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OMB CIRCULAR A-87 (REVISED 05/10/04) <br />CIRCULAR NO. A-87 <br />Revised <br />TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS <br />SUBJECT: Cost Principles for State, Local, and Indian Tribal Governments <br />1.Purpose. This Circular establishes principles and standards for determining costs for Federal <br />awards carried out through grants, cost reimbursement contracts, and other agreements with <br />State and local governments and federally-recognized Indian tribal governments (governmental <br />units). <br />2.Authority. This Circular is issued under the authority of the Budget and Accounting Act of <br />1921, as amended; the Budget and Accounting Procedures Act of 1950, as amended; the Chief <br />Financial Officers Act of 1990; Reorganization Plan No. 2 of 1970; and Executive Order No. <br />11541 ("Prescribing the Duties of the Office of Management and Budget and the Domestic <br />Policy Council in the Executive Office of the President"). <br />3.Background. As part of the governmentwide grant streamlining effort under P.L. 106-107, <br />Federal Financial Award Management Improvement Act of 1999, OMB led an interagency <br />workgroup to simplify and make consistent, to the extent feasible, the various rules used to <br />award Federal grants. An interagency task force was established in 2001 to review existing cost <br />principles for Federal awards to State, local, and Indian tribal governments; Colleges and <br />Universities; and Non-Profit organizations. The task force studied Selected Items of Cost in each <br />of the three cost principles to determine which items of costs could be stated consistently and/or <br />more clearly. A proposed revised Circular reflecting the results of those efforts was issued on <br />August 12, 2002 at 67 FR 52558. Extensive comments on the proposed revisions, discussions <br />with interest groups, and related developments were considered in developing this revision. <br />4.Rescissions. This Circular rescinds and supersedes Circular A-87, as amended, issued May 4, <br />1995. <br />5.Policy. This Circular establishes principles and standards to provide a uniform approach for <br />determining costs and to promote effective program delivery, efficiency, and better relationships <br />between governmental units and the Federal Government. The principles are for determining <br />allowable costs only. They are not intended to identify the circumstances or to dictate the extent <br />of Federal and governmental unit participation in the financing of a particular Federal award. <br />Provision for profit or other increment above cost is outside the scope of this Circular. <br />6.Definitions. Definitions of key terms used in this Circular are contained in Attachment A, <br />Definitions. Definitions of key terms used in this Circular are contained in Attachment A, <br />6. <br />Section B. <br />Section B. <br />7.Required Action. Agencies responsible for administering programs that involve cost <br />. Agencies responsible for administering programs that involve cost <br />Required Action <br />7. <br />1 <br /> <br />