Welcome to Feldesman's Grants Practice Shorts series where we discuss helpful tips and strategies in common areas of federal grant management. Be sure to check out our other installments on our Grants Practice Shorts page.
The Uniform Guidance Property Standards set forth key management restrictions on property that is acquired or improved with federal funds. See 2 C.F.R. §§ 200.200.310 − 200.316. We discuss these requirements in turn. Last week, we discussed "use restrictions." This week, we address "management requirements." Next week, we will cover "disposition."
Management Requirements − Real Property
According to the Property Standards, grantees must generally submit reports at least annually on the status of real property acquired or improved with federal funds. If the federal interest in the property (explained last week) extends fifteen (15) years or longer, then the federal awarding agency (or pass-through entity) may instead require that the grantee report on the status of the real property on some multi-year basis. § 200.329.
Management Requirements – Equipment
The Property Standards require grantees to: (1) maintain property records on federally funded equipment that include: a description of the property, its identification number, its titleholder, source of funding, acquisition date and cost, percentage 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; (2) take physical inventory of the property and reconcile results with the property records at least once every two years; (3) develop a control system to ensure adequate safeguards to prevent loss, damage, or theft of the property; and (4) develop maintenance procedures to keep the equipment in good condition. § 200.313(d).
Management Requirements – Supplies
Although the Uniform Guidance does not specify the manner in which grantees must manage supplies acquired under a federal award, to the extent practicable, it is best practice for grantees to develop and maintain records of such supplies in a form and manner that safeguards the supplies from loss or damage and reasonably accounts for federal and non-federal shares in overall inventories. § 200.314. As we will discuss with respect to disposition next week, the awarding agency may have an interest in residual inventories at the end of a project.
Liens on Federally-Funded Property – Notice of Federal Interest
For real property or equipment that is subject to a federal interest, grantees are sometimes required to file a Notice of Federal Interest ("NOFI"). § 200.316.
Although a federal interest exists independent of any documented NOFI, the NOFI puts the world of interested buyers of the property, as well as lenders, on notice of the government's interest. It helps avoid the transfer of the property's title to a third party, or constitution of a mortgage, easement or any other type of encumbrance or limitation on the owner's property right in favor of a third party who is unaware of the federal interest (termed a "bona fide purchaser" ("BFP")), because transfer to a BFP may interfere with the federal government's direct property interest. When acquiring or improving property with federal funds, it is a best practice for grantees to confirm with their funder whether filing a NOFI is a condition of the grant and whether funder prescribed specific NOFI forms, as well as filing same in the appropriate local land or property records office. Often, the notice of funding opportunity ("NOFO") or resulting notice of award ("NOA") / grant agreement will provide for specific agency NOFI requirements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.