Financial Manual for Grants & Contracts Chapter 21: Enforcement, Appeals & Termination

Introduction

This chapter compiles the applicable federal, state and agency requirements for the enforcement, sanction, and termination of awards made by Contractors to subcontractors using funds administered by the Agency.

In the event of conflict between these standards and federal statute or regulations, the federal statute or regulations will apply.

Record retention and access requirements are provided in Appendix K to this manual. All financial and programmatic records, supporting documents, statistical records, and other records pertaining to an award of federal or state funds must be retained and made available to authorized entities or their representatives in accordance with applicable administrative requirements.

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Enforcement, Appeals & Sanction

A Contractor’s enforcement policies must not conflict with federal or state requirements.

Each Contractor has discretion in developing its own enforcement policies to the extent that such policies do not conflict with federal and/or state provisions as provided below, in this chapter, or as otherwise required. In addition, Contractors may, but are not required to, use the Agency’s sanction policy codified at 40 TAC Chapter 802, Subchapter G, as a model.

Remedies. Enforcement may be accomplished by taking one or more of the following remedies, or by imposing other sanctions, as appropriate in the circumstances:

  • Temporarily withhold cash payments pending correction of the deficiency by subcontractor or more severe enforcement action by the Contractor
  • Disallow (deny both use of funds and matching credit for) all or part of the cost of the activity or action not in compliance (see also Program Specific Considerations)
  • Wholly or partly suspend or terminate the current award for the subcontractor’s program
  • Withhold further awards for the program
  • Place the subcontractor on a corrective action plan
  • Take other remedies that may be legally available

Costs Incurred During Suspension or After Termination. Unless expressly authorized in the notice of suspension or termination, or subsequently, costs from obligations incurred while an award is suspended or after it is terminated are unallowable. Other costs that are necessary and not reasonably avoidable are allowable if all of the following criteria are true:

  • The costs result from obligations that were properly incurred before the effective date of the suspension or termination
  • The costs were not incurred in anticipation of suspension or termination
  • In the case of termination, the costs are noncancellable
  • The costs would be allowable if the award was not suspended or it expired normally at the end of the funding period in which the termination takes effect

See also, Section 8.3.62 of this manual regarding the allowability of termination costs.

Debarment and Suspension. Contractors and subcontractors may also be subject to "Debarment and Suspension" under Executive Order (E.O.) 12549, which prohibits awards to any parties that have been debarred or suspended, or that are otherwise excluded from or ineligible to participate in federal assistance programs.

Program Specific Considerations:

Supplemental Nutrition Assistance Program (SNAP) Employment and Training (E&T). In accordance with 7 CFR §3015.123, which is applicable to SNAP E&T awards, the Contractor must provide reasonable notice to the subcontractor prior to suspending an award. The suspension notice must state the reasons for the suspension, correction action required, and the effective date. The Contractor may require that the suspension be effective immediately when it determines that doing so is necessary to protect its interest and the interest of the federal government. The suspension must remain in effect until corrective action has been taken, evidence has been provided that it will be taken, or until the award is terminated.

Additionally, the provisions allow for third-party in-kind contributions applicable to the suspension period to be allowed for purposes of satisfying cost-sharing or matching requirements if approved by the awarding entity.

Authority:

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Appeals

The Contractor must provide the subcontractor, against which enforcement action is being taken, with an opportunity for a hearing, appeal, or other administrative proceeding as entitled by statute or regulation applicable to the action involved.

Each Contractor has discretion in developing its own appeals policies to the extent that such policies do not conflict with federal and/or state provisions as provided in this chapter, or as otherwise required. In addition, Contractors may use the Agency’s appeal policy codified at 40 TAC §802.142, as a model.

Program Specific Entity:

Supplemental Nutrition Assistance Program (SNAP) Employment and Training (E&T). Although the regulations at 7 CFR Part 3015, which are applicable to SNAP E&T awards, do not specifically require that a Contractor provide subcontractors, such as those described above, with an opportunity to appeal an enforcement decision, such policies are recommended by the Agency.

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Termination

If the Contractor or subcontractor elects to terminate an award, closeout and other settlement requirements must be considered in the termination of the award.

Under uniform administrative requirements a Contractor may terminate an award for cause or convenience subject to the conditions below. The requirements also provide that a subcontractor may terminate an award for convenience as provided below.

Termination for Cause. A Contractor may terminate an award for cause as an enforcement remedy if the subcontractor materially fails to comply with the terms and conditions of the award. See also, Section 21.1 of this manual. “Cause” refers to a subcontractor’s material failure to comply with the terms of an award. (This does not preclude a subcontractor for terminating an award for cause; however, such provisions are not specifically made in federal or state regulations.)

Termination for Convenience. A Contractor or subcontractor may terminate an award for its convenience. “Convenience” refers to termination for reasons other than cause. Termination for convenience must be conducted as follows:

Initiation by Contractor. If the Contractor initiates the termination for its convenience, the subcontractor must consent to:

  • The termination conditions, including the effective date
  • In the case of partial termination, the portion to be terminated

Consent may be obtained through the subcontractor’s acceptance of the termination conditions within a contract. For example, a subcontractor’s signature on a contract that contains a provision allowing the Contractor to cancel the contract without the consent of the subcontractor indicates the subcontractor’s acceptance of and consent to those termination conditions.

Initiation by subcontractor. If the Contractor’s subcontractor initiates the termination for its convenience, it must do so by providing written notification to the Contractor. The written notification must include:

  • The reasons for such termination
  • The effective date of the termination
  • In the case of partial termination, the portion to be terminated

If a subcontractor initiates a partial termination, and the Contractor determines that the remaining portion of the award will not accomplish the purposes for which the award was made, the Contractor may wholly terminate the award for cause or convenience.

Termination Settlements, Closeout, and Other Responsibilities. A subcontractor may have certain responsibilities relating to closeout and other continuing responsibilities after termination, as follows.

Settlements. When an award is terminated, the subcontractor must cancel as many outstanding obligations as possible. Generally, any obligations for the terminated portion of the award that are incurred after the effective date of the termination are not allowable costs. However, full credit will be allowed by the Contractor for the federal share of any noncancellable obligations that were properly incurred by the subcontractor prior to termination. See also Section 8.3.62 of this manual.

Closeout and Other Responsibilities. Closeout requirements, including those relating to property, must be considered in the termination of the award. Additionally, a provision for the continuing responsibilities of the subcontractor after termination must be made, as appropriate. Such responsibilities should include applicable audit requirements and record retention.

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