determine the initial amount of funds or credit to be made available, as well as the future needs for such advances.

(b) Special Bank Account(s).—All advances or other payments under the contract shall be made to the Institute's Special Bank Account(s) with a bank or banks approved by the Administrator. The funds in such Special Bank Account(s) shall not be mingled with other funds. of the Institute and shall be withdrawn from such account only as hereinafter provided.

(c) Use of Funds.-The funds in a Special Bank Account may be used by the Institute solely to pay allowable costs as defined in Article XIV of this contract, entitled "Allowable Costs".

(d) Bank Agreement.-Before any advance is made to a Special Bank Account, the Institute shall enter into an agreement with the bank at which such account is to be established in the form prescribed by the Administrator clearly setting forth the character of the account and the responsibilities of the bank with respect to it.

(e) Lien on Special Bank Account(s).-The Government shall have a lien upon any balance in the Special Bank Account (s) paramount to all other liens, to secure the repayment of any advances made hereunder together with interest.

(f) Lien on Property.-A lien in favor of the Government, paramount to all other liens upon the supplies and all other property of the Institute, shall be secured to cover any and all advances made hereunder. The Institute shall maintain adequate accounting control over such property on its books and records. If at any time during the performance of this contract it becomes necessary to deliver any item or items and materials upon which the Government has a lien as aforesaid to a third person, the Institute shall notify such third person of the lien herein provided and shall obtain from such third person a receipt, in duplicate, acknowledging, inter alia, the existence of such lien. A copy of each receipt shall be delivered to the Contracting Officer. If this contract is terminated in whole or in part and the Institute is authorized to sell or retain termination inventory acquired for or allocated to this contract, such sale or retention shall be made only if approved by the Contracting Officer. Such approval shall constitute a release of the Government's lien hereunder to the extent that the proceeds of the sale, or the credit allowed for such retention, is applied in reduction of advances then outstanding hereunder.

(g) Withdrawal and Withholding of Payments.-The Institute may at any time repay all or any part of the funds advanced under this contract. When so requested in writing by the Administrator, the Institute shall repay such of the advances as are in the Administrator's opinion in excess of current requirements. If the Institute fails to comply with such a request, the Administrator (i) may withdraw advances from the Special Bank Account by checks payable to the Government signed solely by the Administrator, or (ii) withhold amounts due the Institute from invoices submitted pursuant to Article XIII, entitled "Payment". Upon completion or termination of the contract, all remaining advances and interest charges shall be fully refunded. In any event the Contracting Officer may unilaterally take the following actions:

(i) Demand immediate repayment of the remaining balance of advances made hereunder; and

(ii) Take possession of and sell at public sale, at which the Government may be the purchaser, or at a private sale, all of any part of the property on which the Government has a lien under this contract and, after deducting any expenses incident to such sale, apply the net proceeds of such sale in reduction of any remaining balance of advances hereunder; and

(iii) The Government may apply such returns of advances to reduce any claims by employees of the Institute, claims of the Government, or other claims against the Institute;

(h) Local Currency.-The Institute shall, to the extent practicable, pay its expenses in Taiwan in local currency, and shall obtain its local currency from a Disbursing Officer or other source designated by the Administrator or the Contracting Officer.

(i) Interest Charges.-No interest shall be charged by the Department for advances made hereunder. The Institute shall charge interest at the rate established pursuant to Public Law 92-41, 85 Stat. 97, for the Renegotiation Board on subadvances or down payments to subcontractors, and such interest will be credited to the account of the Government. However, interest need not be charged on subadvances on subcontracts with nonprofit educational or research institutions for experimental, developmental or research work or as otherwise authorized by the Contracting Officer. To the maximum extent possible, funds in possession of the Institute pursuant to this Article or from any other source shall be deposited in interest bearing accounts which offer the maximum benefit to the Government.

(j) Covenants.-During the period of time that advances may be made hereunder and so long as any such advances remain available to the Institute, it shall not without the prior written consent of the Administrator:

(i) Mortgage, pledge, or otherwise encumber, or suffer to be encumbered, any of the assets of the Institute whenever acquired; (ii) Sell, assign, transfer, or otherwise dispose of accounts receivable, notes or claims for money due or to become due; (iii) Sell, convey, or lease any of its assets;

(iv) Acquire for value the stock or other securities of any corporation, municipality, or governmental authority, except direct obligations of the United States;

(v) Make any advance or loan to or incur any liability as guarantor, surety, or accommodation endorser for any other firm. person, or corporation;

(vi) Permit a writ of attachment or any similar process to be issued against its property without procuring release thereof or bonding the same within 30 days after the entry of the writ of attachment or any similar process;

(vii) Make any substantial change in management, ownership, or control of the corporation;

(viii) Deposit any of its funds in a bank not approved by the Administrator;

(ix) Create or incur indebtedness for borrowed money or advances other than advances to be made hereunder, except as specified herein;

(x) Make or convenant itself to make any capital expenditures; or

(xi) Make any payments on account of the obligations under this contract except in the manner and to the extent herein provided.

(k) Pursuant to the provisions of (b) through (j) above, the Institute may be required to receive, control, account for and disburse other Government funds as directed by the Administrator or the Contracting Officer.

ARICLE VII—PROHIBITION AGAINST ASSIGNMENT (IN LIEU OF CLAUSE 10 OF THE GENERAL PROVISIONS)

Notwithstanding any other provisions of this contract, the Institute shall not transfer, pledge, or otherwise assign this contract, or any interest therein or any claim arising thereunder, to any party or parties, bank, trust company, or other financing institution.

ARTICLE VIII-COMPENSATION AND BENEFITS OF EMPLOYEES

Employees shall be compensated in accordance with Attachment A, entitled "Compensation and Benefits for Institute Employees.' Payments by the Institute for personnel costs incurred in accordance with that Attachment shall be allowable costs under Article XIV of this Schedule. All American positions will be classified in accordance with position classification standards followed by the U.S. Government (Foreign Service or General Service, as appropriate). The position classification structure for the Institute will be subject to approval by the COR at the outset of performance, and on an annual basis thereafter.

ARTICLE IX-KEY PERSONNEL

(a) The Institute personnel currently filling the positions of the Director, Secretary, and Treasurer in Washington, D.C., and the head of the Institute's Taipei office, his or her deputy, and the administrative officer are considered essential to the successful performance of this contract. The COR may alter this list of such positions by notifying the Institute in writing.

(b) Any proposed replacement of such personnel by the Institute shall require the agreement of the COR in writing, The Institute shall provide the COR in advance of any proposed replacement with sufficient data outlining the background, education, experience and other qualifications for the position and of the individual concernced as the COR may require.

ARTICLE X- -SECURITY REQUIREMENTS

Security Requirements shall be as specified on Form DD-254, Attachment B, hereto.

ARTICLE XI-REPORTING REQUIREMENTS

The Institute shall furnish the following reports:

(a) Progress Reports.-Monthly, or more frequently as required by the COR, written reports of the progress of the Institute will be submitted to the COR. These reports shall be prepared to keep the COR

apprised on a timely basis of the Institute's programs, transactions, and other relations with or relating to the people on Taiwan and of events which might have an impact on the Institute or its intended mission.

(b) Contract Status Reports.-All other activities of the Institute not covered by the Progress Report shall be reported to the COR with a copy to the Contracting Officer on a monthly basis. Contract status reports shall cover separately all functions for which the Institute is responsible under this contract, including such items as finances, staffing, transportation, supply, housing, utilities, maintenance and communications. Identification of any actual or potential problems with the Institute's administrative plans for handling any problems should be indentified.

(c) Financial Reports.-The Institute shall submit periodic financial management reports to the Administrator, describing such items as costs incurred, percentage of estimated cost expended under the contract, or other items which would indicate a change in the Institute's financial conditions.

(d) Personnel Reports.-The Institute shall submit reports concerning its personnel as may be required by the COR.

(e) The form, content and detail of the above reports will be specified by the Contracting Officer, the COR or the Administrator.

ARTICLE XII-ACCOUNTING AND AUDIT

(a) The Institute shall promptly establish accounting and payroll systems which as a minimum will meet the applicable requirements of title 41, Code of Federal Regulations (CFR), chapter 1, section 1-15, and will provide other financial data required by the Administrator. Section 15 of 32 CFR shall be referred to if further guidance is needed.

(b) The accounting system shall be designed to charge the Department for all direct costs associated with the performance of the work covered under this contract and for all indirect costs which normally would be charged to General and Administrative or Overhead accounts for allocation to or among other cost centers (customers). The system should provide for accounting for allocable direct costs which may be incurred as a result of performance of functions contracted or otherwise provided for outside of this contract or for special projects which are being performed under this contract.

(c) The Administrator shall approve the Institute's accounting system prior to implementation. Subsequently, the Institute shall make changes in the accounting system upon the request of the Administrator.

(d) The Institute shall have a Certified Public Accountant, approved by the Administrator, audit all accounting and fiscal activities of the Institute at least once each year. Said accounting firm shall prepare and certify the Balance Sheets, a Statement of Financial Condition (similar to a Profit and Loss Statement) and a Cash Flow Statement for the annual period ending September 30 of each year and shall submit them to the Contracting Officer by November 1 of that year.

(e) The Institute shall permit the Comptroller General of the United States and other persons designated by the Contracting Officer to have access to the books and records of the Institute and to audit its operations. The Institute shall include provision for such access and audit in its grants and contracts, as directed by the Contracting Officer.

ARTICLE XIII-PAYMENT

(a) Once each month, or more frequently if authorized by the Contracting Officer or the COR, the Institute may submit to the COR, n such form and detail as may be directed, vouchers or invoices for the payment of costs incurred in accordance with Clause Number 7 of the General Provisions, entitled "Allowable Cost and Payment." (b) When receipt of goods or services has been certified, payment in the form of funds or continued credit shall be made into the Special Bank Account (s) established under article VI (b) of this Schedule by the following: Office of Finance-General Claims, P.O. Box 9487, Rossyln Station, Arlington, Va.

(c) Separate billing instructions will be provided to the Institute by the Contracting Officer, as appropriate, with respect to services performed by the Institute under article IV of this Schedule.

ARTICLE XIV-ALLOWABLE COSTS

Except as otherwise provided herein, all contract costs will be reimbursed as specified in Clause 7 of the General Provisions, entitled "Allowable Cost and Payment." Any charges for which the allowability is questioned by the COR or the Department's Auditor shall be submitted to the Contracting Officer for approval prior to payment. The decision of the Contracting Officer as to allowability of such charges shall be final and not subject to Clause 25 of the General Provisions, entitled "Disputes". Representational costs shall be considered allowable costs only to the extent approved by the Administrator in writing.

ARTICLE XV-RECORDS MANAGEMENT, PRIVACY AND FREEDOM OF INFORMATION

Even though the Institute as a private corporation is not subject to the Freedom of Information Act, the Privacy Act, or the Records Management Act, the Institute shall nevertheless establish records management policies and procedures which are consistent with the policies and procedures applicable to Government records covered by the Records Management Act, and shall maintain such records. consistent with the Freedom of Information and Privacy Acts as if such acts applied to the Institute. The Institute shall refer requests from the public for access to the Institute's records to the COR.

ARTICLE XVI-PROPERTY (GFP) AND SERVICES (GFS) FURNISHED TO THE INSTITUTE

(a) GFP will be furnished to the Institute as described in Attachment C. For the purposes of this contract, GFP shall include data and records transferred to the Institute or any records or data created in the performance of this contract. The list of GFP in Attachment C shall be updated quarterly for quantity changes and property additions and deletions. The Institute shall receive and utilize the GFP in accordance with Clause 23 of the General Provisions.

(b) Before implementing any management plan that contemplates the performance of a function by or for the Institute which would involve an increase in staff or the procurement of goods and/or