000 Introductory Material

001: Introduction

Grant, Contract & Gift Accounting Manual
Section 000: Introductory Material
Effective: 02/01/2004
Revised: 4/23/2012

The Grant, Contract & Gift Accounting Manual (GCG) is intended to assist OSU personnel who work with the financial aspects of sponsored awards; including principal investigators, project directors, accountants, and others.   The GCG policies and procedures apply to all university personnel and are to be used harmoniously with all other OSU Policy & Procedure Manuals when specific procedures are required by a sponsored agreement.   The GCG Manual is maintained by the Office of Post Award Administration.

The Office of Post Award Administration, a division of the Office of Business Affairs, is responsible for the proper administration of sponsored awards to Oregon State University.  The Office of Post Award Administration works with the Office of Sponsored Programs , the sponsoring agency, the principal investigator or project director, and Business Center’s to set up sponsored award  funds, invoice funding entities, monitor fund transactions to ensure that expenditures are allowable and within budget constraints, and close out the fund at project end.

The GCG Manual assists in accomplishing several important tasks:

  1. Ensure the proper administration of sponsored agreements.
  2. Ensure compliance with all applicable state and federal regulations.
  3. Properly identify costs for reporting and Facilities & Administrative (F&A) rate determination.
  4. Properly report all funds received by OSU.
  5. Provide financial monitoring and reporting for sponsored agreements.
  6. Prepare required financial reports and invoices for receipt of sponsored funds.
  7. All sponsored agreements are set up in FIS Banner. The degree of deviation allowed by the sponsoring agency varies widely from complete discretion by the project director to requiring agency approval for all changes. The reporting of expenditures also varies in the amount of detail required and the frequency of the reports.

The Office of Post Award Administration staff assists Business Centers in complying with federal guidelines, such as those published by the Office of Management and Budget (OMB), general federal policies regarding the use of funds and proper management procedures, and specific agency rules and regulations.  State regulations, such as rules for purchasing and travel, also must be applied to sponsored award expenditures.  In addition, special conditions incorporated into each award document must be carefully followed.  Additional service information and procedures may be found on the Business Affairs website

Corrections, changes, or suggestions for the GCG manual should be communicated to the GCG Manual Coordinator or the Office of Post Award Administration at: 541-737-4711.

In the event of an inconsistency or conflict, applicable law and State Board of Higher Education policies supersede university policies and university policies supersede college, Business Center or lower unit bylaws, policies, or guidelines.

The University reserves the right to add, amend, or revoke any of the contained rules, policies, regulations, and instructions or incorporate additional ones, with or without notice, as circumstances or the good of the university community may require.

002: Definitions

Grant, Contract & Gift Accounting Manual
Section 000: Introductory Material
Revised: 03/09/2004

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A

Account Code

The third element of a FOAPAL accounting string used to identify specific financial transactions. Account codes define the type of activity taking place, such as revenues, expenses, and transfers in the Operating Ledger, and assets, liabilities, and fund balances in the General Ledger.

Accountable Property

Property acquired for a current sponsored project that has not been released unconditionally to Oregon State University (OSU).

Affiliated Foundation

Supports the activities of the institution and must be approved by the president of the institution. OSU affiliated foundations are Oregon State University Foundation and Agricultural Research Foundation.

Agency-Owned Property

Property owned by a federal agency and furnished (on loan) for a specific project.

ACH (Automated Clearinghouse)

This is a method of electronically moving funds from bank to bank, similar to a wire transfer. ACH is available for domestic transactions only.

Allocable Costs

Goods or services that are chargeable or assignable to a particular project.

Assets

Cash, receivables, inventories, investments, land, buildings and equipment, intangibles, prepaid expenses, and anything that has a value of property or economic benefits that are owned.

Asset Tag

A permanent identifying label or decal attached to a piece of equipment. Federally-owned equipment also requires a “Property of U.S. Government” tag.

Award

Funds provided from an external sponsor for support of a project at OSU. This term is used for both original awards and supplements; it can mean monies or equipment.

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B

C

Capital Value

The original purchase price of the item or fair market value at the time of donation, loan, lease, or construction.

Closing of the Books

A process completed at fiscal year end to close all revenue and expense accounts and add net income or loss to fund balance. An additional fiscal period (accrual period 14) is opened in July for any adjustments needed after the last regular fiscal period is closed. No changes can be made to the financial records in FIS for the fiscal year after closing.

Close-Out

Completing the reporting and financial requirements of a sponsored agreement. This includes deliverables, technical reporting and patent reporting.

Compliance - Financial

Act of ensuring that expenditures are made and posted in accordance with all applicable laws, regulations, policies, procedures and sound business practices.

Conflict of Interest

Outside professional activities of faculty are encouraged but the level and type of engagement must avoid ethical and legal conflicts of interest and commitment. Conflicts of interest cover a range of situations, such as placing the financial interests of an outside organization or individual ahead of those of the university, attempting to influence a university decision that would benefit a company in which the faculty member has a financial interest; and directing students in research that is devised principally to serve the faculty member’s outside consulting interests. Conflicts of commitment covering such areas as the level of time and creative energy devoted to consulting, compromises the faculty commitment to university responsibilities and expectations. Sponsored program proposals submitted to the National Science Foundation or the Public Health Service require specific disclosures of all significant financial interests.

Contract

An agreement for services to be performed by an organization for the awarding agency.  Contracts are generally specific about the objectives, direction, specifications, costs, or methods of performance. A contract requires substantial involvement between the awarding agency and recipient during performance of the research.

Contractor-Acquired Property

Property acquired by OSU, which is purchased with sponsored project funds.

Cooperative Agreement

An agreement that provides for a mutual undertaking by the awarding agency and other parties to perform esearch. Both parties take part in the project and are mutually interested in the aims and benefits, even though there may be a difference in the scope of that interest.

Cost Accounting Standards Board (CASB)

A rule-making body established by Congress. CASB has issued four (4) cost accounting standards that apply to educational institutions and have been incorporated into Office of Management and Budget (OMB) Circular A-21 “Cost Principles for Educational Institutions.”  See GCG 104-07: Cost Accounting Standards Guidelines.

Cost Transfer

An adjustment or transfer of expenditures to or from an externally funded contract or grant account.  See GCG 209-08: Cost Transfers/Redistribution.

Cost Accounting Standards (CAS) Disclosure Statement (DS-2)

The Disclosure Statement is designed to disclose all relevant cost accounting policies and procedures. The statement is detailed and provides necessary information to document compliance with Cost Accounting Standards (CAS). Information in the statement is comprehensive; sections include: general information, direct costs, indirect costs, depreciation and use allowance, other costs and credits, deferred compensation and insurance costs, and central system or group expenses. The disclosure statement requires certification “under the penalty of perjury,” the same type of certification required by Circular A-21 for the Facilities and Administrative Rate Proposal. This statement covers all accounting policies related to sponsored projects, beginning with the proposal and including the recording of costs and the final reporting on the project.

The Disclosure Statement must be submitted and approved by OSU’s Federal Cognizant Agency, the U.S. Department of Health and Human Services (DHHS). OSU’s DS-2 was approved August 31, 1998 and revisions have been submitted since that time. See http://oregonstate.edu/fa/businessaffairs/costanalysis/csbindex.pdf for OSU’s latest DS-2.

Cost Overrun

Costs that are incurred for the project that are greater than what was authorized by the sponsor for reimbursement. See GCG 209-03: Grant and Contract Overrun Policy.

Cost Sharing

The financial relationship that results when OSU provides non-sponsored support (usually from education and general funds) for conducting a project.  The portion of project or program costs not borne by the sponsor.  Cost sharing may be mandatory or voluntary, depending on the terms of the award or contract.  Cost sharing is recorded in an unrestricted fund series.  This fund is identified with the sponsored fund in its title and numbering system. Cost sharing shown in the proposal is considered mandatory.  See GCG 212: Cost Share.

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D

 Depreciation

The process of setting aside reserve accumulation dollars for the purchase of replacement equipment. Only auxiliary and service center funds contain accumulated depreciation and are responsible for associated costs. All other depreciation is in the university plant fund.

Direct Costs

Direct costs can be identified specifically with a particular project, instructional activity or other institutional activity, or can be assigned to such activities relatively easily with a high degree of accuracy.

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E

Encumbrance

A reservation of funds for a specific purpose within a fund.  Encumbrances can be manually established for travel, personal service contracts, equipment, or other expenditures. The Office of Post Award Administration currently establishes encumbrances for all subgrants and subcontracts.

Equipment (Capitalized)

Tangible personal property with a unit value of $5000 or more, a life expectancy of more than one year, that is not consumed in the course of operation. Occasionally there is a more restrictive definition required by the research sponsor who furnishes the funds for equipment purchase. Software is excluded.

Equipment Share Program

An OSU program identifying equipment that is not fully utilized and making it available for sharing with other OSU researchers or departments.

Expanded Authority

Several federal agencies have adopted expanded authority policies, which are intended to reduce overhead costs, increase productivity, and reduce paperwork.  Where expanded authority has been authorized by the agency to the university, OSU has passed this responsibility on to the PI for most approvals except no-cost extensions, pre-award costs, and budget changes which must be prior-approved by the Office of Post Award Administration currently.  See GCG 103: Expanded Authority - Budget Changes, Pre-Award Costs & No-Cost Extensions.

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F

Facilities and Administrative Costs (F&A COSTS)

Formerly known as indirect cost. Expenditures associated with a grant, contract, or cooperative agreement that cannot be directly charged to, nor specifically identified with, individual projects. F&A costs involve expenditures necessary for the development and maintenance of an environment conducive to sponsored projects, including maintenance of facilities and library, and administrative services.  The policy for the calculation of an F&A cost rate is found in OMB Circular A-21.

Financial Administration Standards Operating Manual (FASOM)

The OUS Fiscal Policy Manual (formerly the Financial Administration Standard Operating Manual) – this manual sets the accounting/operating guidelines for the universities in the Oregon University System (OUS). 

Federal Acquisition Regulations (FAR)

FAR–Procurement standards that are applicable to federal contracts. Available on the FAR website.

Fellowships

An amount paid for the benefit of an individual to aid in the pursuit of study or research.

Fellowship Administration Fee

Sponsored fellowships that carry an institutional educational allowance are charged an administration fee. See GCG 208-07: Post Doctoral Fellowship Administration Fee Policy and GCG 208-08: Institution Educational Allowances (Fellowship Administrative Fees).

Financial Information Systems (FIS)

A comprehensive software package for entering, adjusting, and retrieving financial data.  Banner FIS is a complete financial system, with modules devoted to accounting, purchasing, accounts payable, fixed assets, grants/contracts, and budget development.

Fiscal Year

A twelve-month period of time to which the annual budget applies, and at the end of which an institution determines its financial position and the results of its operations. Oregon State University’s fiscal year extends from July 1st to June 30th of the following year. The fiscal year for the federal government runs from October 1st to September 30th of the following year.

Fixed Asset

A piece of equipment that is recorded on the fixed asset inventory. See Equipment (Capitalized) definition.

Fixed-Price Agreement

An agreement in which a price is determined in advance for the performance of a specific project or scope of work. Expenses are not subject to detailed billing. Invoices are prepared for a flat amount or by-task basis. Any residual funds, less F&A, after project completion will be authorized to be spent on further project-related research or made available to the department for use in instruction and departmental research.

FOAPAL

Acronym for the accounting distribution code fields in the Banner FIS system.  These fields are Fund/Organization/Account/Program/Activity/Location.

Fringe Benefits (OPE)

Benefits related to personnel listed in budgets that are paid through OSU (personnel does not include consultants).  Benefits are calculated on the portion of the salary charged to the sponsor and include retirement, Social Security, and medical benefits.

Fully Funded Grants

Non-governmental grants that are paid in advance earn interest.  Interest is calculated on the monthly cash balance and is posted quarterly. All restrictions in the grant document must be followed.

Fund Accounting

A method of recording financial information that groups resources into funds based on their source and any limitations on use.

Fund Balance

Fund balance is the excess of the assets of a fund over its liabilities. The term “net equity” is often used for fund balance.

Fund Code

Source of revenue/budget. Examples are: general funds, grant funds, gift funds.

Funding Source

Where the budget or funds for a project or activity come from.

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G

Governmental Accounting Standards Board (GASB)

OSU is subject to financial reporting requirements of GASB 34; 35.  For additional information see FIS 607: Depreciation or for full details view the OUS website.

General Ledger

A balance sheet made up of Asset, Liability, Fund Balance, and Control Accounts.

Gift

A cash donation other than an endowment, with no legal consideration imposed by the donor, i.e., nothing is expected by the donor in return for the gift.  Such funds are spent in accordance with university regulations and the stipulations of the donor and must not be overdrawn.   A Gift fund earns interest or is charged interest depending on the cash balance, which is calculated monthly and posted either as a credit or a charge quarterly throughout the fiscal year. A gift may be unrestricted or restricted as to use. OSU has established MXXXXX funds for the receipt of gifts.  See GCG 210-05: Gift Funds and GCG 210-07: Gift Fees.

Graduate Research Assistant/Teaching Assistant (GRA/GTA)

Assistantships awarded by departments to graduate students with outstanding records in their undergraduate and/or graduate work. To qualify, the student must: 1) be a regular advanced-degree graduate student at OSU; 2) be enrolled as a full-time graduate student at OSU, completing a minimum of 12 credit hours each term; 3) be making satisfactory progress toward an advanced degree; 4) appointment must be between .20 and .49 FTE per term.  See the Graduate School website for more information.

Grant

An agreement that provides for an agency to furnish money, property, or materials to a grantee.  The grantee has freedom to pursue the grant’s stated purpose.  The agency does not specify the manner of performance of the work and is not substantially involved in it.

Grant Ledger (FRIGITD)

Grants and contracts may be in operation for multiple years. These funds are tracked on Banner grant ledger screens in the financial system, which are not limited to current fiscal year activity only.

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H

Human Resources Information System (HRIS)

HRIS module contains employee information used for management decision-making, payroll, reporting, and employee self-service through InfoOSU.

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I

Index

A code that combines the appropriate Fund, ORG, and Program codes. Indexes are used when processing invoices and journal vouchers in the Operating Ledger and for processing payroll in the Human Resource Information System (HRIS). Indexes are not used on General Ledger entries because there is no ORG or Program on these.

Indirect Costs (IC)

Now known as Facilities and Administrative (F&A) Costs.

In-Kind Contribution

A non-cash contribution to a sponsored project or program provided by a party other than the institution or the primary sponsoring agency.  Third party in-kind contributions may be in the form of real property, equipment, supplies, or services directly benefiting and specifically designated for the project or program.

Interagency Agreement

An agreement between two different agencies of the State of Oregon.

Intergovernmental Personnel Act (IPA)

Allows for an OSU employee to work for a federal agency for a specific period of time at their determined location without losing benefits and status as an OSU employee.

Interest

Expense or income resulting from investment of funds over a period of time. Interest is calculated based on the monthly cash balance for all gifts and fully funded non-governmental grants.

Inventory Number

A unique asset number assigned to each asset or piece of equipment on the inventory.

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J

Journal Voucher (JV)

A document used to record debit(s) and credit(s) to be posted to the Operating and/or General Ledgers, reflecting a transaction or adjustment made between or within departments at OSU. JVs are also used (in the form of inter-institutional JVs) for transactions between OSU departments and those of other universities in the Oregon University System (OUS) or the Chancellor’s Office. Journal vouchers are also used to post and adjust budget entries and record manual encumbrances.

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K

 

L

Liabilities

The financial value of obligations owed.

Location Code

Assignment of building and room location for fixed assets, equipment and building inventory.

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M

Matching

A type of cost sharing, wherein a contribution to a sponsored project or program is pledged to match some portion of funds provided by the primary sponsor.  Matching contributions may be in any form acceptable to the sponsor, including cash and third party in-kind contributions.

Minor Equipment

Equipment that is valued at less than $5000; will not be consumed in the course of operation, and lasts a year or more. Exceptions include books, periodicals and reference materials that are not a part of a reference library and property held for resale (e.g. bookstore merchandise).

Modified Total Direct Cost (MTDC)

Total Direct Cost less exemptions.  Exemptions are usually GRA Tuition Remission, capitalized equipment, land and building rentals, subcontracts in excess of $25,000 and participant support costs.  MTDC is defined by the federal government.

Memorandum of Agreement (MOA)

An agreement sometimes used between public agencies.

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N

No-Cost Extensions

For most federal agencies, a one-time no-cost extension of time to complete a sponsored project may be requested through the Office of Post Award Administration, using an Organizational Prior Approval System (OPAS) form. All other requests for no-cost extensions must be made to and approved by the funding agency. This must be done 30 days before the end date of the award. See GCG 103: Expanded Authority - Budget Changes, Pre-Award Costs & No-Cost Extensions.

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O

Office of Management and Budget (OMB)

A regulatory arm of the executive office of the President of the United States. Federal grants and cooperative agreements are regulated by several OMB Circulars [A-21, A-110, A-133]. Guidance for preparation of F&A rate proposal included in (A-21). See the Office of Management & Budget webpage on the White House website.

Operating Ledger (OPAL)

The financial record of the day-to-day business of the university over a given time period, by fiscal year. Sponsored projects use a grant code to activate a grant ledger module, which combines all OPAL ledgers during the life of the award.

Oregon Administrative Rules (OAR)

Rules adopted under the Oregon Administrative Procedures Act located on the OARs website.

Oregon Revised Statutes (ORS)

 Statutes of the State of Oregon located on the ORS website.

Oregon University System (OUS)

The Oregon University System is comprised of seven four-year public universities. The system offers educational opportunities to Oregonians and students from around the world.

OUS Institutions: Eastern Oregon University, Oregon Institute of Technology, Oregon State University, Portland State University, Southern Oregon University, University of Oregon, Western Oregon University and Oregon Health & Science University (OUS affiliate).

Organization Code (ORG)

Identifies the budgetary unit within the university responsible for the budget, such as a department.

Organizational Prior Approval System (OPAS)

OSU’s system to approve requests to certain federal agencies for pre-award costs on grants and cooperative agreements for up to ninety days prior to the award start date or for no-cost extensions up to one year as authorized by OMB Circular A-110 (commonly known as expanded authority). Requests are sent to the Research Accounting Office, using an OPAS form.  See GCG 103: Expanded Authority - Budget Changes, Pre-Award Costs & No-Cost Extensions. OPAS form.

Other Payroll Expenses (OPE)

Expenditures for employee benefits, payroll and personnel assessments, accrued leaves and graduate fee remissions.

Other Sponsored Activities

Activities that involve the performance of work other than instruction and organized research fall into this category.  Examples are: sponsored instruction and workshops, course development, non-research training activities, public service activities, cooperative extension outreach, health service projects, community service programs, conferences, meetings, and other activities not utilizing research space.  This category also includes academic support of libraries, educational media services, and student services.

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P

Participant Support

Expenditures from funds received to support students (not employees) engaged in training or research in a specific field or program. Typical expenses are stipends, dependency allowances, tuition, fees, travel, books, materials and subsistence needs.

Personnel Activity Report Forms (PAR FORMS)

An accounting of time and effort expended by OSU employees. The form is required for all personnel working on grants and contracts to provide documentation to support effort expended toward sponsored agreements, including cost sharing. Student effort is documented by time sheets.

Pending Funds

Process used by OSU to give approval for expenditures to begin before the award is officially signed. The department head can send a written request to the Office of Post Award Administration, asking for a pending fund to be established. Start date of the award will be adjusted to the start date indicated on the award when the signed agreement is received. A signed proposal must be on file before set up of a pending fund is approved. All project costs can be placed on these funds up to the amount authorized by the Department Head.

Personal/Professional Service Contract (PSC)

A contract between the university and independent contractors for professional, specialized, educational, research, or creative services. A personal service contract can be for a length of time, for a one-time performance of services, or for services provided on a continuing basis.  A personal service contract is not used if primarily for a tangible product, even if professional services are needed to design or install the product.  Contact Business Services at 7-4712 for more information about PSCs or visit the Business Services website.

Personal Services Invoice (PSI)

This form is to be used for all contracted services of $5000 or less.  It does not require Contract Office approval and is the tool for payment of that service.  An example of a PSI (pdf format) is found on the Contracts Office website.   A PSI cannot be used to pay non-resident aliens or federal employees.

Posting

The official recording of a transaction (document) on a ledger (OPAL or GL). In FIS, the “posting process” is a background batch job that generally runs several times an hour. It takes approved documents and performs the appropriate accounting ledger updates. Once posted, documents will then appear on the transaction listing forms of FGITRND or FGIGLAC, and in all appropriate ledgers, including the grant ledger form FRIGITD.

Principal Investigator (PI)

The person directly responsible for coordinating and managing the timely implementation and completion of a specific project.  Principal investigators must ensure compliance with sponsor regulations for project costs incurred, patents, or licensing and reporting requirements, as appropriate.

Prior Approval Requirements

A federal agency's requirement that changes relating to a sponsored agreement have to be pre-approved by the sponsoring agency .

Program Code

Program codes identify the type of activities for which dollars are spent, such as Instruction, Administrative, Research and Public Service.

Project Director

Typically, a faculty member who submitted a proposal that was accepted and funded by an external sponsor, also referred to as the principal investigator, or PI. The project director has primary responsibility for technical compliance, completion of programmatic work, and fiscal stewardship of sponsor funds.

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Q

R

Reasonable

A cost may be considered reasonable if the nature of goods and services reflects prudent action. Generally, charges for goods or services that foster or support the on-going missions of the university are considered reasonable as long as they comply with regulations to which the university and/or project is governed.

Restricted Fund

Fund types used to identify resources that may be available for current operations, but that are to be used only for a specific purpose as directed by the donor or project sponsor. These include amounts received from non-university sources for student aid (scholarships) and construction.

Returned Overhead (ROH)

A distribution of funds recovered on sponsored projects for Facilities and Administrative (F&A) costs. An estimate of ROH is provided in the initial budget for those colleges and research centers with active projects. An adjustment to the budget is made in the next budget year, based on a reconciliation of individual funds for the prior year.

Revenue

Proceeds from any activity sponsored by OSU, evidenced in part by the use of OSU letterhead, and/or using state resources such as employee time and effort, or OSU property. These proceeds must be deposited into an OSU fund. Examples include proceeds from short course workshops and seminars, and testing services. These revenues must not be deposited in affiliated foundations (OSU Foundation or Agriculture Research Foundation).

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S

Sponsor

The federal agency or private entity that sponsors a project and provides funding or other resources toward project completion.

Sponsored Agreement

An agreement between OSU and a sponsoring agency where the agency provides funds for research, equipment, materials and services to be provided by OSU.

Sponsored Instruction

This is specific instruction or training activity sponsored by grants, contracts, or cooperative agreements.

Sponsored Research

Scholarly investigation conducted to obtain new knowledge. Basic or applied research that is separately budgeted and accounted for. This may also be called organized research.

Stipend

A subsistence allowance for students, post doc’s and participants to help defray general living expenses, in support of those engaged in training or research programs.

Subcontract/Subgrant/Subaward

An agreement between a party of an original contract and a third party, to provide all or a specified part of the work or materials required in the original award. In most cases, subcontracts must be approved by the sponsoring agency. Subcontractors should be identified in the proposal, including the subcontractor’s budget, their indirect rates, scope of work, and approval from their administration to participate in the project.

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T

Title-to-Code

Banner FIS fixed asset field that identifies who has title to an asset, and whether the State of Oregon insures the asset.  See GCG 207-03: Guidelines for Ownership Coding of Sponsor Funded Equipment.

Trade-In

Providing a vendor with a piece of used property in return for a credit on the purchase of a piece of new property. See GCG 207-02: Trade-in of Capital Equipment.

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U

Unrestricted Funds

Funds that identify resources with no specific limitations imposed by donors or external agencies. These types of funds represent the resources available for the general operations of the university. Included in this category is the general fund, with revenues primarily from state appropriations and student tuition, royalty income, service and testing income.

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V W X Y Z

003: List of Exhibits

See GCG-Ex1: Fly America Act - Federal Register Amendment Vol. 63, No. 219, Nov. 13, 1998.

See GCG-Ex2: Fly America Act Brochure and Fly America Act Waiver Checklist (pdf format)

Exhibit 1

Grant, Contract & Gift Accounting Manual
Section 000: Introductory Material - Exhibits

[Federal Register: November 13, 1998 (Volume 63, Number 219)]
[Rules and Regulations]              
[Page 63417-63421]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13no98-18]

[[Page 63417]]

=================================================================

GENERAL SERVICES ADMINISTRATION

41 CFR Parts 301-3 and 301-10

[FTR Amendment 74--1998 Edition]
RIN 3090-AG73

Federal Travel Regulation; Use of Commercial Transportation, Fly America Act

AGENCY: Office of Governmentwide Policy (OGP), GSA.

ACTION: Final rule.

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SUMMARY: This final rule amends the Federal Travel Regulation (FTR) provisions pertaining to use of U.S. flag air carriers under the provisions of 49 U.S.C. 40118, commonly referred to as the Fly America Act. This final rule reduces the connecting time for use of U.S. flag air carrier service at an overseas interchange point; requires that airline tickets issued under a code share agreement identify the U.S. flag air carrier's designator code and flight number; removes references to "gateway airports;"' and implements a new method for calculation of the employee's liability for unauthorized transportation on a foreign air carrier.

EFFECTIVE DATE: January 1, 1999.

FOR FURTHER INFORMATION CONTACT: Technical information: Umeki G. Thorne, telephone (202) 501-1538. FTR ``plain language'' format: Internet GSA, ftrtravel.chat@gsa.gov.

SUPPLEMENTARY INFORMATION: Subsection 127 (d) of the General Accounting Office Act of 1996 (Pub. L. 104-316) amended 49 U.S.C. 40118 to require that the Administrator of General Services Administration (GSA) issue regulations under which agencies may permit payment for transportation on a foreign air carrier when such transportation is determined necessary. This final rule implements the Administrator's authority under the statute, identifying when U.S. flag air carrier service is deemed available (for transportation between a point in the United States and a point outside the United States) or reasonably available (for transportation between two points outside the United States). This final rule is written in the "plain language" style of regulation writing as a continuation of GSA's effort to make the FTR easier to understand and use. This final rule removes Part 301-3 of 41 CFR Chapter 301 and adds the provisions implementing the Fly America Act to Part 301-10. This final rule also modifies the proposed rule with request for comments published in the Federal Register on April 7, 1998 (63 FR 16936).

During the 30-day comment period provided by the proposed rule, GSA received comments from four Federal agencies, three U.S. flag air carriers, an air carrier association, and three non-Government entities. GSA carefully reviewed each comment. Changes based on comments received have been grouped by section of the proposed rule and subject area and are discussed in the following general analysis.

Section 301-10.134

What Is U.S. Flag Air Carrier Service?

U.S. Air Carrier Certificate

Section 301-10.134 of the proposed rule generally defines ``U.S. flag air carrier service'' as service on an air carrier holding a certificate under 49 U.S.C. 41102. One Federal agency requested that GSA clarify that although U.S. flag air carriers must hold a certificate, the transportation does not have to be authorized by such certificate, if it is authorized by rule or exemption. GSA has revised Sec. 301-10.134 accordingly.

Code Share Agreements

Ticket Stock

A comment from a non-Government entity supported the language in Sec. 301-10.134 of the proposed rule stating that service under a code share arrangement, when the entire ticket is issued by a U.S. flag air carrier, is deemed U.S. flag air carrier service. In contrast, three Federal agencies, two U.S. flag air carriers and the air carrier association objected to this requirement as too restrictive. Two of the Federal agencies and the air carrier association stated that many developing countries have neither U.S. flag air carrier facilities nor personnel. Accordingly, in such cases, obtaining a ticket on U.S. flag air carrier ticket stock is not practicable and could preclude travelers from benefiting from U.S. flag air carrier service through code share arrangements. The air carrier association also pointed out that the essential feature on an airline ticket is the air carrier designator code and flight number rather than the ticket stock. One U.S. flag air carrier stated that imposing a U.S. air carrier ticket stock requirement could, in some cases, divert traffic to foreign air carriers in those locations where no U.S. flag air carrier facilities or personnel are located. In addition, GSA notes that as airlines and travelers more frequently utilize electronic ticketing, a U.S. air carrier ticket stock requirement appears outdated. As a result of these comments, the language of the proposed rule has been revised. The final rule states that the ticket (or documentation for an electronic ticket) must identify the U.S. flag air carrier's designator code and flight number. The requirement that the ticket be issued on U.S. flag air carrier ticket stock has been removed.

Foreign Air Carrier Code Share Service as U.S. Flag Air Carrier Service

One U.S. flag air carrier objected, except under limited circumstances, to the determination that service by a foreign air carrier under a code share arrangement is service by a U.S. flag air carrier. Specifically, the U.S. flag air carrier stated that code share service by a foreign air carrier is merely a form of interline service and therefore should not be considered service by a U.S. flag air carrier unless the U.S. flag air carrier bears the financial risk of empty seats on the aircraft. In contrast, the air carrier association commented that code share arrangements between U.S. flag air carriers and foreign air carriers are consistent with the Fly America Act because they promote the intent of the Fly America Act by improving the economic and competitive position of U.S. flag air carriers.

The final rule provides that U.S. flag air carrier service includes service provided by a foreign air carrier under a code share agreement when the ticket, or documentation in the case of an electronic ticket, identifies the U.S. flag air carrier's designator code and flight number. It is GSA's position that codesharing between U.S. flag air carriers and foreign air carriers increases opportunities for U.S. flag air carriers to expand into new international markets, which in turn promotes revenues to U.S. flag air carriers, thereby furthering the goals of the Fly America Act. Additionally, the U.S. flag air carrier whose designator code and flight number appears on the ticket, or documentation in the case of an electronic ticket, takes responsibility for the passenger(s) traveling under the U.S. flag air carrier's designator code and flight number, supporting the determination that the code share service is properly deemed service by the U.S. flag air carrier.

Section 301-10.135

When Must I Travel Using U.S. Flag Air Carrier Service?

Exception for Transportation Under Bilateral and Multilateral Agreements

Section 301-10.135 of the proposed rule states that U.S. flag air carrier service must be used for all travel funded by the U.S. Government, unless one of the various exceptions applies. One Federal agency commented that Sec. 301-10.135(b), which addresses bilateral or multilateral agreements, could be misleading because the criteria from the Fly America Act for exchanging fly-national privileges under such agreements are to be applied by the negotiators at the time the agreement is made, not by the traveler. That agency also stated that as of the date of the proposed rule there were no bilateral or multilateral agreements in effect that met the requirements of the Fly America Act. Based on this comment, GSA has clarified Sec. 301-10.135(b). Under the final rule, a traveler is not required to use U.S. flag air carrier service if transportation by a foreign air carrier is provided under a bilateral or multilateral air transportation agreement which the Department of Transportation has determined meets the conditions specified in the Fly America Act. To verify existence of any qualifying bilateral or multilateral agreements, agencies should contact the U.S. Department of Transportation, Office of the Secretary, Office of International Aviation, Room X-40, Washington, DC 20590.

Direct Service by Foreign Air Carrier

A Federal agency commented on Sec. 301-10.135(d) of the proposed rule, which states that when no U.S. flag air carrier provides service on a particular leg of the route, foreign air carrier service may be used, but only to or from the nearest interchange point on a usually traveled route to connect with U.S. flag air carrier service. The agency requested that GSA eliminate the words, ``but only to or from the nearest interchange point on a usually traveled route'' in order to save travel time by enabling travelers to use direct service on a foreign air carrier. GSA is not persuaded that this change is warranted. While the use of a foreign air carrier may be more convenient when the foreign air carrier has nonstop or direct service, GSA does not consider a shorter travel time in these circumstances to be sufficient to consider U.S. flag air carrier service unavailable or use of a foreign air carrier necessary. Therefore, GSA did not adopt the revision proposed in the comment. Of course, if the traveler meets an exception provided in the regulation, such as those provided in Sec. 301-10.136, then the traveler may use a foreign air carrier.

Section 301-10.136

What Exceptions to the Fly America Act Requirements Apply When I Travel Between the United States and Another Country?

            Removal of the terms "gateway airport in the United States" and "gateway airport abroad."  The air carrier association requested clarification for the removal of terms "gateway airport in the United States'' and "gateway airport abroad." The association stated that it does not oppose the deletion of the terms but requested that GSA clarify any policy change intended by the elimination of these terms. GSA does not intend to make a significant substantive policy change through the removal of the terms "gateway airport abroad" and "gateway airport in the United States." However, as there are a myriad of potential travel situations, there may be instances where the removal of the terms result in a different outcome than that which would have resulted under the former rule.

Connecting Time

Section Sec. 301-10.136 (b)(3) of the proposed rule reduced the connecting time from 6 hours or more to 4 hours or more at an overseas interchange point for purposes of determining whether U.S. flag air carrier service is unavailable. One Federal agency and one non-Government entity commented in support of this policy change. In contrast, two U.S. flag air carriers and the air carrier association opposed this policy change. The U.S. flag air carriers and the air carrier association stated that this change would unnecessarily risk the loss of business by U.S. airlines as it is likely to result in U.S. flag air carrier service being deemed unavailable in more instances, thereby diverting more travel to foreign air carriers.

GSA has considered these comments, but the change included in the proposed rule reducing the connecting time from 6 hours or more to 4 hours or more remains in this final rule. GSA included a number of considerations in its review of the issue. When the Fly America Act was first implemented in the 1970's, the 6 hour or more connecting time rule was established as a reasonable standard for connecting service through an overseas interchange point. Since that time, U.S. flag air carriers have significantly expanded their service in international markets and increased their service at international interchange points so that passengers can connect in a shorter time frame. Expanded use of code share arrangements has also helped reduce connecting times at overseas interchange points.

In reviewing this issue, GSA's analysis of airline schedule data showed that the airlines' average layover or connecting time is 2\1/2\ hours. GSA's analysis also showed that there would not be a large number of flights impacted by this change. Therefore, reducing the connecting time from 6 hours to 4 hours should not result in a significant loss of revenue to U.S. flag air carriers. Under the final rule, U.S. flag air carrier service is deemed unavailable when connecting service at an overseas interchange point would require a connecting time of 4 hours or more. This exception applies only when no U.S. flag air carrier service is available within the 4 hour time period, including U.S. flag air carrier service under a code share agreement.

Section 301-10.138

In What Circumstances Is Foreign Air Carrier Service Deemed a Matter of Necessity?

Excess Foreign Currency

Section (b)(3) of this section of the proposed rule stated that "(b) Necessity includes, but is not limited to, the following circumstances when: (3) Your program or activity may only be financed, under statute, using excess foreign currency and all U.S. flag air carriers refuse to accept foreign currencies." As no excess foreign currency situations exist at the present time (and have not existed since 1992), GSA has determined that the provision included at Sec. 301-10.138(b)(3) of the proposed rule is unnecessary. Therefore Sec. 301-10.138(b)(3) of the proposed rule is not included in this final rule. Should excess foreign currency issues arise in the future, GSA will determine at that time whether a provision on the subject should be included in the regulation.

Safety Exceptions

The air carrier association commented on Sec. 301-10.138(b)(1)(2), stating that although the association did not object to the safety exceptions included in the proposed rule, GSA should inform travelers that security exceptions (due to a terrorist threat on a U.S. flag air carrier) should only be invoked after consultation with the Office of Civil Aviation Security of the Federal Aviation Administration (FAA). In the event of a threat to a U.S. flag air carrier, the FAA and the Department of State will issue a travel advisory notice to the general public. Agencies should take any such travel advisory notices into account when determining whether foreign air carrier service is deemed a necessity as provided in Sec. 301-10.138. Written approval is required for a determination that foreign air carrier service is a necessity based on a security threat to a U.S. flag air carrier and must be supported by a travel advisory notice. The language of this final rule includes this requirement. With respect to threats against Government employees or other travelers, which formulate the basis for a determination that foreign air carrier service is necessary (as contrasted with threats to a U.S. flag air carrier), evidence of such threats must accompany the agency's approval of the use of foreign air carrier service.

Section 301-10.144

What Is My Liability if I Improperly Use a Foreign Air Carrier?

Splitting the Cost of Air Travel Between Federal and Non-Federal Funds

One non-Government entity commented that the provision included in this section of the proposed rule for computing liability may encourage splitting the cost of a trip between non-Federal and Federal funds to permit the use of a foreign air carrier for convenience or lower rates. The comment stated that the entity's practice has been to deny payment of the total cost of the air travel (both foreign and U.S.) if a foreign air carrier was improperly used for any part of the trip.

Under Sec. 301-3.6(c)(4) of the current FTR, employee liability is computed based on a formula used to determine the amount of lost revenue to the U.S. flag air carrier(s) rather than denial of the entire cost of air travel. The new policy for employee liability, which denies reimbursement for use of any foreign air carrier for any part of the trip for which it was not authorized, is intended to simplify the process for computing employee liability. 49 U.S.C. 40118 applies only to transportation that is financed with U.S. Government funds and will not result in improperly splitting the costs of a trip between Federal and non-Federal funds. GSA's intent is to ensure that agencies establish internal procedures for disallowance of reimbursement to travelers who use foreign air carrier service that was not authorized or otherwise permitted under this regulation. Therefore this section has been modified to include a provision requiring agencies to establish such internal procedures.

Ticket Purchases Made Through a Government Contractor Travel Agency

One Federal agency stated that agencies which are not using charge cards for purchase of airline tickets should be allowed to make payment directly to the Travel Management Center, and then seek reimbursement from the employee when an employee has improperly used a foreign air carrier. The issue of whether a Federal agency must pay a travel management center/travel agency contractor when there is improper use of a foreign air carrier is a matter of contract administration. GSA notes that many Government contracts for travel management center/travel agency services include a provision requiring that the contractor abide by the terms of the Fly America Act in issuing tickets for Federal travelers and bear the financial burden for failure to do so.  Accordingly, GSA determined it unnecessary to revise Sec. 301-10.144 on this issue.

GSA has determined that this final rule is not a significant regulatory action for the purposes of Executive Order 12866 of September 30, 1993. This final rule is not required to be published in the Federal Register for notice and comment; therefore, the Regulatory Flexibility Act does not apply. The Paperwork Reduction Act does not apply because the proposed revisions do not impose recordkeeping or information collection requirements, or the collection of information from offerors, contractors, or members of the public which require the approval of the Office of Management and Budget under 44 U.S.C. 501 et seq. This final rule is also exempt from Congressional review prescribed under 5 U.S.C. 801 since it relates solely to agency management and personnel.

List of Subjects in 41 CFR Parts 301-3 and 301-10

Government employees, Travel and transportation expenses.  For the reasons set out in the preamble, 41 CFR Chapter 301 is amended as follows.

PART 301-3--USE OF COMMERCIAL TRANSPORTATION

  1. Under the authority of 5 U.S.C. 5707, part 301-3 is removed.
    PART 301-10--TRANSPORTATION EXPENSES
  1. The authority citation for 41 CFR part 301-10 continues to read as follows:
    Authority: 5 U.S.C. 5707; 40 U.S.C. 486(c); 49 U.S.C. 40118.
  1. An undesignated center heading and sections 301-10.131 through 301-10.144 are added to read as follows:

Use of United States Flag Air Carriers

Sec.
<!--[if !supportLists]--> 301-10.131    What does United States mean?
<!--[if !supportLists]--> 301-10.132    Who is required to use a U.S. flag air carrier?
<!--[if !supportLists]--> 301-10.133    What is a U.S. flag air carrier?
<!--[if !supportLists]--> 301-10.134    What is U.S. flag air carrier service?
<!--[if !supportLists]--> 301-10.135    When must I travel using U.S. flag air carrier service?
<!--[if !supportLists]--> 301-10.136    What exceptions to the Fly America Act requirements apply when I travel between the United States and another country?
<!--[if !supportLists]--> 301-10.137    What exceptions to the Fly America Act requirements apply when I travel solely outside the United States, and a U.S. flag air carrier provides service between my origin and destination?
<!--[if !supportLists]--> 301-10.138    In what circumstances is foreign air carrier service deemed a matter of necessity?
<!--[if !supportLists]--> 301-10.139    May I travel by a foreign air carrier if the cost of my ticket is less than traveling by a U.S. flag air carrier?
<!--[if !supportLists]--> 301-10.140    May I use a foreign air carrier if the service is preferred by or more convenient for my agency or me?
<!--[if !supportLists]--> 301-10.141    Must I provide any special certification or documents if I use a foreign air carrier?
<!--[if !supportLists]--> 301-10.142    What must the certification include?
<!--[if !supportLists]--> 301-10.143    What is my liability if I improperly use a foreign air carrier?

Use of United States Flag Air Carriers

Sec. 301-10.131

What does United States mean?

For purposes of the use of United States flag air carriers, United States means the 50 states, the District of Columbia, and the territories and possessions of the United States (49 U.S.C. 40102).

Sec. 301-10.132

Who is required to use a U.S. flag air carrier?

Anyone whose air travel is financed by U.S. Government funds, except as provided in Sec. 301-10.135, Sec. 301-10.136, and Sec. 301-10.137.

Sec. 301-10.133

What is a U.S. flag air carrier?

An air carrier which holds a certificate under 49 U.S.C. 41102 but does not include a foreign air carrier operating under a permit.

Sec. 301-10.134

What is U.S. flag air carrier service?

U.S. flag air carrier service is service provided on an air carrier which holds a certificate under 49 U.S.C. 41102 and which service is authorized either by the carrier's certificate or by exemption or regulation. U.S. flag air carrier service also includes service provided under a code share agreement with a foreign air carrier in accordance with Title 14, Code of Federal Regulations when the ticket, or documentation for an electronic ticket, identifies the U.S. flag air carrier's designator code and flight number.

Sec. 301-10.135

When must I travel using U.S. flag air carrier service?

You are required by 49 U.S.C. 40118, commonly referred to as the ``Fly America Act,'' to use U.S. flag air carrier service for all air travel funded by the U.S. Government, except as provided in Sec. 301-10.136 and Sec. 301-10.137 or when one of the following exceptions applies:

  1. Use of a foreign air carrier is determined to be a matter of necessity in accordance with Sec. 301-10.138; or
  2. The transportation is provided under a bilateral or multilateral air transportation agreement to which the United States Government and the government of a foreign country are parties, and which the Department of Transportation has determined meets the requirements of the Fly America Act; or
  3. You are an officer or employee of the Department of State, United States Information Agency, United States International Development Cooperation Agency, or the Arms Control Disarmament Agency, and your travel is paid with funds appropriated to one of these agencies, and your travel is between two places outside the United States; or
  4. No U.S. flag air carrier provides service on a particular leg of the route, in which case foreign air carrier service may be used, but only to or from the nearest interchange point on a usually traveled route to connect with U.S. flag air carrier service; or
  5. A U.S. flag air carrier involuntarily reroutes your travel on a foreign air carrier; or
  6. Service on a foreign air carrier would be three hours or less, and use of the U.S. flag air carrier would at least double your en route travel time; or
  7. When the costs of transportation are reimbursed in full by a third party, such as a foreign government, international agency, or other organization.

Sec. 301-10.136

What exceptions to the Fly America Act requirements apply when I travel between the United States and another country?

The exceptions are:

  1. If a U.S. flag air carrier offers nonstop or direct service (no aircraft change) from your origin to your destination, you must use the U.S. flag air carrier service unless such use would extend your travel time, including delay at origin, by 24 hours or more.
  2. If a U.S. flag air carrier does not offer nonstop or direct service (no aircraft change) between your origin and your destination, you must use a U.S. flag air carrier on every portion of the route where it provides service unless, when compared to using a foreign air carrier, such use would:
    1. Increase the number of aircraft changes you must make outside of the U.S. by 2 or more; or
    2. Extend your travel time by at least 6 hours or more; or
    3. Require a connecting time of 4 hours or more at an overseas interchange point.

Sec. 301-10.137

What exceptions to the Fly America Act requirements apply when I travel solely outside the United States, and a U.S. flag air carrier provides service between my origin and my destination?

You must always use a U.S. flag carrier for such travel, unless, when compared to using a foreign air carrier, such use would:

  1. Increase the number of aircraft changes you must make en route by 2 or more; or
  2. Extend your travel time by 6 hours or more; or
  3. Require a connecting time of 4 hours or more at an overseas interchange point.

Sec. 301-10.138

In what circumstances is foreign air carrier service deemed a matter of necessity?

  1. Foreign air carrier service is deemed a necessity when service by a U.S. flag air carrier is available, but
    1. Cannot provide the air transportation needed; or
    2. Will not accomplish the agency's mission.
  2. Necessity includes, but is not limited to, the following circumstances:
    1. When the agency determines that use of a foreign air carrier is necessary for medical reasons, including use of foreign air carrier service to reduce the number of connections and possible delays in the transportation of persons in need of medical treatment; or
    2. When use of a foreign air carrier is required to avoid an unreasonable risk to your safety and is approved by your agency (e.g., terrorist threats). Written approval of the use of foreign air carrier service based on an unreasonable risk to your safety must be approved by your agency on a case by case basis. An agency determination and approval of use of a foreign air carrier based on a threat against a U.S. flag air carrier must be supported by a travel advisory notice issued by the Federal Aviation Administration and the Department of State. An agency determination and approval of use of a foreign air carrier based on a threat against Government employees or other travelers must be supported by evidence of the threat(s) that form the basis of the determination and approval; or
    3. When you can not purchase a ticket in your authorized class of service on a U.S. flag air carrier, and a seat is available in your authorized class of service on a foreign air carrier.

Sec. 301-10.139

May I travel by a foreign air carrier if the cost of my ticket is less than traveling by a U.S. flag air carrier?

No. Foreign air carrier service may not be used solely based on the cost of your ticket.

Sec. 301-10.140

May I use a foreign air carrier if the service is preferred by or more convenient for my agency or me?

No. You must use U.S. flag air carrier service, unless you meet one of the exceptions in Sec. 301-10.135, Sec. 301-10.136, or Sec. 301-10.137 or unless foreign air carrier service is deemed a matter of necessity under Sec. 301-10.138.

Sec. 301-10.141

Must I provide any special certification or documents if I use a foreign air carrier?

Yes, you must provide a certification, as required in Sec. 301-10.143 and any other documents required by your agency. Your agency cannot pay your foreign air carrier fare if you do not provide the required certification.

Sec. 301-10.142

What must the certification include?

The certification must include:

  1. Your name;
  2. The dates that you traveled;
  3. The origin and the destination of your travel;
  4. A detailed itinerary of your travel, name of the air carrier and flight number for each leg of the trip; and
  5. A statement explaining why you met one of the exceptions in Sec. 301-10.135, Sec. 301-10.136, or Sec. 301-10.137 or a copy of your agency's written approval that foreign air carrier service was deemed a matter of necessity in accordance with Sec. 301-10.138.

Sec. 301-10.143

What is my liability if I improperly use a foreign air carrier?

You will not be reimbursed for any transportation cost for which you improperly use foreign air carrier service. If you are authorized by your agency to use U.S. flag air carrier service for your entire trip, and you improperly use a foreign air carrier for any part of or the entire trip (i.e., when not permitted under this regulation), your transportation cost on the foreign air carrier will not be payable by your agency. If your agency authorizes you to use U.S. flag air carrier service for part of your trip and foreign air carrier service for another part of your trip, and you improperly use a foreign air carrier (i.e., when neither authorized to do so nor otherwise permitted under this regulation), your agency will pay the transportation cost on the foreign air carrier for only the portion(s) of the trip for which you were authorized to use foreign air carrier service. The agency must establish internal procedures for denying reimbursement to travelers when use of a foreign air carrier was neither authorized nor otherwise permitted under this regulation.

Dated: November 5, 1998.
David J. Barram,
Administrator of General Services.
[FR Doc. 98-30344 Filed 11-12-98; 8:45 am]
BILLING CODE 6820-34-P