AmeriCorps National Service Program

CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

45 CFR Parts 2510, 2520, 2521, 2522, 2540 and 2550

RIN 3045-AA41

AmeriCorps National Service Program

ACTION:

Final rule.

SUMMARY:

The Corporation for National and Community Service (hereinafter the “Corporation”) is amending several provisions relating to the AmeriCorps national service program, and adding rules to clarify the Corporation's requirements for program sustainability, performance measures and evaluation, capacity-building activities by AmeriCorps members, qualifications for tutors, and other requirements.

DATES:

This final rule is effective September 6, 2005, with specific sections becoming applicable according to the implementation schedule in part VII of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

Amy Borgstrom, Associate Director for Policy, Department of AmeriCorps, Corporation for National and Community Service, 1201 New York Avenue, NW., Washington, DC 20525, (202) 606-5000, ext. 132. T.D.D. (202) 606-3472. Persons with visual impairments may request this rule in an alternative format.

SUPPLEMENTARY INFORMATION:

List of Topics

I. Background

II. Preliminary Public Input and Public Comments

III. Terminology Change: FTE to MSY

IV. Highlights of Proposed Rule

V. Broad Policy Issues

A. Sustainability Generally

B. Intermediaries

C. Education Award Program

D. Professional Corps

VI. Specifics of Final Rule and Analysis of Comments

A. Definitions of “Target Community” and “Recognized Equivalent of a High-School Diploma”

B. Member Service Activities

C. Increase in Required Grantee Share of Program Costs

D. Cap on Childcare Payments and Corporation Share of Health Care Benefits

E. AmeriCorps Grants Selection Process and Criteria

F. Corporation Cost per Member Service Year (MSY)

G. Performance Measures and Evaluation

H. Qualifications for Members Serving as Tutors and Requirements for Tutoring Programs

I. Non-Displacement of Volunteers

J. Transitional Entities

K. State Commissions Directly Operating Programs

VII. Effective Dates

VIII. Non-Regulatory Issues

IX. Rulemaking Analyses and Notices

I. Background

Under the National and Community Service Act of 1990, as amended (hereinafter “NCSA, or the Act,” 42 U.S.C. 12501

et seq.

), the Corporation makes grants to support community service through the AmeriCorps program. In addition, the Corporation, through the National Service Trust, provides education awards to, and certain interest payments on behalf of, AmeriCorps participants who successfully complete a term of service in an approved national service position.

On February 27, 2004, President Bush issued Executive Order (E.O.) 13331 aimed at making national and community service programs better able to engage Americans in volunteering, more responsive to State and local needs, more accountable and effective, and more accessible to community organizations, including faith-based organizations. The E.O. directed the Corporation to review and modify its policies as necessary to accomplish these goals.

In the Consolidated Appropriations Act for 2004, Congress directed the Corporation to reduce the Federal cost per participant in the AmeriCorps program and to increase the level of matching funds and in-kind contributions provided by the private sector. The Conference Report accompanying the 2004 Consolidated Appropriations Act directed the Corporation to engage in notice and comment rulemaking around the issue of “sustainability.”

On September 23, 2003, the Corporation's Board of Directors (the Board) had directed the Corporation to “undertake rulemaking to establish regulations on significant issues, such as sustainability and the limitation on the Federal share of program costs, consistent with any applicable directives from Congress.” On August 12, 2004, the Corporation published a Notice of Proposed Rulemaking (NPRM) in the

Federal Register

for public comment (69 FR 50124).

This rulemaking process is one of two the Corporation initiated in 2004, and addresses several significant and time-sensitive issues. The Corporation intends to implement these changes over the next year, with some taking effect in the AmeriCorps 2005 program year, and the remainder in the 2006 program year (See section VII. Effective Dates). The second process stemmed from a recommendation by the Board's Taskforce on Grant-making and is largely an effort to streamline and improve our current grant-making processes. That effort is already underway, and we plan to issue a Notice of Proposed Rulemaking for that purpose later this year. The two rulemakings address distinct and separate issues.

II. Preliminary Public Input and Public Comments

A. Preliminary Public Input

On March 4, 2004, the Corporation published a notice in the

Federal Register

inviting informal preliminary public input in advance of rulemaking (69 FR 10188). The notice outlined the general topics the Corporation was interested in addressing through rulemaking and posed questions for the public to consider in providing input. Following the notice, the Corporation held four conference calls and five public meetings across the country in Columbus, Ohio; Seattle, Washington; Boston, Massachusetts; Washington, DC; and Arlington, Texas, to frame the issues and collect public input. Through the hearings, conference calls, and e-mail and paper submissions, the Corporation received comments from nearly 600 individuals and organizations, and used this input to inform the drafting of the proposed rule.

B. 60-Day Comment Period

In the

Federal Register

of August 12, 2004 (69 FR 50122), the Corporation published the proposed rule with a 60-day comment period. In addition to accepting comments in writing, the Corporation held three conference calls and five public meetings across the country in Philadelphia, Pennsylvania; Atlanta, Georgia; Portland, Oregon; Denver, Colorado; and Chicago, Illinois. During the public comment period, the Corporation received 217 written comments and 78 oral comments from grantees, foundations, State governments, non-profits, Members of Congress, and other interested individuals and organizations.

The comments express a wide variety of views on the merits of particular sections of the proposed regulations, as well as some broader policy statements and issues. Acknowledging that there are strong views on, and competing legitimate public policy interests relating to, the issues in this rulemaking, the Corporation has carefully considered all of the comments on the proposed regulations.

The Corporation has summarized below the major comments received on the proposed regulatory changes, and has described the changes we made in the final regulatory text in response to the comments received. In addition to the more substantive comments discussed below, the Corporation received some editorial suggestions, some of which we have adopted and some of which we have not. The Corporation has made a number of other minor editorial changes to better organize or structure the regulatory text. Finally, the Corporation received a number of comments on issues outside the scope of the proposed rule, which the Corporation does not address in the discussion that follows.

III. Terminology Change: FTE to MSY

In the proposed rule, the Corporation defined cost per full-time equivalent (FTE), and referred to cost per FTE throughout the regulation. Until now, the Corporation has used the term FTE to describe the number of service years performed by a full-time AmeriCorps member (each service year being equal to 1,700 hours of service). Because the term FTE is most often associated with budgeting for employee payroll, we are replacing “FTE” with “Member Service Year” (MSY). We think this term more accurately describes units of AmeriCorps service, and we want to avoid any misimpression that AmeriCorps members are Federal employees. Consequently, the Corporation has amended the final rule to refer to cost per MSY, and uses MSY and cost per MSY throughout this final rule in lieu of FTE and cost per FTE, respectively.

IV. Highlights of Final Rule

This final rule includes a targeted series of reforms designed to strengthen the impact, efficiency, and reach of AmeriCorps, our AmeriCorps grantees, and the Corporation. Our primary objectives are to:

• Create a framework for long-term growth and sustainability of the AmeriCorps program as a public-private partnership;

• Provide consistency, reliability, and predictability for AmeriCorps grantees;

• Enhance the measurable positive impact of the AmeriCorps program on:

—Communities and beneficiaries that receive service;

—Non-profit organizations and community infrastructures that host service; and

—AmeriCorps members who serve;

• Resolve longstanding issues relating to Federal share, Corporation cost per member service year (MSY), and sustainability of AmeriCorps projects to minimize uncertainty about annual grantee funding levels and restrictions;

• Assure fiscal and programmatic accountability and effective performance measurement for the Corporation, AmeriCorps, and grantees; and

• Generate additional and wider varieties of grant applicant organizations. In addition, wherever possible, this rule reflects the Corporation's determination to:

• Eliminate unnecessary paperwork burdens on Corporation grantees;

• Strengthen AmeriCorps' ability to respond to State and local needs;

• Engage more community volunteers;

• Include community organizations, including faith-based organizations, in all Corporation programs; and

• Invigorate the competitive grant-making process.

Existing and potential AmeriCorps grantees are a strong and diverse group of talented and innovative forces for change, with different needs, circumstances, and abilities. Therefore, the Corporation has endeavored, throughout these regulations, to:

• Use competitive criteria to foster and encourage, rather than require, desired actions or activities; and

• Tailor implementation of the regulatory requirements based on the unique goals and circumstances of grantees, including limited waivers if appropriate.

The Corporation has focused reforms in the final rule on four main areas: Sustainability of AmeriCorps programs, including decreasing grantee reliance on Federal resources and decreasing Corporation costs per MSY; Grant selection criteria; Performance measures and evaluation; and Tutor qualifications and other requirements for tutoring programs. The proposed rule also included a discussion in some detail of several non-regulatory issues including the Corporation's goal of streamlining continuation applications and adjusting grant cycles. As discussed in the proposed rule, the Corporation is undertaking both those reforms outside of these regulations.

The Corporation is publishing these regulations pursuant to the Chief Executive Officer's statutory authority to “prescribe such rules and regulations as are necessary or appropriate to carry out the national service laws.” 42 U.S.C. 12651c(c). The Corporation intends to monitor the impact of this final rule on grantees.

The next section of this preamble, section V, addresses sustainability, and specific issues concerning intermediaries, Education Award Program grantees, and professional corps programs. Section VI includes a section-by-section summary and analysis of the major comments we received and the Corporation's response. Section VII of this preamble addresses implementation of the final rule. Section VIII addresses several non-regulatory policy issues the Corporation considered in light of the public input and comments we received.

V. Broad Policy Issues

A. Sustainability

Many of the comments the Corporation received addressed the issue of sustainability. Many suggested that the Corporation had too narrowly defined sustainability in the proposed rule as only including financial or monetary measures, and had given insufficient consideration to other measures of sustainability, such as community support and partnerships, and program quality. Those commenting on the definition generally suggested various revisions on the same theme of defining sustainability broadly and beyond just financial commitments. Two commenters suggested that sustainability be measured by criteria that capture capacity in terms of program quality and cost structure, fiscal and community support, partnerships, and leveraged resources, including volunteer hours and in-kind goods and services. The Corporation agrees that sustainability includes many elements beyond cost, and has modified the rule language in several places to bring greater emphasis on multiple and diverse measures of sustainability.

The Corporation did not intend for the proposed rule to define sustainability solely in terms of money, nor did we intend for sustainability itself to be viewed as the only factor in the grant selection process. The Corporation's intent was to broadly define sustainability and to specify measures of sustainability in the grant selection criteria and program requirements. At the same time, the Corporation does believe that decreasing the federal share of costs for AmeriCorps programs is essential to sustainability, and we have, thus, retained increased matching requirements as a key part of our effort to boost program sustainability.

As stated in the proposed rule, the Corporation's annual appropriation and its authorizing legislation, as well as E.O. 13331, support this approach to sustainability. In our annual appropriations act each year dating back

to fiscal year 1996, and most recently in the Consolidated Appropriation Act for fiscal year 2005, Congress directed the Corporation to “increase significantly the level of matching funds and in-kind contribution provided by the private sector,” and “reduce the total Federal costs per participant in all programs.” Section 133(c)(3) of the Act requires the Corporation to include in its selection criteria the sustainability of the national service program, based on evidence such as the existence of strong and broad-based community support for the program, and of multiple funding sources or private funding for the program. Section 130(b)(3) of the Act authorizes the Corporation to ask an organization “re-competing” for funding after a three-year initial grant period to include a “description of the success of the programs in reducing their reliance on Federal funds.” In addition, E.O. 13331 directs that “national and community service programs should leverage Federal resources to maximize support from the private sector and from State and local governments.”

While the Corporation is committed to meeting these goals, in our view, they do not require imposing across-the-board limitations on the number of years an organization may receive funds, particularly given the many organizations providing valuable infrastructure and experience that enable national and community service to continue to thrive across the country. At the national level, the Corporation continues to believe it unnecessary to disqualify an organization from receiving Federal funding based on the number of years that organization has received funding. To do so would ultimately result in a loss of some of the strongest organizations with the capacity, infrastructure, and experience to provide high-quality service and deliver results that strengthen and expand national and community service. We do believe, however, that the majority, if not all, of the organizations that receive Corporation funds can and should increase their share of program costs as their programs mature.

Through increased sustainability, the Corporation seeks to expand the national service field and provide new organizations the opportunity to participate in national and community service programs. The Corporation also seeks to strengthen the capacity of existing national and community service programs by promoting an expansion and diversification of their non-Corporation funding sources, and strengthening the competitive framework. At the same time, the Corporation wants to treat grantees fairly and equitably and avoid impairing their independence, operating flexibility, and autonomy.

As described in more detail below, the Corporation's strategy to increase organizational sustainability and expand national and community service has six main elements:

1. Incorporates the broad spectrum of sustainability elements throughout the Corporation's grant selection criteria and program requirements.

2. Increases the emphasis in the selection process on program cost-effectiveness, including using Corporation cost per MSY as one of several measures of cost-effectiveness.

3. Increases, based on a predictable schedule and incremental scale, the grantee share of program costs to a 50 percent overall level by the 10th year in which an organization receives AmeriCorps funding for the same program. Programs in severely economically distressed or rural areas are eligible to apply for permission to meet an alternative match schedule, which would increase their grantee share to a 35 percent overall level by the 10th year in which an organization receives AmeriCorps funding for the same program.

4. Requires State commissions to develop and implement a sustainability approach as part of their oversight function.

5. Targets a percentage of non-continuation AmeriCorps State and national grant funds each year for new applicants.

6. Provides technical support and limited exceptions to organizations that demonstrate hardship in meeting the increasing match requirements.

With the exception of the fourth and fifth elements, which are not included in the regulatory language and which we address immediately hereafter, the individual section discussions that follow in part VI address each of the other elements of sustainability in more detail.

State Commission Sustainability Approaches (§ 2550.80(a)(3) in Proposed Rule)

Part of the Corporation's sustainability strategy is to build upon what some States are already accomplishing in the sustainability arena. The Corporation understands that roughly 25 percent of the State commissions already have written sustainability policies or approaches through which they promote sustainability and encourage new programs in their States. Some States, for example, gradually and predictably reduce their subgrantees' Corporation cost per MSY over 12 years, to allow the commission to invest resources in new programs and encourage on-going programs to develop efficiencies and enhance community support. One State commission requires, among other things, that its subgrantees develop their own sustainability plans and increase the subgrantee share of program operating costs over a seven-year period to 75 percent. Some States, in addition to requiring a small increase in program share of member support costs over a three-year period, actively solicit private donations to use, in part, to help local AmeriCorps programs develop relationships with corporate donors and increase private support. The Corporation praises these efforts and encourages State commissions to consider these and other approaches to promote program sustainability in their States.

In an effort to promote these State sustainability efforts, the proposed rule required each State to describe its sustainability approach in its State-wide service plan.

Several commenters expressed confusion regarding the proposed requirement. One viewed this provision as requiring States to duplicate the new Federal sustainability and matching regulatory requirements. One State commission indicated that it may develop additional sustainability requirements for programs in its State, but did not wish to report those requirements to the Corporation. Another commission supported the development of local sustainability plans for States, but sought clarifying language that would leave room for States to determine sustainability for themselves.

The Corporation supports the efforts that States are making towards sustainability in their respective States. Furthermore, the Corporation notes that State commissions may generally choose to impose more stringent requirements on State subgrantees than the Corporation's requirements. The Corporation's intent in proposing the reporting requirement was to ensure that each State engage in meaningful discussions about how it should manage its portfolio to maximize long-term impact of programs in the State. The Corporation expects State commissions to consider, in developing their sustainability plans, whether they should add any sustainability requirements to the Corporation's minimum requirements, as well as what strategies the State may use to develop capacity and sustainability of projects and service in the State.

The Corporation has now concluded that the State-wide service plan (formerly “unified State plan”) is not necessarily the best mechanism for obtaining this information. Rather, the Corporation believes that the most efficient way for commissions to report on their sustainability plans is through their administrative funds application. The Corporation plans to add one or more questions to the administrative application through which States will report their sustainability plan efforts. The Corporation is, therefore, removing from the final rule the requirement that State commissions submit a sustainability plan to the Corporation. Paragraph (a)(3) of section 2550.80 in the proposed rule has been deleted.

Funds Targeted for New Programs

The Corporation anticipates annually targeting a percentage of AmeriCorps funds for grants to new applicants. To give us the ability to manage our nationwide portfolio and ensure the appropriate mix of programs, the Corporation will determine the category of applicants eligible to receive the targeted funds annually and announce it in the relevant funding announcement.

The target amount will vary, rather than be a fixed amount that the Corporation must use for new programs each year. In some years, the Corporation may receive enough high-quality new program applications to meet or even exceed the target, and in other years, if the new program applications are not of sufficient quality to merit funding, the number of new programs funded may be lower than the amount targeted for that purpose. The Corporation will, to the maximum extent possible, announce the amount targeted for new programs prior to the submission deadline.

One commenter agreed with the Corporation's efforts to support new programs, but expressed concern that this support should not lead to replacing high-quality existing programs with new programs. This commenter supported the Corporation setting aside funding for new programs only under limited circumstances, including: (1) A year when “new” funding represents the majority of the funding available for new and recompeting programs; or (2) a year when there is a substantial amount of new funding made available through an increase in appropriations for AmeriCorps grants of 10 percent or more. In addition, the commenter supported grants awarded out of set-aside funds based on the results of a “truly competitive” process.

The Corporation disagrees with this commenter's suggestions. The Corporation will determine the target percentage annually based on the availability of appropriations and the projected number of recompeting applications, and publish this information, including posting it on the Web site at

www.nationalservice.gov,

in advance of the selection process. The Corporation will not, however, tie itself now to the specific parameters the commenter suggests. The Corporation will ensure that the process for selecting new programs is competitive and results in the selection of high-quality proposals, as for all its AmeriCorps grant competitions.

Several commenters did not support targeting funds for new programs. Other commenters noted that competition is the best way to increase the number and diversity of organizations funded over time. The Corporation views targeting funds for new programs as an important incentive for new organizations to consider applying for AmeriCorps funds, when they otherwise might not. The Corporation acknowledges that its legislative requirements can appear daunting to organizations unfamiliar with AmeriCorps or new to national and community service, particularly when competing with existing organizations that have had the opportunity to learn from experience. The Corporation therefore hopes that, by targeting funds for new programs, more new organizations will apply, thereby increasing the likelihood that more new programs will receive funding. The Corporation will award all of its AmeriCorps funds, including those targeted for new programs, through rigorous competition, to ensure that we fund the best possible programs that will demonstrate strong results and help address our communities' unmet needs.

One commenter asked whether the Corporation would announce the amount we would target for new programs before the selection of grantees or prior to the submission deadline. While the Corporation will generally announce the amount of funds we will target for new programs before the submission deadline, in some years, we may not receive our appropriation until close to the application deadline or after applications are due. In that case, the Corporation would announce the amount targeted for new programs as soon as possible after receiving our annual appropriation.

Several commenters asked that the Corporation specify the annual percentage, or at the very least the maximum annual percentage we will target for new programs. The Corporation cannot specify in this rule how much—if any—we will target for new programs each year because the target amount will depend each year on the level of our annual appropriation, as well as the number of continuation programs and the level of their respective grant requests.

One commenter asked whether States would be required to set-aside a percentage of their formula funds for new programs. The Corporation will not require States to set aside or target formula funds for new programs, although a State may choose to do so.

Another commenter suggested the Corporation hold a competition to determine the best quality programs before targeting money for new programs. The Corporation intends only to fund high-quality programs and does not believe it necessary to determine the quality of applications through a separate process. As discussed above, the amount the Corporation annually targets for new programs will not be a fixed amount. If the Corporation has any remaining funds from the amount allocated for new high-quality programs that year, the Corporation will make these funds available to recompeting and continuation grantees.

Other Sustainability Issues

Several commenters expressed concern that the Corporation's proposed sustainability strategy may in fact jeopardize programs in low-income and economically-distressed regions of the country. As discussed more fully in the section dealing with increased grantee share, the final rule accommodates programs located in rural or severely economically-distressed areas of the country that are unable to meet the higher match requirements by allowing them to request a waiver that would qualify them for an alternative lower match requirement. The rule also includes programs in rural and severely economically-distressed areas in the list of programs eligible for special consideration in the competitive selection process.

One commenter expressed concern that fundraising costs are currently not included in the budgets submitted to the Corporation, obscuring the true cost of doing business as an AmeriCorps program. This commenter suggested that, given the increased emphasis on program fundraising and increased match, the Corporation request an exception from the Office of Management and Budget to allow development costs to count as match or be reimbursed. It is government-wide Federal policy that fundraising costs are not reimbursable, and the Corporation can find no basis upon which it may deviate from that policy. Many other

Federal grant programs require a 50 percent match without corresponding OMB waivers relating to development costs.

Another commenter suggested that the Corporation apply different, presumably less rigorous, sustainability requirements and measures to “stand alone” AmeriCorps programs—that is, organizations whose sole purpose is to carry out AmeriCorps. Again, the Corporation does not find sufficient merit to the suggestion to make a change in the final rule. Sustainability is one of the core principles of this rule. While the final rule carves out some limited exceptions to the sustainability requirements, the characteristics of a “stand-alone” AmeriCorps program are not sufficiently different from other AmeriCorps programs to warrant different treatment. Moreover, the Corporation wants to avoid creating a disincentive for an organization to diversify its activities.

In several places in this final rule, the Corporation makes a distinction between compliance with a requirement and performance under the competitive selection criteria. For example, the final rule requires programs to recruit or support volunteers, unless the Corporation waives the requirement. At the same time, the selection criteria for AmeriCorps grants include volunteer recruitment and support as a competitive criterion. A proposal that does not include volunteer recruitment or support will potentially score lower in that category, regardless of whether, ultimately, the Corporation waives the volunteer recruitment or support requirement when making an award. Similarly, in the area of match, the Corporation is establishing minimum requirements for grantees that the Corporation will enforce, generally upon closing out a grant. If a grantee has not met its minimum required match, the grantee will have to repay funds to the Corporation. The selection criteria, on the other hand, look at match also from a performance perspective: An organization's failure to meet its budgeted match may negatively impact its success in the competitive process, but will not translate into a requirement that the organization repay funds. When considering the final rule, one should bear in mind this distinction between compliance and performance.

The Corporation believes that its approach represents a fair, equitable, and authoritative resolution of the issue of programmatic, organizational, and financial sustainability. The rules are authorized by, and consistent with, our enabling legislation, and support our goals of supporting and strengthening high-quality programs while leveraging Federal resources to achieve the greatest benefit possible for our nation's communities. Predictability and consistency are crucial elements of this rulemaking. Thus, we seek to provide clear guidance to our grantees on our long-term expectations for sustainability, which we believe conclusively resolves the issue.

B. Intermediaries

The Corporation received significant public comment regarding intermediaries and, in particular, the potential effect on those entities of efforts to promote sustainability. There is, and should continue to be, a prominent place for intermediaries in the national and community service portfolio, particularly given their important role in reaching smaller community organizations, including faith-based organizations. The Corporation recognizes that many intermediary models include a regular infusion of new sites, which, as with any new program, may have higher costs initially. In designing the selection criteria, the Corporation has explicitly recognized the potentially higher cost of some intermediary models.

One commenter suggested that the Corporation define “intermediary” as a program that “places members in community-based and faith-based organizations in specific communities.” This commenter indicated that these intermediary model programs are more expensive because they take on new partnerships each year and must manage multiple partnerships. The higher relative cost of these intermediary models should, according to this commenter, be recognized in the selection criteria for cost-effectiveness. As discussed in the selection criteria below, the cost-effectiveness criteria specifically take into account, among other things, the higher relative costs of programs that either bring on new sites or engage or serve difficult-to-reach populations. As far as defining “intermediary,” the suggested definition is, based on the Corporation's experience, too imprecise. The Corporation has spent considerable effort examining intermediaries and has determined that its portfolio of grantees includes many different models of intermediary, such that including a cost-effectiveness criterion for a multi-faceted category of organizations would not be appropriate or workable.

The Corporation has set matching requirements generally at the grantee or parent organization level, rather than at the member placement or service site level, and we have not adjusted the matching requirements based on the proportion of new sites in any given year. We believe that establishing the matching requirements at the parent organization level gives greater flexibility to intermediaries to manage and achieve a healthy mix of new and established sites. As discussed more fully below in section VI(C), the Corporation is sensitive to the fact that the increased match requirements may create obstacles for some intermediary organizations. In particular, the Corporation is concerned about intermediary organizations that place members in small and new grass-roots organizations in needy communities, and rely on those communities to contribute matching resources to the intermediary in order to participate.

C. Education Award Programs (EAP)

The Education Award Program (EAP) allocates education awards to national, State and local community service programs that can support most or all of the costs associated with managing the service of AmeriCorps members from sources other than the Corporation. Several commenters recommended that the final rule clarify the extent to which its provisions apply to Education Award Programs (EAP). One commenter recommended that EAP grantees be exempted from all “irrelevant sections,” including those referring to match generation, volunteer generation, evaluation, and health care.

The final rule explicitly excludes Education Award Program grantees from its provisions where necessary, and as described herein.

EAP—Sustainability and Cost Effectiveness

Several commenters opined that the discussion of sustainability and its related implementation simply should not apply to EAP grantees. These commenters believe that EAP programs are the epitome of sustainability, because they already manage programs with minimal financial assistance from the Federal Government, other than the education award that members receive for completing a term of service. In particular, these commenters opposed using cost per MSY as a selection criterion for Education Award Program grantees, as these grantees receive fixed amount grants of $400 per MSY currently. Two commenters indicated that EAP programs invest significant amounts of non-Corporation resources in their programs, and they are concerned that the Corporation has not recognized or rewarded that investment in considering program sustainability.

In the final rule's selection criteria, the Corporation has retained Corporation cost per MSY as an important factor to consider in determining a program's cost-effectiveness for programs other than Education Award Program grantees. For Education Award Program grantees, the Corporation has included explicit language to make clear that Corporation cost per MSY is not a factor in considering their cost-effectiveness. However, other measures of cost-effectiveness will apply to Education Award Program grants.

The Corporation agrees that the EAP program is a clear example of a sustainable program from a financial perspective. The Corporation is aware of the significant financial contribution and investment that EAPs make in their programs and the relatively small amount of money they receive from the Corporation. The question, in evaluating EAP programs in the selection process, is the extent to which they can demonstrate sustainability in other ways. For example, an EAP program will fare better in the competitive process if it can show that its program is having a sustainable impact in the community, or its members are continuing to show, post-service, an ethic of service.

One commenter asked whether the current $400 cost per MSY for EAP programs would be increased. Another commenter indicated that the Corporation's reporting requirements have become increasingly burdensome, while the cost per MSY for Education Award Programs has steadily declined. Whether or not to increase the $400 cost per MSY is outside the scope of this regulation. The Corporation, as indicated below, is committed to streamlining its reporting requirements while ensuring accountability and sustainability, and will continue to work towards that goal for all its grantees.

EAP—Member Service Activities

Sections 2520.20 through 2520.55 of the final rule address allowable member service activities, and include a requirement that some component of each AmeriCorps program must involve recruiting or supporting volunteers. As discussed in part VI, encouraging more Americans to engage in service and volunteer activities is one of the pillars of our sustainability goals. Like any other AmeriCorps applicant, any EAP grantee that believes recruiting or supporting volunteers would fundamentally alter its program model may apply for a waiver of this requirement.

EAP—Non-Displacement of Volunteers

The proposed rule stated that the service of an AmeriCorps member must complement, and may not displace, the service of other volunteers in the community, including partial displacement such as reducing a volunteer's hours. As discussed below in the section addressing the non-displacement of volunteers provision (§ 2540.100), the Corporation has amended that section to remove these particular references to volunteer hours, in favor of a broader focus on addressing unmet needs. The Corporation will enforce this rule for all AmeriCorps programs, including EAP programs.

EAP—Performance Measures

The Corporation expects all its grantees, including EAP grantees, to adhere to performance reporting requirements. Performance measures are critical to demonstrating that national and community service programs are having their intended impact in our communities.

EAP—Evaluation

The proposed rule clearly indicated that EAP grantees would not be required to perform an independent evaluation of their programs. The final rule, while not requiring an independent evaluation, will require EAP grantees to perform an internal program evaluation, and submit that evaluation with the appropriate recompete application. This provision is consistent with the requirements in the NCSA.

D. Professional Corps

Professional Corps programs place members as teachers, nurses and other health care providers, police officers, early childhood development staff, engineers, or other professionals providing service to meet unmet needs in communities with an inadequate number of such professionals. Professional Corps programs pay 100 percent of the member support costs, but receive operating funds and an allocation of education awards for their members. Several commenters reiterated their desire that the Corporation establish separate application guidelines for professional corps programs to reflect the fact that they are responsible for 100 percent of the benefits paid to AmeriCorps members, and that their program model may be inconsistent with some of the general program requirements, such as volunteer recruitment and required training. The Corporation believes, however, that most program requirements can and should apply to all AmeriCorps programs, including Professional Corps programs, and therefore does not necessarily see a need for separate guidelines. If a program demonstrates, in its funding application, that its program design is incompatible with the requirement to recruit or support volunteers, the Corporation will consider waiving the requirement that programs recruit or support volunteers.

In addition, the Corporation has already taken the extra step of soliciting proposals for Professional Corps programs in a separate NOFA, and envisions doing so again in the future. The Corporation believes, however, that professional corps programs, particularly those for which the cost is largely borne by sponsoring organizations, will continue to compete well in all our AmeriCorps grant competitions. By grouping similar program models together in our selection process, the Corporation will ensure, to the maximum extent possible, that professional corps programs are evaluated together. The Corporation believes that all of these steps obviate the need for a separate set of application guidelines for professional corps programs.

Several commenters asked whether the Corporation intends for all teaching fellows programs to apply under a professional corps NOFA, rather than as Education Awards programs. Professional corps may apply under other applicable NOFAs, such as AmeriCorps State, National, or EAP, in addition to any applicable Professional Corps only NOFA.

VI. Specifics of the Final Rule and Analysis of Comments

As discussed in more detail below, the final rule:

• Defines the term “target community” as the geographic community in which an AmeriCorps grant applicant intends to address an identified unmet need.

• Defines the term “recognized equivalent of a high-school diploma” as including documents recognized for this purpose by the U.S. Department of Education.

• Clarifies the types of service activities in which AmeriCorps members may engage and explains the parameters for grantees and members to engage in capacity-building service activities, including volunteer recruitment and support.

• Increases, in an incremental and predictable fashion, the grantee's required share of program costs to a 50 percent overall match plateau over 10 years; provides alternative matching requirements for programs located in rural and severely economically

distressed communities, increasing the grantee's required share of program costs to a 35 percent overall match plateau over 10 years.

• Codifies that the amount of childcare payments the Corporation makes to an eligible provider on behalf of an AmeriCorps member may not exceed the amount authorized under the Child Care and Development Block Grant Act of 1990 (Pub. L. 101-508).

• Codifies the grant selection process and criteria.

• Clarifies how grantees are to calculate their budgeted Corporation cost per member service year (MSY).

• Codifies the Corporation's requirements for grantees to establish performance measures and to evaluate program outcomes, and establishes a grant amount threshold for required independent evaluations.

• Establishes qualifications for members serving as tutors and requirements for tutoring programs.

• Prohibits displacement of volunteers.

• Removes obsolete references to “transitional entities” serving as State commissions on national and community service.

• Broadens State commission flexibility to operate specified national service programs directly.

A. Definition of “Target Community” and “Recognized Equivalent of a High-School Diploma” (§ 2510.20)

Target Community

In the proposed rule, the Corporation defined the term “target community” as the geographic community for which an AmeriCorps grant applicant identifies an unmet human need. The Corporation assumed that educational, environmental, and public safety needs were all subsumed within the term “human need.”

Two commenters interpreted this language as excluding educational, environmental, and public safety needs from the definition. In order to clarify our intent, the Corporation has amended the language to specifically include educational, environmental, and public safety needs (including disaster preparedness and response), in addition to other human needs. The Corporation has also made technical changes to the definition to make it clearer.

Recognized Equivalent of a High-School Diploma

In reading the comments on the proposed tutor requirements, the Corporation concluded that grantees were not clear that the term “high-school diploma or its equivalent” means more than simply a high-school diploma or a GED. For the sake of clarity, the Corporation is including a technical amendment to § 2510.20 to clearly define what is a recognized equivalent to a high-school diploma. The definition incorporates the Department of Education's definition of the equivalent to a high-school diploma. Under the Department of Education's regulations (34 CFR § 600.2), the equivalent to a high-school diploma includes not only a GED, but also (1) a State certificate received by a student after the student has passed a State-authorized examination that the State recognizes as the equivalent to a high-school diploma; (2) an academic transcript of a student who has successfully completed at least a two-year program that is acceptable for full credit towards a bachelor's degree; or (3) for a person seeking to enroll (or enrolled) in an educational program that leads to at least an associate degree or its equivalent and who has not completed high school but who excelled academically in high school, documentation that the student excelled academically in high school and has met the formalized, written policies of the institution for admitting such students.

B. Member Service Activities on Behalf of the Organization (§§ 2520.20 Through 2520.60)

Except for those member activities specifically prohibited in sections 132 and 174 of the Act, as amended, the Corporation has broad authority to determine appropriate service activities for AmeriCorps members. In the proposed regulation, the Corporation largely codified and clarified the Corporation's current guidelines and grant provisions on this issue. Specifically, the proposed rule clarified that AmeriCorps members may: (1) Perform direct service activities, and (2) engage in other activities that build the organizational and financial capacity of nonprofit organizations and communities, including volunteer recruitment and certain fundraising activities.

Several commenters supported allowing AmeriCorps members to be involved in capacity-building, including fundraising activities. Others expressed concern that AmeriCorps may be diluting its mission by allowing members to engage in capacity building activities, rather than direct service exclusively. One commenter opposed members engaging in anything other than direct service, on the basis that partner organizations are providing matching resources for direct services provided onsite, such as tutoring during the school day. Another commenter expressed the hope that this policy of allowing member capacity-building activities remain an opportunity for programs, but not become a mandate.

The principal purpose of AmeriCorps is still direct service and “getting things done” in our communities and our country. With the exception of the requirement that programs recruit or support volunteers, the final rule does not require that programs allow members to engage in any other capacity-building activities. The final rule merely permits members to engage in such activities, at the discretion of the program. That said, the Corporation believes that AmeriCorps members and AmeriCorps funds have the ability to leverage resources and increase the capacity of the organizations with, and the communities in which, they serve. The Corporation sees no compelling reason to limit members only to direct service, as valuable as that is, when they could also be recruiting or supporting volunteers, helping to raise funds for their projects, and helping to build sustainable service in their communities. Because these activities promote sustainability, which is one of the primary reasons for this rulemaking, the final rule remains unchanged from the proposed rule in terms of permitting members to engage in both direct service and capacity-building activities.

One commenter recommended adding K-12 education as a fifth example under “developing collaborative relationships with other organizations working to achieve similar goals in the community” in § 2520.30(b)(4). The Corporation agrees that including K-12 education in that section is appropriate, but believes that the broader category of “local education agencies or organizations” is the most appropriate descriptor. Consequently, the Corporation has added “local education agencies or organizations” as a fifth example in § 2520.30(b)(4).

AmeriCorps Members Serving With Faith-Based Organizations

The Corporation received comments from several organizations about AmeriCorps members serving with faith-based organizations. Of the comments relating to matters in the proposed rule, one recommended that the Corporation clarify the final rule to ensure that activities on behalf of participating organizations meet statutory and constitutional safeguards regarding religious activity. Specifically, this commenter recommended that §§ 2520.20 through 2520.65 be amended to acknowledge the statutory restrictions on member activities. Another

commenter recommended that the Corporation develop and provide clear guidance for AmeriCorps programs working with faith-based organizations.

The redesignated section 2520.65 (formerly § 2520.30) of the regulations addresses AmeriCorps members' prohibited activities, including those relating to religious activities. The Corporation believes that these prohibitions are sufficiently clear, and further that it would be outside the scope of this rulemaking process to amend them at this time.

One commenter suggested that the regulations require faith-based organizations that receive AmeriCorps funds to establish a separate corporate structure to receive and segregate government funds and the capacity-building activities thereby supported. The Corporation disagrees with this suggestion. While an organization is free to establish a separate account for its Corporation funds, it would be unfair to require faith-based organizations to comply with these additional burdens. Except for the Education Award Program, which offers a modest fixed amount grant, the Corporation requires all its grantees to track their Corporation funds separately and to ensure that they use their Corporation funds only for reasonable and necessary expenses and permissible program activities.

Volunteer Recruitment or Support (§ 2520.35)

One focus of Executive Order 13331 is leveraging Federal resources “to enable the recruitment and effective management of a larger number of volunteers than is currently possible.” The proposed regulations clearly directed that some component of an AmeriCorps grant must help build the long-term capacity of nonprofit organizations and the community by recruiting and supporting volunteers. While this has implicitly been a requirement over the past two years, clarifying and reinforcing this requirement in regulation is expected to encourage more Americans to engage in service and volunteer activities, and advance program goals.

One commenter stated that its new homeland security program was successful because AmeriCorps became a tool for partnering with local American Red Cross chapters to maximize the effectiveness of community volunteers by offering them a structured, supervised and coordinated volunteer experience.

On the other hand, several other commenters expressed reservations about the proposed requirement that programs recruit or support volunteers. One commenter stated that it would “not be an effective use of resources to pull AmeriCorps into volunteer recruitment,” and that the regulation should be broadened to allow AmeriCorps members to support existing volunteer efforts, rather than requiring every program to generate and recruit volunteers. The language in § 2520.35 of the proposed rule specifically gives programs the option of recruiting

or

supporting volunteers—it does not require all programs to recruit volunteers. Some programs, for example, may not be able to recruit volunteers, but may be able to support volunteers recruited by other organizations. The Corporation, therefore, has not changed the language in this section of the final rule.

Several commenters stated that the recruitment, supervision, and training of volunteers requires higher levels of training and management skills than members generally have, and detracts from direct service and service outcomes. One of these commenters suggested that the Corporation encourage volunteer recruitment, rather than require it. Another commenter stated that the Corporation should not stress sheer numbers of volunteers to the detriment of quality service and effectiveness. In particular, this commenter suggested that the Corporation should guard against taxing the volunteer base beyond its capacity, bearing in mind that all its streams of service, including AmeriCorps State and National, AmeriCorps VISTA, Learn and Serve, as well as Citizen Corps, America's Promise, and the Points of Light Foundation, are recruiting from the same pool of potential volunteers.

As stated in the proposed rule, the Corporation does not intend for this requirement to distract from an organization's mission, nor do we expect grantees to replace direct service with volunteer generation and other capacity-building activities. In most cases, direct service and volunteer recruitment or support can complement each other to strengthen programs and communities. When considering how an AmeriCorps program can promote the effective involvement of volunteers, applicants have the flexibility to determine the best way to enhance or build upon the direct service goals of the program in which the AmeriCorps members are serving and to propose capacity-building activities accordingly. The Corporation strongly believes that most, if not all, programs can support the goal of increasing and supporting volunteering in this country.

As discussed in the proposed rule, however, the Corporation recognizes that some program models, such as certain professional corps, youth corps, and programs in some rural locations with a limited volunteer pool, may not be able to include significant volunteer recruitment or support in their program model, and the Corporation will take these and other factors into account in considering requests to waive the requirement that programs recruit or support volunteers.

The Corporation is maintaining the requirement that programs recruit or support volunteers as currently drafted. We believe that requiring programs to recruit or support volunteers is central to the Corporation's mission of leveraging resources.

One commenter was concerned that many of the member activities permitted by the proposed rule are currently activities performed either by volunteers or employees. This commenter, therefore, read the proposed rule as encouraging displacement of volunteers and employees. In fact, the Corporation prohibits displacement of volunteers and employees. The Corporation only funds programs whose activities add value beyond what would occur in the absence of our funding. Any program that simply replaces volunteers or staff with AmeriCorps members performing the same activities will, by definition, be unable to demonstrate that its program adds value and meets unmet needs in the community.

One commenter saw a disparity between full-time programs and part-time programs in terms of their ability to recruit and support volunteers, and the potential for the Corporation to favor full-time programs. This commenter's view was that a full-time program has more resources upon which to draw when recruiting volunteers and thus an advantage in the grant selection process. The Corporation does not favor full-time over part-time programs, or vice versa. The Corporation seeks to achieve the best use of its resources in light of priorities and funding constraints. In applying its selection criteria, the Corporation has sought to take into account similarities and differences between programs, including part-time and full-time programs. A program of members serving less than full-time would have the opportunity to articulate in its application the challenges it faces in meeting any particular requirement or selection criterion, including the volunteer support requirement.

Several commenters asked whether a program in which AmeriCorps teaching fellows guide K-12 students in a service-learning project could count those students as volunteers for purposes of the volunteer support

component. These commenters said that most Teaching Fellows Programs have a service-learning requirement and that, given the increasing use of service-learning in K-12 schools as a way to connect academic learning to service, it would be helpful to see this reflected in the new rule. One commenter recommended that the section be renamed “Volunteer Recruitment or Service Learning” to ensure that AmeriCorps won't be criticized for counting mandatory K-12 class activities as “volunteer” work.

The Corporation intends to interpret the requirement that programs recruit or support volunteers broadly so as to allow a program to count as volunteers any volunteer activity generated, supported, or coordinated by its AmeriCorps members for purposes of requirement. A program could therefore expect to count as volunteers students engaged in service-learning projects under the supervision of AmeriCorps members. The Corporation does not believe it is necessary to rename the regulatory section to specifically include service-learning, as we will broadly interpret the term “volunteers,” as used in this section.

Waiver of Requirement To Recruit or Support Volunteers

Several commenters requested that the Corporation clearly define the method and timing for requesting a waiver from the requirement to recruit or support volunteers, and implement it as part of a pre-application process. Three commenters added that the rule should clearly state that applying for a waiver will not negatively affect a proposal's success in the grant selection process.

The Corporation views volunteer recruitment and support as both a requirement and a competitive criterion in the grant selection process. The Corporation expects that a program that believes it is unable to fulfill the requirement to support or recruit volunteers will address that inability in its application and thereby request a waiver from the requirement. While a waiver request itself will not disadvantage an applicant, failure to address volunteer recruitment or support at all will be a disadvantage in the grant selection process. That said, the extent to which a program recruits or supports volunteers is but one criterion in the grant selection process—the Corporation does not expect that every applicant will be able to meet or demonstrate it can fulfill every criterion. In order to succeed in a competitive grant making process, a program unable to include volunteer recruitment or support will simply have to deliver more with respect to other selection criteria.

If the Corporation is ready to negotiate an applicant's award, and the applicant has requested a waiver, the Corporation will then decide whether to relieve the particular program of the requirement to support or recruit volunteers. The Corporation needs the flexibility, in building our portfolio, to balance the types of programs we will fund. Providing a pre-application waiver, which would essentially entail reviewing an applicant's entire application outside of the competitive process to assess the program design, would undermine our ability to achieve that balance. Furthermore, it would not be the best use of our resources to consider waiver requests for applications that we have not yet determined to be of sufficient quality to receive funding.

The Corporation reiterates, however, that a State commission can require its subgrantees to include volunteer recruitment and support, without regard to whether the Corporation might be willing to waive the requirement. Applicants applying for funding through a State commission will be required to request a waiver from the requirement to support or recruit volunteers through the State commission. We expect a commission to forward requests for waivers only from those applicants for whom the commission has approved the initial request. The Corporation will leave to State commissions the determination of whether a formula applicant effectively makes the case for a waiver from the requirement to support or recruit volunteers, but expects State commissions to make these decisions judiciously. The Corporation will include waiver application instructions in the grant application instructions.

Fundraising (§ 2520.40)

The proposed regulation also clarified that AmeriCorps members may help organizations raise resources directly in support of service activities that meet local environmental, educational, public safety, homeland security, or other human needs. The proposed rule allowed members to participate in a wide range of fundraising activities if these activities make up only a relatively small amount of any individual member's overall service hours. It also allowed members to write grant applications excepting those for AmeriCorps or any other Federal funding. The Corporation believes that these activities could enhance the use of AmeriCorps members to build the capacity of nonprofit organizations, and advance the professional development of the members themselves.

The proposed rule's provisions governing fundraising were more flexible for AmeriCorps members than those for grantee staff, who are subject to Federal cost principles described in the Office of Management and Budget Circulars that generally disallow costs incurred in organized fundraising.

Several commenters were supportive of AmeriCorps members being allowed to engage in fundraising, but had areas of concern. In particular, several commenters felt it was as important for program staff to be allowed to engage in fundraising on AmeriCorps time. Specifically, some commenters opined that if members may engage in fundraising, staff must be able to do so in order to coach, train, and supervise the members, and that absence of this ability for staff may fail to produce positive results.

The OMB circulars set the parameters for allowable expenses and specifically identify the cost of development officers and fundraising staff as unallowable expenses. It would be inconsistent with government-wide rules for the Corporation to allow otherwise. Thus, the final rule is the same as the proposed rule with respect to the restrictions on staff fundraising.

One commenter stated that the language in § 2520.40(a) and (c)(1) implies that members may raise resources for program operating expenses, including staff salaries, travel, supplies, and, equipment. At most non-profit agencies, according to this commenter, this type of fundraising is the responsibility of paid staff. The Corporation's intent is merely to give grantees flexibility to allow members to engage in fundraising for reasonable and necessary costs attributable to the AmeriCorps project, which may, in certain circumstances include the type of expenses this commenter has listed. The Corporation is, in no way, requiring that members engage in fundraising. If programs do use members for fundraising, the programs will nonetheless have to ensure they can continue to meet performance expectations and show results.

One commenter suggested that the rule specifically allow members to engage more broadly in organized fundraising, “including financial campaigns, endowment drives, solicitation of gifts and bequests” and similar activities performed “solely to raise capital or obtain contributions.” The Corporation's intention was to limit member fundraising to support for the program or project with which they are

serving, and its approved program objectives. Member fundraising was not intended to support on-going broad organizational fundraising objectives. The final rule does not incorporate the suggested change.

Two commenters questioned the efficiency and cost effectiveness of having members help with fundraising. One stated that fundraising is a skill that requires contacts and grant writing abilities that develop over several years. The other commenter felt that many organizations use professional fundraisers and that the obstacle to raising resources is not lack of volunteer fundraisers, but rather the economy. The Corporation takes no position on whether or not having members engage in fundraising is efficient. Some organizations with limited resources may find it useful to use AmeriCorps members for some limited fundraising. Other organizations may not. Ultimately, it is up to the individual program to decide whether, and to what extent, to allow members to engage in fundraising activities. If a program does intend for its members to engage in fundraising, the program should inform prospective members that fundraising will be one of their activities. The Corporation's goal is simply to increase the flexibility of the rules in this area to enable programs to achieve results.

One commenter asked that the Corporation clarify that including member fundraising in a program design will not advantage that program in the AmeriCorps grant selection process. The Corporation will not consider member fundraising as a competitive factor in selecting applicants, and an applicant's decision to have or not have members fundraise will not have a bearing on the selection process. While the Corporation will not judge whether a program chooses to have members engage in fundraising activities, we may assess, either during review or as part of our monitoring and oversight function, whether the fundraising activities are reasonably connected to the program's ability to carry out its objectives and meet its performance measures.

Limitation on Time Spent Fundraising (§ 2520.45)

In the proposed rule, the Corporation limited the time any individual member may spend fundraising to not more than 10 percent of that member's term of service. Several commenters requested that the Corporation define recordkeeping requirements for tracking member fundraising and ensure that they are not overly burdensome to programs. The Corporation will require programs to identify fundraising on member time-sheets, just as they currently identify hours that members spend training. Again, member fundraising is an option, not a requirement. If a program chooses to have members engage in fundraising, the program must track and report on the number of hours members spend on fundraising activities.

Several commenters believed that the 10 percent cap on hours spent fundraising should be counted in the aggregate across the program, as it has been for training and education activities, rather than member-by-member. Another commenter proposed that members be allowed to exceed 10 percent of their time on fundraising when fundraising activities are geared toward efforts to build organizational capacity and expand services. The Corporation's goal in establishing a member-by-member limit is to ensure that any one member does not spend a disproportionate number of hours on fundraising activities. Consequently, the Corporation has left the 10 percent limit on a per-member basis. In addition, the Corporation considers 10 percent, or the equivalent of 170 hours for the average full-time member, as sufficient to allow for a meaningful member contribution in this area. The Corporation, therefore, has not increased the maximum allowable percentage in the final rule.

Clerical and Administrative Activities (§ 2520.65 in Proposed Rule)

Prior to issuing the proposed rule, the general rule prohibited AmeriCorps members from engaging in clerical activities as part of their service, except if incidental to direct service, or if the Corporation authorized otherwise in connection with homeland security or other activities. The general expectation and practice among AmeriCorps grantees was that members did not perform clerical activities, except as an incidental part of their direct service. In the proposed rule, the Corporation increased grantees' ability to allow members to perform clerical activities, up to a 10 percent cap of each member's term of service.

Many commenters opposed allowing members to perform any administrative duties. One commenter was concerned that this provision would create an incentive to take members away from direct service activities. Two other commenters were concerned about members supplanting the duties formerly performed by employees. Another commenter was concerned about the administrative burden of keeping records to document compliance with this limitation. Another was concerned that one of the reasons that individuals join AmeriCorps is because they believe they will be doing real service work and making a difference, and not to do clerical work as part of their regularly expected or scheduled activities.

The Corporation agrees that the proposed rule did not sufficiently consider the potential for these and other unintended consequences. The Corporation is, therefore, removing from the final rule § 2520.65 that would allow 10 percent of a member's term of service to be spent on administrative activities, and thereby returning to the current policy. The common expectation among program directors and AmeriCorps members should be that members may not engage in unreasonable amounts of clerical activities, except in exceptional circumstances as approved by the Corporation. The Corporation believes that the best way to resolve issues relating to members engaging in more significant clerical activities is for Corporation staff to address them on a case-by-case basis directly with grantees as a program quality issue. In limited circumstances, the Corporation may approve a member performing more extensive clerical duties in connection with disaster relief, or other compelling community needs. For example, we might approve a member engaging in some limited amount of clerical activities to lend support to an organization whose regular staff has been called up in the armed forces. On the other hand, it would be inappropriate for an individual to be performing clerical work for extended periods as a part of his or her daily responsibilities in a program not faced with a compelling need as described above.

Fee-for-Service Activities (§ 2520.55)

The proposed rule authorized programs, where appropriate, to collect fees for services provided by AmeriCorps members. One commenter was concerned that allowing fee-for-service in AmeriCorps programs could result in programs competing with other nonprofits and for-profits. The Corporation, consistent with government-wide OMB circulars, has always allowed fee-for-service activities under limited circumstances. For example, an AmeriCorps program that provides inoculations might reasonably charge a nominal fee for providing flu shots, in order to defray costs of the medication. The Corporation does not anticipate that programs will charge the public for every service they provide. In addition, the Corporation's goal is to fund programs meeting unmet needs. We, therefore, do not anticipate

programs will be providing a service that already exists elsewhere in the program's community. For sake of clarity, the Corporation has modified the language in § 2520.55 to state that organizations may choose to collect fees for service under certain circumstances, rather than encouraging them to do so. The final rule maintains the language from the proposed rule that fees-for-service must be considered program income and used to finance the program's non-Corporation share of costs.

“80/20 Rule” and Education and Training Activities (§ 2520.50)

In the proposed rule, the Corporation codified its longstanding so-called “80/20” rule, which limits a program's aggregate number of hours for education and training activities to not more than 20 percent of its members' total service hours. Two commenters opposed the 20 percent limit for training and educational activities, particularly for programs engaged in tutoring. One of these commenters asked that the limit be raised to 25 percent; the other asked that it be raised to 30 percent. The Corporation continues to believe that 20 percent is an appropriate limit on training and education activities to ensure that programs are able to meet their programmatic objectives, and the final rule remains unchanged in that regard. However, the Corporation is establishing the base for the aggregate 20% limitation as the number of hours members agree to perform in their term of service, as reflected upon their enrollment in the National Service Trust. This clarification will alleviate the audit problem programs face when members are released from the program before completing the agreed-upon term of service, and the program has provided a large part of its training agenda at the beginning if the program year.

C. Increase in Required Grantee Share of Program Costs (§§ 2521.35 Through 2521.90)

Sections 121 and 140 of the Act require an AmeriCorps grantee to provide not less than 25 percent of operating costs and 15 percent of member support costs. The Corporation has the discretion under the statute to increase the minimum grantee share of costs, and did so in 1996, when we increased the grantee share of operating costs from 25 percent to 33 percent.

Section 130 of the Act explicitly authorizes the Corporation to ask an organization applying for renewal of assistance (or “recompete” funding) after an initial three-year grant period to describe how it has decreased its reliance on Federal funding. In addition, in our annual appropriations act each year dating back to fiscal year 1996, including most recently the Consolidated Appropriations Act for fiscal year 2005, Congress has directed the Corporation to “increase significantly the level of matching funds and in-kind contribution provided by the private sector,” and to “reduce the total Federal costs per participant in all programs.” Finally, E.O. 13331 directs that “national and community service programs should leverage Federal resources to maximize support from the private sector and from State and local governments.”

Consequently, the proposed rule increased, in a predictable and incremental fashion, the grantee share of program costs to a 50 percent aggregate (overall) level by the 10th year in which an organization receives AmeriCorps funding. Under the proposed rule, each grantee was required to meet the current minimum requirements of 33 percent match (cash or in-kind) for operating costs and at least 15 percent match (non-Federal cash only, except for health care benefits) for member support costs. After meeting those minimum requirements, the grantee could meet the balance of its aggregate share of costs through any combination of operating or member support matching resources.

To avoid confusion about the terms “aggregate share” and “aggregate match” as used in the proposed rule, the Corporation has changed the terminology in the final rule to refer to an “overall match” or “overall share.” The overall match or share is the total of the program operating costs match and the member support match that the program must provide starting in the fourth year the program receives a grant. For example, consider an AmeriCorps grant with a total budget of $400,000—$200,000 for member support that includes such items as the living allowance, FICA, worker's compensation, unemployment insurance, and health care costs, and $200,000 for program operating costs that includes staff, operating, and administrative costs. Current matching requirements would call for this grantee to provide at least 15 percent of member support costs ($30,000) and 33 percent of operating costs ($66,000). In this example, the minimum overall grantee share is $96,000, or about 25 percent. By year 10 with the same total budget, the program must provide $200,000 overall towards the $400,000 budget.

In the proposed rule, the new matching requirements began in the fourth year and increased in each year thereafter in which an organization received a program grant up to a 50% overall match by the tenth year an organization continued to receive funding for the project.

The proposed rule established that a current grantee or subgrantee that had received an AmeriCorps grant for one or more 3-year grant cycles at the time the regulation takes effect would begin meeting the match requirements at the year three level. So, for example, an organization that is in its fourth year of AmeriCorps funding when the regulation takes effect would remain under the existing requirement in the first year the new rule is in effect. In the second year the new rule is in effect, the grantee would be considered in year 4 on the new matching scale and its overall share would begin to increase in regular increments.

The proposed rule signaled the Corporation's intent to provide training and technical assistance to grantees to assist them in achieving their matching goals. We also committed to consulting with grantees to determine the most useful and appropriate training and technical assistance.

In the proposed rule, we indicated that we believe it is reasonable to expect most grantees to achieve the increased level of matching, and stated our expectation that State commissions continue to manage their portfolios to achieve even higher match levels.

Increased Match Requirements

Over 70 commenters addressed the proposed increase in match. Several commenters supported the proposed share increase in principle or as an overall strategy. One commission stated that increasing a program's match requirement each year strengthens the program's connection to the local community and increases the buy-in of program sponsors. Several commenters specifically indicated that their organizations would not have trouble meeting the new match requirements, but they were concerned about the effect of the new rule on other organizations, particularly those in rural and severely economically-distressed areas. One commission indicated that programs in its State would not have a problem meeting the in-kind match requirements, but would have trouble meeting the cash match requirement over time. In response to this last comment, a grantee's cash match requirement may not necessarily increase over time. Once a grantee meets the minimum 15 percent non-Federal cash match for member support costs, the grantee may meet the balance of its

overall share of costs through any combination of operating and member support matching resources, including in-kind donations, provided that the resources meet the criteria of 45 CFR 2541.240 or 45 CFR 2543.23, as applicable.

Most commenters on this issue opposed the proposed match increases. Most of these commenters viewed the increased match as inconsistent with the long-term stated goal of creating “a framework for long-term growth and sustainability of the AmeriCorps program as a public-private partnership.” Many commenters stated that “in the current philanthropic climate, increasing the match requirements for AmeriCorps programs will destabilize those programs and force many out of existence.” One commenter viewed the progressive match increases as “steps toward de-funding * * * without any consideration for need and the impact of the services provided.” The Corporation, however, continues to believe that an important piece of sustainability is decreasing reliance on Federal funding, and increasing the capacity of organizations operating AmeriCorps programs to assume more of the cost. This will make existing grantees stronger and more tied to their communities, while allowing the Corporation to satisfy Congressional direction, invest in new programs, and expand the reach of national and community service. The Corporation does agree that there is a point at which match requirements can become de-stabilizing, but a 50 percent overall share does not reach that point. In addition, Congress has consistently directed the Corporation to “increase significantly the level of matching funds and in-kind contribution provided by the private sector.” The Corporation is, therefore, maintaining the match requirements as drafted in the proposed rule, according to the following table, except for programs in rural or severely economically distressed communities, which we address more fully later:

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year

10 and on

Minimum Overall Share

N/A

N/A

N/A

26%

30%

34%

38%

42%

46%

50%

The final rule clarifies that, as is currently the case, a grantee will be held to its matching requirements at grant closeout—usually at the end of each three-year grant cycle. At that time, the grantee must have contributed match in an amount equal to the combined total of each year's required match amounts. For example, if a grantee begins a recompeting program grant matching at the year 4 level (26 percent) and has a grant in the amount of $100,000 in the first year, $110,000 in the second year, and $115,000 in the third year, the grantee would be responsible at the end of the three-year grant for a total of $98,100 in match (the sum of 26 percent of $100,000 in the first year, 30 percent of $110,000 in the second year, and 34 percent of $115,000 in the third year.) The Corporation does not necessarily expect the grantee to provide match on a year-by-year basis according to the schedule, as long as the total match at the end of the three-year grant meets the regulatory requirements. If the grantee does not reach the 26 percent threshold of $100,000, or of actual expenditures, in the first year of the grant (year 4 on the matching scale), but makes up the difference by matching more than the amount required in year 2 or year 3 (year 5 or year 6 on the matching scale) such that the cumulative match across the three years meets the requirement, the grantee will be in compliance and will not be required to repay funds.

Several commenters indicated that the increased match requirements will force program staff to spend more time on the administrative burdens of raising and documenting match, which will directly impact member attrition, service hours, training and education, and programmatic outcomes. Many programs, however, have demonstrated that they can exceed the expected match levels without adverse results. Our common challenge is to share best practices to achieve both sustainability goals and improve program outcomes. For example, at least eight State commissions already have match requirements that are more stringent than the Corporation's current requirements.

One commenter questioned how the Corporation plans to use training and technical assistance to help programs that cannot meet the 50 percent match. In response, the Corporation reiterates its intent to target training and technical assistance to assist grantees having difficulty raising match. The Corporation will consult with grantees regarding the issues that training and technical assistance should address, and how best to deliver such training and technical assistance.

Timetable for Match Increases

One commenter supported the 3-year “establishment phase” during which the grantee share for new programs remains unchanged and “grandfathering” existing programs into the match schedule at the year 3 level.

A few commenters requested clarification as to what the match requirements would be for current programs that have completed one or more 3-year grant cycles on the date the regulation takes effect and how the “N/A” applies to a program beginning its match requirements at the year three level. In years 1 through 3 that an organization receives a grant, it is required only to meet the minimum 15 percent member support, and 33 percent operational costs match requirements. There is no overall match for years 1 through 3—hence the “N/A.” In each year from year 4 on, once a grantee has met the minimum 15 percent and 33 percent as described above, it may meet the additional match in whatever combination of additional member support or operational costs match it deems appropriate. Any program that has received 3 or more years of AmeriCorps funding on the date the regulation takes effect will begin matching at the year 3 level (meeting the minimum matches in member support and operating costs). These programs will, therefore, have another 7 years before their overall match requirement reaches the maximum 50 percent match. A new program will be required to meet the 15 percent and 33 percent minimum match requirements for member support and program operating costs during its first three-year grant period, and the required overall match in year 4 and beyond, unless the program receives a waiver. The Corporation has not amended the final rule on this point.

The following table reflects when and how the new match requirements will take effect:

If in the 2005 program year, your program has received AmeriCorps funding for this many years

Then, you will begin matching in the 2005 program year at this year level

0

1

1

2

2

3

3

3

4 or more

3

Impact of Match Requirements on Small, Economically-Distressed, and Rural Communities

Many commenters raised concerns about the impact of the sustainability requirements on small, economically-distressed, and rural communities. One representative of a commission in a largely rural State was concerned that the increased match requirements would eventually mean that no programs would exist in that commission's State because of the lack of resources. Another State specifically requested that its “unique geography, weather, population, and general remoteness be reflected in the application of the new regulations, either granting [the State] an exception for sustainability rules or creating a less onerous sliding scale.”

While the Corporation continues to believe that most programs can meet the requirements as stated in the proposed rule, the Corporation is concerned about the impact this rule could have on programs operating in rural and economically distressed areas across the country. The Corporation wishes to increase AmeriCorps participation in those areas and is concerned that a “one-size fits all” approach to the match might contravene that goal.

After much deliberation and consideration of the comments on this issue, the Corporation has developed an alternative match schedule that, while still requiring increases over time, does so more gradually up to a 35 percent overall match requirement in the tenth year an organization receives AmeriCorps funding. The Corporation will authorize the alternative match scale for programs that demonstrate they are in rural or severely economically distressed communities, and that they need the lower match requirement. This alternative match schedule will not be available to programs that the Corporation believes are able to meet the regular match requirements. For example, a program that historically has demonstrated its ability to meet the higher match will continue to be required to do so, even if it is located in a rural or severely economically distressed community. The alternative match requirement will allow programs in rural and severely economically distressed communities to provide match over 10 years at a lower rate than other programs, but still increase their overall match levels over time. The alternative match requirement will be in effect for the duration of the three-year grant period. A program that qualifies for the alternative match requirement will have to reapply to extend the alternative match requirement for any subsequent recompete application.

The alternative match scale for programs in rural or severely economically distressed communities will incrementally increase beginning in the seventh year the organization receives AmeriCorps funding and reach 35 percent by the tenth year the organization receives AmeriCorps funding. The following table summarizes the alternative match requirements for these programs:

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year

10 and on

Minimum Overall Share

N/A

N/A

N/A

N/A

N/A

N/A

29%

31%

33%

35%

The alternative match requirement is designed to address the specific circumstances of programs that must primarily conduct their fundraising in low resource areas. The Corporation believes that this alternative lower match scale for the programs in our neediest communities will allow such programs to begin, or continue to participate in AmeriCorps and meet those communities' unmet needs.

Qualifying for Alternative Match Requirement as Rural

In determining whether a program is rural, the Corporation intends initially to consider the most recent Beale code rating published by the U.S. Department of Agriculture for the county in which the program is located. Any program located in a county with a Beale code of 6, 7, 8, or 9 will be eligible to apply for the alternative match requirement. The table below provides definitions for each Beale code.

2003 Beale Codes

Code

Metro type

Description

1

Metro

Counties in metro areas of 1 million population or more.

2

Metro

Counties in metro areas of 250,000 to 1 million population.

3

Metro

Counties in metro areas of fewer than 250,000 population.

4

Non-metro

Urban population of 20,000 or more, adjacent to a metro area.

5

Non-metro

Urban population of 20,000 or more, not adjacent to a metro area.

6

Non-metro

Urban population of 2,500 to 19,999, adjacent to a metro area.

7

Non-metro

Urban population of 2,500 to 19,999, not adjacent to a metro area.

8

Non-metro

Completely rural or less than 2,500 urban population, adjacent to a metro area.

9

Non-metro

Completely rural or less than 2,500 urban population, not adjacent to a metro area.

Qualifying for Alternative Match Requirement as Severely Economically-Distressed

In determining whether a program is located in a severely economically-distressed county, the Corporation intends initially to consider the following county-level characteristics: County-level per capita income is less than or equal to 75 percent of the national average for all counties using the most recent census data or Bureau of Economic Analysis data; the county-level poverty rate is equal to or greater than 125 percent of the national average for all counties using the most recent census data; and county-level unemployment is above the national average for all counties for the previous 12 months using the most recently available Bureau of Labor Statistics data.

The following table provides the website addresses where the publicly-available information referred to above can be found:

Web site address

Explanation

www.econdata.net

Econdata.Net: This site links to a variety of social and economic data by States, counties and metro areas.

www.bea.doc.gov/bea/regional/rei

Bureau of Economic Analysis' Regional Economic Information System (REIS): Provides data on per capita income by county for all States except Puerto Rico.

www.census.gov/hhes/www/saipe/index.html

Census Bureau's Small Area Poverty Estimates: Provides data on poverty and population estimates by county for all States except Puerto Rico.

www.census.gov/main/www/cen2000.html

Census Bureau's American Fact-finder: Provides all 1990 and 2000 census data including estimates on poverty, per capita income and unemployment by counties, States, and metro areas including Puerto Rico.

www.bls.gov/lau/home.htm

Bureau of Labor Statistics' Local Area Unemployment Statistics (LAUS): Provides data on annual and monthly employment and unemployment by counties for all States including Puerto Rico.

http://www.ers.usda.gov/Data/RuralUrbanContinuumCodes/

U.S. Department of Agriculture's Rural-Urban Continuum Codes (Beale codes): Provides urban rural code for all counties in U.S.

The location of a program will be determined by the legal applicant's address, except where the Corporation in its sole discretion determines that some other address is more appropriate. If a particular legal applicant believes that its address or the use of county-level data is not the appropriate way to determine the program's location or its funding environment, the applicant may make its case to the Corporation as to why the Corporation should consider the program location differently and the basis for requesting the alternative match requirement. An example might include a program located in a more affluent or urban area but with a majority of its members serving at sites located in rural or severely economically distressed counties and whose fundraising primarily occurs in those counties through matching contributions from the sites. The Corporation will disseminate instructions on how to apply for the alternative match schedule in the AmeriCorps application instructions.

Note that the alternative match schedule for programs in rural and severely economically distressed counties does not replace the Corporation's existing statutory authority to waive match based on a demonstrated lack of resources at the local level (§ 2521.70). The Corporation accepts requests for waivers from any program unable to meet its match requirements if the waiver would be equitable due to lack of available financial resources at the local level. However, the Corporation provides these waivers only in extreme circumstances, and only when it would be equitable. The burden is on the grantee to demonstrate the unique lack of resources in its community that would support the Corporation's granting a waiver equitably.

Intermediaries

The Corporation received several comments from intermediary organizations expressing concern that the 50 percent match requirement would hamper their ability to provide service to communities through a changing portfolio of new and small community organizations, including faith-based. The Corporation believes that the higher match may be difficult for some organizations that regularly bring on new small sites that themselves contribute matching funds to meet matching requirements. Many faith-based and small-community based organizations are only able to participate in AmeriCorps through this type of intermediary organization that has the infrastructure to manage all the Corporation's requirements. The Corporation is concerned that the increase in match requirements to 50 percent over 10 years could create a barrier to those organizations' continued participation in AmeriCorps.

However, in attempting to craft regulatory language that addresses this issue, the Corporation was unable to adequately define “intermediary organizations” without the rule becoming either over-inclusive, or, alternately, inappropriately inciting organizations to change their business model. Moreover, after close analysis, the Corporation does not believe it necessary to make substantive changes to the regulations to accommodate these types of organizations, as the Corporation may use its statutory waiver authority to accommodate an organization that is having difficulty meeting its match requirements due to lack of resources at the local level.

The Corporation will consider waiving the higher match requirements for this type of intermediary if the intermediary demonstrates (1) that the majority of its members are placed in new organizations or small faith-based and other community organizations, and (2) the intermediary derives its matching funds substantially from the contributions of placement organizations that are unable to generate the higher match amounts.

One commenter suggested that the proposed match requirements would have a disproportionate impact on community organizations, including faith-based organizations, and thus, could violate section 104 of the Temporary Aid for Needy Families legislation (TANF), better known as “charitable choice.” The Corporation is committed to equal protection and the expansion of opportunities for involvement by community

organizations, including faith-based organizations, and believes that this final rule includes several refinements that help to achieve those goals. These include (1) the Corporation's plan to review similar program models together in the selection process; (2) special consideration in the selection process for programs operated by, or involving, community organizations, including faith-based organizations; and (3) the ability of members to engage in capacity-building activities. In addition, the Corporation's waiver authority, as discussed above, will enable the Corporation to adjust match requirements under limited circumstances. The Corporation will continue to look for effective ways to include community organizations, including faith-based organizations, in national and community service.

Definition of “Grantee” for Purposes of Match Requirements

Several commenters asked that the Corporation clarify to whom the matching requirements apply. The Corporation has added a new section 2521.40 to clarify that matching requirements apply to subgrantees of State commissions and direct program grantees of the Corporation. The Corporation will hold State commissions to an aggregate overall match based on the matching levels of all its subgrantees, which will be adjusted annually to reflect the annual change in each of the commission's subgrantee's share of costs. A State commission will be required to repay funds to the Corporation if, in the aggregate, the commission's subgrantees do not meet their match requirements under these regulations. The Corporation will expect the State commissions to monitor match requirements for their subgrantees and ensure that individual subgrantees are meeting their match requirements. The Corporation will review subgrantee match levels when an organization recompetes for AmeriCorps funding. At that point, the Corporation will consider an applicant's success in meeting both its budgeted match (match as reflected in an applicant's grant application budget) and regulatory match requirements (match as required under these regulations).

Some national direct organizations requested that the match requirements be imposed at the parent organization (for multi-State grantees) level, while others believed that it would be more consistent to apply them at the sub-grantee or site level. One commenter noted that national directs need the flexibility to match at the grantee level rather than the operating site level, where resources may be more limited. The Corporation believes that the responsible entity for meeting the increased match requirements is the parent organization; however, the parent can choose either to pass down the match requirements or use a portfolio strategy to manage the match requirements across its sites.

Two commenters specifically noted that tracking a program's match requirements based on the applicant organization's Employer Identification Number (EIN) penalizes large organizations that support a number of programs. The Corporation agrees that the EIN is not the appropriate identifier to track program match. For purposes of determining the applicable match schedule, the Corporation will determine tenure based on the particular grant and project, rather than legal applicant. The Corporation is modifying its grants management systems to enable us to track the longevity of each program. Thus, one legal applicant will, theoretically, be able to receive funding for two separate programs, under two separate grants, subject to two different match scales depending upon when each program began to receive funding. Similarly, the local site of a national direct grantee may choose to end its relationship with the national direct and compete on its own for State commission funding. If successful, this would constitute a new program and a new grant, and matching requirements would begin at the year one level for this program.

State Flexibility To Meet Match Requirements (§ 2521.65 in the Proposed Rule)

Under § 2521.65 of the proposed rule, if a State commission determined that a particular subgrantee was unable to meet its required matching levels because it operated in a resource-poor community, the State commission could still meet that subgrantee's matching requirements by pairing a high-matching subgrantee in the State commission's portfolio with the low-matching subgrantee to make up the difference. Several commenters supported the proposal to provide the States with flexibility to manage their portfolio of grantees. Two other commenters, however, requested that the Corporation provide flexibility to States to use a State portfolio average for grantee share, rather than allowing commissions to pair low-matching with high-matching subgrantees, as described in the proposed rule. As discussed above, while a commission's subgrantees will be individually responsible to the State for meeting their required match levels according to the match scale they are on, we will hold State commissions to a State portfolio aggregate overall match, based on all the programs' match requirements in a State's portfolio. This means that a State commission will be required to monitor and enforce match requirements for its individual grantees, but will have the flexibility to accommodate discrepancies in match across its portfolio, without increasing its liability to repay funds. The Corporation will only consider the actual matching history of individual commission subgrantees if and when they apply for AmeriCorps competitive funding.

This revised approach makes the provision in the proposed rule that allowed commissions to pair a low-matching subgrantee with a high-matching one for the purpose of meeting match unnecessary. The Corporation has, therefore, deleted that provision from the final rule.

Match Requirements for Organizations With Break in Funding (§ 2521.80)

The proposed and final rule clarify that an organization that has not directly received an AmeriCorps State or National operational grant for five years or more, as determined by the end date of the organization's most recent grant period, may begin matching at the year 1 level upon receiving a new grant from the Corporation. This means that, for example, a site of an existing grantee, or a recipient of a planning grant, that chooses to apply directly to the Corporation for AmeriCorps program funding will be able to apply as a year 1 program, subject to the year 1 match requirements. A program that starts in a State's formula portfolio, on the other hand, and then moves three years later to the competitive pool, will continue meeting match requirements based on where the program was matching the year before. One commenter supported this approach. The final rule includes a new paragraph (b) to § 2521.80 that explains the requirements for former grantees with a break in funding of less than five years.

The following table summarizes the circumstances under which an organization would be deemed to have had a break in funding:

If you previously were a

And then, within 5 years, apply as a

Your status for purposes of match will be

National direct parent, Professional Corps, State competitive, or State formula program

National direct parent, Professional Corps, State competitive, or State formula program

Existing grantee (match at the level you would have matched the year following your last grant year).

National direct subgrantee or site, State competitive subgrantee or site, or State formula subgrantee or site

National direct parent, Professional Corps, State competitive, or State formula program

New grantee (begin match at year 1).

Any other Corporation grantee

National direct parent, Professional Corps, State competitive, or State formula program

New grantee (begin match at year 1).

Changing Legal Applicants (§ 2521.90)

The proposed rule stated that an organization that is a new or replacement legal applicant for an existing program would be required to provide matching resources at the same level as the previous legal applicant was matching at the time the new organization took over the program. Two commenters objected to this provision, stating that the original legal applicant may have many established sources for match that are not available to the new legal applicant, and the latter therefore might not be able to pick up where the first legal applicant left off. Another commenter asked the Corporation to define an existing program under this proposed provision.

By existing program, the Corporation means a set of project activities meeting specific unmet needs of a community previously funded by the Corporation. Over the years, several programs have had a change in legal applicants either in the middle of a grant cycle, or at the end of a grant cycle. The Corporation, therefore, saw a need to include a provision to address this circumstance. To the extent that a new grantee is unable to meet the match at the level of the predecessor legal applicant, the grantee may request a waiver of the match requirements due to lack of resources at the local level.

Limitations on the Use of Federal Funds

The comments revealed some confusion over grantees using other Federal funds to meet the increased match requirements. As reflected above, the Federal share of member support costs, excluding health care, may not exceed 85 percent. There is no statutory prohibition or limit in the NCSA on an organization using other Federal funds, to the extent otherwise permitted, to cover its share of operating (

i.e.

costs other than member support) or health care costs. As a matter of compliance, grantees may use Federal funds for their non-member support related match, as long as the other Federal agency permits its funds to be used as match for Corporation funds. However, as a matter of program performance, more non-Federal funds are better, because Congress' mandate to the Corporation is to “increase significantly the level of matching funds and in-kind contributions provided by the private sector.” Consequently, an organization's reliance on Federal funds could have an impact in the selection process, where we will consider the diversity of non-Corporation funding, including non-Federal funding, and the extent to which grantees are increasing private sector contributions.

Several commenters objected to the proposed blanket prohibition on a grantee's using other Federal funds for the grantee's share of member support costs. While the proposed rule appeared to set a maximum Federal share of 85 percent for all member benefits, that was not the Corporation's intent. The Corporation has amended the language in § 2522.250(b)(3), relating to health care benefits, to reflect, consistent with the NCSA, that health care benefits are subject to a maximum Corporation share of 85 percent, rather than a maximum Federal share.

The final rule also includes a technical amendment in § 2521.45(a)(2) relating to professional corps programs. In the proposed rule, the Corporation reiterated, in clearer language, the current regulatory language, by stating that professional corps programs could not use any Corporation

or other Federal funds

for any part of the member living allowance. In practice, the Corporation has never prohibited professional corps programs from using non-Corporation Federal funds towards the living allowance, and does not believe that such an extreme limitation is appropriate or warranted by statute. The Corporation is, therefore, amending the final rule to reflect that professional corps programs are prohibited only from using Corporation funds for the living allowance, thereby bringing the regulation in line with Corporation policy and practice.

Match Requirements for Indian Tribes

Indian Tribes must, as a general matter, meet the regular match requirements applicable to all Corporation grantees. Most of the Corporation's current tribal grantees, however, are located in rural or severely economically depressed areas of the country. Consequently, they will likely be eligible to waive into the alternative match requirement, assuming they have not demonstrated the ability to meet higher match requirements in the past. To the extent that a tribal grantee is not able to meet even the alternative match requirement, the Corporation will, as always, consider using its statutory waiver due to lack of resources at the local level. In compliance with Executive Order 13175, the Corporation will handle any waiver request from an Indian Tribe in an expedited manner.

Match Requirements for U.S. Territories

Section 1469a of title 48, United States Code, requires departments and agencies to waive “any requirement for local matching funds under $200,000 (including in-kind contributions) required by law” for Guam, the Virgin Islands, American Samoa, and the Northern Mariana Islands. Consequently, the Corporation waives the AmeriCorps matching requirements for those U.S. Territory governments. Non-profits and other organizations located in the territories that apply directly to the Corporation are not eligible for this title 48 waiver, and will be required to meet the match requirements applicable to all regular AmeriCorps programs, absent some other Corporation waiver.

Other Assistance for Low-Matching Programs

In the proposed rule, the Corporation identified several strategies of targeted assistance for otherwise well-performing and compliant programs who are demonstrably at risk of not meeting the new matching requirements. The Corporation remains committed to assisting grantees in the following ways: (1) By looking for opportunities to align our resources, including training and technical assistance and other program resources such as VISTA members, if appropriate, to help grantees identify new strategies to raise matching resources and community support and to help broaden and build the capacity of community organizations; (2) by

looking for opportunities to help raise resources; (3) by providing State commissions the flexibility to meet their overall match requirements in the aggregate across their portfolio of programs; and, (4) through limited use of the Corporation's statutory authority to waive match requirements for those satisfactorily performing and otherwise compliant programs that demonstrate an inability, in spite of reasonable efforts, to achieve sufficient financial support to meet the increased matching requirements.

The Corporation believes that incrementally increasing match requirements and providing an alternative match requirement for programs in rural and severely economically distressed communities, together with the measures described above that are designed to assist grantees in meeting the new requirements, satisfy Congressional direction and represent a fair, equitable, and authoritative resolution of the issue of organizational financial sustainability, such that additional requirements in annual appropriations bills, or through rulemaking, are not necessary. We intend to monitor and report to the public on a regular basis the progress grantees are making in leveraging Federal resources.

D. Codifying the Cap on Child-Care Payments and Corporation Share of Health Benefits (§ 2522.250)

Child Care

Section 140(e) of the Act authorizes the Corporation to establish guidelines on the availability and amount of child-care assistance. By current regulation, child-care payments for eligible AmeriCorps State and National members are “based on” amounts authorized under the Child Care and Development Block Grant Act of 1990. These payments are made directly to the child care provider on behalf of a full-time member eligible for childcare assistance. To be eligible, a full-time participant must be the parent or legal guardian of a child under 13 who resides with the participant, must have a family income less than 75 percent of the State's median income, must not currently be receiving child care assistance from another source (including another family member), and must certify that such assistance is necessary in order to participate in AmeriCorps. To be eligible to receive a payment, a child care provider must be eligible to receive payments under the Child Care and Development Block Grant Act of 1990. In the proposed rule, the Corporation made one change to existing regulation by explicitly capping the amount of child-care benefits for any individual AmeriCorps member at the level established by each State under the Child Care and Development Block Grant.

One commenter opposed the proposed change on the grounds that it could lead to a reduction in the amount of assistance available to an AmeriCorps member in a State that requires counties to match Federal Child Care and Development Block Grant funds. Several commenters expressed concern that the proposed rule did not provide direction to a State that is issued a waiver under the CCDBG program. Several commenters expressed concern that the proposed rule was not clear on what formula would be used to determine child care assistance. Two commenters commended the proposed rule for providing clarity and direction to State childcare agencies and providers. Another commenter recommended that current levels for child care be maintained in order to preserve equal access and opportunity to AmeriCorps.

The final rule ensures that child care assistance on behalf of eligible AmeriCorps members does not exceed applicable payment rates to an eligible child care provider established by each State under the Child Care and Development Block Grant Act. Under that Act, each State must certify that payment rates are sufficient to provide access to child care services for eligible families that are comparable to those provided to families that do not receive subsidies. To demonstrate that its plan achieves equal access, a State must consider the results of a local market survey conducted at least every two years. The CCBDG Act affords States latitude in setting payment rates—rather than a formal waiver mechanism—provided that a State demonstrates that it has considered key elements of equal access, outlined in the U.S. Department of Health and Human Services regulations published at 45 CFR 98.16 and 98.43. The fact that a particular State might require counties to contribute a portion of the payment does not affect the amount of the payment to an eligible provider, which is based on the local market survey. An AmeriCorps member is eligible for the same payment established by the State under the CCDBG Act to an eligible child care provider in the applicable locality, regardless of whether a county contributes to that payment. The Corporation seeks only to ensure that any child care assistance to an eligible AmeriCorps member not exceed the applicable payment rate to an eligible provider under the CCDBG Act. Therefore, the only change we have made in the final rule is to clarify that the payment rate in question is “to an eligible provider.” However, we intend to solicit suggestions about how, given the relatively limited Federal funds available, we should structure the provision of child care assistance to full-time AmeriCorps members, and may amend these regulations in the future.

Health Care Benefits

In § 2522.250(b)(3) of the proposed rule, the Corporation mistakenly referred to a maximum

Federal

share for health care benefits, rather than the maximum

Corporation

share of 85 percent, as provided in statute. Several commenters noted the discrepancy. The Corporation has amended the above-referenced section, and added a new § 2521.45(a)(4) to now refer to the maximum Corporation share.

One commenter read the proposed rule as mandating health care benefits for all members. The Corporation did not, in fact, change any of the rules relating to health care benefits for AmeriCorps members. Programs must, as always, provide each full-time member with health benefits if the member does not otherwise have coverage.

E. AmeriCorps Grants Selection Process and Criteria (§§ 2522.400 Through 2522.475)

In addition to establishing specific AmeriCorps grant application requirements, section 130 of the Act, gives the Corporation broad authority to set additional application requirements and to establish the selection process. We are adjusting our grant selection criteria to meet three objectives: (1) To better align the selection criteria with elements that predict program success; (2) To incorporate into the selection criteria greater emphasis on all elements of sustainability; and (3) To provide transparency, predictability, and consistency for organizations applying for AmeriCorps funds.

The proposed rule described the Corporation's processes and criteria for selecting grantees. In selecting AmeriCorps programs, the Corporation generally needs to know four things: (1) An organization's plan and its expected outcomes; (2) Whether the organization can manage Federal funds, and operate and support the proposed program effectively; (3) The budget adequacy and cost-effectiveness of the proposed program; and (4) For an existing program, whether the organization has implemented a sound program, including achieving strong outputs and outcomes, demonstrating organizational

capability and cost-effectiveness, and complying with other Corporation requirements.

To address these issues, the proposed rule modified the current structure of three overall categories of criteria—Program Design, Organizational Capability (formerly Organizational Capacity), and Cost-Effectiveness (formerly Budget/Cost-Effectiveness). We adjusted the weights of the three categories to better balance program design against organizational strength, which is reflected through organizational capability and cost-effectiveness. Consequently,

• Program Design was worth 50 percent of the score (as opposed to 60 percent currently),

• Organizational Capability remained at its current 25 percent weight, and

• Cost-Effectiveness increased to 25 percent (as opposed to 15 percent currently).

Under these regulations, the Corporation's focus within Program Design is now on the relationship between an applicant's rationale and approach, on the one hand, and the outputs and outcomes to be achieved for members and the community, on the other. Most of the criteria from the Corporation's current AmeriCorps 2005 guidelines remain part of the revised selection criteria, although they may now appear under a different category. (Please visit our website at

www.nationalservice.gov/funding_initiatives

to view the AmeriCorps 2005 guidelines). We also added criteria across all three categories to better reflect our focus on outcomes and sustainability and our desire to maintain a portfolio that serves a broad range of people through diverse program models.

General Comments About Selection Criteria and Process

Two commenters supported the Corporation's effort to clarify the grant selection criteria. One of these commenters expressed the hope that this process and the criteria would foster stronger cooperation between States and the Corporation. Several commenters, however, felt that the proposed rule did not achieve the NPRM's stated goals of providing transparency, predictability, and consistency. Three commenters recommended maintaining the grant selection criteria currently in use.

The Corporation strongly believes that, in setting out the selection process and criteria in regulation, and tightening the selection criteria themselves, the Corporation has greatly increased the transparency, predictability and consistency of the selection process. Furthermore, the Corporation has endeavored to clarify, step by step, how the selection process works.

One commenter noted that the proposed rule fails to distinguish between new and recompeting applicants regarding which elements would apply only to recompeting organizations. The Corporation has amended the language to indicate, where relevant, that a particular provision applies only to applicants that have previously received AmeriCorps funding.

Some commenters read the proposed rule as removing State and local control over which programs receive funding in the State. The Corporation disagrees with this interpretation. First, States, as always, have broad discretion over which programs to fund through their formula allocation. Second, States continue to have the discretion to decide which proposals to forward to the Corporation for competitive funding. The selection criteria, as proposed, do not represent a substantial deviation from the selection criteria the Corporation has used up until now—they are more focused, clearer, more specific, and incorporate more elements relating to performance and sustainability.

Two commenters recommended that the selection criteria explicitly include program enrollment and retention rates. The Corporation agrees that a program's history of member enrollment and retention rates should be a factor in the selection process. The final rule includes a new subsection 2522.425(b)(2) to reflect this. The Corporation does not, however, believe it necessary to include a specific selection criterion on the timeliness of reporting, particularly since the Corporation may consider a grantee's reporting on prior grants under § 2522.470(b)(1), in the context of clarifying and verifying information in a grant application. We expect all Corporation grantees to comply with all program requirements, including timely reporting. While the Corporation has an interest in improving grantee timeliness with reporting requirements, we do not believe it is appropriate to measure as basic an expectation as meeting deadlines in the competitive process.

One commenter suggested that the Corporation hold a separate grant competition for stand-alone AmeriCorps programs whose sole mission is national service. This commenter viewed such stand-alone programs as having unique costs and benefits that the Corporation may not be able to consider in the context of a broader competition. The Corporation does not believe that a separate grants competition is necessary for these types of programs as we are prepared, in the grant selection process, to consider the unique circumstances of programs.

Overall Criteria Weight (§ 2522.440)

One commenter supported the increased weight on cost-effectiveness. Four commenters, on the other hand, specifically recommended keeping the weight of program design at 60 percent. One recommended decreasing the weight of organizational capability to 15 percent in order to keep program design at 60 percent. One commenter felt that 25 percent for program infrastructure (presumably organizational capability) was too high, because if a program is performing well and cost-effective, one may presume sound program infrastructure. The Corporation notes, in response, that we did not propose to change the current weight of organizational capability. Both the proposed rule and the final rule maintain the weight of organizational capability at its current 25 percent.

Several commenters recommended that program quality should be more important than cost-effectiveness, and others urged that program design and performance measurement be given more weight. Many commenters opposed increasing the weight of the cost-effectiveness category. One of these commenters believed that AmeriCorps programs are already cost-effective.

Four commenters suggested that the emphasis on cost-effectiveness will lead to lower quality programs. Several commenters expressed concern that it will discourage innovative program design, particularly those reaching hard to serve areas or populations, or distressed rural, poor communities with lack of private and local government resources. As stated throughout this document, the Corporation is very deliberately trying to ensure that the selection criteria, particularly those relating to cost-effectiveness, take into consideration the inherent costs and unique circumstances of each program. The Corporation, therefore, does not anticipate that the shift in emphasis of the selection criteria will lead to the results the commenters above are expecting. The Corporation will, however, monitor the impact of the proposed rule and will publicly share its findings.

Program Design (§ 2522.425)

One commenter stated that fostering civic responsibility should not be a criterion for selection. The Corporation disagrees. The Corporation believes that

AmeriCorps programs should plan for this in a systematic way, and that it is a relevant measure of sustainability. This criterion remains in the final rule.

One commenter recommended including in the final rule language that would ask intermediaries to identify the process by which they will select issue areas and partners, rather than require them to define services and partners for the coming year. Applicants can do this already under the proposed selection criteria. An organization that typically selects its placement sites and specific service activities following approval of the grant will be able, within the selection criteria as currently drafted, to identify how it will select its placement sites and emphasize the types of service activities the program typically supports. The Corporation will continue, however, to require all applicants to include their proposed operating sites and, at least, a general description of member activities in the application for funding.

One commenter recommended that if a program scores poorly in the rationale and approach category, it should receive no further consideration. The Corporation anticipates that any applicant that scores poorly in the rationale and approach category will be unable to adequately respond to the other selection criteria and, therefore, will ultimately score poorly overall. In our view, it is significantly easier to articulate the need for the program than to describe and secure all the elements necessary for program success. For that reason, we do not believe that the rationale and approach subcategory of program design needs more weight or emphasis than it had in the proposed rule.

One commenter recommended that the Corporation clarify its commitment to racial, ethnic, and socioeconomic diversity. Two commenters urged the Corporation to reward programs that successfully recruit a diverse group of participants in terms of racial, ethnic, socioeconomic, geographic and educational backgrounds in the grant selection process. In fact, the Corporation's selection criteria under program design specifically reward applicants who can show they have plans to recruit a diverse corps of members. Another commenter suggested the Corporation intensify efforts to identify and support programs that seek to enroll youth who are low-income or out-of-school. The Corporation's on-line application allows applicants to self-identify their program model from a list that includes youth corps. Our ability to more clearly identify program models, and our plan to review, to the extent possible, similar models together, will allow us to ensure that our portfolio of programs is rich and diverse. In addition, three of the Corporation's priorities, as listed in § 2522.450, specifically include this population.

One commenter interpreted the language in § 2522.425(c)(3) as expecting programs to replace member activities with volunteers. The language refers to assessing the extent to which a program “generates and supports volunteers to expand the reach of your program in the community.” This section was not intended to result in volunteers replacing member activities—the goal of this provision was to assess the impact and reach of a program's volunteer generation and support activities in the community.

Organizational Capability (§ 2522.430)

In § 2522.430(c) of the proposed rule, the Corporation stated that in reviewing a proposal submitted by a State commission for competitive funding, the Corporation may deny funding to a program applicant if the Corporation determines that the State commission's financial management and monitoring capabilities are “materially weak.” Several commenters expressed concern that the process for determining a State commission to be “materially weak” is not clear. One commenter recommended that the status of a commission be based on set criteria and clarified prior to the opening of the grant process, and others opined that applicants should not be penalized if their State commission is weak.

The Corporation's intent in including this factor in the selection criteria was to ensure that, in approving a State's portfolio of programs, the Corporation is able to match the commission's capacity with the needs of the programs we are approving. While the Corporation does assess commission capacity through the administrative standards process, the Corporation does not, in fact, have a mechanism by which it determines a State commission to be “materially weak,” and therefore has decided not to use the term in this context. For these reasons, the Corporation has removed paragraph (c) from § 2522.430 in the final rule.

The Corporation will, however, assess a commission's capacity to manage and monitor grants as it prepares to approve the commission's grants package, and may determine that a commission does not have sufficient capacity to manage a particular grant, or manage more than a certain number of grants. The Corporation has added a new paragraph (c) to section 2522.470 that addresses this issue.

Section 2522.430(a)(3) of the proposed rule included as a criterion the extent to which an applicant is securing community support that is “stronger” and more diverse. One commenter found the use of the term “stronger” unclear, and recommended that the final rule replace that language with “recurs, expands in scope, or increases in amount.” The Corporation agrees that the suggested language is more precise and has amended the final rule accordingly.

Cost Effectiveness and Corporation Cost per MSY (§ 2522.435)

In the proposed rule, the Corporation changed the name of the former Budget/Cost Effectiveness category to “Cost-Effectiveness” and increased the overall weight of the category from 15 percent to 25 percent. Within this category, the Corporation focused on the adequacy of the applicant's budget to support the planned program design, and whether the program is cost-effective, as measured through one or more of several indicators of cost-effectiveness, including a program's Corporation cost per MSY.

The Corporation received a significant number of comments on the proposed cost-effectiveness category. Several comments focused on defining the cost-effectiveness of a program based on program quality and results. Other commenters recommended determining cost-effectiveness by comparing similar program models for their value as an investment based on mission, quality, location, and results, as well as cost.

One commenter expressed concern that the Corporation would decide not to fund an otherwise high-quality program for falling just short of its required matching level. The Corporation's goal is to fund high-quality programs. The principal mechanism to enforce match requirements is through the grants closeout process, which could require a grantee to repay funds if the grantee has not met required match levels. The inability to meet match does not necessarily bar a program from successfully recompeting, because the selection process allows the Corporation to take into account specific circumstances, strengths, contributions, and challenges of individual programs in deciding who should receive funding. Clearly, a program's record of match is a factor the Corporation will consider, but it is just one of many factors, and each applicant will have the opportunity in the selection process to explain its record in meeting its required match.

Many commenters did not support increasing the weight of the cost-effectiveness category. Some commenters suggested that the emphasis on cost-effectiveness would lead to lower quality programs. One commenter suggested renaming the category as “Budget, Cost, and Grantee Share,” maintaining the total score of the cost-effectiveness category at 15 percent (rather than 25 percent as proposed), and, within that 15 percent, assigning 5 percent for Corporation cost per MSY, 5 percent for budget grantee share, and 5 percent for adequacy of budget to support program design. Another commenter suggested weighting the budget adequacy with 50 percent of the points in that category, and Corporation cost per MSY with the other 50 percent. Another suggested that cost-effectiveness be further divided to reflect 60 percent for budget adequacy and 40 percent for Corporation cost per MSY.

With respect to renaming the category as proposed above, grantee share and Corporation cost per MSY are two of several indicators of cost-effectiveness. It would not, therefore, make sense to limit the category to these two indicators. The Corporation agrees, however, that removing the term “budget” from the name of this category may have led people to believe that cost-effectiveness was the only aspect the Corporation considered important. In fact, the Corporation believes that budget adequacy is an important factor in the selection process. Accordingly, the Corporation is reinserting the words “budget adequacy” into the title of this category of criteria in §§ 2522.420 through 2522.448.

As to the commenter's proposal to maintain the overall scoring of the cost-effectiveness and budget adequacy category back at 15 percent, the Corporation believes that doing so would be counter to its efforts to increase the importance of budget adequacy and cost-effectiveness in the grant selection process. The Corporation views cost-effectiveness and budget adequacy as at least as important as organizational capability, which is also 25 percent, and believes that the appropriate balance is 50 percent for program design, and 50 percent for organizational capability and cost-effectiveness and budget adequacy combined. Consequently, the Corporation is maintaining the cost-effectiveness and budget adequacy category at 25 percent in the final rule.

With respect to weighting the factors within cost-effectiveness and budget adequacy, the Corporation does see merit in clarifying how it will weigh the two separate criteria of cost-effectiveness and budget adequacy. Consequently, the final rule, in new § 2522.448, indicates that the criterion relating to program cost-effectiveness will be worth 15 points out of the 25, with the remaining 10 points for the adequacy of the budget to support the program design. The 15 points for program cost-effectiveness incorporate several different elements: The program's proposed Corporation cost per MSY, and other cost-effectiveness indicators, such as the extent to which the program demonstrates diverse non-Federal resources; the program's matching levels; and, for a recompeting program, the program's ability to expand outcomes without a commensurate increase in Corporation assistance. An applicant can receive high points for cost-effectiveness by proposing a competitive cost per MSY and by showing its strength in any one (or more) of the other cost-effectiveness criteria. We did not, however, include sub-scores for these individual elements, but only for cost-effectiveness as a whole.

Several commenters read the proposed rule as emphasizing cost over quality in the grant selection process. Two commenters recommended conducting a blind review of program design and organizational capacity prior to evaluating programs on the basis of cost-effectiveness in order to ensure that the Corporation funds programs with good models, rather than programs that are simply cheap. The Corporation notes that the cost-effectiveness portion of the new cost-effectiveness and budget adequacy category is worth only 15 of the 100 total possible points. While the Corporation is placing more weight on cost-effectiveness than in the past, this emphasis is consistent with Congressional direction and our efforts to promote program sustainability. That being said, the quality of a proposal is still important, and a poor quality program is unlikely to receive funding, even if it is low-cost.

Because cost-effectiveness is only worth 15 percent of the total score and the criteria allow the Corporation to take into account individual contributions and circumstances of programs, the Corporation sees no reason to review program design and organizational capacity separately—the most cost-effective program will not receive funding if the program model is not sound and the organization does not have the capability to operate it.

Two commenters requested clarification on how the 25 percent for cost-effectiveness and budget adequacy would apply to Education Award Programs. As discussed earlier, Corporation cost per MSY and increase in match indicators are not relevant in the context of assessing the cost-effectiveness of an EAP program. The Corporation does believe, however, that both the adequacy of the budget to support the program, and other indicators of cost-effectiveness can and should apply to EAP programs. Consequently, the cost-effectiveness and budget adequacy category will remain at 25 percent for EAP programs, just like for other programs. The Corporation has, however, amended § 2522.435 by adding a new paragraph (c) that explicitly identifies the cost-effectiveness indicators that do not apply to EAP programs.

Corporation Cost per MSY in the Selection Process

The proposed rule included, for the first time, Corporation cost per MSY as an indicator of cost-effectiveness. A few commenters noted that Corporation cost per MSY should be considered, but should not be the primary consideration. Many commenters read the proposed rule as making Corporation cost per MSY the paramount or “tie-breaker” criterion in the new selection criteria. This was not the Corporation's intent. The Corporation's goal in emphasizing its inclusion of Corporation cost per MSY in the criteria as one measure or indicator of cost-effectiveness was to give programs an incentive to lower their Corporation cost per MSY as one of many elements to be more competitive. The Corporation continues to view the cost per MSY as a key indicator of cost-effectiveness. Nonetheless, a program that has a higher Corporation cost per MSY that is justified in its application and that demonstrates cost efficiency in other ways under the cost-effectiveness criteria, could still score enough points in the cost-effectiveness category to be eligible for funding.

Five commenters found the proposed rule to be unrealistic in that it appears to value expanding program size and impact while, at the same time, decreasing funding. Several commenters recommended removing program growth and expansion from the selection criteria, given the emphasis on decreasing the Federal share of funding. The Corporation does not agree with this recommendation, as a program can show cost-effectiveness either by decreasing the Corporation share of costs

or

by growing in size without a commensurate growth in budget.

One commenter did not intrinsically have a concern with the increase in

emphasis in Corporation cost per MSY, but considered the determination of cost-effectiveness as subjective, and therefore suggested that each program be evaluated individually. While the Corporation will review programs together on panels of like programs, we do not score programs against each other, but rather each program individually against the selection criteria.

One commenter requested clarification of the terms “deeper impact” and “broader reach” as used in § 2522.435(a)(2)(iii) of the proposed rule (§ 2522.435(a)(1)(ii)(C) in the final rule). By “deeper impact,” the Corporation is looking for more pronounced outcomes that show the program is having a more beneficial impact on a static number of beneficiaries. By “broader reach,” the Corporation means outcomes that affect more beneficiaries in the community or affect a larger portion of the community with a static level of impact.

Individual Program Circumstances

Several commenters viewed the proposed rules as favoring low-cost programs over a program's quality and results. Some commenters were concerned that the criteria favor part-time programs over full-time programs. Other commenters viewed the selection criteria as favoring urban areas with more access to resources than rural areas. And yet another commenter was concerned that the rule did not adequately recognize or address the fact that different program models require different levels of Federal investment. Two commenters were concerned that the emphasis on cost-effectiveness will discourage innovative program designs, particularly those reaching hard-to-serve populations. Another commenter stated that the rule would threaten programs with at-risk members, because they require more resources than programs with college-educated members.

Sections 2522.430(b) and 2522.435(b) of the proposed rule indicated that, in assessing an organization's capability and the cost-effectiveness and budget adequacy of the proposed program, the Corporation would consider a variety of individual program circumstances that might put an applicant's proposal into context. The goal was to give the Corporation the opportunity to fully weigh the contributions and benefits, as well as the challenges that individual programs and organizations might face in competing under these criteria.

While the language in sections 2522.430(b) and 2522.435(b) remains unchanged, the Corporation reiterates here its commitment to considering cost-effectiveness in the context of all that the applicant proposes—including its level of innovation, its focus on areas with higher need, its program model, its contributions, and its challenges. The Corporation does not believe that there can be a “one cost fits all” approach in the AmeriCorps program; on the contrary, the Corporation recognizes the breadth and diversity of programs, service, community beneficiaries, and individual circumstances, and is committed to considering all of these when selecting programs. The Corporation will not replace high-quality and high-impact programs with low-cost programs that cannot meet the unmet needs in our communities.

Waiver Process and Impact on Selection

The proposed rule included two possible bases for waivers—one relating to the requirement to recruit or support volunteers; the other relating to match requirements. Several commenters expressed concern as to when applicants would apply for and receive waivers, and the impact those waivers would have on the selection process. Three commenters suggested that the Corporation address waiver requests before the applicant submits the full grant application, and three others asked how the waiver request would impact the selection process. Several commenters specifically recommended that waivers not affect grant scoring.

As discussed earlier in section VI(B) of this preamble, the Corporation intends to consider waivers of the requirement that programs recruit or support volunteers after the proposal has been reviewed, but prior to awarding the grant. Volunteer recruitment will also remain a competitive criterion in the grant selection process, regardless of the outcome on the waiver request.

An applicant requesting an alternative match requirement or a waiver of match due to lack of resources at the local level, must request a waiver before submitting its application for funding. This will enable applicants to include an appropriate budget with their grant application. Applicants applying through a State commission will be required to request waivers from the Corporation through the commission. The Corporation will address the process for obtaining a waiver in the applicable grant application instructions.

Considering Similar Program Models Together

In applying the selection criteria, the Corporation will ensure, to the maximum extent possible, that similar program models are evaluated together. This will help promote equity and fairness. One commenter strongly supported this approach. A different commenter requested a definition of “similar program models.” Another commenter asked the Corporation to clarify how it will consider programs together. As a general matter, the Corporation defines its different program models according to the list of statutory program models included in § 122(a) of the NCSA. When an organization applies to the Corporation, it must self-identify which program model best describes its proposal. To the extent practicable, the Corporation then groups programs together on review panels, first by program model, such as youth corps or professional corps, and then, if possible, by other factors such as program design (e.g., statewide initiative or intermediary), member model (e.g., individual placement or team-based), issue area (e.g., environment or tutoring) and geographic area to be served (e.g., urban or rural). The more applications the Corporation receives in a particular competition, the more focused each review panel can be. For example, in the 2004 competition, the review panels the Corporation used included a panel reviewing proposals from campus-based professional corps, one reviewing community corps statewide initiatives, and two panels looking at community corps team-based programs focused on independent living. In addition to looking at like-programs together, this process allows us to ensure that we fund a broad and diverse portfolio of programs.

Information Outside the Application (§ 2522.470)

The proposed rule described in detail relevant information outside of the grant application that the Corporation may consider in making grant decisions. A few commenters asked how the Corporation would consider each document in the selection process. Two commenters argued that considering supplemental documents would create an unlevel playing field and could “appear to be an advantage to a more sophisticated sponsor, or, again, to discourage new small community-based organizations.” One of these commenters recommended that, if the Corporation does consider additional documents, the Corporation should only use documents provided by the applicant and should clearly identify how the document will be scored. One commenter asked the Corporation whether the documents on this list will be used to supplement information in an application, or just to verify

information. Another commenter recommended that the Corporation clarify what information it will consider and the weight it will give to the information.

The Corporation will not supplement an applicant's proposal with information that is not included in the proposal except to clarify or verify information as described below—to do otherwise could create an unlevel playing field and would be contrary to the Corporation's practice that an applicant may not submit supplemental material after the application deadline. Nor will the Corporation score any additional information it may consider. The primary purpose for obtaining information outside the application is to clarify information that is included in the applicant's proposal and to verify assertions made in an applicant organization's proposal, including engaging in due diligence to ensure that the applicant organization can appropriately manage Federal funds. The Corporation will not lower an applicant's score, for example, based on the quality of its Web site—however, the information on the Web site may, in certain circumstances, clarify an organization's structure, shed light on an organization's history, or provide other information that validates data in the application. To clarify the Corporation's intent with respect to considering information outside of the grant application, the final rule includes specific language in § 2522.470(b) stating that the Corporation may consider this information only to clarify or verify information in an application, including engaging in due diligence.

In addition, the Corporation has pared down the list of information sources from 21 items to 11. Several of the individual items listed in the proposed rule have been subsumed into single broader categories. The Corporation removed the financial management survey from the list because the Corporation does not use the survey to make grant decisions. Rather, the Corporation uses it to assess the training and technical assistance that approved applicants may need to establish appropriate systems for managing Federal funds.

One of the information sources in the proposed rule was reports from the Corporation's Office of Inspector General (OIG). One commenter suggested that the Corporation only consider final OIG reports because issues raised in draft reports often are resolved before the IG issues its final report. The Corporation does not believe it should be precluded from considering any information the OIG might make available to the Corporation regarding prospective grantees, particularly information that might impact a prospective grantee's ability to manage Federal funds or operate an AmeriCorps program. Reports, whether draft or final, contain information that the Corporation may properly consider even before a final report is issued. However, we recognize that a final report might have more reliable information than a draft report, and we intend to give appropriate consideration based on the specific circumstances surrounding the report. The Corporation has amended the language in § 2522.470(b)(4) (2522.470(b)(6) in the proposed rule) to clarify that the Corporation may consider any internal agency information, including information from the OIG.

One commenter suggested that the Corporation replace the list of outside information with language that states that “the Corporation conducts due diligence on prospective applicants,” including examining “financial and programmatic information as well as [an applicant's] previous experience operating Corporation programs as applicable.” As discussed above, the Corporation has added language to the final rule that speaks to the Corporation using the information described as a part of conducting due diligence on applicants, but the Corporation believes that including a list provides more clarity and specificity than simply stating the Corporation will undertake due diligence activities.

If the Corporation denies an application for funding based on outside information that is at variance with information in the application, the Corporation will inform the applicant, through the Corporation's feedback process, of the specific information the Corporation considered.

Applicants Eligible for Special Consideration (§ 2522.450)

In the NPRM, the Corporation indicated that, after we apply the basic selection criteria, we may apply one or more of the Corporation's selection priorities. The NPRM also indicated that the Corporation may announce additional priorities in the Notice of Funding Availability (NOFA), or other notice to the public. Our intent, however, in codifying the selection priorities in these regulations was to provide transparency and baseline consistency for current and prospective grantees. The list of selection priorities in the proposed rule reflects several long-standing priorities as well as a smaller number of new priorities that we believe are appropriate.

Three commenters asked the Corporation to clearly identify how it will apply selection priorities or provide “special consideration” to programs under § 2522.450. One commenter was concerned that many programs address more than one program activity and recommended that the final rule reflect that. The Corporation's goal in giving special consideration to certain program models or activities is to ensure that our portfolio of programs includes, to the extent possible, a meaningful representation of programs addressing those priorities. In each competition, the number of proposals that receive special consideration will vary depending upon how many high-quality applications the Corporation receives that address the enumerated priorities. The Corporation has amended the language in the final rule to clarify that the Corporation may give special consideration to ensure that its portfolio of programs includes a meaningful representation of programs that address one or more of the enumerated priorities.

One commenter supported adding homeland security to the list of national priorities, as long as homeland security-related activities were not required for all programs. As stated above, the Corporation will ensure that its portfolio of programs includes a meaningful representation of programs that address homeland security, but is not requiring all programs to engage in homeland security activities, or any of the other activities included on the list for special consideration.

One commenter supported the inclusion of lower-cost professional corps programs (§ 2522.450(a)(2)) on the list for special consideration because it will encourage the development of more high-quality professional corps programs. Another person commented that States find it difficult to develop programs from community organizations, including faith-based organizations, because of the complicated application process and the lack of State resources to coach applicants through the process. Consequently, this commenter found the priority for such programs somewhat meaningless. The Corporation acknowledges that many community organizations may find the AmeriCorps structure and process challenging. Nonetheless, the Corporation hopes that special consideration for this group of applicants will encourage more such programs to accept this challenge and apply for funding. In addition, the special consideration for community organizations, including faith-based organizations, (§ 2522.450(a)(1))

includes both programs operated by these types of organizations, and programs that do not have these characteristics themselves, but that support the efforts of community organizations, including faith-based organizations, to solve local problems. This means that an intermediary, for example, that includes significant service or placements with community organizations, including faith-based organizations, would fall within this category of programs eligible for special consideration. The Corporation hopes that larger grantees will bring on as sites or sub-grantees other community organizations, including faith-based organizations, that are unable themselves to apply directly for funds.

One commenter noted that the proposed rule created a preference for faith-based organizations over secular organizations by providing special consideration to “an organization of any size that is faith-based” but limiting the analogous special consideration to only “small community-based organizations.” To avoid this, the Corporation has amended § 2522.450(a)(1) to remove the reference to “small.” The Corporation has also amended the language in this section of the final rule to refer to “community organizations, including faith-based organizations,” rather than “faith-based and community-based organizations,” as was used in the proposed rule.

One commenter opined that any religion-based criterion or preference in the grant selection process is unconstitutional and therefore should be eliminated from the final rule. Another commenter opposed faith-based organizations receiving a preference over secular programs because secular programs are more likely to be subject to non-discrimination laws. In including a priority for community organizations, including faith-based organizations, the Corporation is not carving out funding exclusively for faith-based organizations. Providing special consideration for community organizations, including faith-based organizations, is not including any religion-based criterion in the selection process—it is merely a way to ensure that the Corporation's portfolio includes a meaningful representation of programs operated by or reaching community organizations, including faith-based organizations. The Corporation has acknowledged that many community organizations may find the AmeriCorps structure and process challenging, and hopes that providing special consideration for this category of applicants may make it more worthwhile for this type of organization to apply for AmeriCorps funding.

One commenter recommended that special consideration be given to programs that address a State priority. Section 2522.460 of the proposed rule, mirrored in the final rule, addresses the circumstances under which the Corporation will give special consideration to programs that address a State priority, rather than one of the Corporation's priorities.

The Corporation has added “disadvantaged youth” to § 2522.450(b)(1) to better align that selection preference with the Corporation's strategic goal of addressing the needs of that population. In addition, the Corporation has added programs that will be conducted in rural communities and in severely economically-distressed communities to the list in § 2522.450(c) to reflect the Corporation's goal of expanding the presence of AmeriCorps in those communities. To align our selection criteria with the Corporation's strategic goals, the final list of programs eligible for special consideration includes programs that increase service and service-learning on higher education campuses in partnership with their surrounding communities, and programs that foster service opportunities for baby-boomers. Finally, the Corporation has more clearly defined in § 2522.450(b)(8) the types of community-development programs that may receive special consideration.

State Commission Rankings of Competitive Proposals (§ 2522.465)

The final rule mirrors the proposed rule in requiring State commissions to prioritize their State competitive proposals in rank order to help inform our selection process. The Corporation originally included this provision in response to State commission feedback that the Corporation sometimes did not fund proposals that a

This text is long and has been trimmed here. Open the source document for the complete record.