State-administered Programs; State Postsecondary Review Program

SUMMARY: The Secretary amends Part 76 of the Education Department

General Administrative Regulations (EDGAR) to require a State to file

its State plan and other related documents under a given program by a

date certain or face deferral of the date on which the State may begin

to obligate funds under the program. The Secretary also modifies the

policy announced in the notice of proposed rulemaking (NPRM) regarding

pre-award costs incurred after the date funds are available for

obligation by the Secretary and before the date a State has an approved

State plan. Under the modified policy, the Secretary will allow pre-

award costs for matching and Maintenance of Effort expenditures because

these expenditures are not subject to the Cash Management Improvement

Act of 1990 (CMIA). The Secretary takes these actions to protect the

Federal Government from interest liabilities under the CMIA when the

Department is late in making an initial payment under a State-

administered program because the State failed to submit a substantially

approvable plan or other required document in a timely fashion. The

Secretary also makes conforming amendments to Part 667.

DATES: These regulations take effect on September 11, 1995.

FOR FURTHER INFORMATION CONTACT: Peter Wathen-Dunn, U.S. Department of

Education, 600 Independence Avenue, S.W., Room 4434, Washington, D.C.

20202-2243. Telephone: (202) 401-6700. Individuals who use a

telecommunications device for the deaf (TDD) may call the Federal

Information Relay Service (FIRS) at 1-800-877-8339 between 8 a.m. and 8

p.m., Eastern time, Monday through Friday.

SUPPLEMENTARY INFORMATION: The Cash Management Improvement Act of 1990

(CMIA) was passed by Congress to ensure greater efficiency,

effectiveness, and equity in the exchange of funds between the Federal

Government and the States. Under this statute and the Treasury

Department's implementing regulations at 31 CFR Part 205, the Federal

Government is liable for interest payments to a State that disburses

its own funds for Federal program purposes before the date that Federal

funds are deposited to the State's bank account for those obligations,

31 U.S.C. 6503(d). Conversely, a State must pay interest to the Federal

Government from the time Federal funds are deposited to the State's

account until the time that those funds are paid out by the State, 31

U.S.C. 6503(c).

The CMIA applies to ``major Federal assistance programs,'' which

are determined under a chart in the implementing Treasury regulations

at 31 CFR 205.4 and Appendix A to Part 205, Subpart A. The chart

establishes thresholds for CMIA coverage based on a comparison between

the amount of Federal funds expended in a State under a particular

program and the total Federal funds expended in the State. The Treasury

Department negotiates agreements with each of the States that cover a

number of issues under the CMIA, including which programs of the

Federal Government are covered by the CMIA in that State. Under the

Treasury-State agreement, a State may choose to cover more programs

under the CMIA than would be required under the regulatory chart. Thus,

to determine whether a program administered by the Department is

covered by the CMIA in a particular State, contact the CMIA contact

person for the State. These people are usually located in fiscal

offices such as a State controller's office. Many of the formula grant

State-administered programs of the Department meet the threshold for

coverage in most, if not all, States.

The Department of Education (Department) published a notice of

proposed rulemaking (NPRM) in the Federal Register on December 16,

1993, (58 FR 65856) that proposed regulations to limit the Federal

Government's interest liability under the CMIA. The Secretary received

60 comments in response to the NPRM from State educational agencies,

State fiscal offices, a trust territory, the Treasury Department, and

three national organizations. In addition to the comments, the

Department has discussed this rule with the States at various

conferences and presentations over the past one and one-half years.

Most States asked the Department to defer the proposed rule so that it

would not apply to funds made available for obligation by the Secretary

starting in calendar year 1994. The reason advanced most often to

support the deferral request was to give States time to adjust their

schedules to a new clearance process designed to submit State plans to

the Department on an earlier date. Commenters who were responsible for

State administration of programs that are current-funded, such as the

Library Services and Construction Act, suggested that the change in

submission date would be particularly burdensome for them without

greater advance notice of the change in the regulations. The commenters

also asked that the Secretary not apply, in 1994, the decision not to

grant pre-award costs if a State is late in submitting its State plan.

In addition to asking for the deferrals, the commenters raised many

questions that had to be answered before the regulations could become

effective. The Secretary decided to defer both application of the

proposed rule and the decision not to grant pre-award costs so that

States would have additional time to adjust their State plan

development processes to the timelines in the proposed regulations.

Thus, the Secretary published a notice in the Federal Register on May

26, 1994 (59 FR 27404) indicating his decision to defer application of

the actions proposed in the NPRM until the submission of State plans in

the spring and summer of 1995. After considering the comments, the

Secretary has decided to apply this final rule to applications

submitted in the spring and summer of 1996.

The NPRM for these regulations discussed the basis for these

regulations, the history of how the Department treated late State plans

in past years, the effect of the Treasury regulations implementing the

Act on the Department's practices, and the Department's proposed

regulations.

Analysis of Comments and Changes

An analysis of the comments and of the changes in the regulations

since publication of the NPRM follows. These regulations are designed

to cover the full spectrum of the Department's State-administered

programs. Thus, this preamble uses examples from many programs to

illustrate the applicability of the final regulations. If you have

questions about the application of these regulations to a specific

program of the Department, contact the program office responsible for

the program.

Technical changes to the regulations have been made to improve

their quality. These changes, which do not affect substance, are not

discussed in this preamble.

General Comments on Interest Liability

Comment: Several commenters expressed concern over the proposed

regulatory changes that would limit interest liability to States. Some

States concurred with the regulations that would require States to

submit a timely State plan and the Department of

[[Page 41287]]

Education to respond in a timely manner so interest would not be an

issue. However, they believed that if the Federal Government was not

responsive within a specific time frame, interest should be paid to the

States.

Discussion: The purpose of the CMIA is to achieve efficient,

equitable cash management practices so that no interest is exchanged.

It is prudent for the Department of Education to take action to correct

past practices regarding the acceptance of State plans that are

submitted late. The CMIA requires the Secretary of Treasury to regulate

and enforce timely disbursements of funds by Federal agencies. The

final regulations require States to submit substantially approvable

plans by specific dates, and the Department to respond in a timely

manner, or pay interest to the States in cases where States use their

own funds to pay for Federal program obligations during a period of

delay caused by the Department. The Secretary is committed to

conducting timely reviews of State plans.

Change: None.

What does substantially approvable mean?

Comment: Many commenters asked the Secretary to define

``substantially approvable,'' stressing the heightened importance of

its meaning now that the Secretary has decided not to grant pre-award

costs. Some of the commenters expressed the fear that the term could

and would be interpreted differently by every program official who

approves State plans. Others asked that explicit criteria be included

in a definition of the term or that a term different than substantially

approvable be used as a test to determine whether funds should flow to

a State. One commenter suggested that the Department should authorize

the flow of funds if a State made a ``good faith'' submission.

One commenter stated that there have been numerous requests to

reword sections of its State plans that have been approved by other

staff in past years and that the State had been asked to move sentences

from one page to another or to repeat sentences that appear on one page

at a later place in the State plan. To this commenter, it was unclear

whether the failure to respond to these requests would have rendered

the plan not substantially approvable.

Another commenter was concerned that if substantially approvable is

interpreted to mean not just submission of required components, but

resolution of disagreements about approvable content, the term must

mean the same thing as ``fully approvable.'' This commenter believed

that disagreements over interpretations of content should not delay the

allocation of funds because these disagreements often take months to

resolve.

Some of the commenters asked exactly what documents had to be

submitted to determine whether a plan was substantially approvable. One

recommended that the Department establish a regulatory list of required

documents so that there could be no ambiguity about what was required

to be submitted.

One commenter was concerned that minor modifications or submission

of additional information should not delay the availability of Federal

funds for obligation by the State.

Discussion: The Secretary has decided to continue using the term

``substantially approvable'' as the test for whether a State may begin

to obligate funds under a program. Most of the programs of the

Department and its predecessor, the Education Division of the former

Department of Health, Education, and Welfare, have used this term since

the early 1970s as the test to determine whether a State may begin to

obligate funds. Under this standard, the Department decides whether a

plan is substantially approvable based on whether the plan has met

substantive requirements under a funding statute and regulations.

While some commenters expressed concern that the substantially

approvable standard might be used to defer funding for a State based

solely on the need for trivial changes to the State plan, the

Department has always made its determination of whether a State plan is

substantially approvable based on whether the plan has met substantive

requirements under a funding statute and regulations. Thus, the need

for minor modifications of a non-substantive nature will not delay the

availability of Federal funds for obligation by the State.

The Secretary is aware that in some cases employees of the

Department have asked for changes to elements of a State plan that

might not be deficient under the ``substantially approvable'' test.

These requests have been motivated by a desire to assist a State in

improving its State plan and have been made in the context of other

changes that have been requested as necessary to make a plan

substantially approvable. In the future, employees of the Department

will distinguish their requests so that State officials will know which

requests must be satisfied in order to make a State plan substantially

approvable.

The Secretary understands the concern that each employee of the

Department may interpret the standard differently, subjecting a State

to arbitrary determinations by the Department. However, the Secretary

notes that front line employees of the Department who review State

plans do not make the final decisions about whether a plan is

substantially approvable. Those decisions are made by senior officials

in consultation with program managers. Thus, a decision about whether a

particular plan is substantially approvable is made by officials who

are exposed to a broad array of plans and who exercise their judgment

to ensure that States are treated equitably.

The following examples are taken from past experiences of the

Department and demonstrate how the term ``substantially approvable''

has been applied in the context of various programs.

Example 1: Part B of the Individuals With Disabilities Education Act

(IDEA)

Under the IDEA, Part B, each participating agency must permit

parents to inspect and review any education record relating to their

children which is collected, maintained, or used by the agency under

Part B. The agency must comply with a parental request to inspect and

review records without unnecessary delay and before any meeting

regarding an individualized education program or hearing relating to

the identification, evaluation, or placement of the child, and in no

case more than 45 days after the request has been made. In one case,

the State plan referenced a State statute that required that ``After an

individual has been shown the private data and informed of its meaning,

the data need not be disclosed to that individual for six months

thereafter unless a dispute or action pursuant to this section is

pending or additional data on the individual has been collected or

created.'' The State was required to ensure that a parent's right to

access under the Federal requirement was not limited by State statute

in order for its plan to be substantially approvable.

Example 2: Rehabilitation Act of 1973

Section 101(a)(5)(A) of the Rehabilitation Act, as amended in 1992,

contains the requirements for the order of selection for services.

Under this section, a State plan must show and provide the

justification for an order of selection that will be used by the State

in determining which individuals with disabilities will be served if

the State cannot serve all individuals eligible for services under the

Act. The order of selection for the provision of vocational

rehabilitation services must be

[[Page 41288]]

determined on the basis of serving first those individuals with the

most severe disabilities in accordance with criteria established by the

State. The State plan must also describe the outcomes and service goals

for the individuals served by the State and the time within which the

outcomes and service goals may be achieved.

Several State plans that indicated an inability to serve all

eligible individuals have been found not to be substantially approvable

because they failed to contain the State's criteria for determining

which individuals with disabilities are the individuals with the most

severe disabilities. In other cases, State plans were found not

substantially approvable because the plans failed to indicate that the

State would target its resources to serve individuals with the most

severe disabilities first.

Example 3: Adult Education Act

The Adult Education Act and its implementing regulations require

assurances that public and nonprofit agencies, including correctional

education agencies, be provided direct and equitable access to all

Federal funds provided under the State plan program. However, one State

plan stated ``Correctional agencies will be eligible for any newly

appropriated federal funding directly from the U.S. Department of

Education for corrections educational programs.'' This language was

unacceptable under the requirements of the Act and regulations. The

State was asked to submit a revision to the plan to correct the

deficiency. The State plan was found substantially approvable when the

State revised it to say ``Eligible recipients for adult basic education

funding include correctional educational agencies.''

Example 4: Library Services and Construction Act (LSCA)

One State submitted a plan in which a project for strengthening the

capacity of the State Library Agency and an Administration project both

included administrative expenses. The plan was not considered

substantially approvable because activities that would be considered as

administration of the Act are not allowed in a Strengthening project.

The State was required to include all administrative expenditures under

its Administration project before the plan was found substantially

approvable.

Under the LSCA, a State must have an approved Long-range Program

(LRP) on record with the Department, and all annual programs must be

based on needs, priorities, and plans identified in the LRP. In the

second year after the passage of amendments to LSCA in 1990, several

State plans were not found substantially approvable because the States

had not changed their LRPs to reflect new statutory priorities under

the LSCA amendments. These plans were found substantially approvable

when the new priorities were addressed either in a revised or amended

LRP.

The examples described above indicate that the kinds of issues that

must be resolved before a State plan can be found substantially

approvable are not trivial and the Department's decisions in these

cases are based on clear mandates in statutes and implementing program

regulations. The Secretary assures the States that the Department will

not find a State plan not substantially approvable simply because an

assurance or other text is misplaced in the plan or there is some other

non-substantive problem with the plan.

This preamble discusses the issue of what documents must be

submitted under the heading ``Should the Department be required to send

documents, including a list of any other documents required to prove

eligibility under each program, to States by a date certain and what

should be the effect of the Department's failure to do so?''

Change: None.

How do the regulations affect Maintenance of Effort and Matching

Requirements?

Several commenters addressed the discussion in the NPRM regarding

the effect of the proposed regulations on fiscal maintenance of effort

requirements (MOE). Some confusion was created by the fact that the

preamble described the MOE requirement under the Rehabilitation Act as

if it were an eligibility requirement. However, under that Act, failure

to meet MOE requirements does not deny eligibility. Instead, the

allotment for a State is reduced by the amount that the State fails to

meet the MOE requirement unless a waiver or modification of the MOE

requirement is granted.

Comment: One commenter was concerned that the regulations appeared

to require submission of documents demonstrating that a State had met

the MOE requirements before a State plan could be considered

substantially approvable. The commenter noted that this would not be

workable because the financial report needed to demonstrate that MOE

had been met was not available until 90 days after the end of the grant

period and the State plan for a current funded program had to be

submitted before the end of the prior grant period.

Discussion: The CMIA and these implementing regulations do not

independently require submission of any document. The documents that

must be submitted under a particular program are based on the program

statute and implementing regulations.

Most program offices of the Department do not review actual MOE

data before making a decision that a plan is substantially approvable.

Instead, these programs require a State to submit an assurance that the

State has met the MOE requirement based on currently available data.

Under these programs, the Department relies on financial audits,

reports, and other information to determine whether a State has met its

MOE requirement for a particular year. Thus, for these programs,

submission of MOE documentation, other than an assurance, would not be

required before the Department made a decision about whether a State

plan was substantially approvable.

One program office that does review MOE data as part of the State-

plan review process is the office administering the LSCA program. Under

the LSCA, the determination of whether a State has met a MOE

requirement is based on a comparison of the planned expenditures of the

State and the expenditures of the State from the second preceding year.

Program officials for this program compare the budget of the State-plan

submission against the expenditures of the State for the second

preceding year before the budgeted year to determine if the State has

budgeted sufficient funds to meet the MOE requirement.

Change: None.

Comment: Many commenters wanted the Department to accept, for the

purpose of meeting MOE and matching requirements, non-federal

expenditures made after the date that funds are available for

obligation by the Secretary but before the date a State plan was found

substantially approvable. Under some programs, the difference of just a

few thousand dollars made a difference for a State in determining

whether it met its MOE requirements.

Discussion: The Secretary has decided to modify the policy

announced in the NPRM regarding pre-award costs, based on the concerns

expressed in these comments. Expenditures incurred to meet matching and

MOE requirements are not expenditures for which the Federal Government

must deposit funds to the account of a State. Thus, these expenditures

are not subject to the interest liabilities of the CMIA.

Given that the CMIA does not apply to non-Federal funds used to

meet

[[Page 41289]]

matching and MOE requirements, the Secretary decided that he had more

flexibility to permit a State to use these expenditures to meet

matching and MOE requirements even though the period for obligation by

the Secretary has started and the State does not yet have a

substantially approvable State plan. Thus, the Secretary has decided to

permit States to use these expenditures to meet matching and MOE

requirements before the date a State plan is found substantially

approvable. However, a State that chooses to use its funds for these

types of expenditures would risk the possibility that they would be

found unallowable because they do not comply with the State plan that

is finally approved. The Secretary decided to change the pre-award cost

policy so that States managing programs that require matching or MOE

expenditures would have greater flexibility to keep those programs

running with matching and MOE expenditures during a period when costs

would otherwise be unallowable due to the late submission of a State

plan.

The Secretary notes that the MOE determination under some programs

of the Department is not based on State expenditures under the Federal

program. For example, under the newly reauthorized Title I program of

the Elementary and Secondary Education Act of 1965, the MOE

determination is based on whether a State has expended sufficient funds

on free public education. Another example is one of the MOE

requirements under the LSCA Title I program under which the MOE

determination is based on State expenditures under a State program that

has a similar purpose to the Federal program. Under requirements such

as these, State expenditures used to meet the MOE requirement do not

need to be for allowable costs under the Federal program. Thus, for

these types of MOE requirements, even without the change in policy

regarding pre-award costs, expenditures made by a State after the start

of the obligation period but before the State plan is found

substantially approvable may be used by the State to meet MOE

requirements.

Change: No change has been made to the regulations. However, the

Secretary has modified the policy regarding pre-award costs to permit

grantees to use expenditures made after the date funds become available

for obligation by the Secretary and before the date a State plan is

found substantially approvable to meet matching and MOE requirements.

When must State plans be submitted?

Comment: Fourteen comments were received concerning the due date

specified in proposed Sec. 76.703(a)(1) for submission of State plans.

One commenter stated that the proposed submission date change for State

plans would not impact that State. Four commenters were concerned that

the proposed April 1 submission would be too early: (a) to allow

planning time; and, (b) because State program requirements for public

input prohibited early submission. One commenter was concerned that an

April 1 submission date would not allow sufficient time for

Departmental review and feedback to States needing to correct their

plans, and still allow adequate time for States to make these

corrections before the availability date. Two commenters suggested that

an already lengthy process would be made still longer. One commenter

believed that the time frame for receiving a plan in substantially

approvable form should be 60 days before the start of the obligation

period rather than 90 days before that date. Two commenters were

concerned that States received their final allocations prior to plan

submission in order to provide final financial reports. Three comments

concerned precedence of statutory deadlines over regulatory deadlines.

One commenter suggested that the Department issue a formal notification

to the State when a plan is approved.

Discussion: The Secretary set the deadline date in

Sec. 76.703(a)(2) for the submission of State plans as a back-up that

would be used only if a program office did not establish its own

deadline for submission of State plans. The administrators for each

State-administered program are free to set deadlines that are

appropriate for their programs. Most State-administered programs

already have deadlines that are set in statute, regulations, or direct

communications with States. The Secretary is aware that the

establishment of a deadline three months before the start of the

obligation period could have caused hardship on some States if it had

been imposed last spring, before States had time to adjust their State-

plan preparation processes to mesh with the new regulations. As stated

in the May 26, 1994 (59 FR 27404) document, this consideration was one

of the factors that the Secretary considered in deciding to defer

application of the regulations to submissions made during the spring

and summer of 1995. Therefore, the Secretary has decided to leave the

deadline in Sec. 76.703(a)(2) as stated in the proposed regulations. If

a State believes that the submission date for a particular program

should be adjusted due to conditions particular to that program, the

issue should be addressed with Department officials responsible for

that program.

Change: None.

When should a plan be considered submitted?

Comment: Five commenters opposed the proposed change in the test

under proposed Sec. 76.703(b) that the Department uses to determine

when a State plan is considered submitted. The proposed regulations

would change the date of submission from the postmark date to the date

the State plan is actually received by the Department. The commenters'

reasons for opposition included: (1) the acceptance by other Federal

agencies of a postmark date; (2) increased burden on States resulting

from reduced time frames to complete plans because of having to mail

them earlier in order to assure receipt by the Department by the

required date; and (3) lack of control over the mail process, which

could have negative financial consequences on States. One commenter did

not present a reason for opposing the change from postmark to receipt

date.

Discussion: In the past, the Department frequently received grant

applications from grantees that had mailed applications on the

submission date, with receipt by the Department as much as two weeks

later. The lag time created by ``mail-in-transit'' has resulted in the

Department having shortened review time frames for grant applicants,

thereby hampering the Department's ability to complete grant reviews

within its prescribed time frame. Earlier mailing of a State plan or

use of an expedited delivery service by grant applicants would assure

the Department a uniform application review period for all State plans

under each grant program.

Change: None.

Should the Department be required to send documents, including a

list of any other documents required to prove eligibility under each

program, to States by a date certain, and what should be the effect of

the Department's failure to do so?

Comment: Some commenters expressed the opinion that the Department

should be required to send to States all State plan submission

instructions and other relevant materials in a timely manner.

Commenters stressed the critical importance this issue plays in

allowing States sufficient time to develop and submit plans by the

established date, particularly when public input is required.

[[Page 41290]]

Specifically, some commenters suggested the Department provide all

necessary guidance three months before the States' prescribed State

plan submission date, and other commenters recommended six-, four-, and

two-month lead times for the receipt of these materials. Other

commenters did not suggest specific time frames, but called for

``timely receipt'' of all plan instructions issued by the Department.

One commenter proposed that the regulations at Sec. 76.703(a)(2)

include a list of any other documents required to prove eligibility

under each program subject to this part.

A related issue addressed by some commenters concerned proposed

penalties against the Department should it fail to provide all relevant

State plan materials and instructions by a date certain. Some of these

commenters suggested that when guidance is late, the deadline for State

plan submission should be extended by one day for each day the

Department is late in providing guidance. Other commenters proposed a

general waiver of the penalty to the State for late submissions if the

Department transmits the guidance to the States late, and one commenter

suggested an unspecified extension for the State if this occurs.

Discussion: The Secretary is committed to providing States

necessary State plan information and instructions--including a list of

required documents--in a timely manner. In light of this commitment,

the regulation has been changed to require each program subject to

these regulations to provide guidance to the States regarding the

contents of State plans. The Secretary establishes the date for the

delivery of guidance so that there are at least as many days between

that date and the date that State plans must be submitted to the

Department as there are days between the date that State plans must be

submitted to the Department and the date that funds are available for

obligation on July 1, or October 1, as appropriate.

In the event that the Department fails to deliver guidance as

required, the deadline for the receipt of State plans will be extended

one day for each day that the documents are late in being received by

the State. The Secretary intends that guidance be sent to the States

far enough in advance of the due date for the guidance that the

information will be received by the States on or before the due date

for the guidance. If a State asserts that it has received the guidance

after the due date, it will have the burden of proving the date that it

received the guidance. The Secretary is aware of the Department's

responsibility to deliver State plan guidance on a timely basis, and

will devote appropriate resources to ensure that guidance documents are

delivered on a timely basis.

Change: A new paragraph (b) has been added to Sec. 76.703 to cover

deferrals of the date that a State plan must be submitted to the

Department. Paragraph (b)(3) covers deferral of State plan submission

dates caused by failure of the Department to deliver timely guidance to

the States regarding State plan requirements.

Should there be a deadline for the Department's decision and what

should be the effect of failure to meet such a deadline?

Comment: Many commenters expressed concern that the proposed

regulations did not require the Department to complete a timely review

such that, if State plans and other documents are submitted on time,

the State has an opportunity to submit any necessary modifications or

corrections before any delay in the obligation date is imposed. None of

the examples in the proposed regulations indicate what will happen if

the State plan is submitted in substantially approvable form, on time,

but the Department fails to conduct a timely review.

Some of the commenters cited the following example: the State plan

is submitted on April 1; the Department completes the review at the end

of June and finds that the plan is not substantially approvable;

corrections are requested but insufficient time is allowed for the

State to make the corrections for an obligation date of July 1.

Several commenters recommended imposing time limits for the

Departmental review of the plan. Some of these commenters suggested

thirty days, while another commenter suggested forty-five days.

One commenter suggested that, if a time limit on Departmental

review could not be imposed, resulting in a State agency not receiving

Federal funds until after the first day the funds are available for

obligation, then at the very least an appeal process with provisions

for due process should be established.

One commenter suggested that if the Department were unable to

complete a review in a timely manner, the State should be granted pre-

award costs.

Discussion: The Secretary is committed to conducting timely reviews

of State plans. If a State submits a State plan in conformance with the

guidance provided, it should take less than the three months allotted

for the Department to review the plan. Under these circumstances it is

anticipated that any changes or corrections needed to make the plan

substantially approvable will be minor and can be completed in a very

limited amount of time. On the other hand, if a State submits a plan

that is not in accord with the guidance provided, then it is possible

that the resubmission and approval process could extend beyond the date

funds are first available to the Department for obligation. If the

Department fails to conduct a timely review of a State plan that is

submitted in substantially approvable form on the date it is due, the

State could begin to obligate funds on the date funds are available for

obligation by the Secretary. Also, States have a responsibility to

submit plans that are substantially approvable upon submission.

The Secretary believes that these regulations will result in States

submitting timely and high quality plans and in efficient and punctual

review by the various Department program offices. In view of the wide

variety of content requirements for State plans under Department

programs and of the number of plans reviewed by various program

offices, the Secretary declines to impose intermediate time frames for

Department review of State plans within this three-month period.

However, the Secretary believes that the Department should be held

accountable in meeting the timeliness established for review of State

plans under a program. Thus, the Secretary has decided to modify the

regulation so that if the Department takes longer to review a plan than

established in advance, the Secretary will grant pre-award costs to the

State, regardless of what the regulation would otherwise require.

Change: A new paragraph (g) has been added to Sec. 76.703 so that

if the Department takes longer to review a State plan than established

under the regulation, the Secretary would grant pre-award costs.

Should the Department establish procedures for notifying the States

of the results of the Department's review?

Comment: Several commenters expressed concerns about the

Department's ability to maintain and review documents and notify States

of the results of that review in a timely manner.

One commenter asked whether the grant award would be the indication

of approval or whether there would also be an accompanying letter.

Two commenters suggested that the Department should notify the

State when the initial State plan submission is received.

Discussion: The Secretary believes that the Department must be

timely in

[[Page 41291]]

its response to States concerning the State plan submission. The

Secretary will ensure that the Department establishes internal

procedures in order to facilitate the notification process. The

Department will establish a method of formal notification to States

when the documents specified in guidance provided by the Department

have been received for review. If a State submits an incomplete State

plan, the Department will informally notify the State regarding the

missing pieces. Also, the Department will develop internal procedures

to include both formal and informal means (phone and fax messages) of

notifying the States concerning the status of the review during the

process. The Department officially notifies a State regarding the

issuance of its grant through a notification of grant award (NGA). Some

program offices may provide cover letters prior to or accompanying the

NGA. It is mutually beneficial to all parties for the Department to

conduct a timely review which includes periodic contact with the State.

Change: A new paragraph (c)(3) has been added to Sec. 76.703 that

will require the Department to inform States when all documents

specified in Departmental guidance have been received by the

Department.

Should the Department change the proposed rule about who may sign

for changes to a State plan?

Comment: Two commenters expressed concern about the requirement in

proposed Sec. 76.703(e)(2) that would require a State that submits

additional information to bring the State plan into substantially

approvable form to secure signatures for required changes from the

original submitter of the plan or an authorized delegate of that

officer.

One commenter suggested that since changes to the plan often are

faxed to the Department for review, the State should be allowed to

supply the Department with the names of individuals who are authorized

to sign the State plan.

One commenter suggested that the Department should consider not

requiring signatures from other agencies (i.e. Drug Free Communities)

and allow the State agency receiving the grant to submit its plan

separately.

Discussion: The Secretary appreciates the difficulties that arise

in securing appropriate signatures in a very short turn-around time.

The Secretary agrees that submitting a list of staff authorized to

sign-off on changes to the plan would be appropriate. The Department

does not have the authority to waive the signature required of the

Governor for the drug-free program.

The Department will work with States to develop procedures for

submitting documents by electronic transmittal and appropriate means of

verifying signatures.

Change: None

Should the Department establish a rule permitting waiver of the

Sec. 76.703 regulation in certain circumstances?

Comment: Several commenters requested that the regulations provide

for a waiver authority or other discretion by the Department to allow

pre-award costs when submission of a State plan is late. The reasons

commenters felt might justify exceptions to the general rule included

circumstances beyond a State's control, such as a natural disaster,

absence of State program personnel due to serious medical problems or

death and instances when the Federal interest in the timely beginning

or continuation of a State's program would be adversely affected, or

when significant impairment to the achievement of a program's

objectives would result.

Discussion: The Secretary agrees with commenters that there is a

need to allow the Department the discretion to allow pre-award costs

for expenditures under the Federal program in some limited

circumstances. However, the Secretary believes that instances in which

pre-award costs are allowed under these regulations should be clear,

susceptible to consistent application across programs, and narrowly

tailored to situations that are truly outside the control of the State.

Some programs may need to permit discretion in granting pre-award costs

in program-specific situations. This authority should be addressed, as

appropriate, in individual program regulations.

Change: A new paragraph (b) has been added to Sec. 76.703 to cover

deferrals for the date that a State plan must be submitted to the

Department. Paragraph (b)(1) provides that the Secretary, at a State's

request, may extend the submission date for a State plan and, if

necessary, approve pre-award costs for a particular grant based on a

Presidentially-declared disaster in the State that significantly

impairs the ability of the State to submit a timely application.

Should the Department have a special rule when there is a delay in

program appropriations or implementing regulations?

Comment: Several commenters noted that there are instances when,

due to changing Federal statutes and regulations, States do not have

notice of what the State plan requirements are in enough time to enable

them to complete the development of the plan and submit it on time. One

commenter noted that for one program an April 1 submission date would

mean that they would have to begin preparation of the plan 12 to 15

months prior to the start of the fiscal year to which the grant

applies. Commenters indicated that States should not be penalized for

late submissions in circumstances where there has been a late

appropriation or the Department has not notified the States in a timely

manner regarding the State plan requirements for a program.

Discussion: Regarding late appropriations, the Treasury Department

regulations at 31 CFR 205.11(b) already provide that if a State pays

out its own funds for program purposes due to a delay in the passage of

a Federal appropriations act, the Federal Government will incur an

interest liability if the appropriations act covers the period of the

State's expenditure and permits payment for expenditures already

incurred by the State. The Secretary does not have authority to change

the result under the Treasury regulations.

Regarding program regulations, as a general rule, the requirements

that apply to a grant are the statutes and regulations that are in

effect on the day that the grant is made. Often, legislation that

imposes significant new responsibilities on States has a delayed

effective date so that States have time to make the changes necessary

for implementation. Similarly, the Federal rulemaking process generally

incorporates a delayed effective date, although that delay may not be

sufficient in some cases to allow States to make necessary changes in

their State plans. Therefore, the Secretary agrees with commenters that

these regulations should be modified to allow States a reasonable

period of time to make needed changes in State plans.

In many instances, under current practice, if new program

requirements take effect at a time that the Department determines is

too close to the date on which grants are to be made to allow the State

to make needed changes, the Department obtains an assurance from the

State that the State is operating the program consistent with all

applicable requirements, including those that are newly effective.

Other assurances and documentation that the new requirements are being

followed may be required by particular programs. Revisions to the State

plan to incorporate changes needed as a result of the new requirements

must be completed as soon as possible but generally not later than the

expected

[[Page 41292]]

beginning of the next grant award period. The Secretary believes that

this practice may continue to be appropriate for situations that can be

addressed by State assurances and documentation that program

requirements are being implemented. In other situations, an assurance

would not be sufficient to address the new State plan requirements,

even in the short run, and the Secretary may need the discretion to

give States additional time to submit their applications under a

program.

Change: A new Sec. 76.704 has been added that provides that, unless

the particular program has established an earlier date, the State plan

must meet the requirements that were in effect for the program three

months before the State plan due date and any additional requirements

known on that date that are scheduled to become effective by the

expected grant award date (July 1 for forward-funded programs or

October 1 for current-funded programs). If any of these requirements is

changed after that date (three months before the State plan due date or

the other date established by the program), the Secretary may require a

State to submit appropriate assurances and documentation or extend the

due date for the State plan and, if necessary under an extended due

date, approve pre-award costs for that program.

Should States be permitted to waive their right to interest in

return for the Department's acceptance of late State plans without

penalty?

Comment: One commenter suggested that the regulations provide that

the Secretary could waive these regulations if the State agreed to

``waive'' its claim to interest on the State funds used for pre-award

costs under the CMIA. Another commenter recommended that expenditures

made during a period that a State plan is not substantially approved be

exempted from the operation of the CMIA.

Discussion: The Department is without authority to require or even

permit States to forego claims to interest under the CMIA. Congress

delegated to the Treasury Department the authority to enforce the CMIA.

The operation of the CMIA and the programs to which it applies are

controlled by Treasury's CMIA implementing regulations, 31 CFR part

205, and the State-Treasury agreements under those regulations.

Change: None.

Should certain programs be exempt from the regulations in 76.703?

Comment: Commenters noted the particular problems of the programs

that are not forward-funded, such as the LSCA programs and the

Rehabilitation Act programs. One commenter suggested that these

programs be exempted from the operation of the proposed regulations.

Discussion: As explained above, the Secretary cannot control the

application of the CMIA to these programs. Thus, the Secretary does not

believe that it would be prudent to exclude these programs from the

operation of these Department regulations.

Change: None.

Should subgrantees be permitted to obligate funds during a period

before the State may begin to obligate funds?

Comment: One comment was received regarding the relationship

between proposed Sec. 76.703 and the current Sec. 76.704 (redesignated

by this final rulemaking document as Sec. 76.708), which provides that

a subgrantee may not begin to obligate funds until the State may begin

to obligate funds. The commenter noted that, under many State-

administered programs, most of the funds flow through to subgrantees

that are required to provide most of the services required under a

program. The commenter thought that the proposed regulations should be

amended so that subgrantees could begin to obligate funds even if the

State had failed to submit a substantially approvable State plan.

According to the commenter, this result was appropriate because

subgrantees have no control over the timely preparation of the State

plan but would be penalized under the proposed regulations for a

State's failure to submit a substantially approvable State plan on a

timely basis.

Discussion: The Secretary is aware that subgrantees must depend

upon responsible management of Federal programs by the States in order

to be able to obligate funds at the start of the obligation period.

However, the Secretary cannot sever this dependency due to the

relationship between the Department, the States, and their subgrantees.

Under the framework established by Congress for State-administered

programs, the Department makes grants to States and has no direct

relationship with subgrantees. The Department looks to the States for

proper administration of the programs. For example, when a subgrantee

misspends funds under a State-administered program, the Department

seeks recovery of the funds or takes other action against the State to

achieve compliance by the subgrantee. In this context, a subgrantee

derives its entire authority to obligate funds under a program from the

State. Thus, if a State lacks authority to obligate funds, its

subgrantees are equally without authority to obligate funds.

Even if the Secretary had the power to permit obligation by

subgrantees before the State could obligate funds, there are good

policy reasons for the Department not to permit such a practice. One of

the purposes of approving a State plan is to ensure that the State is

imposing correct requirements upon its subgrantees. If a State

submitted a plan that was not substantially approvable and subgrantees

were permitted to submit local applications for flow through funds and

obligate funds under that plan, serious questions would be raised about

whether the subgrantees were complying with the Federal requirements

under the program.

Change: None.

What issues are raised under the Library Services and Construction

Act?

Comment: One commenter suggested that instead of the proposed

regulations, the Secretary pro-rate decreases to the grant awards in

accordance with the days the plan is late.

Discussion: Under the LSCA statute and GEPA, the Secretary does not

have the authority to decrease the grant awards due to a State's late

plan submission.

Change: None.

Comment: Two commenters noted that disallowing pre-award costs

under LSCA, Title II (Construction), would adversely impact on

communities that need to count the cost of the land and architectural

fees (both pre-award expenditures) in order to meet the 50 percent

matching requirement. They recommend that the Title II construction

program be exempt from these regulatory changes.

Discussion: It is highly unlikely that the LSCA Title II program

will ever meet the funding threshold for coverage under the CMIA

Treasury regulations in subpart A of 31 CFR part 205. The LSCA Title II

program regulations require that the request for grant award be

submitted to the Department after the State has approved the final

working drawings. This, by implication, requires that the land be

purchased and the architectural drawings be completed before the plan

is submitted. The LSCA Title II regulations clearly provide that these

expenditures are allowable. 34 CFR 770.11(a)(5). The Assistant

Secretary will specifically authorize these pre-award costs in grant

award notices under the LSCA Title II program so that the costs may be

allowed to meet the requirements of the program.

Change: None.

Comment: Several commenters were concerned that State and/or local

funds expended between July 1 and the effective date of the program (or

the date of the acceptance of a substantially approvable plan) would

not be counted

[[Page 41293]]

toward the matching required under the LSCA program.

Discussion: State or local funds expended between July 1 and the

effective date of the program cannot be counted as matching. The LSCA

Titles I and III programs begin on October 1 and end on September 30.

These two programs do not exist before the October 1 effective date

each year. Therefore, the Secretary notes that funds counted as

matching under the program must be expended in the same time period as

the Federal grant program.

The Secretary also notes that Federal carryover funds may not be

obligated and expended after September 30th until there is a

substantially approvable plan received by the Department.

Change: None.

Comment: Some commenters asked, given the fact that LSCA is a

current-funded program and that, in many years, the Congress has not

appropriated funds for LSCA by the start of the Federal fiscal year, is

the October 1 date still to be the date on which the Secretary will

obligate funds under Sec. 76.703(c). They asked how this would affect

the obligation and expenditure of funds between October 1 and the date

that Congress actually appropriates funds for LSCA.

Discussion: Regulations covering Federal interest liabilities are

found in the Treasury Department regulations implementing the Cash

Management Improvement Act at 31 CFR Part 205. Specifically,

Sec. 205.11(b) addresses late appropriations and provides that the

Federal Government will incur an interest liability if an

appropriations act, as enacted, covers the period of the State's

expenditure and permits payment for expenses already incurred by the

State.

Change: None.

Comment: A commenter asked if a substantially approvable plan was

submitted by April 1, could LSCA funds be obligated on July 1.

Discussion: The beginning of the obligation period for current

funded programs is October 1, and, therefore, obligations generally may

not occur prior to that date.

Change: None.

Comment: Many commenters noted that the examples under

Sec. 76.703(e)(3) of the proposed regulations only referred to forward-

funded programs. They noted that because LSCA is not forward-funded it

should be exempt from these regulatory changes.

Discussion: The Secretary will not exempt the LSCA program from

these regulations because current-funded programs cannot be excluded

from coverage under the CMIA.

Change: None.

Comment: It was feared by one commenter that, in trying to fit a

current funded program under regulations that the commenter felt were

clearly intended for forward-funded programs, there might be unforeseen

problems in the future.

Discussion: The Secretary does not foresee any issues that are

unique to current-funded programs. However, these regulations have been

reviewed by Departmental staff knowledgeable about current-funded

programs such as the LSCA in order to ensure that issues that may arise

with regard to these programs are addressed.

Change: None.

Comment: Several commenters noted that, unlike forward-funded

programs, planning for LSCA is done on an unknown Federal allocation.

Under these regulations, the State budget might also be unknown. In

addition, the staff of the State agency would be compelled to work on

the plans for LSCA at the same time they must be effecting closeout of

the State fiscal year.

Discussion: The commenters are correct in that State plans prepared

for submission under this revised regulation would, in many cases, be

based on unknown funding at either the Federal or State levels or at

both levels. However, annual plans are considered estimates and are

expected to be revised to reflect final Federal funding amounts. (See

next discussion for details.) Submissions prior to the due date are

acceptable if necessary to decrease impact on State staff.

Change: None.

Comment: Some commenters noted that State plans based on estimated

figures would have to be amended at a later date so that the plan

proposes activities consistent with the actual funding amounts. This

would make even more complex planning and might ``* * * create

confusion at the sub-grantee level, and possible fiscal chaos at the

state level.'' Such added work was considered by a commenter as a

violation of the Paperwork Reduction Act.

Discussion: State plans are expected to be based on an estimation

of funds. Under 34 CFR 80.30(c)(ii), changes to plans or budgets that

are within ten percent of the budgeted amount, require no additional

Federal funding, and make no significant change to the intent of the

project or plan, need not be submitted to the Department for prior

approval. Because planning is done on an estimated Federal amount

currently, grantees are already in the position of amending some

projects after the start of the grant period. The need to amend grants,

based upon a submission of actual State funding data, and the

submission of the supporting data, are considered in the burden when

the paperwork burden is calculated under the Paperwork Reduction Act of

1980. Therefore, these revised regulations contain no added information

collection requirements.

Change: None.

Comment: Several commenters expressed concern that the required

assurances under LSCA would be due prior to the passing of the State's

budget confirming the availability of such funds.

Discussion: The assurances may be based on the best available

information as of the date of the submission.

Change: None.

Comment: One commenter noted that the revised Sec. 76.703 would

require estimated annual expenditure reports (rather than actual report

of expenditures) be accepted by the Department in order to generate a

plan by July 1.

Discussion: Under current law, the Federal fiscal year ends on

September 30. The report covering expenditures for that period is due

to the Department at the end of December. The LSCA program plans that

will use the information from the report, as a prerequisite for

funding, will not be due until the following July 1, which is nine

months after the expenditure period. The Secretary does not agree that

only estimated expenditures and not actual expenditures could be

verified during this time period. Therefore, there is no allowance for

estimated annual reports.

Change: None.

Comment: Several commenters voiced a concern that some State

expenditures under MOE requirements occur during the July 1 to October

1 period, and a failure to receive permission to count these

expenditures towards MOE would cause a failure to qualify for Federal

LSCA funding.

Discussion: MOEs under the LSCA are based on the requirement of a

State to maintain the support of services of a protected program or to

a protected population. Some of these expenditures may not be part of

the expenditures under LSCA (such as State Aid) and only have a tenuous

relationship to the Federal program. Since many of these programs are

ongoing State supported efforts, the Secretary agrees that these

amounts are eligible for counting as MOE from the beginning of the

State fiscal year, whether or not the State plan is substantially

approvable.

Change: None.

Comment: Many commenters noted that Sec. 76.703(a)(2) establishes a

due date

[[Page 41294]]

for State Plans, of three months prior to the date that the Secretary

may obligate funds for the program. The effective date of current

programs is October 1, and, therefore, plans are due on the prior July

1. Some commenters noted that such a proposed change will require new

timetables at the State and local level. Most commented that the change

can be implemented if given enough time. Other commenters requested

that the date of October 1 be retained and cited a number of problems

associated with this change.

Discussion: The program staff will have reviewed and accepted all

timely and substantially approvable plans prior to the effective date

of the program in order that the Secretary may make obligations in a

timely manner. The retention of the October due date for the submission

of State plans is impossible if all reviews are to be accomplished

prior to October 1. The Department must reserve the three-month period

for review (including negotiations) of the State Plans.

Change: None.

Section 76.711: Should States have to request funds by CFDA number?

The NPRM proposed to add a new Sec. 76.708. This document adds that

section as a new Sec. 76.711.

Comment: One commenter asked why the Department would require

States to use the CFDA number when the Treasury Department would not

require Federal agencies to provide the CFDA number to the States for

funds transmitted to the States. Conversely, the Treasury Department

suggested in its comments that the Department should require all

grantees to request the draw down of funds by CFDA number, because all

programs that are covered in the CFDA are subject to coverage under the

CMIA. A third commenter stated that a requirement to request funds by

CFDA number would place an unnecessary administrative burden on States

which might actually hinder timely payments under the CMIA. This

commenter asked that the Department stay with the current, single-

request system, which permits grantees to request funds needed under

all grants to a State in a single request, without having to identify

the programs for which the funds are being requested.

Discussion: As the Treasury Department stated in the preamble to

the final regulations implementing the CMIA, ``CFDA numbers are key to

the provisions of this rule.'' This statement was made in the context

of Treasury's discussion of concerns that agencies don't always provide

CFDA numbers to States when the agencies make their awards. Treasury

said ``Respondents emphasized the problems created in such situations

given the fact that [the Treasury regulation implementing the CMIA]

relies on program CFDA numbers for tracking withdrawals and payments,

and for calculating interest accruals.''

This discussion indicates Treasury's understanding that States will

need to request payments by CFDA number and agencies will have to make

payments by CFDA number in order to calculate interest liabilities

under the Act. The Department of Education already identifies the CFDA

number of a grant program whenever it issues a notification of grant

award. Thus, the Secretary does not expect any increased burden for a

State to check the CFDA number on a grant award document in order to

request funds under a program.

Change: In response to the Treasury Department's comment,

Sec. 76.708 will require use of the CFDA number when requesting funds

for any grant subject to Part 76.

Change: This final rulemaking document makes technical changes by

redesignating certain sections that were not affected by the NPRM in

order to make room for the new Sec. 76.704. Current Secs. 76.704,

76.705, and 76.706 have been redesignated as Sec. 76.708, 76.709, and

76.710, respectively. Cross references to these sections in other parts

of 34 CFR have been amended as appropriate.

Paperwork Reduction Act of 1980

These regulations have been examined under the Paperwork Reduction

Act of 1980 and have been found to contain no information collection

requirements.

List of Subjects

34 CFR Part 76

Education Department, Grant programs-education, Grant

administration, Intergovernmental relations, State-administered

programs.

34 CFR Part 667

Colleges and universities, Cultural exchange programs, Education,

Educational study programs, Grant programs--education.

Dated: April 6, 1995.

Richard Riley,

Secretary of Education.

(Catalog of Federal Domestic Assistance Number does not apply)

The Secretary amends Parts 76 and 667 of Title 34 of the Code of

Federal Regulations as follows:

PART 76--STATE-ADMINISTERED PROGRAMS

1. The authority citation for part 76 is revised to read as

follows:

Authority: 20 U.S.C. 1221e-3, 6511(a), 3474, unless otherwise

noted.

2. Section 76.703 is amended by removing paragraphs (a) and (b),

redesignating paragraph (c) as paragraph (h), adding new paragraphs (a)

through (g), and adding notes following new paragraphs (b) and (g), to

read as follows:

Sec. 76.703 When a State may begin to obligate funds.

(a) (1) The Secretary may establish, for a program subject to this

part, a date by which a State must submit for review by the Department

a State plan and any other documents required to be submitted under

guidance provided by the Department under paragraph (b)(3) of this

section.

(2) If the Secretary does not establish a date for the submission

of State plans and any other documents required under guidance provided

by the Department, the date for submission is three months before the

date the Secretary may begin to obligate funds under the program.

(b) (1) This paragraph (b) describes the circumstances under which

the submission date for a State plan may be deferred.

(2) If a State asks the Secretary in writing to defer the

submission date for a State plan because of a Presidentially declared

disaster that has occurred in that State, the Secretary may defer the

submission date for the State plan and any other document required

under guidance provided by the Department if the Secretary determines

that the disaster significantly impairs the ability of the State to

submit a timely State plan or other document required under guidance

provided by the Department.

(3) (i) The Secretary establishes, for a program subject to this

part, a date by which the program office must deliver guidance to the

States regarding the contents of the State plan under that program.

(ii) The Secretary may only establish a date for the delivery of

guidance to the States so that there are at least as many days between

that date and the date that State plans must be submitted to the

Department as there are days between the date that State plans must be

submitted to the Department and the date that funds are available for

obligation by the Secretary on July 1, or October 1, as appropriate.

(iii) If a State does not receive the guidance by the date

established under

[[Page 41295]]

paragraph (b)(3)(i) of this section, the submission date for the State

plan under the program is deferred one day for each day that the

guidance is late in being received by the State.

Note: The following examples describe how the regulations in

Sec. 76.703(b)(3) would act to defer the date that a State would

have to submit its State plan.

Example 1. The Secretary decides that State plans under a

forward-funded program must be submitted to the Department by May

first. The Secretary must provide guidance to the States under this

program by March first, so that the States have at least as many

days between the guidance date and the submission date (60) as the

Department has between the submission date and the date that funds

are available for obligation (60). If the program transmits guidance

to the States on February 15, specifying that State plans must be

submitted by May first, States generally would have to submit State

plans by that date. However, if, for example, a State did not

receive the guidance until March third, that State would have until

May third to submit its State plan because the submission date of

its State plan would be deferred one day for each day that the

guidance to the State was late.

Example 2. If a program publishes the guidance in the Federal

Register on March third, the States would be considered to have

received the guidance on that day. Thus, the guidance could not

specify a date for the submission of State plans before May second,

giving the States 59 days between the date the guidance is published

and the submission date and giving the Department 58 days between

the submission date and the date that funds are available for

obligation.

(c) (1) For the purposes of this section, the submission date of

a State plan or other document is the date that the Secretary

receives the plan or document.

(2) The Secretary does not determine whether a State plan is

substantially approvable until the plan and any documents required

under guidance provided by the Department have been submitted.

(3) The Secretary notifies a State when the Department has

received the State plan and all documents required under guidance

provided by the Department.

(d) If a State submits a State plan in substantially approvable

form (or an amendment to the State plan that makes it substantially

approvable), and submits any other document required under guidance

provided by the Department, on or before the date the State plan

must be submitted to the Department, the State may begin to obligate

funds on the date that the funds are first available for obligation

by the Secretary.

(e) If a State submits a State plan in substantially approvable

form (or an amendment to the State plan that makes it substantially

approvable) or any other documents required under guidance provided

by the Department after the date the State plan must be submitted to

the Department, and--

(1) The Department determines that the State plan is

substantially approvable on or before the date that the funds are

first available for obligation by the Secretary, the State may begin

to obligate funds on the date that the funds are first available for

obligation by the Secretary; or

(2) The Department determines that the State plan is

substantially approvable after the date that the funds are first

available for obligation by the Secretary, the State may begin to

obligate funds on the earlier of the two following dates:

(i) The date that the Secretary determines that the State plan

is substantially approvable.

(ii) The date that is determined by adding to the date that

funds are first available for obligation by the Secretary--

(A) The number of days after the date the State plan must be

submitted to the Department that the State plan or other document

required under guidance provided by the Department is submitted; and

(B) If applicable, the number of days after the State receives

notice that the State plan is not substantially approvable that the

State submits additional information that makes the plan

substantially approvable.

(f) Additional information submitted under paragraph

(e)(2)(ii)(B) of this section must be signed by the person who

submitted the original State plan (or an authorized delegate of that

officer).

(g) (1) If the Department does not complete its review of a

State plan during the period established for that review, the

Secretary will grant pre-award costs for the period after funds

become available for obligation by the Secretary and before the

State plan is found substantially approvable.

(2) The period established for the Department's review of a plan

does not include any day after the State has received notice that

its plan is not substantially approvable.

Note: The following examples describe how the regulations in

Sec. 76.703 would be applied in certain circumstances. For the

purpose of these examples, assume that the grant program established

an April 1 due date for the submission of the State plan and that

funds are first available for obligation by the Secretary on July 1.

Example 1. Paragraph (d): A State submits a plan in

substantially approvable form by April 1. The State may begin to

obligate funds on July 1.

Example 2. Paragraph (e)(1): A State submits a plan in

substantially approvable form on May 15, and the Department notifies

the State that the plan is substantially approvable on June 20. The

State may begin to obligate funds on July 1.

Example 3. Paragraph (e)(2)(i): A State submits a plan in

substantially approvable form on May 15, and the Department notifies

the State that the plan is substantially approvable on July 15. The

State may begin to obligate funds on July 15.

Example 4. Paragraph (e)(2)(ii)(A): A State submits a plan in

substantially approvable form on May 15, and the Department notifies

the State that the plan is substantially approvable on August 21.

The State may begin to obligate funds on August 14. (In this

example, the plan is 45 days late. By adding 45 days to July 1, we

reach August 14, which is earlier than the date, August 21, that the

Department notifies the State that the plan is substantially

approvable. Therefore, if the State chose to begin drawing funds

from the Department on August 14, obligations made on or after that

date would generally be allowable.)

Example 5. Paragraph (e)(2)(i): A State submits a plan on May

15, and the Department notifies the State that the plan is not

substantially approvable on July 10. The State submits changes that

make the plan substantially approvable on July 20 and the Department

notifies the State that the plan is substantially approvable on July

25. The State may begin to obligate funds on July 25. (In this

example, the original submission is 45 days late. In addition, the

Department notifies the State that the plan is not substantially

approvable and the time from that notification until the State

submits changes that make the plan substantially approvable is an

additional 10 days. By adding 55 days to July 1, we reach August 24.

However, since the Department notified the State that the plan was

substantially approvable on July 25, that is the date that the State

may begin to obligate funds.)

Example 6. Paragraph (e)(2)(ii)(B): A State submits a plan on

May 15, and the Department notifies the State that the plan is not

substantially approvable on August 1. The State submits changes that

make the plan substantially approvable on August 20, and the

Department notifies the State that the plan is substantially

approvable on September 5. The State may choose to begin drawing

funds from the Department on September 2, and obligations made on or

after that date would generally be allowable. (In this example, the

original submission is 45 days late. In addition, the Department

notifies the State that the plan is not substantially approvable and

the time from that notification until the State submits changes that

make the plan substantially approvable is an additional 19 days. By

adding 64 days to July 1, we reach September 2, which is earlier

than September 5, the date that the Department notifies the State

that the plan is substantially approvable.)

Example 7. Paragraph (g): A State submits a plan on April 15 and

the Department notifies the State that the plan is not substantially

approvable on July 16. The State makes changes to the plan and

submits a substantially approvable plan on July 30. The Department

had until July 15 to decide whether the plan was substantially

approvable because the State was 15 days late in submitting the

plan. The date the State may begin to obligate funds under the

regulatory deferral is July 29 (based on the 15 day deferral for

late submission plus a 14 day deferral for the time it took to

submit a substantially approvable plan after having received

notice). However, because the Department was one day late in

completing its review of the plan, the State would get pre-award

costs to cover the period of July 1 through July 29.

* * * * *

(Authority: 20 U.S.C. 1221e-3, 6511(a), 3474, 31 U.S.C. 6503)

3. Sections 76.704, 76.705, and 76.706 are redesignated as

Secs. 76.708, 76.709, and 76.710, respectively.

[[Page 41296]]

4. A new Sec. 76.704 is added to read as follows:

Sec. 76.704 New State plan requirements that must be addressed in a

State plan.

(a) This section specifies the State plan requirements that must be

addressed in a State plan if the State plan requirements established in

statutes or regulations change on a date close to the date that State

plans are due for submission to the Department.

(b)(1) A State plan must meet the following requirements:

(i) Every State plan requirement in effect three months before the

date the State plan is due to be submitted to the Department under 34

CFR 76.703; and

(ii) Every State plan requirement included in statutes or

regulations that will be effective on or before the date that funds

become available for obligation by the Secretary and that have been

signed into law or published in the Federal Register as final

regulations three months before the date the State plan is due to be

submitted to the Department under 34 CFR 76.703.

(2) If a State plan does not have to meet a new State plan

requirement under paragraph (b)(1) of this section, the Secretary takes

one of the following actions:

(i) Require the State to submit assurances and appropriate

documentation to show that the new requirements are being followed

under the program.

(ii) Extend the date for submission of State plans and approve pre-

award costs as necessary to hold the State harmless.

(3) If the Secretary requires a State to submit assurances under

paragraph (b)(2) of this section, the State shall incorporate changes

to the State plan as soon as possible to comply with the new

requirements. The State shall submit the necessary changes before the

start of the next obligation period.

(Authority: 20 U.S.C. 1221e-3, 6511(a), 3474, 31 U.S.C. 6503)

5. A new Sec. 76.711 is added after redesignated Sec. 76.710 and

before the center heading ``REPORTS'' to read as follows:

Sec. 76.711 Requesting funds by CFDA number.

If a program is listed in the Catalog of Federal Domestic

Assistance (CFDA), a State, when requesting funds under the program,

shall identify that program by the CFDA number.

(Authority: 20 U.S.C. 1221e-3, 6511(a), 3474, 31 U.S.C. 6503)

PART 667--STATE POSTSECONDARY REVIEW PROGRAM

6. The authority citation for Part 667 continues to read as

follows:

Authority: 20 U.S.C. 1099a through 1099a-3, unless otherwise

noted.

7. Section 667.1 is amended by revising paragraph (d)(1)(iii) to

read as follows:

Sec. 667.1 Scope and purpose.

* * * * *

(d)(1) * * *

(iii) 34 CFR 76.701, 76.702, 76.703, 76.704, 76.707, 76.720,

76.730, 76.731, 76.734, 76.760, and 76.761 of subpart G;

* * * * *

[FR Doc. 95-18064 Filed 8-10-95; 8:45 am]

BILLING CODE 4000-01-P