[Title 34 CFR ]
[Code of Federal Regulations (annual edition) - July 1, 2005 Edition]
[From the U.S. Government Printing Office]



[[Page i]]



          34


          Parts 1 to 299

                         Revised as of July 1, 2005


          Education
          
          


________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of July 1, 2005
          With Ancillaries
                    Published by
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

[[Page ii]]

          U.S. GOVERNMENT OFFICIAL EDITION NOTICE

          Legal Status and Use of Seals and Logos
          
          
          The seal of the National Archives and Records Administration 
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              the official codification of Federal regulations established 
              under the Federal Register Act. Under the provisions of 44 
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              Federal Register, shall be judicially noticed. The CFR is 
              prima facie evidence of the original documents published in 
              the Federal Register (44 U.S.C. 1510).

          It is prohibited to use NARA's official seal and the stylized Code 
              of Federal Regulations logo on any republication of this 
              material without the express, written permission of the 
              Archivist of the United States or the Archivist's designee. 
              Any person using NARA's official seals and logos in a manner 
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              1017.

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 34:
          Subtitle A--Office of the Secretary, Department of 
          Education                                                  3
    Subtitle B--Regulations of the Offices of the Department 
      of Education
          Chapter I--Office for Civil Rights                       335
          Chapter II--Office of Elementary and Secondary 
          Education                                                437
  Finding Aids:
      Material Approved for Incorporation by Reference........     597
      Table of CFR Titles and Chapters........................     599
      Alphabetical List of Agencies Appearing in the CFR......     617
      List of CFR Sections Affected...........................     627

[[Page iv]]





                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 34 CFR 3.1 refers to 
                       title 34, part 3, section 
                       1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, July 1, 2005), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 2001, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, 1973-1985, or 1986-2000, published in 11 separate 
volumes. For the period beginning January 1, 2001, a ``List of CFR 
Sections Affected'' is published at the end of each CFR volume.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    Properly approved incorporations by reference in this volume are 
listed in the Finding Aids at the end of this volume.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed in 
the Finding Aids of this volume as an approved incorporation by 
reference, please contact the agency that issued the regulation 
containing that incorporation. If, after contacting the agency, you find 
the material is not available, please notify the Director of the Federal 
Register, National Archives and Records Administration, Washington DC 
20408, or call 202-741-6010.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Statutory 
Authorities and Agency Rules (Table I). A list of CFR titles, chapters, 
and parts and an alphabetical list of agencies publishing in the CFR are 
also included in this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

[[Page vii]]


REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of textual material 
appearing in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-741-6000 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, Washington, DC 20408 or e-mail, 
fedreg.info@nara.gov.

SALES

    The Government Printing Office (GPO) processes all sales and 
distribution of the CFR. For payment by credit card, call toll-free, 
866-512-1800 or DC area, 202-512-1800, M-F, 8 a.m. to 4 p.m. e.s.t. or 
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512-1803.

ELECTRONIC SERVICES

    The full text of the Code of Federal Regulations, the LSA (List of 
CFR Sections Affected), The United States Government Manual, the Federal 
Register, Public Laws, Public Papers, Weekly Compilation of Presidential 
Documents and the Privacy Act Compilation are available in electronic 
format at www.gpoaccess.gov/nara (``GPO Access''). For more information, 
contact Electronic Information Dissemination Services, U.S. Government 
Printing Office. Phone 202-512-1530, or 888-293-6498 (toll-free). E-
mail, gpoaccess@gpo.gov.
    The Office of the Federal Register also offers a free service on the 
National Archives and Records Administration's (NARA) World Wide Web 
site for public law numbers, Federal Register finding aids, and related 
information. Connect to NARA's web site at www.archives.gov/federal--
register. The NARA site also contains links to GPO Access.

                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

July 1, 2005.

[[Page ix]]



                               THIS TITLE

    Title 34--Education is presently composed of three volumes (parts 1 
to 299, parts 300 to 399, and part 400 to End). The contents of these 
volumes represent all regulations codified under this title of the CFR 
as of July 1, 2005.

    For this volume, Elmer Barksdale was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Frances D. McDonald, assisted by Alomha S. Morris.

[[Page 1]]



                           TITLE 34--EDUCATION




                   (This book contains parts 1 to 299)

  --------------------------------------------------------------------
                                                                    Part
SUBTITLE A--Office of the Secretary, Department of Education           3

  SUBTITLE B--Regulations of the Offices of the Department of Education

chapter I--Office for Civil Rights, Department of Education.         100

chapter II--Office of Elementary and Secondary Education, 
  Department of Education...................................         200

[[Page 3]]

      Subtitle A--Office of the Secretary, Department of Education

  --------------------------------------------------------------------

Part                                                                Page
3               Official seal...............................           5
4               Service of process..........................           6
5               Availability of information to the public 
                    pursuant to Pub. L. 90-23...............           6
5b              Privacy Act regulations.....................          15
6               Inventions and patents (general)............          26
7               Employee inventions.........................          27
8               Demands for testimony or records in legal 
                    proceedings.............................          28
12              Disposal and utilization of surplus Federal 
                    real property for educational purposes..          31
15              Uniform relocation assistance and real 
                    property acquisition for federal and 
                    federally assisted programs.............          39
21              Equal access to justice.....................          40
30              Debt collection.............................          49
31              Salary offset for Federal employees who are 
                    indebted to the United States under 
                    programs administered by the Secretary 
                    of Education............................          59
32              Salary offset to recover overpayments of pay 
                    or allowances from Department of 
                    Education employees.....................          66
33              Program Fraud Civil Remedies Act............          70
34              Administrative wage garnishment.............          87
35              Tort claims against the Government..........          95
36              Adjustment of civil monetary penalties for 
                    inflation...............................          98
60              Indemnification of Department of Education 
                    employees...............................          99
73              Standards of conduct........................         100

[[Page 4]]

74              Administration of grants and agreements with 
                    institutions of higher education, 
                    hospitals, and other non-profit 
                    organizations...........................         101
75              Direct grant programs.......................         129
76              State-administered programs.................         162
77              Definitions that apply to Department 
                    regulations.............................         193
79              Intergovernmental review of Department of 
                    Education programs and activities.......         195
80              Uniform administrative requirements for 
                    grants and cooperative agreements to 
                    state and local governments.............         199
81              General Education Provisions Act--
                    enforcement.............................         229
82              New restrictions on lobbying................         242
84              Governmentwide requirements for drug-free 
                    workplace (financial assistance)........         254
85              Governmentwide debarment and suspension 
                    (nonprocurement)........................         260
86              Drug and alcohol abuse prevention...........         290
97              Protection of human subjects................         299
98              Student rights in research, experimental 
                    programs, and testing...................         313
99              Family educational rights and privacy.......         316

[[Page 5]]



PART 3_OFFICIAL SEAL--Table of Contents




Sec.
3.1 Definitions.
3.2 Description.
3.3 Authority to affix seal.
3.4 Use of the seal.

    Authority: 20 U.S.C. 3472 and 3485, unless otherwise noted.

    Source: 45 FR 86491, Dec. 31, 1980, unless otherwise noted.



Sec. 3.1  Definitions.

    For the purposes of this part:
    (a) ED means all organizational units of the Department of 
Education.
    (b) Embossing Seal means a display of the form and content of the 
Official Seal made on a die so that the Seal can be embossed on paper or 
other media.
    (c) Official Seal means the original(s) of the Seal showing the 
exact form, content, and colors.
    (d) Replica means a copy of the Official Seal displaying the 
identical form, content, and colors.
    (e) Reproduction means a copy of the Official Seal displaying the 
form and content, reproduced in only one color.
    (f) Secretary means the Secretary of Education.



Sec. 3.2  Description.

    The Official Seal of the Department of Education is described as 
follows: Standing upon a mound, an oak tree with black trunk and limbs 
and green foliage in front of a gold rising sun, issuing gold rays on a 
light blue disc, enclosed by a dark blue border with gold edges bearing 
the inscription ``DEPARTMENT OF EDUCATION'' above a star at either side 
of the words ``UNITED STATES OF AMERICA'' in smaller letters in the 
base; letters and stars in white. The Offical Seal of the Department is 
modified when used in reproductions in black and white and when 
embossed. As so modified, it appears below.
[GRAPHIC] [TIFF OMITTED] TC21OC91.062



Sec. 3.3  Authority to affix seal.

    The Secretary and the Secretary's designees are authorized to affix 
the Official Seal, replicas, reproductions, and embossing seals to 
appropriate documents, certifications, and other material for all 
purposes as authorized by this section.

(Authority: 20 U.S.C. 3474)



Sec. 3.4  Use of the seal.

    (a) Use by any person or organization outside of the Department may 
be made only with the Department's prior written approval.
    (b) Requests by any person or organization outside of the Department 
for permission to use the Seal must be made in writing to Director of 
Public Affairs, U.S. Department of Education, 400 Maryland Avenue, SW., 
Washington, DC 20202, and must specify, in detail, the exact use to be 
made. Any permission granted applies only to the specific use for which 
it was granted and is not to be construed as permission for any other 
use.
    (c) In regard to internal use, replicas may be used only:
    (1) For display in or adjacent to ED facilities, in Departmental 
auditoriums, presentation rooms, hearing rooms, lobbies, and public 
document rooms;
    (2) In offices of senior officials;
    (3) For official awards, certificates, medals, and plaques;
    (4) For electronic media, motion picture film, video tape and other 
audiovisual media prepared by or for ED and attributed thereto;

[[Page 6]]

    (5) On official publications which represent the achievements or 
mission of ED;
    (6) In non-ED facilities in connection with events and displays 
sponsored by ED, and public appearances of the Secretary or other senior 
ED officials; and
    (7) For other internal purposes as determined by the Director for 
Management;
    (d) In regard to internal use, reproductions may be used only--
    (1) On ED letterhead stationery;
    (2) On official ED identification cards, security, and other 
approved credentials;
    (3) On business cards for ED employees;
    (4) On official ED signs;
    (5) On official publications or graphics issued by and attributed to 
ED, or joint statements of ED with one or more other Federal agencies, 
State or local governments, or foreign governments;
    (6) On official awards, certificates, and medals;
    (7) On electronic media, motion picture film, video tape, and other 
audiovisual media prepared by or for ED and attributed thereto; and
    (8) For other internal purposes as determined by the Director for 
Management.
    (e) Embossing seals may be used only internally--
    (1) On ED legal documents, including interagency or 
intergovernmental agreements, agreements with State or local 
governments, foreign patent applications, certification(s) of true 
copies, and similar documents;
    (2) On official awards and certificates; and
    (3) For other purposes as determined by the General Counsel or the 
Director for Management.
    (f) Falsely making, forging, counterfeiting, mutilating, or altering 
the Official Seal, replicas, reproductions, or embossing seals, or 
knowingly using or possessing with fraudulent intent and altered 
official seal, replica, reproduction or embossing seal is punishable 
under 18 U.S.C. 506.
    (g) Any person using the Official Seal, replicas, reproductions, or 
embossing seals in a manner inconsistent with the provisions of this 
part is subject to the provisions of 18 U.S.C. 1017, which states 
penalties for the wrongful use of an Official Seal, and to other 
provisions of law as applicable.

[45 FR 86491, Dec. 31, 1980, as amended at 53 FR 4620, Feb. 17, 1988; 56 
FR 65388, Dec. 16, 1991; 65 FR 57286, Sept. 22, 2000]



PART 4_SERVICE OF PROCESS--Table of Contents






Sec. 4.1  Service of process required to be served on or delivered to 
Secretary.

    Summons, complaints, subpoenas, and other process which are required 
to be served on or delivered to the Secretary of Education shall be 
delivered to the General Counsel or a Deputy General Counsel, by mail at 
400 Maryland Avenue SW., Washington, DC 20202 or by personal service at 
that address. The persons above designated are authorized to accept 
service of such process.

(Authority: 5 U.S.C. 301)

[47 FR 16780, Apr. 20, 1982]



PART 5_AVAILABILITY OF INFORMATION TO THE PUBLIC PURSUANT TO 
PUB. L. 90-23--Table of Contents




                          Subpart A_Definitions

Sec.
5.1 Act.
5.2 Department.
5.5 Records.
5.6 Statutory definitions.

                  Subpart B_What Records Are Available

5.11 Purpose and scope.
5.12 General policy.
5.13 Records available.
5.14 Published documents.
5.15 Creation of records.
5.16 Deletion of identifying details.
5.17 Records in record centers.
5.18 Destroyed records.
5.19 Records of other departments and agencies.

                Subpart C_Freedom of Information Officer

5.32 Freedom of information officer.

          Subpart D_Procedures for Requesting Access to Records

5.51 Procedure.
5.52 Copies of records.
5.53 Denial of requests for records.

[[Page 7]]

                       Subpart E_Fees and Charges

5.60 Schedule of fees.
5.61 Notification of estimated fees.
5.62 Advance payment of fees.
5.63 Payment of fees and interest.
5.64 Waiver or reduction of fees.

               Subpart F_Availability of Specific Records

5.70 Policy.
5.71 Protection of personal privacy and proprietary information.
5.72 Records available.
5.73 Records not available.
5.74 Further disclosure.

                     Subpart G_Administrative Review

5.80 Review of denial of a record.
5.81 Time for initiation of request for review.
5.82 By whom review is made.
5.83 Contents of request for review.
5.84 Consideration on review.
5.85 Decisions on review.

Appendix to Part 5

    Authority: 5 U.S.C. 552.

    Source: 45 FR 30803, May 9, 1980, unless otherwise noted.



                          Subpart A_Definitions



Sec. 5.1  Act.

    As used in this part, Act means section 552 of title 5, United 
States Code, as amended by Pub. L. 90-23, codifying the Act of July 4, 
1966, sometimes referred to as the ``Freedom of Information Act''.



Sec. 5.2  Department.

    As used in this part, Department means the Department of Education.



Sec. 5.5  Records.

    As used in this part:
    (a) Record includes books, brochures, punch cards, magnetic tapes, 
paper tapes, sound recordings, maps, pamphlets, photographs, slides, 
motion pictures, or other documentary materials, regardless of physical 
form or characteristics, made or received by the Department pursuant to 
Federal law or in connection with the transaction of public business and 
preserved by the Department as evidence of the organization, functions, 
policies, decisions, procedures, operations, programs, or other 
activities.
    (b) Record does not include: Objects or articles such as tangible 
exhibits, models, equipment, or processing materials; or formulae, 
designs, drawings, or other items of valuable property; books, 
magazines, pamphlets, or other reference material in formally organized 
and officially designated libraries of the Department, which are 
available under the rules of the particular library concerned.



Sec. 5.6  Statutory definitions.

    The definitions in the Act and the Office of Management and Budget's 
``Uniform FOIA Fee Schedule and Guidelines,'' 52 FR 10012 (March 27, 
1987), apply to this part.

[52 FR 32525, Aug. 27, 1987]



                  Subpart B_What Records Are Available



Sec. 5.11  Purpose and scope.

    This part constitutes the regulation of the Department respecting 
the availability to the public, pursuant to the Act, of records of the 
Department. It informs the public what records are generally available.



Sec. 5.12  General policy.

    The Department's policy is one of the fullest responsible disclosure 
limited only by the obligations of confidentiality and the 
administrative necessities recognized by the Act. Unless otherwise 
exempted from disclosure pursuant to law, records of the Department 
shall be available for inspection and copying in accordance with this 
part.



Sec. 5.13  Records available.

    (a) Publication in the Federal Register. The following shall be 
published in the Federal Register:
    (1) Descriptions of the Department's central and field organization 
and the established places at which, the officers from whom, and the 
methods whereby, the public may secure information, make submittals or 
requests, or obtain decisions;
    (2) Statements of the general course and method by which the 
Department's

[[Page 8]]

functions are channeled and determined, including the nature and 
requirements of all formal and informal procedures available;
    (3) Rules of procedures, descriptions of forms available or the 
places at which forms may be obtained, and instructions as to the scope 
and contents of all papers, reports, or examinations;
    (4) Substantive rules of general applicability adopted as authorized 
by law, and statements of general policy or interpretations of general 
applicability formulated and adopted by the Department;
    (5) Every amendment, revision, or repeal of the foregoing.
    (b) Agency opinions and orders. The Department shall, in accordance 
with this part and applicable regulations, make available for public 
inspection and copying:
    (1) All final opinions (including concurring and dissenting 
opinions) and all orders made in the adjudication of cases (initial 
decisions and reconsiderations thereof in matters that are not the 
result of administrative proceedings such as hearings or formal appeals 
are not ``opinions and orders in the adjudication of cases'');
    (2) Those statements of policy and interpretations which have been 
adopted by the agency and are not published in the Federal Register;
    (3) Administrative staff manuals and instructions to staff that 
affect any member of the public;

unless such materials are promptly published and copies offered for 
sale.

The Department shall maintain and make available for public inspection 
and copying current indexes providing identifying information for the 
public as to any matter which is issued, adopted, or promulgated after 
July 4, 1967, and which is required by this paragraph (b) to be 
published or made available.
    (c) Availability of records on request. In addition to the records 
made available pursuant to paragraphs (a) and (b) of this section, the 
Department shall, upon request for identifiable records made in 
accordance with this part, make such records available to any person, 
unless it is determined that such records must be withheld from 
disclosure and are exempt under subsection (b) of the Act and subpart F 
of this part.



Sec. 5.14  Published documents.

    Published records of the Department, whether or not available for 
purchase, shall be made available for examination.



Sec. 5.15  Creation of records.

    Records are not required to be created by compiling selected items 
from the files, and records are not required to be created to provide 
the requester with such data as ratios, proportions, percentages, per 
capitas, frequency distributions, trends, correlations, and comparisons. 
If such data have been compiled and are available in the form of a 
record, the record shall be made available as provided in this part.



Sec. 5.16  Deletion of identifying details.

    Whenever any final opinion, order, or other materials required to be 
made available pursuant to subsection (a)(2) of the Act relates to a 
private party or parties and the release of the name or names or other 
identifying details will constitute a clearly unwarranted invasion of 
personal privacy, the record shall be published or made available with 
such identifying details left blank, or shall be published or made 
available with obviously fictitious substitutes and with a notification 
such as the following as a preamble:

    Names of parties and certain other identifying details have been 
removed [and fictitious names substituted] in order to prevent a clearly 
unwarranted invasion of the personal privacy of the individuals 
involved.



Sec. 5.17  Records in record centers.

    When a request is made for identifiable records of the Department 
which have been stored in the National Archives or other record centers 
of the General Services Administration, but would otherwise be available 
under this Act, such records shall be requested by the Department for 
the requester.



Sec. 5.18  Destroyed records.

    Records of specified form or character are destroyed after the lapse 
of time specified in the Records Disposal Act of 1943 (44 U.S.C. 366-
380), the Federal Property Management Regulations

[[Page 9]]

(41 CFR parts 101-111), and the Records Control Schedules.



Sec. 5.19  Records of other departments and agencies.

    Requests for records which originated in or concern matters which 
originated in another Department or Government agency may be forwarded 
to the Department or agency primarily concerned and the requester so 
notified.



                Subpart C_Freedom of Information Officer



Sec. 5.32  Freedom of information officer.

    The Freedom of Information Officer shall be responsible for 
determining whether records of the Department must be withheld from 
disclosure and shall have authority to deny requests for records of the 
Department.



          Subpart D_Procedures for Requesting Access to Records



Sec. 5.51  Procedure.

    (a) A request for any information or record may be made at any 
appropriate office of the Department.
    (b) If a request is made at any office of the Department and the 
information or record is not located where the request is made, the 
requester shall be referred to the proper office, or if the request is 
put in writing it may be forwarded to the proper office.
    (c) A request should reasonably identify the requested record by 
brief description. Requesters who have detailed information which would 
assist in identifying the records requested are urged to provide such 
information in order to expedite the handling of the request. Envelopes 
in which written requests are submitted should be clearly identified as 
a Freedom of Information request.
    (d) Determination of whether records will be released or withheld 
will be made within 10 working days from date of receipt in the office 
having custody of the records This time may be extended by written 
notice for no longer than an additional 10 working days, only in unusual 
circumstances. Unusual circumstances mean:
    (1) The need to search for and collect the requested records from 
field facilities or other establishments that are separate from the 
office processing the request;
    (2) The need to search for, collect and appropriately examine a 
voluminous amount of separate and distinct records which are demanded in 
a single request; or
    (3) The need for consultation, which shall be conducted with all 
practicable speed, with another agency having a substantial interest in 
the determination of the request or among two or more components of the 
agency having substantial subject-matter interest therein.

If such extension is made, the requester will be notified in writing 
with an explanation of why the extension was necessary and the date on 
which a determination will be made.



Sec. 5.52  Copies of records.

    Copies of available records shall be produced as promptly as 
possible upon receipt of the fee therefor. Copying service shall be 
limited to not more than two copies of any single page, except that 
additional copies may be made where administrative considerations 
permit. Records which are published or available for sale need not be 
copied.



Sec. 5.53  Denial of requests for records.

    Written requests for inspection or copying of records shall be 
denied only by the Freedom of Information Officer. Denials of requests 
shall be in writing and shall contain the reasons for the denial and 
provide the requester with appropriate information on how to exercise 
the right of appeal under subpart G of this part. Such notification 
shall also set forth the names and titles or positions of each person 
responsible for the denial of such request if such person or persons is 
other than the Freedom of Information Officer.



                       Subpart E_Fees and Charges

    Source: 52 FR 32525, Aug. 27, 1987, unless otherwise noted.

[[Page 10]]



Sec. 5.60  Schedule of fees.

    (a) Fees and charges are charged under this part as follows:
    (1) Search for records--(i) General. Full search fees are charged 
for records requested by commercial use requesters. For records 
requested by representatives of the news media or educational or 
noncommercial scientific institutions whose purpose is scholarly or 
scientific research, no search fee is charged if the records requested 
are not for commercial use. For other requesters, if the records 
requested are not for commercial use, the first two hours of search time 
are provided without charge, except as limited in paragraph (a)(1)(iii) 
of this section. Search fees are recorded and assessed to the nearest 
quarter hour.
    (ii) Manual search. The charge for a manual search is calculated by 
determining the search time to the nearest quarter hour and multiplying 
that figure by the sum of the basic rate of pay per hour of the employee 
conducting the search plus 16 percent of that rate.
    (iii) Computer search. The charge for a computer search is 
calculated by determining the search time to the nearest quarter hour 
and multiplying that figure by the sum of the basic rate of pay per hour 
of the computer operator plus 16% of that rate plus $287 per hour for 
computer operation. Two hours of search time on a computer search is 
deemed to have been spent if the cost of the search equals the 
equivalent of two hours of the computer operator's basic rate of pay per 
hour plus 16 percent of that rate.
    (2) Review of records. Review fees are charged only for commercial 
use requests and only for the initial review. The review rate is 
calculated by determining the review time to the nearest quarter hour 
and multiplying that figure by the sum of the basic rate of pay per hour 
of the employee conducting the review plus 16% of that rate. If records 
requested under this part are stored elsewhere than the headquarters of 
the Department at Washington, DC, the mailing and handling costs of 
returning those records to the headquarters for review is added to the 
review costs.
    (3) Duplication of records. No duplication fee is charged for the 
first 100 pages, except for commercial use requests. Duplication charges 
for paper copy reproduction of documents on photocopy machines is $0.10 
per page.
    (4) Certification of records. The charge for certifying records is 
$5 per record certified.
    (5) Other. If no specific fee has been established for a service, or 
the request for a service does not fall under one of the categories in 
paragraphs (a)(1)-(4) of this section due to the amount or type of 
service, the Secretary is authorized to establish an appropriate fee, 
based on direct costs on a case-by-case basis as provided in the FOIA.
    (b) If the Secretary awards a contract for a search or duplication 
of records for a FOI request, the fees charged are the actual costs 
under the contract.
    (c) Fees are not charged if the total amount of the fee is less than 
$5. If the total amount of the fee is $5, or more, applicable search and 
review costs are charged even if no records are located or disclosed. 
The Secretary does not refund fees paid for services actually rendered.
    (d) If the FOI Officer reasonably believes that a requester or group 
of requesters acting in concert is attempting to break down a request 
into multiple requests for the purpose of avoiding fee assessment, those 
requests and fees are aggregated and charged accordingly.



Sec. 5.61  Notification of estimated fees.

    If the estimated fees under this section total more than $25, or 
more than the maximum amount specified in the request if that amount 
exceeds $25, the requester is:
    (a) Notified promptly of the amount of the estimated fee or that 
portion of the fee as can readily be estimated; and
    (b) Offered the opportunity to reformulate the request.



Sec. 5.62  Advance payment of fees.

    (a) If the estimated fee for processing a request exceeds $250, the 
FOI Officer:
    (1) Notifies the requester of the anticipated cost and obtains 
satisfactory assurance of full payment if the requester has a history of 
prompt payment of FOIA fees; or

[[Page 11]]

    (2) Requires an advance payment if the requester has no history of 
payment.
    (b) If a requester has previously failed to pay a fee in a timely 
fashion, the FOI Officer does not process any subsequent request until 
the requester pays the arrears in full, including interest, and makes an 
advance payment of the estimated fee for the new request.
    (c) Requests under this section are not deemed to have been received 
for purposes of Sec. 5.51(d) until the Department receives the 
satisfactory assurance or advance payment.



Sec. 5.63  Payment of fees and interest.

    (a) If a requester does not pay a fee under this subpart within 30 
days after the date the billing was sent, interest is assessed at the 
rate prescribed under 31 U.S.C. 3717. The Secretary may use the 
procedures authorized under the Debt Collection Act of 1982 to collect 
fees due under this subpart, including disclosure to consumer reporting 
or collection agencies.
    (b) Fee payments must be in the form either of a personal check or 
bank draft drawn on a bank in the United States, or a postal money 
order. Fee payments must be made payable to the U.S. Department of 
Education and mailed to the FOI Officer, Department of Education, 400 
Maryland Avenue, SW., Washington, DC 20202. A receipt for fees paid is 
given upon request.



Sec. 5.64  Waiver or reduction of fees.

    (a) The Secretary may, in accordance with the FOIA, waive or reduce 
all or part of any fee provided for in this section if the Secretary 
determines that it is:
    (1) In the public interest because furnishing the information can be 
considered as primarily benefiting the general public and is likely to 
contribute significantly to public understanding of the operations or 
activities of the government; and
    (2) Is not primarily in the commercial interest of the requester.
    (b) In making the determination to waive or reduce a fee under 
paragraph (a) of this section, the Secretary considers the following 
factors:
    (1) Whether the subject of the requested records concerns the 
operations or activities of the government.
    (2) Whether the disclosure is likely to contribute significantly to 
public understanding of government operations or activities.
    (3) Whether the requester has a commercial interest that would be 
furthered by the requested disclosure; and, if so, whether the magnitude 
of the identified commercial interest of the requester is sufficiently 
large, in comparison with the public interest in disclosure, that 
disclosure is primarily in the commercial interest of the requester.



               Subpart F_Availability of Specific Records



Sec. 5.70  Policy.

    This subpart specifies the types of records which the Department 
shall, in keeping with its policy of fullest possible disclosure, make 
available for inspection and copying. For clarity and purposes of 
guidance, there are also set forth below the kinds or portions of 
records which generally will not be released, except as may be 
determined under Sec. 5.74. The appendix to this part contains some 
examples of the kinds of materials which, in accordance with Sec. 5.72, 
will generally be released and other materials which, in accordance with 
Sec. 5.73, are not normally available. In the event that any record 
contains both information which is disclosable and that which is not 
disclosable under this regulation, the nondisclosable information will 
be deleted and the balance of the record disclosed.



Sec. 5.71  Protection of personal privacy and proprietary information.

    As set forth with more particularity below, certain types of 
information in whatever record or document contained shall not be 
disclosed where disclosure would be inconsistent with individual rights 
of personal privacy or would violate obligations of confidentiality.
    (a) No disclosure will be made of information of a personal and 
private nature, such as information in personnel and medical files, in 
welfare and social

[[Page 12]]

security records and any other information of a private and personal 
nature.
    (b) Information having a commercial or financial value and in which 
the person providing the information has a proprietary interest will not 
be disclosed if it is in fact confidential. In determining whether such 
information is in fact confidential, consideration may be given to such 
factors as (1) the general custom or usage in the occupation or business 
to which the information relates that it be held confidential, (2) the 
number and situation of the individuals who have access to such 
information, (3) the type and degree of risk of financial injury to be 
expected if disclosure occurs, and (4) the length of time such 
information should be regarded as retaining the characteristics noted 
above.
    (c) Information obtained by the Department from any individual or 
organization, who furnishes it in reliance upon a provision for 
confidentiality authorized by applicable statute or regulation, will not 
be disclosed. This subpart does not itself authorize the giving of any 
pledge of confidentiality by any officer or employee of the Department.

This section does not preclude use of nondiscloseable records or 
information from such records for authorized program purposes, including 
law enforcement purposes and litigation. Release of information of the 
nature described in this section to the individual or the organization 
to whom the information pertains or to an authorized representative of 
either will not be deemed a disclosure within the meaning of this part.



Sec. 5.72  Records available.

    The following records of the Department shall, subject to the 
exceptions set forth in Sec. Sec. 5.71 and 5.73, be available upon 
request for inspection and copying.
    (a) Correspondence. Correspondence, relating to or resulting from 
the conduct of the official business of the Department, between the 
Department and individuals or organizations which are not agencies 
within the meaning of 5 U.S.C. 551(1) and 552(e).
    (b) Records pertaining to grants. (1) Portions of funded initial 
research grant applications and portions of continuation, renewal or 
supplemental grant applications, whether funded or not, including 
interim progress reports and other supporting documents submitted by 
applicants, which are not otherwise exempted from disclosure by this 
subpart.
    (2) Grant award documents.
    (3) All State plans, amendments, and supplements thereto, including 
applications for the waiver of any provision thereof whether acted upon 
by the Department or not.
    (c) Contracts. (1) Contract instruments.
    (2) Portions of offers reflecting final prices submitted in 
negotiated procurements.
    (d) Reports on grantee, contractor, or provider performance. Final 
reports of audits, surveys, reviews, or evaluations by, for, or on 
behalf of the Department, of performance by any grantee, contractor, or 
provider under any departmentally financed or supported program or 
activity, which reports have been transmitted to the grantee, 
contractor, or provider.
    (e) Research, development, and demonstration project records. The 
reports of a grantee or a contractor of the performance under any 
research, development, or demonstration project, records, other than 
reports, produced in such projects, such as films, computer software, 
other copyrightable materials and reports of inventions, will be 
available, except that considerations relating to obtaining copyright 
and patent protection may require delay in disclosure for such period as 
necessary to accomplish such protection. Disclosure of records which are 
copyrightable or which reflect patentable inventions shall not confer 
upon the requester any license under any copyright or patent without 
regard to the holder or owner thereof.



Sec. 5.73  Records not available.

    The following types of records or information contained in any 
record, in addition to those prohibited by law from disclosure, are not 
available for inspection or copying, any provision of Sec. 5.72 
notwithstanding:

[[Page 13]]

    (a) Intra-agency and inter-agency communications. Communications 
within the Department other than those described in Sec. 5.72(d) or 
between the Department or any other agency within the meaning of 5 
U.S.C. 551(1) and 552(e), to the extent they reflect the views or 
judgment of the writer or of other individuals. If disclosure of any 
factual portion of the communication would indicate the views or 
judgment being withheld from disclosure, then such factual portions will 
also be withheld.
    (b) Investigatory files. Investigatory files compiled for law 
enforcement purposes to the extent that production of such records would 
(1) interfere with enforcement proceedings, (2) deprive a person of a 
right to a fair trial or an impartial adjudication, (3) constitute an 
unwarranted invasion of personal privacy, (4) disclose the identity of a 
confidential source, and, in the case of a record compiled by a criminal 
law enforcement authority in the course of a criminal investigation, or 
by an agency conducting a lawful national security intelligence 
investigation, confidential information furnished only by the 
confidential source, (5) disclose investigative techniques and 
procedures or (6) endanger the life or physical safety of law 
enforcement personnel. For the purpose of this section enforcement 
action means any authorized action intended to abate, prevent, 
counteract, deter, or terminate violations of law and includes action 
involving possible civil, criminal, or administrative sanctions whether 
such sanctions involve adversary proceedings or other procedures, such 
as termination of benefits, protective measures, etc.



Sec. 5.74  Further disclosure.

    (a) The Secretary may in particular instances, except where 
prohibited by law, disclose documents or portions of documents described 
in Sec. 5.73 if he determines that disclosure is in the public interest 
and is consistent with obligations of confidentiality and administrative 
necessity.
    (b) In making such a determination, consideration may be given to 
the Department's responsibilities under law for dissemination to the 
public of information relating to education.
    (c) When such determination has been made, the particular document 
or portion of document to which it relates shall thereafter be available 
upon request for inspection and copying: Provided however, That use of 
nondiscloseable records or information from such records for authorized 
program purposes, including law enforcement purposes and litigation is 
not a disclosure within the meaning of this section.



                     Subpart G_Administrative Review



Sec. 5.80  Review of denial of a record.

    This subpart provides for the review of a denial, pursuant to Sec. 
5.53, of a written request for inspection or copying of a record.



Sec. 5.81  Time for initiation of request for review.

    A person whose request has been denied may initiate a review by 
filing a request for review within (a) 30 days of receipt of the 
determination to deny or (b) within 30 days of receipt of records which 
are in partial response to his request if a portion of a request is 
granted and a portion denied, whatever is later.



Sec. 5.82  By whom review is made.

    (a) Requests for review of denials should be addressed to the 
Secretary.
    (b) [Reserved]



Sec. 5.83  Contents of request for review.

    The request for review shall include a copy of the written request 
and the denial.



Sec. 5.84  Consideration on review.

    Review shall be considered on the basis of the written record 
including any written argument submitted by the requester.



Sec. 5.85  Decisions on review.

    (a) Decisions on review shall be in writing within 20 working days 
from receipt of the request for review. Extension of the time limit may 
be granted to the extent that the maximum 10-day limit on extensions has 
not been exhausted on the initial determination.

[[Page 14]]

Such extension may only be granted for the reasons enumerated in Sec. 
5.51(d).
    (b) The decision, which constitutes final action of the Department, 
if adverse to the requester shall be in writing, stating the reasons for 
the decision, and advising the requester of the right to judicial review 
of such decision.
    (c) Failure to comply with time limits set forth in Sec. 5.51 or in 
this paragraph constitutes an exhaustion of the requester's 
administrative remedies.

                           Appendix to Part 5

[The following are some examples of specific records (or specific 
information relating to personnel, programs, or activities of this 
Department) listed according to whether or not they are available upon 
request for inspection and copying]

------------------------------------------------------------------------
       Generally available                Generally not available
------------------------------------------------------------------------
                                 grants
------------------------------------------------------------------------
Funded initial grant               Research protocol, design,
 applications, subject to           processing, and other technical
 provisions of Sec. 5.71.         information to the extent
Reports of grantee.                 proprietary or of a confidential
Final report of any review or       nature submitted with initial
 evaluation of grantee              applications not yet funded, or
 performance conducted or caused    where disclosure would adversely
 to be conducted by the             affect patent or other valuable
 Department.                        rights.
                                   Confidential financial information of
                                    grantee.
                                   Site visit reports.
Applications for continuation,     Initial research or research training
 renewal, or supplemental grants,   grant application on which award is
 subject to provisions of Sec. not made.
 5.71.
State plan material.
----------------------------------
                                contracts
------------------------------------------------------------------------
Name of contractor, subject        Trade secrets.
 matter, date, and amount of
 contract.
Contract performance review        Confidential pricing data contained
 report.                            in contract proposal if in the
                                    Department's judgment it is properly
                                    so designated by the offeror.
Deficiency report................  Proprietary technical data contained
                                    in a contract proposal if in the
                                    Department's judgment it is properly
                                    so designated by offeror.
Final report.....................  Confidential financial information of
                                    contractor
                                   Draft of proposed final report
                                    submitted for comment prior to
                                    acceptance.
                                   Research protocol, design,
                                    processing, and other technical
                                    information to the extent
                                    proprietary or of a confidential
                                    nature, including proprietary
                                    contents of unsolicited proposals.
                                   Proposals on which no award is made.
----------------------------------
                           advisory committees
------------------------------------------------------------------------
Name of committee................  Minutes or transcripts of committee
Final report.....................   meetings or portions thereof which
Minutes or transcripts of           are involved with matters exempt
 meetings open to the public and    from mandatory disclosure under
 not involved with matters exempt   Freedom of Information Act.
 from mandatory disclosure under
 Freedom of Information Act.
----------------------------------
                          personnel information
------------------------------------------------------------------------
Name of employee, title of         Home addresses of employees.
 position, and location of
 regular duty station.
Grade, position description, and
 salary of public employees.
----------------------------------
     affirmative action plan filed pursuant to executive order 11246
------------------------------------------------------------------------
Approved action plan, including
 analysis, proposed remedial or
 affirmative steps to be taken
 with goals and timetables,
 policies on recruitment, hiring,
 and promotion, and description
 of grievance procedures.
----------------------------------
                              miscellaneous
------------------------------------------------------------------------
                                   Names of individual beneficiaries of
                                    departmental programs or a list of
                                    the benefits they receive if release
                                    would be an unwarranted invasion of
                                    privacy.
                                   Office for Civil Rights investigatory
                                    files in open cases.
------------------------------------------------------------------------


[[Page 15]]



PART 5b_PRIVACY ACT REGULATIONS--Table of Contents




Sec.
5b.1 Definitions.
5b.2 Purpose and scope.
5b.3 Policy.
5b.4 Maintenance of records.
5b.5 Notification of or access to records.
5b.7 Procedures for correction or amendment of records.
5b.8 Appeals of refusals to correct or amend records.
5b.9 Disclosure of records.
5b.10 Parents and guardians.
5b.11 Exempt systems.
5b.12 Contractors.
5b.13 Fees.

Appendix A to Part 5b--Employee Standards of Conduct
Appendix B to Part 5b--Routine Uses Applicable to More Than One System 
          of Records Maintained by ED

    Authority: 5 U.S.C. 301, 5 U.S.C. 552a.

    Source: 45 FR 30808, May 9, 1980, unless otherwise noted.



Sec. 5b.1  Definitions.

    As used in this part:
    (a) Access means availability of a record to a subject individual.
    (b) Agency means the Department of Education.
    (c) Department means the Department of Education.
    (d) Disclosure means the availability or release of a record to 
anyone other than the subject individual.
    (e) Individual means a living person who is a citizen of the United 
States or an alien lawfully admitted for permanent residence. It does 
not include persons such as sole proprietorships, partnerships, or 
corporations. A business firm which is identified by the name of one or 
more persons is not an individual within the meaning of this part.
    (f) Maintain means to maintain, collect, use, or disseminate when 
used in connection with the term ``record''; and, to have control over 
or responsibility for a system of records when used in connection with 
the term ``system of records.''
    (g) Notification means communication to an individual whether he is 
a subject individual.
    (h) Record means any item, collection, or grouping of information 
about an individual that is maintained by the Department, including but 
not limited to the individual's education, financial transactions, 
medical history, and criminal or employment history and that contains 
his name, or an identifying number, symbol, or other identifying 
particular assigned to the individual, such as a finger or voice print 
or a photograph. When used in this part, record means only a record 
which is in a system of records.
    (i) Responsible Department official means that officer who is listed 
in a notice of a system of records as the system manager for a given 
system of records or another individual listed in the notice of a system 
of records to whom requests may be made, or the designee of either such 
officer or individual.
    (j) Routine use means the disclosure of a record outside the 
Department, without the consent of the subject individual, for a purpose 
which is compatible with the purpose for which the record was collected. 
It includes disclosures required to be made by statute other than the 
Freedom of Information Act, 5 U.S.C. 552. It does not include 
disclosures which are permitted to be made without the consent of the 
subject individual which are not compatible with the purpose for which 
it was collected such as disclosures to the Bureau of the Census, the 
General Accounting Office, or to Congress.
    (k) Secretary means the Secretary of Education.
    (l) Statistical record means a record maintained for statistical 
research or reporting purposes only and not maintained to make 
determinations about a particular subject individual.
    (m) Subject individual means that individual to whom a record 
pertains.
    (n) System of records means any group of records under the control 
of the Department from which a record is retrieved by personal 
identifier such as the name of the individual, number, symbol or other 
unique retriever assigned to the individual. Single records or groups of 
records which are not retrieved by a personal identifier are not part of 
a system of records. Papers maintained by individual employees of the 
Department which are prepared, maintained, or discarded at the 
discretion of the employee and which are not

[[Page 16]]

subject to the Federal Records Act, 44 U.S.C. 2901, are not part of a 
system of records; Provided, That such personal papers are not used by 
the employee or the Department to determine any rights, benefits, or 
privileges of individuals.

[45 FR 30808, May 9, 1980; 45 FR 37426, June 3, 1980]



Sec. 5b.2  Purpose and scope.

    (a) This part implements section 3 of the Privacy Act of 1974, 5 
U.S.C. 552a (hereinafter referred to as the Act), by establishing agency 
policies and procedures for the maintenance of records. This part also 
establishes agency policies and procedures under which a subject 
individual may be given notification of or access to a record pertaining 
to him and policies and procedures under which a subject individual may 
have his record corrected or amended if he believes that his record is 
not accurate, timely, complete, or relevant or necessary to accomplish a 
Department function.
    (b) All components of the Department are governed by the provisions 
of this part. Also governed by the provisions of this part are advisory 
committees and councils within the meaning of the Federal Advisory 
Committee Act which provide advice to (1) any official or component of 
the Department or (2) the President and for which the Department has 
been delegated responsibility for providing services.
    (c) Employees of the Department governed by this part include all 
regular and special government employees of the Department; experts and 
consultants whose temporary (not in excess of 1 year) or intermittent 
services have been procured by the Department by contract pursuant to 
3109 of title 5, United States Code; volunteers where acceptance of 
their services are authorized by law; those individuals performing 
gratuitous services as permitted under conditions prescribed by the 
Office of Personnel Management; and, participants in work-study or 
training programs.
    (d) This part does not:
    (1) Make available to a subject individual records which are not 
retrieved by that individual's name or other personal identifier.
    (2) Make available to the general public records which are retrieved 
by a subject individual's name or other personal identifier or make 
available to the general public records which would otherwise not be 
available to the general public under the Freedom of Information Act, 5 
U.S.C. 552, and part 5 of this title.
    (3) Govern the maintenance or disclosure of, notification of or 
access to, records in the possession of the Department which are subject 
to regulations of another agency, such as personnel records subject to 
the regulations of the Office of Personnel Management.
    (4) Apply to grantees, including State and local governments or 
subdivisions thereof, administering federally funded programs.
    (5) Make available records compiled by the Department in reasonable 
anticipation of court litigation or formal administrative proceedings. 
The availability of such records to the general public or to any subject 
individual or party to such litigation or proceedings shall be governed 
by applicable constitutional principles, rules of discovery, and 
applicable regulations of the Department.



Sec. 5b.3  Policy.

    It is the policy of the Department to protect the privacy of 
individuals to the fullest extent possible while nonetheless permitting 
the exchange of records required to fulfill the administrative and 
program responsibilities of the Department, and responsibilities of the 
Department for disclosing records which the general public is entitled 
to have under the Freedom of Information Act, 5 U.S.C. 552, and part 5 
of this title.



Sec. 5b.4  Maintenance of records.

    (a) No record will be maintained by the Department unless:
    (1) It is relevant and necessary to accomplish a Department function 
required to be accomplished by statute or Executive Order;
    (2) It is acquired to the greatest extent practicable from the 
subject individual when maintenance of the record may result in a 
determination about the subject individual's rights, benefits or 
privileges under Federal programs;

[[Page 17]]

    (3) The individual providing the record is informed of the authority 
for providing the record (including whether the providing of the record 
is mandatory or voluntary, the principal purpose for maintaining the 
record, the routine uses for the record, what effect his refusal to 
provide the record may have on him), and if the record is not required 
by statute or Executive Order to be provided by the individual, he 
agrees to provide the record.
    (b) No record will be maintained by the Department which describes 
how an individual exercises rights guaranteed by the First Amendment 
unless expressly authorized (1) by statute, or (2) by the subject 
individual, or (3) unless pertinent to and within the scope of an 
authorized law enforcement activity.



Sec. 5b.5  Notification of or access to records.

    (a) Times, places, and manner of requesting notification of or 
access to a record. (1) Any individual may request notification of a 
record. He may at the same time request access to any record pertaining 
to him. An individual may be accompanied by another individual of his 
choice when he requests access to a record in person; Provided, That he 
affirmatively authorizes the presence of such other individual during 
any discussion of a record to which access is requested.
    (2) An individual making a request for notification of or access to 
a record shall address his request to the responsible Department 
official and shall verify his identity when required in accordance with 
paragraph (b)(2) of this section. At the time the request is made, the 
individual shall specify which systems of records he wishes to have 
searched and the records to which he wishes to have access. He may also 
request that copies be made of all or any such records. An individual 
shall also provide the responsible Department official with sufficient 
particulars to enable such official to distinguish between records on 
subject individuals with the same name. The necessary particulars are 
set forth in the notices of systems of records.
    (3) An individual who makes a request in person may leave with any 
responsible Department official a request for notification of or access 
to a record under the control of another responsible Department 
official; Provided, That the request is addressed in writing to the 
appropriate responsible Department official.
    (b) Verification of identity--(1) When required. Unless an 
individual, who is making a request for notification of or access to a 
record in person, is personally known to the responsible Department 
official, he shall be required to verify his identity in accordance with 
paragraph (b)(2) of this section if:
    (i) He makes a request for notification of a record and the 
responsible Department official determines that the mere disclosure of 
the existence of the record would be a clearly unwarranted invasion of 
privacy if disclosed to someone other than the subject individual; or,
    (ii) He makes a request for access to a record which is not required 
to be disclosed to the general public under the Freedom of Information 
Act, 5 U.S.C. 552, and part 5 of this title.
    (2) Manner of verifying identity. (i) An individual who makes a 
request in person shall provide to the responsible Department official 
at least one piece of tangible identification such as a driver's 
license, passport, alien or voter registration card, or union card to 
verify his identity. If an individual does not have identification 
papers to verify his identity, he shall certify in writing that he is 
the individual who he claims to be and that he understands that the 
knowing and willful request for or acquisition of a record pertaining to 
an individual under false pretenses is a criminal offense under the Act 
subject to a $5,000 fine.
    (ii) Except as provided in paragraph (b)(2)(v) of this section, an 
individual who does not make a request in person shall submit a 
notarized request to the responsible Department official to verify his 
identity or shall certify in his request that he is the individual who 
he claims to be and that he understands that the knowing and willful 
request for or acquisition of a record pertaining to an individual under 
false pretenses is a criminal offense under the Act subject to a $5,000 
fine.

[[Page 18]]

    (iii) An individual who makes a request on behalf of a minor or 
legal incompetent as authorized under Sec. 5b.10 of this part shall 
verify his relationship to the minor or legal incompetent, in addition 
to verifying his own identity, by providing a copy of the minor's birth 
certificate, a court order, or other competent evidence of guardianship 
to the responsible Department official; except that, an individual is 
not required to verify his relationship to the minor or legal 
incompetent when he is not required to verify his own identity or when 
evidence of his relationship to the minor or legal incompetent has been 
previously given to the responsible Department official.
    (iv) An individual shall further verify his identity if he is 
requesting notification of or access to sensitive records. Any further 
verification shall parallel the record to which notification or access 
is being sought. Such further verification may include such particulars 
as the individual's years of attendance at a particular educational 
institution, rank attained in the uniformed services, date or place of 
birth, names of parents, or an occupation.
    (v) An individual who makes a request by telephone shall verify his 
identity by providing to the responsible Department official identifying 
particulars which parallel the record to which notification or access is 
being sought. If the responsible Department official determines that the 
particulars provided by telephone are insufficient, the requester will 
be required to submit the request in writing or in person. Telephone 
requests will not be accepted where an individual is requesting 
notification of or access to sensitive records.
    (c) Granting notification of or access to a record. (1) Subject to 
the provisions governing exempt systems in Sec. 5b.11 of this part, a 
responsible Department official, who receives a request for notification 
of or access to a record and, if required, verification of an 
individual's identity, will review the request and grant notification or 
access to a record, if the individual requesting access to the record is 
the subject individual.
    (2) If the responsible Department official determines that there 
will be a delay in responding to a request because of the number of 
requests being processed, a breakdown of equipment, shortage of 
personnel, storage of records in other locations, etc., he will so 
inform the individual and indicate when notification or access will be 
granted.
    (3) Prior to granting notification of or access to a record, the 
responsible Department official may at his discretion require an 
individual making a request in person to reduce his request to writing 
if the individual has not already done so at the time the request is 
made.



Sec. 5b.7  Procedures for correction or amendment of records.

    (a) Any subject individual may request that his record be corrected 
or amended if he believes that the record is not accurate, timely, 
complete, or relevant or necessary to accomplish a Department function. 
A subject individual making a request to amend or correct his record 
shall address his request to the responsible Department official in 
writing; except that, the request need not be in writing if the subject 
individual makes his request in person and the responsible Department 
official corrects or amends the record at that time. The subject 
individual shall specify in each request:
    (1) The system of records from which the record is retrieved;
    (2) The particular record which he is seeking to correct or amend;
    (3) Whether he is seeking an addition to or a deletion or 
substitution of the record; and,
    (4) His reasons for requesting correction or amendment of the 
record.
    (b) A request for correction or amendment of a record will be 
acknowledged within 10 working days of its receipt unless the request 
can be processed and the subject individual informed of the responsible 
Department official's decision on the request within that 10 day period.
    (c) If the responsible Department official agrees that the record is 
not accurate, timely, or complete based on a preponderance of the 
evidence, the record will be corrected or amended. The record will be 
deleted without regard to its accuracy, if the record is

[[Page 19]]

not relevant or necessary to accomplish the Department function for 
which the record was provided or is maintained. In either case, the 
subject individual will be informed in writing of the correction, 
amendment, or deletion and, if accounting was made of prior disclosures 
of the record, all previous recipients of the record will be informed of 
the corrective action taken.
    (d) If the responsible Department official does not agree that the 
record should be corrected or amended, the subject individual will be 
informed in writing of the refusal to correct or amend the record. He 
will also be informed that he may appeal the refusal to correct or amend 
his record Sec. 5b.8 of this part.
    (e) Requests to correct or amend a record governed by the regulation 
of another government agency, e.g., Office of Personnel Management, 
Federal Bureau of Investigation, will be forwarded to such government 
agency for processing and the subject individual will be informed in 
writing of the referral.



Sec. 5b.8  Appeals of refusals to correct or amend records.

    (a) Processing the appeal. (1) A subject individual who disagrees 
with a refusal to correct or amend his record may appeal the refusal in 
writing. All appeals shall be made to the Secretary.
    (2) An appeal will be completed within 30 working days from its 
receipt by the appeal authority; except that, the appeal authority may 
for good cause extend this period for an additional 30 days. Should the 
appeal period be extended, the subject individual appealing the refusal 
to correct or amend the record will be informed in writing of the 
extension and the circumstances of the delay. The subject individual's 
request to amend or correct the record, the responsible Department 
official's refusal to correct or amend, and any other pertinent material 
relating to the appeal will be reviewed. No hearing will be held.
    (3) If the appeal authority agrees that the record subject to the 
appeal should be corrected or amended, the record will be amended and 
the subject individual will be informed in writing of the correction or 
amendment. Where an accounting was made of prior disclosures of the 
record, all previous recipients of the record will be informed of the 
corrective action taken.
    (4) If the appeal is denied, the subject individual will be informed 
in writing:
    (i) Of the denial and the reasons for the denial;
    (ii) That he has a right to seek judicial review of the denial; and,
    (iii) That he may submit to the responsible Department official a 
concise statement of disagreement to be associated with the disputed 
record and disclosed whenever the record is disclosed.
    (b) Notation and disclosure of disputed records. Whenever a subject 
individual submits a statement of disagreement to the responsible 
Department official in accordance with paragraph (a)(4)(iii) of this 
section, the record will be noted to indicate that it is disputed. In 
any subsequent disclosure, a copy of the subject individual's statement 
of disagreement, will be disclosed with the record. If the responsible 
Department official deems it appropriate, a concise statement of the 
appeal authority's reasons for denying the subject individual's appeal 
may also be disclosed with the record. While the subject individual will 
have access to this statement of reasons, such statement will not be 
subject to correction or amendment. Where an accounting was made of 
prior disclosures of the record, all previous recipients of the record 
will be provided a copy of the subject individual's statement of 
disagreement, as well as the statement, if any, of the appeal 
authority's reasons for denying the subject individual's appeal.



Sec. 5b.9  Disclosure of records.

    (a) Consent to disclosure by a subject individual. (1) Except as 
provided in paragraph (b) of this section authorizing disclosures of 
records without consent, no disclosure of a record will be made without 
the consent of the subject individual. In each case the consent, whether 
obtained from the subject individual at the request of the Department or 
whether provided to the Department by the subject individual on his own 
initiative, shall be in writing. The consent shall specify the 
individual, organizational unit or class of individuals or 
organizational units to

[[Page 20]]

whom the record may be disclosed, which record may be disclosed and, 
where applicable, during which time frame the record may be disclosed 
(e.g., during the school year, while the subject individual is out of 
the country, whenever the subject individual is receiving specific 
services). A blanket consent to disclose all of a subject individual's 
records to unspecified individuals or organizational units will not be 
honored. The subject individual's identity and, where applicable (e.g., 
where a subject individual gives consent to disclosure of a record to a 
specific individual), the identity of the individual to whom the record 
is to be disclosed shall be verified.
    (2) A parent or guardian of any minor is not authorized to give 
consent to a disclosure of the minor's medical record.
    (b) Disclosures without the consent of the subject individual. The 
disclosures listed in this paragraph may be made without the consent of 
the subject individual. Such disclosures are:
    (1) To those officers and employees of the Department who have a 
need for the record in the performance of their duties. The responsible 
Department official may upon request of any officer or employee, or on 
his own initiative, determine what constitutes legitimate need.
    (2) Required to be disclosed under the Freedom of Information Act, 5 
U.S.C. 552, and part 5 of this title.
    (3) For a routine use as defined in paragraph (j) of Sec. 5b.1. 
Routine uses will be listed in any notice of a system of records. 
Routine uses published in Appendix B are applicable to more than one 
system of records. Where applicable, notices of systems of records may 
contain references to the routine uses listed in Appendix B. Appendix B 
will be published with any compendium of notices of systems of records.
    (4) To the Bureau of the Census for purposes of planning or carrying 
out a census or survey or related activity pursuant to the provisions of 
title 13 U.S.C.
    (5) To a recipient who has provided the agency with advance written 
assurance that the record will be used solely as a statistical research 
or reporting record; Provided, That, the record is transferred in a form 
that does not identify the subject individ- ual.
    (6) To the National Archives of the United States as a record which 
has sufficient historical or other value to warrant its continued 
preservation by the United States Government, or for evaluation by the 
Administrator of General Services or his designee to determine whether 
the record has such value.
    (7) To another government agency or to an instrumentality of any 
governmental jurisdiction within or under the control of the United 
States for a civil or criminal law enforcement activity if the activity 
is authorized by law, and if the head of such government agency or 
instrumentality has submitted a written request to the Department 
specifying the record desired and the law enforcement activity for which 
the record is sought.
    (8) To an individual pursuant to a showing of compelling 
circumstances affecting the health or safety of any individual if a 
notice of the disclosure is transmitted to the last known address of the 
subject individual.
    (9) To either House of Congress, or to the extent of matter within 
its jurisdiction, any committee or subcommittee thereof, any joint 
committee of Congress or subcommittee of any such joint committee.
    (10) To the Comptroller General, or any of the Comptroller General's 
authorized representatives, in the course of the performance of the 
duties of the General Accounting Office.
    (11) Pursuant to the order of a court of competent jurisdiction.
    (c) Accounting of disclosures. (1) An accounting of all disclosures 
of a record will be made and maintained by the Department for 5 years or 
for the life of the record, whichever is longer; except that, such an 
accounting will not be made:
    (i) For disclosures under paragraphs (b) (1) and (2) of this 
section; and,
    (ii) For disclosures made with the written consent of the subject 
individual.
    (2) The accounting will include:
    (i) The date, nature, and purpose of each disclosure; and

[[Page 21]]

    (ii) The name and address of the person or entity to whom the 
disclosure is made.
    (3) Any subject individual may request access to an accounting of 
disclosures of a record. The subject individual shall make a request for 
access to an accounting in accordance with the procedures in Sec. 5b.5 
of this part. A subject individual will be granted access to an 
accounting of the disclosures of a record in accordance with the 
procedures of this part which govern access to the related record. 
Access to an accounting of a disclosure of a record made under paragraph 
(b)(7) of this section may be granted at the discretion of the 
responsible Department official.



Sec. 5b.10  Parents and guardians.

    For the purpose of this part, a parent or guardian of any minor or 
the legal guardian or any individual who has been declared incompetent 
due to physical or mental incapacity or age by a court of competent 
jurisdiction is authorized to act on behalf of an individual or a 
subject individual. Except as provided in paragraph (b)(2) of Sec. 
5b.5, of this part governing procedures for verifying an individual's 
identity, an individual authorized to act on behalf of a minor or legal 
incompetent will be viewed as if he were the individual or subject 
individual.



Sec. 5b.11  Exempt systems.

    (a) General policy. The Act permits an agency to exempt certain 
types of systems of records from some of the Act's requirements. It is 
the policy of the Department to exercise authority to exempt systems of 
records only in compelling cases.
    (b) Specific systems of records exempted under (j)(2). The 
Department exempts the Investigative Files of the Inspector General ED/
OIG (18-10-01) and the Hotline Complaint Files of the Inspector General 
ED/OIG (18-10-04) systems of records from the following provisions of 5 
U.S.C. 552a and this part:
    (1) 5 U.S.C. 552a(c)(3) and Sec. 5b.9(a)(1) and (c)(3) of this 
part, regarding access to an accounting of disclosures of a record.
    (2) 5 U.S.C. 552a(c)(4) and Sec. Sec. 5b.7(c) and 5b.8(b) of this 
part, regarding notification to outside parties and agencies of 
correction or notation of dispute made in accordance with 5 U.S.C. 
552a(d).
    (3) 5 U.S.C. 552a(d) (1) through (4) and (f) and Sec. Sec. 
5b.5(a)(1) and (c), 5b.7, and 5b.8 of this part, regarding notification 
or access to records and correction or amendment of records.
    (4) 5 U.S.C. 552a(e)(1) and Sec. 5b.4(a)(1) of this part, regarding 
maintaining only relevant and necessary information.
    (5) 5 U.S.C. 552a(e)(2) and Sec. 5b.4(a)(2) of this part, regarding 
collection of information from the subject individual.
    (6) 5 U.S.C. 552a(e)(3) and Sec. 5b.4(a)(3) of this part, regarding 
notice to individuals asked to provide information to the Department.
    (7) 5 U.S.C. 552a(e)(4) (G), (H), and (I), regarding inclusion of 
information in the system notice about procedures for notification, 
access, correction, and source of records.
    (8) 5 U.S.C. 552a(e)(5), regarding maintaining records with 
requisite accuracy, relevance, timeliness, and completeness.
    (9) 5 U.S.C. 552a(e)(8), regarding service of notice on subject 
individual if a record is made available under compulsory legal process 
if that process becomes a matter of public record.
    (10) 5 U.S.C. 552a(g), regarding civil remedies for violation of the 
Privacy Act.
    (c) Specific systems of records exempted under (k)(2). (1) The 
Department exempts the Investigative Files of the Inspector General ED/
OIG (18-10-01) and the Hotline Complaint Files of the Inspector General 
ED/OIG (18-10-04) from the following provisions of 5 U.S.C. 552a and 
this part to the extent that these systems of records consist of 
investigatory material and complaints that may be included in 
investigatory material compiled for law enforcement purposes:
    (i) 5 U.S.C. 552a(c)(3) and Sec. 5b.9(c)(3) of this part, regarding 
access to an accounting of disclosures of records.
    (ii) 5 U.S.C. 552a(d) (1) through (4) and (f) and Sec. Sec. 
5b.5(a)(1) and (c), 5b.7, and 5b.8 of this part, regarding notification 
of and access to records and correction or amendment of records.
    (iii) 5 U.S.C. 552a(e)(1) and Sec. 5b.4(a)(1) of this part, 
regarding the requirement to maintain only relevant and necessary 
information.

[[Page 22]]

    (iv) 5 U.S.C. 552a(e)(4) (G), (H), and (I), regarding inclusion of 
information in the system notice about procedures for notification, 
access, correction, and source of records.
    (2) The Department exempts the Complaint Files and Log, Office for 
Civil Rights (18-08-01) from the following provisions of 5 U.S.C. 552a 
and this part:
    (i) 5 U.S.C. 552a(c)(3) and Sec. 5b.9(c)(3) of this part, regarding 
access to an accounting of disclosures of records.
    (ii) 5 U.S.C. 552a(d) (1) through (4) and (f) and Sec. Sec. 
5b.5(a)(1) and (c), 5b.7, and 5b.8 of this part, regarding notification 
of and access to records and correction or amendment of records.
    (iii) 5 U.S.C. 552a(e)(4) (G) and (H), regarding inclusion of 
information in the system notice about procedures for notification, 
access, and correction of records.
    (d) Specific systems of records exempted under (k)(5). The 
Department exempts the Investigatory Material Compiled for Personnel 
Security and Suitability Purposes (18-05-17) system of records from the 
following provisions of 5 U.S.C. 552a and this part:
    (1) 5 U.S.C. 552a(c)(3) and Sec. 5b.9(c)(3) of this part, regarding 
access to an accounting of disclosures of records.
    (2) 5 U.S.C. 552a(d) (1) through (4) and (f) and Sec. Sec. 
5b.5(a)(1) and (c), 5b.7, and 5b.8 of this part, regarding notification 
of and access to records and correction or amendment of records.
    (3) 5 U.S.C. 552a(e)(4) (G) and (H), regarding inclusion of 
information in the system notice about procedures for notification, 
access, and correction of records.
    (e) Basis for exemptions taken under (j)(2), (k)(2), and (k)(5). The 
reason the Department took each exemption described in this section is 
stated in the preamble for the final rulemaking document under which the 
exemption was promulgated. These final rulemaking documents were 
published in the Federal Register and may be obtained from the 
Department of Education by mailing a request to the following address: 
U.S. Department of Education, Privacy Act Officer, Office of the Chief 
Information Officer, Regulatory Information Management Group, 
Washington, DC 20202-4651.
    (f) Notification of or access to records in exempt systems of 
records. (1) If a system of records is exempt under this section, an 
individual may nonetheless request notification of or access to a record 
in that system. An individual shall make requests for notification of or 
access to a record in an exempt system or records in accordance with the 
procedures of Sec. 5b.5 of this part.
    (2) An individual will be granted notification of or access to a 
record in an exempt system but only to the extent that notification or 
access would not reveal the identity of a source who furnished the 
record to the Department under an express promise, and, prior to 
September 27, 1975, an implied promise, that his identity would be held 
in confidence if--
    (i) The record is in a system of records or that portion of a system 
of records that is exempt under subsection (k)(2), but not under 
subsection (j)(2), of the Act and the individual has been, as a result 
of the maintenance of the record, denied a right, privilege, or benefit 
to which he or she would otherwise be eligible; or
    (ii) The record is in a system of records that is exempt under 
subsection (k)(5) of the Act.
    (3) If an individual is not granted notification of or access to a 
record in a system of records exempt under subsections (k)(2) (but not 
under subsection (j)(2)) and (k)(5) of the Act in accordance with this 
paragraph, he or she will be informed that the identity of a 
confidential source would be revealed if notification of or access to 
the record were granted to the individual.
    (g) Discretionary actions by the responsible Department official. 
Unless disclosure of a record to the general public is otherwise 
prohibited by law, the responsible Department official may, in his or 
her discretion, grant notification of or access to a record in a system 
of records that is exempt under this section. Discretionary notification 
of or access to a record in accordance with this paragraph will not be a 
precedent for discretionary notification of or access to a similar or 
related record and will not obligate the responsible Department official 
to exercise his or her discretion to grant notification of or

[[Page 23]]

access to any other record in a system of records that is exempt under 
this section.

[58 FR 44424, Aug. 20, 1993, as amended at 64 FR 31066, June 9, 1999; 69 
FR 12246, Mar. 15, 2004]



Sec. 5b.12  Contractors.

    (a) All contracts entered into on or after September 27, 1975 which 
require a contractor to maintain or on behalf of the Department to 
maintain, a system of records to accomplish a Department function must 
contain a provision requiring the contractor to comply with the Act and 
this part.
    (b) All unexpired contracts entered into prior to September 27, 1975 
which require the contractor to maintain or on behalf of the Department 
to maintain, a system of records to accomplish a Department function 
will be amended as soon as practicable to include a provision requiring 
the contractor to comply with the Act and this part. All such contracts 
must be so amended by July 1, 1976 unless for good cause the appeal 
authority identified in Sec. 5b.8 of this part authorizes the 
continuation of the contract without amendment beyond that date.
    (c) A contractor and any employee of such contractor shall be 
considered employees of the Department only for the purposes of the 
criminal penalties of the Act, 5 U.S.C. 552a(i), and the employee 
standards of conduct listed in appendix A of this part where the 
contract contains a provision requiring the contractor to comply with 
the Act and this part.
    (d) This section does not apply to systems of records maintained by 
a contractor as a result of his management discretion, e.g., the 
contractor's personnel records.



Sec. 5b.13  Fees.

    (a) Policy. Where applicable, fees for copying records will be 
charged in accordance with the schedule set forth in this section. Fees 
may only be charged where an individual requests that a copy be made of 
the record to which he is granted access. No fee may be charged for 
making a search of the system of records whether the search is manual, 
mechanical, or electronic. Where a copy of the record must be made in 
order to provide access to the record (e.g., computer printout where no 
screen reading is available), the copy will be made available to the 
individual without cost.
    (b) Fee schedule. The fee schedule for the Department is as follows:
    (1) Copying of records susceptible to photocopying--$.10 per page.
    (2) Copying records not susceptible to photocopying (e.g., punch 
cards or magnetic tapes)--at actual cost to be determined on a case-by-
case basis.
    (3) No charge will be made if the total amount of copying does not 
exceed $25.

          Appendix A to Part 5b--Employee Standards of Conduct

    (a) General. All employees are required to be aware of their 
responsibilities under the Privacy Act of 1974, 5 U.S.C. 552a. 
Regulations implementing the Act are set forth in 34 CFR 5b. Instruction 
on the requirements of the Act and regulation shall be provided to all 
new employees of the Department. In addition, supervisors shall be 
responsible for assuring that employees who are working with systems of 
records or who undertake new duties which require the use of systems of 
records are informed of their responsibilities. Supervisors shall also 
be responsible for assuring that all employees who work with such 
systems of records are periodically reminded of the requirements of the 
Act and are advised of any new provisions or interpretations of the Act.
    (b) Penalties. (1) All employees must guard against improper 
disclosure of records which are governed by the Act. Because of the 
serious consequences of improper invasions of personal privacy, 
employees may be subject to disciplinary action and criminal prosecution 
for knowing and willful violations of the Act and regulation. In 
addition, employees may also be subject to disciplinary action for 
unknowing or unwillful violations, where the employee had notice of the 
provisions of the Act and regulations and failed to inform himself 
sufficiently or to conduct himself in accordance with the requirements 
to avoid violations.
    (2) The Department may be subjected to civil liability for the 
following actions undertaken by its employees:
    (a) Making a determination under the Act and Sec. Sec. 5b.7 and 
5b.8 of the regulation not to amend an individual's record in accordance 
with his request, or failing to make such review in conformity with 
those provisions;
    (b) Refusing to comply with an individual's request for notification 
of or access to a record pertaining to him;

[[Page 24]]

    (c) Failing to maintain any record pertaining to any individual with 
such accuracy, relevance, timeliness, and completeness as is necessary 
to assure fairness in any determination relating to the qualifications, 
character, rights, or opportunities of, or benefits to the individual 
that may be made on the basis of such a record, and consequently a 
determination is made which is adverse to the individual; or
    (d) Failing to comply with any other provision of the Act or any 
rule promulgated thereunder, in such a way as to have an adverse effect 
on an individual.
    (3) ``An employee may be personally subject to criminal liability as 
set forth below and in 5 U.S.C. 552a (i):
    (a) Any officer or employee of an agency, who by virtue of his 
employment or official position, has possession of, or access to, agency 
records which contain individually identifiable information the 
disclosure of which is prohibited by the Act or by rules or regulations 
established thereunder, and who, knowing that disclosure of the specific 
material is so prohibited, willfully discloses the material in any 
manner to any person or agency not entitled to receive it, shall be 
guilty of a misdemeanor and fined not more than $5,000.''
    (b) ``Any officer or employee of any agency who willfully maintains 
a system of records without meeting the notice requirements [of the Act] 
shall be guilty of a misdemeanor and fined not more than $5,000.''
    (c) Rules Governing Employees Not Working With Systems of Records. 
Employees whose duties do not involve working with systems of records 
will not generally disclose to any one, without specific authorization 
from their supervisors, records pertaining to employees or other 
individuals which by reason of their official duties are available to 
them. Notwithstanding the above, the following records concerning 
Federal employees are a matter of public record and no further 
authorization is necessary for disclosure:
    (1) Name and title of individual.
    (2) Grade classification or equivalent and annual rate of salary.
    (3) Position description.
    (4) Location of duty station, including room number and telephone 
number.

In addition, employees shall disclose records which are listed in the 
Department's Freedom of Information Regulation as being available to the 
public. Requests for other records will be referred to the responsible 
Department official. This does not preclude employees from discussing 
matters which are known to them personally, and without resort to a 
record, to official investigators of Federal agencies for official 
purposes such as suitability checks, Equal Employment Opportunity 
investigations, adverse action proceedings, grievance proceedings, etc.
    (d) Rules governing employees whose duties require use or reference 
to systems of records. Employees whose official duties require that they 
refer to, maintain, service, or otherwise deal with systems of records 
(hereinafter referred to as ``Systems Employees'') are governed by the 
general provisions. In addition, extra precautions are required and 
systems employees are held to higher standards of conduct.
    (1) Systems Employees shall:
    (a) Be informed with respect to their responsibilities under the 
Act;
    (b) Be alert to possible misuses of the system and report to their 
supervisors any potential or actual use of the system which they believe 
is not in compliance with the Act and regulation;
    (c) Make a disclosure of records within the Department only to an 
employee who has a legitimate need to know the record in the course of 
his official duties;
    (d) Maintain records as accurately as practicable.
    (e) Consult with a supervisor prior to taking any action where they 
are in doubt whether such action is in conformance with the Act and 
regulation.
    (2) Systems Employees shall not:
    (a) Disclose in any form records from a system of records except (1) 
with the consent or at the request of the subject individual; or (2) 
where its disclosure is permitted under Sec. 5b.9 of the regulation.
    (b) Permit unauthorized individuals to be present in controlled 
areas. Any unauthorized individuals observed in controlled areas shall 
be reported to a supervisor or to the guard force.
    (c) Knowingly or willfully take action which might subject the 
Department to civil liability.
    (d) Make any arrangements for the design development, or operation 
of any system of records without making reasonable effort to provide 
that the system can be maintained in accordance with the Act and 
regulation.
    (e) Contracting officers. In addition to any applicable provisions 
set forth above, those employees whose official duties involve entering 
into contracts on behalf of the Department shall also be governed by the 
following provisions:
    (1) Contracts for design, or development of systems and equipment. 
No contract for the design or development of a system of records, or for 
equipment to store, service or maintain a system of records shall be 
entered into unless the contracting officer has made reasonable effort 
to ensure that the product to be purchased is capable of being used 
without violation of the Act or regulation. Special attention shall be 
given to provision of physical safeguards.

[[Page 25]]

    (2) Contracts for the operation of systems and equipment. No 
contract for the design or development of a system of whom he feels 
appropriate, of all proposed contracts providing for the operation of 
systems of records shall be made prior to execution of the contracts to 
determine whether operation of the system of records is for the purpose 
of accomplishing a Department function. If a determination is made that 
the operation of the system is to accomplish a Department function, the 
contracting officer shall be responsible for including in the contract 
appropriate provisions to apply the provisions of the Act and regulation 
to the system, including prohibitions against improper release by the 
contractor, his employees, agents, or subcontractors.
    (3) Other service contracts. Contracting officers entering into 
general service contracts shall be responsible for determining the 
appropriateness of including provisions in the contract to prevent 
potential misuse (inadvertent or otherwise) by employees, agents, or 
subcontractors of the contractor.
    (f) Rules Governing Responsible Department Officials. In addition to 
the requirements for Systems Employees, responsible Department officials 
shall:
    (1) Respond to all requests for notification of or access, 
disclosure, or amendment of records in a timely fashion in accordance 
with the Act and regulation;
    (2) Make any amendment of records accurately and in a timely 
fashion;
    (3) Inform all persons whom the accounting records show have 
received copies of the record prior to the amendments of the correction; 
and
    (4) Associate any statement of disagreement with the disputed 
record, and
    (a) Transmit a copy of the statement to all persons whom the 
accounting records show have received a copy of the disputed record, and
    (b) Transmit that statement with any future disclosure.

 Appendix B to Part 5b--Routine Uses Applicable to More Than One System 
                       of Records Maintained by ED

    (1) In the event that a system of records maintained by this agency 
to carry out its functions indicates a violation or potential violation 
of law, whether civil, criminal or regulatory in nature, and whether 
arising by general statute or particular program statute, or by 
regulation, rule or order issued pursuant thereto, the relevant records 
in the system of records may be referred, as a routine use, to the 
appropriate agency, whether federal, or foreign, charged with the 
responsibility of investigating or prosecuting such violation or charged 
with enforcing or implementing the statute, or rule, regulation or order 
issued pursuant thereto.
    (2) Referrals may be made of assignments of research investigators 
and project monitors to specific research projects to the Smithsonian 
Institution to contribute to the Smithsonian Science Information 
Exchange, Inc.
    (3) In the event the Department deems it desirable or necessary, in 
determining whether particular records are required to be disclosed 
under the Freedom of Information Act, disclosure may be made to the 
Department of Justice for the purpose of obtaining its advice.
    (4) A record from this system of records may be disclosed as a 
``routine use'' to a federal, state or local agency maintaining civil, 
criminal or other relevant enforcement records or other pertinent 
records, such as current licenses, if necessary to obtain a record 
relevant to an agency decision concerning the hiring or retention of an 
employee, the issuance of a security clearance, the letting of a 
contract, or the issuance of a license, grant or other benefit.

A record from this system of records may be disclosed to a federal 
agency, in response to its request, in connection with the hiring or 
retention of an employee, the issuance of a security clearance, the 
reporting of an investigation of an employee, the letting of a contract, 
or the issuance of a license, grant, or other benefit by the requesting 
agency, to the extent that the record is relevant and necessary to the 
requesting agency's decision on the matter.
    (5) In the event that a system of records maintained by this agency 
to carry out its function indicates a violation or potential violation 
of law, whether civil, criminal or regulatory in nature, and whether 
arising by general statute or particular program statute, or by 
regulation, rule or order issued pursuant thereto, the relevant records 
in the system of records may be referred, as a routine use, to the 
appropriate agency, whether state or local charged with the 
responsibility of investigating or prosecuting such violation or charged 
with enforcing or implementing the statute, or rule, regulation or order 
issued pursuant thereto.
    (6) Where federal agencies having the power to subpoena other 
federal agencies' records, such as the Internal Revenue Service or the 
Civil Rights Commission, issue a subpoena to the Department for records 
in this system of records, the Department will make such records 
available.
    (7) Where a contract between a component of the Department and a 
labor organization recognized under E.O. 11491 provides that the agency 
will disclose personal records relevant to the organization's mission, 
records in this system of records may be disclosed to such organization.

[[Page 26]]

    (8) Where the appropriate official of the Department, pursuant to 
the Department's Freedom of Information Regulation determines that it is 
in the public interest to disclose a record which is otherwise exempt 
from mandatory disclosure, disclosure may be made from this system of 
records.
    (9) The Department contemplates that it will contract with a private 
firm for the purpose of collating, analyzing, aggregating or otherwise 
refining records in this system. Relevant records will be disclosed to 
such a contractor. The contractor shall be required to maintain Privacy 
Act safeguards with respect to such records.
    (10) To individuals and organizations, deemed qualified by the 
Secretary to carry out specific research solely for the purpose of 
carrying out such research.
    (11) Disclosures in the course of employee discipline or competence 
determination proceedings.

[45 FR 30808, May 9, 1980; 45 FR 37426, June 3, 1980]



PART 6_INVENTIONS AND PATENTS (GENERAL)--Table of Contents




Sec.
6.0 General policy.
6.1 Publication or patenting of inventions.
6.3 Licensing of Government-owned patents.
6.4 Central records; confidentiality.

    Authority: 5 U.S.C. 301.

    Source: 45 FR 30814, May 9, 1980, unless otherwise noted.



Sec. 6.0  General policy.

    Inventions developed through the resources and activities of the 
Department are a potential resource of great value to the public. It is 
the policy of the Department:
    (a) To safeguard the public interest in inventions developed by 
Department employees, contractors and grantees with the aid of public 
funds and facilities;
    (b) To encourage and recognize individual and cooperative 
achievement in research and investigations; and
    (c) To establish a procedure, consistent with pertinent statutes, 
Executive orders and general Government regulations, for the 
determination of rights and obligations relating to the patenting of 
inventions.



Sec. 6.1  Publication or patenting of inventions.

    It is the general policy of the Department that the results of 
Department research should be made widely, promptly and freely available 
to other research workers and to the public. This availability can 
generally be adequately preserved by the dedication of a Government-
owned invention to the public. Determinations to file a domestic patent 
application on inventions in which the Department has an interest will 
be made where the circumstances indicate that this is desirable in the 
public interest, and if it is practicable to do so. Department 
determinations not to apply for a domestic patent on employee inventions 
are subject to review and approval by the Commissioner of Patents. 
Except where deemed necessary for protecting the patent claim, the fact 
that a patent application has been or may be filed will not require any 
departure from normal policy regarding the dissemination of the results 
of Department research.



Sec. 6.3  Licensing of Government-owned patents.

    (a) Licenses to practice inventions covered by patents and pending 
patent applications owned by the U.S. Government as represented by this 
Department will generally be royalty free, revocable and nonexclusive. 
They will normally be issued to all applicants and will generally 
contain no limitations or standards relating to the quality or testing 
of the products to be manufactured, sold, or distributed thereunder.
    (b) Where it appears however that the public interest will be served 
under the circumstances of the particular case by licenses which impose 
conditions, such as those relating to quality or testing of products, 
requirement of payment of royalties to the Government, etc., or by the 
issuance of limited exclusive licenses by the Secretary after notice and 
opportunity for hearing thereon, such licenses may be issued.



Sec. 6.4  Central records; confidentiality.

    Central files and records shall be maintained of all inventions, 
patents, and licenses in which the Department has an interest, together 
with a record

[[Page 27]]

of all licenses issued by the Department under such patents. Invention 
reports required from employees or others for the purpose of obtaining 
determinations of ownership, and documents and information obtained for 
the purpose of prosecuting patent applications shall be confidential and 
shall be disclosed only as required for official purposes or with the 
consent of the inventor.



PART 7_EMPLOYEE INVENTIONS--Table of Contents




Sec.
7.0 Who are employees.
7.1 Duty of employee to report inventions.
7.3 Determination as to domestic rights.
7.4 Option to acquire foreign rights.
7.7 Notice to employee of determination.
7.8 Employee's right of appeal.

    Authority: E.O. 10096, 15 FR 391; 3 CFR 1950 Supp.; E.O. 10930, 26 
FR 2583; 3 CFR 1961 Supp.

    Source: 45 FR 30814, May 9, 1980, unless otherwise noted.



Sec. 7.0  Who are employees.

    As used in this part, the term Government employee means any officer 
or employee, civilian or military, except such part-time employees or 
part-time consultants as may be excluded therefrom by a determination 
made in writing by the head of the employee's office or constituent 
organization, pursuant to an exemption approved by the Commissioner of 
Patents that to include him or them would be impracticable or 
inequitable, given the reasons therefor. A person shall not be 
considered to be a part-time employee or part-time consultant for this 
purpose unless the terms of his employment contemplate that he shall 
work for less than the minimum number of hours per day, or less than a 
minimum number of days per week, or less than the minimum number of 
weeks per year, regularly required of full-time employees of his class.



Sec. 7.1  Duty of employee to report inventions.

    Every Department employee is required to report to the Secretary in 
accordance with the procedures established therefor, every invention 
made by him (whether or not jointly with others) which bears any 
relation to his official duties or which was made in whole or in any 
part during working hours, or with any contribution of Government 
facilities, equipment, material, funds, or information, or of time or 
services of other Government employees on official duty.



Sec. 7.3  Determination as to domestic rights.

    The determination of the ownership of the domestic right, title, and 
interest in and to an invention which is or may be patentable, made by a 
Government employee while under the administrative jurisdiction of the 
Department, will be made in writing by the Secretary in accordance with 
the provisions of Executive Order 10096 and Government-wide regulations 
issued thereunder by the Commissioner of Patents as follows:
    (a) The Government as represented by the Secretary shall obtain the 
entire domestic right, title and interest in and to all inventions made 
by any Government employee (1) during working hours, or (2) with a 
contribution by the Government of facilities, equipment, materials, 
funds, or information, or of time or services of other Government 
employees on official duty, or (3) which bear a direct relation to or 
are made in consequence of the official duties of the inventor.
    (b) In any case where the contribution of the Government, as 
measured by any one or more of the criteria set forth in paragraph (a) 
of this section, to the invention is insufficient equitably to justify a 
requirement of assignment to the Government of the entire domestic 
right, title and interest in and to such invention, or in any case where 
the Government has insufficient interest in an invention to obtain the 
entire domestic right, title, and interest therein (although the 
Government could obtain same under paragraph (a) of this section), the 
Department, subject to the approval of the Commissioner, shall leave 
title to such invention in the employee, subject, however, to the 
reservation to the Government of a nonexclusive, irrevocable, royalty-
free license in the invention with power to grant licenses for all 
governmental purposes, such reservation to

[[Page 28]]

appear, where practicable, in any patent, domestic or foreign, which may 
issue on such invention.
    (c) In applying the provisions of paragraphs (a) and (b) of this 
section, to the facts and circumstances relating to the making of any 
particular invention, it shall be presumed that an invention made by an 
employee who is employed or assigned (1) to invent or improve or perfect 
any art, machine, manufacture, or composition of matter, (2) to conduct 
or perform research, development work, or both, (3) to supervise, 
direct, coordinate, or review Government financed or conducted research, 
development work, or both, or (4) to act in a liaison capacity among 
governmental or nongovernmental agencies or individuals engaged in such 
work, falls within the provisions of paragraph (a) of this section, and 
it shall be presumed that any invention made by any other employee falls 
within the provisions of paragraph (b) of this section. Either 
presumption may be rebutted by a showing of the facts and circumstances 
and shall not preclude a determination that these facts and 
circumstances justify leaving the entire right, title and interest in 
and to the invention in the Government employee, subject to law.
    (d) In any case wherein the Government neither (1) obtains the 
entire domestic right, title and interest in and to an invention 
pursuant to the provisions of paragraph (a) of this section, nor (2) 
reserves a nonexclusive, irrevocable, royalty-free license in the 
invention, with power to grant licenses for all governmental purposes, 
pursuant to the provisions of paragraph (b) of this section, the 
Government shall leave the entire right, title and interest in and to 
the invention in the Government employee, subject to law.



Sec. 7.4  Option to acquire foreign rights.

    In any case where it is determined that all domestic rights should 
be assigned to the Government, it shall further be determined, pursuant 
to Executive Order 9865 and Government-wide regulations issued 
thereunder, that the Government shall reserve an option to require the 
assignment of such rights in all or in any specified foreign countries. 
In case where the inventor is not required to assign the patent rights 
in any foreign country or countries to the Government or the Government 
fails to exercise its option within such period of time as may be 
provided by regulations issued by the Commissioner of Patents, any 
application for a patent which may be filed in such country or countries 
by the inventor or his assignee shall nevertheless be subject to a 
nonexclusive, irrevocable, royalty-free license to the Government for 
all governmental purposes, including the power to issue sublicenses for 
use in behalf of the Government and/or in furtherance of the foreign 
policies of the Government.



Sec. 7.7  Notice to employee of determination.

    The employee-inventor shall be notified in writing of the 
Department's determination of the rights to his invention and of his 
right of appeal, if any. Notice need not be given if the employee stated 
in writing that he would agree to the determination of ownership which 
was in fact made.



Sec. 7.8  Employee's right of appeal.

    An employee who is aggrieved by a determination of the Department 
may appeal to the Commissioner of Patents, pursuant to section 4(d) of 
Executive Order 10096, as amended by Executive Order 10930, and 
regulations issued thereunder, by filing a written appeal with the 
Commissioner, in duplicate, and a copy of the appeal with the Secretary 
within 30 days (or such longer period as the Commissioner may, for good 
cause, fix in any case) after receiving written notice of such 
determination.



PART 8_DEMANDS FOR TESTIMONY OR RECORDS IN LEGAL PROCEEDINGS--Table 
of Contents




Sec.
8.1 What is the scope and applicability of this part?
8.2 What definitions apply?
8.3 What are the requirements for submitting a demand for testimony or 
          records?
8.4 What procedures are followed in response to a demand for testimony?
8.5 What procedures are followed in response to a demand for records?


[[Page 29]]


    Authority: 5 U.S.C. 301; 5 U.S.C. 552; 20 U.S.C. 3474, unless 
otherwise noted.

    Source: 57 FR 34646, Aug. 5, 1992, unless otherwise noted.



Sec. 8.1  What is the scope and applicability of this part?

    (a) Except as provided in paragraph (c) of this section, this part 
establishes the procedures to be followed if the Department or any 
departmental employee receives a demand for--
    (1) Testimony by an employee concerning--
    (i) Records contained in the files of the Department;
    (ii) Information relating to records contained in the files of the 
Department; or
    (iii) Information or records acquired or produced by the employee in 
the course of his or her official duties or because of the employee's 
official status; or
    (2) The production or disclosure of any information or records 
referred to in paragraph (a)(1) of this section.
    (b) This part does not create any right or benefit, substantive or 
procedural, enforceable by any person against the Department.
    (c) This part does not apply to--
    (1) Any proceeding in which the United States is a party before an 
adjudicative authority;
    (2) A demand for testimony or records made by either House of 
Congress or, to the extent of matter within its jurisdiction, any 
committee or subcommittee of Congress; or
    (3) An appearance by an employee in his or her private capacity in a 
legal proceeding in which the employee's testimony does not relate to 
the mission or functions of the Department.

(Authority: 5 U.S.C. 301; 20 U.S.C. 3474)



Sec. 8.2  What definitions apply?

    The following definitions apply to this part:
    Adjudicative authority includes, but is not limited to--
    (1) A court of law or other judicial forums; and
    (2) Mediation, arbitration, or other forums for dispute resolution.
    Demand includes a subpoena, subpoena duces tecum, request, order, or 
other notice for testimony or records arising in a legal proceeding.
    Department means the U.S. Department of Education.
    Employee means a current employee or official of the Department or 
of an advisory committee of the Department, including a special 
government employee, unless specifically provided otherwise in this 
part.
    Legal proceeding means--
    (1) A proceeding before an adjudicative authority;
    (2) A legislative proceeding, except for a proceeding before either 
House of Congress or before any committee or subcommittee of Congress, 
to the extent of matter within the committee's or subcommittee's 
jurisdiction; or
    (3) An administrative proceeding.
    Secretary means the Secretary of Education or an official or 
employee of the Department acting for the Secretary under a delegation 
of authority.
    Testimony means statements made in connection with a legal 
proceeding, including but not limited to statements in court or other 
forums, depositions, declarations, affidavits, or responses to 
interrogatories.
    United States means the Federal Government of the United States and 
any of its agencies or instrumentalities.

(Authority: 5 U.S.C. 301; 20 U.S.C. 3474)



Sec. 8.3  What are the requirements for submitting a demand for testimony 
or records?

    (a) A demand for testimony of an employee or former employee, or a 
demand for records issued pursuant to the rules governing the legal 
proceeding in which the demand arises--
    (1) Must be in writing; and
    (2) Must state the nature of the requested testimony or records and 
why the information sought is unavailable by any other means.
    (b) Service of a demand for testimony of an employee or former 
employee must be made on the employee or former employee whose testimony 
is demanded, with a copy simultaneously delivered to the General 
Counsel, U.S. Department of Education, Office of the General Counsel, 
400 Maryland Avenue, SW., room 4083, FOB-6, Washington, DC 20202-2100.

[[Page 30]]

    (c) Service of a demand for records, as described in Sec. 
8.5(a)(1), must be made on an employee or former employee who has 
custody of the records, with a copy simultaneously delivered to the 
General Counsel at the address listed in paragraph (b) of this section. 
For assistance in identifying the custodian of the specific records 
demanded, contact the Records Management Branch Chief, Office of 
Information Resources Management, U.S. Department of Education, 7th and 
D Streets, SW., ROB-3, Washington, DC 20202-4753.

(Authority: 5 U.S.C. 301; 20 U.S.C. 3474)

(Approved by the Office of Management and Budget under control number 
1801-0002)

[57 FR 34646, Aug. 5, 1992, as amended at 58 FR 7860, Feb. 9, 1993]



Sec. 8.4  What procedures are followed in response to a demand for 
testimony?

    (a) After an employee receives a demand for testimony, the employee 
shall immediately notify the Secretary and request instructions.
    (b) An employee may not give testimony without the prior written 
authorization of the Secretary.
    (c)(1) The Secretary may allow an employee to testify if the 
Secretary determines that the demand satisfies the requirements of Sec. 
8.3 and that granting permission--
    (i) Would be appropriate under the rules of procedure governing the 
matter in which the demand arises and other applicable laws, rules, and 
regulations; and
    (ii) Would not be contrary to an interest of the United States, 
which includes furthering a public interest of the Department and 
protecting the human and financial resources of the United States.
    (2) The Secretary may establish conditions under which the employee 
may testify.
    (d) If a response to a demand for testimony is required before the 
Secretary determines whether to allow an employee to testify, the 
employee or counsel for the employee shall--
    (1) Inform the court or other authority of the regulations in this 
part; and
    (2) Request that the demand be stayed pending the employee's receipt 
of the Secretary's instructions.
    (e) If the court or other authority declines the request for a stay, 
or rules that the employee must comply with the demand regardless of the 
Secretary's instructions, the employee or counsel for the employee shall 
respectfully decline to comply with the demand, citing United States ex 
rel. Touhy v. Ragen, 340 U.S. 462 (1951), and the regulations in this 
part.

(Authority: 5 U.S.C. 301; 20 U.S.C. 3474)



Sec. 8.5  What procedures are followed in response to a demand for 
records?

    (a)(1) After an employee receives a demand for records issued 
pursuant to the rules governing the legal proceeding in which the demand 
arises, the employee shall immediately notify the Secretary and request 
instructions.
    (2) If an employee receives any other demand for records, the 
Department--
    (i) Considers the demand to be a request for records under the 
Freedom of Information Act; and
    (ii) Handles the demand under rules governing public disclosure, as 
established in 34 CFR part 5.
    (b) An employee may not produce records in response to a demand as 
described in paragraph (a)(1) of this section without the prior written 
authorization of the Secretary.
    (c) The Secretary may make these records available if the Secretary 
determines that the demand satisfies the requirements of Sec. 8.3 and 
that disclosure--
    (1) Would be appropriate under the rules of procedure governing the 
matter in which the demand arises and other applicable laws, rules, and 
regulations; and
    (2) Would not be contrary to an interest of the United States, which 
includes furthering a public interest of the Department and protecting 
the human and financial resources of the United States.
    (d) If a response to a demand for records as described in paragraph 
(a)(1) of this section is required before the Secretary determines 
whether to allow an employee to produce those records, the employee or 
counsel for the employee shall--
    (1) Inform the court or other authority of the regulations in this 
part; and

[[Page 31]]

    (2) Request that the demand be stayed pending the employee's receipt 
of the Secretary's instructions.
    (e) If the court or other authority declines the request for a stay, 
or rules that the employee must comply with the demand regardless of the 
Secretary's instructions, the employee or counsel for the employee shall 
respectfully decline to comply with the demand, citing United States ex 
rel. Touhy v. Ragen, 340 U.S. 462 (1951), and the regulations in this 
part.

(Authority: 5 U.S.C. 301; 5 U.S.C. 552; 20 U.S.C. 3474)



PART 12_DISPOSAL AND UTILIZATION OF SURPLUS FEDERAL REAL PROPERTY FOR 
EDUCATIONAL PURPOSES--Table of Contents




                            Subpart A_General

Sec.
12.1 What is the scope of this part?
12.2 What definitions apply?
12.3 What other regulations apply to this program?

         Subpart B_Distribution of Surplus Federal Real Property

12.4 How does the Secretary provide notice of availability of surplus 
          Federal real property?
12.5 Who may apply for surplus Federal real property?
12.6 What must an application for surplus Federal real property contain?
12.7 How is surplus Federal real property disposed of when there is more 
          than one applicant?
12.8 What transfer or lease instruments does the Secretary use?
12.9 What warranties does the Secretary give?
12.10 How is a Public Benefit Allowance (PBA) calculated?

         Subpart C_Conditions Applicable to Transfers or Leases

12.11 What statutory provisions and Executive Orders apply to transfers 
          of surplus Federal real property?
12.12 What are the terms and conditions of transfers or leases of 
          surplus Federal real property?
12.13 When is use of the transferred surplus Federal real property by 
          entities other than the transferee or lessee permissible?

                          Subpart D_Enforcement

12.14 What are the sanctions for noncompliance with a term or condition 
          of a transfer or lease of surplus Federal real property?

                          Subpart E_Abrogation

12.15 What are the procedures for securing an abrogation of the 
          conditions and restrictions contained in the conveyance 
          instrument?

Appendix A to Part 12--Public Benefit Allowance for Transfer of Surplus 
          Federal Real Property for Educational Purposes

    Authority: 40 U.S.C. 471-488; 20 U.S.C. 3401 et seq.; 42 U.S.C. 
2000d (1) et seq.; 20 U.S.C. 1681 et seq.; 29 U.S.C. 794 et seq.; 42 
U.S.C. 4332.

    Source: 57 FR 60394, Dec. 18, 1992, unless otherwise noted.



                            Subpart A_General



Sec. 12.1  What is the scope of this part?

    This part is applicable to surplus Federal real property located 
within any State that is appropriate for assignment to, or that has been 
assigned to, the Secretary by the Administrator for transfer for 
educational purposes, as provided for in section 203(k) of the Federal 
Property and Administrative Services Act of 1949, as amended, 63 Stat. 
377 (40 U.S.C. 471 et seq.).

(Authority: 40 U.S.C. 484(k))



Sec. 12.2  What definitions apply?

    (a) Definitions in the Act. The following terms used in this part 
are defined in section 472 of the Act:

Administrator
Surplus property

    (b) Definitions in the Education Department General Administrative 
Regulations (EDGAR). The following terms used in this part are defined 
in 34 CFR 77.1:

Department
Secretary
State

    (c) Other definitions: The following definitions also apply to this 
part:
    Abrogation means the procedure the Secretary may use to release the 
transferee of surplus Federal real property from the covenants, 
conditions, reservations, and restrictions contained in

[[Page 32]]

the conveyance instrument before the term of the instrument expires.
    Act means the Federal Property and Administrative Services Act of 
1949, as amended, 63 Stat. 377 (40 U.S.C. 471 et seq.).
    Applicant means an eligible entity as described in Sec. 12.5 that 
formally applies to be a transferee or lessee of surplus Federal real 
property, using a public benefit allowance (PBA) under the Act.
    Lessee, except as used in Sec. 12.14(a)(5), means an entity that is 
given temporary possession, but not title, to surplus Federal real 
property by the Secretary for educational purposes.
    Nonprofit institution means any institution, organization, or 
association, whether incorporated or unincorporated--
    (1) The net earnings of which do not inure or may not lawfully inure 
to the benefit of any private shareholder or individual; and
    (2) That has been determined by the Internal Revenue Service to be 
tax-exempt under section 501(c)(3) of title 26.
    Off-site property means surplus buildings and improvements--
including any related personal property--that are capable of being 
removed from the underlying land and that are transferred by the 
Secretary without transferring the underlying real property.
    On-site property means surplus Federal real property, including any 
related personal property--other than off-site property.
    Period of restriction means that period during which the surplus 
Federal real property transferred for educational purposes must be used 
by the transferee or lessee in accordance with covenants, conditions, 
and any other restrictions contained in the conveyance instrument.
    Program and plan of use means the educational activities to be 
conducted by the transferee or lessee using the surplus Federal real 
property, as described in the application for that property.
    Public benefit allowance (``PBA'') means the credit, calculated in 
accordance with appendix A to this part, given to a transferee or lessee 
which is applied against the fair market value of the surplus Federal 
real property at the time of the transfer or lease of such property in 
exchange for the proposed educational use of the property by the 
transferee or lessee.
    Related personal property means any personal property--
    (1) That is located on and is an integral part of, or incidental to 
the operation of, the surplus Federal real property; or
    (2) That is determined by the Administrator to be otherwise related 
to the surplus Federal real property.
    Surplus Federal real property means the property assigned or 
suitable for assignment to the Secretary by the Administrator for 
disposal under the Act.
    Transfer means to sell and convey title to surplus Federal real 
property for educational purposes as described in this part.
    Transferee means that entity which has purchased and acquired title 
to the surplus Federal real property for educational purposes pursuant 
to section 203(k) of the Act.

(Authority: 40 U.S.C. 472 and 20 U.S.C. 3401 et seq.)



Sec. 12.3  What other regulations apply to this program?

    The following regulations apply to this program:
    (a) 34 CFR parts 100, 104, and 106.
    (b) 41 CFR part 101-47.
    (c) 34 CFR part 85.

(Authority: 40 U.S.C. 484(k); 42 U.S.C. 2000d-1 et seq.; 29 U.S.C. 794 
et seq.; 20 U.S.C. 1681 et seq.; Executive Order 12549; and 20 U.S.C. 
3474)



         Subpart B_Distribution of Surplus Federal Real Property



Sec. 12.4  How does the Secretary provide notice of availability of 
surplus Federal real property?

    The Secretary notifies potential applicants of the availability of 
surplus Federal real property for transfer for educational uses in 
accordance with 41 CFR 101-47.308-4.

(Authority: 40 U.S.C. 484(k)(1))



Sec. 12.5  Who may apply for surplus Federal real property?

    The following entities may apply for surplus Federal real property:
    (a) A State.

[[Page 33]]

    (b) A political subdivision or instrumentality of a State.
    (c) A tax-supported institution.
    (d) A nonprofit institution.
    (e) Any combination of these entities.

(Authority: 40 U.S.C. 484(k)(1)(A))



Sec. 12.6  What must an application for surplus Federal real property 
contain?

    An application for surplus Federal real property must--
    (a) Contain a program and plan of use;
    (b) Contain a certification from the applicant that the proposed 
program is not in conflict with State or local zoning restrictions, 
building codes, or similar limitations;
    (c) Demonstrate that the proposed program and plan of use of the 
surplus Federal real property is for a purpose that the applicant is 
authorized to carry out;
    (d) Demonstrate that the applicant is able, willing, and authorized 
to assume immediate custody, use, care, and maintenance of the surplus 
Federal real property;
    (e) Demonstrate that the applicant is able, willing, and authorized 
to pay the administrative expenses incident to the transfer or lease;
    (f) Demonstrate that the applicant has the necessary funds, or the 
ability to obtain those funds immediately upon transfer or lease, to 
carry out the proposed program and plan of use for the surplus Federal 
real property;
    (g) Demonstrate that the applicant has an immediate need and ability 
to use all of the surplus Federal real property for which it is 
applying;
    (h) Demonstrate that the surplus Federal real property is needed for 
educational purposes at the time of application and that it is so needed 
for the duration of the period of restriction;
    (i) Demonstrate that the surplus Federal real property is suitable 
or adaptable to the proposed program and plan of use; and
    (j) Provide information requested by the Secretary in the notice of 
availability, including information of the effect of the proposed 
program and plan of use on the environment.

(Approved by the Office of Management and Budget under control number 
1880-0524)

(Authority: 40 U.S.C. 484(k))



Sec. 12.7  How is surplus Federal real property disposed of when there 
is more than one applicant?

    (a) If there is more than one applicant for the same surplus Federal 
real property, the Secretary transfers or leases the property to the 
applicant whose proposed program and plan of use the Secretary 
determines provides the greatest public benefit, using the criteria 
contained in appendix A to this part that broadly address the weight 
given to each type of entity applying and its proposed program and plan 
of use. (See example in Sec. 12.10(d)).
    (b) If, after applying the criteria described in paragraph (a) of 
this section, two or more applicants are rated equally, the Secretary 
transfers or leases the property to one of the applicants after--
    (1) Determining the need for each applicant's proposed educational 
use at the site of the surplus Federal real property;
    (2) Considering the quality of each applicant's proposed program and 
plan of use; and
    (3) Considering each applicant's ability to carry out its proposed 
program and plan of use.
    (c) If the Secretary determines that the surplus Federal real 
property is capable of serving more than one applicant, the Secretary 
may apportion it to fit the needs of as many applicants as is 
practicable.
    (d)(1) The Secretary generally transfers surplus Federal real 
property to a selected applicant that meets the requirements of this 
part.
    (2) Alternatively, the Secretary may lease surplus Federal real 
property to a selected applicant that meets the requirements of this 
part if the Secretary determines that a lease will promote the most 
effective use of the property consistent with the purposes of this part 
or if having a lease is otherwise in the best interest of the United 
States, as determined by the Secretary.

(Authority: 40 U.S.C. 484(k))

[[Page 34]]



Sec. 12.8  What transfer or lease instruments does the Secretary use?

    (a) The Secretary transfers or leases surplus Federal real property 
using transfer or lease instruments that the Secretary prescribes.
    (b) The transfer or lease instrument contains the applicable terms 
and conditions described in this part and any other terms and conditions 
the Secretary or Administrator determines are appropriate or necessary.

(Authority: 40 U.S.C. 484(c))



Sec. 12.9  What warranties does the Secretary give?

    The Secretary transfers or leases surplus Federal real property on 
an ``as is, where is,'' basis without warranty of any kind.

(Authority: 40 U.S.C. 484(k)(1))



Sec. 12.10  How is a Public Benefit Allowance (PBA) calculated?

    (a) The Secretary calculates a PBA in accordance with the provisions 
of appendix A to this part taking into account the nature of the 
applicant, and the need for, impact of, and type of program and plan of 
use for the property, as described in that appendix.
    (b) The following are illustrative examples of how a PBA would be 
calculated and applied under appendix A:
    (1) Entity A is a specialized school that has had a building 
destroyed by fire, and that has existing facilities determined by the 
Secretary to be between 26 and 50% inadequate. It is proposing to use 
the surplus Federal real property to add a new physical education 
program. Entity A would receive a basic PBA of 70%, a 10% hardship 
organization allowance, a 20% allowance for inadequacy of existing 
school plant facilities, and a 10% utilization allowance for 
introduction of new instructional programs. Entity A would have a total 
PBA of 110%. If Entity A is awarded the surplus Federal real property, 
it would not be required to pay any cash for the surplus Federal real 
property, since the total PBA exceeds 100%.
    (2) Entity B proposes to use the surplus Federal real property for 
nature walks. Because this qualifies as an outdoor educational program, 
Entity B would receive a basic PBA of 40%. If Entity B is awarded the 
surplus Federal real property, it would be required to pay 60% of the 
fair market value of the surplus Federal real property in cash at the 
time of the transfer.
    (3) Entity C is an accredited university, has an ROTC unit, and 
proposes to use the surplus Federal real property for a school health 
clinic and for special education of the physically handicapped. Entity C 
would receive a basic PBA of 50% (as a college or university), a 20% 
accreditation organization allowance (accredited college or university), 
a 10% public service training organization allowance (ROTC), a 10% 
student health and welfare utilization allowance (school health clinic), 
and a 10% service to the handicapped utilization allowance (education of 
the physically handicapped). Entity C would have a total PBA of 100%. If 
Entity C is awarded the surplus Federal real property, it would not be 
required to pay any cash for the surplus Federal real property, since 
the total PBA is 100%.
    (4) Entities A, B, and C all submit applications for the same 
surplus Federal real property. Unless the Secretary decides to apportion 
it, the Secretary transfers or leases the surplus Federal real property 
to Entity A, since its proposed program and plan of use has the highest 
total PBA.

(Authority: 40 U.S.C. 484(k)(1)(c))



         Subpart C_Conditions Applicable to Transfers or Leases



Sec. 12.11  What statutory provisions and Executive Orders apply to 
transfers of surplus Federal real property?

    The Secretary directs the transferee or lessee to comply with 
applicable provisions of the following statutes and Executive Orders 
prior to, or immediately upon, transfer or lease, as applicable:
    (a) National Environmental Policy Act of 1969, 42 U.S.C. 4332.
    (b) National Historic Preservation Act of 1966, 16 U.S.C. 470.
    (c) National Flood Insurance Act of 1968, 42 U.S.C. 4001 et seq.
    (d) Floodplain Management, Exec. Order No. 11988, 42 FR 26951 (May 
25, 1977).

[[Page 35]]

    (e) Protection of Wetlands, Exec. Order No. 11990, 42 FR 26961 (May 
25, 1977).
    (f) Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000(d)(1) 
et seq.
    (g) Title IX of the Education Amendments of 1972, 20 U.S.C. 1681 et 
seq.
    (h) Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. 794 et 
seq.
    (i) Age Discrimination Act of 1975, 42 U.S.C. 1601 et seq.
    (j) Any other applicable Federal or State laws and Executive Orders.

(Authority: 40 U.S.C. 484(k))

(Approved by the Office of Management and Budget under control number 
1880-0524)



Sec. 12.12  What are the terms and conditions of transfers or leases of 
surplus Federal real property?

    (a) General terms and conditions for transfers and leases. The 
following general terms and conditions apply to transfers and leases of 
surplus Federal real property under this part:
    (1) For the period provided in the transfer or lease instrument, the 
transferee or lessee shall use all of the surplus Federal real property 
it receives solely and continuously for its approved program and plan of 
use, in accordance with the Act and these regulations, except that--
    (i) The transferee or lessee has twelve (12) months from the date of 
transfer to place this surplus Federal real property into use, if the 
Secretary did not, at the time of transfer, approve in writing 
construction of major new facilities or major renovation of the 
property;
    (ii) The transferee or lessee has thirty-six (36) months from the 
date of transfer to place the surplus Federal real property into use, if 
the transferee or lessee proposes construction of major new facilities 
or major renovation of the property and the Secretary approves it in 
writing at the time of transfer; and
    (iii) The Secretary may permit use of the surplus Federal real 
property at any time during the period of restriction by an entity other 
than the transferee or lessee in accordance with Sec. 12.13.
    (2) The transferee or lessee may not modify its approved program and 
plan of use without the prior written consent of the Secretary.
    (3) The transferee or lessee may not sell, lease or sublease, rent, 
mortgage, encumber, or otherwise dispose of all or a portion of the 
surplus Federal real property or any interest therein without the prior 
written consent of the Secretary.
    (4) A transferee or lessee shall pay all administrative costs 
incidental to the transfer or lease including, but not limited to--
    (i) Transfer taxes;
    (ii) Surveys;
    (iii) Appraisals;
    (iv) Inventory costs;
    (v) Legal fees;
    (vi) Title search;
    (vii) Certificate or abstract expenses;
    (viii) Decontamination costs;
    (ix) Moving costs;
    (x) Recordation expenses;
    (xi) Other closing costs; and
    (xii) Service charges, if any, provided for by an agreement between 
the Secretary and the applicable State agency for Federal Property 
Assistance.
    (5) The transferee or lessee shall protect the residual financial 
interest of the United States in the surplus Federal real property by 
insurance or such other means as the Secretary directs.
    (6) The transferee or lessee shall file with the Secretary reports 
on its maintenance and use of the surplus Federal real property and any 
other reports required by the Secretary in accordance with the transfer 
or lease instrument.
    (7) Any other term or condition that the Secretary determines 
appropriate or necessary.
    (b) Additional terms and conditions for on-site transfers. The terms 
and conditions in the transfer, including those in paragraph (a) of this 
section, apply for a period not to exceed thirty (30) years.
    (c) Additional terms and conditions for off-site transfers. (1) The 
terms and conditions in the transfer, including those in paragraph (a) 
of this section, apply for a period equivalent to the estimated economic 
life of the property conveyed for a transfer of off-site surplus Federal 
real property.
    (2) In addition to the terms and conditions contained in paragraph 
(c) of this section, the Secretary may also require the transferee of 
off-site surplus Federal real property--
    (i) To post performance bonds;

[[Page 36]]

    (ii) To post performance guarantee deposits; or
    (iii) To give such other assurances as may be required by the 
Secretary or the holding agency to ensure adequate site clearance.
    (d) Additional terms and conditions for leases. In addition to the 
terms and conditions contained in paragraph (a) of this section, the 
Secretary requires, for leases of surplus Federal real property, that 
all terms and conditions apply to the initial lease agreement, and any 
renewal periods, unless specifically excluded in writing by the 
Secretary.

(Authority: 40 U.S.C. 484(k)(1))

(Approved by the Office of Management and Budget under control number 
1880-0524)



Sec. 12.13  When is use of the transferred surplus Federal real property 
by entities other than the transferee or lessee permissible?

    (a) By eligible entities. A transferee or lessee may permit the use 
of all or a portion of the surplus Federal real property by another 
eligible entity as described in Sec. 12.5, only upon those terms and 
conditions the Secretary determines appropriate if--
    (1) The Secretary determines that the proposed use would not 
substantially limit the program and plan of use by the transferee or 
lessee and that the use will not unduly burden the Department;
    (2) The Secretary's written consent is obtained by the transferee or 
lessee in advance; and
    (3) The Secretary approves the use instrument in advance and in 
writing.
    (b) By ineligible entities. A transferee or lessee may permit the 
use of a portion of the surplus Federal real property by an ineligible 
entity, one not described in Sec. 12.5, only upon those terms and 
conditions the Secretary determines appropriate if--
    (1) In accordance with paragraph (a) of this section, the Secretary 
makes the required determination and approves both the use and the use 
instrument;
    (2) The use is confined to a portion of the surplus Federal real 
property;
    (3) The use does not interfere with the approved program and plan of 
use for which the surplus Federal real property was conveyed; and
    (4) Any rental fees or other compensation for use are either 
remitted directly to the Secretary or are applied to purposes expressly 
approved in writing in advance by the Secretary.

(Authority: 40 U.S.C. 484(k)(4))



                          Subpart D_Enforcement



Sec. 12.14  What are the sanctions for noncompliance with a term or 
condition of a transfer or lease of surplus Federal real property?

    (a) General sanctions for noncompliance. The Secretary imposes any 
or all of the following sanctions, as applicable, to all transfers or 
leases of surplus Federal real property:
    (1) If all or a portion of, or any interest in, the transferred or 
leased surplus Federal real property is not used or is sold, leased or 
subleased, encumbered, disposed of, or used for purposes other than 
those in the approved program and plan of use, without the prior written 
consent of the Secretary, the Secretary may require that--
    (i) All revenues and the reasonable value of other benefits received 
by the transferee or lessee directly or indirectly from that use, as 
determined by the Secretary, be held in trust by the transferee or 
lessee for the United States subject to the direction and control of the 
Secretary;
    (ii) Title or possession to the transferred or leased surplus 
Federal real property and the right to immediate possession revert to 
the United States;
    (iii) The surplus Federal real property be transferred or leased to 
another eligible entity as the Secretary directs;
    (iv) The transferee or lessee abrogate the conditions and 
restrictions in the transfer or lease instrument in accordance with the 
provisions of Sec. 12.15;
    (v) The transferee or lessee place the surplus Federal real property 
into immediate use for an approved purpose and extend the period of 
restriction in the transfer or lease instrument for a term equivalent to 
the period during which the property was not fully and solely used for 
an approved use; or
    (vi) The transferee or lessee comply with any combination of the 
sanctions

[[Page 37]]

described in paragraph (a)(1) or (a)(3) of this section.
    (2) If title or possession reverts to the United States for 
noncompliance or is voluntarily reconveyed, the Secretary may require 
the transferee or lessee--
    (i) To reimburse the United States for the decrease in value of the 
transferred or leased surplus Federal real property not due to--
    (A) Reasonable wear and tear;
    (B) Acts of God; or
    (C) Reasonable alterations made by the transferee or lessee to adapt 
the surplus Federal real property to the approved program and plan of 
use for which it was transferred or leased;
    (ii) To reimburse the United States for any costs incurred in 
reverting title or possession;
    (iii) To forfeit any cash payments made by the transferee or lessee 
against the purchase or lease price of surplus Federal real property 
transferred;
    (iv) To take any other action directed by the Secretary; or
    (v) To comply with any combination of the provisions of paragraph 
(a)(3) of this section.
    (3) If the transferee or lessee does not put the surplus Federal 
real property into use within the applicable time limitation in Sec. 
12.12(a), the Secretary may require the transferee or lessee to make 
cash payments to the Secretary equivalent to the current fair market 
rental value of the surplus Federal real property for each month during 
which the program and plan of use has not been implemented.

(Authority: 40 U.S.C. 484(k)(4))

    (4) If the Secretary determines that a lessee of a transferee or a 
sublessee of a lessee is not complying with a term or condition of the 
lease, or if the lessee voluntarily surrenders the premises, the 
Secretary may require termination of the lease.

(Authority: 40 U.S.C. 484(k)(4)(A))

    (b) Additional sanction for noncompliance with off-site transfer. In 
addition to the sanctions in paragraph (a) of this section, if the 
Secretary determines that a transferee is not complying with a term or 
condition of a transfer of off-site surplus Federal real property, the 
Secretary may require that the unearned PBA become immediately due and 
payable in cash to the United States.

(Authority: 40 U.S.C. 484(k)(4)(A))



                          Subpart E_Abrogation



Sec. 12.15  What are the procedures for securing an abrogation of the 
conditions and restrictions contained in the conveyance instrument?

    (a) The Secretary may, in the Secretary's sole discretion, abrogate 
the conditions and restrictions in the transfer or lease instrument if--
    (1) The transferee or lessee submits to the Secretary a written 
request that the Secretary abrogate the conditions and restrictions in 
the conveyance instrument as to all or any portion of the surplus 
Federal real property;
    (2) The Secretary determines that the proposed abrogation is in the 
best interests of the United States;
    (3) The Secretary determines the terms and conditions under which 
the Secretary will consent to the proposed abrogation; and
    (4) The Secretary transmits the abrogation to the Administrator and 
there is no disapproval by the Administrator within thirty (30) days 
after notice to the Administrator.
    (b) The Secretary abrogates the conditions and restrictions in the 
transfer or lease instrument upon a cash payment to the Secretary based 
on the formula contained in the transfer or lease instrument and any 
other terms and conditions the Secretary deems appropriate to protect 
the interest of the United States.

(Authority: 40 U.S.C. 484(k)(4)(A)(iii))

[[Page 38]]

Appendix A to Part 12--Public Benefit Allowance for Transfer of Surplus 
           Federal Real Property for Educational Purposes \1\
---------------------------------------------------------------------------

    \1\ This Appendix applies to transfers of both on-site and off-site 
surplus property.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Percent allowed
                                                       -----------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Organization allowances                                    Utilization allowances
                                                          Basic   --------------------------------------------------------------------------------------------------------------------  Maximum
                    Classification                        public                                                Inadequacy of existing   Introduction  Student                           public
                                                         benefit                  Federal   Public             school plant facilities      of new      health             Service to   benefit
                                                        allowance  Accreditation   impact   service  Hardship ------------------------- instructional    and    Research  handicapped  allowance
                                                                                           training            10-25%  26-50%  51-100%     programs    welfare                            \4\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Elementary or high schools............................        70   .............       10       10        10       10      20       30          10          10       10          10         100
Colleges or Universities..............................        50           20     .......       10        10       10      20       30          10          10       10          10         100
Specialized schools...................................        70   .............  .......       10        10       10      20       30          10          10       10          10         100
Public libraries or educational museums...............   \2\ 100   .............  .......  ........  ........  ......  ......  .......  .............  .......  ........  ...........   \2\ 100
School outdoor education..............................        40   .............  .......  ........  ........  ......  ......  .......          10      \3\ 10       10   ...........        70
Central administrative and/or service centers.........        80   .............  .......  ........  ........  ......  ......  .......  .............  .......  ........  ...........        80
Non-profit educational research organizations.........        50           20     .......       10   ........  ......  ......  .......          10          10  ........         10         100
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\2\ Applicable when this is the primary use to be made of the property. The public benefit allowance for the overall program is applicable when such facilities are conveyed as a minor
  component of other facilities.
\3\ This 10% may include an approvable recreation program which will be accessible to the public and entirely compatible with, but subordinate to, the educational program.
\4\ This column establishes the maximum discount from the fair market value for payment due from the transferee at the time of the transfer. This column does not apply for purposes of ranking
  applicants to determine to which applicant the property will be transferred. Competitive rankings are based on the absolute total of public benefit allowance points and are not limited to
  the 100% ceiling.

               Description of Terms Used in This Appendix

    Elementary or High School means an elementary school (including a 
kindergarten), high school, junior high school, junior-senior high 
school or elementary or secondary school system, that provides 
elementary or secondary education as determined under State law. 
However, it does not include a nursery school even though it may operate 
as part of a school system.
    College or University means a non-profit or public university or 
college, including a junior college, that provides postsecondary 
education.
    Specialized School means a vocational school, area trade school, 
school for the blind, or similar school.
    Public Library means a public library or public library service 
system, not a school library or library operated by non-profit, private 
organizations or institutions that may be open to the general public. 
School libraries receive the public benefit allowance in the appropriate 
school classification.
    Educational Museum means a museum that conducts courses on a 
continuing, not ad hoc, basis for students who receive credits from 
accredited postsecondary education institutions or school systems.
    School Outdoor Education means a separate facility for outdoor 
education as distinguished from components of a basic school. Components 
of a school such as playgrounds and athletic fields receive the basic 
allowance applicable for that type of school. The

[[Page 39]]

outdoor education must be located reasonably near the school system and 
may be open to and used by the general public, but only if the 
educational program for which the property is conveyed is given priority 
of use. This category does not include components of the school such as 
playgrounds and athletic fields, that are utilized during the normal 
school year, and are available to all students.
    Central Administrative and/or Service Center means administrative 
office space, equipment storage areas, and similar facilities.

                        Description of Allowances

    Basic Public Benefit Allowance means an allowance that is earned by 
an applicant that satisfies the requirements of Sec. 12.10 of this 
part.

                         Organization Allowance

    Accreditation means an allowance that is earned by any postsecondary 
educational institution, including a vocational or trade school, that is 
accredited by an accrediting agency recognized by the Secretary under 34 
CFR part 602.
    Federal Impact means an allowance that is earned by any local 
educational agency (LEA) qualifying for Federal financial assistance as 
the result of the impact of certain Federal activities upon a community, 
such as the following under Public Law 81-874 and Public Law 81-815: to 
any LEA charged by law with responsibility for education of children who 
reside on, or whose parents are employed on, Federal property, or both; 
to any LEA to which the Federal Government has caused a substantial and 
continuing financial burden as the result of the acquisition of a 
certain amount of Federal property since 1938; or to any LEA that 
urgently needs minimum school facilities due to a substantial increase 
in school membership as the result of new or increased Federal 
activities.
    Public Services Training means an allowance that is earned if the 
applicant has cadet or ROTC units or other personnel training contracts 
for the Federal or State governments. This is given to a school system 
only if the particular school receiving the property furnishes that 
training.
    Hardship means an allowance earned by an applicant that has suffered 
a significant facility loss because of fire, storm, flood, other 
disaster, or condemnation. This allowance is also earned if unusual 
conditions exist such as isolation or economic factors that require 
special consideration.
    Inadequacies of Existing Facilities means an allowance that is 
earned on a percentage basis depending on the degree of inadequacy 
considering both public and nonpublic facilities. Overall plant 
requirements are determined based on the relationship between the 
maximum enrollment accommodated in the present facilities, excluding 
double and night sessions and the anticipated enrollment if the 
facilities are transferred. Inadequacies may be computed for a component 
school unit such as a school farm, athletic field, facility for home 
economics, round-out school site, cafeteria, auditorium, teacherages, 
faculty housing, etc., only if the component is required to meet State 
standards. In that event, the State Department of Education will be 
required to provide a certification of the need. Component school unit 
inadequacies may only be related to a particular school and not to the 
entire school system.

                         Utilization Allowances

    Introduction of New Instructional Programs means an allowance that 
is earned if the proposed use of the property indicates that new 
programs will be added at a particular school. Examples of these new 
programs include those for vocational education, physical education, 
libraries, and similar programs.
    Student Health and Welfare means an allowance that is earned if the 
proposed program and plan of use of the property provides for cafeteria, 
clinic, infirmary, bus loading shelters, or other uses providing for the 
well-being and health of students and eliminating safety and health 
hazards.
    Research means an allowance that is earned if the proposed use of 
the property will be predominantly for research by faculty or graduate 
students under school auspices, or other primary educational research.
    Service to Handicapped means an allowance that is earned if the 
proposed program and plan of use for the property will be for special 
education for the physically or mentally handicapped.



PART 15_UNIFORM RELOCATION ASSISTANCE AND REAL PROPERTY ACQUISITION 
FOR FEDERAL AND FEDERALLY ASSISTED PROGRAMS--Table of Contents




    Authority: Section 213, Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970, Pub. L. 91-646, 84 Stat. 1894 
(42 U.S.C. 4601) as amended by the Surface Transportation and Uniform 
Relocation Assistance Act of 1987, Title IV of Pub. L. 100-17, 101 Stat. 
246-256 (42 U.S.C. 4601 note).



Sec. 15.1  Uniform relocation assistance and real property acquisition.

    Regulations and procedures for complying with the Uniform Relocation 
Assistance Act of 1970 (Pub. L. 91-646, 84 Stat. 1894, 42 U.S.C. 4601) 
as amended

[[Page 40]]

by the SUrface Transportation and Uniform Relocation Assistance Act of 
1987 (Title IV of Pub. L. 100-17, 101 Stat. 264-255, 42 U.S.C. 4601 
note) are set forth in 49 CFR part 24.

[52 FR 48021, Dec. 17, 1987]



PART 21_EQUAL ACCESS TO JUSTICE--Table of Contents




                            Subpart A_General

Sec.
21.1 Equal Access to Justice Act.
21.2 Time period when the Act applies.
21.3 Definitions.

          Subpart B_Which Adversary Adjudications Are Covered?

21.10 Adversary adjudications covered by the Act.
21.11 Effect of judicial review of adversary adjudication.

                Subpart C_How Is Eligibility Determined?

21.20 Types of eligible applicants.
21.21 Determination of net worth and number of employees.
21.22 Applicants representing others.

               Subpart D_How Does One Apply for an Award?

21.30 Time for filing application.
21.31 Contents of application.
21.32 Confidentiality of information about net worth.
21.33 Allowable fees and expenses.

     Subpart E_What Procedures Are Used in Considering Applications?

21.40 Filing and service of documents.
21.41 Answer to application.
21.42 Reply.
21.43 Comments by other parties.
21.44 Further proceedings.

                  Subpart F_How Are Awards Determined?

21.50 Standards for awards.
21.51 Initial decision in applications not subject to the CRRA.
21.52 Initial decision by an adjudicative officer in applications 
          subject to CRRA jurisdiction.
21.53 Final decision of the CRRA.
21.54 Review by the Secretary.
21.55 Final decision if the Secretary does not review.
21.56 Judicial review.

                     Subpart G_How Are Awards Paid?

21.60 Payment of awards.
21.61 Release.

    Authority: 5 U.S.C. 504, unless otherwise noted.

    Source: 58 FR 47192, Sept. 7, 1993, unless otherwise noted.



                            Subpart A_General



Sec. 21.1  Equal Access to Justice Act.

    (a) The Equal Access to Justice Act (the Act) provides for the award 
of fees and other expenses to applicants that--
    (1) Are prevailing parties in adversary adjudications before the 
Department of Education; and
    (2) Meet all other conditions of eligibility contained in this part.
    (b) An eligible applicant, as described in paragraph (a) of this 
section, is entitled to receive an award unless--
    (1) The adjudicative officer, the Civil Rights Reviewing Authority 
(CRRA), or the Secretary on review, determines that--
    (i) The Department's position was substantially justified; or
    (ii) Special circumstances make an award unjust; or
    (2) The adversary adjudication is under judicial review, in which 
case the applicant may receive an award only as described in Sec. 
21.11.
    (c) The determination under paragraph (b)(1)(i) of this section is 
based on the administrative record, as a whole, made during the 
adversary adjudication for which fees and other expenses are sought.

(Authority: 5 U.S.C. 504(a)(1) and (c)(1))



Sec. 21.2  Time period when the Act applies.

    The Act applies to any adversary adjudication covered under this 
part pending or commenced before the Department on or after August 5, 
1985.

(Authority: 5 U.S.C. 504(note))



Sec. 21.3  Definitions.

    The following definitions apply to this part:
    Act means the Equal Access to Justice Act.
    Adjudicative officer means the Administrative Law Judge, hearing 
examiner,

[[Page 41]]

or other deciding official who presided at the underlying adversary 
adjudication.

(Authority: 5 U.S.C. 504(b)(1)(D))

    Adversary adjudication means a proceeding--
    (1) Conducted by the Department for the formulation of an order or 
decision arising from a hearing on the record under the Administrative 
Procedure Act (5 U.S.C. 554);
    (2) Listed in Sec. 21.10; and
    (3) In which the position of the Department was represented by 
counsel or other representative who entered an appearance and 
participated in the proceeding.

(Authority: 5 U.S.C. 504(b)(1)(C))

    Application subject to the jurisdiction of the CRRA means an 
application for fees and expenses based on an underlying proceeding 
conducted under 34 CFR parts 100, 101, 104, 106, or 110.

(Authority: 5 U.S.C. 504(b)(1)(C); 20 U.S.C. 1681; 29 U.S.C. 794; 42 
U.S.C. 2000d-1 et seq. and 6101 et seq.)

    CRRA means the Civil Rights Reviewing Authority, the reviewing 
authority established by the Secretary to consider applications under 34 
CFR parts 100, 101, 104, 106, and 110.

(Authority: 5 U.S.C. 504(b)(1)(C); 20 U.S.C. 1681; 29 U.S.C. 794; 42 
U.S.C. 2000d-1 et seq. and 6101 et seq.)

    Department means the U.S. Department of Education.
    Department's counsel means counsel for the Department of Education 
or another Federal agency.
    Employee means:
    (1) A person who regularly performs services for an applicant--
    (i) For remuneration; and
    (ii) Under the applicant's direction and control.
    (2) A part-time or seasonal employee who performs services for an 
applicant--
    (i) For renumeration; and
    (ii) Under the applicant's direction and control.

(Authority: 5 U.S.C. 504(c)(1))

    Fees and other expenses means an eligible applicant's reasonable 
fees and expenses--
    (1) Related to the issues on which it was the prevailing party in 
the adversary adjudication; and
    (2) Further described in Sec. Sec. 21.33 and 21.50.

(Authority: 5 U.S.C. 504 (a)(1), (b)(1)(A), and (c)(1))

    Party means a ``person'' or a ``party'' as those terms are defined 
in the Administrative Procedure Act (5 U.S.C. 551(3)), including an 
individual, partnership, corporation, association, unit of local 
government, or public or private organization that meets the 
requirements in Sec. 21.20. The term does not include an agency of the 
Federal Government.

(Authority: 5 U.S.C. 504(b)(1)(B))

    Position of the Department means, in addition to the position taken 
by the Department in the adversary adjudication, the action or failure 
to act by the Department upon which the adversary adjudication is based.

(Authority: 5 U.S.C. 504 (a)(1) and (b)(1)(E))

    Secretary means the Secretary of the U.S. Department of Education or 
an official or employee of the Department acting for the Secretary under 
a delegation of authority.

(Authority: 5 U.S.C. 504 (b)(2) and (c)(1))



          Subpart B_Which Adversary Adjudications Are Covered?



Sec. 21.10  Adversary adjudications covered by the Act.

    The Act covers adversary adjudications under section 554 of title 5 
of the United States Code. These include the following:
    (a) Compliance proceedings under title VI of the Civil Rights Act of 
1964 (42 U.S.C. 2000d et seq.).
    (b) Compliance and enforcement proceedings under the Age 
Discrimination Act of 1975 (42 U.S.C. 6101 et seq.).
    (c) Compliance proceedings under title IX of the Education 
Amendments of 1972 (20 U.S.C. 1681 et seq.).
    (d) Compliance proceedings under section 504 of the Rehabilitation 
Act of 1973 (29 U.S.C. 794).
    (e) Withholding proceedings under section 1001 of Pub. L. 100-297 
(Hawkins-Stafford) (20 U.S.C. 2833).

[[Page 42]]

    (f) Proceedings under any of the following:
    (1) Section 5(g) of Pub. L. 81-874 (Financial Assistance for Local 
Educational Agencies in Areas Affected by Federal Activity) (20 U.S.C. 
240(g)).
    (2) Sections 6(c) or 11(a) of Pub. L. 81-815 (an act relating to the 
construction of school facilities in areas affected by Federal 
activities and for other purposes) (20 U.S.C. 636(c) or 641(a)).
    (3) Section 6 of Pub. L. 95-563 (Contract Disputes Act of 1978) (41 
U.S.C. 605).
    (4) Part E of the General Education Provisions Act (20 U.S.C. 1234 
et seq.).
    (g) Other adversary adjudications that fall within the coverage of 
the Act.

(Authority: 5 U.S.C. 504(c) and 554; 20 U.S.C. 1234(f)(2))



Sec. 21.11  Effect of judicial review of adversary adjudication.

    If a court reviews the underlying decision of an adversary 
adjudication covered under this part, an award of fees and other 
expenses may be made only under 28 U.S.C. 2412 (awards in certain 
judicial proceedings).

(Authority: 5 U.S.C. 504(c)(1); 28 U.S.C. 2412(d)(3))



                Subpart C_How Is Eligibility Determined?



Sec. 21.20  Types of eligible applicants.

    The following types of parties that prevail in adversary 
adjudications are eligible to apply under the Act for an award of fees 
and other expenses:
    (a) An individual who has a net worth of not more than $2 million.
    (b) Any owner of an unincorporated business who has--
    (1) A net worth of not more than $7 million, including both personal 
and business interests; and
    (2) Not more than 500 employees.
    (c) A charitable or other tax-exempt organization--
    (1) As described in section 501(c)(3) of the Internal Revenue Code 
of 1954 (26 U.S.C. 501(c)(3)); and
    (2) Having not more than 500 employees.
    (d) A cooperative association--
    (1) As defined in section 15(a) of the Agricultural Marketing Act 
(12 U.S.C. 1141(a)); and
    (2) Having not more than 500 employees.
    (e) Any other partnership, corporation, association, unit of local 
government, or organization that has--
    (1) A net worth of not more than $7 million; and
    (2) Not more than 500 employees.

(Authority: 5 U.S.C. 504(b)(1)(B))



Sec. 21.21  Determination of net worth and number of employees.

    (a) The adjudicative officer shall determine an applicant's net 
worth and number of employees as of the date the adversary adjudication 
was initiated.
    (b) In determining eligibility, the adjudicative officer shall 
include the net worth and number of employees of the applicant and all 
of the affiliates of the applicant.
    (c) For the purposes of paragraph (b) of this section, the 
adjudicative officer shall consider the following as an affiliate:
    (1) Any individual, corporation, or other entity that directly or 
indirectly owns or controls a majority of the voting shares or other 
interest of the applicant;
    (2) Any corporation or other entity of which the applicant directly 
or indirectly owns or controls a majority of the voting shares or other 
interest; and
    (3) Any entity with a financial relationship to the applicant that, 
in the determination of the adjudicative officer, constitutes an 
affiliation for the purposes of paragraph (b) of this section.
    (d) In determining the number of employees of an applicant and its 
affiliates, the adjudicative officer shall count part-time employees on 
a proportional basis.

(Authority: 5 U.S.C. 504(c)(1))



Sec. 21.22  Applicants representing others.

    If an applicant is a party in an adversary adjudication primarily on 
behalf of one or more persons or entities that are ineligible under this 
part, then the applicant is not eligible for an award.

(Authority: 5 U.S.C. 504 (b)(1)(B) and (c)(1))

[[Page 43]]



               Subpart D_How Does One Apply for an Award?



Sec. 21.30  Time for filing application.

    (a) In order to be considered for an award under this part, an 
applicant may file its application when it prevails in an adversary 
adjudication--or in a significant and discrete substantive portion of an 
adversary adjudication--but no later than 30 days after the Department's 
final disposition of the adversary adjudication.
    (b) In the case of a review or reconsideration of a decision in 
which an applicant has prevailed or believes it has prevailed, the 
adjudicative officer shall stay the proceedings on the application 
pending final disposition of the underlying issue.
    (c) For purposes of this part, final disposition of the adversary 
adjudication means the latest of--
    (1) The date on which an initial decision or other recommended 
disposition of the merits of the proceeding by an adjudicative officer 
becomes administratively final;
    (2) The date of an order disposing of any petitions for 
reconsideration of the final order in the adversary adjudication;
    (3) If no petition for reconsideration is filed, the last date on 
which that type of petition could have been filed; or
    (4) The date of a final order or any other final resolution of a 
proceeding--such as a settlement or voluntary dismissal--that is not 
subject to a petition for reconsideration.

(Authority: 5 U.S.C. 504 (a)(2) and (c)(1))



Sec. 21.31  Contents of application.

    (a) In its application for an award of fees and other expenses, an 
applicant shall include the following:
    (1) Information adequate to show that the applicant is a prevailing 
party in an adversary adjudication or in a significant and discrete 
substantive portion of an adversary adjudication.
    (2) A statement that the adversary adjudication is covered by the 
Act according to Sec. 21.10.
    (3) An allegation that the position of the Department was not 
substantially justified, including a description of the specific 
position.
    (4) Unless the applicant is a qualified tax-exempt organization or a 
qualified agricultural cooperative association, information adequate to 
show that the applicant qualifies under the requirements of Sec. Sec. 
21.20 and 21.21 regarding net worth. The information, if applicable, 
shall include a detailed exhibit of the net worth of the applicant--and 
its affiliates as described in Sec. 21.21--as of the date the 
proceeding was initiated.
    (5)(i) The total amount of fees and expenses sought in the award; 
and
    (ii) An itemized statement of--
    (A) Each expense; and
    (B) Each fee, including the actual time expended for this fee and 
the rate at which the fee was computed.
    (6) A written verification under oath or affirmation or under 
penalty of perjury from each attorney representing the applicant 
stating--
    (i) The rate at which the fee submitted by the attorney was 
computed; and
    (ii) The actual time expended for the fee.
    (7) A written verification under oath, affirmation, or under penalty 
of perjury that the information contained in the application and any 
accompanying material is true and complete to the best of the 
applicant's information and belief.
    (b) The adjudicative officer may require the applicant to submit 
additional information.

(Authority: 5 U.S.C. 504 (a)(2) and (c)(1))



Sec. 21.32  Confidentiality of information about net worth.

    (a) In a proceeding on an application, the public record ordinarily 
includes the information showing the net worth of the applicant.
    (b) However, if an applicant objects to public disclosure of any 
portion of the information and believes there are legal grounds for 
withholding it from disclosure, the applicant may submit directly to the 
adjudicative officer--
    (1) The information the applicant wishes withheld in a sealed 
envelope labeled ``Confidential Financial Information;'' and
    (2) A motion to withhold the information from public disclosure.

[[Page 44]]

    (c) The motion must--
    (1) Describe the information the applicant is requesting be 
withheld; and
    (2) Explain in detail--
    (i) Why that information falls within one or more of the specific 
exemptions from mandatory disclosure under the Freedom of Information 
Act;
    (ii) Why public disclosure of the information would adversely affect 
the applicant; and
    (iii) Why disclosure is not required in the public interest.
    (d)(1) The applicant shall serve on Department's counsel a copy of 
the material referred to in paragraph (c) of this section.
    (2) The applicant is not required to give a copy of that material to 
any other party to the proceeding.
    (e)(1) If the adjudicative officer finds that the information should 
not be withheld from public disclosure, the information is placed in the 
public record of the proceeding.
    (2) If the adjudicative officer finds that the information should be 
withheld from public disclosure, any request to inspect or copy the 
information is treated in accordance with the Department's established 
procedures under the Freedom of Information Act (34 CFR part 5).

(Authority: 5 U.S.C. 504(c)(1))



Sec. 21.33  Allowable fees and expenses.

    (a) A prevailing party may apply for an award of fees and other 
expenses incurred by the party in connection with--
    (1) An adversary adjudication; or
    (2) A significant and discrete substantive portion of an adversary 
adjudication.
    (b) If a proceeding includes issues covered by the Act and issues 
excluded from coverage, the applicant may apply only for an award of 
fees and other expenses related to covered issues.
    (c) Allowable fees and expenses include the following, as 
applicable:
    (1) An award of fees based on rates customarily charged by 
attorneys, agents, and expert witnesses.
    (2) An award for the reasonable expenses of the attorney, agent, or 
expert witness as a separate item if the attorney, agent, or expert 
witness ordinarily charges clients separately for those expenses.
    (3) The cost of any study, analysis, engineering report, test, or 
project related to the preparation of the applicant's case in the 
adversary adjudication.
    (d) The calculation of fees and expenses as provided for under 
paragraph (c) of this section shall be in accordance with the standards 
for awards as described in Sec. 21.50(a) through (c).

(Authority: 5 U.S.C. 504(a)(1), (b)(1)(A) and (c)(1))



     Subpart E_What Procedures Are Used in Considering Applications?



Sec. 21.40  Filing and service of documents.

    (a) Except as provided in Sec. 21.32 and in applications subject to 
the jurisdiction of the CRRA, an applicant shall--
    (1) File with the adjudicative officer its application and any 
related documents; and
    (2) Serve on all parties to the adversary adjudication copies of its 
application and any related documents.
    (b)(1) In an application subject to the jurisdiction of the CRRA, 
the applicant shall--
    (i) File with the CRRA its application and any other related 
documents; and
    (ii) Serve on all parties to the adversary adjudication copies of 
its application and any related documents.
    (2) In applications subject to Sec. 21.40(b)(1), the CRRA shall 
direct the adjudicative officer to issue an initial decision within 30 
days of the completion of the proceedings on the application. The 
adjudicative officer shall conduct proceedings under the procedures of 
Sec. Sec. 21.41-21.44.

(Authority: 5 U.S.C. 504(a)(2) and (c)(1); 20 U.S.C. 1681; 29 U.S.C. 
794; 42 U.S.C. 2000d-1 et seq. and 6101 et seq.)



Sec. 21.41  Answer to application.

    (a)(1) Within 30 days after receiving an application for an award 
under this part, the Department's counsel may file an answer to the 
application.
    (2) The Department's counsel may request an extension of time for 
filing the Department's answer.

[[Page 45]]

    (3) The adjudicative officer shall grant the request for an 
extension if the Department's counsel shows good cause for the request.
    (b)(1) The Department's answer must--
    (i) Explain any objections to the award requested; and
    (ii) Identify the facts relied on in support of the position of the 
Department.
    (2) If the answer is based on any alleged facts not in the record of 
the adversary adjudication, the Department's counsel shall include with 
the answer either--
    (i) Supporting affidavits; or
    (ii) A request for further proceedings under Sec. 21.44.
    (c)(1) If the Department's counsel and the applicant believe that 
the issues in the application can be settled, they may jointly file a 
statement of their intent to negotiate a settlement.
    (2)(i) The filing of a statement of an intent to negotiate extends 
the time for filing an answer for 30 days.
    (ii) The adjudicative officer shall grant further extensions if the 
Department's counsel and the applicant jointly request those extensions.

(Authority: 5 U.S.C. 504(c)(1))



Sec. 21.42  Reply.

    (a) Within 15 days after receiving an answer, an applicant may file 
a reply.
    (b) If the applicant's reply is based on any alleged facts not in 
the record of the adversary adjudication, the applicant shall include 
with the reply either--
    (1) Supporting affidavits; or
    (2) A request for further proceedings under Sec. 21.44.

(Authority: 5 U.S.C. 504(c)(1))



Sec. 21.43  Comments by other parties.

    (a) Any party to a proceeding, other than an applicant or the 
Department's counsel, may file comments on--
    (1) The application within 30 days after the applicant files the 
application;
    (2) The answer within 30 days after the counsel files the answer; or
    (3) Both, if the comments are filed within the time period specified 
in paragraphs (a)(1) and (a)(2) of this section.
    (b) The commenting party may not participate further in proceedings 
on the application unless the adjudicative officer determines that 
further participation is necessary to permit full exploration of matters 
raised in the comments.

(Authority: 5 U.S.C. 504(c)(1))



Sec. 21.44  Further proceedings.

    (a) The adjudicative officer shall make the determination of an 
award on the basis of the written record.
    (b)(1) However, the adjudicative officer may order further 
proceedings on his or her own initiative or at the request of the 
applicant or the Department's counsel.
    (2) The adjudicative officer may order further proceedings only if 
he or she determines that those proceedings are necessary for full and 
fair resolution of issues arising from the application.
    (3) If further proceedings are ordered, the adjudicative officer 
shall determine the scope of those proceedings, which may include such 
proceedings as informal conferences, oral arguments, additional written 
submissions, discovery, or an evidentiary hearing.
    (4) An adjudicative officer may not order discovery or an 
evidentiary hearing for the issue of whether or not the Department's 
position was substantially justified.
    (c) If the applicant or the Department's counsel requests the 
adjudicative officer to order further proceedings, the request must--
    (1) Specify the information sought or the disputed issues; and
    (2) Explain why the additional proceedings are necessary to obtain 
that information or resolve those issues.

(Authority: 5 U.S.C. 504(a)(3) and (c)(1))



                  Subpart F_How Are Awards Determined?



Sec. 21.50  Standards for awards.

    (a) In determining the reasonableness of the amount sought as an 
award of fees and expenses for an attorney, agent, or expert witness, 
the adjudicative officer shall consider one or more of the following:

[[Page 46]]

    (1)(i) If the attorney, agent, or expert witness is in private 
practice, his or her customary fee for similar services; or
    (ii) If the attorney, agent, or expert witness is an employee of the 
applicant, the fully allocated cost of the services.
    (2) The prevailing rate for similar services in the community in 
which the attorney, agent, or expert witness ordinarily performs 
services.
    (3) The time the attorney, agent, or expert witness actually spent 
on the applicant's behalf with respect to the adversary adjudication.
    (4) The time the attorney, agent, or expert witness reasonably spent 
in light of the difficulty or complexity of the covered issues in the 
adversary adjudication.
    (5) Any other factors that may bear on the value of the services 
provided by the attorney, agent, or expert witness.
    (b) The adjudicative officer may not grant--
    (1) An award for the fee of an attorney or agent in excess of $75.00 
per hour; or
    (2) An award to compensate an expert witness in excess of the 
highest rate at which the Department pays expert witnesses.
    (c) The adjudicative officer may also determine whether--
    (1) Any study, analysis, engineering report, text, or project for 
which the applicant seeks an award was necessary for the preparation of 
the applicant's case in the adversary adjudication; and
    (2) The costs claimed by the applicant for this item or items are 
reasonable.
    (d) The adjudicative officer may not make an award to an eligible 
party if the adjudicative officer, the CRRA, or the Secretary on review 
finds that, based on a review of the administrative record as a whole--
    (1) The position of the Department, as defined in Sec. 21.3, was 
substantially justified; or
    (2) Special circumstances make an award unjust.
    (e) The adjudicative officer may reduce or deny an award to the 
extent that the applicant engaged in conduct that unduly or unreasonably 
protracted the adversary adjudication.
    (f) If an applicant is entitled to an award because the applicant 
prevailed over another agency of the United States that participated in 
a proceeding before the Department and that agency's position was not 
substantially justified, the adjudicative officer shall determine 
whether to make the award, or an appropriate portion of the award, 
against that agency. For the purpose of this determination, the 
requirements of this subpart apply.

(Authority: 5 U.S.C. 504(a), (b)(1)(A), and (b)(1)(E))



Sec. 21.51  Initial decision in applications not subject to the CRRA.

    (a) In applications not subject to the jurisdiction of the CRRA, the 
adjudicative officer shall issue an initial decision on an application 
within 30 days after completion of proceedings on the application.
    (b) The initial decision must include the following:
    (1) Written findings, including sufficient supporting explanation, 
on--
    (i) The applicant's status as a prevailing party;
    (ii) The applicant's eligibility;
    (iii) Whether the position of the Department was substantially 
justified;
    (iv) Whether special circumstances make an award unjust;
    (v) If applicable, whether the applicant engaged in conduct that 
unduly or unreasonably protracted the adversary adjudication; and
    (vi) Other factual issues raised in the adversary adjudication.
    (2) A statement of the amount awarded, including an explanation--
with supporting information--for any difference between the amount 
requested by the applicant and the amount awarded.
    (3) A statement of the applicant's right to request review by the 
Secretary under Sec. 21.54.
    (4) A statement of the applicant's right under Sec. 21.56 to seek 
judicial review of the final award determination.
    (c) The explanation referred to in paragraph (b)(2) of this section 
may include--
    (1) Whether the amount requested was reasonable; and

[[Page 47]]

    (2) The extent to which the applicant unduly or unreasonably 
protracted the adversary adjudication.

(Authority: 5 U.S.C. 504 (a)(3) and (c))



Sec. 21.52  Initial decision by an adjudicative officer in applications 
subject to CRRA jurisdiction.

    (a) If the application is subject to the jurisdiction of the CRRA, 
the adjudicative officer shall issue the initial decision within 30 days 
after completion of the proceedings.
    (b) The initial decision must include the information required under 
Sec. 21.51(b). However, instead of the information required under Sec. 
21.51(b)(3), the initial decision must inform the applicant of--
    (1) Its right to request review by the CRRA; and
    (2) Its right to request review by the Secretary of the CRRA's final 
decision.
    (c) If the applicant or the Department's counsel appeals the 
adjudicative officer's initial decision, the appeal must be submitted to 
the CRRA, in writing, within 30 days after the initial decision is 
issued.
    (d) If the applicant or the Department's counsel does not appeal the 
adjudicative officer's initial decision to the CRRA and the Secretary 
does not decide to review the initial decision under Sec. 21.54(a), the 
initial decision becomes the Department's final decision 60 days after 
it is issued by the officer.

(Authority: 5 U.S.C. 504(b)(1)(C); 20 U.S.C. 1681; 29 U.S.C. 794; 42 
U.S.C. 2000d-1 et seq. and 6101 et seq.)



Sec. 21.53  Final decision of the CRRA.

    (a) In an application subject to the jurisdiction of the CRRA, the 
CRRA shall, within 30 days after receipt of the written appeal--
    (1) Issue a final decision on the appeal of the adjudicative 
officer's initial decision; or
    (2) Remand the application to the adjudicative officer for further 
proceedings.
    (b) The CRRA shall review the initial decision on the basis of the 
written record of the proceedings on the application. This includes but 
is not limited to--
    (1) The written request; and
    (2) The adjudicative officer's findings as described in Sec. 
21.51(b).
    (c) The CRRA shall act on the review by either--
    (1) Issuing a final decision on the application; or
    (2) Remanding the application to the adjudicative officer for 
further proceedings.
    (d) If the CRRA issues a final decision, the CRRA's decision must 
include--
    (1) Written findings, including supporting explanation, on--
    (i) The applicant's status as a prevailing party;
    (ii) The applicant's eligibility;
    (iii) Whether the position of the Department was substantially 
justified;
    (iv) Whether special circumstances make an award unjust;
    (v) Whether the applicant engaged in conduct that unduly or 
unreasonably protracted the adversary adjudication; and
    (vi) Other factual issues raised in the adversary adjudication.
    (2) A statement of the amount awarded, including an explanation--
with supporting information--for any difference between the amount 
requested by the applicant and the amount awarded.
    (3) A statement of the applicant's right to request review by the 
Secretary under Sec. 21.54.
    (4) A statement of the applicant's right under Sec. 21.56 to seek 
judicial review of the final award determination.
    (e) The explanation referred to in paragraph (d)(2) of this section 
may include--
    (1) Whether the amount requested was reasonable; and
    (2) The extent to which the applicant unduly or unreasonably 
protracted the adversary adjudication.

(Authority: 5 U.S.C. 301, 557 (b) and (c); 20 U.S.C. 1681 and 3401 et 
seq.; 29 U.S.C. 794; 42 U.S.C. 2000d-1 et seq. and 6101 et seq.)



Sec. 21.54  Review by the Secretary.

    (a) The Secretary may decide to review--
    (1) An initial decision made by an adjudicative officer in a 
proceeding not subject to CRRA review;

[[Page 48]]

    (2) An initial decision made by an adjudicative officer in a 
proceeding subject to CRRA review that was not appealed to the CRRA; or
    (3) A final decision made by the CRRA under Sec. 21.53.
    (b)(1) The Secretary does not review a final decision made by an 
adjudicative officer of the General Services Administration Board of 
Contract Appeals.
    (2) The Secretary or a party to the proceedings may seek 
reconsideration of the final decision by an adjudicative officer of the 
General Services Administration Board of Contract Appeals on the fee 
application in accordance with 48 CFR 6101.32.
    (c) The Secretary decides to review a decision under Sec. 21.54(a) 
either--
    (1) Upon receipt of a written request for review by an applicant or 
Department's counsel; or
    (2) Upon the Secretary's own motion.
    (d) If the applicant or the Department's counsel seeks a review, the 
request must be submitted to the Secretary, in writing, within 30 days 
of--
    (1) An initial decision in a proceeding not subject to CRRA review; 
or
    (2) A final decision of the CRRA.
    (e) The Secretary decides whether to accept or reject a request for 
review of an initial decision made by the adjudicative officer in a 
proceeding not subject to CRRA review or a final decision of the CRRA 
within 30 days after receipt of a request for review.
    (f) The Secretary may decide on his own motion to review a decision 
made under Sec. 21.54(a) within 60 days of the initial decision by the 
adjudicative officer or a final decision of the CRRA.
    (g) If the Secretary decides to review the adjudicative officer's 
initial decision or the CRRA's final decision--
    (1) The Secretary reviews the adjudicative officer's initial 
decision or the CRRA's final decision on the basis of the written record 
of the proceedings on the application. This includes, but is not 
restricted to--
    (i) The written request for review;
    (ii) The adjudicative officer's findings as described in Sec. 
21.51(b); and
    (iii) If applicable, the final decision of the CRRA, if any; and
    (2) The Secretary either--
    (i) Issues a final decision; or
    (ii) Remands the application to the adjudicative officer or the CRRA 
for further proceedings.
    (h) If the Secretary issues a final decision, the Secretary's 
decision--
    (1) Is in writing;
    (2) States the reasons for the decision; and
    (3) If the decision is adverse to the applicant, advises the 
applicant of its right to petition for judicial review under Sec. 
21.56.

(Authority: 5 U.S.C. 557 (b) and (c))



Sec. 21.55  Final decision if the Secretary does not review.

    If the Secretary takes no action under Sec. 21.54--
    (a) The adjudicative officer's initial decision on the application 
becomes the Department's final decision 60 days after it is issued by 
the adjudicative officer; or
    (b) The CRRA's decision on the application becomes the Department's 
final decision 60 days after it is issued by the CRRA.

(Authority: 5 U.S.C. 301)



Sec. 21.56  Judicial review.

    If the applicant is dissatisfied with the award determination in the 
final decision under Sec. Sec. 21.52-21.55, the applicant may seek 
judicial review of that determination under 5 U.S.C. 504(c)(2) within 30 
days after that determination was made.

(Authority: 5 U.S.C. 504(c)(2))



                     Subpart G_How Are Awards Paid?



Sec. 21.60  Payment of awards.

    To receive payment, an applicant granted an award under the Act must 
submit to the Financial Management Service of the Department--
    (a) A request for payment signed by the applicant or its duly 
authorized agent;
    (b) A copy of the final decision granting the award; and
    (c) A statement that--
    (1) The applicant will not seek review of the decision in the United 
States courts; or

[[Page 49]]

    (2) The process for seeking review of the award has been completed.

(Authority: 5 U.S.C. 504(c)(1) and (d))



Sec. 21.61  Release.

    If an applicant, its agent, or its attorney accepts payment of any 
award or settlement in conjunction with an application under this part, 
that acceptance--
    (a) Is final and conclusive with respect to that application; and
    (b) Constitutes a complete release of any further claim against the 
United States with respect to that application.

(Authority: 5 U.S.C. 504(c)(1))



PART 30_DEBT COLLECTION--Table of Contents




                            Subpart A_General

Sec.
30.1 What administrative actions may the Secretary take to collect a 
          debt?
30.2 On what authority does the Secretary rely to collect a debt under 
          this part?

Subpart B [Reserved]

        Subpart C_What Provisions Apply to Administrative Offset?

                        General Offset Procedures

30.20 To what do Sec. Sec. 30.20-30.31 apply?
30.21 When may the Secretary offset a debt?
30.22 What notice does the debtor receive before the commencement of 
          offset?
30.23 How must a debtor request an opportunity to inspect and copy 
          records relating to a debt?
30.24 What opportunity does the debtor receive to obtain a review of the 
          existence or amount of a debt?
30.25 How may a debtor obtain an oral hearing?
30.26 What special rules apply to an oral hearing?
30.27 When does the Secretary enter into a repayment agreement rather 
          than offset?
30.28 When may the Secretary offset before completing the procedures 
          under Sec. Sec. 30.22-30.27?
30.29 What procedures apply when the Secretary offsets to collect a debt 
          owed another agency?
30.30 What procedures apply when the Secretary requests another agency 
          to offset a debt owed under a program or activity of the 
          Department?
30.31 How does the Secretary apply funds recovered by offset if multiple 
          debts are involved?

                    IRS Tax Refund Offset Procedures

30.33 What procedures does the Secretary follow for IRS tax refund 
          offsets?

      Procedures for Reporting Debts to Consumer Reporting Agencies

30.35 What procedures does the Secretary follow to report debts to 
          consumer reporting agencies?

Subpart D [Reserved]

    Subpart E_What Costs and Penalties Does the Secretary Impose on 
                           Delinquent Debtors?

30.60 What costs does the Secretary impose on delinquent debtors?
30.61 What penalties does the Secretary impose on delinquent debtors?
30.62 When does the Secretary forego interest, administrative costs, or 
          penalties?

  Subpart F_What Requirements Apply to the Compromise of a Debt or the 
             Suspension or Termination of Collection Action?

30.70 How does the Secretary exercise discretion to compromise a debt or 
          to suspend or terminate collection of a debt?

Subpart G [Reserved]

    Authority: 20 U.S.C. 1221e-3(a)(1), and 1226a-1, 31 U.S.C. 3711(e), 
31 U.S.C. 3716(b) and 3720A, unless otherwise noted.

    Source: 51 FR 24099, July 1, 1986, unless otherwise noted.



                            Subpart A_General



Sec. 30.1  What administrative actions may the Secretary take to 
collect a debt?

    (a) The Secretary may take one or more of the following actions to 
collect a debt owed to the United States:
    (1) Collect the debt under the procedures authorized in the 
regulations in this part.
    (2) Refer the debt to the General Accounting Office for collection.
    (3) Refer the debt to the Department of Justice for compromise, 
collection, or litigation.
    (4) Take any other action authorized by law.
    (b) In taking any of the actions listed in paragraph (a) of this 
section, the Secretary complies with the requirements of the Federal 
Claims Collection

[[Page 50]]

Standards (FCCS) at 4 CFR parts 101-105 that are not inconsistent with 
the requirements of this part.
    (c) The Secretary may--
    (1) Collect the debt under the offset procedures in subpart C of 
this part;
    (2) Report a debt to a consumer reporting agency under the 
procedures in subpart C of this part;
    (3) Charge interest on the debt as provided in the FCCS;
    (4) Impose upon a debtor a charge based on the costs of collection 
as determined under subpart E of this part;
    (5) Impose upon a debtor a penalty for failure to pay a debt when 
due under subpart E of this part;
    (6) Compromise a debt, or suspend or terminate collection of a debt, 
under subpart F of this part;
    (7) Take any other actions under the procedures of the FCCS in order 
to protect the United States Government's interests; or
    (8) Use any combination of the procedures listed in this paragraph 
(c) as may be appropriate in a particular case.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3711(e))

[53 FR 33425, Aug. 30, 1988]



Sec. 30.2  On what authority does the Secretary rely to collect a debt 
under this part?

    (a)(1) The Secretary takes an action referred to under Sec. 30.1(a) 
in accordance with--
    (i) 31 U.S.C. chapter 37, subchapters I and II;
    (ii) Other applicable statutory authority; or
    (iii) The common law.
    (2) If collection of a debt in a particular case is not authorized 
under one of the authorities described in paragraph (a)(1) of this 
section, the Secretary may collect the debt under any other available 
authority under which collection is authorized.
    (b) The Secretary does not use a procedure listed in Sec. 30.1(c) 
to collect a debt, or a certain type of debt, if--
    (1) The procedure is specifically prohibited under a Federal 
statute; or
    (2) A separate procedure other than the procedure described under 
Sec. 30.1(c) is specifically required under--
    (i) A contract, grant, or other agreement;
    (ii) A statute other than 31 U.S.C. 3716; or
    (iii) Other regulations.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3711(e))

[53 FR 33425, Aug. 30, 1988]

Subpart B [Reserved]



        Subpart C_What Provisions Apply to Administrative Offset?

                        General Offset Procedures



Sec. 30.20  To what do Sec. Sec. 30.20-30.31 apply?

    (a)(1)(i) Sections 30.20-30.31 establish the general procedures used 
by the Secretary to collect debts by administrative offset.
    (ii) The Secretary uses the procedures established under other 
regulations, including Sec. 30.33, What procedures does the Secretary 
follow for IRS tax refund offsets?, 34 CFR part 31, Salary Offset for 
Federal Employees Who Are Indebted to the United States Under Programs 
Administrated by the Secretary of Education, and 34 CFR part 32, Salary 
Offset to Recover Overpayments of Pay or Allowances from Department of 
Education Employees, if the conditions requiring application of those 
special procedures exists.
    (2) The word ``offset'' is used in this subpart to refer to the 
collection of a debt by administrative offset.
    (b) The Secretary does not rely on 31 U.S.C. 3716 as authority for 
offset if:
    (1) The debt is owed by a State or local government;
    (2) The debt, or the payment against which offset would be taken, 
arises under the Social Security Act;
    (3) The debt is owed under:
    (i) The Internal Revenue Code of 1954; or
    (ii) The tariff laws of the United States; or
    (4) The right to collect the debt first accrued more than ten years 
before initiation of the offset.
    (c)(1) The Secretary may rely on 31 U.S.C. 3716 as authority for 
offset of a debt to which paragraph (b)(4) of this section would 
otherwise apply if facts material to the Government's right to

[[Page 51]]

collect the debt were not known and could not reasonably have been known 
by the official or officials of the Government who are charged with the 
responsibility to discover and collect the debt.
    (2) If paragraph (c)(1) of this section applies, the Secretary may 
rely on 31 U.S.C. 3716 as authority for offset up to 10 years after the 
date that the official or officials described in that paragraph first 
knew or reasonably should have known of the right of the United States 
to collect the debt.
    (d) The Secretary determines when the right to collect a debt first 
accrued under the existing law regarding accrual of debts such as 28 
U.S.C. 2415.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3716(b))

[51 FR 24099, July 1, 1986, as amended at 51 FR 35646, Oct. 7, 1986; 53 
FR 33425, Aug. 30, 1988; 54 FR 43583, Oct. 26, 1989]



Sec. 30.21  When may the Secretary offset a debt?

    (a) The Secretary may offset a debt if:
    (1) The debt is liquidated or certain in amount; and
    (2) Offset is feasible and not otherwise prohibited.
    (b)(1) Whether offset is feasible is determined by the Secretary in 
the exercise of sound discretion on a case-by-case basis, either:
    (i) For each individual debt or offset; or
    (ii) For each class of similar debts or offsets.
    (2) The Secretary considers the following factors in making this 
determination:
    (i) Whether offset can be practically and legally accomplished.
    (ii) Whether offset will further and protect the interests of the 
United States.
    (c) The Secretary may switch advance funded grantees to a 
reimbursement payment system before initiating an offset.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3716(b))



Sec. 30.22  What notice does the debtor receive before the commencement 
of offset?

    (a)(1) Except as provided in Sec. Sec. 30.28 and 30.29, the 
Secretary provides a debtor with written notice of the Secretary's 
intent to offset before initiating the offset.
    (2) The Secretary mails the notice to the debtor at the current 
address of the debtor, as determined by the Secretary from information 
regarding the debt maintained by the Department.
    (b) The written notice informs the debtor regarding:
    (1) The nature and amount of the debt;
    (2) The Secretary's intent to collect the debt by offset;
    (3) The debtor's opportunity to:
    (i) Inspect and copy Department records pertaining to the debt;
    (ii) Obtain a review within the Department of the existence or 
amount of the debt; and
    (iii) Enter into a written agreement with the Secretary to repay the 
debt;
    (4) The date by which the debtor must request an opportunity set 
forth under paragraph (b)(3) of this section; and
    (5) The Secretary's decision, in appropriate cases, to switch the 
debtor from advance funding to a reimbursement payment system.
    (c)(1) In determining whether a debtor has requested an opportunity 
set forth under paragraph (b)(3) of this section in a timely manner, the 
Secretary relies on:
    (i) A legibly dated U.S. Postal Service postmark for the debtor's 
request; or
    (ii) A legibly stamped U.S. Postal service mail receipt for debtor's 
request.
    (2) The Secretary does not rely on either of the following as proof 
of mailing;
    (i) A private metered postmark.
    (ii) A mail receipt that is not dated by the U.S. Postal Service.
    Note: The U.S. Postal Service does not uniformly provide a dated 
postmark. Before relying on this method for proof of mailing, a debtor 
should check with its local post office.
    (d) If a debtor previously has been notified of the Secretary's 
intent to offset or offered an opportunity to take any

[[Page 52]]

of the actions set forth in paragraph (b)(3) of this section in 
connection with the same debt, the Secretary may offset without 
providing the debtor with an additional notice of intent or opportunity 
to take any of those actions under these offset procedures.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3716(b))



Sec. 30.23  How must a debtor request an opportunity to inspect and 
copy records relating to a debt?

    (a) If a debtor wants to inspect and copy Department documents 
relating to the debt, the debtor must:
    (1) File a written request to inspect and copy the documents within 
20 days after the date of the notice provided under Sec. 30.22; and
    (2) File the request at the address specified in that notice.
    (b) A request filed under paragraph (a) of this section must 
contain:
    (1) All information provided to the debtor in the notice under Sec. 
30.22 or Sec. 30.33(b) that identifies the debtor and the debt, 
including the debtor's Social Security number and the program under 
which the debt arose, together with any corrections of that identifying 
information; and
    (2) A reasonably specific identification of the records the debtor 
wishes to have available for inspection and copying.
    (c) The Secretary may decline to provide an opportunity to inspect 
and copy records if the debtor fails to request inspection and copying 
in accordance with this section.

(Approved by the Office of Management and Budget under control number 
1880-0515)

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3716(b))

[51 FR 24099, July 1, 1986, as amended at 51 FR 35646, Oct. 7, 1986]



Sec. 30.24  What opportunity does the debtor receive to obtain a review 
of the existence or amount of a debt?

    (a) If a debtor wants a review within the Department of the issues 
identified in the notice under Sec. 30.22(b)(3)(ii) or Sec. 
30.33(b)(3)(ii), the debtor must:
    (1) File a request for review within 20 days after the date of the 
notice provided under Sec. 30.22; and
    (2) File a request at the address specified in that notice.
    (b) A request filed under paragraph (a) of this section must 
contain:
    (1) All information provided to the debtor in the notice under Sec. 
30.22 or Sec. 30.33(b) that identifies the debtor and the particular 
debt, including the debtor's Social Security number and the program 
under which the debt arose, together with any corrections of that 
identifying information; and
    (2) An explanation of the reasons the debtor believes that the 
notice the debtor received under Sec. 30.22 or Sec. 30.33(b) 
inaccurately states any facts or conclusions relating to the debt.
    (c) The Secretary may decline to provide an opportunity for review 
of a debt if the debtor fails to request the review in accordance with 
this section.
    (d)(1) The debtor shall:
    (i) File copies of any documents relating to the issues identified 
in the notice under Sec. 30.22(b)(3)(ii) or Sec. 30.33(b)(3)(ii) that 
the debtor wishes the Secretary to consider in the review;
    (ii) File the documents at the address specified in that notice, and
    (iii) File the documents no later than:
    (A) 20 days after the date of the notice provided under Sec. 30.22; 
or
    (B) If the debtor has requested an opportunity to inspect and copy 
records under Sec. 30.23 within the time period specified in that 
section, 15 days after the date on which the Secretary makes available 
to the debtor the relevant, requested records.
    (2) The Secretary may decline to consider any reasons or documents 
that the debtor fails to provide in accordance with paragraphs (b) and 
(d) of this section.
    (e) If the Secretary bases the review on only the documentary 
evidence, the Secretary:
    (1) Reviews the documents submitted by the debtor and other relevant 
evidence; and
    (2) Notifies the debtor in writing of the Secretary's decision 
regarding the issues identified in the notice under Sec. 
30.22(b)(3)(ii) or Sec. 30.33(b)(3)(ii) and, if

[[Page 53]]

appropriate, the question of waiver of the debt.

(Approved by the Office of Management and Budget under control number 
1880-0515)

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3716(b))

[51 FR 24099, July 1, 1986, as amended at 51 FR 35647, Oct. 7, 1986]



Sec. 30.25  How may a debtor obtain an oral hearing?

    (a) If a debtor wants the Secretary to conduct the review requested 
under Sec. 30.24 as an oral hearing, the debtor must file a written 
request for an oral hearing together with the request for review filed 
under Sec. 30.24(a).
    (b) A request filed under paragraph (a) of this section must contain 
the following in addition to the information filed under Sec. 30.24(b):
    (1) An explanation of reason(s) why the debtor believes the 
Secretary cannot resolve the issues identified in the notice under Sec. 
30.22(b)(3)(ii) or Sec. 30.33(b)(3)(ii) through a review of the 
documentary evidence.
    (2) An identification of:
    (i) The individuals that the debtor wishes to have testify at the 
oral hearing;
    (ii) The specific issues identified in the notice regarding which 
each individual is prepared to testify; and
    (iii) The reasons why each individual's testimony is necessary to 
resolve the issue.
    (c) The Secretary grants a debtor's request for an oral hearing 
regarding the issues identified in the notice under Sec. 
30.22(b)(3)(ii) or Sec. 30.33(b)(3)(ii) only if:
    (1)(i) A statute authorizes or requires the Secretary to consider 
waiver of the indebtedness involved;
    (ii) The debtor files a request for waiver of the indebtedness with 
the request for review filed under paragraph (a)(1) of this section; and
    (iii) The question of waiver of the indebtedness turns on an issue 
of credibility or veracity; or
    (2) The Secretary determines that the issues identified in the 
notice under Sec. 30.22(b)(3)(ii) or Sec. 30.33(b)(3)(ii) cannot be 
resolved by review of only the documentary evidence.
    (d) Notwithstanding paragraph (b) of this section, the Secretary may 
deny oral hearings for a class of similar debts if:
    (1) The issues identified in the notice under Sec. 30.22(b)(3)(ii) 
or 30.33(b)(3)(ii) for which an oral hearing was requested, or the issue 
of waiver, rarely involve issues of credibility or veracity; and
    (2) The Secretary determines that review of the documentary evidence 
is ordinarily an adequate means to correct mistakes.
    (e) The Secretary may decline to consider any reasons that the 
debtor fails to provide in accordance with paragraph (b)(1) of this 
section.

(Approved by the Office of Management and Budget under control number 
1880-0515)

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3716(b))

[51 FR 24099, July 1, 1986, as amended at 51 FR 35647, Oct. 7, 1986]



Sec. 30.26  What special rules apply to an oral hearing?

    (a) The oral hearing under Sec. 30.25 is not a formal evidentiary 
hearing subject to 5 U.S.C. 554, unless required by law.
    (b) If the Secretary grants an oral hearing, the Secretary notifies 
the debtor in writing of:
    (1) The time and place for the hearing;
    (2) The debtor's right to representation; and
    (3) The debtor's right to present and cross examine witnesses.
    (c) If the Secretary grants an oral hearing, the Secretary 
designates an official to:
    (1) Govern the conduct of the hearing;
    (2) Take all necessary action to avoid unreasonable delay in the 
proceedings;
    (3) Review the evidence presented at the hearing, the documents 
submitted by the debtor, and other relevant evidence; and
    (4) After considering the evidence, notify the debtor in writing of 
the official's decision regarding the issues identified in the notice 
under Sec. 30.22(b)(3)(ii) or Sec. 30.33(b)(3)(ii) and, if 
appropriate, the question of waiver of the debt.

[[Page 54]]

    (d) The official designated under paragraph (c) of this section may 
decline to hear any witnesses or testimony not identified by the debtor 
in accordance with Sec. 30.25(b)(2).
    (e) The decision of the designated official under paragraph (c) of 
this section constitutes the final decision of the Secretary.

(Authority: 20 U.S.C. 1221-3(a)(1) and 1226a-1, 31 U.S.C. 3716(b))



Sec. 30.27  When does the Secretary enter into a repayment agreement 
rather than offset?

    (a) If a debtor wants an opportunity to enter into a written 
agreement to repay a debt on terms acceptable to the Secretary, the 
debtor must:
    (1) File a request to enter into such agreement within 20 days after 
the date of the notice provided under Sec. 30.22; and
    (2) File the request at the address specified in the notice.
    (b) A request filed under paragraph (a) of this section must contain 
all information provided to the debtor in the notice under Sec. 30.22 
or Sec. 30.33(b) that identifies the debtor and the debt, including the 
debtor's Social Security number and the program under which the debt 
arose, together with any corrections of that identifying information.
    (c) If the Secretary receives a request filed in accordance with 
this section, the Secretary may enter into a written agreement requiring 
repayment in accordance with 4 CFR 102.11, instead of offsetting the 
debt.
    (d) In deciding whether to enter into the agreement, the Secretary 
may consider:
    (1) The Government's interest in collecting the debt; and
    (2) Fairness to the debtor.
    (e)(1) A debtor that enters into a repayment agreement with the 
Secretary under this section waives any right to further review by the 
Secretary of the issues relating to the original debt identified in the 
notice under Sec. 30.22(b)(3)(ii) or Sec. 30.33(b)(3)(ii).
    (2) If a debtor breaches a repayment agreement, the Secretary may 
offset, or, under Sec. 30.30, refer to another agency for offset:
    (i) The amount owing under the agreement; or
    (ii) The entire original debt, to the extent not repaid.

(Authority: 20 U.S.C. 1221-3(a)(1) and 1226a-1, 31 U.S.C. 3716(b))

[51 FR 24099, July 1, 1986, as amended at 51 FR 35647, Oct. 7, 1986]



Sec. 30.28  When may the Secretary offset before completing the 
procedures under Sec. Sec. 30.22-30.27?

    (a) The Secretary may offset before completing the procedures 
otherwise required by Sec. Sec. 30.22-30.27 if:
    (1) Failure to offset would substantially prejudice the Government's 
ability to collect the debt; and
    (2) The amount of time remaining before the payment by the United 
States which is subject to offset does not reasonably permit completion 
of the procedures under Sec. Sec. 30.22-30.27.
    (b) If the Secretary offsets under paragraph (a) of this section, 
the Secretary:
    (1) Promptly completes the procedures under Sec. Sec. 30.22-30.27 
after initiating the offset; and
    (2) Refunds any amounts recovered under the offset that are later 
found not to be owed to the United States.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3716(b))



Sec. 30.29  What procedures apply when the Secretary offsets to collect 
a debt owed another agency?

    The Secretary may initiate offset to collect a debt owed another 
Federal agency if:
    (a) An official of that agency certifies in writing:
    (1) That the debtor owes a debt to the United States;
    (2) The amount of the debt; and
    (3) That the agency has complied with 4 CFR 102.3; and
    (b) For offsets under 31 U.S.C. 3716, the Secretary makes an 
independent determination that the offset meets the standards under 
Sec. 30.21(a)(2).

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3716(b))

[[Page 55]]



Sec. 30.30  What procedures apply when the Secretary requests another 

agency to offset a debt owed under a program or activity of the 
Department?

    (a) The Secretary may request another Federal agency to offset a 
debt owed under a program or activity of the Department if the Secretary 
certifies in writing to the other Federal agency:
    (1) That the debtor owes a debt to the United States;
    (2) The amount of the debt; and
    (3) That the Secretary has complied with 4 CFR 102.3.
    (b) Before providing the certification required under paragraph (a) 
of this section, the Secretary complies with the procedures in 
Sec. Sec. 30.20-30.27.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3716(b))



Sec. 30.31  How does the Secretary apply funds recovered by offset if 
multiple debts are involved?

    If the Secretary collects more than one debt of a debtor by 
administrative offset, the Secretary applies the recovered funds to 
satisfy those debts based on the Secretary's determination of the best 
interests of the United States, determined by the facts and 
circumstances of the particular case.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3716(b))

                    IRS Tax Refund Offset Procedures



Sec. 30.33  What procedures does the Secretary follow for IRS tax 
refund offsets?

    (a) If a named person owes a debt under a program or activity of the 
Department, the Secretary may refer the debt for offset to the Secretary 
of the Treasury after complying with the procedures in Sec. Sec. 30.20-
30.28, as modified by this section.
    (b) Notwithstanding Sec. 30.22(b), the notice sent to a debtor 
under Sec. 30.22 informs the debtor that:
    (1) The debt is past due;
    (2) The Secretary intends to refer the debt for offset to the 
Secretary of Treasury;
    (3) The debtor has an opportunity to:
    (i) Inspect and copy Department records regarding the existence, 
amount, enforceability, or past-due status of the debt;
    (ii) Obtain a review within the Department of the existence, amount, 
enforceability, or past-due status of the debt;
    (iii) Enter into a written agreement with the Secretary to repay the 
debt; and
    (4) The debtor must take an action set forth under paragraph (b)(3) 
by a date specified in the notice.
    (c) Notwithstanding Sec. 30.23(a), if a debtor wants to inspect and 
copy Department records regarding the existence, amount, enforceability, 
or past-due status of the debt, the debtor must:
    (1) File a written request to inspect and copy the records within 20 
days after the date of the notice provided under Sec. 30.22; and
    (2) File the request at the address specified in that notice.
    (d) Notwithstanding the time frame under Sec. 30.24(a), if a debtor 
wants a review under that paragraph, the debtor must file a request for 
review at the address specified in the notice by the later of:
    (1) Sixty-five days after the date of the notice provided under 
Sec. 30.22;
    (2) If the debtor has requested an opportunity to inspect and copy 
records within the time period specified in paragraph (c) of this 
section, 15 days after the date on which the Secretary makes available 
to the debtor the relevant, requested records; or
    (3) If the debtor has requested a review within the appropriate time 
frame under paragraph (d) (1) or (2) of this section and the Secretary 
has provided an initial review by a guarantee agency, seven days after 
the date of the initial determination by the guarantee agency.
    (e) Notwithstanding the time frames under Sec. 30.24(d), a debtor 
shall file the documents specified under that paragraph with the request 
for review.
    (f) Notwithstanding the time frame under Sec. 30.27(a), a debtor 
must agree to repay the debt under terms acceptable to the Secretary and 
make the first payment due under the agreement by the latest of:
    (1) The seventh day after the date of decision of the Secretary if 
the debtor requested a review under Sec. 30.24;

[[Page 56]]

    (2) The sixty-fifth day after the date of the notice under Sec. 
30.22(b), if the debtor did not request a review under Sec. 30.24, or 
an opportunity to inspect and copy records of the Department under Sec. 
30.23; or
    (3) The fifteenth day after the date on which the Secretary made 
available relevant records regarding the debt, if the debtor filed a 
timely request under Sec. 30.23(a).

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3720A)

      Procedures for Reporting Debts to Consumer Reporting Agencies



Sec. 30.35  What procedures does the Secretary follow to report debts 
to consumer reporting agencies?

    (a)(1) The Secretary reports information regarding debts arising 
under a program or activity of the Department and held by the Department 
to consumer reporting agencies, in accordance with the procedures 
described in this section.
    (2) The term consumer reporting agency, as used in this section, has 
the same meaning as provided in 31 U.S.C. 3701(a)(3).
    (b) Before reporting information on a debt to a consumer reporting 
agency, the Secretary follows the procedures set forth in Sec. 30.33.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3711, Sec. 
16023, 16029, Pub. L. 99-272)

Subpart D [Reserved]



    Subpart E_What Costs and Penalties Does the Secretary Impose on 
                           Delinquent Debtors?

    Source: 53 FR 33425, Aug. 30, 1988, unless otherwise noted.



Sec. 30.60  What costs does the Secretary impose on delinquent debtors?

    (a) The Secretary may charge a debtor for the costs associated with 
the collection of a particular debt. These costs include, but are not 
limited to--
    (1) Salaries of employees performing Federal loan servicing and debt 
collection activities;
    (2) Telephone and mailing costs;
    (3) Costs for reporting debts to credit bureaus;
    (4) Costs for purchase of credit bureau reports;
    (5) Costs associated with computer operations and other costs 
associated with the maintenance of records;
    (6) Bank charges;
    (7) Collection agency costs;
    (8) Court costs and attorney fees; and
    (9) Costs charged by other Governmental agencies.
    (b) Notwithstanding any provision of State law, if the Secretary 
uses a collection agency to collect a debt on a contingent fee basis, 
the Secretary charges the debtor, and collects through the agency, an 
amount sufficient to recover--
    (1) The entire amount of the debt; and
    (2) The amount that the Secretary is required to pay the agency for 
its collection services.
    (c)(1) The amount recovered under paragraph (b) of this section is 
the entire amount of the debt, multiplied by the following fraction:
[GRAPHIC] [TIFF OMITTED] TC15NO91.009

    (2) In paragraph (c)(1) of this section, cr equals the commission 
rate the Department pays to the collection agency.
    (d) If the Secretary uses more than one collection agency to collect 
similar debts, the commission rate (cr) described in paragraph (c)(2) of 
this section is calculated as a weighted average of the commission rates 
charged by all collection agencies collecting similar debts, computed 
for each fiscal year based on the formula
[GRAPHIC] [TIFF OMITTED] TC15NO91.010


where--

    (1) Xi equals the dollar amount of similar debts placed by the 
Department with an individual collection agency as of the end of the 
preceding fiscal year;
    (2) Yi equals the commission rate the Department pays to that 
collection agency for the collection of the similar debts;

[[Page 57]]

    (3) Z equals the dollar amount of similar debts placed by the 
Department with all collection agencies as of the end of the preceding 
fiscal year; and
    (4) N equals the number of collection agencies with which the 
Secretary has placed similar debts as of the end of the preceding fiscal 
year.
    (e) If a debtor has agreed under a repayment or settlement agreement 
with the Secretary to pay costs associated with the collection of a debt 
at a specified amount or rate, the Secretary collects those costs in 
accordance with the agreement.
    (f) The Secretary does not impose collection costs against State or 
local governments under paragraphs (a) through (d) of this section.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3711(e), 
3717(e)(1), 3718))



Sec. 30.61  What penalties does the Secretary impose on delinquent 
debtors?

    (a) If a debtor does not make a payment on a debt, or portion of a 
debt, within 90 days after the date specified in the first demand for 
payment sent to the debtor, the Secretary imposes a penalty on the 
debtor.
    (b)(1) The amount of the penalty imposed under paragraph (a) of this 
section is 6 percent per year of the amount of the delinquent debt.
    (2) The penalty imposed under this section runs from the date 
specified in the first demand for payment to the date the debt 
(including the penalty) is paid.
    (c) If a debtor has agreed under a repayment or settlement agreement 
with the Secretary to pay a penalty for failure to pay a debt when due, 
or has such an agreement under a grant or contract under which the debt 
arose, the Secretary collects the penalty in accordance with the 
agreement, grant, or contract.
    (d) The Secretary does not impose a penalty against State or local 
governments under paragraphs (a) and (b) of this section.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3711(e))



Sec. 30.62  When does the Secretary forego interest, administrative 
costs, or penalties?

    (a) For a debt of any amount based on a loan, the Secretary may 
refrain from collecting interest or charging administrative costs or 
penalties to the extent that compromise of these amounts is appropriate 
under the standards for compromise of a debt contained in 4 CFR part 
103.
    (b) For a debt not based on a loan the Secretary may waive, or 
partially waive, the charging of interest, or the collection of 
administrative costs or penalties, if--
    (1) Compromise of these amounts is appropriate under the standards 
for compromise of a debt contained in 4 CFR part 103; or
    (2) The Secretary determines that the charging of interest or the 
collection of administrative costs or penalties is--
    (i) Against equity and good conscience; or
    (ii) Not in the best interests of the United States.
    (c) The Secretary may exercise waiver under paragraph (b)(1) of this 
section without regard to the amount of the debt.
    (d) The Secretary may exercise waiver under paragraph (b)(2) of this 
section if--
    (1) The Secretary has accepted an installment plan under 4 CFR 
102.11;
    (2) There is no indication of fault or lack of good faith on the 
part of the debtor; and
    (3) The amount of interest, administrative costs, and penalties is 
such a large portion of the installments that the debt may never be 
repaid if that amount is collected.
    (e)(1) The Secretary does not charge interest on any portion of a 
debt, other than a loan, owed by a person subject to 31 U.S.C. 3717 if 
the debt is paid within 30 days after the date of the first demand for 
payment.
    (2) The Secretary may extend the period under paragraph (e)(1) of 
this section if the Secretary determines that the extension is 
appropriate.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 1226a-1, 31 U.S.C. 3711(e))

[[Page 58]]



  Subpart F_What Requirements Apply to the Compromise of a Debt or the 
             Suspension or Termination of Collection Action?



Sec. 30.70  How does the Secretary exercise discretion to compromise a 
debt or to suspend or terminate collection of a debt?

    (a) The Secretary uses the standards in the FCCS, 4 CFR part 103, to 
determine whether compromise of a debt is appropriate if--
    (1) The debt must be referred to the Department of Justice under 
this section; or
    (2) The amount of the debt is less than or equal to $20,000 and the 
Secretary does not follow the procedures in paragraph (e) of this 
section.
    (b) The Secretary refers a debt to the Department of Justice to 
decide whether to compromise a debt if--
    (1) The debt was incurred under a program or activity subject to 
section 452(f) of the General Education Provisions Act and the initial 
determination of the debt was more than $50,000; or
    (2) The debt was incurred under a program or activity not subject to 
section 452(f) of the General Education Provisions Act and the amount of 
the debt is more than $20,000.
    (c) The Secretary may compromise the debt under the procedures in 
paragraph (e) of this section if--
    (1) The debt was incurred under a program or activity subject to 
section 452(f) of the General Education Provisions Act; and
    (2) The initial determination of the debt was less than or equal to 
$50,000.
    (d) The Secretary may compromise a debt without following the 
procedure in paragraph (e) of this section if the amount of the debt is 
less than or equal to $20,000.
    (e) The Secretary may compromise the debt pursuant to paragraph (c) 
of this section if--
    (1) The Secretary determines that--
    (i) Collection of any or all of the debt would not be practical or 
in the public interest; and
    (ii) The practice that resulted in the debt has been corrected and 
will not recur;
    (2) At least 45 days before compromising the debt, the Secretary 
publishes a notice in the Federal Register stating--
    (i) The Secretary's intent to compromise the debt; and
    (ii) That interested persons may comment on the proposed compromise; 
and
    (3) The Secretary considers any comments received in response to the 
Federal Register notice before finally compromising the debt.
    (f)(1) The Secretary uses the standards in the FCCS, 4 CFR part 104, 
to determine whether suspension or termination of collection action is 
appropriate.
    (2) The Secretary--
    (i) Refers the debt to the Department of Justice to decide whether 
to suspend or terminate collection action if the amount of the debt at 
the time of the referral is more than $20,000; or
    (ii) May decide to suspend or terminate collection action if the 
amount of the debt at the time of the Secretary's decision is less than 
or equal to $20,000.
    (g) In determining the amount of a debt under paragraphs (a) through 
(f) of this section, the Secretary excludes interest, penalties, and 
administrative costs.
    (h) Notwithstanding paragraphs (b) through (f) of this section, the 
Secretary may compromise a debt, or suspend or terminate collection of a 
debt, in any amount if the debt arises under the Guaranteed Student Loan 
Program authorized under title IV, part B, of the Higher Education Act 
of 1965, as amended, or the Perkins Loan Program authorized under title 
IV, part E, of the Higher Education Act of 1965, as amended.
    (i) The Secretary refers a debt to the General Accounting Office 
(GAO) for review and approval before referring the debt to the 
Department of Justice for litigation if--
    (1) The debt arose from an audit exception taken by GAO to a payment 
made by the Department; and
    (2) The GAO has not granted an exception from the GAO referral 
requirement.
    (j) Nothing in this section precludes--
    (1) A contracting officer from exercising his authority under 
applicable

[[Page 59]]

statutes, regulations, or common law to settle disputed claims relating 
to a contract; or
    (2) The Secretary from redetermining a claim.

(Authority: 20 U.S.C. 1082(a) (5) and (6), 1087hh, 1221e-3(a)(1), 1226a-
1, and 1234a(f), 31 U.S.C. 3711(e))

[53 FR 33425, Aug. 30, 1988]

Subpart G [Reserved]



PART 31_SALARY OFFSET FOR FEDERAL EMPLOYEES WHO ARE INDEBTED TO THE 

UNITED STATES UNDER PROGRAMS ADMINISTERED BY THE SECRETARY OF EDUCATION
--Table of Contents




Sec.
31.1 Scope.
31.2 Definitions.
31.3 Pre-offset notice.
31.4 Request to inspect and copy documents relating to a debt.
31.5 Request for hearing on the debt or the proposed offset.
31.6 Location and timing of oral hearing.
31.7 Hearing procedures.
31.8 Rules of decision.
31.9 Decision of the hearing official.
31.10 Request for repayment agreement.
31.11 Offset process.

    Authority: 5 U.S.C. 5514; 31 U.S.C. 3716.

    Source: 54 FR 31821, Aug. 19, 1989, unless otherwise noted.



Sec. 31.1  Scope.

    (a) General. The Secretary establishes the standards and procedures 
in this part that apply to the offset from disposable pay of a current 
or former Federal employee or from amounts payable from the Federal 
retirement account of a former Federal employee to recover a debt owed 
the United States under a program adminstered by the Secretary of 
Education.
    (b) Exclusions. This part does not apply to--
    (1) Offsets under 34 CFR part 32 to recover for overpayments of pay 
or allowances to an employee of the Department;
    (2) Offsets under 34 CFR part 30; or
    (3) Offsets under section 124 of Pub. L. 97-276 to collect debts 
owed to the United States on judgments.
    (c) Reports to consumer reporting agency. The Secretary may report a 
debt to a consumer reporting agency after notifying the employee, in 
accordance with 34 CFR 30.35, of the intention to report the debt, and 
after providing the employee an opportunity to inspect documents, 
receive a hearing, and enter into a repayment agreement under this part.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3711; 31 U.S.C. 3716)



Sec. 31.2  Definitions.

    As used in this part:
    Agency means--
    (1) An Executive agency as defined in 5 U.S.C. 105, including the 
U.S. Postal Service and the U.S. Postal Rate Commission;
    (2) A military department as defined in 5 U.S.C. 102;
    (3) An agency or court in the judicial branch, including a court as 
defined in 28 U.S.C. 610, the District Court for the Northern Mariana 
Islands, and the Judicial Panel on Multidistrict Litigation;
    (4) An agency of the legislative branch, including the U.S. Senate 
and the U.S. House of Representatives; and
    (5) Any other independent establishment that is an entity of the 
Federal Government.
    Days refer to calendar days.
    Department means the Education Department.
    Disposable pay means the amount that remains from an employee's pay 
after required deductions for Federal, State, and local income taxes; 
Social Security taxes, including Medicare taxes; Federal retirement 
programs; premiums for basic life insurance and health insurance 
benefits; and such other deductions that are required by law to be 
withheld.
    Employee means a current or former employee of an agency. In the 
case of an offset proposed to collect a debt owed by a deceased 
employee, the references in this part to the employee shall be read to 
refer to the payee of benefits from the Federal retirement account or 
other pay of the employee.
    Federal retirement account means an account of an employee under the 
Civil Service Retirement System or the Federal Employee Retirement 
System.

[[Page 60]]

    Offset means a deduction from the pay of an employee, or a payment 
due from the Federal retirement account of an employee, to satisfy a 
debt.
    Pay means basic pay, special pay, incentive pay, retired pay, 
retainer pay, or, in the case of an individual not entitled to basic 
pay, other authorized pay, including severance pay or lump sum payments 
for accrued annual leave, and amounts payable from the Federal 
retirement account of an employee.
    Secretary means the Secretary of the Department of Education or an 
official or employee of the Department acting for the Secretary under a 
delegation of authority.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 31.3  Pre-offset notice.

    (a) At least 65 days before initiating an offset against the pay of 
an employee, the Secretary sends a written notice to the employee 
stating--
    (1) The nature and amount of the debt;
    (2) A demand for payment of the debt;
    (3) The manner in which the Secretary charges interest, 
administrative costs, and penalties on the debt;
    (4) The Secretary's intention to collect the debt by offset 
against--
    (i) 15 percent of the employee's current disposable pay; and
    (ii) If the debt cannot be satisfied by offset against current 
disposable pay, a specified amount of severance pay, a lump sum annual 
leave payment, a final salary check, or payments from the Federal 
retirement account of the employee;
    (5) The amount, frequency, approximate beginning date and duration 
of the proposed offset;
    (6) The employee's opportunity to--
    (i) Inspect and copy Department records pertaining to the debt;
    (ii) Obtain a pre-offset hearing before a hearing official who is 
not under the control or supervision of the Secretary regarding the 
existence or amount of the debt, or the proposed offset schedule; and
    (iii) Enter into a written agreement with the Secretary to repay the 
debt;
    (7) The date by which the employee must request an opportunity set 
forth under paragraph (a)(6) of this section;
    (8) The grounds for objecting to collection of the debt by offset;
    (9) The applicable hearing procedures and requirements;
    (10) That the Secretary grants any request for access to records, 
for a hearing, or for a satisfactory repayment agreement made by an 
employee;
    (11) That the Secretary does not delay the start of the proposed 
offset, or suspend an offset already commenced, unless--
    (i) An employee makes the request for access to records or for a 
hearing, or enters into a repayment agreement that is acceptable to the 
Secretary, before the deadlines described in this part; or
    (ii) An employee requests a hearing after the deadlines established 
in Sec. 31.5(a), but submits evidence satisfactory to the Secretary 
that the request was not made in a timely manner because the employee 
did not have notice of the proposed offset, or was prevented from making 
the request by factors beyond his or her control, until after the 
deadlines had passed;
    (12) That a final decision on the hearing will be issued not later 
than 60 days after the date on which the employee files a request for a 
hearing under Sec. 31.5, unless a delay in the proceedings is granted 
at the request of the employee;
    (13) That submission by the employee of knowingly false statements, 
representations or evidence may subject the employee to applicable 
disciplinary procedures, or civil or criminal penalties; and
    (14) That any amounts paid or collected by offset on a debt later 
determined to be unenforceable or canceled will be refunded to the 
employee.
    (b)(1) In determining whether an employee has requested an 
opportunity set forth under paragraph (a)(6) of this section in a timely 
manner, the Secretary relies on--
    (i) A legibly dated U.S. Postal Service postmark for the employee's 
request; or
    (ii) A legibly stamped U.S. Postal Service mail receipt for the 
employee's request.

[[Page 61]]

    (2) The Secretary does not rely on either of the following as proof 
of mailing:
    (i) A private metered postmark.
    (ii) A mail receipt that is not dated by the U.S. Postal Service.
    (c) Payment by offset under this part of all or part of a debt does 
not constitute an acknowledgment of the debt or a waiver of rights 
available to the employee under this part or other applicable law if the 
employee has not agreed in writing to the offset.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 31.4  Request to inspect and copy documents relating to a debt.

    (a) The Secretary makes available for inspection and copying before 
offset under this part those Department documents that relate to the 
debt, if the employee--
    (1) Files a written request to inspect and copy the documents within 
20 days of the date of the pre-offset notice under Sec. 31.3, and
    (2) Files the request at the address specified in that notice.
    (b) A request filed under paragraph (a)(1) of this section must 
contain--
    (1) All information provided to the employee in the pre-offset 
notice under Sec. 31.3 that identifies the employee and the debt, 
including the employee's Social Security number and the program under 
which the debt arose, together with any corrections of that identifying 
information; and
    (2) A reasonably specific identification of the documents that the 
employee wishes to have available for inspection and copying.
    (c) The Secretary makes available documents for inspection and 
copying upon request by the employee. However, the Secretary may 
initiate an offset before making the requested documents available if 
the employee fails to request inspection and copying in accordance with 
this section.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 31.5  Request for hearing on the debt or the proposed offset.

    (a) Deadlines. (1) The Secretary provides a hearing before offset on 
the existence, amount, or enforceability of the debt described in the 
pre-offset notice provided under Sec. 31.3, or on the amount or 
frequency of the offsets as proposed in that notice, if the employee--
    (i) Files a request for the hearing within the later of--
    (A) 65 days after the date of the pre-offset notice provided under 
Sec. 31.3; or
    (B) 15 days after the date on which the Secretary makes available to 
the employee the relevant, requested documents if the employee had 
requested an opportunity to inspect and copy documents within 20 days of 
the date of the pre-offset notice provided under Sec. 31.3; and
    (ii) Files a request at the address specified in that notice.
    (2) The Secretary provides a hearing upon request by the employee. 
However, if the employee does not submit, within the deadlines in 
paragraph (a)(1) of this section, a request that meets the requirements 
of paragraphs (b) and (c) of this section, the Secretary does not delay 
the start of an offset, or suspend an offset already commenced, unless 
the employee submits evidence satisfactory to the Secretary that the 
request was not made in a timely manner because the employee did not 
have notice of the proposed offset, or was otherwise prevented from 
making the request by factors beyond his or her control, until after the 
deadlines had passed.
    (b) Contents of request for a hearing. A request for a hearing must 
contain--
    (1) All information provided to the employee in the pre-offset 
notice under Sec. 31.3 that identifies the employee and the particular 
debt, including the employee's Social Security number and the program 
under which the debt arose, together with any corrections needed with 
regard to that identifying information;
    (2) An explanation of the reasons why the employee believes that--
    (i) The debt as stated in the pre-offset notice is not owing or is 
not enforceable by offset; or
    (ii) The amount of the proposed offset described in the pre-offset 
notice will cause extreme financial hardship to the employee;
    (3) If the employee contends that the amount of the proposed offset 
will

[[Page 62]]

cause extreme financial hardship under the standards set forth in Sec. 
31.8(b)--
    (i) An alternative offset proposal;
    (ii) An explanation, in writing, showing why the offset proposed in 
the notice would cause an extreme financial hardship for the employee; 
and
    (iii) Documents that show for the employee and for the spouse and 
dependents of the employee, for the one-year period preceding the 
Secretary's notice and for the repayment period proposed by the employee 
in his or her offset schedule--
    (A) Income from all sources,
    (B) Assets,
    (C) Liabilities,
    (D) Number of dependents,
    (E) Expenses for food, housing, clothing, and transportation,
    (F) Medical expenses, and
    (G) Exceptional expenses, if any; and
    (4) Copies of all documents that the employee wishes to have 
considered to support the objections raised by the employee regarding 
the enforceability of the debt or the claim of extreme financial 
hardship.
    (c) Request for oral hearing. (1) If the employee wants the hearing 
to be conducted as an oral hearing, the employee must submit a request 
that contains the information listed in paragraph (b) and must include 
with the request--
    (i) An explanation of reasons why the employee believes that the 
issues raised regarding the enforceability of the debt or a claim of 
extreme financial hardship cannot be resolved adequately by a review of 
the written statements and documents provided with the request for a 
hearing;
    (ii) An identification of--
    (A) The individuals that the employee wishes to have testify at the 
oral hearing;
    (B) The specific issues about which each individual is prepared to 
testify; and
    (C) The reasons why each individual's testimony is necessary to 
resolve the issue.
    (2) The Secretary grants a request for an oral hearing if--
    (i) The employee files a request for an oral hearing that meets the 
requirements of paragraphs (b) and (c) of this section; and
    (ii) The Secretary determines that the issues raised by the employee 
require a determination of the credibility of testimony and cannot be 
adequately resolved by a review of the written statements and documents 
submitted by the employee and documents contained in the Department's 
records relating to the debt.
    (3) The Secretary may decline a request for an oral hearing if the 
Secretary accepts the employee's proffer of testimomy made in the 
request for an oral hearing under paragraph (c)(1) of this section, and 
considers the facts at issue to be established as stated by the employee 
in the request.
    (4) If the Secretary grants a request for an oral hearing, the 
Secretary--
    (i) Notifies the employee in writing of--
    (A) The date, time, and place of the hearing;
    (B) The name and address of the hearing official;
    (C) The employee's right to be represented at the hearing by counsel 
or other representatives;
    (D) The employee's right to present and cross-examine witnesses; and
    (E) The employee's right to waive the requested oral hearing and 
receive a hearing in the written record; and
    (ii) Provides the hearing official with a copy of all written 
statements submitted by the employee with the request for a hearing, and 
all documents pertaining to the debt or the amount of the offset 
contained in the Department's files on the debt or submitted with the 
request for a hearing.
    (d) Employee choice of oral hearing or hearing on written 
submissions. An employee who has been sent notice under paragraph (c)(4) 
that an oral hearing will be provided must, within 15 days of the date 
of that notice, state in writing to the hearing official and the 
Secretary--
    (1) Whether the employee intends to proceed with the oral hearing, 
or wishes a decision based on the written record; and
    (2) Any changes in the list of the witnesses the employee proposes 
to produce for the hearing, or the facts about which a witness will 
testify.
    (e) Dismissal of request for hearing. The Secretary considers the 
employee to

[[Page 63]]

have waived the request for a hearing of any kind--
    (1) If an employee does not provide the hearing official in a timely 
manner the written statement required under paragraph (d) of this 
section; or
    (2) If the employee does not appear for a scheduled oral hearing.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 31.6  Location and timing of oral hearing.

    (a) If the Secretary grants a request for an oral hearing, the 
Secretary selects the time, date, and location of the hearing. The 
Secretary selects, to the extent feasible, the location that is most 
convenient for the employee.
    (b) For a current military employee, the Secretary selects the time, 
date, and location of the hearing after consultation with the Secretary 
of Defense.
    (c) For a current Coast Guard employee, the Secretary selects the 
time, date, and location of the hearing after consultation with the 
Secretary of Transportation.
    (d) For an employee not described in paragraph (a) or (b) of this 
section, the hearing will be held in Washington, DC, or in one of the 
following cities: Boston, Philadelphia, New York, Atlanta, Chicago, 
Dallas, Kansas City, Denver, San Francisco, or Seattle.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 31.7  Hearing procedures.

    (a) Independence of hearing official. A hearing provided under this 
part is conducted by a hearing official who is neither an employee of 
the Department nor otherwise under the supervision or control of the 
Secretary.
    (b) Lack of subpoena authority or formal discovery. (1) Neither the 
hearing official nor the Secretary has authority to issue subpoenas to 
compel the production of documents or to compel the attendance of 
witnesses at an oral hearing under this part. The Secretary will attempt 
to make available during an oral hearing the testimony of a current 
official of the Department if--
    (i) The employee had identified the official in the request for a 
hearing under Sec. 31.5(b) and demonstrated that the testimony of the 
official is necessary to resolve adequately an issue of fact raised by 
the employee in the request for a hearing; and
    (ii) The Secretary determines that the responsibilities of the 
official permit his or her attendance at the hearing.
    (2) If the Secretary determines that the testimony of a Department 
official is necessary, but that the official cannot attend an oral 
hearing to testify, the Secretary attempts to make the official 
available for testimony at the hearing by means of a telephone 
conference call.
    (3) No discovery is available in a proceeding under this part except 
as provided in Sec. 31.4.
    (c) Hearing on written submissions. If a hearing is conducted on the 
written submissions, the hearing official reviews documents and 
responses submitted by the Secretary and the employee under Sec. 31.5.
    (d) Conduct of oral hearing. (1) The hearing official conducts an 
oral hearing as an informal proceeding. The official--
    (i) Administers oaths to witnesses;
    (ii) Regulates the course of the hearing;
    (iii) Considers the introduction of evidence without regard to the 
rules of evidence applicable to judicial proceedings; and
    (iv) May exclude evidence that is redundant, or that is not relevant 
to those issues raised by the employee in the request for hearing under 
Sec. 31.5 that remain in dispute.
    (2) An oral hearing is generally open to the public. However, the 
hearing official may close all or any portion of the hearing if doing so 
is in the best interest of the employee or the public.
    (3) The hearing official may conduct an oral hearing by telephone 
conference call--
    (i) If the employee is located in a city outside the Washington, DC 
Metropolitan area.
    (ii) At the request of the employee.
    (iii) At the discretion of the hearing official.
    (4) No written record is created or maintained of an oral hearing 
provided under this part.
    (e) Burden of proof. In any hearing under this part--

[[Page 64]]

    (1) The Secretary bears the burden of proving, by a preponderance of 
the evidence, the existence and amount of the debt, and the failure of 
the employee to repay the debt, as the debt is described in the pre-
offset notice provided under Sec. 31.3; and
    (2) The employee bears the burden of proving, by a preponderance of 
the evidence--
    (i) The existence of any fact that would establish that the debt 
described in the pre-offset notice is not enforceable by offset; and
    (ii) The existence of any fact that would establish that the amount 
of the proposed offset would cause an extreme financial hardship for the 
employee.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 31.8  Rules of decision.

    (a) Enforceability of debt by offset. In deciding whether the 
Secretary has established that the debt described in the pre-offset 
under Sec. 31.3 is owed by the employee, or whether the employee has 
established that the debt is not enforceable by offset, the hearing 
official shall apply the principles in this paragraph.
    (1) The statutes and Department regulations authorizing and 
implementing the program under which the debt arose must be applied in 
accordance with official written interpretations by the Department.
    (2) The principles of res judicata and collateral estoppel apply to 
resolution of disputed facts in those instances in which the debt or 
material facts in dispute have been the subject of prior judicial 
decision.
    (3) The act or omission of an institution of higher education at 
which the employee was enrolled does not constitute a defense to 
repayment of an obligation with regard to a grant or loan under a 
program authorized under Title IV of the Higher Education Act or similar 
authority, except to the extent that--
    (i) The act or omission constitutes a defense to the debt under 
applicable Federal or State law;
    (ii) The institution owed the employee a refund under its refund 
policy and failed to pay that refund to the employee or to a lender 
holding a loan made to the employee; or
    (iii) The institution ceased teaching activity while the employee 
was in attendance and during the academic period for which the grant or 
loan was made, and failed to refund to the employee or holder of a loan 
to the employee a proportionate amount of the grant or loan funds used 
to pay tuition and other institutional charges for that academic period.
    (4)(i) A debt otherwise established as owed by the employee is 
enforceable by offset under this part if the Secretary sends the pre-
offset notice for the debt within the ten year period following the 
later of--
    (A) The date on which the Secretary acquired the debt by assignment 
or referral, or
    (B) The date of a subsequent partial payment reaffirming the debt.
    (ii) Periods during which the statute of limitations applicable to a 
lawsuit to collect the debt has been tolled under 11 U.S.C. 108, 28 
U.S.C. 2416, 50 U.S.C. App. 525, or other authority are excluded from 
the calculation of the ten year period described in paragraph (a)(4)(i) 
of this section.
    (b) Extreme financial hardship. (1) In deciding whether an employee 
has established that the amount of the proposed offset would cause 
extreme financial hardship to the employee, the hearing official shall 
determine whether the credible, relevant evidence submitted demonstrates 
that the proposed offset would prevent the employee from meeting the 
costs necessarily incurred for essential subsistence expenses of the 
employee and his or her spouse and dependents.
    (2) For purposes of this determination, essential subsistence 
expenses include costs incurred only for food, housing, clothing, 
essential transportation and medical care.
    (3) In making this determination, the hearing official shall 
consider--
    (i) The income from all sources of the employee, and his or her 
spouse and dependents;
    (ii) The extent to which the assets of the employee and his or her 
spouse and dependents are available to meet the offset and the essential 
subsistence expenses;

[[Page 65]]

    (iii) Whether these essential subsistence expenses have been 
minimized to the greatest extent possible;
    (iv) The extent to which the employee and his or her spouse and 
dependents can borrow to satisfy the debt to be collected by offset or 
to meet essential expenses; and
    (v) The extent to which the employee and his or her spouse and 
dependents have other exceptional expenses that should be taken into 
account, and whether these expenses have been minimized.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 31.9  Decision of the hearing official.

    (a) The hearing official issues a written opinion within sixty days 
of the date on which the employee filed a request for a hearing under 
Sec. 31.5, unless a delay in the proceedings has been granted at the 
request of the employee. In the opinion, the hearing official states his 
or her decision and the findings of fact and conclusions of law on which 
the decision is based.
    (b) If the hearing official finds that a portion of the debt 
described in the pre-offset notice under Sec. 31.3 is not enforceable 
by offset, the official shall state in the opinion that portion which is 
enforceable by offset.
    (c) If the hearing official finds that the amount of the offset 
proposed in the pre-offset notice will cause an extreme financial 
hardship for the employee, the hearing official shall establish an 
offset schedule that will result in the repayment of the debt in the 
shortest period of time without producing an extreme financial hardship 
for the employee.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 31.10  Request for repayment agreement.

    (a) The Secretary does not initiate an offset under this part if the 
employee agrees in writing to repay the debt under terms acceptable to 
the Secretary and makes the first payment due under the agreement on or 
before the latest of--
    (1) The seventh day after the date of the decision of the hearing 
official, if the employee timely requested a hearing under Sec. 31.5 
(a) and (d);
    (2) The sixty-fifth day after the date of the pre-offset notice 
under Sec. 31.3 if the employee did not timely request either a hearing 
in accordance with Sec. 31.5 (a) and (d) or an opportunity to inspect 
and copy documents related to the debt under Sec. 31.4; or
    (3) The fifteenth day after the date on which the Secretary made 
available documents related to the debt, if the employee filed a timely 
request for documents under Sec. 31.4.
    (b) In the agreement, the Secretary and the employee may agree to 
satisfaction of the debt from sources other than an offset under this 
part, or may modify the amount proposed to be offset in the pre-offset 
notice or estimated in the decision of the hearing official.
    (c) If the employee does not enter into a repayment agreement 
acceptable to the Secretary within the deadlines in this section, the 
Secretary may initiate an offset under this part. The Secretary 
continues to collect by offset until an employee enters in a 
satisfactory repayment agreement for the debt. The Secretary suspends an 
offset already commenced under circumstances described in Sec. 
31.5(a)(2).

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 31.11  Offset process.

    (a) The Secretary attempts to collect debts under this part within 
the shortest time authorized under--
    (1) The offset schedule proposed in the pre-offset notice, unless 
modified by agreement or by the decision of a hearing official;
    (2) A written repayment agreement with the employee; or
    (3) The offset schedule established in the decision of the hearing 
official.
    (b) In proposing an offset schedule under Sec. 31.3 or establishing 
a repayment agreement under Sec. 31.10, the Secretary also considers 
the expected period of Federal employment of the employee.
    (c) Unless the Secretary determines, in his discretion, to delay or 
suspend collection, the Secretary effects an offset under this part--
    (1) According to the terms agreed to by the employee pursuant to a 
timely request under Sec. 31.10 to enter into a repayment agreement; 
or,

[[Page 66]]

    (2) After the deadlines in Sec. 31.10(b) for requesting a repayment 
agreement with the Secretary.
    (d) If the employee retires, resigns, or leaves Federal employment 
before the debt is satisfied, the Secretary collects the amount 
necessary to satisfy the debt by offset from subsequent payments of any 
kind, including a final salary payment or a lump sum annual leave 
payment, due the employee on the date of separation. If the debt cannot 
be satisfied by offset from any such final payment due the employee on 
the date of separation, the Secretary collects the debt from later 
payments of any kind due the employee in accordance with the provisions 
of 4 CFR 102.4.
    (e) The Secretary effects an offset under this part against payments 
owing to an employee of another Federal agency after completion of the 
requirements of this part, in accordance with the provisions of 5 CFR 
550.1108.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



PART 32_SALARY OFFSET TO RECOVER OVERPAYMENTS OF PAY OR ALLOWANCES 
FROM DEPARTMENT OF EDUCATION EMPLOYEES--Table of Contents




Sec.
32.1 Scope.
32.2 Definitions.
32.3 Pre-offset notice.
32.4 Employee response.
32.5 Pre-offset hearing--general.
32.6 Request for a pre-offset hearing.
32.7 Pre-offset oral hearing.
32.8 Pre-offset hearing on the written submissions.
32.9 Written decision.
32.10 Deductions process.

    Authority: 5 U.S.C. 5514; 31 U.S.C. 3716.

    Source: 52 FR 24957, July 1, 1987, unless otherwise noted.



Sec. 32.1  Scope.

    (a) The Secretary establishes the standards and procedures in this 
part that apply to the deductions through offset from disposable pay of 
a current or former employee of the Department of Education to recover 
overpayments of pay or allowances.
    (b) This part does not apply to--
    (1) Recovery through offset of an indebtedness to the United States 
by an employee of the Department under a program administered by the 
Secretary of Education covered under 34 CFR part 31;
    (2) The offset of an indebtedness to the United States by a Federal 
employee to satisfy a judgment obtained by the United States against 
that employee in a court of the United States;
    (3) The offset of any payment to an employee of the Department of 
Education which is expressly allowed under statutes other than 5 U.S.C. 
5514, except as to offsets of severance pay and/or lump sum annual leave 
payments as authorized under 31 U.S.C. 3716;
    (4) Offsets under 34 CFR part 30; or
    (5) An employee election of coverage or of a change of coverage 
under a Federal benefits program which requires periodic deductions from 
pay if the amount to be recovered was accumulated over four pay periods 
or less.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 32.2  Definitions.

    The following definitions apply to this part:
    Department means the Department of Education.
    Disposable pay means the amount that remains from an employee's pay 
after required deductions for Federal, State, and local income taxes; 
Social Security taxes, including Medicare taxes; Federal retirement 
programs; premiums for health and basic life insurance benefits; and 
such other deductions that are required by law to be withheld.
    Employee means a current or former employee of the Department.
    Former employee means a former employee of the Department who is 
entitled to pay from the Department or another agency.
    Pay means basic pay, special pay, incentive pay, retired pay, 
retainer pay, or, in the case of an individual not entitled to basic 
pay, other authorized pay, including severance pay and/or lump sum 
payments for accrued annual leave.
    Paying agency means a Federal agency currently employing an 
individual and authorizing the payment of his or her current pay.
    Secretary means the Secretary of the Department of Education or an 
official

[[Page 67]]

or employee of the Department acting for the Secretary under a 
delegation of authority.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 32.3  Pre-offset notice.

    At least 30 days before initiating a deduction from the disposable 
pay of an employee to recover an overpayment of pay or allowances, the 
Secretary sends a written notice to the employee stating--
    (a) The origin, nature and amount of the overpayment;
    (b) How interest is charged and administrative costs and penalties 
will be assessed, unless excused under 31 U.S.C. 3716;
    (c) A demand for repayment, providing for an opportunity for the 
employee to enter into a written repayment agreement with the 
Department;
    (d) Where a waiver of repayment is authorized by law, the employee's 
right to request a waiver;
    (e) The Department's intention to deduct 15 percent of the 
employee's disposable pay, or a specified amount if the disposable pay 
is severance pay and/or a lump sum annual leave payment, to recover the 
overpayment if a waiver is not granted by the Secretary and the employee 
fails to repay the overpayment or enter into a written repayment 
agreement;
    (f) The amount, frequency, approximate beginning date and duration 
of the intended deduction;
    (g) If Government records on which the determination of overpayment 
are not attached, how those records will be made available to the 
employee for inspection and copying;
    (h) The employee's right to request a pre-offset hearing concerning 
the existence or amount of the overpayment or an involuntary repayment 
schedule;
    (i) The applicable hearing procedures and requirements, including a 
statement that a timely petition for hearing will stay commencement of 
collection proceedings and that a final decision on the hearing will be 
issued not later than 60 days after the hearing petition is filed, 
unless a delay is requested and granted;
    (j) That any knowingly false or frivolous statements, 
representations or evidence may subject the employee to applicable 
disciplinary procedures, civil or criminal penalties; and
    (k) That where amounts paid or deducted are later waived or found 
not owed, unless otherwise provided by law, they will be promptly 
refunded to the employee.

(Authority: 5 U.S.C. 5514, 31 U.S.C. 3716)



Sec. 32.4  Employee response.

    (a) Voluntary repayment agreement. Within 7 days of receipt of the 
written notice under Sec. 32.3, the employee may submit a request to 
the Secretary to arrange for a voluntary repayment schedule. To arrange 
for a voluntary repayment schedule, the employee shall submit a 
financial statement and sign a written repayment agreement approved by 
the Secretary. An employee who arranges for a voluntary repayment 
schedule may nonetheless request a waiver of the overpayment under 
paragraph (b) of this section.
    (b) Waiver. An employee seeking a waiver of collection of the debt 
that is authorized by law must request the waiver in writing to the 
Secretary within 10 days of receipt of the written notice under Sec. 
32.3. The employee must state why he or she believes a waiver should be 
granted.
    (c) Involuntary repayment schedule. If the employee claims that the 
amount of the involuntary deduction will cause extreme financial 
hardship and should be reduced, he or she must submit a written 
explanation and a financial statement signed under oath or affirmation 
to the Secretary within 10 days of receipt of the written notice under 
Sec. 32.3. An employee who fails to submit this financial information 
in a timely manner waives the right to object to the involuntary 
repayment schedule at a hearing under Sec. 32.5. The Secretary notifies 
the employee, in writing, whether the Secretary will reduce the rate of 
the involuntary deduction.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 32.5  Pre-offset hearing--general.

    (a) An employee who wishes a review of the existence or amount of 
the overpayment or an involuntary repayment schedule may request a pre-
offset hearing. The pre-offset hearing does not review:

[[Page 68]]

    (1) The denial of a waiver of repayment under 5 U.S.C. 5584;
    (2) The involuntary repayment schedule or financial hardship caused 
by the amount of the involuntary deduction from the employee's 
disposable pay, unless the employee has submitted the financial 
statement and written explanation required under Sec. 32.4(c); and
    (3) The determination under paragraph (b) of this section that the 
pre-offset hearing is on the written submissions.
    (b) Unless the Secretary determines that a matter reviewable under 
paragraph (a) of this section turns on an issue of credibility or 
veracity or cannot be resolved by a review of the documentary evidence, 
the pre-offset hearing is on the written submissions.
    (c) A pre-offset hearing is based on the written submissions for 
overpayments arising from:
    (1) A termination of a temporary promotion;
    (2) A cash award;
    (3) An erroneous salary rate;
    (4) Premature granting of a within-grade increase;
    (5) A lump sum payment for annual leave;
    (6) Unauthorized appointment to a position;
    (7) An error on time and attendance records; or
    (8) Other circumstances where the Secretary determines that an oral 
hearing is not required.
    (d) The hearing is conducted by a hearing official who is not an 
employee of the Department or under the supervision or control of the 
Secretary.
    (e) Formal discovery between the parties is not provided.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 32.6  Request for a pre-offset hearing.

    (a) Except for an employee who has requested a waiver of collection 
of the debt under Sec. 32.4(b), an employee who wishes a pre-offset 
hearing must request the hearing within 15 days of receipt of the 
written notice given under Sec. 32.3. The Secretary waives the 15-day 
requirement if the employee shows that the delay was because of 
circumstances beyond his or her control or because of failure to receive 
notice and lack of knowledge of the time limit.
    (b) An employee who has requested a waiver under Sec. 32.4(b) may 
request a hearing within 10 days of receipt of a determination by the 
Secretary denying a waiver.
    (c) The request for a hearing must:
    (1) Be in writing;
    (2) State why the employee:
    (i) Contests the existence or amount of the overpayment; or
    (ii) Claims that the involuntary repayment schedule will cause 
extreme financial hardship;
    (3) Include all documents on which the employee is relying, other 
than those provided by the Secretary under Sec. 32.3; any document 
which is a statement of an individual must be in the form of an 
affidavit; and
    (4) Be submitted to the designated hearing official with a copy to 
the Secretary.
    (d) If the employee timely requests a pre-offset hearing or the 
timelines are waived under paragraph (a) of this section, the Secretary:
    (1) Notifies the employee whether the employee may elect an oral 
hearing; and
    (2) Provides the hearing official with a copy of all records on 
which the determination of the overpayment and any involuntary repayment 
schedule are based.
    (e) An employee who has been given the opportunity to elect an oral 
hearing and who does elect an oral hearing must notify the hearing 
official and the Secretary of his or her election in writing within 7 
days of receipt of the notice under paragraph (d)(1) of this section and 
must identify all proposed witnesses and all facts and evidence about 
which they will testify.
    (f) Where an employee requests an oral hearing, the hearing official 
notifies the Secretary and the employee of the date, time, and location 
of the hearing. However:
    (1) The employee subsequently may elect to have the hearing based 
only on the written submissions by notifying the hearing official and 
the Secretary at least 3 calendar days before the date of the oral 
hearing. The hearing official may waive the 3-day requirement

[[Page 69]]

for good cause when the employee notifies the hearing official before 
the date of the hearing; and
    (2) The request for a hearing of an employee who fails to appear at 
the oral hearing must be dismissed and the Secretary's decision 
affirmed.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 32.7  Pre-offset oral hearing.

    (a) Oral hearings are informal in nature. The Secretary and the 
employee, through their representatives, and by reference to the 
documentation submitted, explain their case. The employee may testify on 
his or her own behalf, subject to cross examination. Other witnesses may 
be called to testify only where the hearing official determines that 
their testimony is relevant and not redundant.
    (b) The hearing official shall:
    (1) Conduct a fair and impartial hearing; and
    (2) Preside over the course of the hearing, maintain decorum, and 
avoid delay in the disposition of the hearing.
    (c) The employee may represent himself or herself or may be 
represented by another person at the hearing. The employee may not be 
represented by a person whose representation creates an actual or 
apparent conflict of interest.
    (d) Oral hearings are open to the public. However, the hearing 
official may close all or any portion of the hearing where to do so is 
in the best interests of the employee or the public.
    (e) Oral hearings may be conducted by conference call--
    (1) If the employee is located in a city outside the Washington, DC 
Metropolitan area;
    (2) At the request of the employee; or
    (3) At the discretion of the hearing official.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 32.8  Pre-offset hearing on the written submissions.

    If a hearing is to be held on the written submissions, the hearing 
official reviews the records and responses submitted by the Secretary 
and the employee under Sec. 32.6.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 32.9  Written decision.

    (a) The hearing official issues a written decision stating the facts 
supporting the nature and origin of the debt and the hearing official's 
analysis, findings and conclusions as to the amount of the debt and the 
repayment schedule within 60 days of filing of the employee's request 
for a pre-offset hearing, unless the employee requests, and the hearing 
official grants, a delay in the proceedings.
    (b) The hearing official decides whether the Secretary's 
determination of the existence and the amount of the overpayment or the 
extreme financial hardship caused by the involuntary repayment schedule 
is clearly erroneous. A determination is clearly erroneous if although 
there is evidence to support the determination, the hearing official, 
considering the record as a whole, is left with a definite and firm 
conviction that a mistake was made.
    (c) In making the decision, the hearing official is governed by 
applicable Federal statutes, rules and regulations.
    (d) The hearing official decides the issue of extreme financial 
hardship caused by the involuntary repayment schedule only where the 
employee has submitted the financial statement and written explanation 
required under Sec. 32.4(c). Where the hearing official determines that 
the involuntary repayment schedule creates extreme financial hardship, 
he or she must establish a schedule that alleviates the financial 
hardship but may not reduce the involuntary repayment schedule to a 
deduction of zero percent.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



Sec. 32.10  Deductions process.

    (a) Debts must be collected in one lump sum where possible. If the 
employee does not agree to a lump sum that exceeds 15 percent of 
disposable pay, the debt must be collected in installment deductions at 
officially established pay intervals in the amount established under:
    (1) A voluntary repayment agreement;
    (2) An involuntary repayment schedule where no hearing is requested; 
or
    (3) The schedule established under the written hearing decision.

[[Page 70]]

    (b) Installment deductions must be made over a period not greater 
than the anticipated period of employment, except as provided under 
paragraph (d) of this section. If possible, the installment payment must 
be sufficient in size and frequency to liquidate the debt in, at most, 
three years. Installment payments of less than $25 may be accepted only 
in the most unusual circumstances.
    (c) Deductions must begin:
    (1) After the employee has entered a voluntary repayment schedule;
    (2) If a waiver is requested under Sec. 32.4(b), after the employee 
has been denied a waiver by the Secretary; or
    (3) If a hearing is requested under Sec. 32.5, after a written 
decision.
    (d) If the employee retires or resigns or his or her employment ends 
before collection of the debt is completed, the amount necessary to 
liquidate the debt must be offset from subsequent payments of any nature 
(for example, final salary payment and/or lump sum annual leave payment) 
due the employee on the date of separation. If the debt cannot be 
liquidated by offset from any such final payment due the employee on the 
date of separation, the debt must be liquidated by administrative offset 
pursuant to 31 U.S.C. 3716 from later payments of any kind due the 
employee, where appropriate. After the Secretary has complied with the 
procedures in this part, the Secretary may refer the debt to a paying 
agency for collection by offset under 5 CFR 550.1108.
    (e) Interest, penalties and administrative costs on debts collected 
under this part must be assessed, in accordance with the provisions of 4 
CFR 102.13.
    (f) An employee's payment, whether voluntary or involuntary, of all 
or any portion of an alleged debt collected pursuant to this part may 
not be construed as a waiver of any rights which the employee may have 
under this part or any other provision of law, except as otherwise 
provided by law.
    (g) Amounts paid or deducted pursuant to this part by an employee 
for a debt that is waived or otherwise found not owing to the United 
States or which the Secretary is ordered to refund must be promptly 
refunded to the employee.

(Authority: 5 U.S.C. 5514; 31 U.S.C. 3716)



PART 33_PROGRAM FRAUD CIVIL REMEDIES ACT--Table of Contents




Sec.
33.1 Basis and purpose.
33.2 Definitions.
33.3 Basis for civil penalties and assessments.
33.4 Investigation.
33.5 Review by the reviewing official.
33.6 Prerequisites for issuing a complaint.
33.7 Complaint.
33.8 Service of complaint.
33.9 Answer.
33.10 Default upon failure to file an answer.
33.11 Referral of complaint and answer to the ALJ.
33.12 Notice of hearing.
33.13 Parties to the hearing.
33.14 Separation of functions.
33.15 Ex parte contacts.
33.16 Disqualification of reviewing official or ALJ.
33.17 Rights of parties.
33.18 Authority of the ALJ.
33.19 Prehearing conferences.
33.20 Disclosure of documents.
33.21 Discovery.
33.22 Exchange of witness lists, statements and exhibits.
33.23 Subpoenas for attendance at hearing.
33.24 Protective order.
33.25 Fees.
33.26 Form, filing and service of papers.
33.27 Computation of time.
33.28 Motions.
33.29 Sanctions.
33.30 The hearing and burden of proof.
33.31 Determining the amount of penalties and assessments.
33.32 Location of hearing.
33.33 Witnesses.
33.34 Evidence.
33.35 The record.
33.36 Post-hearing briefs.
33.37 Initial decision.
33.38 Reconsideration of initial decision.
33.39 Appeal to Department head.
33.40 Stays ordered by the Department of Justice.
33.41 Stay pending appeal.
33.42 Judicial review.
33.43 Collection of civil penalties and assessments.
33.44 Right to administrative offset.
33.45 Deposit in Treasury of United States.
33.46 Compromise or settlement.
33.47 Limitations.

    Authority: 31 U.S.C. 3801-3812.

[[Page 71]]


    Source: 53 FR 15675, May 3, 1988, unless otherwise noted.



Sec. 33.1  Basis and purpose.

    (a) Basis. This part implements the Program Fraud Civil Remedies Act 
of 1986, Pub. L. No. 99-509, 6101 through 6104, 100 Stat. 16674 (October 
21, 1986), to be codified at 31 U.S.C. 3801 through 3812. This law (31 
U.S.C. 3809) requires each Federal department head to promulgate 
regulations necessary to implement the provisions of the statute.

(Authority: 31 U.S.C. 3809)

    (b) Purpose. This part:
    (1) Establishes administrative procedures for imposing civil 
penalties and assessments against persons who make, submit, or present, 
or cause to be made, submitted, or presented, false, fictitious, or 
fraudulent claims or written statements to the Department or to its 
agents; and
    (2) Specifies the hearing and appeal rights of persons subject to 
allegations of liability for those penalties and assessments.

(Authority: 31 U.S.C. 3809)



Sec. 33.2  Definitions.

    As used in this part:
    ALJ means an Administrative Law Judge in the Department appointed 
pursuant to 5 U.S.C. 3105 or detailed to the Department pursuant to 5 
U.S.C. 3344.

(Authority: 31 U.S.C. 3801(a)(7)(A))

    Benefits, as used in the definition of ``statement,'' means anything 
of value, including but no limited to any advantage, preference, 
privilege, license, permit, favorable decision, ruling, status, or loan 
guarantee.

(Authority: 31 U.S.C. 3809)

    Claim means any request, demand, or submission:
    (a) Made to the Department for property, services, or money 
(including money representing grants, cooperative agreements, loans, 
insurance, or benefits);
    (b) Made to a recipient of property, services, or money from the 
Department or to a party to a contract or agreement with the Department:
    (1) For property or services if the United States:
    (i) Provided the property or services;
    (ii) Provided any portion of the funds for the purchase of the 
property or services; or
    (iii) Will reimburse the recipient or party for the purchase of the 
property or services; or
    (2) For the payment of money (including money representing grants, 
cooperative agreements, loans, insurance, or benefits) if the United 
States:
    (i) Provided any portion of the money requested or demanded;
    (ii) Will reimburse the recipient or party for any portion of the 
money paid on that request or demand; or
    (iii) Will guarantee or reinsure any portion of a loan made by the 
party; or
    (c) Made to the Department which has the effect of decreasing an 
obligation to pay or account for property, services, or money.

(Authority: 31 U.S.C. 3801(a)(3))

    Complaint means the administrative complaint served by the reviewing 
official on the defendant under Sec. 33.7.

(Authority: 31 U.S.C. 3809)

    Defendant means any person alleged in a complaint under Sec. 33.7 
to be liable for a civil penalty or assessment under Sec. 33.3.

(Authority: 31 U.S.C. 3809)

    Department means the United States Department of Education.

(Authority: 31 U.S.C. 3809)

    Department head means the Secretary or Under Secretary of the United 
States Department of Education.

(Authority: 31 U.S.C. 3801(a)(2))

    Government means the United States Government.

(Authority: 31 U.S.C. 3809)

    Individual means a natural person.

(Authority: 31 U.S.C. 3809)

    Initial decision means the written decision of the ALJ required by 
Sec. 33.10 or Sec. 33.37, and includes a revised initial decision 
issued following a remand or a motion for reconsideration.

(Authority: 31 U.S.C. 3803(h))


[[Page 72]]


    Investigating official means the Inspector General of the Department 
or an officer or employee of the Office of the Inspector General 
designated by the Inspector General and serving in a position for which 
the rate of basic pay is not less than the minimum rate of basic pay for 
grade GS-16 under the General Schedule.

(Authority: 31 U.S.C. 3801(4)(A)(i))

    Knows or has reason to know, means that a person, with respect to a 
claim or statement:
    (a) Has actual knowledge that the claim or statement is false, 
fictitious, or fraudulent;
    (b) Acts in deliberate ignorance of the truth or falsity of the 
claim or statement; or
    (c) Acts in reckless disregard of the truth or falsity of the claim 
or statement.

(Authority: 31 U.S.C. 3801(5))

    Makes includes the terms presents, submits, and causes to be made, 
presented, or submitted.

(Authority: 31 U.S.C. 3802(a))

    Person means any individual, partnership, corporation, association, 
or private organization.

(Authority: 31 U.S.C. 3801(a)(6))

    Representative means:
    (a) An attorney who is a member in good standing of the bar of any 
State, territory, possession of the United States, the District of 
Columbia, or the Commonwealth of Puerto Rico; or
    (b) Any other person designated by a party in writing, provided that 
the designation includes a certification that the party understands the 
nature and consequences of an administrative enforcement action under 
this part, and that he or she has the right to representation by counsel 
or to self-representation.

(Authority: 31 U.S.C. 3803(g)(2)(F))

    Reviewing official means the General Counsel of the Department or 
his or her designee who is:
    (a) Not subject to supervision by, or required to report to, the 
investigating official; and
    (b) Not employed in the organizational unit of the Department in 
which the investigating official is employed; and
    (c) Serving in a position for which the rate of basic pay is not 
less than the minimum rate of basic pay for grade GS-16 under the 
General Schedule.

(Authority: 31 U.S.C. 3801(8))

    Statement means any representation, certification, affirmation, 
document, record, or accounting or bookkeeping entry made:
    (a) With respect to a claim or to obtain the approval or payment of 
a claim (including relating to eligibility to make a claim); or
    (b) With respect to (including relating to eligibility for):
    (1) A contract with, or a bid or proposal for a contract with; or
    (2) A grant, cooperative agreement, loan, or benefit from;

The Department, or any State, political subdivision of a State, or other 
party, if the United States Government provides any portion of the money 
or property under the contract or for the grant, loan, cooperative 
agreement, or benefit, or if the Government will reimburse or reinsure 
the State, political subdivision, or party for any portion of the money 
or property under the contract or for the grant, cooperative agreement, 
loan, or benefit.

(Authority: 31 U.S.C. 3801(9))



Sec. 33.3  Basis for civil penalties and assessments.

    (a) Claims. (1) Any person who makes a claim that the person knows 
or has reason to know:
    (i) Is false, fictitious, or fraudulent;
    (ii) Includes or is supported by any written statement which asserts 
a material fact which is false, fictitious, or fraudulent;
    (iii) Includes or is supported by any written statement that:
    (A) Omits a material fact;
    (B) Is false, fictitious, or fraudulent as a result of such 
omission; and
    (C) Is a statement in which the person making such statement has a 
duty to include such material fact; or
    (iv) Is for payment for the provision of property or services which 
the person has not provided as claimed;

[[Page 73]]


shall be subject, in addition to any other remedy that may be prescribed 
by law, to a civil penalty of not more than $5,000 for each claim.
    (2) Each voucher, invoice, claim form, or other individual request 
or demand for property, services, or money constitutes a separate claim.
    (3) A claim is considered made to the Department, a recipient, or 
party when that claim is actually made to an agent, fiscal intermediary, 
or other entity, including any State or political subdivision thereof, 
acting for or on behalf of the Department, a recipient, or party.
    (4) Each claim for property, services, or money is subject to a 
civil penalty regardless of whether the property, services, or money is 
actually delivered or paid.
    (5) If the Government has made any payment (including transferred 
property or provided services) on a claim, a person subject to a civil 
penalty under paragraph (a)(1) of this section is also subject to an 
assessment of not more than twice the amount of that claim or that 
portion thereof that is determined to be in violation of paragraph 
(a)(1) of this section. The assessment is in lieu of damages sustained 
by the Government because of that claim.

(Authority: 31 U.S.C. 3802(a)(1))

    (b) Statements. (1) Any person who makes a written statement that:
    (i) The person knows or has reason to know:
    (A) Asserts a material fact which is false, fictitious, or 
fraudulent; or
    (B) Is false, fictitious, or fraudulent because it omits a material 
fact that the person making the statement has a duty to include in the 
statement; and
    (ii) Contains or is accompanied by an express certification or 
affirmation of the truthfulness and accuracy of the contents of the 
statement;

shall be subject, in addition to any other remedy that may be prescribed 
by law, to a civil penalty of not more than $5,000 for each statement.
    (2) Each written representation, certification, or affirmation 
constitutes a separate statement.
    (3) A statement is considered made to the Department when the 
statement is actually made to an agent, fiscal intermediary, or other 
entity, including any State or political subdivision thereof, acting for 
or on behalf of the Department.

(Authority: 31 U.S.C. 3802(a)(2))

    (c) No proof of specific intent to defraud is required to establish 
liability under this section.

(Authority: 31 U.S.C. 3801(5))

    (d) In any case in which it is determined that more than one person 
is liable for making a claim or statement under this section, each of 
those persons may be held liable for a civil penalty under this section.

(Authority: 31 U.S.C. 3802(a))

    (e) In any case in which it is determined that more than one person 
is liable for making a claim under this section of which the Government 
has made payment (including transferred property or provided services), 
an assessment may be imposed against any of those persons or jointly and 
severally against any combination of those persons.

(Authority: 31 U.S.C. 3802(a)(1); 3809)



Sec. 33.4  Investigation.

    (a) If an investigating official concludes that a subpoena pursuant 
to the authority conferred by 31 U.S.C. 3604(a) is warranted:
    (1) The subpoena so issued must notify the person to whom it is 
addressed of the authority under which the subpoena is issued and must 
identify the records or documents sought;
    (2) The investigating official may designate a person to act on his 
or her behalf to receive the documents sought; and
    (3) The person receiving the subpoena is required to tender to the 
investigating official or the person designated to receive the documents 
a certification that the documents sought have been produced, or that 
the documents are not available and the reasons therefore, or that the 
documents, suitably identified, have been withheld based upon the 
assertion of an identified privilege.

(Authority: 31 U.S.C. 3804(a))


[[Page 74]]


    (b) If the investigating official concludes that an action under the 
Program Fraud Civil Remedies Act may be warranted, the investigating 
official shall submit a report containing the findings and conclusions 
of the investigation to the reviewing official.

(Authority: 31 U.S.C. 3803(a)(1))

    (c) Nothing in this section precludes or limits an investigating 
official's discretion to refer allegations directly to the Department of 
Justice for suit under the False Claims Act or other civil relief, or to 
defer or postpone a report or referral to the reviewing official to 
avoid interference with a criminal investigation or prosecution.

(Authority: 31 U.S.C. 3809)

    (d) Nothing in this section modifies any responsibility of an 
investigating official to report violations of criminal law to the 
Attorney General.

(Authority: 31 U.S.C. 3803(a)(1))



Sec. 33.5  Review by the reviewing official.

    (a) If, based on the report of the investigating official under 
Sec. 33.4(b), the reviewing official determines that there is adequate 
evidence to believe that a person is liable under Sec. 33.3 of this 
part, the reviewing official transmits to the Attorney General a written 
notice of the reviewing official's intention to issue a complaint under 
Sec. 33.7.
    (b) The notice must include--
    (1) A statement of the reviewing official's reasons for issuing a 
complaint;
    (2) A statement specifying the evidence that supports the 
allegations of liability;
    (3) A description of the claims or statements upon which the 
allegations of liability are based;
    (4) An estimate of the amount of money or the value of property, 
services, or other benefits requested or demanded in violation of Sec. 
33.3;
    (5) A statement of any exculpatory or mitigating circumstances that 
may relate to the claims or statements known by the reviewing official 
or the investigating official; and
    (6) A statement that there is a reasonable prospect of collecting an 
appropriate amount of penalties and assessments. Such a statement may be 
based upon information then known or an absence of any information 
indicating that the person may be unable to pay such an amount.

(Authority: 31 U.S.C. 3803(a)(2); 3809(2))



Sec. 33.6  Prerequisites for issuing a complaint.

    (a) The reviewing official may issue a complaint under Sec. 33.7 
only if--
    (1) The Department of Justice approves the issuance of a complaint 
in a written statement described in 31 U.S.C. 3803(b)(1); and
    (2) In the case of allegations of liability under Sec. 33.3(a) with 
respect to a claim, the reviewing official determines that, with respect 
to that claim or a group of related claims submitted at the same time 
the claim is submitted (as defined in paragraph (b) of this section), 
the amount of money or the value of property or services demanded or 
requested in violation of Sec. 33.3(a) does not exceed $150,000.
    (b) For the purposes of this section, a related group of claims 
submitted at the same time includes only those claims arising from the 
same transaction (e.g., grant, cooperative agreement, loan, application, 
or contract) that are submitted simultaneously as part of a single 
request, demand, or submission.
    (c) Nothing in this section may be construed to limit the reviewing 
official's authority to join in a single complaint against a person 
claims that are unrelated or were not submitted simultaneously, 
regardless of the amount of money, or the value of property or services, 
demanded or requested.

(Authority: 31 U.S.C. 3803(b), (c))



Sec. 33.7  Complaint.

    (a) On or after the date the Department of Justice approves the 
issuance of a complaint in accordance with 31 U.S.C. 3803(b)(1), the 
reviewing official may serve a complaint on the defendant, as provided 
in Sec. 33.8.
    (b) The complaint must state:
    (1) The allegations of liability against the defendant, including 
the statutory basis for liability, an identification of the claims or 
statements

[[Page 75]]

that are the basis for the alleged liability, and the reasons why 
liability allegedly arises from those claims or statements;
    (2) The maximum amount of penalties and assessments for which the 
defendant may be held liable;
    (3) Instructions for filing an answer to request a hearing, 
including a specific statement of the defendant's right to request a 
hearing by filing an answer and to be represented by a representative; 
and
    (4) That failure to file an answer within 30 days of service of the 
complaint will result in the imposition of the maximum amount of 
penalties and assessments without right to appeal, as provided in Sec. 
33.10.
    (c) At the same time the reviewing official serves the complaint, he 
or she shall serve the defendant with a copy of the regulations in this 
part.

(Authority: 31 U.S.C. 3803(a))



Sec. 33.8  Service of complaint.

    (a) Service of a complaint must be made by certified or registered 
mail or by delivery in any manner authorized by Rule 4(d) of the Federal 
Rules of Civil Procedure. Service is complete upon receipt.
    (b) Proof of service, stating the name and address of the person on 
whom the complaint was served, and the manner and date of service, may 
be made by:
    (1) Affidavit of the individual serving the complaint by delivery;
    (2) An acknowledged United States Postal Service return receipt 
card; or
    (3) Written acknowledgment of receipt by the defendant or his 
representative.

(Authority: 31 U.S.C. 3802(d))



Sec. 33.9  Answer.

    (a) The defendant may request a hearing by filing an answer with the 
reviewing official within 30 days of service of the complaint. An answer 
is deemed to be a request for hearing.
    (b) In the answer, the defendant:
    (1) Shall admit or deny each of the allegations of liability made in 
the complaint;
    (2) Shall state any defense on which the defendant intends to rely;
    (3) May state any reasons why the defendant contends that the 
penalties and assessments should be less than the statutory maximum; and
    (4) Shall state the name, address, and telephone number of the 
person authorized by the defendant to act as defendant's representative, 
if any.
    (c) If the defendant is unable to file an answer meeting the 
requirements of paragraph (b) of this section within the time provided, 
the defendant may, before the expiration of 30 days from service of the 
complaint, file with the reviewing official a general answer denying 
liability and requesting a hearing, and a request for an extension of 
time within which to file an answer meeting the requirements of 
paragraph (b) of this section. The reviewing official shall file 
promptly with the ALJ the complaint, the general answer denying 
liability, and the request for an extension of time as provided in Sec. 
33.11 for good cause shown, the ALJ may grant the defendant up to 30 
additional days within which to file an answer meeting the requirements 
of paragraph (b) of this section.

(Authority: 31 U.S.C. 3803(d)(2), 3809)



Sec. 33.10  Default upon failure to file an answer.

    (a) If the defendant does not file an answer within the time 
prescribed in Sec. 33.9(a), the reviewing official may refer the 
complaint to the ALJ.
    (b) Upon the referral of the complaint, the ALJ shall promptly serve 
on defendant in the manner prescribed in Sec. 33.8, a notice that an 
initial decision will be issued under this section.
    (c) The ALJ shall assume the facts alleged in the complaint to be 
true and, if those facts establish liability under Sec. 33.3, the ALJ 
shall issue an initial decision imposing the maximum amount of penalties 
and assessments allowed under the statute.
    (d) Except as otherwise provided in this section, by failing to file 
a timely answer the defendant waives any right to further review of the 
penalties and assessments imposed under paragraph (c) of this section, 
and the initial decision becomes final and binding upon the parties 30 
days after it is issued.
    (e) If, before such an initial decision becomes final, the defendant 
files a

[[Page 76]]

motion with the ALJ seeking to reopen on the grounds that extraordinary 
circumstances prevented the defendant from filing an answer, the initial 
decision must be stayed pending the ALJ's decision on the motion.
    (f) If, on such a motion, the defendant can demonstrate 
extraordinary circumstances excusing the failure to file a timely 
answer, the ALJ shall withdraw the initial decision under paragraph (c) 
of this section, if such a decision has been issued, and shall grant the 
defendant an opportunity to answer the complaint.
    (g) A decision of the ALJ denying a defendant's motion under 
paragraph (e) of this section is not subject to reconsideration under 
Sec. 33.38.
    (h) The defendant may appeal to the Department head the decision 
denying a motion to reopen by filing a notice of appeal with the 
Department head within 15 days after the ALJ denies the motion. The 
timely filing of a notice of appeal stays the initial decision until the 
Department head decides the issue.
    (i) If the defendant files a timely notice of appeal with the 
Department head, the ALJ shall forward the record of the proceeding to 
the Department head.
    (j) The Department head decides expeditiously whether extraordinary 
circumstances excuse the defendant's failure to file a timely answer 
based solely on the record before the ALJ.
    (k) If the Department head decides that extraordinary circumstances 
excuse the defendant's failure to file a timely answer, the Department 
head remands the case to the ALJ with instructions to grant the 
defendant an opportunity to answer.
    (l) If the Department head decides that the defendant's failure to 
file a timely answer is not excused, the Department head reinstates the 
initial decision of the ALJ, which becomes final and binding upon the 
parties 30 days after the Department head issues that decision.

(Authority: 31 U.S.C. 3809)



Sec. 33.11  Referral of complaint and answer to the ALJ.

    Upon receipt of an answer, the reviewing official shall file the 
complaint and answer with the ALJ.

(Authority: 31 U.S.C. 3803(d)(2); 3809)



Sec. 33.12  Notice of hearing.

    (a) When the ALJ receives the complaint and answer, the ALJ shall 
promptly serve a notice of hearing upon the defendant in the manner 
prescribed by Sec. 33.8. At the same time, the ALJ shall send a copy of 
the notice to the representative for the Government.
    (b) The notice must include:
    (1) The tentative time and place, and the nature of the hearing;
    (2) The legal authority and jurisdiction under which the hearing is 
to be held;
    (3) The matters of fact and law to be asserted;
    (4) A description of the procedures for the conduct of the hearing;
    (5) The name, address, and telephone number of the representative of 
the Government and of the defendant, if any; and
    (6) Such other matters as the ALJ deems appropriate.

(Authority: 31 U.S.C. 3803(g)(2)(A))



Sec. 33.13  Parties to the hearing.

    (a) The parties to the hearing are the defendant and the Department.
    (b) Pursuant to 31 U.S.C. 3730(c)(5), a private plaintiff under the 
False Claims Act may participate in these proceedings to the extent 
authorized by the provisions of that Act.

(Authority: 31 U.S.C. 3803(g)(2))



Sec. 33.14  Separation of functions.

    (a) The investigating official, the reviewing official, and any 
employee or agent of the Department who takes part in investigating, 
preparing, or presenting a particular case may not, in that case or a 
factually related case:
    (1) Participate in the hearing as the ALJ;
    (2) Participate or advise in the initial decision or the review of 
the initial decision by the Department head, except as a witness or a 
representative in public proceedings; or

[[Page 77]]

    (3) Make the collection of penalties and assessments under 31 U.S.C. 
3806.
    (b) The ALJ may not be responsible to, or subject to the supervision 
or direction of, the investigating official or the reviewing official.
    (c) Except as provided in paragraph (a) of this section, the 
representative for the Government may be employed anywhere in the 
Department, including in the offices of either the investigating 
official or the reviewing official.

(Authority: 31 U.S.C. 3809(l)(2))



Sec. 33.15  Ex parte contacts.

    No party or person (except employees of the ALJ's office) may 
communicate in any way with the ALJ on any matter at issue in a case, 
unless on notice and opportunity for all parties to participate. This 
provision does not prohibit a person or party from inquiring about the 
status of a case or asking routine questions concerning administrative 
functions or procedures.

(Authority: 31 U.S.C. 3803(g)(1)(A))



Sec. 33.16  Disqualification of reviewing official or ALJ.

    (a) A reviewing official or ALJ in a particular case may disqualify 
himself or herself at any time.
    (b) A party may file with the ALJ a motion for disqualification of a 
reviewing official or an ALJ. That motion must be accompanied by an 
affidavit alleging personal bias or other reason for disqualification.
    (c) The motion and affidavit must be filed promptly upon the party's 
discovery of reasons requiring disqualification, or the objections are 
deemed waived.
    (d) The affidavit must state specific facts that support the party's 
belief that personal bias or other reason for disqualification exists 
and the time and circumstances of the party's discovery of those facts. 
It must be accompanied by a certificate of the representative of record 
that it is made in good faith.
    (e) Upon the filing of the motion and affidavit, the ALJ shall not 
proceed further in the case until he or she resolves the matter of 
disqualification in accordance with paragraph (f) of this section.
    (f)(1) If the ALJ determines that a reviewing official is 
disqualified, the ALJ shall dismiss the complaint without prejudice.
    (2) If the ALJ disqualifies himself or herself, the case must be 
reassigned promptly to another ALJ.
    (3) If the ALJ denies a motion to disqualify, the Department head 
may determine the matter only as part of his or her review of the 
initial decision upon appeal, if any.

(Authority: 31 U.S.C. 3803(g)(2)(G))



Sec. 33.17  Rights of parties.

    Except as otherwise limited by this part, all parties may:
    (a) Be accompanied, represented, and advised by a representative (as 
defined in Sec. 33.2);
    (b) Participate in any conference held by the ALJ:
    (c) Conduct discovery under Sec. 33.21;
    (d) Agree to stipulations of fact or law, which must be made part of 
the record;
    (e) Present evidence relevant to the issues at the hearing;
    (f) Present and cross-examine witnesses;
    (g) Present oral arguments at the hearing as permitted by the ALJ; 
and
    (h) Submit written briefs and proposed findings of fact and 
conclusions of law after the hearing.

(Authority: 31 U.S.C. 3803(g) (2) (E), (F), (3)(B)(ii))



Sec. 33.18  Authority of the ALJ.

    (a) The ALJ shall conduct a fair and impartial hearing, avoid delay, 
maintain order, and assure that a record of the proceeding is made.
    (b) The ALJ has the authority to:
    (1) Set and change the date, time, and place of the hearing upon 
reasonable notice to the parties;
    (2) Disqualify a non-attorney representative (designated as 
described in the Sec. 33.2 definitions of ``representative'') if the 
ALJ determines that the representative is incapable of rendering 
reasonably effective assistance;
    (3) Continue or recess the hearing in whole or in part for a 
reasonable period of time;

[[Page 78]]

    (4) Hold conferences to identify or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the proceeding;
    (5) Administer oaths and affirmations;
    (6) Issue subpoenas requiring the attendance of witnesses and the 
production of documents at depositions or at hearings;
    (7) Rule on motions and other procedural matters;
    (8) Regulate the scope and timing of discovery;
    (9) Regulate the course of the hearing and the conduct of 
representatives and parties;
    (10) Examine witnesses;
    (11) Receive, rule on, exclude, or limit evidence;
    (12) Upon motion of a party, take official notice of facts;
    (13) Upon motion of a party, decide cases, in whole or in part, by 
summary judgment if there is no disputed issue of material fact;
    (14) Conduct any conference, argument, or hearing on motions in 
person or by telephone; and
    (15) Exercise such other authority as is necessary to carry out the 
responsibilities of the ALJ under this part.
    (c) The ALJ does not have the authority to find Federal statutes or 
regulations invalid.

(Authority: 31 U.S.C. 3803(g))



Sec. 33.19  Prehearing conferences.

    (a) The ALJ may schedule perhearing conferences as appropriate.
    (b) Upon the motion of any party, the ALJ shall schedule at least 
one perhearing conference at a reasonable time in advance of the 
hearing.
    (c) The ALJ may use prehearing conferences to discuss the following:
    (1) Simplification of the issues.
    (2) The necessity or desirability of amendments to the pleadings, 
including the need for a more definite statement.
    (3) Stipulations, admissions of fact or as to the contents and 
authenticity of documents.
    (4) Whether the parties can agree to submission of the case on a 
stipulated record.
    (5) Whether a party chooses to waive appearance at an oral hearing 
and to submit only documentary evidence (subject to the objection of 
other parties) and written argument.
    (6) Limitation of the number of witnesses.
    (7) Scheduling dates for the exchange of witness lists and of 
proposed exhibits.
    (8) Discovery.
    (9) The time and place for the hearing.
    (10) Such other matters as may tend to expedite the fair and just 
disposition of the proceedings.
    (d) The ALJ may issue an order containing all matters agreed upon by 
the parties or ordered by the ALJ at a prehearing conference.

(Authority: 31 U.S.C. 3803(g))



Sec. 33.20  Disclosure of documents.

    (a) Upon written request to the reviewing official, the defendant 
may review any relevant and material documents, transcripts, records, 
and other materials that relate to the allegations set out in the 
complaint and upon which the findings and conclusions of the 
investigating official under Sec. 33.4(b) are based, unless those 
documents are subject to a privilege under Federal law. Upon payment of 
fees for duplication, the defendant may obtain copies of the documents.
    (b) Upon written request to the reviewing official, the defendant 
also may obtain a copy of all exculpatory information in the possession 
of the reviewing official or investigating official relating to the 
allegations in the complaint, even if it is contained in a document that 
would otherwise be privileged. If the document would otherwise be 
privileged, only that portion containing exculpatory information must be 
disclosed.
    (c) The notice sent to the Attorney General from the reviewing 
official as described in Sec. 33.5 is not discoverable under any 
circumstances.
    (d) The defendant may file a motion to compel disclosure of the 
documents subject to the provisions of this section. Such a motion may 
only be filed with the ALJ following the filing of an answer pursuant to 
Sec. 33.9.

(Authority: 31 U.S.C. 3803(g)(3)(B)(ii), 3803(e))

[[Page 79]]



Sec. 33.21  Discovery.

    (a) The following types of discovery are authorized:
    (1) Requests for production of documents for inspection and copying.
    (2) Requests for admissions of the authenticity of any relevant 
document or of the truth of any relevant fact.
    (3) Written interrogatories.
    (4) Depositions.
    (b) For the purpose of this section and Sec. Sec. 33.22 and 33.23, 
the term ``documents'' includes information, documents, reports, 
answers, records, accounts, papers, and other data and documentary 
evidence. Nothing contained in this part may be interpreted to require 
the creation of a document.
    (c) Unless mutually agreed to by the parties, discovery is available 
only as ordered by the ALJ. The ALJ shall regulate the timing of 
discovery.
    (d) Motions for discovery. (1) A party seeking discovery may file a 
motion with the ALJ. Such a motion shall be accompanied by a copy of the 
requested discovery, or in the case of depositions, a summary of the 
scope of the proposed deposition.
    (2) Within ten days of service, a party may file an opposition to 
the motion or a motion for protective order, or both, as provided in 
Sec. 33.24.
    (3) The ALJ may grant a motion for discovery only if he finds that 
the discovery sought:
    (i) Is necessary for the expeditious, fair, and reasonable 
determination of the issues;
    (ii) Is not unduly costly or burdensome;
    (iii) Will not unduly delay the proceeding; and
    (iv) Does not seek privileged information.
    (4) The burden of showing that discovery should be allowed is on the 
party seeking discovery.
    (5) The ALJ may grant discovery subject to a protective order under 
Sec. 33.24.

(Authority: 31 U.S.C. 3803(a)(3)(B)(ii))

    (e) Depositions. (1) If a motion for deposition is granted, the ALJ 
shall issue a subpoena for the deponent, which may require the deponent 
to produce documents. The subpoena must specify the time and place at 
which the deposition will be held.
    (2) The party seeking to depose shall serve the subpoena in the 
manner prescribed in Sec. 33.8.
    (3) The deponent may file with the ALJ a motion to quash the 
subpoena or a motion for a protective order within ten days of service.
    (4) The party seeking to depose shall provide for the taking a 
verbatim transcript of the deposition, which the party shall make 
available to all other parties for inspection and copying.
    (f) Each party shall bear its own costs of discovery.

(Authority: 31 U.S.C. 3803(g)(3)(B)(ii))



Sec. 33.22  Exchange of witness lists, statements and exhibits.

    (a) At least 15 days before the hearing or at such other time as may 
be ordered by the ALJ, the parties shall exchange witness lists, copies 
of prior statements of proposed witnesses, and copies of proposed 
hearing exhibits, including copies of any written statements that the 
party intends to offer in lieu of live testimony in accordance with 
Sec. 33.33(b). At the time these documents are exchanged, any party 
that is permitted by the ALJ to rely on the transcript of deposition 
testimony in lieu of live testimony at the hearing, shall provide each 
other party with a copy of the specific pages of the transcript it 
intends to introduce.
    (b) If a party objects, the ALJ shall not admit into evidence the 
testimony of any witness whose name does not appear on the witness list 
or any exhibit not provided to the opposing party as provided in 
paragraph (a) of this Section unless the ALJ finds good cause for the 
failure or that there is no prejudice to the objecting party.
    (c) Unless another party objects within the time set by the ALJ, 
documents exchanged in accordance with paragraph (a) of this section are 
deemed to be authentic for the purpose of admissibility at the hearing.

(Authority: 31 U.S.C. 3803(g)(2))



Sec. 33.23  Subpoenas for attendance at hearing.

    (a) A party wishing to procure the appearance and testimony of any 
individual at the hearing may request that the ALJ issue a subpoena.

[[Page 80]]

    (b) A subpoena requiring the attendance and testimony of an 
individual may also require the individual to produce documents at the 
hearing.
    (c) A party seeking a subpoena shall file a written request therefor 
not less than 15 days before the date fixed for the hearing unless 
otherwise allowed by the ALJ for good cause shown. The request must 
specify any documents to be produced and must designate the witnesses 
and describe their address and location with sufficient particularity to 
permit the witnesses to be found.
    (d) The subpoena must specify the time and place at which a witness 
is to appear and any documents the witness is to produce.
    (e) The party seeking the subpoena shall serve it in the manner 
prescribed in Sec. 33.8. A subpoena on a party or upon an individual 
under the control of a party may be served by first class mail.
    (f) A party or the individual to whom the subpoena is directed may 
file with the ALJ a motion to quash the subpoena within ten days after 
service or on or before the time specified in the subpoena for 
compliance if is is less then ten days after service.

(Authority: 31 U.S.C. 3804(b))



Sec. 33.24  Protective order.

    (a) A party or a prospective witness or deponent may file a motion 
for a protective order with respect to discovery sought by an opposing 
party or with respect to the hearing, seeking to limit the availability 
or disclosure of evidence.
    (b) In issuing a protective order, the ALJ may take any order which 
justice requires to protect a party or person from annoyance, 
embarrassment, oppression, or undue burden or expense, including one or 
more of the following:
    (1) That the discovery not be had.
    (2) That the discovery may be had only on specified terms and 
conditions, including a designation of the time or place.
    (3) That the discovery may be had only through a method of discovery 
other than that requested.
    (4) That certain matters not be inquired into, or that the scope of 
discovery be limited to certain matters.
    (5) That the discovery be conducted with no one present except 
persons designated by the ALJ.
    (6) That the contents of discovery or evidence be sealed.
    (7) That a deposition after being sealed be opened only by order of 
the ALJ.
    (8) That a trade secret or other confidential research, development, 
commercial information, or facts pertaining to any criminal 
investigation, proceeding, or other administrative investigation not be 
disclosed or be disclosed only in a designated way.
    (9) That the parties simultaneously file specified documents or 
information enclosed in sealed envelopes to be opened as directed by the 
ALJ.

(Authority: 31 U.S.C. 3803(g)(3)(B)(ii))



Sec. 33.25  Fees.

    The party requesting a subpoena shall pay the cost of the fees and 
mileage of any witness subpoenaed in the amounts that would be payable 
to a witness in a proceeding in United States District Court. A check 
for witness fees and mileage must accompany the subpoena when served, 
except that if a subpoena is issued on behalf of the authority, a check 
for witness fees and mileage need not accompany the subpoena.

(Authority: 31 U.S.C. 3804(b))



Sec. 33.26  Form, filing and service of papers.

    (a) Form. (1) Documents filed with the ALJ must include an original 
and two copies.
    (2) Every pleading and paper filed in the proceeding must contain a 
caption setting for the title of the action, the case number assigned by 
the ALJ, and a designation of the paper (e.g., motion to quash 
subpoena).
    (3) Every pleading and paper must be signed by, and must contain the 
address and telephone number of the party or the person on whose behalf 
the paper was filed, or his or her representative.
    (4) Papers are considered filed when they are mailed. Date of 
mailing may be established by a certificate from the party or its 
representative or by proof

[[Page 81]]

that the document was sent by certified or registered mail.
    (b) Service. A party filing a document with the ALJ shall, at the 
time of filing, serve a copy of the document on every other party. 
Service upon any party of any document other than those required to be 
served as prescribed in Sec. 33.8 shall be made by delivering a copy, 
or by placing a copy of the document in the United States mail, postage 
prepaid and addressed, to the party's last known address. If a party is 
represented by a representative, service must be made upon the 
representative in lieu of the actual party.
    (c) Proof of service. A certificate of the individual serving the 
document by personal delivery or by mail, setting forth the manner of 
service, is proof of service.

(Authority: 31 U.S.C. 3803(b)(3)(A))



Sec. 33.27  Computation of time.

    (a) In computing any period of time under this part or in an order 
issued under this part, the time begins with the day following the act, 
event, or default, and includes the last day of the period, unless it is 
a Saturday, Sunday, or legal holiday observed by the Federal Government, 
in which event it includes the next business day.
    (b) If the period of time allowed is less than seven days, 
intermediate Saturdays, Sundays, and legal holidays observed by the 
Federal Government are excluded from the computation.
    (c) If a document has been served or issued by placing it in the 
mail, an additional five days is added to the time permitted for any 
response.

(Authority: 31 U.S.C. 3809)



Sec. 33.28  Motions.

    (a) Any application to the ALJ for an order or ruling must be by 
motion. Motions must state the relief sought, the authority relied upon, 
and the facts alleged, and must be filed with the ALJ and served on all 
other parties.
    (b) Except for motions made during a prehearing conference or at the 
hearing, all motions must be in writing. The ALJ may require that oral 
motions be reduced to writing.
    (c) Within 15 days after a written motion is served, or such other 
time as may be fixed by the ALJ, any party may file a response to the 
motion.
    (d) The ALJ may not grant a written motion before the time for 
filing responses to the motion has expired, except upon consent of the 
parties or following a hearing on the motion, but may overrule or deny 
the motion without awaiting a response.
    (e) The ALJ shall make a reasonable effort to dispose of all 
outstanding motions prior to the beginning of the hearing.

(Authority: 31 U.S.C. 3803(g)(3)(A))



Sec. 33.29  Sanctions.

    (a) The ALJ may sanction a person, including any party or 
representative for--
    (1) Failing to comply with an order, rule, or procedure governing 
the proceeding;
    (2) Failing to prosecute or defend an action; or
    (3) Engaging in other misconduct that interferes with the speedy, 
orderly, or fair conduct of the hearing.
    (b) Any sanction, including but not limited to those listed in 
paragraphs (c), (d), and (e) of this section must reasonably relate to 
the severity and nature of the failure or misconduct.
    (c) If a party fails to comply with an order, including an order for 
taking a deposition, the production of evidence within the party's 
control, or a request for admission, the ALJ may--
    (1) Draw an inference in favor of the requesting party with regard 
to the information sought;
    (2) In the case of requests for admission, deem each matter of which 
an admission is requested to be admitted;
    (3) Prohibit the party failing to comply with the order from 
introducing evidence concerning, or otherwise relying upon testimony 
relating to, the information sought; and
    (4) Strike any part of the pleadings or other submissions of the 
party failing to comply with the request.
    (d) If a party fails to prosecute or defend an action under this 
part commenced by service of a notice of hearing, the ALJ may dismiss 
the action or may issue an initial decision imposing penalties and 
assessments.

[[Page 82]]

    (e) The ALJ may refuse to consider any motion, request, response, 
brief, or other document that is not filed in a timely fashion.

(Authority: 31 U.S.C. 3803(g)(2))



Sec. 33.30  The hearing and burden of proof.

    (a) The ALJ shall conduct a hearing on the record in order to 
determine whether the defendant is liable for a civil penalty or 
assessment under Sec. 33.3 and, if so, the appropriate amount of the 
civil penalty or assessment considering any aggravating or mitigating 
factors.
    (b) The Department shall prove a defendant's liability and any 
aggravating factors by a preponderance of the evidence.
    (c) The defendant shall prove any affirmative defenses and any 
mitigating factors by a preponderance of the evidence.
    (d) The hearing must be open to the public unless otherwise ordered 
by the ALJ for good cause shown.

(Authority: 31 U.S.C. 3803 (f), (g)(2))



Sec. 33.31  Determining the amount of penalties and assessments.

    (a) In determining an appropriate amount of civil penalties and 
assessments, the ALJ and the Department head, upon appeal, evaluate any 
circumstances that mitigate or aggravate the violation and articulate in 
their opinions the reasons that support the penalties and assessments 
they impose. Because of the intangible costs of fraud, the expense of 
investigating fraudulent conduct, and the need to deter others who might 
be similarly tempted, ordinarily double damages and a significant civil 
penalty is imposed.
    (b) Although not exhaustive, the following factors are among those 
that may influence the ALJ and the Department head in determining the 
amount of penalties and assessments to impose with respect to the 
misconduct (i.e., the false, fictitious, or fraudulent claims or 
statements) charged in the complaint:
    (1) The number of false, fictitious, or fraudulent claims or 
statements.
    (2) The time period over which such claims or statements were made.
    (3) The degree of the defendent's culpability with respect to the 
misconduct.
    (4) The amount of money or the value of the property, services, or 
benefit falsely claimed.
    (5) The value of the Government's actual loss as a result of the 
misconduct, including foreseeable consequential damages and the costs of 
investigation.
    (6) The relationship of the amount imposed as civil penalties to the 
amount of the Government's loss.
    (7) The potential or actual impact of the misconduct upon national 
defense, public health or safety, or public confidence in the management 
of Government programs and operations, including particularly the impact 
on the intended beneficiaries of such programs.
    (8) Whether the defendant has engaged in a pattern of the same or 
similar misconduct.
    (9) Whether the defendant attempted to conceal the misconduct.
    (10) The degree to which the defendant has involved others in the 
misconduct or in concealing it.
    (11) If the misconduct of employees or agents is imputed to the 
defendant, the extent to which the defendant's practices fostered or 
attempted to preclude the misconduct.
    (12) Whether the defendant cooperated in or obstructed an 
investigation of the misconduct.
    (13) Whether the defendant assisted in identifying and prosecuting 
other wrongdoers.
    (14) The complexity of the program or transaction, and the degree of 
the defendant's sophistication with respect to it, including the extent 
of the defendant's prior participation in the program or in similar 
transactions.
    (15) Whether the defendant has been found, in any criminal, civil, 
or administrative proceeding to have engaged in similar misconduct or to 
have dealt dishonestly with the Government of the United States or of a 
State, directly or indirectly.
    (16) The need to deter the defendant and others from engaging in the 
same or similar misconduct.

[[Page 83]]

    (c) Nothing in this section may be construed to limit the ALJ or the 
Department head from considering any other factors that in any given 
case may mitigate or aggravate the offense for which penalties and 
assessments are imposed.

(Authority: 31 U.S.C. 3803(a)(2) (e), (f))



Sec. 33.32  Location of hearing.

    (a) The hearing may be held:
    (1) In any judicial district of the United States in which the 
defendant resides or transacts business;
    (2) In any judicial district of the United States in which the claim 
or statement in issue was made; or
    (3) In such other place as may be agreed upon by the defendant and 
the ALJ.
    (b) Each party must have the opportunity to present argument with 
respect to the location of the hearing.
    (c) The hearing must be held at the place and at the time ordered by 
the ALJ.

(Authority: 31 U.S.C. 3803(g)(4))



Sec. 33.33  Witnesses.

    (a) Except as provided in paragraph (b) of this section, testimony 
at the hearing must be given orally by witnesses under oath or 
affirmation.
    (b) At the discretion of the ALJ, testimony may be admitted in the 
form of a written statement or deposition. Any such written statement 
must be provided to all other parties along with the last known address 
of the witness, in a manner that allows sufficient time for other 
parties to subpoena the witness for cross-examination at the hearing. 
Prior written statements of witnesses proposed to testify at the hearing 
and deposition transcripts must be exchanged as provided in Sec. 
33.22(a).
    (c) The ALJ shall exercise reasonable control over the mode and 
order of interrogating witnesses and presenting evidence so as to:
    (1) Make the interrogation and presentation effective for the 
ascertainment of the truth;
    (2) Avoid needless consumption of time; and
    (3) Protect witnesses from harassment or undue embarrassment.
    (d) The ALJ shall permit the parties to conduct such cross-
examination as may be required for a full and true disclosure of the 
facts.
    (e) At the discretion of the ALJ, a witness may be cross-examined on 
matters relevant to the proceeding without regard to the scope of his or 
her direct examination. To the extent permitted by the ALJ, cross-
examination on matters outside the scope of direct examination must be 
conducted in the manner of direct examination and may proceed by leading 
questions only if the witness is a hostile witness, an adverse party, or 
a witness identified with an adverse party.
    (f) Upon motion of any party, the ALJ shall order witnesses excluded 
so that they cannot hear the testimony of other witnesses. This rule 
does not authorize exclusion of--
    (1) A party who is an individual;
    (2) In the case of a party that is not an individual, an officer or 
employee of the party appearing for the party pro se or designated by 
the party's representative; or
    (3) An individual whose presence is shown by a party to be essential 
to the presentation of its case, including an individual employed by the 
Government engaged in assisting the representative for the Government.

(Authority: 31 U.S.C. 3803(g)(2)(E); 3809))



Sec. 33.34  Evidence.

    (a) The ALJ shall determine the admissibility of evidence.
    (b) Except as provided in this part, the ALJ is not bound by the 
Federal Rules of Evidence. However, the ALJ may apply the Federal Rules 
of Evidence if appropriate, e.g., to exclude unreliable evidence.
    (c) The ALJ shall exclude irrelevant and immaterial evidence.
    (d) Although relevant, evidence may be excluded if its probative 
value is substantially outweighted by the danger of unfair prejudice, 
confusion of the issues, or by considerations of undue delay or needless 
presentation of cumulative evidence.
    (e) Although relevant, evidence may be excluded if it is privileged 
under Federal law.
    (f) Evidence concerning offers of compromise or settlement are 
inadmissible

[[Page 84]]

to the extend provided in Rule 408 of the Federal Rules of Evidence.
    (g) The ALJ shall permit the parties to introduce rebuttal witnesses 
and evidence.
    (h) All Documents and other evidence offered or taken for the record 
must be open to examination by all parties, unless otherwise ordered by 
the ALJ pursuant to Sec. 33.24.

(Authority: 31 U.S.C. 3803(f)(g)(2)(E))



Sec. 33.35  The record.

    (a) The hearing must be recorded and transcribed. Transcripts may be 
obtained following the hearing from the ALJ at a cost not to exceed the 
actual cost of duplication.

(Authority: 31 U.S.C. 3803 (f))

    (b) The transcript of testimony, exhibits and other evidence 
admitted at the hearing, and all papers and requests filed in the 
proceeding constitute the record for the decision by the ALJ and the 
Department head.
    (c) The record may be inspected and copied (upon payment of a 
reasonable fee) by anyone, unless otherwise ordered by the ALJ pursuant 
to Sec. 33.24.

(Authority: 5 U.S.C. App. 2, section 11)



Sec. 33.36  Post-hearing briefs.

    The ALJ may require the parties to file post-hearing briefs. In any 
event, any party may file a post-hearing brief. The ALJ shall fix the 
time for filing these briefs, not to exceed 60 days from the date the 
parties receive the transcript of the hearing or, if applicable, the 
stipulated record. The briefs may be accompanied by proposed findings of 
fact and conclusions of law. The ALJ may permit the parties to file 
reply briefs.

(Authority: 31 U.S.C. 3803 (g)(1)(2)(E))



Sec. 33.37  Initial decision.

    (a) The ALJ shall issue an initial decision, based only on the 
record, that contains findings of fact, conclusions of law, and the 
amount of any penalties and assessments imposed.
    (b) The findings of fact must include a finding on each of the 
following issues:
    (1) Whether the claims or statements identified in the complaint, or 
any portions of the complaint, violate Sec. 33.3.
    (2) If the person is liable for penalties or assessments, the 
appropriate amount of any such penalties or assessments considering any 
mitigating or aggravating factors that the ALJ finds in the case, such 
as those described in Sec. 33.31.
    (c) The ALJ shall promptly serve the initial decision on all parties 
within 90 days after the time for submission of post-hearing briefs and 
reply briefs (if permitted) has expired. The ALJ shall at the same time 
serve all parties with a statement describing the right of any defendant 
determined to be liable for a civil penalty or assessment to file a 
motion for reconsideration with the ALJ or a notice of appeal with the 
Department head. If the ALJ fails to meet the deadline contained in this 
paragraph, he or she shall notify the parties of the reasons for the 
delay and shall set a new deadline.
    (d) Unless the initial decision of the ALJ is timely appealed to the 
Department head, or a motion for reconsideration of the initial decision 
is timely filed, the initial decision shall constitute the final 
decision of the Department head and shall be final and binding on the 
parties 30 days after it is issued by the ALJ.

(Authority: 31 U.S.C. 3803(h)(i))



Sec. 33.38  Reconsideration of initial decision.

    (a) Except as provided in paragraph (d) of this section, any party 
may file a motion for reconsideration of the initial decision within 20 
days of receipt of the initial decision. If service was made by mail, 
receipt is presumed to be five days from the date of mailing in the 
absence of contrary proof.
    (b) Every motion under paragraph (a) of this section must set forth 
the matters claimed to have been erroneously decided and the nature of 
the alleged errors. The motion must be accompanied by a supporting 
brief.
    (c) Responses to the motion are allowed only upon request to the 
ALJ.
    (d) No party may file a motion for reconsideration of an initial 
decision that has been revised in response to a previous motion for 
reconsideration.

[[Page 85]]

    (e) The ALJ may dispose of a motion for reconsideration by denying 
it or by issuing a revised initial decision.
    (f) If the ALJ denies a motion for reconsideration, the initial 
decision shall constitute the final decision of the Department head and 
shall be final and binding on the parties 30 days after the ALJ denies 
the motion, unless the initial decision is timely appealed to the 
Department head in accordance with Sec. 33.39.
    (g) If the ALJ issues a revised initial decision, that decision 
shall constitute the final decision of the Department head and shall be 
final and binding on the parties 30 days after it is issued, unless it 
is timely appealed to the Department head in accordance with Sec. 
33.39.

(Authority: 31 U.S.C. 3809)



Sec. 33.39  Appeal to Department head.

    (a) Any defendant who has filed a timely answer and who is 
determined in an initial decision to be liable for a civil penalty or 
assessment may appeal the decision to the Department head by filing a 
notice of appeal with the Department head in accordance with this 
section.
    (b)(1) A notice of appeal may be filed at any time within 30 days 
after the ALJ issues a final decision. However, if another party files a 
motion for reconsideration under Sec. 33.38, consideration of the 
appeal shall be stayed automatically pending resolution of the motion 
for reconsideration.
    (2) If a motion for reconsideration is timely filed, a notice of 
appeal may be filed within 30 days after the ALJ denies the motion or 
issues a revised initial decision, whichever applies.
    (3) The Department head may extend the initial 30-day period for an 
additional 30 days if the defendant files with the Department head a 
request for an extension within the initial 30-day period and shows good 
cause.
    (c) If the defendant files a timely notice of appeal with the 
Department head, and the time for filing motions for reconsideration 
under Sec. 33.38 has expired, the ALJ shall forward the record of the 
proceeding to the Department head.
    (d) A notice of appeal must be accompanied by a written brief 
specifying exceptions to the initial decision and reasons supporting the 
exceptions.
    (e) The representative for the Government may file a brief in 
opposition to exceptions within 30 days of receiving the notice of 
appeal and accompanying brief.
    (f) There is no right to appear personally before the Department 
head.
    (g) There is no right to appeal any interlocutory ruling by the ALJ.
    (h) In reviewing the initial decision, the Department head does not 
consider any objection that was not raised before the ALJ unless a 
demonstration is made of extraordinary circumstances causing the failure 
to raise the objection.
    (i) If any party demonstrates to the satisfaction of the Department 
head that additional evidence not presented at such hearing is material 
and that there were reasonable grounds for the failure to present that 
evidence at the hearing, the Department head shall remand the matter to 
the ALJ for consideration of the additional evidence.
    (j) The Department head affirms, reduces, reverses, compromises, 
remands, or settles any penalty or assessment, determined by the ALJ in 
any initial decision.

(Authority: 31 U.S.C. 3803(i))

    (k) The Department head promptly serves each party to the appeal 
with a copy of the decision of the Department head and a statement 
describing the right of any person determined to be liable for a penalty 
or assessment to seek judicial review.

(Authority: 31 U.S.C. 3803(i)(2))

    (l) Unless a petition for review is filed as provided in 31 U.S.C. 
3805, after a defendant has exhausted all administrative remedies under 
this part and within 60 days after the date on which the Department head 
serves the defendant with a copy of the Department head's decision, a 
determination that a defendant is liable under Sec. 33.3 is final and 
is not subject to judicial review.

(Authority: 31 U.S.C. 3805(a)(2))

[[Page 86]]



Sec. 33.40  Stays ordered by the Department of Justice.

    If at any time the Attorney General or an Assistant Attorney General 
designated by the Attorney General transmits to the Department head a 
written finding that continuation of the administrative process 
described in this part with respect to a claim or statement may 
adversely affect any pending or potential criminal or civil action 
related to such claim or statement, the Department head stays the 
process immediately. The Department head orders the process resumed only 
upon receipt of the written authorization of the Attorney General.

(Authority: 31 U.S.C. 3803(b)(3))



Sec. 33.41  Stay pending appeal.

    (a) An initial decision is stayed automatically pending disposition 
of a motion for reconsideration or of an appeal to the Department head.
    (b) No administrative stay is available following a final decision 
of the Department head.

(Authority: 31 U.S.C. 3809)



Sec. 33.42  Judicial review.

    Section 3805 of title 31, United States Code, authorizes judicial 
review by an appropriate United States District Court of a final 
decision of the Department head imposing penalties or assessments under 
this part and specifies the procedures for the review.

(Authority: 31 U.S.C. 3805)



Sec. 33.43  Collection of civil penalties and assessments.

    Section 3806 and 3808(b) of title 31, United States Code, authorize 
actions for collection of civil penalties and assessments imposed under 
this part and specify the procedures for those actions.

(Authority: 31 U.S.C. 3808(b))



Sec. 33.44  Right to administrative offset.

    The amount of any penalty or assessment that has become final, or 
for which a judgment has been entered under Sec. 33.42 or Sec. 33.43, 
or any amount agreed upon in a compromise or settlement under Sec. 
33.46, may be collected by administrative offset under 31 U.S.C. 3716, 
except that an administrative offset may not be under this section 
against a refund of an overpayment of Federal taxes, then or later owing 
by the United States to the defendant.

(Authority: 31 U.S.C. 3806)



Sec. 33.45  Deposit in Treasury of United States.

    All amounts collected pursuant to this part are deposited as 
miscellaneous receipts in the Treasury of the United States, except as 
provided in 31 U.S.C. 3806(g).

(Authority: 31 U.S.C. 3807(b))



Sec. 33.46  Compromise or settlement.

    (a) Parties may make offers of compromise or settlement at any time.

(Authority: 31 U.S.C. 3809)

    (b) The reviewing official has the exclusive authority to compromise 
or settle a case under this part at any time after the date on which the 
reviewing official is permitted to issue a complaint and before the date 
on which the ALJ issues an initial decision.

(Authority: 31 U.S.C. 3803(j))

    (c) The Department head has exclusive authority to compromise or 
settle a case under this part at any time after the date on which the 
ALJ issues an initial decision, except during the pendency of any review 
under Sec. 33.42 or during the pendency of any action to collect 
penalties and assessments under Sec. 33.43.

(Authority: 31 U.S.C. 3803(i)(2)(C))

    (d) The Attorney General has exclusive authority to compromise or 
settle a case under this part during the pendency of any review under 
Sec. 33.42 or of any action to recover penalties and assessments under 
31 U.S.C. 3806.

(Authority: 31 U.S.C. 3806(f))

    (e) The investigating official may recommend settlement terms to the 
reviewing official, the Department head, or the Attorney General, as 
appropriate. The reviewing official may recommend settlement terms to 
the Department head, or the Attorney General, as appropriate.

(Authority: 31 U.S.C. 3809)


[[Page 87]]


    (f) Any compromise or settlement must be in writing.

(Authority: 31 U.S.C. 3809)



Sec. 33.47  Limitations.

    (a) The notice of hearing with respect to a claim or statement must 
be served in the manner specified in Sec. 33.8 within six years after 
the date on which the claim or statement is made.
    (b) If the defendant fails to file a timely answer, service of a 
notice under Sec. 33.10(b) is deemed a notice of hearing for purposes 
of this section.
    (c) The statute of limitations may be extended by agreement of the 
parties.

(Authority: 31 U.S.C. 3808)



PART 34_ADMINISTRATIVE WAGE GARNISHMENT--Table of Contents




Sec.
34.1 Purpose of this part.
34.2 Scope of this part.
34.3 Definitions.
34.4 Notice of proposed garnishment.
34.5 Contents of a notice of proposed garnishment.
34.6 Rights in connection with garnishment.
34.7 Consideration of objection to the rate or amount of withholding.
34.8 Providing a hearing.
34.9 Conditions for an oral hearing.
34.10 Conditions for a paper hearing.
34.11 Timely request for a hearing.
34.12 Request for reconsideration.
34.13 Conduct of a hearing.
34.14 Burden of proof.
34.15 Consequences of failure to appear for an oral hearing.
34.16 Issuance of the hearing decision.
34.17 Content of decision.
34.18 Issuance of the wage garnishment order.
34.19 Amounts to be withheld under a garnishment order.
34.20 Amount to be withheld under multiple garnishment orders.
34.21 Employer certification.
34.22 Employer responsibilities.
34.23 Exclusions from garnishment.
34.24 Claim of financial hardship by debtor subject to garnishment.
34.25 Determination of financial hardship.
34.26 Ending garnishment.
34.27 Actions by employer prohibited by law.
34.28 Refunds of amounts collected in error.
34.29 Enforcement action against employer for noncompliance with 
          garnishment order.
34.30 Application of payments and accrual of interest.

    Authority: 31 U.S.C. 3720D, unless otherwise noted.

    Source: 68 FR 8142, Feb, 19, 2003, unless otherwise noted.



Sec. 34.1  Purpose of this part.

    This part establishes procedures the Department of Education uses to 
collect money from a debtor's disposable pay by means of administrative 
wage garnishment to satisfy delinquent debt owed to the United States.

(Authority: 31 U.S.C. 3720D)



Sec. 34.2  Scope of this part.

    (a) This part applies to collection of any financial obligation owed 
to the United States that arises under a program we administer.
    (b) This part applies notwithstanding any provision of State law.
    (c) We may compromise or suspend collection by garnishment of a debt 
in accordance with applicable law.
    (d) We may use other debt collection remedies separately or in 
conjunction with administrative wage garnishment to collect a debt.
    (e) To collect by offset from the salary of a Federal employee, we 
use the procedures in 34 CFR part 31, not those in this part.

(Authority: 31 U.S.C. 3720D)



Sec. 34.3  Definitions.

    As used in this part, the following definitions apply:
    Administrative debt means a debt that does not arise from an 
individual's obligation to repay a loan or an overpayment of a grant 
received under a student financial assistance program authorized under 
Title IV of the Higher Education Act.
    Business day means a day Monday through Friday, unless that day is a 
Federal holiday.
    Certificate of service means a certificate signed by an authorized 
official of the U.S. Department of Education (the Department) that 
indicates the nature of the document to which it pertains, the date we 
mail the document, and to whom we are sending the document.
    Day means calendar day. For purposes of computation, the last day of 
a period will be included unless that day is a Saturday, a Sunday, or a 
Federal

[[Page 88]]

legal holiday; in that case, the last day of the period is the next 
business day after the end of the period.
    Debt or claim means any amount of money, funds, or property that an 
appropriate official of the Department has determined an individual owes 
to the United States under a program we administer.
    Debtor means an individual who owes a delinquent nontax debt to the 
United States under a program we administer.
    Disposable pay. This term--
    (a)(1) Means that part of a debtor's compensation for personal 
services, whether or not denominated as wages, from an employer that 
remains after the deduction of health insurance premiums and any amounts 
required by law to be withheld.
    (2) For purposes of this part, ``amounts required by law to be 
withheld'' include amounts for deductions such as social security taxes 
and withholding taxes, but do not include any amount withheld under a 
court order; and
    (b) Includes, but is not limited to, salary, bonuses, commissions, 
or vacation pay.
    Employer. This term--
    (a) Means a person or entity that employs the services of another 
and that pays the latter's wages or salary;
    (b) Includes, but is not limited to, State and local governments; 
and
    (c) Does not include an agency of the Federal Government.
    Financial hardship means an inability to meet basic living expenses 
for goods and services necessary for the survival of the debtor and his 
or her spouse and dependents.
    Garnishment means the process of withholding amounts from an 
employee's disposable pay and paying those amounts to a creditor in 
satisfaction of a withholding order.
    We means the United States Department of Education.
    Withholding order. (a) This term means any order for withholding or 
garnishment of pay issued by this Department, another Federal agency, a 
State or private non-profit guaranty agency, or a judicial or 
administrative body.
    (b) For purposes of this part, the terms ``wage garnishment order'' 
and ``garnishment order'' have the same meaning as ``withholding 
order.''
    You means the debtor.

(Authority: 31 U.S.C. 3720D)



Sec. 34.4  Notice of proposed garnishment.

    (a) We may start proceedings to garnish your wages whenever we 
determine that you are delinquent in paying a debt owed to the United 
States under a program we administer.
    (b) We start garnishment proceedings by sending you a written notice 
of the proposed garnishment.
    (c) At least 30 days before we start garnishment proceedings, we 
mail the notice by first class mail to your last known address.
    (d)(1) We keep a copy of a certificate of service indicating the 
date of mailing of the notice.
    (2) We may retain this certificate of service in electronic form.

(Authority: 31 U.S.C. 3720D)



Sec. 34.5  Contents of a notice of proposed garnishment.

    In a notice of proposed garnishment, we inform you of--
    (a) The nature and amount of the debt;
    (b) Our intention to collect the debt through deductions from pay 
until the debt and all accumulated interest, penalties, and collection 
costs are paid in full; and
    (c) An explanation of your rights, including those in Sec. 34.6, 
and the time frame within which you may exercise your rights.

(Authority: 31 U.S.C. 3720D)



Sec. 34.6  Rights in connection with garnishment.

    Before starting garnishment, we provide you the opportunity--
    (a) To inspect and copy our records related to the debt;
    (b) To enter into a written repayment agreement with us to repay the 
debt under terms we consider acceptable;
    (c) For a hearing in accordance with Sec. 34.8 concerning--
    (1) The existence, amount, or current enforceability of the debt;

[[Page 89]]

    (2) The rate at which the garnishment order will require your 
employer to withhold pay; and
    (3) Whether you have been continuously employed less than 12 months 
after you were involuntarily separated from employment.

(Authority: 31 U.S.C. 3720D)



Sec. 34.7  Consideration of objection to the rate or amount of 
withholding.

    (a) We consider objections to the rate or amount of withholding only 
if the objection rests on a claim that withholding at the proposed rate 
or amount would cause financial hardship to you and your dependents.
    (b) We do not provide a hearing on an objection to the rate or 
amount of withholding if the rate or amount we propose to be withheld 
does not exceed the rate or amount agreed to under a repayment agreement 
reached within the preceding six months after a previous notice of 
proposed garnishment.
    (c) We do not consider an objection to the rate or amount of 
withholding based on a claim that by virtue of 15 U.S.C. 1673, no amount 
of wages are available for withholding by the employer.

(Authority: 31 U.S.C. 3720D)



Sec. 34.8  Providing a hearing.

    (a) We provide a hearing if you submit a written request for a 
hearing concerning the existence, amount, or enforceability of the debt 
or the rate of wage withholding.
    (b) At our option the hearing may be an oral hearing under Sec. 
34.9 or a paper hearing under Sec. 34.10.

(Authority: 31 U.S.C. 3720D)



Sec. 34.9  Conditions for an oral hearing.

    (a) We provide an oral hearing if you--
    (1) Request an oral hearing; and
    (2) Show in the request a good reason to believe that we cannot 
resolve the issues in dispute by review of the documentary evidence, by 
demonstrating that the validity of the claim turns on the credibility or 
veracity of witness testimony.
    (b) If we determine that an oral hearing is appropriate, we notify 
you how to receive the oral hearing.
    (c)(1) At your option, an oral hearing may be conducted either in-
person or by telephone conference.
    (2) We provide an in-person oral hearing with regard to 
administrative debts only in Washington D.C.
    (3) We provide an in-person oral hearing with regard to debts based 
on student loan or grant obligations only at our regional service 
centers in Atlanta, Chicago, or San Francisco.
    (4) You must bear all travel expenses you incur in connection with 
an in-person hearing.
    (5) We bear the cost of any telephone calls we place in order to 
conduct an oral hearing by telephone.
    (d)(1) To arrange the time and location of the oral hearing, we 
ordinarily attempt to contact you first by telephone call to the number 
you provided to us.
    (2) If we are unable to contact you by telephone, we leave a message 
directing you to contact us within 5 business days to arrange the time 
and place of the hearing.
    (3) If we can neither contact you directly nor leave a message with 
you by telephone--
    (i) We notify you in writing to contact us to arrange the time and 
place of the hearing; or
    (ii) We select a time and place for the hearing, and notify you in 
writing of the time and place set for the hearing.
    (e) We consider you to have withdrawn the request for an oral 
hearing if--
    (1) Within 15 days of the date of a written notice to contact us, we 
receive no response to that notice; or
    (2) Within five business days of the date of a telephone message to 
contact us, we receive no response to that message.

(Authority: 31 U.S.C. 3720D)



Sec. 34.10  Conditions for a paper hearing.

    We provide a paper hearing--
    (a) If you request a paper hearing;
    (b) If you requested an oral hearing, but we determine under Sec. 
34.9(e) that you have withdrawn that request;
    (c) If you fail to appear for a scheduled oral hearing, as provided 
in Sec. 34.15; or
    (d) If we deny a request for an oral hearing because we conclude 
that, by a

[[Page 90]]

review of the written record, we can resolve the issues raised by your 
objections.

(Authority: 31 U.S.C. 3720D)



Sec. 34.11  Timely request for a hearing.

    (a) A hearing request is timely if--
    (1) You mail the request to the office designated in the garnishment 
notice and the request is postmarked not later than the 30th day 
following the date of the notice; or
    (2) The designated office receives the request not later than the 
30th day following the date of the garnishment notice.
    (b) If we receive a timely written request from you for a hearing, 
we will not issue a garnishment order before we--
    (1) Provide the requested hearing; and
    (2) Issue a written decision on the objections you raised.
    (c) If your written request for a hearing is not timely--
    (1) We provide you a hearing; and
    (2) We do not delay issuance of a garnishment order unless--
    (i) We determine from credible representations in the request that 
the delay in filing the request for hearing was caused by factors over 
which you had no control; or
    (ii) We have other good reason to delay issuing a garnishment order.
    (d) If we do not complete a hearing within 60 days of an untimely 
request, we suspend any garnishment order until we have issued a 
decision.

(Authority: 31 U.S.C. 3720D)



Sec. 34.12  Request for reconsideration.

    (a) If you have received a decision on an objection to garnishment 
you may file a request for reconsideration of that decision.
    (b) We do not suspend garnishment merely because you have filed a 
request for reconsideration.
    (c) We consider your request for reconsideration if we determine 
that--
    (1) You base your request on grounds of financial hardship, and your 
financial circumstances, as shown by evidence submitted with the 
request, have materially changed since we issued the decision so that we 
should reduce the amount to be garnished under the order; or
    (2)(i) You submitted with the request evidence that you did not 
previously submit; and
    (ii) This evidence demonstrates that we should reconsider your 
objection to the existence, amount, or enforceability of the debt.
    (d)(1) If we agree to reconsider the decision, we notify you.
    (2)(i) We may reconsider based on the request and supporting 
evidence you have presented with the request; or
    (ii) We may offer you an opportunity for a hearing to present 
evidence.

(Authority: 31 U.S.C. 3720D)



Sec. 34.13  Conduct of a hearing.

    (a)(1) A hearing official conducts any hearing under this part.
    (2) The hearing official may be any qualified employee of the 
Department whom the Department designates to conduct the hearing.
    (b)(1) The hearing official conducts any hearing as an informal 
proceeding.
    (2) A witness in an oral hearing must testify under oath or 
affirmation.
    (3) The hearing official maintains a summary record of any hearing.
    (c) Before the hearing official considers evidence we obtain that 
was not included in the debt records available for inspection when we 
sent notice of proposed garnishment, we notify you that additional 
evidence has become available, may be considered by the hearing 
official, and is available for inspection or copying.
    (d) The hearing official considers any objection you raise and 
evidence you submit--
    (1) In or with the request for a hearing;
    (2) During an oral hearing;
    (3) By the date that we consider, under Sec. 34.9(e), that a 
request for an oral hearing has been withdrawn; or
    (4) Within a period we set, ordinarily not to exceed seven business 
days, after--
    (i) We provide you access to our records regarding the debt, if you 
requested access to records within 20 days after the date of the notice 
under Sec. 34.4;

[[Page 91]]

    (ii) We notify you that we have obtained and intend to consider 
additional evidence;
    (iii) You request an extension of time in order to submit specific 
relevant evidence that you identify to us in the request; or
    (iv) We notify you that we deny your request for an oral hearing.

(Authority: 31 U.S.C. 3720D)



Sec. 34.14  Burden of proof.

    (a)(1) We have the burden of proving the existence and amount of a 
debt.
    (2) We meet this burden by including in the record and making 
available to the debtor on request records that show that--
    (i) The debt exists in the amount stated in the garnishment notice; 
and
    (ii) The debt is currently delinquent.
    (b) If you dispute the existence or amount of the debt, you must 
prove by a preponderance of the credible evidence that--
    (1) No debt exists;
    (2) The amount we claim to be owed on the debt is incorrect, or
    (3) You are not delinquent with respect to the debt.
    (c)(1) If you object that the proposed garnishment rate would cause 
financial hardship, you bear the burden of proving by a preponderance of 
the credible evidence that withholding the amount of wages proposed in 
the notice would leave you unable to meet the basic living expenses of 
you and your dependents.
    (2) The standards for proving financial hardship are those in Sec. 
34.24.
    (d)(1) If you object on the ground that applicable law bars us from 
collecting the debt by garnishment at this time, you bear the burden of 
proving the facts that would establish that claim.
    (2) Examples of applicable law that may prevent collection by 
garnishment include the automatic stay in bankruptcy (11 U.S.C. 362(a)), 
and the preclusion of garnishment action against a debtor who was 
involuntarily separated from employment and has been reemployed for less 
than a continuous period of 12 months (31 U.S.C. 3720D(b)(6)).
    (e) The fact that applicable law may limit the amount that an 
employer may withhold from your pay to less than the amount or rate we 
state in the garnishment order does not bar us from issuing the order.

(Authority: 31 U.S.C. 3720D)



Sec. 34.15  Consequences of failure to appear for an oral hearing.

    (a) If you do not appear for an in-person hearing you requested, or 
you do not answer a telephone call convening a telephone hearing, at the 
time set for the hearing, we consider you to have withdrawn your request 
for an oral hearing.
    (b) If you do not appear for an oral hearing but you demonstrate 
that there was good cause for not appearing, we may reschedule the oral 
hearing.
    (c) If you do not appear for an oral hearing you requested and we do 
not reschedule the hearing, we provide a paper hearing to review your 
objections, based on the evidence in your file and any evidence you have 
already provided.

(Authority: 31 U.S.C. 3720D)



Sec. 34.16  Issuance of the hearing decision.

    (a) Date of decision. The hearing official issues a written opinion 
stating his or her decision, as soon as practicable, but not later than 
60 days after the date on which we received the request for hearing.
    (b) If we do not provide you with a hearing and render a decision 
within 60 days after we receive your request for a hearing--
    (1) We do not issue a garnishment order until the hearing is held 
and a decision rendered; or
    (2) If we have already issued a garnishment order to your employer, 
we suspend the garnishment order beginning on the 61st day after we 
receive the hearing request until we provide a hearing and issue a 
decision.

(Authority: 31 U.S.C. 3720D)



Sec. 34.17  Content of decision.

    (a) The written decision is based on the evidence contained in the 
hearing record. The decision includes--
    (1) A description of the evidence considered by the hearing 
official;

[[Page 92]]

    (2) The hearing official's findings, analysis, and conclusions 
regarding objections raised to the existence or amount of the debt;
    (3) The rate of wage withholding under the order, if you objected 
that withholding the amount proposed in the garnishment notice would 
cause an extreme financial hardship; and
    (4) An explanation of your rights under this part for 
reconsideration of the decision.
    (b) The hearing official's decision is the final action of the 
Secretary for the purposes of judicial review under the Administrative 
Procedure Act (5 U.S.C. 701 et seq.).

(Authority: 31 U.S.C. 3720D)



Sec. 34.18  Issuance of the wage garnishment order.

    (a)(1) If you fail to make a timely request for a hearing, we issue 
a garnishment order to your employer within 30 days after the deadline 
for timely requesting a hearing.
    (2) If you make a timely request for a hearing, we issue a 
withholding order within 30 days after the hearing official issues a 
decision to proceed with garnishment.
    (b)(1) The garnishment order we issue to your employer is signed by 
an official of the Department designated by the Secretary.
    (2) The designated official's signature may be a computer-generated 
facsimile.
    (c)(1) The garnishment order contains only the information we 
consider necessary for your employer to comply with the order and for us 
to ensure proper credit for payments received from your employer.
    (2) The order includes your name, address, and social security 
number, as well as instructions for withholding and information as to 
where your employer must send the payments.
    (d)(1) We keep a copy of a certificate of service indicating the 
date of mailing of the order.
    (2) We may create and maintain the certificate of service as an 
electronic record.

(Authority: 31 U.S.C. 3720D)



Sec. 34.19  Amounts to be withheld under a garnishment order.

    (a)(1) After an employer receives a garnishment order we issue, the 
employer must deduct from all disposable pay of the debtor during each 
pay period the amount directed in the garnishment order unless this 
section or Sec. 34.20 requires a smaller amount to be withheld.
    (2) The amount specified in the garnishment order does not apply if 
other law, including this section, requires the employer to withhold a 
smaller amount.
    (b) The employer must comply with our garnishment order by 
withholding the lesser of--
    (1) The amount directed in the garnishment order; or--
    (2) The amount specified in 15 U.S.C. 1673(a)(2) (Restriction on 
Garnishment); that is, the amount by which a debtor's disposable pay 
exceeds an amount equal to 30 times the minimum wage. (See 29 CFR 
870.10.)

(Authority: 31 U.S.C. 3720D)



Sec. 34.20  Amount to be withheld under multiple garnishment orders.

    If a debtor's pay is subject to several garnishment orders, the 
employer must comply with our garnishment order as follows:
    (a) Unless other Federal law requires a different priority, the 
employer must pay us the amount calculated under Sec. 34.19(b) before 
the employer complies with any later garnishment orders, except a family 
support withholding order.
    (b) If an employer is withholding from a debtor's pay based on a 
garnishment order served on the employer before our order, or if a 
withholding order for family support is served on an employer at any 
time, the employer must comply with our garnishment order by withholding 
an amount that is the smaller of--
    (1) The amount calculated under Sec. 34.19(b); or
    (2) An amount equal to 25 percent of the debtor's disposable pay 
less the amount or amounts withheld under the garnishment order or 
orders with priority over our order.

[[Page 93]]

    (c)(1) If a debtor owes more than one debt arising from a program we 
administer, we may issue multiple garnishment orders.
    (2) The total amount withheld from the debtor's pay for orders we 
issue under paragraph (c)(1) of this section does not exceed the amounts 
specified in the orders, the amount specified in Sec. 34.19(b)(2), or 
15 percent of the debtor's disposable pay, whichever is smallest.
    (d) An employer may withhold and pay an amount greater than that 
amount in paragraphs (b) and (c) of this section if the debtor gives the 
employer written consent.

(Authority: 31 U.S.C. 3720D)



Sec. 34.21  Employer certification.

    (a) Along with a garnishment order, we send to an employer a 
certification in a form prescribed by the Secretary of the Treasury.
    (b) The employer must complete and return the certification to us 
within the time stated in the instructions for the form.
    (c) The employer must include in the certification information about 
the debtor's employment status, payment frequency, and disposable pay 
available for withholding.

(Authority: 31 U.S.C. 3720D)



Sec. 34.22  Employer responsibilities.

    (a)(1) Our garnishment order indicates a reasonable period of time 
within which an employer must start withholding under the order.
    (2) The employer must promptly pay to the Department all amounts the 
employer withholds according to the order.
    (b) The employer may follow its normal pay and disbursement cycles 
in complying with the garnishment order.
    (c) The employer must withhold the appropriate amount from the 
debtor's wages for each pay period until the employer receives our 
notification to discontinue wage garnishment.
    (d) The employer must disregard any assignment or allotment by an 
employee that would interfere with or prohibit the employer from 
complying with our garnishment order, unless that assignment or 
allotment was made for a family support judgment or order.

(Authority: 31 U.S.C. 3720D)



Sec. 34.23  Exclusions from garnishment.

    (a) We do not garnish your wages if we have credible evidence that 
you--
    (1) Were involuntarily separated from employment; and
    (2) Have not yet been reemployed continuously for at least 12 
months.
    (b) You have the burden of informing us of the circumstances 
surrounding an involuntary separation from employment.

(Authority: 31 U.S.C. 3720D)



Sec. 34.24  Claim of financial hardship by debtor subject to garnishment.

    (a) You may object to a proposed garnishment on the ground that 
withholding the amount or at the rate stated in the notice of 
garnishment would cause financial hardship to you and your dependents. 
(See Sec. 34.7)
    (b) You may, at any time, object that the amount or the rate of 
withholding which our order specifies your employer must withhold causes 
financial hardship.
    (c)(1) We consider an objection to an outstanding garnishment order 
and provide you an opportunity for a hearing on your objection only 
after the order has been outstanding for at least six months.
    (2) We may provide a hearing in extraordinary circumstances earlier 
than six months if you show in your request for review that your 
financial circumstances have substantially changed after the notice of 
proposed garnishment because of an event such as injury, divorce, or 
catastrophic illness.
    (d)(1) You bear the burden of proving a claim of financial hardship 
by a preponderance of the credible evidence.
    (2) You must prove by credible documentation--
    (i) The amount of the costs incurred by you, your spouse, and any 
dependents, for basic living expenses; and
    (ii) The income available from any source to meet those expenses.
    (e)(1) We consider your claim of financial hardship by comparing--

[[Page 94]]

    (i) The amounts that you prove are being incurred for basic living 
expenses; against
    (ii) The amounts spent for basic living expenses by families of the 
same size and similar income to yours.
    (2) We regard the standards published by the Internal Revenue 
Service under 26 U.S.C. 7122(c)(2) (the ``National Standards'') as 
establishing the average amounts spent for basic living expenses for 
families of the same size as, and with family incomes comparable to, 
your family.
    (3) We accept as reasonable the amount that you prove you incur for 
a type of basic living expense to the extent that the amount does not 
exceed the amount spent for that expense by families of the same size 
and similar income according to the National Standards.
    (4) If you claim for any basic living expense an amount that exceeds 
the amount in the National Standards, you must prove that the amount you 
claim is reasonable and necessary.

(Authority: 31 U.S.C. 3720D)



Sec. 34.25  Determination of financial hardship.

    (a)(1) If we conclude that garnishment at the amount or rate 
proposed in a notice would cause you financial hardship, we reduce the 
amount of the proposed garnishment to an amount that we determine will 
allow you to meet proven basic living expenses.
    (2) If a garnishment order is already in effect, we notify your 
employer of any change in the amount the employer must withhold or the 
rate of withholding under the order.
    (b) If we determine that financial hardship would result from 
garnishment based on a finding by a hearing official or under a 
repayment agreement we reached with you, this determination is effective 
for a period not longer than six months after the date of the finding or 
agreement.
    (c)(1) After the effective period referred to in paragraph (b) of 
this section, we may require you to submit current information regarding 
your family income and living expenses.
    (2) If we conclude from a review of that evidence that we should 
increase the rate of withholding or payment, we--
    (i) Notify you; and
    (ii) Provide you with an opportunity to contest the determination 
and obtain a hearing on the objection under the procedures in Sec. 
34.24.

(Authority: 31 U.S.C. 3720D)



Sec. 34.26  Ending garnishment.

    (a)(1) A garnishment order we issue is effective until we rescind 
the order.
    (2) If an employer is unable to honor a garnishment order because 
the amount available for garnishment is insufficient to pay any portion 
of the amount stated in the order, the employer must--
    (i) Notify us; and
    (ii) Comply with the order when sufficient disposable pay is 
available.
    (b) After we have fully recovered the amounts owed by the debtor, 
including interest, penalties, and collection costs, we send the 
debtor's employer notification to stop wage withholding.

(Authority: 31 U.S.C. 3720D)



Sec. 34.27  Actions by employer prohibited by law.

    An employer may not discharge, refuse to employ, or take 
disciplinary action against a debtor due to the issuance of a 
garnishment order under this part.

(Authority: 31 U.S.C. 3720D)



Sec. 34.28  Refunds of amounts collected in error.

    (a) If a hearing official determines under Sec. Sec. 34.16 and 
34.17 that a person does not owe the debt described in our notice or 
that an administrative wage garnishment under this part was barred by 
law at the time of the collection action, we promptly refund any amount 
collected by means of this garnishment.
    (b) Unless required by Federal law or contract, we do not pay 
interest on a refund.

(Authority: 31 U.S.C. 3720D)



Sec. 34.29  Enforcement action against employer for noncompliance with 
garnishment order.

    (a) If an employer fails to comply with Sec. 34.22 to withhold an 
appropriate

[[Page 95]]

amount from wages owed and payable to an employee, we may sue the 
employer for that amount.
    (b)(1) We do not file suit under paragraph (a) of this section 
before we terminate action to enforce the debt as a personal liability 
of the debtor.
    (2) However, the provision of paragraph (b)(1) of this section may 
not apply if earlier filing of a suit is necessary to avoid expiration 
of any applicable statute of limitations.
    (c)(1) For purposes of this section, termination of an action to 
enforce a debt occurs when we terminate collection action in accordance 
with the FCCS, other applicable standards, or paragraph (c)(2) of this 
section.
    (2) We regard termination of the collection action to have occurred 
if we have not received for one year any payments to satisfy the debt, 
in whole or in part, from the particular debtor whose wages were subject 
to garnishment.

(Authority: 31 U.S.C. 3720D)



Sec. 34.30  Application of payments and accrual of interest.

    We apply payments received through a garnishment in the following 
order--
    (a) To costs incurred to collect the debt;
    (b) To interest accrued on the debt at the rate established by--
    (1) The terms of the obligation under which it arises; or
    (2) Applicable law; and
    (c) To outstanding principal of the debt.

(Authority: 31 U.S.C. 3720D)



PART 35_TORT CLAIMS AGAINST THE GOVERNMENT--Table of Contents




                            Subpart A_General

Sec.
35.1 Scope of regulations.

                          Subpart B_Procedures

35.2 Administrative claim; when presented; place of filing.
35.3 Administrative claim; who may file.
35.4 Administrative claim; evidence and information to be submitted.
35.5 Investigation of claims.
35.6 Final denial of claim.
35.7 Payment of approved claims.
35.8 Release.
35.9 Penalties.
35.10 Limitation on Department's authority.

    Authority: Sec. 1(a), 80 Stat. 306; 28 U.S.C. 2672; 28 CFR, part 14.

    Source: 45 FR 30834, May 9, 1980, unless otherwise noted.



                            Subpart A_General



Sec. 35.1  Scope of regulations.

    The regulations in this part shall apply only to claims asserted 
under the Federal Tort Claims Act, as amended, 28 U.S.C. 2671-2680, for 
money damages against the United States for damage to or loss of 
property or personal injury or death caused by the negligent or wrongful 
act or omission of any employee of the Department of Education while 
acting within the scope of his office or employment.



                          Subpart B_Procedures



Sec. 35.2  Administrative claim; when presented; place of filing.

    (a) For purposes of the regulations in this part, a claim shall be 
deemed to have been presented when the Department of Education receives, 
at a place designated in paragraph (b) of this section, an executed 
Standard Form 95 or other written notification of an incident 
accompanied by a claim for money damages in a sum certain for damage to 
or loss of property, for personal injury, or for death, alleged to have 
occurred by reason of the incident. A claim which should have been 
presented to the Department but which was mistakenly addressed to or 
filed with another Federal agency, shall be deemed to be presented to 
the Department as of the date that the claim is received by the 
Department. A claim mistakenly addressed to or filed with the Department 
shall forthwith be transferred to the appropriate Federal agency, if 
ascertainable, or returned to the claimant.
    (b) A claim presented in compliance with paragraph (a) of this 
section may be amended by the claimant at any time prior to final action 
by the Secretary or prior to the exercise of the claimant's option to 
bring suit under 28 U.S.C. 2675(a). Amendments shall be

[[Page 96]]

submitted in writing and signed by the claimant or his duly authorized 
agent or legal representative. Upon the timely filing of an amendment to 
a pending claim, the Department shall have 6 months in which to make a 
final disposition of the claim as amended and the claimant's option 
under 28 U.S.C. 2675(a) shall not accrue until 6 months after the filing 
of an amendment.
    (c) Forms may be obtained and claims may be filed, with the 
Department of Education Claims Officer, Washington, DC 20202.



Sec. 35.3  Administrative claim; who may file.

    (a) A claim for injury to or loss of property may be presented by 
the owner of the property interest which is the subject of the claim, 
his duly authorized agent, or his legal representative.
    (b) A claim for personal injury may be presented by the injured 
person, his duly authorized agent, or his legal representative.
    (c) A claim based on death may be presented by the executor or 
administrator of the decedent's estate or by any other person legally 
entitled to assert such a claim under applicable state law.
    (d) A claim for loss wholly compensated by an insurer with the 
rights of a subrogee may be presented by the insurer. A claim for loss 
partially compensated by an insurer with the rights of a subrogee may be 
presented by the insurer or the insured individually, as their 
respective interests appear, or jointly. Whenever an insurer presents a 
claim asserting the rights of a subrogee, he shall present with his 
claim appropriate evidence that he has the rights of a subrogee.
    (e) A claim presented by an agent or legal representative shall be 
presented in the name of the claimant, be signed by the agent or legal 
representative, show the title or legal capacity of the person signing, 
and be accompanied by evidence of his authority to present a claim on 
behalf of the claimant as agent, executor, administrator, parent, 
guardian, or other representative.



Sec. 35.4  Administrative claim; evidence and information to be submitted.

    (a) Death. In support of a claim based on death, the claimant may be 
required to submit the following evidence or information:
    (1) An authenticated death certificate or other competent evidence 
showing cause of death, date of death, and age of the decedent.
    (2) Decedent's employment or occupation at time of death, including 
his monthly or yearly salary or earnings (if any), and the duration of 
his last employment or occupation.
    (3) Full names, addresses, birth dates, kinship, and marital status 
of the decedent's survivors, including identification of those survivors 
who were dependent for support upon the decedent at the time of his 
death.
    (4) Degree of support afforded by the decedent to each survivor 
dependent upon him for support at the time of his death.
    (5) Decedent's general physical and mental condition before death.
    (6) Itemized bills for medical and burial expenses incurred by 
reason of the incident causing death, or itemized receipts of payments 
for such expenses.
    (7) If damages for pain and suffering prior to death are claimed, a 
physician's detailed statement specifying the injuries suffered, 
duration of pain and suffering, any drugs administered for pain and the 
decedent's physical condition in the interval between injury and death.
    (8) Any other evidence or information which may have a bearing on 
either the responsibility of the United States for the death or the 
damages claimed.
    (b) Personal injury. In support of a claim for personal injury, 
including pain and suffering, the claimant may be required to submit the 
following evidence or information:
    (1) A written report by his attending physician or dentist setting 
forth the nature and extent of the injury, nature and extent of 
treatment, any degree of temporary or permanent disability, the 
prognosis, period of hospitalization, and any diminished earning 
capacity.

[[Page 97]]

In addition, the claimant may be required to submit to a physical or 
mental examination by a physician employed or designated by the 
Department. A copy of the report of the examining physician shall be 
made available to the claimant upon the claimant's written request 
provided that claimant has, upon request, furnished the report referred 
to in the first sentence of this paragraph and has made or agrees to 
make available to the Department any other physician's reports 
previously or thereafter made of the physical or mental condition which 
is the subject matter of his claim.
    (2) Itemized bills for medical, dental, and hospital expenses 
incurred, or itemized receipts of payment for such expenses.
    (3) If the prognosis reveals the necessity for future treatment, a 
statement of expected duration of and expenses for such treatment.
    (4) If a claim is made for loss of time from employment, a written 
statement from his employer showing actual time lost from employment, 
whether he is a full or part-time employee, and wages or salary actually 
lost.
    (5) If a claim is made for loss of income and the claimant is self-
employed, documentary evidence showing the amount of earnings actually 
lost.
    (6) Any other evidence or information which may have a bearing on 
either the responsibility of the United States for the personal injury 
or the damages claimed.
    (c) Property damage. In support of a claim for damage to or loss of 
property, real or personal, the claimant may be required to submit the 
following evidence or information:
    (1) Proof of ownership.
    (2) A detailed statement of the amount claimed with respect to each 
item of property.
    (3) An itemized receipt of payment for necessary repairs or itemized 
written estimates of the cost of such repairs.
    (4) A statement listing date of purchase, purchase price, market 
value of the property as of date of damage, and salvage value, where 
repair is not economical.
    (5) Any other evidence or information which may have a bearing 
either on the responsibility of the United States for the injury to or 
loss of property or the damages claimed.
    (d) Time limit. All evidence required to be submitted by this 
section shall be furnished by the claimant within a reasonable time. 
Failure of a claimant to furnish evidence necessary to a determination 
of his claim within three months after a request therefor has been 
mailed to his last known address may be deemed an abandonment of the 
claim. The claim may be thereupon disallowed.



Sec. 35.5  Investigation of claims.

    When a claim is received, the Department will make such 
investigation as may be necessary or appropriate for a determination of 
the validity of the claim.



Sec. 35.6  Final denial of claim.

    (a) Final denial of an administrative claim shall be in writing and 
sent to the claimant, his attorney, or legal representative by certified 
or registered mail. The notification of final denial may include a 
statement of the reasons for the denial and shall include a statement 
that, if the claimant is dissatisfied with the Department's action, he 
may file suit in an appropriate U.S. District Court not later than 6 
months after the date of mailing of the notification.
    (b) Prior to the commencement of suit and prior to the expiration of 
the 6-month period after the date of mailing, by certified or registered 
mail of notice of final denial of the claim as provided in 28 U.S.C. 
2401(b), a claimant, his duly authorized agent, or legal representative, 
may file a written request with the Department for reconsideration of a 
final denial of a claim under paragraph (a) of this section. Upon the 
timely filing of a request for reconsideration the Department shall have 
6 months from the date of filing in which to make a final disposition of 
the claim and the claimant's option under 28 U.S.C. 2675(a) to bring 
suit shall not accrue until 6 months after the filing of a request for 
reconsideration. Final Department action on a request for 
reconsideration shall be effected in accordance with the provisions of 
paragraph (a) of this section.

[[Page 98]]



Sec. 35.7  Payment of approved claims.

    (a) Upon allowance of his claim, claimant or his duly authorized 
agent shall sign the voucher for payment, Standard Form 1145, before 
payment is made.
    (b) When the claimant is represented by an attorney, the voucher for 
payment (SF 1145) shall designate both the claimant and his attorney as 
``payees.'' The check shall be delivered to the attorney whose address 
shall appear on the voucher.



Sec. 35.8  Release.

    Acceptance by the claimant, his agent or legal representative, of 
any award, compromise or settlement made hereunder, shall be final and 
conclusive on the claimant, his agent or legal representative and any 
other person on whose behalf or for whose benefit the claim has been 
presented, and shall constitute a complete release of any claim against 
the United States and against any employee of the Government whose act 
or omission gave rise to the claim, by reason of the same subject 
matter.



Sec. 35.9  Penalties.

    A person who files a false claim or makes a false or fraudulent 
statement in a claim against the United States may be liable to a fine 
of not more than $10,000 or to imprisonment of not more than 5 years, or 
both (18 U.S.C. 287.1001), and, in addition, to a forfeiture of $2,000 
and a penalty of double the loss or damage sustained by the United 
States (31 U.S.C. 231).



Sec. 35.10  Limitation on Department's authority.

    (a) An award, compromise or settlement of a claim hereunder in 
excess of $25,000 shall be effected only with the prior written approval 
of the Attorney General or his designee. For the purposes of this 
paragraph, a principal claim and any derivative or subrogated claim 
shall be treated as a single claim.
    (b) An administrative claim may be adjusted, determined, compromised 
or settled hereunder only after consultation with the Department of 
Justice when, in the opinion of the Department:
    (1) A new precedent or a new point of law is involved; or
    (2) A question of policy is or may be involved; or
    (3) The United States is or may be entitled to indemnity or 
contribution from a third party and the Department is unable to adjust 
the third party claim; or
    (4) The compromise of a particular claim, as a practical matter, 
will or may control the disposition of a related claim in which the 
amount to be paid may exceed $25,000.
    (c) An administrative claim may be adjusted, determined, compromised 
or settled only after consultation with the Department of Justice when 
it is learned that the United States or an employee, agent or cost plus 
contractor of the United States is involved in litigation based on a 
claim arising out of the same incident or transaction.



PART 36_ADJUSTMENT OF CIVIL MONETARY PENALTIES FOR INFLATION--Table 
of Contents




Sec.
36.1 Purpose.
36.2 Penalty adjustment.

    Authority: 28 U.S.C. 2461 note and 31 U.S.C. 3701 note, unless 
otherwise noted.

    Source: 67 FR 69655, Nov. 18, 2002, unless otherwise noted.



Sec. 36.1  Purpose.

    The purpose of this part is to make inflation adjustments to the 
civil monetary penalties within the jurisdiction of the Department of 
Education. These penalties are subject to review and adjustment as 
necessary at least once every 4 years in accordance with the Federal 
Civil Penalties Inflation Adjustment Act of 1990, as amended.

(Authority: 28 U.S.C. 2461 note and 31 U.S.C. 3701 note)



Sec. 36.2  Penalty adjustment.

    The citations for the adjusted penalty provisions, a brief 
description of the penalty, and the adjusted maximum (and minimum, if 
applicable) penalty amounts are listed in Table I.

[[Page 99]]



   Table I, Section 36.2--Civil Monetary Penalty Inflation Adjustments
------------------------------------------------------------------------
                                                       New maximum (and
                                                         minimum, if
            Statute                 Description      applicable) penalty
                                                            amount
------------------------------------------------------------------------
20 U.S.C. 1015(c)(5)..........  Provides for a fine  $27,500.
                                 of up to $25,000
                                 for failure by an
                                 institution of
                                 higher education
                                 (IHE) to provide
                                 information on the
                                 cost of higher
                                 education to the
                                 Commissioner of
                                 Education
                                 Statistics.
20 U.S.C. 1027(f)(3)..........  Provides for a fine  $27,500.
                                 of up to $25,000
                                 for failure by an
                                 IHE to provide
                                 information to the
                                 State and the
                                 public regarding
                                 its teacher-
                                 preparation
                                 programs.
20 U.S.C. 1082(g).............  Provides for a       $27,500.
                                 civil penalty of
                                 up to $25,000 for
                                 violations by
                                 lenders and
                                 guaranty agencies
                                 of Title IV-B of
                                 the Higher
                                 Education Act of
                                 1965, as amended
                                 (HEA), which
                                 authorizes the
                                 Federal Family
                                 Education Loan
                                 Program.
20 U.S.C. 1094(c)(3)(B).......  Provides for a       $27,500.
                                 civil penalty of
                                 up to $25,000. for
                                 an institution of
                                 higher education's
                                 violation of Title
                                 IV of the Higher
                                 Education Act of
                                 1965, as amended,
                                 which authorizes
                                 various programs
                                 of student
                                 financial
                                 assistance.
31 U.S.C. 1352(c)(1) and        Provides for a       $11,000 to
 (c)(2)(A).                      civil penalty of     $110,000.
                                 $10,000 to
                                 $100,000 for
                                 recipients of
                                 Government grants,
                                 contracts, etc.
                                 that lobby
                                 Congress or the
                                 Executive Branch
                                 with respect to
                                 the award of
                                 Government grants
                                 and contracts.
31 U.S.C. 3802(a)(1) and        Provides for a       $5,500.
 (a)(2).                         civil penalty of
                                 up to $5,000. for
                                 false claims and
                                 statements made to
                                 the Government.
------------------------------------------------------------------------


(Authority: 28 U.S.C. 2461 note and 31 U.S.C. 3701 note)

[67 FR 69655, Nov. 18, 2002, as amended at 70 FR 298, Jan. 4, 2005]



PART 60_INDEMNIFICATION OF DEPARTMENT OF EDUCATION EMPLOYEES--Table 
of Contents




Sec.
60.1 What are the policies of the Department regarding indemnification?
60.2 What procedures apply to requests for indemnification?

    Authority: 20 U.S.C. 3411, 3461, 3471, and 3474.

    Source: 54 FR 7148, Feb. 16, 1989, unless otherwise noted.



Sec. 60.1  What are the policies of the Department regarding 
indemnification?

    (a)(1) The Department of Education may indemnify, in whole or in 
part, an employee for any verdict, judgment, or other monetary award 
rendered against the employee if--
    (i) The conduct giving rise to the verdict, judgment, or award 
occurred within the scope of his or her employment with the Department; 
and
    (ii) The indemnification is in the interest of the United States, as 
determined by the Secretary.
    (2) The regulations in this part apply to an action pending against 
an ED employee as of March 30, 1989, as well as to any action commenced 
after that date.
    (3) As used in this part, the term employee includes--
    (i) A present or former officer or employee of the Department or of 
an advisory committee to the Department, including a special Government 
employee;
    (ii) An employee of another Federal agency on detail to the 
Department; or
    (iii) A student volunteer under 5 U.S.C. 3111.
    (4) As used in this part the term Secretary means the Secretary of 
the Department of Education or an official or employee of the Department 
acting for the Secretary under a delegation of authority.
    (b)(1) The Department may pay, in whole or in part, to settle or 
compromise a personal damage claim against an employee if--
    (i) The alleged conduct giving rise to the personal damage claim 
occurred within the scope of employment; and
    (ii) The settlement or compromise is in the interest of the United 
States, as determined by the Secretary.
    (2) Payment under paragraph (b)(1) of this section may include 
reimbursement, in whole or in part, of an employee for prior payment 
made by the

[[Page 100]]

employee under a settlement or compromise that meets the requirements of 
this section.
    (c) The Department does not indemnify or settle a personal damage 
claim before entry of an adverse verdict, judgment, or monetary award 
unless the Secretary determines that exceptional circumstances justify 
the earlier indemnification or settlement.
    (d) Any payment under this part, either to indemnify a Department of 
Education employee or to settle a personal damage claim, is contingent 
upon the availability of appropriated funds.

(Authority: 20 U.S.C. 3411, 3461, 3471, and 3474)



Sec. 60.2  What procedures apply to requests for indemnification?

    (a) When an employee of the Department of Education becomes aware 
that an action has been filed against the employee in his or her 
individual capacity as a result of conduct taken within the scope of his 
or her employment, the employee shall immediately notify the head of his 
or her principal operating component and shall cooperate with 
appropriate officials of the Department in the defense of the action.
    (b) As part of the notification in paragraph (a) of this section or 
at a later time, the employee may request--
    (1) Indemnification to satisfy a verdict, judgment, or award entered 
against the employee; or
    (2) Payment to satisfy the requirements of a settlement proposal.
    (c)(1) The employee's request must be in writing to the head of his 
or her principal operating component and must be accompanied by copies 
of the complaint and other documents filed in the action, including the 
verdict, judgment, award, settlement, or settlement proposal, as 
appropriate.
    (2)(i) As used in this section, the term principal operating 
component means an office in the Department headed by an Assistant 
Secretary, a Deputy Under Secretary, or an equivalent departmental 
officer who reports directly to the Secretary.
    (ii) The term also includes the Office of the Secretary and the 
Office of the Under Secretary.
    (d) The head of the employee's principal operating component submits 
to the General Counsel, in a timely manner, the request, together with a 
recommended disposition of the request.
    (e) The General Counsel forwards to the Secretary for decision--
    (1) The employee's request;
    (2) The recommendation of the head of the employee's principal 
operating component; and
    (3) The General Counsel's recommendation.

(Authority: 20 U.S.C. 3411, 3461, 3471, and 3474)



PART 73_STANDARDS OF CONDUCT--Table of Contents




Sec.
73.1 Cross-reference to employee ethical conduct standards and financial 
          disclosure regulations.
73.2 Conflict of interest waiver.

Appendix to Part 73--Code of Ethics for Government Service

    Authority: 5 U.S.C. 301, 7301; 18 U.S.C. 208; and E.O. 12674, 3 CFR, 
1989 Comp., p. 215, as modified by E.O. 12731, 3 CFR, 1990 Comp., p. 
306.

    Source: 60 FR 5818, Jan. 30, 1995, unless otherwise noted.



Sec. 73.1  Cross-reference to employee ethical conduct standards and 
financial disclosure regulations.

    Employees of the Department of Education are subject to the 
executive branch-wide Standards of Ethical Conduct at 5 CFR part 2635 
and to the Department of Education regulation at 5 CFR part 6301 which 
supplements the executive branch-wide standards with a requirement for 
employees to obtain prior approval to participate in certain outside 
activities. In addition, employees are subject to the executive branch-
wide financial disclosure regulations at 5 CFR part 2634.



Sec. 73.2  Conflict of interest waiver.

    If a financial interest arises from ownership by an employee--or 
other person or enterprise referred to in 5 CFR 2635.402(b)(2)--of stock 
in a widely diversified mutual fund or other regulated investment 
company that in turn owns stock in another enterprise, that financial 
interest is exempt from the prohibition in 5 CFR 2635.402(a).

[[Page 101]]

       Appendix to Part 73--Code of Ethics for Government Service

    Any person in Government service should:
    Put loyalty to the highest moral principles and to country above 
loyalty to persons, party, or Government department.
    Uphold the Constitution, laws, and regulations of the United States 
and of all governments therein and never be a party to their evasion.
    Give a full day's labor for a full day's pay; giving earnest effort 
and best thought to the performance of duties.
    Seek to find and employ more efficient and economical ways of 
getting tasks accomplished.
    Never discriminate unfairly by the dispensing of special favors or 
privileges to anyone, whether for remuneration or not; and never accept, 
for himself or herself or for family members, favors or benefits under 
circumstances which might be construed by reasonable persons as 
influencing the performance of governmental duties.
    Make no private promises of any kind binding upon the duties of 
office, since a Government employee has no private word which can be 
binding on public duty.
    Engage in no business with the Government, either directly or 
indirectly, which is inconsistent with the conscientious performance of 
governmental duties.
    Never use any information gained confidentially in the performance 
of governmental duties as a means of making private profit.
    Expose corruption wherever discovered.
    Uphold these principles, ever conscious that public office is a 
public trust.

(This Code of Ethics was unanimously passed by the United States 
Congress on June 27, 1980, and signed into law as Public Law 96-303 by 
the President on July 3, 1980.)



PART 74_ADMINISTRATION OF GRANTS AND AGREEMENTS WITH INSTITUTIONS OF 

HIGHER EDUCATION, HOSPITALS, AND OTHER NON-PROFIT ORGANIZATIONS--Table 
of Contents




                            Subpart A_General

Sec.
74.1 Purpose.
74.2 Definitions.
74.3 Effect on other issuances.
74.4 Deviations.
74.5 Subawards.

                    Subpart B_Pre-Award Requirements

74.10 Purpose.
74.11 Pre-award policies.
74.12 Forms for applying for Federal assistance.
74.13 Debarment and suspension.
74.14 Special award conditions.
74.15 Metric system of measurement.
74.16 Resource Conservation and Recovery Act.
74.17 Certifications and representations.

                    Subpart C_Post-Award Requirements

                    Financial and Program Management

74.20 Purpose of financial and program management.
74.21 Standards for financial management systems.
74.22 Payment.
74.23 Cost sharing or matching.
74.24 Program income.
74.25 Revision of budget and program plans.
74.26 Non-Federal audits.
74.27 Allowable costs.
74.28 Period of availability of funds.

                           Property Standards

74.30 Purpose of property standards.
74.31 Insurance coverage.
74.32 Real property.
74.33 Federally-owned and exempt property.
74.34 Equipment.
74.35 Supplies and other expendable property.
74.36 Intangible property.
74.37 Property trust relationship.

                          Procurement Standards

74.40 Purpose of procurement standards.
74.41 Recipient responsibilities.
74.42 Codes of conduct.
74.43 Competition.
74.44 Procurement procedures.
74.45 Cost and price analysis.
74.46 Procurement records.
74.47 Contract administration.
74.48 Contract provisions.

                           Reports and Records

74.50 Purpose of reports and records.
74.51 Monitoring and reporting program performance.
74.52 Financial reporting.
74.53 Retention and access requirements for records.

                       Termination and Enforcement

74.60 Purpose of termination and enforcement.
74.61 Termination.
74.62 Enforcement.

                 Subpart D_After-the-Award Requirements

74.70 Purpose.
74.71 Closeout procedures.
74.72 Subsequent adjustments and continuing responsibilities.

[[Page 102]]

74.73 Collection of amounts due.

Appendix A to Part 74--Contract Provisions

    Authority: 20 U.S.C. 1221e-3 and 3474; OMB Circular A-110, unless 
otherwise noted.

    Source: 59 FR 34724, July 6, 1994, unless otherwise noted.



                            Subpart A_General



Sec. 74.1  Purpose.

    (a) This part establishes uniform administrative requirements for 
Federal grants and agreements awarded to institutions of higher 
education, hospitals, and other non-profit organizations.
    (b) The Secretary does not impose additional or inconsistent 
requirements, except as provided in Sec. Sec. 74.4 and 74.14 or unless 
specifically required by Federal statute or executive order.
    (c) This part applies to all recipients other than State and local 
governments and Indian tribal organizations. Uniform requirements for 
State and local governments and tribal organizations are in 34 CFR Part 
80--Uniform Administrative Requirements for Grants and Cooperative 
Agreements to State and Local Governments.
    (d) Non-profit organizations that implement Federal programs for the 
States are also subject to State requirements.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.2  Definitions.

    The following definitions apply to this part:
    Accrued expenditures means the charges incurred by the recipient 
during a given period requiring the provision of funds for--
    (1) Goods and other tangible property received;
    (2) Services performed by employees, contractors, subrecipients, and 
other payees; and
    (3) Other amounts becoming owed under programs for which no current 
services or performance is required.
    Accrued income means the sum of--
    (1) Earnings during a given period from--
    (i) Services performed by the recipient; and
    (ii) Goods and other tangible property delivered to purchasers; and
    (2) Amounts becoming owed to the recipient for which no current 
services or performance is required by the recipient.
    Acquisition cost of equipment means the net invoice price of the 
equipment, including the cost of modifications, attachments, 
accessories, or auxiliary apparatus necessary to make the property 
usable for the purpose for which it was acquired. Other charges, such as 
the cost of installation, transportation, taxes, duty, or protective in-
transit insurance, shall be included or excluded from the unit 
acquisition cost in accordance with the recipient's regular accounting 
practices.
    Advance means a payment made by Treasury check or other appropriate 
payment mechanism to a recipient upon its request either before outlays 
are made by the recipient or through the use of predetermined payment 
schedules.
    Award means financial assistance that provides support or 
stimulation to accomplish a public purpose. Awards include grants and 
other agreements in the form of money or property, in lieu of money, by 
the Federal Government to an eligible recipient. The term does not 
include--
    (1) Technical assistance, which provides services instead of money;
    (2) Other assistance in the form of loans, loan guarantees, interest 
subsidies, or insurance;
    (3) Direct payments of any kind to individuals; and
    (4) Contracts which are required to be entered into and administered 
under procurement laws and regulations.
    Cash contributions means the recipient's cash outlay, including the 
outlay of money contributed to the recipient by third parties.
    Closeout means the process by which the Secretary determines that 
all applicable administrative actions and all required work of the award 
have been completed by the recipient and Department of Education (ED).
    Contract means a procurement contract under an award or subaward, 
and a procurement subcontract under a recipient's or subrecipient's 
contract.

[[Page 103]]

    Cost sharing or matching means that portion of project or program 
costs not borne by the Federal Government.
    Date of completion means the date on which all work under an award 
is completed or the date on the award document, or any supplement or 
amendment thereto, on which Federal sponsorship ends.
    Disallowed costs means those charges to an award that the Secretary 
determines to be unallowable, in accordance with the applicable Federal 
cost principles or other terms and conditions contained in the award.
    Equipment means tangible nonexpendable personal property including 
exempt property charged directly to the award having a useful life of 
more than one year and an acquisition cost of $5,000 or more per unit. 
However, consistent with recipient policy, lower limits may be 
established.
    Excess property means property under the control of ED that is no 
longer required for its needs or the discharge of its responsibilities.
    Exempt property means tangible personal property acquired in whole 
or in part with Federal funds, where the Secretary has statutory 
authority to vest title in the recipient without further obligation to 
the Federal Government. An example of exempt property authority is 
contained in the Federal Grant and Cooperative Agreement Act (31 U.S.C. 
6306) for property acquired under an award to conduct basic or applied 
research by a non-profit institution of higher education or non-profit 
organization whose principal purpose is conducting scientific research.
    Federal awarding agency means the Federal agency that provides an 
award to the recipient.
    Federal funds authorized means the total amount of Federal funds 
obligated by the Federal Government for use by the recipient. This 
amount may include any authorized carryover of unobligated funds from 
prior funding periods when permitted by ED regulations or ED 
implementing instructions.
    Federal share of real property, equipment, or supplies means that 
percentage of the property's acquisition costs and any improvement 
expenditures paid with Federal funds.
    Funding period means the period of time when Federal funding is 
available for obligation by the recipient.
    Intangible property and debt instruments means, but is not limited 
to, trademarks, copyrights, patents and patent applications and such 
property as loans, notes and other debt instruments, lease agreements, 
stock, and other instruments of property ownership, whether considered 
tangible or intangible.
    Obligations means the amounts of orders placed, contracts and grants 
awarded, services received, and similar transactions during a given 
period that require payment by the recipient during the same or a future 
period.
    Outlays or expenditures means charges made to the project or 
program. They may be reported on a cash or accrual basis. For reports 
prepared on a cash basis, outlays are the sum of cash disbursements for 
direct charges for goods and services, the amount of indirect expense 
charged, the value of third party in-kind contributions applied, and the 
amount of cash advances and payments made to subrecipients. For reports 
prepared on an accrual basis, outlays are the sum of cash disbursements 
for direct charges for goods and services, the amount of indirect 
expense incurred, the value of in-kind contributions applied, and the 
net increase (or decrease) in the amounts owed by the recipient for 
goods and other property received, for services performed by employees, 
contractors, subrecipients and other payees, and other amounts becoming 
owed under programs for which no current services or performance are 
required.
    Personal property means property of any kind except real property. 
It may be tangible, having physical existence, or intangible, having no 
physical existence, such as copyrights, patents, or securities.
    Prior approval means written approval by an authorized official 
evidencing prior consent.
    Program income means gross income earned by the recipient that is 
directly generated by a supported activity or earned as a result of the 
award (see exclusions in Sec. 74.24(e) and (h)). Program income 
includes, but is not limited to,

[[Page 104]]

income from fees for services performed, the use or rental of real or 
personal property acquired under federally-funded projects, the sale of 
commodities or items fabricated under an award, license fees and 
royalties on patents and copyrights, and interest on loans made with 
award funds. Interest earned on advances of Federal funds is not program 
income. Except as otherwise provided in ED regulations or the terms and 
conditions of the award, program income does not include the receipt of 
principal on loans, rebates, credits, discounts, etc., or interest 
earned on any of them.
    Project costs means all allowable costs, as established in the 
applicable Federal cost principles, incurred by a recipient and the 
value of the contributions made by third parties in accomplishing the 
objectives of the award during the project period.
    Project period means the period established in the award document 
during which Federal sponsorship begins and ends.
    Property means, unless otherwise stated, real property, equipment, 
intangible property and debt instruments.
    Real property means land, including land improvements, structures 
and appurtenances thereto, but excludes movable machinery and equipment.
    Recipient means an organization receiving financial assistance 
directly from ED to carry out a project or program. The term includes 
public and private institutions of higher education, public and private 
hospitals, and other quasi-public and private non-profit organizations 
such as, but not limited to, community action agencies, research 
institutes, educational associations, and health centers. The term may 
include commercial organizations, foreign or international organizations 
(such as agencies of the United Nations) which are recipients, 
subrecipients, or contractors or subcontractors of recipients or 
subrecipients at the discretion of the Secretary. The term does not 
include government-owned contractor-operated facilities or research 
centers providing continued support for mission-oriented, large-scale 
programs that are government-owned or controlled, or are designated as 
federally-funded research and development centers.
    Research and development means all research activities, both basic 
and applied, and all development activities that are supported at 
universities, colleges, and other non-profit institutions. ``Research'' 
is defined as a systematic study directed toward fuller scientific 
knowledge or understanding of the subject studied. ``Development'' is 
the systematic use of knowledge and understanding gained from research 
directed toward the production of useful materials, devices, systems, or 
methods, including design and development of prototypes and processes. 
The term ``research'' also includes activities involving the training of 
individuals in research techniques where these activities utilize the 
same facilities as other pesearch and development activities and where 
these activities are not included in the instruction function.
    Small awards means a grant or cooperative agreement not exceeding 
the small purchase threshold fixed at 41 U.S.C. 403(11) (currently 
$25,000).
    Subaward means an award of financial assistance in the form of 
money, or property in lieu of money, made under an award by a recipient 
to an eligible subrecipient or by a subrecipient to a lower tier 
subrecipient. The term includes financial assistance when provided by 
any legal agreement, even if the agreement is called a contract, but 
does not include procurement of goods and services nor does it include 
any form of assistance which is excluded from the definition of 
``award'' as defined in this section.
    Subrecipient means the legal entity to which a subaward is made and 
which is accountable to the recipient for the use of the funds provided. 
The term may include foreign or international organizations (such as 
agencies of the United Nations) at the discretion of the Secretary.
    Supplies means all personal property excluding equipment, intangible 
property, and debt instruments as defined in this section, and 
inventions of a contractor conceived or first actually reduced to 
practice in the performance of work under a funding agreement (``subject 
inventions''), as defined in 37 CFR Part 401--Rights to Inventions

[[Page 105]]

Made by Nonprofit Organizations and Small Business Firms Under 
Government Grants, Contracts, and Cooperative Agreements.
    Suspension means an action by the Secretary that temporarily 
withdraws Federal sponsorship under an award, pending corrective action 
by the recipient or pending a decision to terminate the award by the 
Secretary. Suspension of an award is a separate action from suspension 
under 34 CFR Part 85 (Governmentwide Debarment and Suspension 
(Nonprocurement) and Governmentwide Requirements for Drug-Free Workplace 
(Grants).
    Termination means the cancellation of Federal sponsorship, in whole 
or in part, under an agreement at any time prior to the date of 
completion.
    Third party in-kind contributions means the value of non-cash 
contributions provided by non-Federal third parties. Third party in-kind 
contributions may be in the form of real property, equipment, supplies 
and other expendable property, and the value of goods and services 
directly benefiting and specifically identifiable to the project or 
program.
    Unliquidated obligations, for financial reports prepared on a cash 
basis, means the amount of obligations incurred by the recipient that 
have not been paid. For reports prepared on an accrued expenditure 
basis, they represent the amount of obligations incurred by the 
recipient for which an outlay has not been recorded.
    Unobligated balance means the portion of the funds authorized by the 
Secretary that has not been obligated by the recipient and is determined 
by deducting the cumulative obligations from the cumulative funds 
authorized.
    Unrecovered indirect cost means the difference between the amount 
awarded and the amount which could have been awarded under the 
recipient's approved negotiated indirect cost rate.
    Working capital advance means a procedure whereby funds are advanced 
to the recipient to cover its estimated disbursement needs for a given 
initial period.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.3  Effect on other issuances.

    For awards subject to this part, all administrative requirements of 
codified program regulations, program manuals, handbooks, and other 
nonregulatory materials which are inconsistent with the requirements of 
this part are superseded, except to the extent they are required by 
statute, or authorized in accordance with the deviations provision in 
Sec. 74.4.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.4  Deviations.

    The Secretary, after consultation with the Office of Management and 
Budget (OMB), may grant exceptions for classes of grants or recipients 
subject to the requirements of this part when exceptions are not 
prohibited by statute. However, in the interest of maximum uniformity, 
exceptions from the requirements of this part are permitted only in 
unusual circumstances. The Secretary may apply more restrictive 
requirements to a class of recipients when approved by OMB. The 
Secretary may apply less restrictive requirements when awarding small 
awards, except for those requirements which are statutory. Exceptions on 
a case-by-case basis may also be made by the Secretary.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.5  Subawards.

    Unless sections of this part specifically exclude subrecipients from 
coverage, the provisions of this part shall be applied to subrecipients 
performing work under awards if the subrecipients are institutions of 
higher education, hospitals, or other non-profit organizations. State 
and local government subrecipients are subject to the provisions of 34 
CFR Part 80--Uniform Administrative Requirements for Grants and 
Cooperative Agreements to State and Local Governments.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[[Page 106]]



                    Subpart B_Pre-Award Requirements



Sec. 74.10  Purpose.

    Sections 74.11 through 74.17 prescribes forms and instructions and 
other pre-award matters to be used in applying for awards.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.11  Pre-award policies.

    (a) Use of grants and cooperative agreements, and contracts. In each 
instance, the Secretary decides on the appropriate award instrument 
(i.e., grant, cooperative agreement, or contract). The Federal Grant and 
Cooperative Agreement Act (31 U.S.C. 6301-08) governs the use of grants, 
cooperative agreements, and contracts. A grant or cooperative agreement 
shall be used only when the principal purpose of a transaction is to 
accomplish a public purpose of support or stimulation authorized by 
Federal statute. The statutory criterion for choosing between grants and 
cooperative agreements is that for the latter, substantial involvement 
is expected between ED and the recipient when carrying out the activity 
contemplated in the agreement. Contracts shall be used when the 
principal purpose is acquisition of property or services for the direct 
benefit or use of the Federal Government.
    (b) Public notice and priority setting. The Secretary notifies the 
public of intended funding priorities for discretionary grant programs, 
unless funding priorities are established by Federal statute.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.12  Forms for applying for Federal assistance.

    (a) The Secretary complies with the applicable report clearance 
requirements of 5 CFR Part 1320--Controlling Paperwork Burdens on the 
Public--with regard to all forms used by ED in place of or as a 
supplement to the Standard Form 424 (SF-424) series.
    (b) Applicants shall use the SF-424 series or those forms and 
instructions prescribed by the Secretary.
    (c) For Federal programs covered by E.O. 12372--Intergovernmental 
Review of Federal Programs (implemented by the Secretary in 34 CFR Part 
79--Intergovernmental Review of Department of Education Programs and 
Activities)--the applicant shall complete the appropriate sections of 
the SF-424 (Application for Federal Assistance) indicating whether the 
application was subject to review by the State Single Point of Contact 
(SPOC). The name and address of the SPOC for a particular State can be 
obtained from the Secretary or the Catalog of Federal Domestic 
Assistance (available from the Superintendent of Documents, Government 
Printing Office). The SPOC shall advise the applicant whether the 
program for which application is made has been selected by that State 
for review.
    (d) If ED does not use the SF-424 form, the Secretary may indicate 
whether the application is subject to review by the State under E.O. 
12372.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995]



Sec. 74.13  Debarment and suspension.

    The Secretary and recipients shall comply with the nonprocurement 
debarment and suspension common rule (implemented by the Secretary in 34 
CFR part 85). This common rule restricts subawards and contracts with 
certain parties that are debarred, suspended, or otherwise excluded from 
or ineligible for participation in Federal assistance programs or 
activities.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.14  Special award conditions.

    (a) The Secretary may impose special award conditions, if an 
applicant or recipient--
    (1) Has a history of poor performance;
    (2) Is not financially stable;
    (3) Has a management system that does not meet the standards 
prescribed in this part;
    (4) Has not conformed to the terms and conditions of a previous 
award; or
    (5) Is not otherwise responsible.

[[Page 107]]

    (b) If special award conditions are established under paragraph (a) 
of this section, the Secretary notifies the applicant or recipient of--
    (1) The nature of the additional requirements;
    (2) The reason why the additional requirements are being imposed;
    (3) The nature of the corrective action needed;
    (4) The time allowed for completing the corrective actions; and
    (5) The method for requesting reconsideration of the additional 
requirements imposed.
    (c) Any special conditions are promptly removed once the conditions 
that prompted them have been corrected.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.15  Metric system of measurement.

    The Metric Conversion Act, as amended by the Omnibus Trade and 
Competitiveness Act (15 U.S.C. 205) declares that the metric system is 
the preferred measurement system for U.S. trade and commerce. The Act 
requires each Federal agency to establish a date or dates in 
consultation with the Secretary of Commerce, when the metric system of 
measurement will be used in the agency's procurements, grants, and other 
business-related activities. Metric implementation may take longer where 
the use of the system is initially impractical or likely to cause 
significant inefficiencies in the accomplishment of federally-funded 
activities. The Secretary follows the provisions of E.O. 12770--Metric 
Usage in Federal Government Programs.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.16  Resource Conservation and Recovery Act.

    Under the Resource Conservation and Recovery Act (RCRA) (Pub. L. 94-
580 codified at 42 U.S.C. 6962), any State agency or agency of a 
political subdivision of a State which is using appropriated Federal 
funds must comply with section 6002 of the RCRA. Section 6002 requires 
that preference be given in procurement programs to the purchase of 
specific products containing recycled materials identified in guidelines 
developed by the Environmental Protection Agency (EPA) (40 CFR parts 
247-254). Accordingly, recipients that receive direct Federal awards or 
other Federal funds shall give preference in their procurement programs 
funded with Federal funds to the purchase of recycled products pursuant 
to the EPA guidelines.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.17  Certifications and representations.

    Unless prohibited by statute or codified regulation, the Secretary 
allows recipients to submit certifications and representations required 
by statute, executive order, or regulation on an annual basis, if the 
recipients have ongoing and continuing relationships with ED. Annual 
certifications and representations shall be signed by responsible 
officials with the authority to ensure recipients' compliance with the 
pertinent requirements.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



                    Subpart C_Post-Award Requirements

                    Financial and Program Management



Sec. 74.20  Purpose of financial and program management.

    Sections 74.21 through 74.28 prescribe standards for financial 
management systems, methods for making payments and rules for--
    (a) Satisfying cost sharing and matching requirements;
    (b) Accounting for program income;
    (c) Approving budget revisions;
    (d) Making audits;
    (e) Determining allowability of cost; and
    (f) Establishing fund availability.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.21  Standards for financial management systems.

    (a) Recipients shall relate financial data to performance data and 
develop unit cost information whenever practical.

[[Page 108]]

    (b) Recipients' financial management systems shall provide for the 
following:
    (1) Accurate, current, and complete disclosure of the financial 
results of each federally-sponsored project in accordance with the 
reporting requirements established in Sec. 74.52. If the Secretary 
requires reporting on an accrual basis from a recipient that maintains 
its records on other than an accrual basis, the recipient shall not be 
required to establish an accrual accounting system. These recipients may 
develop accrual data for its reports on the basis of an analysis of the 
documentation on hand.
    (2) Records that identify adequately the source and application of 
funds for federally-sponsored activities. These records shall contain 
information pertaining to awards, authorizations, obligations, 
unobligated balances, assets, outlays, income, and interest.
    (3) Effective control over and accountability for all funds, 
property, and other assets. Recipients shall adequately safeguard all 
assets and assure they are used solely for authorized purposes.
    (4) Comparison of outlays with budget amounts for each award. 
Whenever appropriate, financial information should be related to 
performance and unit cost data.
    (5) Written procedures to minimize the time elapsing between the 
transfer of funds to the recipient from the U.S. Treasury and the 
issuance or redemption of checks, warrants or payments by other means 
for program purposes by the recipient. To the extent that the provisions 
of the Cash Management Improvement Act (CMIA) (Pub. L. 101-453) govern, 
payment methods of State agencies, instrumentalities, and fiscal agents 
shall be consistent with CMIA Treasury-State Agreements or the CMIA 
default procedures codified at 31 CFR Part 205--Withdrawal of Cash from 
the Treasury for Advances under Federal Grant and Other Programs.
    (6) Written procedures for determining the reasonableness, 
allocability, and allowability of costs in accordance with the 
provisions of the applicable Federal cost principles and the terms and 
conditions of the award.
    (7) Accounting records including cost accounting records that are 
supported by source documentation.
    (c) Where the Federal Government guarantees or insures the repayment 
of money borrowed by the recipient, the Secretary may require adequate 
bonding and insurance if the bonding and insurance requirements of the 
recipient are not deemed adequate to protect the interest of the Federal 
Government.
    (d) The Secretary may require adequate fidelity bond coverage where 
the recipient lacks sufficient coverage to protect the Federal 
Government's interest.
    (e) Where bonds are required under paragraphs (a) and (b) of this 
section, the bonds shall be obtained from companies holding certificates 
of authority as acceptable sureties, as prescribed in 31 CFR Part 223--
Surety Companies Doing Business with the United States.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995]



Sec. 74.22  Payment.

    (a) Payment methods shall minimize the time elapsing between the 
transfer of funds from the United States Treasury and the issuance or 
redemption of checks, warrants, or payment by other means by the 
recipients. Payment methods of State agencies or instrumentalities shall 
be consistent with Treasury-State CMIA agreements or default procedures 
codified at 31 CFR part 205.
    (b)(1) Recipients are paid in advance, provided they maintain or 
demonstrate the willingness to maintain--
    (i) Written procedures that minimize the time elapsing between the 
transfer of funds and disbursement by the recipient; and
    (ii) Financial management systems that meet the standards for fund 
control and accountability as established in Sec. 74.21.
    (2) Cash advances to a recipient organization are limited to the 
minimum amounts needed and be timed to be in accordance with the actual, 
immediate

[[Page 109]]

cash requirements of the recipient organization in carrying out the 
purpose of the approved program or project.
    (3) The timing and amount of cash advances are as close as is 
administratively feasible to the actual disbursements by the recipient 
organization for direct program or project costs and the proportionate 
share of any allowable indirect costs.
    (c) Whenever possible, advances are consolidated to cover 
anticipated cash needs for all awards made by the Secretary.
    (1) Advance payment mechanisms include, but are not limited to, 
Treasury check, and electronic funds transfer.
    (2) Advance payment mechanisms are subject to 31 CFR part 205.
    (3) Recipients are authorized to submit requests for advances and 
reimbursements at least monthly when electronic fund transfers are not 
used.
    (d) Requests for Treasury check advance payment shall be submitted 
on SF-270--Request for Advance or Reimbursement--or other forms as may 
be authorized by OMB. This form is not to be used when Treasury check 
advance payments are made to the recipient automatically through the use 
of a predetermined payment schedule or if precluded by ED instructions 
for electronic funds transfer.
    (e) Reimbursement is the preferred method when the requirements in 
paragraph (b) of this section cannot be met. The Secretary may also use 
this method on any construction agreement, or if the major portion of 
the construction project is accomplished through private market 
financing or Federal loans, and the Federal assistance constitutes a 
minor portion of the project.
    (1) When the reimbursement method is used, the Secretary makes 
payment within 30 days after receipt of the billing, unless the billing 
is improper.
    (2) Recipients are authorized to submit request for reimbursement at 
least monthly when electronic funds transfers are not used.
    (f) If a recipient cannot meet the criteria for advance payments and 
the Secretary has determined that reimbursement is not feasible because 
the recipient lacks sufficient working capital, the Secretary may 
provide cash on a working capital advance basis. Under this procedure, 
the Secretary advances cash to the recipient to cover its estimated 
disbursement needs for an initial period generally geared to the 
awardee's disbursing cycle. Thereafter, the Secretary reimburses the 
recipient for its actual cash disbursements. The working capital advance 
method of payment is not used for recipients unwilling or unable to 
provide timely advances to their subrecipient to meet the subrecipient's 
actual cash disbursements.
    (g) To the extent available, recipients shall disburse funds 
available from repayments to and interest earned on a revolving fund, 
program income, rebates, refunds, contract settlements, audit 
recoveries, and interest earned on these funds before requesting 
additional cash payments.
    (h) Unless otherwise required by statute, the Secretary does not 
withhold payments for proper charges made by recipients at any time 
during the project period unless--
    (1) A recipient has failed to comply with the project objectives, 
the terms and conditions of the award, or Federal reporting 
requirements; or
    (2) The recipient or subrecipient is delinquent in a debt to the 
United States as defined in OMB Circular A-129--Managing Federal Credit 
Programs. Under these conditions, the Secretary may, upon reasonable 
notice, inform the recipient that ED does not make payments for 
obligations incurred after a specified date until the conditions are 
corrected or the indebtedness to the Federal Government is liquidated.
    (i) The standards governing the use of banks and other institutions 
as depositories of funds advanced under awards are as follows:
    (1) Except for situations described in paragraph (i)(2) of this 
section, the Secretary does not require separate depository accounts for 
funds provided to a recipient or establish any eligibility requirements 
for depositories for funds provided to a recipient. However, recipients 
must be able to account for the receipt, obligation, and expenditure of 
funds.
    (2) Advances of Federal funds shall be deposited and maintained in 
insured accounts whenever possible.

[[Page 110]]

    (j) Consistent with the national goal of expanding the opportunities 
for women-owned and minority-owned business enterprises, recipients 
shall be encouraged to use women-owned and minority-owned banks (a bank 
which is owned at least 50 percent by women or minority group members).
    (k) Recipients shall maintain advances of Federal funds in interest 
bearing accounts, unless--
    (1) The recipient receives less than $120,000 in Federal awards per 
year;
    (2) The best reasonably available interest bearing account would not 
be expected to earn interest in excess of $250 per year on Federal cash 
balances; or
    (3) The depository would require an average or minimum balance so 
high that it would not be feasible within the expected Federal and non-
Federal cash resources.
    (l) For those entities where CMIA and its implementing regulations 
do not apply, interest earned on Federal advances deposited in interest 
bearing accounts shall be remitted annually to Department of Health and 
Human Services, Payment Management System, Rockville, MD 20852. Interest 
amounts up to $250 per year may be retained by the recipient for 
administrative expense. State universities and hospitals shall comply 
with CMIA, as it pertains to interest. If an entity subject to CMIA uses 
its own funds to pay pre-award costs for discretionary awards without 
prior written approval from the Secretary, it waives its right to 
recover the interest under CMIA.
    (m) Except as noted elsewhere in this part, only the following forms 
are authorized for the recipients in requesting advances and 
reimbursements. The Secretary does not require more than an original and 
two copies of the following:
    (1) SF-270--Request for Advance or Reimbursement. The Secretary 
adopts the SF-270 as a standard form for all nonconstruction programs 
when electronic funds transfer or predetermined advance methods are not 
used. The Secretary may, however, use this form for construction 
programs in lieu of the SF-271--Outlay Report and Request for 
Reimbursement for Construction Programs.
    (2) SF-271--Outlay Report and Request for Reimbursement for 
Construction Programs. The Secretary adopts the SF-271 as the standard 
form to be used for requesting reimbursement for construction programs. 
However, the Secretary may substitute the SF-270 when the Secretary 
determines that it provides adequate information to meet Federal needs.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.23  Cost sharing or matching.

    (a) All contributions, including cash and third party in-kind, are 
accepted as part of the recipient's cost sharing or matching when 
contributions meet the following criteria:
    (1) Are verifiable from the recipient's records.
    (2) Are not included as contributions for any other federally-
assisted project or program.
    (3) Are necessary and reasonable for proper and efficient 
accomplishment of project or program objectives.
    (4) Are allowable under the applicable cost principles.
    (5) Are not paid by the Federal Government under another award, 
except where authorized by Federal statute to be used for cost sharing 
or matching.
    (6) Are provided for in the approved budget when required by the 
Secretary.
    (7) Conform to other provisions of this part, as applicable.
    (b) Unrecovered indirect costs may be included as part of cost 
sharing or matching only with the prior approval of the Secretary.
    (c) Values for recipient contributions of services and property 
shall be established in accordance with the applicable cost principles. 
If the Secretary authorizes recipients to donate buildings or land for 
construction/facilities acquisition projects or long-term use, the value 
of the donated property for cost sharing or matching shall be the lesser 
of--
    (1) The certified value of the remaining life of the property 
recorded in the recipient's accounting records at the time of donation; 
or
    (2) The current fair market value. However, if there is sufficient 
justification, the Secretary may approve the use of the current fair 
market value of

[[Page 111]]

the donated property, even if it exceeds the certified value at the time 
of donation to the project.
    (d) Volunteer services furnished by professional and technical 
personnel, consultants, and other skilled and unskilled labor may be 
counted as cost sharing or matching if the service is an integral and 
necessary part of an approved project or program. Rates for volunteer 
services must be consistent with those paid for similar work in the 
recipient's organization. In those instances in which the required 
skills are not found in the recipient organization, rates must be 
consistent with those paid for similar work in the labor market in which 
the recipient competes for the kind of services involved. In either 
case, paid fringe benefits that are reasonable, allowable, and allocable 
may be included in the valuation.
    (e) When an employer other than the recipient furnishes the services 
of an employee, these services shall be valued at the employee's regular 
rate of pay (plus an amount of fringe benefits that are reasonable, 
allowable, and allocable, but exclusive of overhead costs), provided 
these services are in the same skill for which the employee is normally 
paid.
    (f) Donated supplies may include such items as expendable equipment, 
office supplies, laboratory supplies, or workshop and classroom 
supplies. Value assessed to donated supplies included in the cost 
sharing or matching share shall be reasonable and shall not exceed the 
fair market value of the property at the time of the donation.
    (g) The method used for determining cost sharing or matching for 
donated equipment, buildings, and land for which title passes to the 
recipient may differ according to the purpose of the award.
    (1) If the purpose of the award is to assist the recipient in the 
acquisition of equipment, buildings or land, the total value of the 
donated property may be claimed as cost sharing or matching.
    (2) If the purpose of the award is to support activities that 
require the use of equipment, buildings or land, normally only 
depreciation or use charges for equipment and buildings may be made. 
However, the full value of equipment or other capital assets and fair 
rental charges for land may be allowed, provided that the Secretary has 
approved the charges.
    (h) The value of donated property must be determined in accordance 
with the usual accounting policies of the recipient, with the following 
qualifications:
    (1) The value of donated land and buildings may not exceed its fair 
market value at the time of donation to the recipient as established by 
an independent appraiser (e.g., certified real property appraiser or 
General Services Administration representative) and certified by a 
responsible official of the recipient.
    (2) The value of donated equipment may not exceed the fair market 
value of equipment of the same age and condition at the time of 
donation.
    (3) The value of donated space may not exceed the fair rental value 
of comparable space as established by an independent appraisal of 
comparable space and facilities in a privately-owned building in the 
same locality.
    (4) The value of loaned equipment shall not exceed its fair rental 
value.
    (5) The following requirements pertain to the recipient's supporting 
records for in-kind contributions from third parties:
    (i) Volunteer services must be documented and, to the extent 
feasible, supported by the same methods used by the recipient for its 
own employees.
    (ii) The basis for determining the valuation for personal service, 
material, equipment, buildings, and land must be documented.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.24  Program income.

    (a) The Secretary applies the standards contained in this section in 
requiring recipient organizations to account for program income related 
to projects financed in whole or in part with Federal funds.
    (b) Except as provided in paragraph (h) of this section, program 
income earned during the project period must be retained by the 
recipient and, in accordance with ED regulations or the terms and 
conditions of the award,

[[Page 112]]

must be used in one or more of the following ways:
    (1) Added to funds committed to the project by the Secretary and 
recipient and used to further eligible project or program objectives.
    (2) Used to finance the non-Federal share of the project or program.
    (3) Deducted from the total project or program allowable cost in 
determining the net allowable costs on which the Federal share of costs 
is based.
    (c) When the Secretary authorizes the disposition of program income 
as described in paragraphs (b)(1) or (b)(2) of this section, program 
income in excess of any limits stipulated shall be used in accordance 
with paragraph (b)(3) of this section.
    (d) In the event that the Secretary does not specify in program 
regulations or the terms and conditions of the award how program income 
is to be used, paragraph (b)(3) of this section applies automatically to 
all projects or programs except research. For awards that support 
research, paragraph (b)(1) of this section applies automatically unless 
the Secretary indicates in the terms and conditions another alternative 
on the award or the recipient is subject to special award conditions, as 
indicated in Sec. 74.14.
    (e) Unless ED regulations or the terms and conditions of the award 
provide otherwise, recipients have no obligation to the Federal 
Government regarding program income earned after the end of the project 
period.
    (f) If authorized by ED or the terms and conditions of the award, 
costs incident to the generation of program income may be deducted from 
gross income to determine program income, provided these costs have not 
been charged to the award.
    (g) Proceeds from the sale of property shall be handled in 
accordance with the requirements of the Property Standards (See 
Sec. Sec. 74.30 through 74.37).
    (h) Unless ED regulations or the terms and condition of the award 
provide otherwise, recipients have no obligation to the Federal 
Government with respect to program income earned from license fees and 
royalties for copyrighted material, patents, patent applications, 
trademarks, and inventions produced under an award. However, Patent and 
Trademark Amendments (35 U.S.C. 18) apply to inventions made under an 
experimental, developmental, or research award.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.25  Revision of budget and program plans.

    (a) The budget plan is the financial expression of the project or 
program as approved during the award process. It may include either the 
Federal and non-Federal share, or only the Federal share, depending upon 
ED requirements. It shall be related to performance for program 
evaluation purposes whenever appropriate.
    (b) Recipients are required to report deviations from budget and 
program plans, and request prior approvals for budget and program plan 
revisions, in accordance with this section.
    (c) For nonconstruction awards, recipients shall request prior 
approvals from ED for one or more of the following program or budget 
related reasons:
    (1) Change in the scope or the objective of the project or program 
(even if there is no associated budget revision requiring prior written 
approval).
    (2) Change in a key person specified in the application or award 
document.
    (3) The absence for more than three months, or a 25 percent 
reduction in time devoted to the project, by the approved project 
director or principal investigator.
    (4) The need for additional Federal funding.
    (5) The transfer of amounts budgeted for indirect costs to absorb 
increases in direct costs, or vice versa, if approval is required by the 
Secretary.
    (6) The inclusion, unless waived by the Secretary, of costs that 
require prior approval in accordance with OMB Circular A-21--Cost 
Principles for Institutions of Higher Education, OMB Circular A-122--
Cost Principles for Non-Profit Organizations, or 45 CFR part 74, 
appendix E--Principles for Determining Costs Applicable to Research and 
Development under Grants and Contracts with Hospitals, or 48 CFR part 
31--Contract Cost Principles and Procedures, as applicable.

[[Page 113]]

    (7) The transfer of funds allotted for training allowances (direct 
payment to trainees) to other categories of expense.
    (8) Unless described in the application and funded in the approved 
awards, the subaward, transfer or contracting out of any work under an 
award. This provision does not apply to the purchase of supplies, 
material, equipment, or general support services.
    (d) No other prior approval requirements for specific items are 
imposed unless a deviation has been approved by OMB.
    (e) Except for requirements listed in paragraphs (c)(1) and (c)(4) 
of this section, the Secretary may waive cost-related and administrative 
prior written approvals required by this part and OMB Circulars A-21 and 
A-122. These waivers may authorize recipients to do any one or more of 
the following:
    (1) Incur pre-award costs 90 calendar days prior to award or more 
than 90 calendar days with the prior approval of the Secretary. All pre-
award costs are incurred at the recipient's risk (i.e., the Secretary is 
under no obligation to reimburse these costs if for any reason the 
recipient does not receive an award or if the award is less than 
anticipated and inadequate to cover these costs).
    (2)(i) Initiate a one-time extension of the expiration date of the 
award of up to 12 months unless one or more of the following conditions 
apply:
    (A) The terms and conditions of award prohibit the extension.
    (B) The extension requires additional Federal funds.
    (C) The extension involves any change in the approved objectives or 
scope of the project.
    (ii) For one-time extensions, the recipient shall notify the 
Secretary in writing with the supporting reasons and revised expiration 
date at least 10 days before the expiration date specified in the award. 
This one-time extension may not be exercised merely for the purpose of 
using unobligated balances.
    (3) Carry forward unobligated balances to subsequent funding 
periods.
    (4) For awards that support research, unless the Secretary provides 
otherwise in the award or in ED's regulations, the prior approval 
requirements described in paragraph (e) of this section are 
automatically waived (i.e., recipients need not obtain prior approvals) 
unless one of the conditions included in paragraph (e)(2)(i) of this 
section applies.
    (f) The Secretary may restrict the transfer of funds among direct 
cost categories or programs, functions and activities for awards in 
which the Federal share of the project exceeds $100,000 and the 
cumulative amount of the transfers exceeds or is expected to exceed 10 
percent of the total budget as last approved by the Secretary. The 
Secretary does not permit a transfer that would cause any Federal 
appropriation or part thereof to be used for purposes other than those 
consistent with the original intent of the appropriation.
    (g) All other changes to nonconstruction budgets, except for the 
changes described in paragraph (j) of this section, do not require prior 
approval.
    (h) For construction awards, recipients shall request prior written 
approval promptly from the Secretary for budget revisions whenever--
    (1) The revision results from changes in the scope or the objective 
of the project or program;
    (2) The need arises for additional Federal funds to complete the 
project; or
    (3) A revision is desired which involves specific costs for which 
prior written approval requirements may be imposed consistent with 
applicable OMB cost principles listed in Sec. 74.27.
    (i) No other prior approval requirements for specific items may be 
imposed unless a deviation has been approved by OMB.
    (j) When the Secretary makes an award that provides support for both 
construction and nonconstruction work, the Secretary may require the 
recipient to request prior approval from the Secretary before making any 
fund or budget transfers between the two types of work supported.
    (k) For both construction and nonconstruction awards, recipients 
shall notify the Secretary in writing promptly whenever the amount of 
Federal authorized funds is expected to exceed the needs of the 
recipient for the

[[Page 114]]

project period by more than $5,000 or five percent of the Federal award, 
whichever is greater. This notification shall not be required if an 
application for additional funding is submitted for a continuation 
award.
    (l) When requesting approval for budget revisions, recipients shall 
use the budget forms that were used in the application unless the 
Secretary indicates a letter of request suffices.
    (m) Within 30 calendar days from the date of receipt of the request 
for budget revisions, the Secretary shall review the request and notify 
the recipient whether the budget revisions have been approved. If the 
revision is still under consideration at the end of 30 calendar days, 
the Secretary informs the recipient in writing of the date when the 
recipient may expect the decision.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995]



Sec. 74.26  Non-Federal audits.

    (a) Recipients and subrecipients that are institutions of higher 
education or other non-profit organizations (including hospitals) shall 
be subject to the audit requirements contained in the Single Audit Act 
Amendments of 1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-133, 
``Audits of States, Local Governments, and Non-Profit Organizations.''
    (b) State and local governments shall be subject to the audit 
requirements contained in the Single Audit Act Amendments of 1996 (31 
U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of States, 
Local Governments, and Non-Profit Organizations.''
    (c) For-profit hospitals not covered by the audit provisions of 
revised OMB Circular A-133 shall be subject to the audit requirements of 
the Federal awarding agencies.
    (d) Commercial organizations are subject to the audit requirements 
established by the Secretary or the prime recipient as incorporated into 
the award document.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 62 FR 45939, 45943, Aug. 29, 
1997]



Sec. 74.27  Allowable costs.

    (a) For each kind of recipient, there is a set of cost principles 
for determining allowable costs. Allowability of costs are determined in 
accordance with the cost principles applicable to the entity incurring 
the costs, as specified in the following chart.

    Note: OMB circulars are available from the Office of Management and 
Budget, Publication Office, Room 2200, New Executive Office Building, 
Washington, DC 20503 (202) 395-7332.)

------------------------------------------------------------------------
        For the cost of a--                Use the principles in--
------------------------------------------------------------------------
Private nonprofit organization      OMB Circular A-122.
 other than (1) An institution of
 higher education; (2) a hospital;
 or (3) an organization named in
 OMB Circular A-122 as not subject
 to that circular.
Educational institution...........  OMB Circular A-21.
Hospital..........................  Appendix E to 45 CFR part 74.
Commercial for-profit organization  48 CFR part 31 Contract Cost
 other than a hospital and an        Principles and Procedures or
 educational institution.            uniform cost accounting standards
                                     that comply with cost principles
                                     acceptable to ED.
------------------------------------------------------------------------

    (b) The cost principles applicable to a State, a local government, 
or Federally recognized Indian tribal government are specified at 34 CFR 
Sec. 80.22.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.28  Period of availability of funds.

    Where a funding period is specified, a recipient may charge to the 
grant only allowable costs resulting from obligations incurred during 
the funding period and any pre-award costs authorized by the Secretary.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[[Page 115]]

                           Property Standards



Sec. 74.30  Purpose of property standards.

    Sections 74.31 through 74.37 establish uniform standards governing 
management and disposition of property furnished by ED whose cost was 
charged to a project supported by a Federal award. Recipients shall 
observe these standards under awards. The Secretary does not impose 
additional requirements, unless specifically required by Federal 
statute. The recipient may use its own property management standards and 
procedures provided it observes the provisions of Sec. Sec. 74.31 
through 74.37.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.31  Insurance coverage.

    Recipients shall, at a minimum, provide the equivalent insurance 
coverage for real property and equipment acquired with Federal funds as 
provided to property owned by the recipient. Federally-owned property 
need not be insured unless required by the terms and conditions of the 
award.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.32  Real property.

    The Secretary prescribes requirements for recipients concerning the 
use and disposition of real property acquired in whole or in part under 
awards. Unless otherwise provided by statute, the minimum requirements 
provide the following:
    (a) Title to real property must vest in the recipient subject to the 
condition that the recipient shall use the real property for the 
authorized purpose of the project as long as it is needed and shall not 
encumber the property without approval of the Secretary.
    (b) The recipient shall obtain written approval by the Secretary for 
the use of real property in other federally-sponsored projects when the 
recipient determines that the property is no longer needed for the 
purpose of the original project. Use in other projects shall be limited 
to those under federally-sponsored projects (i.e., awards) that have 
purposes consistent with those authorized for support by the Secretary.
    (c) When the real property is no longer needed as provided in 
paragraphs (a) and (b) of this section, the recipient shall request 
disposition instructions from ED or its successor Federal awarding 
agency. The Secretary observes one or more of the following disposition 
instructions:
    (1) The recipient may be permitted to retain title without further 
obligation to the Federal Government after it compensates the Federal 
Government for that percentage of the current fair market value of the 
property attributable to the Federal participation in the project.
    (2) The recipient may be directed to sell the property under 
guidelines provided by the Secretary and pay the Federal Government for 
that percentage of the current fair market value of the property 
attributable to the Federal participation in the project (after 
deducting actual and reasonable selling and fix-up expenses, if any, 
from the sales proceeds). When the recipient is authorized or required 
to sell the property, proper sales procedures must be established that 
provide for competition to the extent practicable and result in the 
highest possible return.
    (3) The recipient may be directed to transfer title to the property 
to the Federal Government or to an eligible third party. The recipient 
is entitled to compensation for its attributable percentage of the 
current fair market value of the property.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.33  Federally-owned and exempt property.

    (a) Federally-owned property. (1) Title to federally-owned property 
remains vested in the Federal Government. Recipients shall submit 
annually an inventory listing of federally-owned property in their 
custody to the Secretary. Upon completion of the award or when the 
property is no longer needed, the recipient shall report the property to 
the Secretary for further ED utilization.
    (2) If ED has no further need for the property, it shall be declared 
excess and reported to the General Services

[[Page 116]]

Administration, unless the Secretary has statutory authority to dispose 
of the property by alternative methods (e.g., the authority provided by 
the Federal Technology Transfer Act (15 U.S.C. 3710 (I)) to donate 
research equipment to educational and non-profit organizations in 
accordance with E.O. 12821--Improving Mathematics and Science Education 
in Support of the National Education Goals. Appropriate instructions 
shall be issued to the recipient by the Secretary.
    (b) Exempt property. When statutory authority exists, the Secretary 
may vest title to property acquired with Federal funds in the recipient 
without further obligation to the Federal Government and under 
conditions the Secretary considers appropriate. This property is 
``exempt property.'' Should the Secretary not establish conditions, 
title to exempt property upon acquisition vests in the recipient without 
further obligation to the Federal Government.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.34  Equipment.

    (a) Title to equipment acquired by a recipient with Federal funds 
shall vest in the recipient, subject to conditions of this section.
    (b) The recipient may not use equipment acquired with Federal funds 
to provide services to non-Federal outside organizations for a fee that 
is less than private companies charge for equivalent services, unless 
specifically authorized by Federal statute, for as long as the Federal 
Government retains an interest in the equipment.
    (c) The recipient shall use the equipment in the project or program 
for which it was acquired as long as needed, whether or not the project 
or program continues to be supported by Federal funds and may not 
encumber the property without approval of the Secretary. When no longer 
needed for the original project or program, the recipient shall use the 
equipment in connection with its other federally-sponsored activities, 
in the following order of priority:
    (1) Activities sponsored by the Federal awarding agency which funded 
the original project; and then
    (2) Activities sponsored by other Federal awarding agencies.
    (d) During the time that equipment is used on the project or program 
for which it was acquired, the recipient shall make it available for use 
on other projects or programs if other use will not interfere with the 
work on the project or program for which the equipment was originally 
acquired. First preference for other use shall be given to other 
projects or programs sponsored by the Federal awarding agency that 
financed the equipment; second preference shall be given to projects or 
programs sponsored by other Federal awarding agencies. If the equipment 
is owned by the Federal Government, use on other activities not 
sponsored by the Federal Government shall be permissible if authorized 
by the Federal awarding agency. User charges shall be treated as program 
income.
    (e) When acquiring replacement equipment, the recipient may use the 
equipment to be replaced as trade-in or sell the equipment and use the 
proceeds to offset the costs of the replacement equipment subject to the 
approval of the Secretary.
    (f) The recipient's property management standards for equipment 
acquired with Federal funds and federally-owned equipment shall include 
all of the following:
    (1) Equipment records shall be maintained accurately and shall 
include the following information:
    (i) A description of the equipment.
    (ii) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or other identification number.
    (iii) Source of the equipment, including the award number.
    (iv) Whether title vests in the recipient or the Federal Government.
    (v) Acquisition date (or date received, if the equipment was 
furnished by the Federal Government) and cost.
    (vi) Information from which one can calculate the percentage of 
Federal participation in the cost of the equipment (not applicable to 
equipment furnished by the Federal Government).
    (vii) Location and condition of the equipment and the date the 
information was reported.
    (viii) Unit acquisition cost.

[[Page 117]]

    (ix) Ultimate disposition data, including date of disposal and sales 
price or the method used to determine current fair market value where a 
recipient compensates ED for its share.
    (2) Equipment owned by the Federal Government must be identified to 
indicate Federal ownership.
    (3) A physical inventory of equipment must be taken and the results 
reconciled with the equipment records at least once every two years. Any 
differences between quantities determined by the physical inspection and 
those shown in the accounting records must be investigated to determine 
the causes of the difference. The recipient shall, in connection with 
the inventory, verify the existence, current utilization, and continued 
need for the equipment.
    (4) A control system must be in effect to insure adequate safeguards 
to prevent loss, damage, or theft of the equipment. Any loss, damage, or 
theft of equipment shall be investigated and fully documented; if the 
equipment was owned by the Federal Government, the recipient shall 
promptly notify the Secretary.
    (5) Adequate maintenance procedures must be implemented to keep the 
equipment in good condition.
    (6) Where the recipient is authorized or required to sell the 
equipment, proper sales procedures must be established which provide for 
competition to the extent practicable and result in the highest possible 
return.
    (g) When the recipient no longer needs the equipment, the equipment 
may be used for other activities in accordance with the following 
standards:
    (1) For equipment with a current per unit fair market value of $5000 
or more, the recipient may retain the equipment for other uses provided 
that compensation is made to ED or its successor. The amount of 
compensation shall be computed by applying the percentage of Federal 
participation in the cost of the original project or program to the 
current fair market value of the equipment.
    (2) If the recipient has no need for the equipment, the recipient 
shall request disposition instructions from the Secretary. The Secretary 
shall determine whether the equipment can be used to meet ED 
requirements. If no requirement exists within ED, the availability of 
the equipment shall be reported to the General Services Administration 
by the Secretary to determine whether a requirement for the equipment 
exists in other Federal agencies. The Secretary issues instructions to 
the recipient no later than 120 calendar days after the recipient's 
request and the following procedures govern:
    (i) If so instructed or if disposition instructions are not issued 
within 120 calendar days after the recipient's request, the recipient 
shall sell the equipment and reimburse ED an amount computed by applying 
to the sales proceeds the percentage of Federal participation in the 
cost of the original project or program. However, the recipient shall be 
permitted to deduct and retain from the Federal share $500 or ten 
percent of the proceeds, whichever is less, for the recipient's selling 
and handling expenses.
    (ii) If the recipient is instructed to ship the equipment elsewhere, 
the recipient is reimbursed by ED by an amount which is computed by 
applying the percentage of the recipient's participation in the cost of 
the original project or program to the current fair market value of the 
equipment, plus any reasonable shipping or interim storage costs 
incurred.
    (iii) If the recipient is instructed to otherwise dispose of the 
equipment, the recipient is reimbursed by ED for costs incurred in its 
disposition.
    (iv) The Secretary may reserve the right to transfer the title to 
the Federal Government or to a third party named by the Federal 
Government when the third party is otherwise eligible under existing 
statutes. This transfer shall be subject to the following standards:
    (A) The equipment must be appropriately identified in the award or 
otherwise made known to the recipient in writing.
    (B) The Secretary issues disposition instructions within 120 
calendar days after receipt of a final inventory. The final inventory 
must list all equipment acquired with grant funds and federally-owned 
equipment. If the Secretary does not issue disposition instructions 
within the 120 calendar day period, the

[[Page 118]]

recipient shall apply the standards of this section, as appropriate.
    (C) When the Secretary exercises the right to take title, the 
equipment is subject to the provisions for federally-owned equipment.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995]



Sec. 74.35  Supplies and other expendable property.

    (a) Title to supplies and other expendable property shall vest in 
the recipient upon acquisition. If there is a residual inventory of 
unused supplies exceeding $5,000 in total aggregate value upon 
termination or completion of the project or program and the supplies are 
not needed for any other federally-sponsored project or program, the 
recipient shall retain the supplies for use on non-Federal sponsored 
activities or sell them, but shall, in either case, compensate the 
Federal Government for its share. The amount of compensation shall be 
computed in the same manner as for equipment.
    (b) The recipient may not use supplies acquired with Federal funds 
to provide services to non-Federal outside organizations for a fee that 
is less than private companies charge for equivalent services, unless 
specifically authorized by Federal statute as long as the Federal 
Government retains an interest in the supplies.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.36  Intangible property.

    (a) The recipient may copyright any work that is subject to 
copyright and was developed, or for which ownership was purchased, under 
an award. ED and any other Federal awarding agency reserve a royalty-
free, nonexclusive, and irrevocable right to reproduce, publish, or 
otherwise use the work for Federal purposes, and to authorize others to 
do so.
    (b) Recipients are subject to applicable regulations governing 
patents and inventions, including government-wide regulations issued by 
the Department of Commerce at 37 CFR Part 401--Rights to Inventions Made 
by Nonprofit Organizations and Small Business Firms Under Government 
Grants, Contracts and Cooperative Agreements.
    (c) The Federal Government has the right to:
    (1) Obtain, reproduce, publish or otherwise use the data first 
produced under an award; and
    (2) Authorize others to receive, reproduce, publish, or otherwise 
use such data for Federal purposes.
    (d)(1) In addition, in response to a Freedom of Information Act 
(FOIA) request for research data relating to published research findings 
produced under an award that were used by the Federal Government in 
developing an agency action that has the force and effect of law, ED 
shall request, and the recipient shall provide, within a reasonable 
time, the research data so that they can be made available to the public 
through the procedures established under the FOIA. If ED obtains the 
research data solely in response to a FOIA request, the agency may 
charge the requester a reasonable fee equaling the full incremental cost 
of obtaining the research data. This fee should reflect costs incurred 
by the agency, the recipient, and applicable subrecipients. This fee is 
in addition to any fees the agency may assess under the FOIA (5 U.S.C. 
552(a)(4)(A)).
    (2) The following definitions apply for purposes of this paragraph 
(d):
    (i) Research data is defined as the recorded factual material 
commonly accepted in the scientific community as necessary to validate 
research findings, but not any of the following: preliminary analyses, 
drafts of scientific papers, plans for future research, peer reviews, or 
communications with colleagues. This ``recorded'' material excludes 
physical objects (e.g., laboratory samples). Research data also do not 
include:
    (A) Trade secrets, commercial information, materials necessary to be 
held confidential by a researcher until they are published, or similar 
information which is protected under law; and
    (B) Personnel and medical information and similar information the 
disclosure of which would constitute a

[[Page 119]]

clearly unwarranted invasion of personal privacy, such as information 
that could be used to identify a particular person in a research study.
    (ii) Published is defined as either when:
    (A) Research findings are published in a peer-reviewed scientific or 
technical journal; or
    (B) A Federal agency publicly and officially cites the research 
findings in support of an agency action that has the force and effect of 
law.
    (iii) Used by the Federal Government in developing an agency action 
that has the force and effect of law is defined as when an agency 
publicly and officially cites the research findings in support of an 
agency action that has the force and effect of law.
    (e) Title to intangible property and debt instruments acquired under 
an award or subaward vests upon acquisition in the recipient. The 
recipient shall use that property for the originally-authorized purpose, 
and the recipient shall not encumber the property without approval of 
the Secretary. When no longer needed for the originally authorized 
purpose, disposition of the intangible property shall occur in 
accordance with the provisions of Sec. 74.34(g).

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 65 FR 14407, 14416, Mar. 16, 
2000]



Sec. 74.37  Property trust relationship.

    Real property, equipment, intangible property, and debt instruments 
that are acquired or improved with Federal funds must be held in trust 
by the recipient as trustee for the beneficiaries of the project or 
program under which the property was acquired or improved. The Secretary 
may require recipients to record liens or other appropriate notices of 
record to indicate that personal or real property has been acquired or 
improved with Federal funds and that use and disposition conditions 
apply to the property.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

                          Procurement Standards



Sec. 74.40  Purpose of procurement standards.

    Sections 74.41 through 74.48 contain standards for use by recipients 
in establishing procedures for the procurement of supplies and other 
expendable property, equipment, real property, and other services with 
Federal funds. These standards are designed to ensure that these 
materials and services are obtained in an effective manner and in 
compliance with the provisions of applicable Federal statutes and 
executive orders. The Secretary does not impose additional procurement 
standards or requirements upon recipients, unless specifically required 
by Federal statute or executive order or as authorized in Sec. 74.4 or 
Sec. 74.14.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.41  Recipient responsibilities.

    The standards contained in this section do not relieve the recipient 
of the contractual responsibilities arising under its contract(s). The 
recipient is the responsible authority, without recourse to the 
Secretary, regarding the settlement and satisfaction of all contractual 
and administrative issues arising out of procurements entered into in 
support of an award or other agreement. This includes disputes, claims, 
protests of award, source evaluation, or other matters of a contractual 
nature. Matters concerning violation of statute are to be referred to 
Federal, State or local authority that may have proper jurisdiction.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.42  Codes of conduct.

    The recipient shall maintain written standards of conduct governing 
the performance of its employees engaged in the award and administration 
of contracts. No employee, officer, or agent shall participate in the 
selection, award, or administration of a contract supported by Federal 
funds if a real or apparent conflict of interest would be involved. A 
conflict would arise when the employee, officer, or agent, any

[[Page 120]]

member of his or her immediate family, his or her partner, or an 
organization which employs or is about to employ any of the parties 
indicated herein, has a financial or other interest in the firm selected 
for an award. The officers, employees, and agents of the recipient shall 
neither solicit nor accept gratuities, favors, or anything of monetary 
value from contractors, or parties to subagreements. However, recipients 
may set standards for situations in which the financial interest is not 
substantial or the gift is an unsolicited item of nominal value. The 
standards of conduct shall provide for disciplinary actions to be 
applied for violations of these standards by officers, employees, or 
agents of the recipient.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.43  Competition.

    All procurement transactions shall be conducted in a manner to 
provide, to the maximum extent practical, open and free competition. The 
recipient shall be alert to organizational conflicts of interest as well 
as noncompetitive practices among contractors that may restrict or 
eliminate competition or otherwise restrain trade. In order to ensure 
objective contractor performance and eliminate unfair competitive 
advantage, contractors that develop or draft specifications, 
requirements, statements of work, invitations for bids or requests for 
proposals shall be excluded from competing for procurements. Awards must 
be made to the bidder or offeror whose bid or offer is responsive to the 
solicitation and is most advantageous to the recipient, price, quality 
and other factors considered. Solicitations shall clearly establish all 
requirements that the bidder or offeror shall fulfill in order for the 
bid or offer to be evaluated by the recipient. Any and all bids or 
offers may be rejected when it is in the recipient's interest to do so.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.44  Procurement procedures.

    (a) All recipients shall establish written procurement procedures. 
These procedures must provide for, at a minimum, that--
    (1) Recipients avoid purchasing unnecessary items;
    (2) Where appropriate, an analysis is made of lease and purchase 
alternatives to determine which would be the most economical and 
practical procurement for the Federal Government; or
    (3) Solicitations for goods and services provide for all of the 
following:
    (i) A clear and accurate description of the technical requirements 
for the material, product, or service to be procured. In competitive 
procurements, a description shall not contain features which unduly 
restrict competition.
    (ii) Requirements which the bidder/offeror must fulfill and all 
other factors to be used in evaluating bids or proposals.
    (iii) A description, whenever practicable, of technical requirements 
in terms of functions to be performed or performance required, including 
the range of acceptable characteristics or minimum acceptable standards.
    (iv) The specific features of brand name or equal descriptions that 
bidders are required to meet when these items are included in the 
solicitation.
    (v) The acceptance, to the extent practicable and economically 
feasible, of products and services dimensioned in the metric system of 
measurement.
    (vi) Preference, to the extent practicable and economically 
feasible, for products and services that conserve natural resources and 
protect the environment, and are energy efficient.
    (b) Positive efforts shall be made by recipients to utilize small 
businesses, minority-owned firms, and women's business enterprises, 
whenever possible. Recipients of Federal awards shall take all of the 
following steps to further this goal:
    (1) Ensure that small businesses, minority-owned firms, and women's 
business enterprises are used to the fullest extent practicable.
    (2) Make information on forthcoming opportunities available and 
arrange time frames for purchases and contracts to encourage and 
facilitate participation by small businesses, minority-owned firms, and 
women's business enterprises.

[[Page 121]]

    (3) Consider in the contract process whether firms competing for 
larger contracts intend to subcontract with small businesses, minority-
owned firms, and women's business enterprises.
    (4) Encourage contracting with consortiums of small businesses, 
minority-owned firms and women's business enterprises when a contract is 
too large for one of these firms to handle individually.
    (5) Use the services and assistance, as appropriate, of 
organizations such as the Small Business Administration and the 
Department of Commerce's Minority Business Development Agency in the 
solicitation and utilization of small businesses, minority-owned firms 
and women's business enterprises.
    (c) The type of procuring instruments used (e.g., fixed price 
contracts, cost reimbursable contracts, purchase orders, and incentive 
contracts) shall be determined by the recipient but must be appropriate 
for the particular procurement and for promoting the best interest of 
the program or project involved. The ``cost-plus-a-percentage-of-cost'' 
or ``percentage of construction cost'' methods of contracting must not 
be used.
    (d) Contracts are made only with responsible contractors who possess 
the potential ability to perform successfully under the terms and 
conditions of the proposed procurement. Consideration is given to 
matters as contractor integrity, record of past performance, financial 
and technical resources or accessibility to other necessary resources. 
In certain circumstances, contracts with certain parties are restricted 
by E.O. 12549 (implemented by the Secretary in 34 CFR Part 85) and E.O. 
12689--Debarment and Suspension.
    (e) Recipients shall, on request, make available for the Secretary, 
pre-award review and procurement documents, such as request for 
proposals or invitations for bids, independent cost estimates, etc., 
when any of the following conditions apply:
    (1) A recipient's procurement procedures or operation fails to 
comply with the procurement standards in this part.
    (2) The procurement is expected to exceed the small purchase 
threshold fixed at 41 U.S.C. 403 (11) (currently $25,000) and is to be 
awarded without competition or only one bid or offer is received in 
response to a solicitation.
    (3) The procurement, which is expected to exceed the small purchase 
threshold, specifies a ``brand name'' product.
    (4) The proposed award over the small purchase threshold is to be 
awarded to other than the apparent low bidder under a sealed bid 
procurement.
    (5) A proposed contract modification changes the scope of a contract 
or increases the contract amount by more than the amount of the small 
purchase threshold.
    (f)(1)(i) A faith-based organization is eligible to contract with 
recipients on the same basis as any other private organization, with 
respect to contracts for which such other organizations are eligible.
    (ii) In the selection of goods and services providers, recipients 
shall not discriminate for or against a private organization on the 
basis of the organization's religious character or affiliation.
    (2) The provisions of Sec. Sec. 75.532 and 76.532 applicable to 
grantees and subgrantees apply to a faith-based organization that 
contracts with a recipient, unless the faith-based organization is 
selected as a result of the genuine and independent private choices of 
individual beneficiaries of the program and provided the organization 
otherwise satisfies the requirements of the program.
    (3) A private organization that engages in inherently religious 
activities, such as religious worship, instruction, or proselytization, 
must offer those services separately in time or location from any 
programs or services supported by a contract with a recipient, and 
participation in any such inherently religious activities by 
beneficiaries of the programs supported by the contract must be 
voluntary, unless the organization is selected as a result of the 
genuine and independent private choices of individual beneficiaries of 
the program and provided the organization otherwise satisfies the 
requirements of the program.
    (4)(i) A faith-based organization that contracts with a recipient 
may retain its independence, autonomy, right of

[[Page 122]]

expression, religious character, and authority over its governance.
    (ii) A faith-based organization may, among other things--
    (A) Retain religious terms in its name;
    (B) Continue to carry out its mission, including the definition, 
development, practice, and expression of its religious beliefs;
    (C) Use its facilities to provide services without removing or 
altering religious art, icons, scriptures, or other symbols from these 
facilities;
    (D) Select its board members and otherwise govern itself on a 
religious basis; and
    (E) Include religious references in its mission statement and other 
chartering or governing documents.
    (5) A private organization that contracts with a recipient shall not 
discriminate against a beneficiary or prospective beneficiary in the 
provision of program services on the basis of religion or religious 
belief.
    (6) A religious organization's exemption from the Federal 
prohibition on employment discrimination on the basis of religion, in 
section 702(a) of the Civil Rights Act of 1964, 42 U.S.C. 2000e-1, is 
not forfeited when the organization contracts with a recipient.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995; 69 
FR 31710, June 4, 2004]



Sec. 74.45  Cost and price analysis.

    Some form of cost or price analysis must be made and documented in 
the procurement files in connection with every procurement action. Price 
analysis may be accomplished in various ways, including the comparison 
of price quotations submitted, market prices and similar indicia, 
together with discounts. Cost analysis is the review and evaluation of 
each element of cost to determine reasonableness, allocability, and 
allowability.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995]



Sec. 74.46  Procurement records.

    Procurement records and files for purchases in excess of the small 
purchase threshold must include the following at a minimum--
    (a) Basis for contractor selection;
    (b) Justification for lack of competition when competitive bids or 
offers are not obtained;
    (c) Basis for award cost or price.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995]



Sec. 74.47  Contract administration.

    A system for contract administration must be maintained to ensure 
contractor conformance with the terms, conditions and specifications of 
the contract, and to ensure adequate and timely follow up of all 
purchases. Recipients shall evaluate contractor performance and 
document, as appropriate, whether contractors have met the terms, 
conditions, and specifications of the contract.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995]



Sec. 74.48  Contract provisions.

    The recipient shall include, in addition to provisions to define a 
sound and complete agreement, the following provisions in all contracts. 
The following provisions must also be applied to subcontracts:
    (a) Contracts in excess of the small purchase threshold shall 
contain contractual provisions or conditions that allow for 
administrative, contractual, or legal remedies in instances in which

[[Page 123]]

a contractor violates or breaches the contract terms, and provide for 
remedial actions as may be appropriate.
    (b) All contracts in excess of the small purchase threshold shall 
contain suitable provisions for termination by the recipient, including 
the manner by which termination shall be effected and the basis for 
settlement. In addition, contracts must describe conditions under which 
the contract may be terminated for default, as well as conditions where 
the contract may be terminated because of circumstances beyond the 
control of the contractor.
    (c) Except as otherwise required by statute, an award that requires 
the contracting (or subcontracting) for construction or facility 
improvements must provide for the recipient to follow its own 
requirements relating to bid guarantees, performance bonds, and payment 
bonds unless the construction contract or subcontract exceeds $100,000. 
For those contracts or subcontracts exceeding $100,000, the Secretary 
may accept the bonding policy and requirements of the recipient, 
provided the Secretary has made a determination that the Federal 
Government's interest is adequately protected. If a determination has 
not been made, the minimum requirements are as follows:
    (1) A bid guarantee from each bidder equivalent to five percent of 
the bid price. The ``bid guarantee'' must consist of a firm commitment 
such as a bid bond, certified check, or other negotiable instrument 
accompanying a bid as assurance that the bidder shall, upon acceptance 
of his bid, execute contractual documents as may be required within the 
time specified.
    (2) A performance bond on the part of the contractor for 100 percent 
of the contract price. A ``performance bond'' is one executed in 
connection with a contract to secure fulfillment of all the contractor's 
obligations under a contract.
    (3) A payment bond on the part of the contractor for 100 percent of 
the contract price. A ``payment bond'' is one executed in connection 
with a contract to assure payment as required by statute of all persons 
supplying labor and material in the execution of the work provided for 
in the contract.
    (4) Where bonds are required, the bonds must be obtained from 
companies holding certificates of authority as acceptable sureties 
pursuant to 31 CFR Part 223--Surety Companies Doing Business with the 
United States.
    (d) All negotiated contracts (except those for less than the small 
purchase threshold) awarded by recipients must include a provision to 
the effect that the recipient, ED, the Comptroller General of the United 
States, or any of their duly authorized representatives, must have 
access to any books, documents, papers and records of the contractor 
which are directly pertinent to a specific program for the purpose of 
making audits, examinations, excerpts and transcriptions.
    (e) All contracts, including small purchases, awarded by recipients 
and their contractors must contain the procurement provisions of 
appendix A to this part, as applicable.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

                           Reports and Records



Sec. 74.50  Purpose of reports and records.

    Sections 74.51 through 74.53 establish the procedures for monitoring 
and reporting on the recipient's financial and program performance and 
the necessary standard reporting forms. They also establish record 
retention requirements.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.51  Monitoring and reporting program performance.

    (a) Recipients are responsible for managing and monitoring each 
project, program, subaward, function, or activity supported by the 
award. Recipients shall monitor subawards to ensure subrecipients have 
met the audit requirements in Sec. 74.26.
    (b) The Secretary prescribes the frequency with which the 
performance reports shall be submitted. Except as provided in Sec. 
74.51(f), performance reports are not required more frequently than 
quarterly or, less frequently than annually. Annual reports are due 90 
calendar days after the grant year; quarterly or semi-annual reports are 
due 30 days after the reporting period.

[[Page 124]]

The Secretary may require annual reports before the anniversary dates of 
multiple year awards in lieu of these requirements. The final 
performance reports are due 90 calendar days after the expiration or 
termination of the award.
    (c) If inappropriate, a final technical or performance report is not 
required after completion of the project.
    (d) When required, performance reports must generally contain, for 
each award, brief information on each of the following:
    (1) A comparison of actual accomplishments with the goals and 
objectives established for the period, the findings of the investigator, 
or both. Whenever appropriate and the output of programs or projects can 
be readily quantified, this quantitative data should be related to cost 
data for computation of unit costs.
    (2) Reasons why established goals were not met, if appropriate.
    (3) Other pertinent information including, when appropriate, 
analysis, and explanation of cost overruns or high unit costs.
    (e) Recipients are not required to submit more than the original and 
two copies of performance reports.
    (f) Recipients shall immediately notify the Secretary of 
developments that have a significant impact on the award-supported 
activities. Also, notification must be given in the case of problems, 
delays, or adverse conditions which materially impair the ability to 
meet the objectives of the award. This notification must include a 
statement of the action taken or contemplated, and any assistance needed 
to resolve the situation.
    (g) The Secretary may make site visits, as needed.
    (h) The Secretary complies with the clearance requirements of 5 CFR 
part 1320 when requesting performance data from recipients.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995]



Sec. 74.52  Financial reporting.

    (a) The following forms or other forms as may be approved by OMB are 
authorized for obtaining financial information from recipients.
    (1) SF-269 or SF-269A--Financial Status Report. (i) Recipients are 
required to use the SF-269 or SF-269A to report the status of funds for 
all nonconstruction projects or programs. The Secretary may not require 
the SF-269 or SF-269A when, the Secretary determines that SF-270--
Request for Advance or Reimbursement, or SF-272--Report of Federal Cash 
Transactions--provides adequate information to meet the Department's 
needs, except that a final SF-269 or SF-269A is required at the 
completion of the project when the SF-270 is used only for advances.
    (ii) The Secretary prescribes whether the report is on a cash or 
accrual basis. If the Secretary requires accrual information and the 
recipient's accounting records are not normally kept on the accrual 
basis, the recipient is not required to convert its accounting system, 
but shall develop accrual information through best estimates based on an 
analysis of the documentation on hand.
    (iii) The Secretary determines the frequency of the Financial Status 
Report for each project or program, considering the size and complexity 
of the particular project or program. However, the report is not 
required more frequently than quarterly or less frequently than 
annually. A final report is required at the completion of the agreement.
    (iv) The Secretary requires recipients to submit the SF-269 or SF-
269A (an original and no more than two copies) no later than 30 days 
after the end of each specified reporting period for quarterly and semi-
annual reports, and 90 calendar days for annual and final reports. 
Extensions of reporting due dates may be approved by the Secretary upon 
request of the recipient.
    (2) SF-272--Report of Federal Cash Transactions. (i) When funds are 
advanced to recipients the Secretary requires each recipient to submit 
the SF-272 and, when necessary, its continuation sheet, SF-272a. The 
Secretary

[[Page 125]]

uses this report to monitor cash advanced to recipients and to obtain 
disbursement information for each agreement with the recipients.
    (ii) The Secretary may require forecasts of Federal cash 
requirements in the ``Remarks'' section of the report.
    (iii) When practical and deemed necessary, the Secretary may require 
recipients to report in the ``Remarks'' section the amount of cash 
advances received in excess of three days. Recipients shall provide 
short narrative explanations of actions taken to reduce the excess 
balances.
    (iv) Recipients shall be required to submit not more than the 
original and two copies of the SF-272 15 calendar days following the end 
of each quarter. The Secretary may require a monthly report from those 
recipients receiving advances totaling $1 million or more per year.
    (v) The Secretary may waive the requirement for submission of the 
SF-272 for any one of the following reasons:
    (A) When monthly advances do not exceed $25,000 per recipient, 
provided that advances are monitored through other forms contained in 
this section;
    (B) If, in the Secretary's opinion, the recipient's accounting 
controls are adequate to minimize excessive Federal advances; or
    (C) When the electronic payment mechanisms provide adequate data.
    (b) When the Secretary needs additional information or more frequent 
reports, the following shall be observed:
    (1) When additional information is needed to comply with legislative 
requirements, the Secretary shall issue instructions to require 
recipients to submit information under the ``Remarks'' section of the 
reports.
    (2) When the Secretary determines that a recipient's accounting 
system does not meet the standards in Sec. 74.21, additional pertinent 
information to further monitor awards may be obtained upon written 
notice to the recipient until the system is brought up to standard. The 
Secretary, in obtaining this information, complies with the report 
clearance requirements of 5 CFR part 1320.
    (3) The Secretary may shade out any line item on any report if not 
necessary.
    (4) The Secretary may accept the identical information from the 
recipients in machine readable format or computer printouts or 
electronic outputs in lieu of prescribed formats.
    (5) The Secretary may provide computer or electronic outputs to 
recipients when these outputs expedite or contribute to the accuracy of 
reporting.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995]



Sec. 74.53  Retention and access requirements for records.

    (a) This section establishes requirements for record retention and 
access to records for awards to recipients. The Secretary does not 
impose any other record retention or access requirements upon 
recipients.
    (b) Financial records, supporting documents, statistical records, 
and all other records pertinent to an award shall be retained for a 
period of three years from the date of submission of the final 
expenditure report or, for awards that are renewed quarterly or 
annually, from the date of the submission of the quarterly or annual 
financial report, as authorized by the Secretary. The only exceptions 
are the following:
    (1) If any litigation, claim, or audit is started before the 
expiration of the 3-year period, the records shall be retained until all 
litigation, claims, or audit findings involving the records have been 
resolved and final action taken.
    (2) Records for real property and equipment acquired with Federal 
funds shall be retained for 3 years after final disposition.
    (3) When records are transferred to or maintained by the Secretary, 
the 3-year retention requirement is not applicable to the recipient.
    (4) Indirect cost rate proposals, cost allocations plans, etc. as 
specified in Sec. 74.53(g).
    (c) Copies of original records may be substituted for the original 
records if authorized by the Secretary.

[[Page 126]]

    (d) The Secretary requests transfer of certain records to its 
custody from recipients when it determines that the records possess long 
term retention value. However, in order to avoid duplicate 
recordkeeping, the Secretary may make arrangements for recipients to 
retain any records that are continuously needed for joint use.
    (e) The Secretary, the Inspector General, Comptroller General of the 
United States, or any of their duly authorized representatives, have the 
right of timely and unrestricted access to any books, documents, papers, 
or other records of recipients that are pertinent to the awards, in 
order to make audits, examinations, excerpts, transcripts, and copies of 
documents. This right also includes timely and reasonable access to a 
recipient's personnel for the purpose of interview and discussion 
related to these documents. The rights of access in this paragraph are 
not limited to the required retention period, but shall last as long as 
records are retained.
    (f) Unless required by statute, the Secretary does not place 
restrictions on recipients that limit public access to the records of 
recipients that are pertinent to an award, except when the Secretary can 
demonstrate that the records must be kept confidential and would have 
been exempted from disclosure pursuant to the Freedom of Information Act 
(5 U.S.C. 552) if the records had belonged to ED.
    (g) The starting date for retention of the following types of 
documents (including supporting records) is specified in paragraphs 
(g)(1) and (2) of this section: indirect cost rate computations or 
proposals; cost allocation plans; and any similar accounting 
computations of the rate at which a particular group of costs is 
chargeable (such as computer usage chargeback rates or composite fringe 
benefit rates).
    (1) If submitted for negotiation. If the recipient submits to the 
Secretary or the subrecipient submits to the recipient the proposal, 
plan, or other computation to form the basis for negotiation of the 
rate, then the 3-year retention period for its supporting records starts 
on the date of submission.
    (2) If not submitted for negotiation. If the recipient is not 
required to submit to the Secretary or the subrecipient is not required 
to submit to the recipient the proposal, plan, or other computation for 
negotiation purposes, then the 3-year retention period for the proposal, 
plan, or other computation and its supporting records starts at the end 
of the fiscal year (or other accounting period) covered by the proposal, 
plan, or other computation.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3 and 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995; 60 
FR 46493, Sept. 6, 1995]

                       Termination and Enforcement



Sec. 74.60  Purpose of termination and enforcement.

    Sections 74.61 and 74.62 establish uniform suspension, termination, 
and enforcement procedures.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.61  Termination.

    (a) Awards may be terminated in whole or in part only--
    (1) By the Secretary, if a recipient materially fails to comply with 
the terms and conditions of an award;
    (2) By the Secretary with the consent of the recipient, in which 
case the two parties shall agree upon the termination conditions, 
including the effective date and, in the case of partial termination, 
the portion to be terminated.
    (3) By the recipient, upon sending to the Secretary written 
notification containing the reasons for the termination, the effective 
date, and, in the case of partial termination, the portion to be 
terminated. However, if the Secretary determines in the case of partial 
termination that the reduced or modified portion of the grant will not 
accomplish the purposes for which the grant was made, it may terminate 
the grant in its entirety under either paragraph (a)(1) or (2) of this 
section.
    (b) If costs are allowed under an award, the responsibilities of the 
recipient referred to in Sec. 74.71(a), including those for property 
management as

[[Page 127]]

applicable, shall be considered in the termination of the award, and 
provision shall be made for continuing responsibilities of the recipient 
after termination, as appropriate.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.62  Enforcement.

    (a) Remedies for noncompliance. If a recipient materially fails to 
comply with the terms and conditions of an award, whether stated in a 
Federal statute, regulation, assurance, application, or notice of award, 
the Secretary may, in addition to imposing any of the special conditions 
outlined in Sec. 74.14, take one or more of the following actions, as 
appropriate in the circumstances:
    (1) Temporarily withhold cash payments pending correction of the 
deficiency by the recipient or more severe enforcement action by the 
Secretary.
    (2) Disallow (that is, deny both use of funds and any applicable 
matching credit for) all or part of the cost of the activity or action 
not in compliance.
    (3) Wholly or partly suspend or terminate the current award.
    (4) Withhold further awards for the project or program.
    (5) Take other remedies that may be legally available.
    (b) Hearings and appeals. In taking an enforcement action, the 
Secretary provides the recipient an opportunity for hearing, appeal, or 
other administrative proceeding to which the recipient is entitled under 
any statute or regulation applicable to the action involved.
    (c) Effects of suspension and termination. Costs of a recipient 
resulting from obligations incurred by the recipient during a suspension 
or after termination of an award are not allowable unless the Secretary 
expressly authorizes them in the notice of suspension or termination or 
subsequently. Other recipient costs during suspension or after 
termination which are necessary and not reasonably avoidable are 
allowable if--
    (1) The costs result from obligations which were properly incurred 
by the recipient before the effective date of suspension or termination, 
are not in anticipation of it, and in the case of a termination, are 
noncancellable; and
    (2) The costs would be allowable if the award were not suspended or 
expired normally at the end of the funding period in which the 
termination takes effect.
    (d) Relationship to debarment and suspension. The enforcement 
remedies identified in this section, including suspension and 
termination, do not preclude ED from initiating a debarment or 
suspension action against a recipient under 34 CFR part 85 (see Sec. 
74.13).

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



                 Subpart D_After-the-Award Requirements



Sec. 74.70  Purpose.

    Sections 74.71 through 74.73 contain closeout procedures and other 
procedures for subsequent disallowances and adjustments.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



Sec. 74.71  Closeout procedures.

    (a) Recipients shall submit, within 90 calendar days after the date 
of completion of the award, all financial, performance, and other 
reports as required by the terms and conditions of the award. The 
Secretary may approve extensions when requested by the recipient.
    (b) Unless the Secretary authorizes an extension, a recipient shall 
liquidate all obligations incurred under the award not later than 90 
calendar days after the funding period or the date of completion as 
specified in the terms and conditions of the award or in ED implementing 
instructions.
    (c) The Secretary makes prompt payments to a recipient for allowable 
reimbursable costs under the award being closed out.
    (d) The recipient shall promptly refund any balances of unobligated 
cash that the Secretary has advanced or paid and that is not authorized 
to be retained by the recipient for use in other projects. OMB Circular 
A-129 governs unreturned amounts that become delinquent debts.
    (e) When authorized by the terms and conditions of the award, the 
Secretary

[[Page 128]]

makes a settlement for any upward or downward adjustments to the Federal 
share of costs after closeout reports are received.
    (f) The recipient shall account for any real and personal property 
acquired with Federal funds or received from the Federal Government in 
accordance with Sec. Sec. 74.31 through 74.37.
    (g) In the event a final audit has not been performed prior to the 
closeout of an award, the Secretary shall retain the right to recover an 
appropriate amount after fully considering the recommendations on 
disallowed costs resulting from the final audit.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995]



Sec. 74.72  Subsequent adjustments and continuing responsibilities.

    (a) The closeout of an award does not affect any of the following:
    (1) The right of the Secretary to disallow costs and recover funds 
on the basis of a later audit or other review.
    (2) The obligation of the recipient to return any funds due as a 
result of later refunds, corrections, or other transactions.
    (3) Audit requirements in Sec. 74.26.
    (4) Property management requirements in Sec. Sec. 74.31 through 
74.37.
    (5) Records retention as required in Sec. 74.53.
    (b) After closeout of an award, a relationship created under an 
award may be modified or ended in whole or in part with the consent of 
the Secretary and the recipient, provided the responsibilities of the 
recipient referred to in Sec. 74.73(a), including those for property 
management as applicable, are considered and provisions made for 
continuing responsibilities of the recipient, as appropriate.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

[59 FR 34724, July 6, 1994, as amended at 60 FR 6660, Feb. 3, 1995]



Sec. 74.73  Collection of amounts due.

    (a) Any funds paid to a recipient in excess of the amount to which 
the recipient is finally determined to be entitled under the terms and 
conditions of the award constitute a debt to the Federal Government. If 
not paid within a reasonable period after the demand for payment, the 
Secretary may reduce the debt by--
    (1) Making an administrative offset against other requests for 
reimbursements;
    (2) Withholding advance payments otherwise due to the recipient; or
    (3) Taking other action permitted by statute.
    (b) Except as otherwise provided by law, the Secretary charges 
interest on an overdue debt in accordance with 4 CFR Chapter II--Federal 
Claims Collection Standards.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)

               Appendix A to Part 74--Contract Provisions

    All contracts, awarded by a recipient including small purchases, 
shall contain the following provisions as applicable:
    1. Equal Employment Opportunity--All contracts must contain a 
provision requiring compliance with E.O. 11246--Equal Employment 
Opportunity, as amended by E.O. 11375--Amending Executive Order 11246 
Relating to Equal Employment Opportunity, and as supplemented by 
regulations at 41 CFR Part 60--Office of Federal Contract Compliance 
Programs, Equal Employment Opportunity, Department of Labor.
    2. Copeland ``Anti-Kickback'' Act (18 U.S.C. 874 and 40 U.S.C. 
276c)--All contracts and subgrants in excess of $2,000 for construction 
or repair awarded by recipients and subrecipients must include a 
provision for compliance with the Copeland ``Anti-Kickback'' Act (18 
U.S.C. 874), as supplemented by Department of Labor regulations (29 CFR 
Part 3--Contractors and Subcontractors on Public Building or Public Work 
Financed in Whole or in Part by Loans or Grants from the United States). 
The Act provides that each contractor or subrecipient shall be 
prohibited from inducing, by any means, any person employed in the 
construction, completion, or repair of public work, to give up any part 
of the compensation to which he is otherwise entitled. The recipient 
shall report all suspected or reported violations to the Federal 
awarding agency.

[[Page 129]]

    3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--When 
required by Federal program legislation, all construction contracts 
awarded by the recipients and subrecipients of more than $2,000 shall 
include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 
276a to a-7) and as supplemented by Department of Labor regulations (29 
CFR Part 5--Labor Standards Provisions Applicable to Contracts Governing 
Federally Financed and Assisted Construction). Under this Act, 
contractors shall be required to pay wages to laborers and mechanics at 
a rate not less than the minimum wages specified in a wage determination 
made by the Secretary of Labor. In addition, contractors shall be 
required to pay wages not less than once a week. The recipient shall 
place a copy of the current prevailing wage determination issued by the 
Department of Labor in each solicitation and the award of a contract 
shall be conditioned upon the acceptance of the wage determination. The 
recipient shall report all suspected or reported violations to the 
Federal awarding agency.
    4. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
333)--Where applicable, all contracts awarded by recipients in excess of 
$2,000 for construction contracts and in excess of $2500 for other 
contracts that involve the employment of mechanics or laborers must 
include a provision for compliance with Sections 102 and 107 of the 
Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333), as 
supplemented by Department of Labor regulations (29 CFR Part 5). Under 
Section 102 of the Act, each contractor shall be required to compute the 
wages of every mechanic and laborer on the basis of a standard work week 
of 40 hours. Work in excess of the standard work week is permissible 
provided that the worker is compensated at a rate of not less than 1\1/
2\ times the basic rate of pay for all hours worked in excess of 40 
hours in the work week. Section 107 of the Act is applicable to 
construction work and provides that no laborer or mechanic shall be 
required to work in surroundings or under working conditions which are 
unsanitary, hazardous, or dangerous. These requirements do not apply to 
the purchases of supplies or materials or articles ordinarily available 
on the open market, or contracts for transportation or transmission of 
intelligence.
    5. Rights to Inventions Made Under a Contract or Agreement--
Contracts or agreements for the performance of experimental, 
developmental, or research work must provide for the rights of the 
Federal Government and the recipient in any resulting invention in 
accordance with 37 CFR Part 401--Rights to Inventions Made by Nonprofit 
Organizations and Small Business Firms Under Government Grants, 
Contracts and Cooperative Agreements, and any implementing regulations 
issued by the awarding agency.
    6. Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water 
Pollution Control Act (33 U.S.C. 1251 et seq.), as amended--Contracts 
and subgrants of amounts in excess of $100,000 shall contain a provision 
that requires the recipient to agree to comply with all applicable 
standards, orders, or regulations issued pursuant to the Clean Air Act 
(42 U.S.C. 7401 et seq.) and the Federal Water Pollution Control Act as 
amended (33 U.S.C. 1251 et seq.). Violations shall be reported to ED and 
the Regional Office of the Environmental Protection Agency (EPA).
    7. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors who 
apply or bid for an award of $100,000 or more shall file the required 
certification. Each tier certifies to the tier above that it will not 
and has not used Federal appropriated funds to pay any person or 
organization for influencing or attempting to influence an officer or 
employee of any agency, a member of Congress, officer or employee of 
Congress, or an employee of a member of Congress in connection with 
obtaining any Federal contract, grant, or any other award covered by 31 
U.S.C. 1352. Each tier shall also disclose any lobbying with non-Federal 
funds that takes place in connection with obtaining any Federal award. 
The disclosures are forwarded from tier to tier up to the recipient.
    8. Debarment and Suspension (E.O. 12549 and E.O. 12689)--No contract 
may be made to parties listed on the General Services Administration's 
List of Parties Excluded from Federal Procurement or Nonprocurement 
Programs in accordance with E.O 12549 and E.O. 12689--Debarment and 
Suspension. This list contains the names of parties debarred, suspended, 
or otherwise excluded by agencies, and contractors declared ineligible 
under statutory or regulatory authority other than E.O. 12549.
    Contractors with awards that exceed the small purchase threshold 
must provide the required certification regarding its exclusion status 
and that of its principal employees.

(Authority: 20 U.S.C. 1221e-3, 3474; OMB Circular A-110)



PART 75_DIRECT GRANT PROGRAMS--Table of Contents




                            Subpart A_General

             Regulations That Apply to Direct Grant Programs

Sec.
75.1 Programs to which part 75 applies.
75.2 Exceptions in program regulations to part 75.
75.4 Department contracts.

[[Page 130]]

                         Eligibility for a Grant

75.50 How to find out whether you are eligible.
75.51 How to prove nonprofit status.
75.52 Eligibility of faith-based organizations for a grant.

       Ineligibility of Certain Individuals To Receive Assistance

75.60 Individuals ineligible to receive assistance.
75.61 Certification of eligibility; effect of ineligibility.
75.62 Requirements applicable to entities making certain awards.

Subpart B [Reserved]

                   Subpart C_How To Apply for a Grant

                         The Application Notice

75.100 Publication of an application notice; content of the notice.
75.101 Information in the application notice that helps an applicant 
          apply.
75.102 Deadline date for applications.
75.103 Deadline date for preapplications.
75.104 Applicants must meet procedural rules.
75.105 Annual priorities.

                          Application Contents

75.109 Changes to application; number of copies.
75.112 Include a proposed project period and a timeline.
75.117 Information needed for a multi-year project.
75.118 Requirements for a continuation award.
75.119 Information needed if private school students participate.

               Separate Applications--Alternative Programs

75.125 Submit a separate application to each program.
75.126 Application must list all programs to which it is submitted.

                           Group Applications

75.127 Eligible parties may apply as a group.
75.128 Who acts as applicant; the group agreement.
75.129 Legal responsibilities of each member of the group.

                        State Comment Procedures

75.155 Review procedure if State may comment on applications: Purpose of 
          Sec. Sec. 75.156-75.158.
75.156 When an applicant under Sec. 75.155 must submit its application 
          to the State; proof of submission.
75.157 The State reviews each application.
75.158 Deadlines for State comments.
75.159 Effect of State comments or failure to comment.

           Development of Curricula or Instructional Materials

75.190 Consultation.
75.191 Consultation costs.
75.192 Dissemination.

                      Subpart D_How Grants Are Made

                        Selection of New Projects

75.200 How applications for new grants and cooperative agreements are 
          selected for funding; standards for use of cooperative 
          agreements.
75.201 How the selection criteria will be used.
75.202-75.206 [Reserved]
75.209 Selection criteria based on statutory provisions.
75.210 General selection criteria.
75.211 Selection criteria for unsolicited applications.

                          Selection Procedures

75.215 How the Department selects a new project: purpose of Sec. Sec. 
          75.216-75.222.
75.216 Applications not evaluated for funding.
75.217 How the Secretary selects applications for new grants.
75.218 Applications not evaluated or selected for funding.
75.219 Exceptions to the procedures under Sec. 75.217.
75.220 Procedures the Department uses under Sec. 75.219(a).
75.221 Procedures the Department uses under Sec. 75.219(b).
75.222 Procedures the Department uses under Sec. 75.219(c).
75.223 [Reserved]
75.224 What are the procedures for using a multiple tier review process 
          to evaluate applications?
75.225 What procedures does the Secretary use if the Secretary decides 
          to give special consideration to novice applications?

                       Procedures To Make a Grant

75.230 How the Department makes a grant; purpose of Sec. Sec. 75.231-
          75.236.
75.231 Additional information.
75.232 The cost analysis; basis for grant amount.
75.233 Setting the amount of the grant.
75.234 The conditions of the grant.
75.235 The notification of grant award.
75.236 Effect of the grant.

                     Approval of Multi-Year Projects

75.250 Project period can be up to 60 months.

[[Page 131]]

75.251 The budget period.
75.253 Continuation of a multi-year project after the first budget 
          period.
75.254 [Reserved]

                              Miscellaneous

75.260 Allotments and reallotments.
75.261 Extension of a project period.
75.262 Conversion of a grant or a cooperative agreement.
75.263 Pre-award costs; waiver of approval.
75.264 Transfers among budget categories.

           Subpart E_What Conditions Must Be Met by a Grantee?

                            Nondiscrimination

75.500 Federal statutes and regulations on nondiscrimination.

                              Project Staff

75.511 Waiver of requirement for a full-time project director.
75.515 Use of consultants.
75.516 Compensation of consultants--employees of institutions of higher 
          education.
75.517 Changes in key staff members.
75.519 Dual compensation of staff.

                          Conflict of Interest

75.524 Conflict of interest: Purpose of Sec. 75.525.
75.525 Conflict of interest: Participation in a project.

                             Allowable Costs

75.530 General cost principles.
75.531 Limit on total cost of a project.
75.532 Use of funds for religion prohibited.
75.533 Acquisition of real property; construction.
75.534 Training grants--automatic increases for additional dependents.

                           Indirect Cost Rates

75.560 General indirect cost rates; exceptions.
75.561 Approval of indirect cost rates.
75.562 Indirect cost rates for educational training projects.
75.563 Restricted indirect cost rate--programs covered.
75.564 Reimbursement of indirect costs.
75.580 Coordination with other activities.

                               Evaluation

75.590 Evaluation by the recipient.
75.591 Federal evaluation--cooperation by a grantee.
75.592 Federal evaluation--satisfying requirement for grantee 
          evaluation.

                              Construction

75.600 Use of a grant for construction: Purpose of Sec. Sec. 75.601-
          75.615.
75.601 Applicant's assessment of environmental impact.
75.602 Preservation of historic sites must be described in the 
          application.
75.603 Grantee's title to site.
75.604 Availability of cost-sharing funds.
75.605 Beginning the construction.
75.606 Completing the construction.
75.607 General considerations in designing facilities and carrying out 
          construction.
75.608 Areas in the facilities for cultural activities.
75.609 Comply with safety and health standards.
75.610 Access by the handicapped.
75.611 Avoidance of flood hazards.
75.612 Supervision and inspection by the grantee.
75.613 Relocation assistance by the grantee.
75.614 Grantee must have operational funds.
75.615 Operation and maintenance by the grantee.
75.616 Energy conservation.
75.617 Compliance with the Coastal Barrier Resources Act.

                         Equipment and Supplies

75.618 Charges for use of equipment or supplies.

                       Publications and Copyrights

75.620 General conditions on publication.
75.621 Copyright policy for grantees.
75.622 Definition of ``project materials.''

                         Inventions and Patents

75.626 Show Federal support; give papers to vest title.

                 Other Requirements for Certain Projects

75.650 Participation of students enrolled in private schools.
75.681 Protection of human research subjects.
75.682 Treatment of animals.
75.683 Health or safety standards for facilities.

  Subpart F_What Are the Administrative Responsibilities of a Grantee?

                 General Administrative Responsibilities

75.700 Compliance with statutes, regulations, and applications.
75.701 The grantee administers or supervises the project.
75.702 Fiscal control and fund accounting procedures.
75.703 Obligation of funds during the grant period.
75.707 When obligations are made.
75.708 Prohibition of subgrants.

[[Page 132]]

                                 Reports

75.720 Financial and performance reports.
75.721 [Reserved]

                                 Records

75.730 Records related to grant funds.
75.731 Records related to compliance.
75.732 Records related to performance.
75.733 [Reserved]

                                 Privacy

75.740 Protection of and access to student records; student rights in 
          research, experimental programs, and testing.

  Subpart G_What Procedures Does the Department Use To Get Compliance?

75.900 Waiver of regulations prohibited.
75.901 Suspension and termination.
75.902 [Reserved]
75.903 Effective date of termination.
75.910 Cooperation with audits.

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

    Source: 45 FR 22497, Apr. 3, 1980, unless otherwise noted. 
Redesignated at 45 FR 77368, Nov. 21, 1980.



                            Subpart A_General

             Regulations That Apply to Direct Grant Programs



Sec. 75.1  Programs to which part 75 applies.

    (a) The regulations in part 75 apply to each direct grant program of 
the Department of Education.
    (b) If a direct grant program does not have implementing 
regulations, the Secretary implements the program under the authorizing 
statute and, to the extent consistent with the authorizing statute, 
under the General Education Provisions Act and the regulations in this 
part. For the purposes of this part, the term ``direct grant program'' 
includes any grant program of the Department other than a program whose 
authorizing statute or implementing regulations provide a formula for 
allocating program funds among eligible States. With respect to Public 
Law 81-874 (the Impact Aid Program), the term ``direct grant program'' 
includes only the entitlement increase for children with disabilities 
under section 3(d)(2)(C) of Public Law 81-874 (20 U.S.C. 238(d)(2)(C) 
and disaster assistance under section 7 of that law (20 U.S.C. 241-1).
    Note: See part 76 for the general regulations that apply to programs 
that allocate funds among eligible States. For a description of the two 
kinds of direct grant programs see Sec. 75.200. Paragraph (b) of that 
section describes discretionary grant programs. Paragraph (c) of that 
section describes formula grant programs. Also see Sec. Sec. 75.201, 
75.209, and 75.210 for the selection criteria for discretionary grant 
programs that do not have implementing regulations or whose implementing 
regulations do not include selection criteria.

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

[45 FR 22497, Apr. 3, 1980, as amended at 45 FR 28669, Apr. 29, 1980. 
Redesignated at 45 FR 77368, Nov. 21, 1980, as amended at 45 FR 84059, 
Dec. 22, 1980, 50 FR 29330, July 18, 1985; 52 FR 27803, July 24, 1987; 
57 FR 30336, July 8, 1992; 60 FR 63873, Dec. 12, 1995]



Sec. 75.2  Exceptions in program regulations to part 75.

    If a program has regulations that are not consistent with part 75, 
the implementing regulations for that program identify the sections of 
part 75 that do not apply.

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



Sec. 75.4  Department contracts.

    (a) A Federal contract made by the Department is governed by--
    (1) Chapters 1 and 34 of title 48 of the Code of Federal Regulations 
(Federal Acquisition Regulation and Education Department Acquisition 
Regulation).
    (2) Any applicable program regulations; and
    (3) The request for proposals for the procurement, if any, 
referenced in Commerce Business Daily.
    (b) The regulations in part 75 do not apply to a contract of the 
Department unless regulations in part 75 or a program's regulations 
specifically provide otherwise.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 57 FR 30336, July 8, 1992]

[[Page 133]]

                         Eligibility for a Grant



Sec. 75.50  How to find out whether you are eligible.

    Eligibility to apply for a grant under a program of the Department 
is governed by the authorizing statute and implementing regulations for 
that program.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 52 FR 27803, July 24, 1987]



Sec. 75.51  How to prove nonprofit status.

    (a) Under some programs, an applicant must show that it is a 
nonprofit organization. (See the definition of nonprofit in 34 CFR 
77.1.)
    (b) An applicant may show that it is a nonprofit organization by any 
of the following means:
    (1) Proof that the Internal Revenue Service currently recognizes the 
applicant as an organization to which contributions are tax deductible 
under section 501(c)(3) of the Internal Revenue Code;
    (2) A statement from a State taxing body or the State attorney 
general certifying that:
    (i) The organization is a nonprofit organization operating within 
the State; and
    (ii) No part of its net earnings may lawfully benefit any private 
shareholder or individual;
    (3) A certified copy of the applicant's certificate of incorporation 
or similar document if it clearly establishes the nonprofit status of 
the applicant; or
    (4) Any item described in paragraphs (b) (1) through (3) of this 
section if that item applies to a State or national parent organization, 
together with a statement by the State or parent organization that the 
applicant is a local nonprofit affiliate.

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



Sec. 75.52  Eligibility of faith-based organizations for a grant.

    (a)(1) A faith-based organization is eligible to apply for and to 
receive a grant under a program of the Department on the same basis as 
any other private organization, with respect to programs for which such 
other organizations are eligible.
    (2) In the selection of grantees, the Department shall not 
discriminate for or against a private organization on the basis of the 
organization's religious character or affiliation.
    (b) The provisions of Sec. 75.532 apply to a faith-based 
organization that receives a grant under a program of the Department.
    (c) A private organization that engages in inherently religious 
activities, such as religious worship, instruction, or proselytization, 
must offer those services separately in time or location from any 
programs or services supported by a grant from the Department, and 
participation in any such inherently religious activities by 
beneficiaries of the programs supported by the grant must be voluntary.
    (d)(1) A faith-based organization that applies for or receives a 
grant under a program of the Department may retain its independence, 
autonomy, right of expression, religious character, and authority over 
its governance.
    (2) A faith-based organization may, among other things--
    (i) Retain religious terms in its name;
    (ii) Continue to carry out its mission, including the definition, 
development, practice, and expression of its religious beliefs;
    (iii) Use its facilities to provide services without removing or 
altering religious art, icons, scriptures, or other symbols from these 
facilities;
    (iv) Select its board members and otherwise govern itself on a 
religious basis; and
    (v) Include religious references in its mission statement and other 
chartering or governing documents.
    (e) A private organization that receives a grant under a program of 
the Department shall not discriminate against a beneficiary or 
prospective beneficiary in the provision of program services on the 
basis of religion or religious belief.
    (f) If a grantee contributes its own funds in excess of those funds 
required by a matching or grant agreement to supplement federally funded 
activities, the grantee has the option to segregate those additional 
funds or commingle

[[Page 134]]

them with the funds required by the matching requirements or grant 
agreement. However, if the additional funds are commingled, this section 
applies to all of the commingled funds.
    (g) A religious organization's exemption from the Federal 
prohibition on employment discrimination on the basis of religion, in 
section 702(a) of the Civil Rights Act of 1964, 42 U.S.C. 2000e-1, is 
not forfeited when the organization receives financial assistance from 
the Department.

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


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

[69 FR 31710, June 4, 2004]

       Ineligibility of Certain Individuals To Receive Assistance

    Source: Sections 75.60 through 75.62 appear at 57 FR 30337, July 8, 
1992, unless otherwise noted.



Sec. 75.60  Individuals ineligible to receive assistance.

    (a) An individual is ineligible to receive a fellowship, 
scholarship, or discretionary grant funded by the Department if the 
individual--
    (1) Is not current in repaying a debt or is in default, as that term 
is used in 34 CFR part 668, on a debt--
    (i) Under a program listed in paragraph (b) of this section; or
    (ii) To the Federal Government under a nonprocurement transaction; 
and
    (2) Has not made satisfactory arrangements to repay the debt.
    (b) An individual who is not current in repaying a debt, or is in 
default, as that term is used in 34 CFR part 668, on a debt under a 
fellowship, scholarship, discretionary grant, or loan program, as 
included in the following list, and who has not made satisfactory 
arrangements to repay the debt, is ineligible under paragraph (a) of 
this section:
    (1) A grant awarded under the Pell Grant (20 U.S.C. 1070a, et seq.), 
National Early Intervention Scholarship and Partnership (NEISP) Program 
(20 U.S.C. 1070a-21, et seq.), Supplemental Educational Opportunity 
Grant (SEOG) (20 U.S.C. 1070b, et seq.), or State Student Incentive 
Grant (SSIG) (20 U.S.C. 1070c, et seq.) program, or a scholarship 
awarded under the Robert C. Byrd Honors Scholarship Program (20 U.S.C. 
1070d-31, et seq.), a fellowship awarded under the Jacob K. Javits 
Fellows Program (20 U.S.C. 1134h-1134k), or a fellowship awarded under 
the Patricia Roberts Harris Fellowship Program (20 U.S.C. 1134d-1134f).
    (2) A fellowship awarded under the Christa McAuliffe Fellowship 
Program (20 U.S.C. 1113-1113e), the Bilingual Education Fellowship 
Program (20 U.S.C. 3221-3262), or the Rehabilitation Long-Term Training 
Program (29 U.S.C. 774(b)).
    (3) A loan made under the Perkins Loan Program (20 U.S.C. 1087aa, et 
seq.), the Income Contingent Direct Loan Demonstration Project (20 
U.S.C. 1087a, et seq.), the Stafford Loan Program, Supplemental Loans 
for Students (SLS), PLUS, or Consolidation Loan Program (20 U.S.C. 1071, 
et seq.), or the Cuban Student Loan Program (22 U.S.C. 2601, et seq.).
    (4) A scholarship or repayment obligation incurred under the Paul 
Douglas Teacher Scholarship Program (20 U.S.C. 1111, et seq.).
    (5) A grant, or a loan, made under the Law Enforcement Education 
Program (42 U.S.C. 3775).
    (6) A stipend awarded under the Indian Fellowship Program (29 U.S.C. 
774(b)).
    (7) A scholarship awarded under the Teacher Quality Enhancement 
Grants Program (20 U.S.C. 1021 et seq.).

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

[57 FR 30337, July 8, 1992, as amended at 59 FR 24870, May 12, 1994; 65 
FR 19609, Apr. 11, 2000]



Sec. 75.61  Certification of eligibility; effect of ineligibility.

    (a) An individual who applies for a fellowship, scholarship, or 
discretionary grant from the Department shall provide with his or her 
application a certification under the penalty of perjury--
    (1) That the individual is eligible under Sec. 75.60; and
    (2) That the individual has not been debarred or suspended by a 
judge under section 5301 of the Anti-Drug Abuse Act of 1988 (21 U.S.C. 
853a).
    (b) The Secretary specifies the form of the certification required 
under paragraph (a) of this section.

[[Page 135]]

    (c) The Secretary does not award a fellowship, scholarship, or 
discretionary grant to an individual who--
    (1) Fails to provide the certification required under paragraph (a) 
of this section; or
    (2) Is ineligible, based on information available to the Secretary 
at the time the award is made.
    (d) If a fellowship, scholarship, or discretionary grant is made to 
an individual who provided a false certification under paragraph (a) of 
this section, the individual is liable for recovery of the funds made 
available under the certification, for civil damages or penalties 
imposed for false representation, and for criminal prosecution under 18 
U.S.C. 1001.

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



Sec. 75.62  Requirements applicable to entities making certain awards.

    (a) An entity that provides a fellowship, scholarship, or 
discretionary grant to an individual under a grant from, or an agreement 
with, the Secretary shall require the individual who applies for such an 
award to provide with his or her application a certification under the 
penalty of perjury--
    (1) That the individual is eligible under Sec. 75.60; and
    (2) That the individual has not been debarred or suspended by a 
judge under section 5301 of the Anti-Drug Abuse Act of 1988 (21 U.S.C. 
853a).
    (b) An entity subject to this section may not award a fellowship, 
scholarship, or discretionary grant to an individual if--
    (1) The individual fails to provide the certification required under 
paragraph (a) of this section; or
    (2) The Secretary informs the entity that the individual is 
ineligible under Sec. 75.60.
    (c) If a fellowship, scholarship, or discretionary grant is made to 
an individual who provided a false certification under paragraph (a) of 
this section, the individual is liable for recovery of the funds made 
available under the certification, for civil damages or penalties 
imposed for false representation, and for criminal prosecution under 18 
U.S.C. 1001.
    (d) The Secretary may require an entity subject to this section to 
provide a list of the individuals to whom fellowship, scholarship, or 
discretionary grant awards have been made or are proposed to be made by 
the entity.

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

Subpart B [Reserved]



                   Subpart C_How To Apply for a Grant

                         The Application Notice



Sec. 75.100  Publication of an application notice; content of the notice.

    (a) Each fiscal year the Secretary publishes application notices in 
the Federal Register that explain what kind of assistance is available 
for new grants under the programs that the Secretary administers.
    (b) The application notice for a program explains one or more of the 
following:
    (1) How to apply for a new grant.
    (2) If preapplications are used under the program, how to preapply 
for a new grant.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 86297, Dec. 30, 1980; 51 FR 20824, June 9, 1986; 59 
FR 30261, June 10, 1994]



Sec. 75.101  Information in the application notice that helps an 
applicant apply.

    (a) The Secretary may include such information as the following in 
an application notice:
    (1) How an applicant can get an application package that contains:
    (i) Information about the program; and
    (ii) The application form that the applicant must use.
    (2) The amount of funds available for grants, the estimated number 
of those grants, the estimated amounts of those grants and, if 
appropriate, the maximum award amounts of those grants.
    (3) If the Secretary plans to approve multi-year projects, the 
project period that will be approved.
    (4) Any priorities established by the Secretary for the program for 
that year and the method the Secretary will

[[Page 136]]

use to implement the priorities. (See Sec. 75.105 Annual priorities.)
    (5) Where to find the regulations that apply to the program.
    (6) The statutory authority for the program.
    (7) The deadlines established under Sec. 75.102 (Deadline date for 
applications.) and 34 CFR 79.8 (How does the Secretary provide States an 
opportunity to comment on proposed Federal financial assistance?)
    (b) If the Secretary either requires or permits preapplications 
under a program, an application notice for the program explains how an 
applicant can get the preapplication form.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 84059, Dec. 22, 1980; 46 FR 3205, Jan. 14, 1981; 51 
FR 20824, June 9, 1986; 51 FR 21164, June 11, 1986; 60 FR 63873, Dec. 
12, 1995; 61 FR 8455, Mar. 4, 1996]

    Cross reference: See 34 CFR 77.1--definitions of ``budget period'' 
and ``project period.''



Sec. 75.102  Deadline date for applications.

    (a) The application notice for a program sets a deadline date for 
the transmittal of applications to the Department.
    (b) If an applicant wants a new grant, the applicant must submit an 
application in accordance with the requirements in the application 
notice.
    (c) [Reserved]
    (d) If the Secretary allows an applicant to submit a paper 
application, the applicant must show one of the following as proof of 
mailing by the deadline date:
    (1) A legibly dated U.S. Postal Service postmark.
    (2) A legible mail receipt with the date of mailing stamped by the 
U.S. Postal Service.
    (3) A dated shipping label, invoice, or receipt from a commercial 
carrier.
    (4) Any other proof of mailing acceptable to the Secretary.
    (e) If an application is mailed through the U.S. Postal Service, the 
Secretary does not accept either of the following as proof of mailing:
    (1) A private metered postmark.
    (2) A mail receipt that is not dated by the U.S. Postal Service.

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

    Note: The U.S. Postal Service does not uniformly provide a dated 
postmark. Before relying on this method, an applicant should check with 
its local post office.

[45 FR 22497, Apr. 3, 1980, as amended at 51 FR 20824, June 9, 1986; 69 
FR 41201, July 8, 2004]



Sec. 75.103  Deadline date for preapplications.

    (a) If the Secretary invites or requires preapplications under a 
program, the application notice for the program sets a deadline date for 
preapplications.
    (b) An applicant shall submit its preapplication in accordance with 
the procedures for applications in Sec. 75.102(b) and (d).

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



Sec. 75.104  Applicants must meet procedural rules.

    (a) The Secretary may make a grant only to an eligible party that 
submits an application.
    (b) If a maximum award amount is established in a notice published 
in the Federal Register, the Secretary may reject without consideration 
or evaluation any application that proposes a project funding level that 
exceeds the stated maximum award amount.

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

[61 FR 8455, Mar. 4, 1996]



Sec. 75.105  Annual priorities.

    (a) What programs are covered by this section? This section applies 
to any program for which the Secretary establishes priorities for 
selection of applications in a particular fiscal year.
    (b) How does the Secretary establish annual priorities? (1) The 
Secretary establishes final annual priorities by publishing the 
priorities in a notice in the Federal Register, usually in the 
application notice for that program.
    (2) The Secretary publishes proposed annual priorities for public 
comment, unless:

[[Page 137]]

    (i) The final annual priorities will be implemented only by inviting 
applications that meet the priorities (Cross-reference: See 34 CFR 
75.105(c)(1));
    (ii) The final annual priorities are chosen from a list of 
priorities already established in the program's regulations;
    (iii) Publishing proposed annual priorities would seriously 
interfere with an orderly, responsible grant award process or would 
otherwise be impracticable, unnecessary, or contrary to the public 
interest;
    (iv) The program statute requires or authorizes the Secretary to 
establish specified priorities; or
    (v) The annual priorities are chosen from allowable activities 
specified in the program statute.
    (c) How does the Secretary implement an annual priority? The 
Secretary may choose one or more of the following methods to implement 
an annual priority:
    (1) Invitations. The Secretary may simply invite applications that 
meet a priority. If the Secetary chooses this method, an application 
that meets the priority receives no competitive or absolute preference 
over applications that do not meet the priority.
    (2) Competitive preference. The Secretary may give one of the 
following kinds of competitive preference to applications that meet a 
priority.
    (i) The Secretary may award some or all bonus points to an 
application depending on the extent to which the application meets the 
priority. These points are in addition to any points the applicant earns 
under the selection criteria (see Sec. 75.200(b)). The notice states 
the maximum number of additional points that the Secretary may award to 
an application depending upon how well the application meets the 
priority.
    (ii) The Secretary may select an application that meets a priority 
over an application of comparable merit that does not meet the priority.
    (3) Absolute preference. The Secretary may give an absolute 
preference to applications that meet a priority. The Secretary 
establishes a separate competition for applications that meet the 
priority and reserves all or part of a program's funds solely for that 
competition. The Secretary may adjust the amount reserved for the 
priority after determining the number of high quality applications 
received.

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

[46 FR 3205, Jan. 14, 1981, as amended at 57 FR 30337, July 8, 1992; 60 
FR 63873, Dec. 12, 1995]

                          Application Contents

    Cross reference: See Sec. 75.200 for a description of discretionary 
and formula grant programs.



Sec. 75.109  Changes to application; number of copies.

    (a) Each applicant that submits a paper application shall submit an 
original and two copies to the Department, including any information 
that the applicant supplies voluntarily.
    (b) An applicant may make changes to its application on or before 
the deadline date for submitting applications under the program.

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

    Cross reference: See Sec. 75.200 How applications for new grants 
are selected for funding.

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 69 FR 41201, July 8, 2004]



Sec. 75.112  Include a proposed project period and a timeline.

    (a) An application must propose a project period for the project.
    (b) An application must include a narrative that describes how and 
when, in each budget period of the project, the applicant plans to meet 
each objective of the project.

(Approved by the Office of Management and Budget under control number 
1875-0102)

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 59 FR 30261, June 10, 1994]



Sec. 75.117  Information needed for a multi-year project.

    An applicant that proposes a multi-year project shall include in its 
application:
    (a) Information that shows why a multi-year project is needed;

[[Page 138]]

    (b) A budget narrative accompanied by a budget form prescribed by 
the Secretary, that provides budget information for each budget period 
of the proposed project period.

(Approved by the Office of Management and Budget under control number 
1875-0102)

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 59 FR 30261, June 10, 1994]



Sec. 75.118  Requirements for a continuation award.

    (a) A recipient that wants to receive a continuation award shall 
submit a performance report that provides the most current performance 
and financial expenditure information, as directed by the Secretary, 
that is sufficient to meet the reporting requirements of 34 CFR 74.51, 
75.590, 75.720, and 80.40.
    (b) If a recipient fails to submit a performance report that meets 
the requirements of paragraph (a) of this section, the Secretary denies 
continued funding for the grant.

(Approved by the Office of Management and Budget under control number 
1875-0102)

(Authority: 20 U.S.C. 1221e-3(a)(1) and 3474)

    Cross reference: See Sec. 75.117 Information needed for a multi-
year project, and Sec. Sec. 75.250 through 75.253 Approval of multi-
year projects, Sec. 75.590 Evaluation by the recipient, Sec. 75.720 
Financial and performance reports, Sec. 74.51 Monitoring and reporting 
program performance, and Sec. 80.40 Monitoring and reporting program 
performance.

[59 FR 30261, June 10, 1994, as amended at 64 FR 50391, Sept. 16, 1999]



Sec. 75.119  Information needed if private school students participate.

    If a program requires the applicant to provide an opportunity for 
participation of students enrolled in private schools, the application 
must include the information required of subgrantees under 34 CFR 
76.656.

(Approved by the Office of Management and Budget under control number 
1880-0513)

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 53 FR 49143, Dec. 6, 1988]

               Separate Applications--Alternative Programs



Sec. 75.125  Submit a separate application to each program.

    An applicant shall submit a separate application to each program 
under which it wants a grant.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 52 FR 27803, July 24, 1987; 60 FR 46493, Sept. 6, 1995]



Sec. 75.126  Application must list all programs to which it is submitted.

    If an applicant is submitting an application for the same project 
under more than one Federal program, the applicant shall list these 
programs in its application. The Secretary uses this information to 
avoid duplicate grants for the same project.

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

                           Group Applications



Sec. 75.127  Eligible parties may apply as a group.

    (a) Eligible parties may apply as a group for a grant.
    (b) Depending on the program under which a group of eligible parties 
seeks assistance, the term used to refer to the group may vary. The list 
that follows contains some of the terms used to identify a group of 
eligible parties:
    (1) Combination of institutions of higher education.
    (2) Consortium.
    (3) Joint applicants.
    (4) Cooperative arrangements.

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



Sec. 75.128  Who acts as applicant; the group agreement.

    (a) If a group of eligible parties applies for a grant, the members 
of the group shall either:
    (1) Designate one member of the group to apply for the grant; or
    (2) Establish a separate, eligible legal entity to apply for the 
grant.
    (b) The members of the group shall enter into an agreement that:
    (1) Details the activities that each member of the group plans to 
perform; and

[[Page 139]]

    (2) Binds each member of the group to every statement and assurance 
made by the applicant in the application.
    (c) The applicant shall submit the agreement with its application.

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



Sec. 75.129  Legal responsibilities of each member of the group.

    (a) If the Secretary makes a grant to a group of eligible 
applicants, the applicant for the group is the grantee and is legally 
responsible for:
    (1) The use of all grant funds;
    (2) Ensuring that the project is carried out by the group in 
accordance with Federal requirements; and
    (3) Ensuring that indirect cost funds are determined as required 
under Sec. 75.564(e).
    (b) Each member of the group is legally responsible to:
    (1) Carry out the activities it agrees to perform; and
    (2) Use the funds that it receives under the agreement in accordance 
with Federal requirements that apply to the grant.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 59 FR 59581, Nov. 17, 1994]

                        State Comment Procedures



Sec. 75.155  Review procedures if State may comment on applications: 
Purpose of Sec. Sec. 75.156-75.158.

    If the authorizing statute for a program requires that a specific 
State agency be given an opportunity to comment on each application, the 
State and the applicant shall use the procedures in Sec. Sec. 75.156-
75.158 for that purpose.

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

    Cross reference: See 34 CFR part 79 (Intergovernmental Review of 
Department of Education Programs and Activities) for the regulations 
implementing the application review procedures that States may use under 
E.O. 12372.

[57 FR 30338, July 8, 1992]



Sec. 75.156  When an applicant under Sec. 75.155 must submit its 
application to the State; proof of submission.

    (a) Each applicant under a program covered by Sec. 75.155 shall 
submit a copy of its application to the State on or before the deadline 
date for submitting its application to the Department.
    (b) The applicant shall attach to its application a copy of its 
letter that requests the State to comment on the application.

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



Sec. 75.157  The State reviews each application.

    A State that receives an application under Sec. 75.156 may review 
and comment on the application.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 3474)



Sec. 75.158  Deadlines for State comments.

    (a) The Secretary may establish a deadline date for receipt of State 
comments on applications.
    (b) The State shall make its comments in a written statement signed 
by an appropriate State official.
    (c) The appropriate State official shall submit comments to the 
Secretary by the deadline date for State comments. The procedures in 
Sec. 75.102 (b) and (d) (how to meet a deadline) of this part apply to 
this submission.

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



Sec. 75.159  Effect of State comments or failure to comment.

    (a) The Secretary considers those comments of the State that relate 
to:
    (1) Any selection criterion that applies under the program; or
    (2) Any other matter that affects the selection of projects for 
funding under the program.
    (b) If the State fails to comment on an application on or before the 
deadline date for the appropriate program, the State waives its right to 
comment.
    (c) If the applicant does not give the State an opportunity to 
comment, the Secretary does not select that project for a grant.

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

[[Page 140]]

           Development of Curricula or Instructional Materials



Sec. 75.190  Consultation.

    Each applicant that intends to develop curricula or instructional 
materials under a grant is encouraged to assure that the curricula or 
materials will be developed in a manner conducive to dissemination, 
through continuing consultations with publishers, personnel of State and 
local educational agencies, teachers, administrators, community 
representatives, and other individuals experienced in dissemination.

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



Sec. 75.191  Consultation costs.

    An applicant may budget reasonable consultation fees or planning 
costs in connection with the development of curricula or instructional 
materials.

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



Sec. 75.192  Dissemination.

    If an applicant proposes to publish and disseminate curricula or 
instructional materials under a grant, the applicant shall include an 
assurance in its application that the curricula or materials will reach 
the populations for which the curricula or materials were developed.

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



                      Subpart D_How Grants Are Made

                        Selection of New Projects



Sec. 75.200  How applications for new grants and cooperative agreements 
are selected for funding; standards for use of cooperative agreements.

    (a) Direct grant programs. The Department administers two kinds of 
direct grant programs. A direct grant program is either a discretionary 
grant or a formula grant program.
    (b) Discretionary grant programs. (1) A discretionary grant program 
is one that permits the Secretary to use discretionary judgment in 
selecting applications for funding.

    Cross reference: See Sec. 75.219 Exceptions to the procedures under 
Sec. 75.217.

    (2) The Secretary uses selection criteria to evaluate the 
applications submitted for new grants under a discretionary grant 
program.
    (3) To evaluate the applications for new grants under the program 
the Secretary may use:
    (i) Selection criteria established under Sec. 75.209.
    (ii) Selection criteria in program-specific regulations.
    (iii) Selection criteria established under Sec. 75.210.
    (iv) Any combination of criteria from paragraphs (b)(3)(i), 
(b)(3)(ii), and (b)(3)(iii) of this section.
    (4) The Secretary may award a cooperative agreement instead of a 
grant if the Secretary determines that substantial involvement between 
the Department and the recipient is necessary to carry out a 
collaborative project.
    (5) The Secretary uses the selection procedures in this subpart to 
select recipients of cooperative agreements.
    (c) Formula grant programs. (1) A formula grant program is one that 
entitles certain applicants to receive grants if they meet the 
requirements of the program. Applicants do not compete with each other 
for the funds, and each grant is either for a set amount or for an 
amount determined under a formula.
    (2) The Secretary applies the program statute and regulations to 
fund projects under a formula grant program.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 52 FR 27803, July 24, 1987; 57 FR 30338, July 8, 1992; 60 
FR 63873, Dec. 12, 1995; 62 FR 10401, Mar. 6, 1997]



Sec. 75.201  How the selection criteria will be used.

    (a) In the application package or a notice published in the Federal 
Register, the Secretary informs applicants of--
    (1) The selection criteria chosen; and
    (2) The factors selected for considering the selection criteria, if 
any.
    (b) If points or weights are assigned to the selection criteria, the 
Secretary informs applicants in the application package or a notice 
published in the Federal Register of--

[[Page 141]]

    (1) The total possible score for all of the criteria for a program; 
and
    (2) The assigned weight or the maximum possible score for each 
criterion or factor under that criterion.
    (c) If no points or weights are assigned to the selection criteria 
and selected factors, the Secretary evaluates each criterion equally 
and, within each criterion, each factor equally.

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

[62 FR 10401, Mar. 6, 1997]



Sec. Sec. 75.202-75.206  [Reserved]



Sec. 75.209  Selection criteria based on statutory provisions.

    (a) The Secretary may evaluate applications by--
    (1) Establishing selection criteria based on statutory provisions 
that apply to the authorized program, which may include, but are not 
limited to--
    (i) Specific statutory selection criteria;
    (ii) Allowable activities;
    (iii) Application content requirements; or
    (iv) Other pre-award and post-award conditions; and
    (2) Assigning the maximum possible score for each of the criteria 
established under paragraph (a)(1) of this section.
    (b) The Secretary evaluates an application by determining how well 
the project proposed by the applicant meets each statutory provision 
selected under paragraph (a)(1) of this section.

    Example: If a program statute requires that each application address 
how the applicant will serve the needs of limited English proficient 
children, under Sec. 75.209 the Secretary could establish a criterion 
and evaluate applications based on how well the applicant's proposed 
project meets that statutory provision. The Secretary might decide to 
award up to 10 points for this criterion. Applicants who have the best 
proposals to serve the needs of limited English proficient children 
would score highest under the criterion in this example.

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

[60 FR 63873, Dec. 12, 1995, as amended at 62 FR 10401, Mar. 6, 1997]



Sec. 75.210  General selection criteria.

    In determining the selection criteria to be used in each grant 
competition, the Secretary may select one or more of the following 
criteria and may select from among the list of optional factors under 
each criterion. However, paragraphs (d)(2) and (e)(2) of this section 
are mandatory factors under their respective criteria:
    (a) Need for project. (1) The Secretary considers the need for the 
proposed project.
    (2) In determining the need for the proposed project, the Secretary 
considers one or more of the following factors:
    (i) The magnitude or severity of the problem to be addressed by the 
proposed project.
    (ii) The magnitude of the need for the services to be provided or 
the activities to be carried out by the proposed project.
    (iii) The extent to which the proposed project will provide services 
or otherwise address the needs of students at risk of educational 
failure.
    (iv) The extent to which the proposed project will focus on serving 
or otherwise addressing the needs of disadvantaged individuals.
    (v) The extent to which specific gaps or weaknesses in services, 
infrastructure, or opportunities have been identified and will be 
addressed by the proposed project, including the nature and magnitude of 
those gaps or weaknesses.
    (vi) The extent to which the proposed project will prepare personnel 
for fields in which shortages have been demonstrated.
    (b) Significance. (1) The Secretary considers the significance of 
the proposed project.
    (2) In determining the significance of the proposed project, the 
Secretary considers one or more of the following factors:
    (i) The national significance of the proposed project.
    (ii) The significance of the problem or issue to be addressed by the 
proposed project.
    (iii) The potential contribution of the proposed project to 
increased knowledge or understanding of educational problems, issues, or 
effective strategies.

[[Page 142]]

    (iv) The potential contribution of the proposed project to increased 
knowledge or understanding of rehabilitation problems, issues, or 
effective strategies.
    (v) The likelihood that the proposed project will result in system 
change or improvement.
    (vi) The potential contribution of the proposed project to the 
development and advancement of theory, knowledge, and practices in the 
field of study.
    (vii) The potential for generalizing from the findings or results of 
the proposed project.
    (viii) The extent to which the proposed project is likely to yield 
findings that may be utilized by other appropriate agencies and 
organizations.
    (ix) The extent to which the proposed project is likely to build 
local capacity to provide, improve, or expand services that address the 
needs of the target population.
    (x) The extent to which the proposed project involves the 
development or demonstration of promising new strategies that build on, 
or are alternatives to, existing strategies.
    (xi) The likely utility of the products (such as information, 
materials, processes, or techniques) that will result from the proposed 
project, including the potential for their being used effectively in a 
variety of other settings.
    (xii) The extent to which the results of the proposed project are to 
be disseminated in ways that will enable others to use the information 
or strategies.
    (xiii) The potential replicability of the proposed project or 
strategies, including, as appropriate, the potential for implementation 
in a variety of settings.
    (xiv) The importance or magnitude of the results or outcomes likely 
to be attained by the proposed project, especially improvements in 
teaching and student achievement.
    (xv) The importance or magnitude of the results or outcomes likely 
to be attained by the proposed project, especially improvements in 
employment, independent living services, or both, as appropriate.
    (xvi) The importance or magnitude of the results or outcomes likely 
to be attained by the proposed project.
    (c) Quality of the project design. (1) The Secretary considers the 
quality of the design of the proposed project.
    (2) In determining the quality of the design of the proposed 
project, the Secretary considers one or more of the following factors:
    (i) The extent to which the goals, objectives, and outcomes to be 
achieved by the proposed project are clearly specified and measurable.
    (ii) The extent to which the design of the proposed project is 
appropriate to, and will successfully address, the needs of the target 
population or other identified needs.
    (iii) The extent to which there is a conceptual framework underlying 
the proposed research or demonstration activities and the quality of 
that framework.
    (iv) The extent to which the proposed activities constitute a 
coherent, sustained program of research and development in the field, 
including, as appropriate, a substantial addition to an ongoing line of 
inquiry.
    (v) The extent to which the proposed activities constitute a 
coherent, sustained program of training in the field.
    (vi) The extent to which the proposed project is based upon a 
specific research design, and the quality and appropriateness of that 
design, including the scientific rigor of the studies involved.
    (vii) The extent to which the proposed research design includes a 
thorough, high-quality review of the relevant literature, a high-quality 
plan for research activities, and the use of appropriate theoretical and 
methodological tools, including those of a variety of disciplines, if 
appropriate.
    (viii) The extent to which the design of the proposed project 
includes a thorough, high-quality review of the relevant literature, a 
high-quality plan for project implementation, and the use of appropriate 
methodological tools to ensure successful achievement of project 
objectives.
    (ix) The quality of the proposed demonstration design and procedures 
for documenting project activities and results.
    (x) The extent to which the design for implementing and evaluating 
the proposed project will result in information

[[Page 143]]

to guide possible replication of project activities or strategies, 
including information about the effectiveness of the approach or 
strategies employed by the project.
    (xi) The extent to which the proposed development efforts include 
adequate quality controls and, as appropriate, repeated testing of 
products.
    (xii) The extent to which the proposed project is designed to build 
capacity and yield results that will extend beyond the period of Federal 
financial assistance.
    (xiii) The extent to which the design of the proposed project 
reflects up-to-date knowledge from research and effective practice.
    (xiv) The extent to which the proposed project represents an 
exceptional approach for meeting statutory purposes and requirements.
    (xv) The extent to which the proposed project represents an 
exceptional approach to the priority or priorities established for the 
competition.
    (xvi) The extent to which the proposed project will be coordinated 
with similar or related efforts, and with other appropriate community, 
State, and Federal resources.
    (xvii) The extent to which the proposed project will establish 
linkages with other appropriate agencies and organizations providing 
services to the target population.
    (xviii) The extent to which the proposed project is part of a 
comprehensive effort to improve teaching and learning and support 
rigorous academic standards for students.
    (xix) The extent to which the proposed project encourages parental 
involvement.
    (xx) The extent to which the proposed project encourages consumer 
involvement.
    (xxi) The extent to which performance feedback and continuous 
improvement are integral to the design of the proposed project.
    (xxii) The quality of the methodology to be employed in the proposed 
project.
    (xxiii) The extent to which fellowship recipients or other project 
participants are to be selected on the basis of academic excellence.
    (d) Quality of project services. (1) The Secretary considers the 
quality of the services to be provided by the proposed project.
    (2) In determining the quality of the services to be provided by the 
proposed project, the Secretary considers the quality and sufficiency of 
strategies for ensuring equal access and treatment for eligible project 
participants who are members of groups that have traditionally been 
underrepresented based on race, color, national origin, gender, age, or 
disability.
    (3) In addition, the Secretary considers one or more of the 
following factors:
    (i) The extent to which the services to be provided by the proposed 
project are appropriate to the needs of the intended recipients or 
beneficiaries of those services.
    (ii) The extent to which entities that are to be served by the 
proposed technical assistance project demonstrate support for the 
project.
    (iii) The extent to which the services to be provided by the 
proposed project reflect up-to-date knowledge from research and 
effective practice.
    (iv) The likely impact of the services to be provided by the 
proposed project on the intended recipients of those services.
    (v) The extent to which the training or professional development 
services to be provided by the proposed project are of sufficient 
quality, intensity, and duration to lead to improvements in practice 
among the recipients of those services.
    (vi) The extent to which the training or professional development 
services to be provided by the proposed project are likely to alleviate 
the personnel shortages that have been identified or are the focus of 
the proposed project.
    (vii) The likelihood that the services to be provided by the 
proposed project will lead to improvements in the achievement of 
students as measured against rigorous academic standards.
    (viii) The likelihood that the services to be provided by the 
proposed project will lead to improvements in the skills necessary to 
gain employment or build capacity for independent living.
    (ix) The extent to which the services to be provided by the proposed 
project

[[Page 144]]

involve the collaboration of appropriate partners for maximizing the 
effectiveness of project services.
    (x) The extent to which the technical assistance services to be 
provided by the proposed project involve the use of efficient 
strategies, including the use of technology, as appropriate, and the 
leveraging of non-project resources.
    (xi) The extent to which the services to be provided by the proposed 
project are focused on those with greatest needs.
    (xii) The quality of plans for providing an opportunity for 
participation in the proposed project of students enrolled in private 
schools.
    (e) Quality of project personnel. (1) The Secretary considers the 
quality of the personnel who will carry out the proposed project.
    (2) In determining the quality of project personnel, the Secretary 
considers the extent to which the applicant encourages applications for 
employment from persons who are members of groups that have 
traditionally been underrepresented based on race, color, national 
origin, gender, age, or disability.
    (3) In addition, the Secretary considers one or more of the 
following factors:
    (i) The qualifications, including relevant training and experience, 
of the project director or principal investigator.
    (ii) The qualifications, including relevant training and experience, 
of key project personnel.
    (iii) The qualifications, including relevant training and 
experience, of project consultants or subcontractors.
    (f) Adequacy of resources. (1) The Secretary considers the adequacy 
of resources for the proposed project.
    (2) In determining the adequacy of resources for the proposed 
project, the Secretary considers one or more of the following factors:
    (i) The adequacy of support, including facilities, equipment, 
supplies, and other resources, from the applicant organization or the 
lead applicant organization.
    (ii) The relevance and demonstrated commitment of each partner in 
the proposed project to the implementation and success of the project.
    (iii) The extent to which the budget is adequate to support the 
proposed project.
    (iv) The extent to which the costs are reasonable in relation to the 
objectives, design, and potential significance of the proposed project.
    (v) The extent to which the costs are reasonable in relation to the 
number of persons to be served and to the anticipated results and 
benefits.
    (vi) The potential for continued support of the project after 
Federal funding ends, including, as appropriate, the demonstrated 
commitment of appropriate entities to such support.
    (vii) The potential for the incorporation of project purposes, 
activities, or benefits into the ongoing program of the agency or 
organization at the end of Federal funding.
    (g) Quality of the management plan. (1) The Secretary considers the 
quality of the management plan for the proposed project.
    (2) In determining the quality of the management plan for the 
proposed project, the Secretary considers one or more of the following 
factors:
    (i) The adequacy of the management plan to achieve the objectives of 
the proposed project on time and within budget, including clearly 
defined responsibilities, timelines, and milestones for accomplishing 
project tasks.
    (ii) The adequacy of procedures for ensuring feedback and continuous 
improvement in the operation of the proposed project.
    (iii) The adequacy of mechanisms for ensuring high-quality products 
and services from the proposed project.
    (iv) The extent to which the time commitments of the project 
director and principal investigator and other key project personnel are 
appropriate and adequate to meet the objectives of the proposed project.
    (v) How the applicant will ensure that a diversity of perspectives 
are brought to bear in the operation of the proposed project, including 
those of parents, teachers, the business community, a variety of 
disciplinary and professional fields, recipients or beneficiaries of 
services, or others, as appropriate.
    (h) Quality of the project evaluation. (1) The Secretary considers 
the quality of

[[Page 145]]

the evaluation to be conducted of the proposed project.
    (2) In determining the quality of the evaluation, the Secretary 
considers one or more of the following factors:
    (i) The extent to which the methods of evaluation are thorough, 
feasible, and appropriate to the goals, objectives, and outcomes of the 
proposed project.
    (ii) The extent to which the methods of evaluation are appropriate 
to the context within which the project operates.
    (iii) The extent to which the methods of evaluation provide for 
examining the effectiveness of project implementation strategies.
    (iv) The extent to which the methods of evaluation include the use 
of objective performance measures that are clearly related to the 
intended outcomes of the project and will produce quantitative and 
qualitative data to the extent possible.
    (v) The extent to which the methods of evaluation will provide 
timely guidance for quality assurance.
    (vi) The extent to which the methods of evaluation will provide 
performance feedback and permit periodic assessment of progress toward 
achieving intended outcomes.
    (vii) The extent to which the evaluation will provide guidance about 
effective strategies suitable for replication or testing in other 
settings.

(Approved by the Office of Management and Budget under control number 
1875-0102)

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

[62 FR 10401, Mar. 6, 1997]



Sec. 75.211  Selection criteria for unsolicited applications.

    (a) If the Secretary considers an unsolicited application under 34 
CFR 75.222(a)(2)(ii), the Secretary uses the selection criteria and 
factors, if any, used for the competition under which the application 
could have been funded.
    (b) If the Secretary considers an unsolicited application under 34 
CFR 75.222(a)(2)(iii), the Secretary selects from among the criteria in 
Sec. 75.210(b), and may select from among the specific factors listed 
under each criterion, the criteria that are most appropriate to evaluate 
the activities proposed in the application.

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

[62 FR 10403, Mar. 6, 1997]

                          Selection Procedures



Sec. 75.215  How the Department selects a new project: purpose of 
Sec. Sec. 75.216-75.222.

    Sections 75.216-75.222 describe the process the Secretary uses to 
select applications for new grants. All of these sections apply to a 
discretionary grant program. However, only Sec. 75.216 applies also to 
a formula grant program.

    Cross reference: See Sec. 75.200(b) Discretionary grant program, 
and (c) Formula grant program.

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



Sec. 75.216  Applications not evaluated for funding.

    The Secretary does not evaluate an application if--
    (a) The applicant is not eligible;
    (b) The applicant does not comply with all of the procedural rules 
that govern the submission of the application;
    (c) The application does not contain the information required under 
the program; or
    (d) The proposed project cannot be funded under the authorizing 
statute or implementing regulations for the program.

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

[57 FR 30338, July 8, 1992]



Sec. 75.217  How the Secretary selects applications for new grants.

    (a) The Secretary selects applications for new grants on the basis 
of the authorizing statute, the selection criteria, and any priorities 
or other requirements that have been published in the Federal Register 
and apply to the selection of those applications.
    (b)(1) The Secretary may use experts to evaluate the applications 
submitted under a program.
    (2) These experts may include persons who are not employees of the 
Federal Government.
    (c) The Secretary prepares a rank order of the applications based 
solely

[[Page 146]]

on the evaluation of their quality according to the selection criteria.
    (d) The Secretary then determines the order in which applications 
will be selected for grants. The Secretary considers the following in 
making these determinations:
    (1) The information in each application.
    (2) The rank ordering of the applications.
    (3) Any other information--
    (i) Relevant to a criterion, priority, or other requirement that 
applies to the selection of applications for new grants;
    (ii) Concerning the applicant's performance and use of funds under a 
previous award under any Department program; and
    (iii) Concerning the applicant's failure under any Department 
program to submit a performance report or its submission of a 
performance report of unacceptable quality.

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

[52 FR 27804, July 24, 1987, as amended at 62 FR 4167, Jan. 29, 1997]



Sec. 75.218  Applications not evaluated or selected for funding.

    (a) The Secretary informs an applicant if its application--
    (1) Is not evaluated; or
    (2) Is not selected for funding.
    (b) If an applicant requests an explanation of the reason its 
application was not evaluated or selected, the Secretary provides that 
explanation.

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

[57 FR 30338, July 8, 1992]



Sec. 75.219  Exceptions to the procedures under Sec. 75.217.

    The Secretary may select an application for funding without 
following the procedures in Sec. 75.217 if:
    (a) The objectives of the project cannot be achieved unless the 
Secretary makes the grant before the date grants can be made under the 
procedures in Sec. 75.217;
    (b)(1) The application was evaluated under the preceding competition 
of the program;
    (2) The application rated high enough to deserve selection under 
Sec. 75.217; and
    (3) The application was not selected for funding because the 
application was mishandled by the Department; or
    (c) The Secretary receives an unsolicited application that meets the 
requirements of Sec. 75.222.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 52 FR 27804, July 24, 1987; 60 FR 12096, Mar. 3, 1995]



Sec. 75.220  Procedures the Department uses under Sec. 75.219(a).

    If the special circumstances of Sec. 75.219(a) appear to exist for 
an application, the Secretary uses the following procedures:
    (a) The Secretary assembles a board to review the application.
    (b) The board consists of:
    (1) A program officer of the program under which the applicant wants 
a grant;
    (2) An employee from the Office of the Chief Financial Officer 
(OCFO) with responsibility for grant policy; and
    (3) A Department employee who is not a program officer of the 
program but who is qualified to evaluate the application.
    (c) The board reviews the application to decide if:
    (1) The special circumstances under Sec. 75.219(a) are satisfied;
    (2) The application rates high enough, based on the selection 
criteria, priorities, and other requirements that apply to the program, 
to deserve selection; and
    (3) Selection of the application will not have an adverse impact on 
the budget of the program.
    (d) The board forwards the results of its review to the Secretary.
    (e) If each of the conditions in paragraph (c) of this section is 
satisfied, the Secretary may select the application for funding.
    (f) Even if the Secretary does not select the application for 
funding, the applicant may submit its application under the procedures 
in Subpart C of this part.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 86297, Dec. 30, 1980; 64 FR 50391, Sept. 16, 1999]

[[Page 147]]



Sec. 75.221  Procedures the Department uses under Sec. 75.219(b).

    If the special circumstances of Sec. 75.219(b) appear to exist for 
an application, the Secretary may select the application for funding if:
    (a) The Secretary has documentary evidence that the special 
circumstances of Sec. 75.219(b) exist; and
    (b) The Secretary has a statement that explains the circumstances of 
the mishandling.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 3474)

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 52 FR 27804, July 24, 1987. Redesignated at 60 FR 12096, 
Mar. 3, 1995]



Sec. 75.222  Procedures the Department uses under Sec. 75.219(c).

    If the Secretary receives an unsolicited application, the Secretary 
may consider the application under the following procedures unless the 
Secretary has published a notice in the Federal Register stating that 
the program that would fund the application would not consider 
unsolicited applications:
    (a)(1) The Secretary determines whether the application could be 
funded under a competition planned or conducted for the fiscal year 
under which funds would be used to fund the application.
    (2)(i) If the application could be funded under a competition 
described in paragraph (a)(1) of this section and the deadline for 
submission of applications has not passed, the Secretary refers the 
application to the appropriate competition for consideration under the 
procedures in Sec. 75.217.
    (ii)(A) If the application could have been funded under a 
competition described in paragraph (a)(1) of this section and the 
deadline for submission of applications has passed, the Secretary may 
consider the application only in exceptional circumstances, as 
determined by the Secretary.
    (B) If the Secretary considers an application under paragraph 
(a)(2)(ii) of this section, the Secretary considers the application 
under paragraphs (b) through (e) of this section.
    (iii) If the application could not be funded under a competition 
described in paragraph (a)(1) of this section, the Secretary considers 
the application under paragraphs (b) through (e) of this section.
    (b) If an application may be considered under paragraphs (a)(2)(ii) 
or (iii) of this section, the Secretary determines if--
    (1) There is a substantial likelihood that the application is of 
exceptional quality and national significance for a program administered 
by ED;
    (2) The application meets the requirements of all applicable 
statutes and codified regulations that apply to the program; and
    (3) Selection of the project will not have an adverse impact on the 
funds available for other awards planned for the program.
    (c) If the Secretary determines that the criteria in paragraph (b) 
of this section have been met, the Secretary assembles a panel of 
experts that does not include any employees of the Department to review 
the application.
    (d) The experts--
    (1) Evaluate the application based on the selection criteria; and
    (2) Determine whether the application is of such exceptional quality 
and national significance that it should be funded as an unsolicited 
application.
    (e) If the experts highly rate the application and determine that 
the application is of such exceptional quality and national significance 
that it should be funded as an unsolicited application, the Secretary 
may fund the application.
    Note to Sec. 75.222: To assure prompt consideration, applicants 
submitting unsolicited applications should send the application, marked 
``Unsolicited Application'' on the outside, to the Chief, Application 
Control Center, U.S. Department of Education, Washington, DC 20202-4725.

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

[60 FR 12096, Mar. 3, 1995]



Sec. 75.223  [Reserved]



Sec. 75.224  What are the procedures for using a multiple tier review 
process to evaluate applications?

    (a) The Secretary may use a multiple tier review process to evaluate 
applications.
    (b) The Secretary may refuse to review applications in any tier that 
do

[[Page 148]]

not meet a minimum cut-off score established for the prior tier.
    (c) The Secretary may establish the minimum cut-off score--
    (1) In the application notice published in the Federal Register; or
    (2) After reviewing the applications to determine the overall range 
in the quality of applications received.
    (d) The Secretary may, in any tier--
    (1) Use more than one group of experts to gain different 
perspectives on an application; and
    (2) Refuse to consider an application if the application is rejected 
under paragraph (b) of this section by any one of the groups used in the 
prior tier.

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

[66 FR 60138, Nov. 30, 2001]



Sec. 75.225  What procedures does the Secretary use if the Secretary 
decides to give special consideration to novice applications?

    (a) As used in this section, ``novice applicant'' means--
    (1) Any applicant for a grant from ED that--
    (i) Has never received a grant or subgrant under the program from 
which it seeks funding;
    (ii) Has never been a member of a group application, submitted in 
accordance with Sec. Sec. 75.127-75.129, that received a grant under 
the program from which it seeks funding; and
    (iii) Has not had an active discretionary grant from the Federal 
Government in the five years before the deadline date for applications 
under the program.
    (2) In the case of a group application submitted in accordance with 
Sec. Sec. 75.127-75.129, a group that includes only parties that meet 
the requirements of paragraph (a)(1) of this section.
    (b) For the purposes of paragraph (a)(1)(iii) of this section, a 
grant is active until the end of the grant's project or funding period, 
including any extensions of those periods that extend the grantee's 
authority to obligate funds.
    (c) If the Secretary determines that special consideration of novice 
applications is appropriate, the Secretary may either--
    (1) Establish a separate competition for novice applicants; or
    (2) Give competitive preference to novice applicants under the 
procedures in 34 CFR 75.105(c)(2).
    (d) Before making a grant to a novice applicant, the Secretary 
imposes special conditions, if necessary, to ensure the grant is managed 
effectively and project objectives are achieved.

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

[66 FR 60138, Nov. 30, 2001; 67 FR 4316, Jan. 29, 2002]

                       Procedures To Make a Grant



Sec. 75.230  How the Department makes a grant; purpose of 
Sec. Sec. 75.231-75.236.

    If the Secretary selects an application under Sec. Sec. 75.217, 
75.220, or 75.222, the Secretary follows the procedures in Sec. Sec. 
75.231-75.236 to set the amount and determine the conditions of a grant. 
Sections 75.235-75.236 also apply to grants under formula grant 
programs.

    Cross reference: See Sec. 75.200 How applications for new grants 
are selected for funding.

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



Sec. 75.231  Additional information.

    After selecting an application for funding, the Secretary may 
require the applicant to submit additional information.

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



Sec. 75.232  The cost analysis; basis for grant amount.

    (a) Before the Secretary sets the amount of a new grant, the 
Secretary does a cost analysis of the project. The Secretary:
    (1) Verifies the cost data in the detailed budget for the project;
    (2) Evaluates specific elements of costs; and
    (3) Examines costs to determine if they are necessary, reasonable, 
and allowable under applicable statutes and regulations.
    (b) The Secretary uses the cost analysis as a basis for determining 
the amount of the grant to the applicant. The cost analysis shows 
whether the applicant can achieve the objectives of the project with 
reasonable efficiency

[[Page 149]]

and economy under the budget in the application.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 59 FR 30261, June 10, 1994]



Sec. 75.233  Setting the amount of the grant.

    (a) Subject to any applicable matching or cost-sharing requirements, 
the Secretary may fund up to 100 percent of the allowable costs in the 
applicant's budget.
    (b) In deciding what percentage of the allowable costs to fund, the 
Secretary may consider any other financial resources available to the 
applicant.

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

[57 FR 30338, July 8, 1992]



Sec. 75.234  The conditions of the grant.

    (a) The Secretary makes a grant to an applicant only after 
determining--
    (1) The approved costs; and
    (2) Any special conditions.
    (b) In awarding a cooperative agreement, the Secretary includes 
conditions that state the explicit character and extent of anticipated 
collaboration between the Department and the recipient.

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

[57 FR 30338, July 8, 1992]



Sec. 75.235  The notification of grant award.

    (a) To make a grant, the Secretary issues a notification of grant 
award and sends it to the grantee.
    (b) The notification of grant award sets the amount of the grant 
award and establishes other specific conditions, if any.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 57 FR 30338, July 8, 1992]



Sec. 75.236  Effect of the grant.

    The grant obligates both the Federal Government and the grantee to 
the requirements that apply to the grant.

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

    Cross reference: See 34 CFR part 74, Subpart L--Programmatic Changes 
and Budget Revisions.

                     Approval of Multi-Year Projects



Sec. 75.250  Project period can be up to 60 months.

    The Secretary may approve a project period of up to 60 months.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 52 FR 27804, July 24, 1987]



Sec. 75.251  The budget period.

    (a) The Secretary usually approves a budget period of not more than 
12 months, even if the project has a multi-year project period.
    (b) If the Secretary approves a multi-year project period, the 
Secretary:
    (1) Makes a grant to the project for the initial budget period; and
    (2) Indicates his or her intention to make contination awards to 
fund the remainder of the project period.

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



Sec. 75.253  Continuation of a multi-year proj ect after the first 
budget period.

    (a) The Secretary may make a continuation award for a budget period 
after the first budget period of an approved multi-year project if:
    (1) The Congress has appropriated sufficient funds under the 
program;
    (2) The recipient has either--
    (i) Made substantial progress toward meeting the objectives in its 
approved application; or
    (ii) Obtained the Secretary's approval of changes in the project 
that--
    (A) Do not increase the cost of the grant; and
    (B) Enable the recipient to meet those objectives in succeeding 
budget periods;
    (3) The recipient has submitted all reports as required by Sec. 
75.118, and
    (4) Continuation of the project is in the best interest of the 
Federal Government.
    (b) Subject to the criteria in paragraph (a) of this section, in 
selecting applications for funding under a program the Secretary gives 
priority to contination awards over new grants.

[[Page 150]]

    (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.
    (d)(1) If the Secretary decides, under this section, not to make a 
continuation award, the Secretary may authorize a no-cost extension of 
the last budget period of the grant in order to provide for the orderly 
closeout of the grant.
    (2) If the Secretary makes a continuation award under this section--
    (i) The Secretary makes the award under Sec. Sec. 75.231-75.236; 
and
    (ii) The new budget period begins on the day after the previous 
budget period ends.
    (e) Unless prohibited by program regulations, a recipient that is in 
the final budget period of a project period may seek continued 
assistance for the project under the procedures for selecting new 
projects.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 57 FR 30338, July 8, 1992; 59 FR 30261, June 10, 1994; 62 
FR 40424, July 28, 1997]

    Cross references: 1. See Subpart C--How to Apply for a Grant.

    2. See Sec. 75.117 Information needed for a multi-year project; and 
Sec. 75.118 Application for a continuation award.



Sec. 75.254  [Reserved]

                              Miscellaneous



Sec. 75.260  Allotments and reallotments.

    (a) Under some of the programs covered by this part, the Secretary 
allots funds under a statutory or regulatory formula.
    (b) Any reallotment to other grantees will be made by the Secretary 
in accordance with the authorizing statute for that program.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 52 FR 27804, July 24, 1987]



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, Sec. Sec. 350.17-350.19.

[[Page 151]]

    (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--
    (1) The extension does not violate any statute or regulations;
    (2) The extension does not involve the obligation of additional 
Federal funds;
    (3) The extension is to carry out the activities in the approved 
application; and
    (4)(i) The Secretary determines that, due to special or unusual 
circumstances applicable to a class of grantees, the project periods for 
the grantees should be extended; or
    (ii)(A) The Secretary determines that special or unusual 
circumstances would delay completion of the project beyond the end of 
the project period;
    (B) The grantee requests an extension of the project at least 45 
calendar days before the end of the project period; and
    (C) The grantee provides a written statement before the end of the 
project period giving the reasons why the extension is appropriate under 
paragraph (c)(4)(ii)(A) of this section and the period for which the 
project needs extension.
    (d) Waiver. The Secretary may waive the requirement in paragraph 
(a)(4)(ii)(B) of this section if--
    (1) The grantee could not reasonably have known of the need for the 
extension on or before the start of the 45-day time period; or
    (2) The failure to give notice on or before the start of the 45-day 
time period was unavoidable.

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

[57 FR 30338, July 8, 1992, as amended at 62 FR 40424, July 28, 1997]



Sec. 75.262  Conversion of a grant or a cooperative agreement.

    (a)(1) The Secretary may convert a grant to a cooperative agreement 
or a cooperative agreement to a grant at the time a continuation award 
is made under Sec. 75.253.
    (2) In deciding whether to convert a grant to a cooperative 
agreement or a cooperative agreement to a grant, the Secretary considers 
the factors included in Sec. 75.200(b) (4) and (5).
    (b) The Secretary and a recipient may agree at any time to convert a 
grant to a cooperative agreement or a cooperative agreement to a grant, 
subject to the factors included in Sec. 75.200(b) (4) and (5).

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

[57 FR 30339, July 8, 1992]



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)

[62 FR 40425, July 28, 1997]



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)

[62 FR 40425, July 28, 1997]

[[Page 152]]



           Subpart E_What Conditions Must Be Met by a Grantee?

                            Nondiscrimination



Sec. 75.500  Federal statutes and regulations on nondiscrimination.

    Each grantee shall comply with the following statutes and 
regulations:

------------------------------------------------------------------------
             Subject                    Statute           Regulations
------------------------------------------------------------------------
Discrimination on the basis of    Title VI of the     34 CFR part 100.
 race, color or national origin.   Civil Rights Act
                                   of 1964 (42
                                   U.S.C. 2000d
                                   through 2000d-4).
Discrimination on the basis of    Title IX of the     34 CFR part 106.
 sex.                              Education
                                   Amendments of
                                   1972 (20 U.S.C.
                                   1681-1683).
Discrimination on the basis of    Section 504 of the  34 CFR part 104.
 handicap.                         Rehabilitation
                                   Act of 1973 (29
                                   U.S.C. 794).
Discrimination on the basis of    The Age             45 CFR part 90.
 age.                              Discrimination
                                   Act (42 U.S.C.
                                   6101 et seq.).
------------------------------------------------------------------------


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

                              Project Staff



Sec. 75.511  Waiver of requirement for a full-time project director.

    (a) If regulations under a program require a full-time project 
director, the Secretary may waive that requirement under the following 
conditions:
    (1) The project will not be adversely affected by the waiver.
    (2)(i) The project director is needed to coordinate two or more 
related projects; or
    (ii) The project director must teach a minimum number of hours to 
retain faculty status.
    (b) The waiver either permits the grantee:
    (1) To use a part-time project director; or
    (2) Not to use any project director.
    (c)(1) An applicant or a grantee may request the waiver.
    (2) The request must be in writing and must demonstrate that a 
waiver is appropriate under this section.
    (3) The Secretary gives the waiver in writing. The waiver is 
effective on the date the Secretary signs the waiver.

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

    Cross reference: See 34 CFR 74.25, Revision of budget and program 
plans; and 34 CFR 80.30, Changes.



Sec. 75.515  Use of consultants.

    (a) Subject to Federal statutes and regulations, a grantee shall use 
its general policies and practices when it hires, uses, and pays a 
consultant as part of the project staff.
    (b) The grantee may not use its grant to pay a consultant unless:
    (1) There is a need in the project for the services of that 
consultant; and
    (2) The grantee cannot meet that need by using an employee rather 
than a consultant.

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



Sec. 75.516  Compensation of consultants--employees of institutions of 
higher education.

    If an institution of higher education receives a grant for research 
or for educational services, it may pay a consultant's fee to one of its 
employees only in unusual circumstances and only if:
    (a) The work performed by the consultant is in addition to his or 
her regular departmental load; and
    (b)(1) The consultation is across departmental lines; or
    (2) The consultation involves a separate or remote operation.

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



Sec. 75.517  Changes in key staff members.

    A grantee shall comply with 34 CFR 74.25(c)(2) concerning 
replacement or lesser involvement of any key project staff, whether or 
not the grant is for research.

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

[45 FR 22497, Apr. 3, 1980, as amended at 64 FR 50391, Sept. 16, 1999]



Sec. 75.519  Dual compensation of staff.

    A grantee may not use its grantee to pay a project staff member for 
time or work for which that staff member is compensated from some other 
source of funds.

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

                          Conflict of Interest



Sec. 75.524  Conflict of interest: Purpose of Sec. 75.525.

    (a) The conflict of interest regulations of the Department that 
apply to a grant are in Sec. 75.525.

[[Page 153]]

    (b) These conflict of interest regulations do not apply to a 
``government'' as defined in 34 CFR 80.3.
    (c) The regulations in Sec. 75.525 do not apply to a grantee's 
procurement contracts. The conflict of interest regulations that cover 
those procurement contracts are in 34 CFR part 74.

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

[45 FR 22497, Apr. 3, 1980, as amended at 64 FR 50391, Sept. 16, 1999]



Sec. 75.525  Conflict of interest: Participation in a project.

    (a) A grantee may not permit a person to participate in an 
administrative decision regarding a project if:
    (1) The decision is likely to benefit that person or a member of his 
or her immediate family; and
    (2) The person:
    (i) Is a public official; or
    (ii) Has a family or business relationship with the grantee.
    (b) A grantee may not permit any person participating in the project 
to use his or her position for a purpose that is--or gives the 
appearance of being--motivated by a desire for a private financial gain 
for that person or for others.

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

                             Allowable Costs



Sec. 75.530  General cost principles.

    The general principles to be used in determining costs applicable to 
grants and cost-type contracts under grants are specified at 34 CFR 
74.27 (for administration of grants to institutions of higher education, 
and other non-profit organizations) and 34 CFR 80.22 (for uniform 
administrative requirements for grants and cooperative agreements to 
State and local governments).

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

    Cross reference: See 34 CFR part 74, Subpart D--After-the-Award 
Requirements and 34 CFR part 80, Subpart C--Post-Award Requirements.

[64 FR 50391, Sept. 16, 1999]



Sec. 75.531  Limit on total cost of a project.

    A grantee shall insure that the total cost to the Federal Government 
is not more than the amount stated in the notification of grant award.

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



Sec. 75.532  Use of funds for religion prohibited.

    (a) No grantee may use its grant to pay for any of the following:
    (1) Religious worship, instruction, or proselytization.
    (2) Equipment or supplies to be used for any of the activities 
specified in paragraph (a)(1) of this section.
    (b) [Reserved]

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 69 FR 31711, June 4, 2004.



Sec. 75.533  Acquisition of real property; construction.

    No grantee may use its grant for acquisition of real property or for 
construction unless specifically permitted by the authorizing statute or 
implementing regulations for the program.

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



Sec. 75.534  Training grants--automatic increases for additional 
dependents.

    The Secretary may increase a grant to cover the cost of additional 
dependents not specified in the notice of award under Sec. 75.235 if--
    (a) Allowances for dependents are authorized by the program statute 
and are allowable under the grant; and
    (b) Appropriations are available to cover the cost.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 57 FR 30339, July 8, 1992]

                           Indirect Cost Rates



Sec. 75.560  General indirect cost rates; exceptions.

    (a) The differences between direct and indirect costs and the 
principles for determining the general indirect cost rate that a grantee 
may use for grants under most programs are specified in the cost 
principles for--
    (1) Institutions of higher education, at 34 CFR 74.27;
    (2) Hospitals, at 34 CFR 74.27;

[[Page 154]]

    (3) Other nonprofit organizations, at 34 CFR 74.27;
    (4) Commercial (for-profit) organizations, at 34 CFR 74.27; and
    (5) State and local governments and federally-recognized Indian 
tribal organizations, at 34 CFR 80.22.
    (b) A grantee must have a current indirect cost rate agreement to 
charge indirect costs to a grant. To obtain an indirect cost rate, a 
grantee must submit an indirect cost proposal to its cognizant agency 
and negotiate an indirect cost rate agreement.
    (c) The Secretary may establish a temporary indirect cost rate for a 
grantee that does not have an indirect cost rate agreement with its 
cognizant agency.
    (d) The Secretary accepts an indirect cost rate negotiated by a 
grantee's cognizant agency, but may establish a restricted indirect cost 
rate for a grantee to satisfy the statutory requirements of certain 
programs administered by the Department.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 57 FR 30339, July 8, 1992; 59 FR 59582, Nov. 17, 1994]



Sec. 75.561  Approval of indirect cost rates.

    (a) If the Department of Education is the cognizant agency, the 
Secretary approves an indirect cost rate for a grantee other than a 
local educational agency. For the purposes of this section, the term 
local educational agency does not include a State agency.
    (b) Each State educational agency, on the basis of a plan approved 
by the Secretary, shall approve an indirect cost rate for each local 
educational agency that requests it to do so. These rates may be for 
periods longer than a year if rates are sufficiently stable to justify a 
longer period.
    (c) The Secretary generally approves indirect cost rate agreements 
annually. Indirect cost rate agreements may be approved for periods 
longer than a year if the Secretary determines that rates will be 
sufficiently stable to justify a longer rate period.

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

[59 FR 59583, Nov. 17, 1994]



Sec. 75.562  Indirect cost rates for educational training projects.

    (a) Educational training grants provide funding for training or 
other educational services. Examples of the work supported by training 
grants are summer institutes, training programs for selected 
participants, the introduction of new or expanded courses, and similar 
instructional undertakings that are separately budgeted and accounted 
for by the sponsoring institution. These grants do not usually support 
activities involving research, development, and dissemination of new 
educational materials and methods. Training grants largely implement 
previously developed materials and methods and require no significant 
adaptation of techniques or instructional services to fit different 
circumstances.
    (b) The Secretary uses the definition in paragraph (a) to determine 
which grants are educational training grants.
    (c) Indirect cost reimbursement on a training grant is limited to 
the recipient's actual indirect costs, as determined by its negotiated 
indirect cost rate agreement, or eight percent of a modified total 
direct cost base, whichever amount is less. For the purposes of this 
section, a modified total direct cost base is defined as total direct 
costs less stipends, tuition and related fees, and capital expenditures 
of $5,000 or more.
    (1) The eight percent limit also applies to cost-type contracts 
under grants, if these contracts are for training as defined in this 
section.
    (2) The eight percent limit does not apply to agencies of State or 
local governments, including federally recognized Indian tribal 
governments, as defined in 34 CFR 80.3.
    (3) Indirect costs in excess of the eight percent limit may not be 
charged directly, used to satisfy matching or cost-sharing requirements, 
or charged to another Federal award.
    (d) A grantee using the training rate of eight percent is required 
to have documentation available for audit that shows that its negotiated 
indirect cost rate is at least eight percent.

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

[59 FR 59582, Nov. 17, 1994]

[[Page 155]]



Sec. 75.563  Restricted indirect cost rate--programs covered.

    If a grantee decides to charge indirect costs to a program that has 
a statutory requirement prohibiting the use of Federal funds to supplant 
non-Federal funds, the grantee shall use a restricted indirect cost rate 
computed under 34 CFR 76.564 through 76.569.

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

[59 FR 59583, Nov. 17, 1994]



Sec. 75.564  Reimbursement of indirect costs.

    (a) Reimbursement of indirect costs is subject to the availability 
of funds and statutory or administrative restrictions.
    (b) The application of the rates and the determination of the direct 
cost base by a grantee must be in accordance with the indirect cost rate 
agreement approved by the grantee's cognizant agency.
    (c) Indirect cost reimbursement is not allowable under grants for--
    (1) Fellowships and similar awards if Federal financing is 
exclusively in the form of fixed amounts such as scholarships, stipend 
allowances, or the tuition and fees of an institution;
    (2) Construction grants;
    (3) Grants to individuals;
    (4) Grants to organizations located outside the territorial limits 
of the United States;
    (5) Grants to Federal organizations; and
    (6) Grants made exclusively to support conferences.
    (d) Indirect cost reimbursement on grants received under programs 
with statutory restrictions or other limitations on indirect costs must 
be made in accordance with the restrictions in 34 CFR 76.564 through 
76.569.
    (e) Indirect costs for a group of eligible parties (see Sec. Sec. 
75.127-75.129) are limited to the amount derived by applying the rate of 
the applicant, or a restricted rate when applicable, to the grant in 
keeping with the terms of the applicant's indirect cost rate agreement.

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

[59 FR 59583, Nov. 17, 1994]



Sec. 75.580  Coordination with other activities.

    A grantee shall, to the extent possible, coordinate its project with 
other activities that are in the same geographic area served by the 
project and that serve similar purposes and target groups.

(Authority: 20 U.S.C. 1221e-3, 2890, and 3474)

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 57 FR 30339, July 8, 1992]

                               Evaluation



Sec. 75.590  Evaluation by the recipient.

    A recipient shall submit a performance report, or, for the last year 
of a project, a final report, that evaluates at least annually--
    (a) The recipient's progress in achieving the objectives in its 
approved application;
    (b) The effectiveness of the project in meeting the purposes of the 
program; and
    (c) The effect of the project on participants being served by the 
project.

(Approved by the Office of Management and Budget under control number 
1875-0102)

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 57 FR 30339, July 8, 1992; 59 FR 30262, June 10, 1994; 60 
FR 6660, Feb. 3, 1995]



Sec. 75.591  Federal evaluation--cooperation by a grantee.

    A grantee shall cooperate in any evaluation of the program by the 
Secretary.

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

[45 FR 86297, Dec. 30, 1980]



Sec. 75.592  Federal evaluation--satisfying requirement for grantee 
evaluation.

    If a grantee cooperates in a Federal evaluation of a program, the 
Secretary may determine that the grantee meets the evaluation 
requirements of the program, including Sec. 75.590.

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

                              Construction

    Cross reference: See 34 CFR part 74, Subpart P--Procurement 
Standards.

[[Page 156]]



Sec. 75.600  Use of a grant for construction: Purpose of 
Sec. Sec. 75.601-75.615.

    Sections 75.601-75.615 apply to:
    (a) An applicant that requests funds for construction; and
    (b) A grantee whose grant includes funds for construction.

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



Sec. 75.601  Applicant's assessment of environmental impact.

    An applicant shall include with its application its assessment of 
the impact of the proposed construction on the quality of the 
environment in accordance with section 102(2)(C) of the National 
Environmental Policy Act of 1969 and Executive Order 11514 (34 FR 4247).

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



Sec. 75.602  Preservation of historic sites must be described in the 
application.

    (a) An applicant shall describe in its application the relationship 
of the proposed construction to and probable effect on any district, 
site, building, structure, or object that is:
    (1) Included in the National Register of Historic Places; or
    (2) Eligible under criteria established by the Secretary of Interior 
for inclusion in the National Register of Historic Places.

    Cross reference: See 36 CFR part 60 for these criteria.
    (b) In deciding whether to make a grant, the Secretary considers:
    (1) The information provided by the applicant under paragraph (a) of 
this section; and
    (2) Any comments by the Advisory Council on Historic Preservation.

    Cross reference: See 36 CFR part 800, which provides for comments 
from the Council.

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



Sec. 75.603  Grantee's title to site.

    A grantee must have or obtain a full title or other interest in the 
site, including right of access, that is sufficient to insure the 
grantee's undisturbed use and possession of the facilities for 50 years 
or the useful life of the facilities, whichever is longer.

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



Sec. 75.604  Availability of cost-sharing funds.

    A grantee shall ensure that sufficient funds are available to meet 
any non-Federal share of the cost of constructing the facility.

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



Sec. 75.605  Beginning the construction.

    (a) A grantee shall begin work on construction within a reasonable 
time after the grant for the construction is made.
    (b) Before construction is advertised or placed on the market for 
bidding, the grantee shall get approval by the Secretary of the final 
working drawings and specifications.

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



Sec. 75.606  Completing the construction.

    (a) A grantee shall complete its construction within a reasonable 
time.
    (b) The grantee shall complete the construction in accordance with 
the application and approved drawings and specifications.

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



Sec. 75.607  General considerations in designing facilities and 
carrying out construction.

    (a) A grantee shall insure that the construction is:
    (1) Functional;
    (2) Economical; and
    (3) Not elaborate in design or extravagant in the use of materials, 
compared with facilities of a similar type constructed in the State or 
other applicable geographic area.
    (b) The grantee shall, in developing plans for the facilities, 
consider excellence of architecture and design and inclusion of works of 
art. The grantee may not spend more than one percent of the cost of the 
project on inclusion of works of art.

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

[[Page 157]]



Sec. 75.608  Areas in the facilities for cultural activities.

    A grantee may make reasonable provision, consistent with the other 
uses to be made of the facilities, for areas in the facilities that are 
adaptable for artistic and other cultural activities.

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

[57 FR 30339, July 8, 1992]



Sec. 75.609  Comply with safety and health standards.

    In planning for and designing facilities, a grantee shall observe:
    (a) The standards under the Occupational Safety and Health Act of 
1970 (Pub. L. 91-576) (See 36 CFR part 1910); and
    (b) State and local codes, to the extent that they are more 
stringent.

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



Sec. 75.610  Access by the handicapped.

    A grantee shall comply with the Federal regulations on access by the 
handicapped that apply to construction and alteration of facilities. 
These regulations are:
    (a) For residential facilities--24 CFR part 40; and
    (b) For non-residential facilities--41 CFR subpart 101-19.6.

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



Sec. 75.611  Avoidance of flood hazards.

    In planning the construction, a grantee shall, in accordance with 
the provisions of Executive Order 11988 of February 10, 1978 (43 FR 
6030) and rules and regulations that may be issued by the Secretary to 
carry out those provisions:
    (a) Evaluate flood hazards in connection with the construction; and
    (b) As far as practicable, avoid uneconomic, hazardous, or 
unnecessary use of flood plains in connection with the construction.

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



Sec. 75.612  Supervision and inspection by the grantee.

    A grantee shall maintain competent architectural engineering 
supervision and inspection at the construction site to insure that the 
work conforms to the approved drawings and specifications.

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



Sec. 75.613  Relocation assistance by the grantee.

    A grantee is subject to the regulations on relocation assistance and 
real property acquisition in 34 CFR part 15.

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



Sec. 75.614  Grantee must have operational funds.

    A grantee shall insure that, when construction is completed, 
sufficient funds will be available for effective operation and 
maintenance of the facilities.

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



Sec. 75.615  Operation and maintenance by the grantee.

    A grantee shall operate and maintain the facilities in accordance 
with applicable Federal, State, and local requirements.

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



Sec. 75.616  Energy conservation.

    (a) To the extent feasible, a grantee shall design and construct 
facilities to maximize the efficient use of energy.
    (b) The following standards of the American Society of Heating, 
Refrigerating, and Air Conditioning Engineers (ASHRAE) are incorporated 
by reference in this section:
    (1) ASHRAE-90 A-1980 (Sections 1-9).
    (2) ASHRAE-90 B-1975 (Sections 10-11).
    (3) ASHRAE-90 C-1977 (Section 12).

Incorporation by reference of these provisions has been approved by the 
Director of the Office of the Federal Register pursuant to the 
Director's authority under 5 U.S.C. 552 (a) and 1 CFR part 51. The 
incorporated document is on file at the Department of Education, Grants 
and Contracts Service, rm. 3636 ROB-3, 400 Maryland Avenue, SW., 
Washington, DC 20202-4700 or at the National Archives and Records 
Administration (NARA). For information on the availability of this 
material at NARA, call 202-741-6030, or go to: http://www.archives.gov/
federal--register/code--of--federal--regulations/

[[Page 158]]

ibr--locations.html.These standards may be obtained from the publication 
sales department at the American Society of Heating, Refrigerating, and 
Air Conditioning Engineers, Inc., 1791 Tullie Circle, NE., Atlanta, 
Georgia 30329.
    (c) A grantee shall comply with ASHRAE standards listed in paragraph 
(b) of this section in designing and constructing facilities built with 
project funds.

(Authority: 20 U.S.C. 1221e-3 and 3474, 42 U.S.C. 8373(b), and E.O. 
12185)

[57 FR 30339, July 8, 1992, as amended at 69 FR 18803, Apr. 9, 2004]



Sec. 75.617  Compliance with the Coastal Barrier Resources Act.

    A recipient may not use, within the Coastal Barrier Resources 
System, funds made available under a program administered by the 
Secretary for any purpose prohibited by 31 U.S.C. chapter 55 (sections 
3501-3510).

(Authority: 20 U.S.C. 1221e-3 and 3474, 31 U.S.C. 3504, 3505)

[57 FR 30339, July 8, 1992]

                         Equipment and Supplies

    Cross reference: See 34 CFR 74.32 Real property; 34 CFR 74.35 
Supplies and other expendable property; 34 CFR 74.36 Intangible 
property; 34 CFR 74.2 Definitions; 34 CFR 80.31 Real property; 34 CFR 
80.32 Equipment; 34 CFR 80.33 Supplies; and 34 CFR 80.34 Copyrights.



Sec. 75.618  Charges for use of equipment or supplies.

    A grantee may not charge students or school personnel for the 
ordinary use of equipment or supplies purchased with grant funds.

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

                       Publications and Copyrights



Sec. 75.620  General conditions on publication.

    (a) Content of materials. Subject to any specific requirements that 
apply to its grant, a grantee may decide the format and content of 
project materials that it publishes or arranges to have published.
    (b) Required statement. The grantee shall ensure that any 
publication that contains project materials also contains the following 
statements:

    The contents of this (insert type of publication; e.g., book, 
report, film) were developed under a grant from the Department of 
Education. However, those contents do not necessarily represent the 
policy of the Department of Education, and you should not assume 
endorsement by the Federal Government.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 86297, Dec. 30, 1980]



Sec. 75.621  Copyright policy for grantees.

    A grantee may copyright project materials in accordance with 34 CFR 
part 74 or 80, as appropriate.

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

    Cross reference: See 34 CFR 74.22 Payment; 34 CFR 74.24 Program 
income; and 34 CFR 74.36 Intangible property; 34 CFR 80.25 Program 
income; and 34 CFR 80.34 Copyrights.

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 53 FR 19118, May 26, 1988; 57 FR 30339, July 8, 1992]



Sec. 75.622  Definition of ``project materials.''

    As used in Sec. Sec. 75.620-75.621, ``project materials'' means a 
copyrightable work developed with funds from a grant of the Department.

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

[57 FR 30339, July 8, 1992]

                         Inventions and Patents

    Cross reference: See 34 CFR 74.25, Program income and 34 CFR 80.25, 
Program income.



Sec. 75.626  Show Federal support; give papers to vest title.

    Any patent application filed by a grantee for an invention made 
under a grant must include the following statement in the first 
paragraph:

    The invention described in this application was made under a grant 
from the Department of Education.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 86297, Dec. 30, 1980; 57 FR 30339, July 8, 1992]

[[Page 159]]

                 Other Requirements for Certain Projects

    Cross reference: See 34 CFR 74.21, Standards for financial 
management systems; 34 CFR 74.48, Contract provisions; 34 CFR 80.20, 
Standards for financial management and 34 CFR 80.36, Procurement.



Sec. 75.650  Participation of students enrolled in private schools.

    If the authorizing statute for a program requires a grantee to 
provide for participation by students enrolled in private schools, the 
grantee shall provide a genuine opportunity for equitable participation 
in accordance with the requirements that apply to subgrantees under 34 
CFR 76.650-76.662.

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



Sec. 75.681  Protection of human research subjects.

    If a grantee uses a human subject in a research project, the grantee 
shall protect the person from physical, psychological, or social injury 
resulting from the project.

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

    Cross reference: See 34 CFR part 97--Protection of Human Subjects.



Sec. 75.682  Treatment of animals.

    If a grantee uses an animal in a project, the grantee shall provide 
the animal with proper care and humane treatment in accordance with the 
Animal Welfare Act of 1970.

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



Sec. 75.683  Health or safety standards for facilities.

    A grantee shall comply with any Federal health or safety 
requirements that apply to the facilities that the grantee uses for the 
project.

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



  Subpart F_What Are the Administrative Responsibilities of a Grantee?

                 General Administrative Responsibilities



Sec. 75.700  Compliance with statutes, regulations, and applications.

    A grantee shall comply with applicable statutes, regulations, and 
approved applications, and shall use Federal funds in accordance with 
those statutes, regulations, and applications.

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



Sec. 75.701  The grantee administers or supervises the project.

    A grantee shall directly administer or supervise the administration 
of the project.

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



Sec. 75.702  Fiscal control and fund accounting procedures.

    A grantee shall use fiscal control and fund accounting procedures 
that insure proper disbursement of and accounting for Federal funds.

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

    Cross reference: See 34 CFR part 74, Subpart C--Post-Award 
Requirements and Subpart D--After-the-Award Requirements and 34 CFR part 
80, Subpart C--Post-Award Requirements and Subpart D--After-the-Grant 
Requirements.



Sec. 75.703  Obligation of funds during the grant period.

    A grantee may use grant funds only for obligations it makes during 
the grant period.

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



Sec. 75.707  When obligations are made.

    The following table shows when a grantee makes obligations for 
various kinds of property and services.

------------------------------------------------------------------------
        If the obligation is for--            The obligation is made--
------------------------------------------------------------------------
(a) Acquisition of real or personal         On the date the grantee
 property.                                   makes a binding written
                                             commitment to acquire the
                                             property.
(b) Personal services by an employee of     When the services are
 the grantee.                                performed.

[[Page 160]]

 
(c) Personnal services by a contractor who  On the date on which the
 is not an employee of the grantee.          grantee makes a binding
                                             written commitment to
                                             obtain the services.
(d) Performance of work other than          On the date on which the
 personal services.                          grantee makes a binding
                                             written commitment to
                                             obtain the work.
(e) Public utility services...............  When the grantee receives
                                             the services.
(f) Travel................................  When the travel is taken.
(g) Rental of real or personal property...  When the grantee uses the
                                             property.
(h) A preagreement cost that was properly
 approved by the Secretary under the cost
 principles identified in 34 CFR 74.171 or
 80.22.
------------------------------------------------------------------------


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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 57 FR 30340, July 8, 1992]



Sec. 75.708  Prohibition of subgrants.

    (a) A grantee may not make a subgrant under a program covered by 
this part unless specifically authorized by statute.
    (b) A grantee may contract for supplies, equipment, construction, 
and other services, in accordance with 34 CFR part 74, Subpart C--Post-
Award Requirements (Procurement Standards Sec. Sec. 74.40-74.48) and 34 
CFR part 80, Subpart C--Post-Award Requirements (Sec. 80.36 
Procurement).

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 52 FR 27804, July 24, 1987; 64 FR 50392, Sept. 16, 1999]

                                 Reports

    Cross reference: See 34 CFR 74.51, Monitoring and reporting program 
performance; 34 CFR 74.52, Financial reporting; 34 CFR 80.40, Monitoring 
and reporting program performance; and 34 CFR 80.41 Financial reporting.



Sec. 75.720  Financial and performance reports.

    (a) This section applies to the reports required under--
    (1) 34 CFR 74.51 (Monitoring and reporting program performance) and 
34 CFR 74.52 (Financial reporting); and
    (2) 34 CFR 80.40 (Monitoring and reporting program performance) and 
34 CFR 80.41 (Financial reporting).
    (b) A grantee shall submit these reports annually, unless the 
Secretary allows less frequent reporting. However, the Secretary may 
require a grantee of a grant made under 34 CFR part 700, 706, 707, or 
708 (certain programs of the Office of Educational Research and 
Improvement) to submit performance reports more often than annually.
    (c) The Secretary may require a grantee to report more frequently 
than annually under 34 CFR 74.14 (Special award conditions), 34 CFR 
74.21 (Standards for financial management systems), 34 CFR 80.12 
(Special grant or subgrant conditions for ``high-risk'' grantees) or 34 
CFR 80.20 (Standards for financial management systems).

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

[57 FR 30340, July 8, 1992, as amended at 64 FR 50392, Sept. 16, 1999]



Sec. 75.721  [Reserved]

                                 Records

    Cross reference: See 34 CFR 74.53, Retention and access requirements 
for records and 34 CFR 80.42, Retention and access requirements for 
records.



Sec. 75.730  Records related to grant funds.

    A grantee shall keep records that fully show:
    (a) The amount of funds under the grant;
    (b) How the grantee uses the funds;
    (c) The total cost of the project;
    (d) The share of that cost provided from other sources; and
    (e) Other records to facilitate an effective audit.

(Approved by the Office of Management and Budget under control number 
1880-0513)

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 53 FR 49143, Dec. 6, 1988]



Sec. 75.731  Records related to compliance.

    A grantee shall keep records to show its compliance with program 
requirements.

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

[[Page 161]]



Sec. 75.732  Records related to performance.

    (a) A grantee shall keep records of significant project experiences 
and results.
    (b) The grantee shall use the records under paragraph (a) to:
    (1) Determine progress in accomplishing project objectives; and
    (2) Revise those objectives, if necessary.

(Approved by the Office of Management and Budget under control number 
1880-0513)

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

    Cross reference: See 34 CFR 74.25, Revision of budget and program 
plans.

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 53 FR 49143, Dec. 6, 1988]



Sec. 75.733  [Reserved]

                                 Privacy



Sec. 75.740  Protection of and access to student records; student 
rights in research, experimental programs, and testing.

    (a) Most records on present or past students are subject to the 
requirements of section 444 of GEPA and its implementing regulations in 
34 CFR part 99. (Section 444 is the Family Educational Rights and 
Privacy Act of 1974.)
    (b) Under most programs administered by the Secretary, research, 
experimentation, and testing are subject to the requirements of section 
445 of GEPA and its implementing regulations at 34 CFR part 98.

(Authority: 20 U.S.C. 1221e-3, 1232g, 1232h, and 3474)

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 57 FR 30340, July 8, 1992; 60 FR 46493, Sept. 6, 1995]



  Subpart G_What Procedures Does the Department Use To Get Compliance?

    Cross reference: See 34 CFR part 74, Subpart M--Grant and Subgrant 
Closeout, Suspension, and Termination.



Sec. 75.900  Waiver of regulations prohibited.

    (a) No official, agent, or employee of ED may waive any regulation 
that applies to a Department program, unless the regulation specifically 
provides that it may be waived.
    (b) No act or failure to act by an official, agent, or employee of 
ED can affect the authority of the Secretary to enforce regulations.

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



Sec. 75.901  Suspension and termination.

    (a) [Reserved]
    (b) The Secretary may use the Education Appeal Board to resolve 
disputes that are not subject to other procedures. Cross reference: See 
the following sections in part 74:
    (1) Section 74.113 (Violation of terms).
    (2) Section 74.114 (Suspension).
    (3) Section 74.115 (Termination).
    (4) The last sentence of Sec. 74.73(c) (Financial reporting after a 
termination).
    (5) Section 74.112 (Amounts payable to the Federal Government).

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

[45 FR 86297, Dec. 30, 1980]



Sec. 75.902  [Reserved]



Sec. 75.903  Effective date of termination.

    Termination is effective on the latest of:
    (a) The date of delivery to the grantee of the notice of 
termination;
    (b) The termination date given in the notice of termination; or
    (c) The date of a final decision of the Secretary under part 78 of 
this title.

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

[45 FR 22497, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 86298, Dec. 30, 1980]



Sec. 75.910  Cooperation with audits.

    A grantee shall cooperate with the Secretary and the Comptroller 
General of the United States or any of their authorized representatives 
in the conduct of audits authorized by Federal law. This cooperation 
includes access without unreasonable restrictions to records and 
personnel of the grantee

[[Page 162]]

for the purpose of obtaining relevant information.

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

[54 FR 21775, May 19, 1989]



PART 76_STATE-ADMINISTERED PROGRAMS--Table of Contents




                            Subpart A_General

          Regulations that Apply to State-Administered Programs

Sec.
76.1 Programs to which part 76 applies.
76.2 Exceptions in program regulations to part 76.

                   Eligibility for a Grant or Subgrant

76.50 Statutes determine eligibility and whether subgrants are made.
76.51 A State distributes funds by formula or competition.
76.52 Eligibility of faith-based organizations for a subgrant.

                Subpart B_How a State Applies for a Grant

                      State Plans and Applications

76.100 Effect of this subpart.
76.101 The general State application.
76.102 Definition of ``State plan'' for part 76.
76.103 Multi-year State plans.
76.104 A State shall include certain certifications in its State plan.
76.106 State documents are public information.

            Consolidated Grant Applications for Insular Areas

76.125 What is the purpose of these regulations?
76.126 What regulations apply to the consolidated grant applications for 
          insular areas?
76.127 What is the purpose of a consolidated grant?
76.128 What is a consolidated grant?
76.129 How does a consolidated grant work?
76.130 How are consolidated grants made?
76.131 How does an insular area apply for a consolidated grant?
76.132 What assurances must be in a consolidated grant application?
76.133 What is the reallocation authority?
76.134 What is the relationship between consolidated and non-
          consolidated grants?
76.135 Are there any requirements for matching funds?
76.136 Under what programs may consolidated grant funds be spent?
76.137 How may carryover funds be used under the consolidated grant 
          application?

                               Amendments

76.140 Amendments to a State plan.
76.141 An amendment requires the same procedures as the document being 
          amended.
76.142 An amendment is approved on the same basis as the document being 
          amended.

                Subpart C_How a Grant Is Made to a State

                Approval or Disapproval by the Secretary

76.201 A State plan must meet all statutory and regulatory requirements.
76.202 Opportunity for a hearing before a State plan is disapproved.
76.235 The notification of grant award.

               Allotments and Reallotments of Grant Funds

76.260 Allotments are made under program statute or regulations.
76.261 Realloted funds are part of a State's grant.

           Subpart D_How To Apply to the State for a Subgrant

76.300 Contact the State for procedures to follow.
76.301 Local educational agency general application.
76.302 The notice to the subgrantee.
76.303 Joint applications and projects.
76.304 Subgrantee shall make subgrant application available to the 
          public.

            Subpart E_How a Subgrant Is Made to an Applicant

76.400 State procedures for reviewing an application.
76.401 Disapproval of an application--opportunity for a hearing.

 Subpart F_What Conditions Must Be Met by the State and Its Subgrantees?

                            Nondiscrimination

76.500 Federal statutes and regulations on nondiscrimination.

                             Allowable costs

76.530 General cost principles.
76.532 Use of funds for religion prohibited.
76.533 Acquisition of real property; construction.
76.534 Use of tuition and fees restricted.

[[Page 163]]

                           Indirect Cost Rates

76.560 General indirect cost rates; exceptions.
76.561 Approval of indirect cost rates.
76.563 Restricted indirect cost rate--programs covered.
76.564 Restricted indirect cost rate--formula.
76.565 General management costs--restricted rate.
76.566 Fixed costs--restricted rate.
76.567 Other expenditures--restricted rate.
76.568 Occupancy and space maintenance costs--restricted rate.
76.569 Using the restricted indirect cost rate.
76.580 Coordination with other activities.

                               Evaluation

76.591 Federal evaluation--cooperation by a grantee.
76.592 Federal evaluation--satisfying requirement for State or 
          subgrantee evaluation.

                              Construction

76.600 Where to find construction regulations.

          Participation of Students Enrolled in Private Schools

76.650 Private schools; purpose of Sec. Sec. 76.651-76.662.
76.651 Responsibility of a State and a subgrantee.
76.652 Consultation with representatives of private school students.
76.653 Needs, number of students, and types of services.
76.654 Benefits for private school students.
76.655 Level of expenditures for students enrolled in private schools.
76.656 Information in an application for a subgrant.
76.657 Separate classes prohibited.
76.658 Funds not to benefit a private school.
76.659 Use of public school personnel.
76.660 Use of private school personnel.
76.661 Equipment and supplies.
76.662 Construction.

                          Procedures for Bypass

76.670 Applicability and filing requirements.
76.671 Notice by the Secretary.
76.672 Bypass procedures.
76.673 Appointment and functions of a hearing officer.
76.674 Hearing procedures.
76.675 Posthearing procedures.
76.676 Judicial review of a bypass action.
76.677 Continuation of a bypass.

                 Other Requirements for Certain Programs

76.681 Protection of human subjects.
76.682 Treatment of animals.
76.683 Health or safety standards for facilities.

Subpart G_What Are the Administrative Responsibilities of the State and 
                            Its Subgrantees?

                 General Administrative Responsibilities

76.700 Compliance with statutes, regulations, State plan, and 
          applications.
76.701 The State or subgrantee administers or supervises each project.
76.702 Fiscal control and fund accounting procedures.
76.703 When a State may begin to obligate funds.
76.704 New State plan requirements that must be addressed in a State 
          plan.
76.707 When obligations are made.
76.708 When certain subgrantees may begin to obligate funds.
76.709 Funds may be obligated during a ``carryover period.''
76.710 Obligations made during a carryover period are subject to current 
          statutes, regulations, and applications.
76.711 Requesting funds by CFDA number.

                                 Reports

76.720 Financial and performance reports by a State.
76.722 A subgrantee makes reports required by the State.

                                 Records

76.730 Records related to grant funds.
76.731 Records related to compliance.

                                 Privacy

76.740 Protection of and access to student records; student rights in 
          research, experimental programs, and testing.

                 Use of Funds by States and Subgrantees

76.760 More than one program may assist a single activity.
76.761 Federal funds may pay 100 percent of cost.

                  State Administrative Responsibilities

76.770 A State shall have procedures to ensure compliance.
76.783 State educational agency action--subgrantee's opportunity for a 
          hearing.

Subpart H_How Does a State or Local Educational Agency Allocate Funds to 
                            Charter Schools?

                                 General

76.785 What is the purpose of this subpart?
76.786 What entities are governed by this subpart?

[[Page 164]]

76.787 What definitions apply to this subpart?

               Responsibilities for Notice and Information

76.788 What are a charter school LEA's responsibilities under this 
          subpart?
76.789 What are an SEA's responsibilities under this subpart?

            Allocation of Funds by State Educational Agencies

76.791 On what basis does an SEA determine whether a charter school LEA 
          that opens or significantly expands its enrollment is eligible 
          to receive funds under a covered program?
76.792 How does an SEA allocate funds to eligible charter school LEAs 
          under a covered program in which the SEA awards subgrants on a 
          formula basis?
76.793 When is an SEA required to allocate funds to a charter school LEA 
          under this subpart?
76.794 How does an SEA allocate funds to charter school LEAs under a 
          covered program in which the SEA awards subgrants on a 
          discretionary basis?

                               Adjustments

76.796 What are the consequences of an SEA allocating more or fewer 
          funds to a charter school LEA under a covered program than the 
          amount for which the charter school LEA is eligible when the 
          charter school LEA actually opens or significantly expands its 
          enrollment?
76.797 When is an SEA required to make adjustments to allocations under 
          this subpart?

       Applicability of This Subpart to Local Educational Agencies

76.799 Do the requirements in this subpart apply to LEAs?

   Subpart I_What Procedures Does the Secretary Use To Get Compliance?

76.900 Waiver of regulations prohibited.
76.901 Office of Administrative Law Judges.
76.902 Judicial review.
76.910 Cooperation with audits.

    Authority: 20 U.S.C. 1221e-3, 3474, 6511(a), and 8065a, unless 
otherwise noted.

    Source: 45 FR 22517, Apr. 3, 1980, unless otherwise noted. 
Redesignated at 45 FR 77368, Nov. 21, 1980.



                            Subpart A_General

          Regulations That Apply to State-Administered Programs



Sec. 76.1  Programs to which part 76 applies.

    (a) The regulations in part 76 apply to each State-administered 
program of the Department.
    (b) If a State formula grant program does not have implementing 
regulations, the Secretary implements the program under the authorizing 
statute and, to the extent consistent with the authorizing statute, 
under the General Education Provisions Act and the regulations in this 
part. For the purposes of this part, the term State formula grant 
program means a program whose authorizing statute or implementing 
regulations provide a formula for allocating program funds among 
eligible States.

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

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 84059, Dec. 22, 1980; 50 FR 29330, July 18, 1985; 52 
FR 27804, July 24, 1987; 54 FR 21776, May 19, 1989; 55 FR 14816, Apr. 
18, 1990]



Sec. 76.2  Exceptions in program regulations to part 76.

    If a program has regulations that are not consistent with part 76, 
the implementing regulations for that program identify the sections of 
part 76 that do not apply.

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

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 54 FR 21776, May 19, 1989]

                   Eligibility for a Grant or Subgrant



Sec. 76.50  Statutes determine eligibility and whether subgrants are made.

    (a) Under a program covered by this part, the Secretary makes a 
grant:
    (1) To the State agency designated by the authorizing statute for 
the program; or
    (2) To the State agency designated by the State in accordance with 
the authorizing statute.
    (b) The authorizing statute determines the extent to which a State 
may:

[[Page 165]]

    (1) Use grant funds directly; and
    (2) Make subgrants to eligible applicants.
    (c) The regulations in part 76 on subgrants apply to a program only 
if subgrants are authorized under that program.
    (d) The authorizing statute determines the eligibility of an 
applicant for a subgrant.

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

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 52 FR 27804, July 24, 1987; 54 FR 21776, May 19, 1989]



Sec. 76.51  A State distributes funds by formula or competition.

    If a program statute authorizes a State to make subgrants, the 
statute:
    (a) Requires the State to use a formula to distribute funds;
    (b) Gives the State discretion to select subgrantees through a 
competition among the applicants or through some other procedure; or
    (c) Allows some combination of these procedures.

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

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 54 FR 21776, May 19, 1989]



Sec. 76.52  Eligibility of faith-based organizations for a subgrant.

    (a)(1) A faith-based organization is eligible to apply for and to 
receive a subgrant under a program of the Department on the same basis 
as any other private organization, with respect to programs for which 
such other organizations are eligible.
    (2) In the selection of subgrantees, States shall not discriminate 
for or against a private organization on the basis of the organization's 
religious character or affiliation.
    (b) The provisions of Sec. 76.532 apply to a faith-based 
organization that receives a subgrant from a State under a State-
administered program of the Department.
    (c) A private organization that engages in inherently religious 
activities, such as religious worship, instruction, or proselytization, 
must offer those services separately in time or location from any 
programs or services supported by a subgrant from a State under a State-
administered program of the Department, and participation in any such 
inherently religious activities by beneficiaries of the programs 
supported by the subgrant must be voluntary.
    (d)(1) A faith-based organization that applies for or receives a 
subgrant from a State under a State-administered program of the 
Department may retain its independence, autonomy, right of expression, 
religious character, and authority over its governance.
    (2) A faith-based organization may, among other things--
    (i) Retain religious terms in its name;
    (ii) Continue to carry out its mission, including the definition, 
development, practice, and expression of its religious beliefs;
    (iii) Use its facilities to provide services without removing or 
altering religious art, icons, scriptures, or other symbols from these 
facilities;
    (iv) Select its board members and otherwise govern itself on a 
religious basis; and
    (v) Include religious references in its mission statement and other 
chartering or governing documents.
    (e) A private organization that receives a subgrant from a State 
under a State-administered program of the Department shall not 
discriminate against a beneficiary or prospective beneficiary in the 
provision of program services on the basis of religion or religious 
belief.
    (f) If a State or subgrantee contributes its own funds in excess of 
those funds required by a matching or grant agreement to supplement 
Federally funded activities, the State or subgrantee has the option to 
segregate those additional funds or commingle them with the funds 
required by the matching requirements or grant agreement. However, if 
the additional funds are commingled, this section applies to all of the 
commingled funds.
    (g) A religious organization's exemption from the Federal 
prohibition on employment discrimination on the basis of religion, in 
section 702(a) of the Civil Rights Act of 1964, 42 U.S.C. 2000e-

[[Page 166]]

1, is not forfeited when the organization receives financial assistance 
from the Department.

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

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

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 69 FR 31711, June 4, 2004]



                Subpart B_How a State Applies for a Grant

                      State Plans and Applications



Sec. 76.100  Effect of this subpart.

    This subpart establishes general requirements that a State must meet 
to apply for a grant under a program covered by this part. Additional 
requirements are in the authorizing statute and the implementing 
regulations for the program.

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

[52 FR 27804, July 24, 1987]



Sec. 76.101  The general State application.

    A State that makes subgrants to local educational agencies under a 
program subject to this part shall have on file with the Secretary a 
general application that meets the requirements of section 441 of the 
General Education Provisions Act.

(Authority: 20 U.S.C. 1221e-3, 1232d, and 3474)

[52 FR 27804, July 24, 1987, as amended at 60 FR 46493, Sept. 6, 1995]



Sec. 76.102  Definition of ``State plan'' for part 76.

    As used in this part, State plan means any of the following 
documents:

----------------------------------------------------------------------------------------------------------------
               Document                          Program             Authorizing statute       Principal Office
----------------------------------------------------------------------------------------------------------------
State plan............................  Assistance to States for  Part B (except section     OSERS
                                         Education of              619), Individuals with
                                         Handicapped Children.     Disabilities Education
                                                                   Act (20 U.S.C. 1411-
                                                                   1420).
Application...........................  Preschool Grants........  Section 619, Individuals   OSERS
                                                                   with Disabilities
                                                                   Education Act (20 U.S.C.
                                                                   1419).
Application...........................  Handicapped Infants and   Part H, Individuals with   OSERS
                                         Toddlers.                 Disabilities Education
                                                                   Act (20 U.S.C. 1471-
                                                                   1485).
Application or written request for      Client Assistance         Section 112,               OSERS
 assistance.                             Program.                  Rehabilitation Act of
                                                                   1973 (29 U.S.C. 732).
Application...........................  Removal of Architectural  Section 607, Individuals   OSERS
                                         Barriers to the           with Disabilities
                                         Handicapped Program.      Education Act (20 U.S.C.
                                                                   1406).
State plan............................  State Vocational          Title I, Parts A-C,        OSERS
                                         Rehabilitation Services   Rehabilitation Act of
                                         Program.                  1973 (29 U.S.C. 720-741).
State plan supplement.................  State Supported           Title VI, Part C,          OSERS
                                         Employment Services       Rehabilitation Act of
                                         Program.                  1973 (29 U.S.C. 795j-
                                                                   795r).
State plan............................  State Independent Living  Title VII, Part A,         OSERS
                                         Services Program.         Rehabilitation Act of
                                                                   1973 (29 U.S.C. 796-
                                                                   796d).
State plan............................  State Vocational          Title I, Part B, Carl D.   OVAE
                                         Education Program.        Perkins Vocational
                                                                   Education Act (20 U.S.C.
                                                                   2321-2325).
State plan and application............  State-Administered Adult  Section 341, Adult         OVAE
                                         Education Program.        Education Act (20 U.S.C.
                                                                   1206).
State plan............................  Even Start Family         Title I, Chapter 1, Part   OESE
                                         Literacy Program.         B of the Elementary and
                                                                   Secondary Education Act
                                                                   of 1965 (20 U.S.C. 2741-
                                                                   2749).
State application.....................  State Grants for          Title II, Part A,          OESE
                                         Strengthening             Elementary and Secondary
                                         Instruction in            Education Act of 1965,
                                         Mathematics and Science.  as amended (20 U.S.C.
                                                                   2981-2993).
State application.....................  Federal, State and Local  Title I, Chapter 2,        OESE
                                         Partnership for           Elementary and Secondary
                                         Educational Improvement.  Education Act of 1965,
                                                                   as amended (20 U.S.C.
                                                                   2911-2952 and 2971-2976).
State plan or application.............  Migrant Education         Sections 1201, 1202,       OESE
                                         Program.                  Chapter 1, Title I,
                                                                   Elementary and Secondary
                                                                   Education Act of 1965,
                                                                   as amended (20 U.S.C.
                                                                   2781 and 2782).
Application...........................  State Student Incentive   Section 415C, Higher       OPE
                                         Grant Program.            Education Act of 1965
                                                                   (20 U.S.C. 1070c-2).
Application...........................  Paul Douglas Teacher      Section 553, Higher        OPE
                                         Scholarship Program.      Education Act of 1965
                                                                   (20 U.S.C. 1111b).

[[Page 167]]

 
Basic State plan, long-range program,   The Library Services and  Library Services and       OERI
 and annual program.                     Construction Act State-   Construction Act (20
                                         Administered Program.     U.S.C. 351-355e-3).
Application...........................  Emergency Immigrant       Emergency Immigrant        OBEMLA
                                         Education Program.        Education Act (20 U.S.C.
                                                                   3121-3130).
Application...........................  Transition Program for    Section 412(d)             OBEMLA
                                         Refugee Children.         Immigration and
                                                                   Naturalization Act (8
                                                                   U.S.C. 1522 (d)).
Any document that the authorizing       Any State-administered    Section 408(a)(1),         Dept-wide
 statute for a State-administered        program without           General Education
 program requires a State to submit to   implementing              Provisions Act and
 receive funds.                          regulations.              Section 414, Department
                                                                   of Education
                                                                   Organization Act (20
                                                                   U.S.C. 1221e-3(a)(1) and
                                                                   3474).
----------------------------------------------------------------------------------------------------------------


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

[57 FR 30340, July 8, 1992]



Sec. 76.103  Multi-year State plans.

    (a) Beginning with fiscal year 1996, each State plan will be 
effective for a period of more than one fiscal year, to be determined by 
the Secretary or by regulations.
    (b) If the Secretary determines that the multi-year State plans 
under a program should be submitted by the States on a staggered 
schedule, the Secretary may require groups of States to submit or 
resubmit their plans in different years.
    (c) This section does not apply to:
    (1) The annual accountability report under part A of title I of the 
Vocational Education Act;
    (2) The annual programs under the Library Services and Construction 
Act;
    (3) The application under sections 141-143 of the Elementary and 
Secondary Education Act; and
    (4) The State application under section 209 of title II of the 
Education for Economic Security Act.
    (d) A State may submit an annual State plan under the Vocational 
Education Act. If a State submits an annual plan under that program, 
this section does not apply to that plan.
    Note: This section is based on a provision in the General Education 
Provisions Act (GEPA). Section 427 of the Department of Education 
Organization Act (DEOA), 20 U.S.C. 3487, provides that except to the 
extent inconsistent with the DEOA, the GEPA ``shall apply to functions 
transferred by this Act to the extent applicable on the day preceding 
the effective date of this Act.'' Although standardized nomenclature is 
used in this section to reflect the creation of the Department of 
Education, there is no intent to extend the coverage of the GEPA beyond 
that authorized under section 427 or other applicable law.

(Authority: 20 U.S.C. 1231g(a))

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 86296, Dec. 30, 1980; 50 FR 43545, Oct. 25, 1985; 60 
FR 46493, Sept. 6, 1995]



Sec. 76.104  A State shall include certain certifications in its State 
plan.

    (a) A State shall include the following certifications in each State 
plan:
    (1) That the plan is submitted by the State agency that is eligible 
to submit the plan.
    (2) That the State agency has authority under State law to perform 
the functions of the State under the program.
    (3) That the State legally may carry out each provision of the plan.
    (4) That all provisions of the plan are consistent with State law.
    (5) That a State officer, specified by title in the certification, 
has authority under State law to receive, hold, and disburse Federal 
funds made available under the plan.
    (6) That the State officer who submits the plan, specified by title 
in the certification, has authority to submit the plan.
    (7) That the agency that submits the plan has adopted or otherwise 
formally approved the plan.
    (8) That the plan is the basis for State operation and 
administration of the program.
    (b) [Reserved]

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

[[Page 168]]



Sec. 76.106  State documents are public information.

    A State shall make the following documents available for public 
inspection:
    (a) All State plans and related official materials.
    (b) All approved subgrant applications.
    (c) All documents that the Secretary transmits to the State 
regarding a program.

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

            Consolidated Grant Applications for Insular Areas

    Authority: Title V, Pub. L. 95-134, 91 Stat. 1159 (48 U.S.C. 1469a).



Sec. 76.125  What is the purpose of these regulations?

    (a) Sections 76.125 through 76.137 of this part contain requirements 
for the submission of an application by an Insular Area for the 
consolidation of two or more grants under the programs described in 
paragraph (c) of this section.
    (b) For the purpose of Sec. Sec. 76.125-76.137 of this part the 
term Insular Area means the Virgin Islands, Guam, American Samoa, the 
Trust Territory of the Pacific Islands, or the Commonwealth of the 
Northern Mariana Islands.
    (c) The Secretary may make an annual consolidated grant to assist an 
Insular Area in carrying out one or more State-administered formula 
grant programs of the Department.

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

[47 FR 17421, Apr. 22, 1982, as amended at 54 FR 21776, May 19, 1989; 57 
FR 30341, July 8, 1992]



Sec. 76.126  What regulations apply to the consolidated grant applications 
for insular areas?

    The following regulations apply to those programs included in a 
consolidated grant:
    (a) The regulations in Sec. Sec. 76.125 through 76.137; and
    (b) The regulations that apply to each specific program included in 
a consolidated grant for which funds are used.

(Authority: 48 U.S.C. 1469a)

[47 FR 17421, Apr. 22, 1982]



Sec. 76.127  What is the purpose of a consolidated grant?

    An Insular Area may apply for a consolidated grant for two or more 
of the programs listed in Sec. 76.125(c). This procedure is intended 
to:
    (a) Simplify the application and reporting procedures that would 
otherwise apply for each of the programs included in the consolidated 
grant; and
    (b) Provide the Insular Area with flexibility in allocating the 
funds under the consolidated grant to achieve any of the purposes to be 
served by the programs that are consolidated.

(Authority: 48 U.S.C. 1469a)

[47 FR 17421, Apr. 22, 1982]



Sec. 76.128  What is a consolidated grant?

    A consolidated grant is a grant to an Insular Area for any two or 
more of the programs listed in Sec. 76.125(c). The amount of the 
consolidated grant is the sum of the allocations the Insular Area 
receives under each of the programs included in the consolidated grant 
if there had been no consolidation.

    Example. Assume the Virgin Islands applies for a consolidated grant 
that includes programs under the Adult Education Act, Vocational 
Education Act, and Chapter 1 of the Education Consolidation and 
Improvement Act. If the Virgin Islands' allocation under the formula for 
each of these three programs is $150,000; the total consolidated grant 
to the Virgin Islands would be $450,000.

(Authority: 48 U.S.C. 1469a)

[47 FR 17421, Apr. 22, 1982]



Sec. 76.129  How does a consolidated grant work?

    (a) An Insular Area shall use the funds it receives under a 
consolidated grant to carry out, in its jurisdiction, one or more of the 
programs included in the grant.

    Example. Assume that Guam applies for a consolidated grant under the 
Vocational Education Act, the Handicapped Preschool and School Programs-
Incentive Grants, and the Adult Education Act and that the sum of the 
allocations under these programs is $700,000. Guam may choose to 
allocate this $700,000 among all of the programs authorized under the 
three programs. Alternatively, it may choose to allocate the entire 
$700,000 to one or two of the programs;

[[Page 169]]

for example, the Adult Education Act Program.

    (b) An Insular Area shall comply with the statutory and regulatory 
requirements that apply to each program under which funds from the 
consolidated grant are expended.

    Example. Assume that American Samoa uses part of the funds under a 
consolidated grant for the State program under the Adult Education Act. 
American Samoa need not submit to the Secretary a State plan that 
requires policies and procedures to assure all students equal access to 
adult education programs. However, in carrying out the program, American 
Samoa must meet and be able to demonstrate compliance with this equal 
access requirement.

(Authority: 48 U.S.C. 1469a)

[47 FR 17421, Apr. 22, 1982]



Sec. 76.130  How are consolidated grants made?

    (a) The Secretary annually makes a single consolidated grant to each 
Insular Area that meets the requirements of Sec. Sec. 76.125 through 
76.137 and each program under which the grant funds are to be used and 
administered.
    (b) The Secretary may decide that one or more programs cannot be 
included in the consolidated grant if the Secretary determines that the 
Insular Area failed to meet the program objectives stated in its plan 
for the previous fiscal year in which it carried out the programs.
    (c) Under a consolidated grant, an Insular Area may use a single 
advisory council for any or all of the programs that require an advisory 
council.
    (d) Although Pub. L. 95-134 authorizies the Secretary to consolidate 
grant funds that the Department awards to an Insular Area, it does not 
confer eligibility for any grant funds. The eligibility of a particular 
Insular Area to receive grant funds under a Federal education program is 
determined under the statute and regulations for that program.

(Authority: 48 U.S.C. 1469a)

[47 FR 17421, Apr. 22, 1982]



Sec. 76.131  How does an insular area apply for a consolidated grant?

    (a) An Insular Area that desires to apply for a grant consolidating 
two or more programs listed in Sec. 76.125(c) shall submit to the 
Secretary an application that:
    (1) Contains the assurances in Sec. 76.132; and
    (2) Meets the application requirements in paragraph (c) of this 
section.
    (b) The submission of an application that contains these 
requirements and assurances takes the place of a separate State plan or 
other similar document required by this part or by the authorizing 
statutes and regulations for programs included in the consolidated 
grant.
    (c) An Insular Area shall include in its consolidated grant 
application a program plan that:
    (1) Contains a list of the programs in Sec. 76.125(c) to be 
included in the consolidated grant;
    (2) Describes the program or programs in Sec. 76.125(c) under which 
the consolidated grant funds will be used and administered;
    (3) Describes the goals, objectives, activities, and the means of 
evaluating program outcomes for the programs for which the Insular Area 
will use the funds received under the consolidated grant during the 
fiscal year for which it submits the application, including needs of the 
population that will be met by the consolidation of funds; and
    (4) Contains a budget that includes a description of the allocation 
of funds--including any anticipated carryover funds of the program in 
the consolidated grant from the preceding year--among the programs to be 
included in the consolidated grant.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 48 U.S.C. 1469a)

[47 FR 17421, Apr. 22, 1982, as amended at 53 FR 49143, Dec. 6, 1988]



Sec. 76.132  What assurances must be in a consolidated grant application?

    (a) An Insular Area shall include in its consolidated grant 
application assurances to the Secretary that it will:
    (1) Follow policies and use administrative practices that will 
insure that non-Federal funds will not be supplanted by Federal funds 
made available under the authority of the programs in the consolidated 
grant;

[[Page 170]]

    (2) Comply with the requirements (except those relating to the 
submission of State plans or similar documents) in the authorizing 
statutes and implementing regulations for the programs under which funds 
are to be used and administered, (except requirements for matching 
funds);
    (3) Provide for proper and efficient administration of funds in 
accordance with the authorizing statutes and implementing regulations 
for those programs under which funds are to be used and administered;
    (4) Provide for fiscal control and fund accounting procedures to 
assure proper disbursement of, and accounting for, Federal funds 
received under the consolidated grant;
    (5) Submit an annual report to the Secretary containing information 
covering the program or programs for which the grant is used and 
administered, including the financial and program performance 
information required under 34 CFR 74.51-74.52 and 34 CFR 80.40-80.41.
    (6) Provide that funds received under the consolidated grant will be 
under control of, and that title to property acquired with these funds 
will be in, a public agency, institution, or organization. The public 
agency shall administer these funds and property;
    (7) Keep records, including a copy of the State Plan or application 
document under which funds are to be spent, which show how the funds 
received under the consolidated grant have been spent.
    (8) Adopt and use methods of monitoring and providing technical 
assistance to any agencies, organizations, or institutions that carry 
out the programs under the consolidated grant and enforce any 
obligations imposed on them under the applicable statutes and 
regulations.
    (9) Evaluate the effectiveness of these programs in meeting the 
purposes and objectives in the authorizing statutes under which program 
funds are used and administered;
    (10) Conduct evaluations of these programs at intervals and in 
accordance with procedures the Secretary may prescribe; and
    (11) Provide appropriate opportunities for participation by local 
agencies, representatives of the groups affected by the programs, and 
other interested institutions, organizations, and individuals in 
planning and operating the programs.
    (b) These assurances remain in effect for the duration of the 
programs they cover.

(Authority: 48 U.S.C. 1469a)

[47 FR 17421, Apr. 22, 1982, as amended at 64 FR 50392, Sept. 16, 1999]



Sec. 76.133  What is the reallocation authority?

    (a) After an Insular Area receives a consolidated grant, it may 
reallocate the funds in a manner different from the allocation described 
in its consolidated grant application. However, the funds cannot be used 
for purposes that are not authorized under the programs in the 
consolidated grant under which funds are to be used and administered.
    (b) If an Insular Area decides to reallocate the funds it receives 
under a consolidated grant, it shall notify the Secretary by amending 
its original application to include an update of the information 
required under Sec. 76.131.

(Authority: 48 U.S.C. 1469a)

[47 FR 17421, Apr. 22, 1982]



Sec. 76.134  What is the relationship between consolidated and 
non-consolidated grants?

    (a) An Insular Area may request that any number of programs in Sec. 
76.125(c) be included in its consolidated grant and may apply separately 
for assistance under any other programs listed in Sec. 76.125(c) for 
which it is eligible.
    (b) Those programs that an Insular Area decides to exclude from 
consolidation--for which it must submit separate plans or applications--
are implemented in accordance with the applicable program statutes and 
regulations. The excluded programs are not subject to the provisions for 
allocation of funds among programs in a consolidated grant.

(Authority: 48 U.S.C. 1469a)

[47 FR 17421, Apr. 22, 1982]

[[Page 171]]



Sec. 76.135  Are there any requirements for matching funds?

    The Secretary waives all requirements for matching funds for those 
programs that are consolidated by an Insular Area in a consolidated 
grant application.

(Authority: 48 U.S.C. 1469a)

[47 FR 17421, Apr. 22, 1982]



Sec. 76.136  Under what programs may consolidated grant funds be spent?

    Insular Areas may only use and administer funds under programs 
described in Sec. 76.125(c) during a fiscal year for which the Insular 
Area is entitled to receive funds under an appropriation for that 
program.

(Authority: 48 U.S.C. 1469a)

[47 FR 17421, Apr. 22, 1982, as amended at 57 FR 30341, July 8, 1992]



Sec. 76.137  How may carryover funds be used under the consolidated 
grant application?

    Any funds under any applicable program which are available for 
obligation and expenditure in the year succeeding the fiscal year for 
which they are appropriated must be obligated and expended in accordance 
with the consolidated grant application submitted by the Insular Area 
for that program for the succeeding fiscal year.

(Authority: 20 U.S.C. 1225(b); 48 U.S.C. 1469a)

                               Amendments



Sec. 76.140  Amendments to a State plan.

    (a) If the Secretary determines that an amendment to a State plan is 
essential during the effective period of the plan, the State shall make 
the amendment.
    (b) A State shall also amend a State plan if there is a significant 
and relevant change in:
    (1) The information or the assurances in the plan;
    (2) The administration or operation of the plan; or
    (3) The organization, policies, or operations of the State agency 
that received the grant, if the change materially affects the 
information or assurances in the plan.

(Authority: 20 U.S.C. 1221e-3, 1231g(a), and 3474)



Sec. 76.141  An amendment requires the same procedures as the document 
being amended.

    If a State amends a State plan under Sec. 76.140, the State shall 
use the same procedures as those it must use to prepare and submit a 
State plan.

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



Sec. 76.142  An amendment is approved on the same basis as the document 
being amended.

    The Secretary uses the same procedures to approve an amendment to a 
State plan--or any other document a State submits--as the Secretary uses 
to approve the original document.

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



                Subpart C_How a Grant Is Made to a State

                Approval or Disapproval by the Secretary



Sec. 76.201  A State plan must meet all statutory and regulatory 
requirements.

    The Secretary approves a State plan if it meets the requirements of 
the Federal statutes and regulations that apply to the plan.

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



Sec. 76.202  Opportunity for a hearing before a State plan is disapproved.

    The Secretary may disapprove a State plan only after:
    (a) Notifying the State;
    (b) Offering the State a reasonable opportunity for a hearing; and
    (c) Holding the hearing, if requested by the State.

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



Sec. 76.235  The notification of grant award.

    (a) To make a grant to a State, the Secretary issues and sends to 
the State a notification of grant award.

[[Page 172]]

    (b) The notification of grant award tells the amount of the grant 
and provides other information about the grant.

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

               Allotments and Reallotments of Grant Funds



Sec. 76.260  Allotments are made under program statute or regulations.

    (a) The Secretary allots program funds to a State in accordance with 
the authorizing statute or implementing regulations for the program.
    (b) Any reallotment to other States will be made by the Secretary in 
accordance with the authorizing statute or implementing regulations for 
that program.

(Authority: 20 U.S.C. 3474(a))

[50 FR 29330, July 18, 1985]



Sec. 76.261  Reallotted funds are part of a State's grant.

    Funds that a State receives as a result of a reallotment are part of 
the State's grant for the appropriate fiscal year. However, the 
Secretary does not consider a reallotment in determining the maximum or 
minimum amount to which a State is entitled for a following fiscal year.

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



           Subpart D_How To Apply to the State for a Subgrant



Sec. 76.300  Contact the State for procedures to follow.

    An applicant for a subgrant can find out the procedures it must 
follow by contacting the State agency that administers the program.

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

    Cross reference: See subparts E and G of this part for the general 
responsibilities of the State regarding applications for subgrants.



Sec. 76.301  Local educational agency general application.

    A local educational agency that applies for a subgrant under a 
program subject to this part shall have on file with the State a general 
application that meets the requirements of Section 442 of the General 
Education Provisions Act.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1221e-3, 1232d, and 3474)

[52 FR 27804, July 24, 1987, as amended at 53 FR 49143, Dec. 6, 1988; 60 
FR 46493, Sept. 6, 1995]



Sec. 76.302  The notice to the subgrantee.

    A State shall notify a subgrantee in writing of:
    (a) The amount of the subgrant;
    (b) The period during which the subgrantee may obligate the funds; 
and
    (c) The Federal requirements that apply to the subgrant.

(Approved by the Office of Management and Budget under control number 
1880-0513)

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

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 53 FR 49143, Dec. 6, 1988]



Sec. 76.303  Joint applications and projects.

    (a) Two or more eligible parties may submit a joint application for 
a subgrant.
    (b) If the State must use a formula to distribute subgrant funds 
(see Sec. 76.51), the State may not make a subgrant that exceeds the 
sum of the entitlements of the separate subgrantees.
    (c) If the State funds the application, each subgrantee shall:
    (1) Carry out the activities that the subgrantee agreed to carry 
out; and
    (2) Use the funds in accordance with Federal requirements.
    (d) Each subgrantee shall use an accounting system that permits 
identification of the costs paid for under its subgrant.

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



Sec. 76.304  Subgrantee shall make subgrant application available to 
the public.

    A subgrantee shall make any application, evaluation, periodic 
program plan, or report relating to each program available for public 
inspection.

(Authority: 20 U.S.C. 1221e-3, 1232e, and 3474)

[[Page 173]]



            Subpart E_How a Subgrant Is Made to an Applicant



Sec. 76.400  State procedures for reviewing an application.

    A State that receives an application for a subgrant shall take the 
following steps:
    (a) Review. The State shall review the application.
    (b) Approval--entitlement programs. The State shall approve an 
application if:
    (1) The application is submitted by an applicant that is entitled to 
receive a subgrant under the program; and
    (2) The applicant meets the requirements of the Federal statutes and 
regulations that apply to the program.
    (c) Approval--discretionary programs. The State may approve an 
application if:
    (1) The application is submitted by an eligible applicant under a 
program in which the State has the discretion to select subgrantees;
    (2) The applicant meets the requirements of the Federal statutes and 
regulations that apply to the program; and
    (3) The State determines that the project should be funded under the 
authorizing statute and implementing regulations for the program.
    (d) Disapproval--entitlement and discretionary programs. If an 
application does not meet the requirements of the Federal statutes and 
regulations that apply to a program, the State shall not approve the 
application.

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



Sec. 76.401  Disapproval of an application--opportunity for a hearing.

    (a) State agency hearing before disapproval. Under the programs 
listed in the chart below, the State agency that administers the program 
shall provide an applicant with notice and an opportunity for a hearing 
before it may disapprove the application.

------------------------------------------------------------------------
                                                            Implementing
                                                             regulations
              Program                 Authorizing statute   Title 34 CFR
                                                                Part
------------------------------------------------------------------------
Chapter 1, Program in Local         Title I, Chapter 1,              200
 Educational Agencies.               Elementary and
                                     Secondary Education
                                     Act of 1965, as
                                     amended (20 U.S.C.
                                     2701-2731, 2821-2838,
                                     2851-2854, and 2891-
                                     2901).
Chapter 1, Program for Neglected    Title 1, Chapter 1,              203
 and Delinquent Children.            Elementary and
                                     Secondary Education
                                     Act of 1965, as
                                     amended (20 U.S.C.
                                     2801-2804).
State Grants for Strengthening      Title II, Part A,                208
 Instruction in Mathematics and      Elementary and
 Science.                            Secondary Education
                                     Act of 1965, as
                                     amended (20 U.S.C.
                                     2981-2993).
Federal, State, and Local           Title I, Chapter 2,              298
 Partnership for Educational         Elementary and
 Improvement.                        Secondary Education
                                     Act of 1965, as
                                     amended (20 U.S.C.
                                     2911-2952 and 2971-
                                     2976).
Assistance to States for Education  Part B, Individuals              300
 of Handicapped Children.            with Disabilities
                                     Education Act (except
                                     Section 619) (20
                                     U.S.C. 1411-1420).
Preschool Grants..................  Section 619,                     301
                                     Individuals with
                                     Disabilities
                                     Education Act (20
                                     U.S.C. 1419).
Chapter 1, State-Operated or        Title 1, Chapter 1,              302
 Supported Programs for              Elementary and
 Handicapped Children.               Secondary Education
                                     Act of 1965, as
                                     amended (20 U.S.C.
                                     2791-2795).
Transition Program for Refugee      Section 412(d),                  538
 Children.                           Immigration and
                                     Naturalization Act (8
                                     U.S.C. 1522(d)).
Emergency Immigrant Education       Emergency Immigrant              581
 Program.                            Education Act (20
                                     U.S.C. 3121-3130).
Financial Assistance for            Section 711, Higher              617
 Construction, Reconstruction, or    Education Act of 1965
 Renovation of Higher Education      (20 U.S.C. 1132b).
 Facilities.
------------------------------------------------------------------------

    (b) Other programs--hearings not required. Under other programs 
covered by this part, a State agency--other than a State educational 
agency--is not required to provide an opportunity for a hearing 
regarding the agency's disapproval of an application.

[[Page 174]]

    (c) If an applicant for a subgrant alleges that any of the following 
actions of a State educational agency violates a State or Federal 
statute or regulation, the State educational agency and the applicant 
shall use the procedures in paragraph (d) of this section:
    (1) Disapproval of or failure to approve the application or project 
in whole or in part.
    (2) Failure to provide funds in amounts in accordance with the 
requirements of statutes and regulations.
    (d) State educational agency hearing procedures. (1) If the 
applicant applied under a program listed in paragraph (a) of this 
section, the State educational agency shall provide an opportunity for a 
hearing before the agency disapproves the application.
    (2) If the applicant applied under a program not listed in paragraph 
(a) of this section, the State educational agency shall provide an 
opportunity for a hearing either before or after the agency disapproves 
the application.
    (3) The applicant shall request the hearing within 30 days of the 
action of the State educational agency.
    (4)(i) Within 30 days after it receives a request, the State 
educational agency shall hold a hearing on the record and shall review 
its action.
    (ii) No later than 10 days after the hearing the agency shall issue 
its written ruling, including findings of fact and reasons for the 
ruling.
    (iii) If the agency determines that its action was contrary to State 
or Federal statutes or regulations that govern the applicable program, 
the agency shall rescind its action.
    (5) If the State educational agency does not rescind its final 
action after a review under this paragraph, the applicant may appeal to 
the Secretary. The applicant shall file a notice of the appeal with the 
Secretary within 20 days after the applicant has been notified by the 
State educational agency of the results of the agency's review. If 
supported by substantial evidence, findings of fact of the State 
educational agency are final.
    (6)(i) The Secretary may also issue interim orders to State 
educational agencies as he or she may decide are necessary and 
appropriate pending appeal or review.
    (ii) If the Secretary determines that the action of the State 
educational agency was contrary to Federal statutes or regulations that 
govern the applicable program, the Secretary issues an order that 
requires the State educational agency to take appropriate action.
    (7) Each State educational agency shall make available at reasonable 
times and places to each applicant all records of the agency pertaining 
to any review or appeal the applicant is conducting under this section, 
including records of other applicants.
    (8) If a State educational agency does not comply with any provision 
of this section, or with any order of the Secretary under this section, 
the Secretary terminates all assistance to the State educational agency 
under the applicable program or issues such other orders as the 
Secretary deems appropriate to achieve compliance.
    (e) Other State agency hearing procedures. State agencies that are 
required to provide a hearing under paragraph (a) of this section--other 
than State educational agencies--are not required to use the procedures 
in paragraph (d) of this section.
    Note: This section is based on a provision in the General Education 
Provisions Act (GEPA). Section 427 of the Department of Education 
Organization Act (DEOA), 20 U.S.C. 3487, provides that except to the 
extent inconsistent with the DEOA, the GEPA ``shall apply to functions 
transferred by this Act to the extent applicable on the day preceding 
the effective date of this Act.'' Although standardized nomenclature is 
used in this section to reflect the creation of the Department of 
Education, there is no intent to extend the coverage of the GEPA beyond 
that authorized under Section 427 or other applicable law.

(Authority: 20 U.S.C. 1221e-3, 1231b-2, 3474, and 6511(a))

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 86296, Dec. 30, 1980; 50 FR 43545, Oct. 25, 1985; 52 
FR 27805, July 24, 1987; 54 FR 21775, May 19, 1989; 55 FR 14816, Apr. 
18, 1990; 57 FR 30341, July 8, 1992; 60 FR 46493, Sept. 6, 1995]

[[Page 175]]



 Subpart F_What Conditions Must Be Met by the State and Its Subgrantees?

                            Nondiscrimination



Sec. 76.500  Federal statutes and regulations on nondiscrimination.

    A State and a subgrantee shall comply with the following statutes 
and regulations:

------------------------------------------------------------------------
             Subject                    Statute           Regulation
------------------------------------------------------------------------
Discrimination on the basis of    Title VI of the     34 CFR part 100.
 race, color, or national origin.  Civil Rights Act
                                   of 1964 (45
                                   U.S.C. 2000d
                                   through 2000d-4).
Discrimination on the basis of    Title IX of the     34 CFR part 106.
 sex.                              Education
                                   Amendments of
                                   1972 (20 U.S.C.
                                   1681-1683).
Discrimination on the basis of    Section 504 of the  34 CFR part 104.
 handicap.                         Rehabilitation
                                   Act of 1973 (29
                                   U.S.C. 794).
Discrimination on the basis of    The Age             45 CFR part 90.
 age.                              Discrimination
                                   Act (42 U.S.C.
                                   6101 et seq.).
------------------------------------------------------------------------


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

                             Allowable Costs



Sec. 76.530  General cost principles.

    Both 34 CFR 74.27 and 34 CFR 80.22 reference the general cost 
principles that apply to grants, subgrants and cost type contracts under 
grants and subgrants.

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

[64 FR 50392, Sept. 16, 1999]



Sec. 76.532  Use of funds for religion prohibited.

    (a) No State or subgrantee may use its grant or subgrant to pay for 
any of the following:
    (1) Religious worship, instruction, or proselytization.
    (2) Equipment or supplies to be used for any of the activities 
specified in paragraph (a)(1) of this section.
    (b) [Reserved]

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

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 69 FR 31711, June 4, 2004]



Sec. 76.533  Acquistion of real property; construction.

    No State or subgrantee may use its grant or subgrant for acquisition 
of real property or for construction unless specifically permitted by 
the authorizing statute or implementing regulations for the program.

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



Sec. 76.534  Use of tuition and fees restricted.

    No State or subgrantee may count tuition and fees collected from 
students toward meeting matching, cost sharing, or maintenance of effort 
requirements of a program.

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

                           Indirect Cost Rates



Sec. 76.560  General indirect cost rates; exceptions.

    (a) The differences between direct and indirect costs and the 
principles for determining the general indirect cost rate that a grantee 
may use for grants under most programs are specified in the cost 
principles for--
    (1) Institutions of higher education, at 34 CFR 74.27;
    (2) Hospitals, at 34 CFR 74.27;
    (3) Other nonprofit organizations, at 34 CFR 74.27;
    (4) Commercial (for-profit) organizations, at 34 CFR 74.27; and
    (5) State and local governments and federally-recognized Indian 
tribal organizations, at 34 CFR 80.22.
    (b) A grantee must have a current indirect cost rate agreement to 
charge indirect costs to a grant. To obtain an indirect cost rate, a 
grantee must submit an indirect cost proposal to its cognizant agency 
and negotiate an indirect cost rate agreement.
    (c) The Secretary may establish a temporary indirect cost rate for a 
grantee that does not have an indirect cost rate agreement with its 
cognizant agency.
    (d) The Secretary accepts an indirect cost rate negotiated by a 
grantee's cognizant agency, but may establish a restricted indirect cost 
rate for a grantee to satisfy the statutory requirements

[[Page 176]]

of certain programs administered by the Department.

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

[57 FR 30341, July 8, 1992, as amended at 59 FR 59582, Nov. 17, 1994]



Sec. 76.561  Approval of indirect cost rates.

    (a) If the Department of Education is the cognizant agency, the 
Secretary approves an indirect cost rate for a State agency and for a 
subgrantee other than a local educational agency. For the purposes of 
this section, the term local educational agency does not include a State 
agency.
    (b) Each State educational agency, on the basis of a plan approved 
by the Secretary, shall approve an indirect cost rate for each local 
educational agency that requests it to do so. These rates may be for 
periods longer than a year if rates are sufficiently stable to justify a 
longer period.
    (c) The Secretary generally approves indirect cost rate agreements 
annually. Indirect cost rate agreements may be approved for periods 
longer than a year if the Secretary determines that rates will be 
sufficiently stable to justify a longer rate period.

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

[59 FR 59583, Nov. 17, 1994]



Sec. 76.563  Restricted indirect cost rate--programs covered.

    Sections 76.564 through 76.569 apply to agencies of State and local 
governments that are grantees under programs with a statutory 
requirement prohibiting the use of Federal funds to supplant non-Federal 
funds, and to their subgrantees under these programs.

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

[59 FR 59583, Nov. 17, 1994]



Sec. 76.564  Restricted indirect cost rate--formula.

    (a) An indirect cost rate for a grant covered by Sec. 76.563 or 34 
CFR 75.563 is determined by the following formula:

Restricted indirect cost rate = (General management costs + Fixed costs) 
    / (Other expenditures)

    (b) General management costs, fixed costs, and other expenditures 
must be determined under Sec. Sec. 76.565 through 76.567.
    (c) Under the programs covered by Sec. 76.563, a subgrantee of an 
agency of a State or a local government (as those terms are defined in 
34 CFR 80.3) or a grantee subject to 34 CFR 75.563 that is not a State 
or local government agency may use--
    (1) An indirect cost rate computed under paragraph (a) of this 
section; or
    (2) An indirect cost rate of eight percent unless the Secretary 
determines that the subgrantee or grantee would have a lower rate under 
paragraph (a) of this section.
    (d) Indirect costs that are unrecovered as a result of these 
restrictions may not be charged directly, used to satisfy matching or 
cost-sharing requirements, or charged to another Federal award.

(Authority: 20 U.S.C. 1221e-3(a)(1), 2831(a), 2974(b), and 3474)

[59 FR 59583, Nov. 17, 1994]



Sec. 76.565  General management costs--restricted rate.

    (a) As used in Sec. 76.564, general management costs means the 
costs of activities that are for the direction and control of the 
grantee's affairs that are organization-wide. An activity is not 
organization-wide if it is limited to one activity, one component of the 
grantee, one subject, one phase of operations, or other single 
responsibility.
    (b) General management costs include the costs of performing a 
service function, such as accounting, payroll preparation, or personnel 
management, that is normally at the grantee's level even if the function 
is physically located elsewhere for convenience or better management. 
The term also includes certain occupancy and space maintenance costs as 
determined under Sec. 76.568.
    (c) The term does not include expenditures for--
    (1) Divisional administration that is limited to one component of 
the grantee;

[[Page 177]]

    (2) The governing body of the grantee;
    (3) Compensation of the chief executive officer of the grantee;
    (4) Compensation of the chief executive officer of any component of 
the grantee; and
    (5) Operation of the immediate offices of these officers.
    (d) For purposes of this section--
    (1) The chief executive officer of the grantee is the individual who 
is the head of the executive office of the grantee and exercises overall 
responsibility for the operation and management of the organization. The 
chief executive officer's immediate office includes any deputy chief 
executive officer or similar officer along with immediate support staff 
of these individuals. The term does not include the governing body of 
the grantee, such as a board or a similar elected or appointed governing 
body; and
    (2) Components of the grantee are those organizational units 
supervised directly or indirectly by the chief executive officer. These 
organizational units generally exist one management level below the 
executive office of the grantee. The term does not include the office of 
the chief executive officer or a deputy chief executive officer or 
similar position.

(Authority: 20 U.S.C. 1221e-3(a)(1), 2831(a), 2974(b), and 3474)

[59 FR 59583, Nov. 17, 1994]



Sec. 76.566  Fixed costs--restricted rate.

    As used in Sec. 76.564, fixed costs means contributions of the 
grantee to fringe benefits and similar costs, but only those associated 
with salaries and wages that are charged as indirect costs, including--
    (a) Retirement, including State, county, or local retirement funds, 
Social Security, and pension payments;
    (b) Unemployment compensation payments; and
    (c) Property, employee, health, and liability insurance.

(Authority: 20 U.S.C. 1221e-3(a)(1), 2831(a), 2974(b), and 3474)

[59 FR 59583, Nov. 17, 1994]



Sec. 76.567  Other expenditures--restricted rate.

    (a) As used in Sec. 76.564, other expenditures means the grantee's 
total expenditures for its federally- and non-federally-funded 
activities in the most recent year for which data are available. The 
term also includes direct occupancy and space maintenance costs as 
determined under Sec. 76.568 and costs related to the chief executive 
officers of the grantee and components of the grantee and their offices 
(see Sec. 76.565(c) and (d)).
    (b) The term does not include--
    (1) General management costs determined under Sec. 76.565;
    (2) Fixed costs determined under Sec. 76.566;
    (3) Subgrants;
    (4) Capital outlay;
    (5) Debt service;
    (6) Fines and penalties;
    (7) Contingencies; and
    (8) Election expenses. However, the term does include election 
expenses that result from elections required by an applicable Federal 
statute.

(Authority: 20 U.S.C. 1221e-3(a)(1), 2831(a), 2974(b), and 3474)

[59 FR 59583, Nov. 17, 1994]



Sec. 76.568  Occupancy and space maintenance costs--restricted rate.

    (a) As used in the calculation of a restricted indirect cost rate, 
occupancy and space maintenance costs means such costs as--
    (1) Building costs whether owned or rented;
    (2) Janitorial services and supplies;
    (3) Building, grounds, and parking lot maintenance;
    (4) Guard services;
    (5) Light, heat, and power;
    (6) Depreciation, use allowances, and amortization; and
    (7) All other related space costs.
    (b) Occupancy and space maintenance costs associated with 
organization-wide service functions (accounting, payroll, personnel) may 
be included as general management costs if a space allocation or use 
study supports the allocation.
    (c) Occupancy and space maintenance costs associated with functions 
that

[[Page 178]]

are not organization-wide must be included with other expenditures in 
the indirect cost formula. These costs may be charged directly to 
affected programs only to the extent that statutory supplanting 
prohibitions are not violated. This reimbursement must be approved in 
advance by the Secretary.

(Authority: 20 U.S.C. 1221e-3(a)(1), 2831(a), 2974(b), and 3474)

[59 FR 59584, Nov. 17, 1994]



Sec. 76.569  Using the restricted indirect cost rate.

    (a) Under the programs referenced in Sec. 76.563, the maximum 
amount of indirect costs under a grant is determined by the following 
formula:

Indirect costs=(Restricted indirect cost rate)x(Total direct costs of 
    the grant minus capital outlays, subgrants, and other distorting or 
    unallowable items as specified in the grantee's indirect cost rate 
    agreement)

    (b) If a grantee uses a restricted indirect cost rate, the general 
management and fixed costs covered by that rate must be excluded by the 
grantee from the direct costs it charges to the grant.

(Authority: 20 U.S.C. 1221e-3(a)(1), 2831(a), 2974(b), and 3474)

[59 FR 59584, Nov. 17, 1994]



Sec. 76.580  Coordination with other activities.

    A State and a subgrantee shall, to the extent possible, coordinate 
each of its projects with other activities that are in the same 
geographic area served by the project and that serve similar purposes 
and target groups.

(Authority: 20 U.S.C. 1221e-3, 2890, and 3474)

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 57 FR 30341, July 8, 1992]

                               Evaluation



Sec. 76.591  Federal evaluation--cooperation by a grantee.

    A grantee shall cooperate in any evaluation of the program by the 
Secretary.

(Authority: 20 U.S.C. 1221e-3, 1226c, 1231a, 3474, and 6511(a))

[45 FR 86298, Dec. 30, 1980, as amended at 57 FR 30341, July 8, 1992]



Sec. 76.592  Federal evaluation--satisfying requirement for State or 
subgrantee evaluation.

    If a State or a subgrantee cooperates in a Federal evaluation of a 
program, the Secretary may determine that the State or subgrantee meets 
the evaluation requirements of the program.

(Authority: 20 U.S.C. 1226c; 1231a)

                              Construction



Sec. 76.600  Where to find construction regulations.

    (a) A State or a subgrantee that requests program funds for 
construction, or whose grant or subgrant includes funds for 
construction, shall comply with the rules on construction that apply to 
applicants and grantees under 34 CFR 75.600-75.617.
    (b) The State shall perform the functions that the Secretary 
performs under Sec. Sec. 75.602 (Preservation of historic sites) and 
75.605 (Approval of drawings and specifications) of this title.
    (c) The State shall provide to the Secretary the information 
required under 34 CFR 75.602(a) (Preservation of historic sites).

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

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 86298, Dec. 30, 1980; 57 FR 30341, July 8, 1992]

          Participation of Students Enrolled in Private Schools



Sec. 76.650  Private schools; purpose of Sec. Sec. 76.651-76.662.

    (a) Under some programs, the authorizing statute requires that a 
State and its subgrantees provide for participation by students enrolled 
in private schools. Sections 76.651-76.662 apply to

[[Page 179]]

those programs and provide rules for that participation. These sections 
do not affect the authority of the State or a subgrantee to enter into a 
contract with a private party.
    (b) If any other rules for participation of students enrolled in 
private schools apply under a particular program, they are in the 
authorizing statute or implementing regulations for that program.

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

    Note: Some program statutes authorize the Secretary--under certain 
circumstances--to provide benefits directly to private school students. 
These ``bypass'' provisions--where they apply--are implemented in the 
individual program regulations.



Sec. 76.651  Responsibility of a State and a subgrantee.

    (a)(1) A subgrantee shall provide students enrolled in private 
schools with a genuine opportunity for equitable participation in 
accordance with the requirements in Sec. Sec. 76.652-76.662 and in the 
authorizing statute and implementing regulations for a program.
    (2) The subgrantee shall provide that opportunity to participate in 
a manner that is consistent with the number of eligible private school 
students and their needs.
    (3) The subgrantee shall maintain continuing administrative 
direction and control over funds and property that benefit students 
enrolled in private schools.
    (b)(1) A State shall ensure that each subgrantee complies with the 
requirements in Sec. Sec. 76.651-76.662.
    (2) If a State carries out a project directly, it shall comply with 
these requirements as if it were a subgrantee.

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



Sec. 76.652  Consultation with representatives of private school students.

    (a) An applicant for a subgrant shall consult with appropriate 
representatives of students enrolled in private schools during all 
phases of the development and design of the project covered by the 
application, including consideration of:
    (1) Which children will receive benefits under the project;
    (2) How the children's needs will be identified;
    (3) What benefits will be provided;
    (4) How the benefits will be provided; and
    (5) How the project will be evaluated.
    (b) A subgrantee shall consult with appropriate representatives of 
students enrolled in private schools before the subgrantee makes any 
decision that affects the opportunities of those students to participate 
in the project.
    (c) The applicant or subgrantee shall give the appropriate 
representatives a genuine opportunity to express their views regarding 
each matter subject to the consultation requirements in this section.

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



Sec. 76.653  Needs, number of students, and types of services.

    A subgrantee shall determine the following matters on a basis 
comparable to that used by the subgrantee in providing for participation 
of public school students:
    (a) The needs of students enrolled in private schools.
    (b) The number of those students who will participate in a project.
    (c) The benefits that the subgrantee will provide under the program 
to those students.

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



Sec. 76.654  Benefits for private school students.

    (a) Comparable benefits. The program benefits that a subgrantee 
provides for students enrolled in private schools must be comparable in 
quality, scope, and opportunity for participation to the program 
benefits that the subgrantee provides for students enrolled in public 
schools.
    (b) Same benefits. If a subgrantee uses funds under a program for 
public school students in a particular attendance area, or grade or age 
level, the subgrantee shall insure equitable opportunities for 
participation by students enrolled in private schools who:
    (1) Have the same needs as the public school students to be served; 
and
    (2) Are in that group, attendance area, or age or grade level.
    (c) Different benefits. If the needs of students enrolled in private 
schools are

[[Page 180]]

different from the needs of students enrolled in public schools, a 
subgrantee shall provide program benefits for the private school 
students that are different from the benefits the subgrantee provides 
for the public school students.

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



Sec. 76.655  Level of expenditures for students enrolled in private 
schools.

    (a) Subject to paragraph (b) of this section, a subgrantee shall 
spend the same average amount of program funds on:
    (1) A student enrolled in a private school who receives benefits 
under the program; and
    (2) A student enrolled in a public school who receives benefits 
under the program.
    (b) The subgrantee shall spend a different average amount on program 
benefits for students enrolled in private schools if the average cost of 
meeting the needs of those students is different from the average cost 
of meeting the needs of students enrolled in public schools.

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



Sec. 76.656  Information in an application for a subgrant.

    An applicant for a subgrant shall include the following information 
in its application:
    (a) A description of how the applicant will meet the Federal 
requirements for participation of students enrolled in private schools.
    (b) The number of students enrolled in private schools who have been 
identified as eligible to benefits under the program.
    (c) The number of students enrolled in private schools who will 
receive benefits under the program.
    (d) The basis the applicant used to select the students.
    (e) The manner and extent to which the applicant complied with Sec. 
76.652 (consultation).
    (f) The places and times that the students will receive benefits 
under the program.
    (g) The differences, if any, between the program benefits the 
applicant will provide to public and private school students, and the 
reasons for the differences.

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



Sec. 76.657  Separate classes prohibited.

    A subgrantee may not use program funds for classes that are 
organized separately on the basis of school enrollment or religion of 
the students if:
    (a) The classes are at the same site; and
    (b) The classes include students enrolled in public schools and 
students enrolled in private schools.

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



Sec. 76.658  Funds not to benefit a private school.

    (a) A subgrantee may not use program funds to finance the existing 
level of instruction in a private school or to otherwise benefit the 
private school.
    (b) The subgrantee shall use program funds to meet the specific 
needs of students enrolled in private schools, rather than:
    (1) The needs of a private school; or
    (2) The general needs of the students enrolled in a private school.

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



Sec. 76.659  Use of public school personnel.

    A subgrantee may use program funds to make public personnel 
available in other than public facilities:
    (a) To the extent necessary to provide equitable program benefits 
designed for students enrolled in a private school; and
    (b) If those benefits are not normally provided by the private 
school.

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



Sec. 76.660  Use of private school personnel.

    A subgrantee may use program funds to pay for the services of an 
employee of a private school if:
    (a) The employee performs the services outside of his or her regular 
hours of duty; and
    (b) The employee performs the services under public supervision and 
control.

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

[[Page 181]]



Sec. 76.661  Equipment and supplies.

    (a) Under some program statutes, a public agency must keep title to 
and exercise continuing administrative control of all equipment and 
supplies that the subgrantee acquires with program funds. This public 
agency is usually the subgrantee.
    (b) The subgrantee may place equipment and supplies in a private 
school for the period of time needed for the project.
    (c) The subgrantee shall insure that the equipment or supplies 
placed in a private school:
    (1) Are used only for the purposes of the project; and
    (2) Can be removed from the private school without remodeling the 
private school facilities.
    (d) The subgrantee shall remove equipment or supplies from a private 
school if:
    (1) The equipment or supplies are no longer needed for the purposes 
of the project; or
    (2) Removal is necessary to avoid use of the equipment of supplies 
for other than project purposes.

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



Sec. 76.662  Construction.

    A subgrantee shall insure that program funds are not used for the 
construction of private school facilities.

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

                          Procedures for Bypass



Sec. 76.670  Applicability and filing requirements.

    (a) The regulations in Sec. Sec. 76.671 through 76.677 apply to the 
following programs under which the Secretary is authorized to waive the 
requirements for providing services to private school children and to 
implement a bypass:

----------------------------------------------------------------------------------------------------------------
                                                                                                    Implementing
                                                                                                     regulations
         CFDA number and name of program                         Authorizing statute                title 34 CFR
                                                                                                        part
----------------------------------------------------------------------------------------------------------------
84.010 Chapter 1 Program in Local Educational     Chapter 1, Title I, Elementary and Secondary               200
 Agencies.                                         Education Act of 1965, as amended (20 U.S.C.
                                                   2701 et seq.).
84.151 Federal, State, and Local Partnership for  Chapter 2, Title I, Elementary and Secondary               298
 Educational Improvement.                          Education Act of 1965, as amended (20 U.S.C.
                                                   2911-2952, 2971-2976).
84.164 Mathematics and Science Education........  Title II, Part A, Elementary and Secondary                 208
                                                   Education Act of 1965, as amended (20 U.S.C.
                                                   2981-2993).
84.186 State and Local Programs.................  Part B, Drug Free Schools and Communities Act of          None
                                                   1986 (20 U.S.C. 3191-3197).
----------------------------------------------------------------------------------------------------------------

    (b) Filing requirements. (1) Any written submission under Sec. Sec. 
76.671 through 76.675 must be filed by hand-delivery, by mail, or by 
facsimile transmission. The Secretary discourages the use of facsimile 
transmission for documents longer than five pages.
    (2) If agreed upon by the parties, service of a document may be made 
upon the other party by facsimile transmission.
    (3) The filing date for a written submission is the date the 
document is--
    (i) Hand-delivered;
    (ii) Mailed; or
    (iii) Sent by facsimile transmission.
    (4) A party filing by facsimile transmission is responsible for 
confirming that a complete and legible copy of the document was received 
by the Department.
    (5) If a document is filed by facsimile transmission, the Secretary 
or the hearing officer, as applicable, may require the filing of a 
follow-up hard copy by hand-delivery or by mail within a reasonable 
period of time.

(Authority: 20 U.S.C. 2727(b), 2972(d)-(e), 2990(c), 3223(c))

[54 FR 21775, May 19, 1989, as amended at 57 FR 56795, Nov. 30, 1992]



Sec. 76.671  Notice by the Secretary.

    (a) Before taking any final action to implement a bypass under a 
program listed in Sec. 76.670, the Secretary provides

[[Page 182]]

the affected grantee and subgrantee, if appropriate, with written 
notice.
    (b) In the written notice, the Secretary--
    (1) States the reasons for the proposed bypass in sufficient detail 
to allow the grantee and subgrantee to respond;
    (2) Cites the requirement that is the basis for the alleged failure 
to comply; and
    (3) Advises the grantee and subgrantee that they--
    (i) Have at least 45 days after receiving the written notice to 
submit written objections to the proposed bypass; and
    (ii) May request in writing the opportunity for a hearing to show 
cause why the bypass should not be implemented.
    (c) The Secretary sends the notice to the grantee and subgrantee by 
certified mail with return receipt requested.

(Authority: 20 U.S.C. 2727(b)(4)(A), 2972(h)(1), 2990(c), 3223(c))

[54 FR 21775, May 19, 1989]



Sec. 76.672  Bypass procedures.

    Sections 76.673 through 76.675 contain the procedures that the 
Secretary uses in conducting a show cause hearing. The hearing officer 
may modify the procedures for a particular case if all parties agree the 
modification is appropriate.

(Authority: 20 U.S.C. 2727(b)(4)(A), 2972(h)(1), 2990(c), 3223(c))

[54 FR 21776, May 19, 1989]



Sec. 76.673  Appointment and functions of a hearing officer.

    (a) If a grantee or subgrantee requests a hearing to show cause why 
the Secretary should not implement a bypass, the Secretary appoints a 
hearing officer and notifies appropriate representatives of the affected 
private school children that they may participate in the hearing.
    (b) The hearing officer has no authority to require or conduct 
discovery or to rule on the validity of any statute or regulation.
    (c) The hearing officer notifies the grantee, subgrantee, and 
representatives of the private school children of the time and place of 
the hearing.

(Authority: 20 U.S.C. 2727(b)(4)(A), 2972(h)(1), 2990(c), 3223(c))

[54 FR 21776, May 19, 1989]



Sec. 76.674  Hearing procedures.

    (a) The following procedures apply to a show cause hearing regarding 
implementation of a bypass:
    (1) The hearing officer arranges for a transcript to be taken.
    (2) The grantee, subgrantee, and representatives of the private 
school children each may--
    (i) Be represented by legal counsel; and
    (ii) Submit oral or written evidence and arguments at the hearing.
    (b) Within 10 days after the hearing, the hearing officer--
    (1) Indicates that a decision will be issued on the basis of the 
existing record; or
    (2) Requests further information from the grantee, subgrantee, 
representatives of the private school children, or Department officials.

(Authority: 20 U.S.C. 2727(b)(4)(A), 2972(h)(1), 2990(c), 3223(c))

[54 FR 21776, May 19, 1989]



Sec. 76.675  Posthearing procedures.

    (a)(1) Within 120 days after the record of a show cause hearing is 
closed, the hearing officer issues a written decision on whether a 
bypass should be implemented.
    (2) The hearing officer sends copies of the decision to the grantee, 
subgrantee, representatives of the private school children, and the 
Secretary.
    (b) Within 30 days after receiving the hearing officer's decision, 
the grantee, subgrantee, and representatives of the private school 
children may each submit to the Secretary written comments on the 
decision.
    (c) The Secretary may adopt, reverse, modify, or remand the hearing 
officer's decision.

(Authority: 20 U.S.C. 2727(b)(4)(A), 2972(h)(1), 2990(c), 3223(c))

[54 FR 21776, May 19, 1989]

[[Page 183]]



Sec. 76.676  Judicial review of a bypass action.

    If a grantee or subgrantee is dissatisfied with the Secretary's 
final action after a proceeding under Sec. Sec. 76.672 through 76.675, 
it may, within 60 days after receiving notice of that action, file a 
petition for review with the United States Court of Appeals for the 
circuit in which the State is located.

(Authority: 20 U.S.C. 2727(b)(4)(B)-(D), 2972(h)(2)-(4), 2990(c), 
3223(c))

[54 FR 21776, May 19, 1989]



Sec. 76.677  Continuation of a bypass.

    The Secretary continues a bypass until the Secretary determines that 
the grantee or subgrantee will meet the requirements for providing 
services to private school children.

(Authority: 20 U.S.C. 1221e-3, 2727(b)(3)(D), 2972(f), and 3474)

[54 FR 21776, May 19, 1989]

                 Other Requirements for Certain Programs



Sec. 76.681  Protection of human subjects.

    If a State or a subgrantee uses a human subject in a research 
project, the State or subgrantee shall protect the person from physical, 
psychological, or social injury resulting from the project.

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

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 57 FR 30341, July 8, 1992]



Sec. 76.682  Treatment of animals.

    If a State or a subgrantee uses an animal in a project, the State or 
subgrantee shall provide the animal with proper care and humane 
treatment in accordance with the Animal Welfare Act of 1970.

(Authority: Pub. L. 89-544, as amended)



Sec. 76.683  Health or safety standards for facilities.

    A State and a subgrantee shall comply with any Federal health or 
safety requirements that apply to the facilities that the State or 
subgrantee uses for a project.

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



Subpart G_What Are the Administrative Responsibilities of the State and 
                            Its Subgrantees?

                 General Administrative Responsibilities



Sec. 76.700  Compliance with statutes, regulations, State plan, and 
applications.

    A State and a subgrantee shall comply with the State plan and 
applicable statutes, regulations, and approved applications, and shall 
use Federal funds in accordance with those statutes, regulations, plan, 
and applications.

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



Sec. 76.701  The State or subgrantee administers or supervises each 
project.

    A State or a subgrantee shall directly administer or supervise the 
administration of each project.

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



Sec. 76.702  Fiscal control and fund accounting procedures.

    A State and a subgrantee shall use fiscal control and fund 
accounting procedures that insure proper disbursement of and accounting 
for Federal funds.

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



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

[[Page 184]]

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 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

[[Page 185]]

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

[[Page 186]]

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.

    (h) After determining that a State plan is in substantially 
approvable form, the Secretary informs the State of the date on which it 
could begin to obligate funds. Reimbursement for those obligations is 
subject to final approval of the State plan.

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

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 60 FR 41294, Aug. 11, 1995; 61 FR 14484, Apr. 2, 1996]



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, 3474, 6511(a) and 31 U.S.C. 6503)

[60 FR 41296, Aug. 11, 1995]



Sec. 76.707  When obligations are made.

    The following table shows when a State or a subgrantee makes 
obligations for various kinds of property and services.

------------------------------------------------------------------------
        If the obligation is for--            The obligation is made--
------------------------------------------------------------------------
(a) Acquisition of real or personal         On the date on which the
 property.                                   State or subgrantee makes a
                                             binding written commitment
                                             to acquire the property.
(b) Personal services by an employee of     When the services are
 the State or subgrantee.                    performed.
(c) Personal services by a contractor who   On the date on which the
 is not an employee of the State or          State or subgrantee makes a
 subgrantee.                                 binding written commitment
                                             to obtain the services.
(d) Performance of work other than          On the date on which the
 personal services.                          State or subgrantee makes a
                                             binding written commitment
                                             to obtain the work.
(e) Public utility services...............  When the State or subgrantee
                                             receives the services.
(f) Travel................................  When the travel is taken.
(g) Rental of real or personal property...  When the State or subgrantee
                                             uses the property.
(h) A preagreement cost that was properly
 approved by the State under the cost
 principals identified in 34 CFR 74.171
 and 80.22..
------------------------------------------------------------------------


[[Page 187]]


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

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 55 FR 14817, Apr. 18, 1990; 57 FR 30342, July 8, 1992]



Sec. 76.708  When certain subgrantees may begin to obligate funds.

    (a) If the authorizing statute for a program requires a State to 
make subgrants on the basis of a formula (see Sec. 76.5), the State may 
not authorize an applicant for a subgrant to obligate funds until the 
later of the following two dates:
    (1) The date that the State may begin to obligate funds under Sec. 
76.703; or
    (2) The date that the applicant submits its application to the State 
in substantially approvable form.
    (b) Reimbursement for obligations under paragraph (a) of this 
section is subject to final approval of the application.
    (c) If the authorizing statute for a program gives the State 
discretion to select subgrantees, the State may not authorize an 
applicant for a subgrant to obligate funds until the subgrant is made. 
However, the State may approve pre-agreement costs in accordance with 
the cost principles that are appended to 34 CFR part 74 (Appendices C-
F).

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

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980. 
Further redesignated at 60 FR 41295, Aug. 11, 1995]



Sec. 76.709  Funds may be obligated during a ``carryover period.''

    (a) If a State or a subgrantee does not obligate all of its grant or 
subgrant funds by the end of the fiscal year for which Congress 
appropriated the funds, it may obligate the remaining funds during a 
carryover period of one additional fiscal year.
    (b) The State shall return to the Federal Government any carryover 
funds not obligated by the end of the carryover period by the State and 
its subgrantees.
    Note: This section is based on a provision in the General Education 
Provisions Act (GEPA). Section 427 of the Department of Education 
Organization Act (DEOA), 20 U.S.C. 3487, provides that except to the 
extent inconsistent with the DEOA, the GEPA ``shall apply to functions 
transferred by this Act to the extent applicable on the day preceding 
the effective date of this Act.'' Although standardized nomenclature is 
used in this section to reflect the creation of the Department of 
Education, there is no intent to extend the coverage of the GEPA beyond 
that authorized under section 427 or other applicable law.

(Authority: U.S.C. 1221e-3, 1225(b), and 3474)

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 86296, Dec. 30, 1980. Redesignated at 60 FR 41295, 
Aug. 11, 1995]



Sec. 76.710  Obligations made during a carryover period are subject 
to current statutes, regulations, and applications.

    A State and a subgrantee shall use carryover funds in accordance 
with:
    (a) The Federal statutes and regulations that apply to the program 
and are in effect for the carryover period; and
    (b) Any State plan, or application for a subgrant, that the State or 
subgrantee is required to submit for the carryover period.
    Note: This section is based on a provision in the General Education 
Provisions Act (GEPA). Section 427 of the Department of Education 
Organization Act (DEOA), 20 U.S.C. 3487, provides that except to the 
extent inconsistent with the DEOA, the GEPA ``shall apply to functions 
transferred by this Act to the extent applicable on the day preceding 
the effective date of this Act.'' Although standardized nomenclature is 
used in this section to reflect the creation of the Department of 
Education, there is no intent to extend the coverage of the GEPA beyond 
that authorized under section 427 or other applicable law.

(Authority: U.S.C. 1221e-3, 1225(b), and 3474)

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 86296, Dec. 30, 1980. Redesignated at 60 FR 41295, 
Aug. 11, 1995]



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)

[60 FR 41296, Aug. 11, 1995]

[[Page 188]]

                                 Reports



Sec. 76.720  Financial and performance reports by a State.

    (a) This section applies to a State's reports required under 34 CFR 
80.41 (Financial reporting) and 34 CFR 80.40 (Monitoring and reporting 
of program performance).
    (b) A State shall submit these reports annually, unless the 
Secretary allows less frequent reporting.
    (c) However, the Secretary may, under 34 CFR 80.12 (Special grant or 
subgrant conditions for ``high-risk'' grantees) or 34 CFR 80.20 
(Standards for financial management systems) require a State to report 
more frequently than annually.

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

[57 FR 30342, July 8, 1992]



Sec. 76.722  A subgrantee makes reports required by the State.

    A State may require a subgrantee to furnish reports that the State 
needs to carry out its responsibilities under the program.

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

                                 Records



Sec. 76.730  Records related to grant funds.

    A State and a subgrantee shall keep records that fully show:
    (a) The amount of funds under the grant or subgrant;
    (b) How the State or subgrantee uses the funds;
    (c) The total cost of the project;
    (d) The share of that cost provided from other sources; and
    (e) Other records to facilitate an effective audit.

(Approved by the Office of Management and Budget under control number 
1880-0513)

(Authority: 20 U.S.C. 1232f)

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 53 FR 49143, Dec. 6, 1988]



Sec. 76.731  Records related to compliance.

    A State and a subgrantee shall keep records to show its compliance 
with program requirements.

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

                                 Privacy



Sec. 76.740  Protection of and access to student records; student 
rights in research, experimental programs, and testing.

    (a) Most records on present or past students are subject to the 
requirements of section 438 of GEPA and its implementing regulations 
under 34 CFR part 99. (Section 438 is the Family Educational Rights and 
Privacy Act of 1974.)
    (b) Under most programs administered by the Secretary, research, 
experimentation, and testing are subject to the requirements of section 
439 of GEPA and its implementing regulations at 34 CFR part 98.

(Authority: 20 U.S.C. 1221e-3, 1232g, 1232h, 3474, and 6511(a))

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 57 FR 30342, July 8, 1992]

                 Use of Funds by States and Subgrantees



Sec. 76.760  More than one program may assist a single activity.

    A State or a subgrantee may use funds under more than one program to 
support different parts of the same project if the State or subgrantee 
meets the following conditions:
    (a) The State or subgrantee complies with the requirements of each 
program with respect to the part of the project assisted with funds 
under that program.
    (b) The State or subgrantee has an accounting system that permits 
identification of the costs paid for under each program.

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

[[Page 189]]



Sec. 76.761  Federal funds may pay 100 percent of cost.

    A State or a subgrantee may use program funds to pay up to 100 
percent of the cost of a project if:
    (a) The State or subgrantee is not required to match the funds; and
    (b) The project can be assisted under the authorizing statute and 
implementing regulations for the program.

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

                  State Administrative Responsibilities



Sec. 76.770  A State shall have procedures to ensure compliance.

    Each State shall have procedures for reviewing and approving 
applications for subgrants and amendments to those applications, for 
providing technical assistance, for evaluating projects, and for 
performing other administrative responsibilities the State has 
determined are necessary to ensure compliance with applicable statutes 
and regulations.

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

[57 FR 30342, July 8, 1992]



Sec. 76.783  State educational agency action--subgrantee's opportunity 
for a hearing.

    (a) A subgrantee may request a hearing if it alleges that any of the 
following actions by the State educational agency violated a State or 
Federal statute or regulation:
    (1) Ordering, in accordance with a final State audit resolution 
determination, the repayment of misspent or misapplied Federal funds; or
    (2) Terminating further assistance for an approved project.
    (b) The procedures in Sec. 76.401(d)(2)-(7) apply to any request 
for a hearing under this section.
    Note: This section is based on a provision in the General Education 
Provisions Act (GEPA). Section 427 of the Department of Education 
Organization Act (DEOA), 20 U.S.C. 3487, provides that except to the 
extent inconsistent with the DEOA, the GEPA ``shall apply to functions 
transferred by this Act to the extent applicable on the day preceding 
the effective date of this Act.'' Although standardized nomenclature is 
used in this section to reflect the creation of the Department of 
Education, there is no intent to extend the coverage of the GEPA beyond 
that authorized under section 427 or other applicable law.

(Authority: 20 U.S.C. 1231b-2)

[45 FR 22517, Apr. 3, 1980. Redesignated at 45 FR 77368, Nov. 21, 1980, 
as amended at 45 FR 86296, Dec. 30, 1980; 57 FR 30342, July 8, 1992]



Subpart H_How Does a State or Local Educational Agency Allocate Funds to 
                            Charter Schools?

    Source: 64 FR 71965, Dec. 22, 1999, unless otherwise noted.

                                 General



Sec. 76.785  What is the purpose of this subpart?

    The regulations in this subpart implement section 10306 of the 
Elementary and Secondary Education Act of 1965 (ESEA), which requires 
States to take measures to ensure that each charter school in the State 
receives the funds for which it is eligible under a covered program 
during its first year of operation and during subsequent years in which 
the charter school expands its enrollment.

(Authority: 20 U.S.C. 8065a)



Sec. 76.786  What entities are governed by this subpart?

    The regulations in this subpart apply to--
    (a) State educational agencies (SEAs) and local educational agencies 
(LEAs) that fund charter schools under a covered program, including SEAs 
and LEAs located in States that do not participate in the Department's 
Public Charter Schools Program;
    (b) State agencies that are not SEAs, if they are responsible for 
administering a covered program. State agencies that are not SEAs must 
comply with the provisions in this subpart that are applicable to SEAs; 
and
    (c) Charter schools that are scheduled to open or significantly 
expand their enrollment during the academic year and wish to participate 
in a covered program.

(Authority: 20 U.S.C. 8065a)

[[Page 190]]



Sec. 76.787  What definitions apply to this subpart?

    For purposes of this subpart--
    Academic year means the regular school year (as defined by State 
law, policy, or practice) and for which the State allocates funds under 
a covered program.
    Charter school has the same meaning as provided in title X, part C 
of the ESEA.
    Charter school LEA means a charter school that is treated as a local 
educational agency for purposes of the applicable covered program.
    Covered program means an elementary or secondary education program 
administered by the Department under which the Secretary allocates funds 
to States on a formula basis, except that the term does not include a 
program or portion of a program under which an SEA awards subgrants on a 
discretionary, noncompetitive basis.
    Local educational agency has the same meaning for each covered 
program as provided in the authorizing statute for the program.
    Significant expansion of enrollment means a substantial increase in 
the number of students attending a charter school due to a significant 
event that is unlikely to occur on a regular basis, such as the addition 
of one or more grades or educational programs in major curriculum areas. 
The term also includes any other expansion of enrollment that the SEA 
determines to be significant.

(Authority: 20 U.S.C. 8065a)

               Reponsibilities for Notice and Information



Sec. 76.788  What are a charter school LEA's responsibilities under 
this subpart?

    (a) Notice. At least 120 days before the date a charter school LEA 
is scheduled to open or significantly expand its enrollment, the charter 
school LEA or its authorized public chartering agency must provide its 
SEA with written notification of that date.
    (b) Information. (1) In order to receive funds, a charter school LEA 
must provide to the SEA any available data or information that the SEA 
may reasonably require to assist the SEA in estimating the amount of 
funds the charter school LEA may be eligible to receive under a covered 
program.
    (2)(i) Once a charter school LEA has opened or significantly 
expanded its enrollment, the charter school LEA must provide actual 
enrollment and eligibility data to the SEA at a time the SEA may 
reasonably require.
    (ii) An SEA is not required to provide funds to a charter school LEA 
until the charter school LEA provides the SEA with the required actual 
enrollment and eligibility data.
    (c) Compliance. Except as provided in Sec. 76.791(a), or the 
authorizing statute or implementing regulations for the applicable 
covered program, a charter school LEA must establish its eligibility and 
comply with all applicable program requirements on the same basis as 
other LEAs.

(Approved by the Office of Management and Budget under control number 
1810-0623)

(Authority: 20 U.S.C. 8065a)



Sec. 76.789  What are an SEA's responsibilities under this subpart?

    (a) Information. Upon receiving notice under Sec. 76.788(a) of the 
date a charter school LEA is scheduled to open or significantly expand 
its enrollment, an SEA must provide the charter school LEA with timely 
and meaningful information about each covered program in which the 
charter school LEA may be eligible to participate, including notice of 
any upcoming competitions under the program.
    (b) Allocation of Funds. (1) An SEA must allocate funds under a 
covered program in accordance with this subpart to any charter school 
LEA that--
    (i) Opens for the first time or significantly expands its enrollment 
during an academic year for which the State awards funds by formula or 
through a competition under the program;
    (ii) In accordance with Sec. 76.791(a), establishes its eligibility 
and complies with all applicable program requirements; and
    (iii) Meets the requirements of Sec. 76.788(a).
    (2) In order to meet the requirements of this subpart, an SEA may 
allocate

[[Page 191]]

funds to, or reserve funds for, an eligible charter school LEA based on 
reasonable estimates of projected enrollment at the charter school LEA.
    (3)(i) The failure of an eligible charter school LEA or its 
authorized public chartering agency to provide notice to its SEA in 
accordance with Sec. 76.788(a) relieves the SEA of any obligation to 
allocate funds to the charter school within five months.
    (ii) Except as provided in Sec. 76.792(c), an SEA that receives 
less than 120 days' actual notice of the date an eligible charter school 
LEA is scheduled to open or significantly expand its enrollment must 
allocate funds to the charter school LEA on or before the date the SEA 
allocates funds to LEAs under the applicable covered program for the 
succeeding academic year.
    (iii) The SEA may provide funds to the charter school LEA from the 
SEA's allocation under the applicable covered program for the academic 
year in which the charter school LEA opened or significantly expanded 
its enrollment, or from the SEA's allocation under the program for the 
succeeding academic year.

(Approved by the Office of Management and Budget under control number 
1810-0623)

(Authority: 20 U.S.C. 8065a)

            Allocation of Funds by State Educational Agencies



Sec. 76.791  On what basis does an SEA determine whether a charter 

school LEA that opens or significantly expands its enrollment is 
eligible to receive funds 
          under a covered program?

    (a) For purposes of this subpart, an SEA must determine whether a 
charter school LEA is eligible to receive funds under a covered program 
based on actual enrollment or other eligibility data for the charter 
school LEA on or after the date the charter school LEA opens or 
significantly expands its enrollment.
    (b) For the year the charter school LEA opens or significantly 
expands its enrollment, the eligibility determination may not be based 
on enrollment or eligibility data from a prior year, even if the SEA 
makes eligibility determinations for other LEAs under the program based 
on enrollment or eligibility data from a prior year.

(Authority: 20 U.S.C. 8065a)



Sec. 76.792  How does an SEA allocate funds to eligible charter school 

LEAs under a covered program in which the SEA awards subgrants on a 
formula basis?

    (a) For each eligible charter school LEA that opens or significantly 
expands its enrollment on or before November 1 of an academic year, the 
SEA must implement procedures that ensure that the charter school LEA 
receives the proportionate amount of funds for which the charter school 
LEA is eligible under each covered program.
    (b) For each eligible charter school LEA that opens or significantly 
expands its enrollment after November 1 but before February 1 of an 
academic year, the SEA must implement procedures that ensure that the 
charter school LEA receives at least a pro rata portion of the 
proportionate amount of funds for which the charter school LEA is 
eligible under each covered program. The pro rata amount must be based 
on the number of months or days during the academic year the charter 
school LEA will participate in the program as compared to the total 
number of months or days in the academic year.
    (c) For each eligible charter school LEA that opens or significantly 
expands its enrollment on or after February 1 of an academic year, the 
SEA may implement procedures to provide the charter school LEA with a 
pro rata portion of the proportionate amount of funds for which the 
charter school LEA is eligible under each covered program.

(Authority: 20 U.S.C. 8065a)



Sec. 76.793  When is an SEA required to allocate funds to a charter 
school LEA under this subpart?

    Except as provided in Sec. Sec. 76.788(b) and 76.789(b)(3):
    (a) For each eligible charter school LEA that opens or significantly 
expands its enrollment on or before November 1 of an academic year, the 
SEA must allocate funds to the charter school LEA within five months of 
the date the charter school LEA opens or significantly expands its 
enrollment; and

[[Page 192]]

    (b)(1) For each eligible charter school LEA that opens or 
significantly expands its enrollment after November 1, but before 
February 1 of an academic year, the SEA must allocate funds to the 
charter school LEA on or before the date the SEA allocates funds to LEAs 
under the applicable covered program for the succeeding academic year.
    (2) The SEA may provide funds to the charter school LEA from the 
SEA's allocation under the program for the academic year in which the 
charter school LEA opened or significantly expanded its enrollment, or 
from the SEA's allocation under the program for the succeeding academic 
year.

(Authority: 20 U.S.C. 8065a)



Sec. 76.794  How does an SEA allocate funds to charter school LEAs 

under a covered program in which the SEA awards subgrants on a 
discretionary basis?

    (a) Competitive programs. (1) For covered programs in which the SEA 
awards subgrants on a competitive basis, the SEA must provide each 
eligible charter school LEA in the State that is scheduled to open on or 
before the closing date of any competition under the program a full and 
fair opportunity to apply to participate in the program.
    (2) An SEA is not required to delay the competitive process in order 
to allow a charter school LEA that has not yet opened or significantly 
expanded its enrollment to compete for funds under a covered program.
    (b) Noncompetitive discretionary programs. The requirements in this 
subpart do not apply to discretionary programs or portions of programs 
under which the SEA does not award subgrants through a competition.

(Authority: 20 U.S.C. 8065a)

                               Adjustments



Sec. 76.796  What are the consequences of an SEA allocating more or 

fewer funds to a charter school LEA under a covered program than the 
amount for which the 
          charter school LEA is eligible when the charter school LEA 
          actually opens or significantly expands its enrollment?

    (a) An SEA that allocates more or fewer funds to a charter school 
LEA than the amount for which the charter school LEA is eligible, based 
on actual enrollment or eligibility data when the charter school LEA 
opens or significantly expands its enrollment, must make appropriate 
adjustments to the amount of funds allocated to the charter school LEA 
as well as to other LEAs under the applicable program.
    (b) Any adjustments to allocations to charter school LEAs under this 
subpart must be based on actual enrollment or other eligibility data for 
the charter school LEA on or after the date the charter school LEA first 
opens or significantly expands its enrollment, even if allocations or 
adjustments to allocations to other LEAs in the State are based on 
enrollment or eligibility data from a prior year.

(Authority: 20 U.S.C. 8065a)



Sec. 76.797  When is an SEA required to make adjustments to allocations 
under this subpart?

    (a) The SEA must make any necessary adjustments to allocations under 
a covered program on or before the date the SEA allocates funds to LEAs 
under the program for the succeeding academic year.
    (b) In allocating funds to a charter school LEA based on adjustments 
made in accordance with paragraph (a) of this section, the SEA may use 
funds from the SEA's allocation under the applicable covered program for 
the academic year in which the charter school LEA opened or 
significantly expanded its enrollment, or from the SEA's allocation 
under the program for the succeeding academic year.

(Authority: 20 U.S.C. 8065a)

[[Page 193]]

       Applicability of This Subpart to Local Educational Agencies



Sec. 76.799  Do the requirements in this subpart apply to LEAs?

    (a) Each LEA that is responsible for funding a charter school under 
a covered program must comply with the requirements in this subpart on 
the same basis as SEAs are required to comply with the requirements in 
this subpart.
    (b) In applying the requirements in this subpart (except for 
Sec. Sec. 76.785, 76.786, and 76.787) to LEAs, references to SEA (or 
State), charter school LEA, and LEA must be read as references to LEA, 
charter school, and public school, respectively.

(Authority: 20 U.S.C. 8065a)



   Subpart I_What Procedures Does the Secretary Use To Get Compliance?

    Source: 45 FR 22517, Apr. 3, 1980, unless otherwise noted. 
Redesignated at 45 FR 77368, Nov. 21, 1980, and further redesignated at 
64 FR 71965, Dec. 22, 1999.



Sec. 76.900  Waiver of regulations prohibited.

    (a) No official, agent, or employee of ED may waive any regulation 
that applies to a Department program unless the regulation specifically 
provide that it may be waived.
    (b) No act or failure to act by an official, agent, or employee of 
ED can affect the authority of the Secretary to enforce regulations.

(Authority: 43 Dec. Comp. Gen. 31(1963))



Sec. 76.901  Office of Administrative Law Judges.

    (a) The Office of Administrative Law Judges, established under Part 
E of GEPA, has the following functions:
    (1) Recovery of funds hearings under section 452 of GEPA.
    (2) Withholding hearings under section 455 of GEPA.
    (3) Cease and desist hearings under section 456 of GEPA.
    (4) Any other proceeding designated by the Secretary under section 
451 of GEPA.
    (b) The regulations of the Office of Administrative Law Judges are 
at 34 CFR part 81.

(Authority: 20 U.S.C. 1234)

[57 FR 30342, July 8, 1992]



Sec. 76.902  Judicial review.

    After a hearing by the Secretary, a State is usually entitled--
generally by the statute that required the hearing--to judicial review 
of the Secretary's decision.

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



Sec. 76.910  Cooperation with audits.

    A grantee or subgrantee shall cooperate with the Secretary and the 
Comptroller General of the United States or any of their authorized 
representatives in the conduct of audits authorized by Federal law. This 
cooperation includes access without unreasonable restrictions to records 
and personnel of the grantee or subgrantee for the purpose of obtaining 
relevant information.

(Authority: 5 U.S.C. appendix 3, sections 4(a)(1), 4(b)(1)(A), and 
6(a)(1); 20 U.S.C. 1221e-3(a)(1), 1232f)

[54 FR 21776, May 19, 1989]



PART 77_DEFINITIONS THAT APPLY TO DEPARTMENT REGULATIONS--Table of 
Contents






Sec. 77.1  Definitions that apply to all Department programs.

    (a) [Reserved]
    (b) Unless a statute or regulation provides otherwise, the following 
definitions in part 74 or 80 of this title apply to the regulations in 
title 34 of the Code of Federal Regulations. The section of part 74 or 
80 that contains the definition is given in parentheses.

Award (Sec. 74.2)
Contract (includes definition of ``Subcontract'') (Sec. 74.2) (Sec. 
80.3)
Equipment (Sec. 74.2) (Sec. 80.3)
Grant (Sec. 80.3)
Personal property (Sec. 74.2)
Project period (Sec. 74.2)
Real property (Sec. 74.2) (Sec. 80.3)
Recipient (Sec. 74.2)
Supplies (Sec. 74.2) (Sec. 80.3)


[[Page 194]]


    (c) Unless a statute or regulation provides otherwise, the following 
definitions also apply to the regulations in this title:
    Acquisition means taking ownership of property, receiving the 
property as a gift, entering into a lease-purchase arrangement, or 
leasing the property. The term includes processing, delivery, and 
installation of property.
    Applicant means a party requesting a grant or subgrant under a 
program of the Department.
    Application means a request for a grant or subgrant under a program 
of the Department.
    Budget means that recipient's financial plan for carrying out the 
project or program.
    Budget period means an interval of time into which a project period 
is divided for budgetary purposes.
    Department means the U.S. Department of Education.
    Director of the Institute of Musuem Services means the Director of 
the Institute of Museum Services or an officer or employee of the 
Institute of Museum Services acting for the Director under a delegation 
of authority.
    Director of the National Institute of Education means the Director 
of the National Institute of Education or an officer or employee of the 
National Institute of Education acting for the Director under a 
delegation of authority.
    ED means the U.S. Department of Education.
    EDGAR means the Education Department General Administrative 
Regulations (34 CFR parts 74, 75, 76, 77, 79, 80, 81, 82, 85, 86, 97, 
98, and 99.)
    Elementary school means a day or residential school that provides 
elementary education, as determined under State law.
    Facilities means one or more structures in one or more locations.
    Fiscal year means the Federal fiscal year--a period beginning on 
October 1 and ending on the following September 30.
    GEPA means The General Education Provisions Act.
    Grant period means the period for which funds have been awarded.
    Grantee means the legal entity other than a Government subject to 34 
CFR part 80 to which a grant is awarded and which is accountable to the 
Federal Government for the use of the funds provided. The grantee is the 
entire legal entity even if only a particular component of the entity is 
designated in the award document. For example, a grant award document 
may name as the grantee one school or campus of a university. In this 
case, the granting agency usually intends, or actually intends, that the 
named component assume primary or sole responsibility for administering 
the grant-assisted project or program. Nevertheless, the naming of a 
component of a legal entity as the grantee in a grant award document 
shall not be construed as relieving the whole legal entity from 
accountability to the Federal Government for the use of the funds 
provided. (This definition is not intended to affect the eligibility 
provision of grant programs in which eligibility is limited to 
organizations which may be only components of a legal entity.) The term 
``grantee'' does not include any secondary recipients such as 
subgrantees, contractors, etc., who may receive funds from a grantee 
pursuant to a grant. The definition of ``grantee'' for State, local, and 
tribal governments is contained in 34 CFR 80.3.
    Local educational agency means:
    (a) A public board of education or other public authority legally 
constituted within a State for either administrative control of or 
direction of, or to perform service functions for, public elementary or 
secondary schools in:
    (1) A city, county, township, school district, or other political 
subdivision of a State; or
    (2) Such combination of school districts or counties a State 
recognizes as an administrative agency for its public elementary or 
secondary schools; or
    (b) Any other public institution or agency that has administrative 
control and direction of a public elementary or secondary school.
    (c) As used in 34 CFR parts 400, 408, 525, 526 and 527 (vocational 
education programs), the term also includes any other public institution 
or agency that has administrative control and direction of a vocational 
education program.

[[Page 195]]

    Minor remodeling means minor alterations in a previously completed 
building. The term also includes the extension of utility lines, such as 
water and electricity, from points beyond the confines of the space in 
which the minor remodeling is undertaken but within the confines of the 
previously completed building. The term does not include building 
construction, stuctural alterations to buildings, building maintenance, 
or repairs.
    Nonprofit, as applied to an agency, organization, or institution, 
means that it is owned and operated by one or more corporations or 
associations whose net earnings do not benefit, and cannot lawfully 
benefit, any private shareholder or entity.
    Nonpublic, as applied to an agency, organization, or institution, 
means that the agency, organization, or institution is nonprofit and is 
not under Federal or public supervision or control.
    Preschool means the educational level from a child's birth to the 
time at which the State provides elementary education.
    Private, as applied to an agency, organization, or institution, 
means that it is not under Federal or public supervision or control.
    Project means the activity described in an application.
    Public, as applied to an agency, organization, or institution, means 
that the agency, organization, or institution is under the 
administrative supervision or control of a government other than the 
Federal Government.
    Secondary school means a day or residential school that provides 
secondary education as determined under State law. In the absence of 
State law, the Secretary may determine, with respect to that State, 
whether the term includes education beyond the twelfth grade.
    Secretary means the Secretary of the Department of Education or an 
official or employee of the Department acting for the Secretary under a 
delegation of authority.
    Service function, with respect to a local educational agency:
    (a) Means an educational service that is performed by a legal 
entity--such as an intermediate agency:
    (1)(i) Whose jurisdiction does not extend to the whole State; and
    (ii) That is authorized to provide consultative, advisory, or 
educational services to public elementary or secondary schools; or
    (2) That has regulatory functions over agencies having 
administrative control or direction of public elementary or secondary 
schools.
    (b) The term does not include a service that is performed by a 
cultural or educational resource.
    State means any of the 50 States, the Commonwealth of Puerto Rico, 
the District of Columbia, Guam, American Samoa, the Virgin Islands, the 
Northern Mariana Islands, or the Trust Territory of the Pacific Islands.
    State educational agency means the State board of education or other 
agency or officer primarily responsible for the supervision of public 
elementary and secondary schools in a State. In the absence of this 
officer or agency, it is an officer or agency designated by the Governor 
or State law.
    Work of art means an item that is incorporated into facilities 
primarily because of its aesthetic value.

(Authority: 20 U.S.C. 1221e-3(a)(1), 2831(a), 2974(b), and 3474)

[45 FR 22529, Apr. 3, 1980, as amended at 45 FR 37442, June 3, 1980. 
Redesignated at 45 FR 77368, Nov. 21, 1980, as amended at 45 FR 86298, 
Dec. 30, 1980; 54 FR 21776, May 19, 1989; 57 FR 30342, July 8, 1992; 59 
FR 34739, July 6, 1994; 64 FR 50392, Sept. 16, 1999]



PART 79_INTERGOVERNMENTAL REVIEW OF DEPARTMENT OF EDUCATION PROGRAMS 
AND ACTIVITIES--Table of Contents




Sec.
79.1 What is the purpose of these regulations?
79.2 What definitions apply to these regulations?
79.3 What programs and activities of the Department are subject to these 
          regulations?
79.4 What are the Secretary's general responsibilities under the Order?
79.5 What is the Secretary's obligation with respect to Federal 
          interagency coordinations?
79.6 What procedures apply to the selection of programs and activities 
          under these regulations?

[[Page 196]]

79.7 How does the Secretary communicate with State and local officials 
          concerning the Department's programs and activities?
79.8 How does the Secretary provide States an opportunity to comment on 
          proposed Federal financial assistance?
79.9 How does the Secretary receive and respond to comments?
79.10 How does the Secretary make efforts to accommodate 
          intergovernmental concerns?
79.11 What are the Secretary's obligations in interstate situations?
79.12 How may a State simplify, consolidate, or substitute federally 
          required State plans?
79.13 [Reserved]

    Authority: 31 U.S.C. 6506; 42 U.S.C. 3334; and E.O. 12372, unless 
otherwise noted.

    Source: 48 FR 29166, June 24, 1983, unless otherwise noted.



Sec. 79.1  What is the purpose of these regulations?

    (a) The regulations in this part implement Executive Order 12372, 
``Intergovernmental Review of Federal Programs,'' issued July 14, 1982 
and amended on April 8, 1983. These regulations also implement 
applicable provisions of Section 401 of the Intergovernmental 
Cooperation Act of 1968 and Section 204 of the Demonstration Cities and 
Metropolitan Development Act of 1966.
    (b) These regulations are intended to foster an intergovernmental 
partnership and a strengthened Federalism by relying on state processes 
and on state, areawide, regional, and local coordination for review of 
proposed federal financial assistance.
    (c) These regulations are intended to aid the internal management of 
the Department, and are not intended to create any right or benefit 
enforceable at law by a party against the Department or its officers.

(Authority: E.O. 12372)



Sec. 79.2  What definitions apply to these regulations?

    Department means the U.S. Department of Education.
    Order means Executive Order 12372, issued July 14, 1982, amended 
April 8, 1983, and titled ``Intergovernmental Review of Federal 
Programs.''
    Secretary means the Secretary of the U.S. Department of Education or 
an official or employee of the Department acting for the Secretary under 
a delegation of authority.
    State means any of the 50 states, the District of Columbia, the 
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana 
Islands, Guam, American Samoa, the U.S. Virgin Islands, or the Trust 
Territory of the Pacific Islands.

(Authority: E.O. 12372)



Sec. 79.3  What programs and activities of the Department are subject 
to these regulations?

    (a) The Secretary publishes in the Federal Register a list of the 
Department's programs and activities that are subject to these 
regulations and identifies which of these are subject to the 
requirements of section 204 of the Demonstration Cities and Metropolitan 
Development Act.
    (b) If a program or activity of the Department that provides Federal 
financial assistance does not have implementing regulations, the 
regulations in this part apply to that program or activity.
    (c) The following programs and activities are excluded from coverage 
under this part:
    (1) Proposed legislation.
    (2) Regulation and budget formulation.
    (3) National security matters.
    (4) Procurement.
    (5) Direct payments to individuals.
    (6) Financial transfers for which the Department has no funding 
discretion or direct authority to approve specific sites or projects 
(e.g., block grants under Chapter 2 of the Education Consolidation and 
Improvement Act of 1981).
    (7) Research and development national in scope.
    (8) Assistance to federally recognized Indian tribes.
    (d) In addition to the programs and activities excluded in paragraph 
(c) of this section, the Secretary may only exclude a Federal financial 
assistance program or activity from coverage

[[Page 197]]

under this part if the program or activity does not directly affect 
State or local governments.

(Authority: E.O. 12372)

[48 FR 29166, June 24, 1983, as amended at 51 FR 20824, June 9, 1986]



Sec. 79.4  What are the Secretary's general responsibilities under 
the Order?

    (a) The Secretary provides opportunities for consultation by elected 
officials of those state and local governments that would provide the 
nonfederal funds for, or that would be directly affected by, proposed 
federal financial assistance from the Department.
    (b) If a state adopts a process under the Order to review and 
coordinate proposed federal financial assistance, the Secretary, to the 
extent permitted by law:
    (1) Uses the state process to determine official views of state and 
local elected officials;
    (2) Communicates with state and local elected officials as early in 
a program planning cycle as is reasonably feasible to explain specific 
plans and actions;
    (3) Makes efforts to accommodate state and local elected official's 
concerns with proposed federal financial assistance that are 
communicated through the state process;
    (4) Allows the states to simplify and consolidate existing federally 
required state plan submissions;
    (5) Where state planning and budgeting systems are sufficient and 
where permitted by law, encourages the substitution of state plans for 
federally required state plans;
    (6) Seeks the coordination of views of affected state and local 
elected officials in one state with those of another state when proposed 
federal financial assistance has an impact on interstate metropolitan 
urban centers or other interstate areas; and
    (7) Supports state and local governments by discouraging the 
reauthorization or creation of any planning organization which is 
federally funded, which has a limited purpose, and which is not 
adequately representative of, or accountable to, state or local elected 
officials.

(Authority: E.O. 12372, Sec. 2)



Sec. 79.5  What is the Secretary's obligation with respect to Federal 
interagency coordination?

    The Secretary, to the maximum extent practicable, consults with and 
seeks advice from all other substantially affected federal departments 
and agencies in an effort to assure full coordination between such 
agencies and the Department regarding programs and activities covered 
under these regulations.

(Authority: E.O. 12372)



Sec. 79.6  What procedures apply to the selection of programs and 
activities under these regulations?

    (a) A state may select any program or activity published in the 
Federal Register in accordance with Sec. 79.3 for intergovernmental 
review under these regulations. Each state, before selecting programs 
and activities, shall consult with local elected officials.
    (b) Each state that adopts a process shall notify the Secretary of 
the Department's programs and activities selected for that process.
    (c) A state may notify the Secretary of changes in its selections at 
any time. For each change, the state shall submit to the Secretary an 
assurance that the state has consulted with local elected officials 
regarding the change. The Department may establish deadlines by which 
states are required to inform the Secretary of changes in their program 
selections.
    (d) The Secretary uses a state's process as soon as feasible, 
depending on individual programs and activities, after the Secretary is 
notified of its selections.

(Authority: E.O. 12372, sec. 2)



Sec. 79.7  How does the Secretary communicate with State and local 
officials concerning the Department's programs and activities?

    (a) [Reserved]
    (b)(1) The Secretary provides notice to directly affected state, 
areawide, regional, and local entities in a state of proposed federal 
financial assistance if:

[[Page 198]]

    (i) The state has not adopted a process under the Order; or
    (ii) The assistance involves a program or activity not selected for 
the state process.
    (2) This notice may be made by publication in the Federal Register 
or other means which the Secretary determine appropriate.

(Authority: E.O. 12372, Sec. 2)



Sec. 79.8  How does the Secretary provide States an opportunity to 
comment on proposed Federal financial assistance?

    (a) Except in unusual circumstances, the Secretary gives State 
processes or directly affected State, areawide, regional, and local 
officials and entities--
    (1) At least 30 days to comment on proposed Federal financial 
assistance in the form of noncompeting continuation awards; and
    (2) At least 60 days to comment on proposed Federal financial 
assistance other than noncompeting continuation awards.
    (b) The Secretary establishes a date for mailing or hand-delivering 
comments under paragraph (a) of this section using one of the following 
two procedures:
    (1) If the comments relate to continuation award applications, the 
Secretary notifies each applicant and each State Single Point of Contact 
(SPOC) of the date by which SPOC comments should be submitted.
    (2) If the comments relate to applications for new grants, the 
Secretary establishes the date in a notice published in the Federal 
Register.
    (c) This section also applies to comments in cases in which the 
review, coordination, and communication with the Department have been 
delegated.
    (d) Applicants for programs and activities subject to Section 204 of 
the Demonstration Cities and Metropolitan Act shall allow areawide 
agencies a 60-day opportunity for review and comment.

(Authority: E.O. 12372, Sec. 2)

[48 FR 29166, June 24, 1983, as amended at 51 FR 20825, June 9, 1986]



Sec. 79.9  How does the Secretary receive and respond to comments?

    (a) The Secretary follows the procedure in Sec. 79.10 if:
    (1) A state office or official is designated to act as a single 
point of contact between a state process and all federal agencies, and
    (2) That office or official transmits a State process 
recommendation, and identifies it as such, for a program selected under 
Sec. 79.6.
    (b)(1) The single point of contact is not obligated to transmit 
comments from state, areawide, regional, or local officials and entities 
if there is no state process recommendation.
    (2) If a state process recommendation is transmitted by a single 
point of contact, all comments from state, areawide, regional, and local 
officials and entities that differ from it must also be transmitted.
    (c) If a state has not established a process, or is unable to submit 
a state process recommendation, state, areawide, regional, and local 
officials and entities may submit comments to the Department.
    (d) If a program or activity is not selected for a state process, 
state, areawide, regional, and local officials and entities may submit 
comments to the Department. In addition, if a state process 
recommendation for a nonselected program or activity is transmitted to 
the Department by the single point of contact, the Secretary follows the 
procedures of Sec. 79.10.
    (e) The Secretary considers comments which do not constitute a state 
process recommendation submitted under these regulations and for which 
the Secretary is not required to apply the procedures of Sec. 79.10 of 
this part, if those comments are provided by a single point of contact, 
or directly to the Department by a commenting party.

(Authority: E.O. 12372, Sec. 2)

[48 FR 29166, June 24, 1983, as amended at 51 FR 20825, June 9, 1986]

[[Page 199]]



Sec. 79.10  How does the Secretary make efforts to accommodate 
intergovernmental concerns?

    (a) If a state process provides a state process recommendation to 
the Department through its single point of contact, the Secretary 
either:
    (1) Accepts the recommendation;
    (2) Reaches a mutually agreeable solution with the state process; or
    (3) Provides the single point of contact with a written explanation 
of the decision in such form as the Secretary deems appropriate. The 
Secretary may also supplement the written explanation by providing the 
explanation to the single point of contact by telephone, other 
telecommunication, or other means.
    (b) In any explanation under paragraph (a)(3) of this section, the 
Secretary informs the single point of contact that:
    (1) The Department will not implement its decision for at least ten 
days after the single point of contact receives the explanation; or
    (2) The Secretary has reviewed the decision and determined that, 
because of unusual circumstances, the waiting period of at least ten 
days is not feasible.
    (c) For purposes of computing the waiting period under paragraph 
(b)(1) of this section, a single point of contact is presumed to have 
received written notification 5 days after the date of mailing of the 
notification.

(Authority: E.O. 12372, Sec. 2)



Sec. 79.11  What are the Secretary's obligations in interstate situations?

    (a) The Secretary is responsible for:
    (1) Identifying proposed federal financial assistance that has an 
impact on interstate areas;
    (2) Notifying appropriate officials and entities in states which 
have adopted a process and which select the Department's program or 
activity.
    (3) Making efforts to identify and notify the affected state, 
areawide, regional, and local officials and entities in those states 
that have not adopted a process under the Order or do not select the 
Department's program or activity;
    (4) Responding under Sec. 79.10 if the Secretary receives a 
recommendation from a designated areawide agency transmitted by a single 
point of contact, in cases in which the review, coordination, and 
communication with the Department have been delegated.
    (b) In an interstate situation subject to this section, the 
Secretary uses the procedures in Sec. 79.10 if a state process provides 
a state process recommendation to the Department through a single point 
of contact.

(Authority: E.O. 12372, Sec. 2(e))



Sec. 79.12  How may a State simplify, consolidate, or substitute 
federally required State plans?

    (a) As used in this section:
    (1) Simplify means that a state may develop its own format, choose 
its own submission date, and select the planning period for a state 
plan.
    (2) Consolidate means that a state may meet statutory and regulatory 
requirements by combining two or more plans into one document and that 
the state can select the format, submission date, and planning period 
for the consolidated plan.
    (3) Substitute means that a state may use a plan or other document 
that it has developed for its own purposes to meet Federal requirements.
    (b) If not inconsistent with law, a state may decide to try to 
simplify, consolidate, or substitute federally required state plans 
without prior approval by the Secretary.
    (c) The Secretary reviews each state plan that a state has 
simplified, consolidated, or substituted and accepts the plan only if 
its contents meet federal requirements.

(Authority: E.O. 12372, sec. 2)



Sec. 79.13  [Reserved]



PART 80_UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND COOPERATIVE 
AGREEMENTS TO STATE AND LOCAL GOVERNMENTS--Table of Contents




                            Subpart A_General

Sec.
80.1 Purpose and scope of this part.
80.2 Scope of subpart.
80.3 Definitions.
80.4 Applicability.

[[Page 200]]

80.5 Effect on other issuances.
80.6 Additions and exceptions.

                    Subpart B_Pre-Award Requirements

80.10 Forms for applying for grants.
80.11 State plans.
80.12 Special grant or subgrant conditions for ``high-risk'' grantees.

                    Subpart C_Post-Award Requirements

                        Financial Administration

80.20 Standards for financial management systems.
80.21 Payment.
80.22 Allowable costs.
80.23 Period of availability of funds.
80.24 Matching or cost sharing.
80.25 Program income.
80.26 Non-Federal audit.

                    Changes, Property, and Subawards

80.30 Changes.
80.31 Real property.
80.32 Equipment.
80.33 Supplies.
80.34 Copyrights.
80.35 Subawards to debarred and suspended parties.
80.36 Procurement.
80.37 Subgrants.

               Reports, Records Retention, and Enforcement

80.40 Monitoring and reporting program performance.
80.41 Financial reporting.
80.42 Retention and access requirements for records.
80.43 Enforcement.
80.44 Termination for convenience.

                 Subpart D_After-the-Grant Requirements

80.50 Closeout.
80.51 Later disallowances and adjustments.
80.52 Collections of amounts due.

Subpart E--Entitlement [Reserved]

    Authority: 20 U.S.C. 1221e-3(a)(1) and 3474, OMB Circular A-102, 
unless otherwise noted.

    Source: 53 FR 8071 and 8087, Mar. 11, 1988, unless otherwise noted.



                            Subpart A_General



Sec. 80.1  Purpose and scope of this part.

    This part establishes uniform administrative rules for Federal 
grants and cooperative agreements and subawards to State, local and 
Indian tribal governments.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.2  Scope of subpart.

    This subpart contains general rules pertaining to this part and 
procedures for control of exceptions from this part.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.3  Definitions.

    As used in this part:
    Accrued expenditures mean the charges incurred by the grantee during 
a given period requiring the provision of funds for:
    (1) Goods and other tangible property received;
    (2) Services performed by employees, contractors, subgrantees, 
subcontractors, and other payees; and
    (3) Other amounts becoming owed under programs for which no current 
services or performance is required, such as annuities, insurance 
claims, and other benefit payments.
    Accrued income means the sum of:
    (1) Earnings during a given period from services performed by the 
grantee and goods and other tangible property delivered to purchasers, 
and
    (2) Amounts becoming owed to the grantee for which no current 
services or performance is required by the grantee.
    Acquisition cost of an item of purchased equipment means the net 
invoice unit price of the property including the cost of modifications, 
attachments, accessories, or auxiliary apparatus necessary to make the 
property usable for the purpose for which it was acquired. Other charges 
such as the cost of installation, transportation, taxes, duty or 
protective in-transit insurance, shall be included or excluded from the 
unit acquisition cost in accordance with the grantee's regular 
accounting practices.
    Administrative requirements mean those matters common to grants in 
general, such as financial management,

[[Page 201]]

kinds and frequency of reports, and retention of records. These are 
distinguished from programmatic requirements, which concern matters that 
can be treated only on a program-by-program or grant-by-grant basis, 
such as kinds of activities that can be supported by grants under a 
particular program.
    Awarding agency means (1) with respect to a grant, the Federal 
agency, and (2) with respect to a subgrant, the party that awarded the 
subgrant.
    Cash contributions means the grantee's cash outlay, including the 
outlay of money contributed to the grantee or subgrantee by other public 
agencies and institutions, and private organizations and individuals. 
When authorized by Federal legislation, Federal funds received from 
other assistance agreements may be considered as grantee or subgrantee 
cash contributions.
    Contract means (except as used in the definitions for grant and 
subgrant in this section and except where qualified by Federal) a 
procurement contract under a grant or subgrant, and means a procurement 
subcontract under a contract.
    Cost sharing or matching means the value of the third party in-kind 
contributions and the portion of the costs of a federally assisted 
project or program not borne by the Federal Government.
    Cost-type contract means a contract or subcontract under a grant in 
which the contractor or subcontractor is paid on the basis of the costs 
it incurs, with or without a fee.
    Equipment means tangible, nonexpendable, personal property having a 
useful life of more than one year and an acquisition cost of $5,000 or 
more per unit. A grantee may use its own definition of equipment 
provided that such definition would at least include all equipment 
defined above.
    Expenditure report means:
    (1) For nonconstruction grants, the SF-269 ``Financial Status 
Report'' (or other equivalent report);
    (2) For construction grants, the SF-271 ``Outlay Report and Request 
for Reimbursement'' (or other equivalent report).
    Federally recognized Indian tribal government means the governing 
body or a governmental agency of any Indian tribe, band, nation, or 
other organized group or community (including any Native village as 
defined in section 3 of the Alaska Native Claims Settlement Act, 85 Stat 
688) certified by the Secretary of the Interior as eligible for the 
special programs and services provided by him through the Bureau of 
Indian Affairs.
    Government means a State or local government or a federally 
recognized Indian tribal government.
    Grant means an award of financial assistance, including cooperative 
agreements, in the form of money, or property in lieu of money, by the 
Federal Government to an eligible grantee. The term does not include 
technical assistance which provides services instead of money, or other 
assistance in the form of revenue sharing, loans, loan guarantees, 
interest subsidies, insurance, or direct appropriations. Also, the term 
does not include assistance, such as a fellowship or other lump sum 
award, which the grantee is not required to account for.
    Grantee means the government to which a grant is awarded and which 
is accountable for the use of the funds provided. The grantee is the 
entire legal entity even if only a particular component of the entity is 
designated in the grant award document.
    Local government means a county, municipality, city, town, township, 
local public authority (including any public and Indian housing agency 
under the United States Housing Act of 1937) school district, special 
district, intrastate district, council of governments (whether or not 
incorporated as a nonprofit corporation under state law), any other 
regional or interstate government entity, or any agency or 
instrumentality of a local government.
    Obligations means the amounts of orders placed, contracts and 
subgrants awarded, goods and services received, and similar transactions 
during a given period that will require payment by the grantee during 
the same or a future period.
    OMB means the United States Office of Management and Budget.
    Outlays (expenditures) mean charges made to the project or program. 
They may be reported on a cash or accrual

[[Page 202]]

basis. For reports prepared on a cash basis, outlays are the sum of 
actual cash disbursement for direct charges for goods and services, the 
amount of indirect expense incurred, the value of in-kind contributions 
applied, and the amount of cash advances and payments made to 
contractors and subgrantees. For reports prepared on an accrued 
expenditure basis, outlays are the sum of actual cash disbursements, the 
amount of indirect expense incurred, the value of inkind contributions 
applied, and the new increase (or decrease) in the amounts owed by the 
grantee for goods and other property received, for services performed by 
employees, contractors, subgrantees, subcontractors, and other payees, 
and other amounts becoming owed under programs for which no current 
services or performance are required, such as annuities, insurance 
claims, and other benefit payments.
    Percentage of completion method refers to a system under which 
payments are made for construction work according to the percentage of 
completion of the work, rather than to the grantee's cost incurred.
    Prior approval means documentation evidencing consent prior to 
incurring specific cost.
    Real property means land, including land improvements, structures 
and appurtenances thereto, excluding movable machinery and equipment.
    Share, when referring to the awarding agency's portion of real 
property, equipment or supplies, means the same percentage as the 
awarding agency's portion of the acquiring party's total costs under the 
grant to which the acquisition costs under the grant to which the 
acquisition cost of the property was charged. Only costs are to be 
counted--not the value of third-party in-kind contributions.
    State means any of the several States of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, any territory or 
possession of the United States, or any agency or instrumentality of a 
State exclusive of local governments. The term does not include any 
public and Indian housing agency under United States Housing Act of 
1937.
    (1) The definition of State in this section is used for the purpose 
of determining the scope of part 80 regulations. Some program 
regulations contain different definitions for State based on program 
statute eligibility requirements.
    Subgrant means an award of financial assistance in the form of 
money, or property in lieu of money, made under a grant by a grantee to 
an eligible subgrantee. The term includes financial assistance when 
provided by contractual legal agreement, but does not include 
procurement purchases, nor does it include any form of assistance which 
is excluded from the definition of grant in this part.
    Subgrantee means the government or other legal entity to which a 
subgrant is awarded and which is accountable to the grantee for the use 
of the funds provided.
    Supplies means all tangible personal property other than equipment 
as defined in this part.
    Suspension means depending on the context, either (1) temporary 
withdrawal of the authority to obligate grant funds pending corrective 
action by the grantee or subgrantee or a decision to terminate the 
grant, or (2) an action taken by a suspending official in accordance 
with agency regulations implementing E.O. 12549 to immediately exclude a 
person from participating in grant transactions for a period, pending 
completion of an investigation and such legal or debarment proceedings 
as may ensue.
    Termination means permanent withdrawal of the authority to obligate 
previously-awarded grant funds before that authority would otherwise 
expire. It also means the voluntary relinquishment of that authority by 
the grantee or subgrantee. Termination does not include:
    (1) Withdrawal of funds awarded on the basis of the grantee's 
underestimate of the unobligated balance in a prior period;
    (2) Withdrawal of the unobligated balance as of the expiration of a 
grant;
    (3) Refusal to extend a grant or award additional funds, to make a 
competing or noncompeting continuation, renewal, extension, or 
supplemental award; or
    (4) Voiding of a grant upon determination that the award was 
obtained

[[Page 203]]

fraudulently, or was otherwise illegal or invalid from inception.
    Terms of a grant or subgrant mean all requirements of the grant or 
subgrant, whether in statute, regulations, or the award document.
    Third party in-kind contributions mean property or services which 
benefit a federally assisted project or program and which are 
contributed by non-Federal third parties without charge to the grantee, 
or a cost-type contractor under the grant agreement.
    Unliquidated obligations for reports prepared on a cash basis mean 
the amount of obligations incurred by the grantee that has not been 
paid. For reports prepared on an accrued expenditure basis, they 
represent the amount of obligations incurred by the grantee for which an 
outlay has not been recorded.
    Unobligated balance means the portion of the funds authorized by the 
Federal agency that has not been obligated by the grantee and is 
determined by deducting the cumulative obligations from the cumulative 
funds authorized.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 8072, Mar. 11, 
1988]



Sec. 80.4  Applicability.

    (a) General. Subparts A through D of this part apply to all grants 
and subgrants to governments, except where inconsistent with Federal 
statutes or with regulations authorized in accordance with the exception 
provision of Sec. 80.6, or:
    (1) Grants and subgrants to State and local institutions of higher 
education or State and local hospitals.
    (2) The block grants authorized by the Omnibus Budget Reconciliation 
Act of 1981 (Community Services; Preventive Health and Health Services; 
Alcohol, Drug Abuse, and Mental Health Services; Maternal and Child 
Health Services; Social Services; Low-Income Home Energy Assistance; 
States' Program of Community Development Block Grants for Small Cities; 
and Elementary and Secondary Education other than programs administered 
by the Secretary of Education under Title V, Subtitle D, Chapter 2, 
Section 583--the Secretary's discretionary grant program) and Titles I-
III of the Job Training Partnership Act of 1982 and under the Public 
Health Services Act (Section 1921), Alcohol and Drug Abuse Treatment and 
Rehabilitation Block Grant and Part C of Title V, Mental Health Service 
for the Homeless Block Grant).
    (3) Entitlement grants to carry out the following programs of the 
Social Security Act:
    (i) Aid to Needy Families with Dependent Children (Title IV-A of the 
Act, not including the Work Incentive Program (WIN) authorized by 
section 402(a)19(G); HHS grants for WIN are subject to this part);
    (ii) Child Support Enforcement and Establishment of Paternity (Title 
IV-D of the Act);
    (iii) Foster Care and Adoption Assistance (Title IV-E of the Act);
    (iv) Aid to the Aged, Blind, and Disabled (Titles I, X, XIV, and 
XVI-AABD of the Act); and
    (v) Medical Assistance (Medicaid) (Title XIX of the Act) not 
including the State Medicaid Fraud Control program authorized by section 
1903(a)(6)(B).
    (4) Entitlement grants under the following programs of The National 
School Lunch Act:
    (i) School Lunch (section 4 of the Act),
    (ii) Commodity Assistance (section 6 of the Act),
    (iii) Special Meal Assistance (section 11 of the Act),
    (iv) Summer Food Service for Children (section 13 of the Act), and
    (v) Child Care Food Program (section 17 of the Act).
    (5) Entitlement grants under the following programs of The Child 
Nutrition Act of 1966:
    (i) Special Milk (section 3 of the Act), and
    (ii) School Breakfast (section 4 of the Act).
    (6) Entitlement grants for State Administrative expenses under The 
Food Stamp Act of 1977 (section 16 of the Act).
    (7) A grant for an experimental, pilot, or demonstration project 
that is also supported by a grant listed in paragraph (a)(3) of this 
section;

[[Page 204]]

    (8) Grant funds awarded under subsection 412(e) of the Immigration 
and Nationality Act (8 U.S.C. 1522(e)) and subsection 501(a) of the 
Refugee Education Assistance Act of 1980 (Pub. L. 96-422, 94 Stat. 
1809), for cash assistance, medical assistance, and supplemental 
security income benefits to refugees and entrants and the administrative 
costs of providing the assistance and benefits;
    (9) Grants to local education agencies under 20 U.S.C. 236 through 
241-1(a), and 242 through 244 (portions of the Impact Aid program), 
except for 20 U.S.C. 238(d)(2)(c) and 240(f) (Entitlement Increase for 
Handicapped Children); and
    (10) Payments under the Veterans Administration's State Home Per 
Diem Program (38 U.S.C. 641(a)).
    (b) Entitlement programs. Entitlement programs enumerated above in 
Sec. 80.4(a) (3) through (8) are subject to Subpart E.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.5  Effect on other issuances.

    All other grants administration provisions of codified program 
regulations, program manuals, handbooks and other nonregulatory 
materials which are inconsistent with this part are superseded, except 
to the extent they are required by statute, or authorized in accordance 
with the exception provision in Sec. 80.6.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.6  Additions and exceptions.

    (a) For classes of grants and grantees subject to this part, Federal 
agencies may not impose additional administrative requirements except in 
codified regulations published in the Federal Register.
    (b) Exceptions for classes of grants or grantees may be authorized 
only by the Secretary after consultation with OMB.
    (c) Exceptions on a case-by-case basis and for subgrantees may be 
authorized by the affected Federal agencies.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 8072, Mar. 11, 
1988]



                    Subpart B_Pre-Award Requirements



Sec. 80.10  Forms for applying for grants.

    (a) Scope. (1) This section prescribes forms and instructions to be 
used by governmental organizations (except hospitals and institutions of 
higher education operated by a government) in applying for grants. This 
section is not applicable, however, to formula grant programs which do 
not require applicants to apply for funds on a project basis.
    (2) This section applies only to applications to Federal agencies 
for grants, and is not required to be applied by grantees in dealing 
with applicants for subgrants. However, grantees are encouraged to avoid 
more detailed or burdensome application requirements for subgrants.
    (b) Authorized forms and instructions for governmental 
organizations. (1) In applying for grants, applicants shall only use 
standard application forms or those prescribed by the granting agency 
with the approval of OMB under the Paperwork Reduction Act of 1980.
    (2) Applicants are not required to submit more than the original and 
two copies of preapplications or applications.
    (3) Applicants must follow all applicable instructions that bear OMB 
clearance numbers. Federal agencies may specify and describe the 
programs, functions, or activities that will be used to plan, budget, 
and evaluate the work under a grant. Other supplementary instructions 
may be issued only with the approval of OMB to the extent required under 
the Paperwork Reduction Act of 1980. For any standard form, except the 
SF-424 facesheet, Federal agencies may shade out or instruct the 
applicant to disregard any line item that is not needed.
    (4) When a grantee applies for additional funding (such as a 
continuation or supplemental award) or amends a previously submitted 
application, only the affected pages need be submitted.

[[Page 205]]

Previously submitted pages with information that is still current need 
not be resubmitted.

(Approved by the Office of Management and Budget under control number 
1880-0517)

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 49143, Dec. 6, 
1988]



Sec. 80.11  State plans.

    (a) Scope. The statutes for some programs require States to submit 
plans before receiving grants. Under regulations implementing Executive 
Order 12372, ``Intergovernmental Review of Federal Programs,'' States 
are allowed to simplify, consolidate and substitute plans. This section 
contains additional provisions for plans that are subject to regulations 
implementing the Executive order.
    (b) Requirements. A State need meet only Federal administrative or 
programmatic requirements for a plan that are in statutes or codified 
regulations.
    (c) Assurances. In each plan the State will include an assurance 
that the State shall comply with all applicable Federal statutes and 
regulations in effect with respect to the periods for which it receives 
grant funding. For this assurance and other assurances required in the 
plan, the State may:
    (1) Cite by number the statutory or regulatory provisions requiring 
the assurances and affirm that it gives the assurances required by those 
provisions,
    (2) Repeat the assurance language in the statutes or regulations, or
    (3) Develop its own language to the extent permitted by law.
    (d) Amendments. A State will amend a plan whenever necessary to 
reflect:
    (1) New or revised Federal statutes or regulations or
    (2) A material change in any State law, organization, policy, or 
State agency operation.

The State will obtain approval for the amendment and its effective date 
but need submit for approval only the amended portions of the plan.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.12  Special grant or subgrant conditions for ``high-risk'' 
grantees.

    (a) A grantee or subgrantee may be considered ``high risk'' if an 
awarding agency determines that a grantee or subgrantee:
    (1) Has a history of unsatisfactory performance, or
    (2) Is not financially stable, or
    (3) Has a management system which does not meet the management 
standards set forth in this part, or
    (4) Has not conformed to terms and conditions of previous awards, or
    (5) Is otherwise not responsible; and if the awarding agency 
determines that an award will be made, special conditions and/or 
restrictions shall correspond to the high risk condition and shall be 
included in the award.
    (b) Special conditions or restrictions may include:
    (1) Payment on a reimbursement basis;
    (2) Withholding authority to proceed to the next phase until receipt 
of evidence of acceptable performance within a given funding period;
    (3) Requiring additional, more detailed financial reports;
    (4) Additional project monitoring;
    (5) Requiring the grante or subgrantee to obtain technical or 
management assistance; or
    (6) Establishing additional prior approvals.
    (c) If an awarding agency decides to impose such conditions, the 
awarding official will notify the grantee or subgrantee as early as 
possible, in writing, of:
    (1) The nature of the special conditions/restrictions;
    (2) The reason(s) for imposing them;
    (3) The corrective actions which must be taken before they will be 
removed and the time allowed for completing the corrective actions and
    (4) The method of requesting reconsideration of the conditions/
restrictions imposed.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[[Page 206]]



                    Subpart C_Post-Award Requirements

                        Financial Administration



Sec. 80.20  Standards for financial management systems.

    (a) A State must expand and account for grant funds in accordance 
with State laws and procedures for expending and accounting for its own 
funds. Fiscal control and accounting procedures of the State, as well as 
its subgrantees and cost-type contractors, must be sufficient to:
    (1) Permit preparation of reports required by this part and the 
statutes authorizing the grant, and
    (2) Permit the tracing of funds to a level of expenditures adequate 
to establish that such funds have not been used in violation of the 
restrictions and prohibitions of applicable statutes.
    (b) The financial management systems of other grantees and 
subgrantees must meet the following standards:
    (1) Financial reporting. Accurate, current, and complete disclosure 
of the financial results of financially assisted activities must be made 
in accordance with the financial reporting requirements of the grant or 
subgrant.
    (2) Accounting records. Grantees and subgrantees must maintain 
records which adequately identify the source and application of funds 
provided for financially-assisted activities. These records must contain 
information pertaining to grant or subgrant awards and authorizations, 
obligations, unobligated balances, assets, liabilities, outlays or 
expenditures, and income.
    (3) Internal control. Effective control and accountability must be 
maintained for all grant and subgrant cash, real and personal property, 
and other assets. Grantees and subgrantees must adequately safeguard all 
such property and must assure that it is used solely for authorized 
purposes.
    (4) Budget control. Actual expenditures or outlays must be compared 
with budgeted amounts for each grant or subgrant. Financial information 
must be related to performance or productivity data, including the 
development of unit cost information whenever appropriate or 
specifically required in the grant or subgrant agreement. If unit cost 
data are required, estimates based on available documentation will be 
accepted whenever possible.
    (5) Allowable cost. Applicable OMB cost principles, agency program 
regulations, and the terms of grant and subgrant agreements will be 
followed in determining the reasonableness, allowability, and 
allocability of costs.
    (6) Source documentation. Accounting records must be supported by 
such source documentation as cancelled checks, paid bills, payrolls, 
time and attendance records, contract and subgrant award documents, etc.
    (7) Cash management. Procedures for minimizing the time elapsing 
between the transfer of funds from the U.S. Treasury and disbursement by 
grantees and subgrantees must be followed whenever advance payment 
procedures are used. Grantees must establish reasonable procedures to 
ensure the receipt of reports on subgrantees' cash balances and cash 
disbursements in sufficient time to enable them to prepare complete and 
accurate cash transactions reports to the awarding agency. When advances 
are made by letter-of-credit or electronic transfer of funds methods, 
the grantee must make drawdowns as close as possible to the time of 
making disbursements. Grantees must monitor cash drawdowns by their 
subgrantees to assure that they conform substantially to the same 
standards of timing and amount as apply to advances to the grantees.
    (c) An awarding agency may review the adequacy of the financial 
management system of any applicant for financial assistance as part of a 
preaward review or at any time subsequent to award.

(Approved by the Office of Management and Budget under control number 
1880-0517)

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 49143, Dec. 6, 
1988]



Sec. 80.21  Payment.

    (a) Scope. This section prescribes the basic standard and the 
methods under which a Federal agency will make payments to grantees, and 
grantees will

[[Page 207]]

make payments to subgrantees and contractors.
    (b) Basic standard. Methods and procedures for payment shall 
minimize the time elapsing between the transfer of funds and 
disbursement by the grantee or subgrantee, in accordance with Treasury 
regulations at 31 CFR part 205.
    (c) Advances. Grantees and subgrantees shall be paid in advance, 
provided they maintain or demonstrate the willingness and ability to 
maintain procedures to minimize the time elapsing between the transfer 
of the funds and their disbursement by the grantee or subgrantee.
    (d) Reimbursement. Reimbursement shall be the preferred method when 
the requirements in paragraph (c) of this section are not met. Grantees 
and subgrantees may also be paid by reimbursement for any construction 
grant. Except as otherwise specified in regulation, Federal agencies 
shall not use the percentage of completion method to pay construction 
grants. The grantee or subgrantee may use that method to pay its 
construction contractor, and if it does, the awarding agency's payments 
to the grantee or subgrantee will be based on the grantee's or 
subgrantee's actual rate of disbursement.
    (e) Working capital advances. If a grantee cannot meet the criteria 
for advance payments described in paragraph (c) of this section, and the 
Federal agency has determined that reimbursement is not feasible because 
the grantee lacks sufficient working capital, the awarding agency may 
provide cash or a working capital advance basis. Under this procedure 
the awarding agency shall advance cash to the grantee to cover its 
estimated disbursement needs for an initial period generally geared to 
the grantee's disbursing cycle. Thereafter, the awarding agency shall 
reimburse the grantee for its actual cash disbursements. The working 
capital advance method of payment shall not be used by grantees or 
subgrantees if the reason for using such method is the unwillingness or 
inability of the grantee to provide timely advances to the subgrantee to 
meet the subgrantee's actual cash disbursements.
    (f) Effect of program income, refunds, and audit recoveries on 
payment. (1) Grantees and subgrantees shall disburse repayments to and 
interest earned on a revolving fund before requesting additional cash 
payments for the same activity.
    (2) Except as provided in paragraph (f)(1) of this section, grantees 
and subgrantees shall disburse program income, rebates, refunds, 
contract settlements, audit recoveries and interest earned on such funds 
before requesting additional cash payments.
    (g) Withholding payments. (1) Unless otherwise required by Federal 
statute, awarding agencies shall not withhold payments for proper 
charges incurred by grantees or subgrantees unless--
    (i) The grantee or subgrantee has failed to comply with grant award 
conditions or
    (ii) The grantee or subgrantee is indebted to the United States.
    (2) Cash withheld for failure to comply with grant award condition, 
but without suspension of the grant, shall be released to the grantee 
upon subsequent compliance. When a grant is suspended, payment 
adjustments will be made in accordance with Sec. 80.43(c).
    (3) A Federal agency shall not make payment to grantees for amounts 
that are withheld by grantees or subgrantees from payment to contractors 
to assure satisfactory completion of work. Payments shall be made by the 
Federal agency when the grantees or subgrantees actually disburse the 
withheld funds to the contractors or to escrow accounts established to 
assure satisfactory completion of work.
    (h) Cash depositories. (1) Consistent with the national goal of 
expanding the opportunities for minority business enterprises, grantees 
and subgrantees are encouraged to use minority banks (a bank which is 
owned at least 50 percent by minority group members). A list of minority 
owned banks can be obtained from the Minority Business Development 
Agency, Department of Commerce, Washington, DC 20230.
    (2) A grantee or subgrantee shall maintain a separate bank account 
only when required by Federal-State agreement.
    (i) Interest earned on advances. Except for interest earned on 
advances of

[[Page 208]]

funds exempt under the Intergovernmental Cooperation Act (31 U.S.C. 6501 
et seq.) and the Indian Self-Determination Act (23 U.S.C. 450), grantees 
and subgrantees shall promptly, but at least quarterly, remit interest 
earned on advances to the Federal agency. The grantee or subgrantee may 
keep interest amounts up to $100 per year for administrative expenses.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.22  Allowable costs.

    (a) Limitation on use of funds. Grant funds may be used only for:
    (1) The allowable costs of the grantees, subgrantees and cost-type 
contractors, including allowable costs in the form of payments to fixed-
price contractors; and
    (2) Reasonable fees or profit to cost-type contractors but not any 
fee or profit (or other increment above allowable costs) to the grantee 
or subgrantee.
    (b) For each kind of organization, there is a set of Federal 
principles for determining allowable costs. For the costs of a State, 
local, or Indian tribal government, the Secretary applies the cost 
principles in OMB Circular A-87, as amended on June 9, 1987.

------------------------------------------------------------------------
           For the costs of a--                Use the principles in--
------------------------------------------------------------------------
State, local or Indian tribal government..  OMB Circular A-87.
Private nonprofit organization other than   OMB Circular A-122.
 an (1) institution of higher education,
 (2) hospital, or (3) organization named
 in OMB Circular A-122 as not subject to
 that circular.
Educational institutions..................  OMB Circular A-21.
For-profit organization other than a        48 CFR part 31. Contract
 hospital and an organization named in OBM   Cost Principles and
 Circular A-122 as not subject to that       Procedures, or uniform cost
 circular.                                   accounting standards that
                                             comply with cost principles
                                             acceptable to the Federal
                                             agency.
------------------------------------------------------------------------


(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 8072, Mar. 11, 
1988]



Sec. 80.23  Period of availability of funds.

    (a) General. Where a funding period is specified, a grantee may 
charge to the award only costs resulting from obligations of the funding 
period unless carryover of unobligated balances is permitted, in which 
case the carryover balances may be charged for costs resulting from 
obligations of the subsequent funding period.
    (b) Liquidation of obligations. A grantee must liquidate all 
obligations incurred under the award not later than 90 days after the 
end of the funding period (or as specified in a program regulation) to 
coincide with the submission of the annual Financial Status Report (SF-
269). The Federal agency may extend this deadline at the request of the 
grantee.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.24  Matching or cost sharing.

    (a) Basic rule: Costs and contributions acceptable. With the 
qualifications and exceptions listed in paragraph (b) of this section, a 
matching or cost sharing requirement may be satisfied by either or both 
of the following:
    (1) Allowable costs incurred by the grantee, subgrantee or a cost-
type contractor under the assistance agreement. This includes allowable 
costs borne by non-Federal grants or by others cash donations from non-
Federal third parties.
    (2) The value of third party in-kind contributions applicable to the 
period to which the cost sharing or matching requirements applies.
    (b) Qualifications and exceptions--(1) Costs borne by other Federal 
grant agreements. Except as provided by Federal statute, a cost sharing 
or matching requirement may not be met by costs borne by another Federal 
grant. This prohibition does not apply to income earned by a grantee or 
subgrantee from a contract awarded under another Federal grant.
    (2) General revenue sharing. For the purpose of this section, 
general revenue sharing funds distributed under 31 U.S.C. 6702 are not 
considered Federal grant funds.
    (3) Cost or contributions counted towards other Federal costs-
sharing requirements. Neither costs nor the values of third party in-
kind contributions may count towards satisfying a cost sharing or 
matching requirement of a grant agreement if they have been or will be

[[Page 209]]

counted towards satisfying a cost sharing or matching requirement of 
another Federal grant agreement, a Federal procurement contract, or any 
other award of Federal funds.
    (4) Costs financed by program income. Costs financed by program 
income, as defined in Sec. 80.25, shall not count towards satisfying a 
cost sharing or matching requirement unless they are expressly permitted 
in the terms of the assistance agreement. (This use of general program 
income is described in Sec. 80.25(g).)
    (5) Services or property financed by income earned by contractors. 
Contractors under a grant may earn income from the activities carried 
out under the contract in addition to the amounts earned from the party 
awarding the contract. No costs of services or property supported by 
this income may count toward satisfying a cost sharing or matching 
requirement unless other provisions of the grant agreement expressly 
permit this kind of income to be used to meet the requirement.
    (6) Records. Costs and third party in-kind contributions counting 
towards satisfying a cost sharing or matching requirement must be 
verifiable from the records of grantees and subgrantee or cost-type 
contractors. These records must show how the value placed on third party 
in-kind contributions was derived. To the extent feasible, volunteer 
services will be supported by the same methods that the organization 
uses to support the allocability of regular personnel costs.
    (7) Special standards for third party in-kind contributions. (i) 
Third party in-kind contributions count towards satisfying a cost 
sharing or matching requirement only where, if the party receiving the 
contributions were to pay for them, the payments would be allowable 
costs.
    (ii) Some third party in-kind contributions are goods and services 
that, if the grantee, subgrantee, or contractor receiving the 
contribution had to pay for them, the payments would have been an 
indirect costs. Costs sharing or matching credit for such contributions 
shall be given only if the grantee, subgrantee, or contractor has 
established, along with its regular indirect cost rate, a special rate 
for allocating to individual projects or programs the value of the 
contributions.
    (iii) A third party in-kind contribution to a fixed-price contract 
may count towards satisfying a cost sharing or matching requirement only 
if it results in:
    (A) An increase in the services or property provided under the 
contract (without additional cost to the grantee or subgrantee) or
    (B) A cost savings to the grantee or subgrantee.
    (iv) The values placed on third party in-kind contributions for cost 
sharing or matching purposes will conform to the rules in the succeeding 
sections of this part. If a third party in-kind contribution is a type 
not treated in those sections, the value placed upon it shall be fair 
and reasonable.
    (c) Valuation of donated services--(1) Volunteer services. Unpaid 
services provided to a grantee or subgrantee by individuals will be 
valued at rates consistent with those ordinarily paid for similar work 
in the grantee's or subgrantee's organization. If the grantee or 
subgrantee does not have employees performing similar work, the rates 
will be consistent with those ordinarily paid by other employers for 
similar work in the same labor market. In either case, a reasonable 
amount for fringe benefits may be included in the valuation.
    (2) Employees of other organizations. When an employer other than a 
grantee, subgrantee, or cost-type contractor furnishes free of charge 
the services of an employee in the employee's normal line of work, the 
services will be valued at the employee's regular rate of pay exclusive 
of the employee's fringe benefits and overhead costs. If the services 
are in a different line of work, paragraph (c)(1) of this section 
applies.
    (d) Valuation of third party donated supplies and loaned equipment 
or space. (1) If a third party donates supplies, the contribution will 
be valued at the market value of the supplies at the time of donation.
    (2) If a third party donates the use of equipment or space in a 
building but retains title, the contribution will be valued at the fair 
rental rate of the equipment or space.

[[Page 210]]

    (e) Valuation of third party donated equipment, buildings, and land. 
If a third party donates equipment, buildings, or land, and title passes 
to a grantee or subgrantee, the treatment of the donated property will 
depend upon the purpose of the grant or subgrant, as follows:
    (1) Awards for capital expenditures. If the purpose of the grant or 
subgrant is to assist the grantee or subgrantee in the acquisition of 
property, the market value of that property at the time of donation may 
be counted as cost sharing or matching,
    (2) Other awards. If assisting in the acquisition of property is not 
the purpose of the grant or subgrant, paragraphs (e)(2) (i) and (ii) of 
this section apply:
    (i) If approval is obtained from the awarding agency, the market 
value at the time of donation of the donated equipment or buildings and 
the fair rental rate of the donated land may be counted as cost sharing 
or matching. In the case of a subgrant, the terms of the grant agreement 
may require that the approval be obtained from the Federal agency as 
well as the grantee. In all cases, the approval may be given only if a 
purchase of the equipment or rental of the land would be approved as an 
allowable direct cost. If any part of the donated property was acquired 
with Federal funds, only the non-federal share of the property may be 
counted as cost-sharing or matching.
    (ii) If approval is not obtained under paragraph (e)(2)(i) of this 
section, no amount may be counted for donated land, and only 
depreciation or use allowances may be counted for donated equipment and 
buildings. The depreciation or use allowances for this property are not 
treated as third party in-kind contributions. Instead, they are treated 
as costs incurred by the grantee or subgrantee. They are computed and 
allocated (usually as indirect costs) in accordance with the cost 
principles specified in Sec. 80.22, in the same way as depreciation or 
use allowances for purchased equipment and buildings. The amount of 
depreciation or use allowances for donated equipment and buildings is 
based on the property's market value at the time it was donated.
    (f) Valuation of grantee or subgrantee donated real property for 
construction/acquisition. If a grantee or subgrantee donates real 
property for a construction or facilities acquisition project, the 
current market value of that property may be counted as cost sharing or 
matching. If any part of the donated property was acquired with Federal 
funds, only the non-federal share of the property may be counted as cost 
sharing or matching.
    (g) Appraisal of real property. In some cases under paragraphs (d), 
(e) and (f) of this section, it will be necessary to establish the 
market value of land or a building or the fair rental rate of land or of 
space in a building. In these cases, the Federal agency may require the 
market value or fair rental value be set by an independent appraiser, 
and that the value or rate be certified by the grantee. This requirement 
will also be imposed by the grantee on subgrantees.

(Approved by the Office of Management and Budget under control number 
1880-0517)

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 49143, Dec. 6, 
1988]



Sec. 80.25  Program income.

    (a) General. Grantees are encouraged to earn income to defray 
program costs. Program income includes income from fees for services 
performed, from the use or rental of real or personal property acquired 
with grant funds, from the sale of commodities or items fabricated under 
a grant agreement, and from payments of principal and interest on loans 
made with grant funds. Except as otherwise provided in regulations of 
the Federal agency, program income does not include interest on grant 
funds, rebates, credits, discounts, refunds, etc. and interest earned on 
any of them.
    (b) Definition of program income. Program income means gross income 
received by the grantee or subgrantee directly generated by a grant 
supported activity, or earned only as a result of the grant agreement 
during the grant period. ``During the grant period'' is the time between 
the effective date of the award and the ending date of the

[[Page 211]]

award reflected in the final financial report.
    (c) Cost of generating program income. If authorized by Federal 
regulations or the grant agreement, costs incident to the generation of 
program income may be deducted from gross income to determine program 
income.
    (d) Governmental revenues. Taxes, special assessments, levies, 
fines, and other such revenues raised by a grantee or subgrantee are not 
program income unless the revenues are specifically identified in the 
grant agreement or Federal agency regulations as program income.
    (e) Royalties. Income from royalties and license fees for 
copyrighted material, patents, and inventions developed by a grantee or 
subgrantee is program income only if the revenues are specifically 
identified in the grant agreement or Federal agency regulations as 
program income. (See Sec. 80.34.)
    (f) Property. Proceeds from the sale of real property or equipment 
will be handled in accordance with the requirements of Sec. Sec. 80.31 
and 80.32.
    (g) Use of program income. Program income shall be deducted from 
outlays which may be both Federal and non-Federal as described below, 
unless the Federal agency regulations or the grant agreement specify 
another alternative (or a combination of the alternatives). In 
specifying alternatives, the Federal agency may distinguish between 
income earned by the grantee and income earned by subgrantees and 
between the sources, kinds, or amounts of income. When Federal agencies 
authorize the alternatives in paragraphs (g) (2) and (3) of this 
section, program income in excess of any limits stipulated shall also be 
deducted from outlays.
    (1) Deduction. Ordinarily program income shall be deducted from 
total allowable costs to determine the net allowable costs. Program 
income shall be used for current costs unless the Federal agency 
authorizes otherwise. Program income which the grantee did not 
anticipate at the time of the award shall be used to reduce the Federal 
agency and grantee contributions rather than to increase the funds 
committed to the project.
    (2) Addition. When authorized, program income may be added to the 
funds committed to the grant agreement by the Federal agency and the 
grantee. The program income shall be used for the purposes and under the 
conditions of the grant agreement.
    (3) Cost sharing or matching. When authorized, program income may be 
used to meet the cost sharing or matching requirement of the grant 
agreement. The amount of the Federal grant award remains the same.
    (h) Income after the award period. There are no Federal requirements 
governing the disposition of program income earned after the end of the 
award period (i.e., until the ending date of the final financial report, 
see paragraph (a) of this section), unless the terms of the agreement or 
the Federal agency regulations provide otherwise.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.26  Non-Federal audit.

    (a) Basic Rule. Grantees and subgrantees are responsible for 
obtaining audits in accordance with the Single Audit Act Amendments of 
1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of 
States, Local Governments, and Non-Profit Organizations.'' The audits 
shall be made by an independent auditor in accordance with generally 
accepted government auditing standards covering financial audits.
    (b) Subgrantees. State or local governments, as those terms are 
defined for purposes of the Single Audit Act Amendments of 1996, that 
provide Federal awards to a subgrantee, which expends $300,000 or more 
(or other amount as specified by OMB) in Federal awards in a fiscal 
year, shall:
    (1) Determine whether State or local subgrantees have met the audit 
requirements of the Act and whether subgrantees covered by OMB Circular 
A-110, ``Uniform Administrative Requirements for Grants and Agreements 
with Institutions of Higher Education, Hospitals, and Other Non-Profit 
organizations,'' have met the audit requirements of the Act. Commercial 
contractors (private for-profit and private and governmental 
organizations) providing goods and services to State and local

[[Page 212]]

governments are not required to have a single audit performed. State and 
local governments should use their own procedures to ensure that the 
contractors has complied with laws and regulations affecting the 
expenditures of Federal funds;
    (2) Determine whether the subgrantee spent Federal assistance funds 
provided in accordance with applicable laws and regulations. This may be 
accomplished by reviewing an audit of the subgrantee made in accordance 
with the Act, OMB Circular A-133, or through other means (e.g., program 
reviews) if the subgrantee has not had such an audit;
    (3) Ensure that appropriate corrective action is taken within six 
months after receipt of the audit report in instance of noncompliance 
with Federal laws and regulations;
    (4) Consider whether subgrantee audits necessitate adjustment of the 
grantee's own records; and
    (5) Require each subgrantee to permit independent auditors to have 
access to the records and financial statements.
    (c) Auditor selection. In arranging for audit services, Sec. 80.36 
shall be followed.

(Authority: 20 U.S.C. 1221e-3(a)(1) and 3474, OMB Circulars A-102, A-128 
and A-133)

    Note: The requirements for non-Federal audits are contained in the 
appendix to part 80--Audit Requirements for State and Local Governments.

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 8072, Mar. 11, 
1988; 56 FR 1698, Jan. 16, 1991; 62 FR 45939, 45943, Aug. 29, 1997]

                    Changes, Property, and Subawards



Sec. 80.30  Changes.

    (a) General. Grantees and subgrantees are permitted to rebudget 
within the approved direct cost budget to meet unanticipated 
requirements and may make limited program changes to the approved 
project. However, unless waived by the awarding agency, certain types of 
post-award changes in budgets and projects shall require the prior 
written approval of the awarding agency.
    (b) Relation to cost principles. The applicable cost principles (see 
Sec. 80.22) contain requirements for prior approval of certain types of 
costs. Except where waived, those requirements apply to all grants and 
subgrants even if paragraphs (c) through (f) of this section do not.
    (c) Budget changes--(1) Nonconstruction projects. Except as stated 
in other regulations or an award document, grantees or subgrantees shall 
obtain the prior approval of the awarding agency whenever any of the 
following changes is anticipated under a nonconstruction award:
    (i) Any revision which would result in the need for additional 
funding.
    (ii) Unless waived by the awarding agency, cumulative transfers 
among direct cost categories, or, if applicable, among separately 
budgeted programs, projects, functions, or activities which exceed or 
are expected to exceed ten percent of the current total approved budget, 
whenever the awarding agency's share exceeds $100,000.
    (iii) Transfer of funds allotted for training allowances (i.e., from 
direct payments to trainees to other expense categories).
    (2) Construction projects. Grantees and subgrantees shall obtain 
prior written approval for any budget revision which would result in the 
need for additional funds.
    (3) Combined construction and nonconstruction projects. When a grant 
or subgrant provides funding for both construction and nonconstruction 
activities, the grantee or subgrantee must obtain prior written approval 
from the awarding agency before making any fund or budget transfer from 
nonconstruction to construction or vice versa.
    (d) Programmatic changes. Grantees or subgrantees must obtain the 
prior approval of the awarding agency whenever any of the following 
actions is anticipated:
    (1) Any revision of the scope or objectives of the project 
(regardless of whether there is an associated budget revision requiring 
prior approval).
    (2) Need to extend the period of availability of funds.
    (3) Changes in key persons in cases where specified in an 
application or a grant award. In research projects, a change in the 
project director or principal investigator shall always require approval 
unless waived by the awarding agency.

[[Page 213]]

    (4) Under nonconstruction projects, contracting out, subgranting (if 
authorized by law) or otherwise obtaining the services of a third party 
to perform activities which are central to the purposes of the award. 
This approval requirement is in addition to the approval requirements of 
Sec. 80.36 but does not apply to the procurement of equipment, 
supplies, and general support services.
    (e) Additional prior approval requirements. The awarding agency may 
not require prior approval for any budget revision which is not 
described in paragraph (c) of this section.
    (f) Requesting prior approval. (1) A request for prior approval of 
any budget revision will be in the same budget formal the grantee used 
in its application and shall be accompanied by a narrative justification 
for the proposed revision.
    (2) A request for a prior approval under the applicable Federal cost 
principles (see Sec. 80.22) may be made by letter.
    (3) A request by a subgrantee for prior approval will be addressed 
in writing to the grantee. The grantee will promptly review such request 
and shall approve or disapprove the request in writing. A grantee will 
not approve any budget or project revision which is inconsistent with 
the purpose or terms and conditions of the Federal grant to the grantee. 
If the revision, requested by the subgrantee would result in a change to 
the grantee's approved project which requires Federal prior approval, 
the grantee will obtain the Federal agency's approval before approving 
the subgrantee's request.

(Approved by the Office of Management and Budget under control number 
1880-0517)

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 49143, Dec. 6, 
1988]



Sec. 80.31  Real property.

    (a) Title. Subject to the obligations and conditions set forth in 
this section, title to real property acquired under a grant or subgrant 
will vest upon acquisition in the grantee or subgrantee respectively.
    (b) Use. Except as otherwise provided by Federal statutes, real 
property will be used for the originally authorized purposes as long as 
needed for that purposes, and the grantee or subgrantee shall not 
dispose of or encumber its title or other interests.
    (c) Disposition. When real property is no longer needed for the 
originally authorized purpose, the grantee or subgrantee will request 
disposition instructions from the awarding agency. The instructions will 
provide for one of the following alternatives:
    (1) Retention of title. Retain title after compensating the awarding 
agency. The amount paid to the awarding agency will be computed by 
applying the awarding agency's percentage of participation in the cost 
of the original purchase to the fair market value of the property. 
However, in those situations where a grantee or subgrantee is disposing 
of real property acquired with grant funds and acquiring replacement 
real property under the same program, the net proceeds from the 
disposition may be used as an offset to the cost of the replacement 
property.
    (2) Sale of property. Sell the property and compensate the awarding 
agency. The amount due to the awarding agency will be calculated by 
applying the awarding agency's percentage of participation in the cost 
of the original purchase to the proceeds of the sale after deduction of 
any actual and reasonable selling and fixing-up expenses. If the grant 
is still active, the net proceeds from sale may be offset against the 
original cost of the property. When a grantee or subgrantee is directed 
to sell property, sales procedures shall be followed that provide for 
competition to the extent practicable and result in the highest possible 
return.
    (3) Transfer of title. Transfer title to the awarding agency or to a 
third-party designated/approved by the awarding agency. The grantee or 
subgrantee shall be paid an amount calculated by applying the grantee or 
subgrantee's percentage of participation in the purchase of the real 
property to the current fair market value of the property.
    (d) The provisions of paragraph (c) of this section do not apply to 
disaster assistance under 20 U.S.C. 241-1(b)-(c) and

[[Page 214]]

the construction provisions of the Impact Aid Program, 20 U.S.C. 631-
647.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 8072, Mar. 11, 
1988]



Sec. 80.32  Equipment.

    (a) Title. Subject to the obligations and conditions set forth in 
this section, title to equipment acquired under a grant or subgrant will 
vest upon acquisition in the grantee or subgrantee respectively.
    (b) States. A State will use, manage, and dispose of equipment 
acquired under a grant by the State in accordance with State laws and 
procedures. Other grantees and subgrantees will follow paragraphs (c) 
through (e) of this section.
    (c) Use. (1) Equipment shall be used by the grantee or subgrantee in 
the program or project for which it was acquired as long as needed, 
whether or not the project or program continues to be supported by 
Federal funds. When no longer needed for the original program or 
project, the equipment may be used in other activities currently or 
previously supported by a Federal agency.
    (2) The grantee or subgrantee shall also make equipment available 
for use on other projects or programs currently or previously supported 
by the Federal Government, providing such use will not interfere with 
the work on the projects or program for which it was originally 
acquired. First preference for other use shall be given to other 
programs or projects supported by the awarding agency. User fees should 
be considered if appropriate.
    (3) Notwithstanding the encouragement in Sec. 80.25(a) to earn 
program income, the grantee or subgrantee must not use equipment 
acquired with grant funds to provide services for a fee to compete 
unfairly with private companies that provide equivalent services, unless 
specifically permitted or contemplated by Federal statute.
    (4) When acquiring replacement equipment, the grantee or subgrantee 
may use the equipment to be replaced as a trade-in or sell the property 
and use the proceeds to offset the cost of the replacement property, 
subject to the approval of the awarding agency.
    (d) Management requirements. Procedures for managing equipment 
(including replacement equipment), whether acquired in whole or in part 
with grant funds, until disposition takes place will, as a minimum, meet 
the following requirements:
    (1) Property records must be maintained that include a description 
of the property, a serial number or other identification number, the 
source of property, who holds title, the acquisition date, and cost of 
the property, percentage of Federal participation in the cost of the 
property, the location, use and condition of the property, and any 
ultimate disposition data including the date of disposal and sale price 
of the property.
    (2) A physical inventory of the property must be taken and the 
results reconciled with the property records at least once every two 
years.
    (3) A control system must be developed to ensure adequate safeguards 
to prevent loss, damage, or theft of the property. Any loss, damage, or 
theft shall be investigated.
    (4) Adequate maintenance procedures must be developed to keep the 
property in good condition.
    (5) If the grantee or subgrantee is authorized or required to sell 
the property, proper sales procedures must be established to ensure the 
highest possible return.
    (e) Disposition. When original or replacement equipment acquired 
under a grant or subgrant is no longer needed for the original project 
or program or for other activities currently or previously supported by 
a Federal agency, disposition of the equipment will be made as follows:
    (1) Items of equipment with a current per-unit fair market value of 
less than $5,000 may be retained, sold or otherwise disposed of with no 
further obligation to the awarding agency.
    (2) Items of equipment with a current per unit fair market value in 
excess of $5,000 may be retained or sold and the awarding agency shall 
have a right to an amount calculated by multiplying the current market 
value or proceeds from sale by the awarding agency's share of the 
equipment.

[[Page 215]]

    (3) In cases where a grantee or subgrantee fails to take appropriate 
disposition actions, the awarding agency may direct the grantee or 
subgrantee to take excess and disposition actions.
    (f) Federal equipment. In the event a grantee or subgrantee is 
provided federally-owned equipment:
    (1) Title will remain vested in the Federal Government.
    (2) Grantees or subgrantees will manage the equipment in accordance 
with Federal agency rules and procedures, and submit an annual inventory 
listing.
    (3) When the equipment is no longer needed, the grantee or 
subgrantee will request disposition instructions from the Federal 
agency.
    (g) Right to transfer title. The Federal awarding agency may reserve 
the right to transfer title to the Federal Government or a third part 
named by the awarding agency when such a third party is otherwise 
eligible under existing statutes. Such transfers shall be subject to the 
following standards:
    (1) The property shall be identified in the grant or otherwise made 
known to the grantee in writing.
    (2) The Federal awarding agency shall issue disposition instruction 
within 120 calendar days after the end of the Federal support of the 
project for which it was acquired. If the Federal awarding agency fails 
to issue disposition instructions within the 120 calendar-day period the 
grantee shall follow Sec. 80.32(e).
    (3) When title to equipment is transferred, the grantee shall be 
paid an amount calculated by applying the percentage of participation in 
the purchase to the current fair market value of the property.
    (h) The provisions of paragraphs (c), (d), (e), and (g) of this 
section do not apply to disaster assistance under 20 U.S.C. 241-1(b)-(c) 
and the construction provisions of the Impact Aid Program, 20 U.S.C. 
631-647.

(Approved by the Office of Management and Budget under control number 
1880-0517)

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 8072, Mar. 11, 
1988; 53 FR 49143, Dec. 6, 1988]



Sec. 80.33  Supplies.

    (a) Title. Title to supplies acquired under a grant or subgrant will 
vest, upon acquisition, in the grantee or subgrantee respectively.
    (b) Disposition. If there is a residual inventory of unused supplies 
exceeding $5,000 in total aggregate fair market value upon termination 
or completion of the award, and if the supplies are not needed for any 
other federally sponsored programs or projects, the grantee or 
subgrantee shall compensate the awarding agency for its share.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.34  Copyrights.

    The Federal awarding agency reserves a royalty-free, nonexclusive, 
and irrevocable license to reproduce, publish or otherwise use, and to 
authorize others to use, for Federal Government purposes:
    (a) The copyright in any work developed under a grant, subgrant, or 
contract under a grant or subgrant; and
    (b) Any rights of copyright to which a grantee, subgrantee or a 
contractor purchases ownership with grant support.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.35  Subawards to debarred and suspended parties.

    Grantees and subgrantees must not make any award or permit any award 
(subgrant or contract) at any tier to any party which is debarred or 
suspended or is otherwise excluded from or ineligible for participation 
in Federal assistance programs under Executive Order 12549, ``Debarment 
and Suspension.''

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.36  Procurement.

    (a) States. When procuring property and services under a grant, a 
State will follow the same policies and procedures it uses for 
procurements from its non-Federal funds. The State will ensure that 
every purchase order or other contract includes any clauses required by 
Federal statutes and executive orders

[[Page 216]]

and their implementing regulations. Other grantees and subgrantees will 
follow paragraphs (b) through (i) in this section.
    (b) Procurement standards. (1) Grantees and subgrantees will use 
their own procurement procedures which reflect applicable State and 
local laws and regulations, provided that the procurements conform to 
applicable Federal law and the standards identified in this section.
    (2) Grantees and subgrantees will maintain a contract administration 
system which ensures that contractors perform in accordance with the 
terms, conditions, and specifications of their contracts or purchase 
orders.
    (3) Grantees and subgrantees will maintain a written code of 
standards of conduct governing the performance of their employees 
engaged in the award and administration of contracts. No employee, 
officer or agent of the grantee or subgrantee shall participate in 
selection, or in the award or administration of a contract supported by 
Federal funds if a conflict of interest, real or apparent, would be 
involved. Such a conflict would arise when:
    (i) The employee, officer or agent,
    (ii) Any member of his immediate family,
    (iii) His or her partner, or
    (iv) An organization which employs, or is about to employ, any of 
the above, has a financial or other interest in the firm selected for 
award. The grantee's or subgrantee's officers, employees or agents will 
neither solicit nor accept gratuities, favors or anything of monetary 
value from contractors, potential contractors, or parties to 
subagreements. Grantee and subgrantees may set minimum rules where the 
financial interest is not substantial or the gift is an unsolicited item 
of nominal intrinsic value. To the extent permitted by State or local 
law or regulations, such standards or conduct will provide for 
penalties, sanctions, or other disciplinary actions for violations of 
such standards by the grantee's and subgrantee's officers, employees, or 
agents, or by contractors or their agents. The awarding agency may in 
regulation provide additional prohibitions relative to real, apparent, 
or potential conflicts of interest.
    (4) Grantee and subgrantee procedures will provide for a review of 
proposed procurements to avoid purchase of unnecessary or duplicative 
items. Consideration should be given to consolidating or breaking out 
procurements to obtain a more economical purchase. Where appropriate, an 
analysis will be made of lease versus purchase alternatives, and any 
other appropriate analysis to determine the most economical approach.
    (5) To foster greater economy and efficiency, grantees and 
subgrantees are encouraged to enter into State and local 
intergovernmental agreements for procurement or use of common goods and 
services.
    (6) Grantees and subgrantees are encouraged to use Federal excess 
and surplus property in lieu of purchasing new equipment and property 
whenever such use is feasible and reduces project costs.
    (7) Grantees and subgrantees are encouraged to use value engineering 
clauses in contracts for construction projects of sufficient size to 
offer reasonable opportunities for cost reductions. Value engineering is 
a systematic and creative anaylsis of each contract item or task to 
ensure that its essential function is provided at the overall lower 
cost.
    (8) Grantees and subgrantees will make awards only to responsible 
contractors possessing the ability to perform successfully under the 
terms and conditions of a proposed procurement. Consideration will be 
given to such matters as contractor integrity, compliance with public 
policy, record of past performance, and financial and technical 
resources.
    (9) Grantees and subgrantees will maintain records sufficient to 
detail the significant history of a procurement. These records will 
include, but are not necessarily limited to the following: rationale for 
the method of procurement, selection of contract type, contractor 
selection or rejection, and the basis for the contract price.
    (10) Grantees and subgrantees will use time and material type 
contracts only:
    (i) After a determination that no other contract is suitable, and

[[Page 217]]

    (ii) If the contract includes a ceiling price that the contractor 
exceeds at its own risk.
    (11) Grantees and subgrantees alone will be responsible, in 
accordance with good administrative practice and sound business 
judgment, for the settlement of all contractual and administrative 
issues arising out of procurements. These issues include, but are not 
limited to source evaluation, protests, disputes, and claims. These 
standards do not relieve the grantee or subgrantee of any contractual 
responsibilities under its contracts. Federal agencies will not 
substitute their judgment for that of the grantee or subgrantee unless 
the matter is primarily a Federal concern. Violations of law will be 
referred to the local, State, or Federal authority having proper 
jurisdiction.
    (12) Grantees and subgrantees will have protest procedures to handle 
and resolve disputes relating to their procurements and shall in all 
instances disclose information regarding the protest to the awarding 
agency. A protestor must exhaust all administrative remedies with the 
grantee and subgrantee before pursuing a protest with the Federal 
agency. Reviews of protests by the Federal agency will be limited to:
    (i) Violations of Federal law or regulations and the standards of 
this section (violations of State or local law will be under the 
jurisdiction of State or local authorities) and
    (ii) Violations of the grantee's or subgrantee's protest procedures 
for failure to review a complaint or protest. Protests received by the 
Federal agency other than those specified above will be referred to the 
grantee or subgrantee.
    (c) Competition. (1) All procurement transactions will be conducted 
in a manner providing full and open competition consistent with the 
standards of Sec. 80.36. Some of the situations considered to be 
restrictive of competition include but are not limited to:
    (i) Placing unreasonable requirements on firms in order for them to 
qualify to do business,
    (ii) Requiring unnecessary experience and excessive bonding,
    (iii) Noncompetitive pricing practices between firms or between 
affiliated companies,
    (iv) Noncompetitive awards to consultants that are on retainer 
contracts,
    (v) Organizational conflicts of interest,
    (vi) Specifying only a ``brand name'' product instead of allowing 
``an equal'' product to be offered and describing the performance of 
other relevant requirements of the procurement, and
    (vii) Any arbitrary action in the procurement process.
    (2) Grantees and subgrantees will conduct procurements in a manner 
that prohibits the use of statutorily or administratively imposed in-
State or local geographical preferences in the evaluation of bids or 
proposals, except in those cases where applicable Federal statutes 
expressly mandate or encourage geographic preference. Nothing in this 
section preempts State licensing laws. When contracting for 
architectural and engineering (A/E) services, geographic location may be 
a selection criteria provided its application leaves an appropriate 
number of qualified firms, given the nature and size of the project, to 
compete for the contract.
    (3) Grantees will have written selection procedures for procurement 
transactions. These procedures will ensure that all solicitations:
    (i) Incorporate a clear and accurate description of the technical 
requirements for the material, product, or service to be procured. Such 
description shall not, in competitive procurements, contain features 
which unduly restrict competition. The description may include a 
statement of the qualitative nature of the material, product or service 
to be procured, and when necessary, shall set forth those minimum 
essential characteristics and standards to which it must conform if it 
is to satisfy its intended use. Detailed product specifications should 
be avoided if at all possible. When it is impractical or uneconomical to 
make a clear and accurate description of the technical requirements, a 
``brand name or equal'' description may be used as a means to define the 
performance or other salient requirements of a procurement. The specific 
features of the named brand which must be met by offerors shall be 
clearly stated; and
    (ii) Identify all requirements which the offerors must fulfill and 
all other

[[Page 218]]

factors to be used in evaluating bids or proposals.
    (4) Grantees and subgrantees will ensure that all prequalified lists 
of persons, firms, or products which are used in acquiring goods and 
services are current and include enough qualified sources to ensure 
maximum open and free competition. Also, grantees and subgrantees will 
not preclude potential bidders from qualifying during the solicitation 
period.
    (d) Methods of procurement to be followed--(1) Procurement by small 
purchase procedures. Small purchase procedures are those relatively 
simple and informal procurement methods for securing services, supplies, 
or other property that do not cost more than the simplified acquisition 
threshold fixed at 41 U.S.C. 403(11) (currently set at $100,000). If 
small purchase procedures are used, price or rate quotations shall be 
obtained from an adequate number of qualified sources.
    (2) Procurement by sealed bids (formal advertising). Bids are 
publicly solicited and a firm-fixed-price contract (lump sum or unit 
price) is awarded to the responsible bidder whose bid, conforming with 
all the material terms and conditions of the invitation for bids, is the 
lowest in price. The sealed bid method is the preferred method for 
procuring construction, if the conditions in Sec. 80.36(d)(2)(i) apply.
    (i) In order for sealed bidding to be feasible, the following 
conditions should be present:
    (A) A complete, adequate, and realistic specification or purchase 
description is available;
    (B) Two or more responsible bidders are willing and able to compete 
effectively and for the business; and
    (C) The procurement lends itself to a firm fixed price contract and 
the selection of the successful bidder can be made principally on the 
basis of price.
    (ii) If sealed bids are used, the following requirements apply:
    (A) The invitation for bids will be publicly advertised and bids 
shall be solicited from an adequate number of known suppliers, providing 
them sufficient time prior to the date set for opening the bids;
    (B) The invitation for bids, which will include any specifications 
and pertinent attachments, shall define the items or services in order 
for the bidder to properly respond;
    (C) All bids will be publicly opened at the time and place 
prescribed in the invitation for bids;
    (D) A firm fixed-price contract award will be made in writing to the 
lowest responsive and responsible bidder. Where specified in bidding 
documents, factors such as discounts, transportation cost, and life 
cycle costs shall be considered in determining which bid is lowest. 
Payment discounts will only be used to determine the low bid when prior 
experience indicates that such discounts are usually taken advantage of; 
and
    (E) Any or all bids may be rejected if there is a sound documented 
reason.
    (3) Procurement by competitive proposals. The technique of 
competitive proposals is normally conducted with more than one source 
submitting an offer, and either a fixed-price or cost-reimbursement type 
contract is awarded. It is generally used when conditions are not 
appropriate for the use of sealed bids. If this method is used, the 
following requirements apply:
    (i) Requests for proposals will be publicized and identify all 
evaluation factors and their relative importance. Any response to 
publicized requests for proposals shall be honored to the maximum extent 
practical;
    (ii) Proposals will be solicited from an adequate number of 
qualified sources;
    (iii) Grantees and subgrantees will have a method for conducting 
technical evaluations of the proposals received and for selecting 
awardees;
    (iv) Awards will be made to the responsible firm whose proposal is 
most advantageous to the program, with price and other factors 
considered; and
    (v) Grantees and subgrantees may use competitive proposal procedures 
for qualifications-based procurement of architectural/engineering (A/E) 
professional services whereby competitors' qualifications are evaluated 
and the most qualified competitor is selected, subject to negotiation of 
fair and reasonable compensation. The method, where price is not used as 
a selection factor, can only be used in procurement of A/E professional 
services. It

[[Page 219]]

cannot be used to purchase other types of services though A/E firms are 
a potential source to perform the proposed effort.
    (4) Procurement by noncompetitive proposals is procurement through 
solicitation of a proposal from only one source, or after solicitation 
of a number of sources, competition is determined inadequate.
    (i) Procurement by noncompetitive proposals may be used only when 
the award of a contract is infeasible under small purchase procedures, 
sealed bids or competitive proposals and one of the following 
circumstances applies:
    (A) The item is available only from a single source;
    (B) The public exigency or emergency for the requirement will not 
permit a delay resulting from competitive solicitation;
    (C) The awarding agency authorizes noncompetitive proposals; or
    (D) After solicitation of a number of sources, competition is 
determined inadequate.
    (ii) Cost analysis, i.e., verifying the proposed cost data, the 
projections of the data, and the evaluation of the specific elements of 
costs and profits, is required.
    (iii) Grantees and subgrantees may be required to submit the 
proposed procurement to the awarding agency for pre-award review in 
accordance with paragraph (g) of this section.
    (e) Contracting with small and minority firms, women's business 
enterprise and labor surplus area firms. (1) The grantee and subgrantee 
will take all necessary affirmative steps to assure that minority firms, 
women's business enterprises, and labor surplus area firms are used when 
possible.
    (2) Affirmative steps shall include:
    (i) Placing qualified small and minority businesses and women's 
business enterprises on solicitation lists;
    (ii) Assuring that small and minority businesses, and women's 
business enterprises are solicited whenever they are potential sources;
    (iii) Dividing total requirements, when economically feasible, into 
smaller tasks or quantities to permit maximum participation by small and 
minority business, and women's business enterprises;
    (iv) Establishing delivery schedules, where the requirement permits, 
which encourage participation by small and minority business, and 
women's business enterprises;
    (v) Using the services and assistance of the Small Business 
Administration, and the Minority Business Development Agency of the 
Department of Commerce; and
    (vi) Requiring the prime contractor, if subcontracts are to be let, 
to take the affirmative steps listed in paragraphs (e)(2) (i) through 
(v) of this section.
    (f) Contract cost and price. (1) Grantees and subgrantees must 
perform a cost or price analysis in connection with every procurement 
action including contract modifications. The method and degree of 
analysis is dependent on the facts surrounding the particular 
procurement situation, but as a starting point, grantees must make 
independent estimates before receiving bids or proposals. A cost 
analysis must be performed when the offeror is required to submit the 
elements of his estimated cost, e.g., under professional, consulting, 
and architectural engineering services contracts. A cost analysis will 
be necessary when adequate price competition is lacking, and for sole 
source procurements, including contract modifications or change orders, 
unless price resonableness can be established on the basis of a catalog 
or market price of a commercial product sold in substantial quantities 
to the general public or based on prices set by law or regulation. A 
price analysis will be used in all other instances to determine the 
reasonableness of the proposed contract price.
    (2) Grantees and subgrantees will negotiate profit as a separate 
element of the price for each contract in which there is no price 
competition and in all cases where cost analysis is performed. To 
establish a fair and reasonable profit, consideration will be given to 
the complexity of the work to be performed, the risk borne by the 
contractor, the contractor's investment, the amount of subcontracting, 
the quality of its record of past performance, and industry profit rates 
in the surrounding geographical area for similar work.

[[Page 220]]

    (3) Costs or prices based on estimated costs for contracts under 
grants will be allowable only to the extent that costs incurred or cost 
estimates included in negotiated prices are consistent with Federal cost 
principles (see Sec. 80.22). Grantees may reference their own cost 
principles that comply with the applicable Federal cost principles.
    (4) The cost plus a percentage of cost and percentage of 
construction cost methods of contracting shall not be used.
    (g) Awarding agency review. (1) Grantees and subgrantees must make 
available, upon request of the awarding agency, technical specifications 
on proposed procurements where the awarding agency believes such review 
is needed to ensure that the item and/or service specified is the one 
being proposed for purchase. This review generally will take place prior 
to the time the specification is incorporated into a solicitation 
document. However, if the grantee or subgrantee desires to have the 
review accomplished after a solicitation has been developed, the 
awarding agency may still review the specifications, with such review 
usually limited to the technical aspects of the proposed purchase.
    (2) Grantees and subgrantees must on request make available for 
awarding agency pre-award review procurement documents, such as requests 
for proposals or invitations for bids, independent cost estimates, etc. 
when:
    (i) A grantee's or subgrantee's procurement procedures or operation 
fails to comply with the procurement standards in this section; or
    (ii) The procurement is expected to exceed the simplified 
acquisition threshold and is to be awarded without competition or only 
one bid or offer is received in response to a solicitation; or
    (iii) The procurement, which is expected to exceed the simplified 
acquisition threshold, specifies a ``brand name'' product; or
    (iv) The proposed award is more than the simplified acquisition 
threshold and is to be awarded to other than the apparent low bidder 
under a sealed bid procurement; or
    (v) A proposed contract modification changes the scope of a contract 
or increases the contract amount by more than the simplified acquisition 
threshold.
    (3) A grantee or subgrantee will be exempt from the pre-award review 
in paragraph (g)(2) of this section if the awarding agency determines 
that its procurement systems comply with the standards of this section.
    (i) A grantee or subgrantee may request that its procurement system 
be reviewed by the awarding agency to determine whether its system meets 
these standards in order for its system to be certified. Generally, 
these reviews shall occur where there is a continuous high-dollar 
funding, and third-party contracts are awarded on a regular basis.
    (ii) A grantee or subgrantee may self-certify its procurement 
system. Such self-certification shall not limit the awarding agency's 
right to survey the system. Under a self-certification procedure, 
awarding agencies may wish to rely on written assurances from the 
grantee or subgrantee that it is complying with these standards. A 
grantee or subgrantee will cite specific procedures, regulations, 
standards, etc., as being in compliance with these requirements and have 
its system available for review.
    (h) Bonding requirements. For construction or facility improvement 
contracts or subcontracts exceeding the simplified acquisition 
threshold, the awarding agency may accept the bonding policy and 
requirements of the grantee or subgrantee provided the awarding agency 
has made a determination that the awarding agency's interest is 
adequately protected. If such a determination has not been made, the 
minimum requirements shall be as follows:
    (1) A bid guarantee from each bidder equivalent to five percent of 
the bid price. The ``bid guarantee'' shall consist of a firm commitment 
such as a bid bond, certified check, or other negotiable instrument 
accompanying a bid as assurance that the bidder will, upon acceptance of 
his bid, execute such contractual documents as may be required within 
the time specified.
    (2) A performance bond on the part of the contractor for 100 percent 
of the contract price. A ``performance bond'' is

[[Page 221]]

one executed in connection with a contract to secure fulfillment of all 
the contractor's obligations under such contract.
    (3) A payment bond on the part of the contractor for 100 percent of 
the contract price. A ``payment bond'' is one executed in connection 
with a contract to assure payment as required by law of all persons 
supplying labor and material in the execution of the work provided for 
in the contract.
    (i) Contract provisions. A grantee's and subgrantee's contracts must 
contain provisions in paragraph (i) of this section. Federal agencies 
are permitted to require changes, remedies, changed conditions, access 
and records retention, suspension of work, and other clauses approved by 
the Office of Federal Procurement Policy.
    (1) Administrative, contractual, or legal remedies in instances 
where contractors violate or breach contract terms, and provide for such 
sanctions and penalties as may be appropriate. (Contracts more than the 
simplified acquisition threshold)
    (2) Termination for cause and for convenience by the grantee or 
subgrantee including the manner by which it will be effected and the 
basis for settlement. (All contracts in excess of $10,000)
    (3) Compliance with Executive Order 11246 of September 24, 1965, 
entitled ``Equal Employment Opportunity,'' as amended by Executive Order 
11375 of October 13, 1967, and as supplemented in Department of Labor 
regulations (41 CFR chapter 60). (All construction contracts awarded in 
excess of $10,000 by grantees and their contractors or subgrantees)
    (4) Compliance with the Copeland ``Anti-Kickback'' Act (18 U.S.C. 
874) as supplemented in Department of Labor regulations (29 CFR part 3). 
(All contracts and subgrants for construction or repair)
    (5) Compliance with the Davis-Bacon Act (40 U.S.C. 276a to 276a-7) 
as supplemented by Department of Labor regulations (29 CFR part 5). 
(Construction contracts in excess of $2000 awarded by grantees and 
subgrantees when required by Federal grant program legislation)
    (6) Compliance with sections 103 and 107 of the Contract Work Hours 
and Safety Standards Act (40 U.S.C. 327-330) as supplemented by 
Department of Labor regulations (29 CFR part 5). (Construction contracts 
awarded by grantees and subgrantees in excess of $2000, and in excess of 
$2500 for other contracts which involve the employment of mechanics or 
laborers)
    (7) Notice of awarding agency requirements and regulations 
pertaining to reporting.
    (8) Notice of awarding agency requirements and regulations 
pertaining to patent rights with respect to any discovery or invention 
which arises or is developed in the course of or under such contract.
    (9) Awarding agency requirements and regulations pertaining to 
copyrights and rights in data.
    (10) Access by the grantee, the subgrantee, the Federal grantor 
agency, the Comptroller General of the United States, or any of their 
duly authorized representatives to any books, documents, papers, and 
records of the contractor which are directly pertinent to that specific 
contract for the purpose of making audit, examination, excerpts, and 
transcriptions.
    (11) Retention of all required records for three years after 
grantees or subgrantees make final payments and all other pending 
matters are closed.
    (12) Compliance with all applicable standards, orders, or 
requirements issued under section 306 of the Clean Air Act (42 U.S.C. 
1857(h)), section 508 of the Clean Water Act (33 U.S.C. 1368), Executive 
Order 11738, and Environmental Protection Agency regulations (40 CFR 
part 15). (Contracts, subcontracts, and subgrants of amounts in excess 
of $100,000)
    (13) Mandatory standards and policies relating to energy efficiency 
which are contained in the state energy conservation plan issued in 
compliance with the Energy Policy and Conservation Act (Pub. L. 94-163, 
89 Stat. 871).
    (j) Contracting with faith-based organizations. (1)(i) A faith-based 
organization is eligible to contract with grantees and subgrantees, 
including States, on the same basis as any other private organization, 
with respect to contracts

[[Page 222]]

for which such other organizations are eligible.
    (ii) In the selection of goods and services providers, grantees and 
subgrantees, including States, shall not discriminate for or against a 
private organization on the basis of the organization's religious 
character or affiliation.
    (2) The provisions of Sec. Sec. 75.532 and 76.532 applicable to 
grantees and subgrantees apply to a faith-based organization that 
contracts with a grantee or subgrantee, including a State, unless the 
faith-based organization is selected as a result of the genuine and 
independent private choices of individual beneficiaries of the program 
and provided the organization otherwise satisfies the requirements of 
the program.
    (3) A private organization that engages in inherently religious 
activities, such as religious worship, instruction, or proselytization, 
must offer those services separately in time or location from any 
programs or services supported by a contract with a grantee or 
subgrantee, including a State, and participation in any such inherently 
religious activities by beneficiaries of the programs supported by the 
contract must be voluntary, unless the organization is selected as a 
result of the genuine and independent private choices of individual 
beneficiaries of the program and provided the organization otherwise 
satisfies the requirements of the program.
    (4)(i) A faith-based organization that contracts with a grantee or 
subgrantee, including a State, may retain its independence, autonomy, 
right of expression, religious character, and authority over its 
governance.
    (ii) A faith-based organization may, among other things--
    (A) Retain religious terms in its name;
    (B) Continue to carry out its mission, including the definition, 
development, practice, and expression of its religious beliefs;
    (C) Use its facilities to provide services without removing or 
altering religious art, icons, scriptures, or other symbols from these 
facilities;
    (D) Select its board members and otherwise govern itself on a 
religious basis; and
    (E) Include religious references in its mission statement and other 
chartering or governing documents.
    (5) A private organization that contracts with a grantee or 
subgrantee, including a State, shall not discriminate against a 
beneficiary or prospective beneficiary in the provision of program 
services on the basis of religion or religious belief.
    (6) A religious organization's exemption from the Federal 
prohibition on employment discrimination on the basis of religion, in 
section 702(a) of the Civil Rights Act of 1964, 42 U.S.C. 2000e-1, is 
not forfeited when the organization contracts with a grantee or 
subgrantee.

(Approved by the Office of Management and Budget under control number 
1880-0517)

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 49143, Dec. 6, 
1988; 60 FR 19639, 19643, Apr. 19, 1995; 69 FR 31711, June 4, 2004]



Sec. 80.37  Subgrants.

    (a) States. States shall follow state law and procedures when 
awarding and administering subgrants (whether on a cost reimbursement or 
fixed amount basis) of financial assistance to local and Indian tribal 
governments. States shall:
    (1) Ensure that every subgrant includes any clauses required by 
Federal statute and executive orders and their implementing regulations;
    (2) Ensure that subgrantees are aware of requirements imposed upon 
them by Federal statute and regulation;
    (3) Ensure that a provision for compliance with Sec. 80.42 is 
placed in every cost reimbursement subgrant; and
    (4) Conform any advances of grant funds to subgrantees substantially 
to the same standards of timing and amount that apply to cash advances 
by Federal agencies.
    (b) All other grantees. All other grantees shall follow the 
provisions of this part which are applicable to awarding agencies when 
awarding and administering subgrants (whether on a cost reimbursement or 
fixed amount basis)

[[Page 223]]

of financial assistance to local and Indian tribal governments. Grantees 
shall:
    (1) Ensure that every subgrant includes a provision for compliance 
with this part;
    (2) Ensure that every subgrant includes any clauses required by 
Federal statute and executive orders and their implementing regulations; 
and
    (3) Ensure that subgrantees are aware of requirements imposed upon 
them by Federal statutes and regulations.
    (c) Exceptions. By their own terms, certain provisions of this part 
do not apply to the award and administration of subgrants:
    (1) Section 80.10;
    (2) Section 80.11;
    (3) The letter-of-credit procedures specified in Treasury 
Regulations at 31 CFR part 205, cited in Sec. 80.21; and
    (4) Section 80.50.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

               Reports, Records Retention, and Enforcement



Sec. 80.40  Monitoring and reporting program performance.

    (a) Monitoring by grantees. Grantees are responsible for managing 
the day-to-day operations of grant and subgrant supported activities. 
Grantees must monitor grant and subgrant supported activities to assure 
compliance with applicable Federal requirements and that performance 
goals are being achieved. Grantee monitoring must cover each program, 
function or activity.
    (b) Nonconstruction performance reports. The Federal agency may, if 
it decides that performance information available from subsequent 
applications contains sufficient information to meet its programmatic 
needs, require the grantee to submit a performance report only upon 
expiration or termination of grant support. Unless waived by the Federal 
agency this report will be due on the same date as the final Financial 
Status Report.
    (1) Grantees shall submit annual performance reports unless the 
awarding agency requires quarterly or semi-annual reports. However, 
performance reports will not be required more frequently than quarterly. 
Annual reports shall be due 90 days after the grant year, quarterly or 
semi-annual reports shall be due 30 days after the reporting period. The 
final performance report will be due 90 days after the expiration or 
termination of grant support. If a justified request is submitted by a 
grantee, the Federal agency may extend the due date for any performance 
report. Additionally, requirements for unnecessary performance reports 
may be waived by the Federal agency.
    (2) Performance reports will contain, for each grant, brief 
information on the following:
    (i) A comparison of actual accomplishments to the objectives 
established for the period. Where the output of the project can be 
quantified, a computation of the cost per unit of output may be required 
if that information will be useful.
    (ii) The reasons for slippage if established objectives were not 
met.
    (iii) Additional pertinent information including, when appropriate, 
analysis and explanation of cost overruns or high unit costs.
    (3) Grantees will not be required to submit more than the original 
and two copies of performance reports.
    (4) Grantees will adhere to the standards in this section in 
prescribing performance reporting requirements for subgrantees.
    (c) Construction performance reports. For the most part, on-site 
technical inspections and certified percentage-of-completion data are 
relied on heavily by Federal agencies to monitor progress under 
construction grants and subgrants. The Federal agency will require 
additional formal performance reports only when considered necessary, 
and never more frequently than quarterly.
    (d) Significant developments. Events may occur between the scheduled 
performance reporting dates which have significant impact upon the grant 
or subgrant supported activity. In such cases, the grantee must inform 
the Federal agency as soon as the following types of conditions become 
known:
    (1) Problems, delays, or adverse conditions which will materially 
impair the ability to meet the objective of the

[[Page 224]]

award. This disclosure must include a statement of the action taken, or 
contemplated, and any assistance needed to resolve the situation.
    (2) Favorable developments which enable meeting time schedules and 
objectives sooner or at less cost than anticipated or producing more 
beneficial results than originally planned.
    (e) Federal agencies may make site visits as warranted by program 
needs.
    (f) Waivers, extensions. (1) Federal agencies may waive any 
performance report required by this part if not needed.
    (2) The grantee may waive any performance report from a subgrantee 
when not needed. The grantee may extend the due date for any performance 
report from a subgrantee if the grantee will still be able to meet its 
performance reporting obligations to the Federal agency.

(Approved by the Office of Management and Budget under control number 
1880-0517)

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 49143, Dec. 6, 
1988]



Sec. 80.41  Financial reporting.

    (a) General. (1) Except as provided in paragraphs (a) (2) and (5) of 
this section, grantees will use only the forms specified in paragraphs 
(a) through (e) of this section, and such supplementary or other forms 
as may from time to time be authorized by OMB, for:
    (i) Submitting financial reports to Federal agencies, or
    (ii) Requesting advances or reimbursements when letters of credit 
are not used.
    (2) Grantees need not apply the forms prescribed in this section in 
dealing with their subgrantees. However, grantees shall not impose more 
burdensome requirements on subgrantees.
    (3) Grantees shall follow all applicable standard and supplemental 
Federal agency instructions approved by OMB to the extend required under 
the Paperwork Reduction Act of 1980 for use in connection with forms 
specified in paragraphs (b) through (e) of this section. Federal 
agencies may issue substantive supplementary instructions only with the 
approval of OMB. Federal agencies may shade out or instruct the grantee 
to disregard any line item that the Federal agency finds unnecessary for 
its decisionmaking purposes.
    (4) Grantees will not be required to submit more than the original 
and two copies of forms required under this part.
    (5) Federal agencies may provide computer outputs to grantees to 
expedite or contribute to the accuracy of reporting. Federal agencies 
may accept the required information from grantees in machine usable 
format or computer printouts instead of prescribed forms.
    (6) Federal agencies may waive any report required by this section 
if not needed.
    (7) Federal agencies may extend the due date of any financial report 
upon receiving a justified request from a grantee.
    (b) Financial Status Report--(1) Form. Grantees will use Standard 
Form 269 or 269A, Financial Status Report, to report the status of funds 
for all nonconstruction grants and for construction grants when required 
in accordance with Sec. 80.41(e)(2)(iii).
    (2) Accounting basis. Each grantee will report program outlays and 
program income on a cash or accrual basis as prescribed by the awarding 
agency. If the Federal agency requires accrual information and the 
grantee's accounting records are not normally kept on the accural basis, 
the grantee shall not be required to convert its accounting system but 
shall develop such accrual information through and analysis of the 
documentation on hand.
    (3) Frequency. The Federal agency may prescribe the frequency of the 
report for each project or program. However, the report will not be 
required more frequently than quarterly. If the Federal agency does not 
specify the frequency of the report, it will be submitted annually. A 
final report will be required upon expiration or termination of grant 
support.
    (4) Due date. When reports are required on a quarterly or semiannual 
basis, they will be due 30 days after the reporting period. When 
required on an annual basis, they will be due 90 days after the grant 
year. Final reports will

[[Page 225]]

be due 90 days after the expiration or termination of grant support.
    (c) Federal Cash Transactions Report--(1) Form. (i) For grants paid 
by letter or credit, Treasury check advances or electronic transfer of 
funds, the grantee will submit the Standard Form 272, Federal Cash 
Transactions Report, and when necessary, its continuation sheet, 
Standard Form 272a, unless the terms of the award exempt the grantee 
from this requirement.
    (ii) These reports will be used by the Federal agency to monitor 
cash advanced to grantees and to obtain disbursement or outlay 
information for each grant from grantees. The format of the report may 
be adapted as appropriate when reporting is to be accomplished with the 
assistance of automatic data processing equipment provided that the 
information to be submitted is not changed in substance.
    (2) Forecasts of Federal cash requirements. Forecasts of Federal 
cash requirements may be required in the ``Remarks'' section of the 
report.
    (3) Cash in hands of subgrantees. When considered necessary and 
feasible by the Federal agency, grantees may be required to report the 
amount of cash advances in excess of three days' needs in the hands of 
their subgrantees or contractors and to provide short narrative 
explanations of actions taken by the grantee to reduce the excess 
balances.
    (4) Frequency and due date. Grantees must submit the report no later 
than 15 working days following the end of each quarter. However, where 
an advance either by letter of credit or electronic transfer of funds is 
authorized at an annualized rate of one million dollars or more, the 
Federal agency may require the report to be submitted within 15 working 
days following the end of each month.
    (d) Request for advance or reimbursement--(1) Advance payments. 
Requests for Treasury check advance payments will be submitted on 
Standard Form 270, Request for Advance or Reimbursement. (This form will 
not be used for drawdowns under a letter of credit, electronic funds 
transfer or when Treasury check advance payments are made to the grantee 
automatically on a predetermined basis.)
    (2) Reimbursements. Requests for reimbursement under nonconstruction 
grants will also be submitted on Standard Form 270. (For reimbursement 
requests under construction grants, see paragraph (e)(1) of this 
section.)
    (3) The frequency for submitting payment requests is treated in 
Sec. 80.41(b)(3).
    (e) Outlay report and request for reimbursement for construction 
programs--(1) Grants that support construction activities paid by 
reimbursement method. (i) Requests for reimbursement under construction 
grants will be submitted on Standard Form 271, Outlay Report and Request 
for Reimbursement for Construction Programs. Federal agencies may, 
however, prescribe the Request for Advance or Reimbursement form, 
specified in Sec. 80.41(d), instead of this form.
    (ii) The frequency for submitting reimbursement requests is treated 
in Sec. 80.41(b)(3).
    (2) Grants that support construction activities paid by letter of 
credit, electronic funds transfer or Treasury check advance. (i) When a 
construction grant is paid by letter of credit, electronic funds 
transfer or Treasury check advances, the grantee will report its outlays 
to the Federal agency using Standard Form 271, Outlay Report and Request 
for Reimbursement for Construction Programs. The Federal agency will 
provide any necessary special instruction. However, frequency and due 
date shall be governed by Sec. 80.41(b) (3) and (4).
    (ii) When a construction grant is paid by Treasury check advances 
based on periodic requests from the grantee, the advances will be 
requested on the form specified in Sec. 80.41(d).
    (iii) The Federal agency may substitute the Financial Status Report 
specified in Sec. 80.41(b) for the Outlay Report and Request for 
Reimbursement for Construction Programs.

[[Page 226]]

    (3) Accounting basis. The accounting basis for the Outlay Report and 
Request for Reimbursement for Construction Programs shall be governed by 
Sec. 80.41(b)(2).

(Approved by the Office of Management and Budget under control number 
1880-0517)

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 49143, Dec. 6, 
1988]



Sec. 80.42  Retention and access requirements for records.

    (a) Applicability. (1) This section applies to all financial and 
programmatic records, supporting documents, statistical records, and 
other records of grantees or subgrantees which are:
    (i) Required to be maintained by the terms of this part, program 
regulations or the grant agreement, or
    (ii) Otherwise reasonably considered as pertinent to program 
regulations or the grant agreement.
    (2) This section does not apply to records maintained by contractors 
or subcontractors. For a requirement to place a provision concerning 
records in certain kinds of contracts, see Sec. 80.36(i)(10).
    (b) Length of retention period. (1) Except as otherwise provided, 
records must be retained for three years from the starting date 
specified in paragraph (c) of this section.
    (2) If any litigation, claim, negotiation, audit or other action 
involving the records has been started before the expiration of the 3-
year period, the records must be retained until completion of the action 
and resolution of all issues which arise from it, or until the end of 
the regular 3-year period, whichever is later.
    (3) To avoid duplicate recordkeeping, awarding agencies may make 
special arrangements with grantees and subgrantees to retain any records 
which are continuously needed for joint use. The awarding agency will 
request transfer of records to its custody when it determines that the 
records possess long-term retention value. When the records are 
transferred to or maintained by the Federal agency, the 3-year retention 
requirement is not applicable to the grantee or subgrantee.
    (4) A recipient that receives funds under a program subject to 20 
U.S.C. 1232f (section 437 of the General Education Provisions Act) shall 
retain records for a minimum of three years after the starting date 
specified in paragraph (c) of this section.
    (c) Starting date of retention period--(1) General. When grant 
support is continued or renewed at annual or other intervals, the 
retention period for the records of each funding period starts on the 
day the grantee or subgrantee submits to the awarding agency its single 
or last expenditure report for that period. However, if grant support is 
continued or renewed quarterly, the retention period for each year's 
records starts on the day the grantee submits its expenditure report for 
the last quarter of the Federal fiscal year. In all other cases, the 
retention period starts on the day the grantee submits its final 
expenditure report. If an expenditure report has been waived, the 
retention period starts on the day the report would have been due.
    (2) Real property and equipment records. The retention period for 
real property and equipment records starts from the date of the 
disposition or replacement or transfer at the direction of the awarding 
agency.
    (3) Records for income transactions after grant or subgrant support. 
In some cases grantees must report income after the period of grant 
support. Where there is such a requirement, the retention period for the 
records pertaining to the earning of the income starts from the end of 
the grantee's fiscal year in which the income is earned.
    (4) Indirect cost rate proposals, cost allocations plans, etc. This 
paragraph applies to the following types of documents, and their 
supporting records: indirect cost rate computations or proposals, cost 
allocation plans, and any similar accounting computations of the rate at 
which a particular group of costs is chargeable (such as computer usage 
chargeback rates or composite fringe benefit rates).
    (i) If submitted for negotiation. If the proposal, plan, or other 
computation is required to be submitted to the Federal Government (or to 
the grantee) to form the basis for negotiation of the rate, then the 3-
year retention period for its

[[Page 227]]

supporting records starts from the date of such submission.
    (ii) If not submitted for negotiation. If the proposal, plan, or 
other computation is not required to be submitted to the Federal 
Government (or to the grantee) for negotiation purposes, then the 3-year 
retention period for the proposal plan, or computation and its 
supporting records starts from end of the fiscal year (or other 
accounting period) covered by the proposal, plan, or other computation.
    (d) Substitution of microfilm. Copies made by microfilming, 
photocopying, or similar methods may be substituted for the original 
records.
    (e) Access to records--(1) Records of grantees and subgrantees. The 
awarding agency and the Comptroller General of the United States, or any 
of their authorized representatives, shall have the right of access to 
any pertinent books, documents, papers, or other records of grantees and 
subgrantees which are pertinent to the grant, in order to make audits, 
examinations, excerpts, and transcripts.
    (2) Expiration of right of access. The rights of access in this 
section must not be limited to the required retention period but shall 
last as long as the records are retained.
    (f) Restrictions on public access. The Federal Freedom of 
Information Act (5 U.S.C. 552) does not apply to records Unless required 
by Federal, State, or local law, grantees and subgrantees are not 
required to permit public access to their records.

(Approved by the Office of Management and Budget under control number 
1880-0517)

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 8072, Mar. 11, 
1988; 53 FR 49143, Dec. 6, 1988; 64 FR 50392, Sept. 16, 1999]



Sec. 80.43  Enforcement.

    (a) Remedies for noncompliance. If a grantee or subgrantee 
materially fails to comply with any term of an award, whether stated in 
a Federal statute or regulation, an assurance, in a State plan or 
application, a notice of award, or elsewhere, the awarding agency may 
take one or more of the following actions, as appropriate in the 
circumstances:
    (1) Temporarily withhold cash payments pending correction of the 
deficiency by the grantee or subgrantee or more severe enforcement 
action by the awarding agency,
    (2) Disallow (that is, deny both use of funds and matching credit 
for) all or part of the cost of the activity or action not in 
compliance,
    (3) Wholly or partly suspend or terminate the current award for the 
grantee's or subgrantee's program,
    (4) Withhold further awards for the program, or
    (5) Take other remedies that may be legally available.
    (b) Hearings, appeals. In taking an enforcement action, the awarding 
agency will provide the grantee or subgrantee an opportunity for such 
hearing, appeal, or other administrative proceeding to which the grantee 
or subgrantee is entitled under any statute or regulation applicable to 
the action involved.
    (c) Effects of suspension and termination. Costs of grantee or 
subgrantee resulting from obligations incurred by the grantee or 
subgrantee during a suspension or after termination of an award are not 
allowable unless the awarding agency expressly authorizes them in the 
notice of suspension or termination or subsequently. Other grantee or 
subgrantee costs during suspension or after termination which are 
necessary and not reasonably avoidable are allowable if:
    (1) The costs result from obligations which were properly incurred 
by the grantee or subgrantee before the effective date of suspension or 
termination, are not in anticipation of it, and, in the case of a 
termination, are noncancellable, and,
    (2) The costs would be allowable if the award were not suspended or 
expired normally at the end of the funding period in which the 
termination takes effect.
    (d) Relationship to debarment and suspension. The enforcement 
remedies identified in this section, including suspension and 
termination, do not preclude grantee or subgrantee from

[[Page 228]]

being subject to ``Debarment and Suspension'' under E.O. 12549 (see 
Sec. 80.35).

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.44  Termination for convenience.

    Except as provided in Sec. 80.43 awards may be terminated in whole 
or in part only as follows:
    (a) By the awarding agency with the consent of the grantee or 
subgrantee in which case the two parties shall agree upon the 
termination conditions, including the effective date and in the case of 
partial termination, the portion to be terminated, or
    (b) By the grantee or subgrantee upon written notification to the 
awarding agency, setting forth the reasons for such termination, the 
effective date, and in the case of partial termination, the portion to 
be terminated. However, if, in the case of a partial termination, the 
awarding agency determines that the remaining portion of the award will 
not accomplish the purposes for which the award was made, the awarding 
agency may terminate the award in its entirety under either Sec. 80.43 
or paragraph (a) of this section.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



                 Subpart D_After-the-Grant Requirements



Sec. 80.50  Closeout.

    (a) General. The Federal agency will close out the award when it 
determines that all applicable administrative actions and all required 
work of the grant has been completed.
    (b) Reports. Within 90 days after the expiration or termination of 
the grant, the grantee must submit all financial, performance, and other 
reports required as a condition of the grant. Upon request by the 
grantee, Federal agencies may extend this timeframe. These may include 
but are not limited to:
    (1) Final performance or progress report.
    (2) Financial Status Report (SF 269) or Outlay Report and Request 
for Reimbursement for Construction Programs (SF-271) (as applicable).
    (3) Final request for payment (SF-270) (if applicable).
    (4) Invention disclosure (if applicable).
    (5) Federally-owned property report. In accordance with Sec. 
80.32(f), a grantee must submit an inventory of all federally owned 
property (as distinct from property acquired with grant funds) for which 
it is accountable and request disposition instructions from the Federal 
agency of property no longer needed.
    (c) Cost adjustment. The Federal agency will, within 90 days after 
receipt of reports in paragraph (b) of this section, make upward or 
downward adjustments to the allowable costs.
    (d) Cash adjustments. (1) The Federal agency will make prompt 
payment to the grantee for allowable reimbursable costs.
    (2) The grantee must immediately refund to the Federal agency any 
balance of unobligated (unencumbered) cash advanced that is not 
authorized to be retained for use on other grants.

(Approved by the Office of Management and Budget under control number 
1880-0517)

(Authority: 20 U.S.C. 3474; OMB Circular A-102)

[53 FR 8071 and 8087, Mar. 11, 1988, as amended at 53 FR 49143, Dec. 6, 
1988]



Sec. 80.51  Later disallowances and adjustments.

    The closeout of a grant does not affect:
    (a) The Federal agency's right to disallow costs and recover funds 
on the basis of a later audit or other review;
    (b) The grantee's obligation to return any funds due as a result of 
later refunds, corrections, or other transactions;
    (c) Records retention as required in Sec. 80.42;
    (d) Property management requirements in Sec. Sec. 80.31 and 80.32; 
and
    (e) Audit requirements in Sec. 80.26.

(Authority: 20 U.S.C. 3474; OMB Circular A-102)



Sec. 80.52  Collection of amounts due.

    (a) Any funds paid to a grantee in excess of the amount to which the 
grantee is finally determined to be entitled

[[Page 229]]

under the terms of the award constitute a debt to the Federal 
Government. If not paid within a reasonable period after demand, the 
Federal agency may reduce the debt by:
    (1) Making an adminstrative offset against other requests for 
reimbursements,
    (2) Withholding advance payments otherwise due to the grantee, or
    (3) Other action permitted by law.
    (b) Except where otherwise provided by statutes or regulations, the 
Federal agency will charge interest on an overdue debt in accordance 
with the Federal Claims Collection Standards (4 CFR Ch. II). The date 
from which interest is computed is not extended by litigation or the 
filing of any form of appeal.

Subpart E--Entitlement [Reserved]



PART 81_GENERAL EDUCATION PROVISIONS ACT_ENFORCEMENT--Table of Contents




                      Subpart A_General Provisions

Sec.
81.1 Purpose.
81.2 Definitions.
81.3 Jurisdiction of the Office of Administrative Law Judges.
81.4 Membership and assignment to cases.
81.5 Authority and responsibility of an Administrative Law Judge.
81.6 Hearing on the record.
81.7 Non-party participation.
81.8 Representation.
81.9 Location of proceedings.
81.10 Ex parte communications.
81.11 Motions.
81.12 Filing requirements.
81.13 Mediation.
81.14 Settlement negotiations.
81.15 Evidence.
81.16 Discovery.
81.17 Privileges.
81.18 The record.
81.19 Costs and fees of parties.
81.20 Interlocutory appeals to the Secretary from rulings of an ALJ.

                Subpart B_Hearings for Recovery of Funds

81.30 Basis for recovery of funds.
81.31 Measure of recovery.
81.32 Proportionality.
81.33 Mitigating circumstances.
81.34 Notice of a disallowance decision.
81.35 Reduction of claims.
81.36 Compromise of claims under General Education Provisions Act.
81.37 Application for review of a disallowance decision.
81.38 Consideration of an application for review.
81.39 Submission of evidence.
81.40 Burden of proof.
81.41 Initial decision.
81.42 Petition for review of initial decision.
81.43 Review by the Secretary.
81.44 Final decision of the Department.
81.45 Collection of claims.

Appendix to Part 81--Illustrations of Proportionality

    Authority: 20 U.S.C. 1221e-3, 1234-1234i, and 3474(a), unless 
otherwise noted.

    Source: 54 FR 19512, May 5, 1989, unless otherwise noted.



                      Subpart A_General Provisions



Sec. 81.1  Purpose.

    The regulations in this part govern the enforcement of legal 
requirements under applicable programs administered by the Department of 
Education and implement Part E of the General Education Provisions Act 
(GEPA).

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), and 3474(a))



Sec. 81.2  Definitions.

    The following definitions apply to the terms used in this part:
    Administrative Law Judge (ALJ) means a judge appointed by the 
Secretary in accordance with section 451 (b) and (c) of GEPA.
    Applicable program means any program for which the Secretary of 
Education has administrative responsibility, except a program authorized 
by--
    (a) The Higher Education Act of 1965, as amended;
    (b) The Act of September 30, 1950 (Pub. L. 874, 81st Congress), as 
amended; or
    (c) The Act of September 23, 1950 (Pub. L. 815, 81st Congress), as 
amended.
    Department means the United States Department of Education.
    Disallowance decision means the decision of an authorized 
Departmental official that a recipient must return funds because it made 
an expenditure of funds that was not allowable or otherwise failed to 
discharge its obligation to account properly for funds. Such a

[[Page 230]]

decision, referred to as a ``preliminary departmental decision'' in 
section 452 of GEPA, is subject to review by the Office of 
Administrative Law Judges.
    Party means either of the following:
    (a) A recipient that appeals a decision.
    (b) An authorized Departmental official who issues a decision that 
is appealed.
    Recipient means the recipient of a grant or cooperative agreement 
under an applicable program.
    Secretary means the Secretary of the Department of Education or an 
official or employee of the Department acting for the Secretary under a 
delegation of authority.

(Authority: 20 U.S.C. 1221e-3, 1234 (b), (c), and (f)(1), 1234a(a)(1), 
1234i, and 3474(a))

[54 FR 19512, May 5, 1989, as amended at 58 FR 43473, Aug. 16, 1993]



Sec. 81.3  Jurisdiction of the Office of Administrative Law Judges.

    (a) The Office of Administrative Law Judges (OALJ) established under 
section 451(a) of GEPA has jurisdiction to conduct the following 
proceedings concerning an applicable program:
    (1) Hearings for recovery of funds.
    (2) Withholding hearings.
    (3) Cease and desist hearings.
    (b) The OALJ also has jurisdiction to conduct other proceedings 
designated by the Secretary. If a proceeding or class of proceedings is 
so designated, the Department publishes a notice of the designation in 
the Federal Register.

(Authority: 5 U.S.C. 554, 20 U.S.C. 1234(a))



Sec. 81.4  Membership and assignment to cases.

    (a) The Secretary appoints Administrative Law Judges as members of 
the OALJ.
    (b) The Secretary appoints one of the members of the OALJ to be the 
chief judge. The chief judge is responsible for the efficient and 
effective administration of the OALJ.
    (c) The chief judge assigns an ALJ to each case or class of cases 
within the jurisdiction of the OALJ.

(Authority: 20 U.S.C. 1221e-3, 1234 (b) and (c), and 3474(a))



Sec. 81.5  Authority and responsibility of an Administrative Law Judge.

    (a) An ALJ assigned to a case conducts a hearing on the record. The 
ALJ regulates the course of the proceedings and the conduct of the 
parties to ensure a fair, expeditious, and economical resolution of the 
case in accordance with applicable law.
    (b) An ALJ is bound by all applicable statutes and regulations and 
may neither waive them nor rule them invalid.
    (c) An ALJ is disqualified in any case in which the ALJ has a 
substantial interest, has been of counsel, is or has been a material 
witness, or is so related to or connected with any party or the party's 
attorney as to make it improper for the ALJ to be assigned to the case.
    (d)(1) An ALJ may disqualify himself or herself at any time on the 
basis of the standards in paragraph (c) of this section.
    (2) A party may file a motion to disqualify an ALJ under the 
standards in paragraph (c) of this section. A motion to disqualify must 
be accompanied by an affidavit that meets the requirements of 5 U.S.C. 
556(b). Upon the filing of such a motion and affidavit, the ALJ decides 
the disqualification matter before proceeding further with the case.

(Authority: 5 U.S.C. 556(b); 20 U.S.C. 1221e-3, 1234 (d), (f)(1) and 
(g)(1), and 3474(a))



Sec. 81.6  Hearing on the record.

    (a) A hearing on the record is a process for the orderly 
presentation of evidence and arguments by the parties.
    (b) Except as otherwise provided in this part or in a notice of 
designation under Sec. 81.3(b), an ALJ conducts the hearing entirely on 
the basis of briefs and other written submissions unless--
    (1) The ALJ determines, after reviewing all appropriate submissions, 
that an evidentiary hearing is needed to resolve a material factual 
issue in dispute; or
    (2) The ALJ determines, after reviewing all appropriate submissions, 
that oral argument is needed to clarify the issues in the case.
    (c) At a party's request, the ALJ shall confer with the parties in 
person or by conference telephone call before

[[Page 231]]

determining whether an evidentiary hearing or an oral argument is 
needed.

Authority: 5 U.S.C. 556(d); 20 U.S.C. 1221e-3, 1234(f)(1), and 3474)



Sec. 81.7  Non-party participation.

    (a) A person or organization, other than a party, that wishes to 
participate in a case shall file an application to participate with the 
ALJ assigned to the case. The application must--
    (1) Identify the case in which participation is sought;
    (2) State how the applicant's interest relates to the case;
    (3) State how the applicant's participation would aid in the 
disposition of the case; and
    (4) State how the applicant seeks to participate.
    (b) The ALJ may permit an applicant to participate if the ALJ 
determines that the applicant's participation--
    (1) Will aid in the disposition of the case;
    (2) Will not unduly delay the proceedings; and
    (3) Will not prejudice the adjudication of the parties' rights.
    (c) If the ALJ permits an applicant to participate, the ALJ permits 
the applicant to file briefs.
    (d)(1) In addition to the participation described in paragraph (c) 
of this section, the ALJ may permit the applicant to participate in any 
or all of the following ways:
    (i) Submit documentary evidence.
    (ii) Participate in an evidentiary hearing afforded the parties.
    (iii) Participate in an oral argument afforded the parties.
    (2) The ALJ may place appropriate limits on an applicant's 
participation to ensure the efficient conduct of the proceedings.
    (e) A non-party participant shall comply with the requirements for 
parties in Sec. 81.11 and Sec. 81.12.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), and 3474(a))



Sec. 81.8  Representation.

    A party to, or other participant in, a case may be represented by 
counsel.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), and 3474(a))



Sec. 81.9  Location of proceedings.

    (a) An ALJ may hold conferences of the parties in person or by 
conference telephone call.
    (b) Any conference, hearing, argument, or other proceeding at which 
the parties are required to appear in person is held in the Washington, 
DC metropolitan area unless the ALJ determines that the convenience and 
necessity of the parties or their representatives requires that it be 
held elsewhere.

(Authority: 5 U.S.C. 554(b); 20 U.S.C. 1221e-3, 1234(f)(1), and 3474(a))



Sec. 81.10  Ex parte communications.

    A party to, or other participant in, a case may not communicate with 
an ALJ on any fact in issue in the case or on any matter relevant to the 
merits of the case unless the parties are given notice and an 
opportunity to participate.

(Authority: 5 U.S.C. 554(d)(1), 557(d)(1)(A); 20 U.S.C. 1221e-3, 
1234(f)(1), and 3474(a))



Sec. 81.11  Motions.

    (a) To obtain an order or a ruling from an ALJ, a party shall make a 
motion to the ALJ.
    (b) Except for a request for an extension of time, a motion must be 
made in writing unless the parties appear in person or participate in a 
conference telephone call. The ALJ may require a party to reduce an oral 
motion to writing.
    (c) If a party files a motion, the party shall serve a copy of the 
motion on the other party on the filing date by hand-delivery or by 
mail. If agreed upon by the parties, service of the motion may be made 
upon the other party by facsimile transmission.
    (d) Except for a request for an extension of time, the ALJ may not 
grant a party's written motion without the consent of the other party 
unless the other party has had at least 21 days from the date of service 
of the motion to respond. However, the ALJ may deny a motion without 
awaiting a response.

[[Page 232]]

    (e) The date of service of a motion is determined by the standards 
for determining a filing date in Sec. 81.12(d).

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), and 3474(a))

[54 FR 19512, May 5, 1989, as amended at 57 FR 56795, Nov. 30, 1992]



Sec. 81.12  Filing requirements.

    (a) Any written submission to an ALJ or the OALJ under this part 
must be filed by hand-delivery, by mail, or by facsimile transmission. 
The Secretary discourages the use of facsimile transmission for 
documents longer than five pages.
    (b) If a party files a brief or other document with an ALJ or the 
OALJ, the party shall serve a copy of the filed material on the other 
party on the filing date by hand-delivery or by mail. If agreed upon by 
the parties, service of a document may be made upon the other party by 
facsimile transmission.
    (c) Any written submission to an ALJ or the OALJ must be accompanied 
by a statement certifying the date that the filed material was filed and 
served on the other party.
    (d)(1) The filing date for a written submission to an ALJ or the 
OALJ is the date the document is--
    (i) Hand-delivered;
    (ii) Mailed; or
    (iii) Sent by facsimile transmission.
    (2) If a scheduled filing date falls on a Saturday, Sunday, or 
Federal holiday, the filing deadline is the next business day.
    (e) A party filing by facsimile transmission is responsible for 
confirming that a complete and legible copy of the document was received 
by the Department.
    (f) If a document is filed by facsimile transmission, a follow-up 
hard copy must be filed by hand-delivery or by mail within a reasonable 
period of time.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), and 3474(a))

[54 FR 19512, May 5, 1989, as amended at 57 FR 56795, Nov. 30, 1992]



Sec. 81.13  Mediation.

    (a) Voluntary mediation is available for proceedings that are 
pending before the OALJ.
    (b) A mediator must be independent of, and agreed to by, the parties 
to the case.
    (c) A party may request mediation by filing a motion with the ALJ 
assigned to the case. The OALJ arranges for a mediator if the parties to 
the case agree to mediation.
    (d) A party may terminate mediation at any time. Mediation is 
limited to 120 days unless the mediator informs the ALJ that--
    (1) The parties are likely to resolve some or all of the dispute; 
and
    (2) An extension of time will facilitate an agreement.
    (e) The ALJ stays the proceedings during mediation.
    (f)(1) Evidence of conduct or statements made during mediation is 
not admissible in any proceeding under this part. However, evidence that 
is otherwise discoverable may not be excluded merely because it was 
presented during mediation.
    (2) A mediator may not disclose, in any proceeding under this part, 
information acquired as a part of his or her official mediation duties 
that relates to any fact in issue in the case or any matter relevant to 
the merits of the case.

(Authority: 20 U.S.C. 1221e-3, 1234 (f)(1) and (h), and 3474(a))



Sec. 81.14  Settlement negotiations.

    (a) If the parties to a case file a joint motion requesting a stay 
of the proceedings for settlement negotiations, or for approval of a 
settlement agreement, the ALJ may grant a stay of the proceedings upon a 
finding of good cause.
    (b) Evidence of conduct or statements made during settlement 
negotiations is not admissible in any proceeding under this part. 
However, evidence that is otherwise discoverable may not be excluded 
merely because it was presented during settlement negotiations.
    (c) The parties may not disclose the contents of settlement 
negotiations to

[[Page 233]]

the ALJ. If the parties enter into a settlement agreement and file a 
joint motion to dismiss the case, the ALJ grants the motion.

(Authority: 20 U.S.C. 554(c)(1), 1221e-3, 1234(f)(1), and 3474(a))

[54 FR 19512, May 5, 1989, as amended at 58 FR 43473, Aug. 16, 1993]



Sec. 81.15  Evidence.

    (a) The Federal Rules of Evidence do not apply to proceedings under 
this part. However, the ALJ accepts only evidence that is--
    (1) Relevant;
    (2) Material;
    (3) Not unduly repetitious; and
    (4) Not inadmissible under Sec. 81.13 or Sec. 81.14.
    (b) The ALJ may take official notice of facts that are generally 
known or capable of accurate and ready determination by resort to 
sources whose accuracy cannot reasonably be questioned.

(Authority: 5 U.S.C. 556 (d) and (e); 20 U.S.C. 1221e-3, 1234(f)(1), and 
3474(a))



Sec. 81.16  Discovery.

    (a) The parties to a case are encouraged to exchange relevant 
documents and information voluntarily.
    (b) The ALJ, at a party's request, may order compulsory discovery 
described in paragraph (c) of this section if the ALJ determines that--
    (1) The order is necessary to secure a fair, expeditious, and 
economical resolution of the case;
    (2) The discovery requested is likely to elicit relevant information 
with respect to an issue in the case;
    (3) The discovery request was not made primarily for the purposes of 
delay or harassment; and
    (4) The order would serve the ends of justice.
    (c) If a compulsory discovery is permissible under paragraph (b) of 
this section, the ALJ may order a party to do one or more of the 
following:
    (1) Make relevant documents available for inspection and copying by 
the party making the request.
    (2) Answer written interrogatories that inquire into relevant 
matters.
    (3) Have depositions taken.
    (d) The ALJ may issue a subpoena to enforce an order described in 
this section and may apply to the appropriate court of the United States 
to enforce the subpoena.
    (e) The ALJ may not compel the discovery of information that is 
legally privileged.
    (f)(1) The ALJ limits the period for discovery to not more than 90 
days but may grant an extension for good cause.
    (2) At a party's request, the ALJ may set a specific schedule for 
discovery.

(Authority: 20 U.S.C. 1234(f)(1) and (g))



Sec. 81.17  Privileges.

    The privilege of a person or governmental organization not to 
produce documents or provide information in a proceeding under this part 
is governed by the principles of common law as interpreted by the courts 
of the United States.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), and 3474(a))



Sec. 81.18  The record.

    (a) The ALJ arranges for any evidentiary hearing or oral argument to 
be recorded and transcribed and makes the transcript available to the 
parties. Transcripts are made available to non-Departmental parties at a 
cost not to exceed the actual cost of duplication.
    (b) The record of a hearing on the record consists of--
    (1) All papers filed in the proceeding;
    (2) Documentary evidence admitted by the ALJ;
    (3) The transcript of any evidentiary hearing or oral argument; and
    (4) Rulings, orders, and subpoenas issued by the ALJ.

(Authority: 5 U.S.C. 556(e), 557(c); 20 U.S.C. 1221e-3(a)(1), 
1234(f)(1), 3474(a))

[54 FR 19512, May 5, 1989, as amended at 58 FR 43473, Aug. 16, 1993]



Sec. 81.19  Costs and fees of parties.

    The Equal Access to Justice Act, 5 U.S.C. 504, applies by its terms 
to proceedings under this part. Regulations under that statute are in 34 
CFR part 21.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), and 3474(a))

[[Page 234]]



Sec. 81.20  Interlocutory appeals to the Secretary from rulings of an ALJ.

    (a) A ruling by an ALJ may not be appealed to the Secretary until 
the issuance of an initial decision, except that the Secretary may, at 
any time prior to the issuance of an initial decision, grant review of a 
ruling upon either an ALJ's certification of the ruling to the Secretary 
for review, or the filing of a petition seeking review of an interim 
ruling by one or both of the parties, if--
    (1) That ruling involves a controlling question of substantive or 
procedural law; and
    (2) The immediate resolution of the question will materially advance 
the final disposition of the proceeding or subsequent review will be an 
inadequate remedy.
    (b)(1) A petition for interlocutory review of an interim ruling must 
include the following:
    (i) A brief statement of the facts necessary to an understanding of 
the issue on which review is sought.
    (ii) A statement of the issue.
    (iii) A statement of the reasons showing that the ruling complained 
of involves a controlling question of substantive or procedural law and 
why immediate review of the ruling will materially advance the 
disposition of the case, or why subsequent review will be an inadequate 
remedy.
    (2) A petition may not exceed ten pages, double-spaced, and must be 
accompanied by a copy of the ruling and any findings and opinions 
relating to the ruling. The petition must be filed with the Office of 
Hearings and Appeals, which immediately forwards the petition to the 
Office of the Secretary.
    (c) A copy of the petition must be provided to the ALJ at the time 
the petition is filed under paragraph (b)(2) of this section, and a copy 
of a petition or any certification must be served upon the parties by 
certified mail, return receipt requested. The petition or certification 
must reflect that service.
    (d) If a party files a petition under this section, the ALJ may 
state to the Secretary a view as to whether review is appropriate or 
inappropriate by submitting a brief statement addressing the party's 
petition within 10 days of the ALJ's receipt of the petition for 
interlocutory review. A copy of the statement must be served on all 
parties by certified mail, return receipt requested.
    (e)(1) A party's response, if any, to a petition or certification 
for interlocutory review must be filed within seven days after service 
of the petition or certification, and may not exceed ten pages, double-
spaced, in length. A copy of the response must be filed with the ALJ by 
hand delivery, by regular mail, or by facsimile transmission.
    (2) A party shall serve a copy of its response on all parties on the 
filing date by hand-delivery or regular mail. If agreed upon by the 
parties, service of a copy of the response may be made upon the other 
parties by facsimile transmission.
    (f) The filing of a request for interlocutory review does not 
automatically stay the proceedings. Rather, a stay during consideration 
of a petition for review may be granted by the ALJ if the ALJ has 
certified or stated to the Secretary that review of the ruling is 
appropriate. The Secretary may order a stay of proceedings at any time 
after the filing of a request for interlocutory review.
    (g) The Secretary notifies the parties if a petition or 
certification for interlocutory review is accepted, and may provide the 
parties a reasonable time within which to submit written argument or 
other existing material in the administrative record with regard to the 
merit of the petition or certification.
    (h) If the Secretary takes no action on a request for interlocutory 
review within 15 days of receipt of it, the request is deemed to be 
denied.
    (i) The Secretary may affirm, modify, set aside, or remand the ALJ's 
ruling.

(Authority: 5 U.S.C. 557(b); 20 U.S.C. 1234(f)(1))

[58 FR 43473, Aug. 16, 1993]

[[Page 235]]



                Subpart B_Hearings for Recovery of Funds



Sec. 81.30  Basis for recovery of funds.

    (a) Subject to the provisions of Sec. 81.31, an authorized 
Departmental official requires a recipient to return funds to the 
Department if--
    (1) The recipient made an unallowable expenditure of funds under a 
grant or cooperative agreement; or
    (2) The recipient otherwise failed to discharge its obligation to 
account properly for funds under a grant or cooperative agreement.
    (b) An authorized Departmental offcial may base a decision to 
require a recipient to return funds upon an audit report, an 
investigative report, a monitoring report, or any other evidence.

(Authority: 20 U.S.C. 1234a(a) (1) and (2))

[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug. 
16, 1993]



Sec. 81.31  Measure of recovery.

    A recipient that made an unallowable expenditure or otherwise failed 
to discharge its obligation to account properly for funds shall return 
an amount that--
    (a) Meets the standards for proportionality in Sec. 81.32;
    (b) In the case of a State or local educational agency, excludes any 
amount attributable to mitigating circumstances under the standards in 
Sec. 81.23; and
    (c) Excludes any amount expended in a manner not authorized by law 
more than five years before the recipient received the notice of a 
disallowance decision under Sec. 81.34.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(k), 1234b (a) and (b), 
and 3474(a))

[54 FR 19512, May 5, 1989; 54 FR 21622, May 19, 1989. Redesignated and 
amended at 58 FR 43473, Aug. 16, 1993]



Sec. 81.32  Proportionality.

    (a)(1) A recipient that made an unallowable expenditure or otherwise 
failed to account properly for funds shall return an amount that is 
proportional to the extent of the harm its violation caused to an 
identifiable Federal interest associated with the program under which it 
received the grant or cooperative agreement.
    (2) An identifiable Federal interest under paragraph (a)(1) of this 
section includes, but is not limited to, the following:
    (i) Serving only eligible beneficiaries.
    (ii) Providing only authorized services or benefits.
    (iii) Complying with expenditure requirements and conditions, such 
as set-aside, excess cost, maintenance of effort, comparability, 
supplement-not-supplant, and matching requirements.
    (iv) Preserving the integrity of planning, application, 
recordkeeping, and reporting requirements.
    (v) Maintaining accountability for the use of funds.
    (b) The appendix to this part contains examples that illustrate how 
the standards for proportionality apply. The examples present 
hypothetical cases and do not represent interpretations of any actual 
program statute or regulation.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234b(a), and 3474(a))

[54 FR 19512, May 5, 1989. Redesignated at 58 FR 43473, Aug. 16, 1993]



Sec. 81.33  Mitigating circumstances.

    (a) A recipient that is a State or local educational agency and that 
has made an unallowable expenditure or otherwise failed to account 
properly for funds is not required to return any amount that is 
attributable to the mitigating circumstances described in paragraph (b), 
(c), or (d) of this section.
    (b) Mitigating circumstances exist if it would be unjust to compel 
the recovery of funds because the recipient's violation was caused by 
erroneous written guidance from the department. To prove mitigating 
circumstances under this paragraph, the recipient shall prove that--
    (1) The guidance was provided in response to a specific written 
request from the recipient that was submitted to the Department at the 
address provided by notice published in the Federal Register under this 
section;
    (2) The guidance was provided by a Departmental official authorized 
to provide the guidance, as described by that notice;

[[Page 236]]

    (3) The recipient actually relied on the guidance as the basis for 
the conduct that constituted the violation; and
    (4) The recipient's reliance on the guidance was reasonable.
    (c) Mitigating circumstances exist if it would be unjust to compel 
the recovery of funds because the recipient's violation was caused by 
the Department's failure to provide timely guidance. To prove mitigating 
circumstances under this paragraph, the recipient shall prove that--
    (1) The recipient in good faith submitted a written request for 
guidance with respect to the legality of a proposed expenditure or 
practice;
    (2) The request was submitted to the Department at the address 
provided by notice published in the Federal Register under this section;
    (3) The request--
    (i) Accurately described the proposed expenditure or practice; and
    (ii) Included the facts necessary for the Department's determination 
of its legality;
    (4) The request contained the certification of the chief legal 
officer of the appropriate State educational agency that the officer--
    (i) Examined the proposed expenditure or practice; and
    (ii) Believed it was permissible under State and Federal law 
applicable at the time of the certification;
    (5) The recipient reasonably believed the proposed expenditure or 
practice was permissible under State and Federal law applicable at the 
time it submitted the request to the Department;
    (6) No Departmental official authorized to provide the requested 
guidance responded to the request within 90 days of its receipt by the 
Department; and
    (7) The recipient made the proposed expenditure or engaged in the 
proposed practice after the expiration of the 90-day period.
    (d) Mitigating circumstances exist if it would be unjust to compel 
the recovery of funds because the recipient's violation was caused by 
the recipient's compliance with a judicial decree from a court of 
competent jurisdiction. To prove mitigating circumstances under this 
paragraph, the recipient shall prove that--
    (1) The recipient was legally bound by the decree;
    (2) The recipient actually relied on the decree when it engaged in 
the conduct that constituted the violation; and
    (3) The recipient's reliance on the decree was reasonable.
    (e) If a Departmental official authorized to provide the requested 
guidance responds to a request described in paragraph (c) of this 
section more than 90 days after its receipt, the recipient that made the 
request shall comply with the guidance at the earliest practicable time.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234b(b), and 3474(a))

[54 FR 19512, May 5, 1989. Redesignated at 58 FR 43473, Aug. 16, 1993]



Sec. 81.34  Notice of a disallowance decision.

    (a) If an authorized Departmental official decides that a recipient 
must return funds under Sec. 81.30, the official gives the recipient 
written notice of a disallowance decision. The official sends the notice 
by certified mail, return receipt requested, or other means that ensure 
proof of receipt.
    (b)(1) The notice must establish a prima facie case for the recovery 
of funds, including an analysis reflecting the value of the program 
services actually obtained in a determination of harm to the Federal 
interest.
    (2) For the purpose of this section, a prima facie case is a 
statement of the law and the facts that, unless rebutted, is sufficient 
to sustain the conclusion drawn in the notice. The facts may be set out 
in the notice or in a document that is identified in the notice and 
available to the recipient.
    (3) A statement that the recipient failed to maintain records 
required by law or failed to allow an authorized representative of the 
Secretary access to those records constitutes a prima facie case for the 
recovery of the funds affected.
    (i) If the recipient failed to maintain records, the statement must 
briefly describe the types of records that were not maintained and 
identify the recordkeeping requirement that was violated.

[[Page 237]]

    (ii) If the recipient failed to allow access to records, the 
statement must briefly describe the recipient's actions that constituted 
the failure and identify the access requirement that was violated.
    (c) The notice must inform the recipient that it may--
    (1) Obtain a review of the disallowance decision by the OALJ; and
    (2) Request mediation under Sec. 81.13.
    (d) The notice must describe--
    (1) The time available to apply for a review of the disallowance 
decision; and
    (2) The procedure for filing an application for review.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(a), and 3474(a))

[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug. 
16, 1993; 60 FR 46494, Sept. 6, 1995; 61 FR 14484, Apr. 2, 1996]



Sec. 81.35  Reduction of claims.

    The Secretary or an authorized Departmental official as appropriate 
may, after the issuance of a disallowance decision, reduce the amount of 
a claim established under this subpart by--
    (a) Redetermining the claim on the basis of the proper application 
of the law, including the standards for the measure of recovery under 
Sec. 81.31, to the facts;
    (b) Compromising the claim under the Federal Claims Collection 
Standards in 4 CFR part 103; or
    (c) Compromising the claim under Sec. 81.36, if applicable.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(j), and 3474(a); 31 
U.S.C. 3711)

[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug. 
16, 1993]



Sec. 81.36  Compromise of claims under General Education Provisions Act.

    (a) The Secretary or an authorized Departmental official as 
appropriate may compromise a claim established under this subpart 
without following the procedures in 4 CFR part 103 if--
    (1)(i) The amount of the claim does not exceed $200,000; or
    (ii) The difference between the amount of the claim and the amount 
agreed to be returned does not exceed $200,000; and
    (2) The Secretary or the official determines that--
    (i) The collection of the amount by which the claim is reduced under 
the compromise would not be practical or in the public interest; and
    (ii) The practice that resulted in the disallowance decision has 
been corrected and will not recur.
    (b) Not less than 45 days before compromising a claim under this 
section, the Department publishes a notice in the Federal Register 
stating--
    (1) The intention to compromise the claim; and
    (2) That interested persons may comment on the proposed compromise.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a (j), and 3474(a))

[54 FR 19512, May 5, 1989. Redesignated at 58 FR 43473, Aug. 16, 1993]



Sec. 81.37  Application for review of a disallowance decision.

    (a) If a recipient wishes to obtain review of a disallowance 
decision, the recipient shall file a written application for review with 
the Office of Administrative Law Judges, c/o Docket Clerk, Office of 
Hearings and Appeals, and, as required by Sec. 81.12(b), shall serve a 
copy on the applicable Departmental official who made the disallowance 
decision.
    (b) A recipient shall file an application for review not later than 
60 days after the date it receives the notice of a disallowance 
decision.
    (c) Within 10 days after receipt of a copy of the application for 
review, the authorized Departmental official who made the disallowance 
decision shall provide the ALJ with a copy of any document identified in 
the notice pursuant to Sec. 81.34(b)(2).
    (d) An application for review must contain--
    (1) A copy of the disallowance decision of which review is sought;
    (2) A statement certifying the date the recipient received the 
notice of that decision;
    (3) A short and plain statement of the disputed issues of law and 
fact, the recipient's position with respect to these issues, and the 
disallowed funds the recipient contends need not be returned; and

[[Page 238]]

    (4) A statement of the facts and the reasons that support the 
recipient's position.
    (e) The ALJ who considers a timely application for review that 
substantially complies with the requirements of paragraph (c) of this 
section may permit the recipient to supplement or amend the application 
with respect to issues that were timely raised. Any requirement to 
return funds that is not timely appealed becomes the final decision of 
the Department.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(b)(1), and 3474(a))

[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, 
43474, Aug. 16, 1993; 58 FR 51013, Sept. 30, 1993; 60 FR 46494, Sept. 6, 
1995]



Sec. 81.38  Consideration of an application for review.

    (a) The ALJ assigned to the case under Sec. 81.4 considers an 
application for review of a disallowance decision.
    (b) The ALJ decides whether the notice of a disallowance decision 
meets the requirements of Sec. 81.34, as provided by section 451(e) of 
GEPA.
    (1) If the notice does not meet those requirements, the ALJ--
    (i) Returns the notice, as expeditiously as possible, to the 
authorized Departmental official who made the disallowance decision;
    (ii) Gives the official the reasons why the notice does not meet the 
requirements of Sec. 81.34; and
    (iii) Informs the recipient of the ALJ's decision by certified mail, 
return receipt requested.
    (2) An authorized Departmental official may modify and reissue a 
notice that an ALJ returns.
    (c) If the notice of a disallowance decision meets the requirements 
of Sec. 81.34, the ALJ decides whether the application for review meets 
the requirements of Sec. 81.37.
    (1) If the application, including any supplements or amendments 
under Sec. 81.37(d), does not meet those requirements, the disallowance 
decision becomes the final decision of the Department.
    (2) If the application meets those requirements, the ALJ--
    (i) Informs the recipient and the authorized Departmental official 
that the OALJ has accepted jurisdiction of the case; and
    (ii) Schedules a hearing on the record.
    (3) The ALJ informs the recipient of the disposition of its 
application for review by certified mail, return receipt requested. If 
the ALJ decides that the application does not meet the requirements of 
Sec. 81.37, the ALJ informs the recipient of the reasons for the 
decision.

(Authority: 20 U.S.C. 1221e-3, 1234 (e) and (f)(1), 1234a(b), and 
3474(a))

[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug. 
16, 1993]



Sec. 81.39  Submission of evidence.

    (a) The ALJ schedules the submission of the evidence, whether oral 
or documentary, to occur within 90 days of the OALJ's receipt of an 
acceptable application for review under Sec. 81.37.
    (b) The ALJ may waive the 90-day requirement for good cause.

(Authority: 5 U.S.C. 556(d); 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(c), 
and 3474(a))

[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug. 
16, 1993]



Sec. 81.40  Burden of proof.

    If the OALJ accepts jurisdiction of a case under Sec. 81.38, the 
recipient shall present its case first and shall have the burden of 
proving that the recipient is not required to return the amount of funds 
that the disallowance decision requires to be returned because--
    (a) An expenditure identified in the disallowance decision as 
unallowable was allowable;
    (b) The recipient discharged its obligation to account properly for 
the funds;
    (c) The amount required to be returned does not meet the standards 
for proportionality in Sec. 81.32;
    (d) The amount required to be returned includes an amount 
attributable to mitigating circumstances under the standards in Sec. 
81.33; or
    (e) The amount required to be returned includes an amount expended 
in a manner not authorized by law more

[[Page 239]]

than five years before the recipient received the notice of the 
disallowance decision.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(b)(3), 1234b(b)(1), and 
3474(a))

[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug. 
16, 1993]



Sec. 81.41  Initial decision.

    (a) The ALJ makes an initial decision based on the record.
    (b) The initial decision includes the ALJ's findings of fact, 
conclusions of law, and reasoning on all material issues.
    (c) The initial decision is transmitted to the Secretary by hand-
delivery or Department mail, and to the parties by certified mail, 
return receipt requested, by the Office of Administrative Law Judges.
    (d) For the purpose of this part, ``initial decision'' includes an 
ALJ's modified decision after the Secretary's remand of a case.

(Authority: 5 U.S.C. 557(c); 20 U.S.C 1221e-3, 1234(f)(1), and 3474(a))

[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, 
43474, Aug. 16, 1993]



Sec. 81.42  Petition for review of initial decision.

    (a) If a party seeks to obtain the Secretary's review of the initial 
decision of an ALJ, the party shall file a petition for review with the 
Office of Hearings and Appeals, which immediately forwards the petition 
to the Office of the Secretary.
    (b) A party shall file a petition for review not later than 30 days 
after the date it receives the initial decision.
    (c) If a party files a petition for review, the party shall serve a 
copy of the petition on the other party on the filing date by hand 
delivery or by ``overnight or express'' mail. If agreed upon by the 
parties, service of a copy of the petition may be made upon the other 
party by facsimile transmission.
    (d) Any written submission to the Secretary under this section must 
be accompanied by a statement certifying the date that the filed 
material was served on the other party.
    (e) A petition for review of an initial decision must contain--
    (1) The identity of the initial decision for which review is sought; 
and
    (2) A statement of the reasons asserted by the party for affirming, 
modifying, setting aside, or remanding the initial decision in whole or 
in part.
    (f)(1) A party may respond to a petition for review of an initial 
decision by filing a statement of its views on the issues raised in the 
petition with the Secretary, as provided for in this section, not later 
than 15 days after the date it receives the petition.
    (2) A party shall serve a copy of its statement of views on the 
other party by hand delivery or mail, and shall certify that it has done 
so pursuant to the provisions of paragraph (d) of this section. If 
agreed upon by the parties, service of a copy of the statement of views 
may be made upon the other party by facsimile transmission.
    (g)(1) The filing date for written submissions under this section is 
the date the document is--
    (i) Hand delivered;
    (ii) Mailed; or
    (iii) Sent by facsimile transmission.
    (2) If a scheduled filing date falls on a Saturday, Sunday or a 
Federal holiday, the filing deadline is the next business day.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(e), and 3474(a))

[58 FR 43474, Aug. 16, 1993]



Sec. 81.43  Review by the Secretary.

    (a)(1) The Secretary's review of an initial decision is based on the 
record of the case, the initial decision, and any proper submissions of 
the parties or other participants in the case.
    (2) During the Secretary's review of the initial decision there 
shall not be any ex parte contact between the Secretary and individuals 
representing the Department or the recipient.
    (b) The ALJ's findings of fact, if supported by substantial 
evidence, are conclusive.
    (c) The Secretary may affirm, modify, set aside, or remand the ALJ's 
initial decision.
    (1) If the Secretary modifies, sets aside, or remands an initial 
decision, in whole or in part, the Secretary's decision includes a 
statement of reasons that supports the Secretary's decision.

[[Page 240]]

    (2)(i) The Secretary may remand the case to the ALJ with 
instructions to make additional findings of fact or conclusions of law, 
or both, based on the evidence of record. The Secretary may also remand 
the case to the ALJ for further briefing or for clarification or 
revision of the initial decision.
    (ii) If a case is remanded, the ALJ shall make new or modified 
findings of fact or conclusions of law or otherwise modify the initial 
decision in accordance with the Secretary's remand order.
    (iii) A party may appeal a modified decision of the ALJ under the 
provisions of Sec. Sec. 81.42 through 81.45. However, upon that review, 
the ALJ's new or modified findings, if supported by substantial 
evidence, are conclusive.
    (3) The Secretary, for good cause shown, may remand the case to the 
ALJ to take further evidence, and the ALJ may make new or modified 
findings of fact and may modify the initial decision based on that new 
evidence. These new or modified findings of fact are likewise conclusive 
if supported by substantial evidence.

(Authority: 5 U.S.C. 557(b); 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(d), 
and 3474(a))

[58 FR 43474, Aug. 16, 1993, as amended at 60 FR 46494, Sept. 6, 1995]



Sec. 81.44  Final decision of the Department.

    (a) The ALJ's initial decision becomes the final decision of the 
Department 60 days after the recipient receives the ALJ's decision 
unless the Secretary modifies, sets aside, or remands the decision 
during the 60-day period.
    (b) If the Secretary modifies or sets aside the ALJ's initial 
decision, a copy of the Secretary's decision is sent by the Office of 
Hearings and Appeals to the parties by certified mail, return receipt 
requested. The Secretary's decision becomes the final decision of the 
Department on the date the recipient receives the Secretary's decision.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(g), and 3474(a))

[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, 
43474, Aug. 16, 1993]



Sec. 81.45  Collection of claims.

    (a) An authorized Departmental official collects a claim established 
under this subpart by using the standards and procedures in 34 CFR part 
30.
    (b) A claim established under this subpart may be collected--
    (1) 30 days after a recipient receives notice of a disallowance 
decision if the recipient fails to file an acceptable application for 
review under Sec. 81.37; or
    (2) On the date of the final decision of the Department under Sec. 
81.44 if the recipient obtains review of a disallowance decision.
    (c) The Department takes no collection action pending judicial 
review of a final decision of the Department under section 458 of GEPA.
    (d) If a recipient obtains review of a disallowance decision under 
Sec. 81.38, the Department does not collect interest on the claim for 
the period between the date of the disallowance decision and the date of 
the final decision of the Department under Sec. 81.44.

(Authority: 20 U.S.C. 1234(f)(1); 1234a(f)(1) and (2), (i), and (1))

[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug. 
16, 1993]

          Appendix to Part 81--Illustrations of Proportionality

    (1) Ineligible beneficiaries. A State uses 15 percent of its grant 
to meet the special educational needs of children who were migratory, 
but who have not migrated for more than five years as a Federal program 
statute requires for eligibility to participate in the program. Result: 
Recovery of 15 percent of the grant--all program funds spent for the 
benefit of those children. Although the services were authorized, the 
children were not eligible to receive them.
    (2) Ineligible beneficiaries. A Federal program designed to meet the 
special educational needs of gifted and talented children requires that 
at least 80 percent of the children served in any project must be 
identified as gifted or talented. A local educational agency (LEA) 
conducts a project in which 76 students are identified as gifted or 
talented and 24 are not. The project was designed and implemented to 
meet the special educational needs of gifted and talented students. 
Result: The LEA must return five percent of the project costs. The LEA 
provided authorized services for a project in which the 76 target 
students had to constitute at least 80 percent of the total. Thus, the 
maximum number of non-target students permitted

[[Page 241]]

was 19. Project costs relating to the remaining five students must be 
returned.
    (3) Ineligible beneficiaries. Same as the example in paragraph (2), 
except that only 15 percent of the children were identified as gifted or 
talented. On the basis of the low percentage of these children and other 
evidence, the authorized Departmental official finds that the project as 
a whole did not address their special educational needs and was outside 
the purpose of the statute. Result: The LEA must return its entire 
award. The difference between the required percentage of gifted and 
talented children and the percentage actually enrolled is so substantial 
that, if consistent with other evidence, the official may reasonably 
conclude the entire grant was misused.
    (4) Ineligible beneficiaries. Same as the example in paragraph (2), 
except that 60 percent of the children were identified as gifted or 
talented, and it is not clear whether the project was designed or 
implemented to meet the special educational needs of these children. 
Result: If it is determined that the project was designed and 
implemented to serve their special educational needs, the LEA must 
return 25 percent of the project costs. A project that included 60 
target children would meet the requirement that 80 percent of the 
children served be gifted and talented if it included no more than 15 
other children. Thus, while the LEA provided authorized services, only 
75 percent of the beneficiaries were authorized to participate in the 
project (60 target children and 15 others). If the authorized 
Departmental official, after examining all the relevant facts, 
determines that the project was not designed and implemented to serve 
the special educational needs of gifted or talented students, the LEA 
must return its entire award because it did not provide services 
authorized by the statute.
    (5) Unauthorized activities. An LEA uses ten percent of its grant 
under a Federal program that authorizes activities only to meet the 
special educational needs of educationally deprived children to pay for 
health services that are available to all children in the LEA. All the 
children who use the Federally funded health services happen to be 
educationally deprived, and thus eligible to receive program services. 
Result: Recovery of ten percent of the grant--all program funds spent 
for the health services. Although the children were eligible to receive 
program services, the health services were unrelated to a special 
educational need and, therefore, not authorized by law.
    (6) Set-aside requirement. A State uses 22 percent of its grant for 
one fiscal year under a Federal adult education program to provide 
programs of equivalency to a certificate of graduation from a secondary 
school. The adult education program statute restricts those programs to 
no more than 20 percent of the State's grant. Result: Two percent of the 
State's grant must be returned. Although all 22 percent of the funds 
supported adult education, the State had no authority to spend more than 
20 percent on secondary school equivalency programs.
    (7) Set-aside requirement. A State uses eight percent of its basic 
State grant under a Federal vocational education program to pay for the 
excess cost of vocational education services and activities for 
handicapped individuals. The program statute requires a State to use ten 
percent of its basic State grant for this purpose. Result: The State 
must return two percent of its basic State grant, regardless of how it 
was used. Because the State was required to spend that two percent on 
services and activities for handicapped individuals and did not do so, 
it diverted those funds from their intended purposes, and the Federal 
interest was harmed to that extent.
    (8) Excess cost requirement. An LEA uses funds reserved for the 
disadvantaged under a Federal vocational education program to pay for 
the cost of the same vocational education services it provides to non-
disadvantaged individuals. The program statute requires that funds 
reserved for the disadvantaged must be used to pay only for the 
supplemental or additional costs of vocational education services that 
are not provided to other individuals and that are required for 
disadvantaged individuals to participate in vocational education. 
Result: All the funds spent on the disadvantaged must be returned. 
Although the funds were spent to serve the disadvantaged, the funds were 
available to pay for only the supplemental or additional costs of 
providing services to the disadvantaged.
    (9) Maintenance-of-effort requirement. An LEA participates in a 
Federal program in fiscal year 1988 that requires it to maintain its 
expenditures from non-Federal sources for program purposes to receive 
its full allotment. The program statute requires that non-Federal funds 
expended in the first preceding fiscal year must be at least 90 percent 
of non-Federal funds expended in the second preceding fiscal year and 
provides for a reduction in grant amount proportional to the shortfall 
in expenditures. No waiver of the requirement is authorized. In fiscal 
year 1986 the LEA spent $100,000 from non-Federal sources for program 
purposes; in fiscal year 1987, only $87,000. Result: The LEA must return 
1/30 of its fiscal year 1988 grant--the amount of its grant that equals 
the proportion of its shortfall ($3,000) to the required level of 
expenditures ($90,000). If, instead, the statute made maintenance of 
expenditures a clear condition of the LEA's eligibility to receive funds 
and did not provide for a proportional reduction in the grant award, the 
LEA would be required to return its entire grant.

[[Page 242]]

    (10) Supplanting prohibition. An LEA uses funds under a Federal drug 
education program to provide drug abuse prevention counseling to 
students in the eighth grade. The LEA is required to provide that same 
counseling under State law. Funds under the Federal program statute are 
subject to a supplement-not-supplant requirement. Result: All the funds 
used to provide the required counseling to the eighth-grade students 
must be returned. The Federal funds did not increase the total amount of 
spending for program purposes because the counseling would have been 
provided with non-Federal funds if the Federal funds were not available.
    (11) Matching requirement. A State receives an allotment of $90,000 
for fiscal year 1988 under a Federal adult education program. It expends 
its full allotment and $8,000 from its own resources for adult 
education. Under the Federal statute, the Federal share of expenditures 
for the State's program is 90 percent. Result: The State must return the 
unmatched Federal funds, or $18,000. Expenditure of a $90,000 Federal 
allotment required $10,000 in matching State expenditures, $2,000 more 
than the State's actual expenditures. At a ratio of one State dollar for 
every nine Federal dollars, $18,000 in Federal funds were unmatched.
    (12) Application requirements. In order to receive funds under a 
Federal program that supports a wide range of activities designed to 
improve the quality of elementary and secondary education, an LEA 
submits an application to its State educational agency (SEA) for a 
subgrant to carry out school-level basic skills development programs. 
The LEA submits its application after conducting an assessment of the 
needs of its students in consultation with parents, teachers, community 
leaders, and interested members of the general public. The Federal 
program statute requires the application and consultation processes. The 
SEA reviews the LEA's application, determines that the proposed programs 
are sound and the application is in compliance with Federal law, and 
approves the application. After the LEA receives the subgrant, it 
unilaterally decides to use 20 percent of the funds for gifted and 
talented elementary school students--an authorized activity under the 
Federal statute. However, the LEA does not consult with interested 
parties and does not amend its application. Result: 20 percent of the 
LEA's subgrant must be returned. The LEA had no legal authority to use 
Federal funds for programs or activities other than those described in 
its approved application, and its actions with respect to 20 percent of 
the subgrant not only impaired the integrity of the application process, 
but caused significant harm to other Federal interests associated with 
the program as follows: the required planning process was circumvented 
because the LEA did not consult with the specified local interests; 
program accountability was impaired because neither the SEA nor the 
various local interests that were to be consulted had an opportunity to 
review and comment on the merits of the gifted and talented program 
activities, and the LEA never had to justify those activities to them; 
and fiscal accountability was impaired because the SEA and those various 
local interests were, in effect, misled by the LEA's unamended 
application regarding the expenditure of Federal funds.
    (13) Harmless violation. Under a Federal program, a grantee is 
required to establish a 15-member advisory council of affected teachers, 
school administrators, parents, and students to assist in program 
design, monitoring, and evaluation. Although the law requires at least 
three student members of the council, a grantee's council contains only 
two. The project is carried out, and no damage to the project 
attributable to the lack of a third student member can be identified. 
Result: No financial recovery is required, although the grantee must 
take other appropriate steps to come into compliance with the law. The 
grantee's violation has not measurably harmed a Federal interest 
associated with the program.

(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234b(a), and 3474(a))

[54 FR 19512, May 5, 1989; 54 FR 21622, May 19, 1989]



PART 82_NEW RESTRICTIONS ON LOBBYING--Table of Contents




                            Subpart A_General

Sec.
82.100 Conditions on use of funds.
82.105 Definitions.
82.110 Certification and disclosure.

                  Subpart B_Activities by Own Employees

82.200 Agency and legislative liaison.
82.205 Professional and technical services.
82.210 Reporting.

            Subpart C_Activities by Other Than Own Employees

82.300 Professional and technical services.

                   Subpart D_Penalties and Enforcement

82.400 Penalties.
82.405 Penalty procedures.
82.410 Enforcement.

                          Subpart E_Exemptions

82.500 Secretary of Defense.

[[Page 243]]

                        Subpart F_Agency Reports

82.600 Semi-annual compilation.
82.605 Inspector General report.

Appendix A to Part 82--Certification Regarding Lobbying
Appendix B to Part 82--Disclosure Form to Report Lobbying

    Authority: Section 319, Pub. L. 101-121 (31 U.S.C. 1352); 20 U.S.C. 
3474.

    Cross Reference: See also Office of Management and Budget notice 
published at 54 FR 52306, December 20, 1989.

    Source: 55 FR 6737, 6752, Feb. 26, 1990, unless otherwise noted.



                            Subpart A_General



Sec. 82.100  Conditions on use of funds.

    (a) No appropriated funds may be expended by the recipient of a 
Federal contract, grant, loan, or cooperative ageement to pay any person 
for influencing or attempting to influence an officer or employee of any 
agency, a Member of Congress, an officer or employee of Congress, or an 
employee of a Member of Congress in connection with any of the following 
covered Federal actions: the awarding of any Federal contract, the 
making of any Federal grant, the making of any Federal loan, the 
entering into of any cooperative agreement, and the extension, 
continuation, renewal, amendment, or modification of any Federal 
contract, grant, loan, or cooperative agreement.
    (b) Each person who requests or receives from an agency a Federal 
contract, grant, loan, or cooperative agreement shall file with that 
agency a certification, set forth in appendix A, that the person has not 
made, and will not make, any payment prohibited by paragraph (a) of this 
section.
    (c) Each person who requests or receives from an agency a Federal 
contract, grant, loan, or a cooperative agreement shall file with that 
agency a disclosure form, set forth in appendix B, if such person has 
made or has agreed to make any payment using nonappropriated funds (to 
include profits from any covered Federal action), which would be 
prohibited under paragraph (a) of this section if paid for with 
appropriated funds.
    (d) Each person who requests or receives from an agency a commitment 
providing for the United States to insure or guarantee a loan shall file 
with that agency a statement, set forth in appendix A, whether that 
person has made or has agreed to make any payment to influence or 
attempt to influence an officer or employee of any agency, a Member of 
Congress, an officer or employee of Congress, or an employee of a Member 
of Congress in connection with that loan insurance or guarantee.
    (e) Each person who requests or receives from an agency a commitment 
providing for the United States to insure or guarantee a loan shall file 
with that agency a disclosure form, set forth in appendix B, if that 
person has made or has agreed to make any payment to influence or 
attempt to influence an officer or employee of any agency, a Member of 
Congress, an officer or employee of Congress, or an employee of a Member 
of Congress in connection with that loan insurance or guarantee.



Sec. 82.105  Definitions.

    For purposes of this part:
    (a) Agency, as defined in 5 U.S.C. 552(f), includes Federal 
executive departments and agencies as well as independent regulatory 
commissions and Government corporations, as defined in 31 U.S.C. 
9101(1).
    (b) Covered Federal action means any of the following Federal 
actions:
    (1) The awarding of any Federal contract;
    (2) The making of any Federal grant;
    (3) The making of any Federal loan;
    (4) The entering into of any cooperative agreement; and,
    (5) The extension, continuation, renewal, amendment, or modification 
of any Federal contract, grant, loan, or cooperative agreement.

Covered Federal action does not include receiving from an agency a 
commitment providing for the United States to insure or guarantee a 
loan. Loan guarantees and loan insurance are addressed independently 
within this part.
    (c) Federal contract means an acquisition contract awarded by an 
agency, including those subject to the Federal Acquisition Regulation 
(FAR), and any other acquisition contract for real or

[[Page 244]]

personal property or services not subject to the FAR.
    (d) Federal cooperative agreement means a cooperative agreement 
entered into by an agency.
    (e) Federal grant means an award of financial assistance in the form 
of money, or property in lieu of money, by the Federal Government or a 
direct appropriation made by law to any person. The term does not 
include technical assistance which provides services instead of money, 
or other assistance in the form of revenue sharing, loans, loan 
guarantees, loan insurance, interest subsidies, insurance, or direct 
United States cash assistance to an individual.
    (f) Federal loan means a loan made by an agency. The term does not 
include loan guarantee or loan insurance.
    (g) Indian tribe and tribal organization have the meaning provided 
in section 4 of the Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 450B). Alaskan Natives are included under the definitions 
of Indian tribes in that Act.
    (h) Influencing or attempting to influence means making, with the 
intent to influence, any communication to or appearance before an 
officer or employee or any agency, a Member of Congress, an officer or 
employee of Congress, or an employee of a Member of Congress in 
connection with any covered Federal action.
    (i) Loan guarantee and loan insurance means an agency's guarantee or 
insurance of a loan made by a person.
    (j) Local government means a unit of government in a State and, if 
chartered, established, or otherwise recognized by a State for the 
performance of a governmental duty, including a local public authority, 
a special district, an intrastate district, a council of governments, a 
sponsor group representative organization, and any other instrumentality 
of a local government.
    (k) Officer or employee of an agency includes the following 
individuals who are employed by an agency:
    (1) An individual who is appointed to a position in the Government 
under title 5, U.S. Code, including a position under a temporary 
appointment;
    (2) A member of the uniformed services as defined in section 101(3), 
title 37, U.S. Code;
    (3) A special Government employee as defined in section 202, title 
18, U.S. Code; and,
    (4) An individual who is a member of a Federal advisory committee, 
as defined by the Federal Advisory Committee Act, title 5, U.S. Code 
appendix 2.
    (l) Person means an individual, corporation, company, association, 
authority, firm, partnership, society, State, and local government, 
regardless of whether such entity is operated for profit or not for 
profit. This term excludes an Indian tribe, tribal organization, or any 
other Indian organization with respect to expenditures specifically 
permitted by other Federal law.
    (m) Reasonable compensation means, with respect to a regularly 
employed officer or employee of any person, compensation that is 
consistent with the normal compensation for such officer or employee for 
work that is not furnished to, not funded by, or not furnished in 
cooperation with the Federal Government.
    (n) Reasonable payment means, with respect to perfessional and other 
technical services, a payment in an amount that is consistent with the 
amount normally paid for such services in the private sector.
    (o) Recipient includes all contractors, subcontractors at any tier, 
and subgrantees at any tier of the recipient of funds received in 
connection with a Federal contract, grant, loan, or cooperative 
agreement. The term excludes an Indian tribe, tribal organization, or 
any other Indian organization with respect to expenditures specifically 
permitted by other Federal law.
    (p) Regularly employed means, with respect to an officer or employee 
of a person requesting or receiving a Federal contract, grant, loan, or 
cooperative agreement or a commitment providing for the United States to 
insure or guarantee a loan, an officer or employee who is employed by 
such person for at least 130 working days within one year immediately 
preceding the date of the submission that initiates agency consideration 
of such person for

[[Page 245]]

receipt of such contract, grant, loan, cooperative agreement, loan 
insurance commitment, or loan guarantee commitment. An officer or 
employee who is employed by such person for less than 130 working days 
within one year immediately preceding the date of the submission that 
initiates agency consideration of such person shall be considered to be 
regularly employed as soon as he or she is employed by such person for 
130 working days.
    (q) State means a State of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, a territory or possession of 
the United States, an agency or instrumentality of a State, and a multi-
State, regional, or interstate entity having governmental duties and 
powers.



Sec. 82.110  Certification and disclosure.

    (a) Each person shall file a certification, and a disclosure form, 
if required, with each submission that initiates agency consideration of 
such person for:
    (1) Award of a Federal contract, grant, or cooperative agreement 
exceeding $100,000; or
    (2) An award of a Federal loan or a commitment providing for the 
United States to insure or guarantee a loan exceeding $150,000.
    (b) Each person shall file a certification, and a disclosure form, 
if required, upon receipt by such person of:
    (1) A Federal contract, grant, or cooperative agreement exceeding 
$100,000; or
    (2) A Federal loan or a commitment providing for the United States 
to insure or guarantee a loan exceeding $150,000,

Unless such person previously filed a certification, and a disclosure 
form, if required, under paragraph (a) of this section.
    (c) Each person shall file a disclosure form at the end of each 
calendar quarter in which there occurs any event that requires 
disclosure or that materially affects the accuracy of the information 
contained in any disclosure form previously filed by such person under 
paragraphs (a) or (b) of this section. An event that materially affects 
the accuracy of the information reported includes:
    (1) A cumulative increase of $25,000 or more in the amount paid or 
expected to be paid for influencing or attempting to influence a covered 
Federal action; or
    (2) A change in the person(s) or individual(s) influencing or 
attempting to influence a covered Federal action; or,
    (3) A change in the officer(s), employee(s), or Member(s) contacted 
to influence or attempt to influence a covered Federal action.
    (d) Any person who requests or receives from a person referred to in 
paragraphs (a) or (b) of this section:
    (1) A subcontract exceeding $100,000 at any tier under a Federal 
contract;
    (2) A subgrant, contract, or subcontract exceeding $100,000 at any 
tier under a Federal grant;
    (3) A contract or subcontract exceeding $100,000 at any tier under a 
Federal loan exceeding $150,000; or,
    (4) A contract or subcontract exceeding $100,000 at any tier under a 
Federal cooperative agreement,

Shall file a certification, and a disclosure form, if required, to the 
next tier above.
    (e) All disclosure forms, but not certifications, shall be forwarded 
from tier to tier until received by the person referred to in paragraphs 
(a) or (b) of this section. That person shall forward all disclosure 
forms to the agency.
    (f) Any certification or disclosure form filed under paragraph (e) 
of this section shall be treated as a material representation of fact 
upon which all receiving tiers shall rely. All liability arising from an 
erroneous representation shall be borne solely by the tier filing that 
representation and shall not be shared by any tier to which the 
erroneous representation is forwarded. Submitting an erroneous 
certification or disclosure constitutes a failure to file the required 
certification or disclosure, respectively. If a person fails to file a 
required certification or disclosure, the United States may pursue all 
available remedies, including those authorized by section 1352, title 
31, U.S. Code.
    (g) For awards and commitments in process prior to December 23, 
1989, but not made before that date, certifications shall be required at 
award or

[[Page 246]]

commitment, covering activities occurring between December 23, 1989, and 
the date of award or commitment. However, for awards and commitments in 
process prior to the December 23, 1989 effective date of these 
provisions, but not made before December 23, 1989, disclosure forms 
shall not be required at time of award or commitment but shall be filed 
within 30 days.
    (h) No reporting is required for an activity paid for with 
appropriated funds if that activity is allowable under either subpart B 
or C.



                  Subpart B_Activities by Own Employees



Sec. 82.200  Agency and legislative liaison.

    (a) The prohibition on the use of appropriated funds, in Sec. 
82.100(a), does not apply in the case of a payment of reasonable 
compensation made to an officer or employee of a person requesting or 
receiving a Federal contract, grant, loan, or cooperative agreement if 
the payment is for agency and legislative liaison activities not 
directly related to a covered Federal action.
    (b) For purposes of paragraph (a) of this section, providing any 
information specifically requested by an agency or Congress is allowable 
at any time.
    (c) For purposes of paragraph (a) of this section, the following 
agency and legislative liaison activities are allowable at any time only 
where they are not related to a specific solicitation for any covered 
Federal action:
    (1) Discussing with an agency (including individual demonstrations) 
the qualities and characteristics of the person's products or services, 
conditions or terms of sale, and service capabilities; and,
    (2) Technical discussions and other activities regarding the 
application or adaptation of the person's products or services for an 
agency's use.
    (d) For purposes of paragraph (a) of this section, the following 
agencies and legislative liaison activities are allowable only where 
they are prior to formal solicitation of any covered Federal action:
    (1) Providing any information not specifically requested but 
necessary for an agency to make an informed decision about initiation of 
a covered Federal action;
    (2) Technical discussions regarding the preparation of an 
unsolicited proposal prior to its official submission; and,
    (3) Capability presentations by persons seeking awards from an 
agency pursuant to the provisions of the Small Business Act, as amended 
by Pub. L. 95-507 and other subsequent amendments.
    (e) Only those activities expressly authorized by this section are 
allowable under this section.



Sec. 82.205  Professional and technical services.

    (a) The prohibition on the use of appropriated funds, in Sec. 
82.100(a), does not apply in the case of a payment of reasonable 
compensation made to an officer or employee of a person requesting or 
receiving a Federal contract, grant, loan, or cooperative agreement or 
an extension, continuation, renewal, amendment, or modification of a 
Federal contract, grant, loan, or cooperative agreement if payment is 
for professional or technical services rendered directly in the 
preparation, submission, or negotiation of any bid, proposal, or 
application for that Federal contract, grant, loan, or cooperative 
agreement or for meeting requirements imposed by or pursuant to law as a 
condition for receiving that Federal contract, grant, loan, or 
cooperative agreement.
    (b) For purposes of paragraph (a) of this section, ``professional 
and technical services'' shall be limited to advice and analysis 
directly applying any professional or technical discipline. For example, 
drafting of a legal document accompanying a bid or proposal by a lawyer 
is allowable. Similarly, technical advice provided by an engineer on the 
performance or operational capability of a piece of equipment rendered 
directly in the negotiation of a contract is allowable. However, 
communications with the intent to influence made by a professional (such 
as a licensed lawyer) or a technical person (such as a licensed 
accountant) are not allowable under this section unless they provide 
advice and analysis directly applying their professional or

[[Page 247]]

technical expertise and unless the advice or analysis is rendered 
directly and solely in the preparation, submission or negotiation of a 
covered Federal action. Thus, for example, communications with the 
intent to influence made by a lawyer that do not provide legal advice or 
analysis directly and solely related to the legal aspects of his or her 
client's proposal, but generally advocate one proposal over another are 
not allowable under this section because the lawyer is not providing 
professional legal services. Similarly, communications with the intent 
to influence made by an engineer providing an engineering analysis prior 
to the preparation or submission of a bid or proposal are not allowable 
under this section since the engineer is providing technical services 
but not directly in the preparation, submission or negotiation of a 
covered Federal action.
    (c) Requirements imposed by or pursuant to law as a condition for 
receiving a covered Federal award include those required by law or 
regulation, or reasonably expected to be required by law or regulation, 
and any other requirements in the actual award documents.
    (d) Only those services expressly authorized by this section are 
allowable under this section.



Sec. 82.210  Reporting.

    No reporting is required with respect to payments of reasonable 
compensation made to regularly employed officers or employees of a 
person.



            Subpart C_Activities by Other Than Own Employees



Sec. 82.300  Professional and technical services.

    (a) The prohibition on the use of appropriated funds, in Sec. 
82.100(a), does not apply in the case of any reasonable payment to a 
person, other than an officer or employee of a person requesting or 
receiving a covered Federal action, if the payment is for professional 
or technical services rendered directly in the preparation, submission, 
or negotiation of any bid, proposal, or application for that Federal 
contract, grant, loan, or cooperative agreement or for meeting 
requirements imposed by or pursuant to law as a condition for receiving 
that Federal contract, grant, loan, or cooperative agreement.
    (b) The reporting requirements in Sec. 82.110(a) and (b) regarding 
filing a disclosure form by each person, if required, shall not apply 
with respect to professional or technical services rendered directly in 
the preparation, submission, or negotiation of any commitment providing 
for the United States to insure or guarantee a loan.
    (c) For purposes of paragraph (a) of this section, ``professional 
and technical services'' shall be limited to advice and analysis 
directly applying any professional or technical discipline. For example, 
drafting or a legal document accompanying a bid or proposal by a lawyer 
is allowable. Similarly, technical advice provided by an engineer on the 
performance or operational capability of a piece of equipment rendered 
directly in the negotiation of a contract is allowable. However, 
communications with the intent to influence made by a professional (such 
as a licensed lawyer) or a technical person (such as a licensed 
accountant) are not allowable under this section unless they provide 
advice and analysis directly applying their professional or technical 
expertise and unless the advice or analysis is rendered directly and 
solely in the preparation, submission or negotiation of a covered 
Federal action. Thus, for example, communications with the intent to 
influence made by a lawyer that do not provide legal advice or analysis 
directly and solely related to the legal aspects of his or her client's 
proposal, but generally advocate one proposal over another are not 
allowable under this section because the lawyer is not providing 
professional legal services. Similarly, communications with the intent 
to influence made by an engineer providing an engineering analysis prior 
to the preparation or submission of a bid or proposal are not allowable 
under this section since the engineer is providing technical services 
but not directly in the preparation, submission or negotiation of a 
covered Federal action.

[[Page 248]]

    (d) Requirements imposed by or pursuant to law as a condition for 
receiving a covered Federal award include those required by law or 
regulation, or reasonably expected to be required by law or regulation, 
and any other requirements in the actual award documents.
    (e) Persons other than officers or employees of a person requesting 
or receiving a covered Federal action include consultants and trade 
associations.
    (f) Only those services expressly authorized by this section are 
allowable under this section.



                   Subpart D_Penalties and Enforcement



Sec. 82.400  Penalties.

    (a) Any person who makes an expenditure prohibited herein shall be 
subject to a civil penalty of not less than $10,000 and not more than 
$100,000 for each such expenditure.
    (b) Any person who fails to file or amend the disclosure form (see 
appendix B) to be filed or amended if required herein, shall be subject 
to a civil penalty of not less than $10,000 and not more than $100,000 
for each such failure.
    (c) A filing or amended filing on or after the date on which an 
administrative action for the imposition of a civil penalty is commenced 
does not prevent the imposition of such civil penalty for a failure 
occurring before that date. An administrative action is commenced with 
respect to a failure when an investigating official determines in 
writing to commence an investigation of an allegation of such failure.
    (d) In determining whether to impose a civil penalty, and the amount 
of any such penalty, by reason of a violation by any person, the agency 
shall consider the nature, circumstances, extent, and gravity of the 
violation, the effect on the ability of such person to continue in 
business, any prior violations by such person, the degree of culpability 
of such person, the ability of the person to pay the penalty, and such 
other matters as may be appropriate.
    (e) First offenders under paragraphs (a) or (b) of this section 
shall be subject to a civil penalty of $10,000, absent aggravating 
circumstances. Second and subsequent offenses by persons shall be 
subject to an appropriate civil penalty between $10,000 and $100,000, as 
determined by the agency head or his or her designee.
    (f) An imposition of a civil penalty under this section does not 
prevent the United States from seeking any other remedy that may apply 
to the same conduct that is the basis for the imposition of such civil 
penalty.



Sec. 82.405  Penalty procedures.

    Agencies shall impose and collect civil penalties pursuant to the 
provisions of the Program Fraud and Civil Remedies Act, 31 U.S.C. 
sections 3803 (except subsection (c)), 3804, 3805, 3806, 3807, 3808, and 
3812, insofar as these provisions are not inconsistent with the 
requirements herein.



Sec. 82.410  Enforcement.

    The head of each agency shall take such actions as are necessary to 
ensure that the provisions herein are vigorously implemented and 
enforced in that agency.



                          Subpart E_Exemptions



Sec. 82.500  Secretary of Defense.

    (a) The Secretary of Defense may exempt, on a case-by-case basis, a 
covered Federal action from the prohibition whenever the Secretary 
determines, in writing, that such an exemption is in the national 
interest. The Secretary shall transmit a copy of each such written 
exemption to Congress immediately after making such a determination.
    (b) The Department of Defense may issue supplemental regulations to 
implement paragraph (a) of this section.



                        Subpart F_Agency Reports



Sec. 82.600  Semi-annual compilation.

    (a) The head of each agency shall collect and compile the disclosure 
reports (see appendix B) and, on May 31 and November 30 of each year, 
submit to the Secretary of the Senate and the Clerk of the House of 
Representatives a report containing a compilation of the

[[Page 249]]

information contained in the disclosure reports received during the six-
month period ending on March 31 or September 30, respectively, of that 
year.
    (b) The report, including the compilation, shall be available for 
public inspection 30 days after receipt of the report by the Secretary 
and the Clerk.
    (c) Information that involves intelligence matters shall be reported 
only to the Select Committee on Intelligence of the Senate, the 
Permanent Select Committee on Intelligence of the House of 
Representatives, and the Committees on Appropriations of the Senate and 
the House of Representatives in accordance with procedures agreed to by 
such committees. Such information shall not be available for public 
inspection.
    (d) Information that is classified under Executive Order 12356 or 
any successor order shall be reported only to the Committee on Foreign 
Relations of the Senate and the Committee on Foreign Affairs of the 
House of Representatives or the Committees on Armed Services of the 
Senate and the House of Representatives (whichever such committees have 
jurisdiction of matters involving such information) and to the 
Committees on Appropriations of the Senate and the House of 
Representatives in accordance with procedures agreed to by such 
committees. Such information shall not be available for public 
inspection.
    (e) The first semi-annual compilation shall be submitted on May 31, 
1990, and shall contain a compilation of the disclosure reports received 
from December 23, 1989 to March 31, 1990.
    (f) Major agencies, designated by the Office of Management and 
Budget (OMB), are required to provide machine-readable compilations to 
the Secretary of the Senate and the Clerk of the House of 
Representatives no later than with the compilations due on May 31, 1991. 
OMB shall provide detailed specifications in a memorandum to these 
agencies.
    (g) Non-major agencies are requested to provide machine-readable 
compilations to the Secretary of the Senate and the Clerk of the House 
of Representatives.
    (h) Agencies shall keep the originals of all disclosure reports in 
the official files of the agency.



Sec. 82.605  Inspector General report.

    (a) The Inspector General, or other official as specified in 
paragraph (b) of this section, of each agency shall prepare and submit 
to Congress each year, commencing with submission of the President's 
Budget in 1991, an evaluation of the compliance of that agency with, and 
the effectiveness of, the requirements herein. The evaluation may 
include any recommended changes that may be necessary to strengthen or 
improve the requirements.
    (b) In the case of an agency that does not have an Inspector 
General, the agency official comparable to an Inspector General shall 
prepare and submit the annual report, or, if there is no such comparable 
official, the head of the agency shall prepare and submit the annual 
report.
    (c) The annual report shall be submitted at the same time the agency 
submits its annual budget justifications to Congress.
    (d) The annual report shall include the following: All alleged 
violations relating to the agency's covered Federal actions during the 
year covered by the report, the actions taken by the head of the agency 
in the year covered by the report with respect to those alleged 
violations and alleged violations in previous years, and the amounts of 
civil penalties imposed by the agency in the year covered by the report.

         Appendix A to Part 82--Certification Regarding Lobbying

 Certification for Contracts, Grants, Loans, and Cooperative Agreements

    The undersigned certifies, to the best of his or her knowledge and 
belief, that:
    (1) No Federal appropriated funds have been paid or will be paid, by 
or on behalf of the undersigned, to any person for influencing or 
attempting to influence an officer or employee of an agency, a Member of 
Congress, an officer or employee of Congress, or an employee of a Member 
of Congress in connection with the awarding of any Federal contract, the 
making of any Federal grant, the making of any Federal loan, the 
entering into of any cooperative agreement, and the

[[Page 250]]

extension, continuation, renewal, amendment, or modification of any 
Federal contract, grant, loan, or cooperative agreement.
    (2) If any funds other than Federal appropriated funds have been 
paid or will be paid to any person for influencing or attempting to 
influence an officer or employee of any agency, a Member of Congress, an 
officer or employee of Congress, or an employee of a Member of Congress 
in connection with this Federal contract, grant, loan, or cooperative 
agreement, the undersigned shall complete and submit Standard Form-LLL, 
``Disclosure Form to Report Lobbying,'' in accordance with its 
instructions.
    (3) The undersigned shall require that the language of this 
certification be included in the award documents for all subawards at 
all tiers (including subcontracts, subgrants, and contracts under 
grants, loans, and cooperative agreements) and that all subrecipients 
shall certify and disclose accordingly.
    This certification is a material representation of fact upon which 
reliance was placed when this transaction was made or entered into. 
Submission of this certification is a prerequisite for making or 
entering into this transaction imposed by section 1352, title 31, U.S. 
Code. Any person who fails to file the required certification shall be 
subject to a civil penalty of not less than $10,000 and not more than 
$100,000 for each such failure.

            Statement for Loan Guarantees and Loan Insurance

    The undersigned states, to the best of his or her knowledge and 
belief, that:
    If any funds have been paid or will be paid to any person for 
influencing or attempting to influence an officer or employee of any 
agency, a Member of Congress, an officer or employee of Congress, or an 
employee of a Member of Congress in connection with this commitment 
providing for the United States to insure or guarantee a loan, the 
undersigned shall complete and submit Standard Form-LLL, ``Disclosure 
Form to Report Lobbying,'' in accordance with its instructions.
    Submission of this statement is a prerequisite for making or 
entering into this transaction imposed by section 1352, title 31, U.S. 
Code. Any person who fails to file the required statement shall be 
subject to a civil penalty of not less than $10,000 and not more than 
$100,000 for each such failure.

[[Page 251]]

        Appendix B to Part 82--Disclosure Form to Report Lobbying
[GRAPHIC] [TIFF OMITTED] TC21OC91.056


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[GRAPHIC] [TIFF OMITTED] TC21OC91.057


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[GRAPHIC] [TIFF OMITTED] TC21OC91.058


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PART 84_GOVERNMENTWIDE REQUIREMENTS FOR DRUG-FREE WORKPLACE (FINANCIAL 
ASSISTANCE)--Table of Contents




                     Subpart A_Purpose and Coverage

Sec.
84.100 What does this part do?
84.105 Does this part apply to me?
84.110 Are any of my Federal assistance awards exempt from this part?
84.115 Does this part affect the Federal contracts that I receive?

      Subpart B_Requirements for Recipients Other Than Individuals

84.200 What must I do to comply with this part?
84.205 What must I include in my drug-free workplace statement?
84.210 To whom must I distribute my drug-free workplace statement?
84.215 What must I include in my drug-free awareness program?
84.220 By when must I publish my drug-free workplace statement and 
          establish my drug-free awareness program?
84.225 What actions must I take concerning employees who are convicted 
          of drug violations in the workplace?
84.230 How and when must I identify workplaces?

        Subpart C_Requirements for Recipients Who Are Individuals

84.300 What must I do to comply with this part if I am an individual 
          recipient?
84.301 [Reserved]

           Subpart D_Responsibilities of ED Awarding Officials

84.400 What are my responsibilities as an ED awarding official?

           Subpart E_Violations of This Part and Consequences

84.500 How are violations of this part determined for recipients other 
          than individuals?
84.505 How are violations of this part determined for recipients who are 
          individuals?
84.510 What actions will the Federal Government take against a recipient 
          determined to have violated this part?
84.515 Are there any exceptions to those actions?

                          Subpart F_Definitions

84.605 Award.
84.610 Controlled substance.
84.615 Conviction.
84.620 Cooperative agreement.
84.625 Criminal drug statute.
84.630 Debarment.
84.635 Drug-free workplace.
84.640 Employee.
84.645 Federal agency or agency.
84.650 Grant.
84.655 Individual.
84.660 Recipient.
84.665 State.
84.670 Suspension.

    Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327, unless 
otherwise noted.

    Source: 68 FR 66557, 66610, Nov. 26, 2003, unless otherwise noted.



                     Subpart A_Purpose and Coverage



Sec. 84.100  What does this part do?

    This part carries out the portion of the Drug-Free Workplace Act of 
1988 (41 U.S.C. 701 et seq., as amended) that applies to grants. It also 
applies the provisions of the Act to cooperative agreements and other 
financial assistance awards, as a matter of Federal Government policy.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.105  Does this part apply to me?

    (a) Portions of this part apply to you if you are either--
    (1) A recipient of an assistance award from the Department of 
Education; or
    (2) A(n) ED awarding official. (See definitions of award and 
recipient in Sec. Sec. 84.605 and 84.660, respectively.)
    (b) The following table shows the subparts that apply to you:

------------------------------------------------------------------------
            If you are . . .                    see subparts . . .
------------------------------------------------------------------------
(1) A recipient who is not an            A, B and E.
 individual.
(2) A recipient who is an individual...  A, C and E.
(3) A(n) ED awarding official..........  A, D and E.
------------------------------------------------------------------------


[[Page 255]]


Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.110  Are any of my Federal assistance awards exempt from 
this part?

    This part does not apply to any award that the ED Deciding Official 
determines that the application of this part would be inconsistent with 
the international obligations of the United States or the laws or 
regulations of a foreign government.

Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.115  Does this part affect the Federal contracts that I receive?

    It will affect future contract awards indirectly if you are debarred 
or suspended for a violation of the requirements of this part, as 
described in Sec. 84. 510(c). However, this part does not apply 
directly to procurement contracts. The portion of the Drug-Free 
Workplace Act of 1988 that applies to Federal procurement contracts is 
carried out through the Federal Acquisition Regulation in chapter 1 of 
Title 48 of the Code of Federal Regulations (the drug-free workplace 
coverage currently is in 48 CFR part 23, subpart 23.5).

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



      Subpart B_Requirements for Recipients Other Than Individuals



Sec. 84.200  What must I do to comply with this part?

    There are two general requirements if you are a recipient other than 
an individual.
    (a) First, you must make a good faith effort, on a continuing basis, 
to maintain a drug-free workplace. You must agree to do so as a 
condition for receiving any award covered by this part. The specific 
measures that you must take in this regard are described in more detail 
in subsequent sections of this subpart. Briefly, those measures are to--
    (1) Publish a drug-free workplace statement and establish a drug-
free awareness program for your employees (see Sec. Sec. 84.205 through 
84.220); and
    (2) Take actions concerning employees who are convicted of violating 
drug statutes in the workplace (see Sec. 84.225).
    (b) Second, you must identify all known workplaces under your 
Federal awards (see Sec. 84.230).

Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.205  What must I include in my drug-free workplace statement?

    You must publish a statement that--
    (a) Tells your employees that the unlawful manufacture, 
distribution, dispensing, possession, or use of a controlled substance 
is prohibited in your workplace;
    (b) Specifies the actions that you will take against employees for 
violating that prohibition; and
    (c) Lets each employee know that, as a condition of employment under 
any award, he or she:
    (1) Will abide by the terms of the statement; and
    (2) Must notify you in writing if he or she is convicted for a 
violation of a criminal drug statute occurring in the workplace and must 
do so no more than five calendar days after the conviction.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.210  To whom must I distribute my drug-free workplace statement?

    You must require that a copy of the statement described in Sec. 
84.205 be given to each employee who will be engaged in the performance 
of any Federal award.

Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.215  What must I include in my drug-free awareness program?

    You must establish an ongoing drug-free awareness program to inform 
employees about--

[[Page 256]]

    (a) The dangers of drug abuse in the workplace;
    (b) Your policy of maintaining a drug-free workplace;
    (c) Any available drug counseling, rehabilitation, and employee 
assistance programs; and
    (d) The penalties that you may impose upon them for drug abuse 
violations occurring in the workplace.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.220  By when must I publish my drug-free workplace statement 
and establish my drug-free awareness program?

    If you are a new recipient that does not already have a policy 
statement as described in Sec. 84.205 and an ongoing awareness program 
as described in Sec. 84.215, you must publish the statement and 
establish the program by the time given in the following table:

------------------------------------------------------------------------
                If . . .                          then you . . .
------------------------------------------------------------------------
(a) The performance period of the award  must have the policy statement
 is less than 30 days.                    and program in place as soon
                                          as possible, but before the
                                          date on which performance is
                                          expected to be completed.
(b) The performance period of the award  must have the policy statement
 is 30 days or more.                      and program in place within 30
                                          days after award.
(c) You believe there are extraordinary  may ask the ED awarding
 circumstances that will require more     official to give you more time
 than 30 days for you to publish the      to do so. The amount of
 policy statement and establish the       additional time, if any, to be
 awareness program.                       given is at the discretion of
                                          the awarding official.
------------------------------------------------------------------------


(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.225  What actions must I take concerning employees who are 
convicted of drug violations in the workplace?

    There are two actions you must take if an employee is convicted of a 
drug violation in the workplace:
    (a) First, you must notify Federal agencies if an employee who is 
engaged in the performance of an award informs you about a conviction, 
as required by Sec. 84.205(c)(2), or you otherwise learn of the 
conviction. Your notification to the Federal agencies must--
    (1) Be in writing;
    (2) Include the employee's position title;
    (3) Include the identification number(s) of each affected award;
    (4) Be sent within ten calendar days after you learn of the 
conviction; and
    (5) Be sent to every Federal agency on whose award the convicted 
employee was working. It must be sent to every awarding official or his 
or her official designee, unless the Federal agency has specified a 
central point for the receipt of the notices.
    (b) Second, within 30 calendar days of learning about an employee's 
conviction, you must either--
    (1) Take appropriate personnel action against the employee, up to 
and including termination, consistent with the requirements of the 
Rehabilitation Act of 1973 (29 U.S.C. 794), as amended; or
    (2) Require the employee to participate satisfactorily in a drug 
abuse assistance or rehabilitation program approved for these purposes 
by a Federal, State or local health, law enforcement, or other 
appropriate agency.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.230  How and when must I identify workplaces?

    (a) You must identify all known workplaces under each ED award. A 
failure to do so is a violation of your drug-free workplace 
requirements. You may identify the workplaces--
    (1) To the ED official that is making the award, either at the time 
of application or upon award; or
    (2) In documents that you keep on file in your offices during the 
performance of the award, in which case you must make the information 
available for inspection upon request by ED officials or their 
designated representatives.

[[Page 257]]

    (b) Your workplace identification for an award must include the 
actual address of buildings (or parts of buildings) or other sites where 
work under the award takes place. Categorical descriptions may be used 
(e.g., all vehicles of a mass transit authority or State highway 
department while in operation, State employees in each local 
unemployment office, performers in concert halls or radio studios).
    (c) If you identified workplaces to the ED awarding official at the 
time of application or award, as described in paragraph (a)(1) of this 
section, and any workplace that you identified changes during the 
performance of the award, you must inform the ED awarding official.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



        Subpart C_Requirements for Recipients Who Are Individuals



Sec. 84.300  What must I do to comply with this part if I am an 
individual recipient?

    As a condition of receiving a(n) ED award, if you are an individual 
recipient, you must agree that--
    (a) You will not engage in the unlawful manufacture, distribution, 
dispensing, possession, or use of a controlled substance in conducting 
any activity related to the award; and
    (b) If you are convicted of a criminal drug offense resulting from a 
violation occurring during the conduct of any award activity, you will 
report the conviction:
    (1) In writing.
    (2) Within 10 calendar days of the conviction.
    (3) To the ED awarding official or other designee for each award 
that you currently have, unless Sec. 84.301 or the award document 
designates a central point for the receipt of the notices. When notice 
is made to a central point, it must include the identification number(s) 
of each affected award.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.301  [Reserved]



           Subpart D_Responsibilities of ED Awarding Officials



Sec. 84.400  What are my responsibilities as a(n) ED awarding official?

    As a(n) ED awarding official, you must obtain each recipient's 
agreement, as a condition of the award, to comply with the requirements 
in--
    (a) Subpart B of this part, if the recipient is not an individual; 
or
    (b) Subpart C of this part, if the recipient is an individual.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



           Subpart E_Violations of this Part and Consequences



Sec. 84.500  How are violations of this part determined for recipients 
other than individuals?

    A recipient other than an individual is in violation of the 
requirements of this part if the ED Deciding Official determines, in 
writing, that--
    (a) The recipient has violated the requirements of subpart B of this 
part; or
    (b) The number of convictions of the recipient's employees for 
violating criminal drug statutes in the workplace is large enough to 
indicate that the recipient has failed to make a good faith effort to 
provide a drug-free workplace.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.505  How are violations of this part determined for recipients 
who are individuals?

    An individual recipient is in violation of the requirements of this 
part if the ED Deciding Official determines, in writing, that--
    (a) The recipient has violated the requirements of subpart C of this 
part; or
    (b) The recipient is convicted of a criminal drug offense resulting 
from a violation occurring during the conduct of any award activity.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)

[[Page 258]]



Sec. 84.510  What actions will the Federal Government take against a 
recipient determined to have violated this part?

    If a recipient is determined to have violated this part, as 
described in Sec. 84.500 or Sec. 84.505, the Department of Education 
may take one or more of the following actions--
    (a) Suspension of payments under the award;
    (b) Suspension or termination of the award; and
    (c) Suspension or debarment of the recipient under 34 CFR Part 85, 
for a period not to exceed five years.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.515  Are there any exceptions to those actions?

    The ED Deciding Official may waive with respect to a particular 
award, in writing, a suspension of payments under an award, suspension 
or termination of an award, or suspension or debarment of a recipient if 
the ED Deciding Official determines that such a waiver would be in the 
public interest. This exception authority cannot be delegated to any 
other official.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



                          Subpart F_Definitions



Sec. 84.605  Award.

    Award means an award of financial assistance by the Department of 
Education or other Federal agency directly to a recipient.
    (a) The term award includes:
    (1) A Federal grant or cooperative agreement, in the form of money 
or property in lieu of money.
    (2) A block grant or a grant in an entitlement program, whether or 
not the grant is exempted from coverage under the Governmentwide rule 34 
CFR Part 85 that implements OMB Circular A-102 (for availability, see 5 
CFR 1310.3) and specifies uniform administrative requirements.
    (b) The term award does not include:
    (1) Technical assistance that provides services instead of money.
    (2) Loans.
    (3) Loan guarantees.
    (4) Interest subsidies.
    (5) Insurance.
    (6) Direct appropriations.
    (7) Veterans' benefits to individuals (i.e., any benefit to 
veterans, their families, or survivors by virtue of the service of a 
veteran in the Armed Forces of the United States).

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.610  Controlled substance.

    Controlled substance means a controlled substance in schedules I 
through V of the Controlled Substances Act (21 U.S.C. 812), and as 
further defined by regulation at 21 CFR 1308.11 through 1308.15.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.615  Conviction.

    Conviction means a finding of guilt (including a plea of nolo 
contendere) or imposition of sentence, or both, by any judicial body 
charged with the responsibility to determine violations of the Federal 
or State criminal drug statutes.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.620  Cooperative agreement.

    Cooperative agreement means an award of financial assistance that, 
consistent with 31 U.S.C. 6305, is used to enter into the same kind of 
relationship as a grant (see definition of grant in Sec. 84.650), 
except that substantial involvement is expected between the Federal 
agency and the recipient when carrying out the activity contemplated by 
the award. The term does not include cooperative research and 
development agreements as defined in 15 U.S.C. 3710a.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)

[[Page 259]]



Sec. 84.625  Criminal drug statute.

    Criminal drug statute means a Federal or non-Federal criminal 
statute involving the manufacture, distribution, dispensing, use, or 
possession of any controlled substance.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.630  Debarment.

    Debarment means an action taken by a Federal agency to prohibit a 
recipient from participating in Federal Government procurement contracts 
and covered nonprocurement transactions. A recipient so prohibited is 
debarred, in accordance with the Federal Acquisition Regulation for 
procurement contracts (48 CFR part 9, subpart 9.4) and the common rule, 
Government-wide Debarment and Suspension (Nonprocurement), that 
implements Executive Order 12549 and Executive Order 12689.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.635  Drug-free workplace.

    Drug-free workplace means a site for the performance of work done in 
connection with a specific award at which employees of the recipient are 
prohibited from engaging in the unlawful manufacture, distribution, 
dispensing, possession, or use of a controlled substance.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.640  Employee.

    (a) Employee means the employee of a recipient directly engaged in 
the performance of work under the award, including--
    (1) All direct charge employees;
    (2) All indirect charge employees, unless their impact or 
involvement in the performance of work under the award is insignificant 
to the performance of the award; and
    (3) Temporary personnel and consultants who are directly engaged in 
the performance of work under the award and who are on the recipient's 
payroll.
    (b) This definition does not include workers not on the payroll of 
the recipient (e.g., volunteers, even if used to meet a matching 
requirement; consultants or independent contractors not on the payroll; 
or employees of subrecipients or subcontractors in covered workplaces).

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.645  Federal agency or agency.

    Federal agency or agency means any United States executive 
department, military department, government corporation, government 
controlled corporation, any other establishment in the executive branch 
(including the Executive Office of the President), or any independent 
regulatory agency.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.650  Grant.

    Grant means an award of financial assistance that, consistent with 
31 U.S.C. 6304, is used to enter into a relationship--
    (a) The principal purpose of which is to transfer a thing of value 
to the recipient to carry out a public purpose of support or stimulation 
authorized by a law of the United States, rather than to acquire 
property or services for the Federal Government's direct benefit or use; 
and
    (b) In which substantial involvement is not expected between the 
Federal agency and the recipient when carrying out the activity 
contemplated by the award.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.655  Individual.

    Individual means a natural person.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.660  Recipient.

    Recipient means any individual, corporation, partnership, 
association, unit of government (except a Federal agency) or legal 
entity, however organized,

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that receives an award directly from a Federal agency.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.665  State.

    State means any of the States of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, or any territory or 
possession of the United States.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



Sec. 84.670  Suspension.

    Suspension means an action taken by a Federal agency that 
immediately prohibits a recipient from participating in Federal 
Government procurement contracts and covered nonprocurement transactions 
for a temporary period, pending completion of an investigation and any 
judicial or administrative proceedings that may ensue. A recipient so 
prohibited is suspended, in accordance with the Federal Acquisition 
Regulation for procurement contracts (48 CFR part 9, subpart 9.4) and 
the common rule, Government-wide Debarment and Suspension 
(Nonprocurement), that implements Executive Order 12549 and Executive 
Order 12689. Suspension of a recipient is a distinct and separate action 
from suspension of an award or suspension of payments under an award.

(Authority: E.O.s 12549 and 12689; 20 U.S.C. 1082, 1094, 1221e-3 and 
3474; and Sec. 2455, Pub. L. 103-355, 108 Stat. 3243 at 3327.)



PART 85_GOVERNMENTWIDE DEBARMENT AND SUSPENSION (NONPROCUREMENT)--Table 
of Contents




Sec.
85.25 How is this part organized?
85.50 How is this part written?
85.75 Do terms in this part have special meanings?

                            Subpart A_General

85.100 What does this part do?
85.105 Does this part apply to me?
85.110 What is the purpose of the nonprocurement debarment and 
          suspension system?
85.115 How does an exclusion restrict a person's involvement in covered 
          transactions?
85.120 May we grant an exception to let an excluded person participate 
          in a covered transaction?
85.125 Does an exclusion under the nonprocurement system affect a 
          person's eligibility for Federal procurement contracts?
85.130 Does exclusion under the Federal procurement system affect a 
          person's eligibility to participate in nonprocurement 
          transactions?
85.135 May the Department of Education exclude a person who is not 
          currently participating in a nonprocurement transaction?
85.140 How do I know if a person is excluded?
85.145 Does this part address persons who are disqualified, as well as 
          those who are excluded from nonprocurement transactions?

                     Subpart B_Covered Transactions

85.200 What is a covered transaction?
85.205 Why is it important to know if a particular transaction is a 
          covered transaction?
85.210 Which nonprocurement transactions are covered transactions?
85.215 Which nonprocurement transactions are not covered transactions?
85.220 Are any procurement contracts included as covered transactions?
85.225 How do I know if a transaction in which I may participate is a 
          covered transaction?

    Subpart C_Responsibilities of Participants Regarding Transactions

                    Doing Business With Other Persons

85.300 What must I do before I enter into a covered transaction with 
          another person at the next lower tier?
85.305 May I enter into a covered transaction with an excluded or 
          disqualified person?
85.310 What must I do if a Federal agency excludes a person with whom I 
          am already doing business in a covered transaction?
85.315 May I use the services of an excluded person as a principal under 
          a covered transaction?
85.320 Must I verify that principals of my covered transactions are 
          eligible to participate?
85.325 What happens if I do business with an excluded person in a 
          covered transaction?
85.330 What requirements must I pass down to persons at lower tiers with 
          whom I intend to do business?

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            Disclosing Information--Primary Tier Participants

85.335 What information must I provide before entering into a covered 
          transaction with the Department of Education?
85.340 If I disclose unfavorable information required under Sec. 
          85.335, will I be prevented from participating in the 
          transaction?
85.345 What happens if I fail to disclose the information required under 
          Sec. 85.335?
85.350 What must I do if I learn of the information required under Sec. 
          85.335 after entering into a covered transaction with the 
          Department of Education?

             Disclosing Information--Lower Tier Participants

85.355 What information must I provide to a higher tier participant 
          before entering into a covered transaction with that 
          participant?
85.360 What happens if I fail to disclose the information required under 
          Sec. 85.355?
85.365 What must I do if I learn of information required under Sec. 
          85.355 after entering into a covered transaction with a higher 
          tier participant?

    Subpart D_Responsibilities of ED Officials Regarding Transactions

85.400 May I enter into a transaction with an excluded or disqualified 
          person?
85.405 May I enter into a covered transaction with a participant if a 
          principal of the transaction is excluded?
85.410 May I approve a participant's use of the services of an excluded 
          person?
85.415 What must I do if a Federal agency excludes the participant or a 
          principal after I enter into a covered transaction?
85.420 May I approve a transaction with an excluded or disqualified 
          person at a lower tier?
85.425 When do I check to see if a person is excluded or disqualified?
85.430 How do I check to see if a person is excluded or disqualified?
85.435 What must I require of a primary tier participant?
85.440 What method do I use to communicate those requirements to 
          participants?
85.445 What action may I take if a primary tier participant knowingly 
          does business with an excluded or disqualified person?
85.450 What action may I take if a primary tier participant fails to 
          disclose the informat