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AAU/NASULGC Letter to OMB on Proposed Revisions to A-21
October 11, 2002
Mr. Gilbert Tran Re: Proposed revisions to Office of Management and Budget (OMB) cost principles - Circulars A-21, A-87, and A-122 (Federal Register, August 12, 2002). Dear Mr. Tran: We write on behalf of the Association of American Universities and the National Association of State Universities and Land-Grant Colleges to express our concern over OMB's proposed changes to Circular A-21 as part of OMB's effort to simplify the cost principles in that circular and two others (A-87 and A-122), and to make the descriptions of similar cost items consistent with one another where possible. We understand that OMB embarked upon this effort to comply with Public Law 106-107, the Federal Financial Assistance Management Improvement Act of 1999. That statute directs the executive branch to streamline and simplify the application, reporting, and administrative procedures for Federal financial assistance programs. We find that, while the August 12 proposal includes some changes that are positive, overall it fails to simplify grant-making procedures for universities. Indeed, in several respects, it will make grant management more cumbersome for universities, introducing additional requirements for agency approval, audits, and accounting procedures that are not now in the Circular. As such, we find the changes to be inconsistent with the statutory requirements of P.L. 106-107. We appreciate OMB's statement that: "OMB has not attempted to change the policy in any of the circulars. However, in the effort to make the language more consistent, some unintended changes in policy may have been made. OMB encourages comments on any proposed changes that could be construed as changes to current policy."(Federal Register, p. 52559) We believe that policy changes are included, in ways that are harmful. The Council on Governmental Relations (COGR) has provided substantial detail on these inappropriate policy changes. AAU and NASULGC support the letter submitted to you by COGR, and we want to particularly highlight several items. To begin with, we are concerned about the many added requirements where prior approval of the awarding agency must be granted (e.g., concerning foreign travel costs, publication costs, and pre-award costs). In this area as in others, it is not appropriate to make Circular A-21, governing grants to educational institutions, conform with the other two Circulars, which govern grants to state, local and Indian tribal governments and grants to non-profit organizations, respectively. We are also very concerned about the effects of the change in allowability of interest costs (Item 22). Under this proposed change, interest costs would only be allowable on debt incurred after July 1, 1982 for acquisition, replacement or renovation of capital assets if a lease-purchase analysis is (or was) performed. However, under current Circular A-21, the lease-purchase analysis requirement comes into effect only for debt incurred after May 8, 1996. This section would have the effect of making currently allowable interest costs unallowable, which is a very large policy change. We concur with COGR when they state that "we presume these two proposed revisions were unintended; however, if correct as stated, we object in the strongest terms possible to such a material change in policy." We hope that OMB will carefully consider the issues raised in this letter and the COGR letter, and that this proposal will be substantially rethought, through dialogue with the affected communities, before it becomes final. We offer our assistance in any manner that would be helpful. Thank you for your attention to our concerns. Cordially,
Nils Hasselmo
C. Peter Magrath
cc: Mark W. Everson, Deputy Director for Management
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