Contracts with Nonprofit Organizations
FAR Subpart 31.7 requires nonprofit organizations to follow federal cost principles (OMB Circular A-122/2 CFR Part 230) when charging costs to government contracts, ensuring only allowable, reasonable, and properly documented expenses are reimbursed.
Overview
FAR Subpart 31.7 establishes the cost principles and procedures applicable to contracts with nonprofit organizations. It outlines the purpose, general rules, and specific requirements for determining the allowability of costs incurred by nonprofit organizations under government contracts. This subpart ensures that costs charged to the government are reasonable, allocable, and consistent with the principles set forth in OMB Circulars and other federal guidance. The subpart references the use of OMB Circular A-122 (now codified at 2 CFR Part 230) as the primary guide for cost allowability, and it requires both contractors and contracting officers to adhere to these standards when negotiating and administering contracts with nonprofit entities.
Key Rules
- Purpose (31.701)
- Defines the scope and intent of the subpart, focusing on cost principles for nonprofit organizations.
- General (31.702)
- Establishes that OMB Circular A-122 (2 CFR Part 230) governs cost allowability for nonprofit organizations, except where otherwise stated in the contract.
- Requirements (31.703)
- Details the specific requirements for applying cost principles, including documentation, consistency, and adherence to federal guidance.
Responsibilities
- Contracting Officers: Must ensure contracts with nonprofits comply with applicable cost principles and verify cost allowability.
- Contractors: Nonprofit organizations must follow OMB Circular A-122/2 CFR Part 230 and maintain adequate documentation for all claimed costs.
- Agencies: Oversee compliance and provide guidance on cost principle application.
Practical Implications
- This subpart exists to ensure federal funds are used appropriately and only allowable costs are reimbursed.
- It impacts daily contract administration by requiring strict adherence to federal cost principles and documentation standards.
- Common pitfalls include inadequate documentation, misunderstanding of allowable costs, and failure to follow OMB guidance.