Direct Grant Programs

SUMMARY: The Secretary amends Part 75, Education Department General

Administrative Regulations (EDGAR), which governs the administration of

the Department's discretionary grant programs. These amendments revise

certain sections of Part 75 to remove conflicts with Part 74, which was

revised in July 1994. These amendments provide virtually all

discretionary grantees the greater administrative flexibility to take

certain actions without the prior approval of the Department that is

permitted under the revised Part 74 for grantees subject to that part.

Special Projects and Centers funded by the National Institute on

Disability and Rehabilitation Research will continue to need prior

approval to extend their projects due to unique circumstances

associated with those programs. The Secretary retains discretion under

these amendments to require prior approval for any of the actions

permitted under the revised regulations if needed in appropriate

circumstances.

EFFECTIVE DATES: These regulations take effect on August 27, 1997.

These regulations apply to direct grants outstanding on the effective

date of the regulations and to all grants made on or after the

effective date of the regulations. With respect to the following NIDRR

programs, these regulations become applicable on October 1, 1997:

The Knowledge Dissemination and Utilization Centers and Disability

and Technical Assistance Centers programs under 34 CFR Part 350,

Subpart B, Secs. 350.17-350.19;

The Rehabilitation Research and Training Centers program under 34

CFR Part 350, Subpart C;

The Rehabilitation Engineering Research Centers program under 34

CFR Part 350, Subpart D;

The Special Projects and Demonstrations for Spinal Cord Injuries

programs under 34 CFR Part 359.

ADDRESSES: While the Secretary is publishing these procedural rules as

final regulations, the Secretary is interested in comments on the

effect of these changes and ways to improve the discretionary grant

administration process of the Department. Written comments should be

sent to: Greg Vick, U.S. Department of Education, Grants Policy and

Oversight Staff, Mail Stop 4248, Washington, DC 20202. Copies of

comments submitted to the Department will be available for public

inspection, until the regulations become effective, in Room 3652, GSA

National Capital Region Building, 7th and D Streets, SW., Washington,

DC between the hours of 9:00 a.m. and 4:30 p.m., Monday through Friday

of each week except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Greg Vick, (202) 708-8199. 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 5 p.m., Eastern time, Monday through Friday.

SUPPLEMENTARY INFORMATION:

Background

On November 29, 1993 (58 FR 62992), the Office of Management and

Budget (OMB) published a revised version of OMB Circular A-110, which

establishes uniform administrative requirements for Federal grants and

cooperative agreements awarded to institutions of higher education,

hospitals, and other non-profit organizations. On July 6, 1994 (59 FR

34722), the Secretary revised Part 74 (Administration of Grants) of

EDGAR to apply the provisions of the revised circular to Department of

Education grantees that are members of the covered groups.

The revised Part 74 gave the Secretary discretion to dispense with

certain prior approval procedures in Part 74 and various OMB circulars,

in order to permit a grantee: (1) To extend its grant automatically at

the end of a project period for a period of up to one year without

prior approval if the Department obligated no additional funds; (2) to

carry funds over from one budget period to the next without limitation;

(3) to obligate funds up to 90 days before the effective date of the

grant award without prior approval; and (4) to make transfers of funds

between direct cost budget categories for certain kinds of grants.

However, because regulations in Part 80, which applies to governments,

and Part 75, which applies to direct grants to any kind of

organization, conflict with the new rules in Part 74, these amendments

are needed to remove the barriers to use of the discretion authorized

in Part 74. Under the amendments, virtually all direct grantees of the

Department can benefit from the reduced burden in Part 74.

Extending a Project Period

As currently written, Sec. 75.261, binding on all classes of

grantees, requires them to take certain steps before the Department

will consider extending the end date of a project period. This

regulation conflicts with the Secretary's discretion under

Sec. 74.25(e). The new language for Sec. 75.261 provides that grantees

of the Department may extend their grants as provided in Part 74 unless

a statute, certain regulations or a grant condition prohibits that

discretion.

There are situations in which the Secretary might prohibit a

grantee from exercising the no-prior-approval discretion otherwise

available under the revised Sec. 75.261 by including conditions in the

notification of grant award. For example, some grants that support

programs for training teachers include funds for both salaries for

professors and scholarships for students. If a grantee does not receive

new funding for its program, the grantee may try to extend the project

period of the award and use any remaining funds to pay salaries for

professors without paying stipends to students so they could benefit

from the program. To avoid such a result, the Secretary might require

prior approval for an extension.

The Secretary also would refuse to permit a grantee to extend its

project period if, pursuant to statute, the funds would not be

available for expenditure (liquidation of obligations) during the

extended period. Under the account closing provisions of Public Law

101-510, funds must be obligated and expended within five years after

their availability for obligation by ED expired. If funds are not

obligated and expended by a grantee within this period, they revert

automatically to the U.S. Treasury. If a grantee were to unilaterally

extend its project period so that the funds were no longer available

for expenditure, the grantee would suffer from the automatic withdrawal

of its authority to liquidate obligations at the start of or in the

middle of a budget period.

The Secretary does not expect this unanticipated consequence in the

future because the Department is in the process of converting to a new

financial management system that will track all funds by the fiscal

year they were made available for obligation by the Department. Under

this new financial management system, grantees would be required to

expend funds from earlier budget periods of their grants before drawing

on funds from later budget periods. Budget periods for discretionary

grants are not exactly

[[Page 40423]]

synchronous with the period funds are available for obligation by ED.

However, requiring grantees to obligate funds from earlier budget

periods will ensure that, when a grantee gets to its last budget

period, the funds obligated during that last period will not have been

available to the grantee more than five years after the end of the

availability for obligation by the Department. During the period of

transition to the new financial system, ED will monitor expenditures

closely and might include conditions in some grants that would require

prior approval for extensions. Thus, ED could check its records to be

sure that the grantee would have funds available for expenditure under

the account-closing provisions of Public Law 101-510 before permitting

any extension.

Certain programs of NIDRR require special treatment regarding the

authority of grantees to extend their grants. As a result, the

regulations require grantees to request prior approval to extend their

projects under the Knowledge Dissemination and Utilization Centers and

Disability and Technical Assistance Centers programs, Rehabilitation

Research and Training Centers program, the Rehabilitation Engineering

Research Centers program, and the Special Projects and Demonstrations

for Spinal Cord Injuries programs. The special regulation for these

NIDRR programs is necessary to prevent confusion among constituents

that could result if there were more than one center or special project

in a given topical or geographical area. Also, if some of the grantees

under these programs lost competitions for the next centers or special

projects grants and extended their projects, the Assistant Secretary

might be unable to ensure that each of these grantees would have access

to the required ED information and expertise or to the multi-center

databases required for many rehabilitation research grantees.

The Secretary has established a delayed effective date for the

regulations as applied to these programs because their regulations were

recently amended, changing many of the citations to the relevant

subparts and sections. The program amendments become effective on

October 1, 1997. Thus, to avoid the confusion of multiple citations in

the regulations, these amendments are made effective for these programs

on the same date as the program regulations become effective. The end

result of the delayed effective date is that the current regulation,

requiring prior approval for extension of grants past the end of the

project period, will be continued under the new program and EDGAR

regulations that become effective on October 1, 1997.

Carrying Funds Forward

Section 75.253(c) provides that the Secretary considers funds

remaining unused by the grantee at the end of a budget period in

deciding how much new money to make available to a project for the next

budget period. Under the current regulation, if the unused funds are

needed to complete activities from the prior budget period, the

Secretary adds those unused funds to the funds to be granted for the

next budget period, with the result that the grantee gets funds

sufficient to complete the unfinished activities and to carry out all

new activities as well.

However, if the funds are not needed to complete unfinished

activities, the Secretary reduces the amount of new funds made

available to the grant by the amount of remaining funds that are

carried into the next budget period. Thus the Department's current

regulation--in the same manner as the new Part 74--has traditionally

provided for carrying over unused funds from a previous budget period

but requires the Secretary to consider those funds in deciding how much

new money to make available to a grantee.

The Secretary sees the value in many or most cases of letting

grantees carry all of their unused funds forward automatically and

making all of the remaining funds from the previous budget period

available for obligation during the next budget period, especially

since doing so will eliminate a significant paperwork burden for the

many grantees who otherwise would have to write to the Department to

request specific authorization for carrying over unused funds to the

following budget period.

Therefore, the Secretary amends Sec. 75.253(c) so that it clearly

provides that grantees may carry over unused funds from the previous

budget period into a new budget period and gives the Secretary

discretion to consider those funds in determining whether to reduce the

amount of new funds made available to the grant for the next budget

period. Examples of cases where the Secretary might use this discretion

include grants to ``high-risk'' grantees, grants that do not show a

sufficient rate of expenditure to indicate substantial progress had

been made by the grantee, as required by Sec. 75.253(a)(2)(i), or

awards where the grantee has completed the activities of the budget

period and does not need extra funds to cover the activities planned

for the next budget period. The conditions of a continuation award will

alert the grantee in those specific instances where the Department has

either reduced the amount of new funds made available for a new budget

period or might reduce the amount of new funds, depending on what

information the Department gets from regular grantee reports or, in

limited circumstances, from information provided under

Sec. 75.253(c)(2)(i).

Spending Grant Funds Before Getting an Award

Both Part 74 and Part 80 incorporate by reference OMB circulars A-

21, A-87, and A-122, which govern allowable expenditures under most

grant awards, thus giving them the force of law. The relevant circulars

allow grantees to expend funds before the effective date of the award

only with the prior approval of the awarding agency (so-called ``pre-

agreement'' or ``pre-award'' costs). Section 74.25(e)(1) now allows a

grantee to incur certain pre-award costs under the conditions specified

in that section. However, no similar authority exists in Part 80 for

grantees subject to that Part. The Secretary adds a new Sec. 75.263,

which permits all types of grantees to expend funds before the

effective date of the grant as permitted in Sec. 74.25, unless a

statute, regulations other than Part 80 regulations, or, in rare

circumstances, grant conditions prohibit those expenditures.

Cumulative Transfers Among Budget Categories

Under Part 80 recipients of grants in excess of $100,000 are

required to obtain the approval of the Department before making

cumulative cost transfers among categories in a project budget that

would exceed ten percent of the current total approved budget

(Sec. 80.30(c)(1)(ii)). By contrast, the revised Part 74 authorizes

grantees to make these transfers unless the Secretary imposes a

limitation on transfers in a particular case. Thus, Part 80 grantees

and those subject to Part 74 are subject to inconsistent treatment in

regard to this matter. To resolve this discrepancy, the Secretary adds

a new Sec. 75.264, which has the effect of applying the rule in Part 74

to all grantees, including those covered by Part 80.

Conclusion

These amendments reduce regulatory and administrative burden on

discretionary grantees and give them more flexibility in planning and

implementing their program activities. These regulations also reduce

paperwork burden.

[[Page 40424]]

Waiver of Proposed Rulemaking

In accordance with the Administrative Procedure Act (5 U.S.C. 553),

it is the practice of the Secretary to offer interested parties the

opportunity to comment on proposed regulations. However, these

amendments make procedural changes only and do not establish new

substantive policy. Therefore, under 5 U.S.C. 553(b)(A), proposed

rulemaking is not required.

Regulatory Flexibility Act Certification

These regulations would not have a significant economic impact on a

substantial number of small entities.

These regulations could affect State agencies, nonprofit

organizations, institutions of higher education and individuals. State

agencies, and individuals, however, are not defined as ``small

entities'' in the Regulatory Flexibility Act.

The small entities that could be affected by these regulations are

institutions of higher education, local educational agencies,

community-based organizations, hospitals, and nonprofit organizations

receiving Federal funds under a direct grant program. The final

regulations, however, would not have a significant economic impact on

these entities because the amendments relieve regulatory burden.

Paperwork Reduction Act of 1995

The amendments have been examined under the Paperwork Reduction Act

of 1995 and have been found to contain no information collection

requirements. These regulations reduce paperwork burden.

Intergovernmental Review

Some of the programs that would be affected by these regulations

are subject to the requirements of Executive Order 12372 and the

regulations in 34 CFR Part 79. The objective of the Executive order is

to foster an intergovernmental partnership and a strengthened

federalism by relying on processes developed by States and local

governments for coordination and review of proposed Federal financial

assistance.

In accordance with the order, this document is intended to provide

early notification of the Department's specific plans and actions for

these programs.

Assessment of Education Impact

Based on its own review, the Department has determined that the

regulations in this document would not require transmission of

information that is being gathered by or is available from any other

agency or authority of the United States.

List of Subjects in 34 CFR Part 75

Administrative practice and procedure, Continuation funding,

Education, Grant programs--education, Grants administration,

Incorporation by reference, Performance reports, Reporting and record

keeping requirements, Unobligated funds.

(Catalog of Federal Domestic Assistance Number does not apply)

Dated: July 21, 1997.

Richard W. Riley,

Secretary of Education.

The Secretary amends part 75 of title 34 of the Code of Federal

Regulations as follows:

PART 75--DIRECT GRANT PROGRAMS

1. The authority citation for part 75 continues to read as follows:

Authority: 20 U.S.C. 1221e-3 and 3474, unless otherwise noted.

2. Section 75.253(c) is revised to read as follows:

Sec. 75.253 Continuation of a multi-year project after the first

budget period.

* * * * *

(c)(1) Notwithstanding any regulatory requirements in 34 CFR part

80, a grantee may expend funds that have not been obligated at the end

of a budget period for obligations of the subsequent budget period if--

(i) The obligation is for an allowable cost that falls within the

scope and objectives of the project; and

(ii) ED regulations other than 34 CFR part 80, statutes, or the

conditions of the grant do not prohibit the obligation.

Note: See 34 CFR 74.25(e)(2).

(2) The Secretary may--

(i) Require the grantee to send a written statement describing how

the funds made available under this section will be used; and

(ii) Determine the amount of new funds that the Department will

make available for the subsequent budget period after considering the

statement the grantee provides under paragraph (c)(2)(i) of this

section or any other information available to the Secretary about the

use of funds under the grant.

(3) In determining the amount of new funds to make available to a

grantee under this section, the Secretary considers whether the

unobligated funds made available are needed to complete activities that

were planned for completion in the prior budget period.

* * * * *

3. Section 75.261 is amended by redesignating the current

paragraphs (a) and (b) as paragraphs (c) and (d); adding new paragraphs

(a) and (b); revising the introductory text of the newly designated

paragraph (c); amending newly designated paragraph (c)(4)(ii)(C) by

removing ``(a)(4)(ii)(A)'' and adding, in its place, ``(c)(4)(ii)(A)'';

and adding ``Waiver.'' at the beginning of newly designated paragraph

(d) to read as follows:

Sec. 75.261 Extension of a project period.

(a) General rule. A grantee may, notwithstanding any regulatory

requirement in 34 CFR part 80, extend the project period of an award

one time for a period up to twelve months without the prior approval of

the Secretary, if--

(1) The grantee meets the requirements for extension of 34 CFR

74.25(e)(2); and

(2) ED regulations other than the regulations in 34 CFR part 80,

statutes or the conditions of an award do not prohibit the extension.

(b) Specific rule for certain programs of the National Institute on

Disability and Rehabilitation Research. Notwithstanding paragraph (a)

of this section, grantees under the following programs of NIDRR must

request prior approval to extend their grants under paragraph (c) of

this section:

(1) The Knowledge Dissemination and Utilization Centers and

Disability and Technical Assistance Centers authorized under 29 U.S.C.

761a(b)(2), (4), (5), (6), and (11) and implemented at 34 CFR part 350,

subpart B, Secs. 350.17-350.19.

(2) The Rehabilitation Research and Training Centers program

authorized under 29 U.S.C. 762(b) and implemented at 34 CFR part 350,

subpart C.

(3) The Rehabilitation Engineering Research Centers authorized

under 29 U.S.C. 762(b)(3) and implemented at 34 CFR part 350, subpart

D.

(4) The Special Projects and Demonstrations for Spinal Cord

Injuries authorized under 29 U.S.C. 762(b)(4) and implemented at 34 CFR

part 359.

(c) Other regulations. If ED regulations, other than the

regulations in 34 CFR part 80, or the conditions of the award require

the grantee to get prior approval to extend the project period, the

Secretary may permit the grantee to extend the project period if--

* * * * *

4. A new Sec. 75.263 is added to subpart D to read as follows:

[[Page 40425]]

Sec. 75.263 Pre-award costs; waiver of approval.

A grantee may, notwithstanding any requirement in 34 CFR part 80,

incur pre-award costs as specified in 34 CFR 74.25(e)(1) unless--

(a) ED regulations other than 34 CFR part 80 or a statute prohibit

these costs; or

(b) The conditions of the award prohibit these costs.

(Authority: 20 U.S.C. 1221e-3 and 3474; OMB Circulars A-21, A-87,

and A-122)

5. A new Sec. 75.264 is added to subpart D to read as follows:

Sec. 75.264 Transfers among budget categories.

A grantee may, notwithstanding any requirement in 34 CFR part 80,

make transfers as specified in 34 CFR 74.25 unless--

(a) ED regulations other than 34 CFR part 80 or a statute prohibit

these transfers; or

(b) The conditions of the grant prohibit these transfers.

(Authority: 20 U.S.C. 1221e-3 and 3474)

[FR Doc. 97-19761 Filed 7-25-97; 8:45 am]

BILLING CODE 4000-01-P