What Is a Certification Regarding Debarment and
Why Am I Signing It?

Anita Lichtblau, Esq., CAPLAW

May 2008

Applicants for direct federal grants and subgrants are required to
sign a document entitled “Certification Regarding Debarment ….”
The federal government imposes this requirement in order to ensure
that only “responsible” organizations and individuals do business
with the government and receive and spend government grant funds.
The certification may seem like just another one of the annoying, but
relatively simple, requirements for receiving federal grant funds. But
more may be required than simply signing the form, and because of
the potentially serious consequences – disallowance of costs,
termination of the grant, or debarment, for example – a closer look
at what is actually required is warranted.

The principal rules are found in the Interim Final Guidance issued
by the Office of Management and Budget in August 2005 (the OMB
Guidance).1 Individual federal agencies were required to implement
these guidelines through regulations that adopt, and may expand
upon, the OMB Guidance. For example, the U.S. Department of
Health and Human Services issued its Final Rule on June 28, 2007.2
Although the new HHS rules replaced the old suspension and
debarment rules, which were found at 2 C.F.R. Part 76, only a few
substantive changes appear to have been made, discussed below.3

Certification Submitted by Federal Grantee or Applicant to Federal Agency

An applicant for a federal grant must include in its proposal
package a certification that the applicant organization and its
principals have not been excluded from doing business with the
federal government, convicted of, or have charges pending against
them for, certain crimes, or had a government grant or contract
terminated for cause. Specifically, the applicant must certify that it
and its principals:

(a) Are not presently debarred, suspended, proposed for debarment,
declared ineligible, or voluntarily excluded by any Federal
department or agency;
(b) Have not within a three-year period preceding the proposal been
convicted of or had a civil judgment rendered against them for
commission of fraud or a criminal offense in connection with
obtaining, attempting to obtain, or performing a public (Federal,
State, or local) transaction or contract under a public transaction;
violation of Federal or State antitrust statutes or commission of
embezzlement, theft, forgery, bribery, falsification or destruction
of records, making false statements, or receiving stolen property;
(c) Are not presently indicted for or otherwise criminally or civilly
charged by a governmental entity (Federal, State or local) with
commission of any of the offenses enumerated in item (b) above; and
(d) Have not within the preceding three (3) years had one or more
public transactions (Federal, State, or local) terminated for cause
or default.

If the organization cannot certify to these statements, it must
attach an explanation to the proposal.4 The funding agency will then
consider the explanation in determining whether to go forward with
the grant.5 The organization must also notify the funding agency if it
subsequently learns of information inconsistent with the
certification.6

Don’t forget that the certification applies not only to the
organization, but also to its “principals,” which includes officers,
members of the board of directors, owner(s), or other person(s) with
management or supervisory responsibilities relating to the
transaction. So, how can an organization assure itself that the
certification is accurate? Presumably, the organization will know
whether it has been excluded from doing business with the federal
government. It can also search the website for the federal
government’s Excluded Party List System: www.epls.gov, to check
whether either the organization or its principals have been excluded.
Printing out and retaining the copy of the screen indicating that there
are “no records” for the names searched is also recommended,
although not required. The more difficult information to check is the
answers to items (b), (c), and (d) above, in connection with criminal
charges and terminations of transactions. An organization could ask
board members and officers to sign a certification mirroring the
certification signed by the organization and to notify the organization
if information has become known or circumstances have changed
between certifications so as to make any of the statements no longer
true. The OMB Guidance leaves it up to the organization to
determine the frequency by which it checks whether its principals are
excluded or disqualified.7 However, for an organization applying on
an annual basis for numerous federal grants, a yearly certification is
a good way to ensure compliance.

Lower Tier Requirements
Some of these requirements “flow down” from the direct federal grantee to individuals or organizations to whom the grantee awards
subgrants or with whom the grantee does business under the federal
grant; the resulting transactions are known as lower tier transactions.
However, the requirements do not necessarily flow down to all lower
tier transactions; only to those that are considered “covered
transactions” as defined by the regulations. A federal grantee and
each entity down the line that is involved in a “covered transaction”
must verify that the individual or entity with whom it intends to do
business, and its principals, are not excluded or disqualified.8 Note
that this requirement is narrower than the certification the grantee
itself signs, which also addresses criminal convictions and
terminations for cause of contracts with all levels of government.

Under the OMB Guidance, “covered transactions” include all
subgrants awarded under the federal grant and all procurement
transactions awarded under the federal grant itself, subgrants, and
procurement contracts and subcontracts where the amount of the
procurement transaction contract is expected to equal or exceed
$25,000. All contracts under the grant for federally-required audit
services are also covered, regardless of amount. However, some federal agencies, such as HHS, have chosen to expand the certification requirement by applying it to all procurement transactions under the grant and subgrants, not just those equaling or exceeding $25,000.9 This is a change from the previous HHS regulations, which only applied to procurement contracts over $25,000 and to subcontracts over $100,000.10 As a practical matter, although you could implement different policies for when you require certifications for subcontracts depending on the rules of the original federal funding agency, it may be easier to just go with the most stringent rules, i.e. require for all subcontracts or subgrants under the grant.

Federal grantees and subgrantees, as well as covered contractors
under the grant, must include in all of their subgrants or covered
procurement contracts a term or condition requiring compliance with
the suspension and debarment rules (2 C.F.R. Part 180, as adopted by
the federal funding agency), including a requirement that they include
such language in all of the contracts for their lower tier covered
transactions and verification that participants in those transactions are
similarly not debarred or excluded. Many federal agencies, such as the
Administration for Children and Families (ACF) within HHS, include
language in the certification signed by the grantees that must be included in the contracts and solicitations for lower tier covered transactions. See http://www.acf.hhs.gov/programs/ofs/grants/debar.htm.

Recommended Compliance Steps
So, how does a federal grantee or subgrantee comply with the
requirements? The most practical approach to ensure compliance is
to take the following steps:
1. Collect copies of all debarment certifications that your organization
has recently signed or will be required to submit with proposals.
2. Review these certifications to determine which federal agency’s
rules must be followed and to better understand what you are
being asked to do.
3. If you have not already done so, search www.epls.gov for the names
of all members of your board of directors, officers, and other
persons with management or supervisory responsibilities relating to
the grant. Retain copies of screens showing “no records” in records
and, if necessary, investigate situations and notify federal agency
where the website indicates there is an exclusion or disqualification.
4. If you have not already done so, ask the people identified in step
number 3, above to sign certifications as to items (a) through (d)
above. If they cannot so certify, ask for a written explanation. Retain the records for at least three years after close-out of the grant or termination of any ongoing investigation, audit, or proceedings in connection with the grant.
5. If any of the principals are unable to sign the certification, notify
the funding agency.
6. In all subgrant agreements and procurement contracts under the
federal grant, include language requiring compliance with the
federal funding source’s suspension and debarment regulations
adopting the OMB Guidance. Also include in all solicitations, RFPs,
etc., as well as agreements entered into in connection with those
transactions, the appropriate certification for “Lower-tier Covered
Transactions.” Although the ACF certification does not require a
signature separate from the proposal itself, in order to encourage
reading of the document and its requirements, it is recommended
that either a signature line be added, or that the certification be
specifically referenced in the signed proposal or agreement.

1 See 2 C.F.R. Part 180.
2 See 2 C.F.R. Part 376 and 72 Fed. Reg. 35349 (June 28, 2007).
3 See 72 Fed. Reg. 9233-9235 (March 1, 2007).
4 2 C.F.R. § 180.335.
5 2 C.F.R. § 180.340.
6 2 C.F.R. § 180.350.
7 2 C.F.R. § 180.320.
8 2 C.F.R. § 180.300.
9 See 2 C.F.R. § 376.220.
10 See 45 C.F.R. § 76.220.