Department for its information and guidance in determining whether property that is surplus or which is expected to become surplus is usable and necessary for health, educational, or civil defense purposes.

(h) "Service charge" means the fee assessed by a State Agency against the donee when distributing surplus property under section 203 (j) of the Act.

(i) "Shortage" means the deficiency occurring upon the receipt of a smaller number of a specific item or a smaller number of items than either (1) approved on an "Application for Donation of Surplus Personal Property," Standard Form 123, or (2) listed on a shipping document. "Shortage" also means the smaller quantity of a single item or a smaller number of items than shown by stock records upon inventory verification.

(j) "State Agency" means the agency designated by State statute or executive order to make the certifications concerning, and distribution of, donable property to eligible applicants within the State as provided for in section 203 (j) of the Act. 132 F.R. 9167, June 28, 1967, as amended at 33 F.R. 17787, Nov. 28, 1968]

§ 14.2 Basic policy.

It is the policy of the Department to strengthen, and promote the improvement of operations of State agencies so as to achieve maximum effectiveness, efficiency, responsibility and equity in the distribution and utilization of surplus property for health, educational, and civil defense purposes.

[33 F.R. 17787, Nov. 28, 1968]

§ 14.3 Geographic scope.

This part is applicable to States within the United States, the District of Columbia, the Commonwealth of Puerto Rico, and the territories and possessions of the United States.

§ 14.4 Organization.

(a) Each State Agency shall be administered under the direction and supervision of a chief executive officer who shall be responsible for carrying out all phases of the State's program in accordance with the approved Plan submitted pursuant to § 14.5.

(b) Each State Agency shall maintain a staff adequate to enable it to carry out the program as set forth in its approved Plan of Operation.

(a) Each State Agency shall submit to the appropriate regional office of the Department for its approval at least three signed copies of its Plan of Operation which shall conform to the provisions of this part, and Parts 12 and 13 of this subtitle. Such Plans shall be in effect and shall be binding upon the State Agency beginning with the date of approval by the Department. No allocations of donable property shall be made to such State Agency, and no donable property shall, except as directed by the Department, be distributed by such State Agency under section 203 of the Act, if it is determined by the Department that the State Agency is not operating in conformance with the Department's regulations. No subsequent amendments to, nor modifications of, approved Plans shall be placed in effect without prior approval of the Department. Approval of a Plan of Operation shall not be effective for a period in excess of 5 years from the date of approval. The Department may approve Plans, or parts thereof, for lesser periods of time, as determined by the Department in each case. Each State Agency shall, not later than 90 days following the effective date of any change in the Department's regulations which affects a State Plan, submit to the appropriate regional office for its approval, at least three copies, executed by the responsible official(s), of all sections of its State Plan amended to conform with the changes in the Department's regulations. Sixty days prior to the expiration date of a State Plan of Operation the State Agency shall submit to the appropriate regional office a complete new Plan or supplements as appropriate, or request by letter to the regional office that the existing Plan be approved for an additional 1 to 5 years.

(b) The Plan of Operation shall conform to the State plan format prescribed by the Department in its Surplus Property Utilization Manual and include the following:

(1) Copies of State statutes and/or executive orders establishing the State Agency and its authority to:

(i) Acquire, warehouse, and distribute donable personal property to eligible organizations under section 203 of the Act and to execute the certifications and agreements required by that section of the Act and the Federal Government.

(ii) Assess and collect service charges from eligible participating organizations if such charges are contemplated.

(iii) Enter into cooperative agreements as provided for by section 203 (n) of the Act, if the State Agency contemplates entering into such agreements.

(iv) Where express statutory authority does not exist or is ambiguous, or where authority exists by virtue of executive order, the State Agency Plan shall also include the opinion of the State's Attorney General as to the existence of such authority.

(2) A statement of:

(i) The agency's authority for the deposit and investment of service charge funds;

(ii) The types of depositories and/or investments of such funds;

(iii) Authority for the disbursement of funds and the liquidation of investments;

(iv) The agency's authority for the obligation and expenditure of service charge funds to acquire title to, or make advance rental payments for, distribution center and office facilities;

(v) Provision for the submission of a liquidation plan for the Department's approval when a determination has been made to liquidate the State agency. The plan to be submitted at time of liquidation must include, but not be limited to, the following:

(a) Authority for liquidating the agency;

(b) Time schedule for liquidating the agency, including a date by which the agency shall be completely liquidated;

(c) Method for disposing of Federal surplus property on hand;

(d) Provision for the liquidation of agency assets;

(e) Provision for preparing and submission of accounting records and financial reports showing the receipt and disbursement of funds;

(f) Provision for the maintenance, retention, and retirement of records beyond the date of final liquidation which would be made available for inspection by any authorized Federal official.

(3) (i) [Reserved]

(ii) Chart(s) showing (a) organizational units of the State Agency; (b) functions of such units; and (c) major lines of supervisory authority.

(4) Procedures for accounting for surplus property allocated, received, warehoused, and distributed. These must include the following: (i) Provision for

recording and reporting shortages and overages of property both when it is taken into State Agency custody and at the time of inventory verifications; (ii) provision for periodic verification of property on hand (at least annually); (iii) provision for any necessary adjustments to inventory records and/or stock record cards at least annually and upon written authority by the Agency Director: (a) A file shall be maintained by the State Agencies covering all adjustments with justifications therefore, and be made available for inspection by any authorized Federal official; (b) such justification shall, as a minimum, reflect that all reasonable efforts have been expended to ascertain when, where, how, or why the property is missing, damaged or otherwise unaccounted for; and (c) regional offices shall be furnished a copy of the adjustment to inventory records, with justification, at the time the adjustment is made, on any item of property having an acquisition cost of $2,500 or more; (iv) a means of tracing property from receiving documents to disposal documents; and (v) a system of readily determining the quantity of various types of property donated to individual donees.

(5) An explanation of how service charges are determined. This shall include a maximum charge not in excess of $500 for any single item to cover indirect administrative expenses. In addition to the $500 service charge for any single item, State Agencies for Surplus Property may collect direct expenses for labor in removing installed equipment, packing and crating, loading, transportation, rehabilitation, and delivery of property to the donee. Charges in excess of the above must be justified in writing and be approved by the Department in advance of billing the donee on an individual case basis.

(6) Procedure for ascertaining the eligibility of applicants.

(7) Procedure for establishing the authority of representatives of eligible donees to receive surplus property and execute the required certifications and agreements on behalf of applicants.

(8) Procedure for determining the need and usability of surplus property by eligible organizations and the fair and equitable distribution thereof; such procedure must include: (i) Provisions for visits with at least 25 percent of the donees who are eligible but who have not received any surplus property during

the past 12 months (this requirement can be satisfied by having the institutions' representatives visit the State Agency Distribution Center; explaining the donation program at group meetings, conferences, or seminars conducted by donation personnel; personal letters or telephone conversations with, or visits to the institutions for the purpose of explaining the program); (ii) the periodic circularization of information about the donable property program to all eligible donees at least once each year; and (iii) a continuing review of the records of property distributed to donees to insure that all such property is distributed on an equitable basis and that such property is useful and needed by the recipient.

(9) Procedure for obtaining the certifications and agreements required by §§ 13.6(b) (1), (2) and (3), 13.9, and 13.10 of this subtitle.

(10) Procedure for utilization surveys at educational and health institutions to ascertain that property with a single item acquisition cost of $2,500 or more, donated to them, is being used in accordance with their certifications and agreements. This procedure shall include provision for reports on such surveys.

(11) Samples of all forms used by the State Agency.

(c) [Reserved]

[32 F.R. 9167, June 28, 1967, as amended at 33 F.R. 17787, Nov. 28, 1968]

§ 14.6 Books and records.

(a) The fiscal accounting of the State Agency shall be accomplished by a double entry system. The system shall contain a chart of accounts, a general ledger with accounts for all assets, liabilities, income, and expense, and journals, or their equivalent, for the original record of transactions. Accounting records shall be maintained in a manner that will identify and separately account for funds accumulated from service charges against donee institutions and organizations.

(b) Financial records and all other books and records of the State Agency shall be subject to inspection by representatives of the Department.

(c) Each State Agency shall maintain accurate accountability records of all donable property approved for transfer to the State Agency and donable property received, warehoused, and distrib

uted by it. Accountability records of all single items having an acquisition cost of $2,500 or more shall be kept separate from those of lesser amounts.

(d) Records and documents pertaining to the eligibility of donee institutions and organizations shall be maintained in the form and manner prescribed by the Department.

(e) All official records of the State Agency shall be kept for a minimum period of 5 years. However, records pertaining to property containing restrictions for more than 4 years shall be kept 1 year beyond the specified periods of restrictions. In those cases where property is in compliance status at the expiration of the period of restriction the records will be retained for at least 1 year after the compliance case has been closed.

§ 14.7 Service charges and funds.

(a) Service charges, as a whole, for the care and handling of donable surplus property shall be limited to the amount necessary to pay actual expenses of current operations and to purchase necessary equipment, plus the accumulation and maintenance of a working capital reserve. The service charge assessed by a State agency for the transfer of donable surplus property shall be reasonable in relation to costs incident to transfers. (b) A State Agency's working capital reserve shall be computed as follows: (1) Add together the following items of current assets:

(i) Cash on hand and in depositories; (ii) Investments (readily convertible into cash);

(iii) Accounts receivable.

(2) From the total of the above described current assets, deduct all liabilities that are due (including installments that fall due) within 1 year, and any obligations represented by funds not accumulated from service charges which are required to be returned eventually to the source from which they were derived.

(c) The working capital reserve chall not exceed an amount equivalent to the actual cost of operation during the immediate past fiscal year except with the written approval of the Department.

(d) Integrity of funds accumulated from service charges against donee institutions and organizations, including

income accruing from their investments shall be maintained, and such funds shall be used only for the operations of the Surplus Property Utilization Program and shall not be available for any other purpose. Records and accounts shall be maintained by the State agency of monies expended for the construction of warehouses, the purchase of fixtures, equipment, trucks, etc., for State agency operations from service charge funds. When any of this property is no longer needed it shall be disposed of by trading the item for a like item, by public bid sale or under other arrangements approved by the Department. All monies received from sale of such property shall be deposited in the service charge fund. Service charge funds may be used to purchase replacement parts for the purpose of rehabilitating Federal surplus property. Service charge funds may not be used to purchase property solely for donation purposes. No property, equipment, or facilities procured by the State agency through expenditure of service charge funds shall be transferred to or used, part-time or otherwise, by any agency or instrumentality of the State other than the State agency, unless such use is compensated for on a reasonable charge basis and the proceeds deposited to the service charge account.

(e) A State Agency shall accept payment of service charges only in the form of warrants, checks, or other official instruments drawn or issued by, and in the name of, the respective donee institutions or organizations.

(f) Funds accumulated by a State Agency from service charges against donee institutions and organizations, over and above the working capital reserve as provided for in this part, shall be refunded to donee institutions and organizations (1) on a pro rata basis (based upon total charges collected during the preceding fiscal year) or (2) by reduced service charges during the current and the next ensuing fiscal year.

(g) Advance approval of the Department is required for the obligation or expenditure of service charge funds to acquire office or distribution center facilities, for making advance rental payments to acquire or improve the same, or for capital improvements to such facilities. State agencies desiring to utilize service charge funds for capital expendi

tures to acquire or improve office or distribution center facilities shall submit a written proposal describing and justifying the proposed expenditure to the Department. The proposal must specify terms and conditions which would protect the equities of the donees who contributed service charges to the fund. The following circumstances will be considered in the Department's determination that the protection is afforded by the proposal:

(1) If title to the property in which the funds are invested will be vested in the State Agency for Surplus Property, and provision is made for refund to the donees of any amount received from the ultimate sale or other disposition of the property;

(2) If provision is made for a refund to the donees of any unamortized portion of funds advanced or expended in event occupancy by the State Surplus Property Agency is terminated; or

(3) In the case of advance rental payments, if the charges for occupancy of State-owned space are limited to the reasonable cost of maintenance and depreciation, unless it can be demonstrated that other State agencies are required to pay higher rentals under established State policy and practice.

[32 F.R. 9167, June 28, 1967, as amended at 33 F.R. 17787, Nov. 28, 1968]

The operations and financial affairs of the State agency shall be audited at least every 2 years in accordance with generally accepted auditing standards by an appropriate State authority or by independent certified public accountants or independent licensed public accountants, certified or licensed by a regulatory authority of a State or other subdivision of the United States. Guidelines furnished by the Department shall be followed in conducting the audit. [33 F.R. 17787, Nov. 28, 1968] § 14.9 Handling of property.

(a) All acquisition, warehousing, and distribution functions shall be a direct part of the State Agency's operation and shall be under the direction and control of a single executive officer.

(b) All distribution of donable property to eligible civil defense organiza

99-197-69

tions will be made only in accordance with pertinent regulations of the Office of Civil Defense.

(c) Donable surplus property shall be compared with the respective Standard Form 123 and pertinent shipping documents immediately upon receipt, and any shortage or overage shall be reported to the agency from which the property was obtained and a copy of the report shall be transmitted to the appropriate regional office of the Department, in accordance with procedures set forth in the Surplus Property Utilization

Manual issued by the Department.

(d) State Agencies shall maintain adequate provision for protecting property in their custody, including reasonable protection against the hazards of fire, theft, vandalism, and weather.

(e) State Agencies shall, at least annually, report to the appropriate Regional Representative all surplus property which has been in their custody longer than 12 months. Such reports shall be made within 60 days following periodic verification of property on hand as required by the Plan of Operation.

§ 14.10 Eligibility.

Findings by State Agencies as to the eligibility of applicants to acquire donable property in accordance with the requirements of section 203 (j) of the Act and regulations issued thereunder shall be based upon applications by the governing bodies of the applicant institutions stating the nature and purpose of the institutions and shall be recorded and such record preserved in accordance with the provisions of § 14.6(d), However, the foregoing requirement does not apply to tax-supported, approved, and/or accredited public schools, colleges, universities, and school systems which were participating in the donable property program prior to January 1, 1968. [33 F.R. 5875, Apr. 17, 1968]

§ 14.11 Utilization and compliance responsibility.

(a) Each State Agency shall assist the Department in effecting utilization and compliance by health and educational donees with the terms and conditions established for any single item of donated property having an acquisition cost of $2,500 or more, and shall make an on-site investigation of the use of such item as least once during the pe

riod of Federal restrictions. The SASP shall fully document its investigations and make its report of investigation available for review by any authorized Federal official.

(b) State Agencies shall take reasonable measures to assure that single items of personal property with an acquisition cost of less than $2,500 that are donated under the provisions of the Act for health or educational purposes are actually used for such purposes.

(c) Where information received by a State Agency indicates fraud or misuse of surplus property donated for health, educational or civil defense purposes, the circumstances pertaining thereto shall be reported immediately to the Department. Upon request by the appropriate Regional Representative, State Agencies shall make appropriate investigations of alleged fraud or misuse of surplus personal property donated for health and educational purposes.

(d) State Agencies shall report immediately to the appropriate law enforcement authorities and to the respective Regional Representative any theft, fraud or indication of fraud in connection with any donable property in its custody and shall investigate and/or settle any such case only with the concurrence of the Regional Representative. § 14.12

Assistance to the Department.

Each State Agency shall cooperate with the Department by releasing property from its custody upon request, and will assist the Department in obtaining voluntary release by donee institutions of property needed for defense or emergency use.

§ 14.13 Nonconformance.

If the Department determines that a State Agency is not operating in accordance with its approved Plan of Operation or these Minimum Standards, allocation of property to the State Agency may be suspended until the nonconformance is corrected to the satisfaction of the Department.