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governmental unit and the cognizant Federal agency shall establish an appropriate advance <br />agreement on how the governmental unit will comply with applicable CAS requirements when <br />estimating, accumulating and reporting costs under CAS-covered contracts. The agreement shall <br />indicate that OMB Circular A-87 requirements will be applied to other Federal awards. In all <br />cases, only one set of records needs to be maintained by the governmental unit. <br />e. Conditional exemptions. <br />(1) OMB authorizes conditional exemption from OMB administrative requirements and cost <br />principles circulars for certain Federal programs with statutorily-authorized consolidated <br />planning and consolidated administrative funding, that are identified by a Federal agency and <br />approved by the head of the Executive department or establishment. A Federal agency shall <br />consult with OMB during its consideration of whether to grant such an exemption. <br />(2) To promote efficiency in State and local program administration, when Federal <br />non-entitlement programs with common purposes have specific statutorily-authorized <br />consolidated planning and consolidated administrative funding and where most of the State <br />agency's resources come from non-Federal sources, Federal agencies may exempt these covered <br />State-administered, non-entitlement grant programs from certain OMB grants management <br />requirements. The exemptions would be from all but the allocability of costs provisions of OMB <br />Circulars A-87 (Attachment A, subsection C.3), "Cost Principles for State, Local, and Indian <br />Tribal Governments," A-21 (Section C, subpart 4), "Cost Principles for Educational Institutions," <br />and A-122 (Attachment A, subsection A.4), "Cost Principles for Non-Profit Organizations," and <br />from all of the administrative requirements provisions of OMB Circular A-110, "Uniform <br />Administrative Requirements for Grants and Agreements with Institutions of Higher Education, <br />Hospitals, and Other Non-Profit Organizations," and the agencies' grants management common <br />rule. <br />(3) When a Federal agency provides this flexibility, as a prerequisite to a State's exercising this <br />option, a State must adopt its own written fiscal and administrative requirements for expending <br />and accounting for all funds, which are consistent with the provisions of OMB Circular A-87, <br />and extend such policies to all subrecipients. These fiscal and administrative requirements must <br />be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal <br />statutory and regulatory provisions, costs are reasonable and necessary for operating these <br />programs, and funds are not be used for general expenses required to carry out other <br />responsibilities of a State or its subrecipients. <br />B. Definitions <br />1. "Approval or authorization of the awarding or cognizant Federal agency" means <br />documentation evidencing consent prior to incurring a specific cost. If such costs are specifically <br />identified in a Federal award document, approval of the document constitutes approval of the <br />costs. If the costs are covered by a State/local-wide cost allocation plan or an indirect cost <br />proposal, approval of the plan constitutes the approval. <br />2. "Award" means grants, cost reimbursement contracts and other agreements between a State, <br />2. "Award" means grants, cost reimbursement contracts and other agreements between a State, <br />6 <br /> <br />