance by an operator is determined, it should be included in the Investigation Report. The State Agency must take enforcement action for any determined Non-compliances. AID will notify the State Agency when it receives an initial NRC report, an NRC 48-hour update report, or other report of an incident/accident of pipeline facilities in that State. AID staff will relate all details of the incident/accident provided to PHMSA in accordance with the reporting requirements under 49 CFR, Parts 191, 193, or 195. The National Pipeline Incident Coordinator’s (NPIC) goal is to initiate the investigation within 15 minutes after receipt incident report. For events that are particularly time-sensitive, the NPIC calls the State Agency. If the State Agency cannot be reached promptly, the NPIC contacts the operator directly. For less time-sensitive incidents, if the State Agency cannot be reached, the NPIC will wait one hour before directly contacting the operator. The NPIC may call the operator directly when the jurisdiction is uncertain. Upon receipt of the report from the NPIC, the State Agency may make an immediate e-mail statement to the NPIC that they have received the report and are working to gain additional information if they have not been able to secure credible updates or if they are not able to obtain sufficient information within the 15- minute target time. During the telephonic investigation phase, the State Agency validates preliminary information, obtains additional information, evaluates the severity of the incident and the pipeline operator’s response, and disseminates the information to the NPIC. The State Agency and AID staff should maintain close contact until the investigation is completed. The State Agency should Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 53#
Attachment 1, passage 64Incident/Accident Investigation and Safety-Related Conditions communicate its plans for investigating the incident to the NPIC (888-719-9033) and provide updates as directed by the NPIC. 6.2 On-scene investigations For incident/accidents on intrastate pipelines where the State Agency is the lead regulator, OPS typically only participates in the on-scene investigation if there is a fatality or significant evacuation of the population, the State Agency requests assistance, or the NTSB/other federal agency deploys. For incident/accidents on interstate pipelines where the State Agency is an Interstate Agent, the AID Director will decide whether AID or the State Agency will lead the on-scene investigation, but the State Agency will always have the option to participate. A State Agency may investigate an incident/accident on a pipeline where OPS is the lead regulator if the AID Director establishes a Time Defined Project Specific Agreement with the State Agency. Details on Time Defined Project Specific Agreements are included in the PHP-50’s document, Guidelines for States Participating in the Pipeline Safety Program, Appendix B. Irrespective of the team composition, the chain of command and communication channels remain the same for OPS staff. The OPS Lead On- scene Investigator reports to the AID Director for all issues related to the incident. All communications to and from the field are channeled through the NPIC. When the State Agency is the lead regulator, they report up through State Agency chain of command and provide the NPIC with updates. On-scene team members’ roles and responsibilities are provided in Table 6-1: Responsibilities Matrix for On-Scene Investigations. The responsibilities for team members depend on who is the lead regulator and the composition of the on-scene team. • For intrastate pipeline facilities o State jurisdiction (under 49 U.S.C. 60105 State Pipeline Safety Program Certification) o State jurisdiction (under 49 U.S.C. 60106 State Pipeline Safety Agreements) • OPS jurisdiction (including interstate pipelines where the State Agency is an Interstate Agent) • NTSB deploys NTSB also investigates pipeline incidents/accidents, so State Agency staff should be aware of the Board’s responsibilities and authorities. In those Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 54#
Attachment 1, passage 65Incident/Accident Investigation and Safety-Related Conditions investigations where a State Agency with 49 U.S.C.60105 Certification and NTSB participate; NTSB and State authority is concurrent. The State Agency may choose to be a Party to the NTSB investigation. The State Agency should execute its enforcement responsibilities regardless of NTSB involvement. OPS’s Accident Investigation Policy (AIP) which provides further documentation of Federal/State cooperation resides in Appendix E; however, the AIP is currently under review for revision and has been removed from Appendix E. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 55#
Attachment 1, passage 66Incident/Accident Investigation and Safety-Related Conditions Table 6-1 - Responsibilities Matrix for On-scene Deployments Responsibilities Matrix for Personnel at On-scene Investigations Lead Investi gation Suppor t Investi gation Write Investi gation Report * Comple te CAO Data Report* Comple te Violatio n Report* Inspec t for Compl iance Lead Over sight of RCFA Oversi ght of Enforc ement Actions Includi ng Return -to- Service Plan State Agency jurisdiction (under 60105 Certifications) State Agency Only State NA NA NA NA State State State State Agency and AID State AID NA NA NA State State State State Agency and Region State Region NA NA NA State State State State Agency, AID, and Region State Both, AID Lead for OPS NA NA NA State State State State Agency jurisdiction (under 60106 Agreements) State Agency Only State NA State Region Region State State Region State Agency and AID Event Specific Event Specific AID AID AID State State Region State Agency and Region Event Specific Event Specific Region Region Region State State Region State Agency, AID, and Region Event Specific Event Specific AID Region/ AID Region/ AID State State Region OPS jurisdiction AID Only AID NA AID AID AID Region AID Region Region Only Region NA Region Region Region Region Regio n Region AID and Region AID Region AID Region/ AID Region/ AID Region AID Region NTSB deploys State Agency (60105) and AID NTSB State NA AID AID State NTSB State State Agency (Interstate Agent) and AID and/or Region NTSB Both, AID Lead for OPS NA Region and/or AID Region and/or AID State NTSB Region AID NTSB AID NA AID AID Region NTSB Region AID and Region NTSB Both, AID Lead for OPS NA Region/ AID Region/ AID Region NTSB Region *Or State Agency's equivalent form. **NTSB leads the investigation and has priority over others’ investigation. They coordinate resources and prepare the written investigation report. PHMSA may obtain information directly from parties involved in, and witnesses to, the incident/accident, provided they do not interfere with the NTSB's investigation. PHMSA does not write a report when NTSB deploys. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 56#
Attachment 1, passage 67Incident/Accident Investigation and Safety-Related Conditions 6.3 Basic Investigative Procedures To conduct an effective incident/accident investigation, State Agency staff must be familiar with basic investigative procedures. An investigation requires a thorough knowledge of the design, construction, operation, and maintenance factors involved in pipeline safety. A Pipeline Incident/Accident Investigation Report form is available in FedSTAR (SUDS). The inspection of the operator’s response to an emergency shall, include but not be limited to, evaluating the operator for compliance with their procedures and with 49 CFR 192.615, 193.2509, 49 CFR 195.402(e) or 195.403, as appropriate. Further inspection shall determine if the operator complied with the requirements of their incident/accident investigation procedures and 49 CFR 192.617, 193.2515 or 49 CFR 195.402(c)(5), as applicable. Appropriate inspection documentation shall reference each section of the above cited regulations and the compliance of the operator. 6.4 Incident Investigation Procedures Each State Agency should keep adequate records of notifications of all incidents received. If an onsite investigation of an incident was not made, the State Agency should obtain sufficient information by other means to determine the facts and support the decision not to go on-site. Each State Agency should also have a mechanism for receiving and responding to after-hours notifications as necessary. Investigations shall be thorough with conclusions and recommendations documented in an acceptable manner. In addition, the State Agency should initiate any applicable enforcement action for violations found during incident investigation(s). Each State Agency should also assist region office and the AID by taking appropriate follow-up actions related to the operator incident reports to ensure accuracy and that the operator’s final report has been received by PHMSA. The State Agency should work with respective operators to determine any discrepancies on incident cause or contact Region Director/AID for assistance on resolution. 6.5 PHMSA AID Daily Telephonic Investigation Report Operators are required to report incidents/accidents to the NRC. AID develops the Daily Telephonic Investigation Report, a summary of the information gathered during the Telephonic Investigation for all NRC reports or 48-hour Update reports received since the previous Daily Telephonic Investigation Report. The NPIC emails the report daily to NAPSR All States email distribution group. PHMSA State Programs maintains the email list. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 57#
Attachment 1, passage 68Incident/Accident Investigation and Safety-Related Conditions 6.6 Access to NRC Reports Access to NRC Reports - State Agency staff can view NRC reports the next- day in PDM via the Portal. 30-DAY REPORT REVIEW WRITTEN REPORTS FROM THE OPERATOR (Forms 7100 & 7001 INCIDENT REPORTS) Within 30 days of a reportable incident/accident, the operator is required to submit a written report, PHMSA Form 7100 (for gas incidents) or 7001 (hazardous liquid accidents), to OPS under 49 CFR 195.54 (Hazardous Liquid), 49 CFR 191.15 (Transmission, Gathering, LNG, Underground Storage), and 49 CFR 191.9 (Distribution). When the operator obtains new relevant information, they are required to supplement the written report. PHMSA expects operators to submit a final report when the apparent cause has been determined and the report is complete and accurate. After the NPIC receives the operator’s 48-hour Update Report, the AID continues to monitor the investigation until the report has been filed. AID, State Agencies, and the Operations Systems Division (PHP-6) are responsible for the quality assurance and control of the data operators submit on PHMSA accident Forms 7100 and 7001 per Incident Report Data Management Policy (PHP-5340.5B). AID’s Incident Report Team Lead is responsible for AID’s review of operators’ incident forms to ensure the data is complete and accurate. For incidents subject to State authority, AID works with the State Agency to resolve any identified discrepancies or gaps in the report. AID receives feedback from the State Agency and enter the status in WMS. When the report is complete and accurate, AID recommends to the State Agency that the report can be closed. If the State Agency concurs, AID closes the report. If the State Agency does not respond to a repeated request, the AID Incident Report Team Lead can approve closing the report. Closed reports are uploaded into WMS so that the NRC report is linked to the Incident report. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 58#
Attachment 1, passage 69Incident/Accident Investigation and Safety-Related Conditions 6.7 Safety-Related Conditions A pipeline operator is required to file a Safety-Related Condition Report (SRCR) with PHMSA whenever a condition, as defined in 49 CFR 191.23 or 49 CFR 195.55, exists that cannot be corrected within 5 working days after the operator determines that a condition exists but not later than 10 working days after the operator discovers the condition. The State Agency will receive new SRCR alert e-mails from the Work Management System (WMS) and will review the SRCR the same business day to identify reports that warrant immediate investigation by the State Agency. The State Agency should contact the operator and document the actions taken by both the State Agency and the Operator in the Note Tab in WMS within 10 business days of the SRCR being sent to the State Agency. For additional information refer to SRCR in WMS Policy in Appendix L. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 59#
Attachment 1, passage 70Damage Prevention and Once-Call Notification 7 Damage Prevention Program and One Call Notification As required by 49 U.S.C 60134, a State must have an effective damage prevention program or working toward the establishment of a damage prevention program and, as required by 49 CFR 198, Subpart C adopt a one- call notification program that will notify a pipeline operator of excavation activity that could threaten the safety of the pipeline. 7.1 Damage Prevention As required by 49 U.S.C. 60105, a State authority must encourage and promote the establishment of a program designed to prevent damage by demolition, excavation, tunneling, or construction activity to the pipeline facilities to which the Certification applies and that subjects persons who violate the applicable requirements of that program to civil penalties and other enforcement actions that are substantially the same as are provided under this chapter, and addresses the elements in 60134(b). A State must demonstrate that it has made substantial progress toward establishing such a program, and that such program will meet the requirements or have an effective damage prevention program that meets the nine element requirements of 49 U.S.C. 60134(b) as listed below: 1. Participation by operators, excavators, and other stakeholders in the development and implementation of methods for establishing and maintaining effective communications between stakeholders from receipt of an excavation notification until successful completion of the excavation, as appropriate. 2. A process for fostering and ensuring the support and partnership of stakeholders, including excavators, operators, locators, designers, and local government in all phases of the program. 3. A process for reviewing the adequacy of a pipeline operator's internal performance measures regarding persons performing locating services and quality assurance programs. 4. Participation by operators, excavators, and other stakeholders in the development and implementation of effective employee training programs to ensure that operators, the one-call center, the enforcing agency, and the excavators have partnered to design and implement training for the employees of operators, excavators, and locators. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 60#
Attachment 1, passage 71Damage Prevention and Once-Call Notification 5. A process for fostering and ensuring active participation by all stakeholders in public education for damage prevention activities. 6. A process for resolving disputes that defines the State's role as a partner and facilitator to resolve issues. 7. Enforcement of State damage prevention laws and regulations for all aspects of the damage prevention process, including public education, and the use of civil penalties for violations assessable by the appropriate State authority. 8. A process for fostering and promoting the use, by all appropriate stakeholders, of improving technologies that may enhance communications, underground pipeline locating capability, and gathering and analyzing information about the accuracy and effectiveness of locating programs. 9. A process for review and analysis of the effectiveness of each program element, including a means for implementing improvements identified by such program reviews. 7.2 One Call Notification As required by 49 CFR 198, Subpart C, a State must adopt a one-call notification program that will notify a pipeline operator of excavation activity that could threaten the safety of the pipeline. A State notification program must require eight minimum standards, which may be found in 49 CFR 198.37: 1. Each area of the State that contains underground pipeline facilities must be covered by a one-call notification program. 2. Each one-call notification system must be operated in accordance with Sec. 198.39. 3. Excavators must be required to notify the operational center of the one-call notification system that covers the area of each intended excavation activity and provide the following information: a. Name of the person notifying the system. b. Name, address, and telephone number of the excavator. c. Specific location, starting date, and description of the intended excavation activity. However, an excavator must be allowed to begin an excavation activity in an emergency but, Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 61#
Attachment 1, passage 72Damage Prevention and Once-Call Notification in doing so, required to notify the operation center at the earliest practicable moment. 4. The State must determine whether telephonic and other communications to the operational center of a one-call notification system under paragraph (c) of this section are to be toll free or not. 5. Except with respect to interstate transmission facilities as defined in the pipeline safety laws (49 U.S.C. 60101 et seq.), operators of underground pipeline facilities must be required to participate in the one-call notification systems that cover the areas of the State in which those pipeline facilities are located. 6. Operators of underground pipeline facilities participating in the one- call notification systems must be required to respond in the manner prescribed by 49 CFR 192.614 (c)(4) through (c)(6), to notices of intended excavation activity received from the operational center of a one-call notification system. 7. Persons who operate one-call notification systems or operators of underground pipeline facilities participating or required to participate in the one-call notification systems must be required to notify the public and known excavators in the manner prescribed in 49 CFR 192.614 (b)(1) and (b)(2), of the availability and use of one-call notification systems to locate underground pipeline facilities. However, this paragraph does not apply to persons (including Master Meter operator’s) whose primary activity does not include the production, transportation or marketing of gas or hazardous liquids. 8. Operators of underground pipeline facilities (other than operators of interstate transmission facilities as defined in the pipeline safety laws (49 U.S.C. 60101 et seq.), and interstate pipelines as defined in 49 CFR 195.2, excavators and persons who operate one-call notification systems who violate the applicable requirements of this subpart must be subject to civil penalties and injunctive relief that are substantially the same as are provided under the pipeline safety laws (49 U.S.C. 60101 et seq.). Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 62#
Attachment 1, passage 73Damage Prevention and Once-Call Notification 7.3 Damage Prevention and One-Call Grants Grants are made available to states for efforts in both State Damage Prevention Programs (SDP) and the State One-Call Grant Programs. Damage Prevention Grants are described along with their eligibility requirements under 49 U.S.C. 60134. Grant allocations are determined by PHMSA annually. The Statute for One-Call notification grant programs is located under 49 U.S.C. 61, which also outlines the authorized grant appropriation in 6107. 49 U.S.C. 61 can be found in Section III of Appendix A. Annual one-call grant guidelines are recommended by the GAC and relayed to all State Agencies (after OPS approval) prior to the opening of the application for this grant. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 63#
Attachment 1, passage 74State Agency Program Performance 8 State Agency Program Performance OPS uses two means to assess a State Agency’s overall performance in the pipeline safety program - an annual program evaluation, and a review of information attached by the State Agency to its annual progress report. The evaluation is used primarily to determine performance (e.g., operating practices, quality of State Agency inspections, investigations, Compliance Actions, and adequacy of recordkeeping). The progress report attachments are used primarily to determine the State Agency’s compliance with program requirements (e.g., extent of jurisdiction, inspector qualifications, number of inspectors, number of Inspection Person-Days, adoption of applicable Federal regulations and attendance at Federal/State meetings). A State Agency’s performance is the major factor considered in allocating grant-in-aid funds each year. OPS and NAPSR developed a list of performance metrics which are published on PHMSA’s PRIMIS Website. These metrics can be viewed by all stakeholders in pipeline safety including the public. The intent of the performance metrics is meant to illustrate trends in a State Agency to provide insight into areas of continuous improvement. The performance metrics are not intended to compare performance across State Agencies. PHMSA’s PRIMIS Website can be accessed at: http://primis.phmsa.dot.gov/comm/states.htm 8.1 Annual Program Evaluation The OPS annual program evaluation is a review of the State Agency’s pipeline safety program. It includes an examination of State Agency policies, plans, procedures, and records of the previous calendar year as well as the observation of the field inspection of a pipeline operator. Some evaluation form questions relate to NTSB recommendations for which PHMSA has committed to action in the inspections of operators. These questions include a reference to the NTSB recommendation number. Additional information on each recommendation can be viewed in Appendix R or accessed with the recommendation number through the NTSB’s web site at https://data.ntsb.gov/carol-main-public/basic-search. The evaluation is usually conducted by PHMSA State Programs. OPS reviews changes to the program evaluation form with the Program Managers at Region NAPSR meetings. At the beginning of each calendar year, OPS will make available a copy of the final form to each State Agency. PHMSA State Programs personnel should notify the State Agency in advance of the Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 64#
Attachment 1, passage 75State Agency Program Performance schedule for the annual evaluation to ensure that the State Agency has adequate lead-time to prepare for the evaluation. The State Agency’s pipeline safety program will be evaluated for conformance with the procedures in this manual as well as any other specific policies and procedures OPS provides to the State Agency. The evaluation will include the following: 1. Verification of progress report attachments. PHMSA State Programs personnel will review for completeness and accuracy the information provided by the State Agency in the attachments to its most current progress report. 2. Record review. PHMSA State Programs personnel will review the administration of the program and associated records to support program activities. PHMSA State Programs staff will also evaluate the State Agency’s financial/budget information submitted in support of the grant-in-aid funding. 3. Field inspection. PHMSA State Programs personnel will observe the State Agency’s inspection of at least one intrastate Inspection Unit. If the State Agency is also an Interstate Agent, the evaluator may also observe the inspection of an interstate Inspection Unit. In addition, the RD may target specific areas for review in the field inspection. These areas will be selected in advance in consultation with the Program Manager. If possible, a different inspector, operator and geographic area should be observed each year. PHMSA State Programs will conclude the evaluation with a verbal performance review addressing major strengths and weaknesses of the program. Within 60 days after the on-site review, the PHMSA Director of State Programs should send a letter to the State Agency’s chairperson (or equivalent) with a copy to the Program Manager detailing the program’s effectiveness in meeting the terms in the State Agency’s Certification/Agreement and any policy problems (e.g., overall program performance, jurisdiction status over intrastate operators, staffing level, equipment to carry out program functions, major budgetary or travel restrictions, initiative in seeking necessary legislation or adopting required regulations). Where appropriate, the letter will include recommendations for program improvement. The PHMSA Director of State Programs, when appropriate, will include in the letter the contributions and participation in various PHMSA/NAPSR and other committees and work groups of the Program Manager and State Agency pipeline safety staff. If required, the State Agency’s chairperson will be requested to respond in writing within 60 days and describe actions the State Agency proposes to take to address program deficiencies. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 65#
Attachment 1, passage 76State Agency Program Performance The proposed actions are deemed acceptable if PHMSA Director of State Programs does not object in writing within 60 days. Failure to respond in writing within the required timeframe will result in a loss of performance points in the following year’s evaluation. Following the mail out of the PHMSA Director of State Programs’ letter to the State Agency’s chairperson (or equivalent, PHMSA State Programs will send a copy of the completed evaluation form to the Program Manager addressing programmatic problems (e.g., insufficient documentation of inspection forms and records, incorrect completion of progress report attachments, inadequate administrative enforcement procedures, or poor staff communication). 8.2 Compliance with Program Requirements PHMSA State Programs personnel annually review each State Agency’s program performance using the State Evaluation Form. As part of the annual review, the evaluator validates information submitted on the Annual Progress Report. A State Agency must respond to questions regarding its compliance with various Federal requirements. If a requirement is not applicable (e.g., offshore inspections), the State Agency so indicates on the Progress Report and the evaluator notes it where applicable on the State Evaluation Form. If a Federal regulation has been adopted, the State Agency indicates the date adopted on the Progress Report. If a Federal regulation has not been adopted, the State Agency must either describe on the Progress Report the steps it is taking toward adoption or explain why it is not taking steps toward adoption. The annual Progress Report validated during the State Evaluation also requests data on the civil penalty levels in effect in the State as of December 31 of the evaluation year, attendance at the NAPSR Region Meeting, and the frequency of the general legislative session. Information on the general legislative session is considered when determining if applicable Federal regulations have been adopted within 24 months of the effective date or within two general sessions of the State Legislature. For a state to be given credit for taking steps to adopt a regulation, the regulatory action, bill in committee or docket before an agency, must be verifiable and in process prior to the end of the first 24 months or two legislative sessions after the applicable regulation becomes in effect. Any regulations not meeting this requirement will not be considered adopted until actual legislation is signed into state law. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 66#
Attachment 1, passage 77State Agency Program Performance 8.3 Recordkeeping Recordkeeping is vital to the operation of a pipeline safety program. State Agency files shall be well organized and accessible (this includes electronic files). At a minimum, the following records should be maintained by the State Agency for a period of at least five calendar years plus the current calendar year, or longer if the respective State Agency requires. 1. Written program procedures (see Chapter 5) 2. Inspection reports 3. Compliance Actions 4. Incident/accident investigative reports 5. Safety-Related Condition investigative reports 6. Correspondence sent to/received from operators 7. Documents to support the Progress Report and State Program Evaluation 8. Waivers (special permits) – retain until waiver is no longer in place 9. TQ waivers for courses – retain until 6 years after employee is no longer in the pipeline safety program. 10. 11. Documents to support the Federal Grant requirements contained in 2 CFR 200 8.4 Attendance at NAPSR Meetings OPS supports NAPSR and recognizes its importance in the Federal/State cooperative pipeline safety effort. The meetings provide an opportunity for the State Agencies and PHMSA to discuss common objectives and problems concerning pipeline safety. Each State Agency shall send the Program Manager to the annual NAPSR National Meeting (National Meeting) and appropriate NAPSR Region meetings or risk reduction of grant-in-aid funds. In the event the Program Manager is unable to attend either of the meetings, the PHMSA Director of State Programs and the appropriate State Liaison shall be notified by email as soon as possible of the alternate representative. The PHMSA Director of State Programs will determine if a reduction in applicable performance points is appropriate. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 67#
Attachment 1, passage 78State Agency Program Performance In addition to the Region meetings, NAPSR holds an annual National Meeting. The main purpose of the National Meeting, which is attended by the NAPSR Board of Directors, members, and various PHMSA staff, is to develop resolutions and recommendations that will improve the national pipeline safety effort and enhance the working relationship between the States and PHMSA. Following the meeting, the resolutions and recommendations are forwarded to PHMSA, with appropriate personnel then being responsible for returning written responses to NAPSR. 8.5 State Pipeline Safety Training and/or Seminars Each State Agency shall demonstrate that it conducted or participated in a pipeline safety training session or a seminar within the last three calendar years, either in-person or virtually, to educate operators on current regulations. An OPS representative may be present and provide regulatory updates to the participants. For states with both gas and hazardous liquid programs it would be appropriate to hold a combined training session or seminar. Requests for assistance from OPS may be submitted via email, to the appropriate OPS Director(s), at least 4 months in advance of the start of the upcoming calendar year. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 68#
Attachment 1, passage 79DOT Grant-in-Aid Program 9 DOT Grant-in-Aid Program This chapter describes the application and submission procedures and grant management requirements a State Agency must follow to receive the benefits of the gas and/or hazardous liquid pipeline safety grant program. It is intended to assist State Agencies in applying for and administering Federal grant funds authorized by 49 U.S.C. 601. 9.1 Scope of Grant The scope of the grant is to support up to 80 percent of the cost of personnel, equipment and activities reasonably required to carry out inspection and enforcement activities of intrastate pipeline facilities under a Certification or Agreement with the Administrator or to act as an agent of the Administrator with respect to interstate pipeline facilities. The activities covered are those specifically for the inspection of gas or hazardous liquid pipeline facilities to ensure compliance and enforcement as necessary of 49 Code of Federal Regulations. 9.2 Address Unless directed otherwise by the PHMSA Director of State Programs, all correspondence concerning the grant program should be addressed to: Director of State Programs U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration Pipeline Safety - State Programs, PHP-50 1200 New Jersey Avenue, SE Second Floor, E22-321 Washington, DC 20590 Telephone Number: (202) 366-4595 To avoid damage from DOT’s package threat scanning process, all correspondence should be shipped through non-US Postal Service shippers such as FedEx, UPS, etc. 9.3 Eligibility To qualify for Federal grant funds under 49 U.S.C 60107, a State Agency must participate in the pipeline safety program either under Certification in accordance with 49 U.S.C. 60105 or under an Agreement in accordance with 49 U.S.C.60106. 9.4 Assistance Listing Information The federal grant Assistance Listing for the Pipeline Safety Base Grant is 20.700. This was formerly known as the Catalog of Federal Domestic Assistance (CFDA). Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 69#
Attachment 1, passage 80DOT Grant-in-Aid Program 9.5 General Obligations The State Agency assumes responsibility for the administration of the grant program through the application of sound management practices and for seeing that program funds have been expended and accounted for in accordance with program objectives, the Assistance Agreement, these Guidelines, 2 CFR 200 and any other applicable Federal rules and regulations. In recognizing its own unique combination of staff, facilities and expertise, each participating State Agency has the primary responsibility for employing the organization and management techniques necessary to assure proper and efficient administration of the program. 9.6 Grant Application The purpose of the Grant Application is to provide PHMSA with information concerning the State Agency’s need for Federal financial support for its pipeline safety program. PHMSA will make an application available to each State Agency in August of each year. The deadline for filing this application is September 30. (Note: Failure to return the application by this date may result in the loss of grant funds.) To assist PHMSA in determining the funding needs of all State Agencies, those State Agencies that decide NOT to apply for grant funds are also requested to notify PHMSA by September 30. If PHMSA determines that an application is incomplete or insufficient to qualify, PHMSA will advise the State Agency of the reason for the disapproval. The State Agency must then take appropriate corrective action prior to reapplying. The Grant Application, which is made available in FedSTAR (https://portal.phmsa.dot.gov), is furnished to each State Agency by PHMSA contains multiple sections. These include: 9.6.1 Attachment #1: Description of State Pipeline Safety Program. This attachment requires a description of all ongoing and planned pipeline safety program activities for which grant reimbursement is requested. This summary must clearly indicate the types of actions to be performed and contain sufficient details to justify the proposed budget. This should include but is not limited to the applicable items from the following list: • Program Description - Miles of Main - Number of Services - Miles of Transmission Lines Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 70#
Attachment 1, passage 81DOT Grant-in-Aid Program - Number of Inspection Units - Number of Operators - Inspection Frequency by Operator Types • Expected number of inspection days during upcoming calendar year - Summary of Inspection Work Plan - Notations should be made of any special projects, etc. • Notable program activities to be conducted during upcoming calendar year - Major construction projects - Major enforcement cases that are expected to take large amounts of resources - TQ Seminar or other operator training you intend to participate and expected attendance - Interstate Agent (if applicable) • Any legislative proposed, current, or pending activities - This should include any damage prevention rulemakings • Listing of Pipeline Program Staff (Supervisors and Inspectors)– this should include the following - Individual Names and titles (enough information should be provided to describe their job duties) - If less than 100% what is estimated time to be spent in program - Listing of vacancies - Listing of hiring expectations • Listing of Damage Prevention Staff (if applicable) - Individual Names and titles or functions (enough information should be provided to describe their job duties) - - Estimated time spent on underground pipeline damage prevention and methodology used to determine this percentage. (i.e., Pipeline cases/Total Cases) • List of other Administrative Staff - Individual Names and titles or functions (enough information should be provided to describe their job duties) - Estimated time spent in support of pipeline program - This should include any individuals/positions who will have their salary and benefits submitted as a direct cost applied to the grant reimbursement. • Listing of projected equipment purchases (this should directly correlate with estimated program budget submitted) - This should include automobiles and estimated cost of each - Other intended equipment purchases (i.e., printers, computers, or related items) Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 71#
Attachment 1, passage 82DOT Grant-in-Aid Program • Any expected contracts for outside services - All contracts must be preapproved and will not be reimbursed without prior approval and copies must be submitted to PHMSA State Programs • Other relevant program information 9.6.2 Attachment #2: Pipeline Safety Program Estimated Budget. This attachment requires an estimate of the total expenses related to the State Agency’s pipeline safety program. It should include all costs directly relating to pipeline safety that the State Agency plans for the next calendar year regardless of the funding source. The estimate should be presented so that the costs for each item are readily identifiable as to the budget categories established on the form. All cost estimates should be as realistic as possible. Accurate estimates will reduce the amount of reallocation necessary at the end of the program year and permit PHMSA to more realistically allocate available funds to all State Agencies. The State Agency must receive pre-approval from PHMSA State Programs in advance of executing any contract (see Professional Service Costs in 9.16.1) or if there is a substantial change to the scope of the pipeline safety program affecting the approved budget. Copies of any approved final contract should be forwarded to PHMSA State Programs within 30 days of execution. 9.7 Annual Funding Level After funds have been appropriated by Congress, PHMSA will process the applications and allocate available funds to those State Agencies meeting the program qualifications. 49 U.S.C. 601 limits the Federal contribution to State pipeline safety programs to not more than 80 percent of total program costs. If Congressional appropriations are insufficient to fund all programs at the 80 percent level, the amount allocated to each State will be determined by PHMSA to distribute available funds equitably as prescribed in 49 CFR 198, Subpart B. 9.8 Grant Allocation and Percentage of Funding PHMSA will provide to all State Agencies a Grant Allocation Document. This document is provided annually between April and June (subject to federal budget appropriation). The pipeline safety grant allocation is a targeted amount of funding a State Agency may receive for activities during a calendar year providing their actual program expenditures meet the budget estimate submitted in their grant application. Otherwise, the State Agency will receive the percentage of funding for actual program expenses which is listed on the annual Grant Allocation Document. The percentage of program funding is determined based on the Grant Allocation Formula (see 9.7.1) and the total amount of appropriated funding provided by PHMSA. The maximum amount Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 72#
Attachment 1, passage 83DOT Grant-in-Aid Program of any State Agency funding is capped at 80 percent as noted in previous section. 9.8.1 Initial Allocation vs. Final Allocation The basis of the initial allocation are program cost estimates which are submitted by each state agency three months prior to the start of the calendar year or grant year. The initial allocation allows a state pipeline program to proceed operation with a funding percentage guarantee which is outlined in Assistance Agreements made to each program. PHMSA provides a final allocation of grant funds after actual expenses are submitted for the previous calendar year. Historically, grant program cost estimates are at least ten percent over the actual expenses submitted at year- end. The final allocation allows PHMSA to recalculate program funding based on actual costs which generally allow all programs to receive a higher percentage of funding using the same total congressional appropriation for the year in question. Assistance Agreements are only modified if the final payment exceeds the maximum amount identified in the original agreement. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 73#
Attachment 1, passage 84DOT Grant-in-Aid Program 9.8.2 Grant Allocation Formula for Grant Award Pipeline Safety Grants are awarded based on the following formula: Grant Award = State Agency Budget Amount1 x State Agency Performance Score2 x Percent Allocation3 𝑷𝒆𝒓𝒄𝒆𝒏𝒕 𝑨𝒍𝒍𝒐𝒄𝒂𝒕𝒊𝒐𝒏(𝟖𝟎% 𝒎𝒂𝒙𝒊𝒎𝒖𝒎) 𝑻𝒐𝒕𝒂𝒍 𝑨𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆 𝑭𝒖𝒏𝒅𝒊𝒏𝒈4 = ∑ 𝑨𝒍𝒍 𝑷𝒓𝒐𝒈𝒓𝒂𝒎𝒔 (𝑺𝒕𝒂𝒕𝒆 𝑺𝒄𝒐𝒓𝒆 𝑿 𝑺𝒕𝒂𝒕𝒆 𝑩𝒖𝒅𝒈𝒆𝒕)5 9.8.3 State Performance Score A performance score for each State Agency is developed annually which determines the maximum amount of funding that a program will receive in each calendar year for which a grant application was submitted. The score can be waived by the PHMSA Director of State Programs as required to implement program initiatives and improve overall safety program. The formula, outlined in 49 CFR 198.13, is based on State Agency performance and has a maximum of 100 performance points derived as follows. 1 State Budget Amount = Calendar Year Budget Estimate Submitted by each State Agency with Grant Application. 2 Annual State Performance Score Outlined in Section 9.7.3. 3 Percent Allocation – This is the maximum percentage of total program costs that can be applied to each grantee. There is an 80% maximum funding limited required by 49 U.S.C. 60107 of the Pipeline Safety Act. This formula provides for an equal distribution of available funds in the event appropriated funding is less than required for maximum funding. 4 Total Available Funding - This is the annual funding provided by congressional appropriation. This would also include any unexpended (carryover) funds available from previous fiscal years. 5 The combined sum of each State Performance Score multiplied by each State Budget Estimate for all Gas and Hazardous Liquid programs. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 74#
Attachment 1, passage 85DOT Grant-in-Aid Program 1. Fifty points1 based on information provided in the state’s annual progress report attachments which document its activities for the past year (see Appendix Q); and 2. Fifty points2 based on the annual State Agency evaluation as described in Section 8.1. A State Agency will have one year from written notification to correct individual deficiencies found during an annual State Agency evaluation before a reduction is applied to its 50-point maximum* . Evaluation forms are included as Appendix I for gas programs and Appendix J for hazardous liquid programs. (*Individual issues identified in CY2021 Program Evaluation (Conducted by OPS in CY2022 and Communicated to the States by end of CY2022) can also exist for the CY2022 Program Evaluation (Conducted by OPS in CY2023). If the issues are not corrected and are identified again in the CY2023 Program Evaluation (Conducted by OPS in CY2024) the respective point reduction will count toward grant funding score. This will impact CY2025 Grant Funding.) The Administrator assigns weights to various performance factors reflecting program compliance, safety priorities, and national concerns identified by the Administrator and communicated to each State Agency. At a minimum, the Administrator considers the following performance factors in allocating funds: 1. Adequacy of state operating practices. 2. Quality of state inspections, investigations. and enforcement/Compliance Actions. 3. Adequacy of state recordkeeping. 4. Extent of state safety regulatory jurisdiction over pipeline facilities. 5. Qualifications of state inspectors (consideration will be given to qualification results impacted by inspection staff growth). 6. Number of state Inspection Person-Days. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 75#
Attachment 1, passage 86DOT Grant-in-Aid Program 7. State adoption of applicable federal pipeline safety standards; and, 8. Any other factor the Administrator deems necessary to measure performance. For the first three years a pipeline safety program exists or for two years when a program reenters the state grant program, the program will be funded at a level agreed upon in advance by the State Agency and PHMSA. This amount is typically not over 90 percent of maximum funding. This is due to the inability to accurately judge program performance of the state in determining their evaluation score. In addition, programs will also be subject to point deductions for late submission of annual progress report document. Two points will be deducted on progress report score if document is submitted after due date, and four points if more than 30 days late. Grants are limited to the appropriated funds available. If total state Agency requests for grants exceed the funds available, the Administrator prorates each state Agency's allocation. This prorated percentage will serve as the maximum funding level available to each state based on actual expenses. Exhibit 9-1 - Grant Allocation Funding Example Modified 2015 Score ALABAMA Natural Gas 2017 Report Conducted State Score Estimated Program CY 2017 State Allocation (Payment Maximum 50.00 100.00 in 2015 Costs Agreement - Total Allocation Grant Award) 1,608,136.00 Percentage 100.00% $ $ 951,945.00 59.20% ARIZONA 50.00 100.00 100.00% $ 1,714,436.00 $ 1,014,870.00 59.20% ARKANSAS 50.00 100.00 100.00% S 897,964.00 $ 531,555.00 59.20% CALIFORNIA_PUC COLORADO 43.00 97.48 91.74% $ 7,398,477.00 $ 4,017,817.00 54.31% 50.00 100.00 100.00% $ 725,130.00 $ 429,245.00 59.20% CONNECTICUT 50.00 100.00 100.00% $ 1,378,690.00 $ 816,123.00 59.20% Totals $ 87,687,512 $ 50,559,000.00 57.66% Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 76#
Attachment 1, passage 87DOT Grant-in-Aid Program Exhibit 9-2 – Grant Allocation Explanation Progress Report Score – This is the score of progress report activities as outlined in Appendix Q. Modified Program Evaluation Score – This is the state performance score, as outlined in 9.7.2 (2). State Score % – Total score as outlined in 9.7.2. Estimated Program Costs – This is the estimated program funding or budget; each state submits with the grant application for the respective calendar year. Allocation - This is the maximum amount, prorated as necessary, that a state can expect to receive in federal funding if actual program costs are equal to or exceed program budget. The maximum allocation is capped at 80%. Maximum Allocation Percentage – This is the maximum percentage of actual program costs that a State Agency can expect to receive. The allocated amount is only received if actual expenditures meet or exceed the original budget estimate. If actual costs of the State Agency exceed the original estimate, PHMSA will pay additional amounts pending availability of funding (from overestimates of other programs) and the State Agency adequately explains the budget variance. 9.9 Assistance Agreement The purpose of the Assistance Agreement is to notify the State Agency of the allocated amount of the Federal grant for the calendar year. PHMSA will reimburse the State Agency up to the amount specified in this agreement, or up to the state specific maximum percentage of actual program expenses noted in the grant allocation document, whichever is less. Exhibit 9-1 is an actual example from the 2017 gas grant allocation with an explanation of what a State Agency can expect for funding following in Exhibit 9-2. The Assistance Agreement will be sent to the State Agency, between April and July of each year (pending appropriation availability). An authorized State official must sign the agreement and return it to PHMSA (via email to the contact indicated on the cover letter). A State Agency receiving grant funds for both gas and hazardous liquid pipeline safety programs will receive a separate Assistance Agreement for each program type. The Assistance Agreement includes a comprehensive listing of “Award Terms and Conditions”, which must be reviewed thoroughly and complied with as a condition of receiving financial assistance. In support of the Assistance Agreement PHMSA provides the following information to all programs: 1. Grant Funding Score – This document is sent to each state which outlines expected funding score used for each calendar year. This document outlines progress report scoring along with specific Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 77#
Attachment 1, passage 88DOT Grant-in-Aid Program funding deductions from the annual evaluations as outlined in 9.7.2 (2) and is sent in advance of Grant Allocation document. 2. Pipeline Safety Grant Allocation. This attachment lists the gas or hazardous liquid budget estimates, State points, allocations, and percentages of total program funding. An example of this document is provided in Exhibit 9-1 and is also provided as part of the Assistance Agreement. 9.10 Certification Regarding Lobbying and Disclosure of Lobbying Activities Section 319 of Public Law 101-121 prohibits recipients of Federal grants from using appropriated funds for lobbying the Executive or Legislative branches of the Federal government about a specific grant. PHMSA will provide the State Agency a copy of the Certification Regarding Lobbying and Disclosure of Lobbying Activities form and a copy of the New Restrictions on Lobbying; Interim Final Rule. The certification form must be completed by the State Agency and returned to PHMSA with the Notice of Grant Award. If applicable, a State Agency must also complete and submit a disclosure form. 9.11 Mid-Year Request for Reimbursement Federal reimbursement is based on actual cash expenditures, which can be substantiated with auditable receipts, incurred by the State Agency in support of its pipeline safety program between January 1 and December 31 of each year. Each June (or after Assistance Agreements have been executed), PHMSA will make available OMB Standard Form 270 - Request for Advance or Reimbursement to each State Agency for submission of mid-year reimbursement requests. If a State Agency desires mid-year payment, it may complete the online process in the Federal-State Tracking and Reporting tool which will provide the SF-270 form based on the costs entered. The form must be signed by an authorized official and submitted to the electronic invoicing system for approval and payment. Program expenses included on this form may only be for the six-month period between January 1 and June 30. If a State Agency prefers to be reimbursed for expenses only at year-end, it may disregard the mid-year request form and include all program costs on the year- end request. 9.12 Year-end Request for Reimbursement and Cost Summary At the beginning of each year, PHMSA will make available in FedSTAR the Pipeline Program Cost Summary to each State Agency for submission of total program costs for the previous calendar year. This summary includes a Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 78#
Attachment 1, passage 89DOT Grant-in-Aid Program comparison of the estimated budget figures submitted with the original Grant Application and final expenses incurred for the program. In completing the year-end request, the State Agency should include all costs incurred in the pipeline safety program for the entire previous calendar year (January 1 - December 31) regardless of whether a mid-year request was submitted or whether the actual costs exceed the amount specified in the Assistance Agreement. The cost summary must be submitted electronically in FedSTAR by the due date. Requests for reimbursement submitted by each State Agency are reviewed and approved by PHMSA before being forwarded to the DOT accounting office for payment. Variances of more than 10% or $10,000 in each cost category require a written explanation as to the reasons for the differential. After reviewing and approving the submitted costs, the State Agency will be notified of the final reimbursement amount and provided with an OMB approved SF- 270 Form. This form must be signed by a state authority and then an invoice request submitted in the e-invoicing system. When the request has been paid by the accounting office, PHMSA will electronically notify the State Agency/Program manager of the amount of the payment and date paid. Payments are made electronically through an automatic clearinghouse. If the State Agency has any questions or problems with receipt of payment, it should contact PHMSA immediately. It is important to note that PHMSA presumes that the mid-year and year-end reimbursement requests are complete and accurate and include all eligible costs for the entire grant period. All expenses filed with both the mid-year and year-end payment processes must be from auditable receipts and accounted for on a cash basis. In addition, the year-end reimbursement is considered the grant close-out for the applicable period. Once the final request for reimbursement is received and processed, PHMSA is not obligated to make any additional payments for costs which were incurred by the State but not claimed on the request. 9.13 Withholding of Grant Funds - Suspension and/or Termination of Grants In accordance with 49 U.S.C. 601, PHMSA may withhold all or part of a grant when it determines that the State Agency is not satisfactorily administering a safety program under a Certification/Agreement or is not satisfactorily acting as an Interstate Agent. Part or all of the grant payment may be withheld, or the grant may be suspended and/or terminated if PHMSA determines that a State Agency has failed to comply with program requirements. These actions will be taken by PHMSA only after notice to and consultation with the affected State Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 79#
Attachment 1, passage 90DOT Grant-in-Aid Program Agency. Payments made to State Agencies or recoveries by PHMSA will be in accordance with the legal rights and liabilities of both parties. PHMSA or the State Agency may also terminate all or part of the Assistance Agreement when both parties agree that the continuation of the project would not be commensurate with the further expenditure of funds. The two parties must agree upon the termination conditions including the effective date and, in all cases of partial termination, the portion to be terminated. 9.14 Deposit of Grant Funds Pipeline safety grant funds do not need to be separately accounted for as Federal funds. A State Agency is not required to deposit these funds in a separate bank account apart from other funds administered by the State. Any bank account established for receipt of Federal funds must hold insurance coverage from the Federal Deposit Insurance Corporation (FDIC) and the balance exceeding the FDIC coverage must be collaterally secured. 9.15 Eligibility of Program Costs Program costs shall clearly relate to the program budget submitted with the grant application. Program costs shall also be consistent with 2 CFR 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Care shall be exercised in incurring costs to assure that all expenditures are authorized in accordance with these general standards and meet the following criteria of eligible costs. 9.15.1 Direct Costs Direct costs are those that can be identified specifically with the State’s pipeline safety inspection and compliance program. Costs which are shared with other organization programs or other agencies cannot be assigned directly to the pipeline safety grant program, (i.e., costs calculated on a pro-rata basis) should not be assigned as a direct cost but may qualify as part of an indirect cost plan. The following direct cost categories are typical to a pipeline safety program. • Compensation, including benefits, of employees for time and effort specifically devoted to the pipeline safety program (2CFR 200.430/ 200.431). - Cost for Supervisory personnel shall be for individuals listed on annual progress report and costs applied to program should correspond with percentage of time allocated. Any supervisory cost above that of the Program Manager can only be included as a direct cost if actual time and work performed is documented toward a program activity and approved by PHMSA Director of State Programs otherwise it can be included as an indirect cost. - Cost for Inspection/Investigation personnel shall only be for individuals listed on annual progress report and costs applied to program should correspond with percentage of time allocated. This would include the inspection activity Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 80#
Attachment 1, passage 91DOT Grant-in-Aid Program costs of a qualified inspector who may be employed on a contractual basis. This might be an individual who previously retired from the program or another state program. There is no pre-approval requirement if the individual has met applicable training requirements as outlined in Chapter 4. - Cost for Damage Prevention/Technical personnel shall be only for individuals listed on annual progress report and costs applied to program should correspond with percentage of time allocated. This can include damage prevention personnel, GIS personnel and others directly related to the pipeline safety program. Cost for personnel devoting time to things other than pipeline safety such as electric, water or telephone issues should not be applied to the pipeline safety program. (For example, cost for damage prevention personnel investigating underground facilities other than gas or hazardous liquid pipelines should not be included but can be applied for under State Damage Prevention (SDP) or One-Call Grant applications. - Cost for Administrative (clerical) personnel shall be for individuals listed on annual progress report and costs applied to program should correspond with percentage of time allocated. If applicable, costs for personnel who might solely supervise administrative personnel should be included in this category. - In support of salaries and wages, each program must comply with requirements listed in 2 CFR 200. Where direct time of an employee is applied to the pipeline safety base grant, this must be supported by periodic certification that the employee worked solely in the program. These certifications must be prepared at least semi-annually and will be signed by the employee or supervisory official having firsthand knowledge of the work performed by the employee. When employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be supported by personnel activity reports (PARs) or equivalent documentation. A PAR is a timesheet or log maintained by the employee that accounts for 100% of their time and prepared, signed and dated at least monthly. • Cost of materials and supplies acquired, consumed, or expended specifically for the purpose of the grant. (less than $5000 individual value) - Supplies (2CFR 200.453/ 200.314) - General office supplies such as paper, file folders and other office organizing items. - Safety Clothing (2 CFR 200.453/ 200.314) - Any Personal Protective Equipment (PPE) for conducting field inspections. Eye protection, hard hats, ear protection, flame retardant clothing for field use, safety boots, rain gear etc. Normal clothing for time spent in office environment should not be included. - Testing/Inspection Equipment (2 CFR 200.439) - Materials such as volt meters, half cells, pipe locator, pyrometers, current interrupter, Flame Ionization (FI) units, Combustible Gas Indicators (CGI’s), odorometers, cameras etc. - Office Equipment (2 CFR 200.439) - Computer equipment (laptops), fax machine, printers, desks, copiers/printers etc. for use by pipeline safety program only. This category would also include any computer software used Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 81#
Attachment 1, passage 92DOT Grant-in-Aid Program for pipeline program. Note – if the program shares equipment costs with other agency departments for things such as printers, the costs applied must be billed based on actual usage. Any estimated proration of charges would have to be charged as an indirect cost and placed in the indirect cost category. In addition, computer network hardware or software such as servers, data storage units and system software maintenance contracts are inherently indirect costs as they benefit entire agency “networks” and may not be recovered as a direct cost unless preapproved in advance. • Equipment and other approved capital expenditures used directly in the pipeline safety program. Any equipment purchased with a value of over $5000 shall be itemized and noted on grant application and itemized on the year-end reimbursement document submitted. The year-end itemization shall include an inventory listing of all equipment purchased in current and prior periods and still in use. All equipment purchases must be accounted for and safeguarded against loss. PHMSA reserves the right to review and accept or reject any equipment purchases not deemed necessary or reasonable. - Motor Vehicles (2 CFR 200.439) – actual cost of vehicles purchased. Tangible property having a useful life of more than one year and an acquisition cost which equals or exceeds the lesser of the capitalization level established by the governmental unit for financial statement purposes, or $5000. When replacing equipment purchased in whole or in part with Federal funds, the governmental unit may use the equipment to be replaced as a trade-in or sell the property and use the proceeds to offset the cost of the replacement property. This is applicable if the value remains greater than $5000. - Any other capital equipment with a value over $5000 will be included in this category and must have prior approval before purchase. - Grant expenditures are on a cash basis and the expenditures should only be included in the grant year that the equipment was actually paid for. • Travel expenses incurred specifically to carry out the award. - Travel (2 CFR 200.475) - Travel costs are for expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business of the pipeline safety program. This would include automobile general maintenance of tires, oil changes and gasoline. This can include insurance costs and costs of automobiles used through state motor pools. Eligible costs also include commercial air fare travel. Charges for any foreign travel costs are allowable only when the travel has been approved by PHMSA (see 2 CFR 200). • Pipeline Safety Program Activity Costs Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 82#
Attachment 1, passage 93DOT Grant-in-Aid Program - Training and Education (2 CFR 200.473) - This would include costs for registration and training materials acquired for pipeline safety personnel. This is for employee training and development. - Rental Cost of Building and Equipment (2 CFR 200.465) – Rental costs of office space, equipment, maintenance, insurance, janitorial, utilities, operations, and repairs. Rent recovered as a direct cost must be calculated on an “actual” basis, or pro-rated based on actual square footage occupied by the Pipeline Safety Program staff. - Communication (2 CFR 200 Basic Considerations) - Local and long-distance telephone calls, postage, computer transmittal services, internet charges, cell phone charges, emergency phone answering services, etc. - Publication and Printing (2 CFR 200.461) - Costs of printing, distribution, promotion, mailing and general handling. Newsletters or other articles printed and sent to pipeline stakeholders - Memberships, Subscriptions, and professional activities (2 CFR 200.454) - Costs for business, technical and professional organization memberships. Costs for subscriptions to business, professional and technical periodicals. - Professional Service Costs (i.e., Studies and Research) (2 CFR 200.459) – Any costs for professional and consulting services. Any contract for consulting services must be approved by OPS in advance or charges may not be allowed to be recovered in base grant. The State Agency must send an email requesting preapproval to Rex.Evans@dot.gov. The proposed contract should be attached to the email and the body of the email must provide an explanation of the reason for the contract and the deliverables expected from the vendor. OPS will send a reply email stating its decision of approval or disapproval. The email correspondence will be documented in FedSTAR. Copies of any approved final contract should be forwarded to PHMSA State Programs within 30 days of execution. - Maintenance, operations, and repairs (2 CFR 200.452) – costs of utilities, insurance, security, janitorial services, etc. If the State Agency is unable to directly assign these costs to the pipeline safety program any cost must be submitted through an indirect method. - Other (Specify) – These costs should be detailed and described appropriately. 9.15.2 Indirect Costs Indirect costs chargeable to the pipeline safety grant are limited to no more than 20% of direct cost of the program. Indirect costs are those: (a) incurred for a common or joint purpose benefiting more than one cost objective, and (b) not readily assignable to the cost objectives specifically benefited, without effort disproportionate to the results achieved. See Appendix O for further detailed guidance on indirect costs. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 83#
Attachment 1, passage 94DOT Grant-in-Aid Program Since most state agencies have several major functions which benefit from its indirect costs in varying degrees, the allocation of indirect costs may require the accumulation of such costs into separate cost groupings which are then allocated individually to benefit functions by means of a base which best measures the relative degree of benefit. The indirect costs allocated to each function are then distributed to individual awards and other activities included in that function by means of an indirect cost rate (IDR). Indirect costs are normally charged to Federal awards using an IDR. A separate IDR(s) is usually necessary for each department or agency of a governmental unit claiming indirect costs. All programs should refer to 2 CFR 200 for indirect cost plan requirements and it is recommended that a program consult their state grant office, if applicable. In addition, guidelines and illustrations of indirect costs proposals are provided in a brochure published by the Department of Health and Human Services entitled “Cost Principles and Procedures for Establishing Cost Allocation Plans and Indirect Cost Rates for Agreements with the Federal Government” or ASMB C-10. (See Appendix N) 9.15.3 Standards for Documentation of Personnel Expenses Charges to the pipeline safety grant for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. The records must also be incorporated into the official records of the State Agency and reasonably reflect the total activity for which the employee is compensated and not exceeding 100% of the compensated activities. (See 200.430 (i)) 9.15.4 Unallowable Costs Any cost specifically outlined in 2 CFR 200 as being unallowable is automatically excluded from the pipeline safety grant program. PHMSA State Programs also reserves the right to exclude certain costs deemed to be inappropriately applied to pipeline safety grants. Examples would include the following: • Certain Damage Prevention Costs (Personnel and other) – These would be all costs for damage prevention activities other than pipeline safety. (i.e., damage prevention activities for telephone, water, electric, cable or other underground facilities shall not be included but can be applied for under State Damage Prevention (SDP) or One-Call Grant applications) • Any promotional items such as shirts, hats, visors, water bottles, portfolios and any other item purchased to promote the pipeline safety program other than an item that may have an educational benefit from its use, are not an allowable cost. • As described in 2 CFR 200.426, bad debts (debts which have been determined to be uncollectable), including losses (whether actual or estimated) arising from uncollectable Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 84#
Attachment 1, passage 95DOT Grant-in-Aid Program accounts and other claims, are unallowable. Related collection costs, and related legal costs, arising from such debts after they have been determined to be uncollectable are also unallowable. See also 2 CFR 200.428 Collections of improper payments. • Sponsorships or fees paid to outside organizations for organizing meetings or to offset overall meeting costs are unallowable. • Any capital improvements to leased buildings. • Indemnification claims for losses that should be covered by state self-insurance plans (See 2 CFR 200.447(c)). This includes expenses to repair damage to state owned vehicles. 9.16 Pipeline Safety Grant Program Financial Review The purpose of the grant program review is to ensure costs submitted to PHMSA for reimbursement are appropriate and conform with all policies as outlined in “Guidelines for States Participating in the Pipeline Safety Program” and 2 CFR 200 – “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards”. This is to promote efficient and effective administration of the State Pipeline Safety Grant Program and to ensure consistent and fair treatment of all grant applicants to maximize the grant funds available to this program. At intervals not exceeding three years, PHMSA State Programs may conduct an in-depth review of costs applied to the Pipeline Safety Program Grant. The program review can consist of up to at least the previous three calendar years. This review shall consist of an analysis of the appropriateness of costs applied to the Pipeline Safety Program and its activities as submitted in the annual progress report. One-Call and State Damage Prevention grant expenditures will also be reviewed in conjunction with base grant review, if applicable. All programs should be prepared for this grant review with adequate working papers and source documentation to substantiate the reimbursed amounts of program expenditures. 9.16.1 Pre-Review Advance notice will be given for the Program Manager to prepare any financial information needed for the grant review. In addition, this should allow time for the necessary state personnel to be available to answer questions that might not be known by state pipeline safety staff during the on-site review. 9.16.2 Grant Review A review will be conducted of program costs which shall clearly relate to the program budget submitted with the grant application. Program costs shall also be consistent with 2 CFR 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Care shall be exercised in incurring costs to assure Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 85#
Attachment 1, passage 96DOT Grant-in-Aid Program that all expenditures are authorized in accordance with these general standards and meet the criteria of eligible costs. State agencies should be capable of providing enough source documentation during the grant review to ensure OPS that amounts submitted for reimbursement are accurate, necessary, and reasonable costs. This may include detailed invoice or billing reviews and enough documentation to insure items submitted for reimbursement were used by the pipeline safety program and that the items submitted were not used for the benefit any other state program. 9.16.3 Post-Review Following the review of the State Pipeline Safety Program costs, PHMSA State Programs will prepare a report with recommendations, if necessary, outlining any areas of concern on cost items believed to be unacceptable, unallowable or any cause for concern as to the reasonableness in being applied to their Pipeline Safety Grant Program. Notification of findings will be sent to the Program Manager from the PHMSA Director of State Programs. 9.16.4 Adjustments and Penalties Should any costs submitted in the State Pipeline Safety Grant be found to be unsubstantiated, unallowable, or unreasonable the State Pipeline Program will have those costs deducted from the current year grant reimbursement and be required to adjust their practices accordingly. The program review may consist of up to the previous three calendar years. If any One-Call Grant expenditures are found to be unsubstantiated, unallowable, unspent, or unreasonable the State Pipeline Program will have to initiate repayment of applicable funds to PHMSA. That process will be communicated to each program on an individual basis. 9.16.5 Appeal of Findings Should the State Pipeline Program appeal any decision of PHMSA Director of State Programs to deduct costs previously submitted, it shall be made to the PHMSA Associate Administrator of Pipeline Safety. The Associate Administrator shall have the final word in any decision made on these matters. 9.17 Procurement Standards Procurement standards must be followed by the State Agency to ensure that supplies, equipment, and other services are obtained efficiently and economically. State agencies shall use their own procurement procedures which reflect applicable State laws and regulations in the pipeline safety grant program, provided that procurements made with Federal grant funds conform to the applicable Federal laws and regulations. (49 CFR 1201.317) 9.18 Procurement Procedures The State Agency shall establish procurement procedures that: Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 86#
Attachment 1, passage 97DOT Grant-in-Aid Program • avoid the purchase of unnecessary or duplicative items • apply analyses to determine the most economical approach • foster economy and efficiency • encourage intergovernmental agreements for procurement, or use of common goods and services 9.19 Contracts Management The State Agency shall maintain a contracts management system that ensures contractors comply with the terms, conditions, and specifications of their contracts or purchase orders. 9.20 Internal Controls Each program must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the State Agency is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See 2 CFR 200.62 and 2 CFR 200.303) 9.21 Real Property Real Property is defined in 2 CFR 200.85 as land, including land improvements, structures, and appurtenances, but excludes moveable machinery and equipment. Real property purchases are not allowed in the pipeline safety grant. 9.22 Personal Property The State Agency will retain property acquired with pipeline safety grant funds if there is a need for the property to accomplish the purpose of the grant program, and accurate property records shall be maintained. Personal property shall be available for use on other projects or programs if such other use will not interfere with the work on the pipeline safety program. When the State Agency no longer needs the property in any of its federally sponsored programs, the State Agency shall request disposition instructions from PHMSA, for all personal property with a current per unit fair market value more than $5,000. Personal property is defined in 2 CFR 200.78. 9.23 Code of Conduct The State Agency shall maintain a written code, or standards of conduct, to govern the performance of its officers, employees, or agents in the award and administration of contracts supported by Federal grant funds. No State employee, officer, or agent shall participate in the selection, award, or Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 87#
Attachment 1, passage 98DOT Grant-in-Aid Program administration of a contract supported by Federal funds if a conflict of interest, real or implied, would be involved. 9.24 Conflict of Interest and Mandatory Disclosures Each state Agency must disclose in writing any potential conflict of interest to PHMSA Director of State Programs any instances of conflicts of interest or relevant violations of Federal criminal law. (2 CFR 200.112 and 200.113) 9.25 Audit Requirements (2 CFR 200 Subpart F) Non-Federal entities that expend $750,000 or more in a year in Federal awards, must arrange for an independent audit to perform a single or program specific audit. All audits are to comply with Federal requirement stated in 2 CFR 200 Subpart F and conducted annually. (See Appendix G) Failure to comply with the single audit requirement may result in loss of federal financial assistance. In the event there are program-specific audit findings uncovered during this process, a State Agency must contact (as soon as practical) the PHMSA Director of State Programs and communicate a plan for resolution of these findings. PHMSA State Programs will monitor these findings and work with the affected program until resolution is completed, if applicable. Note: State governments, in their entirety, are typically considered an “entity” therefore the Pipeline Safety Program is generally considered a part of that entity. To ensure compliance with this audit requirement, each State Agency must make sure the Pipeline Safety Grant (Base Grant listed under CFDA 20.700 or 20.721 for One-Call) is included in their state-wide single audit conducted annually in each respective state. Past audit information can be found on-line at the Federal Audit Clearinghouse. (https://www.fac.gov/) 9.26 PHMSA Office of Civil Rights Review – Title VI The PHMSA Office of Civil Rights may conduct an on-site review of the State Agency if compliance with Title VI requirements cannot be determined from the assurances alone. It will also conduct regular on-site, or desk audit compliance reviews as required by DOT directives. An on-site review will include personal interviews with persons in the State Agency’s organization and in the community likely to have relevant information or views. The review will also include the collection of all statistical and documentary materials needed to determine compliance. A desk audit will include a review of all material and information concerning the State Agency’s performance but will not include a visit to the State Agency. A copy of the written results of the review will be provided to the State Agency. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 88#
Attachment 1, passage 99DOT Grant-in-Aid Program Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 89#
Attachment 1, passage 100DOT Grant-in-Aid Program 9.27 Grant-in-Aid Program Calendar of Events Activity Grant-in-Aid Program CALENDAR OF EVENTS (Tentative only – Actual dates vary based on Federal Funding Availability) General Open General Notification Dates Closing Dates Base Grant Application for upcoming year and Certification/Agreement August September 30 E-mail sent to states alerting them of opening date for the Base Grant in FedSTAR One Call Application (optional) TBD TBD E-mail sent to states alerting them of opening date for the Base Grant in FedSTAR Base Grant Year End Payment Process January March – April E-mail is sent to the states alerting them of the opening date for the Year End Payment Request in FedSTAR One-Call Progress Report TBD TBD E-mail is sent to states alerting them of opening date in FedSTAR One-Call Allocation After GAC meeting and OPS review After final approval from official designated by Secretary of Transportation Notification to states after GAC meeting and OPS review. Base Grant Progress Report January Late February - March E-mail is sent to states alerting them of opening date in FedSTAR Base Grant Allocation Based on Progress Report Closing Date Late March to April Forwarded to states via email after analysis completed by OPS and confirmation of total state grant appropriation Mid-Year Base Grant Reimbursement Request (optional) June – pending funding release Late July to August – pending funding release E-mail is sent to states alerting them of opening date in FedSTAR Program Evaluation Late February - March Late December Conducted during annual visit from State Liaison Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 90#
Attachment 1, passage 101Federal State Tracking and Reporting – FedSTAR 10 FedSTAR 10.1 Purpose FedSTAR is an internet accessible web application that aids the States in meeting the requirements for participating in and in the preparation of the various forms necessary for participation in the Federal Grant program. FedSTAR collects information and constructs official program documents listed in the guidelines for program performance analysis and grant management. It also standardizes these various submissions that are required to participate in the State Grant Program. FedSTAR is provided by PHMSA to modernize the submission and reporting process for States participating in the State Grant Program. 10.2 Location and Procedures FedSTAR can be found in the PHMSA Portal at https://portal.phmsa.dot.gov. To access the FedSTAR program, the user must be issued a username as well as a password. Each user has a tailored profile which allows each user access to only those modules required for their job. The user is unable to access any of the features of FedSTAR without obtaining this login information: User Account Creation: A User Access Request form (this form can be found on the NAPSR website or by contacting carrie.winslow@dot.gov) is submitted via email to UserAccessRequests@napsr.net by a Program Manager. The requestor shall indicate in the request the level of access required for the individual. Modification of user privileges and roles: The modification of user privileges and roles will be done in a similar manner to the initial request to create a user – the request must come from a Program Manager. Disabling of a user account. When the Program Manager, PHMSA Director of State Programs or any of the State Evaluators (PHP-50) becomes aware that one of the employees under their organization is no longer employed by the State, the FedSTAR Manager shall be notified of the date of termination or employment. The FedSTAR Manager shall schedule a time to disable the user that coincides with their last day with State or shall disable the user immediately upon receiving the notification the user has already been terminated. Additionally, if the FedSTAR Manager becomes aware of a terminated employee (typically through email rejection notice), the FedSTAR Manager will contact the Program Manager of the employee to determine employment status and then take appropriate action to disable the user. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 91#
Attachment 1, passage 102Federal State Tracking and Reporting – FedSTAR Quarterly User Account Audit. A quarterly audit of active user accounts shall be performed. A report will be run through a database query to examine all active accounts and the date of last access. Any State user account found to be 365 days from the last login will be disabled. 10.3 Facilitating Various Program Documentation FedSTAR reduces the time spent filling out the various State Grant Program submittals -- Grant applications, Progress and Performance Reports, and Payment Requests. Each of the programs consists of several steps that the user must work through to successfully complete each document. The first step of each interface asks the user to verify their contact information. This ensures that the FedSTAR database stays up to date which allows PHMSA to better assist each individual State. Currently scanned versions of the printed and signed documents are being accepted in lieu of hard copy documents being mailed to PHMSA HQ. Base Grant Application - This program consists of the steps required to produce a Base Grant application document. The State describes their pipeline safety program, provides an estimated budget, and agrees to the general assurances. Progress Report - This program provides data input screens to complete each of the required nine attachments as listed in Chapter 9. One Call Grant Application - This program consists of the steps required to produce a One Call grant application document. Damage prevention projects are classified by priority, and then subclasses within a priority. Guidance for the One Call application is provided each fall after the GAC sets the project classifications and priorities. One Call Progress Report - This program provides PHMSA with a report on how the State spent the One Call grant funds they received. 10.4 Facilitating Grant Financials Grant Assistance Agreements and payment requests (SF-270) are created in FedSTAR to facilitate the submissions in the electronic invoicing system. One Call Allocation - This document provides the grant award information for the One Call Grant. PHMSA State Programs will coordinate with GAC to schedule a review of the submitted One Call grant applications in accordance with established criteria (One Call Grant Instructions and Priority List) that provides the most efficient timing of awards. The GAC uses the previous year’s Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 92#
Attachment 1, passage 103Federal State Tracking and Reporting – FedSTAR application and One Call progress report to make a determination on funding projects within applications. Allocation – This document publishes the award information for each State by program (Gas, Hazardous Liquid). The PHMSA Director of State Programs and his staff review and score the Progress Report submitted by each State. The Program Evaluation score is combined with the Progress Report score to produce the overall score for the State. This score is then calculated as a percent of funding, which then determines the States grant funding award for that grant period. Assistance Agreement - This is a document that must be submitted by each State which indicates they agree to the score they received through the Allocation process and provides the State with a grant award amount. The Assistance Agreement is signed by the State authorized signatory, emailed back to PHMSA and then PHMSA electronically signs the agreements and returns the fully executed agreement to the State. Certification Regarding Lobbying Document - This document applies to States that receive funding from the Federal government. These States must print out the form and sign it, signifying that they agree to use the money for legitimate purposes. The Certification Regarding Lobbying forms are included with the Assistance Agreement. Payment Requests - There are two payment request programs – the Mid-Year Payment Request and the Year End Payment Request. The Mid Year Payment Request is an optional program where the State can request reimbursement of their Allocated percentage of actual expenses at the 6-month mark. A series of steps collects the information and then produces the SF-270 for signature. The form is then scanned in and uploaded to the eInvoicing system. Additional fields are then completed, and the request is submitted electronically via iSupplier for review and approval by PHMSA. (Note: a separate username/password is required for the iSupplier system). The Year-end Payment Request is mandatory for all states who receive funding and is based on actual expenses for the calendar year. A series of steps collects the information and then produces the report is electronically submitted Costs are reviewed in-depth and then a final amount is determined and a SF-270 provided to the State. The SF-270 is signed and then scanned in and uploaded to the eInvoicing system (iSupplier). Additional fields are then completed, and the request is Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 93#
Attachment 1, passage 104Federal State Tracking and Reporting – FedSTAR submitted electronically via iSupplier for review and approval by PHMSA. (Note: a separate username/password is required for the iSupplier system). 10.5 Other FedSTAR Functions Program Evaluations - The OPS PHP50 State Evaluators use this feature of FedSTAR when they fill out their program evaluations for each state. Evaluations from previous years along with associated information will also be available in the SUDS section. SUDS– for each state a set of ‘completed documents’ exists for each program and each year (back to approximately 2005). These completed documents are the .pdf documents for each of the programs completed in FedSTAR. Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 94#
Attachment 1, passage 105Appendix Summary Appendix Summary Appendix A: 49 U.S.C. 601 and 49 U.S.C. 61 (One-Call) Appendix B: Interstate Agent Agreement Form and Guidance Policy and Sample Letter for Time Defined Agreement Appendix C: PHMSA Training and Qualification Course Listing and Training Requirement Tables Appendix D: DOT-NTSB Memorandum of Understanding Appendix E: Federal/State Cooperation in Case of Accident (Content removed temporarily. (PHMSA’s Accident Investigation Policy is outdated and under review) Appendix F: Pipeline Safety Programs, List of State Program Managers, and OPS Contact List Appendix G: 2 CFR 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Appendix H: State Inspector Mentoring Program Appendix I: State Gas Evaluation Form Appendix J: State Hazardous Liquid Evaluation Form Appendix K: Standards Library Policy Appendix L: Notifications Policies Appendix M: Grant Review Checklist Appendix N: ASMB C-10 – Cost Principles and Procedures for Developing Cost Allocation Plans and Indirect Cost Rates with the Federal Government Appendix O: PHMSA State Pipeline Safety Grants Guidance for Indirect Cost Recovery Appendix P: Procedure to Monitor, Evaluate and Reject Certification Appendix Q: Pipeline Safety Grant Progress Report Scoring Appendix R: NTSB Recommendations Referenced in “Guidelines for States Participating in the Pipeline Safety Program” Appendix S: Examples of State Pipeline Safety Program Plan, Procedures and Risk Based Inspection Prioritization Model Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 95#
Attachment 1, passage 106Appendix Summary Appendix T: WMS Training Links and Resources Appendix U: SICT Instructions Appendix V: State Pipeline Metrics Summary Guidelines for States Participating in the Pipeline Safety Program Revised January 1, 2024 96 Guidelines for States Participating in the Pipeline Safety Program Appendix A The Federal Pipeline Safety Statutes 49 U.S.C. § 60101 et seq. showing amendments enacted by: Red: Pipeline Inspection, Protection, Enforcement and Safety Act of 2006 Public Law No: 109-468 Dec. 29, 2006 Green: Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 Public Law No: 112-90 Jan. 3, 2012 Blue: Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016, Public Law No. 114-183 Jun. 22, 2016 Purple: Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2020, Public Law No. 116-260, Division R December 27, 2020 Compiled by Office of Chief Counsel, PHMSA January 2021 For Official Agency Use Only#
Attachment 1, passage 107Table of Contents Safety (§§ 60101 - 60143) ................................................................................... 1 User Fees (§§ 60301 - 60303) ........................................................................... 66 One-Call Notification Programs (§§ 6101 - 6109) .............................................. 68 Sec. 12 of the Pipeline Safety Improvement Act of 2002 ................................... 73 Uncodified Mandates from Act of 2011 .............................................................. 76 Uncodified Mandates from Act of 2016 .............................................................. 84 Uncodified Mandates from Act of 2020 .............................................................. 96 ii#
Attachment 1, passage 108For Official Agency Use Only Federal Pipeline Safety Statutes (49 U.S.C. § 60101 et seq.) Table of Contents Section Page No. § 60101. Definitions .......................................................................................................................................2 § 60102. Purpose and general authority........................................................................................................4 § 60103. Standards for liquefied natural gas pipeline facilities................................................................... 13 § 60104. Requirements and limitations ...................................................................................................... 14 § 60105. State pipeline safety program certifications ................................................................................. 14 § 60106. State pipeline safety agreements ................................................................................................ 16 § 60107. State pipeline safety grants ......................................................................................................... 17 § 60108. Inspection and maintenance ........................................................................................................ 18 § 60109. High-density population areas and environmentally sensitive areas ........................................... 22 § 60110. Excess flow valves ....................................................................................................................... 27 § 60111. Financial responsibility for liquefied natural gas facilities ............................................................ 28 § 60112. Pipeline facilities hazardous to life and property ......................................................................... 28 § 60113. Customer-owned natural gas service lines .................................................................................. 30 § 60114. One-call notification systems ....................................................................................................... 30 § 60115. Technical safety standards committees ...................................................................................... 31 § 60116. Public education programs .......................................................................................................... 33 § 60117. Administrative .............................................................................................................................. 33 § 60118. Compliance and waivers .............................................................................................................. 38 § 60119. Judicial review.............................................................................................................................. 40 § 60120. Enforcement ................................................................................................................................. 40 § 60121. Actions by private persons ........................................................................................................... 41 § 60122. Civil penalties ............................................................................................................................... 41 § 60123. Criminal penalties ........................................................................................................................ 42 § 60124. Biennial reports ............................................................................................................................ 43 § 60125. Authorization of appropriations .................................................................................................... 44 § 60126. Risk management ........................................................................................................................ 47 § 60127. Population encroachment and rights-of-way ............................................................................... 48 § 60128. Dumping within pipeline rights-of-way ......................................................................................... 49 § 60129. Protection of employees providing pipeline safety information ................................................... 49 § 60130. Pipeline safety information grants to communities ...................................................................... 52 § 60131. Verification of pipeline qualification programs ............................................................................. 53 § 60132. National pipeline mapping system ............................................................................................... 54 § 60133. Coordination of environmental reviews ....................................................................................... 55 § 60134. State damage prevention programs ............................................................................................ 57 § 60135. Enforcement transparency ........................................................................................................... 58 § 60136. Petroleum product transportation capacity study ........................................................................ 58 § 60137. Pipeline control room management ............................................................................................. 59 § 60138. Response plans ........................................................................................................................... 59 § 60139. Maximum allowable operating pressure ...................................................................................... 60 § 60140. Cover over buried pipelines ......................................................................................................... 61 § 60141. Standards for underground natural gas storage facilities ............................................................ 61 § 60142. Pipeline safety enhancement programs ....................................................................................... 62 § 60143. Idled pipelines ............................................................................................................................... 65 Rev. January 28, 2021 1#
Attachment 1, passage 109For Official Agency Use Only § 60101. Definitions (a) General.--In this chapter-- (1) "existing liquefied natural gas facility"-- (A) means a liquefied natural gas facility for which an application to approve the site, construction, or operation of the facility was filed before March 1, 1978, with-- (i) the Federal Energy Regulatory Commission (or any predecessor); or (ii) the appropriate State or local authority, if the facility is not subject to the jurisdiction of the Commission under the Natural Gas Act (15 U.S.C. 717 et seq.); but (B) does not include a facility on which construction is begun after November 29, 1979, without the approval; (2) "gas" means natural gas, flammable gas, or toxic or corrosive gas; (3) "gas pipeline facility" includes a pipeline, a right of way, a facility, a building, or equipment used in transporting gas or treating gas during its transportation; (4) "hazardous liquid" means-- (A) petroleum or a petroleum product; and (B) nonpetroleum fuel, including biofuel, that is flammable, toxic, or corrosive or would be harmful to the environment if released in significant quantities; and (B)(C) a substance the Secretary of Transportation decides may pose an unreasonable risk to life or property when transported by a hazardous liquid pipeline facility in a liquid state (except for liquefied natural gas); (5) "hazardous liquid pipeline facility" includes a pipeline, a right of way, a facility, a building, or equipment used or intended to be used in transporting hazardous liquid; (6) "interstate gas pipeline facility"-- (A) means a gas pipeline facility-- (i) used to transport gas; and (ii) subject to the jurisdiction of the Commission under the Natural Gas Act (15 U.S.C. 717 et seq.); but (B) does not include a gas pipeline facility transporting gas from an interstate gas pipeline in a State to a direct sales customer in that State buying gas for its own consumption; (6) "interstate gas pipeline facility" means a gas pipeline facility— (A) used to transport gas; and (B) subject to the jurisdiction of the Commission under the Natural Gas Act (15 U.S.C. 717 et seq.); (7) "interstate hazardous liquid pipeline facility" means a hazardous liquid pipeline facility used to transport hazardous liquid in interstate or foreign commerce; (8) "interstate or foreign commerce"-- (A) related to gas, means commerce-- (i) between a place in a State and a place outside that State; or (ii) that affects any commerce described in subclause (A)(i) of this clause; and (B) related to hazardous liquid, means commerce between-- (i) a place in a State and a place outside that State; or (ii) places in the same State through a place outside the State; (9) "intrastate gas pipeline facility" means-- (A) a gas pipeline facility and transportation of gas within a State not subject to the jurisdiction of the Commission under the Natural Gas Act (15 U.S.C. 717 et seq.); and (B) a gas pipeline facility transporting gas from an interstate gas pipeline in a State to a direct sales customer in that State buying gas for its own consumption; (9) "intrastate gas pipeline facility" means a gas pipeline facility and transportation of gas within a State not subject to the jurisdiction of the Commission under the Natural Gas Act (15 U.S.C. 717 et seq.); (10) "intrastate hazardous liquid pipeline facility" means a hazardous liquid pipeline facility that is not an interstate hazardous liquid pipeline facility; (11) "liquefied natural gas" means natural gas in a liquid or semisolid state; Rev. January 28, 2021 2#
Attachment 1, passage 110For Official Agency Use Only (12) "liquefied natural gas accident" means a release, burning, or explosion of liquefied natural gas from any cause, except a release, burning, or explosion that, under regulations prescribed by the Secretary, does not pose a threat to public health or safety, property, or the environment; (13) "liquefied natural gas conversion" means conversion of natural gas into liquefied natural gas or conversion of liquefied natural gas into natural gas; (14) "liquefied natural gas pipeline facility"-- (A) means a gas pipeline facility used for transporting or storing liquefied natural gas, or for liquefied natural gas conversion, in interstate or foreign commerce; but (B) does not include any part of a structure or equipment located in navigable waters (as defined in section 3 of the Federal Power Act (16 U.S.C. 796)); (15) "municipality" means a political subdivision of a State; (16) "new liquefied natural gas pipeline facility" means a liquefied natural gas pipeline facility except an existing liquefied natural gas pipeline facility; (17) "person", in addition to its meaning under section 1 of title 1 (except as to societies), includes a State, a municipality, and a trustee, receiver, assignee, or personal representative of a person; (18) "pipeline facility" means a gas pipeline facility and a hazardous liquid pipeline facility; (19) "pipeline transportation" means transporting gas and transporting hazardous liquid; (20) "State" means a State of the United States, the District of Columbia, and Puerto Rico; (21) "transporting gas"-- (A) means the gathering, transmission, or distribution of gas by pipeline, or the storage of gas, in interstate or foreign commerce; but (B) does not include the gathering of gas, other than gathering through regulated gathering lines, in those rural locations that are located outside the limits of any incorporated or unincorporated city, town, or village, or any other designated residential or commercial area (including a subdivision, business, shopping center, or community development) or any similar populated area that the Secretary of Transportation determines to be a nonrural area, except that the term "transporting gas" includes the movement of gas through regulated gathering lines.; (22) "transporting hazardous liquid"-- (A) means the movement of hazardous liquid by pipeline, or the storage of hazardous liquid incidental to the movement of hazardous liquid by pipeline, in or affecting interstate or foreign commerce; but (B) does not include moving hazardous liquid through-- (i) gathering lines in a rural area; (ii) onshore production, refining, or manufacturing facilities; or (iii) storage or in-plant piping systems associated with onshore production, refining, or manufacturing facilities.; (23) "risk management" means the systematic application, by the owner or operator of a pipeline facility, of management policies, procedures, finite resources, and practices to the tasks of identifying, analyzing, assessing, reducing, and controlling risk in order to protect employees, the general public, the environment, and pipeline facilities; (24) "risk management plan" means a management plan utilized by a gas or hazardous liquid pipeline facility owner or operator that encompasses risk management; and (25) "Secretary" means the Secretary of Transportation.; and (26) “underground natural gas storage facility” means a gas pipeline facility that stores natural gas in an underground facility, including— (A) a depleted hydrocarbon reservoir; (B) an aquifer reservoir; or (C) a solution-mined salt cavern reservoir. (b) Gathering lines.--(1)(A) Not later than October 24, 1994, the Secretary shall prescribe standards defining the term "gathering line". (B) In defining "gathering line" for gas, the Secretary-- (i) shall consider functional and operational characteristics of the lines to be included in the definition; and Rev. January 28, 2021 3#
Attachment 1, passage 111For Official Agency Use Only (ii) is not bound by a classification the Commission establishes under the Natural Gas Act (15 U.S.C. 717 et seq.). (2)(A) Not later than October 24, 1995, the Secretary, if appropriate, shall prescribe standards defining the term "regulated gathering line". In defining the term, the Secretary shall consider factors such as location, length of line from the well site, operating pressure, throughput, and the composition of the transported gas or hazardous liquid, as appropriate, in deciding on the types of lines that functionally are gathering but should be regulated under this chapter because of specific physical characteristics. (B)(i) The Secretary also shall consider diameter when defining "regulated gathering line" for hazardous liquid. (ii) The definition of "regulated gathering line" for hazardous liquid may not include a crude oil gathering line that has a nominal diameter of not more than 6 inches, is operated at low pressure, and is located in a rural area that is not unusually sensitive to environmental damage. § 60102. Purpose and general authority (a) Purpose and minimum safety standards.-- (1) Purpose.--The purpose of this chapter is to provide adequate protection against risks to life and property posed by pipeline transportation and pipeline facilities by improving the regulatory and enforcement authority of the Secretary of Transportation. (2) Minimum safety standards.--The Secretary shall prescribe minimum safety standards for pipeline transportation and for pipeline facilities. The standards-- (A) apply to owners and operators any or all of the owners and operators of pipeline facilities; (B) may apply to the design, installation, inspection, emergency plans and procedures, testing, construction, extension, operation, replacement, and maintenance of pipeline facilities; and (C) shall include a requirement that all individuals who operate and maintain pipeline facilities shall be qualified to operate and maintain the pipeline facilities. (3) Qualifications of pipeline operators.-- The qualifications applicable to an individual who operates and maintains a pipeline facility shall address the ability to recognize and react appropriately to abnormal operating conditions that may indicate a dangerous situation or a condition exceeding design limits. The operator of a pipeline facility shall ensure that employees who operate and maintain the facility are qualified to operate and maintain the pipeline facilities. (b) Practicability and safety needs standards.-- (1) In general.--A standard prescribed under subsection (a) shall be-- (A) practicable; and (B) designed to meet the need for-- (i) gas pipeline safety, or safely transporting hazardous liquids, as appropriate; and (ii) protecting the environment. (2) Factors for consideration.--When prescribing any standard under this section or section 60101(b), 60103, 60108, 60109, 60110, or 60113, the Secretary shall consider-- (A) relevant available-- (i) gas pipeline safety information; (ii) hazardous liquid pipeline safety information; and (iii) environmental information; (B) the appropriateness of the standard for the particular type of pipeline transportation or facility; (C) the reasonableness of the standard; (D) based on a risk assessment, the reasonably identifiable or estimated benefits expected to result from implementation or compliance with the standard; (E) based on a risk assessment, the reasonably identifiable or estimated costs expected to result from implementation or compliance with the standard; (F) comments and information received from the public; and (G) the comments and recommendations of the Technical Pipeline Safety Standards Rev. January 28, 2021 4#
Attachment 1, passage 112For Official Agency Use Only Committee, the Technical Hazardous Liquid Pipeline Safety Standards Committee, or both, as appropriate. (3) Risk assessment.--In conducting a risk assessment referred to in subparagraphs (D) and (E) of paragraph (2), the Secretary shall-- (A) identify the regulatory and nonregulatory options that the Secretary considered in prescribing a proposed standard; (B) identify the costs and benefits associated with the proposed standard; (C) include-- (i) an explanation of the reasons for the selection of the proposed standard in lieu of the other options identified; and (ii) with respect to each of those other options, a brief explanation of the reasons that the Secretary did not select the option; and (D) identify technical data or other information upon which the risk assessment information and proposed standard is based. (4) Review.-- (A) In general.--The Secretary shall-- (i) submit any risk assessment information prepared under paragraph (3) of this subsection to the Technical Pipeline Safety Standards Committee, the Technical Hazardous Liquid Pipeline Safety Standards Committee, or both, as appropriate; and (ii) make that risk assessment information available to the general public. (B) Peer review panels.--The committees referred to in subparagraph (A) shall serve as peer review panels to review risk assessment information prepared under this section. Not later than 90 days after receiving risk assessment information for review pursuant to subparagraph (A), each committee that receives that risk assessment information shall prepare and submit to the Secretary a report that includes- (i) an evaluation of the merit of the data and methods used; and (ii) any recommended options relating to that risk assessment information and the associated standard that the committee determines to be appropriate. (C) Review by Secretary.--Not later than 90 days after receiving a report submitted by a committee under subparagraph (B), the Secretary-- (i) shall review the report; (ii) shall provide a written response to the committee that is the author of the report concerning all significant peer review comments and recommended alternatives contained in the report; and (iii) may revise the risk assessment and the proposed standard before promulgating the final standard. (5) Secretarial decisionmaking.--Except where otherwise required by statute, the Secretary shall propose or issue a standard under this Chapter chapter only upon a reasoned determination that the benefits, including safety and environmental benefits, of the intended standard justify its costs. (6) Exceptions from application.--The requirements of subparagraphs (D) and (E) of paragraph (2) do not apply when-- (A) the standard is the product of a negotiated rulemaking, or other rulemaking including the adoption of industry standards that receives no significant adverse comment within 60 days of notice in the Federal Register; (B) based on a recommendation (in which three-fourths of the members voting concur) by the Technical Pipeline Safety Standards Committee, the Technical Hazardous Liquid Pipeline Safety Standards Committee, or both, as applicable, the Secretary waives the requirements; or (C) the Secretary finds, pursuant to section 553(b)(3)(B) of title 5, United States Code, that notice and public procedure are not required. (7) Report.--Not later than March 31, 2000, the Secretary shall transmit to the Congress a report that-- (A) describes the implementation of the risk assessment requirements of this section, including the extent to which those requirements have affected regulatory decisionmaking and pipeline safety; and (B) includes any recommendations that the Secretary determines would make the risk assessment process conducted pursuant to the requirements under this chapter a more Rev. January 28, 2021 5#
Attachment 1, passage 113For Official Agency Use Only effective means of assessing the benefits and costs associated with alternative regulatory and nonregulatory options in prescribing standards under the Federal pipeline safety regulatory program under this chapter. (c) Public safety program requirements.--(1) The Secretary shall include in the standards prescribed under subsection (a) of this section a requirement that an operator of a gas pipeline facility participate in a public safety program that-- (A) notifies an operator of proposed demolition, excavation, tunneling, or construction near or affecting the facility; (B) requires an operator to identify a pipeline facility that may be affected by the proposed demolition, excavation, tunneling, or construction, to prevent damaging the facility; and (C) the Secretary decides will protect a facility adequately against a hazard caused by demolition, excavation, tunneling, or construction. (2) To the extent a public safety program referred to in paragraph (1) of this subsection is not available, the Secretary shall prescribe standards requiring an operator to take action the Secretary prescribes to provide services comparable to services that would be available under a public safety program. (3) The Secretary may include in the standards prescribed under subsection (a) of this section a requirement that an operator of a hazardous liquid pipeline facility participate in a public safety program meeting the requirements of paragraph (1) of this subsection or maintain and carry out a damage prevention program that provides services comparable to services that would be available under a public safety program. (4) Promoting public awareness.-- (A) Not later than one year after the date of enactment of the Accountable Pipeline Safety and Accountability Act of 1996, and annually thereafter, the owner or operator of each interstate gas pipeline facility shall provide to the governing body of each municipality in which the interstate gas pipeline facility is located, a map identifying the location of such facility. (B)(i) Not later than June 1, 1998, the Secretary shall survey and assess the public education programs under section 60116 and the public safety programs under section 60102(c) and determine their effectiveness and applicability as components of a model program. In particular, the survey shall include the methods by which operators notify residents of the location of the facility and its right of way, public information regarding existing One-Call programs, and appropriate procedures to be followed by residents of affected municipalities in the event of accidents involving interstate gas pipeline facilities. (ii) Not later than one year after the survey and assessment are completed, the Secretary shall institute a rulemaking to determine the most effective public safety and education program components and promulgate if appropriate, standards implementing those components on a nationwide basis. In the event that the Secretary finds that promulgation of such standards are not appropriate, the Secretary shall report to Congress the reasons for that finding. (d) Facility operation information standards.--The Secretary shall prescribe minimum standards requiring an operator of a pipeline facility subject to this chapter to maintain, to the extent practicable, information related to operating the facility as required by the standards prescribed under this chapter and, when requested, to make the information available to the Secretary and an appropriate State official as determined by the Secretary. The information shall include-- (1) the business name, address, and telephone number, including an operations emergency telephone number, of the operator; (2) accurate maps and a supplementary geographic description, including an identification of areas described in regulations prescribed under section 60109 of this title, that show the location in the State of-- (A) major gas pipeline facilities of the operator, including transmission lines and significant distribution lines; and (B) major hazardous liquid pipeline facilities of the operator; (3) a description of-- (A) the characteristics of the operator's pipelines in the State; and Rev. January 28, 2021 6#
Attachment 1, passage 114For Official Agency Use Only (B) products transported through the operator's pipelines in the State; (4) the manual that governs operating and maintaining pipeline facilities in the State; (5) an emergency response plan describing the operator's procedures for responding to and containing releases, including-- (A) identifying specific action the operator will take on discovering a release; (B) liaison procedures with State and local authorities for emergency response; and (C) communication and alert procedures for immediately notifying State and local officials at the time of a release; and (6) other information the Secretary considers useful to inform a State of the presence of pipeline facilities and operations in the State. (e) Pipe inventory standards.--The Secretary shall prescribe minimum standards requiring an operator of a pipeline facility subject to this chapter to maintain for the Secretary, to the extent practicable, an inventory with appropriate information about the types of pipe used for the transportation of gas or hazardous liquid, as appropriate, in the operator's system and additional information, including the material's history and the leak history of the pipe. The inventory-- (1) for a gas pipeline facility, shall include an identification of each facility passing through an area described in regulations prescribed under section 60109 of this title but shall exclude equipment used with the compression of gas; and (2) for a hazardous liquid pipeline facility, shall include an identification of each facility and gathering line passing through an area described in regulations prescribed under section 60109 of this title, whether the facility or gathering line otherwise is subject to this chapter, but shall exclude equipment associated only with the pipeline pumps or storage facilities. (f) Standards as accommodating "smart pigs".-- (1) Minimum safety standards.--The Secretary shall prescribe minimum safety standards requiring that- (A) the design and construction of new natural gas transmission pipeline or hazardous liquid pipeline facilities, and (B) when the replacement of existing natural gas transmission pipeline or hazardous liquid pipeline facilities or equipment is required, the replacement of such existing facilities be carried out, to the extent practicable, in a manner so as to accommodate the passage through such natural gas transmission pipeline or hazardous liquid pipeline facilities of instrumented internal inspection devices (commonly referred to as "smart pigs"). The Secretary may extend such standards to require existing natural gas transmission pipeline or hazardous liquid pipeline facilities, whose basic construction would accommodate an instrumented internal inspection device to be modified to permit the inspection of such facilities with instrumented internal inspection devices. (2) Periodic inspections. --Not later than October 24, 1995, the Secretary shall prescribe, if necessary, additional standards requiring the periodic inspection of each pipeline the operator of the pipeline identifies under section 60109 of this title. The standards shall include any circumstances under which an inspection shall be conducted with an instrumented internal inspection device and, if the device is not required, use of an inspection method that is at least as effective as using the device in providing for the safety of the pipeline. (g) Effective dates.--A standard prescribed under this section and section 60110 of this title is effective on the 30th day after the Secretary prescribes the standard. However, the Secretary for good cause may prescribe a different effective date when required because of the time reasonably necessary to comply with the standard. The different date must be specified in the regulation prescribing the standard. (h) Safety condition reports.--(1) The Secretary shall prescribe regulations requiring each operator of a pipeline facility (except a master meter) to submit to the Secretary a written report on any-- (A) condition that is a hazard to life, property, or the environment; and (B) safety-related condition that causes or has caused a significant change or restriction in the operation of a pipeline facility. Rev. January 28, 2021 7#
Attachment 1, passage 115For Official Agency Use Only (2) The Secretary must receive the report not later than 5 working days after a representative of a person to which this section applies first establishes that the condition exists. Notice of the condition shall be given concurrently to appropriate State authorities. (2) Submission of report.—As soon as practicable, but not later than 5 business days, after a representative of a person to whom this section applies first establishes that a condition described in paragraph (1) exists, the operator shall submit the report required under that paragraph to— (A) the Secretary; (B) the appropriate State authority or, where no appropriate State authority exists, to the Governor of a State where the subject of the Safety Related Condition report occurred; and (C) the appropriate Tribe where the subject of the Safety Related Condition report occurred. (3) Submission of report to other entities.—Upon request, a State authority or a Governor that receives a report submitted under this subsection may submit the report to any relevant emergency response or planning entity, including any— (A) State emergency response commission established pursuant to section 301 of the Emergency Planning and Community Right-To-Know Act of 1986 (42 U.S.C. 11001); (B) Tribal emergency response commission or emergency planning committee (as defined in part 355 of title 40, Code of Federal Regulations (or a successor regulation)); (C) local emergency planning committee established pursuant to section 301 of the Emergency Planning and Community Right-To-Know Act of 1986 (42 U.S.C. 11001); or (D) other public agency responsible for emergency response. (i) Carbon dioxide regulation.-- (1) Transportation in liquid state. —The Secretary shall regulate carbon dioxide transported by a hazardous liquid pipeline facility. The Secretary shall prescribe standards related to hazardous liquid to ensure the safe transportation of carbon dioxide by such a facility. (2) Transportation in gaseous state. — (A) Minimum safety standards.—The Secretary shall prescribe minimum safety standards for the transportation of carbon dioxide by pipeline in a gaseous state. (B) Considerations. —In establishing the standards, the Secretary shall consider whether applying the minimum safety standards in part 195 of title 49, Code of Federal Regulations, as in effect on the date of enactment of this paragraph, for the transportation of carbon dioxide in a liquid state to the transportation of carbon dioxide in a gaseous state would ensure safety. (3) Limitation of statutory construction. —Nothing in this subsection authorizes the Secretary to regulate piping or equipment used in the production, extraction, recovery, lifting, stabilization, separation, or treatment of carbon dioxide or the preparation of carbon dioxide for transportation by pipeline at production, refining, or manufacturing facilities. (j) Emergency flow restricting devices.--(1) Not later than October 24, 1994, the Secretary shall survey and assess the effectiveness of emergency flow restricting devices (including remotely controlled valves and check valves) and other procedures, systems, and equipment used to detect and locate hazardous liquid pipeline ruptures and minimize product releases from hazardous liquid pipeline facilities. (2) Not later than 2 years after the survey and assessment are completed, the Secretary shall prescribe standards on the circumstances under which an operator of a hazardous liquid pipeline facility must use an emergency flow restricting device or other procedure, system, or equipment described in paragraph (1) of this subsection on the facility. (3) Remotely controlled valves.--(A) Not later than June 1, 1998, the Secretary shall survey and assess the effectiveness of remotely controlled valves to shut off the flow of natural gas in the event of a rupture of an interstate natural gas pipeline facility and shall make a determination about whether the use of remotely controlled valves is technically and economically feasible and would reduce risks associated with a rupture of an interstate natural gas pipeline facility. (B) Not later than one year after the survey and assessment are completed, if the Secretary has determined that the use of remotely controlled valves is technically and economically feasible and would reduce risks associated with a rupture of an interstate natural gas pipeline facility, the Secretary shall prescribe standards under which an operator of an interstate natural gas pipeline facility must use a remotely controlled valve. These standards shall include, but not be limited to, requirements for high-density population areas. Rev. January 28, 2021 8#
Attachment 1, passage 116For Official Agency Use Only (k) Prohibition against low internal stress exception.--The Secretary may not provide an exception to this chapter for a hazardous liquid pipeline facility only because the facility operates at low internal stress. (k) Low-stress hazardous liquid pipelines. — (1) Minimum standards. —Not later than December 31, 2007, the Secretary shall issue regulations subjecting low-stress hazardous liquid pipelines to the same standards and regulations as other hazardous liquid pipelines, except as provided in paragraph (3). The implementation of the applicable standards and regulatory requirements may be phased in. The regulations issued under this paragraph shall not apply to gathering lines. (2) General prohibition against low internal stress exception.—Except as provided in paragraph (3), the Secretary may not provide an exception to the requirements of this chapter for a hazardous liquid pipeline because the pipeline operates at low internal stress. (3) Limited exceptions. —The Secretary shall provide or continue in force exceptions to this subsection for low-stress hazardous liquid pipelines that— (A) are subject to safety regulations of the United States Coast Guard; or (B) serve refining, manufacturing, or truck, rail, or vessel terminal facilities if the pipeline is less than 1 mile long (measured outside the facility grounds) and does not cross an offshore area or a waterway currently used for commercial navigation, until regulations issued under paragraph (1) become effective. After such regulations become effective, the Secretary may retain or remove those exceptions as appropriate. (4) Relationship to other laws. —Nothing in this subsection shall be construed to prohibit or otherwise affect the applicability of any other statutory or regulatory exemption to any hazardous liquid pipeline. (5) Definition. —For purposes of this subsection, the term ‘low-stress hazardous liquid pipeline’ means a hazardous liquid pipeline that is operated in its entirety at a stress level of 20 percent or less of the specified minimum yield strength of the line pipe. (6) Effective date. —The requirements of this subsection shall not take effect as to low-stress hazardous liquid pipeline operators before the effective date of the rules promulgated by the Secretary under this subsection. (l) Updating standards.--The Secretary shall, to the extent appropriate and practicable, update incorporated industry standards that have been adopted as part of the Federal pipeline safety regulatory program under this chapter. (m) Inspections by direct assessment.--Not later than 1 year after the date of the enactment of this subsection, the Secretary shall issue regulations prescribing standards for inspection of a pipeline facility by direct assessment. (n) Automatic and Remote-Controlled Shut-off Valves for New Transmission Pipelines.— (1) In general. —Not later than 2 years after the date of enactment of this subsection, and after considering the factors specified in subsection (b)(2), the Secretary, if appropriate, shall require by regulation the use of automatic or remote-controlled shut-off valves, or equivalent technology, where economically, technically, and operationally feasible on transmission pipeline facilities constructed or entirely replaced after the date on which the Secretary issues the final rule containing such requirement. (2) High-consequence area study. — (A) Study.—The Comptroller General of the United States shall conduct a study on the ability of transmission pipeline facility operators to respond to a hazardous liquid or gas release from a pipeline segment located in a high-consequence area. (B) Considerations. —In conducting the study, the Comptroller General shall consider the swiftness of leak detection and pipeline shutdown capabilities, the location of the nearest response personnel, and the costs, risks, and benefits of installing automatic and remote- controlled shut-off valves. (C) Report. —Not later than 1 year after the date of enactment of this subsection, the Comptroller General shall submit to the Committee on Transportation and Infrastructure and Rev. January 28, 2021 9#
Attachment 1, passage 117For Official Agency Use Only the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report on the results of the study. (o) Transportation-Related Oil Flow Lines. — (1) Data collection. —The Secretary may collect geospatial or technical data on transportation- related oil flow lines, including unregulated transportation-related oil flow lines. (2) Transportation-related oil flow line defined. — In this subsection, the term “transportation-related oil flow line” means a pipeline transporting oil off of the grounds of the well where it originated and across areas not owned by the producer, regardless of the extent to which the oil has been processed, if at all. (3) Limitation. —Nothing in this subsection authorizes the Secretary to prescribe standards for the movement of oil through production, refining, or manufacturing facilities or through oil production flow lines located on the grounds of wells. (p) Limitation on Incorporation of Documents by Reference.—Beginning 1 year 3 years after the date of enactment of this subsection, the Secretary may not issue guidance or a regulation pursuant to this chapter that incorporates by reference any documents or portions thereof unless the documents or portions thereof are made available to the public, free of charge, on an Internet Web site. (q) Gas Pipeline Leak Detection and Repair.— (1) In general.—Not later than 1 year after the date of enactment of this subsection, the Secretary shall promulgate final regulations that require operators of regulated gathering lines (as defined pursuant to subsection (b) of section 60101 for purposes of subsection (a)(21) of that section) in a Class 2 location, Class 3 location, or Class 4 location, as determined under section 192.5 of title 49, Code of Federal Regulations, operators of new and existing gas transmission pipeline facilities, and operators of new and existing gas distribution pipeline facilities to conduct leak detection and repair programs— (A) to meet the need for gas pipeline safety, as determined by the Secretary; and (B) to protect the environment. (2) Leak detection and repair programs.— (A) Minimum performance standards.—The final regulations promulgated under paragraph (1) shall include, for the leak detection and repair programs described in that paragraph, minimum performance standards that reflect the capabilities of commercially available advanced technologies that, with respect to each pipeline covered by the programs, are appropriate for— (i) the type of pipeline; (ii) the location of the pipeline; (iii) the material of which the pipeline is constructed; and (iv) the materials transported by the pipeline. (B) Requirement.—The leak detection and repair programs described in paragraph (1) shall be able to identify, locate, and categorize all leaks that— (i) are hazardous to human safety or the environment; or (ii) have the potential to become explosive or otherwise hazardous to human safety. (3) Advanced leak detection technologies and practices.— (A) In general.—The final regulations promulgated under paragraph (1) shall— (i) require the use of advanced leak detection technologies and practices described in subparagraph (B); (ii) identify any scenarios where operators may use leak detection practices that depend on human senses; and (iii) include a schedule for repairing or replacing each leaking pipe, except a pipe with a leak so small that it poses no potential hazard, with appropriate deadlines. (B) Advanced leak detection technologies and practices described.—The advanced leak detection technologies and practices referred to in subparagraph (A)(i) include— (i) for new and existing gas distribution pipeline facilities, technologies and practices to detect pipeline leaks— (I) through continuous monitoring on or along the pipeline; or Rev. January 28, 2021 10#
Attachment 1, passage 118For Official Agency Use Only (II) through periodic surveys with handheld equipment, equipment mounted on mobile platforms, or other means using commercially available technology; (ii) for new and existing gas transmission pipeline facilities, technologies and practices to detect pipeline leaks through— (I) equipment that is capable of continuous monitoring; or (II) periodic surveys with handheld equipment, equipment mounted on mobile platforms, or other means using commercially available technology; and (iii) for regulated gathering lines in Class 2 locations, Class 3 locations, or Class 4 locations, technologies and practices to detect pipeline leaks through— (I) equipment that is capable of continuous monitoring; or (II) periodic surveys with handheld equipment, equipment mounted on mobile platforms, or other means using commercially available technology. (4) Rules of construction.— (A) Surveys and timelines.—In promulgating regulations under this subsection, the Secretary— (i) may not reduce the frequency of surveys required under any other provision of this chapter or stipulated by regulation as of the date of enactment of this subsection; and (ii) may not extend the duration of any timelines for the repair or remediation of leaks that are stipulated by regulation as of the date of enactment of this subsection. (B) Application.—The limitations in this paragraph do not restrict the Secretary’s ability to modify any regulations through proceedings separate from or subsequent to the final regulations required under paragraph (1). (C) Existing authority.—Nothing in this subsection may be construed to alter the authority of the Secretary to regulate gathering lines as defined pursuant to section 60101. (r) Emergency Response Plans.—Not later than 2 years after the date of enactment of this subsection, the Secretary shall update regulations to ensure that each emergency response plan developed by an operator of a distribution system under subsection (d)(5), includes written procedures for— (1) establishing communication with first responders and other relevant public officials, as soon as practicable, beginning from the time of confirmed discovery, as determined by the Secretary, by the operator of a gas pipeline emergency involving a release of gas from a distribution system of that operator that results in— (A) a fire related to an unintended release of gas; (B) an explosion; (C) 1 or more fatalities; or (D) the unscheduled release of gas and shutdown of gas service to a significant number of customers, as determined by the Secretary; (2) establishing general public communication through an appropriate channel— (A) as soon as practicable, as determined by the Secretary, after a gas pipeline emergency described in paragraph (1); and (B) that provides information regarding— (i) the emergency described in subparagraph (A); and (ii) the status of public safety; and (3) the development and implementation of a voluntary, opt-in system that would allow operators of distribution systems to rapidly communicate with customers in the event of an emergency. (s) Operations and Maintenance Manuals.—Not later than 2 years after the date of enactment of this subsection, the Secretary shall update regulations to ensure that each procedural manual for operations, maintenance, and emergencies developed by an operator of a distribution pipeline under subsection (d)(4), includes written procedures for— (1) responding to overpressurization indications, including specific actions and an order of operations for immediately reducing pressure in or shutting down portions of the gas distribution system, if necessary; and (2) a detailed procedure for the management of the change process, which shall— (A) be applied to significant technology, equipment, procedural, and organizational changes to the distribution system; and (B) ensure that relevant qualified personnel, such as an engineer with a professional engineer Rev. January 28, 2021 11#
Attachment 1, passage 119For Official Agency Use Only licensure, subject matter expert, or other employee who possesses the necessary knowledge, experience, and skills regarding natural gas distribution systems, review and certify construction plans for accuracy, completeness, and correctness. (t) Other Pipeline Safety Practices.— (1) Records.—Not later than 2 years after the date of enactment of this subsection, the Secretary shall promulgate regulations to require an operator of a distribution system— (A) to identify and manage traceable, reliable, and complete records, including maps and other drawings, critical to ensuring proper pressure controls for a gas distribution system, and updating these records as needed, while collecting and identifying other records necessary for risk analysis on an opportunistic basis; and (B) to ensure that the records required under subparagraph (A) are— (i) accessible to all personnel responsible for performing or overseeing relevant construction or engineering work; and (ii) submitted to, or made available for inspection by, the Secretary or the relevant State authority with a certification in effect under section 60105. (2) Presence of qualified employees.— (A) In general.—Not later than 180 days after the date of enactment of this subsection, the Secretary shall promulgate regulations to require that not less than 1 agent of an operator of a distribution system who is qualified to perform relevant covered tasks, as determined by the Secretary, shall monitor gas pressure at the district regulator station or at an alternative site with equipment capable of ensuring proper pressure controls and have the capability to promptly shut down the flow of gas or control over pressurization at a district regulator station during any construction project that has the potential to cause a hazardous overpressurization at that station, including tie-ins and abandonment of distribution lines and mains, based on an evaluation, conducted by the operator, of threats that could result in unsafe operation. (B) Exclusion.—In promulgating regulations under subparagraph (A), the Secretary shall ensure that those regulations do not apply to a district regulating station that has a monitoring system and the capability for remote or automatic shutoff. (3) District regulator stations.— (A) In general.—Not later than 1 year after the date of enactment of this subsection, the Secretary shall promulgate regulations to require that each operator of a distribution system assesses and upgrades, as appropriate, each district regulator station of the operator to ensure that— (i) the risk of the gas pressure in the distribution system exceeding, by a common mode of failure, the maximum allowable operating pressure (as described in section 192.623 of title 49, Code of Federal Regulations (or a successor regulation)) allowed under Federal law (including regulations) is minimized; (ii) the gas pressure of a low-pressure distribution system is monitored, particularly at or near the location of critical pressure-control equipment; (iii) the regulator station has secondary or backup pressure-relieving or overpressure- protection safety technology, such as a relief valve or automatic shutoff valve, or other pressure-limiting devices appropriate for the configuration and siting of the station and, in the case of a regulator station that employs the primary and monitor regulator design, the operator shall eliminate the common mode of failure or provide backup protection capable of either shutting the flow of gas, relieving gas to the atmosphere to fully protect the distribution system from overpressurization events, or there must be technology in place to eliminate a common mode of failure; and (iv) if the Secretary determines that it is not operationally possible for an operator to implement the requirements under clause (iii), the Secretary shall require such operator to identify actions in their plan that minimize the risk of an overpressurization event. Rev. January 28, 2021 12#
Attachment 1, passage 120For Official Agency Use Only § 60103. Standards for liquefied natural gas pipeline facilities (a) Location standards.--The Secretary of Transportation shall prescribe minimum safety standards for deciding on the location of a new liquefied natural gas pipeline facility. In prescribing a standard, the Secretary shall consider the-- (1) kind and use of the facility; (2) existing and projected population and demographic characteristics of the location; (3) existing and proposed land use near the location; (4) natural physical aspects of the location; (5) medical, law enforcement, and fire prevention capabilities near the location that can cope with a risk caused by the facility; and (6) need to encourage remote siting.; and (7) national security. (b) Design, installation, construction, inspection, and testing standards.--The Secretary of Transportation shall prescribe minimum safety standards for designing, installing, constructing, initially inspecting, and initially testing a new liquefied natural gas pipeline facility. When prescribing a standard, the Secretary shall consider-- (1) the characteristics of material to be used in constructing the facility and of alternative material; (2) design factors; (3) the characteristics of the liquefied natural gas to be stored or converted at, or transported by, the facility; and (4) the public safety factors of the design and of alternative designs, particularly the ability to prevent and contain a liquefied natural gas spill. (c) Nonapplication.--(1) Except as provided in paragraph (2) of this subsection, a design, location, installation, construction, initial inspection, or initial testing standard prescribed under this chapter after March 1, 1978, does not apply to an existing liquefied natural gas pipeline facility if the standard is to be applied because of authority given-- (A) under this chapter; or (B) under another law, and the standard is not prescribed at the time the authority is applied. (2)(A) Any design, installation, construction, initial inspection, or initial testing standard prescribed under this chapter after March 1, 1978, may provide that the standard applies to any part of a replacement component of a liquefied natural gas pipeline facility if the component or part is placed in service after the standard is prescribed and application of the standard-- (i) does not make the component or part incompatible with other components or parts; or (ii) is not impracticable otherwise. (B) Any location standard prescribed under this chapter after March 1, 1978, does not apply to any part of a replacement component of an existing liquefied natural gas pipeline facility. (3) A design, installation, construction, initial inspection, or initial testing standard does not apply to a liquefied natural gas pipeline facility existing when the standard is adopted. (d) Operation and maintenance standards.--The Secretary of Transportation shall prescribe minimum operating and maintenance standards for a liquefied natural gas pipeline facility. In prescribing a standard, the Secretary shall consider-- (1) the conditions, features, and type of equipment and structures that make up or are used in connection with the facility; (2) the fire prevention and containment equipment at the facility; (3) security measures to prevent an intentional act that could cause a liquefied natural gas accident; (4) maintenance procedures and equipment; (5) the training of personnel in matters specified by this subsection; and (6) other factors and conditions related to the safe handling of liquefied natural gas. (e) Effective dates.--A standard prescribed under this section is effective on the 30th day after the Secretary of Transportation prescribes the standard. However, the Secretary for good cause may Rev. January 28, 2021 13#
Attachment 1, passage 121For Official Agency Use Only prescribe a different effective date when required because of the time reasonably necessary to comply with the standard. The different date must be specified in the regulation prescribing the standard. (f) Contingency plans.--A new liquefied natural gas pipeline facility may be operated only after the operator submits an adequate contingency plan that states the action to be taken if a liquefied natural gas accident occurs. The Secretary of Energy or appropriate State or local authority shall decide if the plan is adequate. (g) Effect on other standards.--This section does not preclude applying a standard prescribed under section 60102 of this title to a gas pipeline facility (except a liquefied natural gas pipeline facility) associated with a liquefied natural gas pipeline facility. § 60104. Requirements and limitations (a) Opportunity to present views.--The Secretary of Transportation shall give an interested person an opportunity to make oral and written presentations of information, views, and arguments when prescribing a standard under this chapter. (b) Nonapplication.--A design, installation, construction, initial inspection, or initial testing standard does not apply to a pipeline facility existing when the standard is adopted. (c) Preemption.--A State authority that has submitted a current certification under section 60105(a) of this title may adopt additional or more stringent safety standards for intrastate pipeline facilities and intrastate pipeline transportation only if those standards are compatible with the minimum standards prescribed under this chapter. A State authority may not adopt or continue in force safety standards for interstate pipeline facilities or interstate pipeline transportation. Notwithstanding the preceding sentence, a State authority may enforce a requirement of a one-call notification program of the State if the program meets the requirements for one-call notification programs under this chapter or chapter 61. (d) Consultation.--(1) When continuity of gas service is affected by prescribing a standard or waiving compliance with standards under this chapter, the Secretary of Transportation shall consult with and advise the Federal Energy Regulatory Commission or a State authority having jurisdiction over the affected gas pipeline facility before prescribing the standard or waiving compliance. The Secretary shall delay the effective date of the standard or waiver until the Commission or State authority has a reasonable opportunity to grant an authorization it considers necessary. (2) In a proceeding under section 3 or 7 of the Natural Gas Act (15 U.S.C. 717b or 717f), each applicant for authority to import natural gas or to establish, construct, operate, or extend a gas pipeline facility subject to an applicable safety standard shall certify that it will design, install, inspect, test, construct, operate, replace, and maintain a gas pipeline facility under those standards and plans for inspection and maintenance under section 60108 of this title. The certification is binding on the Secretary of Energy and the Commission except when an appropriate enforcement agency has given timely written notice to the Commission that the applicant has violated a standard prescribed under this chapter. (e) Location and routing of facilities.--This chapter does not authorize the Secretary of Transportation to prescribe the location or routing of a pipeline facility. § 60105. State pipeline safety program certifications (a) General requirements and submission.--Except as provided in this section and sections 60114 and 60121 of this title, the Secretary of Transportation may not prescribe or enforce safety standards and practices for an intrastate pipeline facility or intrastate pipeline transportation to the extent that the safety standards and practices are regulated by a State authority (including a municipality if the standards and practices apply to intrastate gas pipeline transportation) that submits to the Secretary Rev. January 28, 2021 14#
Attachment 1, passage 122For Official Agency Use Only annually a certification for the facilities and transportation that complies with subsections (b) and (c) of this section. (b) Contents.--Each certification submitted under subsection (a) of this section shall state that the State authority-- (1) has regulatory jurisdiction over the standards and practices to which the certification applies; (2) has adopted, by the date of certification, each applicable standard prescribed under this chapter or, if a standard under this chapter was prescribed not later than 120 days before certification, is taking steps to adopt that standard; (3) is enforcing each adopted standard through ways that include inspections conducted by State employees meeting the qualifications the Secretary prescribes under section 60107(d)(1)(C) of this title; (4) is encouraging and promoting programs designed to prevent damage by demolition, excavation, tunneling, or construction activity to the pipeline facilities to which the certification applies; (4) is encouraging and promoting the establishment of a program designed to prevent damage by demolition, excavation, tunneling, or construction activity to the pipeline facilities to which the certification applies that subjects persons who violate the applicable requirements of that program to civil penalties and other enforcement actions that are substantially the same as are provided under this chapter, and addresses the elements in section 60134(b); (5) may require record maintenance, reporting, and inspection substantially the same as provided under section 60117 of this title; (6) may require that plans for inspection and maintenance under section 60108 (a) and (b) of this title be filed for approval; and (7) may enforce safety standards of the authority under a law of the State by injunctive relief and civil penalties substantially the same as provided under sections 60120 and 60122(a)(1) and (b)-(f) of this title.; (8) has the capability to sufficiently review and evaluate the adequacy of the plans and manuals described in section 60109(e)(7)(C)(i); and (9) has a sufficient number of employees described in paragraph (3) to ensure safe operations of pipeline facilities, updating the State Inspection Calculation Tool to take into account factors including— (A) the number of miles of natural gas and hazardous liquid pipelines in the State, including the number of miles of cast iron and bare steel pipelines; (B) the number of services in the State; (C) the age of the gas distribution system in the State; and (D) environmental factors that could impact the integrity of the pipeline, including relevant geological issues. (c) Reports.--(1) Each certification submitted under subsection (a) of this section shall include a report that contains-- (A) the name and address of each person to whom the certification applies that is subject to the safety jurisdiction of the State authority; (B) each accident or incident reported during the prior 12 months by that person involving a fatality, personal injury requiring hospitalization, or property damage or loss of more than an amount the Secretary establishes (even if the person sustaining the fatality, personal injury, or property damage or loss is not subject to the safety jurisdiction of the authority), any other accident the authority considers significant, and a summary of the investigation by the authority of the cause and circumstances surrounding the accident or incident; (C) the record maintenance, reporting, and inspection practices conducted by the authority to enforce compliance with safety standards prescribed under this chapter to which the certification applies, including the number of inspections of pipeline facilities the authority made during the prior 12 months; and (D) any other information the Secretary requires. (2) The report included in the first certification submitted under subsection (a) of this section is only required to state information available at the time of certification. Rev. January 28, 2021 15#
Attachment 1, passage 123For Official Agency Use Only (d) Application.--A certification in effect under this section does not apply to safety standards prescribed under this chapter after the date of certification. This chapter applies to each applicable safety standard prescribed after the date of certification until the State authority adopts the standard and submits the appropriate certification to the Secretary under subsection (a) of this section. (e) Monitoring.--The Secretary may monitor a safety program established under this section to ensure that the program complies with the certification. A State authority shall cooperate with the Secretary under this subsection. (f) Rejections of certification.--If after receiving a certification the Secretary decides the State authority is not enforcing satisfactorily compliance with applicable safety standards prescribed under this chapter, the Secretary may reject the certification, assert United States Government jurisdiction, or take other appropriate action to achieve adequate enforcement. The Secretary shall give the authority notice and an opportunity for a hearing before taking final action under this subsection. When notice is given, the burden of proof is on the authority to demonstrate that it is enforcing satisfactorily compliance with the prescribed standards. § 60106. State pipeline safety agreements (a) Agreements without certification.--If the Secretary of Transportation does not receive a certification under section 60105 of this title, the Secretary may make an agreement with a State authority (including a municipality if the agreement applies to intrastate gas pipeline transportation) authorizing it to take necessary action. Each agreement shall-- (1) establish an adequate program for record maintenance, reporting, and inspection designed to assist compliance with applicable safety standards prescribed under this chapter; and (2) prescribe procedures for approval of plans of inspection and maintenance substantially the same as required under section 60108 (a) and (b) of this title. (b) Agreements with certification. -- (1) In general.--If the Secretary accepts a certification under section 60105 and makes the determination required under this subsection, the Secretary may make an agreement with a State authority authorizing it to participate in the oversight of interstate pipeline transportation. Each such agreement shall include a plan for the State authority to participate in special investigations involving incidents or new construction and allow the State authority to participate in other activities overseeing interstate pipeline transportation or to assume additional inspection or investigatory duties. Nothing in this section modifies section 60104(c) or authorizes the Secretary to delegate the enforcement of safety standards for interstate pipeline facilities prescribed under this chapter to a State authority. (2) Determinations required.--The Secretary may not enter into an agreement under this subsection, unless the Secretary determines in writing that-- (A) the agreement allowing participation of the State authority is consistent with the Secretary's program for inspection and consistent with the safety policies and provisions provided under this chapter; (B) the interstate participation agreement would not adversely affect the oversight responsibilities of intrastate pipeline transportation by the State authority; (C) the State is carrying out a program demonstrated to promote preparedness and risk prevention activities that enable communities to live safely with pipelines; (D) the State meets the minimum standards for State one-call notification set forth in chapter 61; and (E) the actions planned under the agreement would not impede interstate commerce or jeopardize public safety. (3) Existing agreements.--If requested by the State authority, the Secretary shall authorize a State authority which had an interstate agreement in effect after January 31, 1999, to oversee interstate pipeline transportation pursuant to the terms of that agreement until the Secretary determines that the State meets the requirements of paragraph (2) and executes a new agreement, or until Rev. January 28, 2021 16#
Attachment 1, passage 124For Official Agency Use Only December 31, 2003, whichever is sooner. Nothing in this paragraph shall prevent the Secretary, after affording the State notice, hearing, and an opportunity to correct any alleged deficiencies, from terminating an agreement that was in effect before enactment of the Pipeline Safety Improvement Act of 2002 if-- (A) the State authority fails to comply with the terms of the agreement; (B) implementation of the agreement has resulted in a gap in the oversight responsibilities of intrastate pipeline transportation by the State authority; or (C) continued participation by the State authority in the oversight of interstate pipeline transportation has had an adverse impact on pipeline safety. (4) Notice Upon Denial. —If a State authority requests an interstate agreement under this section and the Secretary denies such request, the Secretary shall provide written notification to the State authority of the denial that includes an explanation of the reasons for such denial. (c) Notification.-- (1) In general.--Each agreement shall require the State authority to notify the Secretary promptly of a violation or probable violation of an applicable safety standard discovered as a result of action taken in carrying out an agreement under this section. (2) Response by Secretary.--If a State authority notifies the Secretary under paragraph (1) of a violation or probable violation of an applicable safety standard, the Secretary, not later than 60 days after the date of receipt of the notification, shall-- (A) issue an order under section 60118(b) or take other appropriate enforcement actions to ensure compliance with this chapter; or (B) provide the State authority with a written explanation as to why the Secretary has determined not to take such actions. (d) Monitoring.--The Secretary may monitor a safety program established under this section to ensure that the program complies with the agreement. A State authority shall cooperate with the Secretary under this subsection. (e) Ending agreements.-- (1) Permissive termination.--The Secretary may end an agreement under this section when the Secretary finds that the State authority has not complied with any provision of the agreement. (2) Mandatory termination of agreement.--The Secretary shall end an agreement for the oversight of interstate pipeline transportation if the Secretary finds that-- (A) implementation of such agreement has resulted in a gap in the oversight responsibilities of intrastate pipeline transportation by the State authority; (B) the State actions under the agreement have failed to meet the requirements under subsection (b); or (C) continued participation by the State authority in the oversight of interstate pipeline transportation would not promote pipeline safety. (3) Procedural requirements.--The Secretary shall give notice and an opportunity for a hearing to a State authority before ending an agreement under this section. The Secretary may provide a State an opportunity to correct any deficiencies before ending an agreement. The finding and decision to end the agreement shall be published in the Federal Register and may not become effective for at least 15 days after the date of publication unless the Secretary finds that continuation of an agreement poses an imminent hazard. (f) Joint Inspectors.—At the request of a State authority, the Secretary shall allow for a certified State authority under section 60105 to participate in the inspection of an interstate pipeline facility. § 60107. State pipeline safety grants (a) General authority.--If a State authority files an application not later than September 30 of a calendar year, the Secretary of Transportation shall pay not more than 50 percent not more than 80 percent of Rev. January 28, 2021 17#
Attachment 1, passage 125For Official Agency Use Only the cost of the personnel, equipment, and activities the authority reasonably requires during the next calendar year-- (1) to carry out a safety program under a certification under section 60105 of this title or an agreement under section 60106 of this title; or (2) to act as an agent of the Secretary on interstate gas pipeline facilities or interstate hazardous liquid pipeline facilities. (b) Payments.--After notifying and consulting with a State authority, the Secretary may withhold any part of a payment when the Secretary decides that the authority is not carrying out satisfactorily a safety program or not acting satisfactorily as an agent. The Secretary may pay an authority under this section only when the authority ensures the Secretary that it will provide the remaining costs of a safety program and that the total State amount spent for a safety program (excluding grants of the United States Government) will at least equal the average amount spent-- (1) for a gas safety program, for the fiscal years that ended June 30, 1967, and June 30, 1968; and (2) for a hazardous liquid safety program, for the fiscal years that ended September 30, 1978, and September 30, 1979. spent for gas and hazardous liquid safety programs for the 3 fiscal years prior to the fiscal year in which the Secretary makes the payment, except when the Secretary waives this requirement. For each of fiscal years 2012 and 2013, the Secretary shall grant such a waiver to a State if the State can demonstrate an inability to maintain or increase the required funding share of its safety program at or above the level required by this subsection due to economic hardship in that State. For fiscal year 2014, and each fiscal year thereafter, the Secretary may grant such a waiver to a State if the State can make the demonstration described in the preceding sentence. (b) Payments.—After notifying and consulting with a State authority, the Secretary may withhold any part of a payment when the Secretary decides that the authority is not carrying out satisfactorily a safety program or not acting satisfactorily as an agent. The Secretary may pay an authority under this section only when the authority ensures the Secretary that it will provide the remaining costs of a safety program, except when the Secretary waives this requirement. (c) Apportionment and method of payment.--The Secretary shall apportion the amount appropriated to carry out this section among the States. A payment may be made under this section in installments, in advance, or on a reimbursable basis. (d) Additional authority and considerations.--(1) The Secretary may prescribe-- (A) the form of, and way of filing, an application under this section; (B) reporting and fiscal procedures the Secretary considers necessary to ensure the proper accounting of money of the Government; and (C) qualifications for a State to meet to receive a payment under this section, including qualifications for State employees who perform inspection activities under section 60105 or 60106 of this title. (2) The qualifications prescribed under paragraph (1)(C) of this subsection may-- (A) consider the experience and training of the employee; (B) order training or other requirements; and (C) provide for approval of qualifications on a conditional basis until specified requirements are met. (e) Repurposing of funds.—If a State program’s certification is rejected under section 60105(f) or such program is otherwise suspended or interrupted, the Secretary may use any undistributed, deobligated, or recovered funds authorized under this section to carry out pipeline safety activities for that State within the period of availability for such funds. § 60108. Inspection and maintenance (a) Plans.--(1) Each person owning or operating an intrastate a gas pipeline facility or hazardous liquid pipeline facility shall carry out a current written plan (including any changes) for inspection and Rev. January 28, 2021 18#
Attachment 1, passage 126For Official Agency Use Only maintenance of each facility used in the transportation and owned or operated by the person. A copy of the plan shall be kept at any office of the person the Secretary of Transportation considers appropriate. The Secretary also may require a person owning or operating a pipeline facility subject to this chapter to file a plan for inspection and maintenance for approval. (2) If the Secretary or a State authority responsible for enforcing standards prescribed under this chapter decides that a plan required under paragraph (1) of this subsection is inadequate for safe operation, the Secretary or authority shall require the person to revise the plan. Revision may be required only after giving notice and an opportunity for a hearing. A plan required under paragraph (1) must be practicable and designed to meet the need for pipeline safety, must meet the requirements of any regulations promulgated under section 60102(q), and must include terms designed to enhance the ability to discover safety-related conditions described in section 60102(h)(1) of this title. In deciding on the adequacy of a plan, the Secretary or authority shall consider-- (A) relevant available pipeline safety information; (B) the appropriateness of the plan for the particular kind of pipeline transportation or facility; (C) the reasonableness of the plan; and (D) the extent to which the plan will contribute to public safety and the protection of the environment. (D) the extent to which the plan will contribute to— (i) public safety; (ii) eliminating hazardous leaks and minimizing releases of natural gas from pipeline facilities; and (iii) the protection of the environment; and (E) the extent to which the plan addresses the replacement or remediation of pipelines that are known to leak based on the material (including cast iron, unprotected steel, wrought iron, and historic plastics with known issues), design, or past operating and maintenance history of the pipeline. (3) A plan required under this subsection shall be made available to the Secretary or State authority on request under section 60117 of this title. (3) Review of plans.— (A) In general.—Not later than 2 years after the date of enactment of this subparagraph, and not less frequently than once every 5 years thereafter, the Secretary or relevant State authority with a certification in effect under section 60105 shall review each plan described in this subsection. (B) Context of review.—The Secretary may conduct a review under this paragraph as an element of the inspection of the operator carried out by the Secretary under subsection (b). (C) Inadequate programs.—If the Secretary determines that a plan reviewed under this paragraph does not comply with the requirements of this chapter (including any regulations promulgated under this chapter), has not been adequately implemented, is inadequate for the safe operation of a pipeline facility, or is other inadequate, the Secretary may conduct enforcement proceedings under this chapter. (b) Inspection and testing.--(1) The Secretary shall inspect and require appropriate testing of a pipeline facility subject to this chapter that is not covered by a certification under section 60105 of this title or an agreement under section 60106 of this title. The Secretary shall decide on the frequency and type of inspection and testing under this subsection on a case-by-case basis after considering the following: (A) the location of the pipeline facility. (B) the type, size, age, manufacturer, method of construction, construction material, and condition of the pipeline facility. (C) the nature and volume of material transported through the pipeline facility. (D) the pressure at which that material is transported. (E) climatic, geologic, and seismic characteristics (including soil characteristics) and conditions of the area in which the pipeline facility is located. (F) existing and projected population and demographic characteristics of the area in which the pipeline facility is located. Rev. January 28, 2021 19#
Attachment 1, passage 127For Official Agency Use Only (G) for a hazardous liquid pipeline facility, the proximity of the area in which the facility is located to an area that is unusually sensitive to environmental damage. (H) the frequency of leaks. (I) other factors the Secretary decides are relevant to the safety of pipeline facilities. (2) To the extent and in amounts provided in advance in an appropriation law, the Secretary shall decide on the frequency of inspection under paragraph (1) of this subsection. The Secretary may reduce the frequency of an inspection of a master meter system. (3) Testing under this subsection shall use the most appropriate technology practicable. (c) Pipeline facilities offshore and in other waters.--(1) In this subsection-- (A) "abandoned" means permanently removed from service. (B) "pipeline facility" includes an underwater abandoned pipeline facility. (C) if a pipeline facility has no operator, the most recent operator of the facility is deemed to be the operator of the facility. (2)(A) Not later than May 16, 1993, on the basis of experience with the inspections under section 3(h)(1)(A) of the Natural Gas Pipeline Safety Act of 1968 or section 203(l)(1)(A) of the Hazardous Liquid Pipeline Safety Act of 1979, as appropriate, and any other information available to the Secretary, the Secretary shall establish a mandatory, systematic, and, where appropriate, periodic inspection program of-- (i) all offshore pipeline facilities; and (ii) any other pipeline facility crossing under, over, or through waters where a substantial likelihood of commercial navigation exists, if the Secretary decides that the location of the facility in those waters could pose a hazard to navigation or public safety. (B) In prescribing standards to carry out subparagraph (A) of this paragraph-- (i) the Secretary shall identify what is a hazard to navigation with respect to an underwater abandoned pipeline facility; and (ii) for an underwater pipeline facility abandoned after October 24, 1992, the Secretary shall include requirements that will lessen the potential that the facility will pose a hazard to navigation and shall consider the relationship between water depth and navigational safety and factors relevant to the local marine environment. (3)(A) The Secretary shall establish by regulation a program requiring an operator of a pipeline facility described in paragraph (2) of this subsection to report a potential or existing navigational hazard involving that pipeline facility to the Secretary through the appropriate Coast Guard office. (B) The operator of a pipeline facility described in paragraph (2) of this subsection that discovers any part of the pipeline facility that is a hazard to navigation shall mark the location of the hazardous part with a Coast-Guard-approved marine buoy or marker and immediately shall notify the Secretary as provided by the Secretary under subparagraph (A) of this paragraph. A marine buoy or marker used under this subparagraph is deemed a pipeline sign or right-of-way marker under section 60123(c) of this title. (4)(A) The Secretary shall establish a standard that each pipeline facility described in paragraph (2) of this subsection that is a hazard to navigation is buried not later than 6 months after the date the condition of the facility is reported to the Secretary. The Secretary may extend that 6-month period for a reasonable period to ensure compliance with this paragraph. (B) In prescribing standards for subparagraph (A) of this paragraph for an underwater pipeline facility abandoned after October 24, 1992, the Secretary shall include requirements that will lessen the potential that the facility will pose a hazard to navigation and shall consider the relationship between water depth and navigational safety and factors relevant to the local marine environment. (5)(A) Not later than October 24, 1994, the Secretary shall establish standards on what is an exposed offshore pipeline facility and what is a hazard to navigation under this subsection. (B) Not later than 6 months after the Secretary establishes standards under subparagraph (A) of this paragraph, or October 24, 1995, whichever occurs first, the operator of each offshore pipeline facility not described in section 3(h)(1)(A) of the Natural Gas Pipeline Safety Act of 1968 or section 203(l)(1)(A) of the Hazardous Liquid Pipeline Safety Act of 1979, as appropriate, shall inspect the facility and report to the Secretary on any part of the facility that is exposed or is a hazard to navigation. This subparagraph applies only to a facility that is Rev. January 28, 2021 20#
Attachment 1, passage 128For Official Agency Use Only between the high water mark and the point at which the subsurface is under 15 feet of water, as measured from mean low water. An inspection that occurred after October 3, 1989, may be used for compliance with this subparagraph if the inspection conforms to the requirements of this subparagraph. (C) The Secretary may extend the time period specified in subparagraph (B) of this paragraph for not more than 6 months if the operator of a facility satisfies the Secretary that the operator has made a good faith effort, with reasonable diligence, but has been unable to comply by the end of that period. (6)(A) The operator of a pipeline facility abandoned after October 24, 1992, shall report the abandonment to the Secretary in a way that specifies whether the facility has been abandoned properly according to applicable United States Government and State requirements. (B) Not later than October 24, 1995, the operator of a pipeline facility abandoned before October 24, 1992, shall report to the Secretary reasonably available information related to the facility, including information that a third party possesses. The information shall include the location, size, date, and method of abandonment, whether the facility has been abandoned properly under applicable law, and other relevant information the Secretary may require. Not later than April 24, 1994, the Secretary shall specify how the information shall be reported. The Secretary shall ensure that the Government maintains the information in a way accessible to appropriate Government agencies and State authorities. (C) The Secretary shall request that a State authority having information on a collision between a vessel and an underwater pipeline facility report the information to the Secretary in a timely way and make a reasonable effort to specify the location, date, and severity of the collision. Chapter 35 of title 44 does not apply to this subparagraph. (7) The Secretary may not exempt from this chapter an offshore hazardous liquid pipeline facility only because the pipeline facility transfers hazardous liquid in an underwater pipeline between a vessel and an onshore facility. (8) If, after reviewing existing Federal and State regulations for hazardous liquid gathering lines located offshore in the United States, including within the inlets of the Gulf of Mexico, the Secretary determines it is appropriate, the Secretary shall issue regulations, after notice and an opportunity for a hearing, subjecting offshore hazardous liquid gathering lines and hazardous liquid gathering lines located within the inlets of the Gulf of Mexico to the same standards and regulations as other hazardous liquid gathering lines. The regulations issued under this paragraph shall not apply to production pipelines or flow lines. (d) Replacing cast iron gas pipelines.--(1) The Secretary shall publish a notice on the availability of industry guidelines, developed by the Gas Piping Technology Committee, for replacing cast iron pipelines. Not later than 2 years after the guidelines become available, the Secretary shall conduct a survey of gas pipeline operators with cast iron pipe in their systems to establish-- (A) the extent to which each operator has adopted a plan for the safe management and replacement of cast iron; (B) the elements of the plan, including the anticipated rate of replacement; and (C) the progress that has been made. (2) Chapter 35 of title 44 does not apply to the conduct of the survey. (3) This subsection does not prevent the Secretary from developing Government guidelines or standards for cast iron gas pipelines as the Secretary considers appropriate. (4) Not later than December 31, 2012, and every 2 years thereafter, the Secretary shall conduct a follow-up survey to measure the progress that owners and operators of pipeline facilities have made in adopting and implementing their plans for the safe management and replacement of cast iron gas pipelines. (e) In general.—After the completion of a Pipeline and Hazardous Materials Safety Administration pipeline safety inspection, the Administrator of such Administration, or the State authority certified under section 60105 of title 49, United States Code, to conduct such inspection, shall— (1) within 30 days, conduct a post-inspection briefing with the owner or operator of the gas or hazardous liquid pipeline facility inspected outlining any concerns; and Rev. January 28, 2021 21#
Attachment 1, passage 129For Official Agency Use Only (2) within 90 days, to the extent practicable, provide the owner or operator with written preliminary findings of the inspection. § 60109. High-density population areas and environmentally sensitive areas (a) Identification requirements.--Not later than October 24, 1994, the Secretary of Transportation shall prescribe standards that-- (1) establish criteria for identifying-- (A) by operators of gas pipeline facilities, each gas pipeline facility (except a natural gas distribution line) located in a high-density population area; and (B) by operators of hazardous liquid pipeline facilities and gathering lines-- (i) each hazardous liquid pipeline facility, whether otherwise subject to this chapter, that crosses waters where a substantial likelihood of commercial navigation exists or that is located in an area described in the criteria as a high-density population area; and (ii) each hazardous liquid pipeline facility and gathering line, whether otherwise subject to this chapter, located in an area that the Secretary, in consultation with the Administrator of the Environmental Protection Agency, describes as unusually sensitive to environmental damage if there is a hazardous liquid pipeline accident; and (2) provide that the identification be carried out through the inventory required under section 60102(e) of this title. (b) Areas to be included as unusually sensitive.--When describing areas that are unusually sensitive to environmental damage if there is a hazardous liquid pipeline accident, the Secretary shall consider areas where a pipeline rupture would likely cause permanent or long-term environmental damage, including-- (1) locations near pipeline rights-of-way that are critical to drinking water, including intake locations for community water systems and critical sole source aquifer protection areas; and (2) locations near pipeline rights-of-way that have been identified as are part of the Great Lakes or have been identified as coastal beaches, marine coastal waters certain coastal waters, critical wetlands, riverine or estuarine systems, national parks, wilderness areas, wildlife preservation areas or refuges, wild and scenic rivers, or critical habitat areas for threatened and endangered species. (c) Risk analysis and integrity management programs.-- (1) Requirement.--Each operator of a gas pipeline facility shall conduct an analysis of the risks to each facility of the operator located in an area identified pursuant to subsection (a)(1) and defined in chapter 192 of title 49, Code of Federal Regulations, including any subsequent modifications, and shall adopt and implement a written integrity management program for such facility to reduce the risks. (2) Regulations.-- (A) In general.--Not later than 12 months after the date of enactment of this subsection, the Secretary shall issue regulations prescribing standards to direct an operator's conduct of a risk analysis and adoption and implementation of an integrity management program under this subsection. The regulations shall require an operator to conduct a risk analysis and adopt an integrity management program within a time period prescribed by the Secretary, ending not later than 24 months after such date of enactment. Not later than 18 months after such date of enactment, each operator of a gas pipeline facility shall begin a baseline integrity assessment described in paragraph (3). (B) Authority to issue regulations.--The Secretary may satisfy the requirements of this paragraph through the issuance of regulations under this paragraph or under other authority of law. (3) Minimum requirements of integrity management programs.--An integrity management program required under paragraph (1) shall include, at a minimum, the following requirements: (A) A baseline integrity assessment of each of the operator's facilities in areas identified pursuant to subsection (a)(1) and defined in chapter 192 of title 49, Code of Federal Rev. January 28, 2021 22#
Attachment 1, passage 130For Official Agency Use Only Regulations, including any subsequent modifications, by internal inspection device, pressure testing, direct assessment, or an alternative method that the Secretary determines would provide an equal or greater level of safety. The operator shall complete such assessment not later than 10 years after the date of enactment of this subsection. At least 50 percent of such facilities shall be assessed not later than 5 years after such date of enactment. The operator shall prioritize such facilities for assessment based on all risk factors, including any previously discovered defects or anomalies and any history of leaks, repairs, or failures. The operator shall ensure that assessments of facilities with the highest risks are given priority for completion and that such assessments will be completed not later than 5 years after such date of enactment. (B) Subject to paragraph (5), periodic reassessment of the facility, at a minimum of once every 7 years, using methods described in subparagraph (A). (B) Subject to paragraph (5), periodic reassessments of the facility, at a minimum of once every 7 calendar years, using methods described in subparagraph (A). The Secretary may extend such deadline for an additional 6 months if the operator submits written notice to the Secretary with sufficient justification of the need for the extension. (C) Clearly defined criteria for evaluating the results of assessments conducted under subparagraphs (A) and (B) and for taking actions based on such results. (D) A method for conducting an analysis on a continuing basis that integrates all available information about the integrity of the facility and the consequences of releases from the facility. (E) A description of actions to be taken by the operator to promptly address any integrity issue raised by an evaluation conducted under subparagraph (C) or the analysis conducted under subparagraph (D). (F) A description of measures to prevent and mitigate the consequences of releases from the facility. (G) A method for monitoring cathodic protection systems throughout the pipeline system of the operator to the extent not addressed by other regulations. (H) If the Secretary raises a safety concern relating to the facility, a description of the actions to be taken by the operator to address the safety concern, including issues raised with the Secretary by States and local authorities under an agreement entered into under section 60106. (4) Treatment of baseline integrity assessments.--In the case of a baseline integrity assessment conducted by an operator in the period beginning on the date of enactment of this subsection and ending on the date of issuance of regulations under this subsection, the Secretary shall accept the assessment as complete, and shall not require the operator to repeat any portion of the assessment, if the Secretary determines that the assessment was conducted in accordance with the requirements of this subsection. (5) Waivers and modifications.--In accordance with section 60118(c), the Secretary may waive or modify any requirement for reassessment of a facility under paragraph (3)(B) for reasons that may include the need to maintain local product supply or the lack of internal inspection devices if the Secretary determines that such waiver is not inconsistent with pipeline safety. (6) Standards.--The standards prescribed by the Secretary under paragraph (2) shall address each of the following factors: (A) The minimum requirements described in paragraph (3). (B) The type or frequency of inspections or testing of pipeline facilities, in addition to the minimum requirements of paragraph (3)(B). (C) The manner in which the inspections or testing are conducted. (D) The criteria used in analyzing results of the inspections or testing. (E) The types of information sources that must be integrated in assessing the integrity of a pipeline facility as well as the manner of integration. (F) The nature and timing of actions selected to address the integrity of a pipeline facility. (G) Such other factors as the Secretary determines appropriate to ensure that the integrity of a pipeline facility is addressed and that appropriate mitigative measures are adopted to protect areas identified under subsection (a)(1). In prescribing those standards, the Secretary shall ensure that all inspections required are conducted in a manner that minimizes environmental and safety risks, and shall take into account Rev. January 28, 2021 23#
Attachment 1, passage 131For Official Agency Use Only the applicable level of protection established by national consensus standards organizations. (7) Additional optional standards.--The Secretary may also prescribe standards requiring an operator of a pipeline facility to include in an integrity management program under this subsection-- (A) changes to valves or the establishment or modification of systems that monitor pressure and detect leaks based on the operator's risk analysis; and (B) the use of emergency flow restricting devices. (8) Lack of regulations.--In the absence of regulations addressing the elements of an integrity management program described in this subsection, the operator of a pipeline facility shall conduct a risk analysis and adopt and implement an integrity management program described in this subsection not later than 24 months after the date of enactment of this subsection and shall complete the baseline integrity assessment described in this subsection not later than 10 years after such date of enactment. At least 50 percent of such facilities shall be assessed not later than 5 years after such date of enactment. The operator shall prioritize such facilities for assessment based on all risk factors, including any previously discovered defects or anomalies and any history of leaks, repairs, or failures. The operator shall ensure that assessments of facilities with the highest risks are given priority for completion and that such assessments will be completed not later than 5 years after such date of enactment. (9) Review of integrity management programs.-- (A) Review of programs.-- (i) In general.--The Secretary shall review a risk analysis and integrity management program under paragraph (1) and record the results of that review for use in the next review of an operator's program. (ii) Context of review.--The Secretary may conduct a review under clause (i) as an element of the Secretary's inspection of an operator. (iii) Inadequate programs.--If the Secretary determines that a risk analysis or integrity management program does not comply with the requirements of this subsection or regulations issued as described in paragraph (2), or is inadequate for the safe operation of a pipeline facility, the Secretary shall act under section 60108(a)(2) to require the operator to revise the risk analysis or integrity management program. (iii) Inadequate programs. —If the Secretary determines that a risk analysis or integrity management program does not comply with the requirements of this subsection or regulations issued as described in paragraph (2), has not been adequately implemented, or is inadequate for the safe operation of a pipeline facility, the Secretary may conduct proceedings under this chapter. (B) Amendments to programs.--In order to facilitate reviews under this paragraph, an operator of a pipeline facility shall notify the Secretary of any amendment made to the operator's integrity management program not later than 30 days after the date of adoption of the amendment. The Secretary shall review any such amendment in accordance with this paragraph. (C) Transmittal of programs to State authorities.--The Secretary shall provide a copy of each risk analysis and integrity management program reviewed by the Secretary under this paragraph to any appropriate State authority with which the Secretary has entered into an agreement under section 60106. (10) State review of integrity management plans.--A State authority that enters into an agreement pursuant to section 60106, permitting the State authority to review the risk analysis and integrity management program pursuant to paragraph (9), may provide the Secretary with a written assessment of the risk analysis and integrity management program, make recommendations, as appropriate, to address safety concerns not adequately addressed by the operator's risk analysis or integrity management program, and submit documentation explaining the State-proposed revisions. The Secretary shall consider carefully the State's proposals and work in consultation with the States and operators to address safety concerns. (11) Application of standards.--Section 60104(b) shall not apply to this section. (12) Distribution pipelines.— (A) Study.—The Secretary shall conduct a study of methods that may be used under paragraph (3), other than direct assessment, to assess distribution pipelines to determine whether any such method— (i) would provide a greater level of safety than direct assessment of the pipelines; and Rev. January 28, 2021 24#
Attachment 1, passage 132For Official Agency Use Only (ii) is feasible. (B) Report.—Not later than 2 years after the date of enactment of this paragraph, the Secretary shall submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committees on Energy and Commerce and Transportation and Infrastructure of the House of Representatives a report describing— (i) the results of the study under subparagraph (A); and (ii) recommendations based on that study, if any. (d) Evaluation of integrity management regulations.--Not later than 4 years after the date of enactment of this subsection, the Comptroller General shall complete an assessment and evaluation of the effects on public safety and the environment of the requirements for the implementation of integrity management programs contained in the standards prescribed as described in subsection (c)(2). (e) Distribution integrity management programs. — (1) Minimum standards. —Not later than December 31, 2007, the Secretary shall prescribe minimum standards for integrity management programs for distribution pipelines. (2) Additional authority of Secretary. —In carrying out this subsection, the Secretary may require operators of distribution pipelines to continually identify and assess risks on their distribution lines, to remediate conditions that present a potential threat to line integrity, and to monitor program effectiveness. (3) Excess flow valves. — (A) In general. —The minimum standards shall include a requirement for an operator of a natural gas distribution system to install an excess flow valve on each single family residence service line connected to such system if— (i) the service line is installed or entirely replaced after June 1, 2008; (ii) the service line operates continuously throughout the year at a pressure not less than 10 pounds per square inch gauge; (iii) the service line is not connected to a gas stream with respect to which the operator has had prior experience with contaminants, the presence of which could interfere with the operation of an excess flow valve; (iv) the installation of an excess flow valve on the service line is not likely to cause loss of service to the residence or interfere with necessary operation or maintenance activities, such as purging liquids from the service line; and (v) an excess flow valve meeting performance standards developed under section 60110(e) of title 49, United States Code, is commercially available to the operator, as determined by the Secretary. (B) Distribution branch services, multifamily facilities, and small commercial facilities. —Not later than 2 years after the date of enactment of the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011, and after issuing a final report on the evaluation of the National Transportation Safety Board’s recommendation on excess flow valves in applications other than service lines serving one single family residence, the Secretary, if appropriate, shall by regulation require the use of excess flow valves, or equivalent technology, where economically, technically, and operationally feasible on new or entirely replaced distribution branch services, multifamily facilities, and small commercial facilities. (C)(B) Reports. —Operators of natural gas distribution systems shall report annually to the Secretary on the number of excess flow valves installed on their systems under subparagraph (A). (4) Applicability. —The Secretary shall determine which distribution pipelines will be subject to the minimum standards. (5) Development and implementation. —Each operator of a distribution pipeline that the Secretary determines is subject to the minimum standards prescribed by the Secretary under this subsection shall develop and implement an integrity management program in accordance with those standards. (6) Savings clause. —Subject to section 60104(c), a State authority having a current certification under section 60105 may adopt or continue in force additional integrity management requirements, including additional requirements for installation of excess flow valves, for gas distribution pipelines Rev. January 28, 2021 25#
Attachment 1, passage 133For Official Agency Use Only within the boundaries of that State. (7) Evaluation of risk.— (A) In general.—Not later than 2 years after the date of enactment of this paragraph, the Secretary shall promulgate regulations to ensure that each distribution integrity management plan developed by an operator of a distribution system includes an evaluation of— (i) the risks resulting from the presence of cast iron pipes and mains in the distribution system; and (ii) the risks that could lead to or result from the operation of a low-pressure distribution system at a pressure that makes the operation of any connected and properly adjusted low- pressure gas burning equipment unsafe, as determined by the Secretary. (B) Consideration.—In carrying out subparagraph (A)(ii), the Secretary shall ensure that an operator of a distribution system— (i) considers factors other than past observed abnormal operating conditions (as defined in section 192.803 of title 49, Code of Federal Regulations (or a successor regulation)) in ranking risks and identifying measures to mitigate those risks; and (ii) may not determine that there are no potential consequences associated with low probability events unless that determination is otherwise supported by engineering analysis or operational knowledge. (C) Deadlines.— (i) In general.—Not later than 2 years after the date of enactment of this paragraph, each operator of a distribution system shall make available to the Secretary or the relevant State authority with a certification in effect under section 60105, as applicable, a copy of— (I) the distribution integrity management plan of the operator; (II) the emergency response plan under section 60102(d)(5); and (III) the procedural manual for operations, maintenance, and emergencies under section 60102(d)(4). (ii) Updates.—Each operator of a distribution system shall make available to the Secretary or make available for inspection to the relevant State authority described in clause (i), if applicable, an updated plan or manual described in that clause by not later than 60 days after the date of a significant update, as determined by the Secretary. (iii) Applicability of FOIA.—Nothing in this subsection shall be construed to authorize the disclosure of any information that is exempt from disclosure under section 552(b) of title 5. (D) Review of plans and documents.— (i) Timing.— (I) In general.—Not later than 2 years after the date of promulgation of the regulations under subparagraph (A), and not less frequently than once every 5 years thereafter, the Secretary or relevant State authority with a certification in effect under section 60105 shall review the distribution integrity management plan, the emergency response plan, and the procedural manual for operations, maintenance, and emergencies of each operator of a distribution system and record the results of that review for use in the next review of the program of that operator. (II) Grace period.—For the third, fourth, and fifth years after the date of promulgation of the regulations under subparagraph (A), the Secretary— (aa) shall not use subclause (I) as justification to reduce funding, decertify, or penalize in any way under section 60105, 60106, or 60107 a State authority that has in effect a certification under section 60105 or an agreement under section 60106; and (bb) shall— (AA) submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committees on Transportation and Infrastructure and Energy and Commerce of the House of Representatives a list of States found to be noncompliant with subclause (I) during the annual program evaluation; and (BB) Provide a written notice to each State authority described in item (aa) that is not in compliance with the requirements of subclause (I). (ii) Review.—Each plan or procedural manual made available under subparagraph (C)(i) shall be reexamined— Rev. January 28, 2021 26#
Attachment 1, passage 134For Official Agency Use Only (I) on significant change to the plans or procedural manual, as applicable; (II) on significant change to the gas distribution system of the operator, as applicable; and (III) not less frequently than once every 5 years. (iii) Context of review.—The Secretary may conduct a review under clause (i) or (ii) as an element of the inspection of the operator carried out by the Secretary. (iv) Inadequate programs.—If the Secretary determines that the documents reviewed under clause (i) or (ii) do not comply with the requirements of this chapter (including regulations to implement this chapter), have not been adequately implemented, or are inadequate for the safe operation of a pipeline facility, the Secretary may conduct proceedings under this chapter (f) Certification of pipeline integrity management program performance. —The Secretary shall establish procedures requiring certification of annual and semi-annual pipeline integrity management program performance reports by a senior executive officer of the company operating a pipeline subject to this chapter. The procedures shall require a signed statement, which may be effected electronically in accordance with the provisions of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. 7001 et seq.), certifying that— (1) the signing officer has reviewed the report; and (2) to the best of such officer’s knowledge and belief, the report is true and complete. (g) Hazardous Liquid Pipeline Facilities.— (1) Integrity Assessments. —Notwithstanding any pipeline integrity management program or integrity assessment schedule otherwise required by the Secretary, each operator of a pipeline facility to which this subsection applies shall ensure that pipeline integrity assessments— (A) using internal inspection technology appropriate for the integrity threat are completed not less often than once every 12 months; and (B) using pipeline route surveys, depth of cover surveys, pressure tests, external corrosion direct assessment, or other technology that the operator demonstrates can further the understanding of the condition of the pipeline facility are completed on a schedule based on the risk that the pipeline facility poses to the high consequence area in which the pipeline facility is located, but not less often than once every 12 months. (2) Application. —This subsection shall apply to any underwater hazardous liquid pipeline facility located in a high consequence area— (A) that is not an offshore pipeline facility; and (B) any portion of which is located at depths greater than 150 feet under the surface of the water. (3) High Consequence Area Defined. —For purposes of this subsection, the term ‘high consequence area’ has the meaning given that term in section 195.450 of title 49, Code of Federal Regulations. (4) Inspection and Enforcement. —The Secretary shall conduct inspections under section 60117(c) section 60117(d) to determine whether each operator of a pipeline facility to which this subsection applies is complying with this section. (5) Considerations.—In carrying out this subsection, each operator shall implement procedures that assess potential impacts by maritime equipment or other vessels, including anchors, anchor chains, or any other attached equipment. § 60110. Excess flow valves (a) Application.--This section applies only to-- (1) a natural gas distribution system installed after the effective date of regulations prescribed under this section; and (2) any other natural gas distribution system when repair to the system requires replacing a part to accommodate installing excess flow valves. Rev. January 28, 2021 27#
Attachment 1, passage 135For Official Agency Use Only (b) Installation requirements and considerations.--Not later than April 24, 1994, the Secretary of Transportation shall prescribe standards on the circumstances, if any, under which an operator of a natural gas distribution system must install excess flow valves in the system. The Secretary shall consider-- (1) the system design pressure; (2) the system operating pressure; (3) the types of customers to which the distribution system supplies gas, including hospitals, schools, and commercial enterprises; (4) the technical feasibility and cost of installing, operating, and maintaining the valve; (5) the public safety benefits of installing the valve; (6) the location of customer meters; and (7) other factors the Secretary considers relevant. (c) Notification of availability.--(1) Not later than October 24, 1994, the Secretary shall prescribe standards requiring an operator of a natural gas distribution system to notify in writing its customers having lines in which excess flow valves are not required by law but can be installed according to the standards prescribed under subsection (e) of this section, of-- (A) the availability of excess flow valves for installation in the system; (B) safety benefits to be derived from installation; and (C) costs associated with installation, maintenance, and replacement. (2) The standards shall provide that, except when installation is required under subsection (b) of this section, excess flow valves shall be installed at the request of the customer if the customer will pay all costs associated with installation. (d) Report.--If the Secretary decides under subsection (b) of this section that there are no circumstances under which an operator must install excess flow valves, the Secretary shall submit to Congress a report on the reasons for the decision not later than 30 days after the decision is made. (e) Performance standards.--Not later than April 24, 1994, the Secretary shall develop standards for the performance of excess flow valves used to protect lines in a natural gas distribution system. The Secretary may adopt industry accepted performance standards in order to comply with the requirement under the preceding sentence. The standards shall be incorporated into regulations the Secretary prescribes under this section. All excess flow valves shall be installed according to the standards. § 60111. Financial responsibility for liquefied natural gas facilities (a) Notice.--When the Secretary of Transportation believes that an operator of a liquefied natural gas facility does not have adequate financial responsibility for the facility, the Secretary may issue a notice to the operator about the inadequacy and the amount of financial responsibility the Secretary considers adequate. (b) Hearings.--An operator receiving a notice under subsection (a) of this section may have a hearing on the record not later than 30 days after receiving the notice. The operator may show why the Secretary should not issue an order requiring the operator to demonstrate and maintain financial responsibility in at least the amount the Secretary considers adequate. (c) Orders.--After an opportunity for a hearing on the record, the Secretary may issue the order if the Secretary decides it is justified in the public interest. § 60112. Pipeline facilities hazardous to life and property (a) General authority.--After notice and an opportunity for a hearing, the Secretary of Transportation may decide that a pipeline facility is hazardous if the Secretary decides that-- (1) operation of the facility is or would be hazardous to life, property, or the environment; or Rev. January 28, 2021 28#
Attachment 1, passage 136For Official Agency Use Only (2) the facility is or would be constructed or operated, or a component of the facility is or would be constructed or operated, with equipment, material, or a technique that the Secretary decides is hazardous to life, property, or the environment. (b) Considerations.--In making a decision under subsection (a) of this section, the Secretary shall consider, if relevant-- (1) the characteristics of the pipe and other equipment used in the pipeline facility, including the age, manufacture, physical properties, and method of manufacturing, constructing, or assembling the equipment; (2) the nature of the material the pipeline facility transports, the corrosive and deteriorative qualities of the material, the sequence in which the material are transported, and the pressure required for transporting the material; (3) the aspects of the area in which the pipeline facility is located, including climatic and geologic conditions and soil characteristics; (4) the proximity of the area in which the hazardous liquid pipeline facility is located to environmentally sensitive areas; (5) the population density and population and growth patterns of the area in which the pipeline facility is located; (6) any recommendation of the National Transportation Safety Board made under another law; and (7) other factors the Secretary considers appropriate. (c) Opportunity for State comment.--The Secretary shall provide, to any appropriate official of a State in which a pipeline facility is located and about which a proceeding has begun under this section, notice and an opportunity to comment on an agreement the Secretary proposes to make to resolve the proceeding. State comment shall incorporate comments of affected local officials. (d) Corrective action orders.-- (1) In general.--If the Secretary decides under subsection (a) of this section that a pipeline facility is or would be hazardous, the Secretary shall order the operator of the facility to take necessary corrective action, including suspended or restricted use of the facility, physical inspection, testing, repair, replacement, or other appropriate action. (2) Actions attributable to an employee.--If, in the case of a corrective action order issued following an accident, the Secretary determines that the actions of an employee carrying out an activity regulated under this chapter, including duties under section 60102(a), may have contributed substantially to the cause of the accident, the Secretary shall direct the operator to relieve the employee from performing those activities, reassign the employee, or place the employee on leave until the earlier of the date on which-- (A) the Secretary, after notice and an opportunity for a hearing, determines that the employee's actions did not contribute substantially to the cause of the accident; or (B) the Secretary determines the employee has been re-qualified or re- trained as provided for in section 60131 and can safely perform those activities. (3) Effect of collective bargaining agreements.--An action taken by an operator under paragraph (2) shall be in accordance with the terms and conditions of any applicable collective bargaining agreement. (e) Waiver of notice and hearing in emergency.--The Secretary may waive the requirements for notice and an opportunity for a hearing under this section and issue expeditiously an order under this section if the Secretary decides failure to issue the order expeditiously will result in likely serious harm to life, property, or the environment. An order under this subsection shall provide an opportunity for a hearing as soon as practicable after the order is issued. Rev. January 28, 2021 29#
Attachment 1, passage 137For Official Agency Use Only § 60113. Customer-owned natural gas service lines Not later than October 24, 1993, the Secretary of Transportation shall prescribe standards requiring an operator of a natural gas distribution pipeline that does not maintain customer-owned natural gas service lines up to building walls to advise its customers of-- (1) the requirements for maintaining those lines; (2) any resources known to the operator that could assist customers in carrying out the maintenance; (3) information the operator has on operating and maintaining its lines that could assist customers; and (4) the potential hazards of not maintaining the lines. § 60114. One-call notification systems (a) Minimum requirements.--The Secretary of Transportation shall prescribe standards providing minimum requirements for establishing and operating a one-call notification system for a State to adopt that will notify an operator of a pipeline facility of activity in the vicinity of the facility that could threaten the safety of the facility. The regulations shall include the following: (1) a requirement that the system apply to all areas of the State containing underground pipeline facilities. (2) a requirement that a person, including a government employee or contractor, intending to engage in an activity the Secretary decides could cause physical damage to an underground facility must contact the appropriate system to establish if there are underground facilities present in the area of the intended activity. (3) a requirement that all operators of underground pipeline facilities participate in an appropriate one-call notification system. (4) qualifications for an operator of a facility, a private contractor, or a State or local authority to operate a system. (5) procedures for advertisement and notice of the availability of a system. (6) a requirement about the information to be provided by a person contacting the system under clause (2) of this subsection. (7) a requirement for the response of the operator of the system and of the facility after they are contacted by an individual under this subsection. (8) a requirement that each State decide whether the system will be toll free. (9) a requirement for sanctions substantially the same as provided under sections 60120 and 60122 of this title. (b) Marking facilities.--On notification by an operator of a damage prevention program or by a person planning to carry out demolition, excavation, tunneling, or construction in the vicinity of a pipeline facility, the operator of the facility shall mark accurately, in a reasonable and timely way, the location of the pipeline facilities in the vicinity of the demolition, excavation, tunneling, or construction. (c) Relationship to other laws.--This section and regulations prescribed under this section do not affect the liability established under a law of the United States or a State for damage caused by an activity described in subsection (a)(2) of this section. (d) Prohibition applicable to excavators. —A person who engages in demolition, excavation, tunneling, or construction— (1) may not engage in a demolition, excavation, tunneling, or construction activity in a State that has adopted a one-call notification system with out first using that system to establish the location of underground facilities in the demolition, excavation, tunneling, or construction area; (2) may not engage in such demolition, excavation, tunneling, or construction activity in disregard of location information or markings established by a pipeline facility operator pursuant to subsection (b); and (3) and who causes damage to a pipeline facility that may endanger life or cause serious bodily Rev. January 28, 2021 30#
Attachment 1, passage 138For Official Agency Use Only harm or damage to property— (A) may not fail to promptly report the damage to the owner or operator of the facility; and (B) if the damage results in the escape of any flammable, toxic, or corrosive gas or liquid, may not fail to promptly report to other appropriate authorities by calling the 911 emergency telephone number. (e) Prohibition applicable to underground pipeline facility owners and operators. —Any owner or operator of a pipeline facility who fails to respond to a location request in order to prevent damage to the pipeline facility or who fails to take reasonable steps, in response to such a request, to ensure accurate marking of the location of the pipeline facility in order to prevent damage to the pipeline facility shall be subject to a civil action under section 60120 or assessment of a civil penalty under section 60122. (f) Limitation. —The Secretary may not conduct an enforcement proceeding under subsection (d) for a violation within the boundaries of a State that has the authority to impose penalties described in section 60134(b)(7) against persons who violate that State’s damage prevention laws, unless the Secretary has determined that the State’s enforcement is inadequate to protect safety, consistent with this chapter, and until the Secretary issues, through a rulemaking proceeding, the procedures for determining inadequate State enforcement of penalties. (g) Technology development grants. —The Secretary may make grants to any organization or entity (not including for-profit entities) for the development of technologies that will facilitate the prevention of pipeline damage caused by demolition, excavation, tunneling, or construction activities, with emphasis on wireless and global positioning technologies having potential for use in connection with notification systems and underground facility locating and marking services. Funds provided under this subsection may not be used for lobbying or in direct support of litigation. The Secretary may also support such technology development through cooperative agreements with trade associations, academic institutions, and other organizations. § 60115. Technical safety standards committees (a) Organization.--The Technical Pipeline Safety Standards Committee and the Technical Hazardous Liquid Pipeline Safety Standards Committee are committees in the Department of Transportation. The committees referred to in the preceding sentence shall serve as peer review committees for carrying out this chapter. Peer reviews conducted by the committees shall be treated for purposes of all Federal laws relating to risk assessment and peer review (including laws that take effect after the date of the enactment of the Accountable Pipeline Safety and Partnership Act of 1996) as meeting any peer review requirements of such laws. (b) Composition and appointment.--(1) The Technical Pipeline Safety Standards Committee is composed of 15 members appointed by the Secretary of Transportation after consulting with public and private agencies concerned with the technical aspect of transporting gas or operating a gas pipeline facility. Each member must be experienced in the safety regulation of transporting gas and of gas pipeline facilities or technically qualified, by training, experience, or knowledge in at least one field of engineering applicable to transporting gas or operating a gas pipeline facility, to evaluate gas pipeline safety standards or risk management principles. (2) The Technical Hazardous Liquid Pipeline Safety Standards Committee is composed of 15 members appointed by the Secretary after consulting with public and private agencies concerned with the technical aspect of transporting hazardous liquid or operating a hazardous liquid pipeline facility. Each member must be experienced in the safety regulation of transporting hazardous liquid and of hazardous liquid pipeline facilities or technically qualified, by training, experience, or knowledge in at least one field of engineering applicable to transporting hazardous liquid or operating a hazardous liquid pipeline facility, to evaluate hazardous liquid pipeline safety standards or risk management principles. (3) The members of each committee are appointed as follows: Rev. January 28, 2021 31#
Attachment 1, passage 139For Official Agency Use Only (A) 5 individuals selected from departments, agencies, and instrumentalities of the United States Government and of the States. (B) 5 individuals selected from the natural gas or hazardous liquid industry, as appropriate, after consulting with industry representatives. (C) 5 individuals selected from the general public. (4)(A) Two of the individuals selected for each committee under paragraph (3)(A) of this subsection must be State commissioners. The Secretary shall consult with the national organization of State commissions before selecting those 2 individuals. State officials. The Secretary shall consult with national organizations representing State commissioners or utility regulators before making a selection under this subparagraph. (B) At least 3 of the individuals selected for each committee under paragraph (3)(B) of this subsection must be currently in the active operation of natural gas pipelines or hazardous liquid pipeline facilities, as appropriate. At least 1 of the individuals selected for each committee under paragraph (3)(B) shall have education, background, or experience in risk assessment and cost-benefit analysis. The Secretary shall consult with the national organizations representing the owners and operators of pipeline facilities before selecting individuals under paragraph (3)(B). (C) Two of the individuals selected for each committee under paragraph (3)(C) of this subsection must have education, background, or experience in environmental protection or public safety. At least 1 of the individuals selected for each committee under paragraph (3)(C) shall have education, background, or experience in risk assessment and cost-benefit analysis. At least one individual selected for each committee under paragraph (3)(C) may not have a financial interest in the pipeline, petroleum, or natural gas industries. (D) None of the individuals selected for a committee under paragraph (3)(C) may have a significant financial interest in the pipeline, petroleum, or gas industry. (5) Within 90 days of the date of enactment of the PIPES Act of 2016, the Secretary shall fill all vacancies on the Technical Pipeline Safety Standards Committee, the Technical Hazardous Liquid Pipeline Safety Standards Committee, and any other committee established pursuant to this section. After that period, the Secretary shall fill a vacancy on any such committee not later than 60 days after the vacancy occurs. (c) Committee reports on proposed standards.--(1) The Secretary shall give to-- (A) the Technical Pipeline Safety Standards Committee each standard proposed under this chapter for transporting gas and for gas pipeline facilities including the risk assessment information and other analyses supporting each proposed standard; and (B) the Technical Hazardous Liquid Pipeline Safety Standards Committee each standard proposed under this chapter for transporting hazardous liquid and for hazardous liquid pipeline facilities including the risk assessment information and other analyses supporting each proposed standard. (2) Not later than 90 days after receiving the proposed standard and supporting analyses, the appropriate committee shall prepare and submit to the Secretary a report on the technical feasibility, reasonableness, cost-effectiveness, and practicability of the proposed standard and include in the report recommended actions. The Secretary shall publish each report, including any recommended actions and minority views. The report if timely made is part of the proceeding for prescribing the standard. The Secretary is not bound by the conclusions of the committee. However, if the Secretary rejects the conclusions of the committee, the Secretary shall publish the reasons. (3) The Secretary may prescribe a standard after the end of the 90-day period. (d) Proposed committee standards and policy development recommendations.--(1) The Technical Pipeline Safety Standards Committee may propose to the Secretary a safety standard for transporting gas and for gas pipeline facilities. The Technical Hazardous Liquid Pipeline Safety Standards Committee may propose to the Secretary a safety standard for transporting hazardous liquid and for hazardous liquid pipeline facilities. (2) If requested by the Secretary, a committee shall make policy development recommendations to the Secretary. Rev. January 28, 2021 32#
Attachment 1, passage 140For Official Agency Use Only (e) Meetings.--Each committee shall meet with the Secretary at least up to 4 times annually. Each committee proceeding shall be recorded. The record of the proceeding shall be available to the public. (f) Expenses.--A member of a committee under this section is entitled to expenses under section 5703 of title 5. A payment under this subsection does not make a member an officer or employee of the Government. This subsection does not apply to members regularly employed by the Government. § 60116. Public education programs (a) In general.--Each owner or operator of a gas or hazardous liquid pipeline facility shall carry out a continuing program to educate the public on the use of a one-call notification system prior to excavation and other damage prevention activities, the possible hazards associated with unintended releases from the pipeline facility, the physical indications that such a release may have occurred, what steps should be taken for public safety in the event of a pipeline release, and how to report such an event. (b) Modification of existing programs.--Not later than 12 months after the date of enactment of the Pipeline Safety Improvement Act of 2002, each owner or operator of a gas or hazardous liquid pipeline facility shall review its existing public education program for effectiveness and modify the program as necessary. The completed program shall include activities to advise affected municipalities, school districts, businesses, and residents of pipeline facility locations. The completed program shall be submitted to the Secretary or, in the case of an intrastate pipeline facility operator, the appropriate State agency, and shall be periodically reviewed by the Secretary or, in the case of an intrastate pipeline facility operator, the appropriate State agency. (c) Standards.--The Secretary may issue standards prescribing the elements of an effective public education program. The Secretary may also develop material for use in the program. § 60117. Administrative (a) General authority.--To carry out this chapter, the Secretary of Transportation may conduct investigations, make reports, issue subpoena, conduct hearings, require the production of records, take depositions, and conduct research, testing, development, demonstration, and training activities and promotional activities relating to prevention of damage to pipeline facilities. The Secretary may not charge a tuition-type fee for training State or local government personnel in the enforcement of regulations prescribed under this chapter. (b) Enforcement Procedures.— (1) Process.—In implementing enforcement procedures under this chapter and part 190 of title 49, Code of Federal Regulations (or successor regulations), the Secretary shall— (A) allow the respondent to request the use of a consent agreement and consent order to resolve any matter of fact or law asserted; (B) allow the respondent and the agency to convene 1 or more meetings— (i) for settlement or simplification of the issues; or (ii) to aid in the disposition of issues; (C) require that the case file in an enforcement proceeding include all agency records pertinent to the matters of fact and law asserted; (D) allow the respondent to reply to each post-hearing submission of the agency; (E) allow the respondent to request that a hearing be held, and an order be issued, on an expedited basis; (F) require that the agency have the burden of proof, presentation, and persuasion in any enforcement matter; (G) require that any order contain findings of relevant fact and conclusions of law; (H) require the Office of Pipeline Safety to file a post-hearing recommendation not later than 30 Rev. January 28, 2021 33#
Attachment 1, passage 141For Official Agency Use Only days after the deadline for any post-hearing submission of a respondent; (I) require an order on a petition for reconsideration to be issued not later than 120 days after the date on which the petition is filed; and (J) allow an operator to request that an issue of controversy or uncertainty be addressed through a declaratory order in accordance with section 554(e) of title 5. (2) Open to the public.—A hearing under this section shall be— (A) noticed to the public on the website of the Pipeline and Hazardous Materials Safety Administration; and (B) in the case of a formal hearing (as defined in section 190.3 of title 49, Code of Federal Regulations (or a successor regulation)), open to the public. (3) Transparency.— (A) Agreements, orders, and judgments open to the public.—With respect to each enforcement proceeding under this chapter, the Administrator of the Pipeline and Hazardous Materials Safety Administration shall make publicly available on the website of the Administration— (i) the charging documents; (ii) the written response of the respondent, if filed; and (iii) any consent agreement, consent order, order, or judgment resulting from a hearing under this chapter. (B) GAO report on pipeline safety program collection and transparency of enforcement proceedings.— (i) In general. —Not later than 2 years after the date of enactment of the PIPES Act of 2020, the Comptroller General of the United States shall— (I) review information on pipeline enforcement actions that the Pipeline and Hazardous Materials Safety Administration makes publicly available on the internet; and (II) submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committees on Transportation and Infrastructure and Energy and Commerce of the House of Representatives a report on that review, including any recommendations under clause (iii). (ii) Contents.—The report under clause (i)(II) shall include— (I) a description of the process that the Pipeline and Hazardous Materials Safety Administration uses to collect and record enforcement information; (II) an assessment of whether and, if so, how the Pipeline and Hazardous Materials Safety Administration ensures that enforcement information is made available to the public in an accessible manner; and (III) an assessment of the information described in clause (i)(I). (iii) Recommendations.—The report under clause (i)(II) may include recommendations regarding— (I) any improvements that could be made to the accessibility of the information described in clause (i)(I); (II) whether and, if so, how the information described in clause (i)(I) could be made more transparent; and (III) any other recommendations that the Comptroller General of the United States considers appropriate. (4) Savings clause.—Nothing in this subsection alters the procedures applicable to— (A) an emergency order under subsection (p); (B) a safety order under subsection (m); or (C) a corrective action order under section 60112. (b)(c) Records, reports, and information.--To enable the Secretary to decide whether a person owning or operating a pipeline facility is complying with this chapter and standards prescribed or orders issued under this chapter, the person shall-- (1) maintain records, make reports, and provide information the Secretary requires; and (2) make the records, reports, and information available when the Secretary requests. The Secretary may require owners and operators of gathering lines to provide the Secretary information pertinent to the Secretary's ability to make a determination as to whether and to what extent to regulate gathering lines. Rev. January 28, 2021 34#
Attachment 1, passage 142For Official Agency Use Only (c)(d) Entry and inspection.--An officer, employee, or agent of the Department of Transportation designated by the Secretary, on display of proper credentials to the individual in charge, may enter premises to inspect the records and property of a person at a reasonable time and in a reasonable way to decide whether a person is complying with this chapter and standards prescribed or orders issued under this chapter. (d)(e) Confidentiality of information.--Information related to a confidential matter referred to in section 1905 of title 18 that is obtained by the Secretary or an officer, employee, or agent in carrying out this section may be disclosed only to another officer or employee concerned with carrying out this chapter or in a proceeding under this chapter. (e)(f) Use of accident reports.--(1) Each accident report made by an officer, employee, or agent of the Department may be used in a judicial proceeding resulting from the accident. The officer, employee, or agent may be required to testify in the proceeding about the facts developed in investigating the accident. The report shall be made available to the public in a way that does not identify an individual. (2) Each report related to research and demonstration projects and related activities is public information. (f)(g) Testing facilities involved in accidents.--The Secretary may require testing of a part of a pipeline facility subject to this chapter that has been involved in or affected by an accident only after-- (1) notifying the appropriate State official in the State in which the facility is located; and (2) attempting to negotiate a mutually acceptable plan for testing with the owner of the facility and, when the Secretary considers appropriate, the National Transportation Safety Board. (g)(h) Providing safety information.--On request, the Secretary shall provide the Federal Energy Regulatory Commission or appropriate State authority with information the Secretary has on the safety of material, operations, devices, or processes related to pipeline transportation or operating a pipeline facility. (h)(i) Cooperation.--The Secretary may-- (1) advise, assist, and cooperate with other departments, agencies, and instrumentalities of the United States Government, the States, and public and private agencies and persons in planning and developing safety standards and ways to inspect and test to decide whether those standards have been complied with; (2) consult with and make recommendations to other departments, agencies, and instrumentalities of the Government, State and local governments, and public and private agencies and persons to develop and encourage activities, including the enactment of legislation, that will assist in carrying out this chapter and improve State and local pipeline safety programs; and (3) participate in a proceeding involving safety requirements related to a liquefied natural gas facility before the Commission or a State authority. (i)(j) Promoting coordination.--(1) After consulting with appropriate State officials, the Secretary shall establish procedures to promote more effective coordination between departments, agencies, and instrumentalities of the Government and State authorities with regulatory authority over pipeline facilities about responses to a pipeline accident. (2) In consultation with the Occupational Safety and Health Administration, the Secretary shall establish procedures to notify the Administration of any pipeline accident in which an excavator that has caused damage to a pipeline may have violated a regulation of the Administration. (j)(k) Withholding information from Congress.--This section does not authorize information to be withheld from a committee of Congress authorized to have the information. (k)(l) Authority for cooperative agreements.--To carry out this chapter, the Secretary may enter into grants, cooperative agreements, and other transactions with any person, agency, or instrumentality of the United States, any unit of State or local government, any educational institution, or any other entity Rev. January 28, 2021 35#
Attachment 1, passage 143For Official Agency Use Only to further the objectives of this chapter. The objectives of this chapter include the development, improvement, and promotion of one-call damage prevention programs, research, risk assessment, and mapping. (l) Safety orders.--If the Secretary decides that a pipeline facility has a potential safety-related condition, the Secretary may order the operator of the facility to take necessary corrective action, including physical inspection, testing, repair, replacement, or other appropriate action to remedy the safety- related condition. (l)(m) Safety orders. — (1) In general. —Not later than December 31, 2007, the Secretary shall issue regulations providing that, after notice and opportunity for a hearing, if the Secretary determines that a pipeline facility has a condition that poses a pipeline integrity risk to public safety, property, or the environment, the Secretary may order the operator of the facility to take necessary corrective action, including physical inspection, testing, repair, or other appropriate action, to remedy that condition. (2) Considerations. —In making a determination under paragraph (1), the Secretary, if relevant and pursuant to the regulations issued under paragraph (1), shall consider— (A) the considerations specified in paragraphs (1) through (6) of section 60112(b); (B) the likelihood that the condition will impair the serviceability of a pipeline; (C) the likelihood that the condition will worsen over time; and (D) the likelihood that the condition is present or could develop on other areas of the pipeline. (m)(n) Restoration of operations. — (1) In general. —The Secretary may advise, assist, and cooperate with the heads of other departments, agencies, and instrumentalities of the United States Government, the States, and public and private agencies and persons to facilitate the restoration of pipeline operations that have been or are anticipated to become disrupted by man-made or natural disasters. (2) Savings clause. —Nothing in this section alters or amends the authorities and responsibilities of any department, agency, or instrumentality of the United States Government, other than the Department of Transportation. (n) Cost recovery for design reviews. — (1) In general. —If the Secretary conducts facility design safety reviews in connection with a proposal to construct, expand, or operate a liquefied natural gas pipeline facility, the Secretary may require the person requesting such reviews to pay the associated staff costs relating to such reviews incurred by the Secretary in section 60301(d). The Secretary may assess such costs in any reasonable manner. (2) Deposit. —The Secretary shall deposit all funds paid to the Secretary under this subsection into the Department of Treasury account 69-5172-0-2-407 or its successor account. (3) Authorization of appropriations. —Funds deposited pursuant to this subsection are authorized to be appropriated for the purposes set forth in section 60301(d). (n)(o) Cost Recovery for Design Reviews.— (1) In general. — (A) Review costs. —For any project described in subparagraph (B), if the Secretary conducts facility design safety reviews in connection with a proposal to construct, expand, or operate a gas or hazardous liquid pipeline facility or liquefied natural gas pipeline facility, including construction inspections and oversight, the Secretary may require the person proposing the project to pay the costs incurred by the Secretary relating to such reviews. If the Secretary exercises the cost recovery authority described in this paragraph, the Secretary shall prescribe a fee structure and assessment methodology that is based on the costs of providing these reviews and shall prescribe procedures to collect fees under this paragraph. The Secretary may not collect design safety review fees under this paragraph and section 60301 for the same design safety review. (B) Projects to which applicable. —Subparagraph (A) applies to any project that— (i) has design and construction costs totaling at least $2,500,000,000, as periodically adjusted by the Secretary to take into account increases in the Consumer Price Index for all- urban consumers published by the Department of Labor, based on— Rev. January 28, 2021 36#
Attachment 1, passage 144For Official Agency Use Only (I) the cost estimate provided to the Federal Energy Regulatory Commission in an application for a certificate of public convenience and necessity for a gas pipeline facility or an application for authorization for a liquefied natural gas pipeline facility; or (II) a good faith estimate developed by the person proposing a hazardous liquid pipeline facility and submitted to the Secretary; or (ii) uses new or novel technologies or design, as determined by the Secretary. (2) Notification. —For any new pipeline facility construction project in which the Secretary will conduct design reviews, the person proposing the project shall notify the Secretary and provide the design specifications, construction plans and procedures, and related materials at least 120 days prior to the commencement of construction. To the maximum extent practicable, not later than 90 days after receiving such design specifications, construction plans and procedures, and related materials, the Secretary shall provide written comments, feedback, and guidance on the project. (3) Pipeline safety decision review fund. — (A) Establishment. —There is established a Pipeline Safety Design Review Fund in the Treasury of the United States. (B) Deposits. —The Secretary shall deposit funds paid under this subsection into the Fund. (C) Use. —Amounts in the Fund shall be available to the Secretary, in amounts specified in appropriations Acts, to offset the costs of conducting facility design safety reviews under this subsection. (4) No additional permitting authority. —Nothing in this subsection may be construed as authorizing the Secretary to require a person to obtain a permit before beginning design and construction in connection with a project described in paragraph (1)(B). (o)(p) Emergency Order Authority.— (1) In General. —If the Secretary determines that an unsafe condition or practice, or a combination of unsafe conditions and practices, constitutes or is causing an imminent hazard, the Secretary may issue an emergency order described in paragraph (3) imposing emergency restrictions, prohibitions, and safety measures on owners and operators of gas or hazardous liquid pipeline facilities without prior notice or an opportunity for a hearing, but only to the extent necessary to abate the imminent hazard. (2) Considerations.— (A) In General. —Before issuing an emergency order under paragraph (1), the Secretary shall consider, as appropriate, the following factors: (i) The impact of the emergency order on public health and safety. (ii) The impact, if any, of the emergency order on the national or regional economy or national security. (iii) The impact of the emergency order on the ability of owners and operators of pipeline facilities to maintain reliability and continuity of service to customers. (B) Consultation.—In considering the factors under subparagraph (A), the Secretary shall consult, as the Secretary determines appropriate, with appropriate Federal agencies, State agencies, and other entities knowledgeable in pipeline safety or operations. (3) Written Order. —An emergency order issued by the Secretary pursuant to paragraph (1) with respect to an imminent hazard shall contain a written description of— (A) the violation, condition, or practice that constitutes or is causing the imminent hazard; (B) the entities subject to the order; (C) the restrictions, prohibitions, or safety measures imposed; (D) the standards and procedures for obtaining relief from the order; (E) how the order is tailored to abate the imminent hazard and the reasons the authorities under section 60112 and 60117(l)subsection (m) are insufficient to do so; and (F) how the considerations were taken into account pursuant to paragraph (2). (4) Opportunity For Review. —Upon receipt of a petition for review from an entity subject to, and aggrieved by, an emergency order issued under this subsection, the Secretary shall provide an opportunity for a review of the order under section 554 of title 5 to determine whether the order should remain in effect, be modified, or be terminated. (5) Expiration Of Effectiveness Order. —If a petition for review of an emergency order is filed under paragraph (4) and an agency decision with respect to the petition is not issued on or before the last Rev. January 28, 2021 37#
Attachment 1, passage 145For Official Agency Use Only day of the 30-day period beginning on the date on which the petition is filed, the order shall cease to be effective on such day, unless the Secretary determines in writing on or before the last day of such period that the imminent hazard still exists. (6) Judicial Review Of Orders.— (A) In General. —After completion of the review process described in paragraph (4), or the issuance of a written determination by the Secretary pursuant to paragraph (5), an entity subject to, and aggrieved by, an emergency order issued under this subsection may seek judicial review of the order in a district court of the United States and shall be given expedited consideration. (B) Limitation. —The filing of a petition for review under subparagraph (A) shall not stay or modify the force and effect of the agency’s final decision under paragraph (4), or the written determination under paragraph (5), unless stayed or modified by the Secretary. (7) Regulations.— (A) Temporary Regulations. —Not later than 60 days after the date of enactment of the PIPES Act of 2016, the Secretary shall issue such temporary regulations as are necessary to carry out this subsection. The temporary regulations shall expire on the date of issuance of the final regulations required under subparagraph (B). (B) Final Regulations.—Not later than 270 days after such date of enactment, the Secretary shall issue such regulations as are necessary to carry out this subsection. Such regulations shall ensure that the review process described in paragraph (4) contains the same procedures as subsections (d) and (g) of section 109.19 of title 49, Code of Federal Regulations, and is otherwise consistent with the review process developed under such section, to the greatest extent practicable and not inconsistent with this section. (8) Imminent Hazard Defined. —In this subsection, the term ‘imminent hazard’ means the existence of a condition relating to a gas or hazardous liquid pipeline facility that presents a substantial likelihood that death, serious illness, severe personal injury, or a substantial endangerment to health, property, or the environment may occur before the reasonably foreseeable completion date of a formal proceeding begun to lessen the risk of such death, illness, injury, or endangerment. (9) Limitation And Savings Clause. —An emergency order issued under this subsection may not be construed to— (A) alter, amend, or limit the Secretary’s obligations under, or the applicability of, section 553 of title 5; or (B) provide the authority to amend the Code of Federal Regulations. § 60118. Compliance and waivers (a) General requirements.--A person owning or operating a pipeline facility shall-- (1) comply with applicable safety standards prescribed under this chapter, except as provided in this section or in section 60126; (2) prepare and carry out a plan for inspection and maintenance required under section 60108(a) and (b) of this title; (3) allow access to or copying of records, make reports and provide information, and allow entry or inspection required under section 60117(a) to (d) subsections (a) through (e) of section 60117 of this title; and (4) conduct a risk analysis, and adopt and implement an integrity management program, for pipeline facilities as required under section 60109(c). (b) Compliance orders.--The Secretary of Transportation may issue orders directing compliance with this chapter, an order under section 60126, or a regulation prescribed under this chapter. An order shall state clearly the action a person must take to comply. (c) Waivers by Secretary.--On application of a person owning or operating a pipeline facility, the Secretary by order may waive compliance with any part of an applicable standard prescribed under this chapter on terms the Secretary considers appropriate, if the waiver is not inconsistent with pipeline safety. The Secretary shall state the reasons for granting a waiver under this subsection. The Secretary may act on a waiver only after notice and an opportunity for a hearing. Rev. January 28, 2021 38#
Attachment 1, passage 146For Official Agency Use Only (c) Waivers by Secretary. — (1) Nonemergency waivers. — (A) In general. —On application of an owner or operator of a pipeline facility, the Secretary by order may waive compliance with any part of an applicable standard prescribed under this chapter with respect to such facility on terms the Secretary considers appropriate if the Secretary determines that the waiver is not inconsistent with pipeline safety. (B) Hearing. —The Secretary may act on a waiver under this paragraph only after notice and an opportunity for a hearing. (2) Emergency waivers. — (A) In general. —The Secretary by order may waive compliance with any part of an applicable standard prescribed under this chapter on terms the Secretary considers appropriate without prior notice and comment if the Secretary determines that— (i) it is in the public interest to grant the waiver; (ii) the waiver is not inconsistent with pipeline safety; and (iii) the waiver is necessary to address an actual or impending emergency involving pipeline transportation, including an emergency caused by a natural or manmade disaster. (B) Period of waiver. —A waiver under this paragraph may be issued for a period of not more than 60 days and may be renewed upon application to the Secretary only after notice and an opportunity for a hearing on the waiver. The Secretary shall immediately revoke the waiver if continuation of the waiver would not be consistent with the goals and objectives of this chapter. (3) Statement of reasons. —The Secretary shall state in an order issued under this subsection the reasons for granting the waiver. (d) Waivers by State authorities.--If a certification under section 60105 of this title or an agreement under section 60106 of this title is in effect, the State authority may waive compliance with a safety standard to which the certification or agreement applies in the same way and to the same extent the Secretary may waive compliance under subsection (c) of this section. However, the authority must give the Secretary written notice of the waiver at least 60 days before its effective date. If the Secretary makes a written objection before the effective date of the waiver, the waiver is stayed. After notifying the authority of the objection, the Secretary shall provide a prompt opportunity for a hearing. The Secretary shall make the final decision on granting the waiver. (e) Operator assistance in investigations. --If the Secretary or the National Transportation Safety Board investigate an accident involving a pipeline facility, the operator of the facility shall make available to the Secretary or the Board all records and information that in any way pertain to the accident (including integrity management plans and test results), and shall afford all reasonable assistance in the investigation of the accident. (1) Assistance and Access.— If the Secretary or the National Transportation Safety Board investigates an accident or incident involving a pipeline facility, the operator of the facility shall— (A) make available to the Secretary or the Board all records and information that in any way pertain to the accident or incident, including integrity management plans and test results; and (B) afford all reasonable assistance in the investigation of the accident or incident. (2) Operator Assistance in Investigations.— (A) In general.—The Secretary may impose a civil penalty under section 60122 on a person who obstructs or prevents the Secretary from carrying out inspections or investigations under this chapter. (B) Obstructs Defined.— (i) In General.—In this paragraph, the term “obstructs” includes actions that were known, or reasonably should have been known, to prevent, hinder, or impede an investigation without good cause. (ii) Good cause.—In clause (i), the term “good cause” may include actions such as restricting access to facilities that are not secure or safe for nonpipeline personnel or visitors. (f) Limitation on statutory construction.--Nothing in this section may be construed to infringe upon the constitutional rights of an operator or its employees. Rev. January 28, 2021 39#
Attachment 1, passage 147For Official Agency Use Only § 60119. Judicial review (a) Review of Regulations and waiver orders, Orders, and Other Final Agency Actions. --(1) Except as provided in subsection (b) of this section, a person adversely affected by a regulation prescribed under this chapter or an order issued about an application for a waiver under section 60118(c) or (d) of this title under this chapter may apply for review of the regulation or order by filing a petition for review in the United States Court of Appeals for the District of Columbia Circuit or in the court of appeals of the United States for the circuit in which the person resides or has its principal place of business. The petition must be filed not later than 89 days after the regulation is prescribed or order is issued. The clerk of the court immediately shall send a copy of the petition to the Secretary of Transportation. (2) A judgment of a court under paragraph (1) of this subsection may be reviewed only by the Supreme Court under section 1254 of title 28. A remedy under paragraph (1) is in addition to any other remedies provided by law. (3) A judicial review of agency action under this section shall apply the standards of review established in section 706 of title 5. (b) Review of financial responsibility orders.--(1) A person adversely affected by an order issued under section 60111 of this title may apply for review of the order by filing a petition for review in the appropriate court of appeals of the United States. The petition must be filed not later than 60 days after the order is issued. Findings of fact the Secretary makes are conclusive if supported by substantial evidence. (2) A judgment of a court under paragraph (1) of this subsection may be reviewed only by the Supreme Court under section 1254(1) of title 28. § 60120. Enforcement (a) Civil actions (1) Civil actions to enforce this chapter.--At the request of the Secretary of Transportation, the Attorney General may bring a civil action in an appropriate district court of the United States to enforce this chapter, including section 60112, or a regulation prescribed or order issued under this chapter. The court may award appropriate relief, including a temporary or permanent injunction, punitive damages, and assessment of civil penalties, considering the same factors as prescribed for the Secretary in an administrative case under section 60122. The maximum amount of civil penalties for administrative enforcement actions under section 60122 shall not apply to enforcement actions under this section. (2) Civil actions to require compliance with subpoenas or allow for inspections.--At the request of the Secretary, the Attorney General may bring a civil action in a district court of the United States to require a person to comply immediately with a subpoena or to allow an officer, employee, or agent authorized by the Secretary to enter the premises, and inspect the records and property, of the person to decide whether the person is complying with this chapter. The action may be brought in the judicial district in which the defendant resides, is found, or does business. The court may punish a failure to obey the order as a contempt of court. (b) Jury trial demand.--In a trial for criminal contempt for violating an injunction issued under this section, the violation of which is also a violation of this chapter, the defendant may demand a jury trial. The defendant shall be tried as provided in rule 42(b) of the Federal Rules of Criminal Procedure (18 App. U.S.C.). (c) Effect on tort liability.--This chapter does not affect the tort liability of any person. Rev. January 28, 2021 40#
Attachment 1, passage 148For Official Agency Use Only § 60121. Actions by private persons (a) General authority.--(1) A person may bring a civil action in an appropriate district court of the United States for an injunction against another person (including the United States Government and other governmental authorities to the extent permitted under the 11th amendment to the Constitution) for a violation of this chapter or a regulation prescribed or order issued under this chapter. However, the person— (A) may bring the action only after 60 days after the person has given notice of the violation to the Secretary of Transportation or to the appropriate State authority (when the violation is alleged to have occurred in a State certified under section 60105 of this title) and to the person alleged to have committed the violation; (B) may not bring the action if the Secretary or authority has begun and diligently is pursuing an administrative proceeding for the violation; and (C) may not bring the action if the Attorney General of the United States, or the chief law enforcement officer of a State, has begun and diligently is pursuing a judicial proceeding for the violation. (2) The Secretary shall prescribe the way in which notice is given under this subsection. (3) The Secretary, with the approval of the Attorney General, or the Attorney General may intervene in an action under paragraph (1) of this subsection. (b) Costs and fees.--The court may award costs, reasonable expert witness fees, and a reasonable attorney's fee to a prevailing plaintiff in a civil action under this section. The court may award costs to a prevailing defendant when the action is unreasonable, frivolous, or meritless. In this subsection, a reasonable attorney's fee is a fee-- (1) based on the actual time spent and the reasonable expenses of the attorney for legal services provided to a person under this section; and (2) computed at the rate prevailing for providing similar services for actions brought in the court awarding the fee. (c) State violations as violations of this chapter.--In this section, a violation of a safety standard or practice of a State is deemed to be a violation of this chapter or a regulation prescribed or order issued under this chapter only to the extent the standard or practice is not more stringent than a comparable minimum safety standard prescribed under this chapter. (d) Additional remedies.--A remedy under this section is in addition to any other remedies provided by law. This section does not restrict a right to relief that a person or a class of persons may have under another law or at common law. § 60122. Civil penalties (a) General penalties.--(1) A person that the Secretary of Transportation decides, after written notice and an opportunity for a hearing, has violated section 60114(b) 60114(b), 60114(d), or 60118(a) of this title or a regulation prescribed or order issued under this chapter is liable to the United States Government for a civil penalty of not more than $100,000 $200,000 for each violation. A separate violation occurs for each day the violation continues. The maximum civil penalty under this paragraph for a related series of violations is $1,000,000 $2,000,000. (2) A person violating a standard or order under section 60103 or 60111 of this title is liable to the Government for a civil penalty of not more than $50,000 for each violation. A penalty under this paragraph may be imposed in addition to penalties imposed under paragraph (1) of this subsection. (3) A person violating section 60129, or an order issued thereunder, is liable to the Government for a civil penalty of not more than $1,000 for each violation. The penalties provided by paragraph (1) do not apply to a violation of section 60129 or an order issued thereunder. (b) Penalty considerations.--In determining the amount of a civil penalty under this section-- (1) the Secretary shall consider-- Rev. January 28, 2021 41#
Attachment 1, passage 149For Official Agency Use Only (A) the nature, circumstances, and gravity of the violation, including adverse impact on the environment; (B) with respect to the violator, the degree of culpability, any history of prior violations, the ability to pay, and any effect on ability to continue doing business; and (C) good faith in attempting to comply; and (D) self-disclosure and correction of violations, or actions to correct a violation, prior to discovery by the Pipeline and Hazardous Materials Safety Administration; and (2) the Secretary may consider-- (A) the economic benefit gained from the violation without any reduction because of subsequent damages; and (B) other matters that justice requires. (c) Collection and compromise.--(1) The Secretary may request the Attorney General to bring a civil action in an appropriate district court of the United States to collect a civil penalty imposed under this section. (2) The Secretary may compromise the amount of a civil penalty imposed under this section before referral to the Attorney General. (d) Setoff.--The Government may deduct the amount of a civil penalty imposed or compromised under this section from amounts it owes the person liable for the penalty. (e) Deposit in Treasury.--Amounts collected under this section shall be deposited in the Treasury as miscellaneous receipts. (f) Prohibition on multiple penalties for same act.--Separate penalties for violating a regulation prescribed under this chapter and for violating an order under section 60112 or 60118(b) of this title may not be imposed under this chapter if both violations are based on the same act. § 60123. Criminal penalties (a) General penalty.--A person knowingly and willfully violating section 60114(b), 60118(a), or 60128 of this title or a regulation prescribed or order issued under this chapter shall be fined under title 18, imprisoned for not more than 5 years, or both. (b) Penalty for damaging or destroying facility.--A person knowingly and willfully damaging or destroying an interstate gas pipeline facility, an interstate hazardous liquid pipeline facility, or either an intrastate gas pipeline facility or intrastate hazardous liquid pipeline facility that is used in interstate or foreign commerce or in any activity affecting interstate or foreign commerce, or attempting or conspiring to do such an act, shall be fined under title 18, imprisoned for not more than 20 years, or both, and, if death results to any person, shall be imprisoned for any term of years or for life. (c) Penalty for damaging or destroying sign.--A person knowingly and willfully defacing, damaging, removing, or destroying a pipeline sign or right-of-way marker required by a law or regulation of the United States shall be fined under title 18, imprisoned for not more than one year, or both. (d) Penalty for not using one-call notification system or not heeding location information or markings.--A person shall be fined under title 18, imprisoned for not more than 5 years, or both, if the person-- (1) knowingly and willfully engages in an excavation activity-- (A) without first using an available one-call notification system to establish the location of underground facilities in the excavation area; or (B) without paying attention to appropriate location information or markings the operator of a pipeline facility establishes; and (2) subsequently damages-- (A) a pipeline facility that results in death, serious bodily harm, or actual damage to property of more than $50,000; Rev. January 28, 2021 42#
Attachment 1, passage 150For Official Agency Use Only (B) a pipeline facility, and knows or has reason to know of the damage, but does not report the damage promptly to the operator of the pipeline facility and to other appropriate authorities; or (C) a hazardous liquid pipeline facility that results in the release of more than 50 barrels of product. Penalties under this subsection may be reduced in the case of a violation that is promptly reported by the violator. § 60124. Biennial reports (a) Submission and contents.--Not later than August 15, 1997, and every 2 years thereafter, the Secretary of Transportation shall submit to Congress a report on carrying out this chapter for the 2 immediately preceding calendar years for gas and a report on carrying out this chapter for such period for hazardous liquid. Each report shall include the following information about the prior year for gas or hazardous liquid, as appropriate: (1) a thorough compilation of the leak repairs, accidents, and casualties and a statement of cause when investigated and established by the National Transportation Safety Board. (2) a list of applicable pipeline safety standards prescribed under this chapter including identification of standards prescribed during the year. (3) a summary of the reasons for each waiver granted under section 60118(c) and (d) of this title. (4) an evaluation of the degree of compliance with applicable safety standards, including a list of enforcement actions and compromises of alleged violations by location and company name. (5) a summary of outstanding problems in carrying out this chapter, in order of priority. (6) an analysis and evaluation of-- (A) research activities, including their policy implications, completed as a result of the United States Government and private sponsorship; and (B) technological progress in safety achieved.; and (C) a summary of each research and development project carried out with Federal and non- Federal entities pursuant to section 12 of the Pipeline Safety Improvement Act of 2002 and a review of how the project affects safety. (7) a list, with a brief statement of the issues, of completed or pending judicial actions under this chapter. (8) the extent to which technical information was distributed to the scientific community and consumer-oriented information was made available to the public. (9) a compilation of certifications filed under section 60105 of this title that were-- (A) in effect; or (B) rejected in any part by the Secretary and a summary of the reasons for each rejection. (10) a compilation of agreements made under section 60106 of this title that were-- (A) in effect; or (B) ended in any part by the Secretary and a summary of the reasons for ending each agreement. (11) a description of the number and qualifications of State pipeline safety inspectors in each State for which a certification under section 60105 of this title or an agreement under section 60106 of this title is in effect and the number and qualifications of inspectors the Secretary recommends for that State. (12) recommendations for legislation the Secretary considers necessary-- (A) to promote cooperation among the States in improving-- (i) gas pipeline safety; or (ii) hazardous liquid pipeline safety programs; and (B) to strengthen the national gas pipeline safety program. (b) Submission of one report.--The Secretary may submit one report to carry out subsection (a) of this section. Rev. January 28, 2021 43#
Attachment 1, passage 151For Official Agency Use Only § 60125. Authorization of appropriations (a) Gas and hazardous liquid. - to the Secretary to carry out section 12 of the Pipeline Safety Improvement Act of 2002(49 U.S.C. (1) In general.—From fees collected under section 60301, there are authorized to be appropriated liquid- 60101 note; Public Law 107-355) and the provisions of this chapter relating to gas and hazardous (A) $156,400,000 for fiscal year 2021, of which-- of 2002 (49 U.S.C. 60101 note; Public Law 107-355); and (i) $9,000,000 shall be used to carry out section 12 of the Pipeline Safety Improvement Act (i) $63,000,000 shall be used for making grants; (B) $158,500,000 for fiscal year 2022, of which— of 2002 (49 U.S.C. 60101 note; Public Law 107-355); and (i) $9,000,000 shall be used to carry out section 12 of the Pipeline Safety Improvement Act (i) $66,000,000 shall be used for making grants; and (C) $162,700,000 for fiscal year 2023, of which- (i) $9,000,000 shall be used to carry out section 12 of the Pipeline Safety Improvement Act of 2002 (49 U.S.C. 60101 note; Public Law 17-355); and (2) Trust fund amounts.—In addition to the amounts authorized to be appropriated under (i) $69,000,000 shall be used for making grants. paragraph (1), there are authorized to be appropriated from the Oil Spill Liability Trust Fund established by section 9509(a) of the Internal Revenue Code of 1986 to carry out section 12 of the provisions of this chapter relating to hazardous liquid- Pipeline Safety Improvement Act of 2002 (49 U.S.C. 60101 note; Public Law 107-355) and the (A) $27,000,000 for fiscal year 2021, of which-- i) $3,000,000 shall be used to carry out section 12 of the Pipeline Safety Improvement Act of 2002 (49 U.S.C. 60101 note; Public Law 107-355); and (B) $27,650,000 for fiscal year 2022, of which— (i) $11,000,000 shall be used for making grants; (i) $3,000,000 shall be used to carry out section 12 of the Pipeline Safety Improvement Act of 2002 (49 U.S.C. 60101 note; Public Law 107-355); and (C) $28,700,000 for fiscal year 2023, of which— (i) $12,000,000 shall be used for making grants; and (i) $3,000,000 shall be used to carry out section 12 of the Pipeline Safety Improvement Act of 2002 (49 U.S.C. 60101 note; Public Law 107-355); and (3) Underground natural gas storage facility safety account.—From fees collected under section (i) $13,000,000 shall be used for making grants. 60302, there is authorized to be appropriated to the Secretary to carry out section 60141 $8,000,000 for each of fiscal years 2021 through 2023. (4) Recruitment and retention.—From amounts made available to the Secretary under paragraphs (1) and (2), the Secretary shall use- (A) $1,520,000 to carry out section 102(b)(1) of the PIPES Act of 2020, of which— (i) $1,292,000 shall be from amounts made available under paragraph (1)(A); and (B) $2,300,000 to carry out section 102(b)(2)(A) of the PIPES Act of 2020, of which— (i) $228,000 shall be from amounts made available under paragraph (2)(A); (i) $1,955,000 shall be from amounts made available under paragraph (1)(A); and (C) $1,600,000 to carry out section 102(b)(2)(B) of the PIPES Act of 2020, of which- (ii) $345,000 shall be from amounts made available under paragraph (2)(A); (i) $1,360,000 shall be from amounts made available under paragraph (1)(B); and (D) $1,800,000 to carry out section 102(b)(2)(C) of the PIPES Act of 2020, of which- (i) $240,000 shall be from amounts made available under paragraph (2)(B); (i) $270,000 shall be from amounts made available under paragraph (2)(C); (i) $1,530,000 shall be from amounts made available under paragraph (1)(C); and which- (E) $2,455,000 to carry out section 102(c) of the PIPES Act of 2020 in fiscal year 2021, of (i) $2,086,750 shall be from amounts made available under paragraph (1)(A); and Rev. January 28, 2021 44#
Attachment 1, passage 152For Official Agency Use Only (ii) $368,250 shall be from amounts made available under paragraph (2)(A); which— (F) $2,455,000 to carry out section 102(c) of the PIPES Act of 2020 in fiscal year 2022, of (i) $368,250 shall be from amounts made available under paragraph (2)(B); and (i) $2,086,750 shall be from amounts made available under paragraph (1)(B); and (G) $2,455,000 to carry out section 102(c) of the PIPES Act of 2020 in fiscal year 2023, of which— (i) $368,250 shall be from amounts made available under paragraph (2)(C). (i) $2,086,750 shall be from amounts made available under paragraph (1)(C); and (a) Gas and hazardous liquid. To carry out this chapter (except for section 60107) related to gas and Transportation: hazardous liquid, the following amounts are authorized to be appropriated to the Department of (1) $45,800,000 for fiscal year 2003, of which $31,900,000 is to be derived from user fees for fiscal year 2003 collected under section 60301 of this title. (2) $46,800,000 for fiscal year 2004, of which $35,700,000 is to be derived from user fees for fiscal (3) $47,100,000 for fiscal year 2005, of which $41, 100,000 is to be derived from user fees for fiscal year 2004 collected under section 60301 of this title. year 2005 collected under section 60301 of this title. year 2006 collected under section 60301 of this title. (4) $50,000,000 for fiscal year 2006, of which $45,000,000 is to be derived from user fees for fiscal (a) Gas and hazardous liquid.- (1) In general. To carry out the provisions of this chapter related to gas and hazardous liquid and 355), there is authorized to be appropriated to the Department of Transportation for each of fiscal section 12 of the Pipeline Safety Improvement Act of 2002 (49 U.S.C. 60101 note; Public Law 107- years 2012 through 2015, from fees collected under section 60301, $90,679,000, of which authorized to be appropriated to the Department of Transportation from fees collected under $4,746,000 is for carrying out such section 12 and $36, 194,000 is for making grants. there is section 60301 such section 12 and $39,385,000 shall be expended for making grants; (A) $124,500,000 for fiscal year 2016, of which $9,000,000 shall be expended for carrying out (B) $128,000,000 for fiscal year 2017, of which $9,000,000 shall be expended for carrying out (C) $131,000,000 for fiscal year 2018, of which $9,000,000 shall be expended for carrying out such section 12 and $41,885,000 shall be expended for making grants; (D) $134,000,000 for fiscal year 2019, of which $9,000,000 shall be expended for carrying out such section 12 and $44,885,000 shall be expended for making grants; and the following amounts are authorized to be appropriated to the Department of Transportation from such section 12 and $47,885,000 shall be expended for making grants. fees collected under section 60301 in each respective year: and $17,556,000 is for making grants. (A) For fiscal year 2007, $60,175,000 of which $7,386,000 is for carrying out such section 12 (B) For fiscal year 2008, $67,118,000 of which $7,586,000 is for carrying out such section 12 (C) For fiscal year 2009, $72,045,000 of which $7,586,000 is for carrying out such section 12 and $20,614,000 is for making grants. (D) For fiscal year 2010, $76,580,000 of which $7,586,000 is for carrying out subsection 12 and and $21,513,000 is for making grants. (2) Trust fund amounts. In addition to the amounts authorized to be appropriated by paragraph (1) $22,252,000 is for making grants. the following amounts are authorized from the Oil Spill Liability Trust Fund to carry out the Improvement Act of 2002 (49 U.S.C. 60101 note; Public Law 107-355): provisions of this chapter related to hazardous liquid and section 12 of the Pipeline Safety (A) For fiscal year 2007, $18,810,000 of which $4,207,000 is for carrying out such section 12 and $2,682,000 is for making grants. (B) For fiscal year 2008, $19,000,000 of which $4,207,000 is for carrying out such section 12 (C) For fiscal year 2009, $19,500,000 of which $4,207,000 is for carrying out such section 12 and $2,682,000 is for making grants. and $3,103,000 is for making grants. Rev. January 28, 2021 45#
Attachment 1, passage 153For Official Agency Use Only (D) For fiscal year 2010, $20,000,000 of which $4,207,000 is for carrying out such section 12 (2) Trust fund amounts.- In addition to the amounts authorized to be appropriated by paragraph $3,603,000 is for making grants. Spill Liability Trust Fund to carry out the provisions of this chapter related to hazardous liquid and (1), there is authorized to be appropriated for each of fiscal years 2012 through 2015 from the Oil section 12 of the Pipeline Safety Improvement Act of 2002 (49 U.S.C. 60101 note; Public Law 107- 355), $18,573,000, of which $2,174,000 is for carrying out such section 12 and $4,558,000 is for making grants. there is authorized to be appropriated from the Oil Spill Liability Trust Fund to carry Improvement Act of 2002 (49 U.S.C. 60101 note; Public Law 107-355) out the provisions of this chapter related to hazardous liquid and section 12 of the Pipeline Safety (A) $22,123,000 for fiscal year 2016, of which $3,000,000 shall be expended for carrying out such section 12 and $8,067,000 shall be expended for making grants; (B) $22,123,000 for fiscal year 2017, of which $3,000,000 shall be expended for carrying out such section 12 and $8,067,000 shall be expended for making grants; (C) $23,000,000 for fiscal year 2018, of which $3,000,000 shall be expended for carrying out such section 12 and $8,067,000 shall be expended for making grants; and (D) $23,000,000 for fiscal year 2019, of which $3,000,000 shall be expended for carrying out (3) Underground natural gas storage facility safety account.To carry out section 60141, there is such section 12 and $8,067,000 shall be expended for making grants. authorized to be appropriated to the Department of Transportation from fees collected under section 60302 $8,000,000 for each of fiscal years 2017 through 2019. carry out section 60107 of this title: (b) State grants.- (1) Not more than the following amounts may be appropriated to the Secretary to fiscal year 2003 collected under section 60301 of this title (A) $19,800,000 for fiscal year 2003, of which $14,800,000 is to be derived from user fees for fiscal year 2004 collected under section 60301 of this title. (B) $21,700,000 for fiscal year 2004, of which $16,700,000 is to be derived from user fees for fiscal year 2005 collected under section 60301 of this title. (C) $24,600,000 for fiscal year 2005, of which $19,600,000 is to be derived from user fees for fiscal year 2006 collected under section 60301 of this title. (D) $26,500,000 for fiscal year 2006, of which $21,500, 000 is to be derived from user fees for (2) At least 5 percent of amounts appropriated to carry out United States Government grants-in-aid programs for a fiscal year are available only to carry out section 60107 of this title related to hazardous liquid. (3) Not more than 20 percent of a pipeline safety program grant under section 60107 of this title may be allocated to indirect expenses. (c) Oil Spill Liability Trust Fund. -Of the amounts available in the Oil Spill Liability Trust Fund, $8,000,000 shall be transferred to the Secretary of Transportation, as provided in appropriation Acts, to carry out programs authorized in this chapter for each of fiscal years 2003 through 2006. (d)(b) Emergency response grants.- local governments in high consequence areas, as defined by the Secretary, for emergency (1) In general.--The Secretary may establish a program for making grants to State, county, and to train emergency responders, such training shall ensure that emergency responders have the response management, training, and technical assistance. To the extent that such grants are used ability to protect nearby persons, property and the environment from the effects of accidents or incidents involving gas or hazardous liquid pipelines, in accordance with existing regulations. for each of fiscal years 2003 through 2006 2007 through 2010 2012 through 2015 fiscal years 2021 (2) Authorization of appropriations.-There is authorized to be appropriated $6,000,000 $10,000,000 through 2023 to carry out this subsection. (e)(c) Crediting appropriations for expenditures for training.--The Secretary may credit to an appropriation authorized under subsection (a) amounts received from sources other than the Government for reimbursement for expenses incurred by the Secretary in providing training. Rev. January 28, 2021 46#
Attachment 1, passage 154For Official Agency Use Only § 60126. Risk management (a) Risk management program demonstration projects.-- (1) In general.--The Secretary shall establish risk management demonstration projects-- (A) to demonstrate, through the voluntary participation by owners and operators of gas pipeline facilities and hazardous liquid pipeline facilities, the application of risk management; and (B) to evaluate the safety and cost-effectiveness of the program. (2) Exemptions.--In carrying out a demonstration project under this subsection, the Secretary, by order-- (A) may exempt an owner or operator of the pipeline facility covered under the project (referred to in this subsection as a "covered pipeline facility"), from the applicability of all or a portion of the requirements under this chapter that would otherwise apply to the covered pipeline facility; and (B) shall exempt, for the period of the project, an owner or operator of the covered pipeline facility, from the applicability of any new standard that the Secretary promulgates under this chapter during the period of that participation, with respect to the covered facility. (b) Requirements.--In carrying out a demonstration project under this section, the Secretary shall-- (1) invite owners and operators of pipeline facilities to submit risk management plans for timely approval by the Secretary; (2) require, as a condition of approval, that a risk management plan submitted under this subsection contain measures that are designed to achieve an equivalent or greater overall level of safety than would otherwise be achieved through compliance with the standards contained in this chapter or promulgated by the Secretary under this chapter; (3) provide for-- (A) collaborative government and industry training; (B) methods to measure the safety performance of risk management plans; (C) the development and application of new technologies; (D) the promotion of community awareness concerning how the overall level of safety will be maintained or enhanced by the demonstration project; (E) the development of models that categorize the risks inherent to each covered pipeline facility, taking into consideration the location, volume, pressure, and material transported or stored by that pipeline facility; (F) the application of risk assessment and risk management methodologies that are suitable to the inherent risks that are determined to exist through the use of models developed under subparagraph (E); (G) the development of project elements that are necessary to ensure that-- (i) the owners and operators that participate in the demonstration project demonstrate that they are effectively managing the risks referred to in subparagraph (E); and (ii) the risk management plans carried out under the demonstration project under this subsection can be audited; (H) a process whereby an owner or operator of a pipeline facility is able to terminate a risk management plan or, with the approval of the Secretary, to amend, modify, or otherwise adjust a risk management plan referred to in paragraph (1) that has been approved by the Secretary pursuant to that paragraph to respond to-- (i) changed circumstances; or (ii) a determination by the Secretary that the owner or operator is not achieving an overall level of safety that is at least equivalent to the level that would otherwise be achieved through compliance with the standards contained in this chapter or promulgated by the Secretary under this chapter; (I) such other elements as the Secretary, with the agreement of the owners and operators that participate in the demonstration project under this section, determines to further the purposes of this section; and (J) an opportunity for public comment in the approval process; and Rev. January 28, 2021 47#
Attachment 1, passage 155For Official Agency Use Only (4) in selecting participants for the demonstration project, take into consideration the past safety and regulatory performance of each applicant who submits a risk management plan pursuant to paragraph (1). (c) Emergencies and revocations.--Nothing in this section diminishes or modifies the Secretary's authority under this title to act in case of an emergency. The Secretary may revoke any exemption granted under this section for substantial noncompliance with the terms and conditions of an approved risk management plan. (d) Participation by State authority.--In carrying out this section, the Secretary may provide for consultation by a State that has in effect a certification under section 60105. To the extent that a demonstration project comprises an intrastate natural gas pipeline or an intrastate hazardous liquid pipeline facility, the Secretary may make an agreement with the State agency to carry out the duties of the Secretary for approval and administration of the project. (e) Report.--Not later than March 31, 2000, the Secretary shall transmit to the Congress a report on the results of the demonstration projects carried out under this section that includes-- (1) an evaluation of each such demonstration project, including an evaluation of the performance of each participant in that project with respect to safety and environmental protection; and (2) recommendations concerning whether the applications of risk management demonstrated under the demonstration project should be incorporated into the Federal pipeline safety program under this chapter on a permanent basis. § 60127. Population encroachment and rights-of-way (a) Study.--The Secretary of Transportation, in conjunction with the Federal Energy Regulatory Commission and in consultation with appropriate Federal agencies and State and local governments, shall undertake a study of land use practices, zoning ordinances, and preservation of environmental resources with regard to pipeline rights-of-way and their maintenance. (b) Purpose of study.--The purpose of the study shall be to gather information on land use practices, zoning ordinances, and preservation of environmental resources-- (1) to determine effective practices to limit encroachment on existing pipeline rights-of-way; (2) to address and prevent the hazards and risks to the public, pipeline workers, and the environment associated with encroachment on pipeline rights-of-way; (3) to raise the awareness of the risks and hazards of encroachment on pipeline rights-of-way; and (4) to address how to best preserve environmental resources in conjunction with maintaining pipeline rights-of-way, recognizing pipeline operators' regulatory obligations to maintain rights-of- way and to protect public safety. (c) Considerations.--In conducting the study, the Secretary shall consider, at a minimum, the following: (1) The legal authority of Federal agencies and State and local governments in controlling land use and the limitations on such authority. (2) The current practices of Federal agencies and State and local governments in addressing land use issues involving a pipeline easement. (3) The most effective way to encourage Federal agencies and State and local governments to monitor and reduce encroachment upon pipeline rights-of-way. (d) Report.-- (1) In general.--Not later than 1 year after the date of enactment of this subsection, the Secretary shall publish a report identifying practices, laws, and ordinances that are most successful in addressing issues of encroachment and maintenance on pipeline rights-of-way so as to more effectively protect public safety, pipeline workers, and the environment. (2) Distribution of report.--The Secretary shall provide a copy of the report to-- (A) Congress and appropriate Federal agencies; and Rev. January 28, 2021 48#
Attachment 1, passage 156For Official Agency Use Only (B) States for further distribution to appropriate local authorities. (3) Adoption of practices, laws, and ordinances.--The Secretary shall encourage Federal agencies and State and local governments to adopt and implement appropriate practices, laws, and ordinances, as identified in the report, to address the risks and hazards associated with encroachment upon pipeline rights-of-way and to address the potential methods of preserving environmental resources while maintaining pipeline rights-of-way, consistent with pipeline safety. § 60128. Dumping within pipeline rights-of-way (a) Prohibition.--No person shall excavate for the purpose of unauthorized disposal within the right-of- way of an interstate gas pipeline facility or interstate hazardous liquid pipeline facility, or any other limited area in the vicinity of any such interstate pipeline facility established by the Secretary of Transportation, and dispose solid waste therein. (b) Definition.--For purposes of this section, the term "solid waste" has the meaning given that term in section 1004(27) of the Solid Waste Disposal Act (42 U.S.C. 6903(27)). § 60129. Protection of employees providing pipeline safety information (a) Discrimination against employee.-- (1) In general.--No employer may discharge any employee or otherwise discriminate against any employee with current or former employee with respect to his compensation, terms, conditions, or privileges of employment because the employee (or any person acting pursuant to a request of the employee)-- (A) provided, caused to be provided, or is about to provide or cause to be provided, to the employer or the Federal Government information relating to any violation or alleged violation of any order, regulation, or standard under this chapter or any other Federal law relating to pipeline safety; (B) refused to engage in any practice made unlawful by this chapter or any other Federal law relating to pipeline safety, if the employee has identified the alleged illegality to the employer; (C) provided, caused to be provided, or is about to provide or cause to be provided, testimony before Congress or at any Federal or State proceeding regarding any provision (or proposed provision) of this chapter or any other Federal law relating to pipeline safety; (D) commenced, caused to be commenced, or is about to commence or cause to be commenced a proceeding under this chapter or any other Federal law relating to pipeline safety, or a proceeding for the administration or enforcement of any requirement imposed under this chapter or any other Federal law relating to pipeline safety; (E) provided, caused to be provided, or is about to provide or cause to be provided, testimony in any proceeding described in subparagraph (D); or (F) assisted or participated or is about to assist or participate in any manner in such a proceeding or in any other manner in such a proceeding or in any other action to carry out the purposes of this chapter or any other Federal law relating to pipeline safety. (2) Employer defined.--In this section, the term "employer" means-- (A) a person owning or operating a pipeline facility; or (B) a contractor or subcontractor of such a person. (b) Department of labor complaint procedure.-- (1) Filing and notification.--A person who believes that he or she has been discharged or otherwise discriminated against by any person in violation of subsection (a) may, not later than 180 days after the date on which such violation occurs, file (or have any person file on his or her behalf) a complaint with the Secretary of Labor alleging such discharge or discrimination. Upon receipt of such a complaint, the Secretary of Labor shall notify, in writing, the person or persons named in the complaint and the Secretary of Transportation of the filing of the complaint, of the allegations Rev. January 28, 2021 49#
Attachment 1, passage 157For Official Agency Use Only contained in the complaint, of the substance of evidence supporting the complaint, and of the opportunities that will be afforded to such person or persons under paragraph (2). (2) Investigation; preliminary order.-- (A) In general. --Not later than 60 days after the date of receipt of a complaint filed under paragraph (1) and after affording the person or persons named in the complaint an opportunity to submit to the Secretary of Labor a written response to the complaint and an opportunity to meet with a representative of the Secretary of Labor to present statements from witnesses, the Secretary of Labor shall conduct an investigation and determine whether there is reasonable cause to believe that the complaint has merit and notify in writing the complainant and the person or persons alleged to have committed a violation of subsection (a) of the Secretary of Labor's findings. If the Secretary of Labor concludes that there is reasonable cause to believe that a violation of subsection (a) has occurred, the Secretary of Labor shall include with the Secretary of Labor's findings with a preliminary order providing the relief prescribed by paragraph (3)(B). Not later than 60 days after the date of notification of findings under this subparagraph, any person alleged to have committed a violation or the complainant may file objections to the findings or preliminary order, or both, and request a hearing on the record. The filing of such objections shall not operate to stay any reinstatement remedy contained in the preliminary order. Such hearings shall be conducted expeditiously. If a hearing is not requested in such 60-day period, the preliminary order shall be deemed a final order that is not subject to judicial review. (B) Requirements.-- (i) Required showing by complainant.--The Secretary of Labor shall dismiss a complaint filed under this subsection and shall not conduct an investigation otherwise required under subparagraph (A) unless the complainant makes a prima facie showing that any behavior described in subsection (a) was a contributing factor in the unfavorable personnel action alleged in the complaint. (ii) Showing by employer.--Notwithstanding a finding by the Secretary of Labor that the complainant has made the showing required under clause (i), no investigation otherwise required under subparagraph (A) shall be conducted if the employer demonstrates, by clear and convincing evidence, that the employer would have taken the same unfavorable personnel action in the absence of that behavior. (iii) Criteria for determination by Secretary.--The Secretary of Labor may determine that a violation of subsection (a) has occurred only if the complainant demonstrates that any behavior described in subsection (a) was a contributing factor in the unfavorable personnel action alleged in the complaint. (iv) Prohibition.--Relief may not be ordered under subparagraph (A) if the employer demonstrates by clear and convincing evidence that the employer would have taken the same unfavorable personnel action in the absence of that behavior. (3) Final order.-- (A) Deadline for issuance; settlement agreements.--Not later than 90 days after the date of conclusion of a hearing under paragraph (2), the Secretary of Labor shall issue a final order providing the relief prescribed by this paragraph or denying the complaint. At any time before issuance of a final order, a proceeding under this subsection may be terminated on the basis of a settlement agreement entered into by the Secretary of Labor, the complainant, and the person or persons alleged to have committed the violation. (B) Remedy.--If, in response to a complaint filed under paragraph (1), the Secretary of Labor determines that a violation of subsection (a) has occurred, the Secretary of Labor shall order the person or persons who committed such violation to-- (i) take affirmative action to abate the violation; (ii) reinstate the complainant to his or her former position together with the compensation (including back pay) and restore the terms, conditions, and privileges associated with his or her employment; and (iii) provide compensatory damages to the complainant. If such an order is issued under this paragraph, the Secretary of Labor, at the request of the complainant, shall assess against the person or persons against whom the order is issued a sum equal to the aggregate amount of all costs and expenses (including attorney's and expert Rev. January 28, 2021 50#
Attachment 1, passage 158For Official Agency Use Only witness fees) reasonably incurred, as determined by the Secretary of Labor, by the complainant for, or in connection with, the bringing the complaint upon which the order was issued. (C) Frivolous complaints.--If the Secretary of Labor finds that a complaint under paragraph (1) is frivolous or has been brought in bad faith, the Secretary of Labor may award to the prevailing employer a reasonable attorney's fee not exceeding $1,000. (D) De novo review.— (i) In general.—With respect to a complaint under paragraph (1), if the Secretary of Labor has not issued a final decision by the date that is 210 days after the date on which the complaint was filed, and if the delay is not due to the bad faith of the employee who filed the complaint, that employee may bring an original action at law or equity for de novo review in the appropriate district court of the United States, which shall have jurisdiction over such action without regard to the amount in controversy, and which action shall, at the request of either party to the action, be tried by the court with a jury. (ii) Burdens of proof.—An original action described in clause (i) shall be governed by the same legal burdens of proof specified in paragraph (2)(B) for review by the Secretary of Labor. (4) Review.-- (A) Appeal to court of appeals.--Any person adversely affected or aggrieved by an order issued under paragraph (3) may obtain review of the order in the United States Court of Appeals for the circuit in which the violation, with respect to which the order was issued, allegedly occurred or the circuit in which the complainant resided on the date of such violation. The petition for review must be filed not later than 60 days after the date of issuance of the final order of the Secretary of Labor. Review shall conform to chapter 7 of title 5, United States Code. The commencement of proceedings under this subparagraph shall not, unless ordered by the court, operate as a stay of the order. (B) Limitation on collateral attack.--An order of the Secretary of Labor with respect to which review could have been obtained under subparagraph (A) shall not be subject to judicial review in any criminal or other civil proceeding. (5) Enforcement of order by Secretary of labor.--Whenever any person has failed to comply with an order issued under paragraph (3), the Secretary of Labor may file a civil action in the United States district court for the district in which the violation was found to occur to enforce such order. In actions brought under this paragraph, the district courts shall have jurisdiction to grant all appropriate relief, including, but not to be limited to, injunctive relief and compensatory damages. (6) Enforcement of order by parties.-- (A) Commencement of action.--A person on whose behalf an order was issued under paragraph (3) may commence a civil action against the person or persons to whom such order was issued to require compliance with such order. The appropriate United States district court shall have jurisdiction, without regard to the amount in controversy or the citizenship of the parties, to enforce such order. (B) Attorney fees.--The court, in issuing any final order under this paragraph, may award costs of litigation (including reasonable attorney and expert witness fees) to any party whenever the court determines such award of costs is appropriate. (c) Mandamus.--Any nondiscretionary duty imposed by this section shall be enforceable in a mandamus proceeding brought under section 1361 of title 28, United States Code. (d) Nonapplicability to deliberate violations.--Subsection (a) shall not apply with respect to an action of an employee of an employer who, acting without direction from the employer (or such employer's agent), deliberately causes a violation of any requirement relating to pipeline safety under this chapter or any other law of the United States. (e) Nonenforceability of Certain Provisions Waiving Rights and Remedies or Requiring Arbitration of Disputes.— (1) Waiver of rights and remedies.—The rights and remedies provided under this section may not be waived by any agreement, policy, form, or condition of employment, including by a predispute arbitration agreement. Rev. January 28, 2021 51#
Attachment 1, passage 159For Official Agency Use Only (2) Predispute arbitration agreements.—No provision of a predispute arbitration agreement shall be valid or enforceable if the provision requires arbitration of a dispute arising under subsection (a)(1). § 60130. Pipeline safety information grants to communities (a) Grant authority.-- (1) In general.--The Secretary of Transportation may make grants for technical assistance to local communities, Indian Tribes, and groups of individuals (not including for-profit entities) to local communities and groups of individuals (not including for-profit entities) relating to the safety of pipeline facilities in local communities, other than facilities regulated under Public Law 93-153 (43 U.S.C. 1651 et seq.). The Secretary shall establish competitive No grants may be awarded under section 60114(g) until the Secretary has established competitive procedures for awarding grants under this section and criteria for selecting grant recipients. The amount Except as provided in subsection (c)(2), the amount of any grant under this section may not exceed $50,000$100,000 for a single grant recipient. The Secretary shall establish appropriate procedures to ensure the proper use of funds provided under this section. (2) Demonstration grants. —At least the first 3 grants awarded under this section shall be demonstration grants for the purpose of demonstrating and evaluating the utility of grants under this section. Each such demonstration grant shall not exceed $25,000. (3) Dissemination of technical findings. —Each recipient of a grant under this section shall ensure that— (A) the technical findings made possible by the grants are made available to the relevant operators; and (B) open communication between the grant recipients, local operators, local communities, and other interested parties is encouraged. (24) Technical assistance defined.--In this subsection, the term "technical assistance" means engineering and other scientific analysis of pipeline safety issues, including the promotion of public participation on technical pipeline safety issues in official proceedings conducted under this chapter. (b) Prohibited uses.--Funds provided under this section to grant recipients and their contractors may not be used for lobbying, for direct advocacy for or against a pipeline construction or expansion project, or in direct support of litigation. (c) Annual report.-- (1) In general.—Not later than 90 days after the last day of each fiscal year for which grants are made by the Secretary under this section, the Secretary shall report to the Committees on Commerce, Science, and Transportation and Energy and Natural Resources of the Senate and the Committees on Transportation and Infrastructure and Energy and Commerce of the House of Representatives on grants made under this section in the preceding fiscal year. (2) Contents.--The report shall include-- (A) a listing of the identity and location of each recipient of a grant under this section in the preceding fiscal year and the amount received by the recipient; (B) a description of the purpose for which each grant was made; and (C) a description of how each grant was used by the recipient. (cd) Authorization of appropriations.-- Of the amounts made available under section 2(b) of the PIPES Act of 2016, the Secretary shall expend $1,500,000 for each fiscal years 2016 through 2019 to carry out this section. There is authorized to be appropriated to the Secretary of Transportation for carrying out this section $1,500,000 for each of the fiscal years 2012 through 2015. Such amounts shall not be derived from user fees collected under section 60301. (c) Funding.— (1) In general.—Subject to paragraph (2), out of amounts made available under section 2(b) of the PIPES Act of 2016 (Public Law 114-183; 130 Stat. 515), the Secretary shall use $2,000,000 for each of fiscal years 2021 through 2023 to carry out this section. Rev. January 28, 2021 52#
Attachment 1, passage 160For Official Agency Use Only (2) Improving technical assistance.—From the amounts used to carry out this section under paragraph (1) each fiscal year, the Secretary shall award $1,000,000 to an eligible applicant through a competitive selection process for the purpose of improving the quality of technical assistance provided to communities or individuals under this section. (3) Limitation.—Any amounts used to carry out this section shall not be derived from user fees collected under section 60301. (d) Definitions.—In this section: (1) Technical assistance.—The term “technical assistance” means engineering, research, and other scientific analysis of pipeline safety issues, including the promotion of public participation on technical pipeline safety issues in proceedings related to this chapter. (2) Eligible applicant.—The term “eligible applicant” means a nonprofit entity that— (A) is a public safety advocate; (B) has pipeline safety expertise; (C) is able to provide individuals and communities with technical assistance; and (D) was established with funds designated for the purpose of community service through the implementation of section 3553 of title 18 relating to violations of this chapter. § 60131. Verification of pipeline qualification programs (a) In general.--Subject to the requirements of this section, the Secretary of Transportation shall require the operator of a pipeline facility to develop and adopt a qualification program to ensure that the individuals who perform covered tasks are qualified to conduct such tasks. (b) Standards and criteria.-- (1) Development.--Not later than 1 year after the date of enactment of this section, the Secretary shall ensure that the Department of Transportation has in place standards and criteria for qualification programs referred to in subsection (a). (2) Contents.--The standards and criteria shall include the following: (A) The establishment of methods for evaluating the acceptability of the qualifications of individuals described in subsection (a). (B) A requirement that pipeline operators develop and implement written plans and procedures to qualify individuals described in subsection (a) to a level found acceptable using the methods established under subparagraph (A) and evaluate the abilities of individuals described in subsection (a) according to such methods. (C) A requirement that the plans and procedures adopted by a pipeline operator under subparagraph (B) be reviewed and verified under subsection (e). (c) Development of qualification programs by pipeline operators.--The Secretary shall require each pipeline operator to develop and adopt, not later than 2 years after the date of enactment of this section, a qualification program that complies with the standards and criteria described in subsection (b). (d) Elements of qualification programs.--A qualification program adopted by an operator under subsection (a) shall include, at a minimum, the following elements: (1) A method for examining or testing the qualifications of individuals described in subsection (a). The method may include written examination, oral examination, observation during on-the-job performance, on-the-job training, simulations, and other forms of assessment. The method may not be limited to observation of on-the-job performance, except with respect to tasks for which the Secretary has determined that such observation is the best method of examining or testing qualifications. The Secretary shall ensure that the results of any such observations are documented in writing. (2) A requirement that the operator complete the qualification of all individuals described in subsection (a) not later than 18 months after the date of adoption of the qualification program. (3) A periodic requalification component that provides for examination or testing of individuals in accordance with paragraph (1). Rev. January 28, 2021 53#
Attachment 1, passage 161For Official Agency Use Only (4) A program to provide training, as appropriate, to ensure that individuals performing covered tasks have the necessary knowledge and skills to perform the tasks in a manner that ensures the safe operation of pipeline facilities. (e) Review and verification of programs.-- (1) In general.--The Secretary shall review the qualification program of each pipeline operator and verify its compliance with the standards and criteria described in subsection (b) and that it includes the elements described in subsection (d). The Secretary shall record the results of that review for use in the next review of an operator's program. (2) Deadline for completion.--Reviews and verifications under this subsection shall be completed not later than 3 years after the date of the enactment of this section. (3) Inadequate programs.--If the Secretary decides that a qualification program is inadequate for the safe operation of a pipeline facility, the Secretary shall act as under section 60108(a)(2) to require the operator to revise the qualification program. (4) Program modifications.--If the operator of a pipeline facility significantly modifies a program that has been verified under this subsection, the operator shall notify the Secretary of the modifications. The Secretary shall review and verify such modifications in accordance with paragraph (1). (5) Waivers and modifications.--In accordance with section 60118(c), the Secretary may waive or modify any requirement of this section if the waiver or modification is not inconsistent with pipeline safety. (6) Inaction by the Secretary.--Notwithstanding any failure of the Secretary to prescribe standards and criteria as described in subsection (b), an operator of a pipeline facility shall develop and adopt a qualification program that complies with the requirement of subsection (b)(2)(B) and includes the elements described in subsection (d) not later than 2 years after the date of enactment of this section. (f) Intrastate pipeline facilities.--In the case of an intrastate pipeline facility operator, the duties and powers of the Secretary under this section with respect to the qualification program of the operator shall be vested in the appropriate State regulatory agency, consistent with this chapter. (g) Covered task defined.--In this section, the term "covered task"-- (1) with respect to a gas pipeline facility, has the meaning such term has under section 192.801 of title 49, Code of Federal Regulations, including any subsequent modifications; and (2) with respect to a hazardous liquid pipeline facility, has the meaning such term has under section 195.501 of such title, including any subsequent modifications. (h) Report.--Not later than 4 years after the date of enactment of this section, the Secretary shall transmit to Congress a report on the status and results to date of the personnel qualification regulations issued under this chapter. § 60132. National pipeline mapping system (a) Information to be provided.--Not later than 6 months after the date of enactment of this section, the operator of a pipeline facility (except distribution lines and gathering lines) shall provide to the Secretary of Transportation the following information with respect to the facility: (1) Geospatial data appropriate for use in the National Pipeline Mapping System or data in a format that can be readily converted to geospatial data. (2) The name and address of the person with primary operational control to be identified as its operator for purposes of this chapter. (3) A means for a member of the public to contact the operator for additional information about the pipeline facilities it operates. (4) Any other geospatial or technical data, including design and material specifications, that the Secretary determines are necessary to carry out the purposes of this section. The Secretary shall give reasonable notice to operators that the data are being requested. Rev. January 28, 2021 54#
Attachment 1, passage 162For Official Agency Use Only (b) Updates.--A person providing information under subsection (a) shall provide to the Secretary updates of the information to reflect changes in the pipeline facility owned or operated by the person and as otherwise required by the Secretary. (c) Technical assistance to improve local response capabilities.--The Secretary may provide technical assistance to State and local officials to improve local response capabilities for pipeline emergencies by adapting information available through the National Pipeline Mapping System to software used by emergency response personnel responding to pipeline emergencies. (d) Map of High-consequence Areas. —The Secretary shall— (1) maintain, as part of the National Pipeline Mapping System, a map of designated high- consequence areas (as described in section 60109(a)) in which pipelines are required to meet integrity management program regulations, excluding any proprietary or sensitive security information; and (2) update the map biennially. (e) Program To Promote Awareness of National Pipeline Mapping System. —Not later than 1 year after the date of enactment of this subsection, the Secretary shall develop and implement a program promoting greater awareness of the existence of the National Pipeline Mapping System to State and local emergency responders and other interested parties. The program shall include guidance on how to use the National Pipeline Mapping System to locate pipelines in communities and local jurisdictions. (f) Public Disclosure Limited. —The Secretary may not disclose information collected pursuant to subsection (a) except to the extent permitted by section 552 of title 5. § 60133. Coordination of environmental reviews (a) Interagency committee.-- (1) Establishment and purpose.--Not later than 30 days after the date of enactment of this section, the President shall establish an Interagency Committee to develop and ensure implementation of a coordinated environmental review and permitting process in order to enable pipeline operators to commence and complete all activities necessary to carry out pipeline repairs within any time periods specified by rule by the Secretary. (2) Membership.--The Chairman of the Council on Environmental Quality (or a designee of the Chairman) shall chair the Interagency Committee, which shall consist of representatives of Federal agencies with responsibilities relating to pipeline repair projects, including each of the following persons (or a designee thereof): (A) The Secretary of Transportation. (B) The Administrator of the Environmental Protection Agency. (C) The Director of the United States Fish and Wildlife Service. (D) The Assistant Administrator for Fisheries of the National Oceanic and Atmospheric Administration. (E) The Director of the Bureau of Land Management. (F) The Director of the Minerals Management Service. (G) The Assistant Secretary of the Army for Civil Works. (H) The Chairman of the Federal Energy Regulatory Commission. (3) Evaluation.--The Interagency Committee shall evaluate Federal permitting requirements to which access, excavation, and restoration activities in connection with pipeline repairs described in paragraph (1) may be subject. As part of its evaluation, the Interagency Committee shall examine the access, excavation, and restoration practices of the pipeline industry in connection with such pipeline repairs, and may develop a compendium of best practices used by the industry to access, excavate, and restore the site of a pipeline repair. (4) Memorandum of understanding.--Based upon the evaluation required under paragraph (3) and not later than 1 year after the date of enactment of this section, the members of the Interagency Rev. January 28, 2021 55#
Attachment 1, passage 163For Official Agency Use Only Committee shall enter into a memorandum of understanding to provide for a coordinated and expedited pipeline repair permit review process to carry out the purpose set forth in paragraph (1). The Interagency Committee shall include provisions in the memorandum of understanding identifying those repairs or categories of repairs described in paragraph (1) for which the best practices identified under paragraph (3), when properly employed by a pipeline operator, would result in no more than minimal adverse effects on the environment and for which discretionary administrative reviews may therefore be minimized or eliminated. With respect to pipeline repairs described in paragraph (1) to which the preceding sentence would not be applicable, the Interagency Committee shall include provisions to enable pipeline operators to commence and complete all activities necessary to carry out pipeline repairs within any time periods specified by rule by the Secretary. The Interagency Committee shall include in the memorandum of understanding criteria under which permits required for such pipeline repair activities should be prioritized over other less urgent agency permit application reviews. The Interagency Committee shall not enter into a memorandum of understanding under this paragraph except by unanimous agreement of the members of the Interagency Committee. (5) State and local consultation.--In carrying out this subsection, the Interagency Committee shall consult with appropriate State and local environmental, pipeline safety, and emergency response officials, and such other officials as the Interagency Committee considers appropriate. (b) Implementation.--Not later than 180 days after the completion of the memorandum of understanding required under subsection (a)(4), each agency represented on the Interagency Committee shall revise its regulations as necessary to implement the provisions of the memorandum of understanding. (c) Savings provisions; no preemption.--Nothing in this section shall be construed-- (1) to require a pipeline operator to obtain a Federal permit, if no Federal permit would otherwise have been required under Federal law; or (2) to preempt applicable Federal, State, or local environmental law. (d) Interim operational alternatives.-- (1) In general.--Not later than 30 days after the date of enactment of this section, and subject to the limitations in paragraph (2), the Secretary of Transportation shall revise the regulations of the Department, to the extent necessary, to permit a pipeline operator subject to time periods for repair specified by rule by the Secretary to implement alternative mitigation measures until all applicable permits have been granted. (2) Limitations.--The regulations issued by the Secretary pursuant to this subsection shall not allow an operator to implement alternative mitigation measures pursuant to paragraph (1) unless-- (A) allowing the operator to implement such measures would be consistent with the protection of human health, public safety, and the environment; (B) the operator, with respect to a particular repair project, has applied for and is pursuing diligently and in good faith all required Federal, State, and local permits to carry out the project; and (C) the proposed alternative mitigation measures are not incompatible with pipeline safety. (e) Ombudsman.--The Secretary shall designate an ombudsman to assist in expediting pipeline repairs and resolving disagreements between Federal, State, and local permitting agencies and the pipeline operator during agency review of any pipeline repair activity, consistent with protection of human health, public safety, and the environment. (f) State and local permitting processes.--The Secretary shall encourage States and local governments to consolidate their respective permitting processes for pipeline repair projects subject to any time periods for repair specified by rule by the Secretary. The Secretary may request other relevant Federal agencies to provide technical assistance to States and local governments for the purpose of encouraging such consolidation. Rev. January 28, 2021 56#
Attachment 1, passage 164For Official Agency Use Only § 60134. State damage prevention programs (a) In general. —The Secretary may make a grant to a State authority (including a municipality with respect to intrastate gas pipeline transportation) to assist in improving the overall quality and effectiveness of a damage prevention program of the State authority under subsection (e) if the State authority— (1) has in effect an annual certification under section 60105 or an agreement under section 60106; and (2)(A) has in effect an effective damage prevention program that meets the requirements of subsection (b); or (B) demonstrates that it has made substantial progress toward establishing such a program, and that such program will meet the requirements of subsection (b).(b); and (3) does not provide any exemptions to municipalities, State agencies, or their contractors from the one-call notification system requirements of the program. [this amendment takes effect 1/3/2014] (b) Damage prevention program elements. — An effective damage prevention program includes the following elements: (1) Participation by operators, excavators, and other stakeholders in the development and implementation of methods for establishing and maintaining effective communications between stakeholders from receipt of an excavation notification until successful completion of the excavation, as appropriate. (2) A process for fostering and ensuring the support and partnership of stakeholders, including excavators, operators, locators, designers, and local government in all phases of the program. (3) A process for reviewing the adequacy of a pipeline operator’s internal performance measures regarding persons performing locating services and quality assurance programs. (4) Participation by operators, excavators, and other stakeholders in the development and implementation of effective employee training programs to ensure that operators, the one-call center, the enforcing agency, and the excavators have partnered to design and implement training for the employees of operators, excavators, and locators. (5) A process for fostering and ensuring active participation by all stakeholders in public education for damage prevention activities. (6) A process for resolving disputes that defines the State authority’s role as a partner and facilitator to resolve issues. (7) Enforcement of State damage prevention laws and regulations for all aspects of the damage prevention process, including public education, and the use of civil penalties for violations assessable by the appropriate State authority. (8) A process for fostering and promoting the use, by all appropriate stakeholders, of improving technologies that may enhance communications, underground pipeline locating capability, and gathering and analyzing information about the accuracy and effectiveness of locating programs. (9) A process for review and analysis of the effectiveness of each program element, including a means for implementing improvements identified by such program reviews. (c) Factors to consider. —In making grants under this section, the Secretary shall take into consideration the commitment of each State to ensuring the effectiveness of its damage prevention program, including legislative and regulatory actions taken by the State. (d) Application. —If a State authority files an application for a grant under this section not later than September 30 of a calendar year and demonstrates that the Governor (or chief executive) of the State has designated it as the appropriate State authority to receive the grant, the Secretary shall review the State’s damage prevention program to determine its effectiveness. (e) Use of funds. —A grant under this section to a State authority may only be used to pay the cost of the personnel, equipment, and activities that the State authority reasonably requires for the calendar year covered by the grant to develop or carry out its damage prevention program in accordance with subsection (b). Rev. January 28, 2021 57#
Attachment 1, passage 165For Official Agency Use Only (f) Nonapplicability of limitation. —A grant made under this section is not subject to the section 60107(a) limitation on the maximum percentage of funds to be paid by the Secretary. (g) Limitation on use of funds. —Funds provided to carry out this section may not be used for lobbying or in direct support of litigation. (h) Damage prevention process defined. —In this section, the term ‘damage prevention process’ means a process that incorporates the principles described in sections 60114(b), 60114(d), and 60114(e). (i) Authorization of appropriations. —There is authorized to be appropriated to the Secretary to provide grants under this section $1,500,000 for each of fiscal years 2021 through 2023fiscal years 2012 through 2015. Such funds shall remain available until expended. § 60135. Enforcement transparency (a) In general. —Not later than December 31, 2007, the Secretary shall— (1) provide a monthly updated summary to the public of all gas and hazardous liquid pipeline enforcement actions taken by the Secretary or the Pipeline and Hazardous Materials Safety Administration, from the time a notice commencing an enforcement action is issued until the enforcement action is final; (2) include in each such summary identification of the operator involved in the enforcement activity, the type of alleged violation, the penalty or penalties proposed, any changes in case status since the previous summary, the final assessment amount of each penalty, and the reasons for a reduction in the proposed penalty, if appropriate; and (3) provide a mechanism by which a pipeline operator named in an enforcement action may make information, explanations, or documents it believes are responsive to the enforcement action available to the public. (b) Electronic availability. —Each summary under this section shall be made available to the public by electronic means. (c) Relationship to FOIA. —Nothing in this section shall be construed to require disclosure of information or records that are exempt from disclosure under section 552 of title 5. § 60136. Petroleum product transportation capacity study (a) In general. —The Secretaries of Transportation and Energy shall conduct periodic analyses of the domestic transport of petroleum products by pipeline. Such analyses should identify areas of the United States where unplanned loss of individual pipeline facilities may cause shortages of petroleum products or price disruptions and where shortages of pipeline capacity and reliability concerns may have or are anticipated to contribute to shortages of petroleum products or price disruptions. Upon identifying such areas, the Secretaries may determine if the current level of regulation is sufficient to minimize the potential for un-planned losses of pipeline capacity. (b) Consultation. —In preparing any analysis under this section, the Secretaries may consult with the heads of other government agencies and public- and private-sector experts in pipeline and other forms of petroleum product transportation, energy consumption, pipeline capacity, population, and economic development. (c) Report to Congress. —Not later than June 1, 2008, the Secretaries shall submit to the Committee on Energy and Commerce and the Committee on Transportation and Infrastructure of the House of Representatives and the Committee on Commerce, Science, and Transportation and the Committee on Energy and Natural Resources of the Senate a report setting forth their recommendations to reduce the likelihood of the shortages and price disruptions referred to in subsection (a). Rev. January 28, 2021 58#
Attachment 1, passage 166For Official Agency Use Only (d) Additional reports. —The Secretaries shall submit additional reports to the congressional committees referred to in subsection (c) containing the results of any subsequent analyses performed under subsection (a) and any additional recommendations, as appropriate. (e) Petroleum product defined. —In this section, the term ‘petroleum product’ means oil of any kind or in any form, gasoline, diesel fuel, aviation fuel, fuel oil, kerosene, any product obtained from refining or processing of crude oil, liquefied petroleum gases, natural gas liquids, petrochemical feedstocks, condensate, waste or refuse mixtures containing any of such oil products, and any other liquid hydrocarbon compounds. § 60137. Pipeline control room management (a) In general. —Not later than June 1, 2008, the Secretary shall issue regulations requiring each operator of a gas or hazardous liquid pipeline to develop, implement, and submit to the Secretary or, in the case of an operator of an intrastate pipeline located within the boundaries of a State that has in effect an annual certification under section 60105, to the head of the appropriate State authority, a human factors management plan designed to reduce risks associated with human factors, including fatigue, in each control center for the pipeline. Each plan must include, among the measures to reduce such risks, a maximum limit on the hours of service established by the operator for individuals employed as controllers in a control center for the pipeline. (b) Review and approval of the plan. —The Secretary or, in the case of an operator of an intrastate pipeline located within the boundaries of a State that has in effect an annual certification under section 60105, the head of the appropriate State authority, shall review and approve each plan submitted to the Secretary or the head of such authority, under subsection (a). The Secretary and the head of such authority may not approve a plan that does not include a maximum limit on the hours of service established by the operator of the pipeline for individuals employed as controllers in a control center for the pipeline. (c) Enforcement of the plan. —If the Secretary or the head of the appropriate State authority determines that an operator’s plan submitted to the Secretary or the head of such authority under subsection (a), or implementation of such a plan, does not comply with the regulations issued under this section or is inadequate for the safe operation of a pipeline, the Secretary or the head of such authority may take action consistent with this chapter and enforce the requirements of such regulations. (d) Compliance with the plan. —Each operator of a gas or hazardous liquid pipeline shall document compliance with the plan submitted by the operator under subsection (a) and the reasons for any deviation from compliance with such plan. The Secretary or the head of the appropriate State authority, as the case may be, shall review the reasonableness of any such deviation in considering whether to take enforcement action or discontinue approval of the operator’s plan under subsection (b). (e) Deviation reporting requirements. —In issuing regulations under subsection (a), the Secretary shall develop and include in such regulations requirements for an operator of a gas or hazardous liquid pipeline to report deviations from compliance with the plan submitted to the Secretary by the operator under subsection (a). § 60138. Response plans (a) In General. —The Secretary of Transportation shall— (1) maintain on file a copy of the most recent response plan (as defined in part 194 of title 49, Code of Federal Regulations) prepared by an owner or operator of a pipeline facility; and (2) provide upon written request to a person a copy of the plan, which may exclude, as the Secretary determines appropriate— Rev. January 28, 2021 59#
Attachment 1, passage 167For Official Agency Use Only (A) proprietary information; (B) security-sensitive information, including information described in section 1520.5(a) of title 49, Code of Federal Regulations; (C) specific response resources and tactical resource deployment plans; and (D) the specific amount and location of worst case discharges (as defined in part 194 of title 49, Code of Federal Regulations), including the process by which an owner or operator determines the worst case discharge. (b) Relationship to FOIA. —Nothing in this section may be construed to require disclosure of information or records that are exempt from disclosure under section 552 of title 5. § 60139. Maximum allowable operating pressure (a) Verification of Records. — (1) In general. —The Secretary of Transportation shall require each owner or operator of a pipeline facility to conduct, not later than 6 months after the date of enactment of this section, a verification of the records of the owner or operator relating to the interstate and intrastate gas transmission pipelines of the owner or operator in class 3 and class 4 locations and class 1 and class 2 high- consequence areas. (2) Purpose. —The purpose of the verification shall be to ensure that the records accurately reflect the physical and operational characteristics of the pipelines described in paragraph (1) and confirm the established maximum allowable operating pressure of the pipelines. (3) Elements. —The verification process under this subsection shall include such elements as the Secretary considers appropriate. (b) Reporting. — (1) Documentation of certain pipelines. —Not later than 18 months after the date of enactment of this section, each owner or operator of a pipeline facility shall identify and submit to the Secretary documentation relating to each pipeline segment of the owner or operator described in subsection (a)(1) for which the records of the owner or operator are insufficient to confirm the established maximum allowable operating pressure of the segment. (2) Exceedances of maximum allowable operating pressure. —If there is an exceedance of the maximum allowable operating pressure with respect to a gas transmission pipeline of an owner or operator of a pipeline facility that exceeds the build-up allowed for operation of pressure-limiting or control devices, the owner or operator shall report the exceedance to the Secretary and appropriate State authorities on or before the 5th day following the date on which the exceedance occurs. (c) Determination of maximum allowable operating pressure. — (1) In general. —In the case of a transmission line of an owner or operator of a pipeline facility identified under subsection (b)(1), the Secretary shall— (A) require the owner or operator to reconfirm a maximum allowable operating pressure as expeditiously as economically feasible; and (B) determine what actions are appropriate for the pipeline owner or operator to take to maintain safety until a maximum allowable operating pressure is confirmed. (2) Interim actions. —In determining the actions for an owner or operator of a pipeline facility to take under paragraph (1)(B), the Secretary shall take into account potential consequences to public safety and the environment, potential impacts on pipeline system reliability and deliverability, and other factors, as appropriate. (d) Testing regulations. — (1) In general. —Not later than 18 months after the date of enactment of this section, the Secretary shall issue regulations for conducting tests to confirm the material strength of previously untested natural gas transmission pipelines located in high-consequence areas and operating at a pressure greater than 30 percent of specified minimum yield strength. Rev. January 28, 2021 60#
Attachment 1, passage 168For Official Agency Use Only (2) Considerations. —In developing the regulations, the Secretary shall consider safety testing methodologies, including, at a minimum— (A) pressure testing; and (B) other alternative methods, including in-line inspections, determined by the Secretary to be of equal or greater effectiveness. (3) Completion of testing. —The Secretary, in consultation with the Chairman of the Federal Energy Regulatory Commission and State regulators, as appropriate, shall establish timeframes for the completion of such testing that take into account potential consequences to public safety and the environment and that minimize costs and service disruptions. (e) High-consequence area defined. —In this section, the term “high-consequence area” means an area described in section 60109(a). § 60140. Cover over buried pipelines (a) Hazardous liquid pipeline incidents involving buried pipelines. — (1) Study. —The Secretary of Transportation shall conduct a study of hazardous liquid pipeline incidents at crossings of inland bodies of water with a width of at least 100 feet from high water mark to high water mark to determine if the depth of cover over the buried pipeline was a factor in any accidental release of hazardous liquids. (2) Report. —Not later than 1 year after the date of enactment of this section, the Secretary shall transmit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report on the results of the study. (b) Assessment of current requirements for depth of cover over buried pipelines.— (1) In general. —If, following completion of the study under subsection (a), the Secretary finds that the depth of cover over buried pipelines is a contributing factor in the accidental release of hazardous liquids from the pipelines, the Secretary, not later than 1 year after the date of completion of the study, shall review and determine the sufficiency of current requirements for the depth of cover over buried pipelines. (2) Legislative recommendations. — (A) Development. —If the Secretary determines under paragraph (1) that the current requirements for the depth of cover over buried pipelines are insufficient, the Secretary shall develop legislative recommendations for improving the safety of buried pipelines at crossings of inland bodies of water with a width of at least 100 feet from high water mark to high water mark. (B) Consideration of factors. —In developing legislative recommendations under subparagraph (A), the Secretary shall consider the factors specified in section 60102(b)(2). (C) Report to Congress. —If the Secretary develops legislative recommendations under subparagraph (A), the Secretary shall submit to the committees referred to in subsection (a)(2) a report containing the legislative recommendations. § 60141. Standards for underground natural gas storage facilities (a) Minimum safety standards.—Not later than 2 years after the date of enactment of the PIPES Act of 2016, the Secretary, in consultation with the heads of other relevant Federal agencies, shall issue minimum safety standards for underground natural gas storage facilities. (b) Considerations.—In developing the safety standards required under subsection (a), the Secretary shall, to the extent practicable— (1) consider consensus standards for the operation, environmental protection, and integrity management of underground natural gas storage facilities; (2) consider the economic impacts of the regulations on individual gas customers; Rev. January 28, 2021 61#
Attachment 1, passage 169For Official Agency Use Only (3) ensure that the regulations do not have a significant economic impact on end users; and (4) consider the recommendations of the Aliso Canyon natural gas leak task force established under section 31 of the PIPES Act of 2016. (c) Federal-state cooperation. —The Secretary may authorize a State authority (including a municipality) to participate in the oversight of underground natural gas storage facilities in the same manner as provided in sections 60105 and 60106. (d) Rules of construction. —(1) In general. —Nothing in this section may be construed to affect any Federal regulation relating to gas pipeline facilities that is in effect on the day before the date of enactment of the PIPES Act of 2016. (2) Limitations. —Nothing in this section may be construed to authorize the Secretary— (A) to prescribe the location of an underground natural gas storage facility; or (B) to require the Secretary’s permission to construct a facility referred to in subparagraph (A). (e) Preemption. —A State authority may adopt additional or more stringent safety standards for intrastate underground natural gas storage facilities if such standards are compatible with the minimum standards prescribed under this section. (f) Statutory construction. —Nothing in this section shall be construed to affect the Secretary’s authority under this title to regulate the underground storage of gas that is not natural gas. § 60142. Pipeline safety enhancement programs (a) In General.—The Secretary may establish and carry out limited safety-enhancing testing programs to evaluate innovative technologies and operational practices testing the safe operation of— (1) a natural gas pipeline facility; or (2) a hazardous liquid pipeline facility. (b) Limitations.— (1) In general.—Testing programs established under subsection (a) may not exceed— (A) 5 percent of the total miles of hazardous liquid pipelines in the United States that are regulated by— (i) the Pipeline and Hazardous Materials Safety Administration; or (ii) a State authority under section 60105 or 60106; and (B) 5 percent of the total miles of natural gas pipelines in the United States that are regulated by— (i) the Pipeline and Hazardous Materials Safety Administration; or (ii) a State authority under section 60105 or 60106. (2) Operator mileage limitation.—The Secretary shall limit the miles of pipelines that each operator can test under each program established under subsection (a) to the lesser of— (A) 38 percent of the total miles of pipelines in the system of the operator that are regulated by— (i) the Pipeline and Hazardous Materials Safety Administration; or (ii) a State authority under section 60105 or 60106; or (B) 1,000 miles. (3) Prohibited areas.—Any program established under subsection (a) shall not be located in— (A) a high population area (as defined in section 195.450 of title 49, Code of Federal Regulations (or a successor regulation)); (B) a high consequence area (as defined in section 192.903 of title 49, Code of Federal Regulations (or a successor regulation)); or (C) an unusually sensitive area (as described under subsection (a)(1)(B)(ii) of section 60109 in accordance with subsection (b) of that section). (4) High consequence areas for hazardous liquid pipelines. — (A) In general.—Not later than 1 year after the date of enactment of this section, the Secretary Rev. January 28, 2021 62#
Attachment 1, passage 170For Official Agency Use Only shall submit to Congress a report examining the benefits and costs of prohibiting the testing of hazardous liquid pipelines in high consequence areas (as defined in section 195.450 of title 49, Code of Federal Regulations (or a successor regulation)). (B) Contents of report.—The report described in subparagraph (A) shall examine— (i) the safety benefits of allowing the testing of hazardous liquid pipelines in high consequence areas (as defined in section 195.450 of title 49, Code of Federal Regulations (or a successor regulation)); and (ii) whether additional testing conditions are required to protect those areas while conducting a testing program established under subsection (a) in those areas. (c) Duration.— (1) In general.—The term of a testing program established under subsection (a) shall be not more than a period of 3 years beginning on the date of approval of the program. (2) Requirement.—The Secretary shall not establish any additional safety-enhancing testing programs under subsection (a) after the date that is 3 years after the date of enactment of this section. (d) Safety Standards.— (1) In general.—The Secretary shall require, as a condition of approval of a testing program under subsection (a), that the safety measures in the testing program are designed to achieve a level of safety that is greater than the level of safety required by this chapter. (2) Determination.— (A) In general.—The Secretary may issue an order under subparagraph (A) of section 60118(c)(1) to accomplish the purpose of a testing program for a term not to exceed the time period described in subsection (c) if the condition described in paragraph (1) is met, as determined by the Secretary. (B) Limitation.—An order under subparagraph (A) shall pertain only to those regulations that would otherwise prevent the use of the safety technology to be tested under the testing program. (3) Increased safety capabilities.—For purposes of paragraph (1), improvement in the reliability, accuracy, durability, or certainty of pipeline safety technologies, techniques, or methods shall constitute an appropriate means of meeting the safety measure requirement described in that paragraph. (e) Considerations.—In establishing a testing program under subsection (a), the Secretary shall consider— (1) the accident and incident record of the owners or operators participating in the program; (2)(A) whether the owners or operators participating in the program have a safety management system in place; and (B) how the application of that system proposes to eliminate or mitigate potential safety and environmental risks throughout the duration of the program; and (3) whether the proposed safety technology has been tested through a research and development program carried out by— (A) the Secretary; (B) collaborative research development organizations; or (C) other institutions. (f) Data and Findings.— (1) In general.—As a participant in a testing program established under subsection (a), an owner or operator shall submit to the Secretary detailed findings and a summary of data collected as a result of participation in the testing program. (2) Public report.—The Secretary shall make publicly available on the website of the Department of Transportation an annual report for any ongoing testing program established under subsection (a) summarizing the progress of the program. Rev. January 28, 2021 63#
Attachment 1, passage 171For Official Agency Use Only (g) Authority to Revoke Participation.—The Secretary shall immediately revoke participation in a testing program under subsection (a) if— (1)(A) the participant has an accident or incident involving death or personal injury necessitating in- patient hospitalizations; and (B) the testing program is determined to be the cause of, or a contributing factor to, that accident or incident; (2) the participant fails to comply with the terms and conditions of the testing program; or (3) in the determination of the Secretary, continued participation in the testing program by the participant would be unsafe or would not be consistent with the goals and objectives of this chapter. (h) Authority to Terminate Program.—The Secretary shall immediately terminate a testing program under subsection (a) if continuation of the testing program would not be consistent with the goals and objectives of this chapter. (i) States Rights.-- (1) Exemption.—Except as provided in paragraph (2), if a State submits to the Secretary notice that the State requests an exemption from any testing program considered for establishment under this section, the State shall be exempt. (2) Limitations.— (A) In general.—The Secretary shall not grant a requested exemption under paragraph (1) after a testing program is established. (B) Late notice.—The Secretary shall not grant a requested exemption under paragraph (1) if the notice submitted under that paragraph is submitted to the Secretary more than 30 days after the date on which the Secretary issues an order providing an effective date for the testing program in accordance with subsection (j). (3) Effect.—If a State has not submitted a notice requesting an exemption under paragraph (1), the State shall not enforce any law (including regulations) that is inconsistent with a testing program in effect in the State under this section. (j) Program Review Process and Public Notice.— (1) In general.—The Secretary shall publish in the Federal Register and send directly to each relevant State and each appropriate State authority with a certification in effect under section 60105 a notice of each proposed testing program under subsection (a), including the order to be considered, and provide an opportunity for public comment for not less than 90 days. (2) Response from Secretary.—Not later than the date on which the Secretary issues an order providing an effective date of a testing program noticed under paragraph (1), the Secretary shall— (A) publish the order in the Federal Register; and (B) respond to each comment submitted under paragraph (1). (k) Report to Congress.—At the conclusion of each testing program, the Secretary shall make publicly available on the website of the Department of Transportation a report containing— (1) the findings and conclusions of the Secretary with respect to the testing program; and (2) any recommendations of the Secretary with respect to the testing program, including any recommendations for amendments to laws (including regulations) and the establishment of standards, that— (A) would enhance the safe operation of interstate gas or hazardous liquid pipeline facilities; and (B) are technically, operationally, and economically feasible. (l) Standards.—If a report under subsection (k) indicates that it is practicable to establish technically, operationally, and economically feasible standards for the use of a safety-enhancing technology and any corresponding operational practices tested by the testing program described in the report, the Secretary, as soon as practicable after submission of the report, may promulgate regulations consistent with chapter 5 of title 5 (commonly known as the “Administrative Procedure Act”) that— (1) allow operators of interstate gas or hazardous liquid pipeline facilities to use the relevant technology or practice to the extent practicable; and Rev. January 28, 2021 64#
Attachment 1, passage 172For Official Agency Use Only (2) establish technically, operationally, and economically feasible standards for the capability and deployment of the technology or practice. § 60143. Idled pipelines (a) Definition of Idled.—In this section, the term “idled”, with respect to a pipeline, means that the pipeline— (1)(A) has ceased normal operations; and (B) will not resume service for a period of not less than 180 days; (2) has been isolated from all sources of hazardous liquid, natural gas, or other gas; and (3)(A) has been purged of combustibles and hazardous materials and maintains a blanket of inert, nonflammable gas at low pressure; or (B) has not been purged as described in subparagraph (A), but the volume of gas is so small that there is no potential hazard, as determined by the Secretary pursuant to a rule. (b) Rulemaking.— (1) In general.—Not later than 2 years after the date of enactment of the PIPES Act of 2020, the Secretary shall promulgate regulations prescribing the applicability of the pipeline safety requirements to idled natural or other gas transmission and hazardous liquid pipelines. (2) Requirements.— (A) In general.—The applicability of the regulations under paragraph (1) shall be based on the risk that idled natural or other gas transmission and hazardous liquid pipelines pose to the public, property, and the environment, and shall include requirements to resume operation. (B) Inspection.—The Secretary or an appropriate State agency shall inspect each idled pipeline and verify that the pipeline has been purged of combustibles and hazardous materials, if required under subsection (a). (C) Requirements for reinspection.—The Secretary shall determine the requirements for periodic reinspection of idled natural or other gas transmission and hazardous liquid pipelines. (D) Resumption of operations.—As a condition to allowing an idled pipeline to resume operations, the Secretary shall require that, prior to resuming operations, the pipeline shall be— (i) inspected with— (I) hydrostatic pressure testing; (II) an internal inspection device; or (III) if the use of hydrostatic pressure testing or an internal inspection device is not technologically feasible, another comparable technology or practice; and (ii) in compliance with regulations promulgated under this chapter, including any regulations that became effective while the pipeline was idled. Rev. January 28, 2021 65#
Attachment 1, passage 173For Official Agency Use Only User Fees (49 U.S.C. Chapter 603) § 60301. User fees (a) Schedule of fees.--The Secretary of Transportation shall prescribe a schedule of fees for all natural gas and hazardous liquids transported by pipelines subject to chapter 601 of this title. The fees shall be based on usage (in reasonable relationship to volume-miles, miles, revenues, or a combination of volume-miles, miles, and revenues) of the pipelines. The Secretary shall consider the allocation of resources of the Department of Transportation when establishing the schedule. (b) Imposition and time of collection.--A fee shall be imposed on each person operating a gas pipeline transmission facility, a liquefied natural gas pipeline facility, or a hazardous liquid pipeline facility to which chapter 601 of this title applies. The fee shall be collected before the end of the fiscal year to which it applies. (c) Means of collection.--The Secretary shall prescribe procedures to collect fees under this section. The Secretary may use a department, agency, or instrumentality of the United States Government or of a State or local government to collect the fee and may reimburse the department, agency, or instrumentality a reasonable amount for its services. (d) Use of fees.--A fee collected under this section-- (1)(A) related to a gas pipeline facility may be used only for an activity related to gas under chapter 601 of this title; and (B) related to a hazardous liquid pipeline facility may be used only for an activity related to hazardous liquid under chapter 601 of this title; and (2) may be used only to the extent provided in advance in an appropriation law. (e) Limitations.--Fees prescribed under subsection (a) of this section shall be sufficient to pay for the costs of activities described in subsection (d) of this section. However, the total amount collected for a fiscal year may not be more than 105 percent of the total amount of the appropriations made for the fiscal year for activities to be financed by the fees. § 60302. User fees for underground natural gas storage facilities (a) In General.—A fee shall be imposed on an entity operating an underground natural gas storage facility subject to section 60141. Any such fee imposed shall be collected before the end of the fiscal year to which it applies. (b) Means of Collection.—The Secretary of Transportation shall prescribe procedures to collect fees under this section. The Secretary may use a department, agency, or instrumentality of the United States Government or of a State or local government to collect the fee and may reimburse the department, agency, or instrumentality a reasonable amount for its services. (c) Use of Fees.— (1) Account. —There is established an Underground Natural Gas Storage Facility Safety Account in the Pipeline Safety Fund established in the Treasury of the United States under section 60301. (2) Use of Fees. —A fee collected under this section— (A) shall be deposited in the Underground Natural Gas Storage Facility Safety Account; and Rev. January 28, 2021 66#
Attachment 1, passage 174For Official Agency Use Only (B) if the fee is related to an underground natural gas storage facility subject to section 60141, the amount of the fee may be used only for an activity related to underground natural gas storage facility safety. (3) Limitation. —No fee may be collected under this section, except to the extent that the expenditure of such fee to pay the costs of an activity related to underground natural gas storage facility safety for which such fee is imposed is provided in advance in an appropriations Act. § 60303. Fees for compliance review of liquefied natural gas facilities (a) Imposition of Fee.— (1) In general.—The Secretary of Transportation (referred to in this section as the “Secretary”) shall impose on a person who files with the Federal Energy Regulatory Commission as application for a liquefied natural gas facility that has design and construction costs totaling not less than $2,500,000,000 a fee for the necessary expenses of a review, if any, that the Secretary conducts, in connection with that application, to determine compliance with subpart B of part 193 of title 49, Code of Federal Regulations (or successor regulations). (2) Relation to other review.—The Secretary may not impose fees under paragraph (1) and section 60117(o) or 60301(b) for the same compliance review described in paragraph (1). (b) Means of Collection.— (1) In general.—The Secretary shall prescribe procedures to collect fees under this section. (2) Use of government entities.—The Secretary may— (A) use a department, agency, or instrumentality of the Federal Government or of a State or local government to collect fee under this section; and (B) reimburse that department, agency, or instrumentality a reasonable amount for the services provided. (c) Account.—There is established an account, to be known as the “Liquefied Natural Gas Siting Account”, in the Pipeline Safety Fund established in the Treasury of the United States under section 60301. Rev. January 28, 2021 67#
Attachment 1, passage 175For Official Agency Use Only One-Call Notification Programs Statutes (49 U.S.C. § 6101 et seq.) Table of Contents Section Page No. § 6101. Purposes .................................................................................................................................... 53 § 6102. Definitions .................................................................................................................................. 53 § 6103. Minimum standards for State one-call notification programs .................................................... 53 § 6104. Compliance with minimum standards ........................................................................................ 54 § 6105. Implementation of best practices guidelines ............................................................................. 55 § 6106. Grants to States ......................................................................................................................... 55 § 6107. Authorization of appropriations .................................................................................................. 56 § 6108. Relationship to State laws ......................................................................................................... 56 § 6109. Public education and awareness ............................................................................................... 56 Rev. January 28, 2021 68#
Attachment 1, passage 176For Official Agency Use Only § 6101. Purposes The purposes of this chapter are-- (1) to enhance public safety; (2) to protect the environment; (3) to minimize risks to excavators; and (4) to prevent disruption of vital public services, by reducing the incidence of damage to underground facilities during excavation through the voluntary adoption and efficient implementation by all States of State one-call notification programs that meet the minimum standards set forth under section 6103. § 6102. Definitions In this chapter, the following definitions apply: (1) One-call notification system.--The term "one-call notification system" means a system operated by an organization that has as 1 of its purposes to receive notification from excavators of intended excavation in a specified area in order to disseminate such notification to underground facility operators that are members of the system so that such operators can locate and mark their facilities in order to prevent damage to underground facilities in the course of such excavation. (2) State one-call notification program.--The term "State one-call notification program" means the State statutes, regulations, orders, judicial decisions, and other elements of law and policy in effect in a State that establish the requirements for the operation of one-call notification systems in such State. (3) State.--The term "State" means a State, the District of Columbia, and Puerto Rico. (4) Secretary.--The term "Secretary" means the Secretary of Transportation. § 6103. Minimum standards for State one-call notification programs (a) Minimum standards.--In order to qualify for a grant under section 6106, a State one-call notification program shall, at a minimum, provide for-- (1) appropriate participation by all underground facility operators, including all government operators; (2) appropriate participation by all excavators, including all government and contract excavators; and (3) flexible and effective enforcement under State law with respect to participation in, and use of, one-call notification systems. (a) Minimum Standards. — (1) In general. —In order to qualify for a grant under section 6106, a State one-call notification program, at a minimum, shall provide for— (A) appropriate participation by all underground facility operators, including all government operators; (B) appropriate participation by all excavators, including all government and contract excavators; and (C) flexible and effective enforcement under State law with respect to participation in, and use of, one-call notification systems. (2) Exemptions prohibited. —In order to qualify for a grant under section 6106, a State one-call notification program may not exempt municipalities, State agencies, or their contractors from the one-call notification system requirements of the program. [this amendment takes effect 1/3/2014] (b) Appropriate participation.--In determining the appropriate extent of participation required for types of underground facilities or excavators under subsection (a), a State shall assess, rank, and take into consideration the risks to the public safety, the environment, excavators, and vital public services associated with-- (1) damage to types of underground facilities; and (2) activities of types of excavators. Rev. January 28, 2021 69#
Attachment 1, passage 177For Official Agency Use Only (c) Implementation.--A State one-call notification program also shall, at a minimum, provide for and document-- (1) consideration of the ranking of risks under subsection (b) in the enforcement of its provisions; (2) a reasonable relationship between the benefits of one-call notification and the cost of implementing and complying with the requirements of the State one-call notification program; and (3) voluntary participation where the State determines that a type of underground facility or an activity of a type of excavator poses a de minimis risk to public safety or the environment. (d) Penalties.--To the extent the State determines appropriate and necessary to achieve the purposes of this chapter, a State one-call notification program shall, at a minimum, provide for-- (1) administrative or civil penalties commensurate with the seriousness of a violation by an excavator or facility owner of a State one-call notification program; (2) increased penalties for parties that repeatedly damage underground facilities because they fail to use one-call notification systems or for parties that repeatedly fail to provide timely and accurate marking after the required call has been made to a one-call notification system; (3) reduced or waived penalties for a violation of a requirement of a State one-call notification program that results in, or could result in, damage that is promptly reported by the violator; (4) equitable relief; and (5) citation of violations. § 6104. Compliance with minimum standards (a) Requirement.--In order to qualify for a grant under section 6106, each State shall submit to the Secretary a grant application under subsection (b). The State shall submit the application not later than 2 years after the date of enactment of this chapter. (b) Application.-- (1) Upon application by a State, the Secretary shall review that State's one-call notification program, including the provisions for the implementation of the program and the record of compliance and enforcement under the program. (2) Based on the review under paragraph (1), the Secretary shall determine whether the State's one-call notification program meets the minimum standards for such a program set forth in section 6103 in order to qualify for a grant under section 6106. (3) In order to expedite compliance under this section, the Secretary may consult with the State as to whether an existing State one-call notification program, a specific modification thereof, or a proposed State program would result in a positive determination under paragraph (2). (4) The Secretary shall prescribe the form and manner of filing an application under this section that shall provide sufficient information about a State's one-call notification program for the Secretary to evaluate its overall effectiveness. Such information may include the nature and reasons for exceptions from required participation, the types of enforcement available, and such other information as the Secretary deems necessary. (5) The application of a State under paragraph (1) and the record of actions of the Secretary under this section shall be available to the public. (c) Alternative program.--A State is eligible to receive a grant under section 6106 if the State maintains an alternative one-call notification program that provides protection for public safety, excavators, and the environment that is equivalent to, or greater than, protection provided under a program that meets the minimum standards set forth in section 6103. (d) Report.--The Secretary shall include the following information in reports submitted under section 60124 of this title-- (1) a description of the extent to which each State has adopted and implemented the minimum Federal standards under section 6103 or maintains an alternative program under subsection (c); Rev. January 28, 2021 70#
Attachment 1, passage 178For Official Agency Use Only (2) an analysis by the Secretary of the overall effectiveness of each State's one-call notification program and the one-call notification systems operating under such program in achieving the purposes of this chapter; (3) the impact of each State's decisions on the extent of required participation in one-call notification systems on prevention of damage to underground facilities; and (4) areas where improvements are needed in one-call notification systems in operation in each State. The report shall also include any recommendations the Secretary determines appropriate. If the Secretary determines that the purposes of this chapter have been substantially achieved, no further report under this section shall be required. § 6105. Implementation of best practices guidelines (a) Adoption of best practices.--The Secretary of Transportation shall encourage States, operators of one-call notification programs, excavators (including all government and contract excavators), and underground facility operators to adopt and implement practices identified in the best practices report entitled "Common Ground", as periodically updated. (b) Technical assistance.--The Secretary shall provide technical assistance to and participate in programs sponsored by a non- profit organization specifically established for the purpose of reducing construction-related damage to underground facilities. (c) Grants.-- (1) In general.--The Secretary may make grants to a non-profit organization described in subsection (b). (2) Authorization of appropriations.--In addition to amounts authorized under section 6107, there is authorized to be appropriated for making grants under this subsection $500,000 for each of fiscal years 2003 through 2006. Such sums shall remain available until expended. (3) General revenue funding.--Any sums appropriated under this subsection shall be derived from general revenues and may not be derived from amounts collected under section 60301. § 6106. Grants to States (a) In general.--The Secretary may make a grant of financial assistance to a State that qualifies under section 6104(b) to assist in improving-- (1) the overall quality and effectiveness of one-call notification systems in the State; (2) communications systems linking one-call notification systems; (3) location capabilities, including training personnel and developing and using location technology; (4) record retention and recording capabilities for one-call notification systems; (5) public information and education; (6) participation in one-call notification systems; or (7) compliance and enforcement under the State one-call notification program. (b) State action taken into account.--In making grants under this section, the Secretary shall take into consideration the commitment of each State to improving its State one-call notification program, including legislative and regulatory actions taken by the State after the date of enactment of this chapter. (c) Funding for one-call notification systems.--A State may provide funds received under this section directly to any one-call notification system in such State that substantially adopts the best practices identified under section 6105. Rev. January 28, 2021 71#
Attachment 1, passage 179For Official Agency Use Only § 6107. Authorization of appropriations (a) For grants to states.--There are authorized to be appropriated to the Secretary to provide grants to States under section 6106 $1,000,000 for each of fiscal years 2003 through 2006 2007 through 2010 2012 through 2015. Such funds shall remain available until expended. (b) For administration.--There are authorized to be appropriated to the Secretary such sums as may be necessary to carry out sections 6103, 6104, and 6105 for fiscal years 2003 through 2006 fiscal years 2007 through 2010 2012 through 2015. (c) General revenue funding.--Any sums appropriated under this section shall be derived from general revenues and may not be derived from amounts collected under section 60301 of this title. § 6107. Funding Of the amounts made available under section 60125(a)(1), the Secretary shall expend $1,058,000 for each of fiscal years 2021 through 2023 $1,058,000 for each of fiscal years 2016 through 2019 to carry out section 6106. § 6108. Relationship to State laws Nothing in this chapter preempts State law or shall impose a new requirement on any State or mandate revisions to a one-call system. § 6109. Public education and awareness (a) Grant authority.—The Secretary shall make a grant to an appropriate entity for promoting public education and awareness with respect to the 811 national excavation damage prevention phone number. (b) Authorization of appropriations.—There is authorized to be appropriated to the Secretary $1,000,000 for the period beginning October 1, 2006, and ending September 30, 2008, to carry out this section. Rev. January 28, 2021 72#
Attachment 1, passage 180For Official Agency Use Only Section 12 of the Pipeline Safety Improvement Act of 2002 (49 U.S.C. 60101 note; Public Law 107–355) Sec. 12. Pipeline Integrity, Safety, and Reliability Research and Development. (a) In general.—The heads of the participating agencies shall carry out a program of research, development, demonstration, and standardization to ensure the integrity of pipeline facilities. (b) Memorandum of understanding.— (1) In general.—Not later than 120 days after the date of enactment of this Act, the heads of the participating agencies shall enter into a memorandum of understanding detailing their respective responsibilities in the program authorized by subsection (a). (2) Areas of expertise.—Under the memorandum of understanding, each of the participating agencies shall have the primary responsibility for ensuring that the elements of the program within its expertise are implemented in accordance with this section. The Department of Transportation’s responsibilities shall reflect its lead role in pipeline safety and expertise in pipeline inspection, integrity management, and damage prevention. The Department of Energy’s responsibilities shall reflect its expertise in system reliability, low-volume gas leak detection, and surveillance technologies. The National Institute of Standards and Technology’s responsibilities shall reflect its expertise in materials research and assisting in the development of consensus technical standards, as that term is used in section 12(d)(4) of Public Law 104–13 (15 U.S.C. 272 note). (c) Program elements.—The program authorized by subsection (a) shall include research, development, demonstration, and standardization activities related to— (1) materials inspection; (2) stress and fracture analysis, detection of cracks, corrosion, abrasion, and other abnormalities inside pipelines that lead to pipeline failure, and development of new equipment or technologies that are inserted into pipelines to detect anomalies; (3) internal inspection and leak detection technologies, including detection of leaks at very low volumes; (4) methods of analyzing content of pipeline throughput; (5) pipeline security, including improving the real-time surveillance of pipeline rights-of-way, developing tools for evaluating and enhancing pipeline security and infrastructure, reducing natural, technological, and terrorist threats, and protecting first response units and persons near an incident; (6) risk assessment methodology, including vulnerability assessment and reduction of third-party damage; (7) communication, control, and information systems surety; (8) fire safety of pipelines; (9) improved excavation, construction, and repair technologies; and (10) corrosion detection and improving methods, best practices, and technologies for identifying, detecting, preventing, and managing internal and external corrosion and other safety risks; and (1011) other appropriate elements. The results of activities carried out under paragraph (10) shall be used by the participating agencies to support development and improvement of national consensus standards. (d) Program plan.— (1) In general.—Not later than 1 year after the date of enactment of this section, the Secretary of Transportation, in coordination with the Secretary of Energy and the Director of the National Institute of Standards and Technology, shall prepare and transmit to Congress a 5-year program plan to guide activities under this section. Such program plan shall be submitted to the Technical Pipeline Safety Standards Committee and the Technical Hazardous Liquid Pipeline Safety Standards Committee for review, and the report to Congress shall include the comments of the committees. The 5-year program plan shall be based on the memorandum of understanding under subsection (b) and take into account related activities of other Federal agencies. Rev. January 28, 2021 73#
Attachment 1, passage 181For Official Agency Use Only (2) Consultation.—In preparing the program plan and selecting and prioritizing appropriate project proposals, the Secretary of Transportation shall consult with or seek the advice of appropriate representatives of the natural gas, crude oil, and petroleum product pipeline industries, utilities, manufacturers, institutions of higher learning, Federal agencies, pipeline research institutions, national laboratories, State pipeline safety officials, labor organizations, environmental organizations, pipeline safety advocates, and professional and technical societies. (3) Ongoing pipeline transportation research and development.— (A) In general.—After the initial 5-year program plan has been carried out by the participating agencies, the Secretary of Transportation, in coordination with the Director of the National Institute of Standards and Technology, as appropriate, shall prepare a research and development program plan every 5 years thereafter and shall transmit a report to Congress on the status and results-to-date of implementation of the program every 2 years. The biennial report shall include a summary of updated research needs and priorities identified through the consultation requirements of paragraph (2). (B) Consultation.—The Secretary shall comply with the consultation requirements of paragraph (2) when preparing the program plan and in the selection and prioritization of research and development projects. (C) Funding from non-federal sources.—The Secretary shall ensure at least 30 percent of the costs of program-wide research and development activities are carried out using non-Federal sources. (C) Funding From Non-Federal Sources. —The Secretary shall ensure that— (i) at least 30 percent of the costs of technology research and development activities may be carried out using non-Federal sources; (ii) at least 20 percent of the costs of basic research and development with universities may be carried out using non-Federal sources; and (iii) up to 100 percent of the costs of research and development for purely governmental purposes may be carried out using Federal funds. (e) Reports to Congress.—Not later than 1 year after the date of enactment of this Act, and annually thereafter, the heads of the participating agencies shall transmit jointly to Congress a report on the status and results to date of the implementation of the program plan prepared under subsection (d). (f) Authorization of Appropriations. — (1) Department of Transportation. —There is authorized to be appropriated to the Secretary of Transportation for carrying out this section $10,000,000 for each of the fiscal years 2003 through 2006. (2) Department of Energy. —There is authorized to be appropriated to the Secretary of Energy for carrying out this section $10,000,000 for each of the fiscal years 2003 through 2006. (3) National Institute of Standards and Technology. —There is authorized to be appropriated to the Director of the National Institute of Standards and Technology for carrying out this section $5,000,000 for each of the fiscal years 2003 through 2006. (4) General Revenue Funding. —Any sums appropriated under this subsection shall be derived from general revenues and may not be derived from amounts collected under section 60301 of title 49, United States Code. (g)(f) Pipeline integrity program.—Of the amounts available in the Oil Spill Liability Trust Fund established by section 9509 of the Internal Revenue Code of 1986 (26 U.S.C. 9509), $3,000,000 shall be transferred to the Secretary of Transportation, as provided in appropriation Acts, to carry out programs for detection, prevention, and mitigation of oil spills for each of the fiscal years 2003 through 2006 2012 through 2015 2016 through 2019 2021 through 2023. (h)(g) Participating agencies defined.—In this section, the term ‘‘participating agencies’’ means the Department of Transportation, the Department of Energy, and the National Institute of Standards and Technology. Rev. January 28, 2021 74#
Attachment 1, passage 182For Official Agency Use Only (h) Independent Experts.—Not later than 180 days after the date of enactment of the PIPES Act of 2016, the Secretary shall— (1) implement processes and procedures to ensure that activities listed under subsection (c), to the greatest extent practicable, produce results that are peer-reviewed by independent experts and not by persons or entities that have a financial interest in the pipeline, petroleum, or natural gas industries, or that would be directly impacted by the results of the projects; and (2) submit to the Committee on Transportation and Infrastructure, the Committee on Energy and Commerce, and the Committee on Science, Space, and Technology of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report describing the processes and procedures implemented under paragraph (1). (i) Conflict Of Interest.—The Secretary shall take all practical steps to ensure that each recipient of an agreement under this section discloses in writing to the Secretary any conflict of interest on a research and development project carried out under this section, and includes any such disclosure as part of the final deliverable pursuant to such agreement. The Secretary may not make an award under this section directly to a pipeline owner or operator that is regulated by the Pipeline and Hazardous Materials Safety Administration or a State-certified regulatory authority if there is a conflict of interest relating to such owner or operator. Rev. January 28, 2021 75#
Attachment 1, passage 183For Official Agency Use Only Uncodified Mandates from Act of 2011 Table of Contents Section Page No. Sec. 3(d). Pipeline Damage Prevention ................................................................................................ 77 Sec. 5. Integrity Management ........................................................................................................... 77 Sec. 6(b). Information to Emergency Response Agencies .................................................................... 78 Sec. 7(b). Cast Iron Gas Pipelines ........................................................................................................ 79 Sec. 8. Leak Detection ....................................................................................................................... 79 Sec. 9. Accident and Incident Notification ......................................................................................... 80 Sec.13(b). Cost Recovery for Design Reviews ...................................................................................... 80 Sec.16. Study of Transportation of Diluted Bitumen ........................................................................... 80 Sec.17. Study of Nonpetroleum Hazardous Liquids Transported by Pipeline .................................... 80 Sec. 20(a). Administrative Enforcement Process .................................................................................... 81 Sec. 21. Gas and Hazardous Liquid Gathering Lines.......................................................................... 81 Sec. 25. Pipeline Safety Training for State and Local Government Personnel ................................... 82 Sec. 26. Report on Minority-Owned, Woman-Owned, and Disadvantaged Businesses ..................... 82 Sec. 27. Report on Pipeline Projects .................................................................................................. 82 Sec. 29. Seismicity ............................................................................................................................... 83 Sec. 30. Tribal Consultation for Pipeline Projects ............................................................................... 83 Sec. 31. Pipeline Inspection and Enforcement Needs......................................................................... 83 Rev. January 28, 2021 76#
Attachment 1, passage 184For Official Agency Use Only Sec. 3. Pipeline Damage Prevention. (d) Excavation Damage. (1) Study. —The Secretary of Transportation shall conduct a study on the impact of excavation damage on pipeline safety. (2) Contents. —The study shall include— (A) an analysis of the frequency and severity of different types of excavation damage incidents; (B) an analysis of exemptions to the one-call notification system requirements in each State; (C) a comparison of exemptions to the one-call notification system requirements in each State to the types of excavation damage incidents in that State; and (D) an analysis of the potential safety benefits and adverse consequences of eliminating all exemptions for mechanized excavation from State one-call notification systems. (3) Report. —Not later than 2 years after the date of enactment of this Act, the Secretary shall submit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report on the results of the study. Sec. 5. Integrity Management. (a) Evaluation. —Not later than 18 months after the date of enactment of this Act, the Secretary of Transportation shall evaluate— (1) whether integrity management system requirements, or elements thereof, should be expanded beyond high-consequence areas; and (2) with respect to gas transmission pipeline facilities, whether applying integrity management program requirements, or elements thereof, to additional areas would mitigate the need for class location requirements. (b) Factors. —In conducting the evaluation under subsection (a), the Secretary shall consider, at a minimum, the following: (1) The continuing priority to enhance protections for public safety. (2) The continuing importance of reducing risk in high consequence areas. (3) The incremental costs of applying integrity management standards to pipelines outside of high- consequence areas where operators are already conducting assessments beyond what is required under chapter 601 of title 49, United States Code. (4) The need to undertake integrity management assessments and repairs in a manner that is achievable and sustainable, and that does not disrupt pipeline service. (5) The options for phasing in the extension of integrity management requirements beyond high- consequence areas, including the most effective and efficient options for decreasing risks to an increasing number of people living or working in proximity to pipeline facilities. (6) The appropriateness of applying repair criteria, such as pressure reductions and special requirements for scheduling remediation, to areas that are not high-consequence areas. (c) Report. —Not later than 2 years after the date of enactment of this Act, the Secretary shall submit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report, based on the evaluation conducted under subsection (a), containing the Secretary’s analysis and findings regarding— (1) expansion of integrity management requirements, or elements thereof, beyond high- consequence areas; and (2) with respect to gas transmission pipeline facilities, whether applying the integrity management program requirements, or elements thereof, to additional areas would mitigate the need for class location requirements. (d) Data reporting. —The Secretary shall collect any relevant data necessary to complete the evaluation required by subsection (a). Rev. January 28, 2021 77#
Attachment 1, passage 185For Official Agency Use Only * * * * * (f) Rulemaking requirements.— (1) Review period defined. —In this subsection, the term ‘‘review period’’ means the period beginning on the date of enactment of this Act and ending on the earlier of— (A) the date that is 1 year after the date of completion of the report under subsection (c); or (B) the date that is 3 years after the date of enactment of this Act. (2) Congressional authority. —In order to provide Congress the necessary time to review the results of the report required by subsection (c) and implement appropriate recommendations, the Secretary shall not, during the review period, issue final regulations described in paragraph (3)(B). (3) Standards. — (A) Findings. —As soon as practicable following the review period, the Secretary shall issue final regulations described in subparagraph (B), if the Secretary finds, in the report required under subsection (c), that— (i) integrity management system requirements, or elements thereof, should be expanded beyond high consequence areas; and (ii) with respect to gas transmission pipeline facilities, applying integrity management program requirements, or elements thereof, to additional areas would mitigate the need for class location requirements. (B) Regulations. —Regulations issued by the Secretary under subparagraph (A), if any, shall— (i) expand integrity management system requirements, or elements thereof, beyond high- consequence areas; and (ii) remove redundant class location requirements for gas transmission pipeline facilities that are regulated under an integrity management program adopted and implemented under section 60109(c)(2) of title 49, United States Code. (4) Savings clause. — (A) In general. —Notwithstanding any other provision of this subsection, the Secretary, during the review period, may issue final regulations described in paragraph (3)(B), if the Secretary determines that a condition that poses a risk to public safety, property, or the environment is present or an imminent hazard exists and that the regulations will address the risk or hazard. (B) Imminent hazard defined. —In subparagraph (A), the term ‘‘imminent hazard’’ means the existence of a condition related to pipelines or pipeline operations that presents a substantial likelihood that death, serious illness, severe personal injury, or substantial endangerment to health, property, or the environment may occur. (g) Report to Congress on risk-based pipeline reassessment intervals. —Not later than 2 years after the date of enactment of this Act, the Comptroller General of the United States shall evaluate— (1) whether risk-based reassessment intervals are a more effective alternative for managing risks to pipelines in high consequence areas once baseline assessments are complete when compared to the reassessment interval specified in section 60109(c)(3)(B) of title 49, United States Code; (2) the number of anomalies found in baseline assessments required under section 60109(c)(3)(A) of title 49, United States Code, as compared to the number of anomalies found in reassessments required under section 60109(c)(3)(B) of such title; and (3) the progress made in implementing the recommendations in GAO Report 06–945 and the current relevance of those recommendations that have not been implemented. Sec. 6 Public Education and Awareness. (b) Information to emergency response agencies. — (1) Guidance. —Not later than 18 months after the date of enactment of this Act, the Secretary shall issue guidance to owners and operators of pipeline facilities on the importance of providing system- specific information about their pipeline facilities to emergency response agencies of the communities and jurisdictions in which those facilities are located. Rev. January 28, 2021 78#
Attachment 1, passage 186For Official Agency Use Only (2) Consultation. —Before issuing guidance under paragraph (1), the Secretary shall consult with owners and operators of pipeline facilities to determine the extent to which the owners and operators are already providing system-specific information about their pipeline facilities to emergency response agencies. Sec. 7. Cast Iron Gas Pipelines. (b) Status report. —Not later than December 31, 2013, the Secretary of Transportation shall transmit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report that— (1) identifies the total mileage of cast iron gas pipelines in the United States; and (2) evaluates the progress that owners and operators of pipeline facilities have made in implementing their plans for the safe management and replacement of cast iron gas pipelines. Sec. 8. Leak Detection. (a) Leak detection report. — (1) In general. —Not later than 1 year after the date of enactment of this Act, the Secretary of Transportation shall submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives a report on leak detection systems utilized by operators of hazardous liquid pipeline facilities and transportation-related flow lines. (2) Contents. —The report shall include— (A) an analysis of the technical limitations of current leak detection systems, including the ability of the systems to detect ruptures and small leaks that are ongoing or intermittent, and what can be done to foster development of better technologies; and (B) an analysis of the practicability of establishing technically, operationally, and economically feasible standards for the capability of such systems to detect leaks, and the safety benefits and adverse consequences of requiring operators to use leak detection systems. (b) Rule making requirements. — (1) Review period defined. —In this subsection, the term ‘‘review period’’ means the period beginning on the date of enactment of this Act and ending on the earlier of— (A) the date that is 1 year after the date of completion of the report under subsection (a); or (B) the date that is 2 years after the date of enactment of this Act. (2) Congressional Authority. —In order to provide Congress the necessary time to review the results of the report required by subsection (a) and implement appropriate recommendations, the Secretary, during the review period, shall not issue final regulations described in paragraph (3). (3) Standards. —As soon as practicable following the review period, if the report required by subsection (a) finds that it is practicable to establish technically, operationally, and economically feasible standards for the capability of leak detection systems to detect leaks, the Secretary shall issue final regulations that— (A) require operators of hazardous liquid pipeline facilities to use leak detection systems where practicable; and (B) establish technically, operationally, and economically feasible standards for the capability of such systems to detect leaks. (4) Savings clause. — (A) In general. —Notwithstanding any other provision of this subsection, the Secretary, during the review period, may issue final regulations described in paragraph (3) if the Secretary determines that a condition that poses a risk to public safety, property, or the environment is present or an imminent hazard exists and that the regulations will address the risk or hazard. (B) Imminent hazard defined. —In subparagraph (A), the term ‘‘imminent hazard’’ means the existence of a condition related to pipelines or pipeline operations that presents a substantial Rev. January 28, 2021 79#
Attachment 1, passage 187For Official Agency Use Only likelihood that death, serious illness, severe personal injury, or substantial endangerment to health, property, or the environment may occur. Sed. 9. Accident and Incident Notification. (a) Revision of regulations.—Not later than 18 months after the date of enactment of this Act, the Secretary of Transportation shall revise regulations issued under sections 191.5 and 195.52 of title 49, Code of Federal Regulations, to establish specific time limits for telephonic or electronic notice of accidents and incidents involving pipeline facilities to the Secretary and the National Response Center. (b) Minimum requirements. —In revising the regulations, the Secretary, at a minimum, shall— (1) establish time limits for telephonic or electronic notification of an accident or incident to require such notification at the earliest practicable moment following confirmed discovery of an accident or incident and not later than 1 hour following the time of such confirmed discovery; (2) review procedures for owners and operators of pipeline facilities and the National Response Center to provide thorough and coordinated notification to all relevant State and local emergency response officials, including 911 emergency call centers, for the jurisdictions in which those pipeline facilities are located in the event of an accident or incident, and revise such procedures as appropriate; and (3) require such owners and operators to revise their initial telephonic or electronic notice to the Secretary and the National Response Center with an estimate of the amount of the product released, an estimate of the number of fatalities and injuries, if any, and any other information determined appropriate by the Secretary within 48 hours of the accident or incident, to the extent practicable. (c) Updating of reports. —After receiving revisions described in subsection (b)(3), the National Response Center shall update the initial report on an accident or incident instead of generating a new report. Sec. 13. Cost Recovery for Design Reviews. (b) Guidance. —Not later than 1 year after the date of enactment of this Act, the Secretary of Transportation shall issue guidance to clarify the meaning of the term “new or novel technologies or design” as used in section 60117(n)(1)(B)(ii) of title 49, United States Code, as amended by subsection (a) of this section. Sec. 16. Study of Transportation of Diluted Bitumen. Not later than 18 months after the date of enactment of this Act, the Secretary of Transportation shall complete a comprehensive review of hazardous liquid pipeline facility regulations to determine whether the regulations are sufficient to regulate pipeline facilities used for the transportation of diluted bitumen. In conducting the review, the Secretary shall conduct an analysis of whether any increase in the risk of a release exists for pipeline facilities transporting diluted bitumen. The Secretary shall report the results of the review to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives. Sec. 17. Study of Nonpetroleum Hazardous Liquid Transported by Pipeline. The Secretary of Transportation may conduct an analysis of the transportation of nonpetroleum hazardous liquids by pipeline facility for the purpose of identifying the extent to which pipeline facilities are currently being used to transport nonpetroleum hazardous liquids, such as chlorine, from chemical production Rev. January 28, 2021 80#
Attachment 1, passage 188For Official Agency Use Only facilities across land areas not owned by the producer that are accessible to the public. The analysis should identify the extent to which the safety of the pipeline facilities is unregulated by the States and evaluate whether the transportation of such chemicals by pipeline facility across areas accessible to the public would present significant risks to public safety, property, or the environment in the absence of regulation. The results of the analysis shall be made available to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives. Sec. 20. Administrative Enforcement Process. (a) Issuance of regulations. — (1) In general. —Not later than 2 years after the date of enactment of this Act, the Secretary of Transportation shall issue regulations— (A) requiring hearings under sections 60112, 60117, 60118, and 60122 of title 49, United States Code, to be convened before a presiding official; (B) providing the opportunity for any person requesting a hearing under section 60112, 60117, 60118, or 60122 of such title to arrange for a transcript of the hearing, at the expense of the requesting person; (C) ensuring expedited review of any order issued pursuant to section 60112(e) of such title; (D) implementing a separation of functions between personnel involved with the investigation and prosecution of an enforcement case and advising the Secretary on findings and determinations; and (E) prohibiting ex-parte communication relevant to the question to be decided in such a case by parties to a investigation or hearing. (2) Presiding official. —The regulations issued under this subsection shall— (A) define the term ‘‘presiding official’’ to mean the person who conducts any hearing relating to civil penalty assessments, compliance orders, safety orders, or corrective action orders; and (B) require that the presiding official be an attorney on the staff of the Deputy Chief Counsel of the Pipeline and Hazardous Materials Safety Administration that is not engaged in investigative or prosecutorial functions including the preparation of notices of probable violations, notices relating to civil penalty assessments, notices relating to compliance, or notices of proposed corrective actions. (3) Expedited review. —The regulations issued under this subsection shall define the term ‘‘expedited review’’ for the purposes of paragraph (1)(C). Sec. 21. Gas and Hazardous Liquid Gathering Lines. (a) Review. —The Secretary of Transportation shall conduct a review of existing Federal and State regulations for gas and hazardous liquid gathering lines located onshore and offshore in the United States, including within the inlets of the Gulf of Mexico. (b) Report to Congress. (1) In general. —Not later than 2 years after the date of enactment of this Act, the Secretary shall submit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report on the results of the review. (2) Recommendations. —The report shall include the Secretary’s recommendations with respect to— (A) the sufficiency of existing Federal and State laws and regulations to ensure the safety of gas and hazardous liquid gathering lines; (B) the economic impacts, technical practicability, and challenges of applying existing Federal regulations to gathering lines that are not currently subject to Federal regulation when compared to the public safety benefits; and Rev. January 28, 2021 81#
Attachment 1, passage 189For Official Agency Use Only (C) subject to a risk-based assessment, the need to modify or revoke existing exemptions from Federal regulation for gas and hazardous liquid gathering lines. * * * * * Sec. 25. Pipeline Safety Training for State and Local Government Personnel. (a) In general. —To further the objectives of chapter 601 of title 49, United States Code, the Secretary of Transportation may provide the services of personnel from the Pipeline and Hazardous Materials Safety Administration to provide training for State and local government personnel at a pipeline safety training facility that is established and operated by an agency or instrumentality of the United States, a unit of State or local government, or an educational institution. (b) Reimbursements for training expenditures. — (1) In general. —Notwithstanding any other provision of law, the Secretary may require reimbursement from and local government personnel under subsection (a), including salaries, expenses, transportation for Pipeline and Hazardous Materials Safety Administration personnel, and the cost of training materials. (2) Authorization of appropriations. —Amounts collected as reimbursement under paragraph (1) are authorized to be appropriated for the purposes set forth in chapter 601 of title 49, United States Code. Sec. 26. Report on Minority-owned, Woman-owned, and Disadvantaged Businesses. Not later than 1 year after the date of enactment of this Act, the Comptroller General of the United States, based upon available information, shall submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives a comprehensive report assessing the levels and types of participation and methods of facilitating the participation of minority-owned business enterprises, woman-owned business enterprises, and disadvantaged business enterprises in the construction and operation of pipeline facilities in the United States. Sec. 27. Report on Pipeline Projects. (a) Study. —The Comptroller General of the United States shall conduct a comprehensive study regarding the process for obtaining Federal and State permits for projects to construct pipeline facilities. (b) Evaluation. —In conducting the study, the Comptroller General shall evaluate how long it takes to issue permits for pipeline construction projects, the relationship between the States and the Federal Government in issuing such permits, and any recommendations from the States for improving the permitting process. (c) Consultation. —In conducting the study, the Comptroller General shall consult with the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate. (d) Report. —Not later than 1 year after the date of enactment of this Act, the Comptroller General shall submit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report on the results of the study. Rev. January 28, 2021 82#
Attachment 1, passage 190For Official Agency Use Only Sec. 29. Seismicity. In identifying and evaluating all potential threats to each pipeline=segment pursuant to parts 192 and 195 of title 49, Code of Federal Regulations, an operator of a pipeline facility shall consider the seismicity of the area. Sec. 30. Tribal Consultation for Pipeline Projects. Not later than 1 year after the date of enactment of this Act, the Secretary of Transportation shall develop and implement a protocol for consulting with Indian tribes to provide technical assistance for the regulation of pipelines that are under the jurisdiction of Indian tribes. Sec. 31. Pipeline Inspection and Enforcement Needs. (a) Inspection and enforcement needs. —Not later than 12 months after the date of enactment of this Act, the Secretary of Transportation shall submit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report that provides information on— (1) the total number of full-time equivalent positions for pipeline inspection and enforcement personnel at the Pipeline and Hazardous Materials Safety Administration; (2) out of the total number of such positions, how many of the positions are not filled and the reasons why the positions are not filled; (3) the actions the Administrator of the Pipeline and Hazardous Materials Safety Administration is taking to fill the positions; and (4) any additional inspection and enforcement resource needs of the Pipeline and Hazardous Materials Safety Administration. (b) Staffing. —Subject to the availability of funds, the Secretary may increase the number of positions for pipeline inspection and enforcement personnel at the Pipeline and Hazardous Materials Safety Administration by 10 full-time equivalent employees, if— (1) on or before September 30, 2014, the Secretary fills the 135 full-time equivalent positions for pipeline inspection and enforcement personnel specified in section 18(e) of the Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 (120 Stat. 3498); and (2) in preparing the report under subsection (a), the Secretary finds that additional pipeline inspection and enforcement personnel are necessary. Rev. January 28, 2021 83#
Attachment 1, passage 191For Official Agency Use Only Uncodified Mandates from Act of 2016 Table of Contents Section Page No. Sec. 2. Regulatory Updates .............................................................................................................. 85 Sec. 3. Regulatory Updates .............................................................................................................. 85 Sec. 4. Natural Gas Integrity Management Review .......................................................................... 85 Sec. 5. Hazardous Liquid Integrity Management Review .................................................................. 86 Sec. 7. Inspection Report Information ............................................................................................... 87 Sec. 8. Improving Damage Prevention Technology .......................................................................... 87 Sec. 9. Workforce Management ........................................................................................................ 87 Sec. 10. Information-Sharing System .................................................................................................. 88 Sec. 11. Nationwide Integrated Pipeline Safety Regulatory Database................................................ 89 Sec. 14. Safety Data Sheets ................................................................................................................ 89 Sec. 15. Hazardous Materials Identification Numbers ......................................................................... 90 Sec. 18. Response Plans ..................................................................................................................... 90 Sec. 19. Unusually Sensitive Areas ..................................................................................................... 90 Sec. 20. Pipeline Safety Technical Assistance Grants ........................................................................ 90 Sec. 21. Study of Materials And Corrosion Prevention In Pipeline Transportation ............................. 91 Sec. 22. Research and Development .................................................................................................. 91 Sec. 23. Active and Abandoned Pipelines ........................................................................................... 91 Sec. 24. State Pipeline Safety Agreements ......................................................................................... 92 Sec. 26. Study on Propane Gas Pipeline Facilities ............................................................................. 92 Sec. 27. Standards For Certain Liquefied Natural Gas Pipeline Facilities .......................................... 92 Sec. 28. Pipeline Odorization Study .................................................................................................... 93 Sec. 29. Report on Natural Gas Leak Reporting ................................................................................. 93 Sec. 30. Review of State Policies Relating To Natural Gas Leaks ...................................................... 93 Sec. 31. Aliso Canyon Natural Gas Leak Task Force ......................................................................... 94 Rev. January 28, 2021 84#
Attachment 1, passage 192For Official Agency Use Only Sec. 2. Authorization Of Appropriations. (b) Operational Expenses.—There are authorized to be appropriated to the Secretary of Transportation for the necessary operational expenses of the Pipeline and Hazardous Materials Safety Administration the following amounts: (1) $25,000,000 for fiscal year 2021. (2) $26,000,000 for fiscal year 2022. (3) $27,000,000 for fiscal year 2023. (1) $21,000,000 for fiscal year 2016. (2) $22,000,000 for fiscal year 2017. (3) $22,000,000 for fiscal year 2018. (4) $23,000,000 for fiscal year 2019. Sec. 3. Regulatory Updates. (a) Publication.— (1) IN GENERAL.—The Secretary of Transportation shall publish an update on a publicly available Web site of the Department of Transportation regarding the status of a final rule for each outstanding regulation, and upon such publication notify the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives that such publication has been made. (2) DEADLINES.—The Secretary shall publish an update under this subsection not later than 120 days after the date of enactment of this Act, and every 90 days thereafter until a final rule has been published in the Federal Register for each outstanding regulation. (b) Contents.—The Secretary shall include in each update published under subsection (a)— (1) a description of the work plan for each outstanding regulation; (2) an updated rulemaking timeline for each outstanding regulation; (3) current staff allocations with respect to each outstanding regulation; (4) any resource constraints affecting the rulemaking process for each outstanding regulation; (5) any other details associated with the development of each outstanding regulation that affect the progress of the rulemaking process; and (6) a description of all rulemakings regarding gas or hazardous liquid pipeline facilities published in the Federal Register that are not identified under subsection (c). (c) Outstanding Regulation Defined.—In this section, the term “outstanding regulation” means— (1) a final rule required under the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (Public Law 112–90) that has not been published in the Federal Register; and (2) a final rule regarding gas or hazardous liquid pipeline facilities required under this Act or an Act enacted prior to the date of enactment of this Act (other than the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (Public Law 112–90)) that has not been published in the Federal Register. Sec. 4. Natural Gas Integrity Management Review. (a) Report.—Not later than 18 months after the date of publication in the Federal Register of a final rule regarding the safety of gas transmission pipelines related to the notice of proposed rulemaking issued on April 8, 2016, titled “Pipeline Safety: Safety of Gas Transmission and Gathering Pipelines” (81 Fed. Reg. 20721), the Comptroller General of the United States shall submit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report Rev. January 28, 2021 85#
Attachment 1, passage 193For Official Agency Use Only regarding the integrity management programs for gas pipeline facilities required under section 60109(c) of title 49, United States Code. (b) Contents.—The report required under subsection (a) shall include— (1) an analysis of stakeholder perspectives, taking into consideration technical, operational, and economic feasibility, regarding ways to enhance pipeline facility safety, prevent inadvertent releases from pipeline facilities, and mitigate any adverse consequences of such inadvertent releases, including changes to the definition of high consequence area, or expanding integrity management beyond high consequence areas; (2) a review of the types of benefits, including safety benefits, and estimated costs of the legacy class location regulations; (3) an analysis of the impact pipeline facility features, including the age, condition, materials, and construction of a pipeline facility, have on safety and risk analysis of a particular pipeline facility; (4) a description of any challenges affecting Federal or State regulators in the oversight of gas transmission pipeline facilities and how the challenges are being addressed; and (5) a description of any challenges affecting the natural gas industry in complying with the programs, and how the challenges are being addressed, including any challenges faced by publicly owned natural gas distribution systems. (c) Definition Of High Consequence Area.—In this section, the term “high consequence area” has the meaning given the term in section 192.903 of title 49, Code of Federal Regulations. Sec. 5. Hazardous Liquid Integrity Management Review. (a) Report.—Not later than 18 months after the date of publication in the Federal Register of a final rule regarding the safety of hazardous liquid pipeline facilities related to the notice of proposed rulemaking issued on October 13, 2015, titled “Pipeline Safety: Safety of Hazardous Liquid Pipelines” (80 Fed. Reg. 61610), the Comptroller General of the United States shall submit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report regarding the integrity management programs for hazardous liquid pipeline facilities, as regulated under sections 195.450 and 195.452 of title 49, Code of Federal Regulations. (b) Contents.—The report required under subsection (a) shall include— (1) taking into consideration technical, operational, and economic feasibility, an analysis of stakeholder perspectives on— (A) ways to enhance hazardous liquid pipeline facility safety; (B) risk factors that may warrant more frequent inspections of hazardous liquid pipeline facilities; and (C) changes to the definition of high consequence area; (2) an analysis of how surveying, assessment, mitigation, and monitoring activities, including real- time hazardous liquid pipeline facility monitoring during significant flood events and information sharing with Federal agencies, are being used to address risks associated with rivers, flood plains, lakes, and coastal areas; (3) an analysis of the impact pipeline facility features, including the age, condition, materials, and construction of a pipeline facility, have on safety and risk analysis of a particular pipeline facility and what changes to the definition of high consequence area could be made to improve pipeline facility safety; and (4) a description of any challenges affecting Federal or State regulators in the oversight of hazardous liquid pipeline facilities and how those challenges are being addressed. (c) Definition Of High Consequence Area.—In this section, the term “high consequence area” has the meaning given the term in section 195.450 of title 49, Code of Federal Regulations. Rev. January 28, 2021 86#
Attachment 1, passage 194For Official Agency Use Only Sec. 7. Inspection Report Information. (b) Notification.—Not later than October 1, 2017, and each fiscal year thereafter for 2 years, the Administrator shall notify the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate of— (1) the number of times a deadline under section 60108(e) of title 49, United States Code, was exceeded in the prior fiscal year; and (2) in each instance, the length of time by which the deadline was exceeded. Sec. 8. Improving Damage Prevention Technology. (a) Study.—The Secretary of Transportation, in consultation with stakeholders, shall conduct a study on improving existing damage prevention programs through technological improvements in location, mapping, excavation, and communications practices to prevent excavation damage to a pipe or its coating, including considerations of technical, operational, and economic feasibility and existing damage prevention programs. (b) Contents.—The study under subsection (a) shall include— (1) an identification of any methods to improve existing damage prevention programs through location and mapping practices or technologies in an effort to reduce releases caused by excavation; (2) an analysis of how increased use of global positioning system digital mapping technologies, predictive analytic tools, public awareness initiatives including one-call initiatives, the use of mobile devices, and other advanced technologies could supplement existing one-call notification and damage prevention programs to reduce the frequency and severity of incidents caused by excavation damage; (3) an identification of any methods to improve excavation practices or technologies in an effort to reduce pipeline damage; (4) an analysis of the feasibility of a national data repository for pipeline excavation accident data that creates standardized data models for storing and sharing pipeline accident information; and (5) an identification of opportunities for stakeholder engagement in preventing excavation damage. (c) Report.—Not later than 1 year after the date of the enactment of this Act, the Secretary shall submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives a report containing the results of the study conducted under subsection (a), including recommendations, that include the consideration of technical, operational, and economic feasibility, on how to incorporate into existing damage prevention programs technological improvements and practices that help prevent excavation damage. Sec. 9. Workforce Management. (a) Review.—Not later than 1 year after the date of the enactment of this Act, the Inspector General of the Department of Transportation shall submit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate, a review of Pipeline and Hazardous Materials Safety Administration staff resource management, including— (1) geographic allocation plans, hiring and time-to-hire challenges, and expected retirement rates and recruitment and retention strategies; (2) an identification and description of any previous periods of macroeconomic and pipeline industry conditions under which the Pipeline and Hazardous Materials Safety Administration has encountered difficulty in filling vacancies, and the degree to which special hiring authorities, Rev. January 28, 2021 87#
Attachment 1, passage 195For Official Agency Use Only including direct hiring authority authorized by the Office of Personnel Management, could have ameliorated such difficulty; and (3) recommendations to address hiring challenges, training needs, and any other identified staff resource challenges. (b) Direct Hiring.—Upon identification of a period described in subsection (a)(2), the Administrator of the Pipeline and Hazardous Materials Safety Administration may apply to the Office of Personnel Management for the authority to appoint qualified candidates to any position relating to pipeline safety, as determined by the Administrator, without regard to sections 3309 through 3319 of title 5, United States Code. (c) Savings Clause.—Nothing in this section shall preclude the Administrator of the Pipeline and Hazardous Materials Safety Administration from applying to the Office of Personnel Management for the authority described in subsection (b) prior to the completion of the report required under subsection (a). Sec. 10. Information-Sharing System. (a) In General.—Not later than 180 days after the date of the enactment of this Act, the Secretary of Transportation shall convene a working group to consider the development of a voluntary information- sharing system to encourage collaborative efforts to improve inspection information feedback and information sharing with the purpose of improving gas transmission and hazardous liquid pipeline facility integrity risk analysis. (b) Membership.—The working group convened pursuant to subsection (a) shall include representatives from— (1) the Pipeline and Hazardous Materials Safety Administration; (2) industry stakeholders, including operators of pipeline facilities, inspection technology, coating, and cathodic protection vendors, and pipeline inspection organizations; (3) safety advocacy groups; (4) research institutions; (5) State public utility commissions or State officials responsible for pipeline safety oversight; (6) State pipeline safety inspectors; (7) labor representatives; and (8) other entities, as determined appropriate by the Secretary. (c) Considerations.—The working group convened pursuant to subsection (a) shall consider and provide recommendations to the Secretary on— (1) the need for, and the identification of, a system to ensure that dig verification data are shared with in-line inspection operators to the extent consistent with the need to maintain proprietary and security-sensitive data in a confidential manner to improve pipeline safety and inspection technology; (2) ways to encourage the exchange of pipeline inspection information and the development of advanced pipeline inspection technologies and enhanced risk analysis; (3) opportunities to share data, including dig verification data between operators of pipeline facilities and in-line inspector vendors to expand knowledge of the advantages and disadvantages of the different types of in-line inspection technology and methodologies; (4) options to create a secure system that protects proprietary data while encouraging the exchange of pipeline inspection information and the development of advanced pipeline inspection technologies and enhanced risk analysis; (5) means and best practices for the protection of safety- and security-sensitive information and proprietary information; and (6) regulatory, funding, and legal barriers to sharing the information described in paragraphs (1) through (4). Rev. January 28, 2021 88#
Attachment 1, passage 196For Official Agency Use Only (d) Publication.—The Secretary shall publish the recommendations provided under subsection (c) on a publicly available Web site of the Department of Transportation. Sec. 11. Nationwide Integrated Pipeline Safety Regulatory Database. (a) Report.—Not later than 1 year after the date of enactment of this Act, the Secretary of Transportation shall submit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report on the feasibility of establishing a national integrated pipeline safety regulatory inspection database to improve communication and collaboration between the Pipeline and Hazardous Materials Safety Administration and State pipeline regulators. (b) Contents.—The report submitted under subsection (a) shall include— (1) a description of any efforts underway to test a secure information-sharing system for the purpose described in subsection (a); (2) a description of any progress in establishing common standards for maintaining, collecting, and presenting pipeline safety regulatory inspection data, and a methodology for sharing the data; (3) a description of any inadequacies or gaps in State and Federal inspection, enforcement, geospatial, or other pipeline safety regulatory inspection data; (4) a description of the potential safety benefits of a national integrated pipeline safety regulatory inspection database; and (5) recommendations, including those of stakeholders for how to implement a secure information- sharing system that protects proprietary and security sensitive information and data for the purpose described in subsection (a). (c) Consultation.—In implementing this section, the Secretary shall consult with stakeholders, including each State authority operating under a certification to regulate intrastate pipelines under section 60105 of title 49, United States Code. (d) Establishment Of Database.—The Secretary may establish, if appropriate, a national integrated pipeline safety regulatory database— (1) after submission of the report required under subsection (a); or (2) upon notification to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate of the need to establish such database prior to the submission of the report under subsection (a). Sec. 14. Safety Data Sheets. (a) In General.—Each owner or operator of a hazardous liquid pipeline facility, following an accident involving such pipeline facility that results in a hazardous liquid spill, shall provide safety data sheets on any spilled hazardous liquid to the designated Federal On-Scene Coordinator and appropriate State and local emergency responders within 6 hours of a telephonic or electronic notice of the accident to the National Response Center. (b) Definitions.—In this section: (1) Federal On-Scene Coordinator. —The term “Federal On-Scene Coordinator” has the meaning given such term in section 311(a) of the Federal Water Pollution Control Act (33 U.S.C. 1321(a)). (2) National Response Center. —The term “National Response Center” means the center described under section 300.125(a) of title 40, Code of Federal Regulations. (3) Safety Data Sheet. —The term “safety data sheet” means a safety data sheet required under section 1910.1200 of title 29, Code of Federal Regulations. Rev. January 28, 2021 89#
Attachment 1, passage 197For Official Agency Use Only Sec. 15. Hazardous Materials Identification Numbers. Not later than 90 days after the date of enactment of this Act, the Secretary of Transportation shall issue an advanced notice of proposed rulemaking to take public comment on the petition for rulemaking dated October 28, 2015, titled “Corrections to Title 49 CFR 172.336 Identification numbers; special provisions” (P–1667). Sec. 18. Response Plans. Each owner or operator of a hazardous liquid pipeline facility required to prepare a response plan pursuant to part 194 of title 49, Code of Federal Regulations, shall— (1) consider the impact of a discharge into or on navigable waters or adjoining shorelines, including those that may be covered in whole or in part by ice; and (2) include procedures and resources for responding to such discharge in the plan. Sec. 19. Unusually Sensitive Areas. (b) Unusually Sensitive Areas (USA) Ecological Resources.—The Secretary (1) Definitions.—In this subsection: (A) Certain coastal waters.—The term “certain coastal waters” means— (i) the territorial sea of the United States; (ii) the Great Lakes and their connecting waters; and (iii) the marine and estuarine waters of the United States up to the head of tidal influence. (B) Coastal beach.—The term “coastal beach” means any land between the high- and low-water marks of certain coastal waters. (2) Revision.—The Secretary of Transportation shall revise section 195.6(b) of title 49, Code of Federal Regulations, to explicitly state that the Great Lakes, coastal beaches, and marine coastal waters certain coastal waters are USA ecological resources for purposes of determining whether a pipeline is in a high consequence area (as defined in section 195.450 of such title). Sec. 20. Pipeline Safety Technical Assistance Grants. (b) Audit.—Not later than 180 days after the date of enactment of this Act, the Inspector General of the Department of Transportation shall submit to the Secretary of Transportation, the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives, and the Committee on Commerce, Science, and Transportation of the Senate a report evaluating the grant program under section 60130 of title 49, United States Code. The report shall include— (1) a list of the recipients of all grant funds during fiscal years 2010 through 2015; (2) a description of how each grant was used; (3) an analysis of the compliance with the terms of grant agreements, including subsections (a) and (b) of such section; (4) an evaluation of the competitive process used to award the grant funds; and (5) an evaluation of— (A) the ability of the Pipeline and Hazardous Materials Safety Administration to oversee grant funds and usage; and (B) the procedures used for such oversight. Rev. January 28, 2021 90#
Attachment 1, passage 198For Official Agency Use Only Sec. 21. Study Of Materials And Corrosion Prevention In Pipeline Transportation. (a) In General.—Not later than 2 years after the date of enactment of this Act, the Comptroller General of the United States shall submit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a study on materials, training, and corrosion prevention technologies for gas and hazardous liquid pipeline facilities. (b) Requirements.—The study required under subsection (a) shall include— (1) an analysis of— (A) the range of piping materials, including plastic materials, used to transport hazardous liquids and natural gas in the United States and in other developed countries around the world; (B) the types of technologies used for corrosion prevention, including coatings and cathodic protection; (C) common causes of corrosion, including interior and exterior moisture buildup and impacts of moisture buildup under insulation; and (D) the training provided to personnel responsible for identifying and preventing corrosion in pipelines, and for repairing such pipelines; (2) the extent to which best practices or guidance relating to pipeline facility design, installation, operation, and maintenance, including training, are available to recognize or prevent corrosion; (3) an analysis of the estimated costs and anticipated benefits, including safety benefits, associated with the use of such materials and technologies; and (4) stakeholder and expert perspectives on the effectiveness of corrosion control techniques to reduce the incidence of corrosion-related pipeline failures. Sec. 22. Research and Development. (a) In General.—Not later than 18 months after the date of enactment of this Act, the Inspector General of the Department of Transportation shall submit to the Committee on Transportation and Infrastructure, the Committee on Energy and Commerce, and the Committee on Science, Space, and Technology of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report regarding the Pipeline and Hazardous Materials Safety Administration’s research and development program carried out under section 12 of the Pipeline Safety Improvement Act of 2002 (49 U.S.C. 60101 note). The report shall include an evaluation of— (1) compliance with the consultation requirement under subsection (d)(2) of such section; (2) the extent to which the Pipeline and Hazardous Materials Safety Administration enters into joint research ventures with Federal and non-Federal entities, and benefits thereof; (3) the policies and procedures the Pipeline and Hazardous Materials Safety Administration has put in place to ensure there are no conflicts of interest with administering grants pursuant to the program, and whether those policies and procedures are being followed; and (4) an evaluation of the outcomes of research conducted with Federal and non-Federal entities and the degree to which such outcomes have been adopted or utilized. Sec. 23. Active and Abandoned Pipelines. Not later than 90 days after the date of enactment of this Act, the Secretary of Transportation shall issue an advisory bulletin to owners and operators of gas or hazardous liquid pipeline facilities and Federal and State pipeline safety personnel regarding procedures of the Pipeline and Hazardous Materials Safety Administration required to change the status of a pipeline facility from active to abandoned, including specific guidance on the terms recognized by the Secretary for each pipeline status referred to in such advisory bulletin. Rev. January 28, 2021 91#
Attachment 1, passage 199For Official Agency Use Only SEC. 24. State Pipeline Safety Agreements. (a) Study.—Not later than 2 years after the date of enactment of this Act, the Comptroller General of the United States shall complete a study on State pipeline safety agreements made pursuant to section 60106 of title 49, United States Code. Such study shall consider the following: (1) The integration of Federal and State or local authorities in carrying out activities pursuant to an agreement under such section. (2) The estimated staff and other resources used by Federal and State authorities in carrying out inspection activities pursuant to agreements under such section. (3) The estimated staff and other resources used by the Pipeline and Hazardous Materials Safety Administration in carrying out interstate inspections in areas where there is no interstate agreement with a State pursuant to such section. Sec. 26. Study on Propane Gas Pipeline Facilities. (a) In General.—The Secretary of Transportation shall enter into an agreement with the Transportation Research Board of the National Academies to conduct a study examining the safety, regulatory requirements, techniques, and best practices applicable to pipeline facilities that transport or store only petroleum gas or mixtures of petroleum gas and air to 100 or fewer customers, in accordance with the requirements of this section. (b) Requirements.—In conducting the study pursuant to subsection (a), the Transportation Research Board shall analyze— (1) Federal, State, and local regulatory requirements applicable to pipeline facilities described in subsection (a); (2) techniques and best practices relating to the design, installation, operation, and maintenance of such pipeline facilities; and (3) the costs and benefits, including safety benefits, associated with such applicable regulatory requirements and the use of such techniques and best practices. (c) Participation.—In conducting the study pursuant to subsection (a), the Transportation Research Board shall consult with Federal, State, and local governments, private sector entities, and consumer and pipeline safety advocates, as appropriate. (d) Deadline.—Not later than 2 years after the date of enactment of this Act, the Secretary shall submit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate the results of the study conducted pursuant to subsection (a) and any recommendations for improving the safety of such pipeline facilities. (e) Definition.—In this section, the term “petroleum gas” has the meaning given that term in section 192.3 of title 49, Code of Federal Regulations, as in effect on the date of enactment of this Act. Sec. 27. Standards For Certain Liquefied Natural Gas Pipeline Facilities. (b) Update To Minimum Safety Standards.—The Secretary of Transportation shall review and update the minimum safety standards prescribed pursuant to section 60103 of title 49, United States Code, for permanent, small scale liquefied natural gas pipeline facilities. (c) Savings Clause.—Nothing in this section shall be construed to limit the Secretary’s authority under chapter 601 of title 49, United States Code, to regulate liquefied natural gas pipeline facilities. Rev. January 28, 2021 92#
Attachment 1, passage 200For Official Agency Use Only Sec. 28. Pipeline Odorization Study. Not later than 2 years after the date of the enactment of this Act, the Comptroller General of the United States shall submit a report to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives that assesses— (1) the feasibility, costs, and benefits of odorizing all combustible gas in pipeline transportation; and (2) the affects of the odorization of all combustible gas in pipeline transportation on— (A) manufacturers, agriculture, and other end users; and (B) public health and safety. Sec. 29. Report on Natural Gas Leak Reporting. (a) In General.—Not later than 1 year after the date of the enactment of this Act, the Administrator of the Pipeline and Hazardous Materials Safety Administration shall submit to Congress a report on the metrics provided to the Pipeline and Hazardous Materials Safety Administration and other Federal and State agencies related to lost and unaccounted for natural gas from distribution pipelines and systems. (b) Elements.—The report required under subsection (a) shall include the following elements: (1) An examination of different reporting requirements or standards for lost and unaccounted for natural gas to different agencies, the reasons for any such discrepancies, and recommendations for harmonizing and improving the accuracy of reporting. (2) An analysis of whether separate or alternative reporting could better measure the amounts and identify the location of lost and unaccounted for natural gas from natural gas distribution systems. (3) A description of potential safety issues associated with natural gas that is lost and unaccounted for from natural gas distribution systems. (4) An assessment of whether alternate reporting and measures will resolve any safety issues identified under paragraph (3), including an analysis of the potential impact, including potential savings, on rate payers and end users of natural gas products of such reporting and measures. (c) Consideration of Recommendations.—If the Administrator determines that alternate reporting structures or recommendations included in the report required under subsection (a) would significantly improve the reporting and measurement of lost and unaccounted for gas and safety of natural gas distribution systems, the Administrator shall, not later than 1 year after making such determination, issue regulations, as the Administrator determines appropriate, to implement the recommendations. Sec. 30. Review of State Policies Relating to Natural Gas Leaks. (a) Review.—The Administrator of the Pipeline and Hazardous Materials Safety Administration shall conduct a State-by-State review of State-level policies that— (1) encourage the repair and replacement of leaking natural gas distribution pipelines or systems that pose a safety threat, such as timelines to repair leaks and limits on cost recovery from ratepayers; and (2) may create barriers for entities to conduct work to repair and replace leaking natural gas pipelines or distribution systems. (b) Report.—Not later than 1 year after the date of the enactment of this Act, the Administrator shall submit to the Committee on Transportation and Infrastructure and the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report containing the findings of the review conducted under subsection (a) and recommendations on Federal or State policies or best practices to improve safety by accelerating the repair and replacement of natural gas pipelines or systems that are leaking or releasing Rev. January 28, 2021 93#
Attachment 1, passage 201For Official Agency Use Only natural gas. The report shall consider the potential impact, including potential savings, of the implementation of such recommendations on ratepayers or end users of the natural gas pipeline system. (c) Implementation of Recommendations.—If the Administrator determines that the recommendations made under subsection (b) would significantly improve pipeline safety, the Administrator shall, not later than 1 year after making such determination, and in coordination with the heads of other relevant agencies as appropriate, issue regulations, as the Administrator determines appropriate, to implement the recommendations. Sec. 31. Aliso Canyon Natural Gas Leak Task Force. (a) Establishment Of Task Force.—Not later than 15 days after the date of enactment of this Act, the Secretary of Energy shall lead and establish an Aliso Canyon natural gas leak task force. (b) Membership Of Task Force.—In addition to the Secretary, the task force established under subsection (a) shall be composed of— (1) 1 representative from the Department of Transportation; (2) 1 representative from the Department of Health and Human Services; (3) 1 representative from the Environmental Protection Agency; (4) 1 representative from the Department of the Interior; (5) 1 representative from the Department of Commerce; (6) 1 representative from the Federal Energy Regulatory Commission; and (7) representatives of State and local governments, as determined appropriate by the Secretary and the Administrator. (c) Report.— (1) In General. —Not later than 180 days after the date of enactment of this Act, the task force established under subsection (a) shall submit a final report that contains the information described in paragraph (2) to— (A) the Committee on Energy and Natural Resources of the Senate; (B) the Committee on Natural Resources of the House of Representatives; (C) the Committee on Environment and Public Works of the Senate; (D) the Committee on Transportation and Infrastructure of the House of Representatives; (E) the Committee on Commerce, Science, and Transportation of the Senate; (F) the Committee on Energy and Commerce of the House of Representatives; (G) the Committee on Health, Education, Labor, and Pensions of the Senate; (H) the Committee on Education and the Workforce of the House of Representatives; (I) the President; and (J) relevant Federal and State agencies. (2) Information Included. —The report submitted under paragraph (1) shall include— (A) an analysis and conclusion of the cause and contributing factors of the Aliso Canyon natural gas leak; (B) an analysis of measures taken to stop the natural gas leak, with an immediate focus on other, more effective measures that could be taken; (C) an assessment of the impact of the natural gas leak on— (i) health, safety, and the environment; (ii) wholesale and retail electricity prices; and (iii) the reliability of the bulk-power system; (D) an analysis of how Federal, State, and local agencies responded to the natural gas leak; (E) in order to lessen the negative impacts of leaks from underground natural gas storage facilities, recommendations on how to improve— (i) the response to a future leak; and (ii) coordination between all appropriate Federal, State, and local agencies in the response to the Aliso Canyon natural gas leak and future natural gas leaks; Rev. January 28, 2021 94#
Attachment 1, passage 202For Official Agency Use Only (F) an analysis of the potential for a similar natural gas leak to occur at other underground natural gas storage facilities in the United States; (G) recommendations on how to prevent any future natural gas leaks; (H) recommendations regarding Aliso Canyon and other underground natural gas storage facilities located in close proximity to residential populations; (I) any recommendations on information that is not currently collected but that would be in the public interest to collect and distribute to agencies and institutions for the continued study and monitoring of natural gas storage infrastructure in the United States; and (J) any other recommendations, as appropriate. (3) Publication. —The final report under paragraph (1) shall be made available to the public in an electronically accessible format. (4) Findings. —If, before the final report is submitted under paragraph (1), the task force established under subsection (a) finds methods to solve the natural gas leak at Aliso Canyon, finds methods to better protect the affected communities, or finds methods to help prevent other leaks, the task force shall immediately submit such findings to the entities described in subparagraphs (A) through (J) of paragraph (1). Rev. January 28, 2021 95#
Attachment 1, passage 203For Official Agency Use Only Uncodified Mandates from Act of 2020 Table of Contents Section Page No. Sec. 102. Pipeline Workforce Development. ............................................................................................... 97 Sec. 105. Pipeline Safety Testing Enhancement Study. ............................................................................. 97 Sec. 106. Regulatory Updates. .................................................................................................................... 98 Sec. 110. Updates to Standards for Liquefied Natural Gas Facilities. ........................................................ 99 Sec. 111. National Center of Excellence for Liquefied Natural Gas Safety. .............................................. 100 Sec. 112. Prioritization of Rulemaking. ...................................................................................................... 101 Sec. 114. Inspection and Maintenance Plans. .......................................................................................... 102 Sec. 115. Consideration of Pipeline Class Location Changes. ................................................................. 103 Sec. 117. Interstate Drug and Alcohol Oversight. ..................................................................................... 103 Sec. 119. National Academy of Sciences Study on Automatic and Remote-Controlled Shut-Off Valves on Existing Pipelines. ...................................................................................................................................... 104 Sec. 120. Unusually Sensitive Areas. ........................................................................................................ 104 Sec. 123. Rule of Construction. ................................................................................................................. 104 Sec. 202. Distribution Integrity Management Plans. .................................................................................. 104 Sec. 205. Pipeline Safety Management Systems. ..................................................................................... 105 Rev. January 28, 2021 96#
Attachment 1, passage 204For Official Agency Use Only Sec. 102. Pipeline Workforce Development. (a) Inspector. —Not later than 1 year after the date of enactment of this Act, the Administrator shall— (1) review the inspector training programs provided at the Inspector Training and Qualifications Division of the Administration in Oklahoma City, Oklahoma; and (2) determine whether any of the programs referred to in paragraph (1), or any portions of the programs, could be provided online through teletraining or another type of distance learning. (b) Staffing.— (1) In general.—The Secretary shall increase the number of full-time equivalent employees (as compared to the number of positions on the date of enactment of this Act) by 8 full-time employees with subject matter expertise in pipeline safety, pipeline facilities, and pipeline systems to finalize outstanding rulemakings and fulfill congressional mandates. (2) Pipeline inspection and enforcement personnel. —The Secretary shall ensure that the number of full-time positions for pipeline inspection and enforcement personnel in the Office of Pipeline Safety of the Administration does not fall below the following: (A) 224 for fiscal year 2021. (B) 235 for fiscal year 2022. (C) 247 for fiscal year 2023. (c) Recruitment and Retention Incentives. — (1) In general. —The Secretary shall use incentives, as necessary, to recruit and retain a qualified workforce, including inspection and enforcement personnel and attorneys and subject matter experts at the Office of Pipeline Safety of the Administration, including— (A) special pay rates permitted under section 5305 of title 5, United States Code; (B) repayment of student loans permitted under section 5379 of that title; (C) tuition assistance permitted under chapter 41 of that title; (D) recruitment incentives permitted under section 5753 of that title; and (E) retention incentives permitted under section 5754 of that title. (2) Continued service agreement. —The Secretary shall ensure that the incentives described in paragraph (1) are accompanied by a continued service agreement. (3) Approval. —The Secretary shall request, as necessary, the approval of the Office of Personnel Management to use the incentives described in paragraph (1). Sec. 105. Pipeline Safety Testing Enhancement Study. Not later than 2 years after the date of enactment of this Act, the Secretary shall submit to the Committees on Commerce, Science, and Transportation and Appropriations of the Senate and the Committees on Transportation and Infrastructure, Energy and Commerce, and Appropriations of the House of Representatives a report relating to— (1) the research and development capabilities of the Administration, in accordance with section 12 of the Pipeline Safety Improvement Act of 2002 (49 U.S.C. 60101 note; Public Law 107–355); (2)(A) the development of additional testing and research capabilities through the establishment of an independent pipeline safety testing facility under the Department of Transportation; (B) whether an independent pipeline safety testing facility would be critical to the work of the Administration; (C) the costs and benefits of developing an independent pipeline safety testing facility under the Department of Transportation; and (D) the costs and benefits of colocating an independent pipeline safety testing facility at an existing training center of the Administration; and (3) the ability of the Administration to use the testing facilities of the Department of Transportation, other Federal agencies, or federally funded research and development centers. Rev. January 28, 2021 97#
Attachment 1, passage 205For Official Agency Use Only Sec. 106. Regulatory Updates. (a) Definition of Outstanding Mandate. —In this section, the term “outstanding mandate” means— (1) a final rule required to be issued under the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (Public Law 112–90; 125 Stat. 1904) that has not been published in the Federal Register; (2) a final rule required to be issued under the PIPES Act of 2016 (Public Law 114–183; 130 Stat. 514) that has not been published in the Federal Register; and (3) any other final rule regarding gas or hazardous liquid pipeline facilities required to be issued under this Act or an Act enacted prior to the date of enactment of this Act that has not been published in the Federal Register. (b) Requirements. — (1) Periodic updates. —Not later than 30 days after the date of enactment of this Act, and every 30 days thereafter until a final rule referred to in paragraphs (1) through (3) of subsection (a) is published in the Federal Register, the Secretary shall publish on a publicly available website of the Department of Transportation an update regarding the status of each outstanding mandate in accordance with subsection (c). (2) Notification of Congress. —On publication of a final rule in the Federal Register for an outstanding mandate, the Secretary shall submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committees on Transportation and Infrastructure and Energy and Commerce of the House of Representatives a notification in accordance with subsection (c). (c) Contents. —An update published or a notification submitted under paragraph (1) or (2) of subsection (b) shall contain, as applicable— (1) with respect to information relating to the Administration— (A) a description of the work plan for each outstanding mandate; (B) an updated rulemaking timeline for each outstanding mandate; (C) the staff allocations with respect to each outstanding mandate; (D) any resource constraints affecting the rulemaking process for each outstanding mandate; (E) any other details associated with the development of each outstanding mandate that affect the progress of the rulemaking process with respect to that outstanding mandate; and (F) a description of all rulemakings regarding gas or hazardous liquid pipeline facilities published in the Federal Register that are not identified under subsection (b)(2); and (2) with respect to information relating to the Office of the Secretary— (A) the date that the outstanding mandate was submitted to the Office of the Secretary for review; (B) the reason that the outstanding mandate is under review beyond 45 days; (C) the staff allocations within the Office of the Secretary with respect to each [sic] the outstanding mandate; (D) any resource constraints affecting review of the outstanding mandate; (E) an estimated timeline of when review of the outstanding mandate will be complete, as of the date of the update; (F) if applicable, the date that the outstanding mandate was returned to the Administration for revision and the anticipated date for resubmission to the Office of the Secretary; (G) the date that the outstanding mandate was submitted to the Office of Management and Budget for review; and (H) a statement of whether the outstanding mandate remains under review by the Office of Management and Budget. Rev. January 28, 2021 98#
Attachment 1, passage 206For Official Agency Use Only Sec. 110. Updates to Standards for Liquefied Natural Gas Facilities. (a) In General. —Not later than 3 years after the date of enactment of this Act, the Secretary shall— (1) review the minimum operating and maintenance standards prescribed under section 60103(d) of title 49, United States Code; and (2) based on the review under paragraph (1), update the standards described in that paragraph applicable to large-scale liquefied natural gas facilities (other than peak shaving facilities) to provide for a risk-based regulatory approach for such facilities, consistent with this section. (b) Scope. —In updating the minimum operating and maintenance standards under subsection (a)(2), the Secretary shall ensure that all regulations, guidance, and internal documents— (1) are developed and applied in a manner consistent with this section; and (2) achieve a level of safety that is equivalent to, or greater than, the level of safety required by the standards prescribed as of the date of enactment of this Act under— (A) section 60103(d) of title 49, United States Code; and (B) part 193 of title 49, Code of Federal Regulations (as in effect on the date of enactment of this Act). (c) Requirements. —The updates to the operating and maintenance standards required under subsection (a)(2) shall, at a minimum, require operators— (1) to develop and maintain written safety information identifying hazards associated with— (A) the processes of liquefied natural gas conversion, storage, and transport; (B) equipment used in the processes; and (C) technology used in the processes; (2) to conduct a hazard assessment, including the identification of potential sources of accidental releases; (3)(A) to consult with employees and representatives of employees on the development and execution of hazard assessments under paragraph (2); and (B) to provide employees access to the records of the hazard assessments and any other records required under the updated standards; (4) to establish a system to respond to the findings of a hazard assessment conducted under paragraph (2) that addresses prevention, mitigation, and emergency responses; (5) to review, when a design change occurs, the most recent hazard assessment conducted under paragraph (2) and the response system established under paragraph (4); (6) to develop and implement written operating procedures for the processes of liquefied natural gas conversion, storage, and transport; (7)(A) to provide written safety and operating information to employees; and (B) to train employees in operating procedures with an emphasis on addressing hazards and using safe practices; (8) to ensure contractors and contract employees are provided appropriate information and training; (9) to train and educate employees and contractors in emergency response; (10) to establish a quality assurance program to ensure that equipment, maintenance materials, and spare parts relating to the operations and maintenance of liquefied natural gas facilities are fabricated and installed consistent with design specifications; (11) to establish maintenance systems for critical process-related equipment, including written procedures, employee training, appropriate inspections, and testing of that equipment to ensure ongoing mechanical integrity; (12) to conduct pre-start-up safety reviews of all newly installed or modified equipment; (13) to establish and implement written procedures to manage change to processes of liquefied natural gas conversion, storage, and transport, technology, equipment, and facilities; and (14)(A) to investigate each incident that results in, or could have resulted in— (i) loss of life; (ii) destruction of private property; or (iii) a major accident; and (B) to have operating personnel— Rev. January 28, 2021 99#
Attachment 1, passage 207For Official Agency Use Only (i) review any findings of an investigation under subparagraph (A); and (ii) if appropriate, take responsive measures. (d) Submission and Approval.— (1) In general. —The Secretary shall require that operators that are subject to the regulations under subsection (a)(2) submit to the Secretary for approval a plan for the implementation of the requirements described in subsection (c). (2) Requirement. —The implementation plan described in paragraph (1) shall include— (A) an anticipated schedule for the implementation of the requirements described in subsection (c); and (B) an overview of the process for implementation. (e) Inspection and Compliance Assurance. — (1) Determination of inadequate programs. —If the Secretary determines during an inspection carried out under chapter 601 of title 49, United States Code, that an operator’s implementation of the requirements described in subsection (c) does not comply with the requirements of that chapter (including any regulations promulgated under that chapter), has not been adequately implemented, is inadequate for the safe operation of a large-scale liquefied natural gas facility, or is otherwise inadequate, the Secretary may conduct enforcement proceedings under that chapter. (2) Savings Clause. —Nothing in this section shall affect the authority of the Secretary to carry out inspections or conduct enforcement proceedings under chapter 601 of title 49, United States Code. (f) Emergencies and Compliance. —Nothing in this section may be construed to diminish or modify— (1) the authority of the Secretary under this title to act in the case of an emergency; or (2) the authority of the Secretary under sections 60118 through 60123 of title 49, United States Code. (g) Civil Penalties. —A person violating the standards prescribed under this section, including any revisions to the minimum operating and maintenance standards prescribed under 60103 of title 49, United States Code, shall be liable for a civil penalty that may not exceed $200,000 for each violation pursuant to section 60122(a)(1) of that title. Sec. 111. National Center of Excellence for Liquefied Natural Gas Safety. (a) Definitions. —In this section: (1) Center. —The term “Center” means the National Center of Excellence for Liquefied Natural Gas Safety that may be established under subsection (b). (2) LNG.—The term “LNG” means liquefied natural gas. (3) LNG sector stakeholder. —The term “LNG sector stakeholder” means a representative of— (A) LNG facilities that represent the broad array of LNG facilities operating in the United States; (B) States, Indian Tribes, and units of local government; (C) postsecondary education; (D) labor organizations; (E) safety organizations; or (F) Federal regulatory agencies of jurisdiction, which may include— (i) the Administration; (ii) the Federal Energy Regulatory Commission; (iii) the Department of Energy; (iv) the Occupational Safety and Health Administration; (v) the Coast Guard; and (vi) the Maritime Administration. Rev. January 28, 2021 100#
Attachment 1, passage 208For Official Agency Use Only (b) Establishment. —Only after submitting the report under subsection (c) to the committees of Congress described in that subsection, and subject to the availability of funds appropriated by Congress for the applicable purpose, the Secretary, in consultation with LNG sector stakeholders, may establish a center, to be known as the “National Center of Excellence for Liquefied Natural Gas Safety”. (c) Report. — (1) In general. —Not later than 18 months after the date of enactment of this Act, the Secretary shall submit to the Committees on Commerce, Science, and Transportation and Appropriations of the Senate and the Committees on Transportation and Infrastructure, Energy and Commerce, and Appropriations of the House of Representatives a report on— (A) the resources necessary to establish the Center; and (B) the manner in which the Center will carry out the functions described in subsection (d). (2) Requirement. —The report under paragraph (1) shall include an estimate of all potential costs and appropriations necessary to carry out the functions described in subsection (d). (d) Functions. —The Center shall, for activities regulated under section 60103 of title 49, United States Code, enhance the United States as the leader and foremost expert in LNG operations by— (1) furthering the expertise of the Federal Government in the operations, management, and regulatory practices of LNG facilities through— (A) the use of performance-based principles; (B) experience and familiarity with LNG operational facilities; and (C) increased communication with LNG experts to learn and support state-of-the-art operational practices; (2) acting as a repository of information on best practices for the operation of LNG facilities; and (3) facilitating collaboration among LNG sector stakeholders. (e) Location. — (1) In general. —The Center shall be located in close proximity to critical LNG transportation infrastructure on, and connecting to, the Gulf of Mexico, as determined by the Secretary. (2) Considerations. —In determining the location of the Center, the Secretary shall— (A) take into account the strategic value of locating resources in close proximity to LNG facilities; and (B) locate the Center in the State with the largest LNG production capacity, as determined by the total capacity (in billion cubic feet per day) of LNG production authorized by the Federal Energy Regulatory Commission under section 3 of the Natural Gas Act (15 U.S.C. 717b) as of the date of enactment of this Act. (f) Coordination With TQ Training Center. —In carrying out the functions described in subsection (d), the Center shall coordinate with the Training and Qualifications Training Center of the Administration in Oklahoma City, Oklahoma, to facilitate knowledge sharing among, and enhanced training opportunities for, Federal and State pipeline safety inspectors and investigators. (g) Joint Operation With Educational Institution. —The Secretary may enter into an agreement with an appropriate official of an institution of higher education— (1) to provide for joint operation of the Center; and (2) to provide necessary administrative services for the Center. Sec. 112. Prioritization of Rulemaking. (a) Rulemaking. —Not later than 90 days after the date of enactment of this Act, the Secretary shall issue a final rule with respect to the portion of the proposed rule issued on April 8, 2016, entitled “Pipeline Safety: Safety of Gas Transmission and Gathering Pipelines” (81 Fed. Reg. 20722; Docket No. PHMSA–2011–0023) that relates to the consideration of gathering pipelines. Rev. January 28, 2021 101#
Attachment 1, passage 209For Official Agency Use Only (b) Study. —Not later than 1 year after the date of enactment of this Act, the Comptroller General of the United States shall— (1) review the extent to which geospatial and technical data is collected by operators of gathering lines, including design and material specifications; (2) analyze information collected by operators of gathering lines when the mapping information described in paragraph (1) is not available for a gathering line; and (3) assess any plans and timelines of operators of gathering lines to develop the mapping information described in paragraph (1) or otherwise collect information described in paragraph (2). (c) Report. —The Comptroller General of the United States shall submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committees on Transportation and Infrastructure and Energy and Commerce of the House of Representatives a report on the review required under subsection (b), including any recommendations that the Comptroller General of the United States may have as a result of the review. Sec. 114. Inspection and Maintenance Plans. (b) Deadline. —Not later than 1 year after the date of enactment of this Act, each pipeline operator shall update the inspection and maintenance plan prepared by the operator under section 60108(a) of title 49, United States Code, to address the elements described in the amendments to that section made by subsection (a) [see amendments at 49 U.S.C. § 60108(a)-(b)]. (c) Inspection and Maintenance Plan Oversight. — (1) Study. —The Comptroller General of the United States shall conduct a study to evaluate the procedures used by the Secretary and States in reviewing plans prepared by pipeline operators under section 60108(a) of title 49, United States Code, pursuant to subsection (b) in minimizing releases of natural gas from pipeline facilities. (2) Report of the Comptroller General of the United States. —Not later than 1 year after the Secretary’s review of the operator plans prepared under section 60108(a) of title 49, United States Code, the Comptroller General of the United States shall submit to the Secretary, the Committee on Commerce, Science, and Transportation of the Senate, and the Committees on Transportation and Infrastructure and Energy and Commerce of the House of Representatives a report that— (A) describes the results of the study conducted under paragraph (1), including an evaluation of the procedures used by the Secretary and States in reviewing the effectiveness of the plans prepared by pipeline operators under section 60108(a) of title 49, United States Code, pursuant to subsection (b) in minimizing releases of natural gas from pipeline facilities; and (B) provides recommendations for how to further minimize releases of natural gas from pipeline facilities without compromising pipeline safety based on observations and information obtained through the study conducted under paragraph (1). (3) Response of the Secretary. —Not later than 90 days after the date on which the report under paragraph (2) is published, the Secretary shall submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committees on Transportation and Infrastructure and Energy and Commerce of the House of Representatives a report that includes a response to the results of the study conducted under paragraph (1) and the recommendations contained in the report submitted under paragraph (2). (d) Best Available Technologies or Practices. — (1) Report of the Secretary. —Not later than 18 months after the date of enactment of this Act, the Secretary shall submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committees on Transportation and Infrastructure and Energy and Commerce of the House of Representatives a report— (A) discussing— (i) the best available technologies or practices to prevent or minimize, without compromising pipeline safety, the release of natural gas when making planned repairs, replacements, or maintenance to a pipeline facility; Rev. January 28, 2021 102#
Attachment 1, passage 210For Official Agency Use Only (ii) the best available technologies or practices to prevent or minimize, without compromising pipeline safety, the release of natural gas when the operator intentionally vents or releases natural gas, including blowdowns; and (iii) pipeline facility designs that, without compromising pipeline safety, mitigate the need to intentionally vent natural gas; and (B) recommending a timeline for updating pipeline safety regulations, as the Secretary determines to be appropriate, to address the matters described in subparagraph (A). (2) Rulemaking. —Not later than 180 days after the date on which the Secretary submits the report under this subsection, the Secretary shall update pipeline safety regulations that the Secretary has determined are necessary to protect the environment without compromising pipeline safety. Sec. 115. Consideration of Pipeline Class Location Changes. (a) In General. —Not later than 1 year after the date of enactment of this Act, the Administrator of the Pipeline and Hazardous Materials Safety Administration shall— (1) review all comments submitted in response to the advance notice of proposed rulemaking entitled “Pipeline Safety: Class Location Change Requirements” (83 Fed. Reg. 36861 (July 31, 2018)); (2) complete any other activities or procedures necessary— (A) to make a determination whether to publish a notice of proposed rulemaking; and (B) if a positive determination is made under subparagraph (A), to advance in the rulemaking process, including by taking any actions required under section 60115 of title 49, United State Code; and (3) consider the issues raised in the report to Congress entitled “Evaluation of Expanding Pipeline Integrity Management Beyond High-Consequence Areas and Whether Such Expansion Would Mitigate the Need for Gas Pipeline Class Location Requirements” prepared by the Pipeline and Hazardous Materials Safety Administration and submitted to Congress on June 8, 2016, including the adequacy of existing integrity management programs. (b) Rule of Construction. —Nothing in this section may be construed to require the Administrator of the Pipeline and Hazardous Materials Safety Administration to publish a notice of proposed rulemaking or otherwise continue the rulemaking process with respect to the advance notice of proposed rulemaking described in subsection (a)(1). (c) Reporting. —For purposes of this section, the requirements of section 106 shall apply during the period beginning on the date that is 180 days after the date of enactment of this Act and ending on the date on which the requirements of subsection (a) are completed. Sec. 117. Interstate Drug and Alcohol Oversight. (a) In General. —Not later than 18 months after the date of enactment of this Act, the Secretary shall amend the auditing program for the drug and alcohol regulations in part 199 of title 49, Code of Federal Regulations, to improve the efficiency and processes of those regulations as applied to— (1) operators; and (2) pipeline contractors working for multiple operators in multiple States. (b) Requirement. —In carrying out subsection (a), the Secretary shall minimize duplicative audits of the same operators, and the contractors working for those operators, by the Administration and multiple State agencies. (c) Rule of Construction. —Nothing in this section may be construed to require modification of the inspection or enforcement authority of any Federal agency or State. Rev. January 28, 2021 103#
Attachment 1, passage 211For Official Agency Use Only Sec. 119. National Academy of Sciences Study on Automatic and Remote-Controlled Shut-Off Valves on Existing Pipelines. (a) Study. —The Secretary shall enter into an arrangement with the National Academy of Sciences under which the National Academy of Sciences shall conduct a study of potential methodologies or standards for the installation of automatic or remote-controlled shut-off valves on an existing pipeline in— (1) a high consequence area (as defined in section 192.903 of title 49, Code of Federal Regulations (or a successor regulation)) for a gas transmission pipeline facility; or (2) for a hazardous liquid pipeline facility— (A) a commercially navigable waterway (as defined in section 195.450 of that title (or a successor regulation)); or (B) an unusually sensitive area (as defined in section 195.6 of that title (or a successor regulation)). (b) Factors for Consideration. —In conducting the study under subsection (a), the National Academy of Sciences shall take into consideration, as applicable— (1) methodologies that conform to the recommendations submitted by the National Transportation Safety Board to the Pipeline and Hazardous Materials Safety Administration and Congress regarding automatic and remote-controlled shut-off valves; (2) to the extent practicable, compatibility with existing regulations of the Administration, including any regulations promulgated pursuant to docket number PHMSA–2013–0255, relating to the installation of automatic and remote-controlled shutoff valves; (3) methodologies that maximize safety and environmental benefits; and (4) the economic, technical, and operational feasibility of installing automatic or remote-controlled shut-off valves on existing pipelines by employing such methodologies or standards. (c) Report. —Not later than 2 years after the date of enactment of this Act, the National Academy of Sciences shall submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committees on Transportation and Infrastructure and Energy and Commerce of the House of Representatives a report describing the results of the study under subsection (a). Sec. 120. Unusually Sensitive Areas. (c) Update to Regulations. —The Secretary shall complete the revision to regulations required under section 19(b) of the PIPES Act of 2016 (49 U.S.C. 60109 note; Public Law 114–183) (as amended by subsection (a)) by not later than 90 days after the date of enactment of this Act. Sec. 123. Rule of Construction. Nothing in this title or an amendment made by this title may be construed to affect the authority of the Administrator of the Environmental Protection Agency under the Clean Air Act (42 U.S.C. 7401 et seq.), the authority of the Secretary of the Interior under the Mineral Leasing Act (30 U.S.C. 181 et seq.), or the authority of any State, to regulate a release of pollutants or hazardous substances to air, water, or land, including through the establishment and enforcement of requirements relating to such release. Sec. 202. Distribution Integrity Management Plans. (b) Contents of State Pipeline Safety Program Certifications. — … (2) Rulemaking. —The Secretary shall promulgate regulations to require that a State authority with a certification in effect under section 60105 of title 49, United States Code, has a sufficient number of qualified inspectors to ensure safe operations, as determined by the State Inspection Rev. January 28, 2021 104#
Attachment 1, passage 212For Official Agency Use Only Calculation Tool and other factors determined to be appropriate by the Secretary. (3) Deadline. —Not later than 2 years after the date of enactment of this Act, the Secretary shall promulgate regulations to implement the amendments made by this subsection. Sec. 205. Pipeline Safety Management Systems. (a) In General. —Not later than 3 years after the date of enactment of this Act, the Secretary shall submit to the Committee on Commerce, Science, and Transportation of the Senate and the Committees on Transportation and Infrastructure and Energy and Commerce of the House of Representatives a report describing— (1) the number of operators of natural gas distribution systems who have implemented a pipeline safety management system in accordance with the standard established by the American Petroleum Institute entitled “Pipeline Safety Management System Requirements” and numbered American Petroleum Institute Recommended Practice 1173; (2) the progress made by operators of natural gas distribution systems who have implemented, or are in the process of implementing, a pipeline safety management system described in paragraph (1); and (3) the feasibility of an operator of a natural gas distribution system implementing a pipeline safety management system described in paragraph (1) based on the size of the operator as measured by— (A) the number of customers the operator has; and (B) the amount of natural gas the operator transports. (b) Requirements. —As part of the report required under subsection (a), the Secretary shall provide guidance or recommendations that would further the adoption of safety management systems in accordance with the standard established by the American Petroleum Institute entitled “Pipeline Safety Management System Requirements” and numbered American Petroleum Institute Recommended Practice 1173. (c) Evaluation and Promotion of Safety Management Systems. —The Secretary and the relevant State authority with a certification in effect under section 60105 of title 49, United States Code, as applicable, shall— (1) promote and assess pipeline safety management systems frameworks developed by operators of natural gas distribution systems and described in the report under subsection (a), including— (A) if necessary, using independent third-party evaluators; and (B) through a system that promotes self-disclosure of— (i) errors; and (ii) deviations from regulatory standards; and (2) if a deviation from a regulatory standard is identified during the development and application of a pipeline safety management system, certify that— (A) due consideration will be given to factors such as flawed procedures, honest mistakes, or lack of understanding; and (B) the operators and regulators use the most appropriate tools to fix the deviation, return to compliance, and prevent the recurrence of the deviation, including— (i) root cause analysis; and (ii) training, education, or other appropriate improvements to procedures or training programs. Rev. January 28, 2021 105#
Attachment 1, passage 213Guidelines for States Participating in the Pipeline Safety Program Appendix B Revised January 1, 2023#
Attachment 1, passage 214Appendix B – Interstate Agreements and Guidance Policy Appendix B Interstate Agreements and Guidance Policy Background The PHMSA’s Office of Pipeline Safety (OPS) employs a collaborative work process between States and OPS benefiting safety oversight and making effective use of existing resources. OPS has engaged states since the inception of the pipeline safety program for the purpose of a more nationally harmonized program. This policy document identifies options available, program prerequisites, and administrative considerations for qualified State agencies interested in supporting OPS in the inspection of interstate pipelines and facilities. I. Agreement Options Available OPS provides State agencies participating in the pipeline safety program with opportunities to participate in the inspection of interstate pipelines and facilities through Interstate Agent Agreements or Project Specific Time Defined Cooperative Agreements. Existing Interstate Agent Agreements OPS anticipates continuing the existing Interstate Agent Agreements. If there is a determination to not continue with the existing Interstate Agent Agreements OPS will notify the existing Interstate Agents with the reason for the determination and a transition plan before the start of the next inspection year. If an Existing Interstate Agreement is discontinued, OPS will explore if there are project specific time defined interstate inspections which could be performed under an Agreement to support overall safety. New Applications for Interstate Agents OPS will consider applications for Interstate Agent Agreements from States meeting the qualification requirements in 60106 of the Pipes Act and interested in supporting OPS in the inspection of interstate pipelines. OPS will consider entering into an Interstate Agent Agreement if the Region Director expresses a need for the Agreement to improve safety; the state has full safety authority over all intrastate pipelines; the state average performance score for the previous two years is 95 or greater; the state is meeting intrastate required inspection days and meeting inspection intervals; the state participation does not detract from the core intrastate program; and inspection staff has completed all training required of federal inspectors. The state incident history will also be considered when deciding whether to enter into an Interstate Agent Revised January 1, 2023#
Attachment 1, passage 215Appendix B – Interstate Agreements and Guidance Policy Agreement. The requirements for interstate inspection activity are generally defined by the Region Director. The Interstate Agent Agreement allows for the State agency to perform inspections of new construction, oversight of rehabilitation projects, integrity management programs, accident investigation, standard inspections, and other inspections and activities identified in the work plan approved by the Region Director. Project Specific Time Defined Cooperative Agreements Project Specific Time Defined Cooperative Agreements allow OPS to partner with states for the inspection of specific interstate projects where OPS identifies it needs the support for the specific project, but not all other interstate activities within the state. These projects are typically construction, accident investigation, public complaints, and specialized inspections. The projects may be short term or encompass an entire year. The Agreements may be modified or extended by the Region Director as agreed upon by the Region and State. States interested in participating in interstate pipeline oversight activities but not meeting all the criteria listed in Section II may enter into Project Specific Time- Defined Cooperative Agreements. They may be issued on an annual basis, but typically are of a shorter duration and do not require a formal work plan as for Interstate Agent Agreements. Although program administration requirements under Section III are specific to Interstate Agent Agreements, State agencies working under Project Specific Time Defined Cooperative Agreements are encouraged to comply with them whenever practicable. II. Criteria for Participation as an Interstate Agent Eligibility requirements remain the same as in past years for current and previous Interstate Agents. Intrastate Coverage First Priority States must be certified and take full intrastate jurisdiction within the natural gas or hazardous liquid program, as applicable, with adequate and trained staff. No Impact on Intrastate Performance OPS continues to stress that States focus resources on intrastate facilities as a first priority before apportioning any resources to interstate facilities. Revised January 1, 2023#
Attachment 1, passage 216Appendix B – Interstate Agreements and Guidance Policy Intrastate program participation should not be adversely affected by oversight responsibilities related to interstate pipeline transportation. To qualify for Interstate Agent Agreement status, State programs need to meet and maintain a prerequisite minimum two-year average performance score of 95 for their intrastate program performance score. The staffing level and inspection person- days available for the intrastate program should not be adversely affected. Damage Prevention and Outreach Activities in Agreements Participation in the Interstate Program may require a commitment to projects beyond standard compliance areas. These include damage prevention and continued efforts to improve communication with local authorities. Maintaining Interstate Agent Agreement Status Participating State agencies must meet the terms of the agreement, follow Standard Operating Procedures and maintain performance on the 60105 Certification for the intrastate program. OPS will notify the State agency if it does not comply with any of these requirements. A State agency will have an opportunity to correct deficiencies and will be provided advance notification commensurate with the level of effort required for correction. If a deficiency still remains uncorrected, the State agency will be notified, at least 30 days in advance, of OPS’ intent to terminate, or to decline to renew, an agreement. The State agency will also have the opportunity for a hearing prior to termination or a decision not to renew. Hearings may be held in an OPS Region office or State office with the Director of State Programs, the OPS Deputy Associate Administrator or the PHMSA Associate Administrator. If a State does not meet the performance score or if staffing levels and inspection days are adversely affected by the Agreement OPS may terminate the Agreement without opportunity for a hearing in accordance with Section III C of the Agreement. Dissemination of Inspection Reports and Incident/Accident Reports State agencies must refer all requests for information concerning Inspection Reports and Incident/Accident Reports to PHMSA. PHMSA will handle all requests for information. III. Program Administration OPS will work to accommodate State interests in its development of Interstate Work Plans and Standard Operating Procedures for each inspection type, associated activities, reporting and record keeping requirements. These Procedures will address the use of OPS inspection forms, reports, and other guidance material as appropriate. Record Keeping Interstate inspections are to be documented in the Inspection Assistant (IA) program. Revised January 1, 2023#
Attachment 1, passage 217Appendix B – Interstate Agreements and Guidance Policy Negotiated Work Plans In addition to a signed Interstate Agent Agreement, each Interstate Agent will also have an annual work plan. The Regional Director will work with the Interstate Agent on an annual basis to establish the work plans to support the various functions authorized under the Agreement, such as new construction, major rehabilitation, accident investigations, integrity management plan reviews, damage prevention projects, and standard inspections and other inspections as determined necessary. For new pipeline construction, the State could be requested to monitor the construction and report noncompliance to OPS. For accident investigations, the State could provide onsite evaluations and witness testing and remedial work. The State may review an operator’s integrity management plan, and participate in emergency response planning activities. The State agency may be needed to join in damage prevention projects and outreach activities, such as conducting seminars independently or in conjunction with major pipeline operators. Other options are participation in Federal inspections of company operations and maintenance practices and the monitoring of safety-related condition reports. To the extent practicable, workload planning will seek to make maximum use of Federal and State resources and avoid duplicative efforts. Estimates of time and effort for each inspection assignment should be agreed upon. Once the inspection year has started, the State agency needs to consult with OPS for any modification to the work plan due to emergency or unanticipated conditions. Inspection Scheduling The following timeline provides general goals for developing the work plan and inspection schedule: • By November 15, initial notification to the states • By November 30, response back from the states • By December 15, final discussions about additional activities completed • By Jan 1-15, Final Letters to the States. Need for Systems Inspections and Sharing of Resources OPS revised its inspection approach to include a combination of unit- based and a broader-reaching system-based inspection. Certain aspects of Revised January 1, 2023#
Attachment 1, passage 218Appendix B – Interstate Agreements and Guidance Policy oversight lend themselves to a systemic inspection approach. Other areas should be field validated on a unit-basis. After reviewing and comparing State requests with OPS Region Plans, OPS will draft work plans for state participation in scheduled systems inspections. Consideration will be given to the level of effort needed from Federal and State resources in programming inspection assignments. Once identified, OPS will assign an OPS team coordinator for each interstate operator inspection. The Team Coordinator will harmonize and schedule the inspection activities for greater efficiency and, with input from the State agency, determine the focus of inspections and estimate the time needed to carry out the inspections assigned. Hours of Service State inspectors assigned to interstate activities need to be able to participate in inspection activities in accordance with work requirements. On a job site, particularly during construction and repair activities, this may require work performance outside of standard business hours and over weekends and holidays. If the subject inspections warrant working overtime, 24-hour coverage or overnight travel, the interstate agent will be expected to support such requirements. Training State Inspectors are required to complete PHMSA required training for the area of emphasis of the inspection performed. Training requirements are outlined in Appendix C of the Guidelines for States Participating in the Pipeline Safety Program. Revised January 1, 2023#
Attachment 1, passage 219PHMSA Inspector Training & Qualifications Division Mandatory Training Requirements FY 2024 All mandatory courses must be completed within 3 years from the completion date of the first course taken in the curriculum (successful completion within 5 years). An inspector has an additional 3 years, from the date training is added to the requirements, to complete that specific training (successful completion within 5 years). If new training replaces previous required training and equivalency records are allowed for the new training, then no additional years are permitted. PHMSA Training and Qualifications FY2024 MandatoryTraining - Gas Core Learning Path Course Prerequisites ILT WBT PHMSA-PL1250 Safety Evaluation of Gas Pipeline Systems Course PHMSA-PL3REG Regulatory Overview PHMSA-PL1P192 - Introduction to Part 192 PHMSA-PL1ODOR Natural Gas Odorization PHMSA-PL1255 Gas Pressure Regulation and Overpressure Protection Course PHMSA-PL1GLAW Introduction to Gas Laws 1250 PHMSA-PL1PRESS Fundamentals of Gas Pressure Regulators PHMSA-PL1310 Plastic and Composite Materials Course 1250 PHMSA-PL3PP Fundamentals of Plastic Pipe PHMSA-PL3242 Welding and Welding Inspection of Pipeline Materials Course PHMSA-PL3242-DL Introduction to Welding Inspection 1250 PHMSA-PL3256 Pipeline Failure Investigation Techniques Course 1250 PHMSA-PL3293 Corrosion Control of PHMSA-PL3ELEC Fundamentals of Basic DC Electricity Pipeline Systems Course 1250 PHMSA-PL3CP Fundamentals of Pipeline Corrosion and Cathodic Protection PHMSA-PL3IC - Investigating and Managing Internal Corrosion of Pipelines#
Attachment 1, passage 220PHMSA Training and Qualifications FY2024 Mandatory Training - Gas Integrity Management (IM) Learning Path Course Prerequisites ILT WBT PHMSA-PL3306 External Corrosion PHMSA-PL3ECDA External Corrosion Direct Assessment Direct Assessment (ECDA) Field Course Core PHMSA-PL3267-DL Fundamentals of Integrity Management PHMSA-PL3292 Safety Evaluation of PHMSA-PL3HIP The History of Intelligent Pigging Inline Inspection (ILI)/Pigging Programs Course Core PHMSA-PL3PIG Fundamentals of Launching and Receiving Maintenance Pigs PHMSA-PL1297 Gas Integrity PHMSA-PL3267-DL Fundamentals of Integrity Management Management (IM) Protocol Course Core 3306 3292 PHMSA-PL1ICDA Internal Corrosion Direct Assessment PHMSA-PL3SCCDA Stress Corrosion Cracking Direct Assessment#
Attachment 1, passage 221PHMSA Training and Qualifications FY2024 Mandatory Training - Liquid Core Learning Path Course Prerequisites ILT WBT PHMSA-PL2258 Safety Evaluation of Hazardous Liquid Pipeline Systems Course PHMSA-PL2P195 Introduction to Part 195 PHMSA-PL3275 General Pipeline Safety Awareness Course PHMSA-PL2288 Safety Evaluation of Breakout Tanks Course 2258 PHMSA-PL2TANK Introduction to Aboveground Storage Tanks PHMSA-PL3242 Welding and Welding Inspection of Pipeline Materials Course PHMSA-PL3242-DL Introduction to Welding Inspection 2258 PHMSA-PL3256 Pipeline Failure Investigation Techniques Course 2258 PHMSA-PL3293 Corrosion Control of Pipeline Systems Course PHMSA-PL3ELEC Fundamentals of Basic DC Electricity 2258 PHMSA-PL3CP Fundamentals of Pipeline Corrosion and Cathodic Protection PHMSA-PL3IC - Investigating and Managing Internal Corrosion of Pipelines PHMSA-PL2284 (HAZWOPER) Refresher for Pipeline Safety Representatives 3275 Exception their inspectors. Affiliations serving states without breakout tanks may request PL2288 Safety Evaluation of Breakout Tanks be waived for#
Attachment 1, passage 222PHMSA Training and Qualifications FY2024 Mandatory Training - Liquid Integrity Management (IM) Learning Path Course Prerequisites ILT WBT PHMSA-PL3306 External Corrosion PHMSA-PL3ECDA External Corrosion Direct Assessment Direct Assessment (ECDA) Field Course Core PHMSA-PL3267-DL Fundamentals of Integrity Management PHMSA-PL3292 Safety Evaluation of PHMSA-PL3HIP The History of Intelligent Pigging Inline Inspection (ILI)/Pigging Programs Course Core PHMSA-PL3PIG Fundamentals of Launching and Receiving Maintenance Pigs PHMSA-PL2294 Safety Evaluation of PHMSA-PL3267-DL Fundamentals of Integrity Management Hazardous Liquid Pipeline (IM) Core 3306 3292 PHMSA-PL1ICDA Internal Corrosion Direct Assessment Programs PHMSA-PL3SCCDA Stress Corrosion Cracking Direct Assessment#
Attachment 1, passage 223PHMSA Training and Qualifications FY2024 Mandatory Training - Additional Training 1250 Gas Basic or 2258 Liquid Basic 1325 3322 3350 3359 5342 Underground I| Course CRM LPG Gas Core Gas or Liquid Core 1245 4253 3600 DIMP LNG Root Cause 3DA 1RA 3PAP Drug & Alcohol WBT Risk Assessment WBT Public Awareness WBT Course Prerequisites ILT WBT/*Course Notes PHMSA-PL1325 Safety Evaluation of PHMSA-PL1325-DL Introduction to Underground Natural Gas Storage Underground Storage Facilities Course 1250 course PL1250. *Inspectors who only inspect UGS facilities do not have to take the instructor-led (ILT) underground storage facilities. *Enrollment is limited to OPS and states with current certification or agreement for PHMSA-PL3322 Evaluation of Operator *Lead OQ inspectors must complete all core mandatory training prior to conducting an Qualification (OQ) Programs Course ~ inspection. PHMSA-PL3350 Integrated Inspections (I) 1250 *Enrollment is limited to OPS and states acting as interstate agents. Course PHMSA-PL3359 Safety Evaluation of Control PHMSA-PL3CRM Fundamentals of Control Room Management Room Management PHMSA-PL5342 Safety Evaluation of Liquefied Petroleum Gas (LPG) 1250 PHMSA-PL1245 Safety Evaluation of PHMSA-PL3267-DL Fundamentals of Integrity Management Distribution Integrity Management Programs (DIMP) Course & PHIMSA PLADIMP Introduction of Distribution Integrity Management Program PHMSA-PL4253 Liquefied Natural Gas (LNG) PHMSA-PL4LNG Fundamentals of Liquefied Natural Gas (LNG) Safety Technology and Inspection Course PHMSA-PL3600 Root Cause/Incident PHMSA-PL3600-DL Introduction to Root Cause Analysis Investigation Course Standalone WBTs & Workshops *Course Notes PHMSA-PL3PAP Public Awareness Programs *Available for self-enrollment for Pipeline Operators PHMSA-PLDA Drug and Alcohol Testing for *Available for self-enrollment the Pipeline Industry PHMSA-PL1RA Introduction to Risk *Available for self-enrollment Assessment Methods#
Attachment 1, passage 224PHMSA Inspector Training and Qualifications (TQ) Equivalency Training Active Course Equivalent Course PL1250 Safety Evaluation of Gas Pipeline PL1270 Regulation Compliance Requirements for Gas Pipeline Operators Systems Course (Industry) PL2284 HAZWOPER Refresher for Pipeline Safety Representatives Successful completion of either: • PH2284-DL General Safety Awareness Refresher • External Training Course approved by Wayne St. Germain PL3275 General Pipeline Safety Awareness Successful completion of: • PH3275 General Safety Awareness for Inspectors and Investigators • External Training Course approved by Wayne St. Germain PL3600 Root Cause/Incident Investigation Successful completion of either: • Training conducted by Conger-Elsea, provided by PHMSA HQ, for PHMSA Federal employees from 2007-2008 • PH3600 Root Cause/Incident Investigation PL2294 Safety Evaluation of Hazardous PL2305 IM for Small Pipeline Systems Liquid Pipeline (IM) Programs Course PL3293 Corrosion Control of Pipeline Systems Successful completion of: • PL3251 Safety Evaluation of Pipeline Corrosion Control Systems I • PL3252 Safety Evaluation of Pipeline Corrosion Control Systems II PL3359 Safety Evaluation of Control Room Successful completion of: Management • PL3291 Fundamentals of (SCADA) System Technology and Operation • PL3355 Safety Evaluation of Control Room Management Programs PL1310 Plastic and Composite Materials PL3254 Joining of Pipeline Materials PL3242 Welding and Welding Inspection of PL3254 Joining of Pipeline Materials Pipeline Materials PL3267-DL Fundamentals of Integrity Management Successful completion of both: • PL1297 Gas Integrity Management (IM) Protocol Course or PL2294 Safety Evaluation of Hazardous Liquid Pipeline Integrity Management (IM) Programs • PL3296 Pipeline Reliability Assessment Seminar Or completion of: • PL3267 Fundamentals of Integrity Management PL3365 Public Awareness Program Successful completion of: Effectiveness Evaluation (PAPEE) Seminar • PL3PAP Public Awareness Programs for Pipeline Operators • View recording of PL3365 Public Awareness Program Effectiveness Evaluation (PAPEE) Seminar conducted June 2011 • PAPEE Seminar Assessment PL3322 Evaluation of Operator Qualification (OQ) Programs Successful completion of either: • PL3290 Operator Qualification (OQ) Seminar • PL3311 Assessment Evaluation for Operator Qualification (OQ) Seminar PL3256 Pipeline Failure Investigation PH3256 Pipeline Failure Investigation Techniques Techniques#
Attachment 1, passage 225Guidelines for States Participating in the Pipeline Safety Program Appendix D#
Attachment 1, passage 226Appendix D – MOU Between DOT and NTSB Appendix D Memorandum of Understanding Between Department of Transportation and National Transportation Safety Board I. Purpose The purpose of this Appendix is to establish the relationship between the Office of Pipeline Safety (OPS) and the National Transportation Safety Board (NTSB) within the framework of the DOT-NTSB for the notification of pipeline failures, investigation of accidents, providing services, and program coordination. II. Background The OPS is responsible for establishing and enforcing Federal safety regulations, including investigation of accidents, for the transportation of gas and liquid hazardous materials by pipelines. These responsibilities are carried out in response to five Acts. These are (1) Chapter 601; (2) the Transportation of Explosives Act; (3) the Mineral Leasing Act, as amended; (4) the Deepwater Port Act of 1974; and (5) the Transportation Safety Act of 1974. NTSB, by the Independent Safety Board Act of 1974, has responsibility for investigating and determining the probable cause(s) of any pipeline accident in which there is a fatality, substantial property damage (estimated $100,000), or any other accident which occurs which, in the judgment of the Board, is catastrophic. This agreement then is established to minimize duplication in efforts and maximize exchange of information as both parties execute their respective investigatory responsibilities. III. Notification of Pipeline Failures A representative of OPS will immediately notify, by telephone, NTSB of the occurrence of each pipeline accident which involves one or more fatalities or which causes substantial property damage estimated to be more than $100,000. If, in the initial notification, the information regarding the accident is incomplete, OPS will provide follow-up information as appropriate. IV. Investigation of Accidents A. NTSB and OPS will coordinate and notify the other agency of accidents which it will investigate. Revised December 2007 1 Guidelines for States Participating in the Pipeline Safety Program#
Attachment 1, passage 227Appendix D – MOU Between DOT and NTSB B. When one agency is investigating an accident and the other agency decides to investigate the same accident for its own purposes, the two agencies may jointly participate in the investigation. C. In a joint investigation, OPS and NTSB will coordinate their investigative activities so as to avoid duplication of effort and in accordance with the interest and expertise of the agency representatives. D. Each agency will be responsible for dealing with the operator, State, local officials and the press within its own area of responsibility. V. Service A. Investigative. The assistance of OPS personnel and any agents under contract to OPS may be requested by the NTSB in any investigation. When OPS assistance is required, NTSB will notify OPS as soon as practicable after receipt of initial notification of a pipeline accident and specify the assistance required. All data developed by OPS or its contractors in response to requests for assistance from NTSB will be provided to NTSB, and NTSB will be considered the office of record of public release of such data. B. Furnishing of Studies and Technical Investigations Reports. The OPS will furnish to NTSB two copies of published studies and technical investigations concerning pipeline operations, design, maintenance, personnel training, and such other studies as are directly concerned with safety in pipeline transportation and accident prevention. Likewise, NTSB will furnish OPS with two copies of all studies and technical investigations. C. Furnishing and Processing Pipeline Safety Data. Each party of this agreement will furnish pipeline safety data to the other party upon request. D. Furnishing of Accident Investigation and Hearing Reports. The OPS will furnish NTSB with two copies of on-site or field investigation reports of those accidents of such significance as to prompt the completion of a report. NTSB will furnish OPS with two copies of accident reports at least 5 days in advance of the release of that report. VI. Program Coordination Each party of this agreement is invited to participate in or observe the hearings conducted by the other party. Whether the other party will participate or observe will be determined by the inviting party. Copies of the proceedings and subsequent reports will be furnished the invited party. Revised December 2007 2 Guidelines for States Participating in the Pipeline Safety Program#
Attachment 1, passage 228Guidelines for States Participating in the Pipeline Safety Program Appendix E OFFICE OF PIPELINE SAFETY FAILURE INVESTIGATION POLICY POLICY NUMBER: PHP-5340.9B EFFECTIVE DATE: December 11, 2019 Linda Daugherty Deputy Associate Administrator for Field Operations, Office of Pipeline Safety, PHMSA#
Attachment 1, passage 229Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ Table of Contents 1. INTRODUCTION 3 1.2. SCOPE 3 1.3. AUTHORITIES 3 1.4. DEFINITIONS 3 2. POLICY & PROCEDURE 6 2.1. BACKGROUND 6 2.2. LEVEL 1: PRIMARY INVESTIGATION 8 2.3. PHASE: TELEPHONIC INVESTIGATION 8 2.4. LEVEL 2: OFF-SCENE INVESTIGATION 15 2.5. LEVEL 3: ON-SCENE INVESTIGATION 15 2.6. NTSB INVESTIGATION 24 2.7. PHASE: 30-DAY REPORT REVIEW 25 2.8. DATA ANALYSIS PROGRAM 26 2.9. LESSONS LEARNED PROGRAM 27 3. ROLES & RESPONSIBILITIES 27 3.1. DIRECTOR, ACCIDENT INVESTIGATION DIVISION (PHP-8) 27 3.2. OPERATIONS SUPERVISOR, ACCIDENT INVESTIGATION DIVISION (PHP-8) 27 3.3. NATIONAL PIPELINE INCIDENT COORDINATOR (PHP-8) 27 3.4. OPS LEAD ON-SCENE ACCIDENT INVESTIGATOR (PHP-8 or Region) 28 3.5. INCIDENT REPORT TEAM LEAD (PHP-8) 28 3.6. AID PROGRAM ANALYST (PHP-8) 28 3.7. REGIONAL DIRECTORS (PHP-100, 200, 300, 400, 500) 29 3.8. COMMUNITY LIAISON (PHP-20) 29 3.9. OPERATIONS SYSTEMS DIVISION (PHP-6) 29 3.10. PREPAREDNESS, EMERGENCY SUPPORT, AND SECURITY DIVISION) 29 3.11. DEPUTY ASSOCIATE ADMINISTRATOR OFFICE OF FIELD OPERATIONS 29 3.12. STATE PIPELINE SAFETY AGENCIES 29 3.13. PHMSA NATIONAL SAFETY COORDINATOR 30 3.14. PHMSA EXECUTIVES 30 APPENDIX A: OPS CRITERIA TO DEPLOYING ON-SCENE 31 APPENDIX B: INCIDENT CRITERIA REQUIRING NOTIFICATION AND UPDATES OF INCIDENTS TO THE PHMSA AND DOT EXECUTIVE TEAM 32 Failure Investigation Policy Effective Date: December 11, 2019 1#
Attachment 1, passage 230Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ APPENDIX C: MATRIX OF DEPLOYMENT & EMAIL NOTIFICATION CRITERIA 34 APPENDIX D: NRC CRITERIA FOR EMAIL DISTRIBUTION 37 APPENDIX E: METALLURGICAL LABORATORY FAILURE EXAMINATION PROTOCOL 38 APPENDIX F: PHMSA’s MEDIA RELATIONS LIST OF DO’S AND DON’TS 39 APPENDIX G: FAILURE INVESTIGATION REPORT (FIR) TEMPLATE 40 APPENDIX H: OPERATOR ACCIDENT INFORMATION TEMPLATE 43 APPENDIX I: REGION ENFORCEMENT RECOMMENDATION LETTER TEMPLATE 50 APPENDIX J: PHMSA AID SAFETY RECOMMENDATION MEMO TEMPLATE/EXAMPLE 53 Failure Investigation Policy Effective Date: December 11, 2019 2#
Attachment 1, passage 231Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ 1. INTRODUCTION 1.1. PURPOSE The purpose of this document is to establish the failure investigation standard operating policy (SOP) of the U.S. Department of Transportation (DOT), Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS). OPS follows this policy to carry out its responsibilities to properly investigate and document pipeline incidents, identify the failure cause(s), and to communicate findings and trends. The policy describes the roles and responsibilities of PHMSA OPS’s Accident Investigation Division (AID); Preparedness, Emergency Support, and Security Division; Regional Offices; Outreach and Engagement Division; and other OPS Divisions. The policy covers interactions among OPS and PHMSA Executives, the continuously staffed DOT Transportation Operations Center (TOC) located in Washington D.C., State pipeline safety agencies, the NTSB, and other Federal, State, and local agencies during an investigation. While this SOP provides the framework within which the OPS operates, specific circumstances or needs associated with an individual investigation may lead the Deputy Associate Administrator of Operations or their designee to authorize a deviation from this SOP. The AID is responsible for keeping this policy up to date. 1.2. SCOPE This failure investigation policy applies to gas and hazardous liquid pipeline, liquefied natural gas (LNG) facility, and natural gas underground storage incidents. The policy covers roles and responsibilities of OPS personnel on the process of conducting investigations from the initial notification throughout the investigation process, including probable cause determination, documentation, reporting, and communication of recommendations. 1.3. AUTHORITIES 1.3.1. Federal Pipeline Safety Statutes, 49 U.S.C. § 60101 et seq. 1.3.2. Pipeline Safety Regulations, 49 Code of Federal Regulations (CFR) Parts 190-199. 1.4. DEFINITIONS 1.4.1. 60105 Certifications – States may annually submit a certification to DOT prescribing the extent of intrastate facilities that they will regulate per 49 U.S. Code 60105 State pipeline safety program certifications. Facilities may include gas distribution, intrastate LNG, intrastate underground natural gas storage fields, intrastate gas transmission, and intrastate hazardous liquid pipelines. When the incident involves these facilities, the State is the lead regulator and manages all enforcement actions. 1.4.2. 60106 Agreements – States may annually submit agreements with or without certification to DOT per 49 U.S. Code 60106 State pipeline safety agreements. For agreements without certifications under section 60105, States may have oversight of Failure Investigation Policy Effective Date: December 11, 2019 3#
Attachment 1, passage 232Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ intrastate pipelines except enforcement actions. For agreements with certification under section 60106, States may have oversight of interstate pipelines except enforcement actions. When the incident involves these facilities, the AID Director determines if the State or PHMSA is the lead regulator, but the Region manages all enforcement actions. 1.4.3. Accident – Failure in a pipeline system in which there is a release when transporting hazardous liquid or carbon dioxide, subject to Part 195. Accidents are defined in CFR 49 Part §195.50. 1.4.4. Apparent Cause – The most probable cause(s) that: explains why the event happened; can reasonably be identified; local or facility management has the control to fix; and for which effective recommendations for corrective action(s) to remedy the problem can be generated if necessarily. 1.4.5. 1.4.6. Cause – Cause means an action or lack of action that directly resulted in the incident. Contributing Factor – A factor that by itself does not cause a failure. In some cases, a failure cannot occur without the contributing cause (e.g., multiple contributing causes); in other cases, the contributing factor makes the failure more likely (e.g., a contributing cause and root cause). 1.4.7. Event – An event is a significant occurrence or happening. As applicable to pipeline safety, an event could be an accident, abnormal condition, incident, equipment failure, human failure, or release. 1.4.8. Enforcement Actions – PHMSA employs a range of enforcement mechanisms to require pipeline operators to take appropriate and timely remedial or corrective actions for violations of Federal pipeline safety regulations, final orders, special permits, or conditions imposed in writing, as well as for unsafe or unsound conditions. Enforcement actions include corrective action orders (CAOs), safety orders (SOs), consent orders, compliance orders, notices of probable violation (NOPVs), warning letters (WLs), and notices of amendment (NOA) (see 49 CFR Part 190, Subpart B "Enforcement"). 1.4.9. Failure – Failure is a condition in which a human, structure, component, device, or system fails to adequately perform its intended purpose. While a pipeline that is releasing product is the most obvious indication of failure, failure is also defined as the point at which the pipe material is stressed beyond its elastic or yield point. At that point, the material is deformed and does not return to its original shape. 1.4.10. Failure Investigation Report (FIR) – is a report template used to develop OPS’s report about an incident when there is an on-scene investigation. A version of each failure investigation report, without redactions, is posted on PHMSA’s PHP SharePoint site (Deputy AA for Field Operations (PHP-2) >Failure Investigation Reports), and the redacted version is posted to PHMSA’s public web site. 1.4.11. Hot Wash – Hot wash is the “after-action” discussions and evaluations of OPS’s (or multiple agencies’) performance following an accident investigation. Failure Investigation Policy Effective Date: December 11, 2019 4#
Attachment 1, passage 233Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ 1.4.12. Incident – Incidents are defined in 49 CFR §191.3. Part 192 uses the term ‘incident’ and Part 195 uses the term ‘accident.’ In this document, the term “incident” is used to refer to an event on a pipeline irrespective of the product being transported. 1.4.13. Incident Report – PHMSA Form 7100 and 7001 series that operators must submit to PHMSA within 30 days of an incident or accident (also referred to as a 30-day report). 1.4.14. Interstate Agent – State pipeline safety agency with a hazardous liquid or gas transmission 60106 agreement with certification agreement from OPS. 1.4.15. OPS Regional Offices – Office of Pipeline Safety (OPS) Regional offices are in five regions across the Country. A Regional Director (RD) heads each of the offices. Regional Offices are in Trenton, NJ (Eastern Region); Atlanta, Georgia (Southern Region); Kansas City, Missouri (Central Region); Houston, Texas (Southwest Region); and Lakewood, Colorado (Western Region). 1.4.16. Operator Accident Information Template - An information collection template completed by the OPS Lead Investigator and AID Data Analyst to support the Region’s development of a CAO Data Report when there is an on-scene investigation (Appendix H). 1.4.17. Order(s) – Orders include: CAO, Compliance Order, Order Directing Amendment, Consent Order, and SO. 1.4.18. Region Director – The head of an OPS Regional Office or a designee appointed by the RD. 1.4.19. Return-to-service Plan – Previously referred to as an integrity verification and remediation plan or a restart plan. 1.4.20. Root Cause – The most basic cause(s) that explains why the event happened; that can reasonably be identified; that senior management has the control to fix; and for which effective recommendations for corrective action(s) can (1) remedy the problem, (2) can prevent specific recurrence of the problem, or (3) can preclude occurrence of similar problems. Analysis to determine root cause is typically one level deeper than needed to determine the Apparent Cause(s). 1.4.21. States – State pipeline safety agencies with 60105 certifications and/or 60106 agreements from OPS. 1.4.22. Summary Report - The same report template as the FIR but is intended to be an internal PHMSA document. 1.4.23. Time-defined Project Specific Agreements – Allow a State that is not an interstate agent to inspect or investigate a specific interstate project for a specific time for PHMSA. Failure Investigation Policy Effective Date: December 11, 2019 5#
Attachment 1, passage 234Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ 2. POLICY & PROCEDURE 2.1. BACKGROUND AID is OPS’s Lead Division responsible for the investigation of incidents on gas and hazardous liquid pipelines, LNG facilities, and underground natural gas storage fields subject to U.S. Code of Federal Regulations, Chapter 49 except those where the State has a 60105 certification. For section 60106 agreements with certification, States may have oversight of interstate pipelines except enforcement actions. When the incident occurs on these interstate facilities, the State Interstate Agent typically will be the lead investigator, but it is ultimately for the AID Director to determine if the State or PHMSA will continue as the lead regulator. The Region manages all enforcement actions for these facilities. As the agency’s National Pipeline Incident Coordinator (NPIC), AID reviews notices of incidents and initiates the investigation of failures. AID validates preliminary information, obtains additional information, evaluates the severity of the incident and the pipeline operator’s response, and disseminates the information to internal stakeholders, States, and the NTSB. AID provides continuing updates as needed or requested by stakeholders, and summarizes incidents which have occurred since the previous business day on the Daily Telephonic Investigation Report. AID is typically PHMSA’s Lead Division when OPS deploys on scene. OPS Regions and their Interstate Agents may deploy to investigate pipeline failures irrespective of AID’s deployment status. Often it is critical for an OPS Region to become involved during the investigation as the AID does not issue enforcement or oversee return-to-service plans. When AID becomes aware of potential violations, the investigator drafts a Region Enforcement Recommendation Letter (Appendix I) and the AID Director or OS sends a copy to the RD. When staff deploys on-scene, their roles and responsibilities are delineated in the Responsibilities Matrix for On-scene Deployments. OPS RDs, in conjunction with the Associate Administrator, are responsible for authoring, issuing and tracking orders and enforcement activities that allege an operator did not satisfy a cited requirement for Federally-regulated pipelines and State-regulated pipelines with 60106 Agreements or Time-defined Project Specific Agreements. When OPS deploys on- scene, the AID collects information from the operator via the Operator Accident Information Template (Appendix H) and provides it to the Region to support their drafting of the Corrective Action Order Data Report. The OPS Lead On-scene Investigator or On-scene Region Inspector reviews the completed form with the operator to validate the information. The Region determines the need to develop and issue any CAO, Notice of Proposed Safety Order (NOPSO), NOPV, Compliance Order, or WL. These activities are done with close coordination among OPS Divisions. States cooperate with AID on investigations and have primary responsibility for conducting investigations, authoring, issuing and following up on orders and enforcement activities pursuant to their annual 60105 certifications and 60106 agreements. PHMSA may deploy to intrastate pipeline accidents to provide support to States. Failure Investigation Policy Effective Date: December 11, 2019 6#
Attachment 1, passage 235Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ When NTSB deploys to an accident investigation, PHMSA will also deploy irrespective of State or PHMSA jurisdiction. PHMSA will serve as the Federal liaison to NTSB. An accident may not meet deployment criteria yet still be of investigatory interest. The AID Director may determine that an off-scene investigation is warranted. AID produces a summary report for these investigations. Investigation levels are based on the incident’s severity, investigatory interest, and availability of resources. Each investigation is made up of multiple phases as shown in the chart below. All investigations include the telephonic investigation phase and the 30-day report review phase. The three levels are: • Level 1: Primary Investigation - Most investigations are Level 1 - Primary Investigations. Level 1 investigations have two phases, the telephonic investigation and the 30-day report review. • Level 2: Off-scene Investigation – Off-scene investigations are occasionally conducted at the AID Director’s direction when there is investigatory interest in the incident, but it does not meet the criteria of an on-scene deployment or resource constraints do not permit deployment. Level 2 investigations which have three phases: the telephonic investigation, the off-scene investigation, and the 30-day report review. A summary report is written for most off-scene investigations. • Level 3: On-scene Investigation – On-scene investigations are conducted when the consequences of the incident reach the criteria in Appendix A. On-scene investigations may have one or many staff deployed on scene. Level 3 investigations have three phases: the telephonic investigation, the on-scene investigation, and the 30-day report review. A FIR, as shown in Appendix G, is written post an on-scene investigation. A hot wash may also be conducted. Level 1 Primary Investigation Level 2 Off‐scene Investigation Level 3 On‐Scene Investigation Phase Telephonic Investigation Telephonic Investigation Telephonic Investigation Phase N/A Off‐scene Investigation On‐scene Investigation Phase 30‐day Report Review 30‐day Report Review 30‐day Report Review Report N/A Summary Report Failure Investigation Report Within 30 days after an incident, operators are required to submit a written incident report on PHMSA’s Form 7100 or 7001. These reports are referred to as 30-day reports. AID, States, and OPS’s Operations Services Division oversee the management and data quality of operators’ 30- day reports per Incident Report Data Management Policy (PHP-5340.5B). AID is responsible for the analysis of incident data. Through analysis, AID identifies incident trends and communicates findings with internal stakeholders. AID captures, stores, and manages incident data in the Work Management System (WMS), ODES Regional Review (RR), and AID’s common network drive. Failure Investigation Policy Effective Date: December 11, 2019 7#
Attachment 1, passage 236Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ Figure 1 provides a high-level overview of the process from receipt of information about a potential failure until the 30-day report review. Figure 1: Process Flow from Failure Notification through 30‐Day Report Review Phase 2.2. LEVEL 1: PRIMARY INVESTIGATION A primary investigation consists of two phases: a telephonic investigation (Section 2.3) and a 30-day report review (Section 2.7). During the primary investigation, the NPIC determines the regulatory authority of the affected facilities, assesses the severity of the incident, and communicates the status of the operator’s response and ongoing events. The NPIC collects initial causal information and seeks to identify if the incident will meet reporting requirements. 2.3. PHASE: TELEPHONIC INVESTIGATION 2.3.1. Telephonic Reporting Requirements for Operators When an operator discovers an event meeting the reporting requirements of 49 CFR §191.5 or §195.52, the operator must give direct telephonic notice to the National Response Center (NRC) at the earliest practicable moment, but no later than one hour after confirmed discovery. Within 48 hours after the confirmed discovery of an incident, to the extent practicable, an operator must revise or confirm its initial telephonic notice. This is referred to as the 48-hour update. While States may have separate, additional or more stringent telephonic reporting requirements, all operators are required to call the NRC as per Federal reporting requirements. Under §§192.612 and 195.413, operators are required to notify the NRC when an offshore pipeline in the Gulf of Mexico is exposed or poses a hazard to navigation. Failure Investigation Policy Effective Date: December 11, 2019 8#
Attachment 1, passage 237Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ 2.3.2. National Pipeline Incident Coordinator (NPIC) On-call Staff Schedule The AID on-call investigator is referred to as the “NPIC.” NPIC duties are rotated among PHP-8 Accident Investigators. The NPIC on-duty rotation extends one week, from Monday, 12:00 PM Central Time to the following Monday, 12:00 PM Central Time. The outgoing NPIC provides a debriefing to the incoming NPIC about ongoing investigations and transfers the NPIC emergency phone number to the incoming NPIC. The NPIC number is (888) 719-9033. The NPIC on-call schedule is available on the Accident Investigation Division (PHP-8) - Accident Investigation Division Team Calendar which can be viewed on SharePoint at the Accident Investigation Division Collaboration Site. 2.3.3. Telephonic Notifications from NRC and TOC & PHP Accident/Incident Cadre Upon receiving a telephonic notification, the NRC enters information about the event into the NRC database. The NRC, using OPS provided guidance criteria, determines if the incident type in the telephonic notification should be classified as “pipeline” or “fixed facilities.” The NRC concurrently emails telephonic notifications meeting criteria in Appendix D: NRC CRITERIA FOR EMAIL DISTRIBUTION to the TOC-01(OST) and the PHP Accident/Incident Cadre email groups. The NRC sends notifications from two email addresses HQS-PF-fldr-NRC@uscg.mil (during the day) vs. NRC_NIGHTLY@uscg.mil (during the night). The TOC forwards e-mails to the OPS PHP- 80 Response email group and staff in OST. If the TOC becomes aware of an event receiving National media attention, the TOC will call the PHMSA Emergency Coordinator or Preparedness, Emergency Support, and Security Division staff. If the event is pipeline-related, the PHMSA Emergency Coordinator or Preparedness, Emergency Support, and Security Division staff will call the NPIC to request details of the failure and a summary of the operator response. The NPIC will contact the operator and forward the information to the effected region, AID, and Preparedness, Emergency Support, and Security Division upon receipt. If the facility is State regulated, the State will be notified by the NPIC. See Section 2.3.5 for after-hour notifications from TOC to the NPIC. 2.3.4. Telephonic Notifications to WMS and HMIS/Hazmatics After the NRC enters the information into their database, the report is transmitted to PHMSA’s Hazmatics System (Note: the Hazmatics System replaced PHMSA’s Hazardous Materials Information System (HMIS) System on April 27, 2018). The Hazmatics System retransmits the report to PHMSA’s WMS. The WMS uses a series of filters to identify reports that meet two criteria: TOC and National. The TOC criteria are intended to replicate the TOC’s historical criteria. The National criteria are based primarily on regulated operators’ names. If the report does not meet either criteria, the WMS categorizes the report as ‘immaterial.’ Immaterial reports are auto-closed in WMS. PHMSA staff can view NRC reports in WMS soon after the NRC transmits the report, typically 10 to 20 minutes. Failure Investigation Policy Effective Date: December 11, 2019 9#
Attachment 1, passage 238Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ State and PHMSA staff can view NRC reports the next-day in Hazmatics, in WMS, and in PDM via the Portal. NRC reports prior to April 28, 2018 are archived in HMIS. NRC reports received on or after December 17, 2017 are in WMS. The PHMSA IT HelpDesk, 202- 4354357, provides support for HMIS and Hazmatics. Portal Support PortalSupport@dot.gov provides support for WMS. 2.3.5. After-hours Telephonic Notifications The NPIC monitors NRC reports via email and WMS between 6 AM and 10 PM Central Time and documents their investigation in WMS. Between the hours of 10 PM and 6 AM Central Time, the NPIC responds to all calls made to the NPIC emergency number. In the event of an incident on an OPS-regulated facility that meets the criteria in Appendix B, the NPIC will notify the relevant Regional RD or Operations Supervisor (OS) by the most expeditious means. 2.3.6. NPIC Telephonic Investigation The NPIC performs a telephonic investigation of all failure reports that are received via email, telephone call, or WMS. The NPIC’s goal is to initiate the investigation within 15 minutes after receipt of an email or immediately after a telephone call from the TOC, Emergency Coordinator, or Preparedness, Emergency Support, and Security Division. The NPIC may make an immediate email statement that they have received the report and are working to gain additional information if they have not been able to secure credible updates or if they are not able to obtain sufficient information within the 15-minute target time. The NPIC documents the telephonic investigation in the WMS. a. Determine Jurisdiction of Regulated Facilities The NPIC reviews the NRC report to determine if the event is associated with a facility regulated under 49 CFR Parts 192, 193, or 195. If the facility is non-jurisdictional or non- regulated, the NPIC closes the telephonic investigation. For events associated with regulated facilities, the NPIC determines if OPS or the State is the lead regulator based on their 60105 certifications and 60106 agreements. b. Assess Report for Off-scene Investigation or On-scene Deployment Criteria The NPIC reviews the NRC report to make an initial assessment of the severity of the event. If the failure meets the criteria in Appendix A: CRITERIA FOR DEPLOYING ON-SCENE, the NPIC calls the AID Director or OS who determines if an AID investigator will be deployed on-scene. For failures that meet the criteria, the investigation will be elevated to a Level 3 On-scene Investigation and AID will deploy staff on-scene. Exceptions need to be approved by the OPS Deputy Associate Administrator for Field Operations (DAAFO). The AID Director or AID OS call the RD to discuss the accident and to inform them of AID’s deployment status. The RD will assess the need to deploy staff to support the Region’s work. Failure Investigation Policy Effective Date: December 11, 2019 10#
Attachment 1, passage 239Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ On-scene Staff Composition Determination The decision to deploy and the composition of the staff deployed will be based on the probable scope of the investigation and the magnitude of the tasks, but may also include the following factors: the number of injuries/fatalities/property damage, NTSB involvement, State requests for assistance, previous accidents by the operator, relation to inspections, uniqueness or location of the event, public interest, staff workloads, and training opportunities. Because information about the nature of the accident is often incomplete and may be erroneous at the time of the deployment, the decision about the composition of the staff may change after initial deployment. When the decision to deploy is made, the AID Director notifies the DAAFO. The AID Director holds an internal coordination call to evaluate team availability and proximity to the site. When OPS is the lead regulator, the AID Director and respective RD discuss the specifics of the event and determine who will immediately deploy on-scene. A team of OPS staff from the AID, Regions, States, and Community Liaisons (CLs) may be deployed to work on the investigation. If there is need to form an on-scene investigation team, the DAAFO will coordinate. Some staff may be deployed on-scene and others may go to the operator’s other facilities such as the control center or headquarters depending on their assigned task. For failures on intrastate pipelines where the State is the lead regulator, OPS typically only participates in the on-scene investigation if an event results in a fatality or significant evacuation of the population, the State requests assistance, or the NTSB/other federal agency deploys. For failures on interstate pipelines where the State is an interstate agent, the AID Director will decide whether AID or the State will lead the on-scene investigation, but the State will always have the option to participate. A State may investigate a failure on a pipeline subject to regulation by OPS if the AID Director establishes a time-defined project specific agreement with the State. Details on time-defined project specific agreements are included in PHP-50’s document, Guidelines for States Participating in the Pipeline Safety Program, Appendix B. Irrespective of the team composition, the chain of command and communication channels remain the same for OPS staff. The OPS Lead On-scene Investigator reports to the AID Director for all issues related to the incident. All communications to and from the field are channeled through the NPIC. When the State is the lead regulator, they report up through State chain of command and provide the NPIC with updates. After the on-scene staff has been determined, the NPIC will inform the Preparedness, Emergency Support, and Security Division about the deployment so they can notify PHMSA Executives. The NPIC will also send a notification to the respective region. When the event is on Tribal lands, the AID Director or delegate will immediately notify the Tribe(s) of Failure Investigation Policy Effective Date: December 11, 2019 11#
Attachment 1, passage 240Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ PHMSA’s intention to investigate.1 The AID Director follows Policy Number: PHMSA 5301.1A, PHMSA Communications Policy for Inspections and Investigations on Tribal Lands. Additionally, the NPIC will notify the EPA for all HL events, the United States Coast Guard (USCG) for offshore events, and Bureau of Safety and Environmental Enforcement (BSEE) for events located in the Gulf of Mexico (GOM) when OPS deploys on-scene. Travel to the accident scene will be initiated without delay. See Section 2.5 for further information on a Level 3 On-scene Investigation. If the incident is of special investigatory interest but does not warrant or resource constraints do not permit an on-scene investigation, the AID Director may initiate a Level 2 Off-scene Investigation. See Section 2.4 for further information on off-scene investigations. The telephonic investigation continues in parallel with on-scene or off-scene investigations. c. Notification and Updates to Stakeholders The NPIC disseminates NRC reports (initial and 48-hour update) and serves as the single point of contact for obtaining and sharing information from the operator, the State, or other parties. Depending on the jurisdiction, severity and other characteristics of the failure, the NPIC makes immediate notification to various stakeholders. The NPIC contacts the State or the operator (or NRC reporting party if no operator is identified), to obtain additional information about the event. There may be multiple requests for additional information or to gain clarity. The NPIC continues to obtain and distribute updates including the 48-hour update until the scene has been made safe, or the incident command center ICC has dissolved, disbanded or shut down. The NPIC monitors the investigation until it is determined if a 30-day report will be required. The following describes the notification from the NPIC to various stakeholders: Updates to/from States When the State is the lead regulator, the State plays an integral role in providing information. The NPIC emails the NRC report to the State and the State contacts the operator. The NPIC clearly communicates the expectations for receiving details of the incident and a summary of the operator response in a timely manner from the State. 1 The U.S. Department of the Interior, Indian Affairs provides a web site link to a “Tribal Leaders Directory” at https://www.bia.gov/tribal-leaders-directory. Additionally, many Tribes provide contact information on their web sites. Failure Investigation Policy Effective Date: December 11, 2019 12#
Attachment 1, passage 241Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ For events that are particularly time-sensitive, the NPIC calls the State. If the State cannot be reached promptly, the NPIC contacts the operator directly. For less time sensitive incidents, if the State cannot be reached, the NPIC will wait one hour before directly contacting the operator. The NPIC may call the operator directly when the jurisdiction is uncertain. Updates to Regions The NPIC forwards NRC reports and updates to the Region’s RD and OSs when incidents occur within their Region, whether the State or OPS is the lead regulator. Updates to Preparedness, Emergency Support, and Security Division If the incident meets the criteria in Appendix B: INCIDENT CRITERIA REQUIRING NOTIFICATION AND UPDATES OF INCIDENTS TO THE PHMSA AND DOT EXECUTIVES, the NPIC will immediately send notifications and future updates to Preparedness, Emergency Support, and Security Division. Preparedness, Emergency Support, and Security Division works directly with the NPIC on events that may not meet a known criterion but meets a sensitivity of which the NPIC may not be aware. The NPIC will continue to send updates until the Preparedness, Emergency Support, and Security Division indicates that they have received sufficient information and no longer wish to receive further updates. Updates from Preparedness, Emergency Support, and Security Division to Executives and other Federal Agencies The Preparedness, Emergency Support, and Security Division is the single point of contact to provide accident information to PHMSA Executives. The Preparedness, Emergency Support, and Security Division prepares a more formal executive summary of the failure and sends it to PHMSA Executives. The Preparedness, Emergency Support, and Security Division sends a copy of the summary under a separate email. The email address is: PHMSAOPSAccidentUpdate@dot.gov. If a pipeline could be affected by a train derailment, the NPIC will notify the Preparedness, Emergency Support, and Security Division, who will contact the Federal Railroad Administration (FRA) to ensure the safety of personnel responding to the derailment. The Preparedness, Emergency Support, and Security Division will send updates to the other Federal agencies within the National Response Framework (i.e., USCG, EPA, DOE, DOD, DHS) as needed. Failure Investigation Policy Effective Date: December 11, 2019 13#
Attachment 1, passage 242Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ Updates to Pipeline Safety Policy & Programs (PHP-3) for Natural Gas Underground Storage Events AID forwards all natural gas underground storage field NRC reports to the Underground Storage Team email group, List-PHMSA-UGS IMP Team, and the Region. The Eastern Regional Director leads the investigation and the Underground Storage Team is responsible for determining compliance and issuing enforcement of 49 CFR §192.12. Updates to NTSB The detailed criteria for notifying the NTSB is in Appendix C: MATRIX OF DEPLOYMENT & EMAIL NOTIFICATION CRITERIA. Generally, when there are any injuries, a fatality, significant evacuations, major property damage, or when the accident occurs in the DC metropolitan area, the NPIC forwards the NRC report, under separate email, to the NTSB to let them know that OPS is investigating. As the investigation unfolds, the updates may or may not continue to be sent to the NTSB. When the Preparedness, Emergency Support, and Security Division sends the PHMSA Executive Notification, the NPIC copies the report into a new email and sends it to the NTSB and copies the AID. d. 48-hour Update The NPIC is responsible for confirming that 48-hour update reports have been submitted prior to closing out the WMS telephonic investigation task. WMS links the 48-hour update NRC reports and other NRC reports within WMS and on the daily telephonic investigation report. The NPIC tracks incidents to determine if a 48-hour update has been submitted in the allotted time and contacts the operator or State, as appropriate, when a 48-hour update has not been submitted in the allotted time. The NPIC summarizes outreach activities to the operator or State within WMS. 2.3.7. Develop Daily Telephonic Investigation Report The daily telephonic investigation report is a summary of the information gathered during the telephonic investigation for all NRC reports or 48-hour update reports. The daily telephonic report includes all jurisdictional events that have occurred from 8 AM CT the previous day until 8 AM CT the day of the report. The NPIC distributes the report between 7 AM CT to 12 PM CT. The NPIC enters the information in WMS to generate the daily telephonic investigation report. The NPIC emails the report to: • Associate Administrator, PHP-1 Office of Pipeline Safety • Deputy Associate Administrator, PHP-2 Office of the DAA for Field Operations • Deputy Associate Administrator, PHP-3 Office of the DAA for Policy & Programs • Director for Field Operations, PHP-2 Office of the DAA for Field Operations Failure Investigation Policy Effective Date: December 11, 2019 14#
Attachment 1, passage 243Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ • Management and Program Analyst, PHP-2 Office of the DAA for Field Operations • Director of Policy & Programs, PHP-3 Office of the DAA for Policy & Programs • Emergency Coordinator, PH-3 Office of the Executive Director and Chief Safety Officer • PHMSA Accident Investigation Division • PHMSA Preparedness, Emergency Support, and Security Division • PHMSA PHP Community Liaisons • PHMSA PHP Operations Supervisors • PHMSA PHP Regional Directors • PHMSA PHP-100 EASTERN • PHMSA PHP-200 SOUTHERN • PHMSA PHP-300 CENTRAL • PHMSA PHP-400 SOUTHWEST • PHMSA PHP-500 WESTERN • NAPSR All States • NTSB Contacts (RPH20@ntsb.gov) 2.3.8. Conduct a 30-day Report Review Level 1 investigations include the 30-day report review phase described in Section 2.7. 2.4. LEVEL 2: OFF-SCENE INVESTIGATION Level 2 investigations follow the same telephonic investigation process of a Level 1 Primary Investigation described in Section 2.3 and the 30-day report review phase described in Section 2.7. The decision to conduct an off-scene investigation is typically made during the telephonic investigation. If the AID Director has determined that AID will conduct an off-scene investigation, the AID investigator contacts the operator to seek additional information. The AID investigator may initiate a data request for documents such as the root cause failure analysis (RCFA), metallurgical report, or a copy of the operator’s internal investigation report. When AID performs an off-scene investigation, they produce a summary report to describe the investigation and findings. After the AID Director approves the summary report, the Investigator uploads the summary report with associated operator reports to AID’s SharePoint site. Summary reports are written within 30 business days after all operator information has been obtained. 2.5. LEVEL 3: ON-SCENE INVESTIGATION Level 3 investigations follow the same telephonic investigation process of a Level 1 Primary Investigation described in Section 2.3 and the 30-day report review process described in Section 2.7. The decision to deploy on-scene and the team composition is typically made during the Failure Investigation Policy Effective Date: December 11, 2019 15#
Attachment 1, passage 244Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ telephonic investigation as described in Section 2.3.6 b. Level 3 investigations typically include more extensive data requests. The investigator produces a FIR that is posted internally and to PHMSA’s public web site. The FIR is written within 30 business days after all operator data requests have been obtained. On-scene team members’ roles and responsibilities are provided in Table 1: Responsibilities Matrix for On-scene Investigations. The responsibilities for team members depend on who is the lead regulator and the composition of the on-scene team. • OPS jurisdiction • State jurisdiction (under 49 USC 60105 State Pipeline Safety Program Certification) • State jurisdiction (under 49 USC 60106 State Pipeline Safety Agreements) • NTSB deploys (see Section 2.6 for additional requirements) Failure Investigation Policy Effective Date: December 11, 2019 16#
Attachment 1, passage 245Table 1: Responsibilities Matrix for On-scene Deployments Responsibilities Matrix for Personnel at On-scene Investigation Lead Investigation Support Write Failure Investigation Complete CAO Enforcement Identify Investigations Report* Data Report* Inspect for Actions** Compliance OPS jurisdiction AID Only AID NA AID AID AID Region Region Only Region NA Region Region Region Region AID and Region AID Region AID Region/ AID Region/ AID Region State jurisdiction (under 60105 certifications) State Pipeline Safety Agency Only State NA NA NA NA State State and AID State AID NA NA NA State State and Region State Region NA NA NA State State, AID, and Region State Both, AID Lead for PHMSA NA NA NA State State jurisdiction (under 60106 agreements) State Pipeline Safety Agency Only State NA State Region Region State State and AID Event Specific Event Specific AID AID AID State State and Region Event Specific Event Specific Region Region Region State State, AID, and Region | Event Specific Event Specific AID Region/ AID Region/ AID State NTSB deploys State (60105) and AID NTSB State NA AID AID State State (Interstate Agent) and AID and/or Region NTSB Both, AID Lead for NA Region and/or Region and/or PHMSA AID AID State AID NTSB AID NA AID AID Region AID and Region NTSB Both, AID Lead for PHMSA NA Region/AID Region/AID Region *Or State's equivalent form. **Violation Report or Region Enforcement Letter Recommendation. ***Including Return-to-Service Plan#
Attachment 1, passage 246Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ 2.6.1. Pre-scene Arrival Personnel deployed to the failure scene must meet the minimum requirements of PHMSA Safety Manual, Policy Number: PHMSA 3902.2, have the appropriate personal protective equipment (PPE), cell phone, and Government-issued identification, credentials, and computer. Personnel shall follow OPS’s Logowear Policy PHP-4410.1A and PHMSA Policy on Proper Use of Credentials Order Number 1600.1. The OPS Lead On-scene Investigator or the NPIC will contact the operator to provide arrival information. If the State is the lead regulator and OPS deploys, the NPIC calls the State to coordinate activities. The AID Director or OS will discuss the priorities, interactions, roles and responsibilities of each person on-scene and hand-offs if necessary with the team as soon as practicable. Personnel assigned to respond to the accident scene are obligated to reach the scene as quickly and as safely as possible, and to remain at the scene until properly relieved. Any staff deployed on-scene arranges their travel and obtains the necessary authorizations. If they need assistance with travel, they contact their Division’s Administrative Assistant during work hours or SATO at any time. For deployed staff to focus on investigation preparations and to prevent misinformation, communication to and from deployed staff goes through the NPIC. The AID Data Analyst researches the pipelines history to obtain data for the Operator Accident Information Template (Appendix H). The NPIC and on-scene staff do not release information to the media. Information released to the media should be from PHG. 2.6.2. On-scene Investigation Upon arrival, the OPS Lead On-scene Investigator will check-in with the ICC (if one exists) or Police/Sheriff and initiate contact with the operator’s on-scene personnel and integrate into the ICS. The OPS Lead On-scene Investigator may also contact local or tribal authorities who are involved in the ICC. The OPS Lead On-scene Investigator will request information as to which Federal, State, and local agencies are involved and pass this information onto the NPIC and the CL, if deployed. The Lead On-scene Investigator or CL should identify the channels of information dissemination with the ICC, obtain contact information to receive updates about the response and recovery, and attend meetings with emergency management. The Lead Investigator will discuss scene safety with the ICC. If the Lead Investigator feels something is not proceeding in the correct manner, they inform the ICC though the proper channels. The Lead Investigator is prepared to communicate PHMSA’s role. When the State is the Lead Investigator, PHMSA’s role is to support the State’s investigation. When NTSB is the Lead Investigator, PHMSA’s role is to support NTSB’s investigation and serve as the Federal representative. The Lead Investigator meets with the team to communicate safety requirements, discuss logistics coordination, and assign roles and Failure Investigation Policy Effective Date: December 11, 2019 18#
Attachment 1, passage 247Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ deliverables. All investigation activity at the scene is under the control of the OPS Lead On-scene Investigator. He/she has the overall authority and responsibility to resolve any issues within the investigation team that may arise on-scene. If the issue cannot be resolved, he/she will elevate the matter to the AID Director. While on-scene, as soon as practicable, the OPS Lead Investigator will request information from the Operator Accident Information Template (Appendix H) from the operator. The On-scene Investigator emails the NPIC and AID Data Analyst the template with information they have been able to collect. The NPIC collates the information and distributes the form to the same distribution group that notifications have been distributed to under Section 2.3.7. Anyone deployed to the scene must use extreme care to protect their safety. Appropriate PPE will always be used. Any safety concerns should be promptly conveyed to the NPIC. All investigators will present credentials. OPS staff deployed to a failure scene may use investigation job aids to support the development of a Failure Investigation Report. The investigator(s) perform their on-scene investigation with the following goals: • Compile field notes documenting the on-scene activities including those of the team, • Make preliminary assessment of whether the failure mode could impact other portions of the operator’s system or other modes of transportation. • Assess and communicate to the AID Director and RD the need for enforcement action that may include shutting down the pipeline. • Assess and communicate to the AID Director and RD the need for a CAO, return-to- service plan to assure the pipeline is returned to service safely. • Assure the operator is fully cooperating with State and local emergency response officials and Federal agencies, such as the EPA, Coast Guard, and NTSB. • Assist local emergency response officials with information and access to PHMSA Governmental, International, and Public Affairs (PHG) as needed. • Ensure the pipeline and other infrastructure potentially affected by, or contributing to, the failure has been assessed. • Determine if a portion of the failed pipeline needs to be secured for laboratory analysis or if failed equipment performance testing is needed. If laboratory testing is warranted, ensure that the operator uses the Metallurgical Laboratory Failure Examination Protocol (Appendix E) or equivalent procedure. Oversee the removal and preparation for transport of failed material or equipment. • Identify and collect factual evidence, take photographs, and conduct interviews. • Request the status and results of drug and alcohol testing when it is required. • Collect information to help determine the probable cause, contributing factors, and root causes. • If control room actions or inactions may have contributed to the failure or exacerbated the consequences, travel to the control room or make request for SCADA records. Failure Investigation Policy Effective Date: December 11, 2019 19#
Attachment 1, passage 248Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ At the end of each day of the on-scene investigation, the on-scene team should debrief. The team may review fieldnotes, discuss any issues encountered during the day, and establish work/rest schedules. The OPS Lead On-scene Investigator shall provide an update to the NPIC who distributes them to AID and the Region. The OPS Lead On-scene Investigator and the AID Director discuss the adequacy of resources, well-being and performance of the on-scene staff, emergency travel support, need for technical support, and demobilization plans. The OPS Lead On-scene Investigator reports all findings promptly to the AID Director and NPIC. The AID Director provides an update to the RD including discussion of any systemic safety issues identified during the investigation. The AID Director and RD will decide if a CAO or SO should be drafted. See Table 1: Responsibilities Matrix for On-scene Deployment to identify roles and responsibilities of on-scene team members 2.6.3. Potential Orders An on-scene investigation is usually conducted before recommending a CAO or Notice of Proposed Safety Order (NOPSO) be issued to provide public safety and protection of the environment. The Region completes the factual portions of the CAO data report within 48 hours of the failure using information from the Operator Accident Information Template (Appendix H). The CAO data report template and guidance on information to be collected when considering a CAO or NOPSO is available on the PHP-60, Enforcement SharePoint Page. The RD, PHMSA Counsel (PHC), AID Director, and the DAAFO should agree on the CAO or NOPSO as soon as practicable, but typically within 3 days – not to exceed 10 days of an incident. The AID will work with the Region for the collection of necessary information for the CAO data report to develop the CAO or NOPSO. The order should delineate which OPS Division receives and approves any requirements (e.g., lab analysis, metallurgical plan, RCFA, workplan, excavation plan, return-to-service plan) if it is other than the RD. In some cases, the affected Region, working with AID, may create and issue a formal plan for returning a pipeline to service after a failure. The Region will develop the return-to-service plan and follow-up on the operator’s compliance with the plan. The management of the plan implementation and other actions contained in the CAO or NOPSO will be managed by the affected Region independent of the failure investigation. AID’s primary role is to investigate, identify the need for CAOs or SOs (in partnership with the Region), determine the probable or root cause of the failure, review metallurgical reports, and identify recommendations to reduce the likelihood of recurrence. Other enforcement issues may be recognized by AID personnel during an investigation. When recognized, the AID will note the finding in WMS, complete a Region Enforcement Recommendation Letter (Appendix I) and submit it to the AID Director for review within Failure Investigation Policy Effective Date: December 11, 2019 20#
Attachment 1, passage 249Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ 48 hours. The AID Director sends the Region Enforcement Recommendation Letter to the responsible RD and OS. The RD or OS reviews the Region Enforcement Recommendation Letter and decides what actions the Region will take if any. 2.6.4. Cooperation with Other Federal and State Agencies While On-scene OPS will cooperate, coordinate, and share information with all Federal and State agencies investigating failures, especially those involving multiple modes of transportation. OPS will likely take the lead in the failure investigation if the failure was caused by a pipeline facility. Monitoring or directing spill cleanup and product disposal is the responsibility of the Environmental Protection Agency (EPA), U.S. Coast Guard, or other agencies as appropriate for the type of product and location of the failure. 2.6.5. Facility Response Plan (FRP) The Preparedness and Emergency Support, and Security Division supports the AID by managing the FRP program, which plays a key role in an operator’s response to an oil spill due to hazardous liquid pipeline failure, except those under a State Agency with a Certification with PHMSA. On large HL spills, the Preparedness, Emergency Support, and Security Division will review the FRP to ensure that the operator’s response to the failure conforms with the operator’s approved plan. Preparedness, Emergency Support, and Security Division serves as a subject matter expert (SME) along with input from other response agencies to assist the AID in identifying operational discrepancies and response inadequacies during pipeline failure investigations. 2.6.6. Communication with The Media and Public Office of Governmental, International and Public Affairs (PHG) PHG is responsible for liaison with members of Congress, the media, and the public. The AID, through the NPIC, provides updates on failure investigations to the Preparedness, Emergency Support, and Security Division. The Preparedness, Emergency Support, and Security Division provides the update to PHG as needed. Any communication with U.S. DOT Office of Inspector General (OIG), U.S. General Accountability Office (GAO), Congress, Department of Justice (DOJ), Chemical Safety Board (CSB)goes through PHG. AID’s involvement with the media is expected to be limited, as these interactions most commonly occur through PHG. Under normal circumstances, the AID investigator should refer media inquiries to PHG (PHMSAPublicAffairs@dot.gov 202-366-4831). However, AID investigators may occasionally need to respond to media questions. Details and guidance for responding to the media are explained in Appendix F on the PHMSA Media Relations card provided by PHG. Failure Investigation Policy Effective Date: December 11, 2019 21#
Attachment 1, passage 250Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ Community Liaisons (PHP-20) Local Government officials will want to know what is going on in their community. Neighbors living near the pipeline or facility may need information, especially if they are impacted by the incident. When Community Liaisons (CLs) are deployed on-scene to an accident that impacts the surrounding community, there may be a need to establish or maintain communications with the ICC while investigators are in the field. The CL should identify the channels of information dissemination with the ICC, obtain contact information to receive updates about the response and recovery, and attend meetings with emergency management. The AID and the Regions refer members of the public and State, local, and tribal Government officials to PHMSA’s Community Liaisons. 2.6.7. Post-scene Activities When the OPS Lead On-scene Investigator leaves the failure scene and returns to the office, they may continue the investigation. They will continue to provide updates about the incident to the NPIC as necessary. They will provide support for the CAO or SO. The OPS Lead On-scene Investigator should work with other team members to determine any further activities and develop a plan with assignments if necessary. Depending on the circumstances of each event, the investigator(s) will review and evaluate submitted reports, such as metallurgical reports and RCFA. The Region oversees the implementation of any enforcement actions. AID participates in the review of the RCFA, metallurgical and other reports. All documents related to the investigation will be stored on AID’s network drive (AIDTQ (\\PHMOKCWFS001)). AID manages the investigation information in WMS. All staff must adhere to the policy for documentation within SMART Inspection Policy, PHP- 5340.4E. Each failure should have one I03. Regardless of the Region value for an I03, staff from any Division can add Assignments and Days to the Activity. 2.6.8. Hot Wash A hot wash is the “after-action” discussions and evaluations of OPS’s (or multiple agencies’) performance following an accident investigation. The main purpose of a hot wash session is to identify the strengths and weaknesses of the OPS response to a given event and to guide future response. After each deployment, the OPS Lead On-scene Investigator debriefs the AID at their next regularly scheduled staff meeting. When the AID OS identifies the need for a hot wash, a request is made to the OPS Lead Investigator to initiate the meeting. Arrangements should be made as soon as practicable after demobilizing from the scene. The OPS Lead Investigator works with the AID OS and National Safety Coordinator to identify attendees from OPS Divisions, other Federal and State agencies, and operators’ responders or personnel otherwise involved in the gathering and dissemination of information. The AID Failure Investigation Policy Effective Date: December 11, 2019 22#
Attachment 1, passage 251Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ OS facilitates the meeting and prepares a report as to the items that went well and areas for improvement. The AID Director disseminates the report and a copy is filed with the accident file on AID’s common drive. 2.6.9. OPS Failure Investigation Report Upon conclusion of the investigation, the OPS Lead On-scene Investigator or designee will prepare a Failure Investigation Report (FIR) using the FIR template (Appendix G) within 30 business days after all operator data requests have been obtained. If the NTSB is investigating the failure, OPS does not publish a report but the Regions proceed with enforcement actions as needed. The FIR will include the applicable sections listed below. Guidance for each section of the report is included in the template. 1. Operator, Location, and Consequences 2. Executive Summary 3. System Details 4. Events Leading Up to the Failure 5. Emergency Response 6. Summary of Return-to-service 7. Investigation Details 8. Investigation Findings and Contributing Factors 9. Appendices, as needed: a. Maps and Photographs b. NRC Report c. Operator Accident/Incident Report to OPS d. Operator Procedures and Records e. Metallurgical Laboratory Analysis f. Operator’s Report on their Failure Investigation g. Root Cause Failure Analysis Report The FIR author will verify that the apparent cause reported by the operator aligns with the investigation findings. If there are discrepancies, AID will request that the operator file a supplemental report. If the operator refuses to change the cause through a supplemental report, the discrepancy is documented in the Investigation Findings and Contributing Factors section in the FIR. The FIR does not include probable violations or recommendations. Probable violations are captured in the Region Enforcement Recommendation Letter (Appendix I) and made part of any enforcement action to be developed by the Region. The FIR author shall ensure that the FIR aligns with any enforcement actions. PHC advises that reports with active Failure Investigation Policy Effective Date: December 11, 2019 23#
Attachment 1, passage 252Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ enforcement action(s) subject to Freedom of Information Act (FOIA) requirements should not be publicly distributed. The AID processes FIRs per the Failure Investigation Report Processing and Posting SOP. After the report is approved by the DAAFO, the document is uploaded into WMS and SharePoint (Deputy AA for Field Operations (PHP-2) > Failure Investigation Reports). The PHMSA Directors will be notified via email that it has been posted. Before loading the report to the PHMSA web site, AID will coordinate a PHC redaction review for personally identifiable information (PII), sensitive security information (SSI), or confidential content. Files posted to the Internet are expected to be readable by software to comply with Section 508 of the Rehabilitation Act of 1973. The body of the report and as many appendices as feasible will be prepared in Microsoft Word. When possible, PDF files will be software readable rather than scanned. The AID will coordinate with the PHMSA webmaster to create the file to be posted to the internet. 2.6.10. PHMSA AID Safety Recommendation Memo The AID may issue an internal safety recommendation memo, Appendix J, following investigations of pipeline accidents and completion of the FIR. Safety recommendations usually address a specific issue uncovered during an investigation that extends beyond requirements for the specific operator involved in the investigation. The memo will specify how to correct the situation or identify the need for additional study. For example, the memo may include recommend changes or additions to pipeline safety regulations or a recommendation that PHMSA issue an advisory bulletin. 2.6.11. Review of Inspection Assistant (IA) Questions for Failure Cause The AID Director sends a copy of the FIR to the appropriate PHMSA Team Sponsor who oversees IA questions related to the cause(s) of the incident. The Team reviews the report to determine if there is a need to add or modify any questions based on the findings and reports back to the AID Director and IA Team Sponsor. 2.6. NTSB INVESTIGATION The Independent Safety Board Act (ISBA), 49 U.S.C. 1901 et seq. created the NTSB, and authorized it to investigate various transportation accidents. An amendment to the ISBA gave NTSB investigations priority over investigations conducted by other Federal agencies. OPS or States with certification are not precluded from conducting their own investigations or obtaining information directly from parties involved in or witnesses to an incident. NTSB coordinates resources and prepares the written investigation report. During NTSB’s party designation process, party coordinators and Team members are identified. The OPS Lead On-scene Investigator will be the party coordinator, attend meetings Failure Investigation Policy Effective Date: December 11, 2019 24#
Attachment 1, passage 253Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ on PHMSA’s behalf, and report back to the AID Director after meetings. NTSB creates Teams, depending on the accident specific circumstances. There will typically be an Operations Team and an Emergency Response Team. There may also be an Integrity Management Team. OPS should attempt to have a representative on each Team. Preferably, the same staff member remains on the Team for the duration of the investigation. PHMSA may obtain information directly from parties involved in, and witnesses to, the failure, provided they do not interfere with the NTSB's investigation. PHMSA does not write a FIR when NTSB deploys. The OPS does not sign NTSB’s form, “Statement of Party Representatives to NTSB Investigation.” This form contains pertinent excerpts from 49 CFR Part 831 and explains that by signing the form, the coordinators are obligating and indicating the organizations they represent and that all personnel assigned to the investigative groups understand the rules and that they are willing to abide by them. PHMSA will follow the NTSB’s requirements for parties to NTSB investigation except for the prohibition on sharing information during the investigation. NTSB and PHMSA have an understanding that OPS personnel working on an investigation may share information within OPS as needed. The OPS and States will recognize the NTSB as the lead agency for determining the cause of failures NTSB investigates. The OPS or the State will determine what immediate steps the pipeline operator must take to protect the public and environment, determine if probable violations exist, and issue enforcement actions as necessary. The OPS and NTSB work under a memorandum of understanding (MOU). The MOU is located on PHMSA’s web site. https://www.phmsa.dot.gov/sites/phmsa.dot.gov/files/docs/1975_DOT_NTSB.pdf 2.7. PHASE: 30-DAY REPORT REVIEW WRITTEN REPORTS FROM THE OPERATOR (Forms 7100 & 7001 INCIDENT REPORTS) Within 30 days of a reportable incident/accident, the operator is required to submit a written report, PHMSA Form 7100 (for gas incidents) or 7001 (for hazardous liquid accidents), to the OPS under 49 CFR §195.54 (Hazardous Liquid), 49 CFR §191.15 (Transmission, Gathering, LNG, Underground Storage), and 49 CFR §191.9 (Distribution). The operator may submit the report directly through the Online Data Entry System (ODES) or may send the report to OPS for entry into ODES. When the operator obtains new relevant information, they are required to supplement the written report. PHMSA expects operators to submit a final report when the apparent cause has been determined and the report is complete and accurate. After the NPIC receives the operator’s 48-hour update report, the AID continues to monitor the investigation until the report has been filed. The AID, States, and the Operations Systems Division (PHP-6) are responsible for the quality assurance and control of the data that operators submit on PHMSA accident Forms 7100 and 7001 per Incident Report Data Management Policy (PHP-5340.5B). If there are compliance Failure Investigation Policy Effective Date: December 11, 2019 25#
Attachment 1, passage 254Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ issues with the 30-day report, the AID completes a Region Enforcement Recommendation Letter (Appendix I) which the AID Director sends to the RD. The AID’s Incident Report Team Lead is responsible for AID’s review of operators’ incident forms to ensure the data is complete and accurate. For incidents subject to State regulatory authority, the AID works with the State2 to resolve any identified discrepancies or gaps in the report. The AID receives feedback from the State and enter the status in ODES RR3 and WMS. When the report is complete and accurate, the AID recommends to the State that the report can be closed. If the State concurs, the AID closes the report. If the State does not respond to a repeated request, the AID Incident Report Team Lead can approve closing the report. Closed reports are uploaded into WMS so that the NRC report is linked to the incident report. For incidents subject to OPS-regulated facilities, the AID works directly with the operator to ensure the data is complete and accurate. The AID follows the same procedure to document the status of the report in ODES RR and WMS. 2.8. DATA ANALYSIS PROGRAM The AID’s Data Analysis Program is under development. This section will be updated when the plan is approved by the AID Director. The main goal of AID’s data analysis program is to move OPS’s understanding of incident causes and contributory factors from a reactive mode towards a predictive one. The primary person responsible for incident data analysis is the AID’s Program Analyst. Data sources include incident reports, FIRs, and WMS data. The AID will present the results of data analysis in a format that is easy to comprehend and use visualizations and other tools when practicable. The Data Analyst runs periodic reports to identify instances when operators did not meet the NRC notification or 30-day report reporting requirements. The AID provides the RDs with the results of the AID’s evaluation of these reports. The AID captures, stores, and manages incident data in the WMS, ODES RR, and the AID’s shared network drive. The AID’s Program Analyst is also responsible for ensuring that the AID retains records and disposes of paper and electronic records in accordance with its approved National Archives and Records Administration (NARA) records schedules. 2 Accident and incident reports can be accessed through the Pipeline Data Mart (PDM). 3 WMS is being enhanced to support the migration of the review of the incident reports. This section will be updated when the new process has been implemented. Failure Investigation Policy Effective Date: December 11, 2019 26#
Attachment 1, passage 255Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ 2.9. LESSONS LEARNED PROGRAM The AID’s Lessons Learned Program is under development. This section will be updated as additional products are approved by the AID Director. Current product: AID Situational Awareness for Employees (SAFE) Bulletin – SAFE Bulletins provide inspectors and other PHMSA employees notifications of incident trends or novel incident causes of recent accidents. The bulletin includes: background information, accident investigation summaries, AID data analysis, contributing factors, regulatory requirements to prevent accidents of the cause, and additional resources. The AID’s’ primary purpose is to memorialize and disseminate actionable data and information from accident investigations and data analysis to (1) improve pipeline safety and (2) to improve the failure investigation process to stakeholders. 3. ROLES & RESPONSIBILITIES This section contains a combination of roles and job titles. 3.1. DIRECTOR, ACCIDENT INVESTIGATION DIVISION (PHP-8) The AID Director is responsible for completion of the investigation and all investigative support functions. The AID Director acts as the liaison between PHMSA and all other agencies and/or entities during an investigation while away from the scene. The Director assumes the final responsibility in the investigation and oversees the completion of all reports which are related to a specific inspection/investigation. 3.2. OPERATIONS SUPERVISOR, ACCIDENT INVESTIGATION DIVISION (PHP-8) The AID OS conducts the responsibilities of the AID Director as delegated. 3.3. NATIONAL PIPELINE INCIDENT COORDINATOR (PHP-8) The National Pipeline Incident Coordinator: • Debriefs incoming NPIC about ongoing investigations; • Performs telephonic investigation of NRC reports; • Produces the daily telephonic investigation report; and • Serves as the point-of-contact for receiving and disseminating communications as a part of an on-scene investigation. • Reviews the 30-day report for accuracy and completeness. Failure Investigation Policy Effective Date: December 11, 2019 27#
Attachment 1, passage 256Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ 3.4. OPS LEAD ON-SCENE ACCIDENT INVESTIGATOR (PHP-8 or Region) The OPS On-scene Accident Investigator is typically an AID Investigator. They are the main point of contact for the investigation while on-scene, to include, coordinator of activities for the agency and takes direct responsibility for completion of the investigation and all investigative support functions. The OPS Lead On-scene Accident Investigator may delegate or act as the primary liaison between the OPS and all other agencies and/or entities while on-scene. They assume the final responsibility for the investigation during the on- scene investigative phase. Prior to any non-investigative OPS personnel being allowed to enter the scene of any incident, the OPS Lead On-scene Investigator confirms that the individual(s) have appropriate training and that appropriate PPE is being worn. Duties include: • Perform deployment preparations for travel to incident scene; • Use existing mechanisms (including others through National Incident Management System (NIMS)/Incident Command Structures (ICSs) if necessary) to collect available evidence to enable a thorough investigation; • Generate and communicate initial and updated information for the NPIC for executive notifications; • Pursue a determination as to the root cause; • Serve as the single point of contact between the OPS and the pipeline operator during the investigation. This includes requests for historical data/records, procedures, etc. • Coordinate efforts and progress with other applicable modal administrations; • Coordinate with the Regions to draft the CAO data report to provide information for PHC to write CAOs or SOs; • Refer potential applicable enforcement actions to the AID Director as appropriate; and • Manage incident record repository. • Write FIR. 3.5. INCIDENT REPORT TEAM LEAD (PHP-8) The Incident Report Team Lead provides QA/QC oversight for incident reports to ensure that they are complete and accurate and that they are closed in a reasonable time. 3.6. AID PROGRAM ANALYST (PHP-8) The AID Program Analyst performs data analysis, generates reports, and is responsible for AID’s records management. Failure Investigation Policy Effective Date: December 11, 2019 28#
Attachment 1, passage 257Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ 3.7. REGIONAL DIRECTORS (PHP-100, 200, 300, 400, 500) RDs are responsible for issuing enforcement actions and ensuring proper oversight of the implementation of any requirements because of the enforcement actions. They are responsible for their Region’s utilization of information from the daily telephonic investigation report and other incident data to support future inspections. 3.8. COMMUNITY LIAISON (PHP-20) When Community Liaisons are deployed on-scene, their role is to liaison with the public to address their concerns related to the incident. They meet with and disseminate information to the public affected by incidents. They are also responsible for enforcement of compliance with third-party excavation damage requirements. 3.9. OPERATIONS SYSTEMS DIVISION (PHP-6) The Operations Systems Division produces PHMSA’s performance metrics related to incidents. In this role, they are responsible to ensure that operators submit incident data that is consistent with reporting criteria as it relates to the consequences such as fatalities, injuries requiring hospitalization, quantity spilled, and property damage. They lead periodic meetings with the AID and other stakeholders to review incident reports. 3.10. PREPAREDNESS, EMERGENCY SUPPORT, AND SECURITY DIVISION) Preparedness, Emergency Support, and Security Division is the liaison for PHMSA Executives, PHG, and other Federal agencies such as DHS, DOE, and others entities off- scene. 3.11. DEPUTY ASSOCIATE ADMINISTRATOR OFFICE OF FIELD OPERATIONS (PHP-2) The DAAFO is responsible for the implementation of this policy and approval of deviations from it. If there is need to form an on-scene investigation team, the DAAFO will coordinate. 3.12. STATE PIPELINE SAFETY AGENCIES The relationship between the AID and the State provides for the effective use of each entity’s resources to investigate pipeline failures on intrastate pipelines and LNG facilities. States “own” the regulatory programs within their respective State under a PHMSA certification or agreement that spells out the limits of each State’s regulatory authority. This includes the responsibility and right to complete pipeline failure investigations. The AID supports the State by providing technical assistance when needed and the coordination between the State and PHMSA on information flow. Failure Investigation Policy Effective Date: December 11, 2019 29#
Attachment 1, passage 258Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ State pipeline safety agencies are responsible for the investigation, inspection, and enforcement of incidents on pipeline facilities under their 60105 certifications. Under 60106 agreements, States are responsible for the investigation and inspection of pipeline facilities, but Regions manage enforcement. States are responsible for the review and approval for closure of operators’ incident reports under 60105 certifications and 60106 agreements. For large incidents, a State may rely on mutual aid from PHMSA or other State agencies. When mutual aid is sought, States follow the Mutual Aid process provided in PHP-50’s document, Guidelines for States Participating in the Pipeline Safety Program. 3.13. PHMSA NATIONAL SAFETY COORDINATOR The National Safety Coordinator reviews AID lessons learned products before dissemination. 3.14. PHMSA EXECUTIVES For this policy, the PHMSA Executives include: PHMSA Administrator, Deputy Administrator, Executive Director, Chief Counsel, Associate Administrator for Pipeline Safety, Deputy Associate Administrator for Field Operations, Deputy Associate Administrator for Policy & Programs, Deputy Director Office of Government, International, and Public Affairs, and Emergency Coordinator. Failure Investigation Policy Effective Date: December 11, 2019 30#
Attachment 1, passage 259Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ APPENDIX A: OPS CRITERIA TO DEPLOYING ON-SCENE Before sending OPS staff on-scene, the AID Director will discuss the situation with the DAAFO and RD. Exceptions must be approved by the DAAFO. All Facilities Subject to Regulation by OPS: • One or more fatality • One or more injury(ies) requiring hospitalization • NTSB deploys • Major property damage – multiple or critical structures • Multimodal impact – major interstate highway, waterway, airport, or railroad shutdown • Pipeline systems with recent failure history • Washington, DC metropolitan area failures • National media attention • Request by RD, DAA, or AA • To provide on-the-job training for AID staff • Major supply impacts Additional Criteria for Hazardous Liquids Pipelines: • Major spill that reaches a body of water • Liquid spill over 500 bbl. • Sensitive areas that have incurred multiple pipeline failures • Anhydrous ammonia pipeline release in urban area • LNG/propane peak-shaving and refineries • LNG/propane peak shaving plant major release with or without fire • Pump station destruction by any cause Additional Criteria for Gas Transmission Pipelines: • Compressor station destruction by any cause Failure Investigation Policy Effective Date: December 11, 2019 31#
Attachment 1, passage 260Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ APPENDIX B: INCIDENT CRITERIA REQUIRING NOTIFICATION AND UPDATES OF INCIDENTS TO THE PHMSA AND DOT EXECUTIVE TEAM Criteria: Criteria are listed below and are generally presented by category. Fatalities / Injuries / Evacuations • Hazardous gas or hazardous liquid transmission pipeline failure with one or more fatalities or injuries • Natural gas distribution pipeline failure with one or more fatality or injuries • PHMSA employee death or line-of-duty injury requiring hospitalization • Significant evacuation of civilian population (100 or more individuals, 50 or more homes) Environmental / Infrastructure / Safety / Property Impacts 1. Significant environmental impact or property damage; infrastructure destruction or damage; or widespread community impact (including drinking water sources) caused by hazardous materials in transportation, including by pipeline 2. Pipeline hazardous liquid spill over 1,000 barrels (outside of a containment facility) 3. Release of a toxic-by-inhalation (TIH) (e.g., anhydrous ammonia, chlorine, CO2) of hazardous material or other hazardous materials requiring an evacuation of over ½ mile or affecting a populated area greater than 50 individuals 4. Explosion potentially related to pipeline or hazardous materials transportation; use some discretion on reporting explosions that are potentially pipeline related – try to rule out other causes 5. Major disruption of supply of energy products involving the transportation infrastructure (e.g., major interstate highway, railroad, airport, waterway) expected to last more than 24 hours resulting from an incident involving hazardous gas or liquid pipelines or hazardous materials in transportation 6. LNG plant incident involving significant damage or major release (with or without a fire) 7. LNG carrier incidents during loading or unloading involving release of product, particularly relating to shutdown of operations Incident of Potential National Significance / Sensitivity / Media and External Interest Notes: These criteria should be applied with judgment. If uncertain, err on the side of submitting an initial report for PHMSA Executive Team awareness. These criteria may already be captured for an incident based on other criteria presented in the previous two sections and, therefore, may be incorporated as part of immediate reporting on that incident. 1. Any hazmat transportation incident for which the NTSB, or other safety oversight agency has launched an investigation team Failure Investigation Policy Effective Date: December 11, 2019 32#
Attachment 1, passage 261Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: _ PHP-5340.9B ______________________________________________________________________________________________________________________________________________________________ 2. Hazardous gas or liquid transmission pipeline potentially affected by natural (e.g., hurricane, earthquake) or manmade disasters 3. 4. 5. An incident requiring the need for an emergency special permit issued by PHMSA Sensitive areas that have incurred multiple pipeline failures Incidents involving hazardous gas and liquid pipeline systems with recent failure history; any event having previous significant incident history 6. Strong indication that the incident is expanding/cascading such that criteria contained herein may be met 7. Suspected noteworthy criminal or terrorist acts involving pipeline infrastructure or hazardous materials in transportation 8. Major National Capital Region (NCR) pipeline failure or hazardous materials transportation incident 9. National media attention 10. Potential political interest; or if requested by a senior State or local official (e.g., Governor; Mayor; member of Congress). Failure Investigation Policy Effective Date: December 11, 2019 33#
Attachment 1, passage 262Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Failure Investigation Policy Policy Number: _ PHP-5340.9B ________________________________________________________________________________________________________________________________________________________________________________________________________________________ APPENDIX C: MATRIX OF DEPLOYMENT & EMAIL NOTIFICATION CRITERIA AID Emails AID Pipeline Type - Preparedness, Emails OPS Lead Event OPS Deploys Emergency NTSB Regulator Support, and Security Division All (including State Lead Regulator) All All All One or more fatality OPS Lead Regulator x x One or more injuries requiring hospitalization OPS Lead Regulator x x Significant evacuation of civilian population (100 or more individuals, 50 or more homes) x x Major property damage (public or operator)– multiple or critical structures x x OPS Lead Regulator OPS Lead Regulator All Major supply impacts OPS Lead Regulator x HL Major spill that reaches a body of water OPS Lead Regulator x HL Liquid spill over 500 bbl. OPS Lead Regulator x All Pipeline systems with recent failure history; any event having previous significant incident history. x All Multimodal impact – major interstate highway, waterway, airport, or railroad shutdown x GT/HL Pipeline release of toxic product (e.g., anhydrous ammonia, CO2, chlorine) in urban area OPS Lead Regulator Evacuation of over ½ mile or affecting a populated area greater than 50 individuals x LNG/HL LNG/propane peak-shaving facility OPS Lead Regulator x ___________________________________________________________________________________________________________ Failure Investigation Policy Effective Date: December 11, 2019 34#
Attachment 1, passage 263Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Failure Investigation Policy Policy Number: _ PHP-5340.9B ________________________________________________________________________________________________________________________________________________________________________________________________________________________ All Washington, DC metropolitan area failures OPS Lead Regulator x x AID Emails AID Pipeline Type - Preparedness, Emails OPS Lead Event OPS Deploys Emergency NTSB Regulator Support, and Security Division All NTSB deploys OPS Lead Regulator x All National media attention OPS Lead Regulator x All Request by AID Director, RD, DAA, or AA OPS Lead Regulator x OPS Lead Regulator All To provide on-the-job training for AID staff All Hazardous gas or liquid transmission pipeline potentially affected by natural (e.g., hurricane, earthquake) or manmade disasters x All An incident requiring the need for an emergency special permit issued by PHMSA x All Strong indication that the incident is expanding/cascading such that criteria contained herein may be met x All Suspected noteworthy criminal or terrorist acts involving pipeline infrastructure or hazardous materials in transportation x LNG LNG carrier incidents during loading or unloading involving release of product, particularly relating to shutdown of operations x GT/GG/HL Refineries x All As requested by the Preparedness, Emergency Support, and Security Division x ___________________________________________________________________________________________________________ Failure Investigation Policy Effective Date: December 11, 2019 35#
Attachment 1, passage 264Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Failure Investigation Policy Policy Number: _ PHP-5340.9B ________________________________________________________________________________________________________________________________________________________________________________________________________________________ All PHMSA employee death or line-of-duty injury requiring hospitalization x ___________________________________________________________________________________________________________ Failure Investigation Policy Effective Date: December 11, 2019 36#
Attachment 1, passage 265Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ APPENDIX D: NRC CRITERIA FOR EMAIL DISTRIBUTION HQS-PF-fldr-NRC@uscg.mil (email address NRC emails from during the day) - The reports are not filtered specific to PHMSA reporting. NRC_NIGHTLY@uscg.mil (email address NRC emails from each night) - The NRC NIGHTLY is a nightly transmission of all NRC reports taken the previous day. The NRC NIGHTLY may include additional reports that were not sent during the day. The criteria used for this report is in plain text below, followed by the actual code in the NRC’s software application, IRIS. Criteria: All incidents reported to the NRC (No Drills) AND (Type of incident = Pipeline OR Incident Cause = Explosion OR Description of Incident has the word EXPLOSION in the text OR Reported Chris Code = ‘ONG’ OR Suspected Responsible Company has the word PIPELINE in its name) Where: COM.SEQNOS=C.SEQNOS AND C.SEQNOS = DET.SEQNOS(+) AND COM.SEQNOS = INC.SEQNOS (+) AND C.SEQNOS = RS.SEQNOS AND C.SEQNOS = MI.SEQNOS(+) AND C.CALL_TAKER = P.USERID(+) AND RS.REPORTING_CONFIDENTIAL <> 'Y' AND C.CALLTYPE = 'INC' AND (COM.TYPE_OF_INCIDENT = 'PIPELINE' OR COM.INCIDENT_CAUSE = 'EXPLOSION' OR COM.DESCRIPTION_OF_INCIDENT LIKE '%EXPLOSION%' OR MI.CHRIS_CODE = 'ONG' OR RS.RESPONSIBLE_COMPANY LIKE '%PIPELINE%') AND C.DATE_TIME_RECEIVED BETWEEN :START_DATE AND :END_DATE * Required information to issue the initial CAO. Failure Investigation Policy Effective Date: December 11, 2019 37#
Attachment 1, passage 266Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ APPENDIX E: METALLURGICAL LABORATORY FAILURE EXAMINATION PROTOCOL https://www.phmsa.dot.gov/incident-reporting/accident-investigation-division/metallurgical- laboratory-failure-examination-protocol-pdf Failure Investigation Policy Effective Date: December 11, 2019 38#
Attachment 1, passage 267Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ APPENDIX F: PHMSA’s MEDIA RELATIONS LIST OF DO’S AND DON’TS Do’s Be prepared Remain calm Identify yourself as the PHMSA spokesperson Ask reporters for a business card Speak only for PHMSA (not operators, industry or yourself) Setup a safe, secure briefing area, and position yourself so that you have a line of exit Give a clear, high-level statement of the facts; transition into the steps PHMSA is taking Stay focused on the point you wish to make rather than the reporter’s questions Show compassion & concern Speak in short, clear points without jargon or technical detail Don’ts Provide estimates of either cause or costs Assign blame Speculate or provide comparisons or “war stories” Be afraid to say, “I don’t have an answer for that now.” Allow reporters or sightseers to wander around an incident site unescorted Discuss confidential information within earshot of persons you don’t know Lose your temper, weep or show any raw emotions; television especially thrives on emotion Speak off the record; assume that everything you say will be used in the reporter’s story Say “no comment.” Forget that you are representing PHMSA Failure Investigation Policy Effective Date: December 11, 2019 39#
Attachment 1, passage 268Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ APPENDIX G: FAILURE INVESTIGATION REPORT (FIR) TEMPLATE DOT US Department of Transportation PHMSA Pipeline and Hazardous Materials Safety Administration OPS Office of Pipeline Safety [Which] Region Principal Investigator Senior Accident Investigator [optional] AID Director Date of Report mm/dd/yyyy Subject Failure Investigation Report – [Operator & 3‐word summary – same as page 2 thru end header] Operator, Location, and Consequences Date of Failure mm/dd/yyyy Commodity Released City, County, State OpID and Operator Name Unit # & Unit Name SMART Activity # Milepost / Location Type of Failure Fatalities Injuries Description of the Impacted Area [HCA?] Total Costs [Leak/Rupture and Cause] [Sum all sub‐categories on the operator’s written report, including the cost of lost gas, if applicable] [Guidance for each section of the report is included on the following pages. Recognizing that each failure is unique, the contents of the report should be driven by the unique circumstances of the failure and not by the guidance. Every issue for which guidance is provided may not need to be included in the report.] Failure Investigation Policy Effective Date: December 11, 2019 40#
Attachment 1, passage 269Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ Executive Summary [Brief summary of the accident and investigation – what happened and why. Summarize Investigation Findings and Contributing Factors. Do not reference appendices in this section – leave the details for later sections.] System Details [Description of pipeline system and unit involved in the failure, including age of the system. Describe how the system functions within the overall infrastructure of the operator – who supplies the system and who does the system send to. Describe any supply impacts resulting from the failure. For pipe, include MAOP, MOP, and pipe specifications. For facilities, describe them. Previous pipeline system history relevant to failure.] Events Leading Up to the Failure [Set the stage by describing pipeline operations prior to the failure. Compare operating pressure to MOP/MAOP. Were construction or maintenance projects relevant to the failure? Who, how, and when discovered by operator.] Emergency Response [Summary of response by the operator and its contractors, especially if OPA plan implemented for liquid spill. Shutdown and flow control. Immediate notification to PHMSA through the NRC. Note any problems exacerbated by either operator or community emergency responders. Other Federal and State Agencies responding.] Summary of Return‐to‐service [Actions taken by the operator to safely return the pipeline to service, such as pipe repair, replacement, and reduced operating pressure. If a CAO or SO was issued, summarize the requirements.] Investigation Details [Add sub‐sections as needed for complex failures. Pipeline system was described earlier, but now describe failure location in detail, especially HCA impacts. Adequacy of emergency response. Control room and SCADA relevant to failure. Persons interviewed and relevant information learned. Records, especially ILI results, and procedures reviewed. Summarize laboratory testing results, but don’t rely exclusively on them. Describe what you found as well as what you ruled out.] Investigation Findings and Contributing Factors [If root cause analysis was conducted, state root causes. If no root cause analysis, state apparent cause. List all facts pertinent to identifying the cause. Describe all contributing factors. Do not describe probable violations, just the facts.] Failure Investigation Policy Effective Date: December 11, 2019 41#
Attachment 1, passage 270Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ Appendices [Order of appendices depends on when they “appear” in the report.] A Map and Photographs [see separate template .doc] B NRC Report [To obtain the publicly releasable version of a NRC report, send an email to nrc@uscg.mil indicating that you need a publicly releasable NRC report and the Report #]. Save the email to pdf. C Operator Accident/Incident Report to PHMSA [.pdf from WMS, ODES or PDM, do not scan] D Operator Procedures and Records E Laboratory Analysis [include file received from operator] F Operator Failure Investigation Report [include file received from operator] [Create the report and each appendix as separate .doc or .pdf file in Adobe ‐ Create, Merge all Files in a Single PDF Document, Reduce File Size] Failure Investigation Policy Effective Date: December 11, 2019 42#
Attachment 1, passage 271Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ APPENDIX H: OPERATOR ACCIDENT INFORMATION TEMPLATE Accident Information The purpose of this document is to collect primary information immediately following an unintentional release of product. I. GENERAL INFORMATION Operator Name: OPID: Operator’s contact person(s): [Person communicating with PHMSA on this incident] Name: Title: Telephone: Fax: Email: Operator’s Executive Officer: [Generally a President or VP] Name: Title: Mailing Address: Telephone: Fax: Email: II. PRELIMINARY ACCIDENT INFORMATION Date of Failure: Time of Failure: [Include a.m. or p.m., time zone, and Standard or Daylight Savings Time] NRC Report #: [Provide for each NRC report ‐ If no report, state “No NRC Report Filed”] NRC Report Date: NRC Report Time: Fires, injuries, fatalities, or evacuations reported? [If yes, describe below] Life and property: [Describe and quantify (to the extent practical) any impacts to life and/or property (fatalities, injuries, destroyed buildings, evacuations, etc.) that resulted from the Failure Investigation Policy Effective Date: December 11, 2019 43#
Attachment 1, passage 272Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ pipeline failure and explosions or fires (if any) caused by the pipeline failure, taking into account known population densities, growth patterns, class locations, and HCAs] Environment: [Describe and quantify (to the extent practical) any impacts to the environment that resulted from the pipeline failure such as any product that ran into a river, stream, creek, lake, pond, or another sensitive receptor. Describe and quantify (to the extent practical) any impacts to the environment that resulted from fires or explosions (if any) caused by the pipeline failure or due to restoration and/or clean‐up activities at or near the failure scene.] Description of Failure: [Brief description of the events leading up to, during, and immediately after the failure. Clearly differentiate facts from estimates.] Example: At approximately 10:40 p.m. CST on May 5, 2013, the operator’s control room personnel observed a sudden pressure drop on their SCADA screens indicating a possible failure on the XYZ pipeline. The control room personnel notified the local district office at 10:45 p.m. Five minutes later, observations by the operator’s field personnel confirmed a failure of the XYZ pipeline and the release of an undetermined volume of natural gas. The failure resulted in the ejection of approximately 20 feet of 36‐inch pipe, which landed on the pipeline right‐of‐way approximately 50 feet from the failure location. The failure happened in a remote location. There were no reported injuries, fatalities, or evacuations and there was no ignition of the escaping gas. Initial Response to Control the Discharge: [Brief description of actions taken to control the discharge and to shut‐in the pipeline. Include pump/compressor stations shut down, upstream and downstream block valves closed (manually or automatically), and other pertinent facts.] Failure Scene Information: Mile Post, Station, or other pipeline system identifier of the failure location: State or Offshore BOEM Region: [i.e., Alaska, Atlantic, Gulf of Mexico, or Pacific] County/Parish or Offshore Area: [i.e., Viosca Knoll, Beaufort Sea, Bowers Basin, etc.] Nearest city or town to failure scene; approximate distance/direction to the town: Product discharged: Product Type: Estimate of Volume Released: [Provide latest update, if available. Explain if unavailable.] Pipeline System: Pipeline System Name: [Use operator’s terminology] Pipeline System Description: [Provide a brief description of the overall pipeline system including its approximate total mileage and throughput, if available.] Failure Investigation Policy Effective Date: December 11, 2019 44#
Attachment 1, passage 273Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ Example: The Sample Pipeline System consists of approximately 8,500 miles of natural gas transmission pipelines with a capacity of approximately 9.1 BCF/D. The pipeline system includes three parallel pipelines (Line A, Line B & Line C) in a common right‐of‐way. As a major provider of natural gas along the East Coast, the system transports natural gas from the Gulf Coast to 12 Southeast and Atlantic Seaboard States, and to major metropolitan areas in Virginia and Pennsylvania. Failed Pipeline: [Generally a subset of the pipeline system described above. It could, however, be the entire system especially for the smaller pipeline systems.] Pipeline Name: Product(s) Transported: Year(s) Pipeline Constructed: Failed Pipeline Description: [Provide a description of the specific pipeline that failed, which is either a subset of the pipeline system described above or the entire system itself. The intent is to cover the operational section of the pipeline where the failure occurred. The description should start at a logical point of origin (compressor/pump station, main line valve, pipe junction, etc.) upstream of the failure scene and terminate at a logical point downstream of the failure scene. Include specific facilities along the pipeline and use mile post and/or stationing (as necessary) to clarify the location of facilities. Include the States, counties/parishes, and cities through which the pipeline passes. For offshore pipelines, provide the upstream platform and (for pipelines outside State waters) provide the BOEM Region and offshore areas through which the pipeline passes. Example: The failure occurred at mile post (MP) 55.2 on Operator’s Sample Pipeline System 20‐ inch Line A in Florida. Line A is one of three parallel natural gas transmission pipelines in a common right‐of‐way. In south Florida, Line A runs southerly from MLV 10‐1 at Mayberry Junction (MP 10.1) through Compressor Station 11 (MP 40.5) to Compressor Station 12 (MP 78). There are 5 main line block valves in this pipeline segment; MLV 10‐1 (MP 10.1), MLV 10‐2 (MP 38), MLV 112 (MP 43.6), MLV 11‐3 (MP 50.6) and MLV 11‐4 (MP 64.8). Line A passes through portions of Orange, Osceola, Brevard, and St. Lucie Counties, Florida. Failed Pipe: [Data from the actual joint of pipe that failed on the failed pipeline] Nominal Diameter: Wall thickness: Grade: Coating: Seam Type: Manufacturer: Year Manufactured: Failure Investigation Policy Effective Date: December 11, 2019 45#
Attachment 1, passage 274Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ Impressed current CP System: [Yes or No] Failed Component: [If a component failed, provide details of the failed component.] Failed Pipe Pressure Data: [At the point of failure, if known.] MAOP/MOP: [The intent is to obtain the MAOP/MOP at the point of failure. If the reported MAOP/MOP is not at the point of failure, describe the location where the MAOP/ MOP pertains and its relative position to the point of failure.] Example: The MAOP of 985 psig is at the discharge of Compressor Station X at mile post 10, which is located 7.5 miles upstream of the point of failure at mile post 17.5. When was MAOP/MOP established? How was the MAOP/MOP established? [Design, hydrostatic testing, grandfather, other] Operating pressure at the time of failure? [The intent is to obtain the pressure at the point of failure. However, this usually must be calculated using upstream and/or downstream pressure readings and pressure gradients. If unable to obtain the pressure at the point of failure, list the available upstream and/or downstream pressure readings and describe where these pressure readings were taken relative to the point of failure.] Example: The operating pressure of 980 psig is at the discharge of Compressor Station X at mile post 10, which is located 7.5 miles upstream of the point of failure at mile post 17.5. III. CURRENT STATUS – PLANS FOR CONTINUED OPERATION OR RESTART Current Status and of Failed Pipeline: Shut‐in: Yes [Describe the shut‐in pipeline using specific end points such as valves, compressor/pump stations, etc. along with mile post and/or stationing. Also, explain if other segments of the failed pipeline remain in operation.] Shut‐in: No Restart Plan: Date failed pipeline was or is planned to be returned to service: Maximum pressure at which the pipeline is (or will) operate: Is or will there be a pressure restriction in place? [Explain any pressure restrictions in place relative to MAOP/MOP and operating pressure at the time of the failure.] Repairs planned, initiated, or completed: [Briefly describe] Potential Risks or Threats if Continued Operation or Restart of the Failed Pipeline: Failure Investigation Policy Effective Date: December 11, 2019 46#
Attachment 1, passage 275Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ Life and property: Describe and quantify (to the extent practical) any potential impacts (i.e., risks) to life and/or property that could result along the ROW of failed pipeline from the continued operation (or restart) of the failed pipeline. Environment: Taking into account known geological conditions, soil characteristics, HCAs, unusually sensitive areas, etc., describe and quantify (to the extent practical) any potential impacts (i.e., risks) to the environment that could result from the continued operation (or restart) of the failed pipeline. Describe any expected environmental impacts due to restoration and/or clean‐up activities at or near the failure scene such as significant soil removal or groundwater treatment. Current Status of Other Pipelines in Common ROW: [If the pipeline system has multiple pipelines in a common ROW, describe the status of the parallel pipelines (operating, shut‐in, under pressure reduction, etc.).] IV. PRELIMINARY INVESTIGATION Initial Suspected Cause: [Describe any suspected cause noted during preliminary investigations such as visual inspections in the ditch, ILI reviews, etc.] Example: Line A between Mayberry Junction and Compressor Station 12 was constructed of 20‐ inch OD x 0.250‐inch w.t., X‐52 low frequency electric resistance welded (LF ERW) pipe manufactured by Youngstown Sheet and Tube in 1959. Pipe manufactured prior to 1970 with LF ERW longitudinal seams are a known threat to pipeline integrity under certain conditions. A visual inspection of the failed pipe by personnel on‐scene appeared to show longitudinal seam failure as a probable cause of the failure. Previous History of Significant Releases from the Failed Pipeline: [Describe any previous significant discharge events on the failed pipeline where a failure analysis was performed.] Prior Assessments of the Failed Pipeline: [Describe and quantify (to the extent practical) any prior assessments (hydrostatic testing, ILIs, close‐interval surveys, direct assessments, other) involving the failed pipeline. Provide the limits (mile post, stationing, other method, of the assessments.] Failure Investigation Policy Effective Date: December 11, 2019 47#
Attachment 1, passage 276Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ Examples: Failure Investigation Policy Effective Date: December 11, 2019 48 Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ Failure Investigation Policy Effective Date: December 11, 2019 49#
Attachment 1, passage 277Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ APPENDIX I: REGION ENFORCEMENT RECOMMENDATION LETTER TEMPLATE OFFICE OF PIPELINE SAFETY ACCIDENT INVESTIGATION DIVISION RECOMMENDATION OF PROBABLE VIOLATION CFR PART "[192 / 193 / 195]" [click to enter Date] "[Name of Region Director]" "[Region Name]" Region Director "[Region address]" Dear "[Name of Region Director]" : On "[date or range of dates of on-site investigation]" , an Investigator with the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), Accident Investigation Division conducted an investigation of the "[Company name]" failure of the "[Name the failed system]" at [City, State]. "[Briefly describe the system. The who, what, where, when, etc.]" The cause of the release was "[Describe the cause and contributing factors]" . The following are potential violation identified during the investigation. Operator, Location, & Consequences Date of Failure Commodity Released City, County, State OpID & Operator Name Failure Investigation Policy Effective Date: December 11, 2019 50#
Attachment 1, passage 278Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ Unit # & Unit Name SMART Activity # Milepost / Location Type of Failure Fatalities Injuries Description of the Area Impacted Property Damage 1. [cite the regulation and title] [quote the regulation] [describe the probable violation] The first sentence in this section should describe the allegation by using the same language and terminology from the regulation. Phrase the allegation in terms of the operator’s failure to take a required action, or in terms of the operator doing something that was prohibited. When describing the operator’s conduct, use the past tense to relate actions that occurred prior to the notice letter being issued. For example, a probable violation of §192.74(a) would be stated "ACME Gas Company failed to inspect and partially operate transmission line valves that might be required during an emergency at intervals not exceeding 15 months, but at least once per calendar year." Then, describe the specific facts and circumstances that you intend to rely upon as proof of the alleged violation. Finally, briefly describe how these facts become a violation of the regulation. [state the specific evidence upon which the probable violation is based] Or, a description of the evidence may be included in the paragraph(s) above. 2. [cite the regulation and title] [quote the regulation] Failure Investigation Policy Effective Date: December 11, 2019 51#
Attachment 1, passage 279Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ [describe the probable violation] Please let us know if you have questions with respect to this matter. Sincerely, Peter Katchmar Director, Accident Investigation Division Pipeline and Hazardous Materials Safety Administration Enclosures: Failure Investigation Report cc: PHP-8 Investigator’s First Initial and Last Name Failure Investigation Policy Effective Date: December 11, 2019 52#
Attachment 1, passage 280Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ APPENDIX J: PHMSA AID SAFETY RECOMMENDATION MEMO TEMPLATE/EXAMPLE Memorandum U. S. Department of Transportation Pipeline and Hazardous Materials Safety Administration ACCIDENT: CITY, STATE, PRODUCT RELEASED ACCIDENT DATE ACTION: FOR DAAFO REVIEW DATE: (REPORT DATE) FROM: (NAME) AID DIRECTOR TO: (NAME) DAAFO RE: PHMSA AID INTERNAL SAFETY RECOMMENDATION Executive Summary On 4/2/2010, a release occurred on the Bridger Lake, LLC (Bridger Lake) 6” crude oil line near Robertson, WY. PHMSA’s investigation revealed that the pipeline failed due to the line being over pressured by pumping against a closed valve. Bridger Lake maintained that this line was an unregulated rural gathering line. PHMSA maintained that this line is an interstate transmission line as defined in 49 CFR §195.1(a)(2). PHMSA issued a Corrective Action Order (CAO) to Bridger Lake on April 30, 2010. The line was repaired on April 11, 2010, but has not been restarted since the release. Conclusions 1. 2. PHMSA finds that the root cause of this failure was that there was no mechanical over- pressure protection provided to protect the 6-inch transmission pipeline. Contributory Causes PHMSA Inspector took the operator’s word that this line was a gravity line which would have made it an unregulated facility. No procedures for end-of-month shut down of the LACT units to perform the monthly gauging to prevent someone from turning on the LACT units while the end of line valve was shut. There were no LOTO procedures for the LACT units or physical overpressure protections designed into the system which are a very basic hazard barrier required to protect a pipeline. Previous damage to the pipe - the pipeline ruptured at a dent in the pipe near MP 16.5. Recommendations 3. Failure Investigation Policy Effective Date: December 11, 2019 53#
Attachment 1, passage 281Pipeline and Hazardous Materials Safety Administration Failure Investigation Policy Office of Pipeline Safety Policy Number: PHP-5340.9B _____________________________________________________________________________________________________________________________________________________________ 1. 2. 3. 4. 5. Do not conduct jurisdictional or regulatory oversight interpretation over the phone. Inspectors need to follow up with field verification. Inspectors conducting inspections on downstream pipelines should confirm the regulatory status of all feeder lines during the course of their inspections. In this case, the Bridger Lake Pipeline fed into the Plains All-American Pipeline System and was obviously jurisdictional. Our inspectors need to look at the big picture when conducting field and record inspections. Issue a CAO like we did and schedule for periodic inspections if and when the pipeline comes back on line. Note: PHMSA issued a CAO to Bridger Lake LLC and has since entered into a Consent Agreement. PHMSA’s Engineering Group should consider disseminating this event to all Regions in an effort to educate all PHMSA Inspectors on the importance of an operator having procedures specific enough to prevent little mistakes from becoming large events with large consequences. Failure Investigation Policy Effective Date: December 11, 2019 54#
Attachment 1, passage 282Appendix F – State Program Certification/Agreement Status CY2024 STATES PARTICIPATING IN THE FEDERAL/STATE COOPERATIVE GAS AND HAZARDOUS LIQUID PIPELINE SAFETY PROGRAMS NATURAL GAS PROGRAM State Agencies Under Section 60105(a) Certification (51) Alabama Louisiana Ohio Arizona Maine Oklahoma Arkansas PSC Maryland Oregon Arkansas Oil and Gas Massachusetts Pennsylvania California PUC1 Michigan Puerto Rico Colorado6 Minnesota Rhode Island Connecticut Mississippi South Carolina Delaware Missouri2 South Dakota District of Columbia Montana Tennessee Florida PSC3 Nebraska Texas Georgia Nevada Utah Idaho New Hampshire Vermont Illinois New Jersey Virginia4 Indiana New Mexico Washington Iowa New York West Virginia Kansas North Carolina Wisconsin5 Kentucky North Dakota Wyoming State Agencies Under Section 60106(a) Agreement (3) California Public Utilities Commission (Municipal operators) Colorado Public Utilities Commission (Municipal operators) Virginia State Corporation Commission (Municipal operators) State Agencies Acting as Interstate Agents (8) Arizona Michigan Ohio Connecticut Minnesota Washington Iowa New York 1 California PUC does not exercise jurisdiction over operators of non-utility owned intrastate gas transmission pipelines, gathering pipelines, any offshore facilities and Master Meter facilities that do not serve Mobile Home Parks. California PUC has a 60106 agreement for oversight of operators of Municipal facilities. 2 Missouri PSC does not exercise jurisdiction over LPG operators 3 Florida PSC does not exercise jurisdiction over LPG operators 4 Virginia SCC has a 60106 agreement for oversight of operators of Municipal facilities 5 Wisconsin does not exercise jurisdiction over LPG operators 6 Colorado PUC has a 60106 agreement for oversight of operators of Municipal facilities Revised December 2023#
Attachment 1, passage 283HAZARDOUS LIQUID PROGRAM State Agencies Under Section 60105(a) Certification (15) Alabama Maryland Pennsylvania Arizona Minnesota Texas California (Fire Marshal) New York Virginia Indiana New Mexico Washington Louisiana Oklahoma West Virginia State Agencies Acting as Interstate Agents (5) Arizona New York Washington Minnesota Virginia Revised December 2023 Guidelines for States Participating in the Pipeline Safety Program Appendix G CHAPTER II—OFFICE OF MANAGEMENT AND BUDGET GUIDANCE Part Page 200 Uniform administrative requirements, cost prin- ciples, and audit requirements for Federal awards .................................................................. 81 201–299 [Reserved] 79 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00091 Fmt 8008 Sfmt 8008 Y:\SGML\253005.XXX 253005#
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Attachment 1, passage 285PART 200—UNIFORM ADMINISTRA- TIVE REQUIREMENTS, COST PRIN- CIPLES, AND AUDIT REQUIRE- MENTS FOR FEDERAL AWARDS Subpart A—Acronyms and Definitions ACRONYMS Sec. 200.0 Acronyms. 200.1 Definitions. 200.2 Acquisition cost. 200.3 Advance payment. 200.4 Allocation. 200.5 Audit finding. 200.6 Auditee. 200.7 Auditor. 200.8 Budget. 200.9 Central service cost allocation plan. 200.10 Catalog of Federal Domestic Assist- ance (CFDA) number. 200.11 CFDA program title. 200.12 Capital assets. 200.13 Capital expenditures. 200.14 Claim. 200.15 Class of Federal awards. 200.16 Closeout. 200.17 Cluster of programs. 200.18 Cognizant agency for audit. 200.19 Cognizant agency for indirect costs. 200.20 Computing devices. 200.21 Compliance supplement. 200.22 Contract. 200.23 Contractor. 200.24 Cooperative agreement. 200.25 Cooperative audit resolution. 200.26 Corrective action. 200.27 Cost allocation plan. 200.28 Cost objective. 200.29 Cost sharing or matching. 200.30 Cross-cutting audit finding. 200.31 [Reserved] 200.32 Data Universal Numbering System (DUNS) number. 200.33 Equipment. 200.34 Expenditures. 200.35 Federal agency. 200.36 Federal Audit Clearinghouse (FAC). 200.37 Federal awarding agency. 200.38 Federal award. 200.39 Federal award date. 200.40 Federal financial assistance. 200.41 Federal interest. 200.42 Federal program. 200.43 Federal share. 200.44 Final cost objective. 200.45 Fixed amount awards. 200.46 Foreign public entity. 200.47 Foreign organization. 200.48 General purpose equipment. 200.49 Generally Accepted Accounting Prin- ciples (GAAP). 200.50 Generally Accepted Government Au- diting Standards (GAGAS). 200.51 Grant agreement. 200.52 Hospital. 200.53 Improper payment. 200.54 Indian tribe (or ‘‘federally recognized Indian tribe’’). 200.55 Institutions of Higher Education (IHEs). 200.56 Indirect (facilities & administrative (F&A)) costs. 200.57 Indirect cost rate proposal. 200.58 Information technology systems. 200.59 Intangible property. 200.60 Intermediate cost objective. 200.61 Internal controls. 200.62 Internal control over compliance re- quirements for Federal awards. 200.63 Loan. 200.64 Local government. 200.65 Major program. 200.66 Management decision. 200.67 Micro-purchase. 200.68 Modified Total Direct Cost (MTDC). 200.69 Non-Federal entity. 200.70 Nonprofit organization. 200.71 Obligations. 200.72 Office of Management and Budget (OMB). 200.73 Oversight agency for audit. 200.74 Pass-through entity. 200.75 Participant support costs. 200.76 Performance goal. 200.77 Period of performance. 200.78 Personal property. 200.79 Personally Identifiable Information (PII). 200.80 Program income. 200.81 Property. 200.82 Protected Personally Identifiable In- formation (Protected PII). 200.83 Project cost. 200.84 Questioned cost. 200.85 Real property. 200.86 Recipient. 200.87 Research and Development (R&D). 200.88 Simplified acquisition threshold. 200.89 Special purpose equipment. 200.90 State. 200.91 Student Financial Aid (SFA). 200.92 Subaward. 200.93 Subrecipient. 200.94 Supplies. 200.95 Termination. 200.96 Third-party in-kind contributions. 200.97 Unliquidated obligations. 200.98 Unobligated balance. 200.99 Voluntary committed cost sharing. Subpart B—General Provisions 200.100 Purpose. 200.101 Applicability. 81 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00093 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 286Pt. 200 200.102 Exceptions. 200.103 Authorities. 200.104 Supersession. 200.105 Effect on other issuances. 200.106 Agency implementation. 200.107 OMB responsibilities. 200.108 Inquiries. 200.109 Review date. 200.110 Effective/applicability date. 200.111 English language. 200.112 Conflict of interest. 200.113 Mandatory disclosures. Subpart C—Pre-Federal Award Require- ments and Contents of Federal Awards 200.200 Purpose. 200.201 Use of grant agreements (including fixed amount awards), cooperative agree- ments, and contracts. 200.202 Program planning and design. 200.203 Requirement to provide public no- tice of Federal financial assistance pro- grams. 200.204 Notices of funding opportunities. 200.205 Federal awarding agency review of merit of proposals. 200.206 Federal awarding agency review of risk posed by applicants. 200.207 Standard application requirements. 200.208 Specific conditions. 200.209 Certifications and representations. 200.210 Pre-award costs. 200.211 Information contained in a Federal award. 200.212 Public access to Federal award infor- mation. 200.213 Reporting a determination that a non-Federal entity is not qualified for a Federal award. 200.214 Suspension and debarment. 200.215 Never contract with the enemy. 200.216 Prohibition on certain telecommuni- cations and video surveillance services or equipment. Subpart D—Post Federal Award Requirements 200.300 Statutory and national policy re- quirements. 200.301 Performance measurement. 200.302 Financial management. 200.303 Internal controls. 200.304 Bonds. 200.305 Federal payment. 200.306 Cost sharing or matching. 200.307 Program income. 200.308 Revision of budget and program plans. 200.309 Modifications to period of perform- ance. 2 CFR Ch. II (1–1–21 Edition) 200.312 Federally-owned and exempt prop- erty. 200.313 Equipment. 200.314 Supplies. 200.315 Intangible property. 200.316 Property trust relationship. PROCUREMENT STANDARDS 200.317 Procurements by states. 200.318 General procurement standards. 200.319 Competition. 200.320 Methods of procurement to be fol- lowed. 200.321 Contracting with small and minority businesses, women’s business enterprises, and labor surplus area firms. 200.322 Domestic preferences for procure- ments. 200.323 Procurement of recovered materials. 200.324 Contract cost and price. 200.325 Federal awarding agency or pass- through entity review. 200.326 Bonding requirements. 200.327 Contract provisions. PERFORMANCE AND FINANCIAL MONITORING AND REPORTING 200.328 Financial reporting. 200.329 Monitoring and reporting program performance. 200.330 Reporting on real property. SUBRECIPIENT MONITORING AND MANAGEMENT 200.331 Subrecipient and contractor deter- minations. 200.332 Requirements for pass-through enti- ties. 200.333 Fixed amount subawards. RECORD RETENTION AND ACCESS 200.334 Retention requirements for records. 200.335 Requests for transfer of records. 200.336 Methods for collection, trans- mission, and storage of information. 200.337 Access to records. 200.338 Restrictions on public access to records. REMEDIES FOR NONCOMPLIANCE 200.339 Remedies for noncompliance. 200.340 Termination. 200.341 Notification of termination require- ment. 200.342 Opportunities to object, hearings, and appeals. 200.343 Effects of suspension and termi- nation. CLOSEOUT PROPERTY STANDARDS 200.310 Insurance coverage. 200.311 Real property. 200.344 Closeout. POST-CLOSEOUT ADJUSTMENTS AND CONTINUING RESPONSIBILITIES 200.345 Post-closeout adjustments and con- tinuing responsibilities. 82 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00094 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 287OMB Guidance Pt. 200 COLLECTION OF AMOUNTS DUE 200.346 Collection of amounts due. Subpart E—Cost Principles GENERAL PROVISIONS 200.400 Policy guide. 200.401 Application. BASIC CONSIDERATIONS 200.402 Composition of costs. 200.403 Factors affecting allowability of costs. 200.404 Reasonable costs. 200.405 Allocable costs. 200.406 Applicable credits. 200.407 Prior written approval (prior ap- proval). 200.408 Limitation on allowance of costs. 200.409 Special considerations. 200.410 Collection of unallowable costs. 200.411 Adjustment of previously negotiated indirect (F&A) cost rates containing un- allowable costs. DIRECT AND INDIRECT (F&A) COSTS 200.412 Classification of costs. 200.413 Direct costs. 200.414 Indirect (F&A) costs. 200.415 Required certifications. SPECIAL CONSIDERATIONS FOR STATES, LOCAL GOVERNMENTS AND INDIAN TRIBES 200.416 Cost allocation plans and indirect cost proposals. 200.417 Interagency service. SPECIAL CONSIDERATIONS FOR INSTITUTIONS OF HIGHER EDUCATION 200.418 Costs incurred by states and local governments. 200.419 Cost accounting standards and dis- closure statement. GENERAL PROVISIONS FOR SELECTED ITEMS OF COST 200.420 Considerations for selected items of cost. 200.421 Advertising and public relations. 200.422 Advisory councils. 200.423 Alcoholic beverages. 200.424 Alumni/ae activities. 200.425 Audit services. 200.426 Bad debts. 200.427 Bonding costs. 200.428 Collections of improper payments. 200.429 Commencement and convocation costs. 200.430 Compensation—personal services. 200.431 Compensation—fringe benefits. 200.432 Conferences. 200.433 Contingency provisions. 200.434 Contributions and donations. 200.435 Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringements. 200.436 Depreciation. 200.437 Employee health and welfare costs. 200.438 Entertainment costs. 200.439 Equipment and other capital expend- itures. 200.440 Exchange rates. 200.441 Fines, penalties, damages and other settlements. 200.442 Fund raising and investment man- agement costs. 200.443 Gains and losses on disposition of de- preciable assets. 200.444 General costs of government. 200.445 Goods or services for personal use. 200.446 Idle facilities and idle capacity. 200.447 Insurance and indemnification. 200.448 Intellectual property. 200.449 Interest. 200.450 Lobbying. 200.451 Losses on other awards or contracts. 200.452 Maintenance and repair costs. 200.453 Materials and supplies costs, includ- ing costs of computing devices. 200.454 Memberships, subscriptions, and pro- fessional activity costs. 200.455 Organization costs. 200.456 Participant support costs. 200.457 Plant and security costs. 200.458 Pre-award costs. 200.459 Professional service costs. 200.460 Proposal costs. 200.461 Publication and printing costs. 200.462 Rearrangement and reconversion costs. 200.463 Recruiting costs. 200.464 Relocation costs of employees. 200.465 Rental costs of real property and equipment. 200.466 Scholarships and student aid costs. 200.467 Selling and marketing costs. 200.468 Specialized service facilities. 200.469 Student activity costs. 200.470 Taxes (including Value Added Tax). 200.471 Telecommunication costs and video surveillance costs. 200.472 Termination costs. 200.473 Training and education costs. 200.474 Transportation costs. 200.475 Travel costs. 200.476 Trustees. Subpart F—Audit Requirements GENERAL 200.500 Purpose. AUDITS 200.501 Audit requirements. 200.502 Basis for determining Federal awards expended. 200.503 Relation to other audit require- ments. 200.504 Frequency of audits. 83 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00095 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 288§ 200.0 200.505 Sanctions. 200.506 Audit costs. 200.507 Program-specific audits. AUDITEES 200.508 Auditee responsibilities. 200.509 Auditor selection. 200.510 Financial statements. 200.511 Audit findings follow-up. 200.512 Report submission. FEDERAL AGENCIES 200.513 Responsibilities. AUDITORS 200.514 Scope of audit. 200.515 Audit reporting. 200.516 Audit findings. 200.517 Audit documentation. 200.518 Major program determination. 200.519 Criteria for Federal program risk. 200.520 Criteria for a low-risk auditee. MANAGEMENT DECISIONS 200.521 Management decision. APPENDIX I TO PART 200—FULL TEXT OF NO- TICE OF FUNDING OPPORTUNITY APPENDIX II TO PART 200—CONTRACT PROVI- SIONS FOR NON-FEDERAL ENTITY CON- TRACTS UNDER FEDERAL AWARDS APPENDIX III TO PART 200—INDIRECT (F&A) COSTS IDENTIFICATION AND ASSIGNMENT, AND RATE DETERMINATION FOR INSTITU- TIONS OF HIGHER EDUCATION (IHES) APPENDIX IV TO PART 200—INDIRECT (F&A) COSTS IDENTIFICATION AND ASSIGNMENT, AND RATE DETERMINATION FOR NONPROFIT ORGANIZATIONS APPENDIX V TO PART 200— STATE/LOCAL GOV- ERNMENTWIDE CENTRAL SERVICE COST AL- LOCATION PLANS APPENDIX VI TO PART 200—PUBLIC ASSIST- ANCE COST ALLOCATION PLANS APPENDIX VII TO PART 220—STATES AND LOCAL GOVERNMENT AND INDIAN TRIBE IN- DIRECT COST PROPOSALS APPENDIX VIII TO PART 200—NONPROFIT OR- GANIZATIONS EXEMPTED FROM SUBPART E OF PART 200 APPENDIX IX TO PART 200—HOSPITAL COST PRINCIPLES APPENDIX X TO PART 200—DATA COLLECTION FORM (FORM SF–SAC) APPENDIX XI TO PART 200—COMPLIANCE SUP- PLEMENT APPENDIX XII TO PART 200—AWARD TERM AND CONDITION FOR RECIPIENT INTEGRITY AND PERFORMANCE MATTERS AUTHORITY: 31 U.S.C. 503 SOURCE: 78 FR 78608, Dec. 26, 2013, unless otherwise noted. 2 CFR Ch. II (1–1–21 Edition) Subpart A—Acronyms and Definitions ACRONYMS § 200.0 Acronyms. ACRONYM TERM CAS Cost Accounting Standards CFR Code of Federal Regulations CMIA Cash Management Improve- ment Act COG Councils Of Governments COSO Committee of Sponsoring Orga- nizations of the Treadway Commis- sion EPA Environmental Protection Agen cy ERISA Employee Retirement Income Security Act of 1974 (29 U.S.C. 1301– 1461) EUI Energy Usage Index F&A Facilities and Administration FAC Federal Audit Clearinghouse FAIN Federal Award Identification Number FAPIIS Federal Awardee Perform- ance and Integrity Information Sys- tem FAR Federal Acquisition Regulation FFATA Federal Funding Account- ability and Transparency Act of 2006 or Transparency Act—Public Law 109–282, as amended by section 6202(a) of Public Law 110–252 (31 U.S.C. 6101) FICA Federal Insurance Contribu- tions Act FOIA Freedom of Information Act FR Federal Register FTE Full-time equivalent GAAP Generally Accepted Account- ing Principles GAGAS Generally Accepted Govern- ment Auditing Standards GAO Government Accountability Of- fice GOCO Government owned, contractor operated GSA General Services Administration IBS Institutional Base Salary IHE Institutions of Higher Education IRC Internal Revenue Code ISDEAA Indian Self-Determination and Education and Assistance Act MTC Modified Total Cost MTDC Modified Total Direct Cost NFE Non-Federal Entity 84 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00096 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 289OMB Guidance § 200.1 OMB Office of Management and Budg- et PII Personally Identifiable Informa- tion PMS Payment Management System PRHP Post-retirement Health Plans PTE Pass-through Entity REUI Relative Energy Usage Index SAM System for Award Management SFA Student Financial Aid SNAP Supplemental Nutrition Assist- ance Program SPOC Single Point of Contact TANF Temporary Assistance for Needy Families TFM Treasury Financial Manual U.S.C. United States Code VAT Value Added Tax [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75880, Dec. 19, 2014; 80 FR 43308, July 22, 2015; 85 FR 49529, Aug. 13, 2020] § 200.1 Definitions. These are the definitions for terms used in this part. Different definitions may be found in Federal statutes or regulations that apply more specifi- cally to particular programs or activi- ties. These definitions could be supple- mented by additional instructional in- formation provided in governmentwide standard information collections. For purposes of this part, the following definitions apply: Acquisition cost means the cost of the asset including the cost to ready the asset for its intended use. Acquisition cost for equipment, for example, means the net invoice price of the equipment, including the cost of any modifica- tions, attachments, accessories, or aux- iliary apparatus necessary to make it usable for the purpose for which it is acquired. Acquisition costs for soft- ware includes those development costs capitalized in accordance with gen- erally accepted accounting principles (GAAP). Ancillary charges, such as taxes, duty, protective in transit insur- ance, freight, and installation may be included in or excluded from the acqui- sition cost in accordance with the non- Federal entity’s regular accounting practices. Advance payment means a payment that a Federal awarding agency or pass-through entity makes by any ap- propriate payment mechanism, includ- ing a predetermined payment schedule, before the non-Federal entity disburses the funds for program purposes. Allocation means the process of as- signing a cost, or a group of costs, to one or more cost objective(s), in rea- sonable proportion to the benefit pro- vided or other equitable relationship. The process may entail assigning a cost(s) directly to a final cost objective or through one or more intermediate cost objectives. Assistance listings refers to the pub- licly available listing of Federal assist- ance programs managed and adminis- tered by the General Services Adminis- tration, formerly known as the Catalog of Federal Domestic Assistance (CFDA). Assistance listing number means a unique number assigned to identify a Federal Assistance Listings, formerly known as the CFDA Number. Assistance listing program title means the title that corresponds to the Fed- eral Assistance Listings Number, for- merly known as the CFDA program title. Audit finding means deficiencies which the auditor is required by §200.516(a) to report in the schedule of findings and questioned costs. Auditee means any non-Federal enti- ty that expends Federal awards which must be audited under subpart F of this part. Auditor means an auditor who is a public accountant or a Federal, State, local government, or Indian tribe audit organization, which meets the general standards specified for external audi- tors in generally accepted government auditing standards (GAGAS). The term auditor does not include internal audi- tors of nonprofit organizations. Budget means the financial plan for the Federal award that the Federal awarding agency or pass-through enti- ty approves during the Federal award process or in subsequent amendments to the Federal award. It may include the Federal and non-Federal share or only the Federal share, as determined by the Federal awarding agency or pass-through entity. Budget period means the time inter- val from the start date of a funded por- tion of an award to the end date of that funded portion during which recipients are authorized to expend the funds 85 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00097 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 290§ 200.1 awarded, including any funds carried forward or other revisions pursuant to §200.308. Capital assets means: (1) Tangible or intangible assets used in operations having a useful life of more than one year which are capital- ized in accordance with GAAP. Capital assets include: (i) Land, buildings (facilities), equip- ment, and intellectual property (in- cluding software) whether acquired by purchase, construction, manufacture, exchange, or through a lease accounted for as financed purchase under Govern- ment Accounting Standards Board (GASB) standards or a finance lease under Financial Accounting Standards Board (FASB) standards; and (ii) Additions, improvements, modi- fications, replacements, rearrange- ments, reinstallations, renovations or alterations to capital assets that mate- rially increase their value or useful life (not ordinary repairs and mainte- nance). (2) For purpose of this part, capital assets do not include intangible right- to-use assets (per GASB) and right-to- use operating lease assets (per FASB). For example, assets capitalized that recognize a lessee’s right to control the use of property and/or equipment for a period of time under a lease contract. See also §200.465. Capital expenditures means expendi- tures to acquire capital assets or ex- penditures to make additions, improve- ments, modifications, replacements, rearrangements, reinstallations, ren- ovations, or alterations to capital as- sets that materially increase their value or useful life. Central service cost allocation plan means the documentation identifying, accumulating, and allocating or devel- oping billing rates based on the allow- able costs of services provided by a State or local government or Indian tribe on a centralized basis to its de- partments and agencies. The costs of these services may be allocated or billed to users. Claim means, depending on the con- text, either: (1) A written demand or written as- sertion by one of the parties to a Fed- eral award seeking as a matter of right: 2 CFR Ch. II (1–1–21 Edition) (i) The payment of money in a sum certain; (ii) The adjustment or interpretation of the terms and conditions of the Fed- eral award; or (iii) Other relief arising under or re- lating to a Federal award. (2) A request for payment that is not in dispute when submitted. Class of Federal awards means a group of Federal awards either awarded under a specific program or group of pro- grams or to a specific type of non-Fed- eral entity or group of non-Federal en- tities to which specific provisions or exceptions may apply. Closeout means the process by which the Federal awarding agency or pass- through entity determines that all ap- plicable administrative actions and all required work of the Federal award have been completed and takes actions as described in §200.344. Cluster of programs means a grouping of closely related programs that share common compliance requirements. The types of clusters of programs are re- search and development (R&D), student financial aid (SFA), and other clusters. ‘‘Other clusters’’ are as defined by OMB in the compliance supplement or as designated by a State for Federal awards the State provides to its sub- recipients that meet the definition of a cluster of programs. When designating an ‘‘other cluster,’’ a State must iden- tify the Federal awards included in the cluster and advise the subrecipients of compliance requirements applicable to the cluster, consistent with §200.332(a). A cluster of programs must be consid- ered as one program for determining major programs, as described in §200.518, and, with the exception of R&D as described in §200.501(c), wheth- er a program-specific audit may be elected. Cognizant agency for audit means the Federal agency designated to carry out the responsibilities described in §200.513(a). The cognizant agency for audit is not necessarily the same as the cognizant agency for indirect costs. A list of cognizant agencies for audit can be found on the Federal Audit Clear- inghouse (FAC) website. Cognizant agency for indirect costs means the Federal agency responsible 86 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00098 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 291OMB Guidance § 200.1 for reviewing, negotiating, and approv- ing cost allocation plans or indirect cost proposals developed under this part on behalf of all Federal agencies. The cognizant agency for indirect cost is not necessarily the same as the cog- nizant agency for audit. For assign- ments of cognizant agencies see the following: (1) For Institutions of Higher Edu- cation (IHEs): Appendix III to this part, paragraph C.11. (2) For nonprofit organizations: Ap- pendix IV to this part, paragraph C.2.a. (3) For State and local governments: Appendix V to this part, paragraph F.1. (4) For Indian tribes: Appendix VII to this part, paragraph D.1. Compliance supplement means an an- nually updated authoritative source for auditors that serves to identify exist- ing important compliance require- ments that the Federal Government expects to be considered as part of an audit. Auditors use it to understand the Federal program’s objectives, pro- cedures, and compliance requirements, as well as audit objectives and sug- gested audit procedures for deter- mining compliance with the relevant Federal program. Computing devices means machines used to acquire, store, analyze, process, and publish data and other information electronically, including accessories (or ‘‘peripherals’’) for printing, trans- mitting and receiving, or storing elec- tronic information. See also the defini- tions of supplies and information tech- nology systems in this section. Contract means, for the purpose of Federal financial assistance, a legal in- strument by which a recipient or sub- recipient purchases property or serv- ices needed to carry out the project or program under a Federal award. For additional information on subrecipient and contractor determinations, see §200.331. See also the definition of subaward in this section. Contractor means an entity that re- ceives a contract as defined in this sec- tion. Cooperative agreement means a legal instrument of financial assistance be- tween a Federal awarding agency and a recipient or a pass-through entity and a subrecipient that, consistent with 31 U.S.C. 6302–6305: (1) Is used to enter into a relation- ship the principal purpose of which is to transfer anything of value to carry out a public purpose authorized by a law of the United States (see 31 U.S.C. 6101(3)); and not to acquire property or services for the Federal Government or pass-through entity’s direct benefit or use; (2) Is distinguished from a grant in that it provides for substantial involve- ment of the Federal awarding agency in carrying out the activity con- templated by the Federal award. (3) The term does not include: (i) A cooperative research and devel- opment agreement as defined in 15 U.S.C. 3710a; or (ii) An agreement that provides only: (A) Direct United States Government cash assistance to an individual; (B) A subsidy; (C) A loan; (D) A loan guarantee; or (E) Insurance. Cooperative audit resolution means the use of audit follow-up techniques which promote prompt corrective action by improving communication, fostering collaboration, promoting trust, and de- veloping an understanding between the Federal agency and the non-Federal en- tity. This approach is based upon: (1) A strong commitment by Federal agency and non-Federal entity leader- ship to program integrity; (2) Federal agencies strengthening partnerships and working coopera- tively with non-Federal entities and their auditors; and non-Federal enti- ties and their auditors working coop- eratively with Federal agencies; (3) A focus on current conditions and corrective action going forward; (4) Federal agencies offering appro- priate relief for past noncompliance when audits show prompt corrective action has occurred; and (5) Federal agency leadership sending a clear message that continued failure to correct conditions identified by au- dits which are likely to cause improper payments, fraud, waste, or abuse is un- acceptable and will result in sanctions. Corrective action means action taken by the auditee that: (1) Corrects identified deficiencies; (2) Produces recommended improve- ments; or 87 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00099 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 292§ 200.1 (3) Demonstrates that audit findings are either invalid or do not warrant auditee action. Cost allocation plan means central service cost allocation plan or public assistance cost allocation plan. Cost objective means a program, func- tion, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc. A cost objective may be a major function of the non-Federal entity, a particular service or project, a Federal award, or an indirect (Facilities & Administra- tive (F&A)) cost activity, as described in subpart E of this part. See also the definitions of final cost objective and in- termediate cost objective in this section. Cost sharing or matching means the portion of project costs not paid by Federal funds or contributions (unless otherwise authorized by Federal stat- ute). See also §200.306. Cross-cutting audit finding means an audit finding where the same under- lying condition or issue affects all Fed- eral awards (including Federal awards of more than one Federal awarding agency or pass-through entity). Disallowed costs means those charges to a Federal award that the Federal awarding agency or pass-through enti- ty determines to be unallowable, in ac- cordance with the applicable Federal statutes, regulations, or the terms and conditions of the Federal award. Discretionary award means an award in which the Federal awarding agency, in keeping with specific statutory au- thority that enables the agency to ex- ercise judgment (‘‘discretion’’), selects the recipient and/or the amount of Fed- eral funding awarded through a com- petitive process or based on merit of proposals. A discretionary award may be selected on a non-competitive basis, as appropriate. Equipment means tangible personal property (including information tech- nology systems) having a useful life of more than one year and a per-unit ac- quisition cost which equals or exceeds the lesser of the capitalization level es- tablished by the non-Federal entity for financial statement purposes, or $5,000. See also the definitions of capital as- 2 CFR Ch. II (1–1–21 Edition) sets, computing devices, general purpose equipment, information technology sys- tems, special purpose equipment, and sup- plies in this section. Expenditures means charges made by a non-Federal entity to a project or program for which a Federal award was received. (1) The charges may be reported on a cash or accrual basis, as long as the methodology is disclosed and is con- sistently applied. (2) For reports prepared on a cash basis, expenditures are the sum of: (i) Cash disbursements for direct charges for property and services; (ii) The amount of indirect expense charged; (iii) The value of third-party in-kind contributions applied; and (iv) The amount of cash advance pay- ments and payments made to sub- recipients. (3) For reports prepared on an ac- crual basis, expenditures are the sum of: (i) Cash disbursements for direct charges for property and services; (ii) The amount of indirect expense incurred; (iii) The value of third-party in-kind contributions applied; and (iv) The net increase or decrease in the amounts owed by the non-Federal entity for: (A) Goods and other property re- ceived; (B) Services performed by employees, contractors, subrecipients, and other payees; and (C) Programs for which no current services or performance are required such as annuities, insurance claims, or other benefit payments. Federal agency means an ‘‘agency’’ as defined at 5 U.S.C. 551(1) and further clarified by 5 U.S.C. 552(f). Federal Audit Clearinghouse (FAC) means the clearinghouse designated by OMB as the repository of record where non-Federal entities are required to transmit the information required by subpart F of this part. Federal award has the meaning, de- pending on the context, in either para- graph (1) or (2) of this definition: (1)(i) The Federal financial assistance that a recipient receives directly from 88 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00100 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 293OMB Guidance § 200.1 a Federal awarding agency or indi- rectly from a pass-through entity, as described in §200.101; or (ii) The cost-reimbursement contract under the Federal Acquisition Regula- tions that a non-Federal entity re- ceives directly from a Federal award- ing agency or indirectly from a pass- through entity, as described in §200.101. (2) The instrument setting forth the terms and conditions. The instrument is the grant agreement, cooperative agreement, other agreement for assist- ance covered in paragraph (2) of the definition of Federal financial assistance in this section, or the cost-reimburse- ment contract awarded under the Fed- eral Acquisition Regulations. (3) Federal award does not include other contracts that a Federal agency uses to buy goods or services from a contractor or a contract to operate Federal Government owned, contractor operated facilities (GOCOs). (4) See also definitions of Federal fi- nancial assistance, grant agreement, and cooperative agreement. Federal award date means the date when the Federal award is signed by the authorized official of the Federal awarding agency. Federal financial assistance means (1) Assistance that non-Federal enti- ties receive or administer in the form of: (i) Grants; (ii) Cooperative agreements; (iii) Non-cash contributions or dona- tions of property (including donated surplus property); (iv) Direct appropriations; (v) Food commodities; and (vi) Other financial assistance (ex- cept assistance listed in paragraph (2) of this definition). (2) For §200.203 and subpart F of this part, Federal financial assistance also in- cludes assistance that non-Federal en- tities receive or administer in the form of: (i) Loans; (ii) Loan Guarantees; (iii) Interest subsidies; and (iv) Insurance. (3) For §200.216, Federal financial as- sistance includes assistance that non- Federal entities receive or administer in the form of: (i) Grants; (ii) Cooperative agreements; (iii) Loans; and (iv) Loan Guarantees. (4) Federal financial assistance does not include amounts received as reim- bursement for services rendered to in- dividuals as described in §200.502(h) and (i). Federal interest means, for purposes of §200.330 or when used in connection with the acquisition or improvement of real property, equipment, or supplies under a Federal award, the dollar amount that is the product of the: (1) The percentage of Federal partici- pation in the total cost of the real property, equipment, or supplies; and (2) Current fair market value of the property, improvements, or both, to the extent the costs of acquiring or im- proving the property were included as project costs. Federal program means: (1) All Federal awards which are as- signed a single Assistance Listings Number. (2) When no Assistance Listings Number is assigned, all Federal awards from the same agency made for the same purpose must be combined and considered one program. (3) Notwithstanding paragraphs (1) and (2) of this definition, a cluster of programs. The types of clusters of pro- grams are: (i) Research and development (R&D); (ii) Student financial aid (SFA); and (iii) ‘‘Other clusters,’’ as described in the definition of cluster of programs in this section. Federal share means the portion of the Federal award costs that are paid using Federal funds. Final cost objective means a cost ob- jective which has allocated to it both direct and indirect costs and, in the non-Federal entity’s accumulation sys- tem, is one of the final accumulation points, such as a particular award, in- ternal project, or other direct activity of a non-Federal entity. See also the definitions of cost objective and inter- mediate cost objective in this section. Financial obligations, when ref- erencing a recipient’s or subrecipient’s use of funds under a Federal award, means orders placed for property and services, contracts and subawards 89 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00101 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 294§ 200.1 made, and similar transactions that re- quire payment. Fixed amount awards means a type of grant or cooperative agreement under which the Federal awarding agency or pass-through entity provides a specific level of support without regard to ac- tual costs incurred under the Federal award. This type of Federal award re- duces some of the administrative bur- den and record-keeping requirements for both the non-Federal entity and Federal awarding agency or pass- through entity. Accountability is based primarily on performance and results. See §§200.102(c), 200.201(b), and 200.333. Foreign organization means an entity that is: (1) A public or private organization located in a country other than the United States and its territories that is subject to the laws of the country in which it is located, irrespective of the citizenship of project staff or place of performance; (2) A private nongovernmental orga- nization located in a country other than the United States that solicits and receives cash contributions from the general public; (3) A charitable organization located in a country other than the United States that is nonprofit and tax ex- empt under the laws of its country of domicile and operation, and is not a university, college, accredited degree- granting institution of education, pri- vate foundation, hospital, organization engaged exclusively in research or sci- entific activities, church, synagogue, mosque or other similar entities orga- nized primarily for religious purposes; or (4) An organization located in a coun- try other than the United States not recognized as a foreign public entity. Foreign public entity means: (1) A foreign government or foreign governmental entity; (2) A public international organiza- tion, which is an organization entitled to enjoy privileges, exemptions, and immunities as an international organi- zation under the International Organi- zations Immunities Act (22 U.S.C. 288– 288f); (3) An entity owned (in whole or in part) or controlled by a foreign govern- ment; or 2 CFR Ch. II (1–1–21 Edition) (4) Any other entity consisting whol- ly or partially of one or more foreign governments or foreign governmental entities. General purpose equipment means equipment which is not limited to re- search, medical, scientific or other technical activities. Examples include office equipment and furnishings, mod- ular offices, telephone networks, infor- mation technology equipment and sys- tems, air conditioning equipment, re- production and printing equipment, and motor vehicles. See also the defini- tions of equipment and special purpose equipment in this section. Generally accepted accounting prin- ciples (GAAP) has the meaning specified in accounting standards issued by the GASB and the FASB. Generally accepted government auditing standards (GAGAS), also known as the Yellow Book, means generally accepted government auditing standards issued by the Comptroller General of the United States, which are applicable to financial audits. Grant agreement means a legal instru- ment of financial assistance between a Federal awarding agency or pass- through entity and a non-Federal enti- ty that, consistent with 31 U.S.C. 6302, 6304: (1) Is used to enter into a relation- ship the principal purpose of which is to transfer anything of value to carry out a public purpose authorized by a law of the United States (see 31 U.S.C. 6101(3)); and not to acquire property or services for the Federal awarding agen- cy or pass-through entity’s direct ben- efit or use; (2) Is distinguished from a coopera- tive agreement in that it does not pro- vide for substantial involvement of the Federal awarding agency in carrying out the activity contemplated by the Federal award. (3) Does not include an agreement that provides only: (i) Direct United States Government cash assistance to an individual; (ii) A subsidy; (iii) A loan; (vi) A loan guarantee; or (v) Insurance. Highest level owner means the entity that owns or controls an immediate owner of the offeror, or that owns or 90 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00102 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 295OMB Guidance § 200.1 controls one or more entities that con- trol an immediate owner of the offeror. No entity owns or exercises control of the highest-level owner as defined in the Federal Acquisition Regulations (FAR) (48 CFR 52.204–17). Hospital means a facility licensed as a hospital under the law of any state or a facility operated as a hospital by the United States, a state, or a subdivision of a state. Improper payment means: (1) Any payment that should not have been made or that was made in an incorrect amount under statutory, con- tractual, administrative, or other le- gally applicable requirements. (i) Incorrect amounts are overpay- ments or underpayments that are made to eligible recipients (including inap- propriate denials of payment or serv- ice, any payment that does not account for credit for applicable discounts, pay- ments that are for an incorrect amount, and duplicate payments). An improper payment also includes any payment that was made to an ineli- gible recipient or for an ineligible good or service, or payments for goods or services not received (except for such payments authorized by law). Note 1 to paragraph (1)(i) of this defini- tion. Applicable discounts are only those discounts where it is both advan- tageous and within the agency’s con- trol to claim them. (ii) When an agency’s review is un- able to discern whether a payment was proper as a result of insufficient or lack of documentation, this payment should also be considered an improper payment. When establishing docu- mentation requirements for payments, agencies should ensure that all docu- mentation requirements are necessary and should refrain from imposing addi- tional burdensome documentation re- quirements. (iii) Interest or other fees that may result from an underpayment by an agency are not considered an improper payment if the interest was paid cor- rectly. These payments are generally separate transactions and may be nec- essary under certain statutory, con- tractual, administrative, or other le- gally applicable requirements. (iv) A ‘‘questioned cost’’ (as defined in this section) should not be consid- ered an improper payment until the transaction has been completely re- viewed and is confirmed to be im- proper. (v) The term ‘‘payment’’ in this defi- nition means any disbursement or transfer of Federal funds (including a commitment for future payment, such as cash, securities, loans, loan guaran- tees, and insurance subsidies) to any non-Federal person, non-Federal enti- ty, or Federal employee, that is made by a Federal agency, a Federal con- tractor, a Federal grantee, or a govern- mental or other organization admin- istering a Federal program or activity. (vi) The term ‘‘payment’’ includes disbursements made pursuant to prime contracts awarded under the Federal Acquisition Regulation and Federal awards subject to this part that are ex- pended by recipients. (2) See definition of improper pay- ment in OMB Circular A–123 appendix C, part I A (1) ‘‘What is an improper payment?’’ Questioned costs, including those identified in audits, are not an improper payment until reviewed and confirmed to be improper as defined in OMB Circular A–123 appendix C. Indian tribe means any Indian tribe, band, nation, or other organized group or community, including any Alaska Native village or regional or village corporation as defined in or established pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. Chapter 33), which is recognized as eligible for the special programs and services provided by the United States to Indians be- cause of their status as Indians (25 U.S.C. 450b(e)). See annually published Bureau of Indian Affairs list of Indian Entities Recognized and Eligible to Re- ceive Services. Institutions of Higher Education (IHEs) is defined at 20 U.S.C. 1001. Indirect (facilities & administrative (F&A)) costs means those costs incurred for a common or joint purpose benefit- ting more than one cost objective, and not readily assignable to the cost ob- jectives specifically benefitted, with- out effort disproportionate to the re- sults achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be nec- essary to establish a number of pools of indirect (F&A) costs. Indirect (F&A) 91 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00103 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 296§ 200.1 cost pools must be distributed to bene- fitted cost objectives on bases that will produce an equitable result in consider- ation of relative benefits derived. Indirect cost rate proposal means the documentation prepared by a non-Fed- eral entity to substantiate its request for the establishment of an indirect cost rate as described in appendices III through VII and appendix IX to this part. Information technology systems means computing devices, ancillary equip- ment, software, firmware, and similar procedures, services (including support services), and related resources. See also the definitions of computing devices and equipment in this section. Intangible property means property having no physical existence, such as trademarks, copyrights, patents and patent applications and property, such as loans, notes and other debt instru- ments, lease agreements, stock and other instruments of property owner- ship (whether the property is tangible or intangible). Intermediate cost objective means a cost objective that is used to accumu- late indirect costs or service center costs that are subsequently allocated to one or more indirect cost pools or final cost objectives. See also the defi- nitions of cost objective and final cost ob- jective in this section. Internal controls for non-Federal enti- ties means: (1) Processes designed and imple- mented by non-Federal entities to pro- vide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of op- erations; (ii) Reliability of reporting for inter- nal and external use; and (iii) Compliance with applicable laws and regulations. (2) Federal awarding agencies are re- quired to follow internal control com- pliance requirements in OMB Circular No. A–123, Management’s Responsi- bility for Enterprise Risk Management and Internal Control. Loan means a Federal loan or loan guarantee received or administered by a non-Federal entity, except as used in the definition of program income in this section. 2 CFR Ch. II (1–1–21 Edition) (1) The term ‘‘direct loan’’ means a disbursement of funds by the Federal Government to a non-Federal borrower under a contract that requires the re- payment of such funds with or without interest. The term includes the pur- chase of, or participation in, a loan made by another lender and financing arrangements that defer payment for more than 90 days, including the sale of a Federal Government asset on credit terms. The term does not include the acquisition of a federally guaranteed loan in satisfaction of default claims or the price support loans of the Com- modity Credit Corporation. (2) The term ‘‘direct loan obligation’’ means a binding agreement by a Fed- eral awarding agency to make a direct loan when specified conditions are ful- filled by the borrower. (3) The term ‘‘loan guarantee’’ means any Federal Government guarantee, in- surance, or other pledge with respect to the payment of all or a part of the principal or interest on any debt obli- gation of a non-Federal borrower to a non-Federal lender, but does not in- clude the insurance of deposits, shares, or other withdrawable accounts in fi- nancial institutions. (4) The term ‘‘loan guarantee com- mitment’’ means a binding agreement by a Federal awarding agency to make a loan guarantee when specified condi- tions are fulfilled by the borrower, the lender, or any other party to the guar- antee agreement. Local government means any unit of government within a state, including a: (1) County; (2) Borough; (3) Municipality; (4) City; (5) Town; (6) Township; (7) Parish; (8) Local public authority, including any public housing agency under the United States Housing Act of 1937; (9) Special district; (10) School district; (11) Intrastate district; (12) Council of governments, whether or not incorporated as a nonprofit cor- poration under State law; and (13) Any other agency or instrumen- tality of a multi-, regional, or intra- State or local government. 92 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00104 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 297OMB Guidance § 200.1 Major program means a Federal pro- gram determined by the auditor to be a major program in accordance with §200.518 or a program identified as a major program by a Federal awarding agency or pass-through entity in ac- cordance with §200.503(e). Management decision means the Fed- eral awarding agency’s or pass-through entity’s written determination, pro- vided to the auditee, of the adequacy of the auditee’s proposed corrective ac- tions to address the findings, based on its evaluation of the audit findings and proposed corrective actions. Micro-purchase means a purchase of supplies or services, the aggregate amount of which does not exceed the micro-purchase threshold. Micro-pur- chases comprise a subset of a non-Fed- eral entity’s small purchases as defined in §200.320. Micro-purchase threshold means the dollar amount at or below which a non- Federal entity may purchase property or services using micro-purchase proce- dures (see §200.320). Generally, the micro-purchase threshold for procure- ment activities administered under Federal awards is not to exceed the amount set by the FAR at 48 CFR part 2, subpart 2.1, unless a higher threshold is requested by the non-Federal entity and approved by the cognizant agency for indirect costs. Modified Total Direct Cost (MTDC) means all direct salaries and wages, ap- plicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regard- less of the period of performance of the subawards under the award). MTDC ex- cludes equipment, capital expendi- tures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the dis- tribution of indirect costs, and with the approval of the cognizant agency for indirect costs. Non-discretionary award means an award made by the Federal awarding agency to specific recipients in accord- ance with statutory, eligibility and compliance requirements, such that in keeping with specific statutory author- ity the agency has no ability to exer- cise judgement (‘‘discretion’’). A non- discretionary award amount could be determined specifically or by formula. Non-Federal entity (NFE) means a State, local government, Indian tribe, Institution of Higher Education (IHE), or nonprofit organization that carries out a Federal award as a recipient or subrecipient. Nonprofit organization means any cor- poration, trust, association, coopera- tive, or other organization, not includ- ing IHEs, that: (1) Is operated primarily for sci- entific, educational, service, chari- table, or similar purposes in the public interest; (2) Is not organized primarily for profit; and (3) Uses net proceeds to maintain, improve, or expand the operations of the organization. Notice of funding opportunity means a formal announcement of the avail- ability of Federal funding through a fi- nancial assistance program from a Fed- eral awarding agency. The notice of funding opportunity provides informa- tion on the award, who is eligible to apply, the evaluation criteria for selec- tion of an awardee, required compo- nents of an application, and how to submit the application. The notice of funding opportunity is any paper or electronic issuance that an agency uses to announce a funding opportunity, whether it is called a ‘‘program an- nouncement,’’ ‘‘notice of funding avail- ability,’’ ‘‘broad agency announce- ment,’’ ‘‘research announcement,’’ ‘‘solicitation,’’ or some other term. Office of Management and Budget (OMB) means the Executive Office of the President, Office of Management and Budget. Oversight agency for audit means the Federal awarding agency that provides the predominant amount of funding di- rectly (direct funding) (as listed on the schedule of expenditures of Federal awards, see §200.510(b)) to a non-Fed- eral entity unless OMB designates a specific cognizant agency for audit. When the direct funding represents less than 25 percent of the total Federal ex- penditures (as direct and sub-awards) by the non-Federal entity, then the Federal agency with the predominant 93 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00105 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 298§ 200.1 amount of total funding is the des- ignated cognizant agency for audit. When there is no direct funding, the Federal awarding agency which is the predominant source of pass-through funding must assume the oversight re- sponsibilities. The duties of the over- sight agency for audit and the process for any reassignments are described in §200.513(b). Participant support costs means direct costs for items such as stipends or sub- sistence allowances, travel allowances, and registration fees paid to or on be- half of participants or trainees (but not employees) in connection with con- ferences, or training projects. Pass-through entity (PTE) means a non-Federal entity that provides a subaward to a subrecipient to carry out part of a Federal program. Performance goal means a target level of performance expressed as a tangible, measurable objective, against which actual achievement can be compared, including a goal expressed as a quan- titative standard, value, or rate. In some instances (e.g., discretionary re- search awards), this may be limited to the requirement to submit technical performance reports (to be evaluated in accordance with agency policy). Period of performance means the total estimated time interval between the start of an initial Federal award and the planned end date, which may in- clude one or more funded portions, or budget periods. Identification of the period of performance in the Federal award per §200.211(b)(5) does not com- mit the awarding agency to fund the award beyond the currently approved budget period. Personal property means property other than real property. It may be tangible, having physical existence, or intangible. Personally Identifiable Information (PII) means information that can be used to distinguish or trace an individ- ual’s identity, either alone or when combined with other personal or iden- tifying information that is linked or linkable to a specific individual. Some information that is considered to be PII is available in public sources such as telephone books, public websites, and university listings. This type of in- formation is considered to be Public 2 CFR Ch. II (1–1–21 Edition) PII and includes, for example, first and last name, address, work telephone number, email address, home telephone number, and general educational cre- dentials. The definition of PII is not anchored to any single category of in- formation or technology. Rather, it re- quires a case-by-case assessment of the specific risk that an individual can be identified. Non-PII can become PII whenever additional information is made publicly available, in any me- dium and from any source, that, when combined with other available infor- mation, could be used to identify an in- dividual. Program income means gross income earned by the non-Federal entity that is directly generated by a supported ac- tivity or earned as a result of the Fed- eral award during the period of per- formance except as provided in §200.307(f). (See the definition of period of performance in this section.) Program income includes but is not limited to income from fees for services per- formed, the use or rental or real or per- sonal property acquired under Federal awards, the sale of commodities or items fabricated under a Federal award, license fees and royalties on patents and copyrights, and principal and interest on loans made with Fed- eral award funds. Interest earned on advances of Federal funds is not pro- gram income. Except as otherwise pro- vided in Federal statutes, regulations, or the terms and conditions of the Fed- eral award, program income does not include rebates, credits, discounts, and interest earned on any of them. See also §200.407. See also 35 U.S.C. 200–212 ‘‘Disposition of Rights in Educational Awards’’ applies to inventions made under Federal awards. Project cost means total allowable costs incurred under a Federal award and all required cost sharing and vol- untary committed cost sharing, includ- ing third-party contributions. Property means real property or per- sonal property. See also the definitions of real property and personal property in this section. Protected Personally Identifiable Infor- mation (Protected PII) means an individ- ual’s first name or first initial and last name in combination with any one or 94 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00106 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 299OMB Guidance § 200.1 more of types of information, includ- ing, but not limited to, social security number, passport number, credit card numbers, clearances, bank numbers, biometrics, date and place of birth, mother’s maiden name, criminal, med- ical and financial records, educational transcripts. This does not include PII that is required by law to be disclosed. See also the definition of Personally Identifiable Information (PII) in this sec- tion. Questioned cost means a cost that is questioned by the auditor because of an audit finding: (1) Which resulted from a violation or possible violation of a statute, regula- tion, or the terms and conditions of a Federal award, including for funds used to match Federal funds; (2) Where the costs, at the time of the audit, are not supported by ade- quate documentation; or (3) Where the costs incurred appear unreasonable and do not reflect the ac- tions a prudent person would take in the circumstances. (4) Questioned costs are not an im- proper payment until reviewed and confirmed to be improper as defined in OMB Circular A–123 appendix C. (See also the definition of Improper payment in this section). Real property means land, including land improvements, structures and ap- purtenances thereto, but excludes moveable machinery and equipment. Recipient means an entity, usually but not limited to non-Federal entities that receives a Federal award directly from a Federal awarding agency. The term recipient does not include sub- recipients or individuals that are bene- ficiaries of the award. Renewal award means an award made subsequent to an expiring Federal award for which the start date is con- tiguous with, or closely follows, the end of the expiring Federal award. A renewal award’s start date will begin a distinct period of performance. Research and Development (R&D) means all research activities, both basic and applied, and all development activities that are performed by non- Federal entities. The term research also includes activities involving the training of individuals in research techniques where such activities utilize the same facilities as other research and development activities and where such activities are not included in the instruction function. ‘‘Research’’ is de- fined as a systematic study directed to- ward fuller scientific knowledge or un- derstanding of the subject studied. ‘‘Development’’ is the systematic use of knowledge and understanding gained from research directed toward the pro- duction of useful materials, devices, systems, or methods, including design and development of prototypes and processes. Simplified acquisition threshold means the dollar amount below which a non- Federal entity may purchase property or services using small purchase meth- ods (see §200.320). Non-Federal entities adopt small purchase procedures in order to expedite the purchase of items at or below the simplified acquisition threshold. The simplified acquisition threshold for procurement activities administered under Federal awards is set by the FAR at 48 CFR part 2, sub- part 2.1. The non-Federal entity is re- sponsible for determining an appro- priate simplified acquisition threshold based on internal controls, an evalua- tion of risk, and its documented pro- curement procedures. However, in no circumstances can this threshold ex- ceed the dollar value established in the FAR (48 CFR part 2, subpart 2.1) for the simplified acquisition threshold. Re- cipients should determine if local gov- ernment laws on purchasing apply. Special purpose equipment means equipment which is used only for re- search, medical, scientific, or other technical activities. Examples of spe- cial purpose equipment include micro- scopes, x-ray machines, surgical instru- ments, and spectrometers. See also the definitions of equipment and general purpose equipment in this section. State means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, U.S. Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and any agency or instrumentality thereof ex- clusive of local governments. Student Financial Aid (SFA) means Federal awards under those programs of general student assistance, such as those authorized by Title IV of the 95 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00107 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 300§ 200.2 Higher Education Act of 1965, as amended, (20 U.S.C. 1070–1099d), which are administered by the U.S. Depart- ment of Education, and similar pro- grams provided by other Federal agen- cies. It does not include Federal awards under programs that provide fellow- ships or similar Federal awards to stu- dents on a competitive basis, or for specified studies or research. Subaward means an award provided by a pass-through entity to a sub- recipient for the subrecipient to carry out part of a Federal award received by the pass-through entity. It does not in- clude payments to a contractor or pay- ments to an individual that is a bene- ficiary of a Federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through enti- ty considers a contract. Subrecipient means an entity, usually but not limited to non-Federal entities, that receives a subaward from a pass- through entity to carry out part of a Federal award; but does not include an individual that is a beneficiary of such award. A subrecipient may also be a re- cipient of other Federal awards di- rectly from a Federal awarding agency. Subsidiary means an entity in which more than 50 percent of the entity is owned or controlled directly by a par- ent corporation or through another subsidiary of a parent corporation. Supplies means all tangible personal property other than those described in the definition of equipment in this sec- tion. A computing device is a supply if the acquisition cost is less than the lesser of the capitalization level estab- lished by the non-Federal entity for fi- nancial statement purposes or $5,000, regardless of the length of its useful life. See also the definitions of com- puting devices and equipment in this sec- tion. Telecommunications cost means the cost of using communication and te- lephony technologies such as mobile phones, land lines, and internet. Termination means the ending of a Federal award, in whole or in part at any time prior to the planned end of period of performance. A lack of avail- able funds is not a termination. 2 CFR Ch. II (1–1–21 Edition) Third-party in-kind contributions means the value of non-cash contribu- tions (i.e., property or services) that— (1) Benefit a federally-assisted project or program; and (2) Are contributed by non-Federal third parties, without charge, to a non- Federal entity under a Federal award. Unliquidated financial obligations means, for financial reports prepared on a cash basis, financial obligations incurred by the non-Federal entity that have not been paid (liquidated). For reports prepared on an accrual ex- penditure basis, these are financial ob- ligations incurred by the non-Federal entity for which an expenditure has not been recorded. Unobligated balance means the amount of funds under a Federal award that the non-Federal entity has not ob- ligated. The amount is computed by subtracting the cumulative amount of the non-Federal entity’s unliquidated financial obligations and expenditures of funds under the Federal award from the cumulative amount of the funds that the Federal awarding agency or pass-through entity authorized the non-Federal entity to obligate. Voluntary committed cost sharing means cost sharing specifically pledged on a voluntary basis in the proposal’s budget on the part of the non-Federal entity and that becomes a binding re- quirement of Federal award. See also §200.306. [85 FR 49529, Aug. 13, 2020] § 200.2 Acquisition cost. Acquisition cost means the cost of the asset including the cost to ready the asset for its intended use. Acquisition cost for equipment, for example, means the net invoice price of the equipment, including the cost of any modifica- tions, attachments, accessories, or aux- iliary apparatus necessary to make it usable for the purpose for which it is acquired. Acquisition costs for soft- ware includes those development costs capitalized in accordance with gen- erally accepted accounting principles (GAAP). Ancillary charges, such as taxes, duty, protective in transit insur- ance, freight, and installation may be included in or excluded from the acqui- sition cost in accordance with the non- 96 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00108 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 301OMB Guidance § 200.13 Federal entity’s regular accounting practices. § 200.3 Advance payment. Advance payment means a payment that a Federal awarding agency or pass-through entity makes by any ap- propriate payment mechanism, includ- ing a predetermined payment schedule, before the non-Federal entity disburses the funds for program purposes. § 200.4 Allocation. Allocation means the process of as- signing a cost, or a group of costs, to one or more cost objective(s), in rea- sonable proportion to the benefit pro- vided or other equitable relationship. The process may entail assigning a cost(s) directly to a final cost objective or through one or more intermediate cost objectives. § 200.5 Audit finding. Audit finding means deficiencies which the auditor is required by §200.516 Audit findings, paragraph (a) to report in the schedule of findings and questioned costs. § 200.6 Auditee. Auditee means any non-Federal enti- ty that expends Federal awards which must be audited under Subpart F— Audit Requirements of this part. § 200.7 Auditor. Auditor means an auditor who is a public accountant or a Federal, state, local government, or Indian tribe audit organization, which meets the general standards specified for external audi- tors in generally accepted government auditing standards (GAGAS). The term auditor does not include internal audi- tors of nonprofit organizations. [79 FR 75880, Dec. 19, 2014] § 200.8 Budget. Budget means the financial plan for the project or program that the Fed- eral awarding agency or pass-through entity approves during the Federal award process or in subsequent amend- ments to the Federal award. It may in- clude the Federal and non-Federal share or only the Federal share, as de- termined by the Federal awarding agency or pass-through entity. § 200.9 Central service cost allocation plan. Central service cost allocation plan means the documentation identifying, accumulating, and allocating or devel- oping billing rates based on the allow- able costs of services provided by a state, local government, or Indian tribe on a centralized basis to its depart- ments and agencies. The costs of these services may be allocated or billed to users. § 200.10 Catalog of Federal Domestic Assistance (CFDA) number. CFDA number means the number as- signed to a Federal program in the CFDA. § 200.11 CFDA program title. CFDA program title means the title of the program under which the Federal award was funded in the CFDA. § 200.12 Capital assets. Capital assets means tangible or in- tangible assets used in operations hav- ing a useful life of more than one year which are capitalized in accordance with GAAP. Capital assets include: (a) Land, buildings (facilities), equip- ment, and intellectual property (in- cluding software) whether acquired by purchase, construction, manufacture, lease-purchase, exchange, or through capital leases; and (b) Additions, improvements, modi- fications, replacements, rearrange- ments, reinstallations, renovations or alterations to capital assets that mate- rially increase their value or useful life (not ordinary repairs and mainte- nance). § 200.13 Capital expenditures. Capital expenditures means expendi- tures to acquire capital assets or ex- penditures to make additions, improve- ments, modifications, replacements, rearrangements, reinstallations, ren- ovations, or alterations to capital as- sets that materially increase their value or useful life. 97 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00109 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 302§ 200.14 § 200.14 Claim. Claim means, depending on the con- text, either: (a) A written demand or written as- sertion by one of the parties to a Fed- eral award seeking as a matter of right: (1) The payment of money in a sum certain; (2) The adjustment or interpretation of the terms and conditions of the Fed- eral award; or (3) Other relief arising under or relat- ing to a Federal award. (b) A request for payment that is not in dispute when submitted. § 200.15 Class of Federal awards. Class of Federal awards means a group of Federal awards either awarded under a specific program or group of pro- grams or to a specific type of non-Fed- eral entity or group of non-Federal en- tities to which specific provisions or exceptions may apply. § 200.16 Closeout. Closeout means the process by which the Federal awarding agency or pass- through entity determines that all ap- plicable administrative actions and all required work of the Federal award have been completed and takes actions as described in §200.343 Closeout. § 200.17 Cluster of programs. Cluster of programs means a grouping of closely related programs that share common compliance requirements. The types of clusters of programs are re- search and development (R&D), student financial aid (SFA), and other clusters. ‘‘Other clusters’’ are as defined by OMB in the compliance supplement or as designated by a state for Federal awards the state provides to its sub- recipients that meet the definition of a cluster of programs. When designating an ‘‘other cluster,’’ a state must iden- tify the Federal awards included in the cluster and advise the subrecipients of compliance requirements applicable to the cluster, consistent with §200.331 Requirements for pass-through enti- ties, paragraph (a). A cluster of pro- grams must be considered as one pro- gram for determining major programs, as described in §200.518 Major program 2 CFR Ch. II (1–1–21 Edition) determination, and, with the exception of R&D as described in §200.501 Audit requirements, paragraph (c), whether a program-specific audit may be elected. § 200.18 Cognizant agency for audit. Cognizant agency for audit means the Federal agency designated to carry out the responsibilities described in §200.513 Responsibilities, paragraph (a). The cognizant agency for audit is not necessarily the same as the cognizant agency for indirect costs. A list of cog- nizant agencies for audit may be found at the FAC Web site. § 200.19 Cognizant agency for indirect costs. Cognizant agency for indirect costs means the Federal agency responsible for reviewing, negotiating, and approv- ing cost allocation plans or indirect cost proposals developed under this part on behalf of all Federal agencies. The cognizant agency for indirect cost is not necessarily the same as the cog- nizant agency for audit. For assign- ments of cognizant agencies see the following: (a) For IHEs: Appendix III to Part 200—Indirect (F&A) Costs Identifica- tion and Assignment, and Rate Deter- mination for Institutions of Higher Education (IHEs), paragraph C.11. (b) For nonprofit organizations: Ap- pendix IV to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations, paragraph C.2.a. (c) For state and local governments: Appendix V to Part 200—State/Local Governmentwide Central Service Cost Allocation Plans, paragraph F.1. (d) For Indian tribes: Appendix VII to Part 200—States and Local Govern- ment and Indian Tribe Indirect Cost Proposal, paragraph D.1. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75880, Dec. 19, 2014; 80 FR 54407, Sept. 10, 2015] § 200.20 Computing devices. Computing devices means machines used to acquire, store, analyze, process, and publish data and other information electronically, including accessories (or ‘‘peripherals’’) for printing, trans- mitting and receiving, or storing elec- tronic information. See also §§200.94 98 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00110 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 303OMB Guidance § 200.28 Supplies and 200.58 Information tech- nology systems. § 200.21 Compliance supplement. Compliance supplement means Appen- dix XI to Part 200—Compliance Supple- ment (previously known as the Cir- cular A–133 Compliance Supplement). § 200.22 Contract. Contract means a legal instrument by which a non-Federal entity purchases property or services needed to carry out the project or program under a Federal award. The term as used in this part does not include a legal in- strument, even if the non-Federal enti- ty considers it a contract, when the substance of the transaction meets the definition of a Federal award or subaward (see §200.92 Subaward). § 200.23 Contractor. Contractor means an entity that re- ceives a contract as defined in §200.22 Contract. § 200.24 Cooperative agreement. Cooperative agreement means a legal instrument of financial assistance be- tween a Federal awarding agency or pass-through entity and a non-Federal entity that, consistent with 31 U.S.C. 6302–6305: (a) Is used to enter into a relation- ship the principal purpose of which is to transfer anything of value from the Federal awarding agency or pass- through entity to the non-Federal enti- ty to carry out a public purpose au- thorized by a law of the United States (see 31 U.S.C. 6101(3)); and not to ac- quire property or services for the Fed- eral Government or pass-through enti- ty’s direct benefit or use; (b) Is distinguished from a grant in that it provides for substantial involve- ment between the Federal awarding agency or pass-through entity and the non-Federal entity in carrying out the activity contemplated by the Federal award. (c) The term does not include: (1) A cooperative research and devel- opment agreement as defined in 15 U.S.C. 3710a; or (2) An agreement that provides only: (i) Direct United States Government cash assistance to an individual; (ii) A subsidy; (iii) A loan; (iv) A loan guarantee; or (v) Insurance. § 200.25 Cooperative audit resolution. Cooperative audit resolution means the use of audit follow-up techniques which promote prompt corrective action by improving communication, fostering collaboration, promoting trust, and de- veloping an understanding between the Federal agency and the non-Federal en- tity. This approach is based upon: (a) A strong commitment by Federal agency and non-Federal entity leader- ship to program integrity; (b) Federal agencies strengthening partnerships and working coopera- tively with non-Federal entities and their auditors; and non-Federal enti- ties and their auditors working coop- eratively with Federal agencies; (c) A focus on current conditions and corrective action going forward; (d) Federal agencies offering appro- priate relief for past noncompliance when audits show prompt corrective action has occurred; and (e) Federal agency leadership sending a clear message that continued failure to correct conditions identified by au- dits which are likely to cause improper payments, fraud, waste, or abuse is un- acceptable and will result in sanctions. § 200.26 Corrective action. Corrective action means action taken by the auditee that: (a) Corrects identified deficiencies; (b) Produces recommended improve- ments; or (c) Demonstrates that audit findings are either invalid or do not warrant auditee action. § 200.27 Cost allocation plan. Cost allocation plan means central service cost allocation plan or public assistance cost allocation plan. § 200.28 Cost objective. Cost objective means a program, func- tion, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc. A 99 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00111 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 304§ 200.29 cost objective may be a major function of the non-Federal entity, a particular service or project, a Federal award, or an indirect (Facilities & Administra- tive (F&A)) cost activity, as described in Subpart E—Cost Principles of this Part. See also §§200.44 Final cost objec- tive and 200.60 Intermediate cost objec- tive. § 200.29 Cost sharing or matching. Cost sharing or matching means the portion of project costs not paid by Federal funds (unless otherwise author- ized by Federal statute). See also §200.306 Cost sharing or matching. § 200.30 Cross-cutting audit finding. Cross-cutting audit finding means an audit finding where the same under- lying condition or issue affects Federal awards of more than one Federal awarding agency or pass-through enti- ty. § 200.31 Disallowed costs. Disallowed costs means those charges to a Federal award that the Federal awarding agency or pass-through enti- ty determines to be unallowable, in ac- cordance with the applicable Federal statutes, regulations, or the terms and conditions of the Federal award. § 200.32 [Reserved] § 200.33 Equipment. Equipment means tangible personal property (including information tech- nology systems) having a useful life of more than one year and a per-unit ac- quisition cost which equals or exceeds the lesser of the capitalization level es- tablished by the non-Federal entity for financial statement purposes, or $5,000. See also §§200.12 Capital assets, 200.20 Computing devices, 200.48 General pur- pose equipment, 200.58 Information technology systems, 200.89 Special pur- pose equipment, and 200.94 Supplies. § 200.34 Expenditures. Expenditures means charges made by a non-Federal entity to a project or program for which a Federal award was received. (a) The charges may be reported on a cash or accrual basis, as long as the 2 CFR Ch. II (1–1–21 Edition) methodology is disclosed and is con- sistently applied. (b) For reports prepared on a cash basis, expenditures are the sum of: (1) Cash disbursements for direct charges for property and services; (2) The amount of indirect expense charged; (3) The value of third-party in-kind contributions applied; and (4) The amount of cash advance pay- ments and payments made to sub- recipients. (c) For reports prepared on an ac- crual basis, expenditures are the sum of: (1) Cash disbursements for direct charges for property and services; (2) The amount of indirect expense incurred; (3) The value of third-party in-kind contributions applied; and (4) The net increase or decrease in the amounts owed by the non-Federal entity for: (i) Goods and other property re- ceived; (ii) Services performed by employees, contractors, subrecipients, and other payees; and (iii) Programs for which no current services or performance are required such as annuities, insurance claims, or other benefit payments. § 200.35 Federal agency. Federal agency means an ‘‘agency’’ as defined at 5 U.S.C. 551(1) and further clarified by 5 U.S.C. 552(f). § 200.36 Federal Audit Clearinghouse (FAC). FAC means the clearinghouse des- ignated by OMB as the repository of record where non-Federal entities are required to transmit the reporting packages required by Subpart F—Audit Requirements of this part. The mailing address of the FAC is Federal Audit Clearinghouse, Bureau of the Census, 1201 E. 10th Street, Jeffersonville, IN 47132 and the web address is: http://har- vester.census.gov/sac/. Any future up- dates to the location of the FAC may be found at the OMB Web site. 100 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00112 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 305OMB Guidance § 200.42 § 200.37 Federal awarding agency. Federal awarding agency means the Federal agency that provides a Federal award directly to a non-Federal entity. § 200.38 Federal award. Federal award has the meaning, de- pending on the context, in either para- graph (a) or (b) of this section: (a)(1) The Federal financial assist- ance that a non-Federal entity receives directly from a Federal awarding agen- cy or indirectly from a pass-through entity, as described in §200.101 Applica- bility; or (2) The cost-reimbursement contract under the Federal Acquisition Regula- tions that a non-Federal entity re- ceives directly from a Federal award- ing agency or indirectly from a pass- through entity, as described in §200.101 Applicability. (b) The instrument setting forth the terms and conditions. The instrument is the grant agreement, cooperative agreement, other agreement for assist- ance covered in paragraph (b) of §200.40 Federal financial assistance, or the cost-reimbursement contract awarded under the Federal Acquisition Regula- tions. (c) Federal award does not include other contracts that a Federal agency uses to buy goods or services from a contractor or a contract to operate Federal Government owned, contractor operated facilities (GOCOs). (d) See also definitions of Federal fi- nancial assistance, grant agreement, and cooperative agreement. (6) Other financial assistance (except assistance listed in paragraph (b) of this section). (b) For §200.202 Requirement to pro- vide public notice of Federal financial assistance programs and Subpart F— Audit Requirements of this part, Fed- eral financial assistance also includes as- sistance that non-Federal entities re- ceive or administer in the form of: (1) Loans; (2) Loan Guarantees; (3) Interest subsidies; and (4) Insurance. (c) Federal financial assistance does not include amounts received as reim- bursement for services rendered to in- dividuals as described in §200.502 Basis for determining Federal awards ex- pended, paragraph (h) and (i) of this part. [78 FR 78608, Dec. 26, 2013, as amended at 80 FR 54407, Sept. 10, 2015] § 200.41 Federal interest. Federal interest means, for purposes of §200.329 Reporting on real property or when used in connection with the ac- quisition or improvement of real prop- erty, equipment, or supplies under a Federal award, the dollar amount that is the product of the: (a) Federal share of total project costs; and (b) Current fair market value of the property, improvements, or both, to the extent the costs of acquiring or im- proving the property were included as project costs. § 200.39 Federal award date. Federal award date means the date when the Federal award is signed by the authorized official of the Federal awarding agency. § 200.40 Federal financial assistance. (a) Federal financial assistance means assistance that non-Federal entities re- ceive or administer in the form of: (1) Grants; (2) Cooperative agreements; (3) Non-cash contributions or dona- tions of property (including donated surplus property); (4) Direct appropriations; (5) Food commodities; and § 200.42 Federal program. Federal program means: (a) All Federal awards which are as- signed a single number in the CFDA. (b) When no CFDA number is as- signed, all Federal awards to non-Fed- eral entities from the same agency made for the same purpose must be combined and considered one program. (c) Notwithstanding paragraphs (a) and (b) of this definition, a cluster of programs. The types of clusters of pro- grams are: (1) Research and development (R&D); (2) Student financial aid (SFA); and 101 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00113 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 306§ 200.43 (3) ‘‘Other clusters,’’ as described in the definition of Cluster of Programs. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75880, Dec. 19, 2014] § 200.43 Federal share. Federal share means the portion of the total project costs that are paid by Federal funds. § 200.44 Final cost objective. Final cost objective means a cost ob- jective which has allocated to it both direct and indirect costs and, in the non-Federal entity’s accumulation sys- tem, is one of the final accumulation points, such as a particular award, in- ternal project, or other direct activity of a non-Federal entity. See also §§200.28 Cost objective and 200.60 Inter- mediate cost objective. § 200.45 Fixed amount awards. Fixed amount awards means a type of grant agreement under which the Fed- eral awarding agency or pass-through entity provides a specific level of sup- port without regard to actual costs in- curred under the Federal award. This type of Federal award reduces some of the administrative burden and record- keeping requirements for both the non- Federal entity and Federal awarding agency or pass-through entity. Ac- countability is based primarily on per- formance and results. See §§200.201 Use of grant agreements (including fixed amount awards), cooperative agree- ments, and contracts, paragraph (b) and 200.332 Fixed amount subawards. § 200.46 Foreign public entity. Foreign public entity means: (a) A foreign government or foreign governmental entity; (b) A public international organiza- tion, which is an organization entitled to enjoy privileges, exemptions, and immunities as an international organi- zation under the International Organi- zations Immunities Act (22 U.S.C. 288– 288f); (c) An entity owned (in whole or in part) or controlled by a foreign govern- ment; or (d) Any other entity consisting whol- ly or partially of one or more foreign 2 CFR Ch. II (1–1–21 Edition) governments or foreign governmental entities. § 200.47 Foreign organization. Foreign organization means an entity that is: (a) A public or private organization located in a country other than the United States and its territories that is subject to the laws of the country in which it is located, irrespective of the citizenship of project staff or place of performance; (b) A private nongovernmental orga- nization located in a country other than the United States that solicits and receives cash contributions from the general public; (c) A charitable organization located in a country other than the United States that is nonprofit and tax ex- empt under the laws of its country of domicile and operation, and is not a university, college, accredited degree- granting institution of education, pri- vate foundation, hospital, organization engaged exclusively in research or sci- entific activities, church, synagogue, mosque or other similar entities orga- nized primarily for religious purposes; or (d) An organization located in a country other than the United States not recognized as a Foreign Public En- tity. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75880, Dec. 19, 2014] § 200.48 General purpose equipment. General purpose equipment means equipment which is not limited to re- search, medical, scientific or other technical activities. Examples include office equipment and furnishings, mod- ular offices, telephone networks, infor- mation technology equipment and sys- tems, air conditioning equipment, re- production and printing equipment, and motor vehicles. See also Equip- ment and Special Purpose Equipment. § 200.49 Generally Accepted Account- ing Principles (GAAP). GAAP has the meaning specified in accounting standards issued by the Government Accounting Standards Board (GASB) and the Financial Ac- counting Standards Board (FASB). 102 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00114 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 307OMB Guidance § 200.56 § 200.50 Generally Accepted Govern- ment Auditing Standards (GAGAS). GAGAS, also known as the Yellow Book, means generally accepted gov- ernment auditing standards issued by the Comptroller General of the United States, which are applicable to finan- cial audits. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75880, Dec. 19, 2014] § 200.51 Grant agreement. Grant agreement means a legal instru- ment of financial assistance between a Federal awarding agency or pass- through entity and a non-Federal enti- ty that, consistent with 31 U.S.C. 6302, 6304: (a) Is used to enter into a relation- ship the principal purpose of which is to transfer anything of value from the Federal awarding agency or pass- through entity to the non-Federal enti- ty to carry out a public purpose au- thorized by a law of the United States (see 31 U.S.C. 6101(3)); and not to ac- quire property or services for the Fed- eral awarding agency or pass-through entity’s direct benefit or use; (b) Is distinguished from a coopera- tive agreement in that it does not pro- vide for substantial involvement be- tween the Federal awarding agency or pass-through entity and the non-Fed- eral entity in carrying out the activity contemplated by the Federal award. (c) Does not include an agreement that provides only: (1) Direct United States Government cash assistance to an individual; (2) A subsidy; (3) A loan; (4) A loan guarantee; or (5) Insurance. § 200.52 Hospital. Hospital means a facility licensed as a hospital under the law of any state or a facility operated as a hospital by the United States, a state, or a subdivision of a state. § 200.53 Improper payment. (a) Improper payment means any pay- ment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, con- tractual, administrative, or other le- gally applicable requirements; and (b) Improper payment includes any payment to an ineligible party, any payment for an ineligible good or serv- ice, any duplicate payment, any pay- ment for a good or service not received (except for such payments where au- thorized by law), any payment that does not account for credit for applica- ble discounts, and any payment where insufficient or lack of documentation prevents a reviewer from discerning whether a payment was proper. § 200.54 Indian tribe (or ‘‘federally rec- ognized Indian tribe’’). Indian tribe means any Indian tribe, band, nation, or other organized group or community, including any Alaska Native village or regional or village corporation as defined in or established pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. Chapter 33), which is recognized as eligible for the special programs and services provided by the United States to Indians be- cause of their status as Indians (25 U.S.C. 450b(e)). See annually published Bureau of Indian Affairs list of Indian Entities Recognized and Eligible to Re- ceive Services. § 200.55 Institutions of Higher Edu- cation (IHEs). IHE is defined at 20 U.S.C. 1001. § 200.56 Indirect (facilities & adminis- trative (F&A)) costs. Indirect (F&A) costs means those costs incurred for a common or joint purpose benefitting more than one cost objec- tive, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equi- table distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of indirect (F&A) costs. Indirect (F&A) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in con- sideration of relative benefits derived. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75880, Dec. 19, 2014] 103 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00115 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 308§ 200.57 § 200.57 Indirect cost rate proposal. Indirect cost rate proposal means the documentation prepared by a non-Fed- eral entity to substantiate its request for the establishment of an indirect cost rate as described in Appendix III to Part 200—Indirect (F&A) Costs Iden- tification and Assignment, and Rate Determination for Institutions of High- er Education (IHEs) through Appendix VII to Part 200—States and Local Gov- ernment and Indian Tribe Indirect Cost Proposals of this part, and Appendix IX to Part 200—Hospital Cost Principles. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75880, Dec. 19, 2014] § 200.58 Information technology sys- tems. Information technology systems means computing devices, ancillary equip- ment, software, firmware, and similar procedures, services (including support services), and related resources. See also §§200.20 Computing devices and 200.33 Equipment. § 200.59 Intangible property. Intangible property means property having no physical existence, such as trademarks, copyrights, patents and patent applications and property, such as loans, notes and other debt instru- ments, lease agreements, stock and other instruments of property owner- ship (whether the property is tangible or intangible). § 200.60 Intermediate cost objective. Intermediate cost objective means a cost objective that is used to accumu- late indirect costs or service center costs that are subsequently allocated to one or more indirect cost pools or final cost objectives. See also §200.28 Cost objective and §200.44 Final cost objective. § 200.61 Internal controls. Internal controls means a process, im- plemented by a non-Federal entity, de- signed to provide reasonable assurance regarding the achievement of objec- tives in the following categories: (a) Effectiveness and efficiency of op- erations; (b) Reliability of reporting for inter- nal and external use; and 2 CFR Ch. II (1–1–21 Edition) (c) Compliance with applicable laws and regulations. § 200.62 Internal control over compli- ance requirements for Federal awards. Internal control over compliance re- quirements for Federal awards means a process implemented by a non-Federal entity designed to provide reasonable assurance regarding the achievement of the following objectives for Federal awards: (a) Transactions are properly re- corded and accounted for, in order to: (1) Permit the preparation of reliable financial statements and Federal re- ports; (2) Maintain accountability over as- sets; and (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (b) Transactions are executed in com- pliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and ma- terial effect on a Federal program; and (2) Any other Federal statutes and regulations that are identified in the Compliance Supplement; and (c) Funds, property, and other assets are safeguarded against loss from un- authorized use or disposition. § 200.63 Loan. Loan means a Federal loan or loan guarantee received or administered by a non-Federal entity, except as used in the definition of §200.80 Program in- come. (a) The term ‘‘direct loan’’ means a disbursement of funds by the Federal Government to a non-Federal borrower under a contract that requires the re- payment of such funds with or without interest. The term includes the pur- chase of, or participation in, a loan made by another lender and financing arrangements that defer payment for more than 90 days, including the sale of a Federal Government asset on credit terms. The term does not include the acquisition of a federally guaranteed loan in satisfaction of default claims or the price support loans of the Com- modity Credit Corporation. 104 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00116 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 309OMB Guidance § 200.69 (b) The term ‘‘direct loan obligation’’ means a binding agreement by a Fed- eral awarding agency to make a direct loan when specified conditions are ful- filled by the borrower. (c) The term ‘‘loan guarantee’’ means any Federal Government guarantee, in- surance, or other pledge with respect to the payment of all or a part of the principal or interest on any debt obli- gation of a non-Federal borrower to a non-Federal lender, but does not in- clude the insurance of deposits, shares, or other withdrawable accounts in fi- nancial institutions. (d) The term ‘‘loan guarantee com- mitment’’ means a binding agreement by a Federal awarding agency to make a loan guarantee when specified condi- tions are fulfilled by the borrower, the lender, or any other party to the guar- antee agreement. § 200.64 Local government. Local government means any unit of government within a state, including a: (a) County; (b) Borough; (c) Municipality; (d) City; (e) Town; (f) Township; (g) Parish; (h) Local public authority, including any public housing agency under the United States Housing Act of 1937; (i) Special district; (j) School district; (k) Intrastate district; (l) Council of governments, whether or not incorporated as a nonprofit cor- poration under state law; and (m) Any other agency or instrumen- tality of a multi-, regional, or intra- state or local government. § 200.65 Major program. Major program means a Federal pro- gram determined by the auditor to be a major program in accordance with §200.518 Major program determination or a program identified as a major pro- gram by a Federal awarding agency or pass-through entity in accordance with §200.503 Relation to other audit re- quirements, paragraph (e). § 200.66 Management decision. Management decision means the eval- uation by the Federal awarding agency or pass-through entity of the audit findings and corrective action plan and the issuance of a written decision to the auditee as to what corrective ac- tion is necessary. § 200.67 Micro-purchase. Micro-purchase means a purchase of supplies or services using simplified ac- quisition procedures, the aggregate amount of which does not exceed the micro-purchase threshold. Micro-pur- chase procedures comprise a subset of a non-Federal entity’s small purchase procedures. The non-Federal entity uses such procedures in order to expe- dite the completion of its lowest-dollar small purchase transactions and mini- mize the associated administrative burden and cost. The micro-purchase threshold is set by the Federal Acquisi- tion Regulation at 48 CFR Subpart 2.1 (Definitions). It is $3,000 except as oth- erwise discussed in Subpart 2.1 of that regulation, but this threshold is peri- odically adjusted for inflation. § 200.68 Modified Total Direct Cost (MTDC). MTDC means all direct salaries and wages, applicable fringe benefits, mate- rials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of perform- ance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for pa- tient care, rental costs, tuition remis- sion, scholarships and fellowships, par- ticipant support costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious in- equity in the distribution of indirect costs, and with the approval of the cog- nizant agency for indirect costs. [79 FR 75880, Dec. 19, 2014] § 200.69 Non-Federal entity. Non-Federal entity means a state, local government, Indian tribe, institu- tion of higher education (IHE), or non- profit organization that carries out a Federal award as a recipient or sub- recipient. 105 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00117 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 310§ 200.70 § 200.70 Nonprofit organization. Nonprofit organization means any cor- poration, trust, association, coopera- tive, or other organization, not includ- ing IHEs, that: (a) Is operated primarily for sci- entific, educational, service, chari- table, or similar purposes in the public interest; (b) Is not organized primarily for profit; and (c) Uses net proceeds to maintain, improve, or expand the operations of the organization. § 200.71 Obligations. When used in connection with a non- Federal entity’s utilization of funds under a Federal award, obligations means orders placed for property and services, contracts and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period. § 200.72 Office of Management and Budget (OMB). OMB means the Executive Office of the President, Office of Management and Budget. § 200.73 Oversight agency for audit. Oversight agency for audit means the Federal awarding agency that provides the predominant amount of funding di- rectly to a non-Federal entity not as- signed a cognizant agency for audit. When there is no direct funding, the Federal awarding agency which is the predominant source of pass-through funding must assume the oversight re- sponsibilities. The duties of the over- sight agency for audit and the process for any reassignments are described in §200.513 Responsibilities, paragraph (b). § 200.74 Pass-through entity. Pass-through entity means a non-Fed- eral entity that provides a subaward to a subrecipient to carry out part of a Federal program. § 200.75 Participant support costs. Participant support costs means direct costs for items such as stipends or sub- sistence allowances, travel allowances, and registration fees paid to or on be- 2 CFR Ch. II (1–1–21 Edition) half of participants or trainees (but not employees) in connection with con- ferences, or training projects. § 200.76 Performance goal. Performance goal means a target level of performance expressed as a tangible, measurable objective, against which actual achievement can be compared, including a goal expressed as a quan- titative standard, value, or rate. In some instances (e.g., discretionary re- search awards), this may be limited to the requirement to submit technical performance reports (to be evaluated in accordance with agency policy). § 200.77 Period of performance. Period of performance means the time during which the non-Federal entity may incur new obligations to carry out the work authorized under the Federal award. The Federal awarding agency or pass-through entity must include start and end dates of the period of perform- ance in the Federal award (see §§200.210 Information contained in a Federal award paragraph (a)(5) and 200.331 Re- quirements for pass-through entities, paragraph (a)(1)(iv)). § 200.78 Personal property. Personal property means property other than real property. It may be tangible, having physical existence, or intangible. § 200.79 Personally Identifiable Infor- mation (PII). PII means information that can be used to distinguish or trace an individ- ual’s identity, either alone or when combined with other personal or iden- tifying information that is linked or linkable to a specific individual. Some information that is considered to be PII is available in public sources such as telephone books, public Web sites, and university listings. This type of in- formation is considered to be Public PII and includes, for example, first and last name, address, work telephone number, email address, home telephone number, and general educational cre- dentials. The definition of PII is not anchored to any single category of in- formation or technology. Rather, it re- quires a case-by-case assessment of the specific risk that an individual can be 106 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00118 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 311OMB Guidance § 200.87 identified. Non-PII can become PII whenever additional information is made publicly available, in any me- dium and from any source, that, when combined with other available infor- mation, could be used to identify an in- dividual. § 200.80 Program income. Program income means gross income earned by the non-Federal entity that is directly generated by a supported ac- tivity or earned as a result of the Fed- eral award during the period of per- formance except as provided in §200.307 paragraph (f). (See §200.77 Period of performance.) Program income in- cludes but is not limited to income from fees for services performed, the use or rental or real or personal prop- erty acquired under Federal awards, the sale of commodities or items fab- ricated under a Federal award, license fees and royalties on patents and copy- rights, and principal and interest on loans made with Federal award funds. Interest earned on advances of Federal funds is not program income. Except as otherwise provided in Federal statutes, regulations, or the terms and condi- tions of the Federal award, program in- come does not include rebates, credits, discounts, and interest earned on any of them. See also §200.407 Prior written approval (prior approval). See also 35 U.S.C. 200–212 ‘‘Disposition of Rights in Educational Awards’’ applies to inven- tions made under Federal awards. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75880, Dec. 19, 2014] § 200.81 Property. Property means real property or per- sonal property. § 200.82 Protected Personally Identifi- able Information (Protected PII). Protected PII means an individual’s first name or first initial and last name in combination with any one or more of types of information, including, but not limited to, social security number, passport number, credit card numbers, clearances, bank numbers, biometrics, date and place of birth, mother’s maid- en name, criminal, medical and finan- cial records, educational transcripts. This does not include PII that is re- quired by law to be disclosed. (See also §200.79 Personally Identifiable Informa- tion (PII)). § 200.83 Project cost. Project cost means total allowable costs incurred under a Federal award and all required cost sharing and vol- untary committed cost sharing, includ- ing third-party contributions. § 200.84 Questioned cost. Questioned cost means a cost that is questioned by the auditor because of an audit finding: (a) Which resulted from a violation or possible violation of a statute, regu- lation, or the terms and conditions of a Federal award, including for funds used to match Federal funds; (b) Where the costs, at the time of the audit, are not supported by ade- quate documentation; or (c) Where the costs incurred appear unreasonable and do not reflect the ac- tions a prudent person would take in the circumstances. § 200.85 Real property. Real property means land, including land improvements, structures and ap- purtenances thereto, but excludes moveable machinery and equipment. § 200.86 Recipient. Recipient means a non-Federal entity that receives a Federal award directly from a Federal awarding agency to carry out an activity under a Federal program. The term recipient does not include subrecipients. See also §200.69 Non-Federal entity. § 200.87 Research and Development (R&D). R&D means all research activities, both basic and applied, and all develop- ment activities that are performed by non-Federal entities. The term re- search also includes activities involv- ing the training of individuals in re- search techniques where such activities utilize the same facilities as other re- search and development activities and where such activities are not included in the instruction function. ‘‘Research’’ is defined as a system- atic study directed toward fuller sci- entific knowledge or understanding of the subject studied. ‘‘Development’’ is 107 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00119 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 312§ 200.88 the systematic use of knowledge and understanding gained from research di- rected toward the production of useful materials, devices, systems, or meth- ods, including design and development of prototypes and processes. § 200.88 Simplified acquisition thresh- old. Simplified acquisition threshold means the dollar amount below which a non- Federal entity may purchase property or services using small purchase meth- ods. Non-Federal entities adopt small purchase procedures in order to expe- dite the purchase of items costing less than the simplified acquisition thresh- old. The simplified acquisition thresh- old is set by the Federal Acquisition Regulation at 48 CFR Subpart 2.1 (Defi- nitions) and in accordance with 41 U.S.C. 1908. As of the publication of this part, the simplified acquisition threshold is $150,000, but this threshold is periodically adjusted for inflation. (Also see definition of §200.67 Micro- purchase.) § 200.89 Special purpose equipment. Special purpose equipment means equipment which is used only for re- search, medical, scientific, or other technical activities. Examples of spe- cial purpose equipment include micro- scopes, x-ray machines, surgical instru- ments, and spectrometers. See also §§200.33 Equipment and 200.48 General purpose equipment. § 200.90 State. State means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, U.S. Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and any agency or instrumentality thereof ex- clusive of local governments. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75880, Dec. 19, 2014] § 200.91 Student Financial Aid (SFA). SFA means Federal awards under those programs of general student as- sistance, such as those authorized by Title IV of the Higher Education Act of 1965, as amended, (20 U.S.C. 1070–1099d), which are administered by the U.S. De- partment of Education, and similar 2 CFR Ch. II (1–1–21 Edition) programs provided by other Federal agencies. It does not include Federal awards under programs that provide fellowships or similar Federal awards to students on a competitive basis, or for specified studies or research. § 200.92 Subaward. Subaward means an award provided by a pass-through entity to a sub- recipient for the subrecipient to carry out part of a Federal award received by the pass-through entity. It does not in- clude payments to a contractor or pay- ments to an individual that is a bene- ficiary of a Federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through enti- ty considers a contract. § 200.93 Subrecipient. Subrecipient means a non-Federal en- tity that receives a subaward from a pass-through entity to carry out part of a Federal program; but does not in- clude an individual that is a bene- ficiary of such program. A subrecipient may also be a recipient of other Fed- eral awards directly from a Federal awarding agency. § 200.94 Supplies. Supplies means all tangible personal property other than those described in §200.33 Equipment. A computing device is a supply if the acquisition cost is less than the lesser of the capitaliza- tion level established by the non-Fed- eral entity for financial statement pur- poses or $5,000, regardless of the length of its useful life. See also §§200.20 Com- puting devices and 200.33 Equipment. § 200.95 Termination. Termination means the ending of a Federal award, in whole or in part at any time prior to the planned end of period of performance. § 200.96 Third-party in-kind contribu- tions. Third-party in-kind contributions means the value of non-cash contribu- tions (i.e., property or services) that— (a) Benefit a federally assisted project or program; and 108 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00120 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 313OMB Guidance § 200.100 (b) Are contributed by non-Federal third parties, without charge, to a non- Federal entity under a Federal award. § 200.97 Unliquidated obligations. Unliquidated obligations means, for fi- nancial reports prepared on a cash basis, obligations incurred by the non- Federal entity that have not been paid (liquidated). For reports prepared on an accrual expenditure basis, these are ob- ligations incurred by the non-Federal entity for which an expenditure has not been recorded. § 200.98 Unobligated balance. Unobligated balance means the amount of funds under a Federal award that the non-Federal entity has not ob- ligated. The amount is computed by subtracting the cumulative amount of the non-Federal entity’s unliquidated obligations and expenditures of funds under the Federal award from the cu- mulative amount of the funds that the Federal awarding agency or pass- through entity authorized the non-Fed- eral entity to obligate. § 200.99 Voluntary committed cost sharing. Voluntary committed cost sharing means cost sharing specifically pledged on a voluntary basis in the proposal’s budget or the Federal award on the part of the non-Federal entity and that becomes a binding requirement of Fed- eral award. Subpart B—General Provisions § 200.100 Purpose. (a) Purpose. (1) This part establishes uniform administrative requirements, cost principles, and audit requirements for Federal awards to non-Federal enti- ties, as described in §200.101. Federal awarding agencies must not impose ad- ditional or inconsistent requirements, except as provided in §§200.102 and 200.211, or unless specifically required by Federal statute, regulation, or Ex- ecutive order. (2) This part provides the basis for a systematic and periodic collection and uniform submission by Federal agen- cies of information on all Federal fi- nancial assistance programs to the Of- fice of Management and Budget (OMB). It also establishes Federal policies re- lated to the delivery of this informa- tion to the public, including through the use of electronic media. It pre- scribes the manner in which General Services Administration (GSA), OMB, and Federal agencies that administer Federal financial assistance programs are to carry out their statutory respon- sibilities under the Federal Program Information Act (31 U.S.C. 6101–6106). (b) Administrative requirements. Sub- parts B through D of this part set forth the uniform administrative require- ments for grant and cooperative agree- ments, including the requirements for Federal awarding agency management of Federal grant programs before the Federal award has been made, and the requirements Federal awarding agen- cies may impose on non-Federal enti- ties in the Federal award. (c) Cost principles. Subpart E of this part establishes principles for deter- mining the allowable costs incurred by non-Federal entities under Federal awards. The principles are for the pur- pose of cost determination and are not intended to identify the circumstances or dictate the extent of Federal Gov- ernment participation in the financing of a particular program or project. The principles are designed to provide that Federal awards bear their fair share of cost recognized under these principles except where restricted or prohibited by statute. (d) Single Audit Requirements and Audit Follow-up. Subpart F of this part is issued pursuant to the Single Audit Act Amendments of 1996, (31 U.S.C. 7501–7507). It sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of non-Federal entities expending Fed- eral awards. These provisions also pro- vide the policies and procedures for Federal awarding agencies and pass- through entities when using the results of these audits. (e) Guidance on challenges and prizes. For OMB guidance to Federal awarding agencies on challenges and prizes, please see memo M–10–11 Guidance on the Use of Challenges and Prizes to Promote Open Government, issued March 8, 2010, or its successor. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49536, Aug. 13, 2020] 109 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00121 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 314§ 200.101 § 200.101 Applicability. (a) General applicability to Federal agencies. (1) The requirements estab- lished in this part apply to Federal agencies that make Federal awards to non-Federal entities. These require- ments are applicable to all costs re- lated to Federal awards. (2) Federal awarding agencies may apply subparts A through E of this part to Federal agencies, for-profit entities, foreign public entities, or foreign orga- nizations, except where the Federal awarding agency determines that the application of these subparts would be inconsistent with the international re- sponsibilities of the United States or the statutes or regulations of a foreign government. (b) Applicability to different types of Federal awards. (1) Throughout this part when the word ‘‘must’’ is used it indicates a requirement. Whereas, use of the word ‘‘should’’ or ‘‘may’’ indi- 2 CFR Ch. II (1–1–21 Edition) cates a best practice or recommended approach rather than a requirement and permits discretion. (2) The following table describes what portions of this part apply to which types of Federal awards. The terms and conditions of Federal awards (including this part) flow down to subawards to subrecipients unless a particular sec- tion of this part or the terms and con- ditions of the Federal award specifi- cally indicate otherwise. This means that non-Federal entities must comply with requirements in this part regard- less of whether the non-Federal entity is a recipient or subrecipient of a Fed- eral award. Pass-through entities must comply with the requirements de- scribed in subpart D of this part, §§200.331 through 200.333, but not any requirements in this part directed to- wards Federal awarding agencies un- less the requirements of this part or the terms and conditions of the Federal award indicate otherwise. TABLE 1 TO PARAGRAPH (b) The following portions of this Part Are applicable to the following types of Federal Awards and Fixed-Price Con- tracts and Subcontracts (except as noted in paragraphs (d) and (e) of this section): Are NOT applicable to the following types of Federal Awards and Fixed-Price Contracts and Subcontracts: Subpart A—Acronyms and Definitions ...... Subpart B—General Provisions, except for §§ 200.111 English Language, 200.112 Conflict of Interest, 200.113 Mandatory Disclosures. §§ 200.111 English Language, 200.112 Conflict of Interest, 200.113 Mandatory Disclosures. —All. —All. —Grant Agreements and cooperative agreements. Subparts C–D, except for §§ 200.203 Re- quirement to provide public notice of Federal financial assistance programs, 200.303 Internal controls, 200.331–333 Subrecipient Monitoring and Manage- ment. § 200.203 Requirement to provide public notice of Federal financial assistance programs. §§ 200.303 Internal controls, 200.331–333 Subrecipient Monitoring and Manage- ment. Subpart E—Cost Principles ....................... —Grant Agreements and cooperative agreements. —Grant Agreements and cooperative agreements. —Agreements for loans, loan guaran- tees, interest subsidies and insurance. —All. —Agreements for loans, loan guaran- tees, interest subsidies and insurance. —Procurement contracts awarded by Federal Agencies under the Federal Acquisition Regulation and sub- contracts under those contracts. —Agreements for loans, loan guaran- tees, interest subsidies and insurance. —Procurement contracts awarded by Federal Agencies under the Federal Acquisition Regulation and sub- contracts under those contracts. —Procurement contracts awarded by Federal Agencies under the Federal Acquisition Regulation and sub- contracts under those contracts. —Grant Agreements and cooperative agreements, except those providing food commodities. —All procurement contracts under the Federal Acquisition Regulations ex- cept those that are not negotiated. —Grant agreements and cooperative agreements providing foods commod- ities. —Fixed amount awards. —Agreements for loans, loans guaran- tees, interest subsidies and insurance. —Federal awards to hospitals (see Ap- pendix IX Hospital Cost Principles). 110 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00122 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 315OMB Guidance § 200.101 TABLE 1 TO PARAGRAPH (b)—Continued The following portions of this Part Are applicable to the following types of Federal Awards and Fixed-Price Con- tracts and Subcontracts (except as noted in paragraphs (d) and (e) of this section): Are NOT applicable to the following types of Federal Awards and Fixed-Price Contracts and Subcontracts: Subpart F—Audit Requirements ............... —Grant Agreements and cooperative agreements. —Contracts and subcontracts, except for fixed price contacts and subcontracts, awarded under the Federal Acquisition Regulation. —Agreements for loans, loans guaran- tees, interest subsidies and insurance and other forms of Federal Financial Assistance as defined by the Single Audit Act Amendment of 1996. —Fixed-price contracts and subcontracts awarded under the Federal Acquisition Regulation. (c) Federal award of cost-reimbursement contract under the FAR to a non-Federal entity. When a non-Federal entity is awarded a cost-reimbursement con- tract, only subpart D, §§200.331 through 200.333, and subparts E and F of this part are incorporated by reference into the contract, but the requirements of subparts D, E, and F are supplementary to the FAR and the contract. When the Cost Accounting Standards (CAS) are applicable to the contract, they take precedence over the requirements of this part, including subpart F of this part, which are supplementary to the CAS requirements. In addition, costs that are made unallowable under 10 U.S.C. 2324(e) and 41 U.S.C. 4304(a) as described in the FAR 48 CFR part 31, subpart 31.2, and 48 CFR 31.603 are al- ways unallowable. For requirements other than those covered in subpart D, §§200.331 through 200.333, and subparts E and F of this part, the terms of the contract and the FAR apply. Note that when a non-Federal entity is awarded a FAR contract, the FAR applies, and the terms and conditions of the con- tract shall prevail over the require- ments of this part. (d) Governing provisions. With the ex- ception of subpart F of this part, which is required by the Single Audit Act, in any circumstances where the provi- sions of Federal statutes or regulations differ from the provisions of this part, the provision of the Federal statutes or regulations govern. This includes, for agreements with Indian tribes, the pro- visions of the Indian Self-Determina- tion and Education and Assistance Act (ISDEAA), as amended, 25 U.S.C 450– 458ddd–2. (e) Program applicability. Except for §§200.203 and 200.331 through 200.333, the requirements in subparts C, D, and E of this part do not apply to the following programs: (1) The block grant awards author- ized by the Omnibus Budget Reconcili- ation Act of 1981 (including Community Services), except to the extent that subpart E of this part apply to sub- recipients of Community Services Block Grant funds pursuant to 42 U.S.C. 9916(a)(1)(B); (2) Federal awards to local education agencies under 20 U.S.C. 7702–7703b, (portions of the Impact Aid program); (3) Payments under the Department of Veterans Affairs’ State Home Per Diem Program (38 U.S.C. 1741); and (4) Federal awards authorized under the Child Care and Development Block Grant Act of 1990, as amended: (i) Child Care and Development Block Grant (42 U.S.C. 9858). (ii) Child Care Mandatory and Match- ing Funds of the Child Care and Devel- opment Fund (42 U.S.C. 9858). (f) Additional program applicability. Except for §200.203, the guidance in subpart C of this part does not apply to the following programs: (1) Entitlement Federal awards to carry out the following programs of the Social Security Act: (i) Temporary Assistance for Needy Families (title IV–A of the Social Secu- rity Act, 42 U.S.C. 601–619); (ii) Child Support Enforcement and Establishment of Paternity (title IV–D 111 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00123 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 316§ 200.102 of the Social Security Act, 42 U.S.C. 651–669b); (iii) Foster Care and Adoption Assist- ance (title IV–E of the Act, 42 U.S.C. 670–679c); (iv) Aid to the Aged, Blind, and Dis- abled (titles I, X, XIV, and XVI–AABD of the Act, as amended); (v) Medical Assistance (Medicaid) (title XIX of the Act, 42 U.S.C. 1396– 1396w–5) not including the State Med- icaid Fraud Control program author- ized by section 1903(a)(6)(B) of the So- cial Security Act (42 U.S.C. 1396b(a)(6)(B)); and (vi) Children’s Health Insurance Pro- gram (title XXI of the Act, 42 U.S.C. 1397aa–1397mm). (2) A Federal award for an experi- mental, pilot, or demonstration project that is also supported by a Federal award listed in paragraph (f)(1) of this section. (3) Federal awards under subsection 412(e) of the Immigration and Nation- ality Act and subsection 501(a) of the Refugee Education Assistance Act of 1980 (Pub. L. 96–422, 94 Stat. 1809), for cash assistance, medical assistance, and supplemental security income ben- efits to refugees and entrants and the administrative costs of providing the assistance and benefits (8 U.S.C. 1522(e)). (4) Entitlement awards under the fol- lowing programs of The National School Lunch Act: (i) National School Lunch Program (section 4 of the Act, 42 U.S.C. 1753); (ii) Commodity Assistance (section 6 of the Act, 42 U.S.C. 1755); (iii) Special Meal Assistance (section 11 of the Act, 42 U.S.C. 1759a); (iv) Summer Food Service Program for Children (section 13 of the Act, 42 U.S.C. 1761); and (v) Child and Adult Care Food Pro- gram (section 17 of the Act, 42 U.S.C. 1766). (5) Entitlement awards under the fol- lowing programs of The Child Nutri- tion Act of 1966: (i) Special Milk Program (section 3 of the Act, 42 U.S.C. 1772); (ii) School Breakfast Program (sec- tion 4 of the Act, 42 U.S.C. 1773); and (iii) State Administrative Expenses (section 7 of the Act, 42 U.S.C. 1776). 2 CFR Ch. II (1–1–21 Edition) (6) Entitlement awards for State Ad- ministrative Expenses under The Food and Nutrition Act of 2008 (section 16 of the Act, 7 U.S.C. 2025). (7) Non-discretionary Federal awards under the following non-entitlement programs: (i) Special Supplemental Nutrition Program for Women, Infants and Chil- dren (section 17 of the Child Nutrition Act of 1966) 42 U.S.C. 1786; (ii) The Emergency Food Assistance Programs (Emergency Food Assistance Act of 1983) 7 U.S.C. 7501 note; and (iii) Commodity Supplemental Food Program (section 5 of the Agriculture and Consumer Protection Act of 1973) 7 U.S.C. 612c note. [85 FR 49536, Aug. 13, 2020] § 200.102 Exceptions. (a) With the exception of subpart F of this part, OMB may allow exceptions for classes of Federal awards or non- Federal entities subject to the require- ments of this part when exceptions are not prohibited by statute. In the inter- est of maximum uniformity, exceptions from the requirements of this part will be permitted as described in this sec- tion. (b) Exceptions on a case-by-case basis for individual non-Federal entities may be authorized by the Federal awarding agency or cognizant agency for indirect costs, except where otherwise required by law or where OMB or other approval is expressly required by this part. (c) The Federal awarding agency may apply adjust requirements to a class of Federal awards or non-Federal entities when approved by OMB, or when re- quired by Federal statutes or regula- tions, except for the requirements in subpart F of this part. A Federal awarding agency may apply less re- strictive requirements when making fixed amount awards as defined in sub- part A of this part, except for those re- quirements imposed by statute or in subpart F of this part. (d) Federal awarding agencies may request exceptions in support of inno- vative program designs that apply a risk-based, data-driven framework to 112 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00124 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 317OMB Guidance § 200.106 alleviate select compliance require- ments and hold recipients accountable for good performance. See also §200.206. [85 FR 49538, Aug. 13, 2020] § 200.103 Authorities. This part is issued under the fol- lowing authorities. (a) Subparts B through D of this part are authorized under 31 U.S.C. 503 (the Chief Financial Officers Act, Functions of the Deputy Director for Manage- ment), 41 U.S.C. 1101–1131 (the Office of Federal Procurement Policy Act), Re- organization Plan No. 2 of 1970, and Ex- ecutive Order 11541 (‘‘Prescribing the Duties of the Office of Management and Budget and the Domestic Policy Council in the Executive Office of the President’’), the Single Audit Act Amendments of 1996, (31 U.S.C. 7501– 7507), as well as The Federal Program Information Act (Pub. L. 95–220 and Pub. L. 98–169, as amended, codified at 31 U.S.C. 6101–6106). (b) Subpart E of this part is author- ized under the Budget and Accounting Act of 1921, as amended; the Budget and Accounting Procedures Act of 1950, as amended (31 U.S.C. 1101–1125); the Chief Financial Officers Act of 1990 (31 U.S.C. 503–504); Reorganization Plan No. 2 of 1970; and Executive Order 11541, ‘‘Prescribing the Duties of the Office of Management and Budget and the Do- mestic Policy Council in the Executive Office of the President.’’ (c) Subpart F of this part is author- ized under the Single Audit Act Amendments of 1996, (31 U.S.C. 7501– 7507). [85 FR 49538, Aug. 13, 2020] § 200.104 Supersession. As described in §200.110, this part su- persedes the following OMB guidance documents and regulations under title 2 of the Code of Federal Regulations: (a) A–21, ‘‘Cost Principles for Edu- cational Institutions’’ (2 CFR part 220); (b) A–87, ‘‘Cost Principles for State, Local and Indian Tribal Governments’’ (2 CFR part 225) and also FEDERAL REG- ISTER notice 51 FR 552 (January 6, 1986); (c) A–89, ‘‘Federal Domestic Assist- ance Program Information’’; (d) A–102, ‘‘Grant Awards and Cooper- ative Agreements with State and Local Governments’’; (e) A–110, ‘‘Uniform Administrative Requirements for Awards and Other Agreements with Institutions of Higher Education, Hospitals, and Other Non- profit Organizations’’ (codified at 2 CFR 215); (f) A–122, ‘‘Cost Principles for Non- Profit Organizations’’ (2 CFR part 230); (g) A–133, ‘‘Audits of States, Local Governments and Non-Profit Organiza- tions’’; and (h) Those sections of A–50 related to audits performed under subpart F of this part. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75882, Dec. 19, 2014; 85 FR 49538, Aug. 13, 2020] § 200.105 Effect on other issuances. (a) Superseding inconsistent require- ments. For Federal awards subject to this part, all administrative require- ments, program manuals, handbooks and other non-regulatory materials that are inconsistent with the require- ments of this part must be superseded upon implementation of this part by the Federal agency, except to the ex- tent they are required by statute or au- thorized in accordance with the provi- sions in §200.102. (b) Imposition of requirements on recipi- ents. Agencies may impose legally binding requirements on recipients only through the notice and public comment process through an approved agency process, including as authorized by this part, other statutes or regula- tions, or as incorporated into the terms of a Federal award. [85 FR 49538, Aug. 13, 2020] § 200.106 Agency implementation. The specific requirements and re- sponsibilities of Federal agencies and non-Federal entities are set forth in this part. Federal agencies making Federal awards to non-Federal entities must implement the language in sub- parts C through F of this part in codi- fied regulations unless different provi- sions are required by Federal statute or are approved by OMB. [85 FR 49538, Aug. 13, 2020] 113 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00125 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 318§ 200.107 § 200.107 OMB responsibilities. OMB will review Federal agency reg- ulations and implementation of this part, and will provide interpretations of policy requirements and assistance to ensure effective and efficient imple- mentation. Any exceptions will be sub- ject to approval by OMB. Exceptions will only be made in particular cases where adequate justification is pre- sented. § 200.108 Inquiries. Inquiries concerning this part may be directed to the Office of Federal Finan- cial Management Office of Manage- ment and Budget, in Washington, DC. Non-Federal entities’ inquiries should be addressed to the Federal awarding agency, cognizant agency for indirect costs, cognizant or oversight agency for audit, or pass-through entity as ap- propriate. § 200.109 Review date. OMB will review this part at least every five years after December 26, 2013. § 200.110 Effective/applicability date. (a) The standards set forth in this part that affect the administration of Federal awards issued by Federal awarding agencies become effective once implemented by Federal awarding agencies or when any future amend- ment to this part becomes final. (b) Existing negotiated indirect cost rates (as of the publication date of the revisions to the guidance) will remain in place until they expire. The effective date of changes to indirect cost rates must be based upon the date that a newly re-negotiated rate goes into ef- fect for a specific non-Federal entity’s fiscal year. Therefore, for indirect cost rates and cost allocation plans, the re- vised Uniform Guidance (as of the pub- lication date for revisions to the guid- ance) become effective in generating proposals and negotiating a new rate (when the rate is re-negotiated). [85 FR 49538, Aug. 13, 2020] § 200.111 English language. (a) All Federal financial assistance announcements and Federal award in- formation must be in the English lan- 2 CFR Ch. II (1–1–21 Edition) guage. Applications must be submitted in the English language and must be in the terms of U.S. dollars. If the Federal awarding agency receives applications in another currency, the Federal awarding agency will evaluate the ap- plication by converting the foreign cur- rency to United States currency using the date specified for receipt of the ap- plication. (b) Non-Federal entities may trans- late the Federal award and other docu- ments into another language. In the event of inconsistency between any terms and conditions of the Federal award and any translation into another language, the English language mean- ing will control. Where a significant portion of the non-Federal entity’s em- ployees who are working on the Fed- eral award are not fluent in English, the non-Federal entity must provide the Federal award in English and the language(s) with which employees are more familiar. § 200.112 Conflict of interest. The Federal awarding agency must establish conflict of interest policies for Federal awards. The non-Federal entity must disclose in writing any po- tential conflict of interest to the Fed- eral awarding agency or pass-through entity in accordance with applicable Federal awarding agency policy. § 200.113 Mandatory disclosures. The non-Federal entity or applicant for a Federal award must disclose, in a timely manner, in writing to the Fed- eral awarding agency or pass-through entity all violations of Federal crimi- nal law involving fraud, bribery, or gratuity violations potentially affect- ing the Federal award. Non-Federal en- tities that have received a Federal award including the term and condi- tion outlined in appendix XII to this part are required to report certain civil, criminal, or administrative pro- ceedings to SAM (currently FAPIIS). Failure to make required disclosures can result in any of the remedies de- scribed in §200.339. (See also 2 CFR part 180, 31 U.S.C. 3321, and 41 U.S.C. 2313.) [85 FR 49539, Aug. 13, 2020] 114 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00126 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 319OMB Guidance § 200.202 Subpart C—Pre-Federal Award Requirements and Contents of Federal Awards SOURCE: 85 FR 49539, Aug. 13, 2020, unless otherwise noted. § 200.200 Purpose. Sections 200.201 through 200.216 pre- scribe instructions and other pre-award matters to be used by Federal awarding agencies in the program planning, an- nouncement, application and award processes. § 200.201 Use of grant agreements (in- cluding fixed amount awards), co- operative agreements, and con- tracts. (a) Federal award instrument. The Fed- eral awarding agency or pass-through entity must decide on the appropriate instrument for the Federal award (i.e., grant agreement, cooperative agree- ment, or contract) in accordance with the Federal Grant and Cooperative Agreement Act (31 U.S.C. 6301–08). (b) Fixed amount awards. In addition to the options described in paragraph (a) of this section, Federal awarding agencies, or pass-through entities as permitted in §200.333, may use fixed amount awards (see Fixed amount awards in §200.1) to which the following conditions apply: (1) The Federal award amount is ne- gotiated using the cost principles (or other pricing information) as a guide. The Federal awarding agency or pass- through entity may use fixed amount awards if the project scope has measur- able goals and objectives and if ade- quate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost. Payments are based on meeting specific requirements of the Federal award. Accountability is based on performance and results. Ex- cept in the case of termination before completion of the Federal award, there is no governmental review of the ac- tual costs incurred by the non-Federal entity in performance of the award. Some of the ways in which the Federal award may be paid include, but are not limited to: (i) In several partial payments, the amount of each agreed upon in ad- vance, and the ‘‘milestone’’ or event triggering the payment also agreed upon in advance, and set forth in the Federal award; (ii) On a unit price basis, for a de- fined unit or units, at a defined price or prices, agreed to in advance of perform- ance of the Federal award and set forth in the Federal award; or, (iii) In one payment at Federal award completion. (2) A fixed amount award cannot be used in programs which require manda- tory cost sharing or match. (3) The non-Federal entity must cer- tify in writing to the Federal awarding agency or pass-through entity at the end of the Federal award that the project or activity was completed or the level of effort was expended. If the required level of activity or effort was not carried out, the amount of the Fed- eral award must be adjusted. (4) Periodic reports may be estab- lished for each Federal award. (5) Changes in principal investigator, project leader, project partner, or scope of effort must receive the prior written approval of the Federal awarding agen- cy or pass-through entity. § 200.202 Program planning and de- sign. The Federal awarding agency must design a program and create an Assist- ance Listing before announcing the No- tice of Funding Opportunity. The pro- gram must be designed with clear goals and objectives that facilitate the deliv- ery of meaningful results consistent with the Federal authorizing legisla- tion of the program. Program perform- ance shall be measured based on the goals and objectives developed during program planning and design. See §200.301 for more information on per- formance measurement. Performance measures may differ depending on the type of program. The program must align with the strategic goals and ob- jectives within the Federal awarding agency’s performance plan and should support the Federal awarding agency’s performance measurement, manage- ment, and reporting as required by Part 6 of OMB Circular A–11 (Prepara- tion, Submission, and Execution of the 115 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00127 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 320§ 200.203 Budget). The program must also be de- signed to align with the Program Man- agement Improvement Accountability Act (Pub. L. 114–264). § 200.203 Requirement to provide pub- lic notice of Federal financial as- sistance programs. (a) The Federal awarding agency must notify the public of Federal pro- grams in the Federal Assistance List- ings maintained by the General Serv- ices Administration (GSA). (1) The Federal Assistance Listings is the single, authoritative, government- wide comprehensive source of Federal financial assistance program informa- tion produced by the executive branch of the Federal Government. (2) The information that the Federal awarding agency must submit to GSA for approval by OMB is listed in para- graph (b) of this section. GSA must prescribe the format for the submission in coordination with OMB. (3) The Federal awarding agency may not award Federal financial assistance without assigning it to a program that has been included in the Federal As- sistance Listings as required in this section unless there are exigent cir- cumstances requiring otherwise, such as timing requirements imposed by statute. (b) For each program that awards discretionary Federal awards, non-dis- cretionary Federal awards, loans, in- surance, or any other type of Federal financial assistance, the Federal awarding agency must, to the extent practicable, create, update, and man- age Assistance Listings entries based on the authorizing statute for the pro- gram and comply with additional guid- ance provided by GSA in consultation with OMB to ensure consistent, accu- rate information is available to pro- spective applicants. Accordingly, Fed- eral awarding agencies must submit the following information to GSA: (1) Program Description, Purpose, Goals, and Measurement. A brief sum- mary of the statutory or regulatory re- quirements of the program and its in- tended outcome. Where appropriate, the Program Description, Purpose, Goals, and Measurement should align with the strategic goals and objectives within the Federal awarding agency’s 2 CFR Ch. II (1–1–21 Edition) performance plan and should support the Federal awarding agency’s per- formance measurement, management, and reporting as required by Part 6 of OMB Circular A–11; (2) Identification. Identification of whether the program makes Federal awards on a discretionary basis or the Federal awards are prescribed by Fed- eral statute, such as in the case of for- mula grants. (3) Projected total amount of funds available for the program. Estimates based on previous year funding are ac- ceptable if current appropriations are not available at the time of the sub- mission; (4) Anticipated source of available funds. The statutory authority for funding the program and, to the extent possible, agency, sub-agency, or, if known, the specific program unit that will issue the Federal awards, and asso- ciated funding identifier (e.g., Treasury Account Symbol(s)); (5) General eligibility requirements. The statutory, regulatory or other eligi- bility factors or considerations that de- termine the applicant’s qualification for Federal awards under the program (e.g., type of non-Federal entity); and (6) Applicability of Single Audit Re- quirements. Applicability of Single Audit Requirements as required by subpart F of this part. § 200.204 Notices of funding opportuni- ties. For discretionary grants and cooper- ative agreements that are competed, the Federal awarding agency must an- nounce specific funding opportunities by providing the following information in a public notice: (a) Summary information in notices of funding opportunities. The Federal awarding agency must display the fol- lowing information posted on the OMB- designated governmentwide website for funding and applying for Federal finan- cial assistance, in a location preceding the full text of the announcement: (1) Federal Awarding Agency Name; (2) Funding Opportunity Title; (3) Announcement Type (whether the funding opportunity is the initial an- nouncement of this funding oppor- tunity or a modification of a pre- viously announced opportunity); 116 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00128 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 321OMB Guidance § 200.206 (4) Funding Opportunity Number (re- quired, if applicable). If the Federal awarding agency has assigned or will assign a number to the funding oppor- tunity announcement, this number must be provided; (5) Assistance Listings Number(s); (6) Key Dates. Key dates include due dates for applications or Executive Order 12372 submissions, as well as for any letters of intent or pre-applica- tions. For any announcement issued before a program’s application mate- rials are available, key dates also in- clude the date on which those mate- rials will be released; and any other ad- ditional information, as deemed appli- cable by the relevant Federal awarding agency. (b) Availability period. The Federal awarding agency must generally make all funding opportunities available for application for at least 60 calendar days. The Federal awarding agency may make a determination to have a less than 60 calendar day availability period but no funding opportunity should be available for less than 30 cal- endar days unless exigent cir- cumstances require as determined by the Federal awarding agency head or delegate. (c) Full text of funding opportunities. The Federal awarding agency must in- clude the following information in the full text of each funding opportunity. For specific instructions on the con- tent required in this section, refer to appendix I to this part. (1) Full programmatic description of the funding opportunity. (2) Federal award information, in- cluding sufficient information to help an applicant make an informed deci- sion about whether to submit an appli- cation. (See also §200.414(c)(4)). (3) Specific eligibility information, including any factors or priorities that affect an applicant’s or its applica- tion’s eligibility for selection. (4) Application Preparation and Sub- mission Information, including the ap- plicable submission dates and time. (5) Application Review Information including the criteria and process to be used to evaluate applications. See also §§200.205 and 200.206. (6) Federal Award Administration In- formation. See also §200.211. (7) Applicable terms and conditions for resulting awards, including any ex- ceptions from these standard terms. § 200.205 Federal awarding agency re- view of merit of proposals. For discretionary Federal awards, unless prohibited by Federal statute, the Federal awarding agency must de- sign and execute a merit review process for applications, with the objective of selecting recipients most likely to be successful in delivering results based on the program objectives outlined in section §200.202. A merit review is an objective process of evaluating Federal award applications in accordance with written standards set forth by the Fed- eral awarding agency. This process must be described or incorporated by reference in the applicable funding op- portunity (see appendix I to this part.). See also §200.204. The Federal awarding agency must also periodically review its merit review process. § 200.206 Federal awarding agency re- view of risk posed by applicants. (a) Review of OMB-designated reposi- tories of governmentwide data. (1) Prior to making a Federal award, the Fed- eral awarding agency is required by the Improper Payments Elimination and Recovery Improvement Act of 2012, 31 U.S.C. 3321 note, and 41 U.S.C. 2313 to review information available through any OMB-designated repositories of governmentwide eligibility qualifica- tion or financial integrity information as appropriate. See also suspension and debarment requirements at 2 CFR part 180 as well as individual Federal agency suspension and debarment regulations in title 2 of the Code of Federal Regula- tions. (2) In accordance 41 U.S.C. 2313, the Federal awarding agency is required to review the non-public segment of the OMB-designated integrity and perform- ance system accessible through SAM (currently the Federal Awardee Per- formance and Integrity Information System (FAPIIS)) prior to making a Federal award where the Federal share is expected to exceed the simplified ac- quisition threshold, defined in 41 U.S.C. 134, over the period of performance. As required by Public Law 112–239, Na- tional Defense Authorization Act for 117 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00129 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 322§ 200.207 Fiscal Year 2013, prior to making a Federal award, the Federal awarding agency must consider all of the infor- mation available through FAPIIS with regard to the applicant and any imme- diate highest level owner, predecessor (i.e.; a non-Federal entity that is re- placed by a successor), or subsidiary, identified for that applicant in FAPIIS, if applicable. At a minimum, the infor- mation in the system for a prior Fed- eral award recipient must demonstrate a satisfactory record of executing pro- grams or activities under Federal grants, cooperative agreements, or pro- curement awards; and integrity and business ethics. The Federal awarding agency may make a Federal award to a recipient who does not fully meet these standards, if it is determined that the information is not relevant to the cur- rent Federal award under consideration or there are specific conditions that can appropriately mitigate the effects of the non-Federal entity’s risk in ac- cordance with §200.208. (b) Risk evaluation. (1) The Federal awarding agency must have in place a framework for evaluating the risks posed by applicants before they receive Federal awards. This evaluation may incorporate results of the evaluation of the applicant’s eligibility or the qual- ity of its application. If the Federal awarding agency determines that a Federal award will be made, special conditions that correspond to the de- gree of risk assessed may be applied to the Federal award. Criteria to be evalu- ated must be described in the an- nouncement of funding opportunity de- scribed in §200.204. (2) In evaluating risks posed by appli- cants, the Federal awarding agency may use a risk-based approach and may consider any items such as the fol- lowing: (i) Financial stability. Financial sta- bility; (ii) Management systems and stand- ards. Quality of management systems and ability to meet the management standards prescribed in this part; (iii) History of performance. The appli- cant’s record in managing Federal awards, if it is a prior recipient of Fed- eral awards, including timeliness of compliance with applicable reporting requirements, conformance to the 2 CFR Ch. II (1–1–21 Edition) terms and conditions of previous Fed- eral awards, and if applicable, the ex- tent to which any previously awarded amounts will be expended prior to fu- ture awards; (iv) Audit reports and findings. Re- ports and findings from audits per- formed under subpart F of this part or the reports and findings of any other available audits; and (v) Ability to effectively implement re- quirements. The applicant’s ability to effectively implement statutory, regu- latory, or other requirements imposed on non-Federal entities. (c) Risk-based requirements adjustment. The Federal awarding agency may ad- just requirements when a risk-evalua- tion indicates that it may be merited either pre-award or post-award. (d) Suspension and debarment compli- ance. (1) The Federal awarding agency must comply with the guidelines on governmentwide suspension and debar- ment in 2 CFR part 180, and must re- quire non-Federal entities to comply with these provisions. These provisions restrict Federal awards, subawards and contracts with certain parties that are debarred, suspended or otherwise ex- cluded from or ineligible for participa- tion in Federal programs or activities. § 200.207 Standard application re- quirements. (a) Paperwork clearances. The Federal awarding agency may only use applica- tion information collections approved by OMB under the Paperwork Reduc- tion Act of 1995 and OMB’s imple- menting regulations in 5 CFR part 1320 and in alignment with OMB-approved, governmentwide data elements avail- able from the OMB-designated stand- ards lead. Consistent with these re- quirements, OMB will authorize addi- tional information collections only on a limited basis. (b) Information collection. If applica- ble, the Federal awarding agency may inform applicants and recipients that they do not need to provide certain in- formation otherwise required by the relevant information collection. § 200.208 Specific conditions. (a) Federal awarding agencies are re- sponsible for ensuring that specific 118 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00130 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 323OMB Guidance § 200.211 Federal award conditions are con- sistent with the program design re- flected in §200.202 and include clear performance expectations of recipients as required in §200.301. (b) The Federal awarding agency or pass-through entity may adjust spe- cific Federal award conditions as need- ed, in accordance with this section, based on an analysis of the following factors: (1) Based on the criteria set forth in §200.206; (2) The applicant or recipient’s his- tory of compliance with the general or specific terms and conditions of a Fed- eral award; (3) The applicant or recipient’s abil- ity to meet expected performance goals as described in §200.211; or (4) A responsibility determination of an applicant or recipient. (c) Additional Federal award condi- tions may include items such as the following: (1) Requiring payments as reimburse- ments rather than advance payments; (2) Withholding authority to proceed to the next phase until receipt of evi- dence of acceptable performance within a given performance period; (3) Requiring additional, more de- tailed financial reports; (4) Requiring additional project mon- itoring; (5) Requiring the non-Federal entity to obtain technical or management as- sistance; or (6) Establishing additional prior ap- provals. (d) If the Federal awarding agency or pass-through entity is imposing addi- tional requirements, they must notify the applicant or non-Federal entity as to: (1) The nature of the additional re- quirements; (2) The reason why the additional re- quirements are being imposed; (3) The nature of the action needed to remove the additional requirement, if applicable; (4) The time allowed for completing the actions if applicable; and (5) The method for requesting recon- sideration of the additional require- ments imposed. (e) Any additional requirements must be promptly removed once the condi- tions that prompted them have been satisfied. § 200.209 Certifications and represen- tations. Unless prohibited by the U.S. Con- stitution, Federal statutes or regula- tions, each Federal awarding agency or pass-through entity is authorized to re- quire the non-Federal entity to submit certifications and representations re- quired by Federal statutes, or regula- tions on an annual basis. Submission may be required more frequently if the non-Federal entity fails to meet a re- quirement of a Federal award. § 200.210 Pre-award costs. For requirements on costs incurred by the applicant prior to the start date of the period of performance of the Federal award, see §200.458. § 200.211 Information contained in a Federal award. A Federal award must include the following information: (a) Federal award performance goals. Performance goals, indicators, targets, and baseline data must be included in the Federal award, where applicable. The Federal awarding agency must also specify how performance will be assessed in the terms and conditions of the Federal award, including the tim- ing and scope of expected performance. See §§200.202 and 200.301 for more infor- mation on Federal award performance goals. (b) General Federal award information. The Federal awarding agency must in- clude the following general Federal award information in each Federal award: (1) Recipient name (which must match the name associated with its unique entity identifier as defined at 2 CFR 25.315); (2) Recipient’s unique entity identi- fier; (3) Unique Federal Award Identifica- tion Number (FAIN); (4) Federal Award Date (see Federal award date in §200.201); (5) Period of Performance Start and End Date; (6) Budget Period Start and End Date; 119 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00131 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 324§ 200.212 (7) Amount of Federal Funds Obli- gated by this action; (8) Total Amount of Federal Funds Obligated; (9) Total Approved Cost Sharing or Matching, where applicable; (10) Total Amount of the Federal Award including approved Cost Sharing or Matching; (11) Budget Approved by the Federal Awarding Agency; (11) Federal award description, (to comply with statutory requirements (e.g., FFATA)); (12) Name of Federal awarding agen- cy and contact information for award- ing official, (13) Assistance Listings Number and Title; (14) Identification of whether the award is R&D; and (15) Indirect cost rate for the Federal award (including if the de minimis rate is charged per §200.414). (c) General terms and conditions. (1) Federal awarding agencies must incor- porate the following general terms and conditions either in the Federal award or by reference, as applicable: (i) Administrative requirements. Admin- istrative requirements implemented by the Federal awarding agency as speci- fied in this part. (ii) National policy requirements. These include statutory, executive order, other Presidential directive, or regu- latory requirements that apply by spe- cific reference and are not program- specific. See §200.300 Statutory and na- tional policy requirements. (iii) Recipient integrity and perform- ance matters. If the total Federal share of the Federal award may include more than $500,000 over the period of per- formance, the Federal awarding agency must include the term and condition available in appendix XII of this part. See also §200.113. (iv) Future budget periods. If it is an- ticipated that the period of perform- ance will include multiple budget peri- ods, the Federal awarding agency must indicate that subsequent budget peri- ods are subject to the availability of funds, program authority, satisfactory performance, and compliance with the terms and conditions of the Federal award. 2 CFR Ch. II (1–1–21 Edition) (v) Termination provisions. Federal awarding agencies must make recipi- ents aware, in a clear and unambiguous manner, of the termination provisions in §200.340, including the applicable termination provisions in the Federal awarding agency’s regulations or in each Federal award. (2) The Federal award must incor- porate, by reference, all general terms and conditions of the award, which must be maintained on the agency’s website. (3) If a non-Federal entity requests a copy of the full text of the general terms and conditions, the Federal awarding agency must provide it. (4) Wherever the general terms and conditions are publicly available, the Federal awarding agency must main- tain an archive of previous versions of the general terms and conditions, with effective dates, for use by the non-Fed- eral entity, auditors, or others. (d) Federal awarding agency, program, or Federal award specific terms and con- ditions. The Federal awarding agency must include with each Federal award any terms and conditions necessary to communicate requirements that are in addition to the requirements outlined in the Federal awarding agency’s gen- eral terms and conditions. See also §200.208. Whenever practicable, these specific terms and conditions also should be shared on the agency’s website and in notices of funding op- portunities (as outlined in §200.204) in addition to being included in a Federal award. See also §200.207. (e) Federal awarding agency require- ments. Any other information required by the Federal awarding agency. § 200.212 Public access to Federal award information. (a) In accordance with statutory re- quirements for Federal spending trans- parency (e.g., FFATA), except as noted in this section, for applicable Federal awards the Federal awarding agency must announce all Federal awards pub- licly and publish the required informa- tion on a publicly available OMB-des- ignated governmentwide website. (b) All information posted in the des- ignated integrity and performance sys- tem accessible through SAM (currently FAPIIS) on or after April 15, 2011 will 120 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00132 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 325OMB Guidance § 200.213 be publicly available after a waiting period of 14 calendar days, except for: (1) Past performance reviews required by Federal Government contractors in accordance with the Federal Acquisi- tion Regulation (FAR) 48 CFR part 42, subpart 42.15; (2) Information that was entered prior to April 15, 2011; or (3) Information that is withdrawn during the 14-calendar day waiting pe- riod by the Federal Government offi- cial. (c) Nothing in this section may be construed as requiring the publication of information otherwise exempt under the Freedom of Information Act (5 U.S.C 552), or controlled unclassified information pursuant to Executive Order 13556. § 200.213 Reporting a determination that a non-Federal entity is not qualified for a Federal award. (a) If a Federal awarding agency does not make a Federal award to a non- Federal entity because the official de- termines that the non-Federal entity does not meet either or both of the minimum qualification standards as described in §200.206(a)(2), the Federal awarding agency must report that de- termination to the designated integ- rity and performance system accessible through SAM (currently FAPIIS), only if all of the following apply: (1) The only basis for the determina- tion described in this paragraph (a) is the non-Federal entity’s prior record of executing programs or activities under Federal awards or its record of integ- rity and business ethics, as described in §200.206(a)(2) (i.e., the entity was deter- mined to be qualified based on all fac- tors other than those two standards); and (2) The total Federal share of the Federal award that otherwise would be made to the non-Federal entity is ex- pected to exceed the simplified acquisi- tion threshold over the period of per- formance. (b) The Federal awarding agency is not required to report a determination that a non-Federal entity is not quali- fied for a Federal award if they make the Federal award to the non-Federal entity and include specific award terms and conditions, as described in §200.208. (c) If a Federal awarding agency re- ports a determination that a non-Fed- eral entity is not qualified for a Fed- eral award, as described in paragraph (a) of this section, the Federal award- ing agency also must notify the non- Federal entity that— (1) The determination was made and reported to the designated integrity and performance system accessible through SAM, and include with the no- tification an explanation of the basis for the determination; (2) The information will be kept in the system for a period of five years from the date of the determination, as required by section 872 of Public Law 110–417, as amended (41 U.S.C. 2313), then archived; (3) Each Federal awarding agency that considers making a Federal award to the non-Federal entity during that five year period must consider that in- formation in judging whether the non- Federal entity is qualified to receive the Federal award when the total Fed- eral share of the Federal award is ex- pected to include an amount of Federal funding in excess of the simplified ac- quisition threshold over the period of performance; (4) The non-Federal entity may go to the awardee integrity and performance portal accessible through SAM (cur- rently the Contractor Performance As- sessment Reporting System (CPARS)) and comment on any information the system contains about the non-Federal entity itself; and (5) Federal awarding agencies will consider that non-Federal entity’s comments in determining whether the non-Federal entity is qualified for a fu- ture Federal award. (d) If a Federal awarding agency en- ters information into the designated integrity and performance system ac- cessible through SAM about a deter- mination that a non-Federal entity is not qualified for a Federal award and subsequently: (1) Learns that any of that informa- tion is erroneous, the Federal awarding agency must correct the information in the system within three business days; and (2) Obtains an update to that infor- mation that could be helpful to other Federal awarding agencies, the Federal 121 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00133 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 326§ 200.214 awarding agency is strongly encour- aged to amend the information in the system to incorporate the update in a timely way. (e) Federal awarding agencies must not post any information that will be made publicly available in the non- public segment of designated integrity and performance system that is cov- ered by a disclosure exemption under the Freedom of Information Act. If the recipient asserts within seven calendar days to the Federal awarding agency that posted the information that some or all of the information made publicly available is covered by a disclosure ex- emption under the Freedom of Infor- mation Act, the Federal awarding agency that posted the information must remove the posting within seven calendar days of receiving the asser- tion. Prior to reposting the releasable information, the Federal awarding agency must resolve the issue in ac- cordance with the agency’s Freedom of Information Act procedures. § 200.214 Suspension and debarment. Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise ex- cluded from or ineligible for participa- tion in Federal assistance programs or activities. § 200.215 Never contract with the enemy. Federal awarding agencies and re- cipients are subject to the regulations implementing Never Contract with the Enemy in 2 CFR part 183. The regula- tions in 2 CFR part 183 affect covered contracts, grants and cooperative agreements that are expected to exceed $50,000 within the period of perform- ance, are performed outside the United States and its territories, and are in support of a contingency operation in which members of the Armed Forces are actively engaged in hostilities. 2 CFR Ch. II (1–1–21 Edition) § 200.216 Prohibition on certain tele- communications and video surveil- lance services or equipment. (a) Recipients and subrecipients are prohibited from obligating or expend- ing loan or grant funds to: (1) Procure or obtain; (2) Extend or renew a contract to pro- cure or obtain; or (3) Enter into a contract (or extend or renew a contract) to procure or ob- tain equipment, services, or systems that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system. As described in Public Law 115–232, section 889, covered tele- communications equipment is tele- communications equipment produced by Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of such entities). (i) For the purpose of public safety, security of government facilities, phys- ical security surveillance of critical in- frastructure, and other national secu- rity purposes, video surveillance and telecommunications equipment pro- duced by Hytera Communications Cor- poration, Hangzhou Hikvision Digital Technology Company, or Dahua Tech- nology Company (or any subsidiary or affiliate of such entities). (ii) Telecommunications or video sur- veillance services provided by such en- tities or using such equipment. (iii) Telecommunications or video surveillance equipment or services pro- duced or provided by an entity that the Secretary of Defense, in consultation with the Director of the National Intel- ligence or the Director of the Federal Bureau of Investigation, reasonably be- lieves to be an entity owned or con- trolled by, or otherwise connected to, the government of a covered foreign country. (b) In implementing the prohibition under Public Law 115–232, section 889, subsection (f), paragraph (1), heads of executive agencies administering loan, grant, or subsidy programs shall prioritize available funding and tech- nical support to assist affected busi- nesses, institutions and organizations as is reasonably necessary for those af- fected entities to transition from cov- ered communications equipment and 122 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00134 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 327OMB Guidance § 200.301 services, to procure replacement equip- ment and services, and to ensure that communications service to users and customers is sustained. (c) See Public Law 115–232, section 889 for additional information. (d) See also §200.471. Subpart D—Post Federal Award Requirements SOURCE: 85 FR 49543, Aug. 13, 2020, unless otherwise noted. § 200.300 Statutory and national policy requirements. (a) The Federal awarding agency must manage and administer the Fed- eral award in a manner so as to ensure that Federal funding is expended and associated programs are implemented in full accordance with the U.S. Con- stitution, Federal Law, and public pol- icy requirements: Including, but not limited to, those protecting free speech, religious liberty, public wel- fare, the environment, and prohibiting discrimination. The Federal awarding agency must communicate to the non- Federal entity all relevant public pol- icy requirements, including those in general appropriations provisions, and incorporate them either directly or by reference in the terms and conditions of the Federal award. (b) The non-Federal entity is respon- sible for complying with all require- ments of the Federal award. For all Federal awards, this includes the provi- sions of FFATA, which includes re- quirements on executive compensation, and also requirements implementing the Act for the non-Federal entity at 2 CFR parts 25 and 170. See also statu- tory requirements for whistleblower protections at 10 U.S.C. 2409, 41 U.S.C. 4712, and 10 U.S.C. 2324, 41 U.S.C. 4304 and 4310. § 200.301 Performance measurement. (a) The Federal awarding agency must measure the recipient’s perform- ance to show achievement of program goals and objectives, share lessons learned, improve program outcomes, and foster adoption of promising prac- tices. Program goals and objectives should be derived from program plan- ning and design. See §200.202 for more information. Where appropriate, the Federal award may include specific program goals, indicators, targets, baseline data, data collection, or ex- pected outcomes (such as outputs, or services performance or public impacts of any of these) with an expected timeline for accomplishment. Where applicable, this should also include any performance measures or independent sources of data that may be used to measure progress. The Federal award- ing agency will determine how per- formance progress is measured, which may differ by program. Performance measurement progress must be both measured and reported. See §200.329 for more information on monitoring pro- gram performance. The Federal award- ing agency may include program-spe- cific requirements, as applicable. These requirements must be aligned, to the extent permitted by law, with the Fed- eral awarding agency strategic goals, strategic objectives or performance goals that are relevant to the program. See also OMB Circular A–11, Prepara- tion, Submission, and Execution of the Budget Part 6. (b) The Federal awarding agency should provide recipients with clear performance goals, indicators, targets, and baseline data as described in §200.211. Performance reporting fre- quency and content should be estab- lished to not only allow the Federal awarding agency to understand the re- cipient progress but also to facilitate identification of promising practices among recipients and build the evi- dence upon which the Federal awarding agency’s program and performance de- cisions are made. See §200.328 for more information on reporting program per- formance. (c) This provision is designed to oper- ate in tandem with evidence-related statutes (e.g.; The Foundations for Evi- dence-Based Policymaking Act of 2018, which emphasizes collaboration and co- ordination to advance data and evi- dence-building functions in the Federal government). The Federal awarding agency should also specify any require- ments of award recipients’ participa- tion in a federally funded evaluation, and any evaluation activities required to be conducted by the Federal award. 123 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00135 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 328§ 200.302 § 200.302 Financial management. (a) Each state must expend and ac- count for the Federal award in accord- ance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non-Federal enti- ty’s financial management systems, in- cluding records documenting compli- ance with Federal statutes, regula- tions, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports re- quired by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures ade- quate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also §200.450. (b) The financial management sys- tem of each non-Federal entity must provide for the following (see also §§200.334, 200.335, 200.336, and 200.337): (1) Identification, in its accounts, of all Federal awards received and ex- pended and the Federal programs under which they were received. Federal pro- gram and Federal award identification must include, as applicable, the Assist- ance Listings title and number, Fed- eral award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in ac- cordance with the reporting require- ments set forth in §§200.328 and 200.329. If a Federal awarding agency requires reporting on an accrual basis from a re- cipient that maintains its records on other than an accrual basis, the recipi- ent must not be required to establish an accrual accounting system. This re- cipient may develop accrual data for its reports on the basis of an analysis of the documentation on hand. Simi- larly, a pass-through entity must not require a subrecipient to establish an accrual accounting system and must allow the subrecipient to develop ac- crual data for its reports on the basis of an analysis of the documentation on hand. (3) Records that identify adequately the source and application of funds for 2 CFR Ch. II (1–1–21 Edition) federally-funded activities. These records must contain information per- taining to Federal awards, authoriza- tions, financial obligations, unobli- gated balances, assets, expenditures, income and interest and be supported by source documentation. (4) Effective control over, and ac- countability for, all funds, property, and other assets. The non-Federal enti- ty must adequately safeguard all assets and assure that they are used solely for authorized purposes. See §200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of §200.305. (7) Written procedures for deter- mining the allowability of costs in ac- cordance with subpart E of this part and the terms and conditions of the Federal award. § 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assur- ance that the non-Federal entity is managing the Federal award in compli- ance with Federal statutes, regula- tions, and the terms and conditions of the Federal award. These internal con- trols should be in compliance with guidance in ‘‘Standards for Internal Control in the Federal Government’’ issued by the Comptroller General of the United States or the ‘‘Internal Con- trol Integrated Framework’’, issued by the Committee of Sponsoring Organiza- tions of the Treadway Commission (COSO). (b) Comply with the U.S. Constitu- tion, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non- Federal entity’s compliance with stat- utes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when in- stances of noncompliance are identified including noncompliance identified in audit findings. (e) Take reasonable measures to safe- guard protected personally identifiable information and other information the Federal awarding agency or pass- 124 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00136 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 329OMB Guidance § 200.305 through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. § 200.304 Bonds. The Federal awarding agency may in- clude a provision on bonding, insur- ance, or both in the following cir- cumstances: (a) Where the Federal Government guarantees or insures the repayment of money borrowed by the recipient, the Federal awarding agency, at its discre- tion, may require adequate bonding and insurance if the bonding and insur- ance requirements of the non-Federal entity are not deemed adequate to pro- tect the interest of the Federal Govern- ment. (b) The Federal awarding agency may require adequate fidelity bond coverage where the non-Federal entity lacks suf- ficient coverage to protect the Federal Government’s interest. (c) Where bonds are required in the situations described above, the bonds must be obtained from companies hold- ing certificates of authority as accept- able sureties, as prescribed in 31 CFR part 223. § 200.305 Federal payment. (a) For states, payments are gov- erned by Treasury-State Cash Manage- ment Improvement Act (CMIA) agree- ments and default procedures codified at 31 CFR part 205 and Treasury Finan- cial Manual (TFM) 4A–2000, ‘‘Overall Disbursing Rules for All Federal Agen- cies’’. (b) For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the pay- ment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. See also §200.302(b)(6). Except as noted elsewhere in this part, Federal agencies must require recipients to use only OMB-approved, governmentwide information collection requests to re- quest payment. (1) The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and finan- cial management systems that meet the standards for fund control and ac- countability as established in this part. Advance payments to a non-Federal en- tity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance pay- ments must be as close as is adminis- tratively feasible to the actual dis- bursements by the non-Federal entity for direct program or project costs and the proportionate share of any allow- able indirect costs. The non-Federal entity must make timely payment to contractors in accordance with the contract provisions. (2) Whenever possible, advance pay- ments must be consolidated to cover anticipated cash needs for all Federal awards made by the Federal awarding agency to the recipient. (i) Advance payment mechanisms in- clude, but are not limited to, Treasury check and electronic funds transfer and must comply with applicable guidance in 31 CFR part 208. (ii) Non-Federal entities must be au- thorized to submit requests for advance payments and reimbursements at least monthly when electronic fund transfers are not used, and as often as they like when electronic transfers are used, in accordance with the provisions of the Electronic Fund Transfer Act (15 U.S.C. 1693–1693r). (3) Reimbursement is the preferred method when the requirements in this paragraph (b) cannot be met, when the Federal awarding agency sets a specific condition per §200.208, or when the non- Federal entity requests payment by re- imbursement. This method may be used on any Federal award for con- struction, or if the major portion of the construction project is accomplished through private market financing or Federal loans, and the Federal award constitutes a minor portion of the 125 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00137 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 330§ 200.305 project. When the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass- through entity reasonably believes the request to be improper. (4) If the non-Federal entity cannot meet the criteria for advance payments and the Federal awarding agency or pass-through entity has determined that reimbursement is not feasible be- cause the non-Federal entity lacks suf- ficient working capital, the Federal awarding agency or pass-through enti- ty may provide cash on a working cap- ital advance basis. Under this proce- dure, the Federal awarding agency or pass-through entity must advance cash payments to the non-Federal entity to cover its estimated disbursement needs for an initial period generally geared to the non-Federal entity’s disbursing cycle. Thereafter, the Federal award- ing agency or pass-through entity must reimburse the non-Federal entity for its actual cash disbursements. Use of the working capital advance method of payment requires that the pass- through entity provide timely advance payments to any subrecipients in order to meet the subrecipient’s actual cash disbursements. The working capital ad- vance method of payment must not be used by the pass-through entity if the reason for using this method is the un- willingness or inability of the pass- through entity to provide timely ad- vance payments to the subrecipient to meet the subrecipient’s actual cash dis- bursements. (5) To the extent available, the non- Federal entity must disburse funds available from program income (in- cluding repayments to a revolving fund), rebates, refunds, contract settle- ments, audit recoveries, and interest earned on such funds before requesting additional cash payments. (6) Unless otherwise required by Fed- eral statutes, payments for allowable costs by non-Federal entities must not be withheld at any time during the pe- riod of performance unless the condi- tions of §200.208, subpart D of this part, including §200.339, or one or more of the following applies: 2 CFR Ch. II (1–1–21 Edition) (i) The non-Federal entity has failed to comply with the project objectives, Federal statutes, regulations, or the terms and conditions of the Federal award. (ii) The non-Federal entity is delin- quent in a debt to the United States as defined in OMB Circular A–129, ‘‘Poli- cies for Federal Credit Programs and Non-Tax Receivables.’’ Under such con- ditions, the Federal awarding agency or pass-through entity may, upon rea- sonable notice, inform the non-Federal entity that payments must not be made for financial obligations incurred after a specified date until the condi- tions are corrected or the indebtedness to the Federal Government is liq- uidated. (iii) A payment withheld for failure to comply with Federal award condi- tions, but without suspension of the Federal award, must be released to the non-Federal entity upon subsequent compliance. When a Federal award is suspended, payment adjustments will be made in accordance with §200.343. (iv) A payment must not be made to a non-Federal entity for amounts that are withheld by the non-Federal entity from payment to contractors to assure satisfactory completion of work. A payment must be made when the non- Federal entity actually disburses the withheld funds to the contractors or to escrow accounts established to assure satisfactory completion of work. (7) Standards governing the use of banks and other institutions as deposi- tories of advance payments under Fed- eral awards are as follows. (i) The Federal awarding agency and pass-through entity must not require separate depository accounts for funds provided to a non-Federal entity or es- tablish any eligibility requirements for depositories for funds provided to the non-Federal entity. However, the non- Federal entity must be able to account for funds received, obligated, and ex- pended. (ii) Advance payments of Federal funds must be deposited and main- tained in insured accounts whenever possible. (8) The non-Federal entity must maintain advance payments of Federal awards in interest-bearing accounts, unless the following apply: 126 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00138 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 331OMB Guidance § 200.305 (i) The non-Federal entity receives less than $250,000 in Federal awards per year. (ii) The best reasonably available in- terest-bearing account would not be ex- pected to earn interest in excess of $500 per year on Federal cash balances. (iii) The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources. (iv) A foreign government or banking system prohibits or precludes interest- bearing accounts. (9) Interest earned amounts up to $500 per year may be retained by the non- Federal entity for administrative ex- pense. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Pay- ment Management System (PMS) through an electronic medium using ei- ther Automated Clearing House (ACH) network or a Fedwire Funds Service payment. (i) For returning interest on Federal awards paid through PMS, the refund should: (A) Provide an explanation stating that the refund is for interest; (B) List the PMS Payee Account Number(s) (PANs); (C) List the Federal award number(s) for which the interest was earned; and (D) Make returns payable to: Depart- ment of Health and Human Services. (ii) For returning interest on Federal awards not paid through PMS, the re- fund should: (A) Provide an explanation stating that the refund is for interest; (B) Include the name of the awarding agency; (C) List the Federal award number(s) for which the interest was earned; and (D) Make returns payable to: Depart- ment of Health and Human Services. (10) Funds, principal, and excess cash returns must be directed to the origi- nal Federal agency payment system. The non-Federal entity should review instructions from the original Federal agency payment system. Returns should include the following informa- tion: (i) Payee Account Number (PAN), if the payment originated from PMS, or Agency information to indicate whom to credit the funding if the payment originated from ASAP, NSF, or an- other Federal agency payment system. (ii) PMS document number and sub- account(s), if the payment originated from PMS, or relevant account num- bers if the payment originated from an- other Federal agency payment system. (iii) The reason for the return (e.g., excess cash, funds not spent, interest, part interest part other, etc.) (11) When returning funds or interest to PMS you must include the following as applicable: (i) For ACH Returns: Routing Number: 051036706 Account number: 303000 Bank Name and Location: Credit Gate- way—ACH Receiver St. Paul, MN (ii) For Fedwire Returns1: Routing Number: 021030004 Account number: 75010501 Bank Name and Location: Federal Re- serve Bank Treas NYC/Funds Trans- fer Division New York, NY 1 Please note that the organization initiating payment is likely to incur a charge from their Financial Institution for this type of payment. (iii) For International ACH Returns: Beneficiary Account: Federal Reserve Bank of New York/ITS (FRBNY/ITS) Bank: Citibank N.A. (New York) Swift Code: CITIUS33 Account Number: 36838868 Bank Address: 388 Greenwich Street, New York, NY 10013 USA Payment Details (Line 70): Agency Lo- cator Code (ALC): 75010501 Name (abbreviated when possible) and ALC Agency POC (iv) For recipients that do not have electronic remittance capability, please make check2 payable to: ‘‘The Department of Health and Human Services.’’ Mail Check to Treasury approved lockbox: HHS Program Support Center, P.O. Box 530231, Atlanta, GA 30353–0231 2 Please allow 4–6 weeks for proc- essing of a payment by check to be ap- plied to the appropriate PMS account. 127 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00139 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 332§ 200.306 (v) Questions can be directed to PMS at 877–614–5533 or PMSSupport@psc.hhs.gov. § 200.306 Cost sharing or matching. (a) Under Federal research proposals, voluntary committed cost sharing is not expected. It cannot be used as a factor during the merit review of appli- cations or proposals, but may be con- sidered if it is both in accordance with Federal awarding agency regulations and specified in a notice of funding op- portunity. Criteria for considering vol- untary committed cost sharing and any other program policy factors that may be used to determine who may re- ceive a Federal award must be explic- itly described in the notice of funding opportunity. See also §§200.414 and 200.204 and appendix I to this part. (b) For all Federal awards, any shared costs or matching funds and all contributions, including cash and third-party in-kind contributions, must be accepted as part of the non- Federal entity’s cost sharing or match- ing when such contributions meet all of the following criteria: (1) Are verifiable from the non-Fed- eral entity’s records; (2) Are not included as contributions for any other Federal award; (3) Are necessary and reasonable for accomplishment of project or program objectives; (4) Are allowable under subpart E of this part; (5) Are not paid by the Federal Gov- ernment under another Federal award, except where the Federal statute au- thorizing a program specifically pro- vides that Federal funds made avail- able for such program can be applied to matching or cost sharing requirements of other Federal programs; (6) Are provided for in the approved budget when required by the Federal awarding agency; and (7) Conform to other provisions of this part, as applicable. (c) Unrecovered indirect costs, in- cluding indirect costs on cost sharing or matching may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency. Unrecovered indirect cost means the difference between the amount charged to the Federal award 2 CFR Ch. II (1–1–21 Edition) and the amount which could have been charged to the Federal award under the non-Federal entity’s approved nego- tiated indirect cost rate. (d) Values for non-Federal entity contributions of services and property must be established in accordance with the cost principles in subpart E of this part. If a Federal awarding agency au- thorizes the non-Federal entity to do- nate buildings or land for construction/ facilities acquisition projects or long- term use, the value of the donated property for cost sharing or matching must be the lesser of paragraph (d)(1) or (2) of this section. (1) The value of the remaining life of the property recorded in the non-Fed- eral entity’s accounting records at the time of donation. (2) The current fair market value. However, when there is sufficient jus- tification, the Federal awarding agen- cy may approve the use of the current fair market value of the donated prop- erty, even if it exceeds the value de- scribed in paragraph (d)(1) of this sec- tion at the time of donation. (e) Volunteer services furnished by third-party professional and technical personnel, consultants, and other skilled and unskilled labor may be counted as cost sharing or matching if the service is an integral and necessary part of an approved project or program. Rates for third-party volunteer serv- ices must be consistent with those paid for similar work by the non-Federal en- tity. In those instances in which the required skills are not found in the non-Federal entity, rates must be con- sistent with those paid for similar work in the labor market in which the non-Federal entity competes for the kind of services involved. In either case, paid fringe benefits that are rea- sonable, necessary, allocable, and oth- erwise allowable may be included in the valuation. (f) When a third-party organization furnishes the services of an employee, these services must be valued at the employee’s regular rate of pay plus an amount of fringe benefits that is rea- sonable, necessary, allocable, and oth- erwise allowable, and indirect costs at either the third-party organization’s approved federally-negotiated indirect cost rate or, a rate in accordance with 128 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00140 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 333OMB Guidance § 200.307 §200.414(d) provided these services em- ploy the same skill(s) for which the employee is normally paid. Where do- nated services are treated as indirect costs, indirect cost rates will separate the value of the donated services so that reimbursement for the donated services will not be made. (g) Donated property from third par- ties may include such items as equip- ment, office supplies, laboratory sup- plies, or workshop and classroom sup- plies. Value assessed to donated prop- erty included in the cost sharing or matching share must not exceed the fair market value of the property at the time of the donation. (h) The method used for determining cost sharing or matching for third- party-donated equipment, buildings and land for which title passes to the non-Federal entity may differ accord- ing to the purpose of the Federal award, if paragraph (h)(1) or (2) of this section applies. (1) If the purpose of the Federal award is to assist the non-Federal enti- ty in the acquisition of equipment, buildings or land, the aggregate value of the donated property may be claimed as cost sharing or matching. (2) If the purpose of the Federal award is to support activities that re- quire the use of equipment, buildings or land, normally only depreciation charges for equipment and buildings may be made. However, the fair market value of equipment or other capital as- sets and fair rental charges for land may be allowed, provided that the Fed- eral awarding agency has approved the charges. See also §200.420. (i) The value of donated property must be determined in accordance with the usual accounting policies of the non-Federal entity, with the following qualifications: (1) The value of donated land and buildings must not exceed its fair mar- ket value at the time of donation to the non-Federal entity as established by an independent appraiser (e.g., cer- tified real property appraiser or Gen- eral Services Administration rep- resentative) and certified by a respon- sible official of the non-Federal entity as required by the Uniform Relocation Assistance and Real Property Acquisi- tion Policies Act of 1970, as amended, (42 U.S.C. 4601–4655) (Uniform Act) ex- cept as provided in the implementing regulations at 49 CFR part 24, ‘‘Uni- form Relocation Assistance And Real Property Acquisition For Federal And Federally-Assisted Programs’’. (2) The value of donated equipment must not exceed the fair market value of equipment of the same age and con- dition at the time of donation. (3) The value of donated space must not exceed the fair rental value of com- parable space as established by an inde- pendent appraisal of comparable space and facilities in a privately-owned building in the same locality. (4) The value of loaned equipment must not exceed its fair rental value. (j) For third-party in-kind contribu- tions, the fair market value of goods and services must be documented and to the extent feasible supported by the same methods used internally by the non-Federal entity. (k) For IHEs, see also OMB memo- randum M–01–06, dated January 5, 2001, Clarification of OMB A–21 Treatment of Voluntary Uncommitted Cost Shar- ing and Tuition Remission Costs. § 200.307 Program income. (a) General. Non-Federal entities are encouraged to earn income to defray program costs where appropriate. (b) Cost of generating program income. If authorized by Federal regulations or the Federal award, costs incidental to the generation of program income may be deducted from gross income to de- termine program income, provided these costs have not been charged to the Federal award. (c) Governmental revenues. Taxes, spe- cial assessments, levies, fines, and other such revenues raised by a non- Federal entity are not program income unless the revenues are specifically identified in the Federal award or Fed- eral awarding agency regulations as program income. (d) Property. Proceeds from the sale of real property, equipment, or supplies are not program income; such proceeds will be handled in accordance with the requirements of the Property Stand- ards §§200.311, 200.313, and 200.314, or as specifically identified in Federal stat- utes, regulations, or the terms and con- ditions of the Federal award. 129 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00141 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 334§ 200.308 (e) Use of program income. If the Fed- eral awarding agency does not specify in its regulations or the terms and con- ditions of the Federal award, or give prior approval for how program income is to be used, paragraph (e)(1) of this section must apply. For Federal awards made to IHEs and nonprofit research institutions, if the Federal awarding agency does not specify in its regula- tions or the terms and conditions of the Federal award how program income is to be used, paragraph (e)(2) of this section must apply. In specifying alter- natives to paragraphs (e)(1) and (2) of this section, the Federal awarding agency may distinguish between in- come earned by the recipient and in- come earned by subrecipients and be- tween the sources, kinds, or amounts of income. When the Federal awarding agency authorizes the approaches in paragraphs (e)(2) and (3) of this section, program income in excess of any amounts specified must also be de- ducted from expenditures. (1) Deduction. Ordinarily program in- come must be deducted from total al- lowable costs to determine the net al- lowable costs. Program income must be used for current costs unless the Fed- eral awarding agency authorizes other- wise. Program income that the non- Federal entity did not anticipate at the time of the Federal award must be used to reduce the Federal award and non- Federal entity contributions rather than to increase the funds committed to the project. (2) Addition. With prior approval of the Federal awarding agency (except for IHEs and nonprofit research insti- tutions, as described in this paragraph (e)) program income may be added to the Federal award by the Federal agen- cy and the non-Federal entity. The pro- gram income must be used for the pur- poses and under the conditions of the Federal award. (3) Cost sharing or matching. With prior approval of the Federal awarding agency, program income may be used to meet the cost sharing or matching requirement of the Federal award. The amount of the Federal award remains the same. (f) Income after the period of perform- ance. There are no Federal require- ments governing the disposition of in- 2 CFR Ch. II (1–1–21 Edition) come earned after the end of the period of performance for the Federal award, unless the Federal awarding agency regulations or the terms and condi- tions of the Federal award provide oth- erwise. The Federal awarding agency may negotiate agreements with recipi- ents regarding appropriate uses of in- come earned after the period of per- formance as part of the grant closeout process. See also §200.344. (g) License fees and royalties. Unless the Federal statute, regulations, or terms and conditions for the Federal award provide otherwise, the non-Fed- eral entity is not accountable to the Federal awarding agency with respect to program income earned from license fees and royalties for copyrighted ma- terial, patents, patent applications, trademarks, and inventions made under a Federal award to which 37 CFR part 401 is applicable. § 200.308 Revision of budget and pro- gram plans. (a) The approved budget for the Fed- eral award summarizes the financial aspects of the project or program as ap- proved during the Federal award proc- ess. It may include either the Federal and non-Federal share (see definition for Federal share in §200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include con- siderations for performance and pro- gram evaluation purposes whenever re- quired in accordance with the terms and conditions of the award. (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approv- als from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding agen- cies for the following program or budg- et-related reasons: (1) Change in the scope or the objec- tive of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or the Federal award. 130 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00142 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 335OMB Guidance § 200.308 (3) The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. (4) The inclusion, unless waived by the Federal awarding agency, of costs that require prior approval in accord- ance with subpart E of this part as ap- plicable. (5) The transfer of funds budgeted for participant support costs to other cat- egories of expense. (6) Unless described in the applica- tion and funded in the approved Fed- eral awards, the subawarding, transfer- ring or contracting out of any work under a Federal award, including fixed amount subawards as described in §200.333. This provision does not apply to the acquisition of supplies, material, equipment or general support services. (7) Changes in the approved cost- sharing or matching provided by the non-Federal entity. (8) The need arises for additional Federal funds to complete the project. (d) No other prior approval require- ments for specific items may be im- posed unless an exception has been ap- proved by OMB. See also §§200.102 and 200.407. (e) Except for requirements listed in paragraphs (c)(1) through (8) of this section, the Federal awarding agency is authorized, at its option, to waive other cost-related and administrative prior written approvals contained in subparts D and E of this part. Such waivers may include authorizing re- cipients to do any one or more of the following: (1) Incur project costs 90 calendar days before the Federal awarding agen- cy makes the Federal award. Expenses more than 90 calendar days pre-award require prior approval of the Federal awarding agency. All costs incurred be- fore the Federal awarding agency makes the Federal award are at the re- cipient’s risk (i.e., the Federal award- ing agency is not required to reimburse such costs if for any reason the recipi- ent does not receive a Federal award or if the Federal award is less than antici- pated and inadequate to cover such costs). See also §200.458. (2) Initiate a one-time extension of the period of performance by up to 12 months unless one or more of the con- ditions outlined in paragraphs (e)(2)(i) through (iii) of this section apply. For one-time extensions, the recipient must notify the Federal awarding agency in writing with the supporting reasons and revised period of perform- ance at least 10 calendar days before the end of the period of performance specified in the Federal award. This one-time extension must not be exer- cised merely for the purpose of using unobligated balances. Extensions re- quire explicit prior Federal awarding agency approval when: (i) The terms and conditions of the Federal award prohibit the extension. (ii) The extension requires additional Federal funds. (iii) The extension involves any change in the approved objectives or scope of the project. (3) Carry forward unobligated bal- ances to subsequent budget periods. (4) For Federal awards that support research, unless the Federal awarding agency provides otherwise in the Fed- eral award or in the Federal awarding agency’s regulations, the prior ap- proval requirements described in this paragraph (e) are automatically waived (i.e., recipients need not obtain such prior approvals) unless one of the con- ditions included in paragraph (e)(2) of this section applies. (f) The Federal awarding agency may, at its option, restrict the transfer of funds among direct cost categories or programs, functions and activities for Federal awards in which the Fed- eral share of the project exceeds the simplified acquisition threshold and the cumulative amount of such trans- fers exceeds or is expected to exceed 10 percent of the total budget as last ap- proved by the Federal awarding agen- cy. The Federal awarding agency can- not permit a transfer that would cause any Federal appropriation to be used for purposes other than those con- sistent with the appropriation. (g) All other changes to non-con- struction budgets, except for the changes described in paragraph (c) of this section, do not require prior ap- proval (see also §200.407). 131 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00143 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 336§ 200.309 (h) For construction Federal awards, the recipient must request prior writ- ten approval promptly from the Fed- eral awarding agency for budget revi- sions whenever paragraph (h)(1), (2), or (3) of this section applies: (1) The revision results from changes in the scope or the objective of the project or program. (2) The need arises for additional Federal funds to complete the project. (3) A revision is desired which in- volves specific costs for which prior written approval requirements may be imposed consistent with applicable OMB cost principles listed in subpart E. (4) No other prior approval require- ments for budget revisions may be im- posed unless an exception has been ap- proved by OMB. (5) When a Federal awarding agency makes a Federal award that provides support for construction and non-con- struction work, the Federal awarding agency may require the recipient to ob- tain prior approval from the Federal awarding agency before making any fund or budget transfers between the two types of work supported. (i) When requesting approval for budget revisions, the recipient must use the same format for budget infor- mation that was used in the applica- tion, unless the Federal awarding agen- cy indicates a letter of request suffices. (j) Within 30 calendar days from the date of receipt of the request for budg- et revisions, the Federal awarding agency must review the request and notify the recipient whether the budget revisions have been approved. If the re- vision is still under consideration at the end of 30 calendar days, the Federal awarding agency must inform the re- cipient in writing of the date when the recipient may expect the decision. § 200.309 Modifications to Period of Performance. If a Federal awarding agency or pass- through entity approves an extension, or if a recipient extends under §200.308(e)(2), the Period of Perform- ance will be amended to end at the completion of the extension. If a termi- nation occurs, the Period of Perform- ance will be amended to end upon the effective date of termination. If a re- 2 CFR Ch. II (1–1–21 Edition) newal award is issued, a distinct Period of Performance will begin. PROPERTY STANDARDS § 200.310 Insurance coverage. The non-Federal entity must, at a minimum, provide the equivalent in- surance coverage for real property and equipment acquired or improved with Federal funds as provided to property owned by the non-Federal entity. Fed- erally-owned property need not be in- sured unless required by the terms and conditions of the Federal award. § 200.311 Real property. (a) Title. Subject to the requirements and conditions set forth in this section, title to real property acquired or im- proved under a Federal award will vest upon acquisition in the non-Federal en- tity. (b) Use. Except as otherwise provided by Federal statutes or by the Federal awarding agency, real property will be used for the originally authorized pur- pose as long as needed for that purpose, during which time the non-Federal en- tity must not dispose of or encumber its title or other interests. (c) Disposition. When real property is no longer needed for the originally au- thorized purpose, the non-Federal enti- ty must obtain disposition instructions from the Federal awarding agency or pass-through entity. The instructions must provide for one of the following alternatives: (1) Retain title after compensating the Federal awarding agency. The amount paid to the Federal awarding agency will be computed by applying the Federal awarding agency’s percent- age of participation in the cost of the original purchase (and costs of any im- provements) to the fair market value of the property. However, in those situ- ations where the non-Federal entity is disposing of real property acquired or improved with a Federal award and ac- quiring replacement real property under the same Federal award, the net proceeds from the disposition may be used as an offset to the cost of the re- placement property. (2) Sell the property and compensate the Federal awarding agency. The amount due to the Federal awarding 132 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00144 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 337OMB Guidance § 200.313 agency will be calculated by applying the Federal awarding agency’s percent- age of participation in the cost of the original purchase (and cost of any im- provements) to the proceeds of the sale after deduction of any actual and rea- sonable selling and fixing-up expenses. If the Federal award has not been closed out, the net proceeds from sale may be offset against the original cost of the property. When the non-Federal entity is directed to sell property, sales procedures must be followed that pro- vide for competition to the extent practicable and result in the highest possible return. (3) Transfer title to the Federal awarding agency or to a third party designated/approved by the Federal awarding agency. The non-Federal en- tity is entitled to be paid an amount calculated by applying the non-Federal entity’s percentage of participation in the purchase of the real property (and cost of any improvements) to the cur- rent fair market value of the property. § 200.312 Federally-owned and exempt property. (a) Title to federally-owned property remains vested in the Federal Govern- ment. The non-Federal entity must submit annually an inventory listing of federally-owned property in its custody to the Federal awarding agency. Upon completion of the Federal award or when the property is no longer needed, the non-Federal entity must report the property to the Federal awarding agen- cy for further Federal agency utiliza- tion. (b) If the Federal awarding agency has no further need for the property, it must declare the property excess and report it for disposal to the appropriate Federal disposal authority, unless the Federal awarding agency has statutory authority to dispose of the property by alternative methods (e.g., the author- ity provided by the Federal Technology Transfer Act (15 U.S.C. 3710 (i)) to do- nate research equipment to edu- cational and nonprofit organizations in accordance with Executive Order 12999, ‘‘Educational Technology: Ensuring Opportunity for All Children in the Next Century.’’). The Federal awarding agency must issue appropriate instruc- tions to the non-Federal entity. (c) Exempt property means property acquired under a Federal award where the Federal awarding agency has cho- sen to vest title to the property to the non-Federal entity without further re- sponsibility to the Federal Govern- ment, based upon the explicit terms and conditions of the Federal award. The Federal awarding agency may ex- ercise this option when statutory au- thority exists. Absent statutory au- thority and specific terms and condi- tions of the Federal award, title to ex- empt property acquired under the Fed- eral award remains with the Federal Government. § 200.313 Equipment. See also §200.439. (a) Title. Subject to the requirements and conditions set forth in this section, title to equipment acquired under a Federal award will vest upon acquisi- tion in the non-Federal entity. Unless a statute specifically authorizes the Federal agency to vest title in the non- Federal entity without further respon- sibility to the Federal Government, and the Federal agency elects to do so, the title must be a conditional title. Title must vest in the non-Federal en- tity subject to the following condi- tions: (1) Use the equipment for the author- ized purposes of the project during the period of performance, or until the property is no longer needed for the purposes of the project. (2) Not encumber the property with- out approval of the Federal awarding agency or pass-through entity. (3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section. (b) General. A state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and proce- dures. Other non-Federal entities must follow paragraphs (c) through (e) of this section. (c) Use. (1) Equipment must be used by the non-Federal entity in the pro- gram or project for which it was ac- quired as long as needed, whether or not the project or program continues to be supported by the Federal award, and the non-Federal entity must not encumber the property without prior 133 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00145 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 338§ 200.313 approval of the Federal awarding agen- cy. The Federal awarding agency may require the submission of the applica- ble common form for equipment. When no longer needed for the original pro- gram or project, the equipment may be used in other activities supported by the Federal awarding agency, in the following order of priority: (i) Activities under a Federal award from the Federal awarding agency which funded the original program or project, then (ii) Activities under Federal awards from other Federal awarding agencies. This includes consolidated equipment for information technology systems. (2) During the time that equipment is used on the project or program for which it was acquired, the non-Federal entity must also make equipment available for use on other projects or programs currently or previously sup- ported by the Federal Government, provided that such use will not inter- fere with the work on the projects or program for which it was originally ac- quired. First preference for other use must be given to other programs or projects supported by Federal awarding agency that financed the equipment and second preference must be given to programs or projects under Federal awards from other Federal awarding agencies. Use for non-federally-funded programs or projects is also permis- sible. User fees should be considered if appropriate. (3) Notwithstanding the encourage- ment in §200.307 to earn program in- come, the non-Federal entity must not use equipment acquired with the Fed- eral award to provide services for a fee that is less than private companies charge for equivalent services unless specifically authorized by Federal stat- ute for as long as the Federal Govern- ment retains an interest in the equip- ment. (4) When acquiring replacement equipment, the non-Federal entity may use the equipment to be replaced as a trade-in or sell the property and use the proceeds to offset the cost of the replacement property. (d) Management requirements. Proce- dures for managing equipment (includ- ing replacement equipment), whether acquired in whole or in part under a 2 CFR Ch. II (1–1–21 Edition) Federal award, until disposition takes place will, as a minimum, meet the fol- lowing requirements: (1) Property records must be main- tained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percent- age of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the prop- erty must be taken and the results rec- onciled with the property records at least once every two years. (3) A control system must be devel- oped to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. (5) If the non-Federal entity is au- thorized or required to sell the prop- erty, proper sales procedures must be established to ensure the highest pos- sible return. (e) Disposition. When original or re- placement equipment acquired under a Federal award is no longer needed for the original project or program or for other activities currently or previously supported by a Federal awarding agen- cy, except as otherwise provided in Federal statutes, regulations, or Fed- eral awarding agency disposition in- structions, the non-Federal entity must request disposition instructions from the Federal awarding agency if required by the terms and conditions of the Federal award. Disposition of the equipment will be made as follows, in accordance with Federal awarding agency disposition instructions: (1) Items of equipment with a current per unit fair market value of $5,000 or less may be retained, sold or otherwise disposed of with no further responsi- bility to the Federal awarding agency. (2) Except as provided in §200.312(b), or if the Federal awarding agency fails 134 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00146 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 339OMB Guidance § 200.315 to provide requested disposition in- structions within 120 days, items of equipment with a current per-unit fair market value in excess of $5,000 may be retained by the non-Federal entity or sold. The Federal awarding agency is entitled to an amount calculated by multiplying the current market value or proceeds from sale by the Federal awarding agency’s percentage of par- ticipation in the cost of the original purchase. If the equipment is sold, the Federal awarding agency may permit the non-Federal entity to deduct and retain from the Federal share $500 or ten percent of the proceeds, whichever is less, for its selling and handling ex- penses. (3) The non-Federal entity may transfer title to the property to the Federal Government or to an eligible third party provided that, in such cases, the non-Federal entity must be entitled to compensation for its attrib- utable percentage of the current fair market value of the property. (4) In cases where a non-Federal enti- ty fails to take appropriate disposition actions, the Federal awarding agency may direct the non-Federal entity to take disposition actions. § 200.314 Supplies. See also §200.453. (a) Title to supplies will vest in the non-Federal entity upon acquisition. If there is a residual inventory of unused supplies exceeding $5,000 in total aggre- gate value upon termination or com- pletion of the project or program and the supplies are not needed for any other Federal award, the non-Federal entity must retain the supplies for use on other activities or sell them, but must, in either case, compensate the Federal Government for its share. The amount of compensation must be com- puted in the same manner as for equip- ment. See §200.313 (e)(2) for the calcula- tion methodology. (b) As long as the Federal Govern- ment retains an interest in the sup- plies, the non-Federal entity must not use supplies acquired under a Federal award to provide services to other or- ganizations for a fee that is less than private companies charge for equiva- lent services, unless specifically au- thorized by Federal statute. § 200.315 Intangible property. (a) Title to intangible property (see definition for Intangible property in §200.1) acquired under a Federal award vests upon acquisition in the non-Fed- eral entity. The non-Federal entity must use that property for the origi- nally-authorized purpose, and must not encumber the property without ap- proval of the Federal awarding agency. When no longer needed for the origi- nally authorized purpose, disposition of the intangible property must occur in accordance with the provisions in §200.313(e). (b) The non-Federal entity may copy- right any work that is subject to copy- right and was developed, or for which ownership was acquired, under a Fed- eral award. The Federal awarding agen- cy reserves a royalty-free, nonexclu- sive and irrevocable right to reproduce, publish, or otherwise use the work for Federal purposes, and to authorize oth- ers to do so. (c) The non-Federal entity is subject to applicable regulations governing patents and inventions, including gov- ernmentwide regulations issued by the Department of Commerce at 37 CFR part 401, ‘‘Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Awards, Contracts and Cooperative Agreements.’’ (d) The Federal Government has the right to: (1) Obtain, reproduce, publish, or oth- erwise use the data produced under a Federal award; and (2) Authorize others to receive, repro- duce, publish, or otherwise use such data for Federal purposes. (e)(1) In response to a Freedom of In- formation Act (FOIA) request for re- search data relating to published re- search findings produced under a Fed- eral award that were used by the Fed- eral Government in developing an agency action that has the force and effect of law, the Federal awarding agency must request, and the non-Fed- eral entity must provide, within a rea- sonable time, the research data so that they can be made available to the pub- lic through the procedures established under the FOIA. If the Federal award- ing agency obtains the research data solely in response to a FOIA request, 135 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00147 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 340§ 200.316 the Federal awarding agency may charge the requester a reasonable fee equaling the full incremental cost of obtaining the research data. This fee should reflect costs incurred by the Federal agency and the non-Federal en- tity. This fee is in addition to any fees the Federal awarding agency may as- sess under the FOIA (5 U.S.C. 552(a)(4)(A)). (2) Published research findings means when: (i) Research findings are published in a peer-reviewed scientific or technical journal; or (ii) A Federal agency publicly and of- ficially cites the research findings in support of an agency action that has the force and effect of law. ‘‘Used by the Federal Government in developing an agency action that has the force and effect of law’’ is defined as when an agency publicly and officially cites the research findings in support of an agen- cy action that has the force and effect of law. (3) Research data means the recorded factual material commonly accepted in the scientific community as necessary to validate research findings, but not any of the following: Preliminary anal- yses, drafts of scientific papers, plans for future research, peer reviews, or communications with colleagues. This ‘‘recorded’’ material excludes physical objects (e.g., laboratory samples). Re- search data also do not include: (i) Trade secrets, commercial infor- mation, materials necessary to be held confidential by a researcher until they are published, or similar information which is protected under law; and (ii) Personnel and medical informa- tion and similar information the dis- closure of which would constitute a clearly unwarranted invasion of per- sonal privacy, such as information that could be used to identify a particular person in a research study. § 200.316 Property trust relationship. Real property, equipment, and intan- gible property, that are acquired or im- proved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The Federal awarding agency may re- 2 CFR Ch. II (1–1–21 Edition) quire the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property. Procurement Standards § 200.317 Procurements by states. When procuring property and serv- ices under a Federal award, a State must follow the same policies and pro- cedures it uses for procurements from its non-Federal funds. The State will comply with §§200.321, 200.322, and 200.323 and ensure that every purchase order or other contract includes any clauses required by §200.327. All other non-Federal entities, including sub- recipients of a State, must follow the procurement standards in §§200.318 through 200.327. § 200.318 General procurement stand- ards. (a) The non-Federal entity must have and use documented procurement pro- cedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acqui- sition of property or services required under a Federal award or subaward. The non-Federal entity’s documented procurement procedures must conform to the procurement standards identi- fied in §§200.317 through 200.327. (b) Non-Federal entities must main- tain oversight to ensure that contrac- tors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders. (c)(1) The non-Federal entity must maintain written standards of conduct covering conflicts of interest and gov- erning the actions of its employees en- gaged in the selection, award and ad- ministration of contracts. No em- ployee, officer, or agent may partici- pate in the selection, award, or admin- istration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any 136 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00148 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 341OMB Guidance § 200.318 member of his or her immediate fam- ily, his or her partner, or an organiza- tion which employs or is about to em- ploy any of the parties indicated here- in, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. The of- ficers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or any- thing of monetary value from contrac- tors or parties to subcontracts. How- ever, non-Federal entities may set standards for situations in which the financial interest is not substantial or the gift is an unsolicited item of nomi- nal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity. (2) If the non-Federal entity has a parent, affiliate, or subsidiary organi- zation that is not a State, local govern- ment, or Indian tribe, the non-Federal entity must also maintain written standards of conduct covering organi- zational conflicts of interest. Organiza- tional conflicts of interest means that because of relationships with a parent company, affiliate, or subsidiary orga- nization, the non-Federal entity is un- able or appears to be unable to be im- partial in conducting a procurement action involving a related organiza- tion. (d) The non-Federal entity’s proce- dures must avoid acquisition of unnec- essary or duplicative items. Consider- ation should be given to consolidating or breaking out procurements to ob- tain a more economical purchase. Where appropriate, an analysis will be made of lease versus purchase alter- natives, and any other appropriate analysis to determine the most eco- nomical approach. (e) To foster greater economy and ef- ficiency, and in accordance with efforts to promote cost-effective use of shared services across the Federal Govern- ment, the non-Federal entity is encour- aged to enter into state and local inter- governmental agreements or inter-en- tity agreements where appropriate for procurement or use of common or shared goods and services. Competition requirements will be met with applied to documented procurement actions using strategic sourcing, shared serv- ices, and other similar procurement ar- rangements. (f) The non-Federal entity is encour- aged to use Federal excess and surplus property in lieu of purchasing new equipment and property whenever such use is feasible and reduces project costs. (g) The non-Federal entity is encour- aged to use value engineering clauses in contracts for construction projects of sufficient size to offer reasonable op- portunities for cost reductions. Value engineering is a systematic and cre- ative analysis of each contract item or task to ensure that its essential func- tion is provided at the overall lower cost. (h) The non-Federal entity must award contracts only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procure- ment. Consideration will be given to such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources. See also §200.214. (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not nec- essarily limited to, the following: Ra- tionale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. (j)(1) The non-Federal entity may use a time-and-materials type contract only after a determination that no other contract is suitable and if the contract includes a ceiling price that the contractor exceeds at its own risk. Time-and-materials type contract means a contract whose cost to a non- Federal entity is the sum of: (i) The actual cost of materials; and (ii) Direct labor hours charged at fixed hourly rates that reflect wages, general and administrative expenses, and profit. (2) Since this formula generates an open-ended contract price, a time-and- materials contract provides no positive profit incentive to the contractor for cost control or labor efficiency. There- fore, each contract must set a ceiling price that the contractor exceeds at its 137 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00149 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 342§ 200.319 own risk. Further, the non-Federal en- tity awarding such a contract must as- sert a high degree of oversight in order to obtain reasonable assurance that the contractor is using efficient meth- ods and effective cost controls. (k) The non-Federal entity alone must be responsible, in accordance with good administrative practice and sound business judgment, for the set- tlement of all contractual and adminis- trative issues arising out of procure- ments. These issues include, but are not limited to, source evaluation, pro- tests, disputes, and claims. These standards do not relieve the non-Fed- eral entity of any contractual respon- sibilities under its contracts. The Fed- eral awarding agency will not sub- stitute its judgment for that of the non-Federal entity unless the matter is primarily a Federal concern. Viola- tions of law will be referred to the local, state, or Federal authority hav- ing proper jurisdiction. § 200.319 Competition. (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and §200.320. (b) In order to ensure objective con- tractor performance and eliminate un- fair competitive advantage, contrac- tors that develop or draft specifica- tions, requirements, statements of work, or invitations for bids or re- quests for proposals must be excluded from competing for such procurements. Some of the situations considered to be restrictive of competition include but are not limited to: (1) Placing unreasonable require- ments on firms in order for them to qualify to do business; (2) Requiring unnecessary experience and excessive bonding; (3) Noncompetitive pricing practices between firms or between affiliated companies; (4) Noncompetitive contracts to con- sultants that are on retainer contracts; (5) Organizational conflicts of inter- est; (6) Specifying only a ‘‘brand name’’ product instead of allowing ‘‘an equal’’ 2 CFR Ch. II (1–1–21 Edition) product to be offered and describing the performance or other relevant re- quirements of the procurement; and (7) Any arbitrary action in the pro- curement process. (c) The non-Federal entity must con- duct procurements in a manner that prohibits the use of statutorily or ad- ministratively imposed state, local, or tribal geographical preferences in the evaluation of bids or proposals, except in those cases where applicable Federal statutes expressly mandate or encour- age geographic preference. Nothing in this section preempts state licensing laws. When contracting for architec- tural and engineering (A/E) services, geographic location may be a selection criterion provided its application leaves an appropriate number of quali- fied firms, given the nature and size of the project, to compete for the con- tract. (d) The non-Federal entity must have written procedures for procurement transactions. These procedures must ensure that all solicitations: (1) Incorporate a clear and accurate description of the technical require- ments for the material, product, or service to be procured. Such descrip- tion must not, in competitive procure- ments, contain features which unduly restrict competition. The description may include a statement of the quali- tative nature of the material, product or service to be procured and, when necessary, must set forth those min- imum essential characteristics and standards to which it must conform if it is to satisfy its intended use. De- tailed product specifications should be avoided if at all possible. When it is impractical or uneconomical to make a clear and accurate description of the technical requirements, a ‘‘brand name or equivalent’’ description may be used as a means to define the performance or other salient requirements of pro- curement. The specific features of the named brand which must be met by of- fers must be clearly stated; and (2) Identify all requirements which the offerors must fulfill and all other factors to be used in evaluating bids or proposals. (e) The non-Federal entity must en- sure that all prequalified lists of per- sons, firms, or products which are used 138 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00150 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 343OMB Guidance § 200.320 in acquiring goods and services are cur- rent and include enough qualified sources to ensure maximum open and free competition. Also, the non-Federal entity must not preclude potential bid- ders from qualifying during the solici- tation period. (f) Noncompetitive procurements can only be awarded in accordance with §200.320(c). § 200.320 Methods of procurement to be followed. The non-Federal entity must have and use documented procurement pro- cedures, consistent with the standards of this section and §§200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services re- quired under a Federal award or sub- award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified ac- quisition threshold (SAT), as defined in §200.1, or a lower threshold established by a non-Federal entity, formal pro- curement methods are not required. The non-Federal entity may use infor- mal procurement methods to expedite the completion of its transactions and minimize the associated administra- tive burden and cost. The informal methods used for procurement of prop- erty or services at or below the SAT in- clude: (1) Micro-purchases—(i) Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (See the definition of micro- purchase in §200.1). To the maximum extent practicable, the non-Federal en- tity should distribute micro-purchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micro-pur- chases may be awarded without solic- iting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and docu- ments it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and ap- proved by the non-Federal entity. (iii) Micro-purchase thresholds. The non-Federal entity is responsible for determining and documenting an ap- propriate micro-purchase threshold based on internal controls, an evalua- tion of risk, and its documented pro- curement procedures. The micro-pur- chase threshold used by the non-Fed- eral entity must be authorized or not prohibited under State, local, or tribal laws or regulations. Non-Federal enti- ties may establish a threshold higher than the Federal threshold established in the Federal Acquisition Regulations (FAR) in accordance with paragraphs (a)(1)(iv) and (v) of this section. (iv) Non-Federal entity increase to the micro-purchase threshold up to $50,000. Non-Federal entities may establish a threshold higher than the micro-pur- chase threshold identified in the FAR in accordance with the requirements of this section. The non-Federal entity may self-certify a threshold up to $50,000 on an annual basis and must maintain documentation to be made available to the Federal awarding agency and auditors in accordance with §200.334. The self-certification must in- clude a justification, clear identifica- tion of the threshold, and supporting documentation of any of the following: (A) A qualification as a low-risk auditee, in accordance with the criteria in §200.520 for the most recent audit; (B) An annual internal institutional risk assessment to identify, mitigate, and manage financial risks; or, (C) For public institutions, a higher threshold consistent with State law. (v) Non-Federal entity increase to the micro-purchase threshold over $50,000. Micro-purchase thresholds higher than $50,000 must be approved by the cog- nizant agency for indirect costs. The non-federal entity must submit a re- quest with the requirements included in paragraph (a)(1)(iv) of this section. The increased threshold is valid until there is a change in status in which the justification was approved. (2) Small purchases—(i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must 139 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00151 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 344§ 200.320 be obtained from an adequate number of qualified sources as determined ap- propriate by the non-Federal entity. (ii) Simplified acquisition thresholds. The non-Federal entity is responsible for determining an appropriate sim- plified acquisition threshold based on internal controls, an evaluation of risk and its documented procurement proce- dures which must not exceed the threshold established in the FAR. When applicable, a lower simplified ac- quisition threshold used by the non- Federal entity must be authorized or not prohibited under State, local, or tribal laws or regulations. (b) Formal procurement methods. When the value of the procurement for prop- erty or services under a Federal finan- cial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procure- ment methods are required. Formal procurement methods require following documented procedures. Formal pro- curement methods also require public advertising unless a non-competitive procurement can be used in accordance with §200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procure- ment of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity deter- mines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the respon- sible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring con- struction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and real- istic specification or purchase descrip- tion is available; (B) Two or more responsible bidders are willing and able to compete effec- tively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selec- tion of the successful bidder can be made principally on the basis of price. 2 CFR Ch. II (1–1–21 Edition) (ii) If sealed bids are used, the fol- lowing requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal govern- ments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and per- tinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invita- tion for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transpor- tation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or cost-re- imbursement type contract is awarded. Proposals are generally used when con- ditions are not appropriate for the use of sealed bids. They are awarded in ac- cordance with the following require- ments: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Fed- eral entity, with price and other fac- tors considered; and 140 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00152 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 345OMB Guidance § 200.323 (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of ar- chitectural/engineering (A/E) profes- sional services whereby offeror’s quali- fications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable com- pensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E profes- sional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro- purchase threshold (see paragraph (a)(1) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a com- petitive solicitation; (4) The Federal awarding agency or pass-through entity expressly author- izes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined in- adequate. § 200.321 Contracting with small and minority businesses, women’s busi- ness enterprises, and labor surplus area firms. (a) The non-Federal entity must take all necessary affirmative steps to as- sure that minority businesses, women’s business enterprises, and labor surplus area firms are used when possible. (b) Affirmative steps must include: (1) Placing qualified small and mi- nority businesses and women’s business enterprises on solicitation lists; (2) Assuring that small and minority businesses, and women’s business en- terprises are solicited whenever they are potential sources; (3) Dividing total requirements, when economically feasible, into smaller tasks or quantities to permit max- imum participation by small and mi- nority businesses, and women’s busi- ness enterprises; (4) Establishing delivery schedules, where the requirement permits, which encourage participation by small and minority businesses, and women’s busi- ness enterprises; (5) Using the services and assistance, as appropriate, of such organizations as the Small Business Administration and the Minority Business Development Agency of the Department of Com- merce; and (6) Requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed in paragraphs (b)(1) through (5) of this section. § 200.322 Domestic preferences for pro- curements. (a) As appropriate and to the extent consistent with law, the non-Federal entity should, to the greatest extent practicable under a Federal award, pro- vide a preference for the purchase, ac- quisition, or use of goods, products, or materials produced in the United States (including but not limited to iron, aluminum, steel, cement, and other manufactured products). The re- quirements of this section must be in- cluded in all subawards including all contracts and purchase orders for work or products under this award. (b) For purposes of this section: (1) ‘‘Produced in the United States’’ means, for iron and steel products, that all manufacturing processes, from the initial melting stage through the appli- cation of coatings, occurred in the United States. (2) ‘‘Manufactured products’’ means items and construction materials com- posed in whole or in part of non-ferrous metals such as aluminum; plastics and polymer-based products such as poly- vinyl chloride pipe; aggregates such as concrete; glass, including optical fiber; and lumber. § 200.323 Procurement of recovered materials. A non-Federal entity that is a state agency or agency of a political subdivi- sion of a state and its contractors must comply with section 6002 of the Solid Waste Disposal Act, as amended by the 141 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00153 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 346§ 200.324 Resource Conservation and Recovery Act. The requirements of Section 6002 include procuring only items des- ignated in guidelines of the Environ- mental Protection Agency (EPA) at 40 CFR part 247 that contain the highest percentage of recovered materials prac- ticable, consistent with maintaining a satisfactory level of competition, where the purchase price of the item exceeds $10,000 or the value of the quantity acquired during the preceding fiscal year exceeded $10,000; procuring solid waste management services in a manner that maximizes energy and re- source recovery; and establishing an af- firmative procurement program for procurement of recovered materials identified in the EPA guidelines. § 200.324 Contract cost and price. (a) The non-Federal entity must per- form a cost or price analysis in connec- tion with every procurement action in excess of the Simplified Acquisition Threshold including contract modifica- tions. The method and degree of anal- ysis is dependent on the facts sur- rounding the particular procurement situation, but as a starting point, the non-Federal entity must make inde- pendent estimates before receiving bids or proposals. (b) The non-Federal entity must ne- gotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed. To establish a fair and reasonable prof- it, consideration must be given to the complexity of the work to be per- formed, the risk borne by the con- tractor, the contractor’s investment, the amount of subcontracting, the quality of its record of past perform- ance, and industry profit rates in the surrounding geographical area for similar work. (c) Costs or prices based on estimated costs for contracts under the Federal award are allowable only to the extent that costs incurred or cost estimates included in negotiated prices would be allowable for the non-Federal entity under subpart E of this part. The non- Federal entity may reference its own cost principles that comply with the Federal cost principles. 2 CFR Ch. II (1–1–21 Edition) (d) The cost plus a percentage of cost and percentage of construction cost methods of contracting must not be used. § 200.325 Federal awarding agency or pass-through entity review. (a) The non-Federal entity must make available, upon request of the Federal awarding agency or pass- through entity, technical specifica- tions on proposed procurements where the Federal awarding agency or pass- through entity believes such review is needed to ensure that the item or serv- ice specified is the one being proposed for acquisition. This review generally will take place prior to the time the specification is incorporated into a so- licitation document. However, if the non-Federal entity desires to have the review accomplished after a solicita- tion has been developed, the Federal awarding agency or pass-through enti- ty may still review the specifications, with such review usually limited to the technical aspects of the proposed pur- chase. (b) The non-Federal entity must make available upon request, for the Federal awarding agency or pass- through entity pre-procurement re- view, procurement documents, such as requests for proposals or invitations for bids, or independent cost estimates, when: (1) The non-Federal entity’s procure- ment procedures or operation fails to comply with the procurement stand- ards in this part; (2) The procurement is expected to exceed the Simplified Acquisition Threshold and is to be awarded without competition or only one bid or offer is received in response to a solicitation; (3) The procurement, which is ex- pected to exceed the Simplified Acqui- sition Threshold, specifies a ‘‘brand name’’ product; (4) The proposed contract is more than the Simplified Acquisition Threshold and is to be awarded to other than the apparent low bidder under a sealed bid procurement; or (5) A proposed contract modification changes the scope of a contract or in- creases the contract amount by more than the Simplified Acquisition Threshold. 142 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00154 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 347OMB Guidance § 200.329 (c) The non-Federal entity is exempt from the pre-procurement review in paragraph (b) of this section if the Fed- eral awarding agency or pass-through entity determines that its procurement systems comply with the standards of this part. (1) The non-Federal entity may re- quest that its procurement system be reviewed by the Federal awarding agency or pass-through entity to deter- mine whether its system meets these standards in order for its system to be certified. Generally, these reviews must occur where there is continuous high-dollar funding, and third-party contracts are awarded on a regular basis; (2) The non-Federal entity may self- certify its procurement system. Such self-certification must not limit the Federal awarding agency’s right to sur- vey the system. Under a self-certifi- cation procedure, the Federal awarding agency may rely on written assurances from the non-Federal entity that it is complying with these standards. The non-Federal entity must cite specific policies, procedures, regulations, or standards as being in compliance with these requirements and have its system available for review. § 200.326 Bonding requirements. For construction or facility improve- ment contracts or subcontracts exceed- ing the Simplified Acquisition Thresh- old, the Federal awarding agency or pass-through entity may accept the bonding policy and requirements of the non-Federal entity provided that the Federal awarding agency or pass- through entity has made a determina- tion that the Federal interest is ade- quately protected. If such a determina- tion has not been made, the minimum requirements must be as follows: (a) A bid guarantee from each bidder equivalent to five percent of the bid price. The ‘‘bid guarantee’’ must con- sist of a firm commitment such as a bid bond, certified check, or other ne- gotiable instrument accompanying a bid as assurance that the bidder will, upon acceptance of the bid, execute such contractual documents as may be required within the time specified. (b) A performance bond on the part of the contractor for 100 percent of the contract price. A ‘‘performance bond’’ is one executed in connection with a contract to secure fulfillment of all the contractor’s requirements under such contract. (c) A payment bond on the part of the contractor for 100 percent of the con- tract price. A ‘‘payment bond’’ is one executed in connection with a contract to assure payment as required by law of all persons supplying labor and ma- terial in the execution of the work pro- vided for in the contract. § 200.327 Contract provisions. The non-Federal entity’s contracts must contain the applicable provisions described in appendix II to this part. PERFORMANCE AND FINANCIAL MONITORING AND REPORTING § 200.328 Financial reporting. Unless otherwise approved by OMB, the Federal awarding agency must so- licit only the OMB-approved govern- mentwide data elements for collection of financial information (at time of publication the Federal Financial Re- port or such future, OMB-approved, governmentwide data elements avail- able from the OMB-designated stand- ards lead. This information must be collected with the frequency required by the terms and conditions of the Fed- eral award, but no less frequently than annually nor more frequently than quarterly except in unusual cir- cumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect pro- gram outcomes, and preferably in co- ordination with performance reporting. The Federal awarding agency must use OMB-approved common information collections, as applicable, when pro- viding financial and performance re- porting information. § 200.329 Monitoring and reporting program performance. (a) Monitoring by the non-Federal enti- ty. The non-Federal entity is respon- sible for oversight of the operations of the Federal award supported activities. The non-Federal entity must monitor its activities under Federal awards to 143 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00155 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 348§ 200.329 assure compliance with applicable Fed- eral requirements and performance ex- pectations are being achieved. Moni- toring by the non-Federal entity must cover each program, function or activ- ity. See also §200.332. (b) Reporting program performance. The Federal awarding agency must use OMB-approved common information collections, as applicable, when pro- viding financial and performance re- porting information. As appropriate and in accordance with above men- tioned information collections, the Federal awarding agency must require the recipient to relate financial data and accomplishments to performance goals and objectives of the Federal award. Also, in accordance with above mentioned common information collec- tions, and when required by the terms and conditions of the Federal award, recipients must provide cost informa- tion to demonstrate cost effective practices (e.g., through unit cost data). In some instances (e.g., discretionary research awards), this will be limited to the requirement to submit technical performance reports (to be evaluated in accordance with Federal awarding agency policy). Reporting require- ments must be clearly articulated such that, where appropriate, performance during the execution of the Federal award has a standard against which non-Federal entity performance can be measured. (c) Non-construction performance re- ports. The Federal awarding agency must use standard, governmentwide OMB-approved data elements for col- lection of performance information in- cluding performance progress reports, Research Performance Progress Re- ports. (1) The non-Federal entity must sub- mit performance reports at the inter- val required by the Federal awarding agency or pass-through entity to best inform improvements in program out- comes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is nec- essary for the effective monitoring of the Federal award or could signifi- cantly affect program outcomes. Re- ports submitted annually by the non- 2 CFR Ch. II (1–1–21 Edition) Federal entity and/or pass-through en- tity must be due no later than 90 cal- endar days after the reporting period. Reports submitted quarterly or semi- annually must be due no later than 30 calendar days after the reporting pe- riod. Alternatively, the Federal award- ing agency or pass-through entity may require annual reports before the anni- versary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass- through entity, no later than 90 cal- endar days after the period of perform- ance end date, all final performance re- ports as required by the terms and con- ditions of the Federal award. See also §200.344. If a justified request is sub- mitted by a non-Federal entity, the Federal agency may extend the due date for any performance report. (2) As appropriate in accordance with above mentioned performance report- ing, these reports will contain, for each Federal award, brief information on the following unless other data ele- ments are approved by OMB in the agency information collection request: (i) A comparison of actual accom- plishments to the objectives of the Federal award established for the pe- riod. Where the accomplishments of the Federal award can be quantified, a computation of the cost (for example, related to units of accomplishment) may be required if that information will be useful. Where performance trend data and analysis would be in- formative to the Federal awarding agency program, the Federal awarding agency should include this as a per- formance reporting requirement. (ii) The reasons why established goals were not met, if appropriate. (iii) Additional pertinent information including, when appropriate, analysis and explanation of cost overruns or high unit costs. (d) Construction performance reports. For the most part, onsite technical in- spections and certified percentage of completion data are relied on heavily by Federal awarding agencies and pass- through entities to monitor progress under Federal awards and subawards 144 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00156 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 349OMB Guidance § 200.331 for construction. The Federal awarding agency may require additional per- formance reports only when considered necessary. (e) Significant developments. Events may occur between the scheduled per- formance reporting dates that have sig- nificant impact upon the supported ac- tivity. In such cases, the non-Federal entity must inform the Federal award- ing agency or pass-through entity as soon as the following types of condi- tions become known: (1) Problems, delays, or adverse con- ditions which will materially impair the ability to meet the objective of the Federal award. This disclosure must in- clude a statement of the action taken, or contemplated, and any assistance needed to resolve the situation. (2) Favorable developments which en- able meeting time schedules and objec- tives sooner or at less cost than antici- pated or producing more or different beneficial results than originally planned. (f) Site visits. The Federal awarding agency may make site visits as war- ranted by program needs. (g) Performance report requirement waiver. The Federal awarding agency may waive any performance report re- quired by this part if not needed. § 200.330 Reporting on real property. The Federal awarding agency or pass- through entity must require a non-Fed- eral entity to submit reports at least annually on the status of real property in which the Federal Government re- tains an interest, unless the Federal in- terest in the real property extends 15 years or longer. In those instances where the Federal interest attached is for a period of 15 years or more, the Federal awarding agency or pass- through entity, at its option, may re- quire the non-Federal entity to report at various multi-year frequencies (e.g., every two years or every three years, not to exceed a five-year reporting pe- riod; or a Federal awarding agency or pass-through entity may require an- nual reporting for the first three years of a Federal award and thereafter re- quire reporting every five years). SUBRECIPIENT MONITORING AND MANAGEMENT § 200.331 Subrecipient and contractor determinations. The non-Federal entity may concur- rently receive Federal awards as a re- cipient, a subrecipient, and a con- tractor, depending on the substance of its agreements with Federal awarding agencies and pass-through entities. Therefore, a pass-through entity must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. The Federal awarding agency may supply and require recipi- ents to comply with additional guid- ance to support these determinations provided such guidance does not con- flict with this section. (a) Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the sub- recipient. See definition for Subaward in §200.1 of this part. Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity: (1) Determines who is eligible to re- ceive what Federal assistance; (2) Has its performance measured in relation to whether objectives of a Fed- eral program were met; (3) Has responsibility for pro- grammatic decision-making; (4) Is responsible for adherence to ap- plicable Federal program requirements specified in the Federal award; and (5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the ben- efit of the pass-through entity. (b) Contractors. A contract is for the purpose of obtaining goods and services for the non-Federal entity’s own use and creates a procurement relationship with the contractor. See the definition of contract in §200.1 of this part. Char- acteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the contractor: 145 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00157 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 350§ 200.332 (1) Provides the goods and services within normal business operations; (2) Provides similar goods or services to many different purchasers; (3) Normally operates in a competi- tive environment; (4) Provides goods or services that are ancillary to the operation of the Federal program; and (5) Is not subject to compliance re- quirements of the Federal program as a result of the agreement, though similar requirements may apply for other rea- sons. (c) Use of judgment in making deter- mination. In determining whether an agreement between a pass-through en- tity and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the rela- tionship is more important than the form of the agreement. All of the char- acteristics listed above may not be present in all cases, and the pass- through entity must use judgment in classifying each agreement as a subaward or a procurement contract. § 200.332 Requirements for pass- through entities. All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data ele- ments change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient’s unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the defi- nition of Federal award date in §200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; 2 CFR Ch. II (1–1–21 Edition) (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obli- gated by this action by the pass- through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the cur- rent financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Fed- eral Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agen- cy, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made avail- able under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Fed- eral award (including if the de minimis rate is charged) per §200.414. (2) All requirements imposed by the pass-through entity on the sub- recipient so that the Federal award is used in accordance with Federal stat- utes, regulations and the terms and conditions of the Federal award; (3) Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass- through entity to meet its own respon- sibility to the Federal awarding agency including identification of any required financial and performance reports; (4)(i) An approved federally recog- nized indirect cost rate negotiated be- tween the subrecipient and the Federal Government. If no approved rate exists, the pass-through entity must deter- mine the appropriate rate in collabora- tion with the subrecipient, which is ei- ther: (A) The negotiated indirect cost rate between the pass-through entity and the subrecipient; which can be based on a prior negotiated rate between a dif- ferent PTE and the same subrecipient. If basing the rate on a previously nego- tiated rate, the pass-through entity is 146 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00158 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 351OMB Guidance § 200.332 not required to collect information jus- tifying this rate, but may elect to do so; (B) The de minimis indirect cost rate. (ii) The pass-through entity must not require use of a de minimis indirect cost rate if the subrecipient has a Fed- erally approved rate. Subrecipients can elect to use the cost allocation method to account for indirect costs in accord- ance with §200.405(d). (5) A requirement that the sub- recipient permit the pass-through enti- ty and auditors to have access to the subrecipient’s records and financial statements as necessary for the pass- through entity to meet the require- ments of this part; and (6) Appropriate terms and conditions concerning closeout of the subaward. (b) Evaluate each subrecipient’s risk of noncompliance with Federal stat- utes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate sub- recipient monitoring described in para- graphs (d) and (e) of this section, which may include consideration of such fac- tors as: (1) The subrecipient’s prior experi- ence with the same or similar sub- awards; (2) The results of previous audits in- cluding whether or not the sub- recipient receives a Single Audit in ac- cordance with Subpart F of this part, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal award- ing agency). (c) Consider imposing specific subaward conditions upon a sub- recipient if appropriate as described in §200.208. (d) Monitor the activities of the sub- recipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity moni- toring of the subrecipient must in- clude: (1) Reviewing financial and perform- ance reports required by the pass- through entity. (2) Following-up and ensuring that the subrecipient takes timely and ap- propriate action on all deficiencies per- taining to the Federal award provided to the subrecipient from the pass- through entity detected through au- dits, on-site reviews, and written con- firmation from the subrecipient, high- lighting the status of actions planned or taken to address Single Audit find- ings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521. (4) The pass-through entity is respon- sible for resolving audit findings spe- cifically related to the subaward and not responsible for resolving cross-cut- ting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass- through entity may rely on the sub- recipient’s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting find- ings in accordance with section §300.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-spe- cific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the find- ings that are specifically related to the subaward. (e) Depending upon the pass-through entity’s assessment of risk posed by the subrecipient (as described in para- graph (b) of this section), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achieve- ment of performance goals: 147 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00159 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 352§ 200.333 (1) Providing subrecipients with training and technical assistance on program-related matters; and (2) Performing on-site reviews of the subrecipient’s program operations; (3) Arranging for agreed-upon-proce- dures engagements as described in §200.425. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in §200.501. (g) Consider whether the results of the subrecipient’s audits, on-site re- views, or other monitoring indicate conditions that necessitate adjust- ments to the pass-through entity’s own records. (h) Consider taking enforcement ac- tion against noncompliant subrecipi- ents as described in §200.339 of this part and in program regulations. § 200.333 Fixed amount subawards. With prior written approval from the Federal awarding agency, a pass- through entity may provide subawards based on fixed amounts up to the Sim- plified Acquisition Threshold, provided that the subawards meet the require- ments for fixed amount awards in §200.201. RECORD RETENTION AND ACCESS § 200.334 Retention requirements for records. Financial records, supporting docu- ments, statistical records, and all other non-Federal entity records perti- nent to a Federal award must be re- tained for a period of three years from the date of submission of the final ex- penditure report or, for Federal awards that are renewed quarterly or annu- ally, from the date of the submission of the quarterly or annual financial re- port, respectively, as reported to the Federal awarding agency or pass- through entity in the case of a sub- recipient. Federal awarding agencies and pass-through entities must not im- pose any other record retention re- quirements upon non-Federal entities. The only exceptions are the following: 2 CFR Ch. II (1–1–21 Edition) (a) If any litigation, claim, or audit is started before the expiration of the 3-year period, the records must be re- tained until all litigation, claims, or audit findings involving the records have been resolved and final action taken. (b) When the non-Federal entity is notified in writing by the Federal awarding agency, cognizant agency for audit, oversight agency for audit, cog- nizant agency for indirect costs, or pass-through entity to extend the re- tention period. (c) Records for real property and equipment acquired with Federal funds must be retained for 3 years after final disposition. (d) When records are transferred to or maintained by the Federal awarding agency or pass-through entity, the 3- year retention requirement is not ap- plicable to the non-Federal entity. (e) Records for program income transactions after the period of per- formance. In some cases recipients must report program income after the period of performance. Where there is such a requirement, the retention pe- riod for the records pertaining to the earning of the program income starts from the end of the non-Federal enti- ty’s fiscal year in which the program income is earned. (f) Indirect cost rate proposals and cost allocations plans. This paragraph applies to the following types of docu- ments and their supporting records: In- direct cost rate computations or pro- posals, cost allocation plans, and 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). (1) If submitted for negotiation. If the proposal, plan, or other computation is required to be submitted to the Federal Government (or to the pass-through entity) to form the basis for negotia- tion of the rate, then the 3-year reten- tion period for its supporting records starts from the date of such submis- sion. (2) If not submitted for negotiation. If the proposal, plan, or other computa- tion is not required to be submitted to the Federal Government (or to the pass-through entity) for negotiation 148 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00160 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 353OMB Guidance § 200.338 purposes, then the 3-year retention pe- riod for the proposal, plan, or computa- tion and its supporting records starts from the end of the fiscal year (or other accounting period) covered by the proposal, plan, or other computa- tion. § 200.337 Access to records. § 200.335 Requests for transfer of records. The Federal awarding agency must request transfer of certain records to its custody from the non-Federal enti- ty when it determines that the records possess long-term retention value. However, in order to avoid duplicate recordkeeping, the Federal awarding agency may make arrangements for the non-Federal entity to retain any records that are continuously needed for joint use. § 200.336 Methods for collection, trans- mission, and storage of information. The Federal awarding agency and the non-Federal entity should, whenever practicable, collect, transmit, and store Federal award-related informa- tion in open and machine-readable for- mats rather than in closed formats or on paper in accordance with applicable legislative requirements. A machine- readable format is a format in a stand- ard computer language (not English text) that can be read automatically by a web browser or computer system. The Federal awarding agency or pass- through entity must always provide or accept paper versions of Federal award- related information to and from the non-Federal entity upon request. If paper copies are submitted, the Federal awarding agency or pass-through enti- ty must not require more than an original and two copies. When original records are electronic and cannot be al- tered, there is no need to create and re- tain paper copies. When original records are paper, electronic versions may be substituted through the use of duplication or other forms of elec- tronic media provided that they are subject to periodic quality control re- views, provide reasonable safeguards against alteration, and remain read- able. (a) Records of non-Federal entities. The Federal awarding agency, Inspectors General, the Comptroller General of the United States, and the pass- through entity, or any of their author- ized representatives, must have the right of access to any documents, pa- pers, or other records of the non-Fed- eral entity which are pertinent to the Federal award, in order to make au- dits, examinations, excerpts, and tran- scripts. The right also includes timely and reasonable access to the non-Fed- eral entity’s personnel for the purpose of interview and discussion related to such documents. (b) Extraordinary and rare cir- cumstances. Only under extraordinary and rare circumstances would such ac- cess include review of the true name of victims of a crime. Routine monitoring cannot be considered extraordinary and rare circumstances that would neces- sitate access to this information. When access to the true name of victims of a crime is necessary, appropriate steps to protect this sensitive information must be taken by both the non-Federal enti- ty and the Federal awarding agency. Any such access, other than under a court order or subpoena pursuant to a bona fide confidential investigation, must be approved by the head of the Federal awarding agency or delegate. (c) Expiration of right of access. The rights of access in this section are not limited to the required retention pe- riod but last as long as the records are retained. Federal awarding agencies and pass-through entities must not im- pose any other access requirements upon non-Federal entities. § 200.338 to records. Restrictions on public access No Federal awarding agency may place restrictions on the non-Federal entity that limit public access to the records of the non-Federal entity perti- nent to a Federal award, except for protected personally identifiable infor- mation (PII) or when the Federal awarding agency can demonstrate that such records will be kept confidential and would have been exempted from disclosure pursuant to the Freedom of 149 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00161 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 354§ 200.339 Information Act (5 U.S.C. 552) or con- trolled unclassified information pursu- ant to Executive Order 13556 if the records had belonged to the Federal awarding agency. The Freedom of In- formation Act (5 U.S.C. 552) (FOIA) does not apply to those records that re- main under a non-Federal entity’s con- trol except as required under §200.315. Unless required by Federal, state, local, and tribal statute, non-Federal entities are not required to permit pub- lic access to their records. The non- Federal entity’s records provided to a Federal agency generally will be sub- ject to FOIA and applicable exemp- tions. REMEDIES FOR NONCOMPLIANCE § 200.339 Remedies for noncompliance. If a non-Federal entity fails to com- ply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Fed- eral awarding agency or pass-through entity may impose additional condi- tions, as described in §200.208. If the Federal awarding agency or pass- through entity determines that non- compliance cannot be remedied by im- posing additional conditions, the Fed- eral awarding agency or pass-through entity may take one or more of the fol- lowing actions, as appropriate in the circumstances: (a) Temporarily withhold cash pay- ments pending correction of the defi- ciency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass- through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or ter- minate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a pass- through entity, recommend such a pro- ceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. 2 CFR Ch. II (1–1–21 Edition) § 200.340 Termination. (a) The Federal award may be termi- nated in whole or in part as follows: (1) By the Federal awarding agency or pass-through entity, if a non-Fed- eral entity fails to comply with the terms and conditions of a Federal award; (2) By the Federal awarding agency or pass-through entity, to the greatest extent authorized by law, if an award no longer effectuates the program goals or agency priorities; (3) By the Federal awarding agency or pass-through entity with the con- sent of the non-Federal entity, in which case the two parties must agree upon the termination conditions, in- cluding the effective date and, in the case of partial termination, the portion to be terminated; (4) By the non-Federal entity upon sending to the Federal awarding agen- cy or pass-through entity written noti- fication setting forth the reasons for such termination, the effective date, and, in the case of partial termination, the portion to be terminated. However, if the Federal awarding agency or pass- through entity determines in the case of partial termination that the reduced or modified portion of the Federal award or subaward will not accomplish the purposes for which the Federal award was made, the Federal awarding agency or pass-through entity may ter- minate the Federal award in its en- tirety; or (5) By the Federal awarding agency or pass-through entity pursuant to ter- mination provisions included in the Federal award. (b) A Federal awarding agency should clearly and unambiguously specify ter- mination provisions applicable to each Federal award, in applicable regula- tions or in the award, consistent with this section. (c) When a Federal awarding agency terminates a Federal award prior to the end of the period of performance due to the non-Federal entity’s mate- rial failure to comply with the Federal award terms and conditions, the Fed- eral awarding agency must report the termination to the OMB-designated in- tegrity and performance system acces- sible through SAM (currently FAPIIS). 150 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00162 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 355OMB Guidance § 200.341 (1) The information required under paragraph (c) of this section is not to be reported to designated integrity and performance system until the non-Fed- eral entity either— (i) Has exhausted its opportunities to object or challenge the decision, see §200.342; or (ii) Has not, within 30 calendar days after being notified of the termination, informed the Federal awarding agency that it intends to appeal the Federal awarding agency’s decision to termi- nate. (2) If a Federal awarding agency, after entering information into the designated integrity and performance system about a termination, subse- quently: (i) Learns that any of that informa- tion is erroneous, the Federal awarding agency must correct the information in the system within three business days; (ii) Obtains an update to that infor- mation that could be helpful to other Federal awarding agencies, the Federal awarding agency is strongly encour- aged to amend the information in the system to incorporate the update in a timely way. (3) Federal awarding agencies, must not post any information that will be made publicly available in the non- public segment of designated integrity and performance system that is cov- ered by a disclosure exemption under the Freedom of Information Act. If the non-Federal entity asserts within seven calendar days to the Federal awarding agency who posted the infor- mation, that some of the information made publicly available is covered by a disclosure exemption under the Free- dom of Information Act, the Federal awarding agency who posted the infor- mation must remove the posting with- in seven calendar days of receiving the assertion. Prior to reposting the releas- able information, the Federal agency must resolve the issue in accordance with the agency’s Freedom of Informa- tion Act procedures. (d) When a Federal award is termi- nated or partially terminated, both the Federal awarding agency or pass- through entity and the non-Federal en- tity remain responsible for compliance with the requirements in §§200.344 and 200.345. § 200.341 Notification of termination requirement. (a) The Federal agency or pass- through entity must provide to the non-Federal entity a notice of termi- nation. (b) If the Federal award is terminated for the non-Federal entity’s material failure to comply with the U.S. Con- stitution, Federal statutes, regula- tions, or terms and conditions of the Federal award, the notification must state that— (1) The termination decision will be reported to the OMB-designated integ- rity and performance system accessible through SAM (currently FAPIIS); (2) The information will be available in the OMB-designated integrity and performance system for a period of five years from the date of the termination, then archived; (3) Federal awarding agencies that consider making a Federal award to the non-Federal entity during that five year period must consider that infor- mation in judging whether the non- Federal entity is qualified to receive the Federal award, when the Federal share of the Federal award is expected to exceed the simplified acquisition threshold over the period of perform- ance; (4) The non-Federal entity may com- ment on any information the OMB-des- ignated integrity and performance sys- tem contains about the non-Federal en- tity for future consideration by Fed- eral awarding agencies. The non-Fed- eral entity may submit comments to the awardee integrity and performance portal accessible through SAM (cur- rently (CPARS). (5) Federal awarding agencies will consider non-Federal entity comments when determining whether the non- Federal entity is qualified for a future Federal award. (c) Upon termination of a Federal award, the Federal awarding agency must provide the information required under FFATA to the Federal website established to fulfill the requirements of FFATA, and update or notify any other relevant governmentwide sys- tems or entities of any indications of poor performance as required by 41 U.S.C. 417b and 31 U.S.C. 3321 and im- plementing guidance at 2 CFR part 77 151 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00163 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 356§ 200.342 (forthcoming at time of publication). See also the requirements for Suspen- sion and Debarment at 2 CFR part 180. § 200.342 Opportunities to object, hear- ings, and appeals. Upon taking any remedy for non- compliance, the Federal awarding agency must provide the non-Federal entity an opportunity to object and provide information and documenta- tion challenging the suspension or ter- mination action, in accordance with written processes and procedures pub- lished by the Federal awarding agency. The Federal awarding agency or pass- through entity must comply with any requirements for hearings, appeals or other administrative proceedings to which the non-Federal entity is enti- tled under any statute or regulation applicable to the action involved. § 200.343 Effects of suspension and ter- mination. Costs to the non-Federal entity re- sulting from financial obligations in- curred by the non-Federal entity dur- ing a suspension or after termination of a Federal award or subaward are not allowable unless the Federal awarding agency or pass-through entity ex- pressly authorizes them in the notice of suspension or termination or subse- quently. However, costs during suspen- sion or after termination are allowable if: (a) The costs result from financial obligations which were properly in- curred by the non-Federal entity before the effective date of suspension or ter- mination, are not in anticipation of it; and (b) The costs would be allowable if the Federal award was not suspended or expired normally at the end of the period of performance in which the ter- mination takes effect. CLOSEOUT § 200.344 Closeout. The Federal awarding agency or pass- through entity will close out the Fed- eral award when it determines that all applicable administrative actions and all required work of the Federal award have been completed by the non-Fed- eral entity. If the non-Federal entity 2 CFR Ch. II (1–1–21 Edition) fails to complete the requirements, the Federal awarding agency or pass- through entity will proceed to close out the Federal award with the infor- mation available. This section specifies the actions the non-Federal entity and Federal awarding agency or pass- through entity must take to complete this process at the end of the period of performance. (a) The recipient must submit, no later than 120 calendar days after the end date of the period of performance, all financial, performance, and other reports as required by the terms and conditions of the Federal award. A sub- recipient must submit to the pass- through entity, no later than 90 cal- endar days (or an earlier date as agreed upon by the pass-through entity and subrecipient) after the end date of the period of performance, all financial, performance, and other reports as re- quired by the terms and conditions of the Federal award. The Federal award- ing agency or pass-through entity may approve extensions when requested and justified by the non-Federal entity, as applicable. (b) Unless the Federal awarding agen- cy or pass-through entity authorizes an extension, a non-Federal entity must liquidate all financial obligations in- curred under the Federal award no later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. (c) The Federal awarding agency or pass-through entity must make prompt payments to the non-Federal entity for costs meeting the requirements in Sub- part E of this part under the Federal award being closed out. (d) The non-Federal entity must promptly refund any balances of unob- ligated cash that the Federal awarding agency or pass-through entity paid in advance or paid and that are not au- thorized to be retained by the non-Fed- eral entity for use in other projects. See OMB Circular A–129 and see §200.346, for requirements regarding unreturned amounts that become de- linquent debts. (e) Consistent with the terms and conditions of the Federal award, the Federal awarding agency or pass- 152 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00164 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 357OMB Guidance § 200.346 through entity must make a settle- ment for any upward or downward ad- justments to the Federal share of costs after closeout reports are received. (f) The non-Federal entity must ac- count for any real and personal prop- erty acquired with Federal funds or re- ceived from the Federal Government in accordance with §§200.310 through 200.316 and 200.330. (g) When a recipient or subrecipient completes all closeout requirements, the Federal awarding agency or pass- through entity must promptly com- plete all closeout actions for Federal awards. The Federal awarding agency must make every effort to complete closeout actions no later than one year after the end of the period of perform- ance unless otherwise directed by au- thorizing statutes. Closeout actions in- clude Federal awarding agency actions in the grants management and pay- ment systems. (h) If the non-Federal entity does not submit all reports in accordance with this section and the terms and condi- tions of the Federal Award, the Federal awarding agency must proceed to close out with the information available within one year of the period of per- formance end date. (i) If the non-Federal entity does not submit all reports in accordance with this section within one year of the pe- riod of performance end date, the Fed- eral awarding agency must report the non-Federal entity’s material failure to comply with the terms and condi- tions of the award with the OMB-des- ignated integrity and performance sys- tem (currently FAPIIS). Federal awarding agencies may also pursue other enforcement actions per §200.339. the non-Federal entity within the record retention period. (2) The requirement for the non-Fed- eral entity to return any funds due as a result of later refunds, corrections, or other transactions including final indi- rect cost rate adjustments. (3) The ability of the Federal award- ing agency to make financial adjust- ments to a previously closed award such as resolving indirect cost pay- ments and making final payments. (4) Audit requirements in subpart F of this part. (5) Property management and dis- position requirements in §§200.310 through 200.316 of this subpart. (6) Records retention as required in §§200.334 through 200.337 of this sub- part. (b) After closeout of the Federal award, a relationship created under the Federal award may be modified or ended in whole or in part with the con- sent of the Federal awarding agency or pass-through entity and the non-Fed- eral entity, provided the responsibil- ities of the non-Federal entity referred to in paragraph (a) of this section, in- cluding those for property management as applicable, are considered and provi- sions made for continuing responsibil- ities of the non-Federal entity, as ap- propriate. COLLECTION OF AMOUNTS DUE POST-CLOSEOUT ADJUSTMENTS AND CONTINUING RESPONSIBILITIES § 200.345 Post-closeout adjustments and continuing responsibilities. (a) The closeout of a Federal award does not affect any of the following: (1) The right of the Federal awarding agency or pass-through entity to dis- allow costs and recover funds on the basis of a later audit or other review. The Federal awarding agency or pass- through entity must make any cost disallowance determination and notify § 200.346 Collection of amounts due. (a) Any funds paid to the non-Federal entity in excess of the amount to which the non-Federal entity is finally determined to be entitled under the terms of the Federal award constitute a debt to the Federal Government. If not paid within 90 calendar days after demand, the Federal awarding agency may reduce the debt by: (1) Making an administrative offset against other requests for reimburse- ments; (2) Withholding advance payments otherwise due to the non-Federal enti- ty; or (3) Other action permitted by Federal statute. (b) Except where otherwise provided by statutes or regulations, the Federal awarding agency will charge interest on an overdue debt in accordance with 153 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00165 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 358§ 200.400 the Federal Claims Collection Stand- ards (31 CFR parts 900 through 999). The date from which interest is computed is not extended by litigation or the fil- ing of any form of appeal. Subpart E—Cost Principles GENERAL PROVISIONS § 200.400 Policy guide. The application of these cost prin- ciples is based on the fundamental premises that: (a) The non-Federal entity is respon- sible for the efficient and effective ad- ministration of the Federal award through the application of sound man- agement practices. (b) The non-Federal entity assumes responsibility for administering Fed- eral funds in a manner consistent with underlying agreements, program objec- tives, and the terms and conditions of the Federal award. (c) The non-Federal entity, in rec- ognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employ- ing whatever form of sound organiza- tion and management techniques may be necessary in order to assure proper and efficient administration of the Federal award. (d) The application of these cost prin- ciples should require no significant changes in the internal accounting policies and practices of the non-Fed- eral entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumula- tion of costs as required by the prin- ciples, and must provide for adequate documentation to support costs charged to the Federal award. (e) In reviewing, negotiating and ap- proving cost allocation plans or indi- rect cost proposals, the cognizant agen- cy for indirect costs should generally assure that the non-Federal entity is applying these cost accounting prin- ciples on a consistent basis during their review and negotiation of indirect cost proposals. Where wide variations exist in the treatment of a given cost item by the non-Federal entity, the reasonableness and equity of such treatments should be fully considered. 2 CFR Ch. II (1–1–21 Edition) See the definition of indirect (facilities & administrative (F&A)) costs in §200.1 of this part. (f) For non-Federal entities that edu- cate and engage students in research, the dual role of students as both train- ees and employees (including pre- and post-doctoral staff) contributing to the completion of Federal awards for re- search must be recognized in the appli- cation of these principles. (g) The non-Federal entity may not earn or keep any profit resulting from Federal financial assistance, unless ex- plicitly authorized by the terms and conditions of the Federal award. See also §200.307. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49561, Aug. 13, 2020] § 200.401 Application. (a) General. These principles must be used in determining the allowable costs of work performed by the non-Federal entity under Federal awards. These principles also must be used by the non-Federal entity as a guide in the pricing of fixed-price contracts and subcontracts where costs are used in determining the appropriate price. The principles do not apply to: (1) Arrangements under which Fed- eral financing is in the form of loans, scholarships, fellowships, traineeships, or other fixed amounts based on such items as education allowance or pub- lished tuition rates and fees. (2) For IHEs, capitation awards, which are awards based on case counts or number of beneficiaries according to the terms and conditions of the Federal award. (3) Fixed amount awards. See also §200.1 Definitions and 200.201. (4) Federal awards to hospitals (see appendix IX to this part). (5) Other awards under which the non-Federal entity is not required to account to the Federal Government for actual costs incurred. (b) Federal contract. Where a Federal contract awarded to a non-Federal en- tity is subject to the Cost Accounting Standards (CAS), it incorporates the applicable CAS clauses, Standards, and CAS administration requirements per the 48 CFR Chapter 99 and 48 CFR part 30 (FAR Part 30). CAS applies directly 154 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00166 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 359OMB Guidance § 200.404 to the CAS-covered contract and the Cost Accounting Standards at 48 CFR parts 9904 or 9905 takes precedence over the cost principles in this subpart E with respect to the allocation of costs. When a contract with a non-Federal entity is subject to full CAS coverage, the allowability of certain costs under the cost principles will be affected by the allocation provisions of the Cost Accounting Standards (e.g., CAS 414— 48 CFR 9904.414, Cost of Money as an Element of the Cost of Facilities Cap- ital, and CAS 417—48 CFR 9904.417, Cost of Money as an Element of the Cost of Capital Assets Under Construction), apply rather the allowability provi- sions of §200.449. In complying with those requirements, the non-Federal entity’s application of cost accounting practices for estimating, accumu- lating, and reporting costs for other Federal awards and other cost objec- tives under the CAS-covered contract still must be consistent with its cost accounting practices for the CAS-cov- ered contracts. In all cases, only one set of accounting records needs to be maintained for the allocation of costs by the non-Federal entity. (c) Exemptions. Some nonprofit orga- nizations, because of their size and na- ture of operations, can be considered to be similar to for-profit entities for pur- pose of applicability of cost principles. Such nonprofit organizations must op- erate under Federal cost principles ap- plicable to for-profit entities located at 48 CFR 31.2. A listing of these organiza- tions is contained in appendix VIII to this part. Other organizations, as ap- proved by the cognizant agency for in- direct costs, may be added from time to time. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49562, Aug. 13, 2020] BASIC CONSIDERATIONS § 200.402 Composition of costs. Total cost. The total cost of a Federal award is the sum of the allowable di- rect and allocable indirect costs less any applicable credits. § 200.403 Factors affecting allowability of costs. Except where otherwise authorized by statute, costs must meet the fol- lowing general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or ex- clusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other ac- tivities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Fed- eral award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting prin- ciples (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching re- quirements of any other federally-fi- nanced program in either the current or a prior period. See also §200.306(b). (g) Be adequately documented. See also §§200.300 through 200.309 of this part. (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written ap- provals to carry forward unobligated balances to subsequent budget periods pursuant to §200.308(e)(3). [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49562, Aug. 13, 2020] § 200.404 Reasonable costs. A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances pre- vailing at the time the decision was made to incur the cost. The question of reasonableness is particularly impor- tant when the non-Federal entity is predominantly federally-funded. In de- termining reasonableness of a given cost, consideration must be given to: 155 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00167 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 360§ 200.405 (a) Whether the cost is of a type gen- erally recognized as ordinary and nec- essary for the operation of the non- Federal entity or the proper and effi- cient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound busi- ness practices; arm’s-length bar- gaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award. (c) Market prices for comparable goods or services for the geographic area. (d) Whether the individuals con- cerned acted with prudence in the cir- cumstances considering their respon- sibilities to the non-Federal entity, its employees, where applicable its stu- dents or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its estab- lished practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award’s cost. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014] § 200.405 Allocable costs. (a) A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Fed- eral award or cost objective in accord- ance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal en- tity and can be distributed in propor- tions that may be approximated using reasonable methods; and (3) Is necessary to the overall oper- ation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. (b) All activities which benefit from the non-Federal entity’s indirect (F&A) cost, including unallowable activities and donated services by the non-Fed- eral entity or third parties, will receive an appropriate allocation of indirect costs. 2 CFR Ch. II (1–1–21 Edition) (c) Any cost allocable to a particular Federal award under the principles pro- vided for in this part may not be charged to other Federal awards to overcome fund deficiencies, to avoid re- strictions imposed by Federal statutes, regulations, or terms and conditions of the Federal awards, or for other rea- sons. However, this prohibition would not preclude the non-Federal entity from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal stat- utes, regulations, or the terms and con- ditions of the Federal awards. (d) Direct cost allocation principles: If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional ben- efit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work in- volved, then, notwithstanding para- graph (c) of this section, the costs may be allocated or transferred to bene- fitted projects on any reasonable docu- mented basis. Where the purchase of equipment or other capital asset is spe- cifically authorized under a Federal award, the costs are assignable to the Federal award regardless of the use that may be made of the equipment or other capital asset involved when no longer needed for the purpose for which it was originally required. See also §§200.310 through 200.316 and 200.439. (e) If the contract is subject to CAS, costs must be allocated to the contract pursuant to the Cost Accounting Standards. To the extent that CAS is applicable, the allocation of costs in accordance with CAS takes precedence over the allocation provisions in this part. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, 2020] § 200.406 Applicable credits. (a) Applicable credits refer to those receipts or reduction-of-expenditure- type transactions that offset or reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such transactions are: pur- chase discounts, rebates or allowances, 156 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00168 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 361OMB Guidance § 200.409 recoveries or indemnities on losses, in- surance refunds or rebates, and adjust- ments of overpayments or erroneous charges. To the extent that such cred- its accruing to or received by the non- Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduc- tion or cash refund, as appropriate. (b) In some instances, the amounts received from the Federal Government to finance activities or service oper- ations of the non-Federal entity should be treated as applicable credits. Spe- cifically, the concept of netting such credit items (including any amounts used to meet cost sharing or matching requirements) must be recognized in determining the rates or amounts to be charged to the Federal award. (See §§200.436 and 200.468, for areas of poten- tial application in the matter of Fed- eral financing of activities.) [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, 2020] § 200.407 Prior written approval (prior approval). Under any given Federal award, the reasonableness and allocability of cer- tain items of costs may be difficult to determine. In order to avoid subse- quent disallowance or dispute based on unreasonableness or nonallocability, the non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal awarding agency in advance of the in- currence of special or unusual costs. Prior written approval should include the timeframe or scope of the agree- ment. The absence of prior written ap- proval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under cer- tain circumstances in the following sections of this part: (a) §200.201 Use of grant agreements (including fixed amount awards), coop- erative agreements, and contracts, paragraph (b)(5); (b) §200.306 Cost sharing or matching; (c) §200.307 Program income; (d) §200.308 Revision of budget and program plans; (e) §200.311 Real property; (f) §200.313 Equipment; (g) §200.333 Fixed amount subawards; (h) §200.413 Direct costs, paragraph (c); (i) §200.430 Compensation—personal services, paragraph (h); (j) §200.431 Compensation—fringe ben- efits; (k) §200.438 Entertainment costs; (l) §200.439 Equipment and other cap- ital expenditures; (m) §200.440 Exchange rates; (n) §200.441 Fines, penalties, damages and other settlements; (o) §200.442 Fund raising and invest- ment management costs; (p) §200.445 Goods or services for per- sonal use; (q) §200.447 Insurance and indem- nification; (r) §200.454 Memberships, subscrip- tions, and professional activity costs, paragraph (c); (s) §200.455 Organization costs; (t) §200.456 Participant support costs; (u) §200.458 Pre-award costs; (v) §200.462 Rearrangement and re- conversion costs; (w) §200.467 Selling and marketing costs; (x) §200.470 Taxes (including Value Added Tax); and (y) §200.475 Travel costs. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, 2020] § 200.408 Limitation on allowance of costs. The Federal award may be subject to statutory requirements that limit the allowability of costs. When the max- imum amount allowable under a limi- tation is less than the total amount de- termined in accordance with the prin- ciples in this part, the amount not re- coverable under the Federal award may not be charged to the Federal award. § 200.409 Special considerations. In addition to the basic consider- ations regarding the allowability of costs highlighted in this subtitle, other subtitles in this part describe special considerations and requirements appli- cable to states, local governments, In- dian tribes, and IHEs. In addition, cer- tain provisions among the items of cost in this subpart are only applicable to 157 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00169 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 362§ 200.410 certain types of non-Federal entities, as specified in the following sections: (a) Direct and Indirect (F&A) Costs (§§200.412–200.415) of this subpart; (b) Special Considerations for States, Local Governments and Indian Tribes (§§200.416 and 200.417) of this subpart; and (c) Special Considerations for Insti- tutions of Higher Education (§§200.418 and 200.419) of this subpart. [85 FR 49562, Aug. 13, 2020] § 200.410 Collection of unallowable costs. Payments made for costs determined to be unallowable by either the Federal awarding agency, cognizant agency for indirect costs, or pass-through entity, either as direct or indirect costs, must be refunded (including interest) to the Federal Government in accordance with instructions from the Federal agency that determined the costs are unallowable unless Federal statute or regulation directs otherwise. See also §§200.300 through 200.309 in subpart D of this part. [85 FR 49562, Aug. 13, 2020] § 200.411 Adjustment of previously ne- gotiated indirect (F&A) cost rates containing unallowable costs. (a) Negotiated indirect (F&A) cost rates based on a proposal later found to have included costs that: (1) Are unallowable as specified by Federal statutes, regulations or the terms and conditions of a Federal award; or (2) Are unallowable because they are not allocable to the Federal award(s), must be adjusted, or a refund must be made, in accordance with the require- ments of this section. These adjust- ments or refunds are designed to cor- rect the proposals used to establish the rates and do not constitute a reopening of the rate negotiation. The adjust- ments or refunds will be made regard- less of the type of rate negotiated (pre- determined, final, fixed, or provi- sional). (b) For rates covering a future fiscal year of the non-Federal entity, the un- allowable costs will be removed from the indirect (F&A) cost pools and the rates appropriately adjusted. 2 CFR Ch. II (1–1–21 Edition) (c) For rates covering a past period, the Federal share of the unallowable costs will be computed for each year involved and a cash refund (including interest chargeable in accordance with applicable regulations) will be made to the Federal Government. If cash re- funds are made for past periods covered by provisional or fixed rates, appro- priate adjustments will be made when the rates are finalized to avoid dupli- cate recovery of the unallowable costs by the Federal Government. (d) For rates covering the current pe- riod, either a rate adjustment or a re- fund, as described in paragraphs (b) and (c) of this section, must be required by the cognizant agency for indirect costs. The choice of method must be at the discretion of the cognizant agency for indirect costs, based on its judgment as to which method would be most prac- tical. (e) The amount or proportion of unal- lowable costs included in each year’s rate will be assumed to be the same as the amount or proportion of unallow- able costs included in the base year proposal used to establish the rate. DIRECT AND INDIRECT (F&A) COSTS § 200.412 Classification of costs. There is no universal rule for classifying certain costs as either di- rect or indirect (F&A) under every ac- counting system. A cost may be direct with respect to some specific service or function, but indirect with respect to the Federal award or other final cost objective. Therefore, it is essential that each item of cost incurred for the same purpose be treated consistently in like circumstances either as a direct or an indirect (F&A) cost in order to avoid possible double-charging of Fed- eral awards. Guidelines for determining direct and indirect (F&A) costs charged to Federal awards are provided in this subpart. § 200.413 Direct costs. (a) General. Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other inter- nally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high 158 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00170 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 363OMB Guidance § 200.414 degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect (F&A) costs. See also §200.405. (b) Application to Federal awards. Identification with the Federal award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from in- direct (F&A) costs of Federal awards. Typical costs charged directly to a Federal award are the compensation of employees who work on that award, their related fringe benefit costs, the costs of materials and other items of expense incurred for the Federal award. If directly related to a specific award, certain costs that otherwise would be treated as indirect costs may also be considered direct costs. Examples in- clude extraordinary utility consump- tion, the cost of materials supplied from stock or services rendered by spe- cialized facilities, program evaluation costs, or other institutional service op- erations. (c) The salaries of administrative and clerical staff should normally be treat- ed as indirect (F&A) costs. Direct charging of these costs may be appro- priate only if all of the following condi- tions are met: (1) Administrative or clerical serv- ices are integral to a project or activ- ity; (2) Individuals involved can be spe- cifically identified with the project or activity; (3) Such costs are explicitly included in the budget or have the prior written approval of the Federal awarding agen- cy; and (4) The costs are not also recovered as indirect costs. (d) Minor items. Any direct cost of minor amount may be treated as an in- direct (F&A) cost for reasons of practi- cality where such accounting treat- ment for that item of cost is consist- ently applied to all Federal and non- Federal cost objectives. (e) The costs of certain activities are not allowable as charges to Federal awards. However, even though these costs are unallowable for purposes of computing charges to Federal awards, they nonetheless must be treated as di- rect costs for purposes of determining indirect (F&A) cost rates and be allo- cated their equitable share of the non- Federal entity’s indirect costs if they represent activities which: (1) Include the salaries of personnel, (2) Occupy space, and (3) Benefit from the non-Federal enti- ty’s indirect (F&A) costs. (f) For nonprofit organizations, the costs of activities performed by the non-Federal entity primarily as a serv- ice to members, clients, or the general public when significant and necessary to the non-Federal entity’s mission must be treated as direct costs whether or not allowable, and be allocated an equitable share of indirect (F&A) costs. Some examples of these types of activi- ties include: (1) Maintenance of membership rolls, subscriptions, publications, and related functions. See also §200.454. (2) Providing services and informa- tion to members, legislative or admin- istrative bodies, or the public. See also §§200.454 and 200.450. (3) Promotion, lobbying, and other forms of public relations. See also §§200.421 and 200.450. (4) Conferences except those held to conduct the general administration of the non-Federal entity. See also §200.432. (5) Maintenance, protection, and in- vestment of special funds not used in operation of the non-Federal entity. See also §200.442. (6) Administration of group benefits on behalf of members or clients, in- cluding life and hospital insurance, an- nuity or retirement plans, and finan- cial aid. See also §200.431. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, 2020] § 200.414 Indirect (F&A) costs. (a) Facilities and administration classi- fication. For major Institutions of Higher Education (IHE) and major non- profit organizations, indirect (F&A) costs must be classified within two broad categories: ‘‘Facilities’’ and ‘‘Administration.’’ ‘‘Facilities’’ is de- fined as depreciation on buildings, equipment and capital improvement, interest on debt associated with cer- tain buildings, equipment and capital improvements, and operations and 159 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00171 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 364§ 200.414 maintenance expenses. ‘‘Administra- tion’’ is defined as general administra- tion and general expenses such as the director’s office, accounting, personnel and all other types of expenditures not listed specifically under one of the sub- categories of ‘‘Facilities’’ (including cross allocations from other pools, where applicable). For nonprofit orga- nizations, library expenses are included in the ‘‘Administration’’ category; for IHEs, they are included in the ‘‘Facili- ties’’ category. Major IHEs are defined as those required to use the Standard Format for Submission as noted in ap- pendix III to this part, and Rate Deter- mination for Institutions of Higher Education paragraph C. 11. Major non- profit organizations are those which re- ceive more than $10 million dollars in direct Federal funding. (b) Diversity of nonprofit organizations. Because of the diverse characteristics and accounting practices of nonprofit organizations, it is not possible to specify the types of cost which may be classified as indirect (F&A) cost in all situations. Identification with a Fed- eral award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of Federal awards. However, typical ex- amples of indirect (F&A) cost for many nonprofit organizations may include depreciation on buildings and equip- ment, the costs of operating and main- taining facilities, and general adminis- tration and general expenses, such as the salaries and expenses of executive officers, personnel administration, and accounting. (c) Federal Agency Acceptance of Nego- tiated Indirect Cost Rates. (See also §200.306.) (1) The negotiated rates must be ac- cepted by all Federal awarding agen- cies. A Federal awarding agency may use a rate different from the negotiated rate for a class of Federal awards or a single Federal award only when re- quired by Federal statute or regula- tion, or when approved by a Federal awarding agency head or delegate based on documented justification as described in paragraph (c)(3) of this section. 2 CFR Ch. II (1–1–21 Edition) (2) The Federal awarding agency head or delegate must notify OMB of any ap- proved deviations. (3) The Federal awarding agency must implement, and make publicly available, the policies, procedures and general decision-making criteria that their programs will follow to seek and justify deviations from negotiated rates. (4) As required under §200.204, the Federal awarding agency must include in the notice of funding opportunity the policies relating to indirect cost rate reimbursement, matching, or cost share as approved under paragraph (e)(1) of this section. As appropriate, the Federal agency should incorporate discussion of these policies into Fed- eral awarding agency outreach activi- ties with non-Federal entities prior to the posting of a notice of funding op- portunity. (d) Pass-through entities are subject to the requirements in §200.332(a)(4). (e) Requirements for development and submission of indirect (F&A) cost rate proposals and cost allocation plans are contained in Appendices III– VII and Appendix IX as follows: (1) Appendix III to Part 200—Indirect (F&A) Costs Identification and Assign- ment, and Rate Determination for In- stitutions of Higher Education (IHEs); (2) Appendix IV to Part 200—Indirect (F&A) Costs Identification and Assign- ment, and Rate Determination for Non- profit Organizations; (3) Appendix V to Part 200—State/ Local Governmentwide Central Service Cost Allocation Plans; (4) Appendix VI to Part 200—Public Assistance Cost Allocation Plans; (5) Appendix VII to Part 200—States and Local Government and Indian Tribe Indirect Cost Proposals; and (6) Appendix IX to Part 200—Hospital Cost Principles. (f) In addition to the procedures out- lined in the appendices in paragraph (e) of this section, any non-Federal entity that does not have a current nego- tiated (including provisional) rate, ex- cept for those non-Federal entities de- scribed in appendix VII to this part, paragraph D.1.b, may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely. No documentation 160 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00172 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 365OMB Guidance § 200.415 is required to justify the 10% de mini- mis indirect cost rate. As described in §200.403, costs must be consistently charged as either indirect or direct costs, but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all Fed- eral awards until such time as a non- Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time. (g) Any non-Federal entity that has a current federally-negotiated indirect cost rate may apply for a one-time ex- tension of the rates in that agreement for a period of up to four years. This extension will be subject to the review and approval of the cognizant agency for indirect costs. If an extension is granted the non-Federal entity may not request a rate review until the ex- tension period ends. At the end of the 4-year extension, the non-Federal enti- ty must re-apply to negotiate a rate. Subsequent one-time extensions (up to four years) are permitted if a renegoti- ation is completed between each exten- sion request. (h) The federally negotiated indirect rate, distribution base, and rate type for a non-Federal entity (except for the Indian tribes or tribal organizations, as defined in the Indian Self Determina- tion, Education and Assistance Act, 25 U.S.C. 450b(1)) must be available pub- licly on an OMB-designated Federal website. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49563, Aug. 13, 2020] § 200.415 Required certifications. Required certifications include: (a) To assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets, the annual and final fiscal reports or vouchers requesting payment under the agreements must include a certifi- cation, signed by an official who is au- thorized to legally bind the non-Fed- eral entity, which reads as follows: ‘‘By signing this report, I certify to the best of my knowledge and belief that the re- port is true, complete, and accurate, and the expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the Federal award. I am aware that any false, fictitious, or fraudulent information, or the omis- sion of any material fact, may subject me to criminal, civil or administrative penalties for fraud, false statements, false claims or otherwise. (U.S. Code Title 18, Section 1001 and Title 31, Sec- tions 3729–3730 and 3801–3812).’’ (b) Certification of cost allocation plan or indirect (F&A) cost rate pro- posal. Each cost allocation plan or in- direct (F&A) cost rate proposal must comply with the following: (1) A proposal to establish a cost allo- cation plan or an indirect (F&A) cost rate, whether submitted to a Federal cognizant agency for indirect costs or maintained on file by the non-Federal entity, must be certified by the non- Federal entity using the Certificate of Cost Allocation Plan or Certificate of Indirect Costs as set forth in appen- dices III through VII, and IX of this part. The certificate must be signed on behalf of the non-Federal entity by an individual at a level no lower than vice president or chief financial officer of the non-Federal entity that submits the proposal. (2) Unless the non-Federal entity has elected the option under §200.414(f), the Federal Government may either dis- allow all indirect (F&A) costs or uni- laterally establish such a plan or rate when the non-Federal entity fails to submit a certified proposal for estab- lishing such a plan or rate in accord- ance with the requirements. Such a plan or rate may be based upon audited historical data or such other data that have been furnished to the cognizant agency for indirect costs and for which it can be demonstrated that all unal- lowable costs have been excluded. When a cost allocation plan or indirect cost rate is unilaterally established by the Federal Government because the non-Federal entity failed to submit a certified proposal, the plan or rate es- tablished will be set to ensure that po- tentially unallowable costs will not be reimbursed. (c) Certifications by nonprofit orga- nizations as appropriate that they did not meet the definition of a major non- profit organization as defined in §200.414(a). 161 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00173 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 366§ 200.416 (d) See also §200.450 for another re- quired certification. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49563, Aug. 13, 2020] SPECIAL CONSIDERATIONS FOR STATES, LOCAL GOVERNMENTS AND INDIAN TRIBES § 200.416 Cost allocation plans and in- direct cost proposals. (a) For states, local governments and Indian tribes, certain services, such as motor pools, computer centers, pur- chasing, accounting, etc., are provided to operating agencies on a centralized basis. Since Federal awards are per- formed within the individual operating agencies, there needs to be a process whereby these central service costs can be identified and assigned to benefitted activities on a reasonable and con- sistent basis. The central service cost allocation plan provides that process. (b) Individual operating agencies (governmental department or agency), normally charge Federal awards for in- direct costs through an indirect cost rate. A separate indirect cost rate(s) proposal for each operating agency is usually necessary to claim indirect costs under Federal awards. Indirect costs include: (1) The indirect costs originating in each department or agency of the gov- ernmental unit carrying out Federal awards and (2) The costs of central governmental services distributed through the cen- tral service cost allocation plan and not otherwise treated as direct costs. (c) The requirements for development and submission of cost allocation plans (for central service costs and public as- sistance programs) and indirect cost rate proposals are contained in appen- dices IV, V and VI to this part. § 200.417 Interagency service. The cost of services provided by one agency to another within the govern- mental unit may include allowable di- rect costs of the service plus a pro- rated share of indirect costs. A stand- ard indirect cost allowance equal to ten percent of the direct salary and wage cost of providing the service (ex- cluding overtime, shift premiums, and 2 CFR Ch. II (1–1–21 Edition) fringe benefits) may be used in lieu of determining the actual indirect costs of the service. These services do not in- clude centralized services included in central service cost allocation plans as described in Appendix V to Part 200. [85 FR 49564, Aug. 13, 2020] SPECIAL CONSIDERATIONS FOR INSTITUTIONS OF HIGHER EDUCATION § 200.418 Costs incurred by states and local governments. Costs incurred or paid by a state or local government on behalf of its IHEs for fringe benefit programs, such as pension costs and FICA and any other costs specifically incurred on behalf of, and in direct benefit to, the IHEs, are allowable costs of such IHEs whether or not these costs are recorded in the accounting records of the institutions, subject to the following: (a) The costs meet the requirements of §200.402–411 of this subpart; (b) The costs are properly supported by approved cost allocation plans in ac- cordance with applicable Federal cost accounting principles in this part; and (c) The costs are not otherwise borne directly or indirectly by the Federal Government. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49564, Aug. 13, 2020] § 200.419 Cost accounting standards and disclosure statement. (a) An IHE that receive an aggregate total $50 million or more in Federal awards and instruments subject to this subpart (as specified in §200.101) in its most recently completed fiscal year must comply with the Cost Accounting Standards Board’s cost accounting standards located at 48 CFR 9905.501, 9905.502, 9905.505, and 9905.506. CAS-cov- ered contracts and subcontracts award- ed to the IHEs are subject to the broad- er range of CAS requirements at 48 CFR 9900 through 9999 and 48 CFR part 30 (FAR Part 30). (b) Disclosure statement. An IHE that receives an aggregate total $50 million or more in Federal awards and instru- ments subject to this subpart (as speci- fied in §200.101) during its most re- cently completed fiscal year must dis- close their cost accounting practices by filing a Disclosure Statement (DS– 162 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00174 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 367OMB Guidance § 200.419 2), which is reproduced in Appendix III to Part 200. With the approval of the cognizant agency for indirect costs, an IHE may meet the DS–2 submission by submitting the DS–2 for each business unit that received $50 million or more in Federal awards and instruments. (1) The DS–2 must be submitted to the cognizant agency for indirect costs with a copy to the IHE’s cognizant agency for audit. The initial DS–2 and revisions to the DS–2 must be sub- mitted in coordination with the IHE’s indirect (F&A) rate proposal, unless an earlier submission is requested by the cognizant agency for indirect costs. IHEs with CAS-covered contracts or subcontracts meeting the dollar threshold in 48 CFR 9903.202–1(f) must submit their initial DS–2 or revisions no later than prior to the award of a CAS-covered contract or subcontract. (2) An IHE must maintain an accu- rate DS–2 and comply with disclosed cost accounting practices. An IHE must file amendments to the DS–2 to the cognizant agency for indirect costs in advance of a disclosed practice being changed to comply with a new or modi- fied standard, or when a practice is changed for other reasons. An IHE may proceed with implementing the change after it has notified the Federal cog- nizant agency for indirect costs. If the change represents a variation from 2 CFR part 200, the change may require approval by the Federal cognizant agency for indirect costs, in accordance with §200.102(b). Amendments of a DS– 2 may be submitted at any time. Re- submission of a complete, updated DS– 2 is discouraged except when there are extensive changes to disclosed prac- tices. (3) Cost and funding adjustments. Cost adjustments must be made by the cog- nizant agency for indirect costs if an IHE fails to comply with the cost poli- cies in this part or fails to consistently follow its established or disclosed cost accounting practices when estimating, accumulating or reporting the costs of Federal awards, and the aggregate cost impact on Federal awards is material. The cost adjustment must normally be made on an aggregate basis for all af- fected Federal awards through an ad- justment of the IHE’s future F&A costs rates or other means considered appro- priate by the cognizant agency for indi- rect costs. Under the terms of CAS cov- ered contracts, adjustments in the amount of funding provided may also be required when the estimated pro- posal costs were not determined in ac- cordance with established cost ac- counting practices. (4) Overpayments. Excess amounts paid in the aggregate by the Federal Government under Federal awards due to a noncompliant cost accounting practice used to estimate, accumulate, or report costs must be credited or re- funded, as deemed appropriate by the cognizant agency for indirect costs. In- terest applicable to the excess amounts paid in the aggregate during the period of noncompliance must also be deter- mined and collected in accordance with applicable Federal agency regulations. (5) Compliant cost accounting practice changes. Changes from one compliant cost accounting practice to another compliant practice that are approved by the cognizant agency for indirect costs may require cost adjustments if the change has a material effect on Federal awards and the changes are deemed appropriate by the cognizant agency for indirect costs. (6) Responsibilities. The cognizant agency for indirect cost must: (i) Determine cost adjustments for all Federal awards in the aggregate on behalf of the Federal Government. Ac- tions of the cognizant agency for indi- rect cost in making cost adjustment determinations must be coordinated with all affected Federal awarding agencies to the extent necessary. (ii) Prescribe guidelines and establish internal procedures to promptly deter- mine on behalf of the Federal Govern- ment that a DS–2 adequately discloses the IHE’s cost accounting practices and that the disclosed practices are compliant with applicable CAS and the requirements of this part. (iii) Distribute to all affected Federal awarding agencies any DS–2 determina- tion of adequacy or noncompliance. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49564, Aug. 13, 2020] 163 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00175 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 368§ 200.420 GENERAL PROVISIONS FOR SELECTED ITEMS OF COST § 200.420 Considerations for selected items of cost. This section provides principles to be applied in establishing the allowability of certain items involved in deter- mining cost, in addition to the require- ments of Subtitle II of this subpart. These principles apply whether or not a particular item of cost is properly treated as direct cost or indirect (F&A) cost. Failure to mention a particular item of cost is not intended to imply that it is either allowable or unallow- able; rather, determination as to allow- ability in each case should be based on the treatment provided for similar or related items of cost, and based on the principles described in §§200.402 through 200.411. In case of a discrep- ancy between the provisions of a spe- cific Federal award and the provisions below, the Federal award governs. Cri- teria outlined in §200.403 must be ap- plied in determining allowability. See also §200.102. [85 FR 49564, Aug. 13, 2020] § 200.421 Advertising and public rela- tions. (a) The term advertising costs means the costs of advertising media and cor- ollary administrative costs. Adver- tising media include magazines, news- papers, radio and television, direct mail, exhibits, electronic or computer transmittals, and the like. (b) The only allowable advertising costs are those which are solely for: (1) The recruitment of personnel re- quired by the non-Federal entity for performance of a Federal award (See also §200.463); (2) The procurement of goods and services for the performance of a Fed- eral award; (3) The disposal of scrap or surplus materials acquired in the performance of a Federal award except when non- Federal entities are reimbursed for dis- posal costs at a predetermined amount; or (4) Program outreach and other spe- cific purposes necessary to meet the re- quirements of the Federal award. (c) The term ‘‘public relations’’ in- cludes community relations and means 2 CFR Ch. II (1–1–21 Edition) those activities dedicated to maintain- ing the image of the non-Federal entity or maintaining or promoting under- standing and favorable relations with the community or public at large or any segment of the public. (d) The only allowable public rela- tions costs are: (1) Costs specifically required by the Federal award; (2) Costs of communicating with the public and press pertaining to specific activities or accomplishments which result from performance of the Federal award (these costs are considered nec- essary as part of the outreach effort for the Federal award); or (3) Costs of conducting general liai- son with news media and government public relations officers, to the extent that such activities are limited to com- munication and liaison necessary to keep the public informed on matters of public concern, such as notices of fund- ing opportunities, financial matters, etc. (e) Unallowable advertising and pub- lic relations costs include the fol- lowing: (1) All advertising and public rela- tions costs other than as specified in paragraphs (b) and (d) of this section; (2) Costs of meetings, conventions, convocations, or other events related to other activities of the entity (see also §200.432), including: (i) Costs of displays, demonstrations, and exhibits; (ii) Costs of meeting rooms, hospi- tality suites, and other special facili- ties used in conjunction with shows and other special events; and (iii) Salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations, and providing briefings; (3) Costs of promotional items and memorabilia, including models, gifts, and souvenirs; (4) Costs of advertising and public re- lations designed solely to promote the non-Federal entity. [78 FR 76808, Dec. 26, 2013, as amended at 85 FR 49564, Aug. 13, 2020] § 200.422 Advisory councils. Costs incurred by advisory councils or committees are unallowable unless authorized by statute, the Federal 164 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00176 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 369OMB Guidance § 200.428 awarding agency or as an indirect cost where allocable to Federal awards. See §200.444, applicable to States, local gov- ernments, and Indian tribes. [85 FR 49564, Aug. 13, 2020] § 200.423 Alcoholic beverages. Costs of alcoholic beverages are unal- lowable. § 200.424 Alumni/ae activities. Costs incurred by IHEs for, or in sup- port of, alumni/ae activities are unal- lowable. § 200.425 Audit services. (a) A reasonably proportionate share of the costs of audits required by, and performed in accordance with, the Sin- gle Audit Act Amendments of 1996 (31 U.S.C. 7501–7507), as implemented by re- quirements of this part, are allowable. However, the following audit costs are unallowable: (1) Any costs when audits required by the Single Audit Act and subpart F of this part have not been conducted or have been conducted but not in accord- ance therewith; and (2) Any costs of auditing a non-Fed- eral entity that is exempted from hav- ing an audit conducted under the Sin- gle Audit Act and subpart F of this part because its expenditures under Federal awards are less than $750,000 during the non-Federal entity’s fiscal year. (b) The costs of a financial statement audit of a non-Federal entity that does not currently have a Federal award may be included in the indirect cost pool for a cost allocation plan or indi- rect cost proposal. (c) Pass-through entities may charge Federal awards for the cost of agreed- upon-procedures engagements to mon- itor subrecipients (in accordance with subpart D, §§200.331–333) who are ex- empted from the requirements of the Single Audit Act and subpart F of this part. This cost is allowable only if the agreed-upon-procedures engagements are: (1) Conducted in accordance with GAGAS attestation standards; (2) Paid for and arranged by the pass- through entity; and (3) Limited in scope to one or more of the following types of compliance re- quirements: activities allowed or unallowed; allowable costs/cost prin- ciples; eligibility; and reporting. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49564, Aug. 13, 2020] § 200.426 Bad debts. Bad debts (debts which have been de- termined to be uncollectable), includ- ing losses (whether actual or esti- mated) arising from uncollectable ac- counts and other claims, are unallow- able. Related collection costs, and re- lated legal costs, arising from such debts after they have been determined to be uncollectable are also unallow- able. See also §200.428. [85 FR 49565, Aug. 13, 2020] § 200.427 Bonding costs. (a) Bonding costs arise when the Fed- eral awarding agency requires assur- ance against financial loss to itself or others by reason of the act or default of the non-Federal entity. They arise also in instances where the non-Fed- eral entity requires similar assurance, including: bonds as bid, performance, payment, advance payment, infringe- ment, and fidelity bonds for employees and officials. (b) Costs of bonding required pursu- ant to the terms and conditions of the Federal award are allowable. (c) Costs of bonding required by the non-Federal entity in the general con- duct of its operations are allowable as an indirect cost to the extent that such bonding is in accordance with sound business practice and the rates and pre- miums are reasonable under the cir- cumstances. § 200.428 Collections of improper pay- ments. The costs incurred by a non-Federal entity to recover improper payments are allowable as either direct or indi- rect costs, as appropriate. Amounts collected may be used by the non-Fed- eral entity in accordance with cash management standards set forth in §200.305. [85 FR 49565, Aug. 13, 2020] 165 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00177 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 370§ 200.429 § 200.429 Commencement and convoca- tion costs. For IHEs, costs incurred for com- mencements and convocations are un- allowable, except as provided for in (B)(9) Student Administration and Services, in appendix III to this part, as activity costs. [85 FR 49565, Aug. 13, 2020] § 200.430 Compensation—personal services. (a) General. Compensation for per- sonal services includes all remunera- tion, paid currently or accrued, for services of employees rendered during the period of performance under the Federal award, including but not nec- essarily limited to wages and salaries. Compensation for personal services may also include fringe benefits which are addressed in §200.431. Costs of com- pensation are allowable to the extent that they satisfy the specific require- ments of this part, and that the total compensation for individual employ- ees: (1) Is reasonable for the services ren- dered and conforms to the established written policy of the non-Federal enti- ty consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i) of this sec- tion, when applicable. (b) Reasonableness. Compensation for employees engaged in work on Federal awards will be considered reasonable to the extent that it is consistent with that paid for similar work in other ac- tivities of the non-Federal entity. In cases where the kinds of employees re- quired for Federal awards are not found in the other activities of the non-Fed- eral entity, compensation will be con- sidered reasonable to the extent that it is comparable to that paid for similar work in the labor market in which the non-Federal entity competes for the kind of employees involved. (c) Professional activities outside the non-Federal entity. Unless an arrange- ment is specifically authorized by a 2 CFR Ch. II (1–1–21 Edition) Federal awarding agency, a non-Fed- eral entity must follow its written non- Federal entity-wide policies and prac- tices concerning the permissible extent of professional services that can be pro- vided outside the non-Federal entity for non-organizational compensation. Where such non-Federal entity-wide written policies do not exist or do not adequately define the permissible ex- tent of consulting or other non-organi- zational activities undertaken for extra outside pay, the Federal Govern- ment may require that the effort of professional staff working on Federal awards be allocated between: (1) Non-Federal entity activities, and (2) Non-organizational professional activities. If the Federal awarding agency considers the extent of non-or- ganizational professional effort exces- sive or inconsistent with the conflicts- of-interest terms and conditions of the Federal award, appropriate arrange- ments governing compensation will be negotiated on a case-by-case basis. (d) Unallowable costs. (1) Costs which are unallowable under other sections of these principles must not be allowable under this section solely on the basis that they constitute personnel com- pensation. (2) The allowable compensation for certain employees is subject to a ceil- ing in accordance with statute. For the amount of the ceiling for cost-reim- bursement contracts, the covered com- pensation subject to the ceiling, the covered employees, and other relevant provisions, see 10 U.S.C. 2324(e)(1)(P), and 41 U.S.C. 1127 and 4304(a)(16). For other types of Federal awards, other statutory ceilings may apply. (e) Special considerations. Special con- siderations in determining allowability of compensation will be given to any change in a non-Federal entity’s com- pensation policy resulting in a substan- tial increase in its employees’ level of compensation (particularly when the change was concurrent with an in- crease in the ratio of Federal awards to other activities) or any change in the treatment of allowability of specific types of compensation due to changes in Federal policy. (f) Incentive compensation. Incentive compensation to employees based on 166 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00178 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 371OMB Guidance § 200.430 cost reduction, or efficient perform- ance, suggestion awards, safety awards, etc., is allowable to the extent that the overall compensation is determined to be reasonable and such costs are paid or accrued pursuant to an agreement entered into in good faith between the non-Federal entity and the employees before the services were rendered, or pursuant to an established plan fol- lowed by the non-Federal entity so consistently as to imply, in effect, an agreement to make such payment. (g) Nonprofit organizations. For com- pensation to members of nonprofit or- ganizations, trustees, directors, associ- ates, officers, or the immediate fami- lies thereof, determination must be made that such compensation is rea- sonable for the actual personal services rendered rather than a distribution of earnings in excess of costs. This may include director’s and executive com- mittee member’s fees, incentive awards, allowances for off-site pay, in- centive pay, location allowances, hard- ship pay, and cost-of-living differen- tials. (h) Institutions of Higher Education (IHEs). (1) Certain conditions require special consideration and possible limi- tations in determining allowable per- sonnel compensation costs under Fed- eral awards. Among such conditions are the following: (i) Allowable activities. Charges to Federal awards may include reasonable amounts for activities contributing and directly related to work under an agreement, such as delivering special lectures about specific aspects of the ongoing activity, writing reports and articles, developing and maintaining protocols (human, animals, etc.), man- aging substances/chemicals, managing and securing project-specific data, co- ordinating research subjects, partici- pating in appropriate seminars, con- sulting with colleagues and graduate students, and attending meetings and conferences. (ii) Incidental activities. Incidental activities for which supplemental com- pensation is allowable under written institutional policy (at a rate not to exceed institutional base salary) need not be included in the records described in paragraph (i) of this section to di- rectly charge payments of incidental activities, such activities must either be specifically provided for in the Fed- eral award budget or receive prior writ- ten approval by the Federal awarding agency. (2) Salary basis. Charges for work per- formed on Federal awards by faculty members during the academic year are allowable at the IBS rate. Except as noted in paragraph (h)(1)(ii) of this sec- tion, in no event will charges to Fed- eral awards, irrespective of the basis of computation, exceed the proportionate share of the IBS for that period. This principle applies to all members of fac- ulty at an institution. IBS is defined as the annual compensation paid by an IHE for an individual’s appointment, whether that individual’s time is spent on research, instruction, administra- tion, or other activities. IBS excludes any income that an individual earns outside of duties performed for the IHE. Unless there is prior approval by the Federal awarding agency, charges of a faculty member’s salary to a Fed- eral award must not exceed the propor- tionate share of the IBS for the period during which the faculty member worked on the award. (3) Intra-Institution of Higher Edu- cation (IHE) consulting. Intra-IHE con- sulting by faculty should be under- taken as an IHE responsibility requir- ing no compensation in addition to IBS. However, in unusual cases where consultation is across departmental lines or involves a separate or remote operation, and the work performed by the faculty member is in addition to his or her regular responsibilities, any charges for such work representing ad- ditional compensation above IBS are allowable provided that such con- sulting arrangements are specifically provided for in the Federal award or approved in writing by the Federal awarding agency. (4) Extra Service Pay normally rep- resents overload compensation, subject to institutional compensation policies for services above and beyond IBS. Where extra service pay is a result of Intra-IHE consulting, it is subject to the same requirements of paragraph (b) above. It is allowable if all of the fol- lowing conditions are met: (i) The non-Federal entity estab- lishes consistent written policies which 167 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00179 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 372§ 200.430 apply uniformly to all faculty mem- bers, not just those working on Federal awards. (ii) The non-Federal entity estab- lishes a consistent written definition of work covered by IBS which is specific enough to determine conclusively when work beyond that level has occurred. This may be described in appointment letters or other documentations. (iii) The supplementation amount paid is commensurate with the IBS rate of pay and the amount of addi- tional work performed. See paragraph (h)(2) of this section. (iv) The salaries, as supplemented, fall within the salary structure and pay ranges established by and docu- mented in writing or otherwise applica- ble to the non-Federal entity. (v) The total salaries charged to Fed- eral awards including extra service pay are subject to the Standards of Docu- mentation as described in paragraph (i) of this section. (5) Periods outside the academic year. (i) Except as specified for teaching ac- tivity in paragraph (h)(5)(ii) of this sec- tion, charges for work performed by faculty members on Federal awards during periods not included in the base salary period will be at a rate not in excess of the IBS. (ii) Charges for teaching activities performed by faculty members on Fed- eral awards during periods not included in IBS period will be based on the nor- mal written policy of the IHE gov- erning compensation to faculty mem- bers for teaching assignments during such periods. (6) Part-time faculty. Charges for work performed on Federal awards by fac- ulty members having only part-time appointments will be determined at a rate not in excess of that regularly paid for part-time assignments. (7) Sabbatical leave costs. Rules for sabbatical leave are as follow: (i) Costs of leaves of absence by em- ployees for performance of graduate work or sabbatical study, travel, or re- search are allowable provided the IHE has a uniform written policy on sab- batical leave for persons engaged in in- struction and persons engaged in re- search. Such costs will be allocated on an equitable basis among all related activities of the IHE. 2 CFR Ch. II (1–1–21 Edition) (ii) Where sabbatical leave is in- cluded in fringe benefits for which a cost is determined for assessment as a direct charge, the aggregate amount of such assessments applicable to all work of the institution during the base period must be reasonable in relation to the IHE’s actual experience under its sabbatical leave policy. (8) Salary rates for non-faculty mem- bers. Non-faculty full-time professional personnel may also earn ‘‘extra service pay’’ in accordance with the non-Fed- eral entity’s written policy and con- sistent with paragraph (h)(1)(i) of this section. (i) Standards for Documentation of Per- sonnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately re- flect the work performed. These records must: (i) Be supported by a system of inter- nal control which provides reasonable assurance that the charges are accu- rate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total ac- tivity for which the employee is com- pensated by the non-Federal entity, not exceeding 100% of compensated ac- tivities (for IHE, this per the IHE’s def- inition of IBS); (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of sub- sidiary records as defined in the non- Federal entity’s written policy; (v) Comply with the established ac- counting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of inci- dental work for IHEs.); and (vi) [Reserved] (vii) Support the distribution of the employee’s salary or wages among spe- cific activities or cost objectives if the employee works on more than one Fed- eral award; a Federal award and non- Federal award; an indirect cost activ- ity and a direct cost activity; two or more indirect activities which are allo- cated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., esti- mates determined before the services 168 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00180 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 373OMB Guidance § 200.430 are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approxi- mations of the activity actually per- formed; (B) Significant changes in the cor- responding work activity (as defined by the non-Federal entity’s written poli- cies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctua- tion between workload categories need not be considered as long as the dis- tribution of salaries and wages is rea- sonable over the longer term; and (C) The non-Federal entity’s system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary ad- justment must be made such that the final amount charged to the Federal award is accurate, allowable, and prop- erly allocated. (ix) Because practices vary as to the activity constituting a full workload (for IHEs, IBS), records may reflect categories of activities expressed as a percentage distribution of total activi- ties. (x) It is recognized that teaching, re- search, service, and administration are often inextricably intermingled in an academic setting. When recording sala- ries and wages charged to Federal awards for IHEs, a precise assessment of factors that contribute to costs is therefore not always feasible, nor is it expected. (2) For records which meet the stand- ards required in paragraph (i)(1) of this section, the non-Federal entity will not be required to provide additional sup- port or documentation for the work performed, other than that referenced in paragraph (i)(3) of this section. (3) In accordance with Department of Labor regulations implementing the Fair Labor Standards Act (FLSA) (29 CFR part 516), charges for the salaries and wages of nonexempt employees, in addition to the supporting documenta- tion described in this section, must also be supported by records indicating the total number of hours worked each day. (4) Salaries and wages of employees used in meeting cost sharing or match- ing requirements on Federal awards must be supported in the same manner as salaries and wages claimed for reim- bursement from Federal awards. (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (1) if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, ‘‘rolling’’ time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Tem- porary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sam- pling standards including: (A) The sampling universe must in- clude all of the employees whose sala- ries and wages are to be allocated based on sample results except as pro- vided in paragraph (i)(5)(iii) of this sec- tion; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. (ii) Allocating charges for the sam- pled employees’ supervisors, clerical and support staffs, based on the results of the sampled employees, will be ac- ceptable. (iii) Less than full compliance with the statistical sampling standards noted in subsection (5)(i) may be ac- cepted by the cognizant agency for in- direct costs if it concludes that the amounts to be allocated to Federal awards will be minimal, or if it con- cludes that the system proposed by the non-Federal entity will result in lower costs to Federal awards than a system which complies with the standards. (6) Cognizant agencies for indirect costs are encouraged to approve alter- native proposals based on outcomes and milestones for program perform- ance where these are clearly docu- mented. Where approved by the Federal 169 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00181 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 374§ 200.431 cognizant agency for indirect costs, these plans are acceptable as an alter- native to the requirements of para- graph (i)(1) of this section. (7) For Federal awards of similar pur- pose activity or instances of approved blended funding, a non-Federal entity may submit performance plans that in- corporate funds from multiple Federal awards and account for their combined use based on performance-oriented metrics, provided that such plans are approved in advance by all involved Federal awarding agencies. In these in- stances, the non-Federal entity must submit a request for waiver of the re- quirements based on documentation that describes the method of charging costs, relates the charging of costs to the specific activity that is applicable to all fund sources, and is based on quantifiable measures of the activity in relation to time charged. (8) For a non-Federal entity where the records do not meet the standards described in this section, the Federal Government may require personnel ac- tivity reports, including prescribed cer- tifications, or equivalent documenta- tion that support the records as re- quired in this section. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49565, Aug. 13, 2020] § 200.431 Compensation—fringe bene- fits. (a) General. Fringe benefits are allow- ances and services provided by employ- ers to their employees as compensation in addition to regular salaries and wages. Fringe benefits include, but are not limited to, the costs of leave (vaca- tion, family-related, sick or military), employee insurance, pensions, and un- employment benefit plans. Except as provided elsewhere in these principles, the costs of fringe benefits are allow- able provided that the benefits are rea- sonable and are required by law, non- Federal entity-employee agreement, or an established policy of the non-Fed- eral entity. (b) Leave. The cost of fringe benefits in the form of regular compensation paid to employees during periods of au- thorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, mili- 2 CFR Ch. II (1–1–21 Edition) tary leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: (1) They are provided under estab- lished written leave policies; (2) The costs are equitably allocated to all related activities, including Fed- eral awards; and, (3) The accounting basis (cash or ac- crual) selected for costing each type of leave is consistently followed by the non-Federal entity or specified group- ing of employees. (i) When a non-Federal entity uses the cash basis of accounting, the cost of leave is recognized in the period that the leave is taken and paid for. Pay- ments for unused leave when an em- ployee retires or terminates employ- ment are allowable in the year of pay- ment. (ii) The accrual basis may be only used for those types of leave for which a liability as defined by GAAP exists when the leave is earned. When a non- Federal entity uses the accrual basis of accounting, allowable leave costs are the lesser of the amount accrued or funded. (c) Fringe benefits. The cost of fringe benefits in the form of employer con- tributions or expenses for social secu- rity; employee life, health, unemploy- ment, and worker’s compensation in- surance (except as indicated in §200.447); pension plan costs (see para- graph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under estab- lished written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Fed- eral awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal enti- ty’s accounting practices. (d) Cost objectives. Fringe benefits may be assigned to cost objectives by identifying specific benefits to specific individual employees or by allocating on the basis of entity-wide salaries and wages of the employees receiving the benefits. When the allocation method is used, separate allocations must be 170 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00182 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 375OMB Guidance § 200.431 made to selective groupings of employ- ees, unless the non-Federal entity dem- onstrates that costs in relationship to salaries and wages do not differ signifi- cantly for different groups of employ- ees. (e) Insurance. See also §200.447(d)(1) and (2). (1) Provisions for a reserve under a self-insurance program for unemploy- ment compensation or workers’ com- pensation are allowable to the extent that the provisions represent reason- able estimates of the liabilities for such compensation, and the types of coverage, extent of coverage, and rates and premiums would have been allow- able had insurance been purchased to cover the risks. However, provisions for self-insured liabilities which do not be- come payable for more than one year after the provision is made must not exceed the present value of the liabil- ity. (2) Costs of insurance on the lives of trustees, officers, or other employees holding positions of similar responsi- bility are allowable only to the extent that the insurance represents addi- tional compensation. The costs of such insurance when the non-Federal entity is named as beneficiary are unallow- able. (3) Actual claims paid to or on behalf of employees or former employees for workers’ compensation, unemployment compensation, severance pay, and simi- lar employee benefits (e.g., post-retire- ment health benefits), are allowable in the year of payment provided that the non-Federal entity follows a consistent costing policy. (f) Automobiles. That portion of auto- mobile costs furnished by the non-Fed- eral entity that relates to personal use by employees (including transportation to and from work) is unallowable as fringe benefit or indirect (F&A) costs regardless of whether the cost is re- ported as taxable income to the em- ployees. (g) Pension plan costs. Pension plan costs which are incurred in accordance with the established policies of the non-Federal entity are allowable, pro- vided that: (1) Such policies meet the test of rea- sonableness. (2) The methods of cost allocation are not discriminatory. (3) Except for State and Local Gov- ernments, the cost assigned to each fis- cal year should be determined in ac- cordance with GAAP. (4) The costs assigned to a given fis- cal year are funded for all plan partici- pants within six months after the end of that year. However, increases to nor- mal and past service pension costs caused by a delay in funding the actu- arial liability beyond 30 calendar days after each quarter of the year to which such costs are assignable are unallow- able. Non-Federal entity may elect to follow the ‘‘Cost Accounting Standard for Composition and Measurement of Pension Costs’’ (48 CFR 9904.412). (5) Pension plan termination insur- ance premiums paid pursuant to the Employee Retirement Income Security Act (ERISA) of 1974 (29 U.S.C. 1301–1461) are allowable. Late payment charges on such premiums are unallowable. Ex- cise taxes on accumulated funding defi- ciencies and other penalties imposed under ERISA are unallowable. (6) Pension plan costs may be com- puted using a pay-as-you-go method or an acceptable actuarial cost method in accordance with established written policies of the non-Federal entity. (i) For pension plans financed on a pay-as-you-go method, allowable costs will be limited to those representing actual payments to retirees or their beneficiaries. (ii) Pension costs calculated using an actuarial cost-based method recognized by GAAP are allowable for a given fis- cal year if they are funded for that year within six months after the end of that year. Costs funded after the six- month period (or a later period agreed to by the cognizant agency for indirect costs) are allowable in the year funded. The cognizant agency for indirect costs may agree to an extension of the six- month period if an appropriate adjust- ment is made to compensate for the timing of the charges to the Federal Government and related Federal reim- bursement and the non-Federal enti- ty’s contribution to the pension fund. Adjustments may be made by cash re- fund or other equitable procedures to compensate the Federal Government 171 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00183 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 376§ 200.431 for the time value of Federal reim- bursements in excess of contributions to the pension fund. (iii) Amounts funded by the non-Fed- eral entity in excess of the actuarially determined amount for a fiscal year may be used as the non-Federal enti- ty’s contribution in future periods. (iv) When a non-Federal entity con- verts to an acceptable actuarial cost method, as defined by GAAP, and funds pension costs in accordance with this method, the unfunded liability at the time of conversion is allowable if am- ortized over a period of years in accord- ance with GAAP. (v) The Federal Government must re- ceive an equitable share of any pre- viously allowed pension costs (includ- ing earnings thereon) which revert or inure to the non-Federal entity in the form of a refund, withdrawal, or other credit. (h) Post-retirement health. Post-retire- ment health plans (PRHP) refers to costs of health insurance or health services not included in a pension plan covered by paragraph (g) of this section for retirees and their spouses, depend- ents, and survivors. PRHP costs may be computed using a pay-as-you-go method or an acceptable actuarial cost method in accordance with established written policies of the non-Federal en- tity. (1) For PRHP financed on a pay-as- you-go method, allowable costs will be limited to those representing actual payments to retirees or their bene- ficiaries. (2) PRHP costs calculated using an actuarial cost method recognized by GAAP are allowable if they are funded for that year within six months after the end of that year. Costs funded after the six-month period (or a later period agreed to by the cognizant agency) are allowable in the year funded. The Fed- eral cognizant agency for indirect costs may agree to an extension of the six- month period if an appropriate adjust- ment is made to compensate for the timing of the charges to the Federal Government and related Federal reim- bursements and the non-Federal enti- ty’s contributions to the PRHP fund. Adjustments may be made by cash re- fund, reduction in current year’s PRHP costs, or other equitable procedures to 2 CFR Ch. II (1–1–21 Edition) compensate the Federal Government for the time value of Federal reim- bursements in excess of contributions to the PRHP fund. (3) Amounts funded in excess of the actuarially determined amount for a fiscal year may be used as the non-Fed- eral entity contribution in a future pe- riod. (4) When a non-Federal entity con- verts to an acceptable actuarial cost method and funds PRHP costs in ac- cordance with this method, the initial unfunded liability attributable to prior years is allowable if amortized over a period of years in accordance with GAAP, or, if no such GAAP period ex- ists, over a period negotiated with the cognizant agency for indirect costs. (5) To be allowable in the current year, the PRHP costs must be paid ei- ther to: (i) An insurer or other benefit pro- vider as current year costs or pre- miums, or (ii) An insurer or trustee to maintain a trust fund or reserve for the sole pur- pose of providing post-retirement bene- fits to retirees and other beneficiaries. (6) The Federal Government must re- ceive an equitable share of any amounts of previously allowed post-re- tirement benefit costs (including earn- ings thereon) which revert or inure to the non-Federal entity in the form of a refund, withdrawal, or other credit. (i) Severance pay. (1) Severance pay, also commonly referred to as dismissal wages, is a payment in addition to reg- ular salaries and wages, by non-Federal entities to workers whose employment is being terminated. Costs of severance pay are allowable only to the extent that in each case, it is required by (i) Law; (ii) Employer-employee agreement; (iii) Established policy that con- stitutes, in effect, an implied agree- ment on the non-Federal entity’s part; or (iv) Circumstances of the particular employment. (2) Costs of severance payments are divided into two categories as follows: (i) Actual normal turnover severance payments must be allocated to all ac- tivities; or, where the non-Federal en- tity provides for a reserve for normal 172 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00184 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 377OMB Guidance § 200.432 severances, such method will be ac- ceptable if the charge to current oper- ations is reasonable in light of pay- ments actually made for normal severances over a representative past period, and if amounts charged are al- located to all activities of the non-Fed- eral entity. (ii) Measurement of costs of abnor- mal or mass severance pay by means of an accrual will not achieve equity to both parties. Thus, accruals for this purpose are not allowable. However, the Federal Government recognizes its responsibility to participate, to the ex- tent of its fair share, in any specific payment. Prior approval by the Fed- eral awarding agency or cognizant agency for indirect cost, as appro- priate, is required. (3) Costs incurred in certain sever- ance pay packages which are in an amount in excess of the normal sever- ance pay paid by the non-Federal enti- ty to an employee upon termination of employment and are paid to the em- ployee contingent upon a change in management control over, or owner- ship of, the non-Federal entity’s assets, are unallowable. (4) Severance payments to foreign na- tionals employed by the non-Federal entity outside the United States, to the extent that the amount exceeds the customary or prevailing practices for the non-Federal entity in the United States, are unallowable, unless they are necessary for the performance of Federal programs and approved by the Federal awarding agency. (5) Severance payments to foreign na- tionals employed by the non-Federal entity outside the United States due to the termination of the foreign national as a result of the closing of, or curtail- ment of activities by, the non-Federal entity in that country, are unallow- able, unless they are necessary for the performance of Federal programs and approved by the Federal awarding agency. (j) For IHEs only. (1) Fringe benefits in the form of undergraduate and grad- uate tuition or remission of tuition for individual employees are allowable, provided such benefits are granted in accordance with established non-Fed- eral entity policies, and are distributed to all non-Federal entity activities on an equitable basis. Tuition benefits for family members other than the em- ployee are unallowable. (2) Fringe benefits in the form of tui- tion or remission of tuition for indi- vidual employees not employed by IHEs are limited to the tax-free amount allowed per section 127 of the Internal Revenue Code as amended. (3) IHEs may offer employees tuition waivers or tuition reductions, provided that the benefit does not discriminate in favor of highly compensated employ- ees. Employees can exercise these ben- efits at other institutions according to institutional policy. See §200.466, for treatment of tuition remission pro- vided to students. (k) Fringe benefit programs and other benefit costs. For IHEs whose costs are paid by state or local governments, fringe benefit programs (such as pen- sion costs and FICA) and any other benefits costs specifically incurred on behalf of, and in direct benefit to, the non-Federal entity, are allowable costs of such non-Federal entities whether or not these costs are recorded in the ac- counting records of the non-Federal en- tities, subject to the following: (1) The costs meet the requirements of Basic Considerations in §§200.402 through 200.411; (2) The costs are properly supported by approved cost allocation plans in ac- cordance with applicable Federal cost accounting principles; and (3) The costs are not otherwise borne directly or indirectly by the Federal Government. [85 FR 49565, Aug. 13, 2020] § 200.432 Conferences. A conference is defined as a meeting, retreat, seminar, symposium, work- shop or event whose primary purpose is the dissemination of technical infor- mation beyond the non-Federal entity and is necessary and reasonable for successful performance under the Fed- eral award. Allowable conference costs paid by the non-Federal entity as a sponsor or host of the conference may include rental of facilities, speakers’ fees, costs of meals and refreshments, local transportation, and other items incidental to such conferences unless further restricted by the terms and conditions of the Federal award. As 173 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00185 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 378§ 200.433 needed, the costs of identifying, but not providing, locally available depend- ent-care resources are allowable. Con- ference hosts/sponsors must exercise discretion and judgment in ensuring that conference costs are appropriate, necessary and managed in a manner that minimizes costs to the Federal award. The Federal awarding agency may authorize exceptions where appro- priate for programs including Indian tribes, children, and the elderly. See also §§200.438, 200.456, and 200.475. [85 FR 49567, Aug. 13, 2020] § 200.433 Contingency provisions. (a) Contingency is that part of a budget estimate of future costs (typi- cally of large construction projects, IT systems, or other items as approved by the Federal awarding agency) which is associated with possible events or con- ditions arising from causes the precise outcome of which is indeterminable at the time of estimate, and that experi- ence shows will likely result, in aggre- gate, in additional costs for the ap- proved activity or project. Amounts for major project scope changes, unfore- seen risks, or extraordinary events may not be included. (b) It is permissible for contingency amounts other than those excluded in paragraph (a) of this section to be ex- plicitly included in budget estimates, to the extent they are necessary to im- prove the precision of those estimates. Amounts must be estimated using broadly-accepted cost estimating methodologies, specified in the budget documentation of the Federal award, and accepted by the Federal awarding agency. As such, contingency amounts are to be included in the Federal award. In order for actual costs in- curred to be allowable, they must com- ply with the cost principles and other requirements in this part (see also §§200.300 and 200.403 of this part); be necessary and reasonable for proper and efficient accomplishment of project or program objectives, and be verifiable from the non-Federal enti- ty’s records. (c) Payments made by the Federal awarding agency to the non-Federal entity’s ‘‘contingency reserve’’ or any similar payment made for events the occurrence of which cannot be foretold 2 CFR Ch. II (1–1–21 Edition) with certainty as to the time or inten- sity, or with an assurance of their hap- pening, are unallowable, except as noted in §§200.431 and 200.447. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49567, Aug. 13, 2020] § 200.434 Contributions and donations. (a) Costs of contributions and dona- tions, including cash, property, and services, from the non-Federal entity to other entities, are unallowable. (b) It is permissible for contingency amounts other than those excluded in paragraph (a) of this section to be ex- plicitly included in budget estimates, to the extent they are necessary to im- prove the precision of those estimates. Amounts must be estimated using broadly-accepted cost estimating methodologies, specified in the budget documentation of the Federal award, and accepted by the Federal awarding agency. As such, contingency amounts are to be included in the Federal award. In order for actual costs in- curred to be allowable, they must com- ply with the cost principles and other requirements in this part (see also §§200.300 and 200.403 of this part); be necessary and reasonable for proper and efficient accomplishment of project or program objectives, and be verifiable from the non-Federal enti- ty’s records. (c) Payments made by the Federal awarding agency to the non-Federal entity’s ‘‘contingency reserve’’ or any similar payment made for events the occurrence of which cannot be foretold with certainty as to the time or inten- sity, or with an assurance of their hap- pening, are unallowable, except as noted in §§200.431 and 200.447. (d) To the extent feasible, services donated to the non-Federal entity will be supported by the same methods used to support the allocability of regular personnel services. (e) The following provisions apply to nonprofit organizations. The value of services donated to the nonprofit orga- nization utilized in the performance of a direct cost activity must be consid- ered in the determination of the non- Federal entity’s indirect cost rate(s) and, accordingly, must be allocated a 174 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00186 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 379OMB Guidance § 200.435 proportionate share of applicable indi- rect costs when the following cir- cumstances exist: (1) The aggregate value of the serv- ices is material; (2) The services are supported by a significant amount of the indirect costs incurred by the non-Federal enti- ty; (i) In those instances where there is no basis for determining the fair mar- ket value of the services rendered, the non-Federal entity and the cognizant agency for indirect costs must nego- tiate an appropriate allocation of indi- rect cost to the services. (ii) Where donated services directly benefit a project supported by the Fed- eral award, the indirect costs allocated to the services will be considered as a part of the total costs of the project. Such indirect costs may be reimbursed under the Federal award or used to meet cost sharing or matching require- ments. (f) Fair market value of donated services must be computed as described in §200.306. (g) Personal Property and Use of Space. (1) Donated personal property and use of space may be furnished to a non- Federal entity. The value of the per- sonal property and space may not be charged to the Federal award either as a direct or indirect cost. (2) The value of the donations may be used to meet cost sharing or matching share requirements under the condi- tions described in §200.300 of this part. The value of the donations must be de- termined in accordance with §200.300. Where donations are treated as indirect costs, indirect cost rates will separate the value of the donations so that re- imbursement will not be made. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49567, Aug. 13, 2020] § 200.435 Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringe- ments. (a) Definitions for the purposes of this section. (1) Conviction means a judgment or conviction of a criminal offense by any court of competent jurisdiction, whether entered upon verdict or a plea, including a conviction due to a plea of nolo contendere. (2) Costs include the services of in- house or private counsel, accountants, consultants, or others engaged to as- sist the non-Federal entity before, dur- ing, and after commencement of a judi- cial or administrative proceeding, that bear a direct relationship to the pro- ceeding. (3) Fraud means: (i) Acts of fraud or corruption or at- tempts to defraud the Federal Govern- ment or to corrupt its agents, (ii) Acts that constitute a cause for debarment or suspension (as specified in agency regulations), and (iii) Acts which violate the False Claims Act (31 U.S.C. 3729–3732) or the Anti-kickback Act (41 U.S.C. 1320a– 7b(b)). (4) Penalty does not include restitu- tion, reimbursement, or compensatory damages. (5) Proceeding includes an investiga- tion. (b) Costs. (1) Except as otherwise de- scribed herein, costs incurred in con- nection with any criminal, civil or ad- ministrative proceeding (including fil- ing of a false certification) commenced by the Federal Government, a state, local government, or foreign govern- ment, or joined by the Federal Govern- ment (including a proceeding under the False Claims Act), against the non- Federal entity, (or commenced by third parties or a current or former em- ployee of the non-Federal entity who submits a whistleblower complaint of reprisal in accordance with 10 U.S.C. 2409 or 41 U.S.C. 4712), are not allowable if the proceeding: (i) Relates to a violation of, or failure to comply with, a Federal, state, local or foreign statute, regulation or the terms and conditions of the Federal award, by the non-Federal entity (in- cluding its agents and employees); and (ii) Results in any of the following dispositions: (A) In a criminal proceeding, a con- viction. (B) In a civil or administrative pro- ceeding involving an allegation of fraud or similar misconduct, a deter- mination of non-Federal entity liabil- ity. 175 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00187 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 380§ 200.435 (C) In the case of any civil or admin- istrative proceeding, the disallowance of costs or the imposition of a mone- tary penalty, or an order issued by the Federal awarding agency head or dele- gate to the non-Federal entity to take corrective action under 10 U.S.C. 2409 or 41 U.S.C. 4712. (D) A final decision by an appropriate Federal official to debar or suspend the non-Federal entity, to rescind or void a Federal award, or to terminate a Fed- eral award by reason of a violation or failure to comply with a statute, regu- lation, or the terms and conditions of the Federal award. (E) A disposition by consent or com- promise, if the action could have re- sulted in any of the dispositions de- scribed in paragraphs (b)(1)(ii)(A) through (D) of this section. (2) If more than one proceeding in- volves the same alleged misconduct, the costs of all such proceedings are unallowable if any results in one of the dispositions shown in paragraph (b) of this section. (c) If a proceeding referred to in para- graph (b) of this section is commenced by the Federal Government and is re- solved by consent or compromise pur- suant to an agreement by the non-Fed- eral entity and the Federal Govern- ment, then the costs incurred may be allowed to the extent specifically pro- vided in such agreement. (d) If a proceeding referred to in para- graph (b) of this section is commenced by a state, local or foreign government, the authorized Federal official may allow the costs incurred if such author- ized official determines that the costs were incurred as a result of: (1) A specific term or condition of the Federal award, or (2) Specific written direction of an authorized official of the Federal awarding agency. (e) Costs incurred in connection with proceedings described in paragraph (b) of this section, which are not made un- allowable by that subsection, may be allowed but only to the extent that: (1) The costs are reasonable and nec- essary in relation to the administra- tion of the Federal award and activi- ties required to deal with the pro- ceeding and the underlying cause of ac- tion; 2 CFR Ch. II (1–1–21 Edition) (2) Payment of the reasonable, nec- essary, allocable and otherwise allow- able costs incurred is not prohibited by any other provision(s) of the Federal award; (3) The costs are not recovered from the Federal Government or a third party, either directly as a result of the proceeding or otherwise; and, (4) An authorized Federal official must determine the percentage of costs allowed considering the complexity of litigation, generally accepted prin- ciples governing the award of legal fees in civil actions involving the United States, and such other factors as may be appropriate. Such percentage must not exceed 80 percent. However, if an agreement reached under paragraph (c) of this section has explicitly consid- ered this 80 percent limitation and per- mitted a higher percentage, then the full amount of costs resulting from that agreement are allowable. (f) Costs incurred by the non-Federal entity in connection with the defense of suits brought by its employees or ex- employees under section 2 of the Major Fraud Act of 1988 (18 U.S.C. 1031), in- cluding the cost of all relief necessary to make such employee whole, where the non-Federal entity was found liable or settled, are unallowable. (g) Costs of prosecution of claims against the Federal Government, in- cluding appeals of final Federal agency decisions, are unallowable. (h) Costs of legal, accounting, and consultant services, and related costs, incurred in connection with patent in- fringement litigation, are unallowable unless otherwise provided for in the Federal award. (i) Costs which may be unallowable under this section, including directly associated costs, must be segregated and accounted for separately. During the pendency of any proceeding covered by paragraphs (b) and (f) of this sec- tion, the Federal Government must generally withhold payment of such costs. However, if in its best interests, the Federal Government may provide for conditional payment upon provision of adequate security, or other adequate assurance, and agreement to repay all unallowable costs, plus interest, if the 176 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00188 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 381OMB Guidance § 200.436 costs are subsequently determined to be unallowable. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014] § 200.436 Depreciation. (a) Depreciation is the method for al- locating the cost of fixed assets to peri- ods benefitting from asset use. The non-Federal entity may be com- pensated for the use of its buildings, capital improvements, equipment, and software projects capitalized in accord- ance with GAAP, provided that they are used, needed in the non-Federal en- tity’s activities, and properly allocated to Federal awards. Such compensation must be made by computing deprecia- tion. (b) The allocation for depreciation must be made in accordance with Ap- pendices III through IX. (c) Depreciation is computed apply- ing the following rules. The computa- tion of depreciation must be based on the acquisition cost of the assets in- volved. For an asset donated to the non-Federal entity by a third party, its fair market value at the time of the do- nation must be considered as the acqui- sition cost. Such assets may be depre- ciated or claimed as matching but not both. For the computation of deprecia- tion, the acquisition cost will exclude: (1) The cost of land; (2) Any portion of the cost of build- ings and equipment borne by or do- nated by the Federal Government, irre- spective of where title was originally vested or where it is presently located; (3) Any portion of the cost of build- ings and equipment contributed by or for the non-Federal entity that are al- ready claimed as matching or where law or agreement prohibits recovery; (4) Any asset acquired solely for the performance of a non-Federal award; and (d) When computing depreciation charges, the following must be ob- served: (1) The period of useful service or useful life established in each case for usable capital assets must take into consideration such factors as type of construction, nature of the equipment, technological developments in the par- ticular area, historical data, and the renewal and replacement policies fol- lowed for the individual items or class- es of assets involved. (2) The depreciation method used to charge the cost of an asset (or group of assets) to accounting periods must re- flect the pattern of consumption of the asset during its useful life. In the ab- sence of clear evidence indicating that the expected consumption of the asset will be significantly greater in the early portions than in the later por- tions of its useful life, the straight-line method must be presumed to be the ap- propriate method. Depreciation meth- ods once used may not be changed un- less approved in advance by the cog- nizant agency. The depreciation meth- ods used to calculate the depreciation amounts for indirect (F&A) rate pur- poses must be the same methods used by the non-Federal entity for its finan- cial statements. (3) The entire building, including the shell and all components, may be treat- ed as a single asset and depreciated over a single useful life. A building may also be divided into multiple com- ponents. Each component item may then be depreciated over its estimated useful life. The building components must be grouped into three general components of a building: building shell (including construction and de- sign costs), building services systems (e.g., elevators, HVAC, plumbing sys- tem and heating and air-conditioning system) and fixed equipment (e.g., sterilizers, casework, fume hoods, cold rooms and glassware/washers). In ex- ceptional cases, a cognizant agency may authorize a non-Federal entity to use more than these three groupings. When a non-Federal entity elects to de- preciate its buildings by its compo- nents, the same depreciation methods must be used for indirect (F&A) pur- poses and financial statements pur- poses, as described in paragraphs (d)(1) and (2) of this section. (4) No depreciation may be allowed on any assets that have outlived their depreciable lives. (5) Where the depreciation method is introduced to replace the use allow- ance method, depreciation must be computed as if the asset had been de- preciated over its entire life (i.e., from the date the asset was acquired and ready for use to the date of disposal or 177 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00189 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 382§ 200.437 withdrawal from service). The total amount of use allowance and deprecia- tion for an asset (including imputed de- preciation applicable to periods prior to the conversion from the use allow- ance method as well as depreciation after the conversion) may not exceed the total acquisition cost of the asset. (e) Charges for depreciation must be supported by adequate property records, and physical inventories must be taken at least once every two years to ensure that the assets exist and are usable, used, and needed. Statistical sampling techniques may be used in taking these inventories. In addition, adequate depreciation records showing the amount of depreciation must be maintained. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, 2020] § 200.437 Employee health and welfare costs. (a) Costs incurred in accordance with the non-Federal entity’s documented policies for the improvement of work- ing conditions, employer-employee re- lations, employee health, and employee performance are allowable. (b) Such costs will be equitably ap- portioned to all activities of the non- Federal entity. Income generated from any of these activities will be credited to the cost thereof unless such income has been irrevocably sent to employee welfare organizations. (c) Losses resulting from operating food services are allowable only if the non-Federal entity’s objective is to op- erate such services on a break-even basis. Losses sustained because of oper- ating objectives other than the above are allowable only: (1) Where the non-Federal entity can demonstrate unusual circumstances; and (2) With the approval of the cog- nizant agency for indirect costs. § 200.438 Entertainment costs. Costs of entertainment, including amusement, diversion, and social ac- tivities and any associated costs are unallowable, except where specific costs that might otherwise be consid- ered entertainment have a pro- grammatic purpose and are authorized 2 CFR Ch. II (1–1–21 Edition) either in the approved budget for the Federal award or with prior written ap- proval of the Federal awarding agency. § 200.439 Equipment and other capital expenditures. (a) See §200.1 for the definitions of capital expenditures, equipment, special purpose equipment, general purpose equipment, acquisition cost, and capital assets. (b) The following rules of allow- ability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, ex- cept with the prior written approval of the Federal awarding agency or pass- through entity. (2) Capital expenditures for special purpose equipment are allowable as di- rect costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through enti- ty. (3) Capital expenditures for improve- ments to land, buildings, or equipment which materially increase their value or useful life are unallowable as a di- rect cost except with the prior written approval of the Federal awarding agen- cy, or pass-through entity. See §200.436, for rules on the allowability of depre- ciation on buildings, capital improve- ments, and equipment. See also §200.465. (4) When approved as a direct charge pursuant to paragraphs (b)(1) through (3) of this section, capital expenditures will be charged in the period in which the expenditure is incurred, or as oth- erwise determined appropriate and ne- gotiated with the Federal awarding agency. (5) The unamortized portion of any equipment written off as a result of a change in capitalization levels may be recovered by continuing to claim the otherwise allowable depreciation on the equipment, or by amortizing the amount to be written off over a period of years negotiated with the Federal cognizant agency for indirect cost. (6) Cost of equipment disposal. If the non-Federal entity is instructed by the Federal awarding agency to otherwise dispose of or transfer the equipment 178 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00190 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 383OMB Guidance § 200.443 the costs of such disposal or transfer are allowable. (7) Equipment and other capital ex- penditures are unallowable as indirect costs. See §200.436. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, 2020] § 200.440 Exchange rates. (a) Cost increases for fluctuations in exchange rates are allowable costs sub- ject to the availability of funding. Prior approval of exchange rate fluc- tuations is required only when the change results in the need for addi- tional Federal funding, or the in- creased costs result in the need to sig- nificantly reduce the scope of the project. The Federal awarding agency must however ensure that adequate funds are available to cover currency fluctuations in order to avoid a viola- tion of the Anti-Deficiency Act. (b) The non-Federal entity is re- quired to make reviews of local cur- rency gains to determine the need for additional federal funding before the expiration date of the Federal award. Subsequent adjustments for currency increases may be allowable only when the non-Federal entity provides the Federal awarding agency with ade- quate source documentation from a commonly used source in effect at the time the expense was made, and to the extent that sufficient Federal funds are available. § 200.442 Fund raising and investment management costs. (a) Costs of organized fund raising, including financial campaigns, endow- ment drives, solicitation of gifts and bequests, and similar expenses incurred to raise capital or obtain contributions are unallowable. Fund raising costs for the purposes of meeting the Federal program objectives are allowable with prior written approval from the Fed- eral awarding agency. Proposal costs are covered in §200.460. (b) Costs of investment counsel and staff and similar expenses incurred to enhance income from investments are unallowable except when associated with investments covering pension, self-insurance, or other funds which in- clude Federal participation allowed by this part. (c) Costs related to the physical cus- tody and control of monies and securi- ties are allowable. (d) Both allowable and unallowable fund-raising and investment activities must be allocated as an appropriate share of indirect costs under the condi- tions described in §200.413. [85 FR 49568, Aug. 13, 2020] [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014] § 200.441 Fines, penalties, damages and other settlements. Costs resulting from non-Federal en- tity violations of, alleged violations of, or failure to comply with, Federal, state, tribal, local or foreign laws and regulations are unallowable, except when incurred as a result of compli- ance with specific provisions of the Federal award, or with prior written approval of the Federal awarding agen- cy. See also §200.435. [85 FR 49568, Aug. 13, 2020] § 200.443 Gains and losses on disposi- tion of depreciable assets. (a) Gains and losses on the sale, re- tirement, or other disposition of depre- ciable property must be included in the year in which they occur as credits or charges to the asset cost grouping(s) in which the property was included. The amount of the gain or loss to be in- cluded as a credit or charge to the ap- propriate asset cost grouping(s) is the difference between the amount realized on the property and the undepreciated basis of the property. (b) Gains and losses from the disposi- tion of depreciable property must not be recognized as a separate credit or charge under the following conditions: (1) The gain or loss is processed through a depreciation account and is reflected in the depreciation allowable under §§200.436 and 200.439. (2) The property is given in exchange as part of the purchase price of a simi- lar item and the gain or loss is taken into account in determining the depre- ciation cost basis of the new item. 179 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00191 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 384§ 200.444 (3) A loss results from the failure to maintain permissible insurance, except as otherwise provided in §200.447. (4) Compensation for the use of the property was provided through use al- lowances in lieu of depreciation. (5) Gains and losses arising from mass or extraordinary sales, retire- ments, or other dispositions must be considered on a case-by-case basis. (c) Gains or losses of any nature aris- ing from the sale or exchange of prop- erty other than the property covered in paragraph (a) of this section, e.g., land, must be excluded in computing Federal award costs. (d) When assets acquired with Fed- eral funds, in part or wholly, are dis- posed of, the distribution of the pro- ceeds must be made in accordance with §§200.310 through 200.316 of this part. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, 2020] § 200.444 General costs of government. (a) For states, local governments, and Indian Tribes, the general costs of government are unallowable (except as provided in §200.475). Unallowable costs include: (1) Salaries and expenses of the Office of the Governor of a state or the chief executive of a local government or the chief executive of an Indian tribe; (2) Salaries and other expenses of a state legislature, tribal council, or similar local governmental body, such as a county supervisor, city council, school board, etc., whether incurred for purposes of legislation or executive di- rection; (3) Costs of the judicial branch of a government; (4) Costs of prosecutorial activities unless treated as a direct cost to a spe- cific program if authorized by statute or regulation (however, this does not preclude the allowability of other legal activities of the Attorney General as described in §200.435); and (5) Costs of other general types of government services normally provided to the general public, such as fire and police, unless provided for as a direct cost under a program statute or regula- tion. (b) For Indian tribes and Councils of Governments (COGs) (see definition for 2 CFR Ch. II (1–1–21 Edition) Local government in §200.1 of this part), up to 50% of salaries and expenses di- rectly attributable to managing and operating Federal programs by the chief executive and his or her staff can be included in the indirect cost cal- culation without documentation. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, 2020] § 200.445 Goods or services for per- sonal use. (a) Costs of goods or services for per- sonal use of the non-Federal entity’s employees are unallowable regardless of whether the cost is reported as tax- able income to the employees. (b) Costs of housing (e.g., deprecia- tion, maintenance, utilities, fur- nishings, rent), housing allowances and personal living expenses are only al- lowable as direct costs regardless of whether reported as taxable income to the employees. In addition, to be allow- able direct costs must be approved in advance by a Federal awarding agency. § 200.446 Idle facilities and idle capac- ity. (a) As used in this section the fol- lowing terms have the meanings set forth in this section: (1) Facilities means land and build- ings or any portion thereof, equipment individually or collectively, or any other tangible capital asset, wherever located, and whether owned or leased by the non-Federal entity. (2) Idle facilities means completely unused facilities that are excess to the non-Federal entity’s current needs. (3) Idle capacity means the unused capacity of partially used facilities. It is the difference between: (i) That which a facility could achieve under 100 percent operating time on a one-shift basis less operating interruptions resulting from time lost for repairs, setups, unsatisfactory ma- terials, and other normal delays and; (ii) The extent to which the facility was actually used to meet demands during the accounting period. A multi- shift basis should be used if it can be shown that this amount of usage would normally be expected for the type of fa- cility involved. 180 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00192 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 385OMB Guidance § 200.447 (4) Cost of idle facilities or idle ca- pacity means costs such as mainte- nance, repair, housing, rent, and other related costs, e.g., insurance, interest, and depreciation. These costs could in- clude the costs of idle public safety emergency facilities, telecommuni- cations, or information technology sys- tem capacity that is built to withstand major fluctuations in load, e.g., con- solidated data centers. (b) The costs of idle facilities are un- allowable except to the extent that: (1) They are necessary to meet work- load requirements which may fluctuate and are allocated appropriately to all benefiting programs; or (2) Although not necessary to meet fluctuations in workload, they were necessary when acquired and are now idle because of changes in program re- quirements, efforts to achieve more ec- onomical operations, reorganization, termination, or other causes which could not have been reasonably fore- seen. Under the exception stated in this subsection, costs of idle facilities are allowable for a reasonable period of time, ordinarily not to exceed one year, depending on the initiative taken to use, lease, or dispose of such facili- ties. (c) The costs of idle capacity are nor- mal costs of doing business and are a factor in the normal fluctuations of usage or indirect cost rates from period to period. Such costs are allowable, provided that the capacity is reason- ably anticipated to be necessary to carry out the purpose of the Federal award or was originally reasonable and is not subject to reduction or elimi- nation by use on other Federal awards, subletting, renting, or sale, in accord- ance with sound business, economic, or security practices. Widespread idle ca- pacity throughout an entire facility or among a group of assets having sub- stantially the same function may be considered idle facilities. § 200.447 Insurance and indemnifica- tion. (a) Costs of insurance required or ap- proved and maintained, pursuant to the Federal award, are allowable. (b) Costs of other insurance in con- nection with the general conduct of ac- tivities are allowable subject to the following limitations: (1) Types and extent and cost of cov- erage are in accordance with the non- Federal entity’s policy and sound busi- ness practice. (2) Costs of insurance or of contribu- tions to any reserve covering the risk of loss of, or damage to, Federal Gov- ernment property are unallowable ex- cept to the extent that the Federal awarding agency has specifically re- quired or approved such costs. (3) Costs allowed for business inter- ruption or other similar insurance must exclude coverage of management fees. (4) Costs of insurance on the lives of trustees, officers, or other employees holding positions of similar respon- sibilities are allowable only to the ex- tent that the insurance represents ad- ditional compensation (see §200.431). The cost of such insurance when the non-Federal entity is identified as the beneficiary is unallowable. (5) Insurance against defects. Costs of insurance with respect to any costs in- curred to correct defects in the non- Federal entity’s materials or work- manship are unallowable. (6) Medical liability (malpractice) in- surance. Medical liability insurance is an allowable cost of Federal research programs only to the extent that the Federal research programs involve human subjects or training of partici- pants in research techniques. Medical liability insurance costs must be treat- ed as a direct cost and must be as- signed to individual projects based on the manner in which the insurer allo- cates the risk to the population cov- ered by the insurance. (c) Actual losses which could have been covered by permissible insurance (through a self-insurance program or otherwise) are unallowable, unless ex- pressly provided for in the Federal award. However, costs incurred because of losses not covered under nominal de- ductible insurance coverage provided in keeping with sound management practice, and minor losses not covered by insurance, such as spoilage, break- age, and disappearance of small hand tools, which occur in the ordinary course of operations, are allowable. 181 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00193 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 386§ 200.448 (d) Contributions to a reserve for cer- tain self-insurance programs including workers’ compensation, unemployment compensation, and severance pay are allowable subject to the following pro- visions: (1) The type of coverage and the ex- tent of coverage and the rates and pre- miums would have been allowed had in- surance (including reinsurance) been purchased to cover the risks. However, provision for known or reasonably esti- mated self-insured liabilities, which do not become payable for more than one year after the provision is made, must not exceed the discounted present value of the liability. The rate used for discounting the liability must be deter- mined by giving consideration to such factors as the non-Federal entity’s set- tlement rate for those liabilities and its investment rate of return. (2) Earnings or investment income on reserves must be credited to those re- serves. (3)(i) Contributions to reserves must be based on sound actuarial principles using historical experience and reason- able assumptions. Reserve levels must be analyzed and updated at least bien- nially for each major risk being in- sured and take into account any rein- surance, coinsurance, etc. Reserve lev- els related to employee-related cov- erages will normally be limited to the value of claims: (A) Submitted and adjudicated but not paid; (B) Submitted but not adjudicated; and (C) Incurred but not submitted. (ii) Reserve levels in excess of the amounts based on the above must be identified and justified in the cost allo- cation plan or indirect cost rate pro- posal. (4) Accounting records, actuarial studies, and cost allocations (or bil- lings) must recognize any significant differences due to types of insured risk and losses generated by the various in- sured activities or agencies of the non- Federal entity. If individual depart- ments or agencies of the non-Federal entity experience significantly dif- ferent levels of claims for a particular risk, those differences are to be recog- nized by the use of separate allocations 2 CFR Ch. II (1–1–21 Edition) or other techniques resulting in an eq- uitable allocation. (5) Whenever funds are transferred from a self-insurance reserve to other accounts (e.g., general fund or unre- stricted account), refunds must be made to the Federal Government for its share of funds transferred, including earned or imputed interest from the date of transfer and debt interest, if ap- plicable, chargeable in accordance with applicable Federal cognizant agency for indirect cost, claims collection reg- ulations. (e) Insurance refunds must be cred- ited against insurance costs in the year the refund is received. (f) Indemnification includes securing the non-Federal entity against liabil- ities to third persons and other losses not compensated by insurance or oth- erwise. The Federal Government is ob- ligated to indemnify the non-Federal entity only to the extent expressly pro- vided for in the Federal award, except as provided in paragraph (c) of this sec- tion. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49568, Aug. 13, 2020] § 200.448 Intellectual property. (a) Patent costs. (1) The following costs related to securing patents and copyrights are allowable: (i) Costs of preparing disclosures, re- ports, and other documents required by the Federal award, and of searching the art to the extent necessary to make such disclosures; (ii) Costs of preparing documents and any other patent costs in connection with the filing and prosecution of a United States patent application where title or royalty-free license is required by the Federal Government to be con- veyed to the Federal Government; and (iii) General counseling services re- lating to patent and copyright matters, such as advice on patent and copyright laws, regulations, clauses, and em- ployee intellectual property agree- ments (See also §200.459). (2) The following costs related to se- curing patents and copyrights are unal- lowable: (i) Costs of preparing disclosures, re- ports, and other documents, and of searching the art to make disclosures not required by the Federal award; 182 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00194 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 387OMB Guidance § 200.449 (ii) Costs in connection with filing and prosecuting any foreign patent ap- plication, or any United States patent application, where the Federal award does not require conveying title or a royalty-free license to the Federal Government. (b) Royalties and other costs for use of patents and copyrights. (1) Royalties on a patent or copyright or amortization of the cost of acquiring by purchase a copyright, patent, or rights thereto, necessary for the proper performance of the Federal award are allowable un- less: (i) The Federal Government already has a license or the right to free use of the patent or copyright. (ii) The patent or copyright has been adjudicated to be invalid, or has been administratively determined to be in- valid. (iii) The patent or copyright is con- sidered to be unenforceable. (iv) The patent or copyright is ex- pired. (2) Special care should be exercised in determining reasonableness where the royalties may have been arrived at as a result of less-than-arm’s-length bar- gaining, such as: (i) Royalties paid to persons, includ- ing corporations, affiliated with the non-Federal entity. (ii) Royalties paid to unaffiliated parties, including corporations, under an agreement entered into in con- templation that a Federal award would be made. (iii) Royalties paid under an agree- ment entered into after a Federal award is made to a non-Federal entity. (3) In any case involving a patent or copyright formerly owned by the non- Federal entity, the amount of royalty allowed must not exceed the cost which would have been allowed had the non- Federal entity retained title thereto. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49569, Aug. 13, 2020] § 200.449 Interest. (a) General. Costs incurred for inter- est on borrowed capital, temporary use of endowment funds, or the use of the non-Federal entity’s own funds, how- ever represented, are unallowable. Fi- nancing costs (including interest) to acquire, construct, or replace capital assets are allowable, subject to the conditions in this section. (b) Capital assets. (1) Capital assets is defined as noted in §200.1 of this part. An asset cost includes (as applicable) acquisition costs, construction costs, and other costs capitalized in accord- ance with GAAP. (2) For non-Federal entity fiscal years beginning on or after January 1, 2016, intangible assets include patents and computer software. For software development projects, only interest at- tributable to the portion of the project costs capitalized in accordance with GAAP is allowable. (c) Conditions for all non-Federal enti- ties. (1) The non-Federal entity uses the capital assets in support of Federal awards; (2) The allowable asset costs to ac- quire facilities and equipment are lim- ited to a fair market value available to the non-Federal entity from an unre- lated (arm’s length) third party. (3) The non-Federal entity obtains the financing via an arm’s-length transaction (that is, a transaction with an unrelated third party); or claims re- imbursement of actual interest cost at a rate available via such a transaction. (4) The non-Federal entity limits claims for Federal reimbursement of interest costs to the least expensive al- ternative. For example, a lease con- tract that transfers ownership by the end of the contract may be determined less costly than purchasing through other types of debt financing, in which case reimbursement must be limited to the amount of interest determined if leasing had been used. (5) The non-Federal entity expenses or capitalizes allowable interest cost in accordance with GAAP. (6) Earnings generated by the invest- ment of borrowed funds pending their disbursement for the asset costs are used to offset the current period’s al- lowable interest cost, whether that cost is expensed or capitalized. Earn- ings subject to being reported to the Federal Internal Revenue Service under arbitrage requirements are ex- cludable. (7) The following conditions must apply to debt arrangements over $1 183 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00195 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 388§ 200.450 million to purchase or construct facili- ties, unless the non-Federal entity makes an initial equity contribution to the purchase of 25 percent or more. For this purpose, ‘‘initial equity contribu- tion’’ means the amount or value of contributions made by the non-Federal entity for the acquisition of facilities prior to occupancy. (i) The non-Federal entity must re- duce claims for reimbursement of in- terest cost by an amount equal to im- puted interest earnings on excess cash flow attributable to the portion of the facility used for Federal awards. (ii) The non-Federal entity must im- pute interest on excess cash flow as fol- lows: (A) Annually, the non-Federal entity must prepare a cumulative (from the inception of the project) report of monthly cash inflows and outflows, re- gardless of the funding source. For this purpose, inflows consist of Federal re- imbursement for depreciation, amorti- zation of capitalized construction in- terest, and annual interest cost. Out- flows consist of initial equity contribu- tions, debt principal payments (less the pro-rata share attributable to the cost of land), and interest payments. (B) To compute monthly cash inflows and outflows, the non-Federal entity must divide the annual amounts deter- mined in step (i) by the number of months in the year (usually 12) that the building is in service. (C) For any month in which cumu- lative cash inflows exceed cumulative outflows, interest must be calculated on the excess inflows for that month and be treated as a reduction to allow- able interest cost. The rate of interest to be used must be the three-month Treasury bill closing rate as of the last business day of that month. (8) Interest attributable to a fully de- preciated asset is unallowable. (d) Additional conditions for states, local governments and Indian tribes. For costs to be allowable, the non-Fed- eral entity must have incurred the in- terest costs for buildings after October 1, 1980, or for land and equipment after September 1, 1995. (1) The requirement to offset interest earned on borrowed funds against cur- rent allowable interest cost (paragraph 2 CFR Ch. II (1–1–21 Edition) (c)(5), above) also applies to earnings on debt service reserve funds. (2) The non-Federal entity will nego- tiate the amount of allowable interest cost related to the acquisition of facili- ties with asset costs of $1 million or more, as outlined in paragraph (c)(7) of this section. For this purpose, a non- Federal entity must consider only cash inflows and outflows attributable to that portion of the real property used for Federal awards. (e) Additional conditions for IHEs. For costs to be allowable, the IHE must have incurred the interest costs after July 1, 1982, in connection with acquisitions of capital assets that oc- curred after that date. (f) Additional condition for nonprofit organizations. For costs to be allow- able, the nonprofit organization in- curred the interest costs after Sep- tember 29, 1995, in connection with ac- quisitions of capital assets that oc- curred after that date. (g) The interest allowability provi- sions of this section do not apply to a nonprofit organization subject to ‘‘full coverage’’ under the Cost Accounting Standards (CAS), as defined at 48 CFR 9903.201–2(a). The non-Federal entity’s Federal awards are instead subject to CAS 414 (48 CFR 9904.414), ‘‘Cost of Money as an Element of the Cost of Fa- cilities Capital’’, and CAS 417 (48 CFR 9904.417), ‘‘Cost of Money as an Element of the Cost of Capital Assets Under Construction’’. [78 FR 78608, Dec. 26, 2013, as amended at 80 FR 54409, Sept. 10, 2015; 85 FR 49569, Aug. 13, 2020] § 200.450 Lobbying. (a) The cost of certain influencing ac- tivities associated with obtaining grants, contracts, or cooperative agree- ments, or loans is an unallowable cost. Lobbying with respect to certain grants, contracts, cooperative agree- ments, and loans is governed by rel- evant statutes, including among oth- ers, the provisions of 31 U.S.C. 1352, as well as the common rule, ‘‘New Re- strictions on Lobbying’’ published on February 26, 1990, including definitions, and the Office of Management and Budget ‘‘Governmentwide Guidance for New Restrictions on Lobbying’’ and no- tices published on December 20, 1989, 184 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00196 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 389OMB Guidance § 200.450 June 15, 1990, January 15, 1992, and Jan- uary 19, 1996. (b) Executive lobbying costs. Costs in- curred in attempting to improperly in- fluence either directly or indirectly, an employee or officer of the executive branch of the Federal Government to give consideration or to act regarding a Federal award or a regulatory matter are unallowable. Improper influence means any influence that induces or tends to induce a Federal employee or officer to give consideration or to act regarding a Federal award or regu- latory matter on any basis other than the merits of the matter. (c) In addition to the above, the fol- lowing restrictions are applicable to nonprofit organizations and IHEs: (1) Costs associated with the fol- lowing activities are unallowable: (i) Attempts to influence the out- comes of any Federal, state, or local election, referendum, initiative, or similar procedure, through in-kind or cash contributions, endorsements, pub- licity, or similar activity; (ii) Establishing, administering, con- tributing to, or paying the expenses of a political party, campaign, political action committee, or other organiza- tion established for the purpose of in- fluencing the outcomes of elections in the United States; (iii) Any attempt to influence: (A) The introduction of Federal or state legislation; (B) The enactment or modification of any pending Federal or state legisla- tion through communication with any member or employee of the Congress or state legislature (including efforts to influence state or local officials to en- gage in similar lobbying activity); (C) The enactment or modification of any pending Federal or state legisla- tion by preparing, distributing, or using publicity or propaganda, or by urging members of the general public, or any segment thereof, to contribute to or participate in any mass dem- onstration, march, rally, fund raising drive, lobbying campaign or letter writing or telephone campaign; or (D) Any government official or em- ployee in connection with a decision to sign or veto enrolled legislation; (iv) Legislative liaison activities, in- cluding attendance at legislative ses- sions or committee hearings, gathering information regarding legislation, and analyzing the effect of legislation, when such activities are carried on in support of or in knowing preparation for an effort to engage in unallowable lobbying. (2) The following activities are ex- cepted from the coverage of paragraph (c)(1) of this section: (i) Technical and factual presen- tations on topics directly related to the performance of a grant, contract, or other agreement (through hearing testimony, statements, or letters to the Congress or a state legislature, or subdivision, member, or cognizant staff member thereof), in response to a docu- mented request (including a Congres- sional Record notice requesting testi- mony or statements for the record at a regularly scheduled hearing) made by the non-Federal entity’s member of congress, legislative body or a subdivi- sion, or a cognizant staff member thereof, provided such information is readily obtainable and can be readily put in deliverable form, and further provided that costs under this section for travel, lodging or meals are unal- lowable unless incurred to offer testi- mony at a regularly scheduled Congres- sional hearing pursuant to a written request for such presentation made by the Chairman or Ranking Minority Member of the Committee or Sub- committee conducting such hearings; (ii) Any lobbying made unallowable by paragraph (c)(1)(iii) of this section to influence state legislation in order to directly reduce the cost, or to avoid material impairment of the non-Fed- eral entity’s authority to perform the grant, contract, or other agreement; or (iii) Any activity specifically author- ized by statute to be undertaken with funds from the Federal award. (iv) Any activity excepted from the definitions of ‘‘lobbying’’ or ‘‘influ- encing legislation’’ by the Internal Revenue Code provisions that require nonprofit organizations to limit their participation in direct and ‘‘grass roots’’ lobbying activities in order to retain their charitable deduction sta- tus and avoid punitive excise taxes, I.R.C. §§501(c)(3), 501(h), 4911(a), includ- ing: 185 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00197 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 390§ 200.451 (A) Nonpartisan analysis, study, or research reports; (B) Examinations and discussions of broad social, economic, and similar problems; and (C) Information provided upon re- quest by a legislator for technical ad- vice and assistance, as defined by I.R.C. §4911(d)(2) and 26 CFR 56.4911–2(c)(1)– (c)(3). (v) When a non-Federal entity seeks reimbursement for indirect (F&A) costs, total lobbying costs must be sep- arately identified in the indirect (F&A) cost rate proposal, and thereafter treated as other unallowable activity costs in accordance with the proce- dures of §200.413. (vi) The non-Federal entity must sub- mit as part of its annual indirect (F&A) cost rate proposal a certification that the requirements and standards of this section have been complied with. (See also §200.415.) (vii)(A) Time logs, calendars, or simi- lar records are not required to be cre- ated for purposes of complying with the record keeping requirements in §200.302 with respect to lobbying costs during any particular calendar month when: (1) The employee engages in lobbying (as defined in paragraphs (c)(1) and (c)(2) of this section) 25 percent or less of the employee’s compensated hours of employment during that calendar month; and (2) Within the preceding five-year pe- riod, the non-Federal entity has not materially misstated allowable or un- allowable costs of any nature, includ- ing legislative lobbying costs. (B) When conditions in paragraph (c)(2)(vii)(A)(1) and (2) of this section are met, non-Federal entities are not required to establish records to support the allowability of claimed costs in ad- dition to records already required or maintained. Also, when conditions in paragraphs (c)(2)(vii)(A)(1) and (2) of this section are met, the absence of time logs, calendars, or similar records will not serve as a basis for disallowing costs by contesting estimates of lob- bying time spent by employees during a calendar month. (viii) The Federal awarding agency must establish procedures for resolving in advance, in consultation with OMB, 2 CFR Ch. II (1–1–21 Edition) any significant questions or disagree- ments concerning the interpretation or application of this section. Any such advance resolutions must be binding in any subsequent settlements, audits, or investigations with respect to that grant or contract for purposes of inter- pretation of this part, provided, how- ever, that this must not be construed to prevent a contractor or non-Federal entity from contesting the lawfulness of such a determination. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020] § 200.451 Losses on other awards or contracts. Any excess of costs over income under any other award or contract of any nature is unallowable. This in- cludes, but is not limited to, the non- Federal entity’s contributed portion by reason of cost-sharing agreements or any under-recoveries through negotia- tion of flat amounts for indirect (F&A) costs. Also, any excess of costs over au- thorized funding levels transferred from any award or contract to another award or contract is unallowable. All losses are not allowable indirect (F&A) costs and are required to be included in the appropriate indirect cost rate base for allocation of indirect costs. § 200.452 Maintenance and repair costs. Costs incurred for utilities, insur- ance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise pro- vided for) which neither add to the per- manent value of the property nor ap- preciably prolong its intended life, but keep it in an efficient operating condi- tion, are allowable. Costs incurred for improvements which add to the perma- nent value of the buildings and equip- ment or appreciably prolong their in- tended life must be treated as capital expenditures (see §200.439). These costs are only allowable to the extent not paid through rental or other agree- ments. [85 FR 49569, Aug. 13, 2020] 186 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00198 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 391OMB Guidance § 200.458 § 200.453 Materials and supplies costs, including costs of computing de- vices. (a) Costs incurred for materials, sup- plies, and fabricated parts necessary to carry out a Federal award are allow- able. (b) Purchased materials and supplies must be charged at their actual prices, net of applicable credits. Withdrawals from general stores or stockrooms must be charged at their actual net cost under any recognized method of pricing inventory withdrawals, consist- ently applied. Incoming transportation charges are a proper part of materials and supplies costs. (c) Materials and supplies used for the performance of a Federal award may be charged as direct costs. In the specific case of computing devices, charging as direct costs is allowable for devices that are essential and allo- cable, but not solely dedicated, to the performance of a Federal award. (d) Where federally-donated or fur- nished materials are used in per- forming the Federal award, such mate- rials will be used without charge. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014] § 200.454 Memberships, subscriptions, and professional activity costs. (a) Costs of the non-Federal entity’s membership in business, technical, and professional organizations are allow- able. (b) Costs of the non-Federal entity’s subscriptions to business, professional, and technical periodicals are allowable. (c) Costs of membership in any civic or community organization are allow- able with prior approval by the Federal awarding agency or pass-through enti- ty. (d) Costs of membership in any coun- try club or social or dining club or or- ganization are unallowable. (e) Costs of membership in organiza- tions whose primary purpose is lob- bying are unallowable. See also §200.450. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020] § 200.455 Organization costs. Costs such as incorporation fees, bro- kers’ fees, fees to promoters, organizers or management consultants, attorneys, accountants, or investment counselor, whether or not employees of the non- Federal entity in connection with es- tablishment or reorganization of an or- ganization, are unallowable except with prior approval of the Federal awarding agency. § 200.456 Participant support costs. Participant support costs as defined in §200.1 are allowable with the prior approval of the Federal awarding agen- cy. [85 FR 49569, Aug. 13, 2020] § 200.457 Plant and security costs. Necessary and reasonable expenses incurred for protection and security of facilities, personnel, and work products are allowable. Such costs include, but are not limited to, wages and uniforms of personnel engaged in security activi- ties; equipment; barriers; protective (non-military) gear, devices, and equip- ment; contractual security services; and consultants. Capital expenditures for plant security purposes are subject to §200.439. [85 FR 49569, Aug. 13, 2020] § 200.458 Pre-award costs. Pre-award costs are those incurred prior to the effective date of the Fed- eral award or subaward directly pursu- ant to the negotiation and in anticipa- tion of the Federal award where such costs are necessary for efficient and timely performance of the scope of work. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal award- ing agency. If charged to the award, these costs must be charged to the ini- tial budget period of the award, unless otherwise specified by the Federal awarding agency or pass-through enti- ty. [85 FR 49569, Aug. 13, 2020] 187 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00199 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 392§ 200.459 § 200.459 Professional service costs. (a) Costs of professional and consult- ant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non- Federal entity, are allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contin- gent upon recovery of the costs from the Federal Government. In addition, legal and related services are limited under §200.435. (b) In determining the allowability of costs in a particular case, no single fac- tor or any special combination of fac- tors is necessarily determinative. How- ever, the following factors are relevant: (1) The nature and scope of the serv- ice rendered in relation to the service required. (2) The necessity of contracting for the service, considering the non-Fed- eral entity’s capability in the par- ticular area. (3) The past pattern of such costs, particularly in the years prior to Fed- eral awards. (4) The impact of Federal awards on the non-Federal entity’s business (i.e., what new problems have arisen). (5) Whether the proportion of Federal work to the non-Federal entity’s total business is such as to influence the non-Federal entity in favor of incur- ring the cost, particularly where the services rendered are not of a con- tinuing nature and have little relation- ship to work under Federal awards. (6) Whether the service can be per- formed more economically by direct employment rather than contracting. (7) The qualifications of the indi- vidual or concern rendering the service and the customary fees charged, espe- cially on non-federally funded activi- ties. (8) Adequacy of the contractual agreement for the service (e.g., descrip- tion of the service, estimate of time re- quired, rate of compensation, and ter- mination provisions). (c) In addition to the factors in para- graph (b) of this section, to be allow- able, retainer fees must be supported 2 CFR Ch. II (1–1–21 Edition) by evidence of bona fide services avail- able or rendered. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020] § 200.460 Proposal costs. Proposal costs are the costs of pre- paring bids, proposals, or applications on potential Federal and non-Federal awards or projects, including the devel- opment of data necessary to support the non-Federal entity’s bids or pro- posals. Proposal costs of the current accounting period of both successful and unsuccessful bids and proposals normally should be treated as indirect (F&A) costs and allocated currently to all activities of the non-Federal entity. No proposal costs of past accounting periods will be allocable to the current period. § 200.461 Publication and printing costs. (a) Publication costs for electronic and print media, including distribu- tion, promotion, and general handling are allowable. If these costs are not identifiable with a particular cost ob- jective, they should be allocated as in- direct costs to all benefiting activities of the non-Federal entity. (b) Page charges for professional journal publications are allowable where: (1) The publications report work sup- ported by the Federal Government; and (2) The charges are levied impartially on all items published by the journal, whether or not under a Federal award. (3) The non-Federal entity may charge the Federal award during close- out for the costs of publication or shar- ing of research results if the costs are not incurred during the period of per- formance of the Federal award. If charged to the award, these costs must be charged to the final budget period of the award, unless otherwise specified by the Federal awarding agency. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020] § 200.462 Rearrangement and recon- version costs. (a) Costs incurred for ordinary and normal rearrangement and alteration of facilities are allowable as indirect 188 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00200 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 393OMB Guidance § 200.464 costs. Special arrangements and alter- ations costs incurred specifically for a Federal award are allowable as a direct cost with the prior approval of the Fed- eral awarding agency or pass-through entity. (b) Costs incurred in the restoration or rehabilitation of the non-Federal en- tity’s facilities to approximately the same condition existing immediately prior to commencement of Federal awards, less costs related to normal wear and tear, are allowable. § 200.463 Recruiting costs. (a) Subject to paragraphs (b) and (c) of this section, and provided that the size of the staff recruited and main- tained is in keeping with workload re- quirements, costs of ‘‘help wanted’’ ad- vertising, operating costs of an em- ployment office necessary to secure and maintain an adequate staff, costs of operating an aptitude and edu- cational testing program, travel costs of employees while engaged in recruit- ing personnel, travel costs of appli- cants for interviews for prospective employment, and relocation costs in- curred incident to recruitment of new employees, are allowable to the extent that such costs are incurred pursuant to the non-Federal entity’s standard recruitment program. Where the non- Federal entity uses employment agen- cies, costs not in excess of standard commercial rates for such services are allowable. (b) Special emoluments, fringe bene- fits, and salary allowances incurred to attract professional personnel that do not meet the test of reasonableness or do not conform with the established practices of the non-Federal entity, are unallowable. (c) Where relocation costs incurred incident to recruitment of a new em- ployee have been funded in whole or in part to a Federal award, and the newly hired employee resigns for reasons within the employee’s control within 12 months after hire, the non-Federal en- tity will be required to refund or credit the Federal share of such relocation costs to the Federal Government. See also §200.464. (d) Short-term, travel visa costs (as opposed to longer-term, immigration visas) are generally allowable expenses that may be proposed as a direct cost. Since short-term visas are issued for a specific period and purpose, they can be clearly identified as directly connected to work performed on a Federal award. For these costs to be directly charged to a Federal award, they must: (1) Be critical and necessary for the conduct of the project; (2) Be allowable under the applicable cost principles; (3) Be consistent with the non-Fed- eral entity’s cost accounting practices and non-Federal entity policy; and (4) Meet the definition of ‘‘direct cost’’ as described in the applicable cost principles. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49569, Aug. 13, 2020] § 200.464 Relocation costs of employ- ees. (a) Relocation costs are costs inci- dent to the permanent change of duty assignment (for an indefinite period or for a stated period of not less than 12 months) of an existing employee or upon recruitment of a new employee. Relocation costs are allowable, subject to the limitations described in para- graphs (b), (c), and (d) of this section, provided that: (1) The move is for the benefit of the employer. (2) Reimbursement to the employee is in accordance with an established written policy consistently followed by the employer. (3) The reimbursement does not ex- ceed the employee’s actual (or reason- ably estimated) expenses. (b) Allowable relocation costs for current employees are limited to the following: (1) The costs of transportation of the employee, members of his or her imme- diate family and his household, and personal effects to the new location. (2) The costs of finding a new home, such as advance trips by employees and spouses to locate living quarters and temporary lodging during the transi- tion period, up to maximum period of 30 calendar days. (3) Closing costs, such as brokerage, legal, and appraisal fees, incident to the disposition of the employee’s former home. These costs, together 189 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00201 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 394§ 200.465 with those described in (4), are limited to 8 per cent of the sales price of the employee’s former home. (4) The continuing costs of ownership (for up to six months) of the vacant former home after the settlement or lease date of the employee’s new per- manent home, such as maintenance of buildings and grounds (exclusive of fix- ing-up expenses), utilities, taxes, and property insurance. (5) Other necessary and reasonable expenses normally incident to reloca- tion, such as the costs of canceling an unexpired lease, transportation of per- sonal property, and purchasing insur- ance against loss of or damages to per- sonal property. The cost of canceling an unexpired lease is limited to three times the monthly rental. (c) Allowable relocation costs for new employees are limited to those de- scribed in paragraphs (b)(1) and (2) of this section. When relocation costs in- curred incident to the recruitment of new employees have been charged to a Federal award and the employee re- signs for reasons within the employee’s control within 12 months after hire, the non-Federal entity must refund or credit the Federal Government for its share of the cost. If dependents are not permitted at the location for any rea- son and the costs do not include costs of transporting household goods, the costs of travel to an overseas location must be considered travel costs in ac- cordance with §200.474 Travel costs, and not this relocations costs of em- ployees (See also §200.464). (d) The following costs related to re- location are unallowable: (1) Fees and other costs associated with acquiring a new home. (2) A loss on the sale of a former home. (3) Continuing mortgage principal and interest payments on a home being sold. (4) Income taxes paid by an employee related to reimbursed relocation costs. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49570, Aug. 13, 2020] § 200.465 Rental costs of real property and equipment. (a) Subject to the limitations de- scribed in paragraphs (b) through (d) of 2 CFR Ch. II (1–1–21 Edition) this section, rental costs are allowable to the extent that the rates are reason- able in light of such factors as: rental costs of comparable property, if any; market conditions in the area; alter- natives available; and the type, life ex- pectancy, condition, and value of the property leased. Rental arrangements should be reviewed periodically to de- termine if circumstances have changed and other options are available. (b) Rental costs under ‘‘sale and lease back’’ arrangements are allowable only up to the amount that would be al- lowed had the non-Federal entity con- tinued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under ‘‘less-than- arm’s-length’’ leases are allowable only up to the amount (as explained in para- graph (b) of this section). For this pur- pose, a less-than-arm’s-length lease is one under which one party to the lease agreement is able to control or sub- stantially influence the actions of the other. Such leases include, but are not limited to those between: (1) Divisions of the non-Federal enti- ty; (2) The non-Federal entity under common control through common offi- cers, directors, or members; and (3) The non-Federal entity and a di- rector, trustee, officer, or key em- ployee of the non-Federal entity or an immediate family member, either di- rectly or through corporations, trusts, or similar arrangements in which they hold a controlling interest. For exam- ple, the non-Federal entity may estab- lish a separate corporation for the sole purpose of owning property and leasing it back to the non-Federal entity. (4) Family members include one party with any of the following rela- tionships to another party: (i) Spouse, and parents thereof; (ii) Children, and spouses thereof; (iii) Parents, and spouses thereof; (iv) Siblings, and spouses thereof; (v) Grandparents and grandchildren, and spouses thereof; (vi) Domestic partner and parents thereof, including domestic partners of any individual in 2 through 5 of this definition; and 190 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00202 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 395OMB Guidance § 200.466 (vii) Any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship. (5) Rental costs under leases which are required to be treated as capital leases under GAAP are allowable only up to the amount (as explained in para- graph (b) of this section) that would be allowed had the non-Federal entity purchased the property on the date the lease agreement was executed. The pro- visions of GAAP must be used to deter- mine whether a lease is a capital lease. Interest costs related to capital leases are allowable to the extent they meet the criteria in §200.449 Interest. Unal- lowable costs include amounts paid for profit, management fees, and taxes that would not have been incurred had the non-Federal entity purchased the property. (6) The rental of any property owned by any individuals or entities affiliated with the non-Federal entity, to include commercial or residential real estate, for purposes such as the home office workspace is unallowable. (d) Rental costs under leases which are required to be accounted for as a fi- nanced purchase under GASB stand- ards or a finance lease under FASB standards under GAAP are allowable only up to the amount (as explained in paragraph (b) of this section) that would be allowed had the non-Federal entity purchased the property on the date the lease agreement was executed. Interest costs related to these leases are allowable to the extent they meet the criteria in §200.449. Unallowable costs include amounts paid for profit, management fees, and taxes that would not have been incurred had the non- Federal entity purchased the property. (e) Rental or lease payments are al- lowable under lease contracts where the non-Federal entity is required to recognize an intangible right-to-use lease asset (per GASB) or right of use operating lease asset (per FASB) for purposes of financial reporting in ac- cordance with GAAP. (f) The rental of any property owned by any individuals or entities affiliated with the non-Federal entity, to include commercial or residential real estate, for purposes such as the home office workspace is unallowable. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020] § 200.466 costs. Scholarships and student aid (a) Costs of scholarships, fellowships, and other programs of student aid at IHEs are allowable only when the pur- pose of the Federal award is to provide training to selected participants and the charge is approved by the Federal awarding agency. However, tuition re- mission and other forms of compensa- tion paid as, or in lieu of, wages to stu- dents performing necessary work are allowable provided that: (1) The individual is conducting ac- tivities necessary to the Federal award; (2) Tuition remission and other sup- port are provided in accordance with established policy of the IHE and con- sistently provided in a like manner to students in return for similar activities conducted under Federal awards as well as other activities; and (3) During the academic period, the student is enrolled in an advanced de- gree program at a non-Federal entity or affiliated institution and the activi- ties of the student in relation to the Federal award are related to the degree program; (4) The tuition or other payments are reasonable compensation for the work performed and are conditioned explic- itly upon the performance of necessary work; and (5) It is the IHE’s practice to simi- larly compensate students under Fed- eral awards as well as other activities. (b) Charges for tuition remission and other forms of compensation paid to students as, or in lieu of, salaries and wages must be subject to the reporting requirements in §200.430, and must be treated as direct or indirect cost in ac- cordance with the actual work being performed. Tuition remission may be charged on an average rate basis. See also §200.431. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020] 191 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00203 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 396§ 200.467 § 200.467 Selling and marketing costs. Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under §200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award. [85 FR 49570, Aug. 13, 2020] § 200.468 Specialized service facilities. (a) The costs of services provided by highly complex or specialized facilities operated by the non-Federal entity, such as computing facilities, wind tun- nels, and reactors are allowable, pro- vided the charges for the services meet the conditions of either paragraph (b) or (c) of this section, and, in addition, take into account any items of income or Federal financing that qualify as ap- plicable credits under §200.406. (b) The costs of such services, when material, must be charged directly to applicable awards based on actual usage of the services on the basis of a schedule of rates or established meth- odology that: (1) Does not discriminate between ac- tivities under Federal awards and other activities of the non-Federal entity, in- cluding usage by the non-Federal enti- ty for internal purposes, and (2) Is designed to recover only the ag- gregate costs of the services. The costs of each service must consist normally of both its direct costs and its allocable share of all indirect (F&A) costs. Rates must be adjusted at least biennially, and must take into consideration over/ under-applied costs of the previous pe- riod(s). (c) Where the costs incurred for a service are not material, they may be allocated as indirect (F&A) costs. (d) Under some extraordinary cir- cumstances, where it is in the best in- terest of the Federal Government and the non-Federal entity to establish al- ternative costing arrangements, such arrangements may be worked out with the Federal cognizant agency for indi- rect costs. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020] 2 CFR Ch. II (1–1–21 Edition) § 200.469 Student activity costs. Costs incurred for intramural activi- ties, student publications, student clubs, and other student activities, are unallowable, unless specifically pro- vided for in the Federal award. § 200.470 Taxes (including Value Added Tax). (a) For states, local governments and Indian tribes: (1) Taxes that a governmental unit is legally required to pay are allowable, except for self-assessed taxes that dis- proportionately affect Federal pro- grams or changes in tax policies that disproportionately affect Federal pro- grams. (2) Gasoline taxes, motor vehicle fees, and other taxes that are in effect user fees for benefits provided to the Federal Government are allowable. (3) This provision does not restrict the authority of the Federal awarding agency to identify taxes where Federal participation is inappropriate. Where the identification of the amount of un- allowable taxes would require an inor- dinate amount of effort, the cognizant agency for indirect costs may accept a reasonable approximation thereof. (b) For nonprofit organizations and IHEs: (1) In general, taxes which the non- Federal entity is required to pay and which are paid or accrued in accord- ance with GAAP, and payments made to local governments in lieu of taxes which are commensurate with the local government services received are al- lowable, except for: (i) Taxes from which exemptions are available to the non-Federal entity di- rectly or which are available to the non-Federal entity based on an exemp- tion afforded the Federal Government and, in the latter case, when the Fed- eral awarding agency makes available the necessary exemption certificates, (ii) Special assessments on land which represent capital improvements, and (iii) Federal income taxes. (2) Any refund of taxes, and any pay- ment to the non-Federal entity of in- terest thereon, which were allowed as Federal award costs, will be credited either as a cost reduction or cash re- fund, as appropriate, to the Federal 192 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00204 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 397OMB Guidance § 200.472 Government. However, any interest ac- tually paid or credited to an non-Fed- eral entity incident to a refund of tax, interest, and penalty will be paid or credited to the Federal Government only to the extent that such interest accrued over the period during which the non-Federal entity has been reim- bursed by the Federal Government for the taxes, interest, and penalties. (c) Value Added Tax (VAT) Foreign taxes charged for the purchase of goods or services that a non-Federal entity is legally required to pay in country is an allowable expense under Federal awards. Foreign tax refunds or applica- ble credits under Federal awards refer to receipts, or reduction of expendi- tures, which operate to offset or reduce expense items that are allocable to Federal awards as direct or indirect costs. To the extent that such credits accrued or received by the non-Federal entity relate to allowable cost, these costs must be credited to the Federal awarding agency either as costs or cash refunds. If the costs are credited back to the Federal award, the non-Federal entity may reduce the Federal share of costs by the amount of the foreign tax reimbursement, or where Federal award has not expired, use the foreign government tax refund for approved ac- tivities under the Federal award with prior approval of the Federal awarding agency. § 200.471 Telecommunication costs and video surveillance costs. (a) Costs incurred for telecommuni- cations and video surveillance services or equipment such as phones, internet, video surveillance, cloud servers are al- lowable except for the following cir- cumstances: (b) Obligating or expending covered telecommunications and video surveil- lance services or equipment or services as described in §200.216 to: (1) Procure or obtain, extend or renew a contract to procure or obtain; (2) Enter into a contract (or extend or renew a contract) to procure; or (3) Obtain the equipment, services, or systems. [85 FR 49570, Aug. 13, 2020] § 200.472 Termination costs. Termination of a Federal award gen- erally gives rise to the incurrence of costs, or the need for special treatment of costs, which would not have arisen had the Federal award not been termi- nated. Cost principles covering these items are set forth in this section. They are to be used in conjunction with the other provisions of this part in termination situations. (a) The cost of items reasonably usa- ble on the non-Federal entity’s other work must not be allowable unless the non-Federal entity submits evidence that it would not retain such items at cost without sustaining a loss. In de- ciding whether such items are reason- ably usable on other work of the non- Federal entity, the Federal awarding agency should consider the non-Federal entity’s plans and orders for current and scheduled activity. Contempora- neous purchases of common items by the non-Federal entity must be re- garded as evidence that such items are reasonably usable on the non-Federal entity’s other work. Any acceptance of common items as allocable to the ter- minated portion of the Federal award must be limited to the extent that the quantities of such items on hand, in transit, and on order are in excess of the reasonable quantitative require- ments of other work. (b) If in a particular case, despite all reasonable efforts by the non-Federal entity, certain costs cannot be discon- tinued immediately after the effective date of termination, such costs are generally allowable within the limita- tions set forth in this part, except that any such costs continuing after termi- nation due to the negligent or willful failure of the non-Federal entity to dis- continue such costs must be unallow- able. (c) Loss of useful value of special tooling, machinery, and equipment is generally allowable if: (1) Such special tooling, special ma- chinery, or equipment is not reason- ably capable of use in the other work of the non-Federal entity, (2) The interest of the Federal Gov- ernment is protected by transfer of title or by other means deemed appro- priate by the Federal awarding agency (see also §200.313 (d)), and 193 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00205 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 398§ 200.473 (3) The loss of useful value for any one terminated Federal award is lim- ited to that portion of the acquisition cost which bears the same ratio to the total acquisition cost as the termi- nated portion of the Federal award bears to the entire terminated Federal award and other Federal awards for which the special tooling, machinery, or equipment was acquired. (d) Rental costs under unexpired leases are generally allowable where clearly shown to have been reasonably necessary for the performance of the terminated Federal award less the re- sidual value of such leases, if: (1) The amount of such rental claimed does not exceed the reasonable use value of the property leased for the period of the Federal award and such further period as may be reasonable, and (2) The non-Federal entity makes all reasonable efforts to terminate, assign, settle, or otherwise reduce the cost of such lease. There also may be included the cost of alterations of such leased property, provided such alterations were necessary for the performance of the Federal award, and of reasonable restoration required by the provisions of the lease. (e) Settlement expenses including the following are generally allowable: (1) Accounting, legal, clerical, and similar costs reasonably necessary for: (i) The preparation and presentation to the Federal awarding agency of set- tlement claims and supporting data with respect to the terminated portion of the Federal award, unless the termi- nation is for cause (see subpart D, in- cluding §§200.339–200.343); and (ii) The termination and settlement of subawards. (2) Reasonable costs for the storage, transportation, protection, and disposi- tion of property provided by the Fed- eral Government or acquired or pro- duced for the Federal award. (f) Claims under subawards, including the allocable portion of claims which are common to the Federal award and to other work of the non-Federal enti- ty, are generally allowable. An appro- priate share of the non-Federal entity’s indirect costs may be allocated to the amount of settlements with contrac- tors and/or subrecipients, provided that 2 CFR Ch. II (1–1–21 Edition) the amount allocated is otherwise con- sistent with the basic guidelines con- tained in §200.414. The indirect costs so allocated must exclude the same and similar costs claimed directly or indi- rectly as settlement expenses. [78 FR 78608, Dec. 26, 2013. Redesignated and amended at 85 FR 49570, Aug. 13, 2020] § 200.473 Training and education costs. The cost of training and education provided for employee development is allowable. [78 FR 78608, Dec. 26, 2013. Redesignated at 85 FR 49570, Aug. 13, 2020] § 200.474 Transportation costs. Costs incurred for freight, express, cartage, postage, and other transpor- tation services relating either to goods purchased, in process, or delivered, are allowable. When such costs can readily be identified with the items involved, they may be charged directly as trans- portation costs or added to the cost of such items. Where identification with the materials received cannot readily be made, inbound transportation cost may be charged to the appropriate in- direct (F&A) cost accounts if the non- Federal entity follows a consistent, eq- uitable procedure in this respect. Out- bound freight, if reimbursable under the terms and conditions of the Federal award, should be treated as a direct cost. [78 FR 78608, Dec. 26, 2013. Redesignated at 85 FR 49570, Aug. 13, 2020] § 200.475 Travel costs. (a) General. Travel costs are the ex- penses for transportation, lodging, sub- sistence, and related items incurred by employees who are in travel status on official business of the non-Federal en- tity. Such costs may be charged on an actual cost basis, on a per diem or mileage basis in lieu of actual costs in- curred, or on a combination of the two, provided the method used is applied to an entire trip and not to selected days of the trip, and results in charges con- sistent with those normally allowed in like circumstances in the non-Federal entity’s non-federally-funded activities and in accordance with non-Federal en- tity’s written travel reimbursement 194 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00206 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 399OMB Guidance § 200.500 policies. Notwithstanding the provi- sions of §200.444, travel costs of offi- cials covered by that section are allow- able with the prior written approval of the Federal awarding agency or pass- through entity when they are specifi- cally related to the Federal award. (b) Lodging and subsistence. Costs in- curred by employees and officers for travel, including costs of lodging, other subsistence, and incidental expenses, must be considered reasonable and oth- erwise allowable only to the extent such costs do not exceed charges nor- mally allowed by the non-Federal enti- ty in its regular operations as the re- sult of the non-Federal entity’s written travel policy. In addition, if these costs are charged directly to the Federal award documentation must justify that: (1) Participation of the individual is necessary to the Federal award; and (2) The costs are reasonable and con- sistent with non-Federal entity’s es- tablished travel policy. (c)(1) Temporary dependent care costs (as dependent is defined in 26 U.S.C. 152) above and beyond regular dependent care that directly results from travel to conferences is allowable provided that: (i) The costs are a direct result of the individual’s travel for the Federal award; (ii) The costs are consistent with the non-Federal entity’s documented trav- el policy for all entity travel; and (iii) Are only temporary during the travel period. (2) Travel costs for dependents are unallowable, except for travel of dura- tion of six months or more with prior approval of the Federal awarding agen- cy. See also §200.432. (d) In the absence of an acceptable, written non-Federal entity policy re- garding travel costs, the rates and amounts established under 5 U.S.C. 5701–11, (‘‘Travel and Subsistence Ex- penses; Mileage Allowances’’), or by the Administrator of General Services, or by the President (or his or her des- ignee) pursuant to any provisions of such subchapter must apply to travel under Federal awards (48 CFR 31.205– 46(a)). (e) Commercial air travel. (1) Airfare costs in excess of the basic least expen- sive unrestricted accommodations class offered by commercial airlines are unallowable except when such ac- commodations would: (i) Require circuitous routing; (ii) Require travel during unreason- able hours; (iii) Excessively prolong travel; (iv) Result in additional costs that would offset the transportation sav- ings; or (v) Offer accommodations not reason- ably adequate for the traveler’s med- ical needs. The non-Federal entity must justify and document these condi- tions on a case-by-case basis in order for the use of first-class or business- class airfare to be allowable in such cases. (2) Unless a pattern of avoidance is detected, the Federal Government will generally not question a non-Federal entity’s determinations that cus- tomary standard airfare or other dis- count airfare is unavailable for specific trips if the non-Federal entity can demonstrate that such airfare was not available in the specific case. (f) Air travel by other than commercial carrier. Costs of travel by non-Federal entity-owned, -leased, or -chartered aircraft include the cost of lease, char- ter, operation (including personnel costs), maintenance, depreciation, in- surance, and other related costs. The portion of such costs that exceeds the cost of airfare as provided for in para- graph (d) of this section, is unallow- able. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014. Redesignated and amended at 85 FR 49570, Aug. 13, 2020] § 200.476 Trustees. Travel and subsistence costs of trust- ees (or directors) at IHEs and nonprofit organizations are allowable. See also §200.475. [85 FR 49571, Aug. 13, 2020] Subpart F—Audit Requirements GENERAL § 200.500 Purpose. This part sets forth standards for ob- taining consistency and uniformity among Federal agencies for the audit 195 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00207 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 400§ 200.501 of non-Federal entities expending Fed- eral awards. AUDITS § 200.501 Audit requirements. (a) Audit required. A non-Federal enti- ty that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provi- sions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single audit conducted in accordance with §200.514 except when it elects to have a program-specific audit conducted in ac- cordance with paragraph (c) of this sec- tion. (c) Program-specific audit election. When an auditee expends Federal awards under only one Federal pro- gram (excluding R&D) and the Federal program’s statutes, regulations, or the terms and conditions of the Federal award do not require a financial state- ment audit of the auditee, the auditee may elect to have a program-specific audit conducted in accordance with §200.507. A program-specific audit may not be elected for R&D unless all of the Federal awards expended were received from the same Federal agency, or the same Federal agency and the same pass-through entity, and that Federal agency, or pass-through entity in the case of a subrecipient, approves in ad- vance a program-specific audit. (d) Exemption when Federal awards ex- pended are less than $750,000. A non-Fed- eral entity that expends less than $750,000 during the non-Federal entity’s fiscal year in Federal awards is exempt from Federal audit requirements for that year, except as noted in §200.503, but records must be available for re- view or audit by appropriate officials of the Federal agency, pass-through en- tity, and Government Accountability Office (GAO). (e) Federally Funded Research and De- velopment Centers (FFRDC). Manage- ment of an auditee that owns or oper- ates a FFRDC may elect to treat the FFRDC as a separate entity for pur- poses of this part. 2 CFR Ch. II (1–1–21 Edition) (f) Subrecipients and contractors. An auditee may simultaneously be a re- cipient, a subrecipient, and a con- tractor. Federal awards expended as a recipient or a subrecipient are subject to audit under this part. The payments received for goods or services provided as a contractor are not Federal awards. Section §200.331 sets forth the consider- ations in determining whether pay- ments constitute a Federal award or a payment for goods or services provided as a contractor. (g) Compliance responsibility for con- tractors. In most cases, the auditee’s compliance responsibility for contrac- tors is only to ensure that the procure- ment, receipt, and payment for goods and services comply with Federal stat- utes, regulations, and the terms and conditions of Federal awards. Federal award compliance requirements nor- mally do not pass through to contrac- tors. However, the auditee is respon- sible for ensuring compliance for pro- curement transactions which are struc- tured such that the contractor is re- sponsible for program compliance or the contractor’s records must be re- viewed to determine program compli- ance. Also, when these procurement transactions relate to a major pro- gram, the scope of the audit must in- clude determining whether these trans- actions are in compliance with Federal statutes, regulations, and the terms and conditions of Federal awards. (h) For-profit subrecipient. Since this part does not apply to for-profit sub- recipients, the pass-through entity is responsible for establishing require- ments, as necessary, to ensure compli- ance by for-profit subrecipients. The agreement with the for-profit sub- recipient must describe applicable compliance requirements and the for- profit subrecipient’s compliance re- sponsibility. Methods to ensure compli- ance for Federal awards made to for- profit subrecipients may include pre- award audits, monitoring during the agreement, and post-award audits. See also §200.332. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49571, Aug. 13, 2020] 196 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00208 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 401OMB Guidance § 200.503 § 200.502 Basis for determining Fed- eral awards expended. (a) Determining Federal awards ex- pended. The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that re- quire the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards in- cluding grants, cost-reimbursement contracts under the FAR, compacts with Indian Tribes, cooperative agree- ments, and direct appropriations; the disbursement of funds to subrecipients; the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus prop- erty; the receipt or use of program in- come; the distribution or use of food commodities; the disbursement of amounts entitling the non-Federal en- tity to an interest subsidy; and the pe- riod when insurance is in force. (b) Loan and loan guarantees (loans). Since the Federal Government is at risk for loans until the debt is repaid, the following guidelines must be used to calculate the value of Federal awards expended under loan programs, except as noted in paragraphs (c) and (d) of this section: (1) Value of new loans made or re- ceived during the audit period; plus (2) Beginning of the audit period bal- ance of loans from previous years for which the Federal Government imposes continuing compliance requirements; plus (3) Any interest subsidy, cash, or ad- ministrative cost allowance received. (c) Loan and loan guarantees (loans) at IHEs. When loans are made to students of an IHE but the IHE does not make the loans, then only the value of loans made during the audit period must be considered Federal awards expended in that audit period. The balance of loans for previous audit periods is not in- cluded as Federal awards expended be- cause the lender accounts for the prior balances. (d) Prior loan and loan guarantees (loans). Loans, the proceeds of which were received and expended in prior years, are not considered Federal awards expended under this part when the Federal statutes, regulations, and the terms and conditions of Federal awards pertaining to such loans impose no continuing compliance require- ments other than to repay the loans. (e) Endowment funds. The cumulative balance of Federal awards for endow- ment funds that are federally re- stricted are considered Federal awards expended in each audit period in which the funds are still restricted. (f) Free rent. Free rent received by itself is not considered a Federal award expended under this part. However, free rent received as part of a Federal award to carry out a Federal program must be included in determining Fed- eral awards expended and subject to audit under this part. (g) Valuing non-cash assistance. Fed- eral non-cash assistance, such as free rent, food commodities, donated prop- erty, or donated surplus property, must be valued at fair market value at the time of receipt or the assessed value provided by the Federal agency. (h) Medicare. Medicare payments to a non-Federal entity for providing pa- tient care services to Medicare-eligible individuals are not considered Federal awards expended under this part. (i) Medicaid. Medicaid payments to a subrecipient for providing patient care services to Medicaid-eligible individ- uals are not considered Federal awards expended under this part unless a state requires the funds to be treated as Fed- eral awards expended because reim- bursement is on a cost-reimbursement basis. (j) Certain loans provided by the Na- tional Credit Union Administration. For purposes of this part, loans made from the National Credit Union Share Insur- ance Fund and the Central Liquidity Facility that are funded by contribu- tions from insured non-Federal entities are not considered Federal awards ex- pended. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014] § 200.503 Relation to other audit re- quirements. (a) An audit conducted in accordance with this part must be in lieu of any fi- nancial audit of Federal awards which 197 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00209 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 402§ 200.504 a non-Federal entity is required to un- dergo under any other Federal statute or regulation. To the extent that such audit provides a Federal agency with the information it requires to carry out its responsibilities under Federal statute or regulation, a Federal agency must rely upon and use that informa- tion. (b) Notwithstanding subsection (a), a Federal agency, Inspectors General, or GAO may conduct or arrange for addi- tional audits which are necessary to carry out its responsibilities under Federal statute or regulation. The pro- visions of this part do not authorize any non-Federal entity to constrain, in any manner, such Federal agency from carrying out or arranging for such ad- ditional audits, except that the Federal agency must plan such audits to not be duplicative of other audits of Federal awards. Prior to commencing such an audit, the Federal agency or pass- through entity must review the FAC for recent audits submitted by the non- Federal entity, and to the extent such audits meet a Federal agency or pass- through entity’s needs, the Federal agency or pass-through entity must rely upon and use such audits. Any ad- ditional audits must be planned and performed in such a way as to build upon work performed, including the audit documentation, sampling, and testing already performed, by other auditors. (c) The provisions of this part do not limit the authority of Federal agencies to conduct, or arrange for the conduct of, audits and evaluations of Federal awards, nor limit the authority of any Federal agency Inspector General or other Federal official. For example, re- quirements that may be applicable under the FAR or CAS and the terms and conditions of a cost-reimbursement contract may include additional appli- cable audits to be conducted or ar- ranged for by Federal agencies. (d) Federal agency to pay for additional audits. A Federal agency that conducts or arranges for additional audits must, consistent with other applicable Fed- eral statutes and regulations, arrange for funding the full cost of such addi- tional audits. (e) Request for a program to be audited as a major program. A Federal awarding 2 CFR Ch. II (1–1–21 Edition) agency may request that an auditee have a particular Federal program au- dited as a major program in lieu of the Federal awarding agency conducting or arranging for the additional audits. To allow for planning, such requests should be made at least 180 calendar days prior to the end of the fiscal year to be audited. The auditee, after con- sultation with its auditor, should promptly respond to such a request by informing the Federal awarding agency whether the program would otherwise be audited as a major program using the risk-based audit approach de- scribed in §200.518 and, if not, the esti- mated incremental cost. The Federal awarding agency must then promptly confirm to the auditee whether it wants the program audited as a major program. If the program is to be au- dited as a major program based upon this Federal awarding agency request, and the Federal awarding agency agrees to pay the full incremental costs, then the auditee must have the program audited as a major program. A pass-through entity may use the provi- sions of this paragraph for a sub- recipient. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49570, Aug. 13, 2020] § 200.504 Frequency of audits. Except for the provisions for biennial audits provided in paragraphs (a) and (b) of this section, audits required by this part must be performed annually. Any biennial audit must cover both years within the biennial period. (a) A state, local government, or In- dian tribe that is required by constitu- tion or statute, in effect on January 1, 1987, to undergo its audits less fre- quently than annually, is permitted to undergo its audits pursuant to this part biennially. This requirement must still be in effect for the biennial period. (b) Any nonprofit organization that had biennial audits for all biennial pe- riods ending between July 1, 1992, and January 1, 1995, is permitted to under- go its audits pursuant to this part bi- ennially. § 200.505 Sanctions. In cases of continued inability or un- willingness to have an audit conducted in accordance with this part, Federal 198 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00210 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 403OMB Guidance § 200.507 agencies and pass-through entities must take appropriate action as pro- vided in §200.339. [85 FR 49571, Aug. 13, 2020] § 200.506 Audit costs. See §200.425. [85 FR 49571, Aug. 13, 2020] § 200.507 Program-specific audits. (a) Program-specific audit guide avail- able. In some cases, a program-specific audit guide will be available to provide specific guidance to the auditor with respect to internal controls, compli- ance requirements, suggested audit procedures, and audit reporting re- quirements. A listing of current pro- gram-specific audit guides can be found in the compliance supplement, Part 8, Appendix VI, Program-Specific Audit Guides, which includes a website where a copy of the guide can be obtained. When a current program-specific audit guide is available, the auditor must follow GAGAS and the guide when per- forming a program-specific audit. (b) Program-specific audit guide not available. (1) When a current program- specific audit guide is not available, the auditee and auditor must have ba- sically the same responsibilities for the Federal program as they would have for an audit of a major program in a single audit. (2) The auditee must prepare the fi- nancial statement(s) for the Federal program that includes, at a minimum, a schedule of expenditures of Federal awards for the program and notes that describe the significant accounting policies used in preparing the schedule, a summary schedule of prior audit find- ings consistent with the requirements of §200.511(b), and a corrective action plan consistent with the requirements of §200.511(c). (3) The auditor must: (i) Perform an audit of the financial statement(s) for the Federal program in accordance with GAGAS; (ii) Obtain an understanding of inter- nal controls and perform tests of inter- nal controls over the Federal program consistent with the requirements of §200.514(c) for a major program; (iii) Perform procedures to determine whether the auditee has complied with Federal statutes, regulations, and the terms and conditions of Federal awards that could have a direct and material effect on the Federal program con- sistent with the requirements of §200.514(d) for a major program; (iv) Follow up on prior audit findings, perform procedures to assess the rea- sonableness of the summary schedule of prior audit findings prepared by the auditee in accordance with the require- ments of §200.511, and report, as a cur- rent year audit finding, when the audi- tor concludes that the summary sched- ule of prior audit findings materially misrepresents the status of any prior audit finding; and (v) Report any audit findings con- sistent with the requirements of §200.516. (4) The auditor’s report(s) may be in the form of either combined or sepa- rate reports and may be organized dif- ferently from the manner presented in this section. The auditor’s report(s) must state that the audit was con- ducted in accordance with this part and include the following: (i) An opinion (or disclaimer of opin- ion) as to whether the financial state- ment(s) of the Federal program is pre- sented fairly in all material respects in accordance with the stated accounting policies; (ii) A report on internal control re- lated to the Federal program, which must describe the scope of testing of internal control and the results of the tests; (iii) A report on compliance which in- cludes an opinion (or disclaimer of opinion) as to whether the auditee complied with laws, regulations, and the terms and conditions of Federal awards which could have a direct and material effect on the Federal pro- gram; and (iv) A schedule of findings and ques- tioned costs for the Federal program that includes a summary of the audi- tor’s results relative to the Federal program in a format consistent with §200.515(d)(1) and findings and ques- tioned costs consistent with the re- quirements of §200.515(d)(3). (c) Report submission for program-spe- cific audits. (1) The audit must be com- pleted and the reporting required by paragraph (c)(2) or (c)(3) of this section 199 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00211 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 404§ 200.508 submitted within the earlier of 30 cal- endar days after receipt of the audi- tor’s report(s), or nine months after the end of the audit period, unless a different period is specified in a pro- gram-specific audit guide. Unless re- stricted by Federal law or regulation, the auditee must make report copies available for public inspection. Auditees and auditors must ensure that their respective parts of the re- porting package do not include pro- tected personally identifiable informa- tion. (2) When a program-specific audit guide is available, the auditee must electronically submit to the FAC the data collection form prepared in ac- cordance with §200.512(b), as applicable to a program-specific audit, and the re- porting required by the program-spe- cific audit guide. (3) When a program-specific audit guide is not available, the reporting package for a program-specific audit must consist of the financial state- ment(s) of the Federal program, a sum- mary schedule of prior audit findings, and a corrective action plan as de- scribed in paragraph (b)(2) of this sec- tion, and the auditor’s report(s) de- scribed in paragraph (b)(4) of this sec- tion. The data collection form prepared in accordance with §200.512(b), as appli- cable to a program-specific audit, and one copy of this reporting package must be electronically submitted to the FAC. (d) Other sections of this part may apply. Program-specific audits are sub- ject to: (1) 200.500 Purpose through 200.503 Re- lation to other audit requirements, paragraph (d); (2) 200.504 Frequency of audits through 200.506 Audit costs; (3) 200.508 Auditee responsibilities through 200.509 Auditor selection; (4) 200.511 Audit findings follow-up; (5) 200.512 Report submission, para- graphs (e) through (h); (6) 200.513 Responsibilities; (7) 200.516 Audit findings through 200.517 Audit documentation; (8) 200.521 Management decision; and (9) Other referenced provisions of this part unless contrary to the provisions of this section, a program-specific 2 CFR Ch. II (1–1–21 Edition) audit guide, or program statutes and regulations. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49571, Aug. 13, 2020] AUDITEES § 200.508 Auditee responsibilities. The auditee must: (a) Procure or otherwise arrange for the audit required by this part in ac- cordance with §200.509, and ensure it is properly performed and submitted when due in accordance with §200.512. (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in ac- cordance with §200.510. (c) Promptly follow up and take cor- rective action on audit findings, in- cluding preparation of a summary schedule of prior audit findings and a corrective action plan in accordance with §200.511(b) and (c), respectively. (d) Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed for the auditor to perform the audit required by this part. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49572, Aug. 13, 2020] § 200.509 Auditor selection. (a) Auditor procurement. In procuring audit services, the auditee must follow the procurement standards prescribed by the Procurement Standards in §§200.317 through 200.326 of subpart D of this part or the FAR (48 CFR part 42), as applicable. When procuring audit services, the objective is to obtain high-quality audits. In requesting pro- posals for audit services, the objectives and scope of the audit must be made clear and the non-Federal entity must request a copy of the audit organiza- tion’s peer review report which the auditor is required to provide under GAGAS. Factors to be considered in evaluating each proposal for audit services include the responsiveness to the request for proposal, relevant expe- rience, availability of staff with profes- sional qualifications and technical abilities, the results of peer and exter- nal quality control reviews, and price. Whenever possible, the auditee must 200 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00212 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 405OMB Guidance § 200.511 make positive efforts to utilize small businesses, minority-owned firms, and women’s business enterprises, in pro- curing audit services as stated in §200.321, or the FAR (48 CFR part 42), as applicable. (b) Restriction on auditor preparing in- direct cost proposals. An auditor who prepares the indirect cost proposal or cost allocation plan may not also be se- lected to perform the audit required by this part when the indirect costs recov- ered by the auditee during the prior year exceeded $1 million. This restric- tion applies to the base year used in the preparation of the indirect cost proposal or cost allocation plan and any subsequent years in which the re- sulting indirect cost agreement or cost allocation plan is used to recover costs. (c) Use of Federal auditors. Federal auditors may perform all or part of the work required under this part if they comply fully with the requirements of this part. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49572, Aug. 13, 2020] § 200.510 Financial statements. (a) Financial statements. The auditee must prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The financial statements must be for the same orga- nizational unit and fiscal year that is chosen to meet the requirements of this part. However, non-Federal entity- wide financial statements may also in- clude departments, agencies, and other organizational units that have separate audits in accordance with §200.514(a) and prepare separate financial state- ments. (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with §200.502. While not required, the auditee may choose to provide infor- mation requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of pro- grams, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Fed- eral agency. For example, the National Institutes of Health is a major subdivi- sion in the Department of Health and Human Services. (2) For Federal awards received as a subrecipient, the name of the pass- through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards ex- pended for each individual Federal pro- gram and the Assistance Listings Num- ber or other identifying number when the Assistance Listings information is not available. For a cluster of pro- grams also provide the total for the cluster. (4) Include the total amount provided to subrecipients from each Federal pro- gram. (5) For loan or loan guarantee pro- grams described in §200.502(b), identify in the notes to the schedule the bal- ances outstanding at the end of the audit period. This is in addition to in- cluding the total Federal awards ex- pended for loan or loan guarantee pro- grams in the schedule. (6) Include notes that describe that significant accounting policies used in preparing the schedule, and note whether or not the auditee elected to use the 10% de minimis cost rate as covered in §200.414. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49572, Aug. 13, 2020] § 200.511 Audit findings follow-up. (a) General. The auditee is responsible for follow-up and corrective action on all audit findings. As part of this re- sponsibility, the auditee must prepare a summary schedule of prior audit find- ings. The auditee must also prepare a 201 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00213 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 406§ 200.512 corrective action plan for current year audit findings. The summary schedule of prior audit findings and the correc- tive action plan must include the ref- erence numbers the auditor assigns to audit findings under §200.516(c). Since the summary schedule may include audit findings from multiple years, it must include the fiscal year in which the finding initially occurred. The cor- rective action plan and summary schedule of prior audit findings must include findings relating to the finan- cial statements which are required to be reported in accordance with GAGAS. (b) Summary schedule of prior audit findings. The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs. The summary schedule must also include audit find- ings reported in the prior audit’s sum- mary schedule of prior audit findings except audit findings listed as cor- rected in accordance with paragraph (b)(1) of this section, or no longer valid or not warranting further action in ac- cordance with paragraph (b)(3) of this section. (1) When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken. (2) When audit findings were not cor- rected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action pre- viously reported in a corrective action plan or in the Federal agency’s or pass- through entity’s management decision, the summary schedule must provide an explanation. (3) When the auditee believes the audit findings are no longer valid or do not warrant further action, the reasons for this position must be described in the summary schedule. A valid reason for considering an audit finding as not warranting further action is that all of the following have occurred: (i) Two years have passed since the audit report in which the finding oc- curred was submitted to the FAC; 2 CFR Ch. II (1–1–21 Edition) (ii) The Federal agency or pass- through entity is not currently fol- lowing up with the auditee on the audit finding; and (iii) A management decision was not issued. (c) Corrective action plan. At the com- pletion of the audit, the auditee must prepare, in a document separate from the auditor’s findings described in §200.516, a corrective action plan to ad- dress each audit finding included in the current year auditor’s reports. The cor- rective action plan must provide the name(s) of the contact person(s) re- sponsible for corrective action, the cor- rective action planned, and the antici- pated completion date. If the auditee does not agree with the audit findings or believes corrective action is not re- quired, then the corrective action plan must include an explanation and spe- cific reasons. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49572, Aug. 13, 2020] § 200.512 Report submission. (a) General. (1) The audit must be completed and the data collection form described in paragraph (b) of this sec- tion and reporting package described in paragraph (c) of this section must be submitted within the earlier of 30 cal- endar days after receipt of the audi- tor’s report(s), or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day. (2) Unless restricted by Federal stat- utes or regulations, the auditee must make copies available for public in- spection. Auditees and auditors must ensure that their respective parts of the reporting package do not include protected personally identifiable infor- mation. (b) Data collection. The FAC is the re- pository of record for subpart F of this part reporting packages and the data collection form. All Federal agencies, pass-through entities and others inter- ested in a reporting package and data collection form must obtain it by ac- cessing the FAC. (1) The auditee must submit required data elements described in Appendix X to Part 200, which state whether the audit was completed in accordance 202 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00214 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 407OMB Guidance § 200.512 with this part and provides informa- tion about the auditee, its Federal pro- grams, and the results of the audit. The data must include information available from the audit required by this part that is necessary for Federal agencies to use the audit to ensure in- tegrity for Federal programs. The data elements and format must be approved by OMB, available from the FAC, and include collections of information from the reporting package described in paragraph (c) of this section. A senior level representative of the auditee (e.g., state controller, director of finance, chief executive officer, or chief finan- cial officer) must sign a statement to be included as part of the data collec- tion that says that the auditee com- plied with the requirements of this part, the data were prepared in accord- ance with this part (and the instruc- tions accompanying the form), the re- porting package does not include pro- tected personally identifiable informa- tion, the information included in its entirety is accurate and complete, and that the FAC is authorized to make the reporting package and the form pub- licly available on a website. (2) Exception for Indian Tribes and Tribal Organizations. An auditee that is an Indian tribe or a tribal organization (as defined in the Indian Self-Deter- mination, Education and Assistance Act (ISDEAA), 25 U.S.C. 450b(l)) may opt not to authorize the FAC to make the reporting package publicly avail- able on a Web site, by excluding the au- thorization for the FAC publication in the statement described in paragraph (b)(1) of this section. If this option is exercised, the auditee becomes respon- sible for submitting the reporting package directly to any pass-through entities through which it has received a Federal award and to pass-through entities for which the summary sched- ule of prior audit findings reported the status of any findings related to Fed- eral awards that the pass-through enti- ty provided. Unless restricted by Fed- eral statute or regulation, if the auditee opts not to authorize publica- tion, it must make copies of the report- ing package available for public inspec- tion. (3) Using the information included in the reporting package described in paragraph (c) of this section, the audi- tor must complete the applicable data elements of the data collection form. The auditor must sign a statement to be included as part of the data collec- tion form that indicates, at a min- imum, the source of the information included in the form, the auditor’s re- sponsibility for the information, that the form is not a substitute for the re- porting package described in paragraph (c) of this section, and that the content of the form is limited to the collection of information prescribed by OMB. (c) Reporting package. The reporting package must include the: (1) Financial statements and sched- ule of expenditures of Federal awards discussed in §200.510(a) and (b), respec- tively; (2) Summary schedule of prior audit findings discussed in §200.511(b); (3) Auditor’s report(s) discussed in §200.515; and (4) Corrective action plan discussed in §200.511(c). (d) Submission to FAC. The auditee must electronically submit to the FAC the data collection form described in paragraph (b) of this section and the reporting package described in para- graph (c) of this section. (e) Requests for management letters issued by the auditor. In response to re- quests by a Federal agency or pass- through entity, auditees must submit a copy of any management letters issued by the auditor. (f) Report retention requirements. Auditees must keep one copy of the data collection form described in para- graph (b) of this section and one copy of the reporting package described in paragraph (c) of this section on file for three years from the date of submis- sion to the FAC. (g) FAC responsibilities. The FAC must make available the reporting packages received in accordance with paragraph (c) of this section and §200.507(c) to the public, except for Indian tribes exer- cising the option in (b)(2) of this sec- tion, and maintain a data base of com- pleted audits, provide appropriate in- formation to Federal agencies, and fol- low up with known auditees that have not submitted the required data collec- tion forms and reporting packages. 203 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00215 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 408§ 200.513 (h) Electronic filing. Nothing in this part must preclude electronic submis- sions to the FAC in such manner as may be approved by OMB. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49573, Aug. 13, 2020] FEDERAL AGENCIES § 200.513 Responsibilities. (a)(1) Cognizant agency for audit re- sponsibilities. A non-Federal entity ex- pending more than $50 million a year in Federal awards must have a cognizant agency for audit. The designated cog- nizant agency for audit must be the Federal awarding agency that provides the predominant amount of funding di- rectly (direct funding) (as listed on the Schedule of expenditures of Federal awards, see §200.510(b)) to a non-Fed- eral entity unless OMB designates a specific cognizant agency for audit. When the direct funding represents less than 25 percent of the total expendi- tures (as direct and subawards) by the non-Federal entity, then the Federal agency with the predominant amount of total funding is the designated cog- nizant agency for audit. (2) To provide for continuity of cog- nizance, the determination of the pre- dominant amount of direct funding must be based upon direct Federal awards expended in the non-Federal en- tity’s fiscal years ending in 2019, and every fifth year thereafter. (3) Notwithstanding the manner in which audit cognizance is determined, a Federal awarding agency with cog- nizance for an auditee may reassign cognizance to another Federal award- ing agency that provides substantial funding and agrees to be the cognizant agency for audit. Within 30 calendar days after any reassignment, both the old and the new cognizant agency for audit must provide notice of the change to the FAC, the auditee, and, if known, the auditor. The cognizant agency for audit must: (i) Provide technical audit advice and liaison assistance to auditees and audi- tors. (ii) Obtain or conduct quality control reviews on selected audits made by non-Federal auditors, and provide the results to other interested organiza- 2 CFR Ch. II (1–1–21 Edition) tions. Cooperate and provide support to the Federal agency designated by OMB to lead a governmentwide project to determine the quality of single audits by providing a reliable estimate of the extent that single audits conform to applicable requirements, standards, and procedures; and to make rec- ommendations to address noted audit quality issues, including recommenda- tions for any changes to applicable re- quirements, standards and procedures indicated by the results of the project. The governmentwide project can rely on the current and on-going quality control review work performed by the agencies, State auditors, and profes- sional audit associations. This govern- mentwide audit quality project must be performed once every 6 years (or at such other interval as determined by OMB), and the results must be public. (iii) Promptly inform other affected Federal agencies and appropriate Fed- eral law enforcement officials of any direct reporting by the auditee or its auditor required by GAGAS or statutes and regulations. (iv) Advise the community of inde- pendent auditors of any noteworthy or important factual trends related to the quality of audits stemming from qual- ity control reviews. Significant prob- lems or quality issues consistently identified through quality control re- views of audit reports must be referred to appropriate state licensing agencies and professional bodies. (v) Advise the auditor, Federal awarding agencies, and, where appro- priate, the auditee of any deficiencies found in the audits when the defi- ciencies require corrective action by the auditor. When advised of defi- ciencies, the auditee must work with the auditor to take corrective action. If corrective action is not taken, the cognizant agency for audit must notify the auditor, the auditee, and applicable Federal awarding agencies and pass- through entities of the facts and make recommendations for follow-up action. Major inadequacies or repetitive sub- standard performance by auditors must be referred to appropriate state licens- ing agencies and professional bodies for disciplinary action. (vi) Coordinate, to the extent prac- tical, audits or reviews made by or for 204 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00216 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 409OMB Guidance § 200.513 Federal agencies that are in addition to the audits made pursuant to this part, so that the additional audits or reviews build upon rather than dupli- cate audits performed in accordance with this part. (vii) Coordinate a management deci- sion for cross-cutting audit findings (see in §200.1 of this part) that affect the Federal programs of more than one agency when requested by any Federal awarding agency whose awards are in- cluded in the audit finding of the auditee. (viii) Coordinate the audit work and reporting responsibilities among audi- tors to achieve the most cost-effective audit. (ix) Provide advice to auditees as to how to handle changes in fiscal years. (b) Oversight agency for audit respon- sibilities. An auditee who does not have a designated cognizant agency for audit will be under the general over- sight of the Federal agency determined in accordance with §200.1 oversight agency for audit. A Federal agency with oversight for an auditee may reassign oversight to another Federal agency that agrees to be the oversight agency for audit. Within 30 calendar days after any reassignment, both the old and the new oversight agency for audit must provide notice of the change to the FAC, the auditee, and, if known, the auditor. The oversight agency for audit: (1) Must provide technical advice to auditees and auditors as requested. (2) May assume all or some of the re- sponsibilities normally performed by a cognizant agency for audit. (c) Federal awarding agency respon- sibilities. The Federal awarding agency must perform the following for the Federal awards it makes (See also the requirements of §200.211): (1) Ensure that audits are completed and reports are received in a timely manner and in accordance with the re- quirements of this part. (2) Provide technical advice and counsel to auditees and auditors as re- quested. (3) Follow-up on audit findings to en- sure that the recipient takes appro- priate and timely corrective action. As part of audit follow-up, the Federal awarding agency must: (i) Issue a management decision as prescribed in §200.521; (ii) Monitor the recipient taking ap- propriate and timely corrective action; (iii) Use cooperative audit resolution mechanisms (see the definition of coop- erative audit resolution in §200.1 of this part) to improve Federal program out- comes through better audit resolution, follow-up, and corrective action; and (iv) Develop a baseline, metrics, and targets to track, over time, the effec- tiveness of the Federal agency’s proc- ess to follow-up on audit findings and on the effectiveness of Single Audits in improving non-Federal entity account- ability and their use by Federal award- ing agencies in making award deci- sions. (4) Provide OMB annual updates to the compliance supplement and work with OMB to ensure that the compli- ance supplement focuses the auditor to test the compliance requirements most likely to cause improper payments, fraud, waste, abuse or generate audit finding for which the Federal awarding agency will take sanctions. (5) Provide OMB with the name of a single audit accountable official from among the senior policy officials of the Federal awarding agency who must be: (i) Responsible for ensuring that the agency fulfills all the requirements of paragraph (c) of this section and effec- tively uses the single audit process to reduce improper payments and improve Federal program outcomes. (ii) Held accountable to improve the effectiveness of the single audit process based upon metrics as described in paragraph (c)(3)(iv) of this section. (iii) Responsible for designating the Federal agency’s key management sin- gle audit liaison. (6) Provide OMB with the name of a key management single audit liaison who must: (i) Serve as the Federal awarding agency’s management point of contact for the single audit process both within and outside the Federal Government. (ii) Promote interagency coordina- tion, consistency, and sharing in areas such as coordinating audit follow-up; identifying higher-risk non-Federal en- tities; providing input on single audit and follow-up policy; enhancing the utility of the FAC; and studying ways 205 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00217 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 410§ 200.514 to use single audit results to improve Federal award accountability and best practices. (iii) Oversee training for the Federal awarding agency’s program manage- ment personnel related to the single audit process. (iv) Promote the Federal awarding agency’s use of cooperative audit reso- lution mechanisms. (v) Coordinate the Federal awarding agency’s activities to ensure appro- priate and timely follow-up and correc- tive action on audit findings. (vi) Organize the Federal cognizant agency for audit’s follow-up on cross- cutting audit findings that affect the Federal programs of more than one Federal awarding agency. (vii) Ensure the Federal awarding agency provides annual updates of the compliance supplement to OMB. (viii) Support the Federal awarding agency’s single audit accountable offi- cial’s mission. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49573, Aug. 13, 2020] AUDITORS § 200.514 Scope of audit. (a) General. The audit must be con- ducted in accordance with GAGAS. The audit must cover the entire operations of the auditee, or, at the option of the auditee, such audit must include a se- ries of audits that cover departments, agencies, and other organizational units that expended or otherwise ad- ministered Federal awards during such audit period, provided that each such audit must encompass the financial statements and schedule of expendi- tures of Federal awards for each such department, agency, and other organi- zational unit, which must be consid- ered to be a non-Federal entity. The fi- nancial statements and schedule of ex- penditures of Federal awards must be for the same audit period. (b) Financial statements. The auditor must determine whether the financial statements of the auditee are presented fairly in all material respects in ac- cordance with generally accepted ac- counting principles. The auditor must also determine whether the schedule of expenditures of Federal awards is stat- 2 CFR Ch. II (1–1–21 Edition) ed fairly in all material respects in re- lation to the auditee’s financial state- ments as a whole. (c) Internal control. (1) The compli- ance supplement provides guidance on internal controls over Federal pro- grams based upon the guidance in Standards for Internal Control in the Federal Government issued by the Comptroller General of the United States and the Internal Control—Inte- grated Framework, issued by the Com- mittee of Sponsoring Organizations of the Treadway Commission (COSO). (2) In addition to the requirements of GAGAS, the auditor must perform pro- cedures to obtain an understanding of internal control over Federal programs sufficient to plan the audit to support a low assessed level of control risk of noncompliance for major programs. (3) Except as provided in paragraph (c)(4) of this section, the auditor must: (i) Plan the testing of internal con- trol over compliance for major pro- grams to support a low assessed level of control risk for the assertions rel- evant to the compliance requirements for each major program; and (ii) Perform testing of internal con- trol as planned in paragraph (c)(3)(i) of this section. (4) When internal control over some or all of the compliance requirements for a major program are likely to be in- effective in preventing or detecting noncompliance, the planning and per- forming of testing described in para- graph (c)(3) of this section are not re- quired for those compliance require- ments. However, the auditor must re- port a significant deficiency or mate- rial weakness in accordance with §200.516 Audit findings, assess the re- lated control risk at the maximum, and consider whether additional com- pliance tests are required because of ineffective internal control. (d) Compliance. (1) In addition to the requirements of GAGAS, the auditor must determine whether the auditee has complied with Federal statutes, regulations, and the terms and condi- tions of Federal awards that may have a direct and material effect on each of its major programs. 206 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00218 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 411OMB Guidance § 200.515 (2) The principal compliance require- ments applicable to most Federal pro- grams and the compliance require- ments of the largest Federal programs are included in the compliance supple- ment. (3) For the compliance requirements related to Federal programs contained in the compliance supplement, an audit of these compliance requirements will meet the requirements of this part. Where there have been changes to the compliance requirements and the changes are not reflected in the com- pliance supplement, the auditor must determine the current compliance re- quirements and modify the audit proce- dures accordingly. For those Federal programs not covered in the compli- ance supplement, the auditor must fol- low the compliance supplement’s guid- ance for programs not included in the supplement. (4) When internal control over some or all of the compliance requirements for a major program are likely to be in- effective in preventing or detecting noncompliance, the planning and per- forming of testing described in para- graph (c)(3) of this section are not re- quired for those compliance require- ments. However, the auditor must re- port a significant deficiency or mate- rial weakness in accordance with §200.516, assess the related control risk at the (e) Audit follow-up. The auditor must follow-up on prior audit findings, per- form procedures to assess the reason- ableness of the summary schedule of prior audit findings prepared by the auditee in accordance with §200.511(b), and report, as a current year audit finding, when the auditor concludes that the summary schedule of prior audit findings materially misrepre- sents the status of any prior audit find- ing. The auditor must perform audit follow-up procedures regardless of whether a prior audit finding relates to a major program in the current year. (f) Data collection form. As required in §200.512(b)(3), the auditor must com- plete and sign specified sections of the data collection form. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13, 2020] § 200.515 Audit reporting. The auditor’s report(s) may be in the form of either combined or separate re- ports and may be organized differently from the manner presented in this sec- tion. The auditor’s report(s) must state that the audit was conducted in ac- cordance with this part and include the following: (a) Financial statements. The auditor must determine and provide an opinion (or disclaimer of opinion) whether the financial statements of the auditee are presented fairly in all materials re- spects in accordance with generally ac- cepted accounting principles (or a spe- cial purpose framework such as cash, modified cash, or regulatory as re- quired by state law). The auditor must also decide whether the schedule of ex- penditures of Federal awards is stated fairly in all material respects in rela- tion to the auditee’s financial state- ments as a whole. (b) A report on internal control over financial reporting and compliance with provisions of laws, regulations, contracts, and award agreements, non- compliance with which could have a material effect on the financial state- ments. This report must describe the scope of testing of internal control and compliance and the results of the tests, and, where applicable, it will refer to the separate schedule of findings and questioned costs described in para- graph (d) of this section. (c) A report on compliance for each major program and a report on internal control over compliance. This report must describe the scope of testing of internal control over compliance, in- clude an opinion or disclaimer of opin- ion as to whether the auditee complied with Federal statutes, regulations, and the terms and conditions of Federal awards which could have a direct and material effect on each major program and refer to the separate schedule of findings and questioned costs described in paragraph (d) of this section. (d) A schedule of findings and ques- tioned costs which must include the following three components: (1) A summary of the auditor’s re- sults, which must include: 207 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00219 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 412§ 200.516 (i) The type of report the auditor issued on whether the financial state- ments audited were prepared in accord- ance with GAAP (i.e., unmodified opin- ion, qualified opinion, adverse opinion, or disclaimer of opinion); (ii) Where applicable, a statement about whether significant deficiencies or material weaknesses in internal con- trol were disclosed by the audit of the financial statements; (iii) A statement as to whether the audit disclosed any noncompliance that is material to the financial state- ments of the auditee; (iv) Where applicable, a statement about whether significant deficiencies or material weaknesses in internal con- trol over major programs were dis- closed by the audit; (v) The type of report the auditor issued on compliance for major pro- grams (i.e., unmodified opinion, quali- fied opinion, adverse opinion, or dis- claimer of opinion); (vi) A statement as to whether the audit disclosed any audit findings that the auditor is required to report under §200.516(a); (vii) An identification of major pro- grams by listing each individual major program; however, in the case of a clus- ter of programs, only the cluster name as shown on the Schedule of Expendi- tures of Federal Awards is required; (viii) The dollar threshold used to distinguish between Type A and Type B programs, as described in §200.518(b)(1) or (3) when a recalculation of the Type A threshold is required for large loan or loan guarantees; and (ix) A statement as to whether the auditee qualified as a low-risk auditee under §200.520. (2) Findings relating to the financial statements which are required to be re- ported in accordance with GAGAS. (3) Findings and questioned costs for Federal awards which must include audit findings as defined in §200.516(a). (i) Audit findings (e.g., internal con- trol findings, compliance findings, questioned costs, or fraud) that relate to the same issue must be presented as a single audit finding. Where practical, audit findings should be organized by Federal agency or pass-through entity. (ii) Audit findings that relate to both the financial statements and Federal 2 CFR Ch. II (1–1–21 Edition) awards, as reported under paragraphs (d)(2) and (d)(3) of this section, respec- tively, must be reported in both sec- tions of the schedule. However, the re- porting in one section of the schedule may be in summary form with a ref- erence to a detailed reporting in the other section of the schedule. (e) Nothing in this part precludes combining of the audit reporting re- quired by this section with the report- ing required by §200.512(b) when al- lowed by GAGAS and appendix X to this part. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13, 2020] § 200.516 Audit findings. (a) Audit findings reported. The audi- tor must report the following as audit findings in a schedule of findings and questioned costs: (1) Significant deficiencies and mate- rial weaknesses in internal control over major programs and significant instances of abuse relating to major programs. The auditor’s determination of whether a deficiency in internal con- trol is a significant deficiency or a ma- terial weakness for the purpose of re- porting an audit finding is in relation to a type of compliance requirement for a major program identified in the Compliance Supplement. (2) Material noncompliance with the provisions of Federal statutes, regula- tions, or the terms and conditions of Federal awards related to a major pro- gram. The auditor’s determination of whether a noncompliance with the pro- visions of Federal statutes, regula- tions, or the terms and conditions of Federal awards is material for the pur- pose of reporting an audit finding is in relation to a type of compliance re- quirement for a major program identi- fied in the compliance supplement. (3) Known questioned costs that are greater than $25,000 for a type of com- pliance requirement for a major pro- gram. Known questioned costs are those specifically identified by the auditor. In evaluating the effect of questioned costs on the opinion on compliance, the auditor considers the best estimate of total costs questioned (likely questioned costs), not just the questioned costs specifically identified 208 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00220 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 413OMB Guidance § 200.516 (known questioned costs). The auditor must also report known questioned costs when likely questioned costs are greater than $25,000 for a type of com- pliance requirement for a major pro- gram. In reporting questioned costs, the auditor must include information to provide proper perspective for judg- ing the prevalence and consequences of the questioned costs. (4) Known questioned costs that are greater than $25,000 for a Federal pro- gram which is not audited as a major program. Except for audit follow-up, the auditor is not required under this part to perform audit procedures for such a Federal program; therefore, the auditor will normally not find ques- tioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (e.g., as part of audit follow-up or other audit procedures) and the known ques- tioned costs are greater than $25,000, then the auditor must report this as an audit finding. (5) The circumstances concerning why the auditor’s report on compliance for each major program is other than an unmodified opinion, unless such cir- cumstances are otherwise reported as audit findings in the schedule of find- ings and questioned costs for Federal awards. (6) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and ques- tioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which could compromise investigative or legal proceedings or to make an addi- tional reporting when the auditor con- firms that the fraud was reported out- side the auditor’s reports under the di- rect reporting requirements of GAGAS. (7) Instances where the results of audit follow-up procedures disclosed that the summary schedule of prior audit findings prepared by the auditee in accordance with §200.511(b) materi- ally misrepresents the status of any prior audit finding. (b) Audit finding detail and clarity. Audit findings must be presented in sufficient detail and clarity for the auditee to prepare a corrective action plan and take corrective action, and for Federal agencies and pass-through entities to arrive at a management de- cision. The following specific informa- tion must be included, as applicable, in audit findings: (1) Federal program and specific Fed- eral award identification including the Assistance Listings title and number, Federal award identification number and year, name of Federal agency, and name of the applicable pass-through entity. When information, such as the Assistance Listings title and number or Federal award identification num- ber, is not available, the auditor must provide the best information available to describe the Federal award. (2) The criteria or specific require- ment upon which the audit finding is based, including the Federal statutes, regulations, or the terms and condi- tions of the Federal awards. Criteria generally identify the required or de- sired state or expectation with respect to the program or operation. Criteria provide a context for evaluating evi- dence and understanding findings. (3) The condition found, including facts that support the deficiency iden- tified in the audit finding. (4) A statement of cause that identi- fies the reason or explanation for the condition or the factors responsible for the difference between the situation that exists (condition) and the required or desired state (criteria), which may also serve as a basis for recommenda- tions for corrective action. (5) The possible asserted effect to provide sufficient information to the auditee and Federal agency, or pass- through entity in the case of a sub- recipient, to permit them to determine the cause and effect to facilitate prompt and proper corrective action. A statement of the effect or potential ef- fect should provide a clear, logical link to establish the impact or potential impact of the difference between the condition and the criteria. (6) Identification of questioned costs and how they were computed. Known questioned costs must be identified by applicable Assistance Listings num- ber(s) and applicable Federal award identification number(s). 209 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00221 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 414§ 200.517 (7) Information to provide proper per- spective for judging the prevalence and consequences of the audit findings, such as whether the audit findings rep- resent an isolated instance or a sys- temic problem. Where appropriate, in- stances identified must be related to the universe and the number of cases examined and be quantified in terms of dollar value. The auditor should report whether the sampling was a statis- tically valid sample. (8) Identification of whether the audit finding was a repeat of a finding in the immediately prior audit and if so any applicable prior year audit find- ing numbers. (9) Recommendations to prevent fu- ture occurrences of the deficiency iden- tified in the audit finding. (10) Views of responsible officials of the auditee. (c) Reference numbers. Each audit finding in the schedule of findings and questioned costs must include a ref- erence number in the format meeting the requirements of the data collection form submission required by §200.512(b) to allow for easy referencing of the audit findings during follow-up. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49574, Aug. 13, 2020] § 200.517 Audit documentation. (a) Retention of audit documentation. The auditor must retain audit docu- mentation and reports for a minimum of three years after the date of issuance of the auditor’s report(s) to the auditee, unless the auditor is noti- fied in writing by the cognizant agency for audit, oversight agency for audit, cognizant agency for indirect costs, or pass-through entity to extend the re- tention period. When the auditor is aware that the Federal agency, pass- through entity, or auditee is con- testing an audit finding, the auditor must contact the parties contesting the audit finding for guidance prior to destruction of the audit documentation and reports. (b) Access to audit documentation. Audit documentation must be made available upon request to the cognizant or oversight agency for audit or its des- ignee, cognizant agency for indirect cost, a Federal agency, or GAO at the completion of the audit, as part of a 2 CFR Ch. II (1–1–21 Edition) quality review, to resolve audit find- ings, or to carry out oversight respon- sibilities consistent with the purposes of this part. Access to audit docu- mentation includes the right of Federal agencies to obtain copies of audit docu- mentation, as is reasonable and nec- essary. § 200.518 Major program determina- tion. (a) General. The auditor must use a risk-based approach to determine which Federal programs are major pro- grams. This risk-based approach must include consideration of: current and prior audit experience, oversight by Federal agencies and pass-through en- tities, and the inherent risk of the Fed- eral program. The process in para- graphs (b) through (h) of this section must be followed. (b) Step one. (1) The auditor must identify the larger Federal programs, which must be labeled Type A pro- grams. Type A programs are defined as Federal programs with Federal awards expended during the audit period ex- ceeding the levels outlined in the table in this paragraph (b)(1): Total Federal awards ex- pended Type A/B threshold Equal to or exceed $750,000 but less than or equal to $25 million. Exceed $25 million but less than or equal to $100 mil- lion. Exceed $100 million but less than or equal to $1 billion. Exceed $1 billion but less than or equal to $10 billion. Exceed $10 billion but less than or equal to $20 billion. Exceed $20 billion ................. $750,000. Total Federal awards ex- pended times .03. $3 million. Total Federal awards ex- pended times .003. $30 million. Total Federal awards ex- pended times .0015. (2) Federal programs not labeled Type A under paragraph (b)(1) of this section must be labeled Type B pro- grams. (3) The inclusion of large loan and loan guarantees (loans) must not result in the exclusion of other programs as Type A programs. When a Federal pro- gram providing loans exceeds four times the largest non-loan program it is considered a large loan program, and the auditor must consider this Federal program as a Type A program and ex- clude its values in determining other 210 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00222 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 415OMB Guidance § 200.518 Type A programs. This recalculation of the Type A program is performed after removing the total of all large loan programs. For the purposes of this paragraph a program is only considered to be a Federal program providing loans if the value of Federal awards ex- pended for loans within the program comprises fifty percent or more of the total Federal awards expended for the program. A cluster of programs is treated as one program and the value of Federal awards expended under a loan program is determined as de- scribed in §200.502. (4) For biennial audits permitted under §200.504, the determination of Type A and Type B programs must be based upon the Federal awards ex- pended during the two-year period. (c) Step two. (1) The auditor must identify Type A programs which are low-risk. In making this determina- tion, the auditor must consider wheth- er the requirements in §200.519(c), the results of audit follow-up, or any changes in personnel or systems affect- ing the program indicate significantly increased risk and preclude the pro- gram from being low risk. For a Type A program to be considered low-risk, it must have been audited as a major pro- gram in at least one of the two most recent audit periods (in the most re- cent audit period in the case of a bien- nial audit), and, in the most recent audit period, the program must have not had: (i) Internal control deficiencies which were identified as material weaknesses in the auditor’s report on internal control for major programs as required under §200.515(c); (ii) A modified opinion on the pro- gram in the auditor’s report on major programs as required under §200.515(c); or (iii) Known or likely questioned costs that exceed five percent of the total Federal awards expended for the pro- gram. (2) Notwithstanding paragraph (c)(1) of this section, OMB may approve a Federal awarding agency’s request that a Type A program may not be consid- ered low risk for a certain recipient. For example, it may be necessary for a large Type A program to be audited as a major program each year at a par- ticular recipient to allow the Federal awarding agency to comply with 31 U.S.C. 3515. The Federal awarding agency must notify the recipient and, if known, the auditor of OMB’s ap- proval at least 180 calendar days prior to the end of the fiscal year to be au- dited. (d) Step three. (1) The auditor must identify Type B programs which are high-risk using professional judgment and the criteria in §200.519. However, the auditor is not required to identify more high-risk Type B programs than at least one fourth the number of low- risk Type A programs identified as low- risk under Step 2 (paragraph (c) of this section). Except for known material weakness in internal control or compli- ance problems as discussed in §200.519(b)(1) and (2) and (c)(1), a single criterion in risk would seldom cause a Type B program to be considered high- risk. When identifying which Type B programs to risk assess, the auditor is encouraged to use an approach which provides an opportunity for different high-risk Type B programs to be au- dited as major over a period of time. (2) The auditor is not expected to per- form risk assessments on relatively small Federal programs. Therefore, the auditor is only required to perform risk assessments on Type B programs that exceed twenty-five percent (0.25) of the Type A threshold determined in Step 1 (paragraph (b) of this section). (e) Step four. At a minimum, the auditor must audit all of the following as major programs: (1) All Type A programs not identi- fied as low risk under step two (para- graph (c)(1) of this section). (2) All Type B programs identified as high-risk under step three (paragraph (d) of this section). (3) Such additional programs as may be necessary to comply with the per- centage of coverage rule discussed in paragraph (f) of this section. This may require the auditor to audit more pro- grams as major programs than the number of Type A programs. (f) Percentage of coverage rule. If the auditee meets the criteria in §200.520, the auditor need only audit the major programs identified in Step 4 (para- graphs (e)(1) and (2) of this section) and such additional Federal programs with 211 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00223 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 416§ 200.519 Federal awards expended that, in ag- gregate, all major programs encompass at least 20 percent (0.20) of total Fed- eral awards expended. Otherwise, the auditor must audit the major programs identified in Step 4 (paragraphs (e)(1) and (2) of this section) and such addi- tional Federal programs with Federal awards expended that, in aggregate, all major programs encompass at least 40 percent (0.40) of total Federal awards expended. (g) Documentation of risk. The auditor must include in the audit documenta- tion the risk analysis process used in determining major programs. (h) Auditor’s judgment. When the major program determination was per- formed and documented in accordance with this Subpart, the auditor’s judg- ment in applying the risk-based ap- proach to determine major programs must be presumed correct. Challenges by Federal agencies and pass-through entities must only be for clearly im- proper use of the requirements in this part. However, Federal agencies and pass-through entities may provide auditors guidance about the risk of a particular Federal program and the auditor must consider this guidance in determining major programs in audits not yet completed. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13, 2020] § 200.519 Criteria for Federal program risk. (a) General. The auditor’s determina- tion should be based on an overall eval- uation of the risk of noncompliance oc- curring that could be material to the Federal program. The auditor must consider criteria, such as described in paragraphs (b), (c), and (d) of this sec- tion, to identify risk in Federal pro- grams. Also, as part of the risk anal- ysis, the auditor may wish to discuss a particular Federal program with auditee management and the Federal agency or pass-through entity. (b) Current and prior audit experience. (1) Weaknesses in internal control over Federal programs would indicate high- er risk. Consideration should be given to the control environment over Fed- eral programs and such factors as the expectation of management’s adher- 2 CFR Ch. II (1–1–21 Edition) ence to Federal statutes, regulations, and the terms and conditions of Fed- eral awards and the competence and experience of personnel who administer the Federal programs. (i) A Federal program administered under multiple internal control struc- tures may have higher risk. When as- sessing risk in a large single audit, the auditor must consider whether weak- nesses are isolated in a single oper- ating unit (e.g., one college campus) or pervasive throughout the entity. (ii) When significant parts of a Fed- eral program are passed through to subrecipients, a weak system for moni- toring subrecipients would indicate higher risk. (2) Prior audit findings would indi- cate higher risk, particularly when the situations identified in the audit find- ings could have a significant impact on a Federal program or have not been corrected. (3) Federal programs not recently au- dited as major programs may be of higher risk than Federal programs re- cently audited as major programs with- out audit findings. (c) Oversight exercised by Federal agen- cies and pass-through entities. (1) Over- sight exercised by Federal agencies or pass-through entities could be used to assess risk. For example, recent moni- toring or other reviews performed by an oversight entity that disclosed no significant problems would indicate lower risk, whereas monitoring that disclosed significant problems would indicate higher risk. (2) Federal agencies, with the concur- rence of OMB, may identify Federal programs that are higher risk. OMB will provide this identification in the compliance supplement. (d) Inherent risk of the Federal pro- gram. (1) The nature of a Federal pro- gram may indicate risk. Consideration should be given to the complexity of the program and the extent to which the Federal program contracts for goods and services. For example, Fed- eral programs that disburse funds through third-party contracts or have eligibility criteria may be of higher risk. Federal programs primarily in- volving staff payroll costs may have 212 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00224 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 417OMB Guidance § 200.521 high risk for noncompliance with re- quirements of §200.430, but otherwise be at low risk. (2) The phase of a Federal program in its life cycle at the Federal agency may indicate risk. For example, a new Federal program with new or interim regulations may have higher risk than an established program with time-test- ed regulations. Also, significant changes in Federal programs, statutes, regulations, or the terms and condi- tions of Federal awards may increase risk. (3) The phase of a Federal program in its life cycle at the auditee may indi- cate risk. For example, during the first and last years that an auditee partici- pates in a Federal program, the risk may be higher due to start-up or close- out of program activities and staff. (4) Type B programs with larger Fed- eral awards expended would be of high- er risk than programs with substan- tially smaller Federal awards ex- pended. (d) The auditor did not report a sub- stantial doubt about the auditee’s abil- ity to continue as a going concern. (e) None of the Federal programs had audit findings from any of the fol- lowing in either of the preceding two audit periods in which they were classi- fied as Type A programs: (1) Internal control deficiencies that were identified as material weaknesses in the auditor’s report on internal con- trol for major programs as required under §200.515(c); (2) A modified opinion on a major program in the auditor’s report on major programs as required under §200.515(c); or (3) Known or likely questioned costs that exceeded five percent of the total Federal awards expended for a Type A program during the audit period. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49575, Aug. 13, 2020] MANAGEMENT DECISIONS [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49575, Aug. 13, 2020] § 200.520 Criteria for a low-risk auditee. An auditee that meets all of the fol- lowing conditions for each of the pre- ceding two audit periods must qualify as a low-risk auditee and be eligible for reduced audit coverage in accordance with §200.518. (a) Single audits were performed on an annual basis in accordance with the provisions of this Subpart, including submitting the data collection form and the reporting package to the FAC within the timeframe specified in §200.512. A non-Federal entity that has biennial audits does not qualify as a low-risk auditee. (b) The auditor’s opinion on whether the financial statements were prepared in accordance with GAAP, or a basis of accounting required by state law, and the auditor’s in relation to opinion on the schedule of expenditures of Federal awards were unmodified. (c) There were no deficiencies in in- ternal control which were identified as material weaknesses under the require- ments of GAGAS. § 200.521 Management decision. (a) General. The management deci- sion must clearly state whether or not the audit finding is sustained, the rea- sons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the manage- ment decision, the Federal agency or pass-through entity may request addi- tional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management de- cision should describe any appeal proc- ess available to the auditee. While not required, the Federal agency or pass- through entity may also issue a man- agement decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (b) Federal agency. As provided in §200.513(a)(3)(vii), the cognizant agency for audit must be responsible for co- ordinating a management decision for audit findings that affect the programs of more than one Federal agency. As provided in §200.513(c)(3)(i), a Federal 213 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00225 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 418Pt. 200, App. I awarding agency is responsible for issuing a management decision for findings that relate to Federal awards it makes to non-Federal entities. (c) Pass-through entity. As provided in §200.332(d), the pass-through entity must be responsible for issuing a man- agement decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through enti- ty responsible for issuing a manage- ment decision must do so within six months of acceptance of the audit re- port by the FAC. The auditee must ini- tiate and proceed with corrective ac- tion as rapidly as possible and correc- tive action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with §200.516(c). [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49575, Aug. 13, 2020] APPENDIX I TO PART 200—FULL TEXT OF NOTICE OF FUNDING OPPORTUNITY The full text of the notice of funding op- portunity is organized in sections. The re- quired format outlined in this appendix indi- cates immediately following the title of each section whether that section is required in every announcement or is a Federal award- ing agency option. The format is designed so that similar types of information will appear in the same sections in announcements of different Federal funding opportunities. To- ward that end, there is text in each of the following sections to describe the types of in- formation that a Federal awarding agency would include in that section of an actual announcement. A Federal awarding agency that wishes to include information that the format does not specifically discuss may address that subject in whatever section(s) is most appropriate. For example, if a Federal awarding agency chooses to address performance goals in the announcement, it might do so in the funding opportunity description, the application con- tent, or the reporting requirements. Similarly, when this format calls for a type of information to be in a particular sec- tion, a Federal awarding agency wishing to address that subject in other sections may elect to repeat the information in those sec- tions or use cross references between the sec- tions (there should be hyperlinks for cross- references in any electronic versions of the 2 CFR Ch. II (1–1–21 Edition) announcement). For example, a Federal awarding agency may want to include Sec- tion A information about the types of non- Federal entities who are eligible to apply. The format specifies a standard location for that information in Section C.1 but does not preclude repeating the information in Sec- tion A or creating a cross reference between Section A and C.1, as long as a potential ap- plicant can find the information quickly and easily from the standard location. The sections of the full text of the an- nouncement are described in the following paragraphs. A. PROGRAM DESCRIPTION—REQUIRED This section contains the full program de- scription of the funding opportunity. It may be as long as needed to adequately commu- nicate to potential applicants the areas in which funding may be provided. It describes the Federal awarding agency’s funding prior- ities or the technical or focus areas in which the Federal awarding agency intends to pro- vide assistance. As appropriate, it may in- clude any program history (e.g., whether this is a new program or a new or changed area of program emphasis). This section must in- clude program goals and objectives, a ref- erence to the relevant Assistance Listings, a description of how the award will contribute to the achievement of the program’s goals and objectives, and the expected perform- ance goals, indicators, targets, baseline data, data collection, and other outcomes such Federal awarding agency expects to achieve, and may include examples of successful projects that have been funded previously. This section also may include other informa- tion the Federal awarding agency deems nec- essary, and must at a minimum include cita- tions for authorizing statutes and regula- tions for the funding opportunity. B. FEDERAL AWARD INFORMATION—REQUIRED This section provides sufficient informa- tion to help an applicant make an informed decision about whether to submit a proposal. Relevant information could include the total amount of funding that the Federal awarding agency expects to award through the an- nouncement; the expected performance indi- cators, targets, baseline data, and data col- lection; the anticipated number of Federal awards; the expected amounts of individual Federal awards (which may be a range); the amount of funding per Federal award, on av- erage, experienced in previous years; and the anticipated start dates and periods of per- formance for new Federal awards. This sec- tion also should address whether applica- tions for renewal or supplementation of ex- isting projects are eligible to compete with applications for new Federal awards. 214 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00226 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 419OMB Guidance This section also must indicate the type(s) of assistance instrument (e.g., grant, cooper- ative agreement) that may be awarded if ap- plications are successful. If cooperative agreements may be awarded, this section ei- ther should describe the ‘‘substantial in- volvement’’ that the Federal awarding agen- cy expects to have or should reference where the potential applicant can find that infor- mation (e.g., in the funding opportunity de- scription in Section A. or Federal award ad- ministration information in Section D. If procurement contracts also may be awarded, this must be stated. C. ELIGIBILITY INFORMATION This section addresses the considerations or factors that determine applicant or appli- cation eligibility. This includes the eligi- bility of particular types of applicant organi- zations, any factors affecting the eligibility of the principal investigator or project direc- tor, and any criteria that make particular projects ineligible. Federal agencies should make clear whether an applicant’s failure to meet an eligibility criterion by the time of an application deadline will result in the Federal awarding agency returning the ap- plication without review or, even though an application may be reviewed, will preclude the Federal awarding agency from making a Federal award. Key elements to be addressed are: 1. Eligible Applicants—Required. Announce- ments must clearly identify the types of en- tities that are eligible to apply. If there are no restrictions on eligibility, this section may simply indicate that all potential appli- cants are eligible. If there are restrictions on eligibility, it is important to be clear about the specific types of entities that are eligi- ble, not just the types that are ineligible. For example, if the program is limited to nonprofit organizations subject to 26 U.S.C. 501(c)(3) of the tax code (26 U.S.C. 501(c)(3)), the announcement should say so. Similarly, it is better to state explicitly that Native American tribal organizations are eligible than to assume that they can unambiguously infer that from a statement that nonprofit organizations may apply. Eligibility also can be expressed by exception, (e.g., open to all types of domestic applicants other than indi- viduals). This section should refer to any portion of Section D specifying documenta- tion that must be submitted to support an eligibility determination (e.g., proof of 501(c)(3) status as determined by the Internal Revenue Service or an authorizing tribal res- olution). To the extent that any funding re- striction in Section D.6 could affect the eli- gibility of an applicant or project, the an- nouncement must either restate that restric- tion in this section or provide a cross-ref- erence to its description in Section D.6. Pt. 200, App. I 2. Cost Sharing or Matching—Required. An- nouncements must state whether there is re- quired cost sharing, matching, or cost par- ticipation without which an application would be ineligible (if cost sharing is not re- quired, the announcement must explicitly say so). Required cost sharing may be a cer- tain percentage or amount, or may be in the form of contributions of specified items or activities (e.g., provision of equipment). It is important that the announcement be clear about any restrictions on the types of cost (e.g., in-kind contributions) that are accept- able as cost sharing. Cost sharing as an eligi- bility criterion includes requirements based in statute or regulation, as described in §200.306 of this Part. This section should refer to the appropriate portion(s) of section D. stating any pre-award requirements for submission of letters or other documentation to verify commitments to meet cost-sharing requirements if a Federal award is made. 3. Other—Required, if applicable. If there are other eligibility criteria (i.e., criteria that have the effect of making an application or project ineligible for Federal awards, wheth- er referred to as ‘‘responsiveness’’ criteria, ‘‘go-no go’’ criteria, ‘‘threshold’’ criteria, or in other ways), must be clearly stated and must include a reference to the regulation of requirement that describes the restriction, as applicable. For example, if entities that have been found to be in violation of a par- ticular Federal statute are ineligible, it is important to say so. This section must also state any limit on the number of applica- tions an applicant may submit under the an- nouncement and make clear whether the limitation is on the submitting organization, individual investigator/program director, or both. This section should also address any eligibility criteria for beneficiaries or for program participants other than Federal award recipients. D. APPLICATION AND SUBMISSION INFORMATION 1. Address to Request Application Package— Required. Potential applicants must be told how to get application forms, kits, or other materials needed to apply (if this announce- ment contains everything needed, this sec- tion need only say so). An Internet address where the materials can be accessed is ac- ceptable. However, since high-speed Internet access is not yet universally available for downloading documents, and applicants may have additional accessibility requirements, there also should be a way for potential ap- plicants to request paper copies of materials, such as a U.S. Postal Service mailing ad- dress, telephone or FAX number, Telephone Device for the Deaf (TDD), Text Telephone (TTY) number, and/or Federal Information Relay Service (FIRS) number. 2. Content and Form of Application Submis- sion—Required. This section must identify 215 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00227 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 420Pt. 200, App. I the required content of an application and the forms or formats that an applicant must use to submit it. If any requirements are stated elsewhere because they are general re- quirements that apply to multiple programs or funding opportunities, this section should refer to where those requirements may be found. This section also should include re- quired forms or formats as part of the an- nouncement or state where the applicant may obtain them. This section should specifically address content and form or format requirements for: i. Pre-applications, letters of intent, or white papers required or encouraged (see Section D.4), including any limitations on the number of pages or other formatting re- quirements similar to those for full applica- tions. ii. The application as a whole. For all sub- missions, this would include any limitations on the number of pages, font size and type- face, margins, paper size, number of copies, and sequence or assembly requirements. If electronic submission is permitted or re- quired, this could include special require- ments for formatting or signatures. iii. Component pieces of the application (e.g., if all copies of the application must bear original signatures on the face page or the program narrative may not exceed 10 pages). This includes any pieces that may be submitted separately by third parties (e.g., references or letters confirming commit- ments from third parties that will be con- tributing a portion of any required cost shar- ing). iv. Information that successful applicants must submit after notification of intent to make a Federal award, but prior to a Federal award. This could include evidence of com- pliance with requirements relating to human subjects or information needed to comply with the National Environmental Policy Act (NEPA) (42 U.S.C. 4321–4370h). 3. Unique entity identifier and System for Award Management (SAM)—Required. This paragraph must state clearly that each ap- plicant (unless the applicant is an individual or Federal awarding agency that is excepted from those requirements under 2 CFR 25.110(b) or (c), or has an exception approved by the Federal awarding agency under 2 CFR 25.110(d)) is required to: (i) Be registered in SAM before submitting its application; (ii) Provide a valid unique entity identifier in its application; and (iii) Continue to maintain an active SAM registration with current in- formation at all times during which it has an active Federal award or an application or plan under consideration by a Federal award- ing agency. It also must state that the Fed- eral awarding agency may not make a Fed- eral award to an applicant until the appli- cant has complied with all applicable unique entity identifier and SAM requirements and, 2 CFR Ch. II (1–1–21 Edition) if an applicant has not fully complied with the requirements by the time the Federal awarding agency is ready to make a Federal award, the Federal awarding agency may de- termine that the applicant is not qualified to receive a Federal award and use that deter- mination as a basis for making a Federal award to another applicant. 4. Submission Dates and Times—Required. Announcements must identify due dates and times for all submissions. This includes not only the full applications but also any pre- liminary submissions (e.g., letters of intent, white papers, or pre-applications). It also in- cludes any other submissions of information before Federal award that are separate from the full application. If the funding oppor- tunity is a general announcement that is open for a period of time with no specific due dates for applications, this section should say so. Note that the information on dates that is included in this section also must ap- pear with other overview information in a lo- cation preceding the full text of the an- nouncement (see §200.204 of this part). 5. Intergovernmental Review—Required, if ap- plicable. If the funding opportunity is subject to Executive Order 12372, ‘‘Intergovern- mental Review of Federal Programs,’’ the notice must say so and applicants must con- tact their state’s Single Point of Contact (SPOC) to find out about and comply with the state’s process under Executive Order 12372, it may be useful to inform potential applicants that the names and addresses of the SPOCs are listed in the Office of Manage- ment and Budget’s website. 6. Funding Restrictions—Required. Notices must include information on funding restric- tions in order to allow an applicant to de- velop an application and budget consistent with program requirements. Examples are whether construction is an allowable activ- ity, if there are any limitations on direct costs such as foreign travel or equipment purchases, and if there are any limits on in- direct costs (or facilities and administrative costs). Applicants must be advised if Federal awards will not allow reimbursement of pre- Federal award costs. 7. Other Submission Requirements— Required. This section must address any other submis- sion requirements not included in the other paragraphs of this section. This might in- clude the format of submission, i.e., paper or electronic, for each type of required submis- sion. Applicants should not be required to submit in more than one format and this sec- tion should indicate whether they may choose whether to submit applications in hard copy or electronically, may submit only in hard copy, or may submit only electroni- cally. This section also must indicate where ap- plications (and any pre-applications) must be submitted if sent by postal mail, electronic means, or hand-delivery. For postal mail 216 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00228 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 421OMB Guidance submission, this must include the name of an office, official, individual or function (e.g., application receipt center) and a complete mailing address. For electronic submission, this must include the URL or email address; whether a password(s) is required; whether particular software or other electronic capa- bilities are required; what to do in the event of system problems and a point of contact who will be available in the event the appli- cant experiences technical difficulties.1 E. APPLICATION REVIEW INFORMATION 1. Criteria—Required. This section must ad- dress the criteria that the Federal awarding agency will use to evaluate applications. This includes the merit and other review cri- teria that evaluators will use to judge appli- cations, including any statutory, regulatory, or other preferences (e.g., minority status or Native American tribal preferences) that will be applied in the review process. These criteria are distinct from eligibility criteria that are addressed before an application is accepted for review and any program policy or other factors that are applied during the selection process, after the review process is completed. The intent is to make the appli- cation process transparent so applicants can make informed decisions when preparing their applications to maximize fairness of the process. The announcement should clear- ly describe all criteria, including any sub- criteria. If criteria vary in importance, the announcement should specify the relative percentages, weights, or other means used to distinguish among them. For statutory, reg- ulatory, or other preferences, the announce- ment should provide a detailed explanation of those preferences with an explicit indica- tion of their effect (e.g., whether they result in additional points being assigned). If an applicant’s proposed cost sharing will be considered in the review process (as op- posed to being an eligibility criterion de- scribed in Section C.2), the announcement must specifically address how it will be con- sidered (e.g., to assign a certain number of additional points to applicants who offer cost sharing, or to break ties among applica- tions with equivalent scores after evaluation against all other factors). If cost sharing will not be considered in the evaluation, the an- nouncement should say so, so that there is no ambiguity for potential applicants. Vague statements that cost sharing is encouraged, without clarification as to what that means, are unhelpful to applicants. It also is impor- 1 With respect to electronic methods for providing information about funding oppor- tunities or accepting applicants’ submissions of information, each Federal awarding agen- cy is responsible for compliance with Section 508 of the Rehabilitation Act of 1973 (29 U.S.C. 794d). Pt. 200, App. I tant that the announcement be clear about any restrictions on the types of cost (e.g., in- kind contributions) that are acceptable as cost sharing. 2. Review and Selection Process—Required. This section may vary in the level of detail provided. The announcement must list any program policy or other factors or elements, other than merit criteria, that the selecting official may use in selecting applications for Federal award (e.g., geographical dispersion, program balance, or diversity). The Federal awarding agency may also include other ap- propriate details. For example, this section may indicate who is responsible for evalua- tion against the merit criteria (e.g., peers ex- ternal to the Federal awarding agency or Federal awarding agency personnel) and/or who makes the final selections for Federal awards. If there is a multi-phase review proc- ess (e.g., an external panel advising internal Federal awarding agency personnel who make final recommendations to the deciding official), the announcement may describe the phases. It also may include: the number of people on an evaluation panel and how it op- erates, the way reviewers are selected, re- viewer qualifications, and the way that con- flicts of interest are avoided. With respect to electronic methods for providing informa- tion about funding opportunities or accept- ing applicants’ submissions of information, each Federal awarding agency is responsible for compliance with Section 508 of the Reha- bilitation Act of 1973 (29 U.S.C. 794d). In addition, if the Federal awarding agency permits applicants to nominate suggested re- viewers of their applications or suggest those they feel may be inappropriate due to a con- flict of interest, that information should be included in this section. 3. For any Federal award under a notice of funding opportunity, if the Federal awarding agency anticipates that the total Federal share will be greater than the simplified ac- quisition threshold on any Federal award under a notice of funding opportunity may include, over the period of performance, this section must also inform applicants: i. That the Federal awarding agency, prior to making a Federal award with a total amount of Federal share greater than the simplified acquisition threshold, is required to review and consider any information about the applicant that is in the designated integrity and performance system accessible through SAM (currently FAPIIS) (see 41 U.S.C. 2313); ii. That an applicant, at its option, may re- view information in the designated integrity and performance systems accessible through SAM and comment on any information about itself that a Federal awarding agency pre- viously entered and is currently in the des- ignated integrity and performance system accessible through SAM; 217 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00229 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 422Pt. 200, App. I iii. That the Federal awarding agency will consider any comments by the applicant, in addition to the other information in the des- ignated integrity and performance system, in making a judgment about the applicant’s integrity, business ethics, and record of per- formance under Federal awards when com- pleting the review of risk posed by appli- cants as described in §200.206. 4. Anticipated Announcement and Federal Award Dates—Optional. This section is in- tended to provide applicants with informa- tion they can use for planning purposes. If there is a single application deadline fol- lowed by the simultaneous review of all ap- plications, the Federal awarding agency can include in this section information about the anticipated dates for announcing or noti- fying successful and unsuccessful applicants and for having Federal awards in place. If ap- plications are received and evaluated on a ‘‘rolling’’ basis at different times during an extended period, it may be appropriate to give applicants an estimate of the time need- ed to process an application and notify the applicant of the Federal awarding agency’s decision. F. FEDERAL AWARD ADMINISTRATION INFORMATION 1. Federal Award Notices—Required. This section must address what a successful appli- cant can expect to receive following selec- tion. If the Federal awarding agency’s prac- tice is to provide a separate notice stating that an application has been selected before it actually makes the Federal award, this section would be the place to indicate that the letter is not an authorization to begin performance (to the extent that it allows charging to Federal awards of pre-award costs at the non-Federal entity’s own risk). This section should indicate that the notice of Federal award signed by the grants officer (or equivalent) is the authorizing document, and whether it is provided through postal mail or by electronic means and to whom. It also may address the timing, form, and con- tent of notifications to unsuccessful appli- cants. See also §200.211. 2. Administrative and National Policy Re- quirements—Required. This section must iden- tify the usual administrative and national policy requirements the Federal awarding agency’s Federal awards may include. Pro- viding this information lets a potential ap- plicant identify any requirements with which it would have difficulty complying if its application is successful. In those cases, early notification about the requirements al- lows the potential applicant to decide not to apply or to take needed actions before re- ceiving the Federal award. The announce- ment need not include all of the terms and conditions of the Federal award, but may refer to a document (with information about 2 CFR Ch. II (1–1–21 Edition) how to obtain it) or Internet site where ap- plicants can see the terms and conditions. If this funding opportunity will lead to Federal awards with some special terms and condi- tions that differ from the Federal awarding agency’s usual (sometimes called ‘‘general’’) terms and conditions, this section should highlight those special terms and conditions. Doing so will alert applicants that have re- ceived Federal awards from the Federal awarding agency previously and might not otherwise expect different terms and condi- tions. For the same reason, the announce- ment should inform potential applicants about special requirements that could apply to particular Federal awards after the review of applications and other information, based on the particular circumstances of the effort to be supported (e.g., if human subjects were to be involved or if some situations may jus- tify special terms on intellectual property, data sharing or security requirements). 3. Reporting—Required. This section must include general information about the type (e.g., financial or performance), frequency, and means of submission (paper or elec- tronic) of post-Federal award reporting re- quirements. Highlight any special reporting requirements for Federal awards under this funding opportunity that differ (e.g., by re- port type, frequency, form/format, or cir- cumstances for use) from what the Federal awarding agency’s Federal awards usually require. Federal awarding agencies must also describe in this section all relevant require- ments such as those at 2 CFR 180.335 and 180.350. If the Federal share of any Federal award may include more than $500,000 over the pe- riod of performance, this section must in- form potential applicants about the post award reporting requirements reflected in appendix XII to this part. G. FEDERAL AWARDING AGENCY CONTACT(S)— REQUIRED The announcement must give potential ap- plicants a point(s) of contact for answering questions or helping with problems while the funding opportunity is open. The intent of this requirement is to be as helpful as pos- sible to potential applicants, so the Federal awarding agency should consider approaches such as giving: i. Points of contact who may be reached in multiple ways (e.g., by telephone, FAX, and/ or email, as well as regular mail). ii. A fax or email address that multiple people access, so that someone will respond even if others are unexpectedly absent dur- ing critical periods. iii. Different contacts for distinct kinds of help (e.g., one for questions of programmatic content and a second for administrative questions). 218 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00230 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 423OMB Guidance H. OTHER INFORMATION—OPTIONAL This section may include any additional information that will assist a potential ap- plicant. For example, the section might: i. Indicate whether this is a new program or a one-time initiative. ii. Mention related programs or other up- coming or ongoing Federal awarding agency funding opportunities for similar activities. iii. Include current Internet addresses for Federal awarding agency Web sites that may be useful to an applicant in understanding the program. iv. Alert applicants to the need to identify proprietary information and inform them about the way the Federal awarding agency will handle it. v. Include certain routine notices to appli- cants (e.g., that the Federal Government is not obligated to make any Federal award as a result of the announcement or that only grants officers can bind the Federal Govern- ment to the expenditure of funds). [78 FR 78608, Dec. 26, 2013, as amended at 80 FR 43310, July 22, 2015; 85 FR 49575, Aug. 13, 2020] APPENDIX II TO PART 200—CONTRACT PROVISIONS FOR NON-FEDERAL ENTI- TY CONTRACTS UNDER FEDERAL AWARDS In addition to other provisions required by the Federal agency or non-Federal entity, all contracts made by the non-Federal entity under the Federal award must contain provi- sions covering the following, as applicable. (A) Contracts for more than the simplified acquisition threshold, which is the inflation adjusted amount determined by the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) as authorized by 41 U.S.C. 1908, must address administrative, contractual, or legal rem- edies in instances where contractors violate or breach contract terms, and provide for such sanctions and penalties as appropriate. (B) All contracts in excess of $10,000 must address termination for cause and for con- venience by the non-Federal entity including the manner by which it will be effected and the basis for settlement. (C) Equal Employment Opportunity. Ex- cept as otherwise provided under 41 CFR Part 60, all contracts that meet the defini- tion of ‘‘federally assisted construction con- tract’’ in 41 CFR Part 60–1.3 must include the equal opportunity clause provided under 41 CFR 60–1.4(b), in accordance with Executive Order 11246, ‘‘Equal Employment Oppor- tunity’’ (30 FR 12319, 12935, 3 CFR Part, 1964– 1965 Comp., p. 339), as amended by Executive Order 11375, ‘‘Amending Executive Order 11246 Relating to Equal Employment Oppor- tunity,’’ and implementing regulations at 41 CFR part 60, ‘‘Office of Federal Contract Pt. 200, App. II Compliance Programs, Equal Employment Opportunity, Department of Labor.’’ (D) Davis-Bacon Act, as amended (40 U.S.C. 3141–3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compli- ance with the Davis-Bacon Act (40 U.S.C. 3141–3144, and 3146–3148) as supplemented by Department of Labor regulations (29 CFR Part 5, ‘‘Labor Standards Provisions Appli- cable to Contracts Covering Federally Fi- nanced and Assisted Construction’’). In ac- cordance with the statute, contractors must be required to pay wages to laborers and me- chanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week. The non-Federal entity must place a copy of the current pre- vailing wage determination issued by the De- partment of Labor in each solicitation. The decision to award a contract or subcontract must be conditioned upon the acceptance of the wage determination. The non-Federal en- tity must report all suspected or reported violations to the Federal awarding agency. The contracts must also include a provision for compliance with the Copeland ‘‘Anti- Kickback’’ Act (40 U.S.C. 3145), as supple- mented by Department of Labor regulations (29 CFR Part 3, ‘‘Contractors and Sub- contractors on Public Building or Public Work Financed in Whole or in Part by Loans or Grants from the United States’’). The Act provides that each contractor or sub- recipient must be prohibited from inducing, by any means, any person employed in the construction, completion, or repair of public work, to give up any part of the compensa- tion to which he or she is otherwise entitled. The non-Federal entity must report all sus- pected or reported violations to the Federal awarding agency. (E) Contract Work Hours and Safety Standards Act (40 U.S.C. 3701–3708). Where applicable, all contracts awarded by the non- Federal entity in excess of $100,000 that in- volve the employment of mechanics or labor- ers must include a provision for compliance with 40 U.S.C. 3702 and 3704, as supplemented by Department of Labor regulations (29 CFR Part 5). Under 40 U.S.C. 3702 of the Act, each contractor must be required to compute the wages of every mechanic and laborer on the basis of a standard work week of 40 hours. Work in excess of the standard work week is permissible provided that the worker is com- pensated at a rate of not less than one and a half times the basic rate of pay for all hours worked in excess of 40 hours in the work week. The requirements of 40 U.S.C. 3704 are applicable to construction work and provide that no laborer or mechanic must be re- quired to work in surroundings or under working conditions which are unsanitary, 219 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00231 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 424Pt. 200, App. III hazardous or dangerous. These requirements do not apply to the purchases of supplies or materials or articles ordinarily available on the open market, or contracts for transpor- tation or transmission of intelligence. (F) Rights to Inventions Made Under a Contract or Agreement. If the Federal award meets the definition of ‘‘funding agreement’’ under 37 CFR §401.2 (a) and the recipient or subrecipient wishes to enter into a contract with a small business firm or nonprofit orga- nization regarding the substitution of par- ties, assignment or performance of experi- mental, developmental, or research work under that ‘‘funding agreement,’’ the recipi- ent or subrecipient must comply with the re- quirements of 37 CFR Part 401, ‘‘Rights to In- ventions Made by Nonprofit Organizations and Small Business Firms Under Govern- ment Grants, Contracts and Cooperative Agreements,’’ and any implementing regula- tions issued by the awarding agency. (G) Clean Air Act (42 U.S.C. 7401–7671q.) and the Federal Water Pollution Control Act (33 U.S.C. 1251–1387), as amended—Contracts and subgrants of amounts in excess of $150,000 must contain a provision that requires the non-Federal award to agree to comply with all applicable standards, orders or regula- tions issued pursuant to the Clean Air Act (42 U.S.C. 7401–7671q) and the Federal Water Pollution Control Act as amended (33 U.S.C. 1251–1387). Violations must be reported to the Federal awarding agency and the Regional Office of the Environmental Protection Agency (EPA). (H) Debarment and Suspension (Executive Orders 12549 and 12689)—A contract award (see 2 CFR 180.220) must not be made to par- ties listed on the governmentwide exclusions in the System for Award Management (SAM), in accordance with the OMB guide- lines at 2 CFR 180 that implement Executive Orders 12549 (3 CFR part 1986 Comp., p. 189) and 12689 (3 CFR part 1989 Comp., p. 235), ‘‘Debarment and Suspension.’’ SAM Exclu- sions contains the names of parties debarred, suspended, or otherwise excluded by agen- cies, as well as parties declared ineligible under statutory or regulatory authority other than Executive Order 12549. (I) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)—Contractors that apply or bid for an award exceeding $100,000 must file the required certification. Each tier certifies to the tier above that it will not and has not used Federal appropriated funds to pay any person or organization for influencing or at- tempting to influence an officer or employee of any agency, a member of Congress, officer or employee of Congress, or an employee of a member of Congress in connection with ob- taining any Federal contract, grant or any other award covered by 31 U.S.C. 1352. Each tier must also disclose any lobbying with non-Federal funds that takes place in con- nection with obtaining any Federal award. 2 CFR Ch. II (1–1–21 Edition) Such disclosures are forwarded from tier to tier up to the non-Federal award. (J) See §200.323. (K) See §200.216. (L) See §200.322. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75888, Dec. 19, 2014; 85 FR 49577, Aug. 13, 2020] APPENDIX III TO PART 200—INDIRECT (F&A) COSTS IDENTIFICATION AND ASSIGNMENT, AND RATE DETERMINA- TION FOR INSTITUTIONS OF HIGHER EDUCATION (IHES) A. GENERAL This appendix provides criteria for identi- fying and computing indirect (or indirect (F&A)) rates at IHEs (institutions). Indirect (F&A) costs are those that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, an in- structional activity, or any other institu- tional activity. See subsection B.1 for a dis- cussion of the components of indirect (F&A) costs. 1. Major Functions of an Institution Refers to instruction, organized research, other sponsored activities and other institu- tional activities as defined in this section: a. Instruction means the teaching and training activities of an institution. Except for research training as provided in sub- section b, this term includes all teaching and training activities, whether they are offered for credits toward a degree or certificate or on a non-credit basis, and whether they are offered through regular academic depart- ments or separate divisions, such as a sum- mer school division or an extension division. Also considered part of this major function are departmental research, and, where agreed to, university research. (1) Sponsored instruction and training means specific instructional or training activity es- tablished by grant, contract, or cooperative agreement. For purposes of the cost prin- ciples, this activity may be considered a major function even though an institution’s accounting treatment may include it in the instruction function. (2) Departmental research means research, development and scholarly activities that are not organized research and, con- sequently, are not separately budgeted and accounted for. Departmental research, for purposes of this document, is not considered as a major function, but as a part of the in- struction function of the institution. (3) Only mandatory cost sharing or cost sharing specifically committed in the project budget must be included in the organized re- search base for computing the indirect (F&A) 220 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00232 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 425OMB Guidance cost rate or reflected in any allocation of in- direct costs. Salary costs above statutory limits are not considered cost sharing. b. Organized research means all research and development activities of an institution that are separately budgeted and accounted for. It includes: (1) Sponsored research means all research and development activities that are spon- sored by Federal and non-Federal agencies and organizations. This term includes activi- ties involving the training of individuals in research techniques (commonly called re- search training) where such activities utilize the same facilities as other research and de- velopment activities and where such activi- ties are not included in the instruction func- tion. (2) University research means all research and development activities that are sepa- rately budgeted and accounted for by the in- stitution under an internal application of in- stitutional funds. University research, for purposes of this document, must be com- bined with sponsored research under the function of organized research. c. Other sponsored activities means programs and projects financed by Federal and non- Federal agencies and organizations which in- volve the performance of work other than in- struction and organized research. Examples of such programs and projects are health service projects and community service pro- grams. However, when any of these activities are undertaken by the institution without outside support, they may be classified as other institutional activities. d. Other institutional activities means all ac- tivities of an institution except for instruc- tion, departmental research, organized re- search, and other sponsored activities, as de- fined in this section; indirect (F&A) cost ac- tivities identified in this Appendix para- graph B, Identification and assignment of in- direct (F&A) costs; and specialized services facilities described in §200.468 of this part. 2. Criteria for Distribution a. Base period. A base period for distribu- tion of indirect (F&A) costs is the period during which the costs are incurred. The base period normally should coincide with the fiscal year established by the institution, but in any event the base period should be so selected as to avoid inequities in the dis- tribution of costs. b. Need for cost groupings. The overall ob- jective of the indirect (F&A) cost allocation process is to distribute the indirect (F&A) costs described in Section B, Identification and assignment of indirect (F&A) costs, to the major functions of the institution in pro- portions reasonably consistent with the na- ture and extent of their use of the institu- tion’s resources. In order to achieve this ob- jective, it may be necessary to provide for selective distribution by establishing sepa- Pt. 200, App. III rate groupings of cost within one or more of the indirect (F&A) cost categories referred to in subsection B.1. In general, the cost groupings established within a category should constitute, in each case, a pool of those items of expense that are considered to be of like nature in terms of their relative contribution to (or degree of remoteness from) the particular cost objectives to which distribution is appropriate. Cost groupings should be established considering the general guides provided in subsection c of this sec- tion. Each such pool or cost grouping should then be distributed individually to the re- lated cost objectives, using the distribution base or method most appropriate in light of the guidelines set forth in subsection d of this section. c. General considerations on cost groupings. The extent to which separate cost groupings and selective distribution would be appro- priate at an institution is a matter of judg- ment to be determined on a case-by-case basis. Typical situations which may warrant the establishment of two or more separate cost groupings (based on account classifica- tion or analysis) within an indirect (F&A) cost category include but are not limited to the following: (1) If certain items or categories of expense relate solely to one of the major functions of the institution or to less than all functions, such expenses should be set aside as a sepa- rate cost grouping for direct assignment or selective allocation in accordance with the guides provided in subsections b and d. (2) If any types of expense ordinarily treat- ed as general administration or depart- mental administration are charged to Fed- eral awards as direct costs, expenses applica- ble to other activities of the institution when incurred for the same purposes in like circumstances must, through separate cost groupings, be excluded from the indirect (F&A) costs allocable to those Federal awards and included in the direct cost of other activities for cost allocation purposes. (3) If it is determined that certain expenses are for the support of a service unit or facil- ity whose output is susceptible of measure- ment on a workload or other quantitative basis, such expenses should be set aside as a separate cost grouping for distribution on such basis to organized research, instruc- tional, and other activities at the institution or within the department. (4) If activities provide their own pur- chasing, personnel administration, building maintenance or similar service, the distribu- tion of general administration and general expenses, or operation and maintenance ex- penses to such activities should be accom- plished through cost groupings which include only that portion of central indirect (F&A) costs (such as for overall management) which are properly allocable to such activi- ties. 221 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00233 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 426Pt. 200, App. III (5) If the institution elects to treat fringe benefits as indirect (F&A) charges, such costs should be set aside as a separate cost grouping for selective distribution to related cost objectives. (6) The number of separate cost groupings within a category should be held within practical limits, after taking into consider- ation the materiality of the amounts in- volved and the degree of precision attainable through less selective methods of distribu- tion. d. Selection of distribution method. (1) Actual conditions must be taken into account in selecting the method or base to be used in distributing individual cost groupings. The essential consideration in se- lecting a base is that it be the one best suit- ed for assigning the pool of costs to cost ob- jectives in accordance with benefits derived; with a traceable cause-and-effect relation- ship; or with logic and reason, where neither benefit nor a cause-and-effect relationship is determinable. (2) If a cost grouping can be identified di- rectly with the cost objective benefitted, it should be assigned to that cost objective. (3) If the expenses in a cost grouping are more general in nature, the distribution may be based on a cost analysis study which re- sults in an equitable distribution of the costs. Such cost analysis studies may take into consideration weighting factors, popu- lation, or space occupied if appropriate. Cost analysis studies, however, must (a) be appro- priately documented in sufficient detail for subsequent review by the cognizant agency for indirect costs, (b) distribute the costs to the related cost objectives in accordance with the relative benefits derived, (c) be sta- tistically sound, (d) be performed specifically at the institution at which the results are to be used, and (e) be reviewed periodically, but not less frequently than rate negotiations, updated if necessary, and used consistently. Any assumptions made in the study must be stated and explained. The use of cost anal- ysis studies and periodic changes in the method of cost distribution must be fully justified. (4) If a cost analysis study is not per- formed, or if the study does not result in an equitable distribution of the costs, the dis- tribution must be made in accordance with the appropriate base cited in Section B, un- less one of the following conditions is met: (a) It can be demonstrated that the use of a different base would result in a more equi- table allocation of the costs, or that a more readily available base would not increase the costs charged to Federal awards, or (b) The institution qualifies for, and elects to use, the simplified method for computing indirect (F&A) cost rates described in Sec- tion D. (5) Notwithstanding subsection (3), effec- tive July 1, 1998, a cost analysis or base other 2 CFR Ch. II (1–1–21 Edition) than that in Section B must not be used to distribute utility or student services costs. Instead, subsection B.4.c, may be used in the recovery of utility costs. e. Order of distribution. (1) Indirect (F&A) costs are the broad cat- egories of costs discussed in Section B.1. (2) Depreciation, interest expenses, oper- ation and maintenance expenses, and general administrative and general expenses should be allocated in that order to the remaining indirect (F&A) cost categories as well as to the major functions and specialized service facilities of the institution. Other cost cat- egories may be allocated in the order deter- mined to be most appropriate by the institu- tions. When cross allocation of costs is made as provided in subsection (3), this order of al- location does not apply. (3) Normally an indirect (F&A) cost cat- egory will be considered closed once it has been allocated to other cost objectives, and costs may not be subsequently allocated to it. However, a cross allocation of costs be- tween two or more indirect (F&A) cost cat- egories may be used if such allocation will result in a more equitable allocation of costs. If a cross allocation is used, an appro- priate modification to the composition of the indirect (F&A) cost categories described in Section B is required. B. IDENTIFICATION AND ASSIGNMENT OF INDIRECT (F&A) COSTS 1. Definition of Facilities and Administration See §200.414 which provides the basis for these indirect cost requirements. 2. Depreciation a. The expenses under this heading are the portion of the costs of the institution’s buildings, capital improvements to land and buildings, and equipment which are com- puted in accordance with §200.436. b. In the absence of the alternatives pro- vided for in Section A.2.d, the expenses in- cluded in this category must be allocated in the following manner: (1) Depreciation on buildings used exclu- sively in the conduct of a single function, and on capital improvements and equipment used in such buildings, must be assigned to that function. (2) Depreciation on buildings used for more than one function, and on capital improve- ments and equipment used in such buildings, must be allocated to the individual functions performed in each building on the basis of usable square feet of space, excluding com- mon areas such as hallways, stairwells, and rest rooms. (3) Depreciation on buildings, capital im- provements and equipment related to space (e.g., individual rooms, laboratories) used jointly by more than one function (as deter- mined by the users of the space) must be 222 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00234 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 427OMB Guidance treated as follows. The cost of each jointly used unit of space must be allocated to bene- fitting functions on the basis of: (a) The employee full-time equivalents (FTEs) or salaries and wages of those indi- vidual functions benefitting from the use of that space; or (b) Institution-wide employee FTEs or sal- aries and wages applicable to the benefitting major functions (see Section A.1) of the in- stitution. (4) Depreciation on certain capital im- provements to land, such as paved parking areas, fences, sidewalks, and the like, not in- cluded in the cost of buildings, must be allo- cated to user categories of students and em- ployees on a full-time equivalent basis. The amount allocated to the student category must be assigned to the instruction function of the institution. The amount allocated to the employee category must be further allo- cated to the major functions of the institu- tion in proportion to the salaries and wages of all employees applicable to those func- tions. 3. Interest Interest on debt associated with certain buildings, equipment and capital improve- ments, as defined in §200.449, must be classi- fied as an expenditure under the category Facilities. These costs must be allocated in the same manner as the depreciation on the buildings, equipment and capital improve- ments to which the interest relates. 4. Operation and Maintenance Expenses a. The expenses under this heading are those that have been incurred for the admin- istration, supervision, operation, mainte- nance, preservation, and protection of the in- stitution’s physical plant. They include ex- penses normally incurred for such items as janitorial and utility services; repairs and ordinary or normal alterations of buildings, furniture and equipment; care of grounds; maintenance and operation of buildings and other plant facilities; security; earthquake and disaster preparedness; environmental safety; hazardous waste disposal; property, liability and all other insurance relating to property; space and capital leasing; facility planning and management; and central re- ceiving. The operation and maintenance ex- pense category should also include its allo- cable share of fringe benefit costs, deprecia- tion, and interest costs. b. In the absence of the alternatives pro- vided for in Section A.2.d, the expenses in- cluded in this category must be allocated in the same manner as described in subsection 2.b for depreciation. c. A utility cost adjustment of up to 1.3 percentage points may be included in the ne- gotiated indirect cost rate of the IHE for or- ganized research, per the computation alter- Pt. 200, App. III natives in paragraphs (c)(1) and (2) of this section: (1) Where space is devoted to a single func- tion and metering allows unambiguous meas- urement of usage related to that space, costs must be assigned to the function located in that space. (2) Where space is allocated to different functions and metering does not allow unam- biguous measurement of usage by function, costs must be allocated as follows: (i) Utilities costs should be apportioned to functions in the same manner as deprecia- tion, based on the calculated difference be- tween the site or building actual square foot- age for monitored research laboratory space (site, building, floor, or room), and a sepa- rate calculation prepared by the IHE using the ‘‘effective square footage’’ described in subsection (c)(2)(ii) of this section. (ii) ‘‘Effective square footage’’ allocated to research laboratory space must be calculated as the actual square footage times the rel- ative energy utilization index (REUI) posted on the OMB Web site at the time of a rate determination. A. This index is the ratio of a laboratory energy use index (lab EUI) to the cor- responding index for overall average college or university space (college EUI). B. In July 2012, values for these two indices (taken respectively from the Lawrence Berkeley Laboratory ‘‘Labs for the 21st Cen- tury’’ benchmarking tool and the US Depart- ment of Energy ‘‘Buildings Energy Databook’’ and were 310 kBtu/sq ft-yr. and 155 kBtu/sq ft-yr., so that the adjustment ratio is 2.0 by this methodology. To retain currency, OMB will adjust the EUI numbers from time to time (no more often than annu- ally nor less often than every 5 years), using reliable and publicly disclosed data. Current values of both the EUIs and the REUI will be posted on the OMB website. 5. General Administration and General Expenses a. The expenses under this heading are those that have been incurred for the general executive and administrative offices of edu- cational institutions and other expenses of a general character which do not relate solely to any major function of the institution; i.e., solely to (1) instruction, (2) organized re- search, (3) other sponsored activities, or (4) other institutional activities. The general administration and general expense category should also include its allocable share of fringe benefit costs, operation and mainte- nance expense, depreciation, and interest costs. Examples of general administration and general expenses include: Those expenses incurred by administrative offices that serve the entire university system of which the in- stitution is a part; central offices of the in- stitution such as the President’s or Chancellor’s office, the offices for institu- tion-wide financial management, business 223 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00235 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 428Pt. 200, App. III services, budget and planning, personnel management, and safety and risk manage- ment; the office of the General Counsel; and the operations of the central administrative management information systems. General administration and general expenses must not include expenses incurred within non- university-wide deans’ offices, academic de- partments, organized research units, or simi- lar organizational units. (See subsection 6.) b. In the absence of the alternatives pro- vided for in Section A.2.d, the expenses in- cluded in this category must be grouped first according to common major functions of the institution to which they render services or provide benefits. The aggregate expenses of each group must then be allocated to serv- iced or benefitted functions on the modified total cost basis. Modified total costs consist of the same elements as those in Section C.2. When an activity included in this indirect (F&A) cost category provides a service or product to another institution or organiza- tion, an appropriate adjustment must be made to either the expenses or the basis of allocation or both, to assure a proper alloca- tion of costs. 6. Departmental Administration Expenses a. The expenses under this heading are those that have been incurred for adminis- trative and supporting services that benefit common or joint departmental activities or objectives in academic deans’ offices, aca- demic departments and divisions, and orga- nized research units. Organized research units include such units as institutes, study centers, and research centers. Departmental administration expenses are subject to the following limitations. (1) Academic deans’ offices. Salaries and operating expenses are limited to those at- tributable to administrative functions. (2) Academic departments: (a) Salaries and fringe benefits attrib- utable to the administrative work (including bid and proposal preparation) of faculty (in- cluding department heads) and other profes- sional personnel conducting research and/or instruction, must be allowed at a rate of 3.6 percent of modified total direct costs. This category does not include professional busi- ness or professional administrative officers. This allowance must be added to the com- putation of the indirect (F&A) cost rate for major functions in Section C; the expenses covered by the allowance must be excluded from the departmental administration cost pool. No documentation is required to sup- port this allowance. (b) Other administrative and supporting expenses incurred within academic depart- ments are allowable provided they are treat- ed consistently in like circumstances. This would include expenses such as the salaries of secretarial and clerical staffs, the salaries of administrative officers and assistants, 2 CFR Ch. II (1–1–21 Edition) travel, office supplies, stockrooms, and the like. (3) Other fringe benefit costs applicable to the salaries and wages included in sub- sections (1) and (2) are allowable, as well as an appropriate share of general administra- tion and general expenses, operation and maintenance expenses, and depreciation. (4) Federal agencies may authorize reim- bursement of additional costs for department heads and faculty only in exceptional cases where an institution can demonstrate undue hardship or detriment to project perform- ance. b. The following guidelines apply to the de- termination of departmental administrative costs as direct or indirect (F&A) costs. (1) In developing the departmental admin- istration cost pool, special care should be ex- ercised to ensure that costs incurred for the same purpose in like circumstances are treated consistently as either direct or indi- rect (F&A) costs. For example, salaries of technical staff, laboratory supplies (e.g., chemicals), telephone toll charges, animals, animal care costs, computer costs, travel costs, and specialized shop costs must be treated as direct costs wherever identifiable to a particular cost objective. Direct charg- ing of these costs may be accomplished through specific identification of individual costs to benefitting cost objectives, or through recharge centers or specialized serv- ice facilities, as appropriate under the cir- cumstances. See §§200.413(c) and 200.468. (2) Items such as office supplies, postage, local telephone costs, and memberships must normally be treated as indirect (F&A) costs. c. In the absence of the alternatives pro- vided for in Section A.2.d, the expenses in- cluded in this category must be allocated as follows: (1) The administrative expenses of the dean’s office of each college and school must be allocated to the academic departments within that college or school on the modified total cost basis. (2) The administrative expenses of each academic department, and the department’s share of the expenses allocated in subsection (1) must be allocated to the appropriate func- tions of the department on the modified total cost basis. 7. Sponsored Projects Administration a. The expenses under this heading are lim- ited to those incurred by a separate organi- zation(s) established primarily to administer sponsored projects, including such functions as grant and contract administration (Fed- eral and non-Federal), special security, pur- chasing, personnel, administration, and edit- ing and publishing of research and other re- ports. They include the salaries and expenses of the head of such organization, assistants, and immediate staff, together with the sala- ries and expenses of personnel engaged in 224 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00236 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 429OMB Guidance supporting activities maintained by the or- ganization, such as stock rooms, print shops, and the like. This category also includes an allocable share of fringe benefit costs, gen- eral administration and general expenses, operation and maintenance expenses, and de- preciation. Appropriate adjustments will be made for services provided to other functions or organizations. b. In the absence of the alternatives pro- vided for in Section A.2.d, the expenses in- cluded in this category must be allocated to the major functions of the institution under which the sponsored projects are conducted on the basis of the modified total cost of sponsored projects. c. An appropriate adjustment must be made to eliminate any duplicate charges to Federal awards when this category includes similar or identical activities as those in- cluded in the general administration and general expense category or other indirect (F&A) cost items, such as accounting, pro- curement, or personnel administration. 8. Library Expenses a. The expenses under this heading are those that have been incurred for the oper- ation of the library, including the cost of books and library materials purchased for the library, less any items of library income that qualify as applicable credits under §200.406. The library expense category should also include the fringe benefits applicable to the salaries and wages included therein, an appropriate share of general administration and general expense, operation and mainte- nance expense, and depreciation. Costs in- curred in the purchases of rare books (mu- seum-type books) with no value to Federal awards should not be allocated to them. b. In the absence of the alternatives pro- vided for in Section A.2.d, the expenses in- cluded in this category must be allocated first on the basis of primary categories of users, including students, professional em- ployees, and other users. (1) The student category must consist of full-time equivalent students enrolled at the institution, regardless of whether they earn credits toward a degree or certificate. (2) The professional employee category must consist of all faculty members and other professional employees of the institu- tion, on a full-time equivalent basis. This category may also include post-doctorate fellows and graduate students. (3) The other users category must consist of a reasonable factor as determined by insti- tutional records to account for all other users of library facilities. c. Amount allocated in paragraph b of this section must be assigned further as follows: (1) The amount in the student category must be assigned to the instruction function of the institution. Pt. 200, App. III (2) The amount in the professional em- ployee category must be assigned to the major functions of the institution in propor- tion to the salaries and wages of all faculty members and other professional employees applicable to those functions. (3) The amount in the other users category must be assigned to the other institutional activities function of the institution. 9. Student Administration and Services a. The expenses under this heading are those that have been incurred for the admin- istration of student affairs and for services to students, including expenses of such ac- tivities as deans of students, admissions, reg- istrar, counseling and placement services, student advisers, student health and infir- mary services, catalogs, and commence- ments and convocations. The salaries of members of the academic staff whose respon- sibilities to the institution require adminis- trative work that benefits sponsored projects may also be included to the extent that the portion charged to student administration is determined in accordance with subpart E of this Part. This expense category also in- cludes the fringe benefit costs applicable to the salaries and wages included therein, an appropriate share of general administration and general expenses, operation and mainte- nance, interest expense, and depreciation. b. In the absence of the alternatives pro- vided for in Section A.2.d, the expenses in this category must be allocated to the in- struction function, and subsequently to Fed- eral awards in that function. 10. Offset for Indirect (F&A) Expenses Other- wise Provided for by the Federal Govern- ment a. The items to be accumulated under this heading are the reimbursements and other payments from the Federal Government which are made to the institution to support solely, specifically, and directly, in whole or in part, any of the administrative or service activities described in subsections 2 through 9. b. The items in this group must be treated as a credit to the affected individual indirect (F&A) cost category before that category is allocated to benefitting functions. C. DETERMINATION AND APPLICATION OF INDIRECT (F&A) COST RATE OR RATES 1. Indirect (F&A) Cost Pools a. (1) Subject to subsection b, the separate categories of indirect (F&A) costs allocated to each major function of the institution as prescribed in Section B, must be aggregated and treated as a common pool for that func- tion. The amount in each pool must be di- vided by the distribution base described in 225 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00237 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 430Pt. 200, App. III subsection 2 to arrive at a single indirect (F&A) cost rate for each function. (2) The rate for each function is used to distribute indirect (F&A) costs to individual Federal awards of that function. Since a common pool is established for each major function of the institution, a separate indi- rect (F&A) cost rate would be established for each of the major functions described in Sec- tion A.1 under which Federal awards are car- ried out. (3) Each institution’s indirect (F&A) cost rate process must be appropriately designed to ensure that Federal sponsors do not in any way subsidize the indirect (F&A) costs of other sponsors, specifically activities spon- sored by industry and foreign governments. Accordingly, each allocation method used to identify and allocate the indirect (F&A) cost pools, as described in Sections A.2 and B.2 through B.9, must contain the full amount of the institution’s modified total costs or other appropriate units of measurement used to make the computations. In addition, the final rate distribution base (as defined in subsection 2) for each major function (orga- nized research, instruction, etc., as described in Section A.1 functions of an institution) must contain all the programs or activities which utilize the indirect (F&A) costs allo- cated to that major function. At the time an indirect (F&A) cost proposal is submitted to a cognizant agency for indirect costs, each institution must describe the process it uses to ensure that Federal funds are not used to subsidize industry and foreign government funded programs. 2. The Distribution Basis Indirect (F&A) costs must be distributed to applicable Federal awards and other benefit- ting activities within each major function (see section A.1) on the basis of modified total direct costs (MTDC), consisting of all salaries and wages, fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period covered by the subaward). MTDC is defined in §200.1. For this purpose, an indi- rect (F&A) cost rate should be determined for each of the separate indirect (F&A) cost pools developed pursuant to subsection 1. The rate in each case should be stated as the percentage which the amount of the par- ticular indirect (F&A) cost pool is of the modified total direct costs identified with such pool. 3. Negotiated Lump Sum for Indirect (F&A) Costs A negotiated fixed amount in lieu of indi- rect (F&A) costs may be appropriate for self- contained, off-campus, or primarily subcon- tracted activities where the benefits derived from an institution’s indirect (F&A) services cannot be readily determined. Such nego- 2 CFR Ch. II (1–1–21 Edition) tiated indirect (F&A) costs will be treated as an offset before allocation to instruction, or- ganized research, other sponsored activities, and other institutional activities. The base on which such remaining expenses are allo- cated should be appropriately adjusted. 4. Predetermined Rates for Indirect (F&A) Costs Public Law 87–638 (76 Stat. 437) as amended (41 U.S.C. 4708) authorizes the use of pre- determined rates in determining the ‘‘indi- rect costs’’ (indirect (F&A) costs) applicable under research agreements with educational institutions. The stated objectives of the law are to simplify the administration of cost- type research and development contracts (in- cluding grants) with educational institu- tions, to facilitate the preparation of their budgets, and to permit more expeditious closeout of such contracts when the work is completed. In view of the potential advan- tages offered by this procedure, negotiation of predetermined rates for indirect (F&A) costs for a period of two to four years should be the norm in those situations where the cost experience and other pertinent facts available are deemed sufficient to enable the parties involved to reach an informed judg- ment as to the probable level of indirect (F&A) costs during the ensuing accounting periods. 5. Negotiated Fixed Rates and Carry-Forward Provisions When a fixed rate is negotiated in advance for a fiscal year (or other time period), the over- or under-recovery for that year may be included as an adjustment to the indirect (F&A) cost for the next rate negotiation. When the rate is negotiated before the carry- forward adjustment is determined, the carry- forward amount may be applied to the next subsequent rate negotiation. When such ad- justments are to be made, each fixed rate ne- gotiated in advance for a given period will be computed by applying the expected indirect (F&A) costs allocable to Federal awards for the forecast period plus or minus the carry- forward adjustment (over- or under-recovery) from the prior period, to the forecast dis- tribution base. Unrecovered amounts under lump-sum agreements or cost-sharing provi- sions of prior years must not be carried for- ward for consideration in the new rate nego- tiation. There must, however, be an advance understanding in each case between the in- stitution and the cognizant agency for indi- rect costs as to whether these differences will be considered in the rate negotiation rather than making the determination after the differences are known. Further, institu- tions electing to use this carry-forward pro- vision may not subsequently change without prior approval of the cognizant agency for indirect costs. In the event that an institu- tion returns to a post-determined rate, any 226 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00238 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 431OMB Guidance over- or under-recovery during the period in which negotiated fixed rates and carry-for- ward provisions were followed will be in- cluded in the subsequent post-determined rates. Where multiple rates are used, the same procedure will be applicable for deter- mining each rate. 6. Provisional and Final Rates for Indirect (F&A) Costs Where the cognizant agency for indirect costs determines that cost experience and other pertinent facts do not justify the use of predetermined rates, or a fixed rate with a carry-forward, or if the parties cannot agree on an equitable rate, a provisional rate must be established. To prevent substantial overpayment or underpayment, the provi- sional rate may be adjusted by the cognizant agency for indirect costs during the institu- tion’s fiscal year. Predetermined or fixed rates may replace provisional rates at any time prior to the close of the institution’s fiscal year. If a provisional rate is not re- placed by a predetermined or fixed rate prior to the end of the institution’s fiscal year, a final rate will be established and upward or downward adjustments will be made based on the actual allowable costs incurred for the period involved. 7. Fixed Rates for the Life of the Sponsored Agreement a. Except as provided in paragraph (c)(1) of §200.414, Federal agencies must use the nego- tiated rates in effect at the time of the ini- tial award throughout the life of the Federal award. Award levels for Federal awards may not be adjusted in future years as a result of changes in negotiated rates. ‘‘Negotiated rates’’ per the rate agreement include final, fixed, and predetermined rates and exclude provisional rates. ‘‘Life’’ for the purpose of this subsection means each competitive seg- ment of a project. A competitive segment is a period of years approved by the Federal awarding agency at the time of the Federal award. If negotiated rate agreements do not extend through the life of the Federal award at the time of the initial award, then the ne- gotiated rate for the last year of the Federal award must be extended through the end of the life of the Federal award. b. Except as provided in §200.414, when an educational institution does not have a nego- tiated rate with the Federal Government at the time of an award (because the edu- cational institution is a new recipient or the parties cannot reach agreement on a rate), the provisional rate used at the time of the award must be adjusted once a rate is nego- tiated and approved by the cognizant agency for indirect costs. Pt. 200, App. III 8. Limitation on Reimbursement of Administrative Costs a. Notwithstanding the provisions of sub- section C.1.a, the administrative costs charged to Federal awards awarded or amended (including continuation and re- newal awards) with effective dates beginning on or after the start of the institution’s first fiscal year which begins on or after October 1, 1991, must be limited to 26% of modified total direct costs (as defined in subsection 2) for the total of General Administration and General Expenses, Departmental Adminis- tration, Sponsored Projects Administration, and Student Administration and Services (including their allocable share of deprecia- tion, interest costs, operation and mainte- nance expenses, and fringe benefits costs, as provided by Section B, and all other types of expenditures not listed specifically under one of the subcategories of facilities in Sec- tion B. b. Institutions should not change their ac- counting or cost allocation methods if the ef- fect is to change the charging of a particular type of cost from F&A to direct, or to reclas- sify costs, or increase allocations from the administrative pools identified in paragraph B.1 of this Appendix to the other F&A cost pools or fringe benefits. Cognizant agencies for indirect cost are authorized to allow changes where an institution’s charging practices are at variance with acceptable practices followed by a substantial majority of other institutions. 9. Alternative Method for Administrative Costs a. Notwithstanding the provisions of sub- section C.1.a, an institution may elect to claim a fixed allowance for the ‘‘Adminis- tration’’ portion of indirect (F&A) costs. The allowance could be either 24% of modified total direct costs or a percentage equal to 95% of the most recently negotiated fixed or predetermined rate for the cost pools in- cluded under ‘‘Administration’’ as defined in Section B.1, whichever is less. Under this al- ternative, no cost proposal need be prepared for the ‘‘Administration’’ portion of the indi- rect (F&A) cost rate nor is further identifica- tion or documentation of these costs re- quired (see subsection c). Where a negotiated indirect (F&A) cost agreement includes this alternative, an institution must make no further charges for the expenditure cat- egories described in Section B.5, Section B.6, Section B.7, and Section B.9. b. In negotiations of rates for subsequent periods, an institution that has elected the option of subsection a may continue to exer- cise it at the same rate without further iden- tification or documentation of costs. c. If an institution elects to accept a threshold rate as defined in subsection a of this section, it is not required to perform a detailed analysis of its administrative costs. 227 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00239 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 432Pt. 200, App. III However, in order to compute the facilities components of its indirect (F&A) cost rate, the institution must reconcile its indirect (F&A) cost proposal to its financial state- ments and make appropriate adjustments and reclassifications to identify the costs of each major function as defined in Section A.1, as well as to identify and allocate the fa- cilities components. Administrative costs that are not identified as such by the insti- tution’s accounting system (such as those in- curred in academic departments) will be classified as instructional costs for purposes of reconciling indirect (F&A) cost proposals to financial statements and allocating facili- ties costs. 10. Individual Rate Components In order to provide mutually agreed-upon information for management purposes, each indirect (F&A) cost rate negotiation or de- termination must include development of a rate for each indirect (F&A) cost pool as well as the overall indirect (F&A) cost rate. 11. Negotiation and Approval of Indirect (F&A) Rate a. Cognizant agency for indirect costs is defined in Subpart A. (1) Cost negotiation cognizance is assigned to the Department of Health and Human Services (HHS) or the Department of De- fense’s Office of Naval Research (DOD), nor- mally depending on which of the two agen- cies (HHS or DOD) provides more funds di- rectly to the educational institution for the most recent three years. Information on funding must be derived from relevant data gathered by the National Science Founda- tion. In cases where neither HHS nor DOD provides Federal funding directly to an edu- cational institution, the cognizant agency for indirect costs assignment must default to HHS. Notwithstanding the method for cog- nizance determination described in this sec- tion, other arrangements for cognizance of a particular educational institution may also be based in part on the types of research per- formed at the educational institution and must be decided based on mutual agreement between HHS and DOD. Where a non-Federal entity only receives funds as a subrecipient, see §200.332. (2) After cognizance is established, it must continue for a five-year period. b. Acceptance of rates. See §200.414. c. Correcting deficiencies. The cognizant agency for indirect costs must negotiate changes needed to correct systems defi- ciencies relating to accountability for Fed- eral awards. Cognizant agencies for indirect costs must address the concerns of other af- fected agencies, as appropriate, and must ne- gotiate special rates for Federal agencies that are required to limit recovery of indi- rect costs by statute. 2 CFR Ch. II (1–1–21 Edition) d. Resolving questioned costs. The cog- nizant agency for indirect costs must con- duct any necessary negotiations with an edu- cational institution regarding amounts ques- tioned by audit that are due the Federal Government related to costs covered by a ne- gotiated agreement. e. Reimbursement. Reimbursement to cog- nizant agencies for indirect costs for work performed under this Part may be made by reimbursement billing under the Economy Act, 31 U.S.C. 1535. f. Procedure for establishing facilities and administrative rates must be established by one of the following methods: (1) Formal negotiation. The cognizant agency for indirect costs is responsible for negotiating and approving rates for an edu- cational institution on behalf of all Federal agencies. Federal awarding agencies that do not have cognizance for indirect costs must notify the cognizant agency for indirect costs of specific concerns (i.e., a need to es- tablish special cost rates) which could affect the negotiation process. The cognizant agen- cy for indirect costs must address the con- cerns of all interested agencies, as appro- priate. A pre-negotiation conference may be scheduled among all interested agencies, if necessary. The cognizant agency for indirect costs must then arrange a negotiation con- ference with the educational institution. (2) Other than formal negotiation. The cog- nizant agency for indirect costs and edu- cational institution may reach an agreement on rates without a formal negotiation con- ference; for example, through correspond- ence or use of the simplified method de- scribed in this section D of this Appendix. g. Formalizing determinations and agree- ments. The cognizant agency for indirect costs must formalize all determinations or agreements reached with an educational in- stitution and provide copies to other agen- cies having an interest. Determinations should include a description of any adjust- ments, the actual amount, both dollar and percentage adjusted, and the reason for mak- ing adjustments. h. Disputes and disagreements. Where the cognizant agency for indirect costs is unable to reach agreement with an educational in- stitution with regard to rates or audit reso- lution, the appeal system of the cognizant agency for indirect costs must be followed for resolution of the disagreement. 12. Standard Format for Submission For facilities and administrative (indirect (F&A)) rate proposals, educational institu- tions must use the standard format, shown in section E of this appendix, to submit their indirect (F&A) rate proposal to the cog- nizant agency for indirect costs. The cog- nizant agency for indirect costs may, on an institution-by-institution basis, grant excep- tions from all or portions of Part II of the 228 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00240 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 433OMB Guidance standard format requirement. This require- ment does not apply to educational institu- tions that use the simplified method for cal- culating indirect (F&A) rates, as described in Section D of this Appendix. As provided in section C.10 of this appen- dix, each F&A cost rate negotiation or deter- mination must include development of a rate for each F&A cost pool as well as the overall F&A rate. D. SIMPLIFIED METHOD FOR SMALL INSTITUTIONS 1. General a. Where the total direct cost of work cov- ered by this Part at an institution does not exceed $10 million in a fiscal year, the sim- plified procedure described in subsections 2 or 3 may be used in determining allowable indirect (F&A) costs. Under this simplified procedure, the institution’s most recent an- nual financial report and immediately avail- able supporting information must be utilized as a basis for determining the indirect (F&A) cost rate applicable to all Federal awards. The institution may use either the salaries and wages (see subsection 2) or modified total direct costs (see subsection 3) as the distribution basis. b. The simplified procedure should not be used where it produces results which appear inequitable to the Federal Government or the institution. In any such case, indirect (F&A) costs should be determined through use of the regular procedure. 2. Simplified Procedure—Salaries and Wages Base a. Establish the total amount of salaries and wages paid to all employees of the insti- tution. b. Establish an indirect (F&A) cost pool consisting of the expenditures (exclusive of capital items and other costs specifically identified as unallowable) which customarily are classified under the following titles or their equivalents: (1) General administration and general ex- penses (exclusive of costs of student adminis- tration and services, student activities, stu- dent aid, and scholarships). (2) Operation and maintenance of physical plant and depreciation (after appropriate ad- justment for costs applicable to other insti- tutional activities). (3) Library. (4) Department administration expenses, which will be computed as 20 percent of the salaries and expenses of deans and heads of departments. In those cases where expenditures classi- fied under subsection (1) have previously been allocated to other institutional activi- ties, they may be included in the indirect (F&A) cost pool. The total amount of sala- Pt. 200, App. III ries and wages included in the indirect (F&A) cost pool must be separately identified. c. Establish a salary and wage distribution base, determined by deducting from the total of salaries and wages as established in sub- section a from the amount of salaries and wages included under subsection b. d. Establish the indirect (F&A) cost rate, determined by dividing the amount in the in- direct (F&A) cost pool, subsection b, by the amount of the distribution base, subsection c. e. Apply the indirect (F&A) cost rate to di- rect salaries and wages for individual agree- ments to determine the amount of indirect (F&A) costs allocable to such agreements. 3. Simplified Procedure—Modified Total Direct Cost Base a. Establish the total costs incurred by the institution for the base period. b. Establish an indirect (F&A) cost pool consisting of the expenditures (exclusive of capital items and other costs specifically identified as unallowable) which customarily are classified under the following titles or their equivalents: (1) General administration and general ex- penses (exclusive of costs of student adminis- tration and services, student activities, stu- dent aid, and scholarships). (2) Operation and maintenance of physical plant and depreciation (after appropriate ad- justment for costs applicable to other insti- tutional activities). (3) Library. (4) Department administration expenses, which will be computed as 20 percent of the salaries and expenses of deans and heads of departments. In those cases where expendi- tures classified under subsection (1) have previously been allocated to other institu- tional activities, they may be included in the indirect (F&A) cost pool. The modified total direct costs amount included in the indirect (F&A) cost pool must be separately identi- fied. c. Establish a modified total direct cost distribution base, as defined in Section C.2, The distribution basis, that consists of all institution’s direct functions. d. Establish the indirect (F&A) cost rate, determined by dividing the amount in the in- direct (F&A) cost pool, subsection b, by the amount of the distribution base, subsection c. e. Apply the indirect (F&A) cost rate to the modified total direct costs for individual agreements to determine the amount of indi- rect (F&A) costs allocable to such agree- ments. E. DOCUMENTATION REQUIREMENTS The standard format for documentation re- quirements for indirect (indirect (F&A)) rate 229 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00241 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 434Pt. 200, App. IV proposals for claiming costs under the reg- ular method is available on the OMB website. F. CERTIFICATION 1. Certification of Charges To assure that expenditures for Federal awards are proper and in accordance with the agreement documents and approved project budgets, the annual and/or final fis- cal reports or vouchers requesting payment under the agreements will include a certifi- cation, signed by an authorized official of the university, which reads ‘‘By signing this report, I certify to the best of my knowledge and belief that the report is true, complete, and accurate, and the expenditures, disburse- ments and cash receipts are for the purposes and intent set forth in the award documents. I am aware that any false, fictitious, or fraudulent information, or the omission of any material fact, may subject me to crimi- nal, civil or administrative penalties for fraud, false statements, false claims or oth- erwise. (U.S. Code, Title 18, Section 1001 and Title 31, Sections 3729–3733 and 3801–3812)’’. 2. Certification of Indirect (F&A) Costs a. Policy. Cognizant agencies must not ac- cept a proposed indirect cost rate unless such costs have been certified by the edu- cational institution using the Certificate of indirect (F&A) Costs set forth in subsection F.2.c b. The certificate must be signed on behalf of the institution by the chief financial offi- cer or an individual designated by an indi- vidual at a level no lower than vice president or chief financial officer. An indirect (F&A) cost rate is not binding upon the Federal Government if the most re- cent required proposal from the institution has not been certified. Where it is necessary to establish indirect (F&A) cost rates, and the institution has not submitted a certified proposal for establishing such rates in ac- cordance with the requirements of this sec- tion, the Federal Government must unilater- ally establish such rates. Such rates may be based upon audited historical data or such other data that have been furnished to the cognizant agency for indirect costs and for which it can be demonstrated that all unal- lowable costs have been excluded. When indi- rect (F&A) cost rates are unilaterally estab- lished by the Federal Government because of failure of the institution to submit a cer- tified proposal for establishing such rates in accordance with this section, the rates es- tablished will be set at a level low enough to ensure that potentially unallowable costs will not be reimbursed. c. Certificate. The certificate required by this section must be in the following form: 2 CFR Ch. II (1–1–21 Edition) Certificate of Indirect (F&A) Costs This is to certify that to the best of my knowledge and belief: (1) I have reviewed the indirect (F&A) cost proposal submitted herewith; (2) All costs included in this proposal [iden- tify date] to establish billing or final indi- rect (F&A) costs rate for [identify period covered by rate] are allowable in accordance with the requirements of the Federal agree- ment(s) to which they apply and with the cost principles applicable to those agree- ments. (3) This proposal does not include any costs which are unallowable under subpart E of this part such as (without limitation): Public relations costs, contributions and donations, entertainment costs, fines and penalties, lob- bying costs, and defense of fraud pro- ceedings; and (4) All costs included in this proposal are properly allocable to Federal agreements on the basis of a beneficial or causal relation- ship between the expenses incurred and the agreements to which they are allocated in accordance with applicable requirements. I declare that the foregoing is true and cor- rect. Institution of Higher Education: Signature: llllllllllllllllll Name of Official: llllllllllllll Title: llllllllllllllllllll Date of Execution: lllllllllllll [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75888, Dec. 19, 2014; 80 FR 54409, Sept. 10, 2015; 85 FR 49577, Aug. 13, 2020] APPENDIX IV TO PART 200—INDIRECT (F&A) COSTS IDENTIFICATION AND ASSIGNMENT, AND RATE DETERMINA- TION FOR NONPROFIT ORGANIZA- TIONS A. GENERAL 1. Indirect costs are those that have been incurred for common or joint objectives and cannot be readily identified with a par- ticular final cost objective. Direct cost of minor amounts may be treated as indirect costs under the conditions described in §200.413(d). After direct costs have been de- termined and assigned directly to awards or other work as appropriate, indirect costs are those remaining to be allocated to benefit- ting cost objectives. A cost may not be allo- cated to a Federal award as an indirect cost if any other cost incurred for the same pur- pose, in like circumstances, has been as- signed to a Federal award as a direct cost. 2. ‘‘Major nonprofit organizations’’ are de- fined in paragraph (a) of §200.414. See indi- rect cost rate reporting requirements in sec- tions B.2.e and B.3.g of this Appendix. 230 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00242 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 435OMB Guidance B. ALLOCATION OF INDIRECT COSTS AND DETERMINATION OF INDIRECT COST RATES 1. General a. If a nonprofit organization has only one major function, or where all its major func- tions benefit from its indirect costs to ap- proximately the same degree, the allocation of indirect costs and the computation of an indirect cost rate may be accomplished through simplified allocation procedures, as described in section B.2 of this Appendix. b. If an organization has several major functions which benefit from its indirect costs in varying degrees, allocation of indi- rect costs may require the accumulation of such costs into separate cost groupings which then are allocated individually to ben- efitting functions by means of a base which best measures the relative degree of benefit. The indirect costs allocated to each function are then distributed to individual Federal awards and other activities included in that function by means of an indirect cost rate(s). c. The determination of what constitutes an organization’s major functions will de- pend on its purpose in being; the types of services it renders to the public, its clients, and its members; and the amount of effort it devotes to such activities as fundraising, public information and membership activi- ties. d. Specific methods for allocating indirect costs and computing indirect cost rates along with the conditions under which each method should be used are described in sec- tion B.2 through B.5 of this Appendix. e. The base period for the allocation of in- direct costs is the period in which such costs are incurred and accumulated for allocation to work performed in that period. The base period normally should coincide with the or- ganization’s fiscal year but, in any event, must be so selected as to avoid inequities in the allocation of the costs. 2. Simplified Allocation Method a. Where an organization’s major functions benefit from its indirect costs to approxi- mately the same degree, the allocation of in- direct costs may be accomplished by (i) sepa- rating the organization’s total costs for the base period as either direct or indirect, and (ii) dividing the total allowable indirect costs (net of applicable credits) by an equi- table distribution base. The result of this process is an indirect cost rate which is used to distribute indirect costs to individual Federal awards. The rate should be expressed as the percentage which the total amount of allowable indirect costs bears to the base se- lected. This method should also be used where an organization has only one major function encompassing a number of indi- vidual projects or activities, and may be Pt. 200, App. IV used where the level of Federal awards to an organization is relatively small. b. Both the direct costs and the indirect costs must exclude capital expenditures and unallowable costs. However, unallowable costs which represent activities must be in- cluded in the direct costs under the condi- tions described in §200.413(e). c. The distribution base may be total di- rect costs (excluding capital expenditures and other distorting items, such as sub- awards for $25,000 or more), direct salaries and wages, or other base which results in an equitable distribution. The distribution base must exclude participant support costs as de- fined in §200.1. d. Except where a special rate(s) is re- quired in accordance with section B.5 of this Appendix, the indirect cost rate developed under the above principles is applicable to all Federal awards of the organization. If a special rate(s) is required, appropriate modi- fications must be made in order to develop the special rate(s). e. For an organization that receives more than $10 million in direct Federal funding in a fiscal year, a breakout of the indirect cost component into two broad categories, Facili- ties and Administration as defined in para- graph (a) of §200.414, is required. The rate in each case must be stated as the percentage which the amount of the particular indirect cost category (i.e., Facilities or Administra- tion) is of the distribution base identified with that category. 3. Multiple Allocation Base Method a. General. Where an organization’s indi- rect costs benefit its major functions in varying degrees, indirect costs must be accu- mulated into separate cost groupings, as de- scribed in subparagraph b. Each grouping must then be allocated individually to bene- fitting functions by means of a base which best measures the relative benefits. The de- fault allocation bases by cost pool are de- scribed in section B.3.c of this Appendix. b. Identification of indirect costs. Cost groupings must be established so as to per- mit the allocation of each grouping on the basis of benefits provided to the major func- tions. Each grouping must constitute a pool of expenses that are of like character in terms of functions they benefit and in terms of the allocation base which best measures the relative benefits provided to each func- tion. The groupings are classified within the two broad categories: ‘‘Facilities’’ and ‘‘Ad- ministration,’’ as described in section A.3 of this Appendix. The indirect cost pools are de- fined as follows: (1) Depreciation. The expenses under this heading are the portion of the costs of the organization’s buildings, capital improve- ments to land and buildings, and equipment which are computed in accordance with §200.436. 231 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00243 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 436Pt. 200, App. IV (2) Interest. Interest on debt associated with certain buildings, equipment and cap- ital improvements are computed in accord- ance with §200.449. (3) Operation and maintenance expenses. The expenses under this heading are those that have been incurred for the administra- tion, operation, maintenance, preservation, and protection of the organization’s physical plant. They include expenses normally in- curred for such items as: janitorial and util- ity services; repairs and ordinary or normal alterations of buildings, furniture and equip- ment; care of grounds; maintenance and op- eration of buildings and other plant facili- ties; security; earthquake and disaster pre- paredness; environmental safety; hazardous waste disposal; property, liability and other insurance relating to property; space and capital leasing; facility planning and man- agement; and central receiving. The oper- ation and maintenance expenses category must also include its allocable share of fringe benefit costs, depreciation, and inter- est costs. (4) General administration and general ex- penses. The expenses under this heading are those that have been incurred for the overall general executive and administrative offices of the organization and other expenses of a general nature which do not relate solely to any major function of the organization. This category must also include its allocable share of fringe benefit costs, operation and maintenance expense, depreciation, and in- terest costs. Examples of this category in- clude central offices, such as the director’s office, the office of finance, business serv- ices, budget and planning, personnel, safety and risk management, general counsel, man- agement information systems, and library costs. In developing this cost pool, special care should be exercised to ensure that costs in- curred for the same purpose in like cir- cumstances are treated consistently as ei- ther direct or indirect costs. For example, salaries of technical staff, project supplies, project publication, telephone toll charges, computer costs, travel costs, and specialized services costs must be treated as direct costs wherever identifiable to a particular pro- gram. The salaries and wages of administra- tive and pooled clerical staff should nor- mally be treated as indirect costs. Direct charging of these costs may be appropriate as described in §200.413. Items such as office supplies, postage, local telephone costs, peri- odicals and memberships should normally be treated as indirect costs. c. Allocation bases. Actual conditions must be taken into account in selecting the base to be used in allocating the expenses in each grouping to benefitting functions. The essential consideration in selecting a method or a base is that it is the one best suited for assigning the pool of costs to cost objectives 2 CFR Ch. II (1–1–21 Edition) in accordance with benefits derived; a trace- able cause and effect relationship; or logic and reason, where neither the cause nor the effect of the relationship is determinable. When an allocation can be made by assign- ment of a cost grouping directly to the func- tion benefitted, the allocation must be made in that manner. When the expenses in a cost grouping are more general in nature, the al- location must be made through the use of a selected base which produces results that are equitable to both the Federal Government and the organization. The distribution must be made in accordance with the bases de- scribed herein unless it can be demonstrated that the use of a different base would result in a more equitable allocation of the costs, or that a more readily available base would not increase the costs charged to Federal awards. The results of special cost studies (such as an engineering utility study) must not be used to determine and allocate the in- direct costs to Federal awards. (1) Depreciation. Depreciation expenses must be allocated in the following manner: (a) Depreciation on buildings used exclu- sively in the conduct of a single function, and on capital improvements and equipment used in such buildings, must be assigned to that function. (b) Depreciation on buildings used for more than one function, and on capital improve- ments and equipment used in such buildings, must be allocated to the individual functions performed in each building on the basis of usable square feet of space, excluding com- mon areas, such as hallways, stairwells, and restrooms. (c) Depreciation on buildings, capital im- provements and equipment related space (e.g., individual rooms, and laboratories) used jointly by more than one function (as determined by the users of the space) must be treated as follows. The cost of each joint- ly used unit of space must be allocated to the benefitting functions on the basis of: (i) the employees and other users on a full- time equivalent (FTE) basis or salaries and wages of those individual functions benefit- ting from the use of that space; or (ii) organization-wide employee FTEs or salaries and wages applicable to the benefit- ting functions of the organization. (d) Depreciation on certain capital im- provements to land, such as paved parking areas, fences, sidewalks, and the like, not in- cluded in the cost of buildings, must be allo- cated to user categories on a FTE basis and distributed to major functions in proportion to the salaries and wages of all employees applicable to the functions. (2) Interest. Interest costs must be allo- cated in the same manner as the deprecia- tion on the buildings, equipment and capital equipment to which the interest relates. (3) Operation and maintenance expenses. Operation and maintenance expenses must 232 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00244 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 437OMB Guidance be allocated in the same manner as the de- preciation. (4) General administration and general ex- penses. General administration and general expenses must be allocated to benefitting functions based on modified total costs (MTC). The MTC is the modified total direct costs (MTDC), as described in §200.1, plus the allocated indirect cost proportion. The ex- penses included in this category could be grouped first according to major functions of the organization to which they render serv- ices or provide benefits. The aggregate ex- penses of each group must then be allocated to benefitting functions based on MTC. d. Order of distribution. (1) Indirect cost categories consisting of depreciation, interest, operation and mainte- nance, and general administration and gen- eral expenses must be allocated in that order to the remaining indirect cost categories as well as to the major functions of the organi- zation. Other cost categories should be allo- cated in the order determined to be most ap- propriate by the organization. This order of allocation does not apply if cross allocation of costs is made as provided in section B.3.d.2 of this Appendix. (2) Normally, an indirect cost category will be considered closed once it has been allo- cated to other cost objectives, and costs must not be subsequently allocated to it. However, a cross allocation of costs between two or more indirect costs categories could be used if such allocation will result in a more equitable allocation of costs. If a cross allocation is used, an appropriate modifica- tion to the composition of the indirect cost categories is required. e. Application of indirect cost rate or rates. Except where a special indirect cost rate(s) is required in accordance with section B.5 of this Appendix, the separate groupings of indirect costs allocated to each major function must be aggregated and treated as a common pool for that function. The costs in the common pool must then be distributed to individual Federal awards included in that function by use of a single indirect cost rate. f. Distribution basis. Indirect costs must be distributed to applicable Federal awards and other benefitting activities within each major function on the basis of MTDC (see definition in §200.1). g. Individual Rate Components. An indi- rect cost rate must be determined for each separate indirect cost pool developed. The rate in each case must be stated as the per- centage which the amount of the particular indirect cost pool is of the distribution base identified with that pool. Each indirect cost rate negotiation or determination agreement must include development of the rate for each indirect cost pool as well as the overall indirect cost rate. The indirect cost pools must be classified within two broad cat- Pt. 200, App. IV egories: ‘‘Facilities’’ and ‘‘Administration,’’ as described in §200.414(a). 4. Direct Allocation Method a. Some nonprofit organizations treat all costs as direct costs except general adminis- tration and general expenses. These organi- zations generally separate their costs into three basic categories: (i) General adminis- tration and general expenses, (ii) fund- raising, and (iii) other direct functions (in- cluding projects performed under Federal awards). Joint costs, such as depreciation, rental costs, operation and maintenance of facilities, telephone expenses, and the like are prorated individually as direct costs to each category and to each Federal award or other activity using a base most appropriate to the particular cost being prorated. b. This method is acceptable, provided each joint cost is prorated using a base which ac- curately measures the benefits provided to each Federal award or other activity. The bases must be established in accordance with reasonable criteria and be supported by cur- rent data. This method is compatible with the Standards of Accounting and Financial Reporting for Voluntary Health and Welfare Organizations issued jointly by the National Health Council, Inc., the National Assembly of Voluntary Health and Social Welfare Or- ganizations, and the United Way of America. c. Under this method, indirect costs con- sist exclusively of general administration and general expenses. In all other respects, the organization’s indirect cost rates must be computed in the same manner as that de- scribed in section B.2 of this Appendix. 5. Special Indirect Cost Rates In some instances, a single indirect cost rate for all activities of an organization or for each major function of the organization may not be appropriate, since it would not take into account those different factors which may substantially affect the indirect costs applicable to a particular segment of work. For this purpose, a particular segment of work may be that performed under a sin- gle Federal award or it may consist of work under a group of Federal awards performed in a common environment. These factors may include the physical location of the work, the level of administrative support re- quired, the nature of the facilities or other resources employed, the scientific disciplines or technical skills involved, the organiza- tional arrangements used, or any combina- tion thereof. When a particular segment of work is performed in an environment which appears to generate a significantly different level of indirect costs, provisions should be made for a separate indirect cost pool appli- cable to such work. The separate indirect cost pool should be developed during the course of the regular allocation process, and 233 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00245 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 438Pt. 200, App. IV the separate indirect cost rate resulting therefrom should be used, provided it is de- termined that (i) the rate differs signifi- cantly from that which would have been ob- tained under sections B.2, B.3, and B.4 of this Appendix, and (ii) the volume of work to which the rate would apply is material. C. NEGOTIATION AND APPROVAL OF INDIRECT COST RATES 1. Definitions As used in this section, the following terms have the meanings set forth in this section: a. Cognizant agency for indirect costs means the Federal agency responsible for negoti- ating and approving indirect cost rates for a nonprofit organization on behalf of all Fed- eral agencies. b. Predetermined rate means an indirect cost rate, applicable to a specified current or fu- ture period, usually the organization’s fiscal year. The rate is based on an estimate of the costs to be incurred during the period. A pre- determined rate is not subject to adjust- ment. c. Fixed rate means an indirect cost rate which has the same characteristics as a pre- determined rate, except that the difference between the estimated costs and the actual costs of the period covered by the rate is car- ried forward as an adjustment to the rate computation of a subsequent period. d. Final rate means an indirect cost rate applicable to a specified past period which is based on the actual costs of the period. A final rate is not subject to adjustment. e. Provisional rate or billing rate means a temporary indirect cost rate applicable to a specified period which is used for funding, in- terim reimbursement, and reporting indirect costs on Federal awards pending the estab- lishment of a final rate for the period. f. Indirect cost proposal means the docu- mentation prepared by an organization to substantiate its claim for the reimbursement of indirect costs. This proposal provides the basis for the review and negotiation leading to the establishment of an organization’s in- direct cost rate. g. Cost objective means a function, organiza- tional subdivision, contract, Federal award, or other work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of proc- esses, projects, jobs and capitalized projects. 2. Negotiation and Approval of Rates a. Unless different arrangements are agreed to by the Federal agencies concerned, the Federal agency with the largest dollar value of Federal awards directly funded to an organization will be designated as the cog- nizant agency for indirect costs for the nego- tiation and approval of the indirect cost rates and, where necessary, other rates such as fringe benefit and computer charge-out 2 CFR Ch. II (1–1–21 Edition) rates. Once an agency is assigned cognizance for a particular nonprofit organization, the assignment will not be changed unless there is a shift in the dollar volume of the Federal awards directly funded to the organization for at least three years. All concerned Fed- eral agencies must be given the opportunity to participate in the negotiation process but, after a rate has been agreed upon, it will be accepted by all Federal agencies. When a Federal agency has reason to believe that special operating factors affecting its Fed- eral awards necessitate special indirect cost rates in accordance with section B.5 of this Appendix, it will, prior to the time the rates are negotiated, notify the cognizant agency for indirect costs. (See also §200.414.) If the nonprofit does not receive any funding from any Federal agency, the pass-through entity is responsible for the negotiation of the indi- rect cost rates in accordance with §200.332(a)(4). b. Except as otherwise provided in §200.414(f), a nonprofit organization which has not previously established an indirect cost rate with a Federal agency must submit its initial indirect cost proposal immediately after the organization is advised that a Fed- eral award will be made and, in no event, later than three months after the effective date of the Federal award. c. Unless approved by the cognizant agency for indirect costs in accordance with §200.414(g), organizations that have pre- viously established indirect cost rates must submit a new indirect cost proposal to the cognizant agency for indirect costs within six months after the close of each fiscal year. d. A predetermined rate may be negotiated for use on Federal awards where there is rea- sonable assurance, based on past experience and reliable projection of the organization’s costs, that the rate is not likely to exceed a rate based on the organization’s actual costs. e. Fixed rates may be negotiated where predetermined rates are not considered ap- propriate. A fixed rate, however, must not be negotiated if (i) all or a substantial portion of the organization’s Federal awards are ex- pected to expire before the carry-forward ad- justment can be made; (ii) the mix of Federal and non-Federal work at the organization is too erratic to permit an equitable carry-for- ward adjustment; or (iii) the organization’s operations fluctuate significantly from year to year. f. Provisional and final rates must be nego- tiated where neither predetermined nor fixed rates are appropriate. Predetermined or fixed rates may replace provisional rates at any time prior to the close of the organiza- tion’s fiscal year. If that event does not occur, a final rate will be established and up- ward or downward adjustments will be made based on the actual allowable costs incurred for the period involved. 234 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00246 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 439OMB Guidance g. The results of each negotiation must be formalized in a written agreement between the cognizant agency for indirect costs and the nonprofit organization. The cognizant agency for indirect costs must make avail- able copies of the agreement to all concerned Federal agencies. h. If a dispute arises in a negotiation of an indirect cost rate between the cognizant agency for indirect costs and the nonprofit organization, the dispute must be resolved in accordance with the appeals procedures of the cognizant agency for indirect costs. i. To the extent that problems are encoun- tered among the Federal agencies in connec- tion with the negotiation and approval proc- ess, OMB will lend assistance as required to resolve such problems in a timely manner. D. Certification of Indirect (F&A) Costs (1) Required Certification. No proposal to establish indirect (F&A) cost rates must be acceptable unless such costs have been cer- tified by the nonprofit organization using the Certificate of Indirect (F&A) Costs set forth in section j. of this appendix. The cer- tificate must be signed on behalf of the orga- nization by an individual at a level no lower than vice president or chief financial officer for the organization. (2) Each indirect cost rate proposal must be accompanied by a certification in the fol- lowing form: Certificate of Indirect (F&A) Costs This is to certify that to the best of my knowledge and belief: (1) I have reviewed the indirect (F&A) cost proposal submitted herewith; (2) All costs included in this proposal [iden- tify date] to establish billing or final indi- rect (F&A) costs rate for [identify period covered by rate] are allowable in accordance with the requirements of the Federal awards to which they apply and with subpart E of this part. (3) This proposal does not include any costs which are unallowable under subpart E of this part such as (without limitation): Public relations costs, contributions and donations, entertainment costs, fines and penalties, lob- bying costs, and defense of fraud pro- ceedings; and (4) All costs included in this proposal are properly allocable to Federal awards on the basis of a beneficial or causal relationship between the expenses incurred and the Fed- eral awards to which they are allocated in accordance with applicable requirements. I declare that the foregoing is true and cor- rect. Nonprofit Organization: lllllllllll Signature: llllllllllllllllll Name of Official: llllllllllllll Title: llllllllllllllllllll Pt. 200, App. V Date of Execution: lllllllllllll [78 FR 78608, Dec. 26, 2013, as amended at 80 FR 54410, Sept. 10, 2015; 85 FR 49579, Aug. 13, 2020] APPENDIX V TO PART 200—STATE/LOCAL GOVERNMENTWIDE CENTRAL SERVICE COST ALLOCATION PLANS A. GENERAL 1. Most governmental units provide certain services, such as motor pools, computer cen- ters, purchasing, accounting, etc., to oper- ating agencies on a centralized basis. Since federally-supported awards are performed within the individual operating agencies, there needs to be a process whereby these central service costs can be identified and assigned to benefitted activities on a reason- able and consistent basis. The central service cost allocation plan provides that process. All costs and other data used to distribute the costs included in the plan should be sup- ported by formal accounting and other records that will support the propriety of the costs assigned to Federal awards. 2. Guidelines and illustrations of central service cost allocation plans are provided in a brochure published by the Department of Health and Human Services entitled ‘‘A Guide for State, Local and Indian Tribal Gov- ernments: Cost Principles and Procedures for Developing Cost Allocation Plans and Indirect Cost Rates for Agreements with the Federal Government.’’ A copy of this brochure may be obtained from the HHS Cost Allocation Serv- ices or at their website. B. DEFINITIONS 1. Agency or operating agency means an or- ganizational unit or sub-division within a governmental unit that is responsible for the performance or administration of Federal awards or activities of the governmental unit. 2. Allocated central services means central services that benefit operating agencies but are not billed to the agencies on a fee-for- service or similar basis. These costs are allo- cated to benefitted agencies on some reason- able basis. Examples of such services might include general accounting, personnel ad- ministration, purchasing, etc. 3. Billed central services means central serv- ices that are billed to benefitted agencies or programs on an individual fee-for-service or similar basis. Typical examples of billed cen- tral services include computer services, transportation services, insurance, and fringe benefits. 4. Cognizant agency for indirect costs is de- fined in §200.1. The determination of cog- nizant agency for indirect costs for states and local governments is described in section F.1. 235 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00247 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 440Pt. 200, App. V 5. Major local government means local gov- ernment that receives more than $100 million in direct Federal awards subject to this Part. C. SCOPE OF THE CENTRAL SERVICE COST ALLOCATION PLANS The central service cost allocation plan will include all central service costs that will be claimed (either as a billed or an allo- cated cost) under Federal awards and will be documented as described in section E. omit- ted from the plan will not be reimbursed. D. SUBMISSION REQUIREMENTS 1. Each state will submit a plan to the De- partment of Health and Human Services for each year in which it claims central service costs under Federal awards. The plan should include (a) a projection of the next year’s al- located central service cost (based either on actual costs for the most recently completed year or the budget projection for the coming year), and (b) a reconciliation of actual allo- cated central service costs to the estimated costs used for either the most recently com- pleted year or the year immediately pre- ceding the most recently completed year. 2. Each major local government is also re- quired to submit a plan to its cognizant agency for indirect costs annually. 3. All other local governments claiming central service costs must develop a plan in accordance with the requirements described in this Part and maintain the plan and re- lated supporting documentation for audit. These local governments are not required to submit their plans for Federal approval un- less they are specifically requested to do so by the cognizant agency for indirect costs. Where a local government only receives funds as a subrecipient, the pass-through en- tity will be responsible for monitoring the subrecipient’s plan. 4. All central service cost allocation plans will be prepared and, when required, sub- mitted within six months prior to the begin- ning of each of the governmental unit’s fis- cal years in which it proposes to claim cen- tral service costs. Extensions may be grant- ed by the cognizant agency for indirect costs on a case-by-case basis. E. DOCUMENTATION REQUIREMENTS FOR SUBMITTED PLANS The documentation requirements described in this section may be modified, expanded, or reduced by the cognizant agency for indirect costs on a case-by-case basis. For example, the requirements may be reduced for those central services which have little or no im- pact on Federal awards. Conversely, if a re- view of a plan indicates that certain addi- tional information is needed, and will likely be needed in future years, it may be rou- tinely requested in future plan submissions. Items marked with an asterisk (*) should be 2 CFR Ch. II (1–1–21 Edition) submitted only once; subsequent plans should merely indicate any changes since the last plan. 1. General All proposed plans must be accompanied by the following: an organization chart suffi- ciently detailed to show operations including the central service activities of the state/ local government whether or not they are shown as benefitting from central service functions; a copy of the Comprehensive An- nual Financial Report (or a copy of the Exec- utive Budget if budgeted costs are being pro- posed) to support the allowable costs of each central service activity included in the plan; and, a certification (see subsection 4.) that the plan was prepared in accordance with this Part, contains only allowable costs, and was prepared in a manner that treated simi- lar costs consistently among the various Federal awards and between Federal and non-Federal awards/activities. 2. Allocated Central Services For each allocated central service*, the plan must also include the following: a brief description of the service, an identification of the unit rendering the service and the op- erating agencies receiving the service, the items of expense included in the cost of the service, the method used to distribute the cost of the service to benefitted agencies, and a summary schedule showing the alloca- tion of each service to the specific benefitted agencies. If any self-insurance funds or fringe benefits costs are treated as allocated (rather than billed) central services, docu- mentation discussed in subsections 3.b. and c. must also be included. 3. Billed Services a. General. The information described in this section must be provided for all billed central services, including internal service funds, self-insurance funds, and fringe ben- efit funds. b. Internal service funds. (1) For each internal service fund or simi- lar activity with an operating budget of $5 million or more, the plan must include: A brief description of each service; a balance sheet for each fund based on individual ac- counts contained in the governmental unit’s accounting system; a revenue/expenses state- ment, with revenues broken out by source, e.g., regular billings, interest earned, etc.; a listing of all non-operating transfers (as de- fined by GAAP) into and out of the fund; a description of the procedures (methodology) used to charge the costs of each service to users, including how billing rates are deter- mined; a schedule of current rates; and, a schedule comparing total revenues (includ- ing imputed revenues) generated by the serv- ice to the allowable costs of the service, as 236 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00248 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 441OMB Guidance determined under this part, with an expla- nation of how variances will be handled. (2) Revenues must consist of all revenues generated by the service, including unbilled and uncollected revenues. If some users were not billed for the services (or were not billed at the full rate for that class of users), a schedule showing the full imputed revenues associated with these users must be pro- vided. Expenses must be broken out by ob- ject cost categories (e.g., salaries, supplies, etc.). c. Self-insurance funds. For each self-insur- ance fund, the plan must include: the fund balance sheet; a statement of revenue and expenses including a summary of billings and claims paid by agency; a listing of all non-operating transfers into and out of the fund; the type(s) of risk(s) covered by the fund (e.g., automobile liability, workers’ compensation, etc.); an explanation of how the level of fund contributions are deter- mined, including a copy of the current actu- arial report (with the actuarial assumptions used) if the contributions are determined on an actuarial basis; and, a description of the procedures used to charge or allocate fund contributions to benefitted activities. Re- serve levels in excess of claims (1) submitted and adjudicated but not paid, (2) submitted but not adjudicated, and (3) incurred but not submitted must be identified and explained. d. Fringe benefits. For fringe benefit costs, the plan must include: a listing of fringe ben- efits provided to covered employees, and the overall annual cost of each type of benefit; current fringe benefit policies; and proce- dures used to charge or allocate the costs of the benefits to benefitted activities. In addi- tion, for pension and post-retirement health insurance plans, the following information must be provided: the governmental unit’s funding policies, e.g., legislative bills, trust agreements, or state-mandated contribution rules, if different from actuarially deter- mined rates; the pension plan’s costs accrued for the year; the amount funded, and date(s) of funding; a copy of the current actuarial report (including the actuarial assumptions); the plan trustee’s report; and, a schedule from the activity showing the value of the interest cost associated with late funding. 4. Required Certification Each central service cost allocation plan will be accompanied by a certification in the following form: CERTIFICATE OF COST ALLOCATION PLAN This is to certify that I have reviewed the cost allocation plan submitted herewith and to the best of my knowledge and belief: (1) All costs included in this proposal [iden- tify date] to establish cost allocations or bil- lings for [identify period covered by plan] are Pt. 200, App. V allowable in accordance with the require- ments of this Part and the Federal award(s) to which they apply. Unallowable costs have been adjusted for in allocating costs as indi- cated in the cost allocation plan. (2) All costs included in this proposal are properly allocable to Federal awards on the basis of a beneficial or causal relationship between the expenses incurred and the Fed- eral awards to which they are allocated in accordance with applicable requirements. Further, the same costs that have been treated as indirect costs have not been claimed as direct costs. Similar types of costs have been accounted for consistently. I declare that the foregoing is true and cor- rect. Governmental Unit: lllllllllllll Signature: llllllllllllllllll Name of Official: llllllllllllll Title: llllllllllllllllllll Date of Execution: lllllllllllll F. NEGOTIATION AND APPROVAL OF CENTRAL SERVICE PLANS 1. Federal Cognizant Agency for Indirect Costs Assignments for Cost Negotiation In general, unless different arrangements are agreed to by the concerned Federal agen- cies, for central service cost allocation plans, the cognizant agency responsible for review and approval is the Federal agency with the largest dollar value of total Federal awards with a governmental unit. For indi- rect cost rates and departmental indirect cost allocation plans, the cognizant agency is the Federal agency with the largest dollar value of direct Federal awards with a govern- mental unit or component, as appropriate. Once designated as the cognizant agency for indirect costs, the Federal agency must re- main so for a period of five years. In addi- tion, the following Federal agencies continue to be responsible for the indicated govern- mental entities: Department of Health and Human Services— Public assistance and state-wide cost alloca- tion plans for all states (including the Dis- trict of Columbia and Puerto Rico), state and local hospitals, libraries and health dis- tricts. Department of the Interior—Indian tribal governments, territorial governments, and state and local park and recreational dis- tricts. Department of Labor—State and local labor departments. Department of Education—School districts and state and local education agencies. Department of Agriculture—State and local agriculture departments. Department of Transportation—State and local airport and port authorities and transit districts. 237 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00249 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 442Pt. 200, App. V Department of Commerce—State and local economic development districts. Department of Housing and Urban Develop- ment—State and local housing and develop- ment districts. Environmental Protection Agency—State and local water and sewer districts. 2. Review All proposed central service cost allocation plans that are required to be submitted will be reviewed, negotiated, and approved by the cognizant agency for indirect costs on a timely basis. The cognizant agency for indi- rect costs will review the proposal within six months of receipt of the proposal and either negotiate/approve the proposal or advise the governmental unit of the additional docu- mentation needed to support/evaluate the proposed plan or the changes required to make the proposal acceptable. Once an agreement with the governmental unit has been reached, the agreement will be accepted and used by all Federal agencies, unless pro- hibited or limited by statute. Where a Fed- eral awarding agency has reason to believe that special operating factors affecting its Federal awards necessitate special consider- ation, the funding agency will, prior to the time the plans are negotiated, notify the cognizant agency for indirect costs. 3. Agreement The results of each negotiation must be formalized in a written agreement between the cognizant agency for indirect costs and the governmental unit. This agreement will be subject to re-opening if the agreement is subsequently found to violate a statute or the information upon which the plan was ne- gotiated is later found to be materially in- complete or inaccurate. The results of the negotiation must be made available to all Federal agencies for their use. 4. Adjustments Negotiated cost allocation plans based on a proposal later found to have included costs that: (a) are unallowable (i) as specified by law or regulation, (ii) as identified in subpart F, General Provisions for selected Items of Cost of this Part, or (iii) by the terms and conditions of Federal awards, or (b) are unal- lowable because they are clearly not allo- cable to Federal awards, must be adjusted, or a refund must be made at the option of the cognizant agency for indirect costs, includ- ing earned or imputed interest from the date of transfer and debt interest, if applicable, chargeable in accordance with applicable Federal cognizant agency for indirect costs regulations. Adjustments or cash refunds may include, at the option of the cognizant agency for indirect costs, earned or imputed interest from the date of expenditure and de- linquent debt interest, if applicable, charge- 2 CFR Ch. II (1–1–21 Edition) able in accordance with applicable cognizant agency claims collection regulations. These adjustments or refunds are designed to cor- rect the plans and do not constitute a re- opening of the negotiation. G. OTHER POLICIES 1. Billed Central Service Activities Each billed central service activity must separately account for all revenues (includ- ing imputed revenues) generated by the serv- ice, expenses incurred to furnish the service, and profit/loss. 2. Working Capital Reserves Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and mainte- nance of a reasonable level of working cap- ital reserve, in addition to the full recovery of costs, are allowable. A working capital re- serve as part of retained earnings of up to 60 calendar days cash expenses for normal oper- ating purposes is considered reasonable. A working capital reserve exceeding 60 cal- endar days may be approved by the cog- nizant agency for indirect costs in excep- tional cases. 3. Carry-Forward Adjustments of Allocated Central Service Costs Allocated central service costs are usually negotiated and approved for a future fiscal year on a ‘‘fixed with carry-forward’’ basis. Under this procedure, the fixed amounts for the future year covered by agreement are not subject to adjustment for that year. However, when the actual costs of the year involved become known, the differences be- tween the fixed amounts previously approved and the actual costs will be carried forward and used as an adjustment to the fixed amounts established for a later year. This ‘‘carry-forward’’ procedure applies to all cen- tral services whose costs were fixed in the approved plan. However, a carry-forward ad- justment is not permitted, for a central serv- ice activity that was not included in the ap- proved plan, or for unallowable costs that must be reimbursed immediately. 4. Adjustments of Billed Central Services Billing rates used to charge Federal awards must be based on the estimated costs of pro- viding the services, including an estimate of the allocable central service costs. A com- parison of the revenue generated by each billed service (including total revenues whether or not billed or collected) to the ac- tual allowable costs of the service will be made at least annually, and an adjustment will be made for the difference between the 238 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00250 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 443OMB Guidance revenue and the allowable costs. These ad- justments will be made through one of the following adjustment methods: (a) a cash re- fund including earned or imputed interest from the date of transfer and debt interest, if applicable, chargeable in accordance with applicable Federal cognizant agency for indi- rect costs regulations to the Federal Govern- ment for the Federal share of the adjust- ment, (b) credits to the amounts charged to the individual programs, (c) adjustments to future billing rates, or (d) adjustments to al- located central service costs. Adjustments to allocated central services will not be per- mitted where the total amount of the adjust- ment for a particular service (Federal share and non-Federal) share exceeds $500,000. Ad- justment methods may include, at the option of the cognizant agency, earned or imputed interest from the date of expenditure and de- linquent debt interest, if applicable, charge- able in accordance with applicable cognizant agency claims collection regulations. 5. Records Retention All central service cost allocation plans and related documentation used as a basis for claiming costs under Federal awards must be retained for audit in accordance with the records retention requirements con- tained in subpart D of this part. 6. Appeals If a dispute arises in the negotiation of a plan between the cognizant agency for indi- rect costs and the governmental unit, the dispute must be resolved in accordance with the appeals procedures of the cognizant agency for indirect costs. 7. OMB Assistance To the extent that problems are encoun- tered among the Federal agencies or govern- mental units in connection with the negotia- tion and approval process, OMB will lend as- sistance, as required, to resolve such prob- lems in a timely manner. [78 FR 78608, Dec. 26, 2013, as amended at 80 FR 54410, Sept. 10, 2015; 85 FR 49581, Aug. 13, 2020] Pt. 200, App. VI rect) are normally charged to Federal awards by implementing the public assistance cost allocation plan. This Appendix extends these requirements to all Federal awarding agen- cies whose programs are administered by a state public assistance agency. Major feder- ally-financed programs typically adminis- tered by state public assistance agencies in- clude: Temporary Aid to Needy Families (TANF), Medicaid, Food Stamps, Child Sup- port Enforcement, Adoption Assistance and Foster Care, and Social Services Block Grant. APPENDIX VI TO PART 200—PUBLIC ASSISTANCE COST ALLOCATION PLANS A. GENERAL Federally-financed programs administered by state public assistance agencies are fund- ed predominately by the Department of Health and Human Services (HHS). In sup- port of its stewardship requirements, HHS has published requirements for the develop- ment, documentation, submission, negotia- tion, and approval of public assistance cost allocation plans in Subpart E of 45 CFR Part 95. All administrative costs (direct and indi- B. DEFINITIONS 1. State public assistance agency means a state agency administering or supervising the administration of one or more public as- sistance programs operated by the state as identified in Subpart E of 45 CFR Part 95. For the purpose of this Appendix, these pro- grams include all programs administered by the state public assistance agency. 2. State public assistance agency costs means all costs incurred by, or allocable to, the state public assistance agency, except ex- penditures for financial assistance, medical contractor payments, food stamps, and pay- ments for services and goods provided di- rectly to program recipients. C. POLICY State public assistance agencies will de- velop, document and implement, and the Federal Government will review, negotiate, and approve, public assistance cost alloca- tion plans in accordance with Subpart E of 45 CFR Part 95. The plan will include all pro- grams administered by the state public as- sistance agency. Where a letter of approval or disapproval is transmitted to a state pub- lic assistance agency in accordance with Subpart E, the letter will apply to all Fed- eral agencies and programs. The remaining sections of this Appendix (except for the re- quirement for certification) summarize the provisions of Subpart E of 45 CFR Part 95. D. SUBMISSION, DOCUMENTATION, AND AP- PROVAL OF PUBLIC ASSISTANCE COST ALLO- CATION PLANS 1. State public assistance agencies are re- quired to promptly submit amendments to the cost allocation plan to HHS for review and approval. 2. Under the coordination process outlined in section E, affected Federal agencies will review all new plans and plan amendments and provide comments, as appropriate, to HHS. The effective date of the plan or plan amendment will be the first day of the cal- endar quarter following the event that re- quired the amendment, unless another date is specifically approved by HHS. HHS, as the cognizant agency for indirect costs acting on behalf of all affected Federal agencies, will, 239 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00251 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 444Pt. 200, App. VII as necessary, conduct negotiations with the state public assistance agency and will in- form the state agency of the action taken on the plan or plan amendment. E. REVIEW OF IMPLEMENTATION OF APPROVED PLANS 1. Since public assistance cost allocation plans are of a narrative nature, the review during the plan approval process consists of evaluating the appropriateness of the pro- posed groupings of costs (cost centers) and the related allocation bases. As such, the Federal Government needs some assurance that the cost allocation plan has been imple- mented as approved. This is accomplished by reviews by the Federal awarding agencies, single audits, or audits conducted by the cognizant agency for indirect costs. 2. Where inappropriate charges affecting more than one Federal awarding agency are identified, the cognizant HHS cost negotia- tion office will be advised and will take the lead in resolving the issue(s) as provided for in Subpart E of 45 CFR Part 95. 3. If a dispute arises in the negotiation of a plan or from a disallowance involving two or more Federal awarding agencies, the dis- pute must be resolved in accordance with the appeals procedures set out in 45 CFR Part 16. Disputes involving only one Federal award- ing agency will be resolved in accordance with the Federal awarding agency’s appeal process. 4. To the extent that problems are encoun- tered among the Federal awarding agencies or governmental units in connection with the negotiation and approval process, the Of- fice of Management and Budget will lend as- sistance, as required, to resolve such prob- lems in a timely manner. F. UNALLOWABLE COSTS Claims developed under approved cost allo- cation plans will be based on allowable costs as identified in this Part. Where unallowable costs have been claimed and reimbursed, they will be refunded to the program that re- imbursed the unallowable cost using one of the following methods: (a) a cash refund, (b) offset to a subsequent claim, or (c) credits to the amounts charged to individual Federal awards. Cash refunds, offsets, and credits may include at the option of the cognizant agency for indirect cost, earned or imputed interest from the date of expenditure and de- linquent debt interest, if applicable, charge- able in accordance with applicable cognizant agency for indirect cost claims collection regulations. [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49581, Aug. 13, 2020] 2 CFR Ch. II (1–1–21 Edition) APPENDIX VII TO PART 200—STATES AND LOCAL GOVERNMENT AND INDIAN TRIBE INDIRECT COST PROPOSALS A. GENERAL 1. Indirect costs are those that have been incurred for common or joint purposes. These costs benefit more than one cost ob- jective and cannot be readily identified with a particular final cost objective without ef- fort disproportionate to the results achieved. After direct costs have been determined and assigned directly to Federal awards and other activities as appropriate, indirect costs are those remaining to be allocated to bene- fitted cost objectives. A cost may not be al- located to a Federal award as an indirect cost if any other cost incurred for the same purpose, in like circumstances, has been as- signed to a Federal award as a direct cost. 2. Indirect costs include (a) the indirect costs originating in each department or agency of the governmental unit carrying out Federal awards and (b) the costs of cen- tral governmental services distributed through the central service cost allocation plan (as described in Appendix V to this part) and not otherwise treated as direct costs. 3. Indirect costs are normally charged to Federal awards by the use of an indirect cost rate. A separate indirect cost rate(s) is usu- ally necessary for each department or agen- cy of the governmental unit claiming indi- rect costs under Federal awards. Guidelines and illustrations of indirect cost proposals are provided in a brochure published by the Department of Health and Human Services entitled ‘‘A Guide for States and Local Govern- ment Agencies: Cost Principles and Procedures for Establishing Cost Allocation Plans and Indi- rect Cost Rates for Grants and Contracts with the Federal Government.’’ A copy of this bro- chure may be obtained from HHS Cost Allo- cation Services or at their website. 4. Because of the diverse characteristics and accounting practices of governmental units, the types of costs which may be classi- fied as indirect costs cannot be specified in all situations. However, typical examples of indirect costs may include certain state/ local-wide central service costs, general ad- ministration of the non-Federal entity ac- counting and personnel services performed within the non-Federal entity, depreciation on buildings and equipment, the costs of op- erating and maintaining facilities. 5. This Appendix does not apply to state public assistance agencies. These agencies should refer instead to Appendix VI to this part. B. DEFINITIONS 1. Base means the accumulated direct costs (normally either total direct salaries and wages or total direct costs exclusive of any extraordinary or distorting expenditures) 240 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00252 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 445OMB Guidance used to distribute indirect costs to indi- vidual Federal awards. The direct cost base selected should result in each Federal award bearing a fair share of the indirect costs in reasonable relation to the benefits received from the costs. 2. Base period for the allocation of indirect costs is the period in which such costs are in- curred and accumulated for allocation to ac- tivities performed in that period. The base period normally should coincide with the governmental unit’s fiscal year, but in any event, must be so selected as to avoid inequi- ties in the allocation of costs. 3. Cognizant agency for indirect costs means the Federal agency responsible for reviewing and approving the governmental unit’s indi- rect cost rate(s) on the behalf of the Federal Government. The cognizant agency for indi- rect costs assignment is described in Appen- dix V, section F. 4. Final rate means an indirect cost rate ap- plicable to a specified past period which is based on the actual allowable costs of the pe- riod. A final audited rate is not subject to adjustment. 5. Fixed rate means an indirect cost rate which has the same characteristics as a pre- determined rate, except that the difference between the estimated costs and the actual, allowable costs of the period covered by the rate is carried forward as an adjustment to the rate computation of a subsequent period. 6. Indirect cost pool is the accumulated costs that jointly benefit two or more pro- grams or other cost objectives. 7. Indirect cost rate is a device for deter- mining in a reasonable manner the propor- tion of indirect costs each program should bear. It is the ratio (expressed as a percent- age) of the indirect costs to a direct cost base. 8. Indirect cost rate proposal means the doc- umentation prepared by a governmental unit or subdivision thereof to substantiate its re- quest for the establishment of an indirect cost rate. 9. Predetermined rate means an indirect cost rate, applicable to a specified current or fu- ture period, usually the governmental unit’s fiscal year. This rate is based on an estimate of the costs to be incurred during the period. Except under very unusual circumstances, a predetermined rate is not subject to adjust- ment. (Because of legal constraints, pre- determined rates are not permitted for Fed- eral contracts; they may, however, be used for grants or cooperative agreements.) Pre- determined rates may not be used by govern- mental units that have not submitted and negotiated the rate with the cognizant agen- cy for indirect costs. In view of the potential advantages offered by this procedure, nego- tiation of predetermined rates for indirect costs for a period of two to four years should be the norm in those situations where the cost experience and other pertinent facts Pt. 200, App. VII available are deemed sufficient to enable the parties involved to reach an informed judg- ment as to the probable level of indirect costs during the ensuing accounting periods. 10. Provisional rate means a temporary indi- rect cost rate applicable to a specified period which is used for funding, interim reimburse- ment, and reporting indirect costs on Fed- eral awards pending the establishment of a ‘‘final’’ rate for that period. C. ALLOCATION OF INDIRECT COSTS AND DETERMINATION OF INDIRECT COST RATES 1. General a. Where a governmental unit’s depart- ment or agency has only one major function, or where all its major functions benefit from the indirect costs to approximately the same degree, the allocation of indirect costs and the computation of an indirect cost rate may be accomplished through simplified alloca- tion procedures as described in subsection 2. b. Where a governmental unit’s depart- ment or agency has several major functions which benefit from its indirect costs in vary- ing degrees, the allocation of indirect costs may require the accumulation of such costs into separate cost groupings which then are allocated individually to benefitted func- tions by means of a base which best meas- ures the relative degree of benefit. The indi- rect costs allocated to each function are then distributed to individual Federal awards and other activities included in that function by means of an indirect cost rate(s). c. Specific methods for allocating indirect costs and computing indirect cost rates along with the conditions under which each method should be used are described in sub- sections 2, 3 and 4. 2. Simplified Method a. Where a non-Federal entity’s major functions benefit from its indirect costs to approximately the same degree, the alloca- tion of indirect costs may be accomplished by (1) classifying the non-Federal entity’s total costs for the base period as either di- rect or indirect, and (2) dividing the total al- lowable indirect costs (net of applicable credits) by an equitable distribution base. The result of this process is an indirect cost rate which is used to distribute indirect costs to individual Federal awards. The rate should be expressed as the percentage which the total amount of allowable indirect costs bears to the base selected. This method should also be used where a governmental unit’s department or agency has only one major function encompassing a number of in- dividual projects or activities, and may be used where the level of Federal awards to that department or agency is relatively small. b. Both the direct costs and the indirect costs must exclude capital expenditures and 241 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00253 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 446Pt. 200, App. VII unallowable costs. However, unallowable costs must be included in the direct costs if they represent activities to which indirect costs are properly allocable. c. The distribution base may be (1) total di- rect costs (excluding capital expenditures and other distorting items, such as pass- through funds, subcontracts in excess of $25,000, participant support costs, etc.), (2) direct salaries and wages, or (3) another base which results in an equitable distribution. 3. Multiple Allocation Base Method a. Where a non-Federal entity’s indirect costs benefit its major functions in varying degrees, such costs must be accumulated into separate cost groupings. Each grouping must then be allocated individually to bene- fitted functions by means of a base which best measures the relative benefits. b. The cost groupings should be established so as to permit the allocation of each group- ing on the basis of benefits provided to the major functions. Each grouping should con- stitute a pool of expenses that are of like character in terms of the functions they ben- efit and in terms of the allocation base which best measures the relative benefits provided to each function. The number of separate groupings should be held within practical limits, taking into consideration the materiality of the amounts involved and the degree of precision needed. c. Actual conditions must be taken into ac- count in selecting the base to be used in allo- cating the expenses in each grouping to ben- efitted functions. When an allocation can be made by assignment of a cost grouping di- rectly to the function benefitted, the alloca- tion must be made in that manner. When the expenses in a grouping are more general in nature, the allocation should be made through the use of a selected base which pro- duces results that are equitable to both the Federal Government and the governmental unit. In general, any cost element or related factor associated with the governmental unit’s activities is potentially adaptable for use as an allocation base provided that: (1) it can readily be expressed in terms of dollars or other quantitative measures (total direct costs, direct salaries and wages, staff hours applied, square feet used, hours of usage, number of documents processed, population served, and the like), and (2) it is common to the benefitted functions during the base pe- riod. d. Except where a special indirect cost rate(s) is required in accordance with para- graph (C)(4) of this Appendix, the separate groupings of indirect costs allocated to each major function must be aggregated and treated as a common pool for that function. The costs in the common pool must then be distributed to individual Federal awards in- cluded in that function by use of a single in- direct cost rate. 2 CFR Ch. II (1–1–21 Edition) e. The distribution base used in computing the indirect cost rate for each function may be (1) total direct costs (excluding capital ex- penditures and other distorting items such as pass-through funds, subawards in excess of $25,000, participant support costs, etc.), (2) direct salaries and wages, or (3) another base which results in an equitable distribution. An indirect cost rate should be developed for each separate indirect cost pool developed. The rate in each case should be stated as the percentage relationship between the par- ticular indirect cost pool and the distribu- tion base identified with that pool. 4. Special Indirect Cost Rates a. In some instances, a single indirect cost rate for all activities of a non-Federal entity or for each major function of the agency may not be appropriate. It may not take into ac- count those different factors which may sub- stantially affect the indirect costs applicable to a particular program or group of pro- grams. The factors may include the physical location of the work, the level of administra- tive support required, the nature of the fa- cilities or other resources employed, the or- ganizational arrangements used, or any com- bination thereof. When a particular Federal award is carried out in an environment which appears to generate a significantly different level of indirect costs, provisions should be made for a separate indirect cost pool applicable to that Federal award. The separate indirect cost pool should be devel- oped during the course of the regular alloca- tion process, and the separate indirect cost rate resulting therefrom should be used, pro- vided that: (1) The rate differs significantly from the rate which would have been devel- oped under paragraphs (C)(2) and (C)(3) of this Appendix, and (2) the Federal award to which the rate would apply is material in amount. b. Where Federal statutes restrict the re- imbursement of certain indirect costs, it may be necessary to develop a special rate for the affected Federal award. Where a ‘‘re- stricted rate’’ is required, the same proce- dure for developing a non-restricted rate will be used except for the additional step of the elimination from the indirect cost pool those costs for which the law prohibits reimburse- ment. D. SUBMISSION AND DOCUMENTATION OF PROPOSALS 1. Submission of Indirect Cost Rate Proposals a. All departments or agencies of the gov- ernmental unit desiring to claim indirect costs under Federal awards must prepare an indirect cost rate proposal and related docu- mentation to support those costs. The pro- posal and related documentation must be re- tained for audit in accordance with the 242 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00254 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 447OMB Guidance records retention requirements contained in §200.334. b. A governmental department or agency unit that receives more than $35 million in direct Federal funding must submit its indi- rect cost rate proposal to its cognizant agen- cy for indirect costs. Other governmental de- partment or agency must develop an indirect cost proposal in accordance with the require- ments of this Part and maintain the proposal and related supporting documentation for audit. These governmental departments or agencies are not required to submit their proposals unless they are specifically re- quested to do so by the cognizant agency for indirect costs. Where a non-Federal entity only receives funds as a subrecipient, the pass-through entity will be responsible for negotiating and/or monitoring the subrecipi- ent’s indirect costs. c. Each Indian tribal government desiring reimbursement of indirect costs must submit its indirect cost proposal to the Department of the Interior (its cognizant agency for indi- rect costs). d. Indirect cost proposals must be devel- oped (and, when required, submitted) within six months after the close of the govern- mental unit’s fiscal year, unless an exception is approved by the cognizant agency for indi- rect costs. If the proposed central service cost allocation plan for the same period has not been approved by that time, the indirect cost proposal may be prepared including an amount for central services that is based on the latest federally-approved central service cost allocation plan. The difference between these central service amounts and the amounts ultimately approved will be com- pensated for by an adjustment in a subse- quent period. 2. Documentation of Proposals The following must be included with each indirect cost proposal: a. The rates proposed, including subsidiary work sheets and other relevant data, cross referenced and reconciled to the financial data noted in subsection b. Allocated central service costs will be supported by the sum- mary table included in the approved central service cost allocation plan. This summary table is not required to be submitted with the indirect cost proposal if the central serv- ice cost allocation plan for the same fiscal year has been approved by the cognizant agency for indirect costs and is available to the funding agency. b. A copy of the financial data (financial statements, comprehensive annual financial report, executive budgets, accounting re- ports, etc.) upon which the rate is based. Ad- justments resulting from the use of unaudited data will be recognized, where ap- propriate, by the Federal cognizant agency for indirect costs in a subsequent proposal. Pt. 200, App. VII c. The approximate amount of direct base costs incurred under Federal awards. These costs should be broken out between salaries and wages and other direct costs. d. A chart showing the organizational structure of the agency during the period for which the proposal applies, along with a functional statement(s) noting the duties and/or responsibilities of all units that com- prise the agency. (Once this is submitted, only revisions need be submitted with subse- quent proposals.) 3. Required certification. Each indirect cost rate proposal must be accompanied by a certification in the fol- lowing form: CERTIFICATE OF INDIRECT COSTS This is to certify that I have reviewed the indirect cost rate proposal submitted here- with and to the best of my knowledge and belief: (1) All costs included in this proposal [iden- tify date] to establish billing or final indi- rect costs rates for [identify period covered by rate] are allowable in accordance with the requirements of the Federal award(s) to which they apply and the provisions of this Part. Unallowable costs have been adjusted for in allocating costs as indicated in the in- direct cost proposal (2) All costs included in this proposal are properly allocable to Federal awards on the basis of a beneficial or causal relationship between the expenses incurred and the agree- ments to which they are allocated in accord- ance with applicable requirements. Further, the same costs that have been treated as in- direct costs have not been claimed as direct costs. Similar types of costs have been ac- counted for consistently and the Federal Government will be notified of any account- ing changes that would affect the predeter- mined rate. I declare that the foregoing is true and cor- rect. Governmental Unit: lllllllllllll Signature: llllllllllllllllll Name of Official: llllllllllllll Title: llllllllllllllllllll Date of Execution: lllllllllllll E. NEGOTIATION AND APPROVAL OF RATES 1. Indirect cost rates will be reviewed, ne- gotiated, and approved by the cognizant agency on a timely basis. Once a rate has been agreed upon, it will be accepted and used by all Federal agencies unless prohib- ited or limited by statute. Where a Federal awarding agency has reason to believe that special operating factors affecting its Fed- eral awards necessitate special indirect cost rates, the funding agency will, prior to the time the rates are negotiated, notify the cog- nizant agency for indirect costs. 243 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00255 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 448Pt. 200, App. VIII 2. The use of predetermined rates, if al- lowed, is encouraged where the cognizant agency for indirect costs has reasonable as- surance based on past experience and reli- able projection of the non-Federal entity’s costs, that the rate is not likely to exceed a rate based on actual costs. Long-term agree- ments utilizing predetermined rates extend- ing over two or more years are encouraged, where appropriate. 3. The results of each negotiation must be formalized in a written agreement between the cognizant agency for indirect costs and the governmental unit. This agreement will be subject to re-opening if the agreement is subsequently found to violate a statute, or the information upon which the plan was ne- gotiated is later found to be materially in- complete or inaccurate. The agreed upon rates must be made available to all Federal agencies for their use. 4. Refunds must be made if proposals are later found to have included costs that (a) are unallowable (i) as specified by law or reg- ulation, (ii) as identified in §200.420, or (iii) by the terms and conditions of Federal awards, or (b) are unallowable because they are clearly not allocable to Federal awards. These adjustments or refunds will be made regardless of the type of rate negotiated (predetermined, final, fixed, or provisional). F. OTHER POLICIES 1. Fringe Benefit Rates If overall fringe benefit rates are not ap- proved for the governmental unit as part of the central service cost allocation plan, these rates will be reviewed, negotiated and approved for individual recipient agencies during the indirect cost negotiation process. In these cases, a proposed fringe benefit rate computation should accompany the indirect cost proposal. If fringe benefit rates are not used at the recipient agency level (i.e., the agency specifically identifies fringe benefit costs to individual employees), the govern- mental unit should so advise the cognizant agency for indirect costs. 2. Billed Services Provided by the Recipient Agency In some cases, governmental departments or agencies (components of the govern- mental unit) provide and bill for services similar to those covered by central service cost allocation plans (e.g., computer cen- ters). Where this occurs, the governmental departments or agencies (components of the governmental unit)should be guided by the requirements in Appendix V relating to the development of billing rates and documenta- tion requirements, and should advise the cognizant agency for indirect costs of any billed services. Reviews of these types of services (including reviews of costing/billing methodology, profits or losses, etc.) will be 2 CFR Ch. II (1–1–21 Edition) made on a case-by-case basis as warranted by the circumstances involved. 3. Indirect Cost Allocations Not Using Rates In certain situations, governmental de- partments or agencies (components of the governmental unit), because of the nature of their Federal awards, may be required to de- velop a cost allocation plan that distributes indirect (and, in some cases, direct) costs to the specific funding sources. In these cases, a narrative cost allocation methodology should be developed, documented, main- tained for audit, or submitted, as appro- priate, to the cognizant agency for indirect costs for review, negotiation, and approval. 4. Appeals If a dispute arises in a negotiation of an in- direct cost rate (or other rate) between the cognizant agency for indirect costs and the governmental unit, the dispute must be re- solved in accordance with the appeals proce- dures of the cognizant agency for indirect costs. 5. Collection of Unallowable Costs and Erroneous Payments Costs specifically identified as unallowable and charged to Federal awards either di- rectly or indirectly will be refunded (includ- ing interest chargeable in accordance with applicable Federal cognizant agency for indi- rect costs regulations). 6. OMB Assistance To the extent that problems are encoun- tered among the Federal agencies or govern- mental units in connection with the negotia- tion and approval process, OMB will lend as- sistance, as required, to resolve such prob- lems in a timely manner. [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75889, Dec. 19, 2014; 85 FR 49581, Aug. 13, 2020] APPENDIX VIII TO PART 200— NON- PROFIT ORGANIZATIONS EXEMPTED FROM SUBPART E OF PART 200 1. Advance Technology Institute (ATI), Charleston, South Carolina 2. Aerospace Corporation, El Segundo, Cali- fornia 3. American Institutes of Research (AIR), Washington, DC 4. Argonne National Laboratory, Chicago, Il- linois 5. Atomic Casualty Commission, Wash- ington, DC 6. Battelle Memorial Institute, Headquartered in Columbus, Ohio 7. Brookhaven National Laboratory, Upton, New York 244 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00256 Fmt 8010 Sfmt 8002 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 449CHAPTER XII—DEPARTMENT OF TRANSPORTATION Part Page 1200 Nonprocurement suspension and debarment ........... 507 1201 Uniform administrative requirements, cost prin- ciples, and audit requirements for Federal awards .................................................................. 508 1202-1299 [Reserved] 505 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00517 Fmt 8008 Sfmt 8008 Y:\SGML\253005.XXX 253005 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00518 Fmt 8008 Sfmt 8008 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 450PART 1200—NONPROCUREMENT SUSPENSION AND DEBARMENT Sec. 1200.10 What does this part do? 1200.20 Does this part apply to me? 1200.30 What policies and procedures must I follow? Subpart A—General 1200.137 Who in the Department of Trans- portation may grant an exception to let an excluded person participate in a cov- ered transaction? Subpart B—Covered Transactions 1200.220 What contracts and subcontracts, in addition to those listed in 2 CFR 180.220, are covered transactions? Subpart C—Responsibilities of Participants Regarding Transactions 1200.332 What methods must I use to pass requirements down to participants at lower tiers with whom I intend to do business? Subpart D—Responsibilities of Federal Agency Officials Regarding Transactions 1200.437 What method do I use to commu- nicate to a participant the requirements described in the OMB guidance at 2 CFR 180.435? Subparts E–J [Reserved] AUTHORITY: 49 U.S.C. 322; Sec. 2455, Public Law 103–355, 108 Stat. 3327 (31 U.S.C. 6101 note); E.O. 12549 (3 CFR, 1986 Comp., p. 189); E.O. 12689 (3 CFR, 1989 Comp., p. 235). SOURCE: 73 FR 24140, May 2, 2008, unless otherwise noted. § 1200.10 What does this part do? This part adopts the Office of Man- agement and Budget (OMB) guidance in subparts A through I of 2 CFR part 180, as supplemented by this part, as the Department of Transportation policies and procedures for nonprocurement suspension and debarment. It thereby gives regulatory effect for the Depart- ment of Transportation to the OMB guidance as supplemented by this part. This part satisfies the requirements in section 3 of Executive Order 12549, ‘‘Supension and Debarment’’ (3 CFR 1986 Comp., p. 189), Executive Order 12689, ‘‘Suspension and Debarment’’ (3 CFR 1989 Comp., p. 235) and 31 U.S.C. 6101 note (Section 2455, Public Law 103– 355, 108 Stat. 3327). § 1200.20 Does this part apply to me? This part and, through this part, per- tinent portions of the OMB guidance in subparts A through I of 2 CFR part 180 (see table at 2 CFR 180.100(b)) apply to you if you are a— (a) Participant or principal in a ‘‘covered transaction’’ (see subpart B of 2 CFR part 180 and the definition of ‘‘nonprocurement transaction’’ at 2 CFR 180.970; (b) Respondent in a Department of Transportation suspension or debar- ment action; (c) Department of Transportation de- barment or suspension official; (d) Department of Transportation grants officer, agreements officer, or other official authorized to enter into any type of nonprocurement trans- action that is a covered transaction. § 1200.30 must I follow? What policies and procedures The Department of Transportation policies and procedures that you must follow are the policies and procedures specified in each applicable section of the OMB guidance in subparts A through I of 2 CFR part 180, as that sec- tion is supplemented by the section in this part with the same section num- ber. The contracts that are covered transactions, for example, are specified by section 220 of the OMB guidance (i.e., 2 CFR 180.220), as supplemented by section 220 in this part (i.e., §1200.220). For any section of OMB guidance in subparts A through I of 2 CFR 180 that has no corresponding section in this part, Department of Transportation policies and procedures are those in the OMB guidance. Subpart A—General § 1200.137 Who in the Department of Transportation may grant an excep- tion to let an excluded person par- ticipate in a covered transaction? Within the Department of Transpor- tation, Office of the Secretary, the Sec- retary or an official designated by the 507 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00519 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 451§ 1200.220 Secretary may grant an exception per- mitting an excluded person to partici- pate in a particular covered trans- action. Within an Operating Adminis- tration of the Department of Transpor- tation, the head of the operating ad- ministration may grant an exception permitting an excluded person to par- ticipate in a particular covered trans- action. The head of an operating ad- ministration may delegate this func- tion and authorize successive delega- tions. Subpart B—Covered Transactions § 1200.220 What contracts and sub- contracts, in addition to those listed in 2 CFR 180.220, are covered trans- actions? In addition to the contracts covered under 2 CFR 180.220(b) of the OMB guid- ance, this part applies to any contract, regardless of tier, that is awarded by a contractor, subcontractor, supplier, consultant, or its agent or representa- tive in any transaction, if the contract is to be funded or provided by the De- partment of Transportation under a covered nonprocurement transaction and the amount of the contract is ex- pected to equal or exceed $25,000. This extends the coverage of the Depart- ment of Transportation nonprocure- ment suspension and debarment re- quirements to all lower tiers of sub- contracts under covered nonprocure- ment transactions, as permitted under the OMB guidance at 2 CFR 180.220(c) (see optional lower-tier coverage in the figure in the appendix to 2 CFR part 180). Subpart C—Responsibilities of Par- ticipants Regarding Trans- actions § 1200.332 What methods must I use to pass requirements down to partici- pants at lower tiers with whom I in- tend to do business? You as a participant must include a term or condition in lower-tier trans- actions requiring lower-tier partici- pants to comply with subpart C of the OMB guidance in 2 CFR part 180, as supplemented by this subpart. 2 CFR Ch. XII (1–1–21 Edition) Subpart D—Responsibilities of Fed- eral Agency Officials Regard- ing Transactions § 1200.437 What method do I use to communicate to a participant the requirements described in the OMB guidance at 2 CFR 180.435? To communicate to a participant the requirements described in 2 CFR 180.435 of the OMB guidance, you must include a term or condition in the transaction that requires the participant’s compli- ance with subpart C of 2 CFR part 180 and requires the participant to include a similar term or condition in lower- tier covered transactions. Subparts E–J [Reserved] PART 1201—UNIFORM ADMINIS- TRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT RE- QUIREMENTS FOR FEDERAL AWARDS Sec. 1201.1 What does this part do? 1201.2 Definitions. 1201.80 Program income. 1201.102 Exceptions. 1201.106 DOT Component implementation. 1201.107 DOT Headquarters responsibilities. 1201.108 Inquiries. 1201.109 Review date. 1201.112 Conflict of interest. 1201.206 Standard application requirements. 1201.313 Equipment. 1201.317 Procurements by States. 1201.319 Competition. 1201.327 Financial reporting. AUTHORITY: 49 U.S.C. 322(a); 2 CFR 200.106. SOURCE: 79 FR 76049, Dec. 19, 2014, unless otherwise noted. § 1201.1 What does this part do? Except as otherwise provided in this part, the Department of Transpor- tation adopts the Office of Manage- ment and Budget Uniform Administra- tive Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR part 200). This part su- persedes and repeals the requirements of the Department of Transportation Common Rules (49 CFR part 18—Uni- form Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments and 49 508 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00520 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 452Department of Transportation § 1201.108 CFR part 19—Uniform Administrative Requirements—Uniform Administra- tive Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and other Non- Profit Organizations), except that grants and cooperative agreements exe- cuted prior to December 26, 2014 shall continue to be subject to 49 CFR parts 18 and 19 as in effect on the date of such grants or agreements. New parts with terminology specific to the De- partment of Transportation follow. § 1201.2 Definitions. Throughout this part, the term ‘‘DOT Component’’ refers to any Division, Of- fice, or Mode (e.g., the Federal Avia- tion Administration (FAA), Federal Highway Administration (FHWA), Fed- eral Motor Carrier Safety Administra- tion (FMCSA), Federal Railroad Ad- ministration (FRA), Federal Transit Administration (FTA), Maritime Ad- ministration (MARAD), National High- way Traffic Safety Administration (NHTSA), Office of Inspector General (OIG), Office of the Secretary of Trans- portation (OST), Pipeline and Haz- ardous Materials Safety Administra- tion (PHMSA), St. Lawrence Seaway Development Corporation (SLSDC), and the Surface Transportation Board (STB)) within the Department of Transportation awarding Federal fi- nancial assistance. In addition, the term ‘‘DOT Headquarters’’ refers to the Secretary of Transportation or any of- fice designated by the Secretary to ful- fill headquarters’ functions within any office under the Secretary’s immediate supervision. § 1201.80 Program income. Notwithstanding 2 CFR 200.80, pro- gram income means gross income earned by the non-Federal entity that is di- rectly generated by a supported activ- ity or earned as a result of the Federal award during the period of perform- ance. (See 2 CFR 200.77 Period of per- formance.) Program income includes but is not limited to income from fees for services performed, the use or rent- al or real or personal property acquired under Federal awards, the sale of com- modities or items fabricated under a Federal award, license fees and royal- ties on patents and copyrights, and principal and interest on loans made with Federal award funds. Interest earned on advances of Federal funds is not program income. Except as other- wise provided in Federal statutes, regu- lations, or the terms and conditions of the Federal award, program income does not include rebates, credits, dis- counts, taxes, special assessments, lev- ies, and fines raised by a grantee and subgrantee, and interest earned on any of them. § 1201.102 Exceptions. DOT Headquarters may grant excep- tions to Part 1201 on a case-by-case basis. Such exceptions will be granted only as determined by the Secretary of Transportation. § 1201.106 DOT Component implemen- tation. The specific requirements and re- sponsibilities for grant-making DOT Components are set forth in this part. DOT Components must implement the language in this part unless different provisions are required by Federal stat- ute or are approved by DOT Head- quarters. DOT Components making Federal awards to non-Federal entities must implement the language in the Subpart C—Pre-Federal Award Re- quirements and Contents of Federal Awards of this Part through Subpart F—Audit Requirements of this Part in codified regulations unless different provisions are required by Federal stat- ute or are approved by DOT Head- quarters. § 1201.107 DOT Headquarters respon- sibilities. DOT Headquarters will review DOT Component implementation of this part, and will provide interpretations of policy requirements and assistance to ensure effective and efficient imple- mentation. Any exceptions will be sub- ject to approval by DOT Headquarters. Exceptions will only be made in par- ticular cases where adequate justifica- tion is presented. § 1201.108 Inquiries. Inquiries regarding Part 1201 should be addressed to the DOT Component making the award, cognizant agency 509 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00521 Fmt 8010 Sfmt 8010 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 453§ 1201.109 for indirect costs, cognizant or over- sight agency for audit, or pass-through entities as appropriate. DOT Compo- nents will, in turn, direct the inquiry to the Office of Chief Financial Officer, Department of Transportation. § 1201.109 Review date. DOT Headquarters will review this part at least every five years after De- cember 26, 2014. § 1201.112 Conflict of interest. The DOT Component making a finan- cial assistance award must establish conflict of interest policies for Federal awards, including policies from DOT Headquarters. The non-Federal entity must disclose in writing any potential conflict of interest to the DOT Compo- nent or pass-through entity in accord- ance with applicable Federal awarding agency policy. § 1201.206 Standard application re- quirements. The requirements of 2 CFR 200.206 do not apply to formula grant programs, 2 CFR Ch. XII (1–1–21 Edition) which do not require applicants to apply for funds on a project basis. § 1201.313 Equipment. Notwithstanding 2 CFR 200.313, sub- recipients of States shall follow such policies and procedures allowed by the State with respect to the use, manage- ment and disposal of equipment ac- quired under a Federal award. § 1201.317 Procurements by States. Notwithstanding 2 CFR 200.317, sub- recipients of States shall follow such policies and procedures allowed by the State when procuring property and services under a Federal award. § 1201.327 Financial reporting. Notwithstanding 2 CFR 200.327, re- cipients of FHWA and NHTSA financial assistance may use FHWA, NHTSA or State financial reports. PARTS 1202–1299 [RESERVED] 510 VerDate Sep<11>2014 13:23 Jun 29, 2021 Jkt 253005 PO 00000 Frm 00522 Fmt 8010 Sfmt 8006 Y:\SGML\253005.XXX 253005#
Attachment 1, passage 454Guidelines for States Participating in the Pipeline Safety Program Appendix H STATE PIPELINE SAFETY MENTORING PROGRAM Mission: Provide a process by which state programs shall be able to take advantage of providing or receiving mentoring from or to other state pipeline safety programs or PHMSA. Goals: To provide supplemental information beyond that currently available to state safety programs for the purpose of enhancing pipeline safety and to further the knowledge base of all state pipeline inspector(s) in the use of various inspection and investigation techniques, to exchange state training programs, to assist in promoting consistent of enforcement of federal regulations consistent with our federal partners at the state level, and to assist other state inspectors in their professional growth and improved knowledge of inspection techniques.#
Attachment 1, passage 455Objectives: Review discuss, and utilize inspection techniques; Develop and nurture relationships between state programs and their staff in order to provide for more opportunities to expand mentoring programs between both state programs and with PHMSA; Increase state-to-state inspection and enforcement consistency as applicable to federal pipeline safety regulations; Enhance critical thinking processes that apply to inspections of various size operators; Broaden a state’s knowledge of the diversity of gas pipeline facilities in other states; Develop/review varying processes for relevant data collection including, but not limited to, Damage Prevention, Integrity Management, and Incidents; Develop successful processes for conducting accident and incident investigations as well as a review of supporting reporting documentation requirements. Program Guidelines: Mentoring application will be submitted to the PHMSA Director of State Programs for approval; Invitational Travel (based on availability) will be provided by PHMSA after application approval; Mentoring sessions will be no longer than five working days; States shall have the ability to arrange their own mentoring sessions with other states without invitational travel, but the state will still need an approved application in order for travel and personnel costs to be recovered through their State Pipeline Safety Base Grant; States that choose to arrange their own mentoring program without the approval of the PHMSA shall be responsible for all cost associated with the mentoring and shall not be allowed to recover those cost through their Grant; The state providing and the state receiving approved mentoring shall both provide to the PHMSA Director of State Programs a post-session Action Report identifying the advantages, lessons learned and other relevant information acquired as a result of the mentoring session. A copy of this report will also be provided to the NAPSR Administrative Manager for posting on the private NAPSR web page. Contact Information: Zach Barrett – Director of State Programs, 1-405-834-8344 zach.barrett@dot.gov Robert Clarillos – NAPSR Administrative Manager, 480-263-2260 rclarillos@gmail.com Contact your PHMSA State Program liaison for further questions.#
Attachment 1, passage 456Instructions for Inspection Mentoring Applicants August 6, 2014 1) Discuss inspection mentoring with Program Manager and obtain their approval. 2) With Program Manager identify possible inspection mentoring opportunities (State or Federal) in accordance with the “Program Guidelines” in the “Pipeline Safety Inspector Mentoring Program Outline” document. 3) Complete “Mentoring Application” Form and email to Don.Martin@dot.gov and copy Zach.Barrett@dot.gov 4) Obtain an email approval from Don Martin, PHMSA State Coordinator or Zach Barrett, PHMSA Director of State Programs. 5) Submit Invitational Travel Request through established Invitational Travel process 6) Provide feedback for improving inspection mentoring process in accordance with the “Program Guidelines”.#
Attachment 1, passage 457MENTORING APPLICATION (Form to be completed by State Program Manager requesting mentoring) Date of Request DD/MM/YYYY State Program (Requesting Mentoring) Choose an item. State Program (Providing Mentoring) Describe the Invitational Travel being requested Including dates, transportation, lodging, special needs, etc. Provide a brief synopsis of the goals / expectations of the mentoring to be received: Provide a brief summary identifying the qualifications of the person who will be providing the mentoring: should Include all relevant experience: List all courses completed in PHMSA’s Training and Qualification Division if applicable to the proposed mentoring objectives: Has mentoring under this program been provided previously to the requesting state program? Circle One: Yes No Do travel restrictions exist for State Program providing the mentoring? List any blackout dates – TQ conflict dates – other dates not available within this calendar year: Comments:#
Attachment 1, passage 458Guidelines for States Participating in the Pipeline Safety Program Appendix I 2024 Program Evaluation for CY2023 Activities Pipeline Safety Gas State Program Evaluation A – PROGRESS REPORT AND PROGRAM DOCUMENTATION REVIEW B – PROGRAM INSPECTION PROCEDURES C – STATE QUALIFICATIONS D – PROGRAM PERFORMANCE E – FIELD INSPECTIONS F – DAMAGE PREVENTION & ANNUAL REPORT ANALYSIS G ‐ INTERSTATE AGENT/AGREEMENT STATES NO POINTS 15 10 50 15 10 NO POINTS TOTAL ‐ 100 Appendix I 2024 Guidelines Rev. 2021-11 A – PROGRESS REPORT AND PROGRAM DOCUMENTATION REVIEW 1 Were the following Progress Report items accurate? a. Stats On Operators Data – Progress Report Attachment 1 b. State Inspection Activity Data – Progress Report Attachment 2 c. List of Operators Data – Progress Report Attachment 3* d. Incidents/Accidents Data – Progress Report Attachment 4* e. Stats of Compliance Actions Data – Progress Report Attachment 5* f. List of Records Kept Data ‐ Progress Report Attachment 6 * g. Staff and TQ Training Data – Progress Report Attachment 7 h. Compliance with Federal Regulations Data – Progress Report Attachment 8 i. Performance and Damage Prevention Question Data – Progress Report Attachment 10* NO POINTS * Not scored on Progress Report (No points ‐ Issues addressed in Chair letters) Comments: TOTAL ‐ NO POINTS Appendix I 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 459B – PROGRAM INSPECTION PROCEDURES GENERAL 1 Do written procedures address pre‐inspection, inspection and post inspection activities for each of the following inspection types: Chapter 5.1 5 a. Standard Inspections, which include Drug/Alcohol, CRM and Public Awareness Effectiveness Inspections b. TIMP and DIMP Inspections (reviewing largest operator(s) plans annually) c. OQ Inspections d. Damage Prevention Inspections e. On‐Site Operator Training f. Construction Inspections (annual efforts) g. LNG Inspections (Yes = 5 points, No= 0 Points, NI= 1‐4 points) Comments: Do written procedures address inspection priorities of each operator, and if necessary each unit, 2 based on the following elements and time frames established in its procedures? Chapter 5.1 4 • Length of time since last inspection • Operating history of operator/unit and/or location (includes leakage, incident and compliance activities) • Type of activity being undertaken by operators (i.e. construction) • Locations of operator’s inspection units being inspected ‐ (HCA's, Geographic area, Population Centers, etc.) • Process to identify high‐risk inspection units that includes all threats ‐ (Excavation Damage, Corrosion, Natural Forces, Outside Forces, Material and Welds, Equipment, Operators and any Other Factors) • Are inspection units broken down appropriately? (Yes = 4 points, No= 0 Points, NI= 1‐3 points) COMPLIANCE PROCEDURES 3 Does the state have written procedures to identify steps to be taken from the discovery to resolution of a probable violation? Chapter 5.1 3 • Procedures to notify an operator (company officer) when a noncompliance is identified • Procedures to routinely review progress of compliance actions to prevent delays or breakdowns • Procedures regarding closing outstanding probable violations (Yes = 3 points, No= 0 Points, NI= 1‐2 points) Comments: INCIDENT/ACCIDENT INVESTIGATION PROCEDURES 4 Does the state have written procedures to address state actions in the event of an incident/accident? 3 • Mechanism to receive, record, and respond to operator reports of incidents, including after‐hours reports • If onsite investigation was not made, do procedures require on‐call staff to obtain sufficient information to determine the facts to support the decision not to go on‐site. (Yes = 3 points, No= 0 Points, NI= 1‐2 points) Comments: TOTAL ‐ 15 Appendix I 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 460C – STATE QUALIFICATIONS 1 Has each inspector and program manager fulfilled training requirements? (See Guidelines Appendix C for requirements) Chapter 4.3 5 In addition ‐ • Completion of Required OQ Training before conducting inspection as lead • Completion of Required DIMP/IMP Training before conducting inspection as lead • Completion of Required LNG Training before conducting inspection as lead • Root Cause Training by at least one inspector/program manager • Note any outside training completed • Verify inspector has obtained minimum qualifications to lead any applicable standard inspection as the lead inspector (Reference State Guidelines Section 4.3.1) (Yes = 5 points, No= 0 Points, NI= 1‐4 points) Comments: Did state records and discussions with state pipeline safety program manager indicate 2 adequate knowledge of PHMSA program and regulations? (Yes = 5 points, No= 0 Points, NI= 1‐4 points) Comments: 5 TOTAL ‐ 10 Appendix I 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 461D – PROGRAM PERFORMANCE 1 Did state inspect all types of operators and inspection units in accordance with time intervals established in written procedures? Chapter 5.1 • Standard (General Code Compliance) • Public Awareness Effectiveness Reviews • Drug and Alcohol • Control Room Management • Part 193 LNG Inspections • Construction (did state achieve 20% of total inspection person‐days?) • OQ (see Question 3 for additional requirements) • IMP/DIMP (see Question 4 for additional requirements) (Yes= 5 points, No= 0 Points, NI= 1‐4 points) Comments: 5 2 Did inspection form(s) cover all applicable code requirements addressed on Federal Inspection form(s)? Did State complete all applicable portions of inspection forms? Chapter 5.1 Do inspection records indicate that adequate reviews of procedures, records and field activities, including notes and the appropriate level of inspection person‐days for each inspection, were performed? • Standard (General Code Compliance) • Public Awareness Effectiveness Reviews • Drug and Alcohol • Control Room Management • Part 193 LNG Inspections • Construction • OQ (see Question 3 for additional requirements) • IMP/DIMP (see Question 4 for additional requirements) (Yes= 10 points, No= 0 Points, NI= 1‐9 points) Comments: 10 3 Is state verifying monitoring (Protocol 9/Form 15) operators OQ programs? This should include verification of any plan updates and that persons performing covered tasks (including contractors) are properly qualified and requalified at intervals established in the operator’s plan. (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: 2 4 Is state verifying operator’s integrity management Programs (IMP and DIMP)? This should include a review of plans, along with monitoring progress. In addition, the review should take in to account program review and updates of operator’s plan(s). 49 CFR 192 Subpart P • Are the implementation plans of the state’s large/largest operator(s) being reviewed annually to ensure they are completing the full cycle of the DIMP/IMP process? • Are states verifying with operators any plastic pipe and components that have shown a record of defects/leaks and mitigating those through DIMP plan? • Are the states verifying operators are including low pressure distribution systems in their threat analysis? (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: 2 Appendix I 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 4625 Did the state review the following (these items are NTSB recommendations to PHMSA that have been deemed acceptable response based on PHMSA reviewing these items during the evaluation process): Chapter 5.1 a. operator procedures for determining if exposed cast iron pipe was examined for evidence of graphitization and if necessary remedial action was taken; b. operator procedures for surveillance of cast iron pipelines, including appropriate action resulting from tracking circumferential cracking failures, study of leakage history, or other unusual operating maintenance condition? (Note: See GPTC Appendix G‐18 for guidance); c. operator emergency response procedures for leaks caused by excavation damage near buildings and determine whether the procedures adequately address the possibility of multiple leaks and underground migration of gas into nearby buildings Refer to 4/12/01 letter from PHMSA in response to NTSB recommendation P‐00‐20 and P‐00‐21; d. operator records of previous accidents and failures including reported third‐party damage and leak response to ensure appropriate operator response as required by 192.617; and e. directional drilling/boring procedures of each pipeline operator or its contractor to determine if they include actions to protect their facilities from the dangers posed by drilling and other trench less technologies; f. Operator procedures for considering low pressure distribution systems in threat analysis? g. Operator compliance with state and federal regulations for regulators located inside buildings? (Yes= 2 points, No= 0 Points, NI= 1‐2 points) Comments: 2 6 Did the State verify Operators took appropriate action regarding advisory bulletins issued since last evaluation? • (Advisory Bulletins Current Year) (Yes= 1 point, No= 0 Points, NI= .5 point) Comments: 1 COMPLIANCE ACTIVITIES 7 Did the state follow compliance procedures (from discovery to resolution) and adequately document all probable violations, including what resolution or further course of action is needed to gain compliance? Chapter 5.1 • Were compliance actions sent to company officer or manager/board member if municipal/government system? • Were probable violations documented properly? • Resolve probable violations • Routinely review progress of probable violations • Did state issue compliance actions for all probable violations discovered? • Can state demonstrate fining authority for pipeline safety violations? • Does Program Manager review, approve and monitor all compliance actions? (note:Program Manager or Senior Official should sign any NOPV or related enforcement action) • Did state compliance actions give reasonable due process to all parties? Including "show cause" hearing, if necessary. • Within 30 days, conduct a post‐inspection briefing with the owner or operator outlining any concerns • Within 90 days, to the extent practicable, provide the owner or operator with written preliminary findings of the inspection. (Incident investigations do not need to meet 30/90‐day requirement) (Yes= 10 points, No= 0 Points, NI= 1‐9 points) Comments: 10 Appendix I 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 463INCIDENT INVESTIGATIONS 8 Were all federally reportable incidents investigated, thoroughly documented, with conclusions and recommendations? • Does state have adequate mechanism to receive and respond to operator reports of incidents, including after‐hours reports? • Did state keep adequate records of Incident/Accident notifications received? • If onsite investigation was not made, did the state obtain sufficient information from the operator and/or by means to determine the facts to support the decision not to go on site? • Were onsite observations documented? • Were contributing factors documented? • Were recommendations to prevent recurrences, where appropriate, documented? • Did state initiate compliance action for any violations found during any incident/accident investigation? • Did state assist Region Office or Accident Investigation Division (AID) by taking appropriate follow‐up actions related to the operator incident reports to ensure accuracy and final report has been received by PHMSA? • Does state share any lessons learned from incidents/accidents? (Yes= 10 points, No= 0 Points, NI= 1‐9 points) Comments: 10 9 Did state respond to Chairman's letter on previous evaluation within 60 days and correct or address any noted deficiencies? (If necessary) Chapter 8.1 (Yes= 1 points, No= 0 Points, NI= .5 point) Comments: 1 10 Did State conduct or participate in pipeline safety training session or seminar in Past 3 Years? Chapter 8.5 (Information only ‐ No Points) Comments: No Points 11 Has state confirmed transmission operators have submitted information into NPMS database along with changes made after original submission? (Information only ‐ No Points) Comments: No Points 12 Does the state have a mechanism for communicating with stakeholders ‐ other than state pipeline safety seminar? (This should include making enforcement cases available to public). (Yes= 1 point, No= 0 Points, NI= .5 point) Comments: 1 13 Did state execute appropriate follow‐up actions to Safety Related Condition (SRC) Reports? Chapter 6.7 (Yes= 1 points, No= 0 Points, NI= .5 point) Comments: 14 Was the State responsive to: a. Surveys or information requests from NAPSR or PHMSA; b. PHMSA Work Management System tasks? (Yes= 1 point, No= 0 Points, NI= .5 point) Comments: 1 1 Appendix I 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 46415 If the State has issued any waivers/special permits for any operator, has the state verified conditions of those waivers/special permits are being met? This should include having the operator amend procedures where appropriate. (Yes= 1 points, No= 0 Points, NI= .5 point) Comments: 1 16 Were pipeline program files well‐organized and accessible? (Information only ‐ No Points) Comments: No Points 17 Discussion with State on accuracy of inspection day information submitted into State Inspection Day Calculation Tool (SICT). Has the state updated SICT data? (Yes= 3 points, No= 0 Points, NI= 1‐2 points) Comments: 3 18 Discussion on State Program Performance Metrics found on Stakeholder Communication site. No Points http://primis.phmsa.dot.gov/comm/states.htm?nocache=4805 Comments: 19 Did the state encourage and promote operator implementation of Pipeline Safety Management Systems (PSMS), or API RP 1173? This holistic approach to improving pipeline safety includes the identification, prevention and remediation of safety hazards. ∙ https://pipelinesms.org/ ∙ Reference AGA recommendation to members May 20, 2019 (Information only ‐ No Points) Comments: No Points TOTAL ‐ 50 Appendix I 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 465E – FIELD INSPECTIONS 1 Operator, Inspector, Location, Date and PHMSA Representative • What type of inspection(s) did the state inspector conduct during the field portion of the state evaluation? (i.e. Standard, Construction, IMP, etc) • When was the unit inspected last? • Was pipeline operator or representative present during inspection? • Effort should be made to observe newest state inspector with least experience (Information only ‐ No Points) Comments: 2 Did the inspector use an appropriate inspection form/checklist and was the form/checklist used as a guide for the inspection? (New regulations shall be incorporated) No Points 2 (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: 3 Did the inspector adequately review the following during the inspection ? • Procedures (were the inspector’s questions of the operator adequate to determine compliance?) • Records (did the inspector adequately review trends and ask in‐depth questions?) • Field Activities/Facilities (did inspector ensure that procedures were being followed, including ensuring that properly calibrated equipment was used and OQ’s were acceptable?) • Other (please comment) • Was the inspection of adequate length to properly perform the inspection? 10 4 5 (Yes= 10 points, No= 0 Points, NI= 1‐9 points) Comments: From your observation did the inspector had adequate knowledge of the pipeline safety program and regulations ? (Evaluator will document reasons if unacceptable) (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: Did the inspector conduct an exit interview, including identifying probable violations? (If inspection is not totally completed the interview should be based on areas covered during time of field evaluation) (Yes= 1 point, No= 0 Points, NI= .5 point) Comments: 2 1 6 Was inspection performed in a safe, positive, and constructive manner ? • No unsafe acts should be performed during inspection by the state inspector • What did the inspector observe in the field? (Narrative description of field observations and how inspector performed) • Best Practices to Share with Other States ‐ (Field ‐ could be from operator visited or state inspector practices) • Other (Information only ‐ No Points) General Comments: No Points TOTAL ‐ 15 Appendix I 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 4661 F – DAMAGE PREVENTION & ANNUAL REPORT ANALYSIS Has the state reviewed Operator Annual reports, along with Incident/Accident reports, for accuracy and analyzed data for trends and operator issues? (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: Has the state verified that the operators analyze excavation damages for the purpose of 2 determining root causes and minimizing the possibility of a recurrence? (§ 192.617) • Has the state verified that the operators have appropriately identified excavators who have repeatedly violated one‐call laws and damaged their facilities. Have the operators taken steps to mitigate that risks? (§ 192.1007) (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: Has the state reviewed the operator’s annual report pertaining to Part D – Excavation 3 Damage? • Is the information complete and accurate with root cause numbers? • Has the state evaluated the causes for the damages listed under “One‐Call Notification Practices Not Sufficient” (Part D.1.a.)? 2 4 • Has the state evaluated the causes for the damages listed under “Locating Practices Not Sufficient” (Part D.1.b)? For each operator, does the state review the following? • Is the operator or its locating contractor(s) qualified and following written procedures for locating and marking facilities? • Is the operator appropriately requalifying locators to address performance deficiencies? • What is the number of damages resulting from mismarks? • What is the number of damages resulting from not locating within time requirements (no‐shows)? • Is the operator appropriately addressing discovered mapping errors resulting in excavation damages? • Are mapping corrections timely and according to written procedures? • Has the state evaluated the causes for the damages listed under “Excavation Practices Not Sufficient” (Part D.1.c.)? Comments: (Yes= 4 points, No= 0 Points, NI= 1‐3 point) 4 Has the agency or another organization within the state collected data and evaluated trends on the number of pipeline damages per 1,000 locate requests? • What stakeholder group is causing the highest number of damages to the pipelines? Operator, contractor, locating company or public. • Has the state verified the operator is appropriately focusing damage prevention education and training to stakeholders causing the most damages? • Has the state evaluated which of the following best describes the reason for the excavation damages; i.e., operator or contractor not following written procedures, failure to maintain marks, failure to support exposed facilities, failure to use hand tools were required, failure to test‐hole (pot hole), improper backfilling practices, failure to maintain clearance or insufficient excavation practices. • Has the state verified the operator is appropriately focusing damage prevention education and training to address the causes of excavation damages? (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: 2 TOTAL ‐ 10 Appendix I 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 467G ‐ INTERSTATE AGENT/AGREEMENT STATES 1 Were all inspections of interstate pipelines conducted using the Inspection Assistant program for documenting inspections? (Information only ‐ No Points) Comments: NO POINTS If inspections were conducted independent of a PHMSA team inspection was notice of all 2 identified probable violations provided to PHMSA within 60 days? (Information only ‐ No Points) Comments: NO POINTS If inspections were conducted independent of a PHMSA team inspection was PHMSA 3 immediately notified of conditions which may pose an immediate safety hazard to the public or environment? (Information only ‐ No Points) Comments: NO POINTS If inspections were conducted independent of a PHMSA team inspection did the state 4 coordinate with PHMSA if inspections not were not included in the PHMSA Inspection Work Plan? (Information only ‐ No Points) Comments: NO POINTS Did the state take direction from and cooperate with PHMSA for all incident investigations 5 conducted on interstate pipelines? (Information only ‐ No Points) Comments: NO POINTS Comments: No scoring for this section. Any unsatisfactory response will result in a discussion with the Region and State regarding continued Interstate Agent Status. TOTAL ‐ NO POINTS Appendix I 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 468Guidelines for States Participating in the Pipeline Safety Program Appendix J 2024 Program Evaluation for CY2023 Activities Pipeline Safety Hazardous Liquid State Program Evaluation A – PROGRESS REPORT AND PROGRAM DOCUMENTATION REVIEW B – PROGRAM INSPECTION PROCEDURES C – STATE QUALIFICATIONS D – PROGRAM PERFORMANCE E – FIELD INSPECTIONS F – DAMAGE PREVENTION & ANNUAL REPORT ANALYSIS G ‐ INTERSTATE AGENT/AGREEMENT STATES NO POINTS 15 10 50 15 6 NO POINTS TOTAL ‐ 96 Appendix J 2024 Guidelines Rev. 2021-11 A – PROGRESS REPORT AND PROGRAM DOCUMENTATION REVIEW 1 Were the following Progress Report items accurate? a. Stats On Operators Data – Progress Report Attachment 1 b. State Inspection Activity Data – Progress Report Attachment 2 c. List of Operators Data – Progress Report Attachment 3* d. Incidents/Accidents Data – Progress Report Attachment 4* e. Stats of Compliance Actions Data – Progress Report Attachment 5* f. List of Records Kept Data ‐ Progress Report Attachment 6 * g. Staff and TQ Training Data – Progress Report Attachment 7 h. Compliance with Federal Regulations Data – Progress Report Attachment 8 i. Performance and Damage Prevention Question Data – Progress Report Attachment 10* NO POINTS * Not scored on Progress Report (No points ‐ Issues addressed in Chair letters) Comments: TOTAL ‐ NO POINTS Appendix J 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 469B – PROGRAM INSPECTION PROCEDURES GENERAL 1 Do written procedures address pre‐inspection, inspection and post inspection activities for each of the following inspection types: Chapter 5.1 5 a. Standard Inspections, which include Drug/Alcohol, CRM and Public Awareness Effectiveness Inspections b. IMP Inspections c. OQ Inspections d. Damage Prevention Inspections e. On‐Site Operator Training f. Construction Inspections (annual efforts) (Yes = 5 points, No= 0 Points, NI= 1‐4 points) Comments: Do written procedures address inspection priorities of each operator, and if necessary each unit, 2 based on the following elements and time frames established in its procedures? Chapter 5.1 4 • Length of time since last inspection • Operating history of operator/unit and/or location (includes leakage, incident and compliance activities) • Type of activity being undertaken by operators (i.e. construction) • Locations of operator’s inspection units being inspected ‐ (HCA's, Geographic area, Population Centers, etc.) • Process to identify high‐risk inspection units that includes all threats ‐ (Excavation Damage, Corrosion, Natural Forces, Outside Forces, Material and Welds, Equipment, Operators and any Other Factors) • Are inspection units broken down appropriately? (Yes = 4 points, No= 0 Points, NI= 1‐3 points) COMPLIANCE PROCEDURES 3 Does the state have written procedures to identify steps to be taken from the discovery to resolution of a probable violation? Chapter 5.1 3 • Procedures to notify an operator (company officer) when a noncompliance is identified • Procedures to routinely review progress of compliance actions to prevent delays or breakdowns • Procedures regarding closing outstanding probable violations (Yes = 3 points, No= 0 Points, NI= 1‐2 points) Comments: INCIDENT/ACCIDENT INVESTIGATION PROCEDURES 4 Does the state have written procedures to address state actions in the event of an incident/accident? 3 • Mechanism to receive, record, and respond to operator reports of incidents, including after‐hours reports • If onsite investigation was not made, do procedures require on‐call staff to obtain sufficient information to determine the facts to support the decision not to go on‐site. (Yes = 3 points, No= 0 Points, NI= 1‐2 points) Comments: TOTAL ‐ 15 Appendix J 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 470C – STATE QUALIFICATIONS 1 Has each inspector and program manager fulfilled training requirements? (See Guidelines Appendix C for requirements) Chapter 4.3 5 In addition ‐ • Completion of Required OQ Training before conducting inspection as lead • Completion of Required IMP Training before conducting inspection as lead • Root Cause Training by at least one inspector/program manager • Note any outside training completed • Verify inspector has obtained minimum qualifications to lead any applicable standard inspection as the lead inspector (Reference State Guidelines Section 4.3.1) (Yes = 5 points, No= 0 Points, NI= 1‐4 points) Comments: Did state records and discussions with state pipeline safety program manager indicate 2 adequate knowledge of PHMSA program and regulations? (Yes = 5 points, No= 0 Points, NI= 1‐4 points) Comments: 5 TOTAL ‐ 10 Appendix J 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 471D – PROGRAM PERFORMANCE 1 Did state inspect all types of operators and inspection units in accordance with time intervals established in written procedures? Chapter 5.1 • Standard (General Code Compliance) • Public Awareness Effectiveness Reviews • Drug and Alcohol • Control Room Management • Construction (did state achieve 20% of total inspection person‐days?) • OQ (see Question 3 for additional requirements) • IMP (see Question 4 for additional requirements) (Yes= 5 points, No= 0 Points, NI= 1‐4 points) Comments: 5 2 Did inspection form(s) cover all applicable code requirements addressed on Federal Inspection form(s)? Did State complete all applicable portions of inspection forms? Chapter 5.1 Do inspection records indicate that adequate reviews of procedures, records and field activities, including notes and the appropriate level of inspection person‐days for each inspection, were performed? • Standard (General Code Compliance) • Public Awareness Effectiveness Reviews • Drug and Alcohol • Control Room Management • Construction • OQ (see Question 3 for additional requirements) • IMP (see Question 4 for additional requirements) (Yes= 10 points, No= 0 Points, NI= 1‐9 points) Comments: 10 3 Is state verifying monitoring (Protocol 9/Form 15) operators OQ programs? This should include verification of any plan updates and that persons performing covered tasks (including contractors) are properly qualified and requalified at intervals established in the operator’s plan. 49 CFR Part 195 Subpart G (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: 2 4 Is state verifying operator’s integrity management Programs (IMP)? This should include a review of plans, along with monitoring progress. In addition, the review should take in to account program review and updates of operator’s plan(s). 49 CFR 195 Subpart F • Are the implementation plans of the state’s large/largest operator(s) being reviewed annually to ensure they are completing the full cycle of the IMP process? (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: 2 Appendix J 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 4725 Did the state review the following (these items are NTSB recommendations to PHMSA that have been deemed acceptable response based on PHMSA reviewing these items during the evaluation process): Chapter 5.1 a. operator records of previous accidents and failures including reported third‐party damage and leak response to ensure appropriate operator response as required by 195.402; and b. directional drilling/boring procedures of each pipeline operator or its contractor to determine if they include actions to protect their facilities from the dangers posed by drilling and other trench less technologies; (Yes= 2 points, No= 0 Points, NI= 1‐2 points) Comments: 2 6 Did the State verify Operators took appropriate action regarding advisory bulletins issued since last evaluation? • (Advisory Bulletins Current Year) (Yes= 1 point, No= 0 Points, NI= .5 point) Comments: 1 COMPLIANCE ACTIVITIES 7 Did the state follow compliance procedures (from discovery to resolution) and adequately document all probable violations, including what resolution or further course of action is needed to gain compliance? Chapter 5.1 • Were compliance actions sent to company officer or manager/board member if municipal/government system? • Were probable violations documented properly? • Resolve probable violations • Routinely review progress of probable violations • Did state issue compliance actions for all probable violations discovered? • Can state demonstrate fining authority for pipeline safety violations? • Does Program Manager review, approve and monitor all compliance actions? (note:Program Manager or Senior Official should sign any NOPV or related enforcement action) • Did state compliance actions give reasonable due process to all parties? Including "show cause" hearing, if necessary. • Within 30 days, conduct a post‐inspection briefing with the owner or operator outlining any concerns • Within 90 days, to the extent practicable, provide the owner or operator with written preliminary findings of the inspection. (Incident investigations do not need to meet 30/90‐day requirement) (Yes= 10 points, No= 0 Points, NI= 1‐9 points) Comments: 10 Appendix J 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 473ACCIDENT INVESTIGATIONS 8 Were all federally reportable incidents investigated, thoroughly documented, with conclusions and recommendations? • Does state have adequate mechanism to receive and respond to operator reports of incidents, including after‐hours reports? • Did state keep adequate records of Incident/Accident notifications received? • If onsite investigation was not made, did the state obtain sufficient information from the operator and/or by means to determine the facts to support the decision not to go on site? • Were onsite observations documented? • Were contributing factors documented? • Were recommendations to prevent recurrences, where appropriate, documented? • Did state initiate compliance action for any violations found during any incident/accident investigation? • Did state assist Region Office or Accident Investigation Division (AID) by taking appropriate follow‐up actions related to the operator incident reports to ensure accuracy and final report has been received by PHMSA? • Does state share any lessons learned from incidents/accidents? (Yes= 10 points, No= 0 Points, NI= 1‐9 points) Comments: 10 9 Did state respond to Chairman's letter on previous evaluation within 60 days and correct or address any noted deficiencies? (If necessary) Chapter 8.1 (Yes= 1 points, No= 0 Points, NI= .5 point) Comments: 1 10 Did State conduct or participate in pipeline safety training session or seminar in Past 3 Years? Chapter 8.5 (Information only ‐ No Points) Comments: No Points 11 Has state confirmed transmission operators have submitted information into NPMS database along with changes made after original submission? (Information only ‐ No Points) Comments: No Points 12 Does the state have a mechanism for communicating with stakeholders ‐ other than state pipeline safety seminar? (This should include making enforcement cases available to public). (Yes= 1 point, No= 0 Points, NI= .5 point) Comments: 1 13 Did state execute appropriate follow‐up actions to Safety Related Condition (SRC) Reports? Chapter 6.7 (Yes= 1 points, No= 0 Points, NI= .5 point) Comments: 14 Was the State responsive to: a. Surveys or information requests from NAPSR or PHMSA; b. PHMSA Work Management System tasks? (Yes= 1 point, No= 0 Points, NI= .5 point) Comments: 1 1 Appendix J 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 47415 If the State has issued any waivers/special permits for any operator, has the state verified conditions of those waivers/special permits are being met? This should include having the operator amend procedures where appropriate. (Yes= 1 points, No= 0 Points, NI= .5 point) Comments: 1 16 Were pipeline program files well‐organized and accessible? (Information only ‐ No Points) Comments: No Points 17 Discussion with State on accuracy of inspection day information submitted into State Inspection Day Calculation Tool (SICT). Has the state updated SICT data? (Yes= 3 points, No= 0 Points, NI= 1‐2 points) Comments: 3 18 Discussion on State Program Performance Metrics found on Stakeholder Communication site. No Points http://primis.phmsa.dot.gov/comm/states.htm?nocache=4805 Comments: 19 Did the state encourage and promote operator implementation of Pipeline Safety Management Systems (PSMS), or API RP 1173? This holistic approach to improving pipeline safety includes the identification, prevention and remediation of safety hazards. ∙ https://pipelinesms.org/ ∙ Reference AGA recommendation to members May 20, 2019 (Information only ‐ No Points) Comments: No Points TOTAL ‐ 50 Appendix J 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 475E – FIELD INSPECTIONS 1 Operator, Inspector, Location, Date and PHMSA Representative • What type of inspection(s) did the state inspector conduct during the field portion of the state evaluation? (i.e. Standard, Construction, IMP, etc) • When was the unit inspected last? • Was pipeline operator or representative present during inspection? • Effort should be made to observe newest state inspector with least experience (Information only ‐ No Points) Comments: 2 Did the inspector use an appropriate inspection form/checklist and was the form/checklist used as a guide for the inspection? (New regulations shall be incorporated) No Points 2 (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: 3 Did the inspector adequately review the following during the inspection ? • Procedures (were the inspector’s questions of the operator adequate to determine compliance?) • Records (did the inspector adequately review trends and ask in‐depth questions?) • Field Activities/Facilities (did inspector ensure that procedures were being followed, including ensuring that properly calibrated equipment was used and OQ’s were acceptable?) • Other (please comment) • Was the inspection of adequate length to properly perform the inspection? 10 4 5 (Yes= 10 points, No= 0 Points, NI= 1‐9 points) Comments: From your observation did the inspector had adequate knowledge of the pipeline safety program and regulations ? (Evaluator will document reasons if unacceptable) (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: Did the inspector conduct an exit interview, including identifying probable violations? (If inspection is not totally completed the interview should be based on areas covered during time of field evaluation) (Yes= 1 point, No= 0 Points, NI= .5 point) Comments: 2 1 6 Was inspection performed in a safe, positive, and constructive manner ? • No unsafe acts should be performed during inspection by the state inspector • What did the inspector observe in the field? (Narrative description of field observations and how inspector performed) • Best Practices to Share with Other States ‐ (Field ‐ could be from operator visited or state inspector practices) • Other (Information only ‐ No Points) General Comments: No Points TOTAL ‐ 15 Appendix J 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 4761 F – DAMAGE PREVENTION & ANNUAL REPORT ANALYSIS Has the state reviewed Operator Annual reports, along with Incident/Accident reports, for accuracy and analyzed data for trends and operator issues? (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: Has the state verified that the operators analyze excavation damages for the purpose of 2 determining root causes and minimizing the possibility of a recurrence? (§ 192.617) • Has the state verified that the operators have appropriately identified excavators who have repeatedly violated one‐call laws and damaged their facilities. Have the operators taken steps to mitigate that risks? (§ 192.1007) (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: Has the state reviewed the operator’s annual report pertaining to Part D – Excavation 3 Damage? • Is the information complete and accurate with root cause numbers? • Has the state evaluated the causes for the damages listed under “One‐Call Notification Practices Not Sufficient” (Part D.1.a.)? 2 2 NO POINTS • Has the state evaluated the causes for the damages listed under “Locating Practices Not Sufficient” (Part D.1.b)? For each operator, does the state review the following? • Is the operator or its locating contractor(s) qualified and following written procedures for locating and marking facilities? • Is the operator appropriately requalifying locators to address performance deficiencies? • What is the number of damages resulting from mismarks? • What is the number of damages resulting from not locating within time requirements (no‐shows)? • Is the operator appropriately addressing discovered mapping errors resulting in excavation damages? • Are mapping corrections timely and according to written procedures? • Has the state evaluated the causes for the damages listed under “Excavation Practices Not Sufficient” (Part D.1.c.)? Comments: NO SCORE HAZARDOUS LIQUID PROGRAMS 4 Has the agency or another organization within the state collected data and evaluated trends on the number of pipeline damages per 1,000 locate requests? • What stakeholder group is causing the highest number of damages to the pipelines? Operator, contractor, locating company or public. • Has the state verified the operator is appropriately focusing damage prevention education and training to stakeholders causing the most damages? • Has the state evaluated which of the following best describes the reason for the excavation damages; i.e., operator or contractor not following written procedures, failure to maintain marks, failure to support exposed facilities, failure to use hand tools were required, failure to test‐hole (pot hole), improper backfilling practices, failure to maintain clearance or insufficient excavation practices. • Has the state verified the operator is appropriately focusing damage prevention education and training to address the causes of excavation damages? (Yes= 2 points, No= 0 Points, NI= 1 point) Comments: 2 TOTAL ‐ 6 Appendix J 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 477G ‐ INTERSTATE AGENT/AGREEMENT STATES 1 Were all inspections of interstate pipelines conducted using the Inspection Assistant program for documenting inspections? (Information only ‐ No Points) Comments: NO POINTS If inspections were conducted independent of a PHMSA team inspection was notice of all 2 identified probable violations provided to PHMSA within 60 days? (Information only ‐ No Points) Comments: NO POINTS If inspections were conducted independent of a PHMSA team inspection was PHMSA 3 immediately notified of conditions which may pose an immediate safety hazard to the public or environment? (Information only ‐ No Points) Comments: NO POINTS If inspections were conducted independent of a PHMSA team inspection did the state 4 coordinate with PHMSA if inspections not were not included in the PHMSA Inspection Work Plan? (Information only ‐ No Points) Comments: NO POINTS Did the state take direction from and cooperate with PHMSA for all incident investigations 5 conducted on interstate pipelines? (Information only ‐ No Points) Comments: NO POINTS Comments: No scoring for this section. Any unsatisfactory response will result in a discussion with the Region and State regarding continued Interstate Agent Status. TOTAL ‐ NO POINTS Appendix J 2024 Guidelines Rev. 2021-11#
Attachment 1, passage 478Appendix K OFFICE OF PIPELINE SAFETY STANDARDS LIBRARY POLICY POLICY NUMBER: PHP-1320.2A EFFECTIVE DATE: July 27, 2018 LINDA Digitally signed by LINDA DAUGHERTY DAUGHERTYDate: 2018.07.27 Linda Daugherty Deputy Associate Administrator for Field Operations, Office of Pipeline Safety, PHMSA#
Attachment 1, passage 479Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Standards Library Policy Policy Number: PHP-1320.2A Table of Contents 1. INTRODUCTION ...................................................................................................................3 1.1. PURPOSE ........................................................................................................................3 1.2. SCOPE ..............................................................................................................................3 1.3. AUTHORITIES ...............................................................................................................3 1.4. DEFINITIONS .................................................................................................................3 2. POLICY ...................................................................................................................................4 2.1. PRINCIPLES OF THE PHMSA STANDARDS LIBRARY .......................................4 2.2. PHSMA STANDARDS LIBRARY PORTAL ..............................................................4 2.3. PHYSICAL PHMSA STANDARD LIBRARY.............................................................5 2.4. EMPLOYEE REQUESTS ..............................................................................................5 2.5. SECTION 24 REQUESTS ..............................................................................................6 2.6. STANDARDS CHECK-IN & CHECK-OUT PROCEDURES ...................................6 3. RESPONSIBILITIES .............................................................................................................7 3.1. STANDARDS MANAGER .............................................................................................7 3.2. PPSL LIBRARIAN ..........................................................................................................7 3.3. PSL LIBRARIAN ............................................................................................................7 Standards Library Policy Effective Date: July 27, 2018 2#
Attachment 1, passage 480Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Standards Library Policy Policy Number: PHP-1320.2A 1. INTRODUCTION 1.1. PURPOSE This policy describes the PHMSA Standards Library (PSL) for PHMSA and the National Association of Pipeline State Representatives (NAPSR) employees to satisfy a wide range number of tasks and knowledge. Over the last decade, costs for furnishing standards and their usage has widely varied by year and month. In the past, PHMSA was in a forecasting mode. PHMSA will be borrowing a model from the manufacturing industry: a Just-In-Time (JIT) model is a more reactive model that strives to furnish the right part (in this case, book) at the right time or just in time. It strives for cost and availability efficiency. This policy will be built around this model. 1.2. SCOPE This policy applies to all PHMSA and NAPSR employees. PHMSA Training and Qualifications (T&Q) will play a special role with the PSL operating the physical copies of the PSL. The Standards Manager will oversee the procurement and maintenance of contracts associated with the PSL. Customer support will consist of two PSL Librarians from PHMSA. They will split the jurisdiction of the support between NAPSR and PHMSA employees. 1.3. AUTHORITIES 1.3.1. Not Applicable. 1.4. DEFINITIONS 1.4.1. PHMSA Standards Library refers to a paper based and electronic library that houses pipeline standards. 1.4.2. Physical PSL (PPSL) refers to the paper based component of the PSL. This physical library will house and maintain any paper based copies. 1.4.3. Check Out refers to the means of checking out a paper based copy of a standard from the PPSL 1.4.4. Check In refers to the return of a checked-out paper base copy of a standard to the PPSL. 1.4.5. PSL Portal refers to the web-based portion of the PSL. The portal will be access either through anonymous access or a username and password. Standards Library Policy Effective Date: July 27, 2018 3#
Attachment 1, passage 481Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Standards Library Policy Policy Number: PHP-1320.2A 1.4.6. PSL Standards refers to the format of the standards within the Electronic Portal. The technical format of PDF or portal document format can be opened from many readers. 1.4.7. Anonymous Access refers to a means of accessing the PSL Portal. With anonymous access enabled a username and password is not needed. 1.4.8. Incorporated by Reference (IBR) refers to standards that are incorporated in PHMSA’s regulations by reference. 1.4.9. Section 24 refers to statutory language as written in Pipeline Safety, Regulatory Certainty, and Job Creation Action of 2011 (P.L. 112-90). Section 24 1.4.10. Vendor refers to the standard reseller that PHMSA has contracted with. 1.4.11. PHMSA PSL Librarians refers to two PHMSA employees who are tasks with fulfilling standard requests. 1.4.12. PPSL Librarian refers to a PHMSA employee that is tasked with the physical fulfillment of a paper standard and the management of paper copies at the PPSL. 2. POLICY 2.1. PRINCIPLES OF THE PHMSA STANDARDS LIBRARY The PSL’s purpose is to furnish standards information. There are two priorities for the library. The primary priority goes to standards which are currently IBR’ed into PHMSA’s regulations. The secondary priority are standards which are related to specific needs to PHMSA or NAPSR which are not part of the IBR set. The needs arise from standard committee work, historical use and evaluations, accident/incident analysis, training, etc. Another use of the PSL is to satisfy the requirement in Section 24 of the Pipeline Safety, Regulatory Certainty, and Job Creation Action of 2011 (P.L. 112-90). This requirement states that any IBR revised or newly incorporated after 1/1/2013 must be freely available to the public. 2.2. PHSMA STANDARDS LIBRARY PORTAL The PSL Portal is an online website that houses electronic (PDF) copies of standards which PHMSA subscribes to on a rental basis. The electronic standards are not copy protected and have usage rights as outline in Section 1.4.6 of this policy. The scope of the PSL Portal is for PHMSA and NAPSR employees only, at no time will any other Standards Library Policy Effective Date: July 27, 2018 4#
Attachment 1, passage 482Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Standards Library Policy Policy Number: PHP-1320.2A person or entity be allowed access to this site. The maintenance and operations of the portal will be handled by the Vendor. 2.3. PHYSICAL PHMSA STANDARD LIBRARY The PPSL will be maintained by PHMSA T&Q. T&Q will maintain the permanent paper copies of the PSL. A listing of any paper copy will be maintained on the T&Q Sharepoint site which will show a listing of available standards and their status as to whether they are checked-out or available. The listing shall also show the checked-out date, and the person the standard is checked out to. A calculated column of the current date minus the checked-out date will be shown. The checked-out time for any standard shall not exceed 30 days without a request for renewal. If a checked-out standard is overdue the PPSL shall notify the individual who has the paper copy and his/her Director or State Program Manager. A response to the inquiry is expected within 5 business days. Upon a response, the necessary action or return or replacement shall take place. If the checked-out standard is deemed lost the PPSL Librarian shall notify the individual’s Director or State Program Manager for their information about the employee’s behavior. If the checked-out standard is deemed damaged beyond repair the PPSL shall notify the Standards Manager for replacement of the standard. 2.4. EMPLOYEE REQUESTS All requests for standards must be submitted through email. All requests must have a Director or a State Program Manager’s preapproval. Written evidence of such approval can be in a forwarded email or attached to the request. The email address to submit an approval will be listed within the PSL Portal. All requests must contain the following data elements for approval. No request will be approved without this data. • Standard Organization • Standards ID (designator) • Version (year) • Number of copies • Applicability to other NAPSR and PHMSA employees Standards Library Policy Effective Date: July 27, 2018 5#
Attachment 1, passage 483Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Standards Library Policy Policy Number: PHP-1320.2A • Reason for the request: such as a special inspection; the standard is incorporated by reference; or that it is to be used in a research project. Once the request has gone through final approval the approver will email the requestor back with notification of how to obtain the requested standard. 2.5. SECTION 24 REQUESTS Any request in accordance with Section 24 will be handled directly by a PHMSA PSL Librarian. Requests shall be received via email or telephone. Once the requestor has contacted the representative contact information shall be collected and verified. The requestor shall be a resident within the United States or it territories in which PHSMA has jurisdiction over. The information collected from the requestor shall be the following: • Name • Physical Address • Email Address • Telephone Contact Number Verification shall consist of verifying the name and physical address using a web search. Upon verification, the requestor shall be contact via email or telephone with the further information how and when the request information will be available. A process of elimination will determine the fulfillment of the standard to the requestor, below are the sequential steps taken. 1. The PHMSA PSL Librarian managing the request shall first check to see if an SDO has the IBR standard available through its website or library. 2. The PSL Librarian shall contact a PHMSA Community Liaison to see if the Community Liaison can fulfill the information request. 3. The requestor shall be asked if he/she could visit a PHMSA or NAPSR location where they would be able to view the standard. 4. The request can be fulfilled as outlined in Section 2.6.2 of this policy. 2.6. STANDARDS CHECK-IN & CHECK-OUT PROCEDURES 2.6.1. Internal Outgoing Check-Out The internal outgoing check-out procedure is meant for PHMSA and NAPSR employees that have requested a standard which is available in the PPSL and Standards Library Policy Effective Date: July 27, 2018 6#
Attachment 1, passage 484Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Standards Library Policy Policy Number: PHP-1320.2A not in the PSL Portal. There will be times when a standard has limited usage. For these standards, an electronic PDF version of the standard will not be placed in the PSL Portal due to the higher cost of alternatively buying a few paper copies and housing them in the PPSL. After an official standards request has been accomplished in accordance with 2.4.1 and it has been deemed to be fulfilled from the PPSL. The Standards Manager or Standard Librarians will instruct the PPSL Librarian to issue the paper copy to the requestor via a shipment. The shipment will include the standard as well as an information sheet on how, when and where to return the paper standard back to the PPSL. Upon fulfillment of the request the PPSL Librarian shall update the Sharepoint Library Catalog with the status of the check-out. 2.6.2. External Outgoing Check-Out The external check-out procedure is similar to the internal check-out procedure. The difference is that if a standard does not exist in the PPSL then the Standards Manager shall procure a copy directly from the Vendor which will be stored at the PPSL. Once the PPSL receives the paper copy and is in receipt of the request as outline is 2.5.1 the PPSL Librarian shall ship the standard with instructions for its return in 30 days. The shipment shall also have prepaid envelope for its return to the PPSL. 3. RESPONSIBILITIES 3.1. STANDARDS MANAGER Assist the PPSL and PSL librarians as well as act as the COR for the yearly standards procurement and all other procurement and Vendor management. 3.2. PPSL LIBRARIAN The PPSL Librarian is a PHMSA employee who is responsible for the duties set out in the policy for the PPSL. 3.3. PSL LIBRARIAN The PSL Librarian is a PHMSA employee who is responsible for the duties set out in the policy for the PSL. Standards Library Policy Effective Date: July 27, 2018 7#
Attachment 1, passage 485Guidelines for States Participating in the Pipeline Safety Program Appendix L#
Attachment 1, passage 486Section 192.18 Notification Process – State Agency and PHMSA 1.1 Notifications from Operators for 49 CFR § 192.18 Section 192.18 allows operators to notify PHMSA and the States of proposed alternative approaches to complying with the minimum Federal pipeline safety regulations in several different regulatory sections. The notification procedures for these alternative actions are comparable to the previous notification requirements in subpart O for the gas integrity management regulations. Because PHMSA has expanded the use of notifications to pipeline segments for which subpart O does not apply (i.e., to non-HCA pipeline segments), PHMSA added a new § 192.18 in subpart A that contains the requirements for submitting such notifications for any gas pipeline segment. 1.1.2 Operator Notifications Operator notifications are submitted either electronically or by mail through the PHMSA “Information Resources Manager”, see § 192.18(a). Both PHMSA and the State will get the operator notification through the Work Management System (WMS), see Appendix L - Guidelines for States Participating in the Pipeline Safety Program. Section 192.18(b) requires an operator to notify the appropriate State or local pipeline safety authority when an applicable pipeline segment is located in a State where PHMSA OPS has an interstate agent agreement, or an intrastate applicable pipeline segment is regulated by that State. 1.1.3 Notification Requirements Operator notifications are for alternative approaches to complying with the minimum Federal pipeline safety regulations for part 192 sections identified in § 192.18(c). 1.1.4 Notification Response to the Operator – Timing and Response Section 192.18(c) requires PHMSA to reply to the operator within 90 days of receipt of the notification. In practice, this means that prior to the end of the 90-day interval PHMSA must respond to the request by one of the following means: (1) requesting more information from the operator - which will stop the 90-day reply deadline, (2) objecting to the request – which will require compliance with the regulation as written, Page 1 of 3#
Attachment 1, passage 487Section 192.18 Notification Process – State Agency and PHMSA (3) not objecting to the request (either in writing or by not responding) – which will allow the new approach as requested by the operator, or (4) informing the operator their request requires either a State or Federal waiver/special permit – which will require the operator to apply to either the State or PHMSA for a waiver/special permit – § 190.341. 1.1.4.1 Operator notifications for intrastate pipelines Where the State has a 60105 Certification with PHMSA and the State has safety authority for the intrastate pipeline1, the State Agency must notify PHMSA if they object to the § 192.18 request by the operator and the State Agency must follow the waiver/special permit process as described in Section 3.3 - Waiver of Federal Regulations if the operator requests a State waiver. 1.1.4.2 Timing of State Agency and PHMSA decisions (1) PHMSA (PHP-80) will e-mail notify the State Agency of the WMS request within 3 weeks (21 days) of receipt of the operator request and its proposed path on the operator request. (2) The State Agency will notify PHMSA (PHP-80) of any State Agency needs within 6 weeks (42 days) of the WMS request of any State concerns with the operator notification and whether the State Agency suggests asking for more information, “objecting” or “not objecting”, or requiring a waiver/special permit. a) It is important to note the operator is required to notify PHMSA and the State. PHMSA will evaluate the notification and consult with the State for facilities under State safety authority. PHMSA will then issue a letter of “objection” or “no objection” to the operator. (3) PHMSA (PHP-80) must send a final § 192.18 notification decision to the operator within 90 days of the notification. If an “objection” letter is sent to the operator by PHMSA, the operator still has the option of requesting a waiver/special permit through the State Agency or PHMSA, as appropriate. 1 49 CFR 192.18(b) applies to an applicable pipeline segment that is located in a State where OPS has an interstate agent agreement, or an intrastate applicable pipeline segment is regulated by that State. Page 2 of 3#
Attachment 1, passage 488Section 192.18 Notification Process – State Agency and PHMSA 1.1.5 Interstate Pipelines Section 192.18 notifications concerning interstate facilities may be considered only by PHMSA. PHMSA will consult with the State Interstate Agent when an interstate operator requests a § 192.18 alternative approach for complying with the minimum Federal pipeline safety regulations. 1.1.6 Intrastate Pipelines Upon WMS posting or receipt of a § 192.18 notification from an operator, a State Agency may consider a State waiver of the pipeline safety requirements subject to PHMSA concurrence – See Section 3.3 – Waiver of Federal Regulations. The State Agency must inform PHMSA (PHP-80) that they will require the operator to obtain a waiver, or they plan to “not object” or “object” to the operator §192.18 request. The State Agency must inform PHMSA (PHP-80) of their decision within 6 weeks (42 days) of the WMS posting. PHMSA (PHP-80) must notify the operator prior to the end of the 90-day notification decision interval of the operator § 192.18 request. For all § 192.18 notifications that are approved and in effect, for pipelines under the state safety authority, State Agencies are required to verify that the notification procedures are being met. This includes having the operator amend their 49 CFR Part 192 procedures. Where appropriate, PHMSA, in consultation with the appropriate State Agencies may terminate approved alternative compliance action(s) pursuant to a no objection letter in response to a § 192.18 notification if it is no longer valid. For all § 192.18 notifications that are no longer in effect (e.g., project is completed, time frame has expired, PHMSA/State Agency termination, or code change), State Agencies must notify PHMSAOPSStateWaivers@dot.gov that the § 192.18 notification is no longer in effect. PHMSA (PHP-80) must notify the operator that the § 192.18 request has been terminated. Page 3 of 3#
Attachment 1, passage 489OFFICE OF PIPELINE SAFETY NOTIFICATIONS POLICY AND PROCEDURE POLICY NUMBER: PHP-5340.1H EFFECTIVE DATE: May 24, 2023 LINDA GAIL DAUGHERTY Digitally signed by LINDA GAIL DAUGHERTY Date: 2023.05.23 09:15:13 -04'00' Linda Daugherty Deputy Associate Administrator for Field Operations, Office of Pipeline Safety, PHMSA#
Attachment 1, passage 490Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ Table of Contents 1. INTRODUCTION ............................................................................................................................... 3 1.1. PURPOSE .................................................................................................................................... 3 1.2. SCOPE ......................................................................................................................................... 3 1.3. AUTHORITIES .......................................................................................................................... 3 1.4. DEFINITIONS ............................................................................................................................ 4 2. POLICY ............................................................................................................................................... 5 2.1. INTEGRITY ASSURANCE: GG, GT, AND HL ..................................................................... 5 2.2. OPERATOR QUALIFICATIONS ........................................................................................ 199 2.3. ALTERNATIVE MAXIMUM ALLOWABLE OPERATING PRESSURE ..................... 199 2.4. BIOFUEL NOTIFICATIONS ............................................................................................... 209 2.5. NATIONAL REGISTRY NOTIFICATION ........................................................................ 221 2.6. OPERATOR IDENTIFICATION ASSIGNMENT REQUEST ........................................... 23 2.7. EXTREME WEATHER INSPECTION DELAY .................................................................. 23 2.8. ABDANDONMENT OF UNDERWATER FACILITIES REPORTS ................................ .24 3. RESPONSIBILITIES ....................................................................................................................... 25 3.1. 3.2. INFORMATION RESOURCES MANAGER ....................................................................... 25 PHP OFFICES AND STATE AGENCIES ............................................................................. 25 Notifications Policy and Procedure Effective Date: May 24, 2023 2#
Attachment 1, passage 491Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ 1. INTRODUCTION 1.1. PURPOSE This policy describes how the following are processed by PHMSA’s Office of Pipeline Safety (OPS): Integrity Assurance Notifications required by 49 C.F.R. §192 and §195. Operator Qualifications (OQ) Notifications required by 49 C.F.R. §192 and §195. Alternative Maximum Allowable Operating Pressure (MAOP) Notifications required by 49 C.F.R. §192. Biofuel Notifications requested in PHMSA Advisory Bulletin (ADB-08-05) Notice to Hazardous Liquid Pipeline Operators of Request for Voluntary Advance Notification of Intent To Transport Biofuels, 73 Fed. Reg. 123 (June 25, 2008). National Registry Notifications required by 49 C.F.R. §191 and §195. Operator ID Assignment Requests required by 49 C.F.R. §191 and §195. Abandonment Reports required by 49 C.F.R. §192 and §195. 1.2. SCOPE This policy applies to all OPS employees and contractors involved in processing notifications, requests, and reports. PHP staff designated to receive emails and PHP-6 data owner staff are listed in the Notifications Data Management Procedures (DMP). Additional details about how PHP-6 and the IRM implement this policy are also in the DMP Notification document in SharePoint. 1.3. AUTHORITIES 1.3.1. Statutory 1.3.1.1. 49 U.S.C. – Transportation. 1.3.1.1.1. Subtitle III – General and intermodal programs. Chapter 51– Transportation of hazardous material. 49 U.S.C. §5103 – General regulatory authority. 1.3.1.1.2. 49 U.S.C. §5121 – Administrative. Subtitle VIII – Pipelines. Chapter 61– Safety. §60102 – Purpose and general authority. §60103 – Standards for liquefied natural gas pipeline facilities. §60104 – Requirements and limitations. §60108 – Inspection and maintenance. §60109 – High-density population areas and environmentally sensitive areas. Notifications Policy and Procedure Effective Date: May 24, 2023 3#
Attachment 1, passage 4921.3.1.2. Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ §60110 – Excess flow valves. §60113 – Customer-owned natural gas service lines. §60116 – Public education programs. §60117 – Administrative. §60118 – Compliance and waivers. §60124 – Biennial reports. §60132 – National pipeline mapping system. §60137 – Pipeline control room management. 49 C.F.R. §1.97 – Delegations to the Pipeline and Hazardous Materials Safety Administrator. 1.4. DEFINITIONS 1.4.1. 1.4.2. 1.4.3. 1.4.4. Additional Regulator means an OPS Division or State Agency supporting investigations in a WMS activity. Alternative Maximum Allowable Operating Pressure (Alternative MAOP) refers to the requirements in the Alternative MAOP Rule promulgated by PHMSA that allows certain gas transmission pipelines to operate at higher pressures and pipeline stress levels than regulations previously allowed if certain conditions are met that ensure an adequate margin of safety (73 Fed. Reg. 202 (October 17, 2008)). Information Resources Manager (IRM) is a federal role in PHMSA headquarters providing oversight and guidance to contractor staff involved in data analysis and data collection support services for OPS. Contact the IRM at InformationResourcesManager@dot.gov Integrity Assurance refers to requirements for operators of hazardous liquid, gas transmission, and gas gathering pipelines to develop and implement comprehensive procedures that have four basic objectives: To perform integrity assessments of gas transmission and hazardous liquid pipelines in locations where a pipeline failure could have significant adverse consequences. These locations include High Consequence Areas (HCA), Moderate Consequence Areas (MCA), Class 3 location, and Class 4 location. MAOP reconfirmation and material verification of gas transmission pipelines. Implementation of safety regulations on Type C gas gathering pipelines Install valves to improve safety Some Integrity Assurance notification types have been required since PHMSA established Integrity Management (IM) regulations in the early 2000s. Notifications under these regulations were previously classified as IM Notifications Policy and Procedure Effective Date: May 24, 2023 4#
Attachment 1, passage 493Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ Notifications within OPS. The old IM Notifications and the newer types are collectively referred to as Integrity Assurance Notifications. 1.4.5. Interstate gas pipeline facility means a gas pipeline facility used to transport gas and subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC) under the Natural Gas Act (15 U.S.C. §717 et seq.). 1.4.6. Interstate hazardous liquid and carbon dioxide pipeline facility means a pipeline or that part of a pipeline that is used in the transportation of hazardous liquids or carbon dioxide in interstate or foreign commerce (49 C.F.R. §195.2). 1.4.7. Intrastate gas pipeline facility means a gas pipeline facility and transportation of gas within a State not subject to the jurisdiction of FERC under the Natural Gas Act (15 U.S.C. 717 et seq.). 1.4.8. 1.4.9. Lead means the individual with responsibility for a WMS activity. Lead Regulator means the OPS Division or State Agency with overall responsibility for a WMS activity. 1.4.10. Operator Qualification (OQ) requires pipeline operators to document that certain employees have been adequately trained to recognize and react to abnormal operating conditions that may occur while performing specific tasks (49 C.F.R. §192 Subpart N; 49 C.F.R. §195 Subpart G). 2. POLICY 2.1. INTEGRITY ASSURANCE: GG, GT, AND HL 2.1.1. Receipt Gas Transmission (GT), Hazardous Liquid (HL), and Gas Gathering (GG) Integrity Assurance notifications are received by the Information Resources Manager (IRM) either by e-mail or regular mail. 2.1.2. Validation The IRM reviews the information provided by the operator and, if necessary, requests additional information from the operator. If the content of the notification does not align with one of the reporting requirements, the IRM will send an email to the operator informing them that a notification will not be created. The relevant Region Director(s) and State Program Manager(s) will be copied on the email for informational purposes. Valid Integrity Assurance notification types are shown on the following pages. If the content of the notification does align with one of the reporting requirements, the IRM will create an activity in the WMS. The “Lead Regulator” and “90-Day Action” columns are explained later in this policy. Notifications Policy and Procedure Effective Date: May 24, 2023 5#
Attachment 1, passage 494Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ Gas Gathering (GG) Integrity Assurance Notifications GG Type and Regulation Short Description Lead Regulator 90-Day Action MAOP Determination Type C §192.619(c)(2) …operators not able to determine the actual operating pressure of GG Type C for the five years preceding May 16, 2023 submit proposed MAOP determination method… PHP-80 Yes Start/End Point Delay Onshore §192.8(b)(2) …operators unable to complete a determination of gathering start and end points by November 16, 2022 must submit the notification no later than 90 days before November 16, 2022... PHP-80 Yes Compliance Delay Type C §192.9(g)(4)(ii) …operators not able to comply with GG Type C safety requirements by May 16, 2023 must submit no later than 90 days before May 16, 2023… PHP-80 Yes Composite Materials Type C §192.9(h) …operators using composite materials not otherwise authorized for use in GG Type C must submit at least 90 days prior to installing composite materials… PHP-80 Yes Notifications Policy and Procedure Effective Date: May 24, 2023 6#
Attachment 1, passage 495Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ Gas Transmission (GT) Integrity Assurance Notifications - listed ascending by code cite GT Type and Regulation Short Description Lead Regulator 90-Day Action Management of Change Extension §192.13(d) …extension of time for management of change process… PHP-80 Yes New RMV Alternative Technology §192.179(e) and (g) …alternative equivalent technology instead of RMV for new onshore segments with diameter 6 inches or more… PHP-80 Yes RMV Installation Delay New §192.179(e) …request extension of RMV installation deadline for new onshore segments… Fed/State Yes RMV Installation Delay Replaced §192.179(f) …request extension of RMV installation deadline for replaced onshore segments… Fed/State Yes Replaced RMV Alternative Technology §192.179(f) and (g) …alternative equivalent technology instead of RMV for replaced onshore segments with diameter 6 inches or more… PHP-80 Yes Coating Damage Technology New Pipe §192.319(e) …technology other than current voltage gradient to assess coating damage on newly installed pipelines… PHP-80 Yes Coating Damage Technology Existing Pipe §192.461(g) …technology other than current voltage gradient to assess coating damage on existing pipelines… PHP-80 Yes Other Spike Pressure Test §192.506(b) …when using other technology or another process supported by a documented engineering analysis for establishing a spike hydrostatic pressure test or equivalent to the spike hydrotest requirements in §192.506(a)… PHP-80 Yes Notifications Policy and Procedure Effective Date: May 24, 2023 7#
Attachment 1, passage 496Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ GT Type and Regulation Short Description Lead Regulator 90-Day Action Expanded Pipe Sampling §192.607(e)(4) …when using an expanded pipe sampling approach to identify line pipe with properties that are not consistent with available information, or existing expectations, or assumed properties… PHP-80 Yes Alternative Pipe Sampling §192.607(e)(5) …when using an alternative pipe sampling approach that differs from §192.607 PHP-80 Yes (e)(2)… MAOP Reconfirmation Time Extension §192.624(b)(3) …when operational or environmental constraints limit ability to meet MAOP reconfirmation deadlines and an operator submits a petition for an extension of the completion deadlines… Fed/State No MAOP Reconfirmation Method 2 Factor/Period §192.624(c)(2)(iii) …when using Method 2 and using a less conservative pressure reduction factor or longer look-back period than prescribed by §192.624(c)(2)… PHP-80 Yes MAOP Reconfirmation Method 6 §192.624(c)(6) …when using an alternative technical evaluation process to provide a documented engineering analysis for establishing MAOP… PHP-80 Yes MAOP Reconfirmation Other ECA Technology §192.632(b)(3) …when using “other technology” in the Engineering Critical Assessment (ECA) validated by a subject matter expert to produce an equivalent understanding of the pipe equal to or greater than pressure testing or an inline inspection program… PHP-80 Yes RMV Operational Delay §192.634(a) …RMV not operational within 14 days of new or replaced pipeline going into service… Fed/State Yes Lateral RMV Alternative Technology §192.634(b)(3) …check valve instead of RMV for lateral… PHP-80 Yes Notifications Policy and Procedure Effective Date: May 24, 2023 8#
Attachment 1, passage 497Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ GT Type and Regulation Short Description Lead Regulator 90-Day Action Crossover RMV Alternative Technology §192.634(b)(4) …manual valve instead of RMV for crossover… PHP-80 Yes RMV Open Over 30 Minutes §192.636(c) …leave RMV open for more than 30 minutes after rupture identification… PHP-80 Yes Technology Outside HCA §192.710(c)(7) …when using “other technology” for assessments outside of HCAs… PHP-80 Yes Metal Loss Less Conservative §192.712(b)(1) …corrosion metal loss remaining strength calculation less conservative than ASME/ANSI B31G or R-STRENG… PHP-80 Yes ECA Mechanical Damage Evaluation §192.712(c)(11) …propose engineering critical assessment to evaluate, instead of repairing, dents and other mechanical damage… PHP-80 Yes Assumed Toughness §192.712(d)(3)(iv) and (e)(2)(i)(E) …when using an assumed Charpy v-notch toughness value for analysis of crack-related conditions… PHP-80 Yes Repair Outside HCA §192.714(e)(2) …if the operator cannot meet the schedule for evaluation and remediation required under 192.714 and cannot provide safety through temporary reduction in operating pressure or through another action… Fed/State No Pressure Outside HCA §192.714(e)(3) …when a pressure reduction exceeds 365 days on a pipeline outside of an HCA, the operator must notify PHMSA and explain the reasons for the remediation delay… Fed/State No Notifications Policy and Procedure Effective Date: May 24, 2023 9#
Attachment 1, passage 498Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ GT Type and Regulation Short Description Lead Regulator 90-Day Action RMV Repair Replace Delay §192.745(e)(1) …extend replacement of ineffective RMV beyond 12 months… Fed/State Yes Program §192.909(b) …any change to the program that may substantially affect the program's implementation or may significantly modify the program or schedule for carrying out the program elements… Fed/State No Data Integration Extension §192.917(b) …extend data integration deadline for HCA segments beyond February 26, 2024… PHP-80 Yes Risk Assessment Extension §192.917(c)(5) …extend risk assessment deadline for HCA segments beyond February 26, 2024… PHP-80 Yes Technology §192.921(a)(7) and §192.937(c)(7) …other technology that an operator demonstrates can provide an understanding equivalent to assessment methods prescribed in the regulations of the condition of the line pipe for each threat to which a pipeline in an HCA is susceptible… PHP-80 Yes ICDA With Electrolytes §192.927(b) …ICDA plan for HCA segment with electrolytes present… PHP-80 Yes Repair §192.933(a)(1) …if the operator cannot meet the schedule for evaluation and remediation required under paragraph (c) of this section within an HCA and cannot provide safety through temporary reduction in operating pressure or through another action… Fed/State No Pressure §192.933(a)(2) …when a pressure reduction exceeds 365 days within an HCA, the operator must notify PHMSA and explain the reasons for the remediation delay… Fed/State No Notifications Policy and Procedure Effective Date: May 24, 2023 10#
Attachment 1, passage 499Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ GT Type and Regulation Short Description Lead Regulator 90-Day Action ILI Results Extension §192.933(b) …extend deadline for receipt of ILI assessment results beyond 180 days after the ILI run… Fed/State No Reassessment Interval Above 30% SMYS §192.939(a) …when requesting 6-month extension of the 7-calendar-year reassessment interval for pipelines operating at or above 30% SMYS… Fed/State No Reassessment Interval Below 30% SMYS §192.939(b) …when requesting 6-month extension of the 7-calendar-year reassessment interval for pipelines operating below 30% SMYS… Fed/State No Hazardous Liquid (HL) Integrity Assurance Notifications – listed ascending by code cite HL Type and Regulation Short Description Lead Regulator 90-Day Action Non-Steel Liquid Pipe §195.8 …intent to install non-steel pipe for hazardous liquid or carbon dioxide transport… PHP-80 Yes New RMV Alternative Technology §195.258(c) and (e) …alternative equivalent technology instead of RMV for new onshore segments with diameter 6 inches or more… PHP-80 Yes RMV Installation Delay New §195.258(c) and 260(h) …request extension of RMV installation deadline for new onshore segments… Fed/State Yes Replaced RMV Alternative Technology §195.258(d) and (e) …alternative equivalent technology instead of RMV for replaced onshore segments with diameter 6 inches or more… PHP-80 Yes RMV Installation Delay Replaced §195.258(d) and 260(h) …request extension of RMV installation deadline for replaced onshore segments… Fed/State Yes Notifications Policy and Procedure Effective Date: May 24, 2023 11#
Attachment 1, passage 500Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ HL Type and Regulation Short Description Lead Regulator 90-Day Action RMV Maximum Spacing §195.260(g)(1) and 418(b)(2)(ii) …request alternative RMV spacing for HVL in populated areas… PHP-80 Yes RMV Installation Exemption §195.260(h) …request exemption from RMV installation requirements of 195.260(c), (e), or PHP-80 Yes (f)… Technology Outside HCA §195.416(d) …when using “other technology” for assessments outside of could affect PHP-80 Yes HCA Discovery Beyond 180 Days Outside HCA §195.416(f) …when impracticable to make a determination about a condition within 180 days of the assessment outside could affect HCA… Fed/State No RMV Operational Delay §195.418(a) …RMV not operational within 14 days of new or replaced pipeline going into Fed/State Yes service Lateral RMV Alternative Technology §195.418(b)(3) …check valve instead of RMV on lateral… PHP-80 Yes Crossover RMV Alternative Technology §195.418(b)(4) …manual valve instead of RMV on crossover… PHP-80 Yes non-HCA RMV Operation Exemption §195.419(g) …request exemption from RMV operation requirements in 195.419(b) for non- HCA segments… PHP-80 Yes RMV Repair Replace Delay §195.420(f)(1) …extend replacement of ineffective RMV beyond 12 months… Fed/State Yes Technology §195.452(c)(1)(i)(D) …an operator choosing “other technology” for use in an HCA must notify OPS 90 days before conducting the assessment… PHP-80 Yes Notifications Policy and Procedure Effective Date: May 24, 2023 12#
Attachment 1, passage 501Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ HL Type and Regulation Short Description Lead Regulator 90-Day Action Repair §195.452(h)(1)(i) …if the operator cannot meet the schedule for evaluation and remediation required under paragraph (h)(3) of this section and cannot provide safety through a temporary reduction in operating pressure… Fed/State No Pressure §195.452(h)(1)(ii) …when a pressure reduction exceeds 365 days, the operator must notify PHMSA explain the reasons for the delay… Fed/State No Discovery Beyond 180 Days HCA §195.452(h)(2) …when impracticable to make a determination about a condition within 180 days of the assessment in could affect HCA… Fed/State No EFRD Installation Delay §195.452(i)(4)(iii) …request extension of EFRD installation deadline for new or replaced segments… Fed/State Yes Interval §195.452(j)(4)(i) and (ii) …notify OPS of the justification for a longer interval, and propose an alternative interval… Fed/State No Notifications Policy and Procedure Effective Date: May 24, 2023 13#
Attachment 1, passage 502Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ 2.1.3. Creating Notification Activity IRM staff with the Activity Creator role for PHF-30 perform data entry into WMS from the submittals sent to Headquarters by operators. IRM staff will target creating the Integrity Assurance Notification in WMS within five business days of when the report is received.. On the top row of WMS tabs, select Activities, then Create Activity. After selecting Investigation and Integrity Assurance Notification, select Go. Lead Regulator – Assign Regulator values based on the notification type and combinations of system type, inter/intra, and State values. In section 2.1.2, each type with PHP-80 in the Lead Regulator column, set the Lead Regulator value to PHP-80. For all other types, determine the Lead Regulator by using the Fed/State .xls in SharePoint. Start with the sheet named EXCEPTIONS by looking for the OpID, Inter/Intra, System Type, and State. When State is null, the exception applies in all States. If you find an applicable record, use the Exception Lead Regulator as the Lead Regulator for the IM Notification. If you do not find an applicable record on the EXCEPTIONS sheet, use the JURISDICTION sheet to find the Lead Regulator based on System Type, Inter/Intra, and State. If the Fed/State process above yields more than one Region or State Agency, assign the Region or State Agency with pipeline systems most heavily impacted by the Integrity Assurance Notification as the Lead Regulator. Additional Regulators - determine Additional Regulators for all notification types by using the Fed/State xls. Activity Description - enter a short version of the Operator Name, System Type abbreviation, Notification Type, and State Abbreviations. i.e. Eagle Eye HL Pressure TX, NM. Summary of Incoming Documents – summarize the details of the notification from the documents provided by the operator submitting the notification. Notification Type – select the Notification type from the dropdown. Date Received – enter the date you received the notification. The target for creating the WMS activity is within five business days of receipt. Submitter Email – Enter the Operator’s e-mail into the field. They will get an alert e-mail that the notification has been created. Notification Status – Always select Under Review from the dropdown menu. Inter States/Intra States – Select the Inter/Intra State values from the dropdown menu. You may select multiple values. Select the Create command button and the new IM Notification will open. Notifications Policy and Procedure Effective Date: May 24, 2023 14#
Attachment 1, passage 503Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ Who,What,Where Tab If the Lead Regulator is a Region, add the Unit(s) in the Assets section. If the Lead Regulator is a State Agency, check the WMS for Unit(s) and add them if found. If not, add the OpID and System Type to the Assets section. Select Save. Documents Tab Upload all documents included with the Operator’s submittal, including a pdf of the e-mail. Investigation Tab Recheck all information entered during activity creation. If you make any changes, select Save. Enter all available information into the Additional Information section. Under Operator Information, select the Unit ID or Operator ID most heavily impacted from the drop-down. Select Save. Select Release Lock on the right side of the blue banner and the window will close. If an operator sends an update to PHF-30, update the notification in the WMS. To find notification activities, select Search on the top row of WMS tabs. Click the Activity Search tab on the second row. Adjust prompts and click the Search command button. In the Search Results table, click on the Activity ID to open notification activities. Attach the new documents to the notification on the Documents tab and update other data fields as needed. Check the Who, What, Where tab to determine the Lead. Send an e-mail to the Lead letting them know how you have changed the notification activity. Select Release Lock on the right side of the blue banner and the window will close. 2.1.4. Assigning Lead and Supervisor(s) Assign Lead/Supervisor YouTube Video Upon creation of the Integrity Assurance Notification, staff with the Investigation Receive role for the Lead Regulator will receive an alert e-mail and an Assign Lead/Supervisor task in their Investigation worklist. Open the notification activity from the Investigation worklist. On the Who, What, Where tab, review the Summary of Incoming Documents field. In the Activity Staff table, add Supervisor(s) and a Lead. Click Save. Select the Tasks tab and open the Assign Lead/Supervisor task. Select Save - comments are optional. Notifications Policy and Procedure Effective Date: May 24, 2023 15#
Attachment 1, passage 504Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ For Additional Regulators, Region staff with the Investigation Receive role will own an Investigation task. Select the Tasks tab and open the Investigation task for your Regulator. Modify the task by changing the Task Owner to an investigator in your Regulator. Select Release Lock on the right side of the blue banner and the window will close. 2.1.5. Investigation and Follow-Up Investigation YouTube Video Create New Task YouTube Video The Lead and staff for each Additional Regulator will receive an alert e-mail and an Investigation task in the Investigation worklist. The Lead is responsible for ensuring that all Additional Regulators concur with any Status Change for the notification. Open the notification activity from the Investigation worklist and review all activity tabs. Some of the fields are editable only by Activity creators. If there are errors in these fields, send an email to InformationResourcesManager@dot.gov and describe the errors. If appropriate, contact the operator to get additional information about the notification. On the Who, What, Where tab, check the Unit(s) or OpID(s)/System Type(s) and correct them if necessary. On the Notes tab, create notes describing actions taken by Regions, States, PHP- 80, or the operator. The first note documenting the first follow-up is expected within 30 days of the created date. When new information is obtained, add additional Notes. Set the due date of your Investigation task to match the date you expect the next update. On the Investigation tab, verify or populate the Operator Information and Location sections. On the Who,What,Where tab, multiple Unit ID or OpID can be entered. In the Operator Information section of the Investigation tab, select the Unit or OpID most heavily impacted. If the notification is for a single location, add the information in the Location section. Select Release Lock on the right side of the blue banner and the window will close. Notifications Policy and Procedure Effective Date: May 24, 2023 16#
Attachment 1, passage 505Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ 2.1.6. 90-Day Deadline Notifications and WMS Alert Email In section 2.1.2, each type with Yes in the 90-Day Action column requires PHMSA action within 90 days of the date the operator submitted the notification. When one of the notification types listed above has Status = Under Review and 55 days have passed since the operator submitted the notification, the WMS sends an alert email to all staff on the Staff table of the activity. The email includes the activity ID, notification type, and operator name(s). 2.1.7. Status Changes The WMS does not notify operators of status changes. The Lead is responsible for communicating with the operator about the notification. All staff with Investigation tasks must add notes on the Notes tab indicating whether the regulator supports a status change. The Lead Regulator is responsible for obtaining concurrence from all Additional Regulators before changing the status for the notification. If disagreement exists between affected Region(s)/State(s) and PHP-80, OPS management will resolve the disagreement before the status is changed. The initial status for all notifications is “Under Review.” If Regulators determine that the operator’s notification is incomplete or inadequate, the Lead Regulator sets the status to “Objections Noted” and communicates the inadequacy to the operator. When no further action by the operator is expected, change the Status to “Resolved” or “Objections Resolved” as appropriate. Regulators are encouraged to upload approval emails and procedures the operator has agreed to use on the Documents tab. The status of a notification in the WMS is changed on the Investigation tab and the date of the change is required. 2.1.8. Closing an Integrity Assurance Notification Closing YouTube Video The WMS does not communicate status changes to the operator. The Lead is responsible for informing the operator that the notification is closed and uploading documents to the WMS activity. Integrity Assurance Notification activities may be closed after all regulators have added notes supporting a status of “Resolved” or “Objections Resolved.” On the Notifications Policy and Procedure Effective Date: May 24, 2023 17#
Attachment 1, passage 506Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ Who,What,Where tab, in the Summary of Corrective Actions field, summarize the operator’s corrective actions. Check the Activity Staff table and ensure the person you will ask to approve closure is in the table as a Supervisor. On the Investigation tab, enter the Date Resolved or Objections Resolved. On the Tasks tab, select the Investigation task for the Lead. Select the Complete Task radio button, then Save – comments are optional. If there is more than one Supervisor on the Who,What,Where tab, select the Supervisor to receive the Closure Requested task. Select Release Lock on the right side of the blue banner and the window will close. The Supervisor selected will receive an alert e-mail and a Closure Requested task in their Investigation worklist. Open the activity from the worklist and review all tabs, especially the Notes tab to ensure adequate operator actions have been documented and all regulators support the status. On the Tasks tab, open the Closure Requested task and select the Complete Task radio button. If the Notes tab documents adequate Operator actions and regulator concurrence, select Approve. If all required fields have data, the activity status will change to Closed and the window will close. If not, error messages will explain data inadequacies. Fix the data and open the Closure Requested task again. If the Notes tab does not document adequate Operator actions and regulator concurrence, select Disapprove. In the Comment field for the task, explain what more is needed. The Lead will get an alert e-mail and an Investigation task in the Investigation worklist. Select Release Lock on the right side of the blue banner and the window will close. 2.1.9. Access All notifications, including documents, for an OpID, Inspection System, and Unit are available in the PHMSA Data Mart-Pipeline (PDM-P). Notifications can be viewed at the National, Region, and State levels on the Notifications dashboard. The public has access to notification data, but documents associated with a notification are not available to the public. Notifications Policy and Procedure Effective Date: May 24, 2023 18#
Attachment 1, passage 507Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ 2.2. OPERATOR QUALIFICATIONS 2.2.1. Receipt OQ notifications are received by the IRM either by e-mail or regular mail. 2.2.2. Headquarters Processing The IRM reviews the information provided by the operator and, if necessary, requests additional information from the operator. The IRM will upload the documents into SharePoint. The IRM will e-mail the notification to the appropriate PHMSA Staff Contact(s) at each Region with an active Unit and copy the applicable Region Director(s). 2.2.3. Access All notifications, including documents, for an OpID, Inspection System, and Unit are available in the PHMSA Data Mart-Pipeline (PDM-P). All notifications can be viewed in SharePoint. 2.3. ALTERNATIVE MAXIMUM ALLOWABLE OPERATING PRESSURE 2.3.1. Receipt Alternative MAOP notifications are sent by the operator to Region Offices. The Region forwards the notifications to the IRM. 2.3.2. Headquarters Processing The IRM reviews the information provided by the operator and, if necessary, requests additional information from the operator. The IRM will enter the documents submitted into SharePoint. Region contacts are available to assist with determining the correct Unit(s). 2.3.3. Access All notifications, including documents, for an OpID, Inspection System, and Unit are available in the PHMSA Data Mart-Pipeline (PDM-P). All notifications can be viewed in SharePoint. Notifications Policy and Procedure Effective Date: May 24, 2023 19#
Attachment 1, passage 508Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ 2.4. BIOFUEL NOTIFICATIONS 2.4.1. Receipt Biofuel notifications are received by the Information Resources Manager (IRM) either by e-mail or regular mail. 2.4.2. Headquarters Processing The IRM reviews the information provided by the operator and, if necessary, requests additional information from the operator. The IRM will enter the notification into SharePoint. The IRM will e-mail the document to the appropriate Region Director or State Program Manager. 2.4.3. Updates Notifications typically describe an upcoming biofuel transport test run. Based on the specific content of the notification, the IRM may request the Region/State Partner to contact the operator for an update on their plans for biofuel transport. 2.4.4. Access All notifications, including documents, for an OpID are available in the PHMSA Data Mart-Pipeline (PDM-P) on the Operator dashboard. All notifications can be viewed in SharePoint. Notifications Policy and Procedure Effective Date: May 24, 2023 20#
Attachment 1, passage 509Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ 2.5. NATIONAL REGISTRY NOTIFICATION 2.5.1. Receipt Operators are required to submit National Registry Notifications by 49 C.F.R. §191.22(c) and 195.64(c) for the following actions: Type A – Operator Name Change Type B – Change in Entity Operating (Ceasing or Assuming) Type C – Shared Safety Program Change Type D –Acquire or Divest for Gas or Liquid Type F – Construction or Rehabilitation of Gas or Liquid Facilities Type I – Acquire or Divest for LNG Type J – Construction or Rehabilitation for LNG The notifications are submitted by operators in the PHMSA Portal. 2.5.2. Validation Upon submittal by an operator, some notifications are reviewed in the WMS before being released to Regions and State Agencies as system generated tasks: Type A – reviewed by the Information Resources Manager (IRM) to ensure the notification was not submitted in error. The IRM can void a Type A and have the operator start over if errors are discovered during the review process. Type B, D, F, I, and J – if the notification fails either of the items below, a Review Notification task is fired for the WMS Review Notification role before becoming a Manage Unit task. The Review Notification group can rescind the notification or re-open the notification for editing and resubmittal by the operator. EITHER The divesting or constructing OpID has not submitted a congruent annual report matching the system types, Inter/Intra, subtypes and State(s) covered by the notification. OR Both OpIDs involved in a Type B, D, or I are not entered in the notification. It may be necessary to expedite an OpID Request so that both OpIDs can be entered. Type C – HQ staff in the WMS SPR Name Change role receive a SPR Name Change task. HQ staff review the notification to ensure the Primary OpID, System Types, and Effective Dates in the notification are consistent with existing data. Additionally, HQ staff ensure all required SPR Types (see table below) have been updated. HQ staff can rescind a Type C and have the operator start over. Notifications Policy and Procedure Effective Date: May 24, 2023 21#
Attachment 1, passage 510Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ Safety Program GD GG GT HL LNG UNGS Integrity Management (IM) Yes No Yes Yes No Yes Operations Maintenance Emergency (OME) Yes Yes Yes Yes Yes Yes Control Room Management Yes* Yes* Yes* Yes* No Optional Public Awareness (PA) Yes Yes Yes Yes No No Damage Prevention (DP) Yes Yes Yes Yes No No Operator Qualification (OQ) Yes Yes Yes Yes No No Oil Pollution Act Facility Response Plan (OPA) No No No Yes** No No Drug & Alcohol Testing (D&A) Yes Yes Yes Yes Yes Yes * If the pipeline has a Control Room or SCADA ** The OPA SPR is not required for HL pipelines transporting HVL FLAMM TOXIC or CO2. It is required for CRUDE OIL, REFINED PP, and BIOFUEL 2.5.3. Regulator Review After any necessary validations are completed, the notification flows through the WMS to Regions and State Agencies: Type A – Regions and State Agencies with an active Unit in the WMS receive an Operator Name Change alert email. The email is sent to staff in the Acknowledge Operator Name Change role in the WMS. Type B, D, F, I, and J – a specified group of staff in Regions and State Agencies receive Manage Unit tasks. After the Region or State Agency has adequately adjusted Unit data in response to the notification, the task is completed. Manage Unit tasks are distributed based on the system types, sub-types and States in the notification. In certain instances, a Regulator receiving the notification may not own the applicable Units. If a Regulator receives a notification that should be acted upon by another Regulator, reassign the Manage Unit task to the appropriate Regulator. Type C – a specific group of staff in each Region with an active Unit receive a SPR Change Task. The Region decides if changes to Inspection Systems are warranted based on the new Safety Program data in the notification. After making this decision, complete the SPR Change task. The Type C notification will not appear in the PHMSA Data Mart- Pipeline (PDM-P) until all related SPR Change tasks are completed. Notifications Policy and Procedure Effective Date: May 24, 2023 22#
Attachment 1, passage 511Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ 2.6. OPERATOR IDENTIFICATION ASSIGNMENT REQUEST An Operator Identification Number (OpID) is an internal DOT number that identifies and tracks operator activities over time and across PHMSA databases. Operators of regulated gas facilities (49 C.F.R. §§192 and 193) and hazardous liquid and carbon dioxide systems (49 C.F.R. §195) are required to have an OpID. 2.6.1. Receipt Pipeline operators submit OpID requests via the PHMSA Portal. Once the operator submits their OpID request, a task is generated in the WMS for the IRM to review. 2.6.2. Validation The IRM can reject the request, reopen the request for editing, or submit the request to Regions and State Partners. Rejecting the request typically occurs if the company already has an OpID or intended to submit a National Registry Notification. The IRM may reopen a request if errors or inconsistent data is discovered during the initial review. If no issues are uncovered during the initial review, the IRM submits the OpID request to the applicable PHMSA Region(s) and State Partner(s) for their review. 2.6.3. Regulator OPID Review Task Regions and State Partners review the request to ensure the pipelines are regulated and are NOT being reported by an existing OpID. If all regulators approve the request, an OPID is generated by the WMS and all parties involved receive an e- mail confirming the creation of the OpID. If all regulators do not approve, the IRM decides on the appropriate action. If the request included plans for new construction, each member of the WMS role named “Receive Email Alert: Construction OpID” receives an email when the OpID is created. The IRM and PHP-6 follow up with Regions and State Partners that do not complete Regulator OPID Review Tasks promptly. 2.7. EXTREME WEATHER INSPECTION DELAY §195.414 requires operators to inspect pipeline facilities after certain extreme weather events. If an operator is unable to commence the inspection within 72 hours after the cessation of the event, the operator must notify the appropriate PHMSA Region Director as soon as practicable. For each of the operator’s units requiring notification, Region staff will attach documentation of the notification using the unit attachment category of Extreme Weather Inspection Delay. Notifications Policy and Procedure Effective Date: May 24, 2023 23#
Attachment 1, passage 512Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ 2.8. ABANDONMENT OF UNDERWATER FACILITIES REPORTS Pursuant to §192.727(g) and §195.59(a), for each abandoned offshore pipeline facility or each abandoned onshore pipeline facility that crosses over, under or through a commercially navigable waterway (CNW), the last operator of that facility must file a report upon abandonment of that facility. CNW are determined by the US Army Corps of Engineers’ National Waterway Network (NWN) database, excluding all non-commercial routes designated as no-traffic, non- navigable, and/or for special vessels such as fishing, power, and recreational watercraft. NPMS web-based mapping applications include a CNW layer named “Commercially Navigable Waterways” and data is available for download from CNW Data (dot.gov). 2.8.1. Receipt GT and HL PHMSA’s preferred method for operators to submit abandonment reports for gas transmission or hazardous liquid pipelines is to include them with their NPMS submission using the template available at https://www.npms.phmsa.dot.gov/Documents/Abandonment_Certification_Templ ate.doc. Operators can also submit their abandonment reports prior to their NPMS submission due date by email to NPMS@dot.gov. GD and GG PHMSA’s preferred method for operators to submit abandonment reports for gas distribution and gas gathering lines (not mapped in the NPMS) is by email to InformationResourcesManager@dot.gov. 2.8.2. Validation While processing the operator’s annual NPMS submission, the NPMS team will verify that a complete abandonment report accompanies each abandoned pipeline that crosses a CNW or runs offshore. If an abandonment report is missing, is not signed, the data is incomplete, or the data does not match the abandoned line in the NPMS submission, NPMS staff will put the NPMS submission on hold and request corrected information from the pipeline operator. If the operator does not comply within two weeks the NPMS will continue processing the submission without an abandonment report on file. 2.8.3. SharePoint List All reports received during CY 2016 or later are loaded to SharePoint, including a .pdf of the report, OpID, Report Date, and Unit ID(s). PHMSA staff have access to the SharePoint list. Future enhancements of the PDM-P may include showing the reports on the asset dashboards. 2.8.4. Region/State Notification If the report includes facilities with a federal Unit ID(s), PHP-6 will email the report and federal Unit ID(s) to each Region with a Unit. If the report includes Notifications Policy and Procedure Effective Date: May 24, 2023 24#
Attachment 1, passage 513Pipeline and Hazardous Materials Safety Administration Notifications Policy and Procedure Office of Pipeline Safety Policy Number: PHP-5340.1H ___________________________________________________________________________________________________________________________________________________________________________________________ facilities regulated by State(s), PHP-6 will email the report to the appropriate State Program Manager(s). 3. RESPONSIBILITIES 3.1. INFORMATION RESOURCES MANAGER 3.1.1. Receive gas gathering, gas transmission and hazardous liquid Integrity Assurance notifications, OQ notifications, biofuel notifications, and abandonment reports. Perform review and validation, data entry, and status management of Integrity Assurance notifications, OQ notifications, Alternative MAOP notifications, and biofuel notifications. Perform review, validation, and manage updates of national registry notifications. 3.1.2. Review and validate Operator Assignment requests. 3.2. PHP OFFICES AND STATE AGENCIES 3.2.1. Communicate with pipeline operators, PHP-6, and the Information Resources Manager to implement responsibilities listed throughout this policy. Conduct inspections and initiate enforcement as appropriate. Notifications Policy and Procedure Effective Date: May 24, 2023 25#
Attachment 1, passage 514OFFICE OF PIPELINE SAFETY RELATED CONDITION REPORT IN WMS POLICY POLICY NUMBER: PHP-5340.2D2 EFFECTIVE DATE: January 8, 2020 Linda Daugherty Deputy Associate Administrator for Field Operations, Office of Pipeline Safety, PHMSA#
Attachment 1, passage 515Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety SRCR in WMS Policy Policy Number: PHP-5340.2D2 Table of Contents 1. INTRODUCTION ............................................................................................................................... 3 1.1. PURPOSE .................................................................................................................................... 3 1.2. SCOPE ......................................................................................................................................... 3 1.3. AUTHORITIES ........................................................................................................................... 3 1.4. DEFINITIONS............................................................................................................................. 3 2. POLICY ............................................................................................................................................... 4 2.1. DATA ENTRY BY CHIEF INFORMATION OFFICER (PHF-30) ....................................... 4 2.2. DATA MANAGEMENT BY REGULATORS ......................................................................... 6 2.3. POLICY CHANGE HISTORY .................................................................................................. 9 3. RESPONSIBILITIES ........................................................................................................................ 10 3.1. INFORMATION RESOURCES DIVISION AND CHIEF INFORMATION OFFICER (PHF-30) ....................................................................................................................................... 10 SRCR in WMS Policy Effective Date: January 8, 2020 2#
Attachment 1, passage 516Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety SRCR in WMS Policy Policy Number: PHP-5340.2D2 1. INTRODUCTION 1.1. PURPOSE This policy describes how Safety Related Condition Reports (SRCR) are processed by PHMSA’s Office of Pipeline Safety (OPS). PHMSA regulations require operators of gas distribution (GD), gas gathering (GG), gas transmission (GT), hazardous liquid (HL), liquefied natural gas (LNG) facilities, and underground natural gas storage (UNGS) facilities to submit reports when they learn of certain potentially hazardous conditions. The Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (Pub. L. 112-90) requires operators of gas transmission pipelines to report excessively high operating pressures. These reports are collected as SRCR Condition #10. For this Policy, both speed and accuracy are crucial to ensuring OPS adequately responds to these reports. This Policy covers data entry, contact with operators and State Partners, criteria for closing reports, and data management. 1.2. SCOPE This policy applies to all OPS employees and State Agency staff involved in processing SRCRs. 1.3. AUTHORITIES 1.3.1. Statutory 1.3.1.1. 49 C.F.R. §191.23 – Reporting safety-related conditions. 1.3.1.2. 49 C.F.R. §195.55 – Reporting safety-related conditions. 1.4. DEFINITIONS 1.4.1. Safety Related Condition Report means a report that pipeline operators, LNG facility operators, and UNGS facility operators must submit if certain kinds of conditions are discovered on a pipeline facility. A few examples include: • General corrosion that has reduced wall thickness beyond acceptable tolerances; • Unintended movement or abnormal loading by environmental causes such as a landslide or earthquake; • A material defect that impairs the structural integrity or reliability of a LNG facility; or any safety-related condition that could cause an imminent hazard. A full list of the conditions can be found in Part 191.23 and Part 195.55. The operator is required to submit the information to PHMSA if the company has not resolved the condition within five business days of determining the condition exists. This reporting requirement applies only to conditions that might impact a building intended for human occupancy, outdoor place of SRCR in WMS Policy Effective Date: January 8, 2020 3#
Attachment 1, passage 517Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety SRCR in WMS Policy Policy Number: PHP-5340.2D2 assembly, public road or railroad. When PHMSA receives a Safety Related Condition Report, it will generally contact the company within 24 hours to monitor the actions taken to address the condition. Safety Related Condition Reports allow PHMSA to assure companies are appropriately acting to assure pipelines do not become a hazard to the public or the environment. 1.4.2. Interstate gas pipeline facility means a gas pipeline facility used to transport gas and subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC) under the Natural Gas Act (15 U.S.C. §717 et seq.). 1.4.3. Intrastate gas pipeline facility means a gas pipeline facility and transportation of gas within a State not subject to the jurisdiction of FERC under the Natural Gas Act (15 U.S.C. 717 et seq.). 1.4.4. Interstate hazardous liquid and carbon dioxide pipeline facility means a pipeline or that part of a pipeline that is used in the transportation of hazardous liquids or carbon dioxide in interstate or foreign commerce (49 C.F.R. §195.2). 1.4.5. Intrastate hazardous liquid and carbon dioxide pipeline facility means a pipeline or that part of a pipeline to which Part 195 applies that is not an interstate pipeline (49 C.F.R. §195.2). 2. POLICY 2.1. DATA ENTRY BY CHIEF INFORMATION OFFICER (PHF-30) Create and Edit SRCR YouTube Video Staff with the Activity Creator role for PHF-30 perform data entry into WMS from the submittals sent to Headquarters by operators. PHF-30 will target creating the SRCR in WMS within one business day of when the report is received by PHF-30. 2.1.1. OpID, System Type, State(s), and Interstate/Intrastate Generally, the submittal includes the OpID. If not, use the Operator Name to find the OpID. You must also know the System Type – GD, GG, GT, HL, LNG, or UNGS. The State(s) and Interstate/Intrastate status of the facilities are needed to assign the SRCR to the correct Lead Regulator. Assume GD is Intrastate unless the submittal says Interstate. If you are not able to determine any four of these items from the submittal, call the submitter to ask for the correct values. 2.1.2. SRCR Activity Creation On the top row of WMS tabs, select Activities, then Create Activity. After selecting Investigation and SRCR, select Go. SRCR in WMS Policy Effective Date: January 8, 2020 4#
Attachment 1, passage 518Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety SRCR in WMS Policy Policy Number: PHP-5340.2D2 Determine the Lead Regulator for the SRCR by using the Fed/State xls in SharePoint. Start with the sheet named EXCEPTIONS by looking for the OpID, Inter/Intra, System Type, and State. When State is null, the exception applies in all States. If you find an applicable record, use the Exception Lead Regulator as the Regulator for the SRCR. If you do not find an applicable record on the EXCEPTIONS sheet, use the JURISDICTION sheet to find the Regulator based on System Type, Inter/Intra, and State. If the process above yields more than one Regulator, assign the Regulator with pipeline systems most heavily impacted by the SRCR as the Lead Regulator and select the remaining Regulators in the Additional Regulators drop-down. DO NOT create the SRCR activity with Lead Regulator equal to PHF-30. In Activity Description, enter a short version of the operator name, system type abbreviation, condition abbreviation(s) and number(s), and State most heavily impacted. In Summary of Incoming Documents, summarize the information about the SRCR in the operator’s submittal. Enter the email address of the submitter along with the dates, conditions, and inter/intra States from the operator’s submittal, then select Create. The WMS will send a confirmation email to the submitter. Who,What,Where Tab Enter the Unit ID(s) or OpID(s) for the SRCR. Select Save. Documents Tab Upload all documents included with the Operator’s submittal, including a pdf of the e-mail. Investigation Tab Recheck all of the dates and conditions entered during activity creation. Enter all available information into the Additional Information section. Under Operator Information, select the Unit ID or Operator ID most heavily impacted from the drop-down. Select Save. Select Release Lock on the right side of the blue banner and the window will close. 2.1.3. Updates from Operators If an operator sends an update or supplemental SRCR to PHF-30, update the SRCR in the WMS. To find SRCR activities, select Search on the top row of WMS tabs. Click the Activity Search tab on the second row. Adjust prompts and click the Search command button. In the Search Results table, click on the Activity ID to open the SRCR. SRCR in WMS Policy Effective Date: January 8, 2020 5#
Attachment 1, passage 519Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety SRCR in WMS Policy Policy Number: PHP-5340.2D2 Attach the new documents to the SRCR record on the Documents tab and update other data fields as needed. Check the Who,What,Where tab to determine the Lead Person. Send an e-mail to the Lead Person letting them know how you have changed the SRCR activity. Select Release Lock on the right side of the blue banner and the window will close. 2.2. Data Management by Regulators 2.2.1. Business Rules • Regulator staff receive new SRCR alert e-mails from the WMS and will review SRCR the same business day to identify reports that warrant immediate investigation. • The Regulator should make contact with the operator and create the first N o t e within 10 business days of the SRCR being created. • When the report is for a pipeline included in a Unit, PHF-30 staff will enter the applicable Unit ID(s) on the Who,What,Where tab. If the Unit ID(s) are incorrect, Regulators must correct them. • On the Investigation tab, select the Unit or OpID most heavily impacted by the SRCR. 2.2.2. Assigning SRCR to Inspector YouTube Video Upon creation of the SRCR, Regulator staff with the Investigation Receive role for the activity Lead Regulator will receive an alert e-mail and an Assign Lead/Supervisor task in the Investigation worklist. In rare cases, more than one Regulator provides oversight of the pipeline facilities covered by a SRCR. When this occurs, Regulator staff with the Investigation Receive role for an additional Regulator will receive an Investigation task. Open the SRCR activity from the Investigation worklist. On the Who What Where tab, review the Summary of Incoming Documents field. For the Lead Regulator, add Supervisor(s) and a Lead Person in the Activity Staff table. Select the Tasks tab and open the Assign Lead/Supervisor task. Select Save - comments are optional. For additional Regulators, select the Tasks tab and open the Investigation SRCR in WMS Policy Effective Date: January 8, 2020 6#
Attachment 1, passage 520Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety SRCR in WMS Policy Policy Number: PHP-5340.2D2 task for your Regulator. Modify the task by changing the Task Owner to an investigator in your Regulator. Select Release Lock on the right side of the blue banner and the window will close. 2.2.3. Lead Person Data Review and Follow-Up YouTube Video The Lead Person will receive an alert e-mail and an Investigation task in the Investigation worklist. For each additional Regulator involved in the SRCR, there will be an additional Investigation task. Open the SRCR activity from the SRCR worklist and review all of the activity tabs. Some of the fields are editable only by SRCR creators. If there are error in these fields, send an email to InformationResourcesManager@dot.gov and describe the errors. Contact the operator to get an update on the corrective actions planned. Also, verify the OpID on the Who,What,Where tab is accurate. If the pipeline system has Units(s) in the WMS, verify the Unit ID(s) on the Who,What,Where tab. The first Note should be created within 10 business days of the SRCR being sent to the Regulator and include the actions taken by both the Regulator and the Operator. The Lead Person will assess whether the actions are appropriate and timely. If not, the Lead Person should recommend enforcement action to Regulator management. When new information is received from the Operator, add additional Notes. Set the due date of your Investigation task to match the date you expect the next update from the Operator. On the Investigation tab, verify all of the relevant data fields in the Additional Information section, except Remedial Action Completed Date. In the Location section, add the information for the single location most heavily impacted by the SRCR. Select Release Lock on the right side of the blue banner and the window will close. 2.2.4. Assigning SRCR to Single Unit or OpID On the Who,What,Where tab, multiple Unit ID or OpID can be entered. In the Operator Information section of the Investigation tab, verify that the Unit or OpID most heavily impacted has been selected. SRCR in WMS Policy Effective Date: January 8, 2020 7#
Attachment 1, passage 521Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety SRCR in WMS Policy Policy Number: PHP-5340.2D2 Select Release Lock on the right side of the blue banner and the window will close. 2.2.5. Closing SRCR Request Closure YouTube Video Reports may be closed when Regulator staff is satisfied that the condition has been corrected. If enforcement is initiated, the CPF number or State- enforcement-identifier must be included in a Note. On the Who,What,Where tab, in the Summary of Corrective Actions field, enter a summary. Check the Activity Staff table and ensure the person you will ask to approve closure is in the table as a Supervisor. On the Investigation tab, enter the Remedial Action Completed Date. On the Tasks tab, select the Investigation task for the Lead Person. Select the Complete Task radio button, then OK – comments are optional. If there is more than one Supervisor on the Who,What,Where tab, select the Supervisor to receive the Closure Requested task. When the Lead Person’s Investigation task is completed, all other Investigation tasks will also be completed. Select Release Lock on the right side of the blue banner and the window will close. Closure YouTube Video The Supervisor selected will receive an alert e-mail and a Closure Requested task in the Investigation worklist. Open the activity from the worklist and review all tabs, especially the Notes tab to ensure adequate operator actions have been documented. On the Tasks tab, open the Closure Requested task and select the Complete Task radio button. If the Notes tab documents adequate Operator actions, select Approve. If all required fields have data, the activity status will change to Closed and the window will close. If not, error messages will explain data inadequacies. Fix the data and open the Closure Requested task again. If the Notes tab does not document adequate Operator actions, select Disapprove. In the Comment field for the task, explain what more is needed. The Lead Person will get an alert e-mail and an Investigation task in the Investigation worklist. Select Release Lock on the right side of the blue banner and the window will close. 2.3. Policy Change History SRCR in WMS Policy Effective Date: January 8, 2020 8#
Attachment 1, passage 522Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety SRCR in WMS Policy Policy Number: PHP-5340.2D2 Date Summary 1/?/2020 Implementing improved method of determining Lead Regulator. More data fields available to SRCR creators. Lead Regulator can be a Region or a State Agency. 4/1/2019 Policy rewritten to reflect use of WMS instead of SMART for new SRCR. 10-26-2018 System Type – GD, GG, GT, HL, LNG, or UNGS – required to be entered upon SRCR creation. Changed PHA-50 to PHF-30 to reflect recent reorganization. 3-10-2015 PHA-50, not PHP-20, creates reports in SMART. PHA-50 staff determine OpID, System Type, State, and Interstate/Intrastate for submittals. PHA-50 staff determine Unit ID(s) and Inspection System Lead Region. SRCR assigned based on Inspection System Lead Region. MAOP PLUS BUILDUP EXCEEDED, GAS TRANSMISSION (CONDITION 10) added in 2012 based on requirement in pipeline safety law. 7-15-2011 Added requirements to assign SRCR to Unit(s) when applicable. Added criteria for closing report to section C5 12-14-2010 Reflect 5-2010 PHMSA Reorganization and reformat 4-14-2009 First Edition SRCR in WMS Policy Effective Date: January 8, 2020 9#
Attachment 1, passage 523Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety SRCR in WMS Policy Policy Number: PHP-5340.2D2 3. RESPONSIBILITIES 3.1. INFORMATION RESOURCES DIVISION AND CHIEF INFORMATION OFFICER (PHF-30) 3.1.1. Staff with the Activity Creator role for PHF-30 perform data entry into W M S from the submittals sent to Headquarters by operators. 3.1.2. PHF-30 will target creation of the SRCR in WMS within one business day of when the report is received by PHF-30. SRCR in WMS Policy Effective Date: January 8, 2020 10 Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety SRCR in WMS Policy Policy Number: PHP-5340.2D2 OFFICE OF PIPELINE SAFETY PIPELINE ASSET MANAGEMENT POLICY POLICY NUMBER: PHP-5340.8E EFFECTIVE DATE: August 17, 2021 LINDA GAIL Digitally signed by LINDA GAIL DAUGHERTY Date: 2021.08.16 15:13:25 Linda Daugherty Deputy Associate Administrator for Field Operations, Office of Pipeline Safety, PHMSA SRCR in WMS Policy Effective Date: January 8, 2020 11#
Attachment 1, passage 524Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E Table of Contents 1. INTRODUCTION ............................................................................................................................... 3 1.1. PURPOSE .................................................................................................................................... 3 1.2. SCOPE ......................................................................................................................................... 3 1.3. AUTHORITIES ........................................................................................................................... 3 1.4. DEFINITIONS ............................................................................................................................. 3 2. POLICY ............................................................................................................................................... 4 2.1. ACCESSING THE WORK MANAGEMENT SYSTEM (WMS) ........................................... 4 2.2 UNIT DATA OVERVIEW ......................................................................................................... 4 2.3. UNIT DATA MANAGEMENT .................................................................................................. 9 2.4. UNIT DATA UPDATES ........................................................................................................... 12 2.5. IU MOD TOOL AND UNIT MAPPING ................................................................................. 13 2.6. INSPECTION SYSTEM (IS) DATA ....................................................................................... 14 2.7. OPERATOR CONTACTS ....................................................................................................... 15 2.8. EXCAVATOR ASSETS ........................................................................................................... 15 2.9. CHANGE HISTORY ................................................................................................................ 16 3. RESPONSIBILITIES ........................................................................................................................ 17 3.1. OPS REGION AND HEADQUARTERS (HQ) STAFF WITH DATA MANAGEMENT RESPONSIBILITIES ............................................................................................................................ 17 Pipeline Asset Management Policy Effective Date: August 17, 2021 2#
Attachment 1, passage 525Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E 1. INTRODUCTION 1.1. PURPOSE This policy provides instructions for Office of Pipeline Safety (OPS) Region staff with data management responsibilities to: 1. Maintain the accuracy of Unit and Inspection System (IS) data in the Work Management System (WMS). 2. Communicate changes or corrections to gas transmission and hazardous liquid Unit maps to the NPMS using the WMS and the Inspection Unit Modification Tool (IU Mod Tool). 3. Update operator contacts in the PHMSA Portal 4. Obtain asset data for excavators. 1.2. SCOPE This policy applies to OPS Region and HQ staff with data management responsibilities. 1.3. AUTHORITIES 1.3.1. 49 C.F.R. §190.203 – Inspections and investigations. 1.4. DEFINITIONS 1.4.1. 60105 Agreement – a State agency plans inspections, conducts inspections, and conducts enforcement on intrastate facilities. Units for these intrastate facilities have Regulator value equal to the State agency. 1.4.2. 60106 Agreement – a State agency plans inspections and conducts inspections, but OPS Region conducts enforcement on intrastate facilities. Units for these intrastate facilities have Regulator value equal to the State agency. 1.4.3. Excavator – a company or individual engaged in digging or demolition work and being investigated by OPS for non-compliance with Subpart B of 49 CFR 196. 1.4.4. Inspection System (IS) – a grouping of gas gathering and gas transmission Units or a grouping of hazardous liquid Units for conducting an Integrated Inspection. Gas and liquid units cannot be combined into an inspection system. 1.4.5. IS ID – a four to six-digit number assigned by OPS to an IS. 1.4.6. Interstate Agent – a State agency conducts inspection on interstate facilities. OPS Region responsible for planning inspections, conducting enforcement, and maintaining Unit data. Units for these interstate facilities have Regulator value equal to OPS Region. 1.4.7. IU Mod Tool – software used to geospatially describe changes to Unit NPMS Maps. Available in the PHMSA Portal or at https://www.npms.phmsa.dot.gov/IUModTool/. Pipeline Asset Management Policy Effective Date: August 17, 2021 3#
Attachment 1, passage 526Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E 1.4.8. Operator – definition varies slightly among Part 190, 191, 192, 193, 194, 195, and 199. Generally, a company responsible for the construction or operation & maintenance of a pipeline system. 1.4.9. OpID – a one to five-digit number assigned by OPS to an operator. 1.4.10. Unit – a portion of an Operator’s pipeline system pre-defined for inspection purposes. 1.4.11. Unit ID – a two to six-digit number assigned by OPS to a Unit. 1.4.12. Work Management System (WMS) – software used to generate tasks to create and update data. Available in the PHMSA Portal. 2. POLICY 2.1. ACCESSING THE WORK MANAGEMENT SYSTEM (WMS) 2.1.1. URL WMS is accessed through the PHMSA Portal – On-Network at http://portal.phmsa.dot.gov/PHMSAPortal2/faces/UIShellPortalHome or Off- Network at https://portal.phmsa.dot.gov/PHMSAPortal2. When using the Off- Network option, you must enter your Network UserName and Password. 2.1.2. Roles Your ability to modify and create data in the WMS and PHMSA Portal is controlled by your membership in Roles. The Role names and abilities relevant to this policy are: • WMS Role - Manage Unit_SPR_IS: move Unit from one OpID to another. Deactivate, Activate, Split, Merge, and Create Units. Change Regulator and Plan Required value. Move Units among Inspection Systems (IS), create new and deactivate IS, approve or reject IS changes requested by other Regulators. • Portal Role - OpID Contact Management: update operator contact information in the PHMSA Portal. • WMS Role - Update Unit: change any of the data associated with Unit, except the OpID, Inspection System, Regulator, Plan Required, and Status (Active/Inactive). Add or remove pipeline miles and components if no impact to a second unit. • WMS Role - Unit Mapping: process NPMS Change tasks to communicate Unit boundary changes to the NPMS and submit correction sessions to improve the accuracy of Unit boundary mapping in NPMS data. 2.2. UNIT DATA OVERVIEW Notice - All WMS Unit data, including text fields, could become public information. 2.2.1. Primary tab Pipeline Asset Management Policy Effective Date: August 17, 2021 4#
Attachment 1, passage 527Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E Unit ID Automatically assigned by the WMS upon Creation – see sections 2.3.1 and 2.3.2 Unit Name Assigned by Regulator and editable Operator Can be changed by Moving the Unit – see section 2.3.2 Status Options are Inactive and Active. Inactive means all of the pipeline facilities in the Unit have been abandoned by the operator. The status for all other facilities, including “idle” facilities, is Active. Can be changed by Activating or Deactivating the Unit – see section 2.3.2. Units that have been Merged and Deactivated are no longer available for use and are not findable in the WMS. These Units have a status of Merged in the PDM. Activation Date The most recent date the Unit was Activated. Editable only in Manage Unit – see section 2.3.2. Deactivation Date The most recent date the Unit was Deactivated. Editable only in Manage Unit – see section 2.3.2. Regulator The OPS Region or State Agency responsible for inspection planning. Units inspected by Interstate Agents have a Regulator value equal to one of the OPS Regions. Since GRR HL operators have reporting requirements only and no inspections are performed, PHP-6 is the Regulator. Editable only in Manage Unit – see section 2.3. State Unit ID Only appears for Unit with Regulator value equal to a State Agency. Unique identifier from the State Agency data system. Inspection Plan Field is not currently used and value is irrelevant. Options available reflect how Regions used to plan inspections. Central Region and Eastern Region had a single plan option. Southern Region had two plan options; Florida LPG and all others. Southwest Region had an Onshore plan and an Offshore plan. Western Region had a Continental US (CONUS) plan and an Alaska plan. Jurisdiction If the Unit is inspected by an Interstate Agent, select Interstate Agent. If the Region has authority over the Unit based on an MOU with another agency, pick the appropriate MOU option. If a State agency is temporarily empowered to inspect the Unit, select Temporary Agent. Otherwise, pick Federal. Never pick 60105 Agreement or 60106 Agreement for a Unit with Regulator equal to an OPS Region. Pipeline Type Single select indicating the System Type and Interstate/Intrastate status of the pipeline facilities. System Types – Gas Distribution, Gas Gathering, Gas Pipeline Asset Management Policy Effective Date: August 17, 2021 5#
Attachment 1, passage 528Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E Transmission, Hazardous Liquid, Liquefied Natural Gas Underground Natural Gas Storage, and Gravity and Reporting-Regulated-Only Hazardous Liquid cannot be combined in a single Unit. Interstate and Intrastate facilities of the same System Type cannot be combined in the same Unit. Interstate has nothing to do with crossing State lines. For gas pipeline facilities, interstate is defined in statute as a gas pipeline facility used to transport gas and subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC) under the Natural Gas Act (15 U.S.C. 717 et seq.). For hazardous liquid and carbon dioxide pipeline facilities, interstate is defined in Part 195.2 as a pipeline facility used in the transportation of hazardous liquids or carbon dioxide in interstate or foreign commerce. Appendix A to Part 195 contains PHMSA’s Statement of Policy and Interpretation on the delineation between interstate/intrastate and provides additional guidance. Any pipeline facility that is not interstate is intrastate. Distribution LPG - Large vs Small – For distribution LPG systems serving 100 or more customers from a single source, select large. This aligns with the gas distribution annual report exemption in Part 191.11(b). Date of Operational Change When a Unit is Updated (see section 2.4) or Managed (see section 2.3), you must enter a date for the Unit History. If the Update/Manage is based on operational changes by the operator, enter the date of the changes. If the Update/Manage is just data clean-up and not based on operational changes by the operator, enter the current date. Change comments for Unit History When a Unit is Updated (see section 2.4) or Managed (see section 2.3), enter text for the Unit History describing the reason for the Update/Manage action. Plan Required If all facilities within a Unit are still under construction and not in service, select No and the WMS will set Total Pipeline Miles to zero. If Pipeline Type is Distribution Small LPG or Distribution Master Meter and the Region has no knowledge of an elevated risk, select No. Since no inspections are performed on GRR HL Units, Plan Required is always No. In all other situations, select Yes. IS Change Required? If the Unit needs to be moved to a different Inspection System, select Yes and pick the new Inspection System from the drop-down. Inspection System All OPS Region active gas gathering, gas transmission, and hazardous liquid Units with Plan Required = Yes must be placed in an Inspection System. Units for State Agencies and other System Types are not allowed to be placed in Inspection Systems. Update Unit Options If you want to create an Update Unit Task for someone, select “Assign to Inspector” and find the inspector by typing the inspector’s username. Pipeline Asset Management Policy Effective Date: August 17, 2021 6#
Attachment 1, passage 529Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E NPMS Unit Map already includes mileage changes made in this Update? If the NPMS Unit Map includes all of the miles changed in this Update, select Yes. Otherwise, select No and see section 2.4.1. Do not add new construction miles to Total Pipeline Miles until the miles go into service. The icon named “Unit NPMS Map” to the right of this question opens the Pipeline Data Mart (PDM) Unit Dashboard on the Unit Map tab. Pipeline Description Follow Region policy regarding the contents of this text field. Typically, current construction projects are included in either Pipeline Description or Unit Comments. Unit Comments Follow Region policy regarding the contents of this text field. Typically, current construction projects are included in either Unit Comments or Pipeline Description. Control Center Location Where the Unit’s control center(s) are located. Record Location Where the operator keeps records for the Unit. Unit Address Physical address(es) of operator staff responsible for the Unit. 2.2.2. Contacts tab At least one “Emergency 24 hour Phone Number” and at least one “Control Room Number” are required. Contacts specific to the Unit can be edited, added, or deleted. 2.2.3. Inspection tab Contains read-only data for SMART inspections where the Unit was assigned and an active link to WMS inspections including the Unit. 2.2.4. States/Counties tab State/County combinations must be entered on this tab before the State/County can be selected on the Components tab. State/County cannot be removed if a Component has the State/County value. For Louisiana, Parishes are available for selection in the County list. When States have cities that are not within a County, these cities are available for selection in the County list. In most States, “Not Known” is available in the County list, but efforts should be made to identify the actual County. 2.2.5. Commodity tab The commodity(ies) transported in the Unit 2.2.6. Components tab The Components available are based on the System Type for the Unit. State/County must be entered on the States/Counties tab before it can be selected for a facility. If RRIM appears in the description below, the Component is a threat factor in the Risk Ranking Index Model (RRIM). Gas Distribution, Liquefied Natural Gas, and Underground Natural Gas Storage Units are excluded from RRIM. Gas Gathering, Gas Transmission, and Hazardous Liquid Units with Plan Required = No are excluded from RRIM. Pipeline Asset Management Policy Effective Date: August 17, 2021 7#
Attachment 1, passage 530Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E Total Pipeline Miles RRIM if no miles in NPMS All except Liquefied Natural Gas and Underground Natural Gas Storage The total number of in- service miles. Miles under construction are excluded until the miles are placed in service. Total Right of Way Miles All except Liquefied Natural Gas and Underground Natural Gas Storage Not required for all Regions. The number of miles of right of way containing the Total Pipeline Miles. Non-Rural Right of Way Miles Only for Hazardous Liquid Not required for all Regions. Part 195 definition: Rural area means outside the limits of any incorporated or unincorporated city, town, village, or any other designated residential or commercial area such as a subdivision, a business or shopping center, or community development. Enter the non-rural value. Miles of Bare Pipe (installed w/o coating) RRIM All except Liquefied Natural Gas and Underground Natural Gas Storage The number of steel miles without an external coating. Ineffectively Coated Pipe? RRIM All except Liquefied Natural Gas and Underground Natural Gas Storage If the Unit includes steel pipe with an external coating, but the coating does not meet the requirements of Part 192 or 195, enter Yes. Otherwise, enter No. Class 1 Miles Only for Gas Distribution, Gas Gathering, and Gas Transmission Not required for all Regions. Defined in Part 192. Class 2 Miles Only for Gas Distribution, Gas Gathering, and Gas Transmission Not required for all Regions. Defined in Part 192. Class 3 Miles Only for Gas Distribution, Gas Gathering, and Gas Transmission Defined in Part 192. Class 4 Miles Only for Gas Distribution, Gas Gathering, and Gas Transmission Defined in Part 192. Pipeline Miles SMART Pigged All except Liquefied Natural Gas and Underground Natural Gas Storage Number of Unit miles inspected with an inline inspection tool. PRE70 ERW Pipe RRIM All except Liquefied Natural Gas and Underground Natural Gas Storage Number of Unit miles of steel pipe with a weld seam created using a low frequency electric resistance weld process and manufactured before 1970. Any HCA Miles? All System Types Enter Yes if any of the Unit miles are in an HCA as defined by Part 192 or 195. Otherwise, enter No. Pipeline Asset Management Policy Effective Date: August 17, 2021 8#
Attachment 1, passage 531Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E Number of HCA Miles RRIM if no miles in NPMS All System Types Enter the number of Unit miles in an HCA as defined by Part 192 or 195. Special Permits (Waivers)? All System Types Enter Yes if the operator has a non-expired PHMSA waiver or special permit applicable to pipeline facilities in the Unit. Tribal Land? All System Types Enter Yes if any portion of the Unit resides on a Tribal Land. The PHMSA definition of Tribal Lands is located in the Policy for Inspections and Investigations on Tribal Lands – (PHMSA 5301.1A) Breakout Tanks Only for Hazardous Liquid Create a record for each tank facility within the Unit. Enter the quantity of tanks, not the storage capacity of the tanks. Pump Stations Only for Hazardous Liquid Create a record for each pump station within the Unit. Compressor Stations Only for Gas Distribution, Gas Gathering, and Gas Transmission Create a record for each compressor station within the Unit. Storage Fields For all except Liquefied Natural Gas Create a record for each underground storage field within the Unit. Platforms Only for Gas Gathering, Gas Transmission, and Hazardous Liquid Create a record for each offshore platform within the Unit. Navigable Crossings Only for Gas Gathering, Gas Transmission, and Hazardous Liquid Create a record for each time a pipeline within the Unit crosses a navigable waterway. If a waterway does not appear in the drop-down, it is not navigable. LNG Tanks Only for Liquefied Natural Gas Create a record for each facility within the Unit. Record the total number of tanks and the combined storage capacity of the tanks in barrels. 2.2.7. History tab Read-only data about past changes to the Unit 2.2.8. Attachments tab Six categories of attachments can be loaded to the Unit: Extreme Weather Inspection Delay, Map, Operator Correspondence, Other, Special Permit, and Stay of Enforcement. 2.3. UNIT DATA MANAGEMENT 2.3.1. Creation – Manage Unit_SPR_IS Role Traditionally, Units have been between 300 and 500 miles of pipe. All pipelines subject to inspection and enforcement by Regions shall be placed in a Unit. All Pipeline Asset Management Policy Effective Date: August 17, 2021 9#
Attachment 1, passage 532Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E pipelines inspected by Interstate Agents with enforcement by PHMSA shall be placed in a Unit with the Regulator value set to an OPS Region. Use the Manage Unit task in the WMS to create a new Unit for pipelines that are not already in a different Unit. Populate all of the Unit data you know at the time. These fields are required in the WMS before a Unit can be created: Unit Name Regulator Jurisdiction Pipeline Type Plan Required Inspection System ID – depending on Pipeline Type and Plan Required values – see section 2.6.1 Pipeline Description Unit Comments Total Pipeline Miles – zero is acceptable if Plan Required is No PRE70 ERW Pipe Special Permits (Waivers) These additional fields are required upon the first update of the Unit: Emergency 24 hour Phone Number Control Room Number Date of Operational Change Change Comments for Unit History Does NPMS Unit Map already include mileage changes made in this Update? If all the facilities within the Unit are under construction and not yet in service, ensure Plan Required is set to No and the WMS sets Total Pipeline Miles to zero. Future changes to the Unit’s Pipeline Type are restricted, so ensure you pick the correct value. For example, Interstate Gas Transmission can be changed to Intrastate Gas Transmission, but cannot be changed to any flavor of hazardous liquid, gas distribution, or LNG. For Gas Transmission and Hazardous Liquid Units with Plan Required = “Yes”, you must select “Year NPMS Submittal Accommodates Change” and communicate the correct boundaries for the new Unit in the IU Mod Tool. “Year NPMS Submittal Accommodates Change” is based on when the miles within the Unit appear in the operator’s NPMS submittal. Choices are IMMEDIATE, <This Year>, and <Next Year>. If the pipeline miles in the new Unit are already in the operator’s NPMS submittal, select IMMEDIATE. If the miles are not in the operator’s NPMS submittal but were in service before the end of the previous calendar year, the operator’s NPMS submittal for the current year should include the miles – select <This Year>. If the miles were placed in service during the current calendar year, they will not appear in an NPMS submittal until next year – select <Next Year>. Region staff in the Unit Mapping role will receive a task in the WMS to complete an IU Mod Tool session within a few weeks of creating the new Unit. After the session is available, log-in to the IU Mod Tool with your Pipeline Asset Management Policy Effective Date: August 17, 2021 10#
Attachment 1, passage 533Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E PIMMA username and password, select the IU Mod Tool task type, search for the Create New task, and report the correct unit boundary locations on the map. Contact leigha.gooding@dot.gov if you need to expedite the task or have any questions. NPMS staff will use the modification notes entered in the IU Mod Tool and the Year NPMS Submittal Accommodates to either complete or schedule the Unit mapping change. As well, NPMS staff will not accept a submission from the operator unless it includes the pipelines for the scheduled map change. 2.3.2. Move, Split, Merge, Deactivate, and Activate – Manage Unit_SPR_IS Role Using the Manage Unit task, Units can be Moved to a different OpID, Split, Merged, Deactivated, and Reactivated in the WMS. If only part of a Unit is being Moved to a different OpID, Merged, or Deactivated, you must Split the Unit first. When pipes are removed from one Unit and added to another, for any reason, and only a few Units are affected, Split the Unit losing pipe and immediately Merge the New Split Unit(s) into the Unit gaining pipe. Text fields, State/Counties, and Component data can be efficiently managed within the Split and Merge functions. For each Gas Transmission and Hazardous Liquid Unit Split or Reactivated with Plan Required = Yes, you must communicate the correct split location(s) or boundaries in the IU Mod Tool. Select “Year NPMS Submittal Accommodates Change” and communicate the correct boundaries for the Unit in the IU Mod Tool. “Year NPMS Submittal Accommodates Change” is based on when the split or reactivated miles within the Unit appear in the operator’s NPMS submittal. Choices are IMMEDIATE, <This Year>, and <Next Year>. If the miles are already in the operator’s NPMS submittal, select IMMEDIATE. If the miles are not in the operator’s NPMS submittal but were in service before the end of the previous calendar year, the operator’s NPMS submittal for the current year should include the miles – select <This Year>. If the operator split or reactivated the miles during the current calendar year, they will not appear in an NPMS submittal until next year – select <Next Year>. Region staff in the Unit Mapping role will receive a task in the WMS to complete an IU Mod Tool session within a few weeks of Splitting or Reactivating. After the session is available, log-in to the IU Mod Tool with your PIMMA username and password, select the IU Mod Tool task type, search for the Split or Activate task, and report the correct split or unit boundary locations on the map. Contact leigha.gooding@dot.gov if you need to expedite the task or have any questions. NPMS staff will use the modification notes entered in the IU Mod Tool and Year NPMS Submittal Accommodates to either complete or schedule the Unit mapping change. As well, NPMS staff will not accept a submission from the operator unless it includes the pipelines for the scheduled map change. Bulk Unit Redraw When many Units need to be adjusted at multiple end points, the Split and Merge functions become numerous and onerous. As well, there may be a reason to perform multiple Updates rather than Deactivating and Creating new Units. In these situations, contact the Director of the Operations Systems Division. The Pipeline Asset Management Policy Effective Date: August 17, 2021 11#
Attachment 1, passage 534Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E Director will work with the Region(s) and NPMS Staff to develop an IU Mod Tool plan to efficiently communicate new Unit boundaries. 2.4. UNIT DATA UPDATES – Manage Unit_SPR_IS and Update Unit Roles During every inspection, check the accuracy of the Unit data in the WMS and make corrections if needed. Data can be corrected using an Update Unit task or the “pencil” in the Unit Search results table. In addition, someone else may assign an Update Unit task to you. You can Update a Unit to add pipelines not already in a different Unit, such as new construction placed in service or a pipeline not previously regulated by a Region. Only staff with the Manage Unit role can shift miles from one Unit to another using the Split and Merge functions. 2.4.1. Primary tab Before you can save changes in the Modify/Update Unit task, you must enter an Operational Change Date, Comments for the Unit history, and, for Gas Transmission and Hazardous Liquid pipeline types, state whether the “NPMS Unit Map already includes mileage changes made in this update.” If, for example, you are adding newly constructed, just-placed-in-service pipelines to the Unit or adding miles not previously regulated by a Region, select “No” for the NPMS Unit Map question, select “Year NPMS Submittal Accommodates Change”, and enter text for the Unit history. “Year NPMS Submittal Accommodates Change” is based on when the miles will appear in the operator’s NPMS submittal. Choices are IMMEDIATE, <This Year>, and <Next Year>. If the pipeline miles are already in the operator’s NPMS submittal, select IMMEDIATE. If the miles are not in the operator’s NPMS submittal but were in service before the end of the previous calendar year, the operator’s NPMS submittal for the current year should include the miles – select <This Year>. If the miles were placed in service during the current calendar year, they will not appear in an NPMS submittal until next year – select <Next Year>. The WMS will create an NPMS Mileage Change history record and the mapping changes will be communicated in the IU Mod Tool. Within a few weeks a session will be available for Region staff in the Unit Mapping role, log-in to the IU Mod Tool with your PIMMA username and password, select the IU Mod Tool task type, search for the NPMS Mileage Change task, and report the unit boundary changes. Contact leigha.gooding@dot.gov if you need to expedite the task or have any questions. NPMS staff will use the modification notes entered in the IU Mod Tool and the Year NPMS Submittal Accommodates to complete or schedule the Unit mapping change. As well, NPMS staff will not accept a submission from the operator unless it includes the pipelines for the scheduled map change. These fields are read-only in the Update task, but active in the Modify task: Plan Required?, IS Change Required?, and Regulator. 2.4.2. Contacts tab Pipeline Asset Management Policy Effective Date: August 17, 2021 12#
Attachment 1, passage 535Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E Check the accuracy of existing phone numbers and contacts specific to the Unit. Add or correct as needed. 2.4.3. States/Counties tab Check the accuracy of State and County/Parish/City-not-in-County information. For offshore Units, check the accuracy of the OCS Portion/Area data. Add or correct as needed. If a State/County is included in Component data, the State/County cannot be removed from the States/Counties tab. 2.4.4. Commodity tab Verify the commodity value(s). Add or correct as needed. 2.4.5. Components tab 2.4.6. Accurate Component data is essential for risk ranking and responding to stakeholder inquiries. Ensure all of the component data is complete and accurate. When newly constructed pipelines are placed in service, add the miles to Total Pipeline Miles. Refer to the Primary tab above for mapping instructions. Components cannot be assigned a State/County value until the State/County value is added to the State/Counties tab. Attachments tab Maps provided by operators are often useful during inspections. The NPMS map for the Unit is readily available in the PDM or PIMMA Plus. If the Unit has an active Special Permit, Stay of Enforcement, or Extreme Weather Inspection Delay the conditions and status reports should be loaded to the Unit. Additional Operator Correspondence should be attached to the Unit to ensure legacy information is available for future inspections. The Other category should be assigned for any remaining useful Unit thment information. When uploading attachments, select the category and enter a text description for the file. For the Special Permit, Stay of Enforcement, and Extreme Weather Inspection Delay attachment categories Begin Date is required. 2.5. IU MOD TOOL AND NPMS MAPPING This section applies only to Gas Transmission and Hazardous Liquid Units when Plan Required is Yes. The NPMS segments for pipe in the Unit are assigned the Unit ID value. The Unit value for NPMS segments not assigned to a Unit is -1. 2.5.1. Unit NPMS Map Correction Sessions If Unit data in the WMS is correct, but the Unit NPMS Map is wrong, such as it includes segments that should have a Unit value of -1 or is missing segments, initiate an NPMS Change task in the WMS and create a Correction session in the IU Mod Tool. In the session, create modification notes to describe the correct unit boundaries or what needs to change. The NPMS will use the information from the IU Mod Tool to correct the map before the next Pipeline Asset Management Policy Effective Date: August 17, 2021 13#
Attachment 1, passage 536Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E PIMMA plus and PDM Map update (every 2 months). The WMS will track the NPMS Change task throughout the implementation process. 2.5.2. Manage Unit and NPMS Mileage Change Sessions If you Move, Merge, or Deactivate a Unit, you need to enter the Operational Change Date and select “Year NPMS Submittal Accommodates Change”. Your selection is based on when the miles will appear in the operator’s NPMS submittal. Choices are IMMEDIATE, <This Year>, and <Next Year>. If the pipeline miles are already in the operator’s NPMS submittal, select IMMEDIATE. If the miles are not in the operator’s NPMS submittal but were in service before the end of the previous calendar year, the operator’s NPMS submittal for the current year should include the miles – select <This Year>. If the miles were placed in service during the current calendar year, they will not appear in an NPMS submittal until next year – select <Next Year>. If you Create, Split, or Activate a Unit, you need to enter the Operational Change Date, select “Year NPMS Submittal Accommodates Change”, and use the IU Mod Tool. NPMS staff will use the modification notes entered in the IU Mod Tool and the Year NPMS Submittal Accommodates to either complete or schedule the Unit mapping change. As well, NPMS staff will not accept a submission from the operator unless it includes the pipelines for the scheduled map change. Each time you click Save in a Modify/Update Unit task, you must select Yes or No for the Unit NPMS Map question. For example, if you are correcting State/County data or adding a pump station for a Unit and the Unit NPMS Map is not impacted, select “Yes” for the NPMS question. You do not need to use the IU Mod Tool. When adding newly constructed just-placed-in-service pipelines to a Unit, select No for the Unit NPMS Map question. After selecting No, select the Year NPMS Submittal Accommodates Change and enter text for the Unit history. Use the IU Mod Tool to communicate the new Unit boundary locations. 2.6. INSPECTION SYSTEM (IS) DATA 2.6.1. Plan Required and Pipeline Types Each Unit with one of the Pipeline Types listed below and Plan Required? = Yes must be assigned to an IS: • Interstate liquid • Intrastate liquid • Jurisdictional liquid gathering • Offshore liquid • Offshore liquid (intra) • Interstate gas transmission • Intrastate gas transmission • Offshore gas trans inter • Offshore gas trans inter high H2s Pipeline Asset Management Policy Effective Date: August 17, 2021 14#
Attachment 1, passage 537Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E • Offshore gas trans intra • Offshore gas trans intra high H2s • Offshore gas gather inter • Offshore gas gather inter high H2s • Offshore gas gather intra • Offshore gas gather intra high H2s • Jurisdictional gas gathering 2.6.2. “New” Units When a new Unit is created with Plan Required? = Yes and one of the Pipeline Types above, the Unit must be assigned to an IS in the WMS. When a Unit has Plan Required? changed from No to Yes and the Unit has one of the Pipeline Types above, the Unit must be assigned to an IS in the WMS. 2.6.3. IS Changes – Manage Unit_SPR_IS Role The Unit-to-IS relationship, IS Name, and Lead Regulator are editable in the WMS. Units sharing safety programs and having similar risk are grouped into IS of a size amenable to conducting an Integrated Inspection. If a Unit is moved to a different OpID, the Unit will likely also need to be moved to a different IS. Before you can change the Lead Regulator value for an IS, you must change the Regulator value of each Unit within the IS. 2.7. OPERATOR CONTACTS PHMSA and operators share permission to create, update, and remove operator contacts in the PHMSA Portal. For PHMSA staff, the OPID Contact Management role gives this permission. Under Pipeline Home in the Portal, click “OPID Contact Mgmt Access” to see all staff with permission. If more people need added to the role, send an email to the PHP-6 Operations Systems Division director. To change operator contacts, staff in the OPID Contact Management role must first select an operator in the upper right portion of the Portal. After selecting an operator, click OMS Functions on the left side menu, then OpID Contact Management. Use the Create/Add New, Update, and Remove radio buttons as needed to update operator contacts for Compliance Officers, Compliance Assistants, Inspections, Emergency Situations, Senior Executive Official, President/CEO, NPMS Submissions, Drug & Alcohol, and User Fee. 2.8. EXCAVATOR ASSETS When OPS leadership has approved sending an enforcement action to an excavator, send an email to the PHP-6 Operations Systems Division director and Pipeline Asset Management Policy Effective Date: August 17, 2021 15#
Attachment 1, passage 538Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety Pipeline Asset Management Policy Policy Number: PHP-5340.8E request an excavator OpID and excavator Unit ID. After the Region provides information about the excavator, PHMSA IT will create the IDs in the Portal. Excavator IDs cannot be found in the Portal or WMS, except when adding Units to a WMS Failure Investigation activity. 2.9. CHANGE HISTORY Revision Date Summary of Changes 8-??-2021 Added GRR HL Units, Tribal Lands Unit component data, Operator Contacts in the PHMSA Portal, and Excavator assets 12-21-2020 Updated list of Unit attachment categories. Unit Inspection tab shows SMART and WMS inspections. Removed references to Inspection Scoping Form (ISF) since it has been removed from the IA. Updated IU Mod Tool terminology. 4-15-2020 Jurisdiction now required for all Units. 3-29-2018 Pulled Pipeline Asset Management out of the SMART Inspection, Unit, and Inspection System Policy. Added guidance on Interstate/Intrastate. Added guidance on “Year NPMS Submittal Accommodates Change.” Explained in detail all Unit data fields on all tabs. Started using WMS NPMS Change Activities and Tasks in conjunction with IU Mod Tool, but two systems are not yet integrated. 12-5-2017 Pipeline Asset Management Policy split from SMART Inspection Policy. New policy #, but no content changes. 4-5-2017 Updated list of Pipeline Types to reflect separation of Offshore Gas into Offshore Gas Trans and Offshore Gas Gather. 1-18-2017 Regulator value for a Unit can be changed in the WMS. 7-27-2016 Defined new software - IU Mod Tool and WMS. New construction miles not added to Unit Total Pipeline Miles until placed in service. Unit Details in SMART switched to read-only. Unit management and data updates done in the WMS. Unit NPMS Map changes communicated geospatially in the IU Mod Tool. 1-19-2016 Added Unit and Inspection System to name of policy. Added sections on Accessing WMS and Inspection System Data. Noted that Unit Data Management will transition from SMART to the WMS in winter/spring 2016. Added Change History section. Added Key Term for Inspection System. Added tagging NPMS segments with Unit ID for GT, Offshore Gas, and HL. Pipeline Asset Management Policy Effective Date: August 17, 2021 16#
Attachment 1, passage 539Revision Date Summary of Changes 2009 Combined portions of the OPS Enforcement Manual and SMART User Guides to create this policy. 3. RESPONSIBILITIES 3.1. OPS REGION AND HEADQUARTERS (HQ) STAFF WITH DATA MANAGEMENT RESPONSIBILITIES OPS region and HQ staff with data management responsibilities shall maintain the accuracy of Unit and Inspection System (IS) data in the Work Management System andcommunicate Unit boundary changes or corrections in the IU Mod Tool to maintain theaccuracy of gas transmission and hazardous liquid Unit mapping in the Guidelines for States Participating in the Pipeline Safety Program Appendix M#
Attachment 1, passage 540PIPELINE SAFETY/UNGS GRANT MONITORING CHECKLIST ASSISTANCE LISTING 20.700/20.725 Date(s) of Review From: 4/22/2021 To: 4/22/2021 State Program Choose an item. State Representative(s) PHMSA Representatives Choose a name Choose an item. General Notes: Program costs shall clearly relate to and comply with the program budget submitted with the grant application. Program costs shall also be consistent with the following program and codified guidance: • 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards • Guidelines for States Participating in the Pipeline Safety Program • Pipeline Safety Grant Monitoring Procedures • All Terms and Conditions listed in Notice of Grant Award • § 200.317 Procurements by states. When procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. The state will comply with § 200.322 Procurement of recovered materials and ensure that every purchase order or other contract includes any clauses required by section § 200.326 Contract provisions. All other non-Federal entities, including sub recipients of a state, will follow §§ 200.318 General procurement standards through 200.327 Contract provisions.#
Attachment 1, passage 541COMPENSATION FOR PERSONNEL - SALARY AND FRINGE BENEFITS § 200.430 Compensation—personal services (Salaries). • Program Managers, Supervisors, Inspectors, Technical, Administrative, etc. • Review Program Organization Chart • Match personnel with information on Attachment 7 of Progress Report 1. Are personnel listed directly involved in program? 2. If personnel are devoted to less than 100% pipeline safety activities is time and effort adequately documented? 3. Are costs included in this category reasonable and directly assignable to the pipeline program? NOTES: § 200.431 Compensation—fringe benefits • Statewide service allocations should not be included (i.e. per employee payroll or IT costs, etc.) • Typically included are employee insurance, FICA, pensions, unemployment and other items established by state policy. • Retirement rates should be tracked back to documentation – usually on state retirement website. Document the rate applied. 1. Are fringe benefit costs standard among all agency employees? 2. Are costs included in this category reasonable and directly assignable to the pipeline program? NOTES: 2 YES NO N/A ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ YES NO N/A ☐ ☐ ☐ ☐ ☐ ☐#
Attachment 1, passage 542PIPELINE SAFETY PROGRAM ACTIVITY COSTS Communication and Transportation Costs • Communication has been deleted from “selected” items of cost and is subject to guidance in Subtitle II “Basic Considerations” in Subpart E – Cost Principles. • 200.471 Telecommunications - this category would be for all telephone and cell phone services, data plans, air-cards, postage and shipping • 200.474 Transportation costs – this would include any freight, postage, etc. • Allocated costs from statewide or agency billings should only be collected as indirect costs YES NO N/A 1. Are costs included in this category reasonable and directly assignable to the pipeline program? ☐ ☐ ☐ NOTES: § 200.452 Maintenance and repair costs. • Costs incurred for utilities, insurance, necessary maintenance, repair or upkeep of building and equipment • Any “allocated” or “pro-rated” costs are typically indirect and should not be included • Direct costs in this category are rare for any utilities, maintenance etc. YES NO N/A 1. Are costs included in this category reasonable and directly assignable to the pipeline program? ☐ ☐ ☐ NOTES: § 200.454 Memberships, subscriptions, and professional activity costs. • Costs of memberships in business, technical, and professional organizations • Subscriptions to business, professional, and technical periodicals • Costs of membership in any civic or community organization are allowable with prior approval from PHMSA • Costs of membership in organization whose primary purpose is lobbying are unallowable • Agency memberships in NARUC or other national and regional regulatory or industry associations are not allowed as a direct cost YES NO N/A 1. Are costs included in this category reasonable and directly assignable to the pipeline program? ☐ ☐ ☐ NOTES: 3#
Attachment 1, passage 543§ 200.459 Professional service costs. • Costs of professional and consultant services, contractual studies, etc. • There should be documented pre-approval of any contractual service agreements in either separate correspondence with PHMSA or detail outline in grant application for applicable year. Review SharePoint files. YES NO N/A 1. Have any costs in this category been preapproved? ☐ ☐ ☐ 2. Do costs applied in this category meet scope and intent of contract? ☐ ☐ ☐ NOTES: § 200.461 Publication and printing costs. • Publication costs for electronic and print media. • Generally, there are not large amounts charged in this category. YES NO N/A 1. Are costs included in this category reasonable and directly assignable to the pipeline program? ☐ ☐ ☐ NOTES: § 200.465 Rental costs of real property and equipment. • Rental costs of building and equipment • Calculation of rental costs should be examined and should include a determination of reasonableness of square footage charged to grant. • There will typically be a property lease available that outlines costs per square foot or other document from state which outlines agency cost for building rental. • Lease costs cannot be included in any indirect cost plan if collected as a direct cost. YES NO N/A 1. Are costs included in this category reasonable and directly assignable to the pipeline program? ☐ ☐ ☐ 2. Did program provide a detailed calculation on how costs were determined? ☐ ☐ ☐ NOTES: 4#
Attachment 1, passage 544§ 200.473 Training and education costs. • These are costs for training and education provided for employee development. • This would be costs for tuition, registration fees, training materials, etc. • Travel costs for training should not be included in this category. • § 200.432 Conference Costs would be included in this category – costs related to putting on TQ conferences. Registration or other fees collected should be deducted. YES NO N/A 1. Are costs included in this category reasonable and directly assignable to the pipeline program? ☐ ☐ ☐ NOTES: § 200.475 Travel costs. • Travel costs are expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on office business of pipeline program. • Costs may be charged on an actual basis, on a per diem or mileage basis in lieu of actual costs or a combination of the two provided the method used is applied to entire trip and not just selected days of the trip. • These are charges for travel including automobile expenses, auto leasing, costs billed per automobile by state central service offices. • Review travel vouchers, airline receipts, mileage statements. • Verify that costs were not reimbursed by another entity, such as PHMSA invitational travel. YES NO N/A 1. Are costs included in this category reasonable and directly assignable to the pipeline program? ☐ ☐ ☐ 2. If program automobiles are shared with any other part of agency are charges separated and appropriately billed? ☐ ☐ ☐ NOTES: MATERIAL, SUPPLIES AND EQUIPMENT COSTS 5#
Attachment 1, passage 545§ 200.453 Materials and supplies costs, including costs of computing devices. • Also see § 200.314 Supplies. • Costs incurred for materials and supplies necessary to carry out Federal award • Any withdrawals from central storerooms or stockrooms should be charged at actual net costs – allocated costs of agency wide supplies would be collected under indirect costs. • These include things such as office supplies, safety clothing and any other general supplies used by program. • Office and Testing Equipment will likely fall under guidance of §§ 200.453 or 200.314 but review of various expenditures will not differ. • Pro-rated supplies based on general agency headcount are indirect. 1. Are costs for Materials and Supplies included in this category reasonable and directly assignable to the pipeline program? • This category should include the following normal costs o Office Equipment – individual value less than $5000 o Testing Equipment o Office Supplies o Safety Clothing NOTES: § 200.439 Equipment and other capital expenditures. • Also see 200.1 – Definitions for Equipment, etc. • Capital expenditures with a unit cost of $5000 or more must have prior approval of PHMSA. This information should be outlined on approved grant application or under separate correspondence typically found in SharePoint. • Individual invoices should be reviewed and inventory of previous purchased equipment over $5000 should be appropriately accounted for. • All items should be listed on inventory sheets on Year-End reimbursement, this includes items purchased in previous years. 1. Are costs for MOTOR VEHICLES included in this category reasonable and directly assignable to the pipeline program? 2. Are costs for Other Capital Equipment included in this category reasonable and directly assignable to the pipeline program? NOTES: OTHER COSTS 6 YES NO N/A ☐ ☐ ☐ YES NO N/A ☐ ☐ ☐ ☐ ☐ ☐#
Attachment 1, passage 546§ 200.xxx Various. • Any costs applied in this category should be tied back to some part of 2 CFR Part 200 and should be listed in notes. • State program should be advised if cost listed could be applied to any of the sections above and asked to submit accordingly on future submissions. 1. Are costs included in this category reasonable and directly assignable to the pipeline program? NOTES: N/A INDIRECT COSTS § 200.414 Indirect Costs. • Indirect costs are those: (a) incurred for a common or joint purpose benefiting more than one cost objective, and (b) not readily assignable to the cost objectives specifically benefited, without effort disproportionate to the results achieved. • Also see various other sections of 2 CFR 200, including §§ 200.415, 200.416. • State should have updated negotiated indirect rate on file with PHMSA and will likely be found in SharePoint folders. Advise program to submit current document if not. • Rate and dollar amount calculation should be verified. • Cost basis of calculation should be noted. • State agency may use a de minimis rate of 10% of Modified Total Direct Costs (MTDC) 1. Are costs calculated in the category correct in accordance with either negotiated rate basis or use of de minimis rate? 2. Is current rate documentation on file? NOTES: Indirect rates are on file. No issues. 7 YES NO N/A ☐ ☐ ☒ YES NO N/A ☐ ☐ ☐ ☐ ☐ ☐#
Attachment 1, passage 547Guidelines for States Participating in the Pipeline Safety Program Appendix N A GUIDE FOR STATE, LOCAL AND INDIAN TRIBAL GOVERNMENTS COST PRINCIPLES AND PROCEDURES FOR DEVELOPING COST ALLOCATION PLANS AND INDIRECT COST RATES FOR AGREEMENTS WITH THE FEDERAL GOVERNMENT IMPLEMENTATION GUIDE FOR OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-87 ASMB C-10 Cost Principles and Procedures for Establishing Cost Allocation Plans and Indirect Cost Rates for Agreements with the Federal Government A GUIDE FOR STATE, LOCAL AND INDIAN TRIBAL GOVERNMENTS This guide is intended to assist state, local, and Indian tribal governments in applying Office of Management and Budget Circular A-87, which provides principles and standards for determining costs applicable to Federal grants and contracts performed by state, local, and Indian tribal governments. The procedures in this guide are applicable to grants and contracts awarded by all Federal agencies and have been developed in coordination with the Office of Management and Budget. This document replaces "A Guide for State and Local Government Agencies" (OASC-10), published December 1976 8 April 1997 U.S. Department of Health and Human Services This document can be ordered from the U.S. Government Printing Office, Superin- tendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328, 202-512-1800.#
Attachment 1, passage 548April 8, 1997 TO USERS OF OMB CIRCULAR A-87 - COST PRINCIPLES FOR STATE, LOCAL AND INDIAN TRIBAL GOVERNMENTS Dear Colleague: The Office of Management and Budget, in Circular A-87, mandates that the Department of Health and Human Services issue implementing material for that document on behalf of the Federal Government. The accompanying Cost Principles and Procedures for Establishing Cost Allocation Plans and Indirect Cost Rates for Agreements with the Federal Government reflects our efforts to satisfy that mandate. This brochure, last issued in 1976 under the reference OASC-10, is being assigned the new reference number ASMB C-10. I want to acknowledge the efforts of the Office of Audit Resolution and Cost Policy, in the Office of Grants and Acquisition Management, who had the responsibility for developing this brochure. I also wish to thank the HHS staff, those of other Federal agencies, and OMB who provided much appreciated assistance on this project. Lastly, I would like to acknowledge Management Concepts, Inc., of Vienna, Virginia, who provided advice, layout, and editorial support. As will be noted, the C-10 is issued in loose-leaf form. Users are encouraged to maintain a subscription with the Government Printing Office in order that they can receive up-dates and changes in the future. This document can also be accessed on HHS’s GrantsNet: http://www.os.dhhs.gov/progorg/GrantsNet/index.html. This document may be reproduced without permission. We welcome your comments and inquiries. Please address them to: Director, Office of Audit Resolution and Cost Policy Rm. 1067 - Cohen Building 300 Independence Ave. S.W. Washington, D.C. 20201 Sincerely, Terrence Tychan Deputy Assistant Secretary for Grants and Acquisition Management#
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Attachment 1, passage 550PREFACE This guide contains, by reference, Office of Management and Budget (OMB) Circular A-87, Cost Principles for State, Local and Indian Tribal Governments, and guidance for its interpretation and implementation. Circular A-87 provides both Federal agencies and Federal award recipients with a uniform approach to determining costs of Federally funded programs. This guide also presents information about the preparation, submission, review, and audit of cost allocation plans and indirect cost rate proposals by governmental units. Procedures in this guide are applicable to cost-based awards made by all Federal agencies unless specifically provided otherwise. This guide has been developed in coordination with OMB. This guide provides clarification and procedural guidance to implement the Circular. It is intended to be consistent with the Circular and all other applicable policies. Circular A-87 is incorporated into this document as Appendix 1. This guide consists of several parts, appendices, and a reference section. Each part of this guide focuses on a specific component of the Circular, e.g., Part 1 provides basic information about the Circular as well as details on information in the Circular, Part 2 focuses on Attachment A to the Circular, General Principles for Determining Allowable Costs, Part 3 deals with Attachment B, Selected Items of Cost, etc. The text discussion in each part is supplemented by a section on Highlights of Changes, as well as a Questions and Answers (Q&As) section intended to clarify issues relating to the respective component of the Circular. Each question is numbered and followed by a bracketed citation to the relevant section of the Circular, where applicable. On occasion, one Q&A may reference another by number. The reference section provides a list of related publications and how to obtain them. The appendices include a copy of the May 4, 1995 revision of OMB Circular A-87 (to be provided by users), a list of cognizant agencies, and a sample indirect cost rate agreement. (At the time of this publication, OMB was in the process of revising the cognizant listing based on new criteria. When issued, it will be provided in the C-10 as Appendix 2.)#
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Attachment 1, passage 552TABLE OF CONTENTS Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i Part 1: Basic Information 1.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1 1.1.1 The Cost Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1 1.1.2 Purpose and Significance of OMB Circular A-87 . . . . . . . . . . . . . . . . . . 1-1 1.1.3 Brief History of Circular A-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2 1.1.4 Effective Date of the Revised Circular A-87 . . . . . . . . . . . . . . . . . . . . . . 1-2 1.2 Role of the Office of Management and Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2 1.3 Relationship of Circular A-87 to Other Cost Principles . . . . . . . . . . . . . . . . . . . . 1-3 1.4 Relationship of Circular A-87 to Agency Regulations and Federal Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-4 1.5 Governmentwide Guidance on Implementing the Cost Principles . . . . . . . . . . . . 1-4 1.6 Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-5 Part 2: Attachment A — General Principles for Determining Allowable Costs 2.1 Objectives of the Circular . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1 2.2 Governmental Unit Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1 2.3 Alternative Methods of Cost Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1 2.4 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-2 2.4.1 What Types of Organizations Are Affected by Circular A-87? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-2 2.4.2 What Types of Organizations Are Not Affected by Circular A-87? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3 2.4.3 Determining Whether Circular A-87 Applies to an Award . . . . . . . . . . . 2-3 2.5 Terms Used in Circular A-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-4 2.6 The Cost Reimbursement Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-4 2.7 Composition of Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7 2.8 General Tests of Cost Allowability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7 2.8.1 Necessary and Reasonable Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7 2.8.2 Allocable Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8 2.8.3 The Other Tests of Allowability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-9 2.9 Required Government Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-10 2.10 Highlights of Changes Affecting Attachment A . . . . . . . . . . . . . . . . . . . . . . . . . 2-10 2.11 Questions and Answers on Attachment A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-13#
Attachment 1, passage 553Part 3: Attachment B — Selected Items of Cost 3.1 Handling Items of Cost Not Listed in Attachment B . . . . . . . . . . . . . . . . . . . . . . 3-1 3.2 Prior Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-1 3.3 Highlights of Changes Affecting Attachment B . . . . . . . . . . . . . . . . . . . . . . . . . . 3-2 3.4 Questions and Answers on Attachment B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-7 Part 4: Attachment C — Requirements for Cost Allocation Plans 4.1 Highlights of New Section, Attachment C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1 4.2 What is a Central Service Cost Allocation Plan? . . . . . . . . . . . . . . . . . . . . . . . . . 4-1 4.3 Content of CSCAPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1 4.4 Requirements for Submission of Cost Allocation Plans . . . . . . . . . . . . . . . . . . . . 4-2 4.4.1 Role of Cognizant Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-2 4.4.2 State Governments and "Major" Local Governments . . . . . . . . . . . . . . . 4-2 4.4.3 Local Governments Not Considered "Major" . . . . . . . . . . . . . . . . . . . . . 4-2 4.5 What Are the Documentation Requirements for a CSCAP? . . . . . . . . . . . . . . . . . 4-2 4.5.1 Allocated Central Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-3 4.5.2 Internal Service Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-4 4.5.3 Self-Insurance Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-4 4.5.4 Fringe Benefits Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5 4.5.5 Pension and Postretirement Health Insurance Plans . . . . . . . . . . . . . . . . 4-5 4.5.6 Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-6 4.6 How Should Allocated Costs Be Presented in a CSCAP? . . . . . . . . . . . . . . . . . . 4-6 4.6.1 Sample Formats for Central Service Cost Allocation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-6 4.6.2 Suggested Bases for Cost Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 4-15 4.7 How Should Billed Costs Be Presented in a CSCAP? . . . . . . . . . . . . . . . . . . . . 4-16 4.8 Questions and Answers on Attachment C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-23 Part 5: Attachment D — Public Assistance Cost Allocation Plans 5.1 Highlights of New Section, Attachment D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-1 5.2 Applicability of Regulations at 45 CFR Part 95, Subpart E . . . . . . . . . . . . . . . . . 5-1 5.3 Submission and Documentation Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-3 5.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-5 5.5 Review and Approval of Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-5 5.6 Claims Under PACAPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6 5.7 Questions and Answers on Attachment D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6#
Attachment 1, passage 554Part 6: Attachment E — State and Local Indirect Cost Rate Proposals 6.1 Highlights of New Section, Attachment E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-1 6.2 Acceptable Methodologies for Indirect Cost Allocation and Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-1 6.2.1 Types of Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-1 6.2.2 Direct Cost Bases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-2 6.2.3 Simplified Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-2 6.2.4 Multiple Allocation Base Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-8 6.3 Special Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-13 6.4 Submission and Documentation of Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-13 6.4.1 Documenting Indirect Cost Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . 6-13 6.4.2 Required Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-14 6.5 Review, Negotiation, and Approval of Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-14 6.5.1 The Review Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-14 6.5.2 Indirect Cost Rate Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-15 6.5.3 Features of a Typical Rate Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 6-15 6.6 Applying An Approved Rate to Grants and Contracts . . . . . . . . . . . . . . . . . . . . 6-16 6.6.1 Establishing the Amount of Approved Indirect Costs in the Award Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-16 6.6.2 Applying the Rate to the Direct Cost Base and Calculating Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-16 6.6.3 Effect of Rate Changes from One Fiscal Year to Another . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-16 6.7 Record Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-17 6.8 Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-17 6.9 Disputes and Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-18 6.10 Questions and Answers on Attachment E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-19 Illustrations: Illustration 3-1: A-87 Excess Cash-Flow Calculation - Sample Format for Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-27 Illustration 4-1: Sample Central Service Cost Allocation Plan: Statement of Function & Benefit, Personnel Department For the Fiscal Year Ended June 30, XXXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-8 Illustration 4-2: Sample Central Service Cost Allocation Plan: Costs to be Allocated, Personnel Department For the Fiscal Year Ended June 30, XXXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-9 Illustration 4-3: Sample Central Service Cost Allocation Plan: Allocation of Costs, Personnel Department For the Fiscal Year Ended June 30, XXXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-11 Illustration 4-4: Sample Central Service Cost Allocation Plan: Summary of Allocated Central Service Costs For the Fiscal Year Ended June 30, XXXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-12#
Attachment 1, passage 555Illustration 4-5: Sample Central Service Cost Allocation Plan: Summary of Central Services Billed to User Organizations . . . . . . . . . . . . . . . . . . . . . . . . 4-13 Illustration 4-6: Summary of Actual and Imputed Revenues by Fund . . . . . . . . . . . . . . . 4-18 Illustration 4-7: Reconciliation of Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-19 Illustration 6-1: Sample Indirect Cost Rate Proposal - Simplified Method Department of Environmental Services For the Fiscal Year Ended June 30, XXXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-4 Illustration 6-2: Department of Environmental Services Sample Indirect Cost Rate Proposal - Simplified Method For the Fiscal Year Ended June 30, XXXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7 Illustration 6-3: Sample Indirect Cost Rate Proposal - Multiple Rate Method Department of Environmental Services For the Fiscal Year Ended June 30, XXXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-9 Illustration 6-4: Sample Indirect Cost Rate Proposal - Multiple Rate Method Department of Environmental Services For the Fiscal Year Ended June 30, XXXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-12 Reference Appendices 1 OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments 2 Federal Agencies Responsible for Cost Negotiation and Audit of State and Local Governments 3 Sample Indirect Cost Rate Agreement Index#
Attachment 1, passage 556PART 1 Basic Information 1.1 Background 1.1.1 The Cost Principles Federal cost principles are policies used to determine which costs of an activity/project/program should be borne by the Federal Government. Over the years, various sets of governmentwide cost principles have been developed for reimbursing costs for different classes of recipients. These policy documents ensure the consistent treatment of costs, regardless of whether reimbursement is received directly from the Federal Government or through another recipient of Federal funds. 1.1.2 Purpose and Significance of OMB Circular A-87 Office of Management and Budget (OMB) Circular A-87 is one of several circulars intended to achieve more efficient and uniform administration of Federal awards, and to foster better relationships between the Federal Government and states, local governments, and Federally recognized Indian tribal governments. It provides the foundation for greater uniformity in the costing procedures of nonfederal governments and in the reimbursement practices of Federal agencies. It should be used in conjunction with other applicable laws to provide comprehensive direction and accountability in Federal fund management. Circular A-87 provides principles and standards for determining both direct and indirect costs applicable to Federal cost-based awards to governmental units. Parties using the A-87 cost principles include budget preparers, recipient personnel responsible for tracking costs charged against Federal awards, independent auditors, Federal awarding agency personnel reviewing budget requests and charges to the award, and cognizant agency and recipient personnel negotiating indirect cost rates and cost allocation plans. 1.1.3 Brief History of Circular A-87 1968 Circular A-87 issued by OMB 1974 Circular A-87 reissued as FMC 74-4 1981 Circular reissued as A-87, coverage extended to Indian tribal governments#
Attachment 1, passage 5571987 Interagency task force began review of Circular A-87 1988 First proposed revisions published 1993 Second proposed revisions published 1995 OMB issued significantly revised Circular A-87 1.1.4 Effective Date of the Revised Circular A-87 For indirect costs and costs covered by cost allocation plans described in Attachments C, D, and E of the Circular, the revision of Circular A-87 issued on May 4, 1995 must be applied to cost allocation plans and indirect cost rate proposals submitted or prepared for a governmental unit's fiscal year beginning on or after September 1, 1995. Therefore, for those governments with a fiscal year beginning October 1, 1995 - January 1, 1996, the revised version of Circular A-87 applies to the Central Service Plan for 1996. For all other governments, the revised Circular A- 87 applies to the 1997 plan. Effectively, two plans may be required for several years, i.e., those that would close out fiscal years 1994, 1995, or 1996 (as applicable), and another plan recognizing the new principles for the year that reflects the implementation of the revised Circular A-87. For costs other than indirect costs and costs covered by the cost allocation plans described in Attachments C, D, and E of the Circular, the revised Circular A-87 applies to all awards and amendments, including continuation and renewal awards, made on or after September 1, 1995. 1.2 Role of the Office of Management and Budget OMB is responsible for policy direction for Circular A-87 and for providing interpretations and assistance to assure effective implementation by Federal agencies and award recipients. OMB is also responsible for assigning Federal agencies to serve as cognizant for purposes of review and approval of cost allocation plans and indirect cost rates of states and certain local and Indian tribal governments. Except as provided by statute, any exceptions to the Circular are subject to OMB approval. The Office of Federal Financial Management is the responsible unit within OMB. In the interest of uniformity, exceptions are made only where adequate justification is presented. 1.3 Relationship of Circular A-87 to Other Cost Principles Determining which cost principles apply to a particular recipient entity is governed by the type of recipient. The chart below illustrates the cost principles and their applicability, by recipient type.#
Attachment 1, passage 558For the Costs of a — Use the Cost Principles in — State, local, or Indian tribal OMB Circular A-87 government Private nonprofit organization OMB Circular A-122 other than (1) institution of higher education, (2) hospital, or (3) organization named in OMB Circular A-122 as not subject to that Circular Educational institution OMB Circular A-21 For-profit organization other than 48 CFR Part 31, Contract Cost a hospital or an organization Principles and Procedures, or uniform named in OMB Circular A-122 as cost accounting standards that comply not subject to that Circular with cost principles acceptable to the Federal agency Hospital 45 CFR Part 74, Subpart E, or other cost principles acceptable to the Federal agency, e.g. HIM-15 The applicability of the cost principles flows through to the subrecipient. EXAMPLE: The State of Macedonia receives a Federal award: A-87 applies Macedonia subawards funds to Meerkat County: A-87 applies Meerkat County subawards funds to ProYouth, a nonprofit: A-122 applies In other words, the type of recipient or subrecipient determines the applicable cost principles, regardless of whether funds are received directly from the Federal Government or through a subaward from a primary recipient. The exception to the above is where statutory or regulatory provisions applicable to the prime recipient are more restrictive than the cost or administrative principles applicable to the subrecipient. For example, many awards to nonprofits permit the nonfederal share to be met through in-kind matching rather than matching actual expenditures. Where the matching of actual expenditures is required of the prime recipient, then subrecipients must also match in this same manner. 1.4 Relationship of Circular A-87 to Agency Regulations and Federal Statutes OMB Circular A-87 is a directive to the heads of Federal executive departments and agencies instructing them concerning the cost principles to be applied in cost-based awards to state, local, and Indian tribal governments. The Circular directs agencies to issue implementing regulations. In general, agencies have done so by adopting Circular A-87 by reference in Section __.22 of the Common Rule accompanying OMB Circular A-102, Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments.#
Attachment 1, passage 559Unless specifically required by statute or an exception granted by OMB, the Circular applies to awards to states, localities, and Indian tribal governments. Once implemented or otherwise adopted within Federal agency regulations, it has the force and effect of law. However, if a statute passed by Congress prescribes policies or procedures that differ from those in the Circular, the provisions of the statute govern. For example, it is not uncommon for Congress to enact legislation that restricts certain items of costs (i.e., limitations on indirect or administrative costs). When such a restriction exists, it is binding. Note: Statutes may differ as to how they define certain elements of cost and may further differ with definitions contained in Circular A-87. For example, the terms "indirect" and "administrative" are not necessarily synonymous. Accordingly, Federal agencies and recipients should exercise care in applying Circular A-87 definitions when making judgments about the effect of statutory limitations. 1.5 Governmentwide Guidance on Implementing the Cost Principles Each type of organization performing under agreements with the Federal Government follows one of the sets of governmentwide cost principles. Various Federal agencies have developed implementation guidance for the different cost principles. These principles and guidance apply to awards received directly from the Federal Government, as well as to Federal funds passed through or awarded to the performing organization by another Federal fund recipient. The chart below summarizes the applicable cost principles and available governmentwide guidance by type of organization. The agency that developed the guidance is noted parenthetically. Organization Type Federal Cost Principle Governmentwide Guidance State, local, or Indian tribal OMB Circular A-87 ASMB C-10 (HHS) governments Nonprofit organizations OMB Circular A-122 Various Funding Agency Guidelines Colleges or universities OMB Circular A-21 OASC-1 (HHS) Commercial organizations Federal Acquisition none and nonprofit Regulation, 48 CFR Part organizations listed in 31 Attachment C of A-122 Hospitals 45 CFR 74, Subpart E OASC-3 (HHS) 1.6 Questions and Answers 1-1 What is Federal Management Circular 74-4 and does it have any relevance to current Federal cost policies? Federal Management Circular (FMC) 74-4 was the designation for the Cost Principles for State and Local Governments during a period of the 1970s when the Circular was incorporated into the General Services Administration manual structure. There is no#
Attachment 1, passage 560substantive difference between FMC 74-4 and OMB Circular A-87. FMC 74-4 was superseded in 1981 when OMB reissued the cost principles as Circular A-87, and is no longer applicable. However, some grant agreements and policy documents that contain references to FMC 74-4 may not have been edited to reflect the applicability of Circular A-87 and its most recent revision issued in May 1995. 1-2 What is OASC-10? Is it relevant to current Federal cost policies? In 1976, the Department of Health, Education and Welfare issued "A Guide for State and Local Government Agencies – Cost Principles and Procedures for Establishing Cost Allocation Plans and Indirect Cost Rates for Grants and Contracts with the Federal Government (OASC-10)." OASC-10 is superseded and replaced by this guide, ASMB C-10, which reflects the policies in the revised Circular A-87. The guide is mandated by OMB in Circular A-87 and is a governmentwide document. 1-3 Have any Federal awarding agencies issued agency-specific implementations of Circular A-87? Most agencies adopted Circular A-87 by reference in their applicable agency grants administration regulation. Generally, this reference appears in Section __.22 of agency regulations implementing the Common Rule issued pursuant to OMB Circular A-102 and in Section __.27 of agency regulations implementing OMB Circular A-110. However, a few Federal agencies have issued specific Federal Register notices concerning their implementation of the revised Circular A-87, to clarify issues such as effective dates or to codify the entire Circular into their regulations. 1-4 Circular A-87, prior to its revision on May 17, 1995, stated that "no provision for profit or increment above allowable cost is intended." The revised Circular changed this language to read: "Provision for profit or other increment above cost is outside the scope of this Circular." Has the policy changed? No. Profit continues to be unallowable. In the Preamble to the Circular, OMB explains that the language was changed to be consistent with the wording in other Circulars. However, no change in policy was intended. [Circular, ¶ 5] 1-5 In the case of state-supervised, county-administered programs, which fiscal period controls the effective date for adoption of the revised A-87? [Circular, ¶ 11] It must be the fiscal period of the specific unit of government. Therefore, if a state has a different fiscal period than a local government it supervises, each governmental unit would adopt the Circular in accordance with its individual fiscal period.#
Attachment 1, passage 5611-6 If predetermined indirect cost rates have already been approved that extend beyond the effective date for adoption of the revised Circular A- 87 by a specific governmental component, does this change the effective date for that component? [Circular, ¶ 11] For a governmental component that already has established predetermined cost rates beyond September 1, 1995, the effective date of the revised A-87 is the start of the first accounting period for which an indirect cost rate has not been established. 1-7 When are interest payments on equipment allowable for an internal service fund? Would the interest be allowable after September 1, 1995 or with the first fiscal year beginning after September 1, 1995? [Circular, ¶ 11] Internal service funds are covered by Attachment C of A-87. The transmittal letter from OMB dated May 4, 1995 states that for costs charged indirectly or otherwise covered by the guidelines for cost allocation plans contained in Attachments C, D, and E, the effective date is the first fiscal year beginning after September 1, 1995.#
Attachment 1, passage 562PART 2 Attachment A — General Principles for Determining Allowable Costs 2.1 Objectives of the Circular Office of Management and Budget (OMB) Circular A-87 establishes principles for determining the allowable costs incurred by state, local, and Federally recognized Indian tribal governments (hereinafter referred to as governmental units) under grants, cost-reimbursement contracts, and other agreements with Federal agencies (hereinafter referred to as Federal awards). The principles are for the purpose of cost determination only and are not intended to dictate the extent of Federal or governmental unit participation in the financing of a particular program or project. Accordingly, they describe what may be reimbursed or recovered under a covered Federal award. They are designed to provide that the Federal Government bear its fair share of costs recognized, except where restricted or prohibited by law. Profit or other increment above cost in any Federal award is outside the scope of the Circular. 2.2 Governmental Unit Responsibilities The Circular recognizes the responsibility and sovereignty of governmental units that receive and administer Federal awards. It reinforces the expectation contained in the law and in award agreements that these organizations will administer Federal funds properly and in a manner consistent with the sound management practices that they apply to their own revenues. Standards provided in the Common Rule issued pursuant to OMB Circular A-102, Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments, reinforce this recipient responsibility for financial management, procurement, property management, and record retention. 2.3 Alternative Methods of Cost Recovery The Circular permits Federal agencies to work with governmental units that wish to test alternative methods for cost recovery in all or a portion of a Federal award. Such methods include, where permitted, fixed-amount awards, fee-for-service arrangements, and predetermined indirect cost rates. Alternative methods must comply with the A-87 "benefits received" concept. 2.4 Applicability 2.4.1 What Types of Organizations Are Affected by Circular A-87? Circular A-87 applies to governmental units generally, but definitions within the Circular further establish the entities that fall within that broad category. Under the Circular, the following entities are considered to be a state government: # any of the 50 states; # District of Columbia;#
Attachment 1, passage 563# Commonwealth of Puerto Rico; # any territory or possession of the United States; and # any agency or instrumentality of a state, exclusive of local governments. Circular A-87's definition of local government encompasses all general and special purpose governmental units. It defines the following entities as local governments: # county; # municipality; # city; # town; # township; # local public authority; # school district; # special district; # intrastate district; # council of governments, regardless of incorporation status as a nonprofit corporation under state law; # any other regional or interstate, nonfederal government entity; and # any agency or instrumentality of a local government. The Circular defines a Federally recognized Indian tribal government as the governing body or a governmental agency of any Indian tribe, band, nation, or other organized group, including Alaskan native villages certified by the Secretary of the Interior as eligible for the special programs and services provided through the Bureau of Indian Affairs. Components are agencies or divisions within a governmental unit. 2.4.2 What Types of Organizations Are Not Affected by Circular A-87? For purposes of cost determination, Circular A-87 does not apply to public institutions of higher education. Those organizations are subject to OMB Circular A-21, Cost Principles for Educational Institutions. Circular A-87 also does not apply to public hospitals. They are subject to the requirements developed by their Federal sponsoring agencies, such as the Health Care Financing Administration (HCFA). Generally, they follow cost principles issued by the Department of Health and Human Services at 45 CFR Part 74, Subpart E. Note: Circular A-87 does affect public hospitals and institutions of higher education in one#
Attachment 1, passage 564respect. All central service or departmental costs of a covered governmental unit that are allocated or billed to those institutions are subject to the A-87 requirements. In addition, indirect cost rates and cost allocation plans approved by a cognizant agency for the government component are to be accepted by all awarding agencies. Agency cost principles apply only to those costs not covered by these agreements. 2.4.3 Determining Whether Circular A-87 Applies to an Award Circular A-87 applies uniformly to all cost-based awards made directly or indirectly to governmental units. Cost-based refers to those awards where the costs charged to the award form the basis for the amount reimbursed under the award. Therefore, the types of awards subject to the principles in Circular A-87 include: # cost-reimbursement contracts; # grants and cooperative agreements, which are cost-reimbursement type agreements, whether or not funds are provided in advance of expenditure; and # subgrants and cost-reimbursement subcontracts awarded to governmental units under grants awarded to any type of Federal recipient. Circular A-87 does not apply to fixed-price arrangements, unless projected costs are used in determining the amount to be awarded. OMB occasionally elects to specifically exclude certain programs from mandatory coverage of the Circular. For example, in 1981, OMB instructed Federal agencies administering the nine block grants enacted under the Omnibus Budget Reconciliation Act of 1981 that they were not required to use the Circular as a policy governing awards under those programs. Instead, the agencies were to permit states to use “equivalent procedures of their own” to administer such programs. 2.5 Terms Used in Circular A-87 Because A-87 is a policy directive affecting what costs are allowable charges to Federal programs, what costs are not allowable, and how costs must be documented, it is important that users of the Circular and this guide become familiar with definitions of key terms and how they are used. Terms may have broader, narrower, or more precise meaning than ones that are in customary or colloquial use by financial or programmatic personnel who must rely on the Circular. In addition, such terms may not be defined in other authoritative literature on which readers might normally rely. Definitions can be found in Section B of Attachment A to the Circular. The Circular is located in Appendix 1 of this guide. 2.6 The Cost Reimbursement Process In the context of Circular A-87, the term "cost reimbursement" describes how the claims will be reviewed, accepted, and settled. Although the term cost reimbursement implies that funding is received after-the-fact, the process of cost reimbursement under Federal awards has little to do with when cash is actually received. This is because, with few exceptions, assistance award recipients receive advance funding. Grant and cooperative agreement recipients are usually permitted to draw against their award amounts in advance, so long as they 1) limit their request for funds to the minimum amount needed, and 2) time the request as close as is administratively#
Attachment 1, passage 565feasible to the actual cash outlay for direct program costs and the proportionate share of any allowable indirect costs. (See 31 CFR §205.20; §__.21, OMB Circular A-102 Common Rule.) In contrast, Federal cost-reimbursement contracts are generally paid after cost has been incurred and as progress is being made toward performance. Note: While, for cash-need purposes, advance funding might be provided under grants and cooperative agreements, the advanced funds must be viewed by recipient organizations as an accounts payable to the Federal Government. The cost principles have a role to play at most stages of the assistance award or contract life cycle. These stages, and the role of Circular A-87 at each stage, are summarized in the chart on the following page:#
Attachment 1, passage 566At this stage in the Circular A-87 plays this role: cycle... Soliciting applications Awarding agency announces the applicability of the A-87 and/or proposals from cost principles. governmental units Preparing proposals or Applicant governmental unit includes only costs allocable, plans for use of funds reasonable, and allowable under Circular A-87. Notifying recipient of Applicable assistance or procurement award document cites award the applicability of Circular A-87. Expending funds Governmental unit incurs costs for expenditures that are eligible under applicable program legislation, as well as allowable under Circular A-87, under control procedures that allow proper determination. Developing and As costs are incurred, governmental unit generates retaining documentation documentation consistent with that generated for expenditure of own-source revenue and with any specific requirements of Circular A-87 (e.g., personnel activity reports) — documentation is maintained in a system of records for at least the minimum period of time provided under §__.42, OMB Circular A-102 Common Rule. Preparing claims for At a frequency determined by the awarding agency and on direct costs and authorized forms, governmental unit submits claims attributable indirect asserting that allowable and eligible costs have been costs incurred in accordance with A-87. Governmental unit is permitted to apply its indirect cost rate to those object class categories of expenditure to which the cognizant agency has agreed it should be applied. Auditing Awards Through test procedures, independent auditors or auditors representing awarding agencies review claims to determine whether incurred costs are appropriate under Circular A-87. Discrepancies are reported to awarding agencies as questioned costs requiring resolution. 2.7 Composition of Cost The total amount claimable under a cost-based award covered by Circular A-87 equals the allowable direct costs, plus the allocable portion of allowable indirect costs, minus the applicable credits. allowable direct costs plus Total Amount Claimable = allocable portion of indirect costs minus applicable credits The Circular makes clear that there is no universal rule for classifying costs as direct or indirect under every governmental accounting system. The essential difference is the degree of ease with#
Attachment 1, passage 567which a cost can be readily assigned to a particular cost objective with a high degree of accuracy. Such readily assigned costs are direct costs. Indirect costs are those that cannot be readily assigned to a particular cost objective without effort disproportionate to the benefits received. However, the Circular permits minor direct cost items to be treated as indirect costs for practicality, so long as consistent treatment of all such items is maintained. Applicable credits are receipts or reductions of expenditure that offset or reduce costs allocable to Federal awards as direct or indirect costs. These are to be credited to the cost objective or the award, or refunded to the awarding agency, depending upon the circumstances and the timing of their accrual or receipt. 2.8 General Tests of Cost Allowability Although Attachment B of Circular A-87 lists a number of selected items of cost, which frequently represent significant amounts in individual Federal awards or are costs for which there is a specific Federal policy, Attachment A establishes general tests of allowability that apply irrespective of whether a particular item of cost is specifically mentioned in Attachment B. These general tests frequently involve judgment and an assessment of the facts and circumstances in which the specific cost is incurred. The tests are not only listed in the Circular itself, but are frequently restated in compliance audit guidance that Federal and nonfederal auditors use to carry out field work and reporting. 2.8.1 Necessary and Reasonable Costs The first general test of allowability is that the cost be necessary and reasonable for proper and efficient performance and administration of Federal awards. A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when governmental units or components are predominately Federally funded. In determining reasonableness of a given cost, consideration should be given to: # whether the cost is of a type generally recognized as ordinary and necessary for the operation of the governmental unit or the performance of the Federal award; # the restraints or requirements imposed by such factors as sound business practices; arms-length bargaining; Federal, state, and other laws and regulations; and Federal award terms and conditions; # market prices for comparable goods or services; # whether the individuals concerned acted with prudence in the circumstances, considering their responsibilities to the governmental unit, its employees, the public at large, and the Federal Government; and # significant deviations from the established practices of the governmental unit which may unjustifiably increase the Federal award's cost. 2.8.2 Allocable Costs The second general test of allowability is that the cost be allocable to Federal awards under the provisions of Circular A-87. A cost is allocable to a particular cost objective if the goods or#
Attachment 1, passage 568services involved are chargeable or assignable to that cost objective according to the relative benefits received. All activities which benefit from the governmental unit's indirect costs, including unallowable activities and services donated to the governmental unit by third parties, will receive an appropriate allocation of indirect costs. Any cost allocable to a particular Federal award or cost objective under the principles in Circular A-87 may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by law or terms of the Federal awards, or for other reasons. Such a practice constitutes unallowable cost shifting. However, this prohibition does not preclude governmental units from charging costs that are allowable and allocable under two or more awards, pursuant to existing program agreements. Such charges are viewed as "funding allocations" rather than cost allocations. Where an accumulation of indirect costs will ultimately result in charges to a Federal award, a cost allocation plan or indirect cost rate agreement will be required as described in Attachments C, D, and E to Circular A-87. 2.8.3 The Other Tests of Allowability In addition to reasonableness and allocability, the other general tests of allowability are that the cost: # be authorized or not prohibited under state or local laws or regulations — a governmental unit may not accept and expend Federal funds to undertake an activity for which it does not have the authority under its own state or local law or which would constitute an illegal purpose; # conform to any limitations or exclusions set forth in the cost principles, Federal laws, terms and conditions of the Federal award, or other governing regulations as to types or amounts of cost items; # be consistent with policies, regulations, and procedures that apply uniformly to both Federal awards and other activities of the governmental unit; # be accorded consistent treatment — a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost; # be determined in accordance with generally accepted accounting principles, except as otherwise provided for in Circular A-87; # not be included as a cost or used to meet cost-sharing or matching requirements of any other Federal award in either the current or a prior period, except as specifically provided by Federal law or regulation; # be net of all applicable credits; and # be adequately documented. In general, to meet the test of adequate documentation of charges under a Federal award, a governmental unit must document charges in a manner consistent with documenting#
Attachment 1, passage 569expenditures of its own source revenue. However, certain provisions of Circular A-87 and the Common Rule issued pursuant to OMB Circular A-102 provide for specific standards for certain types of costs. For example, Circular A-87 addresses documentation for employee compensation, depreciation or use allowance for assets, and various types of allocated and billed indirect costs. The A-102 Common Rule establishes documentation requirements for purchase transactions (§__.36(b)(9)). 2.9 Required Government Certification No cost allocation plan or indirect cost rate will be approved by the Federal Government unless the plan or rate proposal has been certified by the governmental unit. Except as noted below, no indirect costs will be reimbursed unless the governmental unit has an approved rate/plan or maintains on file a certified plan/rate, as appropriate. The Federal Government may unilaterally establish such a cost allocation plan or indirect cost rate. Such a plan or rate may be based upon audited historical data or such other data that have been furnished to the cognizant Federal agency and for which it can be demonstrated that all unallowable costs have been excluded. When a cost allocation plan or indirect cost rate is unilaterally established by the Federal Government because of failure of the governmental unit to submit a certified proposal, the plan or rate will be established to ensure that potentially unallowable costs will not be reimbursed. [See also 4.5.6, Certification of CSCAPs, and 6.4.2, Required Certifications for state and local indirect cost rate proposals.] 2.10 Highlights of Changes Affecting Attachment A # Gives Federal agencies the authority to test alternative methods of reimbursement, such as fee-for-service. [Att. A, ¶ A.2.b] # # Clarifies that, while government hospitals and educational institutions are subject to applicable requirements governing those organizations, the measurement of costs allocated or billed to them by other government departments must be made in accordance with Circular A-87 and must be accepted by all awarding agencies. [Att. A, ¶ A.3.a] # Clarifies that subawards are subject to the cost principles applicable to the type of organization receiving the award. [Att. A, ¶ A.3.b] # Circular A-87 is to be used as a guide in the pricing of fixed-price agreements. [Att. A, ¶ A.3.c] # For contracts, makes Cost Accounting Standards (CAS) applicable where required. [Att. A, ¶ A.3.d] # Expands the definition of "approval or authorization" of costs by the "awarding or cognizant agency." Clarifies that prior approval may be assumed where costs are allocated in accordance with an approved cost allocation plan. [Att. A, ¶ B.1] # Adds new definitions for:#
Attachment 1, passage 570— Award; — Awarding Agency; — Central Service Cost Allocation Plan; — Claim; — Cognizant Agency; — Common Rule; — Contract; — Governmental Unit; — Indirect Cost Rate Proposal; — Public Assistance Cost Allocation Plan; and — State. [Att. A, ¶¶ B.1-18] # Clarifies that the definition of "cost" does not include transfers. [Att. A, ¶ B.9] # # Deleted specific prohibition that "routine costs of government" are unallowable. [Att. A, ¶ C.1.a] However, see Highlights of Attachment B, Part 3 of this guide. # Adds a new section defining "reasonable costs" and criteria for measuring reasonableness. [Att. A, ¶ C.2] # Clarifies that costs must be allocated to all benefitting activities, including those that are unallowable, as well as donated services. [Att. A, ¶ C.3.b] # # Clarifies when costs of activities allowable and allocable under multiple programs may be redistributed when funding ceilings for a given program are reached. (Note: not to be misconstrued as unallowable cost shifting.) [Att. A, ¶ C.3.c] # Clarifies that direct costs are those that can be identified specifically with a particular, final cost objective. [Att. A, ¶ E.1] # Adds a new section permitting the treatment of minor direct expenses as indirect. [Att. A, ¶ E.3] # Adds a new section referencing other new sections dealing with the development and submission of indirect cost rates and cost allocation plans. [Att. A, ¶F.2]#
Attachment 1, passage 571# # Previous sections dealing with the allocation of interagency costs have been combined into a new section (Attachment C) which has references to additional, new sections. The previous prohibition of charging general supervision, such as department heads, has been eliminated. In lieu of developing actual indirect costs associated with the allocated service, a standard 10% of direct salaries and wages may be used. This is applicable to services that are not included as billed or allocated services included in the state/local-wide cost allocation plan (SWCAP/LOCAP). [Att. A, § G] # # Sections dealing with cost allocation plans (CAPs) have been expanded and relocated elsewhere as Attachments (C and D) in the Circular. A new section (Attachment E) is added detailing required certifications for indirect cost (IDC) agreements and cost allocation plans submitted by state/local officials. [Att. A, § H] 2.11 Questions and Answers on Attachment A 2-1 Circular A-87 now permits testing of alternative methods of reimbursement, such as fee-for-service. Under what circumstances may such alternative systems be used? [Att. A, ¶ A.2.b] Alternative reimbursement systems for administrative costs might involve a rate system whereby a single rate is paid for outputs, such as the number of programmatic services performed. As with billed services, such alternatives are acceptable for payment purposes, provided that the payments are periodically reconciled to actual costs. Reimbursement systems not based on costs are only allowable where the Federal funding legislation permits such a practice. However, where it can be demonstrated clearly that an alternative system will result in less costs to the Federal Government, the cognizant/awarding agency may deem that such a system satisfies statutory language limiting reimbursement to "expenditures." 2-2 Some Federal programs use cost reports that apply to both proprietary and governmental organizations. These cost reports often dictate policies and/or provide for independent decisions different from what is prescribed in Circular A-87 or what has been approved by the cognizant agency with respect to cost allocation plans or indirect cost rates. Are governmental units so affected required to maintain separate reporting and accounting systems? [Att. A, ¶ A.3] No. Governmental units and Federal awarding agencies in the above situations are to comply with the provisions of A-87 and the costing methodology approved by the cognizant agency with respect to state/local-wide central service costs, billed services from other support agencies, and the distribution of agency/departmental overhead to direct cost objectives/programs. These indirect, overhead, "home office," and general and administrative costs are to be accepted on the awarding agency's cost report without additional review or approval. For example, the governmental unit might have a capitalization threshold higher than that allowed by the HIM-15 (the reimbursement manual used by Medicare). The indirect cost rate will reflect the higher limit. The HIM-15 provisions would only apply to direct costs. 2-3 For awards to subrecipients, such as nonprofits or universities, must the governmental unit recognize an indirect cost rate established with the nonprofit#
Attachment 1, passage 572or university by the Federal cognizant agency? [Att. A, ¶ A.3] No, although governmental units are encouraged to do so. Governmental units are required to reimburse and measure costs for these organizations in accordance with the applicable cost principles, in this case A-122 and A-21, respectively. As such, the full reimbursement of allowable direct and indirect costs is expected. The above-referenced cost principles do provide various methods for measuring costs. For example, the cognizant agency may have used a salary and wage base for distributing cost centers, while the governmental unit might require a modified total direct cost base. If differing bases or methods are imposed upon the subrecipient, dual cost accounting systems will be required. In addition, the use of a combination of bases may result in the over/under recovery of costs. OMB is studying this issue and may promulgate policy requiring consistent application of negotiated rates. 2-4 Do the Circular A-87 principles apply to the block grant programs? [Att. A, ¶ A.3] While the Circular does not apply to many block grants, governmental units should verify the applicability of A-87 with the Federal awarding agency. However, where a governmental unit or component operates both block grants and other Federal programs subject to the Circular, cost allocation plans and indirect cost proposals must be prepared in accordance with A-87 and include the block grants in appropriate bases/cost centers to assure a proper allocation of costs. 2-5 Does Circular A-87 apply to performance partnerships? [Att. A, ¶ A.3] Yes, OMB Circular A-87 applies to performance partnership programs. 2-6 Attachment A, paragraph B.1 defines different methods constituting Federal "approval." Can this definition be read to mean that approval of an indirect cost rate or state-wide cost allocation plan (SWCAP) represents approval of costs contained by reference in such plans or revisions? [Att. A, ¶ B.1] No. This definition only relates to those items that would require prior approval per Attachment B of Circular A-87. It is intended to facilitate the "prior approval" process whereby allocated costs do not require separate approval from every Federal agency affected. In addition, this prior approval concept would not override or make allowable a cost element that is specifically unallowable under another provision of A-87 or program statute. With respect to public assistance cost allocation plans, approval is for methodologies, not costs claimed under such plans. 2-7 Where prior approval is required for a selected item of cost, how is the approval to be handled where the cost is allocated or distributed to a number of programs/cost objectives? [Att. A, ¶ B.1] Where such costs are part of an indirect cost agreement or cost allocation plan, e.g. SWCAP, for which a cognizant agency has been designated, the acceptance of the item of allowable cost by the cognizant agency shall represent prior approval for all Federal#
Attachment 1, passage 573agencies. 2-8 How can I determine which Federal agency is cognizant for a particular governmental unit? [Att. A, ¶ B.6] Appendix 2 is reserved for a future issuance of cognizant assignments pertaining to government agencies and local governments. At the time of this publication, OMB was in the process of revising the current document. The U.S. Department of Health and Human Services is cognizant for all state-wide cost allocation plans. For those entities not listed by OMB, cognizance is generally established based on the Federal agency providing the greatest dollar support that is subject to indirect cost rates. 2-9 In the revised Circular A-87 issued May 4, 1995, under the provisions concerning "Factors affecting allowability of costs," the prohibition of costs attributable to the routine activities of government has been deleted. Are such costs now allowable? [Att. A, ¶ C.1] No. OMB omitted this prohibition under this section because it is now treated as a separate, unallowable cost element under "Selected Items of Cost" — Attachment B, paragraph 23. Such costs continue to be unallowable. 2-10 In the following examples, would a unit or component of government be in compliance with the "consistency" provisions of Attachment A, paragraphs C.1.e and f? [Att. A, ¶¶ C.1.e, f] (1) A state with several data processing recharge centers, each using different billing systems and charging bases. (2) Within a state, one department computes the indirect cost rate using a salaries and wages (S&W) base while another uses modified total direct costs (MTDC). (3) One department computes a single rate for all divisions versus another that develops multiple rates. Depending on the types of programs operated by the various departments and agencies, different methods of allocation may be required to achieve the most appropriate and equitable allocation results. Therefore, the use of different methods for allocating and distributing costs, as described, does not necessarily violate the intent of the A-87 provisions. It is the responsibility of the cognizant agency to assure that the method used in the negotiation and approval process results in the allocation of costs to all activities based on the concept of benefitting program or activity. 2-11 Circular A-87 stipulates that costs must be consistently treated as direct or indirect under like circumstances. Would this preclude, in the course of direct charging costs, a direct charge being made to an indirect cost center for those costs that are not assignable to a benefitting program, i.e., those that are truly of an indirect nature? [Att. A, ¶ C.1.f] No. The requirement in the Circular is to prevent a practice where some of the costs#
Attachment 1, passage 574of a given activity are directly identified to programs/functions while other costs that could have also been charged as direct are treated as indirect. The distribution of a cost grouping or objective must include all benefitting programs/activities in the base, whether they be direct or indirect. EXAMPLE: A local agency, in addition to the Director's Office, has five operating divisions. For its basic telephone service, the agency opts to allocate the bill to organizational units based on the number of telephones in each unit. It must allocate costs to each unit and the Director's Office (which is treated as indirect). It cannot allocate to just two divisions with the other three divisions' allocations being allocated back to the Director's Office. 2-12 Circular A-87 requires that costs be allocated to activities or cost objectives based on relative benefits received. Are there exceptions to this requirement? [Att. A, ¶ C.3] Circular A-87 requires that where a cost or activity benefits multiple activities or programs, those costs must be allocated in accordance with the relative benefits received by each activity or program. This requirement is an underlying principle of cost allocation. Exceptions to this requirement are permissible only under certain circumstances. If an awarding agency determines that costs allocable to another program or cost objective are allowable under their program, then the unallocable costs may be bourne by their program. This shifting of unallocable costs is permitted only when the head of the awarding agency advises the cognizant agency that under its enabling legislation, such cost shifting is allowed and expected. In the absence of such authorization, costs must be allocated to all benefiting programs. 2-13 Some Federal and state programs collect and use identical eligibility criteria or common data such as income, family structure, resources, etc. Can the costs of eligibility determination for several Federal/state programs be assigned to only one program, based on a concept of "primary program"? [Att. A, ¶ C.3] Circular A-87 requires that common activities be allocated to all benefitting programs. The notion of "primary program" is contrary to the allocability provisions of A-87. As noted in the answer to Q&A 2-12 above, where the head of an awarding agency determines that the agency's enabling legislation permits reimbursement of unallocable costs, such costs may be allowed by the cognizant official for cost allocation or indirect cost agreements, when notified by the awarding agency head. Absent such notification, the primary program concept may not be used. 2-14 Sometimes, it is unclear when the costs of one program or activity end and those of another begin. For example, some Federal programs are categorical in nature, requiring some form of cost or beneficiary eligibility determination. In the course of determining that an individual is ineligible for the Federal program, it may be determined that the person qualifies for a state-only program. What criteria are to be used for allocating these costs? Should the Federal program be required to pay for all joint or common costs because, in the course of determining individuals eligible for the program, it follows that some individuals will be determined ineligible as well? [Att. A, ¶ C.3]#
Attachment 1, passage 575Some states have opted to provide benefits with state funding for individuals not covered by Federal programs. Quite often, in order to achieve economies, states will structure their intake or eligibility processes so that applying and determining eligibility for one or the other program can occur concurrently. As this is an efficient method of serving both programs, for which each receives a common benefit, it is appropriate and proper that each program receive an allocable share of these costs. A typical allocation base would be the number of positive eligibility determinations made for each program. (Such a methodology results in each program receiving a proportionate share of "ineligibility determination" costs.) Whether such costs can be viewed as being attributable to the activity of determining ineligibility or a common eligibility cost depends on how the state has structured its operations. For example, if an eligibility determination runs its course for the Federal program, and the eligibility process begins anew for the state-only program, then there are costs of determining ineligibility solely for the Federal program. However, where the failure to qualify for the Federal program only requires some incremental work to be performed to determine eligibility for the state-only program (because information and data has been collected for both), then the latter program receives benefit from the common or joint effort previously expended and must receive an allocation of those costs. In determining whether benefit is received from these common costs, consideration should be given to the following issues: Would the activity still exist, and thereby result in the same costs being incurred, if one program were terminated? Could a reasonable conclusion of eligibility or ineligibility for either program be made if potential beneficiaries were evaluated against certain key eligibility criteria in the early stages of the determination process (i.e., level of income, whether there are children in the home, etc.), rather than at the tail-end of the process? 2-15 Circular A-87 seems to require that donated services always be allocated indirect costs. Are there any circumstances when such a distribution is not required? [Att. A, ¶ C.3.b] As with the distribution of costs to any cost objective, no allocation is required when the component can demonstrate there is no benefit. If the level of benefit is not the same as for other benefitting activities, then additional, intermediate pools would be necessary so that only benefitting indirect costs are distributed to the donated services. 2-16 The discussion in Circular A-87 concerning allocable costs, Attachment A, paragraph C.3.c, stipulates that costs allocable to one program may not be shifted to another, yet it goes on to say that cost shifting is allowable. Is this inconsistent policy? [Att. A, ¶ C.3.c] No inconsistency was intended. OMB made a distinction between cost allocation and funding allocations. [Editor's note: OMB added the exception language to this provision at the specific request of HHS, to address confusion that had occurred in the funding of some of its programs. The term "cost shifting" should not have been used, because cost shifting is unallowable, per se.] A function or activity within the government organization that benefits two or more programs may be set up as a single cost objective. Costs allocable to that cost objective would be allowable under any of#
Attachment 1, passage 576the involved programs which benefit from these activities/costs. The government can make a business decision regarding what combination of funds made available under these programs would be applied to this cost objective. In public assistance agencies, for example, certain services rendered to children may comprise a cost objective. If the services provided and the criteria establishing the children’s eligibility to receive them are the same for two or more child welfare programs, the government could fund the services with any combination of funds made available under these programs. This results in applying eligible funding sources to the single cost objective, rather than allocating the cost objective to the programs involved. EXAMPLE: Program A allows payments for children in foster care whose parents' incomes do not exceed 180% of the poverty income level. The payments to the care givers are matched by the Federal program at 50%, with no ceiling on the total amount that can be paid by the Federal Government. Program B allows payments for children in foster care regardless of the parents' income. While Program B will match these payments at 75%, total Federal payments may not exceed $10M. The state opts to establish a single cost center for children in foster care whose parents' income is less than 180% of the poverty level. As these children qualify for either program, the state can initially fund these services with the higher matching Program B funds (75%). When the Federal ceiling of $10M is reached, the cost center can then be funded, from that point forward, with Program A funds, albeit at a lower matching rate of 50%. Children whose parents' income exceeds the 180% income level would be charged to a separate cost center, along with the attendant eligibility and other administrative costs. (Typically, the costs of determining eligibility for these two groups would initially be aggregated in an intermediate cost pool reflecting common costs. The pool would be further allocated to the two final cost objectives based on the number of children served in each.) 2-17 Is the list of applicable credits all inclusive? [Att. A, ¶ C.4.a] No. There are other common examples. For instance, applicable credits result from allowable activities that generate income, such as income from sales of publications; income generated from employee morale, health, and welfare activities per Attachment B, paragraph 17; and interest earnings on internal service funds and positive cash flows. 2-18 If a government operates its entitlement programs through different component units, such as the health department and welfare department, may cost allocation plans be required from each? [Att. A, ¶ F.2] Yes. The requirements of Attachment D apply to all public assistance programs, regardless of where they are organizationally located. Public assistance programs are not the only instances when a government component may need a cost allocation plan. Whenever the nature of the component's activities are such that direct costs cannot be adequately determined with reasonable precision, a cost allocation plan would be necessary. Typically, a plan is necessary when substantial "direct" costs of programs,#
Attachment 1, passage 577awards, contracts, projects, etc. consist of joint or common cost distributions. This would not preclude, however, the use of an indirect cost rate in conjunction with a cost allocation plan. 2-19 Are cost allocation plans only applicable to state/local-wide cost allocation plans (SWCAPs/LOCAPs) and public assistance cost allocation plans (PACAPs)? [Att. A, ¶ F.2] No. The component or a Federal agency may request a cost allocation plan in lieu of an IDC rate under the circumstances described for public assistance plans in Q&A 2-18 above. Where a cost allocation plan is necessary for a component of the governmental unit for which the cognizant agency makes no awards, or has no knowledge of the component's programs, the awarding agency impacted the greatest may be designated to approve such plans. 2-20 Attachment A, Section G discusses the use of a standard 10% rate for services provided by one agency (except state/local-wide centralized services departments) to another within a governmental unit. Can this concept be used under any circumstances where a state makes a subaward to a local government? [Att. A, § G] No. This provision only applies to components (agencies) within a specific governmental unit, not outside that unit. 2-21 Attachment A, Section G allows components, when billing another component for services, to include a flat 10% of salaries and wages in lieu of determining actual indirect costs. Under what circumstances would this be permissible? [Att. A, § G] A number of agencies do not receive Federal awards and therefore have no need to obtain an indirect cost (IDC) rate from a cognizant agency. From time to time these agencies might provide a reimbursable service to another agency which does receive awards. OMB opted to allow the 10% of salaries and wages, which is viewed as nominal, rather than requiring such agencies to go through the burden of developing indirect cost rates for relatively insignificant activities. If an agency providing services has an IDC rate, that rate must be used in lieu of the flat 10% rate if its application results in less reimbursement.#
Attachment 1, passage 578PART 3 Attachment B — Selected Items of Cost 3.1 Handling Items of Cost Not Listed in Attachment B Like other sets of Office of Management and Budget (OMB) cost principles, Circular A-87 lists selected items of cost that are common to performing and administering Federal awards to governmental units. The selection of these costs represents OMB’s judgment that policy about allowability is either needed or desirable. However, OMB recognizes that it is not possible to develop comprehensive rules that address every possible type of cost that might arise in the context of awards to governmental entities. Accordingly, Attachment B of the Circular, which addresses the selected items, is introduced with a general policy that is intended to be helpful in making cost determinations. It states: "Failure to mention a particular item of cost in these sections is not intended to imply that it is either allowable or unallowable; rather, determination of allowability in each case should be based on the treatment or standards for similar or related items of cost." Under this policy, if an item is not listed in the Circular, but a similar item is discussed, it may be that allowability can be determined by assessing the degree to which common characteristics exist between the two cost items. Alternatively, applying the general tests of allowability contained in Attachment A of the Circular could be determinative. It may be advisable to seek advance understanding with the awarding or cognizant agency concerning particular costs if allowability is more difficult to determine, although such a practice is not specifically mentioned zin Circular A-87. Other OMB cost principles suggest this approach where doubts are present, but further state that the absence of such an advance understanding does not preclude allowability. 3.2 Prior Approval In the past, because of concerns about the allocability of certain items of cost, OMB usually required that these items be subject to the prior approval of Federal agencies. he 1995 revision to the Circular changed the frequency and precision with which these approvals must be obtained. First, through definition changes and other means, it streamlined the award administration process by reducing the number of transactions subject to prior approval. Second, it expanded the actual definition of what constitutes approval. Under the new definition, the term "approval or authorization of the awarding or cognizant Federal agency" means "documentation evidencing consent prior to incurring a specific cost." However, the definition goes on to state that if costs are specifically identified in a Federal award document, approval of the document constitutes approval of the costs. If the costs are covered by a state/local-wide cost allocation plan or an indirect cost rate proposal, approval of the plan constitutes the approval of costs requiring prior approval. The addition of these policies in the 1995 revision is intended to preclude prior approval-seeking for costs requiring prior approval when a cost has already been considered and analyzed as part of another review process.#
Attachment 1, passage 579While not specifically mentioned in the Circular, most Federal awards will also identify the official(s) of the awarding agency who are authorized to issue approvals. Approval should always be documented in writing by the authorized Federal official. 3.3 Highlights of Changes Affecting Attachment B Numerous selected items of cost were added to the listing in the 1995 revision. Many make the Circular consistent with OMB cost principles applicable to other types of recipients. Because of their newness or the relative lack of familiarity that officials of governmental recipients may have with these other cost principles, numerous questions have been raised concerning applicability. Many of these are addressed in the Questions and Answers section which follows the changes listed below. # # Attachment B has been reformatted into an alphabetized discussion of costs, noting in the discussion for each cost whether it is allowable or unallowable. Separate sections dealing with allowability/unallowability have been deleted. Where selected items of cost appear in new sections due to the alphabetical format and there is no substantive change in policy, no mention of the change is provided in this document. Also, as the discussion of allowability for a selected item of cost is applicable regardless of whether a cost is direct or indirect, specific references to billed and like services have been deleted. Again, if no substantive change has been made, no mention is made herein. [Att. B, ¶¶ 1-42] # # Significantly qualifies and defines "advertising and public relations costs" and when they are allowable. [Att. B, ¶ 2] # # Clarifies that "advisory councils" may be allowable as either direct or indirect costs. [Att. B, ¶ 3] # # Adds a new section specifically making alcoholic beverages unallowable. [Att. B, ¶ 4] # # Adds additional language as to what audit costs are allowable and stipulates that they are to be allocated based on the ratio of Federal funds to total expenditures. [Att. B, ¶ 5] # # The specific prohibition of "budgeting costs" attributable to routine costs of government has been deleted from this section. [Att. B, ¶ 9] However, see reference to Att.B,¶ 23, below. # # The section on "Compensation for personnel services" has been greatly expanded. Significant changes are: — criteria for determining what is reasonable compensation; — an expanded fringe benefits discussion rolled into this section that explains, among other things, how costs are claimed when using accrual or cash basis of accounting;#
Attachment 1, passage 580— considerable attention to the accounting and claiming of pension costs; — detailed requirements concerning salary support and time distribution systems; and — a new subsection on "donated services" which prohibits reimbursement of such services but nevertheless requires that they be included in the base for purposes of allocating indirect costs. [Att. B, ¶ 11] # # Contingencies continue to be unallowable but the section has been qualified to clarify that reserves for such things as pensions and other fringe benefits are permitted. [Att. B, ¶ 12] # A new section, "Defense and prosecution of criminal and civil proceedings, and claims" has replaced the former "Legal expenses" section. The new section incorporates statutorily required language applicable to contracts. Legal and related expenses incurred in the prosecution of claims against the Federal Government remain unallowable. [Att. B, ¶ 14] # An expanded section on "Depreciation and use allowances" adds the following provisions: — the assets of enterprise funds must be capitalized, as required by GAAP; — governmental subdivisions may not be considered donors for purposes of establishing an asset's value at fair market value (FMV); — componetization of buildings is allowable; — except for enterprise and bona-fide internal service funds, classes of assets must be the same basis as used in the governmentwide financial statements; and — when converting from use allowance to depreciation, the balance to be depreciated will be computed using a pro forma depreciation schedule starting with the date of acquisition. The prohibition of excess capacity has been relocated to another section. (See reference to Att.B, ¶ 24, below). [Att. B, ¶ 15] # # The "Equipment and other capital expenditures" section has been expanded to: — define what is a capital expenditure; — allow governments to establish a capitalization threshold at the lessor of $5,000 or the threshold used in preparing the financial statements;#
Attachment 1, passage 581— clarify that capital expenditures may only be allowed as a direct cost with prior approval; and — provide guidance on how unamortized portions of assets are to be handled when a governmental unit changes its capitalization policy. Rental costs have been removed from this section and given a dedicated citation. (see 3-22 below) [Att. B, ¶ 19] # A section on "Fund raising and investment management costs" has been added. Fund raising and general investment activities/costs are unallowable but must be allocated a pro rata share of indirect costs. Investment activities related to pension funds, self-insurance funds, etc. are allowable. [Att. B, ¶ 21] # # A new section has been added addressing gains and losses and the relocation of Federally sponsored programs. While gains and losses on the sale, retirement, or other disposition of depreciable property must be accounted for in the current period, several methods are cited for handling the adjustment. Where Federal programs are relocated from a facility in which there was Federal participation in the financing of the facility, adjustments can be required by the cognizant agency. [Att. B, ¶ 22] # # General or routine costs of government have been given a separate section. In addition to the governor's office, several other examples are listed as being unallowable. [Att. B, ¶ 23] # # A new section addressing idle capacity and facilities was created which incorporates definitions of these terms and establishes parameters for establishing allowability. [Att. B, ¶ 24] # # The section on "Insurance and indemnification" has been expanded to address self-insurance funds such as worker's compensation and unemployment compensation. This discussion is quite detailed and covers such areas as measuring risk, funding, offsets for investment income, etc. [Att. B, ¶ 25] # Interest is now allowable on equipment acquired before or after the effective date of the revised Circular. However, for existing debt, only interest expense incurred/paid in the government's fiscal year beginning on or after September 1, 1995 is allowable. Retroactive claims for interest paid in prior periods is unallowable. The Circular also requires, for facilities, that earnings on construction borrowings be offset against income expense. Where depreciation and interest expense exceeds principal and interest payments (positive cash flow), the state is required to "negotiate" the amount of allowable interest with the cognizant agency. While no change was made concerning the allowability of interest for facilities, the section now permits interest for reconstruction or remodeling completed after October 1, 1980. [Att. B, ¶ 26] # # A new section on "Lobbying" generally makes these costs unallowable. [Att. B, ¶ 27]#
Attachment 1, passage 582# # The section on "Professional services" no longer requires prior approval and has been expanded to include retainer fees. Related to this, the previous requirement that the cost of "management studies" had to have specific prior approval has been deleted. [Att. B, ¶ 33] # The Circular no longer requires prior approval of "Proposal costs" that are treated as an indirect costs. Prior approval is still required if the cost is claimed as a direct cost. [Att. B, ¶ 34] # # Two new sections have been added addressing "alterations" and "reconversion" costs of facilities. While both are allowable, circumstances dictate whether prior approval is required. Alterations incurred to meet the specific requirements of a Federal award require prior approval. Alterations at the termination of an award that are necessary to restore facilities to their prior condition are allowable. [Att. B, ¶ 36, 37] # "Rental costs" has been expanded to address capital and less-than-arms-length leases. Allowable costs are limited to the pro forma costs of ownership. [Att. B, ¶ 38] # # The "Taxes" section has been qualified to exclude as allowable those taxes that are self-imposed and otherwise disproportionately affect Federal programs. This qualifier becomes effective on January 1, 1998. [Att. B, ¶ 39] # Where a governmental unit fails to have written travel reimbursement policies, the "Travel" section now requires that General Services Administration (GSA) rules be used. Where noncommercial air transportation is used, allowable costs are limited to commercial fares. [Att. B, ¶ 41] 3.4 Questions and Answers on Attachment B 3-1 How are the cost allowability requirements of Circular A-87 different from those of Circular A-21 and A-122? [Att. B] There are currently some differences between the various sets of OMB cost principles, but they are relatively minor. All three sets of principles reflect essentially the same policies toward cost allowability and documentation. OMB has stated that it intends to eliminate remaining differences as the circulars continue to be revised. 3-2 The previous version of Circular A-87 prohibited budgeting and accounting costs allocable to general costs of government. Are these costs now 100% allowable? [Att. B, ¶ 1] No. In its 1995 revision of Circular A-87, OMB omitted language qualifying which accounting and budgeting costs are allowable. Those costs allocable to general or routine costs of government continue to be unallowable under the general provisions of Attachment B, paragraph 23, "General Government Expenses." In its efforts to reduce verbiage in the Circular, OMB determined that it was unnecessary to qualify every item of cost. All costs are subject to the general prohibition of allowing costs attributable to the general cost of government.#
Attachment 1, passage 5833-3 Other than the capitalization of ADP equipment and related hardware, must the developmental and testing costs for such systems be amortized? [Att. B, ¶ 6] At the time of this guide’s publication, no applicable industry-wide government accounting standards exist for the treatment of these costs. Governmental units are to treat these costs in accordance with their established capitalization policies. In the future, should the Governmental Accounting Standards Board issue applicable pronouncements on this subject, governmental units will be required to follow them. 3-4 Where financing was obtained to develop an ADP system, are there any limitations with respect to claiming interest expense associated with these costs? Interest is only allowable on capital expenditures where there is interest expense and depreciation (or use allowance) in the current period. If development costs are not amortized, i.e. written off as expenditures, then no interest is allocable or allowable under Federal programs. However, interest expense incurred in the first year of the expenditure is allowable. 3-5 Lump sum leave (Unused Leave at B.11.d(3)) payments are to be allocated as general administrative expenses to all activities of the governmental unit or component. Why are both noted here, but only "governmental unit" is cited for severance pay (B.11.g(2))? [Att. B, ¶ 11.d] The section dealing with severance pay requires an allocation of these costs "to all activities of the governmental unit as an indirect cost." This language is interpreted as including components; no distinction is intended. 3-6 If an employee worked on the same program during their entire employment, can their unpaid leave, at the time of separation, be charged to that program? [Att. B, ¶ 11.d(3)] Attachment B, paragraph 11.d(3) requires that unpaid leave be treated as an indirect cost. If a governmental unit wishes to direct charge such costs, the alternative that would result in the same level of equity would be if unpaid leave for all employees were charged to the source(s) where the leave was earned. The allocation would not only have to be within the last component unit worked, but to all other units worked over the employees' careers. As this approach involves burdensome accounting for the entire work force, OMB provided the indirect cost approach as being the least burdensome. 3-7 In the preamble to its notice in the May 17, 1995 Federal Register, page 26485, OMB stated that a proposed revision requiring separate actuarial computations for different classes of employees had been deleted. OMB did not explain why this provision had been deleted. Does this mean that classes of employees, such as police and social workers, may now be combined for computing pension liabilities and employer contributions? [Att. B, ¶ 11.d(5)] No. OMB has stated that this provision was deleted because it was redundant of a more general provision of the final revision to Circular A-87. Attachment B, paragraph 11.d(5) stipulates that fringe benefits must be allocated "in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees...." As#
Attachment 1, passage 584such, it is the intent of OMB that separate actuarial analyses be made for pensions and other applicable fringe benefits involving different classes of employees having different cost patterns. Basic guidelines affecting allowability of costs provide that policies, regulations, and procedures be consistently and uniformly applied to both Federal and nonfederal activities. This consistency concept recognizes that there will probably be several actuarial groupings to reflect different employee classes (e.g., police/fire, judges, regular classified, etc.). Consistency requires that pension contributions for employees within each actuarial grouping be based on the same assumptions and computations (e.g. 7% of salaries and wages). 3-8 Circular A-87 states that pension contributions by a governmental unit in excess of the actuarially determined amount for a fiscal year may be used as the governmental unit's contribution in future periods. Does this mean that the excess amount is not allowable in the year contributed, but may be allowed or recognized in future periods? If so, how should the unallowable amount be calculated? [Att. B, ¶ 11.e] The maximum amount allowed for pension costs in a given fiscal year would be the amount actually contributed, based on the amount determined for that fiscal year under an acceptable actuarial system that has been used by the government in its financial statements. Any amount exceeding this determination would be unallowable in the year funded but would be considered a prepaid contribution that can be used in whole or in part by the government in a future period when its contribution is less than the actuarially determined amount for that period. The amount allowed in this later period would reflect the amount prepaid, plus interest earnings on that amount, as computed based on the assumed interest rate used by the actuary in its determinations. 3-9 Circular A-87 notes only two acceptable methods for computing pension plan costs applicable to a governmental unit's fiscal year, i.e., the pay-as-you-go method or an acceptable actuarial cost method. It further notes the amounts that will be recognized as allowable for a given year, i.e., actual payments to retirees or their beneficiaries under the former method, and amounts funded within six months after the end of that year (extensions subject to approval) for the latter. If another method is used, e.g., an approved funding schedule by the state legislature, is that method acceptable if it produces contributions between what the two approved methods would allow? [Att. B, ¶ 11.e] This would be similar to an actuarial method where a governmental unit funds less than the actuarially determined amount. As provided in Attachment B, paragraph 11.e(2), costs that are funded after the six-month period would be allowable in the year the actual funding takes place. However, only the amount that would have been funded if contributions were made on a timely basis would be allowable. Any increased costs due to the delayed funding would be unallowable in the year funded. 3-10 Circular A-87 allows recognition of actuarial pension contributions in a specific year if these contributions are made in a period not exceeding six months after year end. An extension of the six months is permitted if an imputed interest offset adjustment is made to compensate for the difference in the timing of the Federal#
Attachment 1, passage 585reimbursement versus the state/local contribution. Are such adjustments required during the course of the year, i.e. the timing between the Federal reimbursement during the twelve-month period and the actual contribution to the pension fund during that same period? [Att. B, ¶ 11.e(2)] OMB did not believe it was necessary to establish rules concerning timely contributions, as this matter falls under the purview of cash draw downs and, as such, is subject to the provisions of the Cash Management Improvement Act (CMIA) (P.L. 101-453, implemented by the Treasury Department at 31 CFR Part 205). Where the cognizant agency determines that funds have been drawn down, retained for extended periods, and subsequently used to make untimely contributions, the cognizant agency is required to recover imputed interest through the Treasury Department under the auspices of the CMIA. 3-11 Attachment B, paragraph 11.e(5) provides for the Federal Government to receive a refund, withdrawal, or other credit if pension monies revert to state/local general revenues or other nonpension uses. How would the Federal Government refund be determined? [Att. B, ¶ 11.e(5)] The Federal refund percentage of the amount reverted to the governmental unit should be based on the same pro rata share of the pension contribution charged to Federal programs. However, because Federal pension contributions usually occur over a long period of time, an accurate determination of the pro rata share over this period is seldom feasible. The cognizant agency may negotiate with the governmental unit a reasonable estimate of the pro rata share or elect to use the universally accepted 20 percent as the approximation. The 20 percent representing the Federal share would be applied to the total amount transferred. 3-12 Severance payments associated with normal turnover are allowable and are to be allocated to all activities of the governmental unit as an indirect cost. Are governments required to allocate to the entire governmental unit, e.g. the state, through the state-wide cost allocation plan (SWCAP) as an indirect cost or just to all activities within the affected component of the governmental unit? [Att. B, ¶ 11.g(2)] Attachment B, paragraph 11.g(2) only refers to severance pay involved with normal turnover and not that experienced with reductions due to program cutbacks or elimination, reductions in the government workforce, buy-outs, etc. This section deals with relatively insignificant costs resulting from normal operations and are to be included in a component's indirect costs, the SWCAP/LOCAP, or a state/local-wide fringe benefit rate, depending on how the government accounts for such costs. However, they are not to be treated as direct costs. 3-13 Attachment B, paragraph 11.g(3) notes that "abnormal or mass severance pay will be considered on a case-by-case basis and is allowable only if approved by the cognizant Federal agency." What is the definition of "severance pay" in this case, and what must be submitted to the Federal Government for approval? [Att. B, ¶ 11.g(3)] The question raises several points and the responses to each are as follows:#
Attachment 1, passage 586(1) Mass severance or termination benefits would include all expenses associated with the event. This would include: lump sum payments that may be linked to years of service, increased pension benefits such as granting additional years or eliminating penalties for early retirement, payments of unused leave, and the cost of any other incentive offered to employees as an incentive to leave government service, such as buy-outs. (2) The costs of these special termination benefits must be determined and prior approval of such costs must be obtained from the Federal cognizant office prior to claiming these costs directly or indirectly against Federal programs. The requests for prior approval, at a minimum, must demonstrate the reasonableness and allocability of such costs to Federal programs. (3) If a state or local government is contemplating such packages, they must obtain approval as required, based on the effective date of Circular A-87 for the specific governmental unit. In addition, even though the former Circular A-87 did not note a specific requirement for advance approval for such costs, it did require that, for claiming and reimbursement purposes, all costs be allocable to and benefit Federal programs. (4) Cognizant agencies will generally use the following criteria in making a determination as to whether the abnormal severance costs will be allowed. a. The governmental unit must demonstrate that such costs are allocable to Federal programs. b. The buy-out should be government-wide. (However, see Q&A 3-14 below.) c. The plan should address policies concerning rehiring and forfeiture of buy-out or other severance payments if rehiring policies are not followed. d. The plan should address estimated savings, total and Federal, in both dollars and number of employees. e. The governmental unit should analyze the effect the downsizing will have on the operation, continuity, and effectiveness of programs. f. The governmental unit and the cognizant agency also will establish an agreement providing for compensation to the Federal Government should the terms and conditions of the buy-out/severance plan not be met. 3-14 Is there a prohibition on allocating or charging buy-out and other severance costs directly to the function or activity in which the employee last worked? [Att. B, ¶ 11.g(3)] As stated in Attachment B, paragraph 11.g(3), each incentive package will be#
Attachment 1, passage 587determined on a case by case basis. The direct charging of buy-out costs to functions/programs/components is appropriate under certain circumstances. For example, where the state or the Federal Government is eliminating a program, charging the buy-out costs to that program is consistent with the allocability provisions of Circular A-87. However a problem may be created in this situation because the buy- out costs would be assigned to a component or program that no longer operates. If such programs are state/local-only supported programs, then such costs would not be allocable to Federal programs either directly or indirectly. If such programs are Federally supported programs, then these programs should provide for the costs of such cut backs or terminations because a basic A-87 cost principle at Attachment A, paragraph C.3.c. provides that "[a]ny cost allocable to a particular Federal award or cost objective under the principles provided for in this Circular may not be charged to other Federal awards to overcome fund deficiencies...." 3-15 What is a personnel activity report (PAR)? [Att. B, ¶ 11.h] A PAR is a timesheet or log maintained by the employee which contemporaneously accounts for 100% of their time. The objective is to identify effort spent on multiple activities or programs. Breaks, meals, generic training, etc. can all be coded to a single activity such as "admin" or "other," which in turn would be reallocated to the activities or programs. In limited situations a PAR can be a time certification relying on an informal log or calendar notations. For example, an attorney working in an agency general counsel office routinely works on general management activities, which are allowable, and his time is charged 100% to an indirect cost center. However, in one month he works three weeks with the state attorney general on a lawsuit against the Federal Government. For that month, it would be acceptable for him to complete an end-of-the-month certification reflecting a 25% distribution of time to the IDC pool and 75% to a cost center representing unallowable legal costs (pursuing claims against the Federal Government). Caution must be exercised when using time certifications. Their use is only suitable where few activities are involved and the effort involved covers long periods without diversions to other efforts. Where effort is expended on a number of activities with constant variations throughout the day as well as from day to day, a month-end certification would be unacceptable. It would be at best a rough estimate of time expended and would not meet the requirement of an after-the-fact reporting of actual effort. 3-16 Attachment B, paragraph 11.h establishes acceptable standards for a personnel activity reporting (PAR) system. One standard requires an employee signature when working on multiple activities. If a government component maintains an ADP on-line PAR system which is fully computerized and paperless, would a "digital signature" (occurring when an employee logs on to the PAR system with a logon ID and a secret password) constitute an acceptable alternative to an employee signature? [Att. B, ¶ 11.h] As long as the governmental unit can demonstrate and document that only the employees' actions would result in the identification of the activities to be charged, and#
Attachment 1, passage 588that it complies with the other criteria in Attachment B, paragraph 11.h(5), the procedure would be acceptable. 3-17 Some central services activities are billed based on the service hours provided to user agencies. Circular A-87 requires that "personnel activity reports or equivalent documentation...must reflect an after-the-fact distribution of the actual activity of each employee." Based on the requirements at Attachment B, paragraph 11.h, are timesheets reflecting actual effort required or are monthly estimates sufficient? [Att. B, ¶ 11.h] If an employee is assigned to and expected to work solely in one billed activity (cost objective), only periodic certifications, as required by Attachment B, paragraph 11.h(3), must be generated. However, if that employee is assigned to a billed activity in which multiple rates are developed, then personnel activity reports or equivalent documentation set forth in 11.h(4) and (5) are required. Monthly estimates can only be used for interim billing purposes. Such billings must be adjusted to actual effort based on the criteria set forth in 11.h(5)(e). 3-18 How should year-end bonuses be treated? [Att. B, ¶ 11.h] If the amounts involved are significant, they must be allocated based on the entire year's activity. As such, time and effort reports (or equivalent systems) must be averaged for the period covered by the bonuses, in this case, an entire year. However, if it can be demonstrated that the time and effort or other statistical data for the period in which the bonus was paid is typical of the entire period for which the bonus was awarded, then no redistribution is required. 3-19 If an employee works on only one Federal award, is a certification required? [Att. B, ¶ 11.h(3)] Yes. However, this requirement can be met through certain payroll codings and time and attendance certifications pursuant to payroll authorizations. For example, if (1) employees work in a dedicated function; (2) their potential assignment to multiple programs/activities is not within the authority, function, or purview of the supervisor responsible for certifying payroll time and attendance; and (3) the employee is coded to a dedicated function not benefitting multiple functions or programs, the payroll certification shall be accepted in lieu of the semi-annual certification of time and effort. 3-20 Will an employee working on two indirect cost activities subject to different allocation bases be required to maintain a personnel activity report? [Att. B, ¶ 11.h(4)(d)] Attachment B, paragraph 11.h(4)(d) requires that employees in these circumstances must complete personnel activity reports, whether through time sheets or some form of statistical sampling. 3-21 Where a personnel activity reporting system is based on employee time sheets, what are the minimum increments of time in which employees may record their time? [Att. B, ¶ 11.h(5)]#
Attachment 1, passage 589The purpose of time and effort (T&E) reporting is to capture total activities expended on various Federal and state programs. Depending on the level of detail required by the enabling legislation or management, activity-specific vs. program-specific time might have to be captured. Increments of time should not be limited arbitrarily, because this may prevent employees from accurately and completely reporting effort on all programs and required activities if the minimum increment is too large. Time sheets must be completed contemporaneously and must be detailed enough to reflect all activities performed during a specific period of time. The time increments should be sufficient to recognize the: (1) number of different activities performed, and (2) dynamics of these responsibilities. For example, very large time increments could be used for employees performing only a few functions which change very slowly over time. Conversely, very small increments would be needed for employees performing a multitude of very short-term tasks. Reporting time frames established by a unit or component may be subject to Federal review. If the cognizant agency determines that an established time frame or increment is inadequate because it does not allow employees to report effort on all activities or programs fully and contemporaneously, the unit or component will be required to revise its system to capture all activities and programs. To avoid this condition, a statistical reporting system (e.g. random moment sampling) should be considered for employees working in dynamic situations (performing many different types of activities on a variety of programs over a short period of time). 3-22 For employees working on multiple activities where the component has opted to account for time based on time and effort reports, must the personnel activity report for the employee account for 100% of the worker's effort? [Att. B, ¶ 11.h(5)(b)] Yes. Failure to account for 100% of an employee's or volunteer's time would result in the shifting of program/activity costs to those programs for which time is accounted. 3-23 Can the results of an acceptable statistical sampling method or time and effort reporting covering one period of time be applied to a different period, e.g., a prior quarter? [Att. B, ¶ 11.h(5)(c)] No. The results of a specific period represents the values experienced during that period only. Attachment B, paragraph 11.h(5)(c) requires that time and effort reporting coincide with one or more pay periods. Therefore, retroactive application of such results, whether they are statistically based or effort reporting, is unacceptable. However, prior period actuals may be used as estimates for applying costs in a future period, provided that the estimates are adjusted back to actual effort for that period when claimed for reimbursement. 3-24 How often must time sheets be prepared? [Att. B, ¶ 11.h(5)(c)] The timeliness of completing time and effort reports depends on the nature of activities being reported. The Circular requires that such reports must reflect the actual activity of each employee. If activities or programs worked on vary constantly throughout the work day, then they must be completed as each event begins and ends. However, in#
Attachment 1, passage 590accordance with Attachment B, paragraph 11.h(5)(c), they must be completed no less frequently than monthly. 3-25 Are legal costs associated with administrative appeals of disallowed costs, cost allocation and indirect cost proposal disputes, or other adverse decisions made by the Federal agency allowable? [Att. B, ¶ 14] Circular A-87 stipulates that the costs of pursuing claims against the Federal Government are unallowable. However, OMB has deferred to agencies in interpreting this policy. Most, but not all, agencies have interpreted this policy as prohibiting costs associated with both administrative and judicial appeals occurring after a final management decision has been issued by the agency. As efforts are being made to establish a consistent interpretation throughout the Federal Government, governmental units should periodically check with their cognizant or awarding agency to determine if they are affected. Where such costs are interpreted as being unallowable, governmental units must establish methods and a cost center to aggregate such costs. 3-26 Attachment B, paragraph 14 refers only to those legal defense expenses deemed unallowable. What about accounting or other activities supporting unallowable legal defense activities? [Att. B, ¶ 14] Although not mentioned specifically, other costs supporting unallowable legal defense activities would also be unallowable. Unallowable defense activities constitute the cost objective and any costs allocable to that activity are likewise unallowable. 3-27 How does a governmental unit identify unallowable legal defense and related costs? [Att. B, ¶ 14.b] Unallowable activities must be identified through separate cost objectives or cost centers. With respect to salaries and wages, Attachment B, paragraph 11.h(4)(e) requires that unallowable activities be identified through the use of personnel activity reports or equivalent documentation. These costs would be fully burdened with applicable fringe benefits and related administrative costs. 3-28 Can depreciable lives of assets that are relied upon in the preparation of the financial statements differ from those used in filing claims with the Federal Government? [Att. B, ¶ 15] In accordance with the consistency provisions of Attachment A, paragraph C.1.e, if a governmental unit elects to depreciate in its financial statements (CAFR), the depreciable lives and classes used in those statements must be used by all components of the government in their claims under Federal awards. 3-29 Most states do not have a state-wide policy on depreciation. Quite often, individual state agencies have policies that may be different from state practice, e.g., the state does not depreciate equipment in its financial statements. Are agency policies on depreciation sufficient, if applied consistently throughout the agency, or is the agency required to follow what is practiced by the state in developing its financial statements? [Att. B, ¶ 15]#
Attachment 1, passage 591OMB recognized that states are not required to depreciate assets in their financial statements. As such, OMB granted an exception to the consistency requirements of Attachment A, paragraph C.1.e. Even if the state financial statements do not provide for depreciation, a government component (e.g. Department of Transportation, public university, etc.) may claim this expense. However, the capitalization threshold used in the CAFR for the fixed asset group must be used by the agency in establishing which assets to depreciate. In addition, depreciable lives for classes of assets must be consistent throughout the component. Where componentization is elected for buildings, the practice must be consistently applied to that asset group throughout the component. 3-30 Where a governmental unit or component opts to change from use allowance to depreciation, how is this conversion to be handled? [Att. B, ¶ 15] In accordance with Attachment B, paragraph 15.e, the asset's imputed book value at the time of conversion is to be established by assessing pro forma depreciation for those periods when use allowance was applicable, i.e. from the date of acquisition. The remaining balance is then depreciated over the remaining useful life. 3-31 May components of a governmental unit determine, establish, and account for the cost of assets on a different basis, i.e., some through the use allowance provision and others through deprecation? [Att. B, ¶ 15] Generally, yes. Attachment B, paragraph 15.a, permits this. However, only one method — depreciation or use allowance — may be applied to a single class of assets. A combination of the two methods is not allowed. The exception to the above is in the case of internal service funds (ISFs) and enterprise funds. OMB, at Attachment B, paragraph 15.a, recognizes the requirement in generally accepted accounting principles that assets in such funds must be depreciated. The use of a depreciation method in the ISFs is acceptable even though other central service activities (unbilled) are applying use allowance in the determination of their costs. 3-32 Under what circumstances can accelerated depreciation be claimed? [Att. B, ¶ 15.e] Depreciation accounting is, frequently, a reflection of tax or social policy. In contrast to IRS regulations, Circular A-87 follows traditional financial precepts associated with the production of goods and services by requiring that straight line depreciation procedures be applied to recognize an asset's consumption over its useful life (based on historical information or experience). The straight line procedure is presumed to be the only acceptable method because it is extremely difficult to demonstrate that the expected consumption of an asset will be significantly greater in earlier portions of its useful life. It is assumed that older assets will probably require more maintenance and repair costs than newer assets. However, since these "fix up" costs are recognized as current period expenses, maintenance and repair expenditures have no impact on annual depreciation costs. Depreciation expense might vary from year to year only if an organization could demonstrate that an asset contributes more (or less) each year to the production of#
Attachment 1, passage 592goods and services. Alternative depreciation procedures may be acceptable if an asset's consumption is based on unit of production rather than estimated useful life. For example, an entity may have a policy of removing vehicles from service after 125,000 miles or replacing certain equipment after 200,000 hours of operation. In these cases, miles driven or operating hours per year could be used to compute annual depreciation (rather than estimated years of service). 3-33 Under what circumstances may a use allowance be allowed for assets which have been fully depreciated? [Att. B, ¶ 15.g] In only the most extraordinary circumstances should a use allowance be allowed for fully depreciated assets. Increased maintenance and service costs resulting from the age of the asset generally are insufficient justifications for allowing use allowance, as such costs are reimbursable directly as current period operating expenses. Furthermore, capital improvements/repairs/renovations to maintain the original asset's viability are equally insufficient justification, as they are recoverable through depreciation. The reimbursement of use allowance may be justified when Federal programs had been charged with little or no depreciation expense in the past. 3-34 Under what circumstances may a use allowance be allowed for assets which have been subjected to use allowance and would be considered to be fully depreciated at the use allowance rate? [Att. B, ¶ 15.g] As with situations where an asset has been fully depreciated, additional use allowance for any asset for which the past application of use allowance can be considered to have resulted in the full acquisition cost of the asset having been recovered, use allowance should only be allowed in exceptional cases. The concept of reasonableness assumes that claims submitted to the Federal Government (and other external organizations) for cost reimbursement should be limited to an asset's acquisition cost. In sum, any claim for cost reimbursement in excess of cost would be unreasonable and unallowable. The criteria for allowing use allowance for fully depreciated assets (see Q&A 3-33) should also be applied for assets that have been subjected to use allowance in the past. 3-35 Attachment B, paragraph 19.a(2) defines equipment as the lessor of the governmental unit's capitalization policy or $5,000. However, Attachment B, paragraph 19.d stipulates that items of equipment less than $5,000 can be charged directly to grants without prior approval of the grantor agency. Do these rules contradict each other? [Att. B, ¶ 19] No. Attachment B, paragraph 19.c establishes the requirement for prior approval of capital expenditures. The purpose of Attachment B, paragraph 19.d is to establish the prior approval dollar threshold for capital expenditures charged direct to grants. Attachment B, paragraph 19.a(2) permits governmental units to write-off assets up to $5,000, pursuant to an established government-wide capitalization policy. Based on these definitions, noncapital expenditures become classified as supplies or some other object of expenditure other than "equipment." However, even if a governmental unit has a capitalization policy of less than $5,000, they may still claim direct capital expenditures as "equipment" without prior approval, up to $5,000.#
Attachment 1, passage 593This distinction is necessary to avoid over-reimbursement of indirect costs where a modified total direct cost (MTDC) base is used to distribute indirect costs. When using an MTDC base, the cognizant agency excludes capital expenditures based on the organization's capitalization policy (not to exceed $5,000). If amounts exceeding the organization's capitalization policy, up to $5,000, were to be treated as supplies, then indirect costs would be applied to those supplies, resulting in over-reimbursement. 3-36 When a governmental unit does not account for depreciation in its financial statements, it theoretically does not have a capitalization policy. On what basis should the governmental unit charge use allowance if it does not have a capitalization policy? [Att. B, ¶ 19] Governments that do not report depreciation in their financial statements typically disclose a "fixed asset group." In determining which assets will be reported in this group, the government has established a dollar threshold, i.e., assets costing over a certain amount are included. For purposes of defining equipment and for purposes of charges to Federal programs, the threshold established for the "fixed asset group" would constitute the government's capitalization policy. 3-37 Circular A-87 permits governmental units to define equipment up to $5,000. Assuming a government adopts the $5,000 limit and purchases a computer system for $1M, if no single component costs more than $5,000, can the $1M be expensed? [Att. B, ¶ 19.a] No. The components of the computer system make it useable for the purpose for which it was acquired and therefore establishes the "system" as the capital expenditure. (Att. B, ¶ 19a(1)) In accordance with generally accepted accounting principles, and the definition of "acquisition cost" in section __.3 of the Common Rule accompanying OMB Circular A-102, the entire system of $1M is to be capitalized. Subsequent additions to the system, such as additional personal computers for new staff, may be treated as maintenance costs expensed to the current period. 3-38 A governmental unit does not depreciate capital expenditures but rather expenses everything. For CAFR reporting purposes, however, the unit maintains a fixed asset group category in which all assets over $250 are tracked as capitalized assets. Which capitalization policy should it use for its central service allocation plan, i.e. $250 or $5,000? [Att. B, ¶ 19.d] In accordance with Attachment B, paragraph 19.d, the unit is required to use the lesser of $5,000 or the same capitalization policy used in the development of its financial statements. The capturing of assets over $250 in the fixed asset group category effectively establishes the unit's capitalization policy at that level. As such, capital expenditures over $250 may not be expensed in the cost allocation plan. A use allowance may be claimed on those items. 3-39 Settlements and damages resulting from noncompliance with Federal, state, or local laws are unallowable. Would settlements with employees arising out of bargaining-unit negotiations and agreements also be unallowable? [Att. B, ¶ 20] Provided that no laws have been violated by the governmental unit, such settlements#
Attachment 1, passage 594and awards are allowable as a general management cost. 3-40 The Circular stipulates that when there is substantial relocation of Federal projects from a facility in which the Federal Government participated in the financing, space charges may be renegotiated. What criteria are to be used in determining "substantial relocation," and, if there is an adjustment, how should it be handled? [Att. B, ¶ 22] The criteria for determining whether a substantial relocation has occurred is if over 50% of Federally sponsored programs are transferred in the first 20 years of occupancy or where a pattern of "churning" Federally financed debt can be established. Cognizant agencies are to exercise caution in exercising the 50% rule, taking into consideration program changes, cutbacks, and the governmental unit’s resource needs. Where churning has occurred, i.e. relocations are occurring to maintain Federal programs in debt-financed space, the cognizant agency may limit future space reimbursement to historical costs, i.e. the cost of the vacated space. 3-41 Under Attachment B, paragraph 23.a, five examples are presented as unallowable general government expenses. The previous version of A-87 identified others, e.g., accounting and budgeting. Are these latter items now allowable? [Att. B, ¶ 23] No, these items are still unallowable when attributable to general government functions. For example, budgeting functions in support of the state legislature, taxing functions of the state treasurer, and criminal prosecutions by the attorney general, are all routine costs of general government and are not allocable to Federal programs. 3-42 Attachment B, paragraph 25.e states that severance pay is allowable in the year paid with two conditions, one of which is that the cost is allocated as a general administrative expense to all activities of the government unit. Attachment B, paragraph 11.g also addresses the treatment of severance pay, but makes a distinction between normal turnover and mass severance. Is there a difference between these policies? [Att. B, ¶ 25.e] Attachment B, paragraph 25.e only covers normal severance. If severance payments are determined to be abnormal or mass severance, then the provisions at Attachment B, paragraph 11.g(3) must be applied. 3-43 Is interest allowed on the acquisition of land that is debt-financed? [Att. B, ¶ 26] Yes. However, principal payments for the acquisition of land remain unallowable. The pro rata share of debt payments attributable to land must be deducted from outflows when a cash flow adjustment is required under the provisions of Circular A-87 Attachment B, Paragraph 26. (See Illustration 3-1.) 3-44 How is interest expense on assets that have a shorter life than the debt instrument treated? [Att. B, ¶ 26] Interest on fully depreciated, scrapped, or nonexistent assets is unallowable. The interest is neither allocable to the asset nor is there an allocable benefit to Federal#
Attachment 1, passage 595programs. In addition, single debt-financing for assets having variable lives must be allocated to those assets. Governments are encouraged to structure their debt in such a way so as not to incur additional financing costs for periods beyond the useful lives of the financed assets. EXAMPLE: A 25-year bond is issued for $10M. $7.5M is to be used to construct a facility with a 40-year life and $2.5M is to be used to acquire equipment with a life of 15 years. Allocable interest would be calculated as follows: Building: $7.5M/$10M = 75% Equipment: $2.5M/$10M = 25% As a result, 75% of annual interest would be allocable to the building, which would be fully allowable in years 1-25. With respect to the equipment, 25% of total annual interest would be allocable and allowable in years 1-15. In years 16-25, when the equipment has been fully depreciated or otherwise out-lived its useful life, 25% of annual interest would be unallowable. 3-45 Some governments issue blanket bond issuances to meet their capital needs. Is interest allowable where, in accordance with their capitalization policy, such expenditures are expensed or otherwise not recognized in the comprehensive annual financial report (CAFR) as "fixed assets"? [Att. B, ¶ 26.a] No. Expenditures for items expensed or otherwise written-off constitute operating expenditures, unless they are identified as fixed assets. Attachment B, paragraph 26.a only permits interest for capital expenditures. Interest for operating or working capital is unallowable. 3-46 Attachment B, paragraph 26.b allows interest on equipment paid or incurred on or after the applicable effective date of the revised Circular (May 4, 1995). However, in the preamble to the May 17, 1995 Federal Register notice of the Circular’s issuance, page 26486, in response to a comment, OMB seems to exclude computer equipment. Is interest paid or incurred after the applicable effective date allowable? [Att. B, ¶ 26.b] In the preamble, OMB was responding to comments that sought allowability of interest on both equipment and facilities, regardless of when the assets were acquired. In justifying allowing interest on pre-effective date equipment, but not facilities, OMB reasoned that, except for computer equipment, such acquisitions typically were nominal in cost and had short lives. The intent was not to exclude computer equipment, but merely to state a fact. As such, interest on all equipment, including ADP, incurred or paid after September 1, 1995 is allowable regardless of when the debt was incurred. For those governmental units or components subject to Circular A-87 Attachments C, D and E, interest on equipment is allowable in the government's fiscal year starting after September 1, 1995. For facilities, interest is only allowable for those acquired or constructed after October 1, 1980. 3-47 Attachment B, paragraph 26.b(1) makes interest unallowable when a government#
Attachment 1, passage 596borrows from itself or nonbona fide third parties. If the government has established quasi-public agencies or "authorities" to issue bonds for the acquisition of equipment and facilities, are these viewed as less than third-party transactions? [Att. B, ¶ 26.b(1)] No. Bond issuing authorities are viewed as enterprises of the governmental unit. The authority typically is not operating at a profit and, as a result, reduces bond issuance costs. While the government is issuing the bonds, it is not borrowing from itself but rather from the general public, to which interest is paid. The intent of this A-87 provision is to prohibit reimbursement of costs such as a state agency borrowing funds from general revenues and the state treasurer charging the agency interest on the borrowings. 3-48 The Circular requires governmental units to negotiate with the cognizant agency the amount of interest expense to be allowed when depreciation and interest expense (inflows) exceeds principal and interest payments (outflows). Recovering positive cash flows in the early years will result in negative cash flows in the latter years. Doesn't this penalize the governmental unit in later years? [Att. B, ¶ 26.b(4)] It is not OMB’s intent to require the recovery of positive cash flows. During periods of positive cash flow, earnings, either actual or imputed, can be made on those funds. It is the intent of OMB that during such periods, those earnings on the positive cash flow should be used to offset interest expense. The net amount would be the allowable interest expense allocable to Federal awards. Components would retain the positive cash flow, but not the earnings, to meet shortages during periods of negative cash flow. The interest assessed should be based on actual interest earned or the state treasurer's average return on investment. A suggested format for computing and tracking cash flow is provided in Illustration 3-1.#
Attachment 1, passage 597Illustration 3-1 A-87 Excess Cash-Flow Calculation - Sample Format for Annual Report Applicable for debt arrangements over $1 million, unless initial equity contribution equals 25 percent or more Month 1 2 3 4 *** 12 Annual Total Year_______ of___Years Line 1 Prior Period's cumulative cash flow balance (Prior Month's or Year's Line 9) Add this period's inflows: Line 2 Depreciation expense (Note 1) Line 3 Interest expense (Note 2) Line 4 Amortization of debt issuance costs (Note 2) Subtract this period's outflows: Line 5 Principal payments (Note 3) Line 6 Interest payments (Note 3) Line 7 Subtotal of cumulative cash flows (Line 1+2+3+4 - 5 - 6) Line 8 In initial period only, subtract initial equity contribution (Note 4) (Will be zero after initial period) Line 9 Total of cumulative cash flows (In initial period, Line 7 - Line 8) (In subsequent periods, equals Line 7) Line 10 If Line 9 is positive, state month's closing interest rate based on actual or state treasurer's ROI If Line 9 is negative, put “0” (zero) Line 11 Imputed interest income on cumulative positive cash flow Monthly columns = (Line 10 x Line 9)/12 Line 12 Allowable interest for period (Line 6 - Line 11) Note 1: May include amortization of capitalized construction interest in accordance with GAAP. Depreciation expenses should be reported on a monthly basis (Annual expense/12) if the agency has an IDC rate. Note 2: Interest expense and amortization of debt issuance costs that are not included in loan amount should be reported on a monthly basis (Annual expense/12) if the agency has an IDC rate. Note 3: If land is included in the financing arrangement, Line 5 would be calculated as: principal payment - (Debt proceeds used to purchase land/total debt proceeds x principal payment). Principal and interest payments should be reported in the month that payments were made. Note 4: This line may only include amounts of initial equity contribution made prior to occupancy of the facility. The amount is to be entered only in the initial period covered by the cash flow submission, and should be left blank in future periods.#
Attachment 1, passage 5983-49 The Circular requires an adjustment to interest expense for earnings on positive cash flows. Since the Circular does not specify, how should this be accomplished? Does it apply to all debt? [Att. B, ¶ 26.b(4)] While OMB did not provide guidance in Circular A-87, they have been more precise in other circulars on this subject. Circular A-122 and A-21 require that "[t]he rate of interest to be used to compute earnings on excess cash flows shall be the three month Treasury Bill closing rate as of the last business day of that month." Many organizations covered by Circulars A-21 and A-122 typically do not have adequate data to compute return on investments. Consistent with the other Circulars, under A-87, an offset is only required for debt over $1,000,000. As noted in Illustration 3-1, the cash flow schedule provides for: (1) a cumulative monthly reporting of cash flows; (2) offset of equity contributions on a "first-in-first-out" (FIFO) basis; (3) waiver of the offset requirement if equity contribution is 25% or more; (4) interest on land but not for principal payments on land; and (5) inflows to be averaged over a twelve-month period, regardless of when actual payments (outflows) are made. While components are not required to use the schedule in Illustration 3-1, cash flow computations and adjustments should be made in accordance with these policies. 3-50 What type of assets are subject to interest offset for earnings on positive cash flows? [Att. B, ¶ 26.b(4)] OMB advised HHS that it intended that all capital expenditures be subject to the offset provision, where applicable. This is consistent with the other OMB cost circulars. 3-51 What are the submittal requirements for the cash flow analysis? [Att. B, ¶ 26.b(4)] When required by the cognizant agency, the cash flow analysis is to be submitted with each submission of a component's indirect or cost allocation proposal. The analysis is to be prepared for each twelve-month period contained in the proposal. For those governments and components not required to submit a proposal to a cognizant agency, the analysis is to be prepared annually with a corresponding adjustment to allowable interest for the period. 3-52 Is it acceptable to treat proposal costs for Federal awards as indirect costs? [Att. B, ¶ 34] Attachment B, paragraph 34 encourages such treatment. In accordance with Attachment A, paragraph C.1.e, the practice must be consistently applied throughout the governmental unit. The Circular allows the direct charging of these costs with the prior approval of the awarding agency. This practice is discouraged as it may create inconsistent treatment issues.#
Attachment 1, passage 5993-53 What are the allowable costs for capital leases? [Att. B, ¶ 38.d] The Circular provides that capital leases are allowable to the extent that costs would have been allowed had the asset been purchased outright. As such, interest, depreciation or use allowances, maintenance fees/expenses, related administrative costs, taxes, and insurance are allowable. Interest costs are allowable to the extent they meet the requirements of Attachment B, paragraph 26. Unallowable costs include amounts paid for profit, management fees, and taxes that would not have been incurred had the government/component purchased the asset outright. 3-54 Are "payments in lieu of taxes" (PILOT) allowable? [Att. B, ¶ 39] Generally, PILOT payments are allowable if they are consistently assessed against all activities, regardless of the source of funding. 3-55 If a governmental unit has its own plane(s), what documentation is needed to satisfy the Circular A-87 requirements for noncommercial travel? Can the cognizant agency approve rates for the aircraft that would meet these requirements? [Att. B, ¶ 41.d] Attachment B, paragraph 41.d. limits reimbursement for use of entity-owned or private aircraft to the commercial air fare determined in accordance with Attachment B, paragraph 41.c, which discusses limitations on allowable commercial air fares. In essence, reimbursement for use of private aircraft is based on cost but cannot exceed what would have been reimbursed had commercial air transportation been used. There could be circumstances where the use of commercial air would result in greater costs than the use of private aircraft. In those situations, allowable costs would be based on actual costs.#
Attachment 1, passage 600PART 4 Attachment C — Requirements for Cost Allocation Plans 4.1 Highlights of New Section, Attachment C A new attachment C has been added addressing Central Service Cost Allocation Plans (commonly referred to as the state-wide cost allocation plan or SWCAP and for local governments, LOCAP). The new Attachment generally has incorporated longstanding practices and procedures contained in internal HHS implementing material as well as historical convention. 4.2 What is a Central Service Cost Allocation Plan? Most governmental units provide certain services, such as motor pools, computer centers, purchasing, accounting, etc., to operating agencies on a centralized basis. Because Federally supported awards are performed within the individual operating agencies, there needs to be a process through which these central service costs can be identified and assigned to benefitted activities on a reasonable and consistent basis. The central service cost allocation plan (CSCAP) provides that process. 4.3 Content of CSCAPs CSCAPs must include all central service costs that will be claimed, whether as a billed or an allocated cost, under Federal awards. Costs of central services omitted from the plan will not be reimbursed. Documentation requirements are discussed in section 4.5 below. Plans must include a projection of the next year’s allocated central services cost. This projection should be based on either actual costs for the most recently completed year or the budget projection for the coming year. Plans must also include a reconciliation of actual allocated central services costs to the estimated costs used for either the most recently completed year or the year preceding the most recently completed year. 4.4 Requirements for Submission of Cost Allocation Plans 4.4.1 Role of Cognizant Agencies Circular A-87 provides that, for certain larger governmental units and their subdivisions, Federal cognizant agencies will be appointed to review and approve cost allocation plans on behalf of other Federal agencies. The Circular further explains these assignments and the approval process that these agencies will use. 4.4.2 State Governments and "Major" Local Governments All state governments must submit statewide cost allocation plans to the Department of Health and Human Services. All local governments that OMB designates as "major" are also required to submit their plans to a designated cognizant agency unless the#
Attachment 1, passage 601cognizant agency determines otherwise. Note: Indian tribal governments should use guidelines applicable to local governments and local education agencies (LEAs) should follow the procedures established by the U.S. Department of Education. OMB periodically publishes a listing of major local governments in the Federal Register. The most recently published listing is contained in Appendix 2 of this guide. In general, cognizant agencies for local governments are assigned according to the predominance of Federal funding, although other factors such as availability of resources and past history may also be considered. 4.4.3 Local Governments Not Considered "Major" Local governments that are not designated as "major" are not required to submit their cost allocation plans for Federal review and approval unless specifically instructed to do so by a Federal agency. Local governments that only receive funds as a subrecipient of another government should follow instructions from their pass-through grantors concerning submission and review. However, they are expected to prepare and retain their plans for audit by independent auditors and Federal auditors. Pass-through grantors (primary recipients) are expected to review and monitor subrecipient plans to provide reasonable assurance that provisions of Circular A-87 are being followed. 4.5 What Are the Documentation Requirements for a CSCAP? All costs and other data used to distribute the costs included in the plan should be supported by formal accounting and other records that will support the appropriateness of the costs assigned to Federal awards. 4.5.1 Allocated Central Services The allocated costs of the CSCAP are commonly referred to as "Section I" costs and are categorized as such in both the plan submission and the negotiated agreement. For each allocated central service, the proposed cost allocation plan must: # briefly describe the service; # identify the unit rendering the service and the operating agencies receiving the service; # list the items of expense included in the cost of the service; # identify the method used to distribute the cost of the service to benefitted agencies; and # provide a summary schedule showing the allocation of each service to benefitted agencies. In addition, all proposed cost allocation plans must be accompanied by: # an organization chart which is sufficiently detailed to show operations, including the central service activities of the governmental unit, regardless of whether they are shown as benefitting from central service functions;#
Attachment 1, passage 602# a copy of the comprehensive annual financial report (CAFR) (or executive budget, if budgeted costs are being proposed) to support the allowable costs of each central service activity included in the plan; and # a certification that the plan: — was prepared in accordance with A-87; — contains only allowable costs; and — was prepared in a manner that treated similar costs consistently among the various Federal awards and between Federal and nonfederal awards/activities. 4.5.2 Internal Service Funds The internal service funds (ISFs) and other billed services in the CSCAP are commonly referred to as "Section II" costs in both the plan submission and the negotiated agreement. For each internal service fund or similar activity with an operating budget of $5 million or more, the proposed cost allocation plan must include: # a brief description of each service; # a balance sheet for each fund based on individual accounts contained in the governmental unit's accounting system; # a revenue/expenses statement with revenues broken out by source; # a list of nonoperating transfers (as defined by generally accepted accounting principles) into and out of the fund; # a description of the methodology used to charge the costs of each service to users, including how billing rates are determined; # a schedule of current rates; and # a schedule comparing total revenues (including imputed revenues) generated by the service to the allowable costs of the service under Circular A-87, with an explanation of how variances will be handled. 4.5.3 Self-Insurance Funds For each self-insurance fund, the proposed cost allocation plan must include: # the fund balance sheet; # a statement of revenue and expenses, including a summary of billings and claims paid by the agency; # a listing of all nonoperating transfers into and out of the fund;#
Attachment 1, passage 603# the type(s) of risk(s) covered by the fund; # an explanation of how the level of fund contributions are determined; # a description of the procedures used to charge or allocate fund contributions to benefitted activities; # an identification and explanation of reserve levels in excess of claims: — submitted and adjudicated, but not paid; — submitted but not adjudicated; or — incurred but not submitted; and # an insurance report. 4.5.4 Fringe Benefits Costs For fringe benefit costs, the proposed cost allocation plan must: # list fringe benefits provided to covered employees and the overall annual cost of each type of benefit; # identify current fringe benefit policies; and # describe procedures used to charge or allocate the costs of the benefits to benefitted activities. 4.5.5 Pension and Postretirement Health Insurance Plans For pension and postretirement health insurance plans, the proposed cost allocation plan must provide: # the governmental unit's funding policies, if different from actuarially determined rates; # the pension plan's costs accrued for the year; # the amount funded and date(s) of funding; # a copy of the current actuarial report, including the actuarial assumptions; # the plan trustee's report; and # a schedule from the activity showing the value of the interest cost associated with late funding. 4.5.6 Certification CSCAPs must be accompanied by a certification, shown in Attachment C, ¶ D.4. (See also 2.9, Government Certification)#
Attachment 1, passage 6044.6 How Should Allocated Costs Be Presented in a CSCAP? 4.6.1 Sample Formats for Central Service Cost Allocation Plans The following pages illustrate a central service cost allocation plan. They consist of: Illustration 4-1 - Statement of Function and Benefit, Personnel Department. The personnel department has been selected as an example of a central service. This schedule is a narrative description of the activities conducted by the personnel department, their necessity (benefits) to the successful performance of Federally supported programs, a description of the base(s) selected to distribute the costs of those activities to the organizations to which services are rendered, and the rationale for the base(s) selected. Illustration 4-2 - Costs to be Allocated, Personnel Department. This illustration shows the composition of the costs of the personnel department as contained in official financial or budget statements and a reconciliation of those costs with the amount allocated in Illustration 4-1. Illustration 4-3 - Allocation of Costs, Personnel Department. This illustration shows those state organizations to which the personnel department provides services and the allocation of its costs to those organizations. This illustration is supported by Illustrations 4-1 and 4-2. Illustration 4-4 - Summary of Allocated Central Service Costs. This illustration shows each central service, and the attendant costs, which benefit Federal grants and contracts and for which a state or local government wishes to make a claim. This summary must be supported by detailed schedules comparable to Illustrations 4-1 — 4-3 for each included central service. (For purposes of preparing Attachment A of the Negotiation Agreement, only those state agencies receiving Federal funds are to be individually listed. The remaining agencies are to be grouped under "other.") Illustration 4-5 - Summary of Central Services Billed. It is common practice for central service departments to bill those organizations to which they render services for the cost of those services. This summary illustrates the services billed to organizations conducting Federal grants and contracts, the costs included in the billing, the methodology for computing the billing rate, etc. Amounts allocated to the operating departments from the central service cost allocation plan in Illustrations 4-4 and 4-5 are carried forward to Illustrations 6-1 — 6-4, which provide various sample formats for an indirect cost rate proposal. Only a few of the many possible central services have been shown in Illustration 4-4 and only one central service department is shown in the accompanying Illustrations 4-1 through 4-3. A central service cost allocation plan may include any other services and their attendant costs which are allowable under OMB Circular A-87 and for which documentation can be provided. Each type of cost claimed should be supported by appropriate schedules and other documentation sufficient to provide a reasonable basis for evaluation and acceptance.#
Attachment 1, passage 605Illustration 4-1 Sample Central Service Cost Allocation Plan Statement of Function & Benefit, Personnel Department For the Fiscal Year Ended June 30, XXXX The personnel department is responsible for overall administration of the Civil Service program. This includes recruiting, interviewing, testing, and referring potential candidates for the more than 2,000 municipal positions. The personnel department administers the classifications and salary programs and is responsible for recommending personnel policies and procedures to the Civil Service Commission for approval. The department is involved in the design of the various employee benefit programs. After installation, the department reviews and maintains the records of these programs. Active and inactive personnel records are maintained on all municipal employees. The personnel department is responsible for maintaining the safety program (including workmen’s compensation and injury level) and the city training programs. All functions and services performed by the personnel department benefit all departments of the city. Federal programs are benefitted because city employees are hired to work in these programs. Therefore, the costs of the personnel department have been distributed to all departments of the city. The basis for allocation is the number of employees per department. The base data is readily available and verifiable. All employees receive essentially the same type and level of services. Therefore, this base reflects that condition by distributing the total cost of providing these services to each department in proportion to its relative number of employees. This is a sample. In practice, this schedule should be sufficiently detailed to provide narrative explanations of the functions and benefits associated with the costs being allocated.#
Attachment 1, passage 606Illustration 4-2 Sample Central Service Cost Allocation Plan Costs to be Allocated, Personnel Department For the Fiscal Year Ended June 30, XXXX Salaries and Wages $1,088,380 Fringe Benefits (19.8%) 215,499 Supplies 113,600 Travel 26,200 Equipment/Capital Outlay 41,560 Maintenance and Janitorial Services 26,040 Miscellaneous 35,880 Total Cost $1,547,159 Adjustments Less: Unallowable Costs <40,979> Capital Outlay <41,560> Costs Chargeable to Federal Grant (a) <24,000> Add: Use Allowance 15,236 Subtotal Adjustments <91,303> Total Allowable, Allocable Costs $1,455,856 (b) Notes: (a) Represents charges to a Federal grant awarded to assist the state or local government in improving its efforts to hire and train disabled workers. If a supporting agency received an award from the Federal Government, all costs incurred in connection with the award (including any costs that are required for matching or cost sharing) must be eliminated prior to distributing the supporting agency’s costs to the user departments or agencies. (b) The costs allocated must be reconciled to appropriate financial documents, either financial statements, budgets, or a combination of both. In this example, the government’s base data was cost incurred for its most recent fiscal year. This is a sample. In practice, this schedule should be sufficiently detailed to show the costs of major activities, branches, etc. of the personnel departments in a manner permitting a reasonable assessment of the costs claimed against Federal programs.#
Attachment 1, passage 607Illustration 4-3 Sample Central Service Cost Allocation Plan Allocation of Costs, Personnel Department For the Fiscal Year Ended June 30, XXXX Number of Department/Unit Employees (b) Percent Allocation (c) Health 188 6.61 96,232 Environmental Services 170 5.98 87,060 Social Services 61 2.14 31,155 Highway and Public Transportation 289 10.16 147,915 Police 570 20.04 291,754 Corrections 475 16.70 243,128 Other Departments (a) 1,091 38.37 558,612 Total 2,844 100.00 $1,455,856 Notes: (a) Those departments that do not perform Federal programs may be grouped together. However, a one-time schedule is required, listing all agencies or functions listed under "other." (b) Allocation base must include all full- and part-time employees of all operating departments that are serviced by the personnel department. (c) Allocated amounts are carried forward to the summary schedule in Illustration 4-4. The total of $1,455,856 comes from Illustration 4-2. This is a sample. In practice, the type and level of service provided by the personnel department to the various organizations served may require a separate allocation for each service or to different organizations served.#
Attachment 1, passage 608Illustration 4-4 Sample Central Service Cost Allocation Plan Summary of Allocated Central Service Costs For the Fiscal Year Ended June 30, XXXX Central Service Organizations (c) Total Accounting/ Allocated Department/Operating Unit Personnel (a) Cmptr Svcs. Purchasing Audit Costs (b) Health 96,232 201,450 34,123 16,753 348,558 Environmental Services 87,060 216,220 22,211 12,210 337,701 Social Services 31,155 79,841 8,960 6,452 126,408 Highway and Public Transportation 147,915 428,550 67,512 62,271 706,248 Police 291,754 519,605 94,751 114,211 1,020,321 Corrections 243,128 497,431 99,970 145,260 985,789 Other Departments 558,612 1,876,082 214,311 186,542 2,835,547 TOTALS $1,455,856 $3,819,179 $541,838 $543,699 $6,360,572 Notes: (a) Allocated amounts shown are from Illustration 4-3. In an actual plan, the remaining service departments would also need to be supported by separate schedules showing the computation of the allocated amounts. (b) These amounts are includable in the indirect cost proposals of the individual operating departments/units. See Illustrations 6-1 — 6-4. (c) Suggested allocation bases can be found in Section 4.6.2. This is a sample. In practice, a state or local government may wish to claim more or fewer activities as charges to Federally supported programs. If so, this Illustration and its supporting schedules (Illustrations 4-1 — 4-3) would need to be modified accordingly.#
Attachment 1, passage 609Illustration 4-5 Sample Central Service Cost Allocation Plan Summary of Central Services Billed to User Organizations Motor Pool The state (or local government) operates a central motor pool which makes cars, trucks, and buses available to the user departments. User departments are billed for each mile driven: cars - 40 cents per mile; trucks - 55 cents per mile; and buses - 75 cents per mile. The basis for the charge is the most recent study of cost per mile driven, performed by the internal audit staff. Any over- or under recovery is applied to the next year’s expected expenditures and is included in that year’s billing rate. The costs included are salaries and wages and fringe benefits of motor pool personnel; their travel; supplies and parts; and use charges for equipment, buildings, and vehicles determined in accordance with OMB Circular A-87. Data Processing The state (or local government) operates a central data service center (DSC) consisting of a mainframe computer and an area network. The center provides both regular, continuing, and special job computer support to most operating and staff departments. Billings for services are made to user organizations based on a standard price schedule. The price schedule is related to, and designed to recover, the costs of various types of jobs on each system. It is revised quarterly and audited annually by the internal audit department. Profits or losses are carried forward and used to adjust price schedules of ensuing quarterly billing rates. Costs consist of salaries and wages and fringe benefits of center personnel, supplies, maintenance and utilities, and straight-line depreciation of equipment based on a fifteen-year life. This is a sample. In actual practice, a complete listing of all billed components of the DSC would be required: e.g., CPU, programming, microfiche, etc. Long Distance All long distance telephone calls are placed through a central Telephone switchboard and are billed to the organizations making the call.#
Attachment 1, passage 610Notes: If a direct billing mechanism is used by the government, then all users must be billed, either through actual, memo, or imputed billings. Billing of selected departments and allocation of residual amounts through the cost allocation plan to remaining departments results in inequitable costing and is not acceptable. However, if all users are billed, residual amounts may be allocated through the allocation plan, provided they are not material and the allocation base is equitable. A detailed breakdown of costs is not normally required as a part of this summary. However, the submitting state or local government must have and make available to the Federal cognizant agency such cost and revenue breakdowns, utilization records, and other information necessary to permit a reasonable assessment of the costs incurred and changes made. This is a sample. In practice, the number and types of services billed may be greater than shown here and may require more extensive description and explanation.#
Attachment 1, passage 6114.6.2 Suggested Bases for Cost Distribution Listed below are suggested bases for distributing joint costs of central-type services to local government departments or agencies and to projects and programs utilizing these services. The bases are suggestions only, and should not be used if they are not suitable for the particular services involved. Any method of distribution can be used which will produce an equitable distribution of cost. In selecting one method over another, consideration should be given to the additional effort required to achieve a greater degree of accuracy. Type of Service Suggested Bases for Allocation Accounting Number of transactions processed Auditing Direct audit hours Budgeting Direct hours of identifiable services of employees of central budget Buildings lease management Number of leases Data processing System usage Disbursing service Number of checks or warrants issued Employees retirement system Number of employees contributing administration Insurance management service Dollar value of insurance premiums Legal services Direct hours Mail and messenger service Number of documents handled or employees served Motor pool costs, including automo- Miles driven and/or days used tive management Office machines and equipment Direct hours maintenance repairs Office space use and related costs Square feet of space occupied (heat, light, janitorial services, etc.) Organization and management Direct hours; Square feet services Payroll services Number of employees Personnel administration Number of employees Printing and reproduction Direct hours, job basis, pages printed, etc. Procurement service Number of transactions processed Local telephone Number of telephone instruments Health services Number of employees Fidelity bonding program Employees subject to bond or penalty amounts#
Attachment 1, passage 6124.7 How Should Billed Costs Be Presented in a CSCAP? "Billed costs" include internal service funds (ISFs), self-insurance funds (SIFs), and fringe benefits funds (FBFs). Illustrations 4-6 and 4-7 show suggested formats for presenting these costs in the CSCAP proposal. While these formats are not mandated, the information they contain is required, unless the cognizant agency waives the requirement. Specifically, for all funds, including those under $5 million, a schedule of retained earnings (see e.g., Illustration 4-7) must be submitted which shows: # the beginning balance for the fiscal year; # actual and imputed revenues; # A-87 allowable costs, adjusted for: — capital expenditures, — depreciation or use allowance, — nonrecognized transfers, — bad debts, — CSCAP allocations, — actual or imputed earnings on monthly cash balances and replacement reserves; # working capital reserve; and # contributed capital. Contributed capital consists of unallowable A-87 costs, such as reserves for future asset replacement and capital expenditures, and are funded by nonfederal funds. For those funds which have operating budgets over $5 million, a schedule of billed services must be submitted. Illustration 4-6 is a suggested format for presenting billings. Again, this format is only for illustration purposes, and is not required. However, the schedule must provide, for each fund: # billings by user; # revenues, both actual and imputed; and # adjustments for the pro rata share of the rate representing bad debts, reserves for replacement costs, capital expenditures, etc.#
Attachment 1, passage 613STATE OF SUMMARY OF ACTUAL AND IMPUTED REVENUES FUND Summary of Actual and Imputed Revenues by Fund Illustration 4-6 ATTACHMEN FOR THE YEAR ENDING JUNE 30, 19_ COLLECTED BILLINGS# [USER AGENCY/DEPARTMENT ACTIVITY* FULL RATES FULL RATES BILLINGS"* LESS THAN UNCOLLECTED(FULL-BILLED BEING UNBILLED REVENUES COLLECTED IMPUTED REVENUES 0.0% 0.0% $0| $0 $0 SO $0 $0 $0 $0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% TOTALS $0 $0 $0 SO $0 $0 $0 $0 * FOR EXAMPLE, BASED ON EXPENDITURES EXCLUDING FLOW-THROUGH FUNDS. * ACCOUNTS RECEIVABLE/BAD DEBT EXPENSE *** SHOW THIS FIGURE AS "ACTUAL & IMPUTED REVENUES" ON RECONCILIATION OF FUND TO FEDERAL GUIDELINES (ATTACHMENT B) ** FOR EXAMPLE, INCREMENT FOR UNALLOWABLE COSTS SUCH AS INTEREST, RESERVES FOR REPLACEMENT, PROJECTED COST INCREASES, ETC. BILLED TO STATE FUNDS ***** MUST RECONCILE TO TOTAL ACTUAL COSTS PER STATE FINANCIAL REPORT. # MUST RECONCILE TO BILLED REVENUE PER STATE FINANCIAL REPORT. 4-18#
Attachment 1, passage 614Illustration 4-7 Reconciliation of Retained Earnings STATE OF ATTACHMENT B RECONCILIATION OF RETAINED EARNINGS BALANCE TO FEDERAL GUIDELINES FOR YEAR ENDING JUNE 30, 19 PARTI A-87 R.E. BALANCE (000s) A-87 R.E. BALANCE JULY 1, 19) -SO Adjustments - e.g., Contrib, Capital) FY 19 A-87 Revenue (Actual and Imputed) RETAINED EARNINGS INCREASE (DECREASE) Per CAFR Other- From Attachment A $O Total Revenues SO Expenditures (Actual Costs): Less A-87 Unallowable Costs (e.g.)- Per State's Financial Report $O Capital Outlay Projected Cost Increases/Replacement Reserve (0) Other - (e.g., Gain on Disposal of Assets) Bad Debt (0) Plus A-87 Allowable Costs (e.g.) (If Not Allocated in Section I Of SWAP To User Depts/Programs) Indirect Costs from SWCAF (If Not Included in Actual Costs Above) Depreciation or Use Allowance Other- Adjustments: OMB A-87 Allowable Expenditures $0 mputed Interest Earnings on Monthly Average Cash Balanc Other- t State Treasury Avg. Rate of Retur Total Adjustments SO A-87 R.E. BALANCE June 30, 19_ (A) SO Allowable Reserve (B) $O if there is an excess balance, than the federal share should be returned to the federal govt and the amount (If less than zero, the amount on (A) is the beginning A-87 R.E. balance for the next year's reconciliation. on (B) will be the beginning A-87 R.E. balance for the next year.) PART lI A-87 CONTRIBUTED CAPITAL BALANCE A-87 CONTRIBUTED CAPITAL BALANCE JULY 1, 19_ TRANSFERS Per CAFR (Supported By Official Accounting Records) Less: Transfers Out (e.g., Payback of Contrib. Capital, Other Users of Fund R.E.) Plus: Transfers in (e.g., Contrib. Capital) $0 A-87 CONTRIBUTED CAPITAL BALANCE JUNE 30, 19_ Net Transfers 10) (C) $0 PART I|I A-87 ADJUSTMENTS BALANCE A-87 ADJUSTMENTS BALANCE JULY 1, 19_. ADJUSTMENTS: Less: A-87 Unallowable Costs Plus: A-87 Allowable Costs Other- Total Adjustments $0 A-87 ADJUSTMENTS BALANCE JUNE 30, 19_ (D) PART IV RECONCILIATION OF A-87 R.E., CONTRIBUTED CAPITAL AND ADJUSTMENTS BALANCES TO CAFR BALANCE RECONCILIATION OF A-87 R.E., CONTR. CAPITAL & ADJUST. BALANCES TO CAFR (A) + (C) + (D) (Should Tie to the Fund Balance in the CAFR SO#
Attachment 1, passage 615Instructions for Preparing the Reconciliation of Retained Earnings (R.E.) Balance to Federal Guidelines (Illustration 4-7) General. A reconciliation schedule must be completed for all billed central services, including internal service funds (ISFs), self-insurance funds (SIFs), and fringe benefit funds (FBFs). For those funds which utilize multiple billing rates (e.g., ADP funds), a reconciliation schedule may be required for each billing rate. An overall/average fund balance may not be appropriate, because excess charges may occur in one billed service but undercharges may occur in other billed services. In addition, various users do not utilize each/all billed services to the same extent. Part I A-87 R.E. Balance 1. Beginning A-87 R.E. Balance. If this is the first time the reconciliation schedule is being prepared, the beginning A-87 R.E. balance should be the R.E. balance on the state's CAFR, including allowable adjustments (e.g., transfers in/transfers out, A-87 unallowable/allowable costs, imputed interest). If the fund has been reviewed in prior years, the beginning balance will be the ending balance from the previous year's reconciliation schedule. However, if adjustments for excess reserve balances have been made, then a zero balance may be the appropriate starting balance. 2. A-87 Revenues. Revenues shall consist of all revenues generated by the service, including unbilled and uncollected revenues. If some users were not billed for services (or were not billed at a full rate), a schedule showing the full imputed revenues associated with these users shall be provided (see Summary of Actual and Imputed Revenues - Illustration 4-6). Revenues should also include (i) all other revenues the fund earned from its operation, and (ii) interest earned on reserves. If imputed interest/investment earnings are shown at the bottom of the schedule, these amounts should not be included in this section. 3. A-87 Expenditures. The initial expenditure balance should reconcile to the CAFR (or other financial records). Adjustments in accordance with A-87 are made, for example, the exclusion of bad debts and the inclusion of allocated central service costs (SWCAP Section I costs). 4. Imputed Interest. There are different methods to compute imputed interest earnings. Currently, one acceptable method is the application of the state's Treasury Average Rate of Return to the monthly average cash balance for the year. If actual interest earned is computed incorrectly, then additional interest may be imputed. 5. Allowable Reserves. A. Internal Service Funds. The allowable reserve for ISFs, which are identified in the CAFR, is equal to the ISF's billing cycle up to 60 days allowable operating expenditures. The reserve is determined by applying a percentage to the allowable operating expenditures (excludes depreciation/use allowance, start-up capital, and any reserves to fund#
Attachment 1, passage 616long-term assets). The percentage is the number of days in the billing cycle days divided by 360. Reserves for other billed central services that are not identified as ISFs in the CAFR are unallowable. B. Self-Insurance Funds. The allowable reserve for self-insurance funds is defined in Circular A-87, Attachment B, paragraph 25. d. It is normally limited to the discounted present value of claims (i) submitted and adjudicated but not paid; (ii) submitted but not adjudicated; and (iii) incurred but not submitted. C. Fringe Benefit Funds. (i) Medical, Unemployment, and Workers * Compensation Insurance. See self-insurance funds above. (ii) Pension Plan. Actuarial determined, but limited to the amount funded in accordance with Circular A-87, Attachment B, Paragraph 11.e. (iii) Post-retirement Health Benefits. Actuarial determined, but limited to the amount funded in accordance with Circular A-87, Attachment B, paragraph 11.f. (iv) Accrued Leave. Accrued leave is the amount required to pay leave earned but not taken. The reserve must be a valid liability as defined by GAAP and is limited to the amount funded. It must be supported by the state*s payroll records. Note: To be considered funded, a reserve must be paid to a trustee (or insurer) who maintains a trust fund or reserve for the sole purpose of paying the specific fringe benefit for which the reserve is established. If there is no funding, costs are recognized when paid. 6. Excess Balance. The Federal share of the excess must be returned to the Federal Government. Exceptions are based on negotiator judgment. For example, the state could credit the appropriate Federal and state programs/agencies for the overcharged amount, or the future billing rates could be reduced. Interest may be assessed, taking into consideration the time period required to affect the payback. Part II A-87 Contributed Capital Balance 1. Transfers In/Transfers Out. Contributed capital represents contributions by the state to the fund to cover expenditures not allowable under A-87, capital expenditures, reserves for the acquisition of future assets, etc. Transfers in/transfers out are identified in the CAFR and are in compliance with GAAP. Examples include contributed capital to the fund by the state or the transfer out of earned capital/cash to a fund that is having cash flow problems.#
Attachment 1, passage 617Part III A-87 Adjustments Balance 1. A-87 Adjustments. Adjustments specific to A-87 must be identified and recorded. The figures should be the same as those identified in Part I above. Part IV Reconciliation of R.E., Contr. Capital & Adjustments Balances to CAFR Balance 1. The ending balances for Parts I, II, and III are totaled. The total figure should reconcile to the CAFR fund balance. Note: If this schedule is for a billed central service that is general funded (and not identified as an ISF in the CAFR), there will be no reconciliation. 4.8 Questions and Answers on Attachment C 4-1 Under what, if any, circumstances can an approved cost allocation plan be reopened by either party? [Att. C] With respect to the governmental unit or component, the only circumstance whereby a negotiated plan can be re-opened is noted in Question 4-2 below. The basis for the cognizant agency to reopen the approved plan is stated in Attachment C, paragraph F.2, e.g., if there is a violation of a statute or if submitted information was materially incomplete or inaccurate. Inclusion of unallowable or unallocable costs under Circular A-87 will not be grounds for reopening. In such cases, a roll-forward adjustment or refund will be made at the cognizant agency's option. 4-2 If a central service activity, either allocated (Section I) or billed (Section II), is omitted when the state/local-wide cost allocation plan (SWCAP/LOCAP) is approved, can the carry forward procedure be used to recover the cost of the omitted activity in a future plan? [Att. C, § C] Attachment C, Section C specifically states that costs of central services omitted from the plan will not be reimbursed. However, OMB clarifies in the preamble to the May 17, 1995 Federal Register notice of the Circular’s issuance that if a service did not exist (as opposed to being overlooked) when the plan was prepared, the approved plan can be reopened to include the new activity. In such cases, the plan will be amended to include the nonexistent activity. The definition of "nonexistent" does not include central services that existed when the plan was finally approved, nor those that the state should have known would exist in the future, based on budgets approved by the state legislature. 4-3 Does Circular A-87 require primary recipients to prospectively review cost allocation plans and negotiate indirect cost rates with all organizations to which it makes cost reimbursement subawards? OMB does not impose a similar requirement on Federal agencies. [Att. C, ¶ D.3] Circular A-87 does not specifically prescribe procedures to be used by primary recipients in accepting claims for indirect costs made by organizations to which they make subawards. The Circular states: "Where a local government only#
Attachment 1, passage 618receives funds as a sub-recipient, the primary recipient will be responsible for negotiating indirect cost rates and/or monitoring the sub-recipient's plan. " (Att. C, ¶ D.3.) This would permit a primary recipient to actually engage in prospective review and negotiation. Alternatively, the primary recipient could require subrecipients to develop the necessary documentation concerning indirect charges and retain the documentation for audit and could then review audit reports to determine whether proper cost charging occurred. It would also be acceptable for primary recipients to use a combination of these methods, depending upon the relative size of the subrecipient. As accountability for the Federal funds ultimately rests with the primary recipient, the level of risk and exposure should be the determining factors in what oversight will be required. 4-4 Attachment C, Section E provides the cognizant agency with flexibility in the types of information and documentation it can require when approving central service cost allocation plans (SWCAPs/LOCAPs). Are there limits on this authority? [Att. C, § E] The data and information that a cognizant agency can require is subject to reasonableness. Factors to be considered when assessing documentation needs are: (1) the overall size of the government unit; (2) the timing of previous reviews and the results of such reviews; (3) the appearance of systemic problems; (4) the reoccurrence of problems/issues; (5) the veracity of information provided in the past; and (6) the level of "good faith" exercised in the past by the government or its consultants, if applicable. 4-5 Attachment C, paragraph E.2 requires that a summary schedule be provided showing the allocation of each service to the specific benefitted agencies. Can the allocations to small or inconsequential agencies be included in a grouping, such as "other"? [Att. C, ¶ E.2] Such a practice is permissible where, in fact, the agencies/activities are inconsequential and they receive no Federal awards. However, a narrative description must be provided listing all agencies/activities that have been included in the grouping, so that it can be verified that all operations of the government have been included in the base. 4-6 Attachment C, paragraph E.3.b. identifies the requirements for the submission of information to the cognizant agency concerning internal service funds (ISFs). What is the definition of an ISF? [Att. C, ¶ E.3.b(1)] The definition is provided in generally accepted accounting principles, i.e., a fund used "to account for the financing of goods or services provided by one department or agency to other departments or agencies of a government or to other governments, on a cost-reimbursement basis." (Codification of Standards of Governmental Accounting, 1300.104. Governmental Accounting Standards Board.) Internal Service Funds (ISFs) would be separately recognized in the financial statements using the accrual basis of accounting. However, this section of A-87 covers more than ISFs for central service activities of a state or local government. It covers the submission requirements of all central service activities for which the state or local government uses a billing mechanism (formal or memo billing) to assign or allocate costs to other components of the respective government. This requirement applies whether or not the "billed" activity is established in the unit’s financial statements as a true ISF under#
Attachment 1, passage 619generally accepted accounting principles. 4-7 Under a central service cost allocation plan (SWCAP/LOCAP), is the government required to submit documentation for internal service funds (ISFs) with operating budgets under $5 million? [Att. C, ¶ E.3.b(1)] Attachment C, paragraph E.3.b(1) specifies documentation requirements for internal services funds (ISFs) with operating budgets of $5 million or more. It also states that the requirements may be modified, expanded, or reduced by the cognizant agency on a case-by-case basis. At a minimum, the government or component must submit a schedule for ISFs under $5 million that reconciles the ISF Retained Earnings. Illustration 4-7 provides a sample schedule format for making such presentations. This schedule provides information that is essential for Federal review and approval of the ISFs and which is not included in the comprehensive annual financial report (CAFR) or other financial statements. In addition, the reconciliation determines an A-87 allowable balance on an on-going basis. Additional documentation may be requested on a case-by-case basis, depending, in part, on the dollar impact on Federal awards and when a detailed review of the ISF was last performed by the cognizant Federal agency. 4-8 Attachment C, paragraph E.3.b(1) requires the governmental unit to provide a description of the procedures (methodology) used to charge the costs of each service to the user, including how the billing rates are determined. How much detail is required on how billing rates are determined? [Att. C, ¶ E.3.b(1)] Like any other aspect of the submission requirements, the governmental unit is required to submit sufficient documentation for the reviewer to make an informed judgement as to the acceptability of the basis used by the unit of government. Such documentation would include: (1) the items of expense making up the billed activity; (2) the specific data used to develop the billing rate(s) and how often they are updated; (3) justification as to why the method used is the most appropriate for the activity; (4) an identification of any users that are not billed, with assurance that their share of services are reflected in the base; (5) how often billings are compared to actual costs and usage; (6) how variances will be adjusted; and (7) any other information the cognizant agency requires to evaluate the reasonableness of the billing system. 4-9 Attachment C, paragraph E.3.b(2) of the May 4, 1995 revision to Circular A-87 requires that the expenses of the billed function be broken out by object cost categories. In the past, submissions were permitted where a break-out of salaries and wages was made, but a roll-up of all other costs was presented as one amount. Can this practice continue, supported with detailed, on-site accounting records, or must the plans be modified to include the detail? [Att. C, ¶ E.3.b(2)] A listing of the items of expenses is required for each central service activity whether it is a billed or unbilled activity. In addition, as noted in the beginning of Attachment C, Section E, the documentation requirements can be reduced by the cognizant agency. For example, reduced documentation might be appropriate for a central service function which has little or no impact on Federal awards. Therefore, the initial plan should address the A-87 documentation requirement, unless the cognizant agency approves otherwise based on the#
Attachment 1, passage 620Federal effort, significance of "roll-up amount," and other factors. 4-10 Under what circumstances are working capital reserves permitted for internal service funds (ISFs) and how are they to be determined? [Att. C, ¶ G.2] Attachment C, paragraph G.2 permits working capital reserves to allow ISFs sufficient cash to sustain operations between billing cycles. While the Circular authorizes reserves of up to 60-day cash needs, their allowability is not automatic. The following factors are to be considered when establishing reserves and determining whether they will be allowable. (1) Reserves are only allowable for enterprise funds and bona fide ISFs recognized in the government's comprehensive annual financial report (CAFR). Reserves are not allowable for activities funded through general revenue appropriations. (2) For each fund for which a reserve is determined necessary, the number of days of cash needs, up to 60 days, must be fully supported by a cash flow analysis reflecting billing cycles, revenue receipts, and allowable disbursements. (3) Semi-annual or annual payments are to be amortized in billing rates. (4) Reserves, for purposes of Federal recognition, may only include allowable cash disbursements. Depreciation, principal payments, and capital expenditures are not allowable. However, interest payments are allowable. (5) Self-insurance funds, including fringe benefits operating as such, are further subject to the provisions of Circular A-87, Attachment B, paragraph 25. (6) Pension funds are subject to Circular A-87, Attachment B, paragraph 11. (7) Allowability of reserves covering longer periods can be granted by the cognizant agency in extraordinary circumstances where such needs are fully documented and justified. 4-11 Earnings on ISF cash balances are to be treated as applicable credits. If a state co-mingles its funds, how is the amount of earnings for a single fund to be determined? [Att. C, G] When known, actual earnings should be used. In the circumstances described above, earnings may be imputed by applying the government's, e.g., State Treasurer, Average Rate of Return on the average monthly balance for a given fund. 4-12 Attachment C, paragraph G.4 establishes four methods for adjusting internal service funds (billed central services) for profits or losses realized from operations. Alternative (b) allows credits to amounts charged to the individual programs. This method would only cover profits. If losses occur, why can't individual programs be debited? [Att. C, ¶ G.4]#
Attachment 1, passage 621Effectively, alternative (b) is correcting billed costs in the current year, whereas alternative (c) is carrying forward the profit/loss into the next open fiscal period. The failure of the Circular to note how losses are to be treated in alternative (b) is an editing error. For consistency purposes, both alternative (b) and (c) cover profit and loss situations. However, only one method can be used in a given fiscal year. 4-13 Attachment C, paragraph G.4 allows adjustments to allocated, unbilled central service costs ("Section I costs") as an option for adjusting a particular billed service ("Section II costs") if the amount of the adjustment does not exceed $500,000. May this adjustment be made in the normal course of plan preparation or is prior Federal approval required? [Att. C, ¶ G.4] Prior Federal approval is not required by Circular A-87. It should be noted, however, that the $500,000 threshold applies to the entire billing function and not to components of that function. EXAMPLE: A data service facility typically has numerous cost centers for which it develops individual billing rates. The allocation method for adjusting over/under billings can only be used if the net, total adjustment for the data facility is less than $500,000. 4-14 For adjustments exceeding $500,000, Attachment C, paragraph G.4 presents three options. What criteria will be used to select the method of recovery? [Att. C, ¶ G.4] The primary concern would be the assurance that the Federal programs charged in a given year receive an equitable and appropriate adjustment for the over/under billings. Consideration must also be given to the makeup of the user community in future periods as well as the level of support they will require.#
Attachment 1, passage 622PART 5 Attachment D — Public Assistance Cost Allocation Plans 5.1 Highlights of New Section, Attachment D The new Attachment D deals with Public Assistance Cost Allocation Plans (PACAPs) and incorporates longstanding HHS policies and procedures. The Attachment makes HHS's 45 CFR Part 95, Subpart E applicable to all Federal programs administered by a public assistance agency, e.g. the U.S. Department of Agriculture's (USDA) Food Stamp program. 5.2 Applicability of Regulations at 45 CFR Part 95, Subpart E Federal programs that provide public assistance to individual citizens are often administered at the state level by large, complex, multi-functional agencies. The programs administered by these governmental organizations are predominately financed by the Department of Health and Human Services (HHS). HHS has long required cost allocation plans for those programs and codified rules for development, submission, approval, and use of these plans in 45 CFR Part 95, Subpart E. However, these rules only applied to HHS programs, although there are other Federal agencies whose assistance awards may be handled by the same state units. Accordingly, revised OMB Circular A-87 provides a means for coordinating and assuring consistency among the various Federal agencies. Attachment D of the revised Circular: # describes the basic policy concerning public assistance cost allocation plans (PACAPs); # reflects the salient features of 45 CFR Part 95; and # extends requirements of 45 CFR Part 95 to all Federal agencies whose programs are administered by a state public assistance agency. A public assistance cost allocation plan must be prepared, documented, and implemented by all state public assistance agencies. The plan and any amendments to it must be submitted to the appropriate field office of HHS' Division of Cost Allocation. HHS, as well as other affected Federal agencies, will review new plans or plan amendments. The other agencies will provide comments to HHS, which will in turn act as the cognizant agency on behalf of the others. HHS conducts any negotiations with the state agency and is responsible for notifying the agency about action taken on the plan or plan amendment. Due to the nature of state public assistance agency operations, a public assistance cost allocation plan is required in lieu of an indirect cost rate proposal. A large percentage of agency operations consist of common or indirect costs: program-specific, first-tier cost centers are minimal. Typically, a considerable amount of the work performed involves determining and continuing to verify the eligibility of program beneficiaries. The persons who handle these tasks do so for multiple Federal and state programs. For#
Attachment 1, passage 623example, in determining the eligibility of a person for one program, the case worker may concurrently perform tasks related to another program. Or, the determination established for one program simultaneously determines eligibility for additional programs without any additional incremental effort. The nature of the work performed at state public assistance agencies can result in complex costing issues that are unique to those agencies. However, the concepts and principles contained in Attachment D of the Circular can have applications for other state and local agencies that operate in a Federally funded environment where an indirect cost rate inadequately identifies cost of operations and greater precision is needed. An example might be a state health department which has county and municipal facilities that offer a variety of services that are partially or completely Federally funded. For example, local public health clinics typically operate clinics where they provide general health assessments, medical care, immunizations, health counseling, nutrition guidance, etc. Their funding, for a single, one-day clinic, could come from a variety of sources, including direct Federal grants from several agencies, e.g., well baby clinics (MCH/HHS), nutrition assistance (WIC/USDA), immunizations (PHS/HHS), primary or secondary cost reimbursement funding for health assessments (EPSDT/HCFA/HHS), and provider fees for services provided (Medicaid/HHS). Obviously, the potential for duplicate claims is great. The cost allocation procedures described in 45 CFR Part 95, Subpart E can assist in clarifying the appropriate burden to be borne by each Federal program. Another example of the importance of these procedures involves the somewhat atypical organizational structures that have arisen in recent years at the state level. Through the formation of cabinet or "umbrella" type structures, public assistance programs may be operated by the same entity type that handles unemployment programs, job training, juvenile detention, and even the state prison system. Some of the programs may include those, such as certain block grants, that have been exempted from mandatory application of Circular A-87. All of these programs and activities must be included in the PACAP to ensure that they receive an equitable share of administrative and other indirect costs. While the level of detail to be included in the cost allocation plan for these other nonpublic assistance programs is less than that required for the public assistance programs, HHS will, in reviewing and approving the plans, be responsive to the expressed needs of those Federal agencies whose programs are included and who need to identify allowable and unallowable program activities and costs for their programs. Where an operating component within the umbrella agency is funded primarily from a single Federal agency, that Federal agency may be designated by the cognizant agency responsible for reviewing and approving that component of the plan. Under Attachment D of Circular A-87, when a letter of approval or disapproval of a PACAP is transmitted to a state public assistance agency in accordance with 45 CFR Part 95, Subpart E, the letter will apply to all Federal agencies and programs. This policy is effective for plans and amendments submitted or prepared for a state's fiscal years beginning on or after September 1, 1995. 5.3 Submission and Documentation Requirements State public assistance agencies are required to submit a cost allocation plan that describes the procedures used to identify, measure, and allocate all costs to each of the programs they operate. The plan must contain sufficient detailed information for Federal officials to reach an informed judgment about the correctness and fairness of the methods employed by the state. The submission must be sent to the appropriate field office of the Division of Cost Allocation, HHS, and should include the following#
Attachment 1, passage 624features: # an organizational chart showing the placement of each unit whose costs are charged to the programs operated by the state agency; # a listing of all Federal and all nonfederal programs performed, administered, or serviced by these organizational units; # a description of the activities performed by each organizational unit and, when not self-explanatory, an explanation of the benefits provided to Federal programs; # the procedures used to identify, measure, and allocate all costs to each benefiting program and activity (including those that may be subject to different rates of Federal financial participation; # the estimated cost impact resulting from proposed changes to a previously approved plan (however, subsequent approval of the cost allocation plan does not constitute approval of the estimated costs for use in calculating claims for Federal financial participation); # unless the costs are addressed in a state or local-wide cost allocation plan or an umbrella department cost allocation plan, a statement stipulating that wherever costs are claimed for services provided by a governmental agency outside the state agency, they will be supported by a written agreement that includes certain minimum features, including (1) the specific services being purchased, (2) the basis on which billing will be made by the provider agency, and (3) a stipulation that the billing will be based on the actual cost incurred; # a cost allocation plan for local agencies, if public assistance programs are administered by local governments under a state- supervised system; # a certification by a duly authorized official of the state that (1) information contained in the plan was prepared in accordance with Circular A-87, (2) the costs have been accorded consistent treatment in accordance with generally accepted accounting principles, (3) an adequate accounting and statistical system exists to support claims that will be made under the plan, and (4) the information provided in support of the cost allocation plan is accurate; and # other information that may be necessary for HHS to establish the validity of the procedures used to identify, measure, and allocate costs to all programs being operated by the state agency. (45 CFR § 95.507). 5.4 Amendments A state must promptly amend the public assistance cost allocation plan and submit the amended plan to the appropriate field office of the Division of Cost Allocation, HHS, whenever any of the following events occur: # the procedures shown in the existing plan have become outdated because#
Attachment 1, passage 625of organizational changes, changes in Federal law or regulation, or significant changes in program levels affecting the validity of approved cost allocation procedures; # a material defect is discovered in the cost allocation plan by the Division of Cost Allocation field office or by the state; # the state programmatic plan for public assistance programs is amended in a manner that affects the allocation of costs; or # other changes occur which make the allocation basis or procedures in the plan invalid. (45 CFR § 95.509). Even if none of these types of changes has occurred, an annual statement, indicating that the existing plan is not outdated, must be submitted by the state to the HHS Division of Cost Allocation field office. If an amendment is submitted and approved, its effective date will generally be the first day of the calendar quarter following the date of the event that made the amendment necessary. However, under certain conditions involving inequity, error, or impracticality, the date could be established either earlier or later. 5.5 Review and Approval of Plans Within sixty (60) days of receipt of a proposed cost allocation plan or amendment, the Director of the HHS Division of Cost Allocation field office will notify the state that the submission is either specifically approved or disapproved, that modifications are needed in order for approval to be granted, or that additional information is needed to evaluate the submission. Also, if a determination cannot be made within the 60 day period, the field office will notify the state. If a plan submission is disapproved, the state will be notified accordingly, along with the reasons for the disapproval. Under 45 CFR Part 16, a state may appeal a disapproval of a plan submission so long as the appeal is postmarked no later than 30 days after receipt of the determination letter. (45 CFR § 16.7(a)). 5.6 Claims Under PACAPs Any claims developed under approved cost allocation plans must be for allowable costs under OMB Circular A-87. Where unallowable costs have been claimed, they must be refunded to the Federal program that originally accepted them either by a cash refund, an offset against a subsequent claim (if authorized), or credits to the amounts charged to individual awards. 5.7 Questions and Answers on Attachment D 5-1 In the early 1960s the former Department of Health, Education, and Welfare (HEW) issued a document entitled "Handbook of Public Assistance Administration." Is this issuance still in effect, and if so, which Federal issuance takes precedence when sections of that handbook contradict the cost principles of Circular A-87, e.g., treatment of the cost of land? [Att. D, § A] Under an Action Transmittal Notice of August 11, 1975, the former Social and#
Attachment 1, passage 626Rehabilitation Service of (then) HEW advised State agencies that, as published in the Federal Register on August 11, 1975, Parts I, II, and VI, and Supplements A, B, and C of the Handbook were revoked. Parts III, IV, and V were still in effect to the extent that they were not superseded by subsequent regulation or policy issuances. OMB Circular A-87 was issued to bring consistency to the manner in which Federal awarding agencies measured and recognized allowable administrative costs. Federal agencies are required by OMB to implement the Circular and abide by those rules unless OMB has granted a specific waiver to the agency for a rule(s) or the Circular is in conflict with a given statute. Therefore, if the Handbook conflicts with any section of A-87, Circular A-87 policy would apply unless the exceptions noted above exist. 5-2 45 CFR Part 95.507(b)(6) requires that a statement be submitted describing services provided by a governmental agency outside the state agency other than those provided through the state-wide cost allocation plan (SWCAP) or umbrella department cost allocation plan (CAP) costs. If this other agency is only a subrecipient of Federal monies from the state (or local) agency and the subrecipient proposes a cost allocation procedure, who is responsible for the review and approval of this plan? [Att. D, ¶ D] Review and approval of the plan used by the subrecipient governmental agency is the responsibility of the state agency. The Part 95 provision referenced above does not require Federal approval. It has been long-standing policy that the prime grantee is responsible for assuring that subawardees properly spend and account for flow-through Federal funds. Where the subrecipient has an indirect cost agreement or cost allocation plan approved by a Federal cognizant agency, costing and claims to the primary recipient agency should be made in accordance with that agreement (plan). The amounts claimed under these procedures are still subject to audit and to Federal awarding agency review of quarterly claims. 5-3 Attachment D, paragraph D.2 states that the effective date of the plan is "the first day of the quarter following the submission of the plan or amendment, unless another date is specifically approved by HHS." 45 CFR 95.515 states "[a]s a general rule, the effective date of a cost allocation amendment shall be the first day of the calendar quarter following the date of the event that required the amendment." The date may be earlier or later based on specific conditions. Is there an inconsistency between the two effective dates as currently stated? [Att. D, ¶ D.2] No. The state agency is required to promptly amend its cost allocation plan when one of several conditions occurs. Therefore, these dates should effectively be the same. 5-4 Attachment D, paragraph E.3 states "[i]f a dispute arises in negotiation of a plan or from a disallowance involving two or more funding agencies, the dispute shall be resolved in accordance with the appeals procedures set out in 45 CFR Part 75. Disputes involving only one funding agency will be resolved in accordance with the funding agency's appeal process." The wording implies that single funding issue disputes, whether it involves the negotiation of a plan or disallowance, will be resolved through the funding agency appeal process. 45 CFR Part 95, Subpart E requires use of the Part 75 appeal process for plan disapprovals, and splits responsibility for cross- cutting and single agency disallowance actions. Is this inconsistent with the#
Attachment 1, passage 627revision to Circular A-87? [Att. D, ¶ E.3] No. Disputes involving plan disapprovals are subject to 45 CFR Part 16 governing the Departmental Appeals Board Procedures. (Due to reorganization within HHS, Part 75 has been rescinded.) Single-funding agency disallowance actions are appealed through the applicable funding agency, unless the issue(s) involve cost accounting practices or policies. In such cases, the cognizant agency may determine that the appeal will be handled through its process. 5-5 Attachment D, paragraph E.1 provides for after-the-fact reviews to assure compliance with approved plans. The circular states that these reviews can be accomplished by the funding agency, single audits, or the cognizant audit agency. Does the A-87 language preclude the cognizant agency responsible for approval of the plan from performing compliance reviews? [Att. D, ¶ E.1] No. The term "funding agency," in this context, includes the cognizant agency responsible for negotiating the plan approval. Compliance reviews are part of the oversight function in the approval of the cost allocation plan (CAP).#
Attachment 1, passage 628PART 6 Attachment E — State and Local Indirect Cost Rate Proposals 6.1 Highlights of New Section, Attachment E Attachment E has been added for state and local indirect (IDC) rate proposals. This Attachment is also a compendium of conventions, internal HHS policies and procedures, and portions of the former OASC-10. The Attachment provides definitions, submission requirements, how to develop a rate(s), documentation requirements, etc. for IDC rates issued to state and local agencies. 6.2 Acceptable Methodologies for Indirect Cost Allocation and Rate Determination 6.2.1 Types of Rates Circular A-87 defines four possible types of indirect cost rates. However, two of these types, the provisional and the final, are actually two stages of one approach. The types of rates are listed below: 1. A provisional rate is a temporary rate, agreed to in advance, based on anticipated future costs. It is subject to retroactive adjustment at a future date after costs are known. 2. A final rate is established after the costs are known. It adjusts the provisional rate but is administratively burdensome. Underpayments resulting from application of the provisional rate are subject to availability of funds, while overpayments must be credited or returned. 3. A fixed rate is also agreed to in advance, based on an estimate of future costs, but it is not retroactively adjusted. Instead, the difference between estimated and actual costs is carried forward to future years. 4. A predetermined rate is agreed to in advance, based on an estimate of future costs, but is not subject to adjustment except under very unique circumstances. It is intended to be permanent and thereby reduce the administrative burden associated with indirect cost recovery. A predetermined rate may not be used for any governmental unit that does not submit its indirect cost rate proposals to a cognizant agency for negotiation, nor may it be used on Federal contracts. The 1995 revision of Circular A-87 encourages long-term use of predetermined rates over a period of two to four years where there is a high degree of assurance that the agreed-upon rate will not exceed one that would result if actual costs were determined. 6.2.2 Direct Cost Bases The direct cost base is used to distribute indirect costs to individual Federal awards, i.e., an indirect cost rate must be applied to a direct cost base in order to determine the#
Attachment 1, passage 629amount of indirect costs. There are two basic types of direct cost bases: total direct salaries and wages (S&W), or modified total direct costs (MTDC). MTDC exclude "any extraordinary or distorting expenditures," usually capital expenditures, subawards, contracts, assistance payments (e.g., to beneficiaries), and provider payments. The direct cost base selected should result in each award bearing a fair share of indirect costs in reasonable relation to the benefits received from those indirect costs. 6.2.3 Simplified Method There are two basic methods for calculating indirect cost rates—the simplified method and the multiple rate method. Where each of a recipient agency’s major functions benefit from its indirect costs to approximately the same degree, the allocation of indirect costs may be accomplished under the simplified method. The steps involved in calculating a rate under the simplified method are shown below: Steps Involved in Calculating a Rate Under the Simplified Method 1. Adjust indirect costs for the period by eliminating any costs directly reimbursed through a Federal award awarded specifically for that purpose. For example, if a construction grant was received, then no depreciation or use allowance should be included in the indirect cost pool. Likewise, remove any administrative salaries included in the pool that were funded as direct in a grant. The pool also must be adjusted for any A-87 unallowables and capital expenditures. Use allowances should be computed and added to the pool along with any CSCAP allocations. 2. Adjust direct costs by eliminating flow-through funds and capital expenditures. Compute and add use allowances. 3. Divide the total allowable indirect costs (net of applicable credits) by an equitable direct cost base, e.g. salaries and wages or modified total direct costs. Illustration 6-1 illustrates the distribution of indirect costs of a state or local government department, the division/bureaus of the department, and the cost of central services provided to it. Under the simplified method shown in this illustration, indirect costs are identified at the division or bureau level, and are so indicated. This method may be used if the ratio of the indirect costs to direct salaries and wages (or other selected base) of each division or bureau reasonably approximates the ratio of the other divisions or is otherwise not inequitable to the Federal Government. If the indirect/direct ratio varies significantly between divisions or bureaus, the multiple rate method (Illustration 6-3) should be used.#
Attachment 1, passage 630Illustration 6-1 Sample Indirect Cost Rate Proposal - Simplified Method Department of Environmental Services For the Fiscal Year Ended June 30, XXXX Direct Costs (c) Expenditures Direct Expenditures Not Indirect Salaries For All Other Total Exclusions Allowable Costs & Wages Purposes (e) (a) (b) (d) Division/Bureau Air Quality and Noise $ 438,338 $ 36,820 $ 47,480 $ 206,320 $147,718 Community Environmental Control 691,931 22,161 61,210 481,182 127,378 Water Quality Management 2,390,738 $1,800,000 9,945 52,641 410,771 117,381 Solid Waste Disposal 1,153,057 106,210 96,847 643,782 306,218 Parks and Forests 844,617 115,000 91,119 450,788 187,710 Subtotal $5,518,681 $1,800,000 $290,136 $349,297 $2,192,843 $886,405 Departmental Indirect Costs Office of the Director $ 122,610 $122,610 Financial Management 155,275 155,275 Administrative Services 86,930 86,930 Equipment Use 16,800 16,800 Running Subtotal $5,900,296 $1,800,000 $290,136 $730,912 $2,192,843 $886,405 Services Furnished (But Not Billed) By Other Government Agencies (f Personnel $ 87,060 $ 87,060 Accounting 216,220 216,220 Purchasing 22,211 22,211 Audit 12,210 12,210 Total $6,237,997 $1,800,000 $290,136 $1,068,613 $2,192,843 $886,405 This is a sample. It is not intended to prescribe methods of charging costs.#
Attachment 1, passage 631Notes to Illustration 6-1 (a) Under some Federal programs, funds (called "flow-through funds") are provided to a primary recipient and subsequently passed through to another organization which actually performs the program for which the funds are provided. There is no measurable involvement by the primary recipient in the expenditure of the funds. The primary recipient’s involvement is generally limited to monitoring and oversight. This example illustrates such a situation. Because these funds, which are recorded as a cost in the records of the department, do not reflect the expenditure of resources, they are excluded from the computation. However, if the primary recipient does in fact incur significant costs administering the grant, then it should be assessed for its equitable share of indirect costs. This column is normally used by states only and not local governments. (b) Expenditures not allowable. This amount represents costs or capital expenditures and costs, whether direct or indirect, which are unallowable in accordance with the cost principles. Although a cost may be unallowable, if it either generated or benefitted from the indirect costs, it should be moved to the base (provided that it is salaries and wages in this example) and allocated its share of indirect costs. (c) Under the simplified method, a determination is made as to which activities are direct, illustrated under the heading Direct Costs, and which are indirect, illustrated under the heading Indirect Costs. (d) Once the determination of direct/indirect has been made, a ratio should be determined for each division/bureau as shown in the following calculation: Indirect D i r e c t S a l a r i e s Division/Bureau Costs and Wages Ratio Air Quality & Noise $47,480 $206,320 23.01% Community Environmental $61,210 $481,182 12.72% Control Water Quality Management $52,641 $410,771 12.82% Solid Waste Disposal $96,847 $643,782 15.04% Parks & Forests $91,119 $450,788 20.21% In this illustration, the dollar amounts of indirect costs differ significantly between division or bureau; however, when individually expressed as a percentage of direct salaries and wages, the differences are minor. Therefore, a single overall rate for the department may be computed by adding the departmental indirect costs and the costs incurred by other government agencies and allocating the indirect cost pool over a single base.#
Attachment 1, passage 632(e) Total departmental costs. This amount should be reconciled to the financial statements or other supporting documentation included in the proposal. (f) Costs incurred by other government agencies. This amount must agree with the amounts shown on the central service cost allocation plan (see Illustration 4-4). In Illustration 6-1, costs of $337,701 represent costs of central services allocated to the entire department. Governmentwide services that are billed directly to departments or to programs must also be documented in the cost allocation plan (See Illustration 4-5). Illustration 6-2 Department of Environmental Services Sample Indirect Cost Rate Proposal - Simplified Method For the Fiscal Year Ended June 30, XXXX Exclusions & Expenditures Indirect Direct Salaries Other Direct Total Not Allowable Costs & Wages Expenditures $6,237,997 $290,136 $1,068,613 $2,192,843 $886,405 (A) (B) Indirect cost rate of 48.73% of (A) divided by (B) = $1,068,613 = direct salaries and wages, excluding $2,192,843 fringe benefits. Notes: The totals from Illustration 6-1 are brought forward to this illustration. The indirect cost rate is expressed as a percentage resulting from the ratio of the allowable indirect costs ($1,068,613) to the direct salaries and wages ($2,192,843). In this illustration, fringe benefits applicable to direct salaries and wages are treated as direct costs. This is a sample. It is not intended to prescribe methods of charging costs.#
Attachment 1, passage 6336.2.4 Multiple Allocation Base Method Where a recipient agency’s indirect costs benefit its major functions in varying degrees, the multiple rate method is more appropriate. Steps Involved in Calculating Rates Under the Multiple Rate Method 1. Classify departmental indirect costs into functional cost groupings (cost pools) which benefit divisions of the agency in significantly different proportions. 2. Select appropriate bases for distribution of each classified pool of indirect costs. 3. Distribute each classified pool to the benefitting division. 4. Calculate an indirect cost rate for each division of the agency by relating the total indirect costs allocated to that division to that unit’s direct cost base. Illustration 6-3 shows the distribution of indirect costs on a multiple allocation basis to each division or bureau within a department. This method results in more definitive costing and should be used when operating differences between divisions or bureaus result in material differences in the use of resources and in costs. The computation recognizes the indirect costs of each division or bureau, department level administration, and the cost of services furnished by other government agencies and approved through the central service cost allocation plan. These costs are allocated to the divisions or bureaus on bases which most fairly reflect the extent to which they benefit from or generate the costs. For example, the costs of purchasing services is allocated on the number of purchase orders issued, while the costs of personnel administration is allocated on the number of employees serviced. Indirect costs allocated from the department level and from the central service plan are added to the indirect costs incurred by each division or bureau to arrive at total indirect costs for each of the divisions or bureaus. A rate is developed for each division or bureau by relating its indirect costs to its salaries and wages or other selected base.#
Attachment 1, passage 634Illustration 6-3 Sample Indirect Cost Rate Proposal - Multiple Rate Method Department of Environmental Services For the Fiscal Year Ended June 30, XXXX Total Services Furnished by Other Gov't Agencies Departmental Costs (d) Allocation Indirect Financial Admin. Base Costs Personnel Accounting Purchasing Audit Director Mgmt. Services Equipment Total (a) (b) (f) Services Furnished (But Not Billed) By Other Government Agencies (c) Personnel No. of Employees $ 87,060 ($87,060) Accounting No. of Employees (e) 216,220 ($216,220) Purchasing No. of Purchase Orders (S22,211) Audit No. of Audit Hours 12,210 ($12,210) Subtotal $ 337,701 Departmental Indirect Costs Director's Ofc. Direct Salaries & Wages $ 122,610 ($122,610) Financial Mgmt. Transactions Processed 155,275 ($155,275) Admin. Services Direct Salaries & Wages 86,930 ($86,930) Equipment Use Uses of Equipment 16,800 ($16,800) Subtotal $ 381,615 Division/Bureau Air Quality and Noise S 47,480 $ 17,545 $ 41,495 $ 3,434 $ 1,089 $ 24,522 $ 23,776$ 15,543 $ 1,000 S 175,884 Community Environmental Control 61,210 12,920 30,575 3,434 52,641 11,997 28,394 2,289 1,080 29,885 10,659 175,294 Water Quality Management 174,864 Solid Waste Disposal 96,847 36,935 87,362 11,456 6,777 46,423 29,488 345,810 Parks and Forests 91,119 7,663 28,394 1,598 2,166 24,522 17,918 20,551 2,800 196,761 Subtotal $ 349,297 Totals $1.068,613 - 0- -0. - 0- - 0- - 0- - 0- $ 1,068,613 This is a sample. It is not intended to prescribe methods of charging costs.#
Attachment 1, passage 635Notes to Illustration 6-3 (a) The allocation bases used were selected as reasonable and applicable under the circumstances. Other bases could be just as acceptable if they represented a fair measure of cost generation or cost benefit. (b) The costs in this column must be reconciled to official financial statements. In this illustration, it is assumed that all costs incurred are allowable and relevant in accordance with OMB Circular A-87. To the extent that unallowable or excludable costs are included therein, a separate column should be added to the schedule to show the amounts and adjustments made. (c) These are carried forward from the central service cost allocation plan shown in Illustration 4-4. The costs of services furnished (but not billed) by other government agencies, which are derived through the central service cost allocation plan, are allocated to each functional division or bureau. This allocation could be made more precise by allocating the costs to each departmental administrative function, e.g., to financial management, administrative services, etc., and to the divisions or bureaus. The indirect costs of each departmental administrative service, plus its allocated amount of central service costs, would then be allocated to the divisions or bureaus. If the result of such allocations would have a material effect on the rates computed, the more precise method should be used. In the example presented, the dollar effect is not sufficiently material to warrant this level of precision. In addition to the listed unbilled services, the department also received services from other organizations for which it is billed at rates approved through the central service cost allocation plan (See Illustration 4-5). Illustration 6-3 assumes that these billed costs are already recorded in the accounting records of the department and included in the column Total Indirect Costs, or are treated as a direct cost. (d) Departmental indirect costs are allocated to each division or bureau. As with services furnished by other government agencies, explained in Note (c) above, the allocation of certain departmental indirect costs, such as equipment use charges, could have been allocated to other departmental administrative functions, if the results of such allocation would have had a material effect on the rates to be computed. In the example presented, the dollar effect is not sufficiently material to warrant the additional allocations. (e) Accounting services rendered by other agencies are allocated to the divisions or bureaus on the basis of number of employees. In Illustration 6-3, the accounting services provided by the central service agency were#
Attachment 1, passage 636predominantly payroll services. (f) The total indirect expenses developed for each division or bureau is carried forward to Illustration 6-4, where the relationship between the indirect expenses and direct salaries and wages of each division or bureau is used to develop indirect cost rates. Illustration 6-4 Sample Indirect Cost Rate Proposal - Multiple Rate Method Department of Environmental Services For the Fiscal Year Ended June 30, XXXX Direct Indirect Cost Divisions/Bureaus Indirect Costs Salaries and Wages Rates (a) (b) (c) Air Quality and Noise $ 169,560 $ 206,320 82.18% Community Environmental Control 169,200 481,182 35.16% Water Quality Management 168,666 410,771 41.06% Solid Waste Disposal 336,612 643,782 52.29% Parks and Forests 190,904 450,788 42.35% Total $1,068,613 $2,192,843 Notes: (a) The amounts in this column are from Illustration 6-3. (b) The amounts in this column are derived from, and must be reconciled to, the books and records of the department. Salaries and wages is the preferred base. However, other bases may be used where it results in a more equitable allocation of costs. Generally, the same base should be used for all divisions; however, if approved by the cognizant Federal agency, different bases may be used for one or more of the divisions. (c) The indirect cost rate for each division/bureau is computed by dividing the indirect costs for each division/bureau by the direct salaries and wages of that division/bureau. division/bureau indirect costs ________________________ = indirect cost rates for division/bureau division/bureau direct S&W This is a sample. It is not intended to prescribe methods of charging costs.#
Attachment 1, passage 6376.3 Special Rates Circular A-87 notes that there may be instances where a single indirect rate for all activities of a recipient department or agency may not be appropriate. Factors such as different physical locations for work, level of administrative support needed, organizational arrangements, and subaward practices, or a combination of these factors, may create the need for separate rates. It is not uncommon for these types of situations to result in a headquarters rate and multiple off-site rates. In addition, some Federal programs, such as those funded by the Department of Education, place limitations on allowable indirect costs. In those instances, restricted rates are issued. 6.4 Submission and Documentation of Proposals 6.4.1 Documenting Indirect Cost Proposals A cognizant agency may require additional data, depending on the circumstances, but each indirect cost proposal must include, at a minimum: 1. The rates proposed, including subsidiary work sheets and other relevant data, cross-referenced and reconciled to the financial data. 2. For allocated central service costs, the summary table included in the approved central service cost allocation plan, unless otherwise available to the funding agency. The summary schedule from the approved central service cost allocation plan is frequently needed because the Federal agency that is cognizant for a departmental indirect cost rate proposal may be different from the one that is cognizant for the central service plan for the overall governmental unit. 3. A copy of the financial data upon which the rate is based. 4. The approximate amount of direct base costs incurred under Federal awards, broken out between salaries and wages and other direct costs. The cognizant agency will use the breakdown between salaries and wages and other direct costs within the direct base costs to determine whether to establish the resulting indirect cost rate on the basis of salaries and wages or modified total direct costs. 5. A chart showing the organizational structure of the agency during the period for which the proposal applies, along with a functional statement(s) noting the duties and/or responsibilities of all units that comprise the agency. The organizational chart that is submitted with#
Attachment 1, passage 638the indirect cost rate proposal should be accompanied by a narrative statement. This statement should provide sufficient detail about the functions that are performed by component units to permit the proposal reviewer (cost negotiator) from the cognizant agency to differentiate levels of benefit provided and received within the organization. 6.4.2 Required Certifications Indirect cost rates, whether submitted to a Federal cognizant agency or maintained on file by the governmental unit, must be certified by the governmental unit using the Certificate of Indirect Costs as set forth in Attachment E. The certificate must be signed on behalf of the governmental unit by an individual at a level no lower than chief financial officer of the governmental unit that submits the proposal or component covered by the proposal. (See also 2.9, Government Certification.) 6.5 Review, Negotiation, and Approval of Rates OMB Circular A-87 places considerable discretion with the cognizant Federal agency assigned to particular recipients. It permits the cognizant agency to determine, within reasonable bounds, the level of detail that is appropriate to support a cost allocation plan and/or an indirect cost rate proposal. This discretion carries over to the review and approval process as well. 6.5.1 The Review Process In general, the cognizant agency will follow certain basic steps for most submissions. Note: there is no hard and fast rule about the approach or tools used. Typical steps in the review process are shown below:#
Attachment 1, passage 639Steps in the Review Process 1. Review the submission for materiality, completeness, and reliability of supporting data, including audited financial statements. 2. Acknowledge receipt and request any needed additional information. 3. Review prior negotiation and audit experience; assess prior agreements and applicable conditions. 4. Assess the submission's general reliability and the governmental unit's financial condition. 5. Determine the extent to which coordination with other awarding agencies may be necessary. 6. Review the proposal for accuracy and determine whether it includes all activities and costs of the governmental entity. 7. Determine whether unallowable costs have been excluded and whether allocation methods and billing mechanisms are appropriate and properly designed. 8. Assess what the appropriate rate base (salaries and wages, modified total direct cost, etc.) should be for the resulting indirect cost rate and the extent to which any rate established should be subsequently adjusted. 6.5.2 Indirect Cost Rate Negotiations Negotiations about submissions may be limited or extensive, based largely on the results of the review steps described above. In the case where, for any number of reasons, a rate cannot be negotiated, the Circular does permit unilateral action by a cognizant agency to establish a rate. 6.5.3 Features of a Typical Rate Agreement Appendix 3 is an example of a contemporary rate agreement containing the salient features that are likely to appear in those issued by most cognizant agencies. Note: there is no standard governmentwide Federal form employed for the purpose of rate determination. 6.6 Applying an Approved Rate to Grants and Contracts 6.6.1 Establishing the Amount of Approved Indirect Costs in the Award Budget Because Circular A-87 establishes a policy that Federal programs bear their fair share of costs recognized under the Circular, Federal awarding agencies are expected to recognize and use indirect cost rates approved by the cognizant agency for a particular recipient. This recognition and use usually#
Attachment 1, passage 640occurs at the time that an award is made. Awarding agency officials review direct cost proposals and applications to determine that anticipated costs included are necessary, reasonable, and allocable. Any proposed indirect costs are assessed according to whether or not an agreement exists with a cognizant agency. If one does, the awarding agency officials determine whether it will be fully recognized and to which object class categories of expenditure it will be properly applied. (Some Federal programs impose regulatory limits on the indirect percentage that will be allowed, e.g., HHS training grants that limit reimbursement to 8% of MTDC.) If no agreement exists, awarding agencies should encourage recipients to obtain one. In the interim, agencies may only award funds for direct and allocated costs. The awarding agency should conduct a review of these costs to determine the propriety of any allocations. Agencies may not establish indirect cost rates unless they are the cognizant agency for the recipient. 6.6.2 Applying the Rate to the Direct Cost Base and Calculating Claims Once the indirect cost rate is recognized within an award document, the governmental unit is permitted to apply that rate to the applicable base of the allowable direct costs incurred during award performance. Periodically the governmental unit is expected to submit a Financial Status Report (usually either Standard Form 269 or 269A) which summarizes total expenditures incurred under the award. It may claim indirect costs by multiplying its indirect cost rate by the direct cost elements to which the rate may be applied under the terms of the award. Thus, its total cost recovery for the applicable period is comprised of the allowable direct costs incurred plus the allowable, allocable indirect costs. 6.6.3 Effect of Rate Changes from One Fiscal Year to Another Occasionally, a governmental unit will receive an award which it performs over a period that extends beyond the applicability of a single, approved indirect cost rate. This is likely when the award period does not correspond to the fiscal year of the governmental unit. In such a case, the recipient is expected to apply its rate(s) to expenditures incurred during the applicable fiscal year and to maintain consistent accounting treatment according to its normal procedures of expenditure recognition. 6.7 Record Retention The Common Rule issued pursuant to OMB Circular A-102 covers most policies associated with records to be retained and/or disclosed by a governmental unit receiving Federal assistance funds. Section __.42 of that rule requires that all financial and programmatic records, supporting documents, statistical records, and other records of recipients and#
Attachment 1, passage 641subrecipients be retained. Section __.36 (i)(10) of the rule covers the record retention requirement for contractors under grants and their subcontractors. Generally, records must be retained for three years from the submission date of the final financial report for that funding period. However, if any litigation, claim, negotiation, audit, or other action involving the records has been initiated before the three-year retention period has expired, the records must be retained until the action is completed and all issues which arise from it have been resolved, or until the end of the regular three-year period, whichever is later. (A-102 Common Rule, §__.42(b)(2)). Section __.42(c)(4) of the Common Rule states that records associated with indirect cost rate proposals and cost allocation plans are included within the scope of the broader record retention requirement. Under that provision, "indirect cost rate computations or proposals, cost allocation plans, and 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)" are covered. 6.8 Audit Audit of Federal awards is an aid to determining whether financial information is accurate and whether an award recipient has complied with terms and conditions that could have an effect on claims for costs incurred under the award. Under the Inspector General Act of 1978, as amended, the Inspector General of a Federal agency may audit or investigate any program, function, or activity administered by that agency. This potential for review extends to those organizations (including state, local, and Indian tribal governments) that are performing under awards made by the Federal agency. However, as a way to assure the best use of audit resources, the Act requires the Inspectors General to determine the extent to which they can rely on audit work performed by nonfederal auditors. This policy, combined with the fact that the Single Audit Act of 1984, as amended, requires recipients to arrange to have independent audits performed on Federal financial assistance awards that they receive, means that these nonfederal examinations are the principal means by which a governmental unit’s compliance with Circular A-87 is determined. OMB is responsible for issuing implementing policies, procedures, and guidelines under the Act. Applicable OMB guidance for auditors performing audits under the Single Audit Act identifies general and specific requirements against which the auditor is expected to test governmental unit compliance. Several of these requirements relate to policies contained in Circular A-87. Included within the general requirements are: # allowable costs/cost principles;#
Attachment 1, passage 642# Federal financial reports; and # administrative requirements. Included in the specific requirements section of each listed Federal program are use and use restrictions and limitations, including matching and cost sharing, maintenance of effort, and earmarking requirements. 6.9 Disputes and Appeals If a dispute arises concerning the application of provisions of Circular A-87, the method of resolving the issues raised and the party responsible for adjudicating them depend on the nature of the dispute. For example, if a dispute arises concerning the submission, negotiation, or establishment of a cost allocation plan or indirect cost rate, the procedures of the cognizant agency govern. On the other hand, if a dispute arises about questioned or disallowed costs associated with a particular Federal award, the procedures of the awarding agency govern. Costs incurred by a governmental unit may be questioned during conduct of an audit or through some other form of monitoring or awarding agency oversight. They may be questioned because of an alleged violation of applicable policy, because they are not supported by adequate documentation at the time of the audit, or because they are deemed to be unreasonable or unnecessary by the responsible auditor or other party examining them. The determination as to whether costs will be disallowed is made by an awarding agency official authorized to issue decisions on behalf of the agency. Depending upon awarding agency procedures, there may be several layers of review within the agency before such a decision is considered final. Each Federal agency has its own regulations and policies governing administrative appeals of agency determinations, and many agencies either do not allow appeals, or limit them to very specific areas. The costs of prosecuting these claims may not be allowable under agency interpretations of the A-87 prohibition on pursuing claims against the Federal Government. 6.10 Questions and Answers on Attachment E 6-1 The definition of an "Indirect Cost Rate Proposal" in Attachment E, paragraph B.1 is "the documentation prepared by a government unit...to substantiate its request for the establishment of an indirect cost rate." Based on the definition of "Government Unit" in Attachment A, paragraph B.13, can a state submit a state-wide indirect cost rate proposal in lieu of a state-wide cost allocation plan (SWCAP)? [Att. E, ¶ B.1]#
Attachment 1, passage 643No. A state, if it wishes to identify and claim all administrative and support costs provided to its components (operating agencies) which receive Federal awards, must prepare and submit a state-wide central service plan (SWCAP) in accordance with Attachment C of A-87. That Attachment, at paragraph D.1, stipulates that "[e]ach State will submit a plan...." The use of the term "governmental unit" in the above referenced Attachment E is viewed as an editing error where "government component" was intended. The only government units that have been permitted to develop indirect cost rates in lieu of cost allocation plans for centralized government support activities are local units of government. This is permitted under Attachment C, paragraph D.3. 6-2 A review of Attachment E, paragraph D.1.b raises several questions: (a) When reference is made to "governmental unit," is it actually referring to a "government component" for which an indirect cost (IDC) rate is required? (b) It notes that OMB will publish lists of governmental units and their Federal cognizant agencies. Governmental units not listed on OMB’s published lists of governmental units and their cognizant agencies must prepare an IDC rate proposal, and keep it on record unless the cognizant Federal agency requires that it be submitted for review and negotiation. In the past, a state component was required to negotiate an IDC rate if it wanted to recover IDCs. Has this policy changed? (c) Based on the comments in (b) above, is a local government that is assigned a cognizant Federal agency required to submit its IDC proposal for review and negotiation? [Att. E, ¶ D.1.b] The responses to each of the above are as follows: (a) This is an editing error and "component" was intended. (b) There has been no change. If a state component wishes to recover its IDC, it must develop, submit, and negotiate an IDC rate or cost allocation plan with the cognizant Federal agency.#
Attachment 1, passage 644(c) Appendix 2 identifies "major" local governments that have been assigned a cognizant Federal agency. At the present time local governments are not required to submit proposals for approval unless the cognizant Federal agency requires submission. 6-3 Attachment E, paragraph F.3 discusses IDC CAPs for a governmental unit not by the use of a rate but through a narrative plan similar to public assistance plans. By definition a "governmental unit" is the entire state or local government, not a component thereof. Is this the intent of this section? [Att. E, ¶ F.3] No. This was an editorial error. In some cases, because of the nature of its operations, a component or agency may find it necessary to develop a cost allocation plan rather than an indirect cost rate. See Q&A 2-18, Part 2 of this guide, for the criteria to be used when determining when a cost allocation plan should be used in lieu of an indirect cost rate.#
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Attachment 1, passage 646REFERENCE OMB Circular A-87 references many documents. In addition, various bodies have issued documents which should be used in conjunction with Circular A-87 to ensure compliance with standards of accountability in Federal funds management. Pertinent 1 documents are listed below, along with their issue date and source. This document: as issued: may be obtained from: OMB Circular A-87, Cost Principles May 17, 1995 Executive Office of the President (EOP) for State, Local and Indian Tribal Publications Office, 202-395-7332 or via the Governments Internet, http://www.whitehouse.gov/WH/EOP/omb 2 OR the Federal Register at 60 FR 26484 OMB Circular A-102, Grants and October 14, 1994 Executive Office of the President (EOP) Cooperative Agreements with State (Circular); March Publications Office, 202-395-7332 or via the and Local Governments, and the 11, 1988 (Common Internet, accompanying Common Rule, Rule), as revised http://www.whitehouse.gov/WH/EOP/omb Uniform Administrative April 19, 1995 Requirements for Grants and Cooperative Agreement to State and OR the Federal Register, at 59 FR 52224, 53 FR 8087, 60 FR 19638 Local Governments OMB Circular A-110, Uniform November 29, 1993 Executive Office of the President (EOP) Administrative Requirements for Publications Office, 202-395-7332 or via the Grants and Agreements with Internet, Institutions of Higher Education, http://www.whitehouse.gov/WH/EOP/omb Hospitals, and Other Non-Profit Organizations, and the attached OR the Federal Register, at 58 FR 62992 Common Rule The Federal Acquisition Streamlining October 13, 1994 Statutes at large 3 Act of 1994 (FASA) (PL 103-355) 1 2 3 All issue dates listed in the Reference section of this guide are issue dates as of publication, 4/8/97. Back issues of the Federal Register are generally available in paper or on microfiche at law libraries and larger public libraries. The 1995 and later issues (volumes 60 and up) are available via GPO Access on the Internet, http://www.access.gpo.gov. Available at law libraries and some larger public libraries. Statutes are filed by public law number.#
Attachment 1, passage 647This document: as issued: may be obtained from: OMB Circular A-128, Audits of State April 12, 1985 Executive Office of the President (EOP) 4 and Local Governments Publications Office, 202-395-7332, also via 5 fax-on-demand, 202-395-9068 , or via the Internet, http://www.whitehouse.gov/WH/EOP/omb OMB Circular A-133, Audits of April 30, 1996 Executive Office of the President (EOP) Institutions of Higher Education and Publications Office, 202-395-7332, also via Other Non-Profit Institutions fax-on-demand, 202-395-9068, or via the Internet, http://www.whitehouse.gov/WH/EOP/omb OR the Federal Register, at 61 FR 19134, via the Internet, http://www.access.gpo.gov Compliance Supplement for Single September 1990 US Government Printing Office, Audits of State and Local Superintendent of Documents, Mail Stop: Governments SSOP, Washington, DC 20402-9328, 202-512-1800 Questions and Answers on the Single November 13, 1987 The Federal Register, at 52 FR 43712 Audit Process of OMB Circular A- 128, "Single Audits of State and Local Governments" Common Rule on New Restrictions February 6, 1990 The Federal Register, at 55 FR 6736 on Lobbying 104-65) Lobbying Disclosure Act of 1995 (PL December 1995 Statutes at Large OR via the Internet through GPO Access, http://www.access.gpo.gov OMB Circular A-21, Cost Principles May 8, 1996 Executive Office of the President (EOP) for Educational Institutions Publications Office, 202-395-7332, or via the Internet, http://www.whitehouse.gov/WH/EOP/omb OR the Federal Register, at 61 FR 20880, via the Internet, http://www.access.gpo.gov OMB Circular A-122, Cost July 8, 1980, and Executive Office of the President (EOP) Principles for Nonprofit revised April 27, Publications Office, 202-395-7332 Organizations 1984, May 19, 1987, and October 6, 1995 OR the Federal Register, at 45 FR 46022, 49 FR 18260, 52 FR 19788, 60 FR 52516 4 5 This Circular is scheduled to be rescinded; state and local government audits will be covered by a revised OMB Circular A-133. Only circulars of less than 50 pages are available from OMB’s fax-on-demand service.#
Attachment 1, passage 648This document: as issued: may be obtained from: 45 CFR Part 95, General October 1, 1996 US Government Printing Office, Administration – Grant Programs Superintendent of Documents, Mail Stop: (Public Assistance and Medical SSOP, Washington, DC 20402-9328, 202- Assistance) 512-1800 [This page intentionally left blank.] APPENDIX 1 OMB CIRCULAR A-87 Cost Principles for State, Local, and Indian Tribal Governments APPENDIX 2 Cognizant Agency Assignments APPENDIX 3 Sample Indirect Cost Rate Agreement STATE AND LOCAL RATE AGREEMENT DATE: July 3, 1996 DEPARTMENT/AGENCY: FILING REF.: The preceding State of X Family & Social Agreement was dated Services Administration May 10, 1994 he Federal Government, subject to the conditions in Section III The rates approved in this agreement are for use on grants, contracts and other agreements witl SECTION I: INDIRECT COST RATES* RATE TYPES: FIXED FINAL PROV. (PROVISIONAL) PRED.(PREDETERMINED) EFFECTIVE PERIOD TYPE FROM IO RATE(%) LOCATIONS APPLICABLE TO FINAL 07/01/93 06/30/94 14.4 *All Division of DARS PROV. 07/01/94 UNTIL AMENDED 14.4 * All Division of DARS FINAL 07/01/93 06/30/94 4.4 ** All Div of Mental Health PROV. 07/01/94 UNTIL AMENDED 4.4 ** All Div of Mental Health **BASE: Stal Hospite pchs, and suba ward and love clush uniems of equipment, alerations and renovations, Services (DARS), exclusive of the Developmental Disabilities Centers. Direct salaries and wages, including all fringe benefits for the Division of Disabilities, Aging, and Rehabilitative NOTE: The State claims use allowance on capital expenditures over $1,000.#
Attachment 1, passage 649DEPARTMENT/AGENCY: State of X Family & Social Services Administration AGREEMENT DATE: July 3, 1996 SECTION II: SPECIAL REMARKS TREATMENT OF FRINGE BENEFITS: Fringe benefits are specifically identified to each employee and are charged individually as direct costs. The directly claimed fringe benefits are listed in the Special Remarks Section of this Agreement. TREATMENT OF PAID ABSENCES: Vacation, holiday, sick leave pay, and other paid absences are included in salaries and wages and are claimed on grants, contracts, and other agreements as part of the normal cost for salaries and wages. Separate claims for the costs of these paid absences are not made. FRINGE BENEFITS: FICA Retirement Group Insurance Worker’s Compensation Unemployment Insurance#
Attachment 1, passage 650ORGANIZATION: State of X Family & Social Services Administration AGREEMENT DATE: July 3, 1996 SECTION III: GENERAL A. LIMITATIONS: The rates in this Agreement are subject to any statutory or administrative limitations and apply to a given grant, contract, or other agreement only to the extent that funds are available. Acceptance of the rates is subject to the following conditions: (1) Only costs incurred by the organization were included in its indirect cost pool as finally accepted: such costs are legal obligations of the organization and are allowable under the governing cost principles; (2) The same costs that have been treated as indirect costs are not claimed as direct costs; (3) Similar types of costs have been accorded consistent accounting treatment; and (4) The information provided by the organization which was used to establish the rates is not later found to be materially incomplete or inaccurate by the Federal Government. In such situations the rate(s) would be subject to renegotiation at the discretion of the Federal Government. B. ACCOUNTING CHANGES: This Agreement is based on the accounting system purported by the organization to be in effect during the Agreement period. Changes to the method of accounting for costs which affect the amount of reimbursement resulting from the use of this Agreement require prior approval of the authorized representative of the cognizant agency. Such changes include, but are not limited to, changes in the charging of a particular type of cost form indirect to direct. Failure to obtain approval may result in cost disallowances. C. FIXED RATES: If a fixed rate is in this Agreement, it is based on an estimate of the costs for the period covered by the rate. When the actual costs for this period are determined, an adjustment will be made to a rate of a future year(s) to compensate for the difference between the costs used to establish the fixed rate and actual costs. D. USE BY OTHER FEDERAL AGENCIES: The rates in this Agreement were approved in accordance with the authority in Office of Management and Budget Circular A-87, and should be applied to grants, contracts, and other agreements covered by this Circular, subject to any limitations in A above. The organization may provide copies of the Agreement to other Federal Agencies to give them early notification of the Agreement. E. OTHER: If any Federal contract, grant, or other agreement is reimbursing indirect costs by a means other than the approved rate(s) in this Agreement, the organization should (1) credit such costs to the affected programs, and (2) apply the approved rate(s) to the appropriate base to identify the proper amount of indirect costs allocable to these programs. BY THE COGNIZANT AGENCY BY THE DEPARTMENT/AGENCY: ON BEHALF OF THE FEDERAL GOVERNMENT: State of X Family & Social Services Administration DEPARTMENT OF HEALTH AND HUMAN SERVICES (DEPARTMENT/AGENCY) (AGENCY) _____________________________________________ _____________________________________________ (SIGNATURE) (SIGNATURE) _____________________________________________ _____________________________________________ (NAME) (NAME) DIRECTOR, DIVISION OF COST ALLOCATION _____________________________________________ (TITLE) (TITLE) _____________________________________________ July 3, 1996 (DATE) (DATE) 5629 HHS REPRESENTATIVE: _____________________ Telephone: _____________________________ ______#
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Attachment 1, passage 652INDEX PAGE Aircraft, Private . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 3-29, Q&A 3-55 Allocability . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . p.2-8, §2.8.2 Allocation Bases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .p. 4-15, §4.6.2 Allowability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 2-7, §2.8; p. 2-9, §2.8.3 Alternative Methods . . . . . . . . . . . . . . . . . . . . . . p. 2-1, §2.3; p. 2-13, Q&A 2-1 Applicability, General . . . . . . . . . . .. . . . . . . . . . . . . p. 2-2—2-4, §§2.4.1—2.4.3 Block Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 2-14, Q&A 2-4 Performance Partnerships . . . . . . . . . . . . . . . . . . . . . . . . p. 2-14, Q&A 2-5 Subrecipients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 1-3, §1.3 Applicable Credits . . . . . . . p. 2-7, §2.7, p. 2-20, Q&A 2-17; p. 4-27, Q&A 4-11 Approval of Costs under CAPs . . . . . . . . . p. 2-14, Q&A 2-6; p. 2-15, Q&A 2-7 Benefitting Programs . . . p. 2-17, Q&A 2-12; p. 2-17—2-18, Q&As 2-13—2-14 Billed Costs (See also Retained Earnings) . . . . . . . .p. 4-16, §4.7; p. 4-18—4-22, Illustrations 4-6 and 4-7; p. 4-25—4-26, Q&As 4-8—4-9 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 3-21, Q&A 3-35 Capital Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 3-29, Q&A 3-53 Certification . . . . . . . . . . . . . . . . . . .p. 2-10, §2.9; p. 4-6, §4.5.6; p. 6-14, §6.4.2 Consistency . . . . . . . . . . p. 2-9, §2.8.3; p. 2-15, Q&A 2-10; p. 2-16, Q&A 2-11 Cost Allocation Plans . . . . . . . . . . . . . . . . . . . . . . . p. 2-20, Q&As 2-18—2-19; p. 4-23—4-25, Q&A 4-1—4-7 Depreciation/Use Allowances . . . . . . . . . . . . p. 3-18—3-22, Q&As 3-28—3-38 Accelerated . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . p. 3-19, Q&A 3-32 ADP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. p. 3-7, Q&A 3-3 Donated Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 2-18, Q&A 2-15 Effort Documentation . . . . . . . . p. 3-13—3-17, Q&As 3-15—3-17, 3-19—3-24 FMC 74-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 1-5, Q&A 1-1 General Cost of Government . . . . . . . . . . . p. 2-15, Q&A 2-9; p. 3-7, Q&A 3-2; p. 3-23, Q&A 3-41 Handbook of Public Assistance Administration . . . . . . . . . . . . . p. 5-6, Q&A 5-1 Indirect Costs, General Subrecipients . . . . . . . . . . . . . . . . . . . p. 2-14, Q&A 2-3; p. 5-6, Q&A 5-2 Interest, General . . . . . . . . . . . . . . . . . . . p. 3-6 (Highlights), p. 3-25, Q&A 3-47 ADP . . . . . . . . . . . . . . . . . . . . . . . . . p. 3-8, Q&A 3-4; p. 3-25, Q&A 3-46 Equipment, Allowability . . . . . . . . . . . . . . . . . . . . . . . . . . p. 1-7, Q&A 1-7 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 3-24, Q&A 3-43 Nonexistent Assets . . . . . . . . . . . . p. 3-24, Q&A 3-44, p. 3-25, Q&A 3-45 Positive Cashflow Offset . . . . . . . . . . . . . . . . p. 3-26, Q&A 3-48; p. 3-27, Illustration 3-1; p. 3-28, Q&As 3-49—3-50 Relocation of Programs . . . . . . . . . . . . . . . . . . . . . . . . p. 3-23, Q&A 3-40#
Attachment 1, passage 653Legal Costs . . . . . . . . . . p. 3-17—3-18, Q&As 3-25—3-27; p. 3-23, Q&A 3-39 Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 3-8—3-11, Q&As 3-7—3-11 Primary Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 2-17, Q&A 2-13 Program Cost Principles . . . . . . . . . . . . . . . . . . . p. 1-4, §1.4; p. 2-13, Q&A 2-2 Proposal Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 3-29, Q&A 3-52 Reasonableness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 2-7, §2.8.1 Reserves, Internal Service Funds (ISFs) . . . . p. 4-21—4-22; p. 4-26, Q&A 4-10 Retained Earnings . . . . p. 4-18—4-22, Illustrations 4-6 and 4-7; p. 4-27—4-28, Q&As 4-11—4-14 Severance Pay . . . . . . . . p. 3-11—3-13, Q&As 3-12—3-14; p. 3-23, Q&A 3-42 Taxes, PILOT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 3-29, Q&A 3-54 Unpaid Leave . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 3-8, Q&As 3-5—3-6#
Attachment 1, passage 654Guidelines for States Participating in the Pipeline Safety Program Appendix O APPENDIX O PHMSA State Pipeline Safety Grants Guidance for Indirect Cost Recovery Revised December 2023 Summary The purpose of this appendix is to guide all pipeline safety grant programs as to the establishment of an indirect cost rate or other options to collect indirect costs. This replaces any previously issued guidance. Summary of Topics • Overview of 2 CFR 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards • What are an Indirect Cost Rate and Indirect Cost Proposal? • What do State Programs need to do? • Where should programs go for guidance? Overview of 2 CFR 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards 2 CFR 200 is the Federal Government Guidance on Administrative Requirements, Cost Principles, and Audit Requirements for Federal awards. This codified regulation provides a government-wide framework for grants management. 2 CFR 200 supersedes and streamlines the requirements from any previously applicable requirements under 2 CFR 225 and any previous OMB Circulars A-87 and OMB Circular A-133, which applied to pipeline safety grants.#
Attachment 1, passage 655In determining whether costs are allowable or not follow these basic guidelines: • Necessary and reasonable • Allocable • Authorized under state or local laws • Not restricted by PHMSA policy • Not otherwise restricted by statute • All activities are charged uniformly • Consistent treatment • In accordance with GAAP • Not included as a cost of another federal award • Net of all applicable credits • Adequately document What is an Indirect Cost Rate and Indirect Cost Rate Proposal? Indirect Cost Rate An indirect cost rate is a device for determining equitably the proportion of indirect costs for each program. An indirect cost rate assists a grantee to obtain the full cost of operating a grant or a program, not just the more easily identifiable “direct cost”. An indirect cost rate is the ratio (expressed as a percentage) of the indirect cost to a direct cost base. Indirect costs may be recovered only to the extent that direct costs were incurred. To determine the reimbursable amount for indirect costs, the indirect cost rate is applied to the amount of direct costs expended, NOT to the total grant award. The direct cost base can vary from state to state but each is determined in accordance with 2 CFR 200. Per 2 CFR 200 – Appendix VII, “indirect costs include (a) the indirect costs originating in each department or agency of the governmental unit carrying out Federal awards and (b) the costs of central governmental services distributed through the central service cost allocation plan (as described in Attachment V to Part 200) and not otherwise treated as direct costs”. Indirect costs are normally charged to federal awards by the use of an indirect cost rate. A separate indirect cost rate(s) is usually developed for each department or agency of the governmental unit claiming indirect costs under federal awards. In addition to Appendix VII of 2 CFR 200, guidelines and illustrations of indirect cost proposals are provided in a brochure published by the Department of Health and Human Services entitled “A Guide for State and Local Government Agencies: Cost Principles and Procedures for Establishing Cost Allocation Plans and Indirect Cost Rates for Grants and Contracts with the Federal Government”. This is also known as ASMB C-10 and is located in the State Guidelines as Appendix N.#
Attachment 1, passage 656Indirect Cost Rate Proposal An indirect cost rate proposal is the documentation prepared by a governmental unit or subdivision thereof to substantiate its request for the establishment of an indirect cost rate. All pipeline safety programs desiring to claim indirect costs in their grant reimbursement must prepare an indirect cost rate proposal., The proposal and related documentation must be retained for audit in accordance to record retention requirements. Proposal requirements include the following: • Identification of costs considered to be indirect • Identification of costs used as the direct costs to assist in setting the rate • Rate(s) Development Schedules • Copies of Financial Data • Organizational Charts • Certification of the rate by an authorized official Indirect Cost Rate Types The indirect cost rate type is determined between the cognizant agency and the grantee. Descriptions of the differing rates are as follows: • "Predetermined rate" means an indirect cost rate, applicable to a specified current or future period, usually the governmental unit's fiscal year. This rate is based on an estimate of the costs to be incurred during the period. Except under very unusual circumstances, a predetermined rate is not subject to adjustment. (Because of legal constraints, predetermined rates are not permitted for Federal contracts; they may, however, be used for grants or cooperative agreements.) Predetermined rates may not be used by governmental units that have not submitted and negotiated the rate with the cognizant agency. Given the potential advantages offered by this procedure, negotiation of predetermined rates for indirect costs for a period of two to four years should be the norm in those situations where the cost experience and other pertinent facts available are deemed sufficient to enable the parties involved to reach an informed judgment as to the probable level of indirect costs during the ensuing accounting periods. • "Fixed rate" means an indirect cost rate that has the same characteristics as a predetermined rate, except that the difference between the estimated costs and the actual, allowable costs of the period covered by the rate is carried forward as an adjustment to the rate computation of a subsequent period. • "Provisional rate" means a temporary indirect cost rate applicable to a specified period which is used for funding, interim reimbursement, and reporting indirect costs on Federal awards pending the establishment of a "final" rate for that period.#
Attachment 1, passage 657• "Final rate" means an indirect cost rate applicable to a specified past period which is based on the actual allowable costs of the period. A final audited rate is not subject to adjustment. • “De Minimis rate” means a rate of 10% of modified total direct costs (MTDC) and may be used indefinitely without having a negotiated indirect rate. See 2 CFR 200.414. Indirect Cost Rate Cap There is a program implemented cap on indirect costs of 20% of total direct costs submitted for reimbursement. Due to federal funding limitations, and to substantially fund the direct costs of all programs, this cap is implemented and consistent with previous program policy. An analysis shows the negative impact on the future ability to fund essential pipeline program direct costs of all programs due to the excessive indirect costs collected by a small number of participating programs. What do State Programs need to do? Who will approve the indirect cost proposal? The “Cognizant” federal agency is responsible for indirect cost proposals developed under 2 CFR 200 for each grant program. This agency is typically the federal agency from which the state agency receives the majority of its federal funding. In most cases, this agency is PHMSA, and all indirect cost plans shall be submitted to Rex Evans via email at rex.evans@dot.gov. PHMSA/DOT will likely be the cognizant agent for most programs that have not previously secured an indirect cost rate, but it is recommended that each program consult its state grant office for initial assistance. What will each program need? All state programs will need to have either an approved indirect cost rate agreement from their cognizant agent if other than PHMSA, an accepted indirect cost plan submitted to PHMSA, or they may unconditionally collect the de minimis rate of 10% of MTDC as noted above. PHMSA reserves the right to negotiate any proposal submitted where PHMSA serves as the cognizant agent. When is an indirect cost plan developed? Indirect cost proposals should be developed within six months after the close of the governmental unit’s fiscal year unless an exception is approved by the cognizant federal agency. (See Appendix VII of 2 CFR 200 for guidance)#
Attachment 1, passage 658When PHMSA is the cognizant agency, when should plans be submitted? Updated indirect cost plans should be submitted by December 31 to rex.evans@dot.gov. Does the program have to have an “Indirect Cost Rate Agreement”? No. If a state chooses, no plan or agreement is necessary and may collect up to a maximum of 10% of MTDC. Is there a cap on the amount of indirect costs a program can recover? Yes, per the program implemented policy as described above, there is a limitation of 20% of direct program costs that can be submitted for reimbursement in the pipeline safety grant program. Where should programs go for guidance? 1. Your agency financial personnel and state grant office should be the first place you seek guidance 2. See 2 CFR 200 and ASMB C-10 3. PHMSA State Programs Contact: Rex Evans – rex.evans@dot.gov 217-801-8014#
Attachment 1, passage 659Guidelines for States Participating in the Pipeline Safety Program Appendix P#
Attachment 1, passage 660U. S. Department of Transportation Pipeline and Hazardous Materials Safety Administration PHMSA Office of Pipeline Safety Procedure to Monitor, Evaluate, and Reject a State Program’s Certification Effective Date: April 2012 I. Purpose The following procedure outlines the process by which the Secretary of Transportation (Secretary), and PHMSA as the designee, may monitor, evaluate, and reject a state program’s certification and therefore assume intrastate regulatory, inspection, and enforcement responsibilities, from a state under an annual certification. The Secretary may enter into a certification agreement with a state such that the state assumes regulatory oversight responsibility for intrastate facilities within that state. The certification requires that the state successfully meet several requirements, further discussed in this document. II. Secretary’s Authority to Monitor State Programs After a state becomes certified to regulate its intrastate facilities, the Secretary may monitor a safety program to ensure that the program complies with the certification. PHMSA’s Office of Pipeline Safety (OPS) monitors the performance of the state agencies participating in the pipeline safety program through PHMSA’s State Programs Division. PHMSA has broad statutory authority to regulate pipeline safety. If PHMSA determines that the state is not satisfactorily complying with the certification requirements, then PHMSA may reject the certification, assert United States Government jurisdiction, or take other appropriate action to achieve adequate oversight. PHMSA may adopt policies and rules implementing its statutory authority to reject a state’s certification III. Establishment of Administrative Process and Procedures for Unsatisfactory Compliance with Certification Requirements The following includes the administrative process and procedures PHMSA will follow if a state is found to have such deficiencies in its pipeline safety program that it is not satisfactorily complying with the certification requirements and the statute. Such a finding is a prerequisite before PHMSA may initiate a proceeding to reject a state’s certification. In determining a state program’s inadequacies, PHMSA may also evaluate a state’s overall pipeline safety program, as well as evaluate past specific state oversight activities and enforcement actions. This document also includes the established administrative process and procedures and other remedies available to a state for contesting a notice alleging it failed to satisfactorily comply with the certification, should the state elect to do so.#
Attachment 1, passage 6612 IV. Considerations and alternatives before PHMSA rejects a state’s certification Before rejecting a state certification, PHMSA’s Associate Administrator, OPS, may take other appropriate action to achieve adequate compliance with the certification, which may include: A. The Director of State Programs may issue a letter to the State Senior Official responsible for the pipeline safety program identifying the state’s deficiencies and warning the state to make certain improvements or take other actions necessary to maintain the state’s certification with PHMSA. B. PHMSA may notify the state in writing of the proposed action(s) to reject, suspend, or modify a state’s certificate and provide that the matter may be resolved once PHMSA verifies that the evidence submitted by the state demonstrates completion of the following: 1. corrected the deficiencies, 2. complied with the required corrective action(s), or 3. a written agreement to correct the deficiencies within the time specified by PHMSA; or on or before the end of the suspension period. C. After giving the state an opportunity to respond, PHMSA may: 1. temporarily suspend the state’s certificate, if PHMSA determined that the deficiency can be corrected within a reasonable amount of time; 2. allow states, deemed to have failed to satisfactorily comply with the certification requirements, the opportunity to enhance their programs and to demonstrate their adequacy through periodic reviews; or 3. convert a state certification to a 49 U.S.C. § 60106 agreement, which reduces the state’s pipeline safety responsibility. D. A state may give up its certificate prior to a final action by PHMSA to reject the state’s certificate. The state may do this by sending a certified letter of intent to relinquish all pipeline safety responsibilities to the Associate Administrator, OPS. The letter should include a brief explanation with a description of any outstanding or active inspections and enforcement activities, and include a statement that the state understands and agrees that by relinquishing the certification PHMSA will assume responsibility for intrastate pipeline safety. E. PHMSA may take steps to reject a state’s certification if the state failed to demonstrate that it made improvements or took other actions required by PHMSA to maintain the state’s certification. V. PHMSA’s rejection of a state’s certification When PHMSA finds that a state has such deficiencies in its pipeline safety program that it is not satisfactorily complying with the certification requirements, then PHMSA may initiate Last Revised December 31, 2015 2012#
Attachment 1, passage 6623 action to reject a state’s certification. PHMSA must document the basis for an allegation that a state failed to satisfactorily comply with the certification requirements. VI. Unsatisfactory Compliance Elements Below are illustrative examples of nonconformance. A state program may be considered unsatisfactory if the state engages in one or more of these (as circumstances warrant): A. Substantially failed to conform to the requirements detailed in its certification or the statute when the state: - Failed to have regulatory jurisdiction over the standards and practices prescribed by the certification and statute, - Failed consistently to take enforcement or corrective action after finding significant violations of pipeline safety laws and regulation, - Failed to adopt regulations at least as stringent as the minimum Federal regulations, - Failed to provide adequate oversight through ways that include inspections conducted by State employees that meet the qualifications prescribed by the statute, - Failed to encourage and promote the establishment of a damage prevention program to prevent excavation damage to pipelines, to which the certification applies, subjecting persons who violate the program requirements to civil penalties and other enforcement actions substantially the same as prescribed by the statute, - Failed to provide for the enforcement of record maintenance, reporting, and inspection substantially the same as provided in the statute, or B. Failed to provide for the enforcement of safety standards under a state law by injunctive relief and civil penalties substantially the same as provided in the statute. C. Has been unable to have the majority of inspectors successfully complete requisite pipeline safety training conducted by PHMSA. D. Engaged in any behavior that gives PHMSA reason to believe the state has not satisfactorily complied with the certification requirements or statute. E. Performance indicators, such as incident rates in combination with corrective actions, indicate the state is not satisfactorily meeting the intent of the safety oversight program. Last Revised December 31, 2015 2012#
Attachment 1, passage 6634 VII. Adjudication Process and Procedures: Notice of Intent to Reject a State’s Certification/Show Cause Order When PHMSA determines that a state has such deficiencies in its pipeline safety program that it is not satisfactorily complying with the certification requirements, PHMSA must notify the state of its intent to reject the state’s certification and provide an opportunity for a hearing before taking final action. PHMSA’s Associate Administrator, OPS, may initiate the proceedings by serving Notice on the State with an order to show cause why the state’s certificate should not be rejected. The Notice must include the basis for each allegation that a state failed to satisfactorily comply with the certification requirements. When Notice is given, the state bears the burden of proof that it is enforcing satisfactorily compliance with the prescribed standards. The Notice shall provide an opportunity for the state to appear at a hearing to show cause why PHMSA should not reject its certificate or to show cause why it has not completed any required action(s) identified in written correspondence from PHMSA. The show cause order shall provide: a time and place for the hearing and shall be served upon the state to give evidence upon the matter specified therein contain a statement(s) of the matters or allegations with respect to which PHMSA is inquiring; notify the state they bear the burden of proof for enforcing satisfactorily compliance with the prescribed standards notice and opportunity for the state to respond to any allegation(s) that it has not satisfactorily enforced compliance with safety standards in accordance with 49 U.S.C. Chapter 60101 et seq. PHMSA may dismiss a Notice to show cause before issuing a final order based on evidence that the state has taken action to address the alleged deficiencies the state appear no less than twenty business days after the receipt of such order, except where the safety of life, environment or property is involved, PHMSA may provide in the order for a shorter period of time to appear an extension of time may be granted upon a written request timely submitted by the state demonstrating good cause for an extension notice and opportunity to be represented by counsel at the hearing. notice and opportunity for the state to present witnesses, and submit any relevant explanations, information and material during a hearing. an opportunity to present evidence on any allegation(s) PHMSA to make publicly available all notices, findings and determinations. an opportunity for the state to petition for reconsideration of the final determination[process to be further defined] Last Revised December 31, 2015 2012#
Attachment 1, passage 6645 PHMSA shall make a final written determination, including the reasons for the decision. PHMSA will notify the state of its final determination, including a brief statement of the reason(s) why the state’s certificate should or should not be rejected, or whether other appropriate action may be taken. VIII. Adverse Action Any adverse action taken by PHMSA against a state may impact the state’s grant funding. IX. Reinstatement of State Certification A decertified State may apply for certification to PHMSA and must provide supporting documentation that the state meets certification requirements. A. A state applying for reinstatement must provide evidence of compliance with all certification requirements, at least 30 days prior to the next grant application/certification opportunity. B. PHMSA will respond to such requests and perform an adequacy review in a timely manner. C. PHMSA may not consider an untimely application for reinstatement or an application that failed to include all evidence of compliance at least 30 days prior to the next grant application/certification opportunity. D. PHMSA may grant a request to reinstate a state’s certification upon such showing by the state that it has improved its pipeline safety program to an adequate level. Relevant Contacts Office of Pipeline Safety - Zach Barrett, Director of State Programs Alan Mayberry, Deputy AA Policy & Programs Office of Chief Counsel – Deputy Chief Counsel Chief Counsel Last Revised December 31, 2015 2012#
Attachment 1, passage 665Guidelines for States Participating in the Pipeline Safety Program Appendix Q Revised December 2022 Appendix Q – PIPELINE SAFETY GRANT PROGRESS REPORT SCORING STATE PERFORMANCE CRITERIA (Gas) 1. RATING FROM STATE EVALUATION (50 PERCENT OF SCORE) 2. SELECTED INFORMATION FROM STATE PROGRESS REPORT/AGREEMENT (50 PERCENT OF SCORE) A. Gas Programs - Extent of Intrastate Safety Jurisdiction (12 Points) (Progress Report Attachment 1) N = Number of operator types over which state has jurisdiction M = Number of operator types located in state 60105 State: N/M x 12 60106 State: N/M x 12 x .5 Distribution 1. Private 2. Municipal 3. Master Meter 4. LP Gas 5. LNG Plants Transmission 6. Intrastate Other 7. Gathering Lines (jurisdictional) 8. Offshore Facilities (state waters) B. Inspector Qualifications (8 POINTS) (Progress Report Attachment 7, 7a) 8 - Highest percentage of inspectors in categories I and II (Highest percentage of inspectors (50% or greater) are in categories I and II combined) 4 - Highest percentage of inspectors in categories I, II and III (If percentage of categories I and II combined are less than 50% but percentage of inspectors in categories I, II and III combined are 50% or greater) 0 - Highest percentage of inspectors in categories III, IV and V (If categories I, II and III combined are below 50%.)#
Attachment 1, passage 666Appendix Q – PIPELINE SAFETY GRANT PROGRESS REPORT SCORING C. Number of Inspection Person-Days and Allocation of Effort (11 POINTS) (Progress Report Attachment 2) Inspection Person-Days (9 points) – • Did state meet total minimum number of required Person-Days? (Actual Person-Days are verified on Attachment 2 and required minimum Person-Days are communicated to each program) o Calculation = Total Actual Person-Days/Total Required Person-Days 9 - Meets or exceeds the recommended number of inspection person-days. 7 - Comes within 10 percent of meeting the recommended number of inspection Person-days (achieved 90 percent or above of recommended number). 5 - Comes within 25 percent of meeting the recommended number of inspection person-days (achieved 75 percent or above of recommended number). 3 - Meets less than 75 percent but at least 50 percent of the recommended number of inspection person-days (achieved 50 to 75 percent of recommended number). 0 - Meets less than 50 percent of recommended number of inspection person-days (achieved under 50 percent of recommended number). Allocation of Effort (2 points) – • Did state meet minimum Allocation of Effort – each pipeline inspector must devote a minimum of 85 inspection person-days to pipeline compliance activities each calendar year. (See Chapter 4.2 of State Guidelines) o Calculation = Total Actual Person-Days (Attachment 2) / Total Actual Person-Years (Attachment 7) - Must be greater than > 85. 2 - Meets or exceeds Allocation of Effort per Person-Year (>85). 0 - Does not meet Allocation of Effort per Person-Year (<85).#
Attachment 1, passage 667Appendix Q – PIPELINE SAFETY GRANT PROGRESS REPORT SCORING D. State Adoption of Maximum Civil Penalty Requirement (4 POINTS) (Progress Report Attachment 8, Section I, Item 1) 4 - Adopted $100,000/day; up to $1,000,000 2 - Taking steps to adopts (has filed draft legislation) 0 - Not Adopted E. State Adoption of Applicable Federal Regulations (8 POINTS) (Progress Report Attachment 8, Section I, Items 2, 3, 4, 5, and 6) 8 - Adopted within 24 months of effective date (or two general sessions of the state legislature, whichever is longer). 5 - Taking steps to adopt (has filed draft legislation). 3 - Adopted all regulations within required time frame except one -- where continuing opposition has blocked adoption and state is not presently attempting to adopt. 0 - Not Adopted within 36 months of effective date. F. One Call System Minimum Requirements under Part 198 (4 POINTS) (Progress Report Attachment 8 Section III) 0.5 - Mandatory coverage of areas having pipeline facilities 0.5 - Qualification for operation of one-call system 0.5 - Mandatory excavator notification of one-call center 0.5 - State determination whether calls to center are toll free 0.5 - Mandatory intrastate pipeline operator participation 0.5 - Mandatory operator response to notification 0.5 - Mandatory notification of excavators/public 0.5 - Civil penalties/injunctive relief substantially same as DOT G. State Attendance at NAPSR Regional National Meetings* (3 POINTS) (Progress Report Attachment 8, Section III) 3 - Attended full time (lead rep or alternate pipeline program staff) 1 - Attended less than full time 0 - No one attended * Waiver of meeting attendance must be granted by Director of State Programs H. Penalty Points -2 - State CY Progress Report not received at PHMSA HQ by due date -4 - points assigned if over 1 month late I. Penalty Points – State Damage Prevention Adequacy Determination (49 CFR Part 198.53) -1 – State Damage Prevention program deemed inadequate >5 years of finding. -2 – State Damage Prevention program deemed inadequate >6 years of finding. -3 – State Damage Prevention program deemed inadequate >7 years of finding. -4 – State Damage Prevention program deemed inadequate >8 years of finding.#
Attachment 1, passage 668Appendix Q – PIPELINE SAFETY GRANT PROGRESS REPORT SCORING STATE PERFORMANCE CRITERIA (Hazardous Liquid) J. RATING FROM STATE EVALUATION (50 PERCENT OF SCORE) II. SELECTED INFORMATION FROM STATE PROGRESS REPORT/AGREEMENT (50 PERCENT OF SCORE) A. Hazardous Liquid Programs - Extent of Intrastate Safety Jurisdiction (12 Points) (Progress Report Attachment 1) N = Number of operator types over which state has jurisdiction M = Number of operator types located in state 60105 State: N/M x 12 60106 State: N/M x 12 x .5 1. Petroleum and Petroleum Products 2. Anhydrous Ammonia 3. Carbon Dioxide B. Inspector Qualifications (8 POINTS) (Progress Report Attachment 7, 7a) 8 - Highest percentage of inspectors in categories I and II (Highest percentage of inspectors (50% or greater) are in categories I and II combined) 4 - Highest percentage of inspectors in categories I, II and III (If percentage of categories I and II combined are less than 50% but percentage of inspectors in categories I, II and III combined are 50% or greater) 0 - Highest percentage of inspectors in categories III, IV and V (If categories I, II and III combined are below 50%.)#
Attachment 1, passage 669Appendix Q – PIPELINE SAFETY GRANT PROGRESS REPORT SCORING C. Number of Inspection Person-Days and Allocation of Effort (11 POINTS) (Progress Report Attachment 2) Inspection Person-Days (9 points) – • Did state meet total minimum number of required Person-Days? (Actual Person-Days are verified on Attachment 2 and required minimum Person-Days are communicated to each program) o Calculation = Total Actual Person-Days/Total Required Person-Days 9 - Meets or exceeds the recommended number of inspection person-days. 7 - Comes within 10 percent of meeting the recommended number of inspection Person-days (achieved 90 percent or above of recommended number). 5 - Comes within 25 percent of meeting the recommended number of inspection person-days (achieved 75 percent or above of recommended number). 3 - Meets less than 75 percent but at least 50 percent of the recommended number of inspection person-days (achieved 50 to 75 percent of recommended number). 0 - Meets less than 50 percent of recommended number of inspection person-days (achieved under 50 percent of recommended number). Allocation of Effort (2 points) – • Did state meet minimum Allocation of Effort – each pipeline inspector must devote a minimum of 85 inspection person-days to pipeline compliance activities each calendar year. (See Chapter 4.2 of State Guidelines) o Calculation = Total Actual Person-Days (Attachment 2) / Total Actual Person-Years (Attachment 7) - Must be greater than > 85. 2 - Meets or exceeds Allocation of Effort per Person-Year (>85). 0 - Does not meet Allocation of Effort per Person-Year (<85).#
Attachment 1, passage 670Appendix Q – PIPELINE SAFETY GRANT PROGRESS REPORT SCORING D. State Adoption of Maximum Civil Penalty Requirement (4 Points) (Progress Report Attachment 8, Section I, Item 1) 4 - Adopted $100,000/day; up to $1,000,000 2 - Taking steps to adopts (has filed draft legislation) 0 - Not Adopted E. State Adoption of Applicable Federal Regulations (8 POINTS) (Progress Report Attachment 8, Section I, Items 2, 3, 4, 5, and 6) 8 - Adopted within 24 months of effective date (or two general sessions of the state legislature, whichever is longer). 5 - Taking steps to adopt (has filed draft legislation). 3 - Adopted all regulations within required time frame except one -- where continuing opposition has blocked adoption and state is not presently attempting to adopt. 0 - Not Adopted within 36 months of effective date. F. One Call System Minimum Requirements under Part 198 (4 Points) (Progress Report Attachment 8 Section III) 0.5 - Mandatory coverage of areas having pipeline facilities 0.5 - Qualification for operation of one-call system 0.5 - Mandatory excavator notification of one-call center 0.5 - State determination whether calls to center are toll free 0.5 - Mandatory intrastate pipeline operator participation 0.5 - Mandatory operator response to notification 0.5 - Mandatory notification of excavators/public 0.5 - Civil penalties/injunctive relief substantially same as DOT G. State Attendance at NAPSR Regional and National Meetings* (3 POINTS) (Progress Report Attachment 8, Section III) 3 - Attended full time (lead rep or alternate pipeline program staff) 1 - Attended less than full time 0 - No one attended *Waiver of meeting attendance must be granted by Director of State Programs H. Penalty Points -2 - State CY Progress Report not received at PHMSA HQ by due date -4 - points assigned if over 1 month late I. Penalty Points – State Damage Prevention Adequacy Determination (49 CFR Part 198.53) -1 – State Damage Prevention program deemed inadequate >5 years of finding. -2 – State Damage Prevention program deemed inadequate >6 years of finding. -3 – State Damage Prevention program deemed inadequate >7 years of finding. -4 – State Damage Prevention program deemed inadequate >8 years of finding.#
Attachment 1, passage 671Guidelines for States Participating in the Pipeline Safety Program Appendix R National Transportation Safety Board Washington, D.C. 20594 SHEETY BOARD Pipeline Accident Brief Accident No.: DCA-99-MP-004 Type of System: Vatural gas service lin Type of Accident: upture, explosion, and fir Location: Bridgeport, Alabama Date and Time: January 22, 1999, 10:02 a.m. CST Owner/Operator: Utilities Board of the City of Bridgeport Property Damage and Losses: $1.4 million Fatalities: 3 Injuries: 6 Material Released: Natural gas Pressure: 35 psig Type of Failure: Excavation damage Component Affected: ¾-inch steel gas service line The Accident On January 22, 1999, while digging a trench behind a building at 406 Alabama Avenue, a backhoe operator damaged a ¾-inch steel natural gas service line and a 1-inch water service line. This resulted in two leaks in the natural gas service line, which was operated at 35 psig. One leak occurred where the backhoe bucket had contacted and pulled the natural gas service line. (See figure 1.) The other was a physical separation of he gas service line at an underground joint near the meter, which was close to the building. Gas migrated into the building at 406 Alabama Avenue, where it ignited about 408 Alabama Avenue (see figure 2). Other buildings within a two-block area of the explosion sustained significant damage. Three fatalities, five serious injuries,' and one minor injury resulted from this accident. death within 30 days of the accident." NTSB/PAB-00/01#
Attachment 1, passage 6722 Figure 1. Damaged section of the gas service line to 406 Alabama Avenue. (Arrow shows leak location. Note how the bowed area corresponds with the width of a backhoe bucket.) ИИ Figure 2. Damage to 404, 406, and 408 Alabama Avenue NTSB/PAB-00/01 Preaccident Events The owner of R&B Construction (R&B) told investigators that the owner of 408 Alabama Avenue had hired R&B to dig a trench from an electric pole behind 404 Alabama Avenue to his building for an underground electric service cable. (See figure 3.) The owner of R&B told investigators that he had not planned beforehand to dig the trench to 408 Alabama Avenue on the morning of the accident and that he did not call the Alabama Line Location Center, Inc? However, when a part-time employee, who had operated a backhoe for R&B in the past, arrived at the R&B office the morning of January 22 looking for work, the owner of R&B decided to have the employee dig the trench that day. Alabama Avenue 408 406 404 Excavation Damage Kilpatric Row Proposed Trench Gas Main Gas Service Line • Electric Utility Pole NOT TO SCALE Figure 3. Schematic of accident area The owner of R&B was a full-time employee of the Utilities Board of the City of Bridgeport (Utilities Board) at the time of the accident? He and a Utilities Board coworker, who was the acting supervisor of the Utilities Board field personnel on the morning of the accident, told Safety Board investigators that on the way to work that morning, they located and marked the gas and water service lines for the trenching 2 Since the accident, the Alabama Line Location Center has been redesignated Alabama One Call. The Utilities Board owns and operates Bridgeport's water and natural gas distribution systems. NTSB/PAB-00/01#
Attachment 1, passage 6734 activity. The owner of R&B told investigators that blue paint was used to mark both service lines because that was the only paint that they had.* Upon their arrival the day after the explosion, Safety Board investigators could not find any blue or other line markings on the ground at the accident scene. Representatives from the Alabama Public Service Commission and the Alabama State Fire Marshals Office also did not observe any markings on the ground when they arrived at the accident scene within hours of the explosion. The owner of R&B and the acting supervisor left the excavation site about 8:15 a.m. to go to the Utilities Board shop. They told investigators that, before they left, they had asked the owner of 408 Alabama Avenue to watch the backhoe operator. The R&B backhoe operator arrived at the excavation site some time after 8:15 a.m. While digging the trench, the backhoe operator damaged the underground gas and water service lines to 406 Alabama Avenue, resulting in leaks in the water and gas service lines. About 9:15 a.m., the owner of 408 Alabama Avenue went to the Utilities Board office at 513 Alabama Avenue and reported the excavation damage. He then returned to the excavation site. The General Manager of the Utilities Board said the owner of 408 Alabama Avenue reported that the water line and possibly the gas line were damaged. The Utilities Board paged its field personnel between 9:18 and 9:22 a.m. Shortly afterward, five Utilities Board employees responded to the excavation site from three locations to locate and repair the leaks. One of the Utilities Board employees told Safety Board investigators that upon his arrival at the accident scene, the R&B backhoe operator showed him where he had wrapped black tape over the leak in the gas service line. In addition, he and other Utilities Board employees noticed that water was running on the ground. They could hear the hissing of leaking gas and smell a strong natural gas odor in the general area. The Utilities Board employee who was the acting supervisor turned the water off so that field personnel could excavate and locate the leak. The acting supervisor could see a portion of the pulled gas service line above ground and said that he suspected that the gas service line was severed at some point. Though the acting supervisor could hear the gas blowing and see the gas bubbling from the water in the excavated ditch, he did not know the direction in which the gas was blowing. He told investigators that he "was hoping" that the line was pulled off at the main and that the gas was blowing up into the air. He added that he believed the leak was routine and the situation was safe. The Utilities Board employees did not check for gas migrating underground or accumulating in buildings and did not stop the flow of gas. After the acting supervisor turned off the water, a Utilities Board employee started digging to remove water and soil from the trench with a backhoe. By this time, the owner of R&B, because he was a Utilities Board employee and was paged, had arrived at the excavation site. yellow paint to mark gas lines and blue paint to mark water lines. * The Superintendent of the Utilities Board told Safety Board investigators that the Utilities Board uses NTSB/PAB-00/01#
Attachment 1, passage 674Shortly after the Utilities Board backhoe operator started digging, the building at 406 Alabama Avenue exploded. The owner of 408 Alabama Avenue, the R&B backhoe operator, and a Utilities Board employee received fatal injuries. Five other people, including a bystander, received serious injuries, and one person received a minor injury. The Alabama State Fire Marshals Office determined that the likely source of ignition for the accumulated natural gas was a gas-fired heater at 406 Alabama Avenue, which had an active pilot light at the time of explosion. The Superintendent of the Utilities Board estimated that within 5 to 10 minutes after the explosion he had closed two valves on the 4-inch natural gas main feeding the natural gas to the broken service line. R&B Construction R&B is a small construction company that employs part-time employees. At the time of the accident, it did not have employee qualification and training records or written procedures for excavating near underground utility lines. Recognizing that damages to underground facilities are usually preventable, and most frequently occur due to a breakdown in the damage prevention process, Government and industry have been working to identify and validate existing best practices for preventing damage to underground facilities. The resulting Common Ground study of one-call systems and damage prevention best practices" discusses, among other best practices, the need to "call before you dig." The study recommends, "Unless otherwise specified in state law, the excavator calls the one-call center at least two working days and no more than ten working days prior to beginning excavation." that an excavator observe a "tolerance zone" that includes the width of the facility plus 18 inches on either side and asks that excavators exercise reasonable care when excavating within the tolerance zone to protect the underground facilities. have provided a path that allowed continued gas flow sufficient to have fueled the pilot light. Although the gas line had separated underground, the compacted earth surrounding the line would Department of Transportation, Research and Special Programs Administration, Office of Pipeline Safety, • Common Ground: Study of One-Call Systems and Damage Prevention Best Practices, U.S. Act for the 21st Century (TEA 21), was prepared by more than 160 individuals representing a wide range of Washington, D.C., August 1999. The Common Ground study, as authorized by the Transportation Equity organization, the Common Ground Alliance, has been formed to implement the best practices discussed in interests, organizations, and viewpoints on preventing damage to underground utilities. A nonprofit the Common Ground study. Alabama State law is similar to this recommendation. NTSB/PAB-00/01#
Attachment 1, passage 6756 Bridgeport Utilities Board Procedures for Responding to Pipeline Emergencies The Utilities Board's written emergency procedures in effect at the time of the January 22, 1999, accident instruct service personnel to "...evaluate the extent of the emergency, request assistance as needed, and inform the manager if necessary." The procedures further direct service personnel to: Evacuate and secure the area if necessary. Actions should be directed towards protecting people first and then property. ...If, in the opinion of the person in charge, the emergency is so severe that immediate shutdown is imperative, he may do so without clearance from the Manager. However, the procedures do not instruct employees responding to a reported leak to consider the possibility of multiple leaks, check for gas accumulation in nearby buildings, and, if necessary, to take steps to promptly stop the flow of gas. During its annual inspections of the Utilities Board, the Alabama Public Service Commission did not identify any deficiencies in the Utility Board's emergency procedures. Since the accident, the emergency procedures have been changed only to update the names, addresses, and phone numbers of contact persons and employees. Probable Cause The National Transportation Safety Board determines that the probable cause of the accident was the failure of R&B Construction to establish and follow safe procedures for excavation activities, resulting in damage to a ¾-inch natural gas service line, and the failure of the Utilities Board of the City of Bridgeport to provide appropriate emergency response to the resulting natural gas leak. Adopted: November 28, 2000 NTSB/PAB-00/01#
Attachment 1, passage 676National Transportation Safety Board Washington, D.C. 20594 SHİFY HOAK? Safety Recommendation Date: December 15, 2000 In reply refer to: P-00-20 and -2l Honorable Kelley S. Coyner Administrator Research and Special Programs Administration 400 Seventh Street, S. W. Washington, D.C. 20590 On January 22, 1999, while digging a trench behind a building at 406 Alabama Avenue, a backhoe operator damaged a 3/4-inch steel natural gas service line and 1-inch water service line, both of which were underground. This resulted in two leaks in the natural gas service line, which was operated at 35 psig. One leak occurred where the backhoe bucket had contacted and pulled the natural gas service line. The other was a physical separation of the gas service line at an underground joint near the meter, which was close to the building. Gas migrated into the building at 406 Alabama Avenue, where it ignited about 10:02 a.m. An explosion' followed, destroying three buildings: 404, 406, and 408 Alabama Avenue. Other buildings within a two- block area of the explosion were significantly damaged. Three fatalities, five serious injuries,? and one minor injury resulted from this accident. The National Transportation Safety Board determined that the probable cause of the accident was the failure of R&B Construction (R&B) to establish and follow safe procedures for excavation activities, resulting in damage to a 3/4-inch gas service line, and the failure of the Utilities Board of the City of Bridgeport (Utilities Board) to provide appropriate emergency response to the subsequent natural gas leak. The Utilities Board paged its field personnel shortly after the leak was reported, between 9:18 and 9:22 a.m. Shortly afterward, five Utilities Board employees responded to the excavation site from three locations to locate and repair the leaks. One of the Utilities Board employees told Safety Board investigators that upon his arrival at the accident scene, the R&B backhoe operator showed him where he had wrapped black tape over the leak in the gas service line. In addition, he and other Utilities Board employees noticed that water was running on the Fire, Bridgeport, Alabama, January 22, 1999 (NTSB/PAB-00/01). 'For additional information, read Pipeline Accident Brief-—Natural Gas Pipeline Rupture, Explosion, and one of the seriously injured persons died as a result of injuries sustained in the explosion. In accordance with 49 2 According to the Jackson County Coroner, on March 23, 2000, 14 months and 1 day after the accident, 49 CFR 830.2 defines fatal injury as "any injury which results in death within 30 days of the accident." Code of Federal Regulations (CFR) 830.2, his injuries continue to be classified as "serious" for reporting purposes 7307#
Attachment 1, passage 6772 ground. They could hear the hissing of leaking gas and smell a strong natural gas odor in the general area. The Utilities Board employee who was the acting supervisor turned the water off so that field personnel could excavate and locate the leak. The acting supervisor could see a portion of the pulled gas service line above ground and said that he suspected that the gas service line was severed at some point. Though the acting supervisor could hear the gas blowing and see the gas bubbling from the water in the excavated ditch, he did not know the direction in which the gas was blowing. He told investigators that he "was hoping" that the line was pulled off at the main and that the gas was blowing up into the air. He added that he believed the leak was routine and the situation was safe. The Utilities Board employees did not check for gas migrating underground or accumulating in buildings and did not stop the flow of gas. After the acting supervisor turned off the water, a Utilities Board employee started digging to remove water and soil from the trench with a backhoe. Shortly after the Utilities Board backhoe operator started digging, the building at 406 Alabama Avenue exploded. The Alabama State Fire Marshals Office determined that the likely source of ignition for the accumulated natural gas was a gas-fired heater at 406 Alabama Avenue, which had an active pilot light at the time of the explosion. The Superintendent of the Utilities Board estimated that within 5 to 10 minutes after the explosion he had closed two valves on the 4-inch natural gas main feeding the natural gas to the broken service line. The Utilities Board's written emergency procedures in effect at the time of the January 22, 1999, accident instruct service personnel to "...evaluate the extent of the emergency, request assistance as needed, and inform the manager if necessary." The procedures further direct service personnel to: Evacuate and secure the area if necessary. Actions should be directed towards protecting people first and then property. ...If, in the opinion of the person in charge, the emergency is so severe that immediate shutdown is imperative, he may do so without clearance from the Manager. However, the procedures do not instruct employees responding to a reported leak to consider the possibility of multiple leaks, check for gas accumulation in nearby buildings, and, if necessary, to take steps to promptly stop the flow of gas. During its annual inspections of the Utilities Board, the Alabama Public Service Commission did not identify any deficiencies in the Utility Board's emergency procedures. Since the accident, the emergency procedures have been changed only to update the names, addresses, and phone numbers of contact persons and employees. provided a path that allowed continued gas flow sufficient to have fueled the pilot light. Although the gas line had separated underground, the compacted earth surrounding the line would have#
Attachment 1, passage 6783 The Safety Board made recommendations on July 18, 2000,4 to RSPA, the Occupational Safety and Health Administration, and five utility trade organizations about raising the awareness of utility workers to call 911 or other local emergency number immediately if damage results in a gas leak. The Safety Board concludes the Bridgeport accident illustrates that pipeline operators may also need improved procedures to inform utility workers about the dangers of multiple leaks and of the underground migration of gas from excavation sites into nearby buildings. The Safety Board understands that RSPA is now revising the audit forms used to evaluate the State utility commissions to include such procedures. To ensure that procedures for responding to gas leaks are appropriately reviewed, the Safety Board recommends that the Research and Special Programs Administration: Inform natural gas pipeline operators of the circumstances of the January 22, 1999, accident in Bridgeport, Alabama. Further, advise operators to review their emergency plans and procedures for responding to gas pipeline emergencies and modify them as necessary. The review should determine whether the procedures prompt the appropriate actions for gas leaks caused by excavation damage near buildings and whether the procedures adequately address the possibility of multiple leaks and the underground migration of gas into nearby buildings. (P-00-20) Evaluate, during annual inspections of utilities, the adequacy of operator emergency plans and written procedures for responding to gas pipeline emergencies, paying particular attention to procedures that address the possible migration of gas from excavation sites into nearby buildings. If warranted, require that operators modify the procedures. (P-00-21) The Safety Board also issued safety recommendations to the Alabama Public Service Commission, Alabama One Call, the Utilities Board of the City of Bridgeport, and R&B Construction. Please refer to Safety Recommendations P-00-20 and -21 in your reply. If you need additional information, you may call (202) 314-6170. Acting Chairman HALL and Members HAMMERSCHMIDT, GOGLIA, BLACK, and CARMODY concurred in these recommendations. Original Signed By: Jim Hall Acting Chairman Suksequen Explain in sl. Claud. Nimesed Deceiter 1. 98 NTSBAR-000 as Pipeline Rupure and#
Attachment 1, passage 679Advisory Bulletin ADB-01-02 May 16, 2001 [Notices|| Page 28027] DEPARTMENT OF TRANSPORTATION Research and Special Programs Administration Pipeline Safety: Emergency Plans and Procedures for Responding to Multiple Gas Leaks and Migration of Gas Into Buildings AGENCY: Research and Special Programs Administration (RSPA), DOT. ACTION: Notice; issuance of an advisory bulletin. SUMMARY: The Office of Pipeline Safely (OPS) is issuing this advisory to owners and operators of gas pipeline distribution systems. Owners and operators should review their emergency plans and procedures to determine whether the procedures prompt the appropriate actions for gas leaks caused by excavation damage near buildings, and whether the procedures adequately address the possibility of multiple leaks and the underground migration of gas into nearby buildings. FOR FURTHER INFORMATION CONTACT: Marvin Fell, (202) 366-6205, or by e-mail, marvin.fell@rspa.dot.gov. This document can be viewed at the OPS home page at http://ops.dot.gov. SUPPLEMENTARY INFORMATION: I. Background On January 22, 1999, while excavating a trench behind a building in the downtown area of Bridgeport, Alabama, a backhoe operator damaged a natural gas service line. This resulted in two leaks on the natural gas service line, which was operating at a pressure of 35 pounds per square inch (psig). One leak occurred where the backhoe bucket contacted the gas service line and pulled it aboveground. Although the second leak was not visible, the ensuing investigation revealed that the natural gas service line was separated at an underground joint near the gas meter, and close to a building. As a result, natural gas migrated into the building. The gas ignited, destroying three downtown buildings in a two square block area. The incident resulted in four fatalities and five injuries. The National Transportation Safety Board (NTSB) investigated this incident and determined that the safe procedures for excavation activities, resulting in damage to the \3/4\-inch steel natural gas service probable cause of the accident was (1) the failure of the construction contractor to establish and follow line and (2) the failure of the operator to provide appropriate emergency response to the subsequent natural gas leak. The operator's written emergency procedures in effect at the time of the accident instructed service#
Attachment 1, passage 680personnel to "* * * evaluate the extent of the emergency, request assistance as needed, and to inform the to consider the possibility of multiple leaks, check for gas accumulation in nearby buildings, and, if manager if necessary." However, the procedures did not instruct employees responding to a reported leak necessary, lake steps to prompily stop the flow of gas. II. Advisory Bulletin (ADB-01-02) To: Owners and Operators of Gas Distribution Systems. Subject: Emergency Plans and Procedures for Responding to Multiple Gas Leaks and Migration of Gas into Buildings Purpose: To advise owners and operators of gas distribution pipeline systems to review their emergency plans and procedures to determine whether the procedures prompt the appropriate actions for leaks caused by excavation damage near buildings, and whether the procedures adequately address the possibility of multiple leaks and the underground migration of gas into nearby buildings. Advisory: Owners and operators of gas distribution systems should ensure that their emergency plans and procedures require employees who respond to gas leaks to consider the possibility of multiple leaks, to check for gas accumulation in nearby buildings, and, if necessary, to take steps to promptly stop the flow of gas. These procedures should be communicated to both employee and contractor personnel who are responsible for emergency response to pipeline incidents. Issued in Washington, DC on May 16, 2001. Jeffrey D. Wiese, Manager, Program Development, Office of Pipeline Salety. [FR Doc. 01-12717 Filed 5-18-01; 8:45 am] BILLING CODE 4910-60-P#
Attachment 1, passage 6811 HATIONAL TRANSPORT, DO 2EETY BOARD Pipeline Accident Brief No. DCA9OFP001 System Type: Distribution GAUG 1991 Accident Type: Location: 421-423 North Fifth Street Explosion and Fire Allentown, Pennsylvania : Date: Time: outs focal dat tght- time Owner/Operator: UGI Corporation (UGI) Property Damage: Injuries: I Fatal $300,000 9 Nonfatal Material Released:. Natural Gas Pressure: Type Failure: Overstress 0.32 psig. (9 inches water column) Component Affected: Cast-Iron Main Description of the Accident North Fifth Street and damaged two adjacent houses and three parked cars ir A. natural gas explosion and fire destroyed two row houses at 421-423 Allentown, Pennsylvania. Two of the injured were fire fighters. after-hours dispatcher Three hours before the accident, a police officer advised the Allentown that water was leaking through pavement cracks in The officer satd that he believed that repairs could be deferred until the next day. Minutes after 5 a.m., a North Fifth Street resident notified the city of a gas odor in the area of 421 North Fifth Street and at 5:09 p.m., arrived at the location. Fire fighters and police evacuated residents from houses in the danger zone, and to elimirate to close the gas valves at inside meter sets. potential gas leaks from piping in adjacent residences, they entered houses When UGI employees arrived at 5:30 a.m., they began searching for leaking gas and discovered that several gas valves had not been turned off. residences at the key-operated curb valves and then at meters where valves They then shut off gas search for the source of the gas leak and discovered a braken cast-fron main not previously been The UGI employees then continued their beneath the street. Investigation disclosed that water leaking from a cracked 6-inch cast- municipal water main had eroded the soil foundation beneath a 4-inch cast-iron UGI gas main. The gas main subsequently cracked due soil loads above, releasing natural gas beneath the pavement. The gas migrated#
Attachment 1, passage 682Notation 5530 2 DCA90FP001 through the soil and into the basement of 423 North Fifth Street, where it was ignited, exploded, and burned. Excavation after the accident revealed that both the 6-inch cast-iron municipal water main and the 4-inch cast-fron Gi gas pipeline had cracked circumferentially. Sections of each of the pipelines were sent to the safety Board's laboratory for metallurgical analysis. Analysis revealed that both mains contained areas of significant graphitic corrosion that weakened them. The failure of the gas pipe was inevitable even had the water not eroded its soil foundation because one area of the gas pipe wall was fully graphitized. Numerous factors, individually and/or synergistically, have contributed gas and water mains, most of which were installed in the late 1800s and early to the integrity reduction and failure of Allentown, Pennsylvania's cast-iron 1900s. These include: leaks from storm and sewer lines, water migrating or percolating through the soil, karst development, sinkholes, graphitization, shifting and cracking pavement, increased traffic load, and overburden stress. Probable Cause The National Transportation Safety Board determines that the probable cause of the natural involving the condition of its gas system and to timely replace cast-fron segments weakened by graphitic corrosion. Recommendations Board made the following recommendations: As a result of its investigation, the National Transportation Safety --to the Research and Special Programs Administration: Require each gas operator to implement a program, based on factors replace in a planned, timely manner cast- burial depth, iron piping systems that may threaten public safety. (Class II, Priority Action) (P-91-12) --to the UGI Corporation: Provide initial and recurrent training to local government emergency response personnel on how to control natural locate, gas in emergency situati outside including how to identify, operate key-operated shutoff valves• (Class I1, Priority Action) (P-91-13)#
Attachment 1, passage 683Hotation 5530 3 DCA90FP001 Implement a comprehensive gas system surveillance program that: (1) identifies the type of data to be collected on gas system failures, leakage surveys, changes in corrosion protection and abnormal operating and maintenance conditions; (2) establishes the type and frequency of analyses to be performed for identifying potentially unsafe conditions: and (3) specifies the corrective action to be taken. (Class II, Priority Action) (P=91-14) Implement a cast-iron pípe replacement program, based on soil corrosiveness, softors ros veness, existdia teaphicatiamages sueak history, burial depth, and external loading, no tdentify existing and replace in a planned, timely manner cast- fron pipinc systems that may threaten public safety. (Class I], Priority Action) (P-91-15) Document the location of underground voids discovered during Allentown to develop systematic procedures for centrally excavations and coordinate with the City of location reporting, documenting, and exchanging information on the underground voids. Class Il, Priority Action) (P-91 - 16) --to the National Association of Regulatory Utility Commissioners: : Encourage its member states to require that each gas operator implement a program, based on factors suchois diameter, operating burial depth, and external systems that may threaten public safety. (Class 11, replace in a planned, - Priority Action) (P-91-17) --to the City of Allentown: Coordinate with the UGI Corporation 'o obtain initíal and recurrent training for emergency response personnel on controlling natural gas in emergency situations, including how • to locate, identify, and operate outside key-operated shutoff valves. (Class II, Priority Action) (P-91-18) Coordinate with known underground facility operators in the immediate Allentown vicinity to develop systematic procedures exchanging information on the location of undergrous. and for centrally reporting, documenting, voids discovered through excavations or other means. (Class II, Priority Action) (P-91-19)#
Attachment 1, passage 684National Transportation Safety Board Washington, D.C. 20594 SHEETY BOARD Pipeline Accident Brief Accident No.: DCA-97-FP-005 Type of System: Location: Type of Accident: Date and Time: Property Damage and Losses: Owner/Operator: Citizens Gas & Coke Utility Fatalities: In excess of $2 million Injuries: 1 1 Evacuated: Pressure: Material Released: 75 Natural gas Type of Failure: 310 psig Component Affected: Excavation damage 20-inch-diameter buried steel transmission pipeline The Accident About 2:33 p.m. on July 21, 1997, a 20-inch-diameter steel natural gas transmission pipeline owned and operated by Citizens Gas & Coke Utility Company (Citizens Gas) ruptured and released natural gas near an intersection adjoining the Charter Pointe subdivision in Indianapolis, Indiana. The gas ignited and burned, killing one resident and injuring another. About 75 residents required temporary shelter. Six homes were destroyed, and about 65 others sustained damage significant enough to be documented by the local investigation team. The pipeline had not been under full internal pressure since March 31, 1997, when the pressure was reduced to approximately 30 pounds per square inch gauge (psig) in anticipation of road construction work in the area.' On May 19, 1997, a directional drilling operation had been performed to install an 8-inch-diameter steel natural gas distribution main parallel to the transmission pipeline. About 1 hour and 40 minutes before the rupture, Citizens Gas had begun to return the 20-inch transmission pipeline to full service. " The road construction work required that Citizens Gas relocate an adjacent section of its 20-inch reduce the pressure on the pipeline and discontinue using it to transport gas during the period of transmission pipeline. In view of the reduced seasonal demand for natural gas, the company decided to PAB/99-02#
Attachment 1, passage 685Postaccident Inspections On-site inspection of the ruptured pipe revealed a near-longitudinal gaping fracture about 5.8 feet long. Along the entire length of the longitudinal fracture, the newly installed 8-inch distribution main was within approximately 4 inches of the 20-inch transmission pipeline. (See figure 1.) and 20-inch transmission pipeline at site of rupture Figure 1. Postaccident excavation revealing relative positions of 8-inch distribution main The ruptured segment of the 20-inch pipe was removed and sent to the National Transportation Safety Board's Materials Laboratory for examination. Safety Board examination revealed that the pipeline fractures contained features typical of overstress separation. The fractures contained no arrest marks, which is consistent with a crack in the pipe that, once initiated, propagated continuously. The exterior pipeline surface along the entire length of the longitudinal fracture contained circumferential gouge marks that intersected both halves of the fracture. The gouge marks typically measured approximately 4 inches long in the circumferential direction. Wall thicknesses in the deepest area of two gouge marks adjacent to the longitudinal fracture were 0.168 inch and 0.175 inch, which were 60 and 62 percent, respectively, of the original 0.281-inch wall thickness. Safety Board investigators obtained a tooth from the reaming tool that was used in the drilling operation to install the 8-inch distribution main. Direct comparisons of the tooth with the gouge marks revealed that the size and shape of the tooth tip were 2#
Attachment 1, passage 686consistent with the size and shape of the gouge marks in the vicinity of the rupture. (See figure 2.) Figure 2. Comparison of cutting tool tooth with gouges found at rupture site Preaccident Pipeline Installation Project To minimize damage to the roadway and to some adjoining landscaping features, Citizens Gas decided to use directional drilling to install an approximately 200-foot-long section of new 8-inch distribution main parallel to the 20-inch transmission pipeline. Citizens Gas contracted with Miller Pipeline Corporation (Miller), which carried out the directional drilling operation on May 19, 1997. Citizens Gas construction plans called for the 8-inch distribution main to be installed parallel to the 20-inch pipeline with a horizontal centerline-to-centerline separation of approximately 5 feet along most of its length. Before drilling began, Citizens Gas personnel used paint to mark the approximate location of the 20-inch pipeline at intervals of 15 to 20 feet.? Two excavations, one to verify the location of some utility " Directional drilling, also referred to as boring, is a pipeline construction technique in which a t. Normally, a relatively small pilot hole is drilled first. When the pilot drill reaches the exit location. the oughly horizontal hole is drilled at the intended pipeline location and the pipeline is then pulled through through the hole during this back-reaming process. pilot head is removed, and a larger reaming tool is attached. In this case, the pipeline was pulled back feet wide but not wider than the width of the facility plus two (2) feet on either side of the outer limits of 3 Indiana State Code (IC 8-1-26-2) defines approximate location as a strip of land at least four (4) the physical plant." See Safety Study-Protecting Public Safety Through Excavation Damage Prevention 3#
Attachment 1, passage 687cable crossings and another to serve as an exit pit for the directional drilling operation, exposed the 20-inch transmission pipeline and thus verified its location. Miller drilling personnel stated that field measurements indicated that they could maintain an approximate 5- to 7-foot horizontal separation between the new installation and the paint marks used to indicate the location of the existing 20-inch transmission pipeline. The drilling crew intended to maintain this separation throughout the bore except for one location near the termination of the bore where, in order to avoid an underground horizontal distance of about 1 foot.* telephone duct, the pipeline separation would need to be reduced to an edge-to-edge The Miller crew consisted of two persons, a foreman and a machine operator, utilizing a Vermeer directional drilling rig with a 5-inch-diameter drill head and a 14-inch- he monitored the location and alignment of the pilot drill head every 5 to 10 feet with a diameter reaming tool. The foreman said that throughout the directional drilling operation, "walkover" detector. He said he marked the drill head's location at these intervals as the boring operation progressed to the east. If course corrections were needed, the foreman said, he relayed instructions to the machine operator via a headset radio. The Miller personnel reported that, because of the terrain at the entry point, the initial entry of the drill head was angled slightly toward the 20-inch natural gas transmission pipeline and that minor steering corrections were performed in the beginning portion of the drilling operation. Miller personnel did not report any difficulty in performing the drilling operation, nor did they note any other unplanned deviations from a straight line path. During the back-reaming process, the location of the reaming tool was not tracked as it was during drilling. The presence of rocks, the characteristics of the soil, the alignment of the pilot hole, and the stiffness of the pipe material being pulled back through the hole are some factors that can affect the accuracy with which the back-reaming process follows the path of the pilot hole. Actual Pipeline Locations After the accident, the two pipelines were excavated at points along the bore path to determine the exact horizontal centerline-to-centerline separation between the pipelines and the depth of co located al and the depth of cover over each one. These excavations revealed that the 8-inch distribution main was located at a horizontal centerline-to-centerline distance of 5.5 feet north of the 20-inch transmission pipeline at the entrance point of the bore (west end). Progressing eastward, the 8-inch distribution main veered sharply toward the 20-inch transmission pipeline. Approximately 40 feet east of the entrance point of the bore, the 8- inch distribution main was within a few inches of the existing 20-inch transmission pipeline. At the rupture site, approximately 68 feet east of the entrance point of the bore, the two pipelines were about 4 inches apart. As the 8-inch pipeline continued toward the (NTSB/SS-97/01) for further discussion. at this particular location. 4 The actual separation would be greater than 1 foot, since the pipelines were to be at different depths 4#
Attachment 1, passage 688east, it veered away from the 20-inch pipeline to a horizontal centerline-to-centerline separation of 3.3 feet about 113 feet east of the entrance point of the bore. From this point eastward, the horizontal centerline-to-centerline separation ranged from 4 to 6 feet until the s-inch distribution main angled toward the 20-inch transmission pipeline at the east end of the bore, as originally planned. (See figure 3.) During the postaccident excavations conducted to determine the locations of the pipelines, rocks were discovered east of the rupture site. One rock, located directly beneath the 8-inch distribution main, had been scored in a manner consistent with having been struck by the reaming tool. Regulatory Requirements Title 49 Code of Federal Regulations (CFR) Part 192.614° requires gas pipeline operators to develop and tollow a written program to prevent damage to their pipelines from excavation activities. Excavation activities includes boring operations. Paragraph (c)(6) specifically requires operators, whenever they have reason to believe their pipelines could be damaged by excavation activities, to provide for inspections of those pipelines as frequently as necessary during and after the excavation to verify the integrity of the pipelines. The Gas Piping Technology Committee (GPTC) publishes the GPTC Guide for Gas Transmission and Distribution Piping Systems to provide guidance for natural gas operators to follow to help ensure regulatory compliance." The GPTC has informed the Safety Board that it is in the process of adding material to the guide to address safety issues specific to directional drilling and other trenchless technologies. Actions Taken Since the Accident Citizens Gas had procedures in place at the time of the accident that were applicable to general construction activities in proximity to its pipelines, but it did not have procedures specific to directional drilling operations. Citizens Gas has provided to the Safety Board copies of procedures that it has now adopted that are specific to directional drilling in proximity to existing pipelines. These procedures include a requirement that, whenever directional drilling operations are carried out parallel to and within 10 feet of an existing transmission pipeline, spot holes will be excavated at 25-foot intervals so that the exact location of the drill head can be visually determined. These spot holes will also allow personnel to verify pipe alignment as the pipe is installed during the back-reaming process. hazardous liquids. 5 Title 49 CFR Part 195.442 contains similar provisions for operators of pipelines transporting specialists from both industry and government. " The GPTC is an American National Standards Institute technical committee made up of technical 5#
Attachment 1, passage 689100 Scale in Feet (CRASS) (CONCRETE) Area of Exit Pit 8" Distribution Main- (CUNCRETE) Charter Drive 96th Street (ASPHALT) Figure 3. Relative locations of new 8-inch and existing 20-inch pipelines Area of Cable Crossings (CRASS) Rupture Site 'CONCRETE) Landscaped Area 20" Transmission Pipeline - (ASPHALT) (CRASS) Miller has also provided the Safety Board with procedures it has adopted to provide additional protection for existing facilities during the company's directional drilling operations. Probable Cause The National Transportation Safety Board determines that the probable cause of this accident was the failure of Citizens Gas & Coke Utility and Miller Pipeline Corporation to have adequate controls in place to ensure that directional drilling operations carried out in the proximity of existing underground facilities would not cause damage to those facilities. Adopted: April 20, 1999 7#
Attachment 1, passage 690National Transportation Safety Board Washington, D.C. 20594 NAI ON SAFETY BOARD Safety Recommendation Date: APR 28 1999 In reply refer to: P-99-1 Honorable Kelley S. Coyner Administrator Research and Special Programs Administration 400 Seventh Street, S.W. Washington, D.C. 20590 About 2:33 p.m. on July 21, 1997, a 20-inch-diameter steel natural gas transmission pipeline owned and operated by Citizens Gas & Coke Utility Company (Citizens Gas) ruptured and released natural gas near an intersection adjoining the Charter Pointe subdivision in Indianapolis, Indiana. The gas ignited and burned, killing one resident and injuring another. About 75 residents required temporary shelter. Six homes were destroyed, and about 65 others sustained damage significant enough to be documented by the local investigation team. The pipeline had not been under full internal pressure since March 31, 1997, when the pressure was reduced to approximately 30 pounds per square inch gauge (psig) in anticipation of road construction work in the area.' On May 19, 1997, Miller Pipeline Corporation (Miller), under contract to Citizens Gas, had performed a directional drilling operation to install an 8-inch- diameter natural gas distribution main parallel to the transmission pipeline. About 1 hour and 40 minutes before the rupture, Citizens Gas had begun to return the 20-inch transmission pipeline to full service. The National Transportation Safety Board determined that the probable cause of this accident was the failure of Citizens Gas and Miller to have adequate controls in place to ensure that directional drilling operations carried out in the proximity of existing underground facilities would not cause damage to those facilities. On-site inspection of the ruptured pipe revealed a near-longitudinal gaping fracture about 5.8 feet long. Along the entire length of the longitudinal fracture, the newly installed 8-inch steel distribution main was located within approximately 4 inches of the 20-inch transmission pipeline. Safety Board examination of the ruptured segment of the 20-inch pipe revealed that the pipeline fractures contained features typical of overstress separation. The exterior pipeline surface along the entire length of the longitudinal fracture contained circumferential gouge marks that transmission pipeline. In view of the reduced seasonal demand for natural gas, the company decided to reduce the The road construction work required that Citizens Gas relocate an adjacent section of its 20-inch pressure on the pipeline and discontinue using it to transport gas during the period of construction. 7136#
Attachment 1, passage 6912 intersected both halves of the fracture. The gouge marks typically measured approximately 4 inches long in the circumferential direction. Wall thicknesses in the deepest area of two gouge marks adjacent to the longitudinal fracture were 0.168 inch and 0.175 inch, which were 60 and 62 percent, respectively, of the original 0.281-inch wall thickness. Safety Board investigators obtained a tooth from the reaming tool that was used in the drilling operation to install the 8-inch distribution main in the vicinity of the rupture. Direct comparisons of the tooth with the gouge marks revealed that the size and shape of the tooth tip were consistent with the size and shape of the gouge marks in the vicinity of the rupture. Citizens Gas construction plans called for an approximately 200-foot-long section of new 8-inch distribution main to be installed parallel to the 20-inch pipeline with a horizontal centerline- to-centerline separation of approximately 5 feet along most of its length. Before drilling began, Citizens Gas personnel used paint to mark the approximate location of the 20-inch pipeline at intervals of 15 to 20 feet.? Two excavations, one to verify the location of some utility cable crossings and another to serve as an exit pit for the directional drilling operation, exposed the 20- inch transmission pipeline and thus verified its location. Miller drilling personnel stated that field measurements indicated that they could maintain an approximate 5- to 7-foot horizontal separation between the new installation and the paint marks used to indicate the location of the existing 20-inch transmission pipeline. The drilling crew intended to maintain this separation throughout the bore except for one location near the termination of the bore where, in order to avoid an underground telephone duct, the pipeline separation would need to be reduced to an edge-to-edge horizontal distance of about 1 foot 3 The Miller crew consisted of two persons, a foreman and a machine operator, utilizing a Vermeer directional drilling rig with a 5-inch-diameter drill head and a 14-inch-diameter reaming tool. The foreman said that throughout the directional drilling operation, he monitored the location and alignment of the pilot drill head every 5 to 10 feet with a "walkover" detector. He said he marked the drill head's location at these intervals as the boring operation progressed to the east. If course corrections were needed, the foreman said, he relayed instructions back to the machine operator via a headset radio. Miller personnel did not report any difficulty in performing the drilling operation, nor did they note any other unplanned deviations from a straight line path. During the back-reaming process, the location of the reaming tool was not tracked as it was during drilling. After the accident, the two pipelines were excavated at points along the bore path to determine the exact horizontal centerline-to-centerline separation between the pipelines and the depth of cover over each one. These excavations revealed that the 8-inch distribution main was located at a horizontal centerline-to-centerline distance of 5.5 feet north of the 20-inch wide but not wide than the with 8. 2e achines away ec on tier sue of the our limits of the ply feat plant." See Safety Study-Protecting Public Safely Through Excavation Damage Prevention (NTSB/SS-97/01) for this particular location. 3 The actual separation would be greater than 1 foot, since the pipelines were to be at different depths at#
Attachment 1, passage 692transmission pipeline at the entrance point of the bore (west end). Progressing eastward, the location of the 8-inch distribution main veered sharply toward the 20-inch transmission pipeline. Approximately 40 feet east of the entrance point of the bore, the 8-inch distribution main was within a few inches of the existing 20-inch transmission pipeline. At the rupture site, approximately 68 feet east of the entrance point of the bore, the two pipelines were about 4 inches apart. As the 8-inch pipeline continued toward the east, it veered away from the 20-inch pipeline to a horizontal centerline-to-centerline separation of 3.3 feet about 113 feet east of the entrance point of the bore. From this point eastward, the horizontal centerline-to-centerline separation ranged from 4 to 6 feet until the 8-inch distribution main angled toward the 20-inch transmission pipeline at the east end of the bore, as originally planned. Citizens Gas had procedures in place at the time of the accident that were applicable to general construction activities in proximity to its pipelines, but it did not have procedures specific to directional drilling operations. Citizens Gas has provided to the Safety Board copies of procedures that it has now adopted that are specific to directional drilling in proximity to existing pipelines. These procedures include a requirement that, whenever directional drilling operations are carried out parallel to and within 10 feet of an existing transmission pipeline, spot holes will be excavated at 25-foot intervals so that the exact location of the drill head can be visually determined. These spot holes will also allow personnel to verify pipe alignment as the pipe is installed during the back-reaming process. Miller has also provided the Safety Board with procedures it has adopted to provide additional protection for existing facilities during the company's directional drilling operations. Title 49 Code of Federal Regulations (CFR) Part 192.614ª requires gas pipeline operators to develop and follow a written program to prevent damage to their pipelines from excavation activities. Excavation activities include boring operations. In light of the ever-increasing use of horizontal directional drilling, the Safety Board is concerned that accidents similar to the one in Indianapolis may occur in the future unless operators take precautions to protect their facilities. To address this concern, the National Transportation Safety Board makes the following safety recommendation to the Research and Special Programs Administration: When reviewing pipeline operator safety programs, ensure that the operators' damage prevention programs include actions to protect their facilities when directional drilling operations are conducted in proximity to those facilities. (P-99-1) Also, the Safety Board issued Safety Recommendations P-99-2 to the American Society of Mechanical Engineers, P-99-3 to the American Gas Association, P-99-4 to the American Public Gas Association, P-99-5 to the Interstate Natural Gas Association of America, P-99-6 to the American Petroleum Institute, P-99-7 to the Association of Oil Pipe Lines, P-99-8 to the Distribution Contractors Association, P-99-9 to the Directional Crossing Contractors Association, * Tille 49 CFR Part 195.442 contains similar provisions for operators of pipelines transporting hazardous liquids.#
Attachment 1, passage 6934 P-99-10 to the North American Society for Trenchless Technology, and P-99-11 to the National Utility Contractors Association. Please refer to Safety Recommendation P-99-1 in your reply. If you need additional information, you may call (202) 314-6201. Chairman HALL, Vice Chairman FRANCIS, and Members HAMMERSCHMIDT, GOGLIA, and BLACK concurred in this recommendation. Original Signed By: Jim Hall Chairman#
Attachment 1, passage 694Federal Register / Vol. 64, No. 166/Friday, August 27, 1999/ Notices 46967 improvement of the capacity and national security goal seeks the DEPARTMENT OF TRANSPORTATION technology operations, RSPA is support defense mobilization. operation of the highway system to Research and Special Programs review their damage prevention encouraging operators to carefully would be an annual program under The assistance program envisioned Administration appropriate. RSPA also notes the program and make modifications as Trenchless Technology Operations Directional Drilling and Other competitive basis, predicated on merit which awards would be made on a importance of accurately locating Underground Pipeline Facilities Conducted in Proximity to underground piping and ensuring the review, typically for a period of three this work qualifications of personnel performing would be based on an annual evaluation years. Funding beyond the first year AGENCY: Research and Special Programs Recommendation P-99-1 (April 28, Additionally, NTSB Safety of documented progress, availability of Administration (RSPA), DOT. as unexpended by the awardee at the funds, and the amount of funds reported bulletin. ACTION: Notice: issuance of advisory 1999) directs that RSPA programs, ensure that the operators' damage /when reviewing pipeline operator safety performance. A preliminary estimate of end of each year's period SUMMARY: RSPA is issuing this advisory approximately $100,000 on an annual total award amounts would be operators of natural gas and hazardous bulletin to owners and operators prevention programs include actions to protect their facilities when directional proximity to those facilities. drilling operations are conducted in basis. liquid pipeline systems to advise them interested in participating in such an The HBCUs and the MIHE that are written damage prevention program to to review, and amend if necessary, their investigation into the rupture of a This recommendation reflects NTSB's assistance program are invited to submit directional drilling and other trenchless minimize the risks associated with natural gas pipeline near Indianapolis, caused a fatality and an injury. NTSB Indiana. The ignition of the escaping gas submission should include: an "Expression of Interest." Your technology operations near buried university, point of contact, phone 1. Full name and address of school/ pipelines. This action follows several technology operations which resulted in pipeline incidents involving trenchless the failure of the pipeline operator to determined that the probable cause was number, fax number and E-Mail address. loss of life, injuries, and significant operations were conducted in proximity ensure that safe directional drilling institution would be interested in 2. Specific FHWA goal(s) that your National Transportation Safety Board property damage. It also corresponds to to underground facilities. Bulletin will encourage operators to RSPA believes that this Advisory recent (past three years) experience in participating under and your actual 1, which suggests that RSPA (NTSB) Safety Recommendation P-99- recognize the dangers associated with the area. prevention programs include actions to * * * ensure that the operators' damage directional drilling and other trenchless appropriate action to ensure that technology operations and to take curriculum/majors as they relate to the 3. A list of your institution's current protect their facilities when directional drilling operations are conducted in underground facilities are adequately FHWA strategic goals, that you currently have access to, and 4. Any laboratories/research facilities activities take place near pipelinethese located and protected when these importance of having procedures to This advisory bulletin emphasizes the for expanding your curriculum and or 5. Any specific future plans you have mitigate the risks of directional drilling ADDRESSES: This document can be and other trenchless technology. II. Advisory Bulletin (ADB-99-04) research facilities. Hazardous Liquid and Natural Gas To: Owners and Operators of relevant "Expressions of Interest" are Provided that a sufficient number of viewed at the Office of Pipeline Safety received in response to this notice, the FOR FURTHER INFORMATION CONTACT: (OPS) home page at: http://ops.dot.gov. Other Trenchless Technology Subject: Directional Drilling and solicitation calling for submission of FHWA would issue a program-based email at eben.wyman@rspa.dot.gov. Eben M. Wyman, (202) 366-0918, or by Operations Conducted in Proximity to applications. The application process SUPPLEMENTARY INFORMATION: Underground Pipeline Facilities. and is not dependent upon submitting would be open to all HBCUs and MIHE operators take actions to recognize the Purpose: To ensure that pipeline Applications would be assessed an initial "Expression of Interest. 1. Background hazardous liquid pipelines to examine RSPA revised its inspection form for drilling and other trenchless technology dangers associated with directional according to specific criteria that relate how operators monitor directional operations, and to ensure that Strategic Plan and would be awarded to to the goals of the FHWA's National drilling and other trenchless technology adequately located and protected from underground pipeline facilities are a limited number of applicants underground pipelines. The pipeline operations in the vicinity of according to the merit of the application operators to carry out a written damage safety regulations require pipeline operators of gas and hazardous liquid Advisory: RSPA urges all owners and fiscal year. The target date for initial and the availability of funds in each prevention program for buried maintenance, and damage prevention pipelines to review their operations, awards would be FY 2000. 12876, 58 FR 58735, 3 CFR. 1994 Comp., p. Authority: 23 U.S.C. 307 and 403; E.O. No. considers whether a pipeline operator's pipelines. The revised inspection form programs to include effective actions to actions to protect their facilities when damage prevention program includes the dangers posed by directional drilling protect their underground facilities from 671: E.O. No. 13021, 61 FR 54929, 3 CFR. 1997 Comp., p. 221; 49 CFR 1.48. conducted in proximity to the pipeline. directional drilling operations are and other trenchless technology Gloria J. Jeff, Issued on August 18, 1999. actions to ensure that both company and operations. Operators should take [FR Doc. 99-22289 Filed 8-26-99; 8:45 am] Federal Highway Deputy Administrator. natural gas pipeline inspection form in RSPA will make similar changes to the practices. contractor personnel are following safe accidents involving trenchless its next revision. In light of recent directional drilling, are effective Trenchless technologies, including BILLING CODE 4910-22-P#
Attachment 1, passage 69546968 Federal Register / Vol. 64, No. 166/ Friday, August 27, 1999 / Notices threat of third-party damage to gas and excavating practices that can reduce the and technical publications. In addition, also mitigate environmental and other hazardous liquid pipelines. They can a standards committee composed of the Gas Piping Technology Committee, 94.7 miles in Carteret, Craven, Jones, Lenoir, and Wayne Counties. concerns associated with traditional experts on gas piping issues, publishes August 19, 1999, and the trackage rights The exemption was effective on trenching methods of pipe and cable trenchless technology pipe installations guidelines for planning and designing operations are scheduled to begin on trenchless technology operations to However, the potential exists for in its Guide for Gas Transmission and September 1, 1999. Distribution Piping Systems, which is to allow NSR and AECR to continue as The purpose of the trackage rights is damage underground facilities available from the American Gas sometimes with catastrophic results. Association. freight service on the NCRR lines, as the providers of local and overhead technology operations employ a variety Directional drilling and other trenchless 1999. Issued in Washington, D.C. on August 23, they have previously done under now- jacking techniques. These techniques of cutting, jetting, boring, reaming, and Associate Administrator for Pipeline Safety. Richard B. Felder, expired leases? any employees affected by the trackage As a condition to these exemptions, existing underground facilities, can result in rupture or damage to BILLING CODE 4910-60-P [FR Doc. 99-22331 Filed 8-26-99: 8:45 am| rights will be protected by the cables and ducts, water and sewer including oil and gas pipelines, electric conditions imposed in Norfolk and 354 I.C.C. 605 (1978), as modified in Trackage Rights-BN, optic cables, and cable television pipes, telecommunications ducts, fiber DEPARTMENT OF TRANSPORTATION Operate, 360 I.C.C. 653 (1980). Mendocino Coast Ry., Inc.--Lease and Surface Transportation Board underground facilities is not known, Usually, the exact depth of existing [STB Finance Docket Nos. 33788 and 33789] 1180.2(d)(7). If either contains false or These notices are filed under 49 CFR even if the facilities are accurately located before directional drilling Norfolk Southern Railway Company- misleading information, both commences. In addition, many facilities North Carolina Railroad Company; Trackage Rights Exemption-Over exemptions are void ab initio. Petitions to revoke the exemptions under 49 are buried deeper than the minimums required by law and regulation. This can Company-Trackage Rights Atlantic and East Carolina Railway time. The filing of a petition to revoke U.S.C. 10502(d) may be filed at any contours due to agricultural activities, be caused by changes in the surface Exemption-Line of North Carolina transaction.3 will not automatically stay the landscaping, and road building Trackage Rights by Norfolk Southern Railroad Company Operated Under occur without any immediate indication Damage to underground facilities can Railway Company pleadings, referring to STB Finance An original and 10 copies of all to the operator. Sometimes a damaged In STB Finance Docket No. 33788, No. 33789, or both (as applicable) must Docket No. 33788, STB Finance Docket underground facility will not fail for North Carolina Railroad Company years after the completion of trenchless (NCRR) has agreed to grant to Norfolk be filed with the Surface Transportation technology operations. Drilling Southern Railway Company (NSR) Control Unit, 1925 K Street, N.W., Board, Office of the Secretary, Case equipment does not need to fully exclusive local and overhead freight rupture a facility to create a hazardous trackage rights over its entire line of addition, a copy of each pleading must Washington, DC 20423-0001. In situation. Damage to coatings and other railroad between Charlotte and increase the risk of a delayed corrosion corrosion prevention systems can Morehead City, NC.! The line extends be served on G. Paul Moates, Esq., between mileposts EC-0.0t and EC- Washington, DC 20006. Sidley & Austin, 1722 Eye Street, N.W., failure. Escaping and migrating gas can 94.7ł; mileposts H-0.0t and H-129.5₺; and working near these facilities long create a safety issue for people living and mileposts 284.0t and 376.5t, a available on our website at Board decisions and notices are after the completion of directional in Alamance, Cabarrus, Carteret, Craven, distance of approximately 317.2 miles "WWW.STB.DOT.GOV." drilling and other trenchless technology Davidson, Durham, Guilford, Johnston, operations. Leakage from a damaged or Jones, Lenoir, Mecklenburg, Orange, By the Board, David M. Konschnik, Decided: August 23, 1999. ruptured hazardous liquid pipeline can create environmental and safety issues. Randolph, Rowan, Wake, and Wayne The primary safety concern is Counties, NC. Vernon A. Williams, Director, Office of Proceedings. ensuring that trenchless technology permitted to grant trackage rights to its Under the agreement, NSR is [FR Doc. 99-22340 Filed 8-26-99; 8:45 am] Secretary. operations do not accidentally contact existing underground facilities. This can subsidiaries. Accordingly, in STB be averted by knowing the precise agreed to grant to its wholly owned Finance Docket No. 33789, NSR has BILLING CODE 4915-00-P locations of all underground facilities in proximity to trenchless technology subsidiary, Atlantic and East Carolina operations. In addition to full overhead trackage rights over a portion Railway Company (AECR), local and to Set Trackage Compensation and Other Terms 2 See North Carolina Railroad Company-Petition Company, Norfolk & Western Railway Company. and Conditions--Norfolk Southern Railway compliance with the one-call notification process, the operator should and Morehead City. That portion of NCRR's line between Goldsboro, NC, STB Finance Docket No. 33134 (STB served May and Atlantic and East Carolina Railway Company. also consider thorough site surveys of the area of a proposed directional extends between mileposts EC-0.0t and 29. 1997) (NCRR Compensation). drilling or trenchless technology project EC-94.7t, a distance of approximately intervener Walker F. Rucker seeks an order that he 3 In a pending motion in NCRR Compensation. to locate potential conflicts with underground facilities. and certain future agreements pertaining to ' NSR is permitted to continue in effect existing and the State of North Carolina be allowed and directed to participate in the negotiations for the Information on the safe conduct of Passenger Corporation (Amtrak) over the line. The passenger operations by the National Railroad this notice of exemption. The parties hereto replied. trackage rights agreements that are the subject of available from various trade associations trenchless technology operations is provision of the agreement. Board's jurisdiction is not implicated as to this collateral dispute provides no basis for rejection of and Mr. Rucker responded to their replies. That the notice of exemption in this proceeding.#
Attachment 1, passage 696PHMSA - Advisory Bulletins - ADB-99-01 Page 1 of 3 @PHMSA U.5. Department of Transpertation 1203 Careers | Contact Us | FAQs | Site Map Pipeline and Hazardous Materials Safety Adminisoration Advanced Search For the Public Hazmat Safety Community Pipeline Safety Community Briefing Room Doing Business with PHMSA Calendar About Us Home » Pipeline Safety Community » Regulations » Advisory Bulletins Contact Us ADB-99-01 Data & Statistics Sep 1, 1999 Drug & Alcohol Testing Enforcement Partners Federal and State DEPARTMENT OF TRANSPORTATION Billing Code: 4910-60-P Initiatives Pipeline and Hazardous Materials Safety Administration Inspection Integrity Management Manufactured by Century Utility Products Inc. Potential Failure Due to Brittle-Like Cracking Certain Polyethylene Plastic Pipe Program (IMP) Library Recommendations NTSB Safety AGENCY: Pipeline and Hazardous Materials Safety Administration (PHMSA), DOT. Online Data Entry ACTION: Notice; issuance of advisory bulletin on Century polyethylene gas pipe to owners and Stakeholder operators of natural gas distribution systems. Communications Standards & SUMMARY: This advisory bulletin is directed at owners and operators of natural gas distribution Rulemakings systems that have installed plastic pipe extruded by Century Utility Products Inc. from Union Research 8 Carbide Corporation's DHDA 2077 Tan medium density polyethylene resin (Century pipe). Pipe Development cracking. Operators with Century pipe in their systems should closely monitor this pipe for leaks manufactured between 1970 and 1973 may fail in service due to its poor resistance to brittle-like Security operating in an environment that impairs pipe strength should be replaced. with increased leak survey frequency. Century pipe that may be improperly installed, repaired, or Technical Advisory State Programs Committees http://ops.dot.gov. ADDRESS: This document can be viewed on the Office of Pipeline Safety (OPS) home page at: Inspector Training & Qualifications Division by E-mail at vinjamuri@PHMSA.dot.gov. FOR FURTHER INFORMATION CONTACT: Gopala (Krishna) Vinjamuri at (202) 366 - 4503, or Home About SUPPLEMENTARY INFORMATION: PHMSA I. Background Mission and Goals About the Agency The National Transportation Safety Board (NTSB) recently published the results of a special Key Officials residential and business use. The report, Brittle-Like Cracking in Plastic Pipe for Gas Service investigation into accidents that involved plastic pipe currently in use to deliver natural gas to Organization Calendar piping as a safe and economical alternative to piping made of steel and other materials, [a] (NTSB/SIR-98/01; April 23, 1998) suggested that "[d]espite the general acceptance of plastic manner." Copies of this report may be obtained from NTSB Public Inquiry Office by calling 202- number of pipeline accidents investigated have involved plastic piping that cracked in a brittle-like & Security Promoting Safety Regulations generally understood within the plastic pipeline industry relates to a part-through crack initiation The phenomenon of brittle-like cracking in plastic pipe as described in the NTSB report and Special Permits & in the pipe wall followed by stable crack growth at stress levels much lower than the stress International Approvals required for yielding, resulting in a very tight slit-like opening and gas leak. This failure mode is Standards difficult to detect until significant amount of gas leaks out of the pipe, and potentially migrates Security relatively high localized stress intensification that may be a result from geometrical into closed space such as basements of dwellings. Premature brittle-like cracking requires Initiatives this failure mode exhibits no evidence of gross yielding at the failure location, the term brittle-like discontinuities, excessive bending, improper fitting assemblies, and/or dents and gouges. Because cracking is used. This phenomenon is different from brittle fracture, in which the failure results in http://phmsa.dot.gov/portal/site/PHMSA/menuitem.ebdc7a8a7e39f2e55cf2031050248a0c/... 8/24/2012#
Attachment 1, passage 697PHMSA - Advisory Bulletins - ADB-99-01 Page 2 of 3 Encouraging fragmentation of the pipe. Compliance Outreach Training Resources NTSB also alleged that the guidance provided by manufacturers and industry standards for the service connections to steel mains, many of these connections may have been installed without installation of plastic pipe is inadequate for limiting stress intensification, particularly at plastic Enforcement Inspections & adequate protection from shear and bending forces that may result in brittle-like cracking. Drug & Alcohol Testing Century pipe Supporting Between 1970 and 1973, Century Utility Products Inc. (a/k/a AMDEVCO), now defunct, marketed Community Resporse medium density polyethylene plastic pipe and fittings (Century pipe) in sizes ranging from ½ inch Preparedness & to 4 inches for use in natural gas distribution. These plastic pipes and fittings were manufactured Response by extrusion from Union Carbide Corporation's DHDA 2077 Tan resin, and was marked PE 2306 in State Programs & accordance with American Society for Testing and Materials (ASTM) standards. Following Grants Tuscola, Illinois, and the October 17, 1994, accident in Waterloo, Iowa, that resulted in several investigation of a series of incidents, including the December 2, 1979, explosion in a residence in Incident Reporting resistance to brittle-like cracking and is prone to relatively short life when subjected to high local fatalities, it was established that the Union Carbide's DHDA 2077 Tan resin lacks adequate PHMSA stress concentration. The pipe in the Tuscola, Illinois, accident failed in less than 8 years, and the Century pipe exhibited significantly higher leak rate in comparison with other polyethylene, steel, pipe in the Waterloo, Iowa, accident failed within 23 years in service. It has been established that Resources Data & Statistics and cast iron pipe used in natural gas distribution systems. eForms ePayments Following the Waterloo, Iowa, accident, PHMSA has taken number of actions, including gathering Glossary Century pipe installation data. Also, remedial action has been taken by various operators in mid western states where much of the Century pipe produced was known to have been installed. It is Library PHMSA's understanding that the operators having Century pipe in their systems have initiated close monitoring and some have replacement program in progress. NTSB recommended that PHMSA notify owners and operators of natural gas systems who need to "[d]evelop a plan to closely monitor the performance of and to identify and replace, in a continue to use Century pipe of the potential for premature failures by brittle-like cracking and the timely manner, any piping that indicates poor performance based on such evaluation factors as installation, operating and environmental conditions, piping failure characteristics and leak II. Advisory Bulletin (ADB-99-01) To: Owners and Operators of Natural Gas Distribution Pipeline Systems to premature failure due to brittle-like cracking. Subject: Susceptibility of certain polyethylene pipe manufactured by Century Utility Products Inc. monitor and replace as necessary polyethylene natural gas pipe manufactured by Century Utility Purpose: To advise natural gas distribution pipeline owners and operators of the need to closely Products Inc. between 1970 and 1973 that is susceptible to brittle-like cracking. continue to use polyethylene pipe extruded by Century Utility Products Inc, (now defunct) from Advisory: All owners and operators of natural gas distribution systems who have installed and the resin DHDA 2077 Tan resin manufactured by Union Carbide Corporation during the period 970 to 1973 (Century pipe) are advised that this pipe may be susceptible to premature failure lue to brittle-like cracking. Premature failures by brittle-like cracking of Century pipe is known to In addition, in light of the potential susceptibility of Century pipe to brittle-like cracking, PHMSA leak history or which for any reason is of suspect integrity. (49 U.S.C. Chapter 601; 49 CFR 1.53) Issued in Washington, D.C. on http://phmsa.dot.gov/portal/site/PHMSA/menuitem.ebdc7a8a7e39f2e55cf2031050248a0c/. 8/24/2012#
Attachment 1, passage 698PHMSA - Advisory Bulletins - ADB-99-01 Page 3 of 3 Richard B. Felder Associate Administrator for Pipeline Safety Careers | Contact Us | No Fear | Privacy Policy | FOIA | Accessibility | FAQs | Web Policies | Site Map Acrobat / Download http://phmsa.dot.gov/portal/site/PHMSA/menuitem.ebdc7a8a7e39f2e55cf2031050248a0c/.. 8/24/2012 Overpressurization of Natural Gas Distribution System, Explosions, and Fires in Merrimack Valley, Massachusetts September 13, 2018 pipeline Accident Report NTSB/PAR-19/02 National PB2019-101365 Transportation Safety Board NTSB/PAR-19/02 PB2019-101365 Adopted September 24, 2019 Notation 59529 Pipeline Accident Report Overpressurization of Natural Gas Distribution System, Explosions, and Fires in Merrimack Valley, Massachusetts September 13, 2018 National Transportation Safety Board 490 L'Enfant Plaza, S.W. Washington, D.C. 20594#
Attachment 1, passage 699National Transportation Safety Board. 2019. Overpressurization of Natural Gas Distribution System, Explosions, and Fires in Merrimack Valley, Massachusetts, September 13, 2018. Pipeline Accident Report NTSB/PAR-19/02. Washington, DC. Abstract: On September 13, 2018, about 4:00 p.m. local time, a series of structure fires and explosions occurred after high-pressure natural gas was released into a low-pressure natural gas distribution system in the northeast region of the Merrimack Valley in the Commonwealth of Massachusetts. The natural gas distribution system was owned and operated by Columbia Gas of Massachusetts, a subsidiary of NiSource, Inc. Columbia Gas of Massachusetts delivers natural gas to about 325,000 customers in Massachusetts. One person was killed and 22 individuals, including three firetighters, were transported to local hospitals due to injuries; seven other firefighters incurred minor injuries. The fires and explosions damaged 131 structures, including at least 5 homes that were destroyed in the city of Lawrence and the towns of Andover and North Andover. Most of the damage occurred from fires ignited by natural gas-fueled appliances; several of the homes were destroyed by natural gas-fueled explosions. Fire departments from the three mobilization plan and received mutual aid from neighboring districts in Massachusetts, New Hampshire, and Maine. Emergency management officials had the electric utility shut down electrical power in the area, the state police closed local roads, and freight and passenger railroad operations in the area were suspended. Columbia Gas of Massachusetts shut down the low-pressure natural gas distribution system, affecting National Transportation Safety Board made new recommendations to the Pipeline and Hazardous Materials 10,894 customers, including some outside the area who had their service shut off as a precaution. The Safety Administration; the 31 states with an industrial exemption for natural gas infrastructure projects; the Commonwealth of Massachusetts Executive Office of Public Safety and Security; and NiSource, Inc. The National Transportation Safety Board (NTSB) is an independent federal agency dedicated to promoting aviation, railroad, highway, marine, and pipeline safety. Established in 1967, the agency is mandated by Congress through the accidents, issue safety recommendations, study transportation safety issues, and evaluate the safety effectiveness of Independent Safety Board Act of 1974 to investigate transportation accidents, determine the probable causes of the government agencies involved in transportation. The NTSB makes public its actions and decisions through accident reports, safety studies, special investigation reports, safety recommendations, and statistical reviews. "accident/incident investigations are fact-finding proceedings with no formal issues and no adverse parties ... and are The NTSB does not assign fault or blame for an accident or incident; rather, as specified by NTSB regulation, not conducted for the purpose of determining the rights or liabilities of any person." 49 C.F.R. § 831.4. Assignment of fault or legal liability is not relevant to the NTSB's statutory mission to improve transportation safety by investigating accidents and incidents and issuing safety recommendations. In addition, statutory language prohibits resulting from a matter mentioned in the report. 49 U.S.C. § 1154(b). the admission into evidence or use of any part of an NTSB report related to an accident in a civil action for damages accident ID PLD18MR003. Recent publications are available in their entirety on the Internet at the NTSB website. For more detailed background information on this report, visit the NTSB investigation website and search for NTSB Other information about available publications also may be obtained from the website or by contacting: National Transportation Safety Board Records Management Division, CIO-40, 490 L'Enfant Plaza, SW, Washington, DC 20594, (800) 877-6799 or (202) 314-6551. order product number PB2019-101308 from: NTSB publications may be purchased from the National Technical Information Service. To purchase this publication, National Technical Information Service, 5301 Shawnee Rd., Alexandria, VA 22312, (800) 553-6847 or (703) 605-6000, NTIS website. NOTE: This report was reissued on November 7, 2019 with corrections to page 60 to remove NiSource employee information.#
Attachment 1, passage 700Contents Figures.... ... iii Tables .... iv Acronyms and Abbreviations ... ...... Executive Summary.. ..... vii 1. Factual Information.. 1 1.1 Accident Synopsis... 1 1.2 Background 3 1.2.1 NiSource ... 3 1.2.2 Feeney Brothers.. 4 1.2.3 Natural Gas Distribution Systems. 1.3 Events Preceding the Overpressure... 1.4 Emergency Response .. 1.4.1 Local and State Response .. 9 1.4.2 Columbia Gas Response... 11 1.4.3 Community Impact.... .13 1.5 Natural Gas Main Replacement Project 13 1.5.1 Scope. .13 1.5.2 Project Reviews.. ..15 1.5.3 Sensing Line Documentation.. .17 1.6 Engineering Project Management ..18 1.6.1 Staffing and Scope of Responsibilities.. ..18 1.6.2 Measurement and Regulation Department .20 1.7 Overpressure Protection... .22 1.7.1 Overpressurization Protection Requirements . .22 1.7.2 Previous Overpressurization Accidents Investigated by the NTSB .23 1.7.3 Previous NiSource Overpressurization Incidents .. .25 1.8 Pipeline Safety Management Systems .26 1.9 Professional Engineer Review and Approval .29 1.10 Government Oversight... .31 1.10.1 Federal Oversight.. .31 1.10.2 Massachusetts Oversight .32 2 Postaccident Actions... ...33 2.1 NTSB Safety Recommendation to Commonwealth of Massachusetts ..33 2.2 NTSB Urgent Recommendations to NiSource... ...34 2.3 NiSource Emergency Preparedness and Response Actions ..36 2.4 Industry Actions.. ..38#
Attachment 1, passage 701NISB Pipeline Accident Report 3 Analysis...... ....39 3.1 Exclusions ... .39 3.2 Overpressurization Protection for Low-Pressure Natural Gas Systems .39 3.3 CMA Engineering Processes... ...40 3.3.1 Records and Documentation... ...41 3.3.2 Constructability Review... ...42 3.3.3 Engineering Risk Assessment... ..43 3.4 Professional Engineer Review and Approval ...43 3.5 Emergency Response ... ...44 3.5.1 Public Safety Answering Points. ...44 3.5.2 Emergency Responder Communications.. ...44 3.5.3 NiSource Emergency Coordination with Municipal Responders. ...45 4 Conclusions.. ...48 4.1 Findings.... ...48 4.2 Probable Cause ..49 5 Recommendations.... ...50 5.1 New Recommendations. ..50 5.2 Previously Issued Recommendations. .51 Appendix…... ..52 Appendix A. The Investigation... .53 Appendix B. NiSource Safety Management System Plan .54 Appendix C. Enforcement Actions .... .55 Appendix D. Constructability Safety Review.. ...57 Appendix E. NiSource Operational Notice ON 15-05. ...59 References.. ..62 ii#
Attachment 1, passage 702NISB Pipeline Accident Report Figures Figure 1. Map of the damaged structures in the area impacted by the overpressurization. 2 Figure 2. Remnants of house where the fatality and two severe injuries occurred 3 Figure 3. Typical configuration of the Merrimack Valley low-pressure natural gas distribution Figure 4. Typical configuration of high-pressure natural gas distribution system installed postaccident.. 7 Figure 5. Salem Street tie-in for the South Union Street project 8 Figure 6. Location of September 13, 2018, tie-in and the Winthrop Avenue regulator station..... 9 Figure 7. Areas along South Union Street with tie-ins impacted by the project. 14 Figure 8. The Winthrop Avenue regulator station.. 15 Figure 9. Pipeline SMS maturity model.... 27 Figure 10. NiSource Safety Management System Plan Part A. 54 Figure 11. NiSource Safety Management System Plan Part B 54 iii#
Attachment 1, passage 703NISB Pipeline Accident Report Tables Table 1. Local fire response..... 10 Table 2. Required CMA project workflow documentation. 16 Table 3. Sources of sensing line information and select regulator station documentation. 17 Table 4. P.E. industrial exemption for infrastructure project practices 30 Table 5. Massachusetts DPU enforcement actions for the 5 years previous to the accident....... 55 iv NISB Pipeline Accident Report Acronyms and Abbreviations AGA American Gas Association ANSI American National Standards Institutes API American Petroleum Institute ASME American Society of Mechanical Engineers CFR Code of Federal Regulations CMA Columbia Gas of Massachusetts CoMIRS Commonwealth of Massachusetts Interoperable Radio System DPU Massachusetts Department of Public Utilities EOC emergency operations center ERP emergency response plans FMEA failure modes and effects analysis FOL field operations leader GIS geographic information system IC incident commander LFE leader of field engineering M&R Measurement and Regulation MAOP maximum allowable operating pressure MEMA Massachusetts Emergency Management Agency MOC management of change NG National Grid United States NCEES National Council of Examiners for Engineering and Surveying NSPE National Society of Professional Engineers NTSB National Transportation Safety Board V#
Attachment 1, passage 704NISB Pipeline Accident Report ON Operational Notice 0Q operator qualification P.E. professional engineer PHMSA Pipeline and Hazardous Materials Safety Administration PSAP Public Safety Answering Points psi pounds per square inch psig pounds per square inch, gauge PSMS Pipeline Safety Management Systems RP Recommended Practice RSPA Research and Special Programs Administration SCADA Supervisory Control and Data Acquisition system SCIP Statewide Communications Interoperability Plan SMS safety management systems W.C. water column WMS work management system vi#
Attachment 1, passage 705NISB Pipeline Accident Report Executive Summary On September 13, 2018, about 4:00 p.m. local time, a series of structure fires and explosions occurred after high-pressure natural gas was released into a low-pressure natural gas distribution system in the northeast region of the Merrimack Valley in the Commonwealth of Massachusetts. The natural gas distribution system was owned and operated by Columbia Gas of Massachusetts, a subsidiary of NiSource, Inc. Columbia Gas of Massachusetts delivers natural gas to about 325,000 customers in Massachusetts. One person was killed and 22 individuals, including three firefighters, were transported to local hospitals due to injuries; seven other firefighters incurred minor injuries. The fires and explosions damaged 131 structures, including at least 5 homes that were destroyed in the city of Lawrence and the towns of Andover and North Andover. Most of the damage occurred from fires ignited by natural gas-fueled appliances; several of the homes were destroyed by natural gas-fueled explosions. Fire departments from the three municipalities were dispatched to the fires and explosions. First responders initiated the Massachusetts fire-mobilization plan and received mutual aid from neighboring districts in Massachusetts, New Hampshire, and Maine. Emergency management officials had National Grid United States (the electric utility) shut down electrical power in the area, the state police closed local roads, and freight and passenger railroad operations in the area were suspended. Columbia Gas of Massachusetts shut down the low-pressure natural gas distribution system, affecting 10,894 customers, including some outside the area who had their service shut off as a precaution. The accident investigation focused on the following safety issues: • Adequacy of natural gas regulations • Project documentation • Constructability review • Project management • Risk assessment • Safety management systems • Licensed professional engineer approval of natural gas projects • Emergency response The National Transportation Safety Board determines that the probable cause of the overpressurization of the natural gas distribution system and the resulting fires and explosions was Columbia Gas of Massachusetts' weak engineering management that did not adequately plan, review, sequence, and oversee the construction project that led to the abandonment of a cast iron main without first relocating regulator sensing lines to the new polyethylene main. Contributing to the accident was a low-pressure natural gas distribution system designed and operated without adequate overpressure protection. vii#
Attachment 1, passage 706NISB Pipeline Accident Report 1. Factual Information 1.1 Accident Synopsis On September 13, 2018, about 4:00 p.m. local time, a series of structure fires and explosions occurred after high-pressure natural gas was released into a low-pressure natural gas distribution system in the northeast region of the Merrimack Valley in the Commonwealth of Massachusetts. The natural gas distribution system was owned and operated by Columbia Gas of Massachusetts (CMA), a subsidiary of NiSource, Inc. CMA delivers natural gas to about 325,000 customers in Massachusetts. The fires and explosions damaged 131 structures, including at least 5 homes that were destroyed in the city of Lawrence and the towns of Andover and North Andover. (See figure 1.) Most of the damage occurred from fires ignited by natural gas-fueled appliances; several of the homes were destroyed by natural gas-fueled explosions. Fire departments from the three municipalities were dispatched to the fires and explosions. First responders initiated the Massachusetts fire-mobilization plan and received mutual aid from neighboring districts in Massachusetts, New Hampshire, and Maine. Emergency management officials had National Grid United States (NG) (the electric utility) shut down electrical power in the area, the state police closed local roads, and freight and passenger railroad operations in the area were suspended. CMA shut down the low-pressure natural gas distribution system, affecting 10,894 customers, including some outside the affected area who had their service shut off as a precaution. 1#
Attachment 1, passage 707NISB Pipeline Accident Report shite St Marion Avi Maple St (110 WestSt Lawrence Howard St Woodland St N Canal St Lowell (114 Lawrence North Andover Stevens St [133 Cullen-are sin Rd Andover 133 Shawsh Summer St willow St ation Ra Morto tand Ra Legend Impact area Country Cluti Damage TT 0 0.5 2 miles Japan, METI, Esri China (Hong Kong), Esri Korea, Esri (Thailand), Mapmylndia Sources: Esri, HERE, DeLorme, USGS, Intermap, INCREMENT P. NRCan, Esri NGCC, 6 Open StreetMap contributors, and the GIS User Community Figure 1. Map of the damaged structures in the area impacted by the overpressurization. An 18-year-old male was killed when a home exploded, and the chimney fell onto the vehicle where he was sitting. (See figure 2.) Another person in the vehicle at the time of the 2#
Attachment 1, passage 708NISB Pipeline Accident Report explosion was seriously injured, as was someone on the second floor of the house. In total, 22 people, including 3 firefighters, were transported to hospitals for treatment of their injuries. Injuries included respiratory injuries related to smoke inhalation from fires and musculoskeletal injuries from evacuating. Some people were transported to hospitals to maintain ongoing medical treatment that could not be continued in their homes because of the shutdown of natural gas and electricity and the evacuation of residents. Figure 2. Remnants of house where the fatality and two severe injuries occurred. 1.2 Background 1.2.1 NiSource NiSource, Inc. is an Indiana-based energy holding company whose subsidiaries are regulated natural gas and electric utility companies serving about 3.9 million customers in seven states.' Its natural gas distribution operations comprise about 60,000 miles of pipeline and include 732 low-pressure natural gas distribution systems. NiSource's Massachusetts subsidiary, CMA, ' NiSource is the successor to a corporation organized in 1987 under the name of Northern Indiana Public Service Company Industries, Inc., which changed its name to NiSource in 1999. 3#
Attachment 1, passage 709NISB Pipeline Accident Report delivers natural gas to over 325,000 natural gas customers in southeastern Massachusetts, the greater Springfield area, and the Merrimack Valley? 1.2.2 Feeney Brothers CMA contracted with Feeney Brothers, a pipeline services firm, to work on a CMA project to replace an existing cast iron main with a polyethylene main. About 7:00 a.m. on the day of the accident, a CMA construction coordinator, along with four employees of Feeney Brothers, arrived at Salem and South Union Streets in Lawrence, Massachusetts, to continue work on this project. The work they performed that day led to the overpressurization of the natural gas distribution system. All crewmembers were trained and qualified in accordance with the Pipeline Operator Qualification Rule, commonly known as OQ.4 Following the accident, the contractor crewmembers, along with the CMA construction coordinator, were alcohol and drug tested in accordance with Title 49 Code of Federal Regulations (CFR) Part 199. The test results were negative for alcohol or other drugs. 1.2.3 Natural Gas Distribution Systems Natural gas distribution systems deliver natural gas to customers for heating, cooking, lighting, and other uses. A basic distribution system has three elements: (1) natural gas mains that transport natural gas underground, (2) service lines that deliver natural gas from the mains to customers, and (3) meters that measure the quantity of natural gas used by each customer. Customer piping takes natural gas from the meter to customer's appliances where it is used. To minimize service interruptions, normal maintenance and natural gas distribution system upgrades are typically performed with the system operating. Both low-pressure and high-pressure natural gas distribution systems are used to supply natural gas to customers. In a low-pressure natural gas distribution system, the natural gas in the mains is essentially the same pressure as the pressure provided to the customer's piping and used by the appliances. Natural gas is typically supplied to the mains from a high-pressure source through a regulator station that reduces the pressure to that required by the customers. The low-pressure natural gas distribution system in the Merrimack Valley was installed in the early 1900s with cast iron mains. The system used 14 regulator stations to supply natural gas to the mains and control pressure. The regulator stations each contained two regulators in series a worker regulator and a monitor regulator—each with a sensing line that feeds back the pressure in the main to the regulator, forming a redundant closed-loop control system. The worker regulator is the primary regulator that maintains the natural gas pressure, and the monitor regulator provides a redundant backup to the worker regulator. Each of the regulator stations reduced the natural gas 2 Although CMA had internal guidance documents specifically for its employees, NiSource also had guidance documents that employees in all its subsidiaries were required to follow. In this report, guidance documents are identified accordingly. and employs over 700 employees and operates throughout Massachusetts, Connecticut, and New York. 3 Feeney Brothers, a utility services firm headquartered in Dorchester, Massachusetts, was established in 1988 4 Title 49 Code of Federal Regulations (CFR) Part 192, Subpart N. 5 Regulator stations house the worker and monitor regulators that are used to maintain natural gas pressure. 4#
Attachment 1, passage 710NISB Pipeline Accident Report pressure from about 75 pounds per square inch gauge (psig) to 12 inches of water column (w.c.), about 0.5 psig, for distribution through the mains and delivery to customers.° Since the regulator stations are the primary means of pressure control in the low-pressure systems, an overpressure condition in a natural gas distribution system could affect all customers served by the system. This is an inherent weakness of a low-pressure natural gas distribution system. Figure 3 shows a typical arrangement for the low-pressure natural gas distribution system used in the Merrimack Valley before the accident. At the time of accident Gas distribution/gas pressure regulation Meter Meter • Meter typical main pressure 4-inch to 12-inch w.c. Worker regulator (typical) Monitor regulator (typical) sensing lines 3/4-inch From City Gate (typical) Meter Regulator station 1 of 14 Regulator station 3/4-inch sensing lines Regulator station Meter Meter 99 psig maximum allowable operating pressure Meter Figure 3. Typical configuration of the Merrimack Valley low-pressure natural gas distribution system. • In the pipeline industry, it is customary to measure anything less than 1 psig in inches of water column. A measurement of 1 inch w.c. equals 0.0361 psig. 5#
Attachment 1, passage 711NISB Pipeline Accident Report In a high-pressure natural gas distribution system, the natural gas pressure in the main is substantially higher than that required by the customer. A pressure regulator is installed at each meter to reduce the pressure. These regulators incorporate an overpressure protection device to prevent overpressurization of the customer's piping and appliances should the regulator fail. Additionally, excess flow valves are installed in the service line.? Because each customer's service in a high-pressure natural gas distribution system is protected by an excess flow valve and a pressure regulator, it is highly unlikely that an overpressure condition in the main would impact multiple customers. Figure 4 shows a typical high-pressure natural gas distribution system. This is the type of natural gas distribution system that was installed postaccident in the Merrimack Valley. 7 An excess flow valve is a mechanical safety device installed on a gas service line to a residence or small commercial gas customer. In the event of damage to the gas service line between the street and the meter, the excess company to install such a device on new or replacement service lines for single-family residences and certain flow valve will minimize the flow of gas through the service line. Current federal regulations require a gas distribution specific requirements. multifamily and commercial buildings where the service line pressure is above 10 psig. See 49 CFR 192.383 for 6#
Attachment 1, passage 712NTSB Pipeline Accident Report Postaccident - no sensing lines required Gas distribution/gas pressure regulation Regulator Q Meter 7-inch w.c. Regulator downstream of each regulator • Meter Regulator Meter Excess flow valve From City Gate Regulatar Meter W •Excess flow valve •Excess flow valve Meter Regulator flow valve. Excess Regulator Meter 99 psig maximum allowable operating pressure Regulator Meter Figure 4. Typical configuration of high-pressure natural gas distribution system installed postaccident. 1.3 Events Preceding the Overpressure About 7:00 a.m. on the day of the accident, a CMA construction coordinator, along with four employees of Feeney Brothers, arrived at Salem and South Union Streets in Lawrence, Massachusetts, to continue work on a CMA project to replace an existing cast iron main with a polyethylene main. The crew completed the installation according to the CMA work plan, placed the new tie-ins into service, and isolated the existing cast iron main shortly before 4:00 p.m., by closing 7#
Attachment 1, passage 713NISB Pipeline Accident Report valves on a 2-inch plastic bypass pipe between the cast iron and polyethylene mains. The crew then cut the bypass pipe to abandon the cast iron main. (See figure 5) In postaccident interviews, crewmembers said that within minutes of closing the valves and cutting the bypass, they observed the pressure gauge on the polyethylene main exceed the expected readings? Furthermore, a fitting on the polyethylene natural gas main blew off into the hand of one of the workers. The crewmembers said that they responded quickly to plug the blowing natural gas, and they heard emergency vehicles in the neighborhood and observed smoke plumes in multiple directions within minutes. 2-inch bypass with valve at each Pressure end gauges 6-inch main fed by newly energized 8-inch plastic main connected to Winthrop Avenue regulator station Figure 5. Salem Street tie-in for the South Union Street project (looking west). Photograph courtesy of Feeney Brothers. At the Winthrop Avenue regulator station, about 0.5 mile south of the work area, the abandoned cast iron main was still connected to the regulator sensing lines providing input to the two pressure regulators used to control the system pressure. '° (See figure 6.) Once the contractor branches ran east and west. When the main was replaced, the east and west branches needed to be tied into the new 8 A tie-in involves connecting new piping to existing piping. In this case, the main ran north and south while the 9 Supporting documentation referenced in this report can be found in the public docket for this accident, accessible from the NTSB Accident Dockets web page by searching PLD18MR003. 10 Sensing lines are also called control lines or static lines. 8#
Attachment 1, passage 714NISB Pipeline Accident Report crew isolated the cast iron main, the natural gas pressure began to drop in the cast iron main and in the regulator sensing lines. As the pressure dropped, the pressure regulators responded by opening further, increasing pressure in the natural gas distribution system. Since the Winthrop Avenue regulators no longer sensed system pressure, they fully opened, allowing high-pressure natural gas to be released into the low-pressure natural gas distribution system. iS Union St & Salem St N Location of September 13, tie-in 2350 'South Lawrence Winthrop Regulator 495 Station (location of sensing lines connected to 8-inch cast iron main) Figure 6. Location of September 13, 2018, tie-in and the Winthrop Avenue regulator station. 1.4 Emergency Response 1.4.1 Local and State Response The overpressurization of the low-pressure natural gas distribution system in the Merrimack Valley impacted over 10,000 natural gas customers in three municipalitiesLawrence, North Andover, and Andover. The emergency call centers in these municipalities, known as public safety answering points (PSAP) began receiving 9-1-1 calls immediately following the overpressurization from residents and businesses reporting fires and explosions and requesting assistance. Shortly after 4:00 p.m., the fire departments in Lawrence, North Andover, and Andover were inundated with emergency calls reporting structure fires and explosions. Within the first 30 minutes, all three fire departments had exhausted their list of mutual aid. The incident commanders (IC) from all three fire departments, who were either the fire chief or deputy chief, 9#
Attachment 1, passage 715NTSB Pipeline Accident Report told National Transportation Safety Board (NTSB) investigators they had never responded to a natural gas accident of this magnitude. Table 1 shows information on the local fire response from each of these municipalities. Table 1. Local fire response. Municipality notification Time of Number Number of stations of firefighters responding Number of firefighters injured Andover Lawrence 4:11 p.m. North Andover 4:13 p.m. 4:19 p.m. 3 6 124 3 44 68 4 1 In Massachusetts, municipalities determine their own emergency radio communications and resources because Massachusetts Home Rule grants them the responsibility for the welfare of their residents." The Commonwealth of Massachusetts Interoperable Radio System (CoMIRS) is a statewide network of connected but individually managed radio systems and dispatch networks that supports over 30,000 devices statewide. The Massachusetts State Police and North Andover use CoMIRS, but Lawrence and Andover do not. Once the 10th alarm level was reached, a request to the Massachusetts Emergency Management Agency (MEMA) to activate the statewide Fire Mobilization Plan was triggered. The plan activated 15 task forces across the state, and over 180 fire departments and 140 law enforcement agencies responded to the scene. Massachusetts State Police also responded to the affected area after receiving emergency calls. During the next 24 hours, they dispatched over 200 officers, which included detectives, members of the fire and explosion group, and crime-scene technicians. A total of 362 uniformed assets were deployed in the subsequent 4 days. They assisted in closing portions of Interstate 495, State Route 28, and State Route 114, and the police also escorted firefighters and technicians into the affected area. Shortly after 4:00 p.m., the Massachusetts State Fire Marshal was notified of the natural gas events. Unified command was initiated and collaboratively operated by the Massachusetts State Fire Marshal and the director of MEMA and was staged in South Lawrence. '2 About 5:20 p.m., NG received the first of several requests from CMA using a priority phone number to shut down electricity in the area to reduce sources that could ignite the released natural gas. The mayor of Lawrence issued an evacuation order for areas south of the Merrimack River. The evacuation alert was issued over cell phones and media broadcasts to residents in the area. North Andover authorities issued a voluntary evacuation for all occupied structures with natural the way it serves the needs of its constituency (Coester 2004)." I According to the National Association of Counties, home rule "gives local government the capability to shape 12 In an IC system, a unified command is an authority structure in which the role of the IC is shared by two of more individuals, each already having authority in a different responding agency. 10#
Attachment 1, passage 716NISB Pipeline Accident Report gas utility service, using local cable channels, the town website, and a citizen alert telephone system to send public service messages. The Andover fire chief called for an evacuation using a citizen alert telephone system and social media, and instructed residents to turn off natural gas service meters if they knew how to and to evacuate if they did not feel safe or smelled natural gas. In total, over 50,000 residents were asked to evacuate following the overpressurization (MEMA 2018). Five centers were set up in the three municipalities to receive displaced people; four of the centers became overnight shelters and remained open for several days. Although residents were allowed to return to their homes in all three municipalities on September 16, 2018, 3 days after the accident, many were uninhabitable at that time. As explained in section 1.4.3, many residents were unable to live in their homes for several months after the accident. 1.4.2 Columbia Gas Response On September 13, the NiSource Gas Systems Control monitoring center in Columbus, Ohio, received pressure alarms on its supervisory control and data acquisition (SCADA) system, which recorded a sudden increase of pressure in the Merrimack Valley low-pressure natural gas distribution system at 3:57 p.m. The SCADA capability was only able to monitor system pressures; it was unable to remotely control the natural gas system. '4 The first SCADA high-pressure alarm activated at 4:04 p.m. for the South Lawrence regulator station, noting a pressure of 15.02 inches w.c. 'S A second high-pressure alarm activated for the Riverina SCADA pressure-monitoring center in Andover, noting a pressure of 16.94 inches w.c. at 4:05 p.m. The controller acknowledged both alarms and called the on-call technician for the CMA measurement and regulation (M&R) department at 4:06 p.m. A rate-of-change alarm was activated at 4:07 p.m., as well as a high-high pressure alarm at 4:08 p.m. for the Riverina station, which the controller acknowledged immediately. 1 At 4:16 p.m., the CMA on-call technician reported to the monitoring center that he saw smoke and explosions from a distance. In response to the phone call from the SCADA center, the Lawrence technician called the M&R technicians about the alarms at 4:06 p.m. The M&R technicians immediately responded to perform field checks on the affected 14 regulator stations in the Merrimack Valley natural gas distribution system to identify and shut down any station that was feeding high-pressure natural gas into the system. At 4:30 p.m., one of the M&R technicians at the Winthrop Avenue regulator station heard a loud sound and recognized that a large quantity of natural gas was flowing through the regulators there. He adjusted the setpoint on the two regulators to reduce flow and isolated them. He noticed that the sound of the flowing natural gas began to decrease. 13 The alert system automatically called every landline. Cell phones and private numbers had to be registered. 14 The natural gas distribution system complies with all applicable regulatory requirements. 15 Interviews with NiSource controllers defined a high-pressure alarm as elevated pressure in the system and high-high pressure is when the pressure in the system has reached its maximum allowable operating pressure (MAOP). 16 A rate-of-change alarm is triggered by a rapid change in pressure. 11#
Attachment 1, passage 717NISB Pipeline Accident Report A CMA field engineer and the CMA field operations leader (FOL) were at another construction site when they received notification at 4:18 p.m. to contact the CMA construction department, from whom they learned that fires were coming out of house chimneys."? Due to traffic congestion, a police officer escorted the FOL toward the work site at Salem and South Union Streets. The FOL arrived around 5:08 p.m. 1 When the FOL arrived, the crewmembers told him they had confirmed the pressure in the entire low-pressure natural gas distribution system was in the normal range before removing the bypass. He then went to a home near the Salem and South Union Streets construction site and with the assistance of a pipefitter using a pressure gauge, found there was elevated pressure of 2.5 psi at 5:19 p.m. He then recommended to his supervisor, the Lawrence Operations Center manager, that CMA shut down the low-pressure natural gas distribution system. After being designated as the CMA IC by the Lawrence Operations Center manager, the FOL then called the engineering department for the list of valves that needed closing to isolate and shut down the system. While waiting for this information, he requested all distribution crews to stations and directed them to verify with the engineering department the correct valve to close once they arrived at a regulator station. Once confirmed, they closed the valves. The FOL confirmed the closure of all valves at 7:24 p.m. Low-low pressure alarms, indicating that the system was losing pressure, were received from the Riverina and South Lawrence SCADA pressure-monitoring points between 7:19 p.m. and 7:24 p.m., confirming the system was shutting down. At 7:43 p.m., the president of CMA declared a Level 1 emergency, in accordance with CMA's emergency response plan (ERP). '9 Beginning at 8:39 p.m., the FOL sent pipefitters to different points in the system to take pressure readings to see if the pressure was dropping. About midnight, crews were dispatched to the affected areas in all three municipalities to assist the fire department personnel in shutting off meters and responding to fires, leak calls, and odor complaints. Locksmiths also were requested by CMA to provide technicians access to secured properties that needed to be checked for leaking natural gas. On September 14 at 2:52 a.m., NiSource submitted a request to the Northeast Gas Association seeking mutual assistance from service technicians and supervisors from other natural gas companies. A total of 586 service technicians and 57 supervisors from 27 different natural gas companies responded to the area. During the night, CMA's M&R department worked at the FOL's direction to confirm all regulator stations were locked in.2° At 6:27 a.m., all 14 regulator stations were locked in and the 17 A FOL primarily handles customer requests and responds to natural gas incidents and leaks. 19 Level 1 is defined in NiSource's Emergency Manual as "Catastrophic Event-Which if not handled in an 18 The location of the FOL was recorded by a global positioning system tracker in the NiSource system. appropriate manner may dramatically impact NiSource's reputation, assets, or cause liability. Corporate Crisis Plan activated." Level 1 scenarios include a loss of a major natural gas facility or loss of critical natural gas infrastructure. 20 Lock in refers to the inlet and outlet valves being completely closed and, as a result, there is no natural gas flowing in the regulator station. 12#
Attachment 1, passage 718NISB Pipeline Accident Report low-pressure natural gas distribution system was confirmed shut down for 8,447 customers in the Lawrence, Andover, and North Andover areas. An additional 2,447 customers outside the immediate area had their natural gas shut off as a precaution. 1.4.3 Community Impact Residents who were evacuated from the impacted area were allowed to return to their homes by 7:00 a.m. on September 16, 2018. However, restoration of residential natural gas and electricity required more time and involved multiple steps to coordinate the activities safely. CMA restored natural gas service to most customers in the impacted areas of Lawrence, North Andover, and Andover by December 16, 2018, 3 months after the accident. On September 14, 2018, the governor of Massachusetts authorized Eversource Energy as the lead organization of the recovery process and to manage the restoration of the utility services in Andover, North Andover, and the portion of Lawrence that was south of the river (Commonwealth of Massachusetts 2018). ' Between September 14 and September 16, 2018, NG coordinated with CMA and Eversource Energy to restore electrical power, following a required procedure to ensure that it was safe to re-energize homes without igniting any natural gas. As a precaution, the fire department sent assets to neighborhoods in case structure fires occurred when the electric service was turned on. Until natural gas service was restored, many customers were without heat, hot water, and the service of other natural gas-fueled appliances such as stoves and clothes dryers. MEMA, the American Red Cross, and local officials set up a Recovery Resource Center to provide the communities with food and other support services. Also, NiSource and MEMA collaboratively set up an alternative housing program that relocated about 2,300 families to hotels, apartments, and trailers until they moved back into their homes (MEMA 2018). 1.5 Natural Gas Main Replacement Project 1.5.1 Scope Beginning in 2016, CMA initiated an effort to replace 7,595 feet of low-pressure cast iron and polyethylene mains with 4,845 feet of low-pressure and high-pressure polyethylene mains on South Union Street and neighboring streets. The project was estimated to last 96 days, encompassing 12 different projects with two work crews, and the work scope included 93 service lines—65 service line replacements and 28 service line tie-ins. This was the first of the projects that involved abandoning the existing pipe. A work package, which included materials such as isometric drawings and procedural details for disconnecting and connecting pipes, was prepared for each of the planned construction activities. However, no package was prepared for the relocation of the Winthrop Avenue sensing lines from the cast iron main to the polyethylene main. 21 Eversource Energy is an energy company that offers retail electricity, natural gas service, and water service to about 4 million customers in New England. 13#
Attachment 1, passage 719NISB Pipeline Accident Report Figure 7 shows the area of the replacement of the natural gas main in South Lawrence along South Union Street with the cross-street tie-ins. The work on the day of the accident was at the north end of the project at Salem Street. The Winthrop Avenue regulator station is at the soutl end of the project. IND South Union Street work was underway at Excavation site where time of the accident Salem Street South Lawrence Bailey Street 8-inch PE Abbott Street LP Main Farnham Street Andover Street Foster Street Boxford Street Cambridge Street Regulator Winthrop Dorchester Street Station Exeter Street Winthrop Avenue Oft 250ft 500 ft Figure 7. Areas along South Union Street with tie-ins impacted by the project. The first stage of the project involved the installation of the polyethylene main, which was completed in late 2016. The regulator sensing lines at the Winthrop Avenue regulator station remained attached to the cast iron main, where they controlled natural gas flow through the 14#
Attachment 1, passage 720NISB Pipeline Accident Report Winthrop Avenue regulator station into both the cast iron and polyethylene mains, which were connected in the low-pressure natural gas distribution system. (See figure 8.) The city restrictions, due to paving in the area, delayed the South Union Street project for more than a year. Prior to the delay, CMA connected the polyethylene pipe to the distribution system, which allowed it to be monitored for pressure changes. The second stage of the project began in 2018 and involved installing the tie-ins to the polyethylene main and abandonment of the cast iron main. On the day of the accident, the sensing lines were still connected to the cast iron main and were functionally disconnected from the distribution system when the cast iron main was abandoned. Sensing line High-pressure gas main normal operating pressure of 75 psig To Merrimack neighborhoods regulator station vault Winthrop Avenue • 8-inch low-pressure polyethylene main allowable operating pressure 99 psig maximum 8-inch cast iron low-pressure main Normal 7-inch w.c. lo 12-inch w.c. abandoned on day of accident. (14-inch w.c. maximum allowable operating pressure) To Merrimack neighborhoods 12-inch high-pressure main Figure 8. The Winthrop Avenue regulator station. 1.5.2 Project Reviews CMA uses three types of documents that are found in a work package and that are used to control the workflow of a construction project. Once these documents were complete, they were submitted to engineering management for approval. 15#
Attachment 1, passage 721NTSB Pipeline Accident Report Table 2. Required CMA project workflow documentation. Chronology Title of document of pages Number Description 1 Capital Design Job Order Checklist 2 Details the individual steps and activities, obtained by the field engineer during the project accountabilities, and approvals performed and 2 Capital Project Execution Workflow 3 design and approval process. Provides the activity detail, handoffs, throughout the construction process from the accountability, and approval that occurs time a project is released until it is completed and submitted to the GIS Capital Closeout team 3 Constructability Safety Review 3 for project closeout and mapping. Documents a collaborative discussion between design. potential obstacles to the execution of a project Constructability reviews are a recognized and generally accepted good engineering practice for the execution of professional design services and are intended to provide an independent and structured review of construction plans and specifications to ensure there are no conflicts, errors, or omissions (Kirby and others 1989). Two constructability reviews of the South Union Street project were signed on March 1, 2016, and January 6, 2017. The second constructability review was signed again on December 14, 2017. The constructability review form had a required signature line for the engineering and construction departments and a signature line for M&R that was designated as optional. The constructability review forms for the South Union Street project did not include signature(s) for representatives from the M&R department. Before the accident on September 13, 2018, the M&R department participation in constructability reviews was on a case-by-case basis. For example, if the project involved changing the design or location of a regulator station or installing or replacing a regulator, M&R would likely be involved in the constructability review and meetings in the field. Postaccident review of the engineering work package and construction documentation for the project identified some omissions. Although CMA used its project workflow process to develop, review, and approve the engineering plans, the work package did not consider the existence of regulator sensing lines connected to the distribution lines that were slated to be abandoned within the scope of work. This omission was not identified by any of the CMA constructability reviews (NTSB 2018). In fact, none of the CMA workflow documents refer to natural gas distribution system pressure control nor do they refer to regulator control or sensing lines, and none of the documentation in the construction packages for the South Union Street project referred to sensing lines for regulator control. The 2018 constructability review document referenced pressure monitoring and stated that "if pressure rises/falls beyond these points, contact M&R." 16#
Attachment 1, passage 722NISB Pipeline Accident Report 1.5.3 Sensing Line Documentation NTSB investigators spoke with an M&R department supervisor, who stated: Except for the newest stations, there's no, there is no, there is no drawings of control [sensing] lines. We frequently get asked to come out and help, you know, locators mark control lines. We can't really help them because we don't know where they are. Well, I mean a lot of the stations go back to the '50s and ' 60s. The new stations, we have the field engineers come out and draw them for us. The M&R supervisor said that employees sometimes used older legacy recordkeeping systems to supplement newer isometric drawings of the regulator stations because critical information was missing from the new drawings. He described the documentation failures of the newer drawings, such the omission of valves, as "a deficiency on the engineers," although he said that it might not have been the fault of the engineers because "it wasn't clear enough when they explained to them what they wanted drawn." He described the legacy recordkeeping system as "the old books," stating that "we call them our bibles." He said that even though employees "weren't supposed to have them anymore because they may not be current," during his tenure in his prior position in the field, he found them to sometimes be "more current than the new drawings." Table 3 details the information associated with the sensing lines and the regulator stations including where it can be found and also includes other related documentation, such as the geographic information system (GIS) data. According to the director of field engineering, the GIS data did not provide project reviewers/approvers with sensing line location information at the time of the accident. These information sources were not in one location; hence, engineers would be required to visit multiple places to capture the true as-built configuration. M&R staff also had extensive institutional knowledge about sensing line locations. Table 3. Sources of sensing line information and select regulator station documentation. Table courtesy of NiSource. Document or information source of Location Description interval Update Responsible for updating Critical Valve Book line information) (contain sensing Lawrence Center Operations in relation to other system components, Identifies the location of critical valves As including regulator stations and needed Engineering (contain sensing Work Done Files Operations Lawrence sensing lines where applicable Compilation by town and street of Center records and as-built sketches of work As work installations, replacements, and done on system, including sensing line is done Distribution, line information) Construction, Operations (contain sensing Historical Maps Lawrence relocations line information) Center Operations implementation of is. Certain Historical N/A locations historical maps include sensing line 17#
Attachment 1, passage 723NTSB Pipeline Accident Report Document or information source of Location Description Update interval Responsible for updating Files (contain Capital Close Out Lawrence information) sensing line Center Operations As-built drawings and other project As projects Construction/Capital order packets for capital projects are Close Out sensing as instalationings of project closed out WMS (work WMS Docs management As (contain sensing system) Docs Database projects Capital Close Out are line information) closed M&R As out Technician Books maintained for reference by Vehicles M&R in the field. The books contain needed M&R Inspection Record Regulator Station Station Regulator components, station shut-off valve Record of station attributes, major inventory As M&R changes Inventory Record Regulator Station Station Regulator components, station shut-off valve Record of station attributes, major inventory As M&R Drawing Station Isometric Regulator Station regulator station and sequence of Depicts direction of flow through changes As major station components needed Engineering GIS Map Printout Regulator Station regulator station's critical valve in GIS record identifying location of As needed Capital Close Out inlet and outlet piping, and natural gas relation to regulator station, station's mains in the vicinity of station 1.6 Engineering Project Management 1.6.1 Staffing and Scope of Responsibilities The field engineer assigned to the South Union Street project was based in the Lawrence Operations Center, and began work at CMA in July 2014, soon after graduating from college with a mechanical engineering degree. He was promoted from field engineer 1 to field engineer 2 in December 2016. He was responsible for developing and planning engineering modifications to the natural gas distribution system. He had about 1 year of experience when assigned to the South Union Street project in 2015, and he continued to work on that and other projects through 2018. He had worked as a field engineer with CMA for about 4 years when the accident occurred. The field engineer had completed training from NiSource on various topics, including regulators, sensing lines, and company-wide NiSource Operational Notice (ON) 15-05; the latter discussed how sensing lines could be damaged by excavation close to a regulator station, and it highlighted the specific risk of overpressurization due to damage to sensing lines. However, he imes could be damaged by die to damage dressed in his wank or vance told NTSB investigators that sensing lines typically were not addressed in his work packages unless a project involved replacing a regulator station (such as in the 2014 work package) or vault. He could not recall if he had addressed sensing lines on previous projects. He added that he did 18#
Attachment 1, passage 724NISB Pipeline Accident Report not know if the engineering department had access to sensing line information, although he believed that the M&R department did. Field engineers are supervised by one of two leaders of field engineering (FE), who both report to the manager of field engineering. There is one LFE for CMA's Brockton Operations Center and the other for CMA's Springfield and Lawrence Operations Centers. The LFE for the Springfield and Lawrence Operations Centers oversaw the South Union Street project. He began working for Bay State Gas Company (now CMA) as a co-op student on January 3, 1984. He was hired full time as an associate engineer in 1987 and worked within the engineering department until 2001. He then left the company and went into private consulting for 5 years. He came back to CMA in April 2007. He was promoted from field engineer to LFE in December 2013. In that capacity, his responsibilities included overseeing engineering projects in areas covering Springfield, Massachusetts, and Lawrence, Massachusetts. He had six full-time engineers who reported directly to him from the Springfield division and three engineers in the Lawrence Operations Center, where work packages for the South Union Street project were prepared. The LFE earned a bachelor of science degree in mechanical engineering and a master of science degree in engineering management. He is licensed as a professional engineer (P.E.) in Massachusetts. The field engineering group provides engineering support that includes the design of replacement projects, estimating, cost tracking, creation of tie-ins, and project management. For calendar year 2018, CMA established a goal to replace 58 miles of what was categorized as replacement pipe. The section of cast iron pipe related to the accident was part of this 58-mile scope. In an interview, the LFE described the initiation of the South Union Street project. He said that as part of a natural gas system enhancement program, the field engineering department submits a 5-year pipe-replacement plan each year to the Massachusetts Department of Public Utilities (DPU). From there, the team develops a preliminary design to determine the project scope and prioritize tasks. After a preliminary estimate and preliminary design, the field engineering group meets with the construction group for a constructability review. According to the LFE, once they finalize a plan: We make sure that we take a look at all of the material that's going to be installed and abandoned. We develop tie-in procedures, pressure-testing procedures. We make sure environmental concerns are addressed. And we actually have a checklist to go down to make sure that the protocol has been followed as far as constructability reviews, reviews of crews in the field—I mean, constructability reviews for the construction people so they understand the scope of the project. The engineering review includes sign off by the LFE, the manager of field engineering, and the director of field engineering. During interviews with NTSB investigators, the LFE, and the manager and director of field engineering stated that their review did not include an evaluation of each step in the work package. The LFE stated, "I do not go through and actually—on every 19#
Attachment 1, passage 725NISB Pipeline Accident Report single project look at every single step of the process." The LFE was not required or asked to review the work package and certify it under the standards of a Professional Engineer. The director of field engineering indicated that he is responsible for approving projects with costs over $1 million, which included the South Union Street project. He said that his reviews typically were at a higher level, and he did not carefully review each step of work packages, particularly those that were routine in nature, as was the case with the work being done on the day of the accident. Moreover, he suggested that he would expect the managers of engineering to perform similar high-level reviews. However, the director of field engineering indicated that he would expect the field engineers and the LFEs to work together to ensure that work packages were safely designed. He said that it was up to the LFE to assess the capabilities of each field engineer and provide the appropriate level of oversight based on their capabilities. He added that peer reviews, in which field engineers evaluated each other's work, were often used as well. However, he said that such reviews were informal and unstructured. He added that when field engineers were in the process of gathering information on a project, they looked at the documentation on the facilities that are in the scope of the work. He said that after the accident NiSource recognized that "we were short on readily available information around the sensing lines, the control lines." 1.6.2 Measurement and Regulation Department The M&R department is responsible for maintaining the regulator stations in the CMA natural gas distribution system. On September 13, 2018, the M&R department consisted of 11 full-time technicians across Massachusetts, with 2 technicians in the Lawrence area who had more than 45 years of experience between them. The department is responsible for the regulator vaults, the regulators, and the sensing lines. CMA expects the M&R department to initiate work for existing sensing line maintenance. On capital projects, CMA expects the engineering department to work in coordination with M&R and the construction departments when sensing line work is needed. The NTSB was provided an affidavit from the field engineer in which he stated that he discussed sensing line configurations in general with a member of the construction department during the design phase of the South Union Street project, and during the constructability review that took place on March 1, 2016. The field engineer also said that he contacted the M&R department to discuss sensing lines, though he no longer recalled "all the specifics of that conversation." The field engineer said that he concluded his discussion with the M&R department with the understanding that the engineering department did not need to do anything further regarding sensing lines on the South Union Street project. The affidavit did not reveal a plan to relocate the sensing lines. NiSource did not have a requirement to document conversations between the engineering and measurement and regulation departments regarding sensing lines. NiSource provided the investigation with an e-mail, dated October 16, 2016, from the Lawrence construction leader to the M&R department. The Lawrence construction leader was involved in the South Union Street project and had signed the first constructability review for the project on March 1, 2016, (before sending the e-mail), and the second constructability review on January 6, 2017, (after sending the e-mail). However, the M&R department employee addressed 20#
Attachment 1, passage 726NISB Pipeline Accident Report in the e-mail had left CMA and was not employed by the company at the time of the accident. The e-mail stated: We are working near the union st reg station. We are working on the low-pressure outlet and will be placing a tap fitting on the outlet and eventually moving the static lines to the new outlet piping. A new outlet valve will be installed. The shutdown of the pit will be scheduled for some time later. This is a notice that work in the area has started. In addition, NiSource provided the NTSB with an affidavit from a contract inspector in its Lawrence Operations Center that stated that he discussed with the Lawrence construction leader the need to relocate the sensing lines before the existing cast iron main was abandoned." The contract inspector said that the two agreed to discuss the relocation "in more detail, with input from others, once the project progressed further." He said that the construction crew, including the construction foreman, construction lead, and the NiSource local construction coordinator, also were aware of the need to relocate the sensing lines before the cast iron main was abandoned. Although several affidavits suggest there were conversations about sensing lines, and an e-mail exists that confirms that it was known that the sensing lines needed to be relocated, there is no evidence that a work order or formal plan was ever developed to address the issue. In 2015, NiSource issued an operational notice, Below Grade Regulator Control Lines: Caution When Excavating Near Regulator Stations or Regulator Buildings, ON 15-05, requiring that M&R personnel be consulted on all future excavation work that was done within 25 feet of a regulator station with sensing lines, other communications and/or electric lines critical to the operation of the regulator station, or buried odorant lines. The ON provided that M&R personnel stand by the regulator station throughout the excavation if there was a risk that the excavation could damage any such line. The South Union Street project excavation work being performed on the day of the accident occurred over 2,000 feet away from the Winthrop Avenue regulator station and, thus, was beyond the 25-feet requirement in ON 15-05. The basis of the 25 feet in ON 15-05 is the assumption of a safe distance that encompasses the equipment associated with a regulator station, including sensing lines. According to the document: If a control line breaks, the regulator will sense a pressure loss, causing the valve to open further, resulting in an over pressurization on the downstream piping system, which may lead to a catastrophic event. The same result occurs if the flow through the control line is otherwise disrupted (e.g., control line valve shut off, control line isolated from the regulator it is controlling) (NiSource 2015). As documented in the NTSB's November 14, 2018, Safety Recommendation Report on this accident, a former CMA employee informed NTSB investigators about a purported past policy or practice that CMA allegedly phased out, whereby M&R personnel stood by a regulator station when construction took place on its natural gas mains (NTSB 2018). During interviews with a NiSource employee and a former employee, investigators were told there were times in the past (at least 5 years earlier) when M&R personnel provided assistance while distribution system piping modifications were being tied over to live systems to minimize the risks associated with 22 The affidavit was signed on May 2, 2019, 231 days after the accident. 21#
Attachment 1, passage 727NISB Pipeline Accident Report overpressurization at natural gas mains. No documentation was found to support that such a policy or practice existed, except as outlined by ON 15-05. NiSource stated that no such policy or practice existed and; therefore, none was phased out or discontinued.2 1.7 Overpressure Protection 1.7.1 Overpressurization Protection Requirements For low-pressure natural gas distribution systems, there is no requirement for a service regulator or protective device at the service location that would prevent the overpressurizing of customers' piping and appliances. Overpressure protection relies on the redundant worker and monitor regulators at the regulator stations where natural gas is introduced to the low-pressure natural gas distribution system. Title 49 CFR 192.197 requires high-pressure natural gas distribution systems be equipped with a service regulator or protective devices at the service location that would prevent the overpressurizing of customers' piping and appliances. This is in contrast to the requirements for low-pressure natural gas distribution systems, where the pressure in the main is essentially the same as the pressure provided to the customer. The American Society of Mechanical Engineers (ASME) sets forth guidelines for the safe design and construction of both high and low-pressure natural gas distribution systems. These guidelines, called The Code, include requirements for district regulator vaults, regulators, and control lines (ASME 2012). Specifically, The Code states the following in section 845.3: (g) When a monitoring regulator, series regulator, system relief, or system shutoff is installed at a district regulator station to protect a piping system from overpressuring, the installation shall be designed and installed to prevent any single incident, such as an explosion in a vault or damage by a vehicle, from affecting the operation of both the overpressure protective device and the district regulator. 24 (h) Special attention shall be given to control [sensing] lines. All control lines shall be protected from falling objects, excavations by others, or other foreseeable causes of damage and shall be designed and installed to prevent damage to any one control line from making both the district regulator and the overpressure protective device inoperative. Title 49 CFR 192.195 requires protection from the accidental overpressuring of natural gas distribution systems, and states that systems must have a pressure-relieving or pressure-limiting supervisory employees from the construction and M&R departments at each of NiSource's operations 23 NiSource informed the NTSB that it had investigated this issue thoroughly, speaking with 18 field and centers—including the employees interviewed by the NTSB. NiSource also provided the NTSB with sworn affidavits from each of those employees regarding this issue. 24 Monitor regulators are sometimes referred to as monitoring regulators. 22#
Attachment 1, passage 728NISB Pipeline Accident Report device that meets the requirements outlined in 49 CFR 192.199 (g). Title 49 CFR 192.199 (g) states, "where installed at a district regulator station to protect a pipeline system from overpressuring, be designed and installed to prevent any single incident such as an explosion in a vault or damage by a vehicle from affecting the operation of both the overpressure protective device and the district regulator." The redundant worker and monitor regulators underground vault at the Winthrop Avenue regulator station met the overpressure requirements of 49 CFR 192 and the ASME guidelines. 1.7.2 Previous Overpressurization Accidents Investigated by the NTSB Over the past 50 years, the NTSB has investigated several accidents that involved natural gas under high pressure entering low-pressure natural gas lines.'s On June 3, 1969, the NTSB investigated a natural gas pipeline overpressure incident in Gary, Indiana (NTSB 1969). The pipeline, owned by Northern Indiana Public Service Company (NIPSCO), which is the present-day NiSource, was overpressurized when an employee inadvertently opened a separation valve that allowed 20 psig gas to flow into a 0.25 psig system. The absence of any overpressure protection in the 0.25 psig system now subjected to the 20 psig resulted in a regulator diaphragm failure. Although operators recognized the error and closed the separation valve, the failed regulator allowed 20 psig gas into the natural gas distribution system. There were no fatalities; however, nine residents and five firefighters were injured. Seven homes were destroyed and several incurred damage. The property damage was about $350,000. On November 6, 1969, a low-pressure natural gas distribution system in Burlington, Iowa, overpressurized when a bulldozer impacted one of 24 regulator stations on a 7,500-customer system (NTSB 1969a). The impact damaged the worker regulator. When the worker regulator was damaged, the monitor regulator activated; however, the monitor regulator failed to control the 55 psig inlet pressure to the required 0.25 psig as-designed setting. The Iowa Southern Utility Company estimated that the pressure reached 1.25 psig, which amounted to a four- to five-fold increase over the normal operating pressure. Although the sensing lines were bent in the mishap, their integrity to maintain pressure was not compromised. There were no fatalities, but two firefighters suffered minor injuries. There were no explosions, but six homes were totally destroyed; 42 other homes suffered fire damage. The Burlington Fire Department estimated the damages at $80,000. On August 9, 1977, natural gas under high-pressure (20 psig) entered a Southern Union Gas Company low-pressure (6 ounces per square inch) natural gas distribution line and overpressured more than 750 customer service lines in a 7-block area in El Paso, Texas. 2 Flames from gas pilots and the burners of appliances burned out of control and caused fires in nearby flammable materials. The gas company was replacing a section of 10-inch cast iron low-pressure natural gas main and isolated it between two valves. The isolated sector contained the natural gas regulator pressure sensing control lines. When the pressure fell to 0 psig the natural gas regulators 25 The reports cited in this section are available on http://www.ntsb.gov. 26 For reference, 1 ounce per square inch, gauge equals 0.0625 psig which equals 1.73-inch w.c. 23#
Attachment 1, passage 729NISB Pipeline Accident Report opened up to try to maintain the operating pressure and overpressured the rest of the affected system. The problem was corrected before any fatalities or major injuries resulted (NTSB 1978). On May 17, 1978, a Columbia Gas of Ohio, Inc., construction crew in Mansfield, Ohio, mistaking an 8-inch low-pressure steel natural gas main for an 8-inch high-pressure steel natural gas main, drilled a small pilot bit hole through the wall of the low-pressure natural gas main and began to cut into the pipe wall with a large diameter bit.?? The construction crew was making a "hot tap" to complete the final tie-in of an 8-inch, replacement natural gas main to the existing high-pressure natural gas distribution system.2® The hot tap was to be made using a three-way tapping tee which had its side outlet welded to the live high-pressure replacement natural gas main and its bottom outlet mistakenly welded to the low-pressure natural gas main. When the 1-inch pilot bit on the tapping machine attached to the top outlet of the tee penetrated the wall of the low-pressure natural gas main, gas at 42 psig pressure from the high-pressure natural gas distribution system entered the 14-inch w.c. (about 1/2 psig pressure) low-pressure natural gas main and rapidly increased the pressure in the low-pressure natural gas system in a 4.8 square mile area of Mansfield. The Mansfield Fire Department began receiving reports of fires caused by excessively high appliance flames on natural gas appliances. There were no fatalities or injuries requiring hospitalization. Property damage to 16 houses resulted from the ignition of nearby combustibles by high-pilot flames; five of these houses were extensively damaged. On January 28, 1982, in Centralia, Missouri, natural gas at 47 psig entered a low-pressure natural gas distribution system which normally operated at 11-inches w.c. (0.40 psig) after a backhoe bucket snagged, ruptured, and separated the 0.75-inch diameter steel pressure regulator control line at the Missouri Power and Light Company's district regulator station No. 1 (NTSB 1982). Because the regulator no longer sensed system pressure, the regulator opened and high-pressure natural gas entered customer piping systems, in some cases, resulting in high pilot light flames which initiated fires in buildings; while in other cases, the pilot light flames were blown out, allowing natural gas to escape within the buildings. Of the 167 buildings affected by the overpressurization, 12 were destroyed and 32 sustained moderate to heavy damage. Five occupants received minor injuries. On September 23, 1983, natural gas pressure in the Boston Gas Company's distribution system in East Boston, Massachusetts, rapidly increased from 7-inches w.c. (about 0.25 psig) to more than 17-inches w.c. (about 0.6 psig).? The Boston Fire Department began receiving telephone calls about natural gas odors, high pilot lights, and fires. Natural gas company crews searching for the source of high-natural gas pressure found the district regulator vault at Bremen and Porter Streets (one out of four in the East Boston area) had been submerged in water following a broken water main. After the vault had been pumped out, inspection of the primary regulator 27 For more information, see the NTSB letters, dated August 21, 1978, to Columbia Gas of Ohio (regarding NTSB Recommendations P-78-50 and -51); and American Gas Association (regarding NTSB Safety Recommendation Safety Recommendations P-78-45 through -49); Materials Transportation Bureau (regarding NTSB Safety 28 Hot tapping is the method of making a connection to existing piping while the pipe is in service without interrupting the flow of natural gas. 2 For more information, see the NTSB letter, dated April 9, 1984, to the Boston Gas Company regarding NTSB Safety Recommendations P-84-7 through - 9. 24#
Attachment 1, passage 730NISB Pipeline Accident Report showed that water had entered the regulator through leaks in a gasket and through the vent piping, filling the area above the regulator diaphragm, holding the regulator valve open and allowing natural gas pressure to increase in the distribution system. In addition, a dispatcher at the Boston Gas Company control center received an alarm about the substantial rise in pressure.3° Many East Boston residents had been awakened to the sound and smell of blowing natural gas to see larger-than-normal natural gas pilot lights and natural gas appliance pilot flames in their homes. The Boston Fire Department responded immediately to telephone calls from the residents and began alerting and evacuating residents. The fire department turned off natural gas at customer meters and pursued fighting fires. A 1-square-mile section of East Boston was affected; one restaurant was destroyed by an explosion, two residences were destroyed by natural gas-fed fires, and other small fires occurred as a result of the natural gas overpressurization. No fatalities or injuries resulted from the accident. On January 17, 1992, in the River West area of Chicago, Illinois, a crew from Peoples' Gas, Light and Coke Company (Peoples) was doing routine annual maintenance work on a monitor regulator at one of its regulator stations, when high-pressure natural gas at 10 psig entered a low-pressure natural gas distribution system (NTSB 1993). The natural gas escaped through appliances into homes and other buildings where it was ignited by several unidentified sources. The resulting explosion and fires killed 4 people, injured 4, and damaged 14 houses and 3 commercial buildings. 1.7.3 Previous NiSource Overpressurization Incidents Over the past 15 years, there have been four overpressurization events and one near-miss within the NiSource network, not including this one on September 13.31 NTSB did not investigate these incidents. On March 1, 2004, a system with an inlet pressure of 50 psig and an outlet pressure of 13 inches w.c. was overpressurized to 4.5 psig when debris was lodged at the seat of the bypass valve in Lynchburg, Virginia. On February 28, 2012, an operator error during an M&R station inspection resulted in accidental overpressurization in Wellston, Ohio. Over 300 customers were without service for 14 hours. On March 21, 2013, a segment of pipe with a maximum allowable operating pressure (MAOP) of 1 psig was pressurized at over 2 psig in Pittsburgh, Pennsylvania. A work crew, under the direction of the local NiSource subsidiary, was making a tie-in and failed to monitor the pressure and flow of the existing low-pressure natural gas distribution system during the tie-in process. The pressure cycled from 12 inches w.c. up to 2 psig three times. On August 11, 2014, a local NiSource crew in Frankfort, Kentucky, was excavating to repair a Grade 1 leak located on the outside of a regulator station building. The crew uncovered 30 For more information, see the NTSB letter, dated November 27, 1984, to the Boston Gas Company regarding NTSB Safety Recommendations P-84-43 through -45 31 E-mail from NiSource to NTSB, March 25, 2019. 25#
Attachment 1, passage 731NISB Pipeline Accident Report and narrowly missed hitting the 1-inch sensing line and tap located on the 8-inch outlet pipeline. The crew was unaware of the purpose of the 1-inch pipeline and called local M&R personnel. The M&R personnel advised the crew of the purpose of a sensing line and what would have happened had the line been broken. On January 13, 2018, during the investigation of a service complaint, a pressure of 2 psig was discovered on a 14-inch w.c. natural gas distribution system in Longmeadow, Massachusetts. The cause was associated with debris accumulation on both the worker and monitor regulator seats at a regulator station. Once the debris was removed, the pressure returned to normal. 1.8 Pipeline Safety Management Systems On July 25, 2010, a 30-inch diameter pipeline owned and operated by Enbridge Incorporated ruptured and released more than 840,000 gallons of crude oil into nearby wetlands and a creek that flowed into the Kalamazoo River in Marshall, Michigan. Unaware that the pipeline had ruptured, Enbridge employees continued pumping oil into the ruptured pipeline for 17 hours until a local utility worker discovered the oil and contacted the company (NTSB 2012). The rupture was caused by fatigue cracks that grew and coalesced from crack and corrosion defects under disbonded polyethylene tape coating. Contributing to the accident were weak regulations for assessing and repairing crack indications as well as ineffective oversight of pipeline integrity management programs, weak pipeline control center procedures, and a low level of public awareness. As a result of the Marshall, Michigan, investigation, the NTSB made the following safety recommendation to the American Petroleum Institute (API): Facilitate the development of a safety management system standard specific to the pipeline industry that is similar in scope to your Recommended Practice 750, Management of Process Hazards. The development should follow established American National Standards Institute requirements for standard development. (P-12-17) In response to this recommendation, API developed a recommended practice (RP), titled Pipeline Safety Management Systems, which was sanctioned by the American National Standards Institute (ANSI. 32 The API document, known as API RP-1173, exceeded the NTSB's intent in issuing the recommendation to facilitate the development of a safety management system (SMS) standard specific to the pipeline industry. In addition, API, which represents commercial concerns throughout the oil and natural gas industry, addressed safety culture and other safety-related issues in its API RP-1173 (API 2015). As a result, on October 22, 2015, the NTSB classified Safety Recommendation P-12-17 "Closed-Exceeds Recommended Action." API formed a stakeholder group consisting of oil and natural gas pipeline operator personnel and trade association staff, other federal and state agency personnel, and safety experts representing the public. The group met monthly, surveyed the public, and developed actionable guidelines for the pipeline industry to work toward a goal of continuous safety improvement. The API RP-1173 established a pipeline safety management system (PSMS) framework for 32 A recommended practice is a voluntary pipeline industry consensus standard. 26#
Attachment 1, passage 732NISB Pipeline Accident Report organizations that operate hazardous liquids and natural gas pipelines under the jurisdiction of the US Department of Transportation. In 2015, the pipeline industry completed the development of the PSMS framework, designed specifically for pipeline operators. It is a product of a collaboration between pipeline operators, state and federal regulators, and other stakeholders. Participants include API, the Association of Oil Pipe Lines, the American Gas Association, the American Public Gas Association, the Interstate Natural Gas Association of America, and the Canadian Energy Pipeline Association.33 Since the availability of API RP-1173, many oil and natural gas companies have been aligning with its guidance and building PSMSs that suit their companies' situations and goals. To facilitate the continued success and use of PSMS guidance, the developers of API RP-1173 prepared a PSMS maturity model for companies to gauge the status of their PSMS build out. (See figure 9) Five levels of maturity were defined in the maturity model (MM): planning (level 1), developing (level 2), implemented (level 3), sustaining (level 4), and improving (level 5). The "plan, do, check, act" cycle and; therefore, the full safety benefits of PSMS are realizable in levels 4 and 5. Pipeline SMS Maturity Model and Tools Pipeline SMS www.pipaltiesins.org LEVEL 4 LEVEL 5 LEVEL 1 LEVEL 2 LEVEL 3 IMPLEMENTED SUSTAINING IMPROVING Did you dovolop It? Do you do I!? Is It helping? PLANNING DEVELOPING - Processes • There is evidence • There is evidence Are you starting? Are you developing it? • Processes are developed used consistently of processes being Improvement of continual • Organization Is • Processes are documented • Performance is • Processes are developing an being developed being assessed measurable resulting in management system understanding of the • Implementation is performance MATURITY MODEL about 50% complete are in use improvements • Implementation action plan developed action plan approved CONFORMANCE - EFFECTIVENESS PLANNING TOOL IMPLEMENTATION TOOL EVALUATION TOOL API RP 1173 PEER-TO-PEER SHARING Figure 9. Pipeline SMS maturity model. Graphic courtesy of Pipelinesms.org. 33 For more information, see https://pipelinesms.org. 27#
Attachment 1, passage 733NISB Pipeline Accident Report NiSource began its SMS efforts several years prior to the overpressurization, as evidenced by the company being listed as a participant in the American Gas Association's (AGA) SMS project. Interviews with NiSource executives revealed that they had initiated SMS development in 2015 and accelerated efforts since the accident. NiSource employees indicated that they were excited about SMS development, but were still early in the process. They had not yet determined how they were going to assess the matunty of their SMS. NiSource was among the first natural gas utility companies to embrace API RP-1173 for its operations when it was implemented at its subsidiary, Columbia Gas of Virginia, in 2015. Its initial efforts at Columbia Gas of Virginia began before the Merrimack Valley overpressurization. NTSB investigators interviewed senior executives at NiSource to better understand the status of its PSMS development and implementation efforts. The director of pipeline safety for NiSource Corporate Services said that both he and the NiSource board of directors were excited about the deployment of PSMS. After the accident, he indicated that he had another opportunity to discuss the PSMS with the board, at which point PSMS efforts were "very much encouraged to move even faster," and NiSource has now accelerated implementation of PSMS in all its companies. When investigators asked about the maturity of the PSMS, he indicated that the maturity measures had not "been defined," though there was "certainly a lot of discussion" taking place on the topic, additional resources have been added to accelerate PSMS implementation, and there is not an "endpoint" because it involves a process of continual improvement. He also said that NiSource, as well as third parties, would be involved in safety oversight. He indicated there would be checks and balances and stated that the "governance piece is really good." However, he also indicated that "the auditing process is yet to be defined." He said that NiSource is trying to get the primary elements of PSMS in place by the end of 2019. NTSB investigators also spoke with a NiSource senior vice president about the implementation of PSMS. Direct reports to this senior vice president include the vice president of safety, the vice president of training, and the vice president of environmental. The senior vice president indicated that the initial plans for PSMS were a "sequential deployment" on a state-by-state basis. He said that he believed that a "generic gap analysis kind of at the (natural) gas segment level" had been performed. He added that NiSource was in the process of "really deploying and building safety management systems around the recommended practice [API RP-] 1173." He also indicated that gap analyses had been performed for Virginia and Indiana, and that NiSource is undertaking them in other states, including Massachusetts. The senior vice president indicated that many gaps had been improved upon, if not closed. When they began their effort, they performed a gap analysis based on the 10 elements within the API-1173 standard and determined that NiSource's Virginia-based safety programs were about 58 percent in agreement with the 10 elements. Relating to API-1173 implementation, Virginia was intended to be the pilot state for implementation; at the time of the accident, API-1173 implementation had yet to be 28#
Attachment 1, passage 734NISB Pipeline Accident Report implemented in Massachusetts. Following the accident, CMA was ordered by the Massachusetts DPU to adopt API-1173.34 1.9 Professional Engineer Review and Approval Professional engineer (P.E.) approval and stamping of drawings is a required practice for engineering projects to assure the safety of the public throughout the United States. P.E.s must be licensed by the state in which they practice. Although licensing laws vary state to state, they contain similar requirements for education and experience. To be licensed as a P.E., an engineer must earn a 4-year degree in engineering from an accredited engineering program, pass the Fundamentals of Engineering examination, complete 4 years of progressive engineering experience under the guidance of a licensed P.E., and pass the Principles and Practice of Engineering examination. Projects requiring P.E. approval and stamping include, but are not limited to, roadways, bridges, tunnels, dams, and building structural design. Industrial exemptions allow utilities to perform engineering work related to public safety without the approval and stamp of a licensed P.E. In many cases, this exemption creates a loophole because there is no requirement to have work performed by an engineer at all. The P.E. who approves and stamps the project documents must be in responsible charge of the project.3 This assures that all aspects of the project are performed under the supervision and direction of a qualified engineer. However, 31 states exempt public utilities from this requirement even though proper design is necessary for public safety. Prior to the overpressurization of the CMA natural gas system in Merrimack Valley, Massachusetts was one of those states that exempted utilities. At the time of the accident, two NiSource employees who held P.E. licenses were involved with the South Union Street project: the LFE and the director of field engineering. Their employment roles required both employees to review and sign off on the South Union Street project, but there was no requirement to stamp the construction documents. Neither the LFE nor the director of field engineering was in responsible charge of the project. Therefore, none of the construction documents were issued with P.E. stamps. The documents prepared for the South Union Street project were signed by a degreed engineer who had an engineer-in-training certificate, which is held by individuals preparing to take the P.E. examination. However, he was not yet eligible to take the P.E. examination because he had not satisfied the work experience requirement. On November 14, 2018, the NTSB issued Safety Recommendation P-18-5 to the Commonwealth of Massachusetts that addressed the removal of a P.E. licensure exemption for such public utility work, along with a corresponding Safety Recommendation P-18-6 issued to NiSource, the parent company of Columbia Gas of Massachusetts, recommending P.E. approval 34 Commonwealth of Massachusetts Department of Public Utilities Consent Order, D.P.U. 18-PL-03, November 30, 2018. made personally or by others over whom the engineer exercises supervisory direction and control authority. 35 Responsible charge refers to the degree of control an engineer is required to maintain over engineering decisions 29#
Attachment 1, passage 735NISB Pipeline Accident Report of natural gas pipeline projects within NiSource (NTSB 2018) 36 As described more fully in section 2.1, Massachusetts acted to satisfy Safety Recommendation P-18-5 less than 2 months after it was issued. Subsequent to this recommendation, the NTSB contacted two independent organizations seeking expert information on the current state of P.E. license oversight and the industrial exemptions among the United States and territories for major infrastructure projects. The National Council of Examiners for Engineering and Surveying (NCEES) is a national nonprofit organization dedicated to advancing professional licensure for engineers and surveyors. NEES develops, administers, and scores the examinations used for engineering and surveying licensure in the United States. It also facilitates professional mobility and promotes uniformity of licensure processes in the United States through services for its member licensing boards and licensees, including engineering and surveying examinations, examination preparation materials, records programs, and credentials evaluations. The National Society of Professional Engineers (NSPE) is a professional association representing licensed P.E.s in the United States, in 53 state and territorial societies and over 500 local chapters (NSPE 2019). In August 2016, NSPE compiled a published report that documented the language of the individual states, including Washington, DC, pertaining to laws and regulations that govern the P.E. oversight of major infrastructure project practices and reviewed the industrial exemption provisions, as allowed by those laws and regulations. Currently 31 states have exemptions and 19 states and the District of Columbia do not. The State of New York is in the process of removing the exemption. Table 4 outlines the P.E. industrial exemption by state. Table 4. P.E. industrial exemption for infrastructure project practices. State Yes (Yes or No) Exempt If Yes, action required for change Alaska Alabama Yes Amend statute Arizona Yes Amend statute Arkansas Yes Yes Amend statute Colorado California Amend statute Yes Yes Amend statute Connecticut Amend statute Delaware No Amend statute Florida District of Columbia No Yes Yes Hawaii Georgia Amend statute Yes No Amend statute Idaho Illinois Yes Amend statute lowa Indiana No Amend statute No Yes Kansas Amend statute Kentucky Yes Maine Louisiana Yes Yes Amend statute Amend statute Massachusetts Maryland No Yes Amend statute Amend statute Legislation passed and signed into law 36 NTSB Safety Recommendation P-18-6 (Urgent). 30#
Attachment 1, passage 736NISB Pipeline Accident Report State (Yes or No) Exempt if Yes, action required for change Minnesota Michigan No Mississippi Yes Missouri Yes Amend statute Amend statute Nebraska Montana Yes Yes Amend statute Nevada Yes Amend statute New Hampshire Yes Amend statute Amend statute New Jersey New York New Mexico Yes No North Carolina North Dakota No Yes Amend statute Amend statutea Oklahoma Ohio No No Oregon Pennsylvania No South Carolina Rhode Island No Yes Amend statute Tennessee South Dakota Yes No Yes Amend statute Amend statute Utah Texas Yes Amend statute No Yes Amend statute Amend statute Vermont Washington Virginia Yes No No Amend statute West Virginia Wisconsin Yes No a Legislation proposed. [Wyoming Amend statute 1.10 Government Oversight 1.10.1 Federal Oversight Federal pipeline safety statutes allow for states to assume safety authority over intrastate natural gas pipelines, hazardous liquid pipelines, and underground natural gas storage through certifications and agreements with the Pipeline and Hazardous Materials Safety Administration (PHMSA) under Title 49 United States Code 60105 and 60106. To participate in PHMSA's states do not participate in the pipeline safety programs, the inspection and enforcement of these intrastate pipeline facilities would be PHMSA's responsibility. To support states participating in the pipeline safety programs, PHMSA certifies and provides grants to states to reimburse up to 80 percent of the total cost of the personnel, equipment, and activities reasonably required by the state agency for conducting its pipeline safety program during a given calendar year (PHMSA 2019). 31#
Attachment 1, passage 737NISB Pipeline Accident Report 1.10.2 Massachusetts Oversight 1.10.2.1 Massachusetts Department of Public Utilities The Massachusetts DPU is a state-level adjudicatory agency overseen by a three-member commission. It is responsible for the oversight of investor-owned electric power, natural gas, and water utilities in Massachusetts. In addition, the DPU develops alternatives to traditional regulation, monitors service quality, regulates safety in the transportation and natural gas pipeline areas, and oversees the siting of energy facilities. The mission of the DPU is to ensure that customers of the covered utilities receive reliable and economical service, along with protecting the public from natural gas pipeline-related accidents and ensuring that residential ratepayers' rights are protected (Commonwealth of Massachusetts 2019). The pipeline safety division of the DPU is an enforcement office, ensuring that operators of natural gas distribution companies, municipal natural gas departments, steam distribution companies, and other intrastate operators are following state and federal regulations governing safety. The pipeline safety division investigates natural gas incidents and determines the cause of those incidents, which is intended to improve public safety and prevent similar incidents. Incident investigations have resulted in new safety regulations for abandoned service lines, cast iron pipe, and liquefied natural gas plants. The DPU regulates pipeline safety within the Commonwealth of Massachusetts; however, pipelines that cross state boundaries (interstate) are regulated by PHMSA. The DPU also tests commonwealth natural gas meters for accuracy and leaks. After passing the test, each meter is marked with a stamp, showing that it is approved for use (Commonwealth of Massachusetts 2019a). 37 PHMSA audits the DPU annually and gives it a proficiency score based on its actions to ensure that operators comply with federal requirements. The proficiency score influences funding levels that DPU receives from PHMSA. In the 2017 audit, the DPU scored 112 points out of a possible 115, for an overall state rating of 97.5. Past DPU actions involving CMA violations are listed in appendix C.38 Enforcement action by DPU on this accident is pending. 1.10.2.2 Massachusetts Executive Office of Public Safety and Security oversees several agencies that deal with emergency response. According to its website, the The Commonwealth of Massachusetts Executive Office of Public Safety and Security Executive Office of Public Safety and Security "is responsible for the policy development and budgetary oversight of its secretariat agencies, independent programs, and several boards which aid in crime prevention, homeland security preparedness, and ensuring the safety of residents and visitors in the Commonwealth." (Commonwealth of Massachusetts 2019b). 37 Massachusetts Code 220 Code of Massachusetts Regulations 69.00, "Procedures for the Determination and Enforcement of Violation of Safety Codes pertaining to Pipeline Facilities, Transportation of Natural Gas, and Liquified Natural Gas Facilities" is the guidance for the DPU enforcement actions. 38 E-mail from NiSource to NTSB, May 13, 2019. 32#
Attachment 1, passage 738NISB Pipeline Accident Report 2 Postaccident Actions 2.1 NTSB Safety Recommendation to Commonwealth of Massachusetts At the time of the accident, a Massachusetts P.E. stamp was not required on any utility system construction, operations, or maintenance projects as local natural gas distribution companies in the state had a utility exemption from requiring a P.E.'s stamp. On November 14, 2018, the NTSB issued a safety recommendation report, Natural Gas Distribution System Project Development and Review, in response to this accident and the events that followed (NTSB 2018). According to the report: The Commonwealth of Massachusetts' exemption for the requirement of registered Professional Engineer (P.E.) to perform industrial and public utility work limits the opportunities for competently trained and experienced engineers to uncover system design and work process deficiencies. By eliminating the exemption, especially for systems involving inherently dangerous materials such as natural gas distribution systems, companies, workers, and the public are provided greater safety assurance that competent and qualified engineers, who are ethically bound to work only on projects within the scope of their expertise, will review, assess, and execute the requisite work activities according to best engineering practices and with expected safeguards. As a result of this investigation, the NTSB issued Safety Recommendation P-18-5 to the Commonwealth of Massachusetts Eliminate the professional engineer licensure exemption for public utility work and require a professional engineer's seal on public utility engineering drawings. (P-18-5) Less than 2 months after the safety recommendation was issued, on December 28, 2018, Bill H.5005, requiring that licensed P.E.s review and approve engineering plans developed by or on behalf of natural gas companies, to ensure the safe construction, operation, and maintenance of' natural gas infrastructure, was passed by the Massachusetts House of Representatives. The act applies to engineering work or services on natural gas distribution systems that could pose a material risk to public safety, as determined by the DPU, performed by or on behalf of a natural gas company. Moreover, the act requires any engineering plans or specifications for engineering work or services that could pose a material risk to public safety, developed by or on behalf of a natural gas company, to bear the stamp of approval of a licensed P.E.39 After the Massachusetts Senate passed the act, it was signed by the governor on December 31, 2018, as Chapter 339 of the Acts of 2018. This new law included an emergency preamble and took effect immediately. Because it required natural gas work that might pose a material risk to the public be reviewed and approved by a certified P.E., Safety Recommendation P-18-5 is classified "Closed—Acceptable Action." 39 See https://malegislature.gov/Bills/190/H5005. Accessed on May 25, 2019. 33#
Attachment 1, passage 739NISB Pipeline Accident Report 2.2 NTSB Urgent Recommendations to NiSource In the November 14, 2018, safety recommendation report, Natural Gas Distribution System Project Development and Review, the NTSB also issued four urgent recommendations to NiSource (NTSB 2018). While the engineering design package for the South Union Street project underwent a constructability review, the review did not identify the impact on pressure regulation and control. The NiSource field engineer who developed the engineering plans told NTSB investigators he developed them without reviewing engineering drawings that documented the regulator sensing lines. Because a comprehensive constructability review, which would require all departments to review each project, along with the seal of approval from a registered P.E., likely would have identified the omission of the regulator sensing lines, thereby preventing the error that led to the accident, the NTSB issued urgent Safety Recommendation P-18-6 to NiSource: Revise the engineering plan and constructability review process across all your subsidiaries to ensure that all applicable departments review documents for accuracy, completeness, and correctness, and that the documents or plans be sealed by a professional engineer prior to commencing work. (P-18-6) (Urgent) In response to this recommendation, NiSource developed and implemented a new Gas Standard (GS 2810.050) detailing the stakeholder reviews that are required for design capital projects or projects where pipeline facilities are installed or replaced. The Gas Standard details the steps in project design and execution when additional stakeholder input is necessary to ensure safe work performance. With this Gas Standard, the use of an enhanced Constructability/Safety Review form is required across the organization to provide additional assurance that all applicable departments review project plans prior to the start of work. Since January 1, 2019, NiSource requires that all relevant construction documents for complex projects are being sealed by a P.E. prior to the start of construction. In meetings with the NTSB, NiSource discussed that there were potentially large numbers of routine main extensions involving standard tie-ins, emergency main replacements requiring standard tie-ins, or new and replacement service lines, and that completing all of these standard designs would delay implementing this recommendation beyond what is appropriate given its urgent classification. Therefore, although NiSource agreed that construction work that could pose a material risk to public safety needed P.E. review and approval prior to commencing construction, NiSource developed criteria for when review by a P.E. is not necessary. In GS 2810.050, NiSource defines complex projects requiring that documents or plans be sealed by a P.E. as follows: • Plans for installation or replacement of transmission-class pipelines or distribution mains with an MAOP equal to or greater than 200 psig • Plans for the installation of or replacement of distribution mains with more than two tie-ins • Plans for the installation of pipelines requiring a temporary bypass 34#
Attachment 1, passage 740NISB Pipeline Accident Report • Projects which involve a change in system pressure • Plans for the installation of distribution services requiring the interruption of natural gas flow to the adjacent transmission lines and/or distribution main • Plans for nonstandard new points of delivery and district regulator stations • Plans for regulator station work that require an interruption of natural gas flow on the inlet or outlet transmission lines and/or distribution mains The development and implementation of GS 2810.050, including the requirement that construction documents and plans be sealed by a P.E., satisfies Safety Recommendation P-18-6 which is classified "Closed-Acceptable Action." NiSource engineering plans used during the construction work did not document the location of regulator sensing lines. The NTSB believes that had accurate alignment sheets with comprehensive system information been prominently available and required within the toolsets used by the engineers, and diligently reviewed for completeness and technical/safety risks by engineering supervisors, the work package and construction activity plans would have accounted for the regulator sensing lines and prioritized their relocation before abandoning the cast iron main. As a result, the NTSB made the following urgent safety recommendation to NiSource: Review and ensure that all records and documentation of your natural gas systems are traceable, reliable, and complete. (P-18-7) (Urgent) In its May 10, 2019, letter, NiSource responded it had completed locating, marking, and mapping control (regulator-sensing) lines at all 2,072 low-pressure regulator runs across its system. NiSource said that these facilities are depicted in isometric drawings and are visible in its GIS. In addition, NiSource contracted with a third-party natural gas engineering firm to verify the assets required to safely operate its low-pressure natural gas systems and ensure these assets are clearly indicated on relevant maps and records. On July 22, 2019, Safety Recommendation P-18-7 was classified "Closed-Acceptable Action." NTSB investigators found that NiSource did not use management of change (MOC) procedures for managing maintenance and construction changes to pipeline operations. The company did not conduct separate risk assessments for each construction project, critical components of a PSMS program. MOC procedures require an analysis of implications, among several other elements. Additionally, a risk identification and assessment are necessary to establish the appropriate prevention and mitigation measures to reduce the likelihood of consequences should an incident occur. CMA failed to perform such an analysis and failed to establish appropriate controls to mitigate the risks of the work that was being performed. Had NiSource adequately performed MOC, it could have immediately addressed the issue and mitigated the 35#
Attachment 1, passage 741NISB Pipeline Accident Report consequences of the event. Therefore, the NTSB issued Safety Recommendation P-18-8 to NiSource: Apply management of change process to all changes to adequately identify system threats that could result in a common mode failure. (P-18-8) (Urgent) In response, NiSource improved its MOC process by developing and using Gas Standard 1680.010, "Tie-Ins and Tapping Pressurized Pipelines," and NiSource now requires the use of a written tie-in plan template. As part its PSMS development activities, NiSource initiated asset review and probabilistic risk assessments that focus on improving risk analysis, identification, and mitigation. NiSource also developed and implemented an MOC procedure for its construction employees and contractors that details the steps needed to ensure safety on a project during a change in personnel. These activities satisfy Safety Recommendation P-18-8 which is classified "Closed-Acceptable Action." NTSB investigators also determined that had NiSource adequately performed system engineering management throughout its project work, the safety risk of an overpressurization likely would have been identified, along with appropriate mitigations implemented before undertaking the construction activities. For example, with recognition for potential overpressurization to the unprotected low-pressure distribution lines, mitigations could have been used, such as pressure relief valves, temporary slam-shut valves, or personnel positioned at critical points along the system and prepared to manually intervene by closing valves. NiSource failed to adopt and execute an appropriate system engineering management approach to this work and, consequently, neglected to perform important engineering reviews based on thorough system-level information which, consequentially exposed the company, its workers, and the public to the unexpected, albeit foreseeable through proper engineering practices, overpressurization. The NTSB issued Safety Recommendation P-18-9 to NiSource: Develop and implement control procedures during modifications to gas mains to mitigate the risks identified during management of change operations. Gas main pressures should be continually monitored during these modifications and assets should be placed at critical locations to immediately shut down the system if abnormal operations are detected. (P-18-9) (Urgent) In a May 2019 letter, NiSource said that it has made "significant" enhancements to its tie-in and tapping procedures, including risk assessments, thorough checklists, and the development of contingency plans. NiSource also said that it was installing automatic pressure-control equipment and remote monitoring devices on every low-pressure natural gas distribution system across its operating area. These revisions satisfied Safety Recommendation P-18-9, which on July 22, 2019, was classified "Closed-Acceptable Action." 2.3 NiSource Emergency Preparedness and Response Actions In early 2019, and as part of the company's SMS implementation, NiSource commissioned a cross-functional emergency preparedness and response team, led by a senior vice president for emergency preparedness, to enhance emergency preparedness activities and emergency response capabilities. The project is integrating improved preparedness plans and drills covering a broad 36#
Attachment 1, passage 742NISB Pipeline Accident Report range of potential scenarios and levels of emergency with well-defined roles and clear responsibilities. Key outcomes of the project include: • A single emergency response plan (ERP) across the natural gas segment • Consistent definitions for incident levels from less severe to the most severe • Implementation of a single incident command system and structure regardless of incident level • Consistent use of incident command system processes and terminology • Enhanced training (computer-based, classroom and independent study) for all employees with roles in the ERP and incident command system • Emergency drills in the third and fourth quarters to build familiarity with the plan, processes, and terminology In addition to creating consistency across the NiSource natural gas segment, these efforts enhance consistency with key external partners who have used the incident command system for a number of years. A comprehensive project plan is guiding the team's work and remains on track. Key milestones achieved through the first half of 2019 included: • Successfully completing classroom training and certification in Federal Emergency Management Agency ICS 100, 200, and 700 modules • Reviewing and analyzing existing corporate and operating company emergency and crisis communications plans, as well as the corporation's business continuity plans • Completing best practice visits with industry peers and internally • Conducting more than 20 internal critical function interviews with individuals who spent significant time supporting Merrimack Valley restoration efforts • Finalizing the first draft of the natural gas segment incident command structure in early April and the first draft of the natural gas segment ERP in late April NiSource reported that its emergency preparedness response team is engaged with its technical training department to build comprehensive and individualized plans for those employees with emergency response roles. Concurrently, the team is working to develop comprehensive drills and exercises to test the plan, identify gaps, and make the necessary adjustments to strengthen overall company preparedness. The NiSource corporate affairs and legal teams are working to develop a crisis communications "playbook" to support crisis response efforts. An ongoing assessment by 37#
Attachment 1, passage 743NISB Pipeline Accident Report NiSource corporate affairs is the first phase of the effort. They plan to incorporate the crisis communications plans, processes, protocols and materials into the natural gas segment of the Emergency Preparedness and Response Plan. 2.4 Industry Actions On November 26, 2018, AGA released a technical document titled Leading Practices to Reduce the Possibility of an Over-Pressurization Event, a document that serves as a resource for natural gas utilities to help avoid an overpressurization incident in a natural gas system (AGA 2018). Following this natural gas accident, the AGA had information about the role of overpressurization that allowed the AGA to work to identify practices and procedures that can help avoid a similar accident in the future. There are several leading practices included in the document: • Design practices, including common overpressure protection designs and equipment • Operating procedures and practices, including system monitoring, records, and damage prevention • Human factors, including MOC, OQ, and field oversight • Management of the risk of an overpressurization event, including addressing overpressurization under the operator's distribution integrity management plan General practices the AGA considers key to managing the risk of an overpressure event include: • Looking for opportunities to work with all stakeholders to proactively upgrade utilization pressure systems • Defining risk criteria for overpressure events This AGA document was developed with input from stakeholders and experts across the industry, with the focus on developing leading practices that can be used to help prevent overpressurization events. 38#
Attachment 1, passage 744NISB Pipeline Accident Report 3 Analysis 3.1 Exclusions On the day of the accident, the crew that performed the last tie-in on the South Union Street project included one full-time CMA employee, who was a construction coordinator, and a contracted four-member utility construction crew, consisting of a foreman, a truck driver, and two laborers. The CMA employee had several years' experience running utility construction crews and had worked on multiple occasions with the contracted crew. All crewmembers were trained and qualified in accordance with OQ. In addition, a representative from the local police department was present for traffic control. The type of instructions provided on the day of the accident were of the same format, layout, and overall content as that of the previous 12 tie-ins performed on the South Union Street project; but unique to this work was abandoning the cast iron main. The work package consisted of a computer-aided design drawing with item numbers on it that matched a project execution set of instructions. A review of the work performed by the contractor showed no deviations from the work instructions. Postaccident testing of the regulators from the Winthrop Avenue regulator station determined that they functioned as designed with no deficiencies. Therefore, the NTSB concludes that none of the following were factors in this accident: the training and qualification of the construction crew, the use of alcohol or other drugs, or the condition and operability of the regulators at the Winthrop Avenue regulator station. 3.2 Overpressurization Protection for Low-Pressure Natural Gas Systems The low-pressure natural gas distribution system in Merrimack Valley met the requirements for overpressure protection contained in 49 CFR 192.195 Protection against accidental overpressuring and 49 CFR 192.197 Control of the pressure of gas delivered from high-pressure distribution systems. At each of the 14 regulator stations feeding natural gas into the low-pressure natural gas distribution system, there were two regulators installed in series to control the natural gas flow from the high-pressure natural gas distribution system. The worker regulator and the monitor regulator were set to limit the pressure to the mains and then to the customer to a maximum safe value. However, a review of accidents investigated by the NTSB over the past 50 years (section 1.7.2) and prior NiSource incidents (section 1.7.3) demonstrate that this scheme for overpressure protection can be defeated in several ways. Three of the NTSB investigations (Gary, Indiana, June 3, 1969; Mansfield, Ohio, May 17, 1978; and Chicago, Illinois, January 17, 1992) detailed how operator error resulted in high-pressure gas being introduced into the low-pressure natural gas distribution system through an interconnection. In three other NTSB investigations (Burlington, Iowa, November 6, 1969; Centralia, Missouri, January 26, 1982; and East Boston, Massachusetts, September 23, 1983), outside force damage in or near the regulator vaults damaged equipment, resulting in high-pressure gas being introduced into the low-pressure natural gas distribution system through the regulators. The remaining NTSB investigation (El Paso, Texas, August 9, 1977) was nearly identical to this accident in Merrimack Valley because 39#
Attachment 1, passage 745NISB Pipeline Accident Report it occurred when a cast iron main with sensing lines attached was isolated as part of a pipe replacement project. In this accident, when the cast iron main with the sensing lines attached was isolated from the distribution system and abandoned in place, both regulators responded to the decreasing pressure, detected by the sensing lines, by fully opening. Both regulators were disabled simultaneously by the single event of isolating the cast iron main, which eliminated the redundancy of using dual regulators. In this accident and the earlier accidents discussed above, the overpressure occurred as the result of a single failure. In engineering analyses, such a situation is referred to as a common mode failure. Therefore, the NTSB concludes that the multiple overpressurization accidents investigated by the NTSB over the past 50 years demonstrate that low-pressure natural gas distribution systems that use only sensing lines and regulators as the means to detect and prevent overpressurization are not optimal to prevent overpressurization accidents. Thus, the NTSB recommends that PHMSA revise 49 CFR Part 192 to require overpressure protection for low-pressure natural gas distribution systems that cannot be defeated by a single operator error or equipment failure. For regulator sensing lines, CMA only considered excavation damage as a risk to be mitigated. In engineering design, there are several methods available to assess and mitigate risk. A failure modes and effects analysis (FMEA) is a generally accepted and recognized engineering practice to identify and assess potential failures, including common mode failures. FMEA methodology is a structured and systematic technique for assessing and mitigating risks. FMEA was initially applied in the 1950s to understand and prevent malfunctions. Its use has continued to influence engineering design of systems and it has been expanded into several forms: risk assessment for design, functionality, and process failures; as well as criticality analyses of engineered systems. The NTSB concludes that a comprehensive and formal risk assessment, such as an FMEA, would have identified the human error that caused the redundant regulators to open and overpressurize the system. Although PHMSA rulemaking could take several years, it has other mechanisms to quickly communicate and encourage best safety practices. Therefore, the NTSB recommends that PHMSA issue an alert to all low-pressure natural gas distribution system operators of the possibility of a failure of overpressure protection; and the alert should recommend that operators use an FMEA or equivalent structured and systematic method to identify potential failures and take action to mitigate those identified failures. 3.3 CMA Engineering Processes Early in the investigation, after determining that the contractors followed the instructions they were provided, it became apparent that there were deficiencies in several of NiSource's engineering processes. About 2 months after the accident, NTSB released a safety recommendation report, Natural Gas Distribution System Project Development and Review, which issued several urgent safety recommendations to NiSource (NTSB 2018). The following sections build on that report regarding records and documentation, constructability reviews, and risk management. 40#
Attachment 1, passage 746NISB Pipeline Accident Report 3.3.1 Records and Documentation The field engineer responsible for the South Union Street Project largely relied on GIS to develop work packages. He also had access to isometric drawings containing schematics of the pipes in the regulator vaults as well as the piping and valve configurations. Sensing lines, however, were not included in the isometric drawings or GIS. The field engineer told investigators that he did not know if the engineering department had access to sensing line information, though he believed that the M&R department did. According to NiSource, information about sensing lines for the Winthrop Avenue regulator station was available in hard-copy records in the Lawrence Operations Center. However, when investigators asked NiSource in an e-mail exchange about the instructions that NiSource provides employees with respect to how to find information about sensing lines, NiSource did not provide an answer; rather, it asserted that "CMA Engineering, Construction, and M&R personnel know how to obtain information about sensing line locations."40 Moreover, an M&R manager suggested that locating accurate and up-to-date information about sensing lines was challenging because there was a shortage of information and confusion regarding what recordkeeping system would be used. The available evidence suggests that although the field engineer would have likely been able to seek out sensing line information, these data were not easily accessible electronically. NiSource's director of engineering told investigators that the GIS was the company's centralized record system and that a goal of the system was to integrate data from various sources. That is, the company was taking data from old cabinets and binders and making it available electronically to all interested stakeholders. The director of engineering recognized that, at the time of the accident, there was a shortage of readily available information about the sensing lines. NiSource reported it has addressed the lack of sensing line data in the GIS after the accident. An e-mail provided by NiSource showed that at least one employee, the Lawrence construction leader, knew that the sensing lines needed to be relocated. Moreover, an affidavit provided by NiSource suggested that other employees were aware of the need to relocate the sensing lines. However, NiSource stated in its submission for this accident investigation that after the South Union Project was delayed in 2016: There was a nearly complete turnover in project personnel. CMA did not effectively transfer the knowledge its 2016 construction personnel had about the status of the project sensing lines to its 2018 construction personnel. Thus, according to NiSource, the successful execution of the South Union Street project was contingent upon employees remembering to transfer knowledge. In its evaluation of the probable cause of the accident, the company pointed to the city of Lawrence's "unprecedented suspension of project work," a 1 1/2-year delay, as a contributing factor. A delay in construction does not justify a catastrophic accident. However, NiSource does point to a true system defect in its list of contributing factors: "The project work order package did not explicitly address sensing line locations or their relocation." 40 E-mail from NiSource to NTSB, May 31, 2019. 41#
Attachment 1, passage 747NISB Pipeline Accident Report NiSource displayed an informal, unstructured approach for documenting this critical project step for the South Union Street project. The lack of documentation made it impossible to pinpoint the exact nature of the joint failure between the engineering, M&R, and construction departments to develop a formal plan for relocating the sensing lines. It is likely that more robust documentation and recordkeeping would have resulted in the sensing line issue being formally addressed prior to the work package being released to construction. As it was, the relocation of the sensing lines was not directed in an orderly top-down manner, but rather, NiSource relied on institutional knowledge. When the appropriate employees were not at the correct place at the correct time due to a project delay, there was no documentation to refer to for preventing a critical project step from being omitted. Therefore, the NTSB concludes that CMA's inadequate planning, documentation, and recordkeeping processes led to the omission of the relocation of the sensing lines for the South Union Street project. Furthermore, the NTSB concludes that the abandonment of the cast iron main without first relocating the sensing lines led to the system overpressurization, fires, and explosions. Although there was a 2-year delay from the time the work order was developed until the time of the accident, NTSB investigators could find no evidence that the delay contributed to the accident. Had this work order been executed 2 years earlier, the system would have been overpressurized just as it was on September 13, 2018. The NTSB concludes that the delay between the development of the initial project work order and its execution had no impact on this accident. 3.3.2 Constructability Review The engineering plans were included in the project package that was circulated for a constructability review. Constructability reviews are recognized and accepted as a necessary engineering practice for the execution of construction services. They are intended to provide structured reviews of construction plans and specifications to ensure functionality, sustainability, and safety—ensuring there are no shortcomings, inefficiencies, conflicts, or errors. Constructability reviews are essential in the engineering management of projects for verifying that all stakeholders have knowledge about and input into a work project. Nonetheless, the constructability review process did not detect the omission of the need to relocate the sensing lines. Part of the failure of the process was likely due to the absence of a review by a critical department. Despite there being at least two constructability reviews for the South Union Street project, the M&R department did not participate. CMA requires the engineering department and the construction department to approve all projects, but the land services department and the M&R department are only required to review the packages on an "as-needed basis" as determined by the project engineer. The M&R department maintains the regulator stations, and with the project requiring the relocation of the sensing lines, the department should have been included. A review from someone in the M&R department may have resulted in the detection of the omission of a work order to relocate the sensing lines. The basis for the "need" is not described, nor are examples provided in the NiSource constructability review guidance. There are several other factors that suggest an overall lack of robustness of the review process. The Lawrence construction leader signed all three reviews, but never objected to the lack of a work order to relocate the sensing lines, even though he had e-mailed the M&R department regarding the need to relocate the sensing lines between the first and second review. In addition, 42#
Attachment 1, passage 748NISB Pipeline Accident Report the only indication of a third review is the set of signatures (dated December 14, 2017) on the paperwork for the second review (originally signed January 6, 2017). NiSource did not provide any additional documentation for the third review. This calls into question the thoroughness of the third review. The NTSB concludes that the CMA constructability review process was not sufficiently robust to detect the omission of a work order to relocate the sensing lines. After the accident, NiSource has been working to improve its constructability review process. 3.3.3 Engineering Risk Assessment NiSource's ON 15-05 requires that M&R personnel be consulted on all excavation work that is performed within 25 feet of a regulator station with sensing lines, and for other specified work. This notice resulted from a near-miss incident in 2014, where excavation work almost struck sensing lines near a regulator. The work being performed on the South Union Street project on the day of the accident did not occur within 25 feet of the Winthrop Avenue regulator station; therefore, ON 15-05 did not apply directly to the work. NiSource's ON 15-05 can be read in its entirety in appendix E. Although the risk mitigations mandated in ON 15-05 did not apply, the language of the notice revealed that NiSource was aware that a catastrophic overpressurization of downstream piping would occur if flow should be disrupted through a segment of piping with active sensing lines for any reason. However, the controls implemented in the notice were only intended to prevent sensing lines from being struck during excavation. More robust risk management was needed in the planning of the South Union Street project with respect to the analysis of the impact on the system, as discussed in NTSB Safety Recommendation Report PSR-18/02 (NTSB 2018). Moreover, as discussed earlier, broader risk management was needed with respect to overpressurization to the system in general. That is, engineering controls should have been implemented considering the vulnerability of the system to a common mode failure during the construction project. After the accident, NiSource has worked to improve its risk management processes and is installing automatic pressure-control equipment. Therefore, the NTSB concludes that NiSource's engineering risk management processes were deficient. 3.4 Professional Engineer Review and Approval The NTSB recognizes that a P.E. license is a valued credential, especially for engineering projects affecting public safety. The P.E. license conveys that the holder maintains and demonstrates technical competency and imposes continuing education requirements in most states. Moreover, P.E. licensees are bound to a code of ethics for engineers, which creates a duty to hold public safety, health, and welfare paramount and to perform services only in the areas of their competence, among several other obligations. P.E. licensees are also personally accountable for the work they approve and stamp and must exercise responsible charge over all aspects of the work. As shown in table 4 of this report, 31 states have an industrial exemption for P.E. licensure. The NTSB concludes that requiring a licensed professional engineer to stamp plans would illustrate that the plans had been approved by an accredited professional with the requisite skills, 43#
Attachment 1, passage 749NISB Pipeline Accident Report knowledge, and experience to provide a comprehensive review. Therefore, the NTSB recommends that those 31 states with an industrial exemption for natural gas infrastructure projects remove the exemption so that all future natural gas infrastructure projects require licensed professional engineer approval and stamping. 3.5 Emergency Response 3.5.1 Public Safety Answering Points The PSAPs in each municipality were inundated with emergency calls, especially during the first hour after the accident. Each PSAP had alternate and final PSAPs as backup resources, to handle the overflow of incoming calls. The Lawrence PSAPs, which had the highest number of calls declined after the first hour of the event through midnight on September 13, 2018. The NTSB calls for aid from people affected by the overpressurization, reported that the number of incoming found no evidence that the high number of emergency calls delayed critical reports of damage nor requests for emergency assistance. Therefore, the NTSB concludes that the municipal PSAPs had available and ready resources to handle the large number of distress calls requesting emergency services. 3.5.2 Emergency Responder Communications Radio communications among emergency responders was necessary for effective deployment and reassignment of emergency personnel and resources across the area affected by the natural gas overpressurization. Responding units from fire, police, and medical departments needed to coordinate activities, share situation-specific status information, and communicate instructions when required to move to new locations. Each fire department had one radio channel for intradepartmental communications. In addition, some fire departments had radios capable of interdepartmental communications, allowing direct communications with other fire departments during the emergency response. ICs from each of the three municipalities reported to NTSB investigators that there was a high volume of "chatter" on the radio due to many responders and agencies using the single interdepartmental channel, making it difficult to understand and exchange information. NTSB investigators were told that the mix of radios used by the responding departments also created challenges because not all radios were interoperable. As a result, not all fire departments could directly access other departments. When the 15 task forces were activated across the state, additional communication resources were included. On September 13, Communication unit leaders were sent to the overpressure accident. Communication unit leaders are responsible for developing communications plans in accordance with the Massachusetts Tactical Channel plan and assessing what resources are needed to maintain communications during an accident. Communication plans were developed for the Merrimack Valley natural gas accident through the operational period from September 13 through September 16. However, the first communication plan was not implemented until around 7:05 p.m., 3 hours after the fires began. Local fire departments needed additional tactical radio channels within the first 2 hours of the accident, when most emergency calls were 44#
Attachment 1, passage 750NISB Pipeline Accident Report made. The NTSB concludes that the field radio communications used across fire departments on September 13 lacked adequate interoperability and availability to ensure that emergency responders had efficient means of interdepartmental and intradepartmental communications. Statewide Communications Interoperability Plans (SCIP) are comprehensive plans to enhance and maintain emergency communications between multiple jurisdictions in the event of natural disasters, acts of terrorism, or other man-made disasters. Massachusetts issued its first SCIP in 2007 and noted that home rule poses challenges to radio interoperability because towns were given the authority to determine their own needs (Commonwealth of Massachusetts 2015). The SCIP identified six critical strategic initiatives that Massachusetts needed to put into place to achieve optimum communications interoperability, including the development of funding sources to support the program. The northeast region of Massachusetts, including Merrimack Valley, does have a regional communications system, but the SCIP suggested that the region needed greater interoperability and moment-to-moment sharing of information. Massachusetts' SCIP was last updated in 2015 and outlined a multi-jurisdictional and multidisciplinary statewide strategic plan to enhance interoperable and emergency communications. The purpose of the updated SCIP was to provide a strategic plan for directing and aligning resources for interoperable and emergency communications at both state and local levels, as well as expanding existing systems for voice communications for sufficient capacity and coverage for first responders. The plan discusses critical elements to achieve successful interoperable communications such as developing standard operating procedures and upgrading technology. However, no guidance is provided on how to coordinate and implement a plan for emergency responders to effectively communicate during a multi-jurisdictional incident. The Federal Emergency Management Agency (FEMA) developed "how-to" guides to assist state and local governments in developing effective hazard mitigation planning. This guidance helps local governments develop and implement multi-jurisdictional hazard mitigation plans to help assess and identity vulnerabilities within and across communities and formulate strategies to mitigate the consequences of such events (FEMA 2006). The communications difficulties experienced by emergency responders in the multi-jurisdictional response to the overpressurization indicate that communications interoperability is still a problem in Massachusetts, despite the communication resources available to local jurisdictions, as outlined in the 2015 SCIP. The NTSB concludes that the communications issues during the September 13 overpressurization illustrate the need for emergency planning for a multi-jurisdictional response. Therefore, the NTSB recommends that the Commonwealth of Massachusetts Executive Office of Public Safety and Security develop guidance that includes a component for effective communications when deploying mutual aid resources within the first hours of a multi-jurisdictional incident. 3.5.3 NiSource Emergency Coordination with Municipal Responders The ICs from Lawrence, North Andover, and Andover each told NTSB investigators that they attempted to reach CMA through dispatch, but they did not receive information from the company until hours later. They acknowledged that CMA likely was overwhelmed with 45#
Attachment 1, passage 751NISB Pipeline Accident Report emergency calls, but they emphasized that responders needed to know in a timely manner about the company's response efforts and about which natural gas service sites were impacted. The NiSource Emergency Manual states that when an overpressurization of the system occurs, there "may be a need" to communicate with local government officials and emergency management agencies as well as fire and police departments. The manual states that it is "imperative for all entities involved to remain informed of each other's activities." The manual states that the IC, in this case, the FOL, is required to establish appropriate contacts for communications purposes throughout the accident (NiSource 2018). However, during the initial hours of the event, the IC did not establish these requisite communication contacts because he was involved with shutting down the natural gas system. Moreover, although CMA representatives went to emergency responder staging areas and emergency operations centers, NTSB investigators were told that representatives could not address many of the questions from the emergency responders because they were not prepared with thorough and actionable information. The NTSB concludes that the CMA IC faced multiple competing priorities, such as communicating with affected municipalities, updating the emergency responders, and shutting down the natural gas distribution system, which adversely affected his ability to complete his tasks in a timely manner. The CMA ERP describes a detailed communications plan in which its director of government affairs (or designees) would be posted with the MEMA emergency operations center (EOC), who must have access to the CMA emergency coordinator, the CMA president, and the CMA vice president/general manager. According to the plan, approprate maps and outage reports would be made available to these staff for the purpose of informing the EOC officials. MEMA officials and the state fire marshal stated that NiSource took too long to provide maps of the low-pressure system. They emphasized that emergency response officials needed street maps showing the layout of the natural gas system to understand where the affected customers were located. They also emphasized that emergency response officials needed updates on CMA's progress to shut down the natural gas system. The officials stated that CMA did not provide this requested information, either during the initial hours following the overpressurization or afterward, and that the absence of information from CMA impeded its public safety decision-making. Without understanding the nature or extent of the overpressurization or the company's success in restoring control of the natural gas distribution system, emergency response officials and ICs had to make decisions to preserve public safety despite a lack of critical information. For example, decisions were made to evacuate thousands of people from homes and businesses and to shut down electricity throughout the region, including nonaffected neighboring areas. Because emergency officials did not have accurate information with respect to the affected area, they evacuated and shut down electricity in an area larger than necessary. The evacuations led to major traffic congestion, which slowed CMA and NG technicians responding to the areas in and surrounding the accident location. The traffic issues were handled by the Massachusetts State Police, who were stationed at major intersections within an hour following the overpressurization. Travel delays on public roads and confusion caused by the uncertainty of the natural gas explosions and fires existed for hours following the overpressurization. 46#
Attachment 1, passage 752NISB Pipeline Accident Report When electricity was shut off to the cities and towns, state and local officials had to manage a number of complex public safety issues, such as sustaining critical services in hospitals and critical-care facilities, police and fire departments, water and sewer treatment plants, and ensuring the security of numerous facilities, as well as maintaining orderly evacuations without traffic lights. State and local government and emergency response officials coordinated with NG, the electric utility company, to ensure that sensitive populations and critical infrastructure were prepared before shutting down the electric power. State and local police provided security to some facilities without electric power. The lack of timely, thorough, and actionable information on the circumstances of the overpressurization evacuations and electricity shutdowns were conducted in areas where they were not needed, straining resources and further complicating the response. The NTSB concludes that CMA was not adequately prepared with the resources necessary to assist emergency management services with the response to the overpressurization. Therefore, the NTSB recommends that NiSource review its protocols and training for responding to large-scale emergency events, including providing timely information to emergency responders, appropriately assigning NiSource emergency response duties, performing multi-jurisdictional training exercises, and participating cooperatively with municipal emergency management agencies. 47#
Attachment 1, passage 753NISB Pipeline Accident Report 4 Conclusions 4.1 Findings 1. None of the following were factors in this accident: the training and qualification of the construction crew, the use of alcohol or other drugs, or the condition and operability of the regulators at the Winthrop Avenue regulator station. 2. The multiple overpressurization accidents investigated by the National Transportation Safety Board over the past 50 years demonstrate that low-pressure natural gas distribution systems that use only sensing lines and regulators as the means to detect and prevent overpressurization are not optimal to prevent overpressurization accidents. 3. A comprehensive and formal risk assessment, such as a failure modes and effects analysis, would have identified the human error that caused the redundant regulators to open and overpressurize the system. 4. Columbia Gas of Massachusetts' inadequate planning, documentation, and recordkeeping processes led to the omission of the relocation of the sensing lines for the South Union Street project. 5. The abandonment of the cast iron main without first relocating the sensing lines led to the system overpressurization, fires, and explosions. 6. The delay between the development of the initial project work order and its execution had no impact on this accident. 7. The Columbia Gas of Massachusetts constructability review process was not sufficiently robust to detect the omission of a work order to relocate the sensing lines. 8. NiSource's engineering risk management processes were deficient. 9. Requiring a licensed professional engineer to stamp plans would illustrate that the plans had been approved by an accredited professional with the requisite skills, knowledge, and experience to provide a comprehensive review. 10. The municipal public safety answering points had available and ready resources to handle the large number of distress calls requesting emergency services. 11. The field radio communications used across fire departments on September 13 lacked adequate interoperability and availability to ensure that emergency responders had efficient means of interdepartmental and intradepartmental communications. 12. The communications issues during the September 13 overpressurization illustrate the need for emergency planning for a multi-jurisdictional response. 48#
Attachment 1, passage 754NISB Pipeline Accident Report 13. The Columbia Gas of Massachusetts incident commander faced multiple competing priorities, such as communicating with affected municipalities, updating the emergency responders, and shutting down the natural gas distribution system, which adversely affected his ability to complete his tasks in a timely manner. 14. Columbia Gas of Massachusetts was not adequately prepared with the resources necessary to assist emergency management services with the response to the overpressurization. 4.2 Probable Cause The National Transportation Safety Board determines that the probable cause of the overpressurization of the natural gas distribution system and the resulting fires and explosions was Columbia Gas of Massachusetts' weak engineering management that did not adequately plan, review, sequence, and oversee the construction project that led to the abandonment of a cast iron main without first relocating regulator sensing lines to the new polyethylene main. Contributing to the accident was a low-pressure natural gas distribution system designed and operated without adequate overpressure protection. 49#
Attachment 1, passage 755NISB Pipeline Accident Report 5 Recommendations 5.1 New Recommendations As a result of this investigation, the National Transportation Safety Board makes the following safety recommendations: To the Pipeline and Hazardous Materials Safety Administration: Revise Title 49 Code of Federal Regulations Part 192 to require overpressure protection for low-pressure natural gas distribution systems that cannot be defeated by a single operator error or equipment failure. (P-19-14) Issue an alert to all low-pressure natural gas distribution system operators of the possibility of a failure of overpressure protection; and the alert should recommend that operators use a failure modes and effects analysis or equivalent structured and systematic method to identify potential failures and take action to mitigate those identified failures. (P-19-15) To the States of Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Iowa, Kentucky, Louisiana, Maine, Maryland, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New York, North Carolina, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Virginia, and Wyoming: Remove the exemption so that all future natural gas infrastructure projects require licensed professional engineer approval and stamping. (P-19-16) To the Commonwealth of Massachusetts Executive Office of Public Safety and Security: Develop guidance that includes a component for effective communications when deploying mutual aid resources within the first hours of a multi-jurisdictional incident. (P-19-17) To NiSource, Inc. Review your protocols and training for responding to large-scale emergency events, including providing timely information to emergency responders, appropriately assigning NiSource emergency response duties, performing multi-jurisdictional training exercises, and participating cooperatively with municipal emergency management agencies. (P-19-18) 50#
Attachment 1, passage 756NISB Pipeline Accident Report 5.2 Previously Issued Recommendations On November 14, 2018, the National Transportation Safety Board issued the following safety recommendations: To the Commonwealth of Massachusetts: Eliminate the professional engineer licensure exemption for public utility work and require a professional engineer's seal on public utility engineering drawings. (P-18-5) This recommendation is classified "Closed-Acceptable Action" in section 2.1 of this report. To NiSource, Inc.: Revise the engineering plan and constructability review process across all of your subsidiaries to ensure that all applicable departments review construction documents for accuracy, completeness, and correctness, and that the documents or plans be sealed by a professional engineer prior to commencing work. (P-18-6) (Urgent) This recommendation is classified "Closed-Acceptable Action" in section 2.2 of this report. Review and ensure that all records and documentation of your natural gas systems are traceable, reliable, and complete. (P-18-7) (Urgent) This recommendation is currently classified "Closed-Acceptable Action." Apply management of change process to all changes to adequately identify system threats that could result in a common mode failure. (P-18-8) (Urgent) This recommendation is classified "Closed-Acceptable Action" in section 2.2 of this report. Develop and implement control procedures during modifications to gas mains to mitigate the risks identified during management of change operations. Gas main pressures should be continually monitored during these modifications and assets should be placed at critical locations to immediately shut down the system if abnormal operations are detected. (P-18-9) (Urgent) This recommendation is currently classified "Closed-Acceptable Action." 51#
Attachment 1, passage 757NISB Pipeline Accident Report BY THE NATIONAL TRANSPORTATION SAFETY BOARD ROBERT L. SUMWALT, III JENNIFER HOMENDY Chairman Member BRUCE LANDSBERG Vice Chairman Date: September 24, 2019 52 NISB Pipeline Accident Report Appendix Appendix A. The Investigation The National Transportation Safety Board NTSB) was notified about 4:00 p.m. local time on September 13, 2018, of an overpressurization of a low-pressure natural gas distribution system that occurred in the city of Lawrence and the towns of Andover and North Andover in Massachusetts that resulted in fires or explosions at over 60 locations. Columbia Gas of Massachusetts (CMA) owns and operates the natural gas distribution system in these jurisdictions. Local emergency response officials urged all residents with homes serviced by CMA to evacuate, impacting about 146,000 residents. CMA isolated and depressurized the system to prevent further incidents. Electrical power in the area was shut off to minimize potential ignition sources. One person was killed and at least 10 people were injured in the event. NTSB Board Chairman Robert L. Sumwalt, III, Board Member Jennifer Homendy, an investigator-in-charge, and 18 other staff launched to the accident scene. Parties to the investigation included the Pipeline and Hazardous Materials Safety Administration (PHMSA); the Massachusetts Department of Public Utilities (DPU); the Massachusetts State Police; NiSource, Inc.; and CMA. 53#
Attachment 1, passage 758NISB Pipeline Accident Report Appendix B. NiSource Safety Management System Plan NiSource's Safety Management System Plan Starting the Journey at Columbia Gas of Virginia safety leaders NiSource Implemented reporting Airlines for visit Delta pipeline safety concerns process and tool for completed gap analysis Contracted and SMS insight (Pipeline Safety Action against API RPI 1173 for Program, or PSAP) Columbia Gas of Virginia, Conducted NIPSCO and Columbia annual safety Corporate Services across NiSource culture surveys 2015 2016 Created and Volunteered to manager, PSMS, participate in an AGA Added two SMS position pilot group- committed to specialists to implement a SMS develop and support gap closure work Figure 10. NiSource Safety Management System Plan Part A. NiSource's Safety Management System Plan Continuing the Journey and state rollout 111II 2017 2018 Figure 11. NiSource Safety Management System Plan Part B. 54#
Attachment 1, passage 759NTSB Pipeline Accident Report Appendix C. Enforcement Actions Table 5. Massachusetts DPU enforcement actions for the 5 years previous to the accident. Data courtesy of the Massachusetts DPU. Violation Date Code Sections PHMSA 192 Fine Location Description March 7, 2012 192.227 192.13(c) $7,500 55 Arthur's Place 192.455 Bridgewater Buried steel portion of transition fitting on a 2" 192.461 192.605 July 26, 2012 192.13(c) 192.361(a) $15,000 100 Union Street 192.375 Attleboro allow cover on servi id outlet piping; transitic ting used as service rise June 24, 2012 192.605(a) $20,000 | 390 Fall River Avenue and exposed transition fitting 192.615(b)(2) 192.615(a)(2) Seekonk and outlet piping; transition fitting used as service riser, 192.805(h) and exposed transition fitting 192.727(b) November 23, 2012 $170,000 453 Worthington Street CMA tech failed to follow 192.615(a)(3) Springfield (leak) proper procedures during 192.615(a)(7) 192.615(a)(5) leak investigation; during abnormal operating 192.615(b)(3) 192.615(b)(2) condition, CMA did not check other buildings in area 192.805(d) 192.805(b) per procedures; CMA did not conduct; call center properly evaluate tech's 192.805(h) inadequate, did not follow response to caller was 199.105(b) anti-drug and alcohol plans script; CMA did not follow its 199.107(a) 199.225(a) for testing November 23, 2012 192.491(c) 192.481(a) $150,000 Springfield (ignition) 453 Worthington Street CMA failed to show that it atmospherie core in, for 192.605(a) provided insufficient 192.805(h) 192.723(b)(1) evidence that it performed inspections per procedures; atmospheric corrosion insufficient evidence re leak surveys in business district; insufficiently calibrated leak personnel not properly detection equipment; investigation and surveys requalified for leak 55#
Attachment 1, passage 760NTSB Pipeline Accident Report Violation Date Code Sections PHMSA 192 Fine Location Description May 1, 2012 192.605(a) 192.13(c) $125,000 36 Maple Avenue Seekonk Improper abandonment of 192.615(b) 192.615(a) and fire to Division; CMA service; failed to report leak 192.727(a) failed to act after reports of integration center personnel 220 CMR 192.727(b) insufficient procedures; fire from four employees; 107.04 inadequate communications with Fire Dept; insufficient November 17, 2012 192.13(c) 189 Washington Street CMA personnel failed to public awareness plan 192.605(a) 192.615(a)(5) CMA's (natural) gas classify leak persuant to 192.615(b)(2) 192.615(a)(7) have current operator standard; supervisor did not 192.615(b)(3) qualifications necessary to 192.703(c) 192.703(b) check guilding foundations classify leaks; CMA did no 192.805(e) 192.805(b) 192.805(h) 220 CMR February 4, 2015 192.13(c) 101.06(21)(e) 192.605(a) $35,000 335 Washington Street Unqualified employee 192.805(b) (service outage) attempted 192.807(a) 192.805(h) leak; no mention of Trident to install Trident Seal on Seal in procedures February 15, 2016 192.201(a)(2)(i) 192.739(1) $75,000 West Water Street Taunton exceeded; distribution Overpressurization; MAOP 192.195(b)(2) system not designed to overpressuring; CMA failed prevent accidential 192.605(b)(1) to protect regulators from maintain records retesting, dirt and debris; failed to maintenance, inspection 56#
Attachment 1, passage 761NTSB Pipeline Accident Report Appendix D. Constructability Safety Review CAPITAL DESIGN JOB ORDER CHECKUST For ust by Columble Engineering Team Jab Orter lumbar: 16-03-49082-00 Design to Build - Bulld as Designed Constructability / Safety Review * Project Scoper/ € Route and Drawings • Specul Cursiderations • Porrita • Primary Construction Methods) • ROW and Stakiny Requramsnes € Tie-in Locations, Designe, and Sequencing Re-evail due to cuma 2016 € Material #VALUES check. P/n • Specoil Fillings • Long Leed-tinse Ibertis • All Estimated Mtatenels • Other € Units for Estimate Add 6" BAG tiE iN • Labor • TRe-iTE * Fül • Traffic Control • Restoraton/Parina • Shoning + Survey Requiremenis • Test Holes • Services Fossacaments/Tve-overs * Moter Move-outs € Duration • Working Hours • Number of Cron's • Who Is on Jobelle • Special Condilione * Land Service Regulrements (permits, privale RON, ou E satety 7 police • Encalan Sally • To-m Locatons Tram. Conl Operabidy Damson Presenti & Flald Visit Narded? ( Yes i df Mo) Page 10 2 Lael upeated: 7/30/14 57#
Attachment 1, passage 762NISB Pipeline Accident Report CAPITAL DESIGN JOB ORDER CHECKUST For use by Columba Engineering Team Constructability / Safety Review Job Ordes Number: 16-0849062-00 e Comments/Adjustments • : Ester: 1/6/8812 12/19/17 Cata: 115/517 Date: For Land Services: [Land Services only node lo sigt when arolicable) Data •: Te he llac in WUNSDece Workspacels) Pape 2 of 2 Let updaled 7/2044 58#
Attachment 1, passage 763NISB Pipeline Accident Report Appendix E. NiSource Operational Notice ON 15-05 The following is NiSource's Operational Notice Below Grade Regulator Control Lines: Caution When Excavating Near Regulator Stations or Regulator Buildings. MiSource Distribution Operations Operational Notico 09/D2/2015 Issue Date: Below Grade Regulator Control Linas: latite Nure Superedes: caution When Excavating Near Regulato IN 15-0 N/A Stations or Regulator Bulldings Page 1 of 3 Companies Alfected: • NIPSCO F COV P CMA F CKY F CPA Purpose This Operational Notice has the following objectives. 2. Set forth required actions for iuture Company excavations. A Near Miss station building. They uncovered and narrowly missed hitting the 1-inch control Ine and tap A Company crew was excavating to repair a Grade 1 leak located on the outside of a regulator caled on the B-inch quilet pipeline. The crew was unaware of the purpose of the 1-Ing of a control line and what would have happened if the line had been broken. seline and called local M&R personnel. The M&R personnel advised the crew of the purpos What is a Control Line? any regulators repure externa. control lines. viici Customer Measurement & Regulator (M&R) stations. control lines consist of stanless steel tubing (typically 3/8" or ½ diameter) and extend from the control line tap to a port on the regulator body. However, on certain Installations some control line taps are located further downstream on the buried outlet piping based on the regulator installation standards or practices. manufacurer's recommendalions, smoother operation of the regulator, or previous control line normally a Continental or Mueller punch tee, transition above grade from stainless steel tubing Control fines that extend to a below grade connection, to coated 1-inch steel pipe as required by our design standards. Figure 1 is a schematic drawng showing a regulator setting with control lines extanding below grade. What Happens if a Control Line Breaks? further, resulting in an over pressurization of the downstream piping system, which may lead to If a control ane breaks, ine regulalor will sense a pressure loss, causing ine valve to open 59#
Attachment 1, passage 764NTSB Pipeline Accident Report A Source Distribution Operations Operational Notice 09/02/2015 lague Dete: Below Grade Regulator Control Lines: Notice Number Supersedes: Caution When Excavating Near Regulator ON 15-05 NIA Stations or Regulator Buildings Page 3013 Required Actions General Excavation Requirements Sitr Gate/Town BorderIPOD Statione or District Plant Regulater Stationa Pre-excavation meetings with the plant/distribution or confract crew and MåR personne Gate/Town Border/POD Stetion or a Distric Plant Regulatar Station and/or within 25 feet shall be conducted for Company planned excavations within the footprint of a Gil of a station building or fence. Available as-built station drawings and/or electrical blueprints shall be reviewed for locations of burled condults, control lines, and or odorant shall be located prior to excavation. lines. Known buried control lines. electric and communication lines, and odorant lines As a result of the near miss that occurred and what could have happened, any Company excavations within the footarin of a City Gate/Town Borden/POD Station or a District Plant Regulator Station andor within 25 feet of a station building or fence shall only ines, ather communications and electric lines cillical to the operations af the station, anc xocaed with M&R personnel standing by throughout the axcavation, unless all control Customer M&R Stations odorant lines, are verified lo be located completely above ground other communications andfor electric linests) critical to the operations of the station. or Any Company excavations within 25 feet of a Customer MR Station with control line(s). burled odorant lines, shall only proceed after a consultation with M&R personnel. The control line, other communications or electric lines critical lo the operation of the station, M&R personnel shall stand by throughout the excavation if there Is a risk of damaging a от a buried odorant line Next Steps [Leadership Actions) identify situations where 3% party excavatore are digging within 25 feet of a City Gate/Town NiSouro: Leadership will determine the feasiblilty of other Damage Prevention opportunilies to Company facilibes require consultations and/or on-sile monitoring. Border/POD Station or District Plant Regulator Station, so that excavatons planned near these 60 CORRECTED COPY#
Attachment 1, passage 765NTSB Pipeline Accident Report AiSource Distribudon Operations Operational Notica 0940212015 Iseue Date: Below Grade Regulator Control Lines: Notica Numbar Supersedes. Caution When Excavating Near Regulator ON 15-06 NIA Stations or Regulator Buildings Page 2 of 3 Other Communications and Electric Lines Critical to the Operations of Regulators in pressure monitoring and control issues, which may lead to a catastrophic event. - 15 ruless seel nating. - Above ground - 18" sables seri noted wed pips to Lestrog. shore gond 'coated steel control hat Insalion from l coated set pipe o Enningi Une Tapd Figure 1 In Massachusetts, it is common to have closed looped systems, where the remote terminal unit The cables prowling the signals to and from the RTU often run below ground through conduits (RU) is continuously reading and controlling pressure al a valve that is acting as a regulator. damaged. Inis may regult in pressure monitoring and control issues, which may lead to a within the exising foolprint of the stalion, and if the cables or pressure sensing taps are catastrophic event Burled Odorant Lines Occasionally. buried odorant lines, which transport odorant from an odonzer to an injection poin Station. If an odorant line is damaged causing an odorant spill, the clean-up and impact on the nto the downstream piping system, exist within the footprint of a City Gate/Town Border/POL public may be costly. Although odorizers are typically located at City Gate/Town Border/POD Stations, buried odorant lines may also exist at odorizers located at other sites, such as District Regulator Stations or Customer M&R Stations. 61#
Attachment 1, passage 766NISB Pipeline Accident Report References AGA (American Gas Association). 2018. Leading Practices to Reduce the Possibility of a Natural Gas Over-Pressurization Event. (Washington, DC: AGA). American Council of Engineering Companies of Massachusetts. 2019. "DPU Issues Inquiry for Regulation Development: MA Passes Law Requiring Professional Engineers on Natural Gas Projects." Accessed May 25, 2019. https://www.acecma.org/about/news/massachusetts-passes-law-requiring-professional- engineers-on-natural-gas-projects-2340. API (American Petroleum Institute). 2015. Pipeline Safety Management Systems. API RP-1173. (Washington, DC: API). ASME (The American Society of Mechanical Engineers). 2012. Gas Transmission & Distribution Piping. ASME B31.8. (New York: ASME). Coester, Adam. 2004. "Dillon's Rule or Not?" National Association of Counties Research Brief. Vol. 2, no. 1. (Washington, DC: National Association of Counties). Commonwealth of Massachusetts. 2019. "About the DPU." Accessed June 30, 2019. https://www.mass.gov/about-the-dpu. - 2019a. "Pipeline Safety Information." Accessed March 19, 2019. https://www.mass.gov/pipeline-safety-information. -. 2019b. "Executive Office of Public Safety and Security." Accessed July 9, 2019. https://www.mass.gov/orgs/executive-office-of-public-safety-and-security. --. 2018. "Governor Baker Declares State of Emergency Regarding Incidents in Lawrence, Andover and North Andover." Accessed June 20, 2019. https://www.mass.gov/news/governor-baker-declares-state-of-emergency-regarding- incidents-in-lawrence-andover-and-north. --. 2015. "Statewide Communications Interoperability Plan." Accessed July 15, 2019. https://archives.lib.state.ma.us/handle/2452/208169?show=full. FEMA (Federal Emergency Management Agency). 2006. Multi-jurisdictional Mitigation Planning. FEMA 386-8. (Washington, DC: Department of Homeland Security, Federal Emergency Management Agency). Kirby, J.G., Cannalte, R.P., Hicks, D.K., and Japel, E.J. 1989. Constructability and Design Reviews: Analysis and Recommendations for Improvement. US Army Corps of Engineers Constructional Engineering Research Library Technical Report, P-89/15 (Washington, DC: US Army Corps of Engineers). 62#
Attachment 1, passage 767NISB Pipeline Accident Report MEMA (Massachusetts Emergency Management Agency). 2018. MEMA Reports, "Special Edition Covering August - October 2018." Vol. 17, no. 7. (Framingham, Massachusetts: MEMA). NEES (National Council of Examiners for Engineering and Surveying). 2019. "Advancing Licensure for Engineers and Surveyors." Accessed July 14, 2019. https://ncees.org/. NiSource, Inc. 2018. NiSource Emergency Manual. (Merrillville, Indiana: NiSource). --. 2015. Below Grade Regulator Control Lines: Caution When Excavating Near Regulator Stations or Regulator Buildings. ON 15-05. (Merrillville, Indiana: NiSource). NSPE (National Society of Professional Engineers). 2019. "Champion, Guide, Advance, Unite." Accessed July 14, 2019. https://www.nspe.org/ NTSB (National Transportation Safety Board). 2019. Building Explosion and Fire, Silver Spring, Maryland, August 10, 2016. PAR-19/01. (Washington, DC: NTSB). -. 2018. Natural Gas Distribution System Project Development and Review (Urgent). PSR-18/02. (Washington, DC: NTSB). --. 2012. Enbridge Incorporated Hazardous Liquid Pipeline Rupture and Release, Marshall, Michigan, January 25, 2010. PAR-12/01. (Washington, DC: NTSB). --. 1993. Over-Pressure of Peoples Gas Light and Coke Company Low-Pressure Distribution System, Chicago, Illinois, January 17, 1992. PAR-93/01-SUM. (Washington, DC: NTSB). --. 1982. Missouri Power and Light Company Natural Gas Fires, Centralia, Missouri, January 28, 1982. PAR-82/03. (Washington, DC: NTSB). - 1978. Pipeline Accident Reports - Brief Format. PAB-78/01. (Washington, DC: NTSB). --. 1969a. Low-Pressure Natural Gas Distribution System, Burlington, Iowa, November 6, 1969. PAR-70/01. (Washington, DC: NTSB). --. 1969. Low-Pressure Natural Gas Distribution System, Gary Indiana, June 3, 1969. (Washington, DC: NTSB). PHMSA (Pipeline and Hazardous Materials Safety Administration). 2019. "State Programs Overview." Accessed June 13, 2019. https://www.phmsa.dot.gov/working-phmsa/state- programs/state-programs-overview. 63#
Attachment 1, passage 768Guidelines for States Participating in the Pipeline Safety Program Appendix S EXAMPLE STATE PIPELINE SAFETY PROGRAM PLAN INSPECTION, ENFORCEMENT AND INCIDENT INVESTIGATION PROCEDURES Rev. December 2016 Page 1 of 36#
Attachment 1, passage 769Example Pipeline Safety Program Plan TABLE OF CONTENTS I. PURPOSE ....................................................................................................................................................................................... 4 II. MISSION STATEMENT ............................................................................................................................................................... 5 III. [STATE] PIPELINE SAFETY PROGRAM ........................................................................................................................... 6 A. BACKGROUND .............................................................................................................................................................................. 6 B. CONGRESSIONAL INTENT ............................................................................................................................................................. 6 C. FEDERAL ROLE AND ORGANIZATIONAL STRUCTURE ................................................................................................................... 6 D. STATE PROGRAM OVERSIGHT ...................................................................................................................................................... 7 E. PHMSA MONITORED GOALS ....................................................................................................................................................... 7 F. TRAINING ..................................................................................................................................................................................... 7 IV. INSPECTION PLANNING ...................................................................................................................................................... 9 A. LISTING OF OPERATORS ............................................................................................................................................................... 9 B. INSPECTION PRIORITIES ................................................................................................................................................................ 9 C. TIME INTERVALS FOR INSPECTIONS (INCLUDING LNG FACILITIES) ............................................................................................ 10 V. CONDUCTING INSPECTIONS ................................................................................................................................................ 11 A. OBJECTIVE ................................................................................................................................................................................. 11 B. PRE-INSPECTION ACTIVITIES ...................................................................................................................................................... 11 C. GENERAL INSPECTION GUIDELINES – INSPECTION ACTIVITIES ................................................................................................... 11 D. RECORDS AND REPORTS ............................................................................................................................................................. 12 E. RECORD INSPECTION .................................................................................................................................................................. 12 F. FIELD INSPECTIONS .................................................................................................................................................................... 14 G. COMPREHENSIVE INSPECTIONS .................................................................................................................................................. 15 H. DESIGN, TESTING AND CONSTRUCTION INSPECTION .................................................................................................................. 16 I. TRAINING AND OPERATOR QUALIFICATION (OQ) INSPECTIONS ................................................................................................. 18 J. CHECKLISTS ............................................................................................................................................................................... 18 K. MISCELLANEOUS ........................................................................................................................................................................ 18 L. OPERATOR TRAINING ................................................................................................................................................................. 19 M. DAMAGE PREVENTION ACTIVITIES ............................................................................................................................................ 19 N. INTEGRITY MANAGEMENT PROGRAMS ....................................................................................................................................... 19 O. LIQUEFIED NATURAL GAS .......................................................................................................................................................... 19 P. DISTRIBUTION INTEGRITY MANAGEMENT PROGRAMS (DIMP) .................................................................................................. 19 Q. POST-INSPECTION ACTIVITIES .................................................................................................................................................... 20 R. NOTICES OF PROBABLE VIOLATIONS (NOPV) ........................................................................................................................... 20 S. NOTICE OF PROBABLE VIOLATION ACTIONS .............................................................................................................................. 21 T. NOTICE OF PROBABLE VIOLATION TRACKING ............................................................................................................................ 21 U. CLOSURE OF A PROBABLE VIOLATION ....................................................................................................................................... 22 V. ISSUES IDENTIFIED ..................................................................................................................................................................... 22 VI. INVESTIGATION OF INCIDENTS ..................................................................................................................................... 24 A. BACKGROUND ............................................................................................................................................................................ 24 B. GENERAL PROCEDURES .............................................................................................................................................................. 24 C. INITIAL ISSUES TO NOTE IN RESPONSE TO AN INCIDENT REPORT ............................................................................................... 26 D. INCIDENT INVESTIGATION PROCESS AND SCOPE ........................................................................................................................ 26 E. TELEPHONE NOTIFICATION ........................................................................................................................................................ 27 F. SPECIFIC INVESTIGATION ISSUES - ALL INCIDENTS/ACCIDENTS ................................................................................................. 27 G. ADDITIONAL ISSUES, IF REQUIRED ............................................................................................................................................. 27 APPENDIX A – OPERATOR LIST .................................................................................................................................................... 29 [INSERT OPERATOR LIST]APPENDIX B – EXAMPLE RISK BASED INSPECTION PRIORITIZATION MODEL FOR GAS TRANSMISSION ......................................................................................................................................................................... 29 APPENDIX C – FORMS ....................................................................................................................................................................... 36 APPENDIX D – OPERATOR CONTACT LIST................................................................................................................................ 36 APPENDIX E – FEDERAL STATUTE ............................................................................................................................................... 36 Page 2 of 36#
Attachment 1, passage 770Example Pipeline Safety Program Plan APPENDIX F – FEDERAL REGULATIONS .................................................................................................................................... 36 APPENDIX G – STATE STATUTE .................................................................................................................................................... 36 APPENDIX H – STATE REGULATIONS ......................................................................................................................................... 36 Page 3 of 36 Example Pipeline Safety Program Plan I. PURPOSE The Pipeline and Hazardous Materials Safety Administration (PHMSA) guidelines for state programs, Section 5.0, requires that State Programs have a current, written plan for conducting its pipeline safety inspection and enforcement program. The purpose of this example document is to provide State agencies with additional specificity regarding PHMSA’s expectations for the content of such plans. Specific example statements and requirements are shown for illustration only and are not to be construed or interpreted as mandatory PHMSA requirements for State Programs. Refer to the official PHMSA Guidelines for State Programs for a complete description of program requirements. Caution: This example document is not comprehensive. Absence of specific topics in this example should not be construed as an indication that missing topics need not be addressed in the state program manual. Activities or requirements described in the official PHMSA State Guidelines should be addressed in the requisite level-of-detail similar to the topics illustrated in this document. Page 4 of 36#
Attachment 1, passage 771Example Pipeline Safety Program Plan II. MISSION STATEMENT Each state pipeline safety agency should include a mission statement or policy statement similar to the example below. The mission of the [State Pipeline Safety Program Agency] is to ensure the safe construction, operation and maintenance of intrastate natural gas pipelines and/or intrastate hazardous liquid pipelines in [insert State name]. This is accomplished through education, inspection, enforcement and investigation of incidents/accidents. Our ultimate responsibility is protecting the public and the environment from the dangers of natural gas and/or hazardous liquids in transportation. Page 5 of 36#
Attachment 1, passage 772Example Pipeline Safety Program Plan III. [STATE] PIPELINE SAFETY PROGRAM Each state pipeline safety agency should include a brief overview of its pipeline safety program and its role in oversight of pipeline safety, similar to the example below. A. Background The [State Pipeline Safety Program] is a Federal Program under the direct responsibility of the U.S. Department of Transportation (“DOT”). The Pipeline Safety Act (“Federal Act”) gave jurisdiction over all gas [or hazardous liquid] pipeline safety in the U.S. to the Secretary of Transportation (“Secretary”). However, the Federal Act also provides that any state with a law comparable to the Federal Act in scope and intent could enter into an agreement (“Certification”) with the Secretary to carry out safety enforcement in that state. The [State] legislature passed the [insert State statute] and gave the [insert State Pipeline Safety agency] jurisdiction over all intrastate gas [and/or hazardous liquid] pipeline safety in [insert State]. [Insert State] operators own over [xxxx] miles of gas transmission lines, [xxxx] miles of gas distribution mains [xxxx] million individual service lines [xx] LNG facilities [xxxx] miles of hazardous liquid transmission lines B. Congressional Intent Chapter 601 of the Federal Act provides the statutory basis for the State’s Pipeline Safety Program. Chapter 601 establishes a framework for promoting pipeline safety through exclusive Federal authority for regulation of interstate pipeline facilities and Federal delegation to the states of all or part of the responsibility for intrastate pipeline facilities under annual certification or agreement. Chapter 601 authorizes Federal grants-in-aid of up to 80 percent of a state agency's personnel, equipment, and activity costs for its pipeline safety program. The resulting federal/state partnership is the cornerstone for ensuring uniform implementation of the pipeline safety program nationwide. C. Federal Role and Organizational Structure DOT’s Pipeline and Hazardous Materials Safety Administration (PHMSA) is responsible for protecting the people and the environment in the United States through a comprehensive pipeline safety program. PHMSA directly administers the program, develops issues, and enforces minimum safety regulations for interstate and intrastate pipelines. These regulations are written to ensure safety in (1) the design, construction, testing, operation, and maintenance of pipeline facilities and in (2) the siting, construction, operation, and maintenance of liquefied natural gas facilities. PHMSA ensures compliance with regulations through operator inspections, enforcement actions, and incident investigations. PHMSA also administers grant-in-aid funding to states, conducts research, and collects and analyzes safety data. PHMSA Headquarters is located in Washington, D.C. Headquarters administers the grant-in-aid program to support state agencies conducting gas and hazardous liquid pipeline safety programs. In addition to collecting, compiling, and analyzing pipeline safety and operating data, PHMSA manages the risk-based Page 6 of 36#
Attachment 1, passage 773Example Pipeline Safety Program Plan pipeline inspection plan. PHMSA Headquarters also supports the work of five Regional Offices. PHMSA Regional Offices serve as the focal point for compliance activities. Staff at each regional office provides technical assistance and support to state agency programs and conducts the annual evaluation of those programs. D. State Program Oversight Goals are set for all state programs by PHMSA and enforcement of those goals is attained by reductions in Federal grant-in-aid funding and the potential loss of our Federal Certification if those goals are not met. If state certification is lost, responsibility for pipeline safety within the state falls back to DOT PHMSA. Each state is required to have standards at least as stringent as the Federal Standards. [insert State name’s] response to that requirement is to adopt the Federal Standard itself [or other …please describe if other]. In order to stay current, [insert State] readopts the Federal Standard every [x] years [or other description as applicable]. [Include citation to federal and state statute and regulations] Federal and state statutes and regulations are attached in Appendices E, F, G, and H. E. PHMSA Monitored Goals A formula was developed by PHMSA to determine the proper level of performance for each state. The formula considers the number of gas [or hazardous liquid] system operators, the miles of transmission pipeline, gas main distribution pipelines, and the number of gas service lines in a state. For [insert State name], this formula finds that we need [xx] full-time inspectors and that we should be spending a minimum of [xxx] person-days per year in the field inspecting facilities. Our current allocated staff is at [xx] and the minimum inspection-day requirements are being met with that number of inspectors. F. Training DOT provides training for our Pipeline Safety Program staff primarily at its PHMSA Training and Qualification (“T&Q”) facilities in Oklahoma City, OK. To ensure that each inspector has knowledge of minimum Federal pipeline safety regulations, each individual must attend all required courses within a period of 3 years (successfully complete within 5 years) of completion of the first course in the pipeline safety program. The first course should be scheduled as soon as practical after employment of the inspector.. The courses are approximately 40 hours long and the subjects for those courses are listed below. Some of the courses listed also require additional computer-based training prior to course attendance. Page 7 of 36#
Attachment 1, passage 774Example Pipeline Safety Program Plan Course Code Course Title 1 PHMSA‐PL1250 Safety Evaluation of Gas Pipeline Systems Course 2 PHMSA‐PL1255 Gas Pressure Regulation & Overpressure Protection Course 3 PHMSA‐PL1310 Plastic and Composite Materials Course 4 PHMSA‐PL3242 Welding and Welding Inspection of Pipeline Materials Course 5 PHMSA‐PL3256 Failure Investigation Pipeline Failure Investigation Techniques Course 6 PHMSA‐PL3293 Corrosion Control of Pipeline Systems Course 7 PHMSA‐PL3257 Pipeline Safety Regulation Application and Compliance Procedures Course Additionally, the following courses are required for Pipeline Integrity Management Inspections as a result of newly adopted Federal rules. 8 PHMSA‐PL3267 Fundamentals of Integrity Management Course 9 PHMSA‐PL1297 Gas Integrity Management (IM) Protocol Course 10 PHMSA‐PL3291 Fundamentals of (SCADA) System Technology and Operation Course 11 PHMSA‐PL3292 Safety Evaluation of Inline Inspection (ILI)/Pigging Programs Course 12 PHMSA‐PL3306 External Corrosion Direct Assessment (ECDA) Field Course 13 PHMSA‐PL3IC Investigating and Managing Internal Corrosion of Pipelines WBT 14 PHMSA-PL 1245 Inspections of Distribution Integrity Management Programs [Note: Example course listing is specific to gas pipeline inspector qualifications. Additional courses apply for hazardous liquid pipeline inspector qualification.] Page 8 of 36#
Attachment 1, passage 775Example Pipeline Safety Program Plan IV. INSPECTION PLANNING The PHMSA State Guidelines, section 5.1.1 through 5.1.2, require that state agencies have written procedures that provide for maintaining a current list of operators under its jurisdiction and prioritizing inspection activities based on operator-specific information. This section contains examples of administrative procedures which provide State agencies with additional specificity regarding PHMSA’s expectations for the level-of-detail appropriate for such procedures. A. Listing of Operators In accordance with the PHMSA State Guidelines, section 5.1.1, each State agency must maintain a list of the name and mailing address of each jurisdictional operator. The official address for each operator should be the one to which all pipeline-safety-related correspondence is sent and considered the official notice to the operator. In addition, information about the pipeline location and/or service areas should be maintained. The list should also document the type of operator (e.g., LDC, master meter, etc.). Each State agency should have a written process and procedure it uses to assure that it becomes aware of new operators, mergers, acquisitions, system expansions, new construction, etc., such that the list is maintained current. See Appendix A for an example listing of operators. B. Inspection Priorities In accordance with the PHMSA State Guidelines, section 5.1.2, each State agency must establish Inspection priorities. Inspection priorities are determined in accordance with the following process and procedure. The resulting list will address both the priority of operators (i.e., which operators should be inspected sooner or more frequently), and the focus areas to concentrate the inspection for all operators (i.e., identify riskier or problematic aspects for each operator to focus inspections on the units or topics where needed most). The State’s process for prioritizing inspections or inspection activities addresses the following: 1. Inspector Input/knowledge obtained from prior inspections. 2. Prior compliance performance of operators (both the number and severity of prior non- compliances) a) Number, nature, and age of outstanding compliance issues that remain open 3. Data from annual reports1 or other sources indicative of inherent pipeline system risk such as: b) Prior incident history c) Prior leak history d) Mileage and HCA mileage 1 See Appendix B for an example procedure that documents the system information from annual reports and incidents reports and how the information can be used to develop a relative risk index listing of operators as an aid to development of an Inspection Priority Listing.Page 9 of 36#
Attachment 1, passage 776Example Pipeline Safety Program Plan e) Pipe diameter f) Age of pipe g) Coating and Cathodic Protection h) Type of pipe (especially vintage pipe of problematic design such as LF-ERW pipe, cast iron pipe, etc.) 4. Time since previous inspection 5. Number, nature, and age of outstanding compliance issues that remain open 6. Pipeline system expansion (e.g., new construction, acquisitions, etc.) [Insert State agency name] will develop an Inspection Priority List each year. Although not the sole factor in determining specific inspection plans and priorities, the factors above must be considered when establishing the ultimate Inspection Priority List. The Inspection Priority List should also account for large operators with multiple operational units to insure an adequate rotation is performed. The Inspection Priority List should be periodically updated to reflect new significant information (such as incidents) that results in changing inspection priorities. This Inspection Priority List documents the input listed above to record the basis for the Inspection Priority List, along with any other special needs that influence the final inspection priority decisions. C. Time Intervals for Inspections (including LNG facilities) [Insert State agency name] has established the following maximum allowed time interval between inspections for each type of inspection. 1. Standard inspections............................................... (X years) 2. Operation and Maintenance Plan ........................... (X years) 3. Public Awareness Plan ............................................ (X years) 4. Anti-Drug and Alcohol Plan ..................................... (X years) 5. Emergency Plan ....................................................... (X years) 6. Operator Training Plan ............................................ (X years) 7. Operator Qualification Plan .................................... (X years) 8. Distribution Integrity Management Program Plan . (X years) 9. Integrity Management Program Plan ..................... (X years) 10. Control Room Management Plan ........................... (X years) Inspections of programmatic plans such as integrity management are performed on less frequent intervals because [insert additional rationale/justification for intervals selected]. [Insert State agency name] will conduct additional inspections or adjust the Inspection Priority List as needed in response to unplanned events such as such as leaks, incidents, compliance issues, and/or poor operator performance. Page 10 of 36#
Attachment 1, passage 777Example Pipeline Safety Program Plan V. CONDUCTING INSPECTIONS The PHMSA State Guidelines, section 5.1.3 through 5.1.6 requires that state agencies have written procedures that provide for methodical, systematic, comprehensive, and consistent inspections and enforcement actions. To properly conduct an inspection of an operator’s facilities, an inspector shall utilize an inspection form or checklist referenced to the applicable Federal and/or State regulations. This section contains examples of administrative procedures which provide State agencies with additional specificity regarding PHMSA’s expectations for the level-of-detail appropriate for such procedures. A. Objective Evaluate all natural gas pipeline system operators and/or hazardous liquid pipeline system operators under [insert State name] jurisdiction to verify compliance with the requirements of the [insert State statute] and the Federal Minimum Safety Standards under 49 CFR Parts 191, 192, 193, and 195, as applicable. If an operator fails to meet the minimum requirements, the necessary action will be taken to obtain compliance. B. Pre-Inspection Activities To properly evaluate a pipeline operator, the inspector must be familiar with the operator's plans, procedures, and processes associated with the area to be inspected. Prior to conducting an inspection the Inspector shall become familiar with the history of the operator by reviewing office records and available databases. The Inspector should also check for any outstanding notices of probably violation and become familiar with the circumstances surrounding any outstanding issues previously identified. The inspector should also identify any special permits/waivers and any NTSB recommendations that apply to the system/segments being inspected. C. General Inspection Guidelines – Inspection Activities Make arrangements by telephone or electronic mail with company personnel to assist in conducting safety inspections. Municipal and Master Meter operators will be devoted a minimum of [X] days each for standard inspection activities and additional days will be dedicated as needed. There will be joint or multiple inspectors conducting inspections when warranted. This is an effort to promote consistency and efficiency among the entire staff. An appropriate rotation of inspectors between operators will also occur. All operators will be assigned one inspector to be the contact for questions or concerns they might have. There will also be an adequate rotation of locations inspected within each operating unit. Each on-site inspection should be closed with an exit critique with the operator or representative of the operator, at which time the operator is advised of the inspector’s findings and recommendations. Page 11 of 36#
Attachment 1, passage 778Example Pipeline Safety Program Plan D. Records and Reports All on-site activity will require a report to document the inspection and the results. A brief review of activities performed will need to be noted on the report with a more detailed report recorded on a designated checklist. When applicable, all inspections should be documented using the designated checklist pertaining to the activity being viewed. These checklists can be viewed in Appendix C [or in electronic format]. If there is not a checklist that is applicable to the activity being reviewed a detailed account of the items viewed should be noted. Checklists should be reviewed annually to insure they are up to date with the most current requirements from 49 CFR. Records detailing the types of inspections conducted and the respective person-days devoted to each inspection will also be attached to each report using the Inspection Priority Sheet. E. Record Inspection Each Record Inspection should include a review of the operator's records concerning the construction, inspection, operation, and maintenance of the operator's pipeline, including pipeline facilities. If problems are found during the review, additional review will be necessary to accurately determine the scope of any deficiency found. Checklists should be used to aid the Inspector during each inspection. If the operator’s records are so extensive that checking every document in a certain file is not practical, the inspector may spot check certain records from the file. If a spot check reveals something that is questionable, a more in depth study of that particular record should be conducted. The Field Inspection (see section II.F) should include an on-site inspection of the operator's facilities to confirm that system maintenance is being performed as indicated by those items covered in the record inspection. A Record Inspection, Field Inspection, or Plan review will be considered a Standard Inspection. On-site record inspections should be conducted at the beginning of a calendar year. System records will generally indicate the condition of the system. Any questionable records should be verified with a corresponding field inspection of any facilities in question. The records reviewed for compliance should include, but are not limited to the following: 1. Leak Survey (Part 192 only)- Determine Residential (5 year) and Business District (each calendar year, but at intervals not exceeding 15 months) survey dates, number of leaks found and classified, and if proper repairs were made (leak repair work orders). Refer to Sections 192.706 and 192.723. NOTE: State may have additional requirements per specific state regulations or there may be additional inspection requirements per operator compliance issue. Ask operator if any sections were missed or if any known compliance issues Appropriate documentation (maps) should be reviewed to determine compliance Are leak survey locations documented appropriately – highlighted routes Comprehensive review should be conducted every 3-5 years where ALL leak survey maps are reviewed to determine no geographic areas are missed Page 12 of 36#
Attachment 1, passage 779Example Pipeline Safety Program Plan Are locations of leaks found noted on maps Review leak repair records of any leaks noted on survey Are all leaks reported on annual report 2. Corrosion Control - Determine if system is cathodically protected and type of protection, anodes, rectifiers, isolation, interference bonds, etc. Determine if proper monitoring is maintained. Refer to subpart I-Requirements for Corrosion Control, of Part 192 and/or subpart H – Corrosion Control, of Part 195. Take pipe-to-soil readings, when possible, to determine compliance. Ask operator if any sections were missed or if any known compliance issues Has operator provided you with all records Try and get count of test points used in various systems (to be used for your next inspection also) Ask if any test points were added or removed during last inspection cycle Compare readings and looks for signs of suspicion o Are readings same as last reading o Do readings coincidentally read minimum (.85?) o Does main segment have more than one test point and is reading similar Count of isolated service test points – count variance 3. Odorization - Determine type of equipment, if annual maintenance is performed and test to determine if proper odorant level is maintained. Refer to Section 192.625. Have odor injection levels been reviewed Odorant Purchase records 4. Patrolling - Determine if proper patrolling is done on transmission and gas distribution facilities. Patrolling maps – what are source documents Signatures of person conducting patrol 5. Valves - Determine if annual maintenance is performed on designated key valves on transmission and gas distribution mains. Also, refer to the O & M Plan for designated emergency valves. It is vital to get counts where you can compare from year to year How many valve inspections were done in one day Dates of records – Weekends? Holidays? April 31st? Page 13 of 36#
Attachment 1, passage 780Example Pipeline Safety Program Plan 6. Maximum Allowable Operating Pressure (MAOP) or Maximum Operating Pressure (MOP) - The MAOP or MOP of the facilities must be determined. 7. Regulator Stations (Part 192 only) - Annual inspection for regulator stations is required to determine mechanical condition, correct pressure, adequate capacity and operation. If more than one regulator station is used to supply gas to any single system, telemeter or recording pressure gauges are required. Refer to Sections 192.739, 192.741 and MAOP under 192.619. 8. Relief Devices - Determine if relief devices are tested and if capacities are adequate and set to function at the proper pressures. 9. Vaults (Part 192 only) - Vaults having volumetric internal content of 200 cubic feet or more require ventilation ducts and other features and are required to be inspected annually. 10. Customer Leak Complaints (Part 192 only)- Determine if the operator has the recorded all necessary leak information, (e.g. time received, time dispatched, time arrived, time completed and disposition). 11. Farm Taps (Part 192 only)- Determine if proper odorization, regulation, and adequate overpressure protection is provided. 12. Special Considerations for Master Meters (Part 192 only) - Master meter system O & M Plans should consist of a brief description of the gas facilities, and procedures for leak surveys and repairs, cathodic protection monitor, system pressure, customer leak complaints, system valve maintenance, new construction procedures when applicable and procedures for personnel training. Review of operator records should not be limited to the above list, but should include all of their specific required operation and maintenance activities. The inspection checklist selected should provide a comprehensive list of those items necessary to complete the inspection. Based on records reviewed the Inspector should select future locations for physical on-site facility inspection of Pump/Compressor stations, Regulator Stations, System Valves, C-P Test Stations, Rectifiers, Odorizers (gas only), Line Markers, Leak Repairs, and Customer Meters and Regulators (gas only), etc. It is not necessary to obtain copies of records during routine inspections, unless a noncompliance is found and records may be needed to support an enforcement action. If any request for a copy of any record is refused, immediately telephone the Pipeline Safety Program Manager for guidance. Include a reference to the refusal in your report. F. Field Inspections Physically conduct an on-site inspection of existing system facilities, such as regulating stations, odorizers, commercial and industrial meters and regulators, relief devices and vents, exposed mains, peak shaving plants, system valves, C-P test stations, rectifiers, compressor stations, storage fields and gas wells, etc. Check for proper installations, over-pressure protection, security, etc. Photographs are Page 14 of 36#
Attachment 1, passage 781Example Pipeline Safety Program Plan recommended to support any noncompliance found. G. Comprehensive Inspections A comprehensive or focused inspection should be conducted of each inspection unit at least every [X] years. The intent of the inspection is to take a snapshot of a specific area within the inspection unit. The current year Comprehensive Field Inspection checklist shall be used during the inspection. The inspection may be done independently of operator personnel but the preferred method is to perform the inspection with the assistance of operator personnel. The area chosen for the inspection should be of a manageable size and take into consideration the criteria listed in section [X] of the checklist which includes: population density, age of system, type of piping, operating characteristics, performance history of system (i.e. incident history). The MAOP/MOP of the system should be verified. Pressure regulation should be included and the criteria under section [X] of the checklist should be verified. System valves should be included in the inspection. The criteria for valve inspection are included under section [X] of the checklist. The type of cathodic protection being applied to the system piping should be verified. Pipe-to-soil potentials should be taken a predetermined test points. Pipe-to-soil potentials should be taken at randomly selected service risers to determine if unrecorded electrically isolated services exist. If applicable, rectifiers and bonds should be inspected during the inspection. Atmospheric corrosion inspections should be conducted of all above ground facilities encountered during the inspection. Pay close attention to condition of risers at the surface-to-atmosphere interface. Odor intensity checks (gas only) should be taken in the area of the inspection. Operator owned odor intensity verification equipment should be used during the inspection. Verify odor intensity and calibration dates of equipment. A gas leakage survey of the system piping should be conducted, if applicable. Operator owned leakage survey equipment should be used along with qualified personnel. Compare results of inspection with existing leak documentation. Verify the classifications of any known existing leaks on the system. Customer meter sets should be inspected during the inspection. This can be done in conjunction with the leakage survey. The location of the meter set as well as the condition should be observed. Check for the presence of vent screen and vent position. Verify valve requirements are being met. If marked pipeline facilities are encountered during the inspection verify the accuracy of the location markings. The presence of pipeline marker should be verified at all above ground mains, road and railroad crossings where applicable. The information on the marker should be checked for accuracy and code compliance. Throughout the inspection the accuracy of the system mapping supplied by the operator should be verified when possible. Page 15 of 36#
Attachment 1, passage 782Example Pipeline Safety Program Plan The qualifications of all operator/contractor personnel observed performing covered tasks during the inspection shall be verified and documented on the appropriate forms. H. Design, Testing and Construction Inspection Construction Inspection: Observing the installation of new piping (transmission, main or service) or an installation resulting in an increase in capacity or size of an existing facility accomplished through replacement. In January of each year the inspector shall contact all pipeline system operators and request a listing of, and approximate start date for planned pipeline construction projects. The inspector shall include construction inspections when scheduling field inspection activities based on the projected dates of the projects. Follow-up contact with the operator may be required to verify actual construction project start dates. To conduct a construction inspection, the inspector shall contact the company representative in a reasonable time period prior to the inspection. The inspector shall take the time to become familiar with the company procedures by either reviewing the procedure in advance of the inspection or by requesting a copy of the procedure from company representatives to be reviewed while observing the construction procedure. The appropriate inspection checklist shall be used as guidance and documentation during the inspection. The checklist will also allow the inspector to document adherence to proper procedure. If the Inspector observes that a task is not completed as required, the appropriate company official shall be notified. A review should be conducted to determine if the issue identified relates to the procedure or a training/qualification problem. The checklist references specific code sections. If during the inspection the Inspector determines that the checklist is not correct or in need of updating, the Pipeline Safety Program Manager shall be notified. The most current copy of the checklists is maintained [specify where checklists can be obtained]. The Inspector shall as part of the inspection determine if the company is following their damage prevention program by verifying a ticket has been issued and the excavation is completed within the time interval allowed. The Inspector should determine if the operator approved excavation procedures are being adhered to. The crew members qualifications (if construction tasks are included as covered tasks by the operator) should also be reviewed as part of the inspection and documented on the Operator Qualification Field Inspection checklist. When possible an Element 9 Inspection Protocol form shall be used to evaluate the effectiveness and comprehensiveness of the operators’ qualification plan during the inspection. The Inspector shall review the bulleted items below when applicable to the work being performed. The Inspector shall determine if tasks were conducted satisfactorily and document their findings on the appropriate construction checklist. Page 16 of 36#
Attachment 1, passage 783Example Pipeline Safety Program Plan Establish the Class Location for the area where the work is being performed (gas only). Establish the system MAOP/MOP and operating pressure. Determine if the piping and components being used are properly marked and qualified for gas piping and the pressure rating is adequate for the system MAOP/MOP. Establish the piping grade, specification, and wall thickness are adequate for the installation being observed. Determine if cathodic protection is required, the type of protection being applied (anode, rectifier or bond). Determine the level of protection by performing a pipe to soil potential measurement. Determine if adequate depth is being achieved for the type of installation being observed. Shoring or other acceptable trench protection should be used in excavations as defined by Company procedures where unstable soil is encountered and or the opening is 5 feet or more in depth. Ensure that the backfill being used is clean of debris that may damage coating or piping. If the possibility of a release of natural gas or hazardous liquid is present, ensure that a fire extinguisher is readily accessible. In the event of a planned release confirm that the area has been secured and no ignition sources are present prior to release. Verify that appropriate personal protection equipment is being used. Verify that individuals performing fusion or steel welding are qualified by the appropriate procedure and that qualifications are current. Observe fusions or welding being performed to determine if the company procedures are being followed. If tapping and stopping are being performed ensure that company procedures are being followed and that the employees performing the work have current qualifications. When new or existing pipe is being handled, transported or excavated near, ensure that the piping and coating is in good physical condition. Make certain that the crew is inspecting the piping prior to installation or backfill for gouges, dents or abrasions. If damage is observed ensure that the damaged segment is removed or repaired as defined by company procedure. Prior to pressure test determine if the Class Location has a bearing on the minimum test pressure (gas only). Adherence to pressure test duration required by company procedure and regulations should also be verified. Ensure that the pressure gauge or recording chart used to monitor pressure tests are in good physical condition and if required by company procedure, the calibration date is current. When purging is performed verify the operator has determined the area is cleared and the release is controlled and vented safely. This should include, as applicable, vent stack grounding and maintaining static control. If required by company procedure, ensure that the appropriate emergency officials have been notified of purges that may vent large quantities of material. If a meter set assembly is part of the installation being observed verify that the service regulator vent is located in an area where it can vent safely to atmosphere and is readily accessible. The riser valve or outside shutoff must also be accessible. Verify the meter set assembly has adequate support. If an emergency situation occurs while performing the inspection determine if the emergency procedures are followed and the tasks performed are conducted as defined by company procedure. Page 17 of 36#
Attachment 1, passage 784Example Pipeline Safety Program Plan Determine if line markers are required and are posted with the appropriate warning, company name, and a 24 hour contact number. After completing the inspection the inspector shall perform an exit interview/critique with the appropriate company official indicating any areas of probable violation or issues identified. If follow-up is necessary to confirm corrective action, attach applicable correspondence to the report identifying the steps taken to resolve the issue. Upon completion of the inspection the Inspector shall complete the necessary documentation and checklist including a Post Inspection Memorandum and Priority Sheet. All documentation shall be submitted to the Pipeline Safety Administator printing. Once printed the entire report package shall be reviewed by the author to ensure that the report is correct and the appropriate attachments are included. Once the Inspector has finalized the inspection, the report and associated attachments shall be presented to the Pipeline Safety Program Manager for review. Under normal circumstances the report should be submitted to the Manager within 2 weeks of the completion date of the inspection. If circumstances are encountered requiring additional time to finalize the report, notify the Manager of the reason for the delay. I. Training and Operator Qualification (OQ) Inspections The first round of written Operator Qualification plan inspections was completed by December 17, 2005. Element 9 Inspections are to be used during field inspections and construction inspections where applicable in order to ensure field knowledge of Operator Qualification issues. The Operator Form 15 OQ Field Inspection Protocol should be used to document the individuals and tasks observed during field inspections. The status of qualification should be noted for each task observed. Determine if training requirements of [insert applicable State statute or regulation] are being met and appropriate documentation is being maintained by the operator. J. Checklists Checklists are to be used for all inspections. Whenever a checklist is not used, provide a detailed explanation of inspection activities in the Report or Post Inspection Memorandum. See Appendix C for checklist information. K. Miscellaneous During field work an Inspector may discover other systems. When these systems are identified which may be jurisdictional, a visit to the system should be scheduled to determine whether or not it is jurisdictional. If so, advise the operator of his obligations. Briefly inspect the system to assure that it is jurisdictional and that no obvious hazardous conditions exist. Leave copies of "Small Operator Guidance Manual" and the Minimum Safety Standards with the operator. A written report of findings should be submitted to the Program Manager for review. Page 18 of 36#
Attachment 1, passage 785Example Pipeline Safety Program Plan L. Operator Training Participation in organized training programs intended to enhance the operators knowledge of code requirements and methods used to achieve compliance is permitted. Individual operator training may be warranted in some situations. The days spent on these activities shall be recorded as On-site Operator Training. M. Damage Prevention Activities A damage prevention inspection can consist of review of damages the operator sustained due to third party damages per 1000 locates during the previous year. The numbers should be compared to prior years to determine if the rate is decreasing. Inspection time spent solely on verification of one-call response is also allowed. N. Integrity Management Programs Staff meeting the PHMSA training requirements relating to integrity management inspection will perform or lead all IMP inspections. When conducting the initial review of an operators plan, current IM Protocol Form(s) [or the PHMSA protocol form] will be used to complete the IMP plan reviews. Follow- up reviews of Integrity Management Programs will be conducted at intervals not exceeding [X} calendar years. Form [insert form number] Integrity Management Follow-up Inspection will be used for periodic inspection to verify that the operators are meeting the requirements of CFR 192 Subpart O and/or 49 CFR 195.452. Qualified Staff will be assigned to conduct field inspections of the work being performed on pipeline facilities to meet the Subpart O and/or 49 CFR 195.452 requirements. Staff will request schedules for field activities from the operators to which they are assigned. The inspections will be adapted to the type of work being performed. Staff will verify that all work being conducted is performed in accordance with the operators operation and maintenance plan and integrity management plan. Large operators will have an annual review of Integrity Management plans to ensure operator tests and remedial actions are being conducted and staff inspectors are aware of on-going integrity management activities. O. Liquefied Natural Gas Standard inspection of the LNG facility will be conducted at intervals not exceeding 2 calendar years. The LNG Facility Record Inspection & Field Checklist will be used for the inspection. P. Distribution Integrity Management Programs (DIMP) Staff meeting the PHMSA training requirements relating to distribution integrity management inspection will perform or lead all IMP inspections. When conducting the initial review of an operators plan, current DIMP Protocol Form(s) [or the PHMSA DIMP protocol form] will be used. Qualified Staff will be assigned to conduct field inspections of the work being performed on pipeline facilities to meet the 49 CFR Part 192, Subpart P, requirements. Staff will request schedules for field activities from the operators to which they are assigned. The inspections will be adapted to the type of Page 19 of 36#
Attachment 1, passage 786Example Pipeline Safety Program Plan work being performed. Staff will verify that all work being conducted is performed in accordance with the operators operation and maintenance plan and integrity management plan. Large operators will have an annual review of DIMP plans to ensure operator tests and remedial actions are being conducted and staff inspectors are aware of on-going DIMP activities. Q. Post-Inspection Activities All inspection reports shall be submitted to pipeline safety program manager within 2 weeks of completing an inspection. All checklists shall be complete and accompany any inspection report with any other adequate documentation needed. Compliance issues shall be thoroughly outlined and any follow-up reports made as noted below. Any final reports not requiring further compliance action shall be reviewed by the pipeline safety program manager and filed. Probably violations or other issues discovered should follow procedures noted below for further follow-up. R. Notices of Probable Violations (NOPV) If a probable violation is observed during an inspection, a Notice of Probable Violation (NOPV) will be issued to the operator in question. A verbal notice must be given to the operator personnel assigned as a contact during the inspection. The notice must describe the regulation section or administrative code not being complied with as well as the specific details of the violation. A copy of the completed written notice must be provided to the system operator along with a copy attached to the inspector's Report. The written report and attachments should be submitted to the State Pipeline Safety Program Manager within 2 weeks of the completion of the inspection. A letter addressed to the appropriate operator contact (which should be a company officer, system owner, mayor or other culpable party) shall be drafted by the Inspector issuing the NOPV. The letter should include the appropriate code section and a description of the violation issue. The letter shall be submitted to the Program Manager within one week of identification that the NOPV exists. A copy of each NOPV form shall be supplied to the Program Manager along with the NOPV letter. It is also acceptable to notify an operator of any NOPV via letter if required action is determined after leaving operator premise. The NOPV letter drafted by the Inspector shall be submitted to the Program Manager as described above. A final copy of each NOPV notice and letter is to be submitted to the State Pipeline Safety Program Administrator. It may be the decision of the program manager that further investigation of a questionable violation is needed, or a more in-depth study is needed to determine the extent of the deficiency. This should be completed before any formal notifications are made. [Pipeline Administrator and program manager could be same person – or designated administrator assistant or other designee] The reason or reasons for the noncompliance action taken shall be recorded on the copy of the notice form kept on file at the State agency. This will be accomplished by the use of an enforcement code. The code will be one of the three steps discussed below, followed by one or more of the reasons identified by the corresponding letter of the alphabet (1A, 2B, 3C, etc.). Example Enforcement Codes 1. Follow-up inspection to ensure correction of the deficiency. 2. More in-depth study to determine the extent of deficiency. 3. A noncompliance or warning letter will be drafted and forwarded to the operator Page 20 of 36#
Attachment 1, passage 787Example Pipeline Safety Program Plan requesting corrective action. 4. Request officials from operating unit to appear in person for conference relative to the violation. 5. Initiate a citation order for the operator to appear before the State agency based on seriousness of violation cited. a) Violation not of a critical nature and/or not an immediate hazard to public safety. b) Violation is of a critical nature and/or is an immediate hazard to public safety. c) Operator is currently taking corrective action. d) Long-term corrective action is required. e) Prior performance indicates no repetitive violation. f) Records indicate history of repetitive violations. g) Numerous violations cited and require close attention. h) Violation found and corrected prior to inspection. i) Operator requires further guidance or training. j) Additional information needed before pursuing violation. k) Change in ownership in progress. l) Pending response from operator. m) Pending clarification of rule or law. n) Insufficient corrective action. S. Notice of Probable Violation Actions After taking into consideration the nature of the violation and the past performance of the system operation, one or more of the following steps shall be taken to achieve compliance: a) A NOPV or warning letter will be drafted within 1 week and submitted to the Pipeline Safety Program Manager for forwarding to the operator. The letter must identify the specific violation(s) and request corrective action to be taken. b) System operator officials will be asked to appear for a conference prior to filing a formal citation order. c) If the operator fails to correct the violation or respond to steps a) and/or b), a citation order may be issued by the State agency, directing that the system operator appear before the State agency to show cause why it should not be found in noncompliance and subject to a penalty assessment. T. Notice of Probable Violation Tracking Once a Notice of Probable Violation letter has been sent, the operator will be allowed thirty days (30) from the date of the letter to respond and detail intended corrective actions. The Pipeline Safety Administrator [or designated party] will keep a calendar tracking the due date of each response. If a response is not received within 5 business days past the due date, the Administrator will notify the Inspector assigned to the operator involved as well as the Program Manager. The Inspector will contact the operator in an effort to ascertain why the response has not been submitted. The reason provided will be conveyed to the Administrator and the Program Manager via email to determine if further actions are warranted. Upon receipt of the response the Administrator will provide copies of the response to the Inspector assigned and the Program Manager. The original copy of the response will be filed with Page 21 of 36#
Attachment 1, passage 788Example Pipeline Safety Program Plan the NOPV form and warning letter. Upon completion of the associated report, the NOPV form, and NOPV letter, the violation will be logged onto an Excel spreadsheet maintained on the [designated file location]. The spread sheet contains multiple sheets including outstanding violations and corrected violations. Once updated the outstanding NOPV sheet is printed and posted on the Pipeline Safety bulletin board. Follow-up inquiries will be made to the violation issues. Each violation will receive follow-up on a quarterly basis. The update should be conducted on the first Monday of the new quarter. If the Inspector is absent on the first Monday of the new quarter, the follow-up shall be conducted the day the Inspector returns to the office. The actions to be conducted during the follow-up activities shall include: a review of the NOPV form, NOPV letters and associated documents; updating the NOPV Status form stored on the [designated file location]; printing the updated NOPV Status form; attaching the printed copy of the NOPV Status form to the NOPV file packet, and returning the updated packet to the Pipeline Safety Administrator for logging on the Excel spread stored on the [designated file location]. The extent of the follow-up will be determined by the nature and severity of the violation. Examples of follow-up actions: Periodic contact with the operator to determine corrective actions, Confirmation of corrective actions at specific time intervals determined by the Inspector or Program Manager, possibly including field verification, Review and confirmation during next regularly scheduled inspection, Citation Order/Civil Penalty. U. Closure of a Probable Violation Under normal circumstances closure of a notice of probable violation may be accomplished by one of the follow: The operators response to the NOPV letter includes documentation of correction of the deficiency; A follow-up inspection has been conducted to verify correction of the deficiency; A regularly schedule inspection of the operator has verified the violation issue no longer exists. The process of correcting a NOPV will require the Inspector to document the corrective actions taken by the operator to correct the deficiency and actions taken by the Inspector to verify corrective actions. This can be in the form of a Report, O&M Plan review report, or updating the NOPV Status form. The Inspector will also obtain the original NOPV form from the [state pipeline safety agency] files and note on the form that the NOPV issue has been corrected as well as the date of verification. The entire package containing the NOPV notification form, NOPV letter, NOPV status form if applicable, and corrective action report shall be submitted to the Program Manager. The Program Manager will review all documentation to determine if acceptable actions have been taken and the violation can be removed or corrected. If the corrective actions are acceptable to the Program Manager the entire package will be provided to the Pipeline Safety Program Administrator for appropriate documentation and filing. V. Issues Identified Page 22 of 36#
Attachment 1, passage 789Example Pipeline Safety Program Plan Occasionally, an Inspector may observe conditions or operating practices that are not violations at the time, but could, if not corrected, result in a future violation or an unsafe situation. On those occasions, the inspector should verbally inform the operator of the potential problem, and also include the issue in the Report or Post Inspection Memorandum. A copy of the report will be provided to the operator after review by the Pipeline Safety Program Manager. If the Inspector uses the Issues Identified in lieu of a noncompliance form for minor violations, it should only be used after considering all potential public safety concerns (risk) and the action being taken by the operator to correct the problem. Minor Violation Examples: A record keeping error when an item of maintenance was not properly recorded, but which presents no immediate safety problem unless a set series of events would occur to the gas system operation. An operational or maintenance deficiency, which may involve equipment or facilities, not used as the primary safety protection for the pipeline. A deficiency that is not considered unsafe, but has never been formally addressed before with operator. An issue brought to the attention of the Inspector by the operator prior to the inspection. The Issue Identified option should only be used after the inspector has considered all safety concerns and the operator's past performance for correcting apparent violations. Page 23 of 36#
Attachment 1, passage 790Example Pipeline Safety Program Plan VI. Investigation of Incidents The PHMSA State Guidelines, section 5.1.3 requires that state agencies have written procedures that provide for methodical, systematic, comprehensive, and consistent investigation of incidents and accidents. This section contains examples of administrative procedures which provide State agencies with additional specificity regarding PHMSA’s expectations for the level-of-detail appropriate in such procedures. A. Background The [insert State agency name] enforces safety standards for the transportation in [insert State name] of hazardous liquid and/or natural and other gas by pipeline pursuant to the [insert State statute]. The State agency has adopted and maintained rules establishing minimum safety standards that are at least as inclusive, as stringent, and compatible with the minimum safety standards adopted by the Secretary of Transportation under the Federal Act. The State agency’s Pipeline Safety Program conducts on-site inspections of the approximately [xxx] gas operators to determine compliance with all applicable federal and/or state regulations. Inspectors monitor operator records concerning inspection, operation, maintenance, emergency procedures, and construction. Inspectors also conduct field inspections of operator facilities to verify compliance with regulations covering design, construction, operation and maintenance of the pipeline facilities. Under the State agency’s certification agreement with the U.S. DOT, the State agency must investigate all incidents involving operator procedures or facilities resulting in (1) death, (2) injury requiring hospitalization, or (3) property damage in excess of $50,000. Additionally, incidents which do not satisfy one of these three thresholds may be investigated if the circumstances are unclear or if staff believes operator procedures or facilities may have contributed to or caused of the incident. Where uncertainty exists, inspections are done. B. General Procedures Pipeline owners and operators are required to report all incidents which are the result of gas leaking from their facilities and which resulted in death, personal injury requiring in-patient hospitalization, or property damage of $50,000 or more. Additionally, gas system owners and operators must inform the Pipeline Safety Program of incidents which do not meet these criteria, but may be important to communicate for other reasons (media attention, explosions not involving natural gas, location, etc.). When the Pipeline Safety Program is notified of such incidents, we must decide if (1) an investigation is required (three criteria above, except property damage limit for an investigation is $50,000), (2) not required but prudent, or (3) unnecessary. The Pipeline Safety Program’s role in accident investigations is to determine the cause of the incident, or probable cause, and make recommendations, which will prevent a recurrence. When it appears that a safety violation contributed to the incident, the Pipeline Safety Program may make recommendations to the State agency for enforcement actions in the form of show cause hearings and probable penalty assessment. The scope of the investigation, therefore, is important to provide assurance that the findings, recommendations and follow-up activities contribute to public safety. The initial response involves deciding whether to make an immediate inspection, a delayed inspection Page 24 of 36#
Attachment 1, passage 791Example Pipeline Safety Program Plan or no inspection at all, who should make the inspection, and who should be informed. The scope of an investigation involves deciding which staff will participate, the initial activities, and then, with preliminary results in hand, developing a plan and schedule for completing the investigation and report. (Reference Codified State Requirement if applicable), the pipeline operator is required to give telephonic notice of all incidents caused from gas escaping from pipeline facilities resulting in property damages exceeding $50,000, injury requiring overnight hospitalization, or a fatality. The State agency has established a Pipeline Safety Emergency Line for the reporting of incidents, the number is (xxx) 555- 5555. The line is monitored 24 hours a day, 365 days a year, by Pipeline Safety Program staff during working hours and a contracted answering service on nights, weekends and holidays. The answering service takes the message and then calls the Pipeline Safety Program Manager, or, in his absence, the assigned Inspector. This is usually done within an hour of the incident. The operator is immediately contacted for more detailed information. An hour is usually not enough time for a pipeline operator to complete all the inspections and testing of gas system facilities to confirm whether their facilities are or are not involved in a reported incident. Although additional information may not be available at the time, a communications link is established to keep Pipeline Safety Staff informed as information becomes available. Each incident is different, but the information surrounding each incident must be analyzed to determine whether an on-site inspection is necessary. This analysis is based on Federal reporting criteria, operational knowledge of the facilities and experience in these matters. If it is immediately evident that the probable cause of the incident was not on gas company facilities or there is indication that arson is involved, we would only investigate if the operator requests assistance. Incidents involving customer inside piping go beyond our jurisdictional responsibility and therefore do not require us to investigate. Generally, operators notify Pipeline Safety Staff of all incidents, whether or not they meet one of the aforementioned three criteria, which require reporting (the threshold for property damage is $50,000 for reporting purposes). This is done as a courtesy to give us prompt notice, to inform us of media coverage and is a safe approach to reporting. Ultimately, we decide, based on the information received, whether it is necessary to visit the site. The Pipeline Safety Program is not designed to be a front line responder. The Pipeline Safety Program serves a monitoring function. Our accident investigations are designed to ensure that the gas system operator has conducted a thorough investigation into the circumstances surrounding any incident and, based on that information, the gathering of evidence from on-site inspections and from other sources, including fire and arson investigators, to determine the probable cause of an incident. To make better use of time and resource, and allow the operator time to gather the needed documentation, Pipeline Safety Staff’s response may be delayed for a few days. An example of this would be an incident caused by excavator damage to a pipeline resulting in property damage. When Pipeline Safety does decide to investigate an incident, the purpose is to determine the cause, or probable cause, as required by the Federal Pipeline Safety Act for certification, and to make Page 25 of 36#
Attachment 1, passage 792Example Pipeline Safety Program Plan recommendations for improvements and corrections. If an investigation reveals evidence of wrongdoing, or violation of the [insert State statute], Pipeline Safety Staff may proceed with informal hearings, or recommend formal show-cause actions including civil penalties, whichever is deemed appropriate. Pipeline Safety Staff then monitors the operator’s corrective actions in response to the recommendations, and any noncompliance issued resulting from the incident, through follow-up inspections. The Pipeline Safety Program Manager will assign an Inspector to investigate any incident deemed to qualify as a requirement as reportable under State or Federal law. If it is a major incident involving several injuries or fatalities, more than one Inspector may be assigned to investigate. Depending on the magnitude of the incident the Pipeline Safety Program Manager may coordinate the on-site investigation. The operator may be required to perform a root cause analysis of the incident in certain situations. Examples of such situations are: Staff determines that the operator has done a poor evaluation of the incident cause. Staff does not agree with the incident cause stated by the operator. Staff does not agree with NTSB conclusions (if applicable). In some instances, incidents may be reported but no on-site investigation may be warranted upon receipt of additional information. In those instances, a memo to the Incident File will be created documenting the reason(s) that an on-site investigation was not conducted. C. Initial Issues to Note in Response to an Incident Report 1. Operator responsibility for reporting. 2. Death, or injury requiring hospitalization, damage level. 3. Scope of Incident 4. Decision to send staff to Incident site. 5. Communicating with appropriate State agency, PHMSA, and NTSB individuals if necessary. 6. Internal (agency) communication of incidents/staff response. 7. Other. D. Incident Investigation Process and Scope 1. On-site inspection of company facilities. 2. Review of company records (odorant levels, leak calls, etc.). 3. Interviews. 4. Coordination with others (OSFM, NTSB, fire, police et al.). 5. Determination of cause/probable cause. 6. Review preliminary findings. 7. Schedule. 8. Report preparation. Page 26 of 36#
Attachment 1, passage 793Example Pipeline Safety Program Plan 9. Staff’s Standard Operating and Enforcement Procedures, specifically Accident Investigations. 10. Awareness of the possibility of litigation. 11. Other. E. Telephone Notification Pipeline owners or operators are required to report to the State agency all accidents which result from gas leaking from gas distribution and transmission facilities and which caused death, personal injury requiring hospitalization, or property damage of $50,000 or more. Under our certification agreement with U.S. Department of Transportation, the State agency is required to investigate and report on all accidents resulting in death, personal injury requiring hospitalization, or property damage of $50,000 or more. [List any other applicable state issues here] The gas distribution system does not include fuel line or appliance piping inside the building. F. Specific Investigation Issues - All Incidents/Accidents All incident investigations should be completed using Incident Investigation Checklist – See Appendix C. The information collected should include, but not necessarily limited to the following items. The checklist should encourage a more thorough investigation. 1. Record the location, city, street and number, date and time, occupant name(s), name(s) of injured and/or fatalities and estimated amount of property damage. 2. Nature of accident - explosion, fire, rupture, etc. 3. Indicate cause - third party, human error, etc. 4. Date and time of notification to the company, how received, who received and who reported. 5. Time company personnel arrived at the location. 6. Conditions found at time of arrival. 7. Action taken by company personnel. 8. If gas was escaping, time and method of securing. 9. Take photographs, including close ups of any exposed gas facilities and buildings involved. It is recommended that you record the sequence of photos taken as you proceed, identifying the pictures and what you wish to depict. 10. Statements of company personnel, public and private witnesses and/or investigating or responding parties who may have information relative to the accident. 11. Determine apparent cause if determination probable cause cannot be made. (A statement that a certain piece of equipment failed is not the cause; determine what caused the failure of the particular piece of equipment). Utilize the accident investigation guide (checklist) as applicable. 12. Statement of investigation activities and recommendations for prevention of future occurrence. G. Additional Issues, If Required 1. Make a drawing of the area showing the boundaries of gas in the ground and the degree Page 27 of 36#
Attachment 1, passage 794Example Pipeline Safety Program Plan of the leaking gas from the point of the leak. Show bar-hole pattern description, location of pipes, buildings and streets. 2. Copies of pressure charts of the portion of the system involved. 3. Age, size and type of facilities involved, location and condition of isolation valves. 4. Corrosion control records and odorant test records. 5. Leakage survey data of area involved - dates, number and class of leaks and disposition. 6. Leak and repair history of facilities in the surrounding area. 7. If third party damage, location and marking data, time of request for location, time and method of marking. 8. Inspection and maintenance program relative to facilities involved and degree of compliance. 9. Metallurgical analysis. 10. Pressure test records. 11. Pipe and material specifications, welding and welder qualification data. 12. New construction specifications, contractor or company installation. 13. Description of metal break with respect to: a) Displacement and what may be the cause - measure angle and state plane of maximum deflection. b) Degree of parting. c) Evidence of corrosion, pitting, wall thickness uniformity, pipe coating. d) Shear or tensile break or combination. There is the possibility of litigation in all accidents, and you may be called as a witness. With this in mind, your report should contain the facts as you find them and your conclusions should be supported by accurate documentation. Our role in accident investigations is to determine the probable cause of the accident, if possible, and make recommendations, which will prevent recurrence. Accurate documentation should support any determination made. It is recommended that the inspector use the PHMSA incident investigation form. Page 28 of 36#
Attachment 1, passage 795Example Pipeline Safety Program Plan Appendix A – Operator List [insert operator list] Page 29 of 36#
Attachment 1, passage 796Example Pipeline Safety Program Plan Appendix B – Example Risk Based Inspection Prioritization Model for Gas Transmission To prioritize gas transmission operators using a risk-based approach, a set of risk factors have been developed based on existing data readily obtained from gas operator annual reports, incident reports, leak history data, and semi-annual performance metrics. The methodology is based on the following factors: Actual events that have occurred on an operators system. Pipeline characteristics that could indicate a potential to impact HCAs. Historical operator performance in areas related to pipeline integrity. Some of the indices are indicators of the likelihood of accidents and some relate to the potential consequences of accidents. The algorithm used to calculate each index is designated accordingly. Index #1: Releases That Resulted in Major Impacts Data on actual events that have occurred on an operator’s pipelines can be found in both the Incident Report and the Annual Report. The Annual Report requires the operator to report leaks. An incident report is required to be submitted to PHMSA if there is a release of gas from a pipeline and: There have been fatalities, or There have been injuries requiring in-patient hospitalization, or There has been property damage exceeding $50,000, or The event is significant, in the judgment of the operator, even if it did not meet any of the other criteria. The inputs to the model from Incident Reports submitted by an operator are: The number of incidents in the past three years that have resulted in fatalities. The number of incidents in the past three years that have resulted in injuries that required inpatient hospitalization. The number of incidents in the past three years that have resulted in property damage reported to OPS. The number of incidents in each of these three categories is then multiplied by a weighting factor assigned to fatalities, injuries, and property damage. The weighting factors used are: Fatalities - 10 Injuries but no fatalities - 7 Property damage only (no injuries or fatalities) – 2 Total pipeline mileage is used to normalize the incident data, since large systems will likely have more incidents than smaller systems. A comparison of the relative integrity performance among operators is therefore normalized based on total system mileage (unitized to 1000). Index #2: Releases That Resulted in Minor Impacts Releases that result in minor impacts are leaks that are below the threshold that would trigger an incident report. Leaks do not result in fatalities or injuries or in significant property damage. The Gas Annual Report requires that leaks be reported by cause. The data from available annual reports is used in the risk-based prioritization methodology. The parameters to be input into the model from the Gas Annual Report are: Page 30 of 36#
Attachment 1, passage 797Example Pipeline Safety Program Plan The number of leaks caused by corrosion. The number of leaks caused by natural forces. The number of leaks caused by excavation. The number of leaks caused by other outside forces. The number of leaks caused by material and welds. The number of leaks caused by equipment and operations. The number of leaks caused by “other” causes. The weighting factor for all leaks is 1. This maintains the relative importance of leaks compared to incidents which have higher weighting factor multipliers. Total pipeline mileage is again used to normalize the leak data. This index is related to the likelihood of leaks occurring in the future based on past performance. Index Group #3: Pipeline Characteristics Indicative of Relative Risk The Gas IM Semi-Annual Performance Metrics Report and the Annual Report require each gas operator to report on pipeline characteristics that are directly related to the potential for a pipeline to impact an HCA. The Gas IM Semi-Annual Performance Metrics Report requires the operator to report total pipeline miles, total HCA miles, miles assessed, number of immediate repairs performed, and number of scheduled repairs performed. The Annual Report requires the operator to report the number of miles for a range of pipe diameters; the number of miles by age of the pipeline; the number of miles of steel pipe that are cathodically protected versus unprotected; and the number of miles in each category that are bare versus coated. All of these parameters can be correlated to the potential for an operator’s pipelines to impact an HCA. The higher the number of HCA miles, the greater the potential for an HCA to be impacted. A high number of immediate repairs could reflect a deteriorated pipeline condition and a correspondingly higher likelihood for HCA impact. Bare, unprotected steel pipe is at a higher risk of corrosion than is coated, cathodically protected pipe. Large diameter pipe results in a greater Potential Impact Radius (PIR) than does smaller diameter pipe at the same MAOP, reflecting a larger area of potential impact. The period in which a pipeline was constructed and the pipe manufactured is indicative of the type of seam weld and reliability of the manufacturing process, as well as the likelihood of injurious defects existing in the pipe. Index #3.1: Total Covered Segment Mileage The input into the risk model from the Gas IM Semi-Annual Performance Metrics Report is total HCA miles. Covered segment mileage in a pipeline system is directly proportional to the likelihood of (exposure to) high consequence incidents. Index #3.2: Immediate and One-Year Repairs Made An immediate repair is expected to be the exception rather than the rule. Immediate repairs may be indicative of deteriorating pipeline integrity. The input into the risk model from the Gas IM Report is: Number of Immediate Repair Conditions (NIRC) Number of Scheduled Repair Conditions (NOYRC) In addition, covered segment mileage with completed assessments is used to normalize the repair data, since operators with many completed assessments will likely have reported more repairs than operators with fewer Page 31 of 36#
Attachment 1, passage 798Example Pipeline Safety Program Plan completed assessments. A comparison of the relative integrity performance among operators is thus based on total covered segment mileage that has been assessed (unitized to 1000 total pipeline miles). Scheduled repairs are weighted 1/10 the value of immediate repairs. Index #3.3: Diameter of Pipe The pipeline in an operator’s system is usually of various diameters. The Potential Impact Radius (PIR) is directly proportional to the diameter of the pipe. Large diameter pipe is therefore assumed to pose a higher potential risk than is smaller diameter pipe. Pipeline diameter, by miles, is reported by the operator in the annual report. The ranges reported are >28 inch, >20 to 28 inch, >10 to 20 inch, >4 to 10 inch, 4 inch or less, and unknown. The inputs into the risk model from the Annual Report and the associated assigned weighting factors are: The number of miles of pipe >28 inch ........................ 10 The number of miles of pipe >20 inch to 28 inch ......... 8 The number of miles of pipe > 10 inch to 20 inch ........ 4 The number of miles of pipe >4 inch to 10 inch ........... 2 The number of miles of pipe 4 inch or less ................... 1 The number of miles of pipe of unknown size ........... 10 The index score assigned is based on the ratio of miles of pipe in a given diameter range to the total miles of pipe in an operator’s system. The index is then the sum of the index score for each populated range. Pipe of unknown diameter is conservatively assumed in the model to be in the > 28-inch range. Index #3.4: Age of Pipe Pipe materials and manufacturing techniques have improved steadily over time. Older pipe was generally manufactured with lower quality materials and under less strict quality control methods than those used in later years. Pipelines constructed before 1970 could have flash welded, lap welded, or Low Frequency ERW seams that are known to be less reliable. Pipelines constructed from 1970 to the present day were primarily constructed using High Frequency ERW, Single and Double Submerged Arc Welds, Spiral Welds, or are seamless. In addition, older pipe has had more time to develop defects such as corrosion, coating deterioration, CP interruptions, undetected instances of third party damage, outside forces due to soil instability or ground movement, etc. The inputs into the risk model from the Annual Report and the associated assigned weighting factors are: The number of miles constructed in the period 2000-2009 ................ 2 The number of miles constructed in the period 1990 – 1999 .............. 5 The number of miles constructed in the period 1980 – 1989 .............. 5 The number of miles constructed in the period 1970 – 1979 .............. 5 The number of miles constructed in the period 1960 – 1969 .............. 8 The number of miles constructed in the period 1950 – 1959 .............. 8 The number of miles constructed in the period 1940 – 1949 .............. 8 The number of miles constructed in the period pre 1940 ................. 10 The number of miles of unknown construction period. ..................... 10 Pipe of unknown construction period is conservatively included in the highest risk category. The index scores are calculated from the ratio of the number of miles constructed in a given time period to the total systemPage 32 of 36#
Attachment 1, passage 799Example Pipeline Safety Program Plan miles. Index #3.5: Coating and Cathodic Protection Cathodic protection of steel pipe is critical in preventing metal loss and the potential for pipeline leaks or failures due to corrosion. The Annual Report contains data on the external corrosion protection of steel pipe and the amount of cast iron pipe. The inputs into the risk model from the Annual Report and the associated assigned weighting factors are: The number of miles of cast iron pipe ................................................ 10 The number of miles of bare, unprotected steel pipe ........................ 10 The number of miles of coated, unprotected steel pipe ...................... 5 The number of miles of bare, cathodically protected steel pipe ......... 4 The number of miles of coated, cathodically protected steel pipe. ..... 2 The index scores are calculated based on the ratio of the number of miles in each category to the total number of miles of pipe. Index #3.6: Excavation Activity The amount of excavation activity along the right-of-way is an indicator of third-party risk. An index has been included for excavation activity that is the normalized ratio of location-requests per 1000 services. The operator’s ratio of excavation damages to excavation “one-call” notifications can be to national or regional averages to evaluate the effectiveness of their damage prevention activities. Risk Index #4: Historical Performance An index has been included that allows the State program manager to input a “Letter Grade” that represents an estimate of the performance of an operator. Several parameters should be considered that might reflect an operator’s historical performance in areas that are related to overall safety and integrity management. These include enforcement actions taken, and the State’s experience with an operator’s integrity and compliance performance. The possible grades range from 1 to 10, with 1 being assigned to the best performing operators and 1 assigned to the worst performing (riskiest) operators. Final Relative Risk Score There are 5 statistical indices that are indicative of the relative likelihood of incidents. They are indices 1, 2, 3.2, 3.4 and 3.5. Each index is weighted equally. There are 2 statistical indices indicative of the relative consequences of incidents. They are indices 3.1 and 3.3. The principal factor is HCA mileage (item 3.1) which is weighted by the score for pipe diameter (item 3.3). Using the classical definition of Risk = Likelihood x Consequences, the resulting risk score using operator statistics is based on the following equation: Risk Index = [Index 1 + Index 2 + Index 3.2 + Index 3.4 + Index 3.5] * [(Index 3.1)(Index 3.3)] The total risk score based on operator statistics is further refined based on the State’s experience using the historical integrity and compliance performance factor (overall risk index 4), as follows: Adjusted Relative Risk = Risk Index * Index 4 This adjusted relative risk score can be compared among operators as an aid to prioritizing inspections. This Page 33 of 36#
Attachment 1, passage 800Example Pipeline Safety Program Plan relative risk model is summarized in Table 1, below. Summary The example risk methodology presented above utilizes easily retrievable data from existing reports that are required to be submitted to PHMSA by pipeline operators. Excel spreadsheets have been created into which the data from these reports is input and which then calculate an operator-specific relative risk factor that can be used to aid in developing an Inspections Priority List. The risk algorithm and related weighting factors can be fine tuned based on experience. Adjustments could include expansion of the types of data analyzed, adjustments to the normalization scale, adjustments to the weighting factors, etc. Page 34 of 36#
Attachment 1, passage 801Example Pipeline Safety Program Plan Risk Index – Data Used – Source of Data (TTM) - Total Transmission Miles (THM) - Total HCA Miles (BAM) - Total HCA miles with completed Baseline Assessments (TMM) – Total Miles Distribution Main (TNS) – Total Number of Services (TSM) – Total System Miles Index #1: Incident History (use latest PHMSA Incident Report Data) (F) - Fatalities (previous 3 years) (I) Injuries (previous 3 years) (P) Number of Incidents w property damage (previous 3 years) TABLE 1 TTM THM BAM TMM TNS TTM + TMM Weighted Incident totals 10(F) 7(I) 2(P) Risk Index Calculation Index #1 (Incident History) = Index #2: Cause of Leaks (use latest annual report) (Lc) - Number of leaks caused by corrosion (Ln) - Number of leaks caused by natural forces (Le) - Number of leaks caused by excavation (Lo) - Number of leaks caused by other outside forces (Lm) - Number of leaks caused by material and welds (Lop) - Number of leaks caused by equipment and operations (Lother) - Number of leaks caused by "other" 10(F) + 7(I) + 2(P) Normalized per 1000 miles (Lc)/(TSM/1000) (Ln)/(TSM/1000) (Le)/(TSM/1000) (Lo)/(TSM/1000) (Lm)/(TSM/1000) (Lop)/(TSM/1000) (Lother)/(TSM/1000) Index #2 (Cause of Leaks) = Index #3.1: HCA mileage (use IMP performance metrics report) = Index #3.2: Repairs (Ri) - Number of Immediate Repairs (all baseline assessments) (Rs) - Number of Scheduled Repairs (all baseline assessments) (Lc+Ln+Le+Lo+Lm+Lop+Lother)(TSM) THM Weighted and Normalized per 1000 miles of completed assessments (Ri)/(BAM/1000) 0.1(Rs)/(BAM/1000) Index #3.2 (Repairs) = Index #3.3: Diameter of Pipelines (use most recent annual report) (M0) - Number of miles of pipe with diameter 4 inch or less (M4) - Number of miles of pipe with diamter >4 inch to 10 inch (M10) - Number of miles of pipe with diameter >10 inch to 20 inch (M20) - Number of miles of pipe with diameter >20 inch to 28 inch (M28) - Number of miles of pipe with diameter >28 inch (Mu) - Number of miles of pipe with unknown diameter (Ri+ 0.1Rs)/(BAM/1000) Scored as a weighted % of total system miles 1(M0)/TSM 2(M4)/TSM 4(M10)/TSM 8(M20)/TSM 10(M28)/TSM 10(Mu)/TSM Index #3.3 (Size) = Index #3.4: Age of Pipelines (use most recent annual report) (Au) - Number of miles of pipe constructed in an unknown time period (A39) - Number of miles of pipe constructed pre 1940 (A49) - Number of miles of pipe constructed in period 1940-1949 (A59) - Number of miles of pipe constructed in period 1950-1950 (A69) - Number of miles of pipe constructed in period 1960-1969 (A79) - Number of miles of pipe constructed in period 1970-1979 (A89) - Number of miles of pipe constructed in period 1980-1989 (A99) - Number of miles of pipe constructed in period 1990-1999 (A09) - Number of miles of pipe constructed in period 2000-2009 (1(M0) + 2(M4) = 4(M10) + 8(M20) + 10(M28) + 10(Mu))/TSM Scored as a weighted % of total system miles 10(Au)/TSM 10(A39)/TSM 8(A49)/TSM 8(A59)/TSM 8(A69)/TSM 5(A79)/TSM 5(A89)/TSM 5(A99)/TSM 2(A09)/TSM Index #3.4 (Age) = Index #3.5: Coating & CP (use most recent annual report) (Ic) - Number of miles of cast iron pipe (Bu) - Number of miles of bare unprotected steel pipe (Cu) - Number of miles of coated, unprotected steel pipe (Bp) - Number of miles of bare, cathodically protected steel pipe (Cp) - Number of miles of coated, cathodically protected steel pipe (10(Au+A39) + 8(A49+A59+A69) + 5(A79+A89+A99) + 2(A09))/TSM Scored as a weighted % of total system miles 10(Ic)/TSM 10(Bu)/TSM 5(Cu)/TSM 4(Bp)/TSM 2(Cp)/TSM Index #3.6: Excavation activity (use most recent annual report) = (LOC) – Number of locate requests Index #4: Historical Operator Performance Subjective input of inspectors Index #3.4 (Age) = (10(Ic)+10(Bu) + 5(Cu) + 4(Bp) + 2(Cp))/TSM Normalized per 1000 services LOC/(TNS/1000) State inspector subjective input 1 (best) to 10 (worst) Likelihood Index Total = Consequence Index Total = Index #1 + Index #2 + Index #3.2 + Index #3.4 + Index #3.5 + Index #3.6 Index #3.1 * Index #3.3 Page 35 of 36#
Attachment 1, passage 802Example Pipeline Safety Program Plan Overall Risk Index Total = Adjusted Risk Index Total = (Likelihood Index) (Consequence Index) (Overall Risk Index) (Index #4) Appendix C – Forms [insert forms, checklists, inspection aides, etc.] Appendix D – Operator Contact List [insert operator contact list] Appendix E – Federal Statute [insert copy of federal statute] Appendix F – Federal Regulations [insert copy of federal regulations] Appendix G – State Statute [insert copy of state statute] Appendix H – State Regulations [insert copy of state regulations] Page 36 of 36 Guidelines for States Participating in the Pipeline Safety Program Appendix T 1 WMS Training Links and Resources IM Notifications Assign Lead Person/Supervisor(s) Create New Task Investigation Closing Pipeline Asset Management Manage Unit in WMS WMS and IU Mod Tool Create Unit PAM Policy March 2018 Changes WMS and IU Mod Tool Modify Unit Update Unit in the WMS WMS and IU Mod Tool Split/Merge Unit WMS and IU Mod Tool Activate Unit SRCR Request Closure Closure Lead Person Data Review and Follow-Up WMS Overview, Effort, and User Management WMS Overview WMS Activities Create and Edit SRCR in WMS Assign Lead Person/Supervisor(s) to SRCR Effort in the WMS WMS User Management 2#
Attachment 1, passage 803WMS Inspection and Enforcement Parallel Stage and RSI NOPCAO, CAO, NOPSO IA Plan Approved Stage IA Locked and Issue Batching Create NOA Create NOPV WMS Enforcement Model Guides in SharePoint WMS Stakeholder Inquiry 3 Link to Video in MS Streams WMS Stakeholder Inquiry Stakeholder Inquiry Video Index Link to Video in YouTube return to Topics 0:00 – Introduction and basic navigation 10:06 – Inquiry tab (Task completion) 0:40 – Program Support worklist explained 11:27 – Effort tab (Always Program Support Phase) 1:23 – Activities Tab explained 12:16 – Recipient review task Completion 1:41 – Creating a new Activity 12:05 – RELEASE LOCK! 3:07 – Who What Where tab explained 12:23 – Program Support Worklist 3:50 – Assets table 13:04 – Closing Activity (and Supervisor Approval) 4:41 – Staff table 14:22 – Refresh button 5:00 – Contacts 15:02 – Show completed button(s) 8:58 – Notes, Documents, Effort quick review 15:14 – All Search(s) explained 9:17 – Tasks tab (due date explained) 4#
Attachment 1, passage 804Link to Video in MS Streams WMS Inspection and Enforcement Create NOPV Video Index Link to Video in YouTube return to Topics 0:00 – Introduction 5:27 – Request Approval 0:27 – Case development worklist whittle 6:09 – Legal Review 0:47 – Issues tab 7:37 – CPF Approvers (Approve CPF) 1:06 – Request PCP (greyed out) 8:14 – Send Letter task completed (Commit CPF) 1:37 – Refresh button 9:06 – Enforcement tab (Commit CPF) 1:49 – Request PCP 9:42 – Regulator Comments 2:50 – PCP Incomplete task (tasks tab) 10:13 – Event History 4:12 – PCP Determination finished (Approve PCP) 10:22 – NOPV button (greyed out) 5 Link to Video in MS Streams WMS Inspection and Enforcement Create NOA Video Index Link to Video in YouTube return to Topics 0:00 – Introduction 6:19 – Request review “batched data v. uploaded” 0:27 – Issues Tab 6:56 – Review complete 0:47 – NOA Items (Order &) 7:33 – Issues Tab (Request Approval) 1:02 – Issue ID 7:55 – CPF Approvers role explained 2:44 – Refresh Button 8:40 – Tasks tab (Approve CPF) 2:59 – Letter templet pop-up 9:59 – Tasks tab Letter Mailers (Send Letter) 3:41 – Export to word 10:48 – Tasks tab (Verify CPF) 4:38 – Violation Report 11:15 – Issues tab (Verify CPF) 5:26 – Request review 6#
Attachment 1, passage 805Link to Video in MS Streams WMS Inspection and Enforcement IA Locked and Issue Batching Link to Video in YouTube return to Topics 0:00 – Video Introduction 4:38 – Documents tab (preview of evidence docs) 0:31 – Navigating to the Activities tab 4:44 – Altering Inspection phase dates 0:59 – Inspection tab (IA Connected YES explained) 5:11 – Issues tab (View list) “Supervisor Review” 2:10 – All enforcement sent? Check box explained 7:20 – Issues tab (View list) “Improper Code Cite” 2:42 – Issues tab (issues pulled from IA explained) 7:50 – Issues tab (Specify Compliance Type and Letter type) > Issue ID 3:00 – Tasks tab (Initial Case development task) 9:40 – Issues tab SAVE button 3:57 – Effort tab (Case development phase) 7#
Attachment 1, passage 806Link to Video in MS Streams WMS Inspection and Enforcement IA Plan Approved Stage Video Index Link to Video in YouTube return to Topics 0:38 – Navigating to the Activities tab 3:33 – Inspection tab (IA Connected YES explained) 0:50 – Who What Where tab explained 4:14 – Planning Complete date explained 1:35 – Tasks tab (Tasks explained) 4:44 – Altering Inspection phase dates 2:35 – Effort tab 5:14 – Inspection End date (see IA Locked video) 3:00 – Inspection tab (IA Connected NO explained) 8 Link to Video in MS Streams WMS Inspection and Enforcement NOPCAO, CAO, NOPSO Link to Video in YouTube return to Topics 0:00 – Introduction 4:39 – Corrective Measures 0:40 – Navigation and screen description 5:35 – Effort Tab 0:58 – Actions Tab Create NOPSO 6:20 – Enforcement Coordinator (Commit CPF) 2:15 – CPF Number 7:47 – Commit CPF (Enforcement Tab) 2:33 – Tasks tab (Letter Mailer) 8:10 – Regulator Comments 4:09 – Tasks tab (Verify CPF 9:10 – Due Process 9#
Attachment 1, passage 807WMS Inspection and Enforcement Parallel Stage and RSI return to Topics Link to Video in MS Streams Link to Video in YouTube 0:00 – Introduction and basic navigation 11:12 – Recipient review task on Tasks tab 0:48 – Find an Activity through Activity Search 12:16 – Recipient review task completion 1:17 – Activity locked by another user 12:42 – Review completed 2:30 – Who What Where tab explained 14:30 – Case development worklist 3:39 – Tasks tab 14:45 – RSI tab for a sent RSI 4:00 – Effort tab 15:20 – Reviews complete, Time to send the Letter 4:50 – Inspection tasks explained 15:42 – CPF Approvers 6:00 – RSI types and required fields explained 16:00 – Letter mailers 8:00 – Export to word 16:18 – Operator Monitor 9:30 – Request review “Modern Times” 17:08 – Reason for workflow “Tracking” 10:12 – Request review “batched data v. uploaded file” 10#
Attachment 1, passage 808WMS Overview, Effort, and User Management Effort in WMS return to Topics Link to Video in MS Stream Link to Video in YouTube 0:00 – Introduction 5:26 – Adding time from Effort tab 0:17 – Navigation and scenario 6:05 – Magnifying glass 1:30 – Entering effort in an Activity 7:00 – Red exclamation mark explained 2:30 – Effort comments 8:26 – Activity categories (bucket) 2:50 – Save button and multiple reporting 10:11 – Recap (time in buckets) 3:57 – Effort tab (all effort) 11:10 – Inspection time (not in buckets) 11 Link to Video in MS Streams WMS Overview, Effort, and User Management WMS User Management Link to Video in YouTube return to Topics 0:00 – Introduction and basic navigation 5:08 – Remove last user 0:27 – User Management tab 5:45 – User Management Tasks explained 0:35 – Roles/Special Powers/Tasks xls. 5:56 – Supervisor Arriving 1:02 – User Management special power 6:36 – Complete Task (importance) 1:44 – Export roles 7:41 – Staff Leaving 2:39 – Supervisor change 9:05 – Change Lead Person 3:55 – Change Roles 9:50 – Configure New Staff 4:50 – Populate Role Change 12#
Attachment 1, passage 809Link to Video in MS Streams WMS Overview, Effort, and User Management WMS Activities return to Topics Link to Video in YouTube 0:00 – Introduction and basic navigation 7:33 – Related Activities 0:27 – Tasks Tab (task summary) 8:00 – Notes Tab 0:57 – Program Support 8:37 – Documents Tab 1:47 – One person at a time 9:33 – Tasks tab 2:36 – Editable activity 9:52 – Tasks tab (Create task) 3:30 – Activity tabs explained 11:00 – Task tab (Complete task) 3:41 – WWW explained in detail 11:28 – Task tab (Change task) 5:00 – Assets table (adding Units) 12:00 – Refresh Button 6:18 – Activity Staff table 15:14 – Search tab (Activity & Task Search) 13 Link to Video in MS Streams WMS Overview, Effort, and User Management WMS Overview return to Topics Link to Video in YouTube 0:00 – Introduction and basic navigation 6:40 – Search tab (Unit search) 0:27 – Worklists explained 7:32 – Search tab (Activity search) 1:23 – Ongoing failure investigation worklist 8:25 – Search tab (Save search) 2:15 – Refresh button and show completed 9:05 – Search tab (Task search) 3:38 – Activities tab (My Activity) 9:40 – Reports tab 4:45 – Activities tab (Create Activity) 10:04 – User Management tab 14#
Attachment 1, passage 810Link to Video in MS Streams SRCR Closure return to Topics Link to Video in YouTube 0:00 – Introduction and basic navigation 2:50 – Tasks tab 0:32 – Investigation worklist 3:10 – Disapprove Closure requested task 0:57 – SRCR activity opened 4:10 – Closure requested (closing) 1:24 – Notes tab (mandatory) 4:43 – Refresh button 2:00 – Investigation tab (one Unit) 15 Link to Video in MS Streams SRCR Request Closure return to Topics Link to Video in YouTube 0:00 – Introduction and basic navigation 2:50 – Notes tab 0:17 – Investigation worklist 2:58 – Tasks tab (Request Closure) 0:40 – Summary of Corrective Action 3:38 – Lead Person tasks closure 1:02 – Updating Staff table 4:02 – Release Lock 2:04 – Investigation tab (Investigation Unit ID) 16#
Attachment 1, passage 811Link to Video in MS Streams SRCR Lead Person Data Review and Follow-up Link to Video in YouTube return to Topics 0:00 – Introduction and basic navigation 5:40 – Creating Notes 0:40 – Investigation worklist 6:46 – Investigation tab 0:47 – Release Lock explained 7:45 – Investigation tab (Unit ID) 1:42 – WWW tab explained 9:10 – Tasks tab (Investigation) 2:23 – WWW tab (Assets table) 11:00 – Assign another person 17 Link to Video in MS Streams SRCR Assign Lead Person/Supervisor(s) to SRCR Link to Video in YouTube 0:00 – Introduction and basic navigation 3:29 – Tasks tab 0:35 – Investigation worklist 3:47 – Complete task 1:14 – Activity opens 4:25 – Release lock and Refresh Button 2:05 – Activity staff table return to Topics 18#
Attachment 1, passage 812Link to Video in MS Streams SRCR Create and Edit SRCR in WMS Link to Video in YouTube return to Topics 0:00 – Introduction and basic navigation 4:05 – Add assets 0:40 – Activity Tab (Create SRCR) 5:25 – Documents tab (inclusions) 1:23 – Always a Region 6:12 – Investigation tab 1:41 – Submitter email (one-shot) 6:36 – RELEASE LOCK! 3:07 – Lead Regulator (corrections) 7:19 – Updating an SRCR 19 Pipeline Asset Management WMS and IU Mod Tool Split/Merge Unit return to Topics Link to Video in MS Streams 0:00 – Introduction and basic navigation 6:05 – IU Mod Tool Split New 0:40 – Initiate Manage Unit 8:03 – Modification Notes (Split) 1:02 – Splitting Unit 9:00 – Map Layers (County Boundaries) 4:37 – Merging Unit(s) 10:05 – Submit for Final Mapping 20#
Attachment 1, passage 813Pipeline Asset Management WMS and IU Mod Tool Modify Unit return to Topics Link to Video in MS Streams 0:00 – Introduction and basic navigation 4:30 – NPMS Mileage Change IU Mod Tool 0:29 – Initiate Manage Unit 6:00 – Opened IUMT task 0:57 – Modify Unit from Task 6:35 – Search tab in IUMT 1:23 – Assign to Inspector 7:15 – Modification Notes 2:22 – NPMS question explained 8:11 – Submit for final mapping 3:14 – Components tab 21 Pipeline Asset Management WMS and IU Mod Tool Create Unit return to Topics Link to Video in MS Streams 0:00 – Introduction and basic navigation 6:21 – Opening a Create New task 0:19 – Initiate Manage Unit 7:11 – Mapping a Create new 1:27 – Create Unit task 7:55 – Create Modification Note 1:51 – Primary tab (asterisks) 9:12 – Latitude-Longitude in IUMT 3:02 – Contacts tab 10:25 – Submit for final mapping 3:50 – Logging into IU Mod Tool 22#
Attachment 1, passage 814Pipeline Asset Management WMS and IU Mod Tool Activate return to Topics Link to Video in MS Streams 0:00 – Introduction and scenario 4:59 – Signing into IU Mod Tool 0:24 – Initiate Manage Unit 6:01 – Map builds for Activate 1:25 – Activate Unit (Show Inactive) 6:56 – Create Modification Note 2:32 – NPMS question (explained) 7:44 – Submit for final mapping 3:02 – Contacts tab 23 Link to Video in MS Streams Pipeline Asset Management Update Unit in the WMS Link to Video in YouTube return to Topics 0:00 – Introduction 9:15 – Command buttons explained 0:20 – Key documents in SharePoint 10:42 – Refresh button 1:46 – Manage Unit vs. Update Unit 11:28 – Initiate Update Unit task 3:07 – Landing in the WMS 14:05 – Adding a contact 4:06 – Primary tab explained 15:18 – All tabs explained 4:45 – History tab explained 16:47 – Date of Operational Change explained 5:32 – Components tab explained 18:10 – NPMS question explained in detail 6:42 – Contacts tab explained 21:00 – Updating a Unit through search 7:35 – Required fields 24#
Attachment 1, passage 815Link to Video in MS Streams Pipeline Asset Management Pipeline Asset Management Policy March 2018 Changes Link to Video in YouTube return to Topics 0:00 – Introduction 22:00 – Contacts tab 0:21 – SharePoint and policy location 22:20 – Inspection tab 1:14 – Unit data policy additions 22:30 – States/Counties tab 1:50 – Policy Introduction redlines 24:20 – Components tab (2.2.6) 2:30 – Definitions 29:13 – Facilities 4:30 – Policy and roles 34:10 – Unit Data Updates (2.4) 8:35 – Unit Data Overview (in WMS) 36:10 – Search and magic pencil 9:15 – Accessing the WMS 40:00 – IU Mod Tool and NPMS (2.5) 10:35 – Primary Tab (2.2.1) in DETAIL 41:21 – Inspection System Data (2.6) 25 Link to Video in MS Streams Pipeline Asset Management Manage Unit in WMS Link to Video in YouTube return to Topics 0:00 – Introduction 9:10 – Reassign task 0:17 – System generate emails 9:44 – Update Unit from Search 0:30 – Logging into WMS 10:52 – Update Unit vs. Manage Unit 1:38 – Initiate Manage Unit task 11:52 – Adding Unit contacts 2:29 – Accessing Manage Unit worklist 12:42 – States and Counties tab 3:37 – Create new Unit 13:00 – Components tab 5:27 – Assign to Inspector 13:38 – History tab explained 6:20 – Components tab 13:56 – Attachments tab explained 8:22 – Manage Unit task from System 26#
Attachment 1, passage 816Link to Video in MS Streams IM Notifications Closing return to Topics Link to Video in YouTube 0:00 – Introduction and navigation 2:49 – Complete Task 0:27 – Review available tabs 3:05 – Closure Requested 1:09 – Summary of Corrective Actions 4:38 – Disapproving task 1:36 – Investigation Tab (Notification Status) 4:56 – Adding new Supervisor 2:14 – Tasks Tab 6:51 – Close IM Notification 27 Link to Video in MS Streams IM Notifications Create New Task Link to Video in YouTube return to Topics 0:00 – Introduction 0:53 – Searching Task Owner 0:19 – Tasks tab (Create Task) 1:30 – Due Date and Comments 28 Link to Video in MS Streams IM Notifications Investigation return to Topics Link to Video in YouTube 0:00 – Introduction and basic navigation 5:40 – Notes Tab 0:40 – Email and navigation 6:42 – Documents Tab 1:23 – Release Lock defined 7:15 – Recipient review task Completion 1:41 – Who What Where tab explained 8:26 – RELEASE LOCK! 3:07 – Assets table full explanation 29#
Attachment 1, passage 817Link to Video in MS Streams IM Notifications Assign Lead Person/Supervisor(s) Link to Video in YouTube return to Topics 0:00 – Introduction 1:51 – Summary of incoming documents 0:17 – Alert email 2:31 – Assign a Lead and Supervisor 0:27 – Logon and open activity 3:36 – Tasks tab (complete task) 1:02 – Activity Interface Description 4:26 – RELEASE LOCK! 1:44 – Who What Where tab explained 30 Guidelines for States Participating in the Pipeline Safety Program Appendix U December 2022 Transferring 2022 data to 2023 – State Inspection Calc Tool 1) Access the State Inspection Calc Tool from the link in the PHMSA portal. 2) Click Load to access 2022 data. 3) Select the operator datasheet you would like to review. The most current year (2022) will appear and there should be an “N” in the review column. “Y” indicates already done. 4) Click Review to begin the review/transfer process.#
Attachment 1, passage 8185) Make the necessary changes (if any) to the 2022 data. Make sure you are inserting comments into the risk concerns/considerations - 6) Click Save As 2023 to complete the transfer from 2022 to 2023. Note: If the Review button is clicked and the transfer to 2023 is not completed by clicking the Save As 2023 button prior to closing the sheet, the changes will not be saved. The sheet will then need to be loaded, saved to 2023, re-loaded and edited as a 2023 entry. State Inspection Person-Day Calculation Tool Overview and Example Purpose • The State Inspection Person-Day Calculation Tool is an online interface where states enter data to determine the appropriate level of inspection person-days for their state. • Additional information can be found in section 4.1 of the Guidelines for States Participating in the Pipeline Safety Program. 2#
Attachment 1, passage 819Overview • The tool provides spreadsheet templates for each operator under the jurisdiction of a state program. • Each template collects: – General information about an operator – The number of inspection person-days required to effectively audit that operator – The interval at which inspections need to be conducted – A relative risk ranking of the operator’s pipe 3 Overview • The tool provides templates for nine different operator types: – Local Distribution – Municipal Gas – Master Meter – Liquefied Petroleum Gas (LPG) – Gas Transmission – Liquefied Natural Gas (LNG) – Hazardous Liquid – Gathering – Other (Anhydrous, Carbon Dioxide, Ammonia, etc.) 4 Overview • Once an operator type is selected, the tool provides a list of inspection types which could be applicable to that operator. • The state then enters the number of inspection person-days required to do each type of inspection effectively and the optimum inspection interval (in years). 5#
Attachment 1, passage 820Walk-Through • The tool can be accessed through the PHMSA Portal at: http://portal.phmsa.dot.gov/PHMSAPortal2 7 • Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features Walk-Through • Login using your PHMSA provided username and password. http://portal.phmsa.dot.gov/PHMSAPortal2 8 • Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features Walk-Through • Review the disclaimer. 9 Walk-Through • Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features • Select “State Inspection Calculation Tool” from the navigation pane on the left. 10#
Attachment 1, passage 821• Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features Walk-Through • The Tool is laid out as follows. 11 Roles - Use the drop down menu to select between different modes. Options: - State – Use this mode to enter data about your state’s inspection plan (default setting). Sheet will be locked to the current year and state. - Read Only – Use this mode to review data from other states or years. 12 State and Reporting Year - Displays current state and reporting year when using the “Read Only” role. - These fields are locked on the current state and reporting year by default. 13#
Attachment 1, passage 822Single vs. Multiple Operator Radio Buttons - Switches the current sheet between a single operator layout and a summary sheet for multiple operators. - States should enter data for individual operators whenever possible. The multiple operator summary sheet should only be used when a large number of operators are inspected under the same plan and it would be impractical to enter data for each individual (for example: Master Meter Operators). 14 Operator Name and ID - Enter the Name and Operator ID for the current operator. - The fields are equipped with auto- complete and search functionality. When you begin typing in the name field a drop down will appear showing known registered operators. Entering an OPID first then clicking “Search” will find the operator name automatically. 15#
Attachment 1, passage 823Operator Type - Use to select from one of the nine operator types available. - Each operator type results in a specific list of inspection types that could apply to that operator. 16 Size of Operator - This value attempts to capture the size of the operator. The value required will change based on the operator type selected. - For example: - LDCs are measured by number of services - Transmission operators are measured by miles of pipe - For a summary of multiple operators this field becomes a range (for example: 1 to 100 service lines). 17 Save Sheet, Load Sheet, New Sheet - Use these buttons to save data, load previously entered data or create a new sheet respectively. - Create a new sheet for each operator inspected under your state program. - Once data entry is complete use the save button to save your progress. - Data can be recalled and edited after it is saved by using the load button. 18#
Attachment 1, passage 824Report - Use this button to download a report showing a sum of inspection person- days for all of the operators within each state. - Inspection Person Days per Year total from the report should match the number of inspections a state’s inspectors should perform in one year. 19 Main Data Entry Spreadsheet - This is the area where inspection data is entered. - Click on a cell to select it. - Cells only accept whole numbers and decimals. - Entering fractions, words, formulas, etc. will lock your cursor in the cell until a valid number is entered. 20 Main Data Entry Spreadsheet - On the left is a list of inspection types which could be conducted for the selected operator type. - The inspection types are locked based on the type of operator selected; they can not be edited. - If any one of the inspection types is not applicable to your states inspection plan you should enter zeros (0) in that row. 21#
Attachment 1, passage 8252 Main Data Entry Spreadsheet - The “Person-Days to do Each Inspection” column should be used to enter the total number of inspection person-days required to completely perform the inspection type shown in the first column, regardless of the time taken to perform said inspection. - For example: If it takes one inspector four half- day inspections over 3 years to complete an entire audit of standard procedures, a “2” should be entered in the first row. 22 Main Data Entry Spreadsheet • If filling out a summary sheet for multiple operators, be sure to enter inspection data for one operator only. • Summary sheet data represents what it will take on average to inspect a single operator in the grouping, not all of the operators as a whole. 23#
Attachment 1, passage 8262 2 Main Data Entry Spreadsheet - The “Optimum Inspection Interval” column should be used to enter the interval, in years, that the inspection cycle should be completed at under the state inspection program. - For example: If a standard procedure review for the operator is conducted every two years a “2” should be entered in the first row. 24 Main Data Entry Spreadsheet - Totals are calculated automatically. - Use totals to verify that the values entered make sense. 25 High Risk Pipe Ranking - Considering the characteristics of the operator’s pipe, assign a value from one to ten to represent its perceived risk. - A one represents very little risk, ten represents extremely high risk. - For operators with higher risk pipe, the number of inspection person-days should generally be higher relative to a like operator with lower risk pipe. 26#
Attachment 1, passage 827Listing of Risk Concerns - Use the “Listing of Risk Concerns” field to describe the risk considerations used to determine the optimum inspection intervals. - For example: If risk concerns for one operator include aging infrastructure, third party damage and corrosion issues then inspectors should be allocated to that operator differently than one with new plastic pipe and an effective one- call program. 27 Other Unique Considerations - Use this field to describe any other attributes that affect the amount of time it takes to inspect this operator. Include anything that may be unique to your state. - For example: Travel time between the operator’s facilities causes the inspection to take longer than it would for other similarly sized operators. 28#
Attachment 1, passage 828Walk-Through • Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features • Click the “New” button to create a new sheet. 29 • Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features Walk-Through • If entering data for a single operator: 1) 2) 3) 4) Select the “Single Operator” radio button Enter the name of the operator Enter the operator’s ID number Select the appropriate operator type from the drop down menu 5) Enter a value to represent the size of the operator 30#
Attachment 1, passage 829• Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features Walk-Through • If entering data for a summary of multiple operators with the same inspection requirements: 1) Select the “Multiple Operators” radio button 2) Provide a name for the operator grouping 3) Enter the number of operators in the grouping 4) Describe the grouping in the “Comment” field 5) Select the appropriate operator type from the drop down menu 6) Enter a range which captures the grouping of operators 31 • Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features Walk-Through • Enter the required inspection person days and optimum inspection interval for each type of inspection according to your state’s inspection plan. • Enter zeros (0) in both columns if an inspection type does not apply to the operator. 32#
Attachment 1, passage 830• Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features Walk-Through • Ensure that values appear accurate in the “Totals” Cells. • The total in the “Person days to do each Inspection” column represents the total number of inspection person -days necessary to completely inspect that operator, regardless of the time frame of the inspections. • The total in the “Total Person-Days per Year” column represents the total number of inspection person-days spent inspecting that operator every year. 33 Walk-Through • Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features • Use the save button to save your progress or a completed sheet. 34#
Attachment 1, passage 831• Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features Walk-Through To recall previously saved data: 1) 3) Ensure that any progress has been saved 2) Press the “Load” button Click on an operator from the pop-up list 35 • Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features Walk-Through To recall previously saved data: 1) 3) Ensure that any progress has been saved 2) Press the “Load” button Click on an operator from the pop-up list 36 • Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features Walk-Through • To delete previously saved data: 1) Recall the data using the “Load” button 2) Press the delete button and confirm • To review data in read-only mode (including data entered by other states): 1) Use the “Roles” drop down menu to select “Read Only” mode 2) Use the “Load” button to recall data - Data from all states will be displayed - Data will be locked to prevent editing 37#
Attachment 1, passage 832Walk-Through • Login • Accessing the Tool • Overview • Creating a New Sheet • Entering Data – Single Operator – Summary of Multiple Operators • Saving Data • Recalling Data • Additional Features • To view a summary of the total inspection person days for all operators, a report can be downloaded using the “Report” button. • The report can be used to verify that the numbers entered make sense. 38 Questions and Comments Contact: • Rex Evans • Karl Baker - phone: (217) 801-8014 - email: rex.evans@dot.gov - phone: (860) 827-2661 - email: karl.baker@ct.gov 39 Instructions for NAPSR Users to Update Account Information Tools within the PHMSA Portal require information about a user’s home state to control access to data. Because of the way some users were added to the Portal, this information may not be available. If you are able to log-in but are only able to view data in read-only mode, please follow the steps below: 1. Click the link below to access the Portal login screen: http://portal.phmsa.dot.gov/PHMSAPortal2 2. Enter your username and password, then click “Login”. 3. Review the disclaimer.#
Attachment 1, passage 8334. Click User Profile located under Resource Management in the menu that appears at left. 5. Enter any missing information, then click “Update Profile”. 6. Click “Logout” in the upper right hand corner of the window. 7. Click “Close”. 8. Repeat steps 1-3, to log back into the portal.#
Attachment 1, passage 834Appendix V State Pipeline Program Performance Metrics Introduction On September 26, 2011 the National Transportation Safety Board (NTSB) issued a series of safety recommendations resulting from the September 9, 2010 natural gas incident at San Bruno, California involving the facilities of Pacific Gas & Electric. The Pipeline and Hazardous Materials Safety Administration (PHMSA) was issued several recommendations as part of this communication. As a result of Safety Recommendation P-11-20 a task group was formed in cooperation with PHMSA and the National Association of Pipeline Safety Representatives (NAPSR) to address NTSB concerns. The NTSB recommendation P-11-20 asked PHMSA to: Work with state public utility commissions to (1) implement oversight programs that employ meaningful metrics to assess the effectiveness of their oversight programs and make those metrics available in a centralized database, and (2) identify and then correct deficiencies in those programs. The task group formed consisted of Subject Matter Experts (SME) from NAPSR and PHMSA which met in February, April and September of 2013. The team looked at various possible performance measures that could assess the various state oversight programs and came up with the attached six performance metrics through group consensus. While developing the performance measures the following primary elements were considered: • Is the performance metric measurable? • Is the performance metric data driven? • Is the metric essential to helping meet the goal of zero incidents and zero unintentional releases? • Is the metric meaningful and an essential component to an effective safety program? Once the six consensus metrics were identified, each metric was outlined and the following elements were developed: • Description of Metric • Why the metric is important • Data Sources – where data will come from • Other Unique Considerations • Potential Accelerated Actions – Actions a state can take to improve performance • Report output information – how data will be compiled for analysis The results have been made available on the PHMSA Pipeline Safety Stakeholder Communication website at the following link: http://primis.phmsa.dot.gov/comm/states.htm#
Attachment 1, passage 835Description of Metric Why this Metric is important Data Sources Unique Considerations Potential Accelerated Actions (AA’s) Report output information Performance Metric One: Damage Prevention Program This metric shows pipeline damages per 1000 locate tickets. This measure has been established as an industry benchmark on performance of damage prevention programs Excavation damage is the leading cause of natural gas distribution pipeline incidents, and a leading cause of other pipeline incidents, nationwide. A critical step in preventing excavation damage is for the excavator to notify pipeline operators of intent to excavate at a specific location. This is normally done by the excavator calling a one-call center. The one-call center then issues a locate ticket to inform pipeline operators and other underground utility operators with facilities located near the planned excavation activity. The pipeline operators can then locate and mark the location of their pipelines and otherwise communicate with the excavator as necessary to prevent damage to the pipelines. The number of excavation damage occurrences per 1,000 locate tickets is an established benchmark within the damage prevention industry and an important indicator of damage prevention program performance. However, note that variations among state laws regarding locate ticket size and scope, along with the length of time a locate ticket is valid, will limit any state to state comparison of this metric. The data for this metric will be taken from a summary of each states distribution operator annual reports. (Form PHMSA F 7100.1-1 Part D) This metric does not include data from transmission operators or liquid operators due to availability of data. • State damage prevention program (laws) enhancement • Public Awareness program enhancement (i.e. seminars, websites) • Stakeholder communications (i.e. coordinating councils etc.) • One-call center interaction • Active one-call law enforcement (i.e. training, fines etc.) • Active enforcement of 192.614/195.442 • Identification of damage reason by operator – (i.e. hand digging, no locate, etc.) • Drill down by operating area of each operator Average per 1000 shown by bar graph on a trend by year by state#
Attachment 1, passage 836Performance Metric Two: Inspection Activity Description of Metric This metric shows level of inspection effort by each state program. This data will show inspection days per combined miles of distribution, gathering and transmission lines. Why this Metric is important Regulator inspection time with each pipeline operator is vital in identifying compliance issues and gaining knowledge about the condition of the operator’s systems. Measurement of the level of inspection activity by the state program is based on the number of inspection days per combined miles of distribution (including mains and service lines), gathering and transmission lines. Measurement of the level of inspection activity spent on master meter and small liquid propane gas (LPG) system operators is shown separately, where applicable, as those operators are handled individually by each state due to various unique considerations. Data Sources State program progress report and mileage from annual reports (pipeline data mart) Unique Considerations This primary metric will not include inspection time spent on master meter/small LPG inspections due to lack of mileage data available. Master Meter/Small LPG operators are handled by each state on an individual basis due to unique considerations. Potential Accelerated Actions (AA’s) • Hire and train additional staff • Utilize current staff more efficiently if needed • Inspect operators/inspection units more frequently based on individual risk factors (i.e. age of system, population density, operator history, etc.) Report output information Inspection person-days/mileage by bar graph on a trend by year by state Inspection person-days/master meter-small LPG unit by bar graph on a trend by year by state#
Attachment 1, passage 837Performance Metric Three: Inspector Qualification Description of Metric This metric shows level of training and experience of each state program’s inspection staff. Why this Metric is important PHMSA rates each state’s inspector qualification program based on the levels of training and experience of the program’s inspection staff. The level of training and experience of inspectors directly impacts the quality of pipeline inspections performed. For the ratings, PHMSA looks at three separate attributes, including the percentages of the state’s inspection staff that have: 1) successfully completed the core pipeline safety training program; 2) successfully completed additional training addressing topics such as Integrity Management, Welding, and Failure Investigations; and, 3) five or more years of inspection experience. “Additional Training” primarily consists of detailed PHMSA-provided training relating to conducting integrity inspections and understanding the methods and processes used in integrity management programs. Data Sources Annual state program progress reports and PHMSA TQ training transcripts Unique Considerations This metric also considers retention of inspectors Potential Accelerated Actions (AA’s) • Obtain additional outside training • Accelerate TQ training • Provide competitive compensation/benefits for retention • Agency support of travel to training • Succession planning • Refresher training • Develop in-house training Report output information This will be a bar chart showing the following information – • Percentage of inspection staff that have completed core training. • Percentage of inspection staff that have received all additional training (Integrity Management, etc.) • Percentage of inspection staff that have at least 5-years’ experience.#
Attachment 1, passage 838Description of Metric Why this Metric is important Data Sources Unique Considerations Potential Accelerated Actions (AA’s) Report output information Performance Metric Four: Leak Management This metric shows total leaks repaired per mile, total leaks per mile and total leaks outstanding per mile for each state. Leak management is measured by the total number of leaks repaired per mile, the total number of hazardous leaks repaired per mile, and the total leaks scheduled for repair per mile for gas distribution systems in each state. This provides an overview of the status of gas distribution pipeline systems in each state and the efforts to locate, evaluate, and repair and mitigate leaks. The data for this metric will be taken from a summary of each states distribution operator annual reports. (Form PHMSA F 7100.1-1 Part D) Various major catastrophic events could skew results • State will need to analyze each operator and by leak cause • Encourage systematic and accelerated replacement programs • DIMP program analysis • Additional leak surveys • Leak classification requirements • Trending analysis by operator • Interaction and sharing of data acquired by state with operators • Additional state regulations Data per mile will be shown by bar graph.#
Attachment 1, passage 839Performance Metric Five: Enforcement Description of Metric This metric demonstrates the effectiveness of the state’s regulatory enforcement program Why this Metric is important Effective state enforcement programs and processes are necessary to ensure all operators are in compliance with all applicable pipeline safety regulations. The effectiveness of the State agency’s pipeline safety efforts depends on information obtained through inspections and evaluation of operator compliance. Each State agency must have a current written plan for its pipeline safety program. An important aspect of any State agency’s compliance program involves the gathering of the necessary evidence for documenting noncompliance. Subsequent to each inspection, any findings should be documented and include an account of the situations encountered during the inspection and a copy of the inspection checklist. The documentation must identify and describe each regulation with which the operator is believed to be in noncompliance. Copies of relevant operator records, statements from operator personnel, photographs, calculations, and all other data pertaining to each issue of noncompliance should be made a part of the documentation. This metric demonstrates the effectiveness of the state’s regulatory enforcement program. It is based on PHMSA’s annual evaluation of the state’s enforcement program, with review of the state’s records and procedures. The state’s performance is measured against the percentage of possible score that the state could achieve. Data Sources Annual state program evaluation with review of state records and procedures Unique Considerations There may be issues with various operator types and sizes. Alternative punitive actions may be considered by each state. (other than civil penalties) Potential Accelerated Actions (AA’s) • Automatic adoption of federal regulations • More stringent state regulations • Effective monitoring and supervision of enforcement process (i.e. documentation and follow-up) o Effective follow-up of corrective action related to regulation violations communicated to operators quantified by a ratio of corrected violations/outstanding violations at the end of each calendar year • Agency support on enforcement actions and policy • Adoption of federal civil penalty limits if needed • Self-identification process for operators • Analyze operator violations for repeat occurrence Report output Bar chart based on total points received information#
Attachment 1, passage 840Performance Metric Six: Incident Investigation Description of Metric This metric demonstrates the effectiveness of the state’s incident investigation process Why this Metric is important State agencies must have effective incident investigation processes and must conduct investigations of each significant or reportable incident/accident involving a jurisdictional pipeline facility. The primary objective of the investigation activity is to minimize the possibility of recurrence and to institute enforcement actions where noncompliance with the safety standards has occurred. Effective incident investigation processes are also necessary to ensure operators have and effectively implement emergency response procedures and make continuous improvements to their emergency response programs. This metric demonstrates the effectiveness of the state’s incident investigation process. It is based on PHMSA’s annual evaluation of the state’s program, with review of the state’s records and procedures. It is measured against the percentage of possible score that the state could achieve, and is measured separately for hazardous liquid and natural gas pipelines. Since individual states sometimes experience a limited number of pipeline incidents, they may not conduct a full incident investigation in a given calendar year. In these years, evaluation of a state’s incident investigation performance may be limited to evaluation of the procedures the state has in place. Data Sources Annual state program evaluation with review of state records and procedures Unique Considerations Some states may have a limited amount of incidents and we would only be able to evaluate procedures in place. Potential Accelerated Actions (AA’s) • Tabletop exercises • Share and analyze incident reports from other states with stakeholders • All staff additional training (i.e. fire schools, root cause analysis training etc.) • Periodic communication with operators and other stakeholders on lessons learned from other incidents. Report output Bar chart based on total points received information#
This material provides agency context. It does not replace binding regulatory text, and its legal effect depends on the underlying authority and facts.