31 USC Chapter 63—the same law that it so emphatically makes the distinction between acquisition and assistance—also makes a clear distinction within the assistance realm between grants and cooperative agreements. This legal requirement is repeated in the regulation at 2 CFR 200 §§ __.15 (definition of grant agreement) and __.24 (definition of cooperative agreement).
Grants and cooperative agreements are both assistance awards. That is, they are both used to transfer of “a thing of value” (usually money) to another entity to carry out a public purpose of support or stimulation.
And 31 USC § 6305 distinguishes between them according to the degree of involvement by the funding agency in the funded activity. Specifically, the law states that an agency “shall use a cooperative agreement … when … substantial involvement is expected between the executive agency and the … recipient when carrying out the activity contemplated in the agreement.”
So this raises the question: What is “substantial involvement”?
The law doesn’t say, nor does 2 CFR 200. But OMB published its policy implementing the law in the Federal Register (43 FR 36860 et seq.) on 18 AUG 1978. In that policy, agencies are given fairly specific direction regarding substantial involvement. That policy (paragraph C.2.) requires agencies to use restraint in defining substantial involvement, using cooperative agreements only when necessary.
USAID implements the OMB policy in its internal policy at ADS chapter 304. Paragraphs 304.3.3 through 304.5 are worthy of careful review, especially if you think you’re being offered the wrong type of instrument.
USAID further defines the limits of substantial involvement in ADS chapter 303, paragraph 303.3.11. You may want to review this paragraph if you think the AO is imposing more substantial involvement than is appropriate.
Basically, USAID policy is to use cooperative agreements only when necessary for the successful implementation of the funded activity. And USAID limits substantial involvement to the following four items:
- approval of the recipient’s implementation plans;
- approval of specified key personnel;
- agency and recipient collaboration or joint participation; and
- agency authority to immediately halt a construction activity.
But don't get your hopes up. In actual practice, USAID very strongly prefers using cooperative agreements, especially for awards to US NGOs. And it's worth noting that "agency and recipient collaboration" (third bullet, above) is spelled out further in the ADS as follows:
- collaborative involvement in selection of advisory committee members;
- concurrence in the substantive provisions of subawards;
- approval of the recipient's monitoring and evaluation plans; and
- monitoring of interrelationships with other projects, when specified in the program description.
See also:
Basic Facts about Funding Agreements
Working with the Funding Agency
Construction Activities