[Title 38 CFR ]
[Code of Federal Regulations (annual edition) - July 1, 2006 Edition]
[From the U.S. Government Printing Office]



[[Page i]]



          38


          Part 18 to End

                         Revised as of July 1, 2006


          Pensions, Bonuses, and Veterans' Relief
          
          


________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of July 1, 2006
          With Ancillaries
                    Published by
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

[[Page ii]]

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[[Page iii]]




                            Table of Contents



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

  Title 38:
          Chapter I--Department of Veterans Affairs 
          (Continued)                                                3
  Finding Aids:
      Material Approved for Incorporation by Reference........    1027
      Table of CFR Titles and Chapters........................    1029
      Alphabetical List of Agencies Appearing in the CFR......    1047
      List of CFR Sections Affected...........................    1057

[[Page iv]]





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

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 38 CFR 18.1 refers 
                       to title 38, part 18, 
                       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 
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    To determine whether a Code volume has been amended since its 
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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

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Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
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Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
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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 
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to materials already published elsewhere. For an incorporation to be 
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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 
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the material is not available, please notify the Director of the Federal 
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20408, or call 202-741-6010.

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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

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

July 1, 2006.

[[Page ix]]



                               THIS TITLE

    Title 38--Pensions, Bonuses and Veterans' Relief is composed of two 
volumes, parts 0-17 and part 18 to End. The contents of these volumes 
represent all current regulations of the Department of Veterans Affairs 
codified under this title of the CFR as of July 1, 2006.

    For this volume, Bonnie Fritts 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 38--PENSIONS, BONUSES, AND VETERANS' RELIEF




                   (This book contains part 18 to End)

  --------------------------------------------------------------------
                                                                    Part

chapter i--Department of Veterans Affairs (Continued).......          18

[[Page 3]]



          CHAPTER I--DEPARTMENT OF VETERANS AFFAIRS (CONTINUED)




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


  Editorial Note: Nomenclature changes affecting chapter I appear at 64 
FR 30244, June 7, 1999; 65 FR 1545, Jan. 11, 2000; 66 FR 44053, Aug. 22, 
2001; 66 FR 66767, Dec. 27, 2001; 67 FR 16023, Apr. 4, 2002; and 69 FR 
18803, Apr. 9, 2004.
Part                                                                Page
18              Nondiscrimination in federally-assisted 
                    programs of the Department of Veterans 
                    Affairs--effectuation of Title VI of the 
                    Civil Rights Act of 1964................           5
18a             Delegation of responsibility in connection 
                    with Title VI, Civil Rights Act of 1964.          48
18b             Practice and procedure under Title VI of the 
                    Civil Rights Act of 1964 and Part 18 of 
                    this chapter............................          51
19              Board of Veterans' Appeals: Appeals 
                    regulations.............................          62
20              Board of Veterans' Appeals: Rules of 
                    Practice................................          70
21              Vocational rehabilitation and education.....         112
23              Nondiscrimination on the basis of sex in 
                    education programs or activities 
                    receiving federal financial assistance..         519
25              Uniform relocation assistance and real 
                    property acquisition for Federal and 
                    federally assisted programs.............         535
26              Environmental effects of the Department of 
                    Veterans Affairs (VA) actions...........         535
36              Loan guaranty...............................         540
38              National cemeteries of the Department of 
                    Veterans Affairs........................         714
39              Aid to states for establishment, expansion, 
                    and improvement of veterans' cemeteries.         722
40              Intergovernmental review of Department of 
                    Veterans Affairs programs and activities         747
41              Audits of states, local governments, and 
                    non-profit organizations................         751
42              Standards implementing the Program Fraud 
                    Civil Remedies Act......................         773
43              Uniform administrative requirements for 
                    grants and cooperative agreements to 
                    State and local governments.............         789

[[Page 4]]

44              Governmentwide debarment and suspension 
                    (nonprocurement)........................         816
45              New restrictions on lobbying................         841
46              Policy regarding participation in National 
                    Practitioner Data Bank..................         853
47              Policy regarding reporting health care 
                    professionals to State Licensing Boards.         857
48              Governmentwide requirements for drug-free 
                    workplace (financial assistance)........         858
49              Uniform administrative requirements for 
                    grants and agreements with institutions 
                    of higher education, hospitals, and 
                    other non-profit organizations..........         864
51              Per diem for nursing home care of veterans 
                    in State homes..........................         892
52              Per diem for adult day health care of 
                    veterans in State homes.................         915
58              Forms.......................................         938
59              Grants to states for construction or 
                    acquisition of state homes..............         955
60              Fisher houses and other temporary lodging...        1000
61              VA homeless providers grant and per diem 
                    program.................................        1002

[[Page 5]]



PART 18_NONDISCRIMINATION IN FEDERALLY-ASSISTED PROGRAMS OF THE 
DEPARTMENT OF VETERANS AFFAIRS_EFFECTUATION OF TITLE VI OF THE 
CIVIL RIGHTS ACT OF 1964--Table of Contents




                            Subpart A_General

Sec.
18.1 Purpose.
18.2 Application of this part.
18.3 Discrimination prohibited.
18.4 Assurances required.
18.6 Compliance information.
18.7 Conduct of investigations.
18.8 Procedure for effecting compliance.
18.9 Hearings.
18.10 Decisions and notices.
18.11 Judicial review.
18.12 Effect on other regulations, forms and instructions.
18.13 Definitions.

Appendix A to Subpart A--Statutory Provisions to Which This Subpart 
          Applies
Appendix B to Subpart A--Illustrative Applications

Subparts B-C [Reserved]

          Subpart D_Nondiscrimination on the Basis of Handicap

                           General Provisions

18.401 Purpose.
18.402 Application.
18.403 Definitions.
18.404 Discrimination prohibited.
18.405 Assurances required.
18.406 Remedial action, voluntary action and self-evaluation.
18.407 Designation of responsible employee and adoption of grievance 
          procedures.
18.408 Notice.
18.409 Administrative requirements for certain recipients.
18.410 Effect of State or local law or other requirements and effect of 
          employment opportunities.

                          Employment Practices

18.411 Discrimination prohibited.
18.412 Reasonable accommodation.
18.413 Employment criteria.
18.414 Preemployment inquiries.

                              Accessibility

18.421 Discrimination prohibited.
18.422 Existing facilities.
18.423 New construction.

               Elementary, Secondary, and Adult Education

18.431 Application.
18.432 Location and notification.
18.433 Free appropriate public education.
18.434 Education setting.
18.435 Evaluation and placement.
18.436 Procedural safeguards.
18.437 Nonacademic services.
18.438 Adult education.
18.439 Private education.

                         Postsecondary Education

18.441 Application.
18.442 Admissions and recruitment.
18.443 General treatment of students.
18.444 Academic adjustments.
18.445 Housing.
18.446 Financial and employment assistance to students.
18.447 Nonacademic services.

                       Health and Social Services

18.451 Application.
18.452 Health and other social services.
18.453 Drug and alcohol addicts.
18.454 Education of institutionalized persons.

                               Procedures

18.461 Procedures.

Appendix A to Subpart D--Statutory Provisions to Which This Part Applies

             Subpart E_Nondiscrimination on the Basis of Age

                                 General

18.501 Purpose.
18.502 Application.
18.503 Definitions.

              Standards for Determining Age Discrimination

18.511 Rules against age discrimination.
18.512 Definitions of ``normal operation'' and ``statutory objective.''
18.513 Exceptions to the rules against age discrimination; normal 
          operation or statutory objective of any program or activity.
18.514 Exceptions to the rules against age discrimination; reasonable 
          factors other than age.
18.515 Burden of proof.
18.516 Affirmative action by recipients.

      Responsibilities of Department of Veterans Affairs Recipients

18.531 General responsibilities.
18.532 Notice of subrecipients.
18.533 Assurance of compliance and recipient assessment of age 
          distinctions.
18.534 Information requirements.

         Investigation, Conciliation, and Enforcement Procedures

18.541 Compliance reviews.

[[Page 6]]

18.542 Complaints.
18.543 Mediation.
18.544 Investigation.
18.545 Prohibition against intimidation or retaliation.
18.546 Compliance procedure.
18.547 Hearings, decisions, post-termination proceedings.
18.548 Remedial action by recipient.
18.549 Alternate funds disbursal procedure.
18.550 Exhaustion of administrative remedies.

Appendix A to Subpart E--Statutory Provisions to Which This Subpart 
          Applies
Appendix B to Subpart E--List of Age Distinctions Contained in Statutes 
          and Regulations Governing Federal Financial Assistance of the 
          Department of Veterans Affairs



                            Subpart A_General

    Authority: Sec. 602, 78 Stat. 252 (42 U.S.C. 2000d-1) and the laws 
referred to in Appendix A.



Sec. 18.1  Purpose.

    The purpose of this part is to effectuate the provisions of Title VI 
of the Civil Rights Act of 1964 (hereafter referred to as the Act) to 
the end that no person in the United States shall, on the ground of 
race, color, or national origin, be excluded from participation in, be 
denied the benefits of, or be otherwise subjected to discrimination 
under any program or activity receiving Federal financial assistance 
from the Department of Veterans Affairs.

[29 FR 19301, Dec. 31, 1964. Designated subpart A at 45 FR 63268, Sept. 
24, 1980]



Sec. 18.2  Application of this part.

    This part applies to any program for which Federal financial 
assistance is authorized under a law administered by the Department of 
Veterans Affairs, including the types of Federal financial assistance 
listed in appendix A to this subpart. It applies to money paid, property 
transferred, or other Federal financial assistance extended after the 
effective date of this part pursuant to an application approved prior to 
such effective date. This part does not apply to (a) any Federal 
financial assistance by way of insurance or guaranty contracts, (b) 
money paid, property transferred, or other assistance extended before 
the effective date of this part, (c) any assistance to any individual 
who is the ultimate beneficiary, or (d) any employment practice, under 
any such program, of any employer, employment agency, or labor 
organization, except to the extent described in Sec. 18.3. The fact 
that a type of Federal financial assistance is not listed in appendix A 
to this subpart shall not mean, if Title VI of the Act is otherwise 
applicable, that a program is not covered. Other types of Federal 
financial assistance under statutes now in force or hereinafter enacted 
may be added to appendix A to this subpart by notice published in the 
Federal Register.

[38 FR 17965, July 5, 1973. Designated subpart A at 45 FR 63268, Sept. 
24, 1980, as amended at 68 FR 51369, Aug. 26, 2003]



Sec. 18.3  Discrimination prohibited.

    (a) General. No person in the United States shall, on the ground of 
race, color, or national origin be excluded from participation in, be 
denied the benefits of, or be otherwise subjected to discrimination 
under any program to which this part applies.
    (b) Specific discriminatory actions prohibited. (1) A recipient to 
which this part applies may not, directly or through contractual or 
other arrangements, on grounds of race, color, or national origin:
    (i) Deny an individual any service, financial aid, or other benefit 
provided under the program;
    (ii) Provide any service, financial aid, or other benefit to an 
individual which is different, or is provided in a different manner, 
from that provided to others under the program;
    (iii) Subject an individual to segregation or separate treatment in 
any matter related to receipt of any service, financial aid, or other 
benefit under the program;
    (iv) Restrict an individual in any way in the enjoyment of any 
advantage or privilege enjoyed by others receiving any service, 
financial aid, or other benefit under the program;
    (v) Treat an individual differently from others in determining 
whether is satisfied any admission, enrollment, quota, eligibility, 
membership or other requirement or condition which individuals must meet 
in order to be provided any service, financial aid, or

[[Page 7]]

other benefit provided under the program.
    (vi) Deny a person an opportunity to participate in the program 
through the provision of services or otherwise or afford an opportunity 
to do so which is different from that afforded others under the program.
    (vii) Deny a person the opportunity to participate as a member of a 
planning or advisory body which is an integral part of the program.
    (2) A recipient, in determining the types of services, financial 
aid, or other benefits, or facilities which will be provided under any 
such program, or the class of individuals to whom, or the situations in 
which, such services, financial aid, other benefits, or facilities will 
be provided under any such program, or the class of individuals to be 
afforded an opportunity to participate in any such program, may not, 
directly or through contractual or other arrangements, utilize criteria 
or methods of administration which have the effect of subjecting 
individuals to discrimination because of their race, color, or national 
origin, or have the effect of defeating or substantially impairing 
accomplishment of the objectives of the program with respect to 
individuals of a particular race, color, or national origin.
    (3) In determining the site or location of facilities, a recipient 
or applicant may not make selections with the purpose or effect of 
excluding individuals from, denying them the benefits of, or subjecting 
them to discrimination under any program to which this part applies on 
the grounds of race, color or national origin; or with the purpose or 
effect of defeating or substantially impairing the accomplishment of the 
objectives of the Act or this part.
    (4) As used in this section the services, financial aid, or other 
benefits provided under a program receiving Federal financial assistance 
shall be deemed to include any service, financial aid, or other benefit 
provided in or through a facility provided with the aid of Federal 
financial assistance.
    (5) The enumeration of specific forms of prohibited discrimination 
in this paragraph does not limit the generality of the prohibition in 
paragraph (a) of this section.
    (6)(i) In administering a program regarding which the recipient has 
previously discriminated against persons on the ground of race, color, 
or national origin, the recipient must take affirmative action to 
overcome the effects of prior discrimination.
    (ii) Even in the absence of such prior discrimination, a recipient 
in administering a program may take affirmative action to overcome the 
effects of conditions which resulted in limiting participation by 
persons of a particular race, color or national origin.
    (c) Medical emergencies. Notwithstanding the foregoing provisions of 
this section, a recipient of Federal financial assistance shall not be 
deemed to have failed to comply with paragraph (a) of this section if 
immediate provision of a service or other benefit to an individual is 
necessary to prevent his or her death or serious impairment of his or 
her health, and such service or other benefit cannot be provided except 
by or through a medical institution which refuses or fails to comply 
with paragraph (a) of this section.
    (d) Employment practices. (1) Whenever a primary objective of the 
Federal financial assistance to a program to which part 18 applies, is 
to provide employment, a recipient of such assistance may not (directly 
or through contractual or other arrangements) subject any individual to 
discrimination on the ground of race, color, or national origin in its 
employment practices under such program (including recruitment or 
recruitment advertising, employment, layoff, or termination, upgrading, 
demotion, or transfer, rates of pay or other forms of compensation, and 
use of facilities). The requirements applicable to construction 
employment under any such program shall be those specified in or 
pursuant to part III of Executive Order 11246 (3 CFR Chapter IV) or any 
Executive order which supersedes it.
    (2) In regard to Federal financial assistance which does not have 
providing employment as a primary objective, the provisions of paragraph 
(d)(1) of this section apply to the employment

[[Page 8]]

practices of the recipient if discrimination on the ground of race, 
color, or national origin in such employment practices tends, on the 
grounds of race, color, or national origin, to exclude persons from 
participation in, to deny them the benefits of or to subject them to 
discrimination under the program receiving Federal financial assistance. 
In any such case, the provisions of paragraph (d)(1) of this section 
shall apply to the extent necessary to assure equality of opportunity to 
and nondiscriminatory treatment of beneficiaries.

[29 FR 19301, Dec. 31, 1964, as amended at 38 FR 17965, July 5, 1973; 42 
FR 60144, Nov. 25, 1977. Designated subpart A at 45 FR 63268, Sept. 24, 
1980, and further amended at 51 FR 10384, Mar. 26, 1986; 68 FR 51369, 
Aug. 26, 2003]



Sec. 18.4  Assurances required.

    (a) General. (1) Every application for Federal financial assistance 
to which this part applies, except an application to which paragraph (b) 
of this section applies, and every application for Federal financial 
assistance to provide a facility shall, as a condition to its approval 
and the extension of any Federal financial assistance pursuant to the 
application, contain or be accompanied by an assurance that the program 
will be conducted or the facility operated in compliance with all 
requirements imposed by or pursuant to this part. Every award of Federal 
financial assistance shall require the submission of such an assurance. 
In the case of an application for Federal financial assistance to 
provide real property or structures thereon, the assurance shall 
obligate the recipient, or, in the case of a subsequent transfer, the 
transferee, for the period during which the real property or structures 
are used for a purpose for which the Federal financial assistance is 
extended or for another purpose involving the provision of similar 
services or benefits. In the case of personal property the assurance 
shall obligate the recipient for the period during which the recipient 
retains ownership or possession of the property. In all other cases the 
assurance shall obligate the recipient for the period during which 
Federal financial assistance is extended pursuant to the application. 
The responsible agency official shall specify the form of the foregoing 
assurances and the extent to which like assurances will be required of 
subgrantees, contractors and subcontractors, transferees, successors in 
interest, and other participants. Any such assurance shall include 
provisions which give the United States a right to seek its judicial 
enforcement.
    (2) Transfers of surplus property are subject to regulations issued 
by the Administrator of General Services (41 CFR subpart 101-6.2).
    (b) Continuing Federal financial assistance. Every application by a 
State or a State agency for continuing Federal financial assistance to 
which this part applies (including the types of Federal financial 
assistance listed in appendix A to this subpart) shall as a condition to 
its approval and the extension of any Federal financial assistance 
pursuant to the application (1) contain or be accompanied by a statement 
that the program is (or, in the case of a new program, will be) 
conducted in compliance with all requirements imposed by or pursuant to 
this part, and (2) provide or be accompanied by provision for such 
methods of administration for the program as are found by the 
responsible agency official to give reasonable assurance that the 
applicant and all recipients of Federal financial assistance under such 
program will comply with all requirements imposed by or pursuant to this 
part. In any case in which the recipient is claiming financial 
assistance pursuant to arrangements entered into prior to the effective 
date of this part, the assurances provided by this paragraph shall be 
included in the first application or claim for assistance on or after 
the effective date of this part.
    (c) Elementary and secondary schools. The requirements of paragraph 
(a) or (b) of this section with respect to any elementary or secondary 
school or school system shall be deemed to be satisfied if such school 
or school system (1) is subject to a final order of a court of the 
United States for the desegregation of such school or school system, and 
provides an assurance that it will comply with such order, including any 
future modification of such order, or (2) submits a plan for the 
desegregation of such school or school

[[Page 9]]

system which the responsible agency official determines is adequate to 
accomplish the purposes of the Act and this part, at the earliest 
practicable time, and provides reasonable assurance that it will carry 
out such plan; in any case of continuing Federal financial assistance 
the responsible agency official may reserve the right to redetermine, 
after such period as may be specified by the official, the adequacy of 
the plan to accomplish the purposes of the Act and this part. In any 
case in which a final order of a court of the United States for the 
desegregation of such school or school system is entered after 
submission of such a plan, such plan shall be revised to conform to such 
final order, including any future modification of such order.
    (d) Extent of application to institution or facility. In the case 
where any assurances are required from an academic, a medical care, or 
any other institution or facility, insofar as the assurances relate to 
the institution's practices with respect to the admission, care, or 
other treatment of persons by the institution or with respect to the 
opportunity of persons to participate in the receiving or providing of 
services, treatment, or benefits, such assurances shall be applicable to 
the entire institution or facility.

[38 FR 17965, July 5, 1973. Designated subpart A at 45 FR 63268, Sept. 
24, 1980, and amended at 51 FR 10384, Mar. 26, 1986; 68 FR 51369, Aug. 
26, 2003]



Sec. 18.6  Compliance information.

    (a) Cooperation and assistance. Each responsible agency official 
shall to the fullest extent practicable seek the cooperation of 
recipients in obtaining compliance with this part and shall provide 
assistance and guidance to recipients to help them comply voluntarily 
with this part.
    (b) Compliance reports. Each recipient shall keep such records and 
submit to the responsible agency official or designee, timely, complete 
and accurate compliance reports at such times, and in such form and 
containing such information, as the responsible agency official or 
designee may determine to be necessary to enable the official to 
ascertain whether the recipient has complied or is complying with this 
part. In the case in which a primary recipient extends Federal financial 
assistance to any other recipient, such other recipient shall also 
submit such compliance reports to the primary recipient as may be 
necessary to enable the primary recipient to carry out its obligations 
under this part. In general, recipients should have available for the 
agency racial and ethnic data showing the extent to which members of 
minority groups are beneficiaries of federally assisted programs.
    (c) Access to sources of information. Each recipient shall permit 
access by the responsible agency official or designee during normal 
business hours to such of its books, records, accounts, and other 
sources of information, and its facilities as may be pertinent to 
ascertain compliance with this part. Where any information required of a 
recipient is in the exclusive possession of any other agency, 
institution or person and this agency, institution or person shall fail 
or refuse to furnish this information, the recipient shall so certify in 
its report and shall set forth what efforts it has made to obtain the 
information.
    (d) Information to beneficiaries and participants. Each recipient 
shall make available to participants, beneficiaries, and other 
interested persons such information regarding the provisions of this 
part and its applicability to the program for which the recipient 
receives Federal financial assistance, and make such information 
available to them in such manner, as the responsible agency official 
finds necessary to apprise such persons of the protections against 
discrimination assured them by the Act and this part.

[29 FR 19301, Dec. 31, 1964, as amended at 38 FR 17966, July 5, 1973. 
Designated subpart A at 45 FR 63268, Sept. 24, 1980 and amended at 51 FR 
10384, Mar. 26, 1986; 68 FR 51369, Aug. 26, 2003]



Sec. 18.7  Conduct of investigations.

    (a) Periodic compliance reviews. The responsible agency official or 
designee shall from time to time review the practices of recipients to 
determine whether they are complying with this part.
    (b) Complaints. Any person or any specific class of individuals who 
believe

[[Page 10]]

they have been subjected to discrimination prohibited by this part may 
themselves, or by a representative, file with the responsible agency 
official or designee a written complaint. A complaint must be filed not 
later than 180 days from the date of the alleged discrimination unless 
the time for filing is extended by the responsible agency offical or 
designee.
    (c) Investigations. The responsible agency official or designee will 
initiate a prompt investigation whenever a compliance review, report, 
complaint, or any other information indicates a possible failure to 
comply with this part. The investigation should include, where 
appropriate, a review of the pertinent practices and policies of the 
recipient, the circumstances under which the possible noncompliance with 
this part occurred, and other factors relevant to a determination as to 
whether the recipient has failed to comply with this part.
    (d) Resolution of matters. (1) If an investigation pursuant to 
paragraph (c) of this section indicates a failure to comply with this 
part, the responsible agency official or designee will so inform the 
recipient and the matter will be resolved by informal means whenever 
possible. If it has been determined that the matter cannot be resolved 
by informal means, action will be taken as provided for in Sec. 18.8.
    (2) If an investigation does not warrant action pursuant to 
paragraph (d)(1) of this section the responsible agency official or 
designee will so inform the recipient and the complainant, if any, in 
writing.
    (e) Intimidatory or retaliatory acts prohibited. No recipient or 
other person shall intimidate, threaten, coerce, or discriminate against 
any individual for the purpose of interfering with any right or 
privilege secured by section 601 of the Act or this part, or because the 
individual has made a complaint, testified, assisted, or participated in 
any manner in an investigation, proceeding, or hearing under this part. 
The identity of complainants shall be kept confidential except to the 
extent necessary to carry out the purposes of this part, including the 
conduct of any investigation, hearing, or judicial proceeding arising 
thereunder.

[29 FR 19301, Dec. 31, 1964. Designated subpart A at 45 FR 63268, Sept. 
24, 1980 and amended at 51 FR 10384, Mar. 26, 1986]



Sec. 18.8  Procedure for effecting compliance.

    (a) General. If there appears to be a failure or threatened failure 
to comply with this part, and if the noncompliance or threatened 
noncompliance cannot be corrected by informal means, compliance with 
this part may be effected by the suspension or termination of or refusal 
to grant or to continue Federal financial assistance or by any other 
means authorized by law. Such other means may include, but are not 
limited to, (1) a reference to the Department of Justice with a 
recommendation that appropriate proceedings be brought to enforce any 
rights of the United States under any law of the United States 
(including other titles of the Act), or any assurance or other 
contractual undertaking, and (2) any applicable proceeding under State 
or local law.
    (b) Noncompliance with Sec. 18.4. If an applicant fails or refuses 
to furnish an assurance required under Sec. 18.4 or otherwise fails or 
refuses to comply with a requirement imposed by or pursuant to that 
section Federal financial assistance may be refused in accordance with 
the procedures of paragraph (c) of this section. The Department of 
Veterans Affairs shall not be required to provide assistance in such a 
case during the pendency of the administrative proceedings under such 
paragraph except that the Department of Veterans Affairs shall continue 
assistance during the pendency of such proceedings where such assistance 
is due and payable pursuant to an application therefor approved prior to 
the effective date of this part.
    (c) Termination of or refusal to grant or to continue Federal 
financial assistance. No order suspending, terminating or refusing to 
grant or continue Federal financial assistance shall become effective 
until (1) the responsible agency official has advised the applicant or 
recipient of failure to comply and has determined that compliance cannot 
be secured by voluntary means, (2) there

[[Page 11]]

has been an express finding on the record, after opportunity for 
hearing, of a failure by the applicant or recipient to comply with a 
requirement imposed by or pursuant to this part, (3) the action has been 
approved by the Secretary pursuant to Sec. 18.10(e), and (4) the 
expiration of 30 days after the Secretary has filed with the committee 
of the House and the committee of the Senate having legislative 
jurisdiction over the program involved, a full written report of the 
circumstances and the grounds for such action. Any action to suspend or 
terminate or to refuse to grant or to continue Federal financial 
assistance shall be limited to the particular political entity, or part 
thereof, or other applicant or recipient as to whom such a finding has 
been made and shall be limited in its effect to the particular program, 
or part thereof, in which such noncompliance has been so found.
    (d) Other means authorized by law. No action to effect compliance 
with Title VI of the Act by any other means authorized by law shall be 
taken by the Department of Veterans Affairs until (1) the responsible 
agency official has determined that compliance cannot be secured by 
voluntary means, (2) the recipient or other person has been notified of 
its failure to comply and of the action to be taken to effect 
compliance, and (3) the expiration of at least 10 days from the mailing 
of such notice to the recipient or other person. During this period of 
at least 10 days, additional efforts shall be made to persuade the 
recipient or other person to comply with this part and to take such 
corrective action as may be appropriate.

[29 FR 19301, Dec. 31, 1964, as amended at 38 FR 17966, July 5, 1973. 
Designated subpart A at 45 FR 63268, Sept. 24, 1980, and amended at 51 
FR 10384, Mar. 26, 1986]



Sec. 18.9  Hearings.

    (a) Opportunity for hearing. Whenever an opportunity for a hearing 
is required by Sec. 18.8(c), reasonable notice shall be given by 
registered or certified mail, return receipt requested, to the affected 
applicant or recipient. This notice shall advise the applicant or 
recipient of the action proposed to be taken, the specific provision 
under which the proposed action against it is to be taken, and the 
matters of fact or law asserted as the basis for this action, and either 
(1) fix a date not less than 20 days after the date of such notice 
within which the applicant or recipient may request of the responsible 
agency official that the matter be scheduled for hearing or (2) advise 
the applicant or recipient that the matter in question has been set down 
for hearing at a stated place and time. The time and place so fixed 
shall be reasonable and shall be subject to change for cause. The 
complainant, if any, shall be advised of the time and place of the 
hearing. An applicant or recipient may waive a hearing and submit 
written information and argument for the record. The failure of an 
applicant or recipient to request a hearing under this paragraph or to 
appear at a hearing for which a date has been set shall be deemed to be 
a waiver of the right to a hearing under section 602 of the Act and 
Sec. 18.8(c) of this part and consent to the making of a decision on 
the basis of such information as is available.
    (b) Time and place of hearing. Hearings shall be held at the offices 
of the Department of Veterans Affairs in Washington, D.C., at a time 
fixed by the responsible agency official unless the official determines 
that the convenience of the applicant or recipient or of the Department 
of Veterans Affairs requires that another place be selected. Hearings 
shall be held before the responsible agency official or, at the 
official's discretion, before an administrative law judge appointed in 
accordance with section 3105 of Title 5, U.S.C., or detailed under 
section 3344 of Title 5, U.S.C.
    (c) Right to counsel. In all proceedings under this section, the 
applicant or recipient and the Department of Veterans Affairs shall have 
the right to be represented by counsel.
    (d) Procedures, evidence, and record. (1) The hearing decision and 
any administrative review thereof shall be conducted in conformity with 
the procedures contained in 5 U.S.C. 554-557 (sections 5-8 of the 
Administrative Procedure Act) and in accordance with such rules of 
procedure as are proper (and not inconsistent with this section) 
relating to the conduct of the hearing, giving of notices subsequent to 
those

[[Page 12]]

provided for in paragraph (a) of this section, taking of testimony, 
exhibits, arguments and briefs, requests for findings, and other related 
matters. Both the Department of Veterans Affairs and the applicant or 
recipient shall be entitled to introduce all relevant evidence on the 
issues as stated in the notice for hearing or as determined by the 
officer conducting the hearing at the outset of or during the hearing.
    (2) Technical rules of evidence shall not apply to hearings 
conducted pursuant to this part, but rules or principles designed to 
assure production of the most credible evidence available and to subject 
testimony to test by cross-examination shall be applied where reasonably 
necessary by the officer conducting the hearing. The hearing officer may 
exclude irrelevant, immaterial, or unduly repetitious evidence. All 
documents and other evidence offered or taken for the record shall be 
open to examination by the parties and opportunity shall be given to 
refute facts and arguments advanced on either side of the issues. A 
transcript shall be made of the oral evidence except to the extent the 
substance thereof is stipulated for the record. All decisions shall be 
based upon the hearing record and written findings shall be made.
    (e) Consolidated or joint hearings. In cases in which the same or 
related facts are asserted to constitute noncompliance with this part 
with respect to two or more Federal statutes; authorities, or other 
means by which Federal financial assistance is extended and to which 
this part applies, or noncompliance with this part and the regulations 
of one or more other Federal departments or agencies issued under Title 
VI of the Act, the Secretary may, by agreement with such other 
departments or agencies where applicable, provide for the conduct of 
consolidated or joint hearings, and for the application to such hearings 
of rules of procedures not inconsistent with this part. Final decisions 
in such cases, insofar as this part is concerned, shall be made in 
accordance with Sec. 18.10.

[29 FR 19301, Dec. 28, 1964, as amended at 38 FR 17966, July 5, 1973. 
Designated subpart A at 45 FR 63268, Sept. 24, 1980 and amended at 51 FR 
10384, Mar. 26, 1986; 68 FR 51369, Aug. 26, 2003]



Sec. 18.10  Decisions and notices.

    (a) Procedure on decisions by an administrative law judge. If the 
hearing is held by an administrative law judge such administrative law 
judge shall either make an initial decision, if so authorized, or 
certify the entire record including recommended findings and proposed 
decision to the responsible agency official for a final decision, and a 
copy of such initial decision or certification shall be mailed to the 
applicant or recipient. Where the initial decision is made by the 
administrative law judge the applicant or recipient may within 30 days 
of the mailing of such notice of initial decision file with the 
responsible agency official exceptions to the initial decision with 
reasons therefor. In the absence of exceptions, the responsible agency 
official may within 45 days after the initial decision serve on the 
applicant or recipient a notice that the decision will be reviewed. Upon 
the filing of such exceptions or of such notice of review the 
responsible agency official shall review the initial decision and issue 
a decision thereon including the reasons therefor. In the absence of 
either exceptions or a notice of review the initial decision shall 
constitute the final decision of the responsible agency official.
    (b) Decisions on record or review by the responsible agency 
official. Whenever a record is certified to the responsible agency 
official for decision or the official reviews the decision of an 
administrative law judge pursuant to paragraph (a) of this section, or 
whenever the responsible agency official conducts the hearing, the 
applicant or recipient shall be given reasonable opportunity to file 
with the official briefs or other written statements of its contentions, 
and a written copy of the final decision of the responsible agency 
official shall be sent to the applicant or recipient and to the 
complainant, if any.
    (c) Decisions on record where a hearing is waived. Whenever a 
hearing is waived

[[Page 13]]

pursuant to Sec. 18.9(a) a decision shall be made by the responsible 
agency official on the record and a written copy of such decision shall 
be sent to the applicant or recipient, and to the complainant, if any.
    (d) Rulings required. Each decision of an administrative law judge 
or responsible agency official shall set forth a ruling on each finding, 
conclusion, or exception presented, and shall identify the requirements 
imposed by or pursuant to this part with which it is found that the 
applicant or recipient has failed to comply.
    (e) Approval by Secretary. Any final decision by an administrative 
law judge which provides for the suspension or termination of, or the 
refusal to grant or continue Federal financial assistance, or the 
imposition of any other sanction available under this part of the Act, 
shall promptly be transmitted to the Secretary personally, who may 
approve such decision, may vacate it, or remit or mitigate any sanction 
imposed.
    (f) Content of orders. The final decision may provide for suspension 
or termination of, or refusal to grant or continue Federal financial 
assistance, in whole or in part, to which this regulation applies, and 
may contain such terms, conditions, and other provisions as are 
consistent with and will effectuate the purposes of the Act and this 
part, including provisions designed to assure that no Federal financial 
assistance to which this regulation applies will thereafter be extended 
to the applicant or recipient determined by such decision to be in 
default in its performance of an assurance given by it pursuant to this 
part, or to have otherwise failed to comply with this part, unless and 
until it corrects its noncompliance and satisfies the responsible agency 
official that it will fully comply with this part.
    (g) Post termination proceedings. (1) An applicant or recipient 
adversely affected by an order issued under paragraph (f) of this 
section shall be restored to full eligibility to receive Federal 
financial assistance if it satisfies the terms and conditions of that 
order for such eligibility or if it brings itself into compliance with 
this section and provides reasonable assurance that it will fully comply 
with this part.
    (2) Any applicant or recipient adversely affected by an order 
entered pursuant to paragraph (f) of this section may at any time 
request the responsible agency official to restore fully its eligibility 
to receive Federal financial assistance. Any such request shall be 
supported by information showing that the applicant or recipient has met 
the requirements of paragraph (g)(1) of this section. If the responsible 
agency official determines that those requirements have been satisfied, 
the official shall restore such eligibility.
    (3) If the responsible agency official denies any such request, the 
applicant or recipient may submit a request for a hearing in writing, 
specifying why it believes such official to have been in error. It shall 
thereupon be given an expeditious hearing, with a decision on the 
record, in accordance with rules of procedure issued by the responsible 
agency official. The applicant or recipient will be restored to such 
eligibility if it proves at such a hearing that it satisfied the 
requirements of paragraph (g)(1) of this section. While proceedings 
under this paragraph are pending, the sanctions imposed by the order 
issued under paragraph (f) of this section shall remain in effect.

[29 FR 19301, Dec. 31, 1964, as amended at 38 FR 17966, July 5, 1973. 
Designated subpart A at 45 FR 63268, Sept. 24, 1980, and amended at 51 
FR 10384, Mar. 26, 1986; 68 FR 51369, Aug. 26, 2003]



Sec. 18.11  Judicial review.

    Action taken pursuant to section 602 of the Act is subject to 
judicial review as provided in section 603 of the Act.

[29 FR 19301, Dec. 31, 1964. Designated subpart A at 45 FR 63268, Sept. 
24, 1980]



Sec. 18.12  Effect on other regulations, forms and instructions.

    (a) Effect on other regulations. All regulations, orders, or like 
directions issued before the effective date of this part by any officer 
of the Department of Veterans Affairs which impose requirements designed 
to prohibit any discrimination against individuals on the grounds of 
race, color or national origin under any program to which this part 
applies, and which authorize the

[[Page 14]]

suspension or termination of or refusal to grant or to continue Federal 
financial assistance to any applicant for or recipient of such 
assistance for failure to comply with such requirements, are hereby 
superseded to the extent that such discrimination is prohibited by this 
part, except that nothing in this part shall be deemed to relieve any 
person of any obligation assumed or imposed under any such superseded 
regulation, order, instruction, or like direction prior to the effective 
date of this part. Nothing in this part, however, shall be deemed to 
supersede any of the following (including future amendments thereof):
    (1) Executive Orders 10925 (3 CFR, 1959-1963 Comp., p. 448), 11114 
(3 CFR, 1959-1963, p. 774), and 11246 (3 CFR, 1965 Supp., p. 167) and 
regulations issued thereunder, or
    (2) Executive Order 11063 (3 CFR, 1959-1963 Comp., p. 652) and 
regulations issued thereunder, or any other orders, regulations or 
instructions, insofar as such orders, regulations, or instructions 
prohibit discrimination on the grounds of race, color or national origin 
in any program or situation to which this part is inapplicable, or 
prohibit discrimination on any other ground.
    (b) Forms and instructions. Each responsible agency officials shall 
issue and promptly make available to interested persons forms and 
detailed instructions and procedures for effectuating this part as 
applied to programs to which this part applies and for which he is 
responsible.
    (c) Supervision and coordination. The Secretary may from time to 
time assign to officials of the Department of Veterans Affairs or to 
officials of other departments or agencies of the Government with the 
consent of such departments or agencies, responsibilities in connection 
with the effectuation of the purposes of Title VI of the Act and this 
part (other than responsibility for final decision as provided in Sec. 
18.10) including the achievement of effective coordination and maximum 
uniformity within the Department of Veterans Affairs and within the 
executive branch of the Government in the application of Title VI and 
this part to similar programs and in similar situations. Any action 
taken, determination made, or requirement imposed by an official of 
another department or agency acting pursuant to an assignment of 
responsibility under this paragraph shall have the same effect as though 
such action has been taken by the responsible official of this Agency.

[29 FR 19301, Dec. 31, 1964, as amended at 38 FR 17967, July 5, 1973. 
Designated subpart A at 45 FR 63268, Sept. 24, 1980; 68 FR 51369, Aug. 
26, 2003]



Sec. 18.13  Definitions.

    As used in this part:
    (a) The term agency means the Department of Veterans Affairs, and 
includes each of its operating agencies and other organization units.
    (b) The term Secretary means the Secretary of Veterans Affairs.
    (c) The term responsible agency official with respect to any program 
receiving Federal financial assistance means the Secretary or other 
official of the Department of Veterans Affairs or an official of another 
department or agency to the extent the Secretary has delegated authority 
to such official.
    (d) The term United States means the States of the United States, 
the District of Columbia, Puerto Rico, the Virgin Islands, American 
Samoa, Guam, Wake Island, the Canal Zone, and the territories and 
possessions of the United States, and the term State means any one of 
the foregoing.
    (e) The term Federal financial assistance includes (1) grants of 
Federal funds, (2) the grant or donation of Federal property and 
interests in property, (3) the detail of Federal personnel, (4) the sale 
and lease of, and the permission to use (on other than a casual or 
transient basis), Federal property or any interest in such property 
without consideration or at a nominal consideration, or at a 
consideration which is reduced for the purpose of assisting the 
recipient, or in recognition of the public interest to be served by such 
sale or lease to the recipient, and (5) any Federal agreement, 
arrangement, or other contract which has as one of its purposes the 
provision of assistance.
    (f) The terms program or activity and program mean all of the 
operations of any entity described in paragraphs (f)(1) through (4) of 
this section, any

[[Page 15]]

part of which is extended Federal financial assistance:
    (1)(i) A department, agency, special purpose district, or other 
instrumentality of a State or of a local government; or
    (ii) The entity of such State or local government that distributes 
such assistance and each such department or agency (and each other State 
or local government entity) to which the assistance is extended, in the 
case of assistance to a State or local government;
    (2)(i) A college, university, or other postsecondary institution, or 
a public system of higher education; or
    (ii) A local educational agency (as defined in 20 U.S.C. 7801), 
system of vocational education, or other school system;
    (3)(i) An entire corporation, partnership, or other private 
organization, or an entire sole proprietorship--
    (A) If assistance is extended to such corporation, partnership, 
private organization, or sole proprietorship as a whole; or
    (B) Which is principally engaged in the business of providing 
education, health care, housing, social services, or parks and 
recreation; or
    (ii) The entire plant or other comparable, geographically separate 
facility to which Federal financial assistance is extended, in the case 
of any other corporation, partnership, private organization, or sole 
proprietorship; or
    (4) Any other entity which is established by two or more of the 
entities described in paragraph (f)(1), (2), or (3) of this section.
    (g) The term facility includes all or any portion of structures, 
equipment, or other real or personal property or interests therein, and 
the provision of facilities includes the construction, expansion, 
renovation, remodeling, alteration or acquisition of facilities.
    (h) The term recipient means any State, political subdivision of any 
State, or instrumentality of any State or political subdivision, any 
public or private agency, institution, or organization, or other entity, 
or any individual, in the United States, to whom Federal financial 
assistance is extended, directly or through another recipient, including 
any successor, assignee, or transferee thereof, but such term does not 
include any ultimate beneficiary.
    (i) The term applicant means a person who submits an application, 
request, or plan required to be approved by the Secretary, or by a 
recipient, as a condition to eligibility for Federal financial 
assistance, and application means such an application, request, or plan.

[29 FR 19301, Dec. 31, 1964, as amended at 38 FR 17967, July 5, 1973. 
Designated subpart A at 45 FR 63268, Sept. 24, 1980, and amended at 51 
FR 10385, Mar. 26, 1986; 68 FR 51369, Aug. 26, 2003]

 Appendix A to Subpart A of Part 18--Statutory Provisions to Which This 
                             Subpart Applies

    1. Payments to State homes (38 U.S.C. 1741-1743).
    2. State home facilities for furnishing domiciliary, nursing home, 
and hospital care (38 U.S.C. 8131-8137).
    3. Space and office facilities for representatives of recognized 
national organizations (38 U.S.C. 5902(a)(2)).
    4. All-volunteer force educational assistance, vocational 
rehabilitation, post-Vietnam era veterans' educational assistance, 
survivors' and dependents' educational assistance, and administration of 
educational benefits (38 U.S.C. Chapters 30, 31, 32, 34, 35 and 36, 
respectively).
    5. Sharing of medical facilities, equipment, and information (38 
U.S.C. 8151-8157).
    6. Approval of educational institutions (38 U.S.C. 104).
    7. Space and office facilities for representatives of State 
employment services (38 U.S.C. 7725(1)).
    8. Medical care for survivors and dependents of certain veterans (38 
U.S.C. 1713).
    9. Transfers for nursing home care; adult day health care (38 U.S.C. 
1720).
    10. Treatment and rehabilitation for alcohol or drug dependence or 
abuse disabilities (38 U.S.C. 1720A).
    11. Aid to States for establishment, expansion, and improvement of 
veterans cemeteries (38 U.S.C. 2408).
    12. Assistance in establishing new medical schools; grants to 
affiliated medical schools; assistance to health manpower training 
institutions (38 U.S.C. Chapter 82).
    13. Department of Veterans Affairs health professional scholarship 
program (38 U.S.C. 7601-7655).
    14. Emergency veterans job training (Pub. L. 98-77, 97 Stat. 443-
452).

[51 FR 10385, Mar. 26, 1986]

[[Page 16]]

      Appendix B to Subpart A of Part 18--Illustrative Applications

    The following examples, without being exhaustive, will illustrate 
the application of the nondiscrimination provisions to certain grants of 
the Department of Veterans Affairs. (In all cases the discrimination 
prohibited is discrimination on the grounds of race, color, or national 
origin prohibited by title VI of the Act and this part, as a condition 
of the receipt of Federal financial assistance.)
    (a) In grants which support the provision of health or welfare 
services for veterans in State homes, discrimination in the selection or 
eligibility of individuals to receive the services, and segregation or 
other discriminatory practices in the manner of providing them, are 
prohibited. This prohibition extends to all facilities and services 
provided by the State as grantee under the program or by a political 
subdivision of the State. It extends also to services purchased or 
otherwise obtained by the grantee (or political subdivision) from 
hospitals, nursing homes, schools, and similar institutions for 
beneficiaries of the program, and to the facilities in which such 
services are provided, subject, however, to the provisions of Sec. 
18.3(c).
    (b) In grants to assist in the construction of facilities for the 
provision of health or welfare services assurances will be required that 
services will be provided without discrimination, to the same extent 
that discrimination would be prohibited as a condition of Federal 
operating grants for the support of such services. Thus, as a condition 
of grants for the construction of a State home for furnishing nursing 
home care, assurances will be required that there will be no 
discrimination in the admission or treatment of patients. In the case of 
such grants the assurance will apply to patients, to interns, residents, 
student nurses, and other trainees, and to the privilege of physicians, 
dentists, and other professionally qualified persons to practice in the 
nursing home, and will apply to the entire facility for which, or for a 
part of which, the grant is made, and to facilities operated in 
connection therewith.
    (c) Upon transfers of real or personal surplus property for health 
or educational uses, discrimination is prohibited to the same extent as 
in the case of grants for the construction of facilities or the 
provision of equipment for like purposes.
    (d) A recipient may not take action that is calculated to bring 
about indirectly what this part forbids it to accomplish directly. Thus 
a State, in selecting or approving projects or sites for the 
construction of a nursing home which will receive Federal financial 
assistance, may not base its selections or approvals on criteria which 
have the effect of defeating or of substantially impairing 
accomplishment of the objectives of the Federal assistance program with 
respect to individuals of a particular race, color, or national origin.

(38 U.S.C. 1741, 1744, 8131-8137, 8155, 5902(a)(2), Chapters 31, 34, 35 
and 36)

[38 FR 17968, July 5, 1973. Designated subpart A at 45 FR 63268, Sept. 
24, 1980]

Subparts B-C [Reserved]



          Subpart D_Nondiscrimination on the Basis of Handicap

    Authority: 29 U.S.C. 706, 794.

    Source: 45 FR 63268, Sept. 24, 1980, unless otherwise noted.

                           General Provisions



Sec. 18.401  Purpose.

    The purpose of this part is to effectuate section 504 of the 
Rehabilitation Act of 1973, which is designed to eliminate 
discrimination on the basis of handicap in any program or activity 
receiving Federal financial assistance.



Sec. 18.402  Application.

    This part applies to each recipient of Federal financial assistance 
from the Department of Veterans Affairs and to each program or activity 
that receives such assistance.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]



Sec. 18.403  Definitions.

    As used in this part, the term:
    (a) The Act means the Rehabilitation Act of 1973, Pub. L. 93-112, as 
amended by the Rehabilitation Act Amendments of 1974, Pub. L. 93-516, 
and Rehabilitation, Comprehensive Services, and Developmental 
Disabilities Amendments of 1978, Pub. L. 95-602, 29 U.S.C. 794.
    (b) Section 504 means section 504 of the Act.
    (c) Education of the Handicapped Act means that statute as amended 
by the Education for all Handicapped Children Act of 1975, Pub. L. 94-
142, 20 U.S.C. 1401 et seq.
    (d) Agency means the Department of Veterans Affairs.
    (e) Secretary means the Secretary of Veterans Affairs.

[[Page 17]]

    (f) Recipient means any State or its political subdivision, any 
instrumentality of a State or its political subdivision, any public or 
private agency, institution, organization, or other entity, or any 
person to which Federal financial assistance is extended directly or 
through another recipient, including any successor, assignee, or 
transferee of a recipient but excluding the ultimate beneficiary of the 
assistance.
    (g) Applicant for assistance means one who submits an application, 
request, or plan required to be approved by an Agency official or by a 
recipient as a condition to eligibility for Federal financial 
assistance.
    (h) Federal financial assistance means any grant, loan, contract 
(other than a procurement contract or a contract of insurance or 
guaranty), or any other arrangement by which the Agency provides or 
otherwise makes available assistance in the form of:
    (1) Funds, including funds extended to any entity for payment to or 
on behalf of students admitted to that entity, extended directly to 
those students for payment to that entity, or extended directly to those 
students contingent upon their participation in education or training of 
that entity;
    (2) Services of Federal personnel; or
    (3) Real and personal property or any interest in or use of 
property, including;
    (i) Transfers or leases of such property for less than fair market 
value or for reduced consideration; and
    (ii) Proceeds from a subsequent transfer or lease of such property 
if the Federal share of its fair market value is not returned to the 
Federal Government.
    (i) Facility means all or any portion of buildings, structures, 
equipment, roads, walks, parking lots, or other real or personal 
property or interest in such property.
    (j) Handicapped person. (1) Handicapped person means any person who:
    (i) Has a physical or mental impairment which substantially limits 
one or more major life activities;
    (ii) Has a record of such an impairment; or
    (iii) Is regarded as having such an impairment.
    (2) As used in paragraph (j)(1) of this section, the phrase:
    (i) Physical or mental impairment means:
    (A) Any physiological disorder or condition, cosmetic disfigurement, 
or anatomical loss affecting one or more of the following body systems: 
Neurological, musculoskeletal; special sense organs including speech 
organs; respiratory; cardiovascular; reproductive; digestive; 
genitourinary; hemic and lymphatic; skin; and endocrine; or
    (B) Any mental or psychological discorder, such as mental 
retardation, organic brain syndrome, emotional or mental illness, and 
specific learning disabilities.
    (C) The term physical or mental impairment includes, but is not 
limited to, such diseases and conditions as orthopedic, visual, speech 
and hearing impairments, cerebral palsy, epilepsy, muscular dystrophy, 
multiple sclerosis, cancer, heart disease, diabetes, mental retardation, 
emotional illness, drug addiction and alcoholism.
    (ii) Major life activities means functions such as caring for one's 
self, performing manual tasks, walking, seeing, hearing, speaking, 
breathing, learning and working.
    (iii) Has a record of such an impairment means has a history of, or 
has been misclassified as having, a mental or physical impairment that 
substantially limits one or more major life activities.
    (iv) Is regarded as having an impairment means:
    (A) Has a physical or mental impairment that does not substantially 
limit major life activities but is treated by a recipient as 
constituting such a limitation;
    (B) Has a physical or mental impairment that substantially limits 
major life activities only as a result of the attitudes of others toward 
such impairment;
    (C) Has none of the impairments defined in paragraph (j)(2)(i) of 
this section, but is treated by a recipient as having such an 
impairment.
    (k) Qualified handicapped person means:
    (1) With respect to employment, a handicapped person who, with 
reasonable accommodation, can perform the

[[Page 18]]

essential functions of the job in question;
    (2) With respect to public elementary, secondary, or adult 
educational services, a handicapped person:
    (i) Of an age during which nonhandicapped persons are provided such 
services;
    (ii) Of any age during which it is mandatory under State laws to 
provide such services to handicapped persons; or
    (iii) To whom a State is required to provide a free appropriate 
public education under section 612 of the Education of the Handicapped 
Act; and
    (3) With respect to postsecondary and vocational education services, 
a handicapped person who meets the academic and technical standards 
requisite to admission or participation in the recipient's education 
program or activity; and
    (4) With respect to other services, a handicapped person who meets 
the essential eligibility requirements for the receipt of such services.
    (l) Handicap means any condition or characteristic that renders a 
person a handicapped person as defined in paragraph (j) of this section.
    (m) Program or activity means all of the operations of any entity 
described in paragraphs (m)(1) through (4) of this section, any part of 
which is extended Federal financial assistance:
    (1)(i) A department, agency, special purpose district, or other 
instrumentality of a State or of a local government; or
    (ii) The entity of such State or local government that distributes 
such assistance and each such department or agency (and each other State 
or local government entity) to which the assistance is extended, in the 
case of assistance to a State or local government;
    (2)(i) A college, university, or other postsecondary institution, or 
a public system of higher education; or
    (ii) A local educational agency (as defined in 20 U.S.C. 7801), 
system of vocational education, or other school system;
    (3)(i) An entire corporation, partnership, or other private 
organization, or an entire sole proprietorship--
    (A) If assistance is extended to such corporation, partnership, 
private organization, or sole proprietorship as a whole; or
    (B) Which is principally engaged in the business of providing 
education, health care, housing, social services, or parks and 
recreation; or
    (ii) The entire plant or other comparable, geographically separate 
facility to which Federal financial assistance is extended, in the case 
of any other corporation, partnership, private organization, or sole 
proprietorship; or
    (4) Any other entity that is established by two or more of the 
entities described in paragraph (m)(1), (2), or (3) of this section.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]



Sec. 18.404  Discrimination prohibited.

    (a) General. No qualified handicapped person shall, on the basis of 
handicap, be excluded from participation in, be denied the benefits of, 
or otherwise be subjected to discrimination under any program or 
activity which receives Federal financial assistance.
    (b) Discriminatory actions prohibited. (1) A recipient, in providing 
an aid, benefit, or service, may not, directly or through contractual, 
licensing, or other arrangements, on the basis of handicap:
    (i) Deny a qualified handicapped person the opportunity to 
participate in or benefit from the aid, benefit, or service that is 
equal to that afforded others;
    (ii) Afford a qualified handicapped person an opportunity to 
participate in or benefit from the aid, benefit, or service that is not 
equal to that afforded others;
    (iii) Provide a qualified handicapped person with an aid, benefit, 
or service that is not as effective as that provided to others;
    (iv) Provide different or separate aid, benefits, or services to 
handicapped persons or to any class of handicapped persons unless such 
action is necessary to provide qualified handicapped persons with aid, 
benefits, or services that are as effective as those provided to others;
    (v) Aid or perpetuate discrimination against a qualified handicapped 
person

[[Page 19]]

by providing significant assistance to an agency, organization, or 
person that discriminates on the basis of handicap in providing any aid, 
benefit, or service to beneficiaries of the recipient's program or 
activity;
    (vi) Deny a qualified handicapped person the opportunity to 
participate as a member of planning or advisory boards; or
    (vii) Otherwise limit a qualified handicapped person in the 
enjoyment of any right, privilege, advantage, or opportunity enjoyed by 
others receiving an aid, benefit, or service.
    (2) Aids, benefits, and services, to be equally effective, are not 
required to produce the identical result or level of achievement for 
handicapped and nonhandicapped persons, but must give handicapped 
persons equal opportunity to obtain the same result, to gain the same 
benefit, or to reach the same level of achievement, in the most 
integrated setting appropriate to the person's needs.
    (3) Despite the existence of separate or different aid, benefits, or 
services provided in accordance with this part, a recipient may not deny 
a qualified handicapped person the opportunity to participate in aid, 
benefits, or services that are not separate or different.
    (4) A recipient may not, directly or through contractual or other 
arrangements, utilize criteria or methods of administration that:
    (i) Have the effect of subjecting qualified handicapped persons to 
discrimination on the basis of handicap,
    (ii) Have the purpose or effect of defeating or substantially 
impairing accomplishment of the objectives of the recipient's program or 
activity with respect to handicapped persons, or
    (iii) Perpetuate the discrimination of another recipient if both 
recipients are subject to common administrative control or are agencies 
of the same State.
    (5) In determining the site or location of a facility, an applicant 
for assistance or a recipient may not make selections that:
    (i) Have the effect of excluding handicapped persons from, deny them 
the benefits of, or otherwise subject them to discrimination under any 
program or activity that receives Federal financial assistance, or
    (ii) Have the purpose or effect of defeating or substantially 
impairing the accomplishment of the objective of the program or activity 
with respect to handicapped persons.
    (6) As used in this section, the aid, benefit, or service provided 
under a program or activity receiving Federal financial assistance 
includes any aid, benefit, or service provided in or through a facility 
that has been constructed, expanded, altered, leased or rented, or 
otherwise acquired, in whole of in part, with Federal financial 
assistance.
    (c) Aid, benefits, or services limited by Federal law. The exclusion 
of nonhandicapped persons or the exclusion of a specific class of 
handicapped persons from aid, benefits, or services limited by Federal 
statue or Executive order to a different class of handicapped persons is 
not prohibited by this part.
    (d) Special communication. Recipients shall take appropriate action 
to ensure that communications with their applicants, employees, and 
beneficiaries are available to persons with impaired vision and hearing.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]



Sec. 18.405  Assurances required.

    (a) Assurances. An applicant for Federal financial assistance to 
which this part applies shall submit an assurance on a form specified by 
the Secretary, that the program or activity will be operated in 
compliance with this part.
    (b) Duration of obligation. (1) When Federal financial assistance is 
extended in the form of real property or structures on the property, the 
assurance will obligate the recipient or, in the case of a subsequent 
transfer, the transferee, for the period during which the real property 
or structures are used for the purpose for which Federal financial 
assistance is extended or for another purpose involving the provisions 
of similar services or benefits.
    (2) Where Federal financial assistance is extended to provide 
personal property, the assurance will obligate the recipient for the 
period during which it retains ownership or possession of the property.

[[Page 20]]

    (3) In all other cases the assurance will obligate the recipient for 
the period during which Federal financial assistance is extended.
    (c) Extent of application to institution or facility. An assurance 
shall apply to the entire institution or facility.
    (d) Covenants. (1) Where Federal financial assistance is provided in 
the form of real property or interest in the property from the Agency, 
the instrument effecting or recording this transfer shall contain a 
covenant running with the land to assure nondiscrimination for the 
period during which the real property is used for a purpose for which 
the Federal financial assistance is extended or for another purpose 
involving the provisions of similar services or benefits.
    (2) Where no transfer of property is involved but property is 
purchased or improved with Federal financial assistance, the recipient 
shall agree to include the covenant described in paragraph (b)(2) of 
this section in the instrument effecting or recording any subsequent 
transfer of property.
    (3) Where Federal financial assistance is provided in the form of 
real property or interest in the property from the Agency, the covenant 
shall also include a condition coupled with a right to be reserved by 
the Agency to revert title to the property if there is a breach of the 
covenant. If a transferree of real property proposes to mortgage or 
otherwise encumber the real property as security for financing 
construction of new, or improvement of existing, facilities on the 
property for the purpose for which the property was transferred, the 
Secretary may, upon request of the transferee and if necessary to 
accomplish such financing and upon such conditions as considered 
appropriate, agree to forbear the exercise of the right to revert title 
for as long as the lien of the mortgage or other encumbrance remains 
effective.
    (e) Other methods of enforcement. (1) Recipients are required to 
keep such records as the responsible VA official deems necessary for 
complete and accurate compliance reports. VA can specify intervals for 
reporting and prescribe the form and content of information required to 
ascertain whether the recipient has complied or is complying with the 
law.
    (2) Periodic compliance reviews of training establishments will be 
conducted by VA compliance officers. During these reviews recipients are 
required to permit access by VA compliance officers during normal 
business hours to such of their books, records, accounts, facilities and 
other sources of information including interviews with personnel and 
trainees as may be pertinent to ascertain compliance with the law.
    (3) From study of documentation, results of interviews, and 
observation of activities during tours of facilities, compliance 
officers will evaluate recipients' compliance status.

[45 FR 63268, Sept. 24, 1980, as amended at 51 FR 10385, Mar. 26, 1986; 
68 FR 51370, Aug. 26, 2003]



Sec. 18.406  Remedial action, voluntary action and self-evaluation.

    (a) Remedial action. (1) If the Secretary finds that a recipient has 
discriminated against qualified persons on the basis of handicap in 
violation of section 504 or this part, the recipient shall take such 
remedial action as the Secretary considers necessary to overcome the 
effects of the discrimination.
    (2) Where a recipient is found to have discriminated against 
qualified persons on the basis of handicap in violation of section 504 
or this part and where another recipient exercises control over the 
recipient that has discriminated, the Secretary, where appropriate, may 
require either or both recipients to take remedial action.
    (3) The Secretary may, where necessary to overcome the effects of 
discrimination in violation of section 504 or this part, require a 
recipient to take remedial action with respect to:
    (i) Handicapped persons who are no longer participants in the 
recipient's program or activity but who were participants in the program 
or activity when such discrimination occurred;
    (ii) Handicapped persons who would have been participants in the 
program or activity had the discrimination not occurred; or

[[Page 21]]

    (iii) Handicapped persons presently in the program or activity, but 
not receiving full benefits or equal and integrated treatment within the 
program or activity.
    (b) Voluntary action. A recipient may take steps, in addition to any 
action that is required by this part, to overcome the effects of 
conditions that resulted in limited participation in the recipient's 
program or activity by qualified handicapped persons.
    (c) Self-evaluation. (1) A recipient shall, within one year of the 
effective date of this part:
    (i) Evaluate with the assistance of interested persons, including 
handicapped persons or organizations representing handicapped persons, 
its current policies and practices and the effects of the policies and 
practices that do not or may not meet the requirements of this part;
    (ii) Modify, after consultation with interested persons, including 
handicapped persons or organizations representing handicapped persons, 
any policies and practices that do not meet the requirements of this 
part; and
    (iii) Take, after consultation with interested persons, including 
handicapped persons or organizations representing handicapped persons, 
appropriate remedial steps to eliminate the effects of any 
discrimination that resulted from adherence to these policies and 
practices.
    (2) A recipient that employs fifteen or more persons shall, for at 
least three years following completion of the evaluation required under 
paragraph (c)(1) of this section, maintain on file, make available for 
public inspection, and provide to the Secretary upon request:
    (i) A list of the interested persons consulted;
    (ii) A description of areas examined and any problems identified; 
and
    (iii) A description of any modifications made and of any remedial 
steps taken.
    (3) Recipients who become such more than one year after the 
effective date of these regulations shall complete these self-evaluation 
requirements within one year after becoming recipients of Federal 
financial assistance.

(The information collection requirements contained in paragraph (c) have 
been approved by the Office of Management and Budget under control 
number 2900-0415)

[45 FR 63268, Sept. 24, 1980, as amended at 49 FR 32574, Aug. 15, 1984; 
68 FR 51370, Aug. 26, 2003]



Sec. 18.407  Designation of responsible employee and adoption of 
grievance procedures.

    (a) Designation of responsible employee. A recipient that employs 
fifteen or more persons shall designate at least one person to 
coordinate its efforts to comply with this part.
    (b) Adoption of grievance procedures. A recipient that employs 
fifteen or more persons shall adopt grievance procedures that 
incorporate appropriate due process standards and that provide for the 
prompt and equitable resolution of complaints alleging any action 
prohibited by this part. Such procedures need not be established with 
respect to complaints from applicants for employment or from applicants 
for admission to postsecondary educational institutions.



Sec. 18.408  Notice.

    (a) A recipient that employs fifteen or more persons shall take 
appropriate initial and continuing steps to notify participants, 
beneficiaries, applicants, and employees, including those with impaired 
vision or hearing, and unions or professional organizations holding 
collective bargaining or professional agreements with the recipient that 
it does not discriminate on the basis of handicap in violation of 
section 504 and this part. The notification shall state, where 
appropriate, that the recipient does not discriminate in admission or 
access to, or treatment, or employment in, its programs or activities. 
The notification shall also include an identification of the responsible 
employee designated under Sec. 18.407. A recipient shall make the 
initial notification required by this paragraph within 90 days of the 
effective date of this part. Methods of initial and continuing 
notification may include the posting of notices, publication in 
newspapers and

[[Page 22]]

magazines, placement of notices in recipient's publication, and 
distribution of memorandums or other written communications.
    (b) If a recipient publishes or uses recruitment materials or 
publications containing general information that it makes available to 
participants, beneficiaries, applicants, or employees, it shall include 
in those materials or publications a statement of the policy described 
in paragraph (a) of this section. A recipient may meet the requirement 
of this section either by including appropriate inserts in existing 
materials and publications or by revising and reprinting the materials 
and publications.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]



Sec. 18.409  Administrative requirements for certain recipients.

    The Secretary may require any recipient with fewer than fifteen 
employees, or any class of such recipients, to comply with Sec. Sec. 
18.407 and 18.408 in whole or in part, when the Secretary finds a 
violation of this part or finds that such compliance will not 
significantly impair the ability of the recipient or class of recipients 
to provide benefits or services.



Sec. 18.410  Effect of State or local law or other requirements and 
effect of employment opportunities.

    (a) The obligation to comply with this part is not obviated or 
alleviated by the existence of any State law or other requirement that, 
on the basis of handicap, imposes prohibitions or limits upon the 
eligibility of qualified handicapped persons to receive services or to 
practice any occupation or profession.
    (b) The obligation to comply with this part is not obviated or 
alleviated because employment opportunities in any occupation or 
profession are or may be more limited for handicapped persons than for 
nonhandicapped persons.

                          Employment Practices



Sec. 18.411  Discrimination prohibited.

    (a) General. (1) No qualified handicapped person shall, on the basis 
of handicap, be subjected to discrimination in employment under any 
program or activity to which this part applies.
    (2) A recipient shall make all decisions concerning employment under 
any program or activity to which this part applies in a manner which 
ensures that discrimination on the basis of handicap does not occur and 
may not limit, segregate, or classify applicants or employees in any way 
that adversely affects their opportunities or status because of 
handicap.
    (3) A recipient may not participate in a contractual or other 
relationship that has the effect of subjecting qualified handicapped 
applicants or employees to discrimination in employment. The 
relationships referred to in this section include relationships with 
employment and referral agencies, with organizations providing or 
administering fringe benefits to employees of the recipient, and with 
organizations providing training and apprenticeships.
    (b) Specific activities. Nondiscrimination in employment applies to:
    (1) Recruitment, advertising, and the processing of applications for 
employment;
    (2) Hiring, upgrading, promotion, award of tenure, demotion, 
transfer, layoff, termination, right of return from layoff, and 
rehiring;
    (3) Rates of pay or other forms of compensation and changes in 
compensation;
    (4) Job assignments, job classifications, organizational structures, 
position descriptions, lines of progression, and seniority lists;
    (5) Leaves of absence, sick leave, or any other leave;
    (6) Fringe benefits available by virtue of employment, whether or 
not administered by the recipient;
    (7) Selection and financial support for training, including 
apprenticeship, professional meetings, conferences, and other related 
activities, and selection for leaves of absence to pursue training;
    (8) Employer sponsored activities, including those that are social 
or recreational; and
    (9) Any other term, condition, or privilege of employment.
    (c) Collective bargaining agreements. A recipient's obligation to 
comply with

[[Page 23]]

this subpart is not affected by any inconsistent term of any collective 
bargaining agreement to which it is a party.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]



Sec. 18.412  Reasonable accommodation.

    (a) A recipient shall make reasonable accommodation to the known 
physical or mental limitations of a handicapped applicant or employee if 
such accommodation would enable that person to perform the essential 
functions of the job unless the recipient can demonstrate that the 
accommodation would impose an undue hardship on the operation of its 
program or activity.
    (b) Reasonable accommodation may include:
    (1) Making facilities used by employees readily accessible to and 
usable by handicapped persons; and
    (2) Job restructuring, part-time or modified work schedules, 
acquisition or modification of equipment or devices, the provision of 
readers or interpreters and other similar actions.
    (c) In determining under paragraph (a) of this section whether an 
accommodation would impose an undue hardship on the operation of a 
recipient's program or activity, factors to be considered include:
    (1) The overall size of the recipient's program or activity with 
respect to number of employees, number and type of facilities, and size 
of budget;
    (2) The type of the recipient's operation, including the composition 
and structure of the recipient's work force; and
    (3) The nature and cost of the accommodation needed.
    (d) A recipient may not deny any employment opportunity to a 
qualified handicapped employee or applicant if the basis for denial is 
the need to make reasonable accommodation to the physical or mental 
limitations of the employee or applicant.

[45 FR 63268, Sept. 24, 1980, as amended at 51 FR 10385, Mar. 26, 1986; 
68 FR 51370, Aug. 26, 2003]



Sec. 18.413  Employment criteria.

    (a) A recipient may not use any employment test or other selection 
criterion that screens out or tends to screen out handicapped persons or 
any class of handicapped persons unless:
    (1) The test score or other selection criterion, as used by the 
recipient, is shown to be job-related for the position in question; and
    (2) Alternative job-related tests or criteria that do not screen out 
or tend to screen out as many handicapped persons are not shown by the 
Secretary to be available.
    (b) A recipient shall select and administer tests concerning 
employment to best ensure that when administered to an applicant or 
employee who has a handicap that impairs sensory, manual, or speaking 
skills, the test results accurately reflect the applicant's or 
employee's job skills, aptitude, or whatever other factor the test 
purports to measure, rather than reflect the applicant's or employee's 
impaired sensory, manual, or speaking skills (except when those skills 
are the factors that the test purports to measure).



Sec. 18.414  Preemployment inquiries.

    (a) Except as provided in paragraphs (b) and (c) of this section, a 
recipient may not conduct a preemployment medical examination or may not 
make preemployment inquiry of an applicant as to whether the applicant 
is a handicapped person or as to the nature or severity of a handicap. A 
recipient may, however, make preemployment inquiry into the applicant's 
ability to perform job-related functions.
    (b) When a recipient is taking remedial action to correct the 
effects of past discrimination pursuant to Sec. 18.406(a), when a 
recipient is taking voluntary action to overcome the effects of 
conditions that resulted in limited participation in its federally 
assisted program or activity pursuant to Sec. 18.406(b), or when a 
recipient is taking affirmative action pursuant to section 503 of the 
Act, the recipient may invite applicants for employment to indicate 
whether and to what extent they are handicapped, provided that:
    (1) The recipient states clearly on any written questionnaire used 
for this purpose or makes clear orally if no written questionnaire is 
used that the information requested is intended for

[[Page 24]]

use solely in connection with its remedial action obligations or its 
voluntary or affirmative action efforts; and
    (2) The recipient states clearly that the information is being 
requested on a voluntary basis, that it will be kept confidential as 
provided in paragraph (d) of this section, that refusal to provide it 
will not subject the applicant or employee to any adverse treatment, and 
that it will be used only in accordance with this part.
    (c) Nothing in this section shall prohibit a recipient from 
conditioning an offer of employment on the results of a medical 
examination conducted prior to the employee's entrance on duty, provided 
that:
    (1) All entering employees are subjected to such an examination 
regardless of handicap, and (2) the results of such an examination are 
used only in accordance with the requirements of this part.
    (d) Information obtained in accordance with this section as to the 
medical condition or history of the applicant shall be collected and 
maintained on separate forms that shall be accorded confidentiality as 
medical records, except that:
    (1) Supervisors and managers may be informed regarding restrictions 
on the work or duties of handicapped persons and regarding necessary 
accommodations;
    (2) First aid and safety personnel may be informed, where 
appropriate, if the condition might require emergency treatment;
    (3) Government officials investigating compliance with the Act shall 
be provided relevant information upon request.

                              Accessibility



Sec. 18.421  Discrimination prohibited.

    No qualified handicapped person shall, because a recipient's 
facilities are inaccessible to or unusable by handicapped persons, be 
denied the benefits of, be excluded from participation in, or otherwise 
be subjected to discrimination under any program or activity to which 
this part applies.



Sec. 18.422  Existing facilities.

    (a) Accessibility. A recipient shall operate each program or 
activity to which this part applies so that when each part is viewed in 
its entirety it is readily accessible to handicapped persons. This 
paragraph does not require a recipient to make each of its existing 
facilities or every part of a facility accessible to and usable by 
handicapped persons.
    (b) Methods. A recipient may comply with the requirement of 
paragraph (a) of this section through such measures as redesign of 
equipment, reassignment of classes or other services to accessible 
buildings, assignment of aids to beneficiaries, home visits, delivery of 
health, or other social services at alternate accessible sites, 
alteration of existing facilities and construction of new facilities in 
conformance with Sec. 18.423 or any other methods that make its program 
or activity accessible to handicapped persons. A recipient is not 
required to make structural changes in existing facilities where other 
methods are effective in making its programs or activities readily 
accessible to handicapped persons. In choosing among available methods 
for complying with paragraph (a) of this section, a recipient shall give 
priority to methods that serve handicapped persons in the most 
integrated setting appropriate.
    (c) Small health, welfare or other social service providers, and 
recipients that operate other than educational programs or activities. 
If a recipient with fewer than fifteen employees finds after 
consultation with a handicapped person seeking its services that there 
is no method of complying with paragraph (a) of this section other than 
making a significant alteration in its existing facilities, the 
recipient may, as an alternative, refer the qualified handicapped person 
to other providers whose services are accessible. Where referrals are 
necessary, transportation costs shall not exceed costs to and from 
recipients' programs or activities.
    (d) Time period. A recipient shall comply with paragraph (a) of this 
section within 60 days of the effective date of this part except that 
when structural changes in facilities are necessary, these changes shall 
be made as soon as practicable, but not later than three

[[Page 25]]

years after the effective date of this part.
    (e) Transition plan. If structural changes to facilities are 
necessary to meet the requirements of paragraph (a) of this section, a 
recipient shall develop a transition plan within six months of the 
effective date of this part setting forth the steps necessary to 
complete such change. The plan shall be developed with the assistance of 
interested persons, including handicapped persons or organizations 
representing handicapped persons. A copy of the transition plan shall be 
available for public inspection. The plan shall, at a minimum:
    (1) Identify physical obstacles in the recipient's facilities that 
limit the accessibility of its program or activity to handicapped 
persons;
    (2) Describe in detail the methods that will be used to make the 
facilities accessible;
    (3) Specify the schedule for taking the steps necessary to achieve 
full accessibility under paragraph (a) of this section and, if the time 
period of the transition plan is longer than one year, identify steps 
that will be taken during each year of the transition period; and
    (4) Indicate the person responsible for implementation of the plan.
    (f) Notice. The recipient shall implement procedures to ensure that 
interested persons, including persons with impaired vision or hearing, 
can obtain information concerning the existence and location of 
services, activities, and facilities that are accessible to and usable 
by handicapped persons.

(The information collection requirements contained in paragraph (e) have 
been approved by the Office of Management and Budget under control 
number 2900-0414)

[45 FR 63268, Sept. 24, 1980, as amended at 49 FR 32574, Aug. 15, 1984; 
68 FR 51370, Aug. 26, 2003]



Sec. 18.423  New construction.

    (a) Design and construction. Each facility or part of a facility 
constructed by, on behalf of, or for the use of a recipient shall be 
designed and constructed so that the facility or part of the facility is 
readily accessible to and usable by handicapped persons, if the 
construction was commenced after the effective date of this part.
    (b) Alteration. Each facility or part of a facility which is altered 
by, on behalf of, or for the use of a recipient after the effective date 
of this part in a manner that affects or could affect the usability of 
the facility or part of the facility shall, to the maximum extent 
feasible, be altered so that the altered portion of the facility is 
readily accessible to and usable by handicapped persons.
    (c) Conformance with Uniform Federal Accessibility Standards. (1) 
Effective as of January 18, 1991, design, construction, or alteration of 
buildings in conformance with sections 3-8 of the Uniform Federal 
Accessibility Standards (USAF) (appendix A to 41 CFR subpart 101-19.6) 
shall be deemed to comply with the requirements of this section with 
respect to those buildings. Departures from particular technical and 
scoping requirements of UFAS by the use of other methods are permitted 
where substantially equivalent or greater access to and usability of the 
building is provided.
    (2) For purposes of this section, section 4.1.6(1)(g) of UFAS shall 
be interpreted to exempt from the requirements of UFAS only mechanical 
rooms and other spaces that, because of their intended use, will not 
require accessibility to the public or beneficiaries or result in the 
employment or residence therein of persons with physical handicaps.
    (3) This section does not require recipients to make building 
alterations that have little likelihood of being accomplished without 
removing or altering a load-bearing structural member.

[45 FR 63268, Sept. 24, 1980, as amended at 55 FR 52138, 52141, Dec. 19, 
1990]

               Elementary, Secondary, and Adult Education



Sec. 18.431  Application.

    Sections 18.431 through 18.439 apply to elementary, secondary, and 
adult education programs or activities that receive Federal financial 
assistance from the Department of Veterans Affairs and to recipients 
that operate or receive Federal financial assistance for

[[Page 26]]

the operation of such programs or activities.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]



Sec. 18.432  Location and notification.

    A recipient that operates a public elementary or secondary 
educational program shall annually:
    (a) Undertake to identify and locate every qualified handicapped 
person residing in the recipient's jurisdiction who is not receiving a 
public education; and
    (b) Take appropriate steps to notify handicapped persons their 
parents or guardians of the recipients's duty under Sec. Sec. 18.431 
through 18.439.



Sec. 18.433  Free appropriate public education.

    (a) General. A recipient that operates a public elementary or 
secondary education program shall provide a free appropriate public 
education to each qualified handicapped person who is in the recipient's 
jurisdiction, regardless of the nature or severity of the person's 
handicap.
    (b) Appropriate education. (1) The provision of an appropriate 
education is the provision of regular or special education and related 
aids and services that:
    (i) Are designed to meet individual educational needs of handicapped 
persons as adequately as the needs of nonhandicapped persons are met; 
and
    (ii) Are based upon adherence to procedures that satisfy the 
requirements of Sec. Sec. 18.434, 18.435, and 18.436.
    (2) Implementation of an Individualized Education Program developed 
in accordance with the Education of the Handicapped Act is one means of 
meeting the standard established in paragraph (b)(1)(i) of this section.
    (3) A recipient may place a qualified handicapped person or refer 
that person for aid, benefits, or services other than those that it 
operates or provides as its means of carrying out the requirements of 
Sec. Sec. 18.431 through 18.439. The recipients remain responsible for 
ensuring that the requirements of Sec. Sec. 18.431 through 18.439 are 
met with respect to any qualified handicapped person so placed or 
referred.
    (c) Free education. (1) The provision of a free education is the 
provision of educational and related services without cost to the 
handicapped person, parents or guardian, except for those fees that are 
imposed on nonhandicapped persons or their parents or guardian. It may 
consist either of the provision of free services or, if a recipient 
places a handicapped person or refers that person for aid, benefits, or 
services not operated or provided by the recipient as its means of 
carrying out the requirements of Sec. Sec. 18.431 through 18.439, of 
payment for the costs of the aid, benefits, or services. Funds available 
from any public or private agency may be used to meet the requirements 
of this subpart. Nothing in this section shall be construed to relieve 
an insurer or similar third party from an otherwise valid obligation to 
provide or pay for services provided to a handicapped person.
    (2) If a recipient places a handicapped person or refers that person 
for aid, benefits, or services not operated or provided by the recipient 
as its means of carrying out the requirements of this subpart, the 
recipient shall ensure that adequate transportation to and from the aid, 
benefits, or services is provided at no greater cost than would be 
incurred by the person, parents or guardian if the person were placed in 
the aid, benefits, or services operated by the recipient.
    (3) If placement in a public or private residential program is 
necessary to provide free appropriate public education to a handicapped 
person because of his or her handicap, the program, including non-
medical care and room and board, shall be provided at no cost to the 
person, parents or guardian.
    (4) If a recipient has made available, in conformance with this 
section and Sec. 18.434, a free appropriate public education to a 
handicapped person and the person's parents or guardian chooses to place 
the person in a private school, the recipient is not required to pay for 
the person's education in the private school. Disagreements between a 
parent or guardian and a recipient regarding whether the recipient has 
made a free appropriate public education available or regarding the 
question of financial responsibility are subject to the due process 
procedures of Sec. 18.436.

[[Page 27]]

    (d) Compliance. A recipient may not exclude any qualified 
handicapped person from a public elementary or secondary education after 
the effective date of this part. A recipient that is not, on the 
effective date of this part, in full compliance with the requirements of 
paragraphs (a) through (c) of this section shall meet those requirements 
at the earliest practicable time, but not later than October 1, 1981.

[45 FR 63268, Sept. 24, 1980, as amended at 51 FR 10385, Mar. 26, 1986; 
51 FR 12702, Apr. 15, 1986; 68 FR 51370, Aug. 26, 2003]



Sec. 18.434  Education setting.

    (a) Academic setting. A recipient shall educate, or shall provide 
for the education of, each qualified handicapped person in its 
jurisdiction with persons who are not handicapped to the maximum extent 
appropriate to the needs of the handicapped person. A recipient shall 
place a handicapped person in the regular educational environment 
operated by the recipient unless it is demonstrated by the recipient 
that the education of the person in the regular environment with the use 
of supplementary aids and services cannot be achieved satisfactorily. In 
deciding whether to place a person in a setting other than the regular 
educational environment, a recipient shall consider the proximity of the 
alternate setting to the person's home.
    (b) Nonacademic settings. In providing or arranging for the 
provision of nonacademic and extracurricular services and activities, a 
recipient shall ensure that handicapped persons participate with 
nonhandicapped persons in those activities and services to the maximum 
extent appropriate to the needs of the handicapped person in question.
    (c) Comparable facilities. If a recipient in compliance with 
paragraph (a) of this section operates a facility that is identifiable 
as being for handicapped persons, the recipient shall ensure that the 
facility and the services and activities provided in that facility are 
comparable to the other facilities, services, and activities of the 
recipient.



Sec. 18.435  Evaluation and placement.

    (a) Preplacement evaluation. A recipient that operates a public 
elementary or secondary education program or activity shall conduct an 
evaluation of any qualified person who, because of handicap, needs or is 
believed to need special education or related services before taking any 
action concerning the initial placement of the person in regular or 
program special education and any subsequent change in placement.
    (b) Evaluation procedures. Elementary, secondary, and adult 
education programs or activities that receive Federal financial 
assistance shall establish standards and procedures for the evaluation 
and placement of persons who, because of handicap, need or are believed 
to need special education or related services which ensure that:
    (1) Tests and other evaluation materials have been validated for the 
specific purpose for which they are used and are administered by trained 
personnel in conformance with the instructions provided by their 
producer;
    (2) Tests and other evaluation materials include those tailored to 
assess specific areas of educational need and not merely those which are 
designed to provide a single general intelligence quotient; and
    (3) Tests are selected and administered to best ensure that, when a 
test is administered to a student with impaired sensory, manual, or 
speaking skills, the test results accurately reflect the student's 
aptitude or achievement level or whatever other factor the test purports 
to measure, rather than reflect the student's impaired sensory, manual, 
or speaking skills (except where those skills are the factors that the 
test purports to measure.)
    (c) Placement procedures. In interpreting evaluation data and in 
making placement decisions, a recipient shall:
    (1) Draw upon information from a variety of sources, including 
aptitude and achievement tests, teacher recommendations, physical 
condition, social or cultural background and adaptive behavior;
    (2) Establish procedures to ensure that information obtained from 
all sources is documented and carefully considered;
    (3) Ensure that the placement decision is made by a group of 
persons, including persons knowledgeable about

[[Page 28]]

the student, the meaning of the evaluation data and the placement 
options; and
    (4) Ensure that the placement decision is made in accordance with 
Sec. 18.434.
    (d) Reevaluation. A recipient to which this section applies shall 
establish procedures, in accordance with paragraph (b) of this section, 
for periodic reevaluation of students who have been provided special 
education and related services. A reevaluation procedure consistent with 
the Education for the Handicapped Act is one means of meeting this 
requirement.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]



Sec. 18.436  Procedural safeguards.

    (a) A recipient that operates a public elementary or secondary 
education program shall implement a system of procedural safeguards with 
respect to actions regarding the identification, evaluation, or 
educational placement of persons who, because of handicap, need or are 
believed to need special instruction or related services. The system 
shall include:
    (1) Notice;
    (2) An opportunity for the parents or guardian of the person to 
examine relevant records;
    (3) An impartial hearing with opportunity for participation by the 
person's parents or guardian and representation by counsel; and
    (4) Review procedure.
    (b) Compliance with the procedural safeguards of section 615 of the 
Education of the Handicapped Act is one means of meeting this 
requirement.



Sec. 18.437  Nonacademic services.

    (a) General. (1) Elementary, secondary, and adult education programs 
that receive Federal financial assistance shall provide nonacademic and 
extracurricular services and activities in a manner which gives 
handicapped students an equal opportunity for participation in these 
services and activities.
    (2) Nonacademic and extracurricular services and activities may 
include counseling services, physical recreational athletics, 
transportation, health services, recreational activities, special 
interest groups or clubs sponsored by the recipient, referrals to 
agencies which provide assistance to handicapped persons, and employment 
of students, including both employment by the recipient and assistance 
in making available outside employment.
    (b) Counseling services. Elementary, secondary, and adult education 
programs that receive Federal financial assistance and that provide 
personal, academic, or vocational counseling, guidance, or placement 
services to their students shall provide these services without 
discrimination on the basis of handicap and shall ensure that qualified 
handicapped students are not counseled toward more restrictive career 
objectives than are nonhandicapped students with similar interests and 
abilities.
    (c) Physical education and athletics. (1) In providing physical 
education courses and athletics and similar aid, benefits, or services 
to any of its students, an elementary, secondary, or adult education 
program or activity that receives Federal financial assistance may not 
discriminate on the basis of handicap. A recipient that offers physical 
education courses or that operates or sponsors interscholastic, club, or 
intramural activities shall provide to qualified handicapped students an 
equal opportunity for participation.
    (2) A recipient may offer to handicapped students physical education 
and athletic activities that are separate or different from those 
offered to nonhandicapped students only if separation or differentiation 
is consistent with the requirements of Sec. 18.434 and only if no 
qualified handicapped student is denied the opportunity to compete for 
teams or to participate in courses that are not separate or different.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]



Sec. 18.438  Adult education.

    A recipient that provides adult education may not, on the basis of 
handicap, exclude qualified handicapped persons. The recipient shall 
take into account the needs of these persons in determining the aid, 
benefits, or services to be provided.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]

[[Page 29]]



Sec. 18.439  Private education.

    (a) A recipient that provides private elementary or secondary 
education may not on the basis of handicap, exclude a qualified 
handicapped person if the person can, with minor adjustments, be 
provided an appropriate education, as defined in Sec. 18.433(b)(1), 
within that recipient's program or activity.
    (b) A recipient may not charge more for providing an appropriate 
education to handicapped persons than to nonhandicapped persons except 
to the extent that any additional charge is justified by a substantial 
increase in cost to the recipient.
    (c) A recipient to which this section applies that provides special 
education shall do so in accordance with Sec. Sec. 18.435 and 18.436. 
Each recipient to which this section applies is subject to Sec. Sec. 
18.434, 18.437, and 18.438.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]

                         Postsecondary Education



Sec. 18.441  Application.

    Sections 18.441 through 18.447 apply to postsecondary education 
programs or activities that receive Federal financial assistance from 
the Department of Veterans Affairs and to recipients that operate or 
receive or benefit from Federal financial assistance for the operation 
of such programs or activities.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]



Sec. 18.442  Admissions and recruitment.

    (a) General. Qualified handicapped persons may not, on the basis of 
handicap, be denied admission or be subjected to discrimination in 
admission or recruitment by a recipient.
    (b) Admission. In administering its admission policies, a recipient;
    (1) May not apply limitations on the number or proportion of 
handicapped persons who may be admitted;
    (2) May not use any test or criterion for admission that has a 
disproportionate, adverse effect on handicapped persons or any class of 
handicapped persons unless:
    (i) The test or criterion, as used by the recipient, has been 
validated as a predictor of success in the education program or activity 
in question; and
    (ii) Alternate tests or criteria that have a less disproportionate, 
adverse effect are not shown by the Secretary to be available;
    (3) Shall assure itself that:
    (i) Admissions tests are selected and administered to best ensure 
that, when a test is administered to an applicant who has a handicap 
that impairs sensory, manual, or speaking skills, the test results 
accurately reflect the applicant's aptitude or achievement level or 
whatever other factors the test purports to measure, rather than reflect 
the applicant's impaired sensory, manual, or speaking skills (except 
where those skills are the factors that the test purports to measure);
    (ii) Admissions tests that are designed for persons with impaired 
sensory, manual, or speaking skills are offered as often and in as 
timely a manner as are other admissions tests; and
    (iii) Admissions tests are administered in facilities that, on the 
whole, are accessible to handicapped persons; and
    (4) Except as provided in paragraph (c) of this section, may not 
make preadmission inquiries as to whether an applicant for admission is 
a handicapped person. After admission, the recipient may inquire on a 
confidential basis as to handicaps that may require accommodation.
    (c) Preadmission inquiry exception. When a recipient is taking 
remedial action to correct the effects of past discrimination under 
Sec. 18.406(a) or when a recipient is taking voluntary action to 
overcome the effects of conditions that resulted in limited 
participation in its federally assisted program or activity under Sec. 
18.406(b), the recipient may invite applicants for admission to indicate 
whether and to what extent they are handicapped.
    (1) The recipient shall state clearly on any written questionnaire 
used for this purpose or make clear orally if no written questionnaire 
is used that the information requested is intended for use solely in 
connection with its remedial action obligations or its voluntary action 
efforts; and
    (2) The recipient shall state clearly that the information is being 
requested

[[Page 30]]

on a voluntary basis, that it will be kept confidential, that refusal to 
provide it will not subject the applicant to any adverse treatment, and 
that it will be used only in accordance with this part.
    (d) Validity studies. For the purpose of paragraph (b)(2) of this 
section, a recipient may base prediction equations on first year grades, 
but shall conduct periodic validity studies against the criterion of 
overall success in the education program or activity in question to 
monitor the general validity of the test scores.



Sec. 18.443  General treatment of students.

    (a) No qualified handicapped student shall, on the basis of 
handicap, be excluded from participation in, be denied the benefits of, 
or otherwise be subjected to discrimination under any academic, 
research, occupational training, housing, health insurance, counseling, 
financial aid, physical education, athletics, recreation, 
transportation, other extracurricular, or other aid, benefits, or 
services operated by a recipient to which this subpart applies.
    (b) A recipient that considers participation by students in 
education programs or activities not operated wholly by the recipient as 
part of, or equivalent to, an education program or activity operated by 
the recipient shall assure itself that the other education program or 
activity, as a whole, provides an equal opportunity for the 
participation of qualified handicapped persons.
    (c) A recipient to which this subpart applies may not, on the basis 
of handicap, exclude any qualified handicapped student from any course, 
course of study, or other part of its education program or activity.
    (d) A recipient shall operate its program or activity in the most 
integrated setting appropriate.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]



Sec. 18.444  Academic adjustments.

    (a) Academic requirements. A recipient shall make necessary 
modifications to its academic requirements to ensure that these 
requirements do not discriminate or have the effect of discriminating, 
on the basis of handicap, against a qualified handicapped applicant or 
student. Modifications may include changes in the length of time 
permitted for the completion of degree requirements, substitution of 
specific courses required for the completion of degree requirements, and 
adaptation of the manner in which specific courses are conducted. 
Academic requirements that the recipient can demonstrate are essential 
to the instruction being pursued by the student or to any directly 
related licensing requirement will not be regarded as discriminatory 
within the meaning of this section.
    (b) Other rules. A recipient may not impose upon handicapped 
students other rules, such as the prohibition of tape recorders in 
classrooms or guide dogs in campus buildings, that have the effect of 
limiting the participation of handicapped students in the recipient's 
education program or activity.
    (c) Course examinations. In its course examinations or other 
procedures for evaluating students' academic achievement, a recipient 
shall provide methods for evaluating the achievement of students who 
have a handicap that impairs sensory, manual, or speaking skills that 
will best ensure that the results of the evaluation represent the 
students' achievement in the course, rather than reflect the students' 
impaired sensory, manual, or speaking skills (except where such skills 
are the factors that the test purports to measure).
    (d) Auxiliary aids. (1) A recipient shall ensure that no qualified 
handicapped student is denied the benefits of, excluded from 
participation in, or otherwise subjected to discrimination because of 
the absence of educational auxiliary aids for students with impaired 
sensory, manual, or speaking skills.
    (2) Auxiliary aids may include taped texts, interpreters or other 
effective methods of making orally delivered materials available to 
students with hearing impairments, readers in libraries for students 
with visual impairments, classroom equipment adapted for use by students 
with manual impairments, and other similar services and actions. 
Recipients need not provide attendants, individually prescribed devices, 
readers for personal

[[Page 31]]

use or study, or other devices or services of a personal nature.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]



Sec. 18.445  Housing.

    (a) Housing provided by a recipient. A recipient that provides 
housing to its nonhandicapped students shall provide comparable, 
convenient, and accessible housing to qualified handicapped students at 
the same cost as to others. At the end of the transition period provided 
for in Sec. 18.422(e), this housing shall be available in sufficient 
quantity and variety so that the scope of handicapped students' choice 
of living accommodations is, as a whole, comparable to that of 
nonhandicapped students.
    (b) Other housing. A recipient that assists any agency, 
organization, or person in making housing available to any of its 
students shall assure itself that such housing is, as a whole, made 
available in a manner that does not result in discrimination on the 
basis of handicap.



Sec. 18.446  Financial and employment assistance to students.

    (a) Provision of financial assistance. (1) In providing financial 
assistance to qualified handicapped persons, a recipient may not:
    (i) On the basis of handicap, provide less assistance than is 
provided to nonhandicapped persons, limit eligibility for assistance, or 
otherwise discriminate; or
    (ii) Assist any entity or person that provides assistance to any of 
the recipient's students in a manner that discriminates against 
qualified handicapped persons on the basis of handicap.
    (2) A recipient may administer or assist in the administration of 
scholarships, fellowships, or other forms of financial assistance 
established under wills, trusts, bequests, or similar legal instruments 
that require awards to be made on the basis of factors that discriminate 
or have the effect of discriminating on the basis of handicap only if 
the overall effect of the award of scholarships, fellowships, and other 
forms of financial assistance is not discriminatory on the basis of 
handicap.
    (b) Assistance in making available outside employment. A recipient 
that assists any agency, organization, or person in providing employment 
opportunities to any of its students shall assure itself that these 
employment opportunities, as a whole, are made available in a manner 
that would not violate Sec. Sec. 18.411 through 18.414 if the 
opportunities were provided by the recipient.
    (c) Employment of students by recipients. A recipient that employs 
any of its students may not do so in a manner that violates Sec. Sec. 
18.411 through 18.414.



Sec. 18.447  Nonacademic services.

    (a) Physical education and athletics. (1) In providing physical 
education courses and athletics and similar aid, benefits, or services 
to any of its students, a recipient may not discriminate on the basis of 
handicap. A recipient that offers physical education courses or that 
operates or sponsors intercollegiate, club or intramural athletics shall 
provide to qualified handicapped students an equal opportunity for 
participation in these activities.
    (2) A recipient may offer to handicapped students physical education 
and athletic activities that are separate or different only if 
separation or differentiation is consistent with the requirements of 
Sec. 18.443(d) and only if no qualified handicapped student is denied 
the opportunity to compete for teams or to participate in courses that 
are not separate or different.
    (b) Counseling and placement services. A recipient that provides 
personal, academic, or vocational counseling, guidance, or placement 
services to its students shall provide these services without 
discrimination on the basis of handicap. The recipient shall ensure that 
qualified handicapped students are not counseled toward more restrictive 
career objectives than are nonhandicapped students with similar 
interests and abilities. This requirement does not preclude a recipient 
from providing factual information about licensing and certification 
requirements that may present obstacles to handicapped persons in their 
pursuit of particular careers.
    (c) Social organizations. A recipient that provides significant 
assistance to

[[Page 32]]

fraternities, sororities, or similar organizations shall assure itself 
that the membership practices of these organizations do not permit 
discrimination otherwise prohibited by Sec. Sec. 18.441 through 18.447.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]

                       Health and Social Services



Sec. 18.451  Application.

    Subpart F applies to health, and other social service programs or 
activities that receive Federal financial assistance from the Department 
of Veterans Affairs and to recipients that operate or receive Federal 
financial assistance for the operation of such programs or activities.

[45 FR 63268, Sept. 24, 1980, as amended at 68 FR 51370, Aug. 26, 2003]



Sec. 18.452  Health and other social services.

    (a) General. In providing health, or other social services or 
benefits, a recipient may not, on the basis of handicap:
    (1) Deny a qualified handicapped person these benefits or services;
    (2) Give a qualified handicapped person the opportunity to receive 
benefits or services that are not equal to those offered nonhandicapped 
persons.
    (3) Provide a qualified handicapped person with benefits or services 
that are not as effective (as defined in Sec. 18.404(b)(2)) as the 
benefits or services provided to others;
    (4) Provide benefits or services in a manner that limits or has the 
effect of limiting the participation of qualified handicapped persons; 
or
    (5) Provide different or separate benefits or services to 
handicapped persons except where necessary to provide qualified 
handicapped persons with benefits and services that are as effective as 
those provided to others.
    (b) Notice. A recipient that provides notice concerning benefits or 
services or written material concerning waivers of rights of consent to 
treatment shall ensure that qualified handicapped persons, including 
those with impaired sensory or speaking skills, are not denied effective 
notice because of their handicap.
    (c) Emergency treatment for the hearing impaired. A recipient 
hospital that provides health services or benefits shall establish a 
procedure for effective communication with persons with impaired hearing 
for the purpose of providing emergency care.
    (d) Auxiliary aids. (1) A recipient that employs fifteen or more 
persons shall provide appropriate auxiliary aids to persons with 
impaired sensory, manual, or speaking skills, where necessary to give 
these persons an equal opportunity to benefit from the service in 
question.
    (2) The Secretary may require recipients with fewer than fifteen 
employees to provide auxiliary aids where the provision of aids would 
not significantly impair the ability of the recipient to provide its 
benefits or services.
    (3) Auxiliary aids may include brailled and taped material, 
interpreters, and aids for persons with impaired hearing or vision.



Sec. 18.453  Drug and alcohol addicts.

    A recipient that operates a general hospital or outpatient facility 
may not discriminate, with regard to a drug or alcohol abuser or 
alcoholic who is suffering from a medical condition, in the admission of 
that person for treatment of the medical condition, or in the treatment 
of the medical condition because of the person's drug or alcohol abuse 
or alcoholism.



Sec. 18.454  Education of institutionalized persons.

    A recipient that operates or supervises a program or activity that 
provides aid, benefits, or services for persons who are 
institutionalized because of handicap and is responsible for providing 
training shall ensure that each qualified handicapped person, as defined 
in Sec. 18.403(k)(2), in its program or activity that provides aid, 
benefits, or services is provided an appropriate education, as defined 
in Sec. 18.433(b). Nothing in this section shall be interpreted as 
altering in any way the obligations of recipients under Sec. Sec. 
18.431 through 18.439.

[45 FR 63268, Sept. 24, 1980; 51 FR 12702, Apr. 15, 1986; 68 FR 51370, 
Aug. 26, 2003]

[[Page 33]]

                               Procedures



Sec. 18.461  Procedures.

    The procedural provisions applicable to Title VI of the Civil Rights 
Act of 1964 apply to this part. These procedures are found in Sec. Sec. 
18.6 through 18.11 and part 18b of this chapter.

 Appendix A to Subpart D of Part 18--Statutory Provisions to Which This 
                              Part Applies

1. Payments to State Homes (38 U.S.C. 1741-1743).
2. State home facilities for furnishing domiciliary, nursing home, and 
          hospital care (38 U.S.C. 8131-8137).
3. Transfers for nursing home care; adult day health care (38 U.S.C. 
          1720).
4. Sharing of medical facilities, equipment, and information (38 U.S.C. 
          8151-8157).
5. Assistance in establishing new state medical schools, grants to 
          affiliated medical schools; assistance to health manpower 
          training institutions (38 U.S.C. Chapter 82).
6. Approval of educational institutions (38 U.S.C. 104).
7. Medical care for survivors and dependents of certain veterans (38 
          U.S.C. 1713).
8. Space and office facilities for representatives of State employment 
          service (38 U.S.C. 7725(4)).
9. Space and office facilities for representatives of recognized 
          national service organizations (38 U.S.C. 5902(a)(2)).
10. All-volunteer force educational assistance, vocational 
          rehabilitation post-Vietnam era veterans educational 
          assistance; veterans educational assistance, survivors' and 
          dependents' educational assistance, and administration of 
          educational benefits (38 U.S.C. Chapters 30, 31, 32, 34, 35 
          and 36 respectively).
11. Treatment and rehabilitation for alcohol or drug dependence or abuse 
          disabilities (38 U.S.C. 1720A).
12. Aid to States for establishment, expansion, and improvement of 
          veterans cemeteries (38 U.S.C. 2408).
13. Department of Veterans Affairs health professional scholarship 
          program (38 U.S.C. 7601-7655).
14. Emergency veterans job training (Pub. L. 98-77, 97 Stat. 443-452).

[45 FR 63268, Sept. 24, 1980, as amended at 51 FR 10385, Mar. 26, 1986; 
51 FR 12702, Apr. 15, 1986]



             Subpart E_Nondiscrimination on the Basis of Age

    Authority: Age Discrimination Act of 1975, as amended, 42 U.S.C. 
6101, et seq.; 45 CFR part 90 (1979).

    Source: 50 FR 34133, Aug. 23, 1985, unless otherwise noted.

                                 General



Sec. 18.501  Purpose.

    The purpose of these regulations is to set out Department of 
Veterans Affairs (VA) policies and procedures under the Age 
Discrimination Act of 1975 and the governmentwide age discrimination 
regulations at 45 CFR part 90. The Act and the governmentwide 
regulations prohibit discrimination on the basis of age in programs or 
activities receiving Federal financial assistance. The Act and the 
governmentwide regulations permit federally assisted programs or 
activities, and recipients of Federal funds, to continue to use age 
distinctions and factors other than age which meet the requirements of 
the Act and its implementing regulations.

(Authority: 42 U.S.C. 6101-6107)

[50 FR 34133, Aug. 23, 1985, as amended at 54 FR 34984, Aug. 23, 1989; 
68 FR 51372, Aug. 26, 2003]



Sec. 18.502  Application.

    (a) These regulations apply to any program or activity receiving 
Federal financial assistance provided by VA directly or through another 
recipient.
    (b) These regulations do not apply to:
    (1) An age distinction contained in that part of a Federal, State, 
or local statute or ordinance adopted by an elected, general purpose 
legislative body which:
    (i) Provides any benefits or assistance to persons based on age; or
    (ii) Establishes criteria for participation in age-related terms; or
    (iii) Describes intended beneficiaries or target groups in age-
related terms.
    (2) Any employment practice of any employer, employment agency, 
labor organization, or any labor-management joint apprenticeship 
training program, except any program or activity receiving Federal 
financial assistance for public service employment under

[[Page 34]]

the Job Training Partnership Act, 29 U.S.C. 1501, et seq.

(Authority: 42 U.S.C. 6101-6107)



Sec. 18.503  Definitions.

    As used in these regulations:
    (a) Act means the Age Discrimination Act of 1975, as amended (Title 
III of Pub. L. 94-135, 42 U.S.C. 6101-6107).
    (b) Action means any act, activity, policy, rule, standard, or 
method of administration; or the use of any policy, rule, standard, or 
method of administration.
    (c) Secretary means the Secretary of Veterans Affairs or designees.
    (d) Age means how old a person is, or the number of elapsed years 
from the date of a person's birth.
    (e) Age discrimination means unlawful treatment based on age.
    (f) Age distinction means any action using age or an age-related 
term.
    (g) Age-related term means a word or words which necessarily imply a 
particular age or range of ages (for example, children, adult, older 
persons, but not student).
    (h) Day means calendar day.
    (i) Federal financial assistance means any grant, entitlement, loan, 
cooperative agreement, contract (other than a procurement contract or a 
contract of insurance or guaranty), or any other arrangement by which a 
Federal agency or department provides or otherwise makes available 
assistance in the form of:
    (1) Funds; or
    (2) Services of Federal personnel; or
    (3) Real and personal property or any interest in or use of 
property, including:
    (i) Transfers or leases of property for less than fair market value 
or for reduced consideration; and
    (ii) Proceeds from a subsequent transfer or lease of property if the 
Federal share of its market value is not returned to the Federal 
Government.
    (j) Program or activity means all of the operations of any entity 
described in paragraphs (j)(1) through (4) of this section, any part of 
which is extended Federal financial assistance:
    (1)(i) A department, agency, special purpose district, or other 
instrumentality of a State or of a local government; or
    (ii) The entity of such State or local government that distributes 
such assistance and each such department or agency (and each other State 
or local government entity) to which the assistance is extended, in the 
case of assistance to a State or local government;
    (2)(i) A college, university, or other postsecondary institution, or 
a public system of higher education; or
    (ii) A local educational agency (as defined in 20 U.S.C. 7801), 
system of vocational education, or other school system;
    (3)(i) An entire corporation, partnership, or other private 
organization, or an entire sole proprietorship--
    (A) If assistance is extended to such corporation, partnership, 
private organization, or sole proprietorship as a whole; or
    (B) Which is principally engaged in the business of providing 
education, health care, housing, social services, or parks and 
recreation; or
    (ii) The entire plant or other comparable, geographically separate 
facility to which Federal financial assistance is extended, in the case 
of any other corporation, partnership, private organization, or sole 
proprietorship; or
    (4) Any other entity that is established by two or more of the 
entities described in paragraph (j)(1), (2), or (3) of this section.
    (k) Recipient means any State or its political subdivision, any 
instrumentality of a State or its political subdivision, any public or 
private agency, institution, organization, or other entity, or any 
person to which Federal financial assistance is extended, directly or 
through another recipient. Recipient includes any successor, assignee, 
or transferee, but excludes the ultimate beneficiary of the assistance.
    (l) Subrecipient means any of the entities in the definition of 
recipient to which a recipient extends or passes on Federal financial 
assistance. A subrecipient is generally regarded as a recipient of 
Federal financial assistance and has all the duties of a recipient in 
these regulations.
    (m) United States means the fifty States, the District of Columbia, 
Puerto Rico, the Virgin Islands, the Canal

[[Page 35]]

Zone, the Trust Territories of the Pacific Islands, the Northern 
Marianas, and the territories and possessions of the United States.

(Authority: 42 U.S.C. 6101-6107)

[50 FR 34133, Aug. 23, 1985, as amended at 68 FR 51371, Aug. 26, 2003]

              Standards for Determining Age Discrimination



Sec. 18.511  Rules against age discrimination.

    The rules in this section are limited by the exceptions contained in 
Sec. Sec. 18.513 and 18.514 of these regulations.
    (a) General rule. No person in the United States shall, on the basis 
of age, be excluded from participation in, be denied the benefits of, or 
be subjected to discrimination under, any program or activity receiving 
Federal financial assistance.
    (b) Specific rules. A recipient may not, in any program or activity 
receiving Federal financial assistance, directly or through contractual 
licensing, or other arrangements, use age distinctions or take any other 
actions which have the effect, on the basis of age, of:
    (1) Excluding individuals from, denying them the benefits of, or 
subjecting them to discrimination under, a program or activity receiving 
Federal financial assistance; or
    (2) Denying or limiting individuals in their opportunity to 
participate in any program or activity receiving Federal financial 
assistance.
    (c) The specific forms of age discrimination listed in paragraph (b) 
of this section do not necessarily constitute a complete list.

(Authority: 42 U.S.C. 6101-6107)



Sec. 18.512  Definitions of ``normal operation'' and ``statutory 
objective.''

    For the purpose of these regulations, the terms normal operation and 
statutory objective shall have the following meaning:
    (a) Normal operation means the operation of a program or activity 
without significant changes that would impair its ability to meet its 
objectives.
    (b) Statutory objective means any purpose of a program or activity 
expressly stated in any Federal statute, State statute, or local statute 
or ordinance adopted by an elected, general purpose legislative body.

(Authority: 42 U.S.C. 6101-6107)



Sec. 18.513  Exceptions to the rules against age discrimination; normal 
operation or statutory objective of any program or activity.

    A recipient is permitted to take an action, otherwise prohibited by 
Sec. 18.511, if the action reasonably takes into account age as a 
factor necessary to the normal operation or the achievement of any 
statutory objective of a program or activity. An action reasonably takes 
into account age as a factor necessary to the normal operation or the 
achievement of any statutory objective of a program or activity, if:
    (a) Age is used as a measure or approximation of one or more other 
characteristics; and
    (b) The other characteristic(s) must be measured or approximated in 
order for the normal operation of the program or activity to continue, 
or to achieve any statutory objective of the program or activity; and
    (c) The other characteristic(s) can be reasonably measured or 
approximated by the use of age; and
    (d) The other characteristic(s) are impractical to measure directly 
on an individual basis.

(Authority: 42 U.S.C. 6101-6107)



Sec. 18.514  Exceptions to the rules against age discrimination; 
reasonable factors other than age.

    A recipient is permitted to take an action otherwise prohibited by 
Sec. 18.511 which is based on a factor other than age, even though that 
action may have a disproportionate effect on persons of different ages. 
An action may be based on a factor other than age only if the factor 
bears a direct and substantial relationship to the normal operation of 
the program or activity or to the achievement of a statutory objective.

(Authority: 42 U.S.C. 6101-6107)



Sec. 18.515  Burden of proof.

    The burden of proving that an age distinction or other action falls 
within the exceptions outlined in Sec. Sec. 18.513 and

[[Page 36]]

18.514 is on the recipient of Federal financial assistance.

(Authority: 42 U.S.C. 6101-6107)



Sec. 18.516  Affirmative action by recipients.

    Even in the absence of a finding of discrimination, a recipient may 
take affirmative action to overcome the effects of conditions that 
resulted in limited participation in the recipient's program or activity 
on the basis of age.

(Authority: 42 U.S.C. 6101-6107)

      Responsibilities of Department of Veterans Affairs Recipients



Sec. 18.531  General responsibilities.

    Each VA recipient must ensure that its programs or activities are in 
compliance with the Act and these regulations.

(Authority: 42 U.S.C. 6101-6107)

[50 FR 34133, Aug. 23, 1985, as amended at 68 FR 51372, Aug. 26, 2003]



Sec. 18.532  Notice of subrecipients.

    Where a recipient passes on Federal financial assistance from VA to 
programs or activities of subrecipients, the recipient shall provide the 
subrecipients written notice of their obligations under the Act and 
these regulations with respect to such programs and activities.

(Approved by the Office of Management and Budget under control number 
2900-0400)

(Authority: 42 U.S.C. 6101-6107)

[50 FR 34133, Aug. 23, 1985, as amended at 68 FR 51372, Aug. 26, 2003]



Sec. 18.533  Assurance of compliance and recipient assessment of age 
distinctions.

    (a) Each recipient of Federal financial assistance from VA shall 
sign a written assurance as specified by the Secretary that it will 
comply with the Act and these regulations.
    (b) Recipient assessment of age distinctions. (1) As part of a 
compliance review under Sec. 18.541 or complaint investigation under 
Sec. 18.544, the Secretary may require a recipient employing the 
equivalent of 15 of more employees to complete a written self-
evaluation, in a manner specified by the responsible agency official, of 
any age distinction imposed in its programs or activities receiving 
Federal financial assistance from VA to assess the recipient's 
compliance with the Act.
    (2) Whenever an assessment indicates a violation of the Act or these 
regulations, the recipient shall take corrective action.

(Authority: 42 U.S.C. 6101-6107)



Sec. 18.534  Information requirements.

    Each recipient shall:
    (a) Make available upon request to VA information necessary to 
determine whether the recipient is complying with the Act and these 
regulations.
    (b) Permit reasonable access by VA to the books, records, accounts, 
and other recipient facilities and sources of information to the extent 
necessary to determine whether the recipient is in compliance with the 
Act and these regulations.

(Authority: 42 U.S.C. 6101-6107)

         Investigation, Conciliation, and Enforcement Procedures



Sec. 18.541  Compliance reviews.

    (a) VA may conduct compliance reviews and preaward reviews of 
recipients or use other similar procedures that will permit it to 
investigate and correct violations of the Act and these regulations. VA 
may conduct these reviews even in the absence of a complaint against a 
recipient. The review may be as comprehensive as necessary to determine 
whether a violation of these regulations has occurred.
    (b) If a compliance review or preaward review indicates a violation 
of the Act or these regulations, VA will attempt to achieve voluntary 
compliance with the Act. If voluntary compliance cannot be achieved, VA 
may institute enforcement proceedings as described in Sec. 18.546.

(Authority: 42 U.S.C. 6101-6107)



Sec. 18.542  Complaints.

    (a) Any person, individually or as a member of a class or on behalf 
of others, may file a complaint with VA alleging discrimination 
prohibited by the Act or these regulations based on an action occurring 
on or after July 1,

[[Page 37]]

1979. A complainant shall file a complaint within 180 days from the date 
the complainant first had knowledge of the alleged act of 
discrimination. However, for good cause shown, VA may extend this time 
limit. Complaints may be submitted to the Director, Office of Equal 
Opportunity (06B), Department of Veterans Affairs, 810 Vermont Avenue, 
NW., Washington, DC 20420.
    (b) VA will attempt to facilitate the filing of complaints wherever 
possible, including taking the following measures:
    (1) Acknowledging receipt and acceptance of a complaint in writing.
    (2) Accepting as a sufficient complaint, any written statement which 
identifies the parties involved and the date the complainant first had 
knowledge of the alleged violation, describes generally the action or 
practice complained of, and is signed by the complainant.
    (3) Freely permitting a complainant to add information to the 
complaint to meet the requirements of a sufficient complaint.
    (4) Widely disseminating information regarding the obligations of 
recipients under the Act and these regulations.
    (5) Notifying the complainant and the recipient of their rights and 
obligations under the complaint procedure, including the right to have a 
representative at all stages of the complaint procedure.
    (6) Notifying the complainant and the recipient (or their 
representatives) of their right to contact VA for information and 
assistance regarding the complaint resolution process.
    (c) VA will refer a complaint of discrimination based on age to 
another appropriate Federal agency when the complaint is outside the 
jurisdiction of VA. VA will notify the complainant in writing that the 
complaint has been referred; explain the reason why the complaint is not 
within the jurisdiction of VA; and give the complainant the name, 
agency, and address of the official to whom the complaint was referred.

(Approved by the Office of Management and Budget under control number 
2900-0401)

(Authority: 42 U.S.C. 6101-6107)



Sec. 18.543  Mediation.

    (a) Referral of complaints for mediation. VA will refer to the 
Federal Mediation and Conciliation Service all complaints that:
    (1) Fall within the jurisdiction of the Act and these regulations; 
and
    (2) Contain all information necessary for further processing.
    (b) Both the complainant and the recipient shall participate in the 
mediation process to the extent necessary to reach an agreement or make 
an informed judgment that an agreement is not possible. However, the 
recipient and the complainant need not meet with the mediator at the 
same time.
    (c) If the complainant and the recipient reach an agreement, the 
mediator shall prepare a written statement of the agreement and have the 
complainant and the recipient sign it. The mediator shall send a copy of 
the agreement to VA. VA will take no further action on the complaint 
unless the complainant or the recipient fails to comply with the 
agreement.
    (d) The mediator shall protect the confidentiality of all 
information obtained in the course of the mediation process. No mediator 
shall testify in any adjunctive proceeding, produce any document, or 
otherwise disclose any information obtained in the course of the 
mediation process without prior approval of the head of the mediation 
agency.
    (e) VA will use the mediation process for a maximum of 60 days after 
the responsible agency official receives a complaint.
    (f) Mediation ends if:
    (1) 60 days elapse from the time the responsible agency official 
receives the complaint; or
    (2) Prior to the end of that 60-day period, an agreement is reached; 
or
    (3) Prior to the end of that 60-day period, the mediator determines 
that an agreement cannot be reached.
    (g) The mediator shall return unresolved complaints to VA.

(Authority: 42 U.S.C. 6101-6107)

[[Page 38]]



Sec. 18.544  Investigation.

    (a) Informal investigation. (1) VA will investigate complaints that 
are reopened because of a violation of a mediation agreement.
    (2) As part of the initial investigation VA will use informal fact 
finding methods, including joint or separate discussions with the 
complainant and recipient to establish the facts and, if possible, 
settle the complaint on terms that are mutually agreeable to the 
parties. VA may seek the assistance of any involved State agency.
    (3) VA will put any agreement in writing and have it signed by the 
parties and an authorized official from the VA.
    (4) The settlement shall not affect the operation of any other 
enforcement effort of VA, including compliance reviews and investigation 
of other complaints which may involve the recipient.
    (5) A settlement need not contain an admission of discrimination or 
other wrongdoing by the recipient nor should it be considered a finding 
of discrimination against the recipient.
    (b) Formal investigation. If VA cannot resolve the complaint through 
informal investigation, it will begin to develop formal findings through 
further investigation of the complaint. If the investigation indicates a 
violation of these regulations, VA will attempt to obtain voluntary 
compliance. If voluntary compliance cannot be achieved, VA may institute 
enforcement proceedings as described in Sec. 18.546.

(Authority: 42 U.S.C. 6101-6107)

[50 FR 34133, Aug. 23, 1985, as amended at 68 FR 51372, Aug. 26, 2003]



Sec. 18.545  Prohibition against intimidation or retaliation.

    A recipient may not engage in acts of intimidation or retaliation 
against any person who:
    (a) Attempts to assert a right protected by the Act or these 
regulations; or
    (b) Cooperates in any mediation, investigation, hearing, or other 
part of VA's investigation, conciliation, and enforcement process.

(Authority: 42 U.S.C. 6101-6107)



Sec. 18.546  Compliance procedure.

    (a) VA may enforce the Act and these regulations through:
    (1) Termination of Federal financial assistance from VA with respect 
to a recipient's program or activity that has violated the Act or these 
regulations. The determination of the recipient's violation may be made 
only after a recipient has had an opportunity for a hearing on the 
record before an administrative law judge. Therefore, cases which are 
settled in mediation, or prior to a hearing, will not involve 
termination of a recipient's Federal financial assistance from VA.
    (2) Any other means authorized by law including but not limited to:
    (i) Referral to the Department of Justice for proceedings to enforce 
any rights of the United States or obligations of the recipient created 
by the Act or these regulations.
    (ii) Use of any requirement of or referral to any Federal, State, or 
local government agency that will have the effect of correcting a 
violation of the Act or these regulations.
    (b) VA will limit any termination under paragraph (a)(1) of this 
section to the particular program or activity or part of such program or 
activity of a recipient that VA finds to be in violation of the Act or 
these regulations. VA will not base any part of a termination on a 
finding with respect to any program or activity of the recipient which 
does not receive Federal financial assistance from VA.
    (c) VA will take no action under paragraph (a) of this section 
until:
    (1) The Secretary has advised the recipient of its failure to comply 
with the Act and these regulations and has determined that voluntary 
compliance cannot be obtained.
    (2) Thirty days have elapsed after the Secretary has sent a written 
report of the circumstances and grounds of the action to the committees 
of the Congress having legislative jurisdiction over the program or 
activity involved. The Secretary will file a report whenever any action 
is taken under paragraph (a) of this section.
    (d) VA also may defer granting new Federal financial assistance from 
VA to a recipient when a hearing under

[[Page 39]]

paragraph (a)(1) of this section is initiated.
    (1) New Federal financial assistance from VA includes all assistance 
for which VA requires an application or approval, including renewal or 
continuation of existing activities, or authorization of new activities 
during the deferral period. New Federal financial assistance from VA 
does not include increases in funding resulting solely from a change in 
the formula or method of computing awards, nor does it include 
assistance approved prior to the beginning of a hearing under paragraph 
(a)(1) of this section.
    (2) VA will not begin a deferral until the recipient has received a 
notice of an opportunity for a hearing under paragraph (a)(1) of this 
section. VA will not continue a deferral for more than 60 days unless a 
hearing has begun within that time or the time for beginning the hearing 
has been extended by mutual consent of the recipient and the Secretary. 
VA will not continue a deferral for more than 30 days after the close of 
the hearing, unless the hearing results in a finding against the 
recipient.

(Authority: 42 U.S.C. 6101-6107)

[50 FR 34133, Aug. 23, 1985, as amended at 68 FR 51372, Aug. 26, 2003]



Sec. 18.547  Hearings, decisions, post-termination proceedings.

    Certain VA procedural provisions applicable to Title VI of the Civil 
Rights Act of 1964 apply to VA enforcement of these regulations. They 
are found at Sec. Sec. 18.9 through 18.11 and part 18b of this title.

(Authority: 42 U.S.C. 6101-1607)



Sec. 18.548  Remedial action by recipient.

    Where VA finds that a recipient has discriminated on the basis of 
age, the recipient shall take any remedial action that VA may require to 
overcome the effects of the discrimination. If another recipient 
exercises control over the recipient that has discriminated, VA may 
require both recipients to take remedial action.

(Authority: 42 U.S.C. 6101-1607)



Sec. 18.549  Alternate funds disbursal procedure.

    (a) When VA withholds funds from a recipient under these 
regulations, the Secretary may disburse the withheld funds directly to 
an alternate recipient: Any public or non-profit private organization or 
agency, or State or political subdivision of the State.
    (b) The Secretary will require any alternate recipient to 
demonstrate;
    (1) The ability to comply with these regulations; and
    (2) The ability to achieve the goals of the Federal statute 
authorizing the Federal financial assistance.

(Authority: 42 U.S.C. 6101-1607)

[50 FR 34133, Aug. 23, 1985, as amended at 68 FR 51372, Aug. 26, 2003]



Sec. 18.550  Exhaustion of administrative remedies.

    (a) A complainant may file a civil action following the exhaustion 
of administrative remedies under the Act. Administrative remedies are 
exhausted if:
    (1) 180 days have elapsed since the complainant filed the complaint 
and VA has made no finding with regard to the complaint; or
    (2) VA issues any finding in favor of the recipient.
    (b) If VA fails to make a finding within 180 days or issues a 
finding in favor of the recipient, VA will:
    (1) Promptly advise the complainant of this fact; and
    (2) Advise the complainant of his or her right to bring a civil 
action for injunctive relief; and
    (3) Inform the complainant that:
    (i) The complainant may bring a civil action only in a United States 
district court for the district in which the recipient is found or 
transacts business;
    (ii) A complainant prevailing in a civil action has the right to be 
awarded the costs of the action, including reasonable attorney's fees, 
but the complainant must demand these costs in the complaint;
    (iii) Before commencing the action, the complainant shall give 30 
days notice by registered mail to the Secretary, the Attorney General of 
the United States, and the recipient;

[[Page 40]]

    (iv) The notice must state: The alleged violation of the Act; the 
relief requested; the court in which the complainant is bringing the 
action; and, whether or not attorney's fees are demanded in the event 
the complainant prevails; and
    (v) The complainant may not bring action if the same alleged 
violations of the Act by the same recipient is the subject of a pending 
action in any court of the United States.

(Authority: 42 U.S.C. 6101-6107)

 Appendix A to Subpart E of Part 18--Statutory Provisions to Which This 
                             Subpart Applies

    1. Approval of educational institutions (38 U.S.C. 104).
    2. Space and office facilities for representatives of State 
employment services (38 U.S.C. 7725(1)).
    3. Medical care for survivors and dependents of certain veterans (38 
U.S.C. 1713).
    4. Transfers for nursing home care; adult day health care (38 U.S.C. 
1720).
    5. Treatment and rehabilitation for alcohol or drug dependence or 
abuse disabilities (38 U.S.C. 1720A).
    6. Payments to State Homes (38 U.S.C. 1741-1743).
    7. Aid to States for establishment, expansion, and improvement of 
veterans' cemeteries (38 U.S.C. 2408).
    8. Vocational Rehabilitation; Post-Vietnam Era Veterans' Educational 
Assistance; Survivors' and Dependents' Educational Assistance; and 
Administration of Educational Benefits (38 U.S.C. Chapters 31, 32, 34, 
35 and 36 respectively).
    9. Space and office facilities for representatives of recognized 
national organizations (38 U.S.C. 5902(a)(2)).
    10. Department of Veterans Affairs Health Professional Scholarship 
Program (38 U.S.C. 7601-7655).
    11. State Home Facilities for Furnishing Domiciliary, Nursing Home 
and Hospital Care (38 U.S.C. 8131-8137).
    12. Sharing of Medical Facilities, Equipment and Information (38 
U.S.C. 8151-8157).
    13. Assistance in Establishing New State Medical Schools; Grants to 
Affiliated Medical Schools; Assistance to Health Manpower Training 
Institutions (38 U.S.C. Chapter 82).
    14. Emergency Veterans' Job Training (Pub. L. 98-77, 97 Stat. 443-
452).

 Appendix B to Subpart E of Part 18--List of Age Distinctions Contained 
 in Statutes and Regulations Governing Federal Financial Assistance of 
                   the Department of Veterans Affairs

    Section 90.31(f) of the governmentwide regulations (45 CFR part 90) 
requires each Federal agency to publish an appendix to its final 
regulations containing a list of age distinctions in Federal statutes 
and regulations affecting financial assistance administered by the 
agency. This appendix is VA's list of age distinctions contained in 
Federal statutes and VA regulations which:
    (1) Provide benefits or assistance to persons based upon age; or
    (2) Establish criteria for participation in age-related terms; or
    (3) Describe intended beneficiaries or target groups in age-related 
terms.
    Appendix B deals only with VA's programs of financial assistance 
covered by the Age Discrimination Act. It does not list age distinctions 
used by VA in its direct assistance programs, such as veterans' 
compensation. Also, this appendix contains only age distinctions in 
Federal statutes and VA regulations in effect on January 1, 1985.
    This appendix has two sections: A list of age distinctions in 
Federal statutes, and a list of age distinctions in VA regulations. The 
first column contains the name of the program; the second column has the 
statute name and U.S. Code citation for statutes, or the regulation name 
and Code of Federal Regulations citation for regulations; the third 
column contains the section number of the statute or regulation and the 
description of the age distinction; and the fourth column cites the 
Catalog of Federal Domestic Assistance number for the program(s) 
affected where it is available.

[[Page 41]]



   Age Distinctions in Statutes Governing Federal Financial Assistance Programs of the Department of Veterans
                                                     Affairs
----------------------------------------------------------------------------------------------------------------
                 Program                            Statute               Section and Age Distinction      CFDA
----------------------------------------------------------------------------------------------------------------
Veterans' Benefits......................  Section 101 of the           Section 101(4)(A) defines the
                                           Veterans' Benefits Act of    term ``child'' for the purposes
                                           1957, as amended; 38         of Title 38, U.S.C. (except for
                                           U.S.C. 101.                  chapter 19 and section 8502(b)
                                                                        of Title 38) as ``a person who
                                                                        is unmarried and--(i) who is
                                                                        under the age of eighteen
                                                                        years; (ii) who, before
                                                                        attaining the age of eighteen
                                                                        years, became permanently
                                                                        incapable of self-support; or
                                                                        (iii) who, after attaining the
                                                                        age of eighteen years and until
                                                                        completion of education or
                                                                        training (but not after
                                                                        attaining the age of twenty-
                                                                        three years), is pursuing a
                                                                        course of instruction at an
                                                                        approved educational
                                                                        institution; and who is a
                                                                        legitimate child, a legally
                                                                        adopted child, a stepchild who
                                                                        is a member of a veteran's
                                                                        household or was a member at
                                                                        the time of the veteran's
                                                                        death, or an illegitimate child
                                                                        but, as to the alleged father,
                                                                        only if acknowledged in writing
                                                                        signed by him, or if he has
                                                                        been judicially ordered to
                                                                        contribute to the child's
                                                                        support or has been, before his
                                                                        death, judicially decreed to be
                                                                        the father of such child, or if
                                                                        he is otherwise shown by
                                                                        evidence statisfactory to the
                                                                        Secretary to be the father or
                                                                        such child. . . .''.
                                                                       Section 101(4)(B) provides that
                                                                        for the purposes of section
                                                                        101(4)(A) of Title 38, in the
                                                                        case of an adoption under the
                                                                        laws of any jurisdiction other
                                                                        than a State, a person residing
                                                                        outside any of the States shall
                                                                        not be considered a legally
                                                                        adopted child of a veteran
                                                                        during the lifetime of that
                                                                        veteran, unless, among other
                                                                        things, such a person was less
                                                                        than eighteen years of age at
                                                                        the time of the adoption.
Approval of Educational Institutions....  Section 104 of the           Section 104(a) authorizes the
                                           Veterans' Benefits Act of    Secretary to approve or
                                           1957, as amended, 38         disapprove an educational
                                           U.S.C. 104.                  institution for the purpose of
                                                                        determining whether or not
                                                                        benefits are payable under
                                                                        Title 38, U.S.C. (except
                                                                        chapter 15 of title 38) for a
                                                                        child over the age of eighteen
                                                                        years and under the age of
                                                                        twenty-three years who is
                                                                        attending a school, college,
                                                                        academy, seminary, technical
                                                                        institution, university, or
                                                                        other educational institution.
                                                                       Section 104(b) provides that the
                                                                        Secretary may not approve an
                                                                        educational institution under
                                                                        section 104 of Title 38, unless
                                                                        the institution has agreed to
                                                                        report the termination of
                                                                        attendance of any child. If the
                                                                        educational institution fails
                                                                        to report any such termination
                                                                        promptly, the approval of the
                                                                        Secretary shall be withdrawn.
Civilian Health and Medical Program of    Section 103(b) of the        Section 1713(a) authorizes the     64.009
 the Department of Veterans Affairs        Veterans Health Care         Secretary to provide medical
 (CHAMPA).                                 Expansion Act of 1973, as    care to: ``(1) The spouse or
                                           amended; 38 U.S.C. 1713.     child of a veteran who has a
                                                                        total disability, permanent in
                                                                        nature, resulting from a
                                                                        service-connected disability,
                                                                        (2) the surviving spouse or
                                                                        child of a veteran who (A) died
                                                                        as a result of a service-
                                                                        connected disability, or (B) at
                                                                        the time of death had a total
                                                                        disability permanent in nature,
                                                                        resulting from a service-
                                                                        connected disability, and (3)
                                                                        the surviving spouse or child
                                                                        of a person who died in the
                                                                        active military, naval, or air
                                                                        service in the line of duty and
                                                                        not due to such person's own
                                                                        misconduct, who are not
                                                                        otherwise eligible for medical
                                                                        care under Chapter 55 of Title
                                                                        10, U.S.C. (CHAMPUS).

[[Page 42]]

 
                                                                       Section 1713(c) provides that
                                                                        for the purposes of this
                                                                        program, ``a child between the
                                                                        ages of eighteen and twenty-
                                                                        three (1) who is eligible for
                                                                        benefits under subsection (a)
                                                                        of this section, (2) who is
                                                                        pursuing a full-time course of
                                                                        instruction at an educational
                                                                        institution, approved under
                                                                        Chapter 36 of this title, and
                                                                        (3) who while pursuing such
                                                                        course of instruction, incurs a
                                                                        disabling illness or injury . .
                                                                        . which results in such child's
                                                                        inability to continue or resume
                                                                        such child's chosen program of
                                                                        education . . . shall remain
                                                                        eligible for benefits under
                                                                        this section until the end of
                                                                        the six-month period beginning
                                                                        on the date the disability is
                                                                        removed, the end of the two-
                                                                        year period beginning on the
                                                                        date of the onset of the
                                                                        disability, or the twenty-third
                                                                        birthday of the child,
                                                                        whichever occurs first''.
VA Hospital, Domiciliary or Nursing Home  Section 510 of the           Section 1710 authorizes the        64.009
 Care.                                     Veterans' Benefits Act of    Secretary, within the limits of   64.010
                                           1957, amended; 38 U.S.C.     VA facilities, to furnish         64.015
                                           1710.                        hospital care or nursing home     64.016
                                                                        care. Among the persons
                                                                        eligible for such care are
                                                                        veterans with a nonservice-
                                                                        connected disability if they
                                                                        are sixty-five years of age or
                                                                        older.
Post-Vietnam Era Veterans' Educational    Post Vietnam Era Veterans'   Section 3201 states that the       64.120
 Assistance.                               Educational Act of 1977,     purpose of Chapter 32 of Title
                                           as amended; U.S.C. Chapter   38, U.S.C. is: ``(1) To provide
                                           32.                          educational asssistance to
                                                                        those men and women who enter
                                                                        the Armed Forces after December
                                                                        31, 1976, (2) to assist young
                                                                        men and women in obtaining an
                                                                        education they might not
                                                                        otherwise be able to afford,
                                                                        and (3) to promote and assist
                                                                        the all volunteer military
                                                                        program of the United States by
                                                                        attracting qualified men and
                                                                        women to serve in the Armed
                                                                        Forces''.
Veterans' Educational Assistance........  Section 2 of the Veterans'   Section 3451 states that the       64.111
                                           Readjustment Benefits Act    education program created by
                                           of 1966, amended; 38         this chapter is for the purpose
                                           U.S.C. Chapter 34.           of: `` . . . (1) Enhancing and
                                                                        making more attractive service
                                                                        in the Armed Forces of the
                                                                        United States, (2) extending
                                                                        the benefits of higher
                                                                        education to qualified and
                                                                        deserving young persons who
                                                                        might not otherwise be able to
                                                                        afford such an education, (3)
                                                                        providing vocational
                                                                        readjustment and restoring lost
                                                                        educational opportunities to
                                                                        those service men and women
                                                                        whose careers have been
                                                                        interrupted or impeded by
                                                                        reason of active duty after
                                                                        January 31, 1955, and (4)
                                                                        aiding such persons in
                                                                        attaining the vocational and
                                                                        educational status which they
                                                                        might normally have aspired to
                                                                        and obtained had they not
                                                                        served their country''.
                                                                       Section 3492(b) authorizes the
                                                                        Secretary to pay to an eligible
                                                                        veteran receiving tutorial
                                                                        assistance pursuant to section
                                                                        3492(a) of this chapter, the
                                                                        cost of such tutorial
                                                                        assistance, subject to certain
                                                                        limits, upon certification by
                                                                        the educational institution
                                                                        that `` . . . (2) the tutor
                                                                        chosen to perform such
                                                                        assistance is qualified and is
                                                                        not the eligible veteran's
                                                                        parent, spouse, child (whether
                                                                        or not married or over eighteen
                                                                        years of age), brother, or
                                                                        sister; and (3) the charges for
                                                                        such assistance do not exceed
                                                                        the customary charges for such
                                                                        tutorial assistance''.

[[Page 43]]

 
Survivors' and Dependents' Educational    War Orphans' Educational     Section 3500 states that ``the     64.117
 Assistance.                               Assistance Act of 1956, as   educational program established
                                           amended; 38 U.S.C. Chapter   by this chapter is for the
                                           35.                          purpose of providing
                                                                        opportunities for education to
                                                                        children whose education would
                                                                        otherwise be impeded or
                                                                        interrupted by reason of the
                                                                        disability or death of a parent
                                                                        from a disease or injury
                                                                        incurred or aggravated in the
                                                                        Armed Forces after the
                                                                        beginning of the Spanish-
                                                                        American War, and for the
                                                                        purpose of aiding such children
                                                                        in attaining the educational
                                                                        status which they might have
                                                                        aspired to and attained but for
                                                                        the disability or death of such
                                                                        parent. The Congress further
                                                                        declares that the educational
                                                                        program extended to the
                                                                        surviving spouses of veterans
                                                                        who died of service-connected
                                                                        total disabilities and to
                                                                        spouses of veterans with a
                                                                        service-connected total
                                                                        disability permanent in nature
                                                                        is for the purpose of assisting
                                                                        them in preparing to support
                                                                        themselves and their families
                                                                        at a standard of living level
                                                                        which the veteran, but for the
                                                                        veteran's death or service
                                                                        disability, could have expected
                                                                        to provide for the veteran's
                                                                        family''.
                                                                       Section 3501 defines the term
                                                                        ``eligible person'' as: ``(A) a
                                                                        child of a person who--(i) died
                                                                        of a service-connected
                                                                        disability, (ii) has a total
                                                                        disability permanent in nature
                                                                        resulting from a service-
                                                                        connected disability, or who
                                                                        died while a disability so
                                                                        evaluated was in existence or
                                                                        (iii) at the time of
                                                                        application for benefits under
                                                                        this chapter is a member of the
                                                                        Armed Forces serving on active
                                                                        duty listed, pursuant to
                                                                        section 556 of Title 37
                                                                        [U.S.C.] and regulations issued
                                                                        thereunder, by the Secretary
                                                                        concerned in one or more of the
                                                                        following categories . . . for
                                                                        a total of ninety days: (A)
                                                                        missing in action, (B) captured
                                                                        in line of duty by a hostile
                                                                        force, or (C) forcibly detained
                                                                        or interned in line of duty by
                                                                        a foreign government or power,
                                                                        . . .'' Subparagraph (a)(2) of
                                                                        this section provides that the
                                                                        term ``child'' includes
                                                                        individuals who are married and
                                                                        individuals who are above the
                                                                        age of twenty-three years.

[[Page 44]]

 
                                                                       Section 3512 establishes periods
                                                                        of eligibility. Provides that
                                                                        the educational program to
                                                                        which an eligible child within
                                                                        the meaning of this chapter is
                                                                        entitled to may be afforded,
                                                                        ``. . . during the period
                                                                        beginning on the person's
                                                                        eighteenth birthday, or on the
                                                                        successful completion of the
                                                                        person's secondary schooling,
                                                                        whichever first occurs, and
                                                                        ending on the person's twenty-
                                                                        sixth birthday, except that--
                                                                        (1) if the person is above the
                                                                        age of compulsory school
                                                                        attendance under applicable
                                                                        State law, and the Secretary
                                                                        determines that the person's
                                                                        best interests will be served
                                                                        thereby, such period may begin
                                                                        before the person's eighteenth
                                                                        birthday; (2) if the person has
                                                                        a mental or physical handicap,
                                                                        and . . . the person's best
                                                                        interests will be served by
                                                                        pursuing a program of special
                                                                        restorative training or a
                                                                        specialized course of
                                                                        vocational training approved
                                                                        under section 3536 of this
                                                                        title, such period may begin
                                                                        before the person's fourteenth
                                                                        birthday; (3) if the Secretary
                                                                        finds that the parent from whom
                                                                        eligibility is derived has a
                                                                        service-connected total
                                                                        disability permanent in nature,
                                                                        or if the death of the parent
                                                                        from whom eligibility is
                                                                        derived occurs, after the
                                                                        eligible person's eighteenth
                                                                        birthday but before the
                                                                        person's twenty-sixth birthday,
                                                                        then (unless paragraph (4)
                                                                        applies) such period shall end
                                                                        8 years after, whichever date
                                                                        last occurs: (A) the date on
                                                                        which the Secretary first finds
                                                                        that the parent from whom
                                                                        eligibility is derived has a
                                                                        service-connected total
                                                                        disability permanent in nature,
                                                                        or (B) the date of death of the
                                                                        parent from whom eligibility is
                                                                        derived; (4) if the person
                                                                        serves on duty with the Armed
                                                                        Forces as an eligible person
                                                                        after the person's eighteenth
                                                                        birthday but before the
                                                                        person's twenty-sixth birthday,
                                                                        then such period shall end 8
                                                                        years after the person's first
                                                                        discharge or release from such
                                                                        duty with the Armed Forces . .
                                                                        . in no event shall such period
                                                                        be extended beyond the person's
                                                                        thirty-first birthday by reason
                                                                        of this paragraph; and (5)(A)
                                                                        if the person becomes eligible
                                                                        by reason of the provisions of
                                                                        section 3501(a)(1)(A)(ii) of
                                                                        this title after the person's
                                                                        eighteenth birthday but before
                                                                        the person's twenty-sixth
                                                                        birthday, then (unless clause
                                                                        (4) of this section applies)
                                                                        such period shall end eight
                                                                        years after the date on which
                                                                        the person becomes eligible by
                                                                        reason of such provisions, but
                                                                        in no event shall such period
                                                                        be extended beyond the person's
                                                                        thirty-first birthday by reason
                                                                        of this clause. . . .''.
                                                                       Section 3513 provides that the
                                                                        parent or guardian of a person
                                                                        or the eligible person (if such
                                                                        person has attained legal
                                                                        majority) for whom the
                                                                        educational assistance is
                                                                        sought under Chapter 35 shall
                                                                        submit an application to the
                                                                        Secretary, which shall be in
                                                                        such form and contain such
                                                                        information as the Secretary
                                                                        shall prescribe.

[[Page 45]]

 
                                                                       Section 3562 provides that the
                                                                        commencement of a program of
                                                                        education or special
                                                                        restorative training under
                                                                        Chapter 35 shall be a bar,
                                                                        ``(1) to subsequent payments of
                                                                        compensation, dependency and
                                                                        indemnity compensation, or
                                                                        pension based on a death of a
                                                                        parent to an eligible person
                                                                        over the age of eighteen by
                                                                        reason of pursuing a course in
                                                                        an educational institution, or
                                                                        (2) to increased rates, or
                                                                        additional amounts of
                                                                        compensation, dependency and
                                                                        indemnity compensation, or
                                                                        pension because of such a
                                                                        person whether eligibility is
                                                                        based upon the death or upon
                                                                        the total permanent disability
                                                                        of the parent''.
                                                                       Section 3563 states that ``The
                                                                        Secretary shall notify the
                                                                        parent or guardian of each
                                                                        eligible person as defined in
                                                                        section 3501(a)(1)(A) of this
                                                                        title of the educational
                                                                        assistance available to such
                                                                        person under Chapter 35. Such
                                                                        notification shall be provided
                                                                        not later then the month in
                                                                        which such eligible person
                                                                        attains such person's
                                                                        thirteenth birthday or as soon
                                                                        thereafter as feasible''.
----------------------------------------------------------------------------------------------------------------


  Age Distinctions in Regulations Governing Federal Financial Assistance Programs of the Department of Veterans
                                                     Affairs
----------------------------------------------------------------------------------------------------------------
                 Program                           Regulation             Section and Age Distinction      CFDA
----------------------------------------------------------------------------------------------------------------
Veterans' Benefits......................  Adjudication (38 CFR part    Section 3.57 defines the term
                                           3).                          ``child'' of a veteran as, ``.
                                                                        . . an unmarried person who is
                                                                        a legitimate child, a child
                                                                        legally adopted before the age
                                                                        of 18 years, a stepchild who
                                                                        acquired that status before the
                                                                        age of 18 years and who is a
                                                                        member of the veteran's
                                                                        household or was a member of
                                                                        the veteran's household at the
                                                                        time of the veteran's death, or
                                                                        an illegitimate child; and (i)
                                                                        who is under the age of 18
                                                                        years; or (ii) who, before
                                                                        reaching the age of 18 years,
                                                                        became permanently incapable of
                                                                        self-support; or (iii) who,
                                                                        after reaching the age of 18
                                                                        years and until completion of
                                                                        education or training (but not
                                                                        after reaching the age of 23
                                                                        years) is pursuing a course of
                                                                        instruction at an approved
                                                                        educational institution. (2)
                                                                        For the purposes of determining
                                                                        entitlement of benefits based
                                                                        on a child's school attendance,
                                                                        the term ``child'' of the
                                                                        veteran also includes the
                                                                        following unmarried persons:
                                                                        (i) A person who was adopted by
                                                                        the veteran between the ages of
                                                                        18 or 23 years. (ii) A person
                                                                        who became a stepchild of a
                                                                        veteran between the ages of 18
                                                                        or 23 years and who is a member
                                                                        of the veteran's household at
                                                                        the time of the veteran's
                                                                        death. . . .''
Survivors' and Dependents' Educational    Adjudication (38 CFR part    Section 3.807(d) sets forth        64.117
 Assistance.                               3).                          basic eligibility criteria for
                                                                        the program of educational
                                                                        assistance under 38 U.S.C.
                                                                        Chapter 35. Defines the term
                                                                        ``child'' as the son or
                                                                        daughter of a veteran who meets
                                                                        the requirements of 38 CFR
                                                                        3.57, except as to age or
                                                                        marital status.
                                          Survivors' and Dependent's   Section 21.3021 describes
                                           Educational Assistant        beneficiaries of the program.
                                           Under 38 U.S.C. Chapter 35   Paragraph (a) defines the term
                                           (38 CFR part 21, subpart     ``eligible person'' as, ``(1) A
                                           C).                          child of a: (i) Veteran who
                                                                        died of a service-connected
                                                                        disability. . . .'' Paragraph
                                                                        (b) defines the term ``child''
                                                                        as a son or daughter of a
                                                                        veteran as defined in 38 CFR
                                                                        3.807(d).

[[Page 46]]

 
                                                                       Section 21.3023 states that:
                                                                        ``(a) Child; age 18. A child
                                                                        who is eligible for educational
                                                                        assistance and who is also
                                                                        eligible for pension,
                                                                        compensation dependency and
                                                                        indemnity compensation based on
                                                                        school attendance must elect
                                                                        whether he or she will receive
                                                                        educational assistance or
                                                                        pension, compensation or
                                                                        dependency and indemnity
                                                                        compensation. (1) An election
                                                                        of education assistance either
                                                                        before or after the age of 18
                                                                        years is a bar to subsequent
                                                                        payment or increased rates or
                                                                        additional amounts of pension,
                                                                        compensation or dependency and
                                                                        indemnity compensation on
                                                                        account of a child based on
                                                                        school attendance on or after
                                                                        the age of 18 years. . . . (2)
                                                                        Payment of pension,
                                                                        compensation or dependency and
                                                                        indemnity compensation to or on
                                                                        account of a child after his or
                                                                        her 18th birthday does not bar
                                                                        subsequent payments of
                                                                        educational assistance. . . .
                                                                        (b) Child; under 18 or
                                                                        helpless. Educational
                                                                        assistance allowance or special
                                                                        restorative training allowance
                                                                        may generally be paid
                                                                        concurrently with pension,
                                                                        compensation or dependency and
                                                                        indemnity compensation for a
                                                                        child under the age of 18 years
                                                                        or for a helpless child based
                                                                        on the service of one or more
                                                                        parents. Where, however,
                                                                        entitlement is based on the
                                                                        death of more than one parent
                                                                        in the same parental line,
                                                                        concurrent payments in two or
                                                                        more cases may not be
                                                                        authorized if the death of one
                                                                        such parent occurred on or
                                                                        after June 9, 1960. In the
                                                                        latter cases, an election of
                                                                        educational assistance and
                                                                        pension, compensation or
                                                                        dependency and indemnity
                                                                        compensation in one case does
                                                                        not preclude a reelection of
                                                                        benefits before attaining age
                                                                        18 or while helpless based on
                                                                        the service of another parent
                                                                        in the same parental line. . .
                                                                        .''
                                                                       Section 21.3040 sets forth
                                                                        criteria for the commencement
                                                                        and termination of the program
                                                                        of education or special
                                                                        restorative training for an
                                                                        eligible child under 38 U.S.C.
                                                                        Chapter 35. Paragraph (a) of
                                                                        this section provides that a
                                                                        program of education or special
                                                                        restorative training may not be
                                                                        afforded prior to the eligible
                                                                        persons' 18th birthday or the
                                                                        completion of secondary
                                                                        schooling, whichever is
                                                                        earlier, unless it is
                                                                        determined through counseling
                                                                        that the best interests of the
                                                                        eligible person will be served
                                                                        by entering training at an
                                                                        earlier date and the eligible
                                                                        person has passed: (1)
                                                                        Compulsory school attendance
                                                                        age under State law; or (2) his
                                                                        or her 14th birthday and due to
                                                                        physical or mental handicap may
                                                                        benefit by special restorative
                                                                        or specialized vocational
                                                                        training. Paragraph (c) of this
                                                                        section provides that no person
                                                                        is eligible for educational
                                                                        assistance who reached his or
                                                                        her 26th birthday on or before
                                                                        the effective date of a finding
                                                                        of permanent total service-
                                                                        connected disability, or on or
                                                                        before the date the veteran's
                                                                        death occurred, or on or before
                                                                        the 91st day of listing by the
                                                                        Secretary concerned of the
                                                                        member of the Armed Forces or
                                                                        whose service eligibility is
                                                                        claimed as being is one of the
                                                                        missing categories identified
                                                                        in 38 CFR 21.3021(a) (1)(iii)
                                                                        and (3)(ii). Paragraph (d)
                                                                        provides that no person is
                                                                        eligible for educational
                                                                        assistance beyond his or her
                                                                        31st birthday, except in
                                                                        certain exceptional cases.

[[Page 47]]

 
                                                                       Section 21.3041 sets forth
                                                                        periods of eligibility for an
                                                                        eligible child. Paragraph (a)
                                                                        of this section provides the
                                                                        basic beginning date for the
                                                                        educational assistance as the
                                                                        person's 18th birthday or
                                                                        successful completion of
                                                                        secondary schooling, whichever
                                                                        occurs first. Paragraph (b)
                                                                        authorizes certain exceptions
                                                                        to the basic beginning date,
                                                                        if: (1) A person has passed
                                                                        compulsory school attendance
                                                                        under applicable State law, or
                                                                        (2) has passed his or her 14th
                                                                        birthday and has a physical or
                                                                        mental handicap. Paragraph (c)
                                                                        provides the basic ending date
                                                                        as the person's 26th birthday.
                                                                        Paragraphs (d) and (e) set
                                                                        forth criteria for modifying or
                                                                        extending the ending date.
                                          Administration of            Section 21.3300 provides that VA
                                           Educational Benefits; 38     may prescribe special
                                           U.S.C. Chapter 34, 35, and   restorative training for the
                                           36 (38 CFR part 21,          purpose of enabling an eligible
                                           subpart D).                  child to pursue a program of
                                                                        education, special vocational
                                                                        program, or other appropriate
                                                                        goal, where needed to overcome
                                                                        or lessen the effects of a
                                                                        physical or mental disability.
                                                                       Section 21.4102(a) requires VA
                                                                        to provide counseling for the
                                                                        purpose set forth in 38 CFR
                                                                        21.4100 to an eligible child
                                                                        when: (1) The eligible child
                                                                        may require specialized
                                                                        vocational or special
                                                                        restorative training, or (2)
                                                                        the eligible child has reached
                                                                        compulsory school attendance
                                                                        age under State law, but has
                                                                        neither reached his or her 18th
                                                                        birthday nor completed
                                                                        secondary schooling, or (3) if
                                                                        requested by the eligible child
                                                                        or his or her parent or
                                                                        guardian for the purpose of
                                                                        preparing an educational plan.
                                                                       Section 21.4139(b) provides that
                                                                        VA will make payment of
                                                                        educational assistance under 38
                                                                        U.S.C. Chapter 35 to the
                                                                        eligible person if: (1) He or
                                                                        she has attained majority and
                                                                        has no known legal disability
                                                                        or (2) is in the eligible
                                                                        person's best interests, and
                                                                        there is no reason not to
                                                                        designate the eligible person
                                                                        as payee. VA may pay minors
                                                                        under this provision.
                                                                       Section 21.4141 provides that
                                                                        payment of educational
                                                                        assistance allowance under 38
                                                                        U.S.C. Chapter 35 will be
                                                                        subject to offsets of amounts
                                                                        of pension, compensation, or
                                                                        dependency and indemnity
                                                                        compensation paid over the same
                                                                        period on behalf of a child
                                                                        based on school attendance.
VA Hospital, Domiciliary or Nursing Home  Eligiblity for hospital,     Section 17.47(e) provides that     64.009
 Care.                                     domiciliary or nursing       within the limits of VA           64.010
                                           home care of persons         facilities, hospital or nursing   64.015
                                           discharged or released       home care may be provided to      64.016
                                           from active military,        any veteran with a nonservice-
                                           naval, or air service (38    connected disability if such a
                                           CFR 17.47).                  veteran is 65 years of age or
                                                                        older.

[[Page 48]]

 
Civilian Health and Medical Program of    Medical Care for Survivors   Section 17.54 states that          64.009
 the Department of Veterans Affairs        and Dependents of Certain    medical care may be provided
 (CHAMPA).                                 Veterans (38 CFR 17.54).     for: ``(1) The spouse or child
                                                                        of a veteran who has a total
                                                                        disability, permanent in
                                                                        nature, resulting from a
                                                                        service-connected disability,
                                                                        and (2) the surviving spouse or
                                                                        child of a veteran who--(a)
                                                                        died as a result of a service-
                                                                        connected disability, or (b) at
                                                                        the time of death had a total
                                                                        disability, permanent in nature
                                                                        resulting from a service-
                                                                        connected disability and--(3)
                                                                        the surviving spouse or child
                                                                        of a person who died in the
                                                                        active military, naval or air
                                                                        service . . . Who are not
                                                                        otherwise eligible for medical
                                                                        care as beneficiaries of the
                                                                        Armed Forces under the
                                                                        provisions of Chapter 55 of
                                                                        Title 10, United States Code
                                                                        (CHAMPUS) . . . and (4) An
                                                                        eligible child who is pursuing
                                                                        a full-time course of
                                                                        instruction approved under 38
                                                                        U.S.C. Chapter 36, and who
                                                                        incurs a disabling illness or
                                                                        injury while pursuing such
                                                                        course; . . . shall remain
                                                                        eligible for medical care
                                                                        until: (a) The end of the 6-
                                                                        month period beginning on the
                                                                        date the disability is removed,
                                                                        or (b) the end of the 2-year
                                                                        period beginning on the date of
                                                                        the onset of the disability; or
                                                                        (c) the 23d birthday of the
                                                                        child, whichever occurs first.
                                                                        . . .''
Veterans' Educational Assistance........  Administration of            Section 21.4135(d) sets forth
                                           Educational Benefits; 38     the following dates for the
                                           U.S.C. Chapters 34, 35,      discontinuance of the
                                           and 36 (38 CFR part 21,      educational assistance
                                           subpart D).                  allowance provided for a
                                                                        dependent child, under Chapter
                                                                        34 of Title 38: ``. . . (1)
                                                                        Last day of the in calendar
                                                                        year in which marriage occurred
                                                                        unless discontinuance is
                                                                        required at an earlier date
                                                                        under other provisions. (2) Age
                                                                        18. Day preceding 18th
                                                                        birthday. (3) School
                                                                        attendance. Last day of month
                                                                        in which 23rd birthday,
                                                                        whichever is earlier. (4)
                                                                        Helplessness ceased. Last day
                                                                        of month school attendance
                                                                        ceased or day preceding
                                                                        following 60 days after notice
                                                                        to payee that helplessness has
                                                                        ceased.''
                                                                       Section 21.4136 sets forth
                                                                        monthly rates for the payment
                                                                        of educational assistance
                                                                        allowance under 38 U.S.C.
                                                                        Chapter 34. Paragraph (f)
                                                                        defines the term ``dependent''
                                                                        as a spouse, child or dependent
                                                                        parent who meets the
                                                                        definitions of relationship
                                                                        specified in 38 CFR 3.50, 3.51,
                                                                        3.57 and 3.59.
----------------------------------------------------------------------------------------------------------------



PART 18a_DELEGATION OF RESPONSIBILITY IN CONNECTION WITH TITLE VI, CIVIL 
RIGHTS ACT OF 1964--Table of Contents




Sec.
18a.1 Delegations of responsibility between the Secretary of Veterans 
          Affairs and the Secretary, Department of Health and Human 
          Services, and the Secretary, Department of Education.
18a.2 Delegation to the Under Secretary for Benefits.
18a.3 Delegation to the Chief Medical Director.
18a.4 Duties of the Director, Contract Compliance Service.
18a.5 Delegation to the General Counsel.

    Authority: 5 U.S.C. 301, 38 U.S.C. 501 and 38 CFR 18.9(d) and 
appendix A, part 18.



Sec. 18a.1  Delegations of responsibility between the Secretary of 
Veterans Affairs and the Secretary, Department of Health and Human 
Services, and the Secretary, Department of Education.

    (a) Authority has been delegated to the Secretary of Veterans 
Affairs by the Secretary, Department of Health and Human Services, and 
the Secretary, Department of Education to perform responsibilities of 
those Departments and of the responsible Departmental officials under 
Title VI of

[[Page 49]]

the Civil Rights Act of 1964 and the Departments' regulations issued 
thereunder (45 CFR part 80 and 34 CFR part 100) with respect to: 
Proprietary (i.e., other than public or nonprofit) educational 
institutions, except if operated by a hospital; and post secondary, 
nonprofit, educational institutions other than colleges and 
universities, except if operated by a college or university, a hospital, 
or a unit of State or local government (i.e., those operating such 
institutions as an elementary or secondary school, an area vocational 
school, a school for the handicapped, etc.)
    (1) The compliance responsibilities so delegated include:
    (i) Soliciting, receiving, and determining the adequacy of 
assurances of compliance under 45 CFR 80.4 and 34 CFR 100.4;
    (ii) All actions under 45 CFR 80.6 including mailing, receiving, and 
evaluating compliance reports under Sec. 80.6(b) and 34 CFR 100.6(b); 
and
    (iii) All other actions related to securing voluntary compliance, or 
related to investigations, compliance reviews, complaints, 
determinations of apparent failure to comply, and resolutions of matters 
by informal means.
    (2) The Department of Health and Human Services and the Department 
of Education specifically reserve to themselves the responsibilities for 
the effectuation of compliance under 45 CFR 80.8, 80.9, 80.10 and 34 CFR 
100.8, 100.9 and 100.10.
    (b) Authority has been delegated to the Secretary, Department of 
Health and Human Services and the Secretary, Department of Education, to 
perform responsibilities of the Department of Veterans Affairs and of 
the responsible Department of Veterans Affairs official under Title VI 
of the Civil Rights Act of 1964 and the Department of Veterans Affairs 
regulations issued thereunder (part 18 of this chapter) with respect to 
institutions of higher learning, including post-high school institutions 
which offer nondegree courses for which credit is given and which would 
be accepted on transfer by a degree-granting institution toward a 
baccalaureate or higher degree; hospitals and other health facilities 
and elementary and secondary schools and school systems including, but 
not limited to, their activities in connection with providing or seeking 
approval to provide vocational rehabilitation to eligible persons under 
Chapter 31 of Title 38 U.S.C., or education or training to eligible 
persons under Chapters 34, 35, or 36 of Title 38 U.S.C.
    (1) The compliance responsibilities so delegated include:
    (i) Soliciting, receiving, and determining the adequacy of 
assurances of compliance under Sec. 18.4 of this chapter;
    (ii) Mailing, receiving, and evaluating compliance reports under 
Sec. 18.6(b) of this chapter; and
    (iii) All other actions related to securing voluntary compliance or 
related investigations, compliance reviews, complaints, determinations 
of apparent failure to comply and resolutions of matters by informal 
means.
    (2) The Department of Veterans Affairs specifically reserves to 
itself responsibilities for effectuation of compliance under Sec. Sec. 
18.8, 18.9, and 18.10 of this chapter. Not included in the delegation to 
the Secretary, Department of Health and Human Services and the 
Secretary, Department of Education and specifically reserved to the 
Department of Veterans Affairs is the exercise of compliance 
responsibilities with respect to:
    (i) Postsecondary schools which do not offer a program or courses 
leading, or creditable, towards the granting of at least a bachelor's 
degree, or its equivalent;
    (ii) Privately-owned and operated proprietary technical, vocational, 
and other private schools at the elementary or secondary level; and
    (iii) Those institutions of higher learning and elementary and 
secondary schools and school systems which, as of January 3, 1969, have 
already been subjected to formal noncompliance proceedings by the 
Department of Health and Human Services or the Department of Education 
and have had their right to receive Federal financial assistance from 
that agency terminated for noncompliance with Title VI of the Civil 
Rights Act of 1964.

The Department of Veterans Affairs also retains the right to exercise 
delegated compliance responsibilities itself in special cases with the 
agreement of

[[Page 50]]

the appropriate official in the Department of Health and Human Services 
or the Department of Education.
    (c) Any institution of higher learning or a hospital or other health 
facility which is listed by the Department of Health and Human Services 
or the Department of Education as having filed an assurance of 
compliance will be accepted as having met the requirements of the law 
for the purpose of payment under 38 U.S.C. Chapters 31, 34, 35, or 36 
and 38 U.S.C. sections 1741, 8131-8137 and 8155.
    (d) If the Department of Health and Human Services or the Department 
of Education finds that a school, hospital or other health facility 
which has signed an assurance of compliance is apparently in 
noncompliance, action will be initiated by that Department to obtain 
compliance by voluntary means. If voluntary compliance is not achieved, 
the Department of Veterans Affairs will join in subsequent proceedings.
    (e) An institution which is on the Department of Health and Human 
Services or the Department of Education list of noncomplying 
institutions will be considered to be in a status of compliance for 
Department of Veterans Affairs purposes if an assurance of compliance is 
filed with the Department of Veterans Affairs and actual compliance is 
confirmed. Certificates of eligibility may be issued and enrollments 
approved and other appropriate payments made until such time as the 
Department of Veterans Affairs has made an independent determination 
that the institution is not in compliance.

[35 FR 10759, July 2, 1970, as amended at 51 FR 10385, Mar. 26, 1986]



Sec. 18a.2  Delegation to the Under Secretary for Benefits.

    The Under Secretary for Benefits is delegated responsibility for 
obtaining evidence of voluntary compliance for vocational 
rehabilitation, education, and special restorative training to implement 
Title VI, Civil Rights Act of 1964. Authority is delegated to the Under 
Secretary for Benefits and designee to take any necessary action as to 
programs of vocational rehabilitation, education, or special restorative 
training under 38 U.S.C. Chapters 31, 34, 35, and 36 for the purpose of 
securing evidence of voluntary compliance directly or through the 
agencies to whom the Secretary of Veterans Affairs has delegated 
responsibility for various schools or training establishments to 
implement part 18 of this chapter. The Under Secretary for Benefits also 
is delegated responsibility for obtaining evidence of voluntary 
compliance from recognized national organizations whose representatives 
are afforded space and office facilities in field facilities under 
jurisdiction of the Under Secretary for Benefits.

[35 FR 10759, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986; 54 
FR 34984, Aug. 23, 1989]



Sec. 18a.3  Delegation to the Chief Medical Director.

    The Chief Medical Director is delegated responsibility for obtaining 
evidence of voluntary compliance implementing the provisions of Title 
VI, Civil Rights Act of 1964, in connection with payments to State 
homes, with State home facilities for furnishing nursing home care, and 
from recognized national organizations whose representatives are 
afforded space and office facilities in field facilities under 
jurisdiction of the Chief Medical Director.

[35 FR 10759, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18a.4  Duties of the Director, Contract Compliance Service.

    Upon referral by the Chief Medical Director or the Under Secretary 
for Benefits, the Director, Contract Compliance Service will:
    (a) Investigate and process all complaints arising under Title VI of 
the Civil Rights Act of 1964;
    (b) Conduct periodic audits, reviews and evaluations;
    (c) Attempt to secure voluntary compliance by conciliatory or other 
informal means whenever investigation of a complaint, compliance review, 
failure to furnish assurance of compliance, or other source indicates 
noncompliance with Title VI; and

report to the Chief Medical Director or the Under Secretary for 
Benefits, whichever is appropriate, the results of

[[Page 51]]

investigations, audits, reviews and evaluations or the results of 
attempts to secure voluntary compliance.

[35 FR 10759, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18a.5  Delegation to the General Counsel.

    The General Counsel is delegated the responsibility, upon receipt of 
information from the Under Secretary for Benefits, the Chief Medical 
Director, or the designee of either of them, that compliance cannot be 
secured by voluntary means, of forwarding to the recipient or other 
person the notice required by Sec. 18.9(a) of this chapter, and also is 
delegated the responsibility of representing the agency in all 
proceedings resulting from such notice.

[35 FR 10759, July 2, 1970]



PART 18b_PRACTICE AND PROCEDURE UNDER TITLE VI OF THE CIVIL RIGHTS ACT 
OF 1964 AND PART 18 OF THIS CHAPTER--Table of Contents




                              General Rules

Sec.
18b.1 Scope of rules.
18b.2 Reviewing authority.
18b.9 Definitions.
18b.10 Records to be public.
18b.11 Use of number.
18b.12 Suspension of rules.

                         Appearance and Practice

18b.13 Appearance.
18b.14 Authority for representation.
18b.15 Exclusion from hearing for misconduct.

                                 Parties

18b.16 Parties.
18b.17 Amici curiae.
18b.18 Complainants not parties.

                                Documents

18b.20 Form of documents to be filed.
18b.21 Signature of documents.
18b.22 Filing and service.
18b.23 Service; how made.
18b.24 Date of service.
18b.25 Certificate of service.

                                  Time

18b.26 Computation.
18b.27 Extension of time or postponement.
18b.28 Reduction of time to file documents.

                       Proceedings Before Hearing

18b.30 Notice of hearing or opportunity for hearing.
18b.31 Answer to notice.
18b.32 Amendment of notice or answer.
18b.33 Request for hearing.
18b.34 Consolidation.
18b.35 Motions.
18b.36 Responses to motions and petitions.
18b.37 Disposition of motions and petitions.

            Responsibilities and Duties of Presiding Officer

18b.40 Who presides.
18b.41 Designation of an administrative law judge.
18b.42 Authority of presiding officer.

                           Hearing Procedures

18b.50 Statements of position and trial briefs.
18b.51 Evidentiary purpose.
18b.52 Testimony.
18b.53 Exhibits.
18b.54 Affidavits.
18b.55 Depositions.
18b.56 Admissions as to facts and documents.
18b.57 Evidence.
18b.58 Cross-examination.
18b.59 Unsponsored written material.
18b.60 Objections.
18b.61 Exceptions to rulings of presiding officer unnecessary.
18b.62 Official notice.
18b.63 Public document items.
18b.64 Offer of proof.
18b.65 Appeals from ruling of presiding officer.

                               The Record

18b.66 Official transcript.
18b.67 Record for decision.

                    Posthearing Procedures; Decisions

18b.70 Posthearing briefs; proposed findings and conclusions.
18b.71 Decisions following hearing.
18b.72 Exceptions to initial or recommended decisions.
18b.73 Final decisions.
18b.74 Oral argument to the reviewing authority.
18b.75 Review by the Secretary.
18b.76 Service on amici curiae.

                     Posthearing Department Actions

18b.77 Final Department action.

                     Judicial Standards of Practice

18b.90 Conduct.
18b.91 Improper conduct.
18b.92 Ex parte communications.
18b.93 Expeditious treatment.
18b.94 Matters not prohibited.

[[Page 52]]

18b.95 Filing of ex parte communications.

    Authority: 5 U.S.C. 301, 38 U.S.C. 501 and 38 CFR 18.9(d) and 
appendix A, part 18.

    Source: 35 FR 10760, July 2, 1970, unless otherwise noted.

                              General Rules



Sec. 18b.1  Scope of rules.

    The rules of procedure in this part supplement Sec. Sec. 18.9 and 
18.10 of this chapter and govern the practice for hearings, decisions, 
and administrative review conducted by the Department of Veterans 
Affairs pursuant to Title VI of the Civil Rights Act of 1964 (section 
602, 78 Stat. 252) and part 18 of this chapter.



Sec. 18b.2  Reviewing authority.

    The term reviewing authority means the Secretary of Veterans 
Affairs, or any person or persons acting pursuant to authority delegated 
by the Secretary to carry out responsibility under Sec. 18.10 of this 
chapter. The term includes the Secretary with respect to action under 
Sec. 18b.75.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.9  Definitions.

    The definitions contained in Sec. 18.13 of this chapter apply to 
this part, unless the context otherwise requires.



Sec. 18b.10  Records to be public.

    All pleadings, correspondence, exhibits, transcripts of testimony, 
exceptions, briefs, decisions, and other documents filed in the docket 
in any proceeding may be inspected and copied in the office of the Civil 
Rights hearing clerk. Inquiries may be made at the Department of 
Veterans Affairs Central Office, 810 Vermont Avenue NW., Washington, DC 
20420.



Sec. 18b.11  Use of number.

    As used in this part, words importing the singular number may extend 
and be applied to several persons or things, and vice versa.

[51 FR 10386, Mar. 26, 1986]



Sec. 18b.12  Suspension of rules.

    Upon notice to all parties, the reviewing authority or the presiding 
officer, with respect to matters pending before them, may modify or 
waive any rule upon determination that no party will be unduly 
prejudiced and the ends of justice will thereby be served.

                         Appearance and Practice



Sec. 18b.13  Appearance.

    A party may appear in person or by counsel and participate fully in 
any proceeding. A State agency or a corporation may appear by any of its 
officers or by any employee it authorizes to appear on its behalf. 
Counsel must be members in good standing of the bar of a State, 
territory, or possession of the United States or of the District of 
Columbia or the Commonwealth of Puerto Rico.



Sec. 18b.14  Authority for representation.

    Any individual acting in any proceeding may be required to show 
authority to act in such capacity.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.15  Exclusion from hearing for misconduct.

    Disrespectful, disorderly, or contumacious language or contemptuous 
conduct, refusal to comply with directions, or continued use of dilatory 
tactics by any person at any hearing before a presiding officer shall 
constitute grounds for immediate exclusion of such person from the 
hearing by the presiding officer.

                                 Parties



Sec. 18b.16  Parties.

    The term party shall include an applicant or recipient or other 
person to whom a notice of hearing or opportunity for hearing has been 
mailed naming that person as respondent. The Department shall also be 
deemed a party to all proceedings and shall be represented by the 
General Counsel.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986; 54 
FR 34984, Aug. 23, 1989]

[[Page 53]]



Sec. 18b.17  Amici curiae.

    (a) Any interested person or organization may file a petition to 
participate in a proceeding as an amicus curiae. Such petition shall be 
filed prior to the prehearing conference, or if none is held, before the 
commencement of the hearing, unless the petitioner shows good cause for 
filing the petition later. The presiding officer may grant the petition 
if the officer finds that the petitioner has a legitimate interest in 
the proceedings, that such participation will not unduly delay the 
outcome, and may contribute materially to the proper disposition 
thereof. An amicus curiae is not a party and may not introduce evidence 
at a hearing.
    (b) An amicus curiae may submit a statement of position to the 
presiding officer prior to the beginning of a hearing, and shall serve a 
copy on each party. The amicus curiae may submit a brief on each 
occasion a decision is to be made or a prior decision is subject to 
review. The brief shall be filed and served on each party within the 
time limits applicable to the party whose position the amicus curiae 
deems to support; or if the amicus curiae does not deem to support the 
position of any party, within the longest time limit applicable to any 
party at that particular stage of the proceedings.
    (c) When all parties have completed their initial examination of a 
witness, any amicus curiae may request the presiding officer to propound 
specific questions to the witness. The presiding officer, in the 
officer's discretion, may grant any such request if the officer believes 
the proposed additional testimony may assist materially in elucidating 
factual matters at issue between the parties and will not expand the 
issues.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.18  Complainants not parties.

    A person submitting a complaint pursuant to Sec. 18.7(b) of this 
chapter is not a party to the proceedings governed by this part, but may 
petition, after proceedings are initiated, to become an amicus curiae.

                                Documents



Sec. 18b.20  Form of documents to be filed.

    Documents to be filed shall be dated, the original signed in ink, 
shall show the docket description and title of the proceeding, and shall 
show the title, if any, and address of the signatory. Copies need not be 
signed but the name of the person signing the original shall be 
reproduced. Documents shall be legible and shall not be more than 8\1/2\ 
inches wide and 12 inches long.



Sec. 18b.21  Signature of documents.

    The signature of a party, authorized officer, employee, or attorney 
constitutes a certificate that one of them has read the document, that 
to the best of that person's knowledge, information, and belief there is 
good ground to support it, and that it is not interposed for delay. If a 
document is not signed or is signed with intent to defeat the purpose of 
this section, it may be stricken as sham and false and the proceeding 
may proceed as though the document had not been filed. Similar action 
may be taken if scandalous or indecent matter is inserted.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.22  Filing and service.

    All notices by a Department of Veterans Affairs official, and all 
written motions, requests, petitions, memoranda, pleadings, exceptions, 
briefs, decisions, and correspondence to a Department of Veterans 
Affairs official from a party, or vice versa, relating to a proceeding 
after its commencement shall be filed and served on all parties. Parties 
shall supply the original and two copies of documents submitted for 
filing. Filings shall be made with the Civil Rights hearing clerk at the 
address stated in the notice of hearing or notice of opportunity for 
hearing, during regular business hours. Regular business hours are every 
Monday through Friday (legal holidays in the District of Columbia 
excepted) from 8 a.m. to 4:30 p.m., eastern standard or daylight saving 
time, whichever is effective in the District of Columbia at the time. 
Originals only of exhibits and transcripts of testimony need be filed.

[[Page 54]]

For requirements of service on amici curiae, see Sec. 18b.76.



Sec. 18b.23  Service; how made.

    Service shall be made by personal delivery of one copy to each 
person to be served or by mailing by first-class mail, properly 
addressed with postage prepaid. When a party or amicus has appeared by 
attorney or other representative, service upon such attorney or 
representative, will be deemed service upon the party or amicus. 
Documents served by mail preferably should be mailed in sufficient time 
to reach the addressee by the date on which the original is due to be 
filed, and should be airmailed if the addressee is more than 300 miles 
distant.



Sec. 18b.24  Date of service.

    The date of service shall be the day when the matter is deposited in 
the U.S. mail or is delivered in person, except that the date of service 
of the initial notice of hearing or opportunity for hearing shall be the 
date of its delivery, or of its attempted delivery if refused.



Sec. 18b.25  Certificate of service.

    The original of every document filed and required to be served upon 
parties to a proceeding shall be endorsed with a certificate of service 
signed by the party making service or by the party's attorney or 
representative, stating that such service has been made, the date of 
service, and the manner of service, whether by mail or personal 
delivery.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]

                                  Time



Sec. 18b.26  Computation.

    In computing any period of time under the rules in this part or in 
an order issued hereunder, 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 in the District of 
Columbia, in which event it includes the next following business day. 
When the period of time prescribed or allowed is less than 7 days, 
intermediate Saturdays, Sundays, and legal holidays shall be excluded 
from the computation.



Sec. 18b.27  Extension of time or postponement.

    Requests for extension of time should be served on all parties and 
should set forth the reasons for the application. Applications may be 
granted upon a showing of good cause by the applicant. From the 
designation of a presiding officer until the issuance of a decision such 
requests should be addressed to the presiding officer. Answers to such 
requests are permitted, if made promptly.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.28  Reduction of time to file documents.

    For good cause, the reviewing authority or the presiding officer, 
with respect to matters pending before them, may reduce any time limit 
prescribed by the rules in this part, except as provided by law or in 
part 18 of this chapter.

                       Proceedings Before Hearing



Sec. 18b.30  Notice of hearing or opportunity for hearing.

    Proceedings are commenced by mailing a notice of hearing or 
opportunity for hearing to an affected applicant or recipient, pursuant 
to Sec. Sec. 18.9 and 18a.5 of this chapter.



Sec. 18b.31  Answer to notice.

    The respondent, applicant or recipient may file an answer to the 
notice within 20 days after service thereof. Answers shall admit or deny 
specifically and in detail each allegation of the notice, unless the 
respondent party is without knowledge, in which case the answer should 
so state, and the statement will be deemed a denial. Allegations of fact 
in the notice not denied or controverted by answer shall be deemed 
admitted. Matters alleged as affirmative defenses shall be separately 
stated and numbered. Failure of the respondent to file an answer within 
the 20-day period following service of the notice may be deemed an 
admission of

[[Page 55]]

all matters of fact recited in the notice.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.32  Amendment of notice or answer.

    The General Counsel may amend the notice of hearing or opportunity 
for hearing once as a matter of course before an answer thereto is 
served, and each respondent may amend the answer once as a matter of 
course not later than 10 days before the date fixed for hearing but in 
no event later than 20 days from the date of service of the original 
answer. Otherwise a notice or answer may be amended only by leave of the 
presiding officer. A respondent shall file the answer to an amended 
notice within the time remaining for filing the answer to the original 
notice or within 10 days after service of the amended notice, whichever 
period may be the longer, unless the presiding officer otherwise orders.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.33  Request for hearing.

    Within 20 days after service of a notice of opportunity for hearing 
which does not fix a date for hearing the respondent, either in the 
answer or in a separate document, may request a hearing. Failure of the 
respondent to request a hearing shall be deemed a waiver of the right to 
a hearing and to constitute consent to the making of a decision on the 
basis of such information as is available.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.34  Consolidation.

    The reviewing authority may provide for proceedings in the 
Department of Veterans Affairs to be joined or consolidated for hearing 
with proceedings in other Federal departments or agencies, by agreement 
with such other departments or agencies. All parties to any proceeding 
consolidated subsequent to service of the notice of hearing or 
opportunity for hearing shall be served with notice of such 
consolidation.



Sec. 18b.35  Motions.

    Motions and petitions shall state the relief sought, the authority 
relied upon, and the facts alleged. If made before or after the hearing, 
these matters shall be in writing. If made at the hearing, they may be 
stated orally; but the presiding officer may require that they be 
reduced to writing and filed and served on all parties in the same 
manner as a formal motion. Motions, answers, and replies shall be 
addressed to the presiding officer, if the case is pending before the 
officer. A repetitious motion will not be entertained.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.36  Responses to motions and petitions.

    Within 8 days after a written motion or petition is served, or such 
other period as the reviewing authority or the presiding officer may 
fix, any party may file a response thereto. An immediate oral response 
may be made to an oral motion.



Sec. 18b.37  Disposition of motions and petitions.

    The reviewing authority or the presiding officer may not sustain or 
grant a written motion or petition prior to expiration of the time for 
filing responses thereto, but may overrule or deny such motion or 
petition without awaiting response: Provided, however, That prehearing 
conferences, hearings and decisions need not be delayed pending 
disposition of motions or petitions. Oral motions and petitions may be 
ruled on immediately. Motions and petitions submitted to the reviewing 
authority or the presiding officer, respectively, and not disposed of in 
separate rulings or in their respective decisions will be deemed denied. 
Oral arguments shall not be held on written motions or petitions unless 
the presiding officer in the officer's discretion expressly so orders.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]

[[Page 56]]

            Responsibilities and Duties of Presiding Officer



Sec. 18b.40  Who presides.

    An administrative law judge assigned under 5 U.S.C. 3105 or 3344 
(formerly section 11 of the Administrative Procedure Act) shall preside 
over the taking of evidence in any hearing to which these rules or 
procedure apply.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.41  Designation of an administrative law judge.

    The designation of the administrative law judge as presiding officer 
shall be in writing, and shall specify whether the administrative law 
judge is to make an initial decision or to certify the entire record 
including recommended findings and proposed decision to the reviewing 
authority, and may also fix the time and place of hearing. A copy of 
such order shall be served on all parties. After service of an order 
designating an administrative law judge to preside, and until such 
administrative law judge makes a decision, motions and petitions shall 
be submitted to the administrative law judge. In the case of the death, 
illness, disqualification or unavailability of the designated 
administrative law judge, another administrative law judge may be 
designated to take that person's place.

[51 FR 10386, Mar. 26, 1986]



Sec. 18b.42  Authority of presiding officer.

    The presiding officer shall have the duty to conduct a fair hearing, 
to take all necessary action to avoid delay, and to maintain order. The 
presiding officer shall have all powers necessary to these ends, 
including (but not limited to) the power to:
    (a) Arrange and issue notice of the date, time, and place of 
hearings, or, upon due notice to the parties, to change the date, time, 
and place of hearings previously set.
    (b) Hold conferences to settle, simplify, or fix the issues in a 
proceeding, or to consider other matters that may aid in the expeditious 
disposition of the proceeding.
    (c) Require parties and amici curiae to state their position with 
respect to the various issues in the proceeding.
    (d) Administer oaths and affirmations.
    (e) Rule on motions, and other procedural items on matters pending 
before the presiding officer.
    (f) Regulate the course of the hearing and conduct of counsel 
therein.
    (g) Examine witnesses and direct witnesses to testify.
    (h) Receive, rule on, exclude or limit evidence.
    (i) Fix the time for filing motions, petitions, briefs, or other 
items in matters pending before the presiding officer.
    (j) Issue initial or recommended decisions.
    (k) Take any action authorized by the rules in this part, or in 
conformance with the provisions of 5 U.S.C. 551-559 (the Administrative 
Procedure Act).

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]

                           Hearing Procedures



Sec. 18b.50  Statements of position and trial briefs.

    The presiding officer may require parties and amici curiae to file 
written statements of position prior to the beginning of a hearing. The 
presiding officer may also require the parties to submit trial briefs.



Sec. 18b.51  Evidentiary purpose.

    (a) The hearing is directed to receiving factual evidence and expert 
opinion testimony related to the issues in the proceeding. Argument will 
not be received in evidence; rather it should be presented in 
statements, memoranda, or briefs, as determined by the presiding 
officer. Brief opening statements, which shall be limited to statement 
of the party's position and what the party intends to prove, may be made 
at hearings.
    (b) Hearings for the reception of evidence will be held only in 
cases where issues of fact must be resolved in order to determine 
whether the respondent has failed to comply with one or more applicable 
requirements of part 18 of

[[Page 57]]

this chapter. In any case where it appears from the respondent's answer 
to the notice of hearing or opportunity for hearing, from failure timely 
to answer, or from admissions or stipulations in the record, that there 
are no matters of material fact in dispute, the reviewing authority or 
presiding officer may enter an order so finding, vacating the hearing 
date if one has been set, and fixing the time for filing briefs under 
Sec. 18b.70. Thereafter the proceedings shall go to conclusion in 
accordance with Sec. Sec. 18b.70 through 18b.76. The presiding officer 
may allow an appeal from such order in accordance with Sec. 18b.65.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.52  Testimony.

    Testimony shall be given orally under oath or affirmation by 
witnesses at the hearing; but the presiding officer, in the officer's 
discretion, may require or permit that the direct testimony of any 
witness be prepared in writing and served on all parties in advance of 
the hearing. Such testimony may be adopted by the witness at the 
hearing, and filed as part of the record thereof. Unless authorized by 
the presiding officer, witnesses will not be permitted to read prepared 
testimony into the record. Except as provided in Sec. Sec. 18b.54 and 
18b.55, witnesses shall be available at the hearing for cross-
examination.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.53  Exhibits.

    Proposed exhibits shall be exchanged at the prehearing conference, 
or otherwise prior to the hearing if the presiding officer so requires. 
Proposed exhibits not so exchanged may be denied admission as evidence. 
The authenticity of all proposed exhibits exchanged prior to hearing 
will be deemed admitted unless written objection thereto is filed prior 
to the hearing or unless good cause is shown at the hearing for failure 
to file such written objection.



Sec. 18b.54  Affidavits.

    An affidavit is not inadmissible as such. Unless the presiding 
officer fixes other time periods affidavits shall be filed and served on 
the parties not later than 15 days prior to the hearing; and not less 
than 7 days prior to hearing a party may file and serve written 
objection to any affidavit on the ground that it is believed necessary 
to test the truth of assertions therein at hearing. In such event the 
assertions objected to will not be received in evidence unless the 
affiant is made available for cross-examination, or the presiding 
officer determines that cross-examination is not necessary for the full 
and true disclosure of facts referred to in such assertions. 
Notwithstanding any objection, however, affidavits may be considered in 
the case of any respondent who waives a hearing.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.55  Depositions.

    Upon such terms as may be just, for the convenience of the parties 
or of the Department of Veterans Affairs, the presiding officer may 
authorize or direct the testimony of any witness to be taken by 
deposition.



Sec. 18b.56  Admissions as to facts and documents.

    Not later than 15 days prior to the scheduled date of the hearing 
except for good cause shown or prior to such earlier date as the 
presiding officer may order, any party may serve upon an opposing party 
a written request for the admission of the genuineness and authenticity 
of any relevant documents described in and exhibited with the request, 
or for the admission of the truth of any relevant matters of fact stated 
in the request. Each of the matters of which an admission is requested 
shall be deemed admitted, unless within a period designated in the 
request (not less than 10 days after service thereof, or within such 
further time as the presiding officer or the reviewing authority if no 
presiding officer has yet been designated may allow upon motion and 
notice) the party to whom the

[[Page 58]]

request is directed serves upon the requesting party a sworn statement 
either denying specifically the matters of which an admission is 
requested or setting forth in detail the reasons why the party cannot 
truthfully either admit or deny such matters. Copies of requests for 
admission and answers thereto shall be served on all parties. Any 
admission made by a party to such request is only for the purposes of 
the pending proceeding, or any proceeding or action instituted for the 
enforcement of any order entered therein, and shall not constitute an 
admission by the party for any other purpose or be used against the 
party in any other proceeding or action.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.57  Evidence.

    Irrelevant, immaterial, unreliable, and unduly repetitious evidence 
will be excluded.



Sec. 18b.58  Cross-examination.

    A witness may be cross-examined on any matter material to the 
proceeding without regard to the scope of his direct examination.



Sec. 18b.59  Unsponsored written material.

    Letters expressing views or urging action and other unsponsored 
written material regarding matters in issue in a hearing will be placed 
in the correspondence section of the docket of the proceeding. These 
data are not deemed part of the evidence or record in the hearing.



Sec. 18b.60  Objections.

    Objections to evidence shall be timely and briefly state the ground 
relied upon.



Sec. 18b.61  Exceptions to rulings of presiding officer unnecessary.

    Exceptions to rulings of the presiding officer are unnecessary. It 
is sufficient that a party, at the time the ruling of the presiding 
officer is sought, makes known the action which the party desires the 
presiding officer to take, or the party's objection to an action taken, 
and the party's grounds therefor.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.62  Official notice.

    Where official notice is taken or is to be taken of a material fact 
not appearing in the evidence of record, any party, on timely request, 
shall be afforded an opportunity to show the contrary.



Sec. 18b.63  Public document items.

    Whenever there is offered (in whole or in part) a public document, 
such as an official report, decision, opinion, or published scientific 
or economic statistical data issued by any of the executive departments 
(or their subdivisions), legislative agencies or committees, or 
administrative agencies of the Federal Government (including Government-
owned corporations), or a similar document issued by a State or its 
agencies, and such document (or part thereof) has been shown by the 
offeror to be reasonably available to the public, such document need not 
be produced or marked for identification, but may be offered for 
official notice, as a public document item by specifying the document or 
relevant part thereof.



Sec. 18b.64  Offer of proof.

    An offer of proof made in connection with an objection taken to any 
ruling of the presiding officer rejecting or excluding proffered oral 
testimony shall consist of a statement of the substance of the evidence 
which counsel contends would be adduced by such testimony; and, if the 
excluded evidence consists of evidence in documentary or written form or 
of reference to documents or records, a copy of such evidence shall be 
marked for identification and shall accompany the record as the offer of 
proof.



Sec. 18b.65  Appeals from ruling of presiding officer.

    Rulings of the presiding officer may not be appealed to the 
reviewing authority prior to consideration of the entire proceeding 
except with the consent of the presiding officer and where the reviewing 
authority certifies on

[[Page 59]]

the record or in writing that the allowance of an interlocutory appeal 
is clearly necessary to prevent exceptional delay, expense, or prejudice 
to any party, or substantial detriment to the public interest. If an 
appeal is allowed, any party may file a brief with the reviewing 
authority within such period as the presiding officer directs. No oral 
argument will be heard unless the reviewing authority directs otherwise. 
At any time prior to submission of the proceeding to the reviewing 
authority for decision, the reviewing authority may direct the presiding 
officer to certify any question or the entire record to the reviewing 
authority for decision. Where the entire record is so certified, the 
presiding officer shall recommend a decision.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]

                               The Record



Sec. 18b.66  Official transcript.

    The Department of Veterans Affairs will designate the official 
reporter for all hearings. The official transcripts of testimony taken, 
together with any exhibits, briefs, or memoranda of law filed therewith 
shall be filed with the Department of Veterans Affairs. Transcripts of 
testimony in hearings may be obtained from the official reporter by the 
parties and the public at rates not to exceed the maximum rates fixed by 
the contract between the Department of Veterans Affairs and the 
reporter. Upon notice to all parties, the presiding officer may 
authorize corrections to the transcript which involve matters of 
substance.



Sec. 18b.67  Record for decision.

    The transcript of testimony, exhibits, and all papers and requests 
filed in the proceedings, except the correspondence section of the 
docket, including rulings and any recommended or initial decision shall 
constitute the exclusive record for decision.

                    Posthearing Procedures; Decisions



Sec. 18b.70  Posthearing briefs; proposed findings and conclusions.

    (a) The presiding officer shall fix the time for filing posthearing 
briefs, which may contain proposed findings of fact and conclusions of 
law, and, if permitted, reply briefs.
    (b) Briefs should include a summary of the evidence relied upon 
together with references to exhibit numbers and pages of the transcript, 
with citations of authorities relied upon.



Sec. 18b.71  Decisions following hearing.

    When the time for submission of posthearing briefs has expired, the 
presiding officer shall certify the entire record, including recommended 
findings and proposed decision, to the reviewing authority; or if so 
authorized shall make an initial decision. A copy of the recommended 
findings and proposed decision, or of the initial decision, shall be 
served upon all parties, and amici, if any.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986]



Sec. 18b.72  Exceptions to initial or recommended decisions.

    Within 20 days after the mailing of an initial or recommended 
decision, any party may file exceptions to the decision, stating reasons 
therefor, with the reviewing authority. Any other party may file a 
response thereto within 30 days after the mailing of the decision. Upon 
the filing of such exceptions, the reviewing authority shall review the 
decision and issue its own decision thereon.



Sec. 18b.73  Final decisions.

    (a) Where the hearing is conducted by a hearing examiner who makes 
an initial decision, if no exceptions thereto are filed within the 20-
day period specified in Sec. 18b.72, such decision shall become the 
final decision of the Department of Veterans Affairs, and shall 
constitute ``final agency action'' within the meaning of 5 U.S.C. 704 
(formerly section 10(c) of the Administrative Procedure Act), subject to 
the provisions of Sec. 18b.75.
    (b) Where the hearing is conducted by an administrative law judge 
who makes a recommended decision or upon the filing of exceptions to an 
administrative law judge's initial decision, the reviewing authority 
shall review the recommended or initial decision and shall issue a 
decision thereon, which

[[Page 60]]

shall become the final decision of VA, and shall constitute ``final 
agency action'' within the meaning of 5 U.S.C. 704 (formerly section 
10(c) of the Administrative Procedures Act), subject to the provisions 
of Sec. 18b.75.
    (c) All final decisions shall be promptly served on all parties, and 
amici, if any.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986; 54 
FR 34984, Aug. 23, 1989]



Sec. 18b.74  Oral argument to the reviewing authority.

    (a) If any party desires to argue a case orally on exceptions or 
replies to exceptions to an initial or recommended decision, the party 
shall make such request in writing. The reviewing authority may grant or 
deny such requests in his or her discretion. If granted, the reviewing 
authority will serve notice of oral argument on all parties. The notice 
will set forth the order of presentation, the amount of time allotted, 
and the time and place for argument. The names of persons who will argue 
should be filed with the agency hearing clerk not later than 7 days 
before the date set for oral argument.
    (b) The purpose of oral argument is to emphasize and clarify the 
written argument in the briefs. Reading at length from the brief or 
other texts is not favored. Participants should confine their arguments 
to points of controlling importance and to points upon which exceptions 
have been filed. Consolidations of appearances at oral argument by 
parties taking the same side will permit the parties' interests to be 
presented more effectively in the time allotted.
    (c) Pamphlets, charts, and other written material may be presented 
at oral argument only if such material is limited to facts already in 
the record and is served on all parties and filed with the Department 
hearing clerk at least 7 days before the argument.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10386, Mar. 26, 1986; 54 
FR 34984, Aug. 23, 1989]



Sec. 18b.75  Review by the Secretary.

    Within 20 days after an initial decision becomes a final decision 
pursuant to Sec. 18b.73(a), or within 20 days of the mailing of a final 
decision referred to in Sec. 18b.73(b), as the case may be, a party may 
request the Secretary to review the final decision. The Secretary may 
grant or deny such request, in whole or in part, or serve notice of 
intent to review the decision in whole or in part upon motion. If the 
Secretary grants the requested review, or serves notice of intent to 
review upon motion, each party to the decision shall have 20 days 
following notice of the Secretary's proposed action within which to file 
exceptions to the decision and supporting briefs and memoranda, or 
briefs and memoranda in support of the decision. Failure of a party to 
request review under this section shall not be deemed a failure to 
exhaust administrative remedies for the purpose of obtaining judicial 
review.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10387, Mar. 26, 1986]



Sec. 18b.76  Service on amici curiae.

    All briefs, exceptions, memoranda, requests, and decisions referred 
to in Sec. Sec. 18b.70 through 18b.76 shall be served upon amici curiae 
at the same times and in the same manner required for service on 
parties. Any written statements of position and trial briefs required of 
parties under Sec. 18b.50 shall be served on amici.

                     Posthearing Department Actions



Sec. 18b.77  Final Department action.

    (a) The final decision of the administrative law judge or reviewing 
authority that a school or training establishment is not in compliance 
will be referred by the reviewing authority to the Secretary for 
approval as required by Sec. 18.10(e) of this chapter. The finding will 
be accompanied by letters from the Secretary to the House Veterans' 
Affairs Committee and the Senate Veterans Affairs Committee containing a 
full report on the circumstances as required by Sec. 18.8(c) of this 
chapter, the reasons for the proposed action and a statement that the 
proposed action will become the final Department action 30 days after 
the date of the letter.

[[Page 61]]

    (b) A copy of the letters to the congressional committees will be 
sent to all parties to the proceedings.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10387, Mar. 26, 1986; 54 
FR 34984, Aug. 23, 1989]

                     Judicial Standards of Practice



Sec. 18b.90  Conduct.

    Parties and their representatives are expected to conduct themselves 
with honor and dignity and observe judicial standards of practice and 
ethics in all proceedings. They should not indulge in offensive 
personalities, unseemly wrangling, or intemperate accusations or 
characterizations. A representative of any party whether or not a lawyer 
shall observe the traditional responsibilities of lawyers as officers of 
the court and use best efforts to restrain the principal represented 
from improprieties in connection with a proceeding.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10387, Mar. 26, 1986]



Sec. 18b.91  Improper conduct.

    With respect to any proceeding it is improper for any interested 
person to attempt to sway the judgment of the reviewing authority by 
undertaking to bring pressure or influence to bear upon the reviewing 
authority or any officer having a responsibility for a decision in the 
proceeding, or decisional staff. It is improper that such interested 
persons or any members of the Department of Veterans Affairs's staff or 
the presiding officer give statements to communications media, by paid 
advertisement or otherwise, designed to influence the judgment of any 
officer having a responsibility for a decision in the proceeding, or 
decisional staff. It is improper for any person to solicit 
communications to any such officer, or decisional staff, other than 
proper communications by parties or amici curiae.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10387, Mar. 26, 1986]



Sec. 18b.92  Ex parte communications.

    Only persons employed by or assigned to work with the reviewing 
authority who perform no investigative or prosecuting function in 
connection with a proceeding shall communicate ex parte with the 
reviewing authority or the presiding officer, or any employee or person 
involved in the decisional process in such proceedings with respect to 
the merits of that or a factually related proceeding. The reviewing 
authority, the presiding officer, or any employee or person involved in 
the decisional process of a proceeding shall communicate ex parte with 
respect to the merits of that or a factually related proceeding only 
with persons employed by or assigned to work with them and who perform 
no investigative or prosecuting function in connection with the 
proceeding.



Sec. 18b.93  Expeditious treatment.

    Requests for expeditious treatment of matters pending before the 
reviewing authority or the presiding officer are deemed communications 
on the merits, and are improper except when forwarded from parties to a 
proceeding and served upon all other parties thereto. Such 
communications should be in the form of a motion.



Sec. 18b.94  Matters not prohibited.

    A request for information which merely inquires about the status of 
a proceeding without discussing issues or expressing points of view is 
not deemed an ex parte communication. Such requests should be directed 
to the civil rights hearing clerk. Communications with respect to minor 
procedural matters or inquiries or emergency requests for extensions of 
time are not deemed ex parte communications prohibited by Sec. 18b.92. 
Where feasible, however, such communications should be by letter with 
copies to all parties. Ex parte communications between a respondent and 
the responsible agency official or the Secretary with respect to 
securing such respondent's voluntary compliance with any requirement of 
part 18 of this chapter are not prohibited.



Sec. 18b.95  Filing of ex parte communications.

    A prohibited communication in writing received by the Secretary, the 
reviewing authority, or by the presiding officer, shall be made public 
by placing it in the correspondence file of the

[[Page 62]]

docket in the case and will not be considered as part of the record for 
decision. If the prohibited communication is received orally, a 
memorandum setting forth its substance shall be made and filed in the 
correspondence section of the docket in the case. A person referred to 
in such memorandum may file a comment for inclusion in the docket if the 
memorandum is considered to be incorrect.

[35 FR 10760, July 2, 1970, as amended at 51 FR 10387, Mar. 26, 1986]



PART 19_BOARD OF VETERANS' APPEALS: APPEALS REGULATIONS--Table of Contents




          Subpart A_Operation of the Board of Veterans' Appeals

Sec.
19.1 Establishment of the Board.
19.2 Composition of the Board; Titles.
19.3 Assignment of proceedings.
19.4 Principal functions of the Board.
19.5 Criteria governing disposition of appeals.
19.6 [Reserved]
19.7 The decision.
19.8 Content of Board decision, remand, or order in simultaneously 
          contested claims.
19.9 Remand for further development.
19.10 [Reserved]
19.11 Reconsideration panel.
19.12 Disqualification of Members.
19.13 Delegation of authority to Chairman and Vice Chairman, Board of 
          Veterans' Appeals.
19.14 Delegation of authority--Appeals regulations.

     Subpart B_Appeals Processing by Agency of Original Jurisdiction

19.25 Notification by agency of original jurisdiction of right to 
          appeal.
19.26 Action by agency of original jurisdiction on Notice of 
          Disagreement.
19.27 Adequacy of Notice of Disagreement questioned within the agency of 
          original jurisdiction.
19.28 Determination that a Notice of Disagreement is inadequate 
          protested by claimant or representative.
19.29 Statement of the Case.
19.30 Furnishing the Statement of the Case and instructions for filing a 
          Substantive Appeal.
19.31 Supplemental statement of the case.
19.32 Closing of appeal for failure to respond to Statement of the Case.
19.33 Timely filing of Notice of Disagreement or Substantive Appeal 
          questioned within the agency of original jurisdiction.
19.34 Determination that Notice of Disagreement or Substantive Appeal 
          was not timely filed protested by claimant or representative.
19.35 Certification of appeals.
19.36 Notification of certification of appeal and transfer of appellate 
          record.
19.37 Consideration of additional evidence received by the agency of 
          original jurisdiction after an appeal has been initiated.
19.38 Action by agency of original jurisdiction when remand received.
19.39-19.49 [Reserved]

                    Subpart C_Administrative Appeals

19.50 Nature and form of administrative appeal.
19.51 Officials authorized to file administrative appeals and time 
          limits for filing.
19.52 Notification to claimant of filing of administrative appeal.
19.53 Restriction as to change in payments pending determination of 
          administrative appeals.
19.54-19.74 [Reserved]

 Subpart D_Hearings Before the Board of Veterans' Appeals at Department 
                  of Veterans Affairs Field Facilities

19.75 Hearing docket.
19.76 Notice of time and place of hearing before the Board of Veterans' 
          Appeals at Department of Veterans Affairs field facilities.
19.77-19.99 [Reserved]

                Subpart E_Simultaneously Contested Claims

19.100 Notification of right to appeal in simultaneously contested 
          claims.
19.101 Notice to contesting parties on receipt of Notice of Disagreement 
          in simultaneously contested claims.
19.102 Notice of appeal to other contesting parties in simultaneously 
          contested claims.

Appendix A to Part 19--Cross-References

    Authority: 38 U.S.C. 501(a), unless otherwise noted.

    Source: 57 FR 4104, Feb. 3, 1992, unless otherwise noted.

[[Page 63]]



          Subpart A_Operation of the Board of Veterans' Appeals



Sec. 19.1  Establishment of the Board.

    The Board of Veterans' Appeals is established by authority of, and 
functions pursuant to, title 38, United States Code, chapter 71.



Sec. 19.2  Composition of the Board; Titles.

    (a) The Board consists of a Chairman, Vice Chairman, Deputy Vice 
Chairmen, Members and professional, administrative, clerical and 
stenographic personnel. Deputy Vice Chairmen are Members of the Board 
who are appointed to that office by the Secretary upon the 
recommendation of the Chairman.
    (b) A member of the Board (other than the Chairman) may also be 
known as a Veterans Law Judge. An individual designated as an acting 
member pursuant to 38 U.S.C. 7101(c)(1) may also be known as an acting 
Veterans Law Judge.

(Authority: 38 U.S.C. 501(a), 512, 7101(a))

[68 FR 6625, Feb. 10, 2003]



Sec. 19.3  Assignment of proceedings.

    (a) Assignment. The Chairman may assign a proceeding instituted 
before the Board, including any motion, to an individual Member or to a 
panel of three or more Members for adjudication or other appropriate 
action. The Chairman may participate in a proceeding assigned to a panel 
of Members.


(Authority: 38 U.S.C. 7102)

    (b) Inability to serve. If a Member is unable to participate in the 
disposition of a proceeding or motion to which the Member has been 
assigned, the Chairman may assign the proceeding or motion to another 
Member or substitute another Member (in the case of a proceeding or 
motion assigned to a panel).


(Authority: 38 U.S.C. 7101(a), 7102)

[61 FR 20448, May 7, 1996]



Sec. 19.4  Principal functions of the Board.

    The principal functions of the Board are to make determinations of 
appellate jurisdiction, consider all applications on appeal properly 
before it, conduct hearings on appeal, evaluate the evidence of record, 
and enter decisions in writing on the questions presented on appeal.

(Authority: 38 U.S.C. 7102, 7104, 7107)



Sec. 19.5  Criteria governing disposition of appeals.

    In the consideration of appeals, the Board is bound by applicable 
statutes, regulations of the Department of Veterans Affairs, and 
precedent opinions of the General Counsel of the Department of Veterans 
Affairs. The Board is not bound by Department manuals, circulars, or 
similar administrative issues.

(Authority: 38 U.S.C. 501(a), 7104(c))



Sec. 19.6  [Reserved]



Sec. 19.7  The decision.

    (a) Decisions based on entire record. The appellant will not be 
presumed to be in agreement with any statement of fact contained in a 
Statement of the Case to which no exception is taken. Decisions of the 
Board are based on a review of the entire record.


(Authority: 38 U.S.C. 7104(a), 7105(d)(4))

    (b) Content. The decision of the Board will be in writing and will 
set forth specifically the issue or issues under appellate 
consideration. Except with respect to issues remanded to the agency of 
original jurisdiction for further development of the case and appeals 
which are dismissed because the issue has been resolved by 
administrative action or because an appellant seeking nonmonetary 
benefits has died while the appeal was pending, the decision will also 
include separately stated findings of fact and conclusions of law on all 
material issues of fact and law presented on the record, the reasons or 
bases for those findings and conclusions, and an order granting or 
denying the benefit or benefits sought on appeal or dismissing the 
appeal.


(Authority: 38 U.S.C. 7104(d))


[[Page 64]]


    (c) A decision by a panel of Members will be by a majority vote of 
the panel Members.

[57 FR 4104, Feb. 3, 1992, as amended at 61 FR 20449, May 7, 1996]



Sec. 19.8  Content of Board decision, remand, or order in simultaneously 
contested claims.

    The content of the Board's decision, remand, or order in appeals 
involving a simultaneously contested claim will be limited to 
information that directly affects the issues involved in the contested 
claim. Appellate issues that do not involve all of the contesting 
parties will be addressed in one or more separate written decisions, 
remands, or orders that will be furnished only to the appellants 
concerned and their representatives, if any.

(Authority: 5 U.S.C. 552a(b), 38 U.S.C. 5701(a))

[61 FR 68666, Dec. 30, 1996]



Sec. 19.9  Remand for further development.

    (a) General. If further evidence, clarification of the evidence, 
correction of a procedural defect, or any other action is essential for 
a proper appellate decision, a Veterans Law Judge or panel of Veterans 
Law Judges shall remand the case to the agency of original jurisdiction, 
specifying the action to be undertaken.
    (b) Exceptions. A remand to the agency of original jurisdiction is 
not necessary for the purposes of:
    (1) Clarifying a procedural matter before the Board, including the 
appellant's choice of representative before the Board, the issues on 
appeal, or requests for a hearing before the Board;
    (2) Consideration of an appeal, in accordance with Sec. 20.903(b) 
of this chapter, with respect to law not already considered by the 
agency of original jurisdiction. This includes, but is not limited to, 
statutes, regulations, and court decisions; or
    (3) Reviewing additional evidence received by the Board, if, 
pursuant to Sec. 20.1304(c) of this chapter, the appellant or the 
appellant's representative waives the right to initial consideration by 
the agency of original jurisdiction, or if the Board determines that the 
benefit or benefits to which the evidence relates may be fully allowed 
on appeal.
    (c) Scope. This section does not apply to:
    (1) The Board's request for an opinion under Rule 901 (Sec. 20.901 
of this chapter);
    (2) The Board's supplementation of the record with a recognized 
medical treatise; and
    (3) Matters over which the Board has original jurisdiction described 
in Rules 609 and 610 (Sec. Sec. 20.609 and 20.610 of this chapter).

(Authority: 38 U.S.C. 7102, 7103(c), 7104(a)).

[67 FR 3104, Jan. 23, 2002, as amended at 69 FR 53808, Sept. 3, 2004]



Sec. 19.10  [Reserved]



Sec. 19.11  Reconsideration panel.

    (a) Assignment of Members. When a motion for reconsideration is 
allowed, the Chairman will assign a panel of three or more Members of 
the Board, which may include the Chairman, to conduct the 
reconsideration.
    (b) Number of Members constituting a reconsideration panel. In the 
case of a matter originally heard by a single Member of the Board, the 
case shall be referred to a panel of three Members of the Board. In the 
case of a matter originally heard by a panel of Members of the Board, 
the case shall be referred to an enlarged panel, consisting of three or 
more Members than the original panel. In order to obtain a majority 
opinion, the number of Members assigned to a reconsideration panel may 
be increased in successive increments of three.
    (c) Members included in the reconsideration panel. The 
reconsideration panel may not include any Member who participated in the 
decision that is being reconsidered. Additional Members will be assigned 
in accordance with paragraph (b) of this section.

(Authority: 38 U.S.C. 7102, 7103)

[61 FR 20449, May 7, 1996]



Sec. 19.12  Disqualification of Members.

    (a) General. A Member of the Board will disqualify himself or 
herself in a hearing or decision on an appeal if that appeal involves a 
determination in which he or she participated or had supervisory 
responsibility in the agency

[[Page 65]]

of original jurisdiction prior to his or her appointment as a Member of 
the Board, or where there are other circumstances which might give the 
impression of bias either for or against the appellant.


(Authority: 38 U.S.C. 7102, 7104)

    (b) Appeal on same issue subsequent to decision on administrative 
appeal. Any Member of the Board who made the decision on an 
administrative appeal will disqualify himself or herself from acting on 
a subsequent appeal by the claimant on the same issue.


(Authority: 38 U.S.C. 7102, 7104, 7106)

    (c) Disqualification of Members by the Chairman. The Chairman of the 
Board, on his or her own motion, may disqualify a Member from acting in 
an appeal on the grounds set forth in paragraphs (a) and (b) of this 
section and in those cases where a Member is unable or unwilling to act.

(Authority: 38 U.S.C. 7102, 7104, 7106)

[57 FR 4104, Feb. 3, 1992, as amended at 61 FR 20449, May 7, 1996]



Sec. 19.13  Delegation of authority to Chairman and Vice Chairman, Board 
of Veterans' Appeals.

    The Chairman and/or Vice Chairman have authority delegated by the 
Secretary of Veterans Affairs to:
    (a) Approve the assumption of appellate jurisdiction of an 
adjudicative determination which has not become final in order to grant 
a benefit, and
    (b) Order VA Central Office investigations of matters before the 
Board.

(Authority: 38 U.S.C. 303, 512(a))



Sec. 19.14  Delegation of authority--Appeals regulations.

    (a) The authority exercised by the Chairman of the Board of 
Veterans' Appeals described in Sec. Sec. 19.3(b) and 19.12(c) of this 
part may also be exercised by the Vice Chairman of the Board.
    (b) The authority exercised by the Chairman of the Board of 
Veterans' Appeals described in Sec. 19.11 of this part may also be 
exercised by the Vice Chairman of the Board and by Deputy Vice Chairmen 
of the Board.

(Authority: 38 U.S.C. 512(a), 7102, 7104)

[57 FR 4104, Feb. 3, 1992, as amended at 70 FR 8930, Feb. 24, 2005]



     Subpart B_Appeals Processing by Agency of Original Jurisdiction



Sec. 19.25  Notification by agency of original jurisdiction of right 
to appeal.

    The claimant and his or her representative, if any, will be informed 
of appellate rights provided by 38 U.S.C. chapters 71 and 72, including 
the right to a personal hearing and the right to representation. The 
agency of original jurisdiction will provide this information in each 
notification of a determination of entitlement or nonentitlement to 
Department of Veterans Affairs benefits.

(Authority: 38 U.S.C. 7105(a))



Sec. 19.26  Action by agency of original jurisdiction on Notice of 
Disagreement.

    When a Notice of Disagreement is timely filed, the agency of 
original jurisdiction must reexamine the claim and determine if 
additional review or development is warranted. When a Notice of 
Disagreement is received following a multiple-issue determination and it 
is not clear which issue, or issues, the claimant desires to appeal, 
clarification sufficient to identify the issue, or issues, being 
appealed should be requested from the claimant or his or her 
representative. If no preliminary action is required, or when it is 
completed, the agency of original jurisdiction must prepare a Statement 
of the Case pursuant to Sec. 19.29 of this part, unless the matter is 
resolved by granting the benefits sought on appeal or the Notice of 
Disagreement is withdrawn by the appellant or his or her representative.

(Authority: 38 U.S.C. 7105(d)(1))



Sec. 19.27  Adequacy of Notice of Disagreement questioned within the 
agency of original jurisdiction.

    If, within the agency of original jurisdiction, there is a question 
as to the adequacy of a Notice of Disagreement,

[[Page 66]]

the procedures for an administrative appeal must be followed.

(Authority: 38 U.S.C. 7105, 7106)



Sec. 19.28  Determination that a Notice of Disagreement is inadequate 
protested by claimant or representative.

    Whether a Notice of Disagreement is adequate is an appealable issue. 
If the claimant or his or her representative protests an adverse 
determination made by the agency of original jurisdiction with respect 
to the adequacy of a Notice of Disagreement, the claimant will be 
furnished a Statement of the Case.

(Authority: 38 U.S.C. 7105)



Sec. 19.29  Statement of the Case.

    The Statement of the Case must be complete enough to allow the 
appellant to present written and/or oral arguments before the Board of 
Veterans' Appeals. It must contain:
    (a) A summary of the evidence in the case relating to the issue or 
issues with which the appellant or representative has expressed 
disagreement;
    (b) A summary of the applicable laws and regulations, with 
appropriate citations, and a discussion of how such laws and regulations 
affect the determination; and
    (c) The determination of the agency of original jurisdiction on each 
issue and the reasons for each such determination with respect to which 
disagreement has been expressed.

(Authority: 38 U.S.C. 7105(d)(1))



Sec. 19.30  Furnishing the Statement of the Case and instructions for 
filing a Substantive Appeal.

    (a) To whom the Statement of the Case is furnished. The Statement of 
the Case will be forwarded to the appellant at the latest address of 
record and a separate copy provided to his or her representative (if 
any).
    (b) Information furnished with the Statement of the Case. With the 
Statement of the Case, the appellant and the representative will be 
furnished information on the right to file, and time limit for filing, a 
Substantive Appeal; information on hearing and representation rights; 
and a VA Form 9, ``Appeal to Board of Veterans' Appeals.''

(Authority: 38 U.S.C. 7105)

[57 FR 4104, Feb. 3, 1992, as amended at 61 FR 20449, May 7, 1996]



Sec. 19.31  Supplemental statement of the case.

    (a) Purpose and limitations. A ``Supplemental Statement of the 
Case,'' so identified, is a document prepared by the agency of original 
jurisdiction to inform the appellant of any material changes in, or 
additions to, the information included in the Statement of the Case or 
any prior Supplemental Statement of the Case. In no case will a 
Supplemental Statement of the Case be used to announce decisions by the 
agency of original jurisdiction on issues not previously addressed in 
the Statement of the Case, or to respond to a notice of disagreement on 
newly appealed issues that were not addressed in the Statement of the 
Case. The agency of original jurisdiction will respond to notices of 
disagreement on newly appealed issues not addressed in the Statement of 
the Case using the procedures in Sec. Sec. 19.29 and 19.30 of this part 
(relating to statements of the case).
    (b) When furnished. The agency of original jurisdiction will furnish 
the appellant and his or her representative, if any, a Supplemental 
Statement of the Case if:
    (1) The agency of original jurisdiction receives additional 
pertinent evidence after a Statement of the Case or the most recent 
Supplemental Statement of the Case has been issued and before the appeal 
is certified to the Board of Veterans' Appeals and the appellate record 
is transferred to the Board;
    (2) A material defect in the Statement of the Case or a prior 
Supplemental statement of the Case is discovered; or
    (3) For any other reason the Statement of the Case or a prior 
Supplemental Statement of the Case is inadequate.
    (c) Pursuant to remand from the Board. The agency of original 
jurisdiction will issue a Supplemental Statement of the Case if, 
pursuant to a remand by the

[[Page 67]]

Board, it develops the evidence or cures a procedural defect, unless:
    (1) The only purpose of the remand is to assemble records previously 
considered by the agency of original jurisdiction and properly discussed 
in a prior Statement of the Case or Supplemental Statement of the Case; 
or
    (2) The Board specifies in the remand that a Supplemental Statement 
of the Case is not required.

(Authority: 38 U.S.C. 7105(d)).

[67 FR 3104, Jan. 23, 2002]



Sec. 19.32  Closing of appeal for failure to respond to Statement of 
the Case.

    The agency of original jurisdiction may close the appeal without 
notice to an appellant or his or her representative for failure to 
respond to a Statement of the Case within the period allowed. However, 
if a Substantive Appeal is subsequently received within the 1-year 
appeal period (60-day appeal period for simultaneously contested 
claims), the appeal will be considered to be reactivated.

(Authority: 38 U.S.C. 7105(d)(3))



Sec. 19.33  Timely filing of Notice of Disagreement or Substantive 
Appeal questioned within the agency of original jurisdiction.

    If, within the agency of original jurisdiction, there is a question 
as to the timely filing of a Notice of Disagreement or Substantive 
Appeal, the procedures for an administrative appeal must be followed.

(Authority: 38 U.S.C. 7105, 7106)



Sec. 19.34  Determination that Notice of Disagreement or Substantive 
Appeal was not timely filed protested by claimant or representative.

    Whether a Notice of Disagreement or Substantive Appeal has been 
filed on time is an appealable issue. If the claimant or his or her 
representative protests an adverse determination made by the agency of 
original jurisdiction with respect to timely filing of the Notice of 
Disagreement or Substantive Appeal, the claimant will be furnished a 
Statement of the Case.

(Authority: 38 U.S.C. 7105)



Sec. 19.35  Certification of appeals.

    Following receipt of a timely Substantive Appeal, the agency of 
original jurisdiction will certify the case to the Board of Veterans' 
Appeals. Certification is accomplished by the completion of VA Form 8, 
``Certification of Appeal.'' The certification is used for 
administrative purposes and does not serve to either confer or deprive 
the Board of Veterans' Appeals of jurisdiction over an issue.

(Authority: 38 U.S.C. 7105)

[57 FR 4104, Feb. 3, 1992, as amended at 61 FR 20449, May 7, 1996; 66 FR 
53339, Oct. 22, 2001]



Sec. 19.36  Notification of certification of appeal and transfer of 
appellate record.

    When an appeal is certified to the Board of Veterans' Appeals for 
appellate review and the appellate record is transferred to the Board, 
the appellant and his or her representative, if any, will be notified in 
writing of the certification and transfer and of the time limit for 
requesting a change in representation, for requesting a personal 
hearing, and for submitting additional evidence described in Rule of 
Practice 1304 (Sec. 20.1304 of this chapter).

(Authority: 38 U.S.C. 7105)



Sec. 19.37  Consideration of additional evidence received by the agency 
of original jurisdiction after an appeal has been initiated.

    (a) Evidence received prior to transfer of records to Board of 
Veterans' Appeals. Evidence received by the agency of original 
jurisdiction prior to transfer of the records to the Board of Veterans' 
Appeals after an appeal has been initiated (including evidence received 
after certification has been completed) will be referred to the 
appropriate rating or authorization activity for review and disposition. 
If the Statement of the Case and any prior Supplemental Statements of 
the Case were prepared before the receipt of the additional evidence, a 
Supplemental Statement of the Case will be furnished to the appellant 
and his or her representative as provided in Sec. 19.31 of this part, 
unless the additional evidence received duplicates evidence previously 
of record which was discussed in the Statement

[[Page 68]]

of the Case or a prior Supplemental Statement of the Case or the 
additional evidence is not relevant to the issue, or issues, on appeal.
    (b) Evidence received after transfer of records to the Board of 
Veterans' Appeals. Additional evidence received by the agency of 
original jurisdiction after the records have been transferred to the 
Board of Veterans' Appeals for appellate consideration will be forwarded 
to the Board if it has a bearing on the appellate issue or issues. The 
Board will then determine what action is required with respect to the 
additional evidence.

(Authority: 38 U.S.C. 7105(d)(1))



Sec. 19.38  Action by agency of original jurisdiction when remand 
received.

    When a case is remanded by the Board of Veterans' Appeals, the 
agency of original jurisdiction will complete the additional development 
of the evidence or procedural development required. Following completion 
of the development, the case will be reviewed to determine whether the 
additional development, together with the evidence which was previously 
of record, supports the allowance of all benefits sought on appeal. If 
so, the appellant and his or her representative, if any, will be 
promptly informed. If any benefits sought on appeal remain denied 
following this review, the agency of original jurisdiction will issue a 
Supplemental Statement of the Case concerning the additional development 
pertaining to those issues in accordance with the provisions of Sec. 
19.31 of this part. Following the 60-day period allowed for a response 
to the Supplemental Statement of the Case pursuant to Rule of Practice 
302, paragraph (c) (Sec. 20.302(c) of this chapter), the case will be 
returned to the Board for further appellate processing unless the appeal 
is withdrawn or review of the response to the Supplemental Statement of 
the Case results in the allowance of all benefits sought on appeal. 
Remanded cases will not be closed for failure to respond to the 
Supplemental Statement of the Case.

(Authority 38 U.S.C. 7105(d)(1))

[57 FR 4104, Feb. 3, 1992, as amended at 69 FR 53808, Sept. 3, 2004]



Sec. Sec. 19.39-19.49  [Reserved]



                    Subpart C_Administrative Appeals



Sec. 19.50  Nature and form of administrative appeal.

    (a) General. An administrative appeal from an agency of original 
jurisdiction determination is an appeal taken by an official of the 
Department of Veterans Affairs authorized to do so to resolve a conflict 
of opinion or a question pertaining to a claim involving benefits under 
laws administered by the Department of Veterans Affairs. Such appeals 
may be taken not only from determinations involving dissenting opinions, 
but also from unanimous determinations denying or allowing the benefit 
claimed in whole or in part.
    (b) Form of Appeal. An administrative appeal is entered by a 
memorandum entitled ``Administrative Appeal'' in which the issues and 
the basis for the appeal are set forth.

(Authority: 38 U.S.C. 7106)



Sec. 19.51  Officials authorized to file administrative appeals and time 
limits for filing.

    The Secretary of Veterans Affairs authorizes certain officials of 
the Department of Veterans Affairs to file administrative appeals within 
specified time limits, as follows:
    (a) Central Office--(1) Officials. The Under Secretary for Benefits 
or a service director of the Veterans Benefits Administration, the Under 
Secretary for Health or a service director of the Veterans Health 
Administration, and the General Counsel.
    (2) Time limit. Such officials must file an administrative appeal 
within 1 year from the date of mailing notice of such determination to 
the claimant.
    (b) Agencies of original jurisdiction--(1) Officials. Directors, 
adjudication officers, and officials at comparable levels in field 
offices deciding any claims for benefits, from any determination 
originating within their established jurisdiction.
    (2) Time limit. The Director or comparable official must file an 
administrative appeal within 6 months from

[[Page 69]]

the date of mailing notice of the determination to the claimant. 
Officials below the level of Director must do so within 60 days from 
such date.
    (c) The date of mailing. With respect to paragraphs (a) and (b) of 
this section, the date of mailing notice of the determination to the 
claimant will be presumed to be the same as the date of the letter of 
notification to the claimant.

(Authority: 38 U.S.C. 7106)

[57 FR 4104, Feb. 3, 1992, as amended at 61 FR 20449, May 7, 1996]



Sec. 19.52  Notification to claimant of filing of administrative appeal.

    When an administrative appeal is entered, the claimant and his or 
her representative, if any, will be promptly furnished a copy of the 
memorandum entitled ``Administrative Appeal,'' or an adequate summary 
thereof, outlining the question at issue. They will be allowed a period 
of 60 days to join in the appeal if they so desire. The claimant will 
also be advised of the effect of such action and of the preservation of 
normal appeal rights if he or she does not elect to join in the 
administrative appeal.

(Authority: 38 U.S.C. 7106)



Sec. 19.53  Restriction as to change in payments pending determination 
of administrative appeals.

    If an administrative appeal is taken from a review or determination 
by the agency of original jurisdiction pursuant to Sec. Sec. 19.50 and 
19.51 of this part, that review or determination may not be used to 
effect any change in payments until after a decision is made by the 
Board of Veterans' Appeals.

(Authority: 38 U.S.C. 7106)



Sec. Sec. 19.54-19.74  [Reserved]



 Subpart D_Hearings Before the Board of Veterans' Appeals at Department 
                  of Veterans Affairs Field Facilities



Sec. 19.75  Field hearing docket.

    Hearings on appeal held at Department of Veterans Affairs field 
facilities will be scheduled for each area served by a regional office 
in accordance with the place of each case on the Board's docket, 
established under Sec. 20.900 of this chapter, relative to other cases 
for which hearings are scheduled to be held within that area. Such 
scheduling is subject to Sec. 20.704(f) of this chapter pertaining to 
advancement of a case on the hearing docket.

(Authority: 38 U.S.C. 7107)

[65 FR 14471, Mar. 17, 2000]



Sec. 19.76  Notice of time and place of hearing before the Board of 
Veterans' Appeals at Department of Veterans Affairs field facilities.

    The agency of original jurisdiction will notify the appellant and 
his or her representative of the place and time of a hearing before the 
Board of Veterans' Appeals at a Department of Veterans Affairs field 
facility not less than 30 days prior to the hearing date. This time 
limitation does not apply to hearings which have been rescheduled due to 
a postponement requested by an appellant, or on his or her behalf, or 
due to the prior failure of an appellant to appear at a scheduled 
hearing before the Board of Veterans' Appeals at a Department of 
Veterans Affairs field facility with good cause. The right to notice at 
least 30 days in advance will be deemed to have been waived if an 
appellant accepts an earlier hearing date due to the cancellation of 
another previously scheduled hearing.

(Authority: 38 U.S.C. 7107)

[61 FR 20449, May 7, 1996, as amended at 61 FR 43008, Aug. 20, 1996]



Sec. Sec. 19.77-19.99  [Reserved]



                Subpart E_Simultaneously Contested Claims



Sec. 19.100  Notification of right to appeal in simultaneously contested 
claims.

    All interested parties will be specifically notified of the action 
taken by the agency of original jurisdiction in a simultaneously 
contested claim and of the right and time limit for initiation of an 
appeal, as well as hearing and representation rights.

(Authority: 38 U.S.C. 7105A(a))

[[Page 70]]



Sec. 19.101  Notice to contesting parties on receipt of Notice of 
Disagreement in simultaneously contested claims.

    Upon the filing of a Notice of Disagreement in a simultaneously 
contested claim, all interested parties and their representatives will 
be furnished a copy of the Statement of the Case. The Statement of the 
Case so furnished will contain only information which directly affects 
the payment or potential payment of the benefit(s) which is (are) the 
subject of that contested claim. The interested parties who filed 
Notices of Disagreement will be duly notified of the right to file, and 
the time limit within which to file, a Substantive Appeal and will be 
furnished with VA Form 9, ``Appeal to Board of Veterans' Appeals.''

(Authority: 38 U.S.C. 7105A(b))

[57 FR 4104, Feb. 3, 1992, as amended at 61 FR 20449, May 7, 1996]



Sec. 19.102  Notice of appeal to other contesting parties in 
simultaneously contested claims.

    When a Substantive Appeal is filed in a simultaneously contested 
claim, the content of the Substantive Appeal will be furnished to the 
other contesting parties to the extent that it contains information 
which could directly affect the payment or potential payment of the 
benefit which is the subject of the contested claim.

(Authority: 38 U.S.C. 7105A(b))

                 Appendix A to Part 19--Cross-References

------------------------------------------------------------------------
                                                     Title of cross-
      Sec.             Cross-reference          referenced material or
                                                         comment
------------------------------------------------------------------------
19.5...........  38 CFR 14.507(b).............  See re ``precedent
                                                 opinions'' of the
                                                 General Counsel of the
                                                 Department of Veterans
                                                 Affairs.
                 38 CFR 20.1303...............  Rule 1303.
                                                 Nonprecedential nature
                                                 of Board decisions.
19.7...........  38 CFR 20.905................  Rule 905. Vacating a
                                                 decision.
19.13..........  38 CFR 2.66..................  Contains similar
                                                 provisions.
19.25..........  38 CFR 19.52.................  Notification to claimant
                                                 of filing of
                                                 administrative appeal.
                 38 CFR 19.100................  Notification of right to
                                                 appeal in
                                                 simultaneously
                                                 contested claims.
19.26..........  38 CFR 20.302................  Rule 302. Time limit for
                                                 filing Notice of
                                                 Disagreement,
                                                 Substantive Appeal, and
                                                 response to
                                                 Supplemental Statement
                                                 of the Case.
19.27..........  38 CFR 19.50-19.53...........  See re administrative
                                                 appeals.
19.30..........  38 CFR 20.202................  Rule 202. Substantive
                                                 Appeal.
19.32..........  38 CFR 20.302................  Rule 302. Time limit for
                                                 filing Notice of
                                                 Disagreement,
                                                 Substantive Appeal, and
                                                 response to
                                                 Supplemental Statement
                                                 of the Case.
                 38 CFR 20.501................  Rule 501. Time limits
                                                 for filing Notice of
                                                 Disagreement,
                                                 Substantive Appeal, and
                                                 response to
                                                 Supplemental Statement
                                                 of the Case in
                                                 simultaneously
                                                 contested claims.
19.33..........  38 CFR 19.50-19.53...........  See re administrative
                                                 appeals.
19.50..........  38 CFR 19.53.................  Restriction as to change
                                                 in payments pending
                                                 determination of
                                                 administrative appeals.
19.76..........  38 CFR 20.704................  Rule 704. Scheduling and
                                                 notice of hearings
                                                 conducted by traveling
                                                 Sections of the Board
                                                 of Veterans' Appeals at
                                                 Department of Veterans
                                                 Affairs field
                                                 facilities.
19.100.........  38 CFR 20.713................  Rule 713. Hearings in
                                                 simultaneously
                                                 contested claims.
19.101.........  38 CFR 19.30.................  Furnishing the Statement
                                                 of the Case and
                                                 instructions for filing
                                                 a Substantive Appeal.
------------------------------------------------------------------------



PART 20_BOARD OF VETERANS' APPEALS: RULES OF PRACTICE--Table of Contents




                            Subpart A_General

Sec.
20.1 Rule 1. Purpose and construction of Rules of Practice.
20.2 Rule 2. Procedure in absence of specific Rule of Practice.
20.3 Rule 3. Definitions.
20.4-20.99 [Reserved]

                           Subpart B_The Board

20.100 Rule 100. Name, business hours, and mailing address of the Board.
20.101 Rule 101. Jurisdiction of the Board.
20.102 Rule 102. Delegation of authority--Rules of Practice.
20.103-20.199 [Reserved]

             Subpart C_Commencement and Perfection of Appeal

20.200 Rule 200. What constitutes an appeal.
20.201 Rule 201. Notice of Disagreement.

[[Page 71]]

20.202 Rule 202. Substantive Appeal.
20.203 [Reserved]
20.204 Rule 204. Withdrawal of Appeal.
20.205-20.299 [Reserved]

                            Subpart D_Filing

20.300 Rule 300. Place of filing Notice of Disagreement and Substantive 
          Appeal.
20.301 Rule 301. Who can file an appeal.
20.302 Rule 302. Time limit for filing Notice of Disagreement, 
          Substantive Appeal, and response to Supplemental Statement of 
          the Case.
20.303 Rule 303. Extension of time for filing Substantive Appeal and 
          response to Supplemental Statement of the Case.
20.304 Rule 304. Filing additional evidence does not extend time limit 
          for appeal.
20.305 Rule 305. Computation of time limit for filing.
20.306 Rule 306. Legal holidays.
20.307-20.399 [Reserved]

                    Subpart E_Administrative Appeals

20.400 Rule 400. Action by claimant or representative on notification of 
          administrative appeal.
20.401 Rule 401. Effect of decision on administrative or merged appeal 
          on claimant's appellate rights.
20.402-20.499 [Reserved]

                Subpart F_Simultaneously Contested Claims

20.500 Rule 500. Who can file an appeal in simultaneously contested 
          claims.
20.501 Rule 501. Time limits for filing Notice of Disagreement, 
          Substantive Appeal, and response to Supplemental Statement of 
          the Case in simultaneously contested claims.
20.502 Rule 502. Time limit for response to appeal by another contesting 
          party in a simultaneously contested claim.
20.503 Rule 503. Extension of time for filing a Substantive Appeal in 
          simultaneously contested claims.
20.504 Rule 504. Notices sent to last addresses of record in 
          simultaneously contested claims.
20.505-20.599 [Reserved]

                        Subpart G_Representation

20.600 Rule 600. Right to representation.
20.601 Rule 601. Only one representative recognized.
20.602 Rule 602. Representation by recognized organizations.
20.603 Rule 603. Representation by attorneys-at-law.
20.604 Rule 604. Representation by agents.
20.605 Rule 605. Other persons as representative.
20.606 Rule 606. Legal interns, law students and paralegals.
20.607 Rule 607. Revocation of a representative's authority to act.
20.608 Rule 608. Withdrawal of services by a representative.
20.609 Rule 609. Payment of representative's fees in proceedings before 
          Department of Veterans Affairs field personnel and before the 
          Board of Veterans' Appeals.
20.610 Rule 610. Payment of representative's expenses in proceedings 
          before Department of Veterans Affairs field personnel and 
          before the Board of Veterans' Appeals.
20.612-20.699 [Reserved]

                      Subpart H_Hearings on Appeal

20.700 Rule 700. General.
20.701 Rule 701. Who may present oral argument.
20.702 Rule 702. Scheduling and notice of hearings conducted by the 
          Board of Veterans' Appeals in Washington, DC.
20.703 Rule 703. When a hearing before the Board of Veterans' Appeals at 
          a Department of Veterans Affairs field facility may be 
          requested.
20.704 Rule 704. Scheduling and notice of hearings conducted by the 
          Board of Veterans' Appeals at Department of Veterans Affairs 
          field facilities.
20.705 Rule 705. Where hearings are conducted.
20.706 Rule 706. Functions of the presiding Member.
20.707 Rule 707. Designation of Member or Members to conduct the 
          hearing.
20.708 Rule 708. Prehearing conference.
20.709 Rule 709. Procurement of additional evidence following a hearing.
20.710 Rule 710. Witnesses at hearings.
20.711 Rule 711. Subpoenas.
20.712 Rule 712. Expenses of appellants, representatives, and witnesses 
          incident to hearings not reimbursable by the Government.
20.713 Rule 713. Hearings in simultaneously contested claims.
20.714 Rule 714. Record of hearing.
20.715 Rule 715. Recording of hearing by appellant or representative.
20.716 Rule 716. Correction of hearing transcripts.
20.717 Rule 717. Loss of hearing tapes or transcripts--motion for new 
          hearing.
20.718-20.799 [Reserved]

                           Subpart I_Evidence

20.800 Rule 800. Submission of additional evidence after initiation of 
          appeal.
20.801-20.899 [Reserved]

[[Page 72]]

                      Subpart J_Action by the Board

20.900 Rule 900. Order of consideration of appeals.
20.901 Rule 901. Medical opinions and opinions of the General Counsel.
20.902 Rule 902. Filing of requests for the procurement of opinions.
20.903 Rule 903. Notification of evidence secured and law to be 
          considered by the Board and opportunity for response.
20.904 Rule 904. Vacating a decision.
20.905-20.999 [Reserved]

                        Subpart K_Reconsideration

20.1000 Rule 1000. When reconsideration is accorded.
20.1001 Rule 1001. Filing and disposition of motion for reconsideration.
20.1002 Rule 1002. [Reserved]
20.1003 Rule 1003. Hearings on reconsideration.
20.1004-20.1099 [Reserved]

                           Subpart L_Finality

20.1100 Rule 1100. Finality of decisions of the Board.
20.1101 Rule 1101. [Reserved]
20.1102 Rule 1102. Harmless error.
20.1103 Rule 1103. Finality of determinations of the agency of original 
          jurisdiction where appeal is not perfected.
20.1104 Rule 1104. Finality of determinations of the agency of original 
          jurisdiction affirmed on appeal.
20.1105 Rule 1105. New claim after promulgation of appellate decision.
20.1106 Rule 1106. Claim for death benefits by survivor--prior 
          unfavorable decisions during veteran's lifetime.
20.1107-20.1199 [Reserved]

                          Subpart M_Privacy Act

20.1200 Rule 1200. Privacy Act request--appeal pending.
20.1201 Rule 1201. Amendment of appellate decisions.
20.1202-20.1299 [Reserved]

                         Subpart N_Miscellaneous

20.1300 Rule 1300. Removal of Board records.
20.1301 Rule 1301. Disclosure of information.
20.1302 Rule 1302. Death of appellant during pendency of appeal.
20.1303 Rule 1303. Nonprecedential nature of Board decisions.
20.1304 Rule 1304. Request for change in representation, request for 
          personal hearing, or submission of additional evidence 
          following certification of an appeal to the Board of Veterans' 
          Appeals.

  Subpart O_Revision of Decisions on Grounds of Clear and Unmistakable 
                                  Error

20.1400 Rule 1400. Motions to revise Board decisions.
20.1401 Rule 1401. Definitions.
20.1402 Rule 1402. Inapplicability of other rules.
20.1403 Rule 1403. What constitutes clear and unmistakable error; what 
          does not.
20.1404 Rule 1404. Filing and pleading requirements; withdrawal.
20.1405 Rule 1405. Disposition.
20.1406 Rule 1406. Effect of revision; discontinuance or reduction of 
          benefits.
20.1407 Rule 1407. Motions by the Board.
20.1408 Rule 1408. Special rules for simultaneously contested claims.
20.1409 Rule 1409. Finality and appeal.
20.1410 Rule 1410. Stays pending court action.
20.1411 Rule 1411. Relationship to other statutes.

Appendix A to Part 20--Cross-References

    Authority: 38 U.S.C. 501(a) and as noted in specific sections.

    Source: 57 FR 4109, Feb. 3, 1992, unless otherwise noted.



                            Subpart A_General



Sec. 20.1  Rule 1. Purpose and construction of Rules of Practice.

    (a) Purpose. These rules establish the practices and procedures 
governing appeals to the Board of Veterans' Appeals.


(Authority: 38 U.S.C. 501(a), 7102, 7104)

    (b) Construction. These rules are to be construed to secure a just 
and speedy decision in every appeal.


(Authority: 38 U.S.C. 501(a), 5107, 7104)



Sec. 20.2  Rule 2. Procedure in absence of specific Rule of Practice.

    Where in any instance there is no applicable rule or procedure, the 
Chairman may prescribe a procedure which is consistent with the 
provisions of title 38, United States Code, and these rules.

(Authority: 38 U.S.C. 501(a), 512(a), 7102, 7104)



Sec. 20.3  Rule 3. Definitions.

    As used in these Rules:
    (a) Agency of original jurisdiction means the Department of Veterans 
Affairs activity or administration, that

[[Page 73]]

is, the Veterans Benefits Administration, Veterans Health 
Administration, or National Cemetery Administration, that made the 
initial determination on a claim.
    (b) Agent means a person who has met the standards and 
qualifications for accreditation outlined in Sec. 14.629(b) of this 
chapter and who has been properly designated under the provisions of 
Rule 604 (Sec. 20.604 of this part). It does not include 
representatives recognized under Rules 602, 603, or 605 (Sec. 20.602, 
20.603, or Sec. 20.605 of this part).
    (c) Appellant means a claimant who has initiated an appeal to the 
Board of Veterans' Appeals by filing a Notice of Disagreement pursuant 
to the provisions of 38 U.S.C. 7105.
    (d) Attorney-at-law means a member in good standing of a State bar.
    (e) Benefit means any payment, service, commodity, function, or 
status, entitlement to which is determined under laws administered by 
the Department of Veterans Affairs pertaining to veterans and their 
dependents and survivors.
    (f) Claim means application made under title 38, United States Code, 
and implementing directives for entitlement to Department of Veterans 
Affairs benefits or for the continuation or increase of such benefits, 
or the defense of a proposed agency adverse action concerning benefits.
    (g) Claimant means a person who has filed a claim, as defined by 
paragraph (f) of this section.
    (h) Electronic hearing means a hearing on appeal in which an 
appellant or a representative participates, through voice transmission 
or through picture and voice transmission, by electronic or other means, 
in a hearing with a Member or Members sitting at the Board's principal 
location in Washington, DC.
    (i) Hearing on appeal means a hearing conducted after a Notice of 
Disagreement has been filed in which argument and/or testimony is 
presented concerning the determination, or determinations, by the agency 
of original jurisdiction being appealed.
    (j) Law student means an individual pursuing a Juris Doctor or 
equivalent degree at a school approved by a recognized accrediting 
association.
    (k) Legal intern means a graduate of a law school, which has been 
approved by a recognized accrediting association, who has not yet been 
admitted to a State bar.
    (l) Motion means a request that the Board rule on some question 
which is subsidiary to the ultimate decision on the outcome of an 
appeal. For example, the questions of whether a representative's fees 
are reasonable or whether additional evidence may be submitted more than 
90 days after certification of an appeal to the Board are raised by 
motion (see Rule 609, paragraph (i), and Rule 1304, paragraph (b) 
Sec. Sec. 20.609(i) and 20.1304(b) of this part). Unless raised orally 
at a personal hearing before Members of the Board, motions for 
consideration by the Board must be made in writing. No formal type of 
document is required. The motion may be in the form of a letter which 
contains the necessary information.
    (m) Paralegal means a graduate of a course of paralegal instruction 
given by a school which has been approved by a recognized accrediting 
association, or an individual who has equivalent legal experience.
    (n) Past-due benefits means a nonrecurring payment resulting from a 
benefit, or benefits, granted on appeal or awarded on the basis of a 
claim reopened after a denial by the Board of Veterans' Appeals or the 
lump sum payment which represents the total amount of recurring cash 
payments which accrued between the effective date of the award, as 
determined by applicable laws and regulations, and the date of the grant 
of the benefit by the agency of original jurisdiction, the Board of 
Veterans' Appeals, or an appellate court.
    (o) Presiding Member means that Member of the Board who presides 
over a hearing, whether conducted as a single Member or panel hearing.
    (p) Simultaneously contested claim refers to the situation in which 
the allowance of one claim results in the disallowance of another claim 
involving the same benefit or the allowance of one claim results in the 
payment of a lesser benefit to another claimant.
    (q) State includes any State, possession, territory, or Commonwealth 
of

[[Page 74]]

the United States, as well as the District of Columbia.

(Authority: 38 U.S.C. 501(a))

[57 FR 4109, Feb. 3, 1992, as amended at 61 FR 20449, May 7, 1996; 67 FR 
36104, May 23, 2002; 69 FR 53808, Sept. 3, 2004]



Sec. Sec. 20.4-20.99  [Reserved]



                           Subpart B_The Board



Sec. 20.100  Rule 100. Name, business hours, and mailing address of the 
Board.

    (a) Name. The name of the Board is the Board of Veterans' Appeals.
    (b) Business hours. The Board is open during business hours on all 
days except Saturday, Sunday and legal holidays. Business hours are from 
8 a.m. to 4:30 p.m.
    (c) Mailing address. Except as otherwise noted in these Rules, mail 
to the Board must be addressed to: Chairman (01), Board of Veterans' 
Appeals, 810 Vermont Avenue NW., Washington, DC 20420.

(Authority: 38 U.S.C. 7101(a))



Sec. 20.101  Rule 101. Jurisdiction of the Board.

    (a) General. All questions of law and fact necessary to a decision 
by the Secretary of Veterans Affairs under a law that affects the 
provision of benefits by the Secretary to veterans or their dependents 
or survivors are subject to review on appeal to the Secretary. Decisions 
in such appeals are made by the Board of Veterans' Appeals. In its 
decisions, the Board is bound by applicable statutes, the regulations of 
the Department of Veterans Affairs and precedent opinions of the General 
Counsel of the Department of Veterans Affairs. Examples of the issues 
over which the Board has jurisdiction include, but are not limited to, 
the following:
    (1) Entitlement to, and benefits resulting from, service-connected 
disability or death (38 U.S.C. chapter 11).
    (2) Dependency and indemnity compensation for service-connected 
death, including benefits in certain cases of inservice or service-
connected deaths (38 U.S.C. 1312) and certification and entitlement to 
death gratuity (38 U.S.C. 1323).
    (3) Benefits for survivors of certain veterans rated totally 
disabled at time of death (38 U.S.C. 1318).
    (4) Entitlement to nonservice-connected disability pension, service 
pension and death pension (38 U.S.C. chapter 15).
    (5) All-Volunteer Force Educational Assistance Program (38 U.S.C. 
chapter 30).
    (6) Training and Rehabilitation for Veterans with Service-Connected 
Disabilities (38 U.S.C. chapter 31).
    (7) Post-Vietnam Era Veterans' Educational Assistance (38 U.S.C. 
chapter 32).
    (8) Veterans' Educational Assistance (38 U.S.C. chapter 34).
    (9) Survivors' and Dependents' Educational Assistance (38 U.S.C. 
chapter 35).
    (10) Veterans' Job Training (Pub. L. 98-77, as amended; 38 CFR 
21.4600 et seq.).
    (11) Educational Assistance for Members of the Selected Reserve (10 
U.S.C. chapter 106).
    (12) Educational Assistance Test Program (10 U.S.C. chapter 107; 38 
CFR 21.5701 et seq.).
    (13) Educational Assistance Pilot Program (10 U.S.C. chapter 107; 38 
CFR 21.5290 et seq.).
    (14) Matters arising under National Service Life Insurance and 
United States Government Life Insurance (38 U.S.C. chapter 19).
    (15) Payment or reimbursement for unauthorized medical expenses (38 
U.S.C. 1728).
    (16) Burial benefits and burial in National Cemeteries (38 U.S.C. 
chapters 23 and 24).
    (17) Benefits for persons disabled by medical treatment or 
vocational rehabilitation (38 U.S.C. 1151).
    (18) Basic eligibility for home, condominium and mobile home loans 
as well as waiver of payment of loan guaranty indebtedness (38 U.S.C. 
chapter 37, 38 U.S.C. 5302).
    (19) Waiver of recovery of overpayments (38 U.S.C. 5302).
    (20) Forfeiture of rights, claims or benefits for fraud, treason, or 
subversive activities (38 U.S.C. 6102-6105).
    (21) Character of discharge (38 U.S.C. 5303).

[[Page 75]]

    (22) Determinations as to duty status (38 U.S.C. 101(21)-(24)).
    (23) Determinations as to marital status (38 U.S.C. 101(3), 103).
    (24) Determination of dependency status as parent or child (38 
U.S.C. 101(4), (5)).
    (25) Validity of claims and effective dates of benefits (38 U.S.C. 
chapter 51).
    (26) Apportionment of benefits (38 U.S.C. 5307).
    (27) Payment of benefits while a veteran is hospitalized and 
questions regarding an estate of an incompetent institutionalized 
veteran (38 U.S.C. 5503).
    (28) Benefits for surviving spouses and children of deceased 
veterans under Public Law 97-377, section 156 (38 CFR 3.812(d)).
    (29) Eligibility for automobile and automobile adaptive equipment 
assistance (38 U.S.C. chapter 39).
    (b) Appellate jurisdiction of determinations of the Veterans Health 
Administration. The Board's appellate jurisdiction extends to questions 
of eligibility for hospitalization, outpatient treatment, and nursing 
home and domiciliary care; for devices such as prostheses, canes, 
wheelchairs, back braces, orthopedic shoes, and similar appliances; and 
for other benefits administered by the Veterans Health Administration. 
Medical determinations, such as determinations of the need for and 
appropriateness of specific types of medical care and treatment for an 
individual, are not adjudicative matters and are beyond the Board's 
jurisdiction. Typical examples of these issues are whether a particular 
drug should be prescribed, whether a specific type of physiotherapy 
should be ordered, and similar judgmental treatment decisions with which 
an attending physician may be faced.
    (c) Appeals as to jurisdiction. All claimants have the right to 
appeal a determination made by the agency of original jurisdiction that 
the Board does not have jurisdictional authority to review a particular 
case. Jurisdictional questions which a claimant may appeal, include, but 
are not limited to, questions relating to the timely filing and adequacy 
of the Notice of Disagreement and the Substantive Appeal.
    (d) Authority to determine jurisdiction. The Board may address 
questions pertaining to its jurisdictional authority to review a 
particular case, including, but not limited to, determining whether 
Notices of Disagreement and Substantive Appeals are adequate and timely, 
at any stage in a proceeding before it, regardless of whether the agency 
of original jurisdiction addressed such question(s). When the Board, on 
its own initiative, raises a question as to a potential jurisdictional 
defect, all parties to the proceeding and their representative(s), if 
any, will be given notice of the potential jurisdictional defect(s) and 
granted a period of 60 days following the date on which such notice is 
mailed to present written argument and additional evidence relevant to 
jurisdiction and to request a hearing to present oral argument on the 
jurisdictional question(s). The date of mailing of the notice will be 
presumed to be the same as the date stamped on the letter of 
notification. The Board may dismiss any case over which it determines it 
does not have jurisdiction.
    (e) Application of 38 CFR 19.9 and 20.1304. Section 19.9 of this 
chapter shall not apply to proceedings to determine the Board's own 
jurisdiction. However, the Board may remand a case to an agency of 
original jurisdiction in order to obtain assistance in securing evidence 
of jurisdictional facts. The time restrictions on requesting a hearing 
and submitting additional evidence in Sec. 20.1304 of this part do not 
apply to a hearing requested, or evidence submitted, under paragraph (d) 
of this section.

(Authority: 38 U.S.C. 511(a), 7104, 7105, 7108)

[57 FR 4109, Feb. 3, 1992, as amended at 66 FR 53339, Oct. 22, 2001]



Sec. 20.102  Rule 102. Delegation of authority--Rules of Practice.

    (a) The authority exercised by the Chairman of the Board of 
Veterans' Appeals described in Rules 717(d) and 1001(c) (Sec. Sec. 
20.717(d) and 20.1001(c) of this part) may also be exercised by the Vice 
Chairman of the Board and by Deputy Vice Chairmen of the Board.
    (b) The authority exercised by the Chairman of the Board of 
Veterans' Appeals described in Rules 2 and 606(d) (Sec. Sec. 20.2, and 
20.606(d) of this part), may also be exercised by the Vice Chairman of 
the Board; by Deputy Vice Chairmen

[[Page 76]]

of the Board; and, in connection with a proceeding or motion assigned to 
them by the Chairman, by a Member or Members of the Board.

(Authority: 38 U.S.C. 512(a), 7102, 7104)

[57 FR 4109, Feb. 3, 1992; 57 FR 20055, May 11, 1992; 57 FR 38443, Aug. 
25, 1992; 61 FR 20449, May 7, 1996; 70 FR 8930, Feb. 24, 2005]



Sec. Sec. 20.103-20.199  [Reserved]



             Subpart C_Commencement and Perfection of Appeal



Sec. 20.200  Rule 200. What constitutes an appeal.

    An appeal consists of a timely filed Notice of Disagreement in 
writing and, after a Statement of the Case has been furnished, a timely 
filed Substantive Appeal.

(Authority: 38 U.S.C. 7105)



Sec. 20.201  Rule 201. Notice of Disagreement.

    A written communication from a claimant or his or her representative 
expressing dissatisfaction or disagreement with an adjudicative 
determination by the agency of original jurisdiction and a desire to 
contest the result will constitute a Notice of Disagreement. While 
special wording is not required, the Notice of Disagreement must be in 
terms which can be reasonably construed as disagreement with that 
determination and a desire for appellate review. If the agency of 
original jurisdiction gave notice that adjudicative determinations were 
made on several issues at the same time, the specific determinations 
with which the claimant disagrees must be identified. For example, if 
service connection was denied for two disabilities and the claimant 
wishes to appeal the denial of service connection with respect to only 
one of the disabilities, the Notice of Disagreement must make that 
clear.

(Authority: 38 U.S.C. 7105)



Sec. 20.202  Rule 202. Substantive Appeal.

    A Substantive Appeal consists of a properly completed VA Form 9, 
``Appeal to Board of Veterans' Appeals,'' or correspondence containing 
the necessary information. If the Statement of the Case and any prior 
Supplemental Statements of the Case addressed several issues, the 
Substantive Appeal must either indicate that the appeal is being 
perfected as to all of those issues or must specifically identify the 
issues appealed. The Substantive Appeal should set out specific 
arguments relating to errors of fact or law made by the agency of 
original jurisdiction in reaching the determination, or determinations, 
being appealed. To the extent feasible, the argument should be related 
to specific items in the Statement of the Case and any prior 
Supplemental Statements of the Case. The Board will construe such 
arguments in a liberal manner for purposes of determining whether they 
raise issues on appeal, but the Board may dismiss any appeal which fails 
to allege specific error of fact or law in the determination, or 
determinations, being appealed. The Board will not presume that an 
appellant agrees with any statement of fact contained in a Statement of 
the Case or a Supplemental Statement of the Case which is not 
specifically contested. Proper completion and filing of a Substantive 
Appeal are the last actions the appellant needs to take to perfect an 
appeal.

(Authority: 38 U.S.C. 7105(d)(3)-(5))

(Approved by the Office of Management and Budget under control number 
2900-0085)

[57 FR 4109, Feb. 3, 1992, as amended at 61 FR 20450, May 7, 1996]



Sec. 20.203  [Reserved]



Sec. 20.204  Rule 204. Withdrawal of Appeal.

    (a) When and by whom filed. Only an appellant, or an appellant's 
authorized representative, may withdraw an appeal. An appeal may be 
withdrawn as to any or all issues involved in the appeal.
    (b) Filing--(1) Form and content. Except for appeals withdrawn on 
the record at a hearing, appeal withdrawals must be in writing. They 
must include the name of the veteran, the name of the claimant or 
appellant if other than the veteran (e.g., a veteran's survivor, a 
guardian, or a fiduciary appointed to receive VA benefits on an 
individual's behalf), the applicable Department of Veterans Affairs file 
number, and a

[[Page 77]]

statement that the appeal is withdrawn. If the appeal involves multiple 
issues, the withdrawal must specify that the appeal is withdrawn in its 
entirety, or list the issue(s) withdrawn from the appeal.
    (2) Where to file. Appeal withdrawals should be filed with the 
agency of original jurisdiction until the appellant or representative 
filing the withdrawal receives notice that the appeal has been 
transferred to the Board. Thereafter, file the withdrawal at the 
following address: Director, Management and Administration (014), Board 
of Veterans' Appeals, 810 Vermont Avenue, NW., Washington, DC 20420.
    (3) When effective. Until the appeal is transferred to the Board, an 
appeal withdrawal is effective when received by the agency of original 
jurisdiction. Thereafter, it is not effective until received by the 
Board. A withdrawal received by the Board after the Board issues a final 
decision under Rule 1100(a) (Sec. 20.1100(a) of this part) will not be 
effective.
    (c) Effect of filing. Withdrawal of an appeal will be deemed a 
withdrawal of the Notice of Disagreement and, if filed, the Substantive 
Appeal, as to all issues to which the withdrawal applies. Withdrawal 
does not preclude filing a new Notice of Disagreement and, after a 
Statement of the Case is issued, a new Substantive Appeal, as to any 
issue withdrawn, provided such filings would be timely under these rules 
if the appeal withdrawn had never been filed.

(Authority: 38 U.S.C. 7105(b) and (d))

[68 FR 13236, Mar. 19, 2003]



Sec. Sec. 20.205-20.299  [Reserved]



                            Subpart D_Filing



Sec. 20.300  Rule 300. Place of filing Notice of Disagreement and 
Substantive Appeal.

    The Notice of Disagreement and Substantive Appeal must be filed with 
the Department of Veterans Affairs office from which the claimant 
received notice of the determination being appealed unless notice has 
been received that the applicable Department of Veterans Affairs records 
have been transferred to another Department of Veterans Affairs office. 
In that case, the Notice of Disagreement or Substantive Appeal must be 
filed with the Department of Veterans Affairs office which has assumed 
jurisdiction over the applicable records.

(Authority: 38 U.S.C. 7105 (b)(1), (d)(3))



Sec. 20.301  Rule 301. Who can file an appeal.

    (a) Persons authorized. A Notice of Disagreement and/or a 
Substantive Appeal may be filed by a claimant personally, or by his or 
her representative if a proper Power of Attorney or declaration of 
representation, as applicable, is on record or accompanies such Notice 
of Disagreement or Substantive Appeal.
    (b) Claimant rated incompetent by Department of Veterans Affairs or 
under disability and unable to file. If an appeal is not filed by a 
person listed in paragraph (a) of this section, and the claimant is 
rated incompetent by the Department of Veterans Affairs or has a 
physical, mental, or legal disability which prevents the filing of an 
appeal on his or her own behalf, a Notice of Disagreement and a 
Substantive Appeal may be filed by a fiduciary appointed to manage the 
claimant's affairs by the Department of Veterans Affairs or a court, or 
by a person acting as next friend if the appointed fiduciary fails to 
take needed action or no fiduciary has been appointed.
    (c) Claimant under disability and able to file. Notwithstanding the 
fact that a fiduciary may have been appointed for a claimant, an appeal 
filed by a claimant will be accepted.

(Authority: 38 U.S.C. 7105(b)(2))



Sec. 20.302  Rule 302. Time limit for filing Notice of Disagreement, 
Substantive Appeal, and response to Supplemental Statement of the Case.

    (a) Notice of Disagreement. Except in the case of simultaneously 
contested claims, a claimant, or his or her representative, must file a 
Notice of Disagreement with a determination by the agency of original 
jurisdiction within one year from the date that that agency mails notice 
of the determination to him or her. Otherwise, that determination will 
become final. The date of

[[Page 78]]

mailing the letter of notification of the determination will be presumed 
to be the same as the date of that letter for purposes of determining 
whether an appeal has been timely filed.


(Authority: 38 U.S.C. 7105(b)(1))

    (b) Substantive Appeal--(1) General. Except in the case of 
simultaneously contested claims, a Substantive Appeal must be filed 
within 60 days from the date that the agency of original jurisdiction 
mails the Statement of the Case to the appellant, or within the 
remainder of the 1-year period from the date of mailing of the 
notification of the determination being appealed, whichever period ends 
later. The date of mailing of the Statement of the Case will be presumed 
to be the same as the date of the Statement of the Case and the date of 
mailing the letter of notification of the determination will be presumed 
to be the same as the date of that letter for purposes of determining 
whether an appeal has been timely filed.
    (2) Special rule in certain cases where additional evidence is 
submitted. Except in the case of simultaneously contested claims, if (i) 
a claimant submits additional evidence within 1 year of the date of 
mailing of the notification of the determination being appealed, and 
(ii) that evidence requires, in accordance with Sec. 19.31 of this 
title, that the claimant be furnished a Supplemental Statement of the 
Case, then the time to submit a Substantive Appeal shall end not sooner 
than 60 days after such Supplemental Statement of the Case is mailed to 
the appellant, even if the 60-day period extends beyond the expiration 
of the 1-year appeal period.


(Authority: 38 U.S.C. 7105 (b)(1), (d)(3).)

    (c) Response to Supplemental Statement of the Case. Where a 
Supplemental Statement of the Case is furnished, a period of 60 days 
from the date of mailing of the Supplemental Statement of the Case will 
be allowed for response. The date of mailing of the Supplemental 
Statement of the Case will be presumed to be the same as the date of the 
Supplemental Statement of the Case for purposes of determining whether a 
response has been timely filed. Provided a Substantive Appeal has been 
timely filed in accordance with paragraph (b) of this section, the 
response to a Supplemental Statement of the Case is optional and is not 
required for the perfection of an appeal.


(Authority: 38 U.S.C. 7105(d)(3))

[57 FR 4109, Feb. 3, 1992; as amended at 66 FR 50318, Oct. 3, 2001; 68 
FR 64806, Nov. 17, 2003]



Sec. 20.303  Rule 303. Extension of time for filing Substantive Appeal 
and response to Supplemental Statement of the Case.

    An extension of the 60-day period for filing a Substantive Appeal, 
or the 60-day period for responding to a Supplemental Statement of the 
Case when such a response is required, may be granted for good cause. A 
request for such an extension must be in writing and must be made prior 
to expiration of the time limit for filing the Substantive Appeal or the 
response to the Supplemental Statement of the Case. The request for 
extension must be filed with the Department of Veterans Affairs office 
from which the claimant received notice of the determination being 
appealed, unless notice has been received that the applicable records 
have been transferred to another Department of Veterans Affairs office. 
A denial of a request for extension may be appealed to the Board.

(Authority: 38 U.S.C. 7105(d)(3))



Sec. 20.304  Rule 304. Filing additional evidence does not extend time 
limit for appeal.

    Except as provided in Rule 302(b) (Sec. 20.302(b) of this part), 
the filing of additional evidence after receipt of notice of an adverse 
determination does not extend the time limit for initiating or 
completing an appeal from that determination.

(Authority: 38 U.S.C. 7105.)

[57 FR 4109, Feb. 3, 1992; as amended at 66 FR 50318, Oct. 3, 2001]



Sec. 20.305  Rule 305. Computation of time limit for filing.

    (a) Acceptance of postmark date. When these Rules require that any 
written document be filed within a specified period of time, a response 
postmarked prior to expiration of the applicable

[[Page 79]]

time limit will be accepted as having been timely filed. In the event 
that the postmark is not of record, the postmark date will be presumed 
to be five days prior to the date of receipt of the document by the 
Department of Veterans Affairs. In calculating this 5-day period, 
Saturdays, Sundays and legal holidays will be excluded.
    (b) Computation of time limit. In computing the time limit for 
filing a written document, the first day of the specified period will be 
excluded and the last day included. Where the time limit would expire on 
a Saturday, Sunday, or legal holiday, the next succeeding workday will 
be included in the computation.

(Authority: 38 U.S.C. 7105)



Sec. 20.306  Rule 306. Legal holidays.

    For the purpose of Rule 305 (Sec. 20.305 of this part), the legal 
holidays, in addition to any other day appointed as a holiday by the 
President or the Congress of the United States, are as follows: New 
Year's Day--January 1; Inauguration Day--January 20 of every fourth year 
or, if the 20th falls on a Sunday, the next succeeding day selected for 
public observance of the inauguration; Birthday of Martin Luther King, 
Jr.--Third Monday in January; Washington's Birthday--Third Monday in 
February; Memorial Day--Last Monday in May; Independence Day--July 4; 
Labor Day--First Monday in September; Columbus Day--Second Monday in 
October; Veterans Day--November 11; Thanksgiving Day--Fourth Thursday in 
November; and Christmas Day--December 25. When a holiday occurs on a 
Saturday, the Friday immediately before is the legal public holiday. 
When a holiday occurs on a Sunday, the Monday immediately after is the 
legal public holiday.

(Authority: 5 U.S.C. 6103)



Sec. Sec. 20.307-20.399  [Reserved]



                    Subpart E_Administrative Appeals



Sec. 20.400  Rule 400. Action by claimant or representative on 
notification of administrative appeal.

    When an official of the Department of Veterans Affairs enters an 
administrative appeal, the claimant and his or her representative, if 
any, are notified and given a period of 60 days from the date of mailing 
of the letter of notification to join in the administrative appeal. The 
date of mailing of the letter of notification will be presumed to be the 
same as the date of the letter of notification. If the claimant, or the 
representative acting on his or her behalf, elects to join in the 
administrative appeal, it becomes a ``merged appeal'' and the rules 
governing an appeal initiated by a claimant are for application. The 
presentation of evidence or argument by the claimant or his or her 
representative in response to notification of the right to join in the 
administrative appeal will be construed as an election to join in the 
administrative appeal. If the claimant does not authorize the merger, he 
or she must hold such evidence or argument in abeyance until resolution 
of the administrative appeal.

(Authority: 38 U.S.C. 7106)



Sec. 20.401  Rule 401. Effect of decision on administrative or merged 
appeal on claimant's appellate rights.

    (a) Merged appeal. If the administrative appeal is merged, the 
appellate decision on the merged appeal will constitute final 
disposition of the claimant's appellate rights.
    (b) Appeal not merged. If the claimant does not authorize merger, 
normal appellate rights on the same issue are preserved, and the 
Chairman will assign the proceeding to a Member or panel of Members of 
the Board who did not make the decision on the administrative appeal. 
The period of time from the date of notification to the claimant of the 
administrative appeal to the date of the Board's decision on the 
administrative appeal is not chargeable

[[Page 80]]

to the claimant for purposes of determining the time limit for 
perfecting his or her separate appeal.

(Authority: 38 U.S.C. 7106)

[57 FR 4109, Feb. 3, 1992, as amended at 61 FR 20450, May 7, 1996]



Sec. Sec. 20.402-20.499  [Reserved]



                Subpart F_Simultaneously Contested Claims



Sec. 20.500  Rule 500. Who can file an appeal in simultaneously 
contested claims.

    In a simultaneously contested claim, any claimant or representative 
of a claimant may file a Notice of Disagreement or Substantive Appeal 
within the time limits set out in Rule 501 (Sec. 20.501 of this part).

(Authority: 38 U.S.C. 7105(b)(2), 7105A)



Sec. 20.501  Rule 501. Time limits for filing Notice of Disagreement, 
Substantive Appeal, and response to Supplemental Statement of the Case 
in simultaneously contested claims.

    (a) Notice of Disagreement. In simultaneously contested claims, the 
Notice of Disagreement from the person adversely affected must be filed 
within 60 days from the date of mailing of the notification of the 
determination to him or her; otherwise, that determination will become 
final. The date of mailing of the letter of notification will be 
presumed to be the same as the date of that letter for purposes of 
determining whether a Notice of Disagreement has been timely filed.


(Authority: 38 U.S.C. 7105A(a))

    (b) Substantive Appeal. In the case of simultaneously contested 
claims, a Substantive Appeal must be filed within 30 days from the date 
of mailing of the Statement of the Case. The date of mailing of the 
Statement of the Case will be presumed to be the same as the date of the 
Statement of the Case for purposes of determining whether an appeal has 
been timely filed.


(Authority: 38 U.S.C. 7105A(b))

    (c) Supplemental Statement of the Case. Where a Supplemental 
Statement of the Case is furnished by the agency of original 
jurisdiction in a simultaneously contested claim, a period of 30 days 
from the date of mailing of the Supplemental Statement of the Case will 
be allowed for response, but the receipt of a Supplemental Statement of 
the Case will not extend the time allowed for filing a Substantive 
Appeal as set forth in paragraph (b) of this section. The date of 
mailing of the Supplemental Statement of the Case will be presumed to be 
the same as the date of the Supplemental Statement of the Case for 
purposes of determining whether a response has been timely filed. 
Provided a Substantive Appeal has been timely filed in accordance with 
paragraph (b) of this section, the response to a Supplemental Statement 
of the Case is optional and is not required for the perfection of an 
appeal.


(Authority: 38 U.S.C. 7105(d)(3), 7105A(b))

[57 FR 4109, Feb. 3, 1992, as amended at 68 FR 64806, Nov. 17, 2003]



Sec. 20.502  Rule 502. Time limit for response to appeal by another 
contesting party in a simultaneously contested claim.

    A party to a simultaneously contested claim may file a brief or 
argument in answer to a Substantive Appeal filed by another contesting 
party. Any such brief or argument must be filed with the agency of 
original jurisdiction within 30 days from the date the content of the 
Substantive Appeal is furnished as provided in Sec. 19.102 of this 
chapter. Such content will be presumed to have been furnished on the 
date of the letter that accompanies the content.

(Authority: 38 U.S.C. 7105A(b))

[66 FR 60153, Dec. 3, 2001]



Sec. 20.503  Rule 503. Extension of time for filing a Substantive Appeal 
in simultaneously contested claims.

    An extension of the 30-day period to file a Substantive Appeal in 
simultaneously contested claims may be granted if good cause is shown. 
In granting an extension, consideration will be given to the interests 
of the other parties involved. A request for such an extension must be 
in writing and must be made prior to expiration

[[Page 81]]

of the time limit for filing the Substantive Appeal.

(Authority: 38 U.S.C. 7105A(b))



Sec. 20.504  Rule 504. Notices sent to last addresses of record in 
simultaneously contested claims.

    Notices in simultaneously contested claims will be forwarded to the 
last address of record of the parties concerned and such action will 
constitute sufficient evidence of notice.

(Authority: 38 U.S.C. 7105A(b))



Sec. Sec. 20.505-20.599  [Reserved]



                        Subpart G_Representation

    Cross-Reference: In cases involving access to medical records 
relating to drug abuse, alcoholism, alcohol abuse, sickle cell anemia, 
or infection with the human immunodeficiency virus, also see 38 U.S.C. 
7332.



Sec. 20.600  Rule 600. Right to representation.

    An appellant will be accorded full right to representation in all 
stages of an appeal by a recognized organization, attorney, agent, or 
other authorized person.

(Authority: 38 U.S.C. 5901-5905, 7105(a))



Sec. 20.601  Rule 601. Only one representative recognized.

    A specific claim may be prosecuted at any one time by only one 
recognized organization, attorney, agent or other person properly 
designated to represent the appellant.

(Authority: 38 U.S.C. 7105(b)(2))



Sec. 20.602  Rule 602. Representation by recognized organizations.

    In order to designate a recognized organization as his or her 
representative, an appellant must execute a VA Form 21-22, ``Appointment 
of Veterans Service Organization as Claimant's Representative.'' This 
form gives the organization power of attorney to represent the 
appellant. The designation will be effective when it is received by the 
agency of original jurisdiction or, if the appellate record has been 
certified to the Board for review, by the Board of Veterans' Appeals. A 
properly filed designation made prior to appeal will continue to be 
honored, unless it has been revoked by the appellant or unless the 
representative has properly withdrawn.

(Authority: 38 U.S.C. 7105(b)(2))



Sec. 20.603  Rule 603. Representation by attorneys-at-law.

    (a) Designation. An attorney-at-law may be designated as an 
appellant's representative through a properly executed VA Form 22a, 
``Appointment of Attorney or Agent as Claimant's Representative.'' This 
form gives the attorney power of attorney to represent the appellant. In 
lieu thereof, an attorney may state in writing on his or her letterhead 
that he or she is authorized to represent the appellant in order to have 
access to information in the appellant's file pertinent to the 
particular claim presented. For an attorney to have complete access to 
all information in an individual's records, the attorney must provide a 
signed consent from the appellant or the appellant's guardian. Such 
consent shall be equivalent to an executed power of attorney. The 
designation must be of an individual attorney, rather than a firm or 
partnership. An appellant may limit an attorney's right to act as his or 
her representative in an appeal to representation with respect to a 
specific claim for one or more specific benefits by noting the 
restriction in the written designation. Unless specifically noted to the 
contrary, however, designations of an attorney as a representative will 
extend to all matters with respect to claims for benefits under laws 
administered by the Department of Veterans Affairs. Designations are 
effective when they are received by the agency of original jurisdiction 
or, if the appellate record has been certified to the Board for review, 
by the Board of Veterans' Appeals. A properly filed designation made 
prior to appeal will continue to be honored, unless it has been revoked 
or unless the representative has properly withdrawn. Legal interns, law 
students, and paralegals may not be independently accredited to 
represent appellants under this Rule.
    (b) Attorneys employed by recognized organization. A recognized 
organization may employ an attorney-at-law to represent an appellant. If 
the attorney so

[[Page 82]]

employed is not an accredited representative of the recognized 
organization, the signed consent of the appellant for the substitution 
of representatives must be obtained and submitted to the agency of 
original jurisdiction or, if the appellate record has been certified to 
the Board for review, to the Board of Veterans' Appeals. When the signed 
consent is received by the agency of original jurisdiction or the Board, 
as applicable, the attorney will be recognized as the appellant's 
representative in lieu of the organization.
    (c) Participation of associated or affiliated attorneys. With the 
specific written consent of the appellant, an attorney associated or 
affiliated with the appellant's attorney of record, including an 
attorney employed by the same legal services office as the attorney of 
record, may assist in representation of the appellant and may have 
access to the appellant's Department of Veterans Affairs records to the 
same extent as the attorney of record. Unless revoked by the appellant, 
such consent will remain effective in the event the original attorney of 
record is replaced by another attorney who is a member of the same law 
firm or an attorney employed by the same legal services office. The 
consent must include the name of the veteran; the name of the appellant 
if other than the veteran (e.g., a veteran's survivor, a guardian, or a 
fiduciary appointed to receive VA benefits on an individual's behalf); 
the applicable Department of Veterans Affairs file number; the name of 
the attorney of record; the consent of the appellant for the use of the 
services of the associated or affiliated attorney and for that 
individual to have access to applicable Department of Veterans Affairs 
records; and the name of the associated or affiliated attorney who will 
be assisting in the case. The consent must be filed with the agency of 
original jurisdiction or, if the appellate record has been certified to 
the Board for review, with the Board of Veterans' Appeals. The presiding 
Member at a hearing on appeal may require that not more than one 
attorney participate in the examination of any one witness or impose 
other reasonable limitations to ensure orderly conduct of the hearing.

(Authority: 38 U.S.C. 5901, 5904)

[57 FR 4109, Feb. 3, 1992, as amended at 61 FR 20450, May 7, 1996]



Sec. 20.604  Rule 604. Representation by agents.

    (a) Designation. The designation of an agent will be by a duly 
executed power of attorney, VA Form 22a, ``Appointment of Attorney or 
Agent as Claimant's Representative,'' or its equivalent. The designation 
must be of an individual, rather than a firm or partnership. The 
designation will be effective when it is received by the agency of 
original jurisdiction or, if the appellate record has been certified to 
the Board for review, by the Board of Veterans' Appeals. A properly 
filed designation made prior to appeal will continue to be honored, 
unless it has been revoked or unless the representative has properly 
withdrawn.
    (b) Admission to practice. The provisions of 38 U.S.C. 5904 and of 
Sec. 14.629(b) of this chapter are applicable to the admission of 
agents to practice before the Department of Veterans Affairs. Authority 
for making determinations concerning admission to practice rests with 
the General Counsel of the Department of Veterans Affairs, and any 
questions concerning admissions to practice should be addressed to: 
Office of the General Counsel (022A), Department of Veterans Affairs, 
810 Vermont Avenue, NW., Washington, DC 20420.

(Authority: 38 U.S.C. 5904)

[57 FR 4109, Feb. 3, 1992, as amended at 61 FR 20450, May 7, 1996]



Sec. 20.605  Rule 605. Other persons as representative.

    (a) Scope of rule. This section applies to representation other than 
by a recognized organization, an agent admitted to practice before the 
Department of Veterans Affairs, or an attorney-at-law.
    (b) Who may act as representative. Any competent person may be 
recognized as a representative for a particular claim, unless that 
person has been barred from practice before the Department of Veterans 
Affairs.

[[Page 83]]

    (c) Designation. The designation of an individual to act as an 
appellant's representative may be made by executing a VA Form 22a, 
``Appointment of Attorney or Agent as Claimant's Representative.'' This 
form gives the individual power of attorney to represent the appellant 
in all matters pertaining to the presentation and prosecution of claims 
for any and all benefits under laws administered by the Department of 
Veterans Affairs. In lieu of using the form, the designation may be by a 
written document signed by both the appellant and the individual 
representative, which may be in the form of a letter, which authorizes a 
named individual to act as the appellant's representative only with 
respect to a specific claim involving one or more specific benefits. The 
document must include the name of the veteran; the name of the appellant 
if other than the veteran (e.g., a veteran's survivor, a guardian, or a 
fiduciary appointed to receive VA benefits on an individual's behalf); 
the applicable Department of Veterans Affairs file number; the 
appellant's consent for the individual representative to have access to 
his or her Department of Veterans Affairs records; the name of the 
individual representative; a description of the specific claim for 
benefits to which the designation of representation applies; and a 
certification that no compensation will be charged or paid for the 
individual representative's services. The designation, in either form, 
must be filed with the agency of original jurisdiction or, if the 
appellate record has been certified to the Board for review, with the 
Board of Veterans' Appeals. The designation will be effective when it is 
received by the agency of original jurisdiction or, if the appellate 
record has been certified to the Board for review, by the Board of 
Veterans' Appeals. A properly filed designation made prior to appeal 
will continue to be honored, unless it has been revoked or unless the 
representative has properly withdrawn.
    (d) Representation of more than one appellant. An individual 
recognized as an appellant's representative under this Rule may 
represent only one appellant. If an individual has been recognized as a 
representative for one appellant and wishes to represent another 
appellant, he or she must obtain permission to do so from the Office of 
the General Counsel as provided in Sec. 14.630 of this chapter.

(Authority: 38 U.S.C. 5903)

[57 FR 4109, Feb. 3, 1992, as amended at 61 FR 20450, May 7, 1996]



Sec. 20.606  Rule 606. Legal interns, law students and paralegals.

    (a) Consent of appellant. If it is contemplated that a legal intern, 
law student, or paralegal will assist in the appeal, written consent 
must be obtained from the appellant. The written consent must include 
the name of the veteran; the name of the appellant if other than the 
veteran (e.g., a veteran's survivor, a guardian, or a fiduciary 
appointed to receive VA benefits on an individual's behalf); the 
applicable Department of Veterans Affairs file number; the name of the 
attorney-at-law; the consent of the appellant for the use of the 
services of legal interns, law students, or paralegals and for such 
individuals to have access to applicable Department of Veterans Affairs 
records; and the names of the legal interns, law students, or paralegals 
who will be assisting in the case. In the case of appeals before the 
Board in Washington, DC, the signed consent must be submitted to: 
Director, Management and Administration (01E), Board of Veterans' 
Appeals, 810 Vermont Avenue, NW., Washington, DC 20420. In the case of 
hearings before a Member or Members of the Board at Department of 
Veterans field facilities, the consent must be presented to the 
presiding Member of the hearing as noted in paragraph (d). Unless 
revoked by the appellant, such consent will remain effective in the 
event the original attorney of record is replaced by another attorney 
who is a member of the same law firm or another attorney employed by the 
same legal services office.
    (b) Supervision. Legal interns, law students and paralegals must be 
under the direct supervision of a recognized attorney-at-law in order to 
prepare and present cases before the Board of Veterans' Appeals.
    (c) Hearings. Legal interns, law students and paralegals who desire 
to participate at a hearing before the Board

[[Page 84]]

in Washington, DC, must make advance arrangements with the Director, 
Management and Administration (01E) and submit written authorization 
from the attorney naming the individual who will be participating in the 
hearing. In the case of hearings before a Member or Members of the Board 
at Department of Veterans field facilities in the field, the attorney-
at-law not less than 10 days prior to the scheduled hearing date must 
inform the office of the Department of Veterans Affairs official who 
gave notice of the Travel Board hearing date and time that the services 
of a legal intern, law student, or paralegal will be used at the 
hearing. At the same time, a prehearing conference with the presiding 
Member of the hearing must be requested. At the conference, the written 
consent of the appellant for the use of the services of such an 
individual required by paragraph (a) must be presented and agreement 
reached as to the individual's role in the hearing. Legal interns, law 
students or paralegals may not present oral arguments at hearings either 
in the field or in Washington, DC, unless the recognized attorney-at-law 
is present. Not more than two such individuals may make presentations at 
a hearing. The presiding Member at a hearing on appeal may require that 
not more than one such individual participate in the examination of any 
one witness or impose other reasonable limitations to ensure orderly 
conduct of the hearing.
    (d) Withdrawal of permission for legal interns, law students, and 
paralegals to assist in the presentation of an appeal. When properly 
designated, the attorney-at-law is the recognized representative of the 
appellant and is responsible for ensuring that an appeal is properly 
presented. Legal interns, law students, and paralegals are permitted to 
assist in the presentation of an appeal as a courtesy to the attorney-
at-law. Permission for a legal intern, law student, or paralegal to 
prepare and present cases before the Board may be withdrawn by the 
Chairman or presiding Member at any time if a lack of competence, 
unprofessional conduct, or interference with the appellate process is 
demonstrated by that individual.

(Authority: 38 U.S.C. 5904, 7105(b)(2))

[57 FR 4109, Feb. 3, 1992, as amended at 61 FR 20450, May 7, 1996; 61 FR 
29028, June 7, 1996]



Sec. 20.607  Rule 607. Revocation of a representative's authority to act.

    Subject to the provisions of Sec. 20.1304 of this part, an 
appellant may revoke a representative's authority to act on his or her 
behalf at any time, irrespective of whether another representative is 
concurrently designated. Written notice of the revocation must be given 
to the agency of original jurisdiction or, if the appellate record has 
been certified to the Board for review, to the Board of Veterans' 
Appeals. The revocation is effective when notice of the revocation is 
received by the agency of original jurisdiction or the Board, as 
applicable. An appropriate designation of a new representative will 
automatically revoke any prior designation of representation. If an 
appellant has limited a designation of representation by an attorney-at-
law to a specific claim under the provisions of Rule 603, paragraph (a) 
(Sec. 20.603(a) of this part), or has limited a designation of 
representation by an individual to a specific claim under the provisions 
of Rule 605, paragraph (c) (Sec. 20.605(c) of this part), such specific 
authority constitutes a revocation of an existing representative's 
authority to act only with respect to, and during the pendency of, that 
specific claim. Following the final determination of that claim, the 
existing representative's authority to act will be automatically 
restored in full, unless otherwise revoked.

(Authority: 38 U.S.C. 5901-5904)



Sec. 20.608  Rule 608. Withdrawal of services by a representative.

    (a) Withdrawal of services prior to certification of an appeal. A 
representative may withdraw services as representative in an appeal at 
any time prior to certification of the appeal to the Board of Veterans' 
Appeals by the agency of original jurisdiction. The representative must 
give written notice of such withdrawal to the appellant and to the 
agency of original jurisdiction. The withdrawal is effective when notice 
of

[[Page 85]]

the withdrawal is received by the agency of original jurisdiction.
    (b) Withdrawal of services after certification of an appeal--(1) 
Applicability. The restrictions on a representative's right to withdraw 
contained in this paragraph apply only to those cases in which the 
representative has previously agreed to act as representative in an 
appeal. In addition to express agreement, orally or in writing, such 
agreement shall be presumed if the representative makes an appearance in 
the case by acting on an appellant's behalf before the Board in any way 
after the appellant has designated the representative as such as 
provided in Sec. Sec. 20.602 through 20.605 of this part. The preceding 
sentence notwithstanding, an appearance in an appeal solely to notify 
the Board that a designation of representation has not been accepted 
will not be presumed to constitute such consent.
    (2) Procedures. After the agency of original jurisdiction has 
certified an appeal to the Board of Veterans' Appeals, a representative 
may not withdraw services as representative in the appeal unless good 
cause is shown on motion. Good cause for such purposes is the extended 
illness or incapacitation of an agent admitted to practice before the 
Department of Veterans Affairs, an attorney-at-law, or other individual 
representative; failure of the appellant to cooperate with proper 
preparation and presentation of the appeal; or other factors which make 
the continuation of representation impossible, impractical, or 
unethical. Such motions must be in writing and must include the name of 
the veteran, the name of the claimant or appellant if other than the 
veteran (e.g., a veteran's survivor, a guardian, or a fiduciary 
appointed to receive VA benefits on an individual's behalf), the 
applicable Department of Veterans Affairs file number, and the reason 
why withdrawal should be permitted, and a signed statement certifying 
that a copy of the motion was sent by first-class mail, postage prepaid, 
to the appellant, setting forth the address to which the copy was 
mailed. Such motions should not contain information which would violate 
privileged communications or which would otherwise be unethical to 
reveal. Such motions must be filed at the following address: Office of 
the Senior Deputy Vice Chairman (012), Board of Veterans' Appeals, 810 
Vermont Avenue, NW., Washington, DC 20420. The appellant may file a 
response to the motion with the Board at the same address not later than 
30 days following receipt of the copy of the motion and must include a 
signed statement certifying that a copy of the response was sent by 
first-class mail, postage prepaid, to the representative, setting forth 
the address to which the copy was mailed.

(Authority: 38 U.S.C. 5901-5904, 7105(a))

(Approved by the Office of Management and Budget under control number 
2900-0085)

[57 FR 4109, Feb. 3, 1992, as amended at 61 FR 20450, May 7, 1996; 69 FR 
21069, Apr. 20, 2004]



Sec. 20.609  Rule 609. Payment of representative's fees in proceedings 
before Department of Veterans Affairs field personnel and before the 
Board of Veterans' Appeals.

    (a) Applicability of rule. The provisions of this section apply to 
the services of representatives with respect to benefits under laws 
administered by the Department of Veterans Affairs in all proceedings 
before Department of Veterans Affairs field personnel or before the 
Board of Veterans' Appeals regardless of whether an appeal has been 
initiated.
    (b) Who may charge fees for representation. Only agents and 
attorneys-at-law may receive fees from claimants or appellants for their 
services. Recognized organizations (including their accredited 
representatives when acting as such) and individuals recognized pursuant 
to Rule 605 (Sec. 20.605 of this part) are not permitted to receive 
fees. An attorney-at-law or agent who may also be an accredited 
representative of a recognized organization may not receive such fees 
unless he or she has been properly designated as representative in 
accordance with Rule 603(a) or Rule 604(a) (Sec. 20.603(a) or Sec.  
20.604(a) of this part) in his or her individual capacity.
    (c) Circumstances under which fees may be charged--(1) General. 
Except as noted in paragraph (d) of this section, attorneys-at-law and 
agents may charge

[[Page 86]]

claimants or appellants for their services only if both of the following 
conditions have been met:
    (i) A final decision has been promulgated by the Board of Veterans' 
Appeals with respect to the issue, or issues, involved; and
    (ii) The attorney-at-law or agent was retained not later than one 
year following the date that the decision by the Board of Veterans' 
Appeals with respect to the issue, or issues, involved was promulgated. 
(This condition will be considered to have been met with respect to all 
successor attorneys-at-law or agents acting in the continuous 
prosecution of the same matter if a predecessor was retained within the 
required time period.)
    (2) Clear and unmistakable error cases. For the purposes of this 
section, in the case of a motion under subpart O of this part (relating 
to requests for revision of prior Board decisions on the grounds of 
clear and unmistakable error), the ``issue'' referred to in this 
paragraph (c) shall have the same meaning as ``issue'' in Rule 1401(a) 
(Sec. 20.1401(a) of this part).
    (d) Exceptions--(1) Chapter 37 loans. With respect to services of 
agents and attorneys provided after October 9, 1992, a reasonable fee 
may be charged or paid in connection with any proceeding in a case 
arising out of a loan made, guaranteed, or insured under chapter 37, 
United States Code, even though the conditions set forth in paragraph 
(c) of this section are not met.
    (2) Payment of fee by disinterested third party. (i) An attorney-at-
law or agent may receive a fee or salary from an organization, 
governmental entity, or other disinterested third party for 
representation of a claimant or appellant even though the conditions set 
forth in paragraph (c) of this section have not been met. In no such 
case may the attorney or agent charge a fee which is contingent, in 
whole or in part, on whether the matter is resolved in a manner 
favorable to the claimant or appellant.
    (ii) For purposes of this part, a person shall be presumed not to be 
disinterested if that person is the spouse, child, or parent of the 
claimant or appellant, or if that person resides with the claimant or 
appellant. This presumption may be rebutted by clear and convincing 
evidence that the person in question has no financial interest in the 
success of the claim.
    (iii) The provisions of paragraph (g) of this section (relating to 
fee agreements) shall apply to all payments or agreements to pay 
involving disinterested third parties. In addition, the agreement shall 
include or be accompanied by the following statement, signed by the 
attorney or agent: ``I certify that no agreement, oral or otherwise, 
exists under which the claimant or appellant will provide anything of 
value to the third-party payer in this case in return for payment of my 
fee or salary, including, but not limited to, reimbursement of any fees 
paid.''.
    (e) Fees permitted. Fees permitted for services of an attorney-at-
law or agent admitted to practice before the Department of Veterans 
Affairs must be reasonable. They may be based on a fixed fee, hourly 
rate, a percentage of benefits recovered, or a combination of such 
bases. Factors considered in determining whether fees are reasonable 
include:
    (1) The extent and type of services the representative performed;
    (2) The complexity of the case;
    (3) The level of skill and competence required of the representative 
in giving the services;
    (4) The amount of time the representative spent on the case;
    (5) The results the representative achieved, including the amount of 
any benefits recovered;
    (6) The level of review to which the claim was taken and the level 
of the review at which the representative was retained;
    (7) Rates charged by other representatives for similar services; and
    (8) Whether, and to what extent, the payment of fees is contingent 
upon the results achieved.
    (f) Presumption of reasonableness. Fees which total no more than 20 
percent of any past-due benefits awarded, as defined in Rule 20.3(n) 
(Sec. 20.3(n) of this part), will be presumed to be reasonable.
    (g) Fee agreements. All agreements for the payment of fees for 
services of attorneys-at-law and agents (including

[[Page 87]]

agreements involving fees or salary paid by an organization, 
governmental entity or other disinterested third party) must be in 
writing and signed by both the claimant or appellant and the attorney-
at-law or agent. The agreement must include the name of the veteran, the 
name of the claimant or appellant if other than the veteran, the name of 
each disinterested third-party payer (see paragraph (d)(2) of this 
section), the applicable Department of Veterans Affairs file number, and 
the specific terms under which the amount to be paid for the services of 
the attorney-at-law or agent will be determined. A copy of the agreement 
must be filed with the Board of Veterans' Appeals within 30 days of its 
execution by mailing the copy to the following address: Office of the 
Senior Deputy Vice Chairman (012), Board of Veterans' Appeals, 810 
Vermont Avenue, NW, Washington, DC 20420.
    (h) Payment of fees by Department of Veterans Affairs directly to an 
attorney-at-law from past-due benefits. (1) Subject to the requirements 
of the other paragraphs of this section, including paragraphs (c) and 
(e), the claimant or appellant and an attorney-at-law may enter into a 
fee agreement providing that payment for the services of the attorney-
at-law will be made directly to the attorney-at-law by the Department of 
Veterans Affairs out of any past-due benefits awarded as a result of a 
successful appeal to the Board of Veterans' Appeals or an appellate 
court or as a result of a reopened claim before the Department following 
a prior denial of such benefits by the Board of Veterans' Appeals or an 
appellate court. Such an agreement will be honored by the Department 
only if the following conditions are met:
    (i) The total fee payable (excluding expenses) does not exceed 20 
percent of the total amount of the past-due benefits awarded,
    (ii) The amount of the fee is contingent on whether or not the claim 
is resolved in a manner favorable to the claimant or appellant, and
    (iii) The award of past-due benefits results in a cash payment to a 
claimant or an appellant from which the fee may be deducted. (An award 
of past-due benefits will not always result in a cash payment to a 
claimant or an appellant. For example, no cash payment will be made to 
military retirees unless there is a corresponding waiver of retirement 
pay. (See 38 U.S.C. 5304(a) and Sec. 3.750 et seq. of this chapter.))
    (2) For purposes of this paragraph, a claim will be considered to 
have been resolved in a manner favorable to the claimant or appellant if 
all or any part of the relief sought is granted.
    (3) For purposes of this paragraph, ``past-due benefits'' means a 
nonrecurring payment resulting from a benefit, or benefits, granted on 
appeal or awarded on the basis of a claim reopened after a denial by the 
Board of Veterans' Appeals or the lump sum payment which represents the 
total amount of recurring cash payments which accrued between the 
effective date of the award, as determined by applicable laws and 
regulations, and the date of the grant of the benefit by the agency of 
original jurisdiction, the Board of Veterans' Appeals, or an appellate 
court.
    (i) When the benefit granted on appeal, or as the result of the 
reopened claim, is service connection for a disability, the ``past-due 
benefits'' will be based on the initial disability rating assigned by 
the agency of original jurisdiction following the award of service 
connection. The sum will equal the payments accruing from the effective 
date of the award to the date of the initial disability rating decision. 
If an increased evaluation is subsequently granted as the result of an 
appeal of the disability evaluation initially assigned by the agency of 
original jurisdiction, and if the attorney-at-law represents the 
claimant or appellant in that phase of the claim, the attorney-at-law 
will be paid a supplemental payment based upon the increase granted on 
appeal, to the extent that the increased amount of disability is found 
to have existed between the initial effective date of the award 
following the grant of service connection and the date of the rating 
action implementing the appellate decision granting the increase.
    (ii) Unless otherwise provided in the fee agreement between the 
claimant or appellant and the attorney-at-law, the

[[Page 88]]

attorney-at-law's fees will be determined on the basis of the total 
amount of the past-due benefits even though a portion of those benefits 
may have been apportioned to the claimant's or appellant's dependents.
    (iii) If an award is made as the result of favorable action with 
respect to several issues, the past-due benefits will be calculated only 
on the basis of that portion of the award which results from action 
taken on issues concerning which the criteria in paragraph (c) of this 
section have been met.
    (4) In addition to filing a copy of the fee agreement with the Board 
of Veterans' Appeals as required by paragraph (g) of this section, the 
attorney-at-law must notify the agency of original jurisdiction within 
30 days of the date of execution of the agreement of the existence of an 
agreement providing for the direct payment of fees out of any benefits 
subsequently determined to be past due and provide that agency with a 
copy of the fee agreement.
    (i) Motion for review of fee agreement. The Board of Veterans' 
Appeals may review a fee agreement between a claimant or appellant and 
an attorney-at-law or agent upon its own motion or upon the motion of 
any party to the agreement and may order a reduction in the fee called 
for in the agreement if it finds that the fee is excessive or 
unreasonable in light of the standards set forth in paragraph (e) of 
this section. Such motions must be in writing and must include the name 
of the veteran, the name of the claimant or appellant if other than the 
veteran, and the applicable Department of Veterans Affairs file number. 
Such motions must set forth the reason, or reasons, why the fee called 
for in the agreement is excessive or unreasonable; must be accompanied 
by all evidence the moving party desires to submit; and must include a 
signed statement certifying that a copy of the motion and any evidence 
was sent by first-class mail, postage prepaid, to each other party to 
the agreement, setting forth the address to which each such copy was 
mailed. Such motions (other than motions by the Board) must be filed at 
the following address: Office of the Senior Deputy Vice Chairman (012), 
Board of Veterans' Appeals, 810 Vermont Avenue, NW, Washington, DC 
20420. The other parties may file a response to the motion, with any 
accompanying evidence, with the Board at the same address not later than 
30 days following the date of receipt of the copy of the motion and must 
include a signed statement certifying that a copy of the response and 
any evidence was sent by first-class mail, postage prepaid, to each 
other party to the agreement, setting forth the address to which each 
such copy was mailed. Once there has been a ruling on the motion, an 
order shall issue which will constitute the final decision of the Board 
with respect to the motion. If a reduction in the fee is ordered, the 
attorney or agent must credit the account of the claimant or appellant 
with the amount of the reduction and refund any excess payment on 
account to the claimant or appellant not later than the expiration of 
the time within which the ruling may be appealed to the United States 
Court of Appeals for Veterans Claims.
    (j) In addition to whatever other penalties may be prescribed by law 
or regulation, failure to comply with the requirements of this section 
may result in proceedings under Sec. 14.633 of this chapter to 
terminate the attorney's or agent's right to practice before the 
Department of Veterans Affairs and the Board of Veterans' Appeals.

(Authority: 38 U.S.C. 5902, 5904, 5905)

(Approved by the Office of Management and Budget under control number 
2900-0085)

[57 FR 4109, Feb. 3, 1992, as amended at 57 FR 38443, Aug. 25, 1992; 59 
FR 25330, May 16, 1994; 64 FR 2138, Jan. 13, 1999; 65 FR 14472, Mar. 17, 
2000; 67 FR 36104, May 23, 2002; 67 FR 49600, July 31, 2002]



Sec. 20.610  Rule 610. Payment of representative's expenses in 
proceedings before Department of Veterans Affairs field personnel 
and before the Board of Veterans' Appeals.

    (a) Applicability of rule. The provisions of this section apply to 
the services of representatives with respect to benefits under laws 
administered by the Department of Veterans Affairs in all proceedings 
before Department of

[[Page 89]]

Veterans Affairs field personnel or before the Board of Veterans' 
Appeals regardless of whether an appeal has been initiated.
    (b) General. Any representative may be reimbursed for expenses 
incurred on behalf of a veteran or a veteran's dependents or survivors 
in the prosecution of a claim for benefits pending before the Department 
of Veterans Affairs. Whether such a representative will be reimbursed 
for expenses and the method of such reimbursement is a matter to be 
determined by the representative and the claimant or appellant. Expenses 
are not payable directly to the representative by the Department of 
Veterans Affairs out of benefits determined to be due to a claimant or 
appellant. Unless required in conjunction with a motion for the review 
of expenses filed in accordance with paragraph (d) of this section, 
agreements for the reimbursement of expenses need not be filed with the 
Department of Veterans Affairs or the Board of Veterans' Appeals.
    (c) Nature of expenses subject to reimbursement. ``Expenses'' 
include nonrecurring expenses incurred directly in the prosecution of a 
claim for benefits upon behalf of a claimant or appellant. Examples of 
such expenses include expenses for travel specifically to attend a 
hearing with respect to a particular claim, the cost of copies of 
medical records or other documents obtained from an outside source, the 
cost of obtaining the services of an expert witness or an expert 
opinion, etc. ``Expenses'' do not include normal overhead costs of the 
representative such as office rent, utilities, the cost of obtaining or 
operating office equipment or a legal library, salaries of the 
representative and his or her support staff, the cost of office 
supplies, etc.
    (d) Expense charges permitted; motion for review of expenses. 
Reimbursement for the expenses of a representative may be obtained only 
if the expenses are reasonable. The Board of Veterans' Appeals may 
review expenses charged by a representative upon the motion of the 
claimant or appellant and may order a reduction in the expenses charged 
if it finds that they are excessive or unreasonable. Such motions must 
be in writing and must include the name of the veteran, the name of the 
claimant or appellant if other than the veteran, and the applicable 
Department of Veterans Affairs file number. Such motions must 
specifically identify which expenses charged are unreasonable; must set 
forth the reason, or reasons, why such expenses are excessive or 
unreasonable; must be accompanied by all evidence the claimant or 
appellant desires to submit; and must include a signed statement 
certifying that a copy of the motion and any evidence was sent by first-
class mail, postage prepaid, to the representative. Such motions must be 
filed at the following address: Office of the Senior Deputy Vice 
Chairman (012), Board of Veterans' Appeals, 810 Vermont Avenue, NW, 
Washington, DC 20420. The representative may file a response to the 
motion, with any accompanying evidence, with the Board at the same 
address not later than 30 days following the date of receipt of the copy 
of the motion and must include a signed statement certifying that a copy 
of the response and any evidence was sent by first-class mail, postage 
prepaid, to the claimant or appellant, setting forth the address to 
which the copy was mailed. Factors considered in determining whether 
expenses are excessive or unreasonable include the complexity of the 
case, the potential extent of benefits recoverable, whether travel 
expenses are in keeping with expenses normally incurred by other 
representatives, etc. Once there has been a ruling on the motion, an 
order shall issue which will constitute the final decision of the Board 
with respect to the motion.
    (e) In addition to whatever other penalties may be prescribed by law 
or regulation, failure to comply with the requirements of this section 
may result in proceedings under Sec. 14.633 of this chapter to 
terminate the attorney's or agent's right to practice before the 
Department of Veterans Affairs and the Board of Veterans' Appeals.

(Authority: 38 U.S.C. 5904)

(Approved by the Office of Management and Budget under control number 
2900-0085)

[57 FR 4109, Feb. 3, 1992, as amended at 57 FR 38443, Aug. 25, 1992; 67 
FR 36105, May 23, 2002]

[[Page 90]]



Sec. Sec. 20.612-20.699  [Reserved]



                      Subpart H_Hearings on Appeal



Sec. 20.700  Rule 700. General.

    (a) Right to a hearing. A hearing on appeal will be granted if an 
appellant, or an appellant's representative acting on his or her behalf, 
expresses a desire to appear in person.
    (b) Purpose of hearing. The purpose of a hearing is to receive 
argument and testimony relevant and material to the appellate issue. It 
is contemplated that the appellant and witnesses, if any, will be 
present. A hearing will not normally be scheduled solely for the purpose 
of receiving argument by a representative. Such argument should be 
submitted in the form of a written brief. Oral argument may also be 
submitted on audio cassette for transcription for the record in 
accordance with paragraph (d) of this section. Requests for appearances 
by representatives alone to personally present argument to Members of 
the Board may be granted if good cause is shown. Whether good cause has 
been shown will be determined by the presiding Member assigned to 
conduct the hearing.
    (c) Nonadversarial proceedings. Hearings conducted by the Board are 
ex parte in nature and nonadversarial. Parties to the hearing will be 
permitted to ask questions, including follow-up questions, of all 
witnesses but cross-examination will not be permitted. Proceedings will 
not be limited by legal rules of evidence, but reasonable bounds of 
relevancy and materiality will be maintained. The presiding Member may 
set reasonable time limits for the presentation of argument and may 
exclude documentary evidence, testimony, and/or argument which is not 
relevant or material to the issue, or issues, being considered or which 
is unduly repetitious.
    (d) Informal hearings. This term is used to describe situations in 
which the appellant cannot, or does not wish to, appear. In the absence 
of the appellant, the authorized representative may present oral 
arguments, not exceeding 30 minutes in length, to the Board on an audio 
cassette without personally appearing before the Board of Veterans 
Appeals. These arguments will be transcribed by Board personnel for 
subsequent review by the Member or Members to whom the appeal has been 
assigned for a determination. This procedure will not be construed to 
satisfy an appellant's request to appear in person.
    (e) Electronic hearings. When suitable facilities and equipment are 
available, an appellant may be scheduled for an electronic hearing. Any 
such hearing will be in lieu of a hearing held by personally appearing 
before a Member or panel of Members of the Board and shall be conducted 
in the same manner as, and considered the equivalent of, such a hearing. 
If an appellant declines to participate in an electronic hearing, the 
appellant's opportunity to participate in a hearing before the Board 
shall not be affected.

(Authority: 38 U.S.C. 7102, 7105(a), 7107)

[57 FR 4109, Feb. 3, 1992, as amended at 58 FR 27935, May 12, 1993; 61 
FR 20450, May 7, 1996]



Sec. 20.701  Rule 701. Who may present oral argument.

    Only the appellant and/or his or her authorized representative may 
appear and present argument in support of an appeal. At the request of 
an appellant, a Veterans Benefits Counselor of the Department of 
Veterans Affairs may present the appeal at a hearing before the Board of 
Veterans' Appeals.

(Authority: 38 U.S.C. 7102, 7105, 7107)

[58 FR 27935, May 12, 1993]



Sec. 20.702  Rule 702. Scheduling and notice of hearings conducted by 
the Board of Veterans' Appeals in Washington, DC.

    (a) General. To the extent that officials scheduling hearings for 
the Board of Veterans' Appeals determine that necessary physical 
resources and qualified personnel are available, hearings will be 
scheduled at the convenience of appellants and their representatives, 
with consideration of the travel distance involved. While a Statement of 
the Case should be prepared prior to the hearing, it is not a 
prerequisite for a hearing and an appellant may request that the hearing 
be scheduled prior to issuance of the Statement of the Case.


(Authority: 38 U.S.C. 7102, 7105(a), 7107)


[[Page 91]]


    (b) Notification of hearing. When a hearing is scheduled, the person 
requesting it will be notified of its time and place, and of the fact 
that the Government may not assume any expense incurred by the 
appellant, the representative or witnesses attending the hearing.


(Authority: 38 U.S.C. 7102, 7105(a), 7107)

    (c) Requests for changes in hearing dates. (1) The appellant or the 
representative may request a different date for the hearing within 60 
days from the date of the letter of notification of the time and place 
of the hearing, or not later than two weeks prior to the scheduled 
hearing date, whichever is earlier. The request must be in writing, but 
the grounds for the request need not be stated. Only one such request 
for a change of the date of the hearing will be granted, subject to the 
interests of other parties if a simultaneously contested claim is 
involved. In the case of hearings to be conducted by the Board of 
Veterans' Appeals in Washington, DC, such requests for a new hearing 
date must be filed with: Director, Management and Administration (01E), 
Board of Veterans' Appeals, 810 Vermont Avenue, NW., Washington, DC 
20420.
    (2) After the period described in paragraph (c)(1) of this section 
has passed, or after one change in the hearing date is granted based on 
a request received during such period, the date of the hearing will 
become fixed. After a hearing date has become fixed, an extension of 
time for appearance at a hearing will be granted only for good cause, 
with due consideration of the interests of other parties if a 
simultaneously contested claim is involved. Examples of good cause 
include, but are not limited to, illness of the appellant and/or 
representative, difficulty in obtaining necessary records, and 
unavailability of a necessary witness. The motion for a new hearing date 
must be in writing and must explain why a new hearing date is necessary. 
If good cause is shown, the hearing will be rescheduled for the next 
available hearing date after the appellant or his or her representative 
gives notice that the contingency which gave rise to the request for 
postponement has been removed. Ordinarily, however, hearings will not be 
postponed more than 30 days. In the case of a hearing conducted by the 
Board of Veterans' Appeals in Washington, DC, whether good cause for 
establishing a new hearing date has been shown will be determined by the 
presiding Member assigned to conduct the hearing. In the case of 
hearings to be conducted by the Board of Veterans' Appeals in 
Washington, DC, the motion for a new hearing date must be filed with: 
Director, Management and Administration (01E), Board of Veterans' 
Appeals, 810 Vermont Avenue, NW., Washington, DC 20420.


(Authority: 38 U.S.C. 7102, 7105(a), 7105A, 7107)

    (d) Failure to appear for a scheduled hearing. If an appellant (or 
when a hearing only for oral argument by a representative has been 
authorized, the representative) fails to appear for a scheduled hearing 
and a request for postponement has not been received and granted, the 
case will be processed as though the request for a hearing had been 
withdrawn. No further request for a hearing will be granted in the same 
appeal unless such failure to appear was with good cause and the cause 
for the failure to appear arose under such circumstances that a timely 
request for postponement could not have been submitted prior to the 
scheduled hearing date. A motion for a new hearing date following a 
failure to appear must be in writing; must be submitted not more than 15 
days following the original hearing date; and must set forth the reason, 
or reasons, for the failure to appear at the originally scheduled 
hearing and the reason, or reasons, why a timely request for 
postponement could not have been submitted. In the case of hearings to 
be conducted by the Board of Veterans' Appeals in Washington, DC, the 
motion must be filed with: Director, Management and Administration 
(01E), Board of Veterans' Appeals, 810 Vermont Avenue, NW., Washington, 
DC 20420. If good cause is shown, the hearing will be rescheduled for 
the next available hearing date after the appellant or his or her 
representative gives notice that the contingency which gave rise to the 
failure to appear has been removed. Ordinarily, however, hearings will 
not be

[[Page 92]]

postponed more than 30 days. In the case of hearings before the Board of 
Veterans' Appeals in Washington, DC, whether good cause for such failure 
to appear has been established will be determined by the presiding 
Member assigned to conduct the hearing.


(Authority: 38 U.S.C. 7102, 7105(a), 7105A, 7107)

    (e) Withdrawal of hearing requests. A request for a hearing may be 
withdrawn by an appellant at any time before the date of the hearing. A 
request for a hearing may not be withdrawn by an appellant's 
representative without the consent of the appellant. In the case of 
hearings to be conducted by the Board of Veterans' Appeals in 
Washington, DC, the notice of withdrawal must be sent to: Director, 
Management and Administration (01E), Board of Veterans' Appeals, 810 
Vermont Avenue, NW., Washington, DC 20420.


(Authority: 38 U.S.C. 7102, 7105(a), 7107)

(Approved by the Office of Management and Budget under control number 
2900-0085)

[57 FR 4109, Feb. 3, 1992, as amended at 58 FR 27935, May 12, 1993; 61 
FR 20450, May 7, 1996]



Sec. 20.703  Rule 703. When a hearing before the Board of Veterans' 
Appeals at a Department of Veterans Affairs field facility may be 
requested.

    An appellant, or an appellant's representative, may request a 
hearing before the Board of Veterans' Appeals at a Department of 
Veterans Affairs field facility when submitting the substantive appeal 
(VA Form 9) or anytime thereafter, subject to the restrictions in Rule 
1304 (Sec. 20.1304 of this part). Requests for such hearings before a 
substantive appeal has been filed will be rejected.


(Authority: 38 U.S.C. 7105(a), 7107)

[61 FR 43009, Aug. 20, 1996]



Sec. 20.704  Rule 704. Scheduling and notice of hearings conducted by 
the Board of Veterans' Appeals at Department of Veterans Affairs field 
facilities.

    (a) General. Hearings are conducted by a Member or Members of the 
Board of Veterans' Appeals during prescheduled visits to Department of 
Veterans Affairs facilities having adequate physical resources and 
personnel for the support of such hearings. Subject to paragraph (f) of 
this section, the hearings will be scheduled in the order specified in 
Sec. 19.75 of this chapter. Requests for such hearings must be 
submitted to the agency of original jurisdiction, in writing, and should 
not be submitted directly to the Board of Veterans' Appeals.
    (b) Notification of hearing. When a hearing is scheduled, the person 
requesting it will be notified of its time and place, and of the fact 
that the Government may not assume any expense incurred by the 
appellant, the representative or witnesses attending the hearing.
    (c) Requests for changes in hearing dates. Requests for a change in 
a hearing date may be made at any time up to two weeks prior to the 
scheduled date of the hearing if good cause is shown. Such requests must 
be in writing, must explain why a new hearing date is necessary, and 
must be filed with the office of the official of the Department of 
Veterans Affairs who signed the notice of the original hearing date. 
Examples of good cause include, but are not limited to, illness of the 
appellant and/or representative, difficulty in obtaining necessary 
records, and unavailability of a necessary witness. If good cause is 
shown, the hearing will be rescheduled for the next available hearing 
date after the appellant or his or her representative gives notice that 
the contingency which gave rise to the request for postponement has been 
removed. If good cause is not shown, the appellant and his or her 
representative will be promptly notified and given an opportunity to 
appear at the hearing as previously scheduled. If the appellant elects 
not to appear at the prescheduled date, the request for a hearing will 
be considered to have been withdrawn. In such cases, however, the record 
will be submitted for review by the Member who would have presided over 
the hearing. If the presiding Member determines that good cause has been 
shown, the hearing will be rescheduled for the next available hearing 
date after the contingency which gave rise to the request for 
postponement has been removed.

[[Page 93]]

    (d) Failure to appear for a scheduled hearing. If an appellant (or 
when a hearing only for oral argument by a representative has been 
authorized, the representative) fails to appear for a scheduled hearing 
and a request for postponement has not been received and granted, the 
case will be processed as though the request for a hearing had been 
withdrawn. No further request for a hearing will be granted in the same 
appeal unless such failure to appear was with good cause and the cause 
for the failure to appear arose under such circumstances that a timely 
request for postponement could not have been submitted prior to the 
scheduled hearing date. A motion for a new hearing date following a 
failure to appear for a scheduled hearing must be in writing, must be 
filed within 15 days of the originally scheduled hearing date, and must 
explain why the appellant failed to appear for the hearing and why a 
timely request for a new hearing date could not have been submitted. 
Such motions must be filed with: Director, Management and Administration 
(01E), Board of Veterans' Appeals, 810 Vermont Avenue, NW., Washington, 
DC 20420. Whether good cause for such failure to appear and the 
impossibility of timely requesting postponement have been established 
will be determined by the Member who would have presided over the 
hearing. If good cause and the impossibility of timely requesting 
postponement are shown, the hearing will be rescheduled for the next 
available hearing date at the same facility after the appellant or his 
or her representative gives notice that the contingency which gave rise 
to the failure to appear has been removed.
    (e) Withdrawal of hearing requests. A request for a hearing may be 
withdrawn by an appellant at any time before the date of the hearing. A 
request for a hearing may not be withdrawn by an appellant's 
representative without the consent of the appellant. Notices of 
withdrawal must be submitted to the office of the Department of Veterans 
Affairs official who signed the notice of the hearing date.
    (f) Advancement of the case on the hearing docket. A hearing may be 
scheduled at a time earlier than would be provided for under Sec. 19.75 
of this chapter upon written motion of the appellant or the 
representative. The same grounds for granting relief, motion filing 
procedures, and designation of authority to rule on the motion specified 
in Rule 900(c) (Sec. 20.900(c) of this part) for advancing a case on 
the Board's docket shall apply.

(Authority: 38 U.S.C. 7107)

(Approved by the Office of Management and Budget under control number 
2900-0085)

[57 FR 4109, Feb. 3, 1992, as amended at 61 FR 20451, May 7, 1996; 65 FR 
14471, Mar. 17, 2000]



Sec. 20.705  Rule 705. Where hearings are conducted.

    A hearing on appeal before the Board of Veterans' Appeals may be 
held in one of the following places at the option of the appellant:
    (a) In Washington, DC, or
    (b) At a Department of Veterans Affairs facility having adequate 
physical resources and personnel for the support of such hearings.

(Authority: 38 U.S.C. 7102, 7105(a), 7107)

[58 FR 27936, May 12, 1993, as amended at 61 FR 20451, May 7, 1996]



Sec. 20.706  Rule 706. Functions of the presiding Member.

    The presiding Member of a hearing panel is responsible for the 
conduct of the hearing, administration of the oath or affirmation, and 
for ruling on questions of procedure. The presiding Member will assure 
that the course of the hearing remains relevant to the issue, or issues, 
on appeal and that there is no cross-examination of the parties or 
witnesses. The presiding Member will take such steps as may be necessary 
to maintain good order at hearings and may terminate a hearing or direct 
that the offending party leave the hearing if an appellant, 
representative, or witness persists in disruptive behavior.

(Authority: 38 U.S.C. 7102, 7105(a), 7107)



Sec. 20.707  Rule 707. Designation of Member or Members to conduct the 
hearing.

    The Member or panel to whom a proceeding is assigned under Sec. 
19.3 of this part shall conduct any hearing before the Board in 
connection with that proceeding. Where a proceeding has been

[[Page 94]]

assigned to a panel, the Chairman, or the Chairman's designee, shall 
designate one of the Members as the presiding Member. The Member or 
Members who conduct the hearing shall participate in making the final 
determination of the claim, subject to the exception in Sec. 19.11(c) 
of this part (relating to reconsideration of a decision).

(Authority: 38 U.S.C. 7102, 7107)

[61 FR 20451, May 7, 1996]



Sec. 20.708  Rule 708. Prehearing conference.

    An appellant's authorized representative may request a prehearing 
conference with the presiding Member of a hearing to clarify the issues 
to be considered at a hearing on appeal, obtain rulings on the 
admissibility of evidence, develop stipulations of fact, establish the 
length of argument which will be permitted, or take other steps which 
will make the hearing itself more efficient and productive. With respect 
to hearings to be held before the Board at Washington, DC, arrangements 
for a prehearing conference must be made through: Director, Management 
and Administration (01E), Board of Veterans' Appeals, 810 Vermont 
Avenue, NW., Washington, DC 20420. Requests for prehearing conferences 
in cases involving hearings to be held before the Board at Department of 
Veterans Affairs field facilities must be addressed to the office of the 
Department of Veterans Affairs official who signed the letter giving 
notice of the time and place of the hearing.

(Authority: 38 U.S.C. 7102, 7105(a), 7107)

[61 FR 20452, May 7, 1996]



Sec. 20.709  Rule 709. Procurement of additional evidence following a 
hearing.

    If it appears during the course of a hearing that additional 
evidence would assist in the review of the questions at issue, the 
presiding Member may direct that the record be left open so that the 
appellant and his or her representative may obtain the desired evidence. 
The presiding Member will determine the period of time during which the 
record will stay open, considering the amount of time estimated by the 
appellant or representative as needed to obtain the evidence and other 
factors adduced during the hearing. Ordinarily, the period will not 
exceed 60 days, and will be as short as possible in order that appellate 
consideration of the case not be unnecessarily delayed.

(Authority: 38 U.S.C. 7102, 7105(a), 7107)



Sec. 20.710  Rule 710. Witnesses at hearings.

    The testimony of witnesses, including appellants, will be heard. All 
testimony must be given under oath or affirmation. Oath or affirmation 
is not required for the sole purpose of presenting contentions and 
argument.

(Authority: 38 U.S.C. 7102, 7105(a), 7107)

[61 FR 29028, June 7, 1996]



Sec. 20.711  Rule 711. Subpoenas.

    (a) General. An appellant, or his or her representative, may arrange 
for the production of any tangible evidence or the voluntary appearance 
of any witnesses desired. When necessary evidence cannot be obtained in 
any other reasonable way, the appellant, or his or her representative, 
may move that a subpoena be issued to compel the attendance of witnesses 
residing within 100 miles of the place where a hearing on appeal is to 
be held and/or to compel the production of tangible evidence. A subpoena 
will not be issued to compel the attendance of Department of Veterans 
Affairs adjudicatory personnel.
    (b) Contents of motion for subpoena. The motion for a subpoena must 
be in writing, must clearly show the name and address of each witness to 
be subpoenaed, must clearly identify all documentary or other tangible 
evidence to be produced, and must explain why the attendance of the 
witness and/or the production of the tangible evidence cannot be 
obtained without a subpoena.
    (c) Where filed. Motions for a subpoena must be filed with the 
Director, Management and Administration (01E), Board of Veterans' 
Appeals, 810 Vermont Avenue, NW, Washington, DC 20420.
    (d) When motion for subpoena is to be filed in cases involving a 
hearing on appeal. Motions for the issuance of a subpoena for the 
attendance of a witness, or the production of documents or

[[Page 95]]

other tangible evidence, at a hearing on appeal must be filed not later 
than 30 days prior to the hearing date.
    (e) Ruling on motion for subpoena--(1) To whom assigned. The ruling 
on the motion will be made by the Member or panel of Members to whom the 
case is assigned. Where the case has not been assigned, the Chairman, or 
the Chairman's designee, will assign the case to a Member or panel who 
will then rule on the motion.
    (2) Procedure. If the motion is denied, the Member(s) ruling on the 
motion will issue an order to that effect which sets forth the reasons 
for the denial and will send copies to the moving party and his or her 
representative, if any. Granting the motion will be signified by 
completion of a VA Form 0714, ``Subpoena,'' if attendance of a witness 
is required, and/or VA Form 0713, ``Subpoena Duces Tecum,'' if 
production of tangible evidence is required. The completed form shall be 
signed by the Member ruling on the motion, or, where applicable, by any 
panel Member on behalf of the panel ruling on the motion, and served in 
accordance with paragraph (g) of this section.
    (f) Fees. Any person who is required to attend a hearing as a 
witness shall be allowed and paid the same fees and mileage as are paid 
witnesses in the district courts of the United States. A subpoena for a 
witness will not be issued or served unless the party on whose behalf 
the subpoena is issued submits a check in an amount equal to the fee for 
one day's attendance and the mileage allowed by law, made payable to the 
witness, as an attachment to the motion for the subpoena. Except for 
checks on the business accounts of attorneys-at-law, agents, and 
recognized service organizations, such checks must be in the form of 
certified checks or cashiers checks.
    (g) Service of subpoenas. The Board will serve the subpoena by 
certified mail, return receipt requested. The check for fees and mileage 
described in paragraph (f) of this section shall be mailed with the 
subpoena. The receipt, which must bear the signature of the witness or 
of the custodian of the tangible evidence, and a copy of the subpoena 
will be filed in the claims folder, loan guaranty folder, or other 
applicable Department of Veterans Affairs records folder.
    (h) Motion to quash or modify subpoena--(1) Filing procedure. Upon 
written motion of the party securing the subpoena, or of the person 
subpoenaed, the Board may quash or modify the subpoena if it is 
unreasonable and oppressive or for other good cause shown. Relief may 
include, but is not limited to, requiring the party who secured the 
subpoena to advance the reasonable cost of producing books, papers, or 
other tangible evidence. The motion must specify the relief sought and 
the reasons for requesting relief. Such motions must be filed at the 
address specified in paragraph (c) of this section within 10 days after 
mailing of the subpoena or the time specified in the subpoena for 
compliance, whichever is less. The motion may be accompanied by such 
supporting evidence as the moving party may choose to submit. It must be 
accompanied by a declaration showing:
    (i) That a copy of the motion, and any attachments thereto, were 
mailed to the party who secured the subpoena, or the person subpoenaed, 
as applicable;
    (ii) The date of mailing; and
    (iii) The address to which the copy was mailed.
    (2) Response. Not later than 10 days after the date that the motion 
was mailed to the responding party, that party may file a response to 
the motion at the address specified in paragraph (c) of this section. 
The response may be accompanied by such supporting evidence as the 
responding party may choose to submit. It must be accompanied by a 
declaration showing:
    (i) That a copy of the response, and any attachments thereto, were 
mailed to the moving party;
    (ii) The date of mailing; and
    (iii) The address to which the copy was mailed. If the subpoena 
involves testimony or the production of tangible evidence at a hearing 
before the Board and less than 30 days remain before the scheduled 
hearing date at the time the response is received by the Board, the 
Board may reschedule the hearing to permit disposition of the motion.

[[Page 96]]

    (3) Ruling on the motion. The Member or panel to whom the case is 
assigned will issue an order disposing of the motion. Such order shall 
set forth the reasons for which a motion is either granted or denied. 
The order will be mailed to all parties to the motion. Where applicable, 
an order quashing a subpoena will require refund of any sum advanced for 
fees and mileage.
    (i) Disobedience. In case of disobedience to a subpoena issued by 
the Board, the Board will take such steps as may be necessary to invoke 
the aid of the appropriate district court of the United States in 
requiring the attendance of the witness and/or the production of the 
tangible evidence subpoenaed. A failure to obey the order of such a 
court may be punished by the court as a contempt thereof.

(Authority: 38 U.S.C. 5711, 5713, 7102(a))

(Authority: 38 U.S.C. 5711, 7102(a), 7107)

[57 FR 4109, Feb. 3, 1992, as amended at 61 FR 20452, May 7, 1996; 66 FR 
49538, Sept. 28, 2001]



Sec. 20.712  Rule 712. Expenses of appellants, representatives, and 
witnesses incident to hearings not reimbursable by the Government.

    No expenses incurred by an appellant, representative, or witness 
incident to attendance at a hearing may be paid by the Government.

(Authority: 38 U.S.C. 111)



Sec. 20.713  Rule 713. Hearings in simultaneously contested claims.

    (a) General. If a hearing is scheduled for any party to a 
simultaneously contested claim, the other contesting claimants and their 
representatives, if any, will be notified and afforded an opportunity to 
be present. The appellant will be allowed to present opening testimony 
and argument. Thereafter, any other contesting party who wishes to do so 
may present testimony and argument. The appellant will then be allowed 
an opportunity to present testimony and argument in rebuttal. Cross-
examination will not be allowed.
    (b) Requests for changes in hearing dates. Any party to a 
simultaneously contested claim may request a change in a hearing date in 
accordance with the provisions of Rule 702, paragraph (c) (Sec. 
20.702(c) of this part), or Rule 704, paragraph (c) (Sec. 20.704(c) of 
this part), as applicable. In order to obtain a new hearing date under 
the provisions of Rule 702, paragraph (c)(1), the consent of all other 
interested parties must be obtained and submitted with the request for a 
new hearing date. If such consent is not obtained, paragraph (c)(2) of 
that rule will apply even though the request is submitted within 60 days 
from the date of the letter of notification of the time and place of the 
hearing. A copy of any motion for a new hearing date required by these 
rules must be mailed to all other interested parties by certified mail, 
return receipt requested. The receipts, which must bear the signatures 
of the other interested parties, and a letter explaining that they 
relate to the motion for a new hearing date and containing the 
applicable Department of Veterans Affairs file number must be filed at 
the same address where the motion was filed as proof of service of the 
motion. Each interested party will be allowed a period of 10 days from 
the date that the copy of the motion was received by that party to file 
written argument in response to the motion.

(Authority: 38 U.S.C. 7105A)



Sec. 20.714  Rule 714. Record of hearing.

    (a) Board of Veterans' Appeals. A hearing before a Member or panel 
of Members of the Board, whether held in Washington, DC, or at a 
Department of Veterans Affairs field facility, will be recorded on audio 
tape. In those instances where a complete written transcript is 
prepared, that transcript will be the official record of the hearing and 
the tape recording will be retained at the Board for a period of 12 
months following the date of the hearing as a duplicate record of the 
hearing. Tape recordings of hearings that have not been transcribed will 
be maintained by the Board as the official record of hearings and 
retained in accordance with retention standards approved by the National 
Archives and Records Administration. A transcript will be prepared and 
incorporated as a part of the claims folder, loan guaranty folder, or 
other applicable Department of Veterans Affairs records folder if one or 
more of the following conditions have been met:

[[Page 97]]

    (1) The appellant or representative has shown good cause why such a 
written transcript should be prepared. (The presiding Member will 
determine whether good cause has been shown. Requests that recordings of 
hearing proceedings be transcribed may be made orally at the time of the 
hearing. Requests made subsequent to the hearing must be in writing and 
must explain why transcription is necessary. They must be filed with: 
Director, Management and Administration (01E), Board of Veterans' 
Appeals, 810 Vermont Avenue, NW., Washington, DC 20420.)
    (2) Testimony and/or argument has been presented at the hearing 
pertaining to an issue which is to be remanded to the agency of original 
jurisdiction for further development or an issue which is not in 
appellate status which is to be referred to the agency of original 
jurisdiction for consideration.
    (3) The hearing involves an issue relating to National Service Life 
Insurance or United States Government Life Insurance.
    (4) With respect to hearings conducted by a Member or Members of the 
Board at a Department of Veterans Affairs field facility :
    (i) An issue on appeal involves radiation, Agent Orange, or asbestos 
exposure;
    (ii) The appeal involves reconsideration of a prior Board of 
Veterans' Appeals decision on the same issue; or
    (5) The Board's decision on an issue addressed at the hearing has 
been appealed to the United States Court of Appeals for Veterans Claims.
    (b) Copy of hearing tape recording or written transcript. One copy 
of the tape recording of hearing proceedings before the Board of 
Veterans' Appeals, or the written transcript of such proceedings when 
such a transcript has been prepared in accordance with the provisions of 
paragraph (a) of this section, shall be furnished without cost to the 
appellant or representative if a request is made in accordance with 
Sec. 1.577 of this chapter.

(Authority: 38 U.S.C. 7102, 7105(a), 7107)

[57 FR 4109, Feb. 3, 1992, as amended at 58 FR 27936, May 12, 1993; 61 
FR 20452, May 7, 1996; 65 FR 14472, Mar. 17, 2000]



Sec. 20.715  Rule 715. Recording of hearing by appellant or 
representative.

    An appellant or representative may record the hearing with his or 
her own equipment. Filming, videotaping or televising the hearing may 
only be authorized when prior written consent is obtained from all 
appellants and contesting claimants, if any, and made a matter of 
record. In no event will such additional equipment be used if it 
interferes with the conduct of the hearing or the official recording 
apparatus. In all such situations, advance arrangements must be made. In 
the case of hearings held before the Board of Veterans' Appeals in 
Washington, DC, arrangements must be made with the Director, Management 
and Administration (01E), Board of Veterans' Appeals, 810 Vermont 
Avenue, NW., Washington, DC 20420. In the case of hearings held before 
the Board at Department of Veterans Affairs field facilities, 
arrangements must be made through the office of the Department of 
Veterans Affairs official who signed the letter giving notification of 
the time and place of the hearing.

(Authority: 38 U.S.C. 7102, 7105(a), 7107)

[58 FR 27936, May 12, 1993, as amended at 61 FR 20452, May 7, 1996]



Sec. 20.716  Rule 716. Correction of hearing transcripts.

    The tape recording on file at the Board of Veterans' Appeals or a 
transcript prepared by the Board of Veterans' Appeals is the only 
official record of a hearing before the Board. Alternate transcript 
versions prepared by the appellant and representative will not be 
accepted. If an appellant wishes to seek correction of perceived errors 
in a hearing transcript, the appellant or his or her representative 
should move for the correction of the hearing transcript within 30 days 
after the date that the transcript is mailed to the appellant. The 
motion must be in writing and must specify the error, or errors, in the 
transcript and the correct wording to be substituted. In the case of 
hearings held before the Board of Veterans' Appeals, whether in 
Washington, DC, or in the field, the motion must be filed with the 
Director, Management and Administration (01E),

[[Page 98]]

Board of Veterans' Appeals, 810 Vermont Avenue, NW., Washington, DC 
20420. The ruling on the motion will be made by the presiding Member of 
the hearing.

(Authority: 38 U.S.C. 7102, 7105(a), 7107)

[58 FR 27936, May 12, 1993, as amended at 61 FR 20452, May 7, 1996]



Sec. 20.717  Rule 717. Loss of hearing tapes or transcripts--motion 
for new hearing.

    (a) Motion for new hearing. In the event that a hearing has not been 
recorded in whole or in part due to equipment failure or other cause, or 
the official transcript of the hearing is lost or destroyed and the 
recording upon which it was based is no longer available, an appellant 
or his or her representative may move for a new hearing. The motion must 
be in writing and must specify why prejudice would result from the 
failure to provide a new hearing.
    (b) Time limit for filing motion for a new hearing. The motion will 
not be granted if there has been no request for a new hearing within a 
period of 120 days from the date of a final Board of Veterans' Appeals 
decision or, in cases appealed to the United States Court of Appeals for 
Veterans Claims, if there has been no request for a new hearing within a 
reasonable period of time after the appeal to that Court has been filed.
    (c) Where motion for a new hearing is filed. In the case of hearings 
held before the Board of Veterans' Appeals, whether in Washington, DC, 
or in the field, the motion must be filed with: Director, Management and 
Administration (01E), Board of Veterans' Appeals, 810 Vermont Avenue, 
NW., Washington, DC 20420.
    (d) Ruling on motion for a new hearing. The ruling on the motion for 
a new hearing will be made by the Member who presided over the hearing. 
If the presiding Member is no longer available, the ruling on the motion 
may be made by the Member or Members to whom the case has been assigned 
for a determination. In cases in which a final Board of Veterans' 
Appeals decision has already been promulgated with respect to the appeal 
in question, the Chairman will assign the matter in accordance with 
Sec. 19.3 of this title. Factors to be considered in ruling on the 
motion include, but will not be limited to, the extent of the loss of 
the record in those cases where only a portion of a hearing tape is 
unintelligible or only a portion of a transcript has been lost or 
destroyed, and the extent and reasonableness of any delay in moving for 
a new hearing. If a new hearing is granted in a case in which a final 
Board of Veterans' Appeals decision has already been promulgated, a 
supplemental decision will be issued.

(Authority: 38 U.S.C. 7102, 7105(a), 7107)

[57 FR 4109, Feb. 3, 1992, as amended at 58 FR 27936, May 12, 1993; 61 
FR 20452, May 7, 1996; 65 FR 14472, Mar. 17, 2000]



Sec. Sec. 20.718-20.799  [Reserved]



                           Subpart I_Evidence



Sec. 20.800  Rule 800. Submission of additional evidence after 
initiation of appeal.

    Subject to the limitations set forth in Rule 1304 (Sec. 20.1304 of 
this part), an appellant may submit additional evidence, or information 
as to the availability of additional evidence, after initiating an 
appeal.

(Authority: 38 U.S.C. 7105(d)(1))



Sec. Sec. 20.801-20.899  [Reserved]



                      Subpart J_Action by the Board



Sec. 20.900  Rule 900. Order of consideration of appeals.

    (a) Docketing of appeals. Applications for review on appeal are 
docketed in the order in which they are received. Cases returned to the 
Board following action pursuant to a remand assume their original places 
on the docket.
    (b) Appeals considered in docket order. Except as otherwise provided 
in this Rule, appeals are considered in the order in which they are 
entered on the docket.
    (c) Advancement on the docket--(1) Grounds for advancement. A case 
may be advanced on the docket on the motion of the Chairman, the Vice 
Chairman, a party to the case before the Board, or such party's 
representative. Such a motion may be granted only if the case

[[Page 99]]

involves interpretation of law of general application affecting other 
claims, if the appellant is seriously ill or is under severe financial 
hardship, or if other sufficient cause is shown. ``Other sufficient 
cause'' shall include, but is not limited to, administrative error 
resulting in a significant delay in docketing the case or the advanced 
age of the appellant. For purposes of this Rule, ``advanced age'' is 
defined as 75 or more years of age. This paragraph does not require the 
Board to advance a case on the docket in the absence of a motion of a 
party to the case or the party's representative.
    (2) Requirements for motions. Motions for advancement on the docket 
must be in writing and must identify the specific reason(s) why 
advancement on the docket is sought, the name of the veteran, the name 
of the appellant if other than the veteran (e.g., a veteran's survivor, 
a guardian, or a fiduciary appointed to receive VA benefits on an 
individual's behalf), and the applicable Department of Veterans Affairs 
file number. The motion must be filed with: Director, Administrative 
Service (014), Board of Veterans' Appeals, 810 Vermont Avenue, NW., 
Washington, DC 20420.
    (3) Disposition of motions. If a motion is received prior to the 
assignment of the case to an individual member or panel of members, the 
ruling on the motion will be by the Vice Chairman, who may delegate such 
authority to a Deputy Vice Chairman. If a motion to advance a case on 
the docket is denied, the appellant and his or her representative will 
be immediately notified. If the motion to advance a case on the docket 
is granted, that fact will be noted in the Board's decision when 
rendered.
    (d) Consideration of appeals remanded by the United States Court of 
Appeals for Veterans Claims. A case remanded by the United States Court 
of Appeals for Veterans Claims for additional development or other 
appropriate action will be treated expeditiously by the Board without 
regard to its place on the Board's docket.
    (e) Postponement to provide hearing. Any other provision of this 
Rule notwithstanding, a case may be postponed for later consideration 
and determination if such postponement is necessary to afford the 
appellant a hearing.

(Authority: 38 U.S.C. 7107, Pub. Law No. 103-446, Sec. 302)

[57 FR 4109, Feb. 3, 1992, as amended at 60 FR 51923, Oct. 4, 1995; 61 
FR 20453, May 7, 1996; 65 FR 14472, Mar. 17, 2000; 68 FR 53683, Sept. 
12, 2003]



Sec. 20.901  Rule 901. Medical opinions and opinions of the General 
Counsel.

    (a) Opinion from the Veterans Health Administration. The Board may 
obtain a medical opinion from an appropriate health care professional in 
the Veterans Health Administration of the Department of Veterans Affairs 
on medical questions involved in the consideration of an appeal when, in 
its judgment, such medical expertise is needed for equitable disposition 
of an appeal.


(Authority: 38 U.S.C. 5103A(d), 7109)

    (b) Armed Forces Institute of Pathology opinions. The Board may 
refer pathologic material to the Armed Forces Institute of Pathology and 
request an opinion based on that material.


(Authority: 38 U.S.C. 7109(a))

    (c) Opinion of the General Counsel. The Board may obtain an opinion 
from the General Counsel of the Department of Veterans Affairs on legal 
questions involved in the consideration of an appeal.


(Authority: 38 U.S.C. 7104(c))

    (d) Independent medical expert opinions. When, in the judgment of 
the Board, additional medical opinion is warranted by the medical 
complexity or controversy involved in an appeal, the Board may obtain an 
advisory medical opinion from one or more medical experts who are not 
employees of the Department of Veterans Affairs. Opinions will be 
secured, as requested by the Chairman of the Board, from recognized 
medical schools, universities, clinics, or medical institutions with 
which arrangements for such opinions have been made by the Secretary of 
Veterans Affairs. An appropriate official of the institution will select 
the

[[Page 100]]

individual expert, or experts, to give an opinion.


(Authority: 38 U.S.C. 7109)

    (e) For purposes of this section, the term ``the Board'' includes 
the Chairman, the Vice Chairman, any Deputy Vice Chairman, and any 
Member of the Board before whom a case is pending.


(Authority: 38 U.S.C. 5107(a), 7104(c), 7109)

[57 FR 4109, Feb. 3, 1992, as amended at 61 FR 20453, May 7, 1996; 66 FR 
38159, July 23, 2001; 69 FR 19937, Apr. 15, 2004]



Sec. 20.902  Rule 902. Filing of requests for the procurement of 
opinions.

    The appellant or representative may request that the Board obtain an 
opinion under Rule 901 (Sec. 20.901 of this part). The request must be 
in writing. It will be granted upon a showing of good cause, such as the 
identification of a complex or controversial medical or legal issue 
involved in the appeal which warrants such an opinion.

(Authority: 38 U.S.C. 5107(a), 7102(c), 7104(c), 7109)



Sec. 20.903  Rule 903. Notification of evidence secured and law to be 
considered by the Board and opportunity for response.

    (a) If the Board obtains a legal or medical opinion. If the Board 
requests an opinion pursuant to Rule 901 (Sec. 20.901 of this part), 
the Board will notify the appellant and his or her representative, if 
any. When the Board receives the opinion, it will furnish a copy of the 
opinion to the appellant, subject to the limitations provided in 38 
U.S.C. 5701(b)(1), and to the appellant's representative, if any. A 
period of 60 days from the date the Board furnishes a copy of the 
opinion will be allowed for response, which may include the submission 
of relevant evidence or argument. The date the Board furnishes a copy 
will be presumed to be the same as the date of the letter or memorandum 
that accompanies the copy of the opinion for purposes of determining 
whether a response was timely filed.
    (b) If the Board considers law not already considered by the agency 
of original jurisdiction. If, pursuant to Sec. 19.9(b)(2) of this 
chapter, the Board intends to consider law not already considered by the 
agency of original jurisdiction and such consideration could result in 
denial of the appeal, the Board will notify the appellant and his or her 
representative, if any, of its intent to do so and that such 
consideration in the first instance by the Board could result in denial 
of the appeal. The notice from the Board will contain a copy or summary 
of the law to be considered. A period of 60 days from the date the Board 
furnishes the notice will be allowed for response, which may include the 
submission of relevant evidence or argument. The date the Board 
furnishes the notice will be presumed to be the same as the date of the 
letter that accompanies the notice for purposes of determining whether a 
response was timely filed. No notice is required under this paragraph if 
the Board intends to grant the benefit being sought or if the appellant 
or the appellant's representative has advanced or otherwise argued the 
applicability of the law in question.

(Authority: 38 U.S.C. 7104(a), 7109(c)).

[67 FR 3105, Jan. 23, 2002, as amended at 69 FR 53808, Sept. 3, 2004]



Sec. 20.904  Rule 904. Vacating a decision.

    An appellate decision may be vacated by the Board of Veterans' 
Appeals at any time upon request of the appellant or his or her 
representative, or on the Board's own motion, on the following grounds:
    (a) Denial of due process. Examples of circumstances in which denial 
of due process of law will be conceded are:
    (1) When the appellant was denied his or her right to representation 
through action or inaction by Department of Veterans Affairs or Board of 
Veterans' Appeals personnel,
    (2) When a Statement of the Case or required Supplemental Statement 
of the Case was not provided, and
    (3) When there was a prejudicial failure to afford the appellant a 
personal hearing. (Where there was a failure to honor a request for a 
hearing and a hearing is subsequently scheduled, but the appellant fails 
to appear, the decision will not be vacated.)
    (b) Allowance of benefits based on false or fraudulent evidence. 
Where it is determined on reconsideration that an allowance of benefits 
by the Board has

[[Page 101]]

been materially influenced by false or fraudulent evidence submitted by 
or on behalf of the appellant, the prior decision will be vacated only 
with respect to the issue or issues to which, within the judgment of the 
Board, the false or fraudulent evidence was material.

(Authority: 38 U.S.C. 7104(a))



Sec. Sec. 20.905-20.999  [Reserved]



                        Subpart K_Reconsideration



Sec. 20.1000  Rule 1000. When reconsideration is accorded.

    Reconsideration of an appellate decision may be accorded at any time 
by the Board of Veterans' Appeals on motion by the appellant or his or 
her representative or on the Board's own motion:
    (a) Upon allegation of obvious error of fact or law;
    (b) Upon discovery of new and material evidence in the form of 
relevant records or reports of the service department concerned; or
    (c) Upon allegation that an allowance of benefits by the Board has 
been materially influenced by false or fraudulent evidence submitted by 
or on behalf of the appellant.

(Authority: 38 U.S.C. 7103, 7104)



Sec. 20.1001  Rule 1001. Filing and disposition of motion for 
reconsideration.

    (a) Application requirements. A motion for Reconsideration must be 
in writing and must include the name of the veteran; the name of the 
claimant or appellant if other than the veteran (e.g., a veteran's 
survivor, a guardian, or a fiduciary appointed to receive VA benefits on 
an individual's behalf); the applicable Department of Veterans Affairs 
file number; and the date of the Board of Veterans' Appeals decision, or 
decisions, to be reconsidered. It must also set forth clearly and 
specifically the alleged obvious error, or errors, of fact or law in the 
applicable decision, or decisions, of the Board or other appropriate 
basis for requesting Reconsideration. If the applicable Board of 
Veterans' Appeals decision, or decisions, involved more than one issue 
on appeal, the motion for reconsideration must identify the specific 
issue, or issues, to which the motion pertains. Issues not so identified 
will not be considered in the disposition of the motion.
    (b) Filing of motion for reconsideration. A motion for 
reconsideration of a prior Board of Veterans' Appeals decision may be 
filed at any time. Such motions must be filed at the following address: 
Director, Management and Administration (01E), Board of Veterans' 
Appeals, 810 Vermont Avenue, NW., Washington, DC 20420.
    (c) Disposition. The Chairman will review the sufficiency of the 
allegations set forth in the motion and, depending upon the decision 
reached, proceed as follows:
    (1) Motion denied. The appellant and representative or other 
appropriate party will be notified if the motion is denied. The 
notification will include reasons why the allegations are found 
insufficient. This constitutes final disposition of the motion.
    (2) Motion allowed. If the motion is allowed, the appellant and his 
or her representative, if any, will be notified. The appellant and the 
representative will be given a period of 60 days from the date of 
mailing of the letter of notification to present additional arguments or 
evidence. The date of mailing of the letter of notification will be 
presumed to be the same as the date of the letter of notification. The 
Chairman will assign a Reconsideration panel in accordance with Sec. 
19.11 of this chapter.

(Authority: 38 U.S.C. 7103, 7108)



Sec. 20.1002  Rule 1002. [Reserved]



Sec. 20.1003  Rule 1003. Hearings on reconsideration.

    After a motion for reconsideration has been allowed, a hearing will 
be granted if an appellant requests a hearing before the Board. The 
hearing will be held by a Member or Members assigned to the 
reconsideration panel. A hearing will not normally be scheduled solely 
for the purpose of receiving argument by a representative. Such argument 
should be submitted in the form of a written brief. Oral argument may 
also be submitted on audio cassette for transcription for the record in 
accordance with Rule 700(d) (Sec. 20.700(d) of this

[[Page 102]]

part). Requests for appearances by representatives alone to personally 
present argument to a Member or panel of Members of the Board may be 
granted if good cause is shown. Whether good cause has been shown will 
be determined by the presiding Member.

(Authority: 38 U.S.C. 7102, 7103, 7105(a))

[61 FR 20453, May 7, 1996]



Sec. Sec. 20.1004-20.1099  [Reserved]



                           Subpart L_Finality



Sec. 20.1100  Rule 1100. Finality of decisions of the Board.

    (a) General. All decisions of the Board will be stamped with the 
date of mailing on the face of the decision. Unless the Chairman of the 
Board orders reconsideration, and with the exception of matters listed 
in paragraph (b) of this section, all Board decisions are final on the 
date stamped on the face of the decision. With the exception of matters 
listed in paragraph (b) of this section, the decision rendered by the 
reconsideration Panel in an appeal in which the Chairman has ordered 
reconsideration is final.
    (b) Exceptions. Final Board decisions are not subject to review 
except as provided in 38 U.S.C. 1975 and 1984 and 38 U.S.C. chapters 37 
and 72. A remand is in the nature of a preliminary order and does not 
constitute a final decision of the Board.

(Authority: 38 U.S.C. 511(a), 7103, 7104(a))

[57 FR 4109, Feb. 3, 1992, as amended at 61 FR 20453, May 7, 1996]



Sec. 20.1101  Rule 1101. [Reserved]



Sec. 20.1102  Rule 1102. Harmless error.

    An error or defect in any decision by the Board of Veterans' Appeals 
which does not affect the merits of the issue or substantive rights of 
the appellant will be considered harmless and not a basis for vacating 
or reversing such decision.

(Authority: 38 U.S.C. 7103)



Sec. 20.1103  Rule 1103. Finality of determinations of the agency of 
original jurisdiction where appeal is not perfected.

    A determination on a claim by the agency of original jurisdiction of 
which the claimant is properly notified is final if an appeal is not 
perfected as prescribed in Rule 302 (Sec. 20.302 of this part).

(Authority: 38 U.S.C. 7105)



Sec. 20.1104  Rule 1104. Finality of determinations of the agency of 
original jurisdiction affirmed on appeal.

    When a determination of the agency of original jurisdiction is 
affirmed by the Board of Veterans' Appeals, such determination is 
subsumed by the final appellate decision.

(Authority: 38 U.S.C. 7104(a))



Sec. 20.1105  Rule 1105. New claim after promulgation of appellate 
decision.

    When a claimant requests that a claim be reopened after an appellate 
decision has been promulgated and submits evidence in support thereof, a 
determination as to whether such evidence is new and material must be 
made and, if it is, as to whether it provides a basis for allowing the 
claim. An adverse determination as to either question is appealable.

(Authority: 38 U.S.C. 5108, 7104)



Sec. 20.1106  Rule 1106. Claim for death benefits by survivor--prior 
unfavorable decisions during veteran's lifetime.

    Except with respect to benefits under the provisions of 38 U.S.C. 
1311(a)(2), 1318, and certain cases involving individuals whose 
Department of Veterans Affairs benefits have been forfeited for treason 
or for subversive activities under the provisions of 38 U.S.C. 6104 and 
6105, issues involved in a survivor's claim for death benefits will be 
decided without regard to any prior disposition of those issues during 
the veteran's lifetime.

(Authority: 38 U.S.C. 7104(b)).

[70 FR 72221, Dec. 2, 2005]

[[Page 103]]



Sec. Sec. 20.1107-20.1199  [Reserved]



                          Subpart M_Privacy Act



Sec. 20.1200  Rule 1200. Privacy Act request--appeal pending.

    When a Privacy Act request is filed under Sec. 1.577 of this 
chapter by an individual seeking records pertaining to him or her and 
the relevant records are in the custody of the Board, such request will 
be reviewed and processed prior to appellate action on that individual's 
appeal.

(Authority: 5 U.S.C. 552a; 38 U.S.C. 7107)



Sec. 20.1201  Rule 1201. Amendment of appellate decisions.

    A request for amendment of an appellate decision under the Privacy 
Act (5 U.S.C. 552a) may be entertained. However, such a request may not 
be used in lieu of, or to circumvent, the procedures established under 
Rules 1000 through 1003 (Sec. Sec. 20.1000-20.1003 of this part). The 
Board will review a request for correction of factual information set 
forth in a decision. Where the request to amend under the Privacy Act is 
an attempt to alter a judgment made by the Board and thereby replace the 
adjudicatory authority and functions of the Board, the request will be 
denied on the basis that the Act does not authorize a collateral attack 
upon that which has already been the subject of a decision of the Board. 
The denial will satisfy the procedural requirements of Sec. 1.579 of 
this chapter. If otherwise appropriate, the request will be considered 
one for reconsideration under Rules 1000 through 1003 (Sec. Sec. 
20.1000-20.1003 of this part).

(Authority: 5 U.S.C. 552a(d); 38 U.S.C. 7103, 7108)



Sec. Sec. 20.1202-20.1299  [Reserved]



                         Subpart N_Miscellaneous

    Cross-Reference: In cases involving access to patient information 
relating to a Department of Veterans Affairs program for, or the 
treatment of, drug abuse, alcoholism, alcohol abuse, sickle cell anemia, 
or infection with the human immunodeficiency virus, also see 38 U.S.C. 
7332.



Sec. 20.1300  Rule 1300. Removal of Board records.

    No original record, paper, document or exhibit certified to the 
Board may be taken from the Board except as authorized by the Chairman 
or except as may be necessary to furnish copies or to transmit copies 
for other official purposes.

(Authority: 38 U.S.C. 5701)

[61 FR 29028, June 7, 1996]



Sec. 20.1301  Rule 1301. Disclosure of information.

    (a) Policy. It is the policy of the Board of Veterans' Appeals for 
the full text of appellate decisions, Statements of the Case, and 
Supplemental Statements of the Case to be disclosed to appellants. In 
those situations where disclosing certain information directly to the 
appellant would not be in conformance with 38 U.S.C. 5701, that 
information will be removed from the decision, Statement of the Case, or 
Supplemental Statement of the Case and the remaining text will be 
furnished to the appellant. A full-text appellate decision, Statement of 
the Case, or Supplemental Statement of the Case will be disclosed to the 
designated representative, however, unless the relationship between the 
appellant and representative is such (for example, a parent or spouse) 
that disclosure to the representative would be as harmful as if made to 
the appellant.


(Authority: 38 U.S.C. 7105(d)(2))

    (b) Public availability of Board decisions. (1) Decisions issued on 
or after January 1, 1992. Decisions rendered by the Board of Veterans' 
Appeals on or after January 1, 1992, are electronically available for 
public inspection and copying on the Internet at http://
www.index.va.gov/search/va/bva.html. All personal identifiers are 
redacted from the decisions prior to publication. Specific decisions may 
be identified by a word and/or topic search, or by the Board docket 
number. Board decisions will continue to be provided in a widely-used 
format as future advances in technology occur.
    (2) Decisions issued prior to January 1, 1992. Decisions rendered by 
the Board of Veterans' Appeals prior to January

[[Page 104]]

1, 1992, have been indexed to facilitate access to the contents of the 
decisions (BVA Index I-01-1). The index, which was published quarterly 
in microfiche form with an annual cumulation, is available for review at 
Department of Veterans Affairs regional offices and at the Research 
Center at the Board of Veterans' Appeals in Washington, DC. Information 
on obtaining a microfiche copy of the index is also available from the 
Board's Research Center. The index can be used to locate citations to 
decisions with issues similar to those of concern to an appellant. Each 
indexed decision has a locator number assigned to it. The manner in 
which the locator number is written depends upon the age of the 
decision. Decisions archived prior to late 1989 have a number such as 
82-07-0001. Decisions archived at a later date have a number such as 
BVA-90-12345. This number must be used when requesting a paper copy of 
that decision. These requests must be directed to the Research Center 
(01C1), Board of Veterans' Appeals, 810 Vermont Avenue, NW., Washington, 
DC 20420.


(Authority: 5 U.S.C. 552(a)(2), 38 U.S.C. 501(a))

[57 FR 4109, Feb. 3, 1992, as amended at 71 FR 18009, Apr. 10, 2006]



Sec. 20.1302  Rule 1302. Death of appellant during pendency of appeal.

    An appeal pending before the Board of Veterans' Appeals when the 
appellant dies will be dismissed.

(Authority: 38 U.S.C. 7104(a))

[62 FR 55170, Oct. 23, 1997]



Sec. 20.1303  Rule 1303. Nonprecedential nature of Board decisions.

    Although the Board strives for consistency in issuing its decisions, 
previously issued Board decisions will be considered binding only with 
regard to the specific case decided. Prior decisions in other appeals 
may be considered in a case to the extent that they reasonably relate to 
the case, but each case presented to the Board will be decided on the 
basis of the individual facts of the case in light of applicable 
procedure and substantive law.

(Authority: 38 U.S.C. 7104(a))



Sec. 20.1304  Rule 1304. Request for change in representation, request 
for personal hearing, or submission of additional evidence following 
certification of an appeal to the Board of Veterans' Appeals.

    (a) Request for a change in representation, request for a personal 
hearing, or submission of additional evidence within 90 days following 
notification of certification and transfer of records. An appellant and 
his or her representative, if any, will be granted a period of 90 days 
following the mailing of notice to them that an appeal has been 
certified to the Board for appellate review and that the appellate 
record has been transferred to the Board, or until the date the 
appellate decision is promulgated by the Board of Veterans' Appeals, 
whichever comes first, during which they may submit a request for a 
personal hearing, additional evidence, or a request for a change in 
representation. Any such request or additional evidence must be 
submitted directly to the Board and not to the agency of original 
jurisdiction. The date of mailing of the letter of notification will be 
presumed to be the same as the date of that letter for purposes of 
determining whether the request was timely made or the evidence was 
timely submitted. Any evidence which is submitted at a hearing on appeal 
which was requested during such period will be considered to have been 
received during such period, even though the hearing may be held 
following the expiration of the period. Any pertinent evidence submitted 
by the appellant or representative is subject to the requirements of 
paragraph (d) of this section if a simultaneously contested claim is 
involved.
    (b) Subsequent request for a change in representation, request for a 
personal hearing, or submission of additional evidence--(1) General 
rule. Subject to the exception in paragraph (b)(2) of this section, 
following the expiration of the period described in paragraph (a) of 
this section, the Board of Veterans' Appeals will not accept a request 
for a change in representation, a request for a personal hearing, or 
additional evidence except when the appellant demonstrates on motion 
that there was good cause for the delay. Examples of good cause include, 
but are not limited

[[Page 105]]

to, illness of the appellant or the representative which precluded 
action during the period; death of an individual representative; illness 
or incapacity of an individual representative which renders it 
impractical for an appellant to continue with him or her as 
representative; withdrawal of an individual representative; the 
discovery of evidence that was not available prior to the expiration of 
the period; and delay in transfer of the appellate record to the Board 
which precluded timely action with respect to these matters. Such 
motions must be in writing and must include the name of the veteran; the 
name of the claimant or appellant if other than the veteran (e.g., a 
veteran's survivor, a guardian, or a fiduciary appointed to receive VA 
benefits on an individual's behalf); the applicable Department of 
Veterans Affairs file number; and an explanation of why the request for 
a change in representation, the request for a personal hearing, or the 
submission of additional evidence could not be accomplished in a timely 
manner. Such motions must be filed at the following address: Director, 
Management and Administration (01E), Board of Veterans' Appeals, 810 
Vermont Avenue, NW., Washington, DC 20420. Depending upon the ruling on 
the motion, action will be taken as follows:
    (i) Good cause not shown. If good cause is not shown, the request 
for a change in representation, the request for a personal hearing, or 
the additional evidence submitted will be referred to the agency of 
original jurisdiction upon completion of the Board's action on the 
pending appeal without action by the Board concerning the request or 
additional evidence. Any personal hearing granted as a result of a 
request so referred or any additional evidence so referred may be 
treated by that agency as the basis for a reopened claim, if 
appropriate. If the Board denied a benefit sought in the pending appeal 
and any evidence so referred which was received prior to the date of the 
Board's decision, or testimony presented at a hearing resulting from a 
request for a hearing so referred, together with the evidence already of 
record, is subsequently found to be the basis of an allowance of that 
benefit, the effective date of the award will be the same as if the 
benefit had been granted by the Board as a result of the appeal which 
was pending at the time that the hearing request or additional evidence 
was received.
    (ii) Good cause shown. If good cause is shown, the request for a 
change in representation or for a personal hearing will be honored. Any 
pertinent evidence submitted by the appellant or representative will be 
accepted, subject to the requirements of paragraph (d) of this section 
if a simultaneously contested claim is involved.
    (2) If the Board obtains evidence or considers law not considered by 
the agency of original jurisdiction. The motion described in paragraph 
(b)(1) of this section is not required to submit evidence in response to 
the notice described in paragraph (a) or (b) of Rule 903 (paragraph (a) 
or (b) of Sec. 20.903 of this part).
    (c) Consideration of additional evidence by the Board or by the 
agency of original jurisdiction. Any pertinent evidence submitted by the 
appellant or representative which is accepted by the Board under the 
provisions of this section, or is submitted by the appellant or 
representative in response to a Sec. 20.903 of this part, notification, 
as well as any such evidence referred to the Board by the agency of 
original jurisdiction under Sec. 19.37(b) of this chapter, must be 
referred to the agency of original jurisdiction for review, unless this 
procedural right is waived by the appellant or representative, or unless 
the Board determines that the benefit or benefits to which the evidence 
relates may be fully allowed on appeal without such referral. Such a 
waiver must be in writing or, if a hearing on appeal is conducted, the 
waiver must be formally and clearly entered on the record orally at the 
time of the hearing. Evidence is not pertinent if it does not relate to 
or have a bearing on the appellate issue or issues.
    (d) Simultaneously contested claims. In simultaneously contested 
claims, if pertinent evidence which directly affects payment, or 
potential payment, of the benefit sought is submitted by any claimant 
and is accepted by the Board under the provisions of this section, the 
substance of such evidence will be mailed to each of the other

[[Page 106]]

claimants who will then have 60 days from the date of mailing of notice 
of the new evidence within which to comment upon it and/or submit 
additional evidence in rebuttal. For matters over which the Board does 
not have original jurisdiction, a waiver of initial agency of original 
jurisdiction consideration of pertinent additional evidence received by 
the Board must be obtained from each claimant in accordance with 
paragraph (c) of this section. The date of mailing of the letter of 
notification of the new evidence will be presumed to be the same as the 
date of that letter for purposes of determining whether such comment or 
evidence in rebuttal was timely submitted. No further period will be 
provided for response to such comment or rebuttal evidence.

(Authority: 38 U.S.C. 7104, 7105, 7105A)

[57 FR 4109, Feb. 3, 1992, as amended at 60 FR 25851, May 15, 1995; 61 
FR 20453, May 7, 1996; 67 FR 3105, Jan. 23, 2002; 69 FR 53808, Sept. 3, 
2004]



  Subpart O_Revision of Decisions on Grounds of Clear and Unmistakable 
                                  Error

    Source: 64 FR 2139, Jan. 13, 1999, unless otherwise noted.



Sec. 20.1400  Rule 1400. Motions to revise Board decisions.

    (a) Review to determine whether clear and unmistakable error exists 
in a final Board decision may be initiated by the Board, on its own 
motion, or by a party to that decision (as the term ``party'' is defined 
in Rule 1401(b) (Sec. 20.1401(b) of this part) in accordance with Rule 
1404 (Sec. 20.1404 of this part).
    (b) All final Board decisions are subject to revision under this 
subpart except:
    (1) Decisions on issues which have been appealed to and decided by a 
court of competent jurisdiction; and
    (2) Decisions on issues which have subsequently been decided by a 
court of competent jurisdiction.

(Authority: 38 U.S.C. 501(a), 7111)

[64 FR 2139, Jan 13, 1999, as amended at 64 FR 73414, Dec. 30, 1999]



Sec. 20.1401  Rule 1401. Definitions.

    (a) Issue. Unless otherwise specified, the term ``issue'' in this 
subpart means a matter upon which the Board made a final decision (other 
than a decision under this subpart). As used in the preceding sentence, 
a ``final decision'' is one which was appealable under Chapter 72 of 
title 38, United States Code, or which would have been so appealable if 
such provision had been in effect at the time of the decision.
    (b) Party. As used in this subpart, the term ``party'' means any 
party to the proceeding before the Board that resulted in the final 
Board decision which is the subject of a motion under this subpart, but 
does not include officials authorized to file administrative appeals 
pursuant to Sec. 19.51 of this title.

(Authority: 38 U.S.C. 501(a), 7104(a))



Sec. 20.1402  Rule 1402. Inapplicability of other rules.

    Motions filed under this subpart are not appeals and, except as 
otherwise provided, are not subject to the provisions of part 19 of this 
title or this part 20 which relate to the processing and disposition of 
appeals.

(Authority: 38 U.S.C. 501(a))



Sec. 20.1403  Rule 1403. What constitutes clear and unmistakable error; 
what does not.

    (a) General. Clear and unmistakable error is a very specific and 
rare kind of error. It is the kind of error, of fact or of law, that 
when called to the attention of later reviewers compels the conclusion, 
to which reasonable minds could not differ, that the result would have 
been manifestly different but for the error. Generally, either the 
correct facts, as they were known at the time, were not before the 
Board, or the statutory and regulatory provisions extant at the time 
were incorrectly applied.
    (b) Record to be reviewed--(1) General. Review for clear and 
unmistakable error in a prior Board decision must be based on the record 
and the law that existed when that decision was made.
    (2) Special rule for Board decisions issued on or after July 21, 
1992. For a Board decision issued on or after July 21, 1992, the record 
that existed when

[[Page 107]]

that decision was made includes relevant documents possessed by the 
Department of Veterans Affairs not later than 90 days before such record 
was transferred to the Board for review in reaching that decision, 
provided that the documents could reasonably be expected to be part of 
the record.
    (c) Errors that constitute clear and unmistakable error. To warrant 
revision of a Board decision on the grounds of clear and unmistakable 
error, there must have been an error in the Board's adjudication of the 
appeal which, had it not been made, would have manifestly changed the 
outcome when it was made. If it is not absolutely clear that a different 
result would have ensued, the error complained of cannot be clear and 
unmistakable.
    (d) Examples of situations that are not clear and unmistakable 
error--(1) Changed diagnosis. A new medical diagnosis that ``corrects'' 
an earlier diagnosis considered in a Board decision.
    (2) Duty to assist. The Secretary's failure to fulfill the duty to 
assist.
    (3) Evaluation of evidence. A disagreement as to how the facts were 
weighed or evaluated.
    (e) Change in interpretation. Clear and unmistakable error does not 
include the otherwise correct application of a statute or regulation 
where, subsequent to the Board decision challenged, there has been a 
change in the interpretation of the statute or regulation.

(Authority: 38 U.S.C. 501(a), 7111)



Sec. 20.1404  Rule 1404. Filing and pleading requirements; withdrawal.

    (a) General. A motion for revision of a decision based on clear and 
unmistakable error must be in writing, and must be signed by the moving 
party or that party's representative. The motion must include the name 
of the veteran; the name of the moving party if other than the veteran; 
the applicable Department of Veterans Affairs file number; and the date 
of the Board of Veterans' Appeals decision to which the motion relates. 
If the applicable decision involved more than one issue on appeal, the 
motion must identify the specific issue, or issues, to which the motion 
pertains. Motions which fail to comply with the requirements set forth 
in this paragraph shall be dismissed without prejudice to refiling under 
this subpart.
    (b) Specific allegations required. The motion must set forth clearly 
and specifically the alleged clear and unmistakable error, or errors, of 
fact or law in the Board decision, the legal or factual basis for such 
allegations, and why the result would have been manifestly different but 
for the alleged error. Non-specific allegations of failure to follow 
regulations or failure to give due process, or any other general, non-
specific allegations of error, are insufficient to satisfy the 
requirement of the previous sentence. Motions which fail to comply with 
the requirements set forth in this paragraph shall be dismissed without 
prejudice to refiling under this subpart.
    (c) Filing. A motion for revision of a decision based on clear and 
unmistakable error may be filed at any time. Such motions should be 
filed at the following address: Director, Management and Administration 
(01E), Board of Veterans' Appeals, 810 Vermont Avenue, NW., Washington, 
DC 20420.
    (d) Requests not filed at the Board. A request for revision 
transmitted to the Board by the Secretary pursuant to 38 U.S.C. 7111(f) 
(relating to requests for revision filed with the Secretary other than 
at the Board) shall be treated as if a motion had been filed pursuant to 
paragraph (c) of this section.
    (e) Motions for reconsideration. A motion for reconsideration, as 
described in subpart K of this part, whenever filed, will not be 
considered a motion under this subpart.
    (f) Withdrawal. A motion under this subpart may be withdrawn at any 
time before the Board promulgates a decision on the motion. Such 
withdrawal shall be in writing, shall be filed at the address listed in 
paragraph (c) of this section, and shall be signed by the moving party 
or by such party's representative. If such a writing is timely received, 
the motion shall be dismissed without prejudice to refiling under this 
subpart.

(Authority: 38 U.S.C. 501(a), 7111)

[64 FR 2139, Jan. 13, 1999, as amended at 66 FR 35903, July 10, 2001]

[[Page 108]]



Sec. 20.1405  Rule 1405. Disposition.

    (a) Docketing and assignment; notification of representative--(1) 
General. Motions under this subpart will be docketed in the order 
received and will be assigned in accordance with Sec. 19.3 of this 
title (relating to assignment of proceedings). Where an appeal is 
pending on the same underlying issue at the time the motion is received, 
the motion and the appeal may be consolidated under the same docket 
number and disposed of as part of the same proceeding. A motion may not 
be assigned to any Member who participated in the decision that is the 
subject of the motion. If a motion is assigned to a panel, the decision 
will be by a majority vote of the panel Members.
    (2) Advancement on the docket. A motion may be advanced on the 
docket subject to the same substantive and procedural requirements as 
those applicable to an appeal under Rule 900(c) (Sec. 20.900(c) of this 
part).
    (3) Notification of representative. When the Board receives a motion 
under this subpart from an individual whose claims file indicates that 
he or she is represented, the Board shall provide a copy of the motion 
to the representative before assigning the motion to a Member or panel. 
Within 30 days after the date on which the Board provides a copy of the 
motion to the representative, the representative may file a relevant 
response, including a request to review the claims file prior to filing 
a further response. Upon request made within the time allowed under this 
paragraph (a)(2), the Board shall arrange for the representative to have 
the opportunity to review the claims file, and shall permit the 
representative a reasonable time after making the file available to file 
a further response.
    (b) Evidence. No new evidence will be considered in connection with 
the disposition of the motion. Material included in the record on the 
basis of Rule 1403(b)(2) (Sec. 20.1403(b)(2) of this part) is not 
considered new evidence.
    (c) Hearing--(1) Availability. The Board may, for good cause shown, 
grant a request for a hearing for the purpose of argument. No testimony 
or other evidence will be admitted in connection with such a hearing. 
The determination as to whether good cause has been shown shall be made 
by the member or panel to whom the motion is assigned.
    (2) Submission of requests. Requests for such a hearing shall be 
submitted to the following address: Director, Management and 
Administration (01E), Board of Veterans' Appeals, 810 Vermont Avenue, 
NW, Washington, DC 20420.
    (d) Decision to be by the Board. The decision on a motion under this 
subpart shall be made by the Board. There shall be no referral of the 
matter to any adjudicative or hearing official acting on behalf of the 
Secretary for the purpose of deciding the motion.
    (e) Referral to ensure completeness of the record. Subject to the 
provisions of paragraph (b) of this section, the Board may use the 
various agencies of original jurisdiction to ensure completeness of the 
record in connection with a motion under this subpart.
    (f) General Counsel opinions. The Board may secure opinions of the 
General Counsel in connection with a motion under this subpart. In such 
cases, the Board will notify the party and his or her representative, if 
any. When the opinion is received by the Board, a copy of the opinion 
will be furnished to the party's representative or, subject to the 
limitations provided in 38 U.S.C. 5701(b)(1), to the party if there is 
no representative. A period of 60 days from the date of mailing of a 
copy of the opinion will be allowed for response. The date of mailing 
will be presumed to be the same as the date of the letter or memorandum 
which accompanies the copy of the opinion for purposes of determining 
whether a response was timely filed.
    (g) Decision. The decision of the Board on a motion will be in 
writing. The decision will include separately stated findings of fact 
and conclusions of law on all material questions of fact and law 
presented on the record, the reasons or bases for those findings and 
conclusions, and an order granting or denying the motion.

(Authority: 38 U.S.C. 501(a), 7104(d), 7111)

[64 FR 2139, Jan. 13, 1999, as amended at 64 FR 7091, Feb. 12, 1999; 66 
FR 37151, July 17, 2001; 68 FR 53682, Sept. 12, 2003]

[[Page 109]]



Sec. 20.1406  Rule 1406. Effect of revision; discontinuance or reduction 
of benefits.

    (a) General. A decision of the Board that revises a prior Board 
decision on the grounds of clear and unmistakable error has the same 
effect as if the decision had been made on the date of the prior 
decision.
    (b) Discontinuance or reduction of benefits. Revision of a prior 
Board decision under this subpart that results in the discontinuance or 
reduction of benefits is subject to laws and regulations governing the 
reduction or discontinuance of benefits by reason of erroneous award 
based solely on administrative error or errors in judgment.

(Authority: 38 U.S.C. 7111(b))



Sec. 20.1407  Rule 1407. Motions by the Board.

    If the Board undertakes, on its own motion, a review pursuant to 
this subpart, the party to that decision and that party's representative 
(if any) will be notified of such motion and provided an adequate 
summary thereof and, if applicable, outlining any proposed 
discontinuance or reduction in benefits that would result from revision 
of the Board's prior decision. They will be allowed a period of 60 days 
to file a brief or argument in answer. The failure of a party to so 
respond does not affect the finality of the Board's decision on the 
motion.

(Authority: 38 U.S.C. 501(a), 7111)



Sec. 20.1408  Rule 1408. Special rules for simultaneously contested 
claims.

    In the case of a motion under this subpart to revise a final Board 
decision in a simultaneously contested claim, as that term is used in 
Rule 3(o) (Sec. 20.3(o) of this part), a copy of such motion shall, to 
the extent practicable, be sent to all other contesting parties. Other 
parties have a period of 30 days from the date of mailing of the copy of 
the motion to file a brief or argument in answer. The date of mailing of 
the copy will be presumed to be the same as the date of the letter which 
accompanies the copy. Notices in simultaneously contested claims will be 
forwarded to the last address of record of the parties concerned and 
such action will constitute sufficient evidence of notice.

(Authority: 38 U.S.C. 501(a))



Sec. 20.1409  Rule 1409. Finality and appeal.

    (a) A decision on a motion filed by a party or initiated by the 
Board pursuant to this subpart will be stamped with the date of mailing 
on the face of the decision, and is final on such date. The party and 
his or her representative, if any, will be provided with copies of the 
decision.
    (b) For purposes of this section, a dismissal without prejudice 
under Rule 1404(a)(Sec. 20.1404(a) of this part), Rule 1404(b)(Sec.  
20.1404(b)), or Rule 1404(f)(Sec. 20.1404(f)), or a referral under Rule 
1405(e) is not a final decision of the Board.
    (c) Once there is a final decision on a motion under this subpart 
relating to a prior Board decision on an issue, that prior Board 
decision on that issue is no longer subject to revision on the grounds 
of clear and unmistakable error. Subsequent motions relating to that 
prior Board decision on that issue shall be dismissed with prejudice.
    (d) Chapter 72 of title 38, United States Code (relating to judicial 
review), applies with respect to final decisions on motions filed by a 
party or initiated by the Board pursuant to this subpart.

(Authority: 38 U.S.C. 501(a); Pub. L. 105-111)

[64 FR 2139, Jan. 13, 1999, as amended at 66 FR 35903, July 10, 2001]



Sec. 20.1410  Rule 1410. Stays pending court action.

    The Board will stay its consideration of a motion under this subpart 
upon receiving notice that the Board decision that is the subject of the 
motion has been appealed to a court of competent jurisdiction until the 
appeal has been concluded or the court has issued an order permitting, 
or directing, the Board to proceed with the motion.

(Authority: 38 U.S.C. 501(a))



Sec. 20.1411  Rule 1411. Relationship to other statutes.

    (a) The ``benefit of the doubt'' rule of 38 U.S.C. 5107(b) does not 
apply to the Board's decision, on a motion under

[[Page 110]]

this subpart, as to whether there was clear and unmistakable error in a 
prior Board decision.
    (b) A motion under this subpart is not a claim subject to reopening 
under 38 U.S.C. 5108 (relating to reopening claims on the grounds of new 
and material evidence).
    (c) A motion under this subpart is not an application for benefits 
subject to any duty associated with 38 U.S.C. 5103(a) (relating to 
applications for benefits).
    (d) A motion under this subpart is not a claim for benefits subject 
to the requirements and duties associated with 38 U.S.C. 5107(a) 
(requiring ``well-grounded'' claims and imposing a duty to assist).

(Authority: 38 U.S.C. 501(a))

                 Appendix A to Part 20--Cross-References

------------------------------------------------------------------------
                                                     Title of cross-
      Sec.             Cross-reference          referenced material or
                                                         comment
------------------------------------------------------------------------
20.1...........  38 CFR 3.103(a)..............  Statement of policy.
20.100.........  38 CFR 20.306................  Rule 306. Legal
                                                 holidays.
20.200.........  38 CFR 20.201................  Rule 201. Notice of
                                                 Disagreement.
                 38 CFR 20.202................  Rule 202. Substantive
                                                 Appeal.
                 38 CFR 20.300-20.306.........  See re filing Notices of
                                                 Disagreement and
                                                 Substantive Appeals.
20.202.........  38 CFR 19.29.................  Statement of the Case.
                 38 CFR 19.31.................  Supplemental Statement
                                                 of the Case.
20.301.........  38 CFR 20.500................  Rule 500. Who can file
                                                 an appeal in
                                                 simultaneously
                                                 contested claims.
                 38 CFR 20.602................  Rule 602. Representation
                                                 by recognized
                                                 organizations.
                 38 CFR 20.603................  Rule 603. Representation
                                                 by attorneys-at-law.
                 38 CFR 20.604................  Rule 604. Representation
                                                 by agents.
                 38 CFR 20.605................  Rule 605. Other persons
                                                 as representative.
20.302.........  38 CFR 20.501................  Rule 501. Time limits
                                                 for filing Notice of
                                                 Disagreement,
                                                 Substantive Appeal, and
                                                 response to
                                                 Supplemental Statement
                                                 of the Case in
                                                 simultaneously
                                                 contested claims.
20.303.........  38 CFR 20.304................  Rule 304. Filing
                                                 additional evidence
                                                 does not extend time
                                                 limit for appeal.
                 38 CFR 20.503................  Rule 503. Extension of
                                                 time for filing a
                                                 Substantive Appeal in
                                                 simultaneously
                                                 contested claims.
20.305.........  38 CFR 20.306................  Rule 306. Legal
                                                 holidays.
20.400.........  38 CFR 19.50-19.53...........  See also re
                                                 administrative appeals.
20.401.........  38 CFR 19.50-19.53...........  See also re
                                                 administrative appeals.
                 38 CFR 20.302-20.306.........  See re time limits for
                                                 perfecting an appeal.
                 38 CFR 20.501, 20.503........  See re time limits for
                                                 perfecting an appeal in
                                                 simultaneously
                                                 contested claims.
20.500.........  38 CFR 20.713................  Rule 713. Hearings in
                                                 simultaneously
                                                 contested claims.
20.501.........  38 CFR 20.305................  Rule 305. Computation of
                                                 time limit for filing.
                 38 CFR 20.306................  Rule 306. Legal
                                                 holidays.
                 38 CFR 20.713................  Rule 713. Hearings in
                                                 simultaneously
                                                 contested claims.
20.502.........  38 CFR 20.305................  Rule 305. Computation of
                                                 time limit for filing.
                 38 CFR 20.306................  Rule 306. Legal
                                                 holidays.
                 38 CFR 20.713................  Rule 713. Hearings in
                                                 simultaneously
                                                 contested claims.
20.503.........  38 CFR 20.713................  Rule 713. Hearings in
                                                 simultaneously
                                                 contested claims.
20.504.........  38 CFR 20.713................  Rule 713. Hearings in
                                                 simultaneously
                                                 contested claims.
20.600.........  38 CFR 14.626 et seq.........  See also re
                                                 representation.
                 38 CFR 20.602................  Rule 602. Representation
                                                 by recognized
                                                 organizations.
                 38 CFR 20.603................  Rule 603. Representation
                                                 by attorneys-at-law.
                 38 CFR 20.604................  Rule 604. Representation
                                                 by agents.
                 38 CFR 20.605................  Rule 605. Other persons
                                                 as representative.
20.602.........  38 CFR 14.628................  Recognition of
                                                 organizations.
                 38 CFR 14.631................  Powers of attorney.
                 38 CFR 20.100................  Rule 100. Name, business
                                                 hours, and mailing
                                                 address of the Board.
                 38 CFR 20.607................  Rule 607. Revocation of
                                                 a representative's
                                                 authority to act.
                 38 CFR 20.608................  Rule 608. Withdrawal of
                                                 services by a
                                                 representative.
                 38 CFR 20.609................  Rule 609. Payment of
                                                 representative's fees
                                                 in proceedings before
                                                 Department of Veterans
                                                 Affairs field personnel
                                                 and before the Board of
                                                 Veterans' Appeals.
                 38 CFR 20.610................  Rule 610. Payment of
                                                 representative's
                                                 expenses in proceedings
                                                 before Department of
                                                 Veterans Affairs field
                                                 personnel and before
                                                 the Board of Veterans'
                                                 Appeals.
20.603.........  38 CFR 14.629................  Requirements for
                                                 accreditation of
                                                 representatives,
                                                 agents, and attorneys.
                 38 CFR 14.631................  Powers of attorney.
                 38 CFR 20.100................  Rule 100. Name, business
                                                 hours, and mailing
                                                 address of the Board.
                 38 CFR 20.606................  Rule 606. Legal interns,
                                                 law students and
                                                 paralegals.
                 38 CFR 20.607................  Rule 607. Revocation of
                                                 a representative's
                                                 authority to act.
                 38 CFR 20.608................  Rule 608. Withdrawal of
                                                 services by a
                                                 representative.
                 38 CFR 20.609................  Rule 609. Payment of
                                                 representative's fees
                                                 in proceedings before
                                                 Department of Veterans
                                                 Affairs field personnel
                                                 and before the Board of
                                                 Veterans' Appeals.
                 38 CFR 20.610................  Rule 610. Payment of
                                                 representative's
                                                 expenses in proceedings
                                                 before Department of
                                                 Veterans Affairs field
                                                 personnel and before
                                                 the Board of Veterans'
                                                 Appeals.

[[Page 111]]

 
20.604.........  38 CFR 14.631................  Powers of attorney.
                 38 CFR 20.100................  Rule 100. Name, business
                                                 hours, and mailing
                                                 address of the Board.
                 38 CFR 20.607................  Rule 607. Revocation of
                                                 a representative's
                                                 authority to act.
                 38 CFR 20.608................  Rule 608. Withdrawal of
                                                 services by a
                                                 representative.
                 38 CFR 20.609................  Rule 609. Payment of
                                                 representative's fees
                                                 in proceedings before
                                                 Department of Veterans
                                                 Affairs field personnel
                                                 and before the Board of
                                                 Veterans' Appeals.
                 38 CFR 20.610................  Rule 610. Payment of
                                                 representative's
                                                 expenses in proceedings
                                                 before Department of
                                                 Veterans Affairs field
                                                 personnel and before
                                                 the Board of Veterans'
                                                 Appeals.
20.605.........  38 CFR 14.630................  Authorization for a
                                                 particular claim.
                 38 CFR 14.631................  Powers of attorney.
                 38 CFR 20.100................  Rule 100. Name, business
                                                 hours, and mailing
                                                 address of the Board.
                 38 CFR 20.607................  Rule 607. Revocation of
                                                 a representative's
                                                 authority to act.
                 38 CFR 20.608................  Rule 608. Withdrawal of
                                                 services by a
                                                 representative.
                 38 CFR 20.609................  Rule 609. Payment of
                                                 representative's fees
                                                 in proceedings before
                                                 Department of Veterans
                                                 Affairs field personnel
                                                 and before the Board of
                                                 Veterans' Appeals.
                 38 CFR 20.610................  Rule 610. Payment of
                                                 representative's
                                                 expenses in proceedings
                                                 before Department of
                                                 Veterans Affairs field
                                                 personnel and before
                                                 the Board of Veterans'
                                                 Appeals.
20.606.........  38 CFR 20.603................  Rule 603. Representation
                                                 by attorneys-at-law.
20.607.........  38 CFR 14.631(d).............  See also re revocation
                                                 of powers of attorney.
20.609.........  38 CFR 14.629................  Requirements for
                                                 accreditation of
                                                 representatives,
                                                 agents, and attorneys.
                 38 CFR 20.603................  Rule 603. Representation
                                                 by attorneys-at-law.
                 38 CFR 20.604................  Rule 604. Representation
                                                 by agents.
                 38 CFR 20.606................  Rule 606. Legal interns,
                                                 law students and
                                                 paralegals.
                 38 CFR 20.610................  Rule 610. Payment of
                                                 representative's
                                                 expenses in proceedings
                                                 before Department of
                                                 Veterans Affairs field
                                                 personnel and before
                                                 the Board of Veterans'
                                                 Appeals.
20.610.........  38 CFR 20.609................  Rule 609. Payment of
                                                 representative's fees
                                                 in proceedings before
                                                 Department of Veterans
                                                 Affairs field personnel
                                                 and before the Board of
                                                 Veterans' Appeals.
20.611.........  38 CFR 1.525(d), 14.631(e)...  See also re continuation
                                                 of authority conferred
                                                 by powers of attorney
                                                 upon the death of a
                                                 claimant.
20.701.........  38 CFR 20.710................  Rule 710. Witnesses at
                                                 hearings.
20.702.........  38 CFR 20.704................  Rule 704. Scheduling and
                                                 notice of hearings
                                                 conducted by traveling
                                                 Sections of the Board
                                                 of Veterans' Appeals at
                                                 Department of Veterans
                                                 Affairs facilities.
                 38 CFR 20.713................  Rule 713. Hearings in
                                                 simultaneously
                                                 contested claims.
20.703.........  38 CFR 20.201................  Rule 201. Notice of
                                                 Disagreement.
20.704.........  38 CFR 20.702................  Rule 702. Scheduling and
                                                 notice of hearings
                                                 conducted by the Board
                                                 of Veterans' Appeals in
                                                 Washington, DC, and by
                                                 agency of original
                                                 jurisdiction personnel
                                                 acting on behalf of the
                                                 Board of Veterans'
                                                 Appeals at field
                                                 facilities.
20.706.........  38 CFR 20.700(c).............  See also re the
                                                 presiding Member's role
                                                 in the conduct of
                                                 hearings.
                 38 CFR 20.708................  Rule 708. Prehearing
                                                 conference.
                 38 CFR 20.709................  Rule 709. Procurement of
                                                 additional evidence
                                                 following a hearing.
20.707.........  38 CFR 19.11.................  Reconsideration Section.
20.708.........  38 CFR 20.606(d).............  See re the prehearing
                                                 conference required
                                                 when a legal intern,
                                                 law student, or
                                                 paralegal is to
                                                 participate in a
                                                 hearing held before a
                                                 traveling Section of
                                                 the Board.
20.709.........  38 CFR 19.37.................  Consideration of
                                                 additional evidence
                                                 received by the agency
                                                 of original
                                                 jurisdiction after an
                                                 appeal has been
                                                 initiated.
                 38 CFR 20.1304...............  Rule 1304. Request for
                                                 change in
                                                 representation, request
                                                 for personal hearing,
                                                 or submission of
                                                 additional evidence
                                                 following certification
                                                 of an appeal to the
                                                 Board of Veterans'
                                                 Appeals.
20.710.........  38 CFR 20.711................  Rule 711. Subpoenas.
20.711.........  38 CFR 2.1...................  See for further
                                                 information on
                                                 subpoenas, including
                                                 action to be taken in
                                                 the event of
                                                 noncompliance.
20.713.........  38 CFR 20.702................  Rule 702. Scheduling and
                                                 notice of hearings
                                                 conducted by the Board
                                                 of Veterans' Appeals in
                                                 Washington, DC, and by
                                                 agency of original
                                                 jurisdiction personnel
                                                 acting on behalf of the
                                                 Board of Veterans'
                                                 Appeals at field
                                                 facilities.
                 38 CFR 20.704................  Rule 704. Scheduling and
                                                 notice of hearings
                                                 conducted by traveling
                                                 Sections of the Board
                                                 of Veterans' Appeals at
                                                 Department of Veterans
                                                 Affairs facilities.
20.715.........  38 CFR 20.706................  Rule 706. Functions of
                                                 the presiding Member.
20.800.........  38 CFR 20.304................  Rule 304. Filing
                                                 additional evidence
                                                 does not extend time
                                                 limit for appeal.
                 38 CFR 20.709................  Rule 709. Procurement of
                                                 additional evidence
                                                 following a hearing.
                 38 CFR 20.1304...............  Rule 1304. Request for
                                                 change in
                                                 representation, request
                                                 for personal hearing,
                                                 or submission of
                                                 additional evidence
                                                 following certification
                                                 of an appeal to the
                                                 Board of Veterans'
                                                 Appeals.
20.901.........  38 CFR 14.507................  See re opinions of the
                                                 General Counsel of the
                                                 Department of Veterans
                                                 Affairs.
20.903.........  38 CFR 20.305................  Rule 305. Computation of
                                                 time limit for filing.
                 38 CFR 20.306................  Rule 306. Legal
                                                 holidays.
20.1003........  38 CFR 20.700(b).............  See re submission of
                                                 written brief and of
                                                 oral argument on audio
                                                 cassette.
20.1105........  38 CFR 3.156.................  New and material
                                                 evidence.
                 38 CFR 3.160(e)..............  Reopened claim.
                 38 CFR 20.1304(b)(1).........  See re request for a
                                                 personal hearing or
                                                 submission of
                                                 additional evidence
                                                 more than 60 days after
                                                 a case has been
                                                 certified to the Board
                                                 of Veterans' Appeals as
                                                 possible basis for a
                                                 reopened claim.
20.1106........  38 CFR 3.22(a)(2)............  See re correction of a
                                                 rating, after a
                                                 veteran's death, based
                                                 on clear and
                                                 unmistakable error, in
                                                 cases involving claims
                                                 for benefits under the
                                                 provisions of 38 U.S.C.
                                                 1318.

[[Page 112]]

 
20.1300........  38 CFR 1.500-1.527...........  See re the release of
                                                 information from
                                                 Department of Veterans
                                                 Affairs claimant
                                                 records.
                 38 CFR 1.550-1.559...........  See re the release of
                                                 information from
                                                 Department of Veterans
                                                 Affairs records other
                                                 than claimant records.
                 38 CFR 1.575-1.584...........  See re safeguarding
                                                 personal information in
                                                 Department of Veterans
                                                 Affairs records.
                 38 CFR 20.1301...............  Rule 1301. Disclosure of
                                                 information.
20.1301........  38 CFR 1.577.................  Access to records.
20.1302........  38 CFR 20.611................  Rule 611. Continuation
                                                 of representation
                                                 following death of a
                                                 claimant or appellant.
20.1304........  38 CFR 3.103(c), 20.700-       See also re hearings.
                  20.717.
                 38 CFR 3.156.................  New and material
                                                 evidence.
                 38 CFR 3.160(e)..............  Reopened claim.
                 38 CFR 20.305................  Rule 305. Computation of
                                                 time limit for filing.
                 38 CFR 20.306................  Rule 306. Legal
                                                 holidays.
------------------------------------------------------------------------



PART 21_VOCATIONAL REHABILITATION AND EDUCATION--Table of Contents




     Subpart A_Vocational Rehabilitation Under 38 U.S.C. Chapter 31

                   Vocational Rehabilitation Overview

Sec.
21.1 Training and rehabilitation for veterans with service-connected 
          disabilities.

                             Nonduplication

21.21 Election of benefits under education programs administered by the 
          Department of Veterans Affairs.
21.22 Nonduplication--Federal programs.

                                 Claims

21.30 Claims.
21.31 Informal claim.
21.32 Time limit.

                               Definitions

21.35 Definitions.

                            Basic Entitlement

21.40 Basic entitlement.

                         Periods of Eligibility

21.41 Basic period of eligibility.
21.42 Basic period of eligibility deferred.
21.44 Extension beyond basic period of eligibility because of serious 
          employment handicap.
21.45 Extension beyond basic period of eligibility for a program of 
          independent living services.
21.47 Eligibility for employment assistance.
21.48 Severance of service-connection--reduction to noncompensable 
          degree.

                     Initial and Extended Evaluation

21.50 Initial evaluation.
21.51 Employment handicap.
21.52 Serious employment handicap.
21.53 Reasonable feasibility of achieving a vocational goal.
21.57 Extended evaluation.
21.58 Redetermination of employment handicap and serious employment 
          handicap.
21.59 Review and appeal of decisions on eligibility and entitlement.

                     Vocational Rehabilitation Panel

21.60 Vocational Rehabilitation Panel.
21.62 Duties of the Vocational Rehabilitation Panel.

                   Duration of Rehabilitation Programs

21.70 Vocational rehabilitation.
21.72 Rehabilitation to the point of employability.
21.73 Duration of employment assistance programs.
21.74 Extended evaluation.
21.76 Independent living.
21.78 Approving more than 48 months of rehabilitation.
21.79 Determining entitlement usage under Chapter 31.

               Individualized Written Rehabilitation Plan

21.80 Requirement for a rehabilitation plan.
21.82 Completing the plan under Chapter 31.
21.84 Individualized written rehabilitation plan.
21.86 Individualized extended evaluation plan.
21.88 Individualized employment assistance plan.
21.90 Individualized independent living plan.
21.92 Preparation of the plan.
21.94 Changing the plan.
21.96 Review of the plan.
21.98 Appeal of disagreement regarding development of, or change in, the 
          plan.

                               Counseling

21.100 Counseling.

              Educational and Vocational Training Services

21.120 Educational and vocational training services.
21.122 School course.

[[Page 113]]

21.123 On-job course.
21.124 Combination course.
21.126 Farm cooperative course.
21.128 Independent study course.
21.129 Home study course.
21.130 Educational and vocational courses outside the United States.
21.132 Repetition of the course.
21.134 Limitation on flight training.

                     Special Rehabilitation Services

21.140 Evaluation and improvement of rehabilitation potential.
21.142 Adult basic education.
21.144 Vocational course in sheltered workshop or rehabilitation 
          facility.
21.146 Independent instructor course.
21.148 Tutorial assistance.
21.150 Reader service.
21.152 Interpreter service for the hearing impaired.
21.154 Special transportation assistance.
21.155 Services to a veteran's family.
21.156 Other incidental goods and services.

                       Independent Living Services

21.160 Independent living services.
21.162 Participation in a program of independent living services.

                               Case Status

21.180 Case status system.
21.182 ``Applicant'' status.
21.184 ``Evaluation and planning'' status.
21.186 ``Ineligible'' status.
21.188 ``Extended evaluation'' status.
21.190 ``Rehabilitation to the point of employability'' status.
21.192 ``Independent living program'' status.
21.194 ``Employment services'' status.
21.196 ``Rehabilitated'' status.
21.197 ``Interrupted'' status.
21.198 ``Discontinued'' status.

                                Supplies

21.210 Supplies.
21.212 General policy in furnishing supplies during periods of 
          rehabilitation.
21.214 Furnishing supplies for special programs.
21.216 Special equipment.
21.218 Methods of furnishing supplies.
21.219 Supplies consisting of clothing, magazines and periodicals, and 
          items which may be personally used by the veteran.
21.220 Replacement of supplies.
21.222 Release of, and repayment for, training and rehabilitation 
          supplies.
21.224 Prevention of abuse.

                      Medical and Related Services

21.240 Medical treatment, care and services.
21.242 Resources for provision of treatment, care and services.

                           Employment Services

21.250 Overview of employment services.
21.252 Job development and placement services.
21.254 Supportive services.
21.256 Incentives for employers.
21.257 Self-employment.
21.258 Special assistance for veterans in self-employment.

                      Monetary Assistance Services

21.260 Subsistence allowance.
21.262 Procurement and reimbursement of cost for training and 
          rehabilitation services, supplies, or facilities.
21.264 Election of payment at the 38 U.S.C. chapter 30 educational 
          assistance rate.
21.266 Payment of subsistence allowance under special conditions.
21.268 Employment adjustment allowance.
21.270 Payment of subsistence allowance during leave and between periods 
          of instruction.
21.272 Veteran-student services.
21.274 Revolving fund loan.
21.276 Incarcerated veterans.

                    Entering a Rehabilitation Program

21.282 Effective date of induction into a rehabilitation program.
21.283 Rehabilitated.
21.284 Reentrance into a rehabilitation program.

                 Course Approval and Facility Selection

21.290 Training and rehabilitation resources.
21.292 Course approvals.
21.294 Selecting the training or rehabilitation facility.
21.296 Selecting a training establishment for on-job training.
21.298 Selecting a farm.
21.299 Use of Government facilities for on-job training or work 
          experience at no or nominal pay.

                             Rate of Pursuit

21.310 Rate of pursuit of a rehabilitation program.
21.312 Reduced work tolerance.
21.314 Pursuit of training under special conditions.

 Authorization of Subsistence Allowance and Training and Rehabilitation 
                                Services

21.320 Awards for subsistence allowance and authorization of 
          rehabilitation services.
21.322 Commencing dates of subsistence allowance.
21.324 Reduction or termination dates of subsistence allowance.
21.326 Authorization of employment services.
21.328 Two veteran cases--dependents.

[[Page 114]]

21.330 Apportionment.
21.332 Payments of subsistence allowance.
21.334 Election of payment at the Chapter 30 rate.

                            Leaves of Absence

21.340 Introduction.
21.342 Leave accounting policy.
21.344 Facility offering training or rehabilitation services.
21.346 Facility temporarily not offering training or rehabilitation 
          services.
21.348 Leave following completion of a period of training or 
          rehabilitation services.
21.350 Unauthorized absences.

                         Conduct and Cooperation

21.362 Satisfactory conduct and cooperation.
21.364 Unsatisfactory conduct and cooperation.

           Interregional and Intraregional Travel of Veterans

21.370 Intraregional travel at government expense.
21.372 Interregional transfer at government expense.
21.374 Authorization for travel of attendants.
21.376 Travel expenses for initial evaluation and counseling.

                   Personnel Training and Development

21.380 Establishment of qualifications for personnel providing 
          assistance under Chapter 31.
21.382 Training and staff development for personnel providing assistance 
          under Chapter 31.

              Rehabilitation Research and Special Projects

21.390 Rehabilitation research and special projects.

             Veterans' Advisory Committee on Rehabilitation

21.400 Veterans' Advisory Committee on Rehabilitation.
21.402 Responsibilities of the Veterans' Advisory Committee on 
          Rehabilitation.

                 Additional Administrative Consideration

21.410 Delegation of authority.
21.412 Finality of decisions.
21.414 Revision of decision.

                          Informing the Veteran

21.420 Informing the veteran.
21.422 Reduction in subsistence allowance following the loss of a 
          dependent.

                             Accountability

21.430 Accountability for authorization and payment of training and 
          rehabilitation services.

      Subpart B_Claims and Applications for Educational Assistance

                                 Claims

21.1029 Definitions.
21.1030 Claims.
21.1031 VA responsibilities when a claim is filed.
21.1032 Time limits.

  Subpart C_Survivors' and Dependents' Educational Assistance Under 38 
                            U.S.C. Chapter 35

                                 General

21.3001 Delegation of authority.
21.3002 Administration of Survivors' and Dependents' Educational 
          Assistance Program.
21.3020 Educational assistance.
21.3021 Definitions.
21.3022 Nonduplication--programs administered by VA.
21.3023 Nonduplication; pension, compensation, and dependency and 
          indemnity compensation.
21.3024 Nonduplication; Federal Employees' Compensation Act.
21.3025 Nonduplication; Federal programs.

                                 Claims

21.3030 Claims.

                       Eligibility and Entitlement

21.3040 Eligibility; child.
21.3041 Periods of eligibility; child.
21.3042 Service with Armed Forces.
21.3043 Suspension of program; child.
21.3044 Entitlement.
21.3045 Entitlement charges.
21.3046 Periods of eligibility; spouses and surviving spouses.
21.3047 Extended period of eligibility due to physical or mental 
          disability.

                               Counseling

21.3100 Counseling.
21.3102 Required counseling.
21.3103 Failure to cooperate.
21.3104 Special training.
21.3105 Travel expenses.

                                Payments

21.3130 Educational assistance.
21.3131 Rates--educational assistance allowance--38 U.S.C. chapter 35.
21.3132 Reductions in survivors' and dependents' educational assistance.
21.3133 Payment procedures.

[[Page 115]]

21.3135 Reduction or discontinuance dates for awards of educational 
          assistance allowance.

                      Special Restorative Training

21.3300 Special restorative training.
21.3301 Need.
21.3302 Agreements.
21.3303 Extent of training.
21.3304 Assistance during training.
21.3305 ``Interrupted'' status.
21.3306 Reentrance after interruption.
21.3307 ``Discontinued'' status.

                 Payments; Special Restorative Training

21.3330 Payments.
21.3331 Commencing date.
21.3332 Discontinuance dates.
21.3333 Rates.

                     Special Assistance and Training

21.3344 Special assistance for the educationally disadvantaged.

       Subpart D_Administration of Educational Assistance Programs

                             Administrative

21.4001 Delegations of authority.
21.4002 Finality of decisions.
21.4003 Revision of decisions.
21.4005 Conflicting interests.
21.4006 False or misleading statements.
21.4007 Forfeiture.
21.4008 Prevention of overpayments.
21.4009 Overpayments; waiver or recovery.

                                 General

21.4020 Two or more programs.
21.4022 Nonduplication--programs administered by VA.

               Payments; Educational Assistance Allowance

21.4131 Commencing dates.
21.4135 Discontinuance dates.
21.4136 Withdrawals or nonpunitive grades may result in nonpayment.
21.4138 Certifications and release of payments.
21.4145 Work-study allowance.
21.4146 Assignments of benefits prohibited.

                        State Approving Agencies

21.4150 Designation.
21.4151 Cooperation.
21.4152 Control by agencies of the United States.
21.4153 Reimbursement of expenses.
21.4154 Report of activities.
21.4155 Evaluations of State approving agency performance.

                                 Schools

21.4200 Definitions.
21.4201 Restrictions on enrollment; percentage of students receiving 
          financial support.
21.4202 Overcharges; restrictions on enrollments.
21.4203 Reports--requirements.
21.4204 Periodic certifications.
21.4206 Reporting fee.
21.4209 Examination of records.
21.4210 Suspension and discontinuance of educational assistance payments 
          and of enrollments or reenrollments for pursuit of approved 
          courses.
21.4211 Composition, jurisdiction, and duties of Committee on 
          Educational Allowances.
21.4212 Referral to Committee on Educational Allowances.
21.4213 Notice of hearing by Committee on Educational Allowances.
21.4214 Hearing rules and procedures for Committee on Educational 
          Allowances.
21.4215 Decision of Director of VA facility of jurisdiction.
21.4216 Review of decision of Director of VA facility of jurisdiction.

                          Programs of Education

21.4232 Specialized vocational training--38 U.S.C. Chapter 35.
21.4233 Combination.
21.4234 Change of program.
21.4235 Programs of education that include flight training.
21.4236 Tutorial assistance.

                                 Courses

21.4250 Approval of courses.
21.4251 Minimum period of operation requirement for educational 
          institutions.
21.4252 Courses precluded.
21.4253 Accredited courses.
21.4254 Nonaccredited courses.
21.4255 Refund policy; nonaccredited courses.
21.4256 Correspondence programs and courses.
21.4257 Cooperative courses.
21.4258 Notice of approval.
21.4259 Suspension or disapproval.
21.4260 Courses in foreign countries.
21.4261 Apprentice courses.
21.4262 Other training on-the-job courses.
21.4263 Approval of flight training courses.
21.4264 Farm cooperative courses.
21.4265 Practical training approved as institutional training or on-job 
          training.
21.4266 Courses offered at subsidiary branches or extensions.
21.4267 Approval of independent study.

                    Assessment and Pursuit of Courses

21.4270 Measurement of courses.
21.4271 [Reserved]
21.4272 Collegiate course measurement.
21.4273 Collegiate graduate.

[[Page 116]]

21.4274 Law courses.
21.4275 Practical training courses; measurement.
21.4277 Discontinuance: unsatisfactory progress, conduct and attendance.
21.4278 Reentrance after discontinuance.
21.4279 Combination correspondence-residence program.
21.4280 [Reserved]

Subpart E [Reserved]

                        Subpart F_Education Loans

21.4500 Definitions.
21.4501 Eligibility.
21.4502 Applications.
21.4503 Determination of loan amount.
21.4504 Promissory note.
21.4505 Check delivery.
21.4507 Advertising.

Subparts F-1--F-3 [Reserved]

  Subpart G_Post-Vietnam Era Veterans' Educational Assistance Under 38 
                            U.S.C. Chapter 32

                             Administrative

21.5001 Administration of benefits: 38 U.S.C. Chapter 32.

                                 General

21.5020 Post-Vietnam era veterans' educational assistance.
21.5021 Definitions.
21.5022 Eligibility under more than one program.
21.5023 Nonduplication; Federal programs.

                         Claims and Applications

21.5030 Applications, claims, and time limits.

                               Eligibility

21.5040 Basic eligibility.
21.5041 Periods of entitlement.
21.5042 Extended period of eligibility.

                              Participation

21.5050 Application requirements for participation.
21.5052 Contribution requirements.
21.5053 Restoration of contributions (Persian Gulf War).
21.5054 Dates of participation.
21.5058 Resumption of participation.
21.5060 Disenrollment.
21.5062 Date of disenrollment.
21.5064 Refund upon disenrollment.
21.5065 Refunds without disenrollment.
21.5066 Suspension of participation.
21.5067 Death of participant.

                               Entitlement

21.5070 Entitlement.
21.5071 Months of entitlement allowed.
21.5072 Entitlement charge.
21.5076 Entitlement charge--overpayment cases.
21.5078 Interruption to conserve entitlement.

                               Counseling

21.5100 Counseling.
21.5103 Travel expenses.

               Payments; Educational Assistance Allowance

21.5130 Payments; educational assistance allowance.
21.5131 Educational assistance allowance.
21.5132 Criteria used in determining benefit payments.
21.5133 Certifications and release of payments.
21.5134 Restrictions on paying benefits to servicepersons.
21.5135 Advance payments.
21.5136 Benefit payments--secondary school program.
21.5138 Computation of benefit payments and monthly rates.
21.5139 Computation of benefit payments for incarcerated individuals.
21.5141 Tutorial assistance.

                        State Approving Agencies

21.5150 State approving agencies.

                                 Schools

21.5200 Schools.

                          Programs of Education

21.5230 Programs of education.
21.5231 Combination.
21.5232 Change of program.

                                 Courses

21.5250 Courses.

                    Assessment and Pursuit of Course

21.5270 Assessment and pursuit of course.

                  Educational Assistance Pilot Program

21.5290 Educational Assistance Pilot Program.
21.5292 Reduced monthly contribution for certain individuals.
21.5294 Transfer of entitlement.
21.5296 Extended period of eligibility.

              Subpart H_Educational Assistance Test Program

21.5701 Establishment of educational assistance test program.
21.5703 Overview.
21.5705 Transfer of authority.

[[Page 117]]

                                 General

21.5720 Definitions.
21.5725 Obtaining benefits.

                         Claims and Applications

21.5730 Applications, claims, and time limits.

                       Eligibility and Entitlement

21.5740 Eligibility.
21.5741 Eligibility under more than one program.
21.5742 Entitlement.
21.5743 Transfer of entitlement.
21.5744 Charges against entitlement.
21.5745 Period of entitlement.

                                 Courses

21.5800 Courses.

                             Certifications

21.5810 Certifications of enrollment.
21.5812 Reports of withdrawals and terminations of attendance and 
          changes in training time.
21.5816 False or fraudulent claims.

       Payments--Educational Assistance and Subsistence Allowance

21.5820 Educational assistance.
21.5822 Subsistence allowance.
21.5824 Nonduplication: Federal programs.
21.5828 False or misleading statements.
21.5830 Payment of educational assistance.
21.5831 Commencing date of subsistence allowance.
21.5834 Discontinuance dates: General.
21.5835 Specific discontinuance dates.
21.5838 Overpayments.

                         Measurement of Courses

21.5870 Measurement of courses.

                             Administrative

21.5900 Administration of benefits program--chapter 107, title 10 U.S.C.
21.5901 Delegations of authority.

   Subpart I_Temporary Program of Vocational Training for Certain New 
                           Pension Recipients

                                 General

21.6001 Temporary vocational training program for certain pension 
          recipients.
21.6005 Definitions.
21.6010 Applicability of rules and administrative procedures under 38 
          U.S.C., chapter 31.
21.6015 Claims and elections.
21.6021 Nonduplication--38 U.S.C., chapters 30, 31, 32, 34 and 35.

                     Basic Eligibility Requirements

21.6040 Eligibility for vocational training and employment assistance.
21.6042 Entry, reentry and completion.

                               Evaluation

21.6050 Participation of eligible veterans in an evaluation.
21.6052 Evaluations.
21.6054 Criteria for determining good employment potential.
21.6056 Cooperation of the veteran in an evaluation.
21.6058 Consequences of evaluation.
21.6059 Limitations on the number of evaluations.

             Services and Assistance to Program Participants

21.6060 Services and assistance.

                          Duration of Training

21.6070 Basic duration of a vocational training program.
21.6072 Extending the duration of a vocational training program.
21.6074 Computing the period of vocational training program 
          participation.

               Individualized Written Rehabilitation Plan

21.6080 Requirement for an individualized written rehabilitation or 
          employment assistance plan.
21.6082 Completing the plan.

                               Counseling

21.6100 Counseling.

              Educational and Vocational Training Services

21.6120 Educational and vocational training services.

         Evaluation and Improvement of Rehabilitation Potential

21.6140 Evaluation and improvement of rehabilitation potential.

                       Independent Living Services

21.6160 Independent living services.

                           Case Status System

21.6180 Case status system.

                                Supplies

21.6210 Supplies.

                      Medical and Related Services

21.6240 Medical treatment, care and services.
21.6242 Resources for provision of medical treatment, care and services.

[[Page 118]]

                          Financial Assistance

21.6260 Financial assistance.

                      Entering Vocational Training

21.6282 Effective dates of induction into and termination of vocational 
          training.
21.6284 Reentrance into a training program.
21.6290 Training resources.

                             Rate of Pursuit

21.6310 Rate of pursuit.

                        Authorization of Services

21.6320 Authorization of services under Chapter 31 rules.

                            Leaves of Absence

21.6340 Leaves of absence.

                  Satisfactory Conduct and Cooperation

21.6362 Satisfactory conduct and cooperation.

                         Transportation Services

21.6370 Authorization of transportation services.

                    Additional Applicable Regulations

21.6380 Additional applicable Chapter 31 regulations.

                         Delegation of Authority

21.6410 Delegation of authority.

              Coordination with the Veterans Service Center

21.6420 Coordination with the Veterans Service Center.

  Subpart J_Temporary Program of Vocational Training and Rehabilitation

21.6501 Overview.
21.6503 Definitions.
21.6505 Participation in the temporary program.
21.6507 Special benefits for qualified veterans under test program.
21.6509 Notice to qualified veterans.
21.6511-21.6513 [Reserved]
21.6515 Formulation of rehabilitation plan.
21.6517 [Reserved]
21.6519 Eligibility of qualified veterans for employment and counseling 
          services.
21.6521 Employment of qualified veterans.
21.6523 Entry and reentry into a program of counseling and employment 
          services under 38 U.S.C. 3104(a) (2) and (5).
21.6525 [Reserved]

Subpart K_All Volunteer Force Educational Assistance Program (Montgomery 
                          GI Bill_Active Duty)

21.7000 Establishment of educational assistance program.

                               Definitions

21.7020 Definitions.

                         Claims and Applications

21.7030 Applications, claims, and time limits.
21.7032 Time limits for making elections.

                               Eligibility

21.7040 Categories of basic eligibility.
21.7042 Basic eligibility requirements.
21.7044 Persons with eligibility under 38 U.S.C. chapter 34.
21.7045 Eligibility based on involuntary separation, voluntary 
          separation, or participation in the Post-Vietnam Era Veterans' 
          Educational Assistance Program.
21.7046 Eligibility for supplemental educational assistance.
21.7050 Ending dates of eligibility.
21.7051 Extended period of eligibility.

                               Entitlement

21.7070 Entitlement.
21.7072 Entitlement to basic educational assistance.
21.7073 Entitlement for some individuals who establish eligibility 
          during the open period or who establish eligibility before 
          involuntary separation.
21.7074 Entitlement to supplemental educational assistance.
21.7076 Entitlement charges.

                               Counseling

21.7100 Counseling.
21.7103 Travel expenses.

                          Programs of Education

21.7110 Selection of a program of education.
21.7112 Programs of education combining two or more types of courses.
21.7114 Change of program.

                                 Courses

21.7120 Courses included in programs of education.
21.7122 Courses precluded.
21.7124 Overcharges.

                    Payments--Educational Assistance

21.7130 Educational assistance.
21.7131 Commencing dates.
21.7133 Suspension or discontinuance of payments.
21.7135 Discontinuance dates.

[[Page 119]]

21.7136 Rates of payment of basic educational assistance.
21.7137 Rates of payment of basic educational assistance for individuals 
          with remaining entitlement under 38 U.S.C. chapter 34.
21.7138 Rates of supplemental educational assistance.
21.7139 Conditions which result in reduced rates or no payment.
21.7140 Certifications and release of payments.
21.7141 Tutorial assistance.
21.7142 Accelerated payments.
21.7143 Nonduplication of educational assistance.
21.7144 Overpayments.

                           Pursuit of Courses

21.7150 Pursuit.
21.7151 Advance payment and accelerated payment certifications.
21.7152 Certification of enrollment.
21.7153 Progress and conduct.
21.7154 Pursuit and absences.
21.7156 Other required reports.
21.7158 False, late, or missing reports.
21.7159 Reporting fee.

                            Course Assessment

21.7170 Course measurement.
21.7172 Measurement of concurrent enrollments.

                        State Approving Agencies

21.7200 State approving agencies.

                           Approval of Courses

21.7220 Course approval.
21.7222 Courses and enrollments which may not be approved.
21.7280 Death benefit.

                             Administrative

21.7301 Delegations of authority.
21.7302 Finality of decisions.
21.7303 Revision of decisions.
21.7305 Conflicting interests.
21.7307 Examination of records.
21.7310 Civil rights.
21.7320 Procedural protection; reduction following loss of dependent.

  Subpart L_Educational Assistance for Members of the Selected Reserve

21.7500 Establishment and purpose of educational assistance program.

                               Definitions

21.7520 Definitions.

                         Claims and Applications

21.7530 Applications, claims, and time limits.

                               Eligibility

21.7540 Eligibility for educational assistance.
21.7550 Ending dates of eligibility.
21.7551 Extended period of eligibility.

                               Entitlement

21.7570 Entitlement.
21.7576 Entitlement charges.

                               Counseling

21.7600 Counseling.
21.7603 Travel expenses.

                          Programs of Education

21.7610 Selection of a program of education.
21.7612 Programs of education combining two or more types of courses.
21.7614 Changes of program.

                                 Courses

21.7620 Courses included in programs of education.
21.7622 Courses precluded.
21.7624 Overcharges and restrictions on enrollments.

                    Payments--Educational Assistance

21.7630 Educational assistance.
21.7631 Commencing dates.
21.7633 Suspension or discontinuance of payments.
21.7635 Discontinuance dates.
21.7636 Rates of payment.
21.7639 Conditions which result in reduced rates or no payment.
21.7640 Release of payments.
21.7642 Nonduplication of educational assistance.
21.7644 Overpayments.

                 Pursuit of Course and Required Reports

21.7650 Pursuit.
21.7652 Certification of enrollment and verification of pursuit.
21.7653 Progress, conduct, and attendance.
21.7654 Pursuit and absences.
21.7656 Other required reports.
21.7658 False, late, or missing reports.
21.7659 Reporting fee.

                            Course Assessment

21.7670 Measurement of courses leading to a standard, undergraduate 
          college degree.
21.7672 Measurement of courses not leading to a standard college degree.
21.7673 Measurement of concurrent enrollments.
21.7674 Measurement of practical training courses.

                        State Approving Agencies

21.7700 State approving agencies.

[[Page 120]]

                           Approval of Courses

21.7720 Course approval.
21.7722 Courses and enrollments which may not be approved.

                             Administrative

21.7801 Delegation of authority.
21.7802 Finality of decisions.
21.7803 Revision of decisions.
21.7805 Conflicting interests.
21.7807 Examination of records.

Subpart M_Vocational Training and Rehabilitation for Certain Children of 
         Vietnam Veterans_Spina Bifida and Covered Birth Defects

                                 General

21.8010 Definitions and abbreviations.
21.8012 Vocational training program for certain children of Vietnam 
          veterans--spina bifida and covered birth defects.
21.8014 Application.
21.8016 Nonduplication of benefits.

                     Basic Entitlement Requirements

21.8020 Entitlement to vocational training and employment assistance.
21.8022 Entry and reentry.

                               Evaluation

21.8030 Requirement for evaluation of child.
21.8032 Evaluations.

             Services and Assistance to Program Participants

21.8050 Scope of training, services, and assistance.

                     Duration of Vocational Training

21.8070 Basic duration of a vocational training program.
21.8072 Authorizing training, services, and assistance beyond the 
          initial individualized written plan of vocational 
          rehabilitation.
21.8074 Computing the period for vocational training program 
          participation.

        Individualized Written Plan of Vocational Rehabilitation

21.8080 Requirement for an individualized written plan of vocational 
          rehabilitation.
21.8082 Inability of child to complete individualized written plan of 
          vocational rehabilitation or achieve vocational goal.

                               Counseling

21.8100 Counseling.

              Vocational Training, Services, and Assistance

21.8120 Vocational training, services, and assistance.

           Evaluation and Improvement of Vocational Potential

21.8140 Evaluation and improvement of vocational potential.

                                Supplies

21.8210 Supplies.

                              Program Costs

21.8260 Training, Services, and Assistance Costs.

    Vocational Training Program Entrance, Termination, and Resources

21.8280 Effective date of induction into a vocational training program.
21.8282 Termination of a vocational training program.
21.8284 Additional vocational training.
21.8286 Training resources.

                             Rate of Pursuit

21.8310 Rate of pursuit.

                        Authorization of Services

21.8320 Authorization of services.

                            Leaves of Absence

21.8340 Leaves of absence.

                  Satisfactory Conduct and Cooperation

21.8360 Satisfactory conduct and cooperation.

                         Transportation Services

21.8370 Authorization of transportation services.

                    Additional Applicable Regulations

21.8380 Additional applicable regulations.

                         Delegation of Authority

21.8410 Delegation of authority.



     Subpart A_Vocational Rehabilitation Under 38 U.S.C. Chapter 31

    Authority: 38 U.S.C. 501(a), 3100-3121, unless otherwise noted.

    Source: 49 FR 40814, Oct. 18, 1984, unless otherwise noted.

[[Page 121]]

                   Vocational Rehabilitation Overview



Sec. 21.1  Training and rehabilitation for veterans with 
service-connected disabilities.

    (a) Purposes. The purposes of this program are to provide to 
eligible veterans with compensable service-connected disabilities all 
services and assistance necessary to enable them to achieve maximum 
independence in daily living and, to the maximum extent feasible, to 
become employable and to obtain and maintain suitable employment.


(Authority: 38 U.S.C. 3100)

    (b) Basic requirements. Before a service-disabled veteran may 
receive training and rehabilitation services under Chapter 31, Title 38 
U.S.C., three basic requirements must be met:
    (1) The Department of Veterans Affairs must first find that the 
veteran has basic entitlement to services as prescribed by Sec. 21.40.


(Authority: 38 U.S.C. 3102)

    (2) The services necessary for training and rehabilitation must be 
identified by the Department of Veterans Affairs and the veteran.


(Authority: 38 U.S.C. 3106)

    (3) An individual written plan must be developed by the Department 
of Veterans Affairs and the veteran describing the goals of the program 
and the means through which these goals will be achieved.


(Authority: 38 U.S.C. 3107)

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]

                             Nonduplication



Sec. 21.21  Election of benefits under education programs administered 
by the Department of Veterans Affairs.

    (a) Election of benefits required. A veteran must make an election 
of benefits among the programs of education administered by VA for which 
he or she may be eligible. A veteran who has basic entitlement to 
rehabilitation under chapter 31 and is also eligible for assistance 
under any of the other education programs administered by VA must make 
an election of benefits between chapter 31 and any other VA program of 
education for which he or she may be eligible. The veteran may reelect 
at any time if he or she is otherwise eligible. (See Sec. Sec. 21.264 
and 21.334.)


(Authority: 38 U.S.C. 1781(b))

    (b) Use of prior training in formulating a rehabilitation program. 
If a veteran has pursued an educational or training program under an 
education program listed in Sec. 21.4020 of this part, the earlier 
program of education or special restorative training shall be utilized 
to the extent practicable.


(Authority: 38 U.S.C. 3695(b))

[53 FR 880, Jan. 14, 1988, as amended at 57 FR 57108, Dec. 3, 1992]



Sec. 21.22  Nonduplication--Federal programs.

    (a) Allowances. A service-disabled veteran who is eligible for 
benefits under Chapter 31, may not receive a subsistence allowance or 
elect payment of an allowance at the educational assistance rate under 
Chapter 30 pursuant to Sec. 21.264 if the veteran:
    (1) Is on active duty and is pursuing a course of education which is 
being paid for by the Armed Forces (or by the Department of Health and 
Human Services in the case of the Public Health Service), or
    (2) Is attending a course of education or training paid for under 
Chapter 41, Title 5 U.S.C. and whose full salary is being paid to such 
veteran while so training.


(Authority: 38 U.S.C. 3681; Pub. L. 98-525)

    (b) Services which may be authorized. A service-disabled veteran who 
is in one of the two categories defined in paragraph (a) of this section 
is entitled to receive all benefits, other than an allowance, to which 
he or she is otherwise entitled under Chapter 31, including:
    (1) Payment of any tuition and fees not paid for by the Armed 
Forces.
    (2) The cost of special services, such as reader services, tutorial 
assistance,

[[Page 122]]

and special equipment during the period of such training.


(Authority: 38 U.S.C. 3681)

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 4283, Jan. 30, 1989; 57 
FR 57108, Dec. 3, 1992]

                                 Claims



Sec. 21.30  Claims.

    A specific claim in the form prescribed by the Department of 
Veterans Affairs must be filed for:
    (a) A program of rehabilitation services, or
    (b) Employment assistance.

(Authority: 38 U.S.C. 501(a), 3102, 3117, 5101(a))



Sec. 21.31  Informal claim.

    Any communication or action indicating an intent to apply for 
rehabilitation or employment assistance, from a veteran, a duly 
authorized representative, or a Member of Congress may be considered an 
informal claim. Upon receipt of an informal claim, if a formal claim has 
not been filed, an application form will be forwarded to the veteran for 
execution. In the case of a claim for rehabilitation, or employment 
assistance, the formal claim will be considered filed as of the date of 
receipt of the informal claim if received within 1 year from the date it 
was sent to the veteran, or before cessation of the course, whichever is 
earlier.

(Authority: 38 U.S.C. 501(a), 5101(a), 5103(a))



Sec. 21.32  Time limit.

    (a) Time limit for filing evidence. The provisions of this paragraph 
are applicable to an original application, formal or informal, for 
rehabilitation or employment assistance and to a claim for increased 
benefits by reason of the existence of a dependent.
    (1) If a claimant's application is incomplete, the claimant will be 
notified of the evidence necessary to complete the application;
    (2) If the evidence is not received within 1 year from the date of 
such notification, benefits may not be paid by reason of that 
application.
    (b) Failure to furnish claim or notice of time limit. The failure of 
VA to furnish a claimant:
    (1) Any form or information concerning the right to file a claim or 
to furnish notice of the time limit for the filing of a claim is not a 
basis for adjusting the periods allowed for these actions;
    (2) Appropriate notice of time limits within which evidence must be 
submitted to perfect a claim shall result in an adjustment of the period 
during which the time limit runs. The period during which the time limit 
runs shall be determined in accordance with paragraph (c) of this 
section. As to appeals see Sec. 19.129 of this chapter.


(Authority: (38 U.S.C. 5113))

    (c) Adjustment of time limit. (1) In computing the time limit for 
any action required of a claimant or beneficiary to perfect the types of 
claims described in paragraph (a) of this section, the first day of the 
specified period will be excluded and the last day included. This rule 
is applicable in cases in which the time limit expires on a workday. 
Where the time limit would expire on a Saturday, Sunday, or holiday, the 
next succeeding workday will be included in the computation.
    (2) The period during which the veteran must provide information 
necessary to perfect his or her claim does not begin to run until the 
veteran has been notified of this requirement for submission of 
information. The date of the letter of notification informing the 
veteran of the action required and the time limit for accomplishing the 
action shall be ``The first day of the specified period'' referred to in 
paragraph (c)(1) of this section.


(Authority: 38 U.S.C. 5101, 5113)

    Cross-Reference: Due Process. See Sec. 3.103.

[49 FR 40814, Oct. 18, 1984, as amended at 55 FR 12821, Apr. 6, 1990]

                               Definitions



Sec. 21.35  Definitions.

    (a) Employment handicap. This term means an impairment of a 
veteran's ability to prepare for, obtain, or retain

[[Page 123]]

employment consistent with such veteran's abilities, aptitudes, and 
interests.


(Authority: 38 U.S.C. 3101(1), 3102)

    (b) Independence in daily living. This term means the ability of a 
veteran, without the service of others, or with a reduced level of the 
services of others, to live and function within such veteran's family 
and community.


(Authority: 38 U.S.C. 3101(2))

    (c) Program of education. This term means:
    (1) A combination of subjects or unit courses pursued at a school 
which is generally acceptable to meet requirements for a predetermined 
educational, professional or vocational objective; or
    (2) Such subjects or courses which are generally acceptable to meet 
requirements for more than one objective if all objectives pursued are 
generally recognized as being related to a single career field; or
    (3) Any unit course or subject, or combination of courses or 
subjects, pursued by an eligible veteran at any educational institution 
required by the Administrator of the Small Business Administration as a 
condition to obtaining financial assistance under the provisions of 
section (7)(i)(1) of the Small Business Act.


(Authority: 15 U.S.C. 636(i)(1), 38 U.S.C. 3452(b))

    (d) Program of independent living services and assistance. This term 
includes:
    (1) The services provided in this program that are needed to enable 
a veteran to achieve maximum independence in daily living, including 
counseling, diagnostic, medical, social, psychological, and educational 
services determined by the Department of Veterans Affairs to be 
necessary, and
    (2) The monthly allowance authorized by 38 U.S.C. Chapter 31 for 
such a veteran.


(Authority: 38 U.S.C. 3101(4))

    (e) Rehabilitated to the point of employability. This term means 
that the veteran is employable in an occupation for which a vocational 
rehabilitation program has been provided under this program


(Authority: 38 U.S.C. 3101(5))

    (f) Rehabilitation program. This term includes, when appropriate:
    (1) A vocational rehabilitation program (see paragraph (i) of this 
section);
    (2) A program of independent living services and assistance (see 
paragraph (d) of this section) for a veteran for whom a vocational goal 
has been determined not to be currently reasonably feasible; or


(Authority: 38 U.S.C. 3101(6); Pub. L. 99-576)

    (3) A program of employment services for employable veterans who are 
prior participants in Department of Veterans Affairs or state-federal 
vocational rehabilitation programs.


(Authority: 38 U.S.C. 3117)

    (g) Serious employment handicap. This term means a significant 
impairment of a veteran's ability to prepare for, obtain, or retain 
employment consistent with such veteran's abilities, aptitudes, and 
interests.


(Authority: 38 U.S.C. 3101(7)

    (h) Vocational goal. (1) The term vocational goal means a gainful 
employment status consistent with a veteran's abilities, aptitudes, and 
interests;
    (2) The term achievement of a vocational goal is reasonably feasible 
means the effects of the veteran's disability (service and nonservice-
connected), when considered in relation to the veteran's circumstances 
does not prevent the veteran from successfully pursuing a vocational 
rehabilitation program and becoming gainfully employed in an occupation 
consistent with the veteran's abilities, aptitudes, and interests;
    (3) The term achievement of a vocational goal is not currently 
reasonably feasible means the effects of the veteran's disability 
(service and nonservice-connected), when considered in relation to the 
veteran's circumstances at the time of the determination:
    (i) Prevent the veteran from successfully achieving a vocational 
goal at that time; or

[[Page 124]]

    (ii) Are expected to worsen within the period needed to achieve a 
vocational goal and which would, therefore, make achievement not 
reasonably feasible.


(Authority: 38 U.S.C. 3101(8))

    (i) Vocational rehabilitation program. This term includes:
    (1) The services that are needed for the accomplishment of the 
purposes of 38 U.S.C. Chapter 31 including such counseling, diagnostic, 
medical, social, psychological, independent living, economic, 
educational, vocational, and employment services as are determined by 
the Department of Veterans Affairs to be needed;
    (i) In the case of a veteran for whom the achievement of a 
vocational goal has not been found to be currently infeasible, such 
services include:
    (A) Determining whether a vocational goal is reasonably feasible;
    (B) Improving the veteran's potential to participate in a program of 
services designed to achieve a vocational goal;
    (C) Enabling the veteran to achieve maximum independence in daily 
living;
    (ii) In the case of a veteran for whom achievement of a vocational 
goal is feasible, such services include assisting the veteran to become, 
to the maximum extent feasible, employable and to obtain and maintain 
suitable employment; and
    (2) The term also includes the monetary assistance authorized by 38 
U.S.C. Chapter 31 for a veteran receiving any of the services described 
in this paragraph.


(Authority: 38 U.S.C. 3101(9); Pub. L. 99-576)

    (j) Program of employment services. This term includes the 
counseling, medical, social, and other placement and post-placement 
services provided to a veteran under 38 U.S.C. Chapter 31 to assist the 
veteran in obtaining or maintaining suitable employment.


(Authority: 38 U.S.C. 3117)

    (k) Other terminology. The following are primarily intended as 
explanations rather than definitions of terms to which frequent 
reference will be made in these regulations.
    (1) Counseling psychologist. Unless otherwise stated, the term 
counseling psychologist refers to a counseling psychologist in the 
Vocational Rehabilitation and Employment Division in the Veterans 
Benefits Administration, Department of Veterans Affairs.


(Authority: 38 U.S.C. 3118(c))

    (2) Vocational rehabilitation specialist. Unless otherwise stated, 
the term vocational rehabilitation specialist refers to a vocational 
rehabilitation specialist in the Vocational Rehabilitation and 
Employment Division in the Veterans Benefits Administration of the 
Department of Veterans Affairs, or to a Department of Veterans Affairs 
counseling psychologist performing the duties of a vocational 
rehabilitation specialist.


(Authority: 38 U.S.C. 3118(c))

    (3) School, educational institution, institution. These terms means 
any public or private school, secondary school, vocational school, 
correspondence school, business school, junior college, teachers' 
college, college, normal school, professional school, university, or 
scientific or technical institution, or other institution furnishing 
education for adults.


(Authority: 38 U.S.C. 3452(c))

    (4) Training establishment. This term means any establishment 
providing apprentice or other training on the job, including those under 
the supervision of a college or university or any State department of 
education, or any State apprenticeship agency, or any State board of 
vocational education, or any joint apprenticeship committee, or the 
Bureau of Apprenticeship and Training established in accordance with 29 
U.S.C. Chapter 4C, or any agency of the Federal Government authorized to 
supervise such training.


(Authority: 38 U.S.C. 3452(e))

    (5) Rehabilitation facility. This term means a distinct 
organizational entity, either separate or within a larger insititution 
or agency, which provides goal-oriented comprehensive and coordinated 
services to individuals designed to evaluate and minimize the

[[Page 125]]

handicapping effects of physical, mental, social and vocational 
disadvantages, and to effect a realization of the individual's 
potential.


(Authority: 38 U.S.C. 3115(a))

    (6) Workshop. This term means a charitable organization or 
institution, conducted not for profit, but for the purpose of carrying 
out an organized program of evaluation and rehabilitation for 
handicapped workers and/or for providing such individuals with 
remunerative employment and other occupational rehabilitative activity 
of an educational or therapeutic nature.


(Authority: 38 U.S.C. 3115(a))

    (7) Vocational rehabilitation counselor. Unless otherwise stated, 
the term vocational rehabilitation counselor refers to a vocational 
rehabilitation counselor in the Vocational Rehabilitation and Employment 
Division in the Veterans Benefits Administration, Department of Veterans 
Affairs.


(Authority: 38 U.S.C. 3118(c))

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985, as amended at 53 
FR 50956, Dec. 19, 1988; 62 FR 17707, Apr. 11, 1997]

                            Basic Entitlement



Sec. 21.40  Basic entitlement.

    A veteran or serviceperson shall be entitled to a program of 
rehabilitation services under 38 U.S.C. chapter 31 if all of the 
following conditions are met:
    (a) Service-connected disability. (1) The veteran has a service-
connected disability of 20 percent or more which is, or but for the 
receipt of retired pay would be, compensable under 38 U.S.C. chapter 11, 
and which was incurred or aggravated in service on or after September 
16, 1940; or
    (2) A serviceperson is hospitalized for a service-connected 
disability in a hospital over which the Secretary concerned has charge 
pending discharge or release from active military, naval or air service 
and is suffering from a disability which will likely be compensable at a 
rate of 20 percent or more under 38 U.S.C. Chapter 11; or
    (3) A veteran or serviceperson, as described in paragraphs (a)(1) 
and (2) of this section, has a service-connected disability which is 
compensable or is likely to be compensable at less than 20 percent, if 
the individual filed an original application for Chapter 31 before 
November 1, 1990.
    (b) Employment handicap. The veteran or serviceperson is determined 
to be in need of rehabilitation to overcome an employment handicap.

(Authority: 38 U.S.C. 3102, Pub. L. 101-508)

[56 FR 15836, Apr. 18, 1991]

                         Periods of Eligibility



Sec. 21.41  Basic period of eligibility.

    A veteran having basic entitlement may be provided a program of 
rehabilitative services during the twelve-year period following 
discharge. The beginning date of the twelve-year period is the day of 
the veteran's discharge or release from his or her last period of active 
military, naval, or air service and the ending date is twelve years from 
the discharge or release date, unless the beginning date is deferred or 
the ending date is deferred or extended as provided in Sec. Sec. 21.42, 
21.44, and 21.45.

(Authority: 38 U.S.C. 3103)

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]



Sec. 21.42  Basic period of eligibility deferred.

    The basic twelve-year period of eligibility does not begin to run if 
the veteran was prevented from beginning or continuing a vocational 
rehabilitation program for one of the following reasons:
    (a) Qualifying compensable service-connected disability established. 
The basic twelve-year period shall not begin to run until the veteran 
establishes the existence of a compensable service-connected disability 
described in Sec. 21.40(a). When the veteran establishes the existence 
of a compensable service-connected disability described in Sec. 
21.40(a), the basic twelve-year period begins on the day the Department 
of Veterans Affairs notifies the veteran of this. The ending date is 
twelve years from the beginning date.


(Authority: 38 U.S.C. 3103(b)(3), Pub. L. 101-508)


[[Page 126]]


    (b) Character of discharge. (1) The basic twelve-year period of 
eligibility shall not begin to run during any period when the veteran 
had not met the requirement of a discharge or release from the active 
military, naval or air services under conditions other than dishonorable 
before:
    (i) The discharge or release was changed by appropriate authority, 
or
    (ii) The Department of Veterans Affairs determines that the 
discharge or release was under conditions other than dishonorable.
    (2) The basic twelve-year period shall not begin to run during any 
period in which the veteran's discharge or dismissal was considered a 
bar to benefits by the Department of Veterans Affairs, before this bar 
is removed by the Department of Veterans Affairs.
    (3) When there is a change in the character of discharge or 
dismissal under paragraph (b) (1) or (2) of this section the beginning 
date of the basic twelve-year period of eligibility is the effective 
date of the change. Determination of character of discharge and change 
in the character of discharge shall be made under the provisions of 
Sec. 3.12. The ending date is twelve years from the beginning date.


(Authority: 38 U.S.C. 3103(b)(2))

    (c) Medical condition prevents initiation or continuation. (1) The 
basic 12-year period of eligibility shall not begin to run or continue 
to run during any period of 30 days or more in which the veteran's 
participation in vocational rehabilitation is infeasible because of the 
veteran's medical condition, which condition may include the disabling 
effects of chronic alcoholism, subject to paragraph (c)(5) of this 
section. The 12-year period shall begin or resume when it is feasible 
for the veteran to participate in a vocational rehabilitation program, 
as that term is defined in Sec. 21.35.
    (2) The term disabling effects of chronic alcoholism means alcohol-
induced physical or mental disorders or both, such as habitual 
intoxication, withdrawal, delirium, amnesia, dementia, and other like 
manifestations of chronic alcoholism which, in the particular case:
    (i) Have been medically diagnosed as manifestations of alcohol 
dependency or chronic alcohol abuse; and
    (ii) Are determined to have prevented commencement or completion of 
the affected individual's rehabilitation program.
    (3) A diagnosis of alcoholism, chronic alcoholism, alcohol 
dependency, chronic alcohol abuse, etc., in and of itself, does not 
satisfy the definition of disabling effects of chronic alcoholism.
    (4) Injury sustained by a veteran as a proximate and immediate 
result of activity undertaken by the veteran while physically or 
mentally unqualified to do so due to alcoholic intoxication is not 
considered a disabling effect of chronic alcoholism.
    (5) The disabling effects of chronic alcoholism, which prevent 
initiation or continuation of participation in a vocational 
rehabilitation program after November 17, 1988, shall not be considered 
to be the result of willful misconduct.


(Authority: 38 U.S.C. 3103(b)(1), Pub. L. 100-689)

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985, as amended at 55 
FR 40171, Oct. 2, 1990; 56 FR 15836, Apr. 18, 1991]



Sec. 21.44  Extension beyond basic period of eligibility because of 
serious employment handicap.

    The basic period of eligibility of a veteran with a serious 
employment handicap may be extended when the veteran's employment and 
particular handicap necessitate an extension as necessary to pursue a 
vocational rehabilitation program under the following conditions:
    (a) Not rehabilitated to the point of employability. The basic 
period of eligibility may be extended when the veteran has not 
previously been rehabilitated to the point of employability.


(Authority: 38 U.S.C. 3103(c))

    (b) Rehabilitated to the point of employability. The veteran was 
previously declared rehabilitated to the point of employability, under 
the Department of Veterans Affairs vocational rehabilitation program, 
but either:
    (1) The veteran's service-connected disability or disabilities have 
worsened to the extent that he or she is unable

[[Page 127]]

to perform the duties of the occupation in which he or she is trained, 
or in a related occupation; or
    (2) The occupation in which the veteran was rehabilitated to the 
point of employability is not presently suitable in view of the 
veteran's current employment handicap and capabilities. (The finding of 
unsuitability must be based upon objective evidence developed in the 
course of reconsideration which shows that the nature or extent of the 
veteran's employment handicap and his or her capabilities are 
significantly different than were previously found.) or;
    (3) Occupational requirements have changed and additional services 
are needed to help the veteran continue in the occupation in which he or 
she was trained or in a related field.


(Authority: 38 U.S.C. 3103(c))



Sec. 21.45  Extension beyond basic period of eligibility for a program 
of independent living services.

    The period of eligibility for a veteran to pursue a program of 
independent living services may be extended beyond the basic twelve-year 
period under the following conditions:
    (a) The veteran's medical condition (service and nonservice-
connected disabilities) is so severe that achievement of a vocational 
goal is not currently reasonably feasible, or (b) the extension is 
necessary to ensure that he or she will achieve maximum independence in 
daily living.

(Authority: 38 U.S.C. 3103(d); Pub. L. (99-576)

[49 FR 40814, Oct. 18, 1984, as amended at 53 FR 50956, Dec. 19, 1988]



Sec. 21.47  Eligibility for employment assistance.

    (a) Providing employment services to veterans eligible for a 
rehabilitation program under chapter 31. Each veteran, other than one 
found in need of a program of independent living services and 
assistance, who is otherwise currently eligible for and entitled to 
participate in a program of rehabilitation under chapter 31 may receive 
employment services. Included are those veterans who:
    (1) Have completed a program of rehabilitation services under 
chapter 31 and been declared rehabilitated to the point of 
employability;
    (2) Have not completed a period of rehabilitation to the point of 
employability under chapter 31, but:
    (i) Have elected to secure employment without completing the period 
of rehabilitation to the point of employability; and
    (ii) Are employable; or
    (3) Have never received services for rehabilitation to the point of 
employability under chapter 31 if they:
    (i) Are employable or employed in a suitable occupation;
    (ii) Have an employment handicap or a serious employment handicap; 
and
    (iii) Need employment services to secure and/or maintain suitable 
employment.


(Authority: 38 U.S.C. 3102)

    (b) Veteran previously participated in a VA vocational 
rehabilitation program or a similar program under the Rehabilitation Act 
of 1973, as amended. A veteran who at some time in the past has 
participated in a vocational rehabilitation program under chapter 31 or 
a similar program under the Rehabilitation Act of 1973 as amended, and 
is employable is eligible for employment services under the following 
conditions even though he or she is ineligible for any other assistance 
under chapter 31:
    (1) The veteran is employable in a suitable occupation;
    (2) The veteran has filed a claim for vocational rehabilitation or 
employment assistance;
    (3) The veteran meets the criteria for eligibility described in 
Sec. 21.40(a); and
    (4) The veteran has an employment handicap or serious employment 
handicap; and
    (5) The veteran:
    (i) Completed a vocational rehabilitation program under 38 U.S.C. 
ch. 31 or participated in such a program for at least 90 days on or 
after September 16, 1940; or
    (ii) Completed a vocational rehabilitation program under the 
Rehabilitation Act of 1973 after September 26, 1975, or participated in 
such a program

[[Page 128]]

which included at least 90 days of postsecondary education or vocational 
training.


(Authority: 38 U.S.C. 3117)

    (c) Veteran never received vocational rehabilitation services from 
the Department of Veterans Affairs or under the Rehabilitation Act of 
1973. If a veteran is currently ineligible under chapter 31 because he 
or she does not have an employment handicap, and has never before 
participated in a vocational rehabilitation program under chapter 31 or 
under the Rehabilitation Act of 1973, no employment assistance may now 
be provided to the veteran under chapter 31.


(Authority: 38 U.S.C. 3117)

    (d) Duration of period of employment assistance. The periods during 
which employment assistance may be provided are not subject to 
limitations on periods of eligibility for vocational rehabilitation 
provided in Sec. Sec. 21.41 through 21.45 of this part, but entitlement 
to such assistance is, as provided in Sec. 21.73 of this part, limited 
to 18 total months of assistance.


(Authority: 38 U.S.C. 3105)

[54 FR 21215, May 17, 1989, as amended at 56 FR 15836, Apr. 18, 1991]



Sec. 21.48  Severance of service-connection--reduction to noncompensable 
degree.

    When a rating action is taken which proposes severance of service-
connection or reduction to a noncompensable degree, the provisions of 
the following paragraphs will govern the veteran's entitlement to 
rehabilitation and employment assistance under 38 U.S.C. Chapter 31.
    (a) Applicant. If the veteran is an applicant for rehabilitation or 
employment assistance when the proposed rating action is taken, all 
processes respecting determination of entitlement or induction into 
training shall be immediately suspended. In no event shall any veteran 
be inducted into a rehabilitation program or provided employment 
assistance during the interim periods provided in Sec. 3.105 (d) and 
(e) of this title. If the proposed rating action becomes final, the 
application will be denied. See also Sec. 21.50 as to initial 
evaluation.


(Authority: 38 U.S.C. 3104)

    (b) Reduction while in a rehabilitation program. If the proposed 
rating action is taken while the veteran is in a rehabilitation program 
and results in a reduction to a noncompensable rating of his or her 
disability, the veteran may be retained in the program until the 
completion of the program, except if ``discontinued'' under Sec. 21.198 
he or she may not reenter.


(Authority: 38 U.S.C. 3103)

    (c) Severance while in a rehabilitation program. If the proposed 
rating action is taken while the veteran is in a rehabilitation program 
and results in severance of the service-connection of his or her 
disability, rehabilitation will be terminated effective as of the last 
day of the month in which severance of service-connection becomes final.


(Authority: 38 U.S.C. 3103)

                     Initial and Extended Evaluation



Sec. 21.50  Initial evaluation.

    (a) Eligibility for initial evaluation. VA shall provide an initial 
evaluation to each individual who applies for benefits under chapter 31 
if the individual's compensable service-connected disability meets one 
of the conditions contained in Sec. 21.40(a).


(Authority: 38 U.S.C. 3102(1), Pub. L. 101-508)

    (b) Purpose. An initial evaluation will be provided to each 
individual who meets the conditions of paragraph (a) of this section to:
    (1) Determine the existence of an employment handicap;
    (2) Determine the basic twelve-year period of eligibility;
    (3) Determine whether an employment handicap shall be considered a 
serious employment handicap;
    (4) Determine whether the basic twelve-year period of eligibility is 
extended for a veteran with a serious employment handicap;
    (5) Determine as expeditiously as possible, without extended 
evaluation,

[[Page 129]]

whether achievement of a vocational goal is currently reasonably 
feasible.
    (6) Evaluate the ability of the veteran to live and function 
independently within the veteran's family and community;
    (7) Determine if the veteran is eligible for employment services 
under Sec. 21.47;
    (8) Develop information necessary to plan an individual program for 
a veteran found eligible and entitled to services under Chapter 31; and
    (9) Assist a veteran who is found ineligible for assistance under 
Chapter 31 to identify other resources and programs for which he or she 
may be eligible.


(Authority: 38 U.S.C. 523, 3106(a), (d), 3116)

    (c) Scope of initial evaluation. The initial evaluation shall 
include consideration of:
    (1) The handicapping effects of the veteran's service-connected 
disability on employability and independence in daily living;
    (2) The veteran's residual physical and mental capabilities which 
contribute to employability and independence in daily living;
    (3) The veteran's ability to function independently in family and 
community;
    (4) Prior assessments of employability by a counseling psychologist;
    (5) Assessments authorized to provide additional information 
necessary for initial evaluation; and
    (6) The veteran's personal history including:
    (i) Education and training;
    (ii) Employment;
    (iii) Nonservice-connected disabil- ity(ies), and
    (iv) Family and community adjustment.


(Authority: 38 U.S.C. 3106(a))

    (d) Responsibility for initial evaluation. (1) All determinations 
regarding service requirements for basic entitlement and, the beginning 
and ending dates of a veteran's basic twelve-year period of eligibility 
shall be made by appropriate staff of the Veterans Service Center.
    (2) All other determinations, including extension of the basic 
twelve-year period because of serious employment handicap, and 
entitlement to assistance under Chapter 31 shall be made by appropriate 
staff of the Vocational Rehabilitation and Employment Division.


(Authority: 38 U.S.C. 3102, 3103, 3115(a))

    (e) Cooperation of the veteran. The cooperation of the veteran is 
essential to an initial evaluation. The purpose of the initial 
evaluation and the steps in the process shall be explained to the 
veteran and his or her cooperation requested. If the veteran does not 
cooperate in the initiation or completion of the initial evaluation the 
counseling psychologist shall make a reasonable effort through 
counseling to secure the veteran's cooperation. If the veteran's 
cooperation cannot be secured, the counseling psychologist shall suspend 
the initial evaluation until such time as the veteran cooperates. The 
veteran will be informed of any suspension of the initial evaluation, 
the reasons for this action, and the steps necessary to resume the 
evaluation.


(Authority: 38 U.S.C. 3111)

[49 FR 40814, Oct. 18, 1984, as amended at 53 FR 50956, Dec. 19, 1988; 
56 FR 15836, Apr. 18, 1991; 71 FR 28586, May 17, 2006]



Sec. 21.51  Employment handicap.

    (a) Importance of decision. The proper determination of employment 
handicap is a critical decision for rehabilitation planning and program 
accountability. To the extent possible, necessary information shall be 
developed in the course of initial evaluation and the significance of 
the information under paragraphs (d) and (e) of this section for 
determining employment handicap shown in each case.


(Authority: 38 U.S.C. 3101(1), 3102)

    (b) Definition. The term employment handicap means an impairment of 
the veteran's ability to prepare for, obtain, or retain employment 
consistent with the veteran's abilities, aptitudes, and interests.


(Authority: 38 U.S.C. 3101(1))

    (c) Components of employment handicap. Components of employment 
handicap include:

[[Page 130]]

    (1) Impairment. This term means the restrictions on employability 
caused by:
    (i) The veteran's service and nonservice-connected disabilities;
    (ii) Deficiencies in education and training;
    (iii) Negative attitudes toward the disabled; and
    (iv) Other pertinent factors.
    (2) Service-connected disability. The veteran's service-connected 
disability need not be the sole or primary cause of the employment 
handicap but it must materially contribute to the impairment described 
in paragraph (c)(1) of this section. Therefore its effects must be 
identifiable, measurable, or observable.
    (3) Nonservice-connected disability. This term includes all physical 
and mental disabilities which have not been found to be service-
connected by the Department of Veterans Affairs, including alcoholism 
and drug abuse. The effects of alcoholism and drug abuse are to be 
considered in the same manner as other nonservice-connected disabilities 
in evaluating restrictions on employability. When the manifestations of 
alcoholism, drug abuse or other nonservice-connected disabilities raise 
questions as to the reasonable feasibility of a vocational goal for a 
veteran otherwise entitled to assistance under Chapter 31 such questions 
will be resolved under provisions of Sec. 21.53.
    (4) Consistency with abilities, aptitudes, and interests. The 
following points should be considered to determine if the veteran's 
training and employment are consistent with his or her abilities, 
aptitudes and interests:
    (i) A finding that a veteran is employed in an occupation which is 
consistent with his or her abilities, aptitudes and interests may not be 
made if the occupation does not require reasonably developed skills, 
except under conditions described in paragraphs (e) (2) and (3), of this 
section;
    (ii) The veteran's residual capacities, as well as limitations 
arising from the veteran's service and nonservice-connected disabilities 
are relevant;
    (iii) Evidence of the consistency of interests with training and 
employment may be based on:
    (A) The veteran's statements to a Department of Veterans Affairs 
counseling psychologist during initial evaluation or subsequent 
reevaluation;
    (B) The veteran's history of participation in specific activities; 
or
    (C) Information developed by the Department of Veterans Affairs 
through use of interest inventories.


(Authority: 38 U.S.C. 3102)

    (d) Determining extent of impairment. The extent of the veterans 
impairment shall be assessed through consideration of factors described 
in paragraph (c)(1) of this section:
    (e) Material contribution of service-connected disability to the 
impairment. A finding that the veteran's service-connected disability 
materially contributes to his or her impairment to employment will be 
made by assessing the following factors:
    (1) Preparation for employment. The service-connected condition 
adversely affects the veteran's current ability to prepare for 
employment in one or more fields which would otherwise be consistent 
with the veteran's abilities, aptitudes, and interests. An adverse 
effect is demonstrated when the physical or psychological results of the 
service-connected condition:
    (i) Impair the veteran's ability to train;
    (ii) Prevent or impede access to training facilities; or
    (iii) Diminish the veteran's motivation and ability to mobilize his 
or her energies for education or training.
    (2) Obtaining employment. The service-connected condition places the 
veteran at a competitive disadvantage with similarly circumstanced 
nondisabled persons in obtaining employment. A veteran without 
reasonably developed specific job skills shall be considered to be at a 
competitive disadvantage unless evidence of record shows a history of 
current, stable, continuing employment.
    (3) Retaining employment. The physical or psychological effects of a 
service-connected condition adversely affect the veteran's ability to 
maintain employment which requires reasonably developed skills. This 
criterion is not

[[Page 131]]

met if a veteran though lacking reasonably developed skills, has a 
history of continuing, stable employment.


(Authority: 38 U.S.C. 3101(1))

    (f) Determination of employment handicap. The counseling 
psychologist may find the veteran has an employment handicap.
    (1) An employment handicap which entitles the veteran to assistance 
under this program exists when all of the following conditions are met:
    (i) The veteran has an impairment of employability; this includes 
veterans who are qualified for suitable employment, but do not obtain or 
retain such employment for reasons not within their control;
    (ii) The veteran's service-connected disability materially 
contributes to the impairment of employability;
    (iii) The veteran has not overcome the effects of the impairment of 
employability through employment in an occupation consistent with his or 
her pattern of abilities, aptitudes and interests.
    (2) An employment handicap does not exist when any of the following 
conditions is present:
    (i) The veteran's employability is not impaired; this includes 
veterans who are qualified for suitable employment, but do not obtain or 
retain such employment for reasons within their control;
    (ii) The veteran's employability is impaired, but his or her 
service-connected disability does not materially contribute to the 
impairment of employability.
    (iii) The veteran has overcome the effects of the impairment of 
employability through employment in an occupation consistent with his or 
her pattern of abilities, aptitudes and interests, and is successfully 
maintaining such employment.


(Authority: 38 U.S.C. 3102)

    (g) Eligibility for employment assistance. If a veteran is not found 
to have an employment handicap a separate determination of his or her 
eligibility for employment assistance will be made under provisions of 
Sec. 21.47.


(Authority: 38 U.S.C. 3117)

    (h) Responsibility for determinations. The determination of an 
employment handicap and eligibility for employment assistance may only 
be made by a counseling psychologist in the Vocational Rehabilitation 
and Employment Division.


(Authority: 38 U.S.C. 3106(a))

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985, as amended at 54 
FR 21216, May 17, 1989]



Sec. 21.52  Serious employment handicap.

    (a) Requirement of determination of serious employment handicap. A 
separate determination whether a serious employment handicap exists 
shall be made in each case in which an employment handicap is found.


(Authority: 38 U.S.C. 3106(a))

    (b) Definition. The term serious employment handicap means a 
significant impairment of a veteran's ability to prepare for, obtain or 
retain employment consistent with such veteran's abilities, aptitudes, 
and interests.


(Authority: 38 U.S.C. 3101(7))

    (c) Serious employment handicap exists. A veteran who has been found 
to have an employment handicap shall also be held to have serious 
employment handicap if he or she has:
    (1) A neuropsychiatric service-connected disability rated at thirty 
percent or more disabling; or
    (2) Any other service-connected disability rated at fifty percent or 
more disabling.
    (d) Serious employment handicap may exist. A veteran with a 
nonneuropsychiatric service-connected disability may be found to have a 
serious employment handicap even though the disability is rated at 
thirty or forty percent disabling, when either of the following 
conditions exists:
    (1) The veteran has a prior history of poor adjustment in training 
and employment, and special efforts will be needed if the veteran is to 
be rehabilitated; or
    (2) The veteran's situation presents special problems due to 
nonservice-connected disability, family pressures,

[[Page 132]]

etc., and a number of special and supportive services are needed to 
effect rehabilitation.
    (e) Serious employment handicap normally not found. A finding of 
serious employment handicap will normally not be made when a veteran's 
service-connected disability is rated at less than thirty percent 
disabling. A finding of serious employment handicap may nevertheless be 
made when:
    (1) The veteran's service-connected disability has caused 
substantial periods of unemployment or unstable work history;
    (2) The veteran has demonstrated a pattern of maladaptive behavior 
which is shown by a history of withdrawal from society or continuing 
dependency on government income support programs; and
    (f) Responsibility for determining serious employment handicap. A 
counseling psychologist in the Vocational Rehabilitation and Employment 
Division shall make determinations of serious employment handicap.


(Authority: 38 U.S.C. 3106(a))

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 37332, Sept. 8, 1989]



Sec. 21.53  Reasonable feasibility of achieving a vocational goal.

    (a) Requirement. The Department of Veterans Affairs shall determine 
the reasonable feasibility of achieving a vocational goal in each case 
in which a veteran has either:
    (1) An employment handicap, or
    (2) A serious employment handicap.


(Authority: 38 U.S.C. 3106(a))

    (b) Definition. The term vocational goal means a gainful employment 
status consistent with the veteran's abilities, aptitudes, and 
interests.


(Authority: 38 U.S.C. 3101(8))

    (c) Expeditious determination. The determination of reasonable 
feasibility shall be made as expeditiously as possible when necessary 
information has been developed in the course of initial evaluation. If 
an extended evaluation is necessary as provided in Sec. 21.57 a 
decision of feasibility shall be made by the end of the extended 
evaluation. Any reasonable doubt shall be resolved in favor of a finding 
of feasibility.


(Authority: 38 U.S.C. 3105(d))

    (d) Vocational goal is reasonably feasible. Achievement of a 
vocational goal is reasonably feasible for a veteran with either an 
employment or serious employment handicap when the following conditions 
are met:
    (1) Vocational goal(s) has (have) been identified;
    (2) The veteran's physical and mental conditions permit training for 
the goal(s) to begin within a reasonable period; and
    (3) The veteran:
    (i) Possesses the necessary educational skills and background to 
pursue the vocational goal; or
    (ii) Will be provided services by the Department of Veterans Affairs 
to develop such necessary educational skills as part of the program.


(Authority: 38 U.S.C. 3104(a)(1), 3106(a))

    (e) Criteria for reasonable feasibility not met. (1) When VA finds 
that the provisions of paragraph (d) of this section are not met, but VA 
has not determined that achievement of a vocational goal is not 
currently reasonably feasible, VA shall provide the rehabilitation 
services contained in Sec. 21.35(i)(1)(i) of this part as appropriate;
    (2) A finding that achievement of a vocational goal is infeasible 
without a period of extended evaluation requires compelling evidence 
which establishes infeasibility beyond any reasonable doubt.


(Authority: 38 U.S.C. 3104(a)(1), 3106(b))

    (f) Independent living services. The counseling psychologist shall 
determine the current reasonable feasibility of a program of independent 
living services in each case in which a vocational rehabilitation 
program is not found reasonably feasible. The concurrence of the 
Vocational Rehabilitation and Employment (VR&C) Officer is required in 
any case in which the counseling psychologist does not approve a program 
of independent living services.


(Authority: 38 U.S.C. 3100)


[[Page 133]]


    (g) Responsible staff. A counseling psychologist in the Vocational 
Rehabilitation and Employment Division shall determine whether 
achievement of a vocational goal is:
    (1) Reasonably feasible; or
    (2) Not currently reasonably feasible under the provisions of 
paragraph (e) of this section for the purpose of determining present 
eligibility to receive a program of independent living services.


(Authority: 38 U.S.C. 3106(b), Pub. L. 99-576)

[49 FR 40814, Oct. 18, 1984, as amended at 53 FR 50956, Dec. 19, 1988; 
54 FR 37332, Sept. 8, 1989]



Sec. 21.57  Extended evaluation.

    (a) Purpose. The purpose of an extended evaluation for a veteran 
with a serious employment handicap is to determine the current 
feasibility of the veteran achieving a vocational goal, when this 
decision reasonably cannot be made on the basis of information developed 
during the initial evaluation.


(Authority: 38 U.S.C. 3106(c), Pub. L. 99-576)

    (b) Scope of services. During the extended evaluation, a veteran may 
be provided:
    (1) Diagnostic and evaluative services;
    (2) Services to improve his or her ability to attain a vocational 
goal;
    (3) Services to improve his or her ability to live and function 
independently in the community;
    (4) An allowance as provided in Sec. 21.260.


(Authority: 38 U.S.C. 3104)

    (c) Determination. (1) The determination of the reasonable 
feasibility of a veteran achieving a vocational goal will be made at the 
earliest time possible during an extended evaluation, but not later than 
the end of the period of evaluation, or an extension of that period. Any 
reasonable doubt as to feasibility will be resolved in the veteran's 
favor;


(Authority: 38 U.S.C. 3106(d))

    (2) When it is reasonably feasible for the veteran to achieve a 
vocational goal, an individualized written rehabilitation plan (IWRP) 
will be developed as indicated in Sec. 21.84 of this part.


(Authority: 38 U.S.C. 3106(b))

    (d) Responsibility for determining the need for a period of extended 
evaluation. A counseling psychologist in the Vocational Rehabilitation 
and Employment Division shall determine whether a period of extended 
evaluation is needed.


(Authority: 38 U.S.C. 3106(c))

[49 FR 40814, Oct. 18, 1984, as amended at 53 FR 50956, Dec. 19, 1988; 
54 FR 37332, Sept. 8, 1989; 62 FR 17707, Apr. 11, 1997]



Sec. 21.58  Redetermination of employment handicap and serious 
employment handicap.

    (a) Prior to induction into a program. A determination as to 
employment handicap, serious employment handicap, or eligibility for a 
program of employment services will not be changed except for:
    (1) Unmistakable error in fact or law; or
    (2) New and material evidence which justifies a change.
    (b) After induction into a program. (1) The Department of Veterans 
Affairs will not redetermine a finding of employment handicap, serious 
employment handicap, or eligibility for a program of employment services 
subsequent to the veteran's induction into a program because of a 
reduction in his or her disability rating, including a reduction to 0 
percent:
    (2) The Department of Veterans Affairs may consider whether a 
finding of employment handicap should be changed to serious employment 
handicap when there is an increase in the degree of service-connected 
disability, or other significant change in the veteran's situation;
    (3) A redetermination of employment handicap, serious employment 
handicap, or eligibility for a program of employment services will be 
made when there is a clear and unmistakable error of fact or law.


(Authority: 38 U.S.C. 3102, 3106)

    (c) Following rehabilitation or discontinuance. A veteran's 
eligibility and entitlement to assistance must be redetermined in any 
case in which:

[[Page 134]]

    (1) The veteran is determined to be rehabilitated to the point of 
employability under the provisions of Sec. 21.190;
    (2) The veteran is determined to meet the requirements for 
rehabilitation under the provisions of Sec. 21.196; or
    (3) The veteran's program is discontinued under the provisions of 
Sec. 21.198, except as described in Sec.  21.198(c)(3).


(Authority: 38 U.S.C. 3102, 3111)



Sec. 21.59  Review and appeal of decisions on eligibility and 
entitlement.

    A veteran may appeal decisions of the Vocational Rehabilitation and 
Employment staff on eligibility and entitlement to rehabilitation 
services to the Board of Veterans Appeals as provided in Sec. 19.2 of 
Title 38, CFR. However, the veteran or an accredited representative, on 
his or her behalf, may request administrative review by Central Office 
prior to filing an appeal to BVA. A case already on appeal to BVA may 
not be referred to Central Office for administrative review or advisory 
opinion.

(Authority: 38 U.S.C. 3107(c))

                     Vocational Rehabilitation Panel



Sec. 21.60  Vocational Rehabilitation Panel.

    (a) Establishment of the Panel. A Vocational Rehabilitation Panel 
will be established at each field facility by the facility head. The 
purpose of the Panel is to provide technical assistance in the planning 
of rehabilitation programs for seriously disabled veterans and 
dependents. This purpose will be most effectively carried out through 
use of the services of a wide range of professionals to bring the 
resources of the Department of Veterans Affairs and the community to 
bear on problems presented in the individual case.


(Authority: 38 U.S.C. 3104(a))

    (b) Composition of the Panel. The Panel will include, but not be 
limited to the following:
    (1) A counseling psychologist in the VR&C (Vocational Rehabilitation 
and Employment) Division as the chairperson;
    (2) A vocational rehabilitation specialist in VR&C
    (3) A medical consultant from a Department of Veterans Affairs 
Medical Center;
    (4) A member of the Social Services staff from a Department of 
Veterans Affairs Medical Center; and
    (5) Other specialists from the Department of Veterans Affairs.


(Authority: 38 U.S.C. 3104(a), 3115(a))

    (c) Appointment to the Panel. (1) The VR&C (Vocational 
Rehabilitation and Employment) Officer may not serve as either 
chairperson or member of the Panel.
    (2) The VR&C Officer will arrange for the participation of 
nonmedical professional staff in the Panel's meetings.


(Authority: 38 U.S.C. 3115(a)(2))

    (d) Scope of Panel review. The Panel will review each case which has 
been referred to it in relation to:
    (1) Specific reason for the referral; and
    (2) Other problem areas which the Panel identifies in the course of 
its consideration of the case.
    (e) Referral. A case may be referred to the Panel by:
    (1) A counseling psychologist in VR&C
    (2) A vocational rehabilitation specialist in VR&C or
    (3) The VR&C officer.
    (f) Report. The Panel must prepare a report on its findings and 
recommendations in each case. The Panel's recommendations may include 
specific actions which are warranted on the basis of current 
information, or may identify additional information needed to provide a 
sounder basis for planning the veteran's program of rehabilitation.


(Authority: 38 U.S.C. 3104(a))



Sec. 21.62  Duties of the Vocational Rehabilitation Panel.

    (a) Consultation requested. The panel shall provide technical and 
consultative services when requested by professional staff of the 
Vocational Rehabilitation and Employment (VR&C) Division to:
    (1) Assist staff members in planning and carrying out a 
rehabilitation plan for seriously disabled veterans and their 
dependents; and

[[Page 135]]

    (2) Consider other cases of individuals eligible for, or being 
provided assistance under chapter 31 and other programs of education and 
training administered by the Department of Veterans Affairs.


(Authority: 38 U.S.C. 3104(a))

    (b) Independent living services. The Panel has a key responsibility 
to assure that seriously disabled service-connected veterans who need 
independent living services to increase their independence in daily 
living are provided necessary services. In carrying out this 
responsibility the Panel shall review all cases which come before it to 
assure that the proposed program of vocational rehabilitation or 
independent living services includes those services necessary to enable 
the veteran to achieve the goals of the program.


(Authority: 38 U.S.C. 3100)

    (c) Dependents. The specific duties of the Panel with respect to 
dependents are more fully described Sec. Sec. 21.3300, 21.3301, 
21.3304, 21.4105, and 21.4276 of this part.


(Authority: 38 U.S.C. 3536, 3540, 3541, 3542, 3543)

[54 FR 37332, Sept. 8, 1989]

                   Duration of Rehabilitation Programs



Sec. 21.70  Vocational rehabilitation.

    (a) General. The goal of a vocational rehabilitation program is to:
    (1) Evaluate and improve the veteran's ability to achieve a 
vocational goal;
    (2) Provide services needed to qualify for suitable employment;
    (3) Enable the veteran to achieve maximum independence in daily 
living;
    (4) Enable the veteran to become employed in a suitable occupation 
and to maintain suitable employment.
    (b) Vocational rehabilitation program. This term includes:
    (1) The services that are needed for the accomplishment of the 
purposes of Chapter 31, including such counseling, diagnostic, medical, 
social, psychological, independent living, economic, educational, 
vocational, and employment services as are determined by the Department 
of Veterans Affairs to be needed;
    (i) In the case of a veteran for whom the achievement of a 
vocational goal has not been found to be currently infeasible such 
needed services include:
    (A) Determining whether a vocational goal is reasonably feasible;
    (B) Improving the veteran's potential to participate in a program of 
services designed to achieve a vocational goal;
    (C) Enabling the veteran to achieve maximum independence in daily 
living;
    (ii) In the case of a veteran for whom achievement of a vocational 
goal is feasible, such needed services include assisting the veteran to 
become, to the maximum extent feasible, employable and to obtain and 
maintain suitable employment;
    (2) The term also includes the monetary assistance authorized by 
Chapter 31 for a veteran receiving any of the services described in this 
paragraph.


(Authority: 38 U.S.C. 3101(9); Pub. L. 99-576)

    (c) Duration of vocational rehabilitation. Decisions on the duration 
of periods for attaining the goals named in paragraph (a) of this 
section are made in the course of development and approval of the 
Individualized Written Rehabilitation Plan. However, the duration of a 
vocational rehabilitation program may not exceed 48 months (or its 
equivalent when pursued on a part-time basis), except as provided in 
Sec. 21.78.


(Authority: 38 U.S.C. 3695, 3105)

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985, as amended at 53 
FR 50957, Dec. 19, 1988]



Sec. 21.72  Rehabilitation to the point of employability.

    (a) General. Rehabilitation to the point of employability may 
include the services needed to:
    (1) Evaluate and improve the veteran's ability to undertake 
training;
    (2) Train the veteran to the level generally recognized as necessary 
for entry into employment in a suitable occupational objective. Where a 
particular degree, diploma, or certificate is generally necessary for 
entry into the occupation, e.g., an MSW for social

[[Page 136]]

work, the veteran shall be trained to that level.


(Authority: 38 U.S.C. 3101(5), 3104)

    (b) When duration of training may exceed general requirements--(1) 
Employment handicap. If the amount of training necessary to qualify for 
employment in a particular occupation in a geographical area where a 
veteran lives or will seek employment exceeds the amount generally 
needed for employment in that occupation, the Department of Veterans 
Affairs will provide, or arrange for the necessary additional training.
    (2) Serious employment handicap. The Department of Veterans Affairs 
will assist a veteran with a serious employment handicap to train to a 
higher level than is usually required to qualify in a particular 
occupation, when one of the following conditions exist:
    (i) The veteran is preparing for a type of work in which he or she 
will be at a definite disadvantage in competing with nondisabled persons 
for jobs or business, and the additional training will help to offset 
the competitive disadvantage;
    (ii) The number of feasible occupations are restricted, and 
additional training will enhance the veteran's employability in one of 
those occupations;
    (iii) The number of employment opportunities within feasible 
occupations are restricted.


(Authority: 38 U.S.C. 3105(c))

    (c) Responsibility for estimating duration of training. (1) The 
counseling psychologist shall estimate the duration of training and the 
estimate shall be incorporated in the IWRP (Individualized Written 
Rehabilitation Plan). When the period of training is estimated to exceed 
48 months, the concurrence of the Vocational Rehabilitation and 
Employment Officer is required, prior to approving the IWRP, under 
conditions listed in Sec. 21.78.
    (2) The estimated duration of the period of training required to 
complete an original or amended IWRP may be extended when necessary. 
Authorization of an extension is the responsibility of the counseling 
psychologist, except as provided in paragraph (d) of this section. Any 
extension which will result in use of more than 48 months of entitlement 
must meet conditions described in Sec. 21.78.


(Authority: 38 U.S.C. 3695(b))

    (d) Extension of training by the vocational rehabilitation 
specialist. (1) The VRS (Vocational Rehabilitation Specialist) may 
authorize an extension of up to six months of the period of vocational 
rehabilitation training authorized by the IWRP when:
    (i) The veteran is in rehabilitation to the point of employability 
status under Sec. 21.190;
    (ii) The veteran has completed more than half of the prescribed 
training;
    (iii) The veteran is making satisfactory progress;
    (iv) The extension is necessary to complete training;
    (v) Training can be completed within six months; and
    (vi) The extension will not result in use of more than 48 months of 
entitlement under Chapter 31 alone or in combination with other programs 
identified in Sec. 21.4020.
    (2) If the conditions listed in paragraph (d)(1) of this section are 
not met, and an extension is needed to complete the program, the case 
will be referred to the counseling psychologist for a determination.


(Authority: 38 U.S.C. 3105(c))



Sec. 21.73  Duration of employment assistance programs.

    (a) Duration. Employment assistance may be provided to the veteran 
for the period necessary to enable the veteran to secure employment in a 
suitable occupation, and to adjust in the employment. This period shall 
not exceed 18 months. A veteran may be provided such assistance if he or 
she is eligible for employment assistance under the provisions of Sec. 
21.47 of this part.


(Authority: 38 U.S.C. 3105(b))

    (b) Employment assistance not charged against Chapter 31 
entitlement. The period of employment assistance provided in paragraph 
(a) of this section is

[[Page 137]]

not charged against the months of entitlement under Chapter 31 (see 
Sec. 21.70).


(Authority: 38 U.S.C. 3105(b))

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 21216, May 17, 1989]



Sec. 21.74  Extended evaluation.

    (a) General. An extended evaluation may be authorized for the period 
necessary to determine whether the attainment of a vocational goal is 
currently reasonably feasible for the veteran. The services which may be 
provided during the period of extended evaluation are listed in Sec. 
21.57(b) of this part.


(Authority: 38 U.S.C. 3105(a), 3106(a))

    (b) Duration. An extended evaluation may not be for less than two 
weeks (full or part-time equivalent) nor for more than twelve months, 
unless a longer period is necessary to determine whether achievement of 
a vocational goal is reasonably feasible.


(Authority: 38 U.S.C. 3105(a))

    (c) Approval of the period of an extended evaluation. (1) The 
counseling psychologist may approve an initial period of up to 12 months 
for an extended evaluation.
    (2) An additional period of extended evaluation of up to 6 months 
may be approved by the counseling psychologist, if there is reasonable 
certainty that the feasibility of achieving a vocational goal can be 
determined during the additional period. The counseling psychologist 
will obtain the concurrence of the Vocational Rehabilitation and 
Employment (VR&C) Officer before approving the extension of a period of 
extended evaluation.
    (3) An extension beyond a total period of 18 months for additional 
periods of up to 6 months each may only be approved by the counseling 
psychologist if there is a substantial certainty that a determination of 
current feasibility may be made within this extended period. The 
concurrence of the VR&C Officer is also required for this extension.


(Authority: 38 U.S.C. 3105(a), 3106(b); Pub. L. 99-576)

[49 FR 40814, Oct. 18, 1984, as amended at 53 FR 50957, Dec. 19, 1988; 
54 FR 37332, Sept. 8, 1989; 62 FR 17707, Apr. 11, 1997]



Sec. 21.76  Independent living.

    (a) General. A program of independent living services may be 
authorized to enable the veteran to:
    (1) Reach the goals of the program, and
    (2) Maintain the newly achieved level of independence in daily 
living.


(Authority: 38 U.S.C. 3101(4), 3104(b))

    (b) Period of independent living services. The duration of an 
independent living services program may not exceed 24 months unless the 
counseling psychologist finds that an additional period of up to 6 
months would enable the veteran to substantially increase his or her 
level of independence in daily living. The concurrence of the Vocational 
Counseling and Rehabilitation Officer in this finding is required.


(Authority: 38 U.S.C. 3105(d))

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 37332, Sept. 8, 1989]



Sec. 21.78  Approving more than 48 months of rehabilitation.

    (a) General. Neither the basic period of entitlement which may be 
authorized for a program of rehabilitation under Chapter 31 alone, nor a 
combination of entitlement of Chapter 31 and other programs listed in 
Sec. 21.4020 shall exceed 48 months except as indicated in paragraphs 
(b) and (c) of this section.


(Authority: 38 U.S.C. 3695)

    (b) Employment handicap. A rehabilitation program for a veteran with 
an employment handicap may only be extended beyond 48 months when:
    (1) The veteran previously completed training for a suitable 
occupation but the veteran's service-connected disability has worsened 
to the point that he or she is unable to perform the duties of the 
occupation for which training had been provided, and a period of

[[Page 138]]

training in the same or a different field is required. An extension 
beyond 48 months under Chapter 31 alone shall be authorized for this 
purpose.


(Authority: 38 U.S.C. 3105(c)(1)(A))

    (2) The occupation in which the veteran previously completed 
training is found to be unsuitable because of the veteran's abilities 
and employment handicap. An extension beyond 48 months under Chapter 31 
alone shall be approved for this purpose.


(Authority: 38 U.S.C. 3105(c)(1)(B))

    (3) The veteran previously used education benefit entitlement under 
other programs administered by VA, and the additional period of 
assistance to be provided under Chapter 31 which the veteran needs to 
become employable will result in more than 48 months being used under 
all VA education programs, under these conditions the number of months 
necessary to complete the program may be authorized under Chapter 31, 
provided that the length of the extension will not result in 
authorization of more than 48 months under Chapter 31 alone.


(Authority: 38 U.S.C. 3695)

    (4) A veteran in an approved Chapter 31 program has elected payment 
of benefits at the Chapter 30 educational assistance rate. The 48 month 
limitation may be exceeded only:
    (i) To the extent that the entitlement in excess of 48 months does 
not exceed the entitlement previously used by the veteran in a course at 
the secondary school level under Sec. 21.4235 before December 31, 1989, 
or
    (ii) If the veteran is in a course on a term, quarter, or semester 
basis which began before the 36 month limitation on Chapter 30 
entitlement was reached, and completion of the course will be possible 
by permitting the veteran to complete the training under Chapter 31.


(Authority: 38 U.S.C. 3013, 3695; Pub. L. 98-525)

    (5) The assistance to be provided in excess of 48 months consists 
only of a period of employment assistance (see Sec. 21.73).


(Authority: 38 U.S.C. 3105(b))

    (c) Serious employment handicap. The duration of a rehabilitation 
program for a veteran with a serious employment handicap may be extended 
beyond 48 months under Chapter 31 for the number of months necessary to 
complete a rehabilitation program under the following conditions:
    (1) To enable the veteran to complete a period of rehabilitation to 
the point of employability;
    (2) To provide an extended evaluation in cases in which the total 
period needed for an extended evaluation and for rehabilitation to the 
point of employability would exceed 48 months;
    (3) To provide a program of independent living services, including 
cases in which achievement of a vocational goal becomes feasible during 
or following a program of independent living services;
    (4) Following rehabilitation to the point of employability:
    (i) The veteran has been unable to secure employment in the 
occupation for which training has been provided despite intensive 
efforts on the part of the Department of Veterans Affairs and the 
veteran, and a period of retraining or additional training is needed;
    (ii) The skills which the veteran developed in training for an 
occupation in which he or she was employed are no longer adequate to 
maintain employment in that field and a period of retraining is needed;
    (iii) The veteran's service-connected disability has worsened to the 
point that he or she is unable to perform the duties of the occupation 
for which the veteran has been trained, and a period of training in the 
same or different field is required;
    (iv) The occupation in which the veteran previously completed 
training is found to be unsuitable due to the veteran's abilities and 
employment handicap.
    (5) The assistance to be provided in excess of 48 months consists, 
only of a

[[Page 139]]

period of employment assistance. (see Sec. 21.73).


(Authority: 38 U.S.C. 3105(c)(2))

    (d) Approval of extension beyond 48 months. All extensions of a 
rehabilitation program beyond 48 months of total entitlement under all 
Department of Veterans Affairs programs requires the approval of the 
counseling psychologist and concurrence of the Vocational Rehabilitation 
and Employment Officer. Concurrence of the VR&C officer is not required 
for an extension due to provision of employment assistance (see Sec. 
21.21).


(Authority: 38 U.S.C. 3105(b))

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 4283, Jan. 30, 1989; 57 
FR 57108, Dec. 3, 1992]



Sec. 21.79  Determining entitlement usage under Chapter 31.

    (a) General. The determination of entitlement usage for chapter 31 
participants is made under the provisions of this section except as 
provided in paragraph (f) of this section. Charges for entitlement usage 
shall be based upon the principle that a veteran who pursues a 
rehabilitation program for 1 day should be charged 1 day of entitlement. 
The determination of entitlement is based upon the rate at which the 
veteran pursues his or her rehabilitation program. The rate of pursuit 
is determined under the provisions of Sec. 21.310 of this part.


(Authority: 38 U.S.C. 3108(d))

    (b) No charge against chapter 31 entitlement. No charge will be made 
against chapter 31 entitlement under any of the following circumstances:
    (1) The veteran is receiving employment services under an 
Individualized Employment Assistance Plan (IEAP);
    (2) The veteran is receiving an employment adjustment allowance; or
    (3) The veteran is on leave from his or her program, but leave is 
not authorized by the Department of Veterans Affairs.


(Authority: 38 U.S.C. 3108(d), 3117)

    (c) Periods during which entitlement may be charged. Charges for 
usage of chapter 31 entitlement may only be made for program 
participants in one of the following case statuses:
    (1) Rehabilitation to the point of employability;
    (2) Extended evaluation; or
    (3) Independent living.


(Authority: 38 U.S.C. 3106, 3109)

    (d) Method of charging entitlement under chapter 31. The Department 
of Veterans Affairs will make a charge against entitlement:
    (1) On the basis of total elapsed time (1 day of entitlement for 
each day of pursuit) if the veteran is being provided a rehabilitation 
program on a full-time basis;
    (2) On the basis of a proportionate rate of elapsed time if the 
veteran is being provided a rehabilitation program on a three-quarter, 
one-half or less than one-half time basis. Entitlement is charged at a:
    (i) Three-quarter time rate if pursuit is three-quarters or more, 
but less than full-time;
    (ii) One-half time rate if pursuit is half-time or more, but less 
than three-quarter time;
    (iii) One-quarter time rate if pursuit is less than half-time. 
Measurement of pursuit on a one-quarter time basis is limited to 
veterans in independent living or extended evaluation programs.


(Authority: 38 U.S.C. 3108(d), 3680(g))

    (e) Computing entitlement. (1) The computation of entitlement is 
based upon the rate of program pursuit, as determined under Sec. 21.310 
of this part, over the elapsed time during which training and 
rehabilitation services were furnished;
    (2) The Department of Veterans Affairs will compute elapsed time 
from the commencing date of the rehabilitation program as determined 
under Sec. 21.322 of this part to the date of termination as determined 
under Sec. 21.324 of this part. This includes the period during which 
veterans not receiving subsistence allowance because of a statutory bar; 
e.g., certain incarcerated veterans or servicepersons in a military 
hospital, nevertheless, received other chapter 31 services and 
assistance. Elapsed time includes the total period from the commencing 
date until the

[[Page 140]]

termination date, except for any period of unauthorized leave;
    (3) If the veteran's rate of pursuit changes after the commencing 
date of the rehabilitation program, the Department of Veterans Affairs 
will:
    (i) Separate the period of rehabilitation program services into the 
actual periods of time during which the veteran's rate of pursuit was 
different; and
    (ii) Compute entitlement based on the rate of pursuit for each 
separate elapsed time period.


(Authority: 38 U.S.C. 3108(f))

    (f) Special situtations. (1) When a chapter 31 participant elects 
benefits of the kind provided under chapter 30 or chapter 34 as a part 
of his or her rehabilitation program under chapter 31, the veteran's 
entitlement usage will be determined by using the entitlement provisions 
of those programs. Entitlement charges shall be in accordance with Sec. 
21.7076 for chapter 30 and Sec. 21.1045 under chapter 34. The 
entitlement usage computed under these provisions is deducted from the 
veteran's chapter 31 entitlement. No entitlement charges are made 
against either chapter 30 or chapter 34.


(Authority: 38 U.S.C. 3108(f))

    (2) When a veteran is pursuing on-job training or work experience in 
a Federal agency on a nonpay or nominal pay basis, the amount of 
entitlement used is determined in the following manner:
    (i) Entitlement used in on-job training in a Federal agency on a 
nonpay or nominal pay basis is determined in the same manner as other 
training.
    (ii) Entitlement used in pursuing work experience will be computed 
in the same manner as for veterans in on-job training except that work 
experience may be pursued on a less than full-time basis. If the veteran 
is receiving work experience on a less than full-time basis, entitlement 
charges are based upon a proportionate amount of the workweek. For 
example, if the workweek is 40 hours, three-quarter time is at least 30 
hours, but less than 40 hours, and half-time is at least 20 hours but 
less than 30 hours.


(Authority: 38 U.S.C. 3108(c))

    (3) Entitlement is charged on a full-time basis for a veteran found 
to have a reduced work tolerance.


(Authority: 38 U.S.C. 3108(d), 3680(g))

    (g) Overpayment. The Department of Veterans Affairs will make a 
charge against entitlement for an overpayment of subsistence allowance 
under the conditions described in Sec. 21.1045(h) of this part.


(Authority: 38 U.S.C. 3680(g))

[54 FR 47770, Nov. 17, 1989]

               Individualized Written Rehabilitation Plan



Sec. 21.80  Requirement for a rehabilitation plan.

    (a) General. An IWRP (Individualized Written Rehabilitation Plan) 
will be developed for each veteran eligible for rehabilitation services 
under Chapter 31. The plan is intended to assist in:
    (1) Providing a structure which allows VR&C staff to translate the 
findings made in the course of the initial evaluation into specific 
rehabilitation goals and objectives;
    (2) Monitoring the veteran's progress in achieving the 
rehabilitation goals established in the plan;
    (3) Assuring the timeliness of assistance by Department of Veterans 
Affairs staff in providing services specified in the plan; and
    (4) Evaluating the effectiveness of the planning and delivery of 
rehabilitation services by VR&C staff.
    (b) When a plan is prepared. A plan will be prepared in each case in 
which a veteran will pursue:
    (1) A vocational rehabilitation program, as that term is defined in 
Sec. 21.35(i);
    (2) An extended evaluation program;
    (3) An independent living services program; or
    (4) An employment program.
    (c) Plan--a generic term. The term plan refers to the IWRP 
(Individualized Written Rehabilitation Plan) Sec. 21.84, IEEP 
(Individualized Extended Evaluation Plan) Sec. 21.86, IEAP 
(Individualized Employment Assistance Plan) Sec. 21.88,

[[Page 141]]

and IILP (Individualized Independent Living Plan) Sec. 21.90.


(Authority: 38 U.S.C. 3107(a))

    (d) Plan not required. A plan will not be prepared for a veteran who 
is not eligible for any assistance under Chapter 31. Department of 
Veterans Affairs staff, with the veteran's assistance and cooperation, 
will utilize information developed in the course of an initial 
evaluation to assist the veteran to develop alternatives for education 
and training, independence in daily living, or employment assistance. 
This assistance should help the veteran in achieving attainable 
vocational, independent living and employment goals utilizing benefits 
and services for which the veteran may be eligible under other 
Department of Veterans Affairs or non-Department of Veterans Affairs 
programs.


(Authority: 38 U.S.C. 523, 7722(c))



Sec. 21.82  Completing the plan under Chapter 31.

    (a) Serious employment handicap. Each plan for a veteran with a 
serious employment handicap shall provide for completion of the program 
provided by the plan under Chapter 31. The provisions of Sec. 21.70 and 
Sec. 21.78(c) are designed to enable a veteran with a serious 
employment handicap to pursue and complete a rehabilitation plan under 
Department of Veterans Affairs auspices. These provisions shall be used 
as necessary to accomplish the goals of the plan.


(Authority: 38 U.S.C. 3105(c), 3107)

    (b) Employment handicap. A plan for a veteran with an employment 
handicap that is not a serious employment handicap shall require that 
the program be completed within 48 months, if the veteran is not 
eligible for an extension as provided in Sec. 21.78. When the program 
provided by the plan cannot be completed under Chapter 31 because of 
limitations imposed by the veteran's termination date or months of 
remaining entitlement, realistic, comprehensive and detailed 
arrangements must be made which will enable the veteran to successfully 
complete training under other auspices. If an arrangement cannot be made 
which meets these requirements, the long-range vocational goal of the 
veteran must be reevaluated, and another vocational goal selected which 
can be completed using the veteran's remaining Chapter 31 resources.


(Authority: 38 U.S.C. 3107(a))

    (c) Employment assistance when training is not completed under 
Chapter 31. A plan for employment assistance may be implemented even 
though the veteran's training has not been or will not be completed 
under Chapter 31.


(Authority: 38 U.S.C. 3117(a))



Sec. 21.84  Individualized written rehabilitation plan.

    (a) Purpose. The purposes of the IWRP (Individualized Written 
Rehabilitation Plan) are to:
    (1) Identify goals and objectives to be achieved by the veteran 
during the period of rehabilitation services that will lead to the point 
of employability;
    (2) Plan for placement of the veteran in the occupational field for 
which training and other services will be provided; and
    (3) Specify the key services needed by the veteran to achieve the 
goals and objectives of the plan.


(Authority: 38 U.S.C. 3107)

    (b) Elements of the plan. A plan will include the following:
    (1) A statement of long-range rehabilitation goals. Each statement 
of long-range goals shall include at a minimum:
    (i) One vocational goal for a veteran with an employment handicap; 
or
    (ii) One vocational goal and, if applicable, one independent living 
goal for a veteran with a serious employment handicap.
    (2) Intermediate rehabilitation objectives; Intermediate objectives 
are statements of achievement expected of the veteran to attain the 
long-range goal. The development of appropriate intermediate objectives 
is the cornerstone of an effective plan. Intermediate objectives should 
have the following characteristics:
    (i) The activity specified relates to the achievement of the goal;

[[Page 142]]

    (ii) The activity specified is definable in terms of observable 
behavior (e.g., pursuing an A.A. degree);
    (iii) The activity has a projected completion date;
    (iv) The outcome desired upon completion is measurable (e.g., 
receiving an A.A. degree).
    (3) The specific services to be provided by the Department of 
Veterans Affairs as stated. Counseling shall be included in all plans 
for a veteran with a serious employment handicap.
    (4) The projected starting and completion dates of the planned 
services and the duration of each service;
    (5) Objective criteria and an evaluation procedure and schedule for 
determining whether the objectives and goals are being achieved as set 
forth; and
    (6) The name, location, and phone number of the VBA case manager.


(Authority: 38 U.S.C. 3107(a))

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]



Sec. 21.86  Individualized extended evaluation plan.

    (a) Purpose. The purpose of an IEEP is to identify the services 
needed for the VA to determine the veteran's current ability to achieve 
a vocational goal when this cannot reasonably be determined during the 
initial evaluation.


(Authority: 38 U.S.C. 3106(a), 3107(a))

    (b) Elements of the plan. An IEEP shall include the same elements as 
an IWRP except that:
    (1) The long range goal shall be to determine achievement of a 
vocational goal is currently reasonably feasible;
    (2) The intermediate objectives relate to problems of questions 
which must be resolved for the VA to determine the current reasonable 
feasibility of achieving a vocational goal.


(Authority: 38 U.S.C. 3106(a), 3107(a))

[53 FR 50957, Dec. 19, 1988]



Sec. 21.88  Individualized employment assistance plan.

    (a) Purpose. The purpose of the IEAP (Individualized Employment 
Assistance Plan) is to assure that a comprehensive, thoughtful approach 
is taken, enabling eligible veterans to secure suitable employment.


(Authority: 38 U.S.C. 3107)

    (b) Requirement for a plan. An IEAP will be prepared:
    (1) As part of an IWRP; or
    (2) When the veteran is eligible for employment assistance under 
provisions of Sec. 21.47.


(Authority: 38 U.S.C. 3107(a))

    (c) Elements of the plan. The IEAP shall follow the same structure 
as the IWRP. Each IEAP will include full utilization of community 
resources to enable the veteran to:
    (1) Secure employment; and
    (2) Maintain employment.


(Authority: 38 U.S.C. 3117)

    (d) Preparation of the IEAP. Preparation of the IEAP will be 
completed:
    (1) No later than 60 days before the projected end of the period of 
rehabilitation services leading to the point of employability; or
    (2) Following initial evaluation when employment services constitute 
the whole of the veteran's program under provisions of Sec. 21.47.


(Authority: 38 U.S.C. 3107(a))



Sec. 21.90  Individualized independent living plan.

    (a) Purpose. The purpose of the IILP is to identify the steps 
through which a veteran, whose disabilities are so severe that a 
vocational goal is not currently reasonably feasible, can become more 
independent in daily living within the family and community.


(Authority: 38 U.S.C. 3109, 3120)

    (b) Elements of the plan. The IILP shall follow the same structure 
as the IWRP. The plan will include:
    (1) Services which may be provided under Chapter 31 to achieve 
independence in daily living;


(Authority: 38 U.S.C. 3104)


[[Page 143]]


    (2) Utilization of programs with a demonstrated capacity to provide 
independent living services for severely handicapped persons;


(Authority: 38 U.S.C. 3104(b), 3120(a))

    (3) Services provided under other Department of Veterans Affairs and 
non-Department of Veterans Affairs programs needed to achieve the goals 
of the plan;


(Authority: 38 U.S.C. 3107)

    (4) Arrangements for maintaining the improved level of independence 
following completion of the plan.


(Authority: 38 U.S.C. 3107(a))

[49 FR 40814, Oct. 18, 1984, as amended at 53 FR 50957, Dec. 19, 1988]



Sec. 21.92  Preparation of the plan.

    (a) General. The plan will be jointly developed by Department of 
Veterans Affairs staff and the veteran.
    (b) Approval of the plan. The terms and conditions of the plan must 
be approved and agreed to by the counseling psychologist, the vocational 
rehabilitation specialist, and the veteran.
    (c) Implementation of the plan. The vocational rehabilitation 
specialist or counseling psychologist designated as case manager has the 
primary role in carrying out Department of Veterans Affairs 
responsibility for implementation of the plan.
    (d) Responsible staff. The counseling psychologist has the primary 
responsibility for the preparation of plans.

(Authority: 38 U.S.C. 3107(a))



Sec. 21.94  Changing the plan.

    (a) General. The veteran, the counseling psychologist or the 
vocational rehabilitation specialist may request a change in the plan at 
any time.


(Authority: 38 U.S.C. 3107(b))

    (b) Long-range goals. A change in the staement of a long-range goal 
may only be made following a reevaluation of the veteran's 
rehabilitation program by the counseling psychologist. A change may be 
made when:
    (1) Achievement of the current goal(s) is no longer reasonably 
feasible; or
    (2) The veteran's circumstances have changed or new information has 
been developed which makes rehabilitation more likely if a different 
long-range goal is established; and
    (3) The veteran fully participates and concurs in the change.


(Authority: 38 U.S.C. 3107(b))

    (c) Intermediate objectives or services. A change in intermediate 
objectives or services provided under the plan may be made by the case 
manager when such change is necessary to carry out the statement of 
long-range goals. The veteran must concur in the change.


(Authority: 38 U.S.C. 3107(b))

    (d) Minor changes. Minor changes in the plan (e.g., changing the 
date of a scheduled evaluation) by the case manager may be made without 
the participation and concurrence of the veteran.


(Authority: 38 U.S.C. 3107(b))

    (e) Changes in duration of the plan. Any change in the total 
duration of a veteran's rehabilitation plan is subject to provisions on 
duration of a rehabilitation program described in Sec. Sec. 21.70-
21.78.


(Authority: 38 U.S.C. 3107(b))



Sec. 21.96  Review of the plan.

    (a) General. The veteran's progress in reaching the goals of the 
plan will be reviewed and evaluated as scheduled in the plan by the case 
manager and the veteran.
    (b) Comprehensive review required. The case manager and the veteran 
will review all of the terms of the plan and the veteran's progress at 
least every twelve months. On the basis of such review the veteran and 
the case manager will agree whether the plan should be:
    (1) Retained in its current form;
    (2) Amended; or
    (3) Redeveloped.

(Authority: 38 U.S.C. 3107(b))

[[Page 144]]



Sec. 21.98  Appeal of disagreement regarding development of, or change 
in, the plan.

    (a) General. The veteran may request a review of a proposed, 
original, or amended plan when Department of Veterans Affairs staff and 
the veteran do not reach agreement on the terms and conditions of the 
plan. A veteran who requests a review of the plan must submit a written 
statement to the case manager which:
    (1) Requests a review of the proposed, original, or amended plan; 
and
    (2) Details his or her objections to the terms and conditions of the 
proposed, original, or amended plan.
    (b) Review by Vocational Rehabilitation and Employment Officer. Upon 
receipt of the veteran's request for review of the plan, the counseling 
psychologist or the case manager will forward the request together with 
relevant comment to the VR&C Officer who will:
    (1) Review relevant information; and
    (2) Inform the veteran of his or her decision within 90 days.
    (c) Review by Director, Vocational Rehabilitation and Employment 
Service. The veteran's request shall be reviewed by the Director, VR&C 
in any case in which the VR&C Officer is the case manager. The veteran 
will be informed of the decision within 90 days.
    (d) Appeal to the Board of Veterans Appeals. The veteran may appeal 
an adverse decision of the VR&C Officer, or the Director, VR&C to the 
Board of Veterans Appeals.

(Authority: 38 U.S.C. 3107(c))

[49 FR 40814, Oct. 18, 1984, as amended at 62 FR 17708, Apr. 11, 1997]

                               Counseling



Sec. 21.100  Counseling.

    (a) General. A veteran requesting or being furnished assistance 
under Chapter 31 shall be provided professional counseling services by 
Vocational Rehabilitation and Employment (VR&C) Service and other staff 
as necessary to:
    (1) Carry out an initial evaluation in each case in which assistance 
is requested;
    (2) Develop a rehabilitation plan or plan for employment services in 
each case in which the veteran is found during the initial evaluation to 
be eligible and entitled to services;
    (3) Assist veterans found ineligible for services under Chapter 31 
to the extent provided in Sec. 21.82; and
    (4) Try to overcome problems which arise during the course of the 
veteran's rehabilitation program or program of employment services.


(Authority: 38 U.S.C. 3101)

    (b) Types of counseling services. VA will furnish comprehensive 
counseling services, including but not limited to
    (1) Psychological;
    (2) Vocational;
    (3) Personal adjustment;
    (4) Employment;
    (5) Educational.


(Authority: 38 U.S.C. 3104(a)(2))

    (c) Qualifications. Counseling services may only be furnished by VA 
or other personnel who meet requirements established under provisions of 
Sec. 21.380 and other policies of the VA pertaining to the 
qualifications of staff providing assistance under Chapter 31.


(Authority: 38 U.S.C. 3118)

    (d) Limitations. (1) If a veteran resides within a State, counseling 
services necessary to carry out the initial evaluation and the 
development of a rehabilitation plan or a program of employment services 
will be furnished by counseling psychologists in the Vocational 
Rehabilitation and Employment (VR&C) Division;
    (2) If a veteran does not reside in a State the counseling services 
necessary to carry out an initial evaluation may be accomplished in the 
same manner as for a veteran residing in a State or through other 
arrangements when deemed appropriate by the VR&C Division. These 
alternative arrangements include, but are not limited to:
    (i) Use of counseling centers or individual qualified professionals 
under contract to VA; and
    (ii) Professional staff of other Federal agencies located in the 
area in which the veteran resides.
    (3) Alternative arrangements to provide counseling are subject to 
the following requirements:

[[Page 145]]

    (i) All arrangements must be consistent with the provisions of 
paragraph (c) of this section regarding utilization of professionally 
qualified persons to provide counseling services during the initial 
evaluation;
    (ii) All determinations of eligibility, entitlement and the 
development of a rehabilitation plan will continue to be made by 
counseling psychologists in the VR&C Division.
    (4) If a counseling psychologist in the VR&C Division determines 
that the evidence of record is insufficient to carry out an initial 
evaluation in a case in which alternative arrangements were used, VA 
staff may authorize the veteran to travel to a VA facility to complete 
the evaluation.


(Authority: 38 U.S.C. 3118(c))

    (e) Definition. For the purposes of this section, the term State 
means each of the several States, the District of Columbia, and the 
Commonwealth of Puerto Rico.


(Authority: 38 U.S.C. 101(20))

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 32071, Aug. 4, 1989; 62 
FR 17708, Apr. 11, 1997]

              Educational and Vocational Training Services



Sec. 21.120  Educational and vocational training services.

    (a) Purposes. The purposes of providing educational and vocational 
training services are to enable a veteran eligible for, and entitled to, 
services and assistance under Chapter 31 to:
    (1) Meet the requirements for employment in the occupational 
objective established in the IWRP (Individualized Written Rehabilitation 
Plan);
    (2) Provide incidental training which is necessary to achieve the 
employment objective in the IEAP (Individualized Employment Assistance 
Plan);
    (3) Provide incidental training needed to achieve the goals of an 
IILP (Individualized Independent Living Plan); or
    (4) Provide training services necessary to implement an IEEP 
(Individualized Extended Evaluation Plan).
    (b) Selection of courses. VA will generally select courses of study 
and training, completion of which usually results in a diploma, 
certificate, degree, qualification for licensure, or employment. If such 
courses are not available in the area in which the veteran resides, or 
if they are available but not accessible to the veteran, other 
arrangements may be made. Such arrangements may include, but are not 
limited to:
    (1) Relocation of the veteran to another area in which necessary 
services are available, or
    (2) Use of an individual instructor to provide necessary training.


(Authority: 38 U.S.C. 3107)

    (c) Charges for education and training services. The cost of 
education and training services will be one of the factors considered in 
selecting a facility when:
    (1) There is more than one facility in the area in which the veteran 
resides which:
    (i) Meets requirements for approval under Sec. Sec. 21.292 through 
21.298;
    (ii) Can provide the education and training services, and other 
supportive services specified in the veteran's plan; and
    (iii) Is within reasonable commuting distance; or
    (2) The veteran wishes to train at a suitable facility in another 
area, even though training can be provided at a suitable facility in the 
area in which the veteran resides.


(Authority: 38 U.S.C. 3104(a)(7), 3115(a))

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]



Sec. 21.122  School course.

    (a) Explanation of terms--schools, educational institution, and 
institution. These terms mean any public or private school, secondary 
school, vocational school, correspondence school, business school, 
junior college, teacher's college, college, normal school, professional 
school, university, scientific or technical institution, or other 
institution funishing education for adults.


(Authority: 38 U.S.C. 501(a), 3104)


[[Page 146]]


    (b) Course. A course generally consists of a number of areas of 
subject matter which are organized into learning units for the purpose 
of attaining a specific educational or vocational objective. Organized 
instruction in the units comprising the course is offered within a given 
period of time and credit toward graduation or certification is 
generally given.


(Authority: 38 U.S.C. 3104(a)(7))

    (c) School course. A school course is a course as defined in 
paragraph (b) of this section offered by a facility identified in 
paragraph (a) of this section.


(Authority: 38 U.S.C. 3115)



Sec. 21.123  On-job course.

    (a) Training establishment. This term means any establishment 
providing apprentice or other training on the job, including those under 
the supervision of a college or university or any State department of 
education, or any state apprenticeship agency, or any State board of 
vocational education, or any joint apprenticeship committee, or the 
Bureau of Apprenticeship and Training established in accordance with 29 
U.S.C. Chapter 4C, or any agency of the Federal government authorized to 
supervise such training.
    (b) On-job course, An on-job course is pursued toward a specified 
vocational objective, provided by a training establishment. The trainee 
learns, in the course of work performed under supervision, primarily by 
receiving formal instruction, observing practical demonstration of work 
tasks, and assisting in those tasks. Productive work should gradually 
increase with greater independence from formal instruction as the course 
progresses.

(Authority: 38 U.S.C. 501(a), 3104)

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]



Sec. 21.124  Combination course.

    (a) General. A combination course is a course which combines 
training on the job with training in school. For the purpose of VA 
vocational rehabilitation, a course will be considered to be a 
combination course, if the student spends full-time on the job and one 
or more times a week also attends school on a part-tme basis. A veteran 
may pursue the components of a combination course in the following 
manner:
    (1) Concurrent school and on-job training;
    (2) Primarily on-job with some related instruction in school;
    (3) In a school as a preparatory course to entering on-job training; 
or
    (4) First training on-job followed by the school portion.
    (b) Cooperative course. A cooperative course is a special type of 
combination course which usually:
    (1) Has an objective which the student attains primarily through 
school instruction with the on-job portion being supplemental to the 
school course;
    (2) Is at the college or junior college level although some 
cooperative courses are offered at post-secondary schools which do not 
offer a college degree or at secondary schools;
    (3) Requires the student to devote at least one-half of the total 
training period to the school portion of the course; and
    (4) Includes relatively long periods each of training on the job and 
in school such as a full term in school followed by a full term on the 
job.

(Authority: 38 U.S.C. 3104(a)(7))

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]



Sec. 21.126  Farm cooperative course.

    (a) Definition. An approvable farm cooperative course is a full-time 
course designated to restore employability by training a veteran to:
    (1) Operate a farm which he or she owns or leases; or
    (2) Manage a farm as the employee of another.
    (b) Reaching the goal of a farm cooperative course. The farm 
cooperative course must enable a veteran to become proficient in the 
type of farming for which he or she is being provided rehabilitation 
services. The areas in which proficiency is to be established include:
    (1) Planning;
    (2) Producing;
    (3) Marketing;
    (4) Maintaining farm equipment;
    (5) Conserving farm resources;

[[Page 147]]

    (6) Financing the farm;
    (7) Managing the farm; and
    (8) Keeping farm and home accounts.
    (c) Instruction, including organized group instruction. Instruction 
in a farm cooperative course may be by a mixture of organized group 
(classroom) instruction and individual instruction or by individual 
instruction alone. A course which includes organized group instruction 
must meet the following criteria to be considered as full-time:
    (1) The number of clock hours of instruction which should be 
provided yearly shall meet the requirements of Sec. 21.310(a)(4) and 
Sec. 21.4264 pertaining to full-time pursuit of a farm cooperative 
course:
    (2) The individual instructor portion of a farm cooperative course 
shall include at least 100 hours of individual instruction per year.
    (d) Instruction given solely by an individual instructor. (1) 
Instruction in a farm cooperative course may be given solely by an 
individual instructor if organized group instruction is:
    (i) Not available within reasonable commuting distance of the 
veteran's farm; or
    (ii) The major portion of the organized group instruction that is 
available does not have a direct relation to the veteran's farming 
operation and pertinent VA records are fully and clearly documented 
accordingly.
    (2) To be considered full-time pursuit the individual instruction 
provided in these course must:
    (i) Consist of at least 200 hours of instruction per year;
    (ii) Be given by a fully qualified individual instructor by contract 
between VA and the instructor or an educational agency which employs the 
instructor.
    (e) Plan requirements for farm operator or farm manager. (1) The 
plan for training developed by the case manager and the veteran in 
collaboration with the instructor must include:
    (i) A complete written survey including but not limited to the areas 
identified in Sec. 21.298 (a) and (b);
    (ii) An overall, long-term plan based upon the survey of the 
operation of the farm;
    (iii) An annual plan identifying the part of the overall plan to be 
implemented which will be prepared before the beginning of each crop 
year; and
    (iv) A detailed individual training program showing the kind and 
amount of instruction, classroom and individual, or individual; and
    (2) The farm must meet the requirements for selecting a farm found 
in Sec. 21.298.

(Authority: 38 U.S.C. 3104(a)(7))

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]



Sec. 21.128  Independent study course.

    A veteran may pursue a course by independent study under the 
following conditions:
    (a) College level. The course is offered by a college or university.
    (b) College degree. The course leads to or is fully creditable 
towards a standard college degree.
    (c) Course content. The course consists of a prescribed program of 
study with provision for interaction between the student and regularly 
employed faculty of the university or college by mail, telephone, 
personally, or class attendance.
    (d) School responsibility. The university or college:
    (1) Evaluates the course in semester or quarter hours or the 
equivalent; and
    (2) Prescribes a period for completion.

(Authority: 38 U.S.C. 3104(a)(7))



Sec. 21.129  Home study course.

    (a) Definition. A home study course is a course conducted by mail, 
consisting of a series of written lesson assignments furnished by a 
school to the student for study and preparation of written answers, 
solutions to problems, and work projects which are corrected and graded 
by the school and returned to the trainee.
    (b) Limitations on inclusion of home study courses, in 
rehabilitation plans. A veteran and his or her case manager may include 
a home study course in a rehabilitation plan only when it supplements 
the major part of the program. The purpose of the home study course is 
to provide the veteran with

[[Page 148]]

theory or technical information directly related to the practice of the 
occupation for which the veteran is training.

(Authority: 38 U.S.C. 3104(a)(7))



Sec. 21.130  Educational and vocational courses outside the United 
States.

    (a) General. VA may provide educational and vocational courses 
outside a State if the case manager determines that such training is in 
the best interest of the veteran and the Federal Government.
    (b) Specific conditions. (1) The training must be necessary to 
enable the veteran to qualify for, obtain, and retain suitable 
employment in the occupational objective; and
    (2) Either:
    (i) The training is not available in the United States; or
    (ii) The training is available in the United States, but personal 
hardship would result from requiring that the veteran pursue training in 
this country; and
    (3) All necessary supportive and follow-up services, including 
medical care and treatment and employment services, reasonably can be 
provided by or through VA, considering such factors as the availability, 
accessibility and cost of such services.

(Authority: 38 U.S.C. 3114)

[49 FR 40814, Oct. 18, 1984, as amended at 55 FR 27822, July 6, 1990]



Sec. 21.132  Repetition of the course.

    (a) Repeating all or part of the course. A veteran, having completed 
a course under Chapter 31 according to the standards and practices of 
the institution, ordinarily will not pursue it again at the expense of 
VA. However, VA may approve repetition of all, or any part of the course 
when VA determines that the repetition is necessary to accomplish the 
veteran's vocational rehabilitation. A veteran repeating a course under 
Chapter 31 is subject to the same requirements for satisfactory pursuit 
and completion of the course as are other veterans taking the course 
unless a longer period is needed because of the veteran's reduced work 
tolerance.


(Authority: 38 U.S.C. 3104(a)(7))

    (b) Review course. A veteran who has completed a course of training 
under Chapter 31 may pursue a review course, such as a bar review 
course, if it is specifically organized and conducted as a review 
course.


(Authority: 38 U.S.C. 3104(a)(7))

    (c) Auditing a subject. Auditing, as defined in Sec. 21.4200(i), 
may not be authorized as a part of any rehabilitation plan. However, if 
an individual repeats a course under the conditions described in 
paragraph (a) of this section, the course shall not be considered an 
audited course, if pursued in the same manner as a subject offered for 
credit. The individual must meet the same requirements as other 
students, and not be a mere listener.


(Authority: 38 U.S.C. 3680(a))



Sec. 21.134  Limitation on flight training.

    Flight Training approved under chapter 31 may only be authorized in 
degree curriculums in the field of aviation that include required flight 
training. This type of training is otherwise subject to the same 
limitations as are applicable to flight training under Chapter 30.

(Authority: 38 U.S.C. 3680A(b))

[57 FR 57108, Dec. 3, 1992]

                     Special Rehabilitation Services



Sec. 21.140  Evaluation and improvement of rehabilitation potential.

    (a) General. The purposes of these services are to:
    (1) Evaluate if the veteran:
    (i) Has an employment handicap;
    (ii) Has a serious employment handicap; and
    (iii) Is reasonably feasible for a vocational goal or an independent 
living goal.
    (2) Provide a basis for planning:
    (i) A program of services and assistance to improve the veteran's 
potential for vocational rehabilitation or independent living;
    (ii) A suitable vocational rehabilitation program; or
    (iii) A suitable independent living program.

[[Page 149]]

    (3) Reevaluate the vocational rehabilitation or independent living 
potential of a veteran participating in a rehabilitation program under 
Chapter 31, as necessary.
    (4) Enable a veteran to achieve:
    (i) A vocational goal; or
    (ii) An independent living goal.


(Authority: 38 U.S.C. 3104)

    (b) Periods during which evaluation and improvement services may be 
provided. Evaluation and improvement services may be provided 
concurrently, whenever necessary, with a period of rehabilitation 
services, including:
    (1) Initial evaluation or reevaluation;
    (2) Extended evaluation:
    (3) Rehabilitation to the point of employability:
    (4) A program of independent living services: or
    (5) Employment services, incidental to obtaining or maintaining 
employment.
    (c) Duration of full-time assistance. If evaluation and improvement 
services are furnished on a full-time basis as a preliminary part of the 
period of rehabilitation to the point of employability, or as the 
vocational rehabilitation program, the duration of such assistance may 
not exceed 12 months, except as provided in Sec. 21.74(c).


(Authority: 38 U.S.C. 3105)

    (d) Scope of services. Evaluation and improvement services include:
    (1) Diagnostic services;
    (2) Personal and work adjustment training;
    (3) Medical care and treatment;
    (4) Independent living services;
    (5) Language training, speech and voice correction, training in 
ambulation, and one-hand typewriting;
    (6) Orientation, adjustment, mobility and related services; and
    (7) Other appropriate services.


(Authority: 38 U.S.C. 3104(a)(1), (6), (9), (10), (15))



Sec. 21.142  Adult basic education.

    (a) Definition. The term adult basic education means an 
instructional program for the undereducated adult planned around those 
basic and specific skills most needed to help him or her to function 
adequately in society.
    (b) Purposes. The purposes of providing adult basic education are 
to:
    (1) Upgrade a veteran's basic educational skills;
    (2) Provide refresher training; or
    (3) Remedy deficiencies which prevent the veteran from undertaking a 
course of education or vocational training.
    (c) Periods during which basic adult education may be provided. 
Basic adult education may be authorized, as necessary, during;
    (1) Rehabilitation to the point of employability;
    (2) Extended evaluation; and
    (3) Independent living services.

(Authority: 38 U.S.C. 3104(a)(1))



Sec. 21.144  Vocational course in a sheltered workshop or rehabilitation 
facility.

    (a) General. A vocational course in a sheltered workshop or 
rehabilitation facility may be an institutional, on-job, or combination 
course which has been modified to facilitate successful pursuit by a 
person with a disability that would otherwise prevent or impair the 
person's participation in the course.
    (b) Authorization. A vocational course in a sheltered workshop or 
rehabilitation facility may be authorized when the training offered is a 
sound method of restoring a veteran's employability.

(Authority: 38 U.S.C. 3104(a)(7))



Sec. 21.146  Independent instructor course.

    (a) Definition. An independent instructor course is a full-time 
course of vocational training which the veteran pursues with an 
individual instructor, who, independently of a training institution or 
on-job training establishment, furnishes and conducts a vocational 
course at a suitable place of training.
    (b) Limitations on including an independent instructor course in a 
rehabilitation plan. A veteran and his or her case manager may include 
an independent instructor course in a rehabilitation plan, other than 
one involving a farm cooperative program, only when either

[[Page 150]]

or both of the following conditions exist:
    (1) Training is not available through an established school, on-job 
training establishment, rehabilitation facility or sheltered workshop 
within a reasonable commuting distance from the veteran's home; or
    (2) The veteran's condition or other circumstances do not permit the 
veteran to attend an otherwise suitable facility within commuting 
distance. See Sec. 21.126.
    (c) Training in the home. Training in the home is a specialized type 
of independent instructor course which the veteran pursues in his or her 
home if:
    (1) He or she is unable to pursue training at an otherwise suitable 
facility because of the effects of his or her disability;
    (2) Based on proper medical opinion, the veteran is able to pursue 
the prescribed training; and
    (3) The veteran's home provides a favorable educational environment 
with adequate work and study space.
    (d) Planning an individual instructor course. The case manager, the 
veteran, and the instructor should jointly plan the training program for 
a veteran for whom an independent instructor course is prescribed.
    (e) Assuring employment. Since the customary channels leading to 
employment may not be readily available to a veteran requiring an 
individual instructor course, the IEAP (Individual Employment Assistance 
Plan) shall indicate thorough consideration of plans and prospects for 
seeking and obtaining employment, including self-employment, upon 
completion of training.
    (f) Rate of pursuit. A veteran in an independent instructor program 
shall pursue training at a rate comparable to the rate at which similar 
training is pursued on an institutional basis, unless the veteran's work 
tolerance is reduced by the effects of his or her disability.

(Authority: 38 U.S.C. 3104(a)(7))



Sec. 21.148  Tutorial assistance.

    (a) General. A veteran may be provided individualized tutorial 
assistance, if VA determines that special assistance beyond that 
ordinarily given by the facility to students pursuing the same or a 
similar subject is needed to correct a deficiency in a subject.
    (b) Authorization of tutorial assistance. Tutorial assistance may be 
provided during any period of rehabilitation services authorized by VA.


(Authority: 38 U.S.C. 3104(a)(7))

    (c) Use of relatives precluded. Tutorial assistance at VA expense 
may not be provided by a relative of the veteran. The term relative has 
the same meaning as under Sec. 21.374 pertaining to the use of a 
relative as an attendant.


(Authority: 38 U.S.C. 3492)

    (d) Payment at the Chapter 30 rate. If a veteran has elected payment 
at the educational assistance rate payable under Chapter 30, he or she 
may not be provided individualized tutorial assistance under provision 
of Chapter 31. (See Sec. 21.334.)


(Authority: 38 U.S.C. 3108(f))

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 4283, Jan. 30, 1989; 57 
FR 57108, Dec. 3, 1992]



Sec. 21.150  Reader service.

    (a) Limitations on vision. A veteran considered to have a visual 
impairment necessitating reader service includes a veteran:
    (1) Whose best corrected vision is 20/200 in both eyes;
    (2) Whose central vision is greater than 20/200 but whose field of 
vision is limited to such an extent that the widest diameter of a visual 
field subtends to an angle no greater than 20 degrees; or
    (3) With impaired vision, whose condition or prognosis indicates 
that the residual sight will be adversely affected by the use of his or 
her eyes for reading.
    (b) Periods during which reader service may be provided. reader 
service necessary to the development of a rehabilitation plan, or the 
successful pursuit of a rehabilitation program may be provided during:
    (1) Initial evaluation or reevaluation;
    (2) Extended evaluation;
    (3) Rehabilitation to the point of employability;
    (4) Independent living services; or

[[Page 151]]

    (5) Employment services, including an initial employment period of 
up to three months.
    (c) Reader responsibility. The reader should be able to do more than 
read to the veteran. The reader should have an understanding of the 
subject matter based upon prior training or experience which allows him 
or her to:
    (1) Read printed material with understanding; and
    (2) Test the veteran's understanding of what has been read.
    (d) Extent of service. The number of hours of service will be 
determined in each case by the amount of reading necessitated by the 
course and the efficacy of other equipment with which the veteran has 
been furnished to enable him or her to read printed material unassisted.
    (e) Recording. VA will not normally pay for recording textbooks or 
other materials as a part of reader services, since excellent recording 
services are provided by volunteer organizations at no cost.
    (f) Selecting a relative as a reader. Utilization of a relative of 
the veteran as a reader is subject to the limitations on use of a 
relative as an attendant under Sec. 21.374.

(Authority: 38 U.S.C. 3104(a)(14))



Sec. 21.152  Interpreter service for the hearing impaired.

    (a) General. The main purpose of interpreter service for the hearing 
impaired is to facilitate instructor-student communication. VA will 
provide interpreter service as necessary for the development and pursuit 
of a rehabilitation program. This service will be provided if:
    (1) A VA physician determines that:
    (i) The veteran is deaf or his or her hearing is severely impaired; 
and
    (ii) All appropriate services and aids have been furnished to 
improve the veteran's residual hearing; or
    (2) A VA physician determines that the veteran:
    (i) Can benefit from language and speech training; and
    (ii) Agrees to undertake language and speech training.
    (b) Periods during which interpreter service may be provided. 
Interpreter service may be furnished during:
    (1) Initial evaluation or reevaluation;
    (2) Extended evaluation;
    (3) Rehabilitation to the point of employability;
    (4) Independent living services; or
    (5) Employment services, including the first three months of 
employment.
    (c) Selecting the interpreter. Only certified interpreters or 
persons meeting generally accepted standards for interpreters shall 
provide interpreter service. When an individual is not certified by a 
State or professional association, VA shall seek the assistance of a 
State certifying agency or a professional association in ascertaining 
whether the individual is qualified to serve as an interpreter.


(Authority: 38 U.S.C. 3104(a)(14))

    (d) Relatives. Interpreter service at VA expense may not be provided 
by a relative of the veteran. The term relative has the same meaning as 
under Sec. 21.374 pertaining to the use of relatives as attendants.


(Authority: 38 U.S.C. 3492)



Sec. 21.154  Special transportation assistance.

    (a) General. A veteran, who because of the effects of disability has 
transportation expenses in addition to those incurred by persons not so 
disabled, shall be provided a transportation allowance to defray such 
additional expenses. The assistance provided in this section is in 
addition to provisions for interregional and intraregional travel which 
may be authorized under provisions of Sec. Sec. 21.370 through 21.376.


(Authority: 38 U.S.C. 3104(a)(13))

    (b) Periods during which special transportation allowance may be 
provided. A special transportation allowance may be provided during:
    (1) Extended evaluation;
    (2) Rehabilitation to the point of employability;
    (3) Independent living services; or
    (4) Employment services, including the first three months of 
employment.


(Authority: 38 U.S.C. 3104(a)(14))

    (c) Scope of transportation assistance. (1) Transportation 
assistance includes

[[Page 152]]

mileage, parking fees, reasonable fee for a driver, transportation 
furnished by a rehabilitation facility or sheltered workshop, and other 
reasonable expenses which may be incurred in local travel;
    (2) The veteran's monthly transportation allowance may not exceed 
the lesser of actual expenses incurred or one-half of the subsistence 
allowance of a single veteran in full-time institutional training, 
unless extraordinary arrangements, such as transportation by ambulance, 
are necessary to enable a veteran to pursue a rehabilitation program.
    (d) Determining the need for a transportation allowance. The case 
manager will determine the need for a transportation allowance. The 
assistance of a medical consultant shall be utilized, as necessary, to 
determine the need for special transportation assistance and to develop 
transportation arrangements which do not unduly tax the veteran's 
ability to travel and pursue a rehabilitation program.
    (e) Use of a relative precluded. A relative of the veteran may not 
be paid any part of a special transportation allowance. The term 
relative has the same meaning as under Sec. 21.374 pertaining to the 
use of a relative as an attendant.


(Authority: 38 U.S.C. 3104(a)(13))



Sec. 21.155  Services to a veteran's family.

    (a) General. VA shall provide services to a veteran's family which 
are necessary to the implementation of the veteran's rehabilitation 
plan. The term family includes the veteran's immediate family, legal 
guardian, or any individual in whose home the veteran certifies an 
intention to live.
    (b) Scope of services to a veteran's family. The services which may 
be furnished to the family are generally limited to consultation, 
homecare training, counseling, and mental health services of brief 
duration which are designed to enable the family to cope with the 
veteran's needs. Extended medical, psychiatric or other services may not 
be furnished to family members under these provisions.
    (c) Providing services to a veteran's family. VR&C Staff will:
    (1) Identify services which family members may need to facilitate 
the rehabilitation of the veteran; and
    (2) Arrange for provision of the services which have been 
identified.
    (d) Resources for provision of services to family members. (1) The 
established program and services which are furnished by Veterans Health 
Administration (VHA) to family members of veterans eligible for Chapter 
31 should be used to the extent practicable; but
    (2) If services are not readily available through regular VHA 
programs, necessary services will normally be secured through 
arrangements with other public and nonprofit agencies.

(Authority: 38 U.S.C. 3104(a)(11))

[49 FR 40814, Oct. 18, 1984, as amended at 62 FR 17708, Apr. 11, 1997]



Sec. 21.156  Other incidental goods and services.

    (a) General. Other incidental goods and services may be authorized 
if the case manager determines them to be necessary to implement the 
veteran's rehabilitation plan. For example, a calculator may be 
authorized for a veteran pursuing an engineering degree, even though the 
veteran may not be required to have a calculator for any specific 
subject in his or her course, where there is substantial evidence that 
lack of a calculator places the veteran at a distinct disadvantage in 
successfully pursuing the course.
    (b) Limitation on cost. The costs of incidental goods and services 
normally should not exceed five percent of training costs for any 
twelve-month period.

(Authority: 38 U.S.C. 3104(a)(10))

                       Independent Living Services



Sec. 21.160  Independent living services.

    (a) Purpose. The purpose of independent living services is to assist 
eligible veterans whose ability to function independently in family, 
community, or employment is so limited by the severity of disability 
(service and nonservice-connected) that vocational or rehabilitation 
services need to be appreciably more extensive than for less disabled 
veterans.


(Authority: 38 U.S.C. 3104(a)(15), 3109, 3120)


[[Page 153]]


    (b) Definitions. The term independence in daily living means the 
ability of a veteran, without the services of others or with a reduced 
level of the services of others, to live and function within the 
veteran's family and community.


(Authority: 38 U.S.C. 3101(2))

    (c) Situations under which independent living services may be 
furnished. Independent living services may be furnished:
    (1) As part of a program to achieve rehabilitation to the point of 
employability;
    (2) As part of an extended evaluation to determine the current 
reasonable feasibility of achieving a vocational goal;
    (3) Incidental to a program of employment services; or
    (4) As a program of rehabilitation services for eligible veterans 
for whom achievement of a vocational goal is not currently reasonably 
feasible. This program of rehabilitation services may be furnished to 
help the veteran:
    (i) Function more independently in the family and community without 
the assistance of others or a reduced level of the assistance of others;
    (ii) Become reasonably feasible for a vocational rehabilitation 
program; or
    (iii) Become reasonably feasible for extended evaluation.


(Authority: 38 U.S.C. 3104(a)(15), 3109, 3120)

    (d) Services which may be authorized. The services which may be 
authorized as part of an IILP (Individualized Independent Living Plan) 
include:
    (1) Any appropriate service which may be authorized for a vocational 
rehabilitation program as that term is defined in Sec. 21.35(i), except 
for a course of education or training as described in Sec. 21.120; and
    (2) Independent living services offered by approved independent 
living centers and programs which are determined to be necessary to 
carry out the veteran's plan including:
    (i) Evaluation of independent living potential;
    (ii) Training in independent living skills;
    (iii) Attendant care;
    (iv) Health maintenance programs; and
    (v) Identifying appropriate housing accommodations.


(Authority: 38 U.S.C. 3104(a)(15), 3109, 3120)

    (e) Coordination with other VA elements and other Federal, State, 
and local programs. Implementation of programs of independent living 
services and assistance will generally require extensive coordination 
with other VA and non-VA programs. If appropriate arrangements cannot be 
made to provide these services through VA, other governmental, private 
nonprofit and for-profit agencies and facilities may be used to secure 
necessary services if the requirements contained in Sec. 21.294 are 
met.


(Authority: 38 U.S.C. 3104(a)(15), 3109, 3115, 3120)

[49 FR 40814, Oct. 18, 1984, as amended at 53 FR 50957, Dec. 19, 1988; 
55 FR 42186, Oct. 18, 1990]



Sec. 21.162  Participation in a program of independent living services.

    (a) Approval of a program of independent living services. A program 
of independent living services and assistance is approved when:
    (1) The VA determines that achievement of a vocational goal is not 
currently reasonably feasible;
    (2) The VA determines that the veteran's independence in daily 
living can be improved, and the gains made can reasonably be expected to 
continue following completion of the program;
    (3) All steps required by Sec. Sec. 21.90 and 21.92 of this part 
for the development and preparation of an Individualized Independent 
Living Plan (IILP) have been completed; and
    (4) The VR&C Officer concurs in the IILP.


(Authority: 38 U.S.C. 3104(a)(15), 3109, 3120)

    (b) Considerations for the VR&C Officer. The VR&C Officer will 
consider the following factors in administering programs providing 
independent living services:
    (1) If VA resources available limit the number of veterans who may 
be provided a program of independent living services and assistance, the 
first priority shall be given to veterans for whom the reasonable 
feasibility of

[[Page 154]]

achieving a vocational goal is precluded solely as a result of service-
connected disability; and
    (2) To the maximum extent feasible, a substantial portion of 
veterans provided with programs of independent living services and 
assistance shall be receiving long-term care in VA medical centers and 
nursing homes.


(Authority: 38 U.S.C. 3120(c))

[49 FR 40814, Oct. 18, 1984, as amended at 53 FR 50957, Dec. 19, 1988; 
55 FR 48842, Nov. 23, 1990; 62 FR 17708, Apr. 11, 1997]

                               Case Status



Sec. 21.180  Case status system.

    (a) General. Each veteran's case will be assigned to a specific case 
status from the point of initial contact until all appropriate steps in 
the rehabilitation process have been completed. The case status system 
will:
    (1) Assist VR&C staff to fulfill its case management responsibility 
to provide authorized assistance to enable the veteran to successfully 
pursue his or her program; and
    (2) Assure program management and accountability.


(Authority: 38 U.S.C. 3107)

    (b) Responsibility for change of case status. The case manager is 
responsible for assigning a case to the appropriate case status at each 
point in the rehabilitation process.
    (c) Case manager. The VR&C (Vocational Rehabilitation and 
Employment) Officer or his or her designee will assign a case manager 
when the veteran's case is placed in evaluation and planning status. The 
VR&C Officer or his or her designee may assign case management 
responsibility for development and implementation of a rehabilitation 
plan authorized under Chapter 31 to a counseling psychologist or 
vocational rehabilitation specialist in the VR&C Division. The case 
manager assigned will, unless replaced by the VR&C Officer, continue to 
be responsible for case management throughout the course of the 
veteran's rehabilitation program. When securing medical care, treatment, 
and other related services, the VR&C case manager will coordinate with 
Veterans Health Administration (VHA) staff members who have case 
management responsibility for the veteran.


(Authority: 38 U.S.C. 3106(e))

    (d) Informing the veteran. The veteran will be informed in writing 
of changes in case status by VA which affect his or her receipt of 
benefits and services under Chapter 31. The letter to the veteran will 
include the reason for the change of case status, and other information 
required under provisions of Sec. 21.420.


(Authority: 38 U.S.C. 3107)

    (e) Normal progression for eligible veterans. The cases of veterans 
who are eligible for and entitled to services under Chapter 31 for whom 
individualized plans have been prepared will generally undergo the 
following changes of status:
    (1) Individualized written rehabilitation plan. A veteran with an 
IWRP (Individualized Written Rehabilitation Plan) will generally move 
sequentially from applicant status through evaluation and planning 
status, rehabilitation to the point of employability status, employment 
services status, and rehabilitated status.
    (2) Individualized extended evaluation plan. A veteran with an IEEP 
(Individualized Extended Evaluation Plan) will generally move from 
applicant status through evaluation and planning status to extended 
evaluation status. Once in extended evaluation status there will 
generally be a finding which leads to development of an IWRP (paragraph 
(e)(1) of this section), or IILP (Individualized Independent Living 
Plan) (paragraph (e)(3) of this section).
    (3) Individualized independent living plan. A veteran with an IILP 
(Individualized Independent Living Plan) will generally move from 
applicant status through evaluation and planning, extended evaluation, 
independent living, and rehabilitated status.
    (4) Individualized employment assistance plan. (i) A veteran with an 
IEAP (Individualized Employment Assistance Plan) which is a part of an 
IWRP will move through the case statuses described in paragraph (e)(1) 
of this section, or in some cases through the steps in paragraph (e)(2) 
of this section.

[[Page 155]]

    (ii) A veteran for whom only employment services are provided will 
generally move from applicant through evaluation and planning, 
employment services to rehabilitated status.


(Authority: 38 U.S.C. 3107)

    (f) Normal progression for ineligible veterans. A veteran found 
ineligible for services under Chapter 31 will generally move from 
applicant to evaluation and planning status, to ineligible status.


(Authority: 38 U.S.C. 3107)

    (g) Changes of status. The case manager may change the case status 
when:
    (1) Conditions for change specified in the status are met;
    (2) The change is not specifically precluded by the status to which 
change is being considered; and
    (3) The change is consistent with provisions of other applicable 
regulations.


(Authority: 38 U.S.C. 3106)

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 34987, Aug. 23, 1989; 
62 FR 17708, Apr. 11, 1997]



Sec. 21.182  ``Applicant'' status.

    (a) Purpose. The purposes of applicant status are to:
    (1) Process a veteran's claim for assistance under Chapter 31 in a 
timely manner; and
    (2) Identify service-disabled veterans whom VA should contact 
individually to increase their awareness and understanding of how they 
may benefit from services furnished under Chapter 31.


(Authority: 38 U.S.C. 3102)

    (b) Assignment to applicant status. VA will assign a veteran's 
records to applicant status when either:
    (1) VA receives a formal or informal application from a veteran for 
services under Chapter 31; or
    (2) The VR&C (Vocational Rehabilitation and Employment) Division:
    (i) Advises a veteran in writing of the veteran's potential 
eligibility for Chapter 31 services, or
    (ii) Is informed that the veteran has been advised in writing of his 
or her potential eligibility for Chapter 31 services by other VA 
elements.


(Authority: 38 U.S.C. 3102(2))

    (c) Termination of applicant status. Applicant status will be 
terminated when:
    (1) An appointment for an initial evaluation has been kept by the 
veteran; or
    (2) The veteran's service-connected disability is reduced to a 
noncompensable degree; or
    (3) The veteran's service-connected disability is severed; or
    (4) The veteran's application is invalid because of fraud or error; 
or
    (5) The veteran withdraws his or her claim, or otherwise indicates 
that no further assistance is desired.


(Authority: 38 U.S.C. 3106)

    (d) Transfer of terminated cases to discontinued status. Each 
instance in which a veteran's case is terminated for reasons described 
in paragraph (c)(4) or (5) of this section shall be placed in 
discontinued status.


(Authority: 38 U.S.C. 3102)

    Cross-Reference: See Sec. Sec. 21.30 Claims, 21.31 Informal claims, 
and 21.32 Time limits.

[49 FR 40814, Oct. 18, 1984, as amended at 52 FR 2518, Jan. 23, 1987]



Sec. 21.184  ``Evaluation and planning'' status.

    (a) Purpose. The purpose of evaluation and planning status is to 
identify veterans for whom evaluation and planing services are needed 
to:
    (1) Accomplish an initial evaluation as provided in Sec. 21.50;
    (2) Develop an IWRP (Individualized Written Rehabilitation Plan), 
IEEP (Individualized Extended Evaluation Plan), IILP (Individualized 
Independent Living Plan) or IEAP (Individualized Employment Assistance 
Plan); or
    (3) Reevaluate:
    (i) Findings made in prior initial evaluations, or
    (ii) Current or previous individualized rehabilitation plans.
    (b) Assignment to evaluation and planning status. A veteran's 
records will be

[[Page 156]]

assigned to evaluation and planning status for any of the purposes 
specified in paragraph (a) of this section.
    (c) Termination of evaluation and planning status. The assignment of 
the veteran's records to evaluation and planning status may be 
terminated under the following conditions:
    (1) Evaluation and planning completed. The services necessary to 
complete evaluation and planning have been provided. These services are:
    (i) Completion of an initial evaluation;
    (ii) Development of an IWRP (Individualized Written Rehabilitation 
Plan) or other individual rehabilitation plan in those cases in which 
eligibility and entitlement to services provided under Chapter 31 are 
established; or
    (iii) Completion of reevaluation of prior findings made in initial 
evaluation or modification of a rehabilitation plan.
    (2) Evaluation and planning not completed. The VR&C Division shall 
make every reasonable effort to enable the veteran to complete the 
evaluation and planning phase of the rehabilitation process. A 
determination that every reasonable effort by VA has been made, and that 
little likelihood exists that continued efforts will lead to completion 
of planning and evaluation, may be made under the following conditions:
    (i) The veteran writes VA and requests that his or her case be 
inactivated;
    (ii) The veteran fails to keep scheduled appointments following his 
or her initial appointment; or
    (iii) The veteran otherwise fails to cooperate with VA in the 
evaluation and planning process. If the veteran fails to cooperate, the 
provisions of Sec. 21.362 are applicable.

(Authority: 38 U.S.C. 3106, 3107)

    Cross-Reference: See Sec. Sec. 21.50 through 21.58 Initial and 
extended evaluation, and Sec. Sec. 21.80 through 21.98 Individualized 
written rehabilitation plan.3



Sec. 21.186  ``Ineligible'' status.

    (a) Purpose. The purpose of ineligible status is to identify the 
cases in which a veteran requests services under Chapter 31, but the 
request is denied by VA, usually, on the basis of information developed 
when the veteran was in evaluation and planning status.


(Authority: 38 U.S.C. 3106)

    (b) Assignment to ineligible status. A veteran's case will be 
assigned to ineligible status following a finding by VA that the veteran 
is not eligible for or entitled to services under Chapter 31. The 
finding must preclude all possible Chapter 31 services.


(Authority: 38 U.S.C. 3106, 3107)

    (c) Termination of ineligible status. The assignment of the 
veteran's case to ineligible status should be terminated if the veteran 
thereafter becomes eligible to receive any Chapter 31 service. Placement 
of the case in ineligible status is a bar to reconsideration of 
eligibility unless a material change in circumstances occurs.


(Authority: 38 U.S.C. 3106)



Sec. 21.188  ``Extended evaluation'' status.

    (a) Purpose. The purposes of extended evaluation status are to:
    (1) Identify a veteran for whom a period of extended evaluation is 
needed; and
    (2) Assure that necessary services are provided by VA during the 
extended evaluation.


(Authority: 38 U.S.C. 3106)

    (b) Assignment to extended evaluation status. A veteran's case may 
be assigned or reassigned to extended evaluation status under provisions 
of Sec. 21.57, Sec.  21.74, Sec.  21.86, Sec.  21.94, Sec.  21.96, or 
Sec. 21.98.


(Authority: 38 U.S.C. 3107)

    (c) Continuation in extended evaluation status. A veteran's case 
will be in extended evaluation status during periods in which:
    (1) The veteran is pending induction into the facility at which 
rehabilitation services will be provided;
    (2) The veteran is receiving rehabilitation services prescribed in 
the IEEP (Sec. 21.86); or
    (3) The veteran is on authorized leave of absence during an extended 
evaluation.


(Authority: 38 U.S.C. 3108)


[[Page 157]]


    (d) Termination of extended evaluation status. A veteran in extended 
evaluation status will remain in that status until one of the following 
events occur:
    (1) Following notification of necessary arrangements to begin an 
extended evaluation, the date the extended evaluation begins, and 
instructions as to the next steps to be taken, the veteran:
    (i) Fails to report and does not respond to followup contact by the 
case manager;
    (ii) Declines or refuses to enter the program; or
    (iii) Defers induction for a period exceeding 30 days beyond the 
scheduled date of induction, except where the deferment is due to 
illness or other sufficient reason;
    (2) VA determines the reasonable feasibility of a vocational goal 
for the veteran before completion of all of the planned evaluation 
because the decision does not require the further evaluation;
    (3) The veteran completes the extended evaluation;
    (4) Either the veteran or VA interrupts the extended evaluation;
    (5) Either the veteran or VA discontinues the extended evaluation; 
or
    (6) Service-connection for the veteran's service-connected 
disability is severed by VA or his or her continued eligibility 
otherwise ceases.


(Authority: 38 U.S.C. 3106)

    Cross-References: See Sec. Sec. 21.57 Extended evaluation, 21.322 
Commencing dates, 21.324 Reduction or termination.



Sec. 21.190  ``Rehabilitation to the point of employability'' status.

    (a) Purpose. The rehabilitation to the point of employability status 
serves to:
    (1) Identify veterans who receive training and rehabilitation 
services to enable them to attain a vocational goal; and
    (2) Assure that services specified in the veteran's IWRP are 
provided in a timely manner by VA.


(Authority: 38 U.S.C. 3101)

    (b) Assignment. A veteran's case may be assigned or reassigned to 
rehabilitation to the point of employability status under the provisions 
of Sec. Sec. 21.84, 21.94, 21.96, or 21.98.


(Authority: 38 U.S.C. 3107)

    (c) Continuation in rehabilitation to the point of employability 
status. A veteran will be assigned to rehabilitation to the point of 
employability status during periods in which:
    (1) The veteran has progressed through applicant status and 
evaluation and planning status (including extended evaluation status 
when appropriate), and is pending induction into the facility at which 
training and rehabilitation services will be provided;
    (2) The veteran is receiving training and rehabilitation services 
prescribed in the IWRP; or
    (3) The veteran is on authorized leave of absence.


(Authority: 38 U.S.C. 3104, 3108)

    (d) Termination of rehabilitation to the point of employability 
status when goals of the IWRP for this period are achieved. VA will 
consider a veteran to have completed the period of rehabilitation to the 
point of employability, and will terminate this status under the 
following conditions:
    (1) The veteran achieves the goals of, and has been provided 
services specified in, the IWRP;
    (2) The veteran who leaves the program has completed a sufficient 
portion of the services prescribed in the IWRP to establish clearly that 
he or she is generally employable as a trained worker in the 
occupational objective established in the IWRP;
    (3) The veteran, who has not completed all prescribed services in 
the IWRP, accepts employment in the occupational objective established 
in the IWRP with wages and other benefits commensurate with wages and 
benefits received by trained workers; or
    (4) The veteran:
    (i) Satisfactorily completes a prescribed program, the practice of 
which requires pursuing an examination for licensure, but
    (ii) Is unable to take the licensure examination prior to the basic 
twelve-year termination date and there is no basis for extension of that 
date.


(Authority: 38 U.S.C. 3107)


[[Page 158]]


    (e) Other conditions for termination of rehabilitation to the point 
of employability status. In addition to termination under conditions 
described in paragraph (d) of this section, the classification of the 
veteran's records in this status may be terminated under any of the 
following conditions:
    (1) A veteran who has been notified of necessary arrangements to 
begin the program, the date the program begins and instructions as to 
the next steps to be taken:
    (i) Fails to report and does not respond to initial or subsequent 
followup by the case manager;
    (ii) Declines or refuses to enter the program; or
    (iii) Defers induction for a period exceeding 30 days beyond the 
scheduled beginning date of the program, except where the deferment is 
due to illness or other sufficient reason.
    (2) Either the veteran or VA interrupts the period of rehabilitation 
to the point of employability;
    (3) Either VA or the veteran discontinues the period of 
rehabilitation to the point of employability;
    (4) The veteran reaches his or her termination date, and there is no 
basis for extension under Sec. 21.44;
    (5) The veteran's entitlement to training and rehabilitation 
services under Chapter 31 is exhausted, and there is no basis for 
extension under Sec. 21.78; or
    (6) Service-connection for the veteran's service-connected 
disability is served by VA or he or she otherwise ceases to be eligible.


(Authority: 38 U.S.C. 3107)

    (f) Payment of employment adjustment allowance. An employment 
adjustment allowance will be paid when the veteran's classification in 
rehabilitation to the point of employability status is terminated under 
provisions of paragraph (d) of this section. An employment adjustment 
allowance will not be paid if termination is for one of the reasons 
specified in paragraph (e) of this section.


(Authority: 38 U.S.C. 3108(a))

    Cross-References: See Sec. Sec. 21.120 Educational and vocational 
trainings services, 21.282 Effective date of induction into a 
rehabilitation program, and 21.284 Reentering into a rehabilitation 
program.



Sec. 21.192  ``Independent living program'' status.

    (a) Purpose. The independent living program status serves to:
    (1) Identify veterans who are being furnished a program of 
independent living services by VA; and
    (2) Assure that such veterans receive necessary services from VA in 
a timely manner.
    (b) Assignment to independent living program status. A veteran may 
be assigned or reassigned to independent living program status under the 
provisions of Sec. Sec. 21.88, 21.94, 21.96, or 21.98.


(Authority: 38 U.S.C. 3107)

    (c) Continuation in independent living program status. A veteran 
will be in independent living program status during periods in which:
    (1) The provisions of Sec. 21.282 for induction into a program are 
met, but the veteran is pending induction into the facility at which 
rehabilitation services will be provided;
    (2) The veteran receives rehabilitation services prescribed in an 
IILP; or
    (3) The veteran is on authorized leave of absence status.


(Authority: 38 U.S.C. 3109, 3120)

    (d) Termination of independent living program status. When a 
veteran's case has been assigned to independent living program status, 
the case will be terminated from that status, if one of the following 
occurs:
    (1) A veteran, who has been notified of necessary arrangements to 
begin a program, the date the program begins and instructions as to the 
next steps to be taken:
    (i) Fails to report and does not respond to followup contact by the 
case manager;
    (ii) Declines or refuses to enter the program; or
    (iii) Defers entry for more than 30 days beyond the scheduled 
beginning date, unless the deferment is due to illness or other 
sufficient reason.
    (2) The veteran completes the IILP;
    (3) Either the veteran or VA interrupts the program;

[[Page 159]]

    (4) Either the veteran or VA discontinues the program; or
    (5) Service-connection for the veteran's service-connected 
disability is severed by VA or he or she otherwise ceases to be 
eligible.


(Authority: 38 U.S.C. 3109, 3110)

    Cross-References: See Sec. Sec. 21.160 Independent living services, 
21.282 Effective date of induction into a rehabilitation program, 21.322 
Commencing date, and 21.324 Reduction or termination date.



Sec. 21.194  ``Employment services'' status.

    (a) Purpose. The status employment services serves to:
    (1) Identify veterans who are being furnished employment services; 
and
    (2) Assure that these veterans receive necessary services in a 
timely manner.
    (b) Assignment to employment services status. A veteran's case may 
be assigned or reassigned to employment services status under the 
provisions of Sec. Sec. 21.84, 21.88, 21.94 and 21.98.
    (c) Continuation in employment services status. A case will remain 
in employment services status for the period specified in the IEAP, 
subject to the limitations specified in paragraph (d) of this section.
    (d) Termination of employment services status. The veteran will 
continue in employment services status until the earliest of the 
following events occurs:
    (1) He or she is determined to be rehabilitated under the provisions 
of Sec. 21.283; or
    (2) He or she is:
    (i) Employed for at least 60 days in employment that does not meet 
the criteria for rehabilitation contained in Sec. 21.283, if the 
veteran intends to maintain this employment and declines further 
assistance; and
    (ii) Adjusted to the duties and responsibilities of the job.
    (3) Either the veteran or VA interrupts the employment services 
program;
    (4) Either the veteran or VA discontinues the employment services 
program;
    (5) He or she reaches the end of the period for which employment 
services have been authorized and there is no basis for extension; or
    (6) Service-connection for the veteran's service-connected 
disability is severed or he or she otherwise ceases to be eligible.

(Authority: 38 U.S.C. 3117)

    Cross-References: See Sec. Sec. 21.47 Eligibility for employment 
assistance, 21.250 Overview of employment services, and 21.326 
Authorization of employment services.

[49 FR 40814, Oct. 18, 1984, as amended at 58 FR 68768, Dec. 29, 1993]



Sec. 21.196  ``Rehabilitated'' status.

    (a) Purpose. The purpose of rehabilitated status is to identify 
those cases in which the goals of a rehabilitation program or a program 
of employment services have been substantially achieved.
    (b) Assignment to ``rehabilitated'' status. A veteran's case shall 
be assigned to ``rehabilitated'' status when his or her case meets the 
criteria for rehabilitation contained in Sec. 21.283.


(Authority: 38 U.S.C. 3102, 3107 and 3117)

    (c) Termination of rehabilitated status. A veteran's case will not 
be removed from rehabilitated status under Sec. 21.284 once that status 
has been assigned, unless the determination of rehabilitation is set 
aside for a reason specified in Sec. 21.284.


(Authority: 38 U.S.C. 3100)

    Cross-Reference: See Sec. 21.284 Reentrance into a rehabilitation 
program.

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985, as amended at 58 
FR 68768, Dec. 29, 1993]



Sec. 21.197  ``Interrupted'' status.

    (a) Purpose. The purpose of interrupted status is to recognize that 
a variety of situations may arise in the course of a rehabilitation 
program in which a temporary suspension of the program is warranted. In 
each case, VA first must determine that the veteran will be able to 
return to a rehabilitation program or a program of employment services 
following the resolution of the situation causing the interruption. This 
determination will be documented in the veteran's record.


(Authority: 38 U.S.C. 3117)


[[Page 160]]


    (b) Assignment to ``interrupted'' status. A veteran's case will be 
assigned to interrupted status when:
    (1) VA determines that a suspension of services being provided is 
necessary; and
    (2) Either:
    (i) A definite date for resumption of the program is established; or
    (ii) The evidence indicates the veteran will be able to resume the 
program at some future date, which can be approximately established.


(Authority: 38 U.S.C. 3110)

    (c) Reasons for assignment to ``interrupted'' status. A veteran's 
case may be interrupted and assigned to interrupted status for reasons 
including but not limited to the following:
    (1) Veteran does not initiate or continue rehabilitation process. If 
a veteran does not begin or continue the rehabilitation process, the 
veteran's case will be interrupted and assigned to interrupted status, 
including:
    (i) A case in evaluation and planning status;
    (ii) A case in extended evaluation status;
    (iii) A case in rehabilitation to the point of employability status;
    (iv) A case in independent living program status; or
    (v) A case in employment services status.
    (2) Unsatisfactory conduct and cooperation. If a veteran's conduct 
or cooperation becomes unsatisfactory, services and assistance may be 
interrupted as determined under provisions of Sec. Sec. 21.362 and 
21.364.
    (3) Services not available. The veteran cannot continue the program 
because the necessary training and rehabilitation services are 
unavailable.
    (4) Prior to assignment to ``discontinued'' status. A veteran's case 
shall be assigned to interrupted status prior to discontinuance and 
assignment to discontinued status in all cases except as provided in 
Sec. 21.182(d) and upon the veteran's death. The purpose of assignment 
to interrupted status is to assure that all appropriate actions have 
been taken to help the veteran continue in his or her program before 
discontinuing benefits and services.
    (5) Absences. The veteran is not entitled to be placed on authorized 
absence under Sec. Sec. 21.340 through 21.350 while in interrupted 
status.


(Authority: 38 U.S.C. 3111)

    (d) Reentrance from ``interrupted'' status. (1) A veteran in 
interrupted status may be assigned to his or her prior status or other 
appropriate status, if he or she reports for entrance or reentrance into 
the prescribed program at the time and place scheduled for the 
resumption of the rehabilitation program.
    (2) If a veteran in interrupted status fails to report for entrance 
or reentrance into the program at the appointed time and place, the 
veteran's case will remain in interrupted status. The case manager will 
then determine whether there is a satisfactory reason for the veteran's 
failure to enter a new or reenter the prior program. If the evidence of 
record does not establish a satisfactory reason, the veteran's case will 
be discontinued and assigned to discontinued status.
    (e) Case management responsibility during a period of interruption. 
The case manager shall maintain contact with the veteran during 
interruption and shall arrange for appropriate medical or other services 
the veteran needs to be able to enter or reenter a rehabilitation 
program or a program of employment services.


(Authority: 38 U.S.C. 3107)

    Cross-Reference: See Sec. 21.324 Reduction or termination date.

[49 FR 40814, Oct. 18, 1984, as amended at 52 FR 2518, Jan. 23, 1987]



Sec. 21.198  ``Discontinued'' status.

    (a) Purpose. The purpose of discontinued status is to identify 
situations in which termination of all services and benefits received 
under Chapter 31 is necessary.
    (b) Placement in ``discontinued''. VA will discontinue the veteran's 
case and assign the case to discontinued status following assignment to 
interrupted status as provided in Sec. 21.197 for reasons including but 
not limited to the following:

[[Page 161]]

    (1) Veteran declines to initiate or continue rehabilitation process. 
If a veteran does not initiate or continue the rehabilitation process 
and does not furnish an acceptable reason for his or her failure to do 
so following assignment to interrupted status, the veteran's case will 
be discontinued and assigned to discontinued status. This includes:
    (i) A case in applicant status;
    (ii) A case in evaluation and planning status;
    (iii) A case in extended evaluation status;
    (iv) A case in rehabilitation to the point of employability status;
    (v) A case in independent living program status;
    (vi) A case in employment services status; or
    (vii) A case in interrupted status;
    (2) Unsatisfactory conduct and cooperation. When a veteran's conduct 
or cooperation becomes unsatisfactory, services and assistance may be 
discontinued and assigned to discontinued status as determined under 
provisions of Sec. Sec. 21.362 and 21.364.
    (3) Eligibility and entitlement. Unless the veteran desires 
employment assistance, the veteran's case will be discontinued and 
assigned to discontinued status when:
    (i) The veteran reaches the basic twelve-year termination date, and 
there is no basis for extension; or
    (ii) The veteran has used 48 months of entitlement under one or more 
VA programs, and there is no basis for extension of entitlement.
    (4) Medical and related problems. A veteran's case will be 
discontinued and assigned to discontinued status when:
    (i) The veteran will be unable to participate in a rehabilitation 
program because of a serious physical or emotional problem for an 
extended period; and
    (ii) VA medical staff are unable to estimate an approximate date by 
which the veteran will be able to begin or return to the program.
    (5) Withdrawal. Veteran voluntarily withdraws from the program.
    (6) Failure to progress. The veteran's case will be discontinued and 
assigned to discontinued status if his or her failure to progress in a 
program is due to:
    (i) Continuing lack of application by the veteran unrelated to any 
personal or other problems; or
    (ii) Inability of the veteran to benefit from rehabilitation 
services despite the best efforts of VA and the veteran.


(Authority: 38 U.S.C. 3108, 3111)

    (7) Special review of proposed discontinuance action. The Vocational 
Rehabilitation and Employment (VR&C) Officer shall review each case in 
which discontinuance is being considered for a veteran with a service-
connected disability rated 50 percent or more disabling. The VR&C 
Officer may utilize exisitng resources to assist in the review, 
including referral to the Vocational Rehabilitation Panel (VRP).


(Authority: 38 U.S.C. 3104(a)(1))

    (c) Termination of ``discontinued'' status. Except as noted in 
paragraph (c)(3) of this section assignment of the veteran's case to the 
same status from which the veteran was discontinued or to a different 
one requires that VA first find:
    (1) The reason for the discontinuance has been removed; and
    (2) VA has redetermined his or her eligibility and entitlement under 
Chapter 31.
    (3) In addition to the criteria described in paragraphs (c) (1) and 
(2) of this section a veteran placed into discontinued status as a 
result of a finding of unsatisfactory conduct or cooperation under 
Sec. Sec. 21.362 and 21.364 must also meet the requirements for 
reentrance into a rehabilitation program found in Sec. 21.364.


(Authority: 38 U.S.C. 3111)

    (d) Follow-up of a cases placed in ``discontinued'' status. VA shall 
establish appropriate procedures to follow up on cases which have been 
placed in discontinued status, except in those cases reassigned from 
applicant status. The purpose of such followup is to determine if:
    (1) The reasons for discontinuance may have been removed, and 
reconsideration of eligibility and entitlement is possible; or

[[Page 162]]

    (2) The veteran is employed, and criteria for assignment to 
rehabilitated status are met.


(Authority: 38 U.S.C. 3107)

    Cross-Reference: See Sec. 21.324 Reduction or termination dates of 
subsistence allowance.

[49 FR 40814, Oct. 18, 1984, as amended at 52 FR 2518, Jan. 23, 1987; 53 
FR 32620, Aug. 26, 1988]

                                Supplies



Sec. 21.210  Supplies.

    (a) Purpose of furnishing supplies. Supplies are furnished to enable 
a veteran to pursue rehabilitation and achieve the goals of his or her 
program.
    (b) Definition. The term supplies includes books, tools, and other 
supplies and equipment which VA determines are necessary for the 
veteran's rehabilitation program.
    (c) Periods during which supplies may be furnished. Supplies may be 
furnished during:
    (1) Extended evaluation;
    (2) Rehabilitation to the point of employability;
    (3) Employment services; and
    (4) An independent living services program.


(Authority: 38 U.S.C. 3104(a))

    (d) Supplies precluded. Notwithstanding the provisions of paragraph 
(c) of this section, supplies may not be furnished to a veteran who has 
elected, or is in receipt of, payment at the educational assistance rate 
paid under Chapter 34.


(Authority: 38 U.S.C. 3108(a))



Sec. 21.212  General policy in furnishing supplies during periods of 
rehabilitation.

    (a) Furnishing necessary supplies during a period of rehabilitation 
services. A veteran will be furnished supplies that are necessary for a 
program of rehabilitation services. For example, a veteran training in a 
school will be furnished the supplies needed to pursue the school 
course. If additional supplies are subsequently needed to secure 
employment, they will be furnished during the period of employment 
services as provided in Sec. 21.214(d).
    (b) Determining supplies needed during a period of rehabilitation. 
Subject to the provisions of Sec. Sec. 21.210 through 21.222, VA will 
authorize only those supplies which are required:
    (1) To be used by similarly circumstanced non-disabled persons in 
the same training or employment situation;
    (2) To mitigate or compensate for the effects of the veteran's 
disability while he or she is being evaluated, trained or assisted in 
gaining employment; or
    (3) To allow the veteran to function more independently and thereby 
lessen his or her dependence on others for assistance.
    (c) When supplies may be authorized. Supplies should generally be 
authorized subsequent to the date of enrollment in training or beginning 
date of other rehabilitation services unless there are compelling 
reasons to authorize them earlier. Supplies may not be authorized 
earlier than the date the veteran's rehabilitation plan is approved by 
VA and the veteran is accepted by the facility or individual providing 
services.
    (d) Supplies needed, but not specifically required. VA may determine 
that an item, such as a calculator, while not required by the school for 
the pursuit of a particular school subject, is nevertheless necessary 
for the veteran to successfully pursue his or her program under the 
provisions of Sec. 21.156 pertaining to incidental goods and services. 
The item may be authorized if:
    (1) It is generally owned and used by students pursuing the course; 
and
    (2) Students who do not have the item would be placed at a distinct 
disadvantage in pursuing the course.
    (e) Supplies for special projects and theses. The amount of supplies 
that VA may authorize for special projects, including theses, may not 
exceed the amount generally needed by similarly circumstanced 
nonveterans in meeting course or thesis requirements.


(Authority: 38 U.S.C. 3104(a))

    (f) Responsibility for authorization of supplies. The case manager 
is responsible for the authorization of supplies, subject to 
requirements for prior approval contained in Sec. 21.258 and other

[[Page 163]]

instructions governing payment of program charges.


(Authority: 38 U.S.C. 3106(e))



Sec. 21.214  Furnishing supplies for special programs.

    (a) General. A veteran pursuing one of the following types of 
vocational rehabilitation programs is eligible for any types of supplies 
listed in Sec. 21.212. The following paragraphs clarify the 
applicability of the general provisions of Sec. 21.212 to these special 
situations.
    (b) Supplies furnished to veterans pursuing training in the home. VA 
may furnish to veterans training in the home:
    (1) Books, tools, and supplies which schools or training 
establishments that train individuals outside the home for the objective 
the veteran is pursuing at home ordinarily require all students and 
trainees to personally possess;
    (2) Supplies and equipment which are essential to the prescribed 
course of training because the veteran is pursuing the course at home. 
Equipment in this category consists of items which ordinarily are not 
required by a school or training establishment;
    (3) Special equipment, such as a vise or drafting table;
    (4) Supplies needed to enable the veteran to function more 
independently in his or her home and community.


(Authority: 38 U.S.C. 3104(a))

    (c) Supplies furnished to a veteran in farm cooperative training. 
The books and related training supplies which VA may furnish a veteran 
in farm cooperative training depend upon the type of instruction he or 
she is receiving:
    (1) When organized, group instruction is part of a veteran's course, 
VA will furnish those books and supplies which the school requires all 
students in the school portion of the course to own personally or on a 
rental basis;
    (2) When all instruction is given on the veteran's farm by an 
individual instructor, VA will furnish to a student only those textbooks 
and other supplies which would ordinarily be required by a school.


(Authority: 38 U.S.C. 3104(a)(7))

    (d) Obtaining and maintaining employment. A veteran being furnished 
employment services may receive supplies which:
    (1) The employer requires similarly circumstanced nonveterans to own 
upon begining employment to the extent that the items were not furnished 
during the period in which the veteran was training for the objective, 
or the items that were furnished for training purposes are not adequate 
for employment;
    (2) VA determines that special equipment is necessary for the 
veteran to perform his or her duties, subject to the obligation of the 
employer to make reasonable accommodation to the disabling effects of 
the veteran's condition.


(Authority: 38 U.S.C. 3104(a), 4212)

    (e) Self-employment. The supplies and services which may be 
furnished, subject to the requirements prescribed under Sec. 21.258, to 
a veteran for whom self-employment has been approved as the occupational 
objective, are generally limited to those necessary to begin operations:
    (1) Minimum stocks of materials, e.g., inventory of saleable 
merchandise or goods, expendable items required for day-to-day 
operations, and items which are consumed on the premises;
    (2) Essential equipment, including machinery, occupational fixtures, 
accessories, and appliances; and
    (3) Other incidental services such as business license fees.


(Authority: 38 U.S.C. 3104(a)(2))

    (f) Supplies and related assistance which may not be furnished for 
self-employment. VA may not authorize assistance for:
    (1) Purchase of, or part payment for, land and buildings;
    (2) Making full or part payment of leases or rentals;
    (3) Purchase or rentals of trucks, cars, or other means of 
transportation;
    (4) Stocking a farm for animal husbandry operations.


(Authority: 38 U.S.C. 3104(a)(12))

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]

[[Page 164]]



Sec. 21.216  Special equipment.

    (a) General. Special equipment should be authorized as necessary to 
enable a veteran to mitigate or overcome the effects of disability in 
pursuing a rehabilitation program. The major types of special equipment 
which may be authorized include:
    (1) Equipment for educational or vocational purposes. This category 
includes items which are ordinarily used by nondisabled persons pursuing 
evaluation or training, modified to allow for use by disabled persons. 
e.g., calculators with speech capability for blinded persons.
    (2) Sensory aids and prostheses. This category includes items which 
are specifically designed to mitigate or overcome the effects of 
disability. They range from eyeglasses and hearing aids to closed-
circuit TV systems which amplify reading material for veterans with 
severe visual impairments.
    (3) Modifications to improve access. This category includes 
adaptations of environment not generally associated with education and 
training, such as adaptive equipment for automobiles or supplies 
necessary to modify a veteran's home to make either training or self-
employment possible.


(Authority: 38 U.S.C. 3104(a))

    (b) Coordination with other VA elements in securing special 
equipment. In any case in which the veteran needs special equipment and 
is eligible for such equipment under other VA programs, such as medical 
care and treatment at VA medical centers, the items will be secured 
under that program. The veteran must be found ineligible for needed 
special equipment under other programs and benefits administered by VA 
before the item may be authorized under Chapter 31.


(Authority: 38 U.S.C. 3115)



Sec. 21.218  Methods of furnishing supplies.

    (a) Supplies furnished by the school or facility. VA will make 
arrangements for the school or other facility furnishing a veteran 
training, rehabilitation assistance, or employment under Chapter 31 to 
provide supplies to the extent practicable. This method is the one most 
likely to assure that supplies are available and can be secured 
expeditiously. A facility may be considered to be furnishing supplies 
when the facility itself is the supplier, or the facility has designated 
a supplier. Prior authorization of supplies by the case manager is 
required, except for standard sets of books, tools, or supplies which 
the facility requires all trainees or employees to have.
    (b) Issuance of supplies not furnished by the facility. VA will 
issue authorized supplies directly to the veteran, if the supplies are 
not furnished by the facility providing training, rehabilitation 
services, or employment.


(Authority: 38 U.S.C. 3104(a))

    Cross-Reference: See 48 CFR part 831. Contract cost principles and 
procedures.



Sec. 21.219  Supplies consisting of clothing, magazines and periodicals, 
and items which may be personally used by the veteran.

    (a) Furnishing protective articles and clothing. Protective articles 
or apparel worn in place of ordinary clothing will be furnished at VA 
expense, when the school or training establishment requires similarly 
circumstanced nonveterans to use the articles of apparel. No other 
clothing will be supplied.
    (b) Furnishing magazines and periodicals. Appropriate past issues of 
magazines, periodicals, or reprints may be furnished in the same manner 
as text material, when relevant to the course or training.
    (c) Furnishing items which may be personally used. Musical 
instruments, cameras, or other items which could be used personally by 
the veteran may only be furnished if required by the facility to meet 
requirements for degree or course completion.


(Authority: 38 U.S.C. 3104(a)(7))



Sec. 21.220  Replacement of supplies.

    (a) Lost, stolen, misplaced or damaged supples. VA will replace 
articles which are necessary to further pursuit of the veteran's program 
and which are lost, stolen, misplaced, or damaged beyond repair through 
no fault of the veteran;

[[Page 165]]

    (1) VA will make an advancement from the Vocational Rehabilitation 
Revolving Fund to a veteran to replace articles for which VA will not 
pay, if the veteran is without funds to pay for them;
    (2) If a veteran refuses to replace an article indispensable to the 
program after VA determines that its loss or damage was his or her 
fault, the veteran's refusal may be considered as noncooperation under 
Sec. 21.364;
    (3) If the veteran's program is discontinued under provisions of 
Sec. 21.364(b), he or she will be reentered into the program only when 
he or she replaces the necessary articles.


(Authority: 38 U.S.C. 3104(a))

    (b) Personally purchased supplies. VA will not generally reimburse a 
veteran who personally buys supplies. VA may pay for the required 
supplies which a training facility or other vendor sells to a veteran, 
if the facility chooses to return to the veteran the amounts he or she 
paid, so that the charges stand as an unpaid obligation of VA to the 
facility. If the facility does not agree to such an arrangement, VA may 
still pay the veteran, if the facts and equities of the case are 
demonstrated.


(Authority: 38 U.S.C. 3115)

    (c) Supplies used in more than one part of the program. Except as 
provided in paragraph (a) of this section, VA will generally furnish any 
nonconsumable supplies only one time, even though the same supplies may 
be required for use by the veteran in another subject or in another 
quarter, semester, or school year.


(Authority: 38 U.S.C. 3104(a)(7))



Sec. 21.222  Release of, and repayment for, training and rehabilitation 
supplies.

    The value of supplies authorized by VA will be repaid under the 
provisions of this section, when the veteran fails to complete the 
program as planned.
    (a) Consumable supplies. VA will require reimbursement from a 
veteran for consumable supplies authorized, unless:
    (1) The veteran fails to complete the rehabilitation program through 
no fault of his or her own;
    (2) The employment objective of the rehabilitation plan is changed 
as a result of reevaluation by VA staff;
    (3) The total value of the supplies for which repayment is required 
is less than $100; or
    (4) The veteran dies.


(Authority: 38 U.S.C. 3104)

    (b) Nonconsumable supplies (general). (1) In addition to the 
exceptions noted in paragraph (c) of this section, VA will not require 
reimbursement from a veteran for nonconsumable supplies authorized, if:
    (i) The veteran and VA change the long-range goal of the 
rehabilitation plan and those supplies are not required for the 
veteran's pursuit of training for the new goal;
    (ii) The veteran's failure to complete the program was not his or 
her fault;
    (iii) The veteran was pursuing the program at a facility which 
recovers nonconsumable supplies from veterans through contractural 
arrangements with VA, and the veteran returned to the facility all the 
nonconsumable supplies furnished at VA expense;
    (iv) The veteran reenters the Armed Forces or is in the process of 
reentering the Armed Forces;
    (v) The veteran satisfactorily completed one-half or more of a 
noncollege degree course (or at least two terms in the case of a college 
course) for which VA furnished the supplies;
    (vi) The veteran certifies that he or she is using in current 
employment the supplies furnished during training;
    (vii) The total value of the supplies for which repayment is 
required is less than $100;
    (viii) The veteran dies;
    (ix) The veteran is furnished supplies during a period of employment 
services but loses the job through no fault of his or her own;
    (x) A veteran discontinued from an independent living services 
program is using supplies and equipment to reduce his or her dependence 
on others; or
    (xi) The veteran is declared rehabilitated.
    (2) The amount which a veteran must repay will be the lesser of the 
current

[[Page 166]]

value of the supplies, or the original cost of the supplies. VA will 
accept supplies in lieu of repayment of the value of the supplies if VA 
has authorized a change of objective.


(Authority: 38 U.S.C. 3104(a))

    (c) Training in the home and self-employment. In addition to the 
reasons for not requiring repayment or return of nonconsumable supplies 
listed in paragraph (b) of this section, VA will not require a veteran 
to pay for or return nonconsumable supplies if: (1) In the case of a 
veteran training in the home:
    (i) VA furnished such supplies to equip his or her home as a place 
of training; and
    (ii) The veteran has completed enough of his or her training program 
to be considered employable, and has been declared rehabilitated to the 
point of employability;
    (2) A veteran in a self-employment program not in the home is 
declared rehabilitated; or
    (3) The veteran dies and the Director, VR&C Service determines that 
the facts and equities of the family situation warrant waiver of all or 
a part of the requirements for repayment.


(Authority: 38 U.S.C. 3104(a)(12))

[49 FR 40814, Oct. 18, 1984, as amended at 62 FR 17708, Apr. 11, 1997]



Sec. 21.224  Prevention of abuse.

    Supplies are to be furnished under the most careful checks by the 
case manager as to what is needed by the veteran to pursue his or her 
program. Determinations of the supplies needed to enable the veteran to 
successfully pursue his or her rehabilitation program are made under the 
provisions of Sec. Sec. 21.210 through 21.222.


(Authority: 38 U.S.C. 3104, 3111)

                      Medical and Related Services



Sec. 21.240  Medical treatment, care and services.

    (a) General. A Chapter 31 participant shall be furnished medical 
treatment, care and services which VA determines are necessary to 
develop, carry out and complete the veteran's rehabilitation plan. The 
provision of such services is a part of the veteran's entitlement to 
benefits and services under Chapter 31, and is limited to the period or 
periods in which the veteran is a Chapter 31 participant.


(Authority: 38 U.S.C. 3104, 3107)

    (b) Scope of services. The services which may be furnished under 
Chapter 31 include the treatment, care and services described in part 17 
of this title. In addition the following services may be authorized 
under Chapter 31 even if not included or described in part 17:
    (1) Prosthetic appliances, eyeglasses, and other corrective or 
assistive devices;
    (2) Services to a veteran's family as necessary for the effective 
rehabilitation of the veteran;
    (3) Special services (including services related to blindness and 
deafness) including:
    (i) Language training; speech and voice correction, training in 
ambulation, and one-hand typewriting;
    (ii) Orientation, adjustment, mobility and related services;
    (iii) Telecommunications, sensory and other technical aids and 
devices.
    (c) Eligibility. A veteran is eligible for the services described in 
paragraph (b) of this section during periods in which he or she is 
considered a Chapter 31 participant. These periods include:
    (1) Initial evaluation;
    (2) Extended evaluation;
    (3) Rehabilitation to the point of employability;
    (4) Independent living services program;
    (5) Employment services; and
    (6) Other periods to the extent that services are needed to begin or 
continue in any of the statutes described in paragraphs (c)(1) through 
(5) of this section. Such periods include but are not limited to 
services needed to facilitate reentry into rehabilitation following:
    (i) Interruption; or
    (ii) Discontinuance because of illness or injury.


(Authority: 38 U.S.C. 3104)

    Cross-Reference: See Sec. 17.48(g). Participating in a 
rehabilitation program under Chapter 31.

[[Page 167]]



Sec. 21.242  Resources for provision of treatment, care and services.

    (a) General. VA medical centers are the primary resources for the 
provision of medical treatment, care and services for Chapter 31 
participants which may be authorized under the provisions of Sec. 
21.240. The availability of necessary services in VA facilities shall be 
ascertained in each case.


(Authority: 38 U.S.C. 3115)

    (b) Hospital care and medical service. Hospital care and medical 
services provided under Chapter 31 shall only be furnished in facilities 
over which VA has direct jurisdiction, except as authorized on a 
contract or fee basis under the provisions of part 17 of this title.


(Authority: 38 U.S.C. 3115(b))

    Cross-References: See Sec. 17.30(l). Hospital care. Sec.  17.30(m) 
Medical services.

                           Employment Services



Sec. 21.250  Overview of employment services.

    (a) General. Employment services shall be provided if:
    (1) Eligibility for employment services exists;
    (2) The employment services which are needed have been identified; 
and
    (3) The services which have been identified are incorporated in the 
veteran's IWRP (Individualized Written Rehabilitation Plan) or IEAP 
(Individualized Employment Assistance Plan).


(Authority: 38 U.S.C. 3107, 3117)

    (b) Definitions. (1) The term program (period) of employment 
services includes the counseling, medical, social, and other placement 
and postplacement services provided to a veteran under 38 U.S.C. Chapter 
31 to assist the veteran in obtaining or maintaining suitable 
employment. The term program of employment services is used only if the 
veteran's eligibility under Chapter 31 is limited to employment 
services.
    (2) The term job development means a comprehensive professional 
service to assist the individual veteran to actually obtain a suitable 
job, and not simply the solicitation of jobs on behalf of the veteran. 
Continuing and mutually beneficial relationships with employers should 
be established by VA staff through referral of suitable employees and 
supportive services (e.g., adjustment counseling and job modification). 
Job development activities by VA staff are intended to provide disabled 
workers with a chance for suitable employment with cooperating 
employers.
    (3) The term employable means the veteran is able to secure and 
maintain employment in the competitive labor market or in a sheltered 
workshop or other special situation at the minimum wage.


(Authority: 38 U.S.C. 3101, 3106, 3116, 3117)

    (c) Determining eligibility for, and the extent of, employment 
services. (1) A veteran's eligibility for employment services shall be 
determined under the provisions of Sec. 21.47;
    (2) The duration of the period of employment services is determined 
under provisions of Sec. 21.73;
    (3) An IEAP (Individualized Employment Assistance Plan) shall be 
prepared under provisions of Sec. 21.88;
    (4) A veteran shall be placed in and removed from ``Employment 
Assistance Status'' under provisions of Sec. 21.194.


(Authority: 38 U.S.C. 3101, 3117)

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985, as amended at 54 
FR 21216, May 17, 1989]



Sec. 21.252  Job development and placement services.

    (a) General. Job development and placement services may include:
    (1) Direct placement assistance by VA;
    (2) Utilization of the job development and placement services of:
    (i) DVOP (Disabled Veterans Outreach Program) specialists;
    (ii) Programs authorized under the Rehabilitation Act of 1973, as 
amended;
    (iii) The State Employment Services and the Veterans' Employment and 
Training Service of the United States Department of Labor;
    (iv) The Office of Personnel Management; and
    (v) The services of any other public, or nonprofit organization 
having placement services available; and

[[Page 168]]

    (vi) Any for-profit agency in a case in which it has been determined 
that comparable services are not available through public and nonprofit 
agencies and comparable services cannot be provided cost-effectively by 
the public and nonprofit agencies listed in this paragraph.


(Authority: 38 U.S.C. 3117(a)(2))

    (b) Promotion of employment and training opportunities. As funding 
permits, VA employees engaged in the administration of Chapter 31 will 
promote the establishment of employment, training, and related 
opportunities to accomplish the purposes described in Sec. 21.1.


(Authority: 38 U.S.C. 3101)

    (c) Advocacy responsibility. VA shall take reasonable steps to 
ensure that a veteran being provided employment services receives the 
benefit of any applicable provision of law or regulation providing for 
special consideration or emphasis or preference of the veteran in 
employment or training, especially programs and activities identified in 
the preceding paragraphs of this section.


(Authority: 38 U.S.C. 523)

    (d) Interagency coordination. VA employees providing assistance to 
Chapter 31 participants shall coordinate their job development, 
placement, promotional, and advocacy activities with similar or related 
activities of:
    (1) The Department of Labor and State employment security agencies 
as provided by written agreement or other arrangement;
    (2) The State approving agencies:
    (3) Other public, for-profit and nonprofit agencies providing 
employment and related services.


(Authority: 38 U.S.C. 3116, 3117, Pub. L. 100-689)

[49 FR 40814, Oct. 18, 1984, as amended at 55 FR 42187, Oct. 18, 1990; 
62 FR 17708, Apr. 11, 1997]



Sec. 21.254  Supportive services.

    (a) General. Supportive services which may be provided during a 
period or program of employment services include a broad range of 
medical treatment, care and services, supplies, license and other fees, 
special services, including services to the blind and deaf, 
transportation assistance, services to the veteran's family, and other 
appropriate services, subject to the limitations provided in VA 
regulations governing the provisions of these services under Chapter 31.
    (b) Exclusions. The following benefits may not be provided to the 
veteran by VA during a period or program of employment services:
    (1) Subsistence allowance, or payment of an allowance at the 
educational assistance rate paid under Chapter 30 for similar training;
    (2) Education and training services, other than brief courses, such 
as review courses necessary for licensure;
    (3) Revolving Fund Loan; and
    (4) Work-study allowance.


(Authority: 38 U.S.C. 3104(a), 3108(f))

    (c) Disabled veterans trained for self-employment under a State 
rehabilitation agency. A service-disabled veteran who has trained for 
self-employment under the auspices of a State rehabilitation agency may 
be provided supplemental equipment and initial stocks and supplies 
similar to the materials supplied to the most severely disabled veterans 
in self-employment programs under Chapter 31, if the following 
conditions are met:
    (1) The veteran is eligible for employment assistance under 
provisions of Sec. 21.47;
    (2) An official of the State rehabilitation program with 
responsibility for administration of self-employment programs certifies 
that:
    (i) The veteran has successfully completed training for a self-
employment program;
    (ii) The assistance needed is not available through the State 
rehabilitation program, or other non-VA sources;
    (iii) The assistance requested is a part of the veteran's IWRP 
(Individualized Written Rehabilitation Plan) developed by the State 
rehabilitation program;
    (3) The requirements of Sec. 21.258 pertaining to self-employment 
for the most severely disabled veterans are met; and

[[Page 169]]

    (4) The Director, VR&E Service, approves the request, if the cost of 
supplies is more than $2,500. The approval of the Director is required 
prior to authorization of supplies.


(Authority: 38 U.S.C. 3117(b))

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 4283, Jan. 30, 1989; 57 
FR 57108, Dec. 3, 1992; 62 FR 17709, Apr. 11, 1997]



Sec. 21.256  Incentives for employers.

    (a) General. VA may make payments to employers to enable a veteran 
who has been rehabilitated to employability to begin and maintain 
employment or to provide on-job training. The purpose of such payment is 
to facilitate the placement of veterans who are generally qualified for 
employment but may lack some specific training or work experience which 
the employer requires or who are difficult to place due to their 
disability. The specific conditions which must be met before this option 
may be considered are contained in paragraphs (b) through (d) of this 
section.
    (b) Requirements for payments to employers. Payments may be made to 
employers to provide on-job training or to begin and maintain employment 
if all of the following conditions are met:
    (1) The veteran is in need of an on-job training situation or is 
generally qualified for employment but such on-job situation or 
employment opportunity is not otherwise available despite repeated and 
intensive efforts on the part of VA and the veteran to secure such 
opportunities. These conditions are also considered to be met when:
    (i) There are few employers within commuting distance of the 
veteran's home who can provide a training or employment opportunity 
consistent with the veteran's plan; and
    (ii) The veteran reasonably could not be required to seek on-job or 
employment opportunities in other areas due to the effects of his or her 
disability, family situation, or other pertinent factors; and
    (iii) The available local employers will only provide a training or 
employment opportunity if VA agrees to reimburse for direct expenses to 
the degree permitted under this section.
    (2) The training establishment or employer is in compliance with 
provisions of Sec. 21.292 (a) and (b), pertaining to the approval of 
courses and facilities.
    (3) VA entered into an agreement with the employer in writing prior 
to the beginning of the period of on-job training or employment, whereby 
the employer will be reimbursed for direct expenses approved under 
provisions of paragraph (c) of this section.
    (4) The on-job training program or employment of the veteran does 
not displace a current employee or prevent the recall of a laid-off 
employee.
    (c) Limitation on payment. Payments to the employer may be made only 
for the employer's direct expenses as a result of hiring the veteran and 
generally may not exceed one-half of the wage paid to other employees in 
the same or similar job. Direct expenses include:
    (1) Instruction;
    (2) Instructional aids;
    (3) Training materials and supplies provided to the veteran;
    (4) Minor modification of equipment to the special limitations of 
the veteran;
    (5) Significant loss of productivity of the employer caused by using 
the veteran as opposed to a nondisabled employee.
    (d) Duration. The period for which the employer is paid may not 
exceed the period necessary to accomplish on-job training or to begin 
and maintain employment at the journeyman level for at least 2 months. 
The period for which payment may be authorized may not exceed 9 months, 
unless the VR&C Officer, approves a longer period.
    (e) Benefits and services. (1) An eligible veteran on whose behalf 
payments are made to the employer shall be provided all other Chapter 31 
benefits and services furnished to other veterans receiving employment 
services. A veteran may not be paid a subsistence allowance during the 
period in which job training or work experience is furnished under this 
section.
    (2) Notwithstanding any other provisions of these regulations, if 
the program in which the veteran is participating meets the criteria for 
approval of on-job training under chapter 30, the veteran may be paid at 
educational assistance rates provided for this type of

[[Page 170]]

training under chapter 30 to the extent that he or she has remaining 
eligibility and entitlement under chapter 30 and has elected to receive 
a subsistence allowance in accordance with Sec. 21.7136.


(Authority: 38 U.S.C. 3108(f), 3116(b))

    (f) Non-duplication. VA will not make payments under the provisions 
of this section to an employer receiving payments from any other program 
for the same training or employment expenses.


(Authority: 38 U.S.C. 3116(b))

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985; 54 FR 4283, Jan. 
30, 1989; 57 FR 57108, Dec. 3, 1992; 62 FR 17709, Apr. 11, 1997]



Sec. 21.257  Self-employment.

    (a) General. Vocational rehabilitation will generally be found to 
have been accomplished by the veteran when he or she achieves suitable 
employment in the objective selected, in an existing business, agency or 
organization in the public or private sector. Rehabilitation of the 
veteran may be achieved through self-employment in a small business, if 
the veteran's access to the normal channels for suitable employment in 
the puplic or private sector is limited because of his or her disability 
or other circumstances in the veteran's situation warrant consideration 
of self-employment as an additional option.
    (b) Self-employment plan. VA staff will conduct a comprehensive 
survey and analysis of the feasibility of self-employment prior to 
authorization of a rehabilitation plan leading to self-employment. The 
analysis and self-employment plan developed on the basis of such 
analysis shall be made a part of the veteran's Chapter 31 record. The 
survey and plan shall include:
    (1) An analysis of the economic viability of the proposed small 
business plan;
    (2) A cost analysis which specifies the amount and type of 
assistance, if any, which VA would be committed to furnish;
    (3) Provision for development of a market for the veteran's services 
during the period of rehabilitation to the point of employability, and/
or employment services;
    (4) A suitable occupational objective in which employment can 
normally be secured in the public or private sector;
    (5) Training necessary for the operation of a successful small 
business;
    (6) Availability of non-VA financing, including the veteran's 
financial resources, local banks and other sources;
    (7) Coordination with the Small Business Administration to secure 
special consideration under section 8 of the Small Business Act, as 
amended;
    (8) The location of the site selected for the business and the cost 
of the site, if any.


(Authority: 38 U.S.C. 3104(a)(12))



Sec. 21.258  Special assistance for veterans in self-employment.

    (a) General. A veteran in a self-employment program is eligible for 
certain special assistance in addition to the services for which 
veterans in a vocational rehabilitation program are generally eligible 
under the provisions of Sec. 21.252. A veteran may be provided the 
assistance described under Sec. 21.214 to the extent of his or her 
eligibility for such services as determined under paragraphs (b) and (c) 
of this section and Sec. 21.254(c).


(Authority: 38 U.S.C. 3116, 3117)

    (b) Special services for the most severely disabled veterans. 
Special services listed in Sec. 21.214(e) shall be provided as 
necessary for the most severely disabled veterans. The term most 
severely disabled veteran means a veteran who has been determined to 
have a serious employment handicap and limitations on employability 
arising from the effects of disability (service-connected and 
nonservice-connected) which necessitates selection of self-employment as 
the veteran's vocational goal. This category includes veterans 
requiring:
    (1) Homebound training and self-employment; or
    (2) Self-employment for other reasons even though the veteran is 
able to pursue training on other than a homebound basis, e.g., lack of 
suitable employment opportunities in the area.


(Authority: 38 U.S.C. 3104(a)(12))

    (c) Special services for other veterans. Special services described 
in Sec. 21.214(e)

[[Page 171]]

may be furnished to a veteran with a serious employment handicap if the 
veteran also meets the following conditions:
    (1) Self-employment is clearly shown to be the soundest method of 
achieving rehabilitation; or
    (2) Self-employment is selected as an alternative to retaining the 
veteran in another occupation, and the cost of a self-employment program 
will not exceed the cost of retraining in another occupation.
    (d) Assisting a veteran with an employment handicap to become self-
employed. A veteran with an employment handicap may not be furnished any 
of the special services described in Sec. 21.214(e). However, if it is 
determined that consideration of self-employment is warranted, VA may 
provide:
    (1) Incidental training in the management of a small business;
    (2) License or other fees required for employment and self-
employment; and
    (3) The tools and supplies which would ordinarily be required for 
the veteran to begin employment in the field in which the veteran has 
trained.


(Authority: 38 U.S.C. 3104(a)(12))

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985, as amended at 55 
FR 25975, June 26, 1990; 55 FR 28511, July 11, 1990]

                      Monetary Assistance Services



Sec. 21.260  Subsistence allowance.

    (a) General. A veteran participating in a rehabilitation program 
under 38 U.S.C. Chapter 31 will receive a monthly subsistence allowance 
at the rates in paragraph (b) of this section, unless the veteran elects 
to receive payment at the rate of monthly educational assistance 
allowance payable under 38 U.S.C. Chapter 30 for the veteran's type of 
training. See Sec. 21.264 for election of payment at the Chapter 30 
rate and Sec. Sec. 21.7136, 21.7137, and 21.7138 to determine the 
applicable Chapter 30 rate.


(Authority: 38 U.S.C. 3108(a), 3108(f))

    (b) Rate of payment. VA pays subsistence allowance at the rates 
stated in the following tables:
    (1) Subsistence allowance is paid at the following rates effective 
October 1, 1994, and before November 2, 1994:

----------------------------------------------------------------------------------------------------------------
                                                                                                      Additional
                                                                                                      amount for
                       Type of program                             No          One          Two          each
                                                               dependents   dependent    dependents   dependent
                                                                                                       over two
----------------------------------------------------------------------------------------------------------------
Institutional: \1\
    Full-time...............................................      $374.93      $465.08      $548.05       $39.95
    \3/4\ time..............................................       281.71       349.32       409.76        30.73
    \1/2\ time..............................................       188.49       233.56       274.54        20.49
Nonpay or nominal pay on-job training in a Federal, State,
 or local agency; training in the home; vocational course in
 a rehabilitation facility or sheltered workshop;
 independent instructor:
    Full-time only..........................................       374.93       465.08       548.05        39.95
Nonpay or nominal pay work experience in a Federal, State,
 or local agency:
    Full-time...............................................       374.93       465.08       548.05        39.95
    \3/4\ time..............................................       281.71       349.32       409.76        30.73
    \1/2\ time..............................................       188.49       233.56       274.54        20.49
Farm cooperative, apprenticeship, or other on-job training:
 \2\
    Full-time only..........................................       327.81       396.44       456.88        29.71
Combination of institutional and OJT (Full-time only):
    Institutional greater than \1/2\ time...................       374.93       465.08       548.05        39.45
    OJT greater than \1/2\ time.............................       327.81       396.44       456.88        29.71
Non-farm cooperative (Full-time only):
    Institutional...........................................       374.93       465.08       548.05        39.95
    On-job..................................................       327.81       396.44       456.88        29.71
Improvement of rehabilitation potential:
    Full-time only..........................................       374.93       465.08       548.05        39.95
    \3/4\ time..............................................       281.71       349.32       409.76        30.73
    \1/2\ time..............................................       188.49       233.56       274.54        20.49
    \1/4\ time \3\..........................................        94.24       116.78       137.27       10.24
----------------------------------------------------------------------------------------------------------------
\1\ For measurement of rate of pursuit, see Sec. Sec.   21.4270 through 21.4275.

[[Page 172]]

 
\2\ For on-job training, subsistence allowance may not exceed the difference between the monthly training wage,
  not including overtime, and the entrance journeyman wage for the veteran's objective.
\3\ The quarter-time rate may be paid only during extended evaluation.

    (2) Subsistence allowance is paid at the following rates effective 
November 2, 1994, and before October 1, 1995:

----------------------------------------------------------------------------------------------------------------
                                                                                                      Additional
                                                                                                      amount for
                       Type of program                             No          One          Two          each
                                                               dependents   dependent    dependents   dependent
                                                                                                       over two
----------------------------------------------------------------------------------------------------------------
Institutional: \1\
    Full-time...............................................      $374.93      $465.08      $548.05       $39.95
    \3/4\ time..............................................       281.71       349.32       409.76        30.73
    \1/2\ time..............................................       188.49       233.56       274.54        20.49
Nonpay or nominal pay on-job training in a facility of a
 Federal, State, local, or federally recognized Indian tribe
 agency; training in the home; vocational course in a
 rehabilitation facility or sheltered workshop; independent
 instructor:
    Full-time only..........................................       374.93       465.08       548.05        39.95
Nonpay or nominal pay work experience in a facility of a
 Federal, State, local, or federally recognized Indian tribe
 agency:
    Full-time...............................................       374.93       465.08       548.05        39.95
    \3/4\ time..............................................       281.71       349.32       409.76        30.73
    \1/2\ time..............................................       188.49       233.56       274.54        20.49
Farm cooperative, apprenticeship, or other on-job training:
 \2\
    Full-time only..........................................       327.81       396.44       456.88        29.71
Combination of institutional and OJT (Full-time only):
    Institutional greater than \1/2\ time...................       374.93       465.08       548.05        39.45
    OJT greater than \1/2\ time.............................       327.81       396.44       456.88        29.71
Non-farm cooperative (Full-time only):
    Institutional...........................................       374.93       465.08       548.05        39.95
    On-job..................................................       327.81       396.44       456.88        29.71
Improvement of rehabilitation potential:
    Full-time only..........................................       374.93       465.08       548.05        39.95
    \3/4\ time..............................................       281.71       349.32       409.76        30.73
    \1/2\ time..............................................       188.49       233.56       274.54        20.49
    \1/4\ time \3\..........................................        94.24       116.78       137.27       10.24
----------------------------------------------------------------------------------------------------------------
\1\ For measurement of rate of pursuit, see Sec. Sec.   21.4270 through 21.4275.
\2\ For on-job training, subsistence allowance may not exceed the difference between the monthly training wage,
  not including overtime, and the entrance journeyman wage for the veteran's objective.
\3\ The quarter-time rate may be paid only during extended evaluation.

    (3) The following table states the monthly rates of subsistence 
allowance payable for participation in a rehabilitation program under 38 
U.S.C. Chapter 31 that occurs after September 30, 1995, and before 
October 1, 1996:

----------------------------------------------------------------------------------------------------------------
                                                                                                      Additional
                                                                                                      amount for
                       Type of program                             No          One          Two          each
                                                               dependents   dependent    dependents   dependent
                                                                                                       over two
----------------------------------------------------------------------------------------------------------------
Institutional:\1\
    Full-time...............................................      $385.80      $478.57      $563.94       $41.11
    \3/4\ time..............................................       289.88       359.45       421.64        31.62
    \1/2\ time..............................................       193.96       240.33       282.50        21.08
Nonpay or nominal pay on-job training in a facility of a
 Federal, State, local, or federally recognized Indian tribe
 agency; training in the home; vocational course in a
 rehabilitation facility or sheltered workshop; independent
 instructor:
    Full-time only..........................................       385.80       478.57       563.94        41.11
Nonpay or nominal pay work experience in a facility of a
 Federal, State, local, or Indian tribe agency:
    Full-time...............................................       385.80       478.57       563.94        41.11
    \3/4\ time..............................................       289.88       359.45       421.64        31.62
    \1/2\ time..............................................       193.96       240.33       282.50        21.08
Farm cooperative, apprenticeship, or other on-job training
 (OJT): \2\
    Full-time only..........................................       337.32       407.94       470.13        30.57
Combination of institutional and OJT (Full-time only):

[[Page 173]]

 
    Institutional greater than \1/2\ time...................       385.80       478.57       563.94        41.11
    OJT greater than \1/2\ time \2\.........................       337.32       407.94       470.13        30.57
Non-farm cooperative (Full-time only):
    Institutional...........................................       385.80       478.57       563.94        41.11
    On-job \2\..............................................       337.32       407.94       470.13        30.57
Improvement of rehabilitation potential:
    Full-time only..........................................       385.80       478.57       563.94        41.11
    \3/4\ time..............................................       289.88       359.45       421.64        31.62
    \1/2\ time..............................................       193.96       240.33       282.50        21.08
    \1/4\ time \3\..........................................        96.97       120.17       141.25       10.54
----------------------------------------------------------------------------------------------------------------
\1\ For measurement of rate of pursuit, see Sec. Sec.   21.4270 through 21.4275.
\2\ For on-job training, subsistence allowance may not exceed the difference between the monthly training wage,
  not including overtime, and the entrance journeyman wage for the veteran's objective.
\3\ The quarter-time rate may be paid only during extended evaluation.

    (4) The following table states the monthly rates of subsistence 
allowance payable for participation in a rehabilitation program under 38 
U.S.C. Chapter 31 that occurs after September 30, 1996, and before 
October 1, 1997:

----------------------------------------------------------------------------------------------------------------
                                                                                                      Additional
                                                                                                      amount for
                       Type of program                             No          One          Two          each
                                                               dependents   dependent    dependents   dependent
                                                                                                       over two
----------------------------------------------------------------------------------------------------------------
Institutional: \1\
    Full-time...............................................      $396.22      $491.49      $579.17       $42.22
     \3/4\time..............................................       297.71       369.16       433.02        32.47
     \1/2\ time.............................................       199.20       246.82       290.13        21.65
Nonpay or nominal pay on-job training in a facility of a
 Federal, State, local, or federally recognized Indian tribe
 agency; training in the home; vocational course in a
 rehabilitation facility or sheltered workshop; independent
 instructor:
    Full-time only..........................................       396.22       491.49       579.17        42.22
Nonpay or nominal pay work experience in a facility of a
 Federal, State, local, or federally recognized Indian tribe
 agency:
    Full-time...............................................       396.22       491.49       579.17        42.22
     \3/4\ time.............................................       297.71       369.16       433.02        32.47
     \1/2\ time.............................................       199.20       246.82       290.13        21.65
Farm cooperative, apprenticeship, or other on-job training
 (OJT) \2\
    Full-time only..........................................       346.43       418.95       482.82        31.40
Combination of institutional and OJT (Full-time only):
    Institutional greater than \1/2\ time...................       396.22       491.49       579.17        42.22
    OJT greater than \1/2\ time \2\.........................       346.43       418.95       482.82        31.40
Non-farm cooperative (Full-time only):
    Institutional...........................................       396.22       491.49       579.17        42.22
    On-job \2\..............................................       346.43       418.95       482.82        31.40
Improvement of rehabilitation potential:
    Full-time only..........................................       396.22       491.49       579.17        42.22
     \3/4\ time.............................................       297.71       369.16       433.02        32.47
     \1/2\ time.............................................       199.20       246.82       290.13        21.65
     \1/4\ time \3\.........................................        99.59       123.41       145.06       10.82
----------------------------------------------------------------------------------------------------------------
\1\ For measurement of rate of pursuit, see Sec. Sec.   21.4270 through 21.4275.
\2\ For on-job training, subsistence allowance may not exceed the difference between the monthly training wage,
  not including overtime, and the entrance journeyman wage for the veteran's objective.
\3\ The quarter-time rate may be paid only during extended evaluation.

    (5) The following table states the monthly rates of subsistence 
allowance payable for participation in a rehabilitation program under 38 
U.S.C. Chapter 31 that occurs after September 30, 1997, and before 
November 1, 1998:

[[Page 174]]



----------------------------------------------------------------------------------------------------------------
                                                                                                      Additional
                                                                                                      amount for
                       Type of program                             No          One          Two          each
                                                               dependents   dependent    dependents   dependent
                                                                                                       over two
----------------------------------------------------------------------------------------------------------------
Institutional: \1\
    Full-time...............................................      $407.31      $505.25      $595.39       $43.40
    \3/4\ time..............................................       306.05       379.50       445.14        33.38
    \1/2\ time..............................................       204.78       253.73       298.25        22.26
Nonpay or nominal pay on-job training in a facility of a
 Federal, State, local, or federally recognized Indian tribe
 agency; training in the home; vocational course in a
 rehabilitation facility or sheltered workshop; independent
 instructor:
    Full-time only..........................................       407.31       505.25       595.39        43.40
Nonpay or nominal pay work experience in a facility of a
 Federal, State, local, or federally recognized Indian tribe
 agency:
    Full-time...............................................       407.31       505.25       595.39        43.40
    \3/4\ time..............................................       306.05       379.50       445.14        33.38
    \1/2\ time..............................................       204.78       253.73       298.25        22.26
Farm cooperative, apprenticeship, or other on-job training
 (OJT): \2\
    Full-time only..........................................       356.13       430.68       496.34        32.28
Combination of institutional and OJT (Full-time only):
    Institutional greater than \1/2\ time...................       407.31       505.25       595.39        43.40
    OJT greater than \1/2\ time \2\.........................       356.13       430.68       496.34        32.28
Non-farm cooperative (Full-time only):
    Institutional...........................................       407.31       505.25       595.39        43.40
    On-job \2\..............................................       356.13       430.68       496.34        32.28
Improvement of rehabilitation potential:
    Full-time only..........................................       407.31       505.25       595.39        43.40
    \3/4\ time..............................................       306.05       379.50       445.14        33.38
    \1/2\ time..............................................       204.78       253.73       298.25        22.26
    \1/4\ time \3\..........................................       102.38       126.87       148.09       11.12
----------------------------------------------------------------------------------------------------------------
\1\For measurement of rate of pursuit, see Sec. Sec.   21.4270 through 21.4275.
\2\ For on-job training, subsistence allowance may not exceed the difference between the monthly training wage,
  not including overtime, and the entrance journeyman wage for the veteran's objective.
\3\ The quarter-time rate may be paid only during extended evaluation.

    (6) The following table states the monthly rates of subsistence 
allowance payable for participation in a rehabilitation program under 38 
U.S.C. Chapter 31 that occurs after September 30, 1998, and before 
October 1, 1999:

----------------------------------------------------------------------------------------------------------------
                                                                                                      Additional
                                                                                                      amount for
                       Type of program                             No          One          Two          each
                                                               dependents   dependent    dependents   dependent
                                                                                                       over two
----------------------------------------------------------------------------------------------------------------
Institutional: \1\
    Full-time...............................................      $413.83      $513.33      $604.92       $44.09
    \3/4\ time..............................................       310.95       385.57       452.26        33.91
    \1/2\ time..............................................       208.06       257.79       303.02        22.62
Nonpay or nominal pay on-job training in a facility of a
 Federal, State, local, or federally recognized Indian tribe
 agency; training in the home; vocational course in a
 rehabilitation facility or sheltered workshop; independent
 instructor:
    Full-time only..........................................       413.83       513.33       604.92        44.09
Nonpay or nominal pay work experience in a facility of a
 Federal, State, local, or federally recognized Indian tribe
 agency:
    Full-time...............................................       413.83       513.33       604.92        44.09
    \3/4\ time..............................................       310.95       385.57       452.26        33.91
    \1/2\ time..............................................       208.06       257.79       303.02        22.62
Farm cooperative, apprenticeship, or other on-job training
 (OJT): \2\
    Full-time only..........................................       361.83       437.57       504.28        32.80
Combination of institutional and OJT (Full-time only):
    Institutional greater than \1/2\ time...................       413.83       513.33       604.92        44.09
    OJT greater than \1/2\ time \2\.........................       361.83       437.57       504.28        32.80
Non-farm cooperative (Full-time only):
    Institutional...........................................       413.83       513.33       604.92        44.09
    On-job \2\..............................................       361.83       437.57       504.28        32.80
Improvement of rehabilitation potential:
    Full-time only..........................................       413.83       513.33       604.92        44.09
    \3/4\ time..............................................       310.95       385.57       452.26        33.91
    \1/2\ time..............................................       208.06       257.79       303.02        22.62

[[Page 175]]

 
    \1/4\ time \3\..........................................       104.02       128.90       151.51       11.30
----------------------------------------------------------------------------------------------------------------
\1\ For measurement of rate of pursuit, see Sec. Sec.   21.4270 through 21.4275.
\2\ For on-job training, subsistence allowance may not exceed the difference between the monthly training wage,
  not including overtime, and the entrance journeyman wage for the veteran's objective.
\3\ The quarter-time rate may be paid only during extended evaluation.

    (7) The following table states the monthly rates of subsistence 
allowance payable for participation in a rehabilitation program under 38 
U.S.C. Chapter 31 that occurs after September 30, 1999, and before 
October 1, 2000:

----------------------------------------------------------------------------------------------------------------
                                                                                                      Additional
                                                                                                      amount for
                       Type of program                             No          One          Two          each
                                                               dependents   dependent    dependents   dependent
                                                                                                       over two
----------------------------------------------------------------------------------------------------------------
Institutional:\1\
    Full-time...............................................      $420.45      $521.54      $614.60       $44.80
    \3/4\ time..............................................       315.93       391.74       459.50        34.45
    \1/2\ time..............................................       211.39       261.91       307.87        22.98
Nonpay or nominal pay on-job training in a Federal, State,
 local, or federally recognized Indian tribe agency;
 training in the home; vocational course in a rehabilitation
 facility or sheltered workshop; independent instructor;
 institutional non-farm cooperative:
    Full-time only..........................................       420.45       521.54       614.60        44.80
Nonpay or nominal pay work experience in a Federal, State,
 local, or federally recognized Indian tribe agency:
    Full-time...............................................       420.45       521.54       614.60        44.80
    \3/4\ time..............................................       315.93       391.74       459.50        34.45
    \1/2\ time..............................................       211.39       261.91       307.87        22.98
Farm cooperative, apprenticeship, or other on-job training
 (OJT):\2\
    Full-time only..........................................       367.62       444.57       512.35        33.32
Combination of institutional and OJT (Full-time only):
    Institutional greater than \1/2\ time...................       420.45       521.54       614.60        44.80
    OJT greater than \1/2\ time\2\..........................       367.62       444.57       512.35        33.32
Non-farm cooperative (Full-time only):
    Institutional...........................................       420.45       521.54       614.60        44.80
    On-job \2\..............................................       367.62       444.57       512.35        33.32
Improvement of rehabilitation potential:
    Full-time...............................................       420.45       521.54      $614.60       $44.80
    \3/4\ time..............................................       315.93       391.74       459.50        34.45
    \1/2\ time..............................................       211.39       261.91       307.87        22.98
    \1/4\ time \3\..........................................       105.98       130.96       153.93       11.48
----------------------------------------------------------------------------------------------------------------
\1\ For measurement of rate of pursuit, see Sec. Sec.   21.4270 through 21.4275.
\2\ For on-job training, subsistence allowance may not exceed the difference between the monthly training wage,
  not including overtime, and the entrance journeyman wage for the veteran's objective.
\3\ The quarter-time rate may be paid only during extended evaluation.



(Authority: 38 U.S.C. 3108, 3115(a)(1); Pub. L. 103-446)

    (c) Subsistence allowance precluded. A veteran may not receive a 
subsistence allowance when VA is providing the veteran only the 
following services:
    (1) Initial evaluation;
    (2) Placement and post-placement services under 38 U.S.C. 3105(b); 
or
    (3) Counseling.


(Authority: 38 U.S.C. 3108 (a)(1) and (a)(3))

    (d) Dependents. The term dependent means a spouse, child or 
dependent parent who meets the definition of relationship specified in 
Sec. Sec. 3.50, 3.51, 3.57 or 3.59 of this chapter.


(Authority: 38 U.S.C. 3108(b))

[49 FR 40814, Oct. 18, 1984, as amended at 51 FR 9955, Mar. 24, 1986; 52 
FR 42113, Nov. 3, 1987; 54 FR 4283, Jan. 30, 1989; 56 FR 7567, Feb. 25, 
1991; 60 FR 4561, Jan. 24, 1995; 65 FR 51764, Aug. 25, 2000; 65 FR 
60724, Oct. 12, 2000]

[[Page 176]]



Sec. 21.262  Procurement and reimbursement of cost for training and 
rehabilitation services, supplies, or facilities.

    (a) General. Whenever services, supplies and facilities from source 
outside VA are required by any of these regulations, they shall be 
provided through contract, agreement of other cooperative arrangement 
between VA and the vendor.


(Authority: 38 U.S.C. 3115(b))

    (b) VA Acquisition Regulations. Payments of charges for training and 
rehabilition services, supplies, or facilities, authorized under Chapter 
31 are subject to the provisions of applicable VA Acquisition 
Regulations especially 48 CFR part 831 and subpart 871.2.


(Authority: 38 U.S.C. 3115(a))



Sec. 21.264  Election of payment at the 38 U.S.C. chapter 30 educational 
assistance rate.

    (a) Eligibility. A veteran who applies for, and is found entitled to 
training or education under Chapter 31, may elect to receive payment at 
the educational allowance rate and other assistance furnished under 
Chapter 30, for similar training in lieu of a subsistence allowance, 
provided the following criteria are met:
    (1) The veteran has remaining eligibility for, and entitlement to 
educational assistance under Chapter 30;
    (2) The veteran enrolls in a program of education or training 
approved for benefits under Chapter 30;
    (3) The program of education is part of an IWRP (Individualized 
Written Rehabilitation Plan) approved by VA.


(Authority: 38 U.S.C. 3015, 3022, 3108(f))

    (b) Reelection of subsistence allowance. Reelection of payment of 
benefits at the Chapter 31 subsistence allowance rate may be made only 
after completion of a term, quarter, semester, or other period of 
instruction unless:
    (1) Chapter 30 eligibility or entitlement ends earlier;
    (2) Failure to approve immediate reelection would prevent the 
veteran from continuing in the rehabilitation program.


(Authority: 38 U.S.C. 3015, 3022, 3108(f))

    (c) Services precluded. A veteran entitled to vocational 
rehabilitation training or education who elects payment at the 
educational assistance rate payable under Chapter 30 shall be provided 
the same training and rehabilitation services as other veterans under 
Chapter 31, but may not be provided:
    (1) Subsistence allowances;
    (2) Loans from the revolving fund loan;
    (3) Payment of costs for:
    (i) Vocational and other training services;
    (ii) Supplies; or
    (iii) Individualized tutorial assistance.


(Authority: 38 U.S.C. 3015, 3022, 3108(f))

    (d) Chapter 30 provisions applicable. A veteran who has elected 
payment at the Chapter 30 educational assistance rate must meet the same 
terms and conditions as other veterans pursuing similar training under 
these programs.


(Authority: 38 U.S.C. 3015, 3022, 3108(f))

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 4283, Jan. 30, 1989; 57 
FR 57108, Dec. 3, 1992]



Sec. 21.266  Payment of subsistence allowance under special conditions.

    (a) Hospitalized veteran or serviceperson. A veteran pursuing a VA 
rehabilitation program under Chapter 31 while hospitalized in a VA 
medical center or in any other hospital at VA expense may receive the 
subsistence allowance otherwise payable. The subsistence allowance will 
be paid at the rates specified in Sec. 21.260, except:
    (1) The amount of subsistence allowance or the allowance provided 
under Sec. 21.264 that may be paid to a veteran pursuing a 
rehabilitation program for any month for which the veteran receives 
compensation at the rate prescribed in Sec. 3.401(h) of this title, as 
the result of hospital treatment (not including post-hospital 
convalescence) or observation at the expense of VA may

[[Page 177]]

not exceed, when added to any compensation to which such veteran is 
entitled for the month, an amount equal to the greater of:
    (i) The sum of: (A) the amount of monthly subsistence of the 
allowance payable under Sec. 21.264, and (B) the amount of monthly 
disability compensation that would be paid to the veteran if he or she 
was not receiving compensation at the temporary 100 percent rate as the 
result of such hospital treatment or observation, or
    (ii) The amount of monthly disability compensation payable under 
Sec. 3.401(h) of this title.
    (2) A veteran pursuing a rehabilitation program while in post 
hospital convalescence (Sec. 3.401(h)) will be paid the regular rate of 
subsistence allowance.
    (3) A serviceperson pursuing a rehabilitation program under Chapter 
31 will not receive a subsistence allowance if he or she is hospitalized 
in a medical facility under the jurisdiction of the Secretary pending 
final discharge from the armed forces.


(Authority: 38 U.S.C. 3108(h))

    (b) Specialized rehabilitation facility--(1) A veteran in a 
specialized rehabilitation facility will be paid the regular rate of 
subsistence allowance at the institutional rate. VA may pay the cost of 
room and board in lieu of subsistence allowance when:
    (i) The specialized rehabilitation facility requires that similarly 
circumstanced persons pay the same charges for room and board, and
    (ii) The case manager finds and the veteran agrees that it is to the 
veteran's advantage for VA to pay the cost of room and board.
    (2) Even though VA pays the cost of room and board, the veteran will 
be paid that portion of subsistence allowance otherwise payable for 
dependents.


(Authority: 38 U.S.C. 3108(e))

    (c) Non-pay work experience or training in a Federal agency. A 
veteran in an on-job program or being provided work experience in a 
Federal agency at no or nominal pay shall receive subsistence allowance 
at the institutional rate.


(Authority: 38 U.S.C. 3108(c))

    (d) Extended evaluation and independent living program. A veteran in 
a program of extended evaluation or independent living service program 
shall be paid subsistence allowance for full or part-time participation 
at the rate specified for institutional training in Sec. 21.260. If an 
extended evaluation or independent living program is pursued on a less 
than a quarter-time basis, as measured under Sec. 21.310(d), VA will 
only pay established charges for services furnished.


(Authority: 38 U.S.C. 3108(h))

    (e) On-job training. A veteran in an on-job training program will be 
paid subsistence allowance at the rate provided under Sec. 21.260(b), 
except that subsistence allowance may not exceed the difference between 
the monthly training wage, exclusive of overtime, and the entrance 
journeyman wage for the veteran's objective.


(Authority: 38 U.S.C. 3108(c))



Sec. 21.268  Employment adjustment allowance.

    (a) General. A veteran who completes a period of rehabilitation and 
reaches the point of employability will be paid an employment adjustment 
allowance for a period of two months at the full-time subsistence 
allowance rate for the type of program the veteran was last pursuing. 
(See Sec. 21.190(d))


(Authority: 38 U.S.C. 3108(a))

    (b) Reelection of subsistence allowance. A veteran who has elected 
payment at the Chapter 30 educational assistance allowance rate may be 
paid an employment adjustment allowance only if he or she reelects 
subsistence allowance to become effective no later than the day 
following completion of the period of rehabilitation to the point of 
employability.


(Authority: 38 U.S.C. 3108(f))

    (c) Special programs. An employment adjustment allowance will be 
paid at the institutional rate of subsistence allowance for veterans in 
any of the following programs:
    (1) On-job training at no or nominal pay in a Federal agency;

[[Page 178]]

    (2) Training in the home program;
    (3) Independent instructor program;
    (4) Cooperative program; or
    (5) Self-employment program.
    (d) Combination program. A veteran who has pursued a combination 
program will be paid an employment adjustment allowance at the full-time 
rate for the type of training the veteran was actually pursuing at the 
completion of the period of rehabilitation to the point of 
employability.
    (e) Subsequent payments of employment adjustment allowance. If a 
veteran has ever received an employment adjustment allowance following 
rehabilitation to the point of employability, he or she may, 
nevertheless, receive it again when completing an additional 
rehabilitation program to the point of employability if:
    (1) The prior determination of rehabilitation to the point of 
employability is set aside; and
    (2) The veteran is reinducted into a new vocational rehabilitation 
program as provided in Sec. 21.282.
    (f) Employment adjustment allowance not charged against entitlement. 
An employment adjustment allowance will not be charged against the 
veteran's basic entitlement.


(Authority: 38 U.S.C. 3108(a))

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 4284, Jan. 30, 1989; 57 
FR 57108, Dec. 3, 1992]



Sec. 21.270  Payment of subsistence allowance during leave and between 
periods of instruction.

    (a) Payment during leave. VA will pay an eligible veteran a 
subsistence allowance during any period of approved leave including a 
veteran:
    (1) Receiving medical or rehabilitation services on an outpatient 
basis at a VA medical center, and who provides his or her own room and 
board;
    (2) Receiving service department retirement or retained pay while 
not on active duty;
    (3) Hospitalized at a VA medical center while on approved leave. If 
the veteran becomes eligible for payment of disability compensation at 
the temporary 100 percent rate, under Sec. 3.401(h) of this title due 
to hospitalization, payment will be made under provisions of Sec. 
21.266(a).


(Authority: 38 U.S.C. 3110)

    (b) Payment for intervals between periods of instruction. 
Subsistence allowance will paid to a veteran during the following 
periods unless the case manager and the veteran jointly determine that 
such payment is not in the veteran's interest:
    (1) A period between consecutive terms within an enrollment period 
that does not exceed 1 full calendar month;
    (2) A period between consecutive school terms, when the veteran, as 
part of his or her approved program of vocational rehabilitation, 
transfers from one educational institution to another for the purpose of 
enrolling in, and pursuing, the same objective at the second 
institution, provided the period does not exceed 30 days;
    (3) A period which does not exceed 30 days, between a semester, 
term, or quarter, when the educational institution certifies the 
enrollment of the veteran on an individual semester, term, or quarter 
basis.
    (c) Payment for other periods. Subsistence allowance will be paid 
for:
    (1) Weeekend and legal holidays, or customary vacation periods 
associated with them;
    (2) Periods in which the school is closed temporarily under 
emergency conditions described in Sec. 21.4138(f).



Sec. 21.272  Veteran-student services.

    (a) Eligibility. Veterans who are pursuing a rehabilitation program 
under chapter 31 on a three-quarter or full-time basis are eligible to 
receive a work-study allowance.


(Authority: 38 U.S.C. 3104(a)(4), 3485)

    (b) Selection criteria. Whenever feasible, VA will give priority to 
veterans with service-connected disabilities rated at 30 percent or more 
disabling in selection of recipients of this allowance. VA shall 
consider the following additional selection criteria:
    (1) Need of the veteran to augment the subsistence allowance or 
payment made by the Chapter 30 rate;
    (2) Motivation of the veteran; and

[[Page 179]]

    (3) Compatibility of the work assignment with the veteran's physical 
condition.


(Authority: 38 U.S.C. 3104(a)(4), 3108(f), 3485)

    (c) Utilization. Veteran-student services may be utilized in 
connection with:
    (1) VA outreach service program as carried out under the supervision 
of a VA employee;
    (2) Preparation and processing of necessary VA papers and other 
documents at educational institutions, regional offices or other VA 
facilities;
    (3) Hospital and domiciliary care and medical treatment at VA 
facilities; and
    (4) Any other appropriate activity of VA.
    (d) Rate of payment. (1) In return for the veterans' agreement to 
perform services for VA totaling 25 times the number of weeks contained 
in an enrollment period, VA will pay an allowance equal to the higher 
of:
    (i) The hourly minimum wage in effect under section 6(a) of the Fair 
Labor Standards Act of 1938 times the number of hours the veteran has 
agreed to work; or
    (ii) The hourly minimum wage under comparable law of the State in 
which the services are to be performed times the number of hours the 
veteran has agreed to work.
    (2) VA will pay proportionately less to a veteran who agrees to 
perform a lesser number of hours of services.


(Authority: 38 U.S.C. 3104(a)(4), 3485)

    (e) Payment in advance. VA will pay in advance an amount equal to 40 
percent of the total amount payable under the contract (but not more 
than an amount equal to 50 times the applicable hourly minimum wage).


(Authority: 38 U.S.C. 3104(a)(4), 3485)

    (f) Veteran reduces rate of training. In the event the veteran 
reduces his or her training to less than three-quarter time before 
completing an agreement, the veteran, with the approval of the Director 
of the VA field station, or designee, may be permitted to complete the 
portions of an agreement in the same or immediately following term, 
quarter or semester in which the veteran ceases to be at least a three-
quarter time student.


(Authority: 38 U.S.C. 3104(a)(4), 3485)

    (g) Veteran terminates training. If the veteran terminates all 
training before completing an agreement, VA:
    (1) Will permit him or her to complete the portion of the agreement 
represented by the sum of money VA has advanced to the veteran for which 
he or she has not performed any services; but
    (2) Will not permit him or her to complete that portion of an 
agreement for which no advance has been made.
    (h) Indebtedness for unperformed service. (1) If the veteran has 
received an advance for hours of unperformed service that remain after 
application of paragraphs (f) and (g) of this section, that advance:
    (i) Will be a debt due the United States; and
    (ii) Will be subject to recovery in the same manner as any other 
debt due the United States;
    (2) For each hour of unperformed service, the amount of indebtedness 
shall equal the hourly wage upon which the contract was made.
    (i) Survey. VA will conduct an annual survey of its regional offices 
to determine the number of veterans whose services can be utilized 
effectively.


(Authority: 38 U.S.C. 3104(a)(4), 3485)

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985; 54 FR 4284, Jan. 
30, 1989, as amended at 56 FR 14648, Apr. 11, 1991; 57 FR 57108, Dec. 3, 
1992; 62 FR 17709, Apr. 11, 1997]



Sec. 21.274  Revolving fund loan.

    (a) Establishment of revolving fund loan. A revolving fund is 
established to provide advances to veterans who would otherwise be 
unable to begin or continue in a rehabilitation program without such 
assistance.
    (b) Definition. The term advance means a non-interest loan from the 
revolving fund.
    (c) Eligibility. A veteran is eligible for an advance if the 
following conditions are present:

[[Page 180]]

    (1) An Individualized Written Rehabilitation Plan, Individualized 
Extended Evaluation Plan, or Individualized Independent Living Plan has 
been prepared; and
    (2) The veteran and VA staff agree on the terms and conditions of 
the plan.
    (d) Advance conditions. (1) An advance may be approved when the 
following conditions are met:
    (i) The purpose of the advance is clearly and directly related to 
beginning, continuing, or reentering a rehabilitation program;
    (ii) The veteran would otherwise be unable to begin, continue or 
reenter his or her rehabilitation program;
    (iii) The advance does not exceed either the amount needed, or twice 
the monthly subsistence allowance for a veteran without dependents in 
full-time institutional training; and
    (iv) The veteran has elected, or is in receipt of, subsistence 
allowance.
    (2) An advance may not be made to a veteran who meets conditions 
described in paragraph (d)(1) of this section if the veteran:
    (i) Has not fully repaid an advance;
    (ii) Does not agree to the terms and conditions for repayment; or
    (iii) Will not be eligible in the future for payments of pension, 
compensation, subsistence allowance, educational assistance, or retired 
pay.
    (e) Determination of the amount of the advance. (1) If the 
conditions described in paragraphs (c) and (d)(2) of this section are 
met, a counseling psychologist or vocational rehabilitation specialist 
in the VR&C Division will:
    (i) Document the findings; and
    (ii) Determine the amount of the advance.
    (2) Loans will be made in multiples of $10.
    (f) Repayment--(1) Offset possible. The amount advanced will be 
repaid in monthly installments from future VA payments for compensation, 
pension, subsistence allowance, educational assistance allowance or 
retired pay.
    (i) Repayment will begin on the earlier of the following dates:
    (A) The first day of the month following the month in which the 
advance is granted; or
    (B) The first day of the month after receipt of the advance in which 
the veteran receives a subsistence allowance
    (ii) The VR&C staff person who approves the advance will determine 
the rate of repayment.
    (iii) The monthly rate of repayment may not be less than 10 percent 
of the amount advanced unless the monthly benefit against which the 
advance is being offset is less than that amount.
    (2) Offset not possible. If the amount advanced cannot be repaid 
from the benefits cited in paragraph (f)(1) of this section because the 
veteran is not in receipt of any of these benefits, collection of the 
amount due will be made in the same manner as any other debt payable to 
VA.

(Authority: 38 U.S.C. 3112)



Sec. 21.276  Incarcerated veterans.

    (a) General. The provisions contained in this section describe the 
limitations on payment of subsistence allowance and charges for tuition 
and fees for:
    (1) Incarcerated veterans;
    (2) Formerly incarcerated veterans in halfway houses; and
    (3) Incarcerated and formerly incarcerated veterans in work release 
programs.


(Authority: 38 U.S.C. 3108(g), 3680(a))

    (b) Definition. The term incarcerated veteran means any veteran 
incarcerated in a Federal, State, or local prison, jail, or other penal 
institution for a felony. It does not include any veteran who is 
pursuing a rehabilitation program under Chapter 31 while residing in a 
halfway house or participating in a work-release program in connection 
with such veteran's conviction of a felony.
    (c) Subsistence allowance not paid to an incarcerated veteran. A 
subsistence allowance may not be paid to an incarcerated veteran 
convicted of a felony, but VA may pay all or part of the veteran's 
tuition and fees.


(Authority: 38 U.S.C. 3108(g))

    (d) Halfway house. A subsistence allowance may be paid to a veteran 
pursuing a rehabilitation program while residing in a halfway house as a 
result of a felony conviction even though all

[[Page 181]]

of the veteran's living expenses are paid by a non-VA Federal, State, or 
local government program.


(Authority: 38 U.S.C. 3108(a))

    (e) Work-release program. A subsistence allowance may be paid to a 
veteran in a work-release program as a result of a felony conviction.
    (f) Services. VA may provide other appropriate services, including 
but not limited to medical, reader service, and tutorial assistance 
necessary for the veteran to pursue his or her rehabilitation program.


(Authority: 38 U.S.C. 3108(g))

    (g) Payment of allowance at the rates paid under Chapter 30. A 
veteran incarcerated for a felony conviction or a veteran in a halfway 
house or work-release program who elects payment at the educational 
assistance rate paid under Chapter 30 shall be paid in accordance with 
the provisions of law applicable to other incarcerated veterans training 
under Chapter 30.


(Authority: 38 U.S.C. 3108(f), 3680(a))

    (h) Apportionment. Apportionment of subsistence allowance which 
began before October 17, 1980 made to dependents of an incarcerated 
veteran convicted of a felony may be continued.


(Authority: 38 U.S.C. 3108(g))

[49 FR 40814, Oct. 18, 1984, as amended at 51 FR 22807, June 23, 1986; 
54 FR 4284, Jan. 30, 1989; 57 FR 57108, Dec. 3, 1992]

                    Entering a Rehabilitation Program



Sec. 21.282  Effective date of induction into a rehabilitation program.

    (a) General. Except as provided in paragraph (b) the effective date 
of induction of a veteran into a rehabilitation program will be one of 
the dates provided in Sec. Sec. 21.320 through 21.334.


(Authority: 38 U.S.C. 3108)

    (b) Retroactive induction. (1) A veteran may be inducted into a 
vocational rehabilitation program retroactively when all of the 
following conditions are met:
    (i) The period for which retroactive induction is requested is 
within the veteran's basic period of eligibility or extended eligibility 
as provided in Sec. Sec. 21.41 through 21.44;
    (ii) The veteran was entitled to disability compensation during the 
period for which retroactive induction is requested, and met the 
criteria of entitlement to vocational rehabilitation for that period; 
and
    (iii) The training the veteran pursued during the period is 
applicable to the occupational objective that is confirmed in initial 
evaluation to be compatible with his or her disability, consistent with 
his or her abilities, interests, and aptitudes, and otherwise suitable 
for accomplishing vocational rehabilitation.


(Authority: 38 U.S.C. 5113)

    (2) A veteran shall not be inducted into a vocational rehabilitation 
program retroactively if any of the following conditions exist even 
though all conditions of paragraph (b) of this section are met;
    (i) Timely induction was prevented by the veteran's lack of 
cooperation in completing an initial evaluation;
    (ii) The veteran has previously received benefits under another VA 
program of education or training for any period for which retroactive 
benefits are being requested under Chapter 31;
    (iii) A period of extended evaluation is authorized to determine the 
reasonable feasibility of a vocational goal; or
    (iv) The veteran's claim is not received within the time limits 
described in Sec. 21.31.


(Authority: 38 U.S.C. 3101(9))

    (c) Effective date of retroactive induction. The effective date of a 
veteran's retroactive induction into training shall be no earlier than 
one year prior to the date of application for Chapter 31 benefits but in 
no event may precede:
    (1) The effective date of the establishment of the veteran's 
compensable service-connected disability; or
    (2) The first date the veteran began training in the program leading 
to the occupational objective established in the veteran's plan.


(Authority: 38 U.S.C. 5113)

[[Page 182]]



Sec. 21.283  Rehabilitated.

    (a) General. For purposes of chapter 31 a veteran shall be declared 
rehabilitated when he or she has overcome the employment handicap to the 
maximum extent feasible as described in paragraph (c), (d) or (e) of 
this section.


(Authority: 38 U.S.C. 3101 (1), (2))

    (b) Definition. The term ``suitably employed'' includes employment 
in the competitive labor market, sheltered situations, or on a nonpay 
basis which is consistent with the veteran's abilities, aptitudes and 
interests if the criteria contained in paragraph (c) (1) or (2) of this 
section are otherwise met.


(Authority: 38 U.S.C. 3100)

    (c) Rehabilitation to the point of employability has been achieved. 
The veteran who has been found rehabilitated to the point of 
employability shall be declared rehabilitated if he or she:
    (1) Is employed in the occupational objective for which a program of 
services was provided or in a closely related occupation for at least 60 
continuous days;
    (2) Is employed in an occupation unrelated to the occupational 
objective of the veteran's rehabilitation plan for at least 60 
continuous days if the veteran concurs in the change and such 
employment:
    (i) Follows intensive, yet unsuccessful, efforts to secure 
employment for the veteran in the occupation objective of a 
rehabilitation plan for a closely related occupation contained in the 
veteran's rehabilitation plan;
    (ii) Is consistent with the veterans's aptitudes, interests, and 
abilities; and
    (iii) Utilizes some of the academic, technical or professional 
knowledge and skills obtained under the rehabilitation plan; or
    (3) Pursues additional education or training, in lieu of obtaining 
employment, after completing his or her prescribed program of training 
and rehabilitation services if:
    (i) The additional education or training is not approvable as part 
of the veteran's rehabilitation program under this chapter; and
    (ii) Achievement of employment consistent with the veterans's 
aptitudes, interests, and abilities will be enhanced by the completion 
of the additional education or training.


(Authority: 38 U.S.C. 3101(1), 3107 and 3117)

    (d) Rehabilitation to the point of employability has not been 
completed. A veteran under a rehabilitation plan who obtains employment 
without being declared rehabilitated to the point of employability as 
contemplated by the plan, including a veteran in a rehabilitation 
program consisting solely of employment services, is considered to be 
rehabilitated if the following conditions exist:
    (1) The veteran obtains and retains employment substantially using 
the services and assistance provided under the plan for rehabilitation.
    (2) The employment obtained is consistent with the veterans's 
abilities, aptitudes and interests.
    (3) Maximum services feasible to assist the veteran to retain the 
employment obtained have been provided.
    (4) The veteran has maintained the employment for at least 60 
continuous days.


(Authority: 38 U.S.C. 3101(1), 3107 and 3117)

    (e) Independent living. A veteran who has pursued a program of 
independent living services will be considered rehabilitated when all 
goals of the program have been achieved, or if not achieved, when:
    (1) The veteran, nevertheless, has attained a substantial increase 
in the level of independence with the program assistance provided;
    (2) The veteran has maintained the increased level of independence 
for at least 60 days; and
    (3) Further assistance is unlikely to significantly increase the 
veteran's level of independence.


(Authority: 38 U.S.C. 3101 (1), (2) 3107)

[58 FR 68768, Dec. 29, 1993]



Sec. 21.284  Reentrance into a rehabilitation program.

    (a) Reentrance into rehabilitation to the point of employability 
following a determination of rehabilitation. A veteran who has been 
found rehabilitated under provisions of Sec. 21.283 may be provided

[[Page 183]]

an additional period of training or services only if the following 
conditions are met:
    (1) The veteran has a compensable service-connected disability and 
either;
    (2) Current facts, including any relevant medical findings, 
establish that the veteran's service-connected disability has worsened 
to the extent that the effects of the service-connected disability 
considered in relation to other facts precludes him or her from 
performing the duties of the occupation for which the veteran previously 
was found rehabilitated; or
    (3) The occupation for which the veteran previously was found 
rehabilitated under Chapter 31 is found to be unsuitable on the basis of 
the veteran's specific employment handicap and capabilities.


(Authority: 38 U.S.C. 3101(a))

    (b) Reentrance into a program of independent living services 
following a determination of rehabilitation. A finding of rehabilitation 
following a program of independent living services may only be set 
aside, and an additional period of independent living services provided, 
if the following conditions are met:
    (1) Either:
    (i) The veteran's condition has worsened and as a result the veteran 
has sustained a substantial loss of independence; or
    (ii) Other changes in the veteran's circumstances have caused a 
substantial loss of independence; and
    (2) The provisions of Sec. 21.162 pertaining to participation in a 
program of independent living services are met.


(Authority: 38 U.S.C. 3109)

    (c) Reentrance into rehabilitation to the point of employability 
during a period of employment services. A finding of rehabilitation to 
the point of employability by VA may be set aside during a period of 
employment services and an additional period of training and related 
services provided, if any of the following conditions are met:
    (1) The conditions for setting aside a finding of rehabilitation 
under paragraph (a) of this section are found;
    (2) The rehabilitation services originally given to the veteran are 
now inadequate to make the veteran employable in the occupation for 
which he or she pursued rehabilitation;
    (3) Experience during the period of employment services has 
demonstrated that employment in the objective or field for which the 
veteran was rehabilitated to the point of employability should not 
reasonably have been expected at the time the program was originally 
developed; or
    (4) The veteran, because of technological change which occurred 
subsequent to the declaration of rehabilitation to the point of 
employability, is no longer able:
    (i) To perform the duties of the occupation for which he or she 
trained, or in a related occupation; or
    (ii) To secure employment in the occupation for which he or she 
trained, or in a related occupation.


(Authority: 38 U.S.C. 3117)

[49 FR 40814, Oct. 18, 1984, as amended at 58 FR 68769, Dec. 29, 1993]

                 Course Approval and Facility Selection



Sec. 21.290  Training and rehabilitation resources.

    (a) General. For the purpose of providing training and 
rehabilitation services under Chapter 31 VA may:
    (1) Use facilities, staff and other resources of VA;
    (2) Employ any additional personnel and experts needed;
    (3) Use the facilities and services of any:
    (i) Federal agency;
    (ii) State agency;
    (iii) Other public agency; or
    (iv) Agency maintained by joint Federal and state contributions.
    (4) Use the facilities and services of any:
    (i) Public institution or establishment;
    (ii) Private institution or establishment; or
    (iii) Private individual.
    (b) Agreement required. Use of facilities and services provided 
under paragraph (a) of this section shall be procured through contract, 
agreement, or other cooperative arrangement. The

[[Page 184]]

specific requirements for use of contracts or other arrangements are 
described in 48 CFR 871.2.

(Authority: 38 U.S.C. 3115)



Sec. 21.292  Course approvals.

    (a) Courses must be approved. Only those courses approved by the 
Department of Veterans Affairs shall be utilized to provide training and 
rehabilitation services under Chapter 31.


(Authority: 38 U.S.C. 3106)

    (b) General. VA staff in consultation with the veteran will select 
courses and services needed to carry out the rehabilitation plan only 
from those which VA determines are offered by a training or 
rehabilitation facility which:
    (1) Meets the requirements of Sec. Sec. 21.120 through 21.162;
    (2) Meets the criteria of Sec. Sec. 21.290 through 21.299; and
    (3) Is in compliance with Title VI of the Civil Rights Act of 1964, 
section 503(a) Veterans Readjustment Act of 1972, and sections 501 
through 504 of the Rehabilitation Act of 1973.
    (c) Obtaining information necessary for approval. In determining 
whether services and courses may be approved for a veteran's training 
and rehabilitation under Chapter 31, the Department of Veterans Affairs 
may use information relevant to the approval or certification of such 
services and courses for similar purposes developed by:
    (1) The State approving agencies;
    (2) The Department of Labor;
    (3) State vocational rehabilitation agencies;
    (4) Nationally recognized accrediting associations;
    (5) The Committee on Accreditation of Rehabilitation Facilities; and
    (6) Other organizations and agencies.
    (d) Course not approved. If a course or program is not approved by 
one of the agencies identified in paragraph (c) of this section, VR&C 
staff shall develop necessary information to determine whether criteria 
given in paragraphs (a) and (b) of this section are met.
    (e) Course disapproved. The VR&C Officer may approve for 38 U.S.C. 
chapter 31 use courses that one of the agencies in paragraph (c) of this 
section has disapproved.


(Authority: 38 U.S.C. 3115)

[49 FR 40814, Oct. 18, 1984, as amended at 62 FR 17709, Apr. 11, 1997]



Sec. 21.294  Selecting the training or rehabilitation facility.

    (a) Criteria the facility must meet. In addition to approval of the 
courses offered, all facilities which provide training and 
rehabilitation services under Chapter 31 must meet the criteria 
contained in Sec. Sec. 21.290 through 21.299 applicable to the type of 
facility. Each facility must:
    (1) Have space, equipment, instructional material and instructor 
personnel adequate in kind, quality, and amount to provide the desired 
service for the veteran;
    (2) Fully accept the obligation to give the training or 
rehabilitation services in all parts of the plan which call for the 
facility's participation;
    (3) Provide courses or services which:
    (i) Meet the customary requirements in the locality for employment 
in the occupation in which training is given when employment is the 
objective of the program; and
    (ii) Meet the requirements for licensure or permit to practice the 
occupation, if such is required;
    (4) Agree:
    (i) To cooperate with VA, and
    (ii) To provide timely and accurate information covering the 
veteran's attendance, performance, and progress in training in the 
manner prescribed by VA.
    (b) Selecting a facility for provision of independent living 
services. (1) Facilities offering independent living services will be 
utilized to:
    (i) Evaluate independent living potential;
    (ii) Provide a program of independent living services to veterans 
for whom an IILP (Individualized Independent Living Plan) has been 
developed; or
    (iii) Provide independent living services to veterans as part of an 
IWRP (Individualized Written Rehabilitation Plan) or an IEEP 
(Individualized Extended Evaluation Plan).

[[Page 185]]

    (2) VA may use public and nonprofit agencies and facilities to 
furnish independent living services. Public and nonprofit facilities may 
be:
    (i) Veterans Health Administration (VHA) facilities that provide 
independent living services;
    (ii) Facilities which meet standards established by the State 
rehabilitation agency for rehabilitation facilities or for providers of 
independent living services;
    (iii) Facilities which are neither approved nor disapproved by the 
State rehabilitation agency, but are determined by VA as able to provide 
the services necessary in an individual veteran's case.
    (3) VA also may use for-profit agencies and organizations to furnish 
programs of independent living services only if services comparable in 
effectiveness to those provided by for-profit agencies and 
organizations:
    (i) Are not available through public or nonprofit agencies or VHA; 
or
    (ii) Cannot be obtained cost-effectively from public or nonprofit 
agencies or VHA.
    (4) In addition to the criteria described in paragraph (b)(3)(i) of 
this section for public and private nonprofit agencies; for-profit 
agencies and organizations must meet any additional standards 
established by local, state (including the State rehabilitation agency), 
and Federal agencies which are applicable to for-profit facilities and 
agencies offering independent living services.


(Authority: 38 U.S.C. 3115, 3120)

    (c) Use of facilities. VA policy shall be to use VA facilities, if 
available, to provide rehabilitation services for veterans in a 
rehabilitation program under chapter 31. Non-VA facilities may be used 
to provide rehabilitation services only when necessary services are not 
readily available at a VHA facility. This policy shall be implemented in 
accordance with the provisions of paragraph (b) of this section in the 
case of the use of for-profit facilities to provide programs of 
independent living services, or in the case of employment services, 
provision of such services by non-VA sources is permitted under Sec. 
21.252.


(Authority: 38 U.S.C. 3115)

    (d) Selection of individual to provide training or rehabilitation 
services. Persons selected to provide individual instruction or other 
services as part of a program leading to the long-range goal of a 
veteran's plan must meet one of the following criteria:
    (1) State requirements for teaching in the field or occupation for 
which training is being provided; or
    (2) Expertise demonstrated through employment in the field in which 
the veteran is to be trained; or
    (3) Requirements established by professional associations to provide 
the services needed by the veteran.
    (e) Relatives. Relatives of the veteran may not be selected to 
provide services, even if otherwise qualified, unless such use is 
specifically permitted by VA regulation governing provision of the 
service. Selection of a training or rehabilitation facility owned by the 
veteran or a relative, or in which the veteran or a relative of the 
veteran has an interest is precluded, except for selection of a farm as 
provided in Sec. 21.298. The term relative has the same meaning as in 
Sec. 21.374.
    (f) Contracts or agreements required. The Department of Veterans 
Affairs will negotiate formal contracts for reimbursement to providers 
of services as requred by Sec. 21.262. However, a letter contract will 
be effected immediately to permit the induction of the veteran into a 
program if:
    (1) The veteran is immediately entered into a school with which a 
contract is required;
    (2) The veteran's rehabilitation plan will be jeopardized by 
withholding services until a contract can be completed; and
    (3) There are no known reasons to indicate that a contract may not 
be completed in a reasonable time.


(Authority: 38 U.S.C. 3115)

    (g) Training outside the United States. VA may only use those 
facilities and courses outside the United States to provide training 
under Chapter 31 which meet requirements for approval

[[Page 186]]

under Sec. Sec. 21.4250(c) and 21.4260. The conditions under which 
training outside the United States may be approved are contained in 
Sec. 21.130.


(Authority: 38 U.S.C. 3114)

    (h) Flight training. Flight training may only be provided in 
educational institutions which offer a standard college degree. The 
specific conditions under which flight training may be approved are 
contained in Sec. 21.134.


(Authority: 38 U.S.C. 3115)

    (i) Additional consideration. The case manager will consider the 
veteran's preference for a particular training or rehabilitation 
facility but VA has final responsibility for selection of the facility.


(Authority: 38 U.S.C. 3115)

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985, as amended at 53 
FR 50958, Dec. 19, 1988; 55 FR 42187, Oct. 18, 1990; 62 FR 17709, Apr. 
11, 1997]



Sec. 21.296  Selecting a training establishment for on-job training.

    (a) Additional criteria for selecting a training establishment. In 
addition to meeting all of the requirements of Sec. 21.294 the training 
establishment must:
    (1) Sign an agreement to provide on-job training to disabled 
veterans;
    (2) Provide continuous training for each veteran without 
interruption except for normal holidays and vacation periods;
    (3) Provide daytime training for the veteran except when the veteran 
cannot obtain necessary on-job or related training during the working 
hours of the day;
    (4) Modify the program when necessary to compensate for the 
limitations resulting from the veteran's disability or needs;
    (5) Organize training into definite steps or units which will result 
in progressive training;
    (6) Encourage rapid progress of each veteran rather than limit the 
progress of the individual to the progress of the group;
    (7) Not, during the period of training, use the veteran on 
production activities beyond the point of efficient training;
    (8) Agree to pay the veteran during training (except as provided in 
paragraph (b) of this section) a salary or wage rate;
    (i) Commensurate with the value of the veteran's productive labor,
    (ii) Not less than that prescribed by the Fair Labor Standards Act 
of 1938, as amended, and
    (iii) Not less than that customarily paid to nonveteran-trainees in 
the same or similar training situation;
    (9) Agree to provide the veteran with employment at the end of the 
training program, provided the veteran's conduct and progress have been 
satisfactory; and
    (10) Agree to furnish VA a statement in writing showing wages, 
compensation, and other income paid directly or indirectly to each 
veteran in training under Chapter 31 during the month.


(Authority: 38 U.S.C. 3108(c), 3115)

    (b) On-job training at subminimum wage rates. A subminimum hourly 
wage rate for handicapped workers may be considered where necessary in 
order to prevent curtailment of opportunities for employment. Payment at 
the subminimum rate must be approved by the Wage and Hour Division of 
the Department of Labor.


(Authority: 38 U.S.C. 3115)

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]



Sec. 21.298  Selecting a farm.

    (a) Control of the farm--farm operator. A farm selected for farm 
cooperative training must be under the control of the veteran by 
ownership, lease or other written tenure arrangement. If the veteran 
does not own the farm, the lease or other written agreement shall:
    (1) Afford the veteran control of the farm at least until the end of 
his or her course;
    (2) Allow the veteran's control to be such that he or she is able:
    (i) To carry out the provisions of the training program; and
    (ii) To operate the farm in accordance with the farm and home plan 
developed by the case manager and the

[[Page 187]]

veteran in collaboration with the instructor, and when appropriate, the 
landowner or lessor;
    (3) Permit instruction in the planning, management, and operation of 
farming enterprise in the veteran's farm and home plan;
    (4) At least by the end of the necessary minimum period of training, 
assure the veteran a reasonably satisfactory living under normal 
economic conditions;
    (5) Provide for the necessary buildings and equipment to enable the 
veteran to satisfactorily begin pursuit of the course of farm 
cooperative training;
    (6) Provide for resources which give reasonable promise that any 
additional items required for the pursuit of the course, including 
livestock, will be available as they become necessary;
    (7) Provide for capital improvements to be made which are necessary 
for carrying out the farm and home plan, with the veteran furnishing no 
greater portion of the costs than the benefits accruing to the veteran 
warrant; and
    (8) Provide for the landowner or leasor to share the costs of 
improved practices put into effect in proportion to the returns he or 
she will receive from such practices.
    (b) Farms on which more than one person trains--farm operator. If a 
veteran in training is a partner of another person or if more than one 
person is involved in operating the farm, the farm shall be of such size 
and character that the farm:
    (1) Together with the instruction part of the course will occupy the 
full time of the veteran; and
    (2) Meets all requirements of paragraph (a) of this section.
    (c) Selecting a farm--farm manager. The farm on which a veteran 
trains to become a farm manager shall be of such size and character 
that, together with the group instruction part of the course the farm:
    (1) Will occupy the full time of the veteran;
    (2) Will permit instruction in all aspects of the management and 
operation of a farm of the type for which the veteran is being trained; 
and
    (3) Meets the requirements of paragraph (a) of this section.
    (d) Employer agreement. VA may approve a farm on which a veteran is 
to train to become a farm manager only if the employer-trainer agrees:
    (1) To instruct the veteran in various aspects of farm management in 
accordance with the individual's plan;
    (2) To pay the veteran for each successive period of training a 
salary or wage rate:
    (i) Commensurate with the value of the veteran's productive labor; 
and
    (ii) Not less than that customarily paid to a nonveteran trainee in 
the same or similar training situation in that community; and
    (3) To employ the veteran as a manager of the farm on which he or 
she is being trained if his or her conduct and progress remain 
satisfactory, or assure that the veteran will be employed as manager of 
a specified comparable farm.

(Authority: 38 U.S.C. 3115)

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]



Sec. 21.299  Use of Government facilities for on-job training or work 
experience at no or nominal pay.

    (a) Types of facilities which may be used to provide training. 
Notwithstanding any other provision of regulations governing chapter 31, 
the facilities of any agency of the United States or of any State or 
local government receiving Federal financial assistance may be used to 
provide training or work experience at no or nominal pay as all or part 
of the veteran's program of vocational training under Sec. Sec. 21.123, 
21.294, and 21.296 of this part. The counseling psychologist and case 
manager must determine that the training work experience is necessary to 
accomplish vocational rehabilitation and providing such training or work 
experience is in the best interest of the veteran and the Federal 
government.


(Authority: 38 U.S.C. 3115, Pub. L. 100-689)

    (b) Employment status of veterans. (1) While pursuing on-job 
training or work experience in a facility of the United States, a 
veteran:
    (i) Shall be deemed to be an employee of the United States for the 
purposes of

[[Page 188]]

benefits under chapter 81, title 5 U.S.C.; but
    (ii) Shall not be deemed an employee of the United States for the 
purpose of laws administered by the Office of Personnel Management.
    (2) While pursuing on-job training or work experience in a State or 
local government agency the veteran shall have the employment status and 
rights comparable to those provided in paragraph (b)(1) of this section 
for a veteran pursuing on-job training or work experience at a Federal 
agency.


(Authority: 38 U.S.C. 3115, Pub. L. 100-689)

    (c) Terms applicable to training in State and local government. (1) 
The term State means each of the several States Territories, any 
possession of the United States, the District of Columbia, and the 
Commonwealth of Puerto Rico.


(Authority: 38 U.S.C. 101(20))

    (2) The term local government agency means an administrative 
subdivision of a government including a county, municipality, city, 
town, township, public authority, district, school district, or other 
such agency or instrumentality of a local government.
    (3) The term Federal financial assistance means the direct or 
indirect provision of funds by grant, loan, contract, or any other 
arrangement by the Federal government to a State or local government 
agency.
    (d) Additional considerations in providing on-job training and work 
experience in State and local government agencies. (1) The veteran's 
progress and adjustment in a rehabilitation program conducted wholly or 
in part at a State or local government agency shall be closely monitored 
by VR&C staff members to assure that:
    (i) Training and rehabilitation services are provided in accordance 
with the veteran's rehabilitation plan. The plan shall provide for:
    (A) Close supervision of the veteran's progress and adjustment by 
the case manager during the period he or she is at the State or local 
government agency; and
    (B) The employer's periodic certification (not less than once every 
three months) that the veteran's progress and adjustment are in 
accordance with the program which has been jointly developed by VA, the 
veteran and the employer; and
    (ii) The veteran achieves his or her employment goal.
    (2) Training may not be provided for a position which involves 
religious or political activities;
    (3) The veteran's training:
    (i) Will not result in the displacement of currently employed 
workers; and
    (ii) Will not be in a job while another person is laid off from a 
substantially equivalent job, or will not be in a job the opening for 
which was created as a result of the employer having terminated the 
employment of any regular employee or otherwise having reduced its 
workforce with the intention of using the opening for a Chapter 31 
trainee.


(Authority: Pub. L. 100-689)

[55 FR 3739, Feb. 5, 1990]

                             Rate of Pursuit



Sec. 21.310  Rate of pursuit of a rehabilitation program.

    (a) Programs offered at educational institutions. This section 
provides policy for determining the full-time and part-time rate of 
pursuit of a rehabilitation program by a veteran whose ability to pursue 
a program has not been reduced by the effects of disability.
    (1) Measuring full and part-time training. VA will measure the full-
time and part-time rate of pursuit of training offered at educational 
institutions according to the criteria found in Sec. Sec. 21.4270 
through 21.4275, except as provided in paragraphs (a) (2) and (3) of 
this section.
    (2) Independent study course. (i) For certain seriously disabled 
veterans described in subdivision (i)(A) of this subparagraph VA may 
measure the veteran's enrollment:
    (A) In an independent study course as half-time or greater training, 
or
    (B) Both in independent study subjects and subjects requiring class 
attendance on the basis of the combined training load when the number of 
credit hours of independent study equals or exceeds the number of other 
credit hours.

[[Page 189]]

    (ii) To qualify for measurement described in paragraph (a)(2)(i) of 
this section:
    (A) The seriously disabled veteran must have a disability or 
circumstances which preclude regular attendance at an institution of 
higher learning, and
    (B) Independent study must be a sound method for providing the 
training necessary for restoring the veteran's employability.
    (iii) In all other cases VA will measure independent study according 
to the provisions of Sec. 21.4280.
    (3) Special school. If training is pursued in a special school, such 
as those for persons with visual or hearing disabilities, the rate of 
pursuit will be measured under Sec. Sec. 21.2470 through 21.4275 unless 
it is the established policy of the school to measure the rate of 
pursuit for full-time or particular level or part-time training based 
upon fewer semester, credit, or clock hours of attendance than 
prescribed in these regulations.
    (4) Farm cooperative. If training in a farm cooperative program is 
provided by an educational institution, the rate of pursuit shall be 
determined the same as under Sec. 21.4270 for that type of training.
    (5) Course offered under contract. When a school or other entity 
furnishes all or part of a vocational rehabilitation program under 
contact with another school, VA will measure the course or courses as 
appropriate for the school or other entity actually providing the 
training.
    (b) Education or training not furnished by an educational 
institution. The following types of training which are not furnished by 
an educational institution (Sec. 21.35(k)(3) may only be pursued full-
time:
    (1) On-job training. Full-time training in an on-job program is the 
lesser of the number of hours in the prevailing workweek for:
    (i) Journeyman employees in the same job categories at the 
establishment where training is being provided;
    (ii) Other persons in on-job training for the same or similar 
occupations at the facility where the veteran is training or at other 
facilities in the locality.
    (2) Farm cooperative training. If training in a farm cooperative 
program is provided by an individual instructor, the full-time rate of 
pursuit must meet the requirements of Sec. 21.126.
    (3) Independent instructor. The full-time rate of pursuit for a 
veteran in an independent instructor program must meet the requirements 
of Sec. 21.146.
    (4) Training in the home. The full-time rate for a training program 
provided in the veteran's home must meet the requirements of Sec. 
21.146.
    (5) Vocational course in a rehabilitation facility or sheltered 
workshop. A vocational course of training offered by a rehabilitation 
facility or sheltered workshop (Sec. 21.35(k) (5) and (6)), will be 
measured under provisions of Sec. 21.4270(b) for trade or technical 
nonaccredited courses, unless it is the established policy of the 
facility to measure the rate of pursuit for full-time or a particular 
level of part-time training based upon fewer clock hours of attendance 
than provided in that regulation.
    (c) Combination and cooperative programs. The rate of pursuit of a 
program which combines institutional training and on job training will 
be measured as follows:
    (1) The institutional part will be assessed under Sec. Sec. 21.4270 
through 21.4275, and
    (2) The on-the-job part will be assessed under paragraph (b)(1) of 
this section.
    (d) Rehabilitative services. Measurement of the rate of pursuit for 
veterans in programs consisting primarily of services designed to 
evaluate and improve physical and psychological functioning will be 
assessed under this paragraph.
    (1) The services assessed under this paragraph include:
    (i) Evaluation and improvement of the rehabilitation potential of a 
veteran for whom attainment of a vocational goal is reasonably feasible;
    (ii) Extended evaluation to determine whether attainment of a 
vocational goal is reasonably feasible; or
    (iii) A program of independent living services to enable a veteran 
to function more independently in his or her family and community when 
attainment of a vocational goal is not reasonably feasible.

[[Page 190]]

    (2) Measurement of the rate of pursuit for services and programs 
named in paragraph (d)(1) of this section will be:
    (i) As provided in paragraph (a) of this section for services 
furnished by educational institutions; or
    (ii) According to the noneducational facility's customary criteria 
for full-time and part-time pursuit. If the facility does not have 
established criteria for full-time and part-time pursuit, or services 
are being provided by more than one facility, the rate of pursuit will 
be assessed in the following manner:

------------------------------------------------------------------------
              Rate of pursuit                   Clock hours per month
------------------------------------------------------------------------
Full-time.................................  120 or more.
Three-quarter time \1\....................  90-119.
Half-time \1\.............................  60-89.
Quarter-time \1\..........................  30-59.
------------------------------------------------------------------------
\1\ Extended evaluation and independent living.


(Authority: 38 U.S.C. 3108(d))



Sec. 21.312  Reduced work tolerance.

    (a) General. VA will consider that a veteran with reduced work 
tolerance is pursuing a rehabilitation program full-time when the amount 
of time the veteran is devoting to his or her program is as great as the 
effects of his or her disability (service and nonservice-connected) will 
permit.
    (b) Pursuit of a program. A veteran with reduced work tolerance may 
pursue a rehabilitation program when the following conditions are met:
    (1) Reduced work tolerance has been determined.
    (2) Achievement of the goals of the program are reasonably feasible;
    (3) The IWRP (Individualized Written Rehabilitation Plan) or other 
plan provides for completion of the program under Chapter 31.
    (c) Redetermination of work tolerance. As necessary, but not less 
than once yearly, the veteran's work tolerance will be reevaluated. The 
rate of pursuit required to meet the standard of full-time pursuit will 
be modified if there is either an increase or decrease in the work 
tolerance of the veteran.
    (d) Payment of allowance. A veteran with a reduced work tolerance 
will be paid a subsistence allowance, at the full-time rate for the type 
of program being pursued, when the veteran meets the standard for full-
time pursuit established for him or her in the Plan. A veteran with 
reduced work tolerance, who elects benefits at the Chapter 34 rate, will 
have to meet normal attendance requirements for that chapter, however.
    (e) Determining work tolerance. A VA physician will make all 
determinations and redeterminations of work tolerance.

(Authority: 38 U.S.C. 3108(d))



Sec. 21.314  Pursuit of training under special conditions.

    A veteran is required to pursue a rehabilitation program at a rate 
which meets the requirement for full- or part-time participation 
described in Sec. Sec. 21.310 and 21.312. However, a veteran may pursue 
a rehabilitation program at a lesser rate, if such pursuit is a part of 
the veteran's plan. Subsistence allowance is not payable during such 
periods.

(Authority: 38 U.S.C. 3108(d))

 Authorization of Subsistence Allowance and Training and Rehabilitation 
                                Services



Sec. 21.320  Awards for subsistence allowance and authorization of 
rehabilitation services.

    Awards providing for payment of a subsistence allowance and 
authorization of services necessary for rehabilitation may be prepared 
when an IWRP (Individualized Written Rehabilitation Plan) or other plan 
has been completed and other requirements for entrance or reentrance 
into a rehabilitation program have been met.
    (a) Commencing date of subsistence allowance. The commencing date of 
an award of subsistence allowance will be determined under the 
provisions of Sec. 21.322.
    (b) Commencing date of authorization of training and rehabilitation 
services. The commencing date for authorization of training and 
rehabilitation services is the same as the effective date for awards for 
subsistence allowance under provisions of Sec. 21.322, except when:
    (1) The commencing date for authorization of a program of employment

[[Page 191]]

services is determined under provisions of Sec. 21.326;
    (2) An earlier commencement date is established in the veteran's 
plan or the veteran is entitled to earlier induction under Sec. 21.282;
    (3) The veteran elects payment at the educational assistance 
allowance rate, in which case the commencing date of payment is 
determined under provisions applicable to commencement of payment under 
Chapter 30.


(Authority: 38 U.S.C. 3108 (a) and (f))

    (c) Ending date of subsistence allowance. The ending date of an 
award for subsistence allowance will be the earliest of the following 
dates:
    (1) The ending date provided in the veteran's IWRP or other plan;
    (2) The ending date of a period of enrollment as certified by a 
training or rehabilitation facility;
    (3) The ending date specified in Sec. 21.324.


(Authority: 38 U.S.C. 3108)

    (d) Ending date for training and rehabilitation services. The ending 
date of training and rehabilitation services will be the same as the 
termination date for subsistence allowance under paragraph (c) of this 
section, except when:
    (1) The ending date for a period of employment services is 
determined under provisions of Sec. 21.326;
    (2) A later termination date is established in the veteran's plan;
    (3) A veteran has elected payment at the educational assistance rate 
paid under Chapter 30. The ending date of the award is determined under 
regulations applicable to termination of training under Chapter 30.


(Authority: 38 U.S.C. 3108 (a) and (f))

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 4284, Jan. 30, 1989; 57 
FR 57108, Dec. 3, 1992]



Sec. 21.322  Commencing dates of subsistence allowance.

    (a) General. VA will determine the commencing date of an award or 
increased award of subsistence allowance under this section. VA will not 
authorize subsistence allowance for any period prior to the earliest 
date for which disability compensation is payable or would be payable 
but for the veteran's receipt of retired pay.


(Authority: 38 U.S.C. 3108, 3113)

    (b) Entrance or reentrance into vocational rehabilitation, extended 
evaluation, independent living services. Except in the case of 
retroactive induction into a rehabilitation program, as provided in 
Sec. 21.282, the commencing date of an award of subsistence allowance 
shall be the earlier of:
    (1) The date the facility requires the veteran to report for 
prescribed activities; or
    (2) The date training or rehabilitation services begin.
    (c) Increases for dependents--(1) Dependency exists at the time of 
entrance or reentrance into a rehabilitation program. A veteran may have 
one or more dependents on or before the date he or she enters or 
reenters a rehabilitation program. When this occurs, the following rules 
apply:
    (i) The effective date of the increase will be the date of entrance 
or reentrance if:
    (A) VA receives the claim for the increase within one year of the 
date of entrance or reentrance; and
    (B) VA receives any necessary evidence within 1 year of the date VA 
requested the evidence and informed the veteran of the time limits 
during which this evidence must be submitted. If VA fails to inform the 
veteran of these time limits, the period of submission of the evidence 
is adjusted in accordance with Sec. 21.32 of this part.
    (ii) The effective date of the increase will be the date VA receives 
notice of the dependents existence if:
    (A) VA receives the claim for the increase more than one year after 
the date of entrance or reentrance; and
    (B) VA receives any necessary evidence within 1 year of the date VA 
requested the evidence and informed the veteran of the time limits 
during which this evidence must be submitted. If VA fails to inform the 
veteran of these time limits, the period for submission of the evidence 
is adjusted in accordance with Sec. 21.32 of this part;

[[Page 192]]

    (iii) The effective date of the increase will be the date VA 
receives all necessary evidence if that evidence is received more than 
one year from the date VA requested the evidence and informed the 
veteran of the time limits during which this evidence must be submitted. 
If VA fails to inform the veteran of these time limits, the period for 
submission of the evidence is adjusted in accordance with Sec. 21.32 of 
this part.
    (2) Dependency arises after entrance or reentrance into a 
rehabilitation program. If the veteran acquires a dependent after he or 
she enters or reenters a rehabilitation program, the increase will be 
effective on the latest of the following dates:
    (i) Date of claim. This term means the following listed in order of 
their applicability:
    (A) Date of the veteran's marriage, or birth of his or her child, or 
his or her adoption of a child, if the evidence of the event is received 
within one year from the date of the event;
    (B) Date notice is received of the dependents's existence if 
evidence is received within 1 year from the date VA requested the 
evidence and informed the veteran of the time limits during which this 
evidence must be submitted. If VA fails to inform the veteran of these 
time limits, the period for submission of the evidence is adjusted in 
accordance with Sec. 21.32 of this part.
    (C) Date VA receives evidence of the dependent's existence if this 
date is more than one year after VA requested this evidence and informed 
the veteran of the time limits during which this evidence must be 
submitted. If VA fails to inform the veteran of the time limits, the 
period for submission of the evidence is adjusted in accordance with 
Sec. 21.32 of this part.
    (ii) Date dependency arises--(3) Increased award not permitted. No 
increased award for dependency may be paid prior to the date the law 
permits benefits for dependents generally.


(Authority: 38 U.S.C. 3108(b))

    (d) Correction of military records. In accordance with the facts 
found, but not earlier than the date the change, correction, or 
modification was made by the service department, if eligibility of a 
veteran arises as the result of correction or modification of military 
records under 10 U.S.C. 1552, or change, correction or modification of a 
discharge or dismissal under 10 U.S.C. 1553, or other competent military 
authority.
    (e) Bar to benefits removed by VA. In accordance with the facts 
found, but not earlier than the date the change was made by VA, if 
eligibility of a veteran arises as the result of review of the evidence 
of record regarding the character of discharge by VA, when the veteran's 
discharge or dismissal was a bar to benefits under 38 U.S.C. 5301.


(Authority: 38 U.S.C. 3103(b))

    (f) Incarcerated veterans. (1) Date of release from Federal, State, 
or local penal institution of a veteran incarcerated for conviction of a 
felony.
    (2) Earlier of the following dates in the case of a veteran residing 
in a half-way house or participating in a work-release program as a 
result of a felony conviction.
    (i) Date of release from the half-way house or work-release program, 
or
    (ii) Date a veteran becomes obligated to pay part of his or her 
living expenses.


(Authority: 38 U.S.C. 3108(g))

    (g) Temporary 100 percent award terminated. Date of reduction of a 
temporary award of disability compensation at the 100 percent rate 
because of hospitalization.


(Authority: 38 U.S.C. 3108(h))

    (h) Liberalizing laws and VA issues. In accordance with facts found, 
but not earlier than the date of the act or administrative issue.


(Authority: 38 U.S.C. 5113)

    Cross-Reference. See Sec. 21.260(c) for definition of dependents.

[49 FR 40814, Oct. 18, 1984, as amended at 51 FR 22808, June 23, 1986; 
52 FR 42113, Nov. 3, 1987; 55 FR 12821, Apr. 6, 1990]

[[Page 193]]



Sec. 21.324  Reduction or termination dates of subsistence allowance.

    (a) General. The effective date of the reduction of the amount paid 
or termination of payment of subsistance allowance will be the earliest 
of the dates specified in this section. If an award is reduced, the 
reduced rate will be effective the day following the date of termination 
of the greater benefit.
    (b) Death of a veteran. Date of death, if death occurs while the 
veteran is in attendance or authorized leave status; otherwise date of 
last attendance.
    (c) Death of a dependent. (1) Before October 1, 1982. Last day of 
the calendar year in which death occurs, unless the veteran's program is 
terminated earlier under other provisions.


(Authority: 38 U.S.C. 5113)

    (2) After September 30, 1982. Last day of the month in which death 
occurs unless discontinuance is required at an earlier date under other 
provisions.


(Authority: 38 U.S.C. 5112(b), 5113)

    (d) Divorce--(1) Before October 1, 1982. Last day of the calendar 
year in which divorce occurs, unless the veteran's program is terminated 
earlier under other provisions.


(Authority: 38 U.S.C. 5113)

    (2) After September 30, 1982. Last day of the month in which divorce 
occurs unless discontinuance is required at an earlier date under other 
provisions.


(Authority: 38 U.S.C. 5112(b), 5113)

    (e) Child--(1) Marriage--(i) Before October 1, 1982. Last day of the 
month in which the marriage occurs, unless the veteran's program is 
terminated earlier under other provisions.


(Authority: 38 U.S.C. 5113)

    (ii) After September 30, 1982. Last day of the month in which the 
marriage occurs, unless discontinuance is required at an earlier date 
under other provisions.


(Authority: 38 U.S.C. 5112(b), 5113)

    (2) Age 18. Day preceding the child's 18th birthday.
    (3) School attendance.
    (i) Last day of the month in which the child ceases attending 
school; or
    (ii) The day preceding the child's 23rd birthday, whichever is 
earlier.
    (4) Helplessness. Last day of the month in which 60 days has passed 
from VA's notice to the payee that the child's helplessness has ceased.
    (f) Interrupted, rehabilitation to the point of employability, 
independent living program completed, and extended evaluation completed 
status. Last day of attendance, or approved leave status, whichever is 
applicable.


(Authority: 38 U.S.C. 5113)

    (g) Discontinued. Last day of attendance or approved leave status, 
whichever is applicable, except as follows:
    (1) If VA places the veteran in ``discontinued'' status following 
the veteran's withdrawal from all courses with nonpunitive grades or 
following his or her completion of all courses with nonpunitive grades 
and the case manager does not find mitigating circumstances, VA will 
terminate subsistence allowance effective:
    (i) The first date of the term, or
    (ii) December 1, 1976, whichever is later.
    (2) If VA places the veteran in ``discontinued'' status following a 
term in which the grades the veteran receives include both those that 
count in the grade point average and nonpunitive grades, and the case 
manager does not find mitigating circumstances:
    (i) VA will terminate subsistence allowance for courses in which the 
veteran receives nonpunitive grades effective the first day of the term 
or December 1, 1976, whichever is later.
    (ii) VA will terminate subsistence allowance for courses in which 
the veteran receives grades that will count in the grade point average 
effective the veteran's last day of attendance or approved leave status, 
whichever is applicable.


(Authority: 38 U.S.C. 3680(a))

    (h) Wages or salary received in apprentice or on-job training. (1) 
If the sum of the training wage plus the scheduled subsistence allowance 
is more than the journeyman wage when the training commences, the 
subsistence allowance will be decreased by VA effective the

[[Page 194]]

first day of the second month following the month in which the veteran 
enters on-job training.
    (2) Subsequent adjustments will be effective the first day of the 
second month following the month in which wages or salary changes are 
made which justify the adjustment under provisions of Sec. 21.266(e).


(Authority: 38 U.S.C. 3108)

    (i) Reduction in rate of pursuit of the program. End of month in 
which reduction occurs, except that if the rate of pursuit is reduced as 
a result of the veteran's withdrawal from a unit course or courses with 
nonpunitive grade(s) or as a result of the veteran's completion of a 
unit course or courses with nonpunitive grade(s) (Sec. 21.4200(j)), VA 
will reduce subsistence allowance as follows:
    (1) If it is determined that there are mitigating circumstances:
    (i) Withdrawal with nonpunitive grades: The end of the month or the 
end of the term in which the veteran withdraws, whichever is earlier; if 
the reduction occurs at the beginning of the term benefits will be 
reduced the first day of the term in which the veteran withdraws.
    (ii) Completion with nonpunitive grades. No reduction required.
    (2) If it is determined there are no mitigating circumstances VA 
will reduce the veteran's subsistence allowance effective the first day 
of the term in which the veteran withdraws or which the veteran 
completes with nonpunitive grades. The term mitigating circumstances 
means circumstances beyond the veteran's or serviceperson's control 
which prevent him or her from continuously pursuing a rehabilitation 
program. The following circumstances are representative of those which 
are considered mitigating.
    (i) An illness of the program participant;
    (ii) An illness or death in the program participant's family;
    (iii) An unavoidable change in the veteran's conditions of 
employment;
    (iv) An unavoidable geographical transfer resulting from the 
veteran's employment;
    (v) Immediate family or financial obligations beyond the control of 
the veteran which are found by VA to require the veteran to suspend 
pursuit of the rehabilitation program;
    (vi) Discontinuance of the course by the educational institution;
    (vii) In the first instance of withdrawal on or after June 1, 1989 
by a program participant from a course or courses with respect to which 
such veteran has been paid subsistence allowance under the provisions of 
Sec. 21.260(b), mitigating circumstances shall be considered to exist 
with respect to courses totaling not more than six semester hours or the 
equivalent thereof;
    (viii) Difficulties in obtaining child care or changes in such 
arrangements which are beyond the control of the program participant and 
which require interruption of the rehabilitation program is order for 
the participant to provide or arrange for such care.


(Authority: 38 U.S.C. 3680(a))

    (j) Severance of service-connection. Last day of the month in which 
the severance becomes final.


(Authority: 38 U.S.C. 5113)

    (k) Fraud. The later of the following dates:
    (1) The beginning date of the award of subsistence allowance, or
    (2) The day preceding the date of the fraudulent act.


(Authority: 38 U.S.C. 6103(a))

    (l) Error--(1) Payee error. Effective date of the award of 
subsistence allowance or day preceding the act, whichever is later, but 
not prior to the date the veteran's entitlement ceases, on an erroneous 
award based on an act of commission or omission by a payee with his or 
her knowledge.
    (2) Administrative error. Except as provided in paragraph (j) of 
this section, date of last payment on an erroneous award based solely on 
administrative error or an error in judgment by a VA employee.
    (m) Treasonable acts, subversive activities. The later of the 
following dates:
    (1) Beginning date of the award of subsistence allowance, or

[[Page 195]]

    (2) Day preceding the date of commission of the treasonable act or 
subversive activities for which the veteran is convicted.


(Authority: 38 U.S.C. 5113)

    (n) Incarceration in prison or jail--(1) Felony conviction. If a 
veteran's subsistence allowance must be reduced because of incarceration 
for a felony conviction under provisions of Sec. 21.276, his or her 
rate of payment will be reduced the later of:
    (i) The date of his or her incarceration in a prison or jail; or
    (ii) The commencing date of his or her award as determined by Sec. 
21.322.
    (2) Halfway house or work-release program. The subsistence allowance 
of a veteran in a halfway house or work release program as a result of 
conviction of a felony will not be reduced under the provisions of Sec. 
21.276 the date on which the Federal Government or a State or local 
government pays all of the veteran's living expenses.


(Authority: 38 U.S.C. 3108(g))

    (o) Specialized rehabilitation facility. Date payment for room and 
board by VA begins, reduce the rate paid to the amount payable for 
dependents.


(Authority: 38 U.S.C. 3108(i))

    (p) Termination of subsistence allowance while hospitalized at VA 
expense. Date before the beginning date of the increased disability 
compensation award, which results in a reduced subsistence allowance 
under the provisions of Sec. 21.266.


(Authority: 38 U.S.C. 3108(h))

[49 FR 40814, Oct. 18, 1984, as amended at 51 FR 22808, June 23, 1986; 
51 FR 25525, July 15, 1986; 55 FR 48843, Nov. 23, 1990]



Sec. 21.326  Authorization of employment services.

    (a) General. Authorization of employment services shall be based 
upon the services identified and goals established in an IEAP 
(Individualized Employment Assistance Plan) under provisions of Sec. 
21.88. The effective dates for the commencement, or termination of such 
services will be determined under this section.


(Authority: 38 U.S.C. 3117(a))

    (b) Commencing date. The commencing date authorizing a period of 
employment services will be the later of:
    (1) The date following completion of the period of rehabilitation to 
the point of employability; or
    (2) The date of the original IEAP.


(Authority: 38 U.S.C. 3107, 3117(a))

    (c) Termination of the authorization of employment services. 
Authorization for employment services will be terminated the earliest 
of:
    (1) The last day employment services are provided under the terms of 
an IEAP when employment services are interrupted, discontinued, or the 
veteran is rehabilitated;
    (2) The date the authorization is found to be erroneous because of 
an act of omission or commission by the veteran, or with his or her 
knowledge;
    (3) The last day of the month in which severance of service 
connection becomes final;
    (4) The day proceding the date of a fraudulent act;
    (5) The date preceding the commission of a treasonable or subversive 
act for which the veteran is convicted.


(Authority: 38 U.S.C. 3108, 5113)



Sec. 21.328  Two veteran cases--dependents.

    If both partners in a marriage are veterans, and if each is 
receiving either subsistence allowance for a vocational rehabilitation 
program or an educational assistance allowance under another VA program, 
each is entitled to receive the additional allowances payable for each 
other and for their children.

(Authority: 38 U.S.C. 3108(a))



Sec. 21.330  Apportionment.

    (a) General. Where in order, VA will apportion subsistence allowance 
in accordance with Sec. 3.451 of this title, subject to the limitations 
of Sec. 3.458 of this

[[Page 196]]

title. If the veteran is in receipt of benefits at the Chapter 30 rate, 
VA will not apportion these benefits.


(Authority: 38 U.S.C. 5307(c))

    (b) Effective date. The effective date of apportionment will be as 
prescribed in Sec. 3.400(e) of this title.


(Authority: 38 U.S.C. 5307(c))

    (c) Child adopted out of family. Where evidence establishes that a 
veteran is the natural parent of a child or children legally adopted 
outside of the veteran's family, VA will apportion in favor of the child 
or children only that additional amount of subsistence allowance payable 
on account of the existence of the child or children. The veteran is not 
entitled in his or her own right to the additional amount of subsistence 
allowance payable for the child because of the existence of the child 
unless the veteran is contributing to the child's support.


(Authority: 38 U.S.C. 5307(c))

    (d) Veteran convicted of a felony. The subsistence allowance of a 
veteran in a rehabilitation program after October 17, 1980, may not be 
apportioned if the veteran is incarcerated because of conviction for a 
felony.


(Authority: 38 U.S.C. 3108(g))

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 4284, Jan. 30, 1989; 57 
FR 57108, Dec. 3, 1992]



Sec. 21.332  Payments of subsistence allowance.

    (a) Eligibility. At the end of the month, VA shall pay to an 
eligible veteran enrolled in a rehabilitation program, subsistence 
allowance at the rates specified in Sec. 21.260 for the type of program 
pursued during the month, unless advance payment is approved. VA will 
continue payments during those intervals described in Sec. 21.270.


(Authority: 38 U.S.C. 3108)

    (b) Advance payment criteria. VA will make an advance payment of 
subsistence allowance only when:
    (1) The veteran specifically requests an advance payment; and
    (2) The educational institution at which the veteran is accepted or 
enrolled has agreed to, and can carry out, satisfactorily, the 
provisions of 38 U.S.C. 3680(d) (4) and (5) pertaining to:
    (i) Receipt, delivery or return of advance checks; and
    (ii) Certifications of delivery and enrollment.
    (c) Advance payment. (1) The amount of advance payment is not to 
exceed:
    (i) The veteran's subsistence allowance for the month or part of a 
month in which his or her course will begin; plus
    (ii) The veteran's subsistence allowance for the following month.
    (2) Upon application and completion of arrangements for enrollment 
of a veteran who meets the criteria for an advance payment, VA shall 
mail a check payable to the veteran to the institution for delivery to 
the veteran upon registration.
    (3) An institution shall not deliver an advance payment check to a 
veteran more than 30 days in advance of commencement of his or her 
program.
    (d) Certification for advance payment. VA will authorize advance 
payment upon receipt of the institution's certification of the following 
information:
    (1) The veteran is eligible for benefits;
    (2) The institution has accepted the veteran or he or she is 
eligible to continue his or her training;
    (3) The veteran has notified the institution of his or her intention 
to attend or to reenroll;
    (4) The number of semester or clock hours the veteran will pursue; 
and
    (5) The beginning and ending dates of the enrollment period.
    (e) Time of advance payment. VA will authorize advance payment only:
    (1) At the beginning of an ordinary school year; or
    (2) At the beginning of any other enrollment period which begins 
after a break in enrollment of one full calendar month or longer.


(Authority: 38 U.S.C. 3680(d))

    (f) Other payments. (1) VA will make all payments other than advance 
payments at the end of the month for the veteran's training during that 
month.

[[Page 197]]

    (2) VA may withhold final payment until:
    (i) VA receives certification that the veteran has completed his or 
her course; and
    (ii) VA makes all necessary adjustments in the veteran's award 
resulting from that certification.


(Authority: 38 U.S.C. 3680(g))

    (g) Payments for courses which are repeated. VA may pay subsistence 
allowance to a veteran who repeats a course under conditions described 
in Sec. 21.132.


(Authority: 38 U.S.C. 3680(a))

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]



Sec. 21.334  Election of payment at the Chapter 30 rate.

    (a) Election. When the veteran elects payment of an allowance at the 
chapter 30 rate, the effective dates for commencement, reduction and 
termination of the allowance shall be in accordance with Sec. Sec. 
21.7130 through 21.7135 and Sec. 21.7050 under chapter 30.


(Authority: 38 U.S.C. 1808(f), 1780)

    (b) Election of payment at the Chapter 30 rate subsequent to 
induction into a rehabilitation program. Election of payment at the 
Chapter 30 rate subsequent to induction into training is permissible 
under provisions of Sec. 21.264 (a) and (b). The effective date of the 
election is the latest of the following dates:
    (1) The commencing date determined under Sec. 21.7131 in the case 
of a veteran who has elected payment at the chapter 30 rate; or

    (2) The day following the end of the period for which VA paid 
tuition, fees or other program charges under this Chapter.


(Authority: 38 U.S.C. 3108(f))

    (c) Reelection of subsistence allowance subsequent to induction. If 
a veteran reelects subsistence allowance under provisions of Sec. 
21.264(b) of this part, the effective date of change is earliest of the 
following:
    (1) The date following completion of the term, semester, quarter, or 
other period of instruction in which the veteran is currently enrolled;
    (2) The veteran's Chapter 30 delimiting date;
    (3) The day after exhaustion of Chapter 30 entitlement; or
    (4) The day following the date of a VA determination that failure to 
approve reelection would prevent the veteran from continuing the 
rehabilitation program.


(Authority: 38 U.S.C. 3108(f))

    (d) Election or reelection during leave or between periods of 
instruction--(1) Payment at the Chapter 30 rate. If an otherwise 
eligible veteran elects payment at the Chapter 30 rate during a period 
between periods of instruction, the effective date of the election shall 
be the first day of the next period of instruction.
    (2) Subsistence allowance. If an otherwise eligible veteran reelects 
subsistence allowance during leave or between periods of instruction 
following election of payment at the Chapter 30 rate, the effective date 
of the change will be the date of the reelection or the beginning of the 
next period of training, whichever is to the veteran's benefit.


(Authority: 38 U.S.C. 3108(f))

    (e) Effect of Chapter 34 program termination. (1) Since Chapter 34 
benefits are not payable beyond December 31, 1989, any previous election 
of benefits at that rate is terminated as of that date;
    (2) A veteran entitled to chapter 30 benefits based on his or her 
chapter 34 eligibility as of December 31, 1989, and whose election of 
chapter 34 rates terminated as of the date under paragraph (e)(1) of 
this section must, if the individual desires payment at the chapter 30 
rate, elect such payment.


(Authority: 38 U.S.C. 1411(a))

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 4284, Jan. 30, 1989, 54 
FR 13522, Apr. 4, 1989; 57 FR 57108, Dec. 3, 1992]

                            Leaves of Absence



Sec. 21.340  Introduction.

    (a) General. VA may approve leaves of absence under certain 
conditions. During approved leaves of absence, a veteran in receipt of 
subsistence allowance shall be considered to be pursuing a 
rehabilitation program. Leave may

[[Page 198]]

be authorized for a veteran during a period of:
    (1) Rehabilitation to the point of employability;
    (2) Extended evaluation; or
    (3) Independent living services.
    (b) Election of subsistence allowance. If a veteran elects to 
receive subsistence allowance and payment of rehabilitation services by 
VA, he or she may be authorized leave of absence under Sec. Sec. 21.342 
through 21.350.
    (c) Election of benefits at the chapter 30 rate. If a veteran elects 
to receive a subsistence allowance paid at the chapter 30 rate, the 
effect of absences is determined under Sec. Sec. 21.7139 and 21.7154.

(Authority: 38 U.S.C. 1508(f) and 1510)

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 4285, Jan. 30, 1989; 57 
FR 57109, Dec. 3, 1992]



Sec. 21.342  Leave accounting policy.

    (a) Amount of leave. A veteran pursuing one of the programs listed 
in Sec. 21.340(a) may be authorized up to 30 days of leave by the case 
manager during a twelve-month period. The beginning date of the first 
twelve-month period is the commencing date of the original award, and 
the ending date is twelve months from the beginning date, with 
subsequent twelve-month periods running consecutively thereafter.
    (b) Additional leave under exceptional circumstances. A veteran in a 
program may be authorized up to 15 additional days of leave during the 
twelve-month period by the case manager under exceptional circumstances, 
such as extended illness or family problems.
    (c) Absence. For the purpose of determining when a leave of absence 
may be authorized, a veteran who elects subsistence allowance shall be 
considered absent during any period in which he or she is:
    (1) Not in attendance under the rules and regulations of the 
educational institution, rehabilitation center, or sheltered workshop;
    (2) Not considered at work under the rules of the training 
establishment; or
    (3) Not present at a scheduled period of individual instruction.
    (d) System of records. An educational institution, training 
establishment, rehabilitation center, or other facility or individual 
providing training and rehabilitation services under Chapter 31 may 
utilize the same system of records to determine absence as the one used 
for similarly circumstanced nonveterans.
    (e) Change in rate of pursuit. The amount of approved leave is not 
affected by the veteran's rate of pursuit of a rehabilitation program.
    (f) Charging leave. VA shall charge 1 day of leave for each day or 
part of a day of absence from pursuit of a rehabilitation program.
    (g) Limitation on carrying leave over to another period. The veteran 
may not carry over unused days of leave from one twelve-month period to 
another.

(Authority: 38 U.S.C. 3110)

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985, as amended by 56 
FR 14649, Apr. 11, 1991]



Sec. 21.344  Facility offering training or rehabilitation services.

    (a) Approval of leaves of absence required. Leaves of absence 
normally must be approved in advance by the case manager when the 
facility offering training or rehabilitation services arranges for the 
leave. The approval of the case manager is required:
    (1) During periods in a rehabilitation program identified in Sec. 
21.342(c); or
    (2) A period of hospitalization at VA expense during one of the 
periods identified in Sec. 21.342(c).
    (b) Responsibility of the veteran in obtaining leave. VA will not 
authorize leave without a verbal or written request by the veteran, and 
the approval of the facility.
    (c) Conditions permitting approval of leaves of absence. (1) The 
case manager may approve leaves of absence up to a total of 30 days 
during a twelve-month period if the facility certifies that the use of 
the leave does not interfere materially with the veteran's progress;
    (2) An additional period of up to 15 days of leave in the same 
twelve-month period under exceptional circumstances may be approved by 
the case manager if failure to approve leave will:
    (i) Result in personal hardship, or

[[Page 199]]

    (ii) Adversely affect the veteran's ability to continue in his or 
her rehabilitation program.

(Authority: 38 U.S.C. 3110)

[49 FR 40814, Oct. 18, 1984, as amended by 56 FR 14649, Apr. 11, 1991]



Sec. 21.346  Facility temporarily not offering training or 
rehabilitation services.

    (a) Approval of leave of absence not required. A veteran may receive 
subsistence allowance, during a period when the facility temporarily is 
not offering services, without the veteran's being charged with leave 
when:
    (1) The facility is closed temporarily under an executive order of 
the President or due to an emergency situation;
    (2) The veteran is pursuing on-job training and he or she receives 
holidays established by Federal or State law;
    (3) The veteran is pursuing farm cooperative training and is 
required in the ordinary day to day conduct of farm business to be 
absent:
    (i) From the farm; or
    (ii) From that part of a farm cooperative course which is given at 
the educational institution.
    (4) The veteran is pursuing a standard college degree; and
    (i) There is an interval between consecutive semesters, terms, 
quarters or periods of instruction within a certified enrollment period 
which does not exceed a full calendar month;
    (ii) There is an interval, which does not exceed a full calendar 
month between semesters, terms or quarters when the educational 
institution only certifies enrollment on a semester, term, or quarter 
basis; or
    (iii) There is an interval, which does not exceed 30 days, when the 
veteran, as part of his or her approved program of vocational 
rehabilitation, transfers from one educational institution to another 
for the purpose of enrolling in and pursuing a similar program at the 
second institution;
    (5) The veteran is pursuing a non-college-degree course and there is 
a period of up to 5 days per twelve-month period during which the school 
offering non-college-degree courses is not operating, because 
instructors are attending professional meetings.
    (b) Case manager responsibility. The case manager may disapprove 
leave under paragraph (a)(4) of this section if:
    (1) Approval would result in or lead to use of more than 48 months 
of entitlement under Chapter 31, alone; or
    (2) Approval would require extension of the scheduled completion 
date of the veteran's program.
    (c) Approval of leaves of absence required. A veteran, who wishes to 
receive subsistence allowance while the facility temporarily is not 
offering training under conditions other than those identified in 
paragraph (a) of this section, must seek an approved leave of absence 
and be charged leave.

(Authority: 38 U.S.C. 3110)



Sec. 21.348  Leave following completion of a period of training or 
rehabilitation services.

    (a) Leave following completion of training or rehabilitation 
services. Leave may not be approved following completion of a period of 
rehabilitation services described in Sec. 21.340(a).
    (b) Postponement of the date of completion of a period of 
rehabilitation services prohibited. The date of completion of the 
veteran's program may not be extended for the purpose of allowing the 
veteran to use leave.

(Authority: 38 U.S.C. 3110)



Sec. 21.350  Unauthorized absences.

    A veteran who is unable to obtain an authorized leave of absence in 
advance may seek to have the unauthorized absence excused.
    (a) Excusing unauthorized absences. VA may excuse an unauthorized 
absence and make proper charges against the veteran's leave when:
    (1) The veteran has absented himself or herself when advance 
approval from VA is impracticable; and
    (2) Conditions for approval of leave are otherwise met.
    (b) Unexcused, unauthorized absences. When an unauthorized absence 
is not satisfactorily explained, VA will take necessary action, 
including recoupment of subsistence allowance for that period of 
absence.

(Authority: 38 U.S.C. 3110)

[[Page 200]]

                         Conduct and Cooperation



Sec. 21.362  Satisfactory conduct and cooperation.

    (a) General. The successful development and implementation of a 
program of rehabilitation services require the full and effective 
participation of the veteran in the rehabilitation process.
    (1) The veteran is responsible for satisfactory conduct and 
cooperation in developing and implementing a program of rehabilitation 
services under Chapter 31;
    (2) The staff is responsible for insuring satisfactory conduct and 
cooperation on the veteran's part; and
    (3) VA staff shall take required action when the veteran's conduct 
and cooperation are not satisfactory. (See Sec. 21.364)
    (b) VA responsibility. VA shall make a reasonable effort to inform 
the veteran and assure his or her understanding of:
    (1) The services and assistance which may be provided under Chapter 
31 to help the veteran maintain satisfactory cooperation and conduct and 
to cope with problems directly related to the rehabilitation process, 
especially counseling services;
    (2) Other services which VR&C staff can assist the veteran in 
securing through non-VA programs; and
    (3) The specific responsibilities of the veteran in the process of 
developing and implementing a program of rehabilitation services, 
especially the specific responsibility for satisfactory conduct and 
cooperation.
    (c) Veteran's responsibility. A veteran requesting or being provided 
services under Chapter 31 must:
    (1) Cooperate with VA staff in carrying out the initial evaluation 
and developing a rehabilitation plan;
    (2) Arrange a schedule which allows him or her to devote the time 
needed to attain the goals of the rehabilitation plan;
    (3) Seek the assistance of VA staff, as necessary, to resolve 
problems which affect attainment of the goals of the rehabilitation 
plan;
    (4) Conform to procedures established by VA governing pursuit of a 
rehabilitation plan including:
    (i) Enrollment and reenrollment in a course;
    (ii) Changing the rate at which a course is pursued;
    (iii) Requesting a leave of absence;
    (iv) Requesting medical care and treatment;
    (v) Securing supplies; and
    (vi) Other applicable procedures.
    (5) Conform to the rules and regulations of the training or 
rehabilitation facility at which services are being provided.
    (d) Responsibility for determining satisfactory conduct and 
cooperation. VR&C staff with case management responsibility in the 
veteran's case will:
    (1) Monitor the veteran's conduct and cooperation as necessary to 
assure consistency with provisions of paragraph (c) of this section.
    (2) Provide assistance which may be authorized under Chapter 31, or 
for which arrangements may be made under other programs to enable the 
veteran to maintain satisfactory conduct and cooperation.

(Authority: 38 U.S.C. 3111)



Sec. 21.364  Unsatisfactory conduct and cooperation.

    (a) General. If VA determines that a veteran has failed to maintain 
satisfactory conduct or cooperation, VA may, after determining that all 
reasonable counseling efforts have been made and are found not 
reasonably likely to be effective, discontinue services and assistance 
to the veteran, unless the case manager determines that mitigating 
circumstances exist. In any case in which such services and assistance 
have been discontinued, VA may reinstitute such services and assistance 
only if the counseling psychologist determines that:
    (1) The unsatisfactory conduct or cooperation of such veteran will 
not be likely to recur; and
    (2) The rehabilitation program which the veteran proposes to pursue 
(whether the same or revised) is suitable to such veteran's abilities, 
aptitudes, and interests.
    (b) Unsatisfactory conduct or cooperation exists. When the case 
manager determines that the veteran's conduct and/or cooperation are not 
in conformity with provisions of Sec. 21.362(c), the case manager will:

[[Page 201]]

    (1) Discuss the situation with the veteran;
    (2) Arrange for services, particularly counseling services, which 
may assist in resolving the problems which led to the veteran's 
unsatisfactory conduct or cooperation;
    (3) Interrupt the program to allow for more intense efforts, if the 
unsatisfactory conduct and cooperation persist. If a reasonable effort 
to remedy the situation is unsuccessful during the period in which the 
program is interrupted, the veteran's case will be discontinued and 
assigned to ``discontinued'' status unless mitigating circumstances are 
found. When mitigating circumstances exist the case may be continued in 
``interrupted'' status until VA staff determines the veteran may be 
reentered into the same or a different program because the veteran's 
conduct and cooperation will be satisfactory, or if a plan has been 
developed, to enable the veteran to reenter and try to maintain 
satisfactory conduct and cooperation. Mitigating circumstances include:
    (i) The effects of the veteran's service and nonservice-connected 
condition;
    (ii) Family or financial problems which have led the veteran to 
unsatisfactory conduct or cooperation; or
    (iii) Other circumstances beyond the veteran's control.

(Authority: 38 U.S.C. 3111)

           Interregional and Intraregional Travel of Veterans



Sec. 21.370  Intraregional travel at government expense.

    (a) Introduction. VA may authorize transportation expenses for 
intraregional travel to a veteran in a rehabilitation program or a 
program of employment services for the purposes presented in paragraph 
(b) of this section. When approved for purposes stated in paragraph (b) 
of this section, authorization of travel is limited to the veteran's 
transportation, and does not include transportation for the veteran's 
dependents, or for moving personal effects.


(Authority: 38 U.S.C. 111, 3104(a)(13))

    (b) Necessary condition for intraregional travel at government 
expense. VA may authorize a veteran to travel at government expense 
within the regional territory of the VA field station of jurisdiction 
when:
    (1) VA determines that the travel is necessary in the discharge of 
the government's obligation to the veteran; and
    (2) The veteran is instructed to travel for any of the following 
reasons:
    (i) To report to the chosen school or training facility for the 
purpose of starting training;
    (ii) To report to a prospective employer-trainer for an interview 
prior to induction into training, when there is definite assurance in 
advance of approving the travel that, upon interview, the employer will 
start the veteran in training, if the employer finds the veteran 
acceptable, or
    (iii) To report to the chosen school for a personal interview prior 
to induction into training when:
    (A) The school requires the interview as a condition of admission,
    (B) There is assurance before the travel is approved that the 
veteran's records (school, counseling, etc.) show he or she meets all 
basic requirements for induction under Sec. 21.282; and
    (C) The veteran submits to the school a transcript of his or her 
high school credits and a transcript from any school he or she attended 
following high school.
    (iv) To report to a rehabilitation facility or sheltered workshop;
    (v) To return to his or her home from the training or rehabilitation 
facility when:
    (A) Services are not available for a period of 30 days or more 
(including summer vacation periods), and
    (B) Travel from his or her home to the training or rehabilitation 
facility was at government expense;
    (vi) To return to the training or rehabilitation facility from his 
or her home, when:
    (A) The purpose of the travel is to continue the rehabilitation 
program, and
    (B) Travel from the training or rehabilitation facility to the 
veteran's home was at government expense;
    (vii) To return to the point from which he or she was transported at 
government expense, upon being placed

[[Page 202]]

in ``discontinued'' or ``interrupted'' status for any reason, except 
abandonment of training by the veteran without good reason;
    (viii) To report to a place of prearranged satisfactory employment 
upon completion of vocational rehabilitation for the purpose of 
beginning work;
    (ix) To return to his or her home from the place of training 
following rehabilitation to the point of employability, when suitable 
employment is not available;
    (x) To return from the place of training to the veteran's prior 
location, when VA could have approved travel to the place of training at 
government expense, but did not issue the necessary travel 
authorization; and
    (xi) To report to a place to take a scheduled examination required 
to practice the trade or profession for which the veteran has been 
trained. This travel shall be limited to points within the state in 
which the veteran has pursued his or her training or, if the veteran 
returned to the state from which he or she was sent to pursue training, 
he or she may be sent at government expense to a place within that state 
to take the examination. If there is more than one place within the 
state at which the veteran may take the examination, travel shall be 
limited to the nearest place.


(Authority: 38 U.S.C. 111)

    (c) Approval of intraregional transfer. Intraregional travel must be 
approved by the case manager.


(Authority: 38 U.S.C. 3104(a)(13))

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]



Sec. 21.372  Interregional transfer at government expense.

    (a) Introduction. A veteran may need to transfer from the 
jurisdiction of one VA facility to another in order to accomplish 
rehabilitation. This section states the conditions which will permit the 
transfer to be made at government expense. Authorization of travel is 
limited to the veteran's transportation, and does not include 
transportation for the veteran's dependents or for moving personal 
effects.


(Authority: 38 U.S.C. 111, 3104(a)(13))

    (b) Conditions which permit interregional transfers at government 
expense. A veteran may be provided travel at government expense when it 
has been determined that such travel is necessary to accomplish 
rehabilitation. VA will authorize an interregional transfer at 
government expense only to allow the veteran:
    (1) To enter training in the nearest satisfactory facility if:
    (i) The nearest satisfactory facility is within the jurisdiction of 
another VA facility; or
    (ii) There are no satisfactory facilities within the jurisdiction of 
the facility in which the veteran resides.
    (2) To enter training in the state in which the veteran has long-
standing family and social ties, and in which he or she plans to live 
following rehabilitation;
    (3) To report to an employer-trainer when all necessary steps have 
been taken to establish an on-job training program;
    (4) To report to rehabilitation facility or sheltered workshop;
    (5) To return to his or her home from the place of training when:
    (i) Training is not available for a period of 30 days or more 
(including summer vacation periods), and
    (ii) Travel from his or her home to the place of training or 
rehabilitation services was at government expense;
    (6) To return to the place of training or rehabilitation services 
from his or her home, when;
    (i) The purpose of the travel is to continue training or 
rehabilitation services; and
    (ii) Travel from the place of training or rehabilitation services to 
the veteran's home was at government expense;
    (7) To return to the point from which he or she was transferred at 
government expense, upon being assigned to ``discontinued'' or 
``interrupted'' status, for any reason, except abandonment of training 
by the veteran without good reason;
    (8) To report to a place of prearranged satisfactory employment or

[[Page 203]]

for a prearranged employment interview following completion of his or 
her program of vocational rehabilitation, when:
    (i) There is no satisfactory opportunity for employment in the 
veteran's occupation within the jurisdiction of the facility which has 
jurisdiction over his or her residence, and
    (ii) The veteran has a serious employment handicap.
    (9) To return to his or her home, from which he or she was 
transferred at government expense to pursue training, when, upon 
completion of his or her course, satisfactory employment is not 
available;
    (10) To return to the location from which he or she traveled without 
authorization because VA did not issue the necessary travel 
authorization on a timely basis.


(Authority: 38 U.S.C. 111)

    (c) Approval of interregional transfer. Interregional travel must be 
approved by the case manager.


(Authority: 38 U.S.C. 3104(a)(13))



Sec. 21.374  Authorization for travel of attendants.

    (a) Travel for attendants. The services of an attendant to accompany 
a veteran while traveling for rehabilitation purposes may be provided 
when such services are necessitated by the severity of the veteran's 
disability. Attendants may only be used to enable a veteran to attend 
appointments for initial evaluation, counseling, or intraregional or 
interregional travel at government expense under Sec. 21.370 and Sec.  
21.372.


(Authority: 38 U.S.C. 111)

    (b) Attendants not employed by the Federal government. (1) VA may 
authorize persons not in regular civilian employment of the Federal 
government to act as attendants. Payment of travel expenses for 
attendants will be authorized on the same basis as for the veteran the 
attendant is accompanying. VA:
    (i) Will furnish the attendant with common-carrier transportation, 
meal and lodging expenses; or
    (ii) Will grant the attendant a mileage allowance in lieu of 
furnishing the assistance cited in paragraph (b)(1)(i) of this section.
    (2) VA will not pay the attendant a fee if he or she is a relative 
of the veteran. A relative, for this purpose, is a person who by blood 
or marriage is the veteran's
    (i) Spouse,
    (ii) Parent,
    (iii) Child,
    (iv) Brother,
    (v) Sister,
    (vi) Uncle,
    (vii) Aunt,
    (viii) Niece, or
    (ix) Nephew.
    (c) Attendant employed by the Federal government. (1) VA may 
authorize a person in the regular civilian employment of the Federal 
government to act as an attendant. When assigned, the attendant:
    (i) Will be entitled to transportation and expenses, or
    (ii) May be allowed per diem in place of subsistence in accordance 
with the provisions of the Federal Travel Regulations (5 U.S.C. Chapter 
57).
    (2) VA will pay no fee to civilian employees of the Federal 
government who act as attendants.

[49 FR 40814, Oct. 18, 1984; 50 FR 9622, Mar. 11, 1985]



Sec. 21.376  Travel expenses for initial evaluation and counseling.

    When VA asks a disabled veteran to report to a designated place for 
an initial evaluation, reevaluation or counseling (including personal or 
vocational adjustment counseling), the veteran will travel to and from 
the place of evaluation and counseling at government expense. When a 
veteran, because of a severe disability, requires the services of an 
attendant while traveling, VA will authorize payment of travel expenses 
for the attendant under the provisions of Sec. 21.374.


(Authority: 38 U.S.C. 111)

[[Page 204]]

                   Personnel Training and Development



Sec. 21.380  Establishment of qualifications for personnel providing 
assistance under Chapter 31.

    (a) General. Notwithstanding any other provision of law or 
regulation, VA shall establish qualification standards for VBA personnel 
providing evaluation, rehabilitation, and case management services to 
eligible veterans under chapter 31, including:
    (1) Counseling psychologists;
    (2) Vocational rehabilitation specialists; and
    (3) Other staff providing professional and technical assistance.
    (b) Rehabilitation Act of 1973. VA shall consider qualification 
standards established for comparable personnel under the Rehabilitation 
Act of 1973, when setting agency standards.

(Authority: 38 U.S.C. 3118(c))



Sec. 21.382  Training and staff development for personnel providing 
assistance under Chapter 31.

    (a) General. VA shall provide a program of ongoing professional 
training and development for staff of the VR&E Service engaged in 
providing rehabilitation services under chapter 31. The objective of 
such training shall be to insure that rehabilitation services for 
disabled veterans are provided in accordance with the most advanced 
knowledge, methods, and techniques available for the rehabilitation of 
disabled persons. The areas in which training and development services 
may be provided to enhance staff skills include:
    (1) Evaluation and assessment:
    (2) Medical aspects of disability;
    (3) Psychological aspects of disability;
    (4) Counseling theory and techniques;
    (5) Personal and vocational adjustment;
    (6) Occupational information;
    (7) Placement processes and job development;
    (8) Special considerations in rehabilitation of the seriously 
disabled;
    (9) Independent living services;
    (10) Resources for training and rehabilitation; and
    (11) Utilizing research findings and professional publications.


(Authority: 38 U.S.C. 3118)

    (b) Training and development resources. For the purpose of carrying 
out the provisions of paragraph (a) of this section VA may:
    (1) Employ the services of consultants;
    (2) Make grants to and contract with public and private agencies, 
including institutions of higher learning, to conduct workshop and 
training activities;
    (3) Authorize individual training at institutions of higher learning 
and other appropriate facilities; and
    (4) Utilize chapter 41 of title 5, U.S.C., and related instructions 
to provide training and staff development activities on a group and 
individual basis.


(Authority: 38 U.S.C. 3118(b))

    (c) Interagency coordination. VA shall coordinate with the 
Commissioner of the Rehabilitation Services Administration and the 
Assistant Secretary for Veterans' Employment in planning and carrying 
out personnel training in areas of mutual programmatic concern.


(Authority: 38 U.S.C. 3118(c))

              Rehabilitation Research and Special Projects



Sec. 21.390  Rehabilitation research and special projects.

    (a) General. VA shall carry out an ongoing program of activities for 
the purpose of advancing the knowledge, methods, techniques, and 
resources available for use in rehabilitation programs for veterans. For 
this purpose, VA may conduct research and development, provide support 
for research and development, or both conduct and provide support for 
the development and conduct of:
    (1) Studies and research concerning the psychological, educational, 
social, vocational, industrial, and economic aspects of rehabilitation; 
and
    (2) Projects which are designed to increase the resources and 
potential for accomplishing the rehabilitation of disabled veterans.


(Authority: 38 U.S.C. 3119(a))


[[Page 205]]


    (b) Grants. VA may make grants to, or contract with, public on 
nonprofit agencies, including institutions of higher learning, to carry 
out the provisions of paragraph (a) of this section.


(Authority: 38 U.S.C. 3119(b))

    (c) Research by Vocational Rehabilitation and Employment (VR&C) 
staff members. VA will encourage research by VR&C staff members. This 
research will address problems affecting service delivery, initiation 
and continuation in rehabilitation programs, and other areas directly 
affecting the quality of VR&C services to veterans.


(Authority: 38 U.S.C. 3119(a))

    (d) Interagency coordination. VA shall cooperate with the 
Commissioner of the Rehabilitation Services Administration and the 
Director of the National Institute of Handicapped Research in the 
Department of Education, the Assistant Secretary for Veterans' 
Employment in the Department of Labor, and the Secretary of Health and 
Human Services regarding rehabilitation studies, research, and special 
projects of mutual programmatic concern.


(Authority: 38 U.S.C. 3119(c))

[49 FR 40814, Oct. 18, 1984, as amended at 62 FR 17710, Apr. 11, 1997]

             Veterans' Advisory Committee on Rehabilitation



Sec. 21.400  Veterans' Advisory Committee on Rehabilitation.

    (a) General. The Secretary shall appoint an advisory committee to be 
known as the Veterans' Advisory Committee on Rehabilitation.
    (b) Purpose. The purposes of the Veterans' Advisory Committee on 
Rehabilitation, hereafter referred to as the committee, are to:
    (1) Assess the rehabilitation needs of service and nonservice-
disabled veterans; and
    (2) Review the programs and activities of VA designed to meet such 
needs;


(Authority: 38 U.S.C. 3121(c))

    (c) Members. The committee shall include:
    (1) Members of the general public;
    (2) Appropriate representation of veterans with service-connected 
disabilities; and
    (3) Persons who have distinguished themselves in the public and 
private sectors in the fields of rehabilitation, and employment and 
training programs.
    (d) Members terms. The Secretary shall appoint members of the 
committee for three-year terms. Members may be reappointed for 
additional three-year terms.
    (e) Chairperson. The Secretary will designate one of the members of 
the committee to chair the committee.
    (f) Ex-officio members. The committee shall also include ex-officio 
members named by the following agencies. The ex-officio members shall 
include one representative from:
    (1) The Veterans Health Services and Research Administration;
    (2) The Veterans Benefits Administration;
    (3) The Rehabilitation Services Administration and one from the 
National Institute for Handicapped Research of the Department of 
Education; and
    (4) The Assistant Secretary of Labor for Veterans' Employment of the 
Department of Labor.


(Authority: 38 U.S.C. 3121(a))



Sec. 21.402  Responsibilities of the Veterans' Advisory Committee on 
Rehabilitation.

    (a) Consultation with the Secretary. The Secretary shall regularly, 
but not less than twice yearly, consult with and seek the advice of the 
committee with respect to the administration of veterans' rehabilitation 
programs authorized under Title 38, United States Code.
    (b) Submission of an annual report. The committee shall:
    (1) Submit to the Secretary an annual report on the rehabilitation 
programs and activities of the VA; and
    (2) Submit such other reports and recommendations to the Secretary 
as the committee determines appropriate.
    (c) Contents of the committee's annual report. The committee's 
annual report shall include:

[[Page 206]]

    (1) An assessment of the rehabilitation needs of veterans; and
    (2) A review of the programs and activities of VA designed to meet 
needs identified in paragraph (c)(1) of this section.
    (d) Secretary's annual report. The findings of the committee shall 
be incorporated in the Secretary's annual report submitted to the 
Congress under 38 U.S.C. 529. In addition the Secretary shall submit, 
together with this annual report, a copy of all reports and 
recommendations of the committee submitted to the Secretary since the 
previous annual report was submitted to the Congress.

(Authority: 38 U.S.C. 3121(c))

                 Additional Administrative Consideration



Sec. 21.410  Delegation of authority.

    The Secretary delegates authority to the Under Secretary for 
Benefits to make findings and decisions under 38 U.S.C. chapter 31 and 
regulations, precedents, and instructions that affect vocational 
rehabilitation services for disabled veterans. The Under Secretary for 
Benefits may further delegate this authority to supervisory and non-
supervisory Vocational Rehabilitation and Employment staff members.

(Authority: 38 U.S.C. 512(a))

[62 FR 17710, Apr. 11, 1997]



Sec. 21.412  Finality of decisions.

    (a) Facility of original jurisdiction. The decision of a VA facility 
in a given veteran's case:
    (1) Will be final and binding upon all field stations of VA as to 
conclusions based on evidence on file at that time; and
    (2) Will not be subject to revision on the same factual basis except 
by duly constituted appellate authorities or except as provided in 
Sec. Sec. 21.410 and 21.414. (See Sec. Sec.  19.153, 19.154, and 
19.155.


(Authority: 38 U.S.C. 512(a), 7103)

    (b) Adjudicative determinations. Current determinations of line of 
duty, character of discharge, relationship, and other pertinent elements 
affecting eligibility for training and rehabilitation services or 
payment of subsistence allowance under Chapter 31, made by an 
adjudicative activity by application of the same criteria and based on 
the same facts, are binding upon all other adjudicative activities in 
the absence of clear and unmistakable error.


(Authority: 38 U.S.C. 512(a))



Sec. 21.414  Revision of decision.

    The revision of a decision on which an action is based is subject to 
the following regulations:
    (a) Clear and unmistakable error, Sec. 3.105(a);
    (b) Difference of opinion, Sec. 3.105(b);
    (c) Character of discharge, Sec. 3.105(c);
    (d) Severance of service-connection, Sec. 3.105(d);
    (e) Reduction to less than compensable evaluation, Sec. 3.105(e). 
(See Sec. Sec. 21.48, 21.322, and 21.324)

(Authority: 38 U.S.C. 5112)

                          Informing the Veteran



Sec. 21.420  Informing the veteran.

    (a) General. VA will inform a veteran in writing of findings 
affecting receipt of benefits and services under Chapter 31. This 
includes veterans:
    (1) Requesting benefits and services; or
    (2) In receipt of benefits and services.
    (b) Notification. (1) Each notification should include the decision 
or finding, the reasons, including fact and law, for the decision, the 
effective date of the decision or finding; and
    (2) The veteran's appeal rights, if any.
    (c) Adverse action. An adverse action is one, other than an interim 
action such as a suspension of benefits pending development, which:
    (1) Denies Chapter 31 benefits, when such benefits have been 
requested;
    (2) Reduces or otherwise diminishes benefits being received by the 
veteran; or
    (3) Terminates receipt of benefits for reasons other than scheduled 
interruptions which are a part of the veteran's plan.
    (d) Prior notification of adverse action. VA shall give the veteran 
a period of at least 30 days to indicate his or her disagreement with an 
adverse action

[[Page 207]]

other than one which arises as a consequence of a change in training 
time or other such alteration in circumstances. If the veteran 
disagrees, he or she shall be given the opportunity, before appealing 
the adverse action as provided in Sec. 21.59 of this part, to:
    (1) Meet informally with a representative of VA;
    (2) Review the basis for VA decision, including any relevant written 
documents or material; and
    (3) Submit to VA any material which he or she may have relevant to 
the decision.

(Authority: 38 U.S.C. 3102)

[49 FR 40814, Oct. 18, 1984, as amended at 54 FR 40872, Oct. 4, 1989]



Sec. 21.422  Reduction in subsistence allowance following the loss of 
a dependent.

    (a) Notice of reduction required when a veteran loses a dependent. 
(1) Except as provided in paragraph (a)(2) of this section, VA will not 
reduce an award of subsistence allowance following the veteran's loss of 
a dependent unless:
    (i) VA has notified the veteran of the adverse action, and
    (ii) VA has provided the veteran with a period of 60 days in which 
to submit evidence for the purpose of showing that subsistence allowance 
should not be reduced.
    (2) When the reduction is based solely on written, factual, 
unambiguous information as to dependency provided by the veteran or his 
or her fiduciary with knowledge or notice that the information would be 
used to determine the monthly rate of subsistence allowance;
    (i) VA is not required to send a pre-reduction notice as stated in 
paragraph (a)(1) of this section, but;
    (ii) VA will send notice contemporaneous with the reduction in 
subsistence allowance.


(Authority: 38 U.S.C. 5112, 5113)

    (b) Pre-reduction notice. Where a reduction in subsistence allowance 
is proposed by reason of information concerning dependency received from 
a source other than the veteran, VA will:
    (1) Prepared a proposal for the reduction of subsistence allowance, 
setting forth material facts and reasons;
    (2) Notify the veteran at his or her latest address of record of the 
proposed action;
    (3) Furnish detailed reasons for the proposed reduction;
    (4) Inform the veteran that he or she has an opportunity for a 
predetermination hearing, provided that VA receives a request for such a 
hearing within 30 days from the date of the notice; and
    (5) Give the veteran 60 days for the presentation of additional 
evidence to show that the subsistence allowance should be continued at 
its present level.


(Authority: 38 U.S.C. 5112, 5113)

    (c) Predetermination hearing. (1) If VA receives a timely request 
for a predetermination hearing as indicated in paragraph (b)(4) of this 
section:
    (i) VA will notify the veteran in writing of the date, time and 
place for the hearing; and
    (ii) Payments of subsistence allowance will continue at the 
previously established level pending a final determination concerning 
the proposed reduction.
    (2) The hearing will be conducted by a VA employee who:
    (i) Did not participate in the preparation of the proposal to reduce 
the veteran's subsistence allowance, and
    (ii) Will bear the decision-making responsibility.


(Authority: 38 U.S.C. 5112, 5113)

    (d) Final action. VA will take final action following the 
predetermination procedures specified in paragraph (c) of this section.
    (1) If a predetermination hearing was not requested or if the 
veteran failed to report for a scheduled predetermination hearing, the 
final action will be based solely upon the evidence of record at the 
expiration of 60 days.
    (2) If a predetermination hearing was conducted, VA will base final 
action upon:
    (i) Evidence presented at the hearing;
    (ii) Evidence contained in the claims file at the time of the 
hearing; and

[[Page 208]]

    (iii) Any additional evidence obtained following the hearing 
pursuant to necessary development.
    (3) Whether or not a predetermination hearing was conducted, a 
written notice of the final action shall be issued to the veteran 
setting forth the reasons for the decison, and the evidence upon which 
it is based. The veteran will be informed of his or her appellate rights 
and right of representation. (For information concerning the conduct of 
the hearing see Sec. 3.103 (c) and (d) of this chapter).
    (4) When a reduction of subsistence allowance is found to be 
warranted following consideration of any additional evidence submitted, 
the effective date of the reduction or discontinuance shall be as 
specified under the provisions of Sec. 21.324 of this part.


(Authority: 38 U.S.C. 5112, 5113)

[54 FR 40872, Oct. 4, 1989]

                             Accountability



Sec. 21.430  Accountability for authorization and payment of training 
and rehabilitation services.

    (a) General. VA shall maintain policies and procedures which provide 
accountability in the authorization and payment of program costs for 
training and rehabilitation services. The procedures established under 
this section are applicable to all program costs except subsistence 
allowance (or the optional allowance at Chapter 34 rates). Policies and 
procedures governing payment of subsistence allowance are governed by 
Sec. Sec. 21.260 through 21.276, and Sec. Sec.  21.320 through 21.334.
    (b) Determining necessary costs for training and rehabilitation 
services. The estimates of program costs during a calendar year or 
lesser period shall be based upon the services necessary to carry out 
the veteran's rehabilitation plan during that period (Sec. Sec. 21.80 
through 21.98). The estimates will be developed by the VBA case manager. 
If additional approval is required, the VBA case manager shall secure 
such additional approval prior to authorization of services.
    (c) Vocational Rehabilitation and Employment (VR&C) Officer's review 
of program costs. The VR&C Officer will review the program costs for the 
services in paragraphs (c)(1) through (c)(3) of this section if the case 
manager's program cost estimate for a calendar year exceeds $25,000. The 
VR&C Officer may not delegate this responsibility. The case manager will 
neither sign a rehabilitation plan nor authorize expenditures before the 
VR&C Officer approves the program costs. The services subject to this 
review are:
    (1) Providing supplies to help establish a small business;
    (2) A period of extended evaluation; or
    (3) A program of independent living services.

(Authority: 38 U.S.C. 3115(b)(4))

    Cross-References: See Sec. 21.156. Other incidental goods and 
services. Sec. 21.258. Special assistance for veterans in self-
employment.

[49 FR 40814, Oct. 18, 1984, as amended at 51 FR 45767, Dec. 22, 1986; 
55 FR 25975, June 26, 1990; 62 FR 17710, Apr. 11, 1997]



      Subpart B_Claims and Applications for Educational Assistance

    Authority: 38 U.S.C. 501(a), ch. 51, unless otherwise noted.

    Editorial Note: The regulations formerly appearing under this 
subpart were revoked at 30 FR 14103, Nov. 9, 1965. That order provided 
in part, ``these regulations remain in force insofar as they are 
pertinent to any problems, appeals, litigation, or determinations of 
liability of educational institutions or training establishments for 
overpayments under 38 U.S.C. 1666.''

                                 Claims



Sec. 21.1029  Definitions.

    These definitions apply to this subpart, and to subparts C, D, G, H, 
K, and L of this part.
    (a) Abandoned claim. A claim is an abandoned claim if:
    (1) In connection with a formal claim VA requests that the claimant 
furnish additional evidence, and the claimant--
    (i) Does not furnish that evidence within one year of the date of 
the request; and

[[Page 209]]

    (ii) Does not show good cause why the evidence could not have been 
submitted within one year of the date of the request; or
    (2) In connection with an informal claim, VA requests a formal 
claim, and--
    (i) VA does not receive the formal claim within one year of the date 
of request; and
    (ii) The claimant does not show good cause why he or she could not 
have filed the formal claim in sufficient time for VA to have received 
it within one year of the date of the request.


(Authority: 38 U.S.C. 5103(a))

    (b) Date of claim. The date of claim is the date on which a valid 
claim or application for educational assistance is considered to have 
been filed with VA, for purposes of determining the commencing date of 
an award of that educational assistance.
    (1) If an informal claim is filed and VA receives a formal claim 
within one year of the date VA requested it, or within such other period 
of time as provided by Sec. 21.1032, the date of claim, subject to the 
provisions of paragraph (b)(3) of this section, is the date VA received 
the informal claim.
    (2) If a formal claim is filed other than as described in paragraph 
(b)(1) of this section, the date of claim, subject to the provisions of 
paragraph (b)(3) of this section, is the date VA received the formal 
claim.
    (3) If a formal claim itself is abandoned and a new formal or 
informal claim is filed, the date of claim is as provided in paragraph 
(b)(1) or (b)(2) of this section, as appropriate.


(Authority: 38 U.S.C. 5103)

    (c) Formal claim. A claim is a formal claim when the claimant (or 
his or her authorized representative) files the claim with VA, and--
    (1) The claim is a claim for--
    (i) Educational assistance;
    (ii) An increase in educational assistance; or
    (iii) An extension of the eligibility period for receiving 
educational assistance; and
    (2) If there is a form (either paper or electronic) prescribed under 
this part, the claim is filed on that form.


(Authority: 38 U.S.C. 5101(a))

    (d) Informal claim. (1) If a form (either paper or electronic) has 
been prescribed under this part to use in claiming the benefit sought, 
the term informal claim means--
    (i) Any communication from an individual, or from an authorized 
representative or a Member of Congress on that individual's behalf that 
indicates a desire on the part of the individual to claim or to apply 
for VA-administered educational assistance; or
    (ii) A claim from an individual or from an authorized representative 
on that individual's behalf for a benefit described in paragraph 
(c)(1)(i) of this section that is filed in a document other than in the 
prescribed form.
    (2) If a form (either paper or electronic) has not been prescribed 
to use in claiming the benefit sought, the term informal claim means any 
communication, other than a formal claim, from an individual, or from an 
authorized representative or a Member of Congress on that individual's 
behalf that indicates a desire on the part of the individual to claim or 
to apply for VA-administered educational assistance.
    (3) When VA requests evidence in connection with a claim, and the 
claimant submits that evidence to VA after having abandoned the claim, 
the claimant's submission of the evidence is an informal claim.
    (4) The act of enrolling in an approved school is not an informal 
claim.
    (5) VA will not consider a communication received from a service 
organization, an attorney, or agent to be an informal claim if a valid 
power of attorney, executed by the claimant, is not in effect at the 
time the communication is written.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3471, 3513, 
5101(a), 5102, 5901)


[[Page 210]]


    (e) VA. The term VA means the United States Department of Veterans 
Affairs.


(Authority: 38 U.S.C. 301)

[64 FR 23770, May 4, 1999]



Sec. 21.1030  Claims.

    An individual must file a formal claim for educational assistance 
for pursuit of a program of education, indicating the proposed place of 
training, the school or training establishment, the objective of the 
program of education, and such other information as the Secretary may 
require. A servicemember also must consult with his or her service 
education officer before filing a formal claim for educational 
assistance.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3471, 3513, 
5101(a))

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0596.)

[64 FR 23771, May 4, 1999]



Sec. 21.1031  VA responsibilities when a claim is filed.

    (a) VA will furnish forms. VA will furnish all necessary claim 
forms, instructions, and, if appropriate, a description of any 
supporting evidence required upon receipt of an informal claim.


(Authority: 38 U.S.C. 5102)

    (b) Request for additional evidence. If a formal claim for 
educational assistance is incomplete, or if VA requires additional 
evidence or information to adjudicate the claim, VA will notify the 
claimant of the evidence and/or information necessary to complete or 
adjudicate the claim and of the time limit provisions of Sec. 
21.1032(a).


(Authority: 38 U.S.C. 5103)

[64 FR 23771, May 4, 1999]



Sec. 21.1032  Time limits.

    The provisions of this section are applicable to informal claims and 
formal claims.
    (a) Failure to furnish form, information, or notice of time limit. 
VA's failure to give a claimant or potential claimant any form or 
information concerning the right to file a claim or to furnish notice of 
the time limit for the filing of a claim will not extend the time 
periods allowed for these actions.


(Authority: 38 U.S.C. 5101, 5113)

    (b) Notice of time limit for filing evidence. If a claimant's claim 
is incomplete, VA will notify the claimant of the evidence necessary to 
complete the claim. Unless payment of educational assistance is 
permitted by paragraph (e) of this section, if the evidence is not 
received within one year from the date of such notification, VA will not 
pay educational assistance by reason of that claim.


(Authority: 38 U.S.C. 5103)

    (c) Time limit for filing a claim for an extended period of 
eligibility under 38 U.S.C. chapter 30, 32, or 35, and 10 U.S.C. chapter 
1606. VA must receive a claim for an extended period of eligibility 
provided by Sec. 21.3047, Sec.  21.5042, Sec.  21.7051, or Sec.  
21.7551 by the later of the following dates.
    (1) One year from the date on which the spouse's, surviving 
spouse's, veteran's, or reservist's original period of eligibility 
ended; or
    (2) One year from the date on which the spouse's, surviving 
spouse's, veteran's, or reservist's physical or mental disability no 
longer prevented him or her from beginning or resuming a chosen program 
of education.


(Authority: 10 U.S.C. 16133(b); 38 U.S.C. 3031(d), 3232(a), 3512)

    (d) Time limit for filing for an extension of eligibility due to 
suspension of program (38 U.S.C. chapter 35). VA must receive a claim 
for an extended period of eligibility due to a suspension of an eligible 
child's program of education as provided in Sec. 21.3043 by the later 
of the following dates.
    (1) One year from the date on which the child's original period of 
eligibility ended; or
    (2) One year from the date on which the condition that caused the 
suspension of the program of education ceased to exist.


(Authority: 38 U.S.C. 3512(c))


[[Page 211]]


    (e) Extension for good cause. (1) VA may extend for good cause a 
time limit within which a claimant or beneficiary is required to act to 
perfect a claim or challenge an adverse VA decision. VA may grant such 
an extension only when the following conditions are met:
    (i) When a claimant or beneficiary requests an extension after 
expiration of a time limit, he or she must take the required action 
concurrently with or before the filing of that request; and
    (ii) The claimant or beneficiary must show good cause as to why he 
or she could not take the required action during the original time 
period and could not have taken the required action sooner.
    (2) Denials of time limit extensions are separately appealable 
issues.


(Authority: 38 U.S.C. 5101, 5113)

    (f) Computation of time limit. (1) In computing the time limit for 
any action required of a claimant or beneficiary, including the filing 
of claims or evidence requested by VA, VA will exclude the first day of 
the specified period, and will include the last day. This rule is 
applicable in cases in which the time limit expires on a workday. When 
the time limit would expire on a Saturday, Sunday, or holiday, the VA 
will include the next succeeding day in the computation.
    (2) The first day of the specified period referred to in paragraph 
(f)(1) of this section will be the date of the letter of notification to 
the claimant or beneficiary for purposes of computing time limits. As to 
appeals, see Sec. Sec. 20.302 and 20.305 of this chapter.


(Authority: 38 U.S.C. 501(a))

[64 FR 23771, May 4, 1999, as amended at 71 FR 1497, Jan. 10, 2006]



  Subpart C_Survivors' and Dependents' Educational Assistance Under 38 
                            U.S.C. Chapter 35

    Authority: 38 U.S.C. 501(a), 512, 3500-3566, unless otherwise noted.

                                 General



Sec. 21.3001  Delegation of authority.

    Except as otherwise provided, authority is delegated to the Under 
Secretary for Benefits and to supervisory or administrative personnel 
within the jurisdiction of the Education Service, Veterans Benefits 
Administration, designated by him or her to make findings and decisions 
under 38 U.S.C. chapter 35 and the applicable regulations, precedents 
and instructions, as to the program authorized by this subpart.


(Authority: 38 U.S.C. 512(a))

[61 FR 26108, May 24, 1996]



Sec. 21.3002  Administration of Survivors' and Dependents' Educational 
Assistance Program.

    Subpart D of this part applies to the Survivors' and Dependents' 
Educational Assistance Program, unless the provisions of a section in 
that subpart are explicitly limited to one or more of the other 
educational assistance programs VA administers.

(Authority: 38 U.S.C. 501, 3501-3566)

[61 FR 26108, May 24, 1996]



Sec. 21.3020  Educational assistance.

    The program of educational assistance under 38 U.S.C. Chapter 35 
captioned Survivors' and Dependents' Educational Assistance, may be 
referred to as Dependents' Educational Assistance.


(Authority: Sec. 309, 90 Stat. 2383)

    (a) General. A program of education or special restorative training 
may be authorized for an eligible person who meets the definition 
contained in Sec. 21.3021.
    (b) 45 months limitation. Educational assistance may not exceed a 
period of 45 months, or the equivalent in part-time training, unless it 
is determined that a longer period is required for special restorative 
training under the circumstances outlined in Sec. 21.3300(c) or except 
as specified in Sec. 21.3044(c).


(Authority: 38 U.S.C. 3511(a), 3533, 3541(b))

    (c) Courses in foreign countries. A course to be pursued at a school 
not located in a State or in the Philippines

[[Page 212]]

may not be approved except under the circumstances outlined in Sec. 
21.4260.

[30 FR 15631, Dec. 18, 1965, as amended at 31 FR 6773, May 6, 1966; 34 
FR 841, Jan. 18, 1969; 38 FR 14931, June 7, 1973; 43 FR 35289, Aug. 9, 
1978]



Sec. 21.3021  Definitions.

    (a) Eligible person means:
    (1) A child of a:
    (i) Veteran who died of a service-connected disability.
    (ii) Veteran who died while having a disability evaluated as total 
and permanent in nature resulting from a service-connected disability.
    (iii) Veteran, serviceman or servicewoman who has a total disability 
permanent in nature resulting from a service-connected disability.
    (iv) Person who is on active duty as a member of the Armed Forces 
and who now is, and, for a period of more than 90 days, has been, listed 
by the Secretary concerned as missing in action, captured in line of 
duty by a hostile force, or forcibly detained or interned in line of 
duty by a foreign government or power.
    (2) The surviving spouse of a:
    (i) Veteran who died of a service-connected disability.
    (ii) Veteran who died while having a disability evaluated as total 
and permanent in nature resulting from a service-connected disability, 
arising out of active military, naval or air service after the beginning 
of the Spanish-American War. (See Sec. Sec. 3.6(a) and 3.807 of this 
chapter.)
    (3) The spouse of a:
    (i) Veteran, serviceman or servicewoman who has a total disability 
permanent in nature resulting from a service-connected disability.
    (ii) Person who is on active duty as a member of the Armed Forces 
and who now is, and, for a period of more than 90 days, has been, listed 
by the Secretary concerned as missing in action, captured in line of 
duty by a hostile force, or forcibly detained or interned in line of 
duty by a foreign government or power.
    (b) Child means a son or daughter of a veteran as defined in Sec. 
3.807(d) of this chapter. The term includes a child of a Philippine 
Commonwealth Army veteran and a Philippine Scout (designated as a New 
Philippine Scout under 38 U.S.C. 3566(b)), as defined in Sec. 3.40(b), 
(c), or (d) of this chapter, but educational assistance allowance may 
not be authorized based on such service for any period before September 
30, 1966.
    (c) Wife and widow, spouse and surviving spouse. The terms wife and 
widow mean an individual as defined in Sec. 3.807(d) of this chapter 
and the terms spouse and surviving spouse shall have the same respective 
meaning when used in the regulations in part 21, Title 38, Code of 
Federal Regulations. Educational assistance allowance may not be 
authorized for any such individuals for any period before December 1, 
1968.


(Authority: 38 U.S.C. 3500, 3501, and 3511)

    (d) Parent or guardian means a natural or adoptive parent, a 
fiduciary legally appointed by a court of competent jurisdiction or any 
person who is determined to be otherwise legally vested with the care of 
the eligible person (38 U.S.C. 3501(a)(4)) or it may be the eligible 
person if he or she has attained majority under laws applicable in his 
or her State of residence as shown on the application and is under no 
known legal disability. (38 U.S.C. 3501(b)) The eligible person may be 
designated as the person by whom required actions may be taken even 
though he or she has not attained majority, or having attained majority, 
is under a legal disability, when it is determined that to do otherwise 
would not be in his or her best interest, would result in undue delay or 
would not be administratively feasible. Where necessary to protect his 
or her interest and there is reason why the eligible person should not 
act for himself or herself, some other individual may be designated as 
the person by whom required actions should be taken.


(Authority: 38 U.S.C. 3501(c))

    (e) Armed Forces, as to service by the eligible person, means the 
U.S. Army, Navy, Marine Corps, Air Force, and Coast Guard, including the 
Reserve components of each, the National Guard of the United States and 
the Air National Guard of the United States. (38 U.S.C. 3501 (a)(3) and 
(d) and 3512(a)) Effective December 31, 1970, the term

[[Page 213]]

includes the National Oceanic and Atmospheric Administration, the 
Environmental Science Services Administration and the Coast and Geodetic 
Survey, as to full-time duty of officers commissioned therein.


(Authority: 38 U.S.C. 101(21)(C))

    (f) Duty with the Armed Forces, as to service by the eligible 
person, means active duty, active duty for training for a period of 6 or 
more consecutive months, or an initial period of active duty for 
training of not less than 3 months or more than 6 months in the Ready 
Reserve. (38 U.S.C. 3501(a)(3) and (d), 3512(a)) See Sec. Sec. 21.3041 
and 21.3042.
    (g) State means each of the several States, territories, and 
possessions of the United States, the District of Columbia, and the 
Commonwealth of Puerto Rico, and the Canal Zone. (38 U.S.C. 101(20)) 
(Although the Republic of the Philippines is not included in the 
definition of a State, eligible persons may pursue courses of training 
in that country.)
    (h) Program of education. The term program of education means any 
curriculum or any combination of unit courses or subjects pursued at an 
educational institution which is generally accepted as necessary to 
fulfill the requirements for the attainment of a predetermined and 
identified educational, professional, or vocational objective.


(Authority: 38 U.S.C. 3501(a)(5))

    (i) Educational objective. An educational objective is one that 
leads to the awarding of a diploma, degree, or certificate which 
reflects educational attainment.


(Authority: 38 U.S.C. 3501(a)(5))

    (j) Professional or vocational objective. A professional or 
vocational objective is one that leads to an occupation. It may include 
educational objectives essential to prepare for the chosen occupation. 
When a program consists of a series of courses not leading to an 
educational objective, such courses must be directed toward attainment 
of a designated professional or vocational objective.


(Authority: 38 U.S.C. 3501(a)(5))

    (k) School, educational institution, institution. The terms school, 
educational institution and institution mean:
    (1) A vocational school or business school;
    (2) A junior college, teachers' college, college, normal school, 
professional school, university, or scientific or technical institution;
    (3) A public or private secondary school;
    (4) A training establishment as defined in Sec. 21.4200(c); or
    (5) An institution that provides specialized vocational training, 
generally recognized as on the secondary school level or above, for 
people with mental or physical disabilities.


(Authority: 38 U.S.C. 3501(a)(6), 3535)

    (l) Disabling effects of chronic alcoholism. (1) The term disabling 
effects of chronic alcoholism means alcohol-induced physical or mental 
disorders or both, such as habitual intoxication, withdrawal, delirium, 
amnesia, dementia, and other like manifestations of chronic alcoholism 
which in the particular case:
    (i) Have been medically diagnosed as manifestations of alcohol 
dependency or chronic alcohol abuse; and
    (ii) Are determined to have prevented commencement or completion of 
the affected individual's chosen program of education.
    (2) A diagnosis of alcoholism, chronic alcoholism, alcohol-
dependency, chronic alcohol abuse, etc., in and of itself, does not 
satisfy the definition of this term.
    (3) Injury sustained by an eligible spouse or surviving spouse as a 
proximate and immediate result of activity undertaken by the eligible 
spouse or surviving spouse while physically or mentally unqualified to 
do so due to alcoholic intoxication is not considered a disabling effect 
of chronic alcoholism.


(Authority: 38 U.S.C. 105, 3512(b))

    (m) Additional definitions. The definitions of all terms that are 
defined in Sec. Sec. 21.1029 and 21.4200 but that are not defined in 
this section apply to subpart C of this part.


(Authority: 38 U.S.C. 501, 3501)

[[Page 214]]


    Cross References: Duty periods. See Sec. 3.6 of this chapter.


    Persons included. See Sec. 3.7 of this chapter.

    Philippine and insular forces. See Sec. 3.40 of this chapter.

[36 FR 2508, Feb. 5, 1971, as amended at 38 FR 12110, May 9, 1973; 43 FR 
35290, Aug. 9, 1978; 61 FR 26108, May 24, 1996; 61 FR 29295, June 10, 
1996; 62 FR 51784, Oct. 3, 1997; 64 FR 23771, May 4, 1999]



Sec. 21.3022  Nonduplication--programs administered by VA.

    A person who is eligible for educational assistance under 38 U.S.C. 
chapter 35 and is also eligible for assistance under any of the 
provisions of law listed in this paragraph cannot receive such 
assistance concurrently. The eligible person must elect which benefit he 
or she will receive for the particular period or periods during which 
education or training is to be pursued. The election is subject to the 
conditions specified in Sec. 21.4022 of this part. The provisions of 
law are:
    (a) 38 U.S.C. chapter 30,
    (b) 38 U.S.C. chapter 31,
    (c) 38 U.S.C. chapter 32,
    (d) 38 U.S.C. chapter 34,
    (e) 10 U.S.C. chapter 1606,
    (f) 10 U.S.C. chapter 107,
    (g) Section 903 of the Department of Defense Authorization Act, 
1981,
    (h) The Hostage Relief Act of 1980, and
    (i) The Omnibus Diplomatic Security and Antiterrorism Act of 1986.


(Authority: 38 U.S.C. 3681)

[54 FR 33886, Aug. 17, 1989, as amended at 57 FR 29798, July 7, 1992; 61 
FR 20728, May 8, 1996]



Sec. 21.3023  Nonduplication; pension, compensation, and dependency and 
indemnity compensation.

    (a) Child; age 18. A child who is eligible for educational 
assistance and who is also eligible for pension, compensation or 
dependency and indemnity compensation based on school attendance must 
elect whether he or she will receive educational assistance or pension, 
compensation or dependency and indemnity compensation.
    (1) An election of educational assistance either before or after the 
age of 18 years is a bar to subsequent payment or increased rates or 
additional amounts of pension, compensation or dependency and indemnity 
compensation on account of the child based on school attendance on or 
after the age of 18 years. The bar is equally applicable where the child 
has eligibility from more than one parent.
    (2) Payment of pension, compensation or dependency and indemnity 
compensation to or on account of a child after his or her 18th birthday 
does not bar subsequent payments of educational assistance.
    (3) An election of educational assistance will not preclude the 
allowance of pension, compensation, or dependency and indemnity 
compensation based on school attendance for periods, including vacation 
periods, prior to the commencement of educational assistance.
    (b) Child; under 18 or helpless. Educational assistance allowance or 
special restorative training allowance may generally be paid 
concurrently with pension, compensation or dependency and indemnity 
compensation for a child under the age of 18 years or for a helpless 
child based on the service of one or more parents. Where, however, 
entitlement is based on the death of more than one parent in the same 
parental line, concurrent payments in two or more cases may not be 
authorized if the death of one such parent occurred on or after June 9, 
1960. In the latter cases, an election of educational assistance and 
pension, compensation or dependency and indemnity compensation in one 
case does not preclude a reelection of benefits before attaining age 18 
or while helpless based on the service of another parent in the same 
parental line.
    (c) Child; election. An election by a child under this section must 
be submitted to VA in writing.
    (1) Except as provided in paragraph (c)(2) of this section, an 
election to receive Survivors' and Dependents' Educational Assistance 
(DEA) is final when the eligible child commences a program of education 
under DEA (38 U.S.C. chapter 35). Commencement of a program of education 
under DEA will be deemed to have occurred for VA purposes on the date 
the first payment of DEA educational assistance is made, as evidenced by 
negotiation of the first

[[Page 215]]

check or receipt of the first payment by electronic funds transfer.
    (2) An election based on erroneous information furnished by an 
authorized representative of the Department of Veterans Affairs is not 
considered final.
    (3) A child other than a helpless child, whose eligibility was based 
on a finding that the veteran had a permanent total service-connected 
disability and who commenced a program of education under DEA may not 
thereafter qualify as a dependent for disability compensation purposes 
if the veteran is later found to be less than permanently and totally 
disabled, or for pension, compensation or dependency and indemnity 
compensation after the veteran's death.
    (d) Spouse or surviving spouse. Educational assistance allowance may 
be paid for an eligible spouse or surviving spouse concurrently with 
pension, compensation or dependency and indemnity compensation.

(Authority: 38 U.S.C. 3562)

(The information collection requirements in this section have been 
approved by the Office of Management and Budget under control number 
2900-0595)

    Cross References: Discontinuance. See Sec. 3.503(h) of this 
chapter.

    Concurrent payments. See Sec. 3.707 of this chapter.

    Certification. See Sec. 3.807 of this chapter.

[30 FR 15631, Dec. 18, 1965, as amended at 31 FR 6773, May 6, 1966; 34 
FR 842, Jan. 18, 1969; 40 FR 42879, Sept. 17, 1975; 50 FR 27826, July 8, 
1985; 63 FR 45718, Aug. 27, 1998]



Sec. 21.3024  Nonduplication; Federal Employees' Compensation Act.

    (a) Civilian employment. The provisions of this paragraph are 
applicable to cases where there is eligibility for benefits from the 
Office of Workers' Compensation Programs, under the Federal Employees' 
Compensation Act (FECA) based on the disability or death as a result of 
civilian employment of the veteran from whom eligibility for educational 
assistance is derived.
    (1) Child, spouse or surviving spouse. A person who is eligible for 
educational assistance and is also eligible for Office of Workers' 
Compensation Programs benefits, under the Federal Employees' 
Compensation Act (FECA) must elect which benefit he or she will receive.
    (2) Veteran, spouse and child--surviving spouse and child. An 
eligible person may receive educational assistance notwithstanding that 
the Office of Workers' Compensation Programs benefits under the Federal 
Employees' Compensation Act (FECA) are being paid to a veteran, or 
surviving spouse.
    (3) Election. An election of Office of Workers' Compensation 
Programs benefits, under the Federal employees' Compensation Act (FECA), 
by or for a child filed on or after July 4, 1966, is a bar to subsequent 
payments of Department of Veterans Affairs benefits during the period of 
concurrent eligibility. An election of Office of Workers' Compensation 
Programs benefits under the Federal Employees' Compensation Act (FECA) 
by a surviving spouse filed on or after December 1, 1968, is a bar to 
subsequent payments of Department of Veterans Affairs benefits during 
the period of concurrent eligibility.
    (b) Military service. The provisions of this paragraph are 
applicable to cases where there is eligibility for benefits from Office 
of Workers' Compensation Program, under the Federal Employee's 
Compensation Act (FECA) based on the disability or death as a result of 
military service by the veteran from whom eligibility for educational 
assistance is derived.
    (1) Child, spouse or surviving spouse. A person who is eligible for 
educational assistance and is also eligible for Office of Workers' 
Compensation Programs benefits, under the Federal Employees' 
Compensation Act (FECA) must elect which benefit he or she will receive. 
The election may be made at any time.
    (2) Veteran, spouse and child--surviving spouse and child. An 
eligible person may receive educational assistance notwithstanding that 
the Office of Workers' Compensation Programs benefits, under the Federal 
Employees' Compensation Act (FECA) are being paid to a veteran, or 
surviving spouse.

    Cross Reference: Federal Employees' Compensation. See Sec. 3.708 of 
this chapter.

[40 FR 42879, Sept. 17, 1975, as amended at 50 FR 27826, July 8, 1985]

[[Page 216]]



Sec. 21.3025  Nonduplication; Federal programs.

    Payment of subsistence allowance and special training allowance is 
prohibited to an otherwise eligible person--
    (a) Who is on active duty and is pursuing a course of education 
which is being paid for by the Armed Forces (or by the Department of 
Health and Human Services in the case of the Public Health Service); or
    (b) For a unit course or courses which are being paid for under 5 
U.S.C. chapter 41.

(Authority: 38 U.S.C. 3681(a))

[61 FR 26108, May 24, 1996]

                                 Claims



Sec. 21.3030  Claims.

    The provisions of subpart B of this part apply with respect to 
submission of a claim for educational assistance under 38 U.S.C. chapter 
35, VA actions upon receiving a claim, and time limits connected with 
claims.

(Authority: 38 U.S.C. 3513, 5101, 5102, 5103)

[64 FR 23772, May 4, 1999]

                       Eligibility and Entitlement



Sec. 21.3040  Eligibility; child.

    (a) Commencement. A program of education or special restorative 
training may not be afforded prior to the eligible person's 18th 
birthday or the completion of secondary schooling, whichever is earlier, 
unless it is determined through counseling that the best interests of 
the eligible person will be served by entering training at an earlier 
date and the eligible person has passed:
    (1) Compulsory school attendance age under State law; or
    (2) His or her 14th birthday and due to physical or mental handicap 
may benefit by special restorative or specialized vocational training.
    (b) Secondary schooling. Completion of secondary schooling means 
completion of a curriculum offered by a public or private school which 
satisfies the requirements for a high school diploma or its equivalent--
usually completion of the 12th grade in the public school system.
    (c) Age limitation for commencement. No person is eligible for 
educational assistance who reached his or her 26th birthday on or before 
the effective date of a finding of permanent total service-connected 
disability, or on or before the date the veteran's death occurred, or on 
or before the 91st day of listing by the Secretary concerned of the 
member of the Armed Forces on whose service eligibility is claimed as 
being in one of the missing status categories of Sec. 21.3021 
(a)(1)(iv) and (3)(ii).
    (d) Termination of eligibility. No person is eligible for 
educational assistance beyond his or her 31st birthday, except as 
provided under Sec. 21.3041(e)(2). In no event may educational 
assistance be provided after the period of entitlement has been 
exhausted. In an exceptional case special restorative training may be 
provided in excess of 45 months. See Sec. 21.3300.

(Authority: 38 U.S.C. 3512(a))

[30 FR 15632, Dec. 18, 1965, as amended at 34 FR 842, Jan. 18, 1969; 39 
FR 38227, Oct. 30, 1974; 40 FR 42879, Sept. 17, 1975; 41 FR 47929, Nov. 
1, 1976; 43 FR 35290, Aug. 9, 1978]



Sec. 21.3041  Periods of eligibility; child.

    (a) Basic beginning date. The basic beginning date of an eligible 
child's period of eligibility is his or her 18th birthday or successful 
completion of secondary schooling, whichever occurs first. See paragraph 
(b) of this section and Sec. 21.3040 (a) and (b).


(Authority: 38 U.S.C. 3512(a))

    (b) Exceptions to basic beginning date. (1) An eligible child may 
have a beginning date earlier than the basic beginning date when he or 
she has:
    (i) Completed compulsory school attendance under applicable State 
law, or
    (ii) Passed his or her 14th birthday and has a physical or mental 
handicap. See Sec. 21.3040(a).
    (2) The eligible child may have a beginning date later than the 
basic beginning date when any of the following circumstances exist.
    (i) If the effective date of the permanent and total disability 
rating is before the child has reached 18 but the date of notification 
to the veteran from whom the child derives eligibility occurs after the 
child has reached 18, the

[[Page 217]]

beginning date of eligibility shall be the basic beginning date as 
determined in paragraph (a) of this section, or the date of notification 
to the veteran, whichever is more advantageous to the eligible child.
    (ii) If the effective date of the permanent and total disability 
rating occurs after the child has reached 18 but before he or she has 
reached 26, the beginning date of eligibility will be the effective date 
of the rating or the date of notification to the veteran from whom the 
child derives eligibility, whichever is more advantageous to the 
eligible child.


(Authority: 38 U.S.C. 3512(a)(3), 3512(d))

    (iii) If the child becomes eligible through the death of a veteran, 
the date of death will be the beginning date of eligibility if it occurs 
after the child's 18th birthday and before his or her 26th birthday.
    (iv) The child may become eligible through qualifying as the 
veteran's adopted child (see Sec. 3.57(c)) or by becoming a stepchild 
of the veteran and a member of the veteran's household. If either of 
these events occurs after the child's 18th birthday and before his or 
her 26th birthday, the effective date of eligibility will be whichever 
of the following is appropriate:
    (A) The date the child qualifies as an adopted child under Sec. 
3.57(c), or
    (B) The date the child becomes the veteran's stepchild and a member 
of his or her household.


(Authority: 38 U.S.C. 3501)

    (c) Basic ending date. The eligible person's 26th birthday.
    (d) Modified ending date. When one of the following occurs between 
ages 18 and 26, the ending date will be the eligible person's 26th 
birthday or 8 years from the date of happening specified in paragraphs 
(d) (1) to (7) of this section and 10 years in paragraph (d)(8); 
whichever is later. When paragraph (d)(9) is applicable, the ending date 
will be as stated in paragraph (d)(9). Where the ending date is subject 
to modification under more than one of paragraph (d) (3), (4), (5), (6) 
or (7) of this section, the more favorable date will apply. In no case 
will the modified ending date extend beyond the eligible person's 31st 
birthday.


(Authority: 38 U.S.C. 3512).

    (1) Effective date of permanent total rating of veteran-parent or 
the date of notification to him or her of such rating, whichever is the 
more advantageous to the eligible person.


(Authority: 38 U.S.C. 3512)

    (2) Death of veteran-parent.
    (3) Date of first unconditional discharge or release from ``duty 
with the Armed Forces'' served as an eligible person if he or she served 
after age 18 and before age 26. See Sec. 21.3042.
    (4) Enactment of Pub. L. 88-361 on July 7, 1964, providing 
eligibility based on permanent total disability; that is, July 6, 1969.
    (5) Enactment of Pub. L. 89-349 on November 8, 1965, providing 
eligibility based on peacetime service after the Spanish-American War 
and prior to September 16, 1940; or during World War I or World War II 
solely by reason of the provisions of 38 U.S.C. 1101; that is, November 
7, 1970.
    (6) Enactment of Pub. L. 89-613 on September 30, 1966, providing 
eligibility based on service with the Philippine Commonwealth Army or as 
a Philippine Scout as defined in Sec. 3.40 (b), (c), or (d) of this 
chapter; that is, September 29, 1971. See Sec. 3.807 of this chapter.
    (7) Effective date of Pub. L. 90-77, section 307, October 1, 1967, 
providing eligibility for persons solely by virtue of that section who 
were over age 23 and below age 26 on that date; that is September 30, 
1972.
    (8) Enactment of Pub. L. 92-540 (86 Stat. 1074) on October 24, 1972, 
providing for a course of apprentice or other on-the-job training 
approved under the provisions of Sec. 21.4261 or 21.4262; that is, 
October 24, 1982 or until age 31, whichever is earlier.
    (9) The child may lose eligibility through ceasing to be the 
veteran's stepchild either because the veteran and the child's natural 
or adoptive parent divorce or because the veteran and the child's 
natural or adoptive parent separate and the child is no longer a member 
of the veteran's household. If this occurs, the ending date of the

[[Page 218]]

child's period of eligibility will be determined as follows:
    (i) If the child ceases to be the veteran's stepchild while the 
child is not in training, the ending date of the child's eligibility 
shall be the date on which the child ceases to be the veteran's 
stepchild.
    (ii) If the child ceases to be the veteran's stepchild while the 
child is in training in a school organized on a term, semester or 
quarter basis, the ending date of the child's eligibility will be the 
last date of the term, semester or quarter during which the child ceases 
to be the veteran's stepchild.
    (iii) If the child ceases to be the veteran's stepchild while the 
child is in training in a school not organized on a term, semester or 
quarter basis, the ending date of the child's period of eligibility will 
be the end of the course or 12 weeks from the date on which the child 
ceases to be the veteran's stepchild, whichever is earlier. See Sec. 
21.3135(g).


(Authority: 38 U.S.C. 101(4)(a), 3501).

    (e) Extensions to ending dates. (1) Suspension of program due to 
conditions determined by the Department of Veterans Affairs to have been 
beyond the person's control (see Sec. 21.3043): extended for length of 
period of suspension, but not beyond age 31. See Sec. 21.3040(d).
    (2) Period of eligibility as specified in paragraph (c) or (d) of 
this section ends while enrolled in an educational institution regularly 
operated on the quarter or semester system and such period ends during a 
quarter or semester, such period shall be extended to the end of the 
quarter or semester, or for courses at educational institutions operated 
on other than a quarter or semester system, if the period ends after a 
major portion of the course is completed, such period shall be extended 
to the end of the course, or until 12 weeks have expired, whichever 
first occurs. Extension may be authorized beyond age 31, but may not 
exceed maximum entitlement. See Sec. 21.3044(a). No extension of the 
period of eligibility will be made where training is pursued in a 
training establishment as defined in Sec. 21.4200(c).


(Authority: 38 U.S.C. 3512(a)(5))

    (3) Child is enrolled and eligibility ceases because veteran is no 
longer rated permanently and totally disabled: extended to date 
specified in paragraph (e)(2) of this section without regard to whether 
the midpoint of the quarter, semester or term has been reached. See 
Sec. 21.3135(h).
    (4) Child is enrolled and eligibility ceases because the member of 
the Armed Forces upon whose service eligibility is based is no longer 
listed by the Secretary concerned in any of the categories specified in 
Sec. 21.3021(a)(1)(iv): extended to date specified in paragraph (e)(2) 
of this section without regard to whether the midpoint of the quarter, 
semester or term has been reached. See Sec. 21.3135(i).

[30 FR 15632, Dec. 18, 1965, as amended at 31 FR 6773, May 6, 1966; 31 
FR 13993, Nov. 2, 1966; 32 FR 13402, Sept. 23, 1967; 34 FR 842, Jan. 18, 
1969; 39 FR 38228, Oct. 30, 1974; 40 FR 42879, Sept. 17, 1975; 41 FR 
47929, Nov. 1, 1976; 43 FR 35290, Aug. 9, 1978; 48 FR 57275, Dec. 29, 
1983; 54 FR 31952, Aug. 3, 1989; 54 FR 42501, Oct. 17, 1989; 61 FR 
26108, May 24, 1996; 62 FR 55760, Oct. 28, 1997]



Sec. 21.3042  Service with Armed Forces.

    (a) No educational assistance under 38 U.S.C. chapter 35 may be 
provided an otherwise eligible person during any period he or she is on 
duty with the Armed Forces. See Sec. 21.3021 (e) and (f). This does not 
apply to brief periods of active duty for training. See Sec. 
21.3135(f).


(Authority: 38 U.S.C. 3501(d))

    (b) If the eligible person served with the Armed Forces, his or her 
discharge or release from each period of service must have been under 
conditions other than dishonorable.


(Authority: 38 U.S.C. 3501(d))

    (c) The term unconditional discharge, as used in Sec. 21.3041 means 
unconditional discharge or release from duty with the

[[Page 219]]

Armed Forces. See Sec. 3.13 of this chapter.

[30 FR 15633, Dec. 18, 1965, as amended at 34 FR 842, Jan. 18, 1969; 36 
FR 2508, Feb. 5, 1971; 41 FR 42929, Nov. 1, 1976; 61 FR 26109, May 24, 
1996]



Sec. 21.3043  Suspension of program; child.

    For an eligible person who suspends his program due to conditions 
determined by the Department of Veterans Affairs to have been beyond his 
or her control the period of eligibility may, upon his request, be 
extended by the number of months and days intervening the date the 
suspension began and the date the reason for suspension ceased to exist. 
The burden of proof is on the eligible person to establish that 
suspension of a program was due to conditions beyond his or her control. 
The period of suspension shall be considered to have ended as of the 
date of the person's first available opportunity to resume training 
after the condition which caused it ceased to exist. The following 
circumstances may be considered as beyond the eligible person's control:
    (a) While in active pursuit of a program of education he or she is 
appointed by the responsible governing body of an established church, 
officially charged with the selection and designation of missionary 
representatives, in keeping with its traditional practice, to serve the 
church in an official missionary capacity and is thereby prevented from 
pursuit of his or her program of studies.
    (b) Immediate family or financial obligations beyond his or her 
control require the eligible person to take employment, or otherwise 
preclude pursuit of his or her program.
    (c) Unavoidable conditions arising in connection with the eligible 
person's employment which preclude pursuit of his or her program.
    (d) Pursuit of his or her program is precluded because of the 
eligible person's own illness or illness or death in his or her 
immediate family.
    (e) Active duty, including active duty for training in the Armed 
Forces.

[41 FR 47929, Nov. 1, 1976]



Sec. 21.3044  Entitlement.

    (a) Limitations on entitlement. Each eligible person in entitled to 
educational assistance not in excess of 45 months, or the equivalent 
thereof in part-time training. The Department of Veterans Affairs will 
not authorize an extension of entitlement except as provided in 
paragraph (c) of this section. The period of entitlement when added to 
education or training received under any or all of the laws cited in 
Sec. 21.4020 will not exceed 48 months of full-time educational 
assistance. The period of entitlement will not be reduced by any period 
during which employment adjustment allowance was paid after the eligible 
person completes a period of rehabilitation and reaches a point of 
employability.
    (b) Continuous pursuit is not required. The 45-month period of 
entitlement is any 45 months within the period of eligibility. The 
eligible person is not required to pursue his or her program for 45 
consecutive months.


(Authority: 38 U.S.C. 3511(a))

    (c) Exceeding the 45 months limitation. The 45 months limitation may 
be exceeded only in the following cases:
    (1) Where no charge against the entitlement is made based on a 
course or courses pursued by a spouse or surviving spouse under the 
special assistance for the educationally disadvantaged program (See 
Sec. 21.3344(d); or
    (2) Where special restorative training authorized under Sec. 
21.3300 exceeds 45 months.


(Authority: 38 U.S.C. 3541(b), 3533(b))

[49 FR 48692, Dec. 14, 1984, as amended at 61 FR 26109, May 24, 1996]



Sec. 21.3045  Entitlement charges.

    VA will make charges against an eligible person's entitlement only 
when required by this section. Charges for institutional training will 
be based upon the principle that an eligible person who trains full time 
for 1 day should be charged 1 day of entitlement.
    (a) No entitlement charge for eligible persons receiving tutorial 
assistance. VA

[[Page 220]]

will make no charge against the entitlement of an eligible person for 
tutorial assistance received in accordance with Sec. 21.4236.


(Authority: 38 U.S.C. 3492, 3533(b))

    (b) Entitlement charges for elementary and secondary education. (1) 
When an eligible spouse or surviving spouse is pursuing a course leading 
to a secondary school diploma or an equivalency certificate as described 
in Sec. 21.3344, there are two sets of circumstances which will always 
result in VA's making no charge against his or her entitlement. These 
are as follows:
    (i) Either the eligible spouse or surviving spouse completed 
training during the period beginning on October 1, 1980, and ending on 
August 14, 1989, and remained continuously enrolled from October 1, 
1980, through the time the spouse or surviving spouse either completed 
training or August 14, 1989, whichever is earlier; or
    (ii) The eligible spouse or surviving spouse completed training 
before August 15, 1989, and received educational assistance based upon 
the tuition and fees charged for the course.
    (2) When an eligible spouse or surviving spouse is pursuing a course 
leading to a secondary school diploma or an equivalency certificate as 
described in Sec. 21.3344, the following circumstances will always 
result in VA's making a charge against his or her entitlement unless the 
provisions of paragraph (d) of this section would exempt the spouse or 
surviving spouse from receiving an entitlement charge.
    (i) The spouse or surviving spouse elects to receive dependents' 
educational assistance at the rate described in Sec. 21.3131(a), and
    (ii) Either was not pursuing a course leading to a secondary school 
diploma or equivalency certificate on October 1, 1980, or has not 
remained continuously enrolled in such a course since October 1, 1980.
    (3) When an eligible person pursues refresher, remedial or 
deficiency training before August 15, 1989, the following provisions 
govern the charge against the entitlement.
    (i) VA will not make a charge against the entitlement of an eligible 
spouse or surviving spouse.
    (ii) VA will make a charge against the entitlement of an eligible 
child.
    (4) The following provisions apply to an eligible person for 
training received after August 14, 1989. When he or she is pursuing a 
course leading to a secondary school diploma or equivalency certificate 
or refresher, remedial or deficiency training.
    (i) VA will make no charge against the entitlement of an eligible 
person for the first five months of full time pursuit (or its equivalent 
in part-time pursuit).
    (ii) VA will make a charge against the entitlement of an eligible 
person for pursuit in excess of the pursuit described in paragraph 
(b)(4)(i) unless the provisions of paragraph (d) of this section would 
exempt the eligible person from receiving an entitlement charge.


(Authority: 38 U.S.C. 3511(a), 3533(a); Pub. L. 100-689, Pub. L. 102-
127)(Oct. 10, 1991)

    (c) Other courses for which entitlement will be charged. Except when 
the requirements of paragraph (d) of this section are met, VA will make 
a charge against the period of entitlement--
    (1) An eligible person for pursuit of a program of apprenticeship or 
other on-job training;
    (2) A spouse or surviving spouse for pursuit of a correspondence 
course; or
    (3) An eligible person for the pursuit of any course not described 
in paragraph (a) or (b) of this section.


(Authority: 38 U.S.C. 3534)

    (d) Exemption from entitlement charge. (1) VA will not make a charge 
against the entitlement of an eligible person for the pursuit of any 
course or courses when VA finds that the eligible person--
    (i) Had to discontinue pursuit of the course or courses as the 
result of being ordered, in connection with the Persian Gulf War, to 
serve on active duty under section 672 (a), (d), or (g), 673, 673b, or 
688 of title 10, U.S. Code; and
    (ii) Failed to receive credit or training time toward completion of 
the eligible person's approved educational, professional or vocational 
objective as a result of having to discontinue, as described in 
paragraph (d)(1)(i) of this section, his or her course pursuit.

[[Page 221]]

    (2) The period for which VA will not make a charge against 
entitlement shall not exceed the portion of the period of enrollment in 
the course or courses for which the eligible person failed to receive 
credit or with respect to which the eligible person lost training time.


(Authority: 38 U.S.C. 3511(a); Pub. L. 102-127)(Oct. 10, 1991)

    (e) Determining entitlement charge. The provisions of this paragraph 
apply to all courses except those courses for which VA is not making a 
charge against the eligible person's entitlement, apprenticeship or 
other on-job training, correspondence courses, and courses offered 
solely through independent study.
    (1) After making any adjustments required by paragraph (e)(3) of 
this section, VA will make a charge against entitlement--
    (i) On the basis of total elapsed time (one day for each day of 
pursuit) if the eligible person is pursuing the program of education on 
a full-time basis,
    (ii) On the basis of a proportionate rate of elapsed time, if the 
eligible person is pursuing a program of education on a three-quarter, 
one-half or less than one-half time basis. For the purpose of this 
computation, training time which is less that one-half, but more than 
one-quarter time, will be treated as though it were one-quarter time 
training.
    (2) VA will compute elapsed time from the commencing date of 
enrollment to date of discontinuance. If the eligible person changes his 
or her training time after the commencing date of enrollment, VA will--
    (i) Divide the enrollment period into separate periods of time 
during which the eligible person's training time remains constant; and
    (ii) Compute the elapsed time separately for each time period.
    (3) An eligible person may concurrently enroll in refresher, 
remedial or deficiency training for which paragraph (b)(3) or (b)(4)(i) 
of this section requires no charge against entitlement and in a course 
or courses for which paragraph (b)(2) or (b)(4)(ii) or (c) of this 
section requires a charge against entitlement. When this occurs, VA will 
charge entitlement for the concurrent enrollment based only on pursuit 
of the courses described in paragraph (b)(2) or (b)(4)(ii) or (c) of 
this section, measured in accordance with Sec. Sec. 21.4270 through 
21.4275 of this part, as appropriate.


(Authority: 38 U.S.C. 3533(a); Pub. L. 100-689)

    (f) Entitlement charge for pursuit solely by independent study. For 
enrollments in terms, quarters, or semesters that begin after June 30, 
1993, VA will make charges against the entitlement of an eligible person 
in the manner prescribed by paragraph (e) of this section, if he or she 
is pursuing a program of education solely by independent study. For all 
other enrollments where the eligible person is pursuing a program of 
education solely by independent study, the computation will be made as 
though the eligible person's training were one-quarter time.


(Authority: 38 U.S.C. 3482(b), 3532(a))

    (g) Entitlement charge for apprenticeship or other on-job training. 
The charge against entitlement for pursuit of apprenticeship or other 
on-job training program shall be 1 month for each month of training 
assistance allowance paid to the eligible person for the program. If 
there is a reduction in the eligible person's monthly training 
assistance allowance due to his or her failure to complete 120 hours of 
training during the month, VA will combine the portions of those months 
for which a reduction was made. VA will make no charge against 
entitlement for the period of combined reductions.


(Authority: 38 U.S.C. 3534, 3687)

    (h) Entitlement charge for correspondence courses. The charge 
against entitlement of a spouse or surviving spouse for pursuit of a 
course exclusively by correspondence will be 1 month for each of the 
following amounts paid as an educational assistance allowance:
    (1) $680.00 paid after September 30, 2002, and before October 1, 
2003;
    (2) $695.00 paid after September 30, 2003, and before July 1, 2004; 
and
    (3) $788.00 paid after June 30, 2004.


(Authority: 38 U.S.C. 3534(b), 3564, 3686(a)).


[[Page 222]]


    (i) Overpayment cases. VA will make a charge against entitlement for 
an overpayment only if the overpayment is discharged in bankruptcy, is 
waived and is not recovered, or is compromised.
    (1) If the overpayment is discharged in bankruptcy or is waived and 
is not recovered, the charge against entitlement will be at the 
appropriate rate for the elapsed period covered by the overpayment 
(exclusive of interest, administrative costs of collection, court costs 
and marshal fees).
    (2) If the overpayment is compromised and the compromise offer is 
less than the amount of interest, administrative costs of collection, 
court costs and marshal fees, the charge against entitlement will be at 
the appropriate rate for the elapsed period covered by the overpayment 
(exclusive of interest, administrative costs of collection, court costs 
and marshal fees).
    (3) If the overpayment is compromised and the compromise offer is 
equal to or greater than the amount of interest, administrative costs of 
collection, court costs and marshal fees, the charge against entitlement 
will be determined by--
    (i) Subtracting from the sum paid in the compromise offer the amount 
attributable to interest, administrative costs of collection, court 
costs and marshal fees,
    (ii) Subtracting the remaining amount of the overpayment balance 
determined in paragraph (i)(3)(i) of this section from the amount of the 
original overpayment (exclusive of interest, administrative costs of 
collection, court costs and marshal fees),
    (iii) Dividing the result obtained in paragraph (h)(3)(ii) of this 
section by the amount of the original debt (exclusive of interest, 
administrative costs of collection, court costs and marshal fees), and
    (iv) Multiplying the percentage obtained in paragraph (h)(3)(iii) of 
this section by the amount of the entitlement otherwise chargeable for 
the period of the original overpayment.


(Authority: 38 U.S.C. 3471, 3532)

    (j) Interruption to conserve entitlement. An eligible person may not 
interrupt a certified period of enrollment for the purpose of conserving 
entitlement. An educational institution may not certify a period of 
enrollment for a fractional part of the normal term, quarter or 
semester, if the eligible person is enrolled for the term, quarter or 
semester. VA will make a charge against entitlement for the entire 
period of certified enrollment, if the eligible person is otherwise 
eligible for benefits, except when benefits are interrupted under any of 
the following conditions:
    (1) Enrollment is actually terminated;
    (2) The eligible person cancels his or her enrollment, and does not 
negotiate an educational benefits check for any part of the certified 
period of enrollment;
    (3) The eligible person interrupts his or her enrollment at the end 
of any term, quarter, or semester within the certified period of 
enrollment, and does not negotiate a check for educational benefits for 
the succeeding term, quarter, or semester;
    (4) The eligible person requests interruption or cancellation for 
any break when a school was closed during a certified period of 
enrollment, and VA continued payments under an established policy based 
upon an Executive Order of the President or an emergency situation. 
Whether the eligible person negotiated a check for educational benefits 
for the certified period is immaterial.


(Authority: 38 U.S.C. 3511)

    (k) Education loan after otherwise applicable delimiting date--
spouse or surviving spouse. VA will make a charge against the 
entitlement of a spouse or surviving spouse who receives an education 
loan pursuant to Sec. 21.4501(c) at the rate of 1 day for each day of 
entitlement that would have been used had the spouse or surviving spouse 
been in receipt of educational assistance allowance for the period for 
which the loan was granted.


(Authority: 38 U.S.C. 3512)

[55 FR 28024, July 9, 1990, as amended at 57 FR 29799, July 7, 1992; 58 
FR 26240, May 3, 1993; 61 FR 26109, May 24, 1996; 62 FR 55760, Oct. 28, 
1997; 63 FR 67778, Dec. 9, 1998; 66 FR 32227, June 14, 2001; 68 FR 
34320, June 9, 2003; 69 FR 62207, Oct. 25, 2004]

[[Page 223]]



Sec. 21.3046  Periods of eligibility; spouses and surviving spouses.

    This section states how VA will compute the beginning date, the 
ending date and the length of a spouse's or surviving spouse's period of 
eligibility. The period of eligibility of a spouse computed under the 
provisions of paragraph (a) of this section will be recomputed under the 
provisions of paragraph (b) of this section if her or his status changes 
to that of surviving spouse.


(Authority: 38 U.S.C. 3512(b))

    (a) Beginning date of eligibility period-spouses. (1) If the 
permanent total rating is effective before December 1, 1968, the 
beginning date of the 10-year period of eligibility is December 1, 1968.
    (2) The beginning date of eligibility--
    (i) Shall be determined as provided in paragraph (a)(2) of this 
section when--
    (A) The permanent total rating is effective after November 30, 1968, 
or the notification to the veteran of the rating was after that date, 
and
    (B) Eligibility does not arise under Sec. 21.3021(a)(3)(ii) of this 
part.
    (ii) For spouses for whom VA made a final determination of 
eligibility before October 28, 1986, shall be--
    (A) The effective date of the rating, or
    (B) The date of notification, whichever is more advantageous to the 
spouse.
    (iii) For spouses for whom VA made a final determination of 
eligibility after October 27, 1986, shall be--
    (A) The effective date of the rating, or
    (B) The date of notification, or
    (C) Any date between the dates specified in paragraphs (a)(2)(iii) 
(A) and (B) of this section as chosen by the eligible spouse.
    (iv) May not be changed once a spouse has chosen it as provided in 
paragraph (a)(2)(iii) of this section.
    (3) If eligibility arises under Sec. 21.3021(a)(3)(ii) of this 
part, the beginning date of the 10-year eligibility period is--
    (i) December 24, 1970, or
    (ii) The date the member of the Armed Forces on whose service 
eligibility is based was so listed by the Secretary concerned, whichever 
last occurs.


(Authority: 38 U.S.C. 3501(a); Pub. L. 99-576)

    (b) Beginning date of eligibility period-surviving spouses. (1) If 
VA determines before December 1, 1968, that the veteran died of a 
service-connected disability, the beginning date of the 10-year period 
is December 1, 1968.


(Authority: 38 U.S.C. 3512)

    (2) If the veteran's death occurred before December 1, 1968, but VA 
does not determine that the veteran died of a service-connected 
disability until after November 30, 1968, the beginning date of the 10-
year period is the date on which VA determines that the veteran died of 
a service-connected disability.
    (3) If the veteran's death occurred before December 1, 1968, while a 
total, service-connected disability evaluated as permanent in nature was 
in existence, the beginning date of the 10-year period is December 1, 
1968.
    (4) If the veteran's death occurred after November 30, 1968, and VA 
makes a final decision concerning the surviving spouse's eligibility for 
dependents' educational assistance before October 28, 1986, the 
beginning date of the 10-year period is--
    (i) The date of death of the veteran who dies while a total, 
service-connected disability evaluated as permanent in nature was in 
existence, or
    (ii) The date on which VA determines that the veteran died of a 
service-connected disability.
    (5) If the veteran's death occurred after November 30, 1968, and VA 
makes a final decision concerning the surviving spouse's eligibility for 
dependents educational assistance after October 27, 1986, VA will 
determine the beginning date of the 10-year period as follows.
    (i) If the surviving spouse's eligibility is based on the veteran's 
death while a total, service-connected disability evaluated as permanent 
in nature was in existence, the beginning date of the 10-year period is 
the date of death.
    (ii) If the surviving spouse's eligibility is based on the veteran's 
death from a service-connected disability,

[[Page 224]]

the surviving spouse will choose the beginning date of the 10-year 
period. That date will be no earlier than the date of death and no later 
than the date of the VA determination that the veteran's death was due 
to a service-connected disability.


(Authority: 38 U.S.C. 3512(b); Pub. L. 99-576)

    (6) Once a surviving spouse has chosen a beginning date of 
eligibility as provided in paragraph (b)(5) of this section, the 
surviving spouse may not revoke that choice.


(Authority: 38 U.S.C. 3512(b); Pub. L. 99-576)

    (c) Ending date of eligibility period. (1) The period of eligibility 
cannot exceed 10 years and can be extended only as provided in paragraph 
(d) of this section and Sec. 21.3047.
    (2) If eligibility arises before October 24, 1972, educational 
assistance based on a course of apprentice or other on-job training or 
correspondence approved under the provisions Sec. Sec. 21.4256, 
21.4261, and 21.4262 of this part will not be afforded later than 
October 23, 1982, unless the eligible spouse or surviving spouse 
qualifies for the extended period of eligibility provided in paragraph 
(d) of this section.


(Authority: 38 U.S.C. 3512)

    (d) Extension to ending date. (1) The ending date of a spouse's 
period of eligibility may be extended when the spouse is enrolled and 
eligibility ceases for one of the following reasons:
    (i) The veteran is no longer rated permanently and totally disabled;
    (ii) The spouse is divorced from the veteran without fault on the 
spouse's part; or
    (iii) The spouse no longer is listed in any of the categories of 
Sec. 21.3021(a)(3)(ii) of this part.
    (2) If the spouse is enrolled in a school operating on a quarter or 
semester system, VA will extend the period of eligibility to the end of 
the quarter or semester, regardlesss of whether the spouse has reached 
the midpoint of the quarter, semester or term.
    (3) If the spouse is enrolled in a school not operating on a quarter 
or semester system, VA will extend the period of eligibility to the 
earlier of the following:
    (i) The end of the course, or
    (ii) 12 weeks.
    (4) If the spouse is enrolled in a course pursued exclusively by 
correspondence, VA will extend the period of eligibility to whichever of 
the following will result in the lessser expenditure:
    (i) The end of the course, or
    (ii) The total additional amount of instruction that--
    (A) $1,904 will provide during the period October 1, 2002, through 
September 30, 2003;
    (B) $1,946 will provide during the period October 1, 2003, through 
June 30, 2004; or
    (C) $2,206 will provide after June 30, 2004.


(Authority: 38 U.S.C. 3511(b))

    (5) VA will not extend the period of eligibility when the spouse is 
pursuing training in a training establishment as defined in Sec. 
21.4200(c) of this part.
    (6) An extension may not--
    (i) Exceed maximum entitlement, or
    (ii) Extend beyond the delimiting date specified in paragraph (a) of 
this section or Sec. 21.3047, as appropriate.


(Authority: 38 U.S.C. 3511(b), 3512(b), 3532, 3586)

[54 FR 33886, Aug. 17, 1989, as amended at 57 FR 29799, July 7, 1992; 57 
FR 60735, Dec. 22, 1992; 62 FR 51784, Oct. 3, 1997; 62 FR 59579, Nov. 4, 
1997; 69 FR 62207, Oct. 25, 2004]



Sec. 21.3047  Extended period of eligibility due to physical or mental 
disability.

    (a) General. (1) An eligible spouse or surviving spouse shall be 
granted an extension of the applicable period of eligibility as 
otherwise determined by Sec. 21.3046 provided the eligible spouse or 
surviving spouse:
    (i) Applies for the extension within the appropriate time limit;
    (ii) Was prevented from initiating or completing the chosen program 
of education within the otherwise applicable period of eligibility 
because of a physical or mental disability that did not result from the 
willful misconduct of the eligible spouse or surviving spouse;

[[Page 225]]

    (iii) Provides VA with any requested evidence tending to show that 
the requirement of paragraph (a)(1)(ii) of this section has been met; 
and
    (iv) Is otherwise eligible for payment of educational assistance for 
the training pursuant to 38 U.S.C. chapter 35.
    (2) In determining whether the eligible spouse or surviving spouse 
was prevented from initiating or completing the chosen program of 
education because of a physical or mental disability, VA will consider 
the following:
    (i) It must be clearly established by medical evidence that such a 
program of education was medically infeasible.
    (ii) An eligible spouse or surviving spouse who is disabled for a 
period of 30 days or less will not be considered as having been 
prevented from initiating or completing a chosen program, unless the 
evidence establishes that the eligible spouse or surviving spouse was 
prevented from enrolling or reenrolling in the chosen program of 
education, or was forced to discontinue attendance, because of the short 
disability.
    (iii) VA will not consider the disabling effects of chronic 
alcoholism to be the result of willful misconduct and will consider 
those disabling effects as physical or mental disabilities.
    (b) Commencing date. The eligible spouse or surviving spouse shall 
elect the commencing date of an extended period of eligibility. The date 
chosen--
    (1) Must be on or after the original date of expiration of 
eligibility as determined by Sec. 21.3046(c); and
    (2) Must be on or before the ninetieth day following the date on 
which the eligible spouse's or surviving spouse's application for an 
extension was approved by VA, if the eligible spouse or surviving spouse 
is training during the extended period of eligibility in a course not 
organized on a term, quarter, or semester basis; or
    (3) Must be on or before the first ordinary term, quarter, or 
semester following the ninetieth day after the eligible spouse's or 
surviving spouse's application for an extension was approved by VA if 
the eligible spouse or surviving spouse is training during the extended 
period of eligibility in a course organized on a term, quarter, or 
semester basis.


(Authority: 38 U.S.C. 3512(b))

    (c) Length of extended periods of eligibility. An eligible spouse's 
or surviving spouse's extended period of eligibility shall be for the 
length of time that the individual was prevented from initiating or 
completing his or her chosen program of education. This shall be 
determined as follows:
    (1) If the eligible spouse or surviving spouse is in training in a 
course organized on a term, quarter, or semester basis, his or her 
extended period of eligibility shall contain the same number of days as 
the number of days from the date during the eligible spouse's or 
surviving spouse's original period of eligibility that his or her 
training became medically infeasible to the earliest of the following 
dates:
    (i) The commencing date of the ordinary term, quarter, or semester 
following the day the eligible spouse's or surviving spouse's training 
became medically feasible;
    (ii) The ending date of the eligible spouse's or surviving spouse's 
period of eligibility as determined by Sec. 21.3046(c); or
    (iii) The date the eligible spouse or surviving spouse resumed 
training.
    (2) If the eligible spouse or surviving spouse is training in a 
course not organized on a term, quarter, or semester basis, his or her 
extended period of eligibility shall contain the same number of days 
from the date during the eligible spouse's or surviving spouse's 
original period of eligibility that his or her training became medically 
infeasible to the earlier of the following dates:
    (i) The date the eligible spouse's or surviving spouse's training 
became medically feasible; or
    (ii) The ending date of the eligible spouse's or surviving spouse's 
period of eligibility as determined by Sec. 21.3046.

(Paperwork requirements were approved by the Office of Management and 
Budget under control number 2900-0573)


(Authority: 38 U.S.C. 3512(b))

[62 FR 51784, Oct. 3, 1997]

[[Page 226]]

                               Counseling

    Source: 61 FR 26109, May 24, 1996, unless otherwise noted.



Sec. 21.3100  Counseling.

    (a) Purpose of counseling. The purpose of counseling is to assist:
    (1) In selecting an educational or training objective;


(Authority: 38 U.S.C. 3520)

    (2) In developing a suitable program of education or training;


(Authority: 38 U.S.C. 3520)

    (3) In selecting an educational institution or training 
establishment appropriate for the attainment of the educational or 
training objective;


(Authority: 38 U.S.C. 3561(a))

    (4) In resolving any personal problems which are likely to interfere 
with successful pursuit of a program;


(Authority: 38 U.S.C. 3561(a))

    (5) In selecting an employment objective for the eligible person 
that would be likely to provide the eligible person with satisfactory 
employment opportunities in light of his or her circumstances.


(Authority: 38 U.S.C. 3520, 3561(a))

    (b) Availability of counseling. Counseling assistance is available 
for--
    (1) Identifying and removing reasons for academic difficulties which 
may result in interruption or discontinuance of training; or
    (2) In considering changes in career plans, and making sound 
decisions about the changes.


(Authority: 38 U.S.C. 3520, 3561(a))

    (c) Provision of counseling. VA shall provide counseling as needed 
for the purposes identified in paragraphs (a) and (b) of this section 
upon the request of the eligible person.


(Authority: 38 U.S.C. 3520, 3561(a))



Sec. 21.3102  Required counseling.

    (a) Child. The VA counseling psychologist will provide counseling 
and assist in preparing the educational plan only if the eligible child 
or his or her parent or guardian requests assistance, except that 
counseling is required for an eligible child if--
    (1) The eligible child may require specialized vocational training 
or special restorative training; or
    (2) The eligible child has reached the compulsory school attendance 
age under State law, but has neither reached his or her 18th birthday, 
nor completed secondary schooling. See Sec. 21.3040(a).
    (b) Spouse or surviving spouse. Counseling is required for a spouse 
or surviving spouse only if he or she desires specialized vocational 
training.

(Authority: 38 U.S.C. 3520, 3536, 3541, 3561)



Sec. 21.3103  Failure to cooperate.

    VA will not act further on an eligible person's application for 
assistance under 38 U.S.C. chapter 35 when counseling is required for 
him or her and the eligible person--
    (a) Fails to report;
    (b) Fails to cooperate in the counseling process; or
    (c) Does not complete counseling to the extent required under Sec. 
21.3102.

(Authority: 38 U.S.C. 3536, 3541, 3561(a))



Sec. 21.3104  Special training.

    (a) Initial counseling. A counseling psychologist in the Vocational 
Rehabilitation and Employment Division will counsel a disabled child, 
spouse, or surviving spouse before referring the case to the Vocational 
Rehabilitation Panel (established under Sec. 21.60) for consideration 
as to the child's, spouse's or surviving spouse's need for a course of 
specialized vocational training or the child's need for special 
restorative training. After consulting with the panel, and considering 
the panel's report, the counseling psychologist will determine if the 
disabled child, spouse, or surviving spouse needs a course of 
specialized vocational training or the disabled child needs special 
restorative training, and where need is found to exist will prescribe a 
course which is suitable to accomplish the goals of 38 U.S.C. chapter 
35.


(Authority: 38 U.S.C. 3536, 3540-3543, 3561(a))


[[Page 227]]


    (b) Counseling after special restorative training. When an eligible 
child completes or discontinues a course of special restorative training 
without having selected an objective and a program of education, a 
counseling psychologist in the Vocational Rehabilitation and Employment 
Division will provide additional counseling to assist the child in 
selecting a program of education suitable to accomplish the purposes of 
38 U.S.C. chapter 35.


(Authority: 38 U.S.C. 3561)



Sec. 21.3105  Travel expenses.

    (a) General. VA shall determine and pay the necessary expense of 
travel to and from the place of counseling for an eligible person who is 
required to receive counseling as provided under 38 U.S.C. 111 (a), (d), 
(e), and (g).


(Authority: 38 U.S.C. 111 (a), (d), (e), and (g))

    (b) Restriction. VA will not pay the necessary cost of travel to and 
from the place of counseling when counseling is not required, but is 
provided as a result of a voluntary request by the eligible person.


(Authority: 38 U.S.C. 111)

                                Payments



Sec. 21.3130  Educational assistance.

    (a) Approval of a program of education. VA will approve a program of 
education selected by an eligible person if:
    (1) The program is described in Sec. 21.3021 (h) and (i) or (j);
    (2) The individual is not already qualified for the objective of the 
program of education;
    (3) The proposed educational institution or training establishment 
is in compliance with all the requirements of 38 U.S.C. chapters 35 and 
36; and
    (4) It does not appear that the enrollment in or pursuit of such 
person's program of education would violate any provision of 38 U.S.C. 
chapters 35 and 36.


(Authority: 38 U.S.C. 3521)

    (b) Payments. VA will pay educational assistance at the rate 
specified in Sec. 21.3131 (subject to the reductions required by Sec.  
21.3132) while the eligible person is pursuing an approved program of 
education or training.


(Authority: 38 U.S.C. 3521, 3532)

    (c) No payment for excessive training. (1) VA will make no payment 
for:
    (i) Training in an apprenticeship or other on-job training program 
in excess of the number of hours approved by the State approving agency 
or VA; or
    (ii) Lessons completed in a correspondence course in excess of the 
number approved by the State approving agency.
    (2) A school's standards of progress may permit a student to repeat 
a course or portion of a course in which he or she has done poorly. VA 
considers the repeated courses to be part of the program of education. 
VA will make no payment for courses or training if the courses or 
training are not part of the eligible person's program of education.


(Authority: 38 U.S.C. 3501(a)(5), 3521)

    (d) Courses precluded. VA may not pay educational assistance:
    (1) For pursuit of a course if approval of the enrollment in the 
course is precluded by Sec. 21.4252;
    (2) For training in a foreign country unless the training is in the 
Philippines or is approved pursuant to the provisions of Sec. 21.4260; 
or
    (3) For pursuit of a course offered by open-circuit television, 
unless the eligible person's pursuit meets the requirements of Sec. 
21.4233(c).


(Authority: 38 U.S.C. 3523)

    (e) Commencing date. In determining the commencing date of an award 
of educational assistance, VA will apply the provisions of Sec. 
21.4131.


(Authority: 38 U.S.C. 5113)

[61 FR 26109, May 24, 1996]



Sec. 21.3131  Rates--educational assistance allowance--38 U.S.C. chapter 
35.

    (a) Rates. Except as provided in Sec. 21.3132, educational 
assistance allowance is payable at the following rates for pursuit of 
education or training that occurs after September 30, 2002, and before 
October 1, 2003:

[[Page 228]]



------------------------------------------------------------------------
             Type of course                        Monthly rate
------------------------------------------------------------------------
Institutional:
    Full time..........................  $680.00.
    \3/4\ time.........................  511.00.
    \1/2\ time.........................  340.00.
    Less than \1/2\ but more than \1/4\  340.00.
     time \1\.
    \1/4\ time or less \1\.............  170.00.
------------------------------------------------------------------------
Cooperative training (other than farm    680.00.
 cooperative) (Full time only).
------------------------------------------------------------------------
Apprenticeship or on-the-job (full time
 only) \2\:
    First six months...................  495.00.
    Second six months..................  370.00.
    Third six months...................  246.00.
    Fourth six months and thereafter...  124.00.
------------------------------------------------------------------------
Farm cooperative:
    Full time..........................  549.00.
    \3/4\ time.........................  412.00.
    \1/2\ time.........................  275.00.
------------------------------------------------------------------------
Correspondence.........................  55 percent of the established
                                          charge for the number of
                                          lessons completed by the
                                          eligible spouse or surviving
                                          spouse and serviced by the
                                          school--Allowance paid
                                          quarterly. \3\
------------------------------------------------------------------------
\1\ If an eligible person under 38 U.S.C. chapter 35 pursuing
  independent study on a less than one-half-time basis completes his or
  her program before the designated completion time, his or her award
  will be recomputed to permit payment of tuition and fees not to exceed
  $340.00 or $170.00, as appropriate, per month, if the maximum
  allowance is not initially authorized.
\2\ See footnote 5 of Sec.  21.4270(c) for measurement of full time and
  Sec.  21.3132(c) for proportionate reduction in award for completion
  of less than 120 hours per month.
\3\ Established charge means the charge for the course or courses
  determined on the basis of the lowest extended time payment plan
  offered by the institution and approved by the appropriate State
  approving agency or the actual cost to the eligible spouse or
  surviving spouse, whichever is less. VA considers the continuity of an
  enrollment broken when there are more than 6 months between the
  servicing of the lessons.



(Authority: 38 U.S.C. 3532(a), 3542(a), 3687(b)(2), (d))

    (b) Rates. Except as provided in Sec. 21.3132, educational 
assistance allowance is payable at the following rates for pursuit of 
education or training that occurs after September 30, 2003, and before 
July 1, 2004:

------------------------------------------------------------------------
             Type of course                        Monthly rate
------------------------------------------------------------------------
Institutional:
    Full time..........................  $695.00.
    \3/4\ time.........................  522.00.
    \1/2\ time.........................  347.00
    Less than \1/2\ but more than \1/4\  347.00.
     time \1\.
    \1/4\ time or less \1\.............  173.75.
------------------------------------------------------------------------
Cooperative training (other than farm    695.00.
 cooperative) (Full time only).
------------------------------------------------------------------------
Apprenticeship or on-the-job (full time
 only) \2\:
    First six months...................  506.00.
    Second six months..................  378.00.
    Third six months...................  251.00.
    Fourth six months and thereafter...  127.00.
------------------------------------------------------------------------
Farm cooperative:
    Full time..........................  561.00.
    \3/4\ time.........................  421.00.
    \1/2\ time.........................  281.00.
------------------------------------------------------------------------
Correspondence.........................  55 percent of the established
                                          charge for the number of
                                          lessons completed by the
                                          eligible spouse or surviving
                                          spouse and serviced by the
                                          school--Allowance paid
                                          quarterly. \3\
------------------------------------------------------------------------
\1\ If an eligible person under 38 U.S.C. chapter 35 pursuing
  independent study on a less than one-half-time basis completes his or
  her program before the designated completion time, his or her award
  will be recomputed to permit payment of tuition and fees not to exceed
  $347.00 or $173.75, as appropriate, per month, if the maximum
  allowance is not initially authorized.
\2\ See footnote 5 of Sec.  21.4270(c) for measurement of full time and
  Sec.  21.3132(c) for proportionate reduction in award for completion
  of less than 120 hours per month.

[[Page 229]]

 
\3\ Established charge means the charge for the course or courses
  determined on the basis of the lowest extended time payment plan
  offered by the institution and approved by the appropriate State
  approving agency or the actual cost to the eligible spouse or
  surviving spouse, whichever is less. VA considers the continuity of an
  enrollment broken when there are more than 6 months between the
  servicing of the lessons.



(Authority: 38 U.S.C. 3532(a), 3542(a), 3687(b)(2), (d))

    (c) Rates. Except as provided in Sec. 21.3132, educational 
assistance allowance is payable at the following rates for pursuit of 
education or training that occurs after June 30, 2004:

------------------------------------------------------------------------
             Type of course                        Monthly rate
------------------------------------------------------------------------
Institutional:
    Full time..........................  $788.00.
    \3/4\ time.........................  592.00.
    \1/2\ time.........................  394.00.
    Less than \1/2\ but more than \1/4\  394.00.
     time \1\.
    \1/4\ time or less \1\.............  197.00.
------------------------------------------------------------------------
Cooperative training (other than farm    788.00.
 cooperative) (Full time only).
------------------------------------------------------------------------
Apprenticeship or on-the-job (full time
 only) \2\:
    First six months...................  574.00.
    Second six months..................  429.00.
    Third six months...................  285.00.
    Fourth six months and thereafter...  144.00.
------------------------------------------------------------------------
Farm cooperative:
    Full time..........................  636.00.
    \3/4\ time.........................  477.00.
    \1/2\ time.........................  319.00.
------------------------------------------------------------------------
Correspondence.........................  55 percent of the established
                                          charge for the number of
                                          lessons completed by the
                                          eligible spouse or surviving
                                          spouse and serviced by the
                                          school--Allowance paid
                                          quarterly.\3\
------------------------------------------------------------------------
\1\ If an eligible person under 38 U.S.C. chapter 35 pursuing
  independent study on a less than one-half-time basis completes his or
  her program before the designated completion time, his or her award
  will be recomputed to permit payment of tuition and fees not to exceed
  $394.00 or $197.00, as appropriate, per month, if the maximum
  allowance is not initially authorized.
\2\ See footnote 5 of Sec.  21.4270(c) for measurement of full time and
  Sec.  21.3132(c) for proportionate reduction in award for completion
  of less than 120 hours per month.
\3\ Established charge means the charge for the course or courses
  determined on the basis of the lowest extended time payment plan
  offered by the institution and approved by the appropriate State
  approving agency or the actual cost to the eligible spouse or
  surviving spouse, whichever is less. VA considers the continuity of an
  enrollment broken when there are more than 6 months between the
  servicing of the lessons.



(Authority: 38 U.S.C. 3532(a), 3542(a), 3687(b)(2), (d))

    (d) Less than half time. The monthly rate for an eligible person who 
is pursuing an institutional course on less than one-half time basis may 
not exceed the monthly rate of the cost of the course computed on basis 
of the total cost for tuition and fees which the school requires 
similarly circumstanced individuals enrolled in the same course to pay. 
``Cost of the course'' does not include the cost of books or supplies 
which the student is required to purchase at his or her own expense.


(Authority: 38 U.S.C. 3532(a)(2))

    (e) Courses leading to a secondary school diploma or equivalency 
certificate. The monthly rate of Survivors' and Dependents' Educational 
Assistance payable for an eligible person enrolled in a course leading 
to a secondary school diploma or equivalency certificate shall be the 
rate for institutional training stated in paragraph (a) of this section.


(Authority: 38 U.S.C. 3532(d), 3533)

    (f) Payments made to eligible persons in the Republic of the 
Philippines or to certain Filipinos. When the eligible person is 
pursuing training at an institution located in the Republic of the 
Philippines or when an eligible child's entitlement is based on the 
service of a veteran in the Philippine Commonwealth Army, or as a 
Philippine Scout as defined in Sec. 3.40 (b), (c), or (d) of this

[[Page 230]]

chapter, payments of educational assistance allowance made after 
December 31, 1994, will be made at the rate of 50 cents for each dollar 
authorized.


(Authority: 38 U.S.C. 3532(d), 3565)

[61 FR 26110, May 24, 1996, as amended at 63 FR 67778, Dec. 9, 1998; 66 
FR 32227, June 14, 2001; 68 FR 34321, June 9, 2003; 68 FR 37206, June 
23, 2003; 69 FR 62207, Oct. 25, 2004]



Sec. 21.3132  Reductions in survivors' and dependents' educational 
assistance.

    The monthly rates established in Sec. 21.3131 shall be reduced as 
stated in this section whenever the circumstances described in this 
section arise.
    (a) No educational assistance allowance for some incarcerated 
eligible persons. VA will pay no educational assistance allowance to an 
eligible person who:
    (1) Is incarcerated in a Federal, State, or local penal institution 
for conviction of a felony; and
    (2) Is enrolled in a course:
    (i) For which there are no tuition or fees, or charges for books, 
supplies, and equipment; or
    (ii) For which tuition and fees are being paid by a Federal program 
(other than one administered by VA) or by a State or local program, and 
the eligible person is incurring no charge for the books, supplies, and 
equipment necessary for the course.


(Authority: 38 U.S.C. 3532(e))

    (b) Reduced educational assistance allowance for some incarcerated 
eligible persons--felony conviction. (1) VA will pay a reduced 
educational assistance allowance to an eligible person who:
    (i) Is incarcerated in a Federal, State, or local penal institution 
for conviction of a felony; and
    (ii) Is enrolled in a course:
    (A) For which the eligible person pays some (but not all) of the 
charges for tuition and fees; or
    (B) For which a Federal program (other than one administered by VA) 
or a State or local program pays all the charges for tuition and fees, 
but which requires the eligible person to pay for books, supplies, and 
equipment.
    (2) The monthly rate of educational assistance allowance payable to 
such an eligible person who is pursuing a course on a half-time or 
greater basis shall be the lesser of the following:
    (i) The monthly rate of the portion of the tuition and fees that the 
eligible person must pay plus the monthly rate of the charge to the 
eligible person for the cost of necessary supplies, books, and 
equipment; or
    (ii) The monthly rate stated in Sec. 21.3131.
    (3) The monthly rate of educational assistance payable to such an 
eligible person who is pursuing the course on a less than half-time 
basis or on a one quarter-time basis shall be the lowest of the 
following:
    (i) The monthly rate of the tuition and fees charged for the course;
    (ii) The monthly rate of tuition and fees which the eligible person 
must pay plus the monthly rate of the charge to the eligible person for 
the cost of necessary supplies, books, and equipment; or
    (iii) The monthly rate stated in Sec. 21.3131.


(Authority: 38 U.S.C. 3482(g))

    (c) Reduction in training assistance allowance. (1) For any month in 
which an eligible person pursuing an apprenticeship or on-job training 
program fails to complete 120 hours of training, VA shall reduce the 
rate specified in Sec. 21.3131(a) proportionally. In this computation 
VA shall round the number of hours worked to the nearest multiple of 
eight.
    (2) For the purpose of this paragraph hours worked include only:
    (i) The training hours the eligible person worked; and
    (ii) All hours of the eligible person's related training which 
occurred during the standard workweek and for which the eligible person 
received wages.


(Authority: 38 U.S.C. 3687(b)(3))

    (d) Mitigating circumstances. (1) VA will not pay benefits to any 
eligible person for a course from which the eligible person withdraws or 
receives a nonpunitive grade which is not used in computing the 
requirements for graduation unless the provisions of this paragraph are 
met.
    (i) The eligible person withdraws because he or she is ordered to 
active duty; or

[[Page 231]]

    (ii) All of the following criteria are met:
    (A) There are mitigating circumstances;
    (B) The eligible person submits a description of the circumstances 
in writing to VA either within one year from the date VA notifies the 
eligible person that he or she must submit the mitigating circumstances 
or at a later date if the eligible person is able to show good cause why 
the one-year time limit should be extended to the date on which he or 
she submitted the description of the mitigating circumstances; and
    (C) The eligible person submits evidence supporting the existence of 
mitigating circumstances within one year of the date that evidence is 
requested by VA, or at a later date if the eligible person is able to 
show good cause why the one-year time limit should be extended to the 
date on which he or she submitted the evidence supporting the existence 
of mitigating circumstances.


(Authority: 38 U.S.C. 3680(a); Pub. L. 102-127)(Aug. 1, 1990)

    (2) The following circumstances are representative of those which 
the Department of Veterans Affairs considers to be mitigating provided 
they prevent the eligible person from pursuing the program of education 
continuously. This list is not all inclusive.
    (i) An illness of the eligible person,
    (ii) An illness or death in the eligible person's family,
    (iii) An unavoidable geographical transfer resulting from the 
eligible person's employment,
    (iv) An unavoidable change in the eligible person's conditions of 
employment,
    (v) Immediate family or financial obligations beyond the control of 
the eligible person which require him or her to suspend pursuit of the 
program of education to obtain employment,
    (vi) Discontinuance of a course by a school,
    (vii) Unanticipated active duty for training,
    (viii) Unanticipated difficulties in caring for the eligible 
person's child or children.


(Authority: 38 U.S.C. 3680)

    (3) If the eligible child fails to complete satisfactorily a course 
of special restorative training or if the eligible person fails to 
complete satisfactorily a course under section 3533, Title 38 U.S.C., 
without fault, the Department of Veterans Affairs will consider the 
circumstances which caused the failure to be mitigating. This will be 
the case even if the circumstances were not so severe as to preclude 
continuous pursuit of a program of education.
    (4) In the first instance of a withdrawal after May 31, 1989, from a 
course or courses for which the eligible person received educational 
assistance under title 38 U.S.C. or under chapter 1606, title 10 U.S.C., 
VA will consider that mitigating circumstances exist with respect to 
courses totaling not more than six semester hours or the equivalent. 
Eligible persons to whom the provisions of this subparagraph apply are 
not subject to the reporting requirement found in paragraph (d)(1)(ii) 
of this section.


(Authority: 38 U.S.C. 3680(a)(4); Pub. L. 100-689)

    (5) If an eligible person withdraws from a course during a drop-add 
period, VA will consider the circumstances which caused the withdrawal 
to be mitigating. Eligible persons who withdraw from a course during a 
drop-add period are not subject to the reporting requirement found in 
paragraph (d)(1)(ii) of this section.


(Authority: 38 U.S.C. 3680(a))

[31 FR 6774, May 6, 1966]

    Editorial Note: For Federal Register citations affecting Sec. 
21.4137, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 21.3133  Payment procedures.

    (a) Release of payments and payment procedures. In determining 
whether payments of educational assistance allowance may be made in a 
lump sum, in advance, for an interval or if a certification is required 
from an eligible person before a payment may be made, VA will apply the 
provisions of Sec. 21.4138.


(Authority: 38 U.S.C. 3680)


[[Page 232]]


    (b) Payee. (1) VA will pay an educational assistance allowance to 
the eligible person if he or she has attained majority and has no known 
legal disability.
    (2) If an eligible person has not attained majority, VA will pay an 
educational assistance allowance directly to an eligible person, a 
relative, or some other person for the use and benefit of the eligible 
person notwithstanding a legal disability on the part of the eligible 
person when VA determines:
    (i) The best interest of the eligible person would be served;
    (ii) Undue delay in payment would be avoided; or
    (iii) Payment would otherwise not be feasible.


(Authority: 38 U.S.C. 3501(a)(4), 3501(c), 3531(a), 5502)

    (c) Payment of accrued benefits. Educational assistance remaining 
due and unpaid at the date of the eligible person's death is payable 
under the provisions of Sec. 3.1000 of this chapter.


(Authority: 38 U.S.C. 5121)

    (d) Tutorial assistance. An individual who is otherwise eligible to 
receive benefits under the Survivors' and Dependents' Educational 
Assistance program may receive supplemental monetary assistance to 
provide tutorial services. In determining whether VA will pay the 
individual this assistance, VA will apply the provisions of Sec. 
21.4236.


(Authority: 38 U.S.C. 3492, 3533(b))

    (e) Offsets: 38 U.S.C. chapter 35, compensation, pension and 
dependency and indemnity compensation. Payment of dependents' 
educational assistance will be subject to offset of amounts of pension, 
compensation or dependency and indemnity compensation paid over the same 
period on behalf of a child based on school attendance.


(Authority: 38 U.S.C. 3562)

    (f) Final payment. VA may withhold final payment until VA receives 
proof of continued enrollment and adjusts the eligible person's account.


(Authority: 38 U.S.C. 3680)

[61 FR 26111, May 24, 1996]



Sec. 21.3135  Reduction or discontinuance dates for awards of 
educational assistance allowance.

    The reduction or discontinuance date of an award of educational 
assistance will be as stated in this section. If more than one basis for 
reduction or discontinuance is involved, the earliest date will control.
    (a) Ending date of course. Educational assistance allowance will be 
discontinued on the ending date of the course or period of enrollment as 
certified by the school.


(Authority: 38 U.S.C. 3531, 3680(a))

    (b) Ending date of eligibility. Educational assistance allowance 
will be discontinued on the ending date of the eligible person's 
eligibility as determined by Sec. 21.3041, Sec.  21.3042, Sec.  
21.3043, or Sec. 21.3046.


(Authority: 38 U.S.C. 3512)

    (c) General reduction or discontinuance dates. Educational 
assistance allowance will be reduced or discontinued on the date 
specified in Sec. 21.4135.


(Authority: 38 U.S.C. 3482(g), 3531, 3671(g), 3672(a), 3680, 3683, 3690, 
5112, 5113, 6103, 6104, 6105)

    (d) Divorce. If the veteran and eligible spouse divorce, the 
discontinuance date for the eligible spouse's award of educational 
assistance will be:
    (1) The end of the quarter or semester if the school is operated on 
a quarter or semester system, and the divorce was without fault on the 
eligible spouse's part;
    (2) The end of the course or a 12-week period, whichever is earlier, 
if the school does not operate on a quarter or semester system, and the 
divorce was without fault on the eligible spouse's part; or
    (3) In all other instances, the date the divorce decree becomes 
final.


(Authority: 38 U.S.C. 3501(a)(1)(D), 3511(b))


[[Page 233]]


    (e) Remarriage or other relationship of spouse or surviving spouse. 
(1) If an eligible surviving spouse remarries, the date of 
discontinuance of his or her award of educational assistance allowance 
will be the last date of attendance before remarriage.
    (2) If a spouse or surviving spouse begins a relationship by living 
with another person and holding himself or herself out openly to the 
public to be the spouse of the other person, the date of discontinuance 
of his or her award of educational assistance allowance will be the last 
date of the month before the spouse's or surviving spouse's relationship 
began.


(Authority: 38 U.S.C. 101(3), 3501(a)(1)(B))

    (f) Entrance on active duty (Sec. 21.3042). If an eligible person 
enters on active duty, VA will terminate his or her educational 
assistance allowance on the day before the day of entrance on active 
duty. Brief periods of active duty for training, if the school permits 
such an absence without interruption of training, will not result in 
termination of the allowance under this paragraph.


(Authority: 38 U.S.C. 3501(d))

    (g) Eligible child ceases to be a stepchild. When an eligible child 
loses eligibility because he or she ceases to be the stepchild of the 
veteran, VA will discontinue the dependent's educational assistance 
allowance on the last day of the child's eligibility as determined by 
Sec. 21.3041(d)(9).


(Authority: 38 U.S.C. 101(4)(A), 3501)

    (h) Veteran no longer rated permanently and totally disabled. (1) If 
the veteran on whose service an eligible person's eligibility is based 
is no longer permanently and totally disabled, VA will discontinue the 
educational assistance allowance--
    (i) On the last date of the quarter or semester during which VA 
rated the veteran as no longer permanently and totally disabled if the 
eligible person's educational institution is organized on a quarter or 
semester basis; or
    (ii) On the earlier of the following dates when the eligible 
person's educational institution is not organized on a quarter or 
semester basis:
    (A) The last date of the course;
    (B) The end of a 12-week period beginning on the date VA rated the 
veteran as being no longer permanently and totally disabled.


(Authority: 38 U.S.C. 3511(b), 3512(a)(6)(A))

    (i) Serviceperson is removed from ``missing status'' listing. (1) If 
the serviceperson on whose service an eligible person's eligibility is 
based is removed from the ``missing status'' listing, VA will 
discontinue the educational assistance allowance--
    (i) On the last date of the quarter or semester during which the 
serviceperson was removed from the ``missing status'' listing if the 
eligible person's educational institution is organized on a quarter or 
semester basis; or
    (ii) On the earlier of the following dates when the eligible 
person's educational institution is not organized on a quarter or 
semester basis:
    (A) The last date of the course;
    (B) The end of a 12-week period beginning on the date the 
serviceperson was removed from the ``missing status'' listing.


(Authority: 38 U.S.C. 3512(a)(6)(A))
    (j) Fugitive felons. (1) VA will not award educational assistance 
allowance to an otherwise eligible person for any period after December 
26, 2001, during which the--
    (i) Eligible person is a fugitive felon; or
    (ii) Veteran from whom eligibility is derived is a fugitive felon.
    (2) The date of discontinuance of an award of educational assistance 
allowance to an eligible person is the later of--
    (i) The date of the warrant for the arrest of the felon; or
    (ii) December 27, 2001.


(Authority: 38 U.S.C. 5313B)

[61 FR 26111, May 24, 1996, as amended at 70 FR 25786, May 16, 2005]

                      Special Restorative Training



Sec. 21.3300  Special restorative training.

    (a) Purpose of special restorative training. The Department of 
Veterans Affairs may prescribe special restorative training where needed 
to overcome or

[[Page 234]]

lessen the effects of a physical or mental disability for the purpose of 
enabling an eligible child to pursue a program of education, special 
vocational program or other appropriate goal. Medical care and treatment 
or psychiatric treatment are not included.
    (b) Special restorative training courses. The counseling 
psychologist, after consulting with the Vocational Rehabilitation Panel, 
may prescribe for special restorative training purposes courses such 
as--
    (1) Speech and voice correction or retention,
    (2) Language retraining,
    (3) Speech (lip) reading,
    (4) Auditory training,
    (5) Braille reading and writing,
    (6) Training in ambulation,
    (7) One-hand typewriting,
    (8) Nondominant handwriting,
    (9) Personal, social and work adjustment training,
    (10) Remedial reading, and
    (11) Courses at special schools for mentally and physically disabled 
or
    (12) Courses provided at facilities which are adapted or modified to 
meet special needs of disabled students.


(Authority: 38 U.S.C. 3540)

    (c) Duration of special restorative training. VA may provide special 
restorative training in excess of 45 months where an additional period 
of time is needed to complete the training. Entitlement, including any 
authorized in excess of 45 months, may be expended through an 
accelerated program requiring a rate of payment for tuition and fees in 
excess of--
    (1) $213.00 a month for the period beginning October 1, 2002, and 
ending September 30, 2003;
    (2) $218.00 a month for the period beginning October 1, 2003, and 
ending June 30, 2004; and
    (3) $247.00 a month for months after June 30, 2004.


(Authority: 38 U.S.C. 3541(b), 3542)

    (d) Special restorative training precluded in Department of Veterans 
Affairs facilities. Special restorative training will not be provided in 
Department of Veterans Affairs facilities.


(Authority: 38 U.S.C. 3543(b))

[48 FR 37973, Aug. 22, 1983, as amended at 49 FR 42725, Oct. 24, 1984; 
50 FR 19934, May 13, 1985; 63 FR 67779, Dec. 9, 1998; 66 FR 32228, June 
14, 2001; 68 FR 34322, June 9, 2003; 69 FR 62208, Oct. 25, 2004]



Sec. 21.3301  Need.

    (a) Determination of need. When special restorative training has 
been requested or is being considered for a handicapped child, a 
counseling psychologist will obtain all information necessary to 
determine the need for and feasibility of special restorative training. 
After the counseling psychologist completes this task, he or she will 
refer the case to the Vocational Rehabilitation Panel. The panel will 
consider whether--
    (1) There exists a handicap which will interfere with pursuit of a 
program of education;
    (2) It is in the best interests of an eligible child to begin 
special restorative training after his or her 14th birthday;
    (3) The period of special restorative training materially will 
improve the eligible child's ability to:
    (i) Pursue a program of education,
    (ii) Pursue a program of specialized vocational training,
    (iii) Obtain continuing employment in a sheltered workshop, or
    (iv) Adjust in his or her family or community;


(Authority: 38 U.S.C. 3541(a))

    (4) The special restorative training may be pursued concurrently 
with a program of education; and
    (5) Training will affect adversely the child's mental or physical 
condition;
    (6) The Department of Veterans Affairs:
    (i) Has considered assistance available under provisions of State-
Federal programs for education of handicapped children, and
    (ii) Has determined that it is in the child's interest to receive 
benefits under Chapter 35,


(Authority: 38 U.S.C. 3541(a))


[[Page 235]]


    (b) Report. The Vocational Rehabilitation Panel will prepare a 
written report of its findings and recommendations as to the need for 
assistance and the types of assistance which should be provided. The 
report will be sent to the counseling psychologist.
    (c) Development and implementation. Following consultation with the 
panel or receipt of the panel's report, or both, the counseling 
psychologist will determine the need and feasibility of special 
restorative training. If an affirmative finding is made, an 
individualized, written plan comparable to that developed in cases of 
extended evaluation under 38 U.S.C. Chapter 31 will be prepared. The 
plan will be developed jointly with the eligible child and parent or 
guardian.


(Authority: 38 U.S.C. 3541(a))

    (d) Notification of disallowance. When a parent or guardian has 
requested special restorative training on behalf of an eligible child, 
and the counseling psychologist finds that this training is not needed 
or will not materially improve the child's condition, the Department of 
Veterans Affairs will inform the parent or guardian in writing of the 
finding. The Department of Veterans Affairs will also inform the parent 
or guardian of his or her appeal rights.
    (e) Reentrance after interruption. The case of an eligible child 
shall be referred to the panel for consideration of whether the eligible 
child may be permitted reentrance into special restorative training 
following interruption. The panel will recommend approval to the 
counseling psychologist if there is a reasonable expectation that the 
purpose of special restorative training will be accomplished. See Sec. 
21.3306.


(Authority: 38 U.S.C. 3540)

[48 FR 37973, Aug. 22, 1983, as amended at 49 FR 42725, Oct. 24, 1984]



Sec. 21.3302  Agreements.

    (a) Agreements to provide training. The Department of Veterans 
Affairs may make agreements with public or private educational 
institutions or others to provide suitable and necessary special 
restorative training for an eligible child.
    (b) Tuition charge. When a customary tuition charge is not 
applicable, the agreement will include the fair and reasonable amounts 
which may be charged the parent or guardian for the training provided an 
eligible child.
    (c) Content of agreement. Each agreement will include the same type 
of information required for special restorative training for disabled 
veterans under 38 U.S.C. Chapter 31, including the requirement that the 
educational institutions, or others with whom arrangements have been 
made, report to the Department of Veterans Affairs promptly the eligible 
child's enrollment in, interruption or termination of the course of 
special restorative training.

(Authority: 38 U.S.C. 3543)

[48 FR 37973, Aug. 22, 1983]



Sec. 21.3303  Extent of training.

    (a) Length of special restorative training. Ordinarily, special 
restorative training may not exceed 12 months. When the counseling 
psychologist, after consulting with the Vocational Rehabilitation Panel, 
determines that more than 12 months of training is necessary, he or she 
will refer the program to the Director, Vocational Rehabilitation and 
Employment Service for prior approval. Where the plan for a program of 
special restorative training itself (not in combination with the program 
of education) will require more than 45 months (or its equivalent in 
accelerated payments) the plan will be included in the recommendation to 
the Director, Vocational Rehabilitation and Employment Service for 
approval.


(Authority: 38 U.S.C. 3543(b))

    (b) Age limitation. No eligible child may receive special 
restorative training after reaching age 31.


(Authority: 38 U.S.C. 3512)

    (c) Full-time training. An eligible child will pursue special 
restorative training on a full-time basis.
    (1) Full-time training requires training for:
    (i) That amount of time per week which commonly is required for a 
full-time course at the educational institution when, based on medical 
findings,

[[Page 236]]

the Department of Veterans Affairs determines that the eligible child's 
physical or mental condition permits training for that amount of time, 
or
    (ii) The maximum time per week permitted by the child's disability, 
as determined by the Department of Veterans Affairs, based on medical 
findings, if the disability precludes the weekly training time stated in 
paragraph (c)(1)(i) of this section.
    (2) If the hours per week that can reasonably be devoted to 
restorative training will not of themselves equal the time required by 
paragraph (c)(1) of this section, the course will be supplemented with 
subject matter which will contribute toward the objective of the program 
of education.


(Authority: 38 U.S.C. 3542(c))

[48 FR 37973, Aug. 22, 1983, as amended at 49 FR 42726, Oct. 24, 1984]



Sec. 21.3304  Assistance during training.

    (a) General. A vocational rehabilitation specialist will provide the 
professional and technical assistance needed by the eligible child in 
pursuing special restorative training. The assistance will be timely, 
sustained and personal.
    (b) Adjustments in the training situation. The vocational 
rehabilitation specialist must be continually aware of the eligible 
child's progress. At frequent intervals he or she will determine whether 
the eligible child is progressing satisfactorily. When the vocational 
rehabilitation specialist determines that adjustments are needed in the 
course or in the training situation, he or she will act immediately to 
bring about the adjustments in accordance with the following:
    (1) When the eligible child or his or her instructor indicates 
dissatisfaction with elements of the program, the vocational 
rehabilitation specialist, through personal discussion with the eligible 
child or his or her instructor or both, will, if possible, correct the 
difficulty through such means as making minor adjustments in the course 
or by persuading the eligible child to give more attention to 
performance.
    (2) When major difficulties cannot be corrected, the vocational 
rehabilitation specialist will prepare a report of pertinent facts and 
recommendations for action by the counseling psychologist in 
consultation with the Vocational Rehabilitation Panel.
    (3) Action will be taken to terminate the eligible child's course at 
the proper time so that his or her entitlement may be conserved when the 
vocational rehabilitation specialist determines that:
    (i) The eligible child is progressing much faster than anticipated, 
and
    (ii) The eligible child's course may be terminated with satisfactory 
results before the time originally planned.

(Authority: 38 U.S.C. 3541)

[48 FR 37973, Aug. 22, 1983, as amended at 49 FR 42726, Oct. 24, 1984]



Sec. 21.3305  ``Interrupted'' status.

    (a) Special restorative training should be uninterrupted. An 
eligible child once entered into special restorative training should 
pursue his or her course to completion without interruption. Wherever 
possible, continuous training shall be provided for each eligible child, 
including training during the summer, except where, because of his or 
her physical condition or other good reason, it would not be to his or 
her best interest to pursue training. As long as the eligible child is 
progressing satisfactorily toward overcoming his or her handicap, the 
eligible child will be continued in his or her course of training 
without accounting for days of nonattendance within the authorized 
enrollment.


(Authority: 38 U.S.C. 3541)

    (b) Interrupting special restorative training. Special restorative 
training will be interrupted as necessary under the following 
conditions:
    (1) During summer vacations or periods when no instruction is given 
before and after summer sessions.
    (2) During a prolonged period of illness or medical infeasibility.
    (3) When the eligible child voluntarily abandons special restorative 
training.
    (4) When the eligible child fails to make satisfactory progress in 
the special restorative training course.

[[Page 237]]

    (5) When the eligible child is no longer acceptable to the 
institution because of failure to maintain satisfactory conduct or 
progress in accordance with the rules of the institution.
    (6) When the eligible child's progress is materially retarded 
because of his or her negligence, lack of application or misconduct.


(Authority: 38 U.S.C. 3541, 3543(b))

[48 FR 37973, Aug. 22, 1983]



Sec. 21.3306  Reentrance after interruption.

    When a course of special restorative training has been interrupted 
and the eligible child presents himself or herself for reentrance, the 
Department of Veterans Affairs will act as follows:
    (a) Action by a vocational rehabilitation specialist. A vocational 
rehabilitation specialist will approve reentrance when special 
restorative training was interrupted:
    (1) For a scheduled vacation period, such as a summer break,
    (2) For a short period of illness, or
    (3) For other reasons which permit reentrance in the same course of 
special restorative training without corrective action.


(Authority: 38 U.S.C. 3543(b))

    (b) Referral to the counseling psychologist. (1) The vocational 
rehabilitation specialist will refer the eligible child's case to the 
counseling psychologist when special restorative training was 
interrupted--
    (i) By reason of failure to maintain satisfactory conduct or 
progress, or
    (ii) For any other reason, which requires corrective action, such as 
changes of place of training, change of course, personal adjustment, 
etc.
    (2) The counseling psychologist will consult with the Vocational 
Rehabilitation Panel. If he or she determines that the conditions which 
caused the interruption can be overcome, he or she will approve the 
necessary adjustment.
    (3) The counseling psychologist will make a finding of infeasibility 
if--
    (i) All efforts to effect proper adjustment in the case have failed; 
and
    (ii) There is substantial evidence, resolving any reasonable doubt 
in favor of the child (as discussed in Sec. 3.102 of this chapter), 
that additional efforts will be unsuccessful.


(Authority: 38 U.S.C. 3541, 3543(b))

[48 FR 37973, Aug. 22, 1983, as amended at 49 FR 42726, Oct. 24, 1984]



Sec. 21.3307  ``Discontinued'' status.

    (a) Placement in ``discontinued'' status. If reentrance from 
interrupted status into a program of special restorative training is not 
approved by a counseling psychologist under the provisions of Sec. 
21.3306, the vocational rehabilitation specialist will place the case in 
discontinued status.
    (b) Notification. In any case of discontinuance the Department of 
Veterans Affairs will:
    (1) Notify the eligible child's parent or guardian of the action 
taken, and
    (2) Inform him or her of the eligible child's potential right to a 
program of education.
    (c) Effect of discontinuance. An eligible child who has been placed 
in discontinued status is precluded from any further pursuit of special 
restorative training until a Department of Veterans Affairs counseling 
psychologist in the Vocational Rehabilitation and Employment Division 
determines that the cause of the discontinuance has been removed.

(Authority: 38 U.S.C. 3543(b))

[48 FR 37973, Aug. 22, 1983, as amended at 49 FR 42726, Oct. 24, 1984]

                 Payments; Special Restorative Training



Sec. 21.3330  Payments.

    (a) Payments will be made to the person designated to receive the 
payments under the provisions of Sec. 21.3133(b).
    (b) VA will pay special training allowance only for the period of 
the eligible child's approved enrollment as certified by the vocational 
rehabilitation specialist. In no event, however, will VA pay such 
allowance for any period during which:
    (1) The eligible child is not pursuing the prescribed course of 
special restorative training that has been determined to be full-time 
training with respect to his or her capacities.

[[Page 238]]

    (2) An educational assistance allowance is paid.


(Authority: 38 U.S.C. 3542)

    (c) The provisions of Sec. 21.3133(e) apply to the payment of 
special restorative training allowance.


(Authority: 38 U.S.C. 3562)

[30 FR 15646, Dec. 18, 1965, as amended at 31 FR 6774, May 6, 1966; 50 
FR 21606, May 28, 1985; 61 FR 26112, May 24, 1996]



Sec. 21.3331  Commencing date.

    The commencing date of an authorization of a special training 
allowance will be the date of entrance or reentrance into the prescribed 
course of special restorative training, or the date the counseling 
psychologist approved the course for the eligible child whichever is 
later. See also Sec. 21.3130(c).

(Authority: 38 U.S.C. 3542)

[49 FR 42726, Oct. 24, 1984, as amended at 61 FR 26112, May 24, 1996]



Sec. 21.3332  Discontinuance dates.

    VA will discontinue special training allowance as provided in this 
section on the earliest date of the following:
    (a) The ending date of the course.
    (b) The ending date of the period of enrollment as certified by the 
vocational rehabilitation specialist.
    (c) The ending date of the period of eligibility.
    (d) The expiration of the eligible child's entitlement.
    (e) Date of interruption of course as determined by the vocational 
rehabilitation specialist under Sec. 21.3305.
    (f) Date of discontinuance under the applicable provisions of Sec. 
21.3130(d).

(Authority: 38 U.S.C. 3543(b))

[50 FR 21606, May 28, 1985, as amended at 61 FR 26112, May 24, 1996]



Sec. 21.3333  Rates.

    (a) Rates. Special training allowance is payable at the following 
monthly rates, except as provided in paragraph (c) of this section.
    (1) For special restorative training that occurs after September 30, 
2002, and before October 1, 2003.

------------------------------------------------------------------------
             Course               Monthly  rate     Accelerated charges
------------------------------------------------------------------------
Special restorative training...         $680.00   If costs for tuition
                                                   and fees average in
                                                   excess of $213.00 per
                                                   month, rate may be
                                                   increased by such
                                                   amount in excess of
                                                   $213.00.
------------------------------------------------------------------------



(Authority: 38 U.S.C. 3542)

    (2) For special restorative training that occurs after September 30, 
2003, and before July 1, 2004:

------------------------------------------------------------------------
             Course               Monthly  rate     Accelerated charges
------------------------------------------------------------------------
Special restorative training...         $695.00   If costs for tuition
                                                   and fees average in
                                                   excess of $218.00 per
                                                   month, rate may be
                                                   increased by such
                                                   amount in excess of
                                                   $218.00.
------------------------------------------------------------------------



(Authority: 38 U.S.C. 3542)

    (3) For special restorative training that occurs after June 30, 
2004:

------------------------------------------------------------------------
             Course                Monthly rate     Accelerated charges
------------------------------------------------------------------------
Special restorative training...         $788.00   If costs for tuition
                                                   and fees average in
                                                   excess of $247.00 per
                                                   month, rate may be
                                                   increased by training
                                                   such amount in excess
                                                   of $247.00.
------------------------------------------------------------------------



[[Page 239]]


(Authority: 38 U.S.C. 3542)

    (b) Accelerated charges. (1) VA may pay the additional monthly rate 
if the parent or guardian concurs in having the eligible child's period 
of entitlement reduced by 1 day for each--
    (i) $22.67 that the special training allowance exceeds the basic 
monthly rate of $680.00 for the period October 1, 2002, through 
September 30, 2003;
    (ii) $23.17 that the special training allowance exceeds the basic 
monthly rate of $695.00 for the period October 1, 2003, through June 30, 
2004; and
    (iii) $26.27 that the special training allowance exceeds the basic 
monthly rate of $788.00 for months after June 30, 2004.
    (2) VA will:
    (i) Charge fractions of more than one-half day as 1 day;
    (ii) Disregard fractions of one-half or less; and
    (iii) Record charges when the eligible child is entered into 
training.


(Authority: 38 U.S.C. 3542)

    (c) Payments made to eligible persons in the Republic of the 
Philippines or to certain Filipinos. When the eligible person is 
pursuing training at an institution located in the Republic of the 
Philippines or when an eligible child's entitlement is based on the 
service of a veteran in the Philippine Commonwealth Army, or as a 
Philippine Scout as defined in Sec. 3.40(b), (c), or (d) of this 
chapter, payments of special training allowance made after December 31, 
1994, will be made at the rate of 50 cents for each dollar authorized.


(Authority: 38 U.S.C. 3532(d), 3542, 3565)

[35 FR 9814, June 16, 1970, as amended at 48 FR 37975, Aug. 22, 1983; 50 
FR 19934, May 13, 1985; 57 FR 29799, July 7, 1992; 61 FR 29295, June 10, 
1996; 63 FR 67779, Dec. 9, 1998; 66 FR 32228, June 14, 2001; 68 FR 
34322, June 9, 2003; 68 FR 37206, June 23, 2003; 69 FR 62209, Oct. 25, 
2004]

                     Special Assistance and Training



Sec. 21.3344  Special assistance for the educationally disadvantaged.

    (a) Enrollment. VA may approve the enrollment of an eligible person 
in an appropriate course or courses at the secondary school level. This 
approval may be made only if the eligible person--
    (1) Has not received a secondary school diploma (or an equivalency 
certificate);
    (2) Needs additional secondary school education, remedial, 
refresher, or deficiency courses, to qualify for admission to an 
appropriate educational institution in a State in order to pursue a 
program of education; and
    (3) Is to pursue the course or courses in a State.


(Authority: 38 U.S.C. 3491(a), 3533)

    (b) Measurement. VA will measure remedial, deficiency, or refresher 
courses offered at the secondary school level as provided in Sec. Sec. 
21.4270(a)(2) and 21.4272(k).


(Authority: 38 U.S.C. 3533)

    (c) Educational assistance. VA will authorize educational assistance 
at the monthly rates specified in Sec. 21.3131.


(Authority: 38 U.S.C. 3491(a), 3533)

    (d) Entitlement charge. The provisions of Sec. 21.3045 will 
determine whether VA will make a charge against the period of the 
entitlement of the eligible person because of enrollment in a course 
under the provisions of this section.


(Authority: 38 U.S.C. 3533)

    (e) Certifications. (1) Certifications of the eligible person's need 
for deficiency or remedial courses in basic English language skills and 
mathematics skills may be made by:
    (i) A VA counseling psychologist in the Vocational Rehabilitation 
and Employment Division;
    (ii) The educational institution administering the course; or
    (iii) The educational institution where the student has applied for 
admission.
    (2) Certification of need for other refresher, remedial or 
deficiency course requirements are to be made by the educational 
institution--
    (i) Administering the course which the eligible person is planning 
to enter; or

[[Page 240]]

    (ii) Where the eligible person has applied for admission.


(Authority: 38 U.S.C. 3533)

    (f) Basic skills. Basic English language courses or mathematics 
courses will be authorized when it is found by accepted testing methods 
that the eligible person is lacking in basic reading, writing, speaking, 
or essential mathematics.

(Authority: 38 U.S.C. 3533)

[61 FR 26112, May 24, 1996]



       Subpart D_Administration of Educational Assistance Programs

    Authority: 10 U.S.C. 2141 note, ch. 1606; 38 U.S.C. 501(a), chs. 30, 
32, 34, 35, 36, unless otherwise noted.

    Source: 31 FR 6774, May 6, 1966, unless otherwise noted.

                             Administrative



Sec. 21.4001  Delegations of authority.

    (a) Except as otherwise provided, authority is delegated to the 
Under Secretary for Benefits and to supervisory or adjudicative 
personnel within the jurisdiction of the Education Service, designated 
by him or her to make findings and decisions under 38 U.S.C. Chapters 34 
and 36 and the applicable regulations, precedents and instructions, as 
to programs authorized by these paragraphs.
    (b) Authority is delegated to the Under Secretary for Benefits and 
the Director, Education Service, to enter into agreements for the 
reimbursement of State approving agencies under Sec. 21.4153.


(Authority: 38 U.S.C. 512(a))

    (c) Authority is delegated to the Director, Education Service, to 
exercise the functions required of the Secretary for:
    (1) Waiver of penalties for conflicting interests as provided by 
Sec. 21.4005;
    (2) Actions otherwise required of State approving agencies under 
Sec. 21.4150(c);
    (3) Approval of courses under Sec. 21.4250(c)(2).


(Authority: 38 U.S.C. 512(c))

    (d) The Under Secretary for Benefits is delegated responsibility for 
obtaining evidence of voluntary compliance for vocational 
rehabilitation, education and special restorative training to implement 
Title VI, Civil Rights Act of 1964. Authority is delegated to him or her 
and his or her designee to take any necessary action as to programs of 
vocational rehabilitation, education or special restorative training 
under 38 U.S.C. Chapters 31, 34, 35 and 36 for the purpose of securing 
evidence of voluntary compliance directly or through the agencies to 
whom the Secretary has delegated responsibility for various schools or 
training establishments to implement Sec. Sec. 18.1 through 18.13 of 
this chapter.
    (e) The Under Secretary for Benefits is delegated responsibility for 
obtaining evidence of voluntary compliance from recognized national 
organizations whose representatives are afforded space and office 
facilities in facilities under his or her jurisdiction.
    (f) The Under Secretary for Benefits is delegated responsibility to 
enter into an agreement with the Federal Trade Commission to utilize, 
where appropriate, its services and facilities, consistent with its 
available resources, to carry out investigations and make determinations 
as to enrollment of an eligible veteran or eligible person in any course 
offered by an institution which utilizes advertising, sales, or 
enrollment practices of any type which are erroneous, deceptive, or 
misleading either by actual statement, omission, or intimation.


(Authority: 38 U.S.C. 3696)

    (g) Authority is delegated to the Director, Vocational 
Rehabilitation and Employment Service to exercise the functions required 
of the Secretary for approval of courses under Sec. 21.4250(c)(1).


(Authority: 38 U.S.C. 512(a))

[31 FR 6774, May 6, 1966, as amended at 40 FR 31759, July 29, 1975; 48 
FR 37975, Aug. 22, 1983; 50 FR 46764, Nov. 13, 1985; 61 FR 26112, May 
24, 1996]



Sec. 21.4002  Finality of decisions.

    (a) The decision of a duly constituted agency of original 
jurisdiction on which an action was predicated will be

[[Page 241]]

final and binding upon all field offices of the Department of Veterans 
Affairs as to conclusions based on evidence on file at that time and 
will not be subject to revision on the same factual basis except by duly 
constituted appellate authorities or except as provided in Sec. 
21.4003. (See Sec. Sec. 19.192 and 19.183 of this chapter.)
    (b) Current determinations of line of duty, character of discharge, 
relationship, and other pertinent elements of eligibility for a program 
of education or special restorative training, made by either an 
adjudicative activity or an insurance activity by application of the 
same criteria and based on the same facts are binding one upon the other 
in the absence of clear and unmistakable error.

[31 FR 6774, May 6, 1966, as amended at 48 FR 37976, Aug. 22, 1983]



Sec. 21.4003  Revision of decisions.

    The revision of a decision on which an action was predicated will be 
subject to the following sections:
    (a) Clear and unmistakable error, Sec. 3.105(a) of this chapter;
    (b) Difference of opinion, Sec. 3.105(b) of this chapter;
    (c) Character of discharge, Sec. 3.105(c) of this chapter;
    (d) Severance of service connection, Sec. 3.105(d) of this chapter;
    (e) Veteran no longer totally and permanently disabled, Sec. 
21.4135(o).



Sec. 21.4005  Conflicting interests.

    (a) General. (1) An officer or employee of VA will be immediately 
dismissed from his or her office or employment, if while such an officer 
or employee he or she has owned any interest in, or received any wages, 
salary, dividends, profits, gratuities, or services from, any school 
operated for profit in which a veteran or eligible person was pursuing a 
course of education under 10 U.S.C. chapter 1606 or 38 U.S.C. chapters 
30, 32, 34, 35 or 36.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3034(a), 3241, 3683(a))

    (2) VA will discontinue payments under Sec. 21.4153 to a State 
approving agency when the Secretary finds that any person who is an 
officer or employee of a State approving agency has, while he or she was 
such an officer or employee, owned any interest in, or received any 
wages, salary, dividends, profits, gratuities, or services from a school 
operated for profit in which a veteran or eligible person was pursuing a 
course of education or training under 10 U.S.C. chapter 1606 or 38 
U.S.C. chapters 30, 32, 34, 35 or 36 unless that agency takes, without 
delay such steps as may be necessary to terminate the employment of such 
a person. VA will not resume payments while such a person is an officer 
or employee of
    (i) The State approving agency, or
    (ii) State Department of Veterans' Affairs, or
    (iii) State Department of Education.
    (3) A State approving agency will not approve any course offered by 
a school operated for profit and, if any such course has been approved, 
will disapprove each such course, if it finds that any officer or 
employee of the Department of Veterans Affairs, or the State approving 
agency owns an interest in, or receives any wages, salary, dividends, 
profits, gratuities, or service from, such school.
    (4) The Secretary may, after reasonable notice, and public hearings 
if requested, waive in writing the application of this paragraph in the 
case of any officer or employee of the Department of Veterans Affairs or 
of a State approving agency, if it is found that no detriment will 
result to the United States or to veterans or eligible persons by reason 
of such interest or connection of such officer or employee.


(Authority: 38 U.S.C. 3683)

    (b) Waiver. (1) Where a request is made for waiver of application of 
paragraph (a)(1) of this section, it will be considered that no 
detriment will result to the United States or to veterans or eligible 
persons by reason of such interest or connection of such officer or 
employee of the Department of Veterans Affairs, if the officer or 
employee:
    (i) Acquired his or her interest in the school by operation of law, 
or before the statute became applicable to the officer or employee, and 
his or her interest has been disposed of and his or her connection 
discontinued, or

[[Page 242]]

    (ii) Meets all of the following conditions:
    (a) His or her position involves no policy determinations, at any 
administrative level, having to do with matters pertaining to payment of 
educational assistance allowance, or special training allowance.
    (b) His or her position has no relationship with the processing of 
any veteran's or eligible person's application for education or 
training.
    (c) His or her position precludes him or her from taking any 
adjudicative action on individual applications for education or 
training.
    (d) His or her position does not require him or her to perform 
duties involved in the investigation of irregular actions on the part of 
schools or veterans or eligible persons in connection with 10 U.S.C. 
chapter 1606 or 38 U.S.C. chapters 30, 32, 34, 35 or 36.
    (e) His or her position is not connected with the processing of 
claims by, or payments to, schools, or their students enrolled under the 
provisions of 10 U.S.C. chapter 1606 or 38 U.S.C. chapters 30, 32, 34, 
35 or 36.
    (f) His or her work is not connected in any way with the inspection, 
approval, or supervision of schools desiring to train veterans or 
eligible persons.
    (2) Where a request is made for waiver of application of paragraph 
(a) (2) of this section, it will be considered that no detriment will 
result to the United States or to veterans or eligible persons by reason 
of such interest or connection of such officer or employee of a State 
approving agency, if the officer or employee:
    (i) Acquired his or her interest in the school by operation of law, 
or before the statute became applicable to the officer or employee, and 
his or her interest has been disposed of and his or her connection 
discontinued, or
    (ii) Meets all of the following conditions:
    (a) His or her position does not require him or her to perform 
duties involved in the investigation of irregular actions on the part of 
schools or veterans or eligible persons in connection with 10 U.S.C. 
chapter 1606 or 38 U.S.C. chapters 30, 32, 34, 35 or 36.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3034(a), 3241, 3683(b))

    (b) His or her work is not connected in any way with the inspection, 
approval, or supervision of schools desiring to train veterans or 
eligible persons.
    (c) Authority. (1) Authority is delegated to the Director, Education 
Service, and to the facility head in the cases of VA employees under his 
or her jurisdiction, to waive the application of paragraph (a)(1) of 
this section in the case of any VA employee who meets the criteria of 
paragraph (b)(1) of this section, and to deny request for a waiver which 
do not meet those criteria. If the circumstances warrant, a waiver 
request may be submitted to the Secretary for a decision.
    (2) Authority is delegated to the Director, Education Service, in 
cases of State approving agency employees to waive the application of 
paragraph (a)(2) of this section in the case of anyone who meets the 
criteria of paragraph (b)(2) of this section, and to deny requests for a 
waiver which do not meet those criteria. If the circumstances warrant, a 
waiver request may be submitted to the Secretary for a decision.


(Authority: 38 U.S.C. 512(a))

    (3) Authority is reserved to the Secretary to waive the requirement 
of paragraphs (a) (1) and (2) of this section in the case of an officer 
of the Department of Veterans Affairs or a State approving agency and in 
the case of any employee of either who does not meet the criteria of 
paragraph (b) of this section.
    (d) Disapproval of courses. Where it is found that an officer or 
employee of the Department of Veterans Affairs has any interest in, or 
receives any wages, salary, dividends, profits, gratuities, or services 
from any such school, and waiver has not been granted, the State 
approving agency and the school will be notified immediately that the 
courses offered by the school shall be disapproved, the reason for 
disapproval, and the conditions under which the disapproval may be 
lifted.

[[Page 243]]

    (e) Notice to veterans and eligible persons. The veteran or eligible 
person will be notified in writing sent to his or her latest address of 
record when:
    (1) The course or courses are disapproved by the State approving 
agency, or
    (2) The State approving agency fails to disapprove the course or 
courses within 15 days after the date of written notice to the agency, 
and no waiver has been requested, or
    (3) Waiver has been denied.

The veteran or eligible person will be informed that he or she may apply 
for enrollment in an approved course in another school, but that in the 
absence of such transfer, educational assistance allowance payments will 
be discontinued effective the date of discontinuance of the course, or 
the 30th day following the date of such letter, whichever is earlier.
    (f) Definition of ``officer.'' For the purposes of this section a 
person will be considered to be an officer of the State approving agency 
or the Department of Veterans Affairs, when he or she has authority to 
exercise supervisory authority.

[31 FR 6774, May 6, 1966, as amended at 43 FR 3707, Jan. 27, 1978; 51 FR 
16315, May 2, 1986; 61 FR 20728, May 8, 1996]



Sec. 21.4006  False or misleading statements.

    (a) Payments may not be based on false statements. Except as 
provided in this section payments may not be authorized based on a claim 
where it is found that the school or any person has willfully submitted 
a false or misleading claim, or that the veteran or eligible person with 
the complicity of the school or other person has submitted such a claim. 
A complete report of the facts will be made to the State approving 
agency, and if in order to the Attorney General of the United States.


(Authority: 38 U.S.C. 3690)

    (1) Where it is determined prior to payment that a certification or 
claim is false or misleading, payment will be authorized for only that 
portion of the claim to which entitlement is established on the basis of 
other evidence of record.
    (2) When the Department of Veterans Affairs discovers that a 
certification or claim is false after it has released payment, the 
Department of Veterans Affairs will establish an overpayment for only 
that portion of the claim to which the claimant was not entitled.


(Authority: 38 U.S.C. 3680)

    (b) Effect of false statements on subsequent payments. A claimant's 
false or misleading statements are not a bar to payments based on 
further training.


(Authority: 38 U.S.C. 3680)

    (c) Forfeiture. The provisions of this section do not apply when 
forfeiture of all rights has been or may be declared under the 
provisions of Sec. 21.4007.


(Authority: 38 U.S.C. 6103)

[31 FR 6774, May 6, 1966, as amended at 38 FR 14932, June 7, 1973; 48 FR 
37976, Aug. 22, 1983]



Sec. 21.4007  Forfeiture.

    The rights of a veteran or eligible person to receive educational 
assistance allowance or special training allowance are subject to 
forfeiture under the provisions of Sec. Sec. 3.900, 3.901 (except 
paragraph (c)), 3.902 (except paragraph (c)), 3.903, 3.904, 3.905 and 
19.2 of this chapter.

(Authority: 38 U.S.C. 6103, 6104 and 6105)

[54 FR 4286, Jan. 30, 1989]



Sec. 21.4008  Prevention of overpayments.

    When approval of a course may be withdrawn, and overpayments may 
exist or be created, the Department of Veterans Affairs may suspend 
further payments to veterans or eligible persons enrolled in the school 
until the question of withdrawing approval is resolved. See Sec. 
21.4210.

(Authority: 38 U.S.C. 3690(b))

[48 FR 37976, Aug. 22, 1983, as amended at 63 FR 35831, July 1, 1998]



Sec. 21.4009  Overpayments; waiver or recovery.

    (a) General. (1) The amount of the overpayment of educational 
assistance allowance or special training allowance paid to a veteran or 
eligible person constitutes a liability of that veteran or eligible 
person.

[[Page 244]]

    (2) The amount of the overpayment of educational assistance 
allowance or special training allowance paid to a veteran or eligible 
person constitutes a liability of the education institution if the 
Department of Veterans Affairs determines that the overpayment was made 
as the result of willful or negligent:
    (i) Failure of the educational institution to report, as required by 
Sec. Sec. 21.4203 and 21.4204, discontinuance or interruption of a 
course by a veteran, reservist or eligible person, or
    (ii) False certification by the educational institution.
    (3) If it appears that the falsity or misrepresentation was 
deliberate, the Department of Veterans Affairs may not pursue 
administrative collection pending a determination whether the matter 
should be referred to the Department of Justice for possible civil or 
criminal action. However, the Department of Veterans Affairs may recover 
the amount of the overpayment from the educational institution by 
administrative collection procedure when the Department of Veterans 
Affairs determines the false certification or misrepresentation resulted 
from an administrative error or a misstatement of fact and that no 
criminal or civil action is warranted.
    (4) If the Department of Veterans Affairs recovers any part of the 
overpayment from the educational institution, it may reimburse the 
educational institution, if the Department of Veterans Affairs 
subsequently collects the overpayment from a veteran or eligible person. 
The reimbursement--
    (i) Will be made when the total amount collected from the 
educational institution and from the veterans and eligible persons (less 
any amount applied toward marshal fees, court costs, administrative cost 
of collection and interest) exceeds the total amount for which the 
educational institution is liable, and
    (ii) Will be equal to the excess.
    (5) This paragraph does not preclude the imposition of any civil or 
criminal liability under this or any other law.
    (b) Reporting. (1) If a school is required to make periodic or other 
certifications, the Department of Veterans Affairs may consider the 
following in determining whether a school is potentially liable for an 
overpayment:
    (i) The school's failure to report, or to report timely facts which 
resulted in an overpayment, or
    (ii) The school's submission of an incorrect certification as to 
fact.
    (2) In either instance the Department of Veterans Affairs will 
consider other pertinent factors such as:
    (i) Allowing for occasional clerical error or occasional 
administrative error:
    (ii) The school's past reliability in reporting;
    (iii) The adequacy of the school's reporting system; and
    (iv) The extent of noncompliance with reporting requirements.


(Authority: 38 U.S.C. 3685)

    (c) Committee on school liability. Each field station having 
jurisdiction over schools with courses approved for training under 
Chapter 1606, Title 10 U.S.C., Chapters 30, 32, 34, 35 and/or 36, Title 
38 U.S.C. shall establish a Committee on School Liability. The committee 
or a panel designated by the committee chairperson and drawn from the 
committee, is authorized to find whether a school is liable for an 
overpayment.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3034(a), 3241, 3685)

    (d) Initial determination. The Veterans Service Center Manager of 
the Department of Veterans Affairs facility of jurisdiction will 
determine whether there is evidence that would warrant a finding that 
the school is potentially liable for an overpayment. When the decision 
is in the affirmative, the Finance Officer of the Department of Veterans 
Affairs facility of jurisdiction will notify the school in writing of 
the Department of Veterans Affairs's intent to apply the liability 
provisions of paragraph (a) of this section. The notice will identify 
the students overpaid and will set out in each student's case the 
actions or omissions by the school which resulted in the finding that 
the school was potentially liable for the overpayment. The notice will 
also state that a determination of liability

[[Page 245]]

will be made on the basis of the evidence of record, unless additional 
evidence or a request for a hearing is received within 30 days of the 
date of receipt of such notice by the school.
    (e) Hearings. A school is entitled to a hearing before a panel drawn 
from the Committee on School Liability before a decision is made as to 
whether it is liable for an overpayment. Every hearing will be preceded 
by a prehearing conference unless the conference is waived by the 
school. The Committee on School Liability will consider all evidence and 
testimony presented at the hearing.
    (f) Extent of liability. Waiver of collection of an overpayment as 
to a veteran or eligible person will not relieve the school of liability 
for the overpayment. Recovery in whole or in part from the veteran or 
eligible person will limit such liability accordingly. If an overpayment 
has been recovered from the school and the veteran or eligible person 
subsequently repays the amount in whole or in part, the amount repaid 
will be reimbursed to the school.
    (g) Notice to school. The school shall be notified in writing of the 
decision of the Committee on School Liability. If the school is found 
liable for an overpayment, the school also will be notified of the right 
to appeal the decision to the Central Office School Liability Appeals 
Board within 60 days from the date of the letter to the school 
containing notice of the decision. The 60-day time limit may be extended 
to 90 days at the discretion of the chairperson of the Committee on 
School Liability. The appeal must be in writing setting forth fully the 
alleged errors of fact and law. If an appeal is not received within the 
60-day time limit, the Committee decision is final.
    (h) Appeals. An appeal will be forwarded to Central Office where it 
will be considered by the School Liability Appeals Board. The Board's 
decision will serve as authority for instituting collection proceedings, 
if appropriate, or for discontinuing collection proceedings instituted 
on the basis of the original decision of the Committee on School 
Liability in any case where the Board reverses a decision made by the 
Committee that the school is liable.
    (i) Review. Review by the School Liability Appeals Board is limited 
to the issues raised by the school and shall be on the record and not de 
novo in character. The Board may affirm, modify or reverse a decision of 
the Committee on School Liability or may remand an appeal for further 
consideration by the appropriate Committee on School Liability. If new 
and material evidence is discovered while the School Liability Appeals 
Board is considering a case, the Board may remand the case to the 
appropriate Committee on School Liability.
    (j) Finality of decisions. The School Liability Appeals Board has 
authority to act for the Secretary in deciding appeals concerning a 
school's liability for an overpayment. There is no right of additional 
administrative appeal of a decision of the School Liability Appeals 
Board.

[32 FR 4533, Mar. 25, 1967, as amended at 44 FR 15492, Mar. 14, 1979; 48 
FR 37976, Aug. 22, 1983; 49 FR 35630, Sept. 11, 1984; 51 FR 16316, May 
2, 1986; 61 FR 20728, May 8, 1996; 61 FR 26112, May 24, 1996; 62 FR 
55760, Oct. 28, 1997; 71 FR 28586, May 17, 2006]

                                 General



Sec. 21.4020  Two or more programs.

    (a) Limit on training under two or more programs. The aggregate 
period for which any person may receive assistance under two or more of 
the following laws may not exceed 48 months (or the part-time 
equivalent):
    (1) Part VII or VIII, Veterans Regulations numbered 1(a), as 
amended:
    (2) Title II of the Veterans' Readjustment Assistance Act of 1952;
    (3) The War Orphans' Educational Assistance Act of 1956;
    (4) 38 U.S.C. Chapters 30, 32, 34, 35 and 36 and the former Chapter 
33;
    (5) 10 U.S.C. Chapters 107 and 1606;
    (6) Section 903 of the Department of Defense Authorization Act, 
1981,
    (7) The Hostage Relief Act of 1980, and
    (8) The Omnibus Diplomatic Security and Antiterrorism Act of 1986.


(Authority: 38 U.S.C. 3695(a))

    (b) Limit on combining assistance received under Chapter 31 with 
assistance under another program. No person may

[[Page 246]]

receive assistance under Chapter 31, Title 38 U.S.C. in combination with 
any provisions of law listed in paragraph (a) of this section in excess 
of 48 months (or the part-time equivalent) unless the Department of 
Veterans Affairs determines that additional months of benefits under 
Chapter 31 are necessary to accomplish the purpose of the veteran's 
rehabilitation program.


(Authority: 38 U.S.C. 3695(b))

[48 FR 37976, Aug. 22, 1983, as amended at 51 FR 16316, May 2, 1986; 57 
FR 29800, July 7, 1992; 61 FR 20728, May 8, 1996]



Sec. 21.4022  Nonduplication--programs administered by VA.

    A veteran or eligible person who is eligible for education or 
training benefits under more than one of the provisions of law listed in 
this paragraph based on his or her own service or based on the service 
of another person cannot receive such benefits concurrently. The 
individual must elect which benefit he or she will receive for the 
particular period or periods during which education or training is to be 
pursued. Except for an election between 38 U.S.C. chapters 32 and 34 
which is irrevocable once a check has been negotiated, the person may 
reelect at any time.
    (a) 38 U.S.C. chapter 30,
    (b) 38 U.S.C. chapter 31,
    (c) 38 U.S.C. chapter 32,
    (d) 38 U.S.C. chapter 34,
    (e) 38 U.S.C. chapter 35,
    (f) 10 U.S.C. chapter 1606,
    (g) Section 903 of the Department of Defense Authorization Act, 1981
    (h) The Hostage Relief Act of 1980, or
    (i) The Omnibus Diplomatic Security and Antiterrorism Act of 1986.

(Authority: 38 U.S.C. 3681)

[34 FR 843, Jan. 18, 1969, as amended at 48 FR 37976, Aug. 22, 1983; 50 
FR 27826, July 8, 1985; 51 FR 16316, May 2, 1986; 54 FR 33887, Aug. 17, 
1989; 57 FR 29800, July 7, 1992; 61 FR 20728, May 8, 1996; 61 FR 26113, 
May 24, 1996]

               Payments; Educational Assistance Allowance



Sec. 21.4131  Commencing dates.

    VA will determine the commencing date of an award or increased award 
of educational assistance under this section. When more than one 
paragraph in this section applies, VA will award educational assistance 
using the latest of the applicable commencing dates.
    (a) Entrance or reentrance including change of program or 
educational institution: individual eligible under 38 U.S.C. chapter 32. 
When an eligible veteran or servicemember enters or reenters into 
training (including a reentrance following a change of program or 
educational institution), the commencing date of his or her award of 
educational assistance will be determined as follows:
    (1) If the award is the first award of educational assistance for 
the program of education the veteran or servicemember is pursuing, the 
commencing date of the award of educational assistance is the latest of:
    (i) The date the educational institution certifies under paragraph 
(b) or (c) of this section;
    (ii) One year before the date of claim as determined by Sec. 
21.1029(b);
    (iii) The effective date of the approval of the course, or one year 
before the date VA receives the approval notice, whichever is later; or
    (2) If the award is the second or subsequent award of educational 
assistance for the program of education the veteran or servicemember is 
pursuing, the effective date of the award of educational assistance is 
the later of--
    (i) The date the educational institution certifies under paragraph 
(b) or (c) of this section; or
    (ii) The effective date of the approval of the course, or one year 
before the date VA receives the approval notice, whichever is later.


(Authority: 38 U.S.C. 3672, 5103, 5110(b), 5113)

    (b) Certification by school--the course or subject leads to a 
standard college degree. (1) When the student enrolls in a course 
offered by independent study, the commencing date of the award or 
increased award of educational assistance will be the date the student 
began pursuit of the course according to the regularly established 
practices of the educational institution.
    (2) Except as provided in paragraphs (b)(3), (b)(4) and (b)(5) of 
this section when a student enrolls in a resident

[[Page 247]]

course or subject, the commencing date of the award or increased award 
of educational assistance will be the first scheduled date of classes 
for the term, quarter or semester in which the student is enrolled.
    (3) When the student enrolls in a resident course or subject whose 
first scheduled class begins after the calendar week when, according to 
the school's academic calendar, classes are scheduled to commence for 
the term, quarter, or semester, the commencing date of the award or 
increased award of educational assistance allowance will be the actual 
date of the first class scheduled for that particular course or subject.
    (4) When a student enrolls in a resident course or subject, the 
commencing date of the award will be the date the student reports to the 
school provided that--
    (i) The published standards of the school require the student to 
register before reporting, and
    (ii) The published standards of the school require the student to 
report no more than 14 days before the first scheduled date of classes 
for the term, quarter or semester for which the student has registered, 
and no later than the first scheduled date of classes for the term, 
quarter or semester for which the student has registered.
    (5) When the student enrolls in a resident course or subject and the 
first day of classes is more than 14 days after the date of 
registration, the commencing date of the award or the increased award of 
educational assistance will be the first day of classes.


(Authority: 38 U.S.C. 3481(a), 3680(a); Pub. L. 98-525)

    (c) Certification by school or establishment--course does not lead 
to a standard college degree. (1) Residence school: See paragraph (b) of 
this section.
    (2) Correspondence school: Date first lesson sent or date of 
affirmance whichever is later.
    (3) Job training: First date of employment in training position.


(Authority: 38 U.S.C. 3481, 3687)

    (d) Entrance or reentrance including change of program or 
educational institution: individual eligible under 38 U.S.C. chapter 35. 
When a person eligible to receive educational assistance under 38 U.S.C. 
chapter 35 enters or reenters into training (including a reentrance 
following a change of program or educational institution), the 
commencing date of his or her award of educational assistance will be 
determined as follows:
    (1) If the award is the first award of educational assistance for 
the program of education the eligible person is pursuing, the commencing 
date of the award of educational assistance is the latest of:
    (i) The beginning date of eligibility as determined by Sec. 
21.3041(a) or (b) or by Sec. 21.3046(a) or (b), whichever is 
applicable;
    (ii) One year before the date of claim as determined by Sec. 
21.1029(b);
    (iii) The date the educational institution certifies under paragraph 
(b) or (c) of this section;
    (iv) The effective date of the approval of the course, or one year 
before the date VA receives the approval notice, whichever is later; or
    (2) If the award is the second or subsequent award of educational 
assistance for that program, the effective date of the award of 
educational assistance is the later of--
    (i) The date the educational institution certifies under paragraph 
(b) or (c) of this section; or
    (ii) The effective date of the approval of the course, or one year 
before the date VA receives the approval notice, whichever is later.


(Authority: 38 U.S.C. 3014, 3023, 3034, 3672, 5103)

    (e) [Reserved]
    (f) Liberalizing laws and Department of Veterans Affairs issues. In 
accordance with facts found, but not earlier than the effective date of 
the act or administrative issue.
    (g) Correction of military records. Eligibility of a veteran or 
eligible person may arise as the result of correction or modification of 
military records under 10 U.S.C. 1552, or a change, correction or 
modification of a discharge or dismissal under 10 U.S.C. 1553, or other 
competent military authority. In these cases the commencing date of 
educational assistance allowance will be in

[[Page 248]]

accordance with the facts found, but not earlier than the date the 
change, correction or modification was made by the service department.


(Authority: 38 U.S.C. 3462(b), 3501(d))

    (h) Individuals in a penal institution. If a veteran or eligible 
person is paid a reduced rate of educational assistance or no 
educational assistance under Sec. 21.3132 (a) or (b) or Sec.  21.5139, 
the rate will be increased or benefits will commence effective the 
earlier of the following dates:
    (1) The date the tuition and fees are no longer being paid under 
another Federal program, or a State or local program, or
    (2) The date of the release from the prison or jail.


(Authority: 38 U.S.C. 3482(g), 3532(e))

    (i) Fugitive felons. An award of educational assistance allowance to 
an otherwise eligible veteran or person will begin effective the date 
the warrant for the arrest of the felon is cleared by--
    (1) Arrest;
    (2) Surrendering to the issuing authority;
    (3) Dismissal; or
    (4) Court documents (dated after the warrant for the arrest of the 
felon) showing the individual is no longer a fugitive.


(Authority: 38 U.S.C. 5313B)
    (j) [Reserved]

[31 FR 6774, May 6, 1966, as amended at 39 FR 43220, Dec. 11, 1974; 41 
FR 47929, Nov. 1, 1976; 46 FR 62060, Dec. 22, 1981; 48 FR 37977 and 
37978, Aug. 22, 1983; 49 FR 5113, Feb. 10, 1984; 50 FR 48581, Nov. 26, 
1985; 51 FR 16318, May 2, 1986; 54 FR 28677, July 7, 1989; 57 FR 40614, 
Sept. 4, 1992; 61 FR 6782, Feb. 22, 1996; 61 FR 26113, May 24, 1996; 64 
FR 23772, May 4, 1999; 66 FR 38938, July 26, 2001; 70 FR 25786, May 16, 
2005]



Sec. 21.4135  Discontinuance dates.

    The effective date of reduction or discontinuance of educational 
assistance allowance will be as specified in this section. If more than 
one type of reduction or discontinuance is involved, the earliest date 
will control.
    (a) Death of veteran or eligible person. (1) If the veteran or 
eligible person receives an advance payment pursuant to 38 U.S.C. 
3680(d) and dies before the period covered by the advance payment ends, 
the discontinuance date of educational assistance shall be the last date 
of the period covered by the advance payment.
    (2) In all other cases if the veteran or eligible person dies while 
pursuing a program of education, the discontinuance date of educational 
assistance shall be the last date of attendance.


(Authority: 38 U.S.C. 3680)

    (b) Election to receive educational assistance under the Montgomery 
GI Bill--Active Duty. If a veteran makes a valid election, as provided 
in Sec. 21.7045(d), to receive educational assistance under the 
Montgomery GI Bill--Active Duty in lieu of educational assistance under 
the Post-Vietnam Era Veterans' Educational Assistance Program, the 
discontinuance date of educational assistance under the Post-Vietnam Era 
Veterans' Educational Assistance Program shall be the date on which the 
election was made pursuant to procedures described in Sec. 
21.7045(d)(2).


(Authority: 38 U.S.C. 3018C(c)(1))

    (c)-(d) [Reserved]
    (e) Course discontinued; course interrupted; course terminated; 
course not satisfactorily completed or withdrawn from. (1) If the 
individual receives all nonpunitive grades, or withdraws from all 
courses other than because of being ordered to active duty, and no 
mitigating circumstances are found, VA will terminate the individual's 
educational assistance allowance effective the first date of the term in 
which the withdrawal occurs.
    (2) If the individual withdraws from all other courses other than 
courses in paragraph (e)(3) of this section and with mitigating 
circumstances, or withdraws from all courses such that a punitive grade 
is or will be assigned for those courses:
    (i) Residence training: Last date of attendance.
    (ii) Independent study: Official date of change in status under the 
practices of the institution.

[[Page 249]]

    (3) If the individual withdraws from correspondence, flight, farm 
cooperative, cooperative or job training, benefits will be terminated 
effective:
    (i) Correspondence training: Date last lesson is serviced.
    (ii) Flight training: Date of last instruction.
    (iii) Job training: Date of last training.
    (iv) Farm cooperative training: Date of last class attendance.
    (v) Cooperative training: Date of last training.


(Authority: 38 U.S.C. 3680(a))

    (f) Discontinued by VA (Sec. Sec. 21.4215, 21.4216). If VA 
discontinues payments of educational assistance as provided by 
Sec. Sec. 21.4215(d) and 21.4216, the effective date of discontinuance 
will be as follows:
    (1) The date on which payments first were suspended by the Director 
of a VA facility as provided in Sec. 21.4210, if the discontinuance 
were preceded by such a suspension.
    (2) End of the month in which the decision to discontinue is 
effective pursuant to Sec. 21.4215(d), if the Director of a VA facility 
did not suspend payments prior to the discontinuance.


(Authority: 38 U.S.C. 3690)

    (g) Unsatisfactory progress, conduct or attendance Sec. 21.4277. 
The date the veteran's or eligible person's enrollment is discontinued 
by the school or the date determined under Sec. 21.4277, whichever is 
earlier.


(Authority: 38 U.S.C. 3474, 3524)

    (h) Required certifications not received after certification of 
enrollment (Sec. Sec. 21.4203 and 21.4204). (1) If required 
certification of attendance of a veteran or eligible person enrolled in 
a course not leading to a standard college degree is not timely 
received, payments will be terminated date of last certification. If 
certification is later received, adjustment will be made based on facts 
found.
    (2) If verification of enrollment and certificate of delivery of the 
check is not received within 60 days, in the case of an advance payment, 
the actual facts will be determined and adjustment made, if required, on 
the basis of facts found. If student failed to enroll, termination will 
be effective the beginning date of the enrollment period.
    (i) False or misleading statements. See Sec. 21.4006.
    (j) Disapproval by State approving agency (Sec. 21.4259(a)). If a 
State approving agency disapproves a course, the date of discontinuance 
of payments to those receiving educational assistance while enrolled in 
the course will be as follows:
    (1) The date on which payments first were suspended by the Director 
of a VA facility as provided in Sec. 21.4210, if disapproval were 
preceded by such a suspension.
    (2) End of the month in which disapproval is effective or notice of 
disapproval is received in the Department of Veterans Affairs, whichever 
is later, provided that the Director of a Department of Veterans Affairs 
facility did not suspend payments prior to the disapproval.


(Authority: 38 U.S.C. 3672(a), 3690)

    (k) Disapproval by Department of Veterans Affairs (Sec. Sec. 
21.4215, 21.4259(c)). If VA disapproves a course, the date of 
discontinuance of payments to those receiving educational assistance 
while enrolled in the course will be as follows:
    (1) Date on which payments first were suspended by the Director of a 
VA facility as provided in Sec. 21.4210, if disapproval were preceded 
by such a suspension.
    (2) End of the month in which disapproval occurred, provided that 
the Director of a Department of Veterans Affairs facility did not 
suspend payments prior to the disapproval.


(Authority: 38 U.S.C. 3671(b), 3672(a), 3690)

    (l) Conflicting interests (not waived) (Sec. 21.4005). Thirty days 
after date of letter notifying veteran or eligible person, unless 
terminated earlier for other reason.
    (m) Incarceration in prison or penal institution for conviction of a 
felony. (1) The provisions of this paragraph apply to a veteran or 
eligible person whose educational assistance must be discontinued or who 
becomes restricted to

[[Page 250]]

payment of educational assistance allowance at a reduced rate under 
Sec. 21.3132(a) or (b) or Sec.  21.5139.
    (2) The reduced rate or discontinuance will be effective the latest 
of the following dates.
    (i) The first day on which all or part of the veteran's or eligible 
person's tuition and fees were paid by a Federal, State or local 
program,
    (ii) The date the veteran or eligible person is incarcerated in 
prison or penal institution, or
    (iii) The commencing date of the award as determined by Sec. 
21.4131.


(Authority: 38 U.S.C. 3482(g), 3532(e))

    (n) Fugitive felons: veterans eligible under 38 U.S.C. chapter 32. 
VA will not award educational assistance allowance to an otherwise 
eligible veteran for any period after December 26, 2001, during which 
the veteran is a fugitive felon. The date of discontinuance of an award 
of educational assistance allowance to a veteran who is a fugitive felon 
is the later of--
    (1) The date of the warrant for the arrest of the felon; or
    (2) December 27, 2001.


(Authority: 38 U.S.C. 5313B)
    (o) [Reserved]
    (p) Error; payee's or administrative. (1) Effective date of award or 
day preceding act, whichever is later, but not prior to the date 
entitlement ceased, on an erroneous award based on an act of commission 
or omission by a payee or with his or her knowledge.
    (2) Date of last payment on an erroneous award based solely on 
administrative error by VA or error in judgment by VA.


(Authority: 38 U.S.C. 5112(b)(10) and 5113)

    (q) Fraud; forfeiture resulting (Sec. 21.4007). Beginning date of 
award or day preceding date of fraudulent act whichever is later.
    (r) Treasonable acts or subversive activities; forfeiture (Sec. 
21.4007). Beginning date of award or date preceding date of commission 
of treasonable act or subversive activities for which convicted, 
whichever is later.
    (s) Reduction in rate of pursuit of course (Sec. 21.4270). (1) VA 
will reduce an individual's educational assistance allowance effective 
the first date of the term in which the individual reduces training by 
withdrawing from part of a course, if the reduction occurs at the 
beginning of the term.
    (2) VA will reduce an individual's educational assistance allowance 
effective the earlier of the end of the month or end of the term in 
which an individual reduces training by withdrawing from part of a 
course when:
    (i) The reduction does not occur at the beginning of the term;
    (ii) The individual received a lump-sum payment for the quarter, 
semester, term or other enrollment period during which he or she reduced 
training; and
    (iii) There are mitigating circumstances, or the individual receives 
a punitive grade for the portion of the course from which he or she 
withdrew.
    (3) VA will reduce an individual's educational assistance allowance 
effective the date on which an individual reduces training when:
    (i) The reduction does not occur at the beginning of the term;
    (ii) The individual did not receive a lump-sum payment for the 
quarter, semester, term or other enrollment period during which he or 
she reduced training; and
    (iii) There are mitigating circumstances, or the individual receives 
a punitive grade for the portion of the course from which he or she 
withdrew.
    (4) If the individual reduces training by withdrawing from a part of 
a course and the withdrawal does not occur because the individual was 
ordered to active duty; there are no mitigating circumstances; and the 
individual receives a nonpunitive grade from that portion of the course 
from which he or she withdrew; VA will reduce the individual's 
educational assistance effective the later of the following:
    (i) The first date of enrollment of the term in which the reduction 
occurs; or
    (ii) December 1, 1976. See paragraphs (e) and (w) of this section 
also.
    (5) An individual who enrolls in several subjects and reduces his or 
her rate of pursuit by completing one or more of them while continuing 
training in others, may receive an interval payment based on the 
subjects completed, if the requirements of Sec. 21.4138(f)

[[Page 251]]

of this part are met. If those requirements are not met, VA will reduce 
the individual's educational assistance allowance effective the date the 
subject or subjects were completed.


(Authority: 38 U.S.C. 5113, 3680)

    (t) Change in law or Department of Veterans Affairs issue, or 
interpretation. See Sec. 3.114(b) of this chapter.
    (u) Except as otherwise provided. On basis of facts found.
    (v) [Reserved]
    (w) Nonpunitive grade assigned without a withdrawal from courses. 
(1) If an individual receives a nonpunitive grade for a particular 
course for any reason other than a withdrawal from it, VA will reduce 
the individual's educational assistance allowance effective the last 
date of attendance when mitigating circumstances are found.
    (2) If an individual receives a nonpunitive grade in a particular 
course for any reason other than a withdrawal from it, and there are no 
mitigating circumstances, VA will reduce his or her educational 
assistance effective the later of the following:
    (i) The first date of enrollment for the term in which the grade 
applies, or
    (ii) December 1, 1976. See paragraphs (e) and (s) of this section.


(Authority: 38 U.S.C. 3680(a)(4))

    (x) Independent study course loses accreditation. Except as 
otherwise provided in Sec. 21.4252(g), if the veteran or eligible 
person is enrolled in a course offered in whole or in part by 
independent study, and the course loses its accreditation (or the 
educational institution offering the course loses its accreditation), 
the date of reduction or discontinuance will be the effective date of 
the withdrawal of accreditation by the accrediting agency.


(Authority: 38 U.S.C. 3672, 3676, 3680A(a))

    (y)-(aa) [Reserved]

    Cross Reference: Special restorative training. See Sec. 21.3332.

[31 FR 6774, May 6, 1966]

    Editorial Note: For Federal Register citations affecting Sec. 
21.4135, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 21.4136  Withdrawals or nonpunitive grades may result in nonpayment.

    (a) General. VA will not pay benefits to an individual for a course 
from which the individual withdraws or receives a nonpunitive grade 
which is not used in computing the requirements for graduation unless:
    (1) The individual withdraws because he or she is ordered to active 
duty; or
    (2) All of the following criteria are met:
    (i) There are mitigating circumstances;
    (ii) The individual submits a description of the circumstances in 
writing to VA either within one year from the date VA notifies the 
individual that he or she must submit the mitigating circumstances or at 
a later date if the individual is able to show good cause why the one-
year time limit should be extended to the date on which he or she 
submitted the description of the mitigating circumstances; and
    (iii) The individual submits evidence supporting the existence of 
mitigating circumstances within one year of the date that evidence is 
requested by VA, or at a later date if the individual is able to show 
good cause why the one-year time limit should be extended to the date on 
which he or she submitted the evidence supporting the existence of 
mitigating circumstances.


(Authority: 38 U.S.C. 3680(a))

    (b) Representative mitigating circumstances. The following 
circumstances, which are not all inclusive, are representative of those 
that VA considers to be mitigating provided they prevent the individual 
from pursuing the program of education continuously:
    (1) An illness of the individual;
    (2) An illness or death in the individual's family;
    (3) An unavoidable geographical transfer resulting from the 
individual's employment;
    (4) An unavoidable change in the individual's conditions of 
employment;
    (5) Immediate family or financial obligations beyond the control of 
the individual that require him or her to suspend pursuit of the program 
of education to obtain employment;

[[Page 252]]

    (6) Discontinuance of the course by the school;
    (7) Unanticipated active duty for training;
    (8) Unanticipated difficulties in caring for the individual's child 
or children.


(Authority: 38 U.S.C. 3680(a))

    (c) Failure to complete a course for the educationally 
disadvantaged. If the individual fails to satisfactorily complete a 
course under 38 U.S.C. 3491(a) without fault, VA will consider the 
circumstances that caused the failure to be mitigating. This will be the 
case even if the circumstances were not so severe as to preclude 
continuous pursuit of a program of education.
    (d) Withdrawals after May 31, 1989. In the first instance of a 
withdrawal after May 31, 1989, from a course or courses for which the 
individual received educational assistance under 38 U.S.C. chapter 32, 
VA will consider that mitigating circumstances exist with respect to 
courses totaling not more than six semester hours or the equivalent, and 
paragraphs (a)(2)(ii) and (a)(2)(iii) of this section will not apply.


(Authority: 38 U.S.C. 3680(a)(3))

    (e) Withdrawals during a drop-add period. If the individual 
withdraws from a course during a drop-add period, VA will consider the 
circumstances that caused the withdrawal to be mitigating, and 
paragraphs (a)(2)(ii) and (a)(2)(iii) of this section will not apply.


(Authority: 38 U.S.C. 3680(a))

[31 FR 8292, June 14, 1966]

    Editorial Note: For Federal Register citations affecting Sec. 
21.4136, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 21.4138  Certifications and release of payments.

    (a) Advance payments. (1) VA will make payments of educational 
assistance in advance when:
    (i) The veteran, servicemember, reservist, or eligible person has 
specifically requested such a payment;
    (ii) The student is enrolled for half time or more;
    (iii) The educational institution at which the veteran, 
servicemember, reservist, or eligible person is accepted or enrolled has 
agreed to and can satisfactorily carry out the provisions of 38 U.S.C. 
3680(d)(4)(B) and (C) and (5) pertaining to receipt, delivery, or return 
of checks and certifications of delivery and enrollment;
    (iv) The Director of the VA field facility of jurisdiction has not 
acted under paragraph (a)(4) of this section to prevent advance payments 
being made to the veteran's, servicemember's, reservist's, or eligible 
person's educational institution;
    (v) There is no evidence in the veteran's, servicemember's, 
reservist's, or eligible person's claim file showing that he or she is 
not eligible for an advance payment;
    (vi) The period for which the veteran, servicemember, reservist, or 
eligible person has requested a payment either--
    (A) Is preceded by an interval of nonpayment of 30 days or more; or
    (B) Is the beginning of a school year that is preceded by a period 
of nonpayment of 30 days or more; and
    (vii) The educational institution or the veteran, servicemember, 
reservist, or eligible person has submitted the certification required 
by Sec. 21.7151.
    (2) The amount of the advance payment to a veteran, reservist, or 
eligible person is the educational assistance for the month or fraction 
thereof in which the term or course will begin plus the educational 
assistance for the following month. The amount of the advance payment to 
a servicemember is the amount payable for the entire term, quarter, or 
semester, as applicable.
    (3) VA will mail advance payments to the educational institution for 
delivery to the veteran, servicemember, reservist, or eligible person. 
The educational institution will not deliver the advance payment check 
more than 30 days in advance of the first date of the period for which 
VA makes the advance payment.
    (4) The Director of the VA field station of jurisdiction may direct 
that advance payments not be made to individuals attending an 
educational institution if:

[[Page 253]]

    (i) The educational institution demonstrates an inability to comply 
with the requirements of paragraph (a)(3) of this section;
    (ii) The educational institution fails to provide adequately for the 
safekeeping of the advance payment checks before delivery to the 
veteran, servicemember, reservist, or eligible person or return to VA; 
or
    (iii) The Director determines, based on compelling evidence, that 
the educational institution has demonstrated its inability to discharge 
its responsibilities under the advance payment program.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034, 3680(d))

    (b) Lump-sum payments. A lump-sum payment is a payment of all 
educational assistance due for an entire quarter, semester, or term. VA 
will make a lump-sum payment to:
    (1) A veteran or servicemember pursuing a program of education at 
less than the half-time rate under 38 U.S.C. chapter 30;
    (2) A servicemember pursuing a program of education at the half-time 
rate or greater under 38 U.S.C. chapter 30, provided that VA did not 
make an advance payment to the servicemember for the term for which a 
lump-sum payment would otherwise be due; and
    (3) An eligible person pursuing a program of education at less than 
the half-time rate under 38 U.S.C. chapter 35.


(Authority: 38 U.S.C. 3034(c), 3680(f))

    (c)-(d) [Reserved]
    (e) Other payments. An individual must be pursuing a program of 
education in order to receive payments. To ensure that this is the case 
the provisions of this paragraph must be met.
    (1) VA will pay educational assistance to an individual (other than 
one pursuing a program of apprenticeship or other on-job training or a 
correspondence course, one who qualifies for an advance payment or one 
who qualifies for a lump-sum payment) only after--
    (i) The educational institution has certified his or her enrollment 
as provided in Sec. 21.4203; and
    (ii) VA has received from the individual a verification of the 
individual's enrollment or verification of pursuit and continued 
enrollment, as appropriate. Generally, this verification will be 
required monthly, resulting in monthly payments.
    (2) VA will pay educational assistance to an individual pursuing a 
program of apprenticeship or other on-job training only after--
    (i) The training establishment has certified his or her enrollment 
in the training program as provided in Sec. 21.4203; and
    (ii) VA has received from the individual and the training 
establishment a certification of hours worked.
    (3) VA will pay educational assistance to an individual who is 
pursuing a correspondence course only after--
    (i) The educational institution has certified his or her enrollment;
    (ii) VA has received from the individual a certification as to the 
number of lessons completed and serviced by the educational institution; 
and
    (iii) VA has received from the educational institution a 
certification or an endorsement on the individual's certificate, as to 
the number of lessons completed by the individual and serviced by the 
educational institution.


(Authority: 38 U.S.C. 5113, 3680(b), 3680(g))

    (f) Payment for intervals between terms. A certification such as 
described by this section may result in payment for intervals between 
individual terms, quarters or semesters. In determining whether a 
veteran or eligible person will be paid for such an interval the 
Department of Veterans Affairs will first determine whether any of the 
provisions of paragraph (f)(1) of this section apply. If any do, the 
Department of Veterans Affairs will make no payment for the interval. If 
none of the provisions of paragraph (f)(1) of this section apply the 
Department of Veterans Affairs will examine the appropriate provisions 
of paragraphs (f)(2) and (3) of this section to determine if payments 
may be made for the interval.
    (1) The Department of Veterans Affairs will make no payment for an 
interval described in paragraph (f)(2) of this section if:
    (i) The student is training at less than the half-time rate on the 
last date

[[Page 254]]

of his or her training during the term, quarter, semester or summer term 
preceding the interval;
    (ii) The student is on active duty;
    (iii) The student requests, prior to authorization of an award or 
prior to negotiating the check, that no benefits be paid for the 
interval period;
    (iv) The student will exhaust his or her entitlement by receipt of 
such payment, and it is to the advantage of the individual not to 
receive payment;
    (v) The interval occurs between school years at a school which is 
not organized on a term, quarter or semester basis;
    (vi) The veteran or eligible person withdraws from all his or her 
courses in the term, quarter, or semester or summer session preceding 
the interval, or discontinues training before the scheduled start of an 
interval in a school not organized on a term, quarter or semester basis; 
or
    (vii) The veteran receives an accelerated payment for the term, 
quarter, semester, or summer session preceding the interval.
    (2) If none of the provisions of paragraph (f)(1) of this section 
apply, the Department of Veterans Affairs will use the provisions of 
this paragraph and paragraph (f)(3) of this section to determine if an 
interval payment should be made. In determining the length of a summer 
term the Department of Veterans Affairs will disregard a fraction of a 
week consisting of 3 days or less, and will consider 4 days or more to 
be a full week.
    (i) The Director of the VA facility of jurisdiction may authorize 
payment to be made for breaks, including intervals between terms, within 
a certified period of enrollment during which the school is closed under 
an established policy based upon an order of the President or due to an 
emergency situation.
    (A) If the Director has authorized payment due to an emergency 
school closing resulting from a strike by the faculty or staff of the 
school, and the closing lasts more than 30 days, the Director, Education 
Service will decide if payments may be continued. The decision will be 
based on a full assessment of the strike situation. Further payments 
will not be authorized if in his or her judgment the school closing will 
not be temporary.
    (B) A school which disagrees with a decision made under this 
paragraph by a Director of a VA facility, has 1 year from the date of 
the letter notifying the school of the decision to request that the 
decision be reviewed. The request must be submitted in writing to the 
Director of the VA facility where the decision was made. The Director, 
Education Service shall review the evidence of record and any other 
pertinent evidence the school may wish to submit. The Director, 
Education Service has the authority either to affirm or reverse a 
decision of the Director of a VA facility.


(Authority: 38 U.S.C. 3680(a))

    (ii) If a veteran or eligible person transfers from one approved 
educational institution for the purpose of enrolling in and pursuing a 
similar course at the second institution, the Department of Veterans 
Affairs may make payments for any intervals which do not exceed 30 days 
and which occur between consecutive terms, quarters or semesters. If the 
veteran or eligible person does not enroll in a similar course at the 
second institution, the Department of Veterans Affairs shall not make 
payments for the interval.
    (iii) If the veteran or eligible person remains enrolled at the same 
educational institution, VA may make payment for an interval which does 
not exceed 8 weeks and which occurs between:
    (A) Semesters or quarters as defined in Sec. 21.4200(b);
    (B) A semester or quarter and a term that is at least as long as the 
interval;
    (C) A semester or quarter and a summer term that is at least as long 
as the interval;
    (D) Consecutive terms (other than semesters or quarters as defined 
in Sec. 21.4200(b)) provided that both terms are at least as long as 
the interval; or
    (E) A term and a summer term provided that both the term and the 
summer term are at least as long as the interval.
    (iv) If the veteran or eligible person remains enrolled at the same 
educational institution, VA may make

[[Page 255]]

payment for an interval which does not exceed 30 days and which occurs 
between summer sessions within a summer term.


(Authority: 38 U.S.C. 3680)

    (3) If a veteran is enrolled in overlapping enrollment periods 
whether before or after an interval (either at the same or different 
schools), the Department of Veterans Affairs will determine whether the 
veteran or eligible person is entitled to a payment during an interval 
as follows:
    (i) The Department of Veterans Affairs will treat the ending date of 
each enrollment period as though it were the veteran's or eligible 
person's last date of training before the interval.
    (ii) The Department of Veterans Affairs will treat the beginning 
date of each enrollment period as though it were the veteran's or 
eligible person's first date of training after the interval.
    (iii) The Department of Veterans Affairs will examine the interval 
payment which would be made to the veteran or eligible person on the 
basis of the various combinations of beginning and ending dates. The 
ending date and beginning date of the enrollment periods which will 
result in payment for the interval at the highest rate will be chosen as 
the start and finish of the interval for Department of Veterans Affairs 
measurement purposes.
    (iv) Payment for the interval will be made at the rate determined in 
paragraph (f)(4)(iii) of this section. The Department of Veterans 
Affairs shall not reduce the rate as the result of training the veteran 
or eligible person may take during the interval, but it shall increase 
the rate if warranted by such training.


(Authority: 38 U.S.C. 3680(a))

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0604)

[43 FR 35295, Aug. 9, 1978, as amended at 44 FR 62497, Oct. 31, 1979; 46 
FR 20673, Apr. 7, 1981; 48 FR 37982, Aug. 22, 1983; 54 FR 33888, Aug. 
17, 1989; 57 FR 24367, June 9, 1992; 64 FR 52651, Sept. 30, 1999; 68 FR 
34328, June 9, 2003; 68 FR 35178, June 12, 2003]



Sec. 21.4145  Work-study allowance.

    (a) Eligibility. (1) A veteran or reservist pursuing a program of 
education under either 38 U.S.C. chapter 30 or 32 or 10 U.S.C. chapter 
1606 at a rate of three-quarter time or full time is eligible to receive 
a work-study allowance.
    (2) An eligible person is eligible to receive a work-study allowance 
when-
    (i) The eligible person is pursuing a program of education under 38 
U.S.C. chapter 35 on at least a three-quarter-time basis;
    (ii) The eligible person is pursuing a program of education in a 
State; and
    (iii) The eligible person is not pursuing a program of special 
restorative training.


(Authority: 10 U.S.C. 16136; 38 U.S.C. 3034, 3241, 3485, 3537)

    (b) Selection criteria. Whenever feasible, the Department of 
Veterans Affairs will give priority in selection for this allowance to 
veterans with service-connected disabilities rated at 30 percent or 
more. The Department of Veterans Affairs shall consider the following 
additional selection criteria:
    (1) Need of the veteran, reservist, or eligible person to augment 
his or her educational assistance allowance;
    (2) Availability to the veteran, reservist, or eligible person of 
transportation to the place where his or her services are to be 
performed;
    (3) Motivation of the veteran, reservist, or eligible person; and
    (4) Compatibility of the work assignment to the veteran's, 
reservist's, or eligible person's physical condition.
    (c) Utilization. Work-study services may be utilized in connection 
with:
    (1) Outreach services program as carried out under the supervision 
of a Department of Veterans Affairs employee;
    (2) Preparation and processing of necessary papers and other 
documents at educational institutions or regional offices or facilities 
of the Department of Veterans Affairs;
    (3) Hospital and domiciliary care and medical treatment at VA 
facilities;
    (4) For a reservist training under 10 U.S.C. chapter 1606, 
activities relating to the administration of 10 U.S.C. chapter 1606 at 
Department of Defense facilities, Coast Guard facilities, or National 
Guard facilities; and

[[Page 256]]

    (5) Any other appropriate activity of VA.


(Authority: 10 U.S.C. 16136; 38 U.S.C. 3034, 3241, 3485, 3537)

    (d) Rate of payment. In return for the veteran's, reservist's, or 
eligible person's agreement to perform services for VA totaling not more 
than 25 hours times the number of weeks contained in an enrollment 
period, VA will pay an allowance in an amount equal to the higher of:
    (1) The hourly minimum wage in effect under section 6(a) of the Fair 
Labor Standards Act of 1938 (29 U.S.C. 206(a)) times the number of hours 
the veteran, reservist, or eligible person has agreed to work; or
    (2) The hourly minimum wage under comparable law of the State in 
which the services are to be performed times the number of hours the 
veteran, reservist, or eligible person has agreed to work.


(Authority: 10 U.S.C. 16136; 38 U.S.C. 3034, 3241, 3485, 3537)

    (e) Payment in advance. VA will pay in advance an amount equal to 
the lesser of the following:
    (1) 40 percent of the total amount payable under the contract; or
    (2) An amount equal to 50 times the applicable minimum hourly wage 
in effect on the date the contract is signed.


(Authority: 10 U.S.C. 16136; 38 U.S.C. 3034, 3241, 3485, 3537)

    (f) Veteran, reservist, or eligible person reduces rate of training. 
In the event the veteran, reservist, or eligible person reduces his or 
her training to less than three-quarter-time before completing an 
agreement, the veteran, reservist, or eligible person, with the approval 
of the Director of the VA field station, or designee, may be permitted 
to complete the portions of an agreement in the same or immediately 
following term, quarter, or semester in which the veteran, reservist, or 
eligible person ceases to be a three-quarter-time student.


(Authority: 10 U.S.C. 16136; 38 U.S.C. 3034, 3241, 3485, 3537)

    (g) Veteran, reservist, or eligible person terminates training. (1) 
If the veteran, reservist, or eligible person terminates all training 
before completing an agreement, the Director of the Department of 
Veterans Affairs facility or designee:
    (i) May permit him or her to complete the portion of the agreement 
represented by the money the Department of Veterans Affairs has advanced 
to the veteran, reservist, or eligible person for which he or she has 
performed no services, but
    (ii) Will not permit him or her to complete that portion of an 
agreement for which no advance has been made.
    (2) The veteran, reservist, or eligible person must complete the 
portion of an agreement in the same or immediately following term, 
quarter or semester in which the veteran, reservist, or eligible person 
terminates training.
    (h) Indebtedness for unperformed service. (1) If the veteran, 
reservist, or eligible person has received an advance for hours of 
unperformed service, and the Department of Veterans Affairs has evidence 
that he or she does not intend to perform that service, the advance:
    (i) Will be a debt due the United States, and
    (ii) Will be subject to recovery the same as any other debt due the 
United States.
    (2) The amount of indebtedness for each hour of unperformed service 
shall equal the hourly wage that formed the basis of the contract.


(Authority: 38 U.S.C. 3485)

    (i) Survey. The Department of Veterans Affairs will conduct an 
annual survey of its regional offices to determine the number of 
veterans, reservists, or eligible persons whose services can be utilized 
effectively.
    (ii) [Reserved]


(Authority: 38 U.S.C. 3485)

[38 FR 12214, May 10, 1973, as amended at 48 FR 37983, Aug. 22, 1983; 61 
FR 26113, May 24, 1996]



Sec. 21.4146  Assignments of benefits prohibited.

    (a) General. Section 5301(a), Title 38 U.S.C., provides that 
payments of benefits due or to become due under the

[[Page 257]]

laws administered by the Department of Veterans Affairs shall not be 
assigned, except to the extent specifically authorized by law. No law 
specifically authorizes assignments of educational assistance allowances 
payable under 38 U.S.C. chapters 30, 32, 35, or 36, or 10 U.S.C. chapter 
1606, and therefore none shall be made.
    (b) Designating an attorney-in-fact. In any case where a payee of an 
educational assistance allowance has designated the address of an 
attorney-in-fact as the payee's address for the purpose of receiving his 
or her benefit check and has executed a power of attorney giving the 
attorney-in-fact authority to negotiate such benefit check, such action 
shall be deemed to be an assignment and is prohibited.
    (c) Arrangements amounting to an assignment. Payments may be made to 
a post office box address or a bank address only if the educational 
institution attests that it has not entered into an assignment agreement 
with the student, and is not the attorney-in-fact of the student with 
power to negotiate an educational assistance check on behalf of the 
student and is not otherwise able to control the proceeds of the 
benefits check. Such statements shall be subject to review and when 
determined to be false, may be cause for creation of an overpayment to 
the account of the veteran or other eligible person, for which the 
educational institution may be liable under the provisions of Sec. 
21.4009.
    (d) Correspondence school addresses. A request by a veteran or other 
eligible person to send the benefit check payable to him or her at an 
address which is an educational institution primarily engaged in 
correspondence course instruction will be presumed not to be the actual 
address of the veteran or other eligible person and will not be honored. 
Benefits checks will not be sent to the veteran or other eligible person 
in that event until a new address is provided designating the 
individual's mailing address.
    (e) Referral to Committee on Educational Allowances. When the 
evidence of record indicates that an educational institution has 
violated the terms of this section, the matter will be referred to the 
facility Committee on Educational Allowances as provided in Sec. Sec. 
21.4210(g) and 21.4212.

(Authority: 38 U.S.C. 5301(a))

[43 FR 35296, Aug. 9, 1978, as amended at 44 FR 62498, Oct. 31, 1979; 61 
FR 26114, May 24, 1996; 63 FR 35831, July 1, 1998]

                        State Approving Agencies



Sec. 21.4150  Designation.

    (a) The Chief Executive of each State is requested to create or 
designate a State department or agency as the State approving agency for 
his State, for the purpose of assuming the responsibilities delegated to 
the State under 38 U.S.C. chapter 36, or if the law of the State 
provides otherwise, to indicate the agency provided by such law (38 
U.S.C. 3671(a)).
    (b) The Chief Executive of each State will notify the Department of 
Veterans Affairs of any change in the designation of a State approving 
agency.
    (c) The provisions of 38 U.S.C. chapter 36 and the sections in this 
part which refer to the State approving agency will, with respect to a 
State, be deemed to refer to VA when that State:
    (1) Does not have and fails or declines to create or designate a 
State approving agency, or
    (2) Fails to enter into an agreement as provided in Sec. 21.4153 of 
this part.


(Authority: 38 U.S.C. 3671(b)(1))

    (d) Any function, power or duty otherwise required to be exercised 
by a State, or by an officer or agency of a State, will, with respect to 
the Republic of Philippines, be exercised by the station head.


(Authority: 38 U.S.C. 512(a), 3561(b))

    (e) The Secretary shall act as State approving agency for programs 
of apprenticeship, the standards for which have been approved by the 
Secretary of Labor pursuant to section 50a of title 29 U.S.C. as a 
national apprenticeship program for operation in more than one State and 
the training establishment is a carrier directly engaged in interstate 
commerce which provides such training in more than one State.


(Authority: 38 U.S.C. 3672(c))


[[Page 258]]


    (f) Approval of a course of education offered by any agency or 
instrumentality of the Federal Government shall be under the authority 
of the Secretary.


(Authority: 38 U.S.C. 3672(b))

    Cross Reference: Approval of courses. See Sec. 21.4250.

[31 FR 6774, May 6, 1966, as amended at 35 FR 9815, June 16, 1970; 37 FR 
6679, Apr. 1, 1972; 54 FR 34987, Aug. 23, 1989; 54 FR 49756, Dec. 1, 
1989]



Sec. 21.4151  Cooperation.

    (a) The Department of Veterans Affairs and the State approving 
agencies will take cognizance of the fact that definite duties, 
functions and responsibilities are conferred upon each of them. To 
assure that programs of education are administered effectively and 
efficiently, the cooperation of the Department of Veterans Affairs and 
the State approving agencies is essential.


(Authority: 38 U.S.C. 3673(a))

    (b) State approving agency responsibilities. State approving 
agencies are responsible for:
    (1) Inspecting and supervising schools within the borders of their 
respective States;
    (2) Determining those courses which may be approved for the 
enrollment of veterans and eligible persons;
    (3) Ascertaining whether a school at all times complies with its 
established standards relating to the course or courses which have been 
approved; and
    (4) Under an agreement with VA rendering services and obtaining 
information necessary for the Secretary's approval or disapproval under 
chapters 30 through 36, title 38 U.S.C. and chapters 107 and 1606, title 
10 U.S.C., of courses of education offered by any agency or 
instrumentality of the Federal Government within the borders of their 
respective States.


(Authority: 38 U.S.C. 3672, 3673, 3674; Pub. L. 100-323)

    (c) The Department of Veterans Affairs will furnish State approving 
agencies with copies of such Department of Veterans Affairs 
informational and instructional material as may aid them in carrying out 
the provisions of 38 U.S.C. chapter 36.


(Authority: 38 U.S.C. 3673(b))

[31 FR 6774, May 6, 1966, as amended at 37 FR 6679, Apr. 1, 1972; 54 FR 
49756, Dec. 1, 1989; 61 FR 20728, May 8, 1996]



Sec. 21.4152  Control by agencies of the United States.

    (a) Control of educational institutions and State agencies generally 
prohibited. No department, agency, or officer of the United States will 
exercise any supervision or control over any State approving agency or 
State educational agency, or any educational institution.


(Authority: 38 U.S.C. 3682; Pub. L. 100-323)

    (b) Authority retained by VA. The provisions of paragraph (a) of 
this section do not restrict authority conferred on VA
    (1) To define full-time training in certain courses.
    (2) To determine whether overcharges were made by a school and to 
disapprove the school for enrollment of veterans or eligible persons not 
previously enrolled. See Sec. 21.4210(d).
    (3) To determine whether the State approving agencies under the 
terms of contract or reimbursement agreements are complying with the 
standards and provisions of the law.
    (4) To examine the records and accounts of schools which are 
required to be made available for examination by duly authorized 
representatives of the Federal Government. See Sec. Sec. 21.4209 and 
21.4263.
    (5) To disapprove schools or courses for reasons stated in the law 
and to approve schools or courses notwithstanding lack of State 
approval.

[31 FR 6774, May 6, 1966, as amended at 54 FR 49756, Dec. 1, 1989; 61 FR 
29296, June 10, 1996; 63 FR 35831, July 1, 1998]



Sec. 21.4153  Reimbursement of expenses.

    (a) Expenses will be reimbursed under contract--(1) Scope of 
contracts. (i) If a State or local agency requests payment for service 
contemplated by law, and submits information prescribed in paragraph (e) 
of this section, VA will negotiate a contract or agreement with the 
State or local agency to pay (subject to available funds and acceptable

[[Page 259]]

annual evaluations) reasonable and necessary expenses incurred by the 
State or local agency in--
    (A) Determining the qualifications of educational institutions and 
training establishments to furnish programs of education to veterans and 
eligible persons,
    (B) Supervising educational institutions and training 
establishments, and
    (C) Furnishing any other services VA may request in connection with 
the law governing VA education benefits.
    (ii) VA will take into account the results of annual evaluations 
carried out under Sec. 21.4155 of this part when negotiating the terms 
and conditions of the contract or agreement.


(Authority: 38 U.S.C. 3674, 3674(a); Pub. L. 100-323)

    (2) Reimbursable supervision. Supervision will consist of the 
services required:
    (i) To determine that the programs are furnished in accordance with 
the law and with any other reasonable criteria as may be imposed by the 
State, and
    (ii) To disapprove any programs which fail to meet the law and the 
established criteria.


(Authority: 38 U.S.C. 3674)

    (b) Reimbursement. The Under Secretary for Benefits and the 
Director, Education Service, are authorized to enter into agreements 
necessary to fulfill the purpose of paragraph (a) of this section. See 
Sec. 21.4001(b).


(Authority: 38 U.S.C. 512(a))

    (c) Reimbursable expenses. Reimbursement may be made from the funds 
provided in the existing contract with the State approving agency under 
the provisions of this section. No reimbursement may be authorized for 
expenses incurred by any individual who is not an employee of the State 
approving agency.
    (1) Salaries. Salaries for which reimbursement may be authorized 
under a contract:
    (i) Will not be in excess of the established rate of pay for other 
employees of the State with comparable or equivalent duties and 
responsibilities,
    (ii) Will be limited to the actual salary expense incurred by the 
State, and
    (iii) Will include the basic salary rate plus fringe benefits, such 
as social security, retirement, and health, accident, or life insurance, 
that are payable to all similarly circumstanced State employees.
    (2) Travel. (i) Reimbursement will be made under the terms of the 
contract for travel of personnel engaged in activities in connection 
with the inspection, approval or supervision of educational 
institutions, including--
    (A) Travel of personnel attending training sessions sponsored by VA 
and the State approving agencies.
    (B) Expenses of attending out-of-State meetings and conferences only 
if the Director, Education Service, authorizes the travel.


(Authority: 38 U.S.C. 3674; Pub. L. 100-323)

    (ii) Travel expenses for which reimbursement may be authorized under 
a contract will be limited to:
    (A) Expenses allowable under applicable State laws or travel 
regulations of the State or agency;
    (B) Expenses for travel actually performed by employees specified 
under the terms of the contract and;
    (C) Either actual expenses for transportation, meals, lodging and 
local telephone calls, or the regular State or agency per diem 
allowance.
    (iii) All claims for travel expenses payable under the terms of a 
contract must be supported by factual vouchers and all transportation 
allowances must be supported by detailed claims which can be checked 
against work assignments in the office of the State approving agency.


(Authority: 38 U.S.C. 3674)

    (3) Administrative expenses. In determining the allowance for 
administrative expenses for which payment may be authorized, VA will 
apply the provisions of 38 U.S.C. 3674(b). In making that application, 
VA will determine reimbursable salary cost pursuant to paragraph (c)(1) 
of this section.


(Authority: 38 U.S.C. 3674(b))

    (4) Subcontracts. The State approving agency may also be reimbursed 
for

[[Page 260]]

work performed by a subcontractor provided:
    (i) The work has a direct relationship to the requirements of 
Chapter 1606 of Title 10 U.S.C. or Chapter 30, 32, 34, 35 or 36 of Title 
38 U.S.C., and


(Authority: 10 U.S.C. 16136, 38 U.S.C. 3034, 3674)

    (ii) The Contracting Officer has approved the subcontract in 
advance.


(Authority: 38 U.S.C. 3674; Pub. L. 94-502, Pub. 95-902)

    (d) Nonreimbursable expenses. The Department of Veterans Affairs 
will not provide reimbursement under reimbursement contracts for:
    (1) Expenditures other than salaries and travel of personnel 
required to perform the services specified in the contract and 
Department of Veterans Affairs regulations.
    (2) Supplies, equipment, printing, postage, telephone services, 
rentals, and other miscellaneous items or a service furnished directly 
or indirectly.
    (3) Except as provided in paragraph (c)(2) of this section, the 
salaries and travel of personnel while attending training sessions, or 
when they are engaged in activities other than those in connection with 
the inspection, approval, or supervision of educational institutions.
    (4) The supervision of educational institutions which do not have 
veterans or eligible persons enrolled.
    (5) Expenses incurred in the administration of an educational 
program which are costs properly chargeable as tuition costs, such as 
the development of course material or individual educational programs, 
teacher training or teacher improvement activities, expenses of 
coordinators, or administrative costs, such as those involving selection 
and employment of teachers. (This does not preclude reimbursement for 
expenses of the State agency incurred in the development of standards 
and criteria for the approval of courses under the law.)
    (6) Expenses of a State approving agency for inspecting, approving 
or supervising courses when the agency is responsible for establishing, 
conducting or supervising those courses.
    (7) Any expense for supervision or other services to be covered by 
contract which are already being reimbursed or paid from tuition funds 
under this law.
    (e) Agency operating plan. A request by a State approving agency for 
reimbursement under the law will be subject to the requirements of 41 
CFR 8-7.5101-8 as to ``Equal Opportunity''. The request will be 
accompanied by the proposed plan of operation and the specific duties 
and responsibilities of all personnel for which reimbursement of 
salaries and travel expense is required.
    (1) The Department of Veterans Affairs will determine personnel 
requirements for which the Department of Veterans Affairs provides 
reimbursement on the basis of estimated workloads agreed upon between 
the Department of Veterans Affairs and the State agency. Agreements are 
subject to review and adjustment.
    (2) Workloads will be determined upon three factors:
    (i) Inspection and approval visits,
    (ii) Supervisory visits, and
    (iii) Special visits at the request of the Department of Veterans 
Affairs.
    (f) Contract compliance. Reimbursement under each contract or 
agreement is conditioned upon compliance with the standards and 
provisions of the contract and the law. If the Contracting Officer 
determines that the State has failed to comply with the standards or 
provisions of the law or with terms of the reimbursement contract, he or 
she will withhold reimbursement for claimed expenses under the contract. 
If the State disagrees, the State may request the Contracting Officer to 
reconsider his or her decision or may initiate action under the Disputes 
clause of the contract. See 48 CFR 801.602.


(Authority: 38 U.S.C. 3674)

    (g) Contract disputes. The State approving agency reimbursement 
contract is subject to the Contract Disputes Act of 1978. Disputes 
arising under, or relating to, the contract will

[[Page 261]]

be resolved in accordance with the disputes article of the contract and 
with appropriate procurement regulations.


(Authority: 41 U.S.C. 602)

[31 FR 6774, May 6, 1966, as amended at 40 FR 42880, Sept. 17, 1975; 43 
FR 35296, Aug. 9, 1978; 44 FR 62498, Oct. 31, 1979; 48 FR 37983, Aug. 
22, 1983; 51 FR 16316, May 2, 1986; 54 FR 49757, Dec. 1, 1989; 61 FR 
20728, May 8, 1996; 61 FR 26114, May 24, 1996]



Sec. 21.4154  Report of activities.

    (a) State approving agencies must report their activities. Each 
State approving agency entering into a contract or agreement under Sec. 
21.4153 of this part must submit a report of its activities to VA. The 
report may be submitted monthly or quarterly by the State approving 
agency as provided in the contract or agreement.


(Authority: 38 U.S.C. 3674; Pub. L. 100-323)

    (b) Content of the report. The report:
    (1) Shall be in the form prescribed by the Secretary;
    (2) Shall detail the activities of the State approving agencies 
under the agreement or contract during the preceding month or quarter, 
as appropriate;
    (3) May include, at the option of the State approving agency, a 
cumulative report of its activities from the beginning of the fiscal 
year to date;
    (4) Shall describe the services performed and the determination made 
in supervising and ascertaining the qualifications of educational 
institutions in connection with the programs of the Department of 
Veterans Affairs; and
    (5) Shall include other information as the Secretary may prescribe.


(Authority: 38 U.S.C. 3674)

(Approved by the Office of Management and Budget under control number 
2900-0051)

[49 FR 26227, June 27, 1984, as amended at 54 FR 49757, Dec. 1, 1989; 57 
FR 28087, June 24, 1992]



Sec. 21.4155  Evaluations of State approving agency performance.

    (a) Annual evaluations required. (1) VA shall conduct in conjunction 
with State approving agencies an annual evaluation of each State 
approving agency. The evaluation shall be based on standards developed 
by VA with State approving agencies. VA shall provide each State 
approving agency an opportunity to comment upon the evaluation.
    (2) VA shall take into account the result of the annual evaluation 
of a State approving agency when negotiating the terms and conditions of 
a contract or agreement as provided in Sec. 21.4153(a) of this part.


(Authority: 38 U.S.C. 3674A(a); Pub. L. 100-323)

    (b) Development of a training curriculum. (1) VA shall cooperate 
with State approving agencies in developing and implementing a uniform 
national curriculum, to the extent practicable, for--
    (i) Training new employees of State approving agencies, and
    (ii) Continuing the training of the employees of the State approving 
agencies.
    (2) VA with the State approving agencies shall sponsor the training 
and continuation of training provided by this paragraph.


(Authority: 38 U.S.C. 3674A; Pub. L. 100-323)

    (c) Development, adoption and application of qualification and 
performance standards for employees of State approving agencies. (1) VA 
shall:
    (i) Develop with the State approving agencies prototype 
qualification and performance standards;
    (ii) Prescribe those standards for State approving agency use in the 
development of qualification and performance standards for State 
approving agency personnel carrying out approval responsibilities under 
a contract or agreement as provided in Sec. 21.4153(a) of this part; 
and
    (iii) Review the prototype qualification and performance standards 
with the State approving agencies no less frequently than once every 
five years.
    (2) In developing and applying standards described in paragraph 
(d)(1) of this section, a State approving agency may take into 
consideration the State's merit system requirements and other local 
requirements and conditions. However, no State approving agency may 
develop, adopt or apply qualification or performance standards

[[Page 262]]

that do not meet the requirements of paragraph (d)(3) of this section.
    (3) The qualification and performance standards adopted by the State 
approving agency shall describe a level of qualification and performance 
which shall equal or exceed the level of qualification and performance 
described in the prototype qualification and performance standards 
developed by VA with the State approving agencies. The State approving 
agency may amend or modify its adopted qualification and performance 
standards annually as circumstances may require.
    (4) VA shall provide assistance in developing these standards to a 
State approving agency that requests it.
    (5) After November 19, 1989, each State approving agency carrying 
out a contract or agreement with VA under Sec. 21.4153(a) shall:
    (i) Apply qualification and performance standards based on the 
standards developed under this paragraph, and
    (ii) Make available to any person, upon request, the criteria used 
to carry out its functions under a contract or agreement entered into 
under Sec. 21.4153(a) of this part.
    (6) A State approving agency may not apply these standards to any 
person employed by the State approving agency on May 20, 1988, as long 
as that person remains in the position in which the person was employed 
on that date.


(Authority: 38 U.S.C. 3674 A(b); Pub. L. 100-323)

[54 FR 49757, Dec. 1, 1989, as amended at 61 FR 29296, June 10, 1996]

                                 Schools



Sec. 21.4200  Definitions.

    (a) School, educational institution, institution. The terms school, 
educational institution and institution mean:
    (1) A vocational school or business school;
    (2) A junior college, teachers' college, college, normal school, 
professional school, university, or scientific or technical institution;
    (3) A public or private elementary school or secondary school;
    (4) A training establishment as defined in paragraph (c) of this 
section;
    (5) Any entity during the period beginning on November 2, 1994, and 
ending on September 30, 1996, other than an institution of higher 
learning, that provides training for completion of a State-approved 
alternative teacher certification program; or


(Authority: 38 U.S.C. 3452)
    (6) Any private entity that offers, either directly or indirectly 
under an agreement with another entity, a course or courses to fulfill 
requirements for the attainment of a license or certificate generally 
recognized as necessary to obtain, maintain, or advance in employment in 
a profession or vocation in a high technology occupation.


(Authority: 38 U.S.C. 3452, 3501(a)(6), 3689(d))

    (b) Divisions of the school year. (1) Ordinary School Year is 
generally a period of 2 semesters or 3 quarters which is not less than 
30 nor more than 39 weeks in total length.
    (2) Term, any regularly established division of the ordinary school 
year under which the school operates.
    (3) Quarter, a division of the ordinary school year, usually a 
period from 10 to 13 weeks long.
    (4) Semester, a division of the ordinary school year, usually a 
period from 15 to 19 weeks long.
    (5) Summer term, the whole of the period of instruction at a school 
which takes place between ordinary school years. A summer term may be 
divided into several summer sessions.


(Authority: 38 U.S.C. 3680(a))

    (6) Summer session, any division of a summer term.


(Authority: 38 U.S.C. 3680(a))

    (c) Training establishment. The term means any establishment 
providing apprentice or other training on-the-job, including those under 
the supervision of a college or university or any State department of 
education, or any State apprenticeship agency, or any State board of 
vocational education, or any joint apprenticeship committee, or the 
Bureau of Apprenticeship and Training established in accordance with 29 
U.S.C. Chapter 4C, or any agency of the

[[Page 263]]

Federal Government authorized to supervise such training.


(Authority: 38 U.S.C. 3452(e), 3501(a)(9))

    (d) External degree. This term means a standard college degree given 
by an accredited college or university based on satisfactory completion 
of a prescribed program of independent study. The program may require 
occasional attendance for a workshop or seminar and may include some 
regular residence course work.
    (e) Standard college degree. The term means an associate or higher 
degree awarded by:
    (1) An institution of higher learning that is accredited as a 
collegiate institution by a recognized regional or national accrediting 
agency; or
    (2) An institution of higher learning that is a candidate for 
accreditation, as that term is used by the regional or the national 
accrediting agencies; or
    (3) An institution of higher learning upon completion of a course 
which is accredited by an agency recognized to accredit specialized 
degree-level programs.


(Authority: 38 U.S.C. 3452)

    (f) Undergraduate college degree. The term means a college or 
university degree obtained through the pursuit of unit subjects which 
are below the graduate level. Included are associate degrees, bachelors' 
degrees and first professional degrees.
    (g) Standard class session. The term standard class session means 
the time an educational institution schedules for class each week in a 
regular quarter or semester for one quarter or one semester hour of 
credit. It is not less than 1 hour (or one 50-minute period) of academic 
instruction, 2 hours (or two 50-minute periods) of laboratory 
instruction, or 3 hours (or three 50-minute periods) of workshop 
training.


(Authority: 38 U.S.C. 3688(c))

    (h) Institution of higher learning. This term means:
    (1) A college, university, or similar institution, including a 
technical or business school, offering postsecondary level academic 
instruction that leads to an associate or higher degree if the school is 
empowered by the appropriate State education authority under State law 
to grant an associate or higher degree.
    (2) When there is no State law to authorize the granting of a 
degree, a school which:
    (i) Is accredited for degree programs by a recognized accrediting 
agency, or
    (ii) Is a recognized candidate for accreditation as a degree-
granting school by one of the national or regional accrediting 
associations and has been licensed or chartered by the appropriate State 
authority as a degree-granting institution.
    (3) A hospital offering medical-dental internships or residencies 
approved in accordance with Sec. 21.4265(a) without regard to whether 
the hospital grants a post-secondary degree.
    (4) An educational institution which:
    (i) Is not located in a State,
    (ii) Offers a course leading to a standard college degree or the 
equivalent, and
    (iii) Is recognized as an institution of higher learning by the 
secretary of education (or comparable official) of the country in which 
the educational institution is located.


(Authority: 38 U.S.C. 3452)

    (i) Audited course. The term means any credit course which a student 
attends as a listener only with a prior understanding between school 
officials and the student that such attendance will not result in credit 
being granted toward graduation. See Sec. 21.4252(i).


(Authority: 38 U.S.C. 3680(a)(3))

    (j) Nonpunitive grade. The term means any grade assigned for pursuit 
of a course, whether upon completion of the course or at the time of 
withdrawal from the course, which has the effect of excluding the course 
from any consideration in determining progress toward fulfillment of 
requirements for graduation. No credit toward the school's requirements 
for graduation is granted for such a grade, nor does the grade affect 
any other criteria for graduation by the policies of the school, such as 
a grade point average. Therefore, it has the same effect as an audited 
course. See Sec. 21.4135(e).

[[Page 264]]

    (k) Punitive grade. The term means a grade assigned for pursuit of a 
course which is used in determining the student's overall progress 
toward completion of the school's requirements for graduation. Unlike 
the nonpunitive grade, the punitive grade does affect the criteria to be 
met by the student for graduation, i.e., it is a factor in computing the 
student's grade average or grade point average, for example. For this 
reason it is not the same as an audited course, since it does have an 
effect upon the student's ability to meet the school's criteria for 
graduation. See Sec. 21.4135(e).
    (l) Drop-add period. The term means a reasonably brief period at the 
beginning of a term, not to exceed 30 days, officially designated by a 
school for unrestricted enrollment changes by students.


(Authority: 38 U.S.C. 3680(a)(4))

    (m) Normal commuting distance. Two locations that are within 55 
miles of each other are within normal commuting distance. Furthermore, a 
branch, extension or additional facility of a school located more than 
55 miles from the school's main campus or parent facility will be 
considered within normal commuting distance only if:
    (1) School records show that, prior to the establishment of the 
additional teaching site, at least 20 students or 5 percent of the 
enrollment, whichever is the lesser, on the main campus or parent 
facility were regularly commuting from the area where the additional 
teaching site is located; or
    (2) Other comparable evidence clearly shows that students commute 
regularly between the two locations.


(Authority: 38 U.S.C. 3689(c))

    (n) Enrollment. This term means the state of being on that roll, or 
file of a school which contains the names of active students.
    (o) Pursuit of a program of education. (1) This term means to work, 
while enrolled, toward the objective of a program of education. This 
work must be in accordance with approved institution policy and 
regulations and applicable criteria of Title 38 U.S.C.; must be 
necessary to reach the program's objective; and must be accomplished 
through:
    (i) Resident courses,
    (ii) Independent study courses,
    (iii) Correspondence courses,
    (iv) An apprenticeship or other on-the-job training program,
    (v) Flight courses,
    (vi) A farm cooperative course,
    (vii) A cooperative course, or
    (viii) A graduate program of research in absentia.
    (2) The Department of Veterans Affairs will consider a veteran or 
eligible person who qualifies under Sec. 21.4138 for payment during an 
interval or school closing, or who qualifies under Sec. 21.4205 for 
payment during a holiday vacation to be in pursuit of a program of 
education during the interval, school closing or holiday vacation.
    (p) Enrollment period. (1) This term means an interval of time 
during which a veteran or eligible person:
    (i) Is enrolled in an educational institution; and
    (ii) Is pursuing his or her program of education.
    (2) This term applies to each unit course or subject in the 
veteran's or eligible person's program of education.
    (q) Attendance. This term means the presence of a veteran or 
eligible person:
    (1) In the class where the approved course is being taught in which 
he or she is enrolled;
    (2) At a training establishment; or
    (3) Any other place of instruction, training or study designated by 
the educational institution or training establishment where the veteran 
or eligible person is enrolled and is pursuing a program of education.


(Authority: 38 U.S.C. 3680(g))

    (r) In residence on a standard quarter- or semester-hour basis. This 
term means study at a site or campus of a college or university, or off-
campus at an official resident center, requiring pursuit of regularly 
scheduled weekly class instruction at the rate of one standard class 
session per week throughout a standard quarter or semester for one 
quarter- or one semester-hour credit.


(Authority: 38 U.S.C. 3688(c))


[[Page 265]]


    (s) Deficiency course. This term means any secondary level course or 
subject not previously completed satisfactorily which is specifically 
required for pursuit of a post-secondary program of education.
    (t) Remedial course. This term means a special course designed to 
overcome a deficiency at the elementary or secondary level in a 
particular area of study, or a handicap, such as in speech.
    (u) Refresher course. This term means a course at the elementary or 
secondary level to review or update material previously covered in a 
course that has been satisfactorily completed.


(Authority: 38 U.S.C. 3491(a)(2))

    (v) Reservist. The term reservist means a member of the Selected 
Reserve of the Ready Reserve of any of the reserve components (including 
the Army National Guard of the United States and the Air National Guard 
of the United States) of the Armed Forces who is eligible to receive 
educational assistance under 38 U.S.C. chapter 30 or 10 U.S.C. chapter 
1606.


(Authority: 38 U.S.C. 3002)

    (w) Alternative teacher certification program. The term alternative 
teacher certification program, for the purposes of determining whether 
an entity offering such a program is a school, educational institution, 
or institution as defined in paragraph (a)(5) of this section, means a 
program leading to a teacher's certificate that allows individuals with 
a bachelor's degree or graduate degree to obtain teacher certification 
without enrolling in an institution of higher learning.


(Authority: 38 U.S.C. 3452(c))

    (x) State. The term State has the same meaning as provided in Sec. 
3.1(i) of this chapter.


(Authority: 38 U.S.C. 101(20))

    (y) Pilot certificate. A pilot certificate is a pilot certificate 
issued by the Federal Aviation Administration. The term means a pilot's 
license as that term is used in 10 U.S.C. chapter 1606 and 38 U.S.C. 
chapters 30 and 32.


(Authority: 10 U.S.C. 16136(c); 38 U.S.C. 3034(d), 3241(b))

    (z) Proprietary educational institution. The term proprietary 
educational institution (including a proprietary profit or proprietary 
nonprofit educational institution) means an educational institution 
that:
    (1) Is not a public educational institution;
    (2) Is in a State; and
    (3) Is legally authorized to offer a program of education in the 
State where the educational institution is physically located.


(Authority: 38 U.S.C. 3680A(e))

    (aa) High technology industry: The term high technology industry 
includes the following industries:
    (1) Biotechnology;
    (2) Life science technologies;
    (3) Opto-electronics;
    (4) Computers and telecommunications;
    (5) Electronics;
    (6) Computer-integrated manufacturing;
    (7) Material design;
    (8) Aerospace;
    (9) Weapons;
    (10) Nuclear technology; and
    (11) Any other identified advanced technologies in the biennial 
Science and Engineering Indicators report published by the National 
Science Foundation.


(Authority: 38 U.S.C. 3014A, 3452(c), 3501(a)(6))


    (bb) Employment in a high technology industry. Employment in a high 
technology industry means employment in a high technology occupation 
specific to a high technology industry.


(Authority: 38 U.S.C. 3014A)

    (cc) High technology occupation. The term high technology occupation 
means an occupation that leads to employment in a high technology 
industry. These occupations consist of:
    (1) Life and physical scientists;
    (2) Engineers;
    (3) Mathematical specialists;

[[Page 266]]

    (4) Engineering and science technicians;
    (5) Computer specialists; and
    (6) Engineering, scientific, and computer managers.


(Authority: 38 U.S.C. 3014A, 3452(c), 3501(a)(6))

    (dd) Computer specialists. The term computer specialists includes 
the following occupations:
    (1) Database, system, and network administrators;
    (2) Database, system, and network developers;
    (3) Computer and network engineers;
    (4) Systems analysts;
    (5) Programmers;
    (6) Computer, database, and network support specialists;
    (7) All computer scientists;
    (8) Web site designers;
    (9) Computer and network service technicians;
    (10) Computer and network electronics specialists; and
    (11) All certified professionals, certified associates and certified 
technicians in the information technology field.


(Authority: 38 U.S.C. 3014A, 3452(c), 3501(a)(6))

    (ee)-(jj) [Reserved]
    (kk) Fugitive felon. The term fugitive felon means an individual 
identified as such by Federal, State, or local law enforcement officials 
and who is a fugitive by reason of--
    (1) Fleeing to avoid prosecution for an offense, or an attempt to 
commit an offense, which is a felony under the laws of the place from 
which the person flees;
    (2) Fleeing to avoid custody or confinement after conviction for an 
offense, or an attempt to commit an offense, which is a felony under the 
laws of the place from which the person flees; or
    (3) Violating a condition of probation or parole imposed for 
commission of a felony under Federal or State law.


(Authority: 38 U.S.C. 5313B)

    (ll) Felony. The term felony means a major crime or offense defined 
as such under the law of the place where the offense was committed or 
under Federal law. It includes a high misdemeanor under the laws of a 
State which characterizes as high misdemeanors offenses that would be 
felony offenses under Federal law.


(Authority: 38 U.S.C. 5313B)

[31 FR 6774, May 6, 1966]

    Editorial Note: For Federal Register citations affecting Sec. 
21.4200, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 21.4201  Restrictions on enrollment; percentage of students 
receiving financial support.

    (a) General. Except as otherwise provided in this section the 
Department of Veterans Affairs shall not approve an enrollment in any 
course for an eligible veteran, not already enrolled, for any period 
during which more than 85 percent of the students enrolled in the course 
are having all or part of their tuition, fees or other charges paid for 
them by the educational institution or by the Department of Veterans 
Affairs pursuant to Title 38 U.S.C. This restriction may be waived in 
whole or in part.


(Authority: 38 U.S.C. 3473(d))

    (b) Affected schools. The requirements of paragraph (a) of this 
section apply to all courses not otherwise exempt or waived offered by 
all educational institutions, regardless of whether the institution is 
degree-granting, proprietary profit, proprietary nonprofit, 
eleemosynary, public and/or tax-supported.
    (c) Affected courses. (1) The following courses or programs are 
exempt from the requirements of paragraph (a) of this section:
    (i) Any farm cooperative course; and
    (ii) Any course offered by a flying club established, organized and 
operated pursuant to regulations of a military department of the Armed 
Forces as nonappropriated sundry fund activities which are governmental 
instrumentalities.
    (2) The provisions of paragraph (a) of this section apply to the 
enrollment of a serviceperson in a course leading to a high school 
diploma, equivalency cerificate, or a refresher, remedial or deficiency 
course, but they do not

[[Page 267]]

apply to the enrollment of a veteran in such a course.
    (3) Except as provided in paragraph (c)(2) of this section, the 
provisions of paragraph (a) of this section do not apply to an approved 
course which:
    (i) Is offered under contract with the Department of Defense,
    (ii) Is on or immediately adjacent to a military base, or a facility 
of the National Guard (including the Air National Guard) or the Selected 
Reserve,
    (iii) Has been approved by the State approving agency of the State:
    (A) Where the base is located or
    (B) Where the parent school is located if the course is oftered 
overseas, and
    (iv) Is available only to:
    (A) Military personnel and their dependents, or
    (B) Military personnel, their dependents and civilian employees of a 
base located in a State, or
    (C) Persons authorized by the base commander to attend the course 
provided the base is located outside the United States.
    (D) In the case of a course offered on or immediately adjacent to a 
facility of the National Guard or the Selected Reserve, members of the 
National Guard, members of the Selected Reserve and their dependents.
    (4) The provisions of paragraph (a) of this section generally do not 
apply to a course when the total number of veterans, eligible persons, 
and reservists receiving assistance under chapters 30, 31, 32, 34, 35 
and 36, title 38, United States Code, and chapter 1606, title 10, United 
States Code, who are enrolled in the educational institution offering 
the course, equals 35 percent or less of the total student enrollment at 
the educational institution (computed separately for the main campus and 
any branch or extension of the institution). However, the provisions of 
paragraph (a) of this section will apply to such a course when--


(Authority: 38 U.S.C. 3473(d); Pub. L. 98-525, Pub. L. 100-689)

    (i) The course is a course of Special Assistance for the 
Educationally Disadvantaged and a serviceperson enrolls in it, or
    (ii) The Director of the Department of Veterans Affairs facility of 
jurisdiction has reason to believe that the enrollment of veterans and 
eligible persons in the course may exceed 85 percent of the total 
student enrollment in the course.


(Authority: 38 U.S.C. 3473, 3491(c))

    (d) Applications for exemptions. No applications are required for 
any exemptions except that found in paragraph (c)(4) of this section. To 
obtain an exemption as stated in paragraph (c)(4) of this section 
schools must submit reports as required in paragraph (f)(1) of this 
section.


(Authority: 38 U.S.C. 3473)

    (e) Computing the 85-15 percent ratio--(1) Determining when separate 
computations are required. Except as provided in paragraph (c) of this 
section and in paragraph (e)(3) of this section, an 85-15 percent ratio 
must be computed for each course of study or curriculum leading to a 
separately approved educational or vocational objective. Computations 
will not be made for unit subjects, unless only one unit subject is 
approved by the State approving agency to be offered at a separate 
branch or extension of a school. Courses or curricula which are offered 
at separately approved branches or extensions, as well as courses or 
curricula leading to a secondary school diploma or equivalency 
certificate offered at any branch or extention, must have an 85-15 
percent ratio computed separately from the same course offered at the 
parent institution. The count of students attending the branch may not 
be added to those attending the parent institution even for the same 
courses or curricula. However, the count of those attending courses or 
curricula offered at an additional facility, as opposed to a branch or 
extension, must be added to those attending the same course at the 
parent institution. Pursuit of a course or curriculum that varies in any 
way from a similar course, although it may have the same designation as 
the other similar course or curriculum, will require a separate 85-15 
percent computation. A course or curriculum will be considered to vary

[[Page 268]]

from another if there are different attendance requirements, required 
unit subjects are different, required completion length is different, 
etc.
    (i) Separate courses for computation purposes in institutions of 
higher learning will be determined by general curriculum only until the 
point at which it is reasonable to assume a major field would be 
declared and after that point by specific curriculum.
    (A) General 2-year curricula at 2-year institutions of higher 
learning, general curricula such as AA (Associate of Arts) or AS 
(Associate of Science) degrees with no major specified, will require 
separate computations for each curriculum. Terminal 2-year courses 
(i.e., AAS (Associate of Applied Science), dental technology or auto 
mechanics certificate) and other associate degree courses where a field 
is specified must be computed separately for each objective.
    (B) Students attending 4-year institutions of higher learning and 
graduate schools may be counted in general curricula such as BA 
(Bachelor of Art) and BS (Bachelor of Science) only until the normal 
point at which the school requires the student to declare a major 
subject. Then the 85-15 percent computation must be made for each 
specific curriculum, i.e., BS (Bachelor of Science) in electrical 
engineering, MA (Master of Arts) in English, etc.
    (ii) NCD (noncollege degree) courses must be computed separately by 
approved vocational objective. If several curricula lead to the same 
coded vocational objective, each must meet the 85-15 percent requirement 
separately, unless it can be shown that two or more courses are 
identical in all respects (scheduling, hours devoted to each unit 
subject, etc.). Branch or extension courses will be computed separately 
from courses at the parent facility. Courses offered on a full- and 
part-time basis which are identical in length and content will be 
combined for computing the ratio.
    (2) Assigning students to each part of the ratio. Notwithstanding 
the provisions of paragraph (a) of this section, the following students 
will be considered to be nonsupported provided VA is not furnishing them 
with educational assistance under title 38, United States Code or under 
chapter 1606, title 10, United States Code:
    (i) Students who are not veterans or reservists, and are not in 
receipt of institutional aid.


(Authority: 38 U.S.C. 3473(d); Pub. L. 98-525, Pub. L. 100-689)

    (ii) All graduate students in receipt of institutional aid.
    (iii) Students in receipt of any Federal aid (other than Department 
of Veterans Affairs benefits).
    (iv) Undergraduates and non-college degree students receiving any 
assistance provided by an institution, if the institutional policy for 
determining the recipients of such aid is equal with respect to veterans 
and nonveterans alike.


(Authority: 38 U.S.C. 3473(d))

    (3) Calculation. (i) To determine if the requirement of paragraph 
(a) of this section has been met for all courses except flight courses 
the full-time equivalent, nonsupported students as defined by paragraph 
(e)(2) of this section will be compared to the full-time equivalent 
students enrolled in the course. If the full-time equivalent, 
nonsupported students do not equal at least 15 percent of the total 
full-time enrollment, the 85-15 percent requirement has not been met for 
the course. If a non-Department of Veterans Affairs student in a 
correspondence course has not completed a lesson nor made a payment 
toward the cost of the course during the 6-month period immediately 
prior to the computation, the student will not be counted in computing 
the 85-15 percent ratio.
    (ii) The 85-15 percent ratio for flight courses shall be computed by 
comparing the number of hours of training received by or tuition charged 
to nonsupported students in the preceding 30 days to the total number of 
hours of training received by or tuition charged to all students in the 
same period. All approved courses offered under 14 CFR parts 141 and 142 
at a flight school will be considered to be one course for the purpose 
of making this computation. Similarly, all other approved courses 
offered at a flight school will be considered to be one course for the 
purpose of

[[Page 269]]

making this computation. In this computation hours of training or 
tuition charges for students enrolled--
    (A) In the recreational pilot certification course and the private 
pilot certification course will be excluded;
    (B) In a ground instructor certification course will be included;
    (C) In courses approved under 14 CFR part 141, other than a ground 
instructor certification course, will be actual hours of logged 
instructional flight time or the charges for those hours; and
    (D) In courses not approved under 14 CFR part 141, such as courses 
offered by flight simulator or courses for navigator or flight engineer, 
shall include ground training time or charges; actual logged 
instructional flight time or charges; and instructional time in a flight 
simulator or charges for that training.


(Authority: 10 U.S.C. 16136(c); 38 U.S.C. 3034(d), 3680A(d))

    (f) Reports. (1) Schools must submit to VA all calculations needed 
to support the exemption found in paragraph (c)(4) of this section. If 
the school is organized on a term, quarter, or semester basis, it shall 
make that submission no later than 30 days after the beginning of the 
first term for which the school wants the exemption to apply. If the 
school is not organized on a term, quarter or semester basis, it shall 
make that submission no later than 30 days after the beginning of the 
first calendar quarter for which the school wishes the exemption to 
apply. A school having received an exemption found in paragraph (c)(4) 
of this section shall not be required to certify that 85 percent or less 
of the total student enrollment in any course is receiving Department of 
Veterans Affairs assistance:


(Authority: 38 U.S.C. 3473)

    (i) Unless the Director of the VA facility of jurisdiction has 
reason to believe that the enrollment of eligible veterans and eligible 
persons in a specific course may exceed 85 percent of the total 
enrollment in a specific course, or
    (ii) Until such time as the total number of veterans, eligible 
persons and reservists receiving assistance under chapters 30, 31, 32, 
34, 35, or 36, title 38 U.S.C., or chapter 1606, title 10 U.S.C., who 
are enrolled in the educational institution offering the course, equals 
more than 35 percent of the total student enrollment at the educational 
institution (computed separately for the main campus and any branch or 
extension of the institution). At that time the procedures contained in 
paragraph (f)(2) of this section shall apply.


(Authority: 38 U.S.C. 3473(d); Pub. L. 98-525, Pub. L. 100-689)

    (2) The school must submit all calculations made under paragraph 
(e)(3) of this section to the Department of Veterans Affairs according 
to these time limits.
    (i) If the school is organized on a term, quarter or semester basis, 
the calculations must be submitted no later than 30 days after the 
beginning of each regular school term (excluding summer sessions), or 
before the beginning date of the next term, whichever occurs first.
    (ii) If a school is not organized on a term, quarter or semester 
basis, reports must be received by the Department of Veterans Affairs no 
later than 30 days after the end of each calendar quarter.


(Authority: 38 U.S.C. 3473)

    (g) Effect of the 85-15 percent ratio on processing new enrollments. 
(1) The Department of Veterans Affairs will process new enrollments of 
eligible veterans (and servicepersons where this provision applies to 
them), in a course on the basis of the school's submission of the most 
recent computation showing that:
    (i) The 85-15 percent ratio is satisfactory, or
    (ii) The course is exempt under paragraph (c)(4) of this section.
    (2) Except for those enrollments with a beginning date before or the 
same as the date the school completed the most recent computation, no 
benefits will be paid either under Chapter 1606, Title 10 U.S.C., or 
under Chapters 30, 32, 34, or

[[Page 270]]

36, Title 38 U.S.C., when that computation establishes that the course:


(Authority: 10 U.S.C. 16136, 38 U.S.C. 3034, 3241, 3473(d); Pub. L. 98-
525)

    (i) Neither has a satisfactory 85-15 percent ratio, nor
    (ii) Is exempt under paragraph (c)(4) of this section.


(Authority: 10 U.S.C. 16136, 38 U.S.C. 3034, 3241, 3473(d))

    (3) If a school fails to submit a timely computation, no benefits 
will be paid for:
    (i) The enrollment of a serviceperson in a course leading to a 
secondary school diploma or an equivalency certificate if the enrollment 
has beginning dates beyond the expiration of the allowable computation 
period, or
    (ii) The enrollment of a veteran in any course to which the 
provisions of paragraph (a) of this section apply if the enrollment has 
beginning dates beyond the expiration of the allowable computation 
period.
    (4) Enrollments with later beginning dates may be processed only 
after the school certifies that:
    (i) The proper ratio has been reestablished for the course, or
    (ii) The course is exempt from the requirement under paragraph 
(c)(4) of this section.
    (5) When a school shows a reestablished 85-15 percent ratio, each 
new veteran enrollment or enrollment of a serviceperson in a course 
leading to a secondary school diploma or an equivalency certificate 
which is submitted after reestablishment must be individually computed 
into the ratio to ensure that the 85 percent limitation is not again 
immediately exceeded. The Department of Veterans Affairs will require 
individual computations until:
    (i) The end of the term for which the ratio was reestablished, or
    (ii) The end of the calendar quarter during which the ratio was 
reestablished if the school is not operated on a term, quarter or 
semester basis.


(Authority: 38 U.S.C. 3473, 3491(c))

    (6) Once a student is properly enrolled in a course which either 
meets the 85-15 percent requirement or which is exempt pursuant to 
paragraph (c) of this section, such a student may not have benefits for 
that course terminated because the 85-15 percent requirement 
subsequently is not met or because the course loses its exemption, as 
long as the student's enrollment remains continuous. A student enrolled 
in an institution organized on a term basis need not attend summer 
sessions in order to maintain continuous enrollment. An enrollment may 
also be considered continuous if a ``break'' in enrollment is wholly due 
to circumstances beyond the student's control such as serious illness.
    (h) Waivers. Schools which desire a waiver of the provisions of 
paragraph (a) of this section for a course where the number of full-time 
equivalent students receiving VA education benefits equals or exceeds 85 
percent of the total full-time equivalent enrollment in the course may 
apply for a waiver to the Director, Education Service, through the 
Director of the VA facility of jurisdiction. When applying, a school 
must submit sufficient information to allow the Director, Education 
Service, to judge the merits of the request against the criteria shown 
in this paragraph. This information and any other pertinent information 
available to VA shall be considered in relation to these criteria:
    (1) Availability of comparable alternative educational facilities 
effectively open to veterans in the vicinity of the school requesting a 
waiver.
    (2) Status of the school requesting a waiver as a developing 
institution primarily serving a disadvantaged population. The school 
should enclose a copy of its notice from the Department of Education 
that the school is eligible to be considered for a grant under the 
Strengthening Institutions Program or the Special Needs Program, if 
applicable. Otherwise the school should submit data sufficient to allow 
the Director, Education Service, to judge whether the school is similar 
to institutions which the Department of Education considers to be 
eligible to apply for a grant under these programs. The pertinent 
criteria and data categories are published in Title 34, Code of Federal 
Regulations, Chapter VI, part 624, subpart A; part 625, subpart A; and 
part 626, subpart A. The requirements of

[[Page 271]]

those criteria that a school be a ``public or nonprofit'' institution 
need not be met.
    (3) Previous compliance history of the school, including such 
factors as false or deceptive advertising complaints, enrollment 
certification timeliness and accuracy, and amount of school liability 
indebtedness to VA.
    (4) General effectiveness of the school's program in providing 
educational and employment opportunities to the particular veteran 
population it serves. Factors to be considered should include the 
percentage of veteran-students completing the entire course, ratio of 
educational and general expenditures to full-time equivalency 
enrollment, etc.


(Authority: 38 U.S.C. 3473(d); Pub. L. 94-502, Pub. L. 95-202)

[44 FR 62498, Oct. 31, 1979, as amended at 48 FR 37985, Aug. 22, 1983; 
51 FR 16316, May 2, 1986; 52 FR 45634, Dec. 1, 1987; 54 FR 4285, Jan. 
30, 1989; 54 FR 34984, Aug. 23, 1989; 55 FR 28027, July 9, 1990; 57 FR 
29800, July 7, 1992; 61 FR 20728, May 8, 1996; 61 FR 26114, May 24, 
1996; 61 FR 29296, June 10, 1996; 62 FR 55760, Oct. 28, 1997; 63 FR 
34129, June 23, 1998]



Sec. 21.4202  Overcharges; restrictions on enrollments.

    (a)-(b) [Reserved]
    (c) Restrictions; proprietary schools. Enrollment will not be 
approved for any veteran or eligible person under the provisions of 
Chapter 34 or 35 respectively, in any proprietary school of which the 
veteran or eligible person is an official authorized to sign 
certificates of enrollment or monthly certificates of attendance, an 
owner or an officer.

[31 FR 6774, May 6, 1966, as amended at 32 FR 13403, Sept. 23, 1967; 37 
FR 6679, Apr. 1, 1972; 39 FR 43221, Dec. 11, 1974; 43 FR 35300, Aug. 9, 
1978; 48 FR 37987, Aug. 22, 1983; 49 FR 5115, Feb. 10, 1984; 63 FR 
35831, July 1, 1998]



Sec. 21.4203  Reports--requirements.

    (a) General. All the reports required by this paragraph shall be in 
a form specified by the Secretary.
    (1) Except as provided in paragraph (a)(2) of this section each 
educational institution, veteran and eligible person shall report 
without delay such information on enrollment, entrance, reentrance, 
change in the hours of credit or attendance, pursuit, interruption and 
termination of attendance of each veteran or eligible person enrolled in 
an approved course as the Secretary may require and using a form 
specified by the Secretary. See paragraphs (b) through (h) of this 
section.
    (2) An educational institution may delay in reporting the enrollment 
or reenrollment of a veteran or an eligible person until the end of the 
term, quarter, or semester when--
    (i) The veteran or eligible person is enrolled in a program of 
independent study;
    (ii) The veteran or eligible person is pursuing the program on a 
less than half-time basis;
    (iii) The educational institution has asked the Director of the VA 
facility of jurisdiction in writing for permission to delay in making 
the report; and
    (iv) The Director of the VA facility of jurisdiction has determined 
that it is not feasible for the educational institution to monitor 
interruption or termination of the veteran's or eligible person's 
pursuit of the program.
    (3) An educational institution which disagrees with a decision of a 
Director of a VA facility as to whether it may delay reporting 
enrollments or reenrollments as provided in paragraph (a)(2) of this 
section may ask to have that decision reviewed by the Director, 
Education Service. That request must be made in writing to the Director 
of the VA facility within one year of the date of the letter notifying 
the educational institution of the original decision.
    (4) An educational institution which, under paragraph (a)(2) of this 
section, is delaying the reporting of the enrollment or reenrollment of 
a veteran shall provide the veteran with notice of the delay at the time 
that the veteran enrolls or reenrolls.
    (5) In addition, educational institutions must--


(Authority: 38 U.S.C. 3685; Pub. L. 99-576)

    (i) Verify enrollment for each veteran and eligible person receiving 
an advance payment; and
    (ii) Verify the delivery of advance payment check and education loan

[[Page 272]]

check for each veteran and eligible person receiving an advance payment 
or loan.
    (6) Nothing in this section or in any section in 38 CFR part 21 
shall be construed as requiring any institution of higher learning to 
maintain daily attendance records for any course leading to a standard 
college degree.


(Authority: 38 U.S.C. 3680(d), 3684, 3685, 3698; Pub. L. 95-202, Pub. L. 
96-466; Pub. L. 99-576)

    (b) Certifications of enrollment. All the reports required by this 
paragraph shall be in a form specified by the Secretary.
    (1) VA requires that educational institutions report all entrances 
and reentrances on a certification of enrollment.
    (2) All educational institutions, regardlesss of the way in which 
they are organized, must clearly specify the course in which the veteran 
or eligible person is enrolled.
    (3) Schools organized on a term, quarter or semester basis--
    (i) May report enrollment for the term, quarter, semester, ordinary 
school year plus the following summer term.
    (ii) May not report enrollment for a period that exceeds the 
ordinary school year plus the following summer term.
    (iii) Must report the dates for the break between terms if--
    (A) The certification covers two or more terms, and a term ends and 
the following term does not begin in the same or the next calendar 
month;
    (B) The veteran or eligible person elects not to be paid for the 
intervals between terms;
    (C) The certification covers two or more summer sessions; or
    (D) The certification covers at least one summer session and at 
least one term which is not a standard semester or quarter.
    (iv) Must submit a separate enrollment certification for each term, 
quarter or semester if the student--
    (A) Is a veteran or eligible person pursuing a program on a less 
than half-time basis, or
    (B) Is a serviceperson.


(Authority: 38 U.S.C. 3684(a); Pub. L. 99-576)

    (v) Where a veteran or an eligible person, who is pursing a course 
leading to a standard college degree, transfers between consecutive 
school terms from one approved institution to another approved 
institution, for the purpose of enrolling in, and pursuing, a similar 
course at the second institution, the veteran or eligible person shall, 
for the purpose of entitlement to the payment of educational assistance 
allowance be considered to be enrolled at the first institution during 
the interval, if the interval does not exceed 30 days, following the 
termination date of the school term of the first institution.


(Authority: 38 U.S.C. 3680)

    (c) Nonpunitive grade. A school may assign a nonpunitive grade for a 
course or subject in which the veteran or eligible person is enrolled 
even though the veteran or eligible person does not withdraw from the 
course or subject. When this occurs, the school must report the 
assignment of the nonpunitive grade in a form specified by the Secretary 
in time for VA to receive it before the earlier of the following dates 
is reached:
    (1) Thirty days from the date on which the school assigns the grade, 
or
    (2) Sixty days from the last day of the enrollment period for which 
the nonpunitive grade is assigned.
    (d) Interruptions, terminations and changes in hours of credit or 
attendance. When a veteran or eligible person interrupts or terminates 
his or her training for any reason, including unsatisfactory conduct or 
progress, or when he or she changes the number of hours of credit or 
attendance, this fact must be reported to VA by the school in a form 
specified by the Secretary.
    (1) If the change in status or change in number of hours of credit 
of attendance occurs on a day other than one indicated by paragraph 
(d)(2) or (3) of this section, the school will initiate a report of the 
change in time for the VA to receive it within 30 days of the date on 
which the change occurs. If the course in which the veteran or eligible 
person is enrolled does not lead to a standard college degree, and 
attendance must be certified for the course, the school may include the 
information

[[Page 273]]

on the monthly certification of attendance.


(Authority: 38 U.S.C. 3684(a), 1788(a); Pub. L. 99-576)

    (2) If the enrollment of the veteran or eligible person has been 
certified by the school for more than one term, quarter or semester and 
the veteran or eligible person interrupts or terminates his or her 
training at the end of a term, quarter or semester within the certified 
period of enrollment, the school shall report the change in status to 
the Department of Veterans Affairs in time for the Department of 
Veterans Affairs to receive the report within 30 days of the last 
officially scheduled registration date for the next term, quarter or 
semester.
    (3) If the change in status or change in the number of hours of 
credit or attendance occurs during the 30 days of a drop-add period, the 
school must report the change in status or change in the number of hours 
of credit or attendance to the Department of Veterans Affairs in time 
for the Department of Veterans Affairs to receive the report within 30 
days from the last date of drop-add period or 60 days from the first day 
of the enrollment period, whichever occurs first.


(Authority: 38 U.S.C. 3684(a))

    (e) Correspondence courses. Where the course in which a veteran is 
enrolled under 38 U.S.C. chapter 34 or a spouse or surviving spouse is 
enrolled under 38 U.S.C. chapter 35 is pursued exclusively by 
correspondence, the school will report by an endorsement on the 
veteran's or eligible spouse's or surviving spouse's certification the 
number of lessons completed by the veteran, spouse or surviving spouse 
and serviced by the school. Such reports will be submitted quarterly in 
a form specified by the Secretary.


(Authority: 38 U.S.C. 3680)

    (f) Certification. All reports required by this paragraph must be in 
a form specified by the Secretary.
    (1) Courses not leading to a standard college degree. (i) Except as 
provided in this paragraph VA requires that a certification of 
attendance be submitted monthly for each veteran or eligible person 
enrolled in a course not leading to a standard college degree. The fact 
that the course may be pursued on a quarter, semester or term basis will 
not relieve the veteran or eligible person and the school of this 
requirement. Unless exempted by this paragraph this requirement also 
applies to courses measured on a credit-hour basis. This requirement 
does not apply to--
    (A) Courses measured on a credit-hour basis pursuant to footnote 6 
of Sec. 21.4270(a),
    (B) A course pursued on a less than one-half-time basis,
    (C) A course pursued by a serviceperson while on active duty, or
    (D) A correspondence course which must meet the requirements of 
paragraph (e) of this section.


(Authority: 38 U.S.C. 3680(a)(2), 3688(a)(7); Pub. L. 99-576)

    (2) Courses leading to a standard college degree. Schools which have 
veterans or eligible persons enrolled in courses which lead to a 
standard college degree are not required to submit periodic 
certifications for students enrolled in such courses. Certifications 
are, however, required under paragraphs (b), (c), (d) and (h) of this 
section.
    (3) Apprentice or other on-the-job training. A certification of 
attendance must be submitted monthly during the period of enrollment in 
the same manner as certifications required in paragraph (f)(1) of this 
section.
    (g) Flight training courses. Where the course consists exclusively 
of flight training, the school will report by an endorsement on the 
veteran's certification the type and number of hours of actual flight 
training received by, and the cost thereof to, the veteran. Such reports 
may be submitted monthly.
    (h) Unsatisfactory progress, conduct or attendance. At times the 
unsatisfactory progress, conduct or attendance of a veteran or eligible 
person is caused by or results in his or her interruption or termination 
of training. If this occurs, the interruption or termination shall be 
reported in accordance with paragraph (d) of this section. If the 
veteran or eligible person continues in training despite unsatisfactory 
progress, conduct, or despite having failed to meet

[[Page 274]]

the regularly prescribed standards of attendance at the school, the 
school must report the fact of his or her unsatisfactory progress, 
conduct or attendance to VA within the time limit allowed by paragraph 
(h) (1) and (2) of this section.


(Authority: 38 U.S.C. 3474, 3524)

    (1) A veteran's or eligible person's progress may become 
unsatisfactory according to the regularly prescribed standards and 
practices of the school as a result of the grades he or she receives The 
school shall report such unsatisfactory progress to VA in time for VA to 
receive it before the earlier of the following dates is reached:
    (i) Thirty days from the date on which the school official, who is 
responsible for determining whether a student is making progress, first 
received the final grade report which establishes that the veteran 
either is not progressing satisfactorily, or
    (ii) Sixty days from the last day of the enrollment period during 
which the veteran or eligible person earned the grades that caused him 
or her not to meet the satisfactory progress standards.
    (2) If the unsatisfactory progress, conduct or attendance of the 
veteran or eligible person is caused by any factors other than the 
grades which he or she receives, the school shall report the 
unsatisfactory progress, conduct or attendance to VA in time for VA to 
receive it within 30 days of the date on which the progress, conduct or 
attendance of the veteran or eligible person becomes unsatisfactory. See 
also Sec. 21.4277.


(Authority: 38 U.S.C. 3474, 3524)

(Approved by the Office of Management and Budget under control number 
2900-0354)

[31 FR 6774, May 6, 1966]

    Editorial Note: For Federal Register citations affecting Sec. 
21.4203, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 21.4204  Periodic certifications.

    Educational assistance allowance is payable on the basis of a 
required certification concerning the pursuit of a course during the 
reporting period.
    (a) Reports by eligible persons. An eligible person enrolled in a 
course which leads to a standard college degree, excepting eligible 
persons pursuing the course on a less than half-time basis, must verify 
each month his or her continued enrollment in and pursuit of his or her 
courses. In the case of an eligible person who completed, interrupted or 
terminated his or her course, any communication from the student or 
other authorized person notifying VA of the eligible person's completion 
of course as scheduled or earlier termination date, will be accepted to 
terminate payments accordingly. Reports by other eligible persons will 
be submitted in accordance with Sec. 21.4203 (e), (f) or (g).


(Authority: 38 U.S.C. 1780(g), 3103)

    (b) Requirements. The certifications required by Sec. 21.4203 and 
paragraph (a) of this section will include a report on the following 
items when applicable:
    (1) Continued enrollment in and pursuit of the course.
    (2) Conduct and progress. See Sec. 21.4277.
    (3) Date of interruption or termination of training.
    (4) Changes in number of semester hours or clock hours of 
attendance.
    (5) Any other changes or modifications in the course as certified at 
enrollment.
    (c) Term, quarter, or semester. For a course which does not lead to 
a standard college degree, if a school organized on a term, quarter, or 
semester basis has reported enrollment:
    (1) For the ordinary school year or the complete course, the 
periodic certification will show the intervals between terms, quarters, 
or semesters as absences.
    (2) By term, quarter, or semester, the periodic certification will 
not cover the intervals between terms, quarters, or semesters.
    (d) Year-round courses. The periodic certifications will show any 
vacation period or interval between periods of instruction as absences. 
The periodic certification will not cover the period between school 
years.

[[Page 275]]

    (e) Farm cooperative courses. The monthly certification will cover 
only those periods of classroom instruction which are included in the 
prescheduled institutional portion of the course.


(Authority: 38 U.S.C. 3684(a))

(Approved by the Office of Management and Budget under control number 
2900-0465)

[31 FR 6774, May 6, 1966, as amended at 32 FR 3452, Mar. 2, 1967; 35 FR 
9816, June 16, 1970; 38 FR 14936, June 7, 1973; 39 FR 31903, Sept. 3, 
1974; 41 FR 47929, Nov. 1, 1976; 49 FR 8609, Mar. 8, 1984; 54 FR 33889, 
Aug. 17, 1989; 54 FR 37108, Sept. 7, 1989; 57 FR 24367, June 9, 1992; 61 
FR 26114, May 24, 1996]



Sec. 21.4206  Reporting fee.

    VA may pay annually to each educational institution furnishing 
education or each joint apprenticeship training committee acting as a 
training establishment under 10 U.S.C. Chapter 1606 or 38 U.S.C. 
Chapters 30, 32, 34, 35 or 36 a reporting fee for required reports or 
certifications. The reporting fee will be paid as soon as feasible after 
the end of the calendar year.
    (a) Except as provided in paragraph (b) of this section the 
reporting fee will be computed for each calendar year by multiplying 
$7.00 by the number of eligible veterans and eligible persons enrolled 
under 10 U.S.C. Chapter 1606, or 38 U.S.C. Chapters 30, 32, 34, 35 or 36 
on October 31 of that year.


(Authority: 10 U.S.C. 16136, 38 U.S.C. 3034, 3241, 3684(c))

    (b) For any school or joint apprenticeship training committee where 
the peak enrollment of veterans and eligible persons varies more than 15 
percent from the enrollment on October 31, another date may be 
established as representative of peak enrollment.


(Authority: 38 U.S.C. 3684(c))

    (c) An additional $4 will be paid to those institutions which have 
delivered to the veteran or eligible person at registration the 
educational assistance check representing an advance payment, or which 
have delivered educational loan checks in accordance with the provisions 
of Subpart F. If an institution delivers both an advance payment check 
and educational loan check(s) to the same veteran or eligible person 
within 1 calendar year, it shall receive only one additional $4 fee. In 
order to receive this fee, the institution shall submit to the 
Department of Veterans Affairs a certification of delivery of each 
check. If an advance payment check is not delivered within 30 days after 
commencement of the student's program, the check is to be returned to 
the Department of Veterans Affairs. If an education loan check is not 
delivered within 30 days of the date the educational institution 
received it, the check shall be returned to the Department of Veterans 
Affairs.


(Authority: 38 U.S.C. 3684, 3698)

    (d) No reporting fee payable to an educational institution under 
this section shall be subject to offset by the Department of Veterans 
Affairs against any liability of the educational institution for any 
overpayment which the Department of Veterans Affairs has 
administratively determined to exist unless the liability of the 
educational institution was not contested by the educational institution 
or was upheld by a final decree of a court of appropriate jurisdiction.


(Authority: 38 U.S.C. 3684)

    (e) Before payment of a reporting fee the Department of Veterans 
Affairs will require an educational institution to certify that:
    (1) It has exercised reasonable diligence in determining whether it 
or any course offered by it approved for the enrollment of veterans or 
eligible persons meets all of the applicable requirements of chapter 
1606 of title 10 U.S.C. or chapters 30, 32, 34, 35 and 36 of title 38 
U.S.C.; and


(Authority: 10 U.S.C. 16136, 38 U.S.C. 3034, 3241, 3684(b); Pub. L. 98-
525)

    (2) It will, without delay, report any failure to meet any 
requirement to the Department of Veterans Affairs.


(Authority: 38 U.S.C. 3684(b))

[32 FR 13404, Sept. 23, 1967, as amended at 40 FR 31762, July 29, 1975; 
44 FR 62501, Oct. 31, 1979; 48 FR 37988, Aug. 22, 1983; 51 FR 16317, May 
2, 1986; 61 FR 20728, May 8, 1996]

[[Page 276]]



Sec. 21.4209  Examination of records.

    (a) Availability of records. Notwithstanding any other provision of 
law, educational institutions must make the following records and 
accounts available to authorized Government representatives:
    (1) Records and accounts pertaining to veterans or eligible persons 
who received educational assistance under Chapter 1606 of Title 10 
U.S.C. or Chapters 30, 32, 34, 35 or 36 of Title 38 U.S.C.
    (2) Other students' records necessary for the Department of Veterans 
Affairs to ascertain institutional compliance with the requirements of 
these chapters.


(Authority: 10 U.S.C. 16136; 38 U.S.C. 3034, 3244, 3690)

    (b) Type of records. Each school will upon request of duly 
authorized representatives of the Government make available for 
examination all appropriate records and accounts, including but not 
limited to:
    (1) Records and accounts which are evidence of tuition and fees 
charged to and received from or on behalf of all veterans and eligible 
persons and from other students similarly circumstanced.
    (2) Records of previous education or training of veterans and 
eligible persons at the time of admission as students and records of 
advance credit, if any, granted by the school at the time of admission.
    (3) Records of the veteran's or eligible person's grades and 
progress.
    (4) Records of all advertising, sales or enrollment materials as 
required by Sec. 21.4252(h) and section 3696(b), title 38 U.S.C.
    (5) Records and computations showing compliance with the 
requirements of Sec. 21.4201 regarding the 85-15 percent ratio of 
students for each course.
    (6) Records necessary to demonstrate compliance with the 
requirements of Sec. 21.4252(e) pertaining to the time necessary to 
complete a correspondence course.
    (7) Records necessary to demonstrate compliance with the 
requirements of Sec. 21.4252(g) pertaining to employment of graduates 
of the course.
    (c) Noncollege degree, apprentice, and other on-the-job. The school 
having veterans, servicemembers, reservists, and/or eligible persons 
enrolled in a course that does not lead to a standard college degree 
will make available, in addition to the records and accounts required in 
paragraph (b) of this section, the records of leave, absences, class 
cuts, makeup work, and tardiness. Each training establishment that has 
enrolled veterans under 38 U.S.C. chapter 30 or 32, reservists under 10 
U.S.C. chapter 1606, or eligible persons under 38 U.S.C. chapter 35 will 
also make available payroll records.


(Authority: 10 U.S.C. 16136; ;38 U.S.C. 3034, 3241, 3690(c))

    (d) Nonaccredited courses. The school having veterans or eligible 
persons enrolled in nonaccredited courses will make available, in 
addition to the records and accounts required in paragraphs (b) and (c) 
of this section the following:
    (1) Records of interruptions for unsatisfactory conduct or 
attendance.
    (2) Records of refunds of tuition, fees and other charges made to a 
veteran or eligible person who fails to enter the course or withdraws or 
is discontinued prior to completion of the course.
    (e) Nonavailability. Failure to make such records available as 
provided in this section will be grounds for discontinuing the payment 
of educational assistance allowance or special training allowance.
    (f) Retention of records. The records and accounts, including those 
pertaining to students not receiving benefits from the Department of 
Veterans Affairs, as described in this section, pertaining to each 
period of enrollment of a veteran or eligible person, will be kept 
intact and in good condition at the school for at least 3 years 
following the termination of such enrollment period. Longer retention 
will not be required unless a written request is received from the 
General Accounting Office or the Department of Veterans Affairs not 
later than 30 days prior to the end of the 3-year period.

[31 FR 6774, May 6, 1966, as amended at 38 FR 14936, June 7, 1973; 43 FR 
35300, Aug. 9, 1978; 48 FR 37988, Aug. 22, 1983; 51 FR 16317, May 2, 
1986; 61 FR 20728, May 8, 1996; 61 FR 26114, May 24, 1996]

[[Page 277]]



Sec. 21.4210  Suspension and discontinuance of educational assistance 
payments and of enrollments or reenrollments for pursuit of approved courses.

    (a) Overview. (1) VA may pay educational assistance to an individual 
eligible for such assistance under 10 U.S.C. chapter 1606, or 38 U.S.C. 
chapter 30, 32, 35, or 36, only if the individual is pursuing a course 
approved in accordance with the provisions of 38 U.S.C. chapter 36. In 
general, courses are approved for this purpose by a State approving 
agency designated to do so (or by VA in some instances). Notwithstanding 
such approval, however, VA, as provided in paragraphs (b), (c), and (d) 
of this section, may suspend, discontinue, or deny payment of benefits 
to any or all otherwise eligible individuals for pursuit of courses or 
training approved under 38 U.S.C. chapter 36.
    (2) For the purposes of this section and the purposes of Sec. Sec. 
21.4211 through 21.4216, except as otherwise expressly stated to the 
contrary--
    (i) The term ``course'' includes an apprenticeship or other on-job 
training program;
    (ii) The term ``educational institution'' includes a training 
establishment; and
    (iii) Reference to action suspending, discontinuing, or otherwise 
denying enrollment or reenrollment means such action with respect to 
providing educational assistance under the chapters listed in paragraph 
(a)(1) of this section.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3452, 3671, 
3690)

    (b) Denial of payment in individual cases. VA may deny payment of 
educational assistance to a specific individual for pursuit of a course 
or courses if, following an examination of the individual's case, VA has 
credible evidence affecting that individual that--
    (1) The course fails to meet any of the requirements of 10 U.S.C. 
chapter 1606, or 38 U.S.C. chapter 30, 32, 34, 35, or 36; or
    (2) The educational institution offering the individual's course has 
violated any of those requirements of law.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690(b)(1), 
3690(b)(2))

    (c) Notice in individual cases. Except as provided in paragraph (e) 
of this section, when VA denies payment of educational assistance to an 
individual under paragraph (b) of this section, VA will provide 
concurrent written notice to the individual. The notice shall state--
    (1) The adverse action;
    (2) The reasons for the action; and
    (3) The individual's right to an opportunity to be heard thereon in 
accordance with part 19 of this title.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (d) Actions affecting groups. (1) The Director of the VA facility of 
jurisdiction may suspend payments of educational assistance to all 
veterans, servicemembers, reservists, or eligible persons already 
enrolled in a course, and may disapprove all further enrollments or 
reenrollments of individuals seeking VA educational assistance for 
pursuit of the course. The decision to take such action, except as 
provided in paragraph (d)(2) of this section, must be based on evidence 
of a substantial pattern of veterans, servicemembers, reservists, or 
eligible persons enrolled in the course receiving educational assistance 
to which they are not entitled because:
    (i) One or more of the course approval requirements of 38 U.S.C. 
chapter 36 are not met, including the course approval requirements 
specified in Sec. Sec. 21.4253, 21.4254, 21.4261, 21.4262, 21.4263, and 
21.4264; or
    (ii) The educational institution offering the course has violated 
one or more of the recordkeeping or reporting requirements of 10 U.S.C. 
chapter 1606, or of 38 U.S.C. chapters 30, 32, 34, 35, and 36. These 
violations may include, but are not limited to, the following:
    (A) Willful and knowing submission of false reports or 
certifications concerning students or courses of education;
    (B) Failure to report to VA a veteran's, servicemember's, 
reservist's, or

[[Page 278]]

eligible person's reduction, discontinuance, or termination of education 
or training; or
    (C) Submission of improper or incorrect reports in such number, 
manner, or period of time as to indicate negligence on its part, 
including failure to maintain an adequate reporting or recordkeeping 
system.
    (2) The Director also may make a decision to take the action 
described in paragraph (d)(1) of this section when the Director has 
evidence that one or more prohibited assignments of benefits have 
occurred at an educational institution as a result of that educational 
institution's policy. This decision may be made regardless of whether 
there is a substantial pattern of erroneous payments at the educational 
institution. See Sec. 21.4146.
    (3) The Director may disapprove the enrollment of all individuals 
not already enrolled in an educational institution (which for the 
purposes of this paragraph does not include a training establishment) 
when the Director finds that the educational institution:
    (i) Has charged or received from veterans, servicemembers, 
reservists, or eligible persons an amount for tuition and fees in excess 
of the amount similarly circumstanced nonveterans are required to pay 
for the same course; or
    (ii) Has instituted a policy or practice with respect to the payment 
of tuition, fees, or other charges that substantially denies to 
veterans, servicemembers, reservists, or eligible persons the benefits 
of advance payment of educational assistance authorized to such 
individuals under Sec. Sec. 21.4138(d), 21.7140(a), and 21.7640(d); or
    (iii) Has used erroneous, deceptive, or misleading practices as set 
forth in Sec. 21.4252(h).


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3680A(d), 
3684, 3685, 3690, 3696, 5301)

    (e) Actions that must accompany a mass suspension of educational 
assistance payments or suspension of approval of enrollments and 
reenrollments in a course or educational institution. (1) The Director 
of the VA facility of jurisdiction may suspend payment of educational 
assistance and may suspend approval of new enrollments and reenrollments 
as provided in paragraph (d) of this section, only after:
    (i) The Director notifies in writing the State approving agency 
concerned and the educational institution of any failure to meet the 
approval requirements and any violation of recordkeeping or reporting 
requirements; and
    (ii) The educational institution--
    (A) Refuses to take corrective action; or
    (B) Does not take corrective action within 60 days (or 90 days if 
permitted by the Director).
    (2) Not less than 30 days before the Director acts to make a mass 
suspension of payments of educational assistance and/or suspend approval 
of new enrollments and reenrollments, the Director will, to the maximum 
extent feasible, provide written notice to each veteran, servicemember, 
reservist, and eligible person enrolled in the affected courses. The 
notice will:
    (i) State the Director's intent to suspend payments and/or suspend 
approval of new enrollments and reenrollments unless the educational 
institution takes corrective action;
    (ii) Give the reasons why the Director intends to suspend payments 
and/or suspend approval of new enrollments and reenrollments; and
    (iii) State the date on which the Director intends to suspend 
payments and/or suspend approval of new enrollments and reenrollments.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690(b))

    (f) Actions in cases indicating submission of false, misleading, or 
fraudulent claims or statements. The Director of the VA facility of 
jurisdiction will take the following action, as indicated, that may be 
in addition to suspending payments or further approval of enrollments or 
reenrollments in a course or educational institution.
    (1) If the Director has evidence indicating that an educational 
institution has willfully submitted a false or misleading claim, or that 
a veteran, servicemember, reservist, eligible person, or other person, 
with the complicity of an educational institution, has submitted such a 
claim, the Director will make a complete report of the facts of the case 
to the appropriate

[[Page 279]]

State approving agency and to the Office of Inspector General for 
appropriate action.
    (2) If the Director believes that an educational institution has 
submitted a false, fictitious, or fraudulent claim or written statement 
within the meaning of the Program Fraud Civil Remedies Act (31 U.S.C. 
3801-3812) or that a veteran, servicemember, reservist, eligible person, 
or other person, with the complicity of an educational institution, has 
submitted such a claim or made such a written statement, the Director 
will follow the procedures in part 42 of this title.


(Authority: 10 U.S.C. 16136(b); 31 U.S.C. 3801-3812; 38 U.S.C. 3034(a), 
3241(a), 3690(d))

    (g) Referral to the Committee on Educational Allowances. If the 
Director of the VA facility of jurisdiction suspends payment of 
educational assistance to, or suspends approval of the enrollment or 
reenrollment of, individuals in any course or courses as provided in 
paragraph (d) of this section, the Director will refer the matter to the 
Committee on Educational Allowances as provided in Sec. 21.4212.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (h) Withdrawal of referral to Committee on Educational Allowances. 
(1) If, following a suspension of payments and/or of approval of 
enrollments or reenrollments, the Director of the VA facility of 
jurisdiction determines that the conditions which justified the 
suspension have been corrected, and the State approving agency has not 
withdrawn or suspended approval of the course or courses, the Director 
may resume payments to and/or approval of enrollments or reenrollments 
of the affected veterans, servicemembers, reservists, or eligible 
persons. If the case has already been referred to the Committee on 
Educational Allowances under paragraph (g) of this section at the time 
such action is taken, the Director will advise the Committee that the 
original referral is withdrawn.
    (2) If, following a referral to the Committee on Educational 
Allowances, the Director finds that the State approving agency will 
suspend or withdraw approval, the Director may, if otherwise 
appropriate, advise the Committee that the original referral is 
withdrawn.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

[63 FR 35831, July 1, 1998]



Sec. 21.4211  Composition, jurisdiction, and duties of Committee on 
Educational Allowances.

    (a) Authority. VA is authorized by 38 U.S.C. 3690 to discontinue 
educational benefits to veterans, servicemembers, reservists, or 
eligible persons when VA finds that the program of education or course 
in which such individuals are enrolled fails to meet any of the 
requirements of 38 U.S.C. chapter 30, 32, 34, 35, or 36, or 10 U.S.C. 
chapter 1606, or the regulations in this part, or when VA finds an 
educational institution or training establishment has violated any such 
statute or regulation, or fails to meet any such statutory or regulatory 
requirement. Sections 21.4210 and 21.4216 implement that authority. This 
section provides for establishment of a Committee on Educational 
Allowances within each VA facility of jurisdiction whose findings of 
fact and recommendations will be provided to the Director of that VA 
facility, to whom such authority to discontinue educational benefits or 
disapprove enrollments or reenrollments has been delegated.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (b) Purpose. (1) The Committee on Educational Allowances is 
established to assist the Director of the VA facility of jurisdiction in 
reaching a conclusion as to whether, in a specific case, educational 
assistance to all individuals enrolled in any course or courses offered 
by the educational institution should be discontinued and, if 
appropriate, whether approval of all further enrollments or 
reenrollments in those courses should be denied to veterans, 
servicemembers, reservists, or other eligible persons pursuing those 
courses under programs administered by VA because a requirement of 38 
U.S.C. chapter 30, 32, 34, 35, or 36, or 10 U.S.C. chapter 1606, or the 
regulations in this part, is not being met or a provision of

[[Page 280]]

such statute or regulation has been violated.
    (2) The function of the Committee on Educational Allowances is to 
develop facts and recommend action to be taken on the basis of the facts 
found. A hearing before the Committee is not in the nature of a trial in 
a court of law. Instead, it is an administrative inquiry designed to 
create a full and complete record upon which a recommendation can be 
made as to whether the Director should discontinue payment of 
educational benefits and/or deny approval of new enrollments or 
reenrollments. Both the interested educational institution and VA 
Regional Counsel, or designee, representing VA, will be afforded the 
opportunity to present to the Committee any evidence, argument, or other 
material considered pertinent.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (c) Jurisdiction. The Committee on Educational Allowances will 
consider only those cases which are referred in accordance with 
Sec. Sec. 21.4210(g) and 21.4212.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (d) Committee members. The Committee on Educational Allowances will 
consist of three employees of the VA facility of jurisdiction, at least 
one of whom is familiar with the adjudication of claims for benefits 
administered by the Veterans Benefits Administration. The Director of 
the VA facility of jurisdiction will designate a Chairperson. In the 
event that any member becomes unable to serve for any reason, the 
Director may appoint a replacement member. Before the Committee resumes 
its proceedings, the new member will be given an opportunity to apprise 
himself or herself of the actions and testimony already taken by the 
Committee.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (e) Duties and responsibilities of the Committee. (1) The function 
of the Committee on Educational Allowances is to make recommendations to 
the Director of the VA facility of jurisdiction in connection with 
specific cases referred for consideration as provided in Sec. Sec. 
21.4210(g) and 21.4212.
    (2) The performance of this function will include:
    (i) Hearing testimony or argument from witnesses or representatives 
of educational institutions and VA, as appropriate, when such persons 
appear personally before the Committee;
    (ii) Receiving and reviewing all the evidence, testimony, briefs, 
statements, and records included in each case; and
    (iii) Furnishing the Director of the VA facility of jurisdiction a 
written statement setting forth specifically the question or questions 
considered, a summation of the essential facts of record, 
recommendations as to issues referred for consideration by the 
Committee, and the basis therefor. In any case where there is not 
unanimity, both the majority and the minority views and recommendations 
will be furnished.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

[63 FR 35833, July 1, 1998]



Sec. 21.4212  Referral to Committee on Educational Allowances.

    (a) Form and content of referral to Committee. When the Director of 
the VA facility of jurisdiction refers a case to the Committee on 
Educational Allowances, as provided in Sec. 21.4210(g), the referral 
will be in writing and will--
    (1) State the approval, reporting, recordkeeping, or other criteria 
of statute or regulation which the Director has cause to believe the 
educational institution has violated;
    (2) Describe the substantial pattern of veterans, servicemembers, 
reservists, or eligible persons receiving educational assistance to 
which they are not entitled which the Director has cause to believe 
exists, if applicable;
    (3) Outline the nature of the evidence relied on by the Director in 
reaching the conclusions of paragraphs (a)(1) and (a)(2) of this 
section;
    (4) Describe the Director's efforts to obtain corrective action and 
the results of those efforts; and
    (5) Ask the Committee on Educational Allowances to perform the 
functions described in Sec. Sec. 21.4211, 21.4213,

[[Page 281]]

and 21.4214 and to recommend to the Director whether educational 
assistance payable to individuals pursuing the courses in question 
should be discontinued and approval of new enrollments or reenrollments 
denied.
    (b) Notice of the referral. (1) At the time of referral the Director 
will--
    (i) Send notice of the referral, including a copy of the referral 
document, by certified mail to the educational institution. The notice 
will include statements that the Committee on Educational Allowances 
will conduct a hearing; that the educational institution has the right 
to appear before the Committee and be represented at the hearing to be 
scheduled; and that, if the educational institution intends to appear at 
the hearing, it must notify the Committee within 60 days of the date of 
mailing of the notice;
    (ii) Provide an information copy of the notice and referral document 
to the State approving agency of jurisdiction; and
    (iii) Place a copy of the notice and referral document on display at 
the VA facility of jurisdiction for review by any interested party or 
parties.
    (2) The Director will provide a copy of the notice and referral 
document to the VA Regional Counsel, or designee, of jurisdiction, who 
will represent VA before the Committee on Educational Allowances.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

[63 FR 35834, July 1, 1998]



Sec. 21.4213  Notice of hearing by Committee on Educational Allowances.

    (a) Content of hearing notice. In any case referred to the Committee 
on Educational Allowances for consideration, a hearing will be held. If, 
as provided in Sec. 21.4212(b), the educational institution has timely 
notified the Committee of its intent to participate in the hearing, the 
educational institution will be notified by certified letter from the 
Chairperson of the date when the hearing will be held. This hearing 
notification will inform the educational institution of--
    (1) The time and place of the hearing;
    (2) The matters to be considered;
    (3) The right of the educational institution to appear at the 
hearing with representation by counsel, to present witnesses, to offer 
testimony, to present arguments, and/or to submit a written statement or 
brief; and
    (4) The complete hearing rules and procedures.
    (b) Expenses connected with hearing. The notice also will inform the 
educational institution that VA will not pay any expenses incurred by 
the educational institution resulting from its participation in the 
hearing, including the expenses of counsel or witnesses on behalf of the 
educational institution.
    (c) Publication of hearing notice. Notice of the hearing will be 
published in the Federal Register, which will constitute notice to any 
interested individuals, and will indicate that, while such individuals 
may attend and observe the hearing, they may not participate unless 
called as witnesses by VA or the educational institution.

(Authority: 10 U.S.C. 16136; 38 U.S.C. 3034(a), 3241(a), 3690)

[63 FR 35834, July 1, 1998]



Sec. 21.4214  Hearing rules and procedures for Committee on Educational 
Allowances.

    (a) Rule 1. The Chairperson of the Committee on Educational 
Allowances will be in charge of the proceedings, will administer oaths 
or affirmations to witnesses, and will be responsible for the official 
conduct of the hearing. A majority of the members of the Committee will 
constitute a quorum. No party to the proceedings may conduct a voir dire 
of the Committee members.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (b) Rule 2. At the opening of the hearing, the Chairperson of the 
Committee on Educational Allowances will inform the educational 
institution of the purpose of the hearing, the nature of the evidence of 
record relating to the asserted failures or violations, and the 
applicable provisions of law and VA regulations. The Chairperson will 
advise the VA Regional Counsel, or designee, representing VA, that the 
Committee on Educational Allowances will entertain any relevant evidence 
or witnesses which VA Counsel presents to

[[Page 282]]

the Committee and which would substantiate a decision by the Committee 
to recommend that the Director of the VA facility of jurisdiction take 
an adverse action on the issues submitted for its review. The 
educational institution will be advised of its right to present any 
evidence, relevant to the issues submitted for the Committee's review, 
by oral or documentary evidence; to submit rebuttal evidence; to present 
and cross-examine witnesses; and to make such statements as may be 
appropriate on its behalf for a true and full disclosure of the facts. 
VA Counsel will be allowed to cross-examine any witnesses offered by the 
educational institution and to reply to any written briefs or arguments 
submitted to the Committee.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (c) Rule 3. Any testimony or evidence, either oral or written, which 
the Committee on Educational Allowances deems to be of probative value 
in deciding the question at issue will be admitted in evidence. While 
irrelevant, immaterial, or unduly repetitious evidence, testimony, or 
arguments should be excluded, reasonable latitude will be permitted with 
respect to the relevancy, materiality, and competency of evidence. In 
most instances the evidence will consist of official records of the 
educational institution and VA, and these documents may be attested to 
and introduced by affidavit; but the introduction of oral testimony by 
the educational institution or by VA will be allowed, as appropriate, in 
any instance where the educational institution or VA Counsel desires. 
VA, however, will neither subpoena any witness on behalf of the 
educational institution for such purposes nor bear any expenses in 
connection with the appearance of such witness. In instances where the 
evidence reasonably available consists of signed written statements, 
secondary or hearsay evidence, etc., such evidence may be introduced 
into the record and will be given the weight and consideration which the 
circumstances warrant.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (d) Rule 4. A verbatim stenographic or recorded transcript of the 
hearing will be made. This transcript will become a permanent part of 
the record, and a copy will be furnished to the educational institution 
and the VA Counsel at the conclusion of the proceeding, unless 
furnishing of the copy of the transcript is waived by the educational 
institution.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (e) Rule 5. The Chairperson of the Committee on Educational 
Allowances will identify all exhibits in the order of introduction or 
receipt (numerically for VA exhibits and alphabetically for exhibits 
introduced by the educational institution). All such original exhibits 
or documents shall be attached to the original of the transcript. VA 
shall make photocopies or certified copies and attach them to the copy 
of the transcript furnished to the educational institution and the VA 
Counsel. The original transcript will accompany the Committee's 
recommendation to the Director of the VA facility of jurisdiction along 
with all exhibits, briefs, or written statements received by the 
Committee during the course of the proceedings. Such documents should be 
clearly marked to indicate which were received into evidence and relied 
upon by the Committee in making its recommendations.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (f) Rule 6. The Committee on Educational Allowances, at its 
discretion, may reasonably limit the number of persons appearing at the 
hearing, including any affected individuals presented as witnesses by VA 
or the educational institution.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (g) Rule 7. Any person who is presented to testify will be required 
to be duly placed under oath or affirmation by the Chairperson of the 
Committee on Educational Allowances. If an official of the educational 
institution desires to present a statement personally, the individual 
will be required to be placed under oath or affirmation.

[[Page 283]]

The Chairperson will advise each witness that the Committee understands 
that he or she is voluntarily appearing before the Committee; that any 
testimony or statement given will be considered as being completely 
voluntary; and that no one has authority to require the individual to 
make any statement or answer any question against his or her will before 
the Committee, except that a person called as a witness on behalf of 
either VA or the educational institution must be willing to submit to 
cross-examination with respect to testimony given. Each witness will 
also be advised that his or her testimony or statement, if false, even 
though voluntary, may subject him or her to prosecution under Federal 
statutes.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (h) Rule 8. Any member of the Committee on Educational Allowances 
may question any witness presented to testify at the hearing or either a 
representative of the educational institution or the VA Counsel 
concerning matters that are relevant to the question at issue. 
Generally, questioning by a Committee member will be limited to the 
extent of clarifying information on the facts and issues involved.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (i) Rule 9. If the educational institution fails to timely notify 
the Committee of its intent to participate in a hearing or if a 
representative of the educational institution is scheduled to appear for 
a hearing but, without good cause, fails to appear either in person or 
by writing, the Committee will proceed with the hearing and will review 
the case on the basis of the evidence of record which shall be presented 
by the VA Counsel.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (j) Rule 10. Any objection by an authorized representative of the 
educational institution or the VA Counsel on a ruling by the Chairperson 
of the Committee on Educational Allowances regarding the admissibility 
of testimony or other evidence submitted will be made a matter of 
record, together with the substance in brief of the testimony intended 
or other evidence concerned. If the other evidence concerned is in the 
form of an affidavit or other document, it may be accepted for filing as 
a future reference if it is later ruled admissible as part of the record 
of the hearing.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (k) Rule 11. Objections relating to the jurisdiction or membership 
of the Committee on Educational Allowances or the constitutionality of 
statutes or the constitutionality of, or statutory authority for, VA 
regulations, are not before the Committee for decision. The time of the 
Committee will not be used to hear arguments in this regard. However, 
any such matters outside the province of the Committee may be the 
subject of a brief or a letter for consideration by the VA Office of 
General Counsel upon completion of the hearing. The ruling of such 
authority upon such issues will be obtained and included in the record 
before the Committee's recommendations are submitted to the Director of 
the VA facility of jurisdiction. If the VA General Counsel's ruling on 
such legal issues necessitates reopening the proceeding, that shall be 
done before the Committee makes its recommendations to the Director of 
the VA facility of jurisdiction.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (l) Rule 12. The hearing will be open to the public.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (m) Rule 13. The hearing will be conducted in an orderly manner with 
dignity and decorum. The conduct of members of the Committee on 
Educational Allowances, the VA Counsel, and any representatives of the 
educational institution shall be characterized by appropriate 
impartiality, fairness, and cooperation. The Chairperson of the 
Committee shall take such action as may be necessary, including 
suspension of the hearing or the removal of the offending person from 
the

[[Page 284]]

hearing room for misbehavior, disorderly conduct, or the persistent 
disregard of the Chairperson's ruling. Where this occurs, the 
Chairperson will point out that the Committee is entitled to every 
possible consideration in order that the case may be presented clearly 
and fully, which may be accomplished only through observance of orderly 
procedures.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (n) Rule 14. The Chairperson of the Committee on Educational 
Allowances will conduct the hearing proceedings in such a manner that 
will protect from disclosure information which tends to disclose or 
compromise investigative sources or methods or which would violate the 
privacy of any individual. The salient facts, which form the basis of 
charges, may be disclosed and discussed without revealing the source.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (o) Rule 15. At the close of the hearing, the Chairperson of the 
Committee on Educational Allowances shall inform the appropriate 
representative of the educational institution that the arguments and the 
evidence presented will be given careful consideration; and that notice 
of the decision of the Director of the VA facility of jurisdiction, 
together with the Committee's recommendations, will be furnished to the 
educational institution and the VA Counsel at the earliest possible 
time. The Chairperson will also indicate that notice of the Director's 
decision will be published in the Federal Register for the information 
of all other interested persons.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (p) Rule 16. In making its findings of facts and recommendations, 
the Committee on Educational Allowances will consider only questions 
which are referred to it by the Director of the VA facility of 
jurisdiction as being at issue and which are within the jurisdiction of 
the Committee.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

[63 FR 35834, July 1, 1998]



Sec. 21.4215  Decision of Director of VA facility of jurisdiction.

    (a) Decision. The Director of the VA facility of jurisdiction will 
render a written decision on the issue of discontinuance of payments of 
benefits and/or denial of further enrollments or reenrollments in the 
course or courses at the educational institution which was the subject 
of the Committee on Educational Allowances proceedings.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (b) Basis of decision. (1) The decision of the Director of the VA 
facility of jurisdiction will be based upon all admissible evidence of 
record, including--
    (i) The recommendations of the Committee on Educational Allowances;
    (ii) The hearing transcript and the documents admitted in evidence; 
and
    (iii) The ruling on legal issues referred to appropriate authority.
    (2) The decision will clearly describe the evidence and state the 
facts on which the decision is based and, in the event that the decision 
differs from the recommendations of the Committee on Educational 
Allowances, will give the reasons and facts relied upon by the Director 
in deciding not to follow the Committee majority's recommendations.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (c) Correction of deficiencies. If the Director of the VA facility 
of jurisdiction believes that the record provided for review is 
incomplete or for any reason should be reopened, before rendering a 
decision he or she will order VA staff to gather any additional 
necessary evidence and will notify the educational institution that it 
may comment upon the new evidence added. The Director will then notify 
the educational institution as to whether the matter will be

[[Page 285]]

resubmitted to the Committee on Educational Allowances for further 
proceedings, on the basis of the new circumstances. If the matter is 
referred back to the Committee, the Director will defer a decision until 
he or she has received the Committee's new recommendations based upon 
all of the evidence of record.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (d) Effective date. If the decision of the Director of the VA 
facility of jurisdiction is adverse to the educational institution, the 
decision shall indicate specifically the effective date of each adverse 
action covered by the decision.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (e) Notification of decision. (1) The Director of the VA facility of 
jurisdiction shall send a copy of the decision to the educational 
institution by certified mail, return receipt requested. A copy of the 
decision also will be provided by regular mail to the institution's 
legal representative of record, if any. If the decision is adverse to 
the educational institution, the Director will enclose a notice of the 
educational institution's right to have the Director, Education Service 
review the decision.
    (2) The Director of the VA facility of jurisdiction will also send a 
copy of the decision to:
    (i) The State approving agency; and
    (ii) VA Counsel.
    (3) The Director of the VA facility of jurisdiction shall post a 
copy of the decision at the VA facility of jurisdiction. A copy of the 
decision shall be published in the Federal Register.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

[63 FR 35836, July 1, 1998]



Sec. 21.4216  Review of decision of Director of VA facility of 
jurisdiction.

    (a) Decision is subject to review by Director, Education Service. A 
review by the Director, Education Service of a decision of a Director of 
a VA facility of jurisdiction to terminate payments or disapprove new 
enrollments or reenrollments, when requested by the educational 
institution, will be based on the evidence of record when the Director 
of the VA facility of jurisdiction made that decision. It will not be de 
novo in nature and no hearing on review will be held.
    (b) Authority of Director, Education Service. The Director, 
Education Service has the authority to affirm, reverse, or remand the 
original decision. In the case of such a review, the reviewing 
official's decision, other than a remand, shall become the final 
Department decision on the issue presented.
    (c) Notice of decision of Director, Education Service is required. 
Notice of the reviewing official's decision will be provided to the 
interested parties and published in the Federal Register, in the same 
manner as is provided in Sec. 21.4215(e) for decisions of the Director 
of the VA facility of jurisdiction, for the information of all 
concerned.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

[63 FR 35836, July 1, 1998]

                          Programs of Education



Sec. 21.4232  Specialized vocational training--38 U.S.C. Chapter 35.

    (a) Eligibility requirements for specialized vocational training. 
(1) The Department of Veterans Affairs may provide a program of a 
specialized course of vocational training to an eligible person who:
    (i) Is not in need of special restorative training, and
    (ii) Requires specialized vocational training because of a mental or 
physical handicap.
    (2) The counseling psychologist will:
    (i) After consulting with the Vocational Rehabilation Panel, 
determine whether such a course is in the best interest of the eligible 
person; and
    (ii) Deny the application for the program when the course is not in 
the eligible person's best interest.
    (3) Both the counseling psychologist and the Vocational 
Rehabilitation Panel will assist in developing the program, if the 
counseling psychologist has previously determined that the course is in 
the eligible person's best interest.


(Authority: 38 U.S.C. 3521, 3536; Pub. L. 99-576)


[[Page 286]]


    (4) The Department of Veterans Affairs may authorize specialized 
vocational training for an eligible child only if the child has passed 
his or her 14th birthday at the time training is to begin.


(Authority: 38 U.S.C. 3536)

    (b) Program objective. The objective of a program of specialized 
vocational training will be designated as a vocational objective.
    (c) Special assistance. When needed, special assistance will be 
provided under Sec. 21.4276.
    (d) Length of specialized vocational training. When the program of 
specialized vocational training will exceed 45 months, the counseling 
psychologist will refer the program to the Director, Vocational 
Rehabilitation and Employment Service for prior approval.


(Authority: 38 U.S.C. 3543(b))

[48 FR 37989, Aug. 22, 1983, as amended at 49 FR 42726, Oct. 24, 1984; 
54 FR 33889, Aug. 17, 1989]



Sec. 21.4233  Combination.

    An approved program may consist of a combination of courses with 
instruction offered by a school alternating with instruction in a 
business or industrial establishment (a cooperative course); courses 
offered by two schools concurrently; or courses offered through class 
attendance and by television concurrently. A farm cooperative program 
may be approved which consists of a combination of institutional 
agricultural courses and concurrent agricultural employment (see Sec. 
21.4264). A school may contract the actual training to another school or 
entity, provided the course is approved by the State approving agency 
having approval jurisdiction of the school or entity which actually 
provides the training.
    (a) Cooperative courses. A full-time program of education consisting 
of phases of school instruction alternated with training in a business 
or industrial establishment with such training being strictly 
supplemental to the school instruction may be approved. Alternating 
periods may be a part-day in school and a part-day on job or may be such 
periods which alternate on a daily, weekly, monthly or on a term basis. 
For purposes of approval the school offering the course must submit to 
the State approving agency, with its application, statements of fact 
showing at least the following:
    (1) That the alternate in-school periods of the course are at least 
as long as the alternate periods in the business or industrial 
establishment; in determining this relationship between the two 
components of the course, training received in a business or industrial 
establishment during a vacation or officially scheduled school break 
period shall be excluded from the calculation; where the course is 
approved as continuous part-time work and part-time study in 
combination, it shall be measured on the basis of the ratio which each 
portion of the training bears to full time as defined in Sec. 
21.4270(c) of this part. The institutional portion must be at least 
equivalent to one-half time training and must be combined with a job 
training portion sufficient for the combined training to equal full 
time.


(Authority: 38 U.S.C. 3482(a)(2) and 3532(b))

    (2) That the course is set up as a cooperative course in the school 
catalog or other literature of the school;
    (3) That the school itself arranges with the employer's 
establishment for providing the alternate on-job periods of training on 
such basis that the on-job portion of the course will be training in a 
real and substantial sense and will supplement the in-school portion of 
the course;
    (4) That the school arranges directly with the employer's 
establishment for placing the individual student in that establishment 
and exercises supervision and control over the student's activities at 
the establishment to an extent that assures training in a true sense to 
the student; and
    (5) That the school grants credit for the on-job portion of the 
course for completion of a part of the work required for granting a 
degree or diploma.


(Authority: 38 U.S.C. 3482(a)(2) and 3532(b))

    (b) Concurrent enrollment. Where a veteran or eligible person cannot 
successfully schedule his or her complete program at one school, a 
program of

[[Page 287]]

concurrent enrollment may be approved. When requesting such a program 
the veteran or eligible person must show that his or her complete 
program of education or training is not available at the school in which 
he or she will pursue the major portion of his or her program (the 
primary school), or that it cannot be scheduled successfully within the 
period in which he or she plans to complete his or her program.
    (1) If VA measures the courses pursued at both institutions on 
either a clock-hour basis or a credit-hour basis, VA will measure the 
veteran's or eligible person's enrollment by adding together the units 
of measurement in the second school to the units of measurement for the 
courses in the primary institution. The standard for full time will be 
the full-time standard for the courses at the primary institution.
    (2) Where the standards for measurement of the courses pursued 
concurrently in the two schools are different, VA will measure the 
veteran's or eligible person's enrollment by converting the units of 
measurement for courses in the second school to the equivalent in value 
expressed in units of measurement required for the courses in the 
program of education which the veteran or eligible person is pursuing at 
the primary institution.


(Authority: 38 U.S.C. 3688)

    (3) If the provisions of paragraph (b)(2) of this section require VA 
to convert clock hours to credit hours, it will do so by--
    (i) Dividing the number of credit hours which VA considers to be 
full-time at the educational institution whose courses are measured on a 
credit-hour basis by the number of clock hours which are full-time at 
the educational institution whose courses are measured on a clock-hour 
basis; and
    (ii) Multiplying each clock hour of attendance by the decimal 
determined in paragraph (b)(3)(i) of this section. VA will drop all 
fractional hours.
    (4) If the provisions of paragraph (b)(2) of this section require VA 
to convert credit hours to clock hours, it will do so by--
    (i) Dividing the number of clock hours which VA considers to be 
full-time at the educational institution whose courses are measured on a 
clock-hour basis by the number of credit hours which are full-time at 
the educational institution whose courses are measured on a credit-hour 
basis; and
    (ii) Multiplying each credit hour by the number determined in 
paragraph (b)(4)(i) of this section. VA will drop all fractional hours.
    (5) Periodic certifications of training will be required from the 
veteran and each of the schools where concurrent enrollment is approved 
in a course which does not lead to a standard college degree and to 
which the measurement provisions of Sec. 21.4270(b), of this part do 
not apply. (See Sec. Sec. 21.4203 and 21.4204.)


(Authority: 38 U.S.C. 3688)

    (c) Television. (1) A course offered by open-circuit television is 
an independent study course. In order for an eligible person to receive 
educational assistance while pursuing such a course, the course must 
meet all the requirements for independent study found in Sec. 21.4267.


(Authority: 38 U.S.C. 3523, 3680A)

    (2) Closed circuit telecast. Instruction offered through closed 
circuit telecast which requires regular classroom attendance is to be 
recognized to the same extent as regular classroom and/or laboratory 
instruction.
    (d) Farm cooperative course. A program of education consisting of 
institutional agricultural courses pursued by an eligible person who is 
concurrently engaged in agricultural employment which is relevant to 
such institutional course may be approved if the course meets the 
requirements of Sec. 21.4264.
    (e) Contract. All or part of the program of education of a school 
may be provided by another school or entity under contract. Such school 
or entity actually providing the training must obtain approval of the 
course from the State approving agency in the State having jurisdiction 
of that school or entity. If the course is a course of flight training, 
the school or entity actually providing the training must also obtain 
approval of the course from the Federal Aviation Administration.

[[Page 288]]

Measurement of the course and payment of an allowance will be 
appropriate for the course as offered by the school or entity actually 
providing the training.


(Authority: 10 U.S.C. 16136(c); 38 U.S.C. 3002(8), 3034(d), 3202(4), 
3241(b), 3452(c), 3501(a)(6), 3675, 3676)

[31 FR 6774, May 6, 1966]

    Editorial Note: For Federal Register citations affecting Sec. 
21.4233, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 21.4234  Change of program.

    (a) Definition. (1) Except as provided in paragraph (a)(2) of this 
section, a change of program consists of a change in the educational 
professional or vocational objective for which the veteran or eligible 
person entered training.
    (2) VA does not consider any of the following to be changes of 
program.
    (i) A change in the type of courses needed to attain a vocational 
objective.
    (ii) A change in the individual's educational, professional or 
vocational objective following the successful completion of the 
immediately preceding program of education,
    (iii) A return to the individual's prior program of education 
following a change of program if the individual resumes training in the 
program without any loss of credit or standing in that program, or
    (iv) An enrollment in a new program of education when that program 
leads to a vocational, educational or professional objective in the same 
general field as the immediately preceding program of education.


(Authority: 38 U.S.C. 3691)

    (b) Application. A veteran or eligible person may request a change 
of program by any form of communication. However, if the veteran or 
eligible person does not furnish sufficient information to allow the 
Department of Veterans Affairs to process the request, the Department of 
Veterans Affairs will furnish the prescribed form for a change of 
program to him or her for completion.


(Authority: 38 U.S.C. 3471)

    (c) Optional change of program. A veteran eligible to receive 
educational assistance under Chapter 34 or a spouse or surviving spouse 
eligible to receive educational assistance under Chapter 35 may make one 
optional change of program if his or her previous course was not 
interrupted due to his or her own misconduct, neglect or lack of 
application.


(Authority: 38 U.S.C. 3691(b))

    (d) Other changes of program. (1) The following changes of program 
may not be made solely at the option of the veteran or eligible person. 
The Department of Veterans Affairs must approve them before paying 
educational assistance allowance:
    (i) A second or subsequent change of program made by a veteran or 
eligible spouse or surviving spouse,
    (ii) An initial change of program made by a veteran or eligible 
spouse or surviving spouse if the first program was interrupted or 
discontinued due to his or her own misconduct, neglect or lack of 
application, or
    (iii) Any change of program made by a child.
    (2) The Department of Veterans Affairs will approve a change of 
program listed in paragraph (d)(1) of this section if:
    (i) The program of education which the veteran or eligible person 
proposes to pursue is suitable to his or her aptitudes, interests and 
abilities,
    (ii) In any instance where the veteran or eligible person has 
interrupted, or failed to progress in his or her program due to his or 
her own misconduct, neglect or lack of application, there is a 
reasonable likelihood with respect to the program the veteran or 
eligible person proposes to pursue that there will not be a recurrence 
of such an interruption or failure to progress, and
    (iii) In the case of an eligible child the new program meets the 
criteria applicable to final approval of an original application. See 
Sec. 21.4230.
    (3) The Department of Veterans Affairs may approve a third or 
subsequent change of program if applicable

[[Page 289]]

conditions of paragraph (d)(2) of this section are met and the 
additional change or changes are necessitated by circumstances beyond 
the control of the veteran or eligible person. Circumstances beyond the 
control of the veteran or eligible person include, but are not limited 
to:
    (i) The course being discontinued by the school when no other 
similar course leading to the same objective is available within normal 
commuting distance.
    (ii) Unexpected financial difficulties preventing completion of the 
last program because of the overall cost of the program needed to reach 
the objective, or
    (iii) The veteran or eligible person being required to relocate 
because of health reasons in an area where training for the last 
objective is not available within normal commuting distance.


(Authority: 38 U.S.C. 3691)

    (4) Notwithstanding any provision of any other paragraph of this 
section, if a third or subsequent change of program occurs after May 31, 
1991, VA will apply only the applicable provisions of paragraph (d)(2) 
of this section. If the applicable provisions of paragraph (d)(2) of 
this section are met, VA will approve the change of program. VA will not 
apply any of the provisions of paragraph (d)(3) of this section in 
determining whether the change of program should be approved.


(Authority: 38 U.S.C. 3691; Pub. L. 101-366) (June 1, 1991)

    (e) Adjustments; transfers. A change in courses or places of 
training will not be considered a change of objective in the following 
instances:
    (1) The pursuit of the first program is a prerequisite for entrance 
into and pursuit of a second program.
    (2) A transfer from one school to another when the program at the 
second school leads to the same educational, professional or vocational 
objective, and does not involve a material loss of credit, or increase 
training time.
    (3) Revision of a program which does not involve a change of 
objective or material loss of credit nor loss of time originally planned 
for completion of the veteran's or eligible person's program. For 
example, an eligible person enrolled for a bachelor of science degree 
may show a professional objective such as chemist, teacher or engineer. 
His or her objective for purposes of this paragraph shall be considered 
to be ``bachelor degree'' and any change of courses will be considered 
only an adjustment in the program, not a change, so long as the subjects 
he or she pursues lead to the bachelor degree and there is no extension 
of time in the attaining of that degree.

    Cross Reference: Counseling. See Sec. 21.4100.

[31 FR 6774, May 6, 1966, as amended at 34 FR 845, Jan. 18, 1969; 39 FR 
34036, Sept. 23, 1974; 39 FR 45237, Dec. 31, 1974; 45 FR 67093, Oct. 9, 
1980; 57 FR 29027, June 30, 1992; 57 FR 40614, Sept. 4, 1992; 60 FR 
32272, June 21, 1995; 61 FR 6783, Feb. 22, 1996]



Sec. 21.4235  Programs of education that include flight training.

    VA will use the provisions of this section to determine whether an 
individual may be paid educational assistance for pursuit of flight 
training. See Sec. 21.4263 for approval of flight courses for VA 
training.
    (a) Eligibility. A veteran or servicemember who is otherwise 
eligible to receive educational assistance under 38 U.S.C. chapter 30 or 
32, or a reservist who is eligible for expanded benefits under 10 U.S.C. 
chapter 1606 as provided in Sec. 21.7540(b), may receive educational 
assistance for flight training in an approved course provided that the 
individual meets the requirements of this paragraph. Except when 
enrolled in a ground instructor certification course or when pursuing 
flight training under paragraph (f) of this section, the individual 
must--
    (1) Possess a valid private pilot certificate or higher pilot 
certificate such as a commercial pilot certificate;
    (2) If enrolled in a course other than an Airline Transport Pilot 
(ATP) course, hold a second-class medical certificate on the first day 
of training and, if that course began before October 1, 1998, hold that 
certificate continuously during training; and
    (3) If enrolled in an ATP certification course, hold a first-class 
medical certificate on the first day of training

[[Page 290]]

and, if that course began before October 1, 1998, hold that certificate 
continuously during training.


(Authority: 10 U.S.C. 16136(c); 38 U.S.C. 3034(d), 3241(b))

    (b) Approval of program. VA may approve the individual's program of 
education as described on the individual's application if:
    (1) The flight courses that constitute the program of education meet 
Federal Aviation Administration standards for such courses and the 
Federal Aviation Administration and the State approving agency approve 
them; and
    (2) The flight training included in the program--
    (i) Is generally accepted as necessary for the attainment of a 
recognized vocational objective in the field of aviation; or
    (ii) Is given by an educational institution of higher learning for 
credit toward a standard college degree that the individual is pursuing.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3002(3)(A), 3034(a), 
3202(2)(A), 3241(a), 3241(b), 3452(b), 3680A(a)(3))

    (c) Pursuit of flight courses. (1) VA will pay educational 
assistance to an eligible individual for an enrollment in a commercial 
pilot certification course leading to Federal Aviation Administration 
certification for a particular category even if the individual has a 
commercial pilot certificate issued by the Federal Aviation 
Administration for a different category, since each category represents 
a different vocational objective.
    (2) VA will pay educational assistance to an eligible individual for 
an enrollment in an instrument rating course only if the individual 
simultaneously enrolls in a course required for a commercial pilot 
certificate for the category for which the instrument rating course is 
pursued or if, at the time of enrollment in the instrument rating 
course, the individual has a commercial pilot certificate issued by the 
Federal Aviation Administration for such category. The enrollment in an 
instrument rating course alone does not establish that the individual is 
pursuing a vocational objective, as required for VA purposes, since that 
rating equally may be applied to an individual's private pilot 
certificate, only evidencing an intent to pursue a non-vocational 
objective.
    (3) VA will pay educational assistance to an eligible individual for 
an enrollment in a flight course other than an instrument rating course 
or a ground instructor course, including courses leading to an aircraft 
type rating, only if the individual has a commercial pilot certificate 
issued by the Federal Aviation Administration for the category to which 
the particular course applies.
    (4) VA will pay educational assistance to an eligible individual for 
an enrollment in a ground instructor certificate course, even though the 
individual does not have any other flight certificate issued by the 
Federal Aviation Administration, since the Federal Aviation 
Administration does not require a flight certificate as a prerequisite 
to ground instructor certification and ground instructor is a recognized 
vocational objective.
    (5) VA will not pay an eligible individual for simultaneous 
enrollment in more than one flight course, except as provided in 
paragraph (c)(2) of this section.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3002(3)(A), 3034(a), 
3202(2)(A), 3241(a), 3241(b), 3452(b), 3680A(a)(3))

    (d) Some individuals are already qualified for a flight course 
objective. (1) The provisions of Sec. Sec. 21.5230(a)(4), 
21.7110(b)(4), and 21.7610(b)(4), prohibiting payment of educational 
assistance for enrollment in a course for whose objective the individual 
is already qualified, apply to enrollments in flight courses.
    (2) A former military pilot with the equivalent of a commercial 
pilot certificate and an instrument rating may obtain a commercial pilot 
certificate and instrument rating from the Federal Aviation 
Administration without a flight exam within 12 months of release from 
active duty. Therefore, VA will consider such a veteran to be already 
qualified for the objectives of a commercial pilot certification course 
and an instrument rating course if

[[Page 291]]

begun within 12 months of the individual's release from active duty.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3241(b), 
3471(4))

    (e) Some flight courses are refresher training. The provisions of 
Sec. Sec. 21.5230(c), 21.7020(b)(26), 21.7122(b), 21.7520(b)(20), and 
21.7610(b)(4) that provide limitations on payment for refresher training 
that is needed to update an individual's knowledge and skill in order to 
cope with technological advances while he or she was on active duty 
service apply to flight training.
    (1) An individual who held a Federal Aviation Administration 
certificate before or during active duty service may have surrendered 
that certificate or the Federal Aviation Administration may have 
canceled it. The individual may receive the equivalent of the number of 
months of educational assistance necessary to complete the course that 
will qualify him or her for the same grade certificate.
    (2) A reservist is not eligible for refresher training unless he or 
she has had prior active duty.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3002(3)(A), 3034(a)(3), 
3202(2)(A), 3241(a), 3241(b))

    (f) Flight training at an institution of higher learning. (1) An 
individual who is eligible for educational assistance under 10 U.S.C. 
chapter 1606 or 38 U.S.C. chapter 30, 32, or 35 is exempt from the 
provisions of paragraphs (a)(2) through (d) of this section when his or 
her courses include flight training that is part of a program of 
education that leads to a standard college degree.
    (2) An individual described in paragraph (f)(1) of this section may 
pursue courses that may result in the individual eventually receiving 
recreational pilot certification or private pilot certification, 
provided that the courses also lead to a standard college degree.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3002(3)(A), 3034(a)(3), 
3202(2)(A), 3241(a), 3241(b))

[63 FR 34129, June 23, 1998, as amended at 65 FR 12118, Mar. 8, 2000]



Sec. 21.4236  Tutorial assistance.

    (a) Enrollment. A veteran or eligible person may receive 
supplemental monetary assistance to provide tutorial services if he or 
she:
    (1) Is pursuing a post-secondary educational program on a half-time 
or more basis at an educational institution, and
    (2) Has a deficiency in a subject which is indispensable to the 
satisfactory pursuit of an approved program of education.
    (b) Approval. The Department of Veterans Affairs will grant approval 
when:
    (1) The educational institution certifies that:
    (i) Individualized tutorial assistance is essential to correct a 
deficiency in a specified subject or subjects required as a part of, or 
which is prerequisite to, or which is indispensable to the satisfactory 
pursuit of an approved program of education;
    (ii) The tutor selected:
    (A) Is qualified, and
    (B) Is not the parent, spouse, child, brother or sister of the 
veteran or eligible person; and
    (iii) The charges for this assistance do not exceed the customary 
charges for such tutorial assistance; and
    (2) The assistance is furnished on an individual basis.


(Authority: 10 U.S.C. 16131(h); 38 U.S.C. 3019, 3234, 3492, 3533(b))

    (c) Limits on tutorial assistance. (1) VA will authorize the cost of 
tutorial assistance in an amount not to exceed $100 per month.
    (2) The total amount of all tutorial assistance provided under this 
section will not exceed $1200.


(Authority: 38 U.S.C. 3019, 3492, 3533(b))

    (d) Entitlement charge. VA will make no charge against the veteran's 
or eligible person's entitlement to educational assistance for any 
amount of tutorial assistance authorized.


(Authority: 38 U.S.C. 3019, 3492, 3533(b))

[48 FR 37989, Aug. 22, 1983, as amended at 50 FR 19935, May 13, 1985; 55 
FR 28027, July 9, 1990; 61 FR 26114, May 24, 1996]

[[Page 292]]

                                 Courses



Sec. 21.4250  Approval of courses.

    (a) General. A course of education, including the class schedules of 
a resident course (other than a flight course) not leading to a standard 
college degree, offered by a school must be approved by the State 
approving agency for the State in which the school is located, or by the 
State approving agency which has appropriate approval authority, or, 
where appropriate, by the Department of Veterans Affairs.


(Authority: 38 U.S.C. 3672)

    (1) A course approved under 38 U.S.C. chapter 36 shall be deemed 
approved for purposes of 38 U.S.C. chapter 35.
    (2) Any course which was approved under 38 U.S.C. chapter 33 (as in 
effect before February 1, 1965), or under 38 U.S.C. chapter 35 prior to 
March 3, 1966, and was not or is not disapproved for failure to meet any 
of the requirements of the applicable chapters will be deemed to be 
approved for purposes of 38 U.S.C. chapter 36.


(Authority: 38 U.S.C. 3670)

    (b) State approving agencies. Approval by State approving agencies 
will be in accordance with the provisions of 38 U.S.C. Chapter 36 and 
such regulations and policies as the agency may adopt not in conflict 
therewith.
    (1) Notice of approval. Each State approving agency will furnish to 
the Department of Veterans Affairs a current list of schools specifying 
courses which it has approved, and will furnish such other information 
as it and the Department of Veterans Affairs may determine to be 
necessary. See Sec. 21.4258.
    (2) Notice of suspension of approval or disapproval. Each State 
approving agency will notify the Department of Veterans Affairs of the 
suspension of approval or disapproval of any course previously approved 
and will set forth the reasons for such suspension of approval or 
disapproval. See Sec. 21.4259.


(Authority: 38 U.S.C. 3672(a))

    (3) Failure to act. If notice has been furnished that the State 
approving agency does not intend to act on the application of a school, 
the school may request approval by the Department of Veterans Affairs.
    (c) Department of Veterans Affairs approval. (1) The Director, 
Vocational Rehabilitation and Employment Service may approve special 
restorative training in excess of 12 months to overcome or lessen the 
effects of a physical or mental disability to enable an eligible child 
to pursue a program of education under 38 U.S.C. chapter 35.
    (2) The Director, Education Service may approve--
    (i) A course of education offered by any agency of the Federal 
Government authorized under other laws to offer such a course;
    (ii) A course of education to be pursued under 10 U.S.C. Chapter 
1606 or 38 U.S.C. Chapters 30, 32, 35, or 36 offered by a school located 
in the Canal Zone, Guam or Samoa;


(Authority: 10 U.S.C. 16136, 38 U.S.C. 3034, 3241, 3672)

    (iii) Except as provided in Sec. 21.4150(d) as to the Republic of 
the Philippines, a course of education to be pursued under 10 U.S.C. 
chapter 1606 or 38 U.S.C. chapter 30, 32, or 35 offered by an 
institution of higher learning not located in a State;
    (iv) Any course in any other school in accordance with the 
provisions of 38 U.S.C. chapter 36; and
    (v) Any program of apprenticeship the standards for which have been 
approved by the Secretary of Labor pursuant to section 50a of Title 29 
U.S.C. as a national apprenticeship program for operation in more than 
one State and for which the training establishment is a carrier directly 
engaged in interstate commerce and providing training in more than one 
State.


(Authority: 38 U.S.C. 3241, 3476, 3523, 3672(b), 3672(c))

    Cross Reference: State approving agencies. See Sec. 21.4150(e).

[31 FR 6774, May 6, 1966, as amended at 35 FR 9816, June 16, 1970; 41 FR 
30640, July 26, 1976; 44 FR 54707, Sept. 21, 1979; 48 FR 37990, Aug. 22, 
1983; 51 FR 16317, May 2, 1986; 61 FR 20728, May 8, 1996; 62 FR 55760, 
Oct. 28, 1997]

[[Page 293]]



Sec. 21.4251  Minimum period of operation requirement for educational 
institutions.

    (a) Definitions. The following definitions apply to the terms used 
in this section. The definitions in Sec. 21.4200 apply to the extent 
that no definition is included in this paragraph.
    (1) Control. The term control (including the term controlling) means 
the possession, direct or indirect, of the power to direct or cause the 
direction of the management and policies of a person, whether through 
the ownership of voting securities, by contract, or otherwise.
    (2) Person. The term person means an individual, corporation, 
partnership, or other legal entity.


(Authority: 38 U.S.C. 3680A(e))

    (b) Some educational institutions must be in operation for 2 years. 
Except as provided in paragraph (c) of this section, when a proprietary 
educational institution offers a course not leading to a standard 
college degree, VA may not approve an enrollment in that course if the 
proprietary educational institution--
    (1) Has been operating for less than 2 years;
    (2) Offers the course at a branch or extension and the branch or 
extension has been operating for less than 2 years; or
    (3) Offers the course following either a change in ownership or a 
complete move outside its original general locality, and the educational 
institution does not retain substantially the same faculty, student 
body, and courses as before the change in ownership or the move outside 
the general locality unless the educational institution, after such 
change or move, has been in operation for at least 2 years.


(Authority: 38 U.S.C. 3680A(e) and (g))

    (c) Exception to the 2-year operation requirement. Notwithstanding 
the provisions of paragraph (b) of this section, VA may approve the 
enrollment of a veteran, servicemember, reservist, or eligible person in 
a course not leading to a standard college degree approved under this 
subpart if it is offered by a proprietary educational institution that--
    (1) Offers the course under a contract with the Department of 
Defense or the Department of Transportation; and
    (2) Gives the course on or immediately adjacent to a military base, 
Coast Guard station, National Guard facility, or facility of the 
Selected Reserve.


(Authority: 38 U.S.C. 3680A(e) and (g))

    (d) Operation for 2 years. VA will consider, for the purposes of 
paragraph (b) of this section, that a proprietary educational 
institution (or a branch or extension of such an educational 
institution) will be deemed to have been operating for 2 years when the 
educational institution (or a branch or extension of such an educational 
institution)--
    (1) Has been operating as an educational institution for 24 
continuous months pursuant to the laws of the State(s) in which it is 
approved to operate and in which it is offering the training; and
    (2) Has offered courses continuously for at least 24 months 
inclusive of normal vacation or holiday periods, or periods when the 
institution is closed temporarily due to a natural disaster that 
directly affected the institution or the institution's students.


(Authority: 38 U.S.C. 3680A(e) and (g))

    (e) Move outside the same general locality. A proprietary 
educational institution (or a branch or extension thereof) will be 
deemed to have moved to a location outside the same general locality of 
the original location when the new location is beyond normal commuting 
distance of the original location, i.e., 55 miles or more from the 
original location.


(Authority: 38 U.S.C. 3680A(e))

    (f) Change of ownership. (1) A change of ownership of a proprietary 
educational institution occurs when--
    (i) A person acquires operational management and/or control of the 
proprietary educational institution and its educational activities; or
    (ii) A person ceases to have operational management and/or control 
of

[[Page 294]]

the proprietary educational institution and its educational activities.
    (2) Transactions that may cause a change of ownership include, but 
are not limited to the following:
    (i) The sale of the educational institution;
    (ii) The transfer of the controlling interest of stock of the 
educational institution or its parent corporation;
    (iii) The merger of 2 or more educational institutions; and
    (iv) The division of one educational institution into 2 or more 
educational institutions.
    (3) VA considers that a change in ownership of an educational 
institution does not include a transfer of ownership or control of the 
institution, upon the retirement or death of the owner, to:
    (i) The owner's parent, sibling, spouse, child, spouse's parent or 
sibling, or sibling's or child's spouse; or
    (ii) An individual with an ownership interest in the institution who 
has been involved in management of the institution for at least 2 years 
preceding the transfer.


(Authority: 38 U.S.C. 3680A(e))

    (g) Substantially the same faculty, student body, and courses. VA 
will determine whether a proprietary educational institution has 
substantially the same faculty, student body, and courses following a 
change of ownership or move outside the same general locality by 
applying the provisions of this paragraph.
    (1) VA will consider that the faculty remains substantially the same 
in an educational institution when faculty members who teach a majority 
of the courses after the move or change in ownership, were so employed 
by the educational institution before the move or change in ownership.
    (2) VA will consider that the courses remain substantially the same 
at an educational institution when:
    (i) Faculty use the same instructional methods during the term, 
quarter, or semester after the move or change in ownership as were used 
before the move or change in ownership; and
    (ii) The courses offered after the move or change in ownership lead 
to the same educational objectives as did the courses offered before the 
move or change in ownership.
    (3) VA considers that the student body remains substantially the 
same at an educational institution when, except for those students who 
have graduated, all, or a majority of the students enrolled in the 
educational institution on the last day of classes before the move or 
change in ownership are also enrolled in the educational institution 
after the move or change in ownership.

(Authority: 38 U.S.C. 3680A(e) and (f)(1))

[65 FR 81741, Dec. 27, 2000]



Sec. 21.4252  Courses precluded.

    (a) Bartending and personality development. Enrollment will not be 
approved in any bartending or personality development course.
    (b) Avocational and recreational. Enrollment will not be approved in 
any course which is avocational or recreational in character or the 
advertising for which contains significant avocational or recreational 
themes. The courses identified in paragraphs (b)(1), (2), and (3) of 
this section are presumed to be avocational or recreational in character 
and require justification for their pursuit.
    (1) Any photography course or entertainment course, or
    (2) Any music course, instrumental or vocal, public speaking course, 
or course in dancing, sports or athletics, such as horseback riding, 
swimming, fishing, skiing, golf, baseball, tennis, bowling, sports 
officiating, or other sport or athletic courses, except courses of 
applied music, physical education, or public speaking which are offered 
by institutions of higher learning for credit as an integral part of a 
program leading to an educational objective, or
    (3) Any other type of course which the Department of Veterans 
Affairs determines to be avocational or recreational.


(Authority: 38 U.S.C. 3523(a), 3680A(b))

    (4) To overcome the presumption that a course is avocational or 
recreational in character, the veteran or

[[Page 295]]

eligible person will be required to establish that the course will be of 
bona fide use in the pursuit of his or her present or contemplated 
business or occupation.
    (c) Flight training. The Department of Veterans Affairs may approve 
an enrollment in any of the following types of courses of flight 
training if an institution of higher learning offers the course for 
credit toward the standard college degree the veteran or eligible person 
is pursuing. The Department of Veterans Affairs otherwise will not 
approve an enrollment in:
    (1) A course of flight training to obtain a private pilot's license 
or equivalent level training; or
    (2) Any course of flight training under Chapter 35.


(Authority: 10 U.S.C. 16131(g); 38 U.S.C. 3034(d), 3241(b), 3523(b), 
3680A(b))

    (d) Courses by radio. Enrollment in such courses will not be 
approved.
    (e) Correspondence courses. (1) VA will not approve the enrollment 
of an individual under 10 U.S.C. Chapter 1606 or 38 U.S.C. Chapter 30, 
32, or 35 in a correspondence course or the correspondence portion of a 
correspondence-residence course unless the course is accredited and 
meets the requirements of Sec. Sec. 21.4253, 21.4256, and 21.4279, as 
appropriate.
    (2) VA will not approve the enrollment of an eligible child under 38 
U.S.C. Chapter 35 in a correspondence course or the correspondence 
portion of a correspondence-residence course.


(Authority: 38 U.S.C. 3534(b))

    (f) Alternative teacher certification program. VA will not approve 
the enrollment of an eligible person under 38 U.S.C. Chapter 35 in an 
alternative teacher certification program unless that program is offered 
by an institution of higher learning as defined in Sec. 21.4200(h).


(Authority: 38 U.S.C. 3452(c), 3501(a)(6))

    (g) Independent study. (1) Effective October 29, 1992, VA may pay 
educational assistance to a veteran who is enrolled in a nonaccredited 
course or unit subject offered entirely or partly by independent study 
only if--
    (i) Successful completion of the nonaccredited course or unit 
subject is required in order for the veteran to complete his or her 
program of education; and the veteran--
    (A) Was receiving educational assistance on October 29, 1992, for 
pursuit of the program of education of which the nonaccredited 
independent study course or unit subject forms a part, and
    (B) Has remained continuously enrolled in that program of education 
from October 29, 1992, to the date the veteran enrolls in the 
nonaccredited independent study course or unit subject; or
    (ii) Was enrolled in and receiving educational assistance for the 
nonaccredited independent study course or unit subject on October 29, 
1992, and remains continuously enrolled in that course or unit subject.
    (2) Whether or not the veteran is enrolled will be determined by the 
regularly prescribed standards and practices of the educational 
institution.


(Authority: 38 U.S.C. 3680A; sec. 313(b), Pub. L. 102-568, 106 Stat. 
4331-4332)

    (h) Erroneous, deceptive, misleading practices. (1) The Department 
of Veterans Affairs will not approve an enrollment in any course offered 
by an institution which uses advertising, sales, or enrollment practices 
which are erroneous, deceptive, or misleading by actual statement, 
omission, or intimation. As provided by section 3696, Title 38 U.S.C., 
the Department of Veterans Affairs shall use the services and facilities 
of the Federal Trade Commission, where appropriate, under an agreement:
    (i) To carry out investigations, and
    (ii) To make determinations under this paragraph.
    (2) To ensure compliance, any institution offering courses approved 
for the enrollment of veterans or eligible persons shall maintain a 
complete record of all advertising, sales, or enrollment materials (and 
copies of each) used by or on behalf of the institution during the 
preceding 12-month period. This record shall be available for inspection 
by the State approving agency or the Department of Veterans Affairs. 
These materials shall include, but are not limited to:

[[Page 296]]

    (i) Any direct mail pieces,
    (ii) Brochures,
    (iii) Printed literature used by sales people,
    (iv) Films, video cassettes and audio tapes disseminated through 
broadcast media,
    (v) Material disseminated through print media,
    (vi) Tear sheets,
    (vii) Leaflets,
    (viii) Handbills,
    (ix) Fliers, and
    (x) Any sales or recruitment manuals used to instruct sales 
personnel, agents or representatives of the educational institution.


(Authority: 38 U.S.C. 3696)

    (i) Audited courses. The school's certifications shall exclude 
courses which are being audited by the veteran or eligible person, since 
no educational assistance allowances shall be paid for such courses.


(Authority: 38 U.S.C. 3680(a))

    (j) Nonpunitive graded courses. The school shall report any course 
for which a nonpunitive grade is assigned and no payment shall be 
authorized for such a course. If payment has already been made, in whole 
or in part, by the Department of Veterans Affairs at the time the grade 
is assigned, an overpayment shall be created against the account of the 
student for such a course, unless the Department of Veterans Affairs 
determines there are mitigating circumstances.


(Authority: 38 U.S.C. 3680(a))

    (k) Courses with suspended approval. When a State approving agency 
has suspended the approval of a course for new enrollments, new 
enrollments in the course shall not be approved until the suspense is 
lifted. If the State approving agency does not lift the suspense, but 
disapproves the course instead, new enrollments beginning on or after 
the date the suspense was effective shall not be approved. See Sec. 
21.4259.


(Authority: 38 U.S.C. 3672(a))

    (l) Courses taken by a nonmatriculated student who is pursuing a 
degree. The provisions of this paragraph apply to veterans and eligible 
persons who are pursuing a degree, but who have not matriculated. The 
Department of Veterans Affairs considers a student to have matriculated 
when he or she has been formally admitted to a college or university as 
a degree-seeking student.
    (1) Some colleges or universities admit students provisionally, 
pending receipt of test results or transcripts. The Department of 
Veterans Affairs may approve such a veteran's or eligible person's 
enrollment in a course or subject only if the veteran or eligible person 
matriculates during the first two terms, quarters or semesters following 
his or her admission.
    (2) The first portion of the courses leading to a single degree may 
be offered at one college or university. The remaining courses are not 
offered at the college or university, but are offered at a second 
college or university which grants the degree based upon the combined 
credits earned by the student. If the student is not required to 
matriculate during the portion of the program offered at the first 
college or university, VA may approve an enrollment in a course or 
subject that is part of that portion of the program only when the 
certifications described in either paragraph (l)(2)(i) or (ii) of this 
section are made.
    (i) The college or university granting the degree certifies 
concurrently with the student's enrollment in the first portion of the 
program, that
    (A) Full credit will be granted for the subjects taken in the 
portion of the curriculum offered at the first college or university;
    (B) In the last 5 years at least three students who have completed 
the first part of the program have been accepted into the second part of 
the program;
    (C) At least 90 percent of those who have applied for admission to 
the second part of the program, after successfully completing the first 
part, have been admitted;
    (D) The student will be required to matriculate during the first two 
terms, quarters or semesters following his or her admission to the 
second part of the program.
    (ii) The college or university offering the first part of the 
program:

[[Page 297]]

    (A) Certifies to the appropriate State approving agency that as a 
result of an agreement between that college or university and the 
college or university offering the second part of the program, all of 
the courses taken by the veteran or eligible person in the first part of 
the program, will be accepted by the college or university offering the 
second part of the program without any loss of credit in partial 
fulfillment of the requirements for an associate or higher degree. This 
certification may be made once for each program for which an agreement 
exists.
    (B) Certifies to VA that the veteran or eligible person has stated 
to an appropriate official of the college or university offering the 
first part of the program that he or she is pursuing the program.
    (3) The first portion of the subjects or courses in a baccalaureate 
program beyond those necessary for an associate degree may be given at a 
2-year college, while the remainder may be offered at a 4-year college 
or university. When the college or university does not require the 
student to matriculate while pursuing the additional study at the 2-year 
college, VA may approve an enrollment in a course offered in the program 
at the 2-year college only if the certifications described in either 
paragraph (l)(3)(i) or (ii) of this section are made.
    (i) The college or university granting the baccalaureate degree 
certifies that:
    (A) Full credit is granted for the course upon the student's 
transfer to the college or university granting the baccalaureate degree,
    (B) The courses taken at the 2-year college will be acceptable in 
partial fulfillment for the baccalaureate degree, and
    (C) The student will be required to matriculate during the first two 
terms, quarters or semesters following his or her admission to the 
college or university granting the baccalaureate degree.
    (ii) Either the 2-year college or the college or university granting 
the baccalaureate degree:
    (A) Certifies to the appropriate State approving agency that as a 
result of agreement between the 2-year college and the college or 
university offering the baccalaureate degree all of the courses pursued 
beyond the associate degree will be accepted without any loss of credit 
in partial fulfillment of the requirements for a baccalaureate degree. 
This certification may be made once for each program for which an 
agreement exists.
    (B) Certifies to VA that the veteran or eligible person is enrolled 
in courses covered by the agreement.
    (4) Except as provided in paragraphs (l)(1), (2), and (3) of this 
section, the Department of Veterans Affairs will not approve a veteran's 
or eligible person's enrollment in a course or subject if the veteran or 
eligible person:
    (i) Is pursuing a degree, and
    (ii) Is not matriculated.
    (5) Nothing in this paragraph shall prevent a State approving agency 
from including more restrictive matriculation requirements in its 
approval criteria.


(Authority: 38 U.S.C. 3452)

    (m) Courses offered under contract. VA may not approve the 
enrollment of a veteran, servicemember, reservist, or eligible person in 
a course as a part of a program of education offered by any educational 
institution if the educational institution or entity providing the 
course under contract has not obtained a separate approval for the 
course in the same manner as for any other course as required by 
Sec. Sec. 21.4253, 21.4254, 21.4256, 21.4257, 21.4260, 21.4261, 
21.4263, 21.4264, 21.4265, 21.4266, or 21.4267, as appropriate.


(Authority: 38 U.S.C. 3680A(f) and (g))

[31 FR 6774, May 6, 1966, as amended at 32 FR 13404, Sept. 23, 1967; 35 
FR 9817, June 16, 1970; 40 FR 31763, July 29, 1975; 43 FR 35302, Aug. 9, 
1978; 45 FR 31063, June 12, 1980; 48 FR 14379, Apr. 4, 1983; 48 FR 
37991, Aug. 22, 1983; 49 FR 5116, Feb. 10, 1984; 49 FR 8439, Mar. 7, 
1984; 51 FR 19331, May 29, 1986; 55 FR 28028, July 9, 1990; 61 FR 6783, 
Feb. 22, 1996; 61 FR 26114, May 24, 1996; 61 FR 29296, June 10, 1996; 65 
FR 81742, Dec. 27, 2000]



Sec. 21.4253  Accredited courses.

    (a) General. A course may be approved as an accredited course if it 
meets one of the following requirements:

[[Page 298]]

    (1) The course has been accredited and approved by a nationally 
recognized accrediting agency or association. ``Candidate for 
accreditation'' status is not a basis for approval of a course as 
accredited.
    (2) Credit for such course is approved by the State department of 
education for credit toward a high school diploma.
    (3) The course is conducted under the Act of February 23, 1917 (20 
U.S.C. 11 et seq.).
    (4) The course is accepted by the State department of education for 
credit for a teacher's certificate or teacher's degree.
    (5) The course is approved by the State as meeting the requirement 
of regulations prescribed by the Secretary of Health and Human Services 
under sections 1819(f)(2)(A)(i) and 1919(f)(2)(A)(i) of the Social 
Security Act (42 U.S.C.1395i-3(f)(2)(A)(i) and 1396r(f)(2)(A)(i)).


(Authority: 38 U.S.C. 3675(a))

    (b) Course objective. Any curriculum offered by an educational 
institution which is a member of one of the nationally recognized 
accrediting agencies or associations and which leads to a degree, 
diploma, or certificate will be accepted as an accredited course when 
approved as such by the State approving agency. Any curriculum 
accredited by one of the specialized nationally recognized accrediting 
agencies or associations and which leads to a degree, diploma, or 
certificate will also be accepted as an accredited course when approved 
as such by the State approving agency. Approval of the individual 
subjects, required or elective, which are designated as a part of a 
degree curriculum will not be necessary. Such approval may include 
noncredit subjects that are prescribed as a required part of the 
curriculum. The course objective may be educational (high school diploma 
or a standard college degree) or it may be vocational or professional 
(an occupation).
    (c) Accrediting agencies. A nationally recognized accrediting agency 
or association is one that appears on the list published by the 
Secretary of Education as required by 38 U.S.C. 3675(a). The State 
approving agencies may use the accreditation of these accrediting 
agencies or associations for approval of the course specifically 
accredited and approved by the agency or association.
    (d) School qualification. A school desiring to enroll veterans or 
eligible persons in accredited courses will make application for 
approval of such courses to the State approving agency. The State 
approving agency may approve the application of the school when the 
school and its accredited courses are found to have met the following 
criteria and additional reasonable criteria established by the State 
approving agency:
    (1) The institution (other than an elementary or secondary school) 
has submitted to the State approving agency copies of its catalog or 
bulletin which are certified as true and correct in content and policy 
by an authorized representative, and the publication shall:
    (i) State with specificity the requirements of the institution with 
respect to graduation;
    (ii) Include institution policy and regulations relative to 
standards of progress required of the student by the institution (this 
policy will define the grading system of the institution, the minimum 
grades considered satisfactory, conditions for interruption for 
unsatisfactory grades or progress, a description of the probationary 
period, if any, allowed by the institution, conditions of reentrance for 
those students dismissed for unsatisfactory progress, and a statement 
regarding progress records kept by the institution and furnished the 
student);
    (iii) Include institution policy and regulations relating to student 
conduct and conditions for dismissal for unsatisfactory conduct; and
    (iv) Include any attendance standards of the institution if the 
institution has and enforces such standards.


(Authority: 38 U.S.C. 3675(a), 3676(b))

    (2) Adequate records are kept by the school to show the progress of 
each veteran or eligible person. The records must be sufficient to show 
continued pursuit at the rate for which enrolled and the progress being 
made. They

[[Page 299]]

must include final grade in each subject for each term, quarter, or 
semester; record of withdrawal from any subject to include the last date 
of attendance for a resident course; and record of reenrollment in 
subjects from which there was a withdrawal; and may include such records 
as attendance for resident courses, periodic grades and examination 
results.
    (3) The school maintains a written record of previous education and 
training of the veteran or eligible person which clearly indicates that 
appropriate credit has been given by the school for previous education 
and training, with the training period shortened proportionately, and 
the person and the Department of Veterans Affairs so notified. The 
record must be cumulative in that the results of each enrollment period 
(term, quarter or semester) must be included so that it shows each 
subject undertaken and the final result, i.e., passed, failed, 
incomplete or withdrawn.


(Authority: 38 U.S.C. 3675(b))

    (4) The school enforces a policy relative to standards of conduct 
and progress required of the student. The school policy relative to 
standards of progress must be specific enough to determine the point in 
time when educational benefits should be discontinued, pursuant to 38 
U.S.C. 3474 when the veteran or eligible person ceases to make 
satisfactory progress. The policy must include the grade or grade point 
average that will be maintained if the student is to graduate. For 
example, a 4-year college may require a 1.5 grade point average the 
first year, a 1.75 average at mid-year the second year, and a cumulative 
average of 2.0 thereafter on the basis of 4.0 for an A.
    (5) If the school has a standard of attendance, it maintains records 
of attendance for veterans and eligible persons enrolled in resident 
courses which are adequate to show the student meets the school's 
standard of attendance.


(Authority: 38 U.S.C. 3474, 3675)

    (6) The accredited courses, the curriculum of which they form a 
part, and the instruction connected with those courses are consistent in 
quality, content, and length with similar courses in public educational 
institutions and other private educational institutions in the State 
with recognized accepted standards.
    (7) There is in the educational institution offering the course 
adequate space, equipment, instructional material, and instructor 
personnel to provide training of good quality.
    (8) The educational and experience qualifications of directors, and 
administrators of the educational institution offering the courses, and 
instructors teaching the courses for which approval is sought, are 
adequate.


(Authority: 38 U.S.C. 3675(b), 3676(c)(1), (2), (3))

    (e) College level. Under the provisions of paragraph (a)(1) of this 
section, any course at college level approved by the State approving 
agency as an accredited course will be accepted by the Department of 
Veterans Affairs as an accredited course when all of the following 
conditions are met:
    (1) The college or university is accredited by a nationally 
recognized regional accrediting agency listed by the Secretary of 
Education or the course is accredited at the college level by a 
specialized accrediting agency or association recognized by the 
Secretary of Education; and


(Authority: 38 U.S.C. 3675)

    (2) The course has entrance requirements of not less than the 
requirements applicable to the college level program of the school; and
    (3) Credit for the course is awarded in terms of standard semester 
or quarter hours or by recognition at completion by the granting of a 
standard college degree.
    (f) Courses not leading to a standard college degree. Any course in 
a school approved by the State approving agency will be accepted as an 
accredited course when all of the following conditions are met:
    (1) The course or the school offering such course is accredited by 
the appropriate accrediting agency; and
    (2) The course offers training in the field for which the 
accrediting agency is recognized and at a level for which it is 
recognized; and

[[Page 300]]

    (3) The course leads to a high school diploma or a vocational 
objective.

(Paperwork requirements in Sec. 21.4253(d)(1) were approved by the 
Office of Management and Budget under control number 2900-0568.)

[31 FR 6774, May 6, 1966, as amended at 38 FR 14938, June 7, 1973; 40 FR 
33825, Aug. 12, 1975; 43 FR 35302, Aug. 9, 1978; 48 FR 37992, Aug. 22, 
1983; 50 FR 43135, Oct. 24, 1985; 60 FR 32272, June 21, 1995; 61 FR 
6783, Feb. 22, 1996; 62 FR 35424, July 1, 1997; 65 FR 81742, Dec. 27, 
2000]



Sec. 21.4254  Nonaccredited courses.

    (a) General. Nonaccredited courses are courses which are not 
approved as accredited courses and which are offered by a public or 
private, profit or nonprofit, educational institution. These include 
nonaccredited courses offered by extension centers or divisions, or 
vocational or adult education departments of institutions of higher 
learning.
    (b) Application. Any school desiring to enroll veterans or eligible 
persons in nonaccredited courses will submit a written application to 
the appropriate State approving agency for approval of such courses (38 
U.S.C. 3676(a)). Such application will be accompanied by not less than 
two copies of the current catalog or bulletin which is certified as true 
and correct in content and policy by an authorized owner or official of 
the school and will include the following:
    (1) Identifying data, such as volume number, and date of 
publication;
    (2) Names of the school and its governing body, officials, and 
faculty;
    (3) A calendar of the school showing legal holidays, beginning and 
ending date of each quarter, term, or semester, and other important 
dates;
    (4) School policy and regulations on enrollment with respect to 
enrollment dates and specific entrance requirements for each course;
    (5) School policy and regulations relative to leave, absences, class 
cuts, makeup work, tardiness, and interruptions for unsatisfactory 
attendance;
    (6) School policy and regulations relative to standards of progress 
required of the student. This policy will define the grading system of 
the school, the minimum grades considered satisfactory conditions for 
interruption for unsatisfactory grades or progress, and a description of 
the probationary period, if any, allowed by the school, and conditions 
of reentrance for those students dismissed for unsatisfactory progress. 
A statement will be made regarding progress records kept by the school 
and furnished the student;
    (7) School policy and regulations relating to student conduct and 
conditions for dismissal for unsatisfactory conduct;
    (8) Detailed schedule of fees, charges for tuition, books, supplies, 
tools, student activities, laboratory fees, service charges, rentals, 
deposits, and all other charges;
    (9) Policy and regulations relative to the refund of the unused 
portion of tuition, fees, and other charges in the event the student 
does not enter the course, or withdraws, or is discontinued therefrom;
    (10) A description of the available space, facilities, and 
equipment;
    (11) A course outline for each course for which approval is 
requested, showing subjects or units in the course, type of work, or 
skill to be learned, and approximate time and clock hours to be spent on 
each subject or unit; and
    (12) Policy and regulations relative to granting credit for previous 
education and training.


(Authority: 38 U.S.C. 3676(b))

    (c) Approval criteria. The appropriate State approving agency may 
approve the application of such school when the school and its 
nonaccredited courses are found upon investigation to have met the 
following criteria:
    (1) The courses, curriculum, and instruction are consistent in 
quality, content, and length with similar recognized accepted standards.
    (2) There is in the school adequate space, equipment, instructional 
material, and instructor personnel to provide training of good quality.
    (3) Educational and experience qualifications of directors, 
administrators, and instructors are adequate.
    (4) The school maintains a written record of the previous education 
and training of the veteran or eligible person and clearly indicates 
that appropriate credit has been given for previous education and 
training, with the

[[Page 301]]

training period shortened proportionately, and the veteran or eligible 
person and the Department of Veterans Affairs so notified.
    (5) A copy of the course outline, schedule of tuition, fees, and 
other charges, regulations pertaining to absences, grading policy, and 
rules of operation and conduct will be furnished the veteran or eligible 
person upon enrollment.
    (6) Upon completion of training, the veteran or eligible person is 
given a certificate by the school indicating the approved course and 
indicating that training was satisfactorily completed.
    (7) Adequate records as prescribed by the State approving agency are 
kept to show attendance and progress or grades, and satisfactory 
standards relating to attendance, progress, and conduct are enforced.
    (8) The school complies with all local, city, county, municipal, 
State, and Federal regulations, such as fire codes, building, and 
sanitation codes. The State approving agency may require such evidence 
of compliance as it deemed necessary.
    (9) The school is financially sound and capable of fulfilling its 
commitments for training.
    (10) The school does not utilize advertising of any type which is 
erroneous or misleading, either by actual statement, omission, or 
intimation. The school will not be deemed to have met this requirement 
until the State approving agency:
    (i) Has ascertained from the Federal Trade Commission whether the 
Commission has issued an order to the school to cease and desist from 
any act or practice, and
    (ii) Has, if such an order has been issued, given due weight to that 
fact.
    (11) The school does not exceed its enrollment limitations as 
established by the State approving agency.
    (12) The school administrators, directors, owners, and instructors 
are of good reputation and character.
    (13) The school either: (i) Has and maintains a policy for the pro 
rata refund of the unused portion of tuition, fees and charges if the 
veteran or eligible person fails to enter the course or withdraws or is 
discontinued from it before completion, or
    (ii) Has obtained a waiver of this requirement. See Sec. 21.4255.


(Authority: 38 U.S.C. 3676)

    (14) Such additional reasonable criteria as may be deemed necessary 
by the State approving agency.


(Authority: 38 U.S.C. 3676(c))

    (d) Limitations on course approval. Notwithstanding any other 
provision of this section, a State approving agency shall not approve a 
nonaccredited course if it is to be pursued in whole or in part by 
independent study.


(Authority: 38 U.S.C. 3676(e))

[31 FR 6774, May 6, 1966, as amended at 33 FR 9546, June 29, 1968; 47 FR 
42733, Sept. 29, 1982; 61 FR 6783, Feb. 22, 1996]



Sec. 21.4255  Refund policy; nonaccredited courses.

    (a) Acceptable refund policy. A refund policy meets the requirements 
of Sec. 21.4254(c)(13), if it provides that the amount charged for 
tuition, fees, and other charges for a portion of the course does not 
exceed the approximate pro rata portion of the total charges for 
tuition, fees, and other charges that the length of the completed 
portion of the course bears to the total length. The school may make 
provision for refund within the following limitations:
    (1) Registration fee. An established registration fee in an amount 
not to exceed $10 need not be subject to proration. Where the 
established registration fee is more than $10, the amount in excess of 
$10 will be subject to proration.
    (2) Breakage fee. Where the school has a breakage fee, it may 
provide for the retention of only the exact amount of the breakage, with 
the remaining part, if any, to be refunded.
    (3) Consumable instructional supplies. Where the school makes a 
separate charge for consumable instructional supplies, as distinguished 
from laboratory fees, the exact amount of the charges for supplies 
consumed may be retained but any remaining part must be refunded.
    (4) Books, supplies and equipment. (i) A veteran or eligible person 
may retain or dispose of books, supplies and equipment at his or her 
discretion when:

[[Page 302]]

    (A) He or she purchased them from a bookstore or other source, and
    (B) Their cost is separate and independent from the charge made by 
the school for tuition and fees.
    (ii) The school will make a refund in full for the amount of the 
charge for unissued books, supplies and equipment when:
    (A) The school furnishes the books, supplies and equipment.
    (B) The school includes their cost in the total charge payable to 
the school for the course.
    (C) The veteran or eligible person withdraws or is discontinued 
before completing the course.
    (iii) The veteran or eligible person may dispose of issued items at 
his or her discretion even if they were included in the total charges 
payable to the school for the course.
    (5) Tuition and other charges. Where the school either has or adopts 
an established policy for the refund of the unused portion of tuition, 
fees, and other charges subject to proration, which is more favorable to 
the veteran or eligible person than the approximate pro rata basis as 
provided in this paragraph, such established policy will be applicable. 
Otherwise, the school may charge a sum which does not vary more than 10 
percent from the exact pro rata portion of such tuition, fees, and other 
charges that the length of the completed portion of the course bears to 
its total length. The exact proration will be determined on the ratio of 
the number of days of instruction completed by the student to the total 
number of instructional days in the course.
    (6) Prompt refund. In the event that the veteran, spouse, surviving 
spouse or child fails to enter the course or withdraws or is 
discontinued therefrom at any time prior to completion of the course, 
the unused portion of the tuition, fees and other charges paid by the 
individual shall be refunded promptly. Any institution which fails to 
forward any refund due within 40 days after such a change in status, 
shall be deemed, prima facie, to have failed to make a prompt refund, as 
required by this paragraph.
    (b) Waiver. (1) An educational institution may apply through the 
appropriate State approving agency to the Director of the VA facility of 
jurisdiction for a waiver of the requirements of paragraph (a) of this 
section as they apply to a veteran or eligible person. The State 
approving agency shall forward the application to the Director along 
with its recommendations. The Director shall consider the 
recommendations and shall grant a waiver only when he or she finds that 
the educational institution:
    (i) Is a college, university, or similar institution offering post-
secondary level academic instruction leading to an associate or higher 
degree;
    (ii) Is operated by an agency of a State or a unit of local 
government;
    (iii) If operated by an agency of a State, is located within that 
State;
    (iv) If operated by a unit of local government, is located within 
the boundaries of the area over which that unit has taxing jurisdiction;
    (v) Is a candidate for accreditation by a regional accrediting 
agency; and
    (vi) Charges the veteran or eligible person no more than $120 per 
quarter, $180 per semester or $360 per school year in tuition, fees and 
other charges for the course.
    (2) If an educational institution disagrees with a decision of a 
Director of a VA facility, it may ask that the Director, Education 
Service review the decision. In reviewing the decision the Director must 
consider the evidence of record. He or she may not grant a waiver unless 
all the criteria of paragraph (b)(1) of this section are met.


(Authority: 38 U.S.C. 3676(d))

[47 FR 42733, Sept. 29, 1982]



Sec. 21.4256  Correspondence programs and courses.

    (a) Approval of correspondence programs and courses. (1) An 
educational institution desiring to enroll veterans under 38 U.S.C. 
chapter 30 or 32, spouses and/or surviving spouses under 38 U.S.C. 
chapter 35, and/or reservists under 10 U.S.C. chapter 1606 in a program 
of education to be pursued exclusively by correspondence, or in the 
correspondence portion of a combination correspondence-residence course, 
may have the program or course approved only when the educational 
institution

[[Page 303]]

meets the requirements of Sec. Sec. 21.4252(e), 21.4253, and 21.4279, 
as applicable.

(The information collection requirements in this section have been 
approved by the Office of Management and Budget under control number 
2900-0575)


(Authority: 38 U.S.C. 3672(e))

    (2) The application of an educational institution for approval of a 
program of education to be pursued exclusively by correspondence or the 
correspondence portion of a combined correspondence-residence course 
must demonstrate that the program or course is satisfactory in all 
elements. The educational institution must certify to the State 
approving agency that at least 50 percent of those pursuing the program 
or course require six months or more to complete it. For applications 
for approval that are pending approval by the State approving agency on 
February 2, 1995, and for applications received by the State approving 
agency after that date, the required certification shall be based on the 
experience of students who completed the program or course during the 
six-month period immediately preceding the educational institution's 
application for approval.


(Authority: 38 U.S.C. 3672(e))

    (3) State approving agencies have the authority to review 
periodically the length of time needed to complete each approved 
correspondence program or approved correspondence-residence course in 
order to determine whether the program or course should continue to be 
approved. In implementing this authority, a State approving agency will 
examine the results over a prior two-year period reasonably related to 
the date on which such a review is conducted.


(Authority: 38 U.S.C. 3672(e))

    (b) Enrollment agreement. (1) An educational institution offering a 
program of education to be pursued exclusively by correspondence must 
enter into an enrollment agreement with the veteran, spouse, surviving 
spouse, or reservist who wishes to receive educational assistance from 
VA while pursuing the program. The enrollment agreement shall disclose 
fully the obligations of the institution and the veteran, spouse, 
surviving spouse, or reservist, and shall display in a prominent place 
on the agreement the conditions for affirmance, termination, refund, and 
payment of the educational assistance by VA.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3686(a)(1), 3686(b))

    (2) A copy of the agreement shall be given to the veteran, spouse, 
surviving spouse, or reservist when it is signed.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3686(b))

    (3) The agreement shall not be effective unless the veteran, spouse, 
surviving spouse, or reservist after the expiration of 10 days after the 
agreement is signed, shall have signed and submitted to VA a written 
statement, with a signed copy to the institution, specifically affirming 
the agreement.

(The information collection requirements in this section have been 
approved by the Office of Management and Budget under control number 
2900-0576)


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3686(b))

    (c) Mandatory refund policy. (1) Upon notification of the 
educational institution by the veteran, spouse, surviving spouse, or 
reservist of an intention not to affirm the enrollment agreement, any 
fees paid by the individual shall be returned promptly in full to him or 
her.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3686(c))

    (2) Upon termination of enrollment under an affirmed enrollment 
agreement for training in the accredited course by the veteran, spouse, 
surviving spouse, or reservist, without having completed any lessons, a 
registration fee not in excess of 10 percent of the tuition for the 
course or $50, whichever is less, may be charged him or her. When the 
individual terminates the agreement after completion of less than 25 
percent of the lessons of the course, the institution may retain the 
registration fee plus 25 percent of the tuition. When the individual 
terminates the agreement after completing

[[Page 304]]

25 percent but less than 50 percent of the lessons, the institution may 
retain the registration fee plus 50 percent of the tuition for the 
course. If 50 percent or more of the lessons are completed, no refund of 
tuition is required.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3686(c))

    (3) Where the school either has or adopts an established policy for 
the refund of the unused portion of tuition, fees, and other charges 
subject to proration, which is more favorable to the veteran, spouse, 
surviving spouse, or reservist than the pro rata basis as provided in 
paragraph (b)(2) of this section, such established policy will be 
applicable.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3686(c))

    (4) Any institution that fails to forward any refund due to the 
veteran, spouse, surviving spouse, or reservist within 40 days after 
receipt of a notice of termination or disaffirmance, shall be deemed, 
prima facie, to have failed to make a prompt refund as required by this 
section.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3686(c))

[62 FR 63849, Dec. 3, 1997]



Sec. 21.4257  Cooperative courses.

    A cooperative course may be approved when the course meets the 
requirement of Sec. 21.4233(a).



Sec. 21.4258  Notice of approval.

    (a) The State approving agency, upon determining that a school has 
complied with all the requirements for approval will notify the school 
by letter setting forth the courses which have been approved, and will 
furnish to the Department of Veterans Affairs an official copy of the 
letter and attachments and any subsequent amendments. The letter of 
approval for each school will be accompanied by a copy of the catalog or 
bulletin of the school, as approved by the State approving agency, and 
will contain the following information:
    (1) Date of letter and effective date of approval of courses;
    (2) Proper address and name of each school;
    (3) Authority for approval and conditions of approval, referring 
specifically to the approved catalog or bulletin published by the 
school;
    (4) Name of each course approved;
    (5) Where applicable, enrollment limitations, such as maximum number 
of students authorized and student-teacher ratio;
    (6) Signature of responsible official of State approving agency; and
    (7) Such other fair and reasonable provisions as are considered 
necessary by the appropriate State approving agency.


(Authority: 38 U.S.C. 3678)

    (b) For institutions of higher learning, the letter of approval may 
identify approved courses and subjects by reference to page numbers in 
the school catalog or bulletin in lieu of a listing by name as required 
in paragraph (a)(4) of this section.
    (c) For apprentice and other on-the-job training, the provisions of 
paragraph (a) of this section are applicable to approval of courses 
pursued in training establishments. The copy of the notice of approval 
furnished to the Department of Veterans Affairs will be accompanied by 
one copy of the application submitted by the training establishment.
    (d) Compliance with equal opportunity laws. (1) The State approving 
agency shall solicit assurance of compliance with:
    (i) Title VI, Civil Rights Act of 1964,
    (ii) Title IX, Education Amendments of 1972, as amended,
    (iii) Section 504, Rehabilitation Act of 1973,
    (iv) The Age Discrimination Act of 1975, and
    (v) All Department of Veterans Affairs regulations adopted to carry 
out these laws.
    (2) The State approving agency shall solicit this assurance from:
    (i) Proprietary vocational, trade, technical, or other institutions 
and such schools not a part of a public elementary or secondary school.
    (ii) All other educational institutions which the Department of 
Education has not determined to be in compliance

[[Page 305]]

with the equal opportunity laws listed in paragraph (d)(1) of this 
section.
    (3) Whenever a State approving agency forwards to VA a Notice of 
Approval for a course offered by an institution described in paragraph 
(d)(2) of this section, it shall also forward the institution's signed 
statement of compliance with these equal opportunity laws.


(Authority: 42 U.S.C. 2000 et seq., 20 U.S.C. 1681 et seq., 29 U.S.C. 
794, 42 U.S.C. 6101 et seq.)

[31 FR 6774, May 6, 1966, as amended at 32 FR 3979, Mar. 11, 1967; 32 FR 
13405, Sept. 23, 1967; 51 FR 26158, July 21, 1986]



Sec. 21.4259  Suspension or disapproval.

    (a) The appropriate State approving agency, after approving any 
course:
    (1) May suspend the approval of the course for new enrollments for a 
period not to exceed 60 days to allow the institution to correct any 
deficiencies, if the evidence of record establishes that the course 
fails to meet any of the requirements for approval.
    (2) Will immediately disapprove the course, if any of the 
requirements for approval are not being met and the deficiency cannot be 
corrected within a period of 60 days.
    (3) Upon suspension or disapproval, the State approving agency will 
notify the school by certified or registered letter with a return 
receipt secured (38 U.S.C. 3679). It is incumbent upon the State 
approving agency to determine the conduct of courses and to take 
immediate appropriate action in each case in which it is found that the 
conduct of a course in any manner fails to comply with the requirements 
for approval.
    (b) Each State approving agency will immediately notify the 
Department of Veterans Affairs of each course which it has suspended or 
disapproved.
    (c) The Department of Veterans Affairs will suspend approval for or 
disapprove courses under conditions specified in paragraph (a) of this 
section where it functions for the State approving agency. See Sec. 
21.4150(c).
    (d) The Department of Veterans Affairs will immediately notify the 
State approving agency in each case of Department of Veterans Affairs 
suspension or disapproval of any school under Chapter 31.

(Authority: 38 U.S.C. 3679)

[41 FR 30640, July 26, 1976]



Sec. 21.4260  Courses in foreign countries.

    (a) Approval of postsecondary courses in foreign countries. (1) In 
order to be approved a postsecondary course offered in a foreign country 
must meet all the provisions of this paragraph. A course offered by a 
foreign medical school (other than one located in Canada) must also meet 
all of the provisions of paragraph (b) of this section.
    (i) The educational institution offering the course is an 
institution of higher learning, and
    (ii) The course leads to a standard college degree or its 
equivalent.
    (2) For the purpose of this paragraph, a degree is the equivalent of 
a standard college degree when the program leading to the degree has the 
same entrance requirements as one leading to a degree granted by a 
public degree-granting institution of higher learning in that country.
    (b) Approval of courses offered by a foreign medical school. In 
addition to meeting all the criteria stated in paragraph (a) of this 
section, a course offered by a foreign medical school (other than one 
located in Canada) must also meet all of the following criteria:
    (1) The school satisfies the criteria for listing as a medical 
school in the World Directory of Medical Schools published by the World 
Health Organization (WHO).
    (2) The evaluating bodies (such as medical associations or 
educational agencies) whose views are considered relevant by the 
Director, Education Service, and which are located in the same country 
as the school--
    (i) Recognize the school as a medical school, and
    (ii) Approve the school.
    (3) The school provides, and in the normal course requires its 
students to complete, a program of clinical and classroom instruction at 
least 32 months long. This program must be--
    (i) Supervised closely by members of the school's faculty, and
    (ii) Provided either.

[[Page 306]]

    (A) Outside the United States in facilities adequately equipped and 
staffed to afford students comprehensive clinical and classroom medical 
instruction, or
    (B) Inside the United States, through a training program for foreign 
medical students which has been approved by all the medical licensing 
boards and evaluating bodies whose views are considered relevant by the 
Director, Education Service.
    (4) The school has graduated classes during each of the two 12-month 
periods immediately preceding the date on which VA receives the school's 
application for approval of its courses.
    (5) The Director, Education Service, shall withdraw approval of any 
course when the course or the school offering it fails to meet any of 
the approval criteria in this section or in Chapter 36, Title 38 U.S.C.
    (6) In making the decisions required by this paragraph, the 
Director, Education Service, may consult with the Secretary of 
Education. The Director may review any information about a foreign 
medical school which the Secretary may make available.
    (c) Approval of enrollments in foreign courses. (1) Except as 
provided in paragraph (c)(2) of this section, the Department of Veterans 
Affairs will approve the enrollment of a veteran or eligible person in a 
course offered by an educational institution not located in a State 
when--
    (i) The eligible person, serviceperson, veteran, or reservist meets 
the eligibility and entitlement requirements of either Sec. Sec. 
21.3040 through 21.3046, Sec. Sec. 21.5040 and 21.5041, Sec. Sec.  
21.7040 through 21.7045, or Sec. 21.7540, as appropriate;
    (ii) The eligible person's, serviceperson's, veteran's, or 
reservist's program of education meets the requirements of either Sec. 
21.3021(h), Sec. 21.5230, Sec.  21.7020(b)(23), or Sec.  
21.7520(b)(17), as appropriate; and
    (iii) The course meets the requirements of this section and all 
other applicable VA regulations.
    (2) VA may deny or discontinue the payment of educational assistance 
allowance to a veteran, serviceperson, eligible person or reservist 
pursuing a course in an institution of higher learning not located in a 
State when VA finds that the veteran's, serviceperson's, eligible 
person's, or reservist's enrollment is not in his or her best interest 
or the best interest of the Federal Government.

(Authority: 38 U.S.C. 3687)

[52 FR 13239, Apr. 22, 1987, as amended at 61 FR 29296, June 10, 1996]



Sec. 21.4261  Apprentice courses.

    (a) General. An apprentice course is any training on-the-job course 
which has been established as an apprentice course by a training 
establishment as defined in Sec. 21.4200(c) and which has been approved 
as an apprentice course by the State approving agency.
    (b) Application. Any training establishment desiring to furnish a 
course of apprentice training will submit a written application to the 
appropriate State approving agency setting forth the following:
    (1) Title and description of the specific job objective for which 
the veteran or eligible person is to be trained;
    (2) The length of the training period;
    (3) A schedule listing various operations for major kinds of work or 
tasks to be learned and showing for each job operations or work, tasks 
to be performed, and the approximate length of time to be spent on each 
operation or task;
    (4) The number of hours of supplemental related instruction 
required; and
    (5) Any additional information required by the State approving 
agency.
    (c) Approval criteria. The appropriate State approving agency may 
approve a course of apprentice training when the training establishment 
and its apprentice courses are found upon investigation to have met the 
following criteria:
    (1) The standards of apprenticeship published by the Secretary of 
Labor pursuant to 29 U.S.C. 50a;
    (2) A signed copy of the training agreement for each veteran or 
eligible person, making reference to the training program and wage 
schedule as approved by the State approving agency, is provided to the 
veteran or eligible person and the Department of Veterans Affairs and 
the State approving agency by the employer; and

[[Page 307]]

    (3) The course meets such other reasonable criteria as may be 
established by the State approving agency.


(Authority: 38 U.S.C. 3687)

    (d) Promotion. As funding permits, Department of Veterans Affairs 
employees will promote the development of apprenticeships. They will:
    (1) Visit employers and joint apprenticeship committees,
    (2) Coordinate their efforts with activities of any State approving 
agencies that may choose to promote the development of apprenticeships, 
and
    (3) Avoid duplicating the efforts of others by coordinating their 
promotional efforts with similar activities of the Department of Labor 
and State employment security agencies as provided by written agreements 
covering these activities, including utilization of disabled veterans' 
outreach program specialists.


(Authority: 38 U.S.C. 3672(d))

[32 FR 13405, Sept. 23, 1967, as amended at 33 FR 9546, June 29, 1968; 
38 FR 14938, June 7, 1973; 47 FR 42731, Sept. 29, 1982]



Sec. 21.4262  Other training on-the-job courses.

    (a) General. An ``other training on-the-job'' course is any training 
on the job which does not qualify as an apprentice course, as defined in 
Sec. 21.4261, but which otherwise meets the requirements of paragraph 
(c) of this section.
    (b) Application. Any training establishment desiring to furnish a 
course of other training on-the-job will submit to the appropriate State 
approving agency a written application setting forth the following:
    (1) Title and description of the specific job objective for which 
the veteran or eligible person is to be trained;
    (2) The length of the training period;
    (3) A schedule listing various operations for major kinds of work or 
tasks to be learned and showing for each job operations or work, tasks 
to be performed, and the approximate length of time to be spent on each 
operation or task;
    (4) The number of hours of supplemental related instruction 
required;
    (5) The entrance wage or salary paid by the training establishment 
to employees already trained in the kind of work for which the veteran 
or eligible person is to be trained;
    (6) A certification that the wages to be paid the veteran or 
eligible person upon entrance into training are not less than wages paid 
nonveterans in the same training position and are at least 50 percent of 
the wages paid for the job for which he or she is to be trained, and 
will be increased in regular periodic increments until, not later than 
the last full month of the scheduled training period they will be at 
least 85 percent of the wages paid for the job for which the veteran or 
eligible person is being trained;
    (7) A certification that there is reasonable certainty that the job 
for which the veteran or eligible person is to be trained will be 
available to him or her at the end of the training period; and
    (8) Any additional information required by the State approving 
agency.
    (c) Approval criteria. The appropriate State approving agency may 
approve the application submitted under paragraph (b) of this section, 
when the training establishment and its courses are found upon 
investigation to have met the criteria outlined in this paragraph. 
Approval will not be granted for training in occupations which require a 
relatively short period of experience for a trainee to obtain and hold 
employment at the market wage in the occupation. This includes 
occupations such as automobile service station attendant or manager, 
soda fountain attendant, food service worker, salesman, window washer, 
building custodian or other unskilled or common labor positions as well 
as clerical positions for which on-the-job training is not the normal 
method of procuring qualified personnel.
    (1) The job which is the objective of the training is one in which 
progression and appointment to the next higher classification are based 
upon skills learned through organized and supervised training on-the-job 
and not on such factors as length of service and normal turnover;
    (2) The training content of the course is adequate to qualify the 
veteran or eligible person for appointment to the job for which he or 
she is to be trained;

[[Page 308]]

    (3) The job customarily requires a period of training of not less 
than 6 months and not more than 2 years of full-time training;
    (4) The length of the training period is not longer than that 
customarily required by the training establishments in the community to 
provide the veteran or eligible person with the required skills, arrange 
for the acquiring of job knowledge, technical information, and other 
facts which the veteran or eligible person will need to learn in order 
to become competent on the job for which he or she is being trained;
    (5) Provision is made for related instruction for the individual 
veteran or eligible person who may need it;
    (6) There is in the training establishment adequate space, 
equipment, instructional material, and instructor personnel to provide 
satisfactory training on-the-job;
    (7) Adequate records are kept to show the progress made by each 
veteran or eligible person toward his or her job objective;
    (8) The veteran or eligible person is not already qualified by 
training and experience for the job;
    (9) The requirements of paragraphs (b)(6) and (7) of this section 
are met;
    (10) A signed copy of the training agreement for each veteran or 
eligible person, including the training program and wage schedule as 
approved by the State approving agency, is provided to the veteran or 
eligible person and the Department of Veterans Affairs and the State 
approving agency by the employer; and
    (11) The course meets such other reasonable criteria as may be 
established by the State approving agency.


(Authority: 38 U.S.C. 3677)

    (d) Promotion. As funding permits, Department of Veterans Affairs 
employees will promote the development of on-the-job training courses. 
They will:
    (1) Visit employers,
    (2) Coordinate their efforts with activities of any State approving 
agencies that may choose to promote the development of on-the-job 
training courses, and
    (3) Avoid duplicating the efforts of others by coordinating their 
promotional efforts with similar activities of the Department of Labor 
and State employment security agencies as provided by written agreements 
covering these activities, including utilization of disabled veterans' 
outreach program specialists.


(Authority: 38 U.S.C. 3672(d))

[32 FR 13405, Sept. 23, 1967, as amended at 33 FR 9546, June 29, 1968; 
35 FR 9817, June 16, 1970; 38 FR 14939, June 7, 1973; 45 FR 51778, Aug. 
5, 1980; 47 FR 42731, Sept. 29, 1982; 60 FR 32272, June 21, 1995]



Sec. 21.4263  Approval of flight training courses.

    (a) A flight school or institution of higher learning are the only 
entities that can offer flight courses. A State approving agency may 
approve a flight course only if a flight school or an institution of 
higher learning offers the course. A State approving agency may not 
approve a flight course if an individual instructor offers it. The 
provisions of Sec. 21.4150 shall determine the proper State approving 
agency for approving a flight course.


(Authority: 10 U.S.C. 16136(c); 38 U.S.C. 3032(d), 3241(b), 3671, 3672, 
3676)

    (b) Definition of flight school. A flight school is a school, other 
than an institution of higher learning, or is an entity, such as an aero 
club; is located in a State; and meets one of the following sets of 
requirements:
    (1) The Federal Aviation Administration has issued the school or 
entity either a pilot school certificate or a provisional pilot school 
certificate specifying each course the school is approved to offer under 
14 CFR part 141;
    (2) The entity is either a flight training center or an air carrier 
that does not have a pilot school certificate or provisional pilot 
school certificate issued by the Federal Aviation Administration under 
14 CFR part 141, but pursuant to a grant of exemption letter issued by 
the Federal Aviation Administration under 14 CFR part 61 is permitted to 
offer pilot training by a flight simulator instead of an actual 
aircraft; or
    (3) The Federal Aviation Administration has issued the school or 
entity a

[[Page 309]]

training center certificate under 14 CFR part 142.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3452(c))

    (c) Aero club courses. An aero club, established, formed, and 
operated under authority of service department regulations as a 
nonappropriated sundry fund activity, is an instrumentality of the 
Federal government. Consequently, VA has exclusive jurisdiction over 
approval of flight courses offered by such aero clubs.


(Authority: 38 U.S.C. 3671, 3672)

    (d) Approval of flight training as part of a degree program. A State 
approving agency may approve a flight training course that is part of a 
program of education leading to a standard college degree provided the 
course and program meet the requirements of Sec. 21.4253 or Sec.  
21.4254, as appropriate. The institution of higher learning offering the 
course need not be a flight school.


(Authority: 38 U.S.C. 3675, 3676)

    (e) Approval of flight training courses that are not part of a 
degree program. A flight course is subject to the same approval 
requirements as any other course. In addition, the State approving 
agency must apply the following provisions to the approval of flight 
courses:
    (1) The Federal Aviation Administration must approve the course; and
    (2)(i) The course must meet the requirements of 14 CFR part 63 or 
141, and a flight school described in paragraph (b)(1) or (b)(3) of this 
section must offer it; or
    (ii) The course must meet the requirements of 14 CFR part 61, and 
either be offered--
    (A) By a flight school described in paragraph (b)(3) of this 
section; or
    (B) In whole or in part by a flight simulator pursuant to a grant of 
exemption letter issued by the Federal Aviation Administration to the 
flight school offering the course.


(Authority: 10 U.S.C. 16136(c); 38 U.S.C. 3034(d), 3241(b), 3676, 3680A)

    (f) Application of 38 U.S.C. 3680A(e)(2) to flight training. 
Notwithstanding the fact that the Federal Aviation Administration will 
permit flight schools to conduct training at a base other than the main 
base of operations if the requirements of either 14 CFR 141.91 or 14 CFR 
142.17 are met, the satellite base is considered under 38 U.S.C. 
3680A(e)(2) to be a branch of the principal school, and must meet the 
requirements of 38 U.S.C. 3680A(e)(2).


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3241(b), 
3680A))

    (g) Providing a flight course under contract between schools or 
entities. When a school or entity offers all or part of a flight course 
under a contract with another school or entity, the State approving 
agency must apply Sec. 21.4233 in the following manner:
    (1) The requirements of Sec. 21.4233(e) must be met for all 
contracted flight instruction, instruction by flight training device, 
flight simulator instruction, and ground school training. Ground school 
training may be given through a ground school facility operated jointly 
by two or more flight schools in the same locality; and
    (2) The responsibility for providing the instruction lies with the 
flight school. The degree of affiliation between the flight school and 
the entity or other school that actually does the instructing must be 
such that all charges for instruction are made by, and paid to, one 
entity having jurisdiction and control over both the flight and ground 
portions of the program.


(Authority: 10 U.S.C. 16136(c); 38 U.S.C. 3032(d), 3241(b))

    (h) Nonaccredited courses--(1) Application of Sec. 21.4254 to 
flight training. The provisions of Sec. 21.4254 are applicable to 
approval of flight training courses.
    (2) Additional instruction requirements. The State approving agency 
will apply the following additional requirements to a flight course:
    (i) All flight instruction, instruction by flight training device, 
flight simulator instruction, preflight briefings and postflight 
critiques, and ground school training in a course must be given by the 
flight school or under suitable arrangements between the school and 
another school or entity such as a local community college.

[[Page 310]]

    (ii) All ground school training connected with the course must be in 
residence under the direction and supervision of a qualified instructor 
providing an opportunity for interaction between the students and the 
instructor. Simply making provision for having an instructor available 
to answer questions does not satisfy this requirement.
    (3) A flight school must keep at a minimum the following records for 
each eligible veteran, servicemember, or reservist pursuing flight 
training:
    (i) A copy of his or her private pilot certificate;
    (ii) Evidence of completion of any prior training that may be a 
prerequisite for the course;
    (iii) A copy of the medical certificate required by paragraph (a)(2) 
of this section for the courses being pursued and copies of all medical 
certificates (expired or otherwise) needed to support all periods of 
prior instruction received at the current school;
    (iv) A daily flight log or copy thereof;
    (v) A permanent ground school record;
    (vi) A progress log;
    (vii) An invoice of flight changes for individual flights or flight 
lessons for training conducted on a flight simulator or advanced flight 
training device;
    (viii) Daily flight sheets identifying records upon which the 85-15 
percent ratio may be computed;
    (ix) A continuous meter record for each aircraft;
    (x) An invoice or flight tickets signed by the student and 
instructor showing hour meter reading, type of aircraft, and aircraft 
identification number;
    (xi) An accounts receivable ledger;
    (xii) Individual instructor records;
    (xiii) Engine log books;
    (xiv) A record for each student above the private pilot level 
stating the name of the course in which the student is currently 
enrolled and indicating whether the student is enrolled under 14 CFR 
part 61, part 63, part 141, or part 142;
    (xv) Records of tuition and accounts which are evidence of tuition 
charged and received from all students; and
    (xvi) If training is provided under 14 CFR part 141, the records 
required by that part, or if training is provided under 14 CFR part 142, 
the records required by that part.


(Authority: 38 U.S.C. 3671, 3672, 3676, 3690(c))

    (i) Hourly limitations. A flight course approved pursuant to 
paragraph (e) of this section shall be approved only for those hours of 
instruction generally considered necessary for a student to obtain an 
identified vocational objective. This requirement is met only if the 
number of hours approved does not exceed the maximum set forth in 
paragraph (i)(1) through (3) of this section. Flight instruction may 
never be substituted for ground training.


(Authority: 10 U.S.C. 16136(c); 38 U.S.C. 3002(3), 3202(2), 3452(b))

    (1) Flight or flight simulator instruction. Except as provided in 
paragraph (i)(4) of this section, the maximum number of hours of flight 
instruction or flight simulator instruction which may be approved for a 
flight course shall not exceed the number determined by this paragraph.
    (i) The maximum number of hours of solo flight instruction shall not 
exceed the minimum number of hours required for the course provided by 
FAA regulations.
    (ii) The maximum number of hours of dual flight instruction shall 
not exceed the lesser of--
    (A) The number of hours of dual flight instruction in the course 
outline approved by the FAA, or
    (B) 120% of the minimum number of hours of dual flight instruction 
required for the course by FAA regulations.
    (iii) The maximum number of hours of instruction by flight simulator 
or flight training device that a State approving agency may approve is 
the maximum number of hours of instruction by flight simulator or flight 
training device permitted by 14 CFR part 61 for that course when:
    (A) A course is offered in whole or in part by flight simulator or 
flight training device conducted by a training center certificated under 
14 CFR part 142; and
    (B) 14 CFR part 61 contains a maximum number of hours of instruction 
by flight simulator or flight training

[[Page 311]]

device that may be credited toward the requirements of the rating or 
certificate that is the objective of the course.
    (iv) If a course is offered in whole or in part by flight simulator 
or flight training device, and the course is not described in paragraph 
(i)(1)(iii) of this section, either because the course is offered by a 
flight training center with a grant of exemption letter, or because 14 
CFR part 61 does not contain a maximum number of hours of instruction by 
flight simulator or flight training device, the maximum number of hours 
of instruction by flight simulator or flight training device that may be 
approved may not exceed the number of hours in the Federal Aviation 
Administration-approved outline.


(Authority: 10 U.S.C. 16131(g); 38 U.S.C. 3032(f), 3231(f))

    (2) Ground school. The ground training portion of a flight course 
may include two forms of ground training instruction, ground school and 
preflight briefings and postflight critiques. The minimum hours for 
ground training, as specified in 14 CFR part 141, appendixes C through J 
refer only to ground school and not to preflight briefings and 
postflight critiques. If the ground school training consists of units 
using kits containing audiovisual equipment, quizzes and examinations, 
the maximum number of units approved shall not exceed the number on the 
course outline approved by the FAA. For all other ground school 
training, the number of hours of training shall not exceed the number of 
hours on the course outline approved by the FAA.


(Authority: 10 U.S.C. 16136(c); 38 U.S.C. 3002(3), 3202(2), 3452(b))

    (3) Preflight briefings and postflight critiques. Hours spent in 
preflight briefings and postflight critiques need not be approved by the 
FAA.
    (i) If these hours are on the FAA-approved outline, the maximum 
number of hours of preflight briefings and postflight critiques shall 
not exceed the number of hours on the outline exclusive of the preflight 
briefings and post-flight critiques which are attributable to solo 
flying hours that exceed the minimum number of solo flying hours for the 
course in 14 CFR part 141.
    (ii) If these hours are not on the FAA-approved outline, they may 
not be approved unless the State approving agency finds that the 
briefings and critiques are an integral part of the course and do not 
precede or follow solo flying hours which exceed the minimum number of 
solo flying hours for the course in 14 CFR part 141. The maximum number 
of hours of preflight briefings and postflight critiques which may be 
approved for these courses may not, when added together, exceed 25 
percent of the approved hours of flight instruction.


(Authority: 10 U.S.C. 16131(f)(4); 16136(c), 38 U.S.C. 3002(3), 
3032(f)(4), 3202(2), 3231(f)(4), 3452(b))

    (4) Waiver of limitation in approvable course hours. (i) Flight 
schools that wish to have a greater number of hours of dual flight 
instruction approved than are permitted by paragraph (i)(1)(ii) of this 
section, may seek an administrative review of their approval by the 
Director, Education Service. Requests for such a review should be made 
in writing to the Director of the VA facility having jurisdiction over 
the flight school. The request should--
    (A) State the reasons why the flight school believes that the 
approval should extend to a greater number of hours, and
    (B) Include any evidence tending to show that the greater number of 
hours should be approved.
    (ii) The Director, Education Service shall base her or his decision 
upon the evidence submitted, the recommendation of the Director of the 
VA facility, and, if appropriate, the recommendation of the State 
approving agency having jurisdiction over the flight school.
    (iii) The limit on the number of hours of solo flight instruction 
found in paragraph (i)(1)(i) of this section may not be waived.


(Authority: 10 U.S.C. 16131(f)(4); 38 U.S.C. 3032(f)(4), 3231(f)(4))

    (j) Charges. The appropriate State approving agency shall approve 
charges for tuition and fees for each flight course exclusive of charges 
for tuition and fees for solo flying hours which exceed the maximum 
permitted under

[[Page 312]]

paragraph (i)(1)(i) of this section and for preflight briefings and 
postflight critiques which precede or follow the excess solo hours.


(Authority: 38 U.S.C. 3672)

    (1) The approved charges for tuition and fees shall be based upon 
the charges for tuition and fees which similarly circumstanced 
nonveterans enrolled in the same flight course are required to pay. 
Charges for books, supplies and lodging may not be reimbursed.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(d), 3241(c), 3690(a)(1))

    (2) For the ground school portion of ground training, the State 
approving agency should approve group charges or unit prices if audio-
visual equipment is used. For the preflight briefings and postflight 
critiques, the State approving agency should approve individual 
instructor rates for individual training flights. An average charge per 
hour based upon total hours and cost of all training given on the ground 
may not be approved.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(d), 3241(c), 3690(a)(1))

    (3) A veteran, servicemember or reservist or group (all or part of 
whom are veterans, servicemembers or reservists) owning an airplane may 
lease it to an approved flight school and have exclusive use of the 
aircraft for flight training. The aircraft should meet the requirements 
prescribed for all airplanes to be used in the course, and should be 
shown in the approval by the State approving agency. The leasing 
arrangement should not result in charges for flight instruction for 
those owning the airplane greater than charges made to others not 
leasing an aircraft to the school.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(d), 3241(c), 3690(a)(1))

    (4) If membership in a flight club entitles a veteran, servicemember 
or reservist to flight training at less than the standard rate, his or 
her educational allowance will be based on the reduced rate. No payments 
will be made for the cost of joining the flight club, since it is not a 
charge for the flight course.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(d), 3241(c), 3690(a)(1))

    (k) Substitute aircraft. Except for minor substitutions a veteran, 
servicemember or reservist enrolled in a flight course may train only in 
the aircraft approved for that course. If a particular aircraft is not 
available for some compelling reason, the veteran, servicemember or 
reservist may be permitted to train in an aircraft different from that 
approved for the particular course, provided the aircraft substituted 
will adequately meet the training requirements for this particular phase 
of the course. Substitutions should be explained on the monthly 
certifications of flight training. If this shows that the charge for the 
substituted aircraft is different from the charge approved for the 
regular aircraft, the reimbursement will be based on the lesser charge. 
When substitution becomes the practice rather than the exception, VA 
will suspend payments and notify the veterans, servicemembers, 
reservists and the school. VA will refer the matter to the State 
approving agency for appropriate action.


(Authority: 10 U.S.C. 16136(b), 16136(c); 38 U.S.C. 3034(d), 3672(a))

    (l) Enrollment limitations. A flight course must meet the 85-15 
percent ratio requirement set forth in Sec. 21.4201 before VA may 
approve new enrollments in the course. The contracted portion of a 
flight course must meet all the requirements of Sec. 21.4201 for each 
subcontractor.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(d), 3241(c), 3680A(d))

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0613)

[45 FR 51778, Aug. 5, 1980, as amended at 48 FR 37992, Aug. 22, 1983; 57 
FR 29801, July 7, 1992; 59 FR 21938, Apr. 28, 1994; 61 FR 20728, May 8, 
1996; 63 FR 34130, June 23, 1998; 67 FR 12474, Mar. 19, 2002]

[[Page 313]]



Sec. 21.4264  Farm cooperative courses.

    (a) Description of a farm cooperative course. A farm cooperative 
course is an institutional agricultural course. It provides training on 
a reduced basis to those engaged in farming, compared to other types of 
training. Part-time benefits are provided for students whose farming 
operation will not permit them to attend class at least 10 hours per 
week.
    (b) Farm cooperative students must be farmers. In order to receive 
educational assistance allowance an eligible person must be engaged 
concurrently in agricultural employment for an average of at least 40 
hours per week. This agricultural employment must be relevant to the 
farm cooperative course.
    (c) Acceptable class schedules. (1) The institutional portion of a 
farm cooperative course:
    (i) May be on a term, quarter or semester basis, or
    (ii) May consist of courses which:
    (A) Are offered during at least 44 weeks of the year, and
    (B) Require a minimum of 5 clock hours per week.
    (2) The time involved in field trips and individual and group 
instruction, sponsored and conducted by the educational institution 
offering farm cooperative courses may be counted toward meeting the 
clock-hour requirements. See Sec. 21.4270(c) of this part for 
measurement of farm cooperative courses.


(Authority: 38 U.S.C. 3482, 3532)

    (d) Application. (1) Any school desiring to enroll spouses or 
children in farm cooperative courses:
    (i) Will submit to the appropriate State approving agency a written 
application for approval in accordance with Sec. 21.4253 or Sec.  
21.4254 as appropriate; and
    (ii) Must submit statements of fact showing at least the following:
    (A) That the course is set up in the school catalog or other 
literature of the school;
    (B) That the agricultural course is offered concurrently with 
agricultural employment; and
    (C) That the school itself verifies on a continuing basis that 
students are engaged for an average of at least 40 hours per week in 
suitable agricultural employment which is relevant to the institutional 
agricultural course offered by the school and is in an area consistent 
with their institutional training program.
    (2) For the purposes of this paragraph suitable agricultural 
employment must include employment on a farm or other agricultural 
establishment where the basic activity is either:
    (i) The cultivation of the ground such as the raising and harvesting 
of crops including fruits, vegetables and pastures, or
    (ii) The feeding, breeding and managing of livestock, including 
poultry and other specialized farming.
    (3) The Department of Veterans Affairs does not consider employment 
in training establishments which are engaged primarily in the 
processing, distribution or sale of agricultural products or 
combinations thereof, such as dairy processing plants, grain elevators, 
packing plants, hatcheries, stockyards or florists shops to be suitable 
agricultural employment.
    (e) Approval criteria. The appropriate State approving agency may 
approve the school's application when the agency finds upon 
investigation that the school and its courses have met the following 
conditions:
    (1) The criteria specified in Sec. 21.4253 or Sec.  21.4254, as 
appropriate; and
    (2) The requirements of paragraph (d) of this section.


(Authority: 38 U.S.C. 3482, 3532)

[46 FR 16101, Mar. 11, 1981, as amended at 54 FR 33890, Aug. 17, 1989; 
61 FR 26115, May 24, 1996]



Sec. 21.4265  Practical training approved as institutional training or 
on-job training.

    (a) Medical-dental internships and residencies. (1) Medical 
residencies (other than residencies in podiatric medicine), dental 
residencies, and osteopathic internships and residencies may be approved 
and recognized as institutional courses only when an appropriate 
accrediting agency accredits and approves them as leading to 
certification for a recognized professional objective.
    (2) The appropriate accrediting agencies are:

[[Page 314]]

    (i) The Accreditation Council for Graduate Medical Education, or 
where the Accreditation Council for Graduate Medical Education has 
delegated accrediting authority, the appropriate Residency Review 
Committee,
    (ii) The American Osteopathic Association, and
    (iii) The Commission on Dental Accreditation of the American Dental 
Association.
    (3) These residency programs--
    (i) Must lead to certification by an appropriate Specialty or 
Subspecialty Board, the American Osteopathic Association, or the 
American Dental Association; and
    (ii) Will not be approved to include a period of practice following 
completion of the education requirements even though the accrediting 
agency requires the practice.
    (4) Except as provided in paragraph (a)(5) of this section, no other 
medical or dental residency or osteopathic internship or residency will 
be approved or recognized as institutional training.
    (5) A residency in podiatric medicine may be approved and recognized 
as institutional training only when it has been approved by the Council 
on Podiatry Education of the American Podiatry Association.


(Authority: 38 U.S.C. 3688(b))

    (b) Nursing courses. (1) Courses for the objective of registered 
nurse or registered professional nurse will be assessed as institutional 
training when they are provided in autonomous schools of nursing, 
hospital schools of nursing, or schools of nursing established in other 
schools or departments of colleges and universities, if they are 
accredited by a nationally recognized accrediting agency or if they meet 
the requirements of the licensing body of the State in which the school 
is located. The hospital or fieldwork phase of a nursing course, 
including a course leading to a degree in nursing, will be assessed as 
an institutional course when the hospital or fieldwork phase is an 
integral part of the course, the completion thereof is a prerequisite to 
the successful completion of the course, the student remains enrolled in 
the school during the period, and the training is under the direction 
and supervision of the school.
    (2) Courses offered by schools which lead to the objective of 
practical nurse, practical trained nurse, or licensed practical nurse 
will be assessed as institutional training including both the academic 
subjects and the clinical training if the clinical training is offered 
by an affiliated or cooperating hospital and the student is enrolled in 
and supervised by the school during the period of such clinical 
training. Also they must be accredited by a nationally recognized 
accrediting agency or meet the requirements of the licensing body of the 
State in which the school is located.
    (3) Except for enrollment in a nurse's aide course approved pursuant 
to Sec. 21.4253(a)(5), VA shall not approve an enrollment in a 
nonaccredited nursing course which does not meet the licensing 
requirements of the State where the course is offered.


(Authority: 38 U.S.C. 3452, 3688)

    (c) Medical and dental specialty courses. (1) Required clinical 
training included in a school course given in an affiliated hospital, 
clinic, laboratory, or medical center as a part of a medical or dental 
specialty course whether accredited or nonaccredited offered by a school 
such as X-ray technician, medical technician, medical records 
administrator, physical therapist or dental technician shall be assessed 
as institutional training provided:
    (i) The student remains enrolled in the course during the clinical 
period;
    (ii) The clinical training is;
    (a) An integral part of the course;
    (b) A prerequisite to the successful completion of the course; and
    (c) Under the direction and supervision of the school; and
    (iii) The course includes substantial technical or professional 
training and does not consist of training preliminarily directed to 
clerical, administrative, secretarial, or receptionist duties.
    (2) Medical and dental specialty courses offered in hospitals, 
clinics, laboratories, or medical centers which are accredited as 
institutional courses by a nationally recognized accrediting agency will 
be assessed as institutional training.

[[Page 315]]

    (3) Clinical training included in a school course given in a 
physician's office or a dentist's office, also called externship, will 
be recognized as part of the institutional training if the course is 
accredited by a nationally recognized accrediting agency and meets the 
other requirements of paragraph (c)(1) of this section. If the course is 
not so accredited such practical or on-the-job training or experience in 
a physician's office may not be included unless the program is approved 
as a cooperative course.
    (4) Nonaccredited courses offered in hospitals, clinics, 
laboratories, or medical centers will be considered on-the-job training 
when the courses meet the requirements of Sec. 21.4262.
    (d) Medical and dental assistants courses for the Department of 
Veterans Affairs. A course prescribed by the Secretary for full-time 
physicians' assistants or for full-time expanded-function auxiliaries 
(formerly referred to as dentists' assistants) may be approved as 
institutional training, if the course is conducted at Department of 
Veterans Affairs facilities or in facilities operated by hospitals, 
medical schools, or medical installations pursuant to a contract with 
the Department of Veterans Affairs.


(Authority: 38 U.S.C. 7407)

    (e) Professional training courses. (1) Any non-medically related 
professional internship program, such as a clinical pastoral course, 
will be recognized as an institutional course when it is accredited as 
an institutional course by a nationally recognized accrediting agency, 
and
    (2) The approved facility for such a course must be the institution 
or other facility where the training is given.
    (f) Other practical training courses. (1) Other off-campus job 
experience included in a school course, variously described by schools 
as internship, residency, practicum, externship, et cetera, may be 
included as a part of a cooperative program when the course meets the 
requirements of Sec. 21.4233(a).
    (2) However, such off-campus courses may be considered as resident 
institutional training only if all of the following conditions are met. 
The course is:
    (i) Accredited by a nationally recognized accrediting agency or is 
offered by a school that is accredited by one of the regional 
accrediting associations;
    (ii) A part of the approved curriculum of the school;
    (iii) Directly supervised by the school;
    (iv) Measured in the same unit as other courses;
    (v) Required for graduation; and
    (vi) Has a planned program of activities described in the school's 
official publication which is approved by the State approving agency and 
which is institutional in nature as distinguished from training on-the-
job. The description shall include at least:
    (A) A unit subject description;
    (B) A provision for an assigned instructor;
    (C) A statement that the planned program of activities is controlled 
by the school, not by the officials of the job establishment;
    (D) A requirement that class attendance on at least a weekly basis 
be regularly scheduled to provide for interaction between instructor and 
student;
    (E) A statement that appropriate assignments are required for 
completion of the course;
    (F) A grading system similar to the system used for other resident 
subjects offered by the school; and
    (G) A schedule of time required for the training which demonstrates 
that the student shall spend at least as much time in preparation and 
training as is normally required by the school for its other resident 
courses.
    (g) Nonaccredited courses. Any nonaccredited internship program not 
given in a school will be recognized as other on-the-job training when 
it meets the requirements of Sec. 21.4262 and when the program is 
required for licensure by the State in which it is offered. (See Sec. 
21.4275 for measurement.)

[41 FR 26683, June 29, 1976, as amended at 43 FR 25429, June 13, 1978; 
49 FR 39545, Oct. 9, 1984; 54 FR 34984, Aug. 23, 1989; 61 FR 6783, Feb. 
22, 1996]

[[Page 316]]



Sec. 21.4266  Courses offered at subsidiary branches or extensions.

    (a) General. A State approving agency in approving a course offered 
at a subsidiary branch or extension of an educational institution may 
either approve the course separately from the course approved for the 
educational institution's parent facility (either its main campus or its 
principal teaching location in a State), or it may combine the approval 
for courses offered at the branch or extension with that for the courses 
offered at the educational institution's parent facility. The choice 
made by the State approving agency shall be governed by the provisions 
of this section.
    (b) Combined approval. If the approval for the courses offered at a 
branch or extension is combined with the approval for the courses 
offered at the educational institution's parent facility, the branch or 
extension does not need to have its own administrative capability. In 
these cases the State approving agency will list the branches or 
extensions and the courses approved at each on the notice of approval 
sent to the educational institution pursuant to Sec. 21.4258. The 
approval of courses offered at a branch or extension may be combined 
with the approval of courses offered at a parent facility only when the 
branch or extension is located in the same State as the parent facility 
and one of the following conditions exist:
    (1) The course offering at the branch or extension consists of a 
small number of unit subjects which do not comprise a program of 
education or a set curriculum large enough to allow pursuit on a 
continuing basis;
    (2) The course offering at the branch or extension is being given on 
a temporary basis (the educational institution is contemplating no more 
than a few cycles of training);
    (3) The facilities at the branch or extension contain insufficient 
space for an administrative capability to be developed.
    (c) Separate approval. If the course offered at a subsidiary branch 
or extension cannot qualify under paragraph (b) of this section for a 
combined approval with the courses offered at the educational 
institution's parent facility, the State approving agency can only 
approve the courses separately. Such a course may not be approved if the 
branch or extension neither has administrative capability nor can 
qualify for an exception to having administrative capability.
    (1) A branch or extension is considered to have an administrative 
capability when:
    (i) The branch or extension maintains all records and accounts 
required by Sec. 21.4209;
    (ii) The branch or extension designates a named certifying official;
    (iii) The branch or extension is able to furnish to the Department 
of Veterans Affairs without resort to the parent school all reports and 
certifications required by Sec. Sec. 21.4203 and 21.4204;
    (iv) The branch or extension maintains a local mailing address.
    (2) Notwithstanding any other provisions of this paragraph courses 
may be approved separately at a branch or extension without 
administrative capability if the parent facility within the same State:
    (i) Maintains a centralized recordkeeping system;
    (ii) Can identify the records of students at each branch;
    (iii) Specifies the branch location when certifying enrollments.


(Authority: 38 U.S.C. 3672, 3689(c))

    Cross Reference: Period of operation of course. See Sec. 21.4251.

[43 FR 35303, Aug. 9, 1978, as amended at 44 FR 62503, Oct. 31, 1979; 61 
FR 26115, May 24, 1996]



Sec. 21.4267  Approval of independent study.

    (a) Overview. Except as provided in Sec. Sec. 21.4252(g), 
21.7120(c), and 21.7622(f), VA may not pay educational assistance for a 
nonaccredited course which is offered in whole or in part by independent 
study. Hence, it is necessary to differentiate independent study from 
similar courses.


(Authority: 38 U.S.C. 3014, 3523, 3672, 3676(e), 3680A(a))

    (b) Definition of independent study. (1) VA considers a course to be 
offered entirely by independent study when--

[[Page 317]]

    (i) It consists of a prescribed program of study with provision for 
interaction between the student and the regularly employed faculty of 
the institution of higher learning. The interaction may be personally or 
through use of communications technology, including mail, telephone, 
videoconferencing, computer technology (to include electronic mail), and 
other electronic means;
    (ii) It is offered without any regularly scheduled, conventional 
classroom or laboratory sessions; and
    (iii) It is not a course listed in paragraph (c), (d), or (e) of 
this section.
    (2) VA considers a course to be offered in part by independent study 
when--
    (i) It is an undergraduate course;
    (ii) It is not classified as one of the three types of courses 
listed in paragraph (c) of this section;
    (iii) It has some weeks when standard class sessions are scheduled; 
and
    (iv) It consists of independent study as defined in paragraph (b)(1) 
of this section during those weeks when there are no regularly scheduled 
class sessions.


(Authority: 38 U.S.C. 3523, 3676(e), 3680A(a))

    (c) Scope of independent study. VA does not consider any of the 
following courses to be courses offered by independent study.
    (1) A cooperative course as defined in Sec. 21.4233(a);
    (2) A farm cooperative course; or
    (3) A course approved as a correspondence course.


(Authority: 38 U.S.C. 3676(e), 3680A(a))

    (d) Undergraduate resident training. VA considers the following 
undergraduate courses to be resident training.
    (1) A course which meets the requirements for resident institutional 
training found in Sec. 21.4265(f);
    (2) A course which requires regularly scheduled, standard class 
sessions at least once every two weeks and which has a total number of 
class sessions equal to the number of credit hours awarded for the 
course, times the number of weeks in a standard quarter or semester, as 
applicable;
    (3) A course of student teaching; and
    (4) Flight training which is an integral part of a standard 
undergraduate college degree.
    (e) Graduate resident training. VA considers a graduate course to be 
resident training if the course--
    (1) Is offered through regularly scheduled, conventional classroom 
or laboratory sessions; or
    (2) Consists of research (either on campus or in absentia) necessary 
for the preparation of the student's--
    (i) Master's thesis,
    (ii) Doctoral dissertation, or
    (iii) Similar treatise which is prerequisite to the degree being 
pursued; or
    (3) Consists of a combination of training as described in paragraphs 
(e)(1) and (e)(2) of this section.


(Authority: 38 U.S.C. 3676(e), 3680A(a))

    (f) Course approval. A State approving agency may approve a course 
offered by independent study or a combination of independent study and 
resident training only if--
    (1) The course is accredited and leads to a standard college degree; 
and
    (2) The course meets the requirements of Sec. 21.4253.


(Authority: 38 U.S.C. 3672, 3675, 3680A(a)(4))

[61 FR 6783, Feb. 22, 1996, as amended at 62 FR 40280, July 28, 1997]

                    Assessment and Pursuit of Courses



Sec. 21.4270  Measurement of courses.

    (a) Measurement of trade, technical, and high school courses. Trade, 
technical, high school, and high school preparatory courses shall be 
measured as stated in this paragraph.
    (1) Trade and technical courses. (i) Except as provided in paragraph 
(b) of this section, if shop practice is an integral part of a trade or 
technical course not leading to a standard college degree--
    (A) A full-time enrollment is 22 clock hours per week (exclusive of 
supervised study) with not more than 2\1/2\ hours rest period allowance;
    (B) A three-quarter-time enrollment is 16 through 21 clock hours per 
week (exclusive of supervised study) with not more than 2 hours rest 
period allowance;

[[Page 318]]

    (C) A one-half-time enrollment is 11 through 15 clock hours per week 
(exclusive of supervised study) with not more than 1\1/4\ hours rest 
period allowance;
    (D) A less than one-half-time but more than one-quarter-time 
enrollment is 6 through 10 clock hours per week (exclusive of supervised 
study) with not more than \3/4\ hour rest period allowance; and
    (E) A quarter-time enrollment is 1 through 5 clock hours per week 
(exclusive of supervised study).
    (ii) Except as provided in paragraph (b) of this section, if theory 
and class instruction constitute more than 50 percent of the required 
hours in a trade or technical course not leading to a standard college 
degree, enrollments will be measured as follows. In measuring net 
instruction there will be included customary intervals not to exceed 10 
minutes between classes. Shop practice and rest periods are excluded. 
Supervised instruction periods in a school's shops and the time involved 
in field trips and group instruction may be included in computing the 
clock hour requirements.
    (A) A full-time enrollment is 18 clock hours net instruction per 
week (exclusive of supervised study);
    (B) A three-quarter-time enrollment is 13 through 17 clock hours net 
instruction per week (exclusive of supervised study);
    (C) A one-half-time enrollment is 9 through 12 clock hours net 
instruction per week (exclusive of supervised study);
    (D) A less than one-half-time but more than one-quarter-time 
enrollment is 5 through 8 clock hours net instruction per week 
(exclusive of supervised study); and
    (E) A quarter-time enrollment is 1 through 4 clock hours net 
instruction per week (exclusive of supervised study).
    (2) High school courses. If a student is pursuing high school 
courses at a rate which would result in an accredited high school 
diploma in four ordinary school years, VA considers him or her to be 
enrolled full time. Otherwise, for high school enrollments, training 
time will be determined as follows. (For the purpose of this paragraph, 
a unit is not less than one hundred and twenty 60-minute hours or the 
equivalent of study in any subject in one academic year.)
    (i) A full-time enrollment is 18 clock hours net instruction per 
week or four units per year or the equivalent;
    (ii) A three-quarter-time enrollment is 13 through 17 clock hours 
net instruction per week or three units per year or the equivalent;
    (iii) A one-half-time enrollment is 9 through 12 clock hours net 
instruction per week or two units per year or the equivalent;
    (iv) A less than one-half-time but more than one-quarter-time 
enrollment is 5 through 8 clock hours net instruction per week or one 
unit per year or the equivalent; and
    (v) A one-quarter-time enrollment is 1 through 4 clock hours net 
instruction per week.
    (3) Elementary school. For a high school preparatory course pursued 
at the elementary school level--
    (i) A full-time enrollment is 18 clock hours net instruction per 
week;
    (ii) A three-quarter-time enrollment is 13 through 17 clock hours 
net instruction per week;
    (iii) A one-half-time enrollment is 9 through 12 clock hours net 
instruction per week;
    (iv) A less than one-half-time but more than one-quarter-time 
enrollment is 5 through 8 clock hours net instruction per week; and
    (v) A one-quarter-time enrollment is 1 through 4 clock hours per 
week.


(Authority: 38 U.S.C. 3688(a))

    (b) Measurement of non-college degree courses offered by 
institutions of higher learning. (1) Notwithstanding the provisions of 
paragraph (a)(1) of this section, if a student is enrolled in a course 
which is not leading to a standard college degree and which is offered 
by an institution of higher learning, VA will measure his or her 
enrollment in the same manner as collegiate undergraduate courses are 
measured according to the provisions of paragraph (c) of this section.
    (2) Notwithstanding the provisions of paragraph (a)(1) of this 
section, if a student is enrolled in a course not leading to a standard 
college degree which

[[Page 319]]

is offered on a standard quarter- or semester-hour basis by an 
educational institution which is not an institution of higher learning, 
VA shall measure his or her enrollment in the same manner as collegiate 
undergraduate courses are measured according to the provisions of 
paragraph (c) of this section, provided that the educational institution 
requires at least the same minimum number of hours of weekly attendance 
as are required by paragraph (a)(1) of this section for courses offered 
on a clock-hour basis. If the educational institution does not require 
at least the same minimum number of hours of weekly attendance as are 
required in paragraph (a)(1) of this section, VA will not apply the 
provisions of paragraph (c) of this section, but will measure the course 
according to the criteria in paragraph (a)(1) of this section.


(Authority: 38 U.S.C. 3688(a)(7))

    (c) Undergraduate, graduate, professional, and on-the-job training 
courses. Collegiate graduate, professional and on-the-job training 
courses shall be measured as stated in this table. This shall be used 
for measurement of collegiate undergraduate courses subject to all the 
measurement criteria of Sec. 21.4272. Clock hours and sessions 
mentioned in this table mean clock hours and class sessions per week.


(Authority: 38 U.S.C. 3482, 3532, 3677, 3687, 3688)

                                                                         Courses
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Less than \1/2\
         Kind of school             Kind of course         Full time          \3/4\ time          \1/2\ time        more than \1/4\   \1/4\ time or less
                                                                                                                         time
--------------------------------------------------------------------------------------------------------------------------------------------------------
Collegiate undergraduate........  Standard            14 semester hours   10 through 13       7 through 9         4 through 6         1 through 3
                                   collegiate          or equivalent \2\.  semester hours or   semester hours or   semester hours or   semester hours or
                                   courses including                       equivalent.         equivalent.         equivalent.         equivalent.
                                   cooperative and
                                   external degree
                                   programs \1\.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Collegiate graduate.............  Standard            14 semester hours   10 through 13       7 through 9         4 through 6         1 through 3
                                   collegiate          or equivalent or    semester hours or   semester hours as   semester hours or   semester hours or
                                   graduate courses    as certified by a   as certified by a   certified by a      as certified by a   as certified by a
                                   including law and   responsible         responsible         responsible         responsible         responsible
                                   external degree     official of the     official of the     official of the     official of the     official of the
                                   programs \1\.       school \2\.         school.             school.             school.             school.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Professional nonaccredited......  Law only \3\......  12 class sessions   9 through 11 class  6 through 8 class   4 through 5 class   1 through 3 class
                                                       per week.           sessions per week.  sessions per week.  sessions per week.  sessions per
                                                                                                                                       week.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Professional accredited and       Internships and     As established by   As established by   As established by   As established by   As established by
 equivalent.                       residencies:        accrediting         accrediting         accrediting         accrediting         accrediting
                                   Medical, Dental,    association.        association or      association or      association or      association or
                                   Osteopathic.                            entity offering     entity offering     entity offering     entity offering
                                                                           the internship or   the internship or   the internship or   the internship or
                                                                           residency.          residency.          residency.          residency
                                  Nursing, X-ray,     18 clock hours or   13 through 17       9 through 12 clock  5 through 8 clock   1 through 4 clock
                                   medical             14 semester         clock hours or 10   hours or 7          hours or 4          hours or less
                                   technology,         hours, as           through 13          through 9           through 6           than 4 semester
                                   medical records     appropriate.        semester hours,     semester hours,     semester hours,     hours, as
                                   librarian,                              as appropriate.     as appropriate.     as appropriate.     appropriate.
                                   physical therapy
                                   \4\.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Training establishment..........  Apprentice or       Standard workweek.  ..................  Full time only....  ..................
                                   other on-the-job
                                   \5\.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agricultural....................  Farm Cooperative    10 clock hours net  7 clock hours net   5 clock hours net   ..................  No provision.
                                   \6\.                instruction \7\.    instruction.        instruction.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Cooperative courses may be measured on a full-time basis only.

[[Page 320]]

 
\2\ When the institution certifies that all undergraduate students enrolled for a minimum of 12 or 13 semester hours or the equivalent are charged full-
  time tuition, or considered full time for other administrative purposes, such minimum hours will establish the criteria for full-time measurement.
  When 12 hours is properly certified as full time, VA will measure 9 through 11 hours as \3/4\ time, 6 through 8 hours as \1/2\ time, 4 through 5 hours
  as less than \1/2\ time and more than \1/4\ time, and 1 through 3 hours as \1/4\ time or less. VA will measure all other undergraduate courses as
  indicated in the table for undergraduate or professional courses, as appropriate, but when 13 credit hours or the equivalent is certified as full
  time, \3/4\ time will be 10 through 12 hours. When, in accordance with Sec.  21.4273(a), a responsible official of a school certifies that a lesser
  number of hours constitute full time, \3/4\ time, \1/2\ time, less than \1/2\ time and more than \1/4\ time, or \1/4\ time or less, VA will accept the
  certification for measurement purposes.
To meet criteria for full-time measurement in standard collegiate courses which include required noncredit deficiency courses, in the absence of a
  certification under Sec.  21.4272(k), VA will convert the noncredit deficiency courses on the basis of the applicable measurement criteria, as
  follows: 18 or 22 clock hours, 4 ``Carnegie Units,'' or 12, 13, or 14 (as appropriate) semester hours equal full time. The credit-hour equivalent of
  such noncredit courses may constitute any portion of the required hours for full-time measurement.
\3\ Class sessions measured on basis of not less than 50 minutes of classroom instruction. Supervised study periods, class breaks and rest periods are
  excluded.
\4\ Supervised study must be excluded.
\5\ Full-time training will consist of the number of hours which constitute the standard workweek of the training establishment, but not less than 30
  hours unless a lesser number of hours is established as the standard workweek for the particular establishment through bona fide collective bargaining
  between employers and employees.
\6\ In measuring net instruction there will be included customary intervals not to exceed 10 minutes between classes. Shop practice and rest periods are
  excluded. Supervised instruction periods in school's shops in farm cooperative programs and the time involved in field trips and individual and group
  instruction may be included in computing the clock hour requirements.
\7\ For full-time training the 440 clock hours a year may be prescheduled to provide not less than 80 clock hours in any 3-month period.


[44 FR 62503, Oct. 31, 1979, as amended at 45 FR 73479, Nov. 5, 1980; 48 
FR 37992, Aug. 22, 1983; 50 FR 21605, May 28, 1985; 50 FR 43135, Oct. 
24, 1985; 54 FR 48549, Dec. 1, 1988; 54 FR 33891, Aug. 17, 1989; 57 FR 
29804, July 7, 1992; 57 FR 35628, Aug. 10, 1992; 61 FR 6784, Feb. 22, 
1996; 62 FR 55760, Oct. 28, 1997]



Sec. 21.4271  [Reserved]



Sec. 21.4272  Collegiate course measurement.

    VA will measure a college level course in an institution of higher 
learning on a credit-hour basis provided all the conditions under 
paragraph (a) or (b) of this section are met. See also Sec. 21.4273.


(Authority: 38 U.S.C. 3688)

    (a) Degree courses--accredited or candidate. VA will measure a 
degree course on a credit-hour basis when--
    (1) An institution of higher learning offers the course; and
    (2) A nationally recognized accrediting association either--
    (i) Accredits the institution of higher learning, or
    (ii) Recognizes the institution as a candidate for accreditation; 
and
    (3) The credits earned in the course can be applied towards an 
associate, baccalaureate or higher degree which is--
    (i) Appropriate to the level of the institution of higher learning's 
accreditation, or
    (ii) Appropriate to the level of the institution of higher 
learning's candidacy for accreditation; and
    (4) The course is offered on a semester-hour or quarter-hour basis, 
and
    (5) The degree to which the course credits are applicable either--
    (i) Is granted by the institution of higher learning offering the 
course,
    (ii) Is a part of a concurrent enrollment as described in Sec. 
21.4233(b), or
    (iii) Is being pursued by a nonmatriculated student as provided in 
Sec. 21.4252 (1), (2) or (3).
    (b) Degree courses--nonaccredited. VA will measure on a credit-hour 
basis a degree course which does not meet the requirements of paragraph 
(a) of this section when--
    (1) The course is offered on a semester- or quarter-hour basis, and
    (2) The course leads to an associate, baccalaureate, or higher 
degree, which is granted by the school offering the degree under 
authority specifically conferred by a State education agency, and
    (3) The school will furnish a letter from a State university or 
letters from three schools that are full members of a nationally 
recognized accrediting association. In each letter the State university 
or accredited school must certify either:
    (i) That credits have been accepted on transfer at full value 
without reservation, in partial fulfillment of the requirements for a 
baccalaureate or higher degree for at least three students within the 
last 5 years, and that

[[Page 321]]

at least 40 percent of the subjects within each curriculum, for which 
credit-hour measurement is sought, has been accepted without reservation 
by the certifying State university or accredited school, or
    (ii) That in the last 5 years at least three students, who have 
received a baccalaureate or higher degree as a result of having 
completed the nonaccredited course, have been admitted without 
reservation into a graduate or advanced professional program offered by 
the certifying State university or accredited school.


(Authority: 38 U.S.C. 3688(b))

    (c) [Reserved]
    (d) Course measurement general. When an undergraduate course 
qualifies for credit-hour measurement, VA will measure it according to 
the table contained in Sec. 21.4270(c) of this part.


(Authority: 38 U.S.C. 3688(a); Pub. L. 99-576)

    (e)-(f) [Reserved]
    (g) Course measurement; nonstandard terms. (1) When a term is not a 
standard semester or quarter as defined in Sec. 21.4200(b), the 
Department of Veterans Affairs will determine the equivalent for full-
time training by:
    (i) Multiplying the credits to be earned in the term by 18 if credit 
is granted in semester hours, or by 12 if credit is granted in quarter 
hours, and
    (ii) Dividing the product by the number of whole weeks in the term.
    (2) In determining whole weeks for this formula VA will--
    (i) Determine the number of days from the beginning to the end of 
the term as certified by the educational institution, substracting any 
vacation period of 7 days or more;
    (ii) Divide the number of days in the term by 7;
    (iii) Disregard a remainder of 3 days or less, and
    (iv) Consider 4 days or more to be a whole week.


(Authority: 38 U.S.C. 3688(b))

    (3) The quotient resulting from the use of the formula is called 
equivalent credit hours. VA treats equivalent credit hours as credit 
hours for measurement purposes.


(Authority: 38 U.S.C. 3688(b))

    (h)-(i) [Reserved]
    (j) Course measurement; credit course taken under special 
circumstances. If a course is acceptable for credit, but the educational 
institution does not award credit to the veteran or eligible person 
because he or she has not met college entrance requirements or for some 
other valid reason, the Department of Veterans Affairs will measure the 
course as though it were pursued for credit, provided the veteran or 
eligible person performs all of the work prescribed for other students 
who are enrolled for credit.


(Authority: 38 U.S.C. 3688(b))

    (k) Course measurement; noncredit courses. (1) Except for courses 
leading to a secondary school diploma or equivalent, the Department of 
Veterans Affairs will measure noncredit courses given by an institution 
of higher learning on a quarter- or semester-hour basis if the 
institution considers them to be the equivalent, for other 
administrative purposes, of undergraduate courses that lead to a 
standard college degree at the institution of higher learning.
    (2) The Department of Veterans Affairs shall measure other noncredit 
courses under the appropriate criteria of Sec. 21.4270.
    (3) Where a school requires a veteran or eligible person to pursue 
noncredit deficiency, remedial or refresher courses in order to meet 
scholastic or entrance requirements, the school will certify the credit-
hour equivalent of the noncredit deficiency, remedial or refresher 
courses in addition to the credit hours for which the veteran or 
eligible person is enrolled. The Department of Veterans Affairs will 
measure

[[Page 322]]

the course on the total of the credit hours and credit-hour equivalency.


(Authority: 38 U.S.C. 3688)

[31 FR 6774, May 6, 1966, as amended at 32 FR 13407, Sept. 23, 1967; 41 
FR 47930, Nov. 1, 1976; 43 FR 35307, Aug. 9, 1978; 43 FR 49982, Oct. 26, 
1978; 48 FR 37992, Aug. 22, 1983; 50 FR 21605, May 28, 1985; 51 FR 6412, 
Feb. 24, 1986; 54 FR 13065, Mar. 30, 1989; 54 FR 33894, Aug. 17, 1989; 
61 FR 6784, Feb. 22, 1996]



Sec. 21.4273  Collegiate graduate.

    (a) In residence. (1) The Department of Veterans Affairs will 
measure a nonaccredited graduate or advanced professional course (other 
than a law course) as provided in Sec. 21.4272. The Department of 
Veterans Affairs will measure a nonaccredited law course as stated in 
Sec. 21.4274.
    (2) An accredited graduate or advanced professional course, 
including law as specified in Sec. 21.4274, pursued in residence at an 
institution of higher learning will be measured in accordance with Sec. 
21.4272 unless it is the established policy of the school to consider 
less than 14 semester hours or the equivalent as full-time enrollment, 
or the course includes research, thesis preparation, or a comparable 
prescribed activity beyond that normally required for the preparation of 
ordinary classroom assignments. In either case a responsible official of 
the school will certify that the veteran or eligible person is pursuing 
the course full, three-quarter, one-half, less than one-half but more 
than one-quarter, or one quarter or less time.


(Authority: 38 U.S.C. 3688(b))

    (b) In absentia. A responsible official of the school will certify a 
program of research pursued by a veteran or eligible person in absentia 
as full, three-fourths, one-half, less than one-half but more than one-
quarter, or one-quarter or less time, and the activity will be assessed 
by the Department of Veterans Affairs accordingly when:
    (1) The research activity is defined and organized so as to enable 
the certifying official to evaluate the time required for its successful 
pursuit, and
    (2) The time certified for the research activity is independent of 
the time devoted to any employment situation in which the veteran or 
eligible person might be engaged.
    (c) Undergraduate or combination. If a graduate student is enrolled 
in both graduate and undergraduate courses concurrently, or solely in 
undergraduate courses, VA will measure such an enrollment using the 
provisions of Sec. 21.4272 or the graduate school's assessment of 
training time, whichever will result in a higher monthly rate for the 
veteran.


(Authority: 38 U.S.C. 3668(b); Pub. L. 102-568)

[31 FR 6774, May 6, 1966, as amended at 31 FR 8293, June 14, 1966; 32 FR 
4411, Mar. 23, 1967; 50 FR 21606, May 28, 1985; 61 FR 28755, June 6, 
1996]



Sec. 21.4274  Law courses.

    (a) Accredited. A law course in an accredited law school leading to 
a standard professional law degree will be assessed as provided in Sec. 
21.4273(a).
    (b) Nonaccredited. A law course leading to a professional law 
degree, completion of which will satisfy State educational requirements 
for admission to legal practice, pursued in a nonaccredited law school 
which requires for admission to the course at least 60 standard semester 
units of credit or the equivalent in quarter units of credit, will be 
assessed on the basis of 12 class sessions per week for full-time 
attendance. If the course does not meet these requirements it will be 
assessed on the basis of clock hours of attendance per week.

[36 FR 18304, Sept. 11, 1971, as amended at 38 FR 19371, July 20, 1973; 
41 FR 47931, Nov. 1, 1976]



Sec. 21.4275  Practical training courses; measurement.

    (a) Medical and dental residencies and osteopathic internships and 
residencies. VA will measure medical and dental residencies, and 
osteopathic internships and residencies as provided in Sec. 21.4270(c) 
of this part if they are accredited and approved in accordance with 
Sec. 21.4265(a) of this part.


(Authority: 38 U.S.C. 3688(b); Pub. L. 99-576)

    (b) Nursing courses. (1) Courses for the objective of registered 
nurse or registered professional nurse will be measured on the basis of 
credit hours or

[[Page 323]]

clock hours of attendance, whichever is appropriate. The clock hours of 
attendance may include academic class time, clinical training, and 
supervised study periods.
    (2) Courses offered by schools which lead to the objective of 
practical nurse, practical trained nurse, or licensed practical nurse 
will be measured on credit hours or clock hours of attendance per week 
whichever is appropriate.
    (c) Medical and dental specialty courses. (1) Medical and dental 
specialty courses offered by a school whether accredited or 
nonaccredited, shall be measured on the basis of credit hours or clock 
hours of attendance, whichever is appropriate.
    (2) Medical and dental specialty courses offered in hospitals, 
clinics, laboratories or medical centers which are accredited by a 
nationally recognized accrediting agency shall be measured on the basis 
of clock hours of attendance per week.
    (d) Medical and dental assistants courses for the Department of 
Veterans Affairs. Programs approved in accordance with the provisions of 
Sec. 21.4265(d) will be measured on a clock-hour basis as appropriate 
in accordance with Sec. 21.4270, however, the program will be regarded 
as full-time instructional training: Provided, The combined total of the 
classroom and other formal instruction portion of the program and on-
job-training portion of the program requires 30 or more clock hours of 
attendance per week.
    (e) Professional training courses. Nonmedically related professional 
training courses, such as the clinical pastoral course, shall be 
measured in semester hours of attendance or clock hours of attendance 
per week, whichever is appropriate.
    (f) Other practical training courses. These courses will be measured 
in semester hours of credit or clock hours of attendance per week, 
whichever is appropriate, if approved under Sec. 21.4265(f). (See Sec.  
21.4265 for approval.)

[41 FR 26684, June 29, 1976, as amended at 43 FR 25429, June 13, 1978; 
49 FR 39545, Oct. 9, 1984; 54 FR 33894, Aug. 17, 1989]



Sec. 21.4277  Discontinuance: unsatisfactory progress, conduct and 
attendance.

    (a) Satisfactory pursuit of program. Entitlement to benefits for a 
program of education is subject to the requirement that the veteran or 
eligible person, having commenced the pursuit of such program, continues 
to maintain satisfactory progress. If the veteran or eligible person 
does not maintain satisfactory progress, educational benefits will be 
discontinued by the Department of Veterans Affairs. Progress is 
unsatisfactory if the veteran or eligible person does not satisfactorily 
progress according to the regularly prescribed standards and practices 
of the institution he or she is attending.
    (b) Satisfactory conduct. Entitlement to a program of education is 
subject to the requirement that the veteran or eligible person, having 
commenced the pursuit of such program, continues to maintain 
satisfactory conduct in accordance with the regularly prescribed 
standards and practices of the institution in which he or she is 
enrolled. If the veteran or eligible person will no longer be retained 
as a student or will not be readmitted as a student by the institution 
in which he or she is enrolled, educational benefits will be 
discontinued, unless further development establishes that the action of 
the school is of a retaliatory nature. See Sec. 21.4253.
    (c) Satisfactory attendance. Entitlement to benefits for a program 
of education is subject to the requirement that the veteran or eligible 
person, having commenced the pursuit of such program, continues to 
maintain satis- factory attendance in accordance with the regularly 
prescribed standards and practices of the institution in which he or she 
is enrolled. If the veteran or eligible person will no longer be 
retained as a student or will not be readmitted as a student by the 
institution in which he or she is enrolled, educational benefits will be 
discontinued.


(Authority: 38 U.S.C. 3474, 3524)

    Cross Reference. Reports--requirements. See Sec. 21.4203.

[48 FR 37994, Aug. 22, 1983, as amended at 57 FR 29804, July 7, 1992]

[[Page 324]]



Sec. 21.4278  Reentrance after discontinuance.

    (a) Conditions permitting reentrance after discontinuance. A veteran 
or eligible person may be reentered following discontinuance because of 
unsatisfactory conduct, progress or attendance only when either of the 
following sets of conditions exist:
    (1) The veteran or eligible person is resuming enrollment at the 
same educational institution in the same program of education and the 
educational institution has--
    (i) Approved the veteran's or eligible person's reenrollment, and
    (ii) Certified it to the Department of Veterans Affairs; or
    (2) All of the following exist:
    (i) The cause of unsatisfactory conduct, progress or attendance has 
been removed,
    (ii) VA determines that the program which the veteran or eligible 
person now proposes to pursue is suitable to his or her aptitudes, 
interests and abilities, and
    (iii) If a proposed change of program is involved, the change meets 
the requirements for approval under Sec. Sec. 21.4234, 21.5232, 21.7114 
and 21.7614 of this part.


(Authority: 38 U.S.C. 3474 and 3524)

    (b) Programs which may be reentered after discontinuance. Reentrance 
may be for the same program, for a revised program or for an entirely 
different program depending on the cause of the discontinuance and the 
removal of that cause.


(Authority: 38 U.S.C. 3474 and 3524)

    Cross Reference: Counseling. See Sec. 21.4100.

[45 FR 67093, Oct. 9, 1980, as amended at 57 FR 29804, July 7, 1992]



Sec. 21.4279  Combination correspondence-residence program.

    (a) Requirements for pursuit. A program of education may be pursued 
partly in residence and partly by correspondence for the attainment of a 
predetermined and identified objective under the following conditions:
    (1) The correspondence and residence portions are pursued 
sequentially; that is, not concurrently.
    (2) It is the practice of the institution to permit a student to 
pursue a part of his or her course by correspondence in partial 
fulfillment of the requirements for the attainment of the specified 
objective.
    (3) The total credit established by correspondence does not exceed 
the maximum for which the institution will grant credit toward the 
specified objective.
    (4) The educational institution offering the course is accredited by 
an agency recognized by the Secretary of Education; and
    (5) The State approving agency has approved the correspondence-
residence course and has verified compliance with the requirement of 38 
U.S.C. 3672(e) and Sec. 21.4256(a) that at least 50 percent of those 
pursuing the correspondence-residence course require six months or more 
to complete it.

(The information collection requirements in this section have been 
approved by the Office of Management and Budget under control number 
2900-0575.)


(Authority: 38 U.S.C. 3672(e))

    (b) Payment for pursuit of a correspondence-residence program. The 
rate of educational assistance payable to a spouse or surviving spouse 
under 38 U.S.C. Chapter 35 for the residence portion of a 
correspondence-residence course or program shall be computed as set 
forth in Sec. Sec. 21.3131(a) and 21.4270.
    (1) The charges for that portion of the course or program pursued 
exclusively by correspondence will be in accordance with Sec. 
21.3131(a) with 1 month entitlement charged for each $404 of cost 
reimbursed.


(Authority: 38 U.S.C. 3534)

    (2) The charges for the residence portion of the program must be 
separate from those for the correspondence portion.

[38 FR 7394, Mar. 21, 1973, as amended at 39 FR 45237, Dec. 31, 1974; 43 
FR 35308, Aug. 9, 1978; 50 FR 19936, May 13, 1985; 61 FR 29296, June 10, 
1996; 62 FR 63850, Dec. 3, 1997]



Sec. 21.4280  [Reserved]

Subpart E [Reserved]

[[Page 325]]



                        Subpart F_Education Loans

    Authority: 38 U.S.C. 501, 3537, 3698, 3699, unless otherwise noted.



Sec. 21.4500  Definitions.

    (a) General. These definitions shall be applicable for subpart F of 
part 21.
    (b) Education loan. A loan made by the Department of Veterans 
Affairs to an eligible spouse or surviving spouse pursuant to 38 U.S.C. 
3512(f) and 3698.
    (c) Academic year. The 9 month period usually from August or 
September to May or June, which includes generally two semesters or 
three quarters.
    (d) Loan period. (1) The Department of Veterans Affairs will make 
loans normally for a quarter, semester, summer term or two consecutive 
quarters.
    (2) The Department of Veterans Affairs may grant a loan to an 
eligible spouse or surviving spouse attending a course not organized on 
a term, quarter or semester basis if the course requires at least 6 
months at the full-time rate to complete. A loan will be granted for not 
more than 6 months at a time.


(Authority: 38 U.S.C. 3512(f), 3698)

    (i) The Director of the Department of Veterans Affairs facility of 
jurisdiction may waive the requirement that such a course must take at 
least 6 months to complete. Such a waiver of the length of the course 
shall be granted by the Director only if a school requests one for a 
course and the Director finds that:
    (A) During the previous 2 years at least 75 percent of the students 
enrolled in the course completed it.
    (B) During the previous 2 years at least 75 percent of the persons 
completing the course found employment in the occupational category for 
which the course is designed to provide training.
    (C) The default rate on all Department of Veterans Affairs education 
loans ever made to students at the educational institution does not 
exceed 5 percent or 5 cases, whichever is greater.
    (D) The default rate on all loans ever made to students pursuant to 
loan programs administered by the Department of Education does not 
exceed 5 percent or five cases, whichever is greater.
    (E) The course is at least 3 months long.
    (F) The course is approved for full-time attendance only.
    (G) No more than 35 percent of the students attending the course are 
receiving educational assistance from the Department of Veterans 
Affairs.
    (H) The Field Director for the region in which the Department of 
Veterans Affairs facility is located concurs in the waiver.
    (ii) If a school disagrees with a decision of a Director of a 
Department of Veterans Affairs facility, it may, within 1 year from the 
date of the letter from the Director informing the school of the 
decision, request that the decision be reviewed by the Director, 
Education Service. The Director of the Department of Veterans Affairs 
facility shall forward all requests to the Director, Education Service, 
who shall consider all evidence submitted by the school. He or she has 
the authority to affirm or reverse a decision of a Department of 
Veterans Affairs facility, but shall not grant a waiver if the 
requirements of paragraph (d)(2)(i) of this section are not met.
    (iii) A waiver will remain in effect until the date on which the 
course fails to meet one of the requirements of paragraph (d)(2)(i) of 
this section. A school which has received a waiver for a course must 
notify the Director of the Department of Veterans Affairs facility of 
jurisdiction within 30 days of the date on which one of those 
requirements is not met.


(Authority: 38 U.S.C. 3512(f), 3698(c))

    (e) Total amount of financial resources. This term means the total 
of the following:
    (1) The annual adjusted effective income of the eligible spouse or 
surviving spouse, less Federal income taxes paid or payable by the 
veteran or other eligible person with respect to such income, as 
described in paragraph (h) of this section.
    (2) The amount of cash assets of the eligible spouse or surviving 
spouse, as described in Sec. 21.4502(b)(2).
    (3) The amount of financial assistance received by the eligible 
spouse or

[[Page 326]]

surviving spouse under the provisions of Title IV of the Higher 
Education Act of 1965, as amended.
    (4) Educational assistance received or receivable for the loan 
period by the eligible spouse or surviving spouse under 38 U.S.C. 
chapter 35. This amount shall be exclusive of an education loan.
    (5) Financial assistance received by the eligible spouse or 
surviving spouse under any scholarship or grant other than the one 
specified in paragraph (e)(3) of this section.
    (6) Department of Veterans Affairs work-study allowance received or 
receivable by the eligible spouse or surviving spouse under 38 
U.S.C.3537.
    (f) Actual cost of attendance. The term actual cost of attendance 
means:
    (1) The actual charge per student for tuition, fees, and books;
    (2) An allowance for commuting (this allowance will be based on 
22.5[cent] per mile for distances not exceeding normal commuting 
distance);
    (3) An allowance for other expenses reasonably related to attendance 
at the institution at which the eligible spouse or surviving spouse is 
enrolled; and
    (4) A room and board allowance that shall be determined as follows:
    (i) If the educational institution actually provides the eligible 
spouse or surviving spouse with room and board, the allowance shall 
equal the actual charges to him or her for room and board;
    (ii) If the educational institution provides some students with room 
and board, but does not provide room and board for the eligible spouse 
or surviving spouse, the room and board allowance shall equal either the 
actual expenses incurred by the eligible spouse or surviving spouse for 
room and board, or the amount for room and board that the educational 
institution would have charged the eligible spouse or surviving spouse, 
had the educational institution provided him or her with room and board, 
whichever is less; and
    (iii) If the educational institution does not provide any students 
with room and board, the room and board allowance shall equal either the 
actual expenses incurred by the eligible spouse or surviving spouse for 
room and board or the amount the eligible spouse or surviving spouse 
would have been charged for room and board had he or she been provided 
room and board by the nearest State college or State university that 
provides room and board, whichever is less.
    (g) Loan fee. This shall be a fee collected by discounting the 
amount of any loan granted to an eligible spouse or surviving spouse by 
an appropriate amount. The fee shall be collected for each separate loan 
authorized. The amount of the fee shall be 3 percent of the total loan 
amount.
    (h) Annual adjusted effective income. This income shall include:
    (1) Nontaxable income for the student only for the current tax year 
in which the application for the education loan is received by the 
Department of Veterans Affairs. This includes income from sources such 
as Department of Veterans Affairs compensation and pension, disability 
retirement, unemployment compensation, welfare payments, social security 
benefits, etc.
    (2) Adjusted gross income (wages, salary, dividends, interest, 
rental, business, etc.) for the student only for the current tax year in 
which the application for the education loan is received by the 
Department of Veterans Affairs, less:
    (i) Authorized deductions for exemptions;
    (ii) Itemized or standard deduction, whichever is greater;
    (iii) Mandatory withholdings such as Federal and State income taxes, 
social security taxes, etc.


(Authority: 38 U.S.C. 3512(f), 3698(b))

    (i) School term. This phrase means:
    (1) In the case of an institution of higher learning operating on a 
quarter system, three consecutive quarters within an ordinary school 
year;
    (2) In the case of an institution of higher learning operating on a 
semester system, two consecutive semesters within an ordinary school 
year; or
    (3) In the case of an educational institution not an institution of 
higher learning or in the case of an institution of higher learning not 
operating on a quarter or semester system, a period of 9 to 11 months 
provided:
    (i) The program of education is divided into segments, and

[[Page 327]]

    (ii) At least one segment is completed prior to or during the 9 to 
11-month period.


(Authority: 38 U.S.C. 1682A(e), (repealed, Pub. L. 100-689, section 
124(a)))

[40 FR 31764, July 29, 1975, as amended at 44 FR 62505, Oct. 31, 1979; 
48 FR 37995, Aug. 22, 1983; 54 FR 34984, Aug. 23, 1989; 61 FR 26115, May 
24, 1996]



Sec. 21.4501  Eligibility.

    (a) General. Any eligible spouse or surviving spouse shall be 
eligible to receive an education loan if he or she meets the criteria of 
this section.


(Authority: 38 U.S.C. 3512(f), 3698)

    (b) Eligibility criteria. To qualify for an education loan--
    (1) The eligible spouse's or surviving spouse's delimiting period as 
determined by Sec. 21.3046 (a), (b), or (d), or Sec.  21.3047 must have 
expired;
    (2) The eligible spouse or surviving spouse must--
    (i) Have financial resources that may reasonably be expected to be 
expended for education needs and which are insufficient to meet the 
actual costs of attendance;
    (ii) Execute a promissory note payable to the Department of Veterans 
Affairs, as provided by Sec. 21.4504;
    (iii) Have unused entitlement provided under 38 U.S.C. 3511;
    (iv) During the term, quarter, or semester for which the loan is 
granted, be enrolled on a full-time basis in pursuit of the approved 
program of education in which he or she was enrolled on the date his or 
her eligibility expired under Sec. 21.3046 (a), (b), or (d), or Sec.  
21.3047; and
    (v) Have been enrolled in a program of education on a full-time 
basis--
    (A) On the date his or her period of eligibility expired under Sec. 
21.3046 (a), (b), or (d), or Sec. 21.3047; or
    (B) On the last date of the ordinary term, semester or quarter 
preceding the date his or her eligibility expired under Sec. 21.3046 
(a), (b), or (d), or Sec. 21.3047, if the delimiting date fell during a 
school break or summer term.


(Authority: 38 U.S.C. 3512(f), 3698)

    (c) Limitations. The period for which a loan may be granted shall 
not extend beyond the earliest of the following dates:
    (1) Two years after the expiration of the period of eligibility as 
determined by Sec. 21.3046(a), (b), or (d), or Sec.  21.3047;
    (2) The date on which the eligible spouse's or surviving spouse's 
entitlement is exhausted; or
    (3) The date on which the eligible spouse or surviving spouse 
completes the approved program of education which he or she was pursuing 
on the date the delimiting period determined by Sec. 21.3046 (a), (b), 
or (d), or Sec. 21.3047 expired.


(Authority: 38 U.S.C. 3512(f), 3698)

    (d) Exclusions. No eligible spouse or surviving spouse shall be 
authorized an education loan if he or she has defaulted on a previous 
education loan and there is a remaining unliquidated payment due VA.


(Authority: 38 U.S.C. 3512(f), 3698)

[61 FR 26115, May 24, 1996, as amended at 62 FR 51785, Oct. 3, 1997]



Sec. 21.4502  Applications.

    (a) General. An eligible spouse or surviving spouse shall make an 
application for an education loan in the manner prescribed and upon the 
forms prescribed by the Department of Veterans Affairs. The Department 
of Veterans Affairs must receive the application no later than the last 
date of the term, quarter, semester, or 6-month period to which all or 
part of the loan will apply. The application shall be certified by the 
school as to the date required from the school by the Department of 
Veterans Affairs.


(Authority: 38 U.S.C. 3471)

    (b) Information. The application shall provide the Department of 
Veterans Affairs with the following information and such other 
information as may be reasonable upon specific request:
    (1) A statement of nontaxable income for the student for the current 
tax year in which the application is received by the Department of 
Veterans Affairs; as well as a statement of adjusted gross income for 
the student for the current tax year in which the application for an 
education loan is received by the

[[Page 328]]

Department of Veterans Affairs less authorized deductions for 
exemptions, itemized or standard deduction, whichever is greater, and 
mandatory withholdings such as Federal and State income taxes, social 
security taxes, etc.
    (2) The amount of all funds of the eligible spouse or surviving 
spouse on hand on the date of the application including cash on hand, 
money in a bank or savings and loan association account, and 
certificates of deposit.
    (3) The full amount of the tuition for the course to be paid by the 
eligible spouse or surviving spouse during the period for which the loan 
is sought.
    (4) The amount of reasonably anticipated expenses for room and board 
to be expended by the eligible spouse or surviving spouse during the 
period for which the loan is sought, including a reasonable amount, not 
to exeed 22.5 cents per mile, for commuting normal distances to classes 
if the student does not reside on campus. Applications may also provide 
the Department of Veterans Affairs with a statement of the amount of 
charges for room and board which the school would have made had the 
school provided the eligible spouse or surviving spouse with room and 
board. If the school does not provide room and board, the application 
may provide the Department of Veterans Affairs with a statement of 
charges for room and board which the eligible spouse or surviving spouse 
would have received had he or she been provided room and board at the 
nearest State college or State university which provides room and board.


(Authority: 38 U.S.C. 3698(b))

    (5) The anticipated reasonable cost of books and supplies required 
for the courses to be taken during the period for which the loan is 
sought.

[40 FR 31764, July 29, 1975, as amended at 44 FR 62507, Oct. 31, 1979; 
48 FR 37996, Aug. 22, 1983; 49 FR 8920, Mar. 9, 1984; 61 FR 26116, May 
24, 1996]



Sec. 21.4503  Determination of loan amount.

    (a) General. The amount of the education loan shall be computed by:
    (1) Determining the total amount of financial resources of the 
eligible spouse or surviving spouse, as defined in Sec. 21.4500(e), 
which may be reasonably expected to be expended for education needs in 
any academic year or other loan period.
    (2) Subtracting the available resources determined in paragraph 
(a)(1) of this section from the actual cost of attendance, as defined in 
Sec. 21.4500(f), to obtain the net amount by which costs exceed the 
resources available for education needs. If the available resources and 
the costs are equal, or if the resources exceed the costs, no loan will 
be authorized.
    (b) Amount. A loan shall be authorized in the amount of the excess 
of cost over available resources as determined in paragraph (a) of this 
section subject to the following limitations:
    (1) If the costs exceed the available resources by $50 or less no 
loan shall be granted.
    (2) The aggregate of the amounts any eligible spouse or surviving 
spouse may borrow for an education loan may not exceed $2,500 in any one 
academic year. It also may not exceed an amount determined by 
multiplying the number of months of educational assistance to which the 
eligible spouse or surviving spouse would be entitled were it not for 
the expiration of his or her delimiting period under 38 U.S.C. 3511 
times $376.


(Authority: 38 U.S.C. 3512(f), 3698)

    (3) If a student is enrolled in a course organized on a term, 
quarter or semester basis, no single loan shall be authorized at one 
time for a period that is longer than two consecutive quarters. If a 
student is enrolled in a course not organized on a term, quarter or 
semester basis, no single loan shall be authorized at one time for a 
period that is longer than 6 months.


(Authority: 38 U.S.C. 3698)

    (4) The Department of Veterans Affairs shall pay the following 
maximum amounts for these loan periods:
    (i) $1,250 for any semester.
    (ii) $830 for any term of 8 weeks or more leading to a standard 
college degree which is not part of the normal academic year or for a 
quarter.
    (iii) $1660 for two consecutive quarters.

[[Page 329]]

    (iv) $270 per month for a course not leading to a standard college 
degree if less than 6 months long.
    (v) $1660 for a 6-month loan period based on a course not leading to 
a standard college degree which is 6 or more months long.
    (vi) $270 per month for a loan period of less than 6 months based on 
a course not leading to a standard college degree which is 6 or more 
months long.


(Authority: 38 U.S.C. 3512(f), 3698(b))

    (5) No amount authorized will be paid by the Department of Veterans 
Affairs until the eligible spouse or surviving spouse is certified as 
being enrolled and actually pursuing the course.
    (6) An eligible spouse or surviving spouse may receive more than one 
loan covering separate loan periods, subject to paragraphs (b)(3) and 
(b)(7) of this section.
    (7) If the spouse or surviving spouse has a material change in 
economic circumstances subsequent to the original application for a 
loan, he or she may reapply for an increase in an authorized loan or for 
a loan, if otherwise qualified, if no loan was originally granted. 
However, the Department of Veterans Affairs will not decrease or revoke 
a loan once granted, absent fraud in the application.

[40 FR 31765, July 29, 1975, as amended at 48 FR 37996, Aug. 22, 1983; 
49 FR 8439, Mar. 7, 1984; 50 FR 19936, May 13, 1985; 61 FR 26116, May 
24, 1996]



Sec. 21.4504  Promissory note.

    (a) General. The agreement by VA to loan money pursuant to 38 U.S.C. 
3512(f) and 3698 to any eligible spouse or surviving spouse shall be in 
the form of a promissory note which shall include:
    (1) The full amount of the loan.
    (2) Agreement to pay a fee not to exceed 3 percent for an insurance 
fund against defaults.
    (3) A note or other written obligation providing for repayment of 
the principal amount, and interest on the loan in annual installments 
over a period beginning 9 months after the date on which the borrower 
first ceases to be at least a half-time student and ending:
    (i) For loans of $600 or more, 10 years and 9 months after such 
date, or
    (ii) For loans of less than $600, 1 year and 7 months after such 
date for the first $50 of the loan plus 1 additional month for each 
additional $5 of the loan.
    (4) A provision for prepayment of all or part of the loan, without 
penalty, at the option of the borrower.
    (b) Interest. The promissory note shall advise the student that the 
loan shall bear interest on the unpaid balance of the loan at a rate 
comparable to, but not in excess of, the rate of interest charged 
students at such time on loans insured by the Secretary of Education, 
Department of Education, under part B of Title IV of the Higher 
Education Act of 1965. The rate shall be determined as of the date the 
agreement is executed and shall be a fixed amount.


(Authority: 38 U.S.C. 3698)

    (c) Security. The loan shall be made without security and without 
endorsement.
    (d) Default. Whenever VA determines that a default, in whole or in 
part, has occurred on any such loan the eligible spouse or surviving 
spouse shall be notified that the amount of the default shall be 
recovered from the eligible spouse or surviving spouse concerned in the 
same manner as other debt due the United States. Once a default has 
occurred, the eligible spouse's or surviving spouse's subsequent 
reentrance into training at the half-time or greater rate shall not be 
the basis for rescinding the default. A default may only be rescinded 
when VA has been led to create the default as a result of a mistake of 
fact or law.


(Authority: 38 U.S.C. 3698 (e)(1))

    (e) Death or disability. If the eligible spouse or surviving spouse 
dies or becomes permanently and totally disabled, even though he or she 
ceases to be permanently and totally disabled subsequent to the granting 
of the loan, the remaining liability of such person for an educational 
loan shall be discharged.
    (f) Fraud. Material misrepresentation of fact by the eligible spouse 
or surviving spouse, including omissions of relevant information, shall 
render the

[[Page 330]]

loan agreement null and void. The deferred payment provisions of the 
agreement shall not apply in such a case and the full amount of any loan 
balance shall become due and payable immediately. The amount due shall 
be recovered from the eligible spouse or surviving spouse in the same 
manner as any other debt due the United States.
    (g) Signature. An eligible spouse or surviving spouse may sign both 
the loan application and the promissory note required and payment of the 
amounts authorized will be made to such person, notwithstanding his or 
her minority, unless the person has a legal guardian. In such cases the 
legal guardian must sign and will be paid the loan amounts.

[40 FR 31765, July 29, 1975, as amended at 48 FR 37997, Aug. 22, 1983; 
52 FR 5963, Feb. 27, 1987; 52 FR 7276, Mar. 10, 1987; 61 FR 26116, May 
24, 1996]



Sec. 21.4505  Check delivery.

    (a) General. Education loans by the Department of Veterans Affairs 
shall be made by a check payable to the eligible spouse or surviving 
spouse and shall be mailed promptly to the educational institution in 
which the eligible spouse or surviving spouse is enrolled for delivery 
by the educational institution.
    (b) Delivery and certification. (1) The educational institution, 
electing to participate in this program, shall deliver an education loan 
check to the eligible spouse or surviving spouse and shall certify the 
fact of delivery to the Department of Veterans Affairs immediately upon 
delivery. If the delivery is not made within 30 days after the 
institution receives the check, it shall return the check to the 
Department of Veterans Affairs.
    (2) The Director of the Department of Veterans Affairs facility of 
jurisdiction may direct that education loan checks be sent directly to 
spouses or surviving spouses when:
    (i) The educational institution demonstrates an inability to comply 
with these requirements; or
    (ii) The educational institution fails to provide adequately for the 
safekeeping of the checks prior to the delivery to the student or return 
to the Department of Veterans Affairs; or
    (iii) The educational institution elects not to participate in this 
program; or
    (iv) There is compelling evidence that the institution is unable to 
discharge its responsibilities under this program.


(Authority: 38 U.S.C. 3512(f), 3698)

[44 FR 62508, Oct. 31, 1979, as amended at 61 FR 26116, May 24, 1996]



Sec. 21.4507  Advertising.

    (a) General. No educational institution or training establishment 
shall include a statement in advertisements or brochures intended to 
solicit students as to the availability of education loans from the 
Department of Veterans Affairs for eligible spouses and surviving 
spouses, except as provided in paragraph (b) of this section.
    (b) Form. The statement which is permitted shall be as follows: 
``Certain eligible spouses and surviving spouses may qualify for a 
maximum educational loan of $2,500 per academic year from the Department 
of Veterans Affairs depending upon need. Applications for such loans 
shall be made to the Department of Veterans Affairs on forms prescribed 
by it.''

(Authority: 38 U.S.C. 3512(f), 3696, 3698(b))

[44 FR 62510, Oct. 31, 1979, as amended at 61 FR 26116, May 24, 1996]

Subparts F-1--F-3 [Reserved]



  Subpart G_Post-Vietnam Era Veterans' Educational Assistance Under 38 
                            U.S.C. Chapter 32

    Authority: 38 U.S.C. 501(a), chs. 32, 36, unless otherwise noted.

    Source: 45 FR 31, Jan. 2, 1980, unless otherwise noted.

                             Administrative



Sec. 21.5001  Administration of benefits: 38 U.S.C. Chapter 32.

    (a) Delegation of authority. Except as otherwise provided, authority 
is delegated to the Under Secretary for Benefits and to supervisory or 
administrative personnel within the jurisdiction of the Education 
Service, Veterans Benefits Administration, designated by

[[Page 331]]

him or her to make findings and decisions under 38 U.S.C. Chapter 32 and 
the applicable regulations, precedents, and instructions, as to the 
program authorized by subpart G of this part.


(Authority: 38 U.S.C. 512(a))

    (b) Administrative provisions. In administering benefits payable 
under 38 U.S.C. Chapter 32, VA will apply the following sections:
    (1) Section 21.4002--Finality of decisions;
    (2) Section 21.4003 (except paragraphs (d) and (e))--Revision of 
decisions;
    (3) Section 21.4005--Conflicting interests;
    (4) Section 21.4006--False or misleading statements;
    (5) Section 21.4007--Forfeiture;
    (6) Section 21.4008--Prevention of overpayments; and
    (7) Section 21.4009--Overpayments; waiver or recovery.


(Authority: 38 U.S.C. 3241(a), 3680, 3683, 3685, 3690, 6103)

[61 FR 29029, June 7, 1996]

                                 General



Sec. 21.5020  Post-Vietnam era veterans' educational assistance.

    Title 38 U.S.C. Chapter 32 provides for a participatory program for 
educational assistance benefits to eligible veterans and servicepersons. 
The intent of the Congress for this program is stated in 38 U.S.C. 3201.

(Authority: 38 U.S.C. 3201)

[61 FR 29029, June 7, 1996]



Sec. 21.5021  Definitions.

    For the purpose of subpart G and payment of Chapter 32 benefits the 
following definitions apply:
    (a) Veteran--means anyone whose service meets the requirements of 
Sec. 21.5040.


(Authority: 38 U.S.C. 3202(1))

    (b) Active duty--means full-time duty in the Armed Forces or as a 
commissioned officer of the regular or Reserve Corps of the Public 
Health Service or of the National Oceanic and Atmospheric 
Administration. It does not include any period during which an 
individual:
    (1) Was assigned full-time by the Armed Forces to a civilian 
institution for a course of education which was substantially the same 
as established courses offered to civilians,
    (2) Served as a cadet or midshipman at one of the service academies,
    (3) Served under the provisions of section 511(d) of Title 10, 
United States Code, pursuant to an enlistment in the military reserve or 
national guard,
    (4) Served in an excess leave without pay status, or
    (5) Served in a status specified in Sec. 3.15 of this chapter.


(Authority: 38 U.S.C. 3202)

    (c) State--means each of the several States, territories and 
possessions of the United States, the District of Columbia, the 
Commonwealth of Puerto Rico and the Canal Zone.


(Authority: 38 U.S.C. 101(20))

    (d) School, educational institution, institution. The terms, school, 
educational institution, and institution mean--
    (1) Any vocational school, business school, correspondence school, 
junior college, teacher's college, college, normal school, professional 
school, university or scientific or technical institution;
    (2) Any public or private elementary school or secondary school 
which offers courses for adults; and
    (3) An entity, other than an institution of higher learning, that 
provides training required for completion of a State-approved 
alternative teacher certification program.


(Authority: 38 U.S.C. 3202(2), 3452(c))

    (e) Participant--means a person who is participating in the 
educational benefits program established under Chapter 32. This 
includes:
    (1) A person who has enrolled in and is making contributions by 
monthly payroll deduction to the fund.
    (2) Those individuals who have contributed to the fund and have not 
disenrolled (i.e., users or potential users of benefits).


(Authority: 38 U.S.C. 3202)


[[Page 332]]


    (3) A person who has enrolled in and is having monthly contributions 
to the fund made for him or her by the Secretary of Defense.


(Authority: Sec. 903, Pub. L. 96-342, 94 Stat. 1115)

    (4) A person who has made a lump-sum contribution to the fund in 
lieu of or in addition to monthly contributions deducted from his or her 
military pay.


(Authority: 38 U.S.C. 3222)

    (5) Those individuals who have contributed to the fund and--
    (i) Have been automatically disenrolled as provided in Sec. 
21.5060(b)(3) of this part,
    (ii) Whose funds have been transferred to the Treasury Department as 
provided in Sec. 21.5064(b)(4)(iii) of this part, and
    (iii) Who are found to have qualified for an extended period of 
eligibility as provided in Sec. 21.5042 of this part.


(Authority: 38 U.S.C. 3232;, Pub. L. 99-576)

    (f) Fund--means that trust fund account established to maintain 
dollar contributions of the participant (and contributions, if any, from 
the Department of Defense).


(Authority: 38 U.S.C. 3222)

    (g) Suspends--means a participant stops contributing to the fund 
(temporarily or permanently).
    (h) Disenrolls--means a participant terminates participation and 
forfeits any entitlement to benefits except for a refund of his or her 
contributions previously made.


(Authority: 38 U.S.C. 3221)

    (i) Hardship or other good reasons--means circumstances considered 
to be such by the Department of Defense and the Department of Veterans 
Affairs when referring to suspension or disenrollments, such as illness 
of the participant or a member of his or her immediate family, 
unexpected personal expense, etc.


(Authority: 38 U.S.C. 3221(b))

    (j) Benefit period means:
    (1) For a course leading to a standard college degree:
    (i) The entire enrollment period certified by the school; or
    (ii) That period of time from the beginning of an enrollment period 
until the end of the individual's delimiting period; or
    (iii) That period of time from the beginning of an enrollment period 
to the date on which the individual's contributions in the fund are 
exhausted, whichever is the shortest.
    (2) For a residence course not leading to a standard college degree 
or for a correspondence course that period of time from the beginning of 
the enrollment period as certified by the school or the date the school 
last certified on the quarterly certification of attendance, whichever 
is later, to:
    (i) The end of the enrollment period;
    (ii) The end of the quarter to be certified;
    (iii) The last date of the individual's delimiting period; or
    (iv) The date on which the individual's contributions to the fund 
are exhausted, whichever occurs first.
    (3) [Reserved]
    (4) For apprenticeship and other on-job training that period of time 
from the beginning date of training or the date last certified on the 
monthly certification of training to--
    (i) The end of the month to be certified;
    (ii) The last date of the veteran's delimiting period;
    (iii) The date on which the veteran's entitlement is exhausted, 
whichever occurs first.


(Authority: 38 U.S.C. 3231; Pub. L. 99-576)

    (k) Benefit payment--means all educational assistance allowance paid 
to a veteran for pursuit of a program of education during a benefit 
period.


(Authority: 38 U.S.C. 3231)

    (l) Spouse--means a person of the opposite sex who is the wife or 
husband of the participant, and whose marriage to the participant meets 
the requirements of Sec. 3.1(j) of this chapter.


(Authority: Sec. 903, Pub. L. 96-342, 94 Stat. 1115)


[[Page 333]]


    (m) Surviving spouse--means a person of the opposite sex who is a 
widow or widower of the participant, and whose marriage to the 
participant meets the requirements of Sec. 3.1(j) or Sec.  3.52 of this 
chapter.
    (n) Child--(1) for the purposes of Sec. 21.5067(a) this term means 
a natural child, step-child or adopted child of the participant 
regardless of age or marital status.
    (2) For all other purposes this term means a person whose 
relationship to the participant meets the requirements of Sec. 3.57 or 
Sec. 3.58 of this chapter.
    (o) Parent--means a person whose relationship to the participant 
meets the requirements of Sec. 3.59 of this chapter.


(Authority: 38 U.S.C. 3224)

    (p) Training establishment--means any establishment providing 
apprentice or other training on-the-job, including those under the 
supervision of a college or university or any State department of 
education, or any State apprenticeship agency, or any State board of 
vocational education, or any joint apprenticeship committee, or the 
Bureau of Apprenticeship and Training established in accordance with 29 
U.S.C. Chapter 4C, or any agency of the Federal Government authorized to 
supervise such training.


(Authority: 38 U.S.C. 3202(5), 3452(e); Pub. L. 99-576)

    (q) Program of education--means--
    (1) Any curriculum or combination of subjects or unit courses 
pursued at a school which is generally accepted as necessary to meet 
requirements for a predetermined and identified educational, 
professional or vocational objective;
    (2) Subjects or unit courses which fulfill requirements for more 
than one predetermined and identified objective if all objectives 
pursued are generally recognized as being related to a single career 
field;
    (3) Any unit course or subject or combination of courses or 
subjects, pursued by an individual at an educational institution, 
required by the Administrator of the Small Business Administration as a 
condition to obtaining financial assistance under the provisions of 15 
U.S.C. 636; or
    (4) A full-time program of apprenticeship or other on-job training 
approved as provided in Sec. Sec. 21.4261 or 21.4262 of this part as 
appropriate.


(Authority: 38 U.S.C. 3202(2), 3452(b); Pub. L. 99-576)

    (r) Educational objective--An educational objective is one that 
leads to the awarding of a diploma, degree or certificate which is 
generally recognized as reflecting educational attainment.


(Authority: 38 U.S.C. 3202(2), 3452(b))

    (s) Professional or vocational objective--A professional or 
vocational objective is one that leads to an occupation. It may include 
educational objectives essential to prepare for the chosen occupation. 
When a program of education consists of a series of courses not leading 
to an educational objective, these courses must be generally accepted as 
necessary for attainment of a designated professional or vocational 
objective.


(Authority: 38 U.S.C. 3202(2))

    (t) Deficiency course--The term deficiency course means any 
secondary level course or subject not previously completed 
satisfactorily which is specifically required for pursuit of a post-
secondary program of education.


(Authority: 38 U.S.C. 3241; Pub. L. 100-689)

    (u) Refresher course--The term refresher course means--
    (1) Either a course at the elementary or secondary level to review 
or update material previously covered in a course that has been 
satisfactorily completed, or
    (2) A course which permits an individual to update knowledge and 
skills or be instructed in the technological advances which have 
occurred in the individual's field of employment during and since the 
individual's active military service and which is necessary to enable 
the individual to pursue an approved program of education.


(Authority: 38 U.S.C. 3241(a); Pub. L. 100-689, Pub. L. 101-237).

    (v) Disabling effects of chronic alcoholism. (1) The term disabling 
effects of

[[Page 334]]

chronic alcoholism means alcohol-induced physical or mental disorders or 
both, such as habitual intoxication, withdrawal, delirium, amnesia, 
dementia, and other like manifestations of chronic alcoholism which, in 
the particular case--
    (i) Have been medically diagnosed as manifestations of alcohol 
dependency or chronic alcohol abuse, and
    (ii) Are determined to have prevented commencement or completion of 
the affected individual's chosen program of education.
    (2) A diagnosis of alcoholism, chronic alcoholism, alcohol-
dependency, chronic alcohol abuse, etc., in and of itself, does not 
satisfy the definition of this term.
    (3) Injury sustained by a veteran as a proximate and immediate 
result of activity undertaken by the veteran while physically or 
mentally unqualified to do so due to alcoholic intoxication is not 
considered a disabling effect of chronic alcoholism.


(Authority: 38 U.S.C. 105, 3232, 3462; Pub. L. 100-689)

    (w) Continuous service means--
    (1) Active duty served without interruption. A complete separation 
from active duty service will interrupt the continuity of active duty 
service.
    (2) Time lost while on active duty will not interrupt the continuity 
of service. Time lost includes, but is not limited to, excess leave, 
noncreditable time and not-on-duty time.


(Authority: 38 U.S.C. 3232(a); Pub. L. 101-237)

    (x) Persian Gulf War. The term ``Persian Gulf War'' means the period 
beginning on August 2, 1990, and ending on the date thereafter 
prescribed by Presidential proclamation or by law.


(Authority: 38 U.S.C. 101(33))

    (y) Alternative teacher certification program. The term alternative 
teacher certification program for the purposes of determining whether an 
entity offering such a program is a school, educational institution or 
institution, as defined in paragraph (d)(3) of this section, means a 
program leading to a teacher certificate that allows individuals with a 
bachelor's degree or graduate degree to obtain teacher certification 
without enrolling in an institution of higher learning.


(Authority: 38 U.S.C. 3202(2), 3452(c))

[45 FR 31, Jan. 2, 1980, as amended at 47 FR 51743, Nov. 17, 1982; 52 FR 
3429, Feb. 4, 1987; 53 FR 34495, Sept. 7, 1988; 55 FR 31581, Aug. 3, 
1990; 57 FR 38614, Aug. 26, 1992; 58 FR 34369, June 25, 1993; 61 FR 
1526, Jan. 22, 1996; 65 FR 5786, Feb. 7, 2000]



Sec. 21.5022  Eligibility under more than one program.

    (a) Concurrent benefits under more than one program. An individual 
may not receive educational assistance under 38 U.S.C. Chapter 32 
concurrently with benefits under any of the following provisions of law:
    (1) 38 U.S.C. Chapter 31;
    (2) 38 U.S.C. Chapter 35;
    (3) 10 U.S.C. Chapter 107;
    (4) 10 U.S.C. Chapter 1606;
    (5) Section 903 of the Department of Defense Authorization Act, 1981 
(10 U.S.C. 2141 note); or
    (6) The Omnibus Diplomatic Security and Antiterrorism Act of 1986.


(Authority: 38 U.S.C. 3681(b))

    (b) Total eligibility under more than one program. (1) No one may 
receive a combination of educational assistance benefits under 38 U.S.C. 
Chapter 32 and any of the following provisions of law for more than 48 
months (or part-time equivalent):
    (i) 38 U.S.C. Chapter 30;
    (ii) 38 U.S.C. Chapter 35;
    (iii) 10 U.S.C. Chapter 107;
    (iv) 10 U.S.C. Chapter 1606;
    (v) Section 903 of the Department of Defense Authorization Act, 1981 
(10 U.S.C. 2141, note);
    (vi) The Hostage Relief Act of 1980 (5 U.S.C. 5561 note); or
    (vii) The Omnibus Diplomatic Security and Antiterrorism Act of 1986.
    (2) No one may receive assistance under 38 U.S.C. Chapter 31 in 
combination with assistance under 38 U.S.C. Chapter 32 in excess of 48 
months (or the part-time equivalent) unless VA determines that 
additional months of benefits under 38 U.S.C. Chapter 31 are

[[Page 335]]

necessary to accomplish the purposes of a rehabilitation program.


(Authority: 38 U.S.C. 3231, 3695)

[51 FR 12852, Apr. 16, 1986; 51 FR 16517, May 5, 1986, as amended at 53 
FR 34495, Sept. 7, 1988; 57 FR 38614, Aug. 26, 1992; 61 FR 29029, June 
7, 1996]



Sec. 21.5023  Nonduplication; Federal programs.

    An individual may not receive educational assistance allowance under 
38 U.S.C. Chapter 32, if the individual is:
    (a) On active duty and is pursuing a course of education which is 
being paid for, in whole or in part, by the Armed Forces (or by the 
Department of Health and Human Services in the case of the Public Health 
Service), or


(Authority: 38 U.S.C. 3241, 3681)

    (b) Attending a course of education or training paid for, in whole 
or in part, under the Government Employees' Training Act.


(Authority: 38 U.S.C. 3241, 3681)

[45 FR 31, Jan. 2, 1980, as amended at 47 FR 51744, Nov. 17, 1982; 61 FR 
7217, Feb. 27, 1996]

                         Claims and Applications



Sec. 21.5030  Applications, claims, and time limits.

    (a) To become a participant an individual must apply to his or her 
Service Department on forms prescribed by the Service Department and/or 
the Secretary of Defense.
    (b) Rules and regulations of the applicable Service Department and/
or the Department of Defense shall determine if the application is 
timely.
    (c) The provisions of the following sections shall apply to claims 
for educational assistance under 38 U.S.C. chapter 32:
    (1) Section 21.1029--Definitions.
    (2) Section 21.1030--Claims.
    (3) Section 21.1031--VA responsibilities when a claim is filed.
    (4) Section 21.1032--Time Limits

(Authority: 38 U.S.C. 3232, 3241, 3471; Pub. L. 94-502, Pub. L. 99-576)

[45 FR 31, Jan. 2, 1980, as amended at 48 FR 3368, Jan. 25, 1983; 53 FR 
34495, Sept. 7, 1988; 64 FR 23772, May 4, 1999]

                               Eligibility



Sec. 21.5040  Basic eligibility.

    (a) Individuals not on active duty. Whether an individual has basic 
eligibility under 38 U.S.C. Chapter 32 for educational assistance 
depends upon when he or she entered the military service, the length of 
that service, and the character of that service.


(Authority: 38 U.S.C. 3202).

    (b) Service requirements for all individuals not on active duty. (1) 
An individual not on active duty:
    (i) Must have entered the military service after December 31, 1976, 
and before July 1, 1985;


(Authority: 38 U.S.C. 3202, Pub. L. 99-576)

    (ii) Must not have and except as provided in paragraph (g) of this 
section must not have had basic eligibility under 38 U.S.C. Chapter 34;
    (iii) Must have received an unconditional discharge or release under 
conditions other than dishonorable from any period of service upon which 
eligibility is based;
    (iv) Must either have:
    (A) Served on active duty for a least 181 continuous days, or
    (B) Been discharged or released from active duty for a service-
connected disability.
    (2) The Department of Veterans Affairs will consider that the 
veteran has an unconditional discharge or release if:
    (i) The individual was eligible for complete separation from active 
duty on the date a discharge or release was issued to him or her, or
    (ii) The provisions of Sec. 3.13(c) of this chapter are met.
    (3) The provisions of Sec. 3.12 of this chapter as to character of 
discharge and Sec. 3.13 of this chapter as to conditional discharges 
are applicable.


(Authority: 38 U.S.C. 3202)

    (c) Additional active duty service requirements for some individuals 
not on active duty--Chapter 32. (1) Unless exempted by paragraph (d) of 
this section, persons who originally enlist in a regular component of 
the Armed Forces after September 7, 1980, or who

[[Page 336]]

enter on active duty after October 16, 1981 (either as an enlisted 
member or an officer) to be eligible under 38 U.S.C. Chapter 32, must 
first complete the shorter of:
    (i) 24 continuous months of active duty, or
    (ii) The full period for which the individual was called or ordered 
to active duty.
    (2) For the purpose of paragraph (c)(1) of this section the 
Department of Veterans Affairs considers that an enlisted person 
originally enlisted in a regular component of the Armed Forces on the 
date he or she entered on active duty even through he or she may have 
signed a delayed-entry contract on an earlier date.
    (3) In computing time served for the purpose of this paragraph, the 
Department of Veterans Affairs will exclude any period during which the 
individual is not entitled to credit for service as specified in Sec. 
3.15 of this chapter. However, those periods will be included in 
determining if the service was continuous.
    (d) Individuals exempt from additional active duty requirements. (1) 
An individual who originally enlists in a regular component of the Armed 
Forces after September 7, 1980, or who enters on active duty after 
October 16, 1981 (either as an enlisted member or officer), will be 
eligible to receive benefits under 38 U.S.C. Chapter 32 based upon the 
ensuing period of active duty, and is exempt from the provisions of 
paragraph (c) of this section if he or she subsequently:
    (i) Is discharged or released from active duty:
    (A) Under 10 U.S.C. 1173 (hardship discharge), or
    (B) Under 10 U.S.C. 1171 (early-out discharge), or
    (C) For a disability incurred in or aggravated in line of duty; or
    (ii) Is found by Department of Veterans Affairs to have a service-
connected disability which gives the individual basic entitlement to 
disability compensation as described in Sec. 3.4(b) of this chapter. 
Once the Department of Veterans Affairs makes this finding, the 
exemption will continue to apply even if the disability subsequently 
improves and becomes noncompensable.
    (2) An individual who enters on a period of active duty after 
October 16, 1981, is also exempt from the provisions of paragraph (c) of 
this section if he or she:
    (i) Previously completed a continuous period of active duty of at 
least 24 months, or
    (ii) Was discharged or released from a previous period of active 
duty under 10 U.S.C. 1171 (early-out discharge).
    (3) In computing time served for the purpose of this paragraph, the 
Department of Veterans Affairs will exclude any period during which the 
individual is not entitled to credit for service as specified in Sec. 
3.15 of this chapter. However, those periods will be included in 
determining if the service was continuous.
    (e) Savings provision. An individual may become a participant and 
establish basic eligibility under the provisions of this section based 
upon a period of active duty service which began before October 16, 
1981. He or she would not lose the basic eligibility based upon that 
period of service if, following a release from active duty, the 
individual reenters on active duty after October 16, 1981, and fails to 
meet the requirements of paragraph (c) of this section or qualify for an 
exemption under paragraph (d) of this section. He or she will receive a 
refund of any contributions he or she may make to the fund during the 
second period of active duty. See Sec. 21.5065.


(Authority: 38 U.S.C. 3202, 5303A)

    (f) Individuals on active duty. To establish basic eligibility under 
38 U.S.C. Chapter 32 for educational assistance an individual on active 
duty:
    (1) Must have entered into military service after December 31, 1976, 
and before July 1, 1985.


(Authority: 38 U.S.C. 3202, Pub. L. 96-466, Pub. L. 99-576)

    (2) Must have served on active duty for a period of 181 or more 
continuous days after December 31, 1976, and
    (3) If not enrolled in a course, courses or a program of education 
leading to a secondary school diploma or equivalency certificate, must 
have completed

[[Page 337]]

the lesser of the following two periods of active duty:


(Authority: 38 U.S.C. 3231(b))

    (i) The individual's first obligated period of active duty which 
began after December 31, 1976, or
    (ii) The individual's period of active duty which began after 
December 31, 1976, and which is 6 years in length,
    (4) If enrolled in a course, courses or a program of education 
leading to a seondary school diploma or equivalency certificate, the 
individual:
    (i) Must be an enlisted member of the Armed Forces,
    (ii) Must be a participant
    (iii) Must be training during the last 6 months of his or her first 
period of active duty, or any time thereafter, and
    (5) If he or she originally enlisted after September 7, 1980, must 
have completed at least 24 months of his or her original enlistment


(Authority: 38 U.S.C. 3231(b), 10 U.S.C. 977)

    (g) Election to receive educational assistance allowance under 38 
U.S.C. chapter 32 instead of 10 U.S.C. chapter 1606. An individual who 
serves in the Selected Reserves may not receive credit for that service 
under both 38 U.S.C. Chapter 32 and 10 U.S.C. Chapter 1606. If he or she 
wishes to receive educational assistance based upon this service, the 
veteran must elect the chapter under which he or she will receive 
benefits.
    (1) This election must be in writing and submitted to VA.
    (2) If a veteran elects to receive educational assistance under 38 
U.S.C. Chapter 32, and negotiates an educational assistance check which 
is based upon the period of service for which the election was made, the 
election is irrevocable. Negotiation of an educational assistance check 
provided under either 38 U.S.C. chapter 32 or 10 U.S.C. chapter 1606, 
but based upon a period of service which preceded the period for which 
an election was made, will not serve to make the election irrevocable.


(Authority: 38 U.S.C. 3221(f); Pub. L. 101-237)

[48 FR 36577, Aug. 12, 1983, as amended at 51 FR 12852, Apr. 16, 1986; 
53 FR 34496, Sept. 7, 1988; 57 FR 38614, Aug. 26, 1992; 61 FR 20728, May 
8, 1996; 61 FR 29029, June 7, 1996]



Sec. 21.5041  Periods of entitlement.

    (a) Ten-year delimiting period. Except as provided in Sec. 21.5042 
no educational assistance shall be afforded an eligible individual under 
chapter 32 beyond the date of 10 years after the later of the following:
    (1) His or her last discharge or release from a period of active 
duty of 90 days or more of continuous service; or
    (2) His or her last discharge or release from a period of active 
duty of any length when the eligible individual is discharged or 
released--
    (i) For a service-connected disability;
    (ii) For a medical condition which preexisted such service and which 
VA determines is not service-connected;
    (iii) For hardship; or
    (iv) Involuntarily for convenience of the government after October 
1, 1987, as a result of a reduction in force, as determined by the 
Secretary of the military department concerned in accordance with 
regulations prescribed by the Secretary of Defense or by the Secretary 
of Transportation with respect to the Coast Guard when it is not 
operating as a service in the Navy.


(Authority: 38 U.S.C. 3231; Pub. L. 94-502, Pub. L. 99-576, Pub. L. 101-
237)

    (b) Use of entitlement. The individual--
    (1) May use his or her entitlement at anytime during the 10-year 
period after the last discharge or release from active duty or other 
period as provided pursuant to Sec. 21.5042 of this part;
    (2) Is not required to use his or her entitlement in consecutive 
months.


(Authority: 38 U.S.C. 3232, Pub. L. 94-502, Pub. L. 99-576)

[53 FR 34496, Sept. 7, 1988, as amended at 57 FR 38614, Aug. 26, 1992]

[[Page 338]]



Sec. 21.5042  Extended period of eligibility.

    (a) General. A veteran shall be granted an extension of the 
applicable delimiting period, as otherwise determined by Sec. 21.5041 
of this part provided--
    (1) The veteran applies for an extension.
    (2) The veteran was prevented from initiating or completing the 
chosen program of education within the otherwise applicable delimiting 
period because of a physical or mental disability that did not result 
from the willful misconduct of the veteran. VA will not consider the 
disabling effects of chronic alcoholism to be the result of willful 
misconduct. See Sec. 21.5021(v).


(Authority: 38 U.S.C. 105, 3232, 3462; Pub. L. 99-576, Pub. L. 100-689)

    (b) Application. The veteran must apply for the extended period of 
eligibility in time for VA to receive the application by the later of 
the following dates:
    (1) One year from the last date of the delimiting period otherwise 
applicable to the veteran under Sec. 21.5401 of this part, or
    (2) One year from the termination date of the period of the 
veteran's mental or physical disability.


(Authority: 38 U.S.C. 3232, Pub. L. 99-576)

    (c) Qualifying period of disability. (1) A veteran's extended period 
of eligibility shall be based on the period of time that the veteran 
himself or herself was prevented by reason of physical or mental 
disability, not the result of the veteran's willful misconduct, from 
initiating or completing his or her chosen program of education.
    (2) VA will not consider the disabling effects of chronic alcoholism 
to be the result of willful misconduct provided the last date of the 
time limit for filing a claim for the extension determined under Sec. 
21.5030(c)(3) of this part occurs after November 17, 1988.


(Authority: 38 U.S.C. 105; Pub. L. 100-689)

    (3) Evidence must be presented which clearly establishes that the 
veteran's disability made pursuit of his or her program medically 
infeasible during the veteran's original period of eligibility as 
determined by Sec. 21.5041 of this part. A period of disability 
following the end of the original disability period will not be a basis 
for extension.
    (4) VA will not consider a veteran who is disabled for a period of 
30 days or less as having been prevented from enrolling or reenrolling 
in the chosen program of education or was forced to discontinue 
attendance, because of the short disability.


(Authority: 38 U.S.C. 3232, Pub. L. 99-576)

    (d) Commencing date. The veteran shall elect the commencing date of 
an extended period of eligibility. The date chosen--
    (1) Must be on or after the original date of expiration of 
eligibility as determined by Sec. 21.5041 of this part, and
    (2) Must be on or before the 90th day following the date on which 
the veteran's application for an extension was approved by VA, if the 
veteran is training during the extended period of eligibility in a 
course not organized on a term, quarter or semester basis, or
    (3) Must be on or before the first day of the first ordinary term, 
quarter or semester following the 90th day after the veteran's 
application for an extension was approved by VA if the veteran is 
training during the extended period of eligibility in a course organized 
on a term, quarter or semester basis.


(Authority: 38 U.S.C. 3232; Pub. L. 99-576)

    (4) For a veteran whose entitlement to an extended period of 
eligibility is dependent upon the disabling effects of chronic 
alcoholism, may not begin before November 18, 1988.


(Authority: 38 U.S.C. 105, 3232; Pub. 99-576, Pub. L. 100-689)

    (e) Determining the length of extended periods of eligibility. A 
veteran's extended period of eligibility shall be based upon the 
qualifying period of disability, and determined as follows:
    (1) If the veteran is in training in a course organized on a term, 
quarter or semester basis, his or her extended period of eligibility 
shall contain the same number of days as the number of days from the 
date during the veteran's original delimiting period that his or

[[Page 339]]

her training became medically infeasible to the earliest of the 
following dates:
    (i) The commencing date of the ordinary term, quarter or semester 
following the day the veteran's training became medically feasible,
    (ii) The veteran's delimiting date as determined by Sec. 21.5041 of 
this part, or
    (iii) The date the veteran resumed training.
    (2) If the veteran is training in a course not organized on a term, 
quarter or semester basis, his or her extended period of eligibility 
shall contain the same number of days as the number of days from the 
date during the veteran's original delimiting period that his or her 
training became medically infeasible to the earlier of the following 
dates:
    (i) The date the veteran's training became medically feasible, or
    (ii) The veteran's delimiting date as determined by Sec. 21.5041 of 
this part.


(Authority: 38 U.S.C. 3232; Pub. L. 99-576)

    (f) Discontinuance. If the veteran is pursuing a course on the date 
an extended period of eligibility expires (as determined under this 
section), VA will discontinue the educational assistance allowance 
effective the day before the end of the extended period of eligibility.


(Authority: 38 U.S.C. 3232; Pub. L. 99-576)

[53 FR 34496, Sept. 7, 1988, as amended at 55 FR 31582, Aug. 3, 1990]

                              Participation



Sec. 21.5050  Application requirements for participation.

    (a) An individual, who is otherwise eligible to become a 
participant, must apply to the Service Department under which he or she 
serves upon forms prescribed by the Service Department and/or Secretary 
of Defense.
    (b) No application to participate may be made before entry upon 
active duty.
    (c) Each application must be submitted in time to permit the Service 
Department to make the required deduction from the individual's military 
pay for at least 1 month before the applicant's discharge or release 
from active duty.

(Authority: 38 U.S.C. 3221)



Sec. 21.5052  Contribution requirements.

    (a) Minimum period of participation. Each individual who agrees to 
participate must do so for a minimum period of 12 consecutive months, 
unless the participant:
    (1) Is allowed to disenroll for hardship reasons;
    (2) Is permitted to suspend participation for hardship reasons;
    (3) Is discharged or released from active duty;
    (4) Otherwise ceases to be legally eligible to participate; or
    (5) Elects to make a lump-sum contribution which, when taken 
together with his or her other contributions, equals the equivalent of 
at least 12 months' participation.


(Authority: 38 U.S.C. 3221, 3222)

    (b) Amount of monthly contribution. The individual shall specify the 
amount of his or her contribution to the fund.
    (1) The contribution shall be at least $25 per month but not more 
than $100 per month.
    (2) The contribution shall be evenly divided by five. See Sec. 
21.5292 for contributions made furing the 1-year pilot program.
    (c) Amount of total contribution. An individual may contribute for 
the number of months required to reach a total contribution of $2,700.
    (d) Changing the monthly contribution. An individual may increase or 
decrease the amount of the monthly contribution, but may not do so more 
than once a month.
    (e) Prohibition against contributing. An individual may not make 
contributions to the fund after the date of his or her discharge. The VA 
does not consider the return of an unnegotiated refund check to be a 
contribution. A person who returns a refund check remains continuously 
eligible for benefits.


(Authority: 38 U.S.C. 3222)

    (f) Lump-sum contribution. After September 30, 1980 an individual 
may make

[[Page 340]]

a lump-sum contribution or contributions in place of or in addition to 
monthly contributions.
    (1) A lump-sum contribution:
    (i) Must be evenly divisible by five,
    (ii) Must, when taken together with any monthly contributions the 
participant may have made or may agree to make, equal or exceed 12 
months' participation, and
    (iii) Must not exceed $2,700 when taken together with any monthly 
contributions the participant may have made or may agree to make.
    (2) The Department of Veterans Affairs will consider the lump-sum 
contributions to have been made by monthly deductions from the 
participant's military pay at the rate of $100 per month unless the 
participant specifies a different rate which must be
    (i) No lower than $25 per month,
    (ii) No higher than $100 per month, and
    (iii) Evenly divisible by five.
    (3) If otherwise eligible to make contributions, a participant:
    (i) May make a lump-sum contribution to cover any period of his or 
her active duty. This may entail a retroactive period, including one 
which--
    (A) Begins after December 31, 1976, and before October 1, 1980, or
    (B) Although made after October 27, 1986, includes all or part of 
the period beginning on July 1, 1985, and ending on October 27, 1986.


(Authority: Pub. L. 99-576, sec. 309(c))

    (ii) May make a lump-sum contribution which has the effect of 
increasing the amount of a monthly contribution the participant made 
previously, but the payment cannot have the effect of increasing the 
monthly contribution to an amount greater than $100;
    (iii) May make a lump-sum payment to cover a period for which he or 
she previously obtained a refund;
    (iv) May not make a lump-sum payment to cover a period during which 
the participant was not on active duty or will not be on active duty.
    (4) A participant may make as many lump-sum contributions as he or 
she desires, but he or she may not make more than one lump-sum 
contribution per month.


(Authority: 38 U.S.C. 3222(d)

[45 FR 31, Jan. 2, 1980, as amended at 47 FR 51744, Nov. 17, 1982; 48 FR 
50530, Nov. 2, 1983; 53 FR 617, Jan. 11, 1988; 53 FR 34496, Sept. 7, 
1988]



Sec. 21.5053  Restoration of contributions (Persian Gulf War).

    (a) Restoration of contributions when no entitlement is charged. If 
the provisions of Sec. 21.5072(i) require that a veteran's entitlement 
not be charged for a payment or payments he or she received, the amount 
of the veteran's contributions which were included in the payment or 
payments will be restored to the fund by the Department of Defense.


(Authority: 38 U.S.C. 3235; Pub. L. 102-127) (Oct. 10, 1991)

    (b) Restored contributions are treated like other contributions. VA 
will treat contributions which have been restored under paragraph (a) of 
this section as though the veterans had contributed them for all 
purposes including--
    (1) Computing the veteran's monthly rates and benefit payments under 
Sec. 21.5138, and
    (2) Determining any refund which may become due the veteran under 
Sec. Sec. 21.5064 and 21.5065.


(Authority: 38 U.S.C. 3235; Pub. L. 102-127) (Oct. 10, 1991)

[58 FR 34369, June 25, 1993]



Sec. 21.5054  Dates of participation.

    (a) General. An individual may participate after December 31, 1976. 
An individual was not eligible for benefits before July 1, 1977, unless 
discharged after January 1, 1977, for a service-connected condition. The 
first date on which an individual on active duty enrolled in a course, 
courses or a program of education leading to a secondary school diploma 
or equivalency certificate may receive benefits is subject to the 
eligibility requirements of Sec. 21.5040(f)(4) and (5).


(Authority: 38 U.S.C. 3231 (a) and (b))

    (b) Termination of right to begin participation. (1) Except as 
provided in

[[Page 341]]

paragraph (b)(3) of this section, no individual on active duty in the 
Armed Forces may initially enroll after June 30, 1985.
    (2) An initial enrollment occurs when a serviceperson who has never 
contributed to the fund--
    (i) First makes a lump-sum payment to the fund, or
    (ii) First authorizes an allotment to VA for deposit in the fund. 
See 32 CFR 59.3(b)(10).
    (3) Notwithstanding the provisions of paragraph (b)(1) of this 
section, any individual on active duty in the Armed Forces who was 
eligible to enroll on June 30, 1985, may enroll at any time during the 
period beginning on October 28, 1986, and ending on March 31, 1987.


(Authority: 38 U.S.C. 3221(a), Pub. L. 99-576, sec. 309(c); Pub. L. 99-
576)

[51 FR 2695, Jan. 21, 1986; 51 FR 12321, Apr. 10, 1986, as amended at 53 
FR 34496, Sept. 7, 1988]



Sec. 21.5058  Resumption of participation.

    (a) General. An eligible individual, who remains otherwise eligible, 
may resume active contribution to the fund, if he or she has:
    (1) Voluntarily elected to suspend following completion of minimum 
participation;
    (2) Suspended at any time for reasons of hardship; or
    (3) Received a discharge or release from active duty after 
participation and reenlisted.


(Authority: 38 U.S.C. 3221)

    (b) Disenrollment in order to participate in other educational 
programs. A person who elects to disenroll in order to receive 
educational assistance allowance under 38 U.S.C. chapter 34 or to 
receive an officer adjustment benefit payable under sec. 207, Pub. L. 
101-366, 104 Stat. 442, may not reenroll if he or she has negotiated a 
check under the provisions of law governing the program elected in lieu 
of the Post-Vietnam Era Veterans' Educational Assistance Program. A 
person who elects to disenroll in order to receive educational 
assistance under the Montgomery GI Bill--Active Duty, as provided in 
Sec. 21.7045, may not reenroll.


(Authority: 38 U.S.C. 3018A, 3018B, 3018C, 3202(l), 3222)

    (c) Reenrollment permitted following some disenrollments. (1) Except 
as provided in paragraph (b) of this section, a person who has 
disenrolled may reenroll, but will have to qualify again for minimum 
participation as described in Sec. 21.5052(a).
    (2) If a person does reenroll, he or she may ``repurchase'' 
entitlement by tendering previously refunded contributions which he or 
she received upon disenrollment, subject to the conditions of Sec. 
21.5052(f).


(Authority: 38 U.S.C. 3221, 3222)

[45 FR 31, Jan. 2, 1980, as amended at 46 FR 29474, June 2, 1981; 47 FR 
51745, Nov. 17, 1982; 51 FR 12853, Apr. 16, 1986; 58 FR 38058, July 15, 
1993; 58 FR 40468, July 28, 1993; 61 FR 7217, 7218, Feb. 27, 1996; 61 FR 
29029, June 7, 1996]



Sec. 21.5060  Disenrollment.

    (a) Voluntary disenrollment. (1) An individual may disenroll at 
anytime after the initial 12 months of participation.
    (2) At any time within the initial 12 months of participation, an 
individual may elect to disenroll for reasons of personal hardship only.


(Authority: 38 U.S.C. 3221(a), (b))

    (b) Nonvoluntary disenrollment. The Department of Veterans Affairs 
shall disenroll automatically an individual who meets any of the 
following sets of conditions:
    (1) The individual is discharged or released from his or her initial 
obligated period of active service and:
    (i) The discharge or release is under dishonorable conditions, or
    (ii) A statutory bar to benefits administered by the Department of 
Veterans Affairs exists for the individual;
    (2) The individual participated only after completion of the initial 
or subsequent period of active service; is discharged or released and:
    (i) The discharge or release is under dishonorable conditions, or
    (ii) A statutory bar to benefits exists for the individual; or

[[Page 342]]

    (3) The individual has not utilized all of his or her entitlement to 
benefits within the 10-year period stated in Sec. 21.5041, and at the 
end of one year thereafter has not filed a claim for educational 
assistance allowance as provided in Sec. 21.5030(c).


(Authority: 38 U.S.C. 101, 3225, 3232)

    Cross Reference: Refunds without disenrollment. See Sec. 21.5065.

[45 FR 31, Jan. 2, 1980, as amended at 46 FR 59247, Dec. 4, 1981; 51 FR 
12853, Apr. 16, 1986; 58 FR 31910, June 7, 1993; 61 FR 29030, June 7, 
1996]



Sec. 21.5062  Date of disenrollment.

    An individual will be disenrolled effective:
    (a) The date the Department of Veterans Affairs or the Service 
Department determines he or she has ceased to be legally entitled to 
participate; or
    (b) The date the individual negotiates the check which represents a 
refund of his or her remaining contributions to the fund, whichever is 
earlier.

(Authority: 38 U.S.C. 3221(d))



Sec. 21.5064  Refund upon disenrollment.

    (a) General. A disenrolled individual will be refunded all 
contributions made by him or her to the fund. He or she will be 
ineligible to receive benefits under Sec. Sec. 21.5130 and 21.5138, 
unless the individual reenrolls as a participant and agrees to 
participate in a new period of 12 consecutive months as provided in 
Sec. 21.5058. The amount of the contributions refunded upon 
disenrollment shall be limited to the amount of his or her contributions 
not utilized to receive benefits as of the date of disenrollment, less 
any outstanding debts resulting from overpayments of educational 
assistance allowance.


(Authority: 38 U.S.C. 3223)

    (b) Effective date of refund. The date upon which the refund of 
contributions, if any, will be made shall be determined as follows:
    (1) If an individual voluntarily disenrolls from the program before 
discharge or release from active duty, VA will refund the individual's 
unused contributions:
    (i) On the date of the participant's discharge or release from 
active duty; or
    (ii) Within 60 days of VA's receipt of notice of the individual's 
discharge or disenrollment; or
    (iii) As soon as possible after VA's receipt of notice indicating 
that an earlier refund is needed due to hardship or for other good 
reasons.


(Authority: 38 U.S.C. 3223(b), 3232)

    (2) If an individual voluntarily disenrolls from the program after 
discharge or release from active duty under other than dishonorable 
conditions, his or her contributions shall be refunded within 60 days of 
receipt by VA of an application for a refund from the individual.


(Authority: 38 U.S.C. 3202(1)(A), 3223(c), 3232(b))

    (3) If an individual is disenrolled because he or she is discharged 
or released from active duty under dishonorable conditions, the 
individual's contributions remaining in the fund shall be refunded:
    (i) On the date of the individual's discharge or release from active 
duty; or
    (ii) Within 60 days of receipt of notice by the Department of 
Veterans Affairs of the individual's discharge or release, whichever is 
the later.
    (4) If an individual is disenrolled because he or she has not 
utilized all of his or her entitlement to benefits within the 10-year 
delimiting period, the individual's contributions remaining in the fund 
shall be refunded.
    (i) The Department of Veterans Affairs shall notify the individual 
that the delimiting period has expired and shall state the amount of 
unused contributions.
    (ii) The Department of Veterans Affairs shall make the refund only 
if the individual requests it.
    (iii) If VA does not receive a request within 1 year from the date 
that the individual is notified of his or her entitlement to a refund, 
VA will presume that the individual's whereabouts is unknown. The funds 
on deposit for that

[[Page 343]]

individual will be transferred in accordance with the provisions of 
section 1322(a), Title 31, United States Code.


(Authority: 38 U.S.C. 101, 3223, 3232; Pub. L. 94-502, Pub. L. 99-576)

[45 FR 31, Jan. 2, 1980, as amended at 51 FR 46655, Dec. 24, 1986; 53 FR 
617, Jan. 11, 1988; 53 FR 34497, Sept. 7, 1988; 58 FR 38058, July 15, 
1993; 61 FR 29030, June 7, 1996]



Sec. 21.5065  Refunds without disenrollment.

    (a) Refunds made without disenrollment following a discharge or 
release under dishonorable conditions--(1) A discharge or release under 
dishonorable conditions may result in a partial refund of contributions. 
If an individual who would have been eligible, but for the fact of his 
or her reenlistment, for the award of a discharge or release under 
conditions other than dishonorable at the time he or she completed an 
obligated period of service, later receives a discharge or release under 
dishonorable conditions, the Department of Veterans Affairs may refund a 
portion of his or her contribution.


(Authority: 38 U.S.C. 101, 3223)

    (2) Amount of refund. The Department of Veterans Affairs shall 
refund to the individual all of his or her remaining contributions made 
to the fund after the individual completed the obligated period of 
service.


(Authority: 38 U.S.C. 101, 3223)

    (3) Date of refund. The Department of Veterans Affairs shall refund 
all monies due the individual:
    (i) On the date of the individual's discharge or release from active 
duty; or
    (ii) Within 60 days of receipt by the Department of Veterans Affairs 
of notice of the individual's discharge or release, whichever is later.


(Authority: 38 U.S.C. 101, 3223, 3232)

    (b) Refunds made without disenrollment following a short period of 
active duty. (1) An individual who has contributed to the fund during 
more than one period of active duty may be required to receive a refund 
of those contributions made during the most recent period of active 
duty. When an individual who meets all the criteria in paragraph (b)(2) 
of this section is discharged, the Department of Veterans Affairs will 
refund all contributions he or she made during the most recent period of 
active duty unless the individual meets one or more of the criteria 
stated in either paragraph (b)(4) or (5) of this section. If he or she 
meets one of those criteria, the contributions will not be refunded 
unless the individual voluntarily disenrolls.
    (2) Unless a compulsory refund is prohibited by paragraph (b)(4) or 
(5) of this section, the Department of Veterans Affairs will refund all 
contributions made by an individual during the most recent period of 
active duty when the individual:
    (i) Completed at least one period of active duty before the most 
recent one during which he or she established entitlement to Post-
Vietnam Era Veterans' Educational Assistance;
    (ii) Reentered on his or her most recent period of active duty after 
October 16, 1981;
    (iii) Contributed to the fund during his or her most recent period 
of active duty; and
    (iv) Is discharged.
    (3) The circumstances which prohibit an automatic refund of monies 
contributed during the individual's most recent period of active duty do 
not relate only to the most recent period of active duty which began 
after October 16, 1981, but also the individual's prior periods of 
active duty regardless of whether they began before, after or on October 
16, 1981.
    (4) Meeting one or more of the following criteria concerning periods 
of active duty before the most recent one will be sufficient to prohibit 
a compulsory refund of contributions made during the most recent period 
of active duty. The individual:
    (i) Before the most recent period of active duty began, completed at 
least one continuous period of active duty of at least 24 months, or
    (ii) Was discharged or released under 10 U.S.C. 1171 (early-out 
discharge) from any period of active duty before the most recent one.

[[Page 344]]

    (5) Meeting one or more of the following criteria concerning the 
most recent period of active duty will be sufficient to prohibit a 
compulsory refund of contributions made during the most recent period of 
active duty. The individual:
    (i) For the most recent period of active duty completes 24 months of 
continuous active duty, or the full period for which the individual was 
called or ordered to active duty, whichever is shorter; or
    (ii) Is discharged or released from the most recent period of active 
duty under 10 U.S.C. 1171 (early-out discharge) or 1173 (hardship 
discharge); or
    (iii) Is discharged or released from the most recent period of 
active duty for a disability incurred or aggravated in line of duty; or
    (iv) Has a service-connected disability which give him or her basic 
entitlement to disability compensation as described in Sec. 3.4(b) of 
this chapter.
    (6) In computing time served for the purpose of this paragraph, the 
individual is not entitled for credit for service as specified in Sec. 
3.15 of this chapter. However, those periods will be included in 
determining if the service was continuous.
    (7) The Department of Veterans Affairs shall refund all monies due 
the individual:
    (i) On the date of the individual's discharge or release from active 
duty; or
    (ii) Within 60 days of receipt of notice by the Department of 
Veterans Affairs of the individual's discharge or release, whichever is 
later.


(Authority: 38 U.S.C. 3202, 3223, 3232, 5303A)

    (c) Refunds following an election under Sec. 21.5040(b). If a 
veteran described in Sec. 21.5040(h) makes an election to have a period 
of service credited toward his or her eligibility and entitlement under 
10 U.S.C. Chapter 1606, he or she will be required to receive a refund 
of any contributions he or she made to the fund during that period of 
service.


(Authority: 38 U.S.C. 3221(f); Pub. L. 101-237)

[48 FR 36578, Aug. 12, 1983, as amended at 57 FR 38614, Aug. 26, 1992; 
61 FR 20728, May 8, 1996]



Sec. 21.5066  Suspension of participation.

    An individual may suspend participation in the program without 
disenrolling. If the individual suspends participation, he or she may 
resume participation at any time thereafter while on active duty.
    (a) An individual may suspend participation any time after 12 months 
of participation.
    (b) An individual who has participated for less than 12 consecutive 
months may not suspend unless the Secretary of Defense determines that 
the reason for the suspension is due to a personal hardship.

(Authority: 38 U.S.C. 3221)



Sec. 21.5067  Death of participant.

    (a) Disposition of unused contributions. If an individual dies, the 
Department of Veterans Affairs shall pay the amount of his or her unused 
contributions to the fund to the living person or persons in the order 
listed in this paragraph.
    (1) The beneficiary or beneficiaries designated by the individual 
under the individual's Servicemen's Group Life Insurance policy;
    (2) The surviving spouse of the individual;
    (3) The surviving child or children of the individual, in equal 
shares;
    (4) The surviving parent or parents of the individual in equal 
shares.
    (b) Payments to the individual's estate. If none of the persons 
listed in paragraph (a) of this section is living, the Department of 
Veterans Affairs shall pay the amount of the individual's unused 
contributions to the fund to the individual's estate.


(Authority: 38 U.S.C. 3224)

    (c) Payments of accrued benefits. Educational assistance remaining 
due and unpaid at the date of the veteran's death is payable under the 
provisions of Sec. 3.1000 of this chapter. For this purpose accrued 
benefits include the portion of the benefit represented by the 
individual's contribution as well as the portion included by the 
Department of Veterans Affairs and the Department of Defense.


(Authority: 38 U.S.C. 5121)

[47 FR 51745, Nov. 17, 1982]

[[Page 345]]

                               Entitlement



Sec. 21.5070  Entitlement.

    A participant is entitled to a monthly benefit for periods of time 
during which the individual is enrolled in, and satisfactorily pursuing, 
an approved program of education. The amount of the benefit will vary 
from individual to individual and, in some instances, from month to 
month as provided in Sec. 21.5138.

(Authority: 38 U.S.C. 3231)



Sec. 21.5071  Months of entitlement allowed.

    (a) Entitlement based on monthly contributions. The Department of 
Veterans Affairs will credit an individual with 1 month of entitlement 
for each month he or she contributes to the fund up to a maximum of 36 
months or its equivalent in part-time training.


(Authority: 38 U.S.C. 3231)

    (b) Entitlement based on lump-sum contributions. If an individual 
elects to make a lump-sum contribution, the Department of Veterans 
Affairs will credit an individual with 1 month of entitlement for:
    (1) Every $100 included in the lump sum, or
    (2) Every amount included in the lump sum which:
    (i) Is at least $25 but no more than $100,
    (ii) Is evenly divisible by five, and
    (iii) Is specifically designated by the individual at the time he or 
she makes the contribution.


(Authority: 38 U.S.C. 3222(d))

    (c) Entitlement based on both monthly and lump-sum contributions. 
(1) If the individual makes both monthly and lump-sum contributions, the 
Department of Veterans Affairs will:
    (i) Compute the entitlement due to each type of contribution 
separately under paragraphs (a) and (b) of this section, and
    (ii) Will combine the results of the computations to determine the 
individual's total entitlement.
    (2) In no event will an individual's entitlement exceed 36 months or 
its equivalent in part-time training.


(Authority: 38 U.S.C. 3222(d), 3231)

[47 FR 51745, Nov. 17, 1982, as amended at 48 FR 50530, Nov. 2, 1983]



Sec. 21.5072  Entitlement charge.

    The Department of Veterans Affairs shall determine the entitlement 
charge for each payment in the same manner for all individuals 
regardless of whether they are on active duty. Unless the circumstances 
described in paragraph (i) of this section apply to a servicemember or 
veteran, VA will use paragraphs (a) through (h) of this section to 
determine an entitlement charge.
    (a) General. (1) Except as provided in paragraphs (b) through (i) of 
this section, VA will make a charge against entitlement as follows:
    (i) The Department of Veterans Affairs will charge an individual who 
is a full-time student 1 month's entitlement for each monthly benefit 
paid to him or her.
    (ii) The Department of Veterans Affairs will charge an individual 
who is other than a full-time student 1 month's entitlement for each sum 
of money paid equivalent to what the individual would have been paid had 
he or she been a full-time student for 1 month.
    (2) When the computation results in a period of time other than a 
full month, the entitlement charge will be prorated.


(Authority: 38 U.S.C. 3231)

    (b) Secondary school program. (1) The Department of Veterans Affairs 
will make no charge against the entitlement of an individual:
    (i) Who is pursuing a course, courses or a program of education 
leading to a secondary school diploma or an equivalency certificate, and
    (ii) Whose educational assistance allowance is the monthly rate of 
the tuition and fees being charged to him or her for the course.
    (2) The Department of Veterans Affairs will make a charge (in the 
same manner as for any other residence

[[Page 346]]

training) against the entitlement of an individual who:
    (i) Is pursuing a course, courses or a program of education leading 
to a secondary school diploma or an equivalency certificate, and
    (ii) Elects to receive educational assistance allowance calculated 
according to Sec. 21.5136.


(Authority: 38 U.S.C. 3241, 3491)

    (c) Correspondence training courses. (1) A charge against the period 
of entitlement for a program consisting exclusively of correspondence 
training will be made on the basis of 1 month for each sum of money paid 
equivalent to the dollar value of a month of entitlement as determined 
under Sec. 21.5138(a)(2)(viii), which is paid to the individual as an 
educational assistance allowance for this training. When computation 
results in a period of time other than a full month, the charge will be 
prorated.
    (2) If the individual is contributing to the fund at the same time 
that benefits are being used or subsequently contributes a sum or sums, 
the entitlement charges will not be recomputed. Thus, if the monthly 
rate arrived at by applying the formula is determined to be $150 at the 
time a benefit program for correspondence training is computed, the 
individual will be charged 1 month of entitlement for each $150 paid. If 
a different monthly rate is computed at the time of a subsequent payment 
for such training, no adjustment will be made in the entitlement charged 
for the previous payment(s) even though the value of each month's 
entitlement may vary from payment to payment.


(Authority: 38 U.S.C. 3231(c))

    (d) Apprenticeship or other on-job training. (1) The VA will 
determine the entitlement charge for a veteran in apprenticeship or 
other on-job training as stated in this paragraph.
    (2) The entitlement charge will be--
    (i) 75 percent of a month for those months for which the veteran's 
monthly payment is based upon 75 percent of the monthly benefit 
otherwise payable to him or her;
    (ii) 55 percent of a month for those months for which the veteran's 
monthly payment is based upon 55 percent of the monthly benefit 
otherwise payable to him or her; and
    (iii) 35 percent of a month for those months for which the veteran's 
monthly payment is based upon 35 percent of the monthly benefit 
otherwise payable to him or her.
    (3) The charge against the veteran's entitlement will be prorated if
    (i) The veteran enrollment period ends in the middle of a month,
    (ii) The veteran's monthly rate is reduced in the middle of a month, 
or
    (iii) The veteran's monthly payment is reduced because he or she 
worked less than 120 hours during the month. In this instance the number 
of hours worked will be rounded to the nearest multiple of eight, and 
the entitlement charge will be reduced proportionately.


(Authority: 38 U.S.C. 3233(c); Pub. L. 99-576)

    (e) Cooperative training. VA will make a charge against entitlement 
of 80 percent of a month for each month for which a veteran is paid 
educational assistance allowance at the cooperative training rate as 
provided in Sec. 21.5138(a). If the veteran is paid for a partial month 
of training, the entitlement charge will be prorated.


(Authority: 38 U.S.C. 3231(d); Pub. L. 100-689)

    (f) Training while the veteran is incarcerated. If the veteran must 
be paid educational assistance allowance at a reduced rate because he or 
she is incarcerated as provided in Sec. 21.5139 of this part, VA will 
make a charge against entitlement of one month for each amount of 
educational assistance allowance paid to the veteran which is the 
equivalent of one month's benefits as provided in Sec. 21.5138 of this 
part for the appropriate type of training pursued.


(Authority: 38 U.S.C. 3231(e); Pub. L. 100-689)

    (g) Tutorial assistance. If an individual is paid tutorial 
assistance as provided in Sec. 21.5141 of this part, the following 
provisions will apply.
    (1) There will be no charge to entitlement for the first $600 of 
tutorial assistance paid to an individual.
    (2) VA will make a charge against the period of entitlement for each 
amount

[[Page 347]]

of tutorial assistance paid to the individual in excess of $600 that is 
equal to the amount of monthly educational assistance the individual is 
otherwise eligible to receive for full-time pursuit of a residence 
course as provided in Sec. 21.5138(c) of this part. When the amount of 
tutorial assistance paid to the individual in excess of $600 is less 
than the amount of monthly educational assistance the individual is 
otherwise eligible to receive, the entitlement charge will be prorated.


(Authority: 38 U.S.C. 3234; Pub. L. 100-689)

    (h) Flight training courses. (1) A charge against the period of 
entitlement for pursuit of a flight training course will be one month 
for each sum of money paid equivalent to the dollar value of a month of 
entitlement as determined under Sec. 21.5138(a)(5)(viii). When this 
computation results in a period of time other than a full month, the 
charge will be prorated.
    (2) If the individual is contributing to the fund at the same time 
that benefits are being used or subsequently contributes a sum or sums, 
the entitlement charges will not be recomputed. Thus, if the monthly 
rate arrived at under Sec. 21.5138(a)(5)(viii) is $150 at the time 
educational assistance allowance is paid for a period of flight 
training, the individual will be charged one month of entitlement for 
each $150 paid. If a different monthly rate is computed at the time of a 
subsequent payment for such training, no adjustment will be made in the 
entitlement charged for the previous payment(s) even though the value of 
each month's entitlement may vary from payment to payment.


(Authority: 38 U.S.C. 3231(f); Pub. L. 102-16)(Apr. 1, 1991)

    (i) Entitlement charge may be omitted for course discontinuance 
(Persian Gulf War). VA will make no charge against the entitlement of a 
servicemember or veteran for a payment of educational assistance 
allowance when--
    (1) A veteran not serving on active duty had to discontinue course 
pursuit as a result of being ordered, in connection with the Persian 
Gulf War, to serve on active duty under section 672 (a), (d), or (g), 
673, 673b, or 688 of title 10; or
    (2) A servicemember serving on active duty had to discontinue course 
pursuit as a result of being ordered, in connection with the Persian 
Gulf War, to a new duty location or assignment or to perform an 
increased amount of work; and
    (3) The veteran or servicemember failed to receive credit or lost 
training time toward completion of his or her educational, professional 
or vocational objective as a result of having to discontinue course 
pursuit, as described in paragraphs (i)(1) or (i)(2) of this section.


(Authority: 38 U.S.C. 3235; Pub. L. 102-127) (Oct. 10, 1991)

[45 FR 31, Jan. 2, 1980, as amended at 47 FR 51745, Nov. 17, 1982; 48 FR 
50530, Nov. 2, 1983; 52 FR 3429, Feb. 4, 1987; 53 FR 34497, Sept. 7, 
1988; 55 FR 31582, Aug. 3, 1990; 58 FR 31910, June 7, 1993; 58 FR 34369, 
June 25, 1993; 58 FR 34526, June 28, 1993]



Sec. 21.5076  Entitlement charge--overpayment cases.

    (a) Overpayment cases. VA will make a charge against an individual's 
entitlement of an overpayment of educational assistance allowance only 
if:
    (1) The overpayment is discharged in bankruptcy; or
    (2) VA waives the overpayment and does not recover it; or
    (3) The overpayment is compromised.


(Authority: 38 U.S.C. 3231)

    (b) Debt discharged in bankruptcy or is waived. If the overpayment 
is discharged in bankruptcy or is waived and is not recovered, the 
entitlement charge will be at the appropriate rate for the elapsed 
period covered by the overpayment (exclusive of interest, administrative 
costs of collection, court costs and marshal fees).


(Authority: 38 U.S.C. 3231; Pub. L. 94-502)

    (c) Overpayment is compromised. (1) If the overpayment is 
compromised and the compromise offer is less than the amount of 
interest, administrative costs of collection, court costs and marshal 
fees, the charge against entitlement will be at the appropriate rate for 
the elapsed period covered by the

[[Page 348]]

overpayment (exclusive of interest, administrative costs of collection, 
court costs and marshal fees).
    (2) If the overpayment is compromised and compromise offer is equal 
to or greater than the amount of interest, administrative costs of 
collection, court costs and marshal fees, the charge against entitlement 
will be determined by--
    (i) Subtracting from the sum paid in the compromise offer the amount 
attributable to interest, administrative costs of collection, court 
costs and marshal fees.
    (ii) Subtracting the remaining amount of the overpayment balance 
determined in paragraph (c)(2)(i) of this section from the amount of the 
original overpayment (exclusive of interest, administrative costs of 
collection, court costs and marshal fees),
    (iii) Dividing the result obtained in paragraph (c)(2)(ii) of this 
section by the amount of the original debt (exclusive of interest, 
administrative costs of collection, court costs and marshal fees), and
    (iv) Multiplying the percentage obtained in paragraph (c)(2)(iii) of 
this section by the amount of the entitlement otherwise chargeable for 
the period of the original overpayment.


(Authority: 38 U.S.C. 3231)

[45 FR 31, Jan. 2, 1980, as amended at 52 FR 45181, Nov. 25, 1987]



Sec. 21.5078  Interruption to conserve entitlement.

    (a) Interruption to conserve entitlement generally prohibited. No 
one may interrupt a certified period of enrollment for the purpose of 
conserving entitlement. A school may not certify a period of enrollment 
for a fractional part of the normal term, quarter or semester if the 
individual actually is enrolled and is pursuing his or her program of 
education for the entire term, quarter or semester.
    (b) Exceptions. The Department of Veterans Affairs will charge 
entitlement for the entire period of enrollment certified if the 
individual otherwise is eligible for benefits, except when benefits are 
interrupted under any of the following conditions:
    (1) Enrollment actually is terminated.
    (2) Enrollment is canceled and the individual has not negotiated an 
educational benefits check for any part of the certified period of 
enrollment.
    (3) The individual:
    (i) Interrupts his or her enrollment at the scheduled end of any 
term, quarter, semester or school year within the certified period of 
enrollment; and
    (ii) Has not negotiated any check for educational benefits for the 
succeeding term, quarter, semester or school year.
    (4) The individual requests interruption or cancellation for any 
break when a school was closed during a certified period of enrollment 
and payments were continued under an established policy based upon an 
Executive order of the President or due to an emergency situation. This 
exception applies whether or not the individual has negotiated a check 
for educational benefits for the certified period.

(Authority: 38 U.S.C. 3241, 3680)

                               Counseling



Sec. 21.5100  Counseling.

    (a) Purpose. The purpose of counseling is:
    (1) To assist in selecting an objective:
    (2) To develop a suitable program of education or training; and
    (3) To resolve any personal problems which are likely to interfere 
with the successful pursuit of a program.
    (b) Availability of counseling. Counseling assistance in available 
for--
    (1) Identifying and removing reasons for academic difficulties which 
may result in interruption or discontinuance of training, or
    (2) In considering changes in career plans, and making sound 
decisions about the changes.


(Authority: 38 U.S.C. 3697A(a))

    (c) Optional counseling. VA shall provide counseling as needed for 
the purposes identified in paragraphs (a) and (b) of this section upon 
request of the individual. VA shall take appropriate steps (including 
individual notification

[[Page 349]]

where feasible) to acquaint all participants with the availability and 
advantages of counseling services.


(Authority: 38 U.S.C. 3241, 3697A(a) and (b))

    (d) Required counseling. (1) In any case in which VA has rated the 
veteran as being incompetent, VA must provide counseling as described in 
38 U.S.C. 3697A prior to selection of a program of education or 
training.The counseling will follow the veteran's initial application 
for benefits or any communication from the veteran or guardian 
indicating that the veteran wishes to change his or her program. This 
requirement that counseling be provided is met when--
    (i) The veteran has had one or more personal interviews with the 
counselor;
    (ii) The counselor has jointly developed with the veteran 
recommendations for selecting a program;
    (iii) These recommendations have been reviewed with the veteran.
    (2) The veteran may follow the recommendations developed in the 
course of counseling, but is not required to do so.
    (3) VA will take no further action on a veteran's application for 
assistance under 38 U.S.C. chapter 32 unless he or she--
    (i) Reports for counseling;
    (ii) Cooperates in the counseling process; and
    (iii) Completes counseling to the extent required under paragraph 
(d)(1) of this section.


(Authority: 38 U.S.C. 3241, 3697A(c))

[45 FR 31, Jan. 2, 1980, as amended at 47 FR 51746, Nov. 17, 1982; 53 FR 
34497, Sept. 7, 1988; 58 FR 31911, June 7, 1993; 61 FR 29030, June 7, 
1996; 61 FR 36629, July 12, 1996]



Sec. 21.5103  Travel expenses.

    (a) General. VA shall determine and pay the necessary expense of 
travel to and from the place of counseling for a veteran who is required 
to receive counseling as provided under 38 U.S.C. 111 (a), (d), (e), and 
(g).


(Authority: 38 U.S.C. 111(a), (d), (e), and (g))

    (b) Restriction. VA will not pay the necessary cost of travel to and 
from the place of counseling when counseling is not required, but is 
provided as a result of a voluntary request by the veteran.


(Authority: 38 U.S.C. 111)

[61 FR 29030, June 7, 1996]

               Payments; Educational Assistance Allowance



Sec. 21.5130  Payments; educational assistance allowance.

    VA will apply the following sections in administering benefits 
payable under 38 U.S.C. Chapter 32:
    (a) Section 21.4131--Commencing dates (except paragraph (d)).
    (b) Section 21.4135--Discontinuance dates.
    (c) Section 21.4138 (except paragraph (b)--Certifications and 
release of payments.
    (d) Section 21.4146--Assignments of benefits prohibited.


(Authority: 38 U.S.C. 3241(a))

    (e) Section 21.4136(k) (except paragraph (k)(3))--Mitigating 
circumstances.


(Authority: 38 U.S.C. 3241(a), 3680(a))

[45 FR 31, Jan. 2, 1980, as amended at 46 FR 32024, June 19, 1981; 53 FR 
617, Jan. 11, 1988; 55 FR 31582, Aug. 3, 1990; 57 FR 38612, Aug. 26, 
1992; 61 FR 29030, June 7, 1996; 63 FR 35836, July 1, 1998; 64 FR 23772, 
May 4, 1999; 65 FR 5786, Feb. 7, 2000]



Sec. 21.5131  Educational assistance allowance.

    VA will pay educational assistance allowance at the rate specified 
in Sec. Sec. 21.5136 and 21.5138 of this part while the individual is 
pursuing either an approved program of education or a refresher or 
deficiency course or other preparatory or special education or training 
course which is necessary to enable the individual to pursue an approved 
program of education. VA will make no payment for pursuit of any course 
which either is not part of the veteran's program of education, or is 
not a refresher, deficiency or other preparatory or special education or 
training course which is necessary to enable the individual to pursue an 
approved program of education. VA may withhold a payment until it 
receives

[[Page 350]]

verification or certification of the individual's continued enrollment 
and adjusts the individual's account. See Sec. 21.5133.


(Authority: 38 U.S.C. 3241; Pub. L. 94-592, Pub. L. 99-576, Pub. L. 101-
237)

[57 FR 38612, Aug. 26, 1992]



Sec. 21.5132  Criteria used in determining benefit payments.

    (a) Training time. The amount of benefit payment to an individual in 
all types of training except cooperative training, correspondence 
training and apprenticeship and other on-job training depends on whether 
VA determines that the individual is a full-time student, three-quarter-
time student, half-time student or one-quarter-time student.


(Authority: 38 U.S.C. 3241, 3688; Pub. L. 99-576, Pub. L. 100-689)

    (b) Contributions. The amount of benefit payment to an individual 
also depends on:
    (1) The amount the individual has contributed to the fund.
    (2) The amount the Secretary of Defense has contributed to the fund 
for the individual.


(Authority: 38 U.S.C. 3231)

[45 FR 31, Jan. 2, 1980, as amended at 47 FR 51746, Nov. 17, 1982; 48 FR 
3369, Jan. 25, 1983; 52 FR 3429, Feb. 4, 1987; 53 FR 34498, Sept. 7, 
1988; 55 FR 31582, Aug. 3, 1990; 61 FR 29030, June 7, 1996]



Sec. 21.5133  Certifications and release of payments.

    An individual must be pursuing a program of education in order to 
receive payments. To ensure that this is the case, the provisions of 
this paragraph must be met.
    (a) General. VA will pay educational assistance to a veteran or 
servicemember (other than one who qualifies for an advance payment, or 
one pursuing a program of apprenticeship, other on-job training, or a 
correspondence course) only after--
    (1) The educational institution has certified his or her enrollment 
as provided in Sec. 21.5200(d) of this part; and
    (2) VA has received from the individual a verification of the 
enrollment. Generally, this verification will be required monthly, 
resulting in monthly payments.
    (b) Apprenticeship and other on-job training. VA will pay 
educational assistance to a veteran pursuing a program of apprenticeship 
or other on-job training only after--
    (1) The training establishment has certified his or her enrollment 
in the training program as provided in Sec. 21.5200(d); and
    (2) VA has received from the veteran and the training establishment 
a certification of hours worked. Generally, this certification will be 
required monthly, resulting in monthly payments.
    (c) Correspondence training. VA will pay educational assistance to a 
veteran or servicemember who is pursuing a correspondence course or the 
correspondence portion of a combined correspondence-residence course 
only after--
    (1) The educational institution has certified his or her enrollment;
    (2) VA has received from the veteran or servicemember a 
certification as to the number of lessons completed and serviced by the 
educational institution; and
    (3) VA has received from the educational institution a certification 
or an endorsement on the veteran's or servicemember's certificate, as to 
the number of lessons completed by the veteran or servicemember and 
serviced by the educational institution. Generally, this certification 
will be required quarterly, resulting in quarterly payments.

(Authority: 38 U.S.C. 3680(g))

(Approved by the Office of Management and Budget under control number 
2900-0465)

[57 FR 38612, Aug. 26, 1992]



Sec. 21.5134  Restrictions on paying benefits to servicepersons.

    The Department of Veterans Affairs may not pay benefits to a 
serviceperson (other than one enrolled in a course, courses or a program 
of education leading to a secondary school diploma or an equivalency 
certificate) unless he or she:
    (a) Has completed 3 months of contributions to the fund or has made 
a

[[Page 351]]

lump-sum payment which is the equivalent of at least 3 months of 
contributions to the fund;
    (b) Has agreed either to have a monthly deduction from his or her 
military pay, or has made a lump-sum contribution to the fund, or both, 
so that the 12 months participation requirement of Sec. 21.5052(a) of 
this part will be met; and
    (c) Is serving on active duty in an enlistment period subsequent to 
the initial period of active duty defined in Sec. 21.5040(b)(3) of this 
part.

(Authority: 38 U.S.C. 3221, 3231, Pub. L. 94-502)

[45 FR 31, Jan. 2, 1980, as amended at 47 FR 51746, Nov. 17, 1982; 54 FR 
49977, Dec. 4, 1989]



Sec. 21.5135  Advance payments.

    VA will apply the provisions of Sec. 21.4138(a) in making advance 
payments to veterans and servicemembers.

(Authority: 38 U.S.C. 3241, 3680)

[64 FR 52652, Sept. 30, 1999]



Sec. 21.5136  Benefit payments--secondary school program.

    (a) Restrictions on payments. (1) The Department of Veterans Affairs 
may authorize benefits to qualified enlisted servicepersons for a 
course, courses or program of education leading to a secondary school 
diploma or an equivalency certificate without charge to entitlement. 
Payments may be made only if:
    (i) The individual has contributed to the fund for at least 1 month, 
and
    (ii) The training is received while the individual is serving:
    (A) The last 6 months of his or her first enlistment after December 
31, 1976; or
    (B) At any time after completing his or her first enlistment.
    (2) An individual who is not on active duty must have been an 
enlisted serviceperson while he or she was on active duty in order to 
receive benefits while enrolled in a course, courses or program of 
education leading to a secondary school diploma or an equivalency 
certificate.


(Authority: 38 U.S.C. 3231(b))

    (b) Monthly rate. An individual pursuing a course, courses or a 
program of education leading to a secondary school diploma or an 
equivalency certificate will receive one of two monthly rates.
    (1) Unless the individual notifies the Department of Veterans 
Affairs to the contrary, the monthly rate of his or her educational 
assistance allowance will be based upon his or her tuition and fees. The 
Department of Veterans Affairs will make no charge against the 
entitlement of the individual who is receiving benefits at this monthly 
rate. The monthly rate will be the rate of tuition and fees being 
charged to the individual for the course, not to exceed:
    (i) $376 for full-time training.
    (ii) $283 for three-quarter time training.
    (iii) $188 for half-time training.
    (iv) $94 for quarter-time training.
    (2) The individual may elect to receive educational assistance 
allowance at the monthly rate provided in Sec. 21.5138. The Department 
of Veterans Affairs will make an appropriate charge against the 
individual's entitlement if such an election is made.


(Authority: 38 U.S.C. 3241, 3491)

    (c) Method of payment. (1) If the individual's educational 
assistance allowance is based upon the rate as determined in paragraph 
(b)(1) of this section, payment shall be made in a lump sum for the 
term, quarter or semester at the beginning of the month in which 
training begins.
    (2) If the individual elects to have his or her educational 
assistance allowance computed as provided in Sec. 21.5138, payment will 
be made in the same manner as for any other residence training.


(Authority: 38 U.S.C. 3241)

[47 FR 51746, Nov. 17, 1982, as amended at 50 FR 19933, May 13, 1985]



Sec. 21.5138  Computation of benefit payments and monthly rates.

    The Department of Veterans Affairs will compute all monthly rates 
and benefit payments as stated in this section except for those 
individuals to whom Sec. 21.5136(b)(1) applies.

[[Page 352]]

    (a) Computation of entitlement factor. In computing monthly rates 
and benefit payments the Department of Veterans Affairs will compute an 
entitlement factor in all cases except for individuals in a secondary 
school program whose benefits are computed as provided in Sec. 
21.5136(b)(1).
    (1) For residence training the entitlement factor will be computed 
as follows:

(i) Enter the number of full months in the applicable   (1) ------
 benefit period.
(ii) Enter the number of full days   (a)
 in excess of the number of full
 months.
(iii) Divide line a by 30. Enter the quotient.........  (2) ------
                                    --------------------
(iv) Total (lines 1 and 2)............................  (3) ------
(v) Multiply line 3 by 1 for a full-time student; by    (4) ------
 .75 for a three-quarter time student; by .5 for a
 half-time student; or by .25 for a one-quarter time
 student. Enter the result.
(This is the entitlement factor.)
 

    (2) For correspondence training the entitlement factor will be 
computed as follows:

(i) Enter the amount of the          (b)
 individual's contributions
 remaining in the fund.
(ii) Enter the individual's          (c)
 remaining months of entitlement.
(iii) Divide line b by line c. Enter the quotient.....  (5) ------
(iv) Enter two times the amount in line 5.............  (6) ------
(v) Enter the amount of the          (d)
 contributions, if any, remaining
 in the fund which the Secretary of
 Defense contributed for the
 individual.
(vi) Enter the individual's          (e)
 remaining months of entitlement.
(vii) Divide line d by line e. Enter the quotient.....  (7) ------
                                    --------------------
(viii) Total (lines 5, 6 and 7).......................  (8) ------
(ix) Enter the correspondence charges certified by the  (9) ------
 school.
(x) Divide line 9 by line 8. Enter the quotient.......  (10) ------
(This is the entitlement factor.)
 

    (3) For apprenticeship and other on-job training VA will compute the 
entitlement factor as follows:

(i) Enter the number of full days in the applicable     (1) ------
 benefit period. (Enter 30 if the benefit period is a
 full month.).
(ii) Divide line 1 by 30. Enter the quotient:.........  (2) ------
(iii) Multiply line 2 by .75 if the veteran is in the   (3) ------
 first six months of training; by .55 if the veteran
 is in the second six months of training; by .35 if
 the veteran is in a subsequent month of training; and
 by a pro-rated fraction if one of the veteran's first
 two six-month periods of training ends during the
 benefit period. Enter the result.
(This is the entitlement factor.)
 


(Authority: 38 U.S.C. 3231, 3233; Pub. L. 96-466, Pub. L. 97-306, Pub. 
L. 99-576)

    (4) For cooperative training VA will compute the entitlement factor 
as follows:

(i) Enter the number of full months in the applicable   (1) ------
 benefit period.
(ii) Enter the number of full days in excess of the     (a) ------
 number of full months.
(iii) Divide line a by 30. Enter the quotient.........  (2) ------
(iv) Total lines 1 and 2..............................  (3) ------
(v) Multiply line 3 by .80. Enter the result..........  (4) ------
(This is the entitlement factor.)
 


(Authority: 38 U.S.C. 3231; Pub. L. 100-689)

    (5) For flight training the entitlement factor will be computed as 
follows:

(i) Enter the amount of the           (a) ------
 individual's contributions
 remaining in the fund.
(ii) Enter the individual's           (b) ----
 remaining months of entitlement.
 


(iii) Divide line a by line b. Enter the      (1) ----
 quotient.
(iv) Enter two times the amount in line 1...  (2) ----
 


(v) Enter the amount of the           (c) ----          ................
 contributions, if any, remaining in
 the fund which the Secretary of
 Defense contributed for the
 individual.
(vi) Enter the individual's           (d) ----          ................
 remaining months of entitlement.
 


(vii) Divide line c by line d. Enter the       (3) ----
 quotient.
(viii) Total (lines 1, 2 and 3)..............  (4) ----
 


(ix) Enter the charges for flight     (e) ----
 training certified by the school.
 


(x) Multiply line e by .60..................  (5) ----
(xi) Divide line 5 by line 4. Enter the       (6) ----
 quotient. (This is the entitlement factor.)
 


(Authority: 38 U.S.C. 3231(f))

    (b) Computation of benefit payment. The Department of Veterans 
Affairs will compute benefit payments as follows: for all training 
except for those individuals to whom Sec. 21.5136(b)(1) applies:

[[Page 353]]



(1) Enter the entitlement factor...  (f)
(2) Enter the amount of the          (g)
 individual's contributions
 remaining in the fund.
(3) Multiply line f by line g.       (h)
 Enter the result.
(4) Enter the remaining months of    (i)
 the individual's entitlement.
(5) Divide line h by line i. Enter the quotient.......  (11) ------
(This is the individual's portion.)
(6) Enter two times the amount in line 11.............  (12) ------
(This is the Department of Veterans Affairs's portion
 of benefit payments for training completed before
 January 1, 1982. The Secretary of Defense will
 contribute this portion of the benefit payment for
 training that occurs after December 31, 1981.)
(7) Enter the amount of the          (j)
 additional contributions, if any,
 remaining in the fund which the
 Secretary of Defense contributed
 for the individual.
(8) Multiply line f by line j.       (k)
 Enter the result.
(9) Enter the individual's           (l)
 remaining months of entitlement.
(10) Divide line k by line 1. Enter the quotient......  (13) ------
(This is the Department of Defense's portion for
 training completed before January 1, 1982. For
 training completed after December 31, 1981, this is
 the second part of the Department of Defense's
 portion.) (38 U.S.C. 3231)
(11) Total (add lines 11, 12 and 13)..................  (14) ------
(12) If the veteran is in an apprenticeship or other    (15) ------
 on-job training and fails to complete 120 hours of
 training in a month, reduce the amount on line 14
 proportionately. In this computation round the number
 of hours worked to the nearest multiple of eight.
 Enter the result.
(13) If the veteran is pursuing certain courses which   (16) ------
 do not lead to a standard college degree, has
 excessive absences, and incurred those absences
 before December 18, 1989, reduce the amount on line
 14 sufficiently to avoid paying for any excessive
 absence. Enter the result.
 


(Authority: 38 U.S.C. 3233 (1989), 38 U.S.C. 3680(a)(2) (1974); Pub. L. 
101-237)


(14) The benefit payment is either--
(i) The amount shown on line 14 unless the veteran is in apprenticeship
 or other on-job training and has failed to complete 120 hours of
 training in a month during the benefit period in which case the benefit
 payment is the amount shown on line 15, or the veteran is pursuing
 certain courses which do not lead to a standard college degree in which
 case the benefit payment is the amount shown on line 16, or
 


(Authority: 38 U.S.C. 3233; Pub. L. 99-576)


(ii) The total amount of the remaining contributions in the fund made by
 the individual and the VA and the Secretary of Defense on behalf of the
 individual, whichever is less.
 


(Authority: 38 U.S.C. 3231; Pub. L. 94-502)

    (c) Monthly rates. The Department of Veterans Affairs will compute 
the monthly rates of payment for individuals in residence training by 
repeating the calculations in paragraphs (b)(1) through (11) of this 
section except that instead of entering the entitlement factor on line 
f, paragraph (b)(1), the Department of Veterans Affairs will enter 1 for 
a full-time student, .75 for a three-quarter time student, .5 for a 
half-time student, or .25 for a one-quarter time student.


(Authority: 38 U.S.C. 3231)

[45 FR 31, Jan. 2, 1980, as amended at 46 FR 32024, June 19, 1981; 47 FR 
51747, Nov. 17, 1982; 48 FR 3369, Jan. 25, 1983; 48 FR 50530, Nov. 2, 
1983; 52 FR 3429, Feb. 4, 1987; 53 FR 34498, Sept. 7, 1988; 55 FR 31582, 
Aug. 3, 1990; 57 FR 38615, Aug. 26, 1992; 58 FR 31911, June 7, 1993]



Sec. 21.5139  Computation of benefit payments for incarcerated 
individuals.

    Notwithstanding the provisions of Sec. 21.5138, some incarcerated 
individuals may have their educational assistance allowance terminated 
or reduced. The provisions of this section shall not apply in the case 
of any individual who is pursuing a program of education while residing 
in a halfway house or participating in a work-release program in 
connection with that individual's conviction of a felony.
    (a) No educational assistance allowance payable to some incarcerated 
individuals. VA will pay no educational assistance allowance to an 
individual who--
    (1) Is incarcerated in a Federal, State or local penal institution 
for conviction of a felony, and
    (2) Is enrolled in a course where his or her tuition and fees are 
being paid by a Federal program (other than one administered by VA) or 
by a State or local program, and
    (3) Has incurred no expenses for supplies, books or equipment.

(Authority: 38 U.S.C. 3231(e))

[[Page 354]]

    (b) Reduced educational assistance allowance for some incarcerated 
individuals. (1) VA will pay a reduced educational assistance allowance 
to a veteran who--
    (i) Is incarcerated in a Federal, State or local penal institution 
of conviction of a felony, and
    (ii) Is enrolled in a course--
    (A) For which the individual pays some (but not all) of the charges 
for tuition and fees, or
    (B) For which a Federal program (other than one administered by VA) 
or a State or local program pays all the charges for tuition and fees, 
but which requires the individual to pay for books, supplies and 
equipment.
    (2) The monthly rate of educational assistance allowance payable to 
such an individual shall be the lesser of the following:
    (i) The monthly rate determined by adding the tuition and fees that 
the veteran must pay and the charge to the veteran for the cost of 
necessary supplies, books and equipment and prorating the total on a 
monthly basis, or
    (ii) The monthly rate for the individual as determined by Sec. 
21.5138(c) of this part.

(Authority: 38 U.S.C. 3231(e))

[55 FR 31583, Aug. 3, 1990]



Sec. 21.5141  Tutorial assistance.

    An individual who is otherwise eligible to receive benefits under 
the Post-Vietnam Era Veterans' Educational Assistance Program may 
receive supplemental monetary assistance to provide tutorial services. 
In determining whether VA will pay the individual this assistance, VA 
will apply the provisions of Sec. 21.4236.

(Authority: 38 U.S.C. 3234, 3492)

[61 FR 29030, June 7, 1996]

                        State Approving Agencies



Sec. 21.5150  State approving agencies.

    In administering chapter 32, title 38, United States Code, VA will 
apply the provisions of the following sections:
    (a) Section 21.4150 (except par. (e))--Designation;
    (b) Section 21.4151--Cooperation;
    (c) Section 21.4152--Control by agencies of the United States;
    (d) Section 21.4153--Reimbursement of expenses;
    (e) Section 21.4154--Report of activities;
    (f) Section 21.4155--Evaluations of State approving agency 
performance.

(Authority: 38 U.S.C. 3241, 3670-3674, 3674A; Pub. L. 94-502, Pub. L. 
100-323)

[55 FR 12483, Apr. 4, 1990, as amended at 61 FR 1526, Jan. 22, 1996]

                                 Schools



Sec. 21.5200  Schools.

    In the administration of benefits payable under the provisions of 
chapter 32, title 38, U.S.C., the Department of Veterans Affairs will 
apply the following sections:
    (a) Section 21.4200--Definitions (with the exception of paragraph 
(a)).


(Authority: 38 U.S.C. 3241; Pub. L. 94-502, Pub. L. 99-576)

    (b) Section 21.4201--Restrictions on enrollment; percentage of 
students receiving financial support.


(Authority: 38 U.S.C. 3241, 3473(d))

    (c) Section 21.4202--Overcharges; restrictions on enrollments.


(Authority: 38 U.S.C. 3241, 3690)

    (d) Section 21.4203--Reports by schools--Requirements.


(Authority: 38 U.S.C. 3241, 3684; Pub. L. 94-502, Pub. L. 99-576)

    (e) Section 21.4204 (except paragraphs (a) and (e))-Periodic 
certifications.


(Authority: 38 U.S.C. 3241, 3684)

    (f) [Reserved]
    (g) Section 21.4206--Reporting fee.
    (h) Section 21.4209--Examination of records.


(Authority: 38 U.S.C. 3241, 3690; Pub. L. 94-502, Pub. L. 99-576)

    (i) Section 21.4210--Suspension and discontinuance of educational 
assistance payments and of enrollments or reenrollments for pursuit of 
approved courses.
    (j) Section 21.4211--Composition, jurisdiction and duties of 
Committee on Educational Allowances.

[[Page 355]]

    (k) Section 21.4212--Referral to Committee on Educational 
Allowances.
    (l) Section 21.4213--Notice of hearing by Committee on Educational 
Allowances.
    (m) Section 21.4214--Hearing rules and procedures for Committee on 
Educational Allowances.
    (n) Section 21.4215--Decision of Director of VA facility of 
jurisdiction.
    (o) Section 21.4216--Review of decision of Director of VA facility 
of jurisdiction.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(Approved by the Office of Management and Budget under control number 
2900-0178)

[45 FR 31, Jan. 2, 1980, as amended at 53 FR 34499, Sept. 7, 1988; 57 FR 
38613, August 26, 1992; 61 FR 1526, Jan. 22, 1996; 61 FR 29030, June 7, 
1996; 63 FR 35836, July 1, 1998]

                          Programs of Education



Sec. 21.5230  Programs of education.

    (a) Approving the selected program of education. Except as provided 
in paragraphs (b) and (c) of this section, VA will approve a program of 
education under chapter 32, title 38 U.S.C, only if it--
    (1) Meets the definition of a program of education stated in Sec. 
21.5021(q) of this part;
    (2) Has an objective as described in Sec. 21.5021 (r) or (s) of 
this part;
    (3) The courses or subjects in the program are approved for VA 
training; and
    (4) The veteran or serviceperson is not already qualified for the 
objective of the program.


(Authority: 38 U.S.C. 3202(2))

    (b) Programs which include secondary school training. VA may approve 
the enrollment of a veteran or serviceperson in a refresher, remedial, 
deficiency or other preparatory or special educational assistance course 
when the veteran or eligible serviceperson needs the course in order to 
pursue an approved program of education.


(Authority: 38 U.S.C. 3241(a)(2))

    (c) Refresher training for those already qualified. The refresher 
training referred to in paragraph (b) of this section includes training 
in a course or courses for which the veteran is already qualified 
provided the course or courses permit the veteran to update knowledge 
and skills or to be instructed in the technological advances which have 
occurred in the veteran's field of employment. The relevant field of 
employment may have been pursued either before, during or after the 
veteran's active duty.


(Authority: 38 U.S.C. 3241(a)(2); Pub. L. 100-689)

[55 FR 31583, Aug. 3, 1990]



Sec. 21.5231  Combination.

    In the administration of benefits payable under chapter 32, title 
38, U.S.C., the Department of Veterans Affairs will apply Sec. 
21.4233(b), (c), and (e).

(Authority: 38 U.S.C. 3241)

[45 FR 31, Jan. 2, 1980, as amended at 61 FR 7218, Feb. 27, 1996]



Sec. 21.5232  Change of program.

    In determining whether a change of program of education may be 
approved for the payments of educational assistance, VA will apply Sec. 
21.4234 of this part.

(Authority: 38 U.S.C. 3241, 3691; Pub. L. 94-502, Pub. L. 101-366) (June 
1, 1991)

[58 FR 46866, Sept. 3, 1993]

                                 Courses



Sec. 21.5250  Courses.

    (a) In administering benefits payable under 38 U.S.C. chapter 32, VA 
and, where appropriate, the State approving agencies shall apply the 
following sections.
    (1) Section 21.4250 (except paragraph (c)(1))--Approval of courses.
    (2) Section 21.4251--Period of operation of course.
    (3) Section 21.4252--Courses precluded.
    (4) Section 21.4253--Accredited courses.
    (5) Section 21.4254--Nonaccredited courses.
    (6) Section 21.4255--Refund policy; nonaccredited courses.
    (7) Section 21.4256--Correspondence courses.
    (8) Section 21.4257--Cooperative courses.

[[Page 356]]

    (9) Section 21.4258--Notice of approval.
    (10) Section 21.4259--Suspension or disapproval.
    (11) Section 21.4260--Courses in foreign countries.
    (12) Section 21.4261--Apprentice courses.
    (13) Section 21.4262--Other training on-the-job courses.
    (14) Section 21.4265--Practical training approved as institutional 
training.
    (15) Section 21.4266--Courses offered at subsidiary branches or 
extensions.
    (16) Section 21.4267--Approval of independent study.


(Authority: 38 U.S.C. 3241, 3473, 3476, 3672, 3675, 3676, 3678, 3679, 
3686, 3689)

    (b) Flight courses. In administering benefits payable for flight 
training under chapter 32, title 38, U.S.C., VA and the State approving 
agencies will apply the provisions of Sec. 21.4263 of this part. 
Educational assistance allowance is payable only for flight training 
undertaken by a veteran or serviceperson after March 31, 1991.


(Authority: 38 U.S.C. 3241; Pub. L. 102-16)(Apr. 1, 1991)

[58 FR 31911, June 7, 1993, as amended at 61 FR 1526, Jan. 22, 1996; 61 
FR 7218, Feb. 27, 1996]

                    Assessment and Pursuit of Course



Sec. 21.5270  Assessment and pursuit of course.

    In the administration of benefits payable under 38 U.S.C. chapter 
32, VA shall apply the following sections.
    (a) Section 21.4270 (except those portions of the paragraph and 
footnotes dealing with farm cooperative training)--Measurement of 
courses. For the purpose of benefits payable under 38 U.S.C. chapter 32 
that training identified in Sec. 21.4270 as less than one-half and more 
than one-quarter time will be treated as one-quarter-time training.


(Authority: 38 U.S.C. 3241, 3688; Pub. L. 94-502, Pub. L. 99-576, Pub. 
L. 100-689)

    (b) [Reserved]
    (c) Section 21.4272--Collegiate course measurement.


(Authority: 38 U.S.C. 3241, 3688)

    (d) Section 21.4273--Collegiate graduate.
    (e) Section 21.4274--Law courses.
    (f) Section 21.4275--Practical training courses; measurement.


(Authority: 38 U.S.C. 3241, 3688)

    (g) Section 21.4277--Discontinuance; unsatisfactory progress, 
conduct, and attendance.
    (h) Section 21.4278--Reentrance after discontinuance.


(Authority: 38 U.S.C. 3241, 3474)

    (i) Section 21.4279--Combination correspondence-residence program.


(Authority: 38 U.S.C. 3241, 3688)

    (j) [Reserved]


(Authority: 38 U.S.C. 3241, 3473)

[45 FR 31, Jan. 2, 1980, as amended at 53 FR 34499, Sept. 7, 1988; 55 FR 
31584, Aug. 3, 1990; 61 FR 7218, Feb. 27, 1996; 62 FR 55760, Oct. 28, 
1997]

                  Educational Assistance Pilot Program



Sec. 21.5290  Educational Assistance Pilot Program.

    (a) Purpose. The Educational Assistance Pilot Program is designed to 
encourage enlistments and reenlistments in the Army, Navy, Air Force and 
Marine Corps.


(Authority: Sec. 903, Pub. L. 96-342; 94 Stat. 1115)

    (b) Outline of program. This program allows some individuals:
    (1) To participate while making contributions at a rate less than 
that prescribed in Sec. 21.5052(b), and/or
    (2) To transfer entitlement allowed in Sec. 21.5071 to a spouse or 
child.


(Authority: Sec. 903, Pub. L. 96-342, 94 Stat. 1115)

[47 FR 51747, Nov. 17, 1982]



Sec. 21.5292  Reduced monthly contribution for certain individuals.

    (a) Qualifying for reduced monthly contributions. Some individuals 
can become participants while making no

[[Page 357]]

contributions. To qualify for this portion of the pilot program the 
individual must:
    (1) Enlist or reenlist in the Army, Navy, Air Force or Marine Corps 
after November 30, 1980, and before October 1, 1981;
    (2) Elect or have elected to participate in the Post-Vietnam Era 
Educational Assistance Program; and
    (3) Be chosen for the pilot program by the Secretary of Defense or 
his or her designee.


(Authority: Sec. 903 Pub. L. 96-342, 94 Stat. 1115)

    (b) Monthly contributions made by the Secretary of Defense. (1) The 
Secretary of Defense may pay $75 per month as the monthly contribution 
otherwise required under Sec. 21.5052(b) for an individual described in 
paragraph (a) of this section.
    (2) The individual will not be required to make a contribution for 
any month to the extent that the contribution otherwise required by 
Sec. 21.5052(b) for that month is paid by the Secretary of Defense.
    (3) The amount paid by the Secretary of Defense shall be deposited 
in the fund.


(Authority: Sec. 903, Pub. L. 96-342; 94 Stat. 1115)

    (c) Restrictions on monthly contributions. The Secretary of Defense 
may not make a payment under the pilot program on behalf of any person 
for any month:
    (1) Before the month in which the person enlisted or reenlisted in 
the Army, Navy, Air Force or Marine Corps, or
    (2) Before December 1980.


(Authority: Sec. 903, Pub. L. 96-342, 94 Stat. 1115)

    (d) Refunds. If an individual participating in the pilot program 
disenrolls, any monthly contributions made by the Secretary of Defense 
will be returned to the Secretary of Defense rather than refunded to the 
individual.


(Authority: Sec. 903, Pub. L. 96-342; 94 Stat. 1115)

    (e) Application of sections to this portion of the pilot program. 
(1) The following sections apply to this portion of the pilot program 
with amendments as noted:
    (i) In Sec. 21.5021(e) a participant includes someone whose 
contributions are being made by the Secretary of Defense.
    (ii) In Sec. 21.5052(b) the Secretary of Defense may make 
contributions to the fund and may designate the amount of the 
contribution.
    (iii) In Sec. 21.5052(d) the Secretary of Defense may increase or 
decrease the amount of the contribution.
    (iv) In Sec. Sec. 21.5064 and 21.5065 monthly contributions made by 
the Secretary of Defense will be returned to him or her instead of being 
refunded to the veteran.
    (v) In Sec. 21.5071 the Department of Veterans Affairs will also 
credit the individual with 1 month of entitlement for each month the 
Secretary of Defense contributes to the fund on his or her behalf.
    (vi) In Sec. 21.5138 the references to the individual's 
contributions include those contributions made on the individual's 
behalf by the Secretary of Defense.
    (2) Except as amended in paragraph (e)(1) of this section Sec. Sec. 
21.5001 through 21.5041 and Sec. Sec. 21.5050 through 21.5270 apply 
without change to this portion of the pilot program. See Sec. 21.5296.


(Authority: Pub. L., 96-342, sec. 903; 38 U.S.C. 3232, 3698(a)(2); Pub. 
L. 97-35, Pub. L. 99-576)

[47 FR 51747, Nov. 17, 1982, as amended at 49 FR 2109, Jan. 18, 1984; 53 
FR 34499, Sept. 7, 1988; 61 FR 29030, June 7, 1996]



Sec. 21.5294  Transfer of entitlement.

    (a) Qualifying for a transfer of entitlement. Some participants may 
transfer their entitlement to their spouse or child. To qualify for this 
portion of the pilot program the individual must:
    (1) After June 30, 1981 and before October 1, 1981, reenlist in the 
Army;
    (2) Be a participant;
    (3) Possess a critical military specialty as determined by the 
Secretary of Defense; and

[[Page 358]]

    (4) Be chosen for his portion of the pilot program by the Secretary 
of Defense or his or her designee.


(Authority: Sec. 903, Pub. L. 96-342; 94 Stat. 1115)

    (b) Persons who may receive transferred entitlement. An individual 
meeting the requirements of paragraph (a) of this section may transfer 
entitlement earned under Sec. 21.5071 for the purpose of allowing 
another person to receive educational assistance allowance. Entitlement 
may be transferred only:
    (1) To a spouse or child of the participant,
    (2) To one person at a time,
    (3) If the participant is not receiving educational assistance 
allowance, and
    (4) When the participant states in writing to the Department of 
Veterans Affairs that the entitlement should be transferred.



(Authority: Sec. 903(c), Pub. L. 96-342, 94 Stat. 1115)

    (c) Educational assistance allowance. (1) The individual must 
specify in writing to the Department of Veterans Affairs the period of 
time he or she wishes the spouse or child to receive educational 
assistance allowance on the basis of the transfer of entitlement. The 
Department of Veterans Affairs will not pay educational assistance 
allowance to a spouse or child for training completed either before or 
after the period specified by the participant.
    (2) The commencing date of an award of educational assistance 
allowance to a spouse or child will be the earlier of the following 
dates:
    (i) The date of the spouse's or child's entrance or reentrance under 
Sec. 21.4131;
    (ii) The first day of the period authorized by the participant for 
the transfer of entitlement.
    (3) The ending date of an award of educational assistance allowance 
to a spouse or child will be the earliest of the following dates:
    (i) The ending date of the spouse's or child's course or period of 
enrollment as certified by the school or training establishment;


(Authority: 38 U.S.C. 3233; Pub. L. 99-576)

    (ii) The ending date of the participant's eligibility as determined 
under Sec. 21.5041;
    (iii) The ending date specified in Sec. 21.4135;
    (iv) The date of the death of the participant on whom the spouse's 
or child's entitlement is based;
    (v) The last day of the period authorized by the participant for the 
transfer of entitlement.


(Authority: Sec. 903, Pub. L. 96-342, 94 Stat. 1115)

    (d) Application of VA regulations to this portion of the pilot 
program. (1) Sections 21.5030 (a) and (b), 21.5040, 21.5041 and 21.5050 
through 21.5067 and Sec. 21.5145 apply to the individual who is 
participating in this portion of the pilot program, but they do not 
apply to the individual's spouse or child, per se.


(Authority: Pub. L. 96-342, sec. 903; Pub. L. 99-576)

    (2) The following sections apply to this portion of the pilot 
program with amendments as noted:
    (i) In Sec. 21.5022 the entitlement used by the spouse or child 
counts toward the 48-month limitation on receiving benefits under more 
than one program which is imposed on the individual.
    (ii) In Sec. 21.5072 the charge against the individual's 
entitlement will be made on the basis of payments made to the 
individual's spouse or child.
    (iii) In Sec. 21.5100 the individual's spouse or child may request 
counseling, but an incompetent spouse or child is not required to be 
counseled before selecting a program of education.


(Authority: Pub. L. 96-342, sec. 903, Pub. L. 97-306, Pub. L. 99-576)

    (iv) In Sec. Sec. 21.5132 through 21.5138 references to payment to 
the individual apply equally to payment to the spouse or child.


(Authority: Sec. 903, Pub. L. 96-342; Pub. L. 97-306, 96 Stat. 1429)

    (3) Except as amended in paragraph (d)(2) of this section the 
following sections apply without change to this portion of the pilot 
program:
    (i) Sections 21.5001 through 21.5023,

[[Page 359]]

    (ii) Section 21.5030(c),
    (iii) Sections 21.5070 through 21.5130,
    (iv) The introductory portion of Sec. 21.5131,
    (v) Sections 21.5132 through 21.5300.


(Authority: 38 U.S.C. 3698(a)(2))

    (4) Section 21.5131 (a) and (b) does not apply to this portion of 
the pilot program.


(Authority: Sec. 903, Pub. L. 96-342, 94 Stat. 1115)

[47 FR 51748, Nov. 17, 1982; 48 FR 50530, Nov. 2, 1983; 49 FR 2110, Jan. 
18, 1984; 53 FR 34499, Sept. 7, 1988]



Sec. 21.5296  Extended period of eligibility.

    (a) General. A veteran shall be granted an extension of the 
applicable delimiting period, as otherwise determined by Sec. 21.5041 
provided--
    (1) The veteran applies for an extension.
    (2) The veteran was prevented from initiating or completing the 
chosen program of education within the otherwise applicable delimiting 
period because of a physical or metal disability that did not result 
from the willful misconduct of the veteran. VA will not consider the 
disabling effects of chronic alcoholism to be the result of willful 
misconduct.


(Authority: 38 U.S.C. 105, 3232; Pub. L. 99-576, Pub. L. 100-689)

    (b) Application. (1) Only the veteran may apply for an extended 
period of eligibility pursuant to this section. A spouse or child to 
whom entitlement may be or has been transferred may not apply for, nor 
receive, an extension based upon disability of either the veteran or the 
spouse or child.
    (2) The veteran must apply for the extended period of eligibility in 
time for VA to receive the application by the later of the following 
dates:
    (i) One year from the last date of the delimiting period otherwise 
applicable to the veteran under Sec. 21.5041, or
    (ii) One year from the termination date of the period of the 
veteran's mental or physical disability.
    (3) No application for an extended period of eligibility should be 
submitted and none will be processed during any period when the veteran 
has transferred entitlement to a spouse or child, since eligibility 
cannot be fully determined as provided in paragraph (c)(4)(ii) of this 
section.


(Authority: 38 U.S.C. 3232; Pub. L. 99-576)

    (c) Qualifying period of disability. A veteran's extended period of 
eligibility shall be based on the period of time that the veteran 
himself or herself was prevented by reason of physical or mental 
disability, not the result of the veteran's willful misconduct, from 
initiating or completing his or her chosen program of education. VA will 
not consider the disabling effects of chronic alcoholism to be the 
result of willful misconduct.


(Authority: 38 U.S.C. 105, 3232; Pub. L. 99-576, Pub. L. 100-689)

    (1) Evidence must be presented which clearly establishes that the 
veteran's disability made pursuant of his or her program medically 
infeasible during the veteran's original period of eligibility as 
determined by Sec. 21.5041. A period of disability following the end of 
the original disability period will not be a basis for extension.
    (2) VA will not consider a veteran who is disabled for a period of 
30 days or less as having been prevented from enrolling or reenrolling 
in the chosen program of education or was forced to discontinue 
attendance, because of the short disability.
    (3) Except as provided in paragraph (c)(4) of this section, a 
veteran's transfer of entitlement to a spouse or child during a period 
for which the veteran's disability prevented his or her pursuit of a 
program of education will not affect the veteran's entitlement to an 
extension of eligibility under this section.
    (4) Since the act of entitlement transfer to a spouse or child 
indicates that the veteran did not intend to personally use his or her 
educational assistance during the specified transfer period, a veteran 
who becomes disabled after transferring entitlement will not be entitled 
to an extended period of eligibility based on any period of the 
disability which coincides with the specified transfer period unless--

[[Page 360]]

    (i) The transferee or transferees did not use any entitlement during 
this period, and
    (ii) The veteran can clearly demonstrate that, notwithstanding his 
or her decision to transfer entitlement, the veteran would have used the 
entitlement during all or part of the transfer period and was prevented 
from doing so solely by reason of his or her disability.


(Authority: 38 U.S.C. 3232; Pub. L. 99-576)

    (d) Commencing date. The veteran shall elect the commencing date of 
an extended period of eligibility. The date chosen--
    (1) Must be on or after the original date of expiration of 
eligibility as determined by Sec. 21.5041 of this part, and
    (2) Must be on or before the 90th day following the date on which 
the veteran's application for an extension was approved by VA, if the 
veteran is training during the extended period of eligibility in a 
course not organized on a term, quarter or semester basis, or
    (3) Must be on or before the first day of the first ordinary term, 
quarter or semester following the 90th day after the veteran's 
application for an extension was approved by VA if the veteran is 
training during the extended period of eligibility in a course organized 
on a term, quarter or semester basis.


(Authority: 38 U.S.C. 3232; Pub. L. 99-576)

    (e) Determining the length of extended periods of eligibility. A 
veteran's extended period of eligibility shall be based on the 
qualifying period of disability, and determined as follows:
    (1) If the veteran is in training in a course organized on a term, 
quarter or semester basis, his or her extended period of eligibility 
shall contain the same number of days as the number of days from the 
date during the veteran's original delimiting period that his or her 
training became medically infeasible to the earliest of the following 
dates:
    (i) The commencing date of the ordinary term, quarter or semester 
following the day the veteran's training became medically feasible,
    (ii) The veteran's delimiting date as determined by Sec. 21.5041 of 
this part, or
    (iii) The date the veteran resumed training.
    (2) If the veteran is training in a course not organized on a term, 
quarter or semester basis, his or her extended period of eligibility 
shall contain the same number of days as the number of days from the 
date during the veteran's original delimiting period that his or her 
training became medically infeasible to the earlier of the following 
dates:
    (i) The date the veteran's training became medically feasible, or
    (ii) The veteran's delimiting date as determined by Sec. 21.5041 of 
this part.


(Authority: 38 U.S.C. 3232; Pub. L. 99-576)

    (f) Discontinuance. If the veteran is pursuing a course on the date 
an extended period of eligibility expires (as determined under this 
section), VA will discontinue the educational assistance allowance 
effective the day before the end of the extended period of eligibility.


(Authority: 38 U.S.C. 3232; Pub. L. 99-576)

    (g) No transfer of entitlement for use during the extended period of 
eligibility. (1) The veteran may only transfer entitlement to a spouse 
or child for use during the original period of eligibility as determined 
by Sec. 21.5041 of this part.
    (2) If the veteran has established an extended period of eligibility 
with VA, only the veteran may use remaining entitlement during that 
period.
    (3) If the veteran transfers his or her entitlement after having 
received an extension of eligibility, but before the last day of the 
delimiting period as determined by Sec. 21.5041 of this part, the 
eligibility of the spouse or child to use entitlement ends on the 
veteran's otherwise applicable delimiting date as determined by Sec. 
21.5041 of this part.


(Authority: 38 U.S.C. 3232; Pub. L. 99-576)

[53 FR 34499, Sept. 7, 1988, as amended at 55 FR 31584, Aug. 3, 1990]



              Subpart H_Educational Assistance Test Program

    Authority: 10 U.S.C. ch. 107; 38 U.S.C. 501(a), 3695, 5101, 5113, 
5303A; 42 U.S.C. 2000;

[[Page 361]]

sec. 901, Pub. L. 96-342, 94 Stat. 1111-1114, unless otherwise noted.

    Source: 51 FR 27026, July 29, 1986, unless otherwise noted.



Sec. 21.5701  Establishment of educational assistance test program.

    (a) Establishment. The Departments of Army, Navy and Air Force have 
established an educational assistance test program.


(Authority: 10 U.S.C. 2141(a))

    (b) Purpose. The purpose of this program is to encourage enlistments 
and reenlistments for service on active duty in the Armed Forces of the 
United States during the period from October 1, 1980, through September 
30, 1981.


(Authority: 10 U.S.C. 2141(a))

    (c) Funding. The Department of Defense is bearing the costs of this 
program. Participants in the program do not bear any of the costs.


(Authority: 10 U.S.C. 2141(a))



Sec. 21.5703  Overview.

    This program provides subsistence allowance and educational 
assistance to selected veterans and servicemembers and, in some cases, 
to dependents of these veterans and servicemembers.

(Authority: 10 U.S.C. 2141(b))



Sec. 21.5705  Transfer of authority.

    The Secretary of Defense delegates the authority to administer the 
benefit payment portion of this program to the Secretary of Veterans 
Affairs and his or her designees. See Sec. 21.5901.

(Authority: 10 U.S.C. 2141(b))

                                 General



Sec. 21.5720  Definitions.

    For the purpose of regulations in the Sec. Sec. 21.5700, 21.5800 
and 21.5900 series and payment of benefits under the educational 
assistance and subsistence allowance program, the following definitions 
apply:
    (a) Veteran. This term means a person who--
    (1) Is not on active duty.
    (2) Served as a member of the Air Force, Army, Navy or Marine Corps.
    (3) Enlisted or reenlisted after November 30, 1980, and before 
October 1, 1981, specifically for benefits under the provisions of 10 
U.S.C. 2141 through 2149; Pub. L. 96-342; and
    (4) Meets the eligibility requirements for the program as stated in 
Sec. 21.5740.


(Authority: 10 U.S.C. 2141(a))

    (b) Accredited institution. This term means a civilian college or 
university or a trade, technical or vocational school in the United 
States (including the District of Columbia, the Commonwealth of Puerto 
Rico, Guam and the U.S. Virgin Islands) that--
    (1) Provides education on a postsecondary level (including 
accredited programs conducted at overseas locations) and
    (2) Is accredited by--
    (i) A nationally recognized accrediting agency or association, or
    (ii) An accrediting agency or association recognized by the 
Secretary of Education.


(Authority: 10 U.S.C. 2143(c))

    (c) Dependent child. This means an unmarried legitimate child 
(including an adopted child or a stepchild) who either--
    (1) Has not passed his or her 21st birthday; or
    (2) Is incapable of self-support because of a mental or physical 
incapacity that existed before his or her 21st birthday and is, or was 
at the time of the veteran's or servicemember's death, in fact, 
dependent on him or her for over one-half of his or her support; or
    (3) Has not passed his or her 23rd birthday; is enrolled in a full-
time course of study in an institution of higher learning aproved by the 
Secretary of Defense or the Secretary of Education, as the case may be; 
and is, or was at the time of the veteran's or servicemember's death, in 
fact, dependent upon him or her for over one half of his or her support.


(Authority: 10 U.S.C. 1072(2)(D), 2147(d)(1))


[[Page 362]]


    (d) Surviving spouse. The term means a widow or widower who is not 
remarried.


(Authority: 10 U.S.C. 2147(d)(2))

    (e) Servicemember. This term means anyone who--
    (1) Meets the eligibility requirements for the program, and
    (2) Is on active duty in the Air Force, Army, Navy or Marine Corps.


(Authority: 10 U.S.C. 2142)

    (f) Spouse. This term means a person of the opposite sex who is the 
husband or wife of the veteran or servicemember.


(Authority: 10 U.S.C. 2147)

    (g) Divisions of the school year. (1) Standard academic year is a 
period of 2 standard semesters or 3 standard quarters. It is 9 months 
long.
    (2) Standard quarter is a division of the standard academic year. It 
is from 10 to 13 weeks long.
    (3) Standard semester is a division of the standard academic year. 
It is 15 to 19 weeks long.
    (4) Term is either
    (i) Any regularly established division of the standard academic 
year, or
    (ii) The period of instruction which takes place between standard 
academic years.


(Authority: 10 U.S.C. 2142)

    (h) Full-time training. This term means training at the rate of 12 
or more semester hours per semester, or the equivalent.


(Authority: 10 U.S.C. 2144)

    (i) Part-time training. The term means training at the rate of less 
than 12 semester hours per semester or the equivalent.


(Authority: 10 U.S.C. 2144)

    (j) Enrollment period. This term means an interval of time during 
which an eligible individual--
    (1) Is enrolled in an accredited educational institution; and
    (2) Is pursuing his or her program of education.


(Authority: 10 U.S.C. 2142)



Sec. 21.5725  Obtaining benefits.

    (a) Actions required of the individual. In order to obtain benefits 
under the educational assistance and subsistence allowance program, an 
individual must--
    (1) File a claim for benefits with VA, and
    (2) Ensure that the accredited institution certifies his or her 
enrollment to VA.


(Authority: 10 U.S.C. 2149)

    (b) VA action upon receipt of a claim. Upon receipt of a claim from 
an individual VA shall--
    (1) Determine if the individual, or the veteran upon whose service 
the claim is based, has or had basic eligibility;
    (2) Determine that the eligibility period has not expired;
    (3) Determine that the individual has remaining entitlement;
    (4) Verify that the individual is attending an accredited 
institution;
    (5) Determine whether payments may be made for the course, and
    (6) Make appropriate payments of educational assistance and 
subsistence allowance.


(Authority: 10 U.S.C. 2142-2149)

                         Claims and Applications



Sec. 21.5730  Applications, claims, and time limits.

    The provisions of subpart B of this part apply with respect to 
claims for educational assistance under the educational program 
described in Sec. 21.5701, VA actions upon receiving a claim, and time 
limits connected with claims.

(Authority: 10 U.S.C. 2141, 2149; 38 U.S.C. 5101, 5102, 5103)

[64 FR 23772, May 4, 1999]

                       Eligibility and Entitlement



Sec. 21.5740  Eligibility.

    (a) Establishing eligibility. To establish eligibility to 
educational assistance under 10 U.S.C. Chapter 107 an individual must--

[[Page 363]]

    (1) Enlist or reenlist for service on active duty as a member of the 
Army, Navy, Air Force or Marine Corps after September 30, 1980 and 
before October 1, 1981 specifically for benefits under the provisions of 
10 U.S.C. 2141 through 2149, Pub. L. 96-342,
    (2) Have graduated from a secondary school,
    (3) Meet other requirements as the Secretary of Defense may consider 
appropriate for the purpose of this chapter and the needs of the Armed 
Forces,
    (4) Meet the service requirements stated in paragraph (b) of this 
section, and
    (5) If a veteran, have been discharged under honorable conditions.


(Authority: 10 U.S.C. 2142(b), 38 U.S.C. 5303A)

    (b) Service Requirements. (1) The individual must complete 24 
continuous months of active duty of the enlistment or reenlistment 
described in paragraph (a)(1) of this section; or
    (2) If the enlistment described in paragraph (a) of this section is 
the individual's initial enlistment for service on active duty, the 
individual must--
    (i) Complete 24 continuous months of active duty, or
    (ii) Be discharged or released from active duty--
    (A) Under 10 U.S.C. 1173 (hardship discharge), or
    (B) Under 10 U.S.C. 1171 (early-out discharge), or
    (C) For a disability incurred in or aggravated in line of duty; or
    (iii) Be found by the VA to have a service-connected disability 
which gives the individual basic entitlement to disability compensation 
as described in Sec. 3.4(b) of this title. Once the VA makes this 
finding, the individual's eligibility will continue notwithstanding that 
the disability becomes noncompensable.
    (3) In computing time served for the purpose of this paragraph, VA 
will exclude any period during which the individual is not entitled to 
credit for service as specified in Sec. 3.15 of this title. However, 
those periods will not interrupt the individual's continuity of service.


(Authority: 10 U.S.C. 2142; 38 U.S.C. 5303A)

[45 FR 31, Jan. 2, 1980, as amended at 54 FR 34984, Aug. 23, 1989]



Sec. 21.5741  Eligibility under more than one program.

    (a) Veterans and servicemembers. A veteran or servicemember who is 
eligible for educational assistance under either 38 U.S.C. chapter 31 or 
34, or subsistence allowance under 38 U.S.C. chapter 31 may also be 
eligible for the Educational Assistance Test Program. (See Sec. 21.5824 
for restrictions on duplication of benefits.)
    (b) Spouse, surviving spouse or dependent child. A spouse, surviving 
spouse or dependent child who is eligible to receive educational 
assistance under 38 U.S.C. Chapters 31, 32, 34 and 35 may also be 
eligible for the Educational Assistance Test Program. (See Sec. 21.5824 
for restrictions on duplication of benefits.)


(Authority: 10 U.S.C. 2142)

    (c) Limitation on benefits. (1) Before March 2, 1984 the 48 month 
limitation on benefits under two or more programs found in 38 U.S.C. 
3695 does not apply to the Educational Assistance Test Program when 
taken in combination with any program authorized under title 38 U.S.C.
    (2) After March 1, 1984 the aggregate period for which any person 
may receive assistance under the Educational Assistance Test Program and 
the provisions of any of the laws listed below may not exceed 48 months 
(or the part-time equivalent thereof):
    (i) Part VII or VIII, Veterans Regulations numbered 1(a) as amended,
    (ii) Title II of the Veterans' Readjustment Assistance Act of 1952,
    (iii) The War Orphans' Educational Assistance Act of 1956,
    (iv) Chapters 32, 34, 35 and 36 of title 38 U.S.C. and the former 
chapter 33,
    (v) Section 903 of the Department of Defense Authorization Act, 
1981.


(Authority: Pub. L. 96-342, 10 U.S.C. 2141 note)

    (vi) The Hostage Relief Act of 1980.
    (3) After October 19, 1984 the aggregate period for which any person 
may

[[Page 364]]

receive assistance under the Educational Assistance Test Program and any 
of the laws listed in paragraph (c)(2) of this section, may not exceed 
48 months (or the part-time equivalent thereof):
    (i) Chapter 30 of title 38, U.S.C., and
    (ii) Chapter 1606 of title 10, U.S.C.


(Authority: 38 U.S.C. 3695)

[51 FR 27026, July 29, 1986, as amended at 61 FR 20729, May 8, 1996]



Sec. 21.5742  Entitlement.

    (a) Educational assistance. A veteran or servicemember shall be 
entitled to one standard academic year (or the equivalent) of 
educational assistance for each year of service following the first 
enlistment beginning after November 30, 1980 (up to a maximum of four 
years). If the veteran or servicemember completes two years of active 
duty in the term of enlistment, but fails to complete the enlistment or 
fails to complete four years of active duty in an enlistment of more 
than four years, his or her entitlement to educational assistance shall 
be calculated as follows:
    (1) VA shall determine the number of years, months and days in the 
veteran's qualifying period of service by subtracting the entry on duty 
date from the release from active duty date. Any deductible time under 
Sec. 3.15 of this chapter (during the period of service on which 
eligibility is based) will be excluded from the calculation.
    (2) VA shall convert the number of years determined in paragraph 
(a)(1) of this section to months by multiplying them by 12.
    (3) VA shall convert the number of days determined in paragraph 
(a)(1) of this section to 0 months if there are 14 days or less, and to 
1 month is there are more than 14 days.
    (4) VA shall determine the number of total months by adding the 
number of months determined in paragraph (a)(1) of this section 
(exclusive of years and days) to the number of months determined in 
paragraph (a)(2) of this section, and the number of months in paragraph 
(a)(3).
    (5) VA shall multiply the number of total months in paragraph (a)(4) 
of this section by 75.


(Authority: 10 U.S.C. 2142(a)(2))

    (b) Subsistence allowance. A veteran or servicemember shall be 
entitled to nine months of subsistence allowance for each standard 
academic year of entitlement to educational assistance. For each period 
of entitlement to educational assistance which is shorter than a 
standard academic year, a veteran or servicemember will be entitled to 
one month of subsistence allowance for each month of entitlement to 
educational assistance. This entitlement shall not exceed nine months.


(Authority: 10 U.S.C. 2144)

[51 FR 27026, July 29, 1986, as amended at 51 FR 29471, Aug. 18, 1986]



Sec. 21.5743  Transfer of entitlement.

    (a) Entitlement may be transferred. (1) A veteran or servicemember 
may transfer all or part of his or her entitlement to educational 
assistance and subsistence allowance to a spouse or dependent child. He 
or she may not transfer entitlement to more than one person at a time.
    (2) The Secretary of the Navy may authorize a member or veteran of 
the Navy or Marine Corps to make a transfer described in paragraph 
(a)(1) of this section provided:
    (i) The servicemember or veteran has entitlement to educational 
assistance as provided in Sec. 21.5742;
    (ii) The enlistment that established the servicemember's or 
veteran's entitlement was his or her second reenlistment as a member of 
the Armed Forces;
    (iii) The servicemember or veteran has completed at least four years 
of active service of that second reenlistment; and
    (iv) The servicemember's or veteran's second reenlistment was for a 
period of at least six years.
    (3) No transfer, other than one described in paragraph (a)(2) of 
this section, may be made until the veteran or servicemember--
    (i) Has completed the enlistment upon which his or her entitlement 
is

[[Page 365]]

based or has been discharged for reasons described in Sec. 
21.5740(b)(2), and
    (ii) Has thereafter reenlisted.
    (4) The servicemember or veteran may revoke at any time a transfer 
described in either paragraph (a) (2) or (3) of this section.
    (5) If a veteran attempts to transfer entitlement after 10 years 
have elapsed from the date he or she has retired, has been discharged or 
has otherwise been separated from active duty, the transfer shall be 
null and void.


(Authority: 10 U.S.C. 2147(a), 2148; Pub. L. 99-145)

    (b) Transfer of entitlement upon death of veteran or servicemember. 
(1) A veteran's or servicemember's entitlement to educational assistance 
and subsistence allowance shall be transferred automatically subject to 
provisions of paragraph (b)(2) of this section, provided he or she--
    (i) Completed the enlistment upon which the entitlement is based;
    (ii) Thereafter reenlisted;
    (iii) Never elected not to transfer entitlement; and
    (iv) Dies while on active duty or within 10 years from the date he 
or she retired, was discharged, or was otherwise separated from active 
duty.
    (2) The veteran's or servicemember's entitlement will be transferred 
to--
    (i) The veteran's or servicemember's surviving spouse, or
    (ii) If the veteran or servicemember has no surviving spouse, the 
veteran's or servicemember's dependent children.
    (3) A surviving spouse who receives entitlement under paragraph 
(b)(2) of this section may elect to transfer that entitlement to the 
veteran's or servicemember's dependent children.
    (4) If a servicemember transfers entitlement and then dies, and the 
effective date of the transfer is more than 10 years from the date of 
his or her death, the transfer shall be void. The entitlement will be 
transferred automatically as provided in paragraph (b)(2) of this 
section.


(Authority: 10 U.S.C. 2147(a))

    (c) Effect of transfer upon educational assistance and subsistence 
allowance: veteran or servicemember living. (1) A person to whom a 
veteran or servicemember transfers entitlement is entitled to 
educational assistance and subsistence allowance in the same manner and 
at the same rate as the person from whom entitlement was transferred.
    (2) The total entitlement transferred to the veteran's or 
servicemember's spouse and children shall not exceed the veteran's or 
servicemember's remaining entitlement. The veteran or servicemember may 
transfer entitlement to only one person at a time.


(Authority: 10 U.S.C. 2147)

    (d) Effect of transfer upon educational assistance and subsistence 
allowance: Veteran or servicemember deceased. (1) A person to whom 
entitlement is transferred after the death of a veteran or servicemember 
is entitled to payment of educational assistance and subsistence 
allowance in the manner as the veteran or servicemember. The rate of 
educational assistance and subsistence allowance will be as stated in 
Sec. Sec. 21.5820 and 21.5822.
    (2) If entitlement is transferred to more than one person following 
the death of a veteran or servicemember, the total remaining entitlement 
to educational assistance and subsistence allowance of all is equal to 
the total entitlement of the person on whose service entitlement is 
based.


(Authority: 10 U.S.C. 2147)

    (e) Revocation of a transfer of entitlement. A surviving spouse who 
has transferred entitlement to a dependent child may revoke the transfer 
by notifying VA in writing. A veteran or servicemember who has 
transferred entitlement may revoke that transfer by notifying VA in 
writing. The veteran, servicemember or surviving spouse may choose the 
effective date of the revocation subject to the following conditions:
    (1) If the person to whom entitlement is transferred never enters 
training, the effective date of the revocation may be any date chosen by 
the veteran, servicemember or surviving spouse who transferred the 
entitlement.
    (2) If the person to whom entitlement is transferred is not in 
training on the date the VA processes the revocation, but he or she has 
trained before that

[[Page 366]]

date, the effective date of the revocation may be no earlier than the 
last date that person was in training for which educational assistance 
and subsistence allowance were payable.
    (3) If the person to whom entitlement is transferred is in training 
(for which educational assistance and subsistence allowance are payable) 
on the date the VA processes revocation, the effective date of the 
revocation may be no earlier than--
    (i) The last date of the term, quarter, or semester at the 
accredited institution where that person is enrolled, or
    (ii) If the accredited institution is not organized on a term, 
quarter or semester basis, the last date of the course or the last date 
of the school year, whichever is earlier.


(Authority: 10 U.S.C. 2147)

[51 FR 27026, July 29, 1986, as amended at 53 FR 1779, Jan. 22, 1988]



Sec. 21.5744  Charges against entitlement.

    (a) Charges against entitlement to educational assistance. (1) 
Except as provided in paragraph (a)(2) of this section VA will make a 
charge against an individual's entitlement to educational assistance 
of--
    (i) One month for each month of a term, quarter or semester--
    (A) For which the servicemember receives educational assistance, and
    (B) During which the servicemember is a full-time student; and
    (ii) One-half month for each month of a term, quarter or semester--
    (A) For which the individual receives educational assistance, and
    (B) During which the servicemember is a part-time student.
    (2) VA will prorate the entitlement charge if the individual--
    (i) Is a student for only part of a month, or
    (ii) The individual is a full-time student for part of a month and a 
part-time student for part of the same month.
    (3) The charge against entitlement to educational assistance should 
always equal the charge against entitlement to subsistence allowance for 
the same enrollment period.
    (b) Charges against entitlement to subsistence allowance. (1) For 
each individual, except servicemembers, VA will make a charge against an 
individual's entitlement to subsistence allowance of--
    (i) One month for each month the individual is a full-time student 
receiving subsistence allowance; and
    (ii) One-half for each month the individual is a part-time student 
receiving subsistence allowance.
    (2) Even though a servicemember may not receive subsistence 
allowance, VA will make a charge against a servicemember's entitlement 
to subsistence allowance of--
    (i) One month for each month of a term, quarter or semester--
    (A) For which the servicemember received educational assistance and
    (B) During which the servicemember is a full-time student; and
    (ii) One-half month for each month of a term, quarter or semester--
    (A) For which the servicemember received educational assistance, and
    (B) During which the individual is a part-time student.
    (3) VA will prorate the entitlement charge as stated in paragraph 
(b) (1) or (2) of this section during any month for which a 
servicemember receives educational assistance or for which the 
individual receives subsistence allowance--
    (i) For less than a full month, or
    (ii) At the full-time rate for part of a month and at the part-time 
rate for part of the same month.

(Authority: 10 U.S.C. 2142)



Sec. 21.5745  Period of entitlement.

    (a) Veterans. The period of entitlement of a veteran expires on the 
first day following ten years from the date the veteran retires or is 
discharged or otherwise separated from active duty.


(Authority: 10 U.S.C. 2148; Pub. L. 96-342)

    (b) Spouses, surviving spouses, and dependent children. If the 
veteran's or servicemember's entitlement is transferred, the period of 
entitlement of the spouse, surviving spouse, or dependent child expires 
10 years from--
    (1) The date the veteran retires, is discharged or otherwise 
separated from active duty, or

[[Page 367]]

    (2) If the servicemember dies on active duty, the date of the 
servicemember's death.


(Authority: 10 U.S.C. 2148)

                                 Courses



Sec. 21.5800  Courses.

    (a) Courses permitted. An individual may receive educational 
assistance and subsistence allowance only while receiving instruction in 
a postsecondary course offered at any institution in the United States 
(including the District of Columbia, the Commonwealth of Puerto Rico, 
Guam and the U.S. Virgin Islands) that is accredited by a nationally 
recognized accrediting agency or association or by an accrediting agency 
or association recognized by the Secretary of Education.


(Authority: 10 U.S.C. 2142)

    (b) Courses precluded. An individual shall receive neither 
educational assistance nor subsistence allowance while pursuing any of 
the following courses:
    (1) A course offered at the secondary level or below;
    (2) A course offered by an institution located outside the United 
States (except in Guam, the Commonwealth of Puerto Rico and the U.S. 
Virgin Islands);
    (3) A course offered by a nonaccredited institution; and
    (4) Courses which do not require the student to receive instruction 
at the institution. These include--
    (i) Correspondence courses,
    (ii) Combination correspondence--residence courses, and
    (iii) Courses offered through independent study.


(Authority: 10 U.S.C. 2143)

                             Certifications



Sec. 21.5810  Certifications of enrollment.

    (a) Enrollment certifications. An individual who wishes to receive 
educational assistance and subsistence allowance shall ensure that the 
accredited institution he or she is attending certifies the individual's 
enrollment to VA.


(Authority: 10 U.S.C. 2141)

    (b) Content of certification. The certification should include--
    (1) The number of credit hours or clock hours in which the 
individual is enrolled;
    (2) The amount of the cost of tuition, fees, books, laboratory fees, 
and shop fees for consumable materials used as part of classroom or 
laboratory instruction which the individual will incur during the period 
of enrollment; and
    (3) The beginning and ending dates of the period of enrollment.


(Authority: 10 U.S.C. 2142)

    (c) Length of certification. A school should not certify more than 
one term, quarter or semester at a time.


(Authority: 10 U.S.C. 2141)

(Approved by the Office of Management and Budget under control number 
2900-0073)



Sec. 21.5812  Reports of withdrawals and terminations of attendance and 
changes in training time.

    (a) Reports of withdrawals and terminations of attendance. (1) An 
individual shall report to VA facility of jurisdiction whenever he or 
she withdraws from school or terminates his or her attendance. He or she 
shall report the last day of attendance. The individual may request that 
the school verify this information.
    (2) The report shall include--
    (i) The date of withdrawal or last date of attendance, as 
appropriate; and
    (ii) The amount of educational expenses actually incurred by the 
individual during the period of enrollment before the date of 
withdrawal, or if the individual does not formally withdraw when he or 
she stops attending the amount of educational expenses actually incurred 
by the individual during the period of enrollment before the last date 
of attendance.


(Authority: 10 U.S.C. 2141)

    (b) Reports of changes in training. (1) An individual shall report 
to the VA field station of jurisdiction each time

[[Page 368]]

the individual increases or decreases the number of credit hours or 
clock hours of training in which he or she is enrolled or otherwise 
alters the duration of the enrollment.
    (2) The report shall include--
    (i) The new number of credit hours or clock hours in which the 
individual is enrolled;
    (ii) The amount of educational expenses, enumerated in Sec. 
21.5810(b)(2), which the individual will incur during the revised period 
of enrollment; and
    (iii) The effective date of the change in the number of credit hours 
or clock hours, including any revision in the term of the enrollment.
    (3) The individual or VA may ask the school to verify the 
individual's reports of changes in training.


(Authority: 10 U.S.C. 2141)

(Approved by the Office of Management and Budget under control number 
2900-0156)



Sec. 21.5816  False or fraudulent claims.

    Each individual, or school officer or official shall be subject to 
civil penalties or criminal penalties, or both, under applicable Federal 
law for submitting a false or fraudulent report, revision to a report, 
or verification of accuracy of a report used to support an individual's 
claim, even though the report or verification is provided gratuitously 
or voluntarily to VA.

(Authority: 31 U.S.C. 3729-3731, 18 U.S.C. 1001)

       Payments--Educational Assistance and Subsistence Allowance



Sec. 21.5820  Educational assistance.

    (a) Educational assistance. Educational assistance will be paid to 
cover the educational expenses incurred by an eligible servicemember, 
veteran, spouse, surviving spouse or dependent child while attending an 
accredited institution. Educational assistance payments will be made to 
the eligible individual.
    (1) The educational expenses are limited to--
    (i) Tuition,
    (ii) Fees,
    (iii) Cost of books,
    (iv) Laboratory fees, and
    (v) Shop fees for consumable materials used as part of classroom or 
laboratory instruction.
    (2) Educational expenses may not exceed those normally incurred by 
students at the same educational institution who are not eligible for 
benefits from the educational assistance test program.


(Authority: 10 U.S.C. 2143(a))

    (b) Amount of educational assistance. (1) The amount of educational 
assistance will be adjusted annually by regulation. For the 2003-04 
standard academic year the amount of this assistance may not exceed 
$4,219.
    (2) The amount of educational assistance payable to a servicemember, 
veteran, spouse or dependent child of a living servicemember or veteran 
for an enrollment period will be the lesser of the following:
    (i) The total charges for educational expenses the eligible 
individual incurs during the enrollment period, or
    (ii) For the 2003-04 standard academic year an amount determined by:
    (A) Multiplying the number of whole months in the enrollment period 
by $468.78 for a full-time student or by $234.39 for a part-time 
student;
    (B) Multiplying any additional days in the enrollment period by 
$15.63 for a full-time student or by $7.81 for a part-time student; and
    (C) Adding the two results. If the enrollment period is as long as 
or longer than the standard academic year, this amount will be decreased 
by 2 cents for a full-time student and decreased by 1 cent for a part-
time student.
    (3) The amount of educational assistance payable to each surviving 
spouse or dependent child of a deceased servicemember or veteran for an 
enrollment period will be the lesser of the following:
    (i) The total charges for educational expenses the eligible 
individual incurs during the enrollment period, or
    (ii) For the 2003-04 standard academic year an amount determined by:
    (A) Multiplying the number of whole months in the enrollment period 
by $468.78 for a full-time student or by $234.39 for a part-time 
student;
    (B) Multiplying any additional days in the enrollment period by 
$15.63 for a

[[Page 369]]

full-time student or by $7.81 for a part-time student; and
    (C) Adding the two results. If the enrollment period is as long as 
or longer than a standard academic year, this amount will be decreased 
by 2 cents for a full-time student and decreased by 1 cent for a part-
time student; and
    (D) Dividing the amount determined in paragraph (b)(3)(ii)(C) of 
this section by the number of the deceased veteran's dependents 
receiving educational assistance for that enrollment period. If one or 
more dependents is receiving educational assistance for part of the 
enrollment period, the amount calculated in paragraph (b)(3)(ii)(C) will 
be prorated on a daily basis. The amount for each day when more than one 
dependent is receiving educational assistance will be divided by the 
number of dependents receiving educational assistance on that day. The 
total amount for the days when only one dependent is receiving 
educational assistance will not be divided.


(Authority: 10 U.S.C. 2143, 2145)

    (c) Time of educational assistance payments. VA will make payments 
of educational assistance at the end of the first month of each 
semester, quarter or term in which the individual is entitled to such a 
payment, provided VA receives a timely enrollment certification. If VA 
receives the enrollment certification so late that payment cannot be 
made at the end of the month in which the individual is enrolled, VA 
will make payment as soon as practicable.


(Authority: 10 U.S.C. 2143)

[51 FR 27026, July 29, 1986]

    Editorial Note: For Federal Register citations affecting Sec. 
21.5820, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 21.5822  Subsistence allowance.

    (a) Subsistence allowance. Except as provided in paragraph (a)(2) of 
this section, VA will pay subsistence allowance to a veteran, spouse, 
surviving spouse or dependent child during any period for which he or 
she is entitled to educational assistance. No subsistence allowance is 
payable to:
    (1) A servicemember, even if he or she is entitled to educational 
assistance, or
    (2) A spouse or dependent child of a servicemember, even if the 
spouse or dependent child is entitled to educational assistance.


(Authority: 10 U.S.C. 2144(a))

    (b) Amount of subsistence allowance. (1) The following rules govern 
the amount of subsistence allowance payable to veterans and to spouses 
and dependent children of veterans who are alive during the period for 
which subsistence allowance is payable. As stated in paragraph (a) of 
this section, these amounts are payable only for periods during which 
the veterans, spouses or dependent children are entitled to educational 
assistance.
    (i) If a person is pursuing a course of instruction on a full-time 
basis, his or her subsistence allowance is $1,051 per month for training 
pursued during the 2003-04 academic year.
    (ii) If a person is pursuing a course of instruction on other than a 
full-time basis, his or her subsistence allowance is $525.50 per month 
for training pursued during the 2003-04 academic year.
    (iii) If a person does not pursue a course of instruction for a 
complete month VA will prorate the subsistence allowance for that month 
on the basis of 1/30th of the monthly rate for each day the person is 
pursuing the course.
    (2) The following rules govern the amount of subsistence allowance 
payable to surviving spouses and dependent children of deceased veterans 
and servicemembers.
    (i) VA will determine the monthly rate of subsistence allowance 
payable to a person for a day during which he or she is pursuing a 
course of instruction full-time during the 2003-04 academic year by 
dividing $1,051 per month by the number of the deceased veteran's 
dependents pursuing a course of instruction on that day.
    (ii) VA will determine the monthly rate of subsistence allowance 
payable to a person for a day during which he or she is pursuing a 
course of instruction on other than a full-time basis during the 2003-04 
academic year by dividing $525.50 per month by the number of the 
deceased veteran's dependents

[[Page 370]]

pursuing a course of instruction on that day.


(Authority: 10 U.S.C. 2144, 2145)

    (iii) The total amount of subsistence allowance payable to a person 
for a month is the sum of the person's daily rates for the month.
    (c) Time of subsistence allowance payments. VA will make payments of 
subsistence allowance on the first day of the month following the month 
for which subsistence allowance is due, provided that VA receives a 
timely enrollment certification. If VA receives the enrollment 
certification so late that payment cannot be made on the first day of 
the month following the month for which subsistence allowance is due, VA 
will make payment as soon as practicable.


(Authority: 10 U.S.C. 2144)

[51 FR 27026, July 29, 1986]

    Editorial Note: For Federal Register citations affecting Sec. 
21.5822, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 21.5824  Nonduplication: Federal progams.

    (a) Duplication of some benefits prohibited. An individual who is 
receiving educational assistance under programs authorized by 38 U.S.C. 
Chapters 30, 31, 32, 34, 35 or 36 may not receive concurrently either 
educational assistance or subsistence allowance under the Sec. Sec. 
21.5700, 21.5800 and 21.5900 series of regulations for the same program 
of education, but may receive them sequentially.
    (b) Debts may result from duplication. (1) If an individual receives 
benefits under 38 U.S.C. Chapters 30, 31, 32, 34, 35 or 36 for training, 
and he or she has previously received educational assistance or 
subsistence allowance (or both) under Sec. Sec. 21.5700, 21.5800, 
21.5900 series of regulations the amount of the benefits received under 
38 U.S.C. Chapters 30, 31, 32, 34 or 35 shall not constitute a debt due 
the United States.
    (2) If an individual receives benefits under 38 U.S.C. Chapter 34, 
and had signed an agreement with the Department of Defense to waive 
those benefits in return for receiving benefits under the educational 
assistance test program:
    (i) Any benefits already paid under the educational assistance test 
program will constitute a debt due the United States, and
    (ii) No further benefits under the educational assistance test 
program will be paid to the individual or to anyone to whom entitlement 
may be transferred.

(Authority: 10 U.S.C. 2141)



Sec. 21.5828  False or misleading statements.

    (a) False statements. An individual who attempts to obtain 
educational assistance or subsistance allowance or both through 
submission of false or misleading statements is subject to civil 
penalties or criminal penalties or both under applicable Federal law.


(Authority: 31 U.S.C. 3729-3731; 18 U.S.C. 1001)

    (b) Effect of false statements on subsequent payments. A 
determination that false or misleading statements have been made will 
not constitute a bar to payments based on training to which the false or 
misleading statements do not apply.


(Authority: 10 U.S.C. 2141, 2144)



Sec. 21.5830  Payment of educational assistance.

    (a) Timing and release of payments. VA will pay educational 
assistance to the individual on the last day of the calendar month 
during which the individual enters or reenters training.


(Authority: 10 U.S.C. 2143)

    (b) Period covered by payments. The payments cover those expenses, 
listed in Sec. 21.5820(a) incurred for the period beginning on the 
commencing date of the individual's subsistence allowance and ending on 
the ending date of the individual's subsistence allowance. See Sec. 
21.5831.


(Authority: 10 U.S.C. 2143)

[[Page 371]]



Sec. 21.5831  Commencing date of subsistence allowance.

    The commencing date of an award or increased award of subsistence 
allowance will be determined by this section
    (a) Entrance or reentrance. Latest of the following dates:
    (1) Date certified by school or establishment under paragraph (b) or 
(c) of this section.
    (2) Date 1 year before the date of receipt of the application or 
enrollment certification.
    (3) Date of reopened application under paragraph (d) of this 
section.
    (4) In the case of a spouse, surviving spouse, or dependent child, 
the date that transfer of eligibility and entitlement to the individual 
was effective.


(Authority: 10 U.S.C. 2144)

    (b) Certification by the school-course leads to a standard college 
degree. The date of registration or the date of reporting where the 
student is required by the school's published standard to report in 
advance of registration, but not later than the date the individual 
first reports for classes.


(Authority: 10 U.S.C. 2144)

    (c) Certification by school or establishment-course does not lead to 
a standard college degree. First date of class attendance.


(Authority: 10 U.S.C. 2144(a))

    (d) Reopened application after abandonment. Date of receipt in VA of 
application or enrollment certification, whichever is later.
    (e) Increase due to increased training time. The date the school 
certifies the individual became a full-time student.
    (f) Liberalizing laws and administrative issues. In accordance with 
facts found, but not earlier than the effective date of the act or 
administrative issue.


(Authority: 10 U.S.C. 2144)

    (g) Correction of military records. When a veteran becomes eligible 
following corection or modification of military records under 10 U.S.C. 
1552 or change, correction or modification of a discharge or dismissal 
under 10 U.S.C. 1553; or other competent military authority, the 
commencing date of subsistence allowance will be in accordance with the 
facts found, but not earlier than the date the change, correction or 
modification was made by the service department.


(Authority: 10 U.S.C. 2142)



Sec. 21.5834  Discontinuance dates: General.

    (a) Educational assistance. Although educational assistance is paid 
only once in a term, quarter, or semester, VA may discontinue it under 
the circumstances stated in Sec. 21.5835. The discontinuance may cause 
an overpayment. (See also Sec. 21.5838.) If the individual dies during 
an enrollment period, the provisions of Sec. 21.5835(a) will apply, 
even if other types of discontinuances are involved. In all other cases 
where more than one type of reduction or discontinuance is involved, the 
earliest date found in Sec. 21.5835 will control.


(Authority: 10 U.S.C. 2143)

    (b) Subsistance allowance. The effective date of a reduction or 
discontinuance of subsistence allowance will be as specified in Sec. 
21.5835. If more than one type of discontinuance is involved, the 
earliest date will control.


(Authority: 10 U.S.C. 2144)



Sec. 21.5835  Specific discontinuance dates.

    The following rules will govern reduction and discontinuance dates 
for educational assistance and subsistence allowance.
    (a) Death of individual. If an individual dies--
    (1) VA will discontinue educational assistance effective the last 
day of the most recent term, quarter, semester or enrollment period of 
which the individual received educational assistance.
    (2) VA will discontinue subsistence allowance effective the 
individual's last date of attendance.


(Authority: 10 U.S.C. 2144)

    (b) Lump-sum payment. When a servicemember accepts a lump-sum 
payment in lieu of educational assistance, VA will discontinue 
educational assistance effective the date on which

[[Page 372]]

he or she elects to receive the lump-sum payment.


(Authority: 10 U.S.C. 2146)

    (c) Reduction due to decreased training time. (1) If a decrease in 
an individual's training time requires a decrease in educational 
assistance, the decrease is effective the end of the month in which the 
individual become a part-time student or the end of the term, whichever 
is earlier.
    (2) When an individual decreases his or her training time from full-
time to part-time, VA will decrease his or her subsistence allowance 
effective the end of the month in which the individual became a part-
time student, or the end of the term, whichever is earlier.


(Authority: 10 U.S.C. 2143, 2144)

    (d) Course discontinued, interrupted, terminated or withdrawn from. 
If an individual withdraws, discontinues, ceases to attend, interrupts 
or terminates all courses, VA will discontinue educational assistance 
and subsistence allowance effective the last date of attendance.


(Authority: 10 U.S.C. 2143)

    (e) False claim. VA will discontinue educational assistance and 
subsistence allowance effective the first day of the term for which the 
false claim is submitted.


(Authority: 10 U.S.C. 2141)

    (f) Withdrawal of accreditation. If an accrediting agency withdraws 
accreditation from a course in which an individual is enrolled, VA will 
discontinue educational assistance and subsistence allowance effective 
the end of the month in which the accrediting agency withdrew 
accreditation, or the end of the term, whichever is earlier.


(Authority: 10 U.S.C. 2143(c), 2144)

    (g) Remarriage of surviving spouse. VA will discontinue educational 
assistance and subsistence allowance effective the last date of 
attendance before the date on which the surviving spouse remarries.


(Authority: 10 U.S.C. 2147(d))

    (h) Divorce. If entitlement has been transferred to the veteran's or 
servicemember's spouse, and the spouse is subsequently divorced from the 
veteran or servicemember, the spouse's award of educational assistance 
and subsistence allowance will end on the last date of attendance before 
the divorce decree becomes final.


(Authority: 10 U.S.C. 2147(d))

    (i) Revocation of transfer. If a veteran or servicemember revokes a 
transfer of entitlement, the spouse's or dependent child's award of 
educational assistance will end on the effective date of the revocation. 
See Sec. 21.5743(e).


(Authority: 10 U.S.C. 2147)

    (j) Dependent child ceases to be dependent: veteran or servicemember 
living. If a veteran or servicemember is living and has transferred 
entitlement to his or her dependent child who is not incapable of self 
support due to physical or mental incapacity, VA will discontinue the 
dependent child's award of educational assistance and subsistence 
allowance whenever the child does not meet the definition of a dependent 
child found in Sec. 21.5720(c). The effective date of discontinuance is 
the earliest of the following:
    (1) The child's 21st birthday, if on that date--
    (i) The veteran or servicemember is not providing over one-half the 
child's support, or
    (ii) The child is not enrolled in a full-time course of study in an 
institution of higher learning approved by the Secretary of Defense or 
the Secretary of Education, as the case may be;
    (2) The date, following the child's 21st birthday, on which the 
veteran or servicemember stops providing over one-half the child's 
support;
    (3) The date, following the child's 21st birthday, on which he or 
she is no longer enrolled in a full-time course of study in an 
institution of higher learning approved by the Secretary of Defense or 
the Secretary of Education, as the case may be;
    (4) The child's 23rd birthday;
    (5) the date the child marries.


(Authority: 10 U.S.C. 2147(d))


[[Page 373]]


    (k) Dependent child ceases to be dependent: veteran or servicemember 
deceased. If a veteran or servicemember is deceased and his or her 
dependent child is not incapable of self support due to physical or 
mental incapacity, VA will discontinue the dependent child's award of 
educational assistance whenever the child does not meet the definition 
of a dependent child found in Sec. 21.5720(c). The effective date of 
discontinuance is the earliest of the following:
    (1) The day after the child's 21st birthday, if on that date the 
child is not enrolled in a full-time course of study in an institution 
of higher learning approved by the Secretary of Defense or the Secretary 
of Education, as the case may be;
    (2) The date following the child's 21st birthday on which he or she 
is no longer enrolled in a full-time course of study in an institution 
of higher learning approved by the Secretary of Defense or the Secretary 
of Education, as the case may be;
    (3) The child's 21st birthday; or
    (4) The date the child marries.


(Authority: 10 U.S.C. 2147(d))



Sec. 21.5838  Overpayments.

    (a) Educational assistance. If an individual receives educational 
assistance but the educational assistance must be discontinued according 
to Sec. 21.5835, the amount of educational assistance attributable to 
the portion of the term, quarter or semester following the effective 
date of discontinuance shall constitute a debt due the United States.
    (1) The amount of the debt is equal to the product of--
    (i) The number of days the individual was entitled to receive 
subsistence allowance during the enrollment period for which educational 
assistance was paid, divided by the total number of days in that 
enrollment period, and
    (ii) The amount of educational assistance provided for that 
enrollment period.
    (2) Nothing in this method of calculation shall change the fact that 
the number of months of educational assistance to which the individual 
remains entitled shall always be the same as the number of months of 
subsistence allowance to which the individual is entitled.


(Authority: 10 U.S.C. 2143)

    (b) Subsistence allowance. If an individual receives subsistence 
allowance under any of the following conditions, the amount of that 
subsistence allowance shall constitute a debt due the United States 
unless the debt is waived as provided by Sec. Sec. 1.955 through 1.970 
of this chapter.
    (1) Subsistence allowance received for courses pursued while on 
active duty;
    (2) Subsistence allowance received for courses which are precluded 
under Sec. 21.5800(b);
    (3) Subsistence allowance received by a person who is not eligible 
for educational assistance under Sec. 21.5740;
    (4) Subsistence allowance received by an individual who has 
exhausted all entitlement provided under Sec. 21.5742;
    (5) Subsistence allowance received by an individual for a period 
before the commencing date determined by Sec. 21.5831.
    (6) Subsistence allowance received by an individual for a period 
following a discontinuance date determined by Sec. 21.5835.
    (7) Subsistence allowance received by an individual in excess of the 
part-time rate for a period following a reduction date determined by 
Sec. 21.5835.


(Authority: 10 U.S.C. 2144)

                         Measurement of Courses



Sec. 21.5870  Measurement of courses.

    (a) Credit hour measurement: undergraduate, standard term. An 
individual who enrolls in a standard quarter or semester for 12 
undergraduate credit hours is a full-time student. An individual who 
enrolls in a standard quarter or semester for less than 12 undergraduate 
credit hours is a part-time student.

(Authority: 10 U.S.C. 2144(c))
    (b) Credit hour measurement: Undergraduate, nonstandard term. (1) If 
an individual enrolls in a nonstandard term, quarter or semester, and 
the school measures the course on a credit-hour basis, VA will determine 
whether that individual is a full-time student by--

[[Page 374]]

    (i) Multiplying the credits earned in the term by 18 if credit is 
granted in semester hours, or by 12 if credit is granted in quarter 
hours, and
    (ii) Dividing the product by the number of whole weeks in the term.
    (2) In determining whole weeks VA will--
    (i) Divide the number of days in the term by 7;
    (ii) Disregard a remainder of 3 days or less, and
    (iii) Consider 4 days or more to be a whole week.
    (3) If the number obtained by using the formula in paragraphs (b)(1) 
and (2) of this section is 12 or more, the individual is a full-time 
student. If that number is less than 12, the individual is a part-time 
student.
    (c) Credit hour measurement: graduate. (1) If it is the established 
policy of a school to consider less than 12 credit hours to be full-time 
for graduate students, VA will accept the statement of a responsible 
school offical as to whether the student is a full-time or part-time 
student. If the school does not have such a policy, VA will measure the 
student's enrollment according to the provisions of paragraphs (a) and 
(b) of this section.
    (2) VA will measure undergraduate courses required by the school 
according to the provisions of paragraphs (a) and (b) of this section, 
even though the individual is enrolled as a graduate student. If the 
individual is taking both graduate and undergraduate courses, the school 
will report the credit-hour equivalent of the graduate work. VA will 
first measure the undergraduate courses according to the provisions of 
paragraphs (a) and (b) of this section and combine the result with the 
credit-hour equivalent of the graduate work in order to determine the 
extent of training.
    (d) Clock hour measurement. (1) If an individual enrolls in a course 
measured in clock hours and shop practice is an integral part of the 
course, he or she is a full-time student when enrolled in 22 clock hours 
or more per week with not more than a 2\1/2\ hour rest period allowance 
per week. For all other enrollments the individual is a part-time 
student. VA will exclude supervised study in determining the number of 
clock hours in which the individual is enrolled.
    (2) If an individual enrolls in a course measured in clock hours and 
theory and class instruction predominate in the course, he or she is a 
full-time student enrolled in 18 clock hours or more per week. He or she 
is a part-time student when enrolled in less than 18 clock hours per 
week. Customary intervals not to exceed 10 minutes between classes will 
be included in measuring net instruction. Shop practice, rest periods, 
and supervised study are excluded. Supervised instruction periods in 
schools' shops and the time involved in field trips and individual and 
group instruction may be included in computing the clock hour 
requirements.

(Authority: 10 U.S.C. 2144(c))

                             Administrative



Sec. 21.5900  Administration of benefits program--chapter 107, title 
10 U.S.C.

    In administering benefits payable under Chapter 107, Title 10 U.S.C, 
VA will be bound by the provisons of the Sec. Sec. 21.5700, 21.5800 and 
21.5900 series of regulations.

(Authority: 10 U.S.C. 2144(c))



Sec. 21.5901  Delegations of authority.

    (a) General delegation of authority. Except as otherwise provided, 
authority is delegated to the Under Secretary for Benefits and to 
supervisory or adjudication personnel within the jurisdiction of the 
Education Service of VA, designated by him or her to make findings and 
decisions under 10 U.S.C. chapter 107 and the applicable regulations, 
precedents and instructions concerning the program authorized by these 
regulations.


(Authority: 10 U.S.C. 2144(c))

    (b) Delegation of authority concerning the Civil Rights Act of 1984. 
The Under Secretary for Benefits is delegated the responsibility to 
obtain evidence of voluntary compliance with title VI of

[[Page 375]]

the Civil Rights Act of 1964 from educational institutions and from 
recognized national organizations whose representatives are afforded 
space and office facilities under his or her jurisdiction. See part 18 
of this title.


(Authority: 42 U.S.C. 2000)

[51 FR 27026, July 29, 1986, as amended at 62 FR 55761, Oct. 28, 1997]



   Subpart I_Temporary Program of Vocational Training for Certain New 
                           Pension Recipients

    Authority: Pub. L. 98-543, 38 U.S.C. 501 and chapter 15, sections 
specifically cited, unless otherwise noted.

    Source: 53 FR 4397, Feb. 16, 1988, unless otherwise noted.
    Note: This subpart includes regulations governing the determination 
of eligibility, and the services which may be provided to veterans under 
this program. The numbering of the regulations follows the numbering of 
regulations under 38 U.S.C. chapter 31 to the extent possible. 
Additional regulations affecting this program are found in part 3 and 
part 17, Title 38 Code of Federal Regulations.

                                 General



Sec. 21.6001  Temporary vocational training program for certain pension 
recipients.

    This program provides certain veterans awarded pension with an 
evaluation and, if feasible, with vocational training, employment 
assistance and other services to enable them to achieve a vocational 
goal.

(Authority: 38 U.S.C. 1524, Pub. L. 100-687).

[55 FR 17271, Apr. 24, 1990]



Sec. 21.6005  Definitions.

    (a) Temporary program. The term temporary program means the program 
of vocational training for certain pension recipients authorized by 
section 1524, chapter 15, title 38 U.S.C.


(Authority: 38 U.S.C. 1524, Pub. L. 100-687).

    (b) Program period. The term program period means the period 
beginning on February 1, 1985, and ending on December 31, 1992.


(Authority: 38 U.S.C. 1524(a)(4); Pub. L. 102-291).

    (c) Qualified veteran. The term qualified veteran means--
    (1) A veteran awarded disability pension during the program period; 
or
    (2) A veteran who was awarded disability pension prior to the 
beginning of the program period on February 1, 1985, has been 
continuously in receipt of pension since that time, and is in receipt of 
pension on the date his or her claim for assistance under the vocational 
training program is received by VA.


(Authority: 38 U.S.C. 1524(a), Pub. L. 100-687).

    (d) Program participant. The term program participant means a 
qualified veteran as defined in paragraph (c) of this section who, 
following an evaluation in which VA finds achievement of a vocational 
goal is reasonably feasible for the veteran, elects to participate in a 
vocational training program.


(Authority: 38 U.S.C. 1524(a), Pub. L. 100-687).

    (e) Vocational training program. The term vocational training 
program means vocationally oriented services and assistance of the kind 
provided under chapter 31 of the title 38 U.S.C. and such other services 
and assistance of the kind provided under that chapter as are necessary 
to enable the veteran to prepare for, and participate in, vocational 
training or employment.


(Authority: 38 U.S.C. 1524(b))

    (f) Employment assistance. The term employment assistance means 
employment counseling and placement and postplacement services, and 
personal and work adjustment training.


(Authority: 38 U.S.C. 1524(d)(3))

    (g) Program of employment services. The term program of employment 
services is used when the veteran's entire program is limited to 
employment assistance as that term is defined in paragraph (f) of this 
section.


(Authority: 38 U.S.C. 1524(b)(4))

    (h) Job development. The term job development means comprehensive 
professional services to assist the individual veteran to actually 
obtain a suitable

[[Page 376]]

job, and not simply the solicitation of jobs on behalf of the veteran.


(Authority: 38 U.S.C. 1524(b)(3)).

    (i) Institution of higher learning. The term institution of higher 
learning shall have the same definition as is provided in Sec. 
21.4200(a) of this part.


(Authority: 38 U.S.C. 1524(b)(2))

    (j) Other terms. The following terms shall have the same meaning or 
explanation provided in Sec. 21.35 of this part.
    (1) Vocational goal.
    (2) Program of education.
    (3) Rehabilitation to the point of employability.
    (4) Counseling psychologist.
    (5) Vocational rehabilitation specialist.
    (6) School, educational institution or institution.
    (7) Training establishment.
    (8) Rehabilitation facility.
    (9) Workshop.


(Authority: 38 U.S.C. 1524)

[53 FR 4397, Feb. 16, 1988, as amended at 55 FR 17271, Apr. 24, 1990; 57 
FR 28086, June 24, 1992; 58 FR 41637, Aug. 5, 1993]



Sec. 21.6010  Applicability of rules and administrative procedures under 
38 U.S.C., Chapter 31.

    (a) General. Title 38 U.S.C., section 1524(b)(2)(A) provides, in 
part, that a vocational training program shall consist of vocationally 
oriented services and assistance of the kind provided service-disabled 
veterans under chapter 31, Title 38 U.S.C., and other services and 
assistance of the kind provided under that chapter as are necessary to 
enable the veteran to prepare for and participate in vocational training 
or employment.


(Authority: 38 U.S.C. 1524(b)(2)(A))

    (b) Applicable chapter 31 rules--general. The rules and procedures 
in force for administration of the chapter 31 program (Sec. 21.1-
Sec. 21.430) are deemed to be applicable to administration of this 
program in so far as their use shall not conflict with 38 U.S.C. 1524 or 
the rules under this subpart. Where a particular grouping of chapter 31 
rules are generally applicable, without modification, the rules under 
this subpart will be deemed to incorporate the chapter 31 rules. The 
chapter 31 rules may be read as written, but terms such as chapter 31 
and service-connected disability shall be understood to read chapter 15 
and disabilities whenever used. References in the chapter 31 rules to 
benefits (subsistence allowances, loans) or eligibility (dependents, 
service-connection, serious employment handicap) are to be considered 
inapplicable to this program and do not confer benefits or rights not 
provided by 38 U.S.C. 1524.


(Authority: 38 U.S.C. 1524)



Sec. 21.6015  Claims and elections.

    (a) Claims by veterans under age 45 for whom participation in an 
evaluation is required. A veteran under age 45 who is awarded pension 
during the program period will be scheduled for an evaluation to 
determine whether achievement of a vocational goal is reasonably 
feasible, unless it is determined that the veteran is unable to 
participate in an evaluation for reasons beyond his or her control. If 
VA, as a result of the evaluation, determines that achievement of a 
vocational goal is reasonably feasible, the veteran may elect to pursue 
a vocational training prgoram. To make this election, the veteran must 
file a claim, in a form prescribed by VA, for services under this 
temporary program.


(Authority: 38 U.S.C. 1524(b); Pub. L. 100-687, Pub. L. 100-687, Pub. L. 
101-237).

    (b) Claims by qualified veterans for whom participation in an 
evaluation is not required. Qualified veterans in the following 
categories will be provided an evaluation if they request assistance 
under the temporary program, and are found to have good employment 
potential. These veterans include:
    (1) Veterans age 45 and more who are awarded pension during the 
program period;
    (2) Veterans awarded pension prior to the beginning of the program 
period on

[[Page 377]]

February 1, 1985, who meet the conditions contained in Sec. 21.6005(c) 
of this part.


(Authority: 38 U.S.C. 1524(b), Pub. L. 100-687, Pub. L. 101-237).

    (c) Filing a claim. A veteran in one of the categories identified in 
paragraph (b) of this section must file a claim in the form prescribed 
by VA in order to be considered for an evaluation of his or her ability 
to achieve a vocational goal through participation in this temporary 
program. The veteran's claim is considered a request for both the 
evaluation, and if achievement of a vocational goal is found reasonably 
feasible, for participation in the vocational training program.


(Authority: 38 U.S.C. 1524, Pub. L. 100-687).

    (d) Claims following failure to timely pursue a vocational training 
program. (1) If a veteran for whom achievement of a vocational goal is 
found reasonably feasible does not undertake a vocational training 
program within the time limits specified in Sec. 21.32, he or she must 
file an original or reopened claim, as appropriate, in a form prescribed 
by VA in order to be considered for such services to determine if 
achievement of the previous vocational goal or a new vocational goal is 
reasonably feasible.
    (2) If a veteran has been placed in discontinued case status by the 
VA, he or she must file a new claim in a form prescribed by the VA to 
reopen the case.


(Authority: 38 U.S.C. 1524(b))

    (e) Informal claims. Informal claims shall be governed by Sec. 
21.31 of this part.


(Authority: 38 U.S.C. 1524(a))

    (f) Time limit. The time limit for making a claim to pursue a 
vocational training program shall be governed by Sec. 21.32 of this 
part.


(Authority: 38 U.S.C. 1524(a))

[53 FR 4397, Feb. 16, 1988, as amended at 55 FR 17271, Apr. 24, 1990; 56 
FR 21448, May 9, 1991]



Sec. 21.6021  Nonduplication--38 U.S.C., chapters 30, 31, 32, 34 and 35.

    (a) Election between this temporary program and chapter 31 required. 
A service-disabled veteran awarded VA pension who is offered a 
vocational training program under 38 U.S.C. chapter 15 and is also 
eligible for such assistance under chapter 31, must elect which benefit 
he or she will receive. The veteran may reelect at any time if he or she 
is still eligible for the benefit desired.


(Authority: 38 U.S.C. 1524(b)(2); Pub. L. 100-687).

    (b) VA educational assistance programs. A veteran who is eligible 
under this program may receive an educational assistance allowance under 
chapter 30, 32, 34 or 35 if he or she is otherwise eligible under one of 
these programs.


(Authority: 38 U.S.C. 1524(b)(2))

    (c) Prior training under VA programs. If a veteran has pursued an 
educational or training program under chapter 30, 32, 34 or 35, or a 
vocational rehabilitation program under chapter 31, the training 
received in the earlier program shall be considered, to the extent 
feasible, in determining the character and duration of the services to 
be furnished under this program.


(Authority: 38 U.S.C. 1524(b)(1))

    (d) Other prior training. If a veteran has pursued other significant 
training under non-VA programs or on his or her own, such training will 
be considered in determining the character and duration of services to 
be furnished.


(Authority: 38 U.S.C. 1524(b)(1))

    (e) Not limited by use of other entitlement. The number of months of 
services provided under this program are not subject to the provisions 
of Sec. 21.4020 of this part which limit the aggregate months of VA 
benefits to be provided.


(Authority: 38 U.S.C. 1524(b)(2))

[53 FR 4397, Feb. 16, 1988, as amended at 55 FR 17272, Apr. 24, 1990]

[[Page 378]]

                     Basic Eligibility Requirements



Sec. 21.6040  Eligibility for vocational training and employment 
assistance.

    (a) Basic eligibility requirements. A veteran may be provided 
vocational training, employment assistance and related services to 
achieve a vocational goal under this program, if the following basic 
requirements are met:
    (1) The veteran is a qualified veteran as described in Sec. 
21.6005(c) of this part;
    (2) The veteran participates in a VA evaluation of his or her 
rehabilitation potential to determine whether achievement of a 
vocational goal is reasonably feasible;
    (3) Achievement of a vocational goal is found reasonably feasible, 
following evaluation by VA;
    (4) The veteran elects to pursue a vocational training program;
    (5) The veteran and VA develop and agree to an Individualized 
Written Rehabilitation Plan (IWRP) identifying the vocational goal and 
the means through which this goal will be achieved.


(Authority: 38 U.S.C. 1524(a)(1))

    (b) Eligibility for employment assistance. (1) As provided in this 
paragraph, a veteran who is a participant in this program shall be 
eligible to receive counseling, placement, postplacement, work and 
personal adjustment services furnished under Sec. 21.6060(a)(2) of this 
part for a period not to exceed 18 months. These services are further 
described in Sec. Sec. 21.140(d)(2), 21.250(a), (b)(2), (c)(3), and 
(4), and 21.252, 21.254, 21.256, 21.257, and 21.258 of this part.
    (2) The participants who qualify for the services described in 
paragraph (a) of this section include a veteran who:
    (i) Has completed a vocational rehabilitation training program;


(Authority: 38 U.S.C. 1524(b)(3))

    (ii) Undertakes a vocational training program, but voluntarily 
terminates training. If VA determines the veteran to be employable at 
the time participation in training ends, the veteran shall be deemed to 
have completed the vocational training program and may be provided the 
employment services described in paragraph (b)(1) of this section if he 
or she requests such assistance;


(Authority: 38 U.S.C. 1524(b)(3))

    (iii) Does not require a vocational training program because VA 
determines as a result of an evaluation that he or she already possesses 
the training necessary for suitable employment and is able to achieve a 
vocational goal without further training; and


(Authority: 38 U.S.C. 1524(b)(2))

    (iv) Has been a prior participant in a vocational training program, 
is currently employable, but needs employment assistance to obtain 
employment in a suitable occupation.


(Authority: 38 U.S.C. 1524(b)(2))

    (3) The 18-month period of employment services allowed under this 
section shall begin upon the date that a veteran under paragraph 
(b)(2)(i) of this section completes the vocational training program or 
in the case of a veteran under paragraphs (b)(2)(ii), (iii), and (iv) of 
this section is found to be employable. If a veteran has been provided 
such services and obtains suitable employment, but is later found to 
require additional services of this kind, the veteran may be provided 
such additional services during any portion of the original 18-month 
period remaining.


(Authority: 38 U.S.C. 1524(b); Pub. L. 100-687).

    (c) Eligibility if pension is terminated. A qualified veteran for 
whom a program of vocational training has been found reasonably feasible 
shall remain eligible for the temporary program, subject to the rules of 
this subpart and section 1524 of 38 U.S.C. ch. 15, even if his or her 
pension award is subsequently terminated, except when the veteran's 
award of VA pension was the result of fraud or administrative error.


(Authority: 38 U.S.C. 1524(a); Pub. L. 100-687).

[53 FR 4397, Feb. 16, 1988, as amended at 55 FR 17272, Apr. 24, 1990]



Sec. 21.6042  Entry, reentry and completion.

    (a) Dates of entry. A veteran found eligible under the provisions of 
Sec. 21.6040 of

[[Page 379]]

this part may not begin pursuit of a vocational training program before 
February 1, 1985, or later than December 31, 1992, except under the 
following circumstances:
    (1) The veteran receives a pension award less than 120 days before 
December 31, 1992;
    (2) Illness or other circumstance beyond the veteran's control 
prevent earlier entry.


(Authority: 38 U.S.C. 1524(b)(4); Pub. L. 102-291)

    (b) Entry precluded. In no event may a veteran begin a vocational 
training program after August 1, 1993.


(Authority: 38 U.S.C. 1524(b)(4); Pub. L. 100-687; Pub. L. 102-291)

    (c) Reentry. The provisions of paragraphs (a) and (b) of this 
section are also applicable to veterans reentering a vocational training 
program following a redetermination of eligibility.


(Authority: 38 U.S.C. 1524(b)(4); Pub. L. 102-291)

    (d) Final termination of services. No veteran may receive assistance 
under this temporary program after January 31, 1998.


(Authority: 38 U.S.C. 1524(b)(4); Pub. L. 100-687; Pub. L. 102-291)

    (e) Provision of vocational training and services during the period 
beginning February 1, 1992 and ending May 20, 1992. The provision of a 
vocational training program (including related evaluations and other 
related services) to a veteran under the provisions of subpart I of this 
part, and related determinations during the period beginning February 1, 
1992, and ending May 20, 1992, is ratified.


(Authority: Pub. L. 102-291)

[53 FR 4397, Feb. 16, 1988, as amended at 55 FR 17272, Apr. 24, 1990; 58 
FR 41637, Aug. 5, 1993]

                               Evaluation



Sec. 21.6050  Participation of eligible veterans in an evaluation.

    (a) Veterans under age 45. A veteran under age 45 awarded pension 
during the program period shall be provided an evaluation of his or her 
rehabilitation potential to determine whether achievement of a 
vocational goal is reasonably feasible. The veteran must report for and 
participate in the evaluation unless the failure to do so is for reasons 
beyond the veteran's control. Failure to report for and participate in 
the evaluation, for reasons other than those beyond the veteran's 
control, will result in suspension of the veteran's pension under Sec. 
3.342 of this chapter. See Sec. 21.6056.


(Authority: 38 U.S.C. 1524(a)(1), Pub. L. 101-237)

    (b) Evaluating other qualified veterans. An evaluation shall be 
accorded each qualified veteran as described in Sec. 21.6005(c) of this 
part who seeks to become a program participant provided VA first 
determines the veteran has good potential for achieving employment. 
Failure to choose to participate in an evaluation shall have no adverse 
effect upon the veteran's continued receipt of pension under Sec. 3.342 
of this chapter.


(Authority: 38 U.S.C. 1524(a)(2); Pub. L. 100-687)

    (c) Notice to eligible veteran. (1) A qualified veteran under age 45 
awarded pension during the program period for whom participation in an 
evaluation is not clearly precluded by reasons beyond the veteran's 
control shall be sent a notice at the time he or she is awarded pension. 
The notice will inform the veteran of the provisions of this temporary 
program, the conditions under which participation in an evaluation is 
required, and the consequences of nonparticipation.
    (2) A qualified veteran age 45 or older awarded pension during the 
program period will be informed of the provisions of this temporary 
program and the procedure for requesting an evaluation.


(Authority: 38 U.S.C. 1524(a); Pub. L. 100-687, Pub. L. 101-237)

    (d) Scheduling the evaluation. (1) An evaluation will be arranged as 
promptly as practicable for each qualified veteran:

[[Page 380]]

    (i) Under age 50 who is sent the notice required under paragraph 
(c)(1) of this secton; and
    (ii) [Reserved]
    (2) Other qualified veterans identified in Sec. 21.6005(c) who are 
found to have good employment potential under Sec. 21.6054.


(Authority: 38 U.S.C. 1524(a); Pub. L. 100-687)

    (e) Followup of qualified veterans who do not complete an 
evaluation. The case of each qualified veteran under age 45 awarded 
pension during the program period for whom an evaluation was not 
scheduled or who does not complete an evaluation shall be reviewed for 
followup action by Vocational Rehabilitation and Employment (VR&C) staff 
as provided in Sec. Sec. 21.197(c)(4) and 21.198(d).


(Authority: 38 U.S.C. 1524(a); Pub. L. 100-687, Pub. L. 101-237)

    (f) Limitation on the number of evaluations. Notwithstanding the 
provisions of paragraphs (a) through (e) of this section, the number of 
evaluations which may be provided under this temporary program is 
subject to the limitations contained in Sec. 21.6059 of this part.


(Authority: 38 U.S.C. 1524(a)(3))

[53 FR 4397, Feb. 16, 1988, as amended at 55 FR 17272, Apr. 24, 1990; 56 
FR 21448, May 9, 1991]



Sec. 21.6052  Evaluations.

    (a) Scope and nature of evaluation. The scope and nature of the 
evaluation under this program shall be the same as for an evaluation of 
the reasonable feasibility of achieving a vocational goal under the 
procedures described for chapter 31 benefits. See Sec. 21.50(b)(5) and 
Sec. 21.53 (d) and (f).


(Authority: 38 U.S.C. 1524(a)(1)(2))

    (b) Specific services which may be provided in the course of 
evaluation in determining the reasonable feasibility of achieving a 
vocational goal. The following specific services may be provided as a 
part of the evaluation of reasonable feasibility of achieving a 
vocational goal, as appropriate:
    (1) Assessment of feasibility by a counseling psychologist;
    (2) Review of feasibility assessment and of need for special 
services by the Vocational Rehabilitation Panel;
    (3) Provision of medical and other diagnostic services;
    (4) Evaluation of employability, for a period not to exceed 30 days, 
by professional staff of an educational or rehabilitation facility.


(Authority: 38 U.S.C. 1524(b))

    (c) Responsibility for evaluation. All determinations as to the 
reasonable feasibility of vocational training and entitlement to 
assistance under 38 U.S.C. 1524 shall be made by a counseling 
psychologist in the Vocational Rehabilitation and Employment Division.


(Authority: 38 U.S.C. 1524(b))



Sec. 21.6054  Criteria for determining good employment potential.

    (a) Determining good employment potential. Before scheduling an 
evaluation of feasibility to pursue a vocational goal for a qualified 
veteran under Sec. 21.6005(c)(2), VA will first determine whether the 
veteran has good potential for achieving employment if provided a 
vocational training or employment program. This determination shall be 
made on the basis of the information of record, including information 
submitted by the veteran at the time of the veteran's request to 
participate in this temporary program.


(Authority: 38 U.S.C. 1524(a)(2); Pub. L. 100-687).

    (b) Criteria. The criteria contained in paragraphs (c) and (d) of 
this section are to be applied by Vocational Rehabilitation and 
Employment professional staff members to determine whether information 
of record supports a determination that a veteran age 50 or older has 
good potential for employment. Any reasonable doubt shall be resolved in 
the veteran's favor.


(Authority: 38 U.S.C. 1524(a)(2))

    (c) Indicators of good potential for employment. Indicators of good 
potential for employment include one or more of the following:

[[Page 381]]

    (1) A period of stable employment prior to the onset of disability.
    (2) Strong motivation to return to the work force.
    (3) Successful pursuit of education or training.
    (4) Cooperation in treatment of disabling conditions.
    (5) Stabilization of medical conditions or substance abuse problems.
    (6) Participation in therapeutic work programs.
    (7) Evidence of recent sustained job-seeking.


(Authority: 38 U.S.C. 1524(b)(1))

    (d) Contraindications of good potential for employment. 
Contraindications of good potential for employment include one or more 
of the following:
    (1) A lifelong history of unstable employment with long periods of 
employment before the onset of disability.
    (2) Being out of the labor market for five years or more preceding 
the evaluation.
    (3) Unsuccessful pursuit of education or training.
    (4) Noncooperation in the treatment of disability.
    (5) Need for an additional period of medical care or treatment 
before training would be feasible.
    (6) Nonparticipation in prescribed or recommended therapeutic work 
programs.
    (7) Failure of previous vocational rehabilitation programs to 
achieve employability.


(Authority: 38 U.S.C. 1524(a)(2))

    (e) Negative determinations. If VA does not find good employment 
potential, VA will notify the veteran that he or she is not eligible to 
receive an evaluation. Since this finding will preclude program 
participation, the veteran will be informed of his or her appellate 
rights as described in Sec. 21.59 of this part.
    (1) If the determination cannot be made on the evidence of record, 
VA shall advise the veteran and may provide him or her with an 
opportunity to submit additional information within a reasonable time.
    (2) A veteran's disagreement with a negative finding shall be 
considered evidence of motivation for employment, and may, when 
considered in relation to other information, provide a basis for finding 
that good employment potential exists;
    (3) If the final VA determination, following a review of a contested 
negative finding, is that good potential for achieving employment does 
not exist, a personal interview will be scheduled, and the reasons for 
VA's determination shall be discussed with the veteran.


(Authority: 38 U.S.C. 1524(a)(2))


[53 FR 4397, Feb. 16, 1988, as amended at 55 FR 17272, Apr. 24, 1990]



Sec. 21.6056  Cooperation of the veteran in an evaluation.

    (a) Cooperation of the veteran. The cooperation of the veteran is 
essential to a successful evaluation. The purpose of the evaluation and 
the steps in the process shall be explained to the veteran, and the 
importance of his or her cooperation shall be stressed. If the veteran 
does not cooperate in the initiation or completion of the evaluation, 
the counseling psychologist shall make a reasonable effort through 
counseling to secure the veteran's cooperation.


(Authority: 38 U.S.C. 1524(a)(3))

    (b) Consequences of noncooperation when evaluation is required. If 
the veteran fails to report for or cooperate in a required evaluation 
and the counseling psychologist has made a reasonable effort to secure 
his or her participation, VA shall take appropriate action, including 
discontinuance of the evaluation under the provisions of Sec. 21.364 of 
this part. If the veteran's case is discontinued under Sec. 21.364 of 
this part, the Veterans Service Center will be notified. The Veterans 
Service Center also will be informed if the reason for discontinuance is 
subsequently removed and the evaluation process is resumed.


(Authority: 38 U.S.C. 1524(a)(1))

    (c) Consequences of noncooperation when evaluation is not required. 
If the veteran fails to report for or cooperate in an optional 
evaluation and the counseling psychologist has made a reasonable effort 
to secure the veteran's participation, VA shall take appropriate

[[Page 382]]

action, including discontinuance of the evaluation under the provisions 
of Sec. 21.364 of this part. The evaluation may be resumed if the 
reason for the discontinuance is removed and the veteran is otherwise 
eligible.


(Authority: 38 U.S.C. 1524(a)(2))

[53 FR 4397, Feb. 16, 1988, as amended at 71 FR 28586, May 17, 2006]



Sec. 21.6058  Consequences of evaluation.

    (a) Eligible veteran may choose to participate. If VA finds, based 
on the evaluation, that achievement of a vocational goal by the veteran 
is reasonably feasible, the veteran shall be offered and may elect to 
pursue a vocational training program. If the veteran elects to pursue 
such a program, the program shall be designed in consultation with the 
veteran in order to meet the veteran's individual needs, and shall be 
set forth in an Individualized Written Rehabilitation Plan (IWRP) under 
the provisions of Sec. 21.84 of this part or an Individualized 
Employment Assistance Plan (IEAP) under Sec. 21.88 of this part.


(Authority: 38 U.S.C. 1524(b)(1))

    (b) Veteran ineligible to participate. A veteran for whom 
achievement of a vocational goal is not found reasonably feasible shall 
be notified of this finding and be informed of his or her appellate 
rights as described in Sec. 21.59 of this part. The veteran shall be 
provided the assistance described in Sec. 21.50(b)(9) of this part.


(Authority: 38 U.S.C. 1524(b)(1))



Sec. 21.6059  Limitations on the number of evaluations.

    (a) Number of evaluations. No more than 3,500 evaluations of the 
reasonable feasibility of achieving a vocational goal may be given 
during any 12-month period, beginning on February 1, 1985, and each 
subsequent February 1 during the program period.


(Authority: 38 U.S.C. 1524(a)(3); Pub. L. 100-227)

    (b) Cases counted as evaluation. An evaluation is deemed to be 
countable against the 3,500 limit permitted during each 12-month period 
when the following conditions are met:
    (1) The veteran is provided one or more personal interviews by a 
counseling psychologist; and
    (2) A determination of the reasonable feasibility of achieving a 
vocational goal is made by the counseling psychologist.


(Authority: 38 U.S.C. 1524(a)(3); Pub. L. 100-227)

    (c) Cases not counted as evaluations. Computation of the number of 
evaluations which may be provided in a 12-month period shall exclude 
cases in which:
    (1) The veteran under age 45 awarded pension during the program 
period is unable to participate for reasons beyond his or her control;
    (2) Review of available information does not indicate a good 
potential for employment of other qualified veterans.
    (3) The veteran either fails to keep a scheduled appointment to 
complete the evaluation or withdraws the claim for an evaluation, or
    (4) The veteran who has completed an evaluation requires or requests 
a reevaluation.


(Authority: 38 U.S.C. 1524(a)(3); Pub. L. 100-227, Pub. L. 101-237)

    (d) Priority. If a veteran below age 45 for whom an evaluation is 
required cannot be provided an evaluation during a particular 12-month 
period because of the limitation on the number of evaluations, the 
veteran will be given first priority for evaluation during the following 
12-month period, or first available subsequent 12-month period, if 
otherwise eligible.


(Authority: 38 U.S.C. 1524(a)(3), Pub. L. 101-237)

[53 FR 4397, Feb. 16, 1988, as amended at 55 FR 17272, Apr. 24, 1990; 56 
FR 21448, May 9, 1991]

             Services and Assistance to Program Participants



Sec. 21.6060  Services and assistance.

    (a) General. VA may provide to program participants:

[[Page 383]]

    (1) Vocationally oriented services and assistance of the kind 
provided veterans under chapter 31, title 38 U.S.C.;
    (2) Employment assistance during the 18 month period following 
completion of a vocational training program, including:
    (i) Educational, vocational, psychological, employment and personal 
adjustment counseling;
    (ii) Placement services to effect suitable placement in employment, 
and post-placement services to attempt to insure satisfactory adjustment 
in employment; and
    (iii) Personal adjustment and work adjustment training.


(Authority: 38 U.S.C. 1524(b))

    (3) Such other services and assistance of the kind provided veterans 
under chapter 31, except as provided in paragraph (b) of this section, 
as are necessary to enable the veteran to prepare for, and participate 
in, vocational training or employment.
    (b) Services and assistance not provided. VA will not provide to a 
participant under this program any:
    (1) Loan;
    (2) Subsistence allowance;
    (3) Automobile adaptive equipment of the kind provided eligible 
veterans under 38 U.S.C., chapter 39 or chapter 31;
    (4) Training at an institution of higher learning in a program of 
education that is not predominantly vocational in content;
    (5) Employment adjustment allowance;
    (6) Room and board in a special rehabilitation facility for a period 
in excess of 30 days;
    (7) Independent living services, except those which are 
indispensable to the pursuit of the vocational training program during 
the period of rehabilitation to the point of employability under Sec. 
21.6160 of this part; or
    (8) Period of extended evaluation under 38 U.S.C. 3106(e).


(Authority: 38 U.S.C. 1524(b))

                          Duration of Training



Sec. 21.6070  Basic duration of a vocational training program.

    (a) Basic duration of a vocational training program. The duration of 
a vocational training program may not exceed 24 calendar months of full-
time training except as provided in Sec. 21.6072 of this part.


(Authority: 38 U.S.C. 1524(b)(2))

    (b) Responsibility for estimating the duration of a vocational 
training program. The counseling psychologist is responsible for 
estimating the time needed by the veteran to complete a vocational 
training program. The estimate is made in consultation with the veteran 
and the vocational rehabilitation specialist during the preparation of 
the IWRP.


(Authority: 38 U.S.C. 1524(b)(1))

    (c) Duration of training prescribed must meet general requirements 
for entry into the occupation selected. The veterans will be provided 
training for a period sufficient for the veteran to reach the level 
generally recognized as necessary for entry into employment in a 
suitable occupational objective. Where a particular degree, diploma or 
certificate is generally necessary for entry into employment, the 
veteran may be trained to that level.


(Authority: 38 U.S.C. 1524(b))

    (d) When duration of the training period may be expanded beyond the 
entry level. If the amount of training the particular veteran needs in 
order to qualify for employment in a particular occupation will exceed 
the amount generally needed for employment in that occupation, VA may 
provide the necessary additional training under one or more of the 
following conditions:
    (1) Training requirements for employment in the area in which the 
veteran lives or will seek employment exceed those generally needed for 
employment;
    (2) The veteran is preparing for a type of work in which he or she 
will be at a definite disadvantage in competing with nondisabled persons 
for a job or business, and the additional

[[Page 384]]

training will offset the competitive disadvantage;
    (3) The choice of a feasible occupation is limited and additional 
training will enhance the veteran's employability in one of the feasible 
occupations; or
    (4) The number of employment opportunities within a feasible 
occupation is restricted.


(Authority: 38 U.S.C. 1524(b)(2))

    (e) Estimating the duration of the training period needed. The 
counseling psychologist, in estimating duration of the training period 
needed, must determine that:
    (1) The proposed vocational training program must be one which, when 
pursued full-time by a nondisabled person, would not normally require 
more than 24 calendar months of pursuit for successful completion;
    (2) The program of training and other services needed by the 
veteran, based upon VA's evaluation, will not exceed 24 calendar months, 
if training is pursued on a full-time basis, or 36 calendar months if 
pursued on a less than full-time basis. In making this determination the 
following criteria will be applied:
    (i) The number of actual months and days of the period during which 
the veteran will pursue the training program will be counted;
    (ii) Days of authorized leave and other periods during which the 
veteran wlll not be pursuing training, such as periods between terms 
will also be counted;
    (iii) The period of evaluation prior to determination of reasonable 
feasibility will be excluded but the actual number of months and days 
needed to evaluate and improve rehabilitation potential during the 
training program will be included;
    (iv) The time required, as determined in months and days under 
paragraph (e)(2)(i) through (iii) of this section, will be the total 
period that would be required for the veteran to accomplish the 
vocational program under consideration;
    (v) If the total period the veteran requires exceeds 24 calendar 
months, when pursued on a full-time basis, and an extension of the basic 
training period may not be approved under Sec. 21.6072 of this part, 
another suitable vocational goal must be selected for which training can 
be completed within that period.
    (3) If the veteran's vocational training program would require more 
than 36 calendar months when pursued on a less than full-time basis, the 
program must be reevaluated to select a vocational goal for which a 
suitable vocational training program can be completed within that 
period.


(Authority: 38 U.S.C. 1524(b)(2))

    (f) Effect of change in the vocational goal on duration of training 
period. The veteran's vocational goal may be changed during the program 
in accordance with Sec. 21.94 (a) through (d) of this part. The extent 
to which such changes may be made is limited by the following 
considerations:
    (1) A change of the vocational goal from one field or occupational 
family to another field or occupational family may only be approved 
before the end of the first 24 months of training, whether training is 
pursued on a full-time or a less than full-time basis; and
    (2) A change from one occupational objective to another within the 
same field or occupational family shall not be considered a change in 
the vocational goal identified in the veteran's IWRP.


(Authority: 38 U.S.C. 1524(b)(2))



Sec. 21.6072  Extending the duration of a vocational training program.

    (a) Extension of the duration of a vocational training program. An 
extension of a vocational training program as formulated in the IWRP may 
only be approved to enable the veteran to achieve a vocational goal 
identified before the end of the first 24 calendar months of the 
program.


(Authority: 38 U.S.C. 1524(b)(2))

    (b) Maximum number of months for which a program for new 
participants may be approved. If a veteran had never participated in 
this temporary program of vocational training, the originally planned 
period of training may be extended to a total period consisting of

[[Page 385]]

the number of months necessary to attain the vocational goal, but in no 
case will a program be extended for:
    (1) More than 24 calendar months beyond the originally planned 
period; or
    (2) A period which, when added to the originally planned period, 
totals more than 48 months, as provided in Sec. 21.6074(c) of this 
part.


(Authority: 38 U.S.C. 1524(b))

    (c) Maximum number of months by which a program may be extended for 
prior participants in the temporary program. (1) A veteran who has 
previously participated in this program, but who was not rehabilitated 
to the point of employability, may be provided additional training under 
this program to complete the prior vocational goal or a different 
vocational goal, subject to the same provisions as apply to new 
participants;
    (2) If a finding of prior rehabilitation to the point of 
employability is set aside to enable a veteran to pursue a program of 
on-job training or work experience, including the provision of employer 
incentives under Sec. 21.256 of this part, the number of months for 
which assistance may be authorized under this program shall be 
established as provided in Sec. 21.256 of this part to the extent 
consistent with the rules of this section;
    (3) If the determination of rehabilitation to the point of 
employability has been set aside under Sec. 21.6284 (a) or (b) of this 
part, additional training may be provided subject to the same provisions 
as apply to new participants.


(Authority: 38 U.S.C. 1524(b))

    (d) Who may authorize an extension to a vocational training program. 
(1) The Vocational Rehabilitation Specialist (VRS) may authorize an 
extension of up to 3 calendar months of full-time or up to 6 calendar 
months of less than full-time training to the period of an existing 
vocational training program, if the VRS determines that the additional 
time is needed to successfully complete training and the following 
conditions are met:
    (i) The veteran is in rehabilitation to the point of employability 
status under Sec. 21.190 of this part;
    (ii) The veteran has completed more than half of the prescribed 
training;
    (iii) The veteran is making satisfactory progress;
    (iv) The extension is necessary to complete training;
    (v) Training can be completed with 3 months of full-time training or 
not more than 6 calendar months of less than full-time training; and
    (vi) The extension plus the original program period will not result 
in a program of vocational training greater than 36 total calendar 
months;
    (2) The counseling psychologist may approve any other extensions of 
the vocational training program, except as provided in paragraph (d)(3) 
of this section, if it is determined that the additional time is needed 
and the conditions for extension under paragraphs (a) and (b) of this 
section are met;
    (3) The VR&C Officer must also concur in an extension of the 
vocational training program beyond 24 months when paragraphs (a) through 
(c) of this section are met.


(Authority: 38 U.S.C. 1524(b)(2))



Sec. 21.6074  Computing the period of vocational training program 
participation.

    (a) Computing the participation period. The number of months and 
days used in a vocational training program shall be computed on the 
basis of calendar months and days during which the program participant 
is receiving services under the plan developed in accordance with Sec. 
21.6080 of this part, whether training is pursued on a full-time or less 
than full-time basis. Leaves of absence during a period of instruction 
and periods in which the veteran does not pursue actual training, such 
as breaks between periods of instruction, are included.


(Authority: 38 U.S.C. 1524(b))

    (b) Period of employment services separate. The period during which 
employment services may be provided pursuant to Sec. 21.6040(b) of this 
part is not included in computing the period used for vocational 
training under this program.


(Authority: 38 U.S.C. 1524(b))


[[Page 386]]


    (c) Limitations. (1) A program participant may receive the services 
necessary to carry out the vocational training program during a maximum 
period of 48 months. The 48-month period begins to run on the day the 
veteran begins to receive the services needed to carry out the 
vocational training program as specified in the IWRP, and ends 48 months 
from that date.
    (2) Employment services which begin before the end of the 48-month 
period may be continued for the period specified in the IEAP, or may be 
provided after the end of the 48 month period if so specified in the 
IWRP or IEAP, subject to the provisions of Sec. 21.6040(b) of this 
part.


(Authority: 38 U.S.C. 1524(b)(2), (3))

               Individualized Written Rehabilitation Plan



Sec. 21.6080  Requirement for an individualized written rehabilitation 
or employment assistance plan.

    (a) General. An Individualized Written Rehabilitation Plan (IWRP) 
and/or Individualized Employment Assistance Plan (IEAP) will be 
developed for each program participant for services under 38 U.S.C. 
1524. These plans shall be developed in the same manner as for chapter 
31 purposes. See Sec. Sec. 21.80, 21.84, 21.88, 21.90, 21.92, 21.94 (a) 
through (d), 21.96 and 21.98.


(Authority: 38 U.S.C. 1524(b)(2))

    (b) Selecting the type of training to include in the plan. The use 
of on-job training, including non-pay training, a combination of on-job 
and institutional training, or institutional training to accomplish the 
goals of the program should be explored in each case. On-job training, 
or a combination of on-job and institutional training, should generally 
be used:
    (1) When these options are available;
    (2) When these options are as suitable as institutional training for 
accomplishing the goals of the program; and
    (3) The veteran agrees that such training will meet his or her 
needs.


(Authority: 38 U.S.C. 1524(b))

    (c) Changes in the plan. Any change amending the duration of a 
veteran's plan is subject to provisions governing duration of a 
vocational training program described in Sec. 21.6070 and Sec.  21.6072 
of this part.


(Authority: 38 U.S.C. 1524(b)(1))

    (d) Change in the vocational goal after 24 months of training. If a 
veteran seeks to change the vocational goal after receipt of 24 months 
of training and the change is not permitted under Sec. 21.6070(f) of 
this part, the counseling psychologist shall inform the veteran that:
    (1) No change of goal may be authorized but training for the 
vocational goal previously established may be continued, if it is still 
reasonably feasible for the veteran to pursue the training under 
appropriate extensions of the program pursuant to Sec. 21.6072 of this 
part;
    (2) If the veteran elects to terminate the planned vocational 
training program, he or she shall be provided assistance, to the extent 
provided under Sec. 21.80(d) of this part, in identifying other 
resources through which the training desired may be secured;
    (3) If the veteran disagrees with the decision, the veteran's case 
shall be considered under the provisions of Sec. 21.98 of this part.


(Authority: 38 U.S.C. 1524(b)(2))



Sec. 21.6082  Completing the plan.

    (a) Completing the plan. If the VA determines that the veteran is 
unable to complete the program within the time limits of the plan after 
training has begun and the conditions for extension are not met, the 
long-range vocational goal of the veteran must be reevaluated, and 
another vocational goal selected which can be completed within the 
limits prescribed in Sec. 21.6054 and Sec.  21.6072 of this part.


(Authority: 38 U.S.C. 1524(b)(1))

    (b) Employment assistance when training is not completed under 38 
U.S.C. chapter 15. A plan for employment assistance may be implemented 
under Sec. 21.6040(b) of this part even though the veteran's vocational 
training program has not been, or will not be, completed

[[Page 387]]

under this temporary program, provided the other requirements for 
participation in the program are met.


(Authority: 38 U.S.C. 1524(b)(3))

                               Counseling



Sec. 21.6100  Counseling.

    General. A veteran requesting or being furnished assistance under 
this temporary program shall be provided professional counseling 
services by the Vocational Rehabilitation and Employment (VR&C) Division 
and other qualified staff as necessary, and in the same manner as such 
services are provided veterans participating in a chapter 31 program. 
See Sec. Sec. 21.100, 21.380.

(Authority: 38 U.S.C. 1524(a)(1), (2) and (b)(2))

              Educational and Vocational Training Services



Sec. 21.6120  Educational and vocational training services.

    (a) Purposes. Educational and vocational training services are to be 
provided to a veteran eligible for services and assistance under this 
temporary program to enable the veteran to:
    (1) Become employable in the occupational objective established in 
an IWRP; and
    (2) Receive incidental training necessary to achieve the employment 
objective established in an IEAP.


(Authority: 38 U.S.C. 1524(b)(1))

    (b) Selection of courses. VA and the veteran will select 
vocationally oriented courses of study and training, completion of which 
usually results in a diploma, certificate, degree, qualification for 
licensure, or employment. The educational and training services to be 
provided include:
    (1) Remedial, deficiency and refresher training; and
    (2) Training which leads to a vocational objective. All of the forms 
of program pursuit presented in Sec. 21.122 through Sec.  21.132 of 
this part may be authorized. Education and training programs in 
institutions of higher learning are authorized provided the courses are 
part of a program which is predominantly vocational in content. The 
program of education and training shall be considered to be 
predominantly vocational in content if the majority of the instruction 
offered provides the technical skills and knowledge generally regarded 
as specific to, and required for, entry into the vocational goal 
approved for the veteran. Such education and training may generally be 
authorized at an undergraduate or advanced degree level. However the 
following are excluded:
    (i) An associate degree program in which the content of the majority 
of the instruction provided is not vocationally oriented;
    (ii) The first two years of a 4-year baccalaureate degree program;
    (iii) The last two or more years of a 4-year baccalaureate degree 
program except in degree programs with majors in engineering, teaching, 
or other similar degree programs with vocational content which 
ordinarily lead directly to employment in an occupation that is usually 
available to persons holding such a degree; or
    (iv) An advanced degree program, except for a degree program 
required for entry into the veteran's employment objective, such as a 
master's degree in social work.


(Authority: 38 U.S.C. 1524(b))

    (c) Charges for education and training services. The cost of 
education and training services will be considered in selecting a 
facility when:
    (1) There is more than one facility in the area in which the veteran 
resides which:
    (i) Meets the requirements for approval under Sec. 21.290 through 
Sec. 21.299 of this part;
    (ii) Can provide the education and training services and other 
supportive services specified in the veteran's plan; and
    (iii) Is within reasonable commuting distance; or
    (2) The veteran wishes to train at a suitable facility in another 
area, even though training can be provided at a suitable facility in the 
area in which the veteran resides. See Sec. Sec. 21.120, 21.370, 
21.372.


(Authority: 38 U.S.C. 1524(b)(2)

    (d) Courses not available. If suitable educational and training 
courses are

[[Page 388]]

not available in the area in which the veteran resides, or if they are 
available but not accessible to the veteran, other arrangements may be 
made. Such arrangements may include, but are not limited to:
    (1) Relocation of the veteran to another area in which necessary 
services are available, or
    (2) Use of an individual instructor to provide necessary training as 
provided under Sec. 21.146 of this part.


(Authority: 38 U.S.C. 1524(b))

         Evaluation and Improvement of Rehabilitation Potential



Sec. 21.6140  Evaluation and improvement of rehabilitation potential.

    (a) General. The services described in paragraph (d) of this section 
may be used to:
    (1) Evaluate rehabilitation potential;
    (2) Provide a basis for planning:
    (i) A program of services and assistance to improve the veteran's 
potential for vocational rehabilitation; or
    (ii) A vocational training program; and
    (3) Reevaluate the vocational training potential of a veteran 
participating in a rehabilitation program.


(Authority: 38 U.S.C. 1524(a))

    (b) Periods during which evaluation and improvement services may be 
provided. Services described in paragraph (d) of this section may be 
provided during:
    (1) An evaluation or reevaluation;
    (2) Rehabilitation to the point of employability;
    (3) Employment services.


(Authority: 38 U.S.C. 1524(b)(2))

    (c) Duration of services. The duration of services needed to improve 
rehabilitation potential, furnished on a full-time basis either as a 
preliminary part of the period of rehabilitation to the point of 
employability or as the total program, may not exceed 9 months. If these 
services are furnished on a less than full-time basis the duration will 
be for the period necessary, but may not exceed the equivalent of 9 
months of full-time training. See Sec. 21.6310.


(Authority: 38 U.S.C. 1524(b)(2))

    (d) Scope of services. Evaluation and improvement services include:
    (1) Diagnostic services;
    (2) Personal and work adjustment training;
    (3) Medical care and treatment;
    (4) Independent living services indispensable to pursuing a 
vocational training program;
    (5) Language training, speech and voice correction, training in 
ambulation, and one-hand typewriting;
    (6) Orientation, adjustment, mobility and related services; and
    (7) Other appropriate services.


(Authority: 38 U.S.C. 1524(b)(2))

    (e) Applicability of chapter 31 rules. the provisions of Sec. 
21.140 of this part are not applicable to this temporary program. The 
provisions of Sec. 21.142 through Sec.  21.156 of this part are 
applicable, subject to provisions of this section.


(Authority: 38 U.S.C. 1524(b)(2))

                       Independent Living Services



Sec. 21.6160  Independent living services.

    (a) Services must be part of a vocational training program. 
Independent living services may be provided as a part of a veteran's 
IWRP when such services are indispensable to the achievement of the 
vocational goal, but may not be provided as the sole program of 
rehabilitation for the veteran, since a vocational training program for 
the veteran must be found reasonably feasible before the IWRP is 
prepared.


(Authority: 38 U.S.C. 1524(b)(2))

    (b) Independent living services which may be furnished under this 
program. The independent living services which may be furnished include:
    (1) Training in independent living skills;
    (2) Health management programs;
    (3) Identification of appropriate housing accommodations; and

[[Page 389]]

    (4) Personal care service for a transitional period not to exceed 
two months.


(Authority: 38 U.S.C. 1524(b))

    (c) Coordination with other VA elements and other Federal, State, 
and local programs. Provision of independent living services and 
assistance will generally require extensive coordination with other VA 
and non-VA programs. The resources of VA medical centers shall be 
utilized as prescribed in Sec. 21.6242 of this part. If appropriate 
arrangements cannot be made to provide these services through VA medical 
centers, other governmental and private nonprofit programs may be used 
to secure necessary services if the facility or individual providing 
services meets the requirements of Sec. 21.294 of this part.


(Authority: 38 U.S.C. 523, 1524(b))

    (d) Applicability of chapter 31 rules. Neither Sec. 21.160 nor 
Sec. 21.162 of this part are applicable to provision of independent 
living services under this program.


(Authority: 38 U.S.C. 1524(b))

                           Case Status System



Sec. 21.6180  Case status system.

    (a) General. The case status system used in administering benefits 
under the chapter 31 program, as provided in Sec. 21.180 through Sec.  
21.198 of this part, will be utilized in a similar manner in this 
program subject to the provisions of paragraph (b) of this section.


(Authority: 38 U.S.C. 1524(b)(2))

    (b) Limitations of applicability of chapter 31 rules. (1) The 
provisions of Sec. 21.180(e)(2) and (3), Sec.  21.188, and Sec.  21.192 
of this part are not applicable to this temporary program;
    (2) Other incidental references to service-connected disability 
Chapter 31, extended evaluation status, or independent living status or 
other services precluded under Sec. 21.6060(b) of this part, found in 
Sec. 21.180 to Sec.  21.198 of this part, are not for application to 
this temporary program.


(Authority: 38 U.S.C. 1524(b)(2))

[53 FR 4397, Feb. 16, 1988, as amended at 54 FR 8189, Feb. 27, 1989]

                                Supplies



Sec. 21.6210  Supplies.

    (a) Purpose of furnishing supplies. Supplies are furnished to enable 
a veteran to pursue training, obtain and maintain employment and achieve 
the goals of his or her program.



(Authority: 38 U.S.C. 1524(b)(2))

    (b) Definition. The term supplies includes books, tools and other 
supplies and equipment which VA determines are necessary for the 
veteran's vocational training program.


(Authority: 38 U.S.C. 3104(a))

    (c) Periods during which supplies may be furnished. Supplies may be 
furnished to a veteran receiving:
    (1) An evaluation or reevaluation;
    (2) Rehabilitation to the point of employability; or
    (3) Employment services.


(Authority: 38 U.S.C. 1524(b)(2))

    (d) Applicability of 38 U.S.C. chapter 31 regulations. The 
provisions of Sec. 21.210 of this part are not applicable to veterans 
in this temporary program. The provisions of Sec. 21.212 through Sec.  
21.224 of this part are applicable to veterans pursuing vocational 
training and employment under this program in a similar manner as under 
chapter 31, except the portions thereof noted as follows:
    (1) Section 21.216(a)(3) of this part pertaining to special 
modifications, including automobile adaptive equipment;
    (2) Section 21.220(a)(1) of this part pertaining to advancements 
from the revolving fund loan;
    (3) Section 21.222(b)(x) of this part pertaining to a veteran 
discontinued from an independent living services program.


(Authority: 38 U.S.C. 1524(b)(2))

[[Page 390]]

                      Medical and Related Services



Sec. 21.6240  Medical treatment, care and services.

    (a) General. A participant in a vocational training program or 
receiving employment assistance shall be furnished medical treatment, 
care and services which VA determines are necessary to develop, carry 
out and complete the veteran's plan.


(Authority: 38 U.S.C. 1524(b)(2))

    (b) Scope of services. The services which may be furnished include 
the medical treatment, care and dental services described in part 17 of 
this chapter. In addition, the following services may be authorized even 
if not included or described in part 17:
    (1) Prosthetic appliances, eyeglasses, and other corrective or 
assistive devices;
    (2) Services to a veteran's family as necessary for the effective 
rehabilitation of the veteran;
    (3) Special services (including services related to blindness and 
deafness) including:
    (i) Language training, speech and voice correction, training in 
ambulation, and one-hand typewriting;
    (ii) Orientation, adjustment, mobility and related services; and
    (iii) Telecommunications, sensory and other technical aids and 
devices.


(Authority: 38 U.S.C. 1524(b)(2))

    (c) Periods of eligibility. A veteran is eligible for the services 
described in paragraph (b) of this section during:
    (1) Evaluation;
    (2) Rehabilitation to the point employability;
    (3) Employment services; and
    (4) Other periods, to the extent that services are needed to begin 
or continue in any of the periods described in paragraphs (c)(1) through 
(3) of this section. Such periods include, but are not limited to, those 
when services are needed to facilitate reentry into training following:
    (i) Interruption; or
    (ii) Discontinuance because of illness or injury.


(Authority: 38 U.S.C. 1524(b)(2))



Sec. 21.6242  Resources for provision of medical treatment, care and 
services.

    (a) General. VA medical centers are the primary resources for the 
provision of medical treatment, care and services for program 
participants which may be authorized under the provisions of Sec. 
21.6240 of this part. The availability of necessary services in VA 
facilities shall be ascertained in each case.


(Authority: 38 U.S.C. 1524(b)(2))

    (b) Hospital care and medical services. Hospital care and medical 
services provided to program participants shall only be furnished in 
facilities over which VA has direct jurisdiction, except as authorized 
on a contract or fee basis under the provisions of part 17 of this 
chapter.


(Authority: 38 U.S.C. 1524(b)(2))

    Cross References: See Sec. 17.30(1) Hospital care. Sec.  17.30(m) 
Medical services.

    (c) Provisions of Sec. 21.240 and Sec.  21.242. The provisions of 
Sec. Sec. 21.240 and 21.242 of this part are not applicable to this 
temporary program.


(Authority: 38 U.S.C. 1524(b))

                          Financial Assistance



Sec. 21.6260  Financial assistance.

    (a) Direct financial assistance prohibited. The provisions of Sec. 
21.260 and Sec. 21.264 through Sec.  21.276 of this part are not 
applicable to veterans pursuing training and employment under this 
temporary program, except as indicated in paragraph (b) of this section.


(Authority: 38 U.S.C. 1524(b)(2)(B)(ii))

    (b) Training costs. The provisions of Sec. 21.262 of this part 
pertaining to reimbursement for training costs will be followed to 
reimburse vendors for servics provided under this temporary program.


(Authority: 38 U.S.C. 1524(d))

[[Page 391]]

                      Entering Vocational Training



Sec. 21.6282  Effective dates of induction into and termination of 
vocational training.

    (a) Induction. Subject to the limitations set forth in Sec. 21.6042 
of this part, the date a veteran is inducted into vocational training 
shall be the earlier of:
    (1) The date of the facility requires the veteran to report for 
prescribed activities; or
    (2) The date the program begins at the faciliity providing services.


(Authority: 38 U.S.C. 1524(b)(2))

    (b) Termination. A veteran's training program shall be terminated 
under the provisions of Sec. 21.6180. of this part.


(Authority: 38 U.S.C. 1524(b)(2))



Sec. 21.6284  Reentrance into a training program.

    (a) Reentrance into rehabilitation to the point of employability 
following a determination of rehabilitation. A veteran in a vocational 
training program under this temporary program who has been found 
rehabilitated under provisions of Sec. 21.196 of this part may be 
provided an additional period of training or services only if the 
following conditions are met and the veteran is otherwise eligible.
    (1) Current facts, including any relevant medical findings, 
establish that the veteran's disability has worsened to the extent that 
he or she is precluded from performing the duties of the occupation for 
which the veteran previously was found rehabilitated; or
    (2) The occupation for which the veteran previously was found 
rehabilitated under this temporary program is found to be unsuitable.


(Authority: 38 U.S.C. 1524(b)(1))

    (b) Reentrance into rehabilitation to the point of employability 
during a period of employment services. A finding of rehabilitation to 
the point of employability by VA may be set aside during a period of 
employment services and an additional period of training and related 
services provided if any of the conditions in paragraph (a) of this 
section or one of the following conditions are met and the veteran is 
otherwise eligible:
    (1) The services originally given to the veteran are now inadequate 
to make the veteran employable in the occupation for which he or she 
pursued training;
    (2) Experience during the period of employment services has 
demonstrated that employment in the objective or field for which the 
veteran was rehabilitated to the point of employability should not 
reasonably have been expected at the time the program was originally 
developed; or
    (3) The veteran, because of technological change which occurred 
subsequent to the declaration of rehabilitation to the point of 
employability, is no longer able:
    (i) To perform the duties of the occupation for which he or she 
trained, or in a related occupation; or
    (ii) To secure employment in the occupation for which he or she 
trained, or in a related occupation.


(Authority: 38 U.S.C. 1524(b)(3))

[53 FR 4397, Feb. 16, 1988, as amended at 54 FR 8189, Feb. 27, 1989]



Sec. 21.6290  Training resources

    (a) Applicable 38 U.S.C. chapter 31 provisions. The provisions of 
Sec. 21.290 through Sec.  21.299 are applicable to veterans pursuing 
vocational training and employment under this program in the same manner 
as under 38 U.S.C. chapter 31, except as specified in paragraph (b).


(Authority: 38 U.S.C. 1524(b)(2))

    (b) Limitations. The provisions of Sec. 21.294(b)(1)(i) and (ii) of 
this part pertaining to independent living services are not applicable 
to this temporary program. The provisions of Sec. 21.294(b)(1)(iii) of 
this part pertaining to authorization of independent living services as 
a part of an Individualized Written Rehabilitation Plan (IWRP) are 
applicable to this temporary program to the extent provided under Sec. 
21.6160 of this part.


(Authority: 38 U.S.C. 1524(b)(2))

[[Page 392]]

                             Rate of Pursuit



Sec. 21.6310  Rate of pursuit.

    (a) General requirements. A veteran should pursue a vocational 
training program at a rate which is consistent with his or her ability 
to successfully pursue training, considering:
    (1) Effects of his or her disability;
    (2) Family responsibilities;
    (3) Travel;
    (4) Reasonable adjustment to training; and
    (5) Other circumstances which affect the veteran's ability to pursue 
training.


(Authority: 38 U.S.C. 1524(b)(1))

    (b) Continuous pursuit. A veteran should pursue a program of 
vocational training with as little interruption as necessary, 
considering the factors described in paragraph (a) of this section.


(Authority: 38 U.S.C. 1524(b)(1))

    (c) Responsibility for determining the rate of pursuit. VR&C staff, 
in consultation with the veteran, will determine the rate and continuity 
of pursuit of training. Consultation with the medical consultant and the 
Vocational Rehabilitation Panel should be utilized as necessary. This 
determination will be made in the course of developing the plan, but may 
be changed later, as necessary to enable the veteran to complete his or 
her training.


(Authority: 38 U.S.C. 1524(b)(1))

    (d) Measurement of training time used. The rate of pursuit shall be 
measured on the basis of the provisions of Sec. 21.310 of this part. A 
veteran may not pursue training on a less than half-time basis as 
measured under Sec. 21.310 of this part, except for brief periods, 
after which training must be resumed on a half-time or greater basis. 
Brief periods are limited to all or part of a semester, term or quarter, 
or up to 90 days in a course not conducted on a semester, term, or 
quarter basis.


(Authority: 38 U.S.C. 1524(b)(1))

    (e) Reduced work tolerance. The provisions of Sec. 21.312 of this 
part are not applicable to this temporary program.


(Authority: 38 U.S.C. 1524(b))

    (f) Pursuit of training under special circumstances. The provisions 
of Sec. 21.314 of this part are not applicable to this temporary 
program.


(Authority: 38 U.S.C. 1524(b)(2))

                        Authorization of Services



Sec. 21.6320  Authorization of services under Chapter 31 rules.

    (a) General. Sections 21.320 through 21.334 of this part are not 
applicable to a veteran pursuing a vocational training program except as 
specified in paragraph (b) of this section.


(Authority: 38 U.S.C. 1524(b)(2))

    (b) Applicable rule. Section 21.326 of this part pertaining to the 
beginning and ending dates of a period of employment services is 
applicable to veterans under this temporary program.


(Authority: 38 U.S.C. 1524(b)(2))

                            Leaves of Absence



Sec. 21.6340  Leaves of absence.

    (a) General. VA may approve leaves of absence under vertain 
conditions. During approved leaves of absence, a ceteran shall be 
considered to be pursuing training for purposes of computing the 
duration of a vocational training program under Sec. Sec. 21.6070 
through 21.6074. Leave may only be authorized for a veteran during a 
period of rehabilitation to the point of employability.


(Authority: 38 U.S.C. 1524(b))

    (b) Purpose. The purpose of the leave system is to enable the 
veteran to maintain his or her status as an active participant and avoid 
interruption or discontinuance of training.


(Authority: 38 U.S.C. 1524(b)(2))

    (c) Applicability of chapter 31 rules. The provisions of Sec. 
21.340 of this part are not applicable to this temporary program. The 
provisions of Sec. 21.342

[[Page 393]]

through Sec. 21.350 of this part are applicable except for Sec.  21.346 
of this part.


(Authority: 38 U.S.C. 1524(b))

                  Satisfactory Conduct and Cooperation



Sec. 21.6362  Satisfactory conduct and cooperation.

    The provisions of Sec. 21.362 and Sec.  21.364 of this part are 
applicable to veterans pursuing vocational training under this program 
in the same manner as under 38 U.S.C. chapter 31.

(Authority: 38 U.S.C. 1524)

                         Transportation Services



Sec. 21.6370  Authorization of transportation services.

    (a) General. VA shall authorize transportation services necessary 
for a veteran to pursue a vocational training program under this 
temporary program. Transportation services include:
    (1) Transportation for evaluation, reevaluation or counseling 
authorized under Sec. 21.376 of this part;
    (2) Inter- and intraregional travel which may be authorized under 
Sec. 21.370 (except for (b)(2)(iii)(B)) and Sec.  21.372 of this part;
    (3) Special transportation allowance authorized under Sec. 21.154 
of this part;
    (4) Commuting to and from training and seeking employment as 
authorized under paragraphs (c) and (d) of this section.


(Authority: 38 U.S.C. 1524(b))

    (b) Reimbursement. Payment of transportation services authorized by 
VA shall normally be made in arrears and in the same manner as tuition, 
fees and other services authorized under this program.


(Authority: 38 U.S.C. 1524(b))

    (c) Transportation payment. A veteran may be reimbursed for the 
costs of commuting to and from training and seeking employment if he or 
she requests such assistance and VA determines after careful examination 
of the veteran's situation, and subject to the limitation contained in 
paragraph (d) of this section, that the veteran would be unable to 
pursue training without such assistance. VA may:
    (1) Reimburse the facility at which the veteran is training if the 
facility provides transportation or related services;
    (2) Reimburse the veteran for his or her actual commuting expense.


(Authority: 38 U.S.C. 1524(b))

    (d) Limitations. Payment of commuting expenses may not be made for 
any period:
    (1) Except during the period of training and the first three months 
of employment services;
    (2) When a program participant is employed;
    (3) In which a program participant is eligible for, and entitled to, 
payment of commuting costs through other VA and non-VA programs;
    (4) In which it becomes feasible for the veteran to commute to 
school with family, friends or fellow students.


(Authority: 38 U.S.C. 1524(b))

    (e) Amount which may be paid. VA will reimburse the veteran for his 
or her actual cost, not to exceed $70 per month. Necessary supportive 
documentation must be submitted with each request for reimbursement. 
Payment will be made monthly or at longer intervals as may be agreed to 
in the IWRP.


(Authority: 38 U.S.C. 1524(b))

    (f) Nonduplication. A veteran eligible for reimbursement of 
transportation services under this section and Sec. 21.154 of this part 
may only receive the benefit provided under Sec. 21.154 of this part.


(Authority: 38 U.S.C. 1524(b))

                    Additional Applicable Regulations



Sec. 21.6380  Additional applicable Chapter 31 regulations.

    The following regulations are applicable to veterans pursuing the 
vocational training under this program in the same manner as they apply 
to 38 U.S.C. chapter 31: Sec. 21.380, Sec.  21.390, Sec.  21.400, Sec.  
21.402, Sec. 21.412, Sec.  21.414 (except (d) and (e)), Sec.  21.420, 
and Sec. 21.430 (except (a)) of this part.

(Authority: 38 U.S.C. 1524)

[[Page 394]]

                         Delegation of Authority



Sec. 21.6410  Delegation of authority.

    (a) General. Authority is delegated to the Under Secretary for 
Benefits and to supervisory or non-supervisory personnel within the 
jurisdiction of the Vocational Rehabilitation and Employment Service, to 
make findings and decisions under 38 U.S.C. 1524 and the applicable 
regulations, precedents and instructions pertaining to this program. See 
Sec. 2.6(b).


(Authority: 38 U.S.C. 512(a))

    (b) Applicability of Sec. Sec. 21.412 and 21.414. The provisions of 
Sec. Sec. 21.412 and 21.414 (except for (d) and (e)) are applicable to 
this temporary program.


(Authority: 38 U.S.C. 512(a))

              Coordination With the Veterans Service Center



Sec. 21.6420  Coordination with the Veterans Service Center.

    It is the responsibility of the VR&C Division to inform the Veterans 
Service Center in writing of the following changes in the veteran's 
circumstances contained in the following paragraphs.


(Authority: 38 U.S.C. 1524, Pub. L. 101-237)

    (a) Evaluation. (1) The date an evaluation being provided a veteran 
under age 45, who is required to participate in such evaluation, is 
suspended because of unsatisfactory conduct or cooperation; and
    (2) The date the evaluation is resumed.


(Authority: 38 U.S.C. 1524, Pub. L. 101-237)

    (b) Income information. Any information relating to income from work 
or training which may affect the veteran's continued entitlement to 
pension, including participation in:
    (1) A work adjustment program, incentive or therapeutic work 
program, vocational training in a rehabilitation facility, or employment 
in a rehabilitation facility or sheltered workshop;
    (2) On-job training;
    (3) The work portion of a cooperative or combination program;
    (4) Internships; and
    (5) Full- or part-time employment.


(Authority: 38 U.S.C. 1524)

    (c) Dependency changes. Information regarding dependency changes if 
the case manager learns of such changes in the normal course of 
performing his or her duties.


(Authority: 38 U.S.C. 1524)

    (d) Information to determine if the veteran's permanent and total 
disability rating is protected under Sec. 3.343. The information 
provided by the case manager includes:
    (1) The employment was within the scope of the vocational goal 
identified in the veteran's individualized written plan of vocational 
rehabilitation, or in a related field, and the employment secured by the 
veteran requires the use of the training or services furnished under the 
rehabilitation plan.
    (2) Employment was secured not later than one year after the date 
the veteran's eligibility for counseling expired. A veteran's 
eligibility for counseling expires on the date employment services are 
terminated by VA or the veteran completes rehabilitation to the point of 
employability and terminates program participation, whichever is later; 
and
    (3) The veteran maintained his or her employment for 12 consecutive 
months.


(Authority: 38 U.S.C. 1524, Pub. L. 101-237)

[53 FR 4397, Feb. 16, 1988, as amended at 56 FR 21449, May 9, 1991; 71 
FR 28586, May 17, 2006]



  Subpart J_Temporary Program of Vocational Training and Rehabilitation

    Authority: Pub. L. 98-543, sec. 111; 38 U.S.C. 1163; Pub. L. 100-
687, sec. 1301, unless otherwise noted.

    Source: 51 FR 19333, May 29, 1986, unless otherwise noted. 
Redesignated at 53 FR 4397, Feb. 16, 1988.



Sec. 21.6501  Overview.

    (a) Purpose. The temporary program for trial work periods and 
vocational rehabilitation is intended to test the extent to which a 
veteran, who has

[[Page 395]]

been awarded a VA compensation rating of total disability by reason of 
inability to secure or follow a substantially gainful occupation as a 
result of service-connected disability, may benefit from vocational 
rehabilitation services which may be authorized under 33 U.S.C. chapter 
31, and 38 U.S.C. 1163. See Sec. Sec. 3.340 and 3.341 of this title.
    (b) Chapter 31 evaluations. All veterans participating in this 
temporary program are to be evaluated to determine whether:
    (1) They are eligible for and entitled to receive assistance under 
chapter 31; and
    (2) Achievement of a vocational goal is reasonably feasible.


(Authority: 38 U.S.C. 1163; Pub. L. 100-687).

    (c) Applicability of chapter 31 provisions. The provisions of 
Sec. Sec. 21.1 through 21.430, generally applicable to veterans 
eligible for benefits under chapter 31, apply except as added to or 
modified by the provisions of the following sections. Participants not 
found eligible for chapter 31 benefits may nevertheless receive 
counseling services under 38 U.S.C. 3104(a)(2) and placement and 
postplacement services under 38 U.S.C. 3104(a)(5).


(Authority: 38 U.S.C. 1163)

[51 FR 19333, May 29, 1986. Redesignated at 53 FR 4397, Feb. 16, 1988, 
as amended at 55 FR 17272, Apr. 24, 1990]



Sec. 21.6503  Definitions.

    (a) Program period. The term program period means the period 
beginning on February 1, 1985, and ending December 31, 1992.


(Authority: 38 U.S.C. 1163(a)(2)(B); Pub. L. 102-291)

    (b) Qualified veteran. The term qualified veteran means a veteran 
who has a service-connected disability, or service-connected 
disabilities, not rated as total, but who has been awarded a rating of 
total disability by reason of inability to secure or follow a 
substantially gainful occupation as a result of such disability or 
disabilities. Such a rating is referred to as an IU (individual 
unemployability) rating. See Sec. Sec. 3.340, 3.341, and 4.16 of this 
title.
    (c) Receives an IU rating. The phrase receives an IU rating refers 
to the date of the rating decision authorizing total disability 
compensation based upon individual unemployability.


(Authority: 38 U.S.C. 1163(a)(2)(A))

[51 FR 19333, May 29, 1986. Redesignated at 53 FR 4397, Feb. 16, 1988, 
as amended at 55 FR 17272, Apr. 24, 1990; 58 FR 41637, Aug. 5, 1993]



Sec. 21.6505  Participation in the temporary program.

    Participation in this temporary program of trial work periods and 
vocational rehabilitation is limited to qualified veterans.

(Authority: 38 U.S.C. 1163(a)(2)(A)).

[55 FR 17272, Apr. 24, 1990]



Sec. 21.6507  Special benefits for qualified veterans under test program.

    (a) Protection of IU rating under 38 CFR 3.343(c)(2). The total 
disability rating of any qualified veteran who begins to engage in a 
substantially gainful occupation during the program period is protected 
from reduction by VA on the basis of the veteran's having secured and 
followed a substantially gainful occupation under the provisions of 
Sec. 3.343(c)(2) of this title.


(Authority: 38 U.S.C. 1163(a))

    (b) Counseling and employment services for qualified veterans. 
During the program period, VA will make the counseling services 
described in 38 U.S.C. 3104(a)(2), and the placement and postplacement 
services described in 38 U.S.C. 3104(a)(5), available to each qualified 
veteran for whom achievement of a vocational goal is reasonably 
feasible. These services will be made available regardless of the 
veteran's entitlement to or desire to participate in a vocational 
rehabilitation program under chapter 31. See Sec. 21.6519.


(Authority: 38 U.S.C. 1163(b))



Sec. 21.6509  Notice to qualified veterans.

    (a) At the time notice is provided to a qualified veteran of an 
award of an IU rating, VA shall provide the veteran with an additional 
statement. These statements shall contain the following information:

[[Page 396]]

    (1) Notice of the provisions of 38 U.S.C. 1163;
    (2) Information explaining the purposes and availability of, as well 
as eligibility requirements and procedures for pursuing a vocational 
rehabilitation program under Chapter 31; and
    (3) A summary description of the scope of services and assistance 
available under that chapter.


(Authority: 38 U.S.C. 1163(c)(1)).

    (b) Opportunity for evaluation. After providing the notice required 
under paragraph (a) of this section, VA shall offer the veteran the 
opportunity for an evaluation under Sec. 21.50 of this part.


(Authority: 38 U.S.C. 1163(c); Pub. L. 100-687).

    (c) Evaluation. The term evaluation hereinafter shall be understood 
to mean the same evaluation accorded in an initial evaluation and an 
extended evaluation as those terms are described in Sec. Sec. 21.50 and 
21.57 of this part.
    (d) Responsible staff member. The evaluation or reevaluation will be 
provided by a counseling psychologist in the Vocational Rehabilitation 
and Employment (VR&C) Division.


(Authority: 38 U.S.C. 1163(c)).

[55 FR 17273, Apr. 24, 1990]



Sec. Sec. 21.6511-21.6513  [Reserved]



Sec. 21.6515  Formulation of rehabilitation plan.

    (a) Formulation of plan. Following an evaluation, the counseling 
psychologist will formulate an IWRP (individualized written 
rehabilitation plan) or an IEAP (individualized employment assistance 
plan) for each participating qualified veteran for whom achievement of a 
vocational goal is reasonably feasible. These plans shall be prepared in 
accordance with Sec. 21.84 (IWRP) or Sec.  21.88 (IEAP).
    (b) Existing plan. If the veteran already has undertaken a 
rehabilitation program under Chapter 31, a new plan shall not be 
developed unless circumstances indicate that the existing plan should be 
modified or replaced.


(Authority: 38 U.S.C. 1163(c); Pub. L. 100-687).

[51 FR 19333, May 29, 1986. Redesignated at 53 FR 4397, Feb. 16, 1988, 
and amended at 55 FR 17272, Apr. 24, 1990]



Sec. 21.6517  [Reserved]



Sec. 21.6519  Eligibility of qualified veterans for employment and 
counseling services.

    (a) General. A qualified veteran for whom vocational rehabilitation 
and achievenment of a vocational goal are reasonably feasible may be 
provided the employment and counseling services to which he or she may 
be entitled under chapter 31. If the qualified veteran is not eligible 
for such assistance under chapter 31, he or she may be provided, 
nevertheless, the counseling, placement and postplacement services 
provided under 38 U.S.C. 3104(a)(2) and (5). The specific services which 
may be authorized are discussed in Sec. Sec. 21.100, 21.252 and 
21.254(a).
    (b) Services under other VA and non-VA programs. Veterans being 
provided counseling, placement and postplacement services under 
Sec. Sec. 21.100, 21.252, and 21.254(a) will also be aided in 
identifying services of other VA and non-VA programs which may be of 
assistance in securing employment. All elements of a program of these 
services shall be incorporated in the IEAP.
    (c) Veteran elects counseling, placement and postplacement services. 
If a qualified veteran elects not to undertake the IWRP and is otherwise 
eligible for counseling, placement and postplacement services under 38 
U.S.C. 3104(a)(2) and (5), he or she may be provided those services.


(Authority: 38 U.S.C. 1163(b)).

    (d) Duration of services under 38 U.S.C. 3104(a) (2) and (5). The 
services provided under 38 U.S.C. 3104(a)(2) and (5), are limited to an 
18-month period of employment assistance as described in Sec. 21.73.


(Authority: 38 U.S.C. 1163(b))

[51 FR 19333, May 29, 1986. Redesignated at 53 FR 4397, Feb. 16, 1988, 
as amended at 55 FR 17273, Apr. 24, 1990]

[[Page 397]]



Sec. 21.6521  Employment of qualified veterans.

    (a) Provisions of the IEAP (Individualized Employment Assistance 
Plan). Each IEAP of a qualified veteran shall require that the:
    (1) Case manager maintain close contact with qualified veterans who 
become employed to help assure adjustment to employment;
    (2) Veteran discuss any plan to leave employment during the trial 
work period with the case manager.


(Authority: 38 U.S.C. 1163(c))

    (b) Coordination with the Veterans Service Center. The VR&C Division 
will inform the Veterans Service Center in writing upon employment of 
the participating qualified veteran during a program of either 
vocational rehabilitation services or counseling and employment services 
and when such employment has continued for 12 consecutive months. See 
Sec. 3.343(c)(2) of this title.


(Authority: 38 U.S.C. 1163(a))

[51 FR 19333, May 29, 1986. Redesignated at 53 FR 4397, Feb. 16, 1988, 
as amended at 71 FR 28587, May 17, 2006]



Sec. 21.6523  Entry and reentry into a program of counseling and 
employment services under 38 U.S.C. 3104(a) (2) and (5).

    (a) Dates of entry. A qualified veteran, not eligible to receive 
Chapter 31 benefits, may not enter or pursue a program of counseling and 
employment services under 38 U.S.C. 3104(a) (2) and (5), before February 
1, 1985, or later than December 31, 1992.


(Authority: 38 U.S.C. 1163; Pub. L. 100-687; Pub. L. 102-291)

    (b) Reentry. The provisions of paragraph (a) of this section are 
also applicable to veterans being provided additional counseling and 
employment services following a redetermination of eligibility and 
entitlement to such services.


(Authority: 38 U.S.C. 1163; Pub. L. 100-687; Pub. L. 102-291)

[51 FR 19333, May 29, 1986. Redesignated at 53 FR 4397, Feb. 16, 1988, 
as amended at 55 FR 17273, Apr. 24, 1990; 58 FR 41637, Aug. 5, 1993]



Sec. 21.6525  [Reserved]



Subpart K_All Volunteer Force Educational Assistance Program (Montgomery 
                          GI Bill_Active Duty)

    Authority: 38 U.S.C. 501(a), chs. 30, 36, unless otherwise noted.

    Source: 53 FR 1757, Jan. 22, 1988, unless otherwise noted.



Sec. 21.7000  Establishment of educational assistance program.

    (a) Establishment. An educational assistance program for certain 
veterans and servicemembers is established.


(Authority: 38 U.S.C. 3001(1); Pub. L. 98-525)

    (b) Purpose. The purpose of this program is as stated in 38 U.S.C. 
3001.


(Authority: 38 U.S.C. 3001)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28383, July 11, 1990; 61 
FR 26116, May 24, 1996]

                               Definitions



Sec. 21.7020  Definitions.

    For the purposes of regulations from Sec. 21.7000 through Sec.  
21.7499 and the payment of basic educational assistance and supplemental 
educational assistance under 38 U.S.C. chapter 30, the following 
definitions apply. (See also additional definitions in Sec. 21.1029).
    (a) Definitions of participants--(1) Servicemember. The term 
servicemember means anyone who:
    (i) Meets the eligibility requirements of Sec. 21.7042 or Sec.  
21.7044, and
    (ii) Is on active duty with the Army, Navy, Air Force, Marine Corps, 
Coast Guard, Public Health Service or National Oceanographic and 
Atmospheric Administration.


(Authority: 38 U.S.C. 3016; Pub. L. 98-525)

    (2) Veteran. The term veteran means anyone who--
    (i) Meets the eligibility requirements of Sec. 21.7042, Sec.  
21.7044, or Sec. 21.7045, and
    (ii) Is not on active duty. The term veteran includes an individual 
who is

[[Page 398]]

actively participating in the Selected Reserve.


(Authority: 38 U.S.C. 3011, 3012; Pub. L. 98-525)

    (b) Other definitions--(1) Active duty.
    (i) The term active duty means--
    (A) Full-time duty in the Armed Forces, other than active duty for 
training,
    (B) Full-time duty (other than for training purposes) as a 
commissioned officer of the Regular or Reserve Corps of the Public 
Health Service,
    (C) Full-time duty as a commissioned officer of the National Oceanic 
and Atmospheric Administration, and
    (D) Authorized travel to or from such duty or service.
    (ii) The term active duty does not include any period during which 
an individual:
    (A) Was assigned full time by the Armed Forces to a civilian 
institution for a course of education which was substantially the same 
as established courses offered to civilians,
    (B) Served as a cadet or midshipman at one of the service academies, 
or
    (C) Served under the provisions of 10 U.S.C. 511(d) pursuant to an 
enlistment in the Army National Guard or the Air National Guard, or as a 
Reserve for service in the Army Reserve, Naval Reserve, Air Force 
Reserve, Marine Corps Reserve, or Coast Guard Reserve.


(Authority: 38 U.S.C. 101(21), 3002(6); Pub. L. 98-525)

    (iii) When referring to individuals who, before November 30, 1989, 
had never served on active duty (as that term is defined by Sec. 3.6b 
of this title), the term ``active duty'' when used in this subpart 
includes full-time National Guard duty first performed after November 
29, 1989, by a member of the Army National Guard of the United States or 
the Air National Guard of the United States in the servicemember's 
status as a member of the National Guard of a State for the purpose of 
organizing, administering, recruiting, instructing or training the 
National Guard.


(Authority: 38 U.S.C. 3002(7); Pub. L. 101-510, sec. 563(b)) (Nov. 5, 
1990)

    (iv) When referring to individuals who, before June 30, 1985, had 
never served on active duty (as that term is defined by Sec. 3.6(b) of 
this chapter) and who made the election described in Sec. 21.7042(a)(7) 
or (b)(10), the term active duty when used in this subpart includes 
full-time National Guard duty under title 32, U.S. Code first performed 
after June 30, 1985, by a member of the Army National Guard of the 
United States or the Air National Guard of the United States for the 
purpose of organizing, administering, recruiting, instructing, or 
training the National Guard.


(Authority: 38 U.S.C. 3002(7); sec. 107, Pub. L. 104-275, 110 Stat. 
3329-3330)

    (2) Attendance The term attendance means the presence of a veteran 
or servicemember--
    (i) In the class where the approved course is being taught in which 
he or she is enrolled, or
    (ii) At a training establishment, or
    (iii) Any other place of instruction, training or study designated 
by the educational institution or training establishment where the 
veteran or servicemember is enrolled and is pursuing a program of 
education.


(Authority: 38 U.S.C. 3034, 3680(g))

    (3) Audited course. The term audited course has the same meaning as 
provided in Sec. 21.4200(i) of this part.


(Authority: 38 U.S.C. 3034, 3680(a); Pub. L. 98-525)

    (4) Basic educational assistance. The term basic educational 
assistance means a monetary benefit payable to all individuals who meet 
basic requirements for eligibility under chapter 30, title 38 U.S.C., 
for pursuit of a program of education.


(Authority: 38 U.S.C. 3002(1); Pub. L. 98-525)

    (5) Break in service. (i) Except as provided in paragraph (b)(5)(ii) 
of this section, the term break in service means a period of more than 
90 days between the date when an individual is released from active duty 
or otherwise receives a complete separation from active duty service and 
the date he or she reenters on active duty.

[[Page 399]]

    (ii) A period during which an individual is assigned full time by 
the Armed Forces to a civilian institution for a course of education 
substantially the same as established courses offered to civilians is 
not a break in service.


(Authority: 38 U.S.C. 3011, 3021)

    (6) Continuous active duty. (i) The term continuous active duty 
means active duty served without interruption. An interruption in 
service will only be found when the individual receives a complete 
separation from active duty.
    (ii) A period during which an individual on active duty is assigned 
full time by the Armed Forces to a civilian institution for a course of 
education substantially the same as established courses offered to 
civilians will not interrupt the continuity of the individual's active 
duty.
    (iii) If an individual, during an obligated period of active-duty 
service, is separated from active duty to pursue a course of education 
at a service academy or a post-secondary school preparatory to 
enrollment at a service academy, no interruption in service will be 
found and the individual's service will be considered continuous active-
duty service, provided he or she--
    (A) Commences pursuit of a course of education at a service academy 
or post-secondary school,
    (B) Fails to complete the course of education, and
    (C) Immediately reenters on a period of active duty.
    (iv) An individual who is discharged or released from active duty 
for a reason stated in paragraph (b)(6)(iv) of this section after 
serving not more than 12 months of an obligated period of active duty, 
and who subsequently reenlists or reenters on a period of active duty, 
will not be considered to have an interruption in service. Except as 
provided in paragraph (b)(6)(vi) of this section, the individual's 
service during the two periods will be considered continuous active-duty 
service for the aggregate length of the two service periods. However, 
the individual's discharge or release from the earlier obligated period 
of service must have been:
    (A) For a service-connected disability;
    (B) For hardship;
    (C) For a medical condition which preexisted such active-duty 
service and is not service connected;
    (D) For a physical or mental condition not characterized as a 
disability and not resulting from the individual's own willful 
misconduct which interfered with the individual's performance of duty as 
determined by the Secretary concerned; or
    (E) Involuntary, for the convenience of the Government as a result 
of a reduction in force as determined by the Secretary concerned.
    (v) VA will not consider an individual to have an interruption of 
service when he or she:
    (A) Serves a period of active duty without interruption (without a 
complete separation from active duty), as an enlisted member or warrant 
officer;
    (B) While serving on such active duty is assigned to officer 
training school; and
    (C) Following successful completion of the officer training school 
is discharged to accept, without a break in service, a commission as an 
officer in the Armed Forces for a period of active duty.
    (vi) If the second period of active-duty service referred to in 
paragraph (b)(6)(iv) or (b)(6)(v) of this section is of such nature or 
character that, when aggregated with the earlier period of service 
referred to in that paragraph, it would cause the individual to be 
divested of entitlement to educational assistance otherwise established 
by the earlier period of active duty, the two periods of service will 
not be aggregated and will not be considered a single period of 
continuous active duty.
    (vii) Time lost will not be considered to interrupt the continuity 
of service. For the purpose of this section, ``time lost'' includes 
excess leave, noncreditable time and not-on-duty time.


(Authority: 38 U.S.C. 3011, 3012)

    (7) Cost of course. The term cost of course means the total cost for 
tuition and fees for a course which an educational institution charges 
to nonveterans whose circumstances are similar to veterans enrolled in 
the same course. Cost of course does not include the cost of supplies 
which the student

[[Page 400]]

is required to purchase at his or her own expense.


(Authority: 38 U.S.C. 3032; Pub. L. 98-525)

    (8) Deficiency course. The term deficiency course means any 
secondary level course or subject not previously completed 
satisfactorily which is specifically required for pursuit of a 
postsecondary program of education.


(Authority: 38 U.S.C. 3034; Pub. L. 98-525)

    (9) Dependent. The term dependent means:
    (i) A spouse as defined in Sec. 3.50(c) of this chapter,
    (ii) A child who meets the requirements of Sec. 3.57 of this 
chapter, or
    (iii) A parent who meets the requirements of Sec. 3.59 of this 
chapter.


(Authority: 38 U.S.C. 3015(d); Pub. L. 98-525)

    (10) Divisions of the school year. The term divisions of the school 
year has the same meaning as provided in Sec. 21.4200(b) of this part.


(Authority: 38 U.S.C. 3034, 3680(a); Pub. L. 98-525)

    (11) Drop-add period. The term drop-add period has the same meaning 
as provided in Sec. 21.4200(1) of this part.


(Authority: 38 U.S.C. 3034, 3680(a); Pub. L. 98-525)

    (12) Educational assistance. The term educational assistance means 
basic educational assistance, supplemental educational assistance, and 
all additional amounts payable, commonly called kickers.


(Authority: 38 U.S.C. 3002; Pub. L. 98-525)

    (13) Educational objective. An educational objective is one that 
leads to the awarding of a diploma, degree or certificate which reflects 
educational attainment.


(Authority: 38 U.S.C. 3002(3), 3452(b); Pub. L. 98-525)

    (14) Enrollment. The term enrollment has the same meaning as 
provided in Sec. 21.4200(n) of this part.


(Authority: 38 U.S.C. 3034, 3680(g); Pub. L. 98-525)

    (15) Enrollment period. The term enrollment period has the same 
meaning as provided Sec. 21.4200(p) of this part.


(Authority: 38 U.S.C. 3034, 3680(g); Pub. L. 98-525)

    (16) Holiday vacation. The term holiday vacation means a customary, 
reasonable vacation period connected with a Federal or State legal 
holiday which is identified as a holiday vacation in the educational 
institution's approved literature. Generally, VA will interpret a 
reasonable period as not more than one calendar week at Christmas and 
one calendar week at New Year's and shorter periods of time in 
connection with other legal holidays.


(Authority: 38 U.S.C. 3034, 3680; Pub. L. 98-525)

    (17) In residence on a standard quarter- or semester-hour basis. The 
term in residence on a standard quarter- or semester-hour basis has the 
same meaning as provided in Sec. 21.4200(r) of this part.


(Authority: 38 U.S.C. 3034, 3688(c); Pub. L. 98-525)

    (18) Institution of higher learning. The term institution of higher 
learning has the same meaning as provided in Sec. 21.4200(h) of this 
part.


(Authority: 38 U.S.C. 3034, 3688; Pub. L. 98-525)

    (19) Mitigating circumstances. (i) The term mitigating circumstances 
means circumstances beyond the veteran's or servicemember's control 
which prevent him or her from continuously pursuing a program of 
education. The following circumstances are representative of those which 
VA considers to be mitigating. This list is not all-inclusive.
    (A) An illness of the veteran or servicemember,
    (B) An illness or death in the veteran's or servicemember's family,
    (C) An unavoidable change in the veteran's conditions of employment,
    (D) An unavoidable geographical transfer resulting from the 
veteran's employment,

[[Page 401]]

    (E) Immediate family or financial obligations beyond the control of 
the veteran which require him or her to suspend pursuit of the program 
of education to obtain employment.
    (F) Discontinuance of the course by the educational institution,
    (G) Unanticipated active duty for training,
    (H) Unanticipated difficulties in caring for the veteran's or 
eligible person's child or children.
    (ii) In the first instance of a withdrawal after May 31, 1989, from 
a course or courses for which the veteran received educational 
assistance under title 38, U.S. Code, VA will consider that mitigating 
circumstances exist with respect to courses totaling not more than six 
semester hours or the equivalent.


(Authority: 38 U.S.C. 3034, 3680(a)(1); Pub. L. 100-689) (June 1, 1989)

    (20) Nonpunitive grade. The term nonpunitive grade has the same 
meaning as provided in Sec. 21.4200(j) of this part.


(Authority: 38 U.S.C. 3034, 3680(a); Pub. L. 98-525)

    (21) Normal commuting distance. The term normal commuting distance 
has the same meaning as provided in Sec. 21.4200(m) of this part.


(Authority: 38 U.S.C. 3034, 3680; Pub. L. 98-525)

    (22) Professional or vocational objective. A professional or 
vocational objective is one that leads to an occupation. It may include 
educational objectives essential to prepare for the chosen occupation. 
When a program consists of a series of courses not leading to an 
educational objective, these courses must be directed toward attainment 
of a designated professional or vocational objective.


(Authority: 38 U.S.C. 3002(3); Pub. L. 98-525)

    (23) Program of education. A program of education--
    (i) Is any unit course or subject or combination of courses or 
subjects which is pursued by a veteran or servicemember at an 
educational institution, and which is required by the Secretary of the 
Small Business Administration as a condition to obtaining financial 
assistance under the provisions of 15 U.S.C. 636; or
    (ii) Is a combination of subjects or unit courses pursued at an 
educational institution. The combination generally is accepted as 
necessary to meet requirements for a predetermined educational, 
professional or vocational objective. It may consist of subjects or 
courses which fulfill requirements for more than one objective if all 
objectives pursued are generally recognized as being related to a single 
career field;
    (iii) Includes an approved full-time program of apprenticeship or of 
other on-job training; and
    (iv) Effective November 30, 1999, includes a preparatory course for 
a test that is required or used for admission to--
    (A) An institution of higher education; or
    (B) A graduate school.


(Authority: 38 U.S.C. 3002(3), 3452(b))

    (24) Punitive grade. The term punitive grade has the same meaning as 
provided in Sec. 21.4200(k) of this part.


(Authority: 38 U.S.C. 3034, 3680(a); Pub. L. 98-525)

    (25) Pursuit. (i) The term pursuit means to work, while enrolled, 
towards the objective of a program of education. This work must be in 
accordance with approved institutional policy and regulations, and 
applicable criteria of title 38 U.S.C.; must be necessary to reach the 
program's objective; and must be accomplished through--
    (A) Resident courses (including teacher training courses and similar 
courses which VA considers to be resident training),
    (B) Independent study courses,
    (C) Correspondence courses,
    (D) An apprenticeship or other on-job training program,
    (E) A graduate program of research in absentia,
    (F) Medical-dental internships and residencies, nursing courses and 
other medical-dental specialty courses, or
    (G) A flight training course beginning on or after September 30, 
1990.
    (ii) VA will consider a veteran who qualifies for payment during an 
interval between terms or school closing, or

[[Page 402]]

who qualifies for payment during a holiday vacation to be in pursuit of 
a program of education during the interval, school closing, or holiday 
vacation.


(Authority: 38 U.S.C. 3034, 3680(g); Pub. L. 98-525)

    (26) Refresher course. The term ``refresher course'' means--
    (i) Either a course at the elementary or secondary level to review 
or update material previously covered in a course that has been 
satisfactorily completed, or
    (ii) A course which permits an individual to update knowledge and 
skills or be instructed in the technological advances which have 
occurred in the individual's field of employment during and since the 
period of the individual's active military service.


(Authority: 38 U.S.C. 3034(a))

    (27) Remedial course. The term remedial course means a course 
designed to overcome a deficiency at the elementary or secondary level 
in a particular area of study, or a handicap, such as in speech.


(Authority: 38 U.S.C. 3034, 38 U.S.C. 3491(a)(2); Pub. L. 98-525)

    (28) Secretary. The term Secretary means the Secretary of Defense 
with respect to members of the Armed Forces under the jurisdiction of 
the Secretary of a military department, and the Secretary of 
Transportation with respect to the Coast Guard when it is not operating 
as a service in the Navy.


(Authority: 38 U.S.C. 3002(5); Pub. L. 98-525)

    (29) School, educational institution, institution. The terms school, 
educational institution, and institution mean--
    (i) Any vocational school, correspondence school, business school, 
junior college, teachers' college, college, normal school, professional 
school, university or scientific or technical institution;
    (ii) Any public or private elementary school or secondary school 
which offers courses for adults, provided that the courses lead to an 
objective other than an elementary school diploma, a high school diploma 
or their equivalents; and
    (iii) An entity, other than an institution of higher learning, that 
provides training required for completion of a State-approved 
alternative teacher certification program.


(Authority: 38 U.S.C. 3002(7); sec. 107, Pub. L. 104-275, 110 Stat. 
3329-3330)

    (30) School year. The term school year means generally a period of 2 
semesters or 3 quarters which is not less than 30 nor more than 39 weeks 
in total length.


(Authority: 38 U.S.C. 3034; Pub. L. 98-525)

    (31) Selected Reserve. The term Selected Reserve means the Selected 
Reserve of the Ready Reserve of any of the reserve components (including 
the Army National Guard of the United States and the Air National Guard 
of the United States) of the Armed Forces, as required to be maintained 
under section 268(b), 10 U.S.C.


(Authority: 38 U.S.C. 3002(4); Pub. L. 98-525)

    (32) Standard class session. The term standard class session has the 
same meaning as provided in Sec. 21.4200(g) of this part.


(Authority: 38 U.S.C. 3034; 3688(c); Pub. L. 98-525)

    (33) Standard college degree. The term standard college degree has 
the same meaning as provided in Sec. 21.4200(e) of this part.


(Authority: 38 U.S.C. 3034, 3688; Pub. L. 98-525)

    (34) Supplemental educational assistance. The term supplemental 
educational assistance means a benefit payable to a veteran or 
servicemember as a supplement to his or her basic educational assistance 
for pursuit of a program of education under 38 U.S.C. ch. 30.


(Authority: 38 U.S.C. 3002(2); Pub. L. 98-525)

    (35) Established charge. The term established charge means the 
lesser of--
    (i) The charge for the correspondence course or courses determined 
on the basis of the lowest extended time payment plan offered by the 
educational institution and approved by the appropriate State approving 
agency, or

[[Page 403]]

    (ii) The actual cost to the servicemember or veteran.


(Authority: 38 U.S.C. 3034, 3686(a)(1))

    (36) Date of affirmance. The term date of affirmance means the date 
(after the expiration of ten days after a veteran or servicemember signs 
an enrollment agreement for a correspondence course), on which the 
veteran or servicemember signs and submits to VA a written agreement 
affirming the enrollment agreement.


(Authority: 38 U.S.C. 3034, 3686)

    (37) Training establishment. The term training establishment means 
any establishment providing apprentice or other on-job training, 
including those under the supervision of a college or university or any 
State department of education, or any State apprenticeship agency or any 
State board of vocational education, or any joint apprenticeship 
committee, or the Bureau of Apprenticeship and Training established in 
accordance with 29 U.S.C. Chapter 4C, or any agency of the Federal 
Government authorized to supervise such training.


(Authority: 38 U.S.C. 1434, 3687)

    (38) Disabling effects of chronic alcoholism. (i) The term disabling 
effects of chronic alcoholism means alcohol-induced physical or mental 
disorders or both, such as habitual intoxication, withdrawal, delirium, 
amnesia, dementia, and other like manifestations of chronic alcoholism 
which, in the particular case--
    (A) Have been medically diagnosed as manifestations of alcohol 
dependency or chronic alcohol abuse, and
    (B) Are determined to have prevented commencement or completion of 
the affected individual's chosen program of education.
    (ii) A diagnosis of alcoholism, chronic alcoholism, alcohol-
dependency, chronic alcohol abuse, etc., in and of itself, does not 
satisfy the definition of this term.
    (iii) Injury sustained by a veteran as a proximate and immediate 
result of activity undertaken by the veteran while physically or 
mentally unqualified to do so due to alcoholic intoxication is not 
considered a disabling effect of chronic alcoholism.


(Authority: 38 U.S.C. 105, 3031(d); Pub. L. 100-689) (Nov. 18, 1988)

    (39) Cooperative course. The term cooperative course means a full-
time program of education which consists of institutional courses and 
alternate phases of training in a business or industrial establishment 
with the training in the business of industrial establishment being 
strictly supplemental to the institutional portion.


(Authority: 38 U.S.C. 3002, 3482(a); Pub. L. 100-689) (Jan. 1, 1989)

    (40) Open period. The term ``open period'' means a period of time 
beginning on December 1, 1988, and ending on June 30, 1989.


(Authority: 38 U.S.C. 3018; Pub. L. 100-689) (Nov. 18, 1988)

    (41) Persian Gulf War. The term ``Persian Gulf War'' means the 
period beginning on August 2, 1990, and ending on the date thereafter 
prescribed by Presidential proclamation or by law.


(Authority: 38 U.S.C. 101(33); Pub. L. 102-25)

    (42) Continuously enrolled. The term continuously enrolled means 
being in an enrolled status at an educational institution for each day 
during the school year, and for consecutive school years. Continuity of 
enrollment is not broken by holiday vacations; vacation periods; periods 
during the school year between terms, quarters, or semesters; or by 
nonenrollment during periods of enrollment outside the school year 
(e.g., summer sessions).


(Authority: Sec. 313(b), Pub. L. 102-568, 106 Stat. 4333)

    (43) Alternative teacher certification program. The term alternative 
teacher certification program, for the purposes of determining whether 
an entity offering such a program is a school, educational institution 
or institution as defined in paragraph (b)(29)(iii) of this section, 
means a program leading to a teacher's certificate that allows 
individuals with a bachelor's degree or graduate degree to obtain 
teacher certification without

[[Page 404]]

enrolling in an institution of higher learning.


(Authority: 38 U.S.C. 3452(c))

    (44) Date of election. The term date of election means:
    (i) For an election that must be made in the form and manner 
determined by the Secretary of Defense, the date determined by the 
Secretary of Defense; and
    (ii) For an election that must be submitted to VA, the date VA 
receives the written election.
    (45) Institution of higher education. The term institution of higher 
education means either:
    (i) An educational institution, located in a State, that--
    (A) Admits as regular students only persons who have a high school 
diploma, or its recognized equivalent, or persons who are beyond the age 
of compulsory school attendance in the State in which the educational 
institution is located;
    (B) Offers postsecondary level academic instruction that leads to an 
associate or baccalaureate degree; and
    (C) Is empowered by the appropriate State education authority under 
State law to grant an associate or baccalaureate degree, or where there 
is no State law to authorize the granting of a degree, is accredited for 
associate or baccalaureate degree programs by a recognized accrediting 
agency; or
    (ii) An educational institution, not located in a State, that--
    (A) Offers a course leading to an undergraduate standard college 
degree or the equivalent; and
    (B) Is recognized as an institution of higher education by the 
secretary of education (or comparable official) of the country or other 
jurisdiction in which the educational institution is located.

(Authority: 38 U.S.C. 3002(3))

    (46) Graduate school. The term graduate school means either:
    (i) An educational institution, located in a State, that--
    (A) Admits as regular students only persons who have a baccalaureate 
degree or the equivalent in work experience;
    (B) Offers postsecondary level academic instruction that leads to a 
master's degree, doctorate, or professional degree; and
    (C) Is empowered by the appropriate State education authority under 
State law to grant a master's degree, doctorate, or professional degree, 
or, where there is no State law to authorize the granting of a degree, 
is accredited for master's degree, doctorate, or professional degree 
programs by a recognized accrediting agency; or
    (ii) An educational institution, not located in a State, that--
    (A) Offers a course leading to a master's degree, doctorate, or 
professional degree; and
    (B) Is recognized as an institution of higher education by the 
secretary of education (or comparable official) of the country or other 
jurisdiction in which the educational institution is located.


(Authority: 38 U.S.C. 3002(3)).

    (47) High technology industry. The term high technology industry has 
the same meaning as provided in Sec. 21.4200(aa).


(Authority: 38 U.S.C. 3014A, 3452(c), 3501(a)(6))

    (48) Employment in a high technology industry. Employment in a high 
technology industry has the same meaning as provided in Sec. 
21.4200(bb).


(Authority: 38 U.S.C. 3014A)

    (49) High technology occupation. The term high technology occupation 
has the same meaning as provided in Sec. 21.4200(cc).


(Authority: 38 U.S.C. 3014A, 3452(c), 3501(a)(6))

    (50) Computer specialist. The term computer specialist has the same 
meaning as provided in Sec. 21.4200(dd).


(Authority: 38 U.S.C. 3014A, 3452(c), 3501(a)(6))

    (51) Accelerated payment. An accelerated payment is a lump sum 
payment of a maximum of 60 percent of the charged tuition and fees for 
an individual's enrollment for a term, quarter, or semester in an 
approved program of education leading to employment in a high technology 
industry. In the case of a program of education not offered

[[Page 405]]

on a term, quarter, or semester basis, the accelerated payment is a lump 
sum payment of a maximum of 60 percent of the charged tuition and fees 
for the entire such program.


(Authority: 38 U.S.C. 3014A)

    (52)-(55) [Reserved]
    (56) Fugitive felon. The term fugitive felon has the same meaning as 
provided in Sec. 21.4200(kk).


(Authority: 38 U.S.C. 5313B)
    (57) Felony. The term felony has the same meaning as provided in 
Sec. 21.4200(ll).


(Authority: 38 U.S.C. 5313B)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28383, July 11, 1990; 56 
FR 20130, May 2, 1991; 57 FR 15023, Apr. 24, 1992; 58 FR 26241, May 3, 
1993; 59 FR 24051, May 10, 1994; 61 FR 6785, Feb. 22, 1996; 61 FR 29297, 
June 10, 1996; 62 FR 55761, Oct. 28, 1997; 64 FR 23772, May 4, 1999; 65 
FR 5786, Feb. 7, 2000; 65 FR 67266, Nov. 9, 2000; 66 FR 39279, July 30, 
2001; 68 FR 34328, June 9, 2003; 68 FR 35179, June 12, 2003; 70 FR 
25787, May 16, 2005]

                         Claims and Applications



Sec. 21.7030  Applications, claims, and time limits.

    The provisions of subpart B of this part apply with respect to 
claims for educational assistance under 38 U.S.C. chapter 30, VA actions 
upon receiving a claim, and time limits connected with claims.

(Authority: 38 U.S.C. 3018B, 3034(a), 3471, 5101, 5102, 5103)

[64 FR 23773, May 4, 1999]



Sec. 21.7032  Time limits for making elections.

    (a) Scope of this section. The provisions of this section are 
applicable to certain elections to receive educational assistance under 
38 U.S.C. ch. 30. For time limits governing formal and informal claims 
for educational assistance under 38 U.S.C. ch. 30, see Sec. 21.1032.


(Authority: 38 U.S.C. 3018B)

    (b) Time limit for completing certain elections. An individual who 
seeks to establish eligibility to receive educational assistance under 
Sec. 21.7045 must--
    (1) Within one year of the date of the VA letter or other written 
notice to the individual indicating that additional evidence is needed 
in order to complete the claim, submit that evidence to VA. This time 
limit may be extended if the individual is able to show good cause for 
an extension of the period to the date on which he or she actually 
submits the additional evidence; and
    (2) Submit the $1,200 VA is required pursuant to Sec. 21.7045(c)(2) 
to collect before educational assistance can be awarded. A delay in 
submitting the $1,200 may result in a later effective date for the award 
to the individual, and in no event will VA accept payment of the $1,200 
from the individual after the last date of eligibility as determined by 
Sec. 21.7050 or Sec.  21.7051. See Sec.  21.7131(k).


(Authority: 38 U.S.C. 3018B)

[53 FR 1757, Jan. 22, 1988, as amended at 56 FR 11671, Mar. 20, 1991; 58 
FR 63530, Dec. 2, 1993; 61 FR 6785, Feb. 22, 1996; 64 FR 23773, May 4, 
1999]

                               Eligibility



Sec. 21.7040  Categories of basic eligibility.

    Eligibility for basic educational assistance can be established by:
    (a) Some individuals who first become members of the Armed Forces or 
who first enter on active duty as a member of the Armed Forces after 
June 30, 1985, and
    (b) Some individuals who are eligible for educational assistance 
allowance under 38 U.S.C. chapter 34.

(Authority: 38 U.S.C. 3011, 3012; Pub. L. 98-525)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28384, July 11, 1990]



Sec. 21.7042  Basic eligibility requirements.

    An individual must meet the requirements of this section, Sec. 
21.7044, or Sec. 21.7045 in order to be eligible for basic educational 
assistance. This section requires an individual to complete certain 
academic requirements before applying for educational assistance. If the 
individual applies before completing those requirements, VA will 
disallow the application. However, the

[[Page 406]]

individual's premature application will not prevent the individual from 
establishing eligibility at a later time by applying for educational 
assistance again after having completed those academic requirements. In 
determining whether an individual has met the service requirements of 
this section, VA will exclude any period during which the individual is 
not entitled to credit for service for the periods of time specified in 
Sec. 3.15.


(Authority: 38 U.S.C. 3011, 3012, 3018(b), 3018A)

    (a) Eligibility based solely on active duty. An individual may 
establish eligibility for basic educational assistance based on service 
on active duty under the following terms, conditions and requirements.
    (1) The individual must after June 30, 1985, either--
    (i) First become a member of the Armed Forces, or
    (ii) First enter on active duty as a member of the Armed Forces;
    (2) Except as provided in paragraph (a)(5) of this section, the 
individual must--
    (i) If his or her obligated period of active duty is three years or 
more, serve at least three years of continuous active duty in the Armed 
Forces; or
    (ii) If his or her obligated period of active duty is less than 
three years, serve at least two years of continuous active duty in the 
Armed Forces;
    (3) The individual, before applying for educational assistance, must 
either--
    (i) Complete the requirements of a secondary school diploma (or an 
equivalency certificate), or
    (ii) Successfully complete (or otherwise receive academic credit 
for) 12 semester hours (or the equivalent) in a program of education 
leading to a standard college degree; and


(Authority: 38 U.S.C. 3011, 3016)

    (4) After completing the service requirements of this paragraph the 
individual must--
    (i) Continue on active duty, or
    (ii) Be discharged from service with an honorable discharge, or
    (iii) Be released after service on active duty characterized by the 
Secretary concerned as honorable service, and
    (A) Be placed on the retired list, or
    (B) Be transferred to the Fleet Reserve or Fleet Marine Corps 
Reserve, or
    (C) Be placed on the temporary disability retired list, or
    (iv) Be released from active duty for further service in a reserve 
component of the Armed Forces after service on active duty characterized 
by the Secretary concerned as honorable service.
    (5) An individual who does not meet the requirements of paragraph 
(a)(2) of this section is eligible for basic educational assistance when 
he or she is discharged or released from active duty--
    (i) For a service-connected disability, or
    (ii) For a medical condition which preexisted service on active duty 
and which VA determines is not service connected, or
    (iii) Under 10 U.S.C. 1173 (hardship discharge), or
    (iv) For convenience of the government--
    (A) After completing at least 20 continuous months of active duty of 
an obligated period of active duty that is less than three years, or
    (B) After completing 30 continuous months of active duty of an 
obligated period of active duty that is at least three years, or
    (v) Involuntarily for the convenience of the government as a result 
of a reduction in force, as determined by the Secretary of the military 
department concerned in accordance with regulations prescribed by the 
Secretary of Defense or by the Secretary of Transportation with respect 
to the Coast Guard when it is not operating as a service in the Navy, or
    (vi) For a physical or mental condition that was not characterized 
as a disability and did not result from the individual's own willful 
misconduct but did interfere with the individual's performance of duty, 
as determined by the Secretary of each military department in accordance 
with regulations prescribed by the Secretary of Defense or by the 
Secretary of Transportation with respect to the Coast Guard when

[[Page 407]]

it is not operating as a service in the Navy.


(Authority: 38 U.S.C. 3011)

    (6) An individual whose active duty meets the definition of that 
term found in Sec. 21.7020(b)(1)(iv), and who wishes to become entitled 
to basic educational assistance, must have elected to do so before July 
9, 1997. For an individual electing while on active duty, this election 
must have been made in the manner prescribed by the Secretary of 
Defense. For individuals not on active duty, this election must have 
been submitted in writing to VA.

(Authority: Sec. 107(b), Pub. L. 104-275, 110 Stat. 3329-3330)

    (b) Eligibility based on active duty service and service in the 
Selected Reserve. An individual may establish eligibility for basic 
educational assistance based on a combination of service on active duty 
and service in the Selected Reserve under the following terms, 
conditions and requirements.
    (1) The individual must, after June 30, 1985, either--
    (i) First become a member of the Armed Forces, or
    (ii) First enter on active duty as a member of the Armed Forces;
    (2) The individual, before applying for educational assistance, must 
either--
    (i) Complete the requirements of a high school diploma (or an 
equivalency certificate),
    (ii) Successfully complete (or otherwise receive academic credit 
for) 12 semester hours (or the equivalent) in a program of education 
leading to a standard college degree;


(Authority: 38 U.S.C. 3011, 3012, 3016)

    (3) Except as provided in paragraph (b)(6) of this section, the 
individual must serve at least two years of continuous active duty in 
the Armed Forces characterized by the Secretary concerned as honorable 
service.
    (4) Except as provided in paragraph (b)(7) of this section, after 
completion of active duty service, the individual must serve at least 
four continuous years of service in the Selected Reserve. An individual 
whose release from active duty service occurs after December 17, 1989, 
must begin this service in the Selected Reserve within one year from the 
date of his or her release from active duty. During this period of 
service in the Selected Reserve the individual must satisfactorily 
participate in training as prescribed by the Secretary concerned.


(Authority: 38 U.S.C. 3012(a)(1); Pub. L. 100-689, Pub. L. 101-237)

    (5) The individual must, after completion of all service described 
in this paragraph
    (i) Be discharged from service with an honorable discharge, or
    (ii) Be placed on the retired list, or
    (iii) Be transferred to the Standby Reserve or an element of the 
Ready Reserve other than the Selected Reserve after service in the 
Selected Reserve characterized by the Secretary concerned as honorable 
service, or
    (iv) Continue on active duty, or
    (v) Continue in the Selected Reserve.
    (6) An individual is exempt from serving two years on active duty as 
provided in paragraph (b)(3) of this section when the individual is 
discharged or released from the Armed Forces during those two years--
    (i) For a service-connected disability, or
    (ii) For a medical condition which preexisted such service on active 
duty and which VA determines is not service connected, or
    (iii) Under 10 U.S.C. 1173 (hardship discharge), or
    (iv) In the case of an individual discharged or released after 20 
months of such service, for the convenience of the Government, or
    (v) Involuntarily, for convenience of the Government as a result of 
a reduction in force as determined by the Secretary of the military 
department concerned in accordance with regulations prescribed by the 
Secretary of Defense or by the Secretary of Transportation with respect 
to the Coast Guard when it is not operating as a service in the Navy, or
    (vi) For a physical or mental condition that was not characterized 
as a disability and did not result from the individual's own willful 
misconduct but did interfere with the individual's performance of duty, 
as determined by the

[[Page 408]]

Secretary of each military department in accordance with regulations 
prescribed by the Secretary of Defense or by the Secretary of 
Transportation with respect to the Coast Guard when it is not operating 
as a service in the Navy.


(Authority: 38 U.S.C. 3011; Pub. L. 98-525, Pub. L. 99-576, Pub. L. 100-
689, Pub. L. 101-510) (Oct. 19, 1984)

    (7) An individual is exempt from serving four years in the Selected 
Reserve as provided in paragraph (b)(4) of this section when--
    (i) After completion of the active duty service required by this 
paragraph the individual serves a continuous period of service in the 
Selected Reserve and is discharged or released from service in the 
Selected Reserve--
    (A) For a service-connected disability, or
    (B) For a medical condition which preexisted the individual's 
becoming a member of the Selected Reserve and which VA determines is not 
service connected, or
    (C) Under 10 U.S.C. 1173 (hardship discharge), or
    (D) After a minimum of 30 months of such service for the convenience 
of the Government, or
    (E) Involuntarily for the convenience of the Government as a result 
of a reduction in force, as determined by the Secretary of the military 
department concerned in accordance with regulations prescribed by the 
Secretary of Defense or by the Secretary of Transportation with respect 
to the Coast Guard when it is not operating as a service in the Navy, or
    (F) For a physical or mental condition that was not characterized as 
a disability and did not result from the individual's own willful 
misconduct but did interfere with the individual's performance of duty, 
as determined by the Secretary of each military department in accordance 
with regulations prescribed by the Secretary of Defense or by the 
Secretary of Transportation with respect to the Coast Guard when it is 
not operating as a service in the Navy.


(Authority: 38 U.S.C. 3011; Pub. L. 98-525, Pub. L. 99-576, Pub. L. 100-
689, Pub. L. 101-510) (Oct. 19, 1984)

    (ii) The individual is obligated at the beginning of the two years 
active duty described in paragraph (b)(3) of this section to serve the 
four years in the Selected Reserve as described in subparagraph (b)(4) 
of this section, and during the two years of active duty service he or 
she is discharged or released from active duty in the Armed Forces--
    (A) For a service-connected disability;
    (B) For a medical condition which preexisted that period of active 
duty and which VA determines is not service connected; or
    (C) For a physical or mental condition that was not characterized as 
a disability and did not result from the individual's own willful 
misconduct but did interfere with the individual's performance of duty, 
as determined by the Secretary of each military department in accordance 
with regulations prescribed by the Secretary of Defense or by the 
Secretary of Transportation with respect to the Coast Guard when it is 
not operating as a service in the Navy.


(Authority: 38 U.S.C. 3012(b)(1)(B)(i))

    (iii) Before completing four years service in the Selected Reserve, 
the individual ceases to be a member of the Selected Reserve during the 
period beginning on October 1, 1991, and ending on September 30, 1999, 
by reason of the inactivation of the individual's unit of assignment or 
by reason of involuntarily ceasing to be designated as a member of the 
Selected Reserve pursuant to 10 U.S.C. 268(b). However, this exemption 
from the four-year service requirement does not apply to a reservist who 
ceases to be a member of the Selected Reserve under adverse conditions 
as characterized by the Secretary of the military department concerned, 
or to a reservist who after having involuntarily ceased to be a member 
of the Selected Reserve is involuntarily separated from the Armed Forces

[[Page 409]]

under adverse conditions as characterized by the Secretary of the 
military department concerned.


(Authority: 10 U.S.C. 16133(b)(1); 38 U.S.C. 3012(b)(1)(B); sec. 4421(b) 
and (c), Pub. L. 102-484, 106 Stat. 2718)

    (8) For purposes of determining continuity of Selected Reserve 
service, the Secretary concerned may prescribe by regulation a maximum 
period of time during which the individual is considered to have 
continuous service in the Selected Reserve even though he or she--
    (i) Is unable to locate a unit of the Selected Reserve of the 
individual's Armed Force that the individual is eligible to join or that 
has a vacancy, or
    (ii) Is not attached to a unit of the Selected Reserve for any 
reason prescribed by the Secretary concerned by regulation other than 
those stated in paragraph (b)(8)(i) of this section.
    (9) Any decision as to the continuity of an individual's service in 
the Selected Reserve made by the Department of Defense or the Department 
of Transportation under regulations described in paragraph (b)(8) of 
this section shall be binding upon VA.


(Authority: 38 U.S.C. 3011, 3012; Pub. L. 98-525, Pub. L. 100-689) (July 
1, 1985, Oct. 1, 1987)

    (10) An individual whose active duty meets the definition of that 
term found in Sec. 21.7020(b)(1)(iv), and who wishes to become entitled 
to basic educational assistance, must have elected to do so before July 
9, 1997. For an individual electing while on active duty, this election 
must have been made in the manner prescribed by the Secretary of 
Defense. For individuals not on active duty, this election must have 
been submitted in writing to VA.


(Authority: Sec. 107(b), Pub. L. 104-275, 110 Stat. 3329-3330)

    (c) Eligibility based on withdrawal of election not to enroll. As 
stated in paragraph (f) of this section, a veteran or servicemember who 
elects not to enroll in this educational assistance program is generally 
not eligible for educational assistance. However, such a person may 
establish eligibility by meeting the requirements of this paragraph.
    (1) The individual must withdraw an election not to enroll. Only 
someone who meets the provisions of this subparagraph may make this 
withdrawal. Such a withdrawal is irrevocable. The withdrawal may only be 
made during the period beginning on December 1, 1988, and ending on June 
30, 1989, by a servicemember who--
    (i) Must have first become a member of the Armed Forces or first 
entered on active duty as a member of the Armed Forces during the period 
beginning July 1, 1985, and ending June 30, 1988;
    (ii) As of the day of withdrawal of the election must have served 
continuously on active duty without a break in service since the date 
the individual first became a member of the Armed Forces or first 
entered on active duty as a member of the Armed Forces;
    (iii) Must be serving on active duty on the day he or she withdraws 
the election;
    (iv) Withdraws the election in the form prescribed by the Secretary 
of Defense or in the case of the Coast Guard by the Secretary of 
Transportation with respect to the Coast Guard when it is not operating 
as a service in the Navy.
    (2) The individual must continue to serve the period of service that 
the individual was obligated to serve on December 1, 1988.
    (3) The individual must:
    (i) Complete the period of service that he or she was obligated to 
serve on December 1, 1988, which will include completion of a period of 
extension or reenlistment if an individual's initial obligated period of 
service was scheduled to end after November 30, 1988, but he or she 
extended an enlistment or reenlisted before December 1, 1988; or
    (ii) Before completing the period of service he or she was obligated 
to serve on December 1, 1988, have been discharged or released from 
active duty for--
    (A) A service-connected disability, or
    (B) A medical condition which preexisted that period of service and 
which the Secretary determines is not service connected, or
    (C) Hardship (10 U.S.C. 1173); or
    (iii) Before completing the period of service he or she was 
obligated to serve on December 1, 1988, have been--

[[Page 410]]

    (A) Discharged or released from active duty for the convenience of 
the Government after completing not less than 20 months of that period 
of service if such period was less than three years, or 30 months, if 
that period was at least three years;
    (B) Involuntarily discharged or released from active duty for the 
convenience of the Government as a result of a reduction in force as 
determined by the Secretary concerned in accordance with regulations 
prescribed by the Secretary of Defense; or
    (C) Discharged or released from active duty for a physical or mental 
condition that was not characterized as a disability and did not result 
from the individual's own willful misconduct but did interfere with the 
individual's performance of duty, as determined by the Secretary of the 
military department concerned in accordance with regulations prescribed 
by the Secretary of Defense (or by the Secretary of Transportation for 
the Coast Guard when the Coast Guard is not operating as a service of 
the Navy).
    (4) Before applying for educational assistance, the individual--
    (i) Must complete the requirements of a secondary school diploma (or 
an equivalency certificate) or
    (ii) Successfully complete (or otherwise receive academic credit 
for) 12 semester hours (or the equivalent) in a program of education 
leading to a standard college degree.
    (5) Upon completion of the period of service he or she was obligated 
to serve on December 1, 1988, the individual must--
    (i) Be discharged from service with an honorable discharge, be 
placed on the retired list, be transferred to the Fleet Reserve or Fleet 
Marine Corps Reserve, or be placed on the temporary disability retired 
list; or
    (ii) Continue on active duty; or
    (iii) Be released from active duty for further service in a reserve 
component of the Armed Forces after service on active duty characterized 
by the Secretary concerned as honorable service.


(Authority: 38 U.S.C. 3018; Pub. L. 102-16) (Mar. 22, 1991)

    (d) Dual eligibility. (1) An individual who has established 
eligibility under paragraph (a) of this section through serving at least 
two years of continuous active duty of an obligated period of active 
duty of less than three years, as provided in paragraph (a)(2) of this 
section, may attempt to establish eligibility under paragraph (b) of 
this section through service in the Selected Reserve. If this veteran 
fails to establish eligibility under paragraph (b) of this section, he 
or she will retain eligibility established under paragraph (a) of this 
section.
    (2) An individual must elect, in writing, whether he or she wishes 
service in the Selected Reserve to be credited towards establishing 
eligibility under 38 U.S.C. chapter 30 or under 10 U.S.C. chapter 1606 
when:
    (i) The individual:
    (A) Is a veteran who has established eligibility for basic 
educational assistance through meeting the provisions of paragraph (b) 
of this section; and
    (B) Also is a reservist who has established eligibility for benefits 
under 10 U.S.C. chapter 1606 through meeting the requirements of Sec. 
21.7540; or
    (ii) The individual is a member of the National Guard or Air 
National Guard who has established eligibility for basic educational 
assistance under 38 U.S.C. chapter 30 through activation under a 
provision of law other than 32 U.S.C. 316, 502, 503, 504, or 505.
    (3) An election under this paragraph (d) to have Selected Reserve 
service credited towards eligibility for payment of educational 
assistance under 38 U.S.C. chapter 30 or under 10 U.S.C. chapter 1606 is 
irrevocable when the veteran either negotiates the first check or 
receives the first payment by electronic funds transfer of the 
educational assistance elected.
    (4) If a veteran is eligible to receive educational assistance under 
both 38 U.S.C. chapter 30 and 10 U.S.C. chapter 1606, he or she may 
receive educational assistance alternately or consecutively under each 
of these chapters to the extent that the educational assistance is based 
on service not irrevocably credited to one or the other chapter as 
provided in paragraphs (d)(1) through (d)(3) of this section.


(Authority: 10 U.S.C. 16132, 38 U.S.C. 3033(c))


[[Page 411]]


    (e) Eligibility to receive educational assistance while serving a 
qualifying period of active duty. (1) An individual on active duty who 
does not have sufficient active duty service to establish eligibility 
under paragraph (a) of this section, nevertheless is eligible to receive 
basic educational assistance when he or she
    (i) After June 30, 1985, either--
    (A) First becomes a member of the Armed Forces, or
    (B) First enters on active duty as a member of the Armed Forces;
    (ii) Has completed the requirements of a secondary school diploma 
(or an equivalency certificate) before beginning training;
    (iii) Serves at least two years of continuous active duty in the 
Armed Forces; and
    (iv) Remains on active duty.
    (2) Subject to paragraph (e)(3) of this section, VA will consider an 
individual to have met the requirements of paragraph (b) of this section 
when he or she--
    (i) Has met the active duty requirements of paragraph (b) of this 
section;
    (ii) Is committed to serve 4 years in the Selected Reserve; and
    (iii) Before beginning the training for which he or she wishes to 
receive educational assistance--
    (A) Has completed the requirements of a high school diploma (or 
equivalency certificate), or
    (B) Has successfully completed the equivalent of 12 semester hours 
or the equivalent in a program of education leading to a standard 
college degree.


(Authority: 38 U.S.C. 3011, 3012, 3016)

    (3) An individual who establishes basic eligibility under this 
paragraph shall lose that eligibility if, upon discharge or release from 
active duty, he or she is unable to establish eligibility under any of 
the other paragraphs of this section. The effective date for that loss 
of eligibility is the date the veteran was discharged or released from 
active duty.


(Authority: 38 U.S.C. 3011, 3012, 3016; Pub. L. 98-525)

    (f) Restrictions on establishing eligibility. (1) An individual who, 
after June 30, 1985, first becomes a member of the Armed Forces or first 
enters on active duty as a member of the Armed Forces, may elect not to 
receive educational assistance under 38 U.S.C. ch. 30. This election 
must be made at the time the individual initially enters on active duty 
as a member of the Armed Forces. An individual who makes such an 
election is not eligible for educational assistance under 38 U.S.C. ch. 
30 unless he or she withdraws the election as provided in paragraph (c) 
of this section or in Sec. 21.7045(b) or (c) of this part.


(Authority: 38 U.S.C. 3018, 3018A; Pub. L. 100-689, Pub. L. 101-510) 
(Nov. 5, 1990)

    (2) Except as provided in paragraph (f)(4) of this section, an 
individual is not eligible for educational assistance under 38 U.S.C. 
chapter 30 if after December 31, 1976, he or she receives a commission 
as an officer in the Armed Forces upon graduation from:
    (i) The United States Military Academy;
    (ii) The United States Naval Academy;
    (iii) The United States Air Force Academy; or
    (iv) The United States Coast Guard Academy.
    (3) Except as provided in paragraph (f)(4) of this section, an 
individual who after December 31, 1976, receives a commission as an 
officer in the Armed Forces upon completion of a program of educational 
assistance under 10 U.S.C. 2107 is not eligible for educational 
assistance under 38 U.S.C. chapter 30, if the individual enters on 
active duty--
    (i) Before October 1, 1996; or
    (ii) After September 30, 1996, and while participating in that 
program received more than $2,000 for each year of participation.



(Authority: 38 U.S.C. 3011(c), 3012(d))

    (4) Paragraphs (f)(2) and (f)(3) of this section do not apply to a 
veteran who has met the requirements for educational assistance under 
paragraph (a), (b) or (c) of this section before receiving a commission 
in the Armed Forces upon graduation from the United States Military 
Academy, the United States Naval Academy, the United States Air Force 
Academy, the

[[Page 412]]

United States Coast Guard Academy; or upon completion of a program of 
educational assistance under 10 U.S.C. 2107 (the Senior Reserve Officers 
Training Corps Scholarship Program).



(Authority: 38 U.S.C. 3011, 3012, 3018)

    (g) Reduction in basic pay. (1) Except as elsewhere provided in this 
paragraph, the basic pay of any individual described in paragraph (a), 
(b), or (c) of this section shall be reduced by $100 for each of the 
first 12 months that the individual is entitled to basic pay. If the 
individual does not serve 12 months, it shall be reduced by $100 for 
each month that the individual is entitled to basic pay.
    (2) The basic pay of an individual who withdraws an election not to 
receive educational assistance under 38 U.S.C. ch. 30 as described in 
paragraph (c) of this section shall be reduced by
    (i) $1,200, or
    (ii) In the case of an individual whose discharge or release from 
active duty prevents the reduction of the individual's basic pay by 
$1,200, an amount less than $1,200.
    (3) The basic pay of any individual who makes the election described 
in paragraph (e)(1) of this section and who does not withdraw that 
election will not be subject to the reduction described in either 
paragraph (g)(1) or paragraph (g)(2) of this section.
    (4) The individual who makes the election described in either 
paragraph (a)(7) or (b)(10) of this section shall have his or her basic 
pay reduced by $1,200 in a manner prescribed by the Secretary of 
Defense. To the extent that basic pay is not so reduced before the 
individual's discharge or release from active duty, VA will collect from 
the individual an amount equal to the difference between $1,200 and the 
total amount of the reductions described in this paragraph. If the basic 
pay of an individual is not reduced and/or VA does not collect from the 
individual an amount equal to the difference between $1,200 and the 
total amount of the pay reductions, that individual is ineligible for 
educational assistance.



(Authority: Sec. 107(b)(3), Pub. L. 104-275, 110 Stat. 3329-3330)

    (5) If through administrative error, or other reason--
    (i) The basic pay of an individual described in paragraph (a)(1) 
through (a)(6), (b)(1) through (b)(9), (c), or (d) of this section is 
not reduced as provided in paragraph (g)(1) or (g)(2) of this section, 
the failure to make the reduction will have no effect on his or her 
eligibility, but will negate or reduce the individual's entitlement to 
educational assistance under 38 U.S.C. chapter 30 determined as provided 
in Sec. 21.7073 for an individual described in paragraph (c) of this 
section;
    (ii) The basic pay of an individual, described in paragraph (a)(7) 
or (b)(10) of this section, is not reduced as described in paragraph 
(g)(4) of this section and/or VA does not collect from the individual an 
amount equal to the difference between $1,200 and the total amount of 
the pay reductions described in paragraph (g)(4) of this section, that 
individual is ineligible for educational assistance. If the failure to 
reduce the individual's basic pay and/or the failure to collect from the 
individual was due to administrative error on the part of the Federal 
government or any of its employees, the individual may be considered for 
equitable relief depending on the facts and circumstances of the case. 
See Sec. 2.7 of this chapter.


(Authority: 38 U.S.C. 3002, 3011, 3012, 3018)

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0594)

[53 FR 1757, Jan. 22, 1988]

    Editorial Note: For Federal Register citations affecting Sec. 
21.7042, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 21.7044  Persons with eligibility under 38 U.S.C. chapter 34.

    Certain individuals with 38 U.S.C. chapter 34 eligibility may 
establish eligibility for educational assistance under 38 U.S.C. chapter 
30. This section requires an individual to complete certain academic 
requirements before applying for educational assistance. If the 
individual applies before completing those requirements, VA will 
disallow the application. However, the

[[Page 413]]

individual's premature application will not prevent the individual from 
establishing eligibility at a later time by applying for educational 
assistance again after having completed those academic requirements. In 
determining whether an individual has met the service requirements of 
this section, VA will exclude any period during which the individual is 
not entitled to credit for service for periods of time specified in 
Sec. 3.15.
    (a) Eligibility based solely on active duty. An individual may 
establish eligibility for basic educational assistance based on service 
on active duty under the following terms, conditions, and requirements--
    (1) The individual must have met the requirements of 38 U.S.C. 
chapter 34, as in effect on December 31, 1989, establishing eligibility 
for educational assistance allowance under that chapter;
    (2) As of December 31, 1989, the individual must have entitlement 
remaining for educational assistance allowance under 38 U.S.C. chapter 
34;
    (3) The individual, before applying for educational assistance, 
must:
    (i) Complete the requirements for a secondary school diploma or an 
equivalency certificate; or
    (ii) Successfully complete (or otherwise receive academic credit 
for) 12 semester hours (or the equivalent) in a program of education 
leading to a standard college degree;
    (4) After June 30, 1985--
    (i) The individual must serve at least three years continuous active 
duty in the Armed Forces, or
    (ii) The individual must be discharged or released from active 
duty--
    (A) For a service-connected disability, or
    (B) For a medical condition which preexisted the individual's 
service on active duty and which VA determines is not service connected, 
or
    (C) Under 10 U.S.C. 1173 (Hardship discharge), or
    (D) For the convenience of the Government provided the individual 
completes at least 30 months of active duty, or
    (E) Involuntarily for convenience of the government as a result of a 
reduction in force, as determined by the Secretary of the military 
department concerned in accordance with regulations

prescribed by the Secretary of Defense or by the Secretary of 
Transportation with respect to the Coast Guard when it is not operating 
as a service in the Navy, or
    (F) For a physical or mental condition that was not characterized as 
a disability and did not result from the individual's own willful 
misconduct but did interfere with the individual's performance of duty, 
as determined by the Secretary of each military department in accordance 
with regulations prescribed by the Secretary of Defense or by the 
Secretary of Transportation with respect to the Coast Guard when it is 
not operating as a service in the Navy;
    (5) Upon completion of the requisite active duty service the 
individual must either--
    (i) Continue on active duty, or
    (ii) Be discharged from active duty with an honorable discharge, or
    (iii) Be released after service on active duty characterized by the 
Secretary concerned as honorable service and
    (A) Be placed on the retired list, or
    (B) Be transferred to the Fleet Reserve or Fleet Marine Corps 
Reserve, or
    (C) Be placed on the temporary disability retired list, or
    (iv) Be released from active duty for further service in a reserve 
component of the Armed Forces after service on active duty characterized 
by the Secretary concerned as honorable service; and
    (6) The individual must have been on active duty at any time during 
the period beginning on October 19, 1984, and ending on July 1, 1985, 
and continued on active duty without a break in service.


(Authority: 38 U.S.C. 3011)

    (b) Eligibility based on combined active duty service and service in 
the Selected Reserve. An individual may establish eligibility for basic 
educational assistance based on a combination of service on active duty 
and service in the Selected Reserve under the following terms, 
conditions and requirements.
    (1) The individual must have met the requirements of 38 U.S.C. 
chapter 34, as

[[Page 414]]

in effect on December 31, 1989, establishing eligibility for educational 
assistance allowance under that chapter;
    (2) As of December 31, 1989, the individual must have entitlement 
remaining for educational assistance allowance under 38 U.S.C. chapter 
34;
    (3) The individual, before applying for educational assistance, 
must:
    (i) Complete the requirements for a secondary school diploma or an 
equivalency certificate; or
    (ii) Successfully complete (or otherwise receive academic credit 
for) 12 semester hours (or the equivalent) in a program of education 
leading to a standard college degree.
    (4) The individual must have been on active duty on October 19, 
1984, and have served without a break in service from October 19, 1984 
through June 30, 1985.
    (5) After June 30, 1985, the individual must--
    (i) Except as provided in paragraph (b)(6) of this section, serve at 
least two years of continuous active duty in the Armed Forces 
characterized by the Secretary concerned as honorable service, and
    (ii) Except as provided in paragraph (b)(7) of this section, after 
completion of this active duty service, the individual must serve at 
least four continuous years service in the Selected Reserve, during 
which the individual must participate satisfactorily in training as 
prescribed by the Secretary concerned.


(Authority: 38 U.S.C. 3012(b))

    (6) The individual also must--
    (i) Be discharged from service with an honorable discharge, or
    (ii) Be placed on the retired list, or
    (iii) Be transferred to the Standby Reserve or an element of the 
Ready Reserve other than the Selected Reserve after service in the 
Selected Reserve characterized by the Secretary concerned as honorable 
service, or
    (iv) Continue on active duty, or
    (v) Continue in the Selected Reserve.
    (7) An individual is exempt from serving two years on active duty as 
provided in paragraph (b)(3) of this section when he or she is 
discharged or released during those two years--
    (i) For a service-connected disability, or
    (ii) For a medical condition which preexisted such service on active 
duty and which VA determines is not service-connected, or
    (iii) Under 10 U.S.C. 1173 (hardship discharge), or
    (iv) For convenience of the government provided the individual 
completes at least 20 months of active duty, or
    (v) Involuntarily, for the convenience of the government as a result 
of a reduction in force as determined by the Secretary of the military 
department concerned in accordance with regulations prescribed by the 
Secretary of Defense or by the Secretary of Transportation with respect 
to the Coast Guard when it is not operating as a service in the Navy, or
    (vi) For a physical or mental condition that was not characterized 
as a disability and did not result from the individual's own willful 
misconduct but did interfere with the individual's performance of duty, 
as determined by the Secretary of each military department in accordance 
with regulations prescribed by the Secretary of Defense or by the 
Secretary of Transportation with respect to the Coast Guard when it is 
not operating as a service in the Navy.


(Authority: 38 U.S.C. 3012; Pub. L. 98-525, Pub. L. 99-576, Pub. L. 100-
689, Pub. L. 101-510) (Oct. 19, 1984)

    (8) An individual is exempt from serving four years in the Selected 
Reserve as provided in paragraph (b)(5) of this section when--
    (i) After completion of the active duty required by this paragraph 
he or she serves a continuous period of service in the Selected Reserve, 
and
    (A) Is discharged for a service-connected disability, or
    (B) Is discharged for a medical condition which preexisted the 
individual's becoming a member of the Selected Reserve and which VA 
determines is not service connected, or
    (C) Is discharged for hardship, or
    (D) Is discharged or released after a minimum of 30 months service 
in the Selected Reserve for convenience of the Government, or

[[Page 415]]

    (E) Is discharged involuntarily for the convenience of the 
government as a result of a reduction in force, as determined by the 
Secretary of the military department concerned in accordance with 
regulations prescribed by the Secretary of Defense or by the Secretary 
of Transportation with respect to the Coast Guard when it is not 
operating as a service in the Navy, or
    (F) Is discharged for a physical or mental condition that was not 
characterized as a disability and did not result from the individual's 
own willful misconduct but did interfere with the individual's 
performance of duty, as determined by the Secretary of each military 
department in accordance with regulations prescribed by the Secretary of 
Defense or by the Secretary of Transportation with respect to the Coast 
Guard when it is not operating as a service in the Navy; or


(Authority: 38 U.S.C. 3012; Pub. L. 98-525, Pub. L. 99-576, Pub. L. 100-
689, Pub. L. 101-510) (Oct. 19, 1984)

    (ii) The individual is obligated at the beginning of the two years 
active duty described in paragraph (b)(3) of this section to serve the 
four years in the Selected Reserve as described in paragraph (b)(5) of 
this section, and during the two years of active duty service he or she 
is discharged or released from active duty in the Armed Forces--
    (A) For a service-connected disability, or
    (B) For a medical condition which preexisted that period of active 
duty and which VA determines is not service connected, or
    (iii) Before completing four years service in the Selected Reserve 
the individual ceases to be a member of the Selected Reserve during the 
period beginning on October 1, 1991, and ending on September 30, 1999, 
by reason of the inactivation of the individual's unit of assignment or 
by reason of involuntarily ceasing to be designated as a member of the 
Selected Reserve pursuant to 10 U.S.C. 268(b). However, this exemption 
from the four years service requirement does not apply to a reservist 
who ceases to be a member of the Selected Reserve under adverse 
conditions as characterized by the Secretary of the military department 
concerned, or to a reservist who after having involuntarily ceased to be 
a member of the Selected Reserve is involuntarily separated from the 
Armed Forces under adverse conditions as characterized by the Secretary 
of the military department concerned.


(Authority: 10 U.S.C. 16133(b)(1); sec. 4421(b) and (c), Pub. L. 102-
484, 106 Stat. 2718)

    (9) A veteran who has completed the active duty service required by 
this paragraph and has made a commitment (as determined by the Secretary 
concerned) to serve four continuous years in the Selected Reserve may 
pursue a program of education with basic educational assistance while 
performing the required Selected Reserve service.
    (10) For the purpose of determining continuity of Selected Reserve 
service, the Secretary concerned may prescribe by regulation a maximum 
period of time during which the individual is considered to have 
continuous service in the Selected Reserve even through he or she--
    (i) Is unable to locate a unit of the Selected Reserve of the 
individual's Armed Force that the individual is eligible to join or that 
has a vacancy, or
    (ii) Is not attached to a unit of the Selected Reserve for any 
reason prescribed by the Secretary concerned by regulation other than 
those stated in subdivision (i) of this subparagraph.
    (11) Any decision as to the continuity of an individual's service in 
the Selected Reserve made by the Department of Defense or the Department 
of Transportation under regulations described in paragraph (b) (9) or 
(10) of this section shall be binding upon VA.


(Authority: 38 U.S.C. 3011, 3012, 3016; Pub. L. 98-525, Pub. L. 100-689) 
(July 1, 1985)

    (12) The individual must have been on active duty at any time during 
the period beginning on October 19, 1984, and ending on July 1, 1985, 
and continued on active duty without a break in service.


(Authority: 38 U.S.C. 3012(a)(1)(B))

    (c) Restrictions on establishing eligibility. Except as provided in 
paragraph (d) of this section, an individual, who

[[Page 416]]

would otherwise be eligible for educational assistance under paragraphs 
(a) or (b) of this section, is not eligible for educational assistance 
under 38 U.S.C. ch. 30, if after December 31, 1976, he or she receives a 
commission as an officer in the Armed Forces--
    (1) Upon graduation from--
    (i) The United States Military Academy, or
    (ii) The United States Naval Academy, or
    (iii) The United States Air Force Academy, or
    (iv) The Coast Guard Academy; or
    (2) Upon completion of a program of educational assistance under 10 
U.S.C. 2107 (the Reserve Officers Training Corps Scholarship Program).


(Authority: 38 U.S.C. 3011, 3012; Pub. L. 98-525)

    (d) Exception to restrictions on establishing eligibility. Paragraph 
(c) of this section does not apply to a veteran who has met the 
requirements for educational assistance under paragraph (a) or (b) of 
this section before receiving a commission as an officer in the Armed 
Forces upon graduation from the United States Military Academy, the 
United States Naval Academy, the United States Air Force Academy, or the 
Coast Guard Academy; or upon completion of a program of educational 
assistance under 10 U.S.C. 2107 (the Reserve Officers Training Corps 
Scholarship Program).


(Authority: 38 U.S.C. 3011, 3012, 3018)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28384, July 11, 1990; 56 
FR 20132, May 2, 1991; 57 FR 29026, June 30, 1992; 59 FR 24050, 24051, 
May 10, 1994; 61 FR 6786, Feb. 22, 1996; 61 FR 26116, May 24, 1996; 62 
FR 55761, Oct. 28, 1997; 65 FR 20745, Apr. 18, 2000; 65 FR 67266, Nov. 
9, 2000; 68 FR 34329, June 9, 2003]



Sec. 21.7045  Eligibility based on involuntary separation, voluntary 
separation, or participation in the Post-Vietnam Era Veterans' 
Educational Assistance Program.

    An individual who fails to meet the eligibility requirements found 
in Sec. 21.7042 or Sec.  21.7044 nevertheless will be eligible for 
educational assistance as provided in this subpart if he or she meets 
the requirements of paragraphs (a) and (b) of this section; paragraphs 
(a) and (c) of this section; or paragraph (d) or (e) of this section.
    (a) Service requirements. The individual must meet one of the 
following sets of service requirements.
    (1) The individual--
    (i) If not a member of the Coast Guard, must be on active duty or 
full-time National Guard duty either on September 30, 1990, or after 
November 29, 1993, or if a member of the Coast Guard, must be on active 
duty after September 30, 1994, and
    (ii) After February 2, 1991, must be involuntarily separated, as 
that term is defined in 10 U.S.C. 1141, with an honorable discharge; or
    (2) The individual must--
    (i) Be separated from active military, naval, or air service with an 
honorable discharge, and
    (ii) Receive voluntary separation incentives under 10 U.S.C. 1174a 
or 1175.


(Authority: 10 U.S.C. 1141; 38 U.S.C. 3018A)

    (b) Additional requirements for those individuals voluntarily 
separated after October 23, 1992, or involuntarily separated. An 
individual who meets the requirements of paragraph (a)(1) of this 
section; or an individual who meets the requirements of paragraph (a)(2) 
of this section and who either was not a member of the Coast Guard and 
was separated after October 22, 1992, or who was a member of the Coast 
Guard and was separated after September 30, 1994, must meet the 
following additional requirements in order to establish eligibility for 
educational assistance:
    (1) Required election. (i) If, under Sec. 21.7042(f), the 
individual elected not to receive educational assistance under 38 U.S.C. 
ch. 30, he or she must irrevocably withdraw that election and make an 
election to receive educational assistance under 38 U.S.C. ch. 30. The 
withdrawal and the election must be made:
    (A) Before the involuntary or voluntary separation as the case may 
be, and
    (B) Pursuant to procedures which the Secretary of the military 
department concerned provides in accordance with regulations prescribed 
by the Secretary of Defense or which the Secretary of Transportation 
provides with respect

[[Page 417]]

to the Coast Guard when it is not operating as a service in the Navy; 
and
    (ii) If the individual is a participant (as defined in Sec. 
21.5021(e)) in the educational program provided in 38 U.S.C. ch. 32, the 
individual must make an irrevocable election to receive educational 
assistance under 38 U.S.C. ch. 30 rather than under 38 U.S.C. ch. 32. 
Such an election must be made:
    (A) Before the individual is involuntarily or voluntarily separated 
as the case may be, and
    (B) Pursuant to procedures which the Secretary of the military 
department concerned provides in accordance with regulations prescribed 
by the Secretary of Defense or which the Secretary of Transportation 
provides with respect to the Coast Guard when it is not operating as a 
service in the Navy; or
    (iii) If the individual is not described in either paragraph 
(b)(1)(i) or (b)(1)(ii) of this section, he or she must make an 
irrevocable election to receive educational assistance under 38 U.S.C. 
ch. 30. This election must be made:
    (A) Before the individual is involuntarily or voluntarily separated 
as the case may be, and
    (B) Pursuant to procedures which the Secretary of the military 
department concerned provides in accordance with regulations prescribed 
by the Secretary of Defense or which the Secretary of Transportation 
provides with respect to the Coast Guard when it is not operating as a 
service in the Navy.
    (2) Reduction in basic pay. The basic pay of anyone who makes one of 
the irrevocable elections described in paragraph (b)(1) of this section 
is required by 38 U.S.C. 3018B to be reduced by $1,200.
    (i) If for any reason the basic pay of an individual who received an 
involuntary separation is not so reduced by $1,200, the failure to make 
the reduction will not affect the individual's eligibility for 
educational assistance under 38 U.S.C. ch. 30.
    (ii) If the individual is voluntarily separated, such reduction of 
the individual's basic pay by $1,200 is a precondition to establishing 
eligibility. Hence, educational assistance under 38 U.S.C. ch. 30 may 
not be paid to such an individual when the reduction does not occur.
    (3) Educational requirement. (i) Before the date on which VA 
receives the individual's application for educational assistance under 
subpart K of this part, the individual must have:
    (A) Successfully completed the requirements of a secondary school 
diploma (or equivalency certificate); or
    (B) Successfully completed (or otherwise received academic credit 
for) 12 semester hours (or the equivalent) in a program of education 
leading to a standard college degree.
    (ii) If a veteran's application for educational assistance is denied 
due to failure to meet the requirements of paragraph (b)(3)(i) of this 
section at the time of his or her application for educational 
assistance, the veteran may reapply if the requirements are subsequently 
met.


(Authority: 38 U.S.C. 3018B)

    (c) Additional requirements for individuals who are voluntarily 
discharged before October 23, 1992. If an individual meets the 
requirements of paragraph (a)(2) of this section and is voluntarily 
discharged before October 23, 1992, he or she must also meet the 
following requirements in order to establish eligibility for educational 
assistance.
    (1) Required election. (i) If, under Sec. 21.7042(f), the 
individual elected not to receive educational assistance under 38 U.S.C. 
ch. 30, he or she must irrevocably withdraw that election and make an 
election to receive educational assistance under 38 U.S.C. ch. 30. The 
withdrawal and the new election must be made:
    (A) Before October 23, 1993, and
    (B) In the form and manner prescribed by the Secretary of Veterans 
Affairs; and
    (ii) If the individual is a participant (as defined in Sec. 
21.5021(e)) in the educational program provided in 38 U.S.C. ch. 32, the 
individual must make an irrevocable election to receive educational 
assistance under 38 U.S.C. ch. 30 rather than under 38 U.S.C. ch. 32. 
Such an election must be made:
    (A) Before October 23, 1993, and
    (B) In the form and manner prescribed by the Secretary of Veterans 
Affairs.
    (iii) If the individual is not described in either paragraph 
(c)(1)(i) or (ii) of

[[Page 418]]

this section, he or she must make an irrevocable election to receive 
educational assistance under 38 U.S.C. ch. 30. This election must be 
made:
    (A) Before October 23, 1993, and
    (B) In the form and manner prescribed by the Secretary of Veterans 
Affairs.
    (2) $1,200 collection. VA must collect $1,200 from the individual 
before awarding educational assistance under 38 U.S.C. ch. 30. 
Collection of $1,200 is a precondition to establishing eligibility.
    (3) Educational requirement. (i) Before the date on which VA 
receives the individual's application for educational assistance under 
subpart K of this part, the individual must have:
    (A) Successfully completed the requirements of a secondary school 
diploma (or equivalency certificate); or
    (B) Successfully completed (or otherwise received academic credit 
for) 12 semester hours (or the equivalent) in a program of education 
leading to a standard college degree.
    (ii) If a veteran's application for educational assistance under 
subpart K of this part is denied due to failure to meet the requirements 
of paragraph (c)(3)(i) of this section at the time of his or her 
application for educational assistance, the veteran will be permitted to 
apply at a later date.


(Authority: 38 U.S.C. 3018B)

    (d) Alternate eligibility requirements for participants in the Post-
Vietnam Era Veterans' Educational Assistance Program--(1) Making an 
election. To receive educational assistance under the authority of 
paragraph (d) of this section, a veteran or servicemember must--
    (i) Have elected to do so before October 9, 1997;
    (ii) Have been a participant (as that term is defined in Sec. 
21.5021(e)) in the Post-Vietnam Era Veterans' Educational Assistance 
Program on October 9, 1996;
    (iii) Have been on active duty on October 9, 1996; and
    (iv) Receive an honorable discharge.
    (2) Election. The election to receive educational assistance payable 
under this subpart in lieu of educational assistance payable under the 
Post-Vietnam Era Veterans' Educational Assistance Program is 
irrevocable. The election must have been made before October 9, 1997, 
pursuant to procedures provided by the Secretary of the military 
department concerned in accordance with regulations prescribed by the 
Secretary of Defense or provided by the Secretary of Transportation with 
respect to the Coast Guard when it is not operating as a service in the 
Navy.
    (3) $1,200 collection. An individual who has made the election 
described in paragraph (d)(2) of this section shall have his or her 
basic pay reduced by $1,200 in a manner prescribed by the Secretary of 
Defense. To the extent that basic pay is not so reduced before the 
individual's discharge or release from active duty, VA will collect from 
the individual an amount equal to the difference between $1,200 and the 
total amount of the reductions. Reduction in basic pay by $1,200 or 
collection of $1,200 is a precondition to establishing eligibility.
    (4) Educational requirement. Before applying for benefits that may 
be payable as the result of making a valid election, an individual must 
have--
    (i) Completed the requirements of a secondary school diploma (or 
equivalency certificate); or
    (ii) Successfully completed the equivalent of 12 semester hours in a 
program of education leading to a standard college degree.


(Authority: 38 U.S.C. 3018C)

    (e) Alternate eligibility requirements for former participants in 
the Post-Vietnam Era Veterans' Educational Assistance Program--(1) 
Definition. For the purpose of this paragraph a participant is a veteran 
or servicemember who:
    (i) Had enrolled in the Post-Vietnam Era Veterans' Educational 
Assistance Program, contributed to the fund described in Sec. 
21.5021(f), and either--
    (A) Is making contributions by monthly payroll deduction to that 
fund;
    (B) Has some or all of the contributions remaining in that fund;
    (C) Has disenrolled, and received a refund of contributions; or
    (D) Has used all of his or her entitlement to benefits under the 
Post-Vietnam Era Veterans' Educational Assistance Program; or

[[Page 419]]

    (ii) Had enrolled in the Post-Vietnam Era Veterans' Educational 
Assistance Program, and has had the Secretary of Defense make 
contributions to the fund described in Sec. 21.5021(f) for him or her.
    (2) Making an election. To receive educational assistance under 
authority of this paragraph, a veteran or servicemember must:
    (i) Have elected before November 1, 2001, to receive educational 
assistance payable under 38 U.S.C. chapter 30 in lieu of educational 
assistance payable under the Post-Vietnam Era Veterans' Educational 
Assistance Program;
    (ii) Have been a participant in the Post-Vietnam Era Veterans' 
Educational Assistance Program on or before October 9, 1996;
    (iii) Have served continuously on active duty since October 9, 1996, 
through at least April 1, 2000;
    (iv) Receive an honorable discharge when discharged or released from 
the period of active duty during which the servicemember made the 
election described in paragraph (e)(3) of this section.
    (3) Election. The election to receive educational assistance payable 
under 38 U.S.C. chapter 30 in lieu of educational assistance payable 
under the Post-Vietnam Era Veterans' Educational Assistance Program is 
irrevocable. The election must have been made before November 1, 2001, 
pursuant to procedures provided by the Secretary of the military 
department concerned.
    (4) $2,700 collection. (i) An individual who has made the election 
described in paragraph (e)(3) of this section must have his or her basic 
pay reduced by $2,700 in a manner prescribed by the Secretary of the 
military department concerned. To the extent that basic pay is not so 
reduced before the individual's discharge or release from active duty, 
the Secretary of the military department concerned will collect from the 
individual an amount equal to the difference between $2,700 and the 
amount that the individual's basic pay has been reduced. The individual 
may choose how the $2,700 is to be collected. The Secretary of the 
military department concerned, according to the choice the individual 
makes, will collect this amount--
    (A) From the individual; or
    (B) By reducing the individual's retired or retainer pay.
    (ii) The individual must pay $2,700 to the Secretary of the military 
department concerned, as provided for by that Secretary, during an 18-
month period beginning on the date the individual made the election 
described in paragraph (e)(3) of this section.
    (iii) Educational assistance under authority of paragraph (e) of 
this section to an individual who was discharged or released from active 
duty before the Secretary of the military department concerned had 
collected the full $2,700 described in paragraph (e)(4) of this section 
is not payable until that Secretary either--
    (A) Collects in full the $2,700; or
    (B) Has made the first reduction in retired or retainer pay for the 
purpose of the $2,700 payment described in paragraph (e)(4) of this 
section. Thus, a veteran who is making the $2,700 payment through having 
retired or retainer pay reduced may be eligible before the Secretary of 
the military department concerned collects the full $2,700.
    (5) Educational requirement. Before applying for benefits that may 
be payable as the result of making a valid election, an individual must 
have--
    (i) Completed the requirements of a secondary school diploma (or 
equivalency certificate); or
    (ii) Successfully completed the equivalent of 12 semester hours in a 
program of education leading to a standard college degree.


(Authority: 38 U.S.C. 3018C(e))


[61 FR 6786, Feb. 22, 1996, as amended at 61 FR 29297, June 10, 1996; 65 
FR 5787, Feb. 7, 2000; 65 FR 20745, Apr. 18, 2000; 68 FR 34329, June 9, 
2003]



Sec. 21.7046  Eligibility for supplemental educational assistance.

    The Secretary concerned, pursuant to regulations prescribed by that 
Secretary, has the discretion to provide for the payment of supplemental 
educational assistance to certain veterans and servicemembers eligible 
for basic educational assistance.

[[Page 420]]

    (a) Service requirements: eligibility based only on active duty 
service. The Secretary concerned may authorize supplemental educational 
assistance to an individual who is eligible for basic educational 
assistance under Sec. 21.7042 or Sec.  21.7044 of this part based 
solely on active duty service only if the individual meets the 
provisions of this paragraph.
    (1) An individual may establish eligibility for supplemental 
educational assistance by serving five or more consecutive years of 
active duty in the Armed Forces in addition to the years counted to 
qualify the individual for basic educational assistance without a break 
in any such service.
    (2) After completion of the service described in paragraph (a)(1) of 
this section the individual must either--
    (i) Continue on active duty without a break,
    (ii) Be discharged from service with an honorable discharge,
    (iii) Be placed on the retired list,
    (iv) Be transferred to the Fleet Reserve or the Fleet Marine Corps 
Reserve,
    (v) Be placed on the temporary disability retired list, or
    (vi) Be released from active duty for further service in a reserve 
component of the Armed Forces after service on active duty characterized 
by the Secretary concerned as honorable service.


(Authority: 38 U.S.C. 3021(a); Pub. L. 98-525)

    (b) Service requirements: eligibility based on service in the 
Selected Reserve. The Secretary concerned (pursuant to regulations which 
he or she may prescribe) has the discretion to authorize supplemental 
educational assistance to an individual who is eligible for basic 
educational assistance under Sec. 21.7042 or Sec.  21.7044 of this part 
through consideration of additional active duty service and additional 
service in the Selected Reserve only if the individual meets the 
provisions of this paragraph.
    (1) The individual must serve--
    (i) Two or more consecutive years of active duty in the Armed Forces 
in addition to the years on active duty counted to qualify the 
individual for basic educational assistance, and
    (ii) Four or more consecutive years of duty in the Selected Reserve 
in addition to the years of duty in the Selected Reserve counted to 
qualify the individual for basic educational assistance.
    (2) The individual after completion of the service described in 
paragraph (b)(1) must--
    (i) Be discharged from service with an honorable discharge, or
    (ii) Be placed on the retired list, or
    (iii) Be transferred to the Fleet Reserve or Fleet Marine Corps 
Reserve, or
    (iv) Be placed on the temporary disability retired list, or
    (v) Continue on active duty, or
    (vi) Continue in the Selected Reserve.
    (3) The Secretary concerned may prescribe by regulation a maximum 
period of time during which the individual is considered to have 
continuous service in the Selected Reserve even though he or she is 
unable to locate a unit of the Selected Reserve of the individual's 
Armed Force that the individual is eligible to join or that has a 
vacancy.
    (4) The Secretary concerned may prescribe by regulation a maximum 
period of time during which the individual is considered to have 
continuous service in the Selected Reserve even though he or she is not 
attached to a unit of the Selected Reserve for any reason (also to be 
prescribed by the Secretary concerned by regulation) other than those 
stated in paragraph (b)(3) of this section.
    (5) Any decision as to the continuity of an individual's service in 
the Selected Reserve made by the Department of Defense or the Department 
of Transportation under regulations described in paragraph (b) (3) or 
(4) of this section shall be binding upon VA.


(Authority: 38 U.S.C. 3021(a); Pub. L. 98-525)



Sec. 21.7050  Ending dates of eligibility.

    The ending date of eligibility will be determined as follows:
    (a) Ten-year time limitation. (1) Except as provided in paragraphs 
(c), (d), and (e) of this section and in Sec. 21.7051, VA will not 
provide basic educational assistance or supplemental educational 
assistance to a veteran or service member beyond 10 years from the later 
of--

[[Page 421]]

    (i) The date of the veteran's last discharge or release from a 
period of active duty of 90 days or more of continuous service;
    (ii) The date of the veteran's last discharge or release from a 
shorter period of active duty if the discharge or release is--
    (A) For a service-connected disability, or
    (B) For a medical condition which preexisted such service and which 
VA determines is not service-connected, or
    (C) For hardship, or
    (D) Involuntary, for the convenience of the government after October 
1, 1987, as a result of a reduction in force, as determined by the 
Secretary of the military department concerned, in accordance with 
regulations prescribed by the Secretary of Defense or by the Secretary 
of Transportation with respect to the Coast Guard when it is not 
operating as a service in the Navy; or
    (iii) The date on which the veteran meets the requirement for four 
years service in the Selected Reserve found in Sec. 21.7042(b) and 
Sec. 21.7044(b).
    (2) In determining whether a veteran was discharged or released from 
active duty for a medical condition which preexisted that active duty, 
VA will be bound by a decision made by a competent military authority.


(Authority: 38 U.S.C. 3031(a), 3031(g))

    (b) Reduction of ten-year eligibility period. (1) Except as provided 
in paragraph (b)(2) of this section, a veteran who had eligibility for 
educational assistance under 38 U.S.C. ch. 34 and who is eligible for 
educational assistance under 38 U.S.C. ch. 30 as provided in Sec. 
21.7044 of this part shall have his or her ten-year period of 
eligibility reduced by the number of days he or she was not on active 
duty during the period beginning on January 1, 1977, and ending on June 
30, 1985.
    (2) A veteran's ten-year period of eligibility shall not be reduced 
by any period in 1977 before the veteran began serving on active duty 
when the veteran qualified for educational assistance under 38 U.S.C. 
ch. 34 through service on active duty which--
    (i) Commenced within 12 months of January 1, 1977, and
    (ii) Resulted from a contract with the Armed Forces in a program 
such as the DEP (Delayed Enlistment Program) or an ROTC (Reserve 
Officers' Training Corps) program for which a person enlisted in, or was 
assigned to, a reserve component before January 1, 1977.


(Authority: 3031(e))

    (c) Time limit for some members of the Army and Air National Guard. 
(1) If a veteran or servicemember establishes eligibility for the 
educational assistance payable under this subpart by making the election 
described in Sec. 21.7042(a)(7) or (b)(10), VA will not provide basic 
educational assistance or supplemental educational assistance to that 
veteran or servicemember beyond 10 years from the later of:
    (i) The date determined by paragraph (a) or (b) of this section, as 
appropriate; or
    (ii) The effective date of the election described in Sec. 
21.7042(a)(7) or (b)(10), as appropriate.
    (2) The effective date of election is the date on which the election 
is made pursuant to the procedures described in Sec. 21.7045(d)(2).


(Authority: Sec. 107(b)(3), Pub. L. 104-275, 110 Stat. 3329-3330)

    (d) Individual is eligible due to combining active duty as an 
enlisted member or warrant officer with active duty as a commissioned 
officer. If a veteran would not be eligible but for the provisions of 
Sec. 21.7020(b)(6)(v), VA will not pay basic educational assistance or 
supplemental educational assistance to that veteran beyond 10 years 
after the veteran's last discharge or release from a period of active 
duty of 90 days or more of continuous service, or November 30, 2009, 
whichever is later.


(Authority: 38 U.S.C. 3011(f), 3031(a)).

    (e) Some veterans have a later ending date. (1) The ending date of 
the eligibility period of a veteran described in paragraph (e)(2) of 
this section is the later of:
    (i) November 1, 2010; or
    (ii) 10 years after the date of the veteran's last discharge from a 
period of active duty of 90 days or more.

[[Page 422]]

    (2) The ending date of a veteran's eligibility period will be the 
date described in paragraph (e)(1) of this section if the veteran would 
have been prevented from establishing eligibility by one or more of the 
former requirements described in paragraphs (e)(2)(i) through (e)(2)(iv) 
of this section and the veteran is enabled to establish eligibility by 
the removal of the statutory bases for those requirements. (For the 
purposes of this paragraph, the applicable provisions of those former 
requirements appear in the July 1, 2002 revision of the Code of Federal 
Regulations, title 38.)
    (i) A period of active duty other than the initial period was used 
to establish eligibility. The veteran was enabled to establish 
eligibility by the removal of the former eligibility requirement in 38 
CFR 21.7042(a)(2)(ii), 21.7042(a)(5)(iv)(A), and 21.7042(a)(5)(iv)(B), 
revised as of July 1, 2002, that a veteran had to use his or her initial 
period of active duty to establish eligibility for educational 
assistance;
    (ii) High school education eligibility criterion met after the 
qualifying period of active duty. The veteran was enabled to establish 
eligibility by the removal of the former eligibility requirement in 38 
CFR 21.7042(a)(3), 21.7042(b)(2), and 21.7042(c)(4), revised as of July 
1, 2002, that before completing the period of active duty used to 
establish eligibility for educational assistance, a veteran had to 
complete the requirements for a secondary school diploma (or an 
equivalency certificate) or successfully complete (or otherwise receive 
academic credit for) 12 semester hours (or the equivalent) in a program 
of education leading to a standard college degree;
    (iii) High school education eligibility criterion met after October 
29, 1994. The veteran was enabled to establish eligibility by the 
removal of the former eligibility requirement in 38 CFR 21.7042(a)(6), 
21.7042(b)(11), and 21.7044(b)(13), revised as of July 1, 2002, that 
certain veterans meet the requirements for a secondary school diploma 
(or an equivalency certificate) before October 29, 1994, in order to 
establish eligibility for educational assistance;
    (iv) High school education eligibility criterion for veterans 
formerly eligible under 38 U.S.C. chapter 34 met after January 1, 1990. 
The veteran was enabled to establish eligibility by the removal of the 
former eligibility requirement in 38 CFR 21.7044(a)(3) and 
21.7044(b)(3), revised as of July 1, 2002, that, as one of the two ways 
that certain veterans could meet the educational criteria for 
establishing eligibility for educational assistance, the veteran must 
before January 1, 1990, meet the requirements for a secondary school 
diploma (or equivalency certificate).


(Authority: 38 U.S.C. 3031 note; secs. 102(e), 103(e), Pub. L. 106-419, 
114 Stat. 1825; 1826-27)

    (f) Correction of military records. A veteran may become eligible 
for educational assistance as the result of a correction of military 
records under 10 U.S.C. 1552, or change, correction or modification of a 
discharge or dismissal under 10 U.S.C. 1553, or other corrective action 
by competent military authority. When this occurs, the VA will not 
provide educational assistance later than 10 years from the date his or 
her dismissal or discharge was changed, corrected or modified (except as 
provided in Sec. 21.7051 of this part).


(Authority: 38 U.S.C. 3031(e))

    (g) Periods excluded. VA will not include in computing the 10-year 
period of eligibility for educational assistance under this section, any 
period during which the veteran after his or her last discharge or 
release from active duty--
    (1) Was captured and held as a prisoner of war by a foreign 
government or power, or
    (2) Immediately following the veteran's release from this detention 
during which he or she was hospitalized at a military, civilian or VA 
medical facility.


(Authority: 38 U.S.C. 3031(c); Pub. L. 98-525)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28384, July 11, 1990; 56 
FR 20133, May 2, 1991; 57 FR 15024, Apr. 24, 1992; 61 FR 6787, Feb. 22, 
1996; 65 FR 5787, Feb. 7, 2000; 66 FR 39280, July 30, 2001; 68 FR 34330, 
June 9, 2003]



Sec. 21.7051  Extended period of eligibility.

    (a) Period of eligibility may be extended. VA shall grant an 
extension of the applicable delimiting period, as otherwise

[[Page 423]]

determined by Sec. 21.7050 of this part provided:
    (1) The veteran applies for an extension within the time specified 
in Sec. 21.1032(c) of this part.
    (2) The veteran was prevented from initiating or completing the 
chosen program of education within the otherwise applicable eligibility 
period because of a physical or mental disability that did not result 
from the veteran's willful misconduct. VA will not consider the 
disabling effects of chronic alcoholism to be the result of willful 
misconduct. (See Sec. 21.7020(b)(38)) It must be clearly established by 
medical evidence that such a program of education was medically 
infeasible. VA will not consider a veteran who is disabled for a period 
of 30 days or less as having been prevented from initiating or 
completing a chosen program, unless the evidence establishes that the 
veteran was prevented from enrolling or reenrolling in the chosen 
program or was forced to discontinue attendance, because of the short 
disability.


(Authority: 38 U.S.C. 105, 3031(d); Pub. L. 98-525, Pub. L. 100-689) 
(Nov. 18, 1988)

    (b) Commencing date. The veteran shall elect the commencing date of 
an extended period of eligibility. The date chosen--
    (1) Must be on or after the original date of expiration of 
eligibility as determined by Sec. 21.7050 of this part, and
    (2) Must either be--
    (i) On or before the 90th day following the date on which the 
veteran's application for an extension was approved by VA, if the 
veteran is training during the extended period of eligibility in a 
course not organized on a term, quarter or semester basis, or
    (ii) On or before the commencing date of the first ordinary term, 
quarter or semester following the 90th day after the veteran's 
application for an extension was approved by VA, if the veteran is 
training during the extended period of eligibility in a course organized 
on a term, quarter or semester basis.


(Authority: 38 U.S.C. 3031(d); Pub. L. 98-525)

    (c) Length of extended periods of eligibility. A veteran's extended 
period of eligibility shall be for the length of time that the 
individual was prevented from initiating or completing his or her chosen 
program of education. This shall be determined as follows:
    (1) If the veteran is in training in a course organized on a term, 
quarter or semester basis, his or her extended period of eligibility 
shall contain the same number of days as the number of days from the 
date during the veteran's original eligibility period that his or her 
training became medically infeasible to the earliest of the following 
date.
    (i) The commencing date of the ordinary term, quarter or semester 
following the day the veteran's training became medically infeasible,
    (ii) The last date of the veteran's delimiting date as determined by 
Sec. 21.7050 of this part, or
    (iii) The date the veteran resumed training.
    (2) If the veteran is training in a course not organized on a term, 
quarter or semester basis, his or her extended period of eligibility 
shall contain the same number of days as the number of days from the 
date during the veteran's original delimiting period that his or her 
training became medically infeasible to the earlier of the following 
dates:
    (i) The date the veteran's training became medically feasible, or
    (ii) The veteran's delimiting date as determined by Sec. 21.7050 of 
this part.


(Authority: 38 U.S.C. 3031(d); Pub. L. 98-525)

[53 FR 1757, Jan. 22, 1988, as amended at 56 FR 20133, May 2, 1991; 64 
FR 23773, May 4, 1999]

                               Entitlement



Sec. 21.7070  Entitlement.

    An eligible servicemember or veteran is entitled to a monthly 
benefit for periods of time during which he or she is enrolled in, and 
satisfactorily pursuing, an approved program of education.

(Authority: 38 U.S.C. 3014; Pub. L. 98-525)



Sec. 21.7072  Entitlement to basic educational assistance.

    The provisions of this section apply to all veterans and 
servicemembers except to those to whom Sec. 21.7073 applies.

[[Page 424]]

    (a) Most individuals are entitled to 36 months of assistance. Except 
as provided in paragraphs (b), (c), and (d) of this section and in Sec. 
21.7073, a veteran or servicemember who is eligible for basic 
educational assistance is entitled to 36 months of basic educational 
assistance (or the equivalent thereof in part-time educational 
assistance).


(Authority: 38 U.S.C. 3013; Pub. L. 98-525) (Nov. 18, 1988).

    (b) Entitlement: individual discharged for service-connected 
disability, a medical condition which preexisted service, hardship, or 
involuntarily for the convenience of the Government as a result of a 
reduction in force. (1) Except as provided in Sec. 21.7073, when the 
provisions of paragraph (b) of this section are met, an eligible 
individual is entitled to one month of basic educational assistance (or 
equivalent thereof in part-time basic educational assistance) for each 
month of the individual's continuous active duty service that is after 
June 30, 1985, and that, in the case of an individual who had no 
previous eligibility under 38 U.S.C. ch. 34, is part of the individual's 
qualifying obligated period of active duty. In the case of a veteran to 
whom the definition of continuous active duty found in either Sec. 
21.7020(b)(6)(iii) or Sec. 21.7020(b)(6)(iv) applies, the length of the 
continuous active duty will be the aggregate length of the periods of 
active duty referred to in those paragraphs. Except as provided in Sec. 
21.7073, VA will apply paragraph (b) of this section when the 
individual:
    (i) Establishes eligibility through meeting the eligibility 
requirements of Sec. 21.7042 or Sec.  21.7044,
    (ii) Serves less than 36 months of continuous active duty service 
after June 30, 1985 (or less than 24 continuous months of a qualifying 
obligated period of active duty service after June 30, 1985, if his or 
her qualifying obligated period of active duty is less than 3 years), 
and
    (iii) Is discharged or released from active duty either--
    (A) For a service-connected disability, or
    (B) For a medical condition which preexisted the individual's 
service on active duty and which VA determines is not service connected,
    (C) Under 10 U.S.C. 1173 (hardship discharge), or
    (D) Involuntarily for convenience of the government as a result of a 
reduction in force, as determined by the Secretary of the military 
department concerned in accordance with regulations prescribed by the 
Secretary of Defense or by the Secretary of Transportation with respect 
to the Coast Guard when it is not operating as a service in the Navy, 
or;
    (E) For a physical or mental condition that was not characterized as 
a disability and did not result from the individual's own willful 
misconduct but did interfere with the individual's performance of duty, 
as determined by the Secretary of each military department in accordance 
with regulations prescribed by the Secretary of Defense or by the 
Secretary of Transportation with respect to the Coast Guard when it is 
not operating as a service in the Navy.


(Authority: 38 U.S.C. 3011(f), 3013(a))

    (2) Entitlement will be calculated in whole months.
    (3) The following types of time lost are not countable in 
determining the extent of a veteran's or servicemember's entitlement:
    (i) Excess leave,
    (ii) Noncreditable time, and
    (iii) Not-on-duty time.


(Authority: 38 U.S.C. 3013(a); Pub. L. 98-525)

    (c) Entitlement based on service in the Selected Reserve. (1) Except 
as provided in Sec. 21.7073, when the provisions of paragraph (c) of 
this section are met, an individual is entitled to one month of basic 
educational assistance (or the equivalent thereof in part-time basic 
educational assistance) for each month of the individual's active duty 
service that is after June 30, 1985, and that, in the case of an 
individual who had no previous eligibility under 38 U.S.C. chapter 34, 
is part of the individual's qualifying obligated period of active duty. 
An individual is entitled to one month of basic educational assistance 
(or the equivalent thereof in part-time basic educational assistance) 
for each four months served by the individual in

[[Page 425]]

the Selected Reserve after June 30, 1985 (other than a month in which 
the individual serves on active duty). Except as provided in Sec. 
21.7073, VA will apply the provisions of paragraph (c) of this section 
when the individual--
    (i) Establishes eligibility through meeting the eligibility 
requirements of Sec. 21.7042 or Sec.  21.7044, and
    (ii) Bases his or her eligibility upon a combination of service on 
active duty and service in the Selected Reserve as described in Sec. 
21.7042(b) and Sec. 21.7044(b).


(Authority: 38 U.S.C. 3013(b))

    (2) Entitlement will be calculated in whole months.
    (3) The following types of time lost are not countable in 
determining the extent of a veteran's or servicemember's entitlement:
    (i) Excess leave,
    (ii) Noncreditable time, and
    (iii) Not-on-duty time.
    (4) A veteran described in this paragraph is not entitled to any 
basic educational assistance for service in the Selected Reserve in 
excess of the number of months of service in the Selected Reserve which 
is evenly divisible by four.
    (5) VA will consider a veteran to be entitled to 36 months of basic 
educational assistance when he or she--
    (i) Initially enters on active duty after June 30, 1985;
    (ii) Is attempting to establish eligibility through service in the 
Selected Reserve;
    (iii) Has completed the active duty service required in Sec. 
21.7042 of this part; and
    (iv) Is participating in the Selected Reserve, but has not 
participated for the length of time required in Sec. 21.7042 of this 
part.


(Authority: 38 U.S.C. 3011, 3012; Pub. L. 98-525)

    (d) Entitlement affected by failure to complete required Selected 
Reserve service. If a veteran attempts to establish eligibility through 
a combination of active duty service and service in the Selected 
Reserves, but fails to do so, his or her entitlement shall be the number 
of months to which he or she is entitled on the basis of his or her 
active duty service.


(Authority: 38 U.S.C. 3011, 3012; Pub. L. 98-525)

    (e) Repayment of an education loan affects entitlement. A period of 
service counted for the purpose of repayment under section 902 of the 
Department of Defense Authorization Act, 1981, of an education loan may 
not also be counted for the purposes of determining the number of months 
of the veteran's or servicemember's entitlement to basic educational 
assistance. Therefore, in determining a veteran's or servicemember's 
entitlement, VA will--
    (1) Determine his or her entitlement as provided in paragraph (a), 
(b), (c) or (d) of this section, as appropriate, and
    (2) Subtract from the figure determined in paragraph (e)(1) of this 
section the number of months of service counted for the purposes of 
repayment of an educational loan under section 902 of the Department of 
Defense Authorization Act, 1981.


(Authority: 38 U.S.C. 3033(b); Pub. L. 98-525)

    (f) Limitation on entitlement. Except as provided in Sec. 
21.7076(e) and Sec. 21.7135(s) of this part no one is entitled to more 
than 36 months of full-time basic educational assistance (or its 
equivalent in part-time educational assistance).


(Authority: 38 U.S.C. 3013(c), 3013(f); Pub. L. 98-525, Pub. L. 102-
127)(Oct. 10, 1991)

[53 FR 1757, Jan. 22, 1988, as amended at 56 FR 20134, May 2, 1991; 58 
FR 26241, May 3, 1993; 59 FR 24052, May 10, 1994; 61 FR 6788, Feb. 22, 
1996; 68 FR 34330, June 9, 2003]



Sec. 21.7073  Entitlement for some individuals who establish eligibility 
during the open period or who establish eligibility before involuntary 
separation.

    (a) Individuals who establish eligibility during the open period. 
(1) The provisions of this paragraph apply to a veteran or servicemember 
who:
    (i) Establishes eligibility by withdrawing an election not to enroll 
as provided in Sec. 21.7042(c);
    (ii) Has less than $1,200 deducted from his or her military pay; and

[[Page 426]]

    (iii) Before completing the period of service which the individual 
was obligated to serve on December 1, 1988, the individual:
    (A) Is discharged or released from active duty for a service-
connected disability, a medical condition which preexisted that service, 
or hardship; or
    (B) For a physical or mental condition that was not characterized as 
a disability and did not result from the individual's own willful 
misconduct but did interfere with the individual's performance of duty, 
as determined by the Secretary of each military department in accordance 
with regulations prescribed by the Secretary of Defense or by the 
Secretary of Transportation with respect to the Coast Guard when it is 
not operating as a service in the Navy.
    (C) Is discharged or released from active duty for the convenience 
of the Government after completing not less than 20 months of that 
period of service, if that period was less than three years, or 30 
months, if that period was at least three years; or
    (D) Is involuntarily discharged or released from active duty for 
convenience of the Government as a result of a reduction in force, as 
determined by the Secretary concerned in accordance with regulations 
prescribed by the Secretary of Defense or by the Secretary of 
Transportation with respect to the Coast Guard when it is not operating 
as a service in the Navy.


(Authority: 38 U.S.C. 3018(b)(3))

    (2) A veteran described in paragraph (a)(1) of this section is 
entitled to a number of months of basic educational assistance (or 
equivalent thereof in part-time basic educational assistance) equal to 
the lesser of:
    (i) A number of months determined by multiplying 36 by a fraction 
the numerator of which is the amount by which the basic pay of the 
individual has been reduced as provided in Sec. 21.7042(e)(2) and the 
denominator of which is $1,200, or
    (ii) The number of months the veteran has served on continuous 
active duty after June 30, 1985.


(Authority: 38 U.S.C. 3013(c))

    (b) Individuals who establish eligibility following involuntary 
separation. (1) The provisions of this paragraph apply to a veteran who 
establishes eligibility by meeting the provisions of Sec. 21.7045 of 
this part.


(Authority: 38 U.S.C. 3018A)

    (2) A veteran described in paragraph (b)(1) of this section is 
entitled to a number of months of basic educational assistance (or 
equivalent thereof in part-time basic educational assistance) equal to 
the lesser of--
    (i) 36 months, or
    (ii) The number of months the veteran served on active duty.


(Authority: 38 U.S.C. 3013)

[59 FR 24053, May 10, 1994, as amended at 65 FR 67266, Nov. 9, 2000]



Sec. 21.7074  Entitlement to supplemental educational assistance.

    In determining the entitlement of a veteran or servicemember who is 
eligible for supplemental educational assistance VA shall--
    (a) Calculate the veteran's or servicemember's entitlement to basic 
educational assistance on the day he or she establishes eligibility for 
supplemental educational assistance, and
    (b) Credit the veteran or servicemember with the same number of 
months and days entitlement to supplemental educational assistance as 
the number calculated in paragraph (a) of this section.

(Authority: 38 U.S.C. 3023; Pub. L. 98-525)



Sec. 21.7076  Entitlement charges.

    (a) Overview. VA will make charges against entitlement as stated in 
this section.
    (1) Charges will be made against the entitlement the veteran or 
servicemember has to educational assistance under 38 U.S.C. chapter 30 
as the assistance is paid.
    (2) There will be a charge (for record purposes only) against the 
remaining entitlement, under 38 U.S.C. chapter 34, of an individual who 
is receiving the educational assistance under Sec. 21.7137 of this 
part. The record-purpose charges against entitlement under 38 U.S.C. 
chapter 34 will not count against the 48

[[Page 427]]

months of total entitlement under both 38 U.S.C. chapters 30 and 34 to 
which the veteran or service member may be entitled. (See Sec. 
21.4020(a) of this part).
    (3) Generally, VA will base those entitlement charges on the 
principle that a veteran or service member who trains full time for one 
day should be charged one day of entitlement. However, this general 
principle does not apply to a veteran or servicemember who:
    (i) Is pursuing correspondence training;
    (ii) Is pursuing flight training;
    (iii) Is pursuing an apprenticeship or other on-job training; or
    (iv) Is paid an accelerated payment.
    (4) The provisions of this section apply to:
    (i) Veterans and service members training under 38 U.S.C. chapter 
30; and
    (ii) Veterans training under 38 U.S.C. chapter 31 who make a valid 
election under Sec. 21.21 of this part to receive educational 
assistance equivalent to that paid to veterans under 38 U.S.C. chapter 
30.


(Authority: 38 U.S.C. 3013, 3014(A), 3014(b))

    (b) Determining entitlement charge. This paragraph states how VA 
generally will determine the charge against the entitlement of a 
servicemember or veteran who is receiving educational assistance. 
However, when the circumstances described in paragraph (e) apply to a 
servicemember or veteran, VA will use that paragraph to determine an 
entitlement charge instead of this paragraph.
    (1) Except for those pursuing correspondence training, flight 
training, apprenticeship or other on-the-job training, those who are 
receiving tutorial assistance, and those who receive an accelerated 
payment, VA will make a charge against entitlement:
    (i) On the basis of total elapsed time (one day for each day of 
pursuit) if the servicemember or veteran is pursuing the program of 
education on a full-time basis,
    (ii) On the basis of a proportionate rate of elapsed time, if the 
veteran or servicemember is pursuing the program of education on a 
three-quarter, one-half or less than one-half time basis. For the 
purpose of this computation, training time which is less than one-half, 
but more than one-quarter time, will be treated as though it were one-
quarter time training.
    (2) VA will compute elapsed time from the commencing date of the 
award to date of discontinuance. If the veteran or servicemember changes 
his or her training time after the commencing date of the award, VA 
will--
    (i) Divide the enrollment period into separate periods of time 
during which the veteran's or servicemember's training time remains 
constant, and.
    (ii) Compute the elapsed time separately for each time period.


(Authority: 38 U.S.C. 3013; Pub. L. 98-525)

    (3) For each month that a veteran is paid a monthly educational 
assistance allowance while undergoing apprenticeship or other on-job 
training, VA will make a charge against chapter 30 entitlement of--
    (i) .75 of a month in the case of payments made during the first six 
months of the veteran's pursuit of the program of apprenticeship or 
other on-job training,
    (ii) .55 of a month in the case of payments made during the second 
six months of the veteran's pursuit of the program of apprenticeship or 
other on-job training, and
    (iii) .35 of a month in the case of payments made following the 
first twelve months of the veteran's pursuit of apprenticeship or other 
on-job training.
    (4) For each month that a veteran is paid a monthly educational 
assistance allowance while undergoing apprenticeship or other on-job 
training, VA will make a record purpose charge against chapter 34 
entitlement, if any, of one month for each month of benefits paid to him 
or her.
    (5) When a veteran or servicemember is pursuing a program of 
education by correspondence, VA will make a charge against entitlement 
for each payment made to him or her. The charge--
    (i) Will be made in months and decimal fractions of a month, and
    (ii) Will be determined by dividing the amount of the payment by an 
amount equal to the rate of educational assistance otherwise applicable 
to him or her for full-time training (disregarding in the case of a

[[Page 428]]

servicemember the cost of course comparison).
    (6) When a veteran or servicemember is pursuing a program of 
education partly in residence and partly by correspondence, VA will make 
a charge against entitlement--
    (i) For the residence portion of the program as provided in 
paragraphs (b) (1) and (2) of this section, and
    (ii) For the correspondence portion of the program as provided in 
paragraph (b)(5) of this section.


(Authority: 38 U.S.C. 3032(c), 3034(c); Pub. L. 99-576)

    (7) When a veteran or servicemember is paid an accelerated payment, 
VA will make a charge against entitlement for each accelerated payment 
made to him or her. The charge--
    (i) Will be made in months and decimal fractions of a month; and
    (ii) Will be determined by dividing the amount of the accelerated 
payment by an amount equal to the rate of basic educational assistance 
otherwise applicable to him or her for full-time institutional training. 
If the rate of basic educational assistance increases during the 
enrollment period, VA will charge entitlement for the periods covered by 
the initial rate and the increased rate, respectively.

(Authority: 38 U.S.C. 3014A)

    (8) If an individual is paid tutorial assistance as provided in 
Sec. 21.7141, the following provisions will apply.
    (i) There will be no charge to entitlement for the first $600 of 
tutorial assistance paid to an individual under 38 U.S.C. ch. 30.
    (ii) VA will make a charge against the period of entitlement of one 
month for each amount of tutorial assistance paid under 38 U.S.C. ch. 
30, to the individual in excess of $600 that is equal to the amount of 
monthly educational assistance the individual is otherwise eligible to 
receive for full-time pursuit of a residence course as provided in 
Sec. Sec. 21.7136, 21.7137 and 21.7138, as appropriate. When the amount 
of tutorial assistance paid to the individual in excess of $600 is less 
than the amount of monthly educational assistance the individual is 
otherwise eligible to receive, the entitlement charge will be prorated.


(Authority: 38 U.S.C. 3019; Pub. L. 100-689) (Nov. 18, 1988)

    (9) When a veteran or servicemember is pursuing a program of 
education through flight training, VA will make a charge against 
entitlement for each payment made to him or her. The charge--
    (i) Will be made in months and decimal fractions of a month, and
    (ii) Will be determined by dividing the amount of the payment by an 
amount equal to the rate of basic educational assistance otherwise 
applicable to him or her for full-time institutional training.


(Authority: 38 U.S.C. 3031(f))

    (c) Overpayment cases. VA will make a charge against entitlement for 
an overpayment only if the overpayment is discharged in bankruptcy; is 
waived, and is not recovered; or is compromised.
    (1) If the overpayment is discharged in bankruptcy or is waived and 
is not recovered, the charge against entitlement will be at the 
appropriate rate for the elapsed period covered by the overpayment 
(exclusive of interest, administrative costs of collection, court costs 
and marshal fees).
    (2) If the overpayment is compromised and the compromise offer is 
less than the amount of interest, administrative costs of collection, 
court costs and marshal fees, the charge against entitlement will be at 
the appropriate rate for the elapsed period covered by the overpayment 
(exclusive of interest, administrative costs of collection, court costs 
and marshal fees).
    (3) If the overpayment is compromised and the compromise offer is 
equal to or greater than the amount of interest, administrative costs of 
collection, court costs and marshal fees, the charge against entitlement 
will be determined by--
    (i) Subtracting the portion of the debt attributable to interest, 
administrative costs of collection, court costs and marshal fees from 
the compromise offer,

[[Page 429]]

    (ii) Subtracting the amount determined in paragraph (c)(3)(i) of 
this section from the amount of the original debt (exclusive of 
interest, administrative costs of collection, court costs and marshal 
fees),
    (iii) Dividing the result obtained in paragraph (c)(3)(ii) of this 
section by the amount of the original debt (exclusive of interest, 
administrative costs of collection, court costs and marshal fees), and
    (iv) Multiplying the percentage obtained in paragraph (c)(3)(iii) of 
this section by the amount of the entitlement which represents the whole 
overpaid period.


(Authority: 38 U.S.C. 3013; Pub. L. 98-525)

    (d) Interruption to conserve entitlement. A veteran may not 
interrupt a certified period of enrollment for the purpose of conserving 
entitlement. An educational institution may not certify a period of 
enrollment for a fractional part of the normal term, quarter or 
semester, if the veteran or servicemember is enrolled for the entire 
term, quarter or semester. VA will make a charge against entitlement for 
the entire period of certified enrollment, if the veteran or 
servicemember is otherwise eligible for educational assistance, except 
when educational assistance is interrupted under any of the following 
conditions:
    (1) Enrollment is terminated;
    (2) The veteran or servicemember cancels his or her enrollment, and 
does not negotiate an educational assistance check for any part of the 
certified period of enrollment;
    (3) The veteran or servicemember interrupts his or her enrollment at 
the end of any term, quarter or semester within the certified period of 
enrollment, and does not negotiate a check for educational assistance 
for the succeeding term, quarter or semester;
    (4) The veteran or servicemember requests interruption or 
cancellation for any break when a school was closed during a certified 
period of enrollment, and VA continued payments under an established 
policy based upon an Executive Order of the President or an emergency 
situation. Whether the veteran or servicemember negotiated a check for 
educational assistance for the certified period is immaterial.


(Authority: 38 U.S.C. 3013; Pub. L. 98-525)

    (e) No entitlement charge for some individuals. When the criteria 
described in this paragraph are met, VA will make no charges against 
entitlement as described in paragraph (b) of this section.
    (1) VA will make no charge against an individual's entitlement when 
the individual--
    (i) Either--
    (A) While not serving on active duty, had to discontinue pursuit of 
a course or courses as a result of being ordered, in connection with the 
Persian Gulf War, to serve on active duty under section 672 (a), (d), or 
(g), 673, 673b, or 688 of title 10, U.S. Code; or
    (B) While serving on active duty, had to discontinue pursuit of a 
course or courses as a result of being ordered, in connection with the 
Persian Gulf War, to a new duty location or assignment or to perform an 
increased amount of work.
    (ii) Failed to receive credit or lost training time toward 
completion of the individual's approved educational, professional or 
vocational objective as a result of having to discontinue his or her 
course pursuit.
    (2) The period for which receipt of educational assistance allowance 
is not charged against the entitlement of an individual described in 
paragraph (e)(1) of this section shall not exceed the portion of the 
period of enrollment in the course or courses for which the individual 
failed to receive credit or with respect to which the individual lost 
training time.


(Authority: 38 U.S.C. 3013(f); Pub. L. 102-127)(Oct. 10, 1991))

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28385, July 11, 1990; 56 
FR 20134, May 2, 1991; 56 FR 26035, June 6, 1991; 56 FR 31332, July 10, 
1991; 57 FR 15024, Apr. 24, 1992; 58 FR 26241, May 3, 1993; 68 FR 35179, 
June 12, 2003]

                               Counseling



Sec. 21.7100  Counseling.

    A veteran or servicemember may receive counseling from VA before 
beginning training and during training.

[[Page 430]]

    (a) Purpose. The purpose of counseling is
    (1) To assist in selecting an objective;
    (2) To develop a suitable program of education;
    (3) To select an educational institution appropriate for the 
attainment of the educational objective;
    (4) To resolve any personal problems which are likely to interfere 
with the successful pursuit of a program; and
    (5) To select an employment objective for the veteran that would be 
likely to provide the veteran with satisfactory employment opportunities 
in light of his or her personal circumstances.


(Authority: 38 U.S.C. 3034, 3463; Pub. L. 98-525)

    (b) Required counseling. (1) In any case in which VA has rated the 
veteran as being incompetent, the veteran must be counseled before 
selecting a program of education or training. The requirement that 
counseling be provided is met when--
    (i) The veteran has had one or more personal interviews with the 
counselor;
    (ii) The counselor has jointly developed with the veteran 
recommendations for selecting a program; and
    (iii) These recommendations have been reviewed with the veteran.
    (2) The veteran may follow the recommendations developed in the 
course of counseling, but is not required to do so.
    (3) VA will take no further action on a veteran's application for 
assistance under 38 U.S.C. chapter 30 when he or she--
    (i) Fails to report;
    (ii) Fails to cooperate in the counseling process; or
    (iii) Does not complete counseling to the extent required under 
paragraph (b)(1) of this section.
    (4) Counseling is not required for any other individual eligible for 
educational assistance established under 38 U.S.C. chapter 30.


(Authority: 38 U.S.C. 3032, 3463; Pub. L. 98-525, Pub. L. 99-576)

    (c) Availability of counseling. Counseling is available for--
    (1) Identifying and removing reasons for academic difficulties which 
may result in interruption or discontinuance of training, or
    (2) In considering changes in career plans and making sound 
decisions about the changes.


(Authority: 38 U.S.C. 3034, 3463; Pub. L. 98-525)

    (d) Provision of counseling. VA shall provide counseling as needed 
for the purposes identified in paragraphs (a) and (c) of this section 
upon request of the individual. In addition, VA shall provide counseling 
as needed for the purposes identified in paragraph (b) of this section 
following the veteran's request for counseling, the veteran's initial 
application for benefits or any communication from the veteran or 
guardian indicating that the veteran wishes to change his or her 
program. VA shall take appropriate steps (including individual 
notification where feasible) to acquaint all participants with the 
availability and advantages of counseling services.


(Authority: 38 U.S.C. 3034, 3463; Pub. L. 98-525, Pub. L. 99-576)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28385, July 11, 1990]



Sec. 21.7103  Travel expenses.

    (a) Travel for veterans and servicemembers. (1) Except as provided 
in paragraph (a)(2) of this section, VA shall determine and pay the 
necessary cost of travel to and from the place of counseling for 
individuals who are required to receive counseling if--
    (i) VA determines that the individual is unable to defray the cost 
based upon his or her annual declaration and certification; or
    (ii) The individual has a compensable service-connected disability.
    (2) VA shall not pay for the travel expenses for a veteran who is 
not residing in a State.


(Authority: 38 U.S.C. 111)

    (b) Travel for attendants. (1) VA will authorize payment of travel 
expenses for an attendant while the individual is traveling when--
    (i) The individual, because of a severe disability requires the 
services of an attendant when traveling, and

[[Page 431]]

    (ii) VA is paying the necessary cost of the individual's travel on 
the basis of the criteria stated in paragraph (a) of this section.
    (2) VA will not pay the attendant a fee for travel expenses if he or 
she is a relative as defined in Sec. 21.374 of this part.


(Authority: 38 U.S.C. 111)

    (c) Payment of travel expenses prohibited for most veterans. VA 
shall not pay for any costs of travel to and from the place of 
counseling for anyone who requests counseling under 38 U.S.C. Chapter 
30.

(Authority: 38 U.S.C. 111)


    Cross Reference: 21.374, Authorization for travel of attendants.

[55 FR 28385, July 11, 1990]

                          Programs of Education



Sec. 21.7110  Selection of a program of education.

    (a) General requirement. In order to receive educational assistance 
an individual must either be pursuing an approved program of education 
or be pursuing refresher or deficiency courses, or other preparatory or 
special education or training courses necessary to enable the individual 
to pursue an approved program of education.


(Authority: 38 U.S.C. 3014, 3023; 3034; Pub. L. 98-525, Pub. L. 100-689 
(Aug. 15, 1989)

    (b) Approval of a program of education. VA will approve a program of 
education under 38 U.S.C. chapter 30 selected by an eligible veteran or 
servicemember if--
    (1) It meets the definition of a program of education found in Sec. 
21.7020(b)(23) of this part,
    (2) It has an objective as described in Sec. 21.7020(b) (13) or 
(22) of this part,
    (3) The courses and subjects in the program are approved for VA 
training, and
    (4) The veteran or servicemember is not already qualified for the 
objective of the program.


(Authority: 38 U.S.C. 3002(3), 3034, 3471; Pub. L. 98-525)

[53 FR 1757, Jan. 22, 1988, as amended at 53 FR 3207, Feb. 4, 1988; 56 
FR 20135, May 2, 1991]



Sec. 21.7112  Programs of education combining two or more types of 
courses.

    (a) Concurrent enrollment. (1) When a veteran or servicemember 
cannot successfully schedule his or her complete program at one 
educational institution, VA may approve a program of concurrent 
enrollment. When requesting such a program, the veteran or servicemember 
must show that his or her complete program of education is not available 
at the educational institution in which he or she will pursue the major 
portion of his or her program (the primary educational institution), or 
that it cannot be scheduled successfully within the period in which he 
or she plans to complete his or her program. When the standards for 
measurement of the courses pursued concurrently in the two educational 
institutions are different, the concurrent enrollment shall be measured 
by converting the measurement of courses being pursued at the second 
educational institution under the standard applicable to such 
institution to its equivalent measurement under the standard required 
for full-time courses applicable to the primary educational institution. 
For a complete discussion of measurement of concurrent enrollments see 
Sec. 21.7172 of this part.


(Authority: 38 U.S.C. 3034, 3688; Pub. L. 99-576)

    (2) The veteran or servicemember must submit the monthly 
certification of attendance and pursuit. Each educational institution 
where concurrent enrollment is approved must either endorse that 
certification, or submit a separate certification showing the veteran's 
or servicemember's enrollment and pursuit.


(Authority: 38 U.S.C. 3034(b); Pub. L. 98-525)

    (b) Courses offered under contract. In administering benefits 
payable under

[[Page 432]]

38 U.S.C. chapter 30, the VA will apply the provisions of Sec. 
21.4233(e) of this part in the same manner as they are applied under 38 
U.S.C. chapter 34.


(Authority: 38 U.S.C. 3034(a); Pub. L. 98-525)

    (c) Television. In determining whether a veteran or servicemember 
may pursue all or part of a program of education under 38 U.S.C. chapter 
30 by television, VA will apply the provisions of Sec. 21.4233(c).


(Authority: 38 U.S.C. 3034(a))

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28386, July 11, 1990; 62 
FR 40280, July 28, 1997]



Sec. 21.7114  Change of program.

    In determining whether a veteran or servicemember may change his or 
her program of education under 38 U.S.C. ch. 30, VA will apply the 
provisions of Sec. 21.4234 of this part. VA will not consider programs 
of education a veteran or servicemember may have pursued under 38 U.S.C. 
ch. 34 or 36 before January 1, 1990, if he or she wishes to change 
programs of education under 38 U.S.C. ch. 30.


(Authority: 38 U.S.C. 3034, 3691; Pub. L. 98-525, Pub. L. 101-366) (June 
1, 1991)

[57 FR 29027, June 30, 1992]

                                 Courses



Sec. 21.7120  Courses included in programs of education.

    (a) General. Generally, VA will approve, and will authorize payment 
of educational assistance, for the individual's enrollment in any course 
or subject which a State approving agency has approved as provided in 
Sec. 21.7220 of this part and which forms a part of a program of 
education as defined in Sec. 21.7020(b)(23) of this part. Restrictions 
on this general rule are stated in Sec. 21.7222(b) of this part, 
however.


(Authority: 38 U.S.C. 3002(3), 3452; Pub. L. 98-525)

    (b) Avocational and recreational courses are restricted. (1) VA will 
not pay educational assistance for an enrollment in any course--
    (i) Which is avocational or recreational in character, or
    (ii) The advertising for which contains significant avocational or 
recreational themes.
    (2) VA presumes that the following courses are avocational or 
recreational in character unless the veteran or servicemember justifies 
their pursuit to VA as provided in paragraph (b)(3) of this section. The 
courses are:
    (i) Any photography course or entertainment course, or
    (ii) Any music course, instrumental or vocal, public speaking course 
or courses in dancing, sports or athletics, such as horseback riding, 
swimming, fishing, skiing, golf, baseball, tennis, bowling, sports 
officiating, or other sport or athletic courses, except courses of 
applied music, physical education, or public speaking which are offered 
by institutions of higher learning for credit as an integral part of a 
program leading to an educational objective, or
    (iii) Any other type of course which VA determines to be avocational 
or recreational.
    (3) To overcome the presumption that a course is avocational or 
recreational in character, the veteran or servicemember must establish 
that the course will be of bona fide use in the pursuit of his or her 
present or contemplated business or occupation.


(Authority: 38 U.S.C. 3034, 3473; Pub. L. 98-525)

    (c) Flight training. (1) VA may pay educational assistance for an 
enrollment in a flight training course--
    (i) When an institution of higher learning offers the course for 
credit toward the standard college degree the veteran or servicemember 
is pursuing; or
    (ii) When--
    (A) A flight school is offering the course,
    (B) The State approving agency and the Federal Aviation 
Administration have approved the course,
    (C) The course of flight training is generally accepted as necessary 
to attain a recognized vocational objective in the field of aviation 
which the veteran or servicemember is pursuing, and
    (D) The training for which payment is made occurred after September 
29, 1990.

[[Page 433]]

    (2) VA will not pay educational assistance for an enrollment in a 
flight training course which the veteran or servicemember is pursuing as 
ancillary training for a vocation other than aviation.


(Authority: 38 U.S.C. 3034(f))

    (d) Independent study. (1) Except as provided in paragraph (d)(2) of 
this section, effective October 29, 1992, VA may pay educational 
assistance to a veteran or servicemember who is enrolled in a 
nonaccredited course or unit subject offered entirely or partly by 
independent study only if--
    (i) Successful completion of the nonaccredited course or unit 
subject is required in order for the veteran or servicemember to 
complete his or her program of education,
    (ii) On October 29, 1992, the veteran or servicemember was receiving 
educational assistance for pursuit of the program of education of which 
the nonaccredited independent study course or unit subject forms a part, 
and
    (iii) The veteran or servicemember has remained continuously 
enrolled in the program of education of which the nonaccredited 
independent study course or unit subject forms a part from October 29, 
1992, to the date of enrollment by the veteran or servicemember in the 
nonaccredited independent study course or unit subject.
    (2) Notwithstanding the provisions of paragraph (d)(1) of this 
section, VA may pay educational assistance to a veteran or servicemember 
for enrollment in a course or unit subject offered by independent study 
which, though part of an approved program of education, is not required 
in order for the veteran or servicemember to complete the program of 
education (i.e., an elective) when--
    (i) The veteran or servicemember was enrolled in and receiving 
educational assistance for the course or unit subject on October 29, 
1992, and
    (ii) The veteran or servicemember remains continuously enrolled in 
the course or unit subject.
    (3) Whether or not the veteran or servicemember is enrolled will be 
determined by the regularly prescribed standards and practices of the 
educational institution offering the course or unit subject.


(Authority: 38 U.S.C. 3014, 3034, 3076, 3680A(a); sec. 313(b), Pub. L. 
102-568, 106 Stat. 4333)

[53 FR 1757, Jan. 22, 1988, as amended at 53 FR 3207, Feb. 4, 1988; 57 
FR 15024, Apr. 24, 1992; 61 FR 6788, Feb. 22, 1996; 61 FR 29297, June 
10, 1996]



Sec. 21.7122  Courses precluded.

    (a) Unapproved courses. VA will not pay educational assistance for 
an enrollment in any course which has not been approved by a State 
approving agency or by the VA when that agency acts as a State approving 
agency. VA will not pay educational assistance for a new enrollment in a 
course when a State approving agency has suspended the approval of the 
course for new enrollments, nor for any period within any enrollment 
after the date the State approving agency disapproves a course. See 
Sec. 21.7220 of this part.


(Authority: 38 U.S.C. 3034, 3672; Pub. L. 98-525)

    (b) Courses outside a program of education. VA will not pay 
educational assistance for an enrollment in any course which is not part 
of a veteran's or servicemember's program of education unless the 
veteran or servicemember is enrolled in refresher courses (including 
courses which will permit the veteran or servicemember to update 
knowledge and skills or be instructed in the technological advances 
which have occurred in the veteran's or servicemember's field of 
employment), deficiency courses, or other preparatory or special 
education or training courses necessary to enable the veteran or 
servicemember to pursue an approved program of education.


(Authority: 38 U.S.C. 3002(3), 3034, 3452(b); Pub. L. 98-525) (Aug. 15, 
1989)

    (c) Erroneous, deceptive, misleading practices. VA will not pay 
educational assistance for an enrollment in any course offered by an 
educational institution which uses advertising, sales or enrollment 
practices which are erroneous, deceptive or misleading by actual 
statement, omission or intimation. VA will apply the provisions of Sec. 
21.4252(h) of this part in making these

[[Page 434]]

decisions with regard to enrollments under 38 U.S.C. chapter 30 as it 
does in making similar decisions with regard to enrollments under 38 
U.S.C. chapter 34.


(Authority: 38 U.S.C. 3034, 3696; Pub. L. 98-525)

    (d) Restrictions on enrollment: percentage of students receiving 
financial support. Except as otherwise provided VA shall not approve an 
enrollment in any course for a veteran or servicemember, not already 
enrolled for any period during which more than 85 percent of the 
students enrolled in the course are having all or part of their tuition, 
fees or other charges paid for them by the educational institution or by 
VA pursuant to title 38, United States Code. This restriction may be 
waived in whole or in part. In determining which courses to apply this 
restriction to and whether to waive this restriction, VA will apply the 
provisions of Sec. 21.4201 of this part to enrollments under 38 U.S.C. 
chapter 30 in the same manner as it does to enrollments under 38 U.S.C. 
chapter 34.


(Authority: 38 U.S.C. 3034, 3473(d); Pub. L. 98-525)

    (e) Other courses. VA shall not pay educational assistance for--
    (1) An enrollment in an audited course (see Sec. 21.4252(i));
    (2) An enrollment in a course for which the veteran or servicemember 
received a nonpunitive grade in the absence of mitigating circumstances 
(see Sec. 21.4252(j));
    (3) New enrollments in a course where approval has been suspended by 
a State approving agency;
    (4) An enrollment in certain courses being pursued by 
nonmatriculated students as provided in Sec. 21.4252(l);
    (5) Except as provided in Sec. 21.4252(j), an enrollment in a 
course from which the veteran or servicemember withdrew without 
mitigating circumstances;
    (6) An enrollment in a course offered by a proprietary school when 
the veteran or servicemember is an official of the school authorized to 
sign certificates of enrollment or monthly certificates of attendance or 
monthly certifications of pursuit, an owner of the school, or an 
operator of the school;
    (7) Except as provided in Sec. 21.7120(d), an enrollment in a 
nonaccredited independent study course; or
    (8) An enrollment in a course offered under contract for which VA 
approval is prohibited by Sec. 21.4252(m).


(Authority: 38 U.S.C. 3002(3), 3034, 3672(a), 3676, 3680(a), 3680A(a), 
3680A(f), 3680A(g))

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28386, July 11, 1990; 56 
FR 20135, May 2, 1991; 61 FR 6788, Feb. 22, 1996; 65 FR 81742, Dec. 27, 
2000]



Sec. 21.7124  Overcharges.

    VA may disapprove an educational institution for further 
enrollments, when the educational institution charges or receives from a 
veteran or servicemember tuition and fees that exceed the established 
charges which the educational institution requires from similarly 
circumstanced nonveterans enrolled in the same course.

(Authority: 38 U.S.C. 3034, 3690; Pub. L. 98-525)

                    Payments--Educational Assistance



Sec. 21.7130  Educational assistance.

    VA will pay educational assistance to an eligible veteran or 
servicemember while he or she is pursuing approved courses in a program 
of education at the rates specified in Sec. Sec. 21.7136, 21.7137 and 
21.7139 of this part.

(Authority: 38 U.S.C. 3015, 3022, 3032; Pub. L. 98-525)



Sec. 21.7131  Commencing dates.

    VA will determine the commencing date of an award or increased award 
of educational assistance under this section. When more than one 
paragraph in this section applies, VA will award educational assistance 
using the latest of the applicable commencing dates.
    (a) Entrance or reentrance including change of program or 
educational institution. When an eligible veteran or servicemember 
enters or reenters into training (including a reentrance following a 
change of program or educational institution), the commencing date of 
his or her award of educational assistance will be determined as 
follows:
    (1) If the award is the first award of educational assistance for 
the program

[[Page 435]]

of education the veteran or servicemember is pursuing, the commencing 
date of the award of educational assistance is the latest of:
    (i) The date the educational institution certifies under paragraph 
(b) or (c) of this section;
    (ii) One year before the date of claim as determined by Sec. 
21.1029(b);
    (iii) The effective date of the approval of the course;
    (iv) One year before the date VA receives approval notice for the 
course; or
    (v) November 1, 2000, if paragraph (p) of this section applies to 
the individual.
    (2) If the award is the second or subsequent award of educational 
assistance for the program of education the veteran or servicemember is 
pursuing, the effective date of the award of educational assistance is 
the later of--
    (i) The date the educational institution certifies under paragraph 
(b) or (c) of this section; or
    (ii) The effective date of the approval of the course, or one year 
before the date VA receives the approval notice, whichever is later.


(Authority: 38 U.S.C. 3014, 3023, 3034, 3672)

    (b) Certification by school--the course or subject leads to a 
standard college degree. (1) When the student enrolls in a course 
offered by independent study, the commencing date of the award or 
increased award of educational assistance will be the date the student 
began pursuit of the course according to the regularly established 
practices of the educational institution.
    (2) When a student enrolls in a resident course or subject, the 
commencing date of the award or increased award of educational 
assistance will be the first scheduled date of classes for the term, 
quarter or semester in which the student is enrolled, except as provided 
in paragraphs (b)(3), (b)(4), and (b)(5) of this section.
    (3) When the student enrolls in a resident course or subject whose 
first scheduled class begins after the calendar week when, according to 
the school's academic calendar, classes are scheduled to commence for 
the term, quarter, or semester, the commencing date of the award or 
increased award of educational assistance allowance will be the actual 
date of the first class scheduled for that particular course or subject.
    (4) When a student enrolls in a resident course or subject, the 
commencing date of the award will be the date of reporting provided 
that--
    (i) The published standards of the school require the student to 
register before reporting, and
    (ii) The published standards of the school require the student to 
report no more than 14 days before the first scheduled date of classes 
for the term, quarter or semester for which the student has registered.
    (5) When the student enrolls in a resident course or subject and the 
first day of classes is more than 14 days after the date of 
registration, the commencing date of the award or the increased award of 
educational assistance will be the first day of classes.


(Authority: 38 U.S.C. 3014, 3023; Pub. L. 98-525)

    (c) Certification by educational institution or training 
establishment--course does not lead to a standard college degree. (1) 
When a veteran or servicemember enrolls in a course which does not lead 
to a standard college degree and which is offered in residence, the 
commencing date of the award of educational assistance will be as stated 
in paragraph (b) of this section.
    (2) When a veteran or servicemember enrolls in a course which is 
offered by correspondence, the commencing date of the award of 
educational assistance shall be the later of--
    (i) The date the first lesson was sent, or
    (ii) The date of affirmance.
    (3) When a veteran enrolls in a program of apprenticeship or other 
on-the-job training, the commencing date of the award of educational 
assistance shall be the first date of employment in the training 
position.


(Authority: 38 U.S.C. 3014, 3023; Pub. L. 98-525, Pub. L. 99-576)

    (d) Individual is eligible due to combining active duty as an 
enlisted member or warrant officer with active duty as a commissioned 
officer. If a veteran served

[[Page 436]]

in the Armed Forces both as an enlisted member or warrant officer and as 
a commissioned officer, and that service was such that he or she is 
eligible only through application of Sec. 21.7020(b)(6)(v), the 
commencing date of the award of educational assistance will be no 
earlier than November 30, 1999.


(Authority: Sec. 702(c), Pub. L. 106-117, 113 Stat. 1583).

    (e) Increase for a dependent. A veteran who was eligible for 
educational assistance allowance under 38 U.S.C. chapter 34 on December 
31, 1989, is entitled to additional educational assistance for 
dependents. No other veteran or servicemember is eligible for additional 
educational assistance. The effective date for the additional 
educational assistance is determined as follows.
    (1) The veteran may acquire one or more dependents before he or she 
enters or reenters a program of education. When this occurs, the 
following rules apply.
    (i) The effective date of the increase will be the date of entrance 
or reentrance if--
    (A) VA receives the claim for the increase within 1 year of the date 
of entrance or reentrance, and
    (B) VA receives necessary evidence within 1 year of its request, or 
the veteran shows that good cause exists for VA's not receiving the 
necessary evidence within 1 year of its request. See Sec. 21.7032.
    (ii) The effective date of the increase will be the date the VA 
receives notice of the dependent's existence if--
    (A) VA receives the claim for the increase more than 1 year after 
the date of entrance or reentrance, and
    (B) VA receives notice of the dependent's existence if evidence is 
received either within 1 year of VA request, or the veteran shows that 
there is good cause to extend the one-year time limit to the date on 
which VA received notice of the dependent's existence.
    (iii) The effective date will be the date VA receives all necessary 
evidence, if that evidence is received more than 1 year from the date VA 
requests it, unless the veteran is able to show that there is good cause 
to extend the one-year time limit to the date on which VA received 
notice of the dependent's existence. If the veteran shows good cause, 
the provisions of paragraph (e)(1)(ii)(B) of this section will apply.
    (2) If the veteran acquires a dependent after he or she enters or 
reenters a program of education, the increase will be effective on the 
latest of the following dates:
    (i) Date of the veteran's marriage, or birth of his or her child, or 
his or her adoption of a child, if the evidence of the event is received 
within 1 year of the event.
    (ii) Date notice is received of the dependent's existence if 
evidence is received either within 1 year of the VA request, or the 
veteran shows that there is good cause to extend the one-year time limit 
to the date on which VA received notice of the dependent's existence.
    (iii) The date VA receives evidence if this date is more than 1 year 
after the VA request, and the veteran is not able to show that there is 
good cause to extend the one-year time limit to the date on which VA 
received notice of the dependent's existence.


(Authority: 38 U.S.C. 5110(n))

(See Sec. 3.667 of this chapter as to effective dates with regard to 
children age 18 and older who are attending school)

    (f) Liberalizing laws and VA issues. When a liberalizing law or VA 
issue affects the commencing date of a veteran's or servicemember's 
award of educational assistance, that commencing date shall be in 
accordance with facts found, but not earlier than the effective date of 
the act or administrative issue.


(Authority: 38 U.S.C. 5112(b), 5113; Pub. L. 98-525)

    (g) Correction of military records (Sec. 21.7050(b)). The 
eligibility of a veteran may arise because the nature of the veteran's 
discharge or release is changed by appropriate military authority. In 
these cases the commencing date of educational assistance will be in 
accordance with facts found, but not

[[Page 437]]

earlier than the date the nature of the discharge or release was 
changed.


(Authority: 38 U.S.C. 3031(b); Pub. L. 98-525)

    (h) Individuals in a penal institution. If a veteran or 
servicemember is paid a reduced rate of educational assistance under 
Sec. 21.7139 (c), (d), (e), (f) and (g) of this part, the rate will be 
increased or assistance will commence effective the earlier of the 
following dates:
    (1) The date the tuition and fees are no longer being paid under 
another Federal program or a State or local program, or
    (2) The date of the release from the prison or jail.


(Authority: 38 U.S.C. 3034, 3482(g); Pub. L. 98-525)

    (i) Commitment to service in the Selected Reserve. If a veteran has 
established eligibility to educational assistance through two years' 
active duty service, and he or she establishes entitlement to an 
increased monthly rate through commitment to serve four years in the 
Selected Reserve, the effective date of the increase is the date on 
which he or she--
    (1) Is committed to serve four years in the Selective Reserve, and
    (2) Is attached to a unit of the Selected Reserve.


(Authority: 38 U.S.C. 3012; Pub. L. 98-525)

    (j) Increase due a servicemember due to monetary contributions. (1) 
If a servicemember is contributing additional amounts as provided in 
Sec. 21.7136(h), and is enrolled in an educational institution operated 
on a term, quarter, or semester basis, the monthly rate payable to the 
servicemember will increase on the first day of the term, quarter, or 
semester following the term, quarter, or semester in which the 
servicemember made the contribution(s).
    (2) If a servicemember is contributing additional amounts as 
provided in Sec. 21.7136(h), and is enrolled in an educational 
institution not operated on a term, quarter, or semester basis, the 
monthly rate payable to the servicemember will increase on the first day 
of the enrollment period following the enrollment period in which the 
servicemember made the contribution.


(Authority: 38 U.S.C. 3011(e), 3012(f))

    (k) Increase (``kicker'') due to service in the Selected Reserve. If 
a veteran is entitled to an increase (``kicker'') in the monthly rate of 
basic educational assistance because he or she has met the requirements 
of Sec. 21.7136(g) or Sec.  21.7137(e), the effective date of that 
increase (``kicker'') will be the latest of the following dates:
    (1) The commencing date of the veteran's award as determined by 
paragraphs (a) through (j) of this section;
    (2) The first date on which the veteran is entitled to the increase 
(``kicker'') as determined by the Secretary of the military department 
concerned; or
    (3) February 10, 1996.


(Authority: 10 U.S.C. 16131)

    (l) Eligibility established under Sec. 21.7042 (a)(7) or (b)(10). 
This paragraph must be used to establish the effective date of an award 
of educational assistance when the veteran or servicemember has 
established eligibility under either Sec. 21.7042 (a)(7) or (b)(10). 
The commencing date of an award of educational assistance for such a 
veteran or servicemember is the latest of the following:
    (1) The commencing date as determined by paragraphs (a) through (c) 
and (f) through (j) of this section;
    (2) The date of election provided that--
    (i) The servicemember initiated the $1,200 reduction in basic pay 
required by Sec. 21.7042(g)(4) and the full $1,200 was collected 
through that pay reduction;
    (ii) Within one year of the date of election VA both collected from 
the veteran $1,200 or the difference between $1,200 and the amount 
collected through a reduction in the veteran's military pay, as provided 
in Sec. 21.7042(g)(4), and received from the veteran any other evidence 
necessary to establish a valid election; or
    (iii) VA received from the veteran $1,200 or the difference between 
$1,200 and the amount collected through a reduction in the veteran's 
military pay and any other evidence necessary to establish a valid 
election within one year

[[Page 438]]

of the date VA requested the money and/or the evidence.
    (3) If applicable, the date VA collected the difference between 
$1,200 and the amount by which the servicemember's military pay was 
reduced, if the provisions of paragraph (l)(2)(ii) or (l)(2)(iii) of 
this section are not met; or
    (4) If applicable, the date VA collected $1,200, if the provisions 
of paragraph (l)(2)(ii) or (l)(2)(iii) of this section are not met.


(Authority: 38 U.S.C. 5113; sec. 107, Pub. L. 104-275, 110 Stat. 3329-
3330)

    (m) Eligibility established under 21.7045(d). This paragraph must be 
used to establish the effective date of an award of educational 
assistance when the veteran or servicemember has established eligibility 
under Sec. 21.7045(d). The commencing date of an award of educational 
assistance for such a veteran or servicemember is the latest of the 
following:
    (1) The commencing date as determined by paragraphs (a) through (c) 
and (f) through (j) of this section;
    (2) The date of election provided that--
    (i) The servicemember initiated the $1,200 reduction in basic pay 
required by Sec. 21.7045(d)(3) and the full $1,200 was collected 
through that pay reduction;
    (ii) Within one year of the date of election VA both collected from 
the veteran $1,200 or the difference between $1,200 and the amount 
collected through a reduction in the veteran's military pay, as provided 
in Sec. 21.7045(d)(3), and received from the veteran any other evidence 
necessary to establish a valid election; or
    (iii) VA received from the veteran $1,200 or the difference between 
$1,200 and the amount collected through a reduction in the veteran's 
military pay and any other evidence necessary to establish a valid 
election within one year of the date VA requested the money and/or the 
evidence.
    (3) If applicable, the date VA collected the difference between 
$1,200 and the amount by which the servicemember's military pay was 
reduced, if the provisions of paragraph (m)(2)(ii) or (m)(2)(iii) of 
this section are not met; or
    (4) If applicable, the date VA collected $1,200, if the provisions 
of paragraph (m)(2)(ii) or (m)(2)(iii) of this section are not met.


(Authority: 38 U.S.C. 3018C(a), (b), 5113)

    (n) Eligibility established under Sec. 21.7045(c). The effective 
date of an award of educational assistance when the veteran has 
established eligibility under Sec. 21.7045(c) is as follows:
    (1) If the veteran is not entitled to receive educational assistance 
under 38 U.S.C. ch. 32 on the date he or she made a valid election to 
receive educational assistance under 38 U.S.C. ch. 30, the effective 
date of the award of educational assistance will be the latest of the 
following.
    (i) The commencing date as determined by paragraphs (a) through (c) 
and (f) through (j) of this section; or
    (ii) October 23, 1992, provided that VA received the $1,200 required 
to be collected pursuant to Sec. 21.7045(c)(2) and any other evidence 
necessary to establish that the election is valid before the later of:
    (A) October 23, 1993; or
    (B) One year from the date VA requested the $1,200 or the evidence 
necessary to establish a valid election; or
    (iii) The date VA received the $1,200 required to be collected 
pursuant to Sec. 21.7045(c)(2) and all other evidence needed to 
establish that the election is valid, if the provisions of paragraph 
(n)(1)(ii) of this section are not met.
    (2) If the veteran is entitled to receive educational assistance 
under 38 U.S.C. ch. 32 on the date he or she made a valid election to 
receive educational assistance under 38 U.S.C. ch. 30, the effective 
date of the award of educational assistance will be the latest of the 
following:
    (i) The commencing date as determined by paragraphs (a) through (c) 
and (f) through (j) of this section; or
    (ii) The date on which the veteran made a valid election to receive 
educational assistance under 38 U.S.C. chapter 30 provided that VA 
received the $1,200 required to be collected pursuant to Sec. 
21.7045(c)(2) and any other evidence necessary to establish that the 
election is valid before the later of:
    (A) One year from the date VA received the valid election; or

[[Page 439]]

    (B) One year from the date VA requested the $1,200 or the evidence 
necessary to establish a valid election; or
    (iii) The date VA received the $1,200 required to be collected 
pursuant to Sec. 21.7045(c)(2) and all other evidence needed to 
establish that the election is valid, if the provisions of paragraph 
(n)(2)(ii) of this section are not met.


(Authority: 38 U.S.C. 3018B)
    (o) Eligibility established under Sec. 21.7045(e). This paragraph 
must be used to establish the effective date of an award of educational 
assistance when the veteran or servicemember has established eligibility 
under Sec. 21.7045(e). The commencing date of an award of educational 
assistance for such a veteran or servicemember is the later of the 
following:
    (1) The commencing date as determined by paragraphs (a) through (c) 
and (f) through (k) of this section; or
    (2) The date on which--
    (i) The servicemember's basic pay is reduced by $2,700;
    (ii) The Secretary of the military department concerned collected 
the difference between $2,700 and the amount by which the military 
department concerned reduced the veteran's basic pay following the 
veteran's election under Sec. 21.7045(e), provided that this collection 
was accomplished through a method other than reducing the veteran's 
retired or retainer pay; or
    (iii) The Secretary of the military department concerned first 
reduced the veteran's retired or retainer pay in order to collect the 
difference between $2,700 and the amount by which the military 
department concerned reduced the veteran's basic pay following the 
election under Sec. 21.7045(e).


(Authority: 38 U.S.C. 3018C(e))

    (p) Eligibility established due to changes to Sec. Sec. 21.7042 and 
21.7044. The commencing date of educational assistance will be no 
earlier than November 1, 2000, if a veteran would have been prevented 
from establishing eligibility by one or more of the former requirements 
described in paragraphs (p)(1) through (p)(4) of this section and the 
veteran is enabled to establish eligibility due to the removal of the 
statutory bases for those requirements. (For the purposes of this 
paragraph, the applicable provisions of those former requirements appear 
in the July 1, 2002 revision of the Code of Federal Regulations, title 
38.)
    (1) A period of active duty other than the initial period was used 
to establish eligibility. The veteran was enabled to establish 
eligibility by the removal of the former eligibility requirement in 38 
CFR 21.7042(a)(2)(ii), 21.7042(a)(5)(iv)(A), and 21.7042(a)(5)(iv)(B), 
revised as of July 1, 2002, that a veteran had to use his or her initial 
period of active duty to establish eligibility for educational 
assistance.


(Authority: Sec. 102(e), Pub. L. 106-419, 114 Stat. 1825)

    (2) High school education eligibility criterion met after the 
qualifying period of active duty. The veteran was enabled to establish 
eligibility by the removal of the former eligibility requirement in 38 
CFR 21.7042(a)(3), 21.7042(b)(2), and 21.7042(c)(4), revised as of July 
1, 2002, that before completing the period of active duty used to 
establish eligibility for educational assistance, a veteran had to 
complete the requirements for a secondary school diploma (or an 
equivalency certificate) or successfully complete (or otherwise receive 
academic credit for) 12 semester hours (or the equivalent) in a program 
of education leading to a standard college degree.


(Authority: Sec. 103(e), Pub. L. 106-419, 114 Stat. 1826-27)

    (3) High school education eligibility criterion met after October 
29, 1994. The veteran was enabled to establish eligibility by the 
removal of the former eligibility requirement in 38 CFR 21.7042(a)(6), 
21.7042(b)(11), and 21.7044(b)(13), revised as of July 1, 2002, that 
certain veterans meet the requirements for a secondary school diploma 
(or an equivalency certificate) before October 29, 1994, in order to 
establish eligibility for educational assistance.


(Authority: Sec. 103(e), Pub. L. 106-419, 114 Stat. 1826-27)

    (4) High school education eligibility criterion for veterans 
formerly eligible under 38 U.S.C. chapter 34 met after January 1,

[[Page 440]]

1990. The veteran was enabled to establish eligibility by the removal of 
the former eligibility requirement in 38 CFR 21.7044(a)(3) and 
21.7044(b)(3), revised as of July 1, 2002, that, as one of the two ways 
that certain veterans could meet the educational criteria for 
establishing eligibility, the veteran must before January 1, 1990, meet 
the requirements for a secondary school diploma (or equivalency 
certificate).


(Authority: Sec. 103(e), Pub. L. 106-419, 114 Stat. 1826-27)


(The Office of Management and Budget has approved information collection 
requirements in this section under control number 2900-0607.)
    (q) Fugitive felons. (1) An award of educational assistance 
allowance to an otherwise eligible veteran may begin effective the date 
the warrant for the arrest of the felon is cleared by--
    (i) Arrest;
    (ii) Surrendering to the issuing authority;
    (iii) Dismissal; or
    (iv) Court documents (dated after the warrant) showing the veteran 
is no longer a fugitive.
    (2) An award of educational assistance allowance to a dependent who 
is otherwise eligible to transferred entitlement may begin effective the 
date the warrant is cleared by--
    (i) Arrest;
    (ii) Surrendering to the issuing authority;
    (iii) Dismissal; or
    (iv) Court documents (dated after the warrant) showing the 
individual is no longer a fugitive.


(Authority: 38 U.S.C. 5313B)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28386, July 11, 1990; 56 
FR 11672, Mar. 20, 1991; 57 FR 40615, Sept. 4, 1992; 61 FR 6788, Feb. 
22, 1996; 62 FR 55519, Oct. 27, 1997; 63 FR 34132, June 23, 1998; 64 FR 
23773, May 4, 1999; 65 FR 5788, Feb. 7, 2000; 66 FR 38939, July 26, 
2001; 66 FR 39280, July 30, 2001; 66 FR 42586, Aug. 13, 2001; 68 FR 
34331, June 9, 2003; 70 FR 25787, May 16, 2005]



Sec. 21.7133  Suspension or discontinuance of payments.

    VA may suspend or discontinue payments of educational assistance. In 
doing so, VA will apply Sec. Sec. 21.4210 through 21.4216.

(Authority: 38 U.S.C. 3034, 3690)

[63 FR 35837, July 1, 1998]



Sec. 21.7135  Discontinuance dates.

    The effective date of reduction or discontinuance of educational 
assistance will be as stated in this section. Reference to reduction of 
educational assistance due to the loss of a dependent only applies to 
veterans who were eligible to receive educational assistance allowance 
under 38 U.S.C. chapter 34 on December 31, 1989. No other veteran or 
servicemember will have his or her educational assistance reduced due to 
a loss of a dependent. If more than one type of reduction or 
discontinuance is involved, the earliest date will control.
    (a) Death of veteran or servicemember. (1) If the veteran or 
servicemember receives an advance payment pursuant to 38 U.S.C. 3680(d) 
and dies before the period covered by the advance payment ends, the 
discontinuance date of educational assistance shall be the last date of 
the period covered by the advance payment.
    (2) In all other cases if the veteran or servicemember dies while 
pursuing a program of education, the discontinuance date of educational 
assistance shall be the last date of attendance.


(Authority: 38 U.S.C. 3014, 3023, 3680)

    (b) Death of dependent. When a veteran's dependent dies, and the 
veteran has been receiving additional educational assistance based on 
the dependent, the effective date of reduction of the veteran's 
educational assistance shall be the last day of the month in which the 
death occurs.


(Authority: 38 U.S.C. 5112(b), 5113; Pub. L. 98-525)

    (c) Divorce. If the veteran becomes divorced, the effective date of 
reduction of his or her educational assistance is the last day of the 
month in which the divorce occurs.


(Authority: 38 U.S.C. 5112(b), 5113; Pub. L. 98-525)

    (d) Dependent child. If the veteran's award of educational 
assistance must

[[Page 441]]

be reduced because his or her dependent child ceases to be dependent, 
the effective date of reduction will be as follows.
    (1) If the veteran's child marries, the effective date of reduction 
will be the last day of the month in which the marriage occurs.
    (2) If the veteran's child reaches age 18, the effective date of 
reduction will be the day preceding the dependent child's 18th birthday.
    (3) If the veteran is receiving additional educational assistance 
based on a child's school attendance between the child's 18th and 23rd 
birthdays, the effective date of reduction of the veteran's educational 
assistance will be the last day of the month in which the dependent 
child stops attending school, or the day before the dependent child's 
23rd birthday, whichever is earlier.
    (4) If the veteran is receiving additional educational assistance 
because his or her child is helpless, the effective date of reduction 
will be the last day of the month following 60 days after VA notifies 
the veteran that the dependent child's helplessness has ceased.


(Authority: 38 U.S.C. 5112(b) 5113; Pub. L. 98-525)

    (e) Course discontinued; course interrupted; course terminated; 
course not satisfactorily completed or withdrawn from. (1) If the 
veteran or servicemember, for reasons other than being called or ordered 
to active duty, withdraws from all courses or receives all nonpunitive 
grades, and in either case there are no mitigating circumstances, VA 
will terminate or reduce educational assistance effective the first date 
of the term in which the withdrawal occurs or the first date of the term 
for which nonpunitive grades are assigned.


(Authority: 38 U.S.C. 3680(a); Pub. L. 102-127)(Aug. 1, 1990))

    (2) If the veteran or servicemember withdraws from all courses with 
mitigating circumstances or withdraws from all courses such that a 
punitive grade is or will be assigned for those courses or the veteran 
withdraws from all courses because he or she is ordered to active duty, 
VA will terminate educational assistance for--
    (i) Residence training: last date of attendance; and
    (ii) Independent study: official date of change in status under the 
practices of the educational institution.
    (3) When a veteran or servicemember withdraws from a correspondence 
course, VA will terminate educational assistance effective the date the 
last lesson is serviced.
    (4) When a veteran or servicemember withdraws from an apprenticeship 
or other on-the-job training, VA will terminate educational assistance 
effective the date of last training.


(Authority: 38 U.S.C. 3034, 3680(a); Pub. L. 98-525, Pub. L. 99-576)

    (5) When a veteran or servicemember withdraws from a flight course, 
VA will terminate educational assistance effective the date of last 
instruction.


(Authority: 38 U.S.C. 3034(f))

    (f) Reduction in the rate of pursuit of the course. If the veteran 
or servicemember reduces the rate of training by withdrawing from part 
of a course, but continues training in part of the course, the 
provisions of this paragraph apply.
    (1) If the reduction in the rate of training occurs other than on 
the first date of the term, VA will reduce the veteran's or 
servicemember's educational assistance effective the date on which the 
withdrawal occurs when either:
    (i) A nonpunitive grade is assigned for the part of the course from 
which he or she withdraws; and
    (A) The veteran or servicemember withdraws because he or she is 
ordered to active duty; or
    (B) The withdrawal occurs with mitigating circumstances; or
    (ii) A punitive grade is assigned for the part of the course from 
which the reservist withdraws.
    (2) VA will reduce educational assistance effective the first date 
of the enrollment in which the reduction occurs when--
    (i) The reduction occurs on the first date of the term; or
    (ii) The veteran or servicemember--
    (A) Receives a nonpunitive grade for the part of the course from 
which he or she withdraws; and

[[Page 442]]

    (B) Withdraws without mitigating circumstances; and
    (C) Does not withdraw because he or she is ordered to active duty.


(Authority: 38 U.S.C. 3680(a))

    (3) A veteran or servicemember, who enrolls in several subjects and 
reduces his or her rate of pursuits by completing one or more of them 
while continuing training in the others, may receive an interval payment 
based on the subjects completed if the requirements of Sec. 21.7140(d) 
are met. If those requirements are not met, VA will reduce the 
individual's educational assistance effective the date the subject or 
subjects were completed.


(Authority: 38 U.S.C. 3034, 3680(a), 5113(b))

    (g) End of course or period of enrollment. If a veteran's or 
servicemember's course or period of enrollment ends, the effective date 
of reduction or discountinuance of his or her award of educational 
assistance will be the ending date of the course or period of enrollment 
as certified by the educational institution.


(Authority: 38 U.S.C. 3034(b), 3680; Pub. L. 98-525)

    (h) Nonpunitive grade. (1) If the veteran or servicemember does not 
withdraw, but nevertheless receives a nonpunitive grade in a particular 
course, VA will reduce his or her educational assistance effective the 
first date of enrollment for the term in which the grade applies, when 
no mitigating circumstances are found.
    (2) If an individual does not withdraw, but nevertheless receives a 
nonpunitive grade in a particular course, VA will reduce his or her 
educational assistance effective the last date of attendance when 
mitigating circumstances are found.
    (3) If an individual receives a nonpunitive grade through 
nonattendance in a particular course, VA will reduce the individual's 
educational assistance effective the last date of attendance when 
mitigating circumstances are found.
    (4) If an individual receives a nonpunitive grade through 
nonattendance in a particular course, VA will reduce the individual's 
educational assistance effective the first date of enrollment in which 
the grade applies, when no mitigating circumstances are found.


(Authority: 38 U.S.C. 3034, 3680; Pub. L. 98-525)

    (i) Discontinued by VA. If VA discontinues payment to a veteran or 
servicemember following the procedures stated in Sec. 21.4211(d) and 
(g), the date of discontinuance of payment of educational assistance 
will be--
    (1) Date on which payments first were suspended by the Director of a 
VA facility as provided in Sec. 21.4210, if the discontinuance was 
preceded by such a suspension.
    (2) End of the month in which the decision to discontinue, made by 
VA under Sec. 21.7133 or Sec.  21.4211(d) and (g), is effective, if the 
Director of a VA facility did not suspend payments before the 
discontinuance.


(Authority: 38 U.S.C. 3034, 3680; Pub. L. 98-525)

    (j) Disapproval by State approving agency. If a State approving 
agency disapproves a course in which a veteran or servicemember is 
enrolled, the date of discontinuance of payment of educational 
assistance will be--
    (1) Date on which payments first were suspended by the director of a 
VA facility as provided in Sec. 21.4210, if disapproval was preceded by 
such a suspension.
    (2) End of the month in which disapproval is effective or VA 
receives notice of the disapproval, whichever is later, provided that 
the Director of a VA facility did not suspend payments before the 
disapproval


(Authority: 38 U.S.C. 3034, 3672(a), 3690; Pub. L. 98-525)

    (k) Disapproval by VA. If VA disapproves a course in which a veteran 
or servicemember is enrolled, the effective date of discontinuance of 
payment of educational assistance will be--
    (1) The date on which the Director of a VA facility first suspended 
payments, as provided in Sec. 21.4210, if such a suspension preceded 
the disapproval.
    (2) The end of the month in which the disapproval occurred, provided 
that the

[[Page 443]]

Director of a VA facility did not suspend payments before the 
disapproval.


(Authority: 38 U.S.C. 3034, 3671(b), 3672(a), 3690; Pub. L. 98-525)

    (l) Unsatisfactory progress, conduct or attendance. If a veteran's 
or servicemember's progress, conduct or attendance is unsatisfactory, 
his or her educational assistance shall be discontinued effective the 
earlier of the following:
    (1) The date the educational institution discontinues the veteran's 
or servicemember's enrollment, or
    (2) The date on which the veteran's or servicemember's progress, 
conduct or attendance becomes unsatisfactory according to the 
educational institution's regularly established standards of progress, 
conduct or attendance.


(Authority: 38 U.S.C. 3034, 3474)

    (m) Required certifications not received after certification of 
enrollment. If VA does not timely receive the veteran's or 
servicemember's certification of attendance or does not timely receive 
the educational institution's endorsement of the certification or the 
educational institution's certification of attendance or pursuit, VA 
will assume that the veteran or servicemember has withdrawn. VA will 
apply the provisions of paragraph (e) of this section. VA considers the 
receipt of a certificate of attendance to be timely if it is received 
within 60 days of the last day of the month for which attendance is to 
be certified.


(Authority: 38 U.S.C. 3034(b); Pub. L. 98-525)

    (n) False or misleading statements. If educational assistance is 
paid as the result of false or misleading statements, see Sec. 21.7158:


(Authority: 38 U.S.C. 3034, 3690; Pub. L. 98-525)

    (o) Conflicting interests (not waived). If an educational 
institution and VA have conflicting interests as provided in Sec. 
21.4005 and Sec. 21.7305, and VA does not grant the veteran a waiver, 
the date of discontinuance shall be 30 days after the date of the letter 
notifying the veteran.


(Authority: 38 U.S.C. 3034, 3683, Pub. L. 98-525)

    (p) Incarceration in prison or penal institution for conviction of a 
felony. (1) The provisions of this paragraph apply to a veteran or 
servicemember whose educational assistance must be discontinued or who 
becomes restricted to payment of educational assistance at a reduced 
rate under Sec. 21.7139 (c) , (d), (e), (f), or (g).
    (2) The reduced rate or discontinuance will be effective the latest 
of the following dates:
    (i) The first day on which all or part of the veteran's or 
servicemember's tuition and fees were paid by a Federal, State or local 
program.
    (ii) The date the veteran or servicemember is incarcerated in prison 
or penal institution, or
    (iii) The comencing date of the award as determined by Sec. 
21.7131.


(Authority: 38 U.S.C. 3034, 3482(g); Pub. L. 98-525)

    (q) Active duty. If a veteran reenters on active duty, the effective 
date of reduction of his or her award of educational assistance shall be 
the day before the veteran's entrance on active duty. (This reduction 
does not apply to brief periods of active duty for training if the 
educational institution permits absence for active duty for training 
without considering the veteran's pursuit of a program of education to 
be interrupted).


(Authority: 38 U.S.C. 3032)

    (r) Record-purpose charge against entitlement under 38 U.S.C. 
chapter 34 equals entitlement that remained on December 31, 1989. A 
veteran who is receiving basic educational assistance at the rates 
stated in Sec. 21.7137(a), will have his or her award reduced to the 
rates found in Sec. 21.7136(a) effective the date the total of the 
veteran's record-purpose charges against his or her entitlement under 38 
U.S.C. chapter 34 equals the entitlement to that benefit which the 
veteran had on December 31, 1989.


(Authority: 38 U.S.C. 3015(c); Pub. L. 98-525)


[[Page 444]]


    (s) Exhaustion of entitlement under 38 U.S.C. chapter 30. (1) If an 
individual who is enrolled in an educational institution regularly 
operated on the quarter or semester system exhausts his or her 
entitlement under 38 U.S.C. chapter 30, the discontinuance date shall be 
the last day of the quarter or semester in which entitlement is 
exhausted.
    (2) If an individual who is enrolled in an educational institution 
not regularly operated on the quarter or semester system exhausts his or 
her entitlement under 38 U.S.C. chapter 30 after more than half of the 
course is completed, the discontinuance date shall be the earlier of the 
following:
    (i) The last day of the course, or
    (ii) 12 weeks from the day the entitlement is exhausted.
    (3) If an individual who is enrolled in an educational institution 
not regularly operated on the quarter or semester system exhausts his or 
her entitlement under 38 U.S.C. chapter 30 before completing the major 
portion of the course, the discontinuance date will be the date the 
entitlement is exhausted.


(Authority: 38 U.S.C. 3031(e); Pub. L. 98-525)

    (t) Eligibility expires. If the veteran is pursuing a course on the 
date of expiration of eligibility as determined under Sec. 21.7050 or 
Sec. 21.7051 VA will discontinue educational assistance effective the 
day preceding the end of the eligibility period.


(Authority: 38 U.S.C. 3034(a); Pub. L. 98-525)

    (u) Veteran fails to participate satisfactorily in the Selected 
Reserve. If a veteran is attempting to establish eligibility through 
service on active duty combined with service in the Selected Reserve, 
and he or she fails to participate satisfactorily in the Selected 
Reserve before completing the required service in the Selected Reserve, 
the effective date of reduction of the award of educational assistance 
will be the date the Secretary determines that he or she failed to 
participate satisfactorily.


(Authority: 38 U.S.C. 3012; Pub. L. 98-525)

    (v) Error-payee's or administrative. (1) When an act of commission 
or omission by a payee or with his or her knowledge results in an 
erroneous award of educational assistance, the effective date of the 
reduction or discontinuance will be the effective date of the award, or 
the day before the act, whichever is later, but not before the date on 
which the award would have ended had the act not occurred.
    (2) When VA, the Department of Defense, or the Department of 
Transportation makes an administrative error or an error in judgment 
that is the sole cause of an erroneous award, VA must reduce or 
terminate the award effective the date of last payment.


(Authority: 38 U.S.C. 5112(b), 5113)

    (w) Forfeiture for fraud. If a veteran's or servicemember's 
educational assistance must be forfeited due to fraud, the effective 
date of discontinuance shall be the later of--
    (1) The effective date of the award, or
    (2) The day before the date of the fraudulent act.


(Authority: 38 U.S.C. 6103; Pub. L. 98-525)

    (x) Forfeiture for treasonable acts or subversive activities. If a 
veteran's or servicemember's educational assistance must be forfeited 
due to treasonable acts or subversive activities, the effective date of 
discontinuance shall be the later of--
    (1) The effective date of the award, or
    (2) The date before the date the veteran or servicemember committed 
the treasonable act or subversive activities for which he or she was 
convicted.


(Authority: 38 U.S.C. 6104, 6105; Pub. L. 98-525)

    (y) Change in law or VA issue or interpretation. If there is a 
change in applicable law or VA issue, or in the Department of Veterans 
Affairs's application of the law or VA issue, VA will use the provisions 
of Sec. 3.114(b) of this chapter to determine the date of discontinuance 
of the veteran's or servicemember's educational assistance.


(Authority: 38 U.S.C. 5112, 5113; Pub. L. 98-525)

    (z) Independent study course loses accreditation. Except as 
otherwise provided in Sec. 21.7120(d), if the veteran or servicemember 
is enrolled in a course

[[Page 445]]

offered in whole or in part by independent study, and the course loses 
its accreditation (or the educational institution offering the course 
loses its accreditation), the date of reduction or discontinuance will 
be the effective date of the withdrawal of accreditation by the 
accrediting agency.


(Authority: 38 U.S.C. 3014, 3034, 3676, 3680A(a))

    (aa) Fugitive felons. (1) VA will not award educational assistance 
allowance to an otherwise eligible veteran for any period after December 
26, 2001, during which the veteran is a fugitive felon. The date of 
discontinuance of an award of educational assistance allowance to a 
veteran who is a fugitive felon is the later of--
    (i) The date of the warrant for the arrest of the felon; or
    (ii) December 27, 2001.
    (2) VA will not award educational assistance allowance to a 
dependent who is otherwise eligible to transferred entitlement if the 
dependent is a fugitive felon or if the veteran who transferred the 
entitlement is a fugitive felon. The date of discontinuance of an award 
of educational assistance allowance to a dependent is the later of--
    (i) The date of the warrant; or
    (ii) December 27, 2001.


(Authority: 38 U.S.C. 5313B)
    (bb) Reduction following loss of increase (``kicker'') for Selected 
Reserve service. If a veteran is entitled to an increase (``kicker'') in 
the monthly rate of basic educational assistance as provided in Sec. 
21.7136(g) or Sec. 21.7137(e), due to service in the Selected Reserve, 
and loses that entitlement, the effective date for the reduction in the 
monthly rate payable is the date, as determined by the Secretary of the 
military department concerned, that the veteran is no longer entitled to 
the increase (``kicker'').


(Authority: 10 U.S.C. 16131)

    (cc) Except as otherwise provided. If a veteran's or servicemember's 
educational assistance must be discontinued for any reason other than 
those stated in the other paragraphs of this section, VA will determine 
the date of discontinuance of educational assistance on the basis of 
facts found.


(Authority: 38 U.S.C. 5112(a), 5113; Pub. L. 98-525)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28386, July 11, 1990; 57 
FR 15024, Apr. 24, 1992; 58 FR 26242, May 3, 1993; 61 FR 6788, Feb. 22, 
1996; 61 FR 26116, May 24, 1996; 62 FR 55519, Oct. 27, 1997; 63 FR 
35837, July 1, 1998; 64 FR 38577, July 19, 1999; 64 FR 51901, Sept. 27, 
1999; 66 FR 38939, July 26, 2001; 66 FR 42586, Aug. 13, 2001; 70 FR 
25787, May 16, 2005]



Sec. 21.7136  Rates of payment of basic educational assistance.

    The monthly rate of educational assistance payable to a veteran or 
servicemember depends in part upon the service requirements he or she 
met to establish eligibility for that educational assistance.
    (a) Service requirements for higher rates. The monthly rate of basic 
educational assistance payable to a veteran or servicemember shall be 
the rate stated in paragraph (b) of this section when--
    (1) The veteran has established eligibility for educational 
assistance under Sec. 21.7045; or
    (2) The veteran has established eligibility under Sec. 21.7042, and 
one of the following sets of circumstances exist.
    (i) The veteran's qualifying obligated period of active duty is at 
least three years; or
    (ii) The veteran's qualifying obligated period of active duty is at 
least two years and less than three years and either the veteran has 
served or is committed to serve in the Selected Reserve for a period of 
at least four years, or the veteran was committed to serve in the 
Selected Reserve for a period of at least four years but failed to 
complete four years service for one of the reasons stated in Sec. 
21.7042(b)(7)(i) or (iii); or
    (iii) The veteran's qualifying obligated period of active duty is at 
least two years and less than three years and--
    (A) The basic educational assistance is payable for training 
received after August 31, 1993;
    (B) The veteran's continuous active duty service beginning on the 
date of the commencement of his or her qualifying obligated period of 
active duty is

[[Page 446]]

at least three years and upon completion of that continuous period of 
active duty the veteran either--
    (1) Continues on active duty; or
    (2) Is discharged from active duty with an honorable discharge; or
    (3) Is released after service on active duty characterized by the 
Secretary concerned as honorable service and is placed on the retired 
list, transferred to the Fleet Reserve or the Fleet Marine Corps 
Reserve, placed on the temporary disability retired list; or
    (4) Is released from active duty for further service in a reserve 
component of the Armed Forces after service on active duty characterized 
by the Secretary concerned as honorable service.


(Authority: 38 U.S.C. 3015(a))

    (b) Rates. (1) Except as elsewhere provided in this section or in 
Sec. 21.7139, the monthly rate of basic educational assistance payable 
for training that occurs after September 30, 2004, to a veteran whose 
service is described in paragraph (a) of this section, is the rate 
stated in the following table:

------------------------------------------------------------------------
                                                                Monthly
                           Training                               rate
------------------------------------------------------------------------
Full time....................................................   $1004.00
\3/4\ time...................................................     753.00
\1/2\ time...................................................     502.00
Less than \1/2\ but more than \1/4\..........................     502.00
\1/4\ time...................................................     251.00
------------------------------------------------------------------------



(Authority: 38 U.S.C. 3015.)

    (2) If a veteran's service is described in paragraph (a) of this 
section, the monthly rate of basic educational assistance payable to the 
veteran for pursuit of apprenticeship or other on-the-job training that 
occurs after September 30, 2004, is the rate stated in the following 
table:

------------------------------------------------------------------------
                                                                Monthly
                       Training period                            rate
------------------------------------------------------------------------
First six months of training.................................    $753.00
Second six months of training................................     552.20
Remaining pursuit of training................................     351.40
------------------------------------------------------------------------



(Authority: 38 U.S.C. 3015, 3032(c).)

    (3) If a veteran's service is described in paragraph (a) of this 
section, the monthly rate of basic educational assistance payable to the 
veteran for pursuit of a cooperative course is $1004.00 for training 
that occurs after September 30, 2004.


(Authority: 38 U.S.C. 3015.)

    (c) Rates for some veterans whose qualifying obligated period of 
active duty is less than three years. If a veteran has established 
eligibility under Sec. 21.7042, but the veteran's service is not 
described in paragraph (a)(2) of this section, the monthly rate of 
educational assistance payable to the veteran will be determined by this 
paragraph.
    (1) Except as elsewhere provided in this section or in Sec. 
21.7139, the monthly rate of basic educational assistance payable to a 
veteran for training that occurs after September 30, 2004 is the rate 
stated in the following table:

------------------------------------------------------------------------
                                                                Monthly
                           Training                               rate
------------------------------------------------------------------------
Full time....................................................    $816.00
\3/4\ time...................................................     612.00
\1/2\ time...................................................     408.00
Less than \1/2\ but more than \1/4\..........................     408.00
\1/4\ time or less...........................................     204.00
------------------------------------------------------------------------



(Authority: 38 U.S.C. 3015.)

    (2) The monthly rate of basic educational assistance payable to a 
veteran for pursuit of apprenticeship or other on-the-job training that 
occurs after September 30, 2004 is the rate stated in the following 
table:

------------------------------------------------------------------------
                                                                Monthly
                       Training period                            rate
------------------------------------------------------------------------
First six months of training.................................    $612.00
Second six months of training................................     448.80
Remaining pursuit of training................................     285.60
------------------------------------------------------------------------



(Authority: 38 U.S.C. 3015, 3032(c).)

    (3) The monthly rate of basic educational assistance payable to a 
veteran for pursuit of a cooperative course is $816.00 for training that 
occurs after September 30, 2004.


(Authority: 38 U.S.C. 3015.)

    (d) Increase in basic educational assistance rates (``kicker''). The 
Secretary concerned may increase the amount of basic educational 
assistance payable to an individual who has a skill or specialty which 
the Secretary concerned designates as having a critical shortage of 
personnel or for which it is difficult

[[Page 447]]

to recruit. The amount of the increase is set by the Secretary 
concerned, but (except as provided in paragraphs (f) and (g) of this 
section)--
    (1) For individuals, other than those pursuing cooperative training 
before October 9, 1996, or apprenticeship or other on-job training, it 
may not exceed:
    (i) $400 per month for full-time training,
    (ii) $300 per month for three-quarter-time training,
    (iii) $200 per month for one-half-time training, or for training 
which is less than one-half, but more than one-quarter-time, or
    (iv) $100 per month for one-quarter-time training or less.
    (2) For individuals who first become members of the Armed Forces 
after November 28, 1989 (other than those pursuing cooperative training 
before October 9, 1996, or apprenticeship or other on-job training), it 
may not exceed:
    (i) $700 per month for full-time training,
    (ii) $525 per month for three-quarter-time training,
    (iii) $350 per month for one-half-time training or for training 
which is less than one-half, but more than one-quarter-time, or
    (iv) $175 per month for one-quarter-time training or less.
    (3) For individuals who first become members of the Armed Forces 
before November 29, 1989, and who are pursuing an apprenticeship or 
other on-job training, it may not exceed--
    (i) $300 per month during the first six months of training,
    (ii) $220 per month during the second six months of training, and
    (iii) $140 per month during the remaining months of training.
    (4) For individuals who first become members of the Armed Forces 
after November 28, 1989, and who are pursuing an apprenticeship or other 
on-job training, it may not exceed--
    (i) $525 per month during the first six months of training,
    (ii) $385 per month during the second six months of training, and
    (iii) $245 per month during the remaining months of training.
    (5) For individuals who first become members of the Armed Forces 
before November 29, 1989, and who are pursuing cooperative training, it 
may not exceed $320 per month for training received before October 9, 
1996.
    (6) For individuals who first become members of the Armed Forces 
after November 28, 1989, and who are pursuing cooperative training, it 
may not exceed $560 per month for training received before October 9, 
1996.


(Authority: Sec. 108(a)(2), Pub. L. 100-689, 102 Stat. 4170; Sec. 5(a), 
Pub. L. 102-83, 105 Stat. 406)

    (e) Less than one-half-time training and rates for servicemembers. 
Except as provided in paragraph (g) or (h) of this section, the monthly 
rate for a veteran who is pursuing a course on a less than one-half-time 
basis or the monthly rate for a servicemember who is pursuing a program 
of education is the lesser of:
    (1) The monthly rate stated in either paragraph (b) or (c) of this 
section (as determined by the veteran's or servicemember's initial 
obligated period of active duty) plus any additional amounts that may be 
due under paragraph (d) or (e) of this section, or
    (2) The monthly rate of the cost of the course.
    (3) For individuals pursuing cooperative training, it may not exceed 
$320 per month.


(Authority: 38 U.S.C. 3015, 3032)

    (f) Increase in basic educational assistance rates (``kicker'') for 
those eligible under Sec. 21.7045. A veteran who formerly was eligible 
to receive educational assistance under 38 U.S.C. ch. 32, and becomes 
eligible for educational assistance under 38 U.S.C. ch. 30 as described 
in Sec. 21.7045(b)(1)(ii), (c)(1)(ii), or (e)(2), may receive an 
increase in basic educational assistance allowance (kicker). The 
increase will be determined as follows.
    (1) The basis of the increase will be that portion of the amount of 
money--
    (i) Which remains in the VEAP fund after the veteran has been paid 
all assistance due him or her under 38 U.S.C. ch. 32 and refunded all of 
his or her contributions to the VEAP fund, and--
    (ii) Which represents the Secretary of Defense's additional 
contributions for the veteran as stated in Sec. 21.5132(b)(3) of this 
part.

[[Page 448]]

    (2) For a student pursuing a program of education by residence 
training--
    (i) VA will determine the monthly rate of the increase by dividing 
the amount of money described in paragraph (e)(1) of this section by the 
number of months of entitlement to educational assistance under 38 
U.S.C. chapter 30 which the veteran has at the time his eligibility for 
benefits under 38 U.S.C. chapter 30 is first established;
    (ii) VA will use the monthly rate of the increase determined in 
paragraph (e)(2)(i) of this section if the veteran is pursuing his or 
her program full time;
    (iii) VA will multiply the monthly rate determined by paragraph 
(e)(2)(i) of this section by .75 for a student pursuing his or her 
program three-quarter time;
    (iv) VA will multiply the monthly rate determined by paragraph 
(e)(2)(i) of this section by .5 for a student pursuing his or her 
program half time; and
    (v) VA will multiply the monthly rate determined by paragraph 
(e)(2)(i) of this section by .25 for a student pursuing his or her 
program less than one-half time.
    (3) For a veteran pursuing cooperative training VA will multiply the 
rate determined by paragraph (e)(2)(i) of this section by .8 for 
training received before October 9, 1996.
    (4) For a veteran pursuing a program of apprenticeship or other on-
job training VA will multiply the monthly rate determined by paragraph 
(e)(2)(i) of this section
    (i) By .75 for a veteran in the first six months of pursuit of 
training,
    (ii) By .55 for a veteran in the second six months of pursuit of 
training, and
    (iii) By .35 for a veteran in the remaining months of pursuit of 
training.


(Authority: 38 U.S.C. 3015(e))

    (g) Increase (``kicker'') in basic educational assistance rates 
payable for service in the Selected Reserve. (1) The Secretary of the 
military department concerned may increase the amount of basic 
educational assistance payable under paragraph (b), (c), (d), (e), or 
(f) of this section, as appropriate. The increase (``kicker'') is 
payable to a veteran who has a skill or specialty in which there is a 
critical shortage of personnel or for which it is difficult to recruit, 
or, in the case of critical units, retain personnel, if the veteran:
    (i) Establishes eligibility for educational assistance under Sec. 
21.7042(a) or Sec. 21.7045; and
    (ii) Meets the criteria of Sec. 21.7540(a)(1) with respect to 
service in the Selected Reserve.
    (2) The Secretary of the military department concerned--
    (i) Will, for such an increase (``kicker''), set an amount of the 
increase (``kicker'') for full-time training, but the increase 
(``kicker'') may not exceed $350 per month; and
    (ii) May set the amount of the increase (``kicker'') payable, for a 
veteran pursuing a program of education less than full time or pursuing 
a program of apprenticeship or other on-job training, at an amount less 
than the amount described in paragraph (g)(2)(i) of this section.


(Authority: 10 U.S.C. 16131(i)(2))

    (h) Increase in monthly rates due to contributions. Effective May 1, 
2001, a servicemember who establishes eligibility under Sec. 
21.7042(a), (b), or (c) may contribute up to $600 to the Secretary of 
the military department concerned in multiples of $20.
    (1) VA will increase the monthly rate provided in paragraph (b)(2) 
or (c)(2) of this section by:
    (i) $5 for every $20 an individual pursuing a program of education 
full time has contributed;
    (ii) $3.75 for every $20 an individual pursuing a program of 
education three-quarter time has contributed;
    (iii) $2.50 for every $20 an individual pursuing a program of 
education half time or less than one-half time but more than one-quarter 
time has contributed; and
    (iv) $1.25 for every $20 an individual pursuing a program of 
education one-quarter time has contributed.
    (2) If a veteran is pursuing an apprenticeship or other on-job 
training--
    (i) During the first six months of the veteran's pursuit of 
training, VA will increase the monthly rate provided in paragraph (b)(4) 
or (c)(4) of this section by $3.75 for every $20 the individual has 
contributed;
    (ii) During the second six months of the veteran's pursuit of 
training, VA

[[Page 449]]

will increase the monthly rate provided in paragraph (b)(4) or (c)(4) of 
this section by $2.75 for every $20 the veteran has contributed; and
    (iii) During the remaining months of the veteran's pursuit of 
training, VA will increase the monthly rate proved in paragraph (b)(4) 
or (c)(4) of this section by $1.75 for every $20 the veteran has 
contributed.
    (3) VA will increase the monthly rate provided in paragraph 
(b)(5)(iii) or (c)(5)(iii) of this section by $5 for every $20 the 
veteran has contributed.


(Authority: 38 U.S.C. 3015(g))


[55 FR 28386, July 11, 1990]

    Editorial Note: For Federal Register citations affecting Sec. 
21.7136, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 21.7137  Rates of payment of basic educational assistance for 
individuals with remaining entitlement under 38 U.S.C. chapter 34.

    (a) Minimum rates. (1) Except as elsewhere provided in this section, 
the monthly rate of basic educational assistance for training that 
occurs after September 30, 2004 is the rate stated in the following 
table:

----------------------------------------------------------------------------------------------------------------
                                                                           Monthly rate
                                                 ---------------------------------------------------------------
                                                                                                  Additional for
                    Training                                                            Two            each
                                                   No dependents  One  dependent    dependents      additional
                                                                                                     dependent
----------------------------------------------------------------------------------------------------------------
Full time.......................................       $1,192.00       $1,228.00       $1,259.00          $16.00
\3/4\ time......................................          894.50          921.00          944.50           12.00
\1/2\ time......................................          596.00          614.00          629.50            8.50
Less than \1/2\ but more than \1/4\ time........          596.00          596.00          596.00               0
\1/4\ time or less..............................          298.00          298.00          298.00               0
----------------------------------------------------------------------------------------------------------------



(Authority: 38 U.S.C. 3015.)

    (2) For veterans pursuing apprenticeship or other on-the-job 
training, the monthly rate of basic educational assistance for training 
that occurs after September 30, 2004 is the rate stated in the following 
table:

----------------------------------------------------------------------------------------------------------------
                                                                           Monthly rate
                                                 ---------------------------------------------------------------
                                                                                                  Additional for
                    Training                                                            Two            each
                                                   No dependents  One  dependent    dependents      additional
                                                                                                     dependent
----------------------------------------------------------------------------------------------------------------
1st six months of pursuit of program............         $855.75         $868.13         $879.00           $5.25
2nd six months of pursuit of program............          608.58          617.93          625.63            3.85
3rd six months of pursuit of program............          375.20          381.33          386.05            2.45
Remaining pursuit of program....................          363.30          369.08          374.33            2.45
----------------------------------------------------------------------------------------------------------------



(Authority: 38 U.S.C. 3015.)

    (3) The monthly rate of basic educational assistance payable to a 
veteran who is pursuing a cooperative course after September 30, 2004, 
is the rate stated in the following table:

----------------------------------------------------------------------------------------------------------------
                                                  Monthly rate
-----------------------------------------------------------------------------------------------------------------
                                                                                             Additional for each
             No dependents                    One dependent             Two dependents            additional
                                                                                                  dependent
----------------------------------------------------------------------------------------------------------------
$1192.00..............................  $1228.00.................  $1259.00................  $16.00
----------------------------------------------------------------------------------------------------------------



(Authority: 38 U.S.C. 3015.)

    (b) Less than one-half-time training. Except as provided in 
paragraphs (d) and (e) of this section, the monthly rate of basic 
educational assistance for a veteran who is pursuing a course on a less 
than one-half-time basis is the lesser of:
    (1) The monthly rate in paragraph (a)(1) of this section, or

[[Page 450]]

    (2) The monthly rate of the cost of the course.


(Authority: 38 U.S.C. 3032; Pub. L. 98-525, Pub. L. 99-576)

    (c) Rates for servicemembers. The monthly rate of basic educational 
assistance for a servicemember may not exceed the lesser of the 
following rates (except as provided in paragraph (d) of this section):
    (1) The monthly pro-rated cost of the course.
    (2) The following monthly rates for training that occurs after 
September 30, 2004--
    (i) $1,192.00 for full-time training;
    (ii) $894.50 for three-quarter-time training;
    (iii) $596.00 for one-half-time training and training that is less 
than one-half-time training but more than one-quarter-time training; and
    (iv) $298.00 for one-quarter-time training.


(Authority: 38 U.S.C. 3015.)

    (d) Increase in basic educational assistance rates (``kicker''). The 
Secretary concerned may increase the amount of basic educational 
assistance payable to an individual who has a skill or specialty which 
the Secretary concerned designates as having a critical shortage of 
personnel or for which it is difficult to recruit. The increase may not 
be applied to a servicemember whose monthly rate is determined by 
paragraph (c)(1) of this section, but it can serve to raise the ceiling 
on monthly rates stated in paragraphs (b)(1) and (c)(2) of this section. 
The amount of the increase is set by the Secretary concerned, but--
    (1) For individuals, other than those pursuing cooperative training 
before October 9, 1996, or apprenticeship or other on-job training, it 
may not exceed:
    (i) $400 per month for full-time training,
    (ii) $300 per month for three-quarter-time training.
    (iii) $200 per month for one-half-time training or for training 
which is less than one-half but more than one-quarter-time, or
    (iv) $100 per month for one-quarter-time training or less.
    (2) For individuals pursuing an apprenticeship or other on-job 
training it may not exceed--
    (i) $300 per month for the first six months of training.
    (ii) $220 per month for the second six months of training, and
    (iii) $140 per month for the remaining months of training.


(Authority: 38 U.S.C. 3015, 3032)

    (3) For individuals pursuing cooperative training, it may not exceed 
$320 per month for training received before October 9, 1996.


(Authority: Sec. 108(a)(2), Pub. L. 100-689, 102 Stat. 4170; sec. 5(a), 
Pub. L. 102-83, 105 Stat. 406)

    (e) Increase (``kicker'') in basic educational assistance rates for 
service in the Selected Reserve. (1) The Secretary of the military 
department concerned may increase the amount of basic educational 
assistance payable under paragraph (a), (b), or (d) of this section, as 
appropriate. The increase (``kicker'') is payable to a veteran who has a 
skill or specialty in which there is a critical shortage of personnel or 
for which it is difficult to recruit, or, in the case of critical units, 
retain personnel, if the veteran:
    (i) Establishes eligibility for educational assistance under Sec. 
21.7044(a); and
    (ii) Meets the criteria of Sec. 21.7540(a)(1) with respect to 
service in the Selected Reserve.
    (2) The Secretary of the military department concerned--
    (i) Will, for such an increase, set the amount of the increase 
(``kicker'') payable for full-time training, but the increase 
(``kicker'') may not exceed $350 per month;
    (ii) May set the amount of the ``kicker'' payable, for a veteran 
pursuing a program of education less than full time or pursuing an 
apprenticeship or other on-job training, at an amount less than the 
amount described in paragraph (e)(2)(i) of this section.


(Authority: 10 U.S.C. 16131(i)(2))

    (f) Concurrent benefits. VA may pay additional educational 
assistance to a veteran for a dependent concurrently

[[Page 451]]

with additional pension or compensation for the same dependent.


(Authority: 38 U.S.C. 3015(d), Pub. L. 98-525)

    (g) Two veteran cases. VA may pay additional educational assistance 
to a veteran for a spouse who is also a veteran. This will not bar the 
payment of additional educational assistance or subsistence allowance 
under Sec. 21.260 of this part to the spouse for the veteran. If the 
veteran is paid additional educational assistance for a child, that will 
not bar payment of additional educational assistance or subsistence 
allowance under Sec. 21.260 of this part to the spouse for the same 
child.


(Authority: 38 U.S.C. 3015(d); Pub. L. 98-525)

[53 FR 1757, Jan. 22, 1988]

    Editorial Note: For Federal Register citations affecting Sec. 
21.7137, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 21.7138  Rates of supplemental educational assistance.

    In addition to basic educational assistance, a veteran or 
servicemember who is eligible for supplemental educational assistance 
and entitled to it shall be paid supplemental educational assistance at 
the rate described in this section unless a lesser rate is required by 
Sec. 21.7139 of this part.
    (a) Rates for veterans. (1) Except for a veteran pursuing 
apprenticeship or other on-job training, the rate of supplemental 
educational assistance payable to a veteran is at least the rate stated 
in this table.

------------------------------------------------------------------------
                 Training                           Monthly rate
------------------------------------------------------------------------
Full time.................................  $300.
\3/4\ time................................  225.
\1/2\ time................................  150.
Less than \1/2\ but more than \1/4\ time..  150 See paragraph (c).
\1/4\ time or less........................  75 See paragraph (c).
Cooperative...............................  240.
------------------------------------------------------------------------



(Authority: 38 U.S.C. 3015(d), 3022, 3032(d); Pub. L. 98-525, Pub. L. 
100-689) (Jan. 1, 1989)

    (2) For a veteran pursuing apprenticeship or other on-job training 
the rate of supplemental educational assistance payable to a veteran is 
as provided in this table.

------------------------------------------------------------------------
              Training period                       Monthly rate
------------------------------------------------------------------------
First 6 months of pursuit of program......  $225.00
Second 6 months of pursuit of program.....  165.00
Remaining pursuit of program..............  105.00
------------------------------------------------------------------------



(Authority: 38 U.S.C. 3015(c), 3032(c); Pub. L. 99-576)

    (b) Increase in supplemental educational assistance rates 
(``kicker''). The Secretary concerned may increase the amount of 
supplemental educational assistance payable to an individual who has a 
skill or specialty which the Secretary concerned designates as having a 
critical shortage of personnel or for which it is difficult to recruit. 
The amount of the increase is set by the Secretary concerned, but--
    (1) For an individual other than one pursuing an apprenticeship or 
other on-job training or cooperative training it may not exceed--


(Authority: 38 U.S.C. 3032(d)) (Jan. 1, 1989)

    (i) $300 per month for full-time training.
    (ii) $225 per month for three-quarter-time training,
    (iii) $150 per month for one-half-time training and for training 
which is less than one-half-time, but more than one-quarter-time, or
    (iv) $75 per month for one-quarter-time training or less.
    (2) For an individual pursuing an apprenticeship or other on-job 
training it may not exceed--
    (i) $225 per month for the first six months of training,
    (ii) $165 per month for the second six months of training, and
    (iii) $105 per month for the remaining months of training.


(Authority: 38 U.S.C. 3022(b), 3032(c); Pub. L. 99-576)

    (3) For an individual pursuing cooperative training, it may not 
exceed $240 per month.


(Authority: 38 U.S.C. 3022(b), 3032(d)) (Jan. 1, 1989)

    (c) Rates of supplemental educational assistance for less than one-
half-time training and for servicemembers. The

[[Page 452]]

monthly rate of supplemental educational assistance payable to a veteran 
who is training less than half-time or to a servicemember is determined 
as follows:
    (1) The monthly rate of the veteran's or servicemember's basic 
educational assistance is determined as provided in Sec. Sec. 
21.7136(d), and 21.7137 (b), (c) and (d) of this part.
    (2) If the monthly rate of basic educational assistance equals or is 
greater than the monthly rate of the cost of the course, no supplemental 
educational assistance is payable.
    (3) If the monthly rate of basic educational assistance is less than 
monthly rate of the cost of the course, the monthly rate of supplemental 
educational assistance is the lesser of--
    (i) The monthly rate provided in paragraph (a) of this section, plus 
the monthly rate provided in paragraph (b) of this section, if 
appropriate, or
    (ii) The difference between the monthly rate of the cost of the 
course and the monthly rate of the veteran's or servicemember's basic 
educational assistance.


(Authority: 38 U.S.C. 3022, 3032; Pub. L. 98-525)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28388, July 11, 1990; 56 
FR 20136, May 2, 1991]



Sec. 21.7139  Conditions which result in reduced rates or no payment.

    The monthly rates established in Sec. Sec. 21.7136, 21.7137 and 
21.7138 shall be reduced as stated in this section whenever the 
circumstances described in this section arise.
    (a) Withdrawals and nonpunitive grades. Withdrawal from a course or 
receipt of a nonpunitive grade affects payments to a veteran or 
servicemember. VA will not pay benefits to a veteran or servicemember 
for pursuit of a course from which the veteran or servicemember 
withdraws or receives a nonpunitive grade which is not used in computing 
requirements for graduation unless the provisions of this paragraph are 
met.
    (1) The veteran withdraws because he or she is ordered to active 
duty; or
    (2) All of the following exist.
    (i) There are mitigating circumstances; and
    (ii) The veteran or servicemember submits a description of the 
mitigating circumstances in writing to VA within one year from the date 
VA notifies the veteran or servicemember that he or she must submit a 
description of the mitigating circumstances, or at a later date if the 
veteran or servicemember is able to show good cause why the one-year 
time limit should be extended to the date on which he or she submitted 
the description of the mitigating circumstances; and
    (iii) The veteran or servicemember submits evidence supporting the 
existence of mitigating circumstances within one year of the date that 
evidence is requested by VA, or at a later date if the veteran or 
servicemember is able to show good cause why the one-year time limit 
should be extended to the date on which he or she submitted the evidence 
supporting the existence of mitigating circumstances.


(Authority: 38 U.S.C. 3034, 3680(a); Pub. L. 98-525, Pub. L. 102-
127)(Aug. 1, 1990)

    (b) No educational assistance for some incarcerated servicemembers. 
As with servicemembers who are not incarcerated, VA will not pay 
educational assistance to an incarcerated servicemember enrolled in a 
course for which there are no tuition and fees. Furthermore, VA will not 
pay educational assistance to a servicemember who--
    (1) Is enrolled in a course where his or her tuition and fees are 
being paid for by a Federal program (other than one administered by VA) 
or by a State or local program, and
    (2) Is incarcerated in a Federal, State or local prison or jail for 
conviction of a felony, and has incurred no expenses for supplies, books 
or equipment.


(Authority: 38 U.S.C. 3034, 3482(g))

    (c) No educational assistance for some incarcerated veterans. The VA 
will pay no educational assistance to a veteran who--
    (1) Is incarcerated in a Federal, State or local penal institution 
for conviction of a felony, and
    (2) Is enrolled in a course--

[[Page 453]]

    (i) For which there are no tuition and fees, or
    (ii) For which tuition and fees are being paid by a Federal program 
(other than one administered by the VA) or by a State or local program, 
and
    (3) Is incurring no charge for the books, supplies and equipment 
necessary for the course.


(Authority: 38 U.S.C. 3034, 3482(g))

    (d) Reduced educational assistance for some incarcerated 
servicemembers. (1) VA will pay reduced educational assistance to a 
servicemember who--
    (i) Is incarcerated in a Federal, State or local penal institution 
for conviction of a felony, and
    (ii) Is enrolled in a course where his or her tuition and fees are 
being paid for entirely or partly by a Federal program (other than one 
administered by VA) or by a State or local program, and
    (iii) If all the tuition and fees are paid for by such a program, 
must buy books, supplies or equipment for the course.
    (2) The monthly rate of educational assistance payable to a 
servicemember described in this paragraph shall equal the lowest of the 
following:
    (i) The monthly rate of the portion of the tuition and fees that are 
not paid by a Federal program (other than one administered by VA) or a 
State or local program plus the monthly rate of any charges to the 
servicemember for the cost of necessary supplies, books and equipment;
    (ii) The monthly rate of the portion of the tuition and fees paid by 
the servicemember plus the monthly rate of the portion of tuition and 
fees paid by the Federal, State or local program; or
    (iii) The monthly rate found in Sec. 21.7136(d) or Sec.  
21.7137(c), as appropriate.


(Authority: 38 U.S.C. 3034, 3482(g))

    (e) Reduced educational assistance for some incarcerated veterans. 
(1) VA will pay reduced educational assistance to a veteran who--
    (i) Is incarcerated in a Federal, State or local penal institution 
for conviction of a felony, and
    (ii) Is enrolled in a course for which the veteran pays some (but 
not all) of the charges for tuition and fees, or for which a Federal 
program (other than one administered by VA) or a State or local program 
pays all the charges for tuition and fees, but which requires the 
veteran to pay for books, supplies and equipment.
    (2) The monthly rate of educational assistance payable to such a 
veteran who is pursuing the course on a one-half time or greater basis 
shall be the lesser of the following:
    (i) The monthly rate of the portion of the tuition and fees that are 
not paid by a Federal program (other than one administered by VA) or a 
State or local program plus the monthly rate of the charge to the 
veteran for the cost of necessary supplies, books and equipment, or
    (ii) If the veteran has remaining entitlement under 38 U.S.C. 
chapter 34, monthly rate stated in Sec. 21.7137(a) for a veteran with 
no dependents and the increase provided in Sec. 21.7137(d) or (e), if 
appropriate, plus the monthly rate stated in Sec. 21.7138 (a) and (b) 
for a veteran if the veteran is entitled to supplemental educational 
assistance, or
    (iii) If the veteran has no entitlement under 38 U.S.C. chapter 34, 
the monthly rate stated in Sec. 21.7136 (a) or (b), as appropriate, and 
the increase provided in Sec. 21.7136(d), (f), or (g), if appropriate, 
plus the monthly rate stated in Sec. 21.7138 (a) and (b) for a veteran 
if the veteran is entitled to supplemental educational assistance.
    (3) The monthly rate of educational assistance payable to such a 
veteran who is pursuing the course on a less than one-half time basis or 
on a one-quarter time basis shall be the lowest of the following:
    (i) The monthly rate of the tuition and fees charged for the course,
    (ii) The monthly rate of the tuition and fees which the veteran must 
pay plus the monthly rate of the charge to the veteran for the cost of 
necessary supplies, books and equipment, or
    (iii) The monthly rate determined by Sec. 21.7136(d) or Sec.  
21.7137(b), as appropriate, plus the monthly rate stated in

[[Page 454]]

Sec. 21.7138(c) if the veteran is entitled to supplemental educational 
assistance.


(Authority: 38 U.S.C. 3034, 3482(g))

    (f) Payment for correspondence courses. The amount of payment due a 
veteran or servicemember who is pursuing a correspondence course or the 
correspondence portion of a correspondence-residence course is 55 
percent of the established charge which the educational institution 
requires nonveterans to pay for the lessons that the veteran or 
servicemember has had completed and serviced and for which payment is 
due.


(Authority: 38 U.S.C. 3034, 3686(a)(2))

    (g) Failure to work sufficient hours of apprenticeship and other on-
job training. (1) For any month in which an eligible veteran pursuing an 
apprenticeship or other on-job training program fails to complete 120 
hours of training, VA will reduce proportionally--
    (i) The rates specified in Sec. Sec. 21.7136(b)(2), (c)(2), (d)(3), 
and (d)(4), and 21.7137(a)(2) and (d)(2); and
    (ii) Any increase (``kicker'') set by the Secretary of the military 
department concerned as described in Sec. Sec. 21.7136(g) and 
21.7137(e).
    (2) In making the computations required by paragraph (g)(1) of this 
section, VA will round the number of hours worked to the nearest 
multiple of eight.
    (3) For the purpose of this paragraph ``hours worked'' include 
only--
    (i) The training hours the veteran worked, and
    (ii) All hours of the veteran's related training which occurred 
during the standard workweek and for which the veteran received wages. 
(See Sec. 21.4270(c), footnote 5, as to the requirements for full-time 
training.)


(Authority: 38 U.S.C. 3034, 3687(b)(3)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28388, July 11, 1990; 56 
FR 11672, Mar. 20, 1991; 57 FR 15025, Apr. 24, 1992; 58 FR 26242, May 3, 
1993; 60 FR 32272, June 21, 1995; 62 FR 55520, Oct. 27, 1997]



Sec. 21.7140  Certifications and release of payments.

    (a) Advance payments and lump-sum payments. VA will apply the 
provisions of Sec. 21.4138(a) and (b) in making advance payments and 
lump-sum payments to veterans and servicemembers.


(Authority: 38 U.S.C. 3034 and 3680)

    (b) Accelerated payments. VA will apply the provisions of Sec. Sec. 
21.7151(a), (c), and 21.7154(d) in making accelerated payments.
    (c) Other payments. An individual must be pursuing a program of 
education in order to receive payments. To ensure that this is the case 
the provisions of this paragraph must be met.
    (1) VA will pay educational assistance to a veteran or servicemember 
(other than one pursuing a program of apprenticeship or other on-job 
training, a correspondence course, one who qualifies for advance 
payment, one who qualifies for an accelerated payment, or one who 
qualifies for a lump sum payment) only after--
    (i) The educational institution has certified his or her enrollment 
as provided in Sec. 21.7152; and
    (ii) VA has received from the individual a verification of the 
enrollment.


(Authority: 38 U.S.C. 3680(g))

    (2) VA will pay educational assistance to a veteran pursuing a 
program of apprenticeship or other on-job training only after--
    (i) The training establishment has certified his or her enrollment 
in the training program as provided in Sec. 21.7152; and
    (ii) VA has received from the veteran and the training establishment 
a certification of hours worked.
    (3) VA will pay educational assistance to a veteran or servicemember 
who is pursuing a correspondence course only after-
    (i) The educational institution has certified his or her enrollment;
    (ii) VA has received from the veteran or servicemember a 
certification as to the number of lessons completed and serviced by the 
educational institution; and
    (iii) VA has received from the educational institution a 
certification or an endorsement on the veteran's or servicemember's 
certificate, as to the number of lessons completed by the

[[Page 455]]

veteran or servicemember and serviced by the educational institution.


(Authority: 38 U.S.C. 3034, 3680(b))

    (d) Payment for intervals between terms. (1) In administering 38 
U.S.C. chapter 30, VA will apply the provisions of Sec. 21.4138(f) when 
determining whether a veteran is entitled to payment for an interval 
between terms. References to Sec. 21.4205 in Sec.  21.4138(f) shall be 
deemed to refer to Sec. 21.7136.
    (2) The Director of the VA facility of jurisdiction may authorize 
payment to be made for breaks, including intervals between terms within 
a certified period of enrollment, during which the educational 
institution is closed under an established policy based upon an order of 
the President or due to an emergency situation.
    (i) If the Director has authorized payment due to an emergency 
school closing resulting from a strike by the faculty or staff of the 
school, and the closing lasts more than 30 days, the Director, Education 
Service, will decide if payments may be continued. The decision will be 
based on a full assessment of the strike situation. Further payments 
will not be authorized if in his or her judgment the school closing will 
not be temporary.
    (ii) An educational institution, which disagrees with a decision 
made under this paragraph by a Director of a VA facility, has one year 
from the date of the letter notifying the educational institution of the 
decision to request that the decision be reviewed. The request must be 
submitted in writing to the Director of the VA facility where the 
decision was made. The Director, Education Service, shall review the 
evidence of record and any other pertinent evidence the educational 
institution may wish to submit. The Director, Education Service, has the 
authority either to affirm or reverse a decision of the Director of a VA 
facility.
    (3) A veteran, who is pursuing a course leading to a standard 
college degree, may transfer between consecutive school terms from one 
approved educational institution to another for the purpose of enrolling 
in, and pursuing, a similar course at the second educational 
institution. If the interval between terms does not exceed 30 days, VA 
shall, for the purpose of paying educational assistance, consider the 
veteran to be enrolled in the first educational institution during the 
interval.


(Authority: 38 U.S.C. 3034, 3680)

    (e) Payee. (1) VA will make payment to the veteran or servicemember 
or to a duly appointed fiduciary. The VA will make direct payment to the 
veteran or servicemember even if he or she is a minor.
    (2) The assignment of educational assistance is prohibited. In 
administering this provision, VA will apply the provisions of Sec. 
21.4146 to 38 U.S.C. chapter 30.


(Authority: 38 U.S.C. 3034, 3680)

    (f) Limitations on payments. VA will not apportion educational 
assistance.


(Authority: 38 U.S.C. 3034, 3680)

    (g) Payments of accrued benefits. Educational assistance remaining 
due and unpaid at the date of the servicemember's or veteran's death is 
payable under the provisions of Sec. 3.1000 of this chapter.


(Authority: 38 U.S.C. 5121)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28388, July 11, 1990; 56 
FR 20136, May 2, 1991; 56 FR 31332, July 10, 1991; 57 FR 15025, Apr. 24, 
1992; 61 FR 26117, May 24, 1996; 62 FR 55761, Oct. 28, 1997; 64 FR 
52652, Sept. 30, 1999; 68 FR 35180, June 12, 2003]



Sec. 21.7141  Tutorial assistance.

    An individual who is otherwise eligible to receive benefits under 
the Montgomery GI Bill - Active Duty may receive supplemental monetary 
assistance to provide tutorial services. In determining whether VA will 
pay the individual this assistance, VA will apply the provisions of 
Sec. 21.4236.

(Authority: 38 U.S.C. 3019, 3492)

[61 FR 26117, May 24, 1996



Sec. 21.7142  Accelerated payments.

    The accelerated payment will be the lesser of--
    (a) The amount equal to 60 percent of the charged tuition and fees 
for the term, quarter or semester (or the entire program of education 
for those

[[Page 456]]

programs not offered on a term, quarter, or semester basis), or
    (b) The aggregate amount of basic education assistance to which the 
individual remains entitled under this chapter at the time of the 
payment.

(Authority: 38 U.S.C. 3014A)

[68 FR 35180, June 12, 2003]



Sec. 21.7143  Nonduplication of educational assistance.

    (a) Payments of educational assistance shall not be duplicated. An 
individual, entitled to educational assistance under 38 U.S.C. chapter 
34, who establishes entitlement under 38 U.S.C. chapter 30, shall not be 
eligible to receive educational assistance under 38 U.S.C. chapter 30 
before January 1, 1990. An individual who is entitled to educational 
assistance under 38 U.S.C. chapter 30 and any of the provisions of law 
listed in this paragraph must elect which benefit he or she will receive 
for the program of education he or she wishes to pursue. The provisions 
of law are:
    (1) 38 U.S.C. chapter 31,
    (2) 38 U.S.C. chapter 32,
    (3) 38 U.S.C. chapter 35,
    (4) 10 U.S.C. chapter 1606,
    (5) 10 U.S.C. chapter 107,
    (6) The Hostage Relief Act of 1980, (Pub. L. 96-499, 94 Stat. 1967-
1974, and 5 U.S.C. 5561 note), and
    (7) The Omnibus Diplomatic Security and Antiterrorism Act of 1986 
(Pub. L. 99-399, 100 Stat. 887-889 (10 U.S.C. 2181-2185)).


(Authority: 38 U.S.C. 3033, 3681)

    (b) Election of benefits. The veteran must elect in writing which 
benefit he or she wishes to receive. The veteran may make a new election 
at any time, but may not elect more than once in a calendar month.


(Authority: 38 U.S.C. 3033; Pub. L. 98-525)

    (c) Nonduplication--Federal program. Payment of educational 
assistance is prohibited to an otherwise eligible veteran or 
servicemember--
    (1) For a unit course or courses which are being paid for entirely 
or partly by the Armed Forces during any period he or she is on active 
duty;
    (2) For a unit course or courses which are being paid for entirely 
or partly by the Department of Health and Human Services during any 
period that he or she is on active duty with the Public Health Service; 
or
    (3) For a unit course or courses which are being paid for entirely 
or partly by the United States under the Government Employees' Training 
Act.


(Authority: 38 U.S.C. 3034, 3681)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28389, July 11, 1990; 57 
FR 15025, Apr. 24, 1992; 58 FR 46867, Sept. 3, 1993; 61 FR 20729, May 8, 
1996. Redesignated at 68 FR 35180.]



Sec. 21.7144  Overpayments.

    (a) Prevention of overpayments. In administering benefits payable 
under 38 U.S.C. chapter 30, VA will apply the provisions of Sec. 
21.4008. See Sec. 21.7133.


(Authority: 38 U.S.C. 3034, 3690(b))

    (b) Liability for overpayments. (1) The amount of the overpayment of 
educational assistance paid to a veteran or servicemember constitutes a 
liability of that veteran or servicemember.
    (2) The amount of the overpayment of educational assistance paid to 
a veteran or servicemember constitutes a liability of the educational 
institution if VA determines that the overpayment was made as the result 
of willful or negligent:
    (i) False certification by the educational institution; or
    (ii) Endorsement of a veteran's or servicemember's false 
certification of his or her actual attendance.


(Authority: 38 U.S.C. 3034, 3685)

    (c) Recovery of overpayments. In determining whether an overpayment 
should be recovered from an educational institution, VA will apply the 
provisions of Sec. 21.4009 (except paragraph (a)(1)) to overpayments of 
educational assistance under 38 U.S.C. chapter 30.


(Authority: 38 U.S.C. 3034, 3685)

    Cross reference: Entitlement charges. See Sec. 21.7076(c).

[62 FR 55761, Oct. 28, 1997. Redesignated at 68 FR 35180, June 12, 
2003.]

[[Page 457]]

                           Pursuit of Courses



Sec. 21.7150  Pursuit.

    The veteran's or servicemember's educational assistance depends upon 
his or her pursuit of a program of education. Verification of this 
pursuit is accomplished by various certifications.


(Authority: 38 U.S.C. 3034(b); Pub. L. 98-525)



Sec. 21.7151  Advance payment and accelerated payment certifications.

    All certifications required by this paragraph shall be in a form and 
shall contain such information as specified by the Secretary.
    (a) Certification needed before an advance payment can be made. In 
order for a veteran or service member to receive an advance payment of 
educational assistance, the application or other document must be signed 
by the veteran or the enrollment certification must be signed by an 
authorized official of the educational institution.


(Authority: 38 U.S.C. 3034, 3680(d))

    (b) Advance payments. All verifications required by this paragraph 
shall be in a form and shall contain such information as specified by 
the Secretary.
    (1) For each individual receiving an advance payment an educational 
institution must--
    (i) Verify enrollment for the individual; and
    (ii) Verify the delivery of the advance payment check to the 
individual.
    (2) Once the educational institution has initially verified the 
enrollment of the individual, the individual, not the educational 
institution, must make subsequent verifications in order to release 
further payment for that enrollment as provided in Sec. 21.7154(a) of 
this part.


(Authority: 38 U.S.C. 3034, 3680(d))

    (c) Accelerated payments. (1) A veteran or servicemember is eligible 
for an accelerated payment only if--
    (i) The veteran or servicemember submits a signed statement to the 
school or to VA that states ``I request accelerated payment'';
    (ii) The veteran or servicemember is enrolled in a course or program 
of education or training beginning on or after October 1, 2002;
    (iii) The veteran is enrolled in an approved program as defined in 
Sec. 21.4200 (aa);
    (iv) The charged tuition and fees for the term, quarter, or semester 
(or entire program for those programs not offered on a term, quarter or 
semester basis) divided by the number of months (and fractions thereof) 
in the enrollment period, exceeds the amount equal to 200 percent of the 
monthly rate of basic educational assistance allowance otherwise payable 
under Sec. Sec. 21.7136 or 21.7137, as applicable;
    (v) The veteran or servicemember requesting the accelerated payment 
has not received an advance payment under Sec. 21.7140(a) for the same 
enrollment period; and
    (vi) The veteran or servicemember has submitted all certifications 
required under Sec. 21.7154(d) for any previous accelerated payment he 
or she received.
    (2) Except as provided in paragraph (c)(5) of this section, VA will 
make the accelerated payment directly to the educational institution, in 
the veteran's or servicemember's name, for delivery to the veteran or 
servicemember if:
    (i) The educational institution submits the enrollment certification 
required under Sec. 21.7152 before the actual start of the term, 
quarter or semester (or the start of the program for a program not 
offered on a term, quarter or semester basis); and
    (ii) The educational institution at which the veteran or 
servicemember is accepted or enrolled agrees to--
    (A) Provide for the safekeeping of the accelerated payment check 
before delivery to the veteran or servicemember;
    (B) Deliver the payment to the veteran or servicemember no earlier 
than the start of the term, quarter or semester (or the start of the 
program if the program is not offered on a term, quarter or semester 
basis);
    (C) Certify the enrollment of the veteran or servicemember and the 
amount of tuition and fees therefor; and
    (D) Certify the delivery of the accelerated payment to the veteran 
or servicemember.

[[Page 458]]

    (3) VA will make accelerated payments directly to the veteran or 
servicemember if the enrollment certification required under Sec. 
21.7152 is submitted on or after the first day of the enrollment period. 
VA will electronically deposit the accelerated payment in the veteran's 
or servicemember's bank account unless--
    (i) The veteran or servicemember does not have a bank account; or
    (ii) The veteran or servicemember objects to payment by electronic 
funds transfer.
    (4) VA must make the accelerated payment no later than the last day 
of the month immediately following the month in which VA receives a 
certification from the educational institution regarding--
    (i) The veteran's or servicemember's enrollment in the program of 
education; and
    (ii) The amount of the charged tuition and fees for the term, 
quarter or semester (or for a program that is not offered on a term, 
quarter, or semester basis, the entire program).
    (5) The Director of the VA field station of jurisdiction may direct 
that accelerated payments not be made in advance of the first day of the 
enrollment period in the case of veterans or servicemembers attending an 
educational institution that demonstrates its inability to discharge its 
responsibilities for accelerated payments. In such a case, the 
accelerated payment will be made directly to the veteran or 
servicemember as provided in paragraph (a)(3).

(Authority: 38 U.S.C. 3014A)

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0636.)

[55 FR 28390, July 11, 1990, as amended at 68 FR 35180, June 12, 2003]



Sec. 21.7152  Certification of enrollment.

    As stated in Sec. 21.7140 of this part, the educational institution 
must certify the veteran's or servicemember's enrollment before he or 
she may receive educational assistance.
    (a) Certification of enrollment is required. Except as provided in 
Sec. 21.7151 of this part, the educational institution must certify the 
veteran's or servicemember's enrollment before he or she may receive 
educational assistance. This certification shall be in a form and shall 
contain such information as specified by the Secretary.


(Authority: 38 U.S.C. 3032, 3034, 3482(g), 3680, 3687)

    (b) Length of the enrollment period covered by the enrollment 
certification. (1) Educational institutions organized on a term, quarter 
or semester basis generally shall report enrollment for the term, 
quarter, semester, ordinary school year or ordinary school year plus 
summer term. If the certification covers two or more terms, the 
educational institution will report the dates for the break between 
terms if a term ends and the following term does not begin in the same 
or the next calendar month or if the veteran elects not be paid for the 
intervals between terms. The educational institution must submit a 
separate enrollment certification for each term, quarter or semester 
when the certification is for--
    (i) A servicemember, or
    (ii) A veteran who--
    (A) Is training on a less than one-half time basis, or
    (B) Is incarcerated in a Federal, State or local prison or jail for 
conviction of a felony.
    (2) Educational institutions organized on a year-round basis will 
report enrollment for the length of the course. The certification will 
include a report of the dates during which the educational institution 
closes for any intervals designated in its approval data as breaks 
between school years.
    (3) When a veteran enrolls in independent study leading to a 
standard college degree, the educational institution's certification 
will include--
    (i) The enrollment date, and
    (ii) The ending date for the period being certified. If the 
educational institution has no prescribed maximum time for completion, 
the certification must include an ending date based on

[[Page 459]]

the educational institution's estimate for completion.


(Authority: 38 U.S.C. 3034, 3684; Pub. L. 98-525)

(Approved by the Office of Management and Budget under control number 
2900-0073)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28390, July 11, 1990; 61 
FR 6790, Feb. 22, 1996]



Sec. 21.7153  Progress and conduct.

    (a) Satisfactory pursuit of program. In order to receive educational 
assistance for pursuit of a program of education, an individual must 
maintain satisfactory progress. VA will discontinue educational 
assistance if the individual does not maintain satisfactory progress. 
Progress is unsatisfactory if the individual does not satisfactorily 
progress according to the regularly prescribed standards of the 
educational institution he or she is attending.


(Authority: 38 U.S.C. 3034, 3474; Pub. L. 98-525)

    (b) Satisfactory conduct. In order to receive educational assistance 
for pursuit of a program of education, an individual must maintain 
satisfactory conduct according to the regularly prescribed standards and 
practices of the educational institution in which he or she is enrolled. 
If the individual will be no longer retained as a student or will not be 
readmitted as a student by the educational institution in which he or 
she is enrolled, VA will discontinue educational assistance, unless 
further development establishes that the educational institution's 
action is retaliatory.


(Authority: 38 U.S.C. 3034, 3474; Pub. L. 98-525)

    (c) Satisfactory attendance. In order to receive educational 
assistance for pursuit of a program of education, an individual must 
maintain satisfactory attendance. VA will discontinue educational 
assistance if the individual does not maintain satisfactory attendance. 
Attendance is unsatisfactory if the individual does not attend according 
to the regularly prescribed standards of the educational institution in 
which he or she is enrolled.


(Authority: 38 U.S.C. 3034, 3474)

    (d) Reentrance after discontinuance. (1) An individual may be 
reentered following discontinuance because of unsatisfactory attendance, 
conduct or progress when either of the following sets of conditions 
exists:
    (i) The individual resumes enrollment at the same educational 
institution in the same program of education and the educational 
institution has both approved the individual's reenrollment and 
certified it to VA; or
    (ii) VA determines that--
    (A) The cause of the unsatisfactory attendance, conduct or progress 
has been removed, and
    (B) The program which the individual now proposes to pursue is 
suitable to his or her aptitudes, interests and abilities.
    (2) Reentrance may be for the same program, for a revised program, 
or for an entirely different program depending on the cause of the 
discontinuance and the removal of that cause.


(Authority: 38 U.S.C. 3034, 3474)

[53 FR 1757, Jan. 22, 1988, as amended at 57 FR 15025, Apr. 24, 1992]



Sec. 21.7154  Pursuit and absences.

    Except as provided in this section, an individual must submit a 
verification to VA each month of his or her enrollment during the period 
for which the individual is to be paid. This verification shall be in a 
form prescribed by the Secretary.
    (a) Exceptions to the monthly verification requirement. An 
individual does not have to submit a monthly verification as described 
in the introductory text of this section when the individual--
    (1) Is enrolled in a correspondence course;
    (2) Has received a lump-sum payment for the training completed 
during a month; or
    (3) Has received an advance payment for the training completed 
during a month.


(Authority: 38 U.S.C. 3014A, 3034, 3684)


[[Page 460]]


    (4) Has received an accelerated payment for the enrollment period.
    (b) Items to be reported on all monthly verifications. (1) The 
monthly verification for all veterans and servicemembers will include a 
report on the following items when applicable:
    (i) Continued enrollment in and actual pursuit of the course;
    (ii) The individual's unsatisfactory conduct, progress, or 
attendance;
    (iii) The date of interruption or termination of training;
    (iv) Changes in the number of credit hours or in the number of clock 
hours of attendance other than those described in Sec. 21.7156(a);
    (v) Nonpunitive grades; and
    (vi) Any other changes or modifications in the course as certified 
at enrollment.
    (2) The verification of enrollment must--
    (i) Contain the information required for release of payment;
    (ii) If required or permitted by the Secretary to be submitted on 
paper, be signed by the veteran or servicemember on or after the final 
date of the reporting period, or if permitted by the Secretary to be 
submitted by telephone in a manner designated by the Secretary, be 
submitted in the form and manner prescribed by the Secretary on or after 
the final date of the reporting period; and
    (iii) If submitted on paper, clearly show the date on which it was 
signed.


(Authority: 38 U.S.C. 3034, 3684; Pub. L. 98-525, Pub. L. 99-576)

    (c) Additional requirements for apprenticeships and other on-job 
training programs. (1) When a veteran is pursuing an apprenticeship or 
other on-job training he or she must certify training monthly by 
reporting the number of hours worked.
    (2) The information provided by the veteran must be verified by the 
training establishment.


(Authority: 38 U.S.C. 3034, 3680(a))

    (d) Additional requirements for individuals receiving an accelerated 
payment. (1) When an individual receives an accelerated payment as 
provided in Sec. 21.7151(c) and (d), he or she must certify the 
following information within 60 days of the end of the term, quarter or 
semester (or entire program when the program is not offered on a term, 
quarter, or semester basis) for which the accelerated payment was made:
    (i) The course or program was successfully completed, or if the 
course was not completed--
    (A) The date the veteran or servicemember last attended; and
    (B) An explanation why the course was not completed;
    (ii) If the veteran or servicemember increased or decreased his or 
her training time--
    (A) The date the veteran or servicemember increased or decreased 
training time; and
    (B) The number of credit/clock hours pursued before and after each 
such change in training time; and
    (iii) The accelerated payment was received and used.
    (2) VA will establish an overpayment equal to the amount of the 
accelerated payment if the required certifications in paragraph (c)(1) 
of this section are not timely received.
    (3) VA will determine the amount of the overpayment of benefits for 
courses not completed in the following manner--
    (i) For a veteran or servicemember who does not complete the full 
course, courses, or program for which the accelerated payment was made, 
and who does not substantiate mitigating circumstances for not 
completing, VA will establish an overpayment equal to the amount of the 
accelerated payment.
    (ii) For a veteran or servicemember who does not complete the full 
course, courses, or program for which the accelerated payment was made, 
but who substantiates mitigating circumstances for not completing, VA 
will prorate the amount of the accelerated payment to which he or she is 
entitled based on the number of days from the beginning date of the 
enrollment period through the date of last attendance. VA will determine 
the prorated amount by dividing the accelerated payment amount by the 
number of days in the enrollment period, and multiplying the result by 
the number of days from the beginning date of the

[[Page 461]]

enrollment period through the date of last attendance. The result of 
this calculation will equal the amount the individual is due. The 
difference between the accelerated payment and the amount the individual 
is due will be established as an overpayment.


(Authority: 38 U.S.C. 3014A(g))


(The Office of Management and Budget has approved the information 
collection requirements in this section under control numbers 2900-0465 
and 2900-0636.)

[55 FR 28390, July 11, 1990, as amended at 57 FR 15026, Apr. 24, 1992; 
57 FR 24368, June 9, 1992; 61 FR 26117, May 24, 1996; 63 FR 14038, Mar. 
24, 1998; 68 FR 35180, June 12, 2003]



Sec. 21.7156  Other required reports.

    (a) Reports from veterans and servicemembers. (1) A veteran or 
servicemember enrolled full time in a program of education for a 
standard term, quarter, or semester must report without delay to VA:
    (i) A change in his or her credit hours or clock hours of attendance 
if that change would result in less than full-time enrollment;
    (ii) Any change in his or her pursuit that would result in less than 
full-time enrollment; and
    (iii) Any interruption or termination of his or her attendance.
    (2) A veteran or servicemember not described in paragraph (a)(1) of 
this section must report without delay to VA:
    (i) Any change in his or her credit hours or clock hours of 
attendance;
    (ii) Any change in his or her pursuit; and
    (iii) Any interruption or termination of his or her attendance.


(Authority: 38 U.S.C. 3680(g))

    (b) Interruptions, terminations, or changes in hours of credit or 
attendance. (1) Except as provided in paragraph (b)(2) of this section, 
an educational institution must report without delay to VA each time a 
veteran or servicemember:
    (i) Interrupts or terminates his or her training for any reason; or
    (ii) Changes his or her credit hours or clock hours of attendance.
    (2) An educational institution does not need to report a change in a 
veteran's or servicemember's hours of credit or attendance when:
    (i) The veteran or servicemember is enrolled full time in a program 
of education for a standard term, quarter, or semester before the 
change;
    (ii) The veteran or servicemember continues to be enrolled full time 
after the change; and
    (iii) The tuition and fees charged to the servicemember have not 
been adjusted as a result of the change.


(Authority: 38 U.S.C. 3034, 3684)

    (3) If the change in status or change in number of credit hours or 
clock hours of attendance occurs on a day other than one indicated by 
paragraph (b)(4) or (b)(5) of this section, the educational institution 
will initiate a report of the change in time for VA to receive it within 
30 days of the date on which the change occurs.
    (4) If the educational institution has certified the veteran's or 
servicemember's enrollment for more than one term, quarter or semester 
and the veteran or servicemember interrupts his or her training at the 
end of a term, quarter or semester within the certified enrollment 
period, the educational institution shall report the change in status to 
VA in time for VA to receive the report within 30 days of the last 
officially scheduled registration date for the next term, quarter or 
semester.


(Authority: 38 U.S.C. 3034, 3680(a), 3684)

    (5) If the change in status or change in the number of hours of 
credit or attendance occurs during the 30 days of a drop-add period, the 
educational institution must report the change in status or change in 
the number of hours of credit or attendance to VA in time for VA to 
receive the report within 30 days from the last date of the drop-add 
period or 60 days from the first day of the enrollment period, whichever 
occurs first.


(Authority: 38 U.S.C. 3034, 3684)

    (c) Nonpunitive grades. (1) An educational institution may assign a 
nonpunitive grade for a course or subject in which the veteran or 
servicemember is enrolled even though the veteran or

[[Page 462]]

eligible person does not withdraw from the course or subject. When this 
occurs, the educational institution must report the assignment of the 
nonpunitive grade in a form prescribed by the Secretary in time for VA 
to receive it before the earlier of the following dates is reached:
    (i) Thirty days from the date on which the educational institution 
assigns the grade, or
    (ii) Sixty days from the last day of the enrollment period for which 
the nonpunitive grade is assigned.
    (2) If the veteran or servicemember is enrolled in a course which 
does not lead to a standard college degree and for which a monthly 
certification of attendance is required, the educational institution may 
use the monthly certification of attendance to report nonpunitive grades 
provided VA will receive the report within the time period stated in 
paragraph (c)(1) of this section.


(Authority: 38 U.S.C. 3034, 3684)

    (d) Attendance records. Nothing in this section or in any section in 
38 CFR part 21 shall be construed as requiring any institution of higher 
learning to maintain daily attendance records for any course leading to 
a standard college degree.


(Authority: 38 U.S.C. 3034, 3685)

(The information collection requirements in paragraphs (a) and (b) of 
this section have been approved by the Office of Management and Budget 
under control numbers 2900-0465 and 2900-0156, respectively.)

[55 FR 28391, July 11, 1990, as amended at 57 FR 15026, Apr. 24, 1992; 
63 FR 14038, Mar. 24, 1998]



Sec. 21.7158  False, late, or missing reports.

    (a) Veteran. Payments may not be based on false or misleading 
statements, claims or reports. VA will apply the provisions of 
Sec. Sec. 21.4006 and 21.4007 of this part to a veteran or 
servicemember or any other person who submits false or misleading 
claims, statements or reports in connection with benefits payable under 
38 U.S.C. chapter 30 in the same manner as they are applied to people 
who make similar false or misleading claims for benefits payable under 
38 U.S.C. chapter 34 or 36.


(Authority: 38 U.S.C. 3034, 3680, 3690, 6103; Pub. L. 98-525)

    (b) Educational institution or training establishment. (1) VA may 
hold an educational institution or training establishment liable for 
overpayments which result from the educational institution's or training 
establishment's willful or negligent failure to report excessive 
absences from a course or discontinuance or interruption of a course by 
a veteran or servicemember or from willful or negligent false 
certification by the educational institution or training establishment. 
See Sec. 21.7144(b).
    (2) If an educational institution or training establishment 
willfully and knowingly submits a false report or certification, VA may 
disapprove that institution's or establishment's courses for further 
enrollments and may discontinue educational assistance to veterans and 
servicemembers already enrolled. In doing so, VA will apply Sec. Sec. 
21.4210 through 21.4216.


(Authority: 38 U.S.C. 3034, 3690)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28391, July 11, 1990; 61 
FR 26117, May 24, 1996; 63 FR 35837, July 1, 1998]



Sec. 21.7159  Reporting fee.

    In determining the amount of the reporting fee payable to 
educational institutions or joint apprenticeship training committees 
acting as training establishments for furnishing required reports, VA 
will apply the provisions of Sec. 21.4206 of this part in the same 
manner as they are in the administration of 38 U.S.C. chapters 34 and 
36.

(Authority: 38 U.S.C. 3034, 3684; Pub. L. 98-525, Pub. L. 99-576)

[55 FR 28391, July 11, 1990]

                            Course Assessment



Sec. 21.7170  Course measurement.

    In administering benefits payable under 38 U.S.C. chapter 30, VA 
will apply the following sections:
    (a) Sec. 21.4270 (except paragraphs (a)(2) and (a)(3) and those 
portions of paragraph (c) and footnotes dealing with

[[Page 463]]

farm cooperative training)--Measurement of courses;
    (b) Sec. 21.4272--Collegiate course measurement;
    (c) Sec. 21.4273--Collegiate graduate;
    (d) Sec. 21.4274--Law courses; and
    (e) Sec. 21.4275--Practical training courses; measurement.

(Authority: 38 U.S.C. 3034, 3688)

[62 FR 55761, Oct. 28, 1997]



Sec. 21.7172  Measurement of concurrent enrollments.

    (a) Conversion of units of measurement required. Where a veteran 
enrolls concurrently in courses offered by two schools and the standards 
for the measurement of the courses pursued concurrently in the two 
schools are different, VA will measure the veteran's enrollment by 
converting the units of measurement for courses in the second school to 
their equivalent in units of measurement required for the courses in the 
program of education which the veteran is pursuing at the primary 
institution. This conversion will be accomplished as follows:
    (1) If VA measures the courses at the primary institution on a 
credit-hour basis (including a course which does not lead to a standard 
college degree, which is being measured on a credit-hour basis), and VA 
measures the courses at the second school on a clock-hour basis, the 
clock hours will be converted to credit hours.
    (2) If VA measures the courses pursued at the primary institution on 
a clock-hour basis, and VA measures the courses pursued at the second 
school on a credit-hour basis, VA will convert the credit hours to clock 
hours to determine the veteran's training time.


(Authority: 38 U.S.C. 3034, 3688)

    (3) If VA measures the courses pursued at the primary institution on 
a clock-hour basis, and
    (i) VA measures the courses pursued at the second school on a mixed 
basis, the courses pursued at the second school which VA can measure on 
credit-hour basis for at least one program at the second school will be 
converted to clock hours and the resulting clock hours added to 
determine the veteran's training time; or
    (ii) VA measures the courses pursued at the second school on a 
credit-hour basis, VA will convert the credit hours to clock hours to 
determine the veteran's training time.


(Authority: 38 U.S.C. 3034, 3688)

    (b) Conversion of clock hours to credit hours. If the provisions of 
paragraph (a) of this section require VA to convert clock hours to 
credit hours, it will do so by--
    (1) Dividing the number of credit hours which VA considers to be 
full-time at the educational institution whose courses are measured on a 
credit-hour basis by the number of clock hours which are full-time at 
the educational institution whose courses are measured on a clock-hour 
basis; and
    (2) Multiplying each clock hour of attendance by the decimal 
determined in paragraph (b)(1) of this section. VA will drop all 
fractional hours.


(Authority: 38 U.S.C. 3034, 3688)

    (c) Conversion of credit hours to clock hours. If the provisions of 
paragraph (a) of this section require VA to convert credit hours to 
clock hours, it will do so by--
    (1) Dividing the number of clock hours which VA considers to be 
full-time at the educational institution whose courses are measured on a 
clock-hour basis by the number of credit hours which are full-time at 
the educational institution whose courses are measured on a credit-hour 
basis; and
    (2) Multiplying each credit hour by the number determined in 
paragraph (c)(1) of this section. VA will drop all fractional hours.


(Authority: 38 U.S.C. 3034, 3688)

    (d) Both courses measured on a credit hour basis or both courses 
measured on a clock hour basis. If VA measures the courses pursued at 
both institutions on a credit hour basis or on a clock hour basis, VA 
will measure the veteran's enrollment by adding together the units of 
measurement for the courses at the second school and the units of 
measurement for the courses at the primary institution. The standard for 
full time will be the full-time standard

[[Page 464]]

for the courses at the primary institution.


(Authority: 38 U.S.C. 3034, 3688)

[55 FR 28392, July 11, 1990, as amended at 57 FR 15026, Apr. 24, 1992; 
61 FR 6790, Feb. 22, 1996; 62 FR 55761, Oct. 28, 1997]

                        State Approving Agencies



Sec. 21.7200  State approving agencies.

    State approving agencies have the same general responsibilities for 
approving courses for training under 38 U.S.C. chapter 30 as they do for 
approving courses for training under 38 U.S.C. chapter 34. Accordingly, 
in administering 38 U.S.C. chapter 30, VA will apply the provisions of 
the following sections in the same manner, as they are applied for the 
administration of 38 U.S.C. chapters 34 and 36.
    (a) Section 21.4150 (except paragraph (e))--Designation,
    (b) Section 21.4151--Cooperation,
    (c) Section 21.4152--Control by agencies of the United States,
    (d) Section 21.4153--Reimbursement of expenses;
    (e) Section 21.4154--Report of activities; and
    (f) Section 21.4155--Evaluation of State approving agency 
performance.

(Authority: 38 U.S.C. 3034, 3670, 3671, 3672, 3673, 3674, 3674A; Pub. L. 
98-525, Pub. L. 100-323)

[53 FR 1757, Jan. 22, 1988, as amended at 54 FR 49760, Dec. 1, 1989]

                           Approval of Courses



Sec. 21.7220  Course approval.

    (a) Courses must be approved. (1) A course of education, including 
the class schedules of a resident course not leading to a standard 
college degree, offered by an educational institution must be approved 
by--
    (i) The State approving agency for the State in which the 
educational institution is located, or
    (ii) The State approving agency which has appropriate approval 
authority, or
    (iii) VA, where appropriate. In determining when it is appropriate 
for VA to approve a course, VA will apply the provisions of Sec. 
21.4250(b)(3) and (c) of this part.
    (2) A course approved under 38 U.S.C. chapter 36 is approved for the 
purposes of 38 U.S.C. chapter 30 unless it is one of the types of 
courses listed in Sec. 21.7222 of this part.


(Authority: 38 U.S.C. 3034, 3672; Pub. L. 98-525)

    (b) Course approval criteria. In administering benefits payable 
under 38 U.S.C. chapter 30, VA and, where appropriate, the State 
approving agencies, shall apply the following sections.
    (1) Section 21.4250 (except paragraphs (a) and (c)(1))--Approval of 
courses,
    (2) Section 21.4251--Period of operation of course,
    (3) Section 21.4253 (except that portion of paragraph (f)(3) which 
permits approval of a course leading to a high school diploma)--
Accredited courses,
    (4) Section 21.4254--Nonaccredited courses,
    (5) Section 21.4255--Refund policy--nonaccredited courses,
    (6) Section 21.4258--Notice of approval,
    (7) Section 21.4259--Suspension or disapproval,
    (8) Section 21.4260--Courses in foreign countries,
    (9) Section 21.4265--Practical training approved as institutional 
training or on-job training,
    (10) Section 21.4266--Courses offered at subsidiary branches or 
extensions,
    (11) Section 21.4267--Approval of independent study.


(Authority: 38 U.S.C. 3034, 3476, 3672, 3675, 3676, 3678, 3679, 3680A, 
3689)

    (c) Flight training. VA and the State approving agencies shall apply 
the provisions of Sec. 21.4263 when approving flight training under 38 
U.S.C. ch. 30.


(Authority: 38 U.S.C. 3034)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28392, July 11, 1990; 56 
FR 20136, May 2, 1991; 57 FR 15026, Apr. 24, 1992; 61 FR 6790, Feb. 22, 
1996; 63 FR 34131, June 23, 1998]



Sec. 21.7222  Courses and enrollments which may not be approved.

    The Secretary may not approve an enrollment by a veteran or 
servicemember in, and a State approving agency may not approve for 
training under 38 U.S.C. chapter 30--

[[Page 465]]

    (a) A bartending or personality development course;
    (b) A flight training course unless the course meets the 
requirements of Sec. 21.4263.


(Authority: 38 U.S.C. 3034(d))

    (c) A course offered by radio;
    (d) A course, or a combination of courses consisting of 
institutional agricultural courses and concurrent agricultural 
employment commonly called a farm cooperative course; or
    (e) Except as provided in Sec. 21.7120(d), an independent study 
course which--
    (1) Does not lead to a standard college degree, or
    (2) Is a nonaccredited course.


(Authority: 38 U.S.C. 3676, 3680A)

[53 FR 1757, Jan. 22, 1988, as amended at 55 FR 28392, July 11, 1990; 56 
FR 20136, May 2, 1991; 56 FR 26035, June 6, 1991; 57 FR 15026, Apr. 24, 
1992; 61 FR 6791, Feb. 22, 1996]



Sec. 21.7280  Death benefit.

    (a) Overview. VA will pay a death benefit under 38 U.S.C. ch. 30 
when an individual's death meets the criteria of this section; the 
individual is survived by someone described in this section; and the 
amount of educational assistance paid or payable to the individual is 
less than the amount reduced from the individual's basic pay.


(Authority: 38 U.S.C. 3017; Pub. L. 100-689) (July 1, 1985)

    (b) Necessary criteria for death benefit. VA may pay a death benefit 
under 38 U.S.C. ch. 30 only if--
    (1) The individual either--
    (i) Dies while on active duty, or
    (ii) Dies after October 28, 1992, and his or her date of death is 
within one year after the date of his or her last discharge or release 
from active duty; and
    (2) The death of the individual is service connected. In determining 
if the death is service connected, VA will apply the provisions of Sec. 
3.312 of this chapter; and
    (3) Either--
    (i) At the time of the individual's death he or she is entitled to 
basic educational assistance through having met the eligibility 
requirements of Sec. 21.7042, or
    (ii) At the time of the individual's death he or she is on active 
duty with the Armed Forces and but for the minimum service requirements 
of Sec. 21.7042(a)(2) or Sec.  21.7042(b)(3) or (4) or the educational 
requirements of Sec. 21.7042(a)(3) or Sec.  21.7042(b)(2) or both would 
be entitled to basic educational assistance through having met the 
eligibility requirements of Sec. 21.7042.


(Authority: 38 U.S.C. 3017(a))

    (c) Payee. (1) VA shall pay a death benefit to the living person or 
persons in the order listed in this paragraph.
    (i) The beneficiary or beneficiaries designated by the individual 
under the individual's Servicemen's Group Life Insurance Policy,
    (ii) The surviving spouse of the individual,
    (iii) The surviving child or children of the individual, in equal 
shares,
    (iv) The surviving parent or parents of the individual in equal 
shares.
    (2) If none of the persons listed in this paragraph is living, VA 
shall not pay a death benefit under this section.


(Authority: 38 U.S.C. 3017(a)(2); Pub. L. 100-689) (July 1, 1985)

    (d) Amount of death benefit. (1) The amount of any payment made 
under this section shall be equal to--
    (i) The amount reduced from the individual's basic pay as provided 
in Sec. 21.7042(f) less--
    (ii) The total of--
    (A) The amount of educational assistance that has been paid to the 
individual under 38 U.S.C. ch. 30, and
    (B) The amount of accrued benefits paid or payable with respect to 
the individual.
    (2) VA shall pay no death benefit when the amount determined by 
subparagraph (1) of this paragraph is zero or less than zero.


(Authority: 38 U.S.C. 3017 (b) and (c); Pub. L. 100-689) (July 1, 1985)

[56 FR 20136, May 2, 1991, as amended at 57 FR 15026, Apr. 24, 1992; 61 
FR 6791, Feb. 22, 1996]

[[Page 466]]

                             Administrative



Sec. 21.7301  Delegations of authority.

    (a) General delegation of authority. Except as otherwise provided, 
authority is delegated to the Under Secretary for Benefits of VA, and to 
supervisory or adjudication personnel within the jurisdiction of the 
Education Service of VA designated by him or her, to make findings and 
decisions under 38 U.S.C. chapter 30 and the applicable regulations, 
precedents and instructions concerning the program authorized by that 
chapter.


(Authority: 38 U.S.C. 512(a))

    (b) Other delegations of authority. In administering benefits 
payable under 38 U.S.C. chapter 30, VA shall apply Sec. 21.4001(b), 
(c)(1) and (2) and (f) of this part in the same manner as those 
paragraphs are applied in the administration of 38 U.S.C. chapter 34.


(Authority: 38 U.S.C. 512(a), 3034, 3696; Pub. L. 98-525)



Sec. 21.7302  Finality of decisions.

    (a) Agency decisions generally are binding. The decision of a VA 
facility of original jurisdiction on which an action is based--
    (1) Will be final,
    (2) Will be binding upon all field offices of the VA as to 
conclusions based on evidence on file at that time, and
    (3) Will not be subject to revision on the same factual grounds 
except by duly constituted appellate authorities or except as provided 
in Sec. 21.7303 of this part. (See Sec. Sec.  19.192 and 19.193 of this 
chapter).


(Authority: 38 U.S.C. 511)

    (b) Decisions of an activity within VA. Current determinations of 
line of duty and other pertinent elements of eligibility for a program 
of education made by either an Adjudicative activity or an Insurance 
activity by application of the same criteria and based on the same facts 
are binding one upon the other in the absence of clear and unmistakable 
error.


(Authority: 38 U.S.C. 511)

    (c) Character of discharge determinations. (1) A determination of 
the character of a veteran's discharge made by a competent military or 
naval authority or by the Coast Guard is binding upon VA.
    (2) Any determination of the character of a veteran's discharge made 
by VA in connection with the veteran's eligibility for a benefit other 
than educational assistance under 38 U.S.C. chapter 30, shall not affect 
his or her eligibility for educational assistance.


(Authority: 38 U.S.C. 3011(a), 3012(a); Pub. L. 98-525)



Sec. 21.7303  Revision of decisions.

    The revision of a decision on which an action was predicated is 
subject to the following sections:
    (a) Clear and unmistakable error, Sec. 3.105(a) of this chapter; 
and
    (b) Difference of opinion, Sec. 3.105(b) of this chapter.

(Authority: 38 U.S.C. 511; Pub. L. 98-525)



Sec. 21.7305  Conflicting interests.

    In administering benefits payable under 38 U.S.C. chapter 30, VA 
will apply the provisions of Sec. 21.4005.

(Authority: 38 U.S.C. 3034, 3036)

[62 FR 55761, Oct. 28, 1997]



Sec. 21.7307  Examination of records.

    In administering benefits payable under 38 U.S.C. chapter 30, VA 
will apply the provisions of Sec. 21.4209.

(Authority: 38 U.S.C. 3034, 3690)

[62 FR 55761, Oct. 28, 1997]



Sec. 21.7310  Civil rights.

    (a) Delegation of authority concerning Federal equal opportunity 
laws. The Under Secretary for Benefits is delegated the responsibility 
to obtain evidence of voluntary compliance with Federal equal 
opportunity laws from educational institutions and from recognized 
national organizations whose representatives are afforded space and 
office facilities under his or her jurisdiction. See part 18 of this 
chapter. These equal opportunity laws are:
    (1) Title VI, Civil Rights Act of 1964;
    (2) Title IX, Education Amendments of 1972, as amended;

[[Page 467]]

    (3) Section 504, Rehabilitation Act of 1973; and
    (4) The Age Discrimination Act of 1975.
    (b) Role of State approving agencies. In obtaining evidence from 
educational institutions of compliance with Federal equal opportunity 
laws, the Under Secretary for Benefits may use the State approving 
agencies as provided in Sec. 21.4258(d).

(Authority: 42 U.S.C. 2000)

[62 FR 55761, Oct. 28, 1997]



Sec. 21.7320  Procedural protection; reduction following loss of 
dependent.

    (a) Notice of reduction required when a veteran loses entitlement to 
additional educational assistance for a dependent. Except as provided in 
paragraph (b) of this section, VA will not reduce an award of 
educational assistance following the veteran's loss of a dependent 
unless:
    (1) VA has notified the veteran of the adverse action; and
    (2) VA has provided the veteran with a period of 60 days in which to 
submit evidence for the purpose of showing that the educational 
assistance should not be reduced.
    (b) No advance notice required in certain situations. When the 
reduction is based solely on written, factual, unambiguous information 
as to dependency or marital status provided by the veteran or his or her 
fiduciary with knowledge or notice that the information would be used to 
determine the monthly rate of educational assistance allowance:
    (1) VA will not send either an advance or a prereduction notice as 
stated in paragraph (a) of this section; but
    (2) VA will send notice of the adverse action contemporaneous with 
the reduction in educational assistance.

(Authority: 38 U.S.C. 5112, 5113)

[58 FR 63530, Dec. 2, 1993]



  Subpart L_Educational Assistance for Members of the Selected Reserve

    Authority: 10 U.S.C. ch. 1606; 38 U.S.C. 501(a), 512, ch. 36, unless 
otherwise noted.

    Source: 53 FR 34740, Sept. 8, 1988, unless otherwise noted.



Sec. 21.7500  Establishment and purpose of educational assistance 
program.

    An educational assistance program for certain members of the 
Selected Reserve is established to encourage membership in the Selected 
Reserve of the Ready Reserve.

(Authority: 10 U.S.C. 16131(a); Pub. L. 98-525)

                               Definitions



Sec. 21.7520  Definitions.

    For the purposes of regulations from Sec. 21.7500 through Sec.  
21.7999, governing the administration and payment of educational 
assistance under 10 U.S.C. chapter 1606, the Selected Reserve 
Educational Assistance Program, the following definitions apply. (See 
also additional definitions in Sec. 21.1029).
    (a) Definitions of participants--(1) Reservist. The term reservist 
means a member of the Selected Reserve who is eligible for educational 
assistance under 10 U.S.C. chapter 1606.
    (2) Selected Reserve. The term Selected Reserve means the Selected 
Reserve of the Ready Reserve of any of the reserve components (including 
the Army National Guard of the United States and the Air National Guard 
of the United States) of the Armed Forces of the United States, as 
required to be maintained under section 268(b), 10 U.S.C.


(Authority: 10 U.S.C. 16131; Pub. L. 98-525)

    (b) Other definitions--(1) Attendance. The term attendance means the 
presence of a reservist--
    (i) In the class where the approved course in which he or she is 
enrolled is taught;
    (ii) At a training establishment; or
    (iii) In any other place of instruction, training, or study 
designated by the educational institution or training establishment 
where the reservist is enrolled and is pursuing a program of education.


(Authority: 10 U.S.C. 2131(c)(1), 2136(b); 38 U.S.C. 3474; sec. 
705(a)(1), Pub. L. 98-525, 98 Stat. 2565, 2567; sec. 642, Pub. L. 101-
189, 103 Stat. 1456-1458)


[[Page 468]]


    (2) Audited course. The term audited course has the same meaning as 
provided in Sec. 1.4200(i) of this part.


(Authority: 10 U.S.C. 16136(b) 38 U.S.C. 3680(a); Pub. L. 98-525)

    (3) Deficiency course. The term deficiency course means any 
secondary level course or subject not previously completed 
satisfactorily which is specifically required for pursuit of a post-
secondary program of education.


(Authority: 10 U.S.C. 16136(b); Pub. L. 98-525)

    (4) Divisions of the school year. The term divisions of the school 
year has the same meaning as provided in Sec. 21.4200(b) of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(a); Pub. L. 98-55)

    (5) Drop-add period. The term drop-add period has the same meaning 
as provided in Sec. 21.4200(l) of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(a); Pub. L. 98-525)

    (6) Educational assistance. The term educational assistance means 
the monthly payment made to members of the Selected Reserve for pursuit 
of a program of education.


(Authority: 10 U.S.C. 16131(b); Pub. L. 98-525)

    (7) Educational objective. An approvable educational objective is 
one that leads to the awarding of an associated degree, a bachelor's 
degree or the equivalent.


(Authority: 10 U.S.C. 16131(b), 38 U.S.C. 3680(a); Pub. L. 98-525)

    (8) Enrollment. The term enrollment means the state of being on that 
roll or file of an educational institution which contains the names of 
active students.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(g); Pub. L. 98-525)

    (9) Enrollment period. The term enrollment period has the same 
meaning as provided in Sec. 21.4200(p) of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(g); Pub. L. 98-525)

    (10) In residence on a standard quarter- or semester-hour basis. The 
term in residence on a standard quarter- or semester-hour basis has the 
same meaning as provided in Sec. 21.4200(r) of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3688(c); Pub. L. 98-525)

    (11) Independent study. The term independent study has the same 
meaning as provided in Sec. 21.4267(b) of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3688(c); Pub. L. 98-525)

    (12) Independent study-resident training. The term independent 
study-resident training means:
    (i) The state of being enrolled concurrently in one or more 
undergraduate courses or subjects offered by independent study as 
defined in paragraph (b)(11) of this section and one or more courses or 
subjects offered by resident training as defined by paragraph (b)(22) of 
this section, or
    (ii) The state of being enrolled in one or more undergraduate level 
subjects which
    (A) Do not meet the requirements of either paragraphs (b)(22)(i), 
(b)(22)(ii) or (b)(22)(iii) of this section,
    (B) Have some weeks when standard class sessions are scheduled, and
    (C) Consist of independent study as defined in paragraph (b)(11) of 
this section during those weeks when there are no regularly scheduled 
standard class sessions.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3688(c); Pub. L. 98-525)

    (13) Institution of higher learning. The term institution of higher 
learning means
    (i) A college, university or similar institution, including a 
technical or business school, offering postsecondary level academic 
instruction that leads to an associate or higher degree, if the 
educational institution is empowered by the appropriate State education 
authority under State law to grant an associate or higher degree.
    (ii) When there is no state law to authorize the granting of a 
degree, an educational institution which
    (A) Is accredited for degree programs by a recognized accrediting 
agency, or
    (B) Is a recognized candidate for accreditation as a degree-granting 
school

[[Page 469]]

by one of the national or regional accrediting associations and has been 
licensed or chartered by the appropriate State authority as a degree-
granting institution.
    (iii) A hospital offering educational programs at the postsecondary 
level without regard to whether the hospital grants a postsecondary 
degree.
    (iv) An educational institution which
    (A) Is not located in a State,
    (B) Offers a course leading to a standard college degree or the 
equivalent, and
    (C) Is recognized as an institution of higher learning by the 
secretary of education (or comparable official) of the country in which 
the educational institution is located.


(Authority: 10 U.S.C. 16131; Pub. L. 98-525)

    (14) Mitigating circumstances. (i) Mitigating circumstances are 
circumstances beyond the reservist's control which prevent him or her 
from continuously pursuing a program of education. The following 
circumstances are representative of those which VA considers to be 
mitigating. This list is not all-inclusive.
    (A) An illness of the reservist;
    (B) An illness or death in the reservist's family;
    (C) An unavoidable change in the reservist's conditions of 
employment;
    (D) An unavoidable geographical transfer resulting from the 
reservist's employment;
    (E) Immediate family or financial obligations beyond the control of 
the reservist which require him or her to suspend pursuit of the program 
of education to obtain employment;
    (F) Discontinuance of the course by the educational institution;
    (G) Unanticipated active duty for training; and
    (H) Unanticipated difficulties in providing for child care for the 
reservist's child or children.
    (ii) If a reservist withdraws from a course during a drop-add 
period, VA will consider the circumstances which caused the withdrawal 
to be mitigating.
    (iii) In the first instance of a withdrawal after May 31, 1989, from 
a course or course for which the reservist received educational 
assistance under chapter 1606, title 10, U.S. Code, VA will consider 
that mitigating circumstances exist with respect to courses totaling not 
more than six semester hours or the equivalent. In determining whether a 
withdrawal is the first instance of withdrawal, VA will not consider 
courses dropped during an educational institution's drop-add period as 
provided in paragraph (b)(14)(ii) of this section.


(Authority: 38 U.S.C. 3034, 3680(a)(1); Pub. L. 100-689)(June 1, 1989)

    (15) Nonpunitive grade. The term nonpunitive grade has the same 
meaning as provided in Sec. 21.4200(j) of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(a); Pub. L. 98-525)

    (16) Normal commuting distance. The term normal commuting distance 
has the same meaning as provided in Sec. 21.4200(m) of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680; Pub. L. 98-525)

    (17) Program of education. A program of education--
    (i) Is any unit course or subject or combination of unit courses or 
subjects pursued by a reservist at an educational institution, required 
by the Administrator of the Small Business Administration as a condition 
to obtaining financial assistance under the provisions of 15 U.S.C. 636; 
or
    (ii) Is a combination of subjects or unit courses pursued at an 
educational institution, which combination is generally accepted as 
necessary to meet requirements for a predetermined educational, 
professional, or vocational objective. It may consist of subjects or 
courses which fulfill requirements for more than one objective if all 
objectives pursued are generally recognized as being related to a single 
career field; and
    (iii) Includes an approved full-time program of apprenticeship or of 
other on-job training.


(Authority: 10 U.S.C. 2131; 38 U.S.C. 3452(b); sec. 705(a)(1), Pub. L. 
98-525, 98 Stat. 2565, 2567; secs. 642(a), (b), (d), 645, Pub. L. 101-
189, 103 Stat. 1456-1458)


[[Page 470]]


    (18) Punitive grade. The term punitive grade has the same meaning 
provided in Sec. 21.4200(k) of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(a); Pub. L. 98-525)

    (19) Pursuit. (i) The term pursuit means work, while enrolled, 
toward the objective of a program of education. This work must be in 
accordance with approved institutional policy and regulations, and with 
applicable criteria of 10 U.S.C. and 38 U.S.C.; must be necessary to 
reach the program's objective; and must be accomplished through--
    (A) Resident courses;
    (B) Independent study;
    (C) Correspondence courses;
    (D) An apprenticeship or other on-job training program; or
    (E) Flight courses.


(Authority: 10 U.S.C 2131, 2136; 38 U.S.C. 3680(g); sec. 705(a)(1), Pub. 
L. 98-525, 98 Stat. 2565, 2567; secs. 642, 645, Pub. L. 101-189, 103 
Stat. 1456-1458)

    (ii) VA will consider a reservist who qualifies for payment during 
an interval, school closing, or holiday vacation to be in pursuit of a 
program of education during the interval, school closing, or holiday 
vacation.


(Authority: 10 U.S.C. 2136(b); 38 U.S.C. 3680(g); sec. 705(a)(1), Pub. 
L. 98-525, 98 Stat. 2565, 2567; sec. 642(c), (d), Pub. L. 101-189, 103 
Stat. 1457-1458)

    (20) Refresher course. The term refresher course means either:
    (i) A course at the elementary or secondary level to review or 
update material previously covered in a course that has been 
satisfactorily completed; or
    (ii) A course which permits an individual to update knowledge and 
skills or be instructed in the technological advances which have 
occurred in the reservist's field of employment since his or her entry 
on active duty and which is necessary to enable the individual to pursue 
an approved program of education.


(Authority: 10 U.S.C. 2131(b), (c); sec. 705(a)(1), Pub. L. 98-525, 98 
Stat. 2565; secs. 642(a), (b), (d), 645(a), (b), Pub. L. 101-189, 103 
Stat. 1456-1458))

    (21) Remedial course. The term remedial course means a course 
designed to overcome a deficiency at the elementary or secondary level 
in a particular area of study, or a handicap, such as in speech.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3491(a)(2); Pub. L. 98-525)

    (22) Resident training. The term resident training means--
    (i) A course or subject, leading to a standard college degree, 
offered in residence on a standard quarter- or semester-hour basis;
    (ii) A course of subject leading to a standard college degree at the 
undergraduate level which requires regularly scheduled, weekly classroom 
or laboratory sessions but does not require them in sufficient number to 
meet the provision of paragraph (23)(i) of this section,
    (iii) A course or subject leading to standard college degree at the 
undergraduate level which
    (A) Would qualify as a course under paragraph (b)(22)(i) of this 
section except that it does not have weekly class instruction,
    (B) Requires pursuit of standard class sessions for each credit at a 
rate not less frequent than every 2 weeks,
    (C) Requires monthly pursuit of a total number of standard class 
sessions which, during the month, is required by a course meeting the 
provisions of paragraph (b)(22)(i) of this section,
    (D) Is considered by the institution offering it as fully equivalent 
to a course described in paragraph (b)(22)(i) of this section including 
payment of tuition and fees; the awarding of academic credit for the 
purpose of meeting graduation requirements; and the transfer of credits 
to a course meeting the provision of paragraph (b)(22)(i) of this 
section, and
    (E) Together with all other similar courses offered by the 
institution of higher learning, has an enrollment representing less than 
50 percent of persons at that institution receiving educational 
assistance under either chapter 31, 32, 34, 35 or 36 of title 38 U.S.C.,
    (iv) The hospital or fieldwork phase of a course with the objective 
of registered professional nurse or registered nurses, including a 
course leading to a degree in nursing when--

[[Page 471]]

    (A) The hospital or fieldwork phase of the course is an integral 
part of the course,
    (B) The completion of the hospital or fieldwork course is a 
prerequisite to the successful completion of the course,
    (C) The student remains enrolled in the institution of higher 
learning during the hospital or fieldwork phase, and
    (D) The training is under the direct supervision of the institution 
of higher learning.
    (v) The clinical training portion of a course leading to the 
objective of practical nurse, practical trained nurse, or licensed 
practical nurse when--
    (A) The clinical training is offered by an affiliated or cooperating 
hospital,
    (B) The student is enrolled in and supervised by the institution of 
higher learning during the clinical training, and
    (C) The course is accredited by a nationally recognized accrediting 
agency or meets the requirements of the licensing body of the State in 
which the institution of higher learning is located.
    (vi) An off-campus job experience included in a course offered by an 
institution of higher learning is resident training only if the course 
is--
    (A) Accredited by a nationally recognized accrediting agency or is 
offered by a school that is accredited by one of the regional 
accrediting agencies;
    (B) A part of the approved curriculum of the institution of higher 
learning;
    (C) Directly supervised by the institution of higher learning;
    (D) Measured in the same unit as other courses;
    (E) Required for graduation; and
    (F) Has a planned program of activities described in the institution 
of higher learning's official publication which is approved by the State 
approving agency and which is institutional in nature as distinguished 
from training on-the-job. The description shall include at least a unit 
subject description; a provision for an assigned instructor; a statement 
that the planned program of activities is controlled by the institution 
of higher learning, not by the officials of the job establishment; a 
requirement that class attendance on at least a weekly basis be 
regularly scheduled to provide for interaction between instructor and 
student; a statement that appropriate assignments are required for 
completion of the course; a grading system similar to the system used 
for other resident subjects offered by the institution of higher 
learning; and a schedule of time required for the training which 
demonstrates that the student shall spend at least as much time in 
preparation and training as is normally required by the institution of 
higher learning for its other resident courses.
    (vii) A course including student teaching, or
    (viii) A flight training course when included as a creditable part 
of an undergraduate course leading to a standard college degree.


(Authority: 10 U.S.C. 16131(b); Pub. L. 98-525)

    (23) School, educational institution, institution. The terms school, 
educational institution, and institution mean:
    (i) A vocational school or business school;
    (ii) A junior college, teachers' college, college, normal school, 
professional school, university, or scientific or technical institution;
    (iii) A public or private elementary school or secondary school 
which offers courses for adults, provided that the courses lead to an 
objective other than an elementary school diploma, a high school 
diploma, or their equivalents; or
    (iv) Any entity, other than an institution of higher learning, that 
provides training required for completion of a State-approved 
alternative teacher certification program.


(Authority: 10 U.S.C. 16131(a), (c); 38 U.S.C. 3002, 3452)

    (24) School year. The term school year means generally a period of 2 
semesters or 3 quarters which is not less than 30 nor more than 39 weeks 
in total length.


(Authority: 10 U.S.C. 16136(b); Pub. L. 98-525)

    (25) Standard class session. The term standard class session has the 
same

[[Page 472]]

meaning as provided in Sec. 21.4200(g) of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3688(c); Pub. L. 98-525)

    (26) Standard college degree. The term standard college degree has 
the same meaning as provided in Sec. 21.4200(e) of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3688; Pub. L. 98-525)

    (27) State. The term State has the same meaning as provided in Sec. 
21.1021(c) of this part.


(Authority: 38 U.S.C. 101(20); Pub. L. 98-525)

    (28) Vocational or professional objective. A vocational or 
professional objective is one that leads to an occupation. It may 
include educational objectives essential to prepare for the chosen 
occupation, but not include any educational objectives beyond the 
bachelor's degree. When a program of education consists of series of 
courses not leading to an educational objective, these courses must be 
pursued at an institution of higher learning and must be required for 
attainment of a designated vocational or professional objective.


(Authority: 10 U.S.C. 16131(b); Pub. L. 98-525)

    (29) Disabling effects of chronic alcoholism. (i) The term disabling 
effects of chronic alcoholism means alcohol-induced physical or mental 
disorders or both, such as habitual intoxication, withdrawal, delirium, 
amnesia, dementia, and other like manifestations of chronic alcoholism 
which, in the particular case,--
    (A) Have been medically diagnosed as manifestations of alcohol 
dependency or chronic alcohol abuse; and
    (B) Are determined to have prevented commencement or completion of 
the affected individual's chosen program of education.
    (ii) A diagnosis of alcoholism, chronic alcoholism, alcohol-
dependency, chronic alcohol abuse, etc., in and of itself, does not 
satisfy the definition of this term.
    (iii) Injury sustained by a reservist as a proximate and immediate 
result of activity undertaken by the reservist while physically or 
mentally unqualified to do so due to alcoholic intoxication is not 
considered a disabling effect of chronic alcoholism.


(Authority: 38 U.S.C. 105, 3031(d); Pub. L. 100-689)(Nov. 18, 1988)

    (30) Cooperative course. The term cooperative course means a full-
time program of education which consists of institutional courses and 
alternate phases of training in a business or industrial establishment 
with the training in the business or industrial establishment being 
strictly supplemental to the institutional portion.


(Authority: 10 U.S.C. 2131(e); 38 U.S.C. 3686; sec. 642(b), (d), Pub. L. 
101-189, 103 Stat. 1456-1458)

    (31) Established charge. The term established charge means the 
lesser of--
    (i) The charge for the correspondence course or courses determined 
on the basis of the lowest extended time payment plan offered by the 
educational institution and approved by the appropriate State approving 
agency; or
    (ii) The actual charge to the reservist.


(Authority: 10 U.S.C. 2131(f); sec. 642(b), (d), Pub. L. 101-189, 103 
Stat. 1456-1458)

    (32) Training establishment. The term training establishment means 
any establishment providing apprentice or other on-job training, 
including those under the supervision of a college, university, any 
State department of education, any State apprenticeship agency, any 
State board of vocational education, any joint apprenticeship committee, 
the Bureau of Apprenticeship and Training established in accordance with 
29 U.S.C. chapter 4C, or any agency of the Federal government authorized 
to supervise such training.


(Authority: 10 U.S.C. 2131(d), 16136(b); 38 U.S.C. 3452(e); sec. 642(b), 
(d), Pub. L. 101-189, 103 Stat. 1456-1458)

    (33) Continuously enrolled. The term continuously enrolled means 
being in an enrolled status at an educational institution for each day 
during the ordinary school year, and for consecutive school years. 
Consequently, continuity of enrollment is not broken by holiday 
vacations, vacation periods, periods during the school year between 
terms,

[[Page 473]]

quarters, or semesters, or by nonenrollment during periods of enrollment 
outside the ordinary school year (e.g., summer sessions).


(Authority: 10 U.S.C. 16136(b))

    (34) Persian Gulf War. The term ``Persian Gulf War'' means the 
period beginning on August 2, 1990, and ending on the date thereafter 
prescribed by Presidential proclamation or by law.


(Authority: 38 U.S.C. 101(33))

    (35) Alternative teacher certification program. The term alternative 
teacher certification program, for the purposes of determining whether 
an entity offering such a program is a school, educational institution, 
or institution as defined in paragraph (b)(23)(iv) of this section, 
means a program leading to a teacher's certificate that allows 
individuals with a bachelor's degree or graduate degree to obtain 
teacher certification without enrolling in an institution of higher 
learning.


(Authority: 10 U.S.C. 16136; 38 U.S.C. 3452(c))

[53 FR 34740, Sept. 8, 1988, as amended at 57 FR 57105, Dec. 3, 1992; 58 
FR 51782, Oct. 5, 1993; 61 FR 20729, May 8, 1996; 61 FR 29300, June 10, 
1996; 64 FR 23773, May 4, 1999; 65 FR 5788, Feb. 7, 2000]

                         Claims and Applications



Sec. 21.7530  Applications, claims, and time limits.

    The provisions of subpart B of this part apply with respect to 
claims for educational assistance under 10 U.S.C. chapter 1606, VA 
actions upon receiving a claim, and time limits connected with claims.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3472)

[64 FR 23773, May 4, 1999]

                               Eligibility



Sec. 21.7540  Eligibility for educational assistance.

    (a) Basic eligibility requirements. A reservist must meet the 
requirements for a secondary school diploma (or an equivalency 
certificate) before applying for educational assistance. VA will decide 
whether a reservist met those requirements before applying for 
educational assistance. If the reservist applies before completing the 
requirements, VA will disallow the application. A reservist's premature 
application will not prevent the reservist from establishing eligibility 
at a later time by applying for educational assistance again after 
having completed the academic requirements. The Armed Forces will decide 
whether a reservist has met all the other eligibility criteria needed in 
order to receive educational assistance pursuant to 10 U.S.C. chapter 
1606. To be eligible a reservist:
    (1) Shall:
    (i) Enlist, reenlist, or extend an enlistment as a Reserve for 
service in the Selected Reserve so that the total period of obligated 
service is at least six years from the date of such enlistment, 
reenlistment, or extension; or
    (ii) Be appointed as, or be serving as, a reserve officer and agree 
to serve in the Selected Reserve for a period of not less than six years 
in addition to any other period of obligated service in the Selected 
Reserve to which the person may be subject;
    (2) Must complete his or her initial period of active duty for 
training;
    (3) Must be participating satisfactorily in the Selected Reserve;
    (4) Must not have elected to have his or her service in the Selected 
Reserve credited toward establishing eligibility to benefits provided 
under 38 U.S.C. chapter 30; and
    (5) Must have met the requirements for a secondary school diploma 
(or an equivalency certificate) before applying for educational 
assistance.


(Authority: 10 U.S.C. 16132; 38 U.S.C. 3033(c)).

    (b) Eligibility requirements for expanded benefits. (1) A reservist 
shall be eligible to pursue all types of training described in subpart L 
of this part regardless of whether he or she has received a 
baccalaureate degree or equivalent evidence of completion of study if--
    (i) After September 30, 1990, he or she takes one of the actions 
described in paragraph (a)(1)(i) or (a)(1)(ii) of this section;
    (ii) The reservist meets the criteria of paragraphs (a)(2) through 
(a)(4) of this section; and

[[Page 474]]

    (iii) The reservist does not have his or her eligibility limited as 
described in paragraph (c) of this section.
    (2) A reservist shall be eligible to pursue all types of training 
described in subpart L of this part except the training described in 
paragraph (b)(3) of this section if--
    (i) After June 30, 1985, but not after September 30, 1990, he or she 
takes one of the actions described in paragraph (a)(1) or (a)(2) of this 
section;
    (ii) The reservist has not received a baccalaureate degree or the 
equivalent evidence of completion of study;
    (iii) The reservist meets all the other eligibility criteria of 
paragraph (a) of this section; and
    (iv) The reservist does not have his or her eligibility limited by 
paragraph (c) of this section.
    (3) The types of training which a reservist described in paragraph 
(b)(1) of this section may pursue, but which may not be pursued by a 
reservist described in paragraph (b)(2), are:
    (i) A course which is offered by an educational institution which is 
not an institution of higher learning (to determine if a nursing course 
is offered by an institution of higher learning, see Sec. 21.7622(f));
    (ii) A correspondence course;
    (iii) An accredited independent study course leading to a standard 
college degree. (See Sec. 21.7622(f) concerning enrollment in a 
nonaccredited independent study course after October 28, 1992);
    (iv) An accredited independent study course leading to a certificate 
that reflects educational attainment from an institution of higher 
learning. This provision applies to enrollment in an independent study 
course that begins on or after December 27, 2001. (See Sec. 21.7622(f) 
concerning enrollment in a nonaccredited independent study course after 
October 28, 1992);
    (v) A refresher, remedial or deficiency course;
    (vi) A cooperative course;
    (vii) An apprenticeship or other on-job training; and
    (viii) A flight course.


(Authority: 10 U.S.C. 16131, 16132, 16136; sec. 705(a)(1), Pub. L. 98-
525, 98 Stat. 2565, 2567; 38 U.S.C. 3680A)

    (c) Limitations on establishing eligibility. (1) An individual must 
elect in writing whether he or she wishes service in the Selected 
Reserve to be credited towards establishing eligibility under 38 U.S.C. 
chapter 30 or under 10 U.S.C. chapter 1606 when:
    (i) The individual is a reservist who is eligible for basic 
educational assistance provided under 38 U.S.C. 3012, and has 
established eligibility to that assistance partially through service in 
the Selected Reserve; or
    (ii) The individual is a member of the National Guard or Air 
National Guard who has established eligibility for basic educational 
assistance provided under 38 U.S.C. 3012 through activation under a 
provision of law other than 32 U.S.C. 316, 502, 503, 504, or 505 
followed by service in the Selected Reserve.
    (2) An election under this paragraph (c) to have Selected Reserve 
service credited towards eligibility for payment of educational 
assistance under 38 U.S.C. chapter 30 or under 10 U.S.C. chapter 1606 is 
irrevocable when the reservist either negotiates the first check or 
receives the first payment by electronic funds transfer of the 
educational assistance elected.
    (3) If a reservist is eligible to receive educational assistance 
under both 38 U.S.C. chapter 30 and 10 U.S.C. chapter 1606, he or she 
may receive educational assistance alternately or consecutively under 
each of these chapters to the extent that the educational assistance is 
based on service not irrevocably credited to one or the other chapter as 
provided in paragraphs (c)(1) and (c)(2) of this section.


(Authority: 10 U.S.C. 16132; 38 U.S.C. 3033(c))

    (d) Dual eligibility. An individual who has established eligibility 
for basic educational assistance under 38 U.S.C. chapter 30 solely 
through service on active duty may establish eligibility for educational 
assistance under 10 U.S.C.

[[Page 475]]

chapter 1606 by meeting the requirements of paragraph (a) of this 
section.


(Authority: 10 U.S.C. 16132(d), 16134)

(The information collection requirements in this section have been 
approved by the Office of Management and Budget under control number 
2900-0594)

[53 FR 34740, Sept. 8, 1988, as amended at 56 FR 9628, Mar. 7, 1991; 57 
FR 57106, Dec. 3, 1992; 61 FR 20729, May 8, 1996; 61 FR 29301, June 10, 
1996; 63 FR 45718, Aug. 27, 1998; 68 FR 59731, Oct. 17, 2003; 71 FR 
1497, Jan. 10, 2006]



Sec. 21.7550  Ending dates of eligibility.

    (a) Time limit on eligibility. (1) Reservists who become eligible 
before October 1, 1992. Except as provided in Sec. 21.7551 and 
paragraphs (b), (c), (d), and (e) of this section, if the reservist 
becomes eligible for educational assistance before October 1, 1992, the 
period of eligibility expires effective the earlier of the following 
dates:
    (i) The last day of the 10-year period beginning on the date the 
reservist becomes eligible for educational assistance; or
    (ii) The date the reservist is separated from the Selected Reserve.
    (2) Reservists who become eligible after September 30, 1992. Except 
as provided in Sec. 21.7551 and paragraphs (b), (c), (d), and (e) of 
this section, if a reservist becomes eligible for educational assistance 
after September 30, 1992, the period of eligibility expires effective 
the earlier of the following dates:
    (i) The last day of the 14-year period beginning on the date the 
reservist becomes eligible for educational assistance; or
    (ii) The date the reservist is separated from the Selected Reserve.


(Authority: 10 U.S.C. 16133)

    (b) Extension due to active duty orders. If the reservist serves on 
active duty pursuant to an order to active duty issued under section 
12301(a), 12301(d), 12301(g), 12302, or 12304 of title 10, U.S. Code, 
the period of this active duty plus four months shall not be considered 
in determining the time limit on eligibility found in paragraph (a) of 
this section.


(Authority: 10 U.S.C. 16133)

    (c) Completion of term of program. (1) If a reservist is enrolled in 
an educational institution regularly operated on the quarter or semester 
system, and the reservist's period of eligibility as defined in 
paragraph (a) of this section would expire during a quarter or semester, 
the period of eligibility shall be extended to the end of the quarter or 
semester.
    (2) If a reservist is enrolled in an educational institution not 
regularly operated on the quarter or semester system, and the 
reservist's period of eligibility as defined in paragraph (a) of this 
section would expire after a major portion of the course is completed, 
the period of eligibility shall be extended until the earlier of the 
following occurs:
    (i) The end of the course, or
    (ii) 12 weeks from the date on which the reservist's eligibility 
otherwise would have expired.


(Authority: 10 U.S.C. 16133(b)(1); Pub. L. 98-525)

    (d) Discharge for disability. In the case of a reservist separated 
from the Selected Reserve because of a disability which was not the 
result of the individual's own willful misconduct and which was incurred 
on or after the date on which the reservist became entitled to education 
assistance, the reservist's period of eligibility expires effective the 
last day of the--
    (1) 10-year period beginning on the date the reservist becomes 
eligible for educational assistance if the reservist became eligible 
before October 1, 1992; or
    (2) 14-year period beginning on the date the reservist becomes 
eligible for educational assistance if the reservist becomes eligible 
after September 30, 1992.


(Authority: 10 U.S.C. 16133)

    (e) Unit deactivated. (1) Except as provided in paragraph (e)(3) or 
(e)(4) of this section, the period of eligibility of a reservist, 
eligible for educational assistance under this subpart, who ceases to 
become a member of the Selected Reserve during the period beginning 
October 1, 1991, and ending December 31, 2001, under either of the 
conditions

[[Page 476]]

described in paragraph (e)(2) of this section will expire on the date--
    (i) 10 years after the date the reservist becomes eligible for 
educational assistance if the reservist became eligible before October 
1, 1992; or
    (ii) 14 years after the date the reservist becomes eligible for 
educational assistance if the reservist becomes eligible after September 
30, 1992.
    (2) The conditions referred to in paragraph (e)(1) of this section 
for ceasing to be a member of the Selected Reserve are:
    (i) The deactivation of the reservist's unit of assignment; and
    (ii) The reservist's involuntarily ceasing to be designated as a 
member of the Selected Reserve pursuant to 10 U.S.C. 10143(a).
    (3) The provisions of paragraphs (e)(1) and (e)(2) of this section 
do not apply if the reservist ceases to be a member of the Selected 
Reserve under adverse conditions, as characterized by the Secretary of 
the military department concerned. The expiration of such a reservist's 
period of eligibility will be on the date the reservist ceases, under 
adverse conditions, to be a member of the Selected Reserve.
    (4) A reservist's period of eligibility will expire if he or she is 
a member of a reserve component of the Armed Forces and (after having 
involuntarily ceased to be a member of the Selected Reserve) is 
involuntarily separated from the Armed Forces under adverse conditions, 
as characterized by the Secretary of the military department concerned. 
The expiration of such a reservist's period of eligibility will be on 
the date the reservist is involuntarily separated under adverse 
conditions from the Armed Forces.


(Authority: 10 U.S.C. 16133)

[53 FR 34740, Sept. 8, 1988, as amended at 57 FR 57106, Dec. 3, 1992; 58 
FR 51783, Oct. 5, 1993; 61 FR 29302, June 10, 1996; 68 FR 59731, Oct. 
17, 2003; 71 FR 1498, Jan. 10, 2006; 71 FR 24582, Apr. 26, 2006]



Sec. 21.7551  Extended period of eligibility.

    (a) Period of eligibility may be extended. VA shall grant an 
extension of a delimiting period determined by Sec. 21.7550(a) of this 
part provided:
    (1) The individual applies for an extension within the time period 
specified in Sec. 21.1033(c) of subpart B.
    (2) The individual was prevented from initiating or completing the 
chosen program of education within the otherwise applicable eligibility 
period, because of a physical or mental disability, which is not the 
result of the reservist's own willful misconduct, and which was incurred 
in or aggravated by service in the Selected Reserve. VA will not 
consider the disabling effects of chronic alcoholism to be the result of 
willful misconduct. (See Sec. 21.7520(b)(29)). Evidence must establish 
that such a program of education was medically infeasible. VA will not 
grant a reservist an extension for a period of disability which was 30 
days or less unless the evidence establishes that the reservist was 
prevented from enrolling or reenrolling in the chosen program, or was 
forced to discontinue attendance, because of the short disability.


(Authority: 10 U.S.C. 16133(b)(2), 38 U.S.C. 105, 3031(d); Pub. L. 98-
525, Pub. L. 100-689)(Nov. 18, 1988)

    (b) Commencing date. The reservist shall elect the commencing date 
of an extended period of eligibility. The date chosen--
    (1) Must be on or after the original date of expiration of 
eligibility as determined by Sec. 21.7550(a) of this part, and
    (2) Must either be--
    (i) On or before the 90th day following the date on which the 
reservist's application for an extension was approved by VA if the 
reservist is training during the extended period of eligibility in a 
course not organized on a term, quarter or semester basis, or
    (ii) On or before the first day of a term, quarter or semester 
within an ordinary school year following the 90th day after the 
reservist's application for an extension was approved in VA, if the 
reservist is training during the extended period of eligibility in a 
course organized on a term, quarter or semester basis.


(Authority: 10 U.S.C. 16133(b)(2), 38 U.S.C. 3031(d); Pub. L. 98-525)

    (c) Length of extended period of eligibility. A reservist's extended 
period of

[[Page 477]]

eligibility shall be for the length of time that the reservist was 
prevented from initiating or completing his or her chosen program of 
education, except that it must end when the reservist is separated from 
the Selected Reserve. VA shall determine the length of time the 
reservist was prevented from initiating or completing his or her chosen 
program of education as follows:
    (1) If the reservist is in training in a course organized on a term, 
quarter or semester basis, his or her extended period of eligibility 
shall contain the same number of days as the number of days from the 
date during the reservist's original eligibility period that his or her 
training became medically infeasible to the earliest of the following 
dates:
    (i) The commencing date of the ordinary term, quarter or semester 
following the day the reservist's training became medically infeasible,
    (ii) The last date of the reservist's delimiting date as determined 
by Sec. 21.7550(a) of this part, or
    (iii) The date the reservist resumed training.
    (2) If the reservist is training in a course not organized on a 
term, quarter or semester basis, his or her extended period of 
eligibility shall contain the same number of days as the number of days 
from the date during the reservist's original delimiting period that his 
or her training became medically infeasible to the earlier of the 
following dates:
    (i) The date the reservist's training became medically feasible, or
    (ii) The reservist's delimiting date as determined by Sec. 
21.7550(a)(1) of this part.


(Authority: 10 U.S.C. 16133(b)(2), 38 U.S.C. 3031(d); Pub. L. 98-525)

[53 FR 34740, Sept. 8, 1988, as amended at 57 FR 57106, Dec. 3, 1992; 71 
FR 1498, Jan. 10, 2006]

                               Entitlement



Sec. 21.7570  Entitlement.

    Except as provided in Sec. 21.7576(e) each reservist is entitled to 
a maximum of 36 months of educational assistance (or its equivalent in 
part-time educational assistance) under this program, but is also 
subject to the provisions of Sec. 21.4020 (a) and (b).

(Authority: 10 U.S.C. 16131(c); Pub. L. 98-525, Pub. L. 102-127) (Oct. 
10, 1991)

[58 FR 51783, Oct. 5, 1993]



Sec. 21.7576  Entitlement charges.

    (a) Overview. VA will make charges against entitlement as stated in 
this section. Charges are based upon the principle that a reservist who 
trains full time for one day should be charged one day of entitlement, 
except for those pursuing:
    (1) Flight training;
    (2) Correspondence training;
    (3) Cooperative training; or
    (4) Apprenticeship or other on-job training.


(Authority: 10 U.S.C. 2131(c); sec. 705(a)(1), Pub. L. 98-525, 98 Stat. 
2565; sec. 642(a), (b), (d), Pub. L. 101-189, 103 Stat. 1456-1458)

    (b) Determining entitlement charge. This paragraph states how VA 
will generally determine the charge against the entitlement of a 
reservist who is receiving educational assistance. However, when the 
circumstances described in paragraph (e) of this section apply to a 
reservist, VA will use that paragraph to determine an entitlement charge 
instead of this paragraph.
    (1) Except for those pursuing flight training, correspondence 
training, cooperative training, apprenticeship or other on-job training, 
VA will make a charge against entitlement--
    (i) On the basis of total elapsed time (one day for each day of 
pursuit for which the reservist is paid educational assistance) if the 
reservist is pursuing the program of education on a full-time basis; or
    (ii) On the basis of a proportionate rate of elapsed time, if the 
reservist is pursuing the program of education on a three-quarter, one-
half, or one-quarter-time basis.
    (2) VA will compute elapsed time from the commencing date of the 
award of educational assistance to the date of discontinuance. If the 
reservist changes his or her training time after the commencing date of 
the award, VA will--
    (i) Divide the enrollment period into separate periods of time 
during which

[[Page 478]]

the reservist's training time remains constant; and
    (ii) Compute the elapsed time separately for each time period.
    (3) For each month that a reservist is paid a monthly educational 
assistance allowance while undergoing apprenticeship or other on-job 
training, VA will make a charge against entitlement of--
    (i) .75 of a month in the case of payments made during the first six 
months of the reservist's pursuit of the program of apprenticeship or 
other on-job training;
    (ii) .55 of a month in the case of payments made during the second 
six months of the reservist's pursuit of the program of apprenticeship 
or other on-job training; and
    (iii) .35 of a month in the case of payments made following the 
first twelve months of the reservist's pursuit of the program of 
apprenticeship or other on-job training.
    (4) When a reservist is pursuing a program of education by 
correspondence, VA will make a charge against entitlement for each 
payment made to him or her. The charge will be made in months and 
decimal fractions of a month, as determined by dividing the amount of 
the payment by an amount equal to the rate stated in Sec. 21.7636(a)(1) 
as the rate otherwise applicable to the reservist for full-time 
training.
    (5) When a reservist is pursuing a program of education partly in 
residence and partly by correspondence, VA will make a charge against 
entitlement--
    (i) For the residence portion of the program as provided in 
paragraphs (b)(1) and (b)(2) of this section; and
    (ii) For the correspondence portion of the program as provided in 
paragraph (b)(4) of this section.
    (6) When a reservist is pursuing a program of education through 
cooperative training, VA will make a charge against entitlement of .8 of 
a month for each month in which the reservist is receiving payment at 
the rate for cooperative training. If the reservist is pursuing 
cooperative training for a portion of a month, VA will make a charge 
against entitlement on the basis of total elapsed time (.8 of a day for 
each day of pursuit).


(Authority: 10 U.S.C. 2131(c), (d); sec. 705(a)(1), Pub. L. 98-525, 98 
Stat. 2565; sec. 642(b), (d), Pub. L. 101-189, 103 Stat. 1456-1458)

    (7) When a reservist is pursuing a program of education through 
flight training, VA will make a charge against entitlement at the rate 
of one month for each amount equal to the monthly rate stated in Sec. 
21.7636(a)(1) as applicable for the month in which the training 
occurred.


(Authority: 10 U.S.C. 16136(c))

    (c) Overpayment cases. VA will make a charge against entitlement for 
an overpayment only if the overpayment is discharged in bankruptcy; is 
waived and is not recovered; or is compromised.
    (1) If the overpayment is discharged in bankruptcy or is waived and 
is not recovered, the charge against entitlement will be at the 
appropriate rate for the elapsed period covered by the overpayment 
(exclusive of interest, administrative costs of collection, court costs 
and marshal fees).
    (2) If the overpayment is compromised and the compromise offer is 
less than the amount of interest, administrative costs of collection, 
court costs and marshal fees, the charge against entitlement will be at 
the appropriate rate for the elapsed period covered by the overpayment 
(exclusive of interest, administrative costs of collection, court costs 
and marshal fees).
    (3) If the overpayment is compromised and the compromise offer is 
equal to or greater than the amount of interest administrative costs of 
collection, court costs and marshal fees, the charge against entitlement 
will be determined by--
    (i) Subtracting from the sum paid in the compromise offer the amount 
attributable to interest, administrative costs of collection, court 
costs and marshal fees,
    (ii) Subtracting the remaining amount of the overpayment balance 
determined in paragraph (c)(3)(i) of this section from the amount of the 
original overpayment (exclusive of interest, administrative costs of 
collection, court costs and marshal fees),

[[Page 479]]

    (iii) Dividing the result obtained in paragraph (c)(3)(i) of this 
section by the amount of the original overpayment (exclusive of 
interest, administrative costs of collection, court costs and marshal 
fees), and
    (iv) Multiplying the percentage obtained in paragraph (c)(3)(iii) of 
this section by the amount of the entitlement otherwise chargeable for 
the period of the original overpayment.


(Authority: 10 U.S.C. 16133(c); Pub. L. 98-525)

    (d) Interruption to conserve entitlement. A reservist may not 
interrupt a certified period of enrollment for the purpose of conserving 
entitlement. An institution of higher learning may not certify a period 
of enrollment for a fractional part of the normal term, quarter or 
semester if the reservist is enrolled for the entire term, quarter or 
semester. VA will make a charge for the entire period of certified 
enrollment, if the reservist is otherwise eligible for educational 
assistance, except when educational assistance is interrupted under any 
of the following conditions:
    (1) Enrollment is terminated;
    (2) The reservist cancels his or her enrollment, and does not 
negotiate an educational assistance check for any part of the certified 
period of enrollment;
    (3) The reservist interrupts his or her enrollment at the end of any 
term, quarter or semester within the certified period of enrollment, and 
does not negotiate a check for educational assistance for the succeeding 
term, quarter or semester; and
    (4) The reservist requests interruption or cancellation for any 
break when an institution of higher learning was closed during a 
certified period of enrollment, and VA continued payments under an 
established policy based upon an Executive Order of the President or an 
emergency situation. In such a case entitlement will be restored unless 
the reservist negotiated a check for educational assistance for the 
certified period and does not repay the amount received.


(Authority: 10 U.S.C. 16133(c); Pub. L. 98-525)

    (e) No entitlement charge for some reservists. When the criteria 
described in this paragraph are met, there is an exception to the 
charges against entitlement described in paragraph (b) of this section.
    (1) VA will make no charge against a reservist's entitlement when 
the reservist--
    (i) While not serving on active duty, had to discontinue pursuit of 
a course or courses as a result of being ordered to serve on active duty 
under sections 12301(a),(d),(g), 12302, or 12304 of title 10, U. S. 
Code; and
    (ii) Failed to receive credit or lost training time toward 
completion of the reservist's approved educational, professional or 
vocational objective as a result of having to discontinue his or her 
course pursuit.
    (2) The period for which receipt of educational assistance allowance 
is not charged against a reservist's entitlement shall not exceed the 
portion of the period of enrollment in the course or courses for which 
the reservist failed to receive credit or with respect to which the 
reservist lost training time.


(Authority: 10 U.S.C. 16131(c)(3))

[53 FR 34740, Sept. 8, 1988, as amended at 58 FR 51783, Oct. 5, 1993; 61 
FR 29302, June 10, 1996; 68 FR 59731, Oct. 17, 2003]

                               Counseling



Sec. 21.7600  Counseling.

    A reservist may receive counseling from VA before beginning training 
and during training.
    (a) Purpose. The purpose of counseling is--
    (1) To assist in selecting an objective;
    (2) To develop a suitable program of education;
    (3) To select an institution of higher learning appropriate for the 
educational or training objective;
    (4) To resolve any personal problems which are likely to interfere 
with the successful pursuit of a program; and
    (5) To select an employment objective for the reservist that would 
be likely to provide the reservist with satisfactory employment 
opportunities in light of his or personal circumstances.


(Authority: 38 U.S.C. 16136(b), 3233; Pub. L. 98-525)


[[Page 480]]


    (b) Required counseling. (1) In any case in which the Department of 
Veterans Affairs has rated the reservist as being incompetent, the 
reservist must be counseled before selecting a program of education. The 
requirement that counseling be provided is met when--
    (i) The reservist has had one or more personal interviews with the 
counselor;
    (ii) The counselor and the reservist have jointly developed 
recommendations for selecting a program of education; and
    (iii) The counselor has reviewed the recommendations with the 
reservist.
    (2) The veteran may follow the recommendations developed in the 
course of counseling, but is not required to do so.
    (3) The Department of Veterans Affairs will take no further action 
on a reservist's application for assistance under this chapter when he 
or she--
    (i) Fails to report for counseling;
    (ii) Fails to cooperate in the counseling process; or
    (iii) Does not complete counseling to the extent required under 
paragraph (b)(1) of this section.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3967(a); Pub. L. 98-525, Pub. 
L. 99-576)

    (c) Availability of counseling. Counseling is available for
    (1) Identifying and removing reasons for academic difficulties which 
may result in interruption of discontinuance of training, or
    (2) Considering changes in career plans and making sound decisions 
about the changes.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3967(a); Pub. L. 98-525)

    (d) Provision of counseling. The Department of Veterans Affairs 
shall provide counseling as needed for the purposes identified in 
paragraphs (a) and (c) of this section upon request of the reservist. In 
addition, the Department of Veterans Affairs shall provide counseling as 
needed for the purposes identified in paragraph (b) of this section 
following the reservist's request for counseling, the reservist's 
initial application for benefits or any communication from the reservist 
or guardian indicating that the reservist wishes to change his or her 
program. The Department of Veterans Affairs shall take appropriate steps 
(including individual notification where feasible) to acquaint 
reservists with the availability and advantages of counseling services.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3967(a); Pub. L. 98-525, Pub. 
L. 99-576)

[53 FR 34740, Sept. 8, 1988, as amended at 56 FR 9628, Mar. 7, 1991]



Sec. 21.7603  Travel expenses.

    The Department of Veterans Affairs will not pay for any costs of 
travel to and from the place of counseling for anyone who requests 
counseling under 10 U.S.C. chapter 1606 or for whom counseling is 
required under that chapter.

(Authority: 38 U.S.C. 111)

[56 FR 9628, Mar. 7, 1991, as amended at 61 FR 20729, May 8, 1996]

                          Programs of Education



Sec. 21.7610  Selection of a program of education.

    (a) General requirement. An individual must be pursuing an approved 
program of education in order to receive educational assistance.


(Authority: 10 U.S.C. 16131; Pub. L. 98-525)

    (b) Approval of a program of education. VA will approve a program of 
education selected by a reservist for payment of educational assistance 
under 10 U.S.C. chapter 1606 if--
    (1) The program accords with the definition of a program of 
education found in Sec. 21.7520(b)(17) of this part,
    (2) It has an educational, professional or vocational objective (as 
defined in Sec. Sec. 21.7520(b)(7) and (28) of this part), and
    (3) The courses and subjects in the program are approved for VA 
purposes as provided in Sec. 21.7720 of this part.
    (4) The reservist is not already qualified for the objective of the 
program.


(Authority: 10 U.S.C. 16136(b), 1671; Pub. L. 98-525)

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 20729, May 8, 1996]

[[Page 481]]



Sec. 21.7612  Programs of education combining two or more types of 
courses.

    An approved program may consist of courses offered by two 
educational institutions concurrently, or courses offered through class 
attendance and by television concurrently. An educational institution 
may contract the actual training to another educational institution, 
provided the course is approved by the State approving agency having 
approval jurisdiction over the educational institution actually 
providing the training.
    (a) Concurrent enrollment. When a reservist cannot schedule his or 
her complete program at one educational institution, VA may approve a 
program of concurrent enrollment. When requesting such a program, the 
reservist must show that his or her complete program of education is not 
available at the educational institution in which he or she will pursue 
the major portion of his or her program (the primary educational 
institution), or that it cannot be scheduled within the period in which 
he or she plans to complete his or her program. A reservist who is 
limited in the types of courses he or she may pursue, as provided in 
Sec. 21.7540 (b)(2) and (b)(3), may pursue courses only at an 
institution of higher learning. If such a reservist cannot complete his 
or her program at one institution of higher learning, VA may approve a 
concurrent enrollment only if both the educational institutions the 
reservist enrolls in are institutions of higher learning.


(Authority: 10 U.S.C. 2131(c), 2136(b); 38 U.S.C. 3680(g); sec. 
705(a)(1), Pub. L. 98-525, 98 Stat. 2565, 2567; sec. 642, Pub. L. 101-
189, 103 Stat. 1456-1458)

    (b) Television. In determining whether a reservist may pursue all or 
part of a program of education by television, VA will apply the 
provisions of Sec. 21.4233(c).


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3680A)

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 20729, May 8, 1996; 61 
FR 29303, June 10, 1996; 62 FR 40280, July 28, 1997]



Sec. 21.7614  Changes of program.

    In determining whether a change of program of education may be 
approved for the payments of educational assistance, VA will apply Sec. 
21.4234 of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3691; Pub. L. 98-525, Pub. L. 
101-366) (June 1, 1991)

[58 FR 50846, Sept. 29, 1993]

                                 Courses



Sec. 21.7620  Courses included in programs of education.

    (a) General. Generally, VA will approve, and will authorize payment 
of educational assistance for the reservist's enrollment in any course 
or subject which a State approving agency has approved as provided in 
Sec. 21.7720 of this part, and which forms a part of a program of 
education as defined in Sec. 21.7520(b)(17). Restrictions on this 
general rule are stated in the other paragraphs in this section and in 
Sec. 21.7722(b) of this part, however.


(Authority: 10 U.S.C. 16131; Pub. L. 98-525)

    (b) Flight training. (1) VA may pay educational assistance for an 
enrollment in a flight training course when--
    (i) An institution of higher learning offers the course for credit 
toward the standard college degree the reservist is pursuing; or
    (ii) When:
    (A) The reservist is eligible to pursue flight training as provided 
in Sec. 21.7540(b)(1) and (b)(3);
    (B) The State approving agency has approved the course;
    (C) A flight school is offering the course;
    (D) The reservist's training meets the requirements of Sec. 
21.4263(b)(1);
    (E) The reservist meets the requirements of Sec. 21.4263(a); and
    (F) The training for which payment is made occurs after September 
29, 1990.
    (2) VA will not pay educational assistance for an enrollment in a 
flight training course when the reservist is pursuing an ancillary 
flight objective.


(Authority: 10 U.S.C. 16131, 16136(c)(1); 38 U.S.C. 3034)

    (c) Independent study. (1) VA will pay educational assistance to a 
reservist who is limited in the types of courses he or she may pursue, 
as provided in

[[Page 482]]

Sec. 21.7540(b)(2) and (b)(3), for an enrollment in any course or unit 
subject offered by independent study only when the reservist is enrolled 
concurrently in one or more courses or unit subjects offered by resident 
training.
    (2) Only a reservist who meets the requirements of Sec. 
21.7540(b)(1) may be paid educational assistance for an enrollment in an 
independent study course or unit subject without a simultaneous 
enrollment in a course or unit subject offered by resident training. The 
independent study course or unit subject must be accredited and lead to 
a standard college degree. Beginning with enrollments on or after 
December 27, 2001, a reservist may receive educational assistance for an 
independent study course that leads to a certificate. The certificate 
must reflect educational attainment and must be offered by an 
institution of higher learning.


(Authority: 38 U.S.C. 3680A(a)(4))

    (3) Except as provided in paragraph (c)(4) of this section and 
subject to the restrictions found in paragraph (c)(1) of this section, 
effective October 29, 1992, VA may pay educational assistance to a 
reservist who is enrolled in a nonaccredited course or unit subject 
offered entirely or partly by independent study only if--
    (i) Successful completion of the nonaccredited course or unit 
subject is required in order for the reservist to complete his or her 
program of education and the reservist:
    (A) Was receiving educational assistance on October 29, 1992, for 
pursuit of the program of education of which the nonaccredited 
independent study course or unit subject forms a part; and
    (B) Has remained continuously enrolled in the program of education 
of which the nonaccredited independent study course or unit subject 
forms a part from October 29, 1992, to the date the reservist enrolls in 
the nonaccredited independent study course or unit subject; or
    (ii)(A) Was enrolled in and receiving educational assistance for the 
nonaccredited independent study course or unit subject on October 29, 
1992; and
    (B) Remains continuously enrolled in that course or unit subject.
    (4) Whether or not the reservist is enrolled will be determined by 
the regularly prescribed standards and practices of the educational 
institution offering the course or unit subject.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3680A(a)(4); sec. 313(b), Pub. 
L. 102-568, 106 Stat. 4332)

    (d) Graduate study. VA will pay educational assistance for an 
enrollment in a course or subject leading to a graduate degree or 
certificate when the training occurs after November 29, 1993.


(Authority: 10 U.S.C. 16131(c))

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 29303, June 10, 1996; 
68 FR 59731, Oct. 17, 2003]



Sec. 21.7622  Courses precluded.

    (a) Unapproved courses. VA will not pay educational assistance for 
an enrollment in any course which has not been approved by a State 
approving agency or by VA when that agency acts as a State approving 
agency. VA will not pay educational assistance for a new enrollment in a 
course when a State approving agency has suspended the approval of the 
course for new enrollments, nor for any period within any enrollment 
after the date that the State approving agency disapproves a course. See 
Sec. 21.7720 of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3672; Pub. L. 98-525)

    (b) Courses not part of a program of education. VA will not pay 
educational assistance for an enrollment in any course which is not part 
of a program of education.


(Authority: 10 U.S.C. 16131; Pub. L. 98-525)

    (c) Erroneous, deceptive, misleading practices. VA will not pay 
educational assistance for an enrollment in any courses offered at an 
educational institution that uses advertising, sales, or enrollment 
practices that are erroneous, deceptive, or misleading by actual 
statement, omission, or intimation. VA will apply the provisions of 
Sec. 21.4252(h) in making these decisions with regard to enrollments 
under 10 U.S.C. chapter 1606.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3696)


[[Page 483]]


    (d) Avocational and recreational. (1) VA will not pay educational 
assistance for an enrollment in any course--
    (i) Which is avocational or recreational in character, or
    (ii) The advertising for which contains significant avocational or 
recreational themes.
    (2) VA presumes that the following courses are avocational or 
recreational in character unless the reservist justifies their pursuit 
to VA as provided in paragraph (3) of this section. The courses are:
    (i) Any photography course or entertainment course; or
    (ii) Any music course, instrumental or vocal, public speaking 
course, or course in dancing, sports or athletics, such as horseback 
riding, swimming, fishing, skiing, golf, baseball, tennis, bowling, 
sports officiating, or other sport or athletic courses, except courses 
of applied music, physical education, or public speaking which are 
offered by institutions of higher learning for credit as an integral 
part of a program leading to an educational objective; or
    (iii) Any other type of course which VA determines to be avocational 
or recreational.
    (3) To overcome a presumption that a course is avocational or 
recreational in character, the reservist must establish that the course 
will be of bona fide use in the pursuit of his or her present or 
contemplated business or occupation.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3473(d); Pub. L. 98-525)

    (e) Mitigating circumstances. The reservist is not entitled to 
receive payment of educational assistance from VA for a course from 
which the reservist withdraws or receives a nonpunitive grade which is 
not used in computing the requirements for graduation unless--
    (1) There are mitigating circumstances, and
    (2) The reservist submits the circumstances in writing to VA within 
1 year from the date VA notifies the reservist that he or she must 
submit the mitigating circumstances.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(a); Pub. L. 98-525)

    (f) Other courses. (1) A reservist who is limited in the types of 
courses he or she may pursue, as provided in Sec. 21.7540(b)(2) and 
(b)(3), may not receive any educational assistance for pursuit of any of 
the types of training listed in Sec. 21.7540(b)(3).
    (2) VA will not consider the hospital or field work phase of a 
nursing course, including a course leading to a degree in nursing, to be 
provided by an institution of higher learning unless--
    (i) The hospital or fieldwork phase is an integral part of the 
course;
    (ii) Completion of the hospital or fieldwork phase of the course is 
a prerequisite to the successful completion of the course;
    (iii) The student remains enrolled in the institution of higher 
learning during the hospital or fieldwork phase of the course; and
    (iv) The training is under the direction and supervision of the 
institution of higher learning.
    (3) A reservist who is limited in the types of courses he or she may 
pursue, as provided in Sec. 21.7540(b)(2) and (b)(3), may not receive 
educational assistance for an enrollment in a course pursued after the 
reservist has completed the course of instruction required for the award 
of a baccalaureate degree or the equivalent evidence of completion of 
study, unless the reservist is pursuing a course or courses leading to a 
graduate degree or graduate certificate. Such a reservist may receive 
educational assistance while pursuing a course or courses leading to a 
graduate degree or graduate certificate (subject to the restrictions in 
Sec. 21.7620(d)). Equivalent evidence of completion of study may 
include, but is not limited to, a copy of the reservist's transcript 
showing that he or she has received passing grades in all courses needed 
to obtain a baccalaureate degree at the institution of higher learning 
which he or she has been attending.
    (4) No reservist may receive payment of educational assistance from 
VA for:
    (i) An audited course (see Sec. 21.4252(i));
    (ii) A new enrollment in a course during a period when approval has 
been suspended by a State approving agency or VA;

[[Page 484]]

    (iii) Pursuit of a course by a nonmatriculated student except as 
provided in Sec. 21.4252(l);
    (iv) An enrollment in a course at an educational institution for 
which the reservist is an official of such institution authorized to 
sign certificates of enrollment under 10 U.S.C. chapter 1606;
    (v) A new enrollment in a course which does not meet the veteran-
nonveteran ratio requirement as computed under Sec. 21.4201;
    (vi) Except as provided in Sec. 21.7620(c), an enrollment in a 
nonaccredited independent study course; or
    (vii) An enrollment in a course offered under contract for which VA 
approval is prohibited by Sec. 21.4252(m).


(Authority: 10 U.S.C. 16131(c), 16136(b); 38 U.S.C. 3672(a), 3676, 
3680(a), 3680A(f), 3680A(g); Sec. 642, Public Law 101-189, 103 Stat. 
1458)

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 20729, May 8, 1996; 61 
FR 29304, June 10, 1996; 62 FR 55762, Oct. 28, 1997; 65 FR 81743, Dec. 
27, 2000]



Sec. 21.7624  Overcharges and restrictions on enrollments.

    (a) Overcharges. VA may disapprove an educational institution for 
further enrollments when the educational institution charges or receives 
from a reservist tuition and fees that exceed the established charges 
which the educational institution requires from similarly circumstanced 
nonreservists enrolled in the same course.


(Authority: 10 U.S.C. 2136; 38 U.S.C. 3690; sec. 705(a)(1), Pub. L. 98-
525, 98 Stat. 2565, 2567; secs. 642 (c), (d), 645(a)(1), Pub. L. 101-
189, 103 Stat. 1457-1458)

    (b) Restriction on enrollments. The provisions of Sec. 21.4210(b) 
apply to any determination by VA as to whether to impose restrictions on 
approval of enrollments and whether to discontinue payments to 
reservists already enrolled at an educational institution.


(Authority: 10 U.S.C. 2136; 38 U.S.C. 3690(b); sec. 705(a)(1), Pub. L. 
98-525, 98 Stat. 2565, 2567; secs. 642 (c), (d), 645(a)(1), Pub. L. 101-
189, 103 Stat. 1457-1458)

[61 FR 29304, June 10, 1996, as amended at 63 FR 35837, July 1, 1998]

                    Payments--Educational Assistance



Sec. 21.7630  Educational assistance.

    VA will pay educational assistance pursuant to 10 U.S.C. chapter 
1606 to an eligible reservist while he or she is pursuing approved 
courses in a program of education at the rates specified in Sec. 
21.7636 and Sec. 21.7639.


(Authority: 10 U.S.C. 16131(b); Pub. L. 98-525)

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 20729, May 8, 1996]



Sec. 21.7631  Commencing dates.

    VA will determine the commencing date of an award or increased award 
of educational assistance under this section. When more than one 
paragraph in this section applies, VA will award educational assistance 
using the latest of the applicable commencing dates.
    (a) Entrance or reentrance including change of program or 
educational institution. When an eligible reservist enters or reenters 
into training (including a reentrance following a change of program or 
educational institution), the commencing date of his or her award of 
educational assistance will be determined as follows:
    (1) If the award is the first award of educational assistance for 
the program of education the reservist is pursuing, the commencing date 
of the award of educational assistance is the latest of:
    (i) The date the educational institution certifies under paragraph 
(b) or (c) of this section;
    (ii) One year before the date of claim as determined by Sec. 
21.1029(b);
    (iii) The effective date of the approval of the course, or one year 
before the date VA receives the approval notice whichever is later; or
    (2) If the award is the second or subsequent award of educational 
assistance for the program of education the reservist is pursuing, the 
effective date of the award of educational assistance is the later of--
    (i) The date the educational institution certifies under paragraph 
(b) or (c) of this section; or
    (ii) The effective date of the approval of the course, or one year 
before the

[[Page 485]]

date VA receives the approval notice, whichever is later.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3672, 5103)

    (b) Certification by educational institution--course or subject 
leads to a standard college degree. (1) When a student enrolls in a 
course offered by independent study, the commencing date of the award or 
increased award of educational assistance will be the date the student 
began pursuit of the course according to the regularly established 
practices of the educational institution.
    (2) When a student enrolls in a resident course or subject, the 
commencing date of the award will be the date of reporting provided 
that--
    (i) The published standards of the school require the student to 
register before reporting,
    (ii) The published standards of the school require the student to 
report no more than 14 days before the first scheduled date of classes 
for the term, quarter or semester for which the student has registered, 
and
    (iii) The first scheduled class for the course or subject in which 
the student is enrolled begins during the calendar week when, according 
to the school's academic calendar, classes are generally scheduled to 
commence for the term.
    (3) When a student enrolls in a resident course or subject whose 
first scheduled class begins after the calendar week when, according to 
the school's academic calendar, classes are scheduled to commence for 
the term, quarter, or semester, the commencing date of the award or 
increased award of educational assistance allowance will be the actual 
date of the first class scheduled for the particular course or subject.
    (4) When a student enrolls in a resident course or subject and 
neither the provisions of paragraph (b)(2) nor (b)(3) of this section 
apply to the enrollment, the commencing date of the award or increased 
award of educational assistance will be the first scheduled date of 
classes for the term, quarter, or semester in which the student is 
enrolled.


(Authority: 10 U.S.C. 16136(b)).

    (c) Certification by educational institution--course does not lead 
to a standard college degree. (1) When a reservist enrolls in a course 
which does not lead to a standard college degree and which is offered in 
residence, the commencing date of the award of educational assistance 
will be as stated in paragraph (b) of this section.
    (2) When a reservist enrolls in a course which is offered by 
correspondence, the commencing date of the award of educational 
assistance shall be the later of--
    (i) The date the first lesson was sent, or
    (ii) The date of affirmance in accordance with 38 U.S.C. 3686.
    (3) When a reservist enrolls in a program of apprenticeship or other 
on-job training, the commencing date of the award of educational 
assistance shall be the first date of employment in the training 
position.


(Authority: 10 U.S.C. 16136(b))

    (d) Liberalizing laws and VA issues. When a liberalizing law or VA 
issue affects the commencing date of a reservist's award of educational 
assistance, that commencing date shall be in accordance with facts 
found, but not earlier than the effective date of the act or 
administrative issue.


(Authority: 38 U.S.C. 5112(b), 5113; Pub. L. 98-525)

    (e) Individuals in a penal institution. If a reservist is paid a 
reduced rate of educational assistance under Sec. 21.7639 (d), (e), 
(f), (g) and (h) of this section, the rate will be increased or 
assistance will commence effective the earlier of the following dates:
    (1) The date the tuition and fees are no longer being paid under 
another Federal program or a State or local program, or
    (2) The date of the release from the prison or jail.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3482(g); Pub. L. 98-525)

    (f) [Reserved]
    (g) Increase (``kicker'') in amount payable. If a reservist is 
entitled to an increase (``kicker'') in the monthly rate of educational 
assistance because he or

[[Page 486]]

she has met the requirements of Sec. 21.7636(b), the effective date of 
that increase (``kicker'') will be the latest of the following dates:
    (1) The commencing date of the reservist's award as determined by 
paragraphs (a) through (g) of this section; or
    (2) The first date on which the reservist is entitled to the 
increase (``kicker'') as determined by the Secretary of the military 
department concerned; or
    (3) February 10, 1996.


(Authority: 10 U.S.C. 16131)

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 11311, Mar. 20, 1996; 
61 FR 29304, June 10, 1996; 62 FR 55520, Oct. 27, 1997; 64 FR 23773, May 
4, 1999; 66 FR 38939, July 26, 2001]



Sec. 21.7633  Suspension or discontinuance of payments.

    VA may suspend or discontinue payments of educational assistance. In 
doing so, VA will apply Sec. Sec. 21.4210 through 21.4216.

(Authority: 10 U.S.C 16136(b); 38 U.S.C. 3690)

[63 FR 35837, July 1, 1998]



Sec. 21.7635  Discontinuance dates.

    The effective date of reduction or discontinuance of educational 
assistance will be as stated in this section. If more than one type of 
reduction or discontinuance is involved, the earliest date will control.
    (a) Death of reservist. (1) If the reservist receives an advance 
payment and dies before the end of the period covered by the advance 
payment, the discontinuance date of educational assistance shall be the 
last date of the period covered by the advance payment.
    (2) In all other cases if the reservist dies while pursuing a 
program of education, the discontinuance date of educational assistance 
shall be the last date of attendance.


(Authority: 10 U.S.C. 16136; 38 U.S.C. 3680(e))

    (b) Course discontinued--course interrupted--course terminated--
course not satisfactorily completed or withdrawn from. (1) If the 
reservist, for reasons other than being called or ordered to active 
duty, withdraws from all courses or receives all nonpunitive grades, and 
in either case there are no mitigating circumstances VA will terminate 
or reduce educational assistance effective the first date of the term in 
which the withdrawal occurs or the first date of the term for which 
grades are assigned.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(a); Pub. L. 102-127) 
(Aug. 1, 1990)

    (2) If the reservist withdraws from all courses with mitigating 
circumstances or withdraws from all courses such that a punitive grade 
is or will be assigned for those courses or the reservist withdraws from 
all courses because he or she is ordered to active duty, VA will 
terminate educational assistance for--
    (i) Residence training: last date of attendance; and
    (ii) Independent study: official date of change in status under the 
practices of the institution of higher learning.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(a); Pub. L. 98-525, Pub. 
L. 102-127) (Aug. 1, 1990)

    (3) When a reservist withdraws from a correspondence course, VA will 
terminate educational assistance effective the date the last lesson is 
serviced.
    (4) When a reservist withdraws from an apprenticeship or other on-
job training, VA will terminate educational assistance effective the 
date of last training.


(Authority: 10 U.S.C. 2136(b); 38 U.S.C. 3680(a); sec. 705(a)(1), Pub. 
L. 98-525, 98 Stat. 2565, 2567; sec. 642 (c), (d), Pub. L. 101-189, 103 
Stat. 1457-1458)

    (5) When a reservist withdraws from flight training, VA will 
terminate educational assistance effective the date of last instruction.


(Authority: 10 U.S.C. 2136(b); 38 U.S.C. 3680(a); sec. 705(a)(1), Pub. 
L. 98-525, 98 Stat. 2565, 2567; sec. 642 (c), (d), Pub. L. 101-189, 103 
Stat. 1457-1458)

    (c) Reduction in the rate of pursuit of the course. If the reservist 
reduces the rate of training by withdrawing from part of a course, but 
continues training in part of the course, the provisions of this 
paragraph apply.
    (1) If the reduction in the rate of training occurs other than on 
the first

[[Page 487]]

date of the term, VA will reduce the reservist's educational assistance 
effective on the date the reduction occurred when--
    (i) A nonpunitive grade is assigned for the part of the course from 
which he or she withdraws, and
    (A) The reservist withdraws because he or she is ordered to active 
duty, or
    (B) The withdrawal occurs with mitigating circumstances; or
    (ii) A punitive grade is assigned for the part of the course from 
which the reservist withdraws.
    (2) VA will reduce educational assistance effective the first date 
of the enrollment in which the reduction occurs when--
    (i) The reduction occurs on the first date of the term, or
    (ii) The reservist--
    (A) Receives a nonpunitive grade for the part of the course from 
which he or she withdraws, and
    (B) Withdraws without mitigating circumstances, and
    (C) Does not withdraw because he or she is ordered to active duty.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(a); Pub. L. 102-127) 
(Aug. 1, 1990)

    (3) A reservist, who enrolls in several subjects and reduces his or 
her rate of pursuit by completing one or more of them while continuing 
training in the others, may receive an interval payment based on the 
subjects completed if the requirements of Sec. 21.7640 are met. If 
those requirements are not met, VA will reduce the reservist's 
educational assistance effective the date the subject or subjects were 
completed.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680; Pub. L. 98-525, Pub. L. 
100-689)

    (d) Nonpunitive grade. (1) If the reservist receives a nonpunitive 
grade in a particular course, for any reason other than a withdrawal 
from it, VA will reduce his or her educational assistance effective the 
first date of enrollment for the term in which the grade applies when no 
mitigating circumstances are found.
    (2) If the reservist receives a nonpunitive grade for a particular 
course for any reason other than a withdrawal from it, VA will reduce 
the reservist's educational assistance effective the last date of 
attendance when mitigating circumstances are found.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680; Pub. L. 98-525, Pub. L. 
100-689)(Nov. 18, 1988)

    (e) Discontinued by VA. If VA discontinues payment to a reservist 
following the procedures stated in Sec. 21.4211(d) and (g), the date of 
discontinuance of payment of educational assistance will be--
    (1) The date on which payments first were suspended by the Director 
of a VA facility as provided in Sec. 21.4210, if the discontinuance was 
preceded by suspension.
    (2) The end of the month in which the decision to discontinue, made 
by VA under Sec. 21.7633 or Sec.  21.4211(d) and (g), is effective, if 
the Director of a VA facility did not suspend payments before the 
discontinuance.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3690; Pub. L. 98-525)

    (f) Disapproved by State approving agency. If a State approving 
agency disapproves a course in which a reservist is enrolled, the date 
of discontinuance of payment of educational assistance will be--
    (1) The date on which payments first were suspended by the Director 
of a VA facility as provided in Sec. 21.4210 if disapproval was 
preceded by such a suspension.
    (2) The end of the month in which disapproval is effective or VA 
receives notice of the disapproval, whichever is later, provided that 
the Director of a VA facility did not suspend payments before the 
disapproval.


(Authority: 10 U.S.C. 16131(b), 38 U.S.C. 3672(a), 3690; Pub. L. 98-525)

    (g) Disapproval by VA. If VA disapproves a course in which a 
reservist is enrolled, the effective date of discontinuance of payment 
of educational assistance will be--
    (1) The date on which the Director of a VA facility first suspended 
payments, as provided in Sec. 21.4210 of this part, if such a 
suspension preceded the disapproval.
    (2) The end of the month in which the disapproval occurred, provided 
that the

[[Page 488]]

Director of a VA facility did not suspend payments before the 
disapproval.


(Authority: 10 U.S.C. 16131(b), 38 U.S.C. 3671(b), 3672(a), 3690; Pub. 
L. 98-525)

    (h) Unsatisfactory progress. If a reservist's progress is 
unsatisfactory, his or her educational assistance shall be discontinued 
effective the earlier of the following:
    (1) The date the educational institution discontinues the 
reservist's enrollment, or
    (2) The date on which the reservist's progress becomes 
unsatisfactory according to the educational institution's regularly 
established standards of progress.


(Authority: 10 U.S.C. 16131(b), 38 U.S.C. 3474; Pub. L. 98-525)

    (i) False or misleading statements. If educational assistance is 
paid as the result of false or misleading statements, see Sec. 21.7658 
of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3690; Pub. L. 98-525)

    (j) Conflicting interests (not waived). If an institution of higher 
learning and VA have conflicting interests as provided in Sec. 21.4005 
and Sec. 21.7805 of this part, and VA does not grant the waiver, the 
date of discontinuance shall be 30 days after the date of the letter 
notifying the reservist.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3683; Pub. L. 98-525)

    (k) Incarceration in prison or penal institution for conviction of a 
felony. (1) The provisions of this paragraph apply to a reservist whose 
educational assistance must be discontinued or who becomes restricted to 
payment of educational assistance at a reduced rate under Sec. 
21.7639(d) of this part.
    (2) The reduced rate or discontinuance will be effective the latest 
of the following dates:
    (i) The first day on which all or part of the reservist's tuition 
and fees were paid by a Federal, State or local program,
    (ii) The date the reservist is incarcerated in prison or penal 
institution, or
    (iii) The commencing date of the award as determined by Sec. 
21.7631 of this part.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3482(g); Pub. L. 98-525)

    (l) Exhaustion of entitlement. If a reservist exhausts his or her 36 
months of entitlement, the discontinuance date shall be the date the 
entitlement is exhausted.


(Authority: 10 U.S.C. 16131(c); Pub. L. 98-525)

    (m) End of eligibility period. If the reservist's eligibility period 
ends while the reservist is receiving educational assistance, the date 
of discontinuance shall be the date on which eligibility ends as 
determined by Sec. 21.7550 and Sec.  21.7551 of this part.


(Authority: 10 U.S.C. 16133; Pub. L. 98-525)

    (n) Required certifications not received after certification of 
enrollment. (1) If VA does not timely receive a required certification 
of attendance for a reservist enrolled in a course not leading to a 
standard college degree, VA will terminate payments effective the last 
date of the last period for which a certification of the reservist's 
attendance was received. If VA later receives the certification, VA will 
make any adjustment on the basis of facts found.
    (2) In the case of an advance payment, if VA does not receive 
verification of enrollment and certificate of delivery of the check 
within 60 days of the first day of the term, quarter, semester, or 
course for which the advance payment was made, VA will determine the 
actual facts and make an adjustment, if required. If the reservist 
failed to enroll, termination will be effective the beginning date of 
the enrollment period.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(d); Pub. L. 98-525)

    (o) Receipt of financial assistance under 10 U.S.C. 2107. If the 
reservist receives financial assistance under 10 U.S.C. 2107, the 
effective date for discontinuance of payment of educational assistance 
shall be the first date for which the reservist receives such 
assistance.


(Authority: 10 U.S.C. 16134; Pub. L. 98-525)


[[Page 489]]


    (p) Failure to participate satisfactorily in required training in 
Selected Reserve. If the reservist fails to participate satisfactorily 
in required training in the Selected Reserve, VA will discontinue 
payment of educational assistance allowance effective the first date 
certified by the Department of Defense or the Department of 
Transportation as the date on which the reservist fails to participate 
satisfactorily as a member of the Selected Reserve.


(Authority: 10 U.S.C. 16134; Pub. L. 98-525)

    (q) Error-payee's or administrative. (1) When an act of commission 
or omission by a payee or with his or her knowledge results in an 
erroneous award of educational assistance, the effective date of the 
reduction or discontinuance will be the effective date of the award, or 
the day before the act, whichever is later, but not before the last date 
on which the reservist was entitled to payment of educational 
assistance.
    (2) When an administrative error or error in judgment by VA, the 
Department of Defense, or the Department of Transportation is the sole 
cause of an erroneous award, the award will be reduced or terminated 
effective the date of last payment.


(Authority: 38 U.S.C. 5112(b), 5113; Pub. L. 98-525)

    (r) Completion of baccalaureate instruction. If a reservist who is 
limited in the types of courses he or she may pursue, as provided in 
Sec. 21.7540 (b)(2) and (b)(3), completes a course of instruction 
required for the award of a baccalaureate degree or the equivalent 
evidence of completion of study (see Sec. 21.7622(f)), VA will 
discontinue educational assistance effective the day after the date upon 
which the required course of instruction was completed.


(Authority: 10 U.S.C. 2131; sec. 705(a)(1), Pub. L. 98-525, 98 Stat. 
2565; secs. 642 (a), (b), (d), 645(a), (b), Pub. L. 101-189, 103 Stat. 
1456-1458)

    (s) Forfeiture for fraud. If a reservist must forfeit his or her 
educational assistance due to fraud, the date of discontinuance of 
payment of educational assistance will be the later of--
    (1) The effective date of the award, or
    (2) The day before the date of the fraudulent act.


(Authority: 38 U.S.C. 6103, Pub. L. 98-525)

    (t) Forfeiture for treasonable acts or subversive activities. If a 
reservist must forfeit his or her educational assistance due to 
treasonable acts or subversive activities, the date of discontinuance of 
payment of educational assistance will be the later of--
    (1) The effective date of the award, or
    (2) The day before the date the reservist committed the treasonable 
act or subversive activities for which he or she was convicted.


(Authority: 38 U.S.C. 6104, 6105; Pub. L. 98-525)

    (u) Change in law or VA issue or interpretation. If there is a 
change in applicable law or VA issue, or in the Department of Veterans 
Affairs's application of the law or VA issue, VA will use the provisions 
of Sec. 3.114(b) of this chapter to determine the date of 
discontinuance of the reservist's educational assistance.


(Authority: 38 U.S.C. 5112, 5113; Pub. L. 98-525)

    (v) Independent study course loses accreditation. If the reservist 
is enrolled in a course offered in whole or in part by independent 
study, and the course loses its accreditation (or the educational 
institution offering the course loses its accreditation), the date of 
reduction or discontinuance will be the effective date of the withdrawal 
of accreditation by the accrediting agency, unless the provisions of 
Sec. 21.7620 (c)(3) or (c)(4) apply.


(Authority: 10 U.S.C. 16136; 38 U.S.C. 3680A(a)(4))

    (w) [Reserved]
    (x) Reduction following loss of increase (``kicker''). If a 
reservist is entitled to an increase (``kicker'') in the monthly rate of 
basic educational assistance as provided in Sec. 21.7636(b) and loses 
that entitlement, the effective date for the reduction in the monthly 
rate payable

[[Page 490]]

is the date, as determined by the Secretary of the military department 
concerned, that the reservist is no longer entitled to the increase 
(``kicker'').


(Authority: 10 U.S.C. 16131)

    (y) Election to receive educational assistance under 38 U.S.C. 
chapter 30. VA shall terminate educational assistance effective the 
first date for which the reservist received educational assistance 
when--
    (1) The service that formed a basis for establishing eligibility for 
educational assistance under 10 U.S.C. chapter 1606 included a period of 
active duty as described in Sec. 21.7020(b)(1)(iv); and
    (2) The reservist subsequently made an election, as described in 
Sec. 21.7042(a)(7) or (b)(10), to become entitled to basic educational 
assistance under 38 U.S.C. chapter 30.


(Authority: Sec. 107, Pub. L. 104-275, 110 Stat. 3329-3330)

    (z) Except as otherwise provided. If the reservist's educational 
assistance must be discontinued for any reason other than those stated 
in the other paragraphs of this section, VA will determine the date of 
discontinuance of payment of educational assistance on the basis of 
facts found.


(Authority: 38 U.S.C. 5112(a), 5113; Pub. L. 98-525)

[53 FR 34740, Sept. 8, 1988, as amended at 57 FR 57106, Dec. 3, 1992; 58 
FR 51783, Oct. 5, 1993; 61 FR 29304, June 10, 1996; 62 FR 55520, Oct. 
27, 1997; 63 FR 35837, July 1, 1998; 65 FR 5788, Feb. 7, 2000; 65 FR 
61101, Oct. 16, 2000; 66 FR 38939, July 26, 2001]



Sec. 21.7636  Rates of payment.

    (a) Monthly rate of educational assistance. (1) Except as otherwise 
provided in this section or in Sec. 21.7639, the monthly rate of 
educational assistance payable for training that occurs after September 
30, 2003, and before October 1, 2004, to a reservist pursuing a program 
of education is the rate stated in this table:

------------------------------------------------------------------------
                        Training                           Monthly rate
------------------------------------------------------------------------
Full....................................................         $282.00
\3/4\ time..............................................          212.00
\1/2\ time..............................................          140.00
\1/4\ time..............................................           70.50
------------------------------------------------------------------------

    (2)(i) The monthly rate of basic educational assistance payable to a 
reservist for apprenticeship or other on-the-job training full time that 
occurs after September 30, 2003, and before October 1, 2004, is the rate 
stated in this table:

------------------------------------------------------------------------
                     Training period                       Monthly rate
------------------------------------------------------------------------
First six months of pursuit of training.................         $211.50
Second six months of pursuit of training................          155.10
Remaining pursuit of training...........................           98.70
------------------------------------------------------------------------

    (ii) Full-time training will consist of the number of hours which 
constitute the standard workweek of the training establishment, but not 
less than 30 hours unless a lesser number of hours is established as the 
standard workweek for the particular establishment through bona fide 
collective bargaining between employers and employees.
    (3) The monthly rate of basic educational assistance payable to a 
reservist for pursuit of a cooperative course that occurs after 
September 30, 2003, and before October 1, 2004, is the rate stated in 
paragraph (a)(1) of this section for full-time training during that 
period of time.


(Authority: 10 U.S.C. 16131(b), (c); sec. 8203(b), Pub. L. 105-178, 112 
Stat. 493-494)

    (b) Increase (``kicker'') in educational assistance rates. (1) The 
Secretary of the military department concerned may increase the amount 
of educational assistance stated in paragraph (a) of this section that 
is payable to a reservist who has a skill or specialty in which there is 
a critical shortage of personnel or for which it is difficult to 
recruit, or, in the case of critical units, retain personnel.
    (2) The Secretary of the military department concerned--
    (i) Will set the amount of the increase (``kicker'') for full-time 
training, but the increase (``kicker'') may not exceed $350 per month; 
and
    (ii) May set the amount of the increase (``kicker'') payable, for a 
reservist pursuing a program of education less than full time or 
pursuing an apprenticeship or other on-job training,

[[Page 491]]

at an amount less than the amount described in paragraph (b)(2)(i) of 
this section.


(Authority: 10 U.S.C. 16131(i)(1))

    (c) Limitations on payments. VA may withhold final payment until VA 
receives proof of the reservist's enrollment and adjusts the reservist's 
account.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3680(g))

[61 FR 29305, June 10, 1996, as amended at 62 FR 27964, May 22, 1997; 62 
FR 55520, Oct. 27, 1997; 62 FR 66278, Dec. 18, 1997; 64 FR 26297, May 
14, 1999; 65 FR 59127, Oct. 4, 2000; 65 FR 60499, Oct. 11, 2000; 66 FR 
38937, July 26, 2001; 67 FR 6655, Feb. 13, 2002; 68 FR 42978, July 21, 
2003; 69 FR 62205, Oct. 25, 2004]



Sec. 21.7639  Conditions which result in reduced rates or no payment.

    The payment of educational assistance at the monthly rates 
established in Sec. 21.7636 shall be subject to reduction, whenever the 
circumstances described in this section arise.
    (a) Withdrawals and nonpunitive grades. (1) Withdrawal from a course 
or receipt of a nonpunitive grade affects payments to a reservist. VA 
will not pay benefits to a reservist for pursuit of a course from which 
the reservist withdraws or receives a nonpunitive grade which is not 
used in computing requirements for graduation unless the provisions of 
this paragraph are met.
    (i) The reservist withdraws because he or she is ordered to active 
duty; or
    (ii) Both of the following exist.
    (A) There are mitigating circumstances, and
    (B) The reservist submits a description of the circumstances in 
writing to VA either within one year from the date VA notifies the 
reservist that he or she must submit the mitigating circumstances, or at 
a later date if the reservist is able to show good cause why the one-
year time limit should be extended to the date on which he or she 
submitted the description of the mitigating circumstances.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3471, 3680(a), 5101, 5113; 
Pub. L. 102-127) (Aug. 1, 1990))

    (2) If VA considers that mitigating circumstances exist because the 
reservist withdrew during a drop-add period or because the withdrawal 
constitutes the first withdrawal of no more than six credits after May 
31, 1989, the reservist is not subject to the reporting requirement 
found in paragraph (b)(1)(ii)(B) of this section.


(Authority: 10 U.S.C. 16130(b), 38 U.S.C. 3680(a)) (June. 1, 1989)

    (b) No education assistance for some incarcerated reservists. VA 
will pay no educational assistance to reservists who are incarcerated 
and who are training less than one-half time. In addition, VA will pay 
no educational assistance to a reservist who--
    (1) Is incarcerated in Federal, State or local penal institution for 
conviction of a felony, and
    (2) Is enrolled in a course--
    (i) For which there are no tuition and fees, or
    (ii) For which tuition and fees are being paid by a Federal program 
(other than one administered by VA) or by a State or local program, and
    (3) Is incurring no charge for the books, supplies and equipment 
necessary for the course.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3482(g); Pub. L. 98-525)

    (c) Reduced educational assistance for some incarcerated reservists. 
(1) VA will pay reduced educational assistance to a reservist who--
    (i) Is incarcerated in a Federal, State or local penal institution 
for conviction of a felony, and
    (ii) Is enrolled in a course--
    (A) For which the reservist pays some (but not all) of the charges 
for tuition and fees, or
    (B) For which a Federal program (other than one administered by VA) 
or a State or local program pays all the charges for tuition and fees, 
but for which the reservist must pay for books, supplies and equipment.
    (2) The monthly rate of educational assistance payable to such a 
reservist is the lesser of the following:
    (i) The monthly rate of the portion of tuition and fees that are not 
paid by a Federal program (other than one administered by VA) or a State 
or local

[[Page 492]]

program plus the monthly rate of any charges to the reservist for the 
cost of necessary supplies, books and equipment, or
    (ii) The monthly rate as stated in Sec. 21.7636(a) and any increase 
payable under Sec. 21.7636(b).
    (3) In determining the monthly rate stated in paragraph (c)(2)(i) of 
this paragraph, VA will--
    (i) Add the portion of tuition and fees that are not paid by a 
Federal program (other than one administered by VA) for the reservist's 
enrollment period to the total cost to the reservist for the cost of 
necessary supplies, books and equipment, and
    (ii) Divide the figure obtained in paragraph (c)(3)(i) of this 
paragraph by the number of months and fractions of a month in the 
reservist's enrollment period.


(Authority: 10 U.S.C. 16131(i)(1), 16136(b); 38 U.S.C. 3482(g))

    (d)(1) A reservist pursuing only independent study and whose 
enrollment begins after June 30, 1993, shall be paid educational 
assistance on the basis of his or her training time.
    (2) No payments may be made to a reservist who is limited in the 
types of courses he or she may pursue, as provided in Sec. 
21.7540(b)(2) and (b)(3), and who is pursuing independent study unless 
he or she is concurrently pursuing one or more courses offered through 
resident training at an institution of higher learning.


(Authority: 10 U.S.C. 2131; 10 U.S.C. 2136(b); 38 U.S.C. 3532, 3532 
note, 3680; sec. 705(a)(1), Pub. L. 98-525, 98 Stat. 2565, 2567; secs. 
642, 645 (a), (b), Pub. L. 101-189, 103 Stat. 1457-1458)

    (e) Payment for correspondence courses. A reservist who is pursuing 
a correspondence course or the correspondence portion of a 
correspondence-residence course shall be paid 55 percent of the 
established charge which the educational institution requires 
nonreservists to pay for the lessons--
    (1) Which the reservist has completed;
    (2) Which the educational institution has serviced; and
    (3) For which payment is due.


(Authority: 10 U.S.C. 2131(f); sec. 642 (b), (d), Pub. L. 101-189, 103 
Stat. 1456-1458)

    (f) Failure to work sufficient hours of apprenticeship and other on-
job training. (1) For any calendar month in which a reservist pursuing 
an apprenticeship or other on-job training program fails to complete 120 
hours of training, VA will reduce proportionally--
    (i) The rates specified in Sec. 21.7636(a)(2); and
    (ii) Any increase set by the Secretary of the military department 
concerned as described in Sec. 21.7636(b).
    (2) In making the computations required by paragraph (f)(1) of this 
section, VA will round the number of hours worked to the nearest 
multiple of eight.
    (3) For the purpose of this paragraph, hours worked include only--
    (i) The training hours the reservist worked; and
    (ii) All hours of the reservist's related training which occurred 
during the standard workweek and for which the reservist received wages. 
(See Sec. 21.7636(a)(2)(ii) as to the requirements for full-time 
training.)


(Authority: 10 U.S.C. 2131(d)(2), 16131(i)(1); sec. 642 (b), (d), Pub. 
L. 101-189, 103 Stat. 1456-1458)

    (g) Flight training course. A reservist who is pursuing a flight 
training course shall be paid 60 percent of the established charge for 
tuition and fees (other than tuition and fees charged for or 
attributable to solo flying hours) which the flight school requires 
similarly circumstanced nonreservists enrolled in the same course to 
pay.


(Authority: 10 U.S.C. 16131(g))

    (h) Membership in the Senior Reserve Officers' Training Corps. A 
reservist may not receive educational assistance for any period for 
which he or she receives financial assistance under 10 U.S.C. 2107 as a 
member of the Senior Reserve Officers' Training Corps.


(Authority: 10 U.S.C. 16134)

    (i) Course not offered by an institution of higher learning or not 
leading to an identifiable educational, professional, or

[[Page 493]]

vocational objective. A reservist who is limited in the types of courses 
he or she may pursue, as described in Sec. 21.7540(b)(2) and (b)(3), 
may not receive educational assistance for instruction in a program of 
education unless it is offered at an institution of higher learning. The 
instruction must lead to an identifiable educational, professional, or 
vocational objective, but does not have to lead to a standard college 
degree.


(Authority: 10 U.S.C. 2131(b), 2136(b); sec. 705(a)(1), Pub. L. 98-525, 
98 Stat. 2565, 2567; secs. 642 (b)(1), (c), (d), 645(a), (b), Pub. L. 
101-189, 103 Stat. 1456-1458)

[53 FR 34740, Sept. 8, 1988, as amended at 57 FR 57107, Dec. 3, 1992; 58 
FR 51783, Oct. 5, 1993; 58 FR 65930, Dec. 17, 1993; 61 FR 29305, June 
10, 1996; 61 FR 29482, June 11, 1996; 62 FR 55521, Oct. 27, 1997; 62 FR 
55762, Oct. 28, 1997]



Sec. 21.7640  Release of payments.

    (a) Payments are dependent upon certifications, reports, and 
verifications of pursuit. When certifications, reports, or verifications 
of pursuit are mentioned in this paragraph, the certifications, reports, 
and verifications of pursuit are to be made in the form prescribed by 
the Secretary of Veterans Affairs.
    (1) VA will pay educational assistance to a reservist who is 
pursuing a standard college degree only after the educational 
institution has certified his or her enrollment.
    (2) VA will pay educational assistance to a reservist who is 
pursuing a course not leading to a standard college degree (other than a 
correspondence course, a course of flight training, or an apprenticeship 
or other on-job training) only after:
    (i) The educational institution has certified his or her enrollment 
in the form prescribed by the Secretary of Veterans Affairs; and
    (ii) VA has received a report by the reservist, which report is 
endorsed by the educational institution, of--
    (A) Each day of absence that occurred before December 18, 1989; or
    (B) A verification of pursuit from the reservist of training that 
occurred on or after December 18, 1989.
    (3) VA will pay educational assistance to a reservist pursuing a 
program of apprenticeship or other on-job training only after:
    (i) The training establishment has certified his or her enrollment 
in the training program in the form prescribed by the Secretary of 
Veterans Affairs; and
    (ii) VA has received certification by the reservist and the training 
establishment of the reservist's hours worked.
    (4) VA will pay educational assistance to a reservist who is 
pursuing a correspondence course only after:
    (i) The educational institution has certified his or her enrollment 
in the form prescribed by the Secretary of Veterans Affairs; and
    (ii) VA has received a certification by the reservist, which 
certification is endorsed by the educational institution, as to the 
number of lessons completed and serviced by the educational institution.
    (5) VA will pay educational assistance to a reservist who is 
pursuing a flight course only after:
    (i) The educational institution certifies the reservist's enrollment 
in the form prescribed by the Secretary of Veterans Affairs; and
    (ii) VA has received a report by the reservist of the flight 
training the reservist has completed, which report is endorsed by the 
educational institution.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3680)

    (b) Payment for intervals between terms. (1) In administering 10 
U.S.C. chapter 1606, VA will apply the provisions of Sec. 21.4138(f) in 
the same manner as they are applied in the administration of 38 U.S.C. 
chapter 34 when determining whether a reservist is entitled to payment 
for an interval between terms. References to Sec. 21.4205 and Sec.  
21.4138(f) shall be deemed to refer to Sec. 21.7636.
    (2) The Director of the VA facility of jurisdiction may authorize 
payment to be made for breaks, including intervals between terms within 
a certified period of enrollment, during which the educational 
institution is closed under an established policy based upon an order of 
the President or due to an emergency situation.

[[Page 494]]

    (i) If the Director has authorized payment due to an emergency 
school closing resulting from a strike by the faculty or staff of the 
educational institution, and the closing lasts more than 30 days, the 
Director, Education Service, will decide if payments may be continued. 
The decision will be based on a full assessment of the strike situation. 
Further payments will not be authorized if in his or her judgment the 
school closing will not be temporary.
    (ii) An educational institution which disagrees with a decision made 
under this subparagraph by a Director of a VA facility, has 1 year from 
the date of the letter notifying the educational institution of the 
decision to request that the decision be reviewed. The request must be 
submitted in writing to the Director of the VA facility where the 
decision was made. The Director, Education Service, shall review the 
evidence of record and any other pertinent evidence the educational 
institution may wish to submit. The Director, Education Service has the 
authority either to affirm or reverse a decision of the Director of a VA 
facility.
    (3) A reservist, who is pursuing a course leading to a standard 
college degree, may transfer between consecutive school terms from one 
approved institution of higher learning to another for the purpose of 
enrolling in, and pursuing, a similar course at the second institution 
of higher learning. If the interval between terms does not exceed 30 
days, VA shall, for the purpose of paying educational assistance, 
consider the reservist to be enrolled in the first institution of higher 
learning during the interval.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680)

    (c) Payee. (1) VA will make payment to the reservist or to a duly 
appointed fudiciary. VA will make direct payment to the reservist even 
if he or she is a minor.
    (2) The assignment of educational assistance is prohibited. In 
administering this provision, VA will apply the provisions of Sec. Sec. 
21.4146 (a), (b), (c) and (e) of this part to 10 U.S.C. chapter 1606 in 
a manner not inconsistent with the way in which they are applied in the 
administration of 38 U.S.C. chapters 34 and 36.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680, 5301(a))

    (d) Advance payments. VA will apply the provisions of Sec. 
21.4138(a) in making advance payments to reservists.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3680)

    (e) Frequency of payment. Except as provided in Sec. 21.4138(a), VA 
shall pay educational assistance in the month following the month for 
which training occurs. VA may withhold payment to a reservist who is 
enrolled in a course not leading to a standard college degree for any 
month until the reservist's attendance has been reported for that month. 
VA may withhold final payment in all cases until it both receives 
certification that the reservist pursued his or her course, and makes 
any necessary adjustments.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(g))

    (f) Apportionments prohibited. VA will not apportion educational 
assistance.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680)

(Approved by the Office of Management and Budget under control number 
2900-0073)

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 20729, May 8, 1996; 61 
FR 29306, June 10, 1996; 61 FR 29482, June 11, 1996; 64 FR 52652, Sept. 
30, 1999]



Sec. 21.7642  Nonduplication of educational assistance.

    (a) Payments of educational assistance shall not be duplicated. A 
reservist is barred from receiving educational assistance concurrently 
under 10 U.S.C. Chapter 1606 and any of the following provisions of 
law--
    (1) 38 U.S.C. ch. 30;
    (2) 38 U.S.C. ch. 31;
    (3) 38 U.S.C. ch. 32;
    (4) 38 U.S.C. ch. 34;
    (5) 38 U.S.C. ch. 35;
    (6) 10 U.S.C. ch. 107;
    (7) Section 903 of the Department of Defense Authorization Act, 
1981;
    (8) The Hostage Relief Act of 1980; or

[[Page 495]]

    (9) The Omnibus Diplomatic Security Act of 1986.


(Authority: 10 U.S.C. 2136(b); 38 U.S.C. 3695; sec. 705(a)(1), Pub. L. 
98-525, 98 Stat. 2565, 2567; secs. 642(c), (d), Pub. L. 101-189, 103 
Stat. 1457-1458)

    (b) Election of benefits. When paragraph (a) of this section 
applies, the reservist must elect in writing which benefit he or she 
wishes to receive. The reservist may make a new election at any time, 
but may not elect more than once in any calendar month.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3695; Pub. L. 98-525)

    (c) Senior Reserve Officers' Training Corps scholarship program. 
Educational assistance may not be provided to a reservist receiving 
financial assistance under 10 U.S.C. 2107 as a member of the Senior 
Reserve Officers' Training Corps scholarship program.


(Authority: 10 U.S.C. 16134; Pub. L. 98-525)

    (d) Nonduplication--Federal program. Payment of educational 
assistance is prohibited to an otherwise eligible reservist--
    (1) For a unit course or courses which are being paid for entirely 
or partly by the Armed Forces during any period he or she is on active 
duty;
    (2) For a unit course or courses which are being paid for entirely 
or partly by the Department of Health and Human Services during any 
period that he or she is on active duty with the Public Health Service; 
or
    (3) For a unit course or courses which are being paid for entirely 
or partly by the United States under the Government Employees' Training 
Act.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3681; Pub. L. 98-525)

    (e) Service Members Occupational Conversion and Training Act of 
1992. A reservist may not receive educational assistance under the 
Montgomery GI Bill--Selected Reserve program during the period for which 
benefits are payable under the Service Members Occupational Conversion 
and Training Act of 1992.


(Authority: Sec. 4492(a), Pub. L. 102-484, 106 Stat. 2765-2766)

[53 FR 34740, Sept. 8, 1988, as amended at 56 FR 9628, Mar. 7, 1991; 61 
FR 20729, May 8, 1996; 61 FR 29307, June 10, 1996]



Sec. 21.7644  Overpayments.

    (a) Prevention of overpayments. In administering benefits payable 
under 10 U.S.C. chapter 1606, VA will apply the provisions of Sec. Sec. 
21.4008 and 21.4009 of this part in the same manner as they are applied 
in the administration of 38 U.S.C. chapters 34 and 36. See Sec. 
21.7633.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3690(b); Pub. L. 98-525)

    (b) Penalties are not overpayments. The Secretary concerned may 
require a refund from an individual who fails to participate 
satisfactorily in required training as a member of the Selected Reserve. 
This refund is subject to waiver by the Secretary. However, this 
refund--
    (1) Is not an overpayment for VA purposes, and
    (2) Is not subject to waiver by VA under Sec. 1.957 of this 
chapter.


(Authority: 10 U.S.C. 16135; Pub. L. 98-525)

    (c) Liability for overpayments. (1) The amount of the overpayment of 
educational assistance paid to a reservist constitutes a liability of 
that reservist unless--
    (i) The overpayment is waived as provided in Sec. 1.957 of this 
chapter, or
    (ii) The overpayment results from an administrative error or an 
error in judgment. See Sec. 21.7635(o) of this part.
    (2) The amount of the overpayment of educational assistance paid to 
a reservist constitutes as liability of the educational institution if 
VA determines that the overpayment was made as the result of--
    (i) Willful or negligent false certification by the educational 
institution, or
    (ii) Willful or negligent failure to certify excessive absences from 
a course,

[[Page 496]]

or discontinuance or interruption of a course by the reservist.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3685; Pub. L. 98-525)

    (d) Waiver of recovery of overpayments. (1) Except as stated in 
paragraph (b) of this section in determining whether an overpayment 
should be waived or recovered from a reservist, VA will apply the 
provisions of Sec. 1.957 of this chapter.
    (2) In determining whether an overpayment should be recovered from 
an educational institution, VA will apply the provisions of Sec. 
21.4009(a)(2), (3), (4), and (5), (b), (c), (d), (e), (f), (g), (h), 
(i), and (j) of this part to overpayments of educational assistance 
under 10 U.S.C. chapter 1606 in the same manner as they are applied to 
overpayments of educational assistance allowance under 38 U.S.C. 
chapters 34 and 36.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3685, 5302; Pub. L. 98-525)

    Cross-Reference: Entitlement charges. See Sec. 21.7576(c) of this 
part offering training to veterans and servicemembers under 38 U.S.C. 
ch. 34.

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 20729, May 8, 1996]

                 Pursuit of Course and Required Reports



Sec. 21.7650  Pursuit.

    The reservist is entitled to educational assistance only for actual 
pursuant of a program of educational. Verification is accomplished by 
various certifications.


(Authority: 10 U.S.C. 16131(a); Pub. L. 98-525)



Sec. 21.7652  Certification of enrollment and verification of pursuit.

    As stated in Sec. 21.7640 of this part, the educational institution 
must certify the reservist's enrollment before he or she may receive 
educational assistance. Nothing in this section or in any section in 
Part 21 shall be construed as requiring any institution of higher 
learning to maintain daily attendance records for any course leading to 
a standard college degree.
    (a) Content of certification of entrance or reentrance. The 
certification of entrance or reentrance must clearly specify:
    (1) The course;
    (2) The starting and ending dates of the enrollment period;
    (3) The credit hours or clock hours being pursued by the reservist;
    (4) The amount of tuition, fees and the cost of books, supplies and 
equipment charged to a reservist who is incarcerated in a Federal, State 
or local prison or jail for conviction of a felony; and
    (5) Such other information as the Secretary may find is necessary to 
determine the reservist's monthly rate of educational assistance.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3482(g), 3680; Pub. L. 98-525)

    (b) Length of the enrollment period covered by the enrollment 
certification. (1) Educational institutions organized on a term, quarter 
or semester basis generally shall report enrollment for the term, 
quarter, semester, ordinary school year or ordinary school year plus 
summer term. If the certification covers two or more terms, the 
educational institution will report the dates for the break between 
terms if a term ends and the following term does not begin in the same 
or the next calendar month, or if the reservist elects not to be paid 
for the intervals between terms. The educational institution must submit 
a separate enrollment certification for each term, quarter or semester 
when the certification is for a reservist who is incarcerated in a 
Federal, State or local prison or jail for conviction of a felony.
    (2) Educational institutions organized on a year-round basis will 
report enrollment for the length of the course. The certification will 
include a report of the dates during which the educational institution 
closes for any interval designated in its approval data as breaks 
between school years.
    (3) When a reservist enrolls in independent study leading to a 
standard college degree concurrently with resident training, the 
educational institution's certification will include--
    (i) The enrollment date, and
    (ii) The ending date for the period being certified. If the 
educational institution has not prescribed maximum

[[Page 497]]

time for completion of the independent study portion of the enrollment, 
the certification must include an ending date for the independent study 
based on the educational institution's estimate for completion.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3684; Pub. L. 98-525)

    (c) Verification of pursuit. (1) A reservist who is pursuing a 
course leading to a standard college degree must have his or her 
continued enrollment in and pursuit of the course verified for the 
entire enrollment period. Verification of continued enrollment will be 
made at least once a year and in the last month of enrollment if the 
enrollment period ends more than 3 months after the last verification. 
In the case of a reservist who completed, interrupted or terminated his 
or her course, any communication from the reservist or other authorized 
person notifying the VA of the reservist's completion of a course as 
scheduled or an earlier termination date, will be accepted to terminate 
payments accordingly.
    (2) The verification of pursuit will also include a report on the 
following items when applicable:
    (i) Continued enrollment in and pursuit of the course,
    (ii) Conduct and progress (See Sec. 21.7653(c)),
    (iii) Date of interruption or termination of training (See Sec. 
21.7656(a)),
    (iv) Changes in number of credit hours or clock hours of attendance 
(See Sec. 21.7656(a)), and
    (v) Any other changes or modifications in the course as certified at 
enrollment.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680(g); Pub. L. 98-525)

[52 FR 34740, Sept. 8, 1988, as amended at 61 FR 29482, June 11, 1996]



Sec. 21.7653  Progress, conduct, and attendance.

    (a) Satisfactory pursuit of program. In order to receive educational 
assistance for pursuit of a program of education, a reservist must 
maintain satisfactory progress. Progress is unsatisfactory if the 
reservist does not satisfactorily progress according to the regulatory 
prescribed standards of the educational institution he or she is 
attending.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3474; Pub. L. 98-525)

    (b) Satisfactory conduct. In order to receive educational assistance 
for pursuit of a program of education, a reservist must maintain 
satisfactory conduct according to the regularly prescribed standards and 
practices of the educational institution in which he or she is enrolled. 
If the reservist will no longer be retained as a student or will not be 
readmitted as a student by the educational institution in which he or 
she is enrolled, the VA will discontinue educational assistance, unless 
further development establishes that the educational institution's 
action is retaliatory.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3474; Pub. L. 98-525)

    (c) Satisfactory attendance. In order to receive educational 
assistance for pursuit of a program of education, a reservist must 
maintain satisfactory course attendance. VA will discontinue educational 
assistance if the reservist does not maintain satisfactory course 
attendance. Attendance is unsatisfactory if the reservist does not 
attend according to the regularly prescribed standards of the 
educational institution in which he or she is enrolled.


(Authority: 10 U.S.C. 2136(b); 38 U.S.C. 3474; sec. 705(a)(1), Pub. L. 
98-525, 98 Stat. 2565, 2567; sec. 642 (c), (d), Pub. L. 101-189, 103 
Stat. 1457-1458)

    (d) Reports. At times the unsatisfactory progress, conduct, or 
course attendance of a reservist is caused by or results in his or her 
interruption or termination of training. If this occurs, the 
interruption or termination shall be reported in accordance with Sec. 
21.7656(a). If the reservist continues in training despite making 
unsatisfactory progress, the fact of his or her unsatisfactory progress 
must be reported to VA within the time allowed by paragraphs (d)(1), 
(d)(2), and (d)(3) of this section.
    (1) A reservist's progress may become unsatisfactory as a result of 
the grades

[[Page 498]]

he or she receives. The educational institution shall report such 
unsatisfactory progress to VA in time for VA to receive it before the 
earlier of the following dates is reached:
    (i) Thirty days from the date on which the school official who is 
responsible for determining whether a student is making progress first 
receives the final grade report which establishes that the reservist is 
not progressing satisfactorily; or
    (ii) Sixty days from the last day of the enrollment period during 
which the reservist earned the grades that caused him or her to meet the 
unsatisfactory progress standards.
    (2) If the unsatisfactory progress of the reservist is caused solely 
by any factors other than the grades which he or she receives, the 
educational institution shall report the unsatisfactory progress in time 
for VA to receive it within 30 days of the date on which the progress of 
the reservist becomes unsatisfactory.
    (3) The educational institution shall report the unsatisfactory 
conduct or attendance of the reservist to VA in time for VA to receive 
it within 30 days of the date on which the conduct or attendance of the 
reservist becomes unsatisfactory.
    (e) Reentrance after discontinuance. In order for a reservist to 
receive educational assistance following discontinuance for 
unsatisfactory progress, conduct, or attendance, the provisions of this 
paragraph must be met.
    (1) The reservist's subsequent reentrance into a program of 
education may be for the same program, for a revised program, or for an 
entirely different program, depending on the cause of the discontinuance 
and removal of that cause.
    (2) A reservist may reenter following discontinuance because of 
unsatisfactory attendance, conduct, or progress when either of the 
following sets of conditions exists:
    (i) The reservist resumes enrollment at the same educational 
institution in the same program of education and the educational 
institution has both approved the reservist's reenrollment and certified 
it to VA; or
    (ii) In all other cases, VA determines that--
    (A) The cause of the unsatisfactory attendance, conduct, or progress 
in the previous program has been removed and is not likely to recur; and
    (B) The program which the reservist now proposes to pursue is 
suitable to his or her aptitudes, interests, and abilities.


(Authority: 10 U.S.C. 2136(b); 38 U.S.C. 3474; sec. 705(a)(1), Pub. L. 
98-525, 98 Stat. 2565, 2567; sec. 642 (c), (d), Pub. L. 101-189, 103 
Stat. 1457-1458)

(Approved by the Office of Management and Budget under control number 
2900-0552)

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 29307, June 10, 1996]



Sec. 21.7654  Pursuit and absences.

    Except as provided in this section, a reservist must submit a 
verification to VA each month of his or her enrollment during the period 
for which the reservist is to be paid. This verification shall be in a 
form prescribed by the Secretary.
    (a) Exceptions to the monthly verification requirement. A reservist 
does not have to submit a monthly verification as described in the 
introductory text of this section when the reservist--
    (1) Is enrolled in a correspondence course; or
    (2) Has received an advance payment for the training completed 
during a month.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3680(a), (g))
    (b) Items to be reported on all monthly verifications. (1) The 
monthly verification for all reservists will include a report on the 
following items when applicable:
    (i) Continued enrollment in and actual pursuit of the course;
    (ii) The date of interruption or termination of training;
    (iii) Except as provided in Sec. 21.7656(a), changes in the number 
of credit hours or in the number of clock hours of attendance;
    (iv) Nonpunitive grades; and
    (v) Any other changes or modifications in the course as certified at 
enrollment.

[[Page 499]]

    (2) The verification of enrollment must:
    (i) Contain the information required for release of payment;
    (ii) If required or permitted by the Secretary to be submitted on 
paper, be signed by the reservist on or after the final date of the 
reporting period, or if permitted by the Secretary to be submitted by 
telephone or electronically in a manner designated by the Secretary, be 
submitted in the form and manner prescribed by the Secretary on or after 
the final date of the reporting period; and
    (iii) If submitted on paper, clearly show the date on which it was 
signed.
    (c) Additional requirements for apprenticeships and other on-job 
training programs. (1) When a reservist is pursuing an apprenticeship or 
other on-job training, he or she must monthly certify training by 
reporting the number of hours worked.
    (2) The information provided by the reservist must be verified by 
the training establishment.


(Authority: 10 U.S.C. 2136(b); 38 U.S.C. 3680(a); sec. 705(a)(1), Pub. 
L. 98-525, 98 Stat. 2565, 2567; sec. 642(c), (d), Pub. L. 101-189, 103 
Stat. 1457-1458)

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3680(g))

(Approved by the Office of Management and Budget under control number 
2900-0597)

[61 FR 29308, June 10, 1996, as amended at 65 FR 61101, Oct. 16, 2001]



Sec. 21.7656  Other required reports.

    (a) Reports from reservists. (1) A reservist enrolled full time in a 
program of education for a standard term, quarter, or semester must 
report without delay to VA:
    (i) A change in his or her credit hours or clock hours of attendance 
if that change would result in less than full-time enrollment;
    (ii) Any change in his or her pursuit that would result in less than 
full-time enrollment; and
    (iii) Any interruption or termination of his or her attendance.
    (2) A reservist not described in paragraph (a)(1) of this section 
must report without delay to VA:
    (i) Any change in his or her credit hours or clock hours of 
attendance;
    (ii) Any change in his or her pursuit; and
    (iii) Any interruption or termination of his or her attendance.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3684)

    (b) Interruptions, terminations or changes in hours of credit or 
attendance. When a reservist interrupts or terminates his or her 
training for any reason, including unsatisfactory conduct or progress, 
or when he or she changes the number of hours of credit or attendance, 
the educational institution must report this fact to VA.
    (1) Except as provided in paragraph (b)(2) of this section, an 
educational institution must report without delay to VA each time a 
reservist:
    (i) Interrupts or terminates his or her training for any reason; or
    (ii) Changes his or her credit hours or clock hours of attendance.
    (2) An educational institution does not need to report a change in a 
reservist's hours of credit or attendance when:
    (i) The reservist is enrolled full time in a program of education 
for a standard term, quarter, or semester before the change; and
    (ii) The reservist continues to be enrolled full time after the 
change.
    (3) If the change in status or change in number of credit hours or 
clock hours of attendance occurs on a day other than one indicated by 
paragraph (b)(4) or (b)(5) of this section, the educational institution 
will initiate a report of the change in time for VA to receive it within 
30 days of the date on which the change occurs.
    (4) If the educational institution has certified the reservist's 
enrollment for more than one term, quarter or semester and the reservist 
interrupts his or her training at the end of a term, quarter or semester 
within the certified enrollment period, the educational institution 
shall report the change in status to VA in time for VA to receive the 
report within 30 days of the last officially scheduled registration date 
for the next term, quarter or semester.
    (5) If the change in status or change in the number of hours of 
credit or attendance occurs during the 30 days of a

[[Page 500]]

drop-add period, the educational institution must report the change in 
status or change in the number of hours of credit or attendance to VA in 
time for VA to receive the report within 30 days from the last date of 
the drop-add period or 60 days from the first day of the enrollment 
period, whichever occurs first.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3684.)

    (c) Nonpunitive grades. An educational institution may assign a 
nonpunitive grade for a course or subject in which the reservist is 
enrolled even though the reservist does not withdraw from the course or 
subject. When this occurs, the educational institution must report the 
assignment of the nonpunitive grade in time for VA to receive it before 
the earlier of the following dates is reached:
    (1) 30 days from the date on which the educational institution 
assigns the grade, or
    (2) 60 days from the last day of the enrollment period for which the 
nonpunitive grade is assigned.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3684; Pub. L. 98-525)


(Approved by the Office of Management and Budget under control numbers 
2900-0612 and 2900-0597)

[53 FR 34740, Sept. 8, 1988, as amended at 65 FR 61101, Oct. 16, 2001]



Sec. 21.7658  False, late, or missing reports.

    (a) Reservist. Payments may not be based on false or misleading 
statements, claims or reports. VA will apply the provisions of 
Sec. Sec. 21.4006 and 21.4007 of this part to a reservist or any other 
person who submits false or misleading claims, statements or reports in 
connection with benefits payable under 10 U.S.C. chapter 1606 in the 
same manner as they are applied to people who make similar false or 
misleading claims for benefits payable under 38 U.S.C. chapter 34 or 36.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3680, 3690, 6103; Pub. L. 98-
525)

    (b) Educational institution or training establishment. (1) VA may 
hold an educational institution liable for overpayments which result 
from a willful or negligent:
    (i) Failure of the educational institution to report, excessive 
absences from a course or discontinuance or interruption of a course by 
a reservist; or
    (ii) False certification by the educational institution. See Sec. 
21.7644(c).
    (2) If an educational institution or training establishment 
willfully and knowingly submits a false report or certification, VA may 
disapprove that institution's or establishment's courses for further 
enrollments and may discontinue educational assistance to reservists 
already enrolled. In doing so, VA will apply Sec. Sec. 21.4210 through 
21.4216.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3690)

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 20729, May 8, 1996; 63 
FR 35837, July 1, 1998]



Sec. 21.7659  Reporting fee.

    In determining the amount of the reporting fee payable to 
educational institutions for furnishing required reports, VA will apply 
the provisions of Sec. 21.4206.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3684)

[62 FR 55762, Oct. 28, 1997]

                            Course Assessment



Sec. 21.7670  Measurement of courses leading to a standard, 
undergraduate college degree.

    Except as provided in Sec. 21.7672, VA will measure a reservist's 
courses as stated in this section.
    (a) Fourteen semester hours are full time. Unless 12 or 13 semester 
hours are full time as provided in paragraphs (b) and (c) of this 
section, or unless paragraphs (d) or (e) of this section apply to 
measurement of the reservist's enrollment VA will measure a reservist's 
enrollment as follows:
    (1) 14 or more semester hours or the equivalent are full-time 
training,
    (2) 10 through 13 semester hours or the equivalent are three-
quarter-time training;
    (3) 7 through 9 semester hours or the equivalent are half-time 
training; and

[[Page 501]]

    (4) 1 through 6 semester hours or the equivalent are less than half-
time training.


(Authority: 10 U.S.C. 16131(b), 38 U.S.C. 3688(a); Pub. L. 98-525, Pub. 
L. 100-689)(Nov. 18, 1988)

    (b) Thirteen semester hours are full time. (1) VA will consider that 
13 semester hours or the equivalent are full-time training when the 
educational institution certifies that all undergraduate students 
enrolled for 13 semester hours or the equivalent are
    (i) Charged full-time tuition, or
    (ii) Considered full-time for other administrative purposes.
    (2) When 13 semester hours or the equivalent are full-time 
training--
    (i) 10 through 12 semester hours or the equivalent are three-
quarter-time training;
    (ii) 7 through 9 semester hours or the equivalent are half-time 
training; and
    (iii) 1 through 6 semester hours or the equivalent are less than 
half-time training.


(Authority: 10 U.S.C. 16131(b), 38 U.S.C. 3688(a); Pub. L. 98-525, Pub. 
L. 100-689)(Nov. 18, 1988)

    (c) Twelve semester hours are full time. (1) VA will consider that 
12 semester hours or the equivalent are full-time training when the 
educational institution certifies that all undergraduate students 
enrolled for 12 semester hours or the equivalent are--
    (i) Charged full-time tuition, or
    (ii) Considered full time for other administrative purposes.
    (2) When 12 semester hours or the equivalent are full-time 
training--
    (i) 9 through 11 semester hours or the equivalent are three-quarter-
time training;
    (ii) 6 through 8 semester hours or the equivalent are half-time 
training; and
    (iii) 1 through 5 semester hours or the equivalent are less than 
half-time training.


(Authority: 10 U.S.C. 16131(b), 38 U.S.C. 3688(a); Pub. L. 98-525, Pub. 
L. 100-689)

    (d) Other requirements. Notwithstanding any other provision of this 
section, in administering benefits payable under 10 U.S.C. chapter 1606, 
VA shall apply the provisions of Sec. 21.4272.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3688(b))

[53 FR 34740, Sept. 8, 1988, as amended at 56 FR 9629, Mar. 7, 1991; 57 
FR 57107, Dec. 3, 1992; 61 FR 29308, June 10, 1996; 62 FR 55762, Oct. 
28, 1997]



Sec. 21.7672  Measurement of courses not leading to a standard college 
degree.

    (a) Overview. (1) Courses not leading to a standard college degree 
may be measured on either a clock-hour basis, or a credit-hour basis or 
a combination of both. Factors which the Department of Veterans Affairs 
must include in determining the proper basis for measurement include 
whether the courses are accredited; whether the course could be credited 
toward a standard college degree; and whether the course is offered on a 
standard quarter or semester-hour basis.
    (2) In determining which is the correct basis for measuring a 
reservist's enrollment, VA will first examine whether credit-hour 
measurement is appropriate, as provided in paragraph (b) of this 
section.
    (3) If it is not appropriate to measure a reservist's enrollment on 
a credit-hour basis, VA will measure the enrollment on a clock-hour 
basis as described in paragraph (c) of this section.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3688(b))

    (b) Credit-hour measurement--standard method. (1) When all the 
conditions of paragraph (b)(1) of this section are met, the Department 
of Veterans Affairs will--
    (i) Measure the reservist's enrollment in the same manner as 
collegiate undergraduate courses are measured in Sec. 21.7670 (a), (b), 
and (c).
    (ii) Apply the provisions of Sec. 21.4272(g) if one or more of the 
reservist's courses are offered during a nonstandard term.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3688)

    (2) For new enrollments beginning on or after July 1, 1993, when a 
course is offered by an institution of higher learning in residence on a 
standard quarter- or semester-hour basis, VA

[[Page 502]]

will measure a reservist's enrollment in a course not leading to a 
standard college degree on the same credit-hour basis as courses leading 
to a standard undergraduate degree, as provided in Sec. 21.7670.
    (3) For new enrollments beginning on or after July 1, 1993, when a 
course is offered in residence on a standard quarter- or semester-hour 
basis by an educational institution which is not an institution of 
higher learning, VA also will measure on a credit-hour basis as provided 
in Sec. 21.7670 a reservist's enrollment in a course not leading to a 
standard college degree, provided that the educational institution 
requires at least the same number of clock-hours of attendance as 
required in paragraph (c) of this section. If the educational 
institution does not require at least the same number of clock-hours of 
attendance as required in paragraph (c) of this section, VA will not 
apply the provisions of Sec. 21.7670, but will measure the course 
according to paragraph (c) of this section.
    (4) VA will apply the provisions of Sec. 21.4272(g) to new 
enrollments beginning on or after July 1, 1993, if one or more of the 
reservist's courses are offered during a nonstandard term.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3688(a)(7))

    (c) Clock-hour measurement. The provisions of this paragraph apply 
to all enrollments in courses not leading to a standard college degree. 
If VA concludes that the courses in which a reservist is enrolled do not 
qualify for credit-hour measurement, VA shall measure those courses as 
follows. (Supervised study shall be excluded from measurement of all 
courses to which this paragraph applies).
    (1) If shop practice is an integral part of the course--
    (i) Full-time training shall be 22 clock hours attendance with not 
more than 2\1/2\ hours rest period allowance;
    (ii) Three-quarter-time training shall be 16 through 21 clock hours 
attendance with not more than 2 hours rest period allowance;
    (iii) Half-time training shall be 11 through 15 clock hours 
attendance with not more than 1\1/4\ hours rest period allowance; and
    (iv) One-quarter-time training shall be 1 through 10 clock hours 
attendance. For attendance of 6 through 10 clock hours, there shall be 
not more than one quarter hour rest period allowance. For attendance of 
1 through 5 clock hours, there shall be no rest period allowance.
    (2) If theory and class instruction predominates--
    (i) Full-time training is 18 clock hours net instruction;
    (ii) Three-quarter-time training is 13 through 17 clock hours net 
instruction;
    (iii) Half-time training is 9 through 12 clock hours net 
instruction; and
    (iv) Less than half-time training is 1 through 8 clock hours net 
instruction. In measuring net instruction for this paragraph there will 
be included customary intervals not to exceed 10 minutes between 
classes: however, supervised study must be excluded.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3688)

[56 FR 9629, Mar. 7, 1991, as amended at 57 FR 46985, Oct. 14, 1992; 61 
FR 29308, June 10, 1996; 61 FR 29482, June 11, 1996]



Sec. 21.7673  Measurement of concurrent enrollments.

    (a) Conversion of units of measurement required. Where a reservist 
enrolls concurrently in courses offered by two schools and the standards 
for measurement of the courses pursued concurrently in the two schools 
are different, the Department of Veterans Affairs will measure the 
reservist's enrollment by converting the units of measurement for 
courses in the second school to their equivalent in units of measurement 
required for the courses in the program of education which the reservist 
is pursuing at the primary institution. This conversion will be 
accomplished as follows:
    (1) If VA measures the course at the primary institution on a 
credit-hour basis (including a course which does not lead to a standard 
college degree, which is being measured on a credit-hour basis as 
provided in Sec. 21.7672(b)), and VA measures the courses at the second 
school on a clock-hour basis, the clock hours will be converted to 
credit hours.
    (2) If VA measures the courses pursued at the primary institution on 
a clock-hour basis, and VA measures the

[[Page 503]]

courses pursued at the second school on a credit-hour basis, including 
courses which qualify for credit-hour measurement on the basis of Sec. 
21.7672(b), VA will convert the credit hours to clock hours to determine 
the reservist's training time.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3688)

    (b) Conversion of clock hours to credit hours. If the provisions of 
paragraph (a) of this section require the Department of Veteran Affairs 
to convert clock hours, it will do so by--
    (1) Dividing the number of credit hours which the Department of 
Veterans Affairs considers to be full-time at the educational 
institution whose courses are measured on a credit-hour basis by the 
number of clock hours which are full-time at the educational institution 
whose courses are measured on a clock-hour basis; and
    (2) Multiplying each clock hour of attendance by the decimal 
determined in paragraph (b)(1) of this section. The Department of 
Veterans Affairs will drop all fractional hours.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3688)

    (c) Conversion of credit hours to clock hours. If the provisions of 
paragraph (a) of this section require the Department of Veterans Affairs 
to convert credit hours to clock hours, it will do so by--
    (1) Dividing the number of clock hours which the Department of 
Veterans Affairs considers to be full-time at the educational 
institution whose courses are measured on a clock-hour basis by the 
number of credit hours which are full-time at the educational 
institution whose courses are measured on a credit-hour basis; and
    (2) Multiplying each credit hour by the number determined in 
paragraph (b)(1) of this section. The Department of Veterans Affairs 
will drop all fractional hours.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3688)

    (d) Standards for measurement the same. If VA measures the courses 
pursued at both institutions on either a clock-hour basis or a credit-
hour basis, VA will measure the reservist's enrollment by adding 
together the units of measurement for the courses in the second school 
and the units of measurement for courses in the primary institution. The 
standard for full time will be the full-time standard for the courses at 
the primary institution.


(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3688)

[56 FR 9632, Mar. 7, 1991, as amended at 61 FR 29310, June 10, 1996]



Sec. 21.7674  Measurement of practical training courses.

    (a) Nursing courses. (1) Courses for the objective of registered 
nurse or registered professional nurse will be measured on the basis of 
credit hours or clock hours of attendance, whichever is appropriate. The 
clock hours of attendance may include academic class time, clinical 
training, and supervised study periods.
    (2) Courses offered by institutions of higher learning which lead to 
the objective of practical nurse, practical trained nurse, or licensed 
practical nurse will be measured on credit hours or clock hours of 
attendance per week whichever is appropriate.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3688; Pub. L. 98-525)

    (b) Medical and dental assistants courses for VA. Programs approved 
in accordance with the provisions of Sec. 21.7720(b)(9) will be 
measured on a clock-hour basis as provided in Sec. 21.7672. However, 
the program will be regarded as full-time institutional training, 
provided the combined total of the classroom and other formal 
instruction portion of the program and the on-the-job portion of the 
program requires 30 or more clock hours of attendance per week.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3688; Pub. L. 98-525)

    (c) Other practical training courses. These courses will be measured 
in semester hours of credit or clock hours of attendance per week, 
whichever is appropriate.


(Authority: 10 U.S.C. 16136(b) 38 U.S.C. 3688; Pub. L. 98-525

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 29310, June 10, 1996]

[[Page 504]]

                        State Approving Agencies



Sec. 21.7700  State approving agencies.

    VA and State approving agencies have the same general 
responsibilities for approving courses for training under 38 U.S.C. 
chapter 1606 (or 10 U.S.C. chapter 106 as in effect before December 1, 
1994) as they do for approving courses for training under 38 U.S.C. 
chapter 30 or 32. Accordingly, in administering 10 U.S.C. chapter 1606 
(or 10 U.S.C. chapter 106 as in effect before December 1, 1994), VA will 
apply the provisions of the following sections:
    (a) Sec. 21.4150--Designation,
    (b) Sec. 21.4151--Cooperation,
    (c) Sec. 21.4152--Control by agencies of the United States,
    (d) Sec. 21.4153--Reimbursement of expenses,
    (e) Section 21.4154--Report of activities,

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3670 through 3676)

[53 FR 34740, Sept. 8, 1988, as amended at 55 FR 48844, Nov. 23, 1990; 
61 FR 29310, June 10, 1996]

                           Approval of Courses



Sec. 21.7720  Course approval.

    (a) Courses must be approved. (1) A course of education offered by 
an educational institution must be approved by--
    (i) The State approving agency for the State in which the 
educational institution is located; or
    (ii) The State approving agency which has appropriate approval 
authority; or
    (iii) VA, where appropriate.
    (2) In determining when approval authority rests with the State 
approving agency or VA, the provisions of Sec. 21.4250 (b)(3), 
(c)(2)(i), (c)(2)(ii), (c)(2)(iii), and (c)(2)(iv) apply.
    (3) A course approved under 38 U.S.C. chapter 36 is approved for 
purposes of 10 U.S.C. chapter 1606 (or 10 U.S.C. chapter 106 as in 
effect before December 1, 1994).


(Authority: 10 U.S.C. 2131(c), 2136(b); 16131(c)(1), 16136(b); 38 U.S.C. 
3672; sec. 705(a)(1), Pub. L. 98-525, 98 Stat. 2565, 2567; sec. 642, 
Pub. L. 101-189, 103 Stat. 1456-1458)

    (b) Course approval criteria. In administering benefits payable 
under 10 U.S.C. chapter 1606 (or 10 U.S.C. chapter 106 as in effect 
before December 1, 1994), VA and, where appropriate, the State approving 
agencies, shall apply the following sections:
    (1) Sec. 21.4250 (except paragraph (c)(1))--Approval of courses;
    (2) Sec. 21.4251--Period of operation of course;
    (3) Sec. 21.4253 (except those portions of paragraphs (b) and (f) 
that permit approval of a course leading to a high school diploma)--
Accredited courses;
    (4) Sec. 21.4254--Nonaccredited courses;
    (5) Sec. 21.4255--Refund policy; nonaccredited courses;
    (6) Sec. 21.4258--Notice of approval;
    (7) Sec. 21.4259--Suspension or disapproval;
    (8) Sec. 21.4260--Courses in foreign countries;
    (9) Sec. 21.4261--Apprentice courses;
    (10) Sec. 21.4262--Other training on-the-job courses;
    (11) Sec. 21.4265--Practical training approved as institutional 
training or on-job training;
    (12) Sec. 21.4266--Courses offered at subsidiary branches or 
extensions; and
    (13) Sec. 21.4267--Approval of independent study.


(Authority: 10 U.S.C. 16131(c)(1), 16136(b); 38 U.S.C. 3670 through 
3676)

[61 FR 29310, June 10, 1996, as amended at 62 FR 55762, Oct. 28, 1997]



Sec. 21.7722  Courses and enrollments which may not be approved.

    (a) The Secretary of Veterans Affairs may not approve an enrollment 
by a reservist in, and a State approving agency may not approve for 
training under 10 U.S.C. chapter 1606 (or 10 U.S.C. chapter 106 as in 
effect before December 1, 1994):
    (1) A bartending or personality development course;
    (2) A course offered by radio;
    (3) Except for enrollments in a nurse's aide course approved 
pursuant to Sec. 21.4253(a)(5), an institutional course for the 
objective of nurse's aide or a nonaccredited nursing course which does 
not meet the licensing requirements in the State where the course is 
offered; or

[[Page 505]]

    (4) Effective October 29, 1992, a nonaccredited course or unit 
subject offered entirely or partly by independent study. However, see 
Sec. Sec. 21.7620(c) and 21.7622(f) concerning payment of educational 
assistance to reservists enrolled in such a course.


(Authority: 10 U.S.C. 16131(c)(1), 16136(b); 38 U.S.C. 3452)

    (b) A State approving agency (or VA when acting as a State approving 
agency) may approve the following courses for training under 10 U.S.C. 
chapter 1606 (or 10 U.S.C. chapter 106 as in effect before December 1, 
1994), but VA may not approve an enrollment in any of these courses by a 
reservist who is limited in the types of courses he or she may pursue, 
as provided in Sec. 21.7540 (b)(2) and (b)(3):
    (1) A correspondence course;
    (2) A cooperative course;
    (3) An apprenticeship or other on-job training program;
    (4) A nursing course offered by an autonomous school of nursing;
    (5) A medical or dental specialty course not offered by an 
institution of higher learning;
    (6) A refresher, remedial, or deficiency course; or
    (7) A course or combination of courses consisting solely of 
independent study.


(Authority: 10 U.S.C. 2131(c), 2136(b), 16131(c)(1), 16136(b); 38 U.S.C. 
3670 through 3676; sec. 705(a)(1), Pub. L. 98-525, 98 Stat. 2565, 2567; 
sec. 642, Pub. L. 101-189, 103 Stat. 1456-1458)

[61 FR 29310, June 10, 1996]

                             Administrative



Sec. 21.7801  Delegation of authority.

    (a) General delegation of authority. Except as otherwise provided, 
authority is delegated to the Under Secretary for Benefits of VA, and to 
supervisory or adjudication personnel within the jurisdiction of the 
Education Service of VA designated by the Under Secretary for Benefits 
to make findings and decisions under 10 U.S.C. chapter 1606 and the 
applicable regulations, precedents and instructions concerning the 
program authorized by that chapter to the extent that the program is 
administered by VA.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 512(a); Pub. L. 98-525)

    (b) Other delegations of authority. In administering benefits 
payable under 10 U.S.C. chapter 1606, VA shall apply Sec. 21.4001(b), 
(c)(1), (2), and (3) (in part), and (f) in the same manner as those 
paragraphs are applied in the administration of 38 U.S.C. chapter 34.


(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 512(a); 3696; Pub. L. 98-525)

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 20729, May 8, 1996; 61 
FR 29483, June 11, 1996]



Sec. 21.7802  Finality of decisions.

    (a) Agency decisions generally are binding. The decision of the VA 
facility of original jurisdiction on which an action is based--
    (1) Will be final,
    (2) Will be binding upon all facilities of VA as to conclusions 
based on evidence on file at that time, and
    (3) Will not be subject to revision on the same factual grounds 
except by duly constituted appellate authorities or except as provided 
in Sec. 21.7803. (See Sec. Sec.  19.192 and 19.193 of this chapter).


(Authority: 38 U.S.C. 511)

    (b) Decisions of an Activity within the VA. Current determinations 
of pertinent elements of eligibility for a program of education made by 
a VA adjudicative activity by application of the same criteria and based 
on the same facts are binding one upon the other in the absence of clear 
and unmistakable error.


(Authority: 38 U.S.C. 511)

    (c) Determinations of satisfactory participation. A determination 
made by a competent military or naval authority or by the Coast Guard as 
to whether or not an individual is participating satisfactorily in 
required training as a member of the Selected Reserve is binding upon 
VA.


(Authority: 10 U.S.C. 16134; Pub. L. 98-525)

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 29483, June 11, 1996]

[[Page 506]]



Sec. 21.7803  Revision of decisions.

    The revision of a decision on which an action was predicated is 
subject to the following sections:
    (a) Clear and unmistakable error, Sec. 3.105(a) of this chapter; 
and
    (b) Difference of opinion, Sec. 3.105(b) of this chapter.

(Authority: 38 U.S.C. 511)



Sec. 21.7805  Conflicting interests.

    In administering benefits payable under 10 U.S.C. chapter 1606, VA 
will apply the provisions of Sec. 21.4005 in the same manner as they 
are applied in the administration of 38 U.S.C. chapters 34 and 36.

(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3683; Pub. L. 98-525)

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 20729, May 8, 1996; 61 
FR 29483, June 11, 1996]



Sec. 21.7807  Examination of records.

    In administering benefits payable under 10 U.S.C. chapter 1606, VA 
will apply the provisions of Sec. 21.4209 in the same manner as they 
are applied in the administration of 38 U.S.C. chapters 34 and 36.

(Authority: 10 U.S.C. 16136(b), 38 U.S.C. 3690; Pub. L. 98-525)

[53 FR 34740, Sept. 8, 1988, as amended at 61 FR 20729, May 8, 1996]



Subpart M_Vocational Training and Rehabilitation for Certain Children of 
         Vietnam Veterans_Spina Bifida and Covered Birth Defects

    Authority: 38 U.S.C. 101, 501, 512, 1151 note, 1802, 1804-1805, 
1811, 1811 note, 1812, 1814, 1816, 1821-1824, 5112, unless otherwise 
noted.

    Source: 67 FR 72565, Dec. 6, 2002, unless otherwise noted.

                                 General



Sec. 21.8010  Definitions and abbreviations.

    (a) Program-specific definitions and abbreviations. For the purposes 
of this subpart:
    Covered birth defect means the same as defined at Sec. 3.815(c)(3) 
of this title.
    Eligible child means, as appropriate, either an individual as 
defined at Sec. 3.814(c)(2) of this title who suffers from spina 
bifida, or an individual as defined at Sec. 3.815(c)(2) of this title 
who has a covered birth defect other than a birth defect described in 
Sec. 3.815(a)(2).
    Employment assistance means employment counseling, placement and 
post-placement services, and personal and work adjustment training.
    Institution of higher education has the same meaning that Sec. 
21.4200 provides for the term institution of higher learning.
    Program of employment services means the services an eligible child 
may receive if the child's entire program consists only of employment 
assistance.
    Program participant means an eligible child who, following an 
evaluation in which VA finds the child's achievement of a vocational 
goal is reasonably feasible, elects to participate in a vocational 
training program under this subpart.
    Spina bifida means the same as defined at Sec. 3.814(c)(3) of this 
title.
    Vietnam veteran means, in the case of a child suffering from spina 
bifida, the same as defined at Sec. 3.814(c)(1) or Sec.  3.815(c)(1) of 
this title and, in the case of a child with a covered birth defect, the 
same as defined at Sec. 3.815(c)(1) of this title.
    Vocational training program means the vocationally oriented training 
services, and assistance, including placement and post-placement 
services, and personal and work-adjustment training that VA finds 
necessary to enable an eligible child to prepare for and participate in 
vocational training or employment. A vocational training program may 
include a program of education offered by an institution of higher 
education only if the program is predominantly vocational in content.
    VR&E refers to the Vocational Rehabilitation and Employment activity 
(usually a division) in a Veterans Benefits Administration regional 
office, the staff members of that activity in the regional office or in 
outbased locations, and the services that activity provides.

(Authority: 38 U.S.C. 101, 1802, 1804, 1811-1812, 1814, 1821)


[[Page 507]]


    (b) Other terms and abbreviations. The following terms and 
abbreviations have the same meaning or explanation that Sec. 21.35 
provides:
    (1) CP (Counseling psychologist);
    (2) Program of education;
    (3) Rehabilitation facility;
    (4) School, educational institution, or institution;
    (5) Training establishment;
    (6) Vocational goal;
    (7) VRC (Vocational rehabilitation counselor); and
    (8) Workshop.

(Authority: 38 U.S.C. 1804, 1811, 1814, 1821)



Sec. 21.8012  Vocational training program for certain children of 
Vietnam veterans--spina bifida and covered birth defects.

    VA will provide an evaluation to an eligible child to determine the 
child's potential for achieving a vocational goal. If this evaluation 
establishes that it is feasible for the child to achieve a vocational 
goal, VA will provide the child with the vocational training, employment 
assistance, and other related rehabilitation services authorized by this 
subpart that VA finds the child needs to achieve a vocational goal, 
including employment.

(Authority: 38 U.S.C. 1804, 1812, 1814)



Sec. 21.8014  Application.

    (a) Filing an application. To participate in a vocational training 
program, the child of a Vietnam veteran (or the child's parent or 
guardian, an authorized representative, or a Member of Congress acting 
on behalf of the child) must file an application. An application is a 
request for an evaluation of the feasibility of the child's achievement 
of a vocational goal and, if a CP or VRC determines that achievement of 
a vocational goal is feasible, for participation in a vocational 
training program. The application may be in any form, but it must:
    (1) Be in writing over the signature of the applicant or the person 
applying on the child's behalf;
    (2) Provide the child's full name, address, and VA claim number, if 
any, and the parent Vietnam veteran's full name and Social Security 
number or VA claim number, if any; and
    (3) Clearly identify the benefit sought.

(Authority: 38 U.S.C. 1804(a), 1822, 5101)

    (b) Time for filing. For a child claiming eligibility based on 
having spina bifida, an application under this subpart may be filed at 
any time after September 30, 1997. For a child claiming eligibility 
based on a covered birth defect, an application under this subpart may 
be filed at any time after November 30, 2001. (The Office of Management 
and Budget has approved the information collection requirements in this 
section under control number 2900-0579)

(Authority: 38 U.S.C. 1804, 1811, 1811 note, 1812, 1814, 1821)



Sec. 21.8016  Nonduplication of benefits.

    (a) Election of benefits--chapter 35. An eligible child may not 
receive benefits concurrently under 38 U.S.C. chapter 35 and under this 
subpart. If the child is eligible for both benefits, he or she must 
elect in writing which benefit to receive.

(Authority: 38 U.S.C. 1804(e)(1), 1814, 1824)

    (b) Reelections of benefits--chapter 35. An eligible child receiving 
benefits under this subpart or under 38 U.S.C. chapter 35 may change his 
or her election at any time. A reelection between benefits under this 
subpart and under 38 U.S.C. chapter 35 must be prospective, however, and 
may not result in an eligible child receiving benefits under both 
programs for the same period of training.

(Authority: 38 U.S.C. 1804(e)(1), 1814, 1824)

    (c) Length of benefits under multiple programs--chapter 35. The 
aggregate period for which an eligible child may receive assistance 
under this subpart and under 38 U.S.C. chapter 35 together may not 
exceed 48 months of full-time training or the part-time equivalent.

(Authority: 38 U.S.C. 1804(e)(2), 1814)

    (d) Nonduplication of benefits under 38 U.S.C. 1804 and 1814. An 
eligible child may only be provided one program of vocational training 
under this subpart.

(Authority: 38 U.S.C. 1804, 1814, 1824)

[[Page 508]]

                     Basic Entitlement Requirements



Sec. 21.8020  Entitlement to vocational training and employment assistance.

    (a) Basic entitlement requirements. Under this subpart, for an 
eligible child to receive vocational training, employment assistance, 
and related rehabilitation services and assistance to achieve a 
vocational goal (to include employment), the following requirements must 
be met:
    (1) A CP or VRC must determine that achievement of a vocational goal 
by the child is reasonably feasible; and
    (2) The child and VR&E staff members must work together to develop 
and then agree to an individualized written plan of vocational 
rehabilitation identifying the vocational goal and the means to achieve 
this goal.

(Authority: 38 U.S.C. 1804(b), 1814)

    (b) Services and assistance. An eligible child may receive the 
services and assistance described in Sec. 21.8050(a). The following 
sections in subpart A of this part apply to the provision of these 
services and assistance in a manner comparable to their application for 
a veteran under the 38 U.S.C. chapter 31 program:
    (1) Section 21.250(a) and (b)(2);
    (2) Section 21.252;
    (3) Section 21.254;
    (4) Section 21.256 (not including paragraph (e)(2));
    (5) Section 21.257; and
    (6) Section 21.258.

(Authority: 38 U.S.C. 1804, 1814)

    (c) Requirements to receive employment services and assistance. VA 
will provide employment services and assistance under paragraph (b) of 
this section only if the eligible child:
    (1) Has achieved a vocational objective;
    (2) Has voluntarily ceased vocational training under this subpart, 
but the case manager finds the child has attained sufficient skills to 
be employable; or
    (3) VA determines during evaluation that the child already has the 
skills necessary for suitable employment and does not need additional 
training, but to secure suitable employment the child does need the 
employment assistance that paragraph (b) of this section describes.

(Authority: 38 U.S.C. 1804, 1814)

    (d) Additional employment services and assistance. If an eligible 
child has received employment assistance and obtains a suitable job, but 
VA later finds the child needs additional employment services and 
assistance, VA may provide the child with these services and assistance 
if, and to the extent, the child has remaining program entitlement.

(Authority: 38 U.S.C. 1804, 1814)

    (e) Program entitlement usage--(1) Basic entitlement period. An 
eligible child will be entitled to receive 24 months of full-time 
training, services, and assistance (including employment assistance) or 
the part-time equivalent, as part of a vocational training program.
    (2) Extension of basic entitlement period. VA may extend the basic 
24-month entitlement period, not to exceed another 24 months of full-
time program participation, or the part-time equivalent, if VA 
determines that:
    (i) The extension is necessary for the child to achieve a vocational 
goal identified before the end of the basic 24-month entitlement period; 
and
    (ii) The child can achieve the vocational goal within the extended 
period.
    (3) Principles for charging entitlement. VA will charge entitlement 
usage for training, services, or assistance (but not the initial 
evaluation, as described in Sec. 21.8032) furnished to an eligible 
child under this subpart on the same basis as VA would charge for 
similar training, services, or assistance furnished a veteran in a 
vocational rehabilitation program under 38 U.S.C. chapter 31. VA may 
charge entitlement at a half-time, three-quarter-time, or full-time rate 
based upon the child's training time using the rate-of-pursuit criteria 
in Sec. 21.8310. The provisions concerning reduced work tolerance under 
Sec. 21.312, and those relating to less-than-half-time training under 
Sec. 21.314, do not apply under this subpart.

(Authority: 38 U.S.C. 1804, 1814)

[[Page 509]]



Sec. 21.8022  Entry and reentry.

    (a) Date of program entry. VA may not enter a child into a 
vocational training program or provide an evaluation or any training, 
services, or assistance under this subpart before the date VA first 
receives an application for a vocational training program filed in 
accordance with Sec. 21.8014.

(Authority: 38 U.S.C. 1151 note, 1804, 1811, 1811 note, 1812, 1814)

    (b) Reentry. If an eligible child interrupts or ends pursuit of a 
vocational training program and VA subsequently allows the child to 
reenter the program, the date of reentrance will accord with the facts, 
but may not precede the date VA receives an application for the 
reentrance.

(Authority: 38 U.S.C. 1804, 1814, 1822)

                               Evaluation



Sec. 21.8030  Requirement for evaluation of child.

    (a) Children to be evaluated. The VR&E Division will evaluate each 
child who:
    (1) Applies for a vocational training program; and
    (2) Has been determined to be an eligible child as defined in Sec. 
21.8010.

(Authority: 38 U.S.C. 1804(a), 1814)

    (b) Purpose of evaluation. The evaluation has two purposes:
    (1) To ascertain whether achievement of a vocational goal by the 
child is reasonably feasible; and
    (2) If a vocational goal is reasonably feasible, to develop an 
individualized plan of integrated training, services, and assistance 
that the child needs to prepare for and participate in vocational 
training or employment.

(Authority: 38 U.S.C. 1804, 1814)



Sec. 21.8032  Evaluations.

    (a) Scope and nature of evaluation. The scope and nature of the 
evaluation under this program will be comparable to an evaluation of the 
reasonable feasibility of achieving a vocational goal for a veteran 
under 38 U.S.C. chapter 31 and Sec. Sec. 21.50(b)(5) and 21.53(b) and 
(d).

(Authority: 38 U.S.C. 1804(a), 1814)

    (b) Specific services to determine the reasonable feasibility of 
achieving a vocational goal. As a part of the evaluation of reasonable 
feasibility of achieving a vocational goal, VA may provide the following 
specific services, as appropriate:
    (1) Assessment of feasibility by a CP or VRC;
    (2) Review of feasibility assessment and of need for special 
services by the Vocational Rehabilitation Panel;
    (3) Provision of medical, testing, and other diagnostic services to 
ascertain the child's capacity for training and employment; and
    (4) Evaluation of employability by professional staff of an 
educational or rehabilitation facility, for a period not to exceed 30 
days.

(Authority: 38 U.S.C. 1804(a), 1814)

    (c) Responsibility for evaluation. A CP or VRC will make all 
determinations as to the reasonable feasibility of achieving a 
vocational goal.

(Authority: 38 U.S.C. 1804(a), (b), 1814)

             Services and Assistance to Program Participants



Sec. 21.8050  Scope of training, services, and assistance.

    (a) Allowable training, services, and assistance. VA may provide to 
vocational training program participants:
    (1) Vocationally oriented training, services, and assistance, to 
include:
    (i) Training in an institution of higher education if the program is 
predominantly vocational; and
    (ii) Tuition, fees, books, equipment, supplies, and handling 
charges.
    (2) Employment assistance including:
    (i) Vocational, psychological, employment, and personal adjustment 
counseling;
    (ii) Services to place the individual in suitable employment and 
post-placement services necessary to ensure satisfactory adjustment in 
employment; and
    (iii) Personal adjustment and work adjustment training.
    (3) Vocationally oriented independent living services only to the 
extent that the services are indispensable to the achievement of the 
vocational

[[Page 510]]

goal and do not constitute a significant portion of the services to be 
provided.
    (4) Other vocationally oriented services and assistance of the kind 
VA provides veterans under the 38 U.S.C. chapter 31 program, except as 
paragraph (c) of this section provides, that VA determines the program 
participant needs to prepare for and take part in vocational training or 
in employment.

(Authority: 38 U.S.C. 1804(c), 1814)

    (b) Vocational training program. VA will provide either directly or 
by contract, agreement, or arrangement with another entity, and at no 
cost to the beneficiary, the vocationally oriented training, other 
services, and assistance that VA approves for the individual child's 
program under this subpart. Authorization and payment for approved 
services will be made in a comparable manner to that VA provides for 
veterans under the 38 U.S.C. chapter 31 program.

(Authority: 38 U.S.C. 1804(c), 1814)

    (c) Prohibited services and assistance. VA may not provide to a 
vocational training program participant any:
    (1) Loan;
    (2) Subsistence allowance;
    (3) Automobile adaptive equipment;
    (4) Training at an institution of higher education in a program of 
education that is not predominantly vocational in content;
    (5) Employment adjustment allowance;
    (6) Room and board (other than for a period of 30 days or less in a 
special rehabilitation facility either for purposes of an extended 
evaluation or to improve and enhance vocational potential);
    (7) Independent living services, except those that are incidental to 
the pursuit of the vocational training program.

(Authority: 38 U.S.C. 1804(c), 1814)

                     Duration of Vocational Training



Sec. 21.8070  Basic duration of a vocational training program.

    (a) Basic duration of a vocational training program. The duration of 
a vocational training program, as paragraphs (e)(1) and (e)(2) of Sec. 
21.8020 provide, may not exceed 24 months of full-time training, 
services, and assistance or the part-time equivalent, except as Sec. 
21.8072 allows.

(Authority: 38 U.S.C. 1804(d), 1814)

    (b) Responsibility for estimating the duration of a vocational 
training program. While preparing the individualized written plan of 
vocational rehabilitation, the CP or VRC will estimate the time the 
child needs to complete a vocational training program.

(Authority: 38 U.S.C. 1804(c), 1814)

    (c) Duration and scope of training must meet general requirements 
for entry into the selected occupation. The child will receive training, 
services, and assistance, as Sec. 21.8120 describes, for a period that 
VA determines the child needs to reach the level employers generally 
recognize as necessary for entry into employment in a suitable 
occupational objective.

(Authority: 38 U.S.C. 1804(c), 1814)

    (d) Approval of training beyond the entry level. To qualify for 
employment in a particular occupation, the child may need training that 
exceeds the amount a person generally needs for employment in that 
occupation. VA will provide the necessary additional training under one 
or more of the following conditions:
    (1) Training requirements for employment in the child's vocational 
goal in the area where the child lives or will seek employment exceed 
those job seekers generally need for that type of employment;
    (2) The child is preparing for a type of employment in which he or 
she will be at a definite disadvantage in competing with nondisabled 
persons and the additional training will offset the competitive 
disadvantage;
    (3) The choice of a feasible occupation is limited, and additional 
training will enhance the child's employability in one of the feasible 
occupations; or
    (4) The number of employment opportunities within a feasible 
occupation is restricted.

(Authority: 38 U.S.C. 1804(c), 1814)

    (e) Estimating the duration of the training period. In estimating 
the length of

[[Page 511]]

the training period the eligible child needs, the CP or VRC must 
determine that:
    (1) The proposed vocational training would not normally require a 
person without a disability more than 24 months of full-time pursuit, or 
the part-time equivalent, for successful completion; and
    (2) The program of training and other services the child needs, 
based upon VA's evaluation, will not exceed 24 months or the part-time 
equivalent. In calculating the proposed program's length, the CP or VRC 
will follow the procedures in Sec. 21.8074(a).

(Authority: 38 U.S.C. 1804(d), 1814)

    (f) Required selection of an appropriate vocational goal. If the 
total period the child would require for completion of an initial 
vocational training program in paragraph (e) of this section is more 
than 24 months, or the part-time equivalent, the CP or VRC must work 
with the child to select another suitable initial vocational goal.

(Authority: 38 U.S.C. 1804(d)(2), 1814)



Sec. 21.8072  Authorizing training, services, and assistance beyond 
the initial individualized written plan of vocational rehabilitation.

    (a) Extension of the duration of a vocational training program. VA 
may authorize an extension of a vocational training program when 
necessary to provide additional training, services, and assistance to 
enable the child to achieve the vocational or employment goal identified 
before the end of the child's basic entitlement period, as stated in the 
individualized written plan of vocational rehabilitation under Sec. 
21.8080. A change from one occupational objective to another in the same 
field or occupational family meets the criterion for prior 
identification in the individualized written plan of vocational 
rehabilitation.

(Authority: 38 U.S.C. 1804(d)(2), (e)(2), 1814)

    (b) Extensions for prior participants in the program. (1) Except as 
paragraph (b)(2) of this section provides, VA may authorize additional 
training, limited to the use of remaining program entitlement including 
any allowable extension, for an eligible child who previously 
participated in vocational training under this subpart. The additional 
training must:
    (i) Be designed to enable the child to complete the prior vocational 
goal or a different vocational goal; and
    (ii) Meet the same provisions as apply to training for new 
participants.
    (2) An eligible child who has previously achieved a vocational goal 
in a vocational training program under this subpart may not receive 
additional training under paragraph (b)(1) of this section unless a CP 
or VRC sets aside the child's achievement of that vocational goal under 
Sec. 21.8284.

(Authority: 38 U.S.C. 1804(b) through (e), 1814)

    (c) Responsibility for authorizing a program extension. A CP or VRC 
may approve extensions of the vocational training program the child is 
pursuing up to the maximum program limit of 48 months if the CP or VRC 
determines that the child needs the additional time to successfully 
complete training and obtain employment, and the following conditions 
are met:
    (1) The child has completed more than half of the planned training; 
and
    (2) The child is making satisfactory progress.

(Authority: 38 U.S.C. 1804(d)(2), 1814)



Sec. 21.8074  Computing the period for vocational training program 
participation.

    (a) Computing the participation period. To compute the number of 
months and days of an eligible child's participation in a vocational 
training program:
    (1) Count the number of actual months and days of the child's:
    (i) Pursuit of vocational education or training;
    (ii) Receipt of extended evaluation-type services and training, or 
services and training to enable the child to prepare for vocational 
training or employment, if a veteran in a 38 U.S.C. chapter 31 program 
would have received a subsistence allowance while receiving the same 
type of services and training; and
    (iii) Receipt of employment and post-employment services (any period 
of

[[Page 512]]

employment or post-employment services is considered full-time program 
pursuit).
    (2) Do not count:
    (i) The initial evaluation period;
    (ii) Any period before the child enters a vocational training 
program under this subpart;
    (iii) Days of authorized leave; and
    (iv) Other periods during which the child does not pursue training, 
such as periods between terms.
    (3) Convert part-time training periods to full-time equivalents.
    (4) Total the months and days under paragraphs (a)(1) and (a)(3) of 
this section. This sum is the period of the child's participation in the 
program.

(Authority: 38 U.S.C. 1804(d), 1814)

    (b) Consistency with principles for charging entitlement. 
Computation of the program participation period under this section will 
be consistent with the principles for charging entitlement under Sec. 
21.8020.

(Authority: 38 U.S.C. 1804(d), 1814)

        Individualized Written Plan of Vocational Rehabilitation



Sec. 21.8080  Requirement for an individualized written plan of 
vocational rehabilitation.

    (a) General. A CP or VRC will work in consultation with each child 
for whom a vocational goal is feasible to develop an individualized 
written plan of vocational rehabilitation services and assistance to 
meet the child's vocational training needs. The CP or VRC will develop 
this individualized written plan of vocational rehabilitation in a 
manner comparable to the rules governing the development of an 
individualized written rehabilitation plan (IWRP) for a veteran for 38 
U.S.C. chapter 31 purposes, as Sec. Sec. 21.80, 21.84, 21.88, 21.90, 
21.92, 21.94 (a) through (d), and 21.96 provide.

(Authority: 38 U.S.C. 1804(b), 1814)

    (b) Selecting the type of training to include in the individualized 
written plan of vocational rehabilitation. If training is necessary, the 
CP or VRC will explore a range of possibilities, to include paid and 
unpaid on-job training, institutional training, and a combination of on-
job and institutional training to accomplish the goals of the program. 
Generally, an eligible child's program should include on-job training, 
or a combination of on-job and institutional training, when this 
training:
    (1) Is available;
    (2) Is as suitable as using only institutional training for 
accomplishing the goals of the program; and
    (3) Will meet the child's vocational training program needs.

(Authority: 38 U.S.C. 1804(b), (c), 1814)



Sec. 21.8082  Inability of child to complete individualized written plan 
of vocational rehabilitation or achieve vocational goal.

    (a) Inability to timely complete an individualized written plan of 
vocational rehabilitation or achieve identified goal. After a vocational 
training program has begun, the VR&E case manager may determine that the 
eligible child cannot complete the vocational training program described 
in the child's individualized written plan of vocational rehabilitation 
within the time limits of the individualized written plan of vocational 
rehabilitation or cannot achieve the child's identified vocational goal. 
Subject to paragraph (b) of this section, VR&E may assist the child in 
revising or selecting a new individualized written plan of vocational 
rehabilitation or goal.
    (b) Allowable changes in the individualized written plan of 
vocational rehabilitation or goal. Any change in the eligible child's 
individualized written plan of vocational rehabilitation or vocational 
goal is subject to the child's continuing eligibility under the 
vocational training program and the provisions governing duration of a 
vocational training program in Sec. Sec. 21.8020(e) and 21.8070 through 
21.8074.

(Authority: 38 U.S.C. 1804(d), 1804(e), 1814)

    (c) Change in the individualized written plan of vocational 
rehabilitation or vocational goal. (1) The individualized written plan 
of vocational rehabilitation or vocational goal may be changed under the 
same conditions as provided for a veteran under Sec. 21.94 (a) through 
(d), and subject to Sec. 21.8070 (d) through (f), if:
    (i) The CP or VRC determines that achievement of a vocational goal 
is

[[Page 513]]

still reasonably feasible and that the new individualized written plan 
of vocational rehabilitation or goal is necessary to enable the eligible 
child to prepare for and participate in vocational training or 
employment; and
    (ii) Reentrance is authorized under Sec. 21.8284 in a case when the 
child has completed a vocational training program under this subpart.
    (2) A CP or VRC may approve a change of vocational goal from one 
field or occupational family to another field or occupational family if 
the child can achieve the new goal:
    (i) Before the end of the basic 24-month entitlement period that 
Sec. 21.8020(e)(1) describes; or
    (ii) Before the end of any allowable extension under Sec. Sec. 
21.8020(e)(2) and 21.8072 if the new vocational goal in another field or 
occupational family was identified during the basic 24-month entitlement 
period.
    (3) A change from one occupational objective to another in the same 
field or occupational family does not change the planned vocational 
goal.
    (4) The child must have sufficient remaining entitlement to pursue 
the new individualized written plan of vocational rehabilitation or 
goal, as Sec. 21.8020 provides.

(Authority: 38 U.S.C. 1804(d), 1814)

    (d) Assistance if child terminates planned program before 
completion. If the eligible child elects to terminate the planned 
vocational training program, he or she will receive the assistance that 
Sec. 21.80(d) provides in identifying other resources through which to 
secure the desired training or employment.

(Authority: 38 U.S.C. 1804(c), 1814)

                               Counseling



Sec. 21.8100  Counseling.

    An eligible child requesting or receiving services and assistance 
under this subpart will receive professional counseling by VR&E and 
other qualified VA staff members, and by contract counseling providers, 
as necessary, in a manner comparable to VA's provision of these services 
to veterans under the 38 U.S.C. chapter 31 program, as Sec. Sec. 21.100 
and 21.380 provide.

(Authority: 38 U.S.C. 1803(c)(8), 1804(c), 1814)

              Vocational Training, Services, and Assistance



Sec. 21.8120  Vocational training, services, and assistance.

    (a) Purposes. An eligible child may receive training, services, and 
assistance to enable the child to prepare for and participate in 
vocational training or employment.

(Authority: 38 U.S.C. 1804(b), (c), 1814)

    (b) Training permitted. VA and the child will select vocationally 
oriented courses of study and training, completion of which usually 
results in a diploma, certificate, degree, qualification for licensure, 
or direct placement in employment. The educational and training services 
to be provided include:
    (1) Remedial, deficiency, and refresher training; and
    (2) Training that leads to an identifiable vocational goal. Under 
this program, VA may authorize all forms of programs that Sec. Sec. 
21.122 through 21.132 describe. This includes education and training 
programs in institutions of higher education. VA may authorize the 
education and training at an undergraduate or graduate degree level, 
only if the degree program is predominantly vocational in nature. For an 
eligible child to participate in a graduate degree program, the graduate 
degree must be a requirement for entry into the child's vocational goal. 
For example, a master's degree is required to engage in social work. The 
program of training is predominantly vocational in content if the 
majority of the instruction provides the technical skills and knowledge 
employers generally regard as specific to, and required for, entry into 
the child's vocational goal.
    (c) Cost of education and training services. The CP or VRC will 
consider the cost of training in selecting a facility when:
    (1) There is more than one facility in the area in which the child 
resides that:

[[Page 514]]

    (i) Meets the requirements for approval under Sec. Sec. 21.290 
through 21.298 (except as provided by Sec. 21.8286(b)),
    (ii) Can provide the training, services and other supportive 
assistance the child's individualized written plan of vocational 
rehabilitation specifies, and
    (iii) Is within reasonable commuting distance; or
    (2) The child wishes to train at a suitable facility in another 
area, even though a suitable facility in the area where the child lives 
can provide the training. In considering the costs of providing training 
in this case, VA will use the provisions of Sec. 21.120 (except 
21.120(a)(3)), Sec. 21.370 (however, the words ``under Sec.  21.282'' 
in Sec. 21.370(b)(2)(iii)(B) do not apply), and Sec.  21.372 in a 
manner comparable to that for veterans under the 38 U.S.C. chapter 31 
program.

(Authority: 38 U.S.C. 1804(b), (c), 1814)

    (d) Accessible courses not locally available. If suitable vocational 
training courses are not available in the area in which the child lives, 
or if they are available but not accessible to the child, VA may make 
other arrangements. These arrangements may include, but are not limited 
to:
    (1) Transportation of the child, but not the child's family, 
personal effects, or household belongings, to another area where 
necessary services are available; or
    (2) Use of an individual instructor to provide necessary training in 
a manner comparable to that for veterans under the 38 U.S.C. chapter 31 
program, as Sec. 21.146 describes.

(Authority: 38 U.S.C. 1804(b), (c), 1814)

           Evaluation and Improvement of Vocational Potential



Sec. 21.8140  Evaluation and improvement of vocational potential.

    (a) General. A CP or VRC may use the services that paragraph (d) of 
this section describes to:
    (1) Evaluate vocational training and employment potential;
    (2) Provide a basis for planning:
    (i) A program of services and assistance to improve the eligible 
child's preparation for vocational training and employment; or
    (ii) A vocational training program;
    (3) Reevaluate the vocational training feasibility of an eligible 
child participating in a vocational training program; and
    (4) Remediate deficiencies in the child's basic capabilities, 
skills, or knowledge to give the child the ability to participate in 
vocational training or employment.

(Authority: 38 U.S.C. 1804(b), 1814)

    (b) Periods when evaluation and improvement services may be 
provided. A CP or VRC may authorize the services described in paragraph 
(d) of this section, except those in paragraph (d)(4) of this section, 
for delivery during:
    (1) An initial or extended evaluation; or
    (2) Pursuit of a vocational training program.

(Authority: 38 U.S.C. 1804(c), 1814)

    (c) Duration of services. The duration of services needed to improve 
vocational training and employment potential, furnished on a full-time 
basis either as a preliminary part or all of a vocational training 
program, may not exceed 9 months. If VA furnishes these services on a 
less than full-time basis, the duration will be for the period 
necessary, but may not exceed the equivalent of 9 months of full-time 
training.

(Authority: 38 U.S.C. 1804(c), 1814)

    (d) Scope of services. Evaluation and improvement services include:
    (1) Diagnostic services;
    (2) Personal and work adjustment training;
    (3) Referral for medical care and treatment pursuant to Sec. Sec. 
17.900 through 17.905 of this title for the spina bifida, covered birth 
defects, or related conditions;
    (4) Vocationally oriented independent living services indispensable 
to pursuing a vocational training program;
    (5) Language training, speech and voice correction, training in 
ambulation, and one-hand typewriting;
    (6) Orientation, adjustment, mobility and related services; and
    (7) Other appropriate services to assist the child in functioning in 
the proposed training or work environment.

(Authority: 38 U.S.C. 1804(c), 1814)


[[Page 515]]


    (e) Applicability of chapter 31 rules on special rehabilitation 
services. The provisions of Sec. 21.140 do not apply to this subpart. 
Subject to the provisions of this subpart, the following provisions 
apply to the vocational training program under this subpart in a manner 
comparable to that for veterans under the 38 U.S.C. chapter 31 program: 
Sec. 21.142(a) and (b); Sec.  21.144; Sec.  21.146; Sec.  21.148(a) and 
(c); Sec. 21.150 other than paragraph (b); Sec.  21.152 other than 
paragraph (b); Sec. 21.154 other than paragraph (b); and Sec.  21.156.

(Authority: 38 U.S.C. 1804(c), 1814)

                                Supplies



Sec. 21.8210  Supplies.

    (a) Purpose of furnishing supplies. VA will provide the child with 
the supplies that the child needs to pursue training, to obtain and 
maintain employment, and otherwise to achieve the goal of his or her 
vocational training program.

(Authority: 38 U.S.C. 1804(c), 1814)

    (b) Types of supplies. VA may provide books, tools, and other 
supplies and equipment that VA determines are necessary for the child's 
vocational training program and are required by similarly circumstanced 
veterans pursuing such training under 38 U.S.C. chapter 31.

(Authority: 38 U.S.C. 1804(c), 1814)

    (c) Periods during which VA may furnish supplies. VA may provide 
supplies to an eligible child receiving:
    (1) An initial or extended evaluation;
    (2) Vocational training, services, and assistance to reach the point 
of employability; or
    (3) Employment services.

(Authority: 38 U.S.C. 1804(c), 1814)

    (d) Other rules. The provisions of Sec. Sec. 21.212 through 21.224 
apply to children pursuing a vocational training program under this 
subpart in a comparable manner as VA provides supplies to veterans under 
38 U.S.C. chapter 31, except the following portions:
    (1) Section 21.216(a)(3) pertaining to special modifications, 
including automobile adaptive equipment;
    (2) Section 21.220(a)(1) pertaining to advancements from the 
revolving fund loan;
    (3) Section 21.222(b)(1)(x) pertaining to discontinuance from an 
independent living services program.

(Authority: 38 U.S.C. 1804(c), 1814)

                              Program Costs



Sec. 21.8260  Training, services, and assistance costs.

    The provisions of Sec. 21.262 pertaining to reimbursement for 
training and other program costs apply, in a comparable manner as 
provided under the 38 U.S.C. chapter 31 program for veterans, to 
payments to facilities, vendors, and other providers for training, 
supplies, and other services they deliver under this subpart.

(Authority: 38 U.S.C. 1804(c), 1814)

    Vocational Training Program Entrance, Termination, and Resources



Sec. 21.8280  Effective date of induction into a vocational training 
program.

    Subject to the limitations in Sec. 21.8022, the date an eligible 
child is inducted into a vocational training program will be the date 
the child first begins to receive training, services, or assistance 
under an individualized written plan of vocational rehabilitation.

(Authority: 38 U.S.C. 1804(c), (d), 1814)



Sec. 21.8282  Termination of a vocational training program.

    A case manager may terminate a vocational training program under 
this subpart for cause, including lack of cooperation, failure to pursue 
the individualized written plan of vocational rehabilitation, fraud, 
administrative error, or finding that the child no longer has a covered 
birth defect. An eligible child for whom a vocational goal is reasonably 
feasible remains eligible for the program subject to the rules of this 
subpart unless the child's eligibility for or entitlement to a 
vocational training program under this subpart resulted from fraud or 
administrative error or unless VA finds the child no longer has a 
covered birth defect. The effective date of termination will

[[Page 516]]

be the earliest of the following applicable dates:
    (a) Fraud. If an eligible child establishes eligibility for or 
entitlement to benefits under this subpart through fraud, VA will 
terminate the award of vocational training and rehabilitation as of the 
date VA first began to pay benefits.
    (b) Administrative error. If an eligible child who is not entitled 
to benefits under this subpart receives those benefits through VA 
administrative error, VA will terminate the award of benefits as of the 
first day of the calendar month beginning at least 60 days after 
notifying the child of the proposed termination. This 60-day period may 
not result in the entrance of the child into a new quarter, semester, or 
other term of training unless VA has already obligated payment for the 
training.
    (c) Change in status as an eligible child with a covered birth 
defect. If VA finds that a child no longer has a covered birth defect, 
VA will terminate the award of benefits effective the last day of the 
month in which such determination becomes final.
    (d) Lack of cooperation or failure to pursue individualized written 
plan of vocational rehabilitation. If reasonable VR&E efforts to 
motivate an eligible child do not resolve a lack of cooperation or 
failure to pursue an individualized written plan of vocational 
rehabilitation, VA will terminate the award of benefits as of the first 
day of the calendar month beginning at least 60 days after notifying the 
child of the proposed termination. This 60-day period may not result in 
the entrance of the child into a new quarter, semester, or other term of 
training. VA will deobligate payment for training in the new quarter, 
semester, or other term of training.

(Authority: 38 U.S.C. 1804, 1814)



Sec. 21.8284  Additional vocational training.

    VA may provide an additional period of training or services under a 
vocational training program to an eligible child who has completed 
training for a vocational goal and/or been suitably employed under this 
subpart, if the child is otherwise eligible and has remaining program 
entitlement as provided in Sec. 21.8072(b), only under one of the 
following conditions:
    (a) Current facts, including any relevant medical findings, 
establish that the child's disability has worsened to the extent that he 
or she can no longer perform the duties of the occupation which was the 
child's vocational goal under this subpart;
    (b) The occupation that was the child's vocational goal under this 
subpart is now unsuitable;
    (c) The vocational training program services and assistance the 
child originally received are now inadequate to make the child 
employable in the occupation which he or she sought to achieve;
    (d) Experience has demonstrated that VA should not reasonably have 
expected employment in the objective or field for which the child 
received vocational training program services and assistance; or
    (e) Technological change that occurred after the child achieved a 
vocational goal under this subpart now prevents the child from:
    (1) Performing the duties of the occupation for which VA provided 
training, services, or assistance, or in a related occupation; or
    (2) Securing employment in the occupation for which VA provided 
training, services, or assistance, or in a related occupation.

(Authority: 38 U.S.C. 1804(c), 1814)



Sec. 21.8286  Training resources.

    (a) Applicable 38 U.S.C. chapter 31 resource provisions. The 
provisions of Sec. 21.146 and Sec. Sec.  21.290 through 21.298 apply to 
children pursuing a vocational training program under this subpart in a 
comparable manner as for veterans under the 38 U.S.C. chapter 31 
program, except as paragraph (b) of this section specifies.

(Authority: 38 U.S.C. 1804(c), 1814)

    (b) Limitations. The provisions of Sec. 21.294(b)(1)(i) and 
(b)(1)(ii) pertaining to independent living services do not apply to 
this subpart. The provisions of Sec. 21.294(b)(1)(iii) pertaining to 
authorization of independent living services as a part of an 
individualized written plan of vocational rehabilitation apply to 
children under this subpart in a

[[Page 517]]

comparable manner as for veterans under the 38 U.S.C. chapter 31 program 
only to the extent Sec. 21.8050 allows.

(Authority: 38 U.S.C. 1804(c), 1814)

                             Rate of Pursuit



Sec. 21.8310  Rate of pursuit.

    (a) General requirements. VA will approve an eligible child's 
pursuit of a vocational training program at a rate consistent with his 
or her ability to successfully pursue training, considering:
    (1) Effects of his or her disability;
    (2) Family responsibilities;
    (3) Travel;
    (4) Reasonable adjustment to training; and
    (5) Other circumstances affecting the child's ability to pursue 
training.

(Authority: 38 U.S.C. 1804(c), 1814)

    (b) Continuous pursuit. An eligible child should pursue a program of 
vocational training with as little interruption as necessary, 
considering the factors in paragraph (a) of this section.

(Authority: 38 U.S.C. 1804(c), 1814)

    (c) Responsibility for determining the rate of pursuit. VR&E staff 
members will consult with the child when determining the rate and 
continuity of pursuit of a vocational training program. These staff 
members will also confer with the medical consultant and the Vocational 
Rehabilitation Panel described in Sec. Sec. 21.60 and 21.62, as 
necessary. This rate and continuity of pursuit determination will occur 
during development of the individualized written plan of vocational 
rehabilitation, but may change later, as necessary to enable the child 
to complete training.

(Authority: 38 U.S.C. 1804(c), 1814)

    (d) Measurement of training time used. VA will measure the rate of 
pursuit in a comparable manner to rate of pursuit measurement under 
Sec. 21.310 for veterans under the 38 U.S.C. chapter 31 program.

(Authority: 38 U.S.C. 1804(c), 1814)

                        Authorization of Services



Sec. 21.8320  Authorization of services.

    The provisions of Sec. 21.326, pertaining to the commencement and 
termination dates of a period of employment services, apply to children 
under this subpart in a manner comparable to that provided for veterans 
under the 38 U.S.C. chapter 31 program. References in that section to an 
individualized employment assistance plan or IEAP are considered as 
referring to the child's individualized written plan of vocational 
rehabilitation under this subpart.

(Authority: 38 U.S.C. 1804(c), 1814)

                            Leaves of Absence



Sec. 21.8340  Leaves of absence.

    (a) Purpose of leave of absence. The purpose of the leave system is 
to enable the child to maintain his or her status as an active program 
participant.

(Authority: 38 U.S.C. 1804(c), 1814)

    (b) Basis for leave of absence. The VR&E case manager may grant the 
child leaves of absence for periods during which the child fails to 
pursue a vocational training program. For prolonged periods of absence, 
the VR&E case manager may approve leaves of absence only if the case 
manager determines the child is unable to pursue a vocational training 
program through no fault of the child.

(Authority: 38 U.S.C. 1804(c), 1814)

    (c) Effect on entitlement. During a leave of absence, VA suspends 
the running of the basic 24-month period of entitlement, plus any 
extensions thereto, until the child resumes the program.

(Authority: 38 U.S.C. 1804(c), 1814)

                  Satisfactory Conduct and Cooperation



Sec. 21.8360  Satisfactory conduct and cooperation.

    The provisions for satisfactory conduct and cooperation in 
Sec. Sec. 21.362 and 21.364, except as otherwise provided in this 
section, apply to children under this subpart in a manner comparable to 
the way they apply to veterans under the 38 U.S.C. chapter 31 program. 
If an eligible child fails to meet these requirements for satisfactory 
conduct or cooperation, the VR&E case manager will terminate the child's 
vocational

[[Page 518]]

training program. VA will not grant an eligible child reentrance to a 
vocational training program unless the reasons for unsatisfactory 
conduct or cooperation have been removed.

(Authority: 38 U.S.C. 1804(c), 1814)

                         Transportation Services



Sec. 21.8370  Authorization of transportation services.

    (a) General. VA authorizes transportation services necessary for an 
eligible child to pursue a vocational training program. The sections in 
subpart A of this part that are referred to in this paragraph apply to 
children under this subpart in a manner comparable to the way they apply 
to veterans under the 38 U.S.C. chapter 31 program. Transportation 
services include:
    (1) Transportation for evaluation or counseling under Sec. 21.376;
    (2) Intraregional travel under Sec. 21.370 (except that assurance 
that the child meets all basic requirements for induction into training 
will be determined without regard to the provisions of Sec. 21.282) and 
interregional travel under Sec. 21.372;
    (3) Special transportation allowance under Sec. 21.154; and
    (4) Commuting to and from training and while seeking employment, 
subject to paragraphs (c) and (d) of this section.

(Authority: 38 U.S.C. 1804(c), 1814)

    (b) Reimbursement. For transportation services that VA authorizes, 
VA will normally pay in arrears and in the same manner as tuition, fees, 
and other services under this program.

(Authority: 38 U.S.C. 1804(c), 1814)

    (c) Payment for commuting expenses for training and seeking 
employment. VA may pay for transportation during the period of 
vocational training and the first 3 months the child receives employment 
services. VA may reimburse the child's costs, not to exceed $200 per 
month, of commuting to and from training and seeking employment if he or 
she requests this assistance and VA determines, after careful 
examination of the child's situation and subject to the limitations in 
paragraph (d) of this section, that the child would be unable to pursue 
training or employment without this assistance. VA may:
    (1) Reimburse the facility at which the child is training if the 
facility provided transportation or related services; or
    (2) Reimburse the child for his or her actual commuting expense if 
the child paid for the transportation.

(Authority: 38 U.S.C. 1804(c), 1814)

    (d) Limitations. Payment of commuting expenses under paragraph 
(a)(4) of this section may not be made for any period when the child:
    (1) Is gainfully employed;
    (2) Is eligible for, and entitled to, payment of commuting costs 
through other VA and non-VA programs; or
    (3) Can commute to school with family, friends, or fellow students.

(Authority: 38 U.S.C. 1804(c), 1814)

    (e) Documentation. VA must receive supportive documentation with 
each request for reimbursement. The individualized written plan of 
vocational rehabilitation will specify whether VA will pay monthly or at 
a longer interval.

(Authority: 38 U.S.C. 1804(c), 1814)

    (f) Nonduplication. If a child is eligible for reimbursement of 
transportation services both under this section and under Sec. 21.154, 
the child will receive only the benefit under Sec. 21.154.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0580)

(Authority: 38 U.S.C. 1804(c), 1814)

                    Additional Applicable Regulations



Sec. 21.8380  Additional applicable regulations.

    The following regulations are applicable to children in this program 
in a manner comparable to that provided for veterans under the 38 U.S.C. 
chapter 31 program: Sec. Sec. 21.380, 21.412, 21.414 (except (c), (d), 
and (e)), 21.420, and 21.430.

(Authority: 38 U.S.C. 1804, 1814, 5112)

[[Page 519]]

                         Delegation of Authority



Sec. 21.8410  Delegation of authority.

    The Secretary delegates authority for making findings and decisions 
under 38 U.S.C. 1804 and 1814 and the applicable regulations, 
precedents, and instructions for the program under this subpart to the 
Under Secretary for Benefits and to VR&E supervisory or non-supervisory 
staff members.

(Authority: 38 U.S.C. 512(a), 1804, 1814)



PART 23_NONDISCRIMINATION ON THE BASIS OF SEX IN EDUCATION PROGRAMS OR 
ACTIVITIES RECEIVING FEDERAL FINANCIAL ASSISTANCE--Table of Contents




                         Subpart A_Introduction

Sec.
23.100 Purpose and effective date.
23.105 Definitions.
23.110 Remedial and affirmative action and self-evaluation.
23.115 Assurance required.
23.120 Transfers of property.
23.125 Effect of other requirements.
23.130 Effect of employment opportunities.
23.135 Designation of responsible employee and adoption of grievance 
          procedures.
23.140 Dissemination of policy.

                           Subpart B_Coverage

23.200 Application.
23.205 Educational institutions and other entities controlled by 
          religious organizations.
23.210 Military and merchant marine educational institutions.
23.215 Membership practices of certain organizations.
23.220 Admissions.
23.225 Educational institutions eligible to submit transition plans.
23.230 Transition plans.
23.235 Statutory amendments.

     Subpart C_Discrimination on the Basis of Sex in Admission and 
                         Recruitment Prohibited

23.300 Admission.
23.305 Preference in admission.
23.310 Recruitment.

 Subpart D_Discrimination on the Basis of Sex in Education Programs or 
                          Activities Prohibited

23.400 Education programs or activities.
23.405 Housing.
23.410 Comparable facilities.
23.415 Access to course offerings.
23.420 Access to schools operated by LEAs.
23.425 Counseling and use of appraisal and counseling materials.
23.430 Financial assistance.
23.435 Employment assistance to students.
23.440 Health and insurance benefits and services.
23.445 Marital or parental status.
23.450 Athletics.
23.455 Textbooks and curricular material.

Subpart E_Discrimination on the Basis of Sex in Employment in Education 
                    Programs or Activities Prohibited

23.500 Employment.
23.505 Employment criteria.
23.510 Recruitment.
23.515 Compensation.
23.520 Job classification and structure.
23.525 Fringe benefits.
23.530 Marital or parental status.
23.535 Effect of state or local law or other requirements.
23.540 Advertising.
23.545 Pre-employment inquiries.
23.550 Sex as a bona fide occupational qualification.

                          Subpart F_Procedures

23.600 Notice of covered programs.
23.605 Enforcement procedures.

    Authority: 20 U.S.C. 1681, 1682, 1683, 1685, 1686, 1687, 1688.

    Source: 65 FR 52865, 52889, Aug. 30, 2000, unless otherwise noted.



                         Subpart A_Introduction



Sec. 23.100  Purpose and effective date.

    The purpose of these Title IX regulations is to effectuate Title IX 
of the Education Amendments of 1972, as amended (except sections 904 and 
906 of those Amendments) (20 U.S.C. 1681, 1682, 1683, 1685, 1686, 1687, 
1688), which is designed to eliminate (with certain exceptions) 
discrimination on the basis of sex in any education program or activity 
receiving Federal financial assistance, whether or not such program or 
activity is offered or sponsored by an educational institution as 
defined in these Title IX regulations. The effective date of these Title 
IX regulations shall be September 29, 2000.

[[Page 520]]



Sec. 23.105  Definitions.

    As used in these Title IX regulations, the term:
    Administratively separate unit means a school, department, or 
college of an educational institution (other than a local educational 
agency) admission to which is independent of admission to any other 
component of such institution.
    Admission means selection for part-time, full-time, special, 
associate, transfer, exchange, or any other enrollment, membership, or 
matriculation in or at an education program or activity operated by a 
recipient.
    Applicant means one who submits an application, request, or plan 
required to be approved by an official of the Federal agency that awards 
Federal financial assistance, or by a recipient, as a condition to 
becoming a recipient.
    Designated agency official means Deputy Assistant Secretary for 
Resolution Management.
    Educational institution means a local educational agency (LEA) as 
defined by 20 U.S.C. 8801(18), a preschool, a private elementary or 
secondary school, or an applicant or recipient that is an institution of 
graduate higher education, an institution of undergraduate higher 
education, an institution of professional education, or an institution 
of vocational education, as defined in this section.
    Federal financial assistance means any of the following, when 
authorized or extended under a law administered by the Federal agency 
that awards such assistance:
    (1) A grant or loan of Federal financial assistance, including funds 
made available for:
    (i) The acquisition, construction, renovation, restoration, or 
repair of a building or facility or any portion thereof; and
    (ii) Scholarships, loans, grants, wages, or other funds extended to 
any entity for payment to or on behalf of students admitted to that 
entity, or extended directly to such students for payment to that 
entity.
    (2) A grant of Federal real or personal property or any interest 
therein, including surplus property, and the proceeds of the sale or 
transfer of such property, if the Federal share of the fair market value 
of the property is not, upon such sale or transfer, properly accounted 
for to the Federal Government.
    (3) Provision of the services of Federal personnel.
    (4) Sale or lease of Federal property or any interest therein at 
nominal consideration, or at consideration reduced for the purpose of 
assisting the recipient or in recognition of public interest to be 
served thereby, or permission to use Federal property or any interest 
therein without consideration.
    (5) Any other contract, agreement, or arrangement that has as one of 
its purposes the provision of assistance to any education program or 
activity, except a contract of insurance or guaranty.
    Institution of graduate higher education means an institution that:
    (1) Offers academic study beyond the bachelor of arts or bachelor of 
science degree, whether or not leading to a certificate of any higher 
degree in the liberal arts and sciences;
    (2) Awards any degree in a professional field beyond the first 
professional degree (regardless of whether the first professional degree 
in such field is awarded by an institution of undergraduate higher 
education or professional education); or
    (3) Awards no degree and offers no further academic study, but 
operates ordinarily for the purpose of facilitating research by persons 
who have received the highest graduate degree in any field of study.
    Institution of professional education means an institution (except 
any institution of undergraduate higher education) that offers a program 
of academic study that leads to a first professional degree in a field 
for which there is a national specialized accrediting agency recognized 
by the Secretary of Education.
    Institution of undergraduate higher education means:
    (1) An institution offering at least two but less than four years of 
college-level study beyond the high school level, leading to a diploma 
or an associate degree, or wholly or principally creditable toward a 
baccalaureate degree; or

[[Page 521]]

    (2) An institution offering academic study leading to a 
baccalaureate degree; or
    (3) An agency or body that certifies credentials or offers degrees, 
but that may or may not offer academic study.
    Institution of vocational education means a school or institution 
(except an institution of professional or graduate or undergraduate 
higher education) that has as its primary purpose preparation of 
students to pursue a technical, skilled, or semiskilled occupation or 
trade, or to pursue study in a technical field, whether or not the 
school or institution offers certificates, diplomas, or degrees and 
whether or not it offers full-time study.
    Recipient means any State or political subdivision thereof, or any 
instrumentality of a State or political subdivision thereof, any public 
or private agency, institution, or organization, or other entity, or any 
person, to whom Federal financial assistance is extended directly or 
through another recipient and that operates an education program or 
activity that receives such assistance, including any subunit, 
successor, assignee, or transferee thereof.
    Student means a person who has gained admission.
    Title IX means Title IX of the Education Amendments of 1972, Public 
Law 92-318, 86 Stat. 235, 373 (codified as amended at 20 U.S.C. 1681-
1688) (except sections 904 and 906 thereof), as amended by section 3 of 
Public Law 93-568, 88 Stat. 1855, by section 412 of the Education 
Amendments of 1976, Public Law 94-482, 90 Stat. 2234, and by Section 3 
of Public Law 100-259, 102 Stat. 28, 28-29 (20 U.S.C. 1681, 1682, 1683, 
1685, 1686, 1687, 1688).
    Title IX regulations means the provisions set forth at Sec. Sec. 
23.100 through 23.605.
    Transition plan means a plan subject to the approval of the 
Secretary of Education pursuant to section 901(a)(2) of the Education 
Amendments of 1972, 20 U.S.C. 1681(a)(2), under which an educational 
institution operates in making the transition from being an educational 
institution that admits only students of one sex to being one that 
admits students of both sexes without discrimination.

[65 FR 52865, 52889, 52890, Aug. 30, 2000]



Sec. 23.110  Remedial and affirmative action and self-evaluation.

    (a) Remedial action. If the designated agency official finds that a 
recipient has discriminated against persons on the basis of sex in an 
education program or activity, such recipient shall take such remedial 
action as the designated agency official deems necessary to overcome the 
effects of such discrimination.
    (b) Affirmative action. In the absence of a finding of 
discrimination on the basis of sex in an education program or activity, 
a recipient may take affirmative action consistent with law to overcome 
the effects of conditions that resulted in limited participation therein 
by persons of a particular sex. Nothing in these Title IX regulations 
shall be interpreted to alter any affirmative action obligations that a 
recipient may have under Executive Order 11246, 3 CFR, 1964-1965 Comp., 
p. 339; as amended by Executive Order 11375, 3 CFR, 1966-1970 Comp., p. 
684; as amended by Executive Order 11478, 3 CFR, 1966-1970 Comp., p. 
803; as amended by Executive Order 12086, 3 CFR, 1978 Comp., p. 230; as 
amended by Executive Order 12107, 3 CFR, 1978 Comp., p. 264.
    (c) Self-evaluation. Each recipient education institution shall, 
within one year of September 29, 2000:
    (1) Evaluate, in terms of the requirements of these Title IX 
regulations, its current policies and practices and the effects thereof 
concerning admission of students, treatment of students, and employment 
of both academic and non-academic personnel working in connection with 
the recipient's education program or activity;
    (2) Modify any of these policies and practices that do not or may 
not meet the requirements of these Title IX regulations; and
    (3) Take appropriate remedial steps to eliminate the effects of any 
discrimination that resulted or may have resulted from adherence to 
these policies and practices.
    (d) Availability of self-evaluation and related materials. 
Recipients shall maintain on file for at least three years following 
completion of the evaluation required under paragraph (c) of this 
section, and shall provide to the designated agency official upon 
request, a

[[Page 522]]

description of any modifications made pursuant to paragraph (c)(2) of 
this section and of any remedial steps taken pursuant to paragraph 
(c)(3) of this section.



Sec. 23.115  Assurance required.

    (a) General. Either at the application stage or the award stage, 
Federal agencies must ensure that applications for Federal financial 
assistance or awards of Federal financial assistance contain, be 
accompanied by, or be covered by a specifically identified assurance 
from the applicant or recipient, satisfactory to the designated agency 
official, that each education program or activity operated by the 
applicant or recipient and to which these Title IX regulations apply 
will be operated in compliance with these Title IX regulations. An 
assurance of compliance with these Title IX regulations shall not be 
satisfactory to the designated agency official if the applicant or 
recipient to whom such assurance applies fails to commit itself to take 
whatever remedial action is necessary in accordance with Sec. 23.110(a) 
to eliminate existing discrimination on the basis of sex or to eliminate 
the effects of past discrimination whether occurring prior to or 
subsequent to the submission to the designated agency official of such 
assurance.
    (b) Duration of obligation. (1) In the case of Federal financial 
assistance extended to provide real property or structures thereon, such 
assurance shall obligate the recipient or, in the case of a subsequent 
transfer, the transferee, for the period during which the real property 
or structures are used to provide an education program or activity.
    (2) In the case of Federal financial assistance extended to provide 
personal property, such assurance shall obligate the recipient for the 
period during which it retains ownership or possession of the property.
    (3) In all other cases such assurance shall obligate the recipient 
for the period during which Federal financial assistance is extended.
    (c) Form. (1) The assurances required by paragraph (a) of this 
section, which may be included as part of a document that addresses 
other assurances or obligations, shall include that the applicant or 
recipient will comply with all applicable Federal statutes relating to 
nondiscrimination. These include but are not limited to: Title IX of the 
Education Amendments of 1972, as amended (20 U.S.C. 1681-1683, 1685-
1688).
    (2) The designated agency official will specify the extent to which 
such assurances will be required of the applicant's or recipient's 
subgrantees, contractors, subcontractors, transferees, or successors in 
interest.



Sec. 23.120  Transfers of property.

    If a recipient sells or otherwise transfers property financed in 
whole or in part with Federal financial assistance to a transferee that 
operates any education program or activity, and the Federal share of the 
fair market value of the property is not upon such sale or transfer 
properly accounted for to the Federal Government, both the transferor 
and the transferee shall be deemed to be recipients, subject to the 
provisions of Sec. Sec. 23.205 through 23.235(a).



Sec. 23.125  Effect of other requirements.

    (a) Effect of other Federal provisions. The obligations imposed by 
these Title IX regulations are independent of, and do not alter, 
obligations not to discriminate on the basis of sex imposed by Executive 
Order 11246, 3 CFR, 1964-1965 Comp., p. 339; as amended by Executive 
Order 11375, 3 CFR, 1966-1970 Comp., p. 684; as amended by Executive 
Order 11478, 3 CFR, 1966-1970 Comp., p. 803; as amended by Executive 
Order 12087, 3 CFR, 1978 Comp., p. 230; as amended by Executive Order 
12107, 3 CFR, 1978 Comp., p. 264; sections 704 and 855 of the Public 
Health Service Act (42 U.S.C. 295m, 298b-2); Title VII of the Civil 
Rights Act of 1964 (42 U.S.C. 2000e et seq.); the Equal Pay Act of 1963 
(29 U.S.C. 206); and any other Act of Congress or Federal regulation.
    (b) Effect of State or local law or other requirements. The 
obligation to comply with these Title IX regulations is not obviated or 
alleviated by any State or local law or other requirement that would 
render any applicant or student ineligible, or limit the eligibility of 
any applicant or student, on the basis of sex, to practice any 
occupation or profession.

[[Page 523]]

    (c) Effect of rules or regulations of private organizations. The 
obligation to comply with these Title IX regulations is not obviated or 
alleviated by any rule or regulation of any organization, club, athletic 
or other league, or association that would render any applicant or 
student ineligible to participate or limit the eligibility or 
participation of any applicant or student, on the basis of sex, in any 
education program or activity operated by a recipient and that receives 
Federal financial assistance.



Sec. 23.130  Effect of employment opportunities.

    The obligation to comply with these Title IX regulations is not 
obviated or alleviated because employment opportunities in any 
occupation or profession are or may be more limited for members of one 
sex than for members of the other sex.



Sec. 23.135  Designation of responsible employee and adoption of grievance 
procedures.

    (a) Designation of responsible employee. Each recipient shall 
designate at least one employee to coordinate its efforts to comply with 
and carry out its responsibilities under these Title IX regulations, 
including any investigation of any complaint communicated to such 
recipient alleging its noncompliance with these Title IX regulations or 
alleging any actions that would be prohibited by these Title IX 
regulations. The recipient shall notify all its students and employees 
of the name, office address, and telephone number of the employee or 
employees appointed pursuant to this paragraph.
    (b) Complaint procedure of recipient. A recipient shall adopt and 
publish grievance procedures providing for prompt and equitable 
resolution of student and employee complaints alleging any action that 
would be prohibited by these Title IX regulations.



Sec. 23.140  Dissemination of policy.

    (a) Notification of policy. (1) Each recipient shall implement 
specific and continuing steps to notify applicants for admission and 
employment, students and parents of elementary and secondary school 
students, employees, sources of referral of applicants for admission and 
employment, and all unions or professional organizations holding 
collective bargaining or professional agreements with the recipient, 
that it does not discriminate on the basis of sex in the educational 
programs or activities that it operates, and that it is required by 
Title IX and these Title IX regulations not to discriminate in such a 
manner. Such notification shall contain such information, and be made in 
such manner, as the designated agency official finds necessary to 
apprise such persons of the protections against discrimination assured 
them by Title IX and these Title IX regulations, but shall state at 
least that the requirement not to discriminate in education programs or 
activities extends to employment therein, and to admission thereto 
unless Sec. Sec. 23.300 through 23.310 do not apply to the recipient, 
and that inquiries concerning the application of Title IX and these 
Title IX regulations to such recipient may be referred to the employee 
designated pursuant to Sec. 23.135, or to the designated agency 
official.
    (2) Each recipient shall make the initial notification required by 
paragraph (a)(1) of this section within 90 days of September 29, 2000 or 
of the date these Title IX regulations first apply to such recipient, 
whichever comes later, which notification shall include publication in:
    (i) Newspapers and magazines operated by such recipient or by 
student, alumnae, or alumni groups for or in connection with such 
recipient; and
    (ii) Memoranda or other written communications distributed to every 
student and employee of such recipient.
    (b) Publications. (1) Each recipient shall prominently include a 
statement of the policy described in paragraph (a) of this section in 
each announcement, bulletin, catalog, or application form that it makes 
available to any person of a type, described in paragraph (a) of this 
section, or which is otherwise used in connection with the recruitment 
of students or employees.

[[Page 524]]

    (2) A recipient shall not use or distribute a publication of the 
type described in paragraph (b)(1) of this section that suggests, by 
text or illustration, that such recipient treats applicants, students, 
or employees differently on the basis of sex except as such treatment is 
permitted by these Title IX regulations.
    (c) Distribution. Each recipient shall distribute without 
discrimination on the basis of sex each publication described in 
paragraph (b)(1) of this section, and shall apprise each of its 
admission and employment recruitment representatives of the policy of 
nondiscrimination described in paragraph (a) of this section, and shall 
require such representatives to adhere to such policy.



                           Subpart B_Coverage



Sec. 23.200  Application.

    Except as provided in Sec. Sec. 23.205 through 23.235(a), these 
Title IX regulations apply to every recipient and to each education 
program or activity operated by such recipient that receives Federal 
financial assistance.



Sec. 23.205  Educational institutions and other entities controlled by 
religious organizations.

    (a) Exemption. These Title IX regulations do not apply to any 
operation of an educational institution or other entity that is 
controlled by a religious organization to the extent that application of 
these Title IX regulations would not be consistent with the religious 
tenets of such organization.
    (b) Exemption claims. An educational institution or other entity 
that wishes to claim the exemption set forth in paragraph (a) of this 
section shall do so by submitting in writing to the designated agency 
official a statement by the highest-ranking official of the institution, 
identifying the provisions of these Title IX regulations that conflict 
with a specific tenet of the religious organization.



Sec. 23.210  Military and merchant marine educational institutions.

    These Title IX regulations do not apply to an educational 
institution whose primary purpose is the training of individuals for a 
military service of the United States or for the merchant marine.



Sec. 23.215  Membership practices of certain organizations.

    (a) Social fraternities and sororities. These Title IX regulations 
do not apply to the membership practices of social fraternities and 
sororities that are exempt from taxation under section 501(a) of the 
Internal Revenue Code of 1954, 26 U.S.C. 501(a), the active membership 
of which consists primarily of students in attendance at institutions of 
higher education.
    (b) YMCA, YWCA, Girl Scouts, Boy Scouts, and Camp Fire Girls. These 
Title IX regulations do not apply to the membership practices of the 
Young Men's Christian Association (YMCA), the Young Women's Christian 
Association (YWCA), the Girl Scouts, the Boy Scouts, and Camp Fire 
Girls.
    (c) Voluntary youth service organizations. These Title IX 
regulations do not apply to the membership practices of a voluntary 
youth service organization that is exempt from taxation under section 
501(a) of the Internal Revenue Code of 1954, 26 U.S.C. 501(a), and the 
membership of which has been traditionally limited to members of one sex 
and principally to persons of less than nineteen years of age.



Sec. 23.220  Admissions.

    (a) Admissions to educational institutions prior to June 24, 1973, 
are not covered by these Title IX regulations.
    (b) Administratively separate units. For the purposes only of this 
section, Sec. Sec. 23.225 and 23.230, and Sec. Sec.  23.300 through 
23.310, each administratively separate unit shall be deemed to be an 
educational institution.
    (c) Application of Sec. Sec. 23.300 through .310. Except as 
provided in paragraphs (d) and (e) of this section, Sec. Sec. 23.300 
through 23.310 apply to each recipient. A recipient to which Sec. Sec. 
23.300 through 23.310 apply shall not discriminate on the basis of sex 
in admission or recruitment in violation of Sec. Sec. 23.300 through 
23.310.
    (d) Educational institutions. Except as provided in paragraph (e) of 
this section as to recipients that are educational institutions, 
Sec. Sec. 23.300 through

[[Page 525]]

23.310 apply only to institutions of vocational education, professional 
education, graduate higher education, and public institutions of 
undergraduate higher education.
    (e) Public institutions of undergraduate higher education. 
Sec. Sec. 23.300 through 23.310 do not apply to any public institution 
of undergraduate higher education that traditionally and continually 
from its establishment has had a policy of admitting students of only 
one sex.



Sec. 23.225  Educational institutions eligible to submit transition 
plans.

    (a) Application. This section applies to each educational 
institution to which Sec. Sec. 23.300 through 23.310 apply that:
    (1) Admitted students of only one sex as regular students as of June 
23, 1972; or
    (2) Admitted students of only one sex as regular students as of June 
23, 1965, but thereafter admitted, as regular students, students of the 
sex not admitted prior to June 23, 1965.
    (b) Provision for transition plans. An educational institution to 
which this section applies shall not discriminate on the basis of sex in 
admission or recruitment in violation of Sec. Sec. 23.300 through 
23.310.



Sec. 23.230  Transition plans.

    (a) Submission of plans. An institution to which Sec. 23.225 
applies and that is composed of more than one administratively separate 
unit may submit either a single transition plan applicable to all such 
units, or a separate transition plan applicable to each such unit.
    (b) Content of plans. In order to be approved by the Secretary of 
Education, a transition plan shall:
    (1) State the name, address, and Federal Interagency Committee on 
Education Code of the educational institution submitting such plan, the 
administratively separate units to which the plan is applicable, and the 
name, address, and telephone number of the person to whom questions 
concerning the plan may be addressed. The person who submits the plan 
shall be the chief administrator or president of the institution, or 
another individual legally authorized to bind the institution to all 
actions set forth in the plan.
    (2) State whether the educational institution or administratively 
separate unit admits students of both sexes as regular students and, if 
so, when it began to do so.
    (3) Identify and describe with respect to the educational 
institution or administratively separate unit any obstacles to admitting 
students without discrimination on the basis of sex.
    (4) Describe in detail the steps necessary to eliminate as soon as 
practicable each obstacle so identified and indicate the schedule for 
taking these steps and the individual directly responsible for their 
implementation.
    (5) Include estimates of the number of students, by sex, expected to 
apply for, be admitted to, and enter each class during the period 
covered by the plan.
    (c) Nondiscrimination. No policy or practice of a recipient to which 
Sec. 23.225 applies shall result in treatment of applicants to or 
students of such recipient in violation of Sec. Sec. 23.300 through 
23.310 unless such treatment is necessitated by an obstacle identified 
in paragraph (b)(3) of this section and a schedule for eliminating that 
obstacle has been provided as required by paragraph (b)(4) of this 
section.
    (d) Effects of past exclusion. To overcome the effects of past 
exclusion of students on the basis of sex, each educational institution 
to which Sec. 23.225 applies shall include in its transition plan, and 
shall implement, specific steps designed to encourage individuals of the 
previously excluded sex to apply for admission to such institution. Such 
steps shall include instituting recruitment programs that emphasize the 
institution's commitment to enrolling students of the sex previously 
excluded.



Sec. 23.235  Statutory amendments.

    (a) This section, which applies to all provisions of these Title IX 
regulations, addresses statutory amendments to Title IX.
    (b) These Title IX regulations shall not apply to or preclude:
    (1) Any program or activity of the American Legion undertaken in 
connection with the organization or operation of any Boys State 
conference,

[[Page 526]]

Boys Nation conference, Girls State conference, or Girls Nation 
conference;
    (2) Any program or activity of a secondary school or educational 
institution specifically for:
    (i) The promotion of any Boys State conference, Boys Nation 
conference, Girls State conference, or Girls Nation conference; or
    (ii) The selection of students to attend any such conference;
    (3) Father-son or mother-daughter activities at an educational 
institution or in an education program or activity, but if such 
activities are provided for students of one sex, opportunities for 
reasonably comparable activities shall be provided to students of the 
other sex;
    (4) Any scholarship or other financial assistance awarded by an 
institution of higher education to an individual because such individual 
has received such award in a single-sex pageant based upon a combination 
of factors related to the individual's personal appearance, poise, and 
talent. The pageant, however, must comply with other nondiscrimination 
provisions of Federal law.
    (c) Program or activity or program means:
    (1) All of the operations of any entity described in paragraphs 
(c)(1)(i) through (iv) of this section, any part of which is extended 
Federal financial assistance:
    (i)(A) A department, agency, special purpose district, or other 
instrumentality of a State or of a local government; or
    (B) The entity of such State or local government that distributes 
such assistance and each such department or agency (and each other State 
or local government entity) to which the assistance is extended, in the 
case of assistance to a State or local government;
    (ii)(A) A college, university, or other postsecondary institution, 
or a public system of higher education; or
    (B) A local educational agency (as defined in section 8801 of title 
20), system of vocational education, or other school system;
    (iii)(A) An entire corporation, partnership, or other private 
organization, or an entire sole proprietorship--
    (1) If assistance is extended to such corporation, partnership, 
private organization, or sole proprietorship as a whole; or
    (2) Which is principally engaged in the business of providing 
education, health care, housing, social services, or parks and 
recreation; or
    (B) The entire plant or other comparable, geographically separate 
facility to which Federal financial assistance is extended, in the case 
of any other corporation, partnership, private organization, or sole 
proprietorship; or
    (iv) Any other entity that is established by two or more of the 
entities described in paragraphs (c)(1)(i), (ii), or (iii) of this 
section.
    (2)(i) Program or activity does not include any operation of an 
entity that is controlled by a religious organization if the application 
of 20 U.S.C. 1681 to such operation would not be consistent with the 
religious tenets of such organization.
    (ii) For example, all of the operations of a college, university, or 
other postsecondary institution, including but not limited to 
traditional educational operations, faculty and student housing, campus 
shuttle bus service, campus restaurants, the bookstore, and other 
commercial activities are part of a ``program or activity'' subject to 
these Title IX regulations if the college, university, or other 
institution receives Federal financial assistance.
    (d)(1) Nothing in these Title IX regulations shall be construed to 
require or prohibit any person, or public or private entity, to provide 
or pay for any benefit or service, including the use of facilities, 
related to an abortion. Medical procedures, benefits, services, and the 
use of facilities, necessary to save the life of a pregnant woman or to 
address complications related to an abortion are not subject to this 
section.
    (2) Nothing in this section shall be construed to permit a penalty 
to be imposed on any person or individual because such person or 
individual is seeking or has received any benefit or service related to 
a legal abortion. Accordingly, subject to paragraph (d)(1) of this 
section, no person shall be excluded from participation in, be denied

[[Page 527]]

the benefits of, or be subjected to discrimination under any academic, 
extracurricular, research, occupational training, employment, or other 
educational program or activity operated by a recipient that receives 
Federal financial assistance because such individual has sought or 
received, or is seeking, a legal abortion, or any benefit or service 
related to a legal abortion.



     Subpart C_Discrimination on the Basis of Sex in Admission and 
                         Recruitment Prohibited



Sec. 23.300  Admission.

    (a) General. No person shall, on the basis of sex, be denied 
admission, or be subjected to discrimination in admission, by any 
recipient to which Sec. Sec. 23.300 through Sec. Sec.  23.310 apply, 
except as provided in Sec. Sec. 23.225 and Sec. Sec.  23.230.
    (b) Specific prohibitions. (1) In determining whether a person 
satisfies any policy or criterion for admission, or in making any offer 
of admission, a recipient to which Sec. Sec. 23.300 through 23.310 
apply shall not:
    (i) Give preference to one person over another on the basis of sex, 
by ranking applicants separately on such basis, or otherwise;
    (ii) Apply numerical limitations upon the number or proportion of 
persons of either sex who may be admitted; or
    (iii) Otherwise treat one individual differently from another on the 
basis of sex.
    (2) A recipient shall not administer or operate any test or other 
criterion for admission that has a disproportionately adverse effect on 
persons on the basis of sex unless the use of such test or criterion is 
shown to predict validly success in the education program or activity in 
question and alternative tests or criteria that do not have such a 
disproportionately adverse effect are shown to be unavailable.
    (c) Prohibitions relating to marital or parental status. In 
determining whether a person satisfies any policy or criterion for 
admission, or in making any offer of admission, a recipient to which 
Sec. Sec. 23.300 through 23.310 apply:
    (1) Shall not apply any rule concerning the actual or potential 
parental, family, or marital status of a student or applicant that 
treats persons differently on the basis of sex;
    (2) Shall not discriminate against or exclude any person on the 
basis of pregnancy, childbirth, termination of pregnancy, or recovery 
therefrom, or establish or follow any rule or practice that so 
discriminates or excludes;
    (3) Subject to Sec. 23.235(d), shall treat disabilities related to 
pregnancy, childbirth, termination of pregnancy, or recovery therefrom 
in the same manner and under the same policies as any other temporary 
disability or physical condition; and
    (4) Shall not make pre-admission inquiry as to the marital status of 
an applicant for admission, including whether such applicant is ``Miss'' 
or ``Mrs.'' A recipient may make pre-admission inquiry as to the sex of 
an applicant for admission, but only if such inquiry is made equally of 
such applicants of both sexes and if the results of such inquiry are not 
used in connection with discrimination prohibited by these Title IX 
regulations.



Sec. 23.305  Preference in admission.

    A recipient to which Sec. Sec. 23.300 through 23.310 apply shall 
not give preference to applicants for admission, on the basis of 
attendance at any educational institution or other school or entity that 
admits as students only or predominantly members of one sex, if the 
giving of such preference has the effect of discriminating on the basis 
of sex in violation of Sec. Sec. 23.300 through 23.310.



Sec. 23.310  Recruitment.

    (a) Nondiscriminatory recruitment. A recipient to which Sec. Sec. 
23.300 through 23.310 apply shall not discriminate on the basis of sex 
in the recruitment and admission of students. A recipient may be 
required to undertake additional recruitment efforts for one sex as 
remedial action pursuant to Sec. 23.110(a), and may choose to undertake 
such efforts as affirmative action pursuant to Sec. 23.110(b).
    (b) Recruitment at certain institutions. A recipient to which 
Sec. Sec. 23.300 through 23.310 apply shall not recruit primarily or 
exclusively at educational institutions, schools, or entities that admit 
as students only or predominantly members of one sex, if such actions 
have the

[[Page 528]]

effect of discriminating on the basis of sex in violation of Sec. Sec. 
23.300 through 23.310.



 Subpart D_Discrimination on the Basis of Sex in Education Programs or 
                          Activities Prohibited



Sec. 23.400  Education programs or activities.

    (a) General. Except as provided elsewhere in these Title IX 
regulations, no person shall, on the basis of sex, be excluded from 
participation in, be denied the benefits of, or be subjected to 
discrimination under any academic, extracurricular, research, 
occupational training, or other education program or activity operated 
by a recipient that receives Federal financial assistance. Sections 
23.400 through 23.455 do not apply to actions of a recipient in 
connection with admission of its students to an education program or 
activity of a recipient to which Sec. Sec. 23.300 through 23.310 do not 
apply, or an entity, not a recipient, to which Sec. Sec. 23.300 through 
23.310 would not apply if the entity were a recipient.
    (b) Specific prohibitions. Except as provided in Sec. Sec. 23.400 
through 23.455, in providing any aid, benefit, or service to a student, 
a recipient shall not, on the basis of sex:
    (1) Treat one person differently from another in determining whether 
such person satisfies any requirement or condition for the provision of 
such aid, benefit, or service;
    (2) Provide different aid, benefits, or services or provide aid, 
benefits, or services in a different manner;
    (3) Deny any person any such aid, benefit, or service;
    (4) Subject any person to separate or different rules of behavior, 
sanctions, or other treatment;
    (5) Apply any rule concerning the domicile or residence of a student 
or applicant, including eligibility for in-state fees and tuition;
    (6) Aid or perpetuate discrimination against any person by providing 
significant assistance to any agency, organization, or person that 
discriminates on the basis of sex in providing any aid, benefit, or 
service to students or employees;
    (7) Otherwise limit any person in the enjoyment of any right, 
privilege, advantage, or opportunity.
    (c) Assistance administered by a recipient educational institution 
to study at a foreign institution. A recipient educational institution 
may administer or assist in the administration of scholarships, 
fellowships, or other awards established by foreign or domestic wills, 
trusts, or similar legal instruments, or by acts of foreign governments 
and restricted to members of one sex, that are designed to provide 
opportunities to study abroad, and that are awarded to students who are 
already matriculating at or who are graduates of the recipient 
institution; Provided, that a recipient educational institution that 
administers or assists in the administration of such scholarships, 
fellowships, or other awards that are restricted to members of one sex 
provides, or otherwise makes available, reasonable opportunities for 
similar studies for members of the other sex. Such opportunities may be 
derived from either domestic or foreign sources.
    (d) Aids, benefits or services not provided by recipient. (1) This 
paragraph (d) applies to any recipient that requires participation by 
any applicant, student, or employee in any education program or activity 
not operated wholly by such recipient, or that facilitates, permits, or 
considers such participation as part of or equivalent to an education 
program or activity operated by such recipient, including participation 
in educational consortia and cooperative employment and student-teaching 
assignments.
    (2) Such recipient:
    (i) Shall develop and implement a procedure designed to assure 
itself that the operator or sponsor of such other education program or 
activity takes no action affecting any applicant, student, or employee 
of such recipient that these Title IX regulations would prohibit such 
recipient from taking; and
    (ii) Shall not facilitate, require, permit, or consider such 
participation if such action occurs.



Sec. 23.405  Housing.

    (a) Generally. A recipient shall not, on the basis of sex, apply 
different

[[Page 529]]

rules or regulations, impose different fees or requirements, or offer 
different services or benefits related to housing, except as provided in 
this section (including housing provided only to married students).
    (b) Housing provided by recipient. (1) A recipient may provide 
separate housing on the basis of sex.
    (2) Housing provided by a recipient to students of one sex, when 
compared to that provided to students of the other sex, shall be as a 
whole:
    (i) Proportionate in quantity to the number of students of that sex 
applying for such housing; and
    (ii) Comparable in quality and cost to the student.
    (c) Other housing. (1) A recipient shall not, on the basis of sex, 
administer different policies or practices concerning occupancy by its 
students of housing other than that provided by such recipient.
    (2)(i) A recipient which, through solicitation, listing, approval of 
housing, or otherwise, assists any agency, organization, or person in 
making housing available to any of its students, shall take such 
reasonable action as may be necessary to assure itself that such housing 
as is provided to students of one sex, when compared to that provided to 
students of the other sex, is as a whole:
    (A) Proportionate in quantity; and
    (B) Comparable in quality and cost to the student.
    (ii) A recipient may render such assistance to any agency, 
organization, or person that provides all or part of such housing to 
students of only one sex.



Sec. 23.410  Comparable facilities.

    A recipient may provide separate toilet, locker room, and shower 
facilities on the basis of sex, but such facilities provided for 
students of one sex shall be comparable to such facilities provided for 
students of the other sex.



Sec. 23.415  Access to course offerings.

    (a) A recipient shall not provide any course or otherwise carry out 
any of its education program or activity separately on the basis of sex, 
or require or refuse participation therein by any of its students on 
such basis, including health, physical education, industrial, business, 
vocational, technical, home economics, music, and adult education 
courses.
    (b)(1) With respect to classes and activities in physical education 
at the elementary school level, the recipient shall comply fully with 
this section as expeditiously as possible but in no event later than one 
year from September 29, 2000. With respect to physical education classes 
and activities at the secondary and post-secondary levels, the recipient 
shall comply fully with this section as expeditiously as possible but in 
no event later than three years from September 29, 2000.
    (2) This section does not prohibit grouping of students in physical 
education classes and activities by ability as assessed by objective 
standards of individual performance developed and applied without regard 
to sex.
    (3) This section does not prohibit separation of students by sex 
within physical education classes or activities during participation in 
wrestling, boxing, rugby, ice hockey, football, basketball, and other 
sports the purpose or major activity of which involves bodily contact.
    (4) Where use of a single standard of measuring skill or progress in 
a physical education class has an adverse effect on members of one sex, 
the recipient shall use appropriate standards that do not have such 
effect.
    (5) Portions of classes in elementary and secondary schools, or 
portions of education programs or activities, that deal exclusively with 
human sexuality may be conducted in separate sessions for boys and 
girls.
    (6) Recipients may make requirements based on vocal range or quality 
that may result in a chorus or choruses of one or predominantly one sex.



Sec. 23.420  Access to schools operated by LEAs.

    A recipient that is a local educational agency shall not, on the 
basis of sex, exclude any person from admission to:
    (a) Any institution of vocational education operated by such 
recipient; or
    (b) Any other school or educational unit operated by such recipient, 
unless

[[Page 530]]

such recipient otherwise makes available to such person, pursuant to the 
same policies and criteria of admission, courses, services, and 
facilities comparable to each course, service, and facility offered in 
or through such schools.



Sec. 23.425  Counseling and use of appraisal and counseling materials.

    (a) Counseling. A recipient shall not discriminate against any 
person on the basis of sex in the counseling or guidance of students or 
applicants for admission.
    (b) Use of appraisal and counseling materials. A recipient that uses 
testing or other materials for appraising or counseling students shall 
not use different materials for students on the basis of their sex or 
use materials that permit or require different treatment of students on 
such basis unless such different materials cover the same occupations 
and interest areas and the use of such different materials is shown to 
be essential to eliminate sex bias. Recipients shall develop and use 
internal procedures for ensuring that such materials do not discriminate 
on the basis of sex. Where the use of a counseling test or other 
instrument results in a substantially disproportionate number of members 
of one sex in any particular course of study or classification, the 
recipient shall take such action as is necessary to assure itself that 
such disproportion is not the result of discrimination in the instrument 
or its application.
    (c) Disproportion in classes. Where a recipient finds that a 
particular class contains a substantially disproportionate number of 
individuals of one sex, the recipient shall take such action as is 
necessary to assure itself that such disproportion is not the result of 
discrimination on the basis of sex in counseling or appraisal materials 
or by counselors.



Sec. 23.430  Financial assistance.

    (a) General. Except as provided in paragraphs (b) and (c) of this 
section, in providing financial assistance to any of its students, a 
recipient shall not:
    (1) On the basis of sex, provide different amounts or types of such 
assistance, limit eligibility for such assistance that is of any 
particular type or source, apply different criteria, or otherwise 
discriminate;
    (2) Through solicitation, listing, approval, provision of 
facilities, or other services, assist any foundation, trust, agency, 
organization, or person that provides assistance to any of such 
recipient's students in a manner that discriminates on the basis of sex; 
or
    (3) Apply any rule or assist in application of any rule concerning 
eligibility for such assistance that treats persons of one sex 
differently from persons of the other sex with regard to marital or 
parental status.
    (b) Financial aid established by certain legal instruments. (1) A 
recipient may administer or assist in the administration of 
scholarships, fellowships, or other forms of financial assistance 
established pursuant to domestic or foreign wills, trusts, bequests, or 
similar legal instruments or by acts of a foreign government that 
require that awards be made to members of a particular sex specified 
therein; Provided, that the overall effect of the award of such sex-
restricted scholarships, fellowships, and other forms of financial 
assistance does not discriminate on the basis of sex.
    (2) To ensure nondiscriminatory awards of assistance as required in 
paragraph (b)(1) of this section, recipients shall develop and use 
procedures under which:
    (i) Students are selected for award of financial assistance on the 
basis of nondiscriminatory criteria and not on the basis of availability 
of funds restricted to members of a particular sex;
    (ii) An appropriate sex-restricted scholarship, fellowship, or other 
form of financial assistance is allocated to each student selected under 
paragraph (b)(2)(i) of this section; and
    (iii) No student is denied the award for which he or she was 
selected under paragraph (b)(2)(i) of this section because of the 
absence of a scholarship, fellowship, or other form of financial 
assistance designated for a member of that student's sex.
    (c) Athletic scholarships. (1) To the extent that a recipient awards 
athletic scholarships or grants-in-aid, it must provide reasonable 
opportunities for such awards for members of each sex in

[[Page 531]]

proportion to the number of students of each sex participating in 
interscholastic or intercollegiate athletics.
    (2) A recipient may provide separate athletic scholarships or 
grants-in-aid for members of each sex as part of separate athletic teams 
for members of each sex to the extent consistent with this paragraph (c) 
and Sec. 23.450.



Sec. 23.435  Employment assistance to students.

    (a) Assistance by recipient in making available outside employment. 
A recipient that assists any agency, organization, or person in making 
employment available to any of its students:
    (1) Shall assure itself that such employment is made available 
without discrimination on the basis of sex; and
    (2) Shall not render such services to any agency, organization, or 
person that discriminates on the basis of sex in its employment 
practices.
    (b) Employment of students by recipients. A recipient that employs 
any of its students shall not do so in a manner that violates Sec. Sec. 
23.500 through 23.550.



Sec. 23.440  Health and insurance benefits and services.

    Subject to Sec. 23.235(d), in providing a medical, hospital, 
accident, or life insurance benefit, service, policy, or plan to any of 
its students, a recipient shall not discriminate on the basis of sex, or 
provide such benefit, service, policy, or plan in a manner that would 
violate Sec. Sec. 23.500 through 23.550 if it were provided to 
employees of the recipient. This section shall not prohibit a recipient 
from providing any benefit or service that may be used by a different 
proportion of students of one sex than of the other, including family 
planning services. However, any recipient that provides full coverage 
health service shall provide gynecological care.



Sec. 23.445  Marital or parental status.

    (a) Status generally. A recipient shall not apply any rule 
concerning a student's actual or potential parental, family, or marital 
status that treats students differently on the basis of sex.
    (b) Pregnancy and related conditions. (1) A recipient shall not 
discriminate against any student, or exclude any student from its 
education program or activity, including any class or extracurricular 
activity, on the basis of such student's pregnancy, childbirth, false 
pregnancy, termination of pregnancy, or recovery therefrom, unless the 
student requests voluntarily to participate in a separate portion of the 
program or activity of the recipient.
    (2) A recipient may require such a student to obtain the 
certification of a physician that the student is physically and 
emotionally able to continue participation as long as such a 
certification is required of all students for other physical or 
emotional conditions requiring the attention of a physician.
    (3) A recipient that operates a portion of its education program or 
activity separately for pregnant students, admittance to which is 
completely voluntary on the part of the student as provided in paragraph 
(b)(1) of this section, shall ensure that the separate portion is 
comparable to that offered to non-pregnant students.
    (4) Subject to Sec. 23.235(d), a recipient shall treat pregnancy, 
childbirth, false pregnancy, termination of pregnancy and recovery 
therefrom in the same manner and under the same policies as any other 
temporary disability with respect to any medical or hospital benefit, 
service, plan, or policy that such recipient administers, operates, 
offers, or participates in with respect to students admitted to the 
recipient's educational program or activity.
    (5) In the case of a recipient that does not maintain a leave policy 
for its students, or in the case of a student who does not otherwise 
qualify for leave under such a policy, a recipient shall treat 
pregnancy, childbirth, false pregnancy, termination of pregnancy, and 
recovery therefrom as a justification for a leave of absence for as long 
a period of time as is deemed medically necessary by the student's 
physician, at the conclusion of which the student shall be reinstated to 
the status that she held when the leave began.



Sec. 23.450  Athletics.

    (a) General. No person shall, on the basis of sex, be excluded from 
participation in, be denied the benefits of, be treated differently from 
another person, or otherwise be discriminated

[[Page 532]]

against in any interscholastic, intercollegiate, club, or intramural 
athletics offered by a recipient, and no recipient shall provide any 
such athletics separately on such basis.
    (b) Separate teams. Notwithstanding the requirements of paragraph 
(a) of this section, a recipient may operate or sponsor separate teams 
for members of each sex where selection for such teams is based upon 
competitive skill or the activity involved is a contact sport. However, 
where a recipient operates or sponsors a team in a particular sport for 
members of one sex but operates or sponsors no such team for members of 
the other sex, and athletic opportunities for members of that sex have 
previously been limited, members of the excluded sex must be allowed to 
try out for the team offered unless the sport involved is a contact 
sport. For the purposes of these Title IX regulations, contact sports 
include boxing, wrestling, rugby, ice hockey, football, basketball, and 
other sports the purpose or major activity of which involves bodily 
contact.
    (c) Equal opportunity. (1) A recipient that operates or sponsors 
interscholastic, intercollegiate, club, or intramural athletics shall 
provide equal athletic opportunity for members of both sexes. In 
determining whether equal opportunities are available, the designated 
agency official will consider, among other factors:
    (i) Whether the selection of sports and levels of competition 
effectively accommodate the interests and abilities of members of both 
sexes;
    (ii) The provision of equipment and supplies;
    (iii) Scheduling of games and practice time;
    (iv) Travel and per diem allowance;
    (v) Opportunity to receive coaching and academic tutoring;
    (vi) Assignment and compensation of coaches and tutors;
    (vii) Provision of locker rooms, practice, and competitive 
facilities;
    (viii) Provision of medical and training facilities and services;
    (ix) Provision of housing and dining facilities and services;
    (x) Publicity.
    (2) For purposes of paragraph (c)(1) of this section, unequal 
aggregate expenditures for members of each sex or unequal expenditures 
for male and female teams if a recipient operates or sponsors separate 
teams will not constitute noncompliance with this section, but the 
designated agency official may consider the failure to provide necessary 
funds for teams for one sex in assessing equality of opportunity for 
members of each sex.
    (d) Adjustment period. A recipient that operates or sponsors 
interscholastic, intercollegiate, club, or intramural athletics at the 
elementary school level shall comply fully with this section as 
expeditiously as possible but in no event later than one year from 
September 29, 2000. A recipient that operates or sponsors 
interscholastic, intercollegiate, club, or intramural athletics at the 
secondary or postsecondary school level shall comply fully with this 
section as expeditiously as possible but in no event later than three 
years from September 29, 2000.



Sec. 23.455  Textbooks and curricular material.

    Nothing in these Title IX regulations shall be interpreted as 
requiring or prohibiting or abridging in any way the use of particular 
textbooks or curricular materials.



Subpart E_Discrimination on the Basis of Sex in Employment in Education 
                    Programs or Activities Prohibited



Sec. 23.500  Employment.

    (a) General. (1) No person shall, on the basis of sex, be excluded 
from participation in, be denied the benefits of, or be subjected to 
discrimination in employment, or recruitment, consideration, or 
selection therefor, whether full-time or part-time, under any education 
program or activity operated by a recipient that receives Federal 
financial assistance.
    (2) A recipient shall make all employment decisions in any education 
program or activity operated by such recipient in a nondiscriminatory 
manner and shall not limit, segregate, or classify applicants or 
employees in any way that could adversely affect any applicant's or 
employee's employment opportunities or status because of sex.

[[Page 533]]

    (3) A recipient shall not enter into any contractual or other 
relationship which directly or indirectly has the effect of subjecting 
employees or students to discrimination prohibited by Sec. Sec. 23.500 
through 23.550, including relationships with employment and referral 
agencies, with labor unions, and with organizations providing or 
administering fringe benefits to employees of the recipient.
    (4) A recipient shall not grant preferences to applicants for 
employment on the basis of attendance at any educational institution or 
entity that admits as students only or predominantly members of one sex, 
if the giving of such preferences has the effect of discriminating on 
the basis of sex in violation of these Title IX regulations.
    (b) Application. The provisions of Sec. Sec. 23.500 through 23.550 
apply to:
    (1) Recruitment, advertising, and the process of application for 
employment;
    (2) Hiring, upgrading, promotion, consideration for and award of 
tenure, demotion, transfer, layoff, termination, application of nepotism 
policies, right of return from layoff, and rehiring;
    (3) Rates of pay or any other form of compensation, and changes in 
compensation;
    (4) Job assignments, classifications, and structure, including 
position descriptions, lines of progression, and seniority lists;
    (5) The terms of any collective bargaining agreement;
    (6) Granting and return from leaves of absence, leave for pregnancy, 
childbirth, false pregnancy, termination of pregnancy, leave for persons 
of either sex to care for children or dependents, or any other leave;
    (7) Fringe benefits available by virtue of employment, whether or 
not administered by the recipient;
    (8) Selection and financial support for training, including 
apprenticeship, professional meetings, conferences, and other related 
activities, selection for tuition assistance, selection for sabbaticals 
and leaves of absence to pursue training;
    (9) Employer-sponsored activities, including social or recreational 
programs; and
    (10) Any other term, condition, or privilege of employment.



Sec. 23.505  Employment criteria.

    A recipient shall not administer or operate any test or other 
criterion for any employment opportunity that has a disproportionately 
adverse effect on persons on the basis of sex unless:
    (a) Use of such test or other criterion is shown to predict validly 
successful performance in the position in question; and
    (b) Alternative tests or criteria for such purpose, which do not 
have such disproportionately adverse effect, are shown to be 
unavailable.



Sec. 23.510  Recruitment.

    (a) Nondiscriminatory recruitment and hiring. A recipient shall not 
discriminate on the basis of sex in the recruitment and hiring of 
employees. Where a recipient has been found to be presently 
discriminating on the basis of sex in the recruitment or hiring of 
employees, or has been found to have so discriminated in the past, the 
recipient shall recruit members of the sex so discriminated against so 
as to overcome the effects of such past or present discrimination.
    (b) Recruitment patterns. A recipient shall not recruit primarily or 
exclusively at entities that furnish as applicants only or predominantly 
members of one sex if such actions have the effect of discriminating on 
the basis of sex in violation of Sec. Sec. 23.500 through 23.550.



Sec. 23.515  Compensation.

    A recipient shall not make or enforce any policy or practice that, 
on the basis of sex:
    (a) Makes distinctions in rates of pay or other compensation;
    (b) Results in the payment of wages to employees of one sex at a 
rate less than that paid to employees of the opposite sex for equal work 
on jobs the performance of which requires equal skill, effort, and 
responsibility, and that are performed under similar working conditions.



Sec. 23.520  Job classification and structure.

    A recipient shall not:

[[Page 534]]

    (a) Classify a job as being for males or for females;
    (b) Maintain or establish separate lines of progression, seniority 
lists, career ladders, or tenure systems based on sex; or
    (c) Maintain or establish separate lines of progression, seniority 
systems, career ladders, or tenure systems for similar jobs, position 
descriptions, or job requirements that classify persons on the basis of 
sex, unless sex is a bona fide occupational qualification for the 
positions in question as set forth in Sec. 23.550.



Sec. 23.525  Fringe benefits.

    (a) ``Fringe benefits'' defined. For purposes of these Title IX 
regulations, fringe benefits means: Any medical, hospital, accident, 
life insurance, or retirement benefit, service, policy or plan, any 
profit-sharing or bonus plan, leave, and any other benefit or service of 
employment not subject to the provision of Sec. 23.515.
    (b) Prohibitions. A recipient shall not:
    (1) Discriminate on the basis of sex with regard to making fringe 
benefits available to employees or make fringe benefits available to 
spouses, families, or dependents of employees differently upon the basis 
of the employee's sex;
    (2) Administer, operate, offer, or participate in a fringe benefit 
plan that does not provide for equal periodic benefits for members of 
each sex and for equal contributions to the plan by such recipient for 
members of each sex; or
    (3) Administer, operate, offer, or participate in a pension or 
retirement plan that establishes different optional or compulsory 
retirement ages based on sex or that otherwise discriminates in benefits 
on the basis of sex.



Sec. 23.530  Marital or parental status.

    (a) General. A recipient shall not apply any policy or take any 
employment action:
    (1) Concerning the potential marital, parental, or family status of 
an employee or applicant for employment that treats persons differently 
on the basis of sex; or
    (2) Which is based upon whether an employee or applicant for 
employment is the head of household or principal wage earner in such 
employee's or applicant's family unit.
    (b) Pregnancy. A recipient shall not discriminate against or exclude 
from employment any employee or applicant for employment on the basis of 
pregnancy, childbirth, false pregnancy, termination of pregnancy, or 
recovery therefrom.
    (c) Pregnancy as a temporary disability. Subject to Sec. 23235(d), a 
recipient shall treat pregnancy, childbirth, false pregnancy, 
termination of pregnancy, recovery therefrom, and any temporary 
disability resulting therefrom as any other temporary disability for all 
job-related purposes, including commencement, duration, and extensions 
of leave, payment of disability income, accrual of seniority and any 
other benefit or service, and reinstatement, and under any fringe 
benefit offered to employees by virtue of employment.
    (d) Pregnancy leave. In the case of a recipient that does not 
maintain a leave policy for its employees, or in the case of an employee 
with insufficient leave or accrued employment time to qualify for leave 
under such a policy, a recipient shall treat pregnancy, childbirth, 
false pregnancy, termination of pregnancy, and recovery therefrom as a 
justification for a leave of absence without pay for a reasonable period 
of time, at the conclusion of which the employee shall be reinstated to 
the status that she held when the leave began or to a comparable 
position, without decrease in rate of compensation or loss of 
promotional opportunities, or any other right or privilege of 
employment.



Sec. 23.535  Effect of state or local law or other requirements.

    (a) Prohibitory requirements. The obligation to comply with 
Sec. Sec. 23.500 through 23.550 is not obviated or alleviated by the 
existence of any State or local law or other requirement that imposes 
prohibitions or limits upon employment of members of one sex that are 
not imposed upon members of the other sex.
    (b) Benefits. A recipient that provides any compensation, service, 
or benefit to members of one sex pursuant to a State or local law or 
other requirement shall provide the same compensation,

[[Page 535]]

service, or benefit to members of the other sex.



Sec. 23.540  Advertising.

    A recipient shall not in any advertising related to employment 
indicate preference, limitation, specification, or discrimination based 
on sex unless sex is a bona fide occupational qualification for the 
particular job in question.



Sec. 23.545  Pre-employment inquiries.

    (a) Marital status. A recipient shall not make pre-employment 
inquiry as to the marital status of an applicant for employment, 
including whether such applicant is ``Miss'' or ``Mrs.''
    (b) Sex. A recipient may make pre-employment inquiry as to the sex 
of an applicant for employment, but only if such inquiry is made equally 
of such applicants of both sexes and if the results of such inquiry are 
not used in connection with discrimination prohibited by these Title IX 
regulations.



Sec. 23.550  Sex as a bona fide occupational qualification.

    A recipient may take action otherwise prohibited by Sec. Sec. 23.500 
through 23.550 provided it is shown that sex is a bona fide occupational 
qualification for that action, such that consideration of sex with 
regard to such action is essential to successful operation of the 
employment function concerned. A recipient shall not take action 
pursuant to this section that is based upon alleged comparative 
employment characteristics or stereotyped characterizations of one or 
the other sex, or upon preference based on sex of the recipient, 
employees, students, or other persons, but nothing contained in this 
section shall prevent a recipient from considering an employee's sex in 
relation to employment in a locker room or toilet facility used only by 
members of one sex.



                          Subpart F_Procedures



Sec. 23.600  Notice of covered programs.

    Within 60 days of September 29, 2000, each Federal agency that 
awards Federal financial assistance shall publish in the Federal 
Register a notice of the programs covered by these Title IX regulations. 
Each such Federal agency shall periodically republish the notice of 
covered programs to reflect changes in covered programs. Copies of this 
notice also shall be made available upon request to the Federal agency's 
office that enforces Title IX.



Sec. 23.605  Enforcement procedures.

    The investigative, compliance, and enforcement procedural provisions 
of Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) (``Title 
VI'') are hereby adopted and applied to these Title IX regulations. 
These procedures may be found at 38 CFR 18.6 through 18.11.

[65 FR 52890, Aug. 30, 2000]



PART 25_UNIFORM RELOCATION ASSISTANCE AND REAL PROPERTY ACQUISITION FOR 
FEDERAL AND FEDERALLY ASSISTED PROGRAMS--Table of Contents




    Authority: Sec. 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. 25.1  Uniform relocation

    Regulations and procedures for complying with the 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. 246-255, 42 U.S.C. 4601 note) are set forth 
in 49 CFR part 24.

[52 FR 48022, Dec. 17, 1987]



PART 26_ENVIRONMENTAL EFFECTS OF THE DEPARTMENT OF VETERANS AFFAIRS (VA) 
ACTIONS--Table of Contents




Sec.
26.1 Issuance and purpose.
26.2 Applicability and scope.
26.3 Definitions.
26.4 Policy.
26.5 Responsibilities.
26.6 Environmental documents.
26.7 VA environmental decision making and documents.

[[Page 536]]

26.8 Assistance to applicants.
26.9 Information on and public participation in VA environmental 
          process.

    Authority: 42 U.S.C. 4321-4370a; E.O. 11514, March 5, 1970, as 
amended by E.O. 11991, May 24, 1977.

    Source: 51 FR 37182, Oct. 20, 1986, unless otherwise noted.



Sec. 26.1  Issuance and purpose.

    The purpose of this part is to implement the National Environmental 
Policy Act (NEPA) of 1969 as amended (42 U.S.C. 4321-4370a), in 
accordance with regulations promulgated by the Council of Environmental 
Quality (CEQ Regulations, 40 CFR parts 1500-1508), and Executive Order 
11514, March 5, 1970, as amended by Executive Order 11991, May 24, 1977. 
This part shall provide guidance to officials of the Department of 
Veterans Affairs (VA) on the application of the NEPA process to 
Department activities.

(Authority: 42 U.S.C. 4321-4370a)

[51 FR 37182, Oct. 20, 1986, as amended at 54 FR 34987, Aug. 23, 1989]



Sec. 26.2  Applicability and scope.

    This part applies to VA, its administrations and staff offices.

(Authority: 42 U.S.C. 4321-4370a)

[51 FR 37182, Oct. 20, 1986, as amended at 54 FR 34987, Aug. 23, 1989]



Sec. 26.3  Definitions.

    (a) United States means all States, territories, and possessions of 
the United States and all waters and air space subject to the 
territorial jurisdiction of the United States. The territories and 
possessions of the United States include the Commonwealth of Puerto 
Rico, the Virgin Islands, American Samoa, Guam, and the Trust Territory 
of the Pacific Islands.
    (b) VA elements, for the purposes of this part, means the Veterans 
Health Services and Research Administration (VHS&RA), the Veterans 
Benefits Administration (VBA), the National Cemetery Administration 
(NCS), and the Office of Facilities.
    (c) Other terms used in this part are defined in CEQ Regulations, 40 
CFR part 1508.

(Authority: 42 U.S.C. 4321-4370a)

[51 FR 37182, Oct. 20, 1986, as amended at 54 FR 34987, Aug. 23, 1989]



Sec. 26.4  Policy.

    (a) VA must act with care in carrying out its mission of providing 
services for veterans to ensure it does so consistently with national 
environmental policies. Specifically, VA shall ensure that all practical 
means and measures are used to protect, restore, and enhance the quality 
of the human environment; to avoid or minimize adverse environmental 
consequences, consistently with other national policy considerations; 
and to attain the following objectives:
    (1) Achieve the fullest possible use of the environment, without 
degradation, or undesirable and unintended consequences;
    (2) Preserve historical, cultural, and natural aspects of our 
national heritage, while maintaining, where possible, an environment 
that supports diversity and variety and individual choice;
    (3) Achieve a balance between the use and development of resources, 
within the sustained capacity of the ecological system involved; and,
    (4) Enhance the quality of renewable resources while working toward 
the maximum attainable recycling of nonrenewable resources.
    (b) VA elements shall:
    (1) Interpret and administer the policies, regulations, and public 
laws of the United States in accordance with the policies set forth in 
the NEPA and CEQ Regulations;
    (2) Prepare concise and clear environmental documents which shall be 
supported by documented environmental analyses;
    (3) Integrate the requirements of NEPA with Department planning and 
decision-making procedures;
    (4) Encourage and facilitate involvement by affected agencies, 
organizations, interest groups and the public in decisions which affect 
the quality of the human environment; and,
    (5) Consider alternatives to the proposed actions which are 
encompassed by the range of alternatives discussed

[[Page 537]]

in relevant environmental documents, and described in the environmental 
impact statement.

(Authority: 42 U.S.C. 4321-4370a)

[51 FR 37182, Oct. 20, 1986, as amended at 54 FR 34987, Aug. 23, 1989]



Sec. 26.5  Responsibiities.

    (a) The Director of the Office of Environmental Affairs shall:
    (1) Be responsible to coordinate and provide guidance to VA elements 
on all environmental matters;
    (2) Assist in the preparation of environmental documents by VA 
elements; and, where more than one VA element, or Federal, State, or 
local agency is involved, assign the lead VA element or propose the lead 
Federal, State or local agency to prepare the environmental documents;
    (3) Recommend appropriate actions to the Secretary of Veterans 
Affairs on those environmental matters for which the Secretary of 
Veterans Affairs has final approval authority;
    (4) Assist in resolution of disputes concerning environmental 
matters within VA, and among VA and other Federal, State and local 
agencies;
    (5) Coordinate preparation of VA comments on draft and final 
environmental impact statements of other agencies;
    (6) Serve as the VA's principal liaison to the CEQ, the 
Environmental Protection Agency, the Office of Management and Budget, 
and other Federal, State, and local agencies on VA environmental 
actions; and
    (7) Prepare appropriate supplemental guidance on implementation of 
these regulations.
    (b) VA General Counsel shall provide legal advice and assistance in 
meeting the requirement of NEPA, the CEQ Regulations and these 
regulations.
    (c) The heads of each VA element shall:
    (1) Adopt procedures to ensure that decisions are made in accordance 
with NEPA, the CEQ Regulations and these regulations; and
    (2) Be responsible to prepare environmental documents relating to 
programs and proposed actions by their elements, when required by these 
regulations.

(Authority: 42 U.S.C. 4321-4370a)



Sec. 26.6  Environmental documents.

    (a) Environmental Impact Statements. The head of each VA element 
shall include a detailed written statement ``in every recommendation or 
report on proposals for legislation and other major Federal actions 
significantly affecting the quality of the human environmental.'' NEPA 
102(2), 42 U.S.C. 4332(2) see CEQ Regulations, 40 CFR part 1502. An 
environmental impact statement shall be prepared in accordance with the 
following procedures:
    (1) Typical Classes of Action Which Normally Do Require 
Environmental Impact Statements: (i) Proposed legislation (CEQ 
Regulation, 40 CFR 1508.17);
    (ii) Acquisition of land in excess of 10 acres for development of a 
VA medical center facility;
    (iii) Acquisition of land in excess of 50 acres for development of a 
VA national cemetery; and
    (iv) Promulgation of policies which substantially alter agency 
programs and which have a significant effect on the quality of the human 
environmental.
    (2) Specific Criteria for Typical Classes of Action Which Normally 
Do Require Environmental Impact Statements: (i) Probable significant 
degradation of historic or cultural resources, park lands, prime 
farmlands, designated wetlands or ecologically critical areas;
    (ii) An increase in average daily vehicle traffic volume of at least 
20 percent on access roads to the site or the major roadway network;
    (iii) Probable conflict with Federal, State, or local environmental 
protection laws or requirements;
    (iv) Probable threat or hazard to the public, or the involvement of 
highly uncertain risks to the environment;
    (v) Similarity to previous actions that required an environmental 
impact statement; and
    (vi) Probable conflict with, or significant effect on, local or 
regional zoning or comprehensive land use plans.
    (b) Categorical Exclusions. A categorical exclusion is a ``category 
of actions which do not individually or cumulatively have a significant 
effect on the

[[Page 538]]

human environment and which have been found to have no such effect in 
procedures adopted by a Federal Agency in implementation of these 
regulations . . . and for which, therefore, neither an environmental 
assessment (see subparagraph (c), infra) or an environmental impact 
statement is required.'' CEQ Regulations, 40 CFR 1508.4.
    (1) Typical classes of action which normally do not require either 
an Environmental Impact Statement or an Environmental Assessment:
    (i) Repair, replacement, and new installation of primary or 
secondary electrical distribution systems;
    (ii) Repair, replacement, and new installation of components such as 
windows, doors, roofs; and site elements such as sidewalks, patios, 
fences, retaining walls, curbs, water distribution lines, and sewer 
lines which involve work totally within VA property boundaries;
    (iii) Routine VA grounds and facility maintenance activities;
    (iv) Procurement activities for goods and services for routing 
facility operations maintenance and support;
    (v) Interior construction or renovation;
    (vi) New construction of 75,000 gross square feet or less;
    (vii) Development of 20 acres of land or less within an existing 
cemetery, or development on acquired land of five acres or less;
    (viii) Actions which involve support or ancillary appurtenances for 
normal operation;
    (ix) Leases, licenses, permits, and easements;
    (x) Reduction in force resulting from workload adjustments, reduced 
personnel or funding levels, skill imbalances or other similar causes;
    (xi) VA policies, actions and studies which do not significantly 
affect the quality of the human environment;
    (xii) Preparation of regulations, directives, manuals or other 
guidance that implement, but do not substantially change, the 
regulations, directives, manuals, or other guidance of higher 
organizational levels or another Federal agency; and
    (xiii) Actions, activities, or programs that do not require 
expenditure of Federal funds.
    (2) Specific criteria for typical classes of action which normally 
do not require either an Environmental Impact Statement or an 
Environmental Assessment:
    (i) Minimal or no effect on the environment;
    (ii) No significant change to existing environmental conditions;
    (iii) No significant cumulative environmental impact; and
    (iv) Similarity to Actions previously assessed with a finding of no 
significant impact.
    (3) Extraordinary circumstances that must be considered by a VA 
element before categorically excluding a particular Department action:
    (i) Greater scope or size than normally experienced for a particular 
categorical exclusion;
    (ii) Actions in highly populated or congested areas;
    (iii) Potential for degradation, although slight, or existing poor 
environmental conditions;
    (iv) Use of unproven technology;
    (v) Potential presence of an endangered species, archeological 
remains, or other protected resources; or
    (vi) Potential presence of hazardous or toxic substances.
    (c) Environmental assessments. If the proposed action is not covered 
by paragraph (a) or (b) of this section, the responsible official (head 
of the VA element) will prepare an environmental assessment (CEQ 
Regulations, 40 CFR 1508.9). Based on the environmental assessment, the 
official shall determine whether it is necessary to prepare an 
environmental impact statement, or to prepare a finding of no 
significant impact (CEQ Regulations, 40 CFR 1508.13).
    (1) Typical classes of action which normally do require 
Environmental Assessments, but not necessarily Environmental Impact 
Statements:
    (i) Acquisition of land of 10 acres or less for development of a VA 
medical facility;
    (ii) Acquisition of land from 5 to 50 acres for development of a VA 
national cemetery; and,
    (iii) New construction in excess of 75,000 gross square feet;
    (2) Specific criteria for typical classes of action which normally 
do require an Environmental Assessment:

[[Page 539]]

    (i) Potential minor degradation of environmental quality;
    (ii) Potential cumulative impact on environmental quality;
    (iii) Presence of hazardous or toxic substances;
    (iv) Potential violation of pollution abatement laws;
    (v) Potential impact on protected wildlife or vegetation;
    (vi) Potential effects on designated prime farmlands, wetlands, 
floodplains, or ecologically critical areas;
    (vii) Alteration of stormwater runoff and retention;
    (viii) Potential dislocation of persons or residences;
    (ix) Potential increase of average daily vehicle traffic volume on 
access roads to the site by 10 percent or more but less than 20 percent, 
or which alters established traffic patterns in terms of location and 
direction;
    (x) Potential threat or hazard to the public, or highly uncertain 
risks to the environment;
    (xi) Potential conflicts with Federal, State, or local environmental 
protection laws or requirements;
    (xii) Potential conflict with, or significant impact on, official 
local or regional zoning or comprehensive land use plans; and,
    (xiii) Overloading of public utilities with insufficient capacity to 
provide reliable service and for average and peak periods.

(Authority: 42 U.S.C. 4321-4370a)

[51 FR 37182, Oct. 20, 1986, as amended at 54 FR 34987, Aug. 23, 1989]



Sec. 26.7  VA environmental decision making and documents.

    (a) Relevant environmental documents shall accompany other decision 
documents as they proceed through the decision-making process.
    (b) The major decision points for VA actions, by which time the 
necessary environmental documents must be completed, are as follows:
    (1) Leases. Prior to execution of lease agreement.
    (2) Grants. Prior to notification of grant award.
    (3) Policy. Prior to final approval of a policy which substantially 
alters agency programs and which affects the human environment.
    (4) Legislative proposals. Included in any recommendation or report 
to Congress on a legislative proposal which would affect the 
environment. The document must be available in time for Congressional 
hearings and deliberations.
    (5) Major, minor, minor miscellaneous delegated projects, and non-
recurring maintenance projects. Prior to contract award for working 
drawings or prior to in-house initiation of working drawings. If the 
Secretary of Veterans Affairs or designee makes a finding of compelling 
need, working drawings may commence prior to completion of the 
environmental compliance process. However, this will not preclude 
completion of environmental compliance prior to construction.
    (6) Land acquisition for development. Prior to the Secretary's 
acceptance of custody and accountability (for Federal lands), or 
acceptance of offer to donate or contract for purchase (for private 
lands).
    (c) Where emergency circumstances make it necessary to take an 
action with significant environmental impact without observing the 
provisions of these regulations, VA must act in accordance with CEQ 
Regulations, 40 CFR 1506.11.

(Authority: 42 U.S.C. 4321-4370a)

[51 FR 37182, Oct. 20, 1986, as amended at 54 FR 34987, Aug. 23, 1989]



Sec. 26.8  Assistance to applicants.

    (a) The CEQ Regulations (40 CFR 1501.2(d)) provide for advising of 
private applicants or other non-Federal groups when VA involvement in a 
particular action is reasonably foreseeable. Such foreseeable actions 
involve application to a VA element by private persons, States, and 
local agencies and pertain primarily to permits, leases, requests for 
financial assistance, grants, and related actions involving the use of 
VA real property.
    (b) VA involvement may be reasonably foreseeable when the following 
actions are initiated by non-Federal groups:
    (1) Easements and rights-of-way on VA land;
    (2) Petroleum, grazing, and timber leases;

[[Page 540]]

    (3) Permits, license, and other use agreements or grants of real 
property for use by non-VA groups; and,
    (4) Application for grants-in-aid for acquisition, construction, 
expansion or improvement of state veterans' health care facilities or 
cemeteries.
    (c) Public notices or other means used to inform or solicit 
applicants for permits, leases, or related actions will describe the 
environmental documents, studies or information foreseeably required for 
later action by VA elements and will advise of the assistance available 
to applicants by VA element.
    (d) When VA owned land is leased or otherwise provided to non-VA 
groups, VA element affected will initiate the NEPA process pursuant to 
these regulations.
    (e) When VA grant funds are requested by a State agency, VA element 
affected will initiate the NEPA process and ensure compliance with VA 
environmental program. The environmental documents prepared by the grant 
applicant shall assure full compliance with State and local regulations 
as well as NEPA before the proposed action is approved.

(Authority: 42 U.S.C. 4321-4370a)



Sec. 26.9  Information on and public participation in VA environmental 
process.

    (a) During the preparation of environmental documents, the 
responsible VA element shall include the participation of environmental 
agencies, applicants, State and local governments and the public to the 
extent practicable and in conformance with CEQ Regulations. Information 
or status reports on environmental documents shall be provided to 
interested persons upon request.
    (b) Notice of availability or filing requirements vary, depending on 
the type of environmental documents requested. Specific requirements and 
procedures are defined for each VA element.
    (c) For those actions relating specifically to the Secretary of 
Veterans Affairs, the Office of Environmental Affairs, or a VA element, 
information is available by writing to the Director, Office of 
Environmental Affairs, Department of Veterans Affairs, 810 Vermont 
Avenue NW., Washington, DC 20420.

(Authority: 42 U.S.C. 4321-4370a)



PART 36_LOAN GUARANTY--Table of Contents




 Guaranty of Loans to Veterans To Purchase Manufactured Homes and Lots, 
                       Including Site Preparation

Sec.
36.4201 Applicability of the Sec. 36.4200 series.
36.4202 Definitions.

                           general provisions

36.4203 Eligibility of the veteran for the manufactured home loan 
          benefit under 38 U.S.C. 3712.
36.4204 Loan purposes, maximum loan amounts and terms.
36.4205 Computation of guaranty.
36.4206 Underwriting standards, occupancy, and non-discrimination 
          requirements.
36.4207 Manufactured home standards.
36.4208 Manufactured home location standards.
36.4209 Reporting requirements.
36.4210 Joint loans.
36.4211 Amortization--prepayment.
36.4212 Interest rates and late charges.
36.4213 Capacity of parties.
36.4214 Geographical limits.
36.4215 Maintenance of records.
36.4217 Delivery of notice.
36.4218 Payment in full; termination of guaranty.
36.4219 Incorporation by reference.
36.4220 Substantive and procedural requirements; waiver.
36.4221 Delegation of authority.
36.4222 Hazard insurance.
36.4223 Interest rate reduction refinancing loan.
36.4224 Refinancing existing manufactured home loan including purchase 
          of lot.
36.4225 Authority to close manufactured home loans on the automatic 
          basis.
36.4226 Withdrawal of authority to close manufactured home loans on the 
          automatic basis.
36.4227 Advertising and solicitation requirements.

                    financing manufactured home units

36.4231 Warranty requirements.
36.4232 Allowable fees and charges; manufactured home unit.
36.4234 Title and lien requirements.

               combination and manufactured home lot loans

36.4251 Loans to finance the purchase of manufactured homes and the cost 
          of necessary site preparation.

[[Page 541]]

36.4252 Loans for purchase or refinancing of a manufactured home.
36.4253 Title and lien requirements.
36.4254 Fees and charges.
36.4255 Loans for the acquisition of a lot.

              servicing, liquidation of security and claim

36.4275 Events constituting default and acceptability of partial 
          payments.
36.4276 Advances and other charges.
36.4277 Release of security.
36.4278 Servicing procedures for holders
36.4279 Extensions and reamortizations.
36.4280 Reporting of defaults.
36.4281 Refunding of loans in default.
36.4282 Legal proceedings (notice of repossession).
36.4283 Foreclosure or repossession.
36.4284 Computation of guaranty claims.
36.4285 Subrogation and indemnity.
36.4286 Partial or total loss of guaranty.
36.4287 Substitution of trustees.

               Guaranty or Insurance of Loans to Veterans

36.4300 Applicability of Sec. Sec. 36.4300 to 36.4393, inclusive.
36.4301 Definitions.

                           general provisions

36.4302 Computation of guaranties or insurance credits.
36.4303 Reporting requirements.
36.4304 Deviations; changes of identity.
36.4305 Partial disbursement.
36.4306 Refinancing of mortgage or other lien indebtedness.
36.4306a Interest rate reduction refinancing loan.
36.4307 Joint loans.
36.4308 Transfer of title by borrower or maturity by demand or 
          acceleration.
36.4309 Amortization.
36.4310 Prepayment.
36.4311 Interest rates.
36.4312 Charges and fees.
36.4313 Advances and other charges.
36.4314 Extensions and reamortizations.
36.4315 Notice of default and acceptability of partial payments.
36.4316 Continued default.
36.4317 Notice of intention to foreclose.
36.4318 Refunding of loans in default.
36.4319 Legal proceedings.
36.4320 Sale of security.
36.4321 Computation of guaranty claims; subsequent accounting.
36.4322 Computation of indebtedness.
36.4323 Subrogation and indemnity.
36.4324 Release of security.
36.4325 Partial or total loss of guaranty or insurance.
36.4326 Hazard insurance.
36.4327 Substitution of trustees.
36.4328 Capacity of parties to contract.
36.4329 Geographical limits.
36.4330 Maintenance of records.
36.4332 Delivery of notice.
36.4333 Satisfaction of indebtedness.
36.4334 Incorporation by reference.
36.4335 Supplementary administrative action.
36.4336 Eligibility of loans; reasonable value requirements.

underwriting standards, processing procedures, and lender responsibility 
                            and certification

36.4337 Underwriting standards, processing procedures, lender 
          responsibility, and lender certification.
36.4338 Death or insolvency of holder.
36.4339 Qualification for designated fee appraisers.
36.4340 Restriction on designated fee appraisers.
36.4342 Delegation of authority.
36.4343 Cooperative loans.
36.4344 Lender Appraisal Processing Program.
36.4345 Waivers, consents, and approvals; when effective.
36.4346 Servicing procedures for holders.
36.4347 Minimum property and construction requirements.
36.4348 Authority to close loans on the automatic basis.
36.4349 Withdrawal of authority to close loans on the automatic basis.
36.4350 Estate of veteran in real property.
36.4351 Loans, first, second, or unsecured.
36.4352 Tax, special assessment and other liens.
36.4353 Combination residential and business property.
36.4354 [Reserved]
36.4355 Supplemental loans.
36.4356 Condominium loans--general.
36.4357 Acceptable ownership arrangements and documentation.
36.4358 Rights and restrictions.
36.4359 Miscellaneous legal requirements.
36.4360 Documentation and related requirements--flexible condominiums 
          and condominiums with offsite facilities.
36.4360a Appraisal requirements.
36.4362 Requirement of construction warranty.
36.4363 Nondiscrimination and equal opportunity in housing certification 
          requirements.
36.4364 Correction of structural defects.
36.4365 Advertising and solicitation requirements.

                       loans under 38 U.S.C. 3703

36.4370 Insured loan and insurance account.
36.4372 Transfer of insured loans.
36.4373 Debits and credits to insurance account under Sec. 36.4318.
36.4374 Payment of insurance.

[[Page 542]]

36.4375 Reports of insured institutions.

    Federally Assisted Construction Contracts--Nondiscrimination in 
              Employment--Executive Orders 11246 and 11375

36.4390 Purpose.
36.4391 Applicability.
36.4392 Certification requirements.
36.4393 Complaint and hearing procedure.

 Assistance to Certain Disabled Veterans in Acquiring Specially Adapted 
                                 Housing

36.4400 Applicability.
36.4401 Definitions.
36.4402 Eligibility.
36.4403 Joint ownership of housing unit.
36.4404 Computation of cost.
36.4405 Submission of proof to the Secretary.
36.4406 Disbursement of benefit authorized.
36.4407 Supplementary administrative action.
36.4408 Delegation of authority.
36.4409 Guaranteed or insured loans under 38 U.S.C. Chapter 37.
36.4410 Allocation of the funds of the grant.
36.4411 Geographical limits.

                              Direct Loans

36.4500 Applicability.
36.4501 Definitions.
36.4502 Use of guaranty entitlement.
36.4503 Amount and amortization.
36.4504 Loan closing expenses.
36.4505 Maturity of loan.
36.4506 Recasting.
36.4507 Refinancing of mortgage or other lien indebtedness.
36.4508 Transfer of property by borrower.
36.4509 Joint loans.
36.4510 Prepayment, acceleration, and liquidation.
36.4511 Advances after loan closing.
36.4512 Taxes and insurance.
36.4513 Foreclosure and liquidation.
36.4514 Eligibility requirements.
36.4515 Estate of veteran in real property.
36.4516 Lien requirements.
36.4517 Incorporation by reference.
36.4518 Supplementary administrative action.
36.4519 Eligible purposes and reasonable value requirements.
36.4520 Delegation of authority.
36.4521 Minimum property and construction requirements.
36.4522 Waivers, consents, and approvals.
36.4523 Geographical limits.
36.4524 Sale of loans.
36.4525 Requirement of a construction warranty.
36.4526 Issuance of fund reservation commitments.
36.4527 Direct housing loans to Native American veterans on trust lands.

                   Sale of Loans, Guarantee of Payment

36.4600 Sale of loans, guarantee of payment.
36.4700 Authority, purpose, and scope.
36.4701 Definitions.
36.4702 Requirement to purchase flood insurance where available.
36.4703 Exemptions.
36.4704 Escrow requirement.
36.4705 Required use of standard flood hazard determination form.
36.4706 Forced placement of flood insurance.
36.4707 Determination fees.
36.4708 Notice of special flood hazards and availability of Federal 
          disaster relief assistance.
36.4709 Notice of servicer's identity.

Appendix A to Part 36--Sample Form of Notice of Special Flood Hazards 
          and Availability of Federal Disaster Relief Assistance

    Authority: 38 U.S.C. 501, 3701-3704, 3707, 3710-3714, 3719, 3720, 
3729, 3762, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 36 appear at 61 FR 
7217, Feb. 27, 1996.

 Guaranty of Loans to Veterans To Purchase Manufactured Homes and Lots, 
                       Including Site Preparation

    Authority: Sections 36.4201 through 36.4287 issued under 38 U.S.C. 
501, 3701-3704, 3707, 3710-3714, 3719, 3720, 3729.

    Source: Sections 36.4201 through 36.4287 appear at 36 FR 1253, Jan. 
27, 1971, unless otherwise noted.

    Note: Those requirements, conditions, or limitations which are 
expressly set forth in 38 U.S.C. 3712 and are not restated herein must 
be taken into consideration in conjunction with the Sec. 36.4200 
series.



Sec. 36.4201  Applicability of the Sec.  36.4200 series.

    The Sec. 36.4200 series shall be applicable to each loan entitled 
to guaranty under 38 U.S.C. 3712 on or after the date of publication 
thereof in the Federal Register.



Sec. 36.4202  Definitions.

    Wherever used in 38 U.S.C. 3712 or the Sec. 36.4200 series, unless 
the context otherwise requires, the terms defined in this section shall 
have the meaning herein stated.
    Automatic lender. A lender that may process a loan or assumption 
without submitting the credit package to the Department of Veterans 
Affairs for underwriting review. Pursuant to 38

[[Page 543]]

U.S.C. 3702(d) there are two categories of lenders who may process loans 
automatically: (1) Entities such as banks, savings and loan 
associations, and mortgage and loan companies that are subject to 
examinations by an agency of the United States or any State and (2) 
lenders approved by the Department of Veterans Affairs pursuant to 
standards established by the Department of Veterans Affairs.


(Authority: 38 U.S.C. 3702(d))

    Credit package. Any information, report of verifications used by a 
lender, holder or authorized servicing agent to determine the 
creditworthiness of an applicant for a Department of Veterans Affairs 
guaranteed loan or the assumer of such a loan.


(Authority: 38 U.S.C. 3710 and 3714)

    Date of first uncured default. The due date of the earliest payment 
not fully satisfied by the proper application or available credits or 
deposits.
    Default. Failure of a borrower to comply with the terms of a loan 
agreement.
    Guaranty. The obligation of the United States, assumed by virtue of 
38 U.S.C. 3712, to repay a specified percentage of a loan upon default 
of the primary debtor, which guaranty payment shall be made after 
liquidation of the security for the loan and an accounting with the 
Secretary.
    Holder. The lender or any subsequent assignee or transferee of the 
guaranteed obligation or the authorized servicing agent of the lender or 
of the assignee or transferee if the obligation has been assigned or 
transferred.
    Indebtedness. The unpaid principal and interest plus any other 
amounts allowable under the terms of a loan including those authorized 
by statute and consistent with the Sec. 36.4200 series, which have been 
paid and debited to the loan account. Unpaid late charges may not be 
included in the indebtedness.
    Lender. The payee or assignee or transferee of an obligation at the 
time it is guaranteed. This term also includes any sole proprietorship, 
partnership, or corporation and the owners, officers, and employees of a 
sole proprietorship, partnership, or corporation engaged in the 
origination, procurement, transfer, servicing, or funding of a loan 
which is guaranteed by VA.


(Authority: 38 U.S.C. 3704(d), 3712(g))

    Lien. Any interest in, or power over, real or personal property, 
reserved by the vendor, or created by the parties or by operation of 
law, chiefly or solely for the purpose of assuring the payment of the 
purchase price, or a debt, and irrespective of the identity of the party 
in whom title to the property is vested, including but not limited to 
mortgages, deeds with a defeasance therein or collaterally, deeds of 
trust, security deeds, security instruments, mechanics' liens, lease-
purchase contracts, conditional sales contracts, consignments.
    Loan. Unpaid principal balance plus unpaid earned interest due under 
the terms of the obligation.
    Lot. A parcel of land acceptable to the Secretary as a manufactured 
home site.
    Manufactured home. A movable dwelling unit designed and constructed 
for year-round occupancy on land by a single family, which dwelling unit 
contains permanent eating, cooking, sleeping, and sanitary facilities. A 
double-wide manufactured home is a movable dwelling designed for 
occupancy by one family consisting of (1) two or more units intended to 
be joined together horizontally when located on a site, but capable of 
independent movement or (2) a unit having a section or sections which 
unfold along the entire length of the unit.
    Manufacturer's invoice. A document, issued by a manufacturer and 
provided with a manufactured home to a retail dealer, acceptable in form 
and content to the Secretary which indicates the wholesale (base) price 
at the factory of the manufactured home model or series including any 
furnishings, equipment and accessories installed by the manufacturer, 
net of all rebates to the dealer. The following certification or a 
reasonable facsimile thereof, signed by an authorized representative of 
the manufacturer, must appear on the invoice:
    ``The undersigned certifies that the manufacturer's invoice price 
shown on this invoice reflects the dealer's cost at point of 
manufacture, exclusive of any

[[Page 544]]

and all freight or transportation charges, net of any and all discounts, 
bonuses, refunds, rebates (including volume rebates), prizes or anything 
of value which will inure to the benefit of the dealer at the time of 
purchase or at any future date.''
    Necessary site preparation. Those improvements essential to render a 
manufactured home site acceptable to the Secretary including, but not 
limited to, the installation of utility connections, sanitary facilities 
and paving, and the construction of a suitable pad.
    New manufactured home. A manufactured home which, at the time of 
purchase by the veteran-borrower, has not been previously occupied and 
was manufactured less than 1 year prior to the date of application to 
the Department of Veterans Affairs for loan guaranty.


(Authority: Sec. 406, Pub. L. 97-306)

    Reasonable value means that figure which represents the amount a 
reputable and qualified appraiser, unaffected by personal interest, 
bias, or prejudice, would recommend to a prospective purchaser as a 
proper price or cost in the light of prevailing conditions.
    Repossession--repossessed means recovery or acquisition of such 
physical control of property (pursuant to the provisions of the security 
instrument or as otherwise provided by law) as to make further legal or 
other action unnecessary in order to obtain actual possession of the 
property or to dispose of the same by sale or otherwise.
    Resale means sale of the property by the holder to a third party for 
the purpose of liquidating the security for the loan after having 
acquired the property by repossession, public or private sale, or by any 
other means.
    Secretary. The Secretary of Veterans Affairs, or any employee of the 
Department of Veterans Affairs authorized to act in the Secretary's 
stead.
    Servicing agent. An agent designated by the loan holder as the 
entity to collect installments on the loan and/or perform other 
functions as necessary to protect the interests of the holder.


(Authority: 38 U.S.C. 3714)


Used manufactured home. A manufactured home which has been previously 
occupied or which was manufactured more than 1 year prior to date of 
loan application.
    Wholesale (base) price list. The price list(s) as periodically 
amended, published and distributed by a home manufacturer to all retail 
dealers in a given marketing area, quoting the actual wholesale (base) 
price at the factory for specific models or series of manufactured 
homes, itemized options, itemized furniture, and specialty items offered 
for sale to such dealers during a specified period of time. All such 
wholesale (base) prices shall exclude any costs of trade association 
fees or charges, discounts, refunds, rebates, prizes, loan discount 
points or other financing charges, or anything else of more than a 
nominal value of $10 which will inure to the benefit of a dealer and/or 
home purchaser at any date, as required to be disclosed in the 
manufacturer's invoice. Each price list and amendment shall be retained 
by the manufacturer for a minimum period of six years from the date of 
publication to be available to VA and other Federal agencies upon 
request.

[36 FR 1253, Jan. 27, 1971, as amended at 40 FR 13212, Mar. 25, 1975; 43 
FR 37197, Aug. 22, 1978; 44 FR 22723, Apr. 17, 1979; 48 FR 40227, Sept. 
6, 1983; 50 FR 13193, Apr. 3, 1985; 54 FR 34988, Aug. 23, 1989; 55 FR 
37471, Sept. 12, 1990; 58 FR 29114, May 19, 1993; 58 FR 37858, July 14, 
1993]

                           general provisions



Sec. 36.4203  Eligibility of the veteran for the manufactured home loan 
benefit under 38 U.S.C. 3712.

    (a) To be eligible for the manufactured home loan benefit a veteran 
must have loan guaranty entitlement for manufactured home purposes 
available for use. Notwithstanding the provisions of Sec. 36.4205(e), 
the Secretary may exclude the amount of guaranty entitlement used for 
any guaranteed manufactured home loan provided:
    (1) The property which served as security for the loan has been 
disposed of by the veteran, or has been destroyed by fire or other 
natural hazard; and
    (2)(i) The loan has been repaid in full or the Secretary has been 
released from liability as to the loan, or if the

[[Page 545]]

Secretary has suffered a loss on said loan, such loss has been paid in 
full; or
    (ii) A veteran-transferee has agreed to assume the outstanding 
balance on the loan and consented to the use of his or her entitlement 
to the extent the entitlement of the veteran-transferor had been used 
originally, and the veteran-transferee otherwise meets the requirements 
of 38 U.S.C. chapter 37.
    (3) In a case in which the veteran still owns a property purchased 
with a VA-guaranteed loan, the Secretary may, one time only, restore 
entitlement if:
    (i) The loan has been repaid in full, or, if the Secretary has 
suffered a loss on the loan, the loss has been paid in full; or
    (ii) The Secretary has been released from liability as to the loan 
and, if the Secretary has suffered a loss on the loan, the loss has been 
paid in full.
    (4) The Secretary may, in any case involving circumstances deemed 
appropriate, waive either or both of the requirements set forth in 
paragraphs (a)(1) and (a)(2)(i) of this section.


(Authority: 38 U.S.C. 3702, 3712)


The Secretary may, in any case involving circumstances deemed 
appropriate, waive either or both of the requirements set forth in 
paragraph (a)(1) or (2) of this section.
    (b) A veteran may use his or her remaining home loan guaranty 
entitlement for any purpose authorized by 38 U.S.C. 3710, 3711, or 3712 
except that a veteran who has purchased a manufactured home unit may not 
purchase a second manufactured home unit until the unit which secured 
the first loan has been disposed of by the veteran or has been destroyed 
by fire or other natural hazard.
    (c) The available entitlement of a veteran will be determined by the 
Secretary as of the date of receipt of an application for guaranty of a 
manufactured home loan or loan report. Such date of receipt shall be the 
date the application or loan report is date stamped into the Department 
of Veterans Affairs. Eligibility derived from the most recent period of 
service (1) shall cancel any unused entitlement derived from any earlier 
period of service, and (2) shall be reduced by the amount by which 
entitlement from service during any earlier period has been used to 
obtain a direct, guaranteed, or insured loan:
    (i) On property which the veteran owns at the time of application; 
or
    (ii) As to which the Secretary has incurred actual liability or 
loss, unless in the event of loss or the incurrence and payment of such 
liability by the Secretary the resulting indebtedness of the veteran to 
the United States has been paid in full.

Provided, That if the Secretary issues or has issued a certificate of 
commitment covering the loan described in the application for guaranty 
or in the loan report, the amount and percentage of guaranty 
contemplated by the certificate of commitment shall not be subject to 
reduction if the loan has been or is closed on a date which is not later 
than the expiration date of the certificate of commitment, 
notwithstanding that the Secretary in the meantime and prior to the 
issuance of the evidence of guaranty shall have incurred actual 
liability or loss on a direct, guaranteed, or insured loan previously 
obtained by the borrower. For the purposes of this paragraph, the 
Secretary will be deemed to have incurred actual loss on a guaranteed or 
insured loan if the Secretary has paid a guaranty or insurance claim 
thereon and the veteran's resultant indebtedness to the Government has 
not been paid in full, and to have incurred actual liability on a 
guaranteed or insured loan if the Secretary is in receipt of a claim on 
the guaranty or insurance or is in receipt of a notice of default. In 
the case of a direct loan, the Secretary will be deemed to have incurred 
an actual loss if the loan is in default.


(Authority: 38 U.S.C. 3712(b)(1) and (2) and (c)(4))

[44 FR 22723, Apr. 17, 1979, as amended at 48 FR 40227, Sept. 6, 1983; 
49 FR 28243, July 11, 1984; 60 FR 38257, July 26, 1995]



Sec. 36.4204  Loan purposes, maximum loan amounts and terms.

    (a) A manufactured home loan may be guaranteed if the loan is for 
one of the following purposes;

[[Page 546]]

    (1) To purchase a lot on which to place a manufactured home already 
owned by the veteran;
    (2) To purchase a single-wide manufactured home;
    (3) To purchase a single-wide manufactured home and a lot on which 
to place such home;
    (4) To purchase a double-wide manufactured home;
    (5) To purchase a double-wide manufactured home and lot on which to 
place such home;
    (6) To refinance an existing loan, including a previously refinanced 
purchase money loan, that was made for the purchase of and is secured by 
a manufactured home and to purchase a lot on which the manufactured home 
is or will be placed; or
    (7) To refinance in accordance with Sec. 36.4223 an existing 
manufactured home loan guaranteed, insured or made under paragraphs 
(a)(1) through (6) of this section provided the amount of the loan to 
refinance does not exceed an amount equal to 95 percent of the 
reasonable value of the manufactured home securing the loan, as 
determined by the Secretary.


(Authority: 38 U.S.C. 3712(a)(1))

    (b) In the case of a loan to purchase a new manufactured home unit 
only, the loan amount shall not exceed the lesser of an amount equal to 
95 percent of the purchase price of the property securing the loan or 
the amount computed in paragraph (c), of this section, provided the 
total loan amount does not exceed 145 percent of the manufacturer's 
invoice.
    (c) For all manufactured home loans, the maximum loan amount is as 
follows:
    (1) In the case of a loan to purchase a new manufactured home unit 
only, the loan amount is to be computed as the sum of:
    (i) One hundred twenty-five (125) percent of the figure produced by 
this computation:
    Subtract from the manufacturer's invoice cost the manufacturer's 
invoice cost of any components (furnishings, accessories, equipment) 
removed from the unit by the dealer. To the remainder add the dealer's 
cost for any components added by such dealer. The sum so obtained shall 
be the figure to be multiplied by the specified percentage; and
    (ii) One hundred (100) percent of the actual amount of fees and 
charges permitted in Sec. 36.4232.
    (2) A loan to purchase a lot upon which a manufactured home owned by 
the veteran will be placed is limited to the reasonable value of a 
developed lot or the reasonable value plus such amount determined by the 
Secretary to be appropriate to cover the cost of necessary site 
preparation for an undeveloped lot.
    (3) The maximum loan amount for a used manufactured home may not 
exceed the reasonable value as established by the Secretary, plus:
    (i) Actual fees or charges for required recordation of documents;
    (ii) The amount of any documentary stamp taxes levied on the 
transactions;
    (iii) The amount of State and local taxes levied on the 
transactions; and
    (iv) The premium for customary physical damage insurance and 
vendor's single interest coverage on the manufactured home for an 
initial policy term not to exceed one year.
    (4) In the case of an interest rate reduction refinancing loan (38 
U.S.C. 3712(a)(1)(F)) the maximum loan may not exceed the sum of:
    (i) The balance of the VA loan being refinanced;
    (ii) Closing costs as authorized by Sec. 36.4232 or Sec.  36.4254, 
as appropriate; and
    (iii) Allowable discounts, provided that:
    (A) The loan application is submitted to the Secretary for prior 
approval;
    (B) The amount of discount is disclosed to the Secretary and the 
veteran prior to the issuance of the certificate of commitment by the 
Secretary. This certificate of commitment shall specify the discount to 
be paid by the veteran, and this discount may not be increased once the 
commitment has been issued without the approval of the Secretary;
    (C) The discount has been determined by the Secretary to be 
reasonable in amount; and
    (5) For a loan to refinance a purchase money lien on a manufactured 
home and to purchase a lot (38 U.S.C. 3712(a)(1)(G)) on which the 
manufactured home is or will be placed:

[[Page 547]]

    (i) The loan must be secured by the same manufactured home which 
must be owned and occupied by the veteran as the veteran's home; and
    (ii) The amount of the loan may not exceed an amount equal to the 
sum of:
    (A) The purchase price of the lot, not to exceed the reasonable 
value thereof, as authorized by Sec. 36.4252;
    (B) The amount determined by the Secretary to be appropriate to 
cover the cost of necessary preparation of the lot;
    (C) The balance of the loan being refinanced; and
    (D) Closing costs, as authorized by Sec. 36.4232 or Sec.  36.4254, 
as appropriate, and a reasonable discount with respect to that portion 
of the loan used to refinance the existing purchase money lien.
    (iii) Allowable discounts may be charged to the veteran on the 
portion of the loan used to refinance the existing purchase money lien 
provided:
    (A) The loan application is submitted to the Secretary for prior 
approval;
    (B) The amount of discount to be paid on the unit portion of the 
loan is disclosed to the Secretary and the veteran prior to the issuance 
of the certificate of commitment by the Secretary. The certificate of 
commitment shall specify the discount to be paid by the veteran on the 
unit portion of the loan, and this discount may not be increased once 
the commitment has been issued without the approval of the Secretary; 
and
    (C) The discount on the unit portion of the loan has been determined 
by the Secretary to be reasonable in amount.
    (6) All powers of the Secretary under paragraphs (c) (4) and (5) of 
this section, except the authority to revise the discount after the 
commitment is issued, are hereby delegated to those officials designated 
by Sec. 36.4221(b). The power of the Secretary to approve an increase 
in the discount on the unit portion of the loan after the commitment is 
issued is delegated to those officials designated by Sec. 36.4220(a).
    (d) The loan amount in an individual case shall not exceed the 
following:
    (1) In the case of a loan to purchase a new manufactured home unit 
only, the loan amount shall not exceed the sum of the following:
    (i) 120 percent of the figure produced by the following computation:

Subtract from the manufacturer's invoice cost the manufactuer's invoice 
cost of any components (furnishings, accessories, equipment) removed 
from the unit by the dealer. To the remainder add the dealer's cost for 
any components added by such dealer. The sum so obtained shall be the 
figure to be multiplied by the specified percentage.
    (ii) 100 percent of the actual amount of fees and charge permitted 
in Sec. 36.4232.
    (2) In the case of a loan to purchase a new manufactured home unit 
plus the cost of necessary site preparation where the veteran owns the 
lot, the loan amount shall be limited to the amount determined in 
paragraph (d)(1) of this section plus such costs of necessary site 
preparation as are approved by the Secretary.
    (3) In the case of a loan to purchase a new manufactured home unit 
plus the purchase of an undeveloped lot on which to place such home plus 
the cost of necessary site preparation, the loan amount shall be limited 
to the amount determined in paragraph (d)(1) of this section plus the 
reasonable value of the undeveloped lot as determined by the Secretary 
plus such costs of necessary site preparation as are approved by the 
Secretary.
    (4) In the case of a loan to purchase a new manufactured home unit 
plus the cost of a suitably developed lot on which to place such home, 
the loan amount shall be limited to the amount determined in paragraph 
(d)(1) of this section plus the reasonable value of the developed lot as 
determined by the Secretary.
    (5) In the case of a loan to purchase a lot upon which will be 
placed a manufactured home owned by the veteran the loan is limited to 
the reasonable value of a developed lot or the reasonable value plus 
such amount as is determined by the Secretary to be appropriate to cover 
the cost of necessary site preparation for an undeveloped lot.
    (6) In the case of a used manufactured home the maximum loan may not 
exceed the reasonable value as established by the Secretary, plus;
    (i) Actual fees or charges for required recordation of documents;

[[Page 548]]

    (ii) The amount of any documentary stamp taxes levied on the 
transaction;
    (iii) The amount of State and local taxes levied on the transaction; 
and
    (iv) The premium for customary physical damage insurance and 
vendor's single interest coverage on the manufactured home for an 
initial policy term of not to exceed 5 years.
    (7) In the case of an interest rate reduction refinancing loan (38 
U.S.C. 3712(a)(1)(F)) the maximum loan may not exceed:
    (i) The balance of the Department of Veterans Affairs loan being 
refinanced;
    (ii) Closing costs as authorized by Sec. 36.4232 or Sec.  36.4254, 
as appropriate; and
    (iii) Allowable discounts provided:
    (A) The loan application is submitted to the Secretary for prior 
approval;
    (B) The amount of discount is disclosed to the Secretary and the 
veteran prior to the issuance of the certificate of commitment by the 
Secretary. Said certificate of commitment shall specify the discount to 
be paid by the veteran, and this discount may not be increased once the 
commitment has been issued without the approval of the Secretary;
    (C) The discount has been determined by the Secretary to be 
reasonable in amount; and
    (D) All powers of the Secretary under this paragraph (d)(7) of this 
section, except the authority to revise the discount after the 
commitment is issued, are hereby delegated to those officials designated 
by Sec. 36.4221(b). The power of the Secretary to approve an increase 
in the discount after the commitment is issued is delegated to those 
officials designated by Sec. 36.4220(a).


(Authority: 38 U.S.C. 3712 (a)(4) and (g))

    (8) In the case of a loan to refinance a purchase money lien on a 
manufactured home and to buy a lot (38 U.S.C. 3712(a)(1)(G)) on which 
the manufactured home is or will be placed:
    (i) The loan must be secured by the same manufactured home which 
must be owned and occupied by the veteran as the veteran's home; and
    (ii) The amount of the loan may not exceed an amount equal to the 
sum of:
    (A) The purchase price, not to exceed the reasonable value of the 
lot, as authorized by Sec. 36.4252,
    (B) The amount determined by the Secretary to be appropriate to 
cover the cost of necessary preparation of the lot,
    (C) The balance of the loan being refinanced, and
    (D) Closing costs, as authorized by Sec. 36.4232 or Sec.  36.4254, 
as appropriate, and a reasonable discount with respect to that portion 
of the loan used to refinance the existing purchase money lien.
    (iii) Allowable discounts may be charged to the veteran on the 
portion of the loan used to refinance the existing purchase money lien 
provided:
    (A) The loan application is submitted to the Secretary for prior 
approval;
    (B) The amount of discount to be paid on the unit portion of the 
loan is disclosed to the Secretary and the veteran prior to the issuance 
of the certificate of commitment by the Secretary. The certificate of 
commitment shall specify the discount to be paid by the veteran on the 
unit portion of the loan, and this discount may not be increased once 
the commitment has been issued without the approval of the Secretary;
    (C) The discount on the unit portion of the loan has been determined 
by the Secretary to be reasonable in amount; and
    (D) All powers of the Secretary under paragraph (d)(8) of this 
section, except the authority to revise the discount after the 
commitment is issued, are hereby delegated to those officials designated 
by Sec. 36.4221(b). The power of the Secretary to approve an increase 
in the discount on the unit portion of the loan after the commitment is 
issued is delegated to those officials designated by Sec. 36.4220(a).


(Authority: 38 U.S.C. 3712 (a)(1)(G), (a)(5) and (g))

    Editorial Note: At 58 FR 37858, July 14, 1993, the following 
paragraph (d) was redesignated from paragraph (b), effective August 13, 
1993. However, paragraph (d) already exists, and the redesignation 
resulted in two paragraph (d)s.
    (d) A loan for any of the purposes described in paragraphs (a)(1) 
through (6) of this section may include an amount determined by the 
Secretary to be appropriate to cover the cost of necessary preparation 
of a lot already owned or

[[Page 549]]

to be acquired by the veteran, including the costs of installing utility 
connections and sanitary facilities, of paving, and of constructing a 
suitable pad for the manufactured home.

    (e) The maximum permissible loan terms shall not exceed;
    (1) 20 years and 32 days in the case of a loan to purchase a single-
wide manufactured home or a single-wide manufactured home and lot;
    (2) 15 years and 32 days in the case of a loan to purchase a lot on 
which to place a manufactured home already owned by the veteran;
    (3) 23 years and 32 days in the case of a loan to purchase a double-
wide manufactured home, or 25 years and 32 days in the case of a loan to 
purchase a double-wide manufactured home and lot; or
    (4) In the case of a used manufactured home the maximum term set 
forth in paragraph (c)(1) or (3) of this section or the remaining 
physical life expectancy of the unit as established by the Secretary, 
whichever is less.


(Authority: 38 U.S.C. 3712(a)(1) and (2), (d)(1), (e)(4)(B))

    (f) An itemized list of all items included in the manufactured home 
loan as enumerated in Sec. 36.4232 shall be provided to both the 
purchaser and the Secretary. At the time of loan origination an 
independent fee inspection shall be conducted to assure that all items 
included in the loan amount are accounted for and in place. A similar 
inspection will be conducted in the event of repossession immediately 
prior to repossession. The costs of the fee inspections may be included 
in the loan amount or the claim amount and charged to the borrower 
pursuant to the provisions of Sec. 36.4232 (a) and (b).

(The information collection requirements contained in Sec. 36.4204(f) 
were approved by the Office of Management and Budget under OMB control 
number 2900-0516)

    (g) The cost of the transaction which cannot be paid from the 
proceeds of the loan must be paid by the veteran in cash from the 
veteran's own resources. Except for interest rate reduction refinancing 
loans pursuant to paragraph (a)(7) of this section or loans to refinance 
a manufactured home and to buy a lot pursuant to paragraph (a)(8) of 
this section, closing costs and prepaid items incident to the real 
estate portion of any manufactured home loan must be paid in cash and 
may not be included in the loan amount.


(Authority: 38 U.S.C. 3712 (a)(4), (a)(5), (g))

[48 FR 40227, Sept. 6, 1983, as amended at 54 FR 34988, Aug. 23, 1989; 
58 FR 37858, July 14, 1993]



Sec. 36.4205  Computation of guaranty.

    (a) The amount of guaranty in respect to a loan guaranteed under 38 
U.S.C. 3712 shall be forty (40) percent of the original principal amount 
of the loan or $20,000, whichever is less. With respect to a loan 
guaranteed under 38 U.S.C. 3712(a)(1)(F), the dollar amount of guaranty 
may not exceed the original dollar amount of guaranty on the loan being 
refinanced. With respect to a loan guaranteed under 38 U.S.C. 
3712(a)(1)(G), the dollar amount of guaranty previously used to obtain a 
manufactured unit loan may be transferred pursuant to Sec. 36.4224(b) 
for use in refinancing the unit when simultaneously acquiring a lot.
    (b) Subject to the provisions of paragraph (c) of Sec. 36.4203, the 
following formulas will determine the amount of guaranty entitlement 
which remains available to an eligible veteran after prior use of 
entitlement:
    (1) If a veteran previously secured a nonrealty (business) loan, the 
amount of nonrealty entitlement used is doubled and subtracted from 
$36,000. The sum remaining is the amount of available entitlement for 
use not to exceed $20,000 for manufactured home purposes.
    (2) If a veteran previously secured a realty (home) loan, the amount 
of realty (home) loan entitlement used is subtracted from $36,000. The 
sum remaining is the amount of available entitlement for use not to 
exceed $20,000 for manufactured home purposes.
    (3) If a veteran previously secured a manufactured home loan, the 
amount of entitlement used for manufactured home purposes is subtracted 
from $36,000. The sum remaining is the amount of available entitlement 
for

[[Page 550]]

use for home loan purposes only. To determine the amount of additional 
entitlement available for manufactured home purposes, the amount of 
entitlement previously used for manufactured home purposes is subtracted 
from $20,000. Except for manufactured home loans to be obtained pursuant 
to 38 U.S.C. 3712(a)(1)(F) or (G), the sum remaining is the amount of 
available entitlement for use for manufactured home purposes.
    (c) For the purpose of computing the remaining guaranty benefit to 
which a veteran is entitled, manufactured home and manufactured home lot 
loans guaranteed prior to October 1, 1978, shall be taken into 
consideration as if made subsequent thereto, and the veteran's 
entitlement will be reduced by the amount of the Secretary's guaranty 
issued in the particular loan transaction.
    (d) A guaranty is reduced or increased pro rata with any deduction 
or increase in the amount of the guaranteed indebtedness, but in no 
event will the amount payable on a guaranty exceed the amount of the 
original guaranty or the percentage of the indebtedness corresponding to 
that of the original guaranty.
    (e) The amount of any guaranty for a manufactured home or 
manufactured home lot loan shall be charged against the original or 
remainder of the borrower's guaranty benefit available for manufactured 
home purposes. Complete or partial liquidation, by payment or otherwise, 
of the veteran's guaranteed indebtedness does not increase the remainder 
of the guaranty benefit, if any, otherwise available to the veteran. 
When the maximum guaranty available legally to a veteran for 
manufactured home purposes shall have been granted, no further guaranty 
for manufactured home purposes shall be available to the veteran.
    (f)(1) The amount of guaranty entitlement, available and unused, of 
an eligible unremarried surviving spouse (whose eligibility does not 
result from his or her own service) is determinable in the same manner 
as in the case of any veteran, and any entitlement which the decedent 
(who was his or her spouse) used shall be disregarded. A certificate as 
to the eligibility of such surviving spouse, issued by the Secretary, 
shall be a condition precedent to the guaranty or insurance of any loan 
made to a surviving spouse in such capacity.


(Authority: 38 U.S.C. 3701(a)(2), 3712(c)(4))

    (2) For the purpose of obtaining an interest rate reduction 
refinancing loan purusant to 38 U.S.C. 3712(a)(1)(F), an unmarried 
surviving spouse who was a co-obligor under an existing Department of 
Veterans Affairs guaranteed loan shall be considered to be eligible for 
the 38 U.S.C. 3712(a)(1)(F) benefit.


(Authority: 38 U.S.C. 3712(a)(4)(C))

    (g) Any evidence of guaranty issued by the Secretary in respect to 
such loan shall be conclusive evidence of the eligibility of the loan 
for guaranty and of the amount of such guaranty, Provided, however, That 
the Secretary may establish against the original lender, defenses based 
on fraud or material misrepresentation and that the Secretary may by 
regulations in force at the date of such issuance establish partial 
defenses to the amount payable on the guaranty.

[44 FR 22724, Apr. 17, 1979, as amended at 46 FR 43669, Aug. 31, 1981; 
48 FR 40228, Sept. 6, 1983; 58 FR 37859, July 14, 1993]



Sec. 36.4206  Underwriting standards, occupancy, and non-discrimination 
requirements.

    (a) Except for refinancing loans pursuant to 38 U.S.C. 
3712(a)(1)(F), no loan shall be guaranteed unless the terms of repayment 
bear a proper relationship to the veteran's present and anticipated 
income and expenses, and the veteran is a satisfactory credit risk, as 
determined by use of the standards in Sec. 36.4337 of this part.


(Authority: 38 U.S.C. 3712)

    (b) Use of the standards in Sec. 36.4337 of this part for 
underwriting manufactured home loans will be waived only in 
extraordinary circumstances.


(Authority: 38 U.S.C. 3712)

    (c) The lender responsibilities contained in Sec. 36.4337 of this 
part and the certification required and penalties to be assessed under 
Sec. 36.4337A of this part

[[Page 551]]

against lenders making false certifications also apply to lenders 
originating VA guaranteed manufactured home loans under the authority of 
38 U.S.C. 3712.


(Authority: 38 U.S.C. 3712)

    (d) No loan shall be guaranteed pursuant to 38 U.S.C. 3712(a)(1) 
unless:
    (1) The veteran certifies, in such form as the Secretary shall 
prescribe, that he or she will personally occupy the property as his or 
her home or, if the veteran is on active duty status as a member of the 
Armed Forces and is for that reason unable to occupy the property, the 
veteran's spouse must certify that he or she will personally occupy the 
property as his or her home. For the purposes of this section, the words 
personally occupy the property as his or her home mean that the veteran 
as of the date of his or her certification actually lives in the 
property personally as his or her residence or actually intends upon 
completion of the loan and acquisition of the manufactured home to move 
into the home personally within a reasonable time and to utilize the 
home as his or her residence.
    (2) The veteran certifies, in such form as the Secretary shall 
prescribe that:
    (i) Neither the veteran, nor anyone authorized to act for the 
veteran, will refuse to sell or rent, after the making of a bona fide 
offer, or refuse to negotiate for the sale or rental of, or otherwise 
make unavailable or deny the dwelling or property covered by this loan 
to any person because of race, color, religion, sex, handicap, familial 
status, or national origin;
    (ii) The veteran recognizes that any restrictive covenant on the 
property relating to race, color, religion, sex, handicap, familial 
status, or national origin is illegal and void and any such covenant is 
specifically disclaimed; and
    (iii) The veteran understands that civil action for preventive 
relief may be brought by the Attorney General of the United States in 
any appropriate U.S. district court against any person responsible for a 
violation of the applicable law.

[46 FR 43670, Aug. 31, 1981, as amended at 56 FR 9855, Mar. 8, 1991; 58 
FR 37859, July 14, 1993]



Sec. 36.4207  Manufactured home standards.

    To qualify for purchase with a guaranteed loan a manufactured home 
must:
    (a) Meet the following dimensional requirements.
    (1) A single-wide unit must be a minimum of ten (10) feet wide and 
have a minimum floor area of four hundred (400) square feet.
    (2) A double-wide unit, when assembled, must be a minimum of twenty 
(20) feet wide and have a minimum floor area of seven hundred (700) 
square feet.
    (b) Be so constructed as to be towed on its own chassis and 
undercarriage and/or independent undercarriage;
    (c) Contain living facilities for year around occupancy by one 
family, including permanent provisions for heat, sleeping, cooking, and 
sanitation; and
    (d) Comply with the specifications in effect at the time the loan is 
made that are prescribed by the Secretary.


(Authority: 38 U.S.C. 3712(h)(1))

[36 FR 1253, Jan. 27, 1971, as amended at 40 FR 13213, Mar. 25, 1975; 44 
FR 22725, Apr. 17, 1979; 56 FR 9855, Mar. 8, 1991]



Sec. 36.4208  Manufactured home location standards.

    (a) Any rental site on which a manufactured home to be purchased 
with a guaranteed loan will be placed must qualify as an acceptable 
rental site as follows:
    (1) Be located within a manufactured home park or subdivision which 
is acceptable to the Department of Veterans Affairs; or
    (2) Be a site which is not within a manufactured home park or 
subdivision provided that (i) the site is determined by the Department 
of Veterans Affairs to be an acceptable rental site, or (ii) in the 
absence of a determination by the Department of Veterans Affairs in 
respect to such site the manufactured home purchaser and the dealer 
certify to the Secretary as follows:
    (A) Placement of the manufactured home on the site or lot is not a 
violation of zoning laws or other local requirements applicable to 
manufactured homes;

[[Page 552]]

    (B) The site or lot is served by water and sanitary facilities which 
are approved by the local public authority and which are acceptable to 
the Department of Veterans Affairs;
    (C) The site or lot is served by an all-weather street or road;
    (D) The site or lot is not known to be subject to conditions that 
may be hazardous to the health or safety of the manufactured home 
occupants or that may endanger the manufactured home; and
    (E) The site is free from, and the location of the manufactured home 
thereon will not substantially contribute to, adverse scenic or 
environmental conditions.
    (b) No manufactured home purchased with a guaranteed loan may be 
placed on a lot owned by an eligible veteran or on a lot to be purchased 
or improved with the proceeds of a guaranteed manufactured home loan 
unless the lot owned or to be so purchased or improved is determined by 
the Department of Veterans Affairs to be an acceptable manufactured home 
site.
    (c) A manufactured home park or subdivision which is not approved by 
the Federal Housing Administration will be acceptable to the Department 
of Veterans Affairs for the purpose of 38 U.S.C. 3712 if the Secretary 
determines that the park or subdivision, whether existing or proposed, 
(1) is designed to encourage the maintenance and development of 
manufactured home sites which will be free from, and not substantially 
contribute to, adverse scenic and environmental conditions, and (2) 
complies otherwise with the applicable standards for planning, 
construction, and general acceptability prescribed by the Secretary.

[36 FR 1253, Jan. 27, 1971, as amended at 55 FR 37472, Sept. 12, 1990; 
56 FR 9855, Mar. 8, 1991]



Sec. 36.4209  Reporting requirements.

    (a) Each loan proposed for guaranty under 38 U.S.C. 3712 shall, 
unless otherwise provided in the Sec. 36.4200 series, be submitted to 
the Secretary for approval prior to closing. The Secretary upon 
determining any such proposed loan to be eligible for guaranty will 
issue a certificate of commitment.
    (b) Except as provided in paragraph (c) of this section, a 
certificate of commitment shall entitle the holder to the issuance of 
the evidence of guaranty upon the ultimate actual payment of the full 
proceeds of the loan for the purposes described in the original report 
and upon the submission within 60 days thereafter of a supplemental 
report showing such fact and:
    (1) That the loan conforms to the terms of the certificate of 
commitment;
    (2) The identity of all property purchased therewith, including the 
itemized list required by Sec. 36.4204(f);
    (3) That all property purchased with the proceeds of the loan has 
been encumbered as required by the Sec. 36.4200 series;
    (4) In respect to any property purchased with the loan proceeds as 
to which the Secretary issued a certificate of reasonable value which 
was conditioned upon completion of any construction, repairs, 
alterations or improvements not inspected and approved subsequent to 
completion by a compliance inspector designated by the Secretary that 
such construction, repairs, alterations or improvements have been 
completed according to the plans and specifications upon which such 
reasonable value was based; and
    (5) That the loan conforms otherwise to the applicable provisions of 
38 U.S.C. chapter 37 and Sec. 36.4200 series.
    (c) A deviation of more than five (5) percent between the estimates 
upon which the certificate of commitment was issued and the report of 
final payment of the proceeds of the loan, or a change in the identity 
of the property acquired by the veteran with the loan proceeds will 
invalidate the certificate of commitment, unless such deviation or 
change is approved by the Secretary.
    (d) Upon the failure of the lender to report in accordance with 
paragraph (b) of this section, the certificate of commitment shall have 
no further effect; Provided, nevertheless, That if the loan otherwise 
meets the requirements of this section, said certificate of commitment 
may be given effect by the Secretary, notwithstanding the report is 
received after the date otherwise required.

[[Page 553]]

    (e) Subject to compliance with the regulations concerning guaranty 
of manufactured home loans to veterans, the Certificate of Guaranty will 
be issuable within the available entitlement of the veteran on the basis 
of the loan reported, except for refinancing loans for interest rate 
reductions. No certificate of commitment shall be issued, and no loan 
shall be guaranteed, unless the lender, the veteran, and the loan are 
shown to be eligible; nor shall guaranty be issued on any manufactured 
home loan unless the Secretary determines that there has been compliance 
by the veteran with the certification requirements of 38 U.S.C. 
3712(e)(5).


(Authority: 38 U.S.C. 3712(a)(4), (c)(2), (e)(5))

    (f) Any amount of the loan that is disbursed for an ineligible 
purpose shall be excluded in computing the amount of guaranty.
    (g) Approval by the Secretary pursuant to 38 U.S.C. 3712(c)(1) is 
required before a lender may close manufactured home loans or 
manufactured home lot loans on the automatic basis. Evidence of guaranty 
will be issuable if the loan closed on the automatic basis is reported 
to the Secretary within 60 days of full disbursement, and upon 
certification of the lender that no default exists thereunder which has 
continued for more than 30 days and that the loan complies with 
paragraphs (b)(2), (3), (4), and (5), (e), and (f) of this section. Upon 
the failure of the lender to report in accordance with this paragraph 
the loan will not be eligible for guaranty unless the lender submits 
with the report a certification that the loan is not in default and an 
explanation as to why the loan was not timely reported.


(Authority: 38 U.S.C. 3712 (c)(1) and (g))

    (h) With respect to any loan for which a commitment was made on or 
after March 1, 1988, the Secretary must be notified whenever the holder 
receives knowledge of disposition of a manufactured home and/or lot 
securing a Department of Veterans Affairs guaranteed loan.
    (1) If the seller applies for prior approval of the assumption of 
the loan, then:
    (i) A holder (or its authorized servicing agent) who is an automatic 
lender must examine the creditworthiness of the purchaser and determine 
compliance with the provisions of 38 U.S.C. 3714. The creditworthiness 
review must be performed by the party that has automatic authority. If 
both the holder and its servicing agent are automatic lenders, then they 
must decide between themselves which one will make the determination of 
creditworthiness, whether the loan is current and whether there is a 
contractual obligation to assume the loan, as required by 38 U.S.C. 
3714. If the actual loan holder does not have automatic authority and 
its servicing agent is an automatic lender, then the servicing agent 
must make the determinations required by 38 U.S.C. 3714 on behalf of the 
holder. The actual holder will remain ultimately responsible for any 
failure of its servicing agent to comply with the applicable law and 
Department of Veterans Affairs regulations.
    (A) If the assumption is approved and the transfer of the security 
is completed, then the notice required by this paragraph shall consist 
of the credit package (unless previously provided in accordance with 
paragraph (h)(1)(i)(B) of this section) and a copy of the executed deed, 
bill of sale, transfer of equity agreement, and/or assumption agreement 
as required by the VA office of jurisdiction. The notice shall be 
submitted to the Department of Veterans Affairs with the Department of 
Veterans Affairs receipt for the funding fee provided for in Sec. Sec. 
36.4232(e)(3) or 36.4254(d)(3) of this part.
    (B) If the application for assumption is disapproved, the holder 
shall notify the seller and the purchaser that the decision may be 
appealed to the Department of Veterans Affairs office of jurisdiction 
within 30 days. The holder shall make available to that Department of 
Veterans Affairs office all items used by the holder in making the 
holder's decision in case the decision is appealed to the Department of 
Veterans Affairs. If the application remains disapproved after 60 days 
(to allow time for appeal to and review by the Department of Veterans 
Affairs) then the holder must refund $50 of any

[[Page 554]]

fee previously collected under the provisions of Sec. 
36.4275(a)(3)(iii) of this part. If the application is subsequently 
approved and the sale is completed, then the holder (or its authorized 
servicing agent) shall provide the notice described in paragraph 
(h)(1)(i)(A) of this section.
    (C) In performing the requirements of paragraphs (h)(1)(i)(A) or 
(h)(1)(i)(B) of this section the holder must complete its examination of 
the creditworthiness of the prospective purchaser and advise the seller 
of its decision no later than 45 days after the date of receipt by the 
holder of a complete application package for the approval of the 
assumption. The 45-day period may be extended by an interval not to 
exceed the time caused by delays in processing of the application which 
are documented as beyond the control of the holder, such as employers or 
depositories not responding to requests for verifications, which were 
timely forwarded, or followups on those requests.
    (ii) If neither the holder nor its authorized servicing agent is an 
automatic lender, the notice to the Department of Veterans Affairs shall 
include:
    (A) Advice regarding whether the loan is current or in default;
    (B) A copy of the purchase contract; and
    (C) A complete credit package developed by the holder which the 
Secretary may use for determining the creditworthiness of the purchaser.
    (D) The notice and documents required by this section must be 
submitted to the Department of Veterans Affairs office of jurisdiction 
no later than 35 days after the date of receipt by the holder of a 
complete application package for the approval of the assumption, subject 
to the same extensions as provided in paragraph (h)(1)(i) of this 
section. If the assumption is not automatically approved by the holder 
or its authorized agent pursuant to the automatic authority provisions, 
$50 of any fee collected in accordance with Sec. 36.4275(a)(3)(iii) of 
this part must be refunded. If the Department of Veterans Affairs does 
not approve the assumption, the holder will be notified and an 
additional $50 of any fee collected under Sec. 36.4275(a)(3)(iii) of 
this part must be refunded following expiration of the 30-day appeal 
period set out in paragraph (h)(1)(i)(B) of this section. If such an 
appeal is made to the Department of Veterans Affairs, then the review 
will be conducted at the Department of Veterans Affairs office of 
jurisdiction by an individual who was not involved in the original 
disapproval decision. If the application for assumption is approved and 
the transfer of the security is completed, then the holder (or its 
authorized servicing agent) shall provide the notice required in 
paragraph (h)(1)(i)(A) of this section.
    (2) If the seller fails to notify the holder before disposing of 
property securing the loan, the holder shall notify the Secretary within 
60 days after learning of the transfer. Such notice shall advise whether 
or not the holder intends to exercise its option to immediately 
accelerate the loan or whether an opportunity will be extended to the 
transferor and transferee to apply for retroactive approval of the 
assumption under the terms of this paragraph


(Authority: 38 U.S.C. 3714)

(Approved by the Office of Management and Budget under control number 
2900-0516)

[36 FR 1253, Jan. 27, 1971, as amended at 44 FR 22725, Apr. 17, 1979; 46 
FR 43670, Aug. 31, 1981; 55 FR 37472, Sept. 12, 1990; 58 FR 37859, July 
14, 1993]



Sec. 36.4210  Joint loans.

    (a) Except as provided in paragraph (b) of this section, the prior 
approval of the Secretary is required in respect to any manufactured 
home loan to be made to two or more borrowers who become jointly and 
severally liable, or jointly liable therefor, and who will acquire an 
undivided interest in the property to be purchased or who will otherwise 
share in the proceeds of the loan, or in respect to any loan to be made 
to an eligible veteran whose interest in the property owned, or to be 
acquired with the loan proceeds, is an undivided interest only. The 
amount of the guaranty shall be computed in such cases only on that 
portion of the loan allocable to the eligible veteran which, taking into 
consideration all relevant factors, represents the proper contribution 
of the veteran to the transaction. Such loans shall be secured to the 
extent required by 38 U.S.C. chapter 37

[[Page 555]]

and the regulations concerning guaranty of manufactured home loans to 
veterans.
    (b) Notwithstanding the provisions of paragraph (a) of this section, 
the joinder of the spouse of a veteran-borrower in the ownership of 
property shall not require prior approval or preclude the issuance of a 
guaranty based upon the entire amount of the loan. If both spouses be 
eligible veterans, either or both, within permissible maxima, may 
utilize available guaranty entitlement.
    (c) For the purpose of determining the rights and the liabilities of 
the Secretary with respect to a loan subject to paragraph (a) of this 
section, credits legally applicable to the entire loan shall be applied 
as follows:
    (1) Prepayments made expressly for credit to that portion of the 
indebtedness allocable to the veteran shall be applied to such portion 
of the indebtedness. All other payments shall be applied ratably to 
those portions of the loan allocable respectively to the veteran and to 
the other debtors.
    (2) Proceeds of the sale or other liquidation of the security shall 
be applied ratably to the respective portions of the loan, such portion 
of the proceeds as represents the interest of the veteran being applied 
to that portion of the loan allocable to such veteran.

(Authority: 38 U.S.C. 3703(c)(1))

[44 FR 22725, Apr. 17, 1979, as amended at 55 FR 37473, Sept. 12, 1990]



Sec. 36.4211  Amortization--prepayment.

    (a) To be eligible for guaranty under 38 U.S.C. 3712 a loan shall be 
amortized fully within the term of the loan in accordance with any 
generally recognized plan of amortization requiring approximately equal 
monthly payments. The loan shall not be payable on demand or at sight or 
presentation, or at a time not specified or computable from the language 
in the evidence of indebtedness, or on a renewal basis at the option of 
the holder. The first payment may be deferred not longer than 2 months 
from the date the loan is closed.
    (b) No guaranteed loan security instrument shall contain any 
provision giving the holder a right to declare the loan due or otherwise 
to declare a default if the holder ``shall feel insecure'' or upon the 
occurrence of any similar condition at the holder's option, without 
regard to any act or omission by the debtor.
    (c) The debtor shall have the right, without penalty or fee, to 
prepay all or not less than one installment of the indebtedness at any 
time. Credit for any partial prepayment made on other than an 
installment due date may be postponed to the next installment due date. 
The holder and the debtor may agree at any time that any prepayment not 
previously applied in satisfaction of matured installments shall be 
reapplied for the purpose of curing or preventing any subsequent 
default. Any prepayment in full of the indebtedness (unpaid principal 
balance plus earned interest) shall be credited on the date received. In 
determining the amount required to prepay the indebtedness in full the 
holder of the loan shall exclude all unearned interest or discount.
    (d) Subject to paragraph (a) of this section any amounts which under 
the terms of a loan do not become due and payable on or before the last 
maturity date permissible for loans of its class under the limitations 
contained in Sec. 36.4204 shall automatically fall due on such date.



Sec. 36.4212  Interest rates and late charges.

    (a) In guaranteeing or insuring loans under 38 U.S.C. chapter 37, 
the Secretary may elect to require that such loans either bear interest 
at a rate that is agreed upon by the veteran and the lender, or bear 
interest at a rate not in excess of a rate established by the Secretary. 
The Secretary may, from time to time, change that election by publishing 
a notice in the Federal Register. Provided, however, that the interest 
rate of a loan for the purpose of an interest rate reduction under 38 
U.S.C. 3712(a)(1)(F) must be less than the interest rate of the VA loan 
being refinanced. This paragraph (a) does not apply in the case of an 
adjustable rate mortgage being refinanced with a fixed rate loan.


(Authority: 38 U.S.C. 3703, 3712)

    (b) For loans bearing an interest rate agreed upon by the veteran 
and the

[[Page 556]]

lender, the veteran may pay reasonable discount points in connection 
with the loan. The discount points may not be included in the loan 
amount, except for interest rate reduction refinancing loans under 38 
U.S.C. 3712(a)(1)(F).


(Authority: 38 U.S.C. 3703, 3712)

    (c) The rate of interest in instruments securing the indebtedness 
for all loans may be expressed in terms of add-on or discount.


(Authority: 38 U.S.C. 3710, 3712)

    (d) Interest in excess of the rate reported by the lender when 
requesting evidence of guaranty or insurance shall not be payable on any 
advance, or in the event of any delinquency or default; Provided, that a 
late charge not in excess of an amount equal to 4 percent of any 
installment paid more than 15 days after due date shall not be 
considered a violation of this limitation.


(Authority: 38 U.S.C. 3712)

    (e) Adjustable rate mortgage loans which comply with the 
requirements of this paragraph are eligible for guaranty.
    (1) Interest rate index. Changes in the interest rate charged on an 
adjustable rate mortgage must correspond to changes in the weekly 
average yield on one year (52 week) Treasury bills adjusted to a 
constant maturity. Yields on one year Treasury bills at ``constant 
maturity'' are interpolated by the United States Treasury from the daily 
yield curve. This curve, which relates the yield on the security to its 
time to maturity, is based on the closing market bid yields on actively 
traded one year Treasury bills in the over-the-counter market. The 
weekly average one year constant maturity Treasury bill yields are 
published by the Federal Reserve Board of the Federal Reserve System. 
The Federal Reserve Statistical Release Report H.15 (519) is released 
each Monday. These one year constant maturity Treasury bill yields are 
also published monthly in the Federal Reserve Bulletin, published by the 
Federal Reserve Board of the Federal Reserve System, as well as 
quarterly in the Treasury Bulletin, published by the Department of the 
Treasury.
    (2) Frequency of interest rate changes. Interest rate adjustments 
must occur on an annual basis, except that the first adjustment may 
occur not sooner than 12 months nor later than 18 months from the date 
of the borrower's first mortgage payment. The adjusted rate will become 
effective the first day of the month following the adjustment date; the 
first monthly payment at the new rate will be due on the first day of 
the following month. To set the new interest rate, the lender will 
determine the change between the initial (i.e., base) index figure and 
the current index figure. The initial index figure shall be the most 
recent figure available before the date of mortgage loan origination. 
The current index figure shall be the most recent index figure available 
30 days before the date of each interest rate adjustment.
    (3) Method of rate changes. Interest rate changes may only be 
implemented through adjustments to the borrower's monthly payments.
    (4) Initial rate and magnitude of changes. The initial contract 
interest rate of an adjustable rate mortgage shall be agreed upon by the 
lender and the veteran. The rate must be reflective of adjustable rate 
lending. Annual adjustments in the interest rate shall be set at a 
certain spread or margin over the interest rate index prescribed in 
paragraph (e)(1) of this section. Except for the initial rate, this 
margin shall remain constant over the life of the loan. Annual 
adjustments to the contract interest rate shall correspond to annual 
changes in the interest rate index, subject to the following conditions 
and limitations:
    (i) No single adjustment to the interest rate may result in a change 
in either direction of more than one percentage point from the interest 
rate in effect for the period immediately preceding that adjustment. 
Index changes in excess of one percentage point may not be carried over 
for inclusion in an adjustment in a subsequent year. Adjustments in the 
effective rate of interest over the entire term of the mortgage may not 
result in a change in either direction of more than five percentage 
points from the initial contract interest rate.

[[Page 557]]

    (ii) At each adjustment date, changes in the index interest rate, 
whether increases or decreases, must be translated into the adjusted 
mortgage interest rate, rounded to the nearest one-eighth of one 
percent, up or down. For example, if the margin is 2 percent and the new 
index figure is 6.06 percent, the adjusted mortgage interest rate will 
be 8 percent. If the margin is 2 percent and the new index figure is 
6.07 percent, the adjusted mortgage interest rate will be 8\1/8\ 
percent.
    (5) Pre-loan disclosure. The lender shall explain fully and in 
writing to the borrower, no later than on the date upon which the lender 
provides the prospective borrower with a loan application, the nature of 
the obligation taken. The borrower shall certify in writing that he or 
she fully understands the obligation and a copy of the signed 
certification shall be placed in the loan folder and included in the 
loan submission to VA. Such lender disclosure must include the following 
items:
    (i) The fact that the mortgage interest rate may change, and an 
explanation of how changes correspond to changes in the interest rate 
index;
    (ii) Identification of the interest rate index, its source of 
publication and availability;
    (iii) The frequency (i.e., annually) with which interest rate levels 
and monthly payments will be adjusted, and the length of the interval 
that will precede the initial adjustment; and
    (iv) A hypothetical monthly payment schedule that displays the 
maximum potential increases in monthly payments to the borrower over the 
first five years of the mortgage, subject to the provisions of the 
mortgage instrument.
    (6) Annual disclosure. At least 25 days before any adjustment to a 
borrower's monthly payment may occur, the lender must provide a notice 
to the borrower which sets forth the date of the notice, the effective 
date of the change, the old interest rate, the new interest rate, the 
new monthly payment amount, the current index and the date it was 
published, and a description of how the payment adjustment was 
calculated. A copy of the annual disclosure shall be made a part of the 
lender's permanent record on the loan.


(Authority: 38 U.S.C. 3707, 3712)

[60 FR 38257, July 26, 1995]



Sec. 36.4213  Capacity of parties.

    Nothing in the Sec. 36.4200 series shall be construed to relieve 
any lender of responsibility for any loss caused by lack of legal 
capacity of any person to contract, sell, convey or encumber, or by the 
existence of other legal disability or defects invalidating or rendering 
unenforceable in whole or in part either the loan obligation or the 
security therefor.



Sec. 36.4214  Geographical limits.

    The site for any manufactured home purchased with a guaranteed loan 
must be located within the United States of America, which for the 
purposes of 38 U.S.C. 3712 comprises the several States, the Territories 
and possessions of the United States, the District of Columbia, the 
Commonwealth of Puerto Rico and the Commonwealth of the Northern Mariana 
Islands.

[46 FR 43670, Aug. 31, 1981, as amended at 48 FR 1717, Jan. 14, 1983]



Sec. 36.4215  Maintenance of records.

    (a) The holder shall maintain a record of the amounts of payments 
received on the obligation and disbursements chargable thereto and the 
dates thereof. This record shall be maintained until the Secretary 
ceases to be liable as guarantor of the loan. For the purpose of any 
accounting with the Secretary or computation of claim against the 
Secretary, any holder who fails to maintain such record shall be 
presumed to have received on the dates due all sums which by the terms 
of the contract are payable prior to date of claim, and the burden of 
going forward with evidence and of ultimate proof of the contrary shall 
be on such holder.
    (b) The lender shall retain copies of all loan origination records 
on VA guaranteed loan for at least one year from the date of loan 
closing. Loan origination records include the loan application, 
including any preliminary

[[Page 558]]

application, verifications of employment and deposit, all credit 
reports, including preliminary credit reports, copies of each sales 
contract and addendums, letters of explanation for adverse credit items, 
discrepancies and the like, direct references from creditors, 
correspondence with employers, appraisal reports, reports on other 
inspections of the property, and all closing papers and documents.


(Authority: 38 U.S.C. 501, 3703(c)(1), 3712(g))

    (c) The Secretary has the right to inspect, examine, or audit, at a 
reasonable time and place, the records or accounts of a lender or holder 
pertaining to loans guaranteed by the Secretary.

(Recordkeeping requirements contained in Sec. 36.4215 were approved by 
the Office of Management and Budget under OMB control number 2900-0515)

[36 FR 1253, Jan. 27, 1971, as amended at 40 FR 13214, Mar. 25, 1975; 55 
FR 34913, Aug. 27, 1990]



Sec. 36.4217  Delivery of notice.

    Any notice required by the Sec. 36.4200 series to be given the 
Secretary must be in writing or such other communications medium as may 
be approved by an official designated in Sec. 36.4221(b) and delivered, 
by mail or otherwise, to the VA office at which the guaranty was issued, 
or to any changed address of which the holder has been given notice. 
Such notice must plainly identify the case by setting forth the name of 
the original veteran-obligor and the file number assigned to the case by 
the Secretary, if available, or otherwise the name and serial number of 
the veteran. If mailed, the notice shall be by certified mail when so 
provided by the Sec. 36.4200 series. This section does not apply to 
legal process. (See Sec. 36.4282.)

[58 FR 29114, May 19, 1993]



Sec. 36.4218  Payment in full; termination of guaranty.

    Upon full satisfaction of a guaranteed loan by payment or otherwise 
the instrument evidencing the guaranty shall be returned to the 
Department of Veterans Affairs office issuing the same with the holder's 
cancellation or endorsement of release thereon.



Sec. 36.4219  Incorporation by reference.

    Department of Veterans Affairs regulations issued under 38 U.S.C. 
3712, and in effect on the date of any loan which is submitted and 
accepted or approved for a guaranty thereunder, shall govern the rights, 
duties, and liabilities of the parties to such loan and any provisions 
of the loan instruments inconsistent with such regulations are hereby 
amended and supplemented to conform thereto.



Sec. 36.4220  Substantive and procedural requirements; waiver.

    (a) Notwithstanding any requirement, condition, or limitation stated 
in or imposed by the regulations concerning the guaranty of manufactured 
home loans to veterans, the Under Secretary for Benefits, or the 
Director, Loan Guaranty Service, within the limitations and conditions 
prescribed by the Secretary, is hereby authorized, if the Under 
Secretary for Benefits or Director, Loan Guaranty Service finds the 
interests of the Government are not adversely affected, to relieve undue 
prejudice to a debtor, holder, or other person, which might otherwise 
result, provided no such action may be taken which would impair the 
vested rights of any person affected thereby. If such requirement, 
condition, or limitation is of an administrative or procedural (not 
substantive) nature, any employee designated in Sec. 36.4221 is hereby 
authorized to grant similar relief if the designated employee finds the 
failure or error of the lender was due to misunderstanding or mistake 
and that the interests of the Government are not adversely affected. 
Provisions of the regulations considered to be of an administrative or 
procedural (nonsubstantive) nature are limited to the following:
    (1) The requirement in Sec. 36.4209(b) that a lender originating a 
loan under a certificate of commitment report the loan for issuance of 
guaranty evidence within 60 days following actual payment of the full 
proceeds of the loan. In such cases it is not necessary that a finding 
be made that the loan is not in default.

[[Page 559]]

    (2) The requirements in Sec. 36.4209(h) of this part concerning the 
giving of notice in assumption cases under 38 U.S.C. 3714.


(Authority: 38 U.S.C. 3714)

    (3) The requirement in Sec. 36.4279 that a holder promptly forward 
an advice of the terms of any agreement effecting a reamortization or 
extension of a loan.
    (4) The requirement in Sec. 36.4280 concerning the giving of notice 
of default.
    (5) The requirement in Sec. 36.4280 that a holder give 30 days 
advance notice of its intention to foreclose or repossess the security.
    (6) The requirement in Sec. 36.4282 that a holder give notice of 
repossession of personal property within 10 days after such repossession 
has occurred.
    (7) The requirement in Sec. 36.4210(a) that a lender obtain the 
prior approval of the Secretary before closing a joint loan if the 
lender or class of lenders is approved by the Secretary to close loans 
on the automatic basis pursuant to 38 U.S.C. 3712(c)(1).


(Authority: 38 U.S.C. 3712(c)(1))

    (b) No waiver, consent, or approval required or authorized by the 
regulations concerning guaranty of loans to veterans shall be valid 
unless in writing signed by the Secretary or the employee designated in 
Sec. 36.4221.

[36 FR 1253, Jan. 27, 1971, as amended at 46 FR 43670, Aug. 31, 1981; 49 
FR 13352, Apr. 4, 1984; 55 FR 37473, Sept. 12, 1990; 61 FR 28058, June 
4, 1996]



Sec. 36.4221  Delegation of authority.

    (a) Except as hereinafter provided, each employee of the Department 
of Veterans Affairs heretofore or hereafter appointed to, or lawfully 
filling, any position designated in paragraph (b) of this section is 
hereby delegated authority, within the limitations and conditions 
prescribed by law, to exercise the powers and functions of the Secretary 
with respect to the guaranty of manufactured home loans and the rights 
and liabilities arising therefrom, including but not limited to the 
adjudication and allowance, disallowance, and compromise of claims; the 
collection or compromise of amounts due, in money or other property; the 
extension, rearrangement, or acquisition of loans; the management and 
disposition of secured and unsecured notes and other property; and those 
functions expressly or impliedly embraced within paragraphs (2) to (6), 
inclusive, of 38 U.S.C. 3720(a). Incidental to the exercise and 
performance of the powers and functions hereby delegated, each such 
employee is authorized to execute and deliver (with or without 
acknowledgment) for, and on behalf of, the Secretary, evidence of 
guaranty and such certificates, forms, conveyances, and other 
instruments as may be appropriate in connection with the acquisition, 
ownership, management, sale, transfer, assignment, encumbrance, rental, 
or other disposition of real or personal property, or of any right, 
title, or interest therein, including, but not limited to, contracts of 
sale, installment contracts, deeds, leases, bills of sale, assignments, 
and releases; and to approve disbursements to be made for any purpose 
authorized by 38 U.S.C. chapter 37.
    (b) Designated positions:

Under Secretary for Benefits.
Director, Loan Guaranty Service.
Director, Regional Office.
Director, Medical and Regional Office Center.
Director, VA Regional Office and Insurance Center.
Loan Guaranty Officer.
Assistant Loan Guaranty Officer.


The authority hereby delegated to employees of the positions designated 
in this paragraph may, with the approval of the Under Secretary for 
Benefits, be redelegated.
    (c) Nothing in this section shall be construed (1) to authorize any 
such employee to exercise the authority vested in the Secretary under 38 
U.S.C. 501 or 3715(b) or to sue, or enter appearance for and on behalf 
of the Secretary, or confess judgment against the Secretary in any court 
without prior authorization; or (2) to include the authority to exercise 
those powers delegated to the Under Secretary for Benefits, or the 
Director, Loan Guaranty Service, under Sec. 36.4220: Provided, That 
anything in the regulations concerning guaranty of loans to veterans to 
the contrary notwithstanding, any evidence of guaranty issued on or 
after January 27, 1971

[[Page 560]]

by any of the employees designated in paragraph (b) of this section or 
by any employee designated an authorized agent or a loan guaranty agent 
shall be deemed to have been issued by the Secretary, subject to the 
defenses reserved in 38 U.S.C. 3721.
    (d) Each Regional Office, regional office and insurance center, and 
Medical and Regional Office Center shall maintain and keep current a 
cumulative list of all employees of that Office or Center who, since May 
1, 1980, have occupied the positions of Director, Loan Guaranty Officer 
and Assistant Loan Guaranty Officer. This list will include each 
employee's name, title, date the employee assumed the position, and the 
termination date, if applicable, of the employee's tenure in such 
position. The list shall be available for public inspection and copying 
at the Regional Office, or Center, during normal business hours.


(Authority: 38 U.S.C. 501, 3720(a)(5))

[36 FR 1253, Jan. 27, 1971, as amended at 40 FR 13214, Mar. 25, 1975; 44 
FR 16014, Mar. 16, 1979; 45 FR 21243, Apr. 1, 1980; 46 FR 43671, Aug. 
31, 1981; 49 FR 13352, Apr. 4, 1984; 61 FR 28058, June 4, 1996]



Sec. 36.4222  Hazard insurance.

    (a) The holder shall require insurance policies to be procured and 
maintained in an amount sufficient to protect the security against risks 
or hazards to which it may be subjected to the extent customary in the 
locality. The costs of such required insurance coverage may be paid for 
by the veteran. Only the costs for one year may be included in the loan 
amount.
    (1) Flood insurance will be required on any manufactured home, 
building or personal property securing a loan at any time during the 
term of the loan that such security is located in an area identified by 
the Federal Emergency Management Agency as having special flood hazards 
and in which flood insurance has been made available under the National 
Flood Insurance Act, as amended. The amount of flood insurance must be 
at least equal to the lesser of the outstanding principal balance of the 
loan or the maximum limit of coverage available for the particular type 
of property under the National Flood Insurance Act, as amended. The 
Secretary cannot guarantee a loan for the acquisition or construction of 
property located in an area identified by the Federal Emergency 
Management Agency as having special flood hazards unless the community 
in which such area is situated is then participating in the National 
Flood Insurance Program.


(Authority: 42 U.S.C. 4012a, 4106(a))

    (2) Broad Lender's Protection Insurance or its equivalent is 
required to protect against loss for any items missing from the 
manufactured home at time of repossession and to cover repossession 
expenses including, but not limited to, breakdown and transport charges, 
permit and export fees, and an amount, limited by the Secretary, of 
unpaid park rent.
    (b) All monies under such policies covering payment of insured 
losses shall be applied to restoration of the security or to the loan 
balance.

[58 FR 37859, July 14, 1993, as amended at 62 FR 5531, Feb. 6, 1997]



Sec. 36.4223  Interest rate reduction refinancing loan.

    (a) A veteran may refinance [38 U.S.C. 3712(a)(1)(F)] an existing 
Department of Veterans Affairs guaranteed loan to reduce the interest 
rate payable on the Department of Veterans Affairs loan provided the 
following requirements are met:
    (1) The loan application must be submitted to the Secretary for 
prior approval unless the veteran is not charged a discount, in which 
case the loan application may be processed on the automatic basis;
    (2) The loan must be secured by the same real property and/or 
personal property as the loan being refinanced and the veteran must own 
the manufactured home and/or manufactured home lot securing the loan; 
and
    (i) Presently occupy or have previously occupied the manufactured 
home, a manufactured home on the lot securing the loan, or the 
manufactured home and the lot securing the loan as his or her home and 
must certify in such form as the Secretary shall prescribe that the 
veteran presently or

[[Page 561]]

has previously so occupied the manufactured home or a manufactured home 
on the lot; or
    (ii) When a veteran is on Active Duty status as a member of the 
Armed Forces and is unable to occupy the manufactured home or a 
manufactured home on the lot securing the loan as a home because of such 
status, the veteran's spouse must occupy or must have previously 
occupied the manufactured home or a manufactured home on the lot as the 
spouse's home and must certify such occupancy in such form as the 
Secretary shall prescribe.
    (3) The amount of the refinancing loan may not exceed an amount 
equal to the sum of the balance of the loan being refinanced and such 
closing costs as authorized in Sec. 36.4232 or Sec.  36.4254, as 
appropriate, and a discount not to exceed 2 percent of the loan amount;


(Authority: 38 U.S.C. 3703, 3712)

    (4) The dollar amount of the guaranty of the 38 U.S.C. 3712(a)(1)(F) 
loan may not exceed the greater of the original guaranty amount of the 
loan being refinanced, or 25 percent of the loan; and


(Authority: 38 U.S.C. 3703, 3712)

    (5) The term of the refinancing loan 38 U.S.C. 3712(a)(1)(F) may not 
exceed the original term of the loan being refinanced.
    (b) Notwithstanding any other regulatory provision, the interest 
rate reduction refinancing loan may be guaranteed without regard to the 
amount of guaranty entitlement for manufactured home purposes available 
for use by the veteran, and the amount of the veteran's remaining 
guaranty entitlement for manufactured home purposes shall not be charged 
for an interest rate reduction refinancing loan. The interest rate 
reduction refinancing loan will be guaranteed with the entitlement used 
by the veteran to obtain the loan being refinanced. The veteran's loan 
guaranty entitlement used originally for a purpose as enumerated in 38 
U.S.C. 3712(a)(1)(A) through (E) or (G) and subsequently transferred for 
use on an interest rate reduction refinancing loan (38 U.S.C. 
3712(a)(1)(F)) shall be eligible for restoration when the interest rate 
reduction refinancing loan or subsequent interest rate reduction 
refinancing loan on the same property meets the requirements of Sec. 
36.4203(a).
    (c) Title to the security which is refinanced for the purpose of an 
interest rate reduction must be in conformity with Sec. 36.4234, and/or 
Sec. 36.4253, as appropriate.


(Authority: 38 U.S.C. 3712(a)(1)(F) and (4))

[46 FR 43671, Aug. 31, 1981, as amended at 48 FR 40229, Sept. 6, 1983; 
58 FR 37860, July 14, 1993; 60 FR 38258, July 26, 1995; 61 FR 7415, Feb. 
28, 1996]



Sec. 36.4224  Refinancing existing manufactured home loan including 
purchase of lot.

    (a) A veteran may refinance (38 U.S.C. 3712(a)(1)(G)) an existing 
purchase money lien on a manufactured home owned and occupied by the 
veteran as his or her home in conjunction with a loan to acquire a 
suitable lot on which that manufactured home is or will be located 
provided the following requirements are met.
    (1) The loan application must be submitted to the Secretary for 
prior approval;
    (2) The loan must be secured by the same manufactured home which is 
being refinanced and the real property on which the manufactured home is 
or will be located.
    (3) The amount of the loan may not exceed an amount equal to the sum 
of the balance of the loan being refinanced; the purchase price, not to 
exceed the reasonable value of the lot, as authorized in Sec. 36.4252; 
the costs of necessary site preparation of the lot as determined by the 
Secretary; a reasonable discount as authorized in Sec. 36.4204(d)(8) 
with respect to that portion of the loan used to refinance the existing 
purchase money lien on the manufactured home, and closing costs as 
authorized in Sec. 36.4232 or Sec.  36.4254, as appropriate.
    (b) If the loan being refinanced was guaranteed by the Department of 
Veterans Affairs, the portion of the loan made for the purpose of 
refinancing an existing purchase money manufactured home loan may be 
guaranteed without

[[Page 562]]

regard to the outstanding guaranty entitlement available for use by the 
veteran, and the veteran's guaranty entitlement shall not be charged as 
a result of any guaranty provided for the refinancing portion of the 
loan. For the purposes enumerated in 38 U.S.C. 3702(b) the refinancing 
portion of the loan shall be considered to have been obtained with the 
guaranty entitlement used to obtain the VA-guaranteed loan being 
refinanced. Guaranty for the refinancing loan shall be computed by first 
applying to the loan a combined total of the guaranty entitlement used 
to obtain the VA-guaranteed loan being refinanced and second any 
additional guaranty entitlement available to the veteran for 
manufactured home purposes, up to a maximum of $20,000 or forty (40) 
percent of the original principal amount of the loan, whichever is less.

(Authority: 38 U.S.C. 3712(a)(1)(G) and (5))

[48 FR 40229, Sept. 6, 1983, as amended at 58 FR 37860, July 14, 1993]



Sec. 36.4225  Authority to close manufactured home loans on the automatic 
basis.

    (a) Supervised lenders of the classes described in 38 U.S.C. 3702(d) 
(1) and (2) are authorized by statute to process VA guaranteed 
manufactured home loans on the automatic basis. This category of lenders 
includes any Federal land bank, national bank, State bank, private bank, 
building and loan association, insurance company, credit union or 
mortgage and loan company that is subject to examination and supervision 
by an agency of the United States or of any State or by any State.
    (b) Nonsupervised lenders of the class described in 38 U.S.C. 
3702(d)(3) must apply to the Secretary for authority to process 
manufactured home loans on the automatic basis. The following minimum 
requirements must be met:
    (1) Minimum assets. A minimum of $50,000 of working capital must be 
maintained. Working capital is defined as the excess of current assets 
over current liabilities. Current assets are defined as cash or other 
assets that could readily be converted into cash within 1 year on the 
normal accounting or business cycle. Current liabilities are defined as 
obligations that would be paid within a year on a normal accounting or 
business cycle. The lender's latest financial statements (profit and 
loss statements and balance sheets), audited and certified by a CPA 
(certified public accountant), must accompany the application. If the 
date of the financial statement precedes that of the application by more 
than 6 months, the lender-applicant must also attach a copy of its 
latest internal quarterly report. In addition, the lender-applicant must 
agree that if the application is approved, the applicant will provide 
within 120 days following the end of each of its fiscal years an audited 
financial statement to the Director, Loan Guaranty Service for review.
    (2) Experience. The firm must have been actively engaged in 
originating manufactured home loans for at least the last 2 years. 
Alternately, each principal officer of the firm who is actively involved 
in managing origination functions must have a minimum of 2 recent years' 
total experience in the field of VA manufactured home mortgages in 
managerial functions in either the present company of employment or in 
companies other than that of his or her present employment. In either 
case, every principal officer (president and vice presidents) must 
submit a resume of his or her experience in the mortgage lending field. 
Should the secretary and/or treasurer participate in the management of 
origination functions, they too must submit a resume and meet the 
minimum experience requirement if the company does not meet the 
experience requirement. Should the lender or any of its directors or 
officers ever have been debarred or suspended by any Federal agency or 
department or any of its directors or officers have been a director or 
officer of any other lender or corporation that was so suspended, or if 
the lender-applicant ever had a servicing contract with an investor 
terminated for cause, a statement of the facts must also be submitted. 
Lender-applicants will submit individual requests for each branch office 
they wish to have approved. The parent organization must agree to accept 
full responsibility for the actions of branch offices.

[[Page 563]]

    (3) Underwriter. If it is proposed that all loans to be made by the 
lender will be submitted to its home office for approval or rejection, 
the lender must have at least one full-time designated underwriter in 
its home office. If the loans will be approved or rejected by branch 
managers, the lender must have at least one full-time designated 
underwriter in each branch. In either event, the designated underwriters 
must be identified and a resume on each submitted to VA. The 
underwriters should have at least three years of experience in consumer 
installment finance. If changes in underwriting personnel occur, the 
lender must notify VA.
    (4) Lines of credit. The identity of the source(s) of warehouse 
lines of credit must be revealed to VA and the applicant must agree that 
VA may contact the named source(s) for the purpose of verifying the 
information.
    (5) Secondary market. If the lender-applicant customarily sells the 
manufactured home loans it originates, it must provide a listing of all 
permanent investors to whom the loans are sold, including the investor's 
address, telephone number and names of persons to contact.
    (6) Liaison. The lender-applicant must designate one employee to act 
as liaison on its behalf with the VA. If possible, the lender-applicant 
should select employees other than VA approved underwriters to act as 
liaison. Officers from branch or regional offices should also be 
appointed to act as liaison with local VA offices. The lender must 
notify VA of any changes in liaison personnel.
    (7) Courtesy closing. The lender-applicant must certify to VA that 
it will not close loans on an automatic basis as a courtesy or 
accommodation for other mortgage lenders whether or not such lenders are 
themselves approved to close on an automatic basis. The lender must 
agree that the processing of forms other than the initial credit 
application will not be delegated to the dealer or developer.
    (8) Subsidiaries/affiliates. A lender approved for automatic 
processing may not close manufactured home loans on the automatic basis 
involving any dealership or manufacturer in which it has a financial 
interest or which it owns, is owned by, or with which it is affiliated. 
This restriction may be eliminated for lenders that can provide 
documentation which demonstrates to VA's satisfaction that (i) the 
lender and the manufacturer and/or dealer are separate entities that 
operate independently for each other, and (ii) the percentage of all VA 
manufactured home loans originated by the lender during at least a one-
year period on which payments are past due 90 days or more is no higher 
than the national average for the same period for all mortgage loans.
    (9) Lender agents. A lender using an agent to perform a portion of 
the work involved in originating and closing a VA guaranteed loan on an 
automatic basis must take full responsibility by certification or 
corporate resolution for all acts, errors and omissions of the agent and 
its employees. Any such acts, errors or omissions will be treated as 
those of the lender and appropriate sanctions may be imposed against the 
lender and its agent.
    (10) Minimum use of automatic authority. If approved, lenders must 
use their automatic authority to the maximum extent possible. Any lender 
with automatic authority who submits a loan on the prior approval basis 
will be required to submit an explanation from the designated 
underwriter as to why the loan was not closed automatically. Such a 
statement will not be needed for loans that must be processed on the 
prior approval basis, e.g., joint loans.
    (11) Probation. Lender-applicants meeting the requirements of this 
section will be approved to close loans on an automatic basis for a 1-
year probationary period. Poor underwriting and/or consistently careless 
processing by the lender during the probationary period will be a basis 
for withdrawal of automatic authority.
    (12) Quality control system. In order to be approved as a 
nonsupervised lender for automatic processing authority, the lender must 
implement a written quality control system which ensures compliance with 
VA requirements. The lender must agree to furnish findings under its 
system to VA on demand. The elements of the quality control system must 
include the following:
    (i) Underwriting policies. Each office of the lender shall maintain 
copies of VA

[[Page 564]]

credit standards and all available VA underwriting guidelines.
    (ii) Corrective measures. The system should ensure the effective 
corrective measures are taken promptly when deficiencies in loan 
originations are identified by either the lender or VA. Any cases 
involving major discrepancies which are discovered under the system must 
be reported to VA.
    (iii) System integrity. The quality control system should be 
independent of the loan production function.
    (iv) Scope. The review of understanding decisions and certifications 
must include compliance with VA underwriting requirements, sufficiency 
of documentation and soundness of underwriting judgments.
    (c) A lender approved to close loans on the automatic basis who 
subsequently fails to meet the requirements of this section must report 
the circumstances surrounding the deficiency and the remedial action to 
be taken to cure it to VA.


(Authority: 38 U.S.C. 501, 1803(c)(1), and 1812(g))

    (d) To participate in VA's automatic program nonsupervised lenders 
of the class described in paragraph 3702(d)(3) of title 38 U.S. Code 
shall pay fees as follows:
    (1) $500 for new applications;
    (2) $200 for reinstatement of lapsed or terminated automatic 
authority;
    (3) $100 for each underwriter approval;
    (4) $100 for each agent approval;
    (5) $100 for each regional underwriting office approval;
    (6) A minimum fee of $100 for any other VA administrative action 
pertaining to a lender's participation in ALP;
    (7) $200 annually for certification of home offices;
    (8) $100 annually for certification of regional offices; and
    (9) $100 annually for each agent renewal.
    (e) Supervised lenders of the classes described in paragraphs (d)(1) 
and (d)(2) of 38 U.S. Code 3702 participating in VA's Loan Guaranty 
Program shall pay fees as follows:
    (1) $100 fee for each agent approval; and
    (2) $100 annually for each agent renewal.


(Authority: 38 U.S.C. 3712(g))

    (f) Lenders participating in VA's Lender Appraisal Processing 
Program shall pay a fee of $100 for approval of each staff appraisal 
reviewer.

[56 FR 40559, Aug. 15, 1991, as amended at 57 FR 828, Jan. 9, 1992; 57 
FR 40616, Sept. 4, 1992]



Sec. 36.4226  Withdrawal of authority to close manufactured home loans 
on the automatic basis.

    (a)(1) As provided in 38 U.S.C. 3702(e), the authority of any lender 
to close manufactured home loans on the automatic basis may be withdrawn 
by the Secretary at any time upon 30 days notice. The automatic 
processing authority of both supervised and nonsupervised lenders may be 
withdrawn for engaging in practices which are imprudent from a lending 
standpoint or which are prejudicial to the interests of veterans or the 
Government but are of a lesser degree than would warrant complete 
debarment or suspension of the lender from participation in the program.
    (2) Automatic processing authority may be withdrawn for failure to 
meet basic qualifying criteria. For non-supervised lenders, this 
includes lack of a designated underwriter, failure to maintain $50,000 
working capital and/or failure to file required financial statements. 
For supervised lenders this includes loss of status as an entity subject 
to examination and supervision by a Federal or State supervisory agency 
as required by 38 U.S.C. 3702(d). During the 1 year probationary period 
for newly approved automatic lenders, automatic authority may be 
withdrawn based upon poor underwriting or consistently careless 
processing by the lender, as determined by VA.
    (3) Automatic processing authority may also be withdrawn based on 
any of the causes for debarment set forth at Sec. 44.305 of this title.
    (b) Authority to close manufactured home loans on the automatic 
basis may also be temporarily withdrawn for a period of time under the 
following schedule.
    (1) Withdrawal for 60 days:

[[Page 565]]

    (i) Automatic loan submissions show deficiencies in credit 
underwriting, such as use of unstable sources of income to qualify the 
borrower, ignoring significant adverse credit items affecting the 
applicant's creditworthiness, etc., after such deficiencies have been 
repeatedly called to the lender's attention;
    (ii) Employment or deposit verifications are handcarried by 
applicants or otherwise improperly permitted to pass through the hands 
of a third party;
    (iii) Automatic loan submissions are consistently incomplete after 
such deficiencies have been repeatedly called to the lender's attention 
by VA; or
    (iv) There are continued instances of disregard of VA requirements 
after they have been called to the lender's attention.
    (2) Withdrawal for 180 days:
    (i) Loans are closed automatically which conflict with VA credit 
standards and which would not have been made by a lender acting 
prudently;
    (ii) The lender fails to disclose to VA significant obligations or 
other information so material to the veteran's ability to repay the loan 
that undue risk to the Government results;
    (iii) Employment or deposit verifications are allowed to be 
handcarried by applicant or otherwise mishandled, resulting in the 
submission of significant misinformation to VA;
    (iv) Substantiated complaints are received that the lender 
misrepresented VA requirements to veterans to the detriment of their 
interests (e.g., veteran was dissuaded from seeking a lower interest 
rate based on lender's incorrect advice that such options were precluded 
by VA requirements);
    (v) Closing documentation shows instances of improper charges to the 
veteran after the impropriety of such charges has been called to the 
lender's attention by Va, or refusal to refund such charges after 
notification by VA; or
    (vi) There are other instances of lender actions which are 
prejudicial to the interests of veterans, such as deliberate delays in 
scheduling loan closings.
    (3) Withdrawal for a period from one year to three years:
    (i) The lender fails to properly disburse loans (e.g., loan 
disbursement checks returned due to insufficient funds); or
    (ii) There is involvement by the lender in the improper use of a 
veteran's entitlement (e.g., knowingly permitting the veteran to violate 
occupancy requirements, lender involvement in sale of veteran's 
entitlement).
    (4) A continuation of actions that have led to previous withdrawal 
of automatic authority justifies withdrawal of automatic authority for 
the next longer period of time.
    (5) Withdrawal of automatic processing authority does not prevent a 
lender from processing VA guaranteed manufactured home loans on the 
prior approval basis.
    (6) Action by VA to remove a lender's automatic authority does not 
prevent VA from also taking debarment or suspension action based on the 
same conduct by the lender.
    (7) VA field facilities are authorized to withdraw automatic 
privileges for 60 days, based on any of the violations set forth in 
paragraphs (b)(1) through (b)(3) of this section, for nonsupervised 
lenders without operations in other stations' jurisdictions. All 
determinations regarding withdrawal of automatic authority for longer 
periods of time or multi-jurisdictional lenders must be made in Central 
Office.
    (c) VA will provide 30 days notice of withdrawal of automatic 
authority in order to enable the lender to either close or obtain prior 
approval for a loan on which processing has begun. There is no right to 
a formal hearing to contest the withdrawal of automatic processing 
privileges. However, if within 15 days after receiving notice the lender 
requests an opportunity to contest the withdrawal, the lender may submit 
in person, in writing, or through a representative, information and 
argument in opposition to the withdrawal.
    (d) If the lender's submission in opposition raises a dispute over 
facts material to the withdrawal of automatic authority, the lender will 
be afforded an

[[Page 566]]

opportunity to appear with a representative, submit documentary 
evidence, present witnesses, and confront any witnesses VA presents. The 
Under Secretary for Benefits will appoint a hearing officer or panel to 
conduct the hearing.
    (e) A transcribed record of the proceedings shall be made available 
at cost to the lender, upon request, unless the requirement for a 
transcript is waived by mutual agreement.
    (f) In actions based upon a conviction or civil judgment, or in 
which there is no genuine dispute over material facts, the Under 
Secretary for Benefits shall make a decision on the basis of all the 
information in the administrative record, including any submissions made 
by the lender.
    (g) In actions in which additional proceedings are necessary to 
determine disputed material facts, written findings of fact will be 
prepared by the hearing officer or panel. The Under Secretary for 
Benefits shall base the decision on the facts as found, together with 
any information and argument submitted by the lender and any other 
information in the administrative record.


(Authority: 38 U.S.C. 501, 1803(c)(1), and 1812(g)).

[56 FR 40560, Aug. 15, 1991, as amended at 61 FR 28058, June 4, 1996]



Sec. 36.4227  Advertising and Solicitation Requirements.

    Any advertisement or solicitation in any form (e.g., written, 
electronic, oral) from a private lender concerning manufactured housing 
loans to be guaranteed or insured by the Secretary:
    (a) Must not include information falsely stating or implying that it 
was issued by or at the direction of VA or any other department or 
agency of the United States, and
    (b) Must not include information falsely stating or implying that 
the lender has an exclusive right to make loans guaranteed or insured by 
VA.


(Authority: 38 U.S.C. 3703, 3704)

[67 FR 9402, Mar. 1, 2002]

                    financing manufactured home units



Sec. 36.4231  Warranty requirements.

    (a) When a new manufactured home purchased with financing guaranteed 
under 38 U.S.C. 3712 is delivered to the veteran-borrower he or she will 
be supplied a written warranty by the manufacturer in the form and 
content prescribed by the Secretary. Such warranty shall be in addition 
to, and not in derogation of, all other rights and privileges which such 
purchaser or owner may have under any other law or instrument, and the 
warranty instrument will so provide. No evidence of guaranty shall be 
issued by the Secretary unless a copy of such warranty duly receipted by 
the purchaser is submitted with the loan papers.
    (b) Any manufactured housing unit properly displaying a 
certification of conformity to all applicable Federal manufactured home 
construction and safety standards pursuant to 42 U.S.C. 5415 shall be 
acceptable as security for a VA guaranteed loan.


(Authority: 38 U.S.C. 3712)

    (c) When a used manufactured home is purchased from a manufactured 
home dealer with financing guaranteed under 38 U.S.C. 3712 the veteran-
borrower must be supplied with a written warranty by the manufactured 
home dealer in the form and content prescribed by the Secretary. Such 
warranty shall be in addition to, and not in derogation of, all other 
rights and privileges which such purchaser or owner may have under any 
other law or instrument, and the warranty instrument will so provide. No 
evidence of guaranty shall be issued by the Secretary unless a copy of 
such warranty duly receipted by the purchaser is submitted with the loan 
papers.

[48 FR 40229, Sept. 6, 1983, as amended at 60 FR 38259, July 26, 1995]



Sec. 36.4232  Allowable fees and charges; manufactured home unit.

    (a) Incident to the origination of a guaranteed loan for the 
purchase or refinancing of a manufactured home unit only, no charge 
shall be made against, or paid by, the veteran-borrower without the 
express prior approval of the

[[Page 567]]

Secretary except as provided in paragraph (e) of this section and as 
follows:
    (1) Actual fees or charges for required recordation of documents;
    (2) The costs of independent fee inspections for itemized items 
included in the manufactured home loan, as required by Sec. 36.4204(f);
    (3) The amount of any documentary stamp taxes levied on the 
transaction;
    (4) The amount of State and local taxes levied on the transaction;
    (5) The premium for customary physical damage insurance and vendor's 
single interest coverage on the manufactured home for an initial policy 
term of not to exceed one (1) year;
    (6) The premium for insurance against loss for items missing at time 
of repossession and for repossession expenses, unless State law 
prohibits charging borrowers for this coverage, in which case the lender 
is required to pay for the coverage without reimbursement from the 
veteran;
    (7) For the purposes of obtaining a refinancing loan for interest 
rate reduction or a refinancing loan to simultaneously refinance a unit 
and acquire a lot, the cost of a credit report and an appraisal; and


(Authority: 38 U.S.C. 3712 (a)(1)(b), (a)(4)(A) and (g)).

    (8) The actual amount charged for flood zone determinations, 
including a charge for a life-of-the-loan flood zone determination 
service purchased at the time of loan origination, if made by a third 
party who guarantees the accuracy of the determination. A fee may not be 
charged for a flood zone determination made by a Department of Veterans 
Affairs appraiser or for the lender's own determination.


(Authority: 38 U.S.C. 3712; 42 U.S.C. 4001 note, 4012a)

    (b) Any charge against the borrower properly made under paragraph 
(a) of this section may be included in the loan and paid out of the 
proceeds of the loan provided the total loan amount does not exceed 145 
percent of the manufacturer's invoice.


(Authority: 38 U.S.C. 3712(g))

    (c)(1) Costs of a credit report (except for 38 U.S.C. 3712(a)(1)(F) 
or (G) refinancing loans) such additional insurance as the veteran may 
desire, and any other expenses normally charged to a manufactured home 
purchaser under local customs may be paid by the borrower other than 
from the loan proceeds.
    (2) For the purchase of a used manufactured home unit, the fee of a 
Department of Veterans Affairs appraiser and of compliance inspectors 
designated by the Department of Veterans Affairs, except appraisal fees 
incurred for the predetermination of reasonable value requested by 
others than veteran or lender, may be paid by the borrower from other 
than the loan proceeds.


(Authority: 38 U.S.C. 3712 (e)(4) and (g))

    (d) Subject to the limitations set forth in this section, the 
following may be included in the loan made for the purchase of a new 
(not used) manufactured home unit and paid out of the proceeds of the 
loan:
    (1) The actual cost of transportation or freight;
    (2) Setup charges for installing the manufactured home on site not 
to exceed $400 for a single-wide manufactured home or $800 for a double-
wide manufactured home.


(Authority: 38 U.S.C. 3712(g))


If the actual costs exceed the limitations in this section, the veteran 
must certify that any excess cost has been paid in cash from the 
veteran's own resources without borrowing.
    (e)(1) Subject to the limitations set out in paragraph (e)(5) of 
this section, a fee must be paid to the Secretary. A fee of 1 percent of 
the total amount must be paid in a manner prescribed by the Secretary 
before a manufactured home unit loan will be eligible for guaranty. 
Provided, however, that the fee shall be 0.50 percent of the total loan 
amount for interest rate reduction refinancing loans guaranteed under 38 
U.S.C. 3712(a)(1)(F). All or part of the fee may be paid in cash at loan 
closing or all or part of the fee may be included in the loan without 
regard to the reasonable value of the property or the computed maximum 
loan amount,

[[Page 568]]

as appropriate. In computing the fee, the lender shall disregard any 
amount included in the loan to enable the borrower to pay such fee.


(Authority: 38 U.S.C. 3729(a))

    (2) Subject to the limitations set out in paragraph (e)(5) of this 
section, a fee of one-half of one percent of the loan balance must be 
paid to the Secretary in a manner prescribed by the Secretary by a 
person assuming a loan to which section 3714 of chapter 37 of 38 U.S.C. 
applies. The instrument securing such a loan shall contain a provisions 
describing the right of the holder to collect this fee as trustee for 
the Department of Veterans Affairs. The loan holder shall list the 
amount of this fee in every assumption statement provided and include a 
notice that the fee must be paid to the holder immediately following 
loan settlement. The fee must be transmitted to the Secretary within 15 
days of receipt by the holder of notice of the transfer.


(Authority: 38 U.S.C. 3714, 3729)

    (3) The lender is required to pay to the Secretary the fee described 
in paragraph (e)(1) of this section within 15 days after loan closing. 
Any lender closing a loan, subject to the limitations set out in 
paragraph (e)(5) of this section, who fails to submit timely payment of 
this fee will be subject to a late charge equal to 4 percent of the 
total fee due. If payment of the 1 percent fee is more than 30 days 
after loan closing, interest will be assessed at a rate set in 
conformity with the Department of Treasury's Fiscal Requirements Manual. 
This interest charge is in addition to the 4 percent late charge, but 
the late charge is not included in the amount on which interest is 
computed. This interest charge is to be calculated on a daily basis 
beginning on the date of closing, although the interest will be assessed 
only on funding fee payments received more than 30 days after closing.


(Authority: 38 U.S.C. 501)

    (4) The lender is required to pay to the Secretary electronically 
through the Automated Clearing House (ACH) system the fees described in 
paragraphs (e)(1) and (e)(2) of this section and any late fees and 
interest due on them. This shall be paid to a collection agent by 
operator-assisted telephone, terminal entry, or central processing unit-
to-central processing unit (CPU-to-CPU) transmission. The collection 
agent will be identified by the Secretary. The lender shall provide the 
collection agent with the following: authorization for payment of the 
funding fee (including late fees and interest) along with the following 
information: VA lender ID number; four-digit personal identification 
number; dollar amount of debit; VA loan number; OJ (office of 
jurisdiction) code; closing date; loan amount; information about whether 
the payment includes a shortage, late charge, or interest; veteran name; 
loan type; sale amount; downpayment; whether the veteran is a reservist; 
and whether this is a subsequent use of entitlement. For all 
transactions received prior to 8:15 p.m. on a workday, VA will be 
credited with the amount paid to the collection agent at the opening of 
business the next banking day.


(Authority: 38 U.S.C. 3729(a))

    (5) The fee described in paragraphs (e)(1) and (e)(2) of this 
section shall not be collected from a veteran who is receiving 
compensation (or who but for the receipt of retirement pay would be 
entitled to receive compensation) or from a surviving spouse described 
in section 3701(b)(2) of title 38, United States Code.


(Authority: 38 U.S.C. 3729(b))

(The information collection requirements in this section have been 
approved by the Office of Management and Budget under control numbers 
2900-0474 and 2900-0516)

[36 FR 1253, Jan. 27, 1971, as amended at 40 FR 1514, Jan. 8, 1975; 44 
FR 16014, Mar. 16, 1979; 46 FR 43671, Aug. 31, 1981; 47 FR 46700, Oct. 
20, 1982; 49 FR 40230, Sept. 6, 1983; 50 FR 5754, Feb. 12, 1985; 53 FR 
27047, July 18, 1988; 55 FR 37473, Sept. 12, 1990; 58 FR 37860, July 14, 
1993; 60 FR 38259, July 26, 1996; 62 FR 63278, Nov. 28, 1997]



Sec. 36.4234  Title and lien requirements.

    (a) The interest in the manufactured home acquired by the veteran at 
the time of purchase shall be either:

[[Page 569]]

    (1) Legal title evidenced by such document as is customarily issued 
to the purchaser of a manufactured home in the jurisdiction in which the 
manufactured home is initially sited, or
    (2) A full possessory interest convertible into a legal title 
conforming to paragraph (a)(1) of this section upon payment in full of 
the guaranteed loan.
    (b) The loan must be secured by a properly recorded financing 
statement and security agreement or other security instrument that 
creates a first lien on or equivalent security interest in the 
manufactured home and all of the furnishings, equipment, and accessories 
paid for in whole or in part out of the loan proceeds.
    (c) It is the responsibility of the lender that the veteran 
initially obtains an interest in the manufactured home meeting the 
requirements of paragraph (a) of this section and to obtain and retain a 
security interest meeting the requirements of paragraph (b) of this 
section.

[36 FR 1253, Jan. 27, 1971, as amended at 46 FR 43671, Aug. 31, 1981; 58 
FR 37860, July 14, 1993]

               combination and manufactured home lot loans



Sec. 36.4251  Loans to finance the purchase of manufactured homes and 
the cost of necessary site preparation.

    (a) A loan to finance the purchase of a manufactured home may 
include funds (or be augmented by a separate loan) to pay all or a part 
of the cost of the necessary site preparation of a lot on which to place 
the manufactured home and the loan shall be eligible for guaranty: 
Provided, that:
    (1) The veteran has, or incident to the transaction will acquire, a 
title to the lot that conforms to Sec. 36.4253(a).
    (2) The loan is secured as required by Sec. 36.4253(d).
    (3) The lot is determined by the Secretary to be an acceptable 
manufactured homesite pursuant to Sec. 36.4208,
    (4) The cost of the necessary site preparation is determined by the 
Secretary to be reasonable.
    (5) The amount of the loan to pay for necessary site preparation 
does not exceed the cost thereof and also does not exceed the reasonable 
value of the developed lot as determined by the Secretary, and
    (6) The loan conforms otherwise to the requirements of the Sec. 
36.4200 series.
    (b) Notwithstanding that the veteran-borrower's obligation for such 
site preparation be evidenced and secured separately from the obligation 
for purchase of the manufactured home, the obligations together shall 
constitute one loan for the purposes of the Sec. 36.4200 series, 
including computation of the Secretary's guaranty liability.
    (c) The cost of site preparation which will not be paid from the 
proceeds of the loan must be paid by the veteran in cash from the 
veteran's own resources.

[36 FR 3368, Feb. 23, 1971, as amended at 40 FR 13215, Mar. 25, 1975; 48 
FR 40230, Sept. 6, 1983]



Sec. 36.4252  Loans for purchase or refinancing of a manufactured home.

    (a) A loan to purchase a manufactured home may include funds (or be 
augmented by a separate loan) to finance all or part of the cost of 
acquisition by the veteran of a lot on which to place the manufactured 
home and the loan shall be eligible for guaranty: Provided, That:
    (1) The veteran will acquire title to such lot that conforms to the 
requirements of Sec. 36.4253(a),
    (2) The loan is secured as required by Sec. 36.4253(d),
    (3) The lot is determined by the Secretary to be an acceptable 
manufactured homesite pursuant to Sec. 36.4208,
    (4) The portion of the loan allocated to acquisition of the lot does 
not exceed the reasonable value of the lot as determined by the 
Secretary, and
    (5) The loan conforms otherwise to the requirements of the Sec. 
36.4200 series.
    (b) Notwithstanding that the veteran-borrower's obligation for 
acquisition of the lot be evidenced and secured separately from the 
obligation for purchase of the manufactured home, the obligations 
together (including, where appropriate, that for site preparation) shall 
constitute one loan for the purposes of the Sec. 36.4200 series, 
including computation of the Secretary's guaranty liability.
    (c) The cost of lot acquisition which will not be paid from the 
proceeds of

[[Page 570]]

the loan must be paid by the veteran in cash from the veteran's own 
resources.
    (d) For the purpose of this section acquisition of a manufactured 
home lot includes:
    (1) The refinancing of the balance owed by the veteran as purchaser 
under an existing real estate installment contract, and
    (2) The refinancing of existing mortgage loans or other liens which 
are secured of record on a manufactured home lot owned by the veteran.
    (e) A loan to acquire a lot on which to site a manufactured home may 
include funds to refinance an existing loan made for the purchase of and 
secured by a manufactured home on which lot the manufactured home is 
located or will be placed, provided that:
    (1) The veteran will acquire or retain title to such manufactured 
home and lot that conforms to the requirements of Sec. Sec. 36.4234 and 
36.4253,
    (2) The loan is secured as required by Sec. 36.4253(g),
    (3) The lot is determined by the Secretary to be an acceptable 
manufactured homesite pursuant to Sec. 36.4208,
    (4) The portion of the loan allocated to the acquisition and 
preparation of the lot does not exceed the reasonable value of the 
developed lot as determined by the Secretary,
    (5) The cost of necessary site preparation is determined by the 
Secretary to be reasonable.
    (6) The portion of the loan allocated to the refinancing of the 
manufactured home does not exceed an amount equal to the sum of the 
balance of the loan being refinanced; a reasonable discount as 
authorized in Sec. 36.4204(d)(8) with respect to that portion of the 
loan used to refinance the existing purchase money lien on the 
manufactured loan, and closing costs as authorized in Sec. 36.4232 or 
Sec. 36.4254, as appropriate,
    (7) The loan conforms otherwise to the requirements of the Sec. 
36.4200 series,
    (8) The veteran-borrower's obligation for acquisition of the lot and 
for refinancing the existing loan on the manufactured home (including 
site preparation, where appropriate), shall constitute one loan for the 
purposes of the Sec. 36.4200 series, including computation of the 
Secretary's guaranty liability.

(Authority: 38 U.S.C. 3712(a)(1)(G) or (5))

[36 FR 3368, Feb. 23, 1971, as amended at 40 FR 13215, Mar. 25, 1975; 44 
FR 22725, Apr. 17, 1979; 48 FR 40230, Sept. 6, 1983]



Sec. 36.4253  Title and lien requirements.

    (a) The interest in the realty constituting a manufactured home lot 
acquired by the veteran wholly or in part with the proceeds of a 
guaranteed loan, or in the realty constituting a manufactured home lot 
improved wholly or in part with the proceeds of a guaranteed loan, shall 
not be less than:
    (1) A fee simple estate therein, legal or equitable; or
    (2) A leasehold estate running or renewable at the option of the 
lessee for a period of not less than 14 years from the maturity of the 
loan, or to any earlier date at which the fee simple title will vest in 
the lessee, which is assignable or transferable, if the same be 
subjected to the lien; however, a leasehold estate which is not freely 
assignable and transferable will be considered an acceptable estate if 
it is determined by the Under Secretary for Benefits, or the Director, 
Loan Guaranty Service, (i) that such type of leasehold is customary in 
the area where the property is located, (ii) that a veteran or veterans 
will be prejudiced if the requirement for free assignability is adhered 
to and, (iii) that the assignability and other provisions applicable to 
the leasehold estate are sufficient to protect the interests of the 
veteran and the Government and are otherwise acceptable; or
    (3) A life estate, provided that the remainder and reversionary 
interests are subjected to the lien; or
    (4) A beneficial interest in a revocable Family Living Trust that 
ensures that the veteran, or veteran and spouse, have an equitable life 
estate, provided the lien attaches to any remainder interest and the 
trust arrangement is valid under State law.

The title to such estate shall be such as is acceptable to informed 
buyers, title companies, and attorneys, generally, in the community in 
which the property is situated, except as modified by paragraph (b) of 
this section.

[[Page 571]]

    (b) Any such property or estate will not fail to comply with the 
requirements of paragraph (a) of this section by reason of the 
following:
    (1) Encroachments;
    (2) Easements;
    (3) Servitudes;
    (4) Reservations for water, timber, or subsurface rights;
    (5) Right in any grantor or cotenant in the chain of title, or a 
successor of either, to purchase for cash, which right by the terms 
thereof is exercisable only if:
    (i) An owner elects to sell,
    (ii) The option price is not less than the price at which the then 
owner is willing to sell to another, and
    (iii) Exercised within 30 days after notice is mailed by certified 
mail to the address of optionee last known to the then owner of the then 
owner's election to sell, stating the price and the identity of the 
proposed vendee;
    (6) State and local housing agency deed restrictions provided that 
the veteran obtained the property under a State or local political 
subdivision program designed to assist low- or moderate-income 
purchasers, and as a condition the purchaser must agree to one or more 
of the following restrictions:
    (i) If the property is resold within a time period as established by 
local law or ordinance, after the purchaser acquires title, the 
purchaser must first offer the property to the government housing 
agency, or a low- or moderate-income purchaser designated by such 
agency, provided the option to purchase is exercised within 90 days 
after notice by the purchaser to the agency of intention to sell;
    (ii) If the property is resold within a time period as established 
by local law or ordinance, after the purchaser acquires title, a 
governmental agency may specify a maximum price for the property upon 
resale; or
    (iii) Such other restriction approved by the Secretary designed to 
insure either that a property acquired under such program again be made 
available to low- or moderate-income purchasers, or to prevent a private 
purchaser from obtaining a windfall profit on the resale of such 
property, while assuring that the purchaser has a reasonable opportunity 
to dispose of the property without undue difficulty at a reasonable 
price.

The sale price of a property under any of the restrictions of paragraph 
(b)(6) of this section shall not be less than the lowest of the 
following: The price designated by the owner as the asking price; the 
appraised value of the property; or the original purchase price of the 
property, increased by a factor reflecting all or a reasonable portion 
of the increased costs of housing or the percentage increase in median 
income in the area between the date of original purchase and resale, 
plus the reasonable value or actual costs of any capital improvements 
made by the owner, plus a reasonable real estate commission less the 
cost of necessary repairs required to place the property in saleable 
condition; or other reasonable formula approved by the Secretary. The 
veteran must be fully informed and consent in writing to the deed 
restrictions. A copy of the veteran's consent statement must be 
forwarded with the application for manufactured home loan guaranty or 
the report of a manufactured home loan processed on the automatic basis;


(Authority: 38 U.S.C. 3712(g)).

    (7) A recorded restriction on title designed to provide housing for 
older persons, provided that the restriction is acceptable under the 
provisions of the Fair Housing Act, title VIII of the Civil Rights Act 
of 1968, as amended by the Fair Housing Amendments Act of 1988, 42 
U.S.C. 3601 et seq. The veteran must be fully informed and consent in 
writing to the restrictions. A copy of the veteran's consent statement 
must be forwarded with the application for manufactured home loan 
guaranty or the report of a manufactured home loan processed on the 
automatic basis;


(Authority: 38 U.S.C. 501, 3703(c)(1), 3712(g))

    (8) Building and use restrictions whether or not enforceable by a 
reverter clause if there has been no breach of the conditions affording 
a right to an exercise of the reverter;
    (9) Violation of a restriction based on race, color, religion, sex, 
handicap, familial status, or national origin,

[[Page 572]]

whether or not such restriction provides for reversion or forfeiture of 
title or a lien for liquidated damages in the event of a breach;
    (10) Any other covenant, condition, restriction, or limitation 
approved by the Secretary in the particular case. Such approval shall be 
a condition precedent to the guaranty of the loan;
    (c) The following limitations on the quantum or quality of the 
estate or property shall be deemed for the purposes of paragraph (b) of 
this section to have been taken into account in the appraisal of the 
manufactured home lot and determined by the Secretary as not materially 
affecting the reasonable value of such property:
    (1) Building or use restrictions. Provided, (i) no violation exists, 
(ii) the proposed use by a veteran does not presage a violation of a 
condition affording a right of reverter, and (iii) any right of future 
modification contained in the building or use restrictions is not 
exercisable, by its own terms, until at least 10 years following the 
date of the loan.
    (2) Violations of equal opportunity restrictions. Violations of a 
restriction based on race, color, religion, sex, handicap, familial 
status, or national origin, whether or not such restriction provides for 
reversion or forfeiture of title or a lien for liquidated damages in the 
event of a breach.
    (3) Violations of building or use restrictions of record. Violations 
of building or use restrictions of record which have existed for more 
than 1 year, are not the subject of pending or threatened litigation, 
and which do not provide for a reversion or termination of title or 
condemnation by municipal authorities or a lien for liquidated damages 
which may be superior to the lien securing the guaranteed loan.
    (4) Easements. (i) Easements for public utilities along one or more 
of the property lines and easements for drainage or irrigation ditches, 
provided the exercise of the rights thereof do not interfere with the 
use of the manufactured home or improvements located on the subject 
property.
    (ii) Mutual easements for joint driveways located partly on the 
subject property and partly on adjoining property, provided the 
agreement is recorded in the public records.
    (iii) Easements for underground conduits which are in place and 
which do not extend under any buildings in the subject property.
    (5) Encroachments. (i) On the subject property by improvements on 
the adjoining property where such encroachments do not exceed 1 foot 
within the subjects boundaries, provided such encroachments do not touch 
any buildings or interfere with the use or enjoyment of any building or 
improvement on the subject property.
    (ii) By hedges or removable fences belonging to subject or adjoining 
property.
    (iii) Not exceeding 1 foot on adjoining property by driveways 
belonging to subject property, provided there exists a clearance of at 
least 8 feet between the buildings on the subject propert and the 
property line affected by the encroachment.
    (6) Variations of lot lines. Variations between the length of the 
subject property lines as shown on the plot plan or other exhibits 
submitted to the Department of Veterans Affairs and as shown by the 
record or possession lines, provided such variations do not interfere 
with the current use of any of the improvements on the subject property 
including the manufactured home and do not involve a deficiency of more 
than 2 percent with respect to the length of the front line or more than 
5 percent with respect to the length of any other line.
    (d) In a combination loan (loan to finance the purchase of a 
manufactured home and to finance the purchase of a lot and/or necessary 
site preparation) the total indebtedness of the veteran arising from 
such combination loan transaction must be secured by a first lien or the 
equivalent thereof on the estate of the veteran in the manufactured home 
lot, which real estate security interest shall be in addition to the 
manufactured home security interest required by Sec. 36.4234.
    (e) Tax liens special assessment liens, and ground rents shall be 
disregarded with respect to any requirement that loans shall be secured 
by a lien of specified dignity. With the prior approval of the 
Secretary, Under Secretary for

[[Page 573]]

Benefits, or Director, Loan Guaranty Service, liens retained by 
nongovernmental entities to secure assessments or charges for municipal 
type services and facilities clearly within the public purpose doctrine 
may be disregarded. In determining whether a loan for the purchase or 
improvement of a manufactured home lot is secured by a first lien the 
Secretary may also disregard a superior lien created by a duly recorded 
covenant running with the realty in favor of a private entity to secure 
an obligation to such entity for the homeowner's share of the costs of 
the management, operation, or maintenance of property, services or 
programs within and for the benefit of the development or community in 
which the veteran's realty is located, if the Secretary determines that 
the interests of the veteran-borrower and of the Government will not be 
prejudiced by the operation of such covenant. In respect to any such 
superior lien created after June 6, 1969, the Secretary's determination 
must have been made prior to the recordation of the covenant.
    (f) In the case of a combination loan or a loan to purchase a lot 
upon which a manufactured home owned by the veteran will be placed it 
shall be the responsibility of the lender that the veteran initially 
obtains or has an estate in the land constituting the manufactured home 
lot meeting the requirements of paragraph (a) of this section and to 
obtain and retain a security interest thereon meeting the requirements 
of paragraph (d) of this section.
    (g) In the case of a combination loan to purchase a manufactured 
home lot and to refinance an existing purchase money loan on a 
manufactured home unit which is or will be located on the lot to be 
purchased, it shall be the responsibility of the lender to assure that 
the veteran obtains or retains an estate in the manufactured home and in 
the land meeting the requirements of paragraph (a) of this section and 
Sec. 36.4234. The lender must also obtain and retain a first lien or 
the equivalent thereof on the estate of the veteran in both the 
manufactured home and in the lot on which the manufactured home is 
located.


(Authority: 38 U.S.C. 501, 3703(c), and 3712 (a)(1)(G), (e)(3) and (g))

[36 FR 3368, Feb. 23, 1971, as amended at 45 FR 55720, Aug. 21, 1980; 47 
FR 49393, Nov. 1, 1982; 48 FR 40231, Sept. 9, 1983; 49 FR 22081, May 25, 
1984; 55 FR 25976, June 26, 1990; 58 FR 37860, July 14, 1993; 61 FR 
28058, June 4, 1996]



Sec. 36.4254  Fees and charges.

    (a) Except as provided in Sec. 36.4232 fees and charges incident to 
origination of a combination loan or a loan to purchase a lot upon which 
a manufactured home owned by the veteran will be placed which may be 
paid by the veteran shall be limited, with respect to the real estate 
portion of the loan, to reasonable and customary amounts for any of the 
following:
    (1) Fees of the Department of Veterans Affairs appraiser and of 
compliance inspectors designated by the Department of Veterans Affairs, 
except appraisal fees incurred for the predetermination of reasonable 
value requested by others than veteran or lender,
    (2) Recording fees and recording taxes or other charges incident to 
recordation,
    (3) Credit report,
    (4) That portion of taxes, assessments, and other similar items for 
the current year chargeable to the borrower and an initial deposit 
(lump-sum payment) for any tax and insurance account,
    (5) Survey, if required by lender or veteran,
    (6) Title examination and title insurance, if any,
    (7) The actual amount charged for flood zone determinations, 
including a charge for a life-of-the-loan flood zone determination 
service purchased at the time of loan origination, if made by a third 
party who guarantees the accuracy of the determination. A fee may not be 
charged for a flood zone determination made by a Department of Veterans 
Affairs appraiser or for the lender's own determination, and
    (8) Such other items as may be authorized in advance by the Under 
Secretary for Benefits as appropriate for

[[Page 574]]

inclusion under this paragraph as proper local variances.


(Authority: 38 U.S.C. 3712; 42 U.S.C. 4001 note, 4012a)

    (b) A lender may charge and the veteran may pay a flat charge not 
exceeding one (1) percent of the amount of the loan less the portion 
thereof allocated to the manufactured home: Provided, That such flat 
charge shall be in lieu of all other charges relating to costs of 
origination not expressly specified and allowed in this schedule.
    (c) Except for a refinancing loan pursuant to 38 U.S.C. 
3712(a)(1)(F) or (G) fees and charges specified in this section may not 
be included in the loan.
    (d)(1) Notwithstanding the provisions of paragraph (c) of this 
section and subject to the limitations set out in paragraphs (d)(4) and 
(d)(5) of this section, a fee must be paid to the Secretary. A fee of 1 
percent of the total loan amount must be paid to the Secretary before a 
combination manufactured home and lot loan (or a loan to purchase a lot 
upon which a manufactured home owned by the veteran will be placed) will 
be eligible for guaranty. Provided, however, that the fee shall be 0.50 
percent of the total loan amount for interest rate reduction refinancing 
loans guaranteed under 38 U.S.C. 3712(a)(1)(F). All or part of such fee 
may be paid in cash at loan closing or all or part of the fee may be 
included in the loan without regard to the reasonable value of the 
property or the computed maximum loan amount, as appropriate. In 
computing the fee, the lender will disregard any amount included in the 
loan to enable the borrower to pay such fee.


(Authority: 38 U.S.C. 3729(a))

    (2) Subject to the limitations set out in paragraphs (d)(3) and 
(d)(4) of this section, a fee of one-half of one percent of the loan 
balance must be paid to the Secretary in a manner prescribed by the 
Secretary by a person assuming a loan to which section 3714 of chapter 
37 of 38 U.S.C. applies. The instrument securing such a loan shall 
contain a provision describing the right of the holder to collect this 
fee as trustee for the Department of Veterans Affairs. The loan holder 
shall list the amount of this fee in every assumption statement provided 
and include a notice that the fee must be paid to the holder immediately 
following loan settlement. The fee must be transmitted to the Secretary 
within 15 days of receipt by the holder of notice of the transfer.


(Authority: 38 U.S.C. 3714, 3729)

    (3) The lender is rquired to pay to the Secretary the fee described 
in paragraph (d)(1) of this section within 15 days after loan closing. 
Any lender closing a loan, subject to the limitations set out in 
paragraphs (d)(4) and (d)(5) of this section, who fails to submit timely 
payment of this fee will be subject to a late charge equal to 4 percent 
of the total fee due. If payment of the 1 percent fee is made more than 
30 days after loan closing, interest will be assessed at a rate set in 
conformity with the Department of Treasury's Fiscal Requirements Manual. 
This interest charge is in addition to the 4 percent late charge, but 
the late charge is not included in the amout on which interest is 
computed. This interest charge is to be calculated on a daily basis 
beginning on the date of closing, although the interest will be assessed 
only on funding fee payments received more than 30 days after closing.


(Authority: 38 U.S.C. 501)

    (4) The lender is required to pay to the Secretary electronically 
through the Automated Clearing House (ACH) system the fees described in 
paragraphs (d)(1) and (d)(2) of this section and any late fees and 
interest due on them. This shall be paid to a collection agent by 
operator-assisted telephone, terminal entry, or CPU-to-CPU transmission. 
The collection agent will be identified by the Secretary. The lender 
shall provide the collection agent with the following: authorization for 
payment of the funding fee (including late fees and interest) along with 
the following information: VA lender ID number; four-digit personal 
identification number; dollar amount of debit; VA loan number; OJ 
(office of jurisdiction) code; closing date; loan amount; information 
about whether the payment includes a shortage, late charge, or interest; 
veteran name; loan type; sale amount; downpayment; whether the

[[Page 575]]

veteran is a reservist; and whether this is a subsequent use of 
entitlement. For all transactions received prior to 8:15 p.m. on a 
workday, VA will be credited with the amount paid to the collection 
agent at the opening of business the next banking day.


(Authority: 38 U.S.C. 3729(a))

    (5) The fee described in paragraphs (d)(1) and (d)(2) of this 
section shall not be collected from a veteran who is receiving 
compensation or who but for the receipt of retirement pay would be 
entitled to receive compensation) or from a surviving spouse described 
in section 3701(b)(2) of title 38 U.S.C.


(Authority: 38 U.S.C. 3729(b))

    (6) Collection of the loan fee in this paragraph does not apply to 
loans closed prior to August 17, 1984, between October 1, and October 
15, 1987, inclusive, between November 16 and December 20, 1987, 
inclusive, nor to loans closed after September 30, 1989.


(Authority: 38 U.S.C. 3729(c))

(The information collection requirements in this section have been 
approved by the Office of Management and Budget under control number 
2900-0474)

[36 FR 3369, Feb. 23, 1971, as amended at 46 FR 43671, Aug. 31, 1981; 47 
FR 46700, Oct. 20, 1982; 48 FR 40231, Sept. 6, 1983; 50 FR 5754, Feb. 
12, 1985; 53 FR 27048, July 18, 1988; 55 FR 37473, Sept. 12, 1990; 60 FR 
38259, July 26, 1995; 61 FR 28058, June 4, 1996; 62 FR 63278, Nov. 28, 
1997]



Sec. 36.4255  Loans for the acquisition of a lot.

    (a) A loan to finance all or part of the cost of acquisition by the 
veteran of a lot on which to place a manufactured home owned by the 
veteran shall be eligible for guaranty, Provided, That:
    (1) The veteran will acquire title to such lot that conforms to the 
requirements of Sec. 36.4253(a),
    (2) The loan is secured as required by Sec. 36.4253(d),
    (3) The lot is determined by the Secretary to be an acceptable 
manufactured homesite pursuant to Sec. 36.4208,
    (4) The portion of the loan allocated to acquisition of the lot does 
not exceed the reasonable value of the lot as determined by the 
Secretary,
    (5) The loan conforms otherwise to the requirements of the Sec. 
36.4200 series.
    (b) The cost of lot acquisition which will not be paid from the 
proceeds of the loan must be paid by the veteran in cash from his or her 
own resources.
    (c) For the purpose of this section, acquisition of a manufactured 
home lot includes:
    (1) The refinancing of the balance owed by the veteran as purchaser 
under an existing real estate installment contract, and
    (2) The refinancing of existing mortgage loans or other liens which 
are secured of record on a manufactured home lot owned by the veteran.


(Authority: 38 U.S.C. 501, and 3712(g))

[40 FR 13215, Mar. 25, 1975, as amended at 48 FR 40231, Sept. 6, 1983]

              servicing, liquidation of security and claim



Sec. 36.4275  Events constituting default and acceptability of partial 
payments.

    (a) Except as provided in paragraphs (a)(1), (a)(2) and (a)(3) of 
this section, the conveyance of or other transfer of title to property 
by operation of law or otherwise, after the creation of a lien thereon 
to secure a loan which is guaranteed in whole or in part by the 
Secretary, shall not constitute an event of default, or acceleration of 
maturity, elective or otherwise, and shall not of itself terminate or 
otherwise affect the guaranty.
    (1) The Secretary may issue guaranty on loans in which a State, 
Territorial, or local governmental agency provides assistance to a 
veteran for the acquisition of a mobile home or lot. Such loans will not 
be considered ineligible for guaranty if the State, Territorial, or 
local authority, by virtue of its laws or regulations or by virtue of 
Federal law, requires the acceleration of maturity of the loan upon the 
sale or conveyance of the security property to a person ineligible for 
assistance from such authority.
    (2) At the time of application for a loan assisted by a State, 
Territorial, or local governmental agency, the veteran-applicant must be 
fully informed and consent in writing to the housing

[[Page 576]]

authority restrictions. A copy of the veteran's consent statement must 
be forwarded with the loan application or the report of a loan processed 
on the automatic basis.
    (3) Any housing loan which is financed under 38 U.S.C. chapter 37 
and to which section 3714 of that chapter applies, shall include a 
provision in the security instrument that the holder may declare the 
loan immediately due and payable upon transfer of the property securing 
such loan to any transferee unless the acceptability of the assumption 
of the loan is established pursuant to section 3714.
    (i) A holder may not exercise its option to accelerate a loan upon:
    (A) The creation of a lien or other encumbrance subordinate to the 
lender's security instrument which does not relate to a transfer of 
rights of occupancy in the property;
    (B) The creation of a purchase money security interest for household 
appliances;
    (C) A transfer by devise, descent, or operation of law on the death 
of a joint tenant or tenant by the entirety;
    (D) The granting of a leasehold interest of three years or less not 
containing an option to purchase;
    (E) A transfer to a relative resulting from the death of a borrower;
    (F) A transfer where the spouse or children of the borrower become 
joint owners of the property with the borrower;
    (G) A transfer resulting from a decree of a dissolution of marriage, 
legal separation agreement, or from an incidental property settlement 
agreement by which the spouse of the borrower becomes the sole owner of 
the property. In such a case the borrower shall have the option of 
applying directly to the Department of Veterans Affairs regional office 
of jurisdiction for a release of liability in accordance with Sec. 
36.4285 of this part; or
    (H) A transfer into an inter vivos trust in which the borrower is 
and remains a beneficiary and which does not relate to a transfer of 
rights of occupancy in the property.
    (ii) Any instrument evidencing the loan (i.e., the retail 
installment contract, promissory note and/or mortgage or deed of trust) 
shall bear in a conspicuous position in capital letters on the first 
page of the document in type at least 2\1/2\ times larger in height than 
the regular type on such page the following warning: ``THIS LOAN IS NOT 
ASSUMABLE WITHOUT THE APPROVAL OF THE DEPARTMENT OF VETERANS AFFAIRS OR 
ITS AUTHORIZED AGENT.'' Due to the difficulty in obtaining some 
commercial type sizes which are exactly 2\1/2\ times larger in height 
than other sizes, minor deviations will be permitted based on 
commercially available type sizes nearest to 2\1/2\ times the size of 
the print on the document. A similar warning in regular size type must 
appear on every assumption statement provided on a loan to which this 
paragraph applies.
    (iii) On any loan to which 38 U.S.C. 3714 applies, the holder may 
charge a reasonable fee, not to exceed the lesser of (A) $300 and the 
actual cost of any credit report required, or (B) any maximum prescribed 
by applicable state law, for processing an application for assumption 
and changing its records. A provision authorizing the collection by the 
holder of this fee shall be contained in the instrument securing the 
loan.


(Authority: 38 U.S.C. 3704 and 3714)

    (b) The inclusion in the guaranteed obligation of a provision 
contrary to the provisions of this section or Sec. 36.4211 shall not 
impair the right of the holder to payment of the guaranty provided that:
    (1) Default was declared or maturity was accelerated under some 
other provision of the note, mortgage, or other loan instrument, or
    (2) Activation or enforcement of such provision is warranted under 
Sec. 36.4280, or
    (3) The prior approval of the Secretary was obtained.
    (c) If the title to real property or a leasehold interest therein 
which secures a manufactured home loan guaranteed after December 22, 
1970, is restricted against sale or occupancy on the ground of race, 
color, religion, or national origin, by restrictions created and filed 
of record by the borrower subsequent to that date, such action, at the 
election of the holder, shall constitute an event of default entitling 
the

[[Page 577]]

holder to declare the unpaid balance of the loan immediately due and 
payable.
    (d) The holder of any guaranteed obligation shall have the right, 
notwithstanding the absence of express provision therefor in the 
instruments evidencing the indebtedness, to accelerate the maturity of 
such obligation at any time after the continuance of any default for the 
period specified in Sec. 36.4280.
    (e) If sufficient funds are tendered to bring a delinquency current 
at any time prior to repossession or foreclosure of the manufactured 
home the holder shall be obligated to accept the funds in payment of the 
delinquency, unless the prior approval of the Secretary is obtained to 
do otherwise.
    (f) A partial payment is a remittance on a loan in default (as 
defined in Sec. 36.4202(c)) of any amount less than the full amount due 
under the terms of the loan and security instruments at the time the 
remittance is tendered.
    (1) Except as provided in paragraph (f)(2) of this section, or upon 
the express waiver of the Secretary, the holder shall accept any partial 
payment and either apply it to the obligor's account or identify it with 
the obligor's account and hold it in a special account pending 
disposition. When partial payments held for disposition aggregate a full 
monthly installment, including escrow, they shall be applied to the 
obligor's account.
    (2) A partial payment may be returned to the obligor within 10 
calendar days from date of receipt of such payment, with a letter of 
explanation only if one or more of the following conditions exist:
    (i) The property is wholly or partially tenant-occupied and rental 
payments are not being remitted to the holder for application to the 
loan account;
    (ii) The payment is less than one full monthly installment, 
including escrows and late charge, if applicable, unless the lesser 
payment amount has been agreed to under a written repayment plan;
    (iii) The payment is less than 50 percent of the total amount then 
due, unless the lesser payment amount has been agreed to under a written 
repayment plan;
    (iv) The payment is less than the amount agreed to in a written 
repayment plan;
    (v) The amount tendered is in the form of a personal check and the 
holder has previously notified the obligor in writing that only cash or 
certified remittances are acceptable;
    (vi) A delinquency of any amount has continued for at least 6 months 
since the account first became delinquent and no written repayment plan 
has been arranged;
    (vii) Foreclosure and/or repossession has been commenced by the 
taking of the first action required for foreclosure/repossession under 
local law;
    (viii) The holder's lien position would be jeopardized by acceptance 
of the partial payment.
    (3) A failure by the holder to comply with the provisions of this 
paragraph may result in a partial or total loss of guaranty or insurance 
pursuant to Sec. 36.4286(b), but such failure shall not constitute a 
defense to any legal action to terminate the loan.


(Authority: 38 U.S.C. 501, 3703(c), 3712(g))

(Approved by the Office of Management and Budget under control number 
2900-0516)

[45 FR 31064, May 12, 1980, as amended at 46 FR 51386, Oct. 20, 1981; 55 
FR 37474, Sept. 12, 1990]



Sec. 36.4276  Advances and other charges.

    (a) A holder may advance any reasonable amount necessary and proper 
for the maintenance or repair of the security, or for the payment of 
accrued taxes, special assessments or other charges which constitute 
prior liens, or premiums on fire or other hazard insurance against loss 
of or damage to such property and any such advance so made may be added 
to the guaranteed indebtedness. A holder may also advance the one-half 
of one percent funding fee due on a transfer under 38 U.S.C. 3714 when 
this is not paid at the time of transfer. All security instruments for 
loans to which 38 U.S.C. 3714 applies must include a clause authorizing 
an advance for this purpose if it is not paid at the time of transfer.


(Authority: 38 U.S.C. 3714)

    (b) In addition to advances allowable under paragraph (a) of this 
section, the

[[Page 578]]

holder may charge against the proceeds of the sale of the security; 
against gross amounts collected; or, in the computation of a claim under 
the guaranty, if lawfully authorized by the loan agreement and subject 
to Sec. 36.4284, any of the following items actually paid:
    (1) Any expense which is reasonably necessary for preservation of 
the security,
    (2) Court costs in a foreclosure or other proper judicial proceeding 
involving the security,
    (3) Other expenses reasonably necessary for collecting the debt, or 
repossession or liquidation of the security, including a reasonable 
sales commission to the dealer or sales broker for resale of the 
security,
    (4) Reasonable trustee's fees or commissions paid incident to the 
sale of real property,
    (5) Reasonable amount for legal services actually performed not to 
exceed 10 percent of the unpaid indebtedness as of the date of the first 
uncured default, or $850 whichever is less. In no event may the combined 
total of the amounts claimed for trustee's fees and legal services 
(paragraphs (b)(4) and (5) of this section) exceed $850.
    (6) The cost of a credit report(s) on the debtor(s), which is (are) 
to be forwarded to the Secretary in connection with the claim,
    (7) Reasonable and customary costs of property inspections,
    (8) Any other expense or fee that is approved in advance by the 
Secretary.


(Authority: 38 U.S.C. 3720(g))

    (c) In claims filed under Sec. 36.4283(f)(4) of this part, the 
following costs and expenditures actually incurred and paid may be 
included in the computation of the indebtedness:
    (1) Property preservation or repair costs incurred prior to the date 
of the liquidation appraisal, to the extent that they contributed to the 
minimum selling price of the property as determined by the Secretary, 
and subject to the limitation that they do not exceed the actual cost 
incurred by the holder, and,
    (2) Costs of loan termination, including, but not limited to:
    (i) The reasonable and customary expense of transporting the home to 
the site where it will be repaired and/or resold;
    (ii) The cost of the liquidation appraisal;
    (iii) A reasonable amount for legal services actually performed and 
trustee fees, not to exceed a total of $700;
    (iv) Court costs in a foreclosure or other judicial proceeding 
involving the security;
    (v) Any other expenses reasonably necessary for repossession of the 
security or other termination of the loan; and,
    (vi) Any other expense or fee that is approved in advance by the 
Secretary.

[36 FR 1253, Jan. 27, 1971, as amended at 45 FR 38056, June 6, 1980; 53 
FR 27049, July 18, 1988; 53 FR 34295, Sept. 6, 1988; 55 FR 37474, Sept. 
12, 1990; 58 FR 29114, May 19, 1993; 58 FR 37860, July 14, 1993; 59 FR 
48565, Sept. 22, 1994]



Sec. 36.4277  Release of security.

    (a) Except upon full payment of the indebtedness the holder shall 
not release a lien or other right in or to property held as security for 
a guaranteed loan, or grant a fee or other interest in such property, 
without the prior approval of the Secretary, unless in the opinion of 
the holder such release does not involve a decrease in the value of the 
security in excess of $500: Provided, That the aggregate of the 
reduction in the original value of the security resultant from such 
releases without the Secretary's prior approval does not exceed $500.
    (b) Except upon full payment of the indebtedness or upon the prior 
approval of the Secretary, the holder shall not release a lien under 
paragraph (a) of this section unless the consideration received for the 
release is commensurate with the fair market value of the property 
released and the entire consideration is applied to the indebtedness, or 
if encumbrance on other property is accepted in lieu of that released it 
shall be the holder's duty to acquire such lien on property of 
substantially equal value which is reasonably capable of serving the 
purpose for which the property released was utilized.
    (c) Failure of the holder to comply with the provisions of this 
section shall not in itself affect the validity of the

[[Page 579]]

title of a purchaser to the property released.
    (d) The holder shall notify the Secretary of any such release or 
substitution of security within 30 days after completion of such 
transaction.
    (e) The release of the personal liability of any obligor on a 
guaranteed obligation resultant from the act or omission of any holder 
without the prior approval of the Secretary shall release the obligation 
of the Secretary as guarantor, except when such act or omission consists 
of
    (1) Failure to establish the debt as a valid claim against the 
assets of the estate of any deceased obligor, provided no lien for the 
guaranteed debt is thereby impaired or destroyed; or
    (2) An election and appropriate prosecution of legally available 
effective remedies with respect to the repossession or the liquidation 
of the security in any case, irrespective of the identity or the 
survival of the original or of any subsequent debtor, if holder shall 
have given such notice as required by Sec. 36.4280 and if, after 
receiving such notice, the Secretary shall have failed to notify the 
holder within 15 days to proceed in such manner as to effectively 
preserve the personal liability of the parties liable, or such of them 
as the Secretary indicates is such notice to the holder; or
    (3) The release of an obligor, or obligors, from liability on an 
obligation secured by a lien on property, which release is an incident 
of and contemporaneous with the sale of such property to an eligible 
veteran who assumed such obligation, which assumed obligation is 
guaranteed on his or her account pursuant to 38 U.S.C. 3712; or
    (4) The release of an obligor or obligors as provided in Sec. 
36.4279.
    (5) The release of an obligor, or obligors, incident to the sale of 
property which the holder is authorized to approve under the provisions 
of 38 U.S.C. 3714.


(Authority: 38 U.S.C. 3714)

[36 FR 1253, Jan. 27, 1971, as amended at 53 FR 34295, Sept. 6, 1988; 55 
FR 37474, Sept. 12, 1990]



Sec. 36.4278  Servicing procedures for holders.

    (a) Establishment of loan servicing program. The holder of a loan 
guaranteed or insured by the Secretary shall develop and maintain a loan 
servicing program which follows accepted industry standards for 
servicing of similar type conventional loans. The loan servicing program 
established pursuant to this section may employ different servicing 
approaches to fit individual borrower circumstances and avoid 
establishing a fixed routine. However, it must incorporate each of the 
provisions specified in paragraphs (b) through (l) of this section.
    (b) Procedures for providing information. (1) Loan holders shall 
establish procedures to provide loan information to borrowers, arrange 
for individual loan consultations upon request and maintain controls to 
assure prompt responses to inquiries. One or more of the following means 
of making information readily available to borrowers is required:
    (i) An office staffed with trained servicing personnel with access 
to loan account information located within 200 miles of the property.
    (ii) Toll-free telephone service or acceptance of collect telephone 
calls at an office capable of providing needed information.
    (2) All borrowers must be informed of the system available for 
obtaining answers to loan inquiries, the office from which the needed 
information may be obtained, and reminded of the system at least 
annually.
    (c) Statement for income tax purposes. Within 60 days after the end 
of each calendar year, the holder shall furnish to the borrower a 
statement of the interest paid and, if applicable, a statement of the 
taxes disbursed from the escrow account during the preceding year. At 
the borrower's request, the holder shall furnish a statement of the 
escrow account sufficient to enable the borrower to reconcile the 
account.
    (d) Change of servicing. Whenever servicing of a loan guaranteed or 
insured by the Secretary is transferred from one holder to another, 
notice of such transfer by both the transferor and transferee, the form 
and content of such notice, the timing of such notice,

[[Page 580]]

the treatment of payments during the period of such transfer, and 
damages and costs for failure to comply with these requirements shall be 
governed by the pertinent provisions of the Real Estate Settlement 
Procedures Act as administered by the Department of Housing and Urban 
Development.
    (e) Escrow accounts. A holder of a loan guaranteed or insured by the 
Secretary may collect periodic deposits from the borrower for taxes and/
or insurance on the security and maintain a tax and insurance escrow 
account provided such a requirement is authorized under the terms of the 
security instruments. In maintaining such accounts, the holder shall 
comply with the pertinent provisions of the Real Estate Settlement 
Procedures Act.
    (f) System for servicing delinquent loans. In addition to the 
requirements of the Real Estate Settlement Procedures Act concerning the 
duties of the loan servicer to respond to borrower inquiries, to protect 
the borrower's credit rating during a payment dispute period, and to pay 
damages and costs for noncompliance, holders shall establish a system 
for servicing delinquent loans which ensures that prompt action is taken 
to collect amounts due from borrowers and minimize the number of loans 
in a default status. The holder's servicing system must include the 
following:
    (1) An accounting system which promptly alerts servicing personnel 
when a loan becomes delinquent;
    (2) A collection staff which is trained in techniques of loan 
servicing and counseling delinquent borrowers to advise borrowers how to 
cure delinquencies, protect their equity and credit rating and, if the 
default is insoluble, pursue alternatives to foreclosure;
    (3) Procedural guidelines for individual analysis of each 
delinquency;
    (4) Instructions and appropriate controls for sending delinquent 
notices, assessing late charges, handling partial payments, maintaining 
servicing histories and evaluating repayment proposals;
    (5) Management review procedures for evaluating efforts made to 
collect the delinquency and the response from the borrower before a 
decision is made to initiate action to liquidate a loan;
    (6) Procedures for reporting delinquencies of 90 days or more and 
loan terminations to major consumer credit bureaus as specified by the 
Secretary and for informing borrowers that such action will be taken; 
and,
    (7) Controls to ensure that all notices required to be given to the 
Secretary on delinquent loans are provided timely and in such form as 
the Secretary shall require.
    (g) Collection actions. (1) Holders should employ collection 
techniques which provide flexibility to adapt to the individual needs 
and circumstances of each borrower. A variety of collection techniques 
may be used based on the holder's determination of the most effective 
means of contact with borrowers during various stages of delinquency. 
However, at a minimum, the holder's collection procedures must include 
the following actions:
    (i) A written delinquency notice to the borrower(s) requesting 
immediate payment if a loan installment has not been received within 17 
days after the due date. This notice must be mailed no later than the 
20th day of the delinquency and state the amount of the payment and of 
any late charges that are due.
    (ii) An effort, concurrent with the written delinquency notice, to 
establish contact with the borrower(s) by telephone. When talking with 
the borrower(s), the holder should attempt to determine why payment was 
not made and emphasize the importance of remitting loan installments as 
they come due.
    (iii) A letter to the borrower(s) if payment has not been received 
within 30 days after it is due and telephone contact could not be made. 
This letter should emphasize the seriousness of the delinquency and the 
importance of taking prompt action to resolve the default. It should 
also notify the borrower(s) that the loan is in default, state the total 
amount due and advise the borrower(s) how to contact the holder to make 
arrangements for curing the default.

[[Page 581]]

    (iv) In the event the holder has not established contact with the 
borrower(s) and has not determined the financial circumstances of the 
borrower(s) or established a reason for the default or obtained 
agreement to a repayment plan from the borrower(s), then a face-to-face 
interview with the borrower(s) or a reasonable effort to arrange such a 
meeting is required.
    (2) The holder must provide a valid explanation of any failure to 
perform these collection actions when reporting loan defaults to the 
Secretary. A pattern of such failure may be a basis for sanctions under 
38 CFR 36.4216.
    (h) Conducting interviews with delinquent borrowers. When personal 
contact with the borrower(s) is established, the holder shall solicit 
sufficient information to properly evaluate the prospects for curing the 
default and whether the granting of forbearance or other relief 
assistance would be appropriate. At a minimum, the holder must make a 
reasonable effort to establish the following facts:
    (1) The reason for the default and whether the reason is a temporary 
or permanent condition;
    (2) The present income and employment of the borrower(s);
    (3) The current monthly expenses of the borrower(s) including 
household and debt obligations;
    (4) The current mailing address and telephone number of the 
borrower(s); and,
    (5) A realistic and mutually satisfactory arrangement for curing the 
default.
    (i) Property inspection. (1) The holder shall make an inspection of 
the property securing the loan whenever it becomes aware that the 
physical condition of the security may be in jeopardy. Unless a 
repayment agreement is in effect, a property inspection shall also be 
made:
    (i) Before the 60th day of delinquency or before initiating action 
to liquidate a loan, whichever is earlier; and
    (ii) At least once each month after liquidation proceedings have 
been started unless servicing information shows the property remains 
owner-occupied.
    (2) Whenever a holder obtains information which indicates that a 
property securing a loan is abandoned, it shall make appropriate 
arrangements to protect the property from vandalism and the elements. 
Thereafter, the holder shall schedule inspections at least monthly to 
prevent unnecessary deterioration due to vandalism, or neglect. With 
respect to any loan more than 30 days delinquent, a property abandonment 
must be reported to the Secretary and appropriate action initiated under 
36.4280(e) within 15 days after the holder confirms the property is 
abandoned.
    (j) Collection records. The holder shall maintain individual file 
records of collection action on delinquent loans and make such records 
available to the Secretary for inspection on request. Such collection 
records shall show:
    (1) The dates and content of letters and notices which were mailed 
to the borrower(s);
    (2) Dated summaries of each personal servicing contact and the 
result of same;
    (3) The indicated reason(s) for default; and
    (4) The date and result of each property inspection.
    (k) Reporting to the Secretary. A summary of collection efforts, the 
information obtained through such efforts and the holder's evaluation of 
the reason for the default and prospects for resolution of the default 
must be included in any notice provided to the Secretary pursuant to 
Sec. 36.4280.
    (l) Quality control procedures. No later than 180 days after the 
effective date of this regulation, each loan holder shall establish 
internal controls to periodically assess the quality of the servicing 
performed on loans guaranteed by the Secretary and assure that all 
requirements of this section are being met. Those procedures must 
provide for a review of the holder's servicing activities at least 
annually and include an evaluation of delinquency and foreclosure rates 
on loans in its portfolio which are guaranteed by the Secretary. As part 
of its evaluation of delinquency and foreclosure rates, the holder 
shall:
    (1) Collect and maintain appropriate data on delinquency and 
foreclosure rates to enable the holder to evaluate the effectiveness of 
its collection efforts;

[[Page 582]]

    (2) Determine how its VA delinquency and foreclosure rates compare 
with rates in various reports published by the industry, investors and 
others; and
    (3) Analyze significant variances between its foreclosure and 
delinquency rates and those found in available reports and publications 
and take appropriate corrective action.
    (m) Holders shall provide available statistical data on delinquency 
and foreclosure rates and their analysis of such data to the Secretary 
upon request.

(Approved by the Office of Management and Budget under Control Number 
2900-0530)

[58 FR 29114, May 19, 1993]



Sec. 36.4279  Extensions and reamortizations.

    (a) Provided the debtor(s) is (are) a reasonable credit risk(s), as 
determined by the holder based upon review of the debtor's (s') 
creditworthiness, including a review of a current credit report(s) on 
the debtor(s), the terms of repayment of any loan may, by written 
agreement between the holder and debtor(s), be extended in the event of 
default, to avoid imminent default, or in any other case where the prior 
approval of the Secretary is obtained. Except with the prior approval of 
the Secretary, no such extension shall set a rate of amortization less 
than that sufficient to fully amortize at least 80 percent of the loan 
balance so extended within the maximum maturity prescribed for loans of 
its class.
    (b) In the event of a partial prepayment pursuant to Sec. 36.4211, 
the balance of the indebtedness may, by written agreement between the 
holder and the debtor(s), be reamortized, provided the reamortization 
schedule will result in full repayment of the loan within the original 
maturity, and provided the debtor(s) is (are) a reasonable credit 
risk(s), as determined by the holder based upon review of the debtor's 
(s') creditworthiness, including a review of a current credit report(s) 
on the debtor(s).
    (c) Unless the prior approval of the Secretary has been obtained, 
any extension or reamortization agreed to by a holder which relieves any 
obligor from liability will release the liability of the Secretary under 
the guaranty on the entire loan. However, if such release of liability 
of an obligor results through operation of law by reason of an extension 
or other act of forbearance, the liability of the Secretary as guarantor 
will not be affected thereby, Provided, The required lien is maintained 
and the title holder is and will remain liable for the payment of the 
indebtedness: And further provided, That if such extension or act of 
forbearance will result in the release of the veteran, all delinquent 
installments, plus any foreclosure expenses which may have been 
incurred, shall have been fully paid.
    (d) The holder shall promptly forward to the Secretary an advice of 
the terms of any agreement effecting a reamortization or extension of a 
guaranteed loan, together with cop(y)(ies) of the credit report(s) 
obtained on the debtor(s).

(Authority: 38 U.S.C. 3712)

[36 FR 1253, Jan. 27, 1971, as amended at 53 FR 34295, Sept. 6, 1988]



Sec. 36.4280  Reporting of defaults.

    The holder of any guaranteed loan shall give notice to the Secretary 
within 15 days after any debtor:
    (a) Is in default by reason of nonpayment of two full installments; 
or
    (b) Is in default by failing to comply with any other covenant or 
obligation of such guaranteed loan which failure persists for a 
continuing period of 60 days after demand for compliance therewith has 
been made, except that if the default is due to nonpayment of real 
estate taxes, the notice shall not be required until the failure to pay 
when due has persisted for a continuing period of 120 days.
    (c) In the event any failure of the months or for more than 1 month 
on an extended loan, the holder may then or thereafter give the notice 
in the manner described in paragraph (e) of this section.
    (d) The notice prescribed in paragraph (e) of this section may be 
submitted prior to the time prescribed in paragraph (c) of this section 
in any case where any material prejudice to

[[Page 583]]

the rights of the holder or to the Secretary or hazard to the security 
warrants more prompt action.
    (e) Except upon the express waiver of the Secretary, a holder shall 
not begin proceedings in court or give notice of sale under power of 
sale, repossess the security, or accelerate the loan, or otherwise take 
steps to terminate the debtor's rights in the security until the 
expiration of 30 days after delivery by certified mail to the Secretary 
of a notice of intention to take such action; provided, that immediate 
action as required under 38 CFR 36.4278(i) may be taken if the property 
to be affected thereby has been abandoned by the debtor, or has been or 
may be otherwise subjected to extraordinary waste or hazard.
    (f) The notice required under subparagraph (e) of this paragraph 
shall also be provided to the original veteran-borrower and any other 
liable obligors by certified mail within 30 days after such notice is 
provided to the Secretary in all cases in which the current owner of the 
property is not the original veteran-borrower. A failure by the holder 
to make a good faith effort to comply with the provisions of this 
subparagraph may result in a partial or total loss of guaranty pursuant 
to VA Regulation 36.4286(b), but such failure shall not constitute a 
defense to any legal action to terminate the loan. A good faith effort 
will include:
    (1) A search of the holder's automated and physical loan record 
systems to identify the name and current or last address of the original 
veteran and any other liable obligors;
    (2) A search of the holder's automated and physical loan record 
systems to identify sufficient information (e.g., Social Security 
Number) to perform a routine trace inquiry through a major consumer 
credit bureau;
    (3) Conducting the trace inquiry using an in-house credit reporting 
terminal;
    (4) Obtaining the results of the inquiry;
    (5) Mailing the required notices and concurrently providing the 
Secretary with the names and addresses of all obligors identified and 
sent notice; and
    (6) Documentation of the holder's records.

[36 FR 1253, Jan. 27, 1971, as amended at 58 FR 29116, May 19, 1993]



Sec. 36.4281  Refunding of loans in default.

    Upon receiving a notice of default the Secretary may at any time 
prior to the termination of the borrower's interest in the property 
require the holder upon penalty of otherwise losing the guaranty to 
transfer and assign the loan and the security therefor to the Secretary 
or to another designated by him or her upon receipt of payment of the 
balance of the indebtedness remaining unpaid to the date of such 
assignment. Such assignment may be made without recourse but the 
transferor shall not thereby be relieved from the provisions of Sec. 
36.4286.

[36 FR 1253, Jan. 27, 1971, as amended at 55 FR 37474, Sept. 12, 1990]



Sec. 36.4282  Legal proceedings (notice of repossession).

    (a) When the holder institutes suit or otherwise becomes a party in 
any legal or equitable proceeding brought on or in connection with the 
guaranteed indebtedness, or involving title to, or other lien on, the 
security, such holder, within the time that would be required if the 
Secretary were a party to the proceeding, shall deliver to the 
Secretary, by mail or otherwise, by making such delivery to the loan 
guaranty officer at the office which granted the guaranty, or other 
office to which the holder has been notified the file is transferred, a 
copy of every procedural paper filed on behalf of holder, and shall also 
so deliver, as promptly as possible, a copy of each similar pleading 
served on holder or filed in the cause by any other party thereto. 
Notice of, or motion for, continuance and orders thereon are excepted 
from the foregoing.
    (b) A copy of a notice of sale under power by a holder or one acting 
at his or her behest (e.g., trustee or public official) shall be 
similarly delivered to the Secretary at or before the date of first 
publication, posting, or other notice, but in any event, except in 
emergency or when waived by the Secretary, not less than 10 days prior 
to

[[Page 584]]

date of sale. Copy of any other notice of sale served on the holder or 
of which he or she has knowledge shall be similarly delivered to the 
Secretary, including any such notice of sale under tax or other superior 
lien or any judicial sale.
    (c) The procedure prescribed in paragraphs (a) and (b) of this 
section shall not be applicable in any proceeding to which the Secretary 
is a party, after the Secretary's appearance shall have been entered 
therein by a duly authorized attorney.
    (d) In any legal or equitable proceeding (including probate and 
bankruptcy proceedings) to which the Secretary is a party, original 
process and any other process prior to appearance, proper to be served 
on the Secretary, shall be delivered to the loan guaranty officer of the 
office of the Department of Veterans Affairs having jurisdiction of the 
area in which the court is situated. Within the time required by 
applicable law, or rule of court, the Secretary will cause appropriate 
special or general appearance to be entered in the cause by the 
Secretary's authorized attorney.
    (e) After appearance of the Secretary by attorney, all process and 
notice otherwise proper to serve on the Secretary before or after 
judgment, if served on the Secretary's attorney of record shall have the 
same effect as if the Secretary were personally served within the 
jurisdiction of the court.
    (f) If following a default the holder does not begin appropriate 
action within 30 days after requested in writing by the Secretary to do 
so, or does not prosecute such action with reasonable diligence, the 
Secretary shall have the option to intervene in, or begin and prosecute 
to completion any action or proceeding, in the Secretary's name or in 
the name of the holder, which the Secretary deems necessary or 
appropriate, and may fix a date beyond which no further charges may be 
included in the computation of the guaranty claim. The Secretary shall 
pay, in advance if necessary, any court costs or other expenses incurred 
by the Secretary, or properly taxed against the Secretary, in any such 
action to which the Secretary is a party, but may charge the same, and 
also a reasonable amount for legal services, against the guaranteed 
indebtedness, or the proceeds of the sale of the security to the same 
extent as the holder (see Sec. 36.4276), or otherwise collect from the 
holder any such expenses incurred by the Secretary because of the 
neglect or failure of the holder to take or complete proper action. The 
rights and remedies herein reserved are without prejudice to any other 
rights, remedies, or defenses, in law or in equity, available to the 
Secretary.
    (g) The holder, no later than 10 days after it has repossessed a 
property, must advise the Secretary of such repossession. The holder 
shall proceed thereafter, within a reasonable time after repossession, 
to terminate the debtors' rights in the property. If it is a legal 
requirement or if the Secretary requires that the debtors' rights be 
terminated by public sale, the holder shall follow the procedures set 
forth in paragraph (b) of this section. Otherwise, the holder shall 
proceed in the manner set forth in Sec. 36.4283(f).

[36 FR 1253, Jan. 27, 1971, as amended at 47 FR 12965, Mar. 26, 1982; 53 
FR 34296, Sept. 6, 1988]



Sec. 36.4283  Foreclosure or repossession.

    (a) Upon receipt by the Secretary of notice of a judicial or 
statutory sale, or other public sale under power of sale contained in 
the loan instruments, to liquidate any security for a guaranteed loan, 
the Secretary may specify in advance of such sale the minimum amount 
which shall be credited to the indebtedness of the borrower on account 
of the value of the security to be sold, subject to the provisions of 
paragraphs (a)(1), (2), (3), and (4) of this section:
    (1) If a minimum amount has been specified in relation to a sale of 
the property and the holder is the successful bidder at the sale for an 
amount not in excess of such specified amount the holder shall dispose 
of the property in the manner set forth in paragraph (f) and the amount 
realized from the resale of the property shall govern in the final 
accounting for determining the rights and liabilities of the holder and 
the Secretary.
    (2) If a minimum amount has been specified by the Secretary and:

[[Page 585]]

    (i) A third party is the successful bidder at the sale for an amount 
equal to or in excess of that specified, the holder shall credit to the 
indebtedness the net proceeds of the sale.
    (ii) A third party is the successful bidder at the sale for an 
amount less than that specified, the holder shall credit to the 
indebtedness the amount specified less expenses allowable under Sec. 
36.4276.
    (iii) The holder is the successful bidder at the sale for an amount 
in excess of the specified amount the indebtedness shall be credited 
with the net proceeds of the sale or an amount established in accordance 
with paragraph (f) of this section, whichever is the greater, unless the 
bid in excess of the specified amount was made pursuant to paragraph (d) 
of this section.
    (3) If a minimum amount has not been specified by the Secretary 
under paragraph (a)(1) or (2) of this section, and the Secretary advised 
the holder that it did not intend to specify an amount, and the property 
is purchased at the sale by a third party, the holder shall credit 
against the indebtedness the net proceeds of the sale except as provided 
in paragraph (d) of this section. However, if the property is purchased 
at the sale by the holder, the indebtedness will be credited with the 
net proceeds of the sale or an amount established in accordance with 
paragraph (f) of this section, whichever is greater.
    (4) The holder shall notify the Secretary of the results of the sale 
within 10 days after the sale is completed.
    (b) In the event that any real property which is security for a 
guaranteed loan is to be acquired by a holder in a manner other than as 
provided in paragraph (a) or (c) of this section (e.g., by strict 
foreclosure or by the termination without a public sale of the 
purchaser's interest in a land sale contract), the holder shall notify 
the Secretary of the acquisition within 15 days thereafter and account 
to the Secretary for the proceeds of the liquidation of the security in 
accordance with paragraph (f) of this section.
    (c) When a debtor proposes to convey or transfer any property to a 
holder to avoid foreclosure or other judicial, contractual, or statutory 
disposition of the obligation or of the security, the consent of the 
Secretary to the terms of such proposal shall be obtained in advance of 
such conveyance or transfer. If the Secretary consents thereto, the 
holder may acquire the property and account to the Secretary for the 
proceeds of the liquidation of the security in accordance with paragraph 
(f) of this section.
    (d) If a minimum bid is required under applicable State law, or 
decree of foreclosure or order of sale, or other lawful order or decree, 
the holder may bid an amount not exceeding such amount legally required. 
If an amount has been specified by the Secretary and the holder is the 
successful bidder for an amount not exceeding the amount legally 
required, such specified amount shall govern for the purpose of this 
section.
    (e) If the Secretary has specified an amount as provided in this 
section, and the holder learns of any material damage to the property 
occurring prior to the foreclosure sale or to the acceptance of a deed 
in lieu of foreclosure or prior to any other event to which such 
specified amount is applicable, the holder shall promptly advise the 
Secretary of such damage. Also, if the holder acquires or repossesses 
the property and the holder learns of any material damage to it, the 
holder shall promptly advise the Secretary of such damage.
    (f) When the security for a guaranteed loan is acquired by the 
holder through foreclosure or otherwise, the holder shall resell the 
property within a reasonable time and may thereafter submit its claim 
under the guaranty. The Secretary, upon receipt of a notice of 
acquisition, shall determine the current reasonable value of the 
property and advise the holder of the minimum selling price that will be 
acceptable in any accounting with the Secretary upon liquidation of the 
security.
    (1) If the holder resells the property for an amount at least equal 
to the minimum selling price, it shall credit the indebtedness with the 
proceeds of the sale.
    (2) If the holder is unable to resell the property for an amount at 
least equal to the minimum selling price

[[Page 586]]

after exposure to the market for a reasonable period of time, the holder 
may submit to the Secretary a written advice setting forth the price, 
terms, conditions and expenses of any offer received. The Secretary 
shall thereupon:
    (i) Assent to the resale of the property upon the terms of such 
offer, in which event the holder will credit the indebtedness with the 
proceeds of the sale, or
    (ii) Review the minimum selling price previously established and, if 
appropriate, provide the holder with a reduced minimum selling price at 
which the property shall be further exposed to the market.
    (3) If the holder resells the property and finances the sale under 
the terms of a new security agreement and note, the Secretary may, 
pursuant to paragraph (f)(3)(iv) of this section, agree to indemnify the 
holder against loss on the new loan.
    (i) The Secretary's maximum liability under the indemnity agreement 
shall be the percentage of the loan originally guaranteed applied to the 
indebtedness as of the date of claim computation as set forth in Sec. 
36.4284(a), or the amount originally guaranteed, or the amount of the 
Secretary's liability under a preexisting indemnity agreement, whichever 
is less.
    (ii) In the event the proceeds of sale are less than the total 
indebtedness, the Secretary may pay a partial claim for the difference 
between the indebtedness and the proceeds of sale and thereafter agree 
to indemnify the holder for the amount of the maximum liability as of 
the date of claim computation, less the amount of claim paid.
    (iii) Subject to the limitation that the total amount payable under 
an indemnity agreement shall in no event exceed the Secretary's maximum 
liability, the remaining liability will be continued as a percentage of 
the new loan amount increasing or decreasing pro rata with any increase 
or decrease in the balance of the loan obligation.
    (iv) The Secretary shall execute an indemnity agreement evidencing 
the amount and terms of the indemnity liability, provided:
    (A) The Secretary has determined that resale of the security under 
an indemnity agreement is in the best interest of the Government, and 
the holder has obtained the prior approval of the Secretary;
    (B) The terms of repayment of the proposed loan bear a proper 
relationship to the borrower's present and anticipated income and 
expenses, and the borrower is a satisfactory credit risk;
    (C) The borrower executes an agreement establishing liability to the 
Secretary for the amount of any claim paid under the indemnity 
agreement;
    (D) The term of the proposed loan does not exceed the maximum term 
allowable under Sec. 36.4204(c)(4);
    (E) The interest rate charged the borrower does not exceed the 
maximum rate allowable under Sec. 36.4212 as of the date of closing 
pursuant to the indemnity agreement;
    (F) The holder agrees to comply with VA manufactured home 
regulations as if the original loan had not been terminated.


(Authority: 38 U.S.C. 3712(g))

    (4) If the holder has not resold the property, it may elect to 
submit its claim under Loan Guaranty within 60 days of the date of the 
Secretary's written advice of the minimum selling price.
    (i) For purposes of computation of a claim submitted pursuant to 
this paragraph, and subject to the limitation that the maximum amount of 
claim payable shall in no event exceed the amount originally guaranteed, 
the amount payable on a claim for the guaranty shall be the percentage 
of the loan originally guaranteed applied to the indebtedness computed 
as of the date the holder acquired the security. Further:
    (A) The minimum selling price determined by the Secretary and 
provided to the holder shall be credited to the indebtedness as proceeds 
of sale; or
    (B) If no minimum selling price is provided then the current 
reasonable value of the property as determined by the Secretary and 
provided to the holder shall be credited to the indebtedness as proceeds 
of sale; and
    The amount payable on the claim shall in no event exceed the 
remaining balance of the indebtedness.

[[Page 587]]

    (ii) Allowable post-acquisition expenditures or costs paid by the 
holder which may be included in the accounting with the Secretary are 
limited to those specified in Sec. 36.4276(c).

    (g) If at the end of 6 months from the date of acquisition the 
holder has been unable to resell the property and no claim has been 
filed pursuant to paragraph (f)(4) of this section, a claim may be 
submitted under the guaranty and the Secretary will pay to the holder 
upon submission of such claim:
    (1) The difference between the appraised value of the property as 
determined by the Secretary and the indebtedness including those costs 
allowable under Sec. 36.4276 and the costs of repossessing the 
manufactured home not to exceed $100, plus any accrued and unpaid 
interest to the applicable cutoff date as set forth in Sec. 36.4284(a) 
at the maximum rate allowable. For loans guaranteed prior to May 8, 
1984, the Secretary will also pay accrued interest at a rate of 6 
percent from such cutoff date to the date of claim but not to exceed 60 
days. For loans guaranteed on or after May 8, 1984, the Secretary will 
pay accrued interest at a rate 4.75 percent below the contract interest 
rate from such cutoff date to the date of claim but not to exceed 90 
days.


(Authority: 38 U.S.C. 3712(g))

    (2) The amount of the guaranty payable on the total outstanding 
indebtedness as of the applicable cutoff date set forth in Sec. 
36.4284(a), whichever is less.
    (h) If the property securing the guaranteed loan is acquired by a 
holder pursuant to paragraph (a), (b) or (c) of this section, or Sec. 
36.4282(g), the following provisions shall apply:
    (1) The holder's notice to the Secretary after acquisition shall 
state the amount of the successful bid at public sale, or in the event 
of a repossession or a voluntary conveyance, the date of acquisition.
    (2) The holder's notice after acquisition shall also provide 
complete occupancy data. Except with the prior approval of the Secretary 
the holder shall not rent the property to a new tenant nor extend the 
terms of an existing tenancy on other than a month-to-month basis.
    (3) Except with the prior approval of the Secretary, any taxes or 
special assessments which constitute prior liens due and payable after 
acquisition of the property by the holder shall be paid by the holder 
sufficiently in advance of the payment due dates to avoid penalties and 
to take advantage of any discounts. The holder also may include in its 
accounting with the Secretary any expenditures for repairs made that 
were reasonably necessary to properly maintain or refurbish the security 
property, not to exceed $400. Expenditures in excess of $400 shall not 
be made without the prior approval of the Secretary.
    (4) As between the holder and the Secretary, the holder shall be 
responsible for any loss due to damage to or destruction of the 
property, ordinary wear and tear excepted, from the date of repossession 
or acquisition by the holder to the date the property has been 
liquidated.
    (5) The holder shall include as credits in its accounting with the 
Secretary all rentals and other income collected from the property and 
insurance proceeds or refunds subsequent to the date of acquisition by 
the holder.
    (i) Definitions: (1) The terms date of sale or date of acquisition 
as used in this section are defined as the date of the event (e.g., date 
of repossession, date of sale confirmation when required under local 
practice, date of acceptance of deed in case of voluntary conveyance, 
etc.) which fixes the rights of the parties in the property.
    (2) The term property or real property as used in this section shall 
include:
    (i) A leasehold estate therein which at the time of closing the loan 
was of not less duration than that prescribed by Sec. 36.4253, and
    (ii) The rights derived by the holder through a foreclosure sale of 
real estate whether or not such rights constitute an estate in real 
property under local law.
    (j) A claim for the guaranty must include a cop(y)(ies) of a current 
credit report(s) on the debtor(s).


(Authority: 38 U.S.C. 3712)

    (k) The provisions of this section shall not be in derogation of any 
rights which the Secretary may have under

[[Page 588]]

Sec. 36.4286. The Under Secretary for Benefits, or the Director, Loan 
Guaranty Service, may authorize any deviation from the provisions of 
this section, within the limitations prescribed in 38 U.S.C. chapter 37, 
which may be necessary or desirable to accomplish the objectives of this 
section if such deviation is made necessary by reason of any laws or 
practice in any State, Territory, or the District of Columbia: Provided, 
That no such deviation shall impair the rights of any holder not 
consenting thereto with respect to loans made or approved prior to the 
date the holder is notified of such action.


(Information collection requirements contained in paragraph (j) were 
approved by the Office of Management and Budget under control number 
2900-0480)

[36 FR 1253, Jan. 27, 1971, as amended at 47 FR 12965, Mar. 26, 1982; 49 
FR 22081, May 25, 1984; 53 FR 34296, Sept. 6, 1988; 58 FR 37860, July 
14, 1993; 61 FR 28058, June 4, 1996]



Sec. 36.4284  Computation of guaranty claims.

    (a) Subject to the limitation that the maximum amount payable shall 
in no event exceed the amount originally guaranteed, the amount payable 
on a claim for the guaranty shall be the percentage of the loan 
originally guaranteed applied to the indebtedness computed as of the 
date of claim but not later than (1) the date of judgment or of decree 
of foreclosure; or (2) in nonjudicial foreclosures, the date of 
publication of the first notice of sale; or (3) in cases in which the 
security is repossessed without a judgment, decree, or foreclosure, the 
date the holder repossesses the security; or (4) if no security is 
available, the date of claim but not more than 6 months after the first 
uncured default. Deposits or other credits or setoffs including any 
escrowed or earmarked funds legally applicable to the indebtedness on 
the date of the claim computation shall be applied in reduction of the 
indebtedness upon which the claim is based.
    (b) Credits accruing from the proceeds of a sale or other 
disposition of the security shall be reported to the Secretary incident 
to such submission, and the amount payable on the claim shall in no 
event exceed the remaining balance of the indebtedness.
    (c) Any allowable expenditures or costs, paid by the holder, and any 
accrued and unpaid interest to the applicable cutoff date as set forth 
in paragraph (a) of this section at the maximum rate allowable, may be 
deducted from the proceeds of the sale of the property, or may be 
included in the accounting to the Secretary on such loan. For loans 
guaranteed prior to May 8, 1984, the holder may also either deduct from 
sales proceeds, or include in the accounting, accrued interest at a rate 
of 6 percent from such cutoff date to the date of resale or other 
liquidation but not to exceed 60 days. For loans guaranteed on or after 
May 8, 1984, the holder may also either deduct from sales proceeds, or 
include in the accounting, accrued interest at a rate 4.75 percent below 
the contract interest rate from such cutoff date to the date of resale 
or other liquidation but not to exceed 90 days.


(Authority: 38 U.S.C. 3712(g))

    (d) In computing the indebtedness for the purpose of filing a claim 
for payment of a guaranty, or in the event of a transfer of the loan 
under Sec. 36.4281, or other accounting to the Secretary, the holder 
shall not be entitled to treat repayments theretofore made, as 
liquidated damages, or rentals, or otherwise than as payments on the 
indebtedness, notwithstanding any provision in the note, or mortgage, or 
otherwise, to the contrary.
    (e) Appropriate computation of the guaranty, proceeds of 
liquidation, and allowable costs for claims filed under Sec. 
36.4283(f)(4) are specified in Sec. 36.4276(c).

[36 FR 1253, Jan. 27, 1971, as amended at 49 FR 22082, May 25, 1984; 58 
FR 37861, July 14, 1993]



Sec. 36.4285  Subrogation and indemnity.

    (a) The Secretary shall be subrogated to the contract and the lien 
or other rights of the holder to the extent of any sum paid on a 
guaranty, which right shall be junior to the holder's rights as against 
the debtor or the encumbered property until the holder shall have 
received the full amount payable under the contract with the debtor 
except that where the holder

[[Page 589]]

has entered into a recourse and/or repurchase or indemnity agreement 
with a dealer or servicer or other entity and the Department of Veterans 
Affairs pays a claim under guaranty to the holder the Department of 
Veterans Affairs will not be subrogated to any rights the holder may 
have under the recourse and/or repurchase or indemnity agreement. No 
partial or complete release by a creditor shall impair the rights of the 
Secretary with respect to the debtor's obligation.
    (b) The holder, upon request, shall execute, acknowledge, and 
deliver an appropriate instrument tendered the holder for that purpose, 
evidencing any payment received from the Secretary and the Secretary's 
resulting right of subrogation.
    (c) The Secretary may cause the instrument required by paragraph (b) 
of this section to be filed for record in the Office of the Recorder of 
Deeds, or other appropriate office of the proper county, town, or State, 
in accordance with the applicable State law.
    (d) Any amounts paid by the Secretary on account of the liabilities 
of any veteran guaranteed under the provisions of 38 U.S.C. 3712 shall 
constitute a debt owing to the United States by such veteran.
    (e) Whenever any veteran disposes of residential property securing a 
guaranteed loan obtained under 38 U.S.C. 3712, and for which the 
commitment to make the loan was made prior to March 1, 1988, the 
Secretary, upon application made by such veteran, shall issue to the 
veteran a release relieving him or her of all further liability to the 
Secretary on account of such loan (including liability for any loss 
resulting from any default of the transferee or any subsequent purchaser 
of such property) if the Secretary has determined, after such 
investigation as the Secretary may deem appropriate, that there has been 
compliance with the conditions prescribed in 38 U.S.C. 3713(a). The 
assumption of full liability for repayment of the loan by the transferee 
of the property must be evidenced by an agreement in writing in such 
form as the Secretary may require. Release of the veteran from liability 
to the Secretary will not impair or otherwise affect the Secretary's 
guaranty on the loan, or the liability of the veteran to the holder. Any 
release of liability granted to a veteran by the Secretary shall inure 
to the spouse of such veteran. The release of the veteran from liability 
to the Secretary will constitute the Secretary's prior approval to a 
release of the veteran from liability on the loan by the holder thereof. 
This release will not result in the veteran being entitled to further 
loan benefits unless the requirements of Sec. 36.4203 are met.


(Authority: 38 U.S.C. 3713, 3714)

    (f) If, on or after July 1, 1972, any veteran disposes of 
residential property securing a guaranteed loan obtained by him or her 
under 38 U.S.C. 3712, without securing a release from liability with 
respect to such loan under 38 U.S.C. 3713(a) and a default subsequently 
occurs which results in liability of the veteran to the Secretary on 
account of the loan, the Secretary may relieve the veteran of such 
liability if the Secretary determines that:
    (1) A transferee either immediate or remote is legally liable to the 
Secretary for the debt of the original veteran-borrower established 
after the termination of the loan, and
    (2) The original loan was current at the time such transferee 
acquired the property, and
    (3) The transferee who is liable to the Secretary is found to have 
been a satisfactory credit risk at the time he or she acquired the 
property.


(Authority: 38 U.S.C. 3713(b))

    (g) If a veteran or any other person disposes of residential 
property securing a guaranteed or insured loan for which a commitment 
was made on or after March 1, 1988, and the veteran or other person 
notifies the loan holder in writing before disposing of the property, 
the veteran or other person shall be relieved of all further liability 
to the Secretary with respect to the loan (including liability for any 
loss resulting from any default of the purchaser or any subsequent owner 
of the property) and the application for assumption shall be approved if 
the holder determines that:
    (1) The proposed purchaser is creditworthy;

[[Page 590]]

    (2) The proposed purchaser is contractually obligated to assume the 
loan and the liability to indemnify the Department of Veterans Affairs 
for the amount of any claim paid under the guaranty as a result of a 
default on the loan, or has already done so; and,
    (3) The payments on the loan are current.

Should these requirements be satisfied, the holder may also release the 
selling veteran or other person from liability on the loan. This does 
not apply if the approval for the assumption is granted upon special 
appeal to avoid immediate foreclosure.


(Authority: 38 U.S.C. 3713, 3714)

[36 FR 1253, Jan. 27, 1971, as amended at 36 FR 13032, July 13, 1971; 44 
FR 16015, Mar. 16, 1979; 55 FR 37474, Sept. 12, 1990]



Sec. 36.4286  Partial or total loss of guaranty.

    (a) There shall be no guaranty liability on the part of the 
Secretary in respect to any loan as to which a signature to the note, 
the mortgage or other security instrument is a forgery. Except as to a 
holder who acquired the loan instrument before maturity, for value, and 
without notice, and who has not directly or by agent participated in the 
fraud, or in the misrepresentation hereinafter specified, any willful 
and material misrepresentation or fraud by the lender, or by a holder, 
or the agent of either, in procuring the guaranty shall relieve the 
Secretary of liability, or shall constitute a defense against liability 
on account of the guaranty of the loan in respect to which the willful 
misrepresentation, or the fraud, is practiced: Provided, That if a 
misrepresentation, although material, is not made willfully, or with 
fraudulent intent, it shall have only the consequences prescribed in 
paragraphs (b) and (c) of this section.
    (b) In taking security required by 38 U.S.C. 3712 and the Sec. 
36.4200 series, a holder shall obtain the required lien on real property 
the title to which is such as to be acceptable to prudent lending 
institutions, informed buyers, title companies, and attorneys, generally 
in the community in which the property is situated: Provided, That a 
title will not be unacceptable by reason of any of the limitations on 
the quantum or quality of the property or title stated in Sec. 36.4253. 
If such holder fails in this respect or fails to comply with any of the 
requirements of 38 U.S.C. 3712 and the Sec. 36.4200 series with respect 
to:
    (1) Obtaining and retaining a lien of the dignity prescribed on all 
property upon which a lien is required by 38 U.S.C. 3712 or the Sec. 
36.4200 series,
    (2) Inclusion of power to substitute trustees,
    (3) The procurement and maintenance of insurance coverage,
    (4) Advice to Secretary as to default,
    (5) Notice of intention to begin action,
    (6) Notice to the Secretary in any suit or action, or notice of 
sale,
    (7) The release, conveyance, substitution, or exchange of security,
    (8) Lack of legal capacity of a party to the transaction incident to 
which the guaranty is granted,
    (9) Failure of the lender to see that any escrowed or earmarked 
account is expended in accordance with the agreement,
    (10) The taking into consideration of limitations upon the quantum 
or quality of the estate or property,
    (11) Any other requirement of 38 U.S.C. 3712 or the Sec. 36.4200 
series which does not by the terms of said section or regulations result 
in relieving the Secretary of all liability with respect to the loan,

no claim on the guaranty shall be paid on account of the loan with 
respect to which such failure occurred, or in respect to which an 
unwillful misrepresentation occurred, until the amount by which the 
ultimate liability of the Secretary would thereby be increased has been 
ascertained. The burden of proof shall be upon the holder to establish 
that no increase of ultimate liability is attributable to such failure 
or misrepresentation. The amount of increased liability of the Secretary 
shall be offset by deduction from the amount of the guaranty otherwise 
payable, or if consequent upon loss of security shall be offset by 
crediting to the indebtedness the amount of the impairment as proceeds 
of the sale of security in the final accounting to the Secretary. To the 
extent the loss resultant from the failure of misrepresentation

[[Page 591]]

prejudices the Secretary's right of subrogation acceptance by the holder 
of the guaranty payment shall subordinate the holder's right to those of 
the Secretary.
    (c) If after the payment of a guaranty, or after a loan is 
transferred pursuant to Sec. 36.4281, the fraud, misrepresentation, or 
failure to comply with the regulations concerning guaranty of loans to 
veterans as provided in this section is discovered and the Secretary 
determines that an increased loss to the Government resulted therefrom, 
the transferee or person to whom such payment was made shall be liable 
to the Secretary for the amount of the loss caused by such 
misrepresentation or failure.



Sec. 36.4287  Substitution of trustees.

    In jurisdictions in which valid, any deed of trust or mortgage 
securing a guaranteed loan, if it names trustees or confers a power of 
sale otherwise, shall contain a provision empowering any holder of the 
indebtedness to appoint substitute trustees or other person with such 
power to sell, who shall succeed to all the rights, powers, and duties 
of the trustees, or other person, originally designated.

               Guaranty or Insurance of Loans to Veterans

    Authority: Sections 36.4300 through 36.4375 issued under 38 U.S.C. 
101, 501, 3701-3704, 3710, 3712-3714, 3720, 3729, 3732, unless otherwise 
noted.
    Note: Those requirements, conditions, or limitations which are 
expressly set forth in 38 U.S.C. chapter 37 are not restated in these 
regulations and must be taken into consideration in conjunction with 
Sec. Sec. 36.4300 to 36.4393 of this part, inclusive.

[53 FR 1350, Jan. 19, 1988]



Sec. 36.4300  Applicability of Sec. Sec.  36.4300 to 36.4393, inclusive.

    (a) Sections 36.4300 to 36.4393 of this part, inclusive, shall be 
applicable to each loan entitled to an automatic guaranty, or otherwise 
guaranteed or insured, on or after the date of publication in the 
Federal Register, and shall be applicable to such loans previously 
guaranteed or insured to the extent that no legal rights vested under 
the regulations are impaired.
    (b) Title 38 U.S.C., chapter 37, is a continuation and restatement 
of the provisions of Title III of the Servicemen's Readjustment Act of 
1944, and may be considered an amendment to such Title III. References 
to the sections or chapters of title 38 U.S.C., shall, where applicable, 
be deemed to refer to the prior corresponding provisions of the law.


(Authority: 38 U.S.C. 501, 3703(c), 3712(g))

[53 FR 1350, Jan. 19, 1988]



Sec. 36.4301  Definitions.

    Whenever used in 38 U.S.C. chapter 37 or Sec. Sec. 36.4300 to 
36.4375 of this part, inclusive, and Sec. Sec. 36.4390 through 36.4393 
of this part, unless the context otherwise requires, the terms defined 
in this section shall have the following meaning:
    A period of more than 180 days. For the purposes of sections 3707 
and 3702(a)(2)(C) of title 38 U.S.C., the term a period of more than 180 
days shall mean 181 or more calendar days of continuous active duty.
    Acquisition and improvement loan. A loan to purchase an existing 
property which includes additional funds for the purpose of installing 
energy conservation improvements or making other alterations, 
improvements, or repairs.


(Authority: 38 U.S.C. 3703(c)(1), 3710(a) (1), (4), and (7))

    Alterations. Any structural changes or additions to existing 
improved realty.
    Automatic lender. A lender that may process a loan or assumption \1/
4\without submitting the credit package to the Department of Veterans 
Affairs for underwriting review. Pursuant to 38 U.S.C. 3702(d) there are 
two categories of lenders who may process loans automatically: (1) 
Entities such as banks, savings and loan associations, and mortgage and 
loan companies that are subject to examination by an agency of the 
United States or any State and (2) lenders approved by the Department of 
Veterans Affairs pursuant to standards established by the Department of 
Veterans Affairs.


(Authority: 38 U.S.C. 3702(d))


[[Page 592]]


    Condominium. Unless otherwise provided by State law, a condominium 
is a form of ownership where the buyer receives title to a three 
dimensional air space containing the individual living unit together 
with an undivided interest or share in the ownership of common elements.
    Cost means the entire consideration paid or payable for or on 
account of the application of materials and labor to tangible property.
    Credit package. Any information, reports or verifications used by a 
lender, holder or authorized servicing agent to determine the 
creditworthiness of an applicant for a Department of Veterans Affairs 
guaranteed loan or the assumer of such a loan.


(Authority: 38 U.S.C. 3710 and 3714)

    Date of first uncured default means the due date of the earliest 
payment not fully satisfied by the proper application of available 
credits or deposits.
    Default means failure of a borrower to comply with the terms of a 
loan agreement.
    Designated appraiser means a person requested by the Secretary to 
render an estimate of the reasonable value of a property, or of a 
specified type of property, within a stated area for the purpose of 
justifying the extension of credit to an eligible veteran for any of the 
purposes stated in 38 U.S.C. Chapter 37. An appraiser on a fee basis is 
not an agent of the Secretary.
    Discharge or release. For purposes of basic eligibility a person 
will be considered discharged or released if the veteran was issued a 
discharge certificate under conditions other than dishonorable (38 
U.S.C. 3702(c)). The term discharge or release includes (1) retirement 
from the active military, naval, or air service, and (2) the 
satisfactory completion of the period of active military, naval, or air 
service for which a person was obligated at the time of entry into such 
service in the case of a person who, due to enlistment or reenlistment, 
was not awarded a discharge or release from such period of service at 
the time of such completion thereof and who, at such time, would 
otherwise have been eligible for the award of a discharge or release 
under conditions other than dishonorable.


(Authority: 38 U.S.C. 101(18))

    Dwelling. Any building designed primarily for use as a home 
consisting of not more than four family units plus an added unit for 
each veteran if more than one eligible veteran participates in the 
ownership, except that in the case of a condominium housing development 
or project within the purview of 38 U.S.C. 3710(a)(6) and Sec. Sec. 
36.4356 through 36.4360(a) of this part the term is limited to a one 
single-family residential unit. Also, a manufactured home, permanently 
affixed to a lot owned by a veteran and classified as real property 
under the laws of the State where it is located.


(Authority: 38 U.S.C. 3710(a)(9) and (f))

    Economic readjustment means rearrangement of an eligible veteran's 
indebtedness in a manner calculated to enable the veteran to meet 
obligations and thereby avoid imminent loss of the property which 
secures the delinquent obligation.
    Energy conservation improvement. An improvement to an existing 
dwelling or farm residence through the installation of a solar heating 
system, a solar heating and cooling system, or a combined solar heating 
and cooling system or through application of a residential energy 
conservation measure as prescribed in 38 U.S.C. 3710(d) or by the 
Secretary.


(Authority: 38 U.S.C. 3710(a)(7))

    Full disbursement. Payment by a lender of the entire proceeds of a 
loan or the purposes described in the report of the lender in respect of 
such loan to the Secretary either:
    (1) By payment to those contracting with the borrower for such 
purposes, or
    (2) By payment to the borrower, or
    (3) By transfer to an account against which the borrower can draw at 
will, or
    (4) By transfer to an escrow account, or
    (5) By transfer to an earmarked account if
    (i) The amount is not in excess of 10 percent of the loan, or

[[Page 593]]

    (ii) The loan is an Acquisition and Improvement loan pursuant to 
Sec. 36.4301, or
    (iii) The loan is one submitted by a lender of the class specified 
in 38 U.S.C. 3702(d) or 3703(a)(2).


(Authority: 38 U.S.C. 3703(c)(1))

    Graduated payment mortgage loan. A loan for the purpose of acquiring 
a single-family dwelling unit involving a plan for repayment in which a 
portion of the interest due is deferred for a period of time. The 
interest so deferred is added to the principal balance thus resulting in 
a principal amount greater than at loan origination (negative 
amortization). The monthly payments increase on an annual basis 
(graduate) for a predetermined period of time until the payments reach a 
level which will fully amortize the loan during the remaining loan term.


(Authority: 38 U.S.C. 3703 (c) and (d))

    Guaranty means the obligation of the United States, assumed by 
virtue of 38 U.S.C. Chapter 37, to repay a specified percentage of a 
loan upon the default of the primary debtor.
    Holder. The lender or any subsequent assignee or transferee of the 
guaranteed obligation or the authorized servicing agent of the lender or 
of the assignee or transferee if the obligation has been assigned or 
transferred.


(Authority: 38 U.S.C. 3714)

    Home means place of residence.
    Improvements. Any alteration that improves the property for the 
purpose for which it is occupied.
    Indebtedness. The unpaid principal and interest plus any other 
amounts allowable under the terms of a loan including those authorized 
by statute and consistent with Sec. Sec. 36.4300 to 36.4393 of this 
part, inclusive, which have been paid and debited to the loan account as 
of the applicable date established pursuant to paragraph (f) of Sec. 
36.4319 or Sec. 36.4321 of this part.


(Authority: 38 U.S.C. 3732)

    Insurance means the obligation assumed by the United States to 
indemnify a lender to the extent specified in Sec. Sec. 36.4300 to 
36.4393, inclusive, for any loss incurred upon any loan insured under 38 
U.S.C. 3703(a)(2).
    Insurance account means the record of the amount available to a 
lender or purchaser for losses incurred on loans insured under 38 U.S.C. 
3703(a).
    Lender. The payee or assignee or transferee of an obligation at the 
time it is guaranteed or insured. This term also includes any sole 
proprietorship, partnership, or corporation and the owners, officers and 
employees of a sole proprietorship, partnership, or corporation engaged 
in the origination, procurement, transfer, servicing, or funding of a 
loan which is guaranteed or insured by VA.


(Authority: 38 U.S.C. 3704(d), 3712(g))

    Lien means any interest in, or power over, real or personal 
property, reserved by the vendor, or created by the parties or by 
operation of law, chiefly or solely for the purpose of assuring the 
payment of the purchase price, or a debt, and irrespective of the 
identity of the party in whom title to the property is vested, including 
but not limited to mortgages, deeds with a defeasance therein or 
collaterally, deeds of trust, security deeds, mechanics' liens, lease-
purchase contracts, conditional sales contracts, consignments.
    Liquidation sale. Any judicial, contractural or statutory 
disposition of real property, under the terms of the loan instruments 
and applicable law, to liquidate a defaulted loan that is secured by 
such property. This includes a voluntary conveyance made to avoid such 
disposition of the obligation or of the security.


(Authority: 38 U.S.C. 3732)

    Lot. A parcel of land acceptable to the Secretary as a manufactured 
home site.


(Authority: 38 U.S.C. 3710(a)(9))

    Manufactured home. A moveable dwelling unit designed and constructed 
for year-round occupancy by a single family, on land, containing 
permanent eating, cooking, sleeping and sanitary facilities. A double-
wide manufactured home is a moveable dwelling designed

[[Page 594]]

for occupancy by one family and consisting of: (1) Two or more units 
intended to be joined together horizontally when located on a site, but 
capable of independent movement or (2) a unit having a section or 
sections which unfold along the entire length of the unit. For the 
purposes of this section of VA regulations, manufactured home/lot loans 
guaranteed under the purview of Sec. Sec. 36.4300 to 36.4393, 
inclusive, must be for units permanently affixed to a lot and considered 
to be real property under the laws of the State where it is located. If 
the loan is for the purchase of a manufactured home and lot it must be 
considered as one loan.


(Authority: 38 U.S.C. 3710(a)(9))

    Net loss. (insured loans) means the indebtedness, plus any other 
charges authorized under Sec. 36.4313, remaining unsatisfied after the 
liquidation of all available security and recourse to all intangible 
rights of the holder against those obligated on the debt.
    Net value. The fair market value of real property, minus an amount 
representing the costs that the Secretary estimates would be incurred by 
VA in acquiring and disposing of the property. The number to be 
subtracted from the fair market value will be calculated by multiplying 
the fair market value by the current cost factor. The cost factor used 
will be the most recent percentage of the fair market value that VA 
calculated and published in the Notices section of the Federal Register 
(it is intended that this percentage will be calculated annually). In 
computing this cost factor, VA will determine the average operating 
expenses and losses (or gains) on resale incurred for properties 
acquired under Sec. 36.4320 which were sold during the preceding fiscal 
year and the average administrative cost to VA associated with the 
property management activity. The final net value derived from this 
calculation will be stated as a whole dollar amount (any fractional 
amount will be rounded up to the next whole dollar). The cost items 
included in the calculation will be:
    (1) Property operating expenses. All disbursements made for payment 
of taxes, assessments, liens, property maintenance and related repairs, 
management broker's fees and commissions, and any other charges to the 
property account excluding property improvements and selling expenses.
    (2) Selling expenses. All disbursements for sales commissions plus 
any other costs incurred and paid in connection with the sale of the 
property.
    (3) Administrative costs. (i) An estimate of the total cost for VA 
of personnel (salary and benefits) and overhead (which may include 
things such as travel, transportation, communication, utilities, 
printing, supplies, equipment, insurance claims and other services) 
associated with the acquisition, management and disposition of property 
acquired under Sec. 36.4320 of this part. The average administrative 
costs will be determined by:
    (A) Dividing the total cost for VA personnel and overhead salary and 
benefits costs by the average number of properties on hand and adjusting 
this figure based on the average holding time for properties sold during 
the preceding fiscal year; then
    (B) Dividing the figure calculated in paragraph (3)(i)(A) of this 
definition by the VBA ratio of personal services costs to total 
obligations.
    (ii) The three cost averages will be added to the average loss (or 
gain) on property sold during the preceding fiscal year (based on the 
average property purchase price) and the sum will be divided by the 
average fair market value at the time of acquisition for properties 
which were sold during the preceding fiscal year to derive the 
percentage to be used in estimating net value.


(Authority: 38 U.S.C. 3732)

    Purchase price. The entire legal consideration paid or payable upon 
or on account of the sale of property, exclusive of acquisition costs, 
or for the cost of materials and labor to be applied to the property.
    Real-estate loan. Any obligation incurred for the purchase of real 
property or a leasehold estate as limited in Sec. Sec. 36.4300 to 
36.4393, inclusive, or for the construction of fixtures or appurtenances 
thereon or for alterations, improvements, or repairs thereon required by 
Sec. Sec. 36.4300 to 36.4393, inclusive,

[[Page 595]]

to be secured by a lien on such property or is so secured. Loans for the 
purpose specified in 38 U.S.C. 3710(a)(5) (refinancing of mortgage loans 
or other liens on a dwelling or farm residence), loans for the purpose 
specified in 38 U.S.C. 3710(a)(8) (refinancing of a VA guaranteed, 
insured or direct loan to lower the interest rate), loans for the 
purposes specified in 38 U.S.C. 3710(a)(9) (purchase of manufactured 
homes/lots or the refinancing of such loans in order to reduce the 
interest rate or purchase a lot, in States in which manufactured homes, 
when permanently affixed to a lot, are considered real property, and 
loans to purchase one-family residential units in condominium housing 
developments or projects within the purview of 38 U.S.C. 3710(a)(6) and 
Sec. Sec. 36.4356 through 36.4360a shall also be considered real estate 
loans.
    Reasonable value means that figure which represents the amount a 
reputable and qualified appraiser, unaffected by personal interest, 
bias, or prejudice, would recommend to a prospective purchaser as a 
proper price or cost in the light of prevailing conditions.
    Registered mail. The term registered mail wherever used in the 
regulations concerning guaranty or insurance of loans to veterans shall 
include certified mail.
    Repairs. Any alteration of existing improved realty or equipment 
which is necessary or advisable for protective, safety or restorative 
purposes.
    Repossession - repossessed means recovery or acquisition of such 
physical control of property (pursuant to the provisions of the security 
instrument or as otherwise provided by law) as to make further legal or 
other action unnecessary in order to obtain actual possession of the 
property or to dispose of the same by sale or otherwise.
    Residential property. (1) Any one-family residential unit in a 
condominium housing development within the purview of 38 U.S.C. 
3710(a)(6) and Sec. Sec. 36.4356 through 36.4360a, (2) any manufactured 
home permanently affixed to a lot owned or being purchased by a veteran 
and considered to be real property under the laws of the State where it 
is located, and (3) any improved real property (other than a condominium 
housing development or a manufactured home and/or lot) or leasehold 
estate therein as limited by Sec. Sec. 36.4300 to 36.4393, inclusive, 
the primary use of which is for occupancy as a home, consisting of not 
more than four family units, plus an added unit for each eligible 
veteran if more than one participates in the ownership thereof, or (4) 
any land to be purchased out of the proceeds of a loan for the 
construction of a dwelling, and on which such dwelling is to be erected.


(Authority: 38 U.S.C. 3710(f)(2) and (3))

    Secretary. The Secretary of Veterans Affairs, or any employee of the 
Department of Veterans Affairs authorized to act in the Secretary's 
stead.
    Servicing agent. An agent designated by the loan holder as the 
entity to collect installments on the loan and/or perform other 
functions as necessary to protect the interests of the holder.


(Authority: 38 U.S.C. 3714)

    Specified amount. A sum, equal to the lesser of the net value of 
real property or the total indebtedness secured thereby, which the 
Secretary designates as the minimum amount to be credited to the 
indebtedness incident to a liquidation sale.


(Authority: 38 U.S.C. 3732)

    Unguaranteed portion of the indebtedness. The indebtedness computed 
as of the applicable date of under paragraph (f) of Sec. 36.4319 or 
Sec. 36.4321 of this part minus the amount of the guaranty payable as 
of such date.


(Authority: 38 U.S.C. 3732)

(Authority: 38 U.S.C. 501, 3703(c)(1))

[24 FR 2651, Apr. 7, 1959]

    Editorial Note: For Federal Register citations affecting Sec. 
36.4301, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.

                           general provisions



Sec. 36.4302  Computation of guaranties or insurance credits.

    (a) With respect to a loan to a veteran guaranteed under 38 U.S.C. 
3710

[[Page 596]]

the guaranty shall not exceed the lesser of the dollar amount of 
entitlement available to the veteran or
    (1) 50 percent of the original principal loan amount where the loan 
amount is not more than $45,000; or
    (2) $22,500 where the original principal loan exceeds $45,000, but 
is not more than $56,250; or
    (3) Except as provided in subparagraph (4), the lesser of $36,000 or 
40 percent of the original principal loan amount where the loan amount 
exceeds $56,250; or
    (4) The lesser of $60,000 or 25 percent of the original principal 
loan amount where the loan amount exceeds $144,000 and the loan is for 
the purchase or construction of a home or the purchase of a condominium 
unit.


(Authority: 38 U.S.C. 3703(a))

    (b) With respect to an interest rate reduction refinancing loan 
guaranteed under 38 U.S.C. 3710(a)(8), (a)(9)(B)(i), or (a)(11), the 
dollar amount of guaranty may not exceed the greater of the original 
guaranty amount of the loan being refinanced, or 25 percent of the 
refinancing loan amount.


(Authority: 38 U.S.C. 3703, 3710)

    (c) With respect to a loan for an energy efficient mortgage 
guaranteed under 38 U.S.C. 3710(d), the amount of the guaranty shall be 
in the same proportion as would have been provided if the energy 
efficient improvements were not added to the loan amount, and there 
shall be no additional charge to the veteran's entitlement as a result 
of the increased guaranty amount.


(Authority: 38 U.S.C. 3703, 3710)

    (d) An amount equal to 15 percent of the original principal amount 
of each insured loan shall be credited to the insurance account of the 
lender and shall be charged against the guaranty entitlement of the 
borrower: Provided, That no loan may be insured unless the borrower has 
sufficient entitlement remaining to permit such credit.
    (e) Subject to the provisions of Sec. 36.4303(g), the following 
formulas shall govern the computation of the amount of the guaranty or 
insurance entitlement which remains available to an eligible veteran 
after prior use of entitlement:
    (1) If a veteran previously secured a nonrealty (business) loan, the 
amount of nonrealty entitlement used is doubled and subtracted from 
$36,000. The sum remaining is the amount of available entitlement for 
use, except that:
    (i) Entitlement may be increased by up to $24,000 if the loan amount 
exceeds $144,000 and the loan is for purchase or construction of a home 
or purchase of a condominium; and
    (ii) Entitlement for manufactured home loans that are to be 
guaranteed under 38 U.S.C. 3712 may not exceed $20,000.
    (2) If a veteran previously secured a realty (home) loan, the amount 
of realty (home) loan entitlement used is subtracted from $36,000. The 
sum remaining is the amount of available entitlement for use, except 
that:
    (i) Entitlement may be increased by up to $24,000 if the loan amount 
exceeds $144,000 and the loan is for purchase or construction of a home 
or purchase of a condominium: and
    (ii) Entitlement for manufactured home loans that are to be 
guaranteed under 38 U.S.C. 3712 may not exceed $20,000.
    (3) If a veteran previously secured a manufactured home loan under 
38 U.S.C. 3712, the amount of entitlement used for that loan is 
subtracted from $36,000. The sum remaining is the amount of available 
entitlement for home loans and the sum remaining may be increased by up 
to $24,000 if the loan amount exceeds $144,000 and the loan is for 
purchase or construction of a home or purchase of a condominium. To 
determine the amount of entitlement available for manufactured home 
loans processed under 38 U.S.C. 3712, the amount of entitlement 
previously used for that purpose is subtracted from $20,000. The sum 
remaining is the amount of available entitlement for use for 
manufactured home loan purposes under 38 U.S.C. 3712.


(Authority: 38 U.S.C. 3703)

    (f) For the purpose of computing the remaining guaranty or insurance 
benefit to which a veteran is entitled, loans guaranteed prior to the 
effective date of Sec. Sec. 36.4300 to 36.4393, inclusive,

[[Page 597]]

shall be taken into consideration as if made subsequent thereto.
    (g) A loan eligible for insurance may be either guaranteed or 
insured at the option of the borrower and the lender: Provided, That if 
the Secretary is not advised of the exercise of such option at the time 
the loan is reported pursuant to Sec. 36.4303 such loan will not be 
eligible for insurance.
    (h) A guaranty is reduced or increased pro rata with any deduction 
or increase in the amount of the guaranteed indebtedness, but in no 
event will the amount payable on a guaranty or the percentage of the 
indebtedness corresponding to that of the original guaranty whichever is 
less. However, on a graduated payment mortgage loan, the percentage of 
guaranty applicable to the original loan amount pursuant to paragraph 
(a) of this section shall apply to the loan indebtedness to the extent 
scheduled deferred interest is added to principal during the graduation 
period without regard to the original maximum dollar amount of guaranty.


(Authority: 38 U.S.C. 3703(b) and (d))

    (i) The amount of any guaranty or the amount credited to a lender's 
insurance account in relation to any insured loan shall be charged 
against the original or remainder of the guaranty benefit of the 
borrower. Complete or partial liquidation, by payment or otherwise, of 
the veteran's guaranteed or insured indebtedness does not increase the 
remainder of the guaranty benefit, if any, otherwise available to the 
veteran. When the maximum amount of guaranty or insurance legally 
available to a veteran shall have been granted, no further guaranty or 
insurance is available to the veteran.
    (j) Notwithstanding the provisions of paragraph (g) of this section, 
the Secretary may exclude the amount of guaranty or insurance 
entitlement used for any guaranteed or insured loan provided:
    (1) The property which served as security for the loan has been 
disposed of by the veteran, or has been destroyed by fire or other 
natural hazard; and
    (2)(i) The loan has been repaid in full or the Secretary has been 
released from liability as to the loan, or if the Secretary has suffered 
a loss on said loan, such loss has been paid in full; or
    (ii) A veteran-transferee has agreed to assume the outstanding 
balance on the loan and consented to the use of his or her entitlement 
to the extent the entitlement of the veteran-transferor had been used 
originally; or
    (3) The loan has been repaid in full, and the loan for which the 
veteran seeks to use entitlement is secured by the same property which 
secured the fully repaid loan; or
    (4) In a case in which the veteran still owns the property purchased 
with a VA-guaranteed loan, the Secretary may, one time only, restore 
entitlement used on that loan if:
    (i) the loan has been repaid in full or, if the Secretary has 
suffered a loss on the loan, the loss has been paid in full; or
    (ii) the Secretary has been released from liability as to the loan, 
and, if the Secretary has suffered a loss on the loan, the loss has been 
paid in full.
    (k) The Secretary may, in any case involving circumstances deemed 
appropriate, waive either or both of the requirements set forth in 
paragraphs (j)(1) and (j)(2)(i) of this section.


(Authority: 38 U.S.C. 3702(b), 3710)

    (l)(1) The amount of guaranty entitlement, available and unused, of 
an eligible unmarried surviving spouse (whose eligibility does not 
result from his or her own service) is determinable in the same manner 
as in the case of any veteran, and any entitlement which the decedent 
(who was his or her spouse) used shall be disregarded. A certificate as 
to the eligibility of such surviving spouse, issued by the Secretary, 
shall be a condition precedent to the guaranty or insurance of any loan 
made to a surviving spouse in such capacity.


(Authority: 38 U.S.C. 3701(a))

    (2) An unmarried surviving spouse who was a co-obligor under an 
existing VA guaranteed, insured or direct loan

[[Page 598]]

shall be considered to be a veteran eligible for an interest rate 
reduction refinancing loan pursuant to 38 U.S.C. 3710(a)(8) or 
(9)(B)(i).


(Authority: 38 U.S.C. 3710(e)(3))

(Authority: 38 U.S.C. 501, 3703(c)(1))

[13 FR 7274, Nov. 27, 1948, as amended at 35 FR 17179, Nov. 7, 1970; 40 
FR 34589, Aug. 18, 1975; 46 FR 43672, Aug. 31, 1981; 47 FR 15139, Apr. 
8, 1982; 49 FR 28243, July 11, 1984; 50 FR 3334, Jan. 24, 1985; 55 FR 
40655, Oct. 4, 1990; 60 FR 38259, July 26, 1995; 68 FR 6627, Feb. 10, 
2003]



Sec. 36.4303  Reporting requirements.

    (a) With respect to loans automatically guaranteed under 38 U.S.C. 
3703(a)(1), evidence of the guaranty will be issuable to a lender of a 
class described under 38 U.S.C. 3702(d) if the loan is reported to the 
Secretary within 60 days following full disbursement and upon the 
certification of the lender that:
    (1) No default exists thereunder that has continued for more than 30 
days;
    (2) Except for acquisition and improvement loans as defined in Sec. 
36.4301, any construction, repairs, alterations, or improvements 
effected subsequent to the appraisal of reasonable value, and paid for 
out of the proceeds of the loan, which have not been inspected and 
approved upon completion by a compliance inspector designated by the 
Secretary, have been completed properly in full accordance with the 
plans and specifications upon which the original appraisal was based; 
and any deviations or changes of identity in said property have been 
approved as required in Sec. 36.4304 concerning guaranty or insurance 
of loans to veterans;
    (3) The loan conforms otherwise with the applicable provisions of 38 
U.S.C. Chapter 37 and of the regulations concerning guaranty or 
insurance of loans to veterans.


(Authority: 38 U.S.C. 3703(c)(1))

    (b) Loans made pursuant to 38 U.S.C. 3703(a), although not entitled 
to automatic insurance thereunder, may, when made by a lender of a class 
described in 38 U.S.C. 3702(d)(1), be reported for issuance of an 
insurance credit.


(Authority: 38 U.S.C. 3702(d), 3703(a)(2))

    (c) Each loan proposed to be made to an eligible veteran by a lender 
not within a class described in 38 U.S.C. 3702(d) shall be submitted to 
the Secretary for approval prior to closing. Lenders described in 38 
U.S.C. 3702(d) shall have the optional right to submit any loan for such 
prior approval. The Secretary, upon determining any loan so submitted to 
be eligible for a guaranty, or for insurance, will issue a certificate 
of commitment with respect thereto.
    (d) A certificate of commitment shall entitle the holder to the 
issuance of the evidence of guaranty or insurance upon the ultimate 
actual payment of the full proceeds of the loan for the purposes 
described in the original report and upon the submission within 60 days 
thereafter of a supplemental report showing that fact and:
    (1) The identity of any property purchased therewith,
    (2) That all property purchased or acquired with the proceeds of the 
loan has been encumbered as required by the regulations concerning 
guaranty or insurance of loans to veterans,
    (3) Except for acquisition and improvement loans as defined in Sec. 
36.4301(c), any construction, repairs, alterations, or improvements paid 
for out of the proceeds of the loan, which have not been inspected and 
approved subsequent to completion by a compliance inspector designated 
by the Secretary, have been completed properly in full accordance with 
the plans and specifications upon which the original appraisal was 
based; and that any deviations or changes of identity in said property 
have been approved as required by Sec. 36.4304, and
    (4) That the loan conforms otherwise with the applicable provisions 
of 38 U.S.C. Chapter 37 and the regulations concerning guaranty or 
insurance of loans to veterans.


(Authority: 38 U.S.C. 3703(c)(1))

    (e) Upon the failure of the lender to report in accordance with the 
provisions of paragraph (d) of this section, the certificate of 
commitment shall

[[Page 599]]

have no further effect, or the amount of guaranty or insurance shall be 
reduced pro rata, as may be appropriate under the facts of the case: 
Provided, nevertheless, that if the loan otherwise meets the 
requirements of this section, said certificate of commitment may be 
given effect by the Secretary, notwithstanding the report is received 
after the date otherwise required.
    (f) For loans not reported within 60 days, evidence of guaranty will 
be issued only if the loan report is accompanied by a statement signed 
by a corporate officer of the lending institution which explains why the 
loan was reported late. The statement must identify the case or cases in 
issue and must set forth the specific reason or reasons why the loan was 
not submitted on time. Upon receipt of such a statement evidence of 
guaranty will be issued. A pattern of late reporting and the reasons 
therefore will be considered by VA in taking action under Sec. 36.4349.
    (g) Evidence of a guaranty will be issued by the Secretary by 
appropriate endorsement on the note or other instrument evidencing the 
obligation, or by a separate certificate at the option of the lender. 
Notice of credit to an insurance account will be given to the lender. 
Unused certificates of eligibility issued prior to March 1, 1946, are 
void. No certificate of commitment shall be issued and no loan shall be 
guaranteed or insured unless the lender, the veteran, and the loan are 
shown to be eligible. Evidence of guaranty or insurance will not be 
issued on any loan for the purchase or construction of residential 
property unless the veteran, or the veteran's spouse in the case of a 
veteran who cannot occupy the property because of active duty status 
with the Armed Forces, certifies in such form as the Secretary shall 
prescribe that the veteran, or spouse of the active duty veteran, 
intends to occupy the property as his or her home. Guaranty or insurance 
evidence will not be issued on any loan for the alteration, improvement, 
or repair of any residential property or on a refinancing loan unless 
the veteran, or spouse of an active duty servicemember, certifies that 
he or she presently occupies the property as his or her home. An 
exception to this is if the home improvement or refinancing loan is for 
extensive changes to the property that will prevent the veteran or the 
spouse of the active duty veteran from occupying the property while the 
work is being completed. In such a case the veteran or spouse of the 
active duty veteran must certify that he or she intends to occupy or 
reoccupy the property as his or her home upon completion of the 
substantial improvements or repairs. All of the mentioned certifications 
must take place at the time of loan application and closing except in 
the case of loans automatically guaranteed, in which case veterans or, 
in the case of an active duty veteran, the veterans' spouse shall make 
the required certification only at the time the loan is closed.


(Authority: 38 U.S.C. 3704(c))

    (h) Subject to compliance with the regulations concerning guaranty 
or insurance of loans to veterans, the certificate of guaranty or the 
evidence of insurance credit will be issuable within the available 
entitlement of the veteran on the basis of the loan stated in the final 
loan report or certification of loan disbursement, except for 
refinancing loans for interest rate reductions. The available 
entitlement of a veteran will be determined by the Secretary as of the 
date of receipt of an application for guaranty or insurance of a loan or 
of a loan report. Such date of receipt shall be the date the application 
or loan report is date-stamped into VA. Eligibility derived from the 
most recent period of service:
    (1) Shall cancel any unused entitlement derived from any earlier 
period of service, and
    (2) Shall be reduced by the amount by which entitlement from service 
during any earlier period has been used to obtain a direct, guaranteed, 
or insured loan.
    (i) On property which the veteran owns at the time of application, 
or
    (ii) As to which the Secretary has incurred actual liability or 
loss, unless in the event of loss or the incurrence and payment of such 
liability by the Secretary, the resulting indebtedness of the veteran to 
the United States has been paid in full. Provided, That if the Secretary 
issues or has issued a certificate of commitment covering the loan

[[Page 600]]

described in the application for guaranty or insurance or in the loan 
report, the amount and percentage of guaranty or the amount of the 
insurance credit contemplated by the certificate of commitment shall not 
be subject to reduction if the loan has been or is closed on a date that 
is not later than the expiration date of the certificate of commitment, 
notwithstanding that the Secretary in the meantime and prior to the 
issuance of the evidence of guaranty or insurance shall have incurred 
actual liability or loss on a direct, guaranteed, or insured loan 
previously obtained by the borrower. For the purposes of this paragraph, 
the Secretary will be deemed to have incurred actual loss on a 
guaranteed or insured loan if the Secretary has paid a guaranty or 
insurance claim thereon and the veteran's resultant indebtedness to the 
Government has not been paid in full, and to have incurred actual 
liability on a guaranteed or insured loan if the Secretary is in receipt 
of a claim on the guaranty or insurance or is in receipt of a notice of 
default. In the case of a direct loan, the Secretary will be deemed to 
have incurred an actual loss if the loan is in default. A loan, the 
proceeds of which are to be disbursed progressively or at intervals, 
will be deemed to have been closed for the purposes of this paragraph if 
the loan has been completed in all respects excepting the actual 
``payout'' of the entire loan proceeds.


(Authority: 38 U.S.C. 3702(a), 3710(c))

    (i) Any amounts that are disbursed for an ineligible purpose shall 
be excluded in computing the amount of guaranty or insurance credit.
    (j) Notwithstanding the lender has erroneously, but without intent 
to misrepresent, made certification with respect to paragraph (a)(1) of 
this section, the guaranty or insurance will become effective upon the 
curing of such default and its continuing current for a period of not 
less than 60 days thereafter. For the purpose of this paragraph a loan 
will be deemed current so long as the installment is received within 30 
days after its due date.
    (k) No guaranty or insurance commitment or evidence of guaranty or 
insurance will be issuable in respect to any loan to finance a contract 
that:
    (1) Is for the purchase, construction, repair, alteration, or 
improvement of a dwelling or farm residence;
    (2) Is dated on or after June 4, 1969;
    (3) Provides for a purchase price or cost to the veteran in excess 
of the reasonable value established by the Secretary; and
    (4) Was signed by the veteran prior to the veteran's receipt of 
notice of such reasonable value; unless such contract includes, or is 
amended to include, a provision substantially as follows:

    It is expressly agreed that, notwithstanding any other provisions of 
this contract, the purchaser shall not incur any penalty by forfeiture 
of earnest money or otherwise or be obligated to complete the purchase 
of the property described herein, if the contract purchase price or cost 
exceeds the reasonable value of the property established by the 
Department of Veterans Affairs. The purchaser shall, however, have the 
privilege and option of proceeding with the consummation of this 
contract without regard to the amount of the reasonable value 
established by the Department of Veterans Affairs.


(Authority: 38 U.S.C. 501, 3703(c)(1))

    (l) With respect to any loan for which a commitment was made on or 
after March 1, 1988, the Secretary must be notified whenever the holder 
receives knowledge of disposition of the residential property securing a 
VA-guaranteed loan.
    (1) If the seller applies for prior approval of the assumption of 
the loan, then:
    (i) A holder (or its authorized servicing agent) who is an automatic 
lender must examine the creditworthiness of the purchaser and determine 
compliance with the provisions of 38 U.S.C. 3714. The creditworthiness 
review must be performed by the party that has automatic authority. If 
both the holder and its servicing agent are automatic lenders, then they 
must decide between themselves which one will make the determination of 
creditworthiness, whether the loan is current and whether there is a 
contractual obligation to assume the loan, as required by 38 U.S.C. 
3714. If the actual loan holder does not have automatic authority and 
its servicing agent is an automatic

[[Page 601]]

lender, then the servicing agent must make the determinations required 
by 38 U.S.C. 3714 on behalf of the holder. The actual holder will remain 
ultimately responsible for any failure of its servicing agent to comply 
with the applicable law and VA regulations.
    (A) If the assumption is approved and the transfer of the security 
is completed, then the notice required by this paragraph shall consist 
of the credit package (unless previously provided in accordance with 
paragraph (k)(1)(i)(B) of this section) and a copy of the executed deed 
and/or assumption agreement as required by VA office of jurisdiction. 
The notice shall be submitted to the Department with VA receipt for the 
funding fee provided for in Sec. 36.4312(e)(3) of this part.
    (B) If the application for assumption is disapproved, the holder 
shall notify the seller and the purchaser that the decision may be 
appealed to the VA office of jurisdiction within 30 days. The holder 
shall make available to that VA office all items used by the holder in 
making the holder's decision in case the decision is appealed to VA. If 
the application remains disapproved after 60 days (to allow time for 
appeal to and review by VA), then the holder must refund $50 of any fee 
previously collected under the provisions of Sec. 36.4312(d)(8) of this 
part. If the application is subsequently approved and the sale is 
completed, then the holder (or its authorized servicing agent) shall 
provide the notice described in paragraph (k)(1)(i)(A) of this section.
    (C) In performing the requirements of paragraphs (k)(1)(i)(A) or 
(k)(1)(i)(B) of this section, the holder must complete its examination 
of the creditworthiness of the prospective purchaser and advise the 
seller no later than 45 days after the date of receipt by the holder of 
a complete application package for the approval of the assumption. The 
45-day period may be extended by an interval not to exceed the time 
caused by delays in processing of the application that are documented as 
beyond the control of the holder, such as employers or depositories not 
responding to requests for verifications, which were timely forwarded, 
or follow-ups on those requests.
    (ii) If neither the holder nor its authorized servicing agent is an 
automatic lender, the notice to VA shall include:
    (A) Advice regarding whether the loan is current or in default;
    (B) A copy of the purchase contract; and
    (C) A complete credit package developed by the holder which the 
Secretary may use for determining the creditworthiness of the purchaser.
    (D) The notice and documents required by this section must be 
submitted to the VA office of jurisdiction no later than 35 days after 
the date of receipt by the holder of a complete application package for 
the approval of the assumption, subject to the same extensions as 
provided in paragraph (k)(l)(i) of this section. If the assumption is 
not automatically approved by the holder or its authorized agent, 
pursuant to the automatic authority provisions, $50 of any fee collected 
in accordance with Sec. 36.4312(d)(8) of this part must be refunded. If 
the Department of Veterans Affairs does not approve the assumption, the 
holder will be notified and an additional $50 of any fee collected under 
Sec. 36.4312(d)(8) of this section must be refunded following the 
expiration of the 30-day appeal period set out in paragraph (k)(l)(i)(B) 
of this section. If such an appeal is made to the Department of Veterans 
Affairs, then the review will be conducted at the Department of Veterans 
Affairs office of jurisdiction by an individual who was not involved in 
the original disapproval decision. If the application for assumption is 
approved and the transfer of security is completed, then the holder (or 
its authorized servicing agent) shall provide the notice required in 
paragraph (k)(l)(i)(A) of this section.
    (2) If the seller fails to notify the holder before disposing of 
property securing the loan, the holder shall notify the Secretary within 
60 days after learning of the transfer. Such notice shall advise whether 
or not the holder intends to exercise its option to immediately 
accelerate the loan and whether or not an opportunity will be extended 
to the transferor and transferee to apply for retroactive approval of 
the

[[Page 602]]

assumption under the terms of this paragraph.


(Authority: 38 U.S.C. 3714)

(The Information collection requirements in this section have been 
approved by the Office of Management and Budget under control number 
2900-0516)

[63 FR 12002, Mar. 12, 1998]



Sec. 36.4304  Deviations; changes of identity.

    A deviation of more than 5 percent between the estimates upon which 
a certificate of commitment has been issued and the report of final 
payment of the proceeds of the loan, or a change in the identity of the 
property upon which the original appraisal was based, will invalidate 
the certificate of commitment unless such deviation or change be 
approved by the Secretary. Any deviation in excess of 5 percent or 
change in the identity of the property upon which the original appraisal 
was based must be supported by a new or supplemental appraisal of 
reasonable value: Provided, That substitution of materials of equal or 
better quality and value approved by the veteran and the designated 
appraiser shall not be deemed a ``change in the identity of the 
property'' within the purview of this section. A deviation not in excess 
of 5 percent will not require the prior approval of the Secretary.

[17 FR 9668, Oct. 25, 1952]



Sec. 36.4305  Partial disbursement.

    In cases where intervening circumstances make it impracticable to 
complete the actual paying out of the loan originally proposed, or 
justify the lender in declining to make further disbursements on a 
construction loan, evidence of guaranty or of insurance of the loan or 
the proper pro rata part thereof will be issuable if the loan is 
otherwise eligible for automatic guaranty or a certificate of commitment 
was issued thereon: Provided,
    (a) A report of the loan is submitted to the Secretary within a 
reasonable time subsequent to the last disbursement, but in no event 
more than 90 days thereafter, unless report of the facts and 
circumstances is made and an extension of time obtained from the 
Secretary.
    (b) There has been no default on the loan, except that the existence 
of a default shall not preclude issuance of a guaranty certificate or 
insurance advice if a certificate of commitment was issued with respect 
to the loan.
    (c) The Secretary determines that a person of reasonable prudence 
similarly situated would not make further disbursements in the situation 
presented.
    (d) There has been full compliance with the provisions of 38 U.S.C. 
Chapter 37 and of the applicable regulations up to the time of the last 
disbursement.
    (e) In the case of a construction loan when the construction is not 
fully completed, the amount and percentage of the guaranty and the 
amount of the loan for the purposes of insurance or accounting to the 
Secretary shall be based upon such portion of the amount disbursed out 
of the proceeds of the loan which, when added to any other payments made 
by or on behalf of the veteran to the builder or the contractor, does 
not exceed 80 percent of the value of that portion of the construction 
performed (basing value on the contract price) plus the sum, if any, 
disbursed by the lender out of the proceeds of the loan for the land on 
which the construction is situated: And provided further, That the 
lender shall certify as follows:
    (1) Any amount advanced for land is protected by title or lien as 
provided in the regulations concerning guaranty or insurance of loans to 
veterans; and
    (2) No enforceable liens, for any work done or material furnished 
for that part of the construction completed and for which payment has 
been made out of the proceeds of the loan, exist or can come into 
existence.

[13 FR 7275, Nov. 27, 1948, as amended at 15 FR 4397, July 12, 1950; 24 
FR 2653, Apr. 7, 1959]



Sec. 36.4306  Refinancing of mortgage or other lien indebtedness.

    (a) Any loan for the purpose of refinancing (38 U.S.C. 3710(a)(5)) 
an existing mortgage loan or other indebtedness secured by a lien of 
record on a dwelling or farm residence owned and

[[Page 603]]

occupied or to be reoccupied if the refinancing loan is for the 
completion of major alterations, repairs or improvements to the 
property, by an eligible veteran as the veteran's home, or in the case 
of an eligible veteran unable to occupy the property because of active 
duty status in the Armed Forces, occupied or to be reoccupied by the 
veteran's spouse as the spouse's home, shall be eligible for guaranty in 
an amount as computed under Sec. 36.4302(a) provided that--
    (1) The amount of the loan may not exceed an amount equal to 90 
percent of the reasonable value of the dwelling or farm residence which 
will secure the loan, as determined by the Secretary.


(Authority: 38 U.S.C. 3710(e)(1) and 3710(h))

    (2) The dollar amount of discount, if any, to be paid by the veteran 
is reasonable in amount as determined by the Secretary in accordance 
with Sec. 36.4312(d)(7)(i),
    (3) The loan is otherwise eligible for guaranty.
    (b) [Reserved]
    (c) Nothing shall preclude guaranty of a loan to an eligible veteran 
having home loan guaranty entitlement to refinance under the provisions 
of 38 U.S.C. 3710(a)(5) a VA guaranteed or insured (or direct) mortgage 
loan made to him or her which is outstanding on the dwelling or farm 
residence owned and occupied or to be reoccupied after the completion of 
major alterations, repairs, or improvements to the property, by the 
veteran as a home, or in the case of an eligible veteran unable to 
occupy the property because of active duty status in the Armed Forces, 
occupied or to be reoccupied by the veteran's spouse as the spouse's 
home.


(Authority: 38 U.S.C. 3710(e)(1))

    (d) A refinancing loan may include contractual prepayment penalties, 
if any, due the holder of the mortgage or other lien indebtedness to be 
refinanced.
    (e) [Reserved]
    (f) Nothing in this section shall preclude the refinancing of the 
balance due for the purchase of land on which new construction is to be 
financed through the proceeds of the loan, or the refinancing of the 
balance due on an existing land sale contract relating to a veteran's 
dwelling or farm residence.
    (g) A veteran may refinance (38 U.S.C. 3710(a)(9)(B)(ii)) an 
existing loan that was for the purchase of, and is secured by, a 
manufactured home in order to purchase the lot on which the manufactured 
home is or will be permanently affixed, provided the following 
requirements are met:
    (1) The refinancing of a manufactured home and the purchase of a lot 
must be considered as one loan;
    (2) The manufactured home upon being permanently affixed to the lot 
will be considered real property under the laws of the State where it is 
located;
    (3) The loan must be secured by the same manufactured home which is 
being refinanced and the real property on which the manufactured home is 
or will be located;
    (4) The amount of the loan may not exceed an amount equal to the sum 
of the balance of the loan being refinanced; the purchase price, not to 
exceed the reasonable value of the lot; the costs of the necessary site 
preparation of the lot as determined by the Secretary; a reasonable 
discount as authorized in Sec. 36.4312(d)(6) with respect to that 
portion of the loan used to refinance the existing purchase money lien 
on the manufactured home, and closing costs as authorized in Sec. 
36.4312.
    (5) If the loan being refinanced was guaranteed by VA, the portion 
of the loan made for the purpose of refinancing an existing purchase 
money manufactured home loan may be, guaranteed without regard to the 
outstanding guaranty entitlement available for use by the veteran, and 
the verteran's guaranty entitlement shall not be charged as a result of 
any guaranty provided for the refinancing portion of the loan. For the 
purposes enumerated in 38 U.S.C. 3702(b) the refinancing portion of the 
loan shall be considered to have been obtained with the guaranty 
entitlement used to obtain VA-guaranteed loan being refinanced. The 
total guaranty for the new loan shall be the sum of the guaranty

[[Page 604]]

entitlement used to obtain VA-guaranteed loan being refinanced and any 
additional guaranty entitlement available to the veteran. However, the 
total guaranty may not exceed the guaranty amount as calculated under 
Sec. 36.4302(a) of this part.


(Authority: 38 U.S.C. 3703(a))

[35 FR 18872, Dec. 11, 1970, as amended at 46 FR 43672, Aug. 31, 1981; 
48 FR 27403, June 15, 1983; 49 FR 42571, Oct. 23, 1984; 50 FR 3334, Jan. 
24, 1985; 55 FR 40656, Oct. 4, 1990]



Sec. 36.4306a  Interest rate reduction refinancing loan.

    (a) Pursuant to 38 U.S.C. 3710(a)(8), (a)(9)(B)(i), and (a)(11), a 
veteran may refinance an existing VA guaranteed, insured, or direct loan 
to reduce the interest rate payable on the existing loan provided the 
following requirements are met:
    (1) The loan must be secured by the same dwelling or farm residence 
as the loan being refinanced; and
    (2) The veteran must own the dwelling or farm residence securing the 
loan and
    (i) Must occupy the dwelling or residence as his or her home; or
    (ii) Must have previously occupied the dwelling or residence as his 
or her home and must certify, in such form as the Secretary shall 
require, that he or she has previously occupied the dwelling or 
residence; or
    (iii) In any case in which the veteran is on, or was on, active duty 
status as a member of the Armed Forces and is unable, or was unable, to 
occupy the residence or dwelling as a home because of such active duty 
status, the spouse of the veteran must occupy, or must have previously 
occupied, such dwelling or residence as the spouse's home and must 
certify to that occupancy in such form as the Secretary shall require.


(Authority: 38 U. S.C. 3710(e)(1))

    (3) The monthly principal and interest payment on the new loan must 
be lower than the payment on the loan being refinanced, except when the 
term of the new loan is shorter than the term of the loan being 
refinanced; or the new loan is a fixed-rate loan that refinances a VA-
guaranteed adjustable rate mortgage; or the increase in the monthly 
payments on the loan results from the inclusion of energy efficient 
improvements, as provided by Sec. 36.4336(a)(4); or the Secretary 
approves the loan in advance after determining that the new loan is 
necessary to prevent imminent foreclosure and the veteran qualifies for 
the new loan under the credit standards contained in Sec. 36.4337.
    (4) The amount of the refinancing loan may not exceed:
    (i) An amount equal to the balance of the loan being refinanced, 
which must not be delinquent, except in cases described in paragraph 
(a)(5) of this section, and such closing costs as authorized by Sec. 
36.4312(d) and a discount not to exceed 2 percent of the loan amount; or
    (ii) In the case of a loan to refinance an existing VA-guaranteed or 
direct loan and to improve the dwelling securing such loan through 
energy efficient improvements, the amount referred to with respect to 
the loan under paragraph (a)(4)(i) of this section, plus the amount 
authorized by Sec. 36.4336(a)(4).


(Authority: 38 U.S.C. 3703, 3710)

    (5) If the loan being refinanced is delinquent (delinquent means 
that a scheduled monthly payment of principal and interest is more than 
30 days past due), the new loan will be guaranteed only if the Secretary 
approves it in advance after determining that the borrower, through the 
lender, has provided reasons for the loan deficiency, has provided 
information to establish that the cause of the delinquency has been 
corrected, and qualifies for the loan under the credit standards 
contained in Sec. 36.4337. In such cases, the term ``balance of the 
loan being refinanced'' shall include any past due installments, plus 
allowable late charges.
    (6) The dollar amount of guaranty on the 38 U.S.C. 3710(a)(8) or 
(a)(9)(B)(i) loan may not exceed the greater of the original guaranty 
amount of the loan being refinanced or 25 percent of the loan; and
    (7) The term of the refinancing loan (38 U.S.C. 3710(a)(8)) may not 
exceed the original term of the loan being refinanced plus ten years, or 
the maximum loan term allowed under 38 U.S.C.

[[Page 605]]

3703(d)(1), whichever is less. For manufactured home loans that were 
previously guaranteed under 38 U.S.C. 3712, the loan term, if being 
refinanced under 38 U.S.C. 3710(a)(9)(B)(i), may exceed the original 
term of the loan but may not exceed the maximum loan term allowed under 
38 U.S.C. 3703(d)(1).


(Authority: 38 U.S.C. 3703(c)(1), 3710(e)(1))

    (b) Notwithstanding any other regulatory provision, the interest 
rate reduction refinancing loan may be guaranteed without regard to the 
amount of guaranty entitlement available for use by the veteran, and the 
amount of the veteran's remaining guaranty entitlement, if any, shall 
not be charged for an interest rate reduction refinancing loan. The 
interest rate reduction refinancing loan will be guaranteed with the 
lesser of the entitlement used by the veteran to obtain the loan being 
refinanced or the amount of the guaranty as calculated under Sec. 
36.4302(a) of this part. The veteran's loan guaranty entitlement 
originally used for a purpose as enumerated in 38 U.S.C. 3710(a) (1) 
through (7) and (9)(A) (i) and (ii) and subsequently transferred to an 
interest rate reduction refinancing loan (38 U.S.C. 3710(a) (8) or 
(9)(B)(i)) shall be eligible for restoration when the interest rate 
reduction refinancing loan or subsequent interest rate reduction 
refinancing loans on the same property meets the requirements of Sec. 
36.4302(h).


(Authority: 38 U.S.C. 3703(a))

    (c) Title to the estate which is refinanced for the purpose of an 
interest rate reduction must be in conformity with Sec. 36.4350.


(Authority: 38 U.S.C. 3710(a) (8), (9)(B) (i) and (e))

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0601)

[46 FR 43672, Aug. 31, 1981, as amended at 48 FR 27403, June 15, 1983; 
50 FR 3335, Jan. 24, 1985; 55 FR 40656, Oct. 4, 1990; 60 FR 38260, July 
26, 1995; 61 FR 7415, Feb. 28, 1996; 62 FR 63454, Dec. 1, 1997; 64 FR 
19910, Apr. 23, 1999; 64 FR 28363, May 26, 1999]



Sec. 36.4307  Joint loans.

    (a) Except as provided in paragraph (b) of this section, the prior 
approval of the Secretary is required in respect to any loan to be made 
to two or more borrowers who become jointly and severally liable, or 
jointly liable therefor, and who will acquire an undivided interest in 
the property to be purchased or who will otherwise share in the proceeds 
of the loan, or in respect to any loan to be made to an eligible veteran 
whose interest in the property owned, or to be acquired with the loan 
proceeds, is an undivided interest only, unless such interest is at 
least a 50 percent interest in a partnership. The amount of the guaranty 
or insurance credit shall be computed in such cases only on that portion 
of the loan allocable to the eligible veteran which, taking into 
consideration all relevant factors, represents the proper contribution 
of the veteran to the transaction. Such loans shall be secured to the 
extent required by 38 U.S.C. Chapter 37 and the regulations concerning 
guaranty or insurance of loans to veterans.
    (b) Notwithstanding the provisions of paragraph (a) of this section, 
the joinder of the spouse of a veteran-borrower in the ownership of 
residential property shall not require prior approval or preclude the 
issuance of a guaranty or insurance credit based upon the entire amount 
of the loan. If both spouses be eligible veterans, either or both may, 
within permissible maxima, utilize available guaranty or insurance 
entitlement.
    (c) For the purpose of determining the rights and the liabilities of 
the Secretary with respect to a loan subject to paragraph (a) of this 
section, credits legally applicable to the entire loan shall be applied 
as follows:
    (1) Prepayments made expressly for credit to that portion of the 
indebtedness allocable to the veteran (including the gratuity paid 
pursuant to former provisions of law), shall be applied to such portion 
of the indebtedness. All other payments shall be applied ratably to 
those portions of the loan allocable respectively to the veteran and to 
the other debtors.
    (2) Proceeds of the sale or other liquidation of the security shall 
be applied ratably to the respective portions

[[Page 606]]

of the loan, such portion of the proceeds as represents the interest of 
the veteran being applied to that portion of the loan allocable to such 
veteran.

[13 FR 7739, Dec. 15, 1948, as amended at 24 FR 2653, Apr. 7, 1959; 40 
FR 34590, Aug. 18, 1975]



Sec. 36.4308  Transfer of title by borrower or maturity by demand or 
acceleration.

    (a) Except as provided by paragraphs (b) or (c) of this section the 
conveyance of or other transfer of title to property by operation of law 
or otherwise, after the creation of a lien thereon to secure a loan 
which is guaranteed or insured in whole or in part by the Secretary, 
shall not constitute an event of default, or acceleration of maturity, 
elective or otherwise, and shall not of itself terminate or otherwise 
affect the guaranty or insurance.
    (b)(1) The Secretary may issue guaranty on loans in which a State, 
Territorial, or local governmental agency provides assistance to a 
veteran for the acquisition of a dwelling. Such loans will not be 
considered ineligible for guaranty if the State, Territorial, or local 
authority, by virtue of its laws or regulations or by virtue of Federal 
law, requires the acceleration of maturity of the loan upon the sale or 
conveyance of the security property to a person ineligible for 
assistance from such authority.
    (2) At the time of application for a loan assisted by a State, 
Territorial, or local governmental agency, the veteran-applicant must be 
fully informed and consent in writing to the housing authority 
restrictions. A copy of the veteran's consent statement must be 
forwarded with the loan application or the report of a loan processed on 
the automatic basis.


(Authority: 38 U.S.C. 3703(c))

    (c) Any housing loan which is financed under 38 U.S.C. chapter 37, 
and to which section 3714 of that chapter applies, shall include a 
provision in the security instrument that the holder may declare the 
loan immediately due and payable upon transfer of the property securing 
such loan to any transferee unless the acceptability of the assumption 
of the loan is established pursuant to section 3714.
    (1) A holder may not exercise its option to accelerate a loan upon:
    (i) The creation of a lien or other encumbrance subordinate to the 
lender's security instrument which does not relate to the transfer of 
rights of occupancy in the property;
    (ii) The creation of a purchase money security interest for 
household appliances;
    (iii) A transfer by devise, descent, or operation of law on the 
death of a joint tenant or tenant by the entirety;
    (iv) The granting of a leasehold interest of three years or less not 
containing an option to purchase;
    (v) A transfer to a relative resulting from the death of a borrower;
    (vi) A transfer where the spouse or children of the borrower become 
joint owners of the property with the borrower;
    (vii) A transfer resulting from a decree of a dissolution of 
marriage, legal separation agreement, or from an incidental property 
settlement agreement by which the spouse of the borrower becomes the 
sole owner of the property. In such a case the borrower shall have the 
option of applying directly to the Department of Veterans Affairs 
regional office of jurisdiction for a release of liability in accordance 
with Sec. 36.4323 of this part; or
    (viii) A transfer into an inter vivos trust in which the borrower is 
and remains a beneficiary and which does not relate to a transfer of 
rights of occupancy in the property.
    (2) With respect to each such loan at least one of the instruments 
used in the transaction shall contain the following statement: ``This 
loan is not assumable without the approval of the Department of Veterans 
Affairs or its authorized agent.'' This statement must be:
    (i) Printed in a font size which is the larger of:
    (A) Two times the largest font size contained in the body of the 
instrument; or
    (B) 18 points; and
    (ii) Contained in at least one of the following:
    (A) The note;
    (B) The mortgage or deed of trust; or

[[Page 607]]

    (C) A rider to either the note, the mortgage, or the deed of trust.


(Authority: 38 U.S.C.3714(d))

    (d) The term of payment of any guaranteed or insured obligation 
shall bear a proper relation to the borrower's present and anticipated 
income and expenses, (except loans pursuant to 38 U.S.C. 3710(a)(8) or 
(9)(B)(i)). In addition the terms of payment of any guaranteed or 
insured obligation shall provide for discharge of the obligation at a 
definite date or dates or intervals, in amount specified on or 
computable from the face of the instrument. A loan which is payable on 
demand, or at sight, or on presentation, or at a time not specified or 
computable from the language in the note, mortgage, or other loan 
instrument, or which contemplates periodic renewals at the option of the 
holder to satisfy the repayment requirements of this section, is not 
eligible for guaranty or insurance, except as provided in paragraph (f) 
of this section.
    (e) No guaranteed or insured obligation shall contain a provision to 
the effect that the holder shall have the right to declare the 
indebtedness due, or to pursue one or more legal or equitable remedies, 
if holder ``shall feel insecure,'' or upon the occurrence of one or more 
such conditions optional to the holder, without regard to an act or 
omission by the debtor, which condition by the terms of the note, 
mortgage, or other loan instrument would at the option of the holder 
afford a basis for declaring a default.
    (f) Notwithstanding the inclusion in the guaranteed or insured 
obligation of a provision contrary to the provisions of this section, 
the right of the holder to payment of the guaranty or insurance shall 
not be thereby impaired: Provided,
    (1) Default was declared or maturity was accelerated under some 
other provision of the note, mortgage, or other loan instrument, or
    (2) Activation or enforcement of such provision is warranted under 
Sec. 36.4317 (a), or
    (3) The prior approval of the Secretary was obtained.


(Authority: 38 U.S.C. 3703(c))

    (g) The holder of any guaranteed or insured obligation shall have 
the right, notwithstanding the absence of express provision therefor in 
the instruments evidencing the indebtedness, to accelerate the maturity 
or such obligation at any time after the continuance of any default for 
the period specified in Sec. 36.4316.
    (h) If sufficient funds are tendered to bring a delinquency current 
at any time prior to a judicial or statutory sale or other public sale 
under power of sale provisions contained in the loan instruments to 
liquidate any security for a guaranteed loan, the holder shall be 
obligated to accept the funds in payment of the delinquency unless:
    (1) The prior approval of the Secretary is obtained to do otherwise, 
or
    (2) Reinstatement of the loan would adversely affect the dignity of 
the lien or be otherwise precluded by law.

A delinquency will include all installment payments (principal, 
interest, taxes, insurance, advances, etc.) due and unpaid and any 
accumulated late charges plus any reasonable expenses incurred and paid 
by the holder if termination proceedings have begun (e.g., advertising 
costs, foreclosure costs, attorney or trustee fees, recording fees, 
etc.).


(Authority: 38 U.S.C. 501, 3703(c), 3712(g))

(Approved by the Office of Management and Budget under OMB control 
number 2900-0516)

[13 FR 7739, Dec. 15, 1948, as amended at 15 FR 4397, July 12, 1950; 43 
FR 53728, Nov. 17, 1978; 46 FR 43673, Aug. 31, 1981; 46 FR 51386, Oct. 
20, 1981; 50 FR 3335, Jan. 24, 1985; 55 FR 37476, Sept. 12, 1990; 55 FR 
39404, Sept. 27, 1990; 68 FR 6627, Feb. 10, 2003]



Sec. 36.4309  Amortization.

    (a) All loans, the maturity date of which is beyond 5 years from 
date of loan or date of assumption by the veteran, shall be amortized. 
Except as provided in paragraph (e) of this section, the schedule of 
payments thereon shall be in accordance with any generally recognized 
plan of amortization requiring approximately equal periodic payments and 
shall require a principal reduction not less often than annually during 
the life of the loan. The final installment on any loan shall not be in 
excess of two times the average of the

[[Page 608]]

preceding installments, except that on a construction loan such 
installment may be for an amount not in excess of 5 per centum of the 
original principal amount of the loan. The limitations imposed herein on 
the amount of the final installment shall not apply in the case of any 
loan extended pursuant to Sec. 36.4314(a).
    (b) Any plan of repayment on loans required to be amortized which 
does not provide for approximately equal periodic payments shall not be 
eligible unless the plan conforms with the provisions of paragraph (e) 
of this section, or is otherwise approved by the Secretary.
    (c) Every guaranteed or insured loan shall be repayable within the 
estimated economic life of the property securing the loan.
    (d) Subject to paragraph (a) of this section, any amounts which 
under the terms of a loan do not become due and payable on or before the 
last maturity date permissible for loans of its class under the 
limitations contained in 38 U.S.C. Chapter 37 shall automatically fall 
due on such date. (See Sec. 36.4334.)
    (e) A graduated payment mortgage loan, providing for deferrals of 
interest during the first 5 years of the loan and addition of the 
deferred amounts to principal shall be eligible, Provided:
    (1) The loan is for the purpose of acquiring a single-family 
dwelling unit, including a condominium unit or simultaneously acquiring 
and improving a previously occupied, existing single-family dwelling 
unit.
    (2)(i) For proposed construction or existing homes not previously 
occupied (new homes), the maximum loan amount cannot exceed 97.5 percent 
of the lesser of the reasonable value of the property as of the time the 
loan is made or the purchase price.
    (ii) For previously occupied, existing homes the maximum loan amount 
must be computed to assure that the principal amount of the loan, 
including all interest scheduled to be deferred and added to the loan 
principal, will not exceed the purchase price or reasonable value of the 
property, whichever is less, as of the time the loan is made;
    (3) The increases in the monthly periodic payment amount occur 
annually on each of the first five annual anniversary dates of the first 
loan installment due date, at a rate of 7.5 percent over the preceding 
year's monthly payment amount;
    (4) Beginning with the payment due on the fifth annual anniversary 
date of the first loan installment due date, all remaining monthly 
periodic payments are approximately equal in amount and amortize the 
loan fully in accordance with the requirements of this section, and
    (5) The plan is otherwise acceptable to the Secretary.

(Authority: 38 U.S.C. 3703(d))

[13 FR 7275, Nov. 27, 1948, as amended at 24 FR 2653, Apr. 7, 1959; 47 
FR 15139, Apr. 8, 1982]



Sec. 36.4310  Prepayment.

    The debtor shall have the right to prepay at any time, without 
premium or fee, the entire indebtedness or any part thereof not less 
than the amount of one installment, or $100, whichever is less. Any 
prepayment in full of the indebtedness shall be credited on the date 
received, and no interest may be charged thereafter. Any partial 
prepayment made on other than an installment due date need not be 
credited until the next following installment due date or 30 days after 
such prepayment, whichever is earlier. The holder and the debtor may 
agree at any time that any prepayment not previously applied in 
satisfaction of matured installments shall be reapplied for the purpose 
of curing or preventing any subsequent default.

[38 FR 25678, Sept. 14, 1973]



Sec. 36.4311  Interest rates.

    (a) In guaranteeing or insuring loans under 38 U.S.C. chapter 37, 
the Secretary may elect to require that such loans either bear interest 
at a rate that is agreed upon by the veteran and the lender, or bear 
interest at a rate not in excess of a rate established by the Secretary. 
The Secretary may, from time to time, change that election by publishing 
a notice in the Federal Register. However, the interest rate of a loan 
for the purpose of an interest rate reduction under 38 U.S.C. 
3710(a)(8), (a)(9)(B)(i), or (a)(11) must be less than the interest rate 
of the VA loan being

[[Page 609]]

refinanced. This paragraph does not apply in the case of an adjustable 
rate mortgage being refinanced under 38 U.S.C. 3710(a)(8), (a)(9)(B)(i), 
or (a)(11) with a fixed rate loan.


(Authority: 38 U.S.C. 3703, 3710)

    (b) For loans bearing an interest rate agreed upon by the veteran 
and the lender, the veteran may pay reasonable discount points in 
connection with the loan. The discount points may not be included in the 
loan amount, except for interest rate reduction refinancing loans under 
38 U.S.C. 3710(a)(8), (a)(9)(B)(i), and (a)(11). For loans bearing an 
interest rate agreed upon by the veteran and the lender, the provisions 
of Sec. 36.4312(d)(6) and (d)(7) do not apply.


(Authority: 38 U.S.C. 3703, 3710)

    (c) Interest in excess of the rate reported by the lender when 
requesting evidence of guaranty or insurance shall not be payable on any 
advance, or in the event of any delinquency or default: Provided, that a 
late charge not in excess of an amount equal to 4 percent on any 
installment paid more than 15 days after due date shall not be 
considered a violation of this limitation.


(Authority: 38 U.S.C. 3710)

    (d) Effective October 1, 2003, adjustable rate mortgage loans which 
comply with the requirements of this paragraph (d) are eligible for 
guaranty.
    (1) Interest rate index. Changes in the interest rate charged on an 
adjustable rate mortgage must correspond to changes in the weekly 
average yield on one year (52 weeks) Treasury bills adjusted to a 
constant maturity. Yields on one year Treasury bills at ``constant 
maturity'' are interpolated by the United States Treasury from the daily 
yield curve. This curve, which relates the yield on the security to its 
time to maturity, is based on the closing market bid yields on actively 
traded one year Treasury bills in the over-the-counter market. The 
weekly average one year constant maturity Treasury bill yields are 
published by the Federal Reserve Board of the Federal Reserve System. 
The Federal Reserve Statistical Release Report H. 15 (519) is released 
each Monday. These one year constant maturity Treasury bill yields are 
also published monthly in the Federal Reserve Bulletin, published by the 
Federal Reserve Board of the Federal Reserve System, as well as 
quarterly in the Treasury Bulletin, published by the Department of the 
Treasury.
    (2) Frequency of interest rate changes. Interest rate adjustments 
must occur on an annual basis, except that the first adjustment may 
occur no sooner than 36 months from the date of the borrower's first 
mortgage payment. The adjusted rate will become effective the first day 
of the month following the adjustment date; the first monthly payment at 
the new rate will be due on the first day of the following month. To set 
the new interest rate, the lender will determine the change between the 
initial (i.e., base) index figure and the current index figure. The 
initial index figure shall be the most recent figure available before 
the date of mortgage loan origination. The current index figure shall be 
the most recent index figure available 30 days before the date of each 
interest rate adjustment.
    (3) Method of rate changes. Interest rate changes may only be 
implemented through adjustments to the borrower's monthly payments.
    (4) Initial rate and magnitude of changes. The initial contract 
interest rate of an adjustable rate mortgage shall be agreed upon by the 
lender and the veteran. Annual adjustments in the interest rate shall 
correspond to annual changes in the interest rate index, subject to the 
following conditions and limitations:
    (i) No single adjustment to the interest rate may result in a change 
in either direction of more than one percentage point from the interest 
rate in effect for the period immediately preceding that adjustment. 
Index changes in excess of one percentage point may not be carried over 
for inclusion in an adjustment in a subsequent year. Adjustments in the 
effective rate of interest over the entire term of the mortgage may not 
result in a change in either direction of more than five percentage 
points from the initial contract interest rate.

[[Page 610]]

    (ii) At each adjustment date, changes in the index interest rate, 
whether increases or decreases, must be translated into the adjusted 
mortgage interest rate, rounded to the nearest one-eighth of one 
percent, up or down. For example, if the margin is 2 percent and the new 
index figure is 6.06 percent, the adjusted mortgage interest rate will 
be 8 percent. If the margin is 2 percent and the new index figure is 
6.07 percent, the adjusted mortgage interest rate will be 8\1/8\ 
percent.
    (5) Pre-loan disclosure. The lender shall explain fully and in 
writing to the borrower, at the time of loan application, the nature of 
the obligation taken. The borrower shall certify in writing that he or 
she fully understands the obligation and a copy of the signed 
certification shall be placed in the loan folder and furnished to VA 
upon request.
    (i) The fact that the mortgage interest rate may change, and an 
explanation of how changes correspond to changes in the interest rate 
index;
    (ii) Identification of the interest rate index, its source of 
publication and availability;
    (iii) The frequency (i.e., annually) with which interest rate levels 
and monthly payments will be adjusted, and the length of the interval 
that will precede the initial adjustment; and
    (iv) A hypothetical monthly payment schedule that displays the 
maximum potential increases in monthly payments to the borrower over the 
first five years of the mortgage, subject to the provisions of the 
mortgage instrument.
    (6) Annual disclosure. At least 25 days before any adjustment to a 
borrower's monthly payment may occur, the lender must provide a notice 
to the borrower which sets forth the date of the notice, the effective 
date of the change, the old interest rate, the new interest rate, the 
new monthly payment amount, the current index and the date it was 
published, and a description of how the payment adjustment was 
calculated. A copy of the annual disclosure shall be made a part of the 
lender's permanent record on the loan.


(Authority: 38 U.S.C. 3707A)

[60 FR 38260, July 26, 1995, as amended at 70 FR 22597, May 2, 2005]



Sec. 36.4312  Charges and fees.

    (a) No charge shall be made against, or paid by, the borrower 
incident to the making of a guaranteed or insured loan other than those 
expressly permitted under paragraph (d) or (e) of this section, and no 
loan shall be guaranteed or insured unless the lender certifies to the 
Secretary that it has not imposed and will not impose any charges or 
fees against the borrower in excess of those permissible under paragraph 
(d) or (e) of this section. Any charge which is proper to make against 
the borrower under the provisions of this paragraph may be paid out of 
the proceeds of the loan: Provided, That if the purpose of the loan is 
to finance the purchase or construction of residential property the 
costs of closing the loan including the pro rata portion of the ground 
rents, hazard insurance premiums, current year's taxes, and other 
prepaid items normally involved in financing such transaction may not be 
included in the loan.
    (b) Except as provided in the regulations concerning the guaranty or 
insurance of loans to veterans, no brokerage or service charge or their 
equivalent may be charged against the debtor or the proceeds of the loan 
either initially, periodically, or otherwise.
    (c) Brokerage or other charges shall not be made against the veteran 
for obtaining any guaranty or insurance under 38 U.S.C. chapter 37, nor 
shall any premiums for insurance on the life of the borrower be paid out 
of the proceeds of a loan.
    (d) The following schedule of permissible fees and charges shall be 
applicable to all Department of Veterans Affairs guaranteed or insured 
loans.
    (1) The veteran may pay reasonable and customary amounts for any of 
the following items:
    (i) Fees of Department of Veterans Affairs appraiser and of 
compliance inspectors designated by the Department of Veterans Affairs 
except appraisal fees incurred for the predetermination

[[Page 611]]

of reasonable value requested by others than veteran or lender.
    (ii) Recording fees and recording taxes or other charges incident to 
recordation.
    (iii) Credit report.
    (iv) That portion of taxes, assessments, and other similar items for 
the current year chargeable to the borrower and an initial deposit 
(lump-sum payment) for the tax and insurance account.
    (v) Hazard insurance required by Sec. 36.4326.
    (vi) Survey, if required by lender or veteran; except that any 
charge for a survey in connection with a loan under Sec. Sec. 36.4356 
through 36.4360a (Condominium Loans) must have the prior approval of the 
Secretary.
    (vii) Title examination and title insurance, if any.
    (viii) The actual amount charged for flood zone determinations, 
including a charge for a life-of-the-loan flood zone determination 
service purchased at the time of loan origination, if made by a third 
party who guarantees the accuracy of the determination. A fee may not be 
charged for a flood zone determination made by a Department of Veterans 
Affairs appraiser or for the lender's own determination.
    (ix) Such other items as may be authorized in advance by the Under 
Secretary for Benefits as appropriate for inclusion under this paragraph 
as proper local variances.
    (2) A lender may charge and the veteran may pay a flat charge not 
exceeding 1 percent of the amount of the loan, provided that such flat 
charge shall be in lieu of all other charges relating to costs of 
origination not expressly specified and allowed in this schedule.
    (3) In cases where a lender makes advances to a veteran during the 
progress of construction, alteration, improvement, or repair, either 
under a commitment of the Department of Veterans Affairs to issue a 
guaranty certificate or insurance credit upon completion, or where the 
lender would be entitled to guaranty or insurance on such advances when 
reported under automatic procedure, the lender may make a charge against 
the veteran of not exceeding 2 percent of the amount of the loan for its 
services in supervising the making of advances and the progress of 
construction notwithstanding that the ``holdback'' or final advance is 
not actually paid out until after the construction, alteration, 
improvement, or repair is fully completed: Provided, That the major 
portion (51 percent or more) of the loan proceeds is paid out during the 
actual progress of the construction, alteration, improvement, or repair. 
Such charge may be in addition to the 1 percent charge allowed under 
paragraph (d)(2) of this section.
    (4) In consideration, alteration, improvement or repair loans, 
including supplemental loans made pursuant to Sec. 36.4355, where no 
charge is permissible under the provisions of paragraph (d)(3) of this 
section the lender may charge and the veteran may pay a flat sum not 
exceeding 1 percent of the amount of the loan. Such charge may be in 
addition to the 1 percent allowed under paragraph (d)(2) of this 
section.
    (5) The fees and charges permitted under this paragraph are maximums 
and are not intended to preclude a lender from making alternative 
charges against the veteran which are not specifically authorized in the 
schedule provided the imposition of such alternative charges would not 
result in an aggregate charge or payment in excess of the prescribed 
maximum.
    (6) Allowable discounts. The veteran borrower subject to the 
limitations set forth in paragraphs (d) (6) and (7) of this section may 
pay a discount required by a lender when the proceeds of the loan will 
be used for any of the following purposes:
    (i) To refinance existing indebtedness pursuant to 38 U.S.C. 
3710(a)(5), (8), (9)(B)(i) or (ii);
    (ii) To repair, alter or improve a dwelling owned by the veteran 
pursuant to 38 U.S.C. 3710(a) (4) or (7) if such loan is to be secured 
by a first lien;
    (iii) To construct a dwelling or farm residence on land already 
owned or to be acquired by the veteran, provided that the veteran did 
not or will not acquire the land directly or indirectly from a builder 
or developer who will be constructing such dwelling or farm residence;
    (iv) To purchase a dwelling from a class of sellers which the 
Secretary determines are legally precluded under

[[Page 612]]

all circumstances from paying such a discount if the best interest of 
the veteran would be so served.
    (7) Computation of discounts--(i) Computation of discount--loans 
secured by a first lien. Unless otherwise approved by the Secretary, the 
discount, if any, to be paid by the borrower may not exceed the 
difference between the bid price, rounded to the lower whole number, and 
par value for GNMA ( Government National Mortgage Association) 90-day 
forward bid closing price for pass through securities \1/2\ percent less 
than the face note rate of the loan. Unless the lender and borrower 
negotiate a firm written commitment for a maximum amount of discount to 
be paid, the bid price to be used in the computation must be the GNMA 
90-day forward bid closing quote for any day 1 to 4 business days prior 
to loan closing. ``Loan closing'' is defined for this purpose as the 
date on which the borrower's 3-day right of rescission commences 
pursuant to the Truth in Lending Act. If the lender and borrower choose 
to negotiate a firm discount commitment for a maximum amount of discount 
to be paid, the bid price to be used in establishing the maximum 
discount must be the closing quote for the business day prior to the 
date of the commitment. Lenders negotiating firm commitments must close 
that loan at a discount no higher than the firm commitment regardless of 
changes in the maximum allowable Department of Veterans Affairs interest 
rate. If a lender's commitment expires prior to loan closing, the lender 
and borrower may negotiate a new firm commitment based on the procedure 
outlined in this paragraph (d)(7)(i) or may use the procedure for 
determining the discount based on the GNMA 90-day forward bid closing 
quote for any day 1 to 4 business days prior to loan closing.
    (ii) Computation of discount--unsecured loans or loans secured by 
less than a first lien. The borrower, subject to the limitations set 
forth in paragraphs (d) (6) and (7) of this section, may pay a discount 
required by the lender when the proceeds of the loan will be used to 
repair, alter, or improve a dwelling owned by the veteran pursuant to 38 
U.S.C. 3710(a)(4) or (7) if such loan is unsecured or secured by less 
than a first lien. No such discount may be charged unless:
    (A) The loan is submitted to the Secretary for prior approval;
    (B) The dollar amount of the discount is disclosed to the Secretary 
and the veteran prior to the issuance by the Secretary of the 
certificate of commitment. Said certificate of commitment shall specify 
the discount to be paid by the veteran, and this discount may not be 
increased once the commitment is issued without the approval of the 
Secretary;
    (C) The discount has been determined by the Secretary to be 
reasonable in amount.
    (iii) A veteran may pay the discount on an acquisition and 
improvement loan (as defined in Sec. 36.4301 provided:
    (A) The veteran pays no discount on the acquisition portion of the 
loan except in accordance with paragraph (d)(6)(iv) of this section; and
    (B) The discount paid on the improvements portion of the loan does 
not exceed the percentage of discount paid on the acquisition portion of 
the loan.

Acquisition and improvement loans may be closed either on the automatic 
or prior approval basis.
    (iv) Unless the Under Secretary for Benefits otherwise directs, all 
powers of the Secretary under paragraphs (d) (6) and (7) of this section 
are hereby delegated to the officials designated by Sec. 36.4342(b).


(Authority: 38 U.S.C. 3703, 3710; 42 U.S.C. 4001 note, 4012a)

    (8) On any loan to which section 3714 of 38 U.S.C. chapter 37 
applies, the holder may charge a reasonable fee, not to exceed the 
lesser of (i) $300 and the actual cost of any credit report required, or 
(ii) any maximum prescribed by applicable State law, for processing an 
application for assumption and changing its records.


(Authority: 38 U.S.C. 3714)

    (e) Subject to the limitations set out in paragraph (e)(4) of this 
section, a fee must be paid to the Secretary.
    (1) The fee on loans to veterans shall be as follows:
    (i) On all interest rate reduction refinancing loans guaranteed 
under 38

[[Page 613]]

U.S.C. 3710(a)(8), (a)(9)(B)(i), and (a)(11), the fee shall be 0.50 
percent of the total loan amount.
    (ii) On all refinancing loans other than those described in 
paragraph (e)(1)(i) of this section, the funding fee shall be 2.75 
percent of the loan amount for loans to veterans whose entitlement is 
based on service in the Selected Reserve under the provisions of 38 
U.S.C. 3701(b)(5), and 2 percent of the loan amount for loans to all 
other veterans; provided, however, that if the veteran is using 
entitlement for a second or subsequent time, the fee shall be 3 percent 
of the loan amount.
    (iii) Except for loans to veterans whose entitlement is based on 
service in the Selected Reserve under the provisions of 38 U.S.C. 
3701(b)(5), the funding fee shall be 2 percent of the total loan amount 
for all loans for the purchase or construction of a home on which the 
veteran does not make a down payment, unless the veteran is using 
entitlement for a second or subsequent time, in which case the fee shall 
be 3 percent. On purchase or construction loans on which the veteran 
makes a down payment of 5 percent or more, but less than 10 percent, the 
amount of the funding fee shall be 1.50 percent of the total loan 
amount. On purchase or construction loans on which the veteran makes a 
down payment of 10 percent or more, the amount of the funding fee shall 
be 1.25 percent of the total loan amount.
    (iv) On loans to veterans whose entitlement is based on service in 
the Selected Reserve under the provisions of 38 U.S.C. 3701(b)(5), the 
funding fee shall be 2.75 percent of the total loan amount on loans for 
the purchase or construction of a home on which the veteran does not 
make a down payment, unless the veteran is using entitlement for a 
second or subsequent time, in which case the fee shall be 3 percent. On 
purchase or construction loans on which veterans whose entitlement is 
based on service in the Selected Reserve make a down payment of 5 
percent or more, but less than 10 percent, the amount of the funding fee 
shall be 2.25 percent of the total loan amount. On purchase or 
construction loans on which such veterans make a down payment of 10 
percent or more, the amount of the funding fee shall be 2 percent of the 
total loan amount.
    (v) All or part of the fee may be paid in cash at loan closing or 
all or part of the fee may be included in the loan without regard to the 
reasonable value of the property or the computed maximum loan amount, as 
appropriate. In computing the fee, the lender will disregard any amount 
included in the loan to enable the borrower to pay such fee.


(Authority: 38 U.S.C. 3729)

    (2) Subject to the limitations set out in this section, a fee of 
one-half of one percent of the loan balance must be paid to the 
Secretary in a manner prescribed by the Secretary by a person assuming a 
loan to which section 3714 of title 38 U.S. Code applies. The instrument 
securing such a loan shall contain a provision describing the right of 
the holder to collect this fee as trustee for the Department of Veterans 
Affairs. The loan holder shall list the amount of this fee in every 
assumption statement provided and include a notice that the fee must be 
paid to the holder immediately following loan settlement. The fee must 
be transmitted to the Secretary within 15 days of the receipt by the 
holder of the notice of transfer.


(Authority: 38 U.S.C. 3714, 3729(d))

    (3) The lender is required to pay to the Secretary the fee described 
in paragraph (e)(1) of this section within 15 days after loan closing. 
Any lender closing a loan, subject to the limitations set out in 
paragraph (e)(4) of this section who fails to submit timely payment of 
this fee will be subject to a late charge equal to 4 percent of the 
total fee due. If payment of the fee described in paragraph (e)(1) of 
this section is made more than 30 days after loan closing, interest will 
be assessed at a rate set in conformity with the Department of 
Treasury's Fiscal Requirements Manual. This interest charge is in 
addition to the 4 percent late charge, but the late charge is not 
included in the amount on which interest is computed. This interest 
charge is to be calculated on a daily basis beginning on the date of 
closing, although the interest will be assessed only on

[[Page 614]]

funding fee payments received more than 30 days after closing.
    (4) The lender is required to pay to the Secretary electronically 
through the Automated Clearing House (ACH) system the fees described in 
paragraphs (e)(1) and (e)(2) of this section and any late fees and 
interest due on them. This shall be paid to a collection agent by 
operator-assisted telephone, terminal entry, or CPU-to-CPU transmission. 
The collection agent will be identified by the Secretary. The lender 
shall provide the collection agent with the following: authorization for 
payment of the funding fee (including late fees and interest) along with 
the following information: VA lender ID number; four-digit personal 
identification number; dollar amount of debit; VA loan number; OJ 
(office of jurisdiction) code; closing date; loan amount; information 
about whether the payment includes a shortage, late charge, or interest; 
veteran name; loan type; sale amount; downpayment; whether the veteran 
is a reservist; and whether this is a subsequent use of entitlement. For 
all transactions received prior to 8:15 p.m. on a workday, VA will be 
credited with the amount paid to the collection agent at the opening of 
business the next banking day.


(Authority: 38 U.S.C. 3729(a))

    (5) The fees described in paragraph (e)(1) and (e)(2) of this 
section shall not be collected from a veteran who is receiving 
compensation (or who but for the receipt of retirement pay would be 
entitled to receive compensation) or from a surviving spouse described 
in section 3701(b) of title 38, United States Code.


(Authority: 38 U.S.C. 3729(b))

(The information collection requirements in this section have been 
approved by the Office of Management and Budget under control numbers 
2900-0474 and 2900-0516)

[13 FR 7275, Nov. 27, 1948]

    Editorial Note: For Federal Register citations affecting Sec. 
36.4312, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 36.4313  Advances and other charges.

    (a) A holder may advance any amount reasonably necessary and proper 
for the maintenance or repair of the security, or for the payment of 
accrued taxes, special assessments, ground or water rents, or premiums 
on fire or other casualty insurance against loss of or damage to such 
property and any such advance so made may be added to the guaranteed or 
insured indebtedness. A holder may also advance the one-half of one 
percent funding fee due on a transfer under 38 U.S.C. 3714 when this is 
not paid at the time of transfer. All security instruments for loans to 
which 38 U.S.C. 3714 applies must include a clause authorizing the 
collection of an assumption funding fee and an advance for this fee if 
it is not paid at the time of transfer.


(Authority: 38 U.S.C. 3714)

    (b) In addition to advances allowable under paragraph (a) of this 
section, the holder may charge against the proceeds of the sale of the 
security; against gross amounts collected; in any accounting to the 
Secretary after payment of a claim under the guaranty, in the 
computation of a claim under the guaranty, if lawfully authorized by the 
loan agreement and subject to Sec. 36.4321(a), or, in the computation 
of an insurance loss, any of the following items actually paid:
    (1) Any expense which is reasonably necessary for preservation of 
the security,
    (2) Court costs in a foreclosure or other proper judicial proceeding 
involving the security,
    (3) Other expenses reasonably necessary for collecting the debt, or 
repossession or liquidation of the security,
    (4) Reasonable trustee's fees or commissions not in excess of those 
allowed by statute and in no event in excess of 5 percent of the unpaid 
indebtedness,
    (5) Reasonable amount for legal services actually performed not to 
exceed 10 percent of the unpaid indebtedness as of the date of the first 
uncured default, or $850 whichever is less. In no event may the combined 
total of the amounts claimed for trustee's fees and legal services 
(paragraphs (b)(4) and (5) of this section) exceed $850.

[[Page 615]]

    (6) The cost of a credit report(s) on the debtor(s), which is (are) 
to be forwarded to the Secretary in connection with the claim,
    (7) Reasonable and customary costs of property inspections,
    (8) Any other expense or fee that is approved in advance by the 
Secretary.


(Authority: 38 U.S.C. 3720(a)(3))

    (c) Any advances or charges enumerated in paragraph (a) or (b) of 
this section may be included as specified in the holder's accounting to 
the Secretary, but they are not chargeable to the debtor unless he or 
she otherwise be liable therefor.
    (d) Advances of the type enumerated in paragraph (a) of this section 
and any other advances determined to be necessary and proper in order to 
preserve or protect the security may be authorized by employees 
designated in Sec. 36.4342(b) in the case of any property constituting 
the security for a loan acquired by the Secretary or constituting the 
security for the unpaid balance of the purchase price owing to the 
Secretary on account of the sale of such property. Such advances shall 
be secured to the extent legal and practicable by a lien on the 
property.
    (e) Notwithstanding the provisions of paragraph (a) or (b) of this 
section, holders of condominium loans guaranteed or insured under 38 
U.S.C. 3710(a)(6) shall not pay those assessments or charges allocable 
to the condominium unit which are provided for in the instruments 
establishing the condominium form of ownership in the absence of the 
prior approval of the Secretary.

[13 FR 7739, Dec. 15, 1948, as amended at 17 FR 9668, Oct. 25, 1952; 36 
FR 320, Jan. 9, 1971; 40 FR 34591, Aug. 18, 1975; 45 FR 38056, June 6, 
1980; 53 FR 27049, July 18, 1988; 53 FR 34296, Sept. 6, 1988; 55 FR 
37477, Sept. 12, 1990; 58 FR 29116, May 19, 1993; 59 FR 48566, Sept. 22, 
1994]



Sec. 36.4314  Extensions and reamortizations.

    (a) Provided the debtor(s) is (are) a reasonable credit risk(s), as 
determined by the holder based upon review of the debtor's (s') 
creditworthiness, including a review of a current credit report(s) on 
the debtor(s), the terms of repayment of any loan may by written 
agreement between the holder and the debtor(s), be extended in the event 
of default, to avoid imminent default, or in any other case where the 
prior approval of the Secretary is obtained. Except with the prior 
approval of the Secretary, no such extension shall set a rate of 
amortization less than that sufficient to fully amortize at least 80 
percent of the loan balance so extended within the maximum maturity 
prescribed for loans of its class.
    (b) In the event of a partial prepayment pursuant to Sec. 36.4310, 
the balance of the indebtedness may, by written agreement between the 
holder and the debtor(s), be reamortized, provided the reamortization 
schedule will result in full repayment of the loan within the original 
maturity, and provided the debtor(s) is (are) reasonable credit risk(s), 
as determined by the holder based upon review of the debtor's (s') 
creditworthiness, including a review of a current credit report(s) on 
the debtor(s).
    (c) In the event an additional loan is proposed to be made pursuant 
to Sec. 36.4351 for the repair, alteration, or improvement of real 
property on which there is an existing loan guaranteed or insured under 
38 U.S.C. chapter 37, the terms of repayment of the prior loan may, by 
written agreement between the holder and the debtor, be recast to 
combine the schedule of repayments on the two loans, provided the entire 
indebtedness is repayable within the permissible maximum maturity of the 
original loan.
    (d) Unless the prior approval of the Secretary has been obtained, 
any extension or reamortization agreed to by a holder which relieves any 
obligor from liability will release the liability of the Secretary under 
the guaranty or insurance on the entire loan. However, if such release 
of liability of an obligor results through operation of law by reason of 
an extension or other act of forbearance, the liability of the Secretary 
as guarantor or insurer will not be affected thereby, provided the 
required lien is maintained and the title holder is and will remain 
liable for the payment of the indebtedness: And further provided, That 
if such extension or

[[Page 616]]

act of forbearance will result in the release of the veteran, all 
delinquent installments, plus any foreclosure expenses which may have 
been incurred, shall have been fully paid.
    (e) The holder shall promptly forward to the Secretary an advice of 
the terms of any agreement effecting a reamortization or extension of a 
guaranteed or insured loan, together with a cop(y)(ies) of the credit 
report(s) obtained on the debtor(s).


(Authority: 38 U.S.C. 3703(c)(1))

[13 FR 7276, Nov. 27, 1948, as amended at 19 FR 4002, July 1, 1954; 24 
FR 2653, Apr. 7, 1959; 53 FR 34296, Sept. 6, 1988]



Sec. 36.4315  Notice of default and acceptability of partial payments.

    (a) Reporting of defaults. The holder of any guaranteed or insured 
loan shall give notice to the Secretary within 45 days after any debtor:
    (1) Is in default by reason of nonpayment of any installment for a 
period of 60 days from the date of first uncured default (see Sec. 
36.4301(f)); or
    (2) Is in default by failing to comply with any other covenant or 
obligation of such guaranteed or insured loan which failure persists for 
a continuing period of 90 days after demand for compliance therewith has 
been made, except that if the default is due to nonpayment of real 
estate taxes, the notice shall not be required until the failure to pay 
when due has persisted for a continuing period of 180 days.
    (b) Partial payments. A partial payment is a remittance on a loan in 
default (as defined in Sec. 36.4301(g)) of any amount less than the 
full amount due under the terms of the loan and security instruments at 
the time the remittance is tendered.
    (1) Except as provided in paragraph (b)(2) of this section, or upon 
the express waiver of the Secretary, the mortgage holder shall accept 
any partial payment and either apply it to the mortgagor's account or 
identify it with the mortgagor's account and hold it in a special 
account pending disposition. When partial payments held for disposition 
aggregate a full monthly installment, including escrow, they shall be 
applied to the mortgagor's account.
    (2) A partial payment may be returned to the mortgagor, within 10 
calendar days from date of receipt of such payment, with a letter of 
explanation only if one or more of the following conditions exist:
    (i) The property is wholly or partially tenant-occcupied and rental 
payments are not being remitted to the holder for application to the 
loan account;
    (ii) The payment is less than one full monthly installment, 
including escrows and late charge, if applicable, unless the lesser 
payment amount has been agreed to under a written repayment plan;
    (iii) The payment is less than 50 percent of the total amount then 
due, unless the lesser payment amount has been agreed to under a written 
repayment plan;
    (iv) The payment is less than the amount agreed to in a written 
repayment plan;
    (v) The amount tendered is in the form of a personal check and the 
holder has previously notified the mortgagor in writing that only cash 
or certified remittances are acceptable;
    (vi) A delinquency of any amount has continued for at least 6 months 
since the account first became delinquent and no written repayment plan 
has been arranged;
    (vii) Foreclosure has been commenced by the taking of the first 
action required for foreclosure under local law;
    (viii) The holder's lien position would be jeopardized by acceptance 
of the partial payment.
    (3) A failure by the holder to comply with the provisions of this 
paragraph may result in a partial or total loss of guaranty or insurance 
pursuant to Sec. 36.4325(b), but such failure shall not constitute a 
defense to any legal action to terminate the loan.

(Authority: 38 U.S.C. 3703(c)(1))

[45 FR 31065, May 12, 1980]



Sec. 36.4316  Continued default.

    (a) In the event any failure of the debtor to discharge the debtor's 
obligations under the loan continues for a period of 3 months, or for 
more than 1 month on an extended loan or on a

[[Page 617]]

term loan, the holder may at the holder's option then or thereafter give 
the notice prescribed in Sec. 36.4317.
    (b) The notice prescribed in Sec. 36.4317 may be submitted prior to 
the time prescribed in paragraph (a) of this section in any case where 
any material prejudice to the rights of the holder or to the Secretary 
or hazard to the security warrants more prompt action.

(Authority: 38 U.S.C. 3732)

(The information collection requirements contained in paragraph (c) were 
approved by the Office of Management and Budget under control number 
2900-0480)

[13 FR 7276, Nov. 27, 1948, as amended at 45 FR 31065, May 12, 1980; 53 
FR 34296, Sept. 6, 1988; 61 FR 28058, June 4, 1996]



Sec. 36.4317  Notice of intention to foreclose.

    (See also Sec. 36.4319.) Except upon the express waiver of the 
Secretary, a holder shall not begin proceedings in court or give notice 
of sale under power of sale, or otherwise take steps to terminate the 
debtor's rights in the security until the expiration of 30 days after 
delivery by registered mail to the Secretary of a notice of intention to 
take such action: Provided, That
    (a) Immediate action as required under 38 CFR 36.4346 (i), may be 
taken if the property to be affected thereby has been abandoned by the 
debtor or has been or may be otherwise subjected to extraordinary waste 
or hazard, or if there exist conditions justifying the appointment of a 
receiver for the property (without reference to any contractual 
provisions for such appointment);
    (b) Any right of a holder to repossess personal property may be 
exercised without prior notice to the Secretary; but notice of any such 
action taken shall be given by certified mail to the Secretary within 
ten days thereafter; and
    (c) The notice required under this paragraph shall also be provided 
to the original veteran-borrower and any other liable obligors by 
certified mail within 30 days after such notice is provided to the 
Secretary in all cases in which the current owner of the property is not 
the original veteran-borrower. A failure by the holder to make a good 
faith effort to comply with the provisions of this subparagraph may 
result in a partial or total loss of guaranty or insurance pursuant to 
VA Regulation 36.4325(b), but such failure shall not constitute a 
defense to any legal action to terminate the loan. A good faith effort 
will include, but is not limited to:
    (1) A search of the holder's automated and physical loan record 
systems to identify the name and current or last known address of the 
original veteran and any other liable obligors;
    (2) A search of the holder's automated and physical loan record 
systems to identify sufficient information (e.g., Social Security 
Number) to perform a routine trace inquiry through a major consumer 
credit bureau;
    (3) Conducting the trace inquiry using an in-house credit reporting 
terminal;
    (4) Obtaining the results of the inquiry;
    (5) Mailing the required notices and concurrently providing the 
Secretary with the names and addresses of all obligors identified and 
sent notice; and,
    (6) Documentation of the holder's records.

(Approved by the Office of Management and Budget under Control Number 
2900-0530)

[58 FR 29116, May 19, 1993]



Sec. 36.4318  Refunding of loans in default.

    (a) Upon receiving a notice of default or a notice under Sec. 
36.4317, the Secretary may within 30 days thereafter require the holder 
upon penalty of otherwise losing the guaranty or insurance to transfer 
and assign the loan and the security therefore to the Secretary or to 
another designated by the Secretary upon receipt of payment in full of 
the balance of the indebtedness remaining unpaid to the date of such 
assignment. Such assignment may be made without recourse but the 
transferor shall not thereby be relieved from the provisions of Sec. 
36.4325.
    (b) If the obligation is assigned or transferred to a third party 
pursuant to paragraph (a) of this section the Secretary may continue in 
effect the

[[Page 618]]

guaranty or insurance issued with respect to the previous loan in such 
manner as to cover the assignee or transferee.

[13 FR 7276, Nov. 27, 1948, as amended at 45 FR 31065, May 12, 1980; 61 
FR 28058, June 4, 1996]



Sec. 36.4319  Legal proceedings.

    (a) When the holder institutes suit or otherwise becomes a party in 
any legal or equitable proceeding brought on or in connection with the 
guaranteed or insured indebtedness, or involving title to, or other lien 
on, the security, such holder, within the time that would be required if 
the Secretary were a party to the proceeding, shall deliver to the 
Secretary, by mail or otherwise, by making such delivery to the loan 
guaranty officer at the office which granted the guaranty or the 
insurance, or other office to which the holder has been notified the 
file is transferred, a copy of every procedural paper filed on behalf of 
holder, and shall also so deliver, as promptly as possible, a copy of 
each similar pleading served on holder or filed in the cause by any 
other party thereto. Notice of, or motion for, continuance and orders 
thereon are excepted from the foregoing.
    (b) A copy of a notice of sale shall be similarly delivered by the 
holder, or the holder's agent or trustee, to the Secretary at the VA 
Regional Office of jurisdiction at least 30 days prior to the scheduled 
liquidation sale, or within 5 days after the date of first publication 
of the notice, whichever is later. A copy of any other notice of sale or 
acquisition of the property served on the holder or advice of any sale 
of which the holder has knowledge shall be similarly delivered to the 
Secretary, including any such notice of a tax sale or other superior 
lien or judicial sale. Such notice shall be accompanied by a statement 
of the account indebtedness and a copy of the liquidation appraisal 
request, if not previously delivered.


(Authority: 38 U.S.C. 3732)

    (c) The procedure prescribed in paragraphs (a) and (b) of this 
section shall not be applicable in any proceeding to which the Secretary 
is a party, after the Secretary's appearance shall have been entered 
therein by a duly authorized attorney.
    (d) In any legal or equitable proceeding (including probate and 
bankruptcy proceedings) to which the Secretary is a party, original 
process and any other process prior to appearance, proper to be served 
on the Secretary, shall be delivered to the loan guaranty officer of the 
regional office of the VA having jurisdiction of the area in which the 
court is situated. Within the time required by applicable law, or rule 
of court, the Secretary will cause appropriate special or general 
appearance to be entered in the case by an authorized attorney.


(Authority: 38 U.S.C. 3732)

    (e) After appearance of the Secretary by attorney all process and 
notice otherwise proper to serve on the Secretary before or after 
judgment, if served on the attorney of record, shall have the same 
effect as if the Secretary were personally served within the 
jurisdiction of the court.


(Authority: 38 U.S.C. 3732)

    (f) If following a default, the holder does not bring appropriate 
action within 30 days after requested in writing by the Secretary to do 
so, or does not prosecute such action with reasonable diligence, the 
Secretary may at the Secretary's option fix a date beyond which no 
further charges may be included in the computation of the indebtedness 
for the purposes of accounting between the holder and the Secretary. The 
Secretary may also intervene in, or begin and prosecute to completion 
any action or proceeding, in the Secretary's name or in the name of the 
holder, which the Secretary deems necessary or appropriate. The 
Secretary shall pay, in advance if necessary, any court costs or other 
expenses incurred by the Secretary or properly taxed against the 
Secretary in any such action to which the Secretary is a party, but may 
charge the same, and also a reasonable amount for legal services, 
against the guaranteed or insured indebtedness, or the proceeds of the 
sale of the security to the same extent as the holder (see Sec. 36.4313 
of this part), or otherwise collect from the holder any

[[Page 619]]

such expenses incurred by the Secretary because of the neglect or 
failure of the holder to take or complete proper action. The rights and 
remedies herein reserved are without prejudice to any other rights, 
remedies, or defenses, in law or in equity, available to the Secretary.


(Authority: 38 U.S.C. 3732)

[13 FR 7276, Nov. 27, 1948, as amended at 45 FR 31065, May 12, 1980; 53 
FR 1351, Jan. 19, 1988; 53 FR 4978, Feb. 19, 1988; 53 FR 42950, Oct. 25, 
1988, 54 FR 612, Jan. 9, 1989; 54 FR 27163, June 28, 1989]



Sec. 36.4320  Sale of security.

    (a) Upon receipt by the Secretary of notice of a liquidation sale of 
any security for a guaranteed or insured loan, the Secretary shall 
determine the net value of the security and shall notify the holder of 
the net value and of the regulatory provision which will govern the 
disposition of the security.
    (1) If the net value of the real property securing a guaranteed or 
insured loan exceeds the unguaranteed portion of the indebtedness, the 
Secretary shall specify in advance of the liquidation sale the minimum 
amount which shall be credited to the indebtedness of the borrower on 
account of the value of the security to be sold, subject to the 
following:
    (i) The specified amount in such cases shall be the lesser of the 
net value of the property or the total indebtedness.
    (ii) If a minimum amount for credit to the indebtedness has been 
specified in relation to a liquidation sale of real property, and:
    (A) The holder acquires the property, or the rights to the property, 
at the sale for an amount not in excess of such specified amount, the 
holder shall credit to the indebtedness the amount specified. The holder 
then may retain the property or, not later than 15 days after the date 
of sale, advise the Secretary of the holder's election to convey or 
transfer the property, or the rights to the property, to the Secretary;
    (B) The holder acquires the property, or the rights to the property, 
at the liquidation sale for an amount in excess of the specified amount, 
the indebtedness shall be credited with the proceeds of the sale. The 
holder may elect to convey the property to the Secretary under the terms 
of paragraph (a)(1)(ii)(A) of this section, unless a bid in excess of 
the specified amount was made pursuant to paragraph (a)(3) of this 
section.


(Authority: 38 U.S.C. 3732(c))

    (C) A third party acquires the property, or the rights to the 
property, at the liquidation sale for an amount equal to or in excess of 
that specified, the holder shall credit to the indebtedness the net 
proceeds of the sale;
    (D) A third party acquires the property, or the rights to the 
property, at the liquidation sale for an amount less than that 
specified, the holder shall credit to the indebtedness the amount 
specified.
    (iii) If a minimum amount has been specified by the Secretary, the 
Secretary's liability under loan guaranty shall be the total 
indebtedness less the amount credited to the indebtedness under 
paragraph (a)(1)(ii) of this section, not to exceed the Secretary's 
maximum liability as computed under Sec. 35.4321 of this part.
    (2) If the net value of the real property securing a guaranteed or 
insured loan does not exceed the unguaranteed portion of the 
indebtedness:
    (i) The Secretary shall notify the holder that no minimum amount 
will be specified for credit to the indebtedness on account of the value 
of the security to be sold;
    (ii) The Secretary may not accept conveyance or transfer of the 
property;
    (iii) The holder shall credit against the indebtedness the net 
proceeds of the sale, and the Secretary's liability under loan guaranty 
shall be limited to the total indebtedness less the amount credited to 
the indebtedness not to exceed the Secretary's maximum liability as 
computed under Sec. 36.4321 of this part; and
    (iv) The liability of the Secretary shall not be subject to 
adjustment by reason of any subsequent disposition of the property by 
the holder.
    (3) If a minimum bid is required under applicable State law, or 
decree of foreclosure or order of sale, or other lawful order or decree, 
and:

[[Page 620]]

    (i) Such minimum bid exceeds an amount which has been specified by 
the Secretary under paragraph (a)(1) of this section; and
    (ii) The holder acquires the property at the liquidation sale for an 
amount not exceeding the amount legally required; the holder may elect 
to convey the property to the Secretary pursuant to paragraph 
(a)(1)(ii)(A) of this section. The amount bid at the sale or the total 
indebtedness, whichever is less, shall govern instead of the specified 
amount and for the purpose of determining the Secretary's liability 
under loan guaranty.


(Authority: 38 U.S.C. 3732)

    (b) The holder should not carry out a liquidation sale until the 
Secretary has furnished the notice required under paragraph (a) of this 
section. In the event the holder carries out a liquidation sale prior to 
receiving such notice, the holder shall credit against the indebtedness 
the greater of:
    (1) The net proceeds of the sale; or
    (2) The amount of the indebtedness or the net value of the property, 
whichever is less.

The provisions of paragraph (a)(1)(ii)(A) of this section, which extends 
to the holder the option of conveying or transferring the property to 
the Secretary, shall not be applicable, and the Secretary's liability 
under the loan guaranty shall be the total indebtedness less the amount 
credited to the indebtedness under paragraph (b) (1) or (2) of this 
section, not to exceed the Secretary's maximum liability as computed 
under Sec. 36.4321 of this part.


(Authority: 38 U.S.C. 3732)

    (c) When a debtor proposes to convey or transfer any real property 
to a holder to avoid foreclosure or other judicial, contractural, or 
statutory disposition of the obligation or of the security, the consent 
of the Secretary to the terms of such proposal shall be obtained in 
advance of such conveyance or transfer. In consenting to the terms of 
the debtor's proposal the Secretary shall furnish the notice required 
under paragraph (a) of this section.


(Authority: 38 U.S.C. 3732)

    (d) Upon receipt by the Secretary of notice of a judicial or 
statutory sale, or other public sale under power of sale contained in 
the loan instruments, to liquidate any personal property which is 
security for a guaranteed or insured loan, the Secretary may specify in 
advance of such sale the minimum amount which shall be credited to the 
indebtedness of the borrower on account of the value of the security to 
be sold.
    (1) If a minimum amount has been specified by the Secretary, and
    (i) The holder is the successful bidder at the sale for an amount 
not in excess of such minimum amount, the holder shall sell the property 
pursuant to paragraph (d)(3) of this section and the amount realized 
from the resale of the property shall govern, instead of the specified 
minimum amount, in the final accounting for determining the rights and 
liabilities of the holder and the Secretary,
    (ii) A third party is the successful bidder at the sale for an 
amount equal to or in excess of that specified, the holder shall credit 
to the indebtedness the net proceeds of the sale,
    (iii) A third party is the successful bidder at the sale for an 
amount less than that specified, the holder shall credit to the 
indebtedness the amount specified,
    (iv) The holder is the successful bidder at the sale for an amount 
in excess of the specified amount, the indebtedness shall be credited 
with the proceeds of the sale or the amount realized from the resale of 
the property pursuant to paragraph (d)(3) of this section, whichever is 
the greater, unless the bid in excess of the specified amount was made 
pursuant to paragraph (d)(4) of this section.
    (2) If a minimum amount has not been specified by the Secretary 
under paragraph (d)(1) of this section, the holder shall credit against 
the indebtedness the net proceeds of the sale except as provided in 
paragraph (d)(4) of this section.
    (3) If personal property has been repossessed or otherwise acquired 
by a holder and no public sale is proposed or required to be held to 
entitle the holder to effect a further disposition of such property, or 
if the holder is the

[[Page 621]]

successful bidder at the sale of personal property as provided in 
paragraph (d)(1) of this section, the holder shall sell the property 
within a reasonable time. The holder shall submit to the Secretary a 
written advice setting forth the price, terms, conditions and the 
expenses of the proposed sale at least 10 days in advance, and the 
Secretary shall either assent to such sale in which event the holder 
shall credit against the indebtedness the net proceeds of the sale or, 
upon agreement to indemnify the holder to the extent of any increased or 
resultant loss, the Secretary may specify the minimum net price for 
which the security may be sold. If such amount has been specified, the 
holder shall sell the personal property within a reasonable time in the 
open market for the best price obtainable: Provided, that the prior 
approval of the Secretary shall be obtained if the property is to be 
sold for a net amount less than the specified amount, or if the property 
is to be sold on terms other than all cash. The ultimate net amount 
realized by the holder from such sale shall be reported by the holder to 
the Secretary in an accounting which will determine their respective 
rights and liabilities.
    (4) If a minimum bid is required under applicable State law, or 
decree of foreclosure or order of sale, or other lawful order or decree, 
the holder may bid an amount not exceeding such amount legally required. 
If an amount has been specified by the Secretary and the holder is the 
successful bidder for an amount not exceeding the amount legally 
required, such specified amount shall govern for the purposes of this 
paragraph and for the purpose of computing the ultimate loss under the 
guaranty or insurance. In the event no amount is specified and the 
holder is the successful bidder for an amount not exceeding the amount 
legally required, the amount paid or payable by the Secretary under the 
guaranty shall not be subject to any adjustment by reason of such bid.


(Authority: 38 U.S.C. 3732)

    (e) If the Secretary has specified an amount as provided in this 
section, and the holder learns of any material damage to the property 
occurring prior to the foreclosure sale or to the acceptance of a deed 
in lieu of foreclosure or prior to any other event to which such 
specified amount is applicable, the holder shall promptly advise the 
Secretary of such damage.
    (f) The holder in accounting to the Secretary in connection with the 
disposition of any property in accordance with paragraph (a), (b), or 
(d) of this section, may include as a part of the indebtedness all 
actual expenses or costs of the proceedings, paid by the holder, within 
the limits defined in Sec. 36.4313 of this part. In connection with the 
conveyance or transfer of property to the Secretary the holder may 
include in accounting to the Secretary the following expense items if 
actually paid by the holder, in addition to the consideration payable 
for the property under paragraph (g) of this section:


(Authority: 38 U.S.C. 3732)

    (1) State and documentary stamp taxes as may be required.
    (2) The customary cost of obtaining evidence of title in favor of 
the Secretary as specified in paragraph (h)(5) of this section but not 
including title evidence obtained incident to the making of the loan or 
any expenses incurred to clear title defects.
    (3) Amount expended for taxes, special assessments, including such 
payments which are specified in paragraph (h)(4) of this section.
    (4) Recording fees.
    (5) Any other expenditures in connection with the property which are 
approved by the Secretary.
    (g) In the event a holder elects to convey or transfer the property 
to the Secretary pursuant to paragraph (a), (b), or (c) of this section, 
the consideration to be paid by the Secretary in return for the property 
shall be the specified amount: Provided, That if a claim under the 
guaranty was previously paid, the consideration payable for the property 
shall be an amount equal to the indebtedness (less the amount previously 
paid on the guaranty) or the specified amount, whichever is less. If no 
claim under the guaranty was previously paid, the holder may, pursuant 
to Sec. 36.4321(b) submit a claim within the maximum guaranty liability 
for the difference between the specified

[[Page 622]]

amount and an amount equal to the indebtedness. In the case of an 
insured loan, the holder may submit a claim for the difference between 
an amount equal to the indebtedness and the specified amount pursuant to 
Sec. 36.4374.
    (h) The conveyance or transfer of any property to the Secretary 
pursuant to paragraphs (a), (b), or (c) of this section shall be subject 
to the following provisions:
    (1) If the holder's notice to the Secretary electing to convey or 
transfer the property precedes the acquisition of the property by the 
holder and the holder then acquires the property, the holder shall 
promptly after such acquisition advise the Secretary of the acquisition. 
Such advice, or the notice of election if given subsequent to 
acquisition, shall state the amount of the successful bid (if the 
property was acquired by the holder at public sale) and shall state the 
insurance coverage then in force, specifying for each policy, the name 
of the insurance company, the hazard covered, the amount, and the 
expiration date.
    (2) The holder may cancel any insurance in force when the holder 
acquires the property, provided the holder has obtained the prior 
approval of the Secretary. Coincident with the notice of election to 
convey or transfer the property to the Secretary or with the acquisition 
of the property by the holder, following such notice, whichever is 
later, the holder shall obtain endorsements on all such insurance 
policies naming the Secretary as an assured, as his/her interest may 
appear. Such insurance policies shall be forwarded to the Secretary at 
the time of the conveyance or transfer of the property to the Secretary 
or as soon after that time as feasible.
    (3) Occupancy of the property by anyone properly in possession by 
virtue of and during a period of redemption, or by anyone else unless 
under a claim of title which makes the title sought to be conveyed by 
the holder of less dignity or quality than that required by this 
section, shall not preclude the holder from conveying or transferring 
the property to the Secretary. Except with the prior approval of the 
Secretary, the holder shall not rent the property to a new tenant, nor 
extend the term of an existing tenancy on other than a month-to-month 
basis.
    (4) Any taxes, special assessments or ground rents due and payable 
within 30 days after date of conveyance or transfer to the Secretary 
shall be paid by the holder if bills therefor are obtainable before such 
conveyance or transfer.
    (5) Each conveyance or transfer of real property to the Secretary 
pursuant to this section shall be acceptable if the holder thereby 
convenants or warrants against the acts of the holder and those claiming 
under the holder (e.g., by special warranty deed) and if it vests in the 
Secretary or will entitle the Secretary to such title as is or would be 
acceptable to prudent lending institutions, informed buyers, title 
companies, and attorneys, generally, in the community in which the 
property is situated. Any title so acceptable will not be unacceptable 
to the Secretary by reason of any of the limitations on the quantum or 
quality of the property or title stated in Sec. 36.4350(b) of this 
part:

Provided, That (i) at the time of conveyance or transfer to the 
Secretary there has been no breach of any conditions affording a right 
to the exercise of any reverter, except that title will not be 
unacceptable to the Secretary by reason of a violation of a restriction 
based on race, color, creed, or national origin, whether or not such 
restriction provides for reversion or forfeiture of title or a lien for 
liquidated damages in the event of a breach.
    (ii) With respect to any such limitations which came into existence 
subsequent to the making of the loan, full compliance was had with the 
requirements of Sec. 36.4324 of this part. The acceptability of a 
conveyance or transfer pursuant to the requirements of this paragraph 
will be established by delivery to the Secretary of any of the following 
evidence of title issued by an institution or person satisfactory to the 
Secretary, in form satisfactory to him/her showing that title to the 
property of the quality specified in this paragraph is or will be vested 
in the Secretary:
    (A) A title policy insuring the Secretary in an amount approximately

[[Page 623]]

equal to the consideration for the property, or a commitment for such 
title policy; or
    (B) A certificate of record title; or
    (C) An abstract of title accompanied by a legal opinion as to the 
quality of such title of record; or
    (D) A Torrens or similar title certificate; or
    (E) Such other evidence of title as the Secretary may approve.

In lieu of such title evidence, the Secretary will accept a conveyance 
or transfer with general warranty with respect to the title from a 
holder described in 38 U.S.C. 3702(d) or from a holder of financial 
responsibility satisfactory to the Secretary. In any case where the 
holder does not deliver evidence of title of the character specified in 
this paragraph, the holder to aid the Secretary in determination of 
acceptability of title shall without expense to the Secretary furnish 
such evidence of title, including survey, if any, as may have been 
obtained by the holder incident to the making of the loan or attendant 
to the foreclosure.
    (6) Except with respect to matters covered by any covenants or 
warranties of the holder, the acceptance by the Secretary of a 
conveyance or transfer by the holder shall conclude the responsibility 
of the holder to the Secretary under the regulations of this subpart 
with respect to the title and in the event of the subsequent discovery 
of title defects, the Secretary shall have no recourse against the 
holder with respect to such title other than by reason of such covenants 
and warranties.
    (7) As between the holder and the Secretary, the responsibility for 
any loss due to damage to or destruction of the property or due to 
personal injury sustained in respect to such property shall be governed 
by the provisions of this paragraph and paragraph (h)(10) of this 
section. Ordinary wear and tear excepted, the holder shall bear such 
risk of loss from the date of acquisition by the holder to the date such 
risk of loss is assumed by the Secretary. Such risk of loss is assumed 
by the Secretary from the date of receipt of the holder's election to 
convey or transfer the property to the Secretary or, in the event of 
receipt of notice of such election prior to acquisition, from the date 
of the Secretary's receipt of notice of acquisition by the holder:

Provided, That if custody over the property has not been delivered by 
the holder to the Secretary on the date when the Secretary otherwise 
would have assumed the risk of loss, the Secretary's assumption of the 
risk of loss will be deferred until such custody over the property is 
delivered, or until the property has been conveyed or transferred to the 
Secretary. The amount of any loss chargeable to the holder may be 
deducted from the amount payable by the Secretary at the time the 
property is transferred. In any case where pursuant to the VA 
regulations rejection of the title is legally proper, the Secretary may 
surrender custody of the property as of the date specified in the 
Secretary's notice to the holder. The Secretary's assumption of such 
risk shall terminate upon such surrender.
    (8) The holder shall not be liable to the Secretary for any portion 
of the paid or unpaid taxes, special assessments, ground rents, 
insurance premiums, or other similar items.
    (9) The Secretary shall be entitled to all rentals and other income 
collected from the property and to any insurance proceeds or refunds 
subsequent to the date of acquisition by the holder.
    (10) In respect to a property which was the security for a 
condominium loan guaranteed or insured 38 U.S.C. 3710(a)(6) the 
responsibility for any loss due to damage to or destruction of the 
property or due to personal injury sustained in respect to such property 
shall in no event pass to the Secretary until the Secretary expressly 
assumes such responsibility or until conveyance of the property to the 
Secretary, whichever first occurs. The holder shall have the right to 
convey such property to the Secretary only if the property (including 
elements of the development or project owned in common with other unit 
owners) is undamaged by fire, earthquake, windstorm, flooding or boiler 
explosion. The absence of a right in the holder to convey such property 
which is so damaged shall not preclude a conveyance, if the Secretary 
agrees in a given case to such a conveyance upon completion of repairs 
within a

[[Page 624]]

specified period of time and such repairs are so completed and the 
conveyance is otherwise in order.
    (i)(1) The terms ``date of sale'' or ``date of acquisition'' as used 
in this section are defined as the date of the event (e.g., sale, 
confirmation of sale when required under local practice, delivery of 
deed in case of voluntary conveyance, etc.) which fixes the rights of 
the parties in the property.
    (2) The term ``property'' or ``real property'' as used in this 
section shall include
    (i) A leasehold estate which at the time of closing the loan was not 
less duration than prescribed by Sec. 36.4350(a)(2) of this part, and
    (ii) The rights derived by the holder through a foreclosure sale of 
real estate whether or not such rights constitute an estate in real 
property under local law.
    (j) Except as provided in paragraph (h)(6) of this section, the 
provisions of this section shall not be in derogation of any rights 
which the Secretary may have under Sec. 36.4325 of this part. The Under 
Secretary for Benefits, or the Director, Loan Guaranty Service, may 
authorize any deviation from the provisions of this section, within the 
limitations prescribed in 38 U.S.C. Chapter 37, which may be necessary 
or desirable to accomplish the objectives of this section if such 
deviation is made necessary by reason of any laws or practice in any 
State or Territory or the District of Columbia: Provided, that no such 
deviation shall impair the rights of any holder not consenting to the 
deviation with respect to loans made or approved prior to the date the 
holder is notified of such action.


(Authority: 38 U.S.C. 3732, Pub. L. 100-527)

[13 FR 7739, Dec. 15, 1948, as amended at 20 FR 9180, Dec. 10, 1955; 24 
FR 2654, Apr. 7, 1959; 28 FR 11505, Oct. 29, 1963; 33 FR 6975, May 9, 
1968; 33 FR 18026, Dec. 4, 1968; 34 FR 11095, July 1, 1969; 36 FR 320, 
Jan. 9, 1971; 40 FR 34591, Aug. 18, 1975; 53 FR 1352, Jan. 19, 1988; 54 
FR 27163, June 28, 1989; 60 FR 38262, July 26, 1995; 61 FR 28058, June 
4, 1996]



Sec. 36.4321  Computation of guaranty claims; subsequent accounting.

    (a) Subject to the limitation that the total amounts payable shall 
in no event exceed the amount originally guaranteed, the amount payable 
on a claim for the guaranty shall be the percentage of the loan 
originally guaranteed applied to the indebtedness computed as of the 
earliest of the following dates:
    (1) The date of the liquidation sale; or,
    (2) The cutoff date established under paragraph (f) of Sec. 36.4319 
of this part; or,
    (3) The cutoff date established under paragraph (b) of this section.
    Deposits or other credits or setoffs legally applicable to the 
indebtedness on the date of computation shall be applied in reduction of 
the indebtedness on which the claim is based. Any escrowed or earmarked 
funds not subject to superior claims of third persons must likewise be 
so applied.
    (b) In any case in which there is a delay in the liquidation sale 
caused by:
    (1) The holder of the loan extending forbearance in excess of 30 
days at the request of the Secretary, the cutoff date for computation of 
the indebtedness shall be 30 days after the date the Secretary 
determines the liquidation sale would have taken place if there had been 
no such delay, provided: the net value of the real property securing the 
loan does not exceed the unguaranteed portion of the indebtedness as of 
the actual liquidation sale date and such net value will exceed the 
unguaranteed portion of the indebtedness as ofthe cutoff date;
    (2) The Secretary, including the Secretary's failure to provide the 
holder with advice as to the net value of the security within two 
working days prior to a scheduled liquidation sale but excluding 
forbearance exercised at the request of the Secretary, with respect to a 
holder which has complied with the provisions of Sec. 36.4319(b) of 
this part, the cutoff date for computation of the indebtedness shall be 
the date the liquidation sale would have taken place if there had been 
no such delay;
    (3) A voluntary case commenced under Title 11, United States Code 
(relating to bankruptcy), the cutoff date for computation of the 
indebtedness shall be 30 days after the date the Secretary determines 
the liquidation sale would have taken place if there had been no such 
delay, provided: the net value of the real property securing the

[[Page 625]]

loan does not exceed the unguaranteed portion of the indebtedness as of 
the actual liquidation sale date and such net value will exceed the 
unguaranteed portion of the indebtedness as of the cutoff date.
    (c) Adjustment of cutoff dates:
    (1) Any cutoff date established under Sec. 36.4319(f) of this part 
or paragraph (b) of this section will be adjusted by a period of months 
corresponding to the number of installment payments, if any, received by 
the holder and credited to the indebtedness after the cutoff date is 
established.
    (2) When a cutoff date is established under paragraph (b)(2) of this 
section, the actual liquidation sale date will be used for purposes of 
computing the indebtedness in any subsequent accounting between the 
holder and the Secretary; if an earlier cutoff date is in effect at the 
time delay in a liquidation sale is caused by the Secretary, such date 
will not be modified by application of the provisions of paragraph 
(b)(2) of this section, but will be extended by an interval 
corresponding to the delay in the liquidation sale caused by the 
Secretary for purposes of computing the indebtedness in any subsequent 
accounting between the holder and the Secretary.
    (3) Any cutoff date established under Sec. 36.4319 of this part or 
paragraph (b) of this section will be considered to be the liquidation 
sale date. Such date will be modified in accordance with paragraph (b) 
of this section if the provisions of that paragraph are applicable after 
such date has been established.


(Authority: 38 U.S.C. 501)

    (d) Credits accruing from the proceeds of a sale or other 
disposition of the security subsequent to the date of computation, and 
prior to the submission of this claim, shall be reported to the 
Secretary incident to such submission, and the amount payable on the 
claim shall in no event exceed the remaining balance of the 
indebtedness.


(Authority: 38 U.S.C. 501)

    (e) The claimant shall be deemed to have received as trustee for the 
benefit of the United States any amounts received on account of the 
indebtedness after the date of the claim, from the proceeds of a sale of 
the security or otherwise, to the extent such credits exceed the balance 
of the indebtedness unsatisfied by the payment of the guaranty. The 
claimant shall immediately pay such amounts to the Secretary to the 
extent of the debtor's liability to the Secretary as guarantor.


(Authority: 38 U.S.C. 501)

[54 FR 27163, June 28, 1989]



Sec. 36.4322  Computation of indebtedness.

    In computing the indebtedness for the purpose of filing a claim for 
payment of a guaranty or for payment of an insured loss, or in the event 
of a transfer of the loan under Sec. 36.4318 (a), or other accounting 
to the Secretary, the holder shall not be entitled to treat repayments 
theretofore made as liquidated damages, or rentals, or otherwise than as 
payments on the indebtedness, notwithstanding any provision in the note, 
or mortgage, or otherwise, to the contrary.

[13 FR 7278, Nov. 27, 1948]



Sec. 36.4323  Subrogation and indemnity.

    (a) The Secretary shall be subrogated to the contract and the lien 
or other rights of the holder to the extent of any sum paid on a 
guaranty or on account of an insured loss, which right shall be junior 
to the holder's rights as against the debtor or the encumbered property 
until the holder shall have received the full amount payable under the 
contract with the debtor. No partial or complete release by a creditor 
shall impair the rights of the Secretary with respect to the debtor's 
obligation.
    (b) The holder, upon request, shall execute, acknowledge and deliver 
an appropriate instrument tendered for that purpose, evidencing any 
payment received from the Secretary and the Secretary's resulting right 
of subrogation.
    (c) The Secretary shall cause the instrument required by paragraph 
(b) of this section to be filed for record in the office of the recorder 
of deeds, or other appropriate office of the proper county, town or 
State, in accordance with the applicable State law. The filing or 
failure to file such instrument for record

[[Page 626]]

shall have the legal results prescribed by the applicable law of the 
State where the real or personal property is situated, with respect to 
filing or failure to so file mortgages and other lien instruments and 
assignments thereof.

The references herein to ``filing for record'' include ``registration'' 
or any similar transaction, by whatever name designated when title to 
the encumbered property has been ``registered'' pursuant to a Torrens or 
other similar title registration system provided by law.
    (d) As a condition to paying a claim for an insured loss the 
Secretary may require that the loan, including any security or judgment 
held therefor, be assigned to the extent of such payment, and if any 
claim has been filed in bankruptcy, insolvency, probate, or similar 
proceedings such claim may likewise be required to be so assigned.
    (e) Any amounts paid by the Secretary on account of the liabilities 
of any veteran guaranteed or insured under the provisions of 38 U.S.C. 
chapter 37 shall constitute a debt owing to the United States by such 
veteran.


(Authority: 38 U.S.C. 3732)

    (1) Prior to a liquidation sale, an official authorized to act for 
the Secretary under provisions of Sec. 36.4342 of this part may approve 
a complete release of the Secretary's right to collect a debt owing to 
the United States under this paragraph and/or under paragraph (a) of 
this section provided such official determines:
    (i) The loan default was caused by circumstances beyond the control 
of the obligor;
    (ii) There are no indications of fraud, misrepresentation or bad 
faith on the part of the obligor in obtaining the loan or in connection 
with the loan default;
    (iii) The obligor cooperated with VA in exploring all realistic 
alternatives to termination of the loan through foreclosure; and, either
    (iv) Review of the obligor's current financial situation and 
prospective earning potential and obligations indicates there are no 
realistic prospects that the obligor could repay all or part of the 
anticipated debt within six years of the liquidation sale while 
providing the necessities of life for himself or herself and his or her 
family; or,
    (v) In consideration for a release of the Secretary's collection 
rights the obligor completes, or VA is enabled to authorize, an action 
which reduces the Government's claim liability sufficiently to offset 
the amount of the anticipated indebtedness which would otherwise be 
established pursuant to this paragraph and likely be collectable by VA 
after foreclosure in view of the obligor's financial situation; such 
actions would include termination of the loan by means of a deed in lieu 
of foreclosure, private sale of the property for less than the 
indebtedness with a reduced claim paid by VA for the balance due the 
loan holder or enabling VA to authorize the holder to elect a more 
expeditious foreclosure procedure when such an election would result in 
the legal release of the obligor's liability; or
    (vi) The obligor being released is not the current titleholder to 
the property and there are no indications of fraud, misrepresentation, 
or bad faith on the obligor's part in obtaining the loan or disposing of 
the property or in connection with the loan default.
    (2) Prior to a liquidation sale, an official authorized to act for 
the Secretary under provisions of section 4342 of this part may approve 
a partial release of the Secretary's right to collect a debt owing to 
the United States under this paragraph and/or under paragraph (a) of 
this section provided such official determines:
    (i) The loan default was caused by circumstances beyond the control 
of the obligor:
    (ii) There are no indications of fraud, misrepresentation or bad 
faith on the part of the obligor in obtaining the loan or in connection 
with the loan default;
    (iii) The obligor cooperated with VA in exploring all realistic 
alternatives to termination of the loan through foreclosure;
    (iv) Review of the obligor's current financial situation and 
prospective earning potential and obligations indicates there are no 
realistic prospects that the obligor could repay all of the anticipated 
debt within six years of the

[[Page 627]]

liquidation sale while providing the necessities of life for himself or 
herself and his or her family; and,
    (v) The obligor executes a written agreement acknowledging his or 
her liability to VA under this paragraph and executes a promissory note 
which provides for regular amortized monthly payments of an amount 
determined by VA in accordance with paragraph (e)(3) of this section 
including interest on the total amount payable at the rate in effect for 
Loan Guaranty liability accounts at the time of execution, or, the 
obligor agrees to other terms of repayment acceptable to VA including 
payment of a lump sum in settlement of his or her obligation under this 
paragraph;
    (3) For purposes of this paragraph a review of an obligor's 
financial situation will take into consideration:
    (i) The obligor's current and anticipated family income based on 
employment skills and experience;
    (ii) The obligor's current short-term and long-term financial 
obligations, including the obligation to repay the Government which must 
be afforded consideration at least equal to his or her consumer debt 
obligations;
    (iii) A current credit report on the obligor;
    (iv) The obligor's assets and net worth; and,
    (v) The required balance available for family support used in 
underwriting VA guaranteed loans in the area.
    The amount of indebtedness established will be such that the 
obligor's financial situation permits repayment of the debt to the 
Government in regular monthly installments of principal plus interest 
over a five year period commencing within one year after the date the 
promissory note is executed, except in those cases in which a lump sum 
settlement appears to be in the best interest of the Government or in 
which it appears the obligor may reasonably expect significant changes 
in his or her financial situation which would permit higher payments to 
be made during later periods of the life of the note.
    (4) Determinations made under paragraphs (e)(1) and (e)(2) of this 
section are intended for the benefit of the Government in reducing the 
amount of claim payable by VA and/or avoiding the establishment of 
uncollectible debts owing to the United States. Such determinations are 
discretionary on the part of VA and shall not constitute a defense to 
any legal action to terminate the loan nor vest any appellate right in 
an obligor which would require further review of the case.


(Authority: 38 U.S.C. 501, 3703(c)(1))

    (f) Whenever any veteran disposes of residential property securing a 
guaranteed or insured loan obtained by him or her under 38 U.S.C. 
chapter 37, and for which the commitment to make the loan was made prior 
to March 1, 1988, the Secretary, upon application made by such veteran, 
shall issue to the veteran a release relieving him or her of all further 
liability to the Secretary on account of such loan (including liability 
for any loss resulting from any default of the transferee or any 
subsequent purchaser of such property) if the Secretary has determined, 
after such investigation as may be deemed appropriate, that there has 
been compliance with the conditions prescribed in 38 U.S.C. 3713. The 
assumption of full liability for repayment of the loan by the transferee 
of the property must be evidenced by an agreement in writing in such 
form as the Secretary may require. Release of the veteran from liability 
to the Secretary will not impair or otherwise affect the Secretary's 
guaranty or insurance liability on the loan, or the liability of the 
veteran to the holder. Any release of liability granted to a veteran by 
the Secretary shall inure to the spouse of such veteran. The release of 
the veteran from liability to the Secretary will constitute the 
Secretary's prior approval to a release of the veteran from liability on 
the loan by the holder thereof.


(Authority: 38 U.S.C. 3713)

    (g) If, on or after July 1, 1972, any veteran disposes of 
residential property securing a guaranteed or insured loan obtained 
under 38 U.S.C. Chapter 37, without receiving a release from liability 
with respect to such loan under 38 U.S.C. 3713 and a default 
subsequently occurs which results in liability of the veteran to the 
Secretary on account of the loan, the Secretary may relieve the

[[Page 628]]

veteran of such liability if he determines that:
    (1) A transferee either immediate or remote is legally liable to the 
Secretary for the debt of the original veteran-borrower established 
after the termination of the loan, and
    (2) The original loan was current at the time such transferee 
acquired the property, and
    (3) The transferee who is liable to the Secretary is found to have 
been a satisfactory credit risk at the time he or she acquired the 
property.
    (h) If a veteran or any other person disposes of residential 
property securing a guaranteed or insured loan for which a commitment 
was made on or after March 1, 1988, and the veteran or other person 
notifies the loan holder in writing before disposing of the property, 
the veteran or other person shall be relieved of all further liability 
to the Secretary with respect to the loan (including liability for any 
loss resulting from any default of the purchaser or any subsequent owner 
of the property) and the application for assumption shall be approved if 
the holder determines that:
    (1) The proposed purchaser is creditworthy;
    (2) The proposed purchaser is contractually obligated to assume the 
loan and the liability to indemnify the Department of Veterans Affairs 
for the amount of any claim paid under the guaranty as a result of a 
default on the loan, or has already done so; and,
    (3) The payments on the loan are current.

Should these requirements be satisfied, the holder may also release the 
veteran or other person from liability on the loan. This does not apply 
if the approval for the assumption is granted upon special appeal to 
avoid immediate foreclosure.


(Authority: 38 U.S.C. 3714)

[13 FR 7278, Nov. 27, 1948, as amended at 24 FR 2654, Apr. 7, 1959; 33 
FR 5362, Apr. 4, 1968; 37 FR 24034, Nov. 11, 1972; 54 FR 30211, July 19, 
1989; 54 FR 34988, Aug. 23, 1989; 55 FR 27467, July 3, 1990; 55 FR 
31387, Aug. 2, 1990; 55 FR 33904, Aug. 20, 1990; 55 FR 37477, Sept. 12, 
1990; 67 FR 62647, Oct. 8, 2002]



Sec. 36.4324  Release of security.

    (a) Except upon full payment of the indebtedness the holder shall 
not release a lien or other right in or to real property held as 
security for a guaranteed or insured loan, or grant a fee or other 
interest in such property, without the prior approval of the Secretary, 
unless in the opinion of the holder such release does not involve a 
decrease in the value of the security in excess of $2,500: Provided, 
That the aggregate of the reduction in the original value of the 
security resultant from such releases without the Secretary's prior 
approval does not exceed $2,500.
    (b) Holder may release from the lien personal property including 
crops without the prior approval of the Secretary.
    (c) Except upon full payment of the indebtedness or upon the prior 
approval of the Secretary, the holder shall not release a lien under 
paragraph (a) or (b) of this section unless the consideration received 
for the release is commensurate with the fair market value of the 
property released and the entire consideration is applied to the 
indebtedness, or if encumbrance on other property is accepted in lieu of 
that released it shall be the holder's duty to acquire such lien on 
property of substantially equal value which is reasonably capable of 
serving the purpose for which the property released was utilized.
    (d) Failure of the holder to comply with the provisions of this 
section shall not in itself affect the validity of the title of a 
purchaser to the property released.
    (e) The holder shall notify the Secretary of any such release or 
substitution of security within 30 days after completion of such 
transaction.
    (f) The release of the personal liability of any obligor on a 
guaranteed or insured obligation resultant from the act or omission of 
any holder without the prior approval of the Secretary shall release the 
obligation of the Secretary as guarantor or insurer, except when such 
act or omission consists of (1) failure to establish the debt as a valid 
claim against the assets of the estate of any deceased obligor, provided 
no lien for the guaranteed or insured debt is thereby impaired or 
destroyed;

[[Page 629]]

or (2) an election and appropriate prosecution of legally available 
effective remedies with respect to the repossession or the liquidation 
of the security in any case, irrespective of the identity or the 
survival of the original or of any subsequent debtor, if holder shall 
have given such notice as required by Sec. 36.4317 of this part and if, 
after receiving such notice, the Secretary shall have failed to notify 
the holder within 15 days to proceed in such manner as to effectively 
preserve the personal liability of the parties liable, or such of them 
as the Secretary indicates in such notice to the holder; or (3) the 
release of an obligor, or obligors, from liability on an obligation 
secured by a lien on property, which release is an incident of and 
contemporaneous with the sale of such property to an eligible veteran 
who assumed such obligation, which assumed obligation is guaranteed on 
the assuming veteran's account pursuant to 38 U.S.C. chapter 37; or (4) 
the release of an obligor or obligors as provided in Sec. 36.4314(d) of 
this part; or, the release of an obligor, or obligors, incident to the 
sale of property securing the loan which the holder is authorized to 
approve under the provisions of 38 U.S.C. 3714.

(Authority: 38 U.S.C. 3714)

[13 FR 7278, Nov. 27, 1948, as amended at 24 FR 6315, Aug. 6, 1959; 35 
FR 7728, May 20, 1970; 46 FR 43673, Aug. 31, 1981; 52 FR 26342, July 14, 
1987; 55 FR 37477, Sept. 12, 1990]



Sec. 36.4325  Partial or total loss of guaranty or insurance.

    (a) Subject to the incontestable provisions of 38 U.S.C. 3721 as to 
loans guaranteed or insured on or subsequent to July 1, 1948, there 
shall be no liability on account of a guaranty or insurance, or any 
certificate or other evidence thereof, with respect to a transaction in 
which a signature to the note, the mortgage, or any other loan papers, 
or the application for guaranty or insurance is a forgery; or in which 
the certificate of discharge or the certificate of eligibility is 
counterfeited, or falsified, or is not issued by the Government.
    (1) Except as to a holder who acquired the loan instrument before 
maturity, for value, and without notice, and who has not directly or by 
agent participated in the fraud, or in the misrepresentation hereinafter 
specified, any wilful and material misrepresentation or fraud by the 
lender, or by a holder, or the agent of either, in procuring the 
guaranty or the insurance credit, shall relieve the Secretary of 
liability, or, as to loans guaranteed or insured on, or subsequent to 
July 1, 1948, shall constitute a defense against liability on account of 
the guaranty or insurance of the loan in respect to which the wilful 
misrepresentation, or the fraud, is practiced: Provided, That if a 
misrepresentation, although material, is not made wilfully, or with 
fraudulent intent, it shall have only the consequences prescribed in 
paragraphs (b) and (c) of this section.
    (2) [Reserved]
    (b) In taking security required by 38 U.S.C. chapter 37 and the 
regulations concerning guaranty or insurance of loans to veterans, a 
holder shall obtain the required lien on property the title to which is 
such as to be acceptable to prudent lending institutions, informed 
buyers, title companies, and attorneys, generally, in the community in 
which the property is situated: Provided, That a title will not be 
unacceptable by reason of any of the limitations on the quantum or 
quality of the property or title stated in Sec. 36.4350(b) and if such 
holder fails in this respect or fails to comply with 38 U.S.C. chapter 
37 and the regulations concerning guaranty or insurance of loans to 
veterans with respect to:
    (1) Obtaining and retaining a lien of the dignity prescribed on all 
property upon which a lien is required by 38 U.S.C. chapter 37 or the 
regulations concerning guaranty or insurance of loans to veterans,
    (2) Inclusion of power to substitute trustees (Sec. 36.4327),
    (3) The procurement and maintenance of insurance coverage (Sec. 
36.4326),
    (4) Advice to Secretary as to default (Sec. 36.4315),
    (5) Notice of intention to begin action (Sec. 36.4317),
    (6) Notice to the Secretary in any suit or action, or notice of sale 
(Sec. 36.4319),
    (7) The release, conveyance, substitution, or exchange of security 
(Sec. 36.4324),

[[Page 630]]

    (8) Lack of legal capacity of a party to the transaction incident to 
which the guaranty or the insurance is granted (Sec. 36.4328),
    (9) Failure of the lender to see that any escrowed or earmarked 
account is expended in accordance with the agreement,
    (10) The taking into consideration of limitations upon the quantum 
or quality of the estate or property (Sec. 36.4350(b)),
    (11) Any other requirement of 38 U.S.C. chapter 37 or the 
regulations concerning guaranty or insurance of loans to veterans which 
does not by the terms of said chapter or the regulations concerning 
guaranty or insurance of loans to veterans result in relieving the 
Secretary of all liability with respect to the loan,

no claim on the guaranty or insurance shall be paid on account of the 
loan with respect to which such failure occurred, or in respect to which 
an unwillful misrepresentation occurred, until the amount by which the 
ultimate liability of the Secretary would thereby be increased has been 
ascertained. The burden of proof shall be upon the holder to establish 
that no increase of ultimate liability is attributable to such failure 
or misrepresentation. The amount of increased liability of the Secretary 
shall be offset by deduction from the amount of the guaranty or 
insurance otherwise payable, or if consequent upon loss of security 
shall be offset by crediting to the indebtedness the amount of the 
impairment as proceeds of the sale of security in the final accounting 
to the Secretary. To the extent the loss resultant from the failure or 
misrepresentation prejudices the Secretary's right of subrogation 
acceptance by the holder of the guaranty or insurance payment shall 
subordinate the holder's right to those of the Secretary.
    (c) If after the payment of a guaranty or an insurance loss, or 
after a loan is transferred pursuant to Sec. 36.4318 (a), the fraud, 
misrepresentation or failure to comply with the regulations in this 
subpart as provided in this section is discovered and the Secretary 
determines that an increased loss to the government resulted therefrom 
the transferor or person to whom such payment was made shall be liable 
to the Secretary for the amount of the loss caused by such 
misrepresentation or failure.

[13 FR 7741, Dec. 15, 1948, as amended at 24 FR 2654, Apr. 7, 1959]



Sec. 36.4326  Hazard insurance.

    The holder shall require insurance policies to be procured and 
maintained in an amount sufficient to protect the security against the 
risks or hazards to which it may be subjected to the extent customary in 
the locality. All moneys received under such policies covering payment 
of insured losses shall be applied to restoration of the security or to 
the loan balance. Flood insurance will be required on any building or 
personal property securing a loan at any time during the term of the 
loan that such security is located in an area identified by the Federal 
Emergency Management Agency as having special flood hazards and in which 
flood insurance has been made available under the National Flood 
Insurance Act, as amended. The amount of flood insurance must be at 
least equal to the lesser of the outstanding principal balance of the 
loan or the maximum limit of coverage available for the particular type 
of property under the National Flood Insurance Act, as amended. The 
Secretary cannot guarantee a loan for the acquisition or construction of 
property located in an area identified by the Federal Emergency 
Management Agency as having special flood hazards unless the community 
in which such area is situated is then participating in the National 
Flood Insurance Program.

(Authority: 42 U.S.C. 4012a, 4106(a))

[62 FR 5531, Feb. 6, 1997]



Sec. 36.4327  Substitution of trustees.

    In jurisdictions in which valid, any deed of trust or mortgage 
securing a guaranteed or insured loan, if it names trustees, or confers 
a power of sale otherwise, shall contain a provision empowering any 
holder of the indebtedness to appoint substitute trustees, or other 
person with such power to sell, who shall succeed to all the rights,

[[Page 631]]

powers and duties of the trustees, or other person, originally 
designated.

[13 FR 7279, Nov. 27, 1948]



Sec. 36.4328  Capacity of parties to contract.

    Nothing in Sec. Sec. 36.4300 to 36.4375, inclusive, shall be 
construed to relieve any lender of responsibility otherwise existing, 
for any loss caused by the lack of legal capacity of any person to 
contract, convey, or encumber, or caused by the existence of other legal 
disability or defects invalidating, or rendering unenforceable in whole 
or in part, either the loan obligation or the security therefor.

[13 FR 7279, Nov. 27, 1948]



Sec. 36.4329  Geographical limits.

    Any real property purchased, constructed, altered, improved, or 
repaired with the proceeds of a guaranteed or insured loan shall be 
situated within the United States which for purposes of 38 U.S.C. 
Chapter 37 is here defined as the several States, Territories and 
possessions, and the District of Columbia, the Commonwealth of Puerto 
Rico, and the Commonwealth of the Northern Mariana Islands.

[46 FR 43673, Aug. 31, 1981]



Sec. 36.4330  Maintenance of records.

    (a) The holder shall maintain a record of the amounts of payments 
received on the obligation and disbursements chargeable thereto and the 
dates thereof. This record shall be maintained until the Secretary 
ceases to be liable as guarantor or insurer of the loan. For the purpose 
of any accounting with the Secretary or computation of a claim, any 
holder who fails to maintain such record shall be presumed to have 
received on the dates due all sums which by the terms of the contract 
are payable prior to date of claim for default, and the burden of going 
forward with evidence and of ultimate proof of the contrary shall be on 
such holder.
    (b) The lender shall retain copies of all loan origination records 
on a VA-guaranteed loan for at least two years from the date of loan 
closing. Loan origination records include the loan application, 
including any preliminary application, verifications of employment and 
deposit, all credit reports, including preliminary credit reports, 
copies of each sales contract and addendums, letters of explanation for 
adverse credit items, discrepancies and the like, direct references from 
creditors, correspondence with employers, appraisal and compliance 
inspection reports, reports on termite and other inspections of the 
property, builder change orders, and all closing papers and documents.


(Authority: 38 U.S.C. 501, 3703(c)(1))

    (c) The Secretary has the right to inspect, examine, or audit, at a 
reasonable time and place, the records or accounts of a lender or holder 
pertaining to loans guaranteed or insured by the Secretary.

(The information collection requirements in this section have been 
approved by the Office of Management and Budget under control number 
2900-0515)

[63 FR 12004, Mar. 12, 1998]



Sec. 36.4332  Delivery of notice.

    Any notice required by Sec. Sec. 36.4300 to 36.4375 to be given the 
Secretary must be in writing or such other communications medium as may 
be approved by an official designated in Sec. 36.4342 and delivered, by 
mail or otherwise, to the VA office at which the guaranty or insurance 
was issued, or to any changed address of which the holder has been given 
notice. Such notice must plainly identify the case by setting forth the 
name of the original veteran-obligor and the file number assigned to the 
case by the Secretary, if available, or otherwise the name and serial 
number of the veteran. If mailed, the notice shall be by certified mail 
when so provided by Sec. Sec. 36.4300 to 36.4375. This paragraph does 
not apply to legal process.

[58 FR 29117, May 19, 1993]



Sec. 36.4333  Satisfaction of indebtedness.

    Upon full satisfaction of a guaranteed loan by payment or otherwise 
it shall be the duty of the holder to cancel the endorsement, if any, of 
the Secretary; and forthwith inform the Secretary of such cancellation. 
In the event the Secretary's liability thereon is evidenced by an 
instrument separate

[[Page 632]]

from the instrument evidencing the debtor's obligation, the instrument 
evidencing the obligation of the Secretary shall be returned to the 
Department of Veterans Affairs office issuing same, or to the central 
office, with the holder's cancellation or endorsement of release 
thereon.

[13 FR 7279, Nov. 27, 1948]



Sec. 36.4334  Incorporation by reference.

    Regulations issued under 38 U.S.C. Chapter 37 and in effect on the 
date of any loan which is submitted and accepted or approved for a 
guaranty or for insurance thereunder, shall govern the rights, duties, 
and liabilities of the parties to such loan and any provisions of the 
loan instruments inconsistent with such regulations are hereby amended 
and supplemented to conform thereto.

[24 FR 2655, Apr. 7, 1959]



Sec. 36.4335  Supplementary administrative action.

    Notwithstanding any requirement, condition, or limitation stated in 
or imposed by the regulations concerning the guaranty or insurance of 
loans to veterans, the Under Secretary for Benefits, or the Director, 
Loan Guaranty Service, within the limitations and conditions prescribed 
by the Secretary, is hereby authorized, if he or she finds the interests 
of the Government are not adversely affected, to relieve undue prejudice 
to a debtor, holder, or other person, which might otherwise result, 
provided no such action may be taken which would impair the vested 
rights of any person affected thereby. If such requirement, condition, 
or limitation is of an administrative or procedural (not substantive) 
nature, any employee designated in Sec. 36.4342 is hereby authorized to 
grant similar relief if he or she finds the failure or error of the 
lender was due to misunderstanding or mistake and that the interests of 
the Government are not adversely affected. Provisions of the regulations 
considered to be of an administrative or procedural (nonsubstantive) 
nature are limited to the following:
    (a) The requirement in Sec. 36.4314(e) that a holder promptly 
forward an advice of the terms of any agreement effecting a 
reamortization or extension of a loan.
    (b) The 45-day requirement in Sec. 36.4315(a) concerning the giving 
of notice of default.
    (c) The requirement in Sec. 36.4317 that a holder give 30 days 
advance notice of its intention to foreclose.
    (d) The requirement in Sec. 36.4317(b) that a holder give notice of 
repossession of personal property within 10 days after such repossession 
has occurred.
    (e) The requirement in Sec. 36.4307(a) that a lender obtain in 
prior approval of the Secretary before closing a joint loan if the 
lender or class of lenders is eligible or has been approved by the 
Secretary to close loans on the automatic basis pursuant to 38 U.S.C. 
3702(d).
    (f) The requirements in Sec. 36.4303(k) of this part concerning the 
giving of notice in assumption cases under 38 U.S.C. 3714.


(Authority: 38 U.S.C. 3714 and 3720)

[20 FR 4855, July 8, 1955, as amended at 20 FR 9180, Dec. 10, 1955; 23 
FR 2217, Apr. 4, 1958; 27 FR 224, Jan. 9, 1962; 40 FR 34592, Aug. 18, 
1975; 45 FR 53809, Aug. 13, 1980; 49 FR 13352, Apr. 4, 1984; 55 FR 
37477, Sept. 12, 1990; 61 FR 28058, June 4, 1996; 63 FR 12004, Mar. 12, 
1998]



Sec. 36.4336  Eligibility of loans; reasonable value requirements.

    (a) Evidence of guaranty or insurance shall be issued in respect to 
a loan for any of the purposes specified in 38 U.S.C. 3710(a) only if:
    (1) The proceeds of such loan have been used to pay for the property 
purchased, constructed, repaired, refinanced, altered, or improved and;
    (2)(i) Except as to refinancing loans pursuant to 38 U.S.C. 
3710(a)(8), (a)(9)(B)(i), (a)(11), or (b)(7) and energy efficient 
mortgages pursuant to 38 U.S.C. 3710(d), the loan (including any 
scheduled deferred interest added to principal) does not exceed the 
reasonable value of the property or projected reasonable value of a new 
home which is security for a graduated payment mortgage loan, as 
appropriate, as determined by the Secretary, and
    (ii) For the purpose of determining the reasonable value of a 
graduated payment mortgage loan to purchase a new home, the reasonable 
value of the

[[Page 633]]

property as of the time the loan is made shall be calculated to increase 
at a rate not in excess of 2.5 percent per year, but in no event may the 
projected value of the property exceed 115 percent of the initially 
established reasonable value, and


(Authority: 38 U.S.C. 3703(d)(2))

    (3) The veteran has certified, in such form as the Secretary may 
prescribe, that the veteran has paid in cash from his or her own 
resources on account of such purchase, construction, alteration, repair, 
or improvement a sum equal to the difference, if any, between the 
purchase price or cost of the property and its reasonable value.
    (4) A loan guaranteed under 38 U.S.C. 3710(d) which includes the 
cost of energy efficient improvements may exceed the reasonable value of 
the property. The cost of the energy efficient improvements that may be 
financed may not exceed $3,000; provided, however, that up to $6,000 in 
energy efficient improvements may be financed if the increase in the 
monthly payment for principal and interest does not exceed the likely 
reduction in monthly utility costs resulting from the energy efficient 
improvements.


(Authority: 38 U.S.C. 3710)

    (b) Notwithstanding that the aggregate of the loan amount in the 
case of loans for the purposes specified in paragraph (a) of this 
section, and the amount remaining unpaid on taxes, special assessments, 
prior mortgage indebtedness, or other obligations of any character 
secured by enforceable superior liens or a right to such lien existing 
as of the date the loan is closed exceeds the reasonable value of such 
property as of said date and that evidence of guaranty or insurance 
credit is issued in respect thereof, as between the holder and Secretary 
(for the purpose of computing the claim on the guaranty or insurance and 
for the purposes of Sec. 36.4320, and all accountings), the 
indebtedness which is the subject of the guaranty or insurance shall be 
deemed to have been reduced as of the date of the loan by a sum equal to 
such excess, less any amounts secured by liens released or paid on the 
obligations secured by such superior liens or rights by a holder or 
others without expense to or obligation on the debtor resulting from 
such payment, or release of lien or right; and all payments made on the 
loan shall be applied to the indebtedness as so reduced. Nothing in this 
paragraph affects any right or liability resulting from fraud or willful 
misrepresentation.


(Authority: 38 U.S.C. 501, 3703(c)(1); 38 U.S.C. 501, 3710, 3712)

[33 FR 6975, May 9, 1968, as amended at 35 FR 17180, Nov. 7, 1970; 40 FR 
34592, Aug. 18, 1975; 46 FR 43673, Aug. 31, 1981; 47 FR 15139, Apr. 8, 
1982; 50 FR 3335, Jan. 24, 1985; 60 FR 38262, July 26, 1995]

underwriting standards, processing procedures, and lender responsibility 
                            and certification



Sec. 36.4337  Underwriting standards, processing procedures, lender 
responsibility, and lender certification.

    (a) Use of standards. The standards contained in paragraphs (c) 
through (j) of this section will be used to determine whether the 
veteran's present and anticipated income and expenses, and credit 
history are satisfactory. These standards do not apply to loans 
guaranteed pursuant to 38 U.S.C. 3710(a)(8) except for cases where the 
Secretary is required to approve the loan in advance under Sec. 
36.4306a.


(Authority: 38 U.S.C. 3703, 3710)

    (b) Waiver of standards. Use of the standards in paragraphs (c) 
through (j) of this section for underwriting home loans will be waived 
only in extraordinary circumstances when the Secretary determines, 
considering the totality of circumstances, that the veteran is a 
satisfactory credit risk.
    (c) Methods. The two primary underwriting tools that will be used in 
determining the adequacy of the veteran's present and anticipated income 
are debt-to-income ratio and residual income analysis. They are 
described in paragraphs (d) through (f) of this section. Ordinarily, to 
qualify for a loan, the veteran must meet both standards. Failure to 
meet one standard, however, will not automatically disqualify a veteran. 
The following shall apply to cases

[[Page 634]]

where a veteran does not meet both standards:
    (1) If the debt-to-income ratio is 41 percent or less, and the 
veteran does not meet the residual income standard, the loan may be 
approved with justification, by the underwriter's supervisor, as set out 
in paragraph (c)(4) of this section.
    (2) If the debt-to-income ratio is greater than 41 percent (unless 
it is larger due solely to the existence of tax-free income which should 
be noted in the loan file), the loan may be approved with justification, 
by the underwriter's supervisor, as set out in paragraph (c)(4) of this 
section.
    (3) If the ratio is greater than 41 percent and the residual income 
exceeds the guidelines by at least 20 percent, the second level review 
and statement of justification are not required.
    (4) In any case described by paragraphs (c)(1) and (c)(2) of this 
section, the lender must fully justify the decision to approve the loan 
or submit the loan to the Secretary for prior approval in writing. The 
lender's statement must not be perfunctory, but should address the 
specific compensating factors, as set forth in paragraph (c)(5) of this 
section, justifying the approval of the loan. The statement must be 
signed by the underwriter's supervisor. It must be stressed that the 
statute requires not only consideration of a veteran's present and 
anticipated income and expenses, but also that the veteran be a 
satisfactory credit risk. Therefore, meeting both the debt-to-income 
ratio and residual income standards does not mean that the loan is 
automatically approved. It is the lender's responsibility to base the 
loan approval or disapproval on all the factors present for any 
individual veteran. The veteran's credit must be evaluated based on the 
criteria set forth in paragraph (g) of this section as well as a variety 
of compensating factors that should be evaluated.
    (5) The following are examples of acceptable compensating factors to 
be considered in the course of underwriting a loan:
    (i) Excellent long-term credit;
    (ii) Conservative use of consumer credit;
    (iii) Minimal consumer debt;
    (iv) Long-term employment;
    (v) Significant liquid assets;
    (vi) Downpayment or the existence of equity in refinancing loans;
    (vii) Little or no increase in shelter expense;
    (viii) Military benefits;
    (ix) Satisfactory homeownership experience;
    (x) High residual income;
    (xi) Low debt-to-income ratio;
    (xii) Tax credits of a continuing nature, such as tax credits for 
child care; and
    (xiii) Tax benefits of home ownership.
    (6) The list in paragraph (c)(5) of this section is not exhaustive 
and the items are not in any priority order. Valid compensating factors 
should represent unusual strengths rather than mere satisfaction of 
basic program requirements. Compensating factors must be relevant to the 
marginality or weakness.
    (d) Debt-to-income ratio. A debt-to-income ratio that compares the 
veteran's anticipated monthly housing expense and total monthly 
obligations to his or her stable monthly income will be computed to 
assist in the assessment of the potential risk of the loan. The ratio 
will be determined by taking the sum of the monthly Principal, Interest, 
Taxes and Insurance (PITI) of the loan being applied for, homeowners and 
other assessments such as special assessments, condominium fees, 
homeowners association fees, etc., and any long-term obligations divided 
by the total of gross salary or earnings and other compensation or 
income. The ratio should be rounded to the nearest two digits; e.g., 
35.6 percent would be rounded to 36 percent. The standard is 41 percent 
or less. If the ratio is greater than 41 percent, the steps cited in 
paragraphs (c)(1) through (c)(6) of this section apply.
    (e) Residual income guidelines. The guidelines provided in this 
paragraph for residual income will be used to determine whether the 
veteran's monthly residual income will be adequate to meet living 
expenses after estimated monthly shelter expenses have been paid and 
other monthly obligations have been met. All members of the

[[Page 635]]

household must be included in determining if the residual income is 
sufficient. They must be counted even if the veteran's spouse is not 
joining in title or on the note, or if there are any other individuals 
depending on the veteran for support, such as children from a spouse's 
prior marriage who are not the veteran's legal dependents. It is 
appropriate, however, to reduce the number of members of a household to 
be counted for residual income purposes if there is sufficient verified 
income not otherwise included in the loan analysis, such as child 
support being regularly received as discussed in paragraph (e)(4) of 
this section. In the case of a spouse not to be obligated on the note, 
verification that he/she has stable and reliable employment as discussed 
in paragraph (f)(3) of this section would allow not counting the spouse 
in determining the sufficiency of the residual income. The guidelines 
for residual income are based on data supplied in the Consumer 
Expenditure Survey (CES) published by the Department of Labor's Bureau 
of Labor Statistics. Regional minimum incomes have been developed for 
loan amounts up to $79,999 and for loan amounts of $80,000 and above. It 
is recognized that the purchase price of the property may affect family 
expenditure levels in individual cases. This factor may be given 
consideration in the final determination in individual loan analyses. 
For example, a family purchasing in a higher-priced neighborhood may 
feel a need to incur higher-than-average expenses to support a lifestyle 
comparable to that in their environment, whereas a substantially lower-
priced home purchase may not compel such expenditures. It should also be 
clearly understood from this information that no single factor is a 
final determinant in any applicant's qualification for a VA-guaranteed 
loan. Once the residual income has been established, other important 
factors must be examined. One such consideration is the amount being 
paid currently for rental or housing expenses. If the proposed shelter 
expense is materially in excess of what is currently being paid, the 
case may require closer scrutiny. In such cases, consideration should be 
given to the ability of the borrower and spouse to accumulate liquid 
assets, such as cash and bonds, and to the amount of debts incurred 
while paying a lesser amount for shelter. For example, if an application 
indicates little or no capital reserves and excessive obligations, it 
may not be reasonable to conclude that a substantial increase in shelter 
expenses can be absorbed. Another factor of prime importance is the 
applicant's manner of meeting obligations. A poor credit history alone 
is a basis for disapproving a loan, as is an obviously inadequate 
income. When one or the other is marginal, however, the remaining aspect 
must be closely examined to assure that the loan applied for will not 
exceed the applicant's ability or capacity to repay. Therefore, it is 
important to remember that the figures provided below for residual 
income are to be used as a guide and should be used in conjunction with 
the steps outlined in paragraphs (c) through (j) of this section. The 
residual income guidelines are as follows:
    (1) Table of residual incomes by region (for loan amounts of $79,999 
and below):

                   Table of Residual Incomes by Region
                 [For loan amounts of $79,999 and below]
------------------------------------------------------------------------
           Family size *            Northeast  Midwest   South     West
------------------------------------------------------------------------
1.................................       390       382      382      425
2.................................       654       641      641      713
3.................................       788       772      772      859
4.................................       888       868      868      967
5.................................       921       902      902    1,004
------------------------------------------------------------------------
* For families with more than five members, add $75 for each additional
  member up to a family of seven. ``Family'' includes all members of the
  household.

    (2) Table of residual incomes by region (for loan amounts of $80,000 
and above):

                   Table of Residual Incomes by Region
                 [For loan amounts of $80,000 and above]
------------------------------------------------------------------------
           Family size *            Northeast  Midwest   South     West
------------------------------------------------------------------------
1.................................       450       441      441      491
2.................................       755       738      738      823
3.................................       909       889      889      990
4.................................     1,025     1,003    1,003    1,117
5.................................     1,062     1,039    1,039    1,158
------------------------------------------------------------------------
* For families with more than five members, add $80 for each additional
  member up to a family of seven. ``Family'' includes all members of the
  household.


[[Page 636]]

    (3) Geographic regions for residual income guidelines: Northeast--
Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, 
Pennsylvania, Rhode Island and Vermont; Midwest--Illinois, Indiana, 
Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, 
Ohio, South Dakota and Wisconsin; South--Alabama, Arkansas, Delaware, 
District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, 
Mississippi, North Carolina, Oklahoma, Puerto Rico, South Carolina, 
Tennessee, Texas, Virginia, West Virginia; West--Alaska, Arizona, 
California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, 
Oregon, Utah, Washington and Wyoming.
    (4) Military adjustments. For loan applications involving an active-
duty servicemember or military retiree, the residual income figures will 
be reduced by a minimum of 5 percent if there is a clear indication that 
the borrower or spouse will continue to receive the benefits resulting 
from the use of facilities on a nearby military base. (This reduction 
applies to tables in paragraph (e) of this section.)
    (f) Stability and reliability of income. Only stable and reliable 
income of the veteran and spouse can be considered in determining 
ability to meet mortgage payments. Income can be considered stable and 
reliable if it can be concluded that it will continue during the 
foreseeable future.
    (1) Verification. Income of the borrower and spouse which is derived 
from employment and which is considered in determining the family's 
ability to meet the mortgage payments, payments on debts and other 
obligations, and other expenses must be verified. If the spouse is 
employed and will be contractually obligated on the loan, the combined 
income of both the veteran and spouse is considered when the income of 
the veteran alone is not sufficient to qualify for the amount of the 
loan sought. In other than community property states, if the spouse will 
not be contractually obligated on the loan, Regulation B (12 CFR part 
202), promulgated by the Federal Reserve Board pursuant to the Equal 
Credit Opportunity Act, prohibits any request for, or consideration of, 
information concerning the spouse (including income, employment, assets, 
or liabilities), except that if the applicant is relying on alimony, 
child support, or maintenance payments from a spouse or former spouse as 
a basis for repayment of the loan, information concerning such spouse or 
former spouse may be requested and considered (see paragraph (f)(4) of 
this section). In community property states, information concerning a 
spouse may be requested and considered in the same manner as that for 
the applicant. The standards applied to income of the veteran are also 
applicable to that of the spouse. There can be no discounting of income 
on account of sex, marital status, or any other basis prohibited by the 
Equal Credit Opportunity Act. Income claimed by an applicant that is not 
or cannot be verified cannot be considered when analyzing the loan. If 
the veteran or spouse has been employed by a present employer for less 
than 2 years, a 2-year history covering prior employment, schooling, or 
other training must be secured. Any periods of unemployment must be 
explained. Employment verifications and pay stubs must be no more than 
120 days (180 days for new construction) old to be considered valid. For 
loans closed automatically, this requirement will be considered 
satisfied if the date of the employment verification is within 120 days 
(180 days for new construction) of the date the note is signed. For 
prior approval loans, this requirement will be considered satisfied if 
the verification of employment is dated within 120 days of the date the 
application is received by VA.
    (2) Active-duty, Reserve, or National Guard applicants. (i) In the 
case of an active-duty applicant, a military Leave & Earnings Statement 
is required and will be used instead of an employment verification. The 
statement must be no more than 120 days old (180 days for new 
construction) and must be the original or a lender-certified copy of the 
original. For loans closed automatically, this requirement is satisfied 
if the date of the Leave & Earnings Statement is within 120 days (180 
days for new construction) of the date the note is signed. For prior 
approval

[[Page 637]]

loans, this requirement will be considered satisfied if the verification 
of employment is dated within 120 days of the date the application is 
received by VA.
    (ii) For servicemembers within 12 months of release from active 
duty, or members of the Reserves or National Guard within 12 months of 
release, one of the following is also required:
    (A) Documentation that the servicemember has in fact already 
reenlisted or extended his/her period of active duty or Reserve or 
National Guard service to a date beyond the 12-month period following 
the projected closing of the loan.
    (B) Verification of a valid offer of local civilian employment 
following release from active duty. All data pertinent to sound 
underwriting procedures (date employment will begin, earnings, etc.) 
must be included.
    (C) A statement from the servicemember that he/she intends to 
reenlist or extend his/her period of active duty or Reserve or National 
Guard service to a date beyond the 12 month period following the 
projected loan closing date, and a statement from the servicemember's 
commanding officer confirming that the servicemember is eligible to 
reenlist or extend his/her active duty or Reserve or National Guard 
service as indicated and that the commanding officer has no reason to 
believe that such reenlistment or extension will not be granted.
    (D) Other unusually strong positive underwriting factors, such as a 
downpayment of at least 10 percent, significant cash reserves, or clear 
evidence of strong ties to the community coupled with a nonmilitary 
spouse's income so high that only minimal income from the active duty 
servicemember or member of the Reserves or National Guard is needed to 
qualify.
    (iii) Each active-duty member who applies for a loan must be 
counseled through the use of VA Form 26-0592, Counseling Checklist for 
Military Homebuyers. Lenders must submit a signed and dated VA Form 26-
0592 with each prior approval loan application or automatic loan report 
involving a borrower on active duty.
    (3) Income reliability. Income received by the borrower and spouse 
is to be used only if it can be concluded that the income will continue 
during the foreseeable future and, thus, should be properly considered 
in determining ability to meet the mortgage payments. If an employer 
puts N/A or otherwise declines to complete a verification of employment 
statement regarding the probability of continued employment, no further 
action is required of the lender. Reliability will be determined based 
on the duration of the borrower's current employment together with his 
or her overall documented employment history. There can be no 
discounting of income solely because it is derived from an annuity, 
pension or other retirement benefit, or from part-time employment. 
However, unless income from overtime work and part-time or second jobs 
can be accorded a reasonable likelihood that it is continuous and will 
continue in the foreseeable future, such income should not be used. 
Generally, the reliability of such income cannot be demonstrated unless 
the income has continued for 2 years. The hours of duty and other work 
conditions of the applicant's primary job, and the period of time in 
which the applicant was employed under such arrangement, must be such as 
to permit a clear conclusion as to a good probability that overtime or 
part-time or secondary employment can and will continue. Income from 
overtime work and part-time jobs not eligible for inclusion as primary 
income may, if properly verified for at least 12 months, be used to 
offset the payments due on debts and obligations of an intermediate 
term, i.e., 6 to 24 months. Such income must be described in the loan 
file. The amount of any pension or compensation and other income, such 
as dividends from stocks, interest from bonds, savings accounts, or 
other deposits, rents, royalties, etc., will be used as primary income 
if it is reasonable to conclude that such income will continue in the 
foreseeable future. Otherwise, it may be used only to offset 
intermediate-term debts, as described in this paragraph. Also, the 
likely duration of certain military allowances cannot be determined and, 
therefore, will be used only to offset intermediate-term debts, as 
described in this paragraph. Such allowances are:

[[Page 638]]

Pro-pay, flight or hazard pay, and overseas or combat pay, all of which 
are subject to periodic review and/or testing of the recipient to 
ascertain whether eligibility for such pay will continue. Only if it can 
be shown that such pay has continued for a prolonged period and can be 
expected to continue because of the nature of the recipient's assigned 
duties, will such income be considered as primary income. For instance, 
flight pay verified for a pilot can be regarded as probably continuous 
and, thus, should be added to the base pay. Income derived from service 
in the Reserves or National Guard may be used if the applicant has 
served in such capacity for a period of time sufficient to evidence good 
probability that such income will continue beyond 12 months. The total 
period of active and reserve service may be helpful in this regard. 
Otherwise, such income may be used to offset intermediate-term debts. 
There are a number of additional income sources whose contingent nature 
precludes their being considered as available for repayment of a long-
term mortgage obligation. Temporary income items such as VA educational 
allowances and unemployment compensation do not represent stable and 
reliable income and will not be taken into consideration in determining 
the ability of the veteran to meet the income requirement of the 
governing law. As required by the Equal Opportunity Act Amendments of 
1976, Public Law 94-239, income from public assistance programs is used 
to qualify for a loan if it can be determined that the income will 
probably continue for 3 years or more.
    (4) Tax-exempt income. Special consideration can be given to 
verified nontaxable income once it has been established that such income 
is likely to continue (and remain untaxed) into the foreseeable future. 
Such income includes certain military allowances, child support 
payments, workers' compensation benefits, disability retirement payments 
and certain types of public assistance payments. In such cases, current 
income tax tables may be used to determine an amount which can be 
prudently employed to adjust the borrower's actual income. This adjusted 
or ``grossed up'' income may be used to calculate the monthly debt-to-
income ratio, provided the analysis is documented. Only the borrower's 
actual income may be used to calculate the residual income. Care should 
be exercised to ensure that the income is in fact tax-exempt.
    (5) Alimony, child support, maintenance, workers' compensation, 
foster care payments. (i) If an applicant chooses to reveal income from 
alimony, child support or maintenance payments (after first having been 
informed that any such disclosure is voluntary pursuant to the Federal 
Reserve Board's Regulation B), such payments are considered as income to 
the extent that the payments are likely to be consistently made. Factors 
to be considered in determining the likelihood of consistent payments 
include, but are not limited to: Whether the payments are received 
pursuant to a written agreement or court decree; the length of time the 
payments have been received; the regularity of receipt; the availability 
of procedures to compel payment; and the creditworthiness of the payor, 
including the credit history of the payor when available under the Fair 
Credit Reporting Act or other applicable laws. However, the Fair Credit 
Reporting Act (15 U.S.C. 1681(b)) limits the permissible purposes for 
which credit reports may be ordered, in the absence of written 
instructions of the consumer to whom the report relates, to business 
transactions involving the subject of the credit report or extensions of 
credit to the subject of the credit report.
    (ii) If the applicant chooses to reveal income related to workers' 
compensation, it will be considered as income to the extent it can be 
determined such income will continue.
    (iii) Income received specifically for the care of any foster 
child(ren) may be counted as income if documented. Generally, however, 
such foster care income is to be used only to balance the expenses of 
caring for the foster child(ren) against any increased residual income 
requirements.
    (6) Military quarters allowance. With respect to off-base housing 
(quarters) allowances for service personnel on active duty, it is the 
policy of the Department of Defense to utilize available on-base housing 
when possible. In

[[Page 639]]

order for a quarters allowance to be considered as continuing income, it 
is necessary that the applicant furnish written authorization from his 
or her commanding officer for off-base housing. This authorization 
should verify that quarters will not be made available and that the 
individual should make permanent arrangements for nonmilitary housing. A 
Department of Defense form, DD Form 1747, Status of Housing 
Availability, is used by the Family Housing Office to advise personnel 
regarding family housing. The applicant's quarters allowance cannot be 
considered unless item b (Permanent) or d is completed on DD Form 1747, 
dated October 1990. Of course, if the applicant's income less quarters 
allowance is sufficient, there is no need for assurance that the 
applicant has permission to occupy nonmilitary housing provided that a 
determination can be made that the occupancy requirements of the law 
will be met. Also, authorization to obtain off-base housing will not be 
required when certain duty assignments would clearly qualify service 
personnel with families for quarters allowance. For instance, off-base 
housing authorizations need not be obtained for service personnel 
stationed overseas who are not accompanied by their families, recruiters 
on detached duty, or military personnel stationed in areas where no on-
base housing exists. In any case in which no off-base housing 
authorization is obtained, an explanation of the circumstances 
justifying its omission must be included with the loan application 
except when it has been established by the VA facility of jurisdiction 
that the waiting lists for on-base housing are so long that it is 
improbable that individuals desiring to purchase off-base housing would 
be precluded from doing so in the foreseeable future. If stations make 
such a determination, a release shall be issued to inform lenders.
    (7) Automobile (or similar) allowance. Generally, automobile 
allowances are paid to cover specific expenses related to an applicant's 
employment, and it is appropriate to use such income to offset a 
corresponding car payment. However, in some instances, such an allowance 
may exceed the car payment. With proper documentation, income from a car 
allowance which exceeds the car payment can be counted as effective 
income. Likewise, any other similar type of allowance which exceeds the 
specific expense involved may be added to gross income to the extent it 
is documented to exceed the actual expense.
    (8) Commissions. When all or a major portion of the veteran's income 
is derived from commissions, it will be necessary to establish the 
stability of such income if it is to be considered in the loan analysis 
for the repayment of the mortgage debt and/or short-term obligations. In 
order to assess the value of such income, lenders should obtain written 
verification of the actual amount of commissions paid to date, the basis 
for the payment of such commissions and when commissions are paid; i.e., 
monthly, quarterly, semiannually, or annually. Lenders should also 
obtain signed and dated individual income tax returns, plus applicable 
schedules, for the previous 2 years, or for whatever additional period 
is deemed necessary to properly demonstrate a satisfactory earnings 
record. The length of the veteran's employment in the type of occupation 
for which commissions are paid is also an important factor in the 
assessment of the stability of the income. If the veteran has been 
employed for a relatively short time, the income should not normally be 
considered stable unless the product or service was the same or closely 
related to the product or service sold in an immediate prior position. 
Generally, income from commissions is considered stable when the 
applicant has been receiving such income for at least 2 years. Less than 
2 years of income from commissions cannot usually be considered stable. 
When an applicant has received income from commissions for less than 1 
year, it will rarely be possible to demonstrate that the income is 
stable for qualifying purposes; such cases would require in-depth 
development.
    (9) Self-employment. Generally, income from self-employment is 
considered stable when the applicant has been in business for at least 2 
years. Less than 2 years of income from self-employment cannot usually 
be considered stable unless the applicant has

[[Page 640]]

had previous related employment and/or extensive specialized training. 
When an applicant has been self-employed less than 1 year, it will 
rarely be possible to demonstrate that the income is stable for 
qualifying purposes; such cases would require in-depth development. The 
following documentation is required for all self-employed borrowers:
    (i) A profit-and-loss statement for the prior fiscal year (12-month 
accounting cycle), plus the period year to date since the end of the 
last fiscal year (or for whatever shorter period records may be 
available), and balance sheet based on the financial records. The 
financial statement must be sufficient for a loan underwriter to 
determine the necessary information for loan approval and an independent 
audit (on the veteran and/or the business) by a Certified Public 
Accountant will be required if necessary for such determination; and
    (ii) Copies of signed individual income tax returns, plus all 
applicable schedules for the previous 2 years, or for whatever 
additional period is deemed necessary to properly demonstrate a 
satisfactory earnings record, must be obtained. If the business is a 
corporation or partnership, copies of signed Federal business income tax 
returns for the previous two years plus all applicable schedules for the 
corporation or partnership must be obtained; and
    (iii) If the business is a corporation or partnership, a list of all 
stockholders or partners showing the interest each holds in the business 
will be required. Some cases may justify a written credit report on the 
business as well as the applicant. When the business is of an unusual 
type and it is difficult to determine the probability of its continued 
operation, explanation as to the function and purpose of the business 
may be needed from the applicant and/or any other qualified party with 
the acknowledged expertise to express a valid opinion.
    (10) Recently discharged veterans. Loan applications received from 
recently discharged veterans who have little or no employment experience 
other than their military occupation and from veterans seeking VA-
guaranteed loans who have retired after 20 years of active military duty 
require special attention. The retirement income of the latter veterans 
in many cases may not be sufficient to meet the statutory income 
requirements for the loan amount sought. Many have obtained full-time 
employment and have been employed in their new jobs for a very short 
time.
    (i) It is essential in determining whether veterans in these 
categories qualify from the income standpoint for the amount of the loan 
sought, that the facts in respect to their present employment and 
retirement income be fully developed, and that each case be considered 
on its individual merits.
    (ii) In most cases the veteran's current income or current income 
plus his or her retirement income is sufficient. The problem lies in 
determining whether it can be properly concluded that such income level 
will continue for the foreseeable future. If the veteran's employment 
status is that of a trainee or an apprentice, this will, of course, be a 
factor. In cases of the self-employed, the question to be resolved is 
whether there are reasonable prospects that the business enterprise will 
be successful and produce the required income. Unless a favorable 
conclusion can be made, the income from such source should not be 
considered in the loan analysis.
    (iii) If a recently discharged veteran has no prior employment 
history and the veteran's verification of employment shows he or she has 
not been on the job a sufficient time in which to become established, 
consideration should be given to the duties the veteran performed in the 
military service. When it can be determined that the duties a veteran 
performed in the service are similar or are in direct relation to the 
duties of the applicant's present position, such duties may be construed 
as adding weight to his or her present employment experience and the 
income from the veteran's present employment thus may be considered 
available for qualifying the loan, notwithstanding the fact that the 
applicant has been on the present job only a short time. This same 
principle may be applied to veterans recently retired from the service. 
In addition, when the veteran's income

[[Page 641]]

from retirement, in relation to the total of the estimated shelter 
expense, long-term debts and amount available for family support, is 
such that only minimal income from employment is necessary to qualify 
from the income standpoint, it would be proper to resolve the doubt in 
favor of the veteran. It would be erroneous, however, to give 
consideration to a veteran's income from employment for a short duration 
in a job requiring skills for which the applicant has had no training or 
experience.
    (iv) To illustrate the provisions of paragraph (f)(10), it would be 
proper to use short-term employment income in qualifying a veteran who 
had experience as an airplane mechanic in the military service and the 
individual's employment after discharge or retirement from the service 
is in the same or allied fields; e.g., auto mechanic or machinist. This 
presumes, however, that the verification of employment included a 
statement that the veteran was performing the duties of the job 
satisfactorily, the possibility of continued employment was favorable 
and that the loan application is eligible in all other respects. An 
example of nonqualifying experience is that of a veteran who was an Air 
Force pilot and has been employed in insurance sales on commission for a 
short time. Most cases, of course, fall somewhere between those 
extremes. It is for this reason that the facts of each case must be 
fully developed prior to closing the loan automatically or submitting 
the case to VA for prior approval.
    (11) Employment of short duration. The provisions of paragraph 
(f)(7) of this section are similarly applicable to applicants whose 
employment is of short duration. Such cases will entail careful 
consideration of the employer's confirmation of employment, probability 
of permanency, past employment record, the applicant's qualifications 
for the position, and previous training, including that received in the 
military service. In the event that such considerations do not enable a 
determination that the income from the veteran's current position has a 
reasonable likelihood of continuance, such income should not be 
considered in the analysis. Applications received from persons employed 
in the building trades, or in other occupations affected by climatic 
conditions, should be supported by documentation evidencing the 
applicant's total earnings to date and covering a period of not less 
than 1 year as well as signed and dated copies of complete income tax 
returns, including all schedules for the past 2 years or for whatever 
additional period is deemed necessary to properly demonstrate a 
satisfactory earnings record. If the applicant works out of a union, 
evidence of the previous year's earnings should be obtained together 
with a verification of employment from the current employer.
    (12) Rental income--(i) Multi-unit subject property. When the loan 
pertains to a structure with more than a one-family dwelling unit, the 
prospective rental income will not be considered unless the veteran can 
demonstrate a reasonable likelihood of success as a landlord, and 
sufficient cash reserves are verified to enable the veteran to carry the 
mortgage loan payments (principal, interest, taxes, and insurance) 
without assistance from the rental income for a period of at least 6 
months. The determination of the veteran's likelihood of success as a 
landlord will be based on documentation of any prior experience in 
managing rental units or other collection activities. The amount of 
rental income to be used in the loan analysis will be based on 75 
percent of the amount indicated on the lease or rental agreement, unless 
a greater percentage can be documented.
    (ii) Rental of existing home. Proposed rental of a veteran's 
existing property may be used to offset the mortgage payment on that 
property, provided there is no indication that the property will be 
difficult to rent. If available, a copy of the rental agreement should 
be obtained. It is the responsibility of the loan underwriter to be 
aware of the condition of the local rental market. For instance, in 
areas where the rental market is very strong the absence of a lease 
should not automatically prohibit the offset of the mortgage by the 
proposed rental income.
    (iii) Other rental property. If income from rental property will be 
used to qualify for the new loan, the documentation required of a self-
employed

[[Page 642]]

applicant should be obtained together with evidence of cash reserves 
equaling 3 months PITI on the rental property. As for any self-employed 
earnings (see paragraph (f)(7) of this section), depreciation claimed 
may be added back in as income. In the case of a veteran who has no 
experience as a landlord, it is unlikely that the income from a rental 
property may be used to qualify for the new loan.
    (13) Taxes and other deductions. Deductions to be applied for 
Federal income taxes and Social Security may be obtained from the 
Employer's Tax Guide (Circular E) issued by the Internal Revenue Service 
(IRS). (For veterans receiving a mortgage credit certificate (MCC), see 
paragraph (f)(14) of this section.) Any State or local taxes should be 
estimated or obtained from charts similar to those provided by IRS which 
may be available in those states with withholding taxes. A determination 
of the amount paid or withheld for retirement purposes should be made 
and used when calculating deductions from gross income. In determining 
whether a veteran-applicant meets the income criteria for a loan, some 
consideration may be given to the potential tax benefits the veteran 
will realize if the loan is approved. This can be done by using the 
instructions and worksheet portion of IRS Form W-4, Employee's 
Withholding Allowance Certificate, to compute the total number of 
permissible withholding allowances. That number can then be used when 
referring to IRS Circular E and any appropriate similar State 
withholding charts to arrive at the amount of Federal and State income 
tax to be deducted from gross income.
    (14) Mortgage credit certificates. (i) The Internal Revenue Code (26 
U.S.C.) as amended by the Tax Reform Act of 1984, allows states and 
other political subdivisions to trade in all or part of their authority 
to issue mortgage revenue bonds for authority to issue MCCs. Veterans 
who are recipients of MCCs may realize a significant reduction in their 
income tax liability by receiving a Federal tax credit for a percentage 
of their mortgage interest payment on debt incurred on or after January 
1, 1985.
    (ii) Lenders must provide a copy of the MCC to VA with the home loan 
application. The MCC will specify the rate of credit allowed and the 
amount of certified indebtedness; i.e., the indebtedness incurred by the 
veteran to acquire a principal residence or as a qualified home 
improvement or rehabilitation loan.
    (iii) For credit underwriting purposes, the amount of tax credit 
allowed to a veteran under an MCC will be treated as a reduction in the 
monthly Federal income tax. For example, a veteran having a $600 monthly 
interest payment and an MCC providing a 30-percent tax credit would 
receive a $180 (30 percentx$600) tax credit each month. However, because 
the annual tax credit, which amounts to $2,160 (12x$180), exceeds $2,000 
and is based on a 30-percent credit rate, the maximum tax credit the 
veteran can receive is limited to $2,000 per year (Pub. L. 98-369) or 
$167 per month ($2,000/12). As a consequence of the tax credit, the 
interest on which a deduction can be taken will be reduced by the amount 
of the tax credit to $433 ($600-$167). This reduction should also be 
reflected when calculating Federal income tax.
    (iv) For underwriting purposes, the amount of the tax credit is 
limited to the amount of the veteran's maximum tax liability. If, in the 
example in paragraph (f)(14)(iii) of this section, the veteran's tax 
liability for the year were only $1,500, the monthly tax credit would be 
limited to $125 ($1,500/12).
    (g) Credit. The conclusion reached as to whether or not the veteran 
and spouse are satisfactory credit risks must also be based on a careful 
analysis of the available credit data. Regulation B (12 CFR part 202), 
promulgated by the Federal Reserve Board pursuant to the Equal Credit 
Opportunity Act, requires that lenders, in evaluating creditworthiness, 
shall consider, on the applicant's request, the credit history, when 
available, of any account reported in the name of the applicant's spouse 
or former spouse which the applicant can demonstrate accurately reflects 
the applicant's creditworthiness. In other than community property 
states, if the spouse will not be contractually obligated on the loan, 
Regulation B prohibits any request for or

[[Page 643]]

consideration of information about the spouse concerning income, 
employment, assets or liabilities. In community property states, 
information concerning a spouse may be requested and considered in the 
same manner as that for the applicant.
    (1) Adverse data. If the analysis develops any derogatory credit 
information and, despite such facts, it is determined that the veteran 
and spouse are satisfactory credit risks, the basis for the decision 
must be explained. If a veteran and spouse have debts outstanding which 
have not been paid timely, or which they have refused to pay, the fact 
that the outstanding debts are paid after the acceptability of the 
credit is questioned or in anticipation of applying for new credit does 
not, of course, alter the fact that the record for paying debts has been 
unsatisfactory. With respect to unpaid debts, lenders may take into 
consideration a veteran's claim of bona fide or legal defenses. Such 
defenses are not applicable when the debt has been reduced to judgment. 
Where a collection account has been established, if it is determined 
that the borrower is a satisfactory credit risk, it is not mandatory 
that such an account be paid off in order for a loan to be approved. 
Court-ordered judgments, however, must be paid off before a new loan is 
approved.
    (2) Bankruptcy. When the credit information shows that the borrower 
or spouse has been discharged in bankruptcy under the ``straight'' 
liquidation and discharge provisions of the bankruptcy law, this would 
not in itself disqualify the loan. However, in such cases it is 
necessary to develop complete information as to the facts and 
circumstances concerning the bankruptcy. Generally speaking, when the 
borrower or spouse, as the case may be, has been regularly employed (not 
self-employed) and has been discharged in bankruptcy within the last one 
to two years, it probably would not be possible to determine that the 
borrower or spouse is a satisfactory credit risk unless both of the 
following requirements are satisfied:
    (i) The borrower or spouse has obtained credit subsequent to the 
bankruptcy and has met the credit payments in a satisfactory manner over 
a continued period; and
    (ii) The bankruptcy was caused by circumstances beyond the control 
of the borrower or spouse, e.g., unemployment, prolonged strikes, 
medical bills not covered by insurance. Divorce is not generally viewed 
as beyond the control of the borrower and/or spouse. The circumstances 
alleged must be verified. If a borrower or spouse is self-employed, has 
been adjudicated bankrupt, and subsequently obtains a permanent 
position, a finding as to satisfactory credit risk may be made provided 
there is no derogatory credit information prior to self-employment, 
there is no derogatory credit information subsequent to the bankruptcy, 
and the failure of the business was not due to misconduct. If a borrower 
or spouse has been discharged in bankruptcy within the past 12 months, 
it will not generally be possible to determine that the borrower or 
spouse is a satisfactory credit risk.
    (3) Petition under chapter 13 of Bankruptcy Code. A petition under 
chapter 13 of the Bankruptcy Code (11 U.S.C.) filed by the borrower or 
spouse is indicative of an effort to pay their creditors. Some plans may 
provide for full payment of debts while others arrange for payment of 
scaled-down debts. Regular payments are made to a court-appointed 
trustee over a 2- to 3-year period (or up to 5 years in some cases). 
When the borrowers have made all payments in a satisfactory manner, they 
may be considered as having reestablished satisfactory credit. When they 
apply for a home loan before completion of the payout period, favorable 
consideration may nevertheless be given if at least 12 months' worth of 
payments have been made satisfactorily and the Trustee or Bankruptcy 
Judge approves of the new credit.
    (4) Foreclosures. (i) When the credit information shows that the 
veteran or spouse has had a foreclosure on a prior mortgage; e.g., a VA-
guaranteed or HUD-insured mortgage, this will not in itself disqualify 
the borrower from obtaining the loan. Lenders and field station 
personnel should refer to the preceding guidelines on bankruptcies for 
cases involving foreclosures. As with a borrower who has been 
adjudicated

[[Page 644]]

bankrupt, it is necessary to develop complete information as to the 
facts and circumstances of the foreclosure.
    (ii) When VA pays a claim on a VA-guaranteed loan as a result of a 
foreclosure, the original veteran may be required to repay any loss to 
the Government. In some instances VA may waive the veteran's debt, in 
part or totally, based on the facts and circumstances of the case. 
However, guaranty entitlement cannot be restored unless the Government's 
loss has been repaid in full, regardless of whether or not the debt has 
been waived, compromised, or discharged in bankruptcy. Therefore, a 
veteran who is seeking a new VA loan after having experienced a 
foreclosure on a prior VA loan will in most cases have only remaining 
entitlement to apply to the new loan. The lender should assure that the 
veteran has sufficient entitlement for its secondary marketing purposes.
    (5) Federal debts. An applicant for a Federally-assisted loan will 
not be considered a satisfactory credit risk for such loan if the 
applicant is presently delinquent or in default on any debt to the 
Federal Government, e.g., a Small Business Administration loan, a U.S. 
Guaranteed Student loan, a debt to the Public Health Service, or where 
there is a judgment lien against the applicant's property for a debt 
owed to the Government. The applicant may not be approved for the loan 
until the delinquent account has been brought current or satisfactory 
arrangements have been made between the borrower and the Federal agency 
owed, or the judgment is paid or otherwise satisfied. Of course, the 
applicant must also be able to otherwise qualify for the loan from an 
income and remaining credit standpoint. Refinancing under VA's interest 
rate reduction refinancing provisions, however, is allowed even if the 
borrower is delinquent on the VA guaranteed mortgage being refinanced. 
Prior approval processing is required in such cases.
    (6) Absence of credit history. The fact that recently discharged 
veterans may have had no opportunity to develop a credit history will 
not preclude a determination of satisfactory credit. Similarly, other 
loan applicants may not have established credit histories as a result of 
a preference for purchasing consumer items with cash rather than credit. 
There are also cases in which individuals may be genuinely wary of 
acquiring new obligations following bankruptcy, consumer credit 
counseling (debt proration), or other disruptive credit occurrence. The 
absence of the credit history in these cases will not generally be 
viewed as an adverse factor in credit underwriting. However, before a 
favorable decision is made for cases involving bankruptcies or other 
derogatory credit factors, efforts should be made to develop evidence of 
timely payment of non-installment debts such as rent and utilities. It 
is anticipated that this special consideration in the absence of a 
credit history following bankruptcy would be the rare case and generally 
confined to bankruptcies that occurred over 3 years ago.
    (7) Consumer credit counseling plan. If a veteran, or veteran and 
spouse, have prior adverse credit and are participating in a Consumer 
Credit Counseling plan, they may be determined to be a satisfactory 
credit risk if they demonstrate 12 months' satisfactory payments and the 
counseling agency approves the new credit. If a veteran, or veteran and 
spouse, have good prior credit and are participating in a Consumer 
Credit Counseling plan, such participation is to be considered a neutral 
factor, or even a positive factor, in determining creditworthiness.
    (8) Re-establishment of satisfactory credit. In circumstances not 
involving bankruptcy, satisfactory credit is generally considered to be 
reestablished after the veteran, or veteran and spouse, have made 
satisfactory payments for 12 months after the date of the last 
derogatory credit item.
    (9) Long-term v. short-term debts. All known debts and obligations 
including any alimony and/or child support payments of the borrower and 
spouse must be documented. Significant liabilities, to be deducted from 
the total income in determining ability to meet the mortgage payments 
are accounts that, generally, are of a relatively long term, i.e., 10 
months or over. Other accounts for terms of less than 10 months must, of 
course, be considered in determining ability to meet family expenses. 
Certainly, any severe impact on

[[Page 645]]

the family's resources for any period of time must be considered in the 
loan analysis. For example, monthly payments of $300 on an auto loan 
with a remaining balance of $1,500 would be included in those 
obligations to be deducted from the total income regardless of the fact 
that the account can be expected to pay out in 5 months. It is clear 
that the applicant will, in this case, continue to carry the burden of 
those $300 payments for the first, most critical months of the home 
loan.
    (10) Requirements for verification. If the credit investigation 
reveals debts or obligations of a material nature which were not 
divulged by the applicant, lenders must be certain to obtain 
clarification as to the status of such debts from the borrower. A proper 
analysis is obviously not possible unless there is total correlation 
between the obligations claimed by the borrower and those revealed by a 
credit report or deposit verification. Conversely, significant debts and 
obligations reported by the borrower must be dated. If the credit report 
fails to provide necessary information on such accounts, lenders will be 
expected to obtain their own verifications of those debts directly from 
the creditors. Credit reports and verifications must be no more than 120 
days old (180 days for new construction) to be considered valid. For 
loans closed automatically, this requirement will be considered 
satisfied if the date of the credit report or verification is within 120 
days (180 days for new construction) of the date the note is signed. For 
prior approval loans, this requirement will be considered satisfied if 
the date of the credit report or verification is within 120 days of the 
date of the application is received by VA. Of major significance are the 
applicant's rental history and outstanding or recently retired 
mortgages, if any, particularly prior VA loans. Lenders should be sure 
ratings on such accounts are obtained; a written explanation is required 
when ratings are not available. A determination is necessary as to 
whether alimony and/or child support payments are required. Verification 
of the amount of such obligations should be obtained, although 
documentation concerning an applicant's divorce should not be obtained 
automatically unless it is necessary to verify the amount of any alimony 
or child support liability indicated by the applicant. If in the routine 
course of processing the loan application, however, direct evidence is 
received (e.g., from the credit report) that an obligation to pay 
alimony or child support exists (as opposed to mere evidence that the 
veteran was previously divorced), the discrepancy between the loan 
application and credit report can and should be fully resolved in the 
same manner as any other such discrepancy would be handled. When a pay 
stub or leave-and-earnings statement indicates an allotment, the lender 
must investigate the nature of the allotment(s) to determine whether the 
allotment is related to a debt. Debts assigned to an ex-spouse by a 
divorce decree will not generally be charged against a veteran-borrower.
    (11) Job-related expenses. Known job-related expenses should be 
documented. This will include costs for any dependent care, significant 
commuting costs, etc. When a family's circumstances are such that 
dependent care arrangements would probably be necessary, it is important 
to determine the cost of such services in order to arrive at an accurate 
total of deductions.
    (12) Credit reports. Credit reports obtained by lenders on VA-
guaranteed loan applications must be either a three-file Merged Credit 
Report (MCR) or a Residential Mortgage Credit Report (RMCR). If used, 
the RMCR must meet the standards formulated jointly by the Department of 
Veterans Affairs, Federal National Mortgage Association, Federal Home 
Loan Mortgage Corporation, Federal Housing Administration, Farmers Home 
Administration, credit repositories, repository affiliated consumer 
reporting agencies and independent consumer reporting agencies. All 
credit reports obtained by the lender must be submitted to VA.
    (h) Borrower's personal and financial status. The number and ages of 
dependents have an important bearing on whether income after deduction 
of fixed charges is sufficient to support the family. Type and duration 
of employment of both the borrower and spouse are important as an 
indication of stability of their employment. The

[[Page 646]]

amount of liquid assets owned by the borrower or spouse, or both, is an 
important factor in determining that they have sufficient funds to close 
the loan, as well as being significant in analyzing the overall 
qualifications for the loan. (It is imperative that adequate cash assets 
from the veteran's own resources are verified to allow the payment (see 
Sec. 36.4336(a)(3)) of any difference between the sales price of the 
property and the loan amount, in addition to that necessary to cover 
closing costs, if the sales price exceeds the reasonable value 
established by VA.) Verifications must be no more than 120 days old (180 
days for new construction) to be considered valid. For loans closed on 
the automatic basis, this requirement will be considered satisfied if 
the date of the deposit verification is within 120 days (180 days for 
new construction) of the date of the veteran's application to the 
lender. For prior approval loans, this requirement will be considered 
satisfied if the verification of employment is dated within 120 days of 
the date the application is received by VA. Current monthly rental or 
other housing expense is an important consideration when compared to 
that to be undertaken in connection with the contemplated housing 
purchase.
    (i) Estimated monthly shelter expenses. It is important that monthly 
expenses such as taxes, insurance, assessments and maintenance and 
utilities be estimated accurately based on property location and type of 
house; e.g., old or new, large or small, rather than using or applying a 
``rule of thumb'' to all properties alike. Maintenance and utility 
amounts for various types of property should be realistically estimated. 
Local utility companies should be consulted for current rates. The age 
and type of construction of a house may well affect these expenses. In 
the case of condominiums or houses in a planned unit development (PUD), 
the monthly amount of the maintenance assessment payable to a homeowners 
association should be added. If the amount currently assessed is less 
than the maximum provided in the covenants or master deed, and it 
appears likely that the amount will be insufficient for operation of the 
condominium or PUD, the amount used will be the maximum the veteran 
could be charged. If it is expected that real estate taxes will be 
raised, or if any special assessments are expected, the increased or 
additional amounts should be used. In special flood hazard areas, 
include the premium for any required flood insurance.
    (j) Lender responsibility. (1) Lenders are fully responsible for 
developing all credit information; i.e., for obtaining verifications of 
employment and deposit, credit reports, and for the accuracy of the 
information contained in the loan application.
    (2) Verifications of employment and deposits, and requests for 
credit reports and/or credit information must be initiated and received 
by the lender.
    (3) In cases where the real estate broker/agent or any other party 
requests any of this information, the report(s) must be returned 
directly to the lender. This fact must be disclosed by appropriately 
completing the required certification on the loan application or report 
and the parties must be identified as agents of the lender.
    (4) Where the lender relies on other parties to secure any of the 
credit or employment information or otherwise accepts such information 
obtained by any other party, such parties shall be construed for 
purposes of the submission of the loan documents to VA to be authorized 
agents of the lender, regardless of the actual relationship between such 
parties and the lender, even if disclosure is not provided to VA under 
paragraph (j)(3) of this section. Any negligent or willful 
misrepresentation by such parties shall be imputed to the lender as if 
the lender had processed those documents and the lender shall remain 
responsible for the quality and accuracy of the information provided to 
VA.
    (5) All credit reports secured by the lender or other parties as 
identified in paragraphs (j)(3) and (j)(4) of this section shall be 
provided to VA. If updated credit reports reflect materially different 
information than that in other reports, such discrepancies must be 
explained by the lender and the ultimate decision as to the effects of 
the discrepancy upon the loan application fully addressed by the 
underwriter.

[[Page 647]]

    (k) Lender certification. Lenders originating loans are responsible 
for determining and certifying to VA on the appropriate application or 
closing form that the loan meets all statutory and regulatory 
requirements. Lenders will affirmatively certify that loans were made in 
full compliance with the law and loan guaranty regulations as prescribed 
in this section.
    (1) Definitions. The definitions contained in part 42 of this title 
and the following definitions are applicable in this section.
    (i) Another appropriate amount. In determining the appropriate 
amount of a lender's civil penalty in cases where the Secretary has not 
sustained a loss or where two times the amount of the Secretary's loss 
on the loan involved does not exceed $10,000, the Secretary shall 
consider:
    (A) The materiality and importance of the false certification to the 
determination to issue the guaranty or to approve the assumption;
    (B) The frequency and past pattern of such false certifications by 
the lender; and
    (C) Any exculpatory or mitigating circumstances.
    (ii) Complaint includes the assessment of liability served pursuant 
to this section.
    (iii) Defendant means a lender named in the complaint.
    (iv) Lender includes the holder approving loan assumptions pursuant 
to 38 U.S.C. 3714.
    (2) Procedures for certification. (i) As a condition to VA issuance 
of a loan guaranty on all loans closed on or after October 27, 1994, and 
as a prerequisite to an effective loan assumption on all loans assumed 
pursuant to 38 U.S.C. 3714 on or after November 17, 1997, the following 
certification shall accompany each loan closing or assumption package:

    The undersigned lender certifies that the (loan) (assumption) 
application, all verifications of employment, deposit, and other income 
and credit verification documents have been processed in compliance with 
38 CFR part 36; that all credit reports obtained or generated in 
connection with the processing of this borrower's (loan) (assumption) 
application have been provided to VA; that, to the best of the 
undersigned lender's knowledge and belief the (loan) (assumption) meets 
the underwriting standards recited in chapter 37 of title 38 United 
States Code and 38 CFR part 36; and that all information provided in 
support of this (loan) (assumption) is true, complete and accurate to 
the best of the undersigned lender's knowledge and belief.

    (ii) The certification shall be executed by an officer of the lender 
authorized to execute documents and act on behalf of the lender.
    (3) Any lender who knowingly and willfully makes a false 
certification required pursuant to Sec. 36.4337(k)(2) shall be liable 
to the United States Government for a civil penalty equal to two times 
the amount of the Secretary's loss on the loan involved or to another 
appropriate amount, not to exceed $10,000, whichever is greater.
    (l) Assessment of liability. (1) Upon an assessment confirmed by the 
Under Secretary for Benefits, in consultation with the Investigating 
Official, that a certification, as required in this section, is false, a 
report of findings of the Under Secretary for Benefits shall be 
submitted to the Reviewing Official setting forth:
    (i) The evidence that supports the allegations of a false 
certification and of liability;
    (ii) A description of the claims or statements upon which the 
allegations of liability are based;
    (iii) The amount of the VA demand to be made; and
    (iv) Any exculpatory or mitigating circumstances that may relate to 
the certification.
    (2) The Reviewing Official shall review all of the information 
provided and will either inform the Under Secretary for Benefits and the 
Investigating Official that there is not adequate evidence, that the 
lender is liable, or serve a complaint on the lender stating:
    (i) The allegations of a false certification and of liability;
    (ii) The amount being assessed by the Secretary and the basis for 
the amount assessed;
    (iii) Instructions on how to satisfy the assessment and how to file 
an answer to request a hearing, including a specific statement of the 
lender's right to request a hearing by filing an answer and to be 
represented by counsel; and

[[Page 648]]

    (iv) That failure to file an answer within 30 days of the complaint 
will result in the imposition of the assessment without right to appeal 
the assessment to the Secretary.
    (m) Hearing procedures. A lender hearing on an assessment 
established pursuant to this section shall be governed by the procedures 
recited at 38 CFR 42.8 through 42.47.
    (n) Additional remedies. Any assessment under this section may be in 
addition to other remedies available to VA, such as debarment and 
suspension pursuant to 38 U.S.C. 3704 and part 44 of this title or loss 
of automatic processing authority pursuant to 38 U.S.C. 3702, or other 
actions by the Government under any other law including but not limited 
to title 18 U.S.C. and 31 U.S.C. 3732.


(Authority: 38 U.S.C. 3703, 3710)

(Approved by the Office of Management and Budget under control number 
2900-0521)

[59 FR 49200, Sept. 27, 1994, as amended at 61 FR 56449, Nov. 1, 1996; 
62 FR 53965, Oct. 17, 1997; 62 FR 63454, Dec. 1, 1997; 64 FR 19910, Apr. 
23, 1999]



Sec. 36.4338  Death or insolvency of holder.

    (a) Immediately upon the death of the holder and without the 
necessity of request or other action by the debtor or the Secretary, all 
sums then standing as a credit balance in a trust, or deposit, or other 
account to cover taxes, insurance accruals, or other items in connection 
with the loan secured by the encumbered property, whether stated to be 
such or otherwise designated, and which have not been credited on the 
note shall, nevertheless, be treated as a setoff and shall be deemed to 
have been credited thereon as of the date of the last debit to such 
account, so that the unpaid balance of the note as of that date will be 
reduced by the amount of such credit balance:

Provided, That any unpaid taxes, insurance premiums, ground rents, or 
advances may be paid by the holder of the indebtedness, at the holder's 
option, and the amount which otherwise would have been deemed to have 
been credited on the note reduced accordingly. This paragraph shall be 
applicable whether the estate of the deceased holder is solvent or 
insolvent.
    (b) The provisions of paragraph (a) of this section shall also be 
applicable in the event of:
    (1) Insolvency of holder;
    (2) Initiation of any bankruptcy or reorganization, or liquidation 
proceedings as to the holder, whether voluntary or involuntary;
    (3) Appointment of a general or ancillary receiver for the holder's 
property; or in any case
    (4) Upon the written request of the debtor if all secured and due 
insurance premiums, taxes, and ground rents have been paid, and 
appropriate provisions made for future accruals.
    (c) Upon the occurrence of any of the events enumerated in paragraph 
(a) or (b) of this section, interest on the note and on the credit 
balance of the deposits mentioned in paragraph (a) shall be set off 
against each other at the rate payable on the principal of the note, as 
of the date of last debit to the deposit account. Any excess credit of 
interest shall be treated as a set-off against the unpaid advances, if 
any, and the unpaid balance of the note.
    (d) The provisions of paragraphs (a), (b) and (c) of this section 
shall apply also to corporations. The dissolution thereof by expiration 
of charter, by forfeiture, or otherwise shall be treated as is the death 
of an individual as provided in paragraph (a) of this section.

[13 FR 7279, Nov. 27, 1948, as amended at 40 FR 34593, Aug. 18, 1975]



Sec. 36.4339  Qualification for designated fee appraisers.

    To qualify for approval as a designated fee appraiser, an applicant 
must show to the satisfaction of the Secretary that his or her 
character, experience, and the type of work in which he or she has had 
experience for at least 5 years qualifies the applicant to competently 
appraise and value within a prescribed area the type of property to 
which the approval relates.

[40 FR 34593, Aug. 18, 1975]

[[Page 649]]



Sec. 36.4340  Restriction on designated fee appraisers.

    (a) A designated fee appraiser shall not make an appraisal, 
excepting of alterations, improvements, or repairs to real property 
entailing a cost of not more than $3,500, if such appraiser is an 
officer, director, trustee, employer, or employee of the lender, 
contractor, or vendor.
    (b) An appraisal made by a designated fee appraiser shall be subject 
to review and adjustment by the Secretary. The amount determined to be 
proper upon any such review or adjustment shall constitute the 
``reasonable value'' for the purpose of determining the eligibility of 
the related loan.

[15 FR 4398, July 12, 1950, as amended at 24 FR 2655, Apr. 7, 1959; 43 
FR 51016, Nov. 2, 1978]



Sec. 36.4342  Delegation of authority.

    (a) Except as hereinafter provided, each employee of the Department 
of Veterans Affairs heretofore or hereafter appointed to, or lawfully 
filling, any position designated in paragraph (b) of this section is 
hereby delegated authority, within the limitations and conditions 
prescribed by law, to exercise the powers and functions of the Secretary 
with respect to the guaranty or insurance of loans and the rights and 
liabilities arising therefrom, including but not limited to the 
adjudication and allowance, disallowance, and compromise of claims; the 
collection or compromise of amounts due, in money or other property; the 
extension, rearrangement, or acquisition of loans; the management and 
disposition of secured and unsecured notes and other property; and those 
functions expressly or impliedly embraced within paragraphs (2) to (6), 
inclusive, of 38 U.S.C. 3720(a). Incidental to the exercise and 
performance of the powers and functions hereby delegated, each such 
employee is authorized to execute and deliver (with or without 
acknowledgment) for, and on behalf of, the Secretary, evidence of 
guaranty or of insurance credits and such certificates, forms, 
conveyances, and other instruments as may be appropriate in connection 
with the acquisition, ownership, management, sale, transfer, assignment, 
encumbrance, rental, or other disposition of real or personal property, 
or, of any right, title, or interest therein, including, but not limited 
to, contracts of sale, installment contracts, deeds, leases, bills of 
sale, assignments, and releases; and to approve disbursements to be made 
for any purpose authorized by 38 U.S.C. chapter 37.
    (b) Designated positions:

Under Secretary for Benefits
Director, Loan Guaranty Service
Director, Medical and Regional Office Center
Director, VA Regional Office and Insurance Center
Director, Regional Office
Loan Guaranty Officer
Assistant Loan Guaranty Officer


The authority hereby delegated to employees of the positions designated 
in this paragraph may, with the approval of the Under Secretary for 
Benefits, be redelegated.
    (c) Nothing in this section shall be construed (1) to authorize any 
such employee to exercise the authority vested in the Secretary under 38 
U.S.C. 501 or 3703(a)(2) or to sue, or enter appearance for and on 
behalf of the Secretary, or confess judgment against the Secretary in 
any court without the Secretary's prior authorization; or (2) to include 
the authority to exercise those powers delegated to the Under Secretary 
for Benefits, or the Director, Loan Guaranty Service, under Sec. Sec. 
36.4320(j), 36.4335 or 36.4343:

Provided, That, anything in the regulations concerning guaranty or 
insurance of loans to veterans to the contrary notwithstanding, any 
evidence of guaranty or insurance issued on or after July 1, 1948, by 
any of the employees designated in paragraph (b) of this section or by 
any employee designated an authorized agent or a loan guaranty agent 
shall be deemed to have been issued by the Secretary, subject to the 
defenses reserved in 38 U.S.C. 3721.
    (d) Each Regional Office, regional office and insurance center , and 
Medical and Regional Office Center shall maintain and keep current a 
cumulative list of all employees of that Office or Center who, since May 
1, 1980, have occupied the positions of Director, Loan Guaranty Officer, 
and Assistant Loan Guaranty Officer. This list will include each 
employee's name, title, date the

[[Page 650]]

employee assumed the position, and the termination date, if applicable, 
of the employee's tenure in such position. The list shall be available 
for public inspection and copying at the Regional Office, or Center, 
during normal business hours.
    (e)(1) Authority is hereby delegated to the officers, designated in 
paragraph (e)(2) of this section, of the entity performing loan 
servicing functions under a contract with the Secretary to execute on 
behalf of the Secretary all documents necessary for the servicing and 
termination of a loan made or acquired by the Secretary pursuant to 38 
U.S.C. chapter 37 (other than under subchapter vi of that chapter). 
Documents executed under this paragraph include but are not limited to: 
loan modification agreements, notices of default and other documents 
necessary for loan foreclosure or termination, notices of appointment or 
substitution of trustees under mortgages or deeds of trust, releases or 
satisfactions of mortgages or deeds of trust, acceptance of deeds-in-
lieu of foreclosure, loan assumption agreements, loan assignments, deeds 
tendered upon satisfaction or conversion of an installment land sales 
contract, and documents related to filing, pursuing and settling claims 
with insurance companies relating to hazard coverage on properties 
securing loans being serviced.
    (2) The designated officers are: Vice President, Assistant Vice 
President, and Assistant Secretary.
    (3) The Director, Loan Guaranty Service, Washington, DC, shall 
maintain a log listing all persons authorized to execute documents 
pursuant to paragraph (e) of this section and the dates such persons 
held such authority, together with certified copies of resolutions of 
the board of directors of the entity authorizing such individuals to 
perform the functions specified in paragraph (e)(1) of this section. 
These records shall be available for public inspection and copying at 
the Office of the Director of VA Loan Guaranty Service, Washington, DC 
20420.
    (f)(1) Authority is hereby delegated to the officers, designated in 
paragraph (f)(2) of this section, of the entity performing property 
management and sales functions under a contract with the Secretary to 
execute on behalf of the Secretary all documents necessary for the 
management and sales of residential real property acquired by the 
Secretary pursuant to 38 U.S.C. chapter 37. Documents executed under 
this paragraph include but are not limited to: sales contracts, deeds, 
documents relating to removing adverse occupants, and any documents 
relating to sales closings. The authorization to execute deeds is 
limited to deeds other than general warranty deeds.
    (2) The designated officers are: Senior Vice President, Vice 
President, Assistant Vice President, Assistant Secretary, Director, 
Senior Manager, and Regional Manager.
    (3) The Director, Loan Guaranty Service, Washington, DC, shall 
maintain a log listing all persons authorized to execute documents 
pursuant to paragraph (f) of this section and the dates such persons 
held such authority, together with certified copies of resolutions of 
the board of directors of the entity authorizing such individuals to 
perform the functions specified in paragraph (f)(1) of this section. 
These records shall be available for public inspection and copying at 
the Office of the Director of VA Loan Guaranty Service, Washington, DC 
20420.


(Authority: 38 U.S.C. 501, 3720(a)(5))

[23 FR 2217, Apr. 4, 1958, and 24 FR 2655, Apr. 7, 1959, as amended at 
40 FR 34593, Aug. 18, 1975; 43 FR 60460, Dec. 28, 1978; 45 FR 21243, 
Apr. 1, 1980; 46 FR 43673, Aug. 31, 1981; 54 FR 34988, Aug. 23, 1989; 61 
FR 28058, June 4, 1996; 66 FR 32231, June 14, 2001; 69 FR 10619, Mar. 8, 
2004; 71 FR 30618, May 30, 2006]



Sec. 36.4343  Cooperative loans.

    (a) Any loan, which is (1) related to an enterprise in which more 
than 10 individuals will participate; or (2) to be made for the purchase 
or construction of residential units in any housing development, 
cooperative or otherwise, the title to which development or to the 
individual units therein is not to be held directly by the veteran-
participants, or which contemplates the ownership or maintenance of more 
than three units or of their major appurtenances in common, to be 
eligible for guaranty or insurance shall require prior approval of the 
Under Secretary for Benefits, or the Director, Loan

[[Page 651]]

Guaranty Service, who may issue such approval upon such conditions and 
limitations deemed appropriate, not inconsistent with the provisions of 
38 U.S.C. chapter 37 and the regulations concerning guaranty or 
insurance of loans to veterans.
    (b) The issuance of such approval with respect to a residential 
development under paragraph (a)(2) of this section also shall be subject 
to such conditions and stipulation as in the judgment of the approving 
officer are possible and proper to (1) afford reasonable and feasible 
protection to the rights of the Government as guarantor or insurer, and 
as subrogee, and to each veteran-participant against loss of his or her 
respective equity consequent upon the failure of other participants to 
discharge their obligations; (2) provide for a reasonable and workable 
plan for the operation and management of the project; (3) limit the 
personal liability of each veteran-participant to those sums allocable 
on a proper ratable basis to the purchase, cost, and maintenance of his 
or her individual unit or participating interest; (4) limit commercial 
features to those reasonably calculated to promote the economic 
soundness of the project and the living convenience of the participants, 
retaining the essential character of a residential project.
    (c) No such project, development, or enterprise may be approved 
which involves an initial grouping of more than 500 veterans, or a cost 
of more than five million dollars, unless it is conclusively shown to 
the satisfaction of the approving officer that a greater number of 
veterans or dollar amount will assure substantial advantages to the 
veteran-participants which could not be achieved in a smaller project.
    (d) When approved as in this section provided, and upon performance 
of the conditions indicated in the prior approval, proper guaranty 
certificate or certificates may be issued in connection with the loan or 
loans to be guaranteed on behalf of eligible veterans participating in 
the project, development or enterprise not to exceed in total amount the 
sum of the guaranties applied for by the individual participants and for 
which guaranty each participant is then eligible.
    (e) In lieu of guaranty as authorized in paragraph (d) of this 
section, insurance shall be available on application by the lender and 
all veterans concerned. In such case the insurance credit shall be 
limited to 15 percent of the obligation of the veteran applicant 
(subject to available eligibility) and the total insurance credit in 
respect to the veterans' loans involved in the project shall not exceed 
15 percent of the aggregate of the principal sums of the individual 
indebtedness incurred by the veterans participating in the project for 
the purpose of acquiring their respective interests therein.

[13 FR 7280, Nov. 27, 1948, as amended at 20 FR 9180, Dec. 10, 1955; 24 
FR 2656, Apr. 7, 1959; 40 FR 34593, Aug. 18, 1975; 46 FR 43673, Aug. 31, 
1981; 61 FR 28058, June 4, 1996]



Sec. 36.4344  Lender Appraisal Processing Program.

    (a) Delegation of authority to lenders to review appraisals and 
determine reasonable value. (1) To be eligible for delegation of 
authority to review VA appraisals and determine the reasonable value of 
properties to be purchased with VA guaranteed loans, a lender must (i) 
have automatic processing authority under 38 U.S.C. 3702(d), and (ii) 
employ one or more staff appraisal reviewers acceptable to the 
Secretary.
    (2) To qualify as a lender's staff appraisal reviewer an applicant 
must be a full-time member of the lender's permanent staff and may not 
be employed by, or perform services for, any other mortgagee. The 
individual must not engage in any private pursuits in which there will 
be, or appear to be, any conflict of interest between those pursuits and 
his/her duties, responsibilities, and performance as a Lender Appraisal 
Processing Program (LAPP) staff appraisal reviewer. Three years of 
experience is necessary to qualify as a lender's staff appraisal 
reviewer. That experience must demonstrate a knowledge of, and the 
ability to apply industry-accepted principles, methods, practices and 
techniques of appraising, and the ability to competently determine the 
value of property within a prescribed geographical area. The individual 
must demonstrate the ability to review the

[[Page 652]]

work of others and to recognize deviations from accepted appraisal 
principles, practices, and techniques, errors in computations, and 
unjustifiable and unsupportable conclusions.
    (3) Lenders that meet the requirements of 38 U.S.C. 3702(d), and 
have a staff appraisal reviewer determined acceptable by VA, will be 
authorized to review appraisals and make reasonable value determinations 
on properties that will be security for VA guaranteed loans. The 
lender's authorization will be subject to a one-year probationary 
period. Additionally, lenders must satisfy initial and subsequent VA 
office case review requirements prior to being allowed to determine 
reasonable value without VA involvement. The initial office case review 
requirement must be satisfied in the VA regional office in whose 
jurisdiction the lender's staff appraisal reviewer is located before the 
LAPP authority may be utilized by that lender in any other VA office's 
jurisdiction. To satisfy the initial office case review requirement, the 
first five cases of each lender staff appraisal reviewer involving 
properties in the regional office location where the staff appraisal 
reviewer is located will be processed by him or her up to the point 
where he or she has made a reasonable value determination and fully 
drafted, but not issued, the lender's notification of reasonable value 
letter to the veteran. At that point, and prior to loan closing, each of 
the five cases will be submitted to the local VA office. After a staff 
review of each case, VA will issue a Certificate of Reasonable Value, 
which the lender may use in closing the loan automatically if it meets 
all other requirements of the VA. If these five cases are found to be 
acceptable by VA, the lender's staff appraisal reviewer will be allowed 
to fully process subsequent appraisals for properties located in that VA 
office's jurisdiction without prior submission to VA and issuance by VA 
of a Certificate of Reasonable Value. Lenders must also satisfy a 
subsequent VA office case review requirement in each additional VA 
office location in which they desire to extend and utilize this 
authority. Under this requirement, the lender must have first satisfied 
the initial office case review requirement and then must submit to the 
additional VA office(s) the first case each staff appraisal reviewer 
processes in the jurisdiction of that office. As provided under the 
initial office case review requirement, VA office personnel will issue a 
Certificate of Reasonable value for this case and subsequently determine 
the acceptability of the lender's staff appraisal reviewer's processing. 
If VA finds this first case to be acceptable, the lender's staff 
appraisal reviewer will be allowed to fully process subsequent cases in 
that additional VA office's jurisdiction without prior submission to VA. 
The initial and subsequent office case review requirements may be 
expanded by VA if acceptable performance has not been demonstrated. 
After satisfaction of the initial and subsequent office case review 
requirements, routine reviews of LAPP cases will be made by VA staff 
based upon quality control procedures established by the Under Secretary 
for Benefits. Such review will be made on a random sampling or 
performance related basis. During the probationary period a high 
percentage of reviews will be made by VA staff.
    (4) The following certification by the lender's nominated staff 
appraisal reviewer must be provided with the lender's application for 
delegation of LAPP authority:

    I hereby acknowledge and represent that by signing the Uniform 
Residential Appraisal Report (URAR), FHLMC (Federal Home Loan Mortgage 
Corporation) Form 70/FNMA (Federal Notice Mortgage Association) Form 
1004, I am certifying, in all cases, that I have personally reviewed the 
appraisal report. In doing so I have considered and utilized recognized 
professional appraisal techniques, have found the appraisal report to 
have been prepared in compliance with applicable VA requirements, and 
concur with the recommendations of the fee appraiser, who was assigned 
by VA to the case. Furthermore, in those cases where clarifications or 
corrections have been requested from the VA fee appraiser there has been 
no pressure or influence exerted on that appraiser to remove or change 
information that might be considered detrimental to the subject 
property, or VA's interests, or to reach a predetermined value for that 
property. Signature of Staff Appraisal Reviewer.

    (5) Other certifications required from the lender will be specified 
with particularity in the separate instructions

[[Page 653]]

issued by the Secretary, as noted in Sec. 36.4344(b).
    (b) Instructions for LAPP Procedures. The Secretary will publish 
separate instructions for processing appraisals under the Lenders 
Appraisal Processing Program. Compliance with these regulations and the 
separate instructions issued by the Secretary is deemed by VA to be the 
minimum exercise of due diligence in processing LAPP cases. Due 
diligence is considered by VA to represent that care, as is to be 
properly expected from, and ordinarily exercised by, reasonable and 
prudent lenders who would be dependent on the property as security to 
protect its investment.
    (c) VA minimum property requirements. Lenders are responsible for 
determining that the property meets VA minimum property requirements. 
The separate instructions issued by the Secretary will set forth the 
lender's ability to adjust, remove, or alter the fee appraiser's or fee 
compliance inspector's recommendations concerning VA minimum property 
requirements. Condominiums, planned-unit developments and leasehold 
estates must have been determined acceptable by VA. A condominium or 
planned-unit development which is acceptable to the Department of 
Housing and Urban Development or the Department of Agriculture may also 
be acceptable to VA.
    (d) Adjustment of value recommendations. The amount of authority to 
upwardly adjust the fee appraiser's estimated market value during the 
lender staff appraisal reviewer's initial review of the appraisal report 
or to subsequently process an appeal of the lender's established 
reasonable value will be specified in the separate instructions issued 
by VA as noted in Sec. 36.4344(b). The amount specified must not in any 
way be considered an administrative adjustment figure which may be 
applied indiscriminately and without valid basis or justification with 
the sole purpose of reaching an amount necessary to complete the sale or 
mortgage transaction.
    (1) Adjustment during initial review. Any adjustment during the 
staff appraisal reviewer's initial review of the appraisal report must 
be fully and clearly justified in writing on the appraisal report form 
or, if necessary, on an addendum. The basis for the adjustment must be 
adequate and reasonable by professional appraisal standards. If real 
estate market or other valid data was utilized in arriving at the 
decision to make the adjustment, such data must be attached to the 
appraisal report. All adjustments, comments, corrections, 
justifications, etc., to the appraisal report must be made in a 
contrasting color, be clearly legible, and signed and dated by the staff 
appraisal reviewer.
    (2) Processing appeals. The authority provided under 38 U.S.C. 
3731(d) which permits a lender to obtain a VA fee panel appraiser's 
report which VA is obligated to consider in an appeal of the established 
reasonable value shall not apply to cases processed under the authority 
provided by this section. All appeals of VA fee appraisers' estimated 
market values or lenders' reasonable value determinations above the 
amount specified in the separate instructions issued by VA must be 
submitted, along with the lender's recommendations, if any, to VA for 
processing and final determination. Unless otherwise authorized in the 
separate instructions lenders must also submit appeals, regardless of 
the amount, to VA in all cases where the staff appraisal reviewer has 
made an adjustment during their initial review of the appraisal report 
to the fee appraiser's market value estimate. The fee appraiser's 
estimated market value or lender's reasonable value determination may be 
increased only when such increase is clearly warranted and fully 
supported by real estate market or other valid data considered adequate 
and reasonable by professional appraisal standards and the lender's 
staff appraisal reviewer clearly and fully justifies the reasoning and 
basis for the increase in writing on the appraisal report form or an 
addendum. The staff appraisal reviewer must date and sign the written 
justification and must cite within it the data used in arriving at the 
decision to make the increase. All such data shall be attached to the 
appraisal report form and any addendum.

[[Page 654]]

    (e) Notification. It will be the responsibility of the lender to 
notify the veteran borrower in writing of the determination of 
reasonable value and related conditions specific to the property and to 
provide the veteran with a copy of the appraisal report. Any delay in 
processing the notification of value must be documented. Any delay of 
more than five work days between the date of the lender's receipt of the 
fee appraiser's report and date of the notification of value to the 
veteran, without reasonable and documented extenuating circumstances, 
will not be acceptable. A copy of the lender notification letter to the 
veteran and the appraisal report must be forwarded to the VA office of 
jurisdiction at the same time the veteran is notified. In addition, the 
original appraisal report, related appraisal documentation, and a copy 
of the reasonable value determination notification to the veteran must 
be submitted to the VA with the request for loan guaranty.
    (f) Indemnification. When the Secretary has incurred a loss as a 
result of a payment of claim under guaranty and in which the Secretary 
determines an increase made by the lender under Sec. 36.4344(d) or (f) 
was unwarranted, or arbitrary and capricious, the lender shall indemnify 
the Secretary to the extent the Secretary determines such loss was 
caused, or increased, by the increase in value.
    (g) Affiliations. A lender affiliated with a real estate firm 
builder, land developer or escrow agent as a subsidiary division, 
investment or any other entity in which it has a financial interest or 
which it owns may not use this authority for any cases involving the 
affiliate unless the lender demonstrates to the Secretary's satisfaction 
that the lender and its affiliate(s) are essentially separate entities 
that operate independently of each other, free of all cross-influences 
(e.g., a formal corporate agreement exists which specifically sets forth 
this fact).
    (h) Quality Control Plans. The lender must have an effective self-
policing or quality control system to ensure the adequacy and quality of 
their LAPP staff appraisal reviewer's processing and, that its 
activities do not deviate from high standards of integrity. The quality 
control system must include frequent, periodic audits that specifically 
address the appraisal review activity. These audits may be performed by 
an independent party, or by the lender's independent internal audit 
division which reports directly to the firm's chief executive officer. 
The lender must agree to furnish findings and information under this 
system to VA on demand. While the quality control personnel need not be 
appraisers, they should have basic familiarity with appraisal theory and 
techniques and the ability to prescribe appropriate corrective action(s) 
in the appraisal review process when discrepancies or problems are 
identified. The basic elements of the system will be described in 
separate instructions issued by the Secretary. Copies of the lender's 
quality control plan or self-policing system evidencing appraisal 
related matters must be provided to the VA office of jurisdiction with 
the lender's application for LAPP authority.
    (i) Fees. The Secretary may require mortgagees to pay an application 
fee and/or annual fees, including additional fees for each branch office 
authorized to process cases under the authority delegated under this 
section, in such amounts and at such times as the Secretary may require.
    (j) Withdrawal of lender authority. The authority for a lender to 
determine reasonable value may be withdrawn by the Loan Guaranty Officer 
when proper cause exists. A lender's authority to make reasonable value 
determinations shall be withdrawn when the lender no longer meets the 
basic requirements for delegating the authority, or when it can be shown 
that the lender's reasonable value determinations have not been made in 
accordance with VA regulations, requirements, guidelines, instructions 
or applicable laws, or when there is adequate evidence to support 
reasonable belief by VA that a particular unacceptable act, practice, or 
performance by the lender or the lender's staff has occurred. Such acts, 
practices or performance include, but are not limited to: Demonstrated 
technical incompetence (i.e., conduct which demonstrates an insufficient 
knowledge of industry accepted appraisal principles, techniques and 
practices; or the lack of

[[Page 655]]

technical competence to review appraisal reports and make value 
determinations in accordance with those requirements); substantive or 
repetitive errors (i.e., any error(s) of a nature that would materially 
or significantly affect the determination of reasonable value or 
condition of the property; or a number or series of errors that, 
considered individually, may not significantly impact the determination 
of reasonable value or property condition, but which when considered in 
the aggregate would establish that appraisal reviews or LAPP case 
processing are being performed in a careless or negligent manner), or 
continued instances of disregard for VA requirements after they have 
been called to the lender's attention.
    (1) Withdrawal of authority by the Loan Guaranty Officer may be 
either for an indefinite or a specified period of time. For any 
withdrawal longer than 90 days a reapplication for lender authority to 
process appraisals under these regulations will be required. Written 
notice will be provided at least 30 days in advance of withdrawal unless 
the Government's interests are exposed to immediate risk from the 
lender's activities in which case the withdrawal will be effected 
immediately. The notice will clearly and specifically set forth the 
basis and grounds for the action. There is no right to a formal hearing 
to contest the withdrawal of LAPP processing privileges. However, if 
within 15 days after receiving notice the lender requests an opportunity 
to contest the withdrawal, the lender may submit, in person, in writing, 
or through a representative, information and argument to the Loan 
Guaranty Officer in opposition to the withdrawal. The Loan Guaranty 
Officer will make a recommendation to the Regional Office Director who 
shall make the determination as to whether the action should be 
sustained, modified or rescinded. The lender will be informed in writing 
of the decision.
    (2) The lender has the right to appeal the Regional Office 
Director's decision to the Under Secretary for Benefits. In the event of 
such an appeal, the Under Secretary for Benefits will review all 
relevant material concerning the matter and make a determination that 
shall constitute final agency action. If the lender's submission of 
opposition raises a genuine dispute over facts material to the 
withdrawal of LAPP authority, the lender will be afforded an opportunity 
to appear with a representative, submit documentary evidence, present 
witnesses and confront any witness the Veterans Benefits Administration 
presents. The Under Secretary for Benefits will appoint a hearing 
officer or panel to conduct the hearing. When such additional 
proceedings are necessary, the Under Secretary for Benefits shall base 
the determination on the facts as found, together with any information 
and argument submitted by the lender.
    (3) In actions based upon a conviction or civil judgment, or in 
which there is no genuine dispute over material facts, the Under 
Secretary for Benefits shall make a decision on the basis of all the 
information in the administrative record, including any submission made 
by the lender.
    (4) Withdrawal of the LAPP authority will require that VA make 
subsequent determinations of reasonable value for the lender. 
Consequently, VA staff will review each appraisal report and issue a 
Certificate of Reasonable Value which can then be used by the lender to 
close loans on either the prior VA approval or automatic basis.
    (5) Withdrawal by VA of the lender's LAPP authority does not prevent 
VA from also withdrawing automatic processing authority or taking 
debarment or suspension action based upon the same conduct by the 
lender.

(Authority: 38 U.S.C. 3731)

(Approved by the Office of Management and Budget under control number 
2900-0513)

[55 FR 21019, May 22, 1990]



Sec. 36.4345  Waivers, consents, and approvals; when effective.

    No waiver, consent, or approval required or authorized by the 
regulations concerning guaranty or insurance of loans to veterans shall 
be valid unless in writing signed by the Secretary or the subordinate 
officer to whom authority has been delegated by the Secretary.

[13 FR 7281, Nov. 27, 1948]

[[Page 656]]



Sec. 36.4346  Servicing procedures for holders.

    (a) Establishment of loan servicing program. The holder of a loan 
guaranteed or insured by the Secretary shall develop and maintain a loan 
servicing program which follows accepted industry standards for 
servicing of similar type conventional loans. The loan servicing program 
established pursuant to this section may employ different servicing 
approaches to fit individual borrower circumstances and avoid 
establishing a fixed routine. However, it must incorporate each of the 
provisions specified in paragraphs (b) through (l) of this section.
    (b) Procedures for providing information. (1) Loan holders shall 
establish procedures to provide loan information to borrowers, arrange 
for individual loan consultations upon request and maintain controls to 
assure prompt responses to inquiries. One or more of the following means 
of making information readily available to borrowers is required.
    (i) An office staffed with trained servicing personnel with access 
to loan account information located within 200 miles of the property.
    (ii) Toll-free telephone service or acceptance of collect telephone 
calls at an office capable of providing needed information.
    (2) All borrowers must be informed of the system available for 
obtaining answers to loan inquiries, the office from which the needed 
information may be obtained, and reminded of the system at least 
annually.
    (c) Statement for income tax purposes. Within 60 days after the end 
of each calendar year, the holder shall furnish to the borrower a 
statement of the interest paid and, if applicable, a statement of the 
taxes disbursed from the escrow account during the preceding year. At 
the borrower's request, the holder shall furnish a statement of the 
escrow account sufficient to enable the borrower to reconcile the 
account.
    (d) Change of servicing. Whenever servicing of a loan guaranteed or 
insured by the Secretary is transferred from one holder to another, 
notice of such transfer by both the transferor and transferee, the form 
and content of such notice, the timing of such notice, the treatment of 
payments during the period of such transfer, and damages and costs for 
failure to comply with these requirements shall be governed by the 
pertinent provisions of the Real Estate Settlement Procedures Act as 
administered by the Department of Housing and Urban Development.
    (e) Escrow accounts. A holder of a loan guaranteed or insured by the 
Secretary may collect periodic deposits from the borrower for taxes and/
or insurance on the security and maintain a tax and insurance escrow 
account provided such a requirement is authorized under the terms of the 
security instruments. In maintaining such accounts, the holder shall 
comply with the pertinent provisions of the Real Estate Settlement 
Procedures Act.
    (f) System for servicing delinquent loans. In addition to the 
requirements of the Real Estate Settlement Procedures Act, concerning 
the duties of the loan servicer to respond to borrower inquiries, to 
protect the borrower's credit rating during a payment dispute period, 
and to pay damages and costs for noncompliance, holders shall establish 
a system for servicing delinquent loans which ensures that prompt action 
is taken to collect amounts due from borrowers and minimize the number 
of loans in a default status. The holder's servicing system must include 
the following:
    (1) An accounting system which promptly alerts servicing personnel 
when a loan becomes delinquent;
    (2) A collection staff which is trained in techniques of loan 
servicing and counseling delinquent borrowers to advise borrowers how to 
cure delinquencies, protect their equity and credit rating and, if the 
default is insoluble, pursue alternatives to foreclosure;
    (3) Procedural guidelines for individual analysis of each 
delinquency;
    (4) Instructions and appropriate controls for sending delinquent 
notices, assessing late charges, handling partial payments, maintaining 
servicing histories and evaluating repayment proposals;
    (5) Management review procedures for evaluating efforts made to 
collect the delinquency and the response from

[[Page 657]]

the borrower before a decision is made to initiate action to liquidate a 
loan;
    (6) Procedures for reporting delinquencies of 90 days or more and 
loan terminations to major consumer credit bureaus as specified by the 
Secretary and for informing borrowers that such action will be taken; 
and
    (7) Controls to ensure that all notices required to be given to the 
Secretary on delinquent loans are provided timely and in such form as 
the Secretary shall require.
    (g) Collection actions. (1) Holders shall employ collection 
techniques which provide flexibility to adapt to the individual needs 
and circumstances of each borrower. A variety of collection techniques 
may be used based on the holder's determination of the most effective 
means of contact with borrowers during various stages of delinquency. 
However, at a minimum the holder's collection procedures must include 
the following actions:
    (i) A written delinquency notice to the borrower(s) requesting 
immediate payment if a loan installment has not been received within 17 
days after the due date. This notice must be mailed no later than the 
20th day of the delinquency and state the amount of the payment and of 
any late charges that are due.
    (ii) An effort, concurrent with the written delinquency notice to 
establish contact with the borrower(s) by telephone. When talking with 
the borrower(s), the holder should attempt to determine why payment was 
not made and emphasize the importance of remitting loan installments as 
they come due.
    (iii) A letter to the borrower(s) if payment has not been received 
within 30 days after it is due and telephone contact could not be made. 
This letter should emphasize the seriousness of the delinquency and the 
importance of taking prompt action to resolve the default. It should 
also notify the borrower(s) that the loan is in default, state the total 
amount due and advise the borrower(s) how to contact the holder to make 
arrangements for curing the default.
    (iv) In the event the holder has not established contact with the 
borrower(s) and has not determined the financial circumstances of the 
borrower(s) or established a reason for the default or obtained 
agreement to a repayment plan from the borrower(s), then a face-to-face 
interview with the borrower(s) or a reasonable effort to arrange such a 
meeting is required.
    (2) The holder must provide a valid explanation of any failure to 
perform these collection actions when reporting loan defaults to the 
Secretary. A pattern of such failure may be a basis for sanctions under 
38 CFR 44.205 and 44.305.
    (h) Conducting interviews with delinquent borrowers. When personal 
contact with the borrower(s) is established, the holder shall solicit 
sufficient information to properly evaluate the prospects for curing the 
default and whether the granting of forbearance or other relief 
assistance would be appropriate. At a minimum, the holder must make a 
reasonable effort to establish the following:
    (1) The reason for the default and whether the reason is a temporary 
or permanent condition;
    (2) The present income and employment of the borrower(s);
    (3) The current monthly expenses of the borrower(s) including 
household and debt obligations;
    (4) The current mailing address and telephone number of the 
borrower(s); and
    (5) A realistic and mutually satisfactory arrangement for curing the 
default.
    (i) Property inspections. (1) The holder shall make an inspection of 
the property securing the loan whenever it becomes aware that the 
physical condition of the security may be in jeopardy. Unless a 
repayment agreement is in effect, a property inspection shall also be 
made at the following times:
    (i) Before the 60th day of delinquency or before initiating action 
to liquidate a loan, whichever is earlier; and,
    (ii) At least once each month after liquidation proceedings have 
been started unless servicing information shows the property remains 
owner-occupied.
    (2) Whenever a holder obtains information which indicates that the 
property securing the loan is abandoned, it shall make appropriate 
arrangements

[[Page 658]]

to protect the property from vandalism and the elements. Thereafter, the 
holder shall schedule inspections at least monthly to prevent 
unnecessary deterioration due to vandalism, or neglect. With respect to 
any loan more than 30 days delinquent, a property abandonment must be 
reported to the Secretary and appropriate action initiated under Sec. 
36.4317(a) within 15 days after the holder confirms the property is 
abandoned.
    (j) Collection records. The holder shall maintain individual file 
records of collection action on delinquent loans and make such records 
available to the Secretary for inspection on request. Such collection 
records shall show:
    (1) The dates and content of letters and notices which were mailed 
to the borrower(s);
    (2) Dated summaries of each personal servicing contact and the 
result of same;
    (3) The indicated reason(s) for default; and,
    (4) The date and result of each property inspection.
    (k) Reporting to the Secretary. A summary of collection efforts, the 
information obtained through such efforts and the holder's evaluation of 
the reason for the default and prospects for resolution of the default 
must be included in any notice provided to the Secretary pursuant to 
Sec. Sec. 36.4315 and 36.4317.
    (l) Quality control procedures. No later than 180 days after the 
effective date of this regulation, each loan holder shall establish 
internal controls to periodically assess the quality of the servicing 
performed on loans guaranteed by the Secretary and assure that all 
requirements of this section are being met. Those procedures must 
provide for a review of the holder's servicing activities at least 
annually and include an evaluation of delinquency and foreclosure rates 
on loans in its portfolio which are guaranteed by the Secretary. As part 
of its evaluation of delinquency and foreclosure rates, the holder 
shall:
    (1) Collect and maintain appropriate data on delinquency and 
foreclosure rates to enable the holder to evaluate effectiveness of its 
collection efforts;
    (2) Determine how its VA delinquency and foreclosure rates compare 
with rates in reports published by the industry, investors and others; 
and,
    (3) Analyze significant variances between its foreclosure and 
delinquency rates and those found in available reports and publications 
and take appropriate corrective action.
    (m) Holders shall provide available statistical data on delinquency 
and foreclosure rates and their analysis of such data to the Secretary 
upon request.

(Approved by the Office of Management and Budget under Control Number 
2900-0530)

[58 FR 29117, May 19, 1993, as amended at 61 FR 28058, June 4, 1996]



Sec. 36.4347  Minimum property and construction requirements.

    No loan for the purchase or construction of residential property 
shall be eligible for guaranty or insurance unless such property 
complies or conforms with those standards of planning, construction, and 
general acceptability that may be applicable thereto and prescribed by 
the Secretary pursuant to 38 U.S.C. 3704(a).

[24 FR 2656, Apr. 7, 1959]



Sec. 36.4348  Authority to close loans on the automatic basis.

    (a) Supervised lenders of the classes described in 38 U.S.C. 3702(d) 
(1) and (2) are authorized by statute to process VA guaranteed home 
loans on the automatic basis. This category of lenders includes any 
Federal land bank, national bank, State bank, private bank, building and 
loan association, insurance company, credit union or mortgage and loan 
company that is subject to examination and supervision by an agency of 
the United States or of any State or by any State.
    (b) Non-supervised lenders of the class described in 38 U.S.C. 
3702(d)(3) must apply to the Secretary for authority to process loans on 
the automatic basis. Each of the minimum requirements listed below must 
be met by applicant lenders.
    (1) Experience. The firm must meet one of the following experience 
requirements:
    (i) The firm must have been actively engaged in originating VA loans 
for at least two years, have a VA Lender ID

[[Page 659]]

number and have originated and closed a minimum of ten VA loans within 
the past two years, excluding interest rate reduction refinance loans 
(IRRRLs), that have been properly documented and submitted in compliance 
with VA requirements and procedures; or
    (ii) The firm must have a VA ID number and, if active for less than 
two years, have originated and closed at least 25 VA loans, excluding 
IRRRLs, that have been properly documented and submitted in compliance 
with VA requirements and procedures; or
    (iii) Each principal officer of the firm, who is actively involved 
in managing origination functions, must have a minimum of two recent 
years' management experience in the origination of VA loans. This 
experience may be with the current or prior employer. For the purposes 
of this requirement, principal officer is defined as president or vice 
president; or
    (iv) If the firm has been operating as an agent for a non-supervised 
automatic lender (sponsoring lender), the firm must submit documentation 
confirming that it has a VA Lender ID number and has originated a 
minimum of ten VA loans, excluding IRRRLs, over the past two years. If 
active for less than two years, the agent must have originated at least 
25 VA loans. The required documentation is a copy of the VA letter 
approving the firm as an agent for the sponsoring lender; a copy of the 
corporate resolution, describing the functions the agent was to perform, 
submitted to VA by the sponsoring lender; and a letter from a senior 
officer of the sponsoring lender indicating the number of VA loans 
submitted by the agent each year and that the loans have been properly 
documented and submitted in compliance with VA requirements and 
procedures.
    (2) Underwriter. A senior officer of the firm must nominate a full-
time qualified employee(s) to act in the firm's behalf as underwriter(s) 
to personally review and make underwriting decisions on VA loans to be 
closed on the automatic basis.
    (i) Nominees for underwriter must have a minimum of three years 
experience in processing, pre-underwriting or underwriting mortgage 
loans. At least one recent year of this experience must have included 
making underwriting decisions on VA loans. (Recent is defined as within 
the past three years.) A VA nomination and current resume, outlining the 
underwriter's specific experience with VA loans, must be submitted for 
each underwriter nominee.
    (ii) Alternatively, if an underwriter does not have the experience 
outlined above, the underwriter must submit documentation verifying that 
he or she is a current Accredited Residential Underwriter (ARU) as 
designated by the Mortgage Bankers Association (MBA).
    (iii) If an underwriter is not located in the lender's corporate 
office, then a senior officer must certify that the underwriter reports 
to and is supervised by an individual who is not a branch manager or 
other person with production responsibilities.
    (iv) All VA-approved underwriters must attend a 1-day (eight-hour) 
training course on underwriter responsibilities, VA underwriting 
requirements, and VA administrative requirements, including the usage of 
VA forms, within 90 days of approval (if VA is unable to make such 
training available within 90 days, the underwriter must attend the first 
available training). Immediately upon approval of a VA underwriter, the 
office of jurisdiction will contact the underwriter to schedule this 
training at a VA regional office (VARO) of the underwriter's choice. 
This training is required for all newly approved VA underwriters, 
including those who qualified for approval based on an ARU designation, 
as well as VA-approved underwriters who have not underwritten VA-
guaranteed loans in the past 24 months. Furthermore, and at the 
discretion of any VARO in whose jurisdiction the lender is originating 
VA loans, VA-approved underwriters who consistently approve loans that 
do not meet VA credit standards may be required to retake this training.
    (3) Underwriter certification. The lender must certify that all 
underwriting decisions as to whether to accept or reject a VA loan will 
be made by a VA-approved underwriter. In addition each VA-approved 
underwriter will be required to certify on each VA loan that he or she 
approves that the loan has been personally reviewed and approved by the 
underwriter.

[[Page 660]]

    (4) Financial requirements. Each application must include the most 
recent annual financial statement audited and certified by a certified 
public accountant (CPA). If the date of the annual financial statement 
precedes that of the application by more than six months, the lender 
must also attach a copy of its latest internal financial statement. 
Lenders are required to meet either the working capital or the minimum 
net worth financial requirement as defined below.
    (i) Working capital. A minimum of $50,000 in working capital must be 
demonstrated.
    (A) Working capital is a measure of a firm's liquidity, or the 
ability to pay its short-term debts. Working capital is defined as the 
excess of current assets over current liabilities. Current assets are 
defined as cash or other liquid assets convertible into cash within a 1-
year period. Current liabilities are defined as debts that must be paid 
within the same 1-year time frame.
    (B) The VA determination of whether a lender has the required 
minimum working capital is based on the balance sheet of the lender's 
annual audited financial statement. Therefore, either the balance sheet 
must be classified to distinguish between current and fixed assets and 
between current and long-term liabilities or the information must be 
provided in a footnote to the statement.
    (ii) Net worth. Lenders must show evidence of a minimum of $250,000 
in adjusted net worth. Net worth is a measure of a firm's solvency, or 
its ability to exist in the long run, quantified by the payment of long-
term debts. Net worth as defined by generally accepted accounting 
principles (GAAP) is total assets minus total liabilities. Adjusted net 
worth for VA purposes is the same as the adjusted net worth required by 
the Department of Housing and Urban Development (HUD), net worth less 
certain unacceptable assets including:
    (A) Any assets of the lender pledged to secure obligations of 
another person or entity.
    (B) Any asset due from either officers or stockholders of the lender 
or related entities, in which the lender's officers or stockholders have 
a personal interest, unrelated to their position as an officer or 
stockholder.
    (C) Any investment in related entities in which the lender's 
officers or stockholders have a personal interest unrelated to their 
position as an officer or stockholder.
    (D) That portion of an investment in joint ventures, subsidiaries, 
affiliates and/or other related entities which is carried at a value 
greater than equity, as adjusted. ``Equity as adjusted'' means the book 
value of the related entity reduced by the amount of unacceptable assets 
carried by the related entity.
    (E) All intangibles, such as goodwill, covenants not to compete, 
franchisee fees, organization costs, etc., except unamortized servicing 
costs carried at a value established by an arm's-length transaction and 
presented in accordance with generally accepted accounting principles.
    (F) That portion of an asset not readily marketable and for which 
appraised values are very subjective, carried at a value in excess of a 
substantially discounted appraised value. Assets such as antiques, art 
work and gemstones are subject to this provision and should be carried 
at the lower of cost or market.
    (G) Any asset that is principally used for the personal enjoyment of 
an officer or stockholder and not for normal business purposes. Adjusted 
net worth must be calculated by a CPA using an audited and certified 
balance sheet from the lender's latest financial statements. ``Personal 
interest'' as used in this section indicates a relationship between the 
lender and a person or entity in which that specified person (e.g., 
spouse, parent, grandparent, child, brother, sister, aunt, uncle or in-
law) has a financial interest in or is employed in a management position 
by the lender.
    (5) Lines of credit. The lender applicant must have one or more 
lines of credit aggregating at least $1 million. The identity of the 
source(s) of warehouse lines of credit must be submitted to VA and the 
applicant must agree that VA may contact the named source(s) for the 
purpose of verifying the information. A line of credit must be 
unrestricted, that is, funds are available upon demand to close loans

[[Page 661]]

and are not dependent on prior investor approval. A letter from the 
company(ies) verifying the unrestricted line(s) of credit must be 
submitted with the application for automatic authority.
    (6) Permanent investors. If the lender customarily sells loans it 
originates, it must have a minimum of two permanent investors. The 
names, addresses and telephone numbers of the permanent investors must 
be submitted with the application.
    (7) Liaison. The lender applicant must designate an employee and an 
alternate to be the primary liaison with VA. The liaison officers should 
be thoroughly familiar with the lender's entire operation and be able to 
respond to any query from VA concerning a particular VA loan or the 
firm's automatic authority.
    (8) Other considerations. All applications will also be reviewed in 
light of the following considerations:
    (i) There must be no factors that indicate that the firm would not 
exercise the care and diligence required of a lender originating and 
closing VA loans on the automatic basis; and
    (ii) In the event the firm, any member of the board of directors, or 
any principal officer has ever been debarred or suspended by any Federal 
agency or department, or any of its directors or officers has been a 
director or officer of any other lender or corporation that was so 
debarred or suspended, or if the lender applicant ever had a servicing 
contract with an investor terminated for cause, a statement of the facts 
must be submitted with the application for automatic authority.
    (9) Quality control system. In order to be approved as a non-
supervised lender for automatic-processing authority, the lender must 
implement a written quality control system which ensures compliance with 
VA requirements. The lender must agree to furnish findings under its 
systems to VA on demand. The elements of the quality control system must 
include the following:
    (i) Underwriting policies. Each office of the lender shall maintain 
copies of VA credit standards and all available VA underwriting 
guidelines.
    (ii) Corrective measures. The system should ensure that effective 
corrective measures are taken promptly when deficiencies in loan 
origination's are identified by either the lender or VA. Any cases 
involving major discrepancies which are discovered under the system must 
be reported to VA.
    (iii) System integrity. The quality control system should be 
independent of the mortgage loan production function.
    (iv) Scope. The review of underwriting decisions and certifications 
must include compliance with VA underwriting requirements, sufficiency 
of documentation and soundness of underwriting judgments.
    (v) Appraisal quality. For lenders approved for the Lender Appraisal 
Processing Program (LAPP), the quality control system must specifically 
contain provisions concerning the adequacy and quality of real property 
appraisals. While the lender's quality control personnel need not be 
appraisers, they should have basic familiarity with appraisal theory and 
techniques so that they can select appropriate cases for review if 
discretionary sampling is used, and prescribe appropriate corrective 
action(s) in the appraisal review process when discrepancies or problems 
are identified. Copies of the lender's quality control plan or self-
policing system evidencing appraisal related matters must be provided to 
the VA office of jurisdiction.
    (10) Courtesy closing. The lender-applicant must certify to VA that 
it will not close loans on an automatic basis as a courtesy or 
accommodation for other mortgage lenders, whether or not such lenders 
are themselves approved to close on an automatic basis without the 
express approval of VA. However, a lender with automatic authority may 
close loans for which information and supporting credit data have been 
developed on its behalf by a duly authorized agent.
    (11) Probation. Lenders meeting these requirements will be approved 
to close VA loans on an automatic basis for a 1-year period. At the end 
of this period, the lender's quality of underwriting, the completeness 
of loan submissions, compliance with VA requirements and procedures, and 
the delinquency and foreclosure rates will be reviewed.

[[Page 662]]

    (12) Extensions of automatic authority. When a lender wants its 
automatic authority extended to another State, the request must be 
submitted, with the fee designated in paragraph (e)(5) of this section, 
to the VA regional office having jurisdiction in the State where the 
lender's corporate office is located.
    (i) When a lender wants its automatic authority to include loans 
involving a real estate brokerage and/or a residential builder or 
developer in which it has a financial interest, owns, is owned by, or 
with which it is affiliated, the following documentation must be 
submitted:
    (A) A corporate resolution from the lender and each affiliate 
indicating that they are separate entities operating independently of 
each other. The lender's corporate resolution must indicate that it will 
not give more favorable underwriting consideration to its affiliate's 
loans, and the affiliate's corporate resolution must indicate that it 
will not seek to influence the lender to give their loans more favorable 
underwriting consideration.
    (B) Letters from permanent investors indicating the percentage of 
all VA loans based on the affiliate's production originated by the 
lender over a 1-year period that are past due 90 days or more. This 
delinquency ratio must be no higher than the national average for the 
same period for all mortgage loans.
    (ii) When a lender wants its automatic authority extended to 
additional States, the lender must indicate how it plans to originate VA 
loans in those States. Unless a lender proposes a telemarketing plan, VA 
requires that a lender have a presence in the State, that is, a branch 
office, an agent relationship, or that it is a reasonable distance from 
one of its offices in an adjacent State, i.e., 50 miles. If the request 
is based on an agency relationship, the documentation outlined in 
paragraph (b)(13) must be submitted with the request for extension.
    (13) Use of agents. A lender using an agent to perform a portion of 
the work involved in originating and closing a VA-guaranteed loan on an 
automatic basis must take full responsibility by certification for all 
acts, errors and omissions of the agent or other entity and its 
employees for the work performed. Any such acts, errors or omissions 
will be treated as those of the lender and appropriate sanctions may be 
imposed against the lender and its agent. Lenders requesting an agent 
must submit the following documentation to the VA regional office having 
jurisdiction for the lender's corporate office:
    (i) A corporate resolution certifying that the lender takes full 
responsibility for all acts, errors and omissions of the agent that it 
is requesting. The corporate resolution must also identify the agent's 
name and address, and the geographic area in which the agent will be 
originating and/or closing VA loans; whether the agent is authorized to 
issue interest rate lock-in agreements on behalf of the lender; and 
outline the functions the agent is to perform. Alternatively, the lender 
may submit a blanket corporate resolution which sets forth the functions 
of any and all agents and identifies individual agents by name, address, 
and geographic area in separate letters which refer to the blanket 
resolution.
    (ii) When the VA regional office having jurisdiction for the 
lender's corporate office acknowledges receipt of the lender's request 
in writing, the agent is thereby authorized to originate VA loans on the 
lender's behalf.


(Authority: 38 U.S.C. 501(a), 3702(d))

    (c) A lender approved to close loans on the automatic basis who 
subsequently fails to meet the requirements of this section must report 
to VA the circumstances surrounding the deficiency and the remedial 
action to be taken to cure it. Failure to advise VA in a timely manner 
could result in a lender's loss of its approval to close VA loans on the 
automatic basis.


(Authority: 38 U.S.C. 501(a), 3702(d))

    (d) Annual recertification. Non-supervised lenders of the class 
described in 38 U.S.C. 3702(d)(3) must be recertified annually for 
authority to process loans on the automatic basis. The following minimum 
annual recertification requirements must be met by each lender approved 
for automatic authority:
    (1) Financial requirements. A lender must submit, within 120 days 
following the end of its fiscal year, an audited

[[Page 663]]

and certified financial statement with a classified balance sheet or a 
separate footnote for adjusted net worth to VA Central Office (264) for 
review. The same minimum financial requirements described in Sec. 
36.4348(b)(5) must be maintained and verified annually in order to be 
recertified for automatic authority.
    (2) Processing annual lender data. The VA regional office having 
jurisdiction for the lender's corporate office will mail an annual 
notice to the lender requesting current information on the lender's 
personnel and operation. The lender is required to complete the form and 
return it with the appropriate annual renewal fees to the VA regional 
office.


(Authority: 38 U.S.C. 501(a), 3702(d))

    (e) Lender fees. To participate as a VA automatic lender, non-
supervised lenders of the class described in 38 U.S.C. 3702(d)(3) shall 
pay fees as follows:
    (1) $500 for new applications;
    (2) $200 for reinstatement of lapsed or terminated automatic 
authority;
    (3) $100 for each underwriter approval;
    (4) $100 for each agent approval;
    (5) A minimum fee of $100 for any other VA administrative action 
pertaining to a lender's status as an automatic lender;
    (6) $200 annually for certification of home offices; and
    (7) $100 annually for each agent renewal.
    (f) Supervised lenders of the classes described in paragraphs (d)(1) 
and (d)(2) of 38 U.S. Code 3702 participating in VA's Loan Guaranty 
Program shall pay fees as follows:
    (1) $100 fee for each agent approval; and
    (2) $100 annually for each agent renewal.


(Authority: 38 U.S.C. 501(a) and 3703(c)(1))

    (g) Lenders participating in VA's Lender Appraisal Processing 
Program shall pay a fee of $100 for approval of each staff appraisal 
reviewer.

[56 FR 40561, Aug. 15, 1991, as amended at 57 FR 829, Jan. 9, 1992; 57 
FR 40616, Sept. 4, 1992; 63 FR 12004, Mar. 12, 1998]



Sec. 36.4349  Withdrawal of authority to close loans on the automatic 
basis.

    (a)(1) As provided in 38 U.S.C. 3702(e), the authority of any lender 
to close loans on the automatic basis may be withdrawn by the Secretary 
at any time upon 30 days notice. The automatic processing authority of 
both supervised and nonsupervised lenders may be withdrawn for engaging 
in practices which are imprudent from a lending standpoint or which are 
prejudicial to the interests of veterans or the Government but are of a 
lesser degree than would warrant complete suspension or debarment of the 
lender from participation in the program.
    (2) Automatic-processing authority may be withdrawn at any time for 
failure to meet basic qualifying and/or annual recertification criteria.
    (i) Non-supervised lenders. (A) Automatic authority may be withdrawn 
for lack of a VA-approved underwriter, failure to maintain $50,000 in 
working capital or $250,000 in adjusted net worth, or failure to file 
required financial information.
    (B) During the 1-year probationary period for newly approved 
lenders, automatic authority may be temporarily or permanently withdrawn 
for any of the reasons set forth in this section regardless of whether 
deficiencies previously have been brought to the attention of the 
probationary lender.
    (ii) Supervised lenders. Automatic authority will be withdrawn for 
loss of status as an entity subject to examination and supervision by a 
Federal or State supervisory agency as required by 38 U.S.C. 3702(d).


(Authority: 38 U.S.C. 501(a), 3702(d))

    (3) Automatic processing authority may also be withdrawn for any of 
the causes for debarment set forth at Sec. 44.305 of this title.
    (b) Authority to close loans on the automatic basis may also be 
temporarily withdrawn for a period of time under the following schedule.
    (1) Withdrawal for 60 days:
    (i) Automatic loan submissions show deficiencies in credit 
underwriting, such as use of unstable sources of income to qualify the 
borrower, ignoring significant adverse credit items affecting the 
applicant's creditworthiness,

[[Page 664]]

etc., after such deficiencies have been repeatedly called to the 
lender's attention;
    (ii) Employment or deposit verifications are handcarried by 
applicants or otherwise improperly permitted to pass through the hands 
of a third party;
    (iii) Automatic loan submissions are consistently incomplete after 
such deficiencies have been repeatedly called to the lender's attention 
by VA; or
    (iv) There are continued instances of disregard of VA requirements 
after they have been called to the lender's attention.
    (2) Withdrawal for 180 days:
    (i) Loans are closed automatically which conflict with VA credit 
standards and which would not have been made by a lender acting 
prudently;
    (ii) The lender fails to disclose to VA significant obligations or 
other information so material to the veteran's ability to repay the loan 
that undue risk to the Government results;
    (iii) Employment or deposit verifications are allowed to be 
handcarried by applicant or otherwise mishandled, resulting in the 
submission of significant misinformation to VA;
    (iv) Substantiated complaints are received that the lender 
misrepresented VA requirements to veterans to the detriment of their 
interests (e.g., veteran was dissuaded from seeking a lower interest 
rate based on lender's incorrect advice that such options were precluded 
by VA requirements);
    (v) Closing documentation shows instances of improper charges to the 
veteran after the impropriety of such charges has been called to the 
lender's attention by VA, or refusal to refund such charges after 
notification by VA; or
    (vi) There are other instances of lender actions which are 
prejudicial to the interests of veterans such as deliberate delays in 
scheduling loan closings.
    (3) Withdrawal for a period of from one year to three years:
    (i) The lender fails to properly disburse loans (e.g., loan 
disbursement checks returned due to insufficient funds);
    (ii) There is involvement by the lender in the improper use of a 
veteran's entitlement (e.g., knowingly permitting the veteran to violate 
occupancy requirements, lender involvement in sale of veteran's 
entitlement, etc.).
    (4) A continuation of actions that have led to previous withdrawal 
of automatic authority justifies withdrawal of automatic authority for 
the next longer period of time.
    (5) Withdrawal of automatic processing authority does not prevent a 
lender from processing VA guaranteed loans on the prior approval basis.
    (6) Action by VA to remove a lender's automatic authority does not 
prevent VA from also taking debarment or suspension action based on the 
same conduct by the lender.
    (7) VA field facilities are authorized to withdraw automatic 
privileges for 60 days, based on any of the violations set forth in 
paragraphs (b)(1) through (b)(3) of this section, for nonsupervised 
lenders without operations in other stations' jurisdictions. All 
determinations regarding withdrawal of automatic authority for longer 
periods of time or multi-jurisdictional lenders must be made in Central 
Office.
    (c) VA will provide 30 days notice of a withdrawal of automatic 
authority in order to enable the lender to either close or obtain prior 
approval for a loan on which processing has begun. There is no right to 
a formal hearing to contest the withdrawal of automatic processing 
privileges. However, if within 15 days after receiving notice the lender 
requests an opportunity to contest the withdrawal, the lender may submit 
in person, in writing, or through a representative, information and 
argument in opposition to the withdrawal.
    (d) If the lender's submission in opposition raises a dispute over 
facts material to the withdrawal of automatic authority, the lender will 
be afforded an opportunity to appear with a representative, submit 
documentary evidence, present witnesses, and confront any witnesses VA 
presents. The Under Secretary for Benefits will appoint a hearing 
officer or panel to conduct the hearing.
    (e) A transcribed record of the proceedings shall be made available 
at cost to the lender, upon request, unless

[[Page 665]]

the requirement for a transcript is waived by mutual agreement.
    (f) In actions based upon a conviction or civil judgment, or in 
which there is no genuine dispute over material facts, the Under 
Secretary for Benefits shall make a decision on the basis of all the 
information in the administrative record, including any submission made 
by the lender.
    (g) In actions in which additional proceedings are necessary to 
determine disputed material facts, written findings of fact will be 
prepared by the hearing officer or panel. The Under Secretary for 
Benefits shall base the decision on the facts as found, together with 
any information and argument submitted by the lender and any other 
information in the administrative record.


(Authority: 38 U.S.C. 501, 1803(c)(1))

(The information collection requirements in this section have been 
approved by the Office of Management and Budget under control numbers 
2900-0574)

[56 FR 40562, Aug. 15, 1991, as amended at 61 FR 28059, June 4, 1996; 63 
FR 12007, Mar. 12, 1998]



Sec. 36.4350  Estate of veteran in real property.

    (a) The estate in the realty acquired by the veteran, wholly or 
partly with the proceeds of a guaranteed or insured loan, or owned by 
him and on which construction, or repairs, or alterations or 
improvements are to be made, shall be not less than:
    (1) A fee simple estate therein, legal or equitable; or
    (2) A leasehold estate running or renewable at the option of the 
lessee for a period of not less than 14 years from the maturity of the 
loan, or to any earlier date at which the fee simple title will vest in 
the lessee, which is assignable or transferable, if the same be 
subjected to the lien; however, a leasehold estate which is not freely 
assignable and transferable will be considered an acceptable estate if 
it is determined by the Under Secretary for Benefits, or the Director, 
Loan Guaranty Service, (i) that such type of leasehold is customary in 
the area where the property is located, (ii) that a veteran or veterans 
will be prejudiced if the requirement for free assignability is adhered 
to and, (iii) that the assignability and other provisions applicable to 
the leasehold estate are sufficient to protect the interests of the 
veteran and the Government and are otherwise acceptable; or
    (3) A life estate, provided that the remainder and reversionary 
interests are subjected to the lien; or
    (4) A beneficial interest in a revocable Family Living Trust that 
ensures that the veteran, or veteran and spouse, have an equitable life 
estate, provided the lien attaches to any remainder interest and the 
trust arrangement is valid under State law.

The title to such estate shall be such as is acceptable to informed 
buyers, title companies, and attorneys, generally, in the community in 
which the property is situated, except as modified by paragraph (b) of 
this section.
    (b) Any such property or estate will not fail to comply with the 
requirements of paragraph (a) of this section by reason of the 
following:
    (1) Encroachments;
    (2) Easements;
    (3) Servitudes;
    (4) Reservations for water, timber, or subsurface rights;
    (5) Sale and lease restrictions:
    (i) Except as to condominiums, the right in any grantor or cotenant 
in the chain of title, or a successor of either, to purchase for cash, 
which right was established by an instrument recorded prior to December 
1, 1976, and by the terms thereof is exercisable only if:
    (A) An owner elects to sell,
    (B) The option price is not less than the price at which the then 
owner is willing to sell to another, and
    (C) Exercised within 30 days after notice is mailed by registered 
mail to the address of optionee last known to the then owner of the then 
owner's election to sell, stating the price and the identity of the 
proposed vendee;
    (ii) A condominium estate established by the filing for record of 
the Master Deed, or other enabling document before December 1, 1976 will 
not fail to comply with the requirements of paragraph (a) of this 
section by reason of:
    (A) Prohibition against leasing a unit for a period of less than 6 
months.

[[Page 666]]

    (B) The existence of a right of first option to purchase or right to 
provide a substitute buyer reserved to the condominium association 
provided such option or right is exercisable only if:
    (1) An owner elects to sell,
    (2) The option price is not less than the price at which the then 
owner is willing to sell to another,
    (3) The terms and conditions under which the option price is to be 
paid are identical to or are not less favor- able to the owner than the 
terms and conditions under which the owner was willing to sell to the 
owner's prospective buyer, and
    (4) Notice of the association's decision to exercise the option must 
be mailed to the owner by registered or certified mail within 30 days 
after notice is mailed by registered or certified mail to the address of 
the association last known to the owner of the owner's election to sell, 
stating the price, terms of sale, and the identity of the proposed 
vendee;
    (iii) Any property subject to a restriction on the owner's right to 
convey to any party of the owner's choice, which restriction is 
established by a document recorded on or after December 1, 1976, will 
not qualify as security for a guaranteed or insured loan. A prohibition 
or restriction on leasing an individual unit in a condominium will not 
cause the condominium estate to fail to qualify as security for such 
loan, provided the restriction is in accordance with Sec. 36.4358(c);
    (iv) Notwithstanding the provisions of paragraphs (b)(5) (i), (ii), 
and (iii) of this section, a property shall not be considered ineligible 
pursuant to paragraph (a) of this section if:
    (A) The veteran obtained the property under a State or local 
political subdivision program designed to assist low- or moderate-income 
purchasers, and as a condition the purchaser must agree to one or more 
of the following restrictions:
    (1) If the property is resold within a time period as established by 
local law or ordinance, after the purchaser acquires title, the 
purchaser must first offer the property to the government housing 
agency, or a low- or moderate-income purchaser designated by such 
agency, provided the option to purchase is exercised within 90 days 
after notice by the purchaser to the agency of intention to sell;
    (2) If the property is resold within a time period as established by 
local law or ordinance after the purchaser acquires title, a 
governmental agency may specify a maximum price which the veteran may 
receive for the property upon resale; or
    (3) Such other restriction approved by the Secretary designed to 
insure either that a property acquired under such program again be made 
available to low- or moderate-income purchasers, or to prevent a private 
purchaser from obtaining a windfall profit on the resale of such 
property, while assuring that the purchaser has a reasonable opportunity 
to dispose of the property without undue difficulty at a reasonable 
price.

The sale price of a property under any of the restrictions of paragraph 
(b)(5)(iv)(A) of this section shall not be less than the lowest of the 
following: The price designated by the owner as the asking price; the 
appraised value of the property; or the original purchase price of the 
property, increased by a factor reflecting all or a reasonable portion 
of the increased costs of housing or the percentage increase in median 
income in the area between the date of original purchase and resale, 
plus the reasonable value or actual costs of any capital improvements 
made by the owner plus a reasonable real estate commission less the cost 
of necessary repairs required to place the property in saleable 
condition; or other reasonable formula approved by the Secretary. The 
veteran must be fully informed and consent in writing to the housing 
restrictions. A copy of the veteran's consent statement must be 
forwarded with the application for home loan guaranty or the report of a 
home loan processed on the automatic basis; or


(Authority: 38 U.S.C. 3703(c))

    (B) A recorded restriction on title designed to provide housing for 
older persons, provided that the restriction is acceptable under the 
provisions of the Fair Housing Act, title VIII of the Civil Rights Act 
of 1968, as amended by the Fair Housing Amendments Act of 1988,

[[Page 667]]

42 U.S.C. 3601 et seq. The veteran must be fully informed and consent in 
writing to the restrictions. A copy of the veteran's consent statement 
must be forwarded with the application for home loan guaranty or the 
report of a home loan processed on the automatic basis;


(Authority: 38 U.S.C. 501, 3703(c)(1))

    (6) Building and use restrictions whether or not enforceable by a 
reverter clause if there has been no breach of the conditions affording 
a right to an exercise of the reverter;
    (7) Any other covenant, condition, restriction, or limitation 
approved by the Secretary in the particular case. Such approval shall be 
a condition precedent to the guaranty or insurance of the loan;

Provided, That the limitations on the quantum or quality of the estate 
or property that are indicated in this paragraph, insofar as they may 
materially affect the value of the property for the purpose for which it 
is used, are taken into account in the appraisal of reasonable value 
required by 38 U.S.C. chapter 37.
    (c) The following limitations on the quantum or quality of the 
estate or property shall be deemed for the purposes of paragraph (b) of 
this section to have been taken into account in the appraisal of 
residential property and determined by the Secretary as not materially 
affecting the reasonable value of such property:
    (1) Building or use restrictions. Provided, (i) no violation exists, 
(ii) the proposed use by a veteran does not presage a violation of a 
condition affording a right of reverter, and (iii) any right of future 
modification contained in the building or use restrictions is not 
exercisable, by its own terms, until at least 10 years following the 
date of the loan.
    (2) Violations of racial and creed restrictions. Violations of a 
restriction based on race, color, creed, or national origin, whether or 
not such restriction provides for reversion or forfeiture of title or a 
lien for liquidated damages in the event of a breach.
    (3) Violations of building or use restrictions of record. Violations 
of building or use restrictions of record which have existed for more 
than 1 year, are not the subject of pending or threatened litigation, 
and which do not provide for a reversion or termination of title, or 
condemnation by municipal authorities, or, a lien for liquidated damages 
which may be superior to the lien of the guaranteed or insured mortgage.
    (4) Easements. (i) Easements for public utilities along one or more 
of the property lines and easements for drainage or irrigation ditches, 
provided the exercise of the rights thereof do not interfere with the 
use of any of the buildings or improvements located on the subject 
property.
    (ii) Mutual easements for joint driveways located partly on the 
subject property and partly on adjoining property, provided the 
agreement is recorded in the public records.
    (iii) Easements for underground conduits which are in place and 
which do not extend under any buildings in the subject property.
    (5) Encroachments. (i) On the subject property by improvements on 
the adjoining property where such encroachments do not exceed 1 foot 
within the subject boundaries, provided such encroachments do not touch 
any buildings or interfere with the use or enjoyment of any building or 
improvement on the subject property.
    (ii) By hedges or removable fences belonging to subject or adjoining 
property.
    (iii) Not exceeding 1 foot on adjoining property by driveways 
belonging to subject property, provided there exists a clearance of at 
least 8 feet between the buildings on the subject property and the 
property line affected by the encroachment.
    (6) Variations of lot lines. Variations between the length of the 
subject property lines as shown on the plot plan or other exhibits 
submitted to Department of Veterans Affairs and as shown by the record 
or possession lines, provided such variations do not interfere with the 
current use of any of the improvements on the subject property and do 
not involve a deficiency of more than 2 percent with respect to the 
length of the front line or more than 5

[[Page 668]]

percent with respect to the length of any other line.


(Authority: 38 U.S.C. 501, 3703(c), 3712(g))

[15 FR 4550, July 18, 1950, as amended at 24 FR 2656, Apr. 7, 1959; 33 
FR 18026, Dec. 4, 1968; 34 FR 11095, July 1, 1969; 41 FR 44039, Oct. 6, 
1976; 44 FR 47338, Aug. 13, 1979; 45 FR 55720, Aug. 21, 1980; 47 FR 
49394, Nov. 1, 1982; 55 FR 25976, June 26, 1990; 61 FR 28059, June 4, 
1996]



Sec. 36.4351  Loans, first, second, or unsecured.

    Loans for the purchase of real property or a leasehold estate as 
limited in the regulations concerning guaranty or insurance of loans to 
veterans, or for the alteration, improvement, or repair thereof, and for 
more than $1,500 and more than 40 percent of the reasonable value of 
such property or estate prior thereto shall be secured by a first lien 
on the property or estate. Loans for such alteration, improvement, or 
repairs for more than $1,500 but 40 percent or less of the prior 
reasonable value of the property shall be secured by a lien reasonable 
and customary in the community for the type of alteration, improvement, 
or repair financed. Those for $1,500 or less need not be secured, and in 
lieu of the title examination the lender may accept a statement from the 
borrower that he or she has an interest in the property not less than 
that prescribed in Sec. 36.4350(a).

[43 FR 51016, Nov. 2, 1978]



Sec. 36.4352  Tax, special assessment and other liens.

    Tax liens, special assessment liens, and ground rents shall be 
disregarded with respect to any requirement that loans shall be secured 
by a lien of specified dignity. With the prior approval of the 
Secretary, Under Secretary for Benefits, or Director, Loan Guaranty 
Service, liens retained by nongovernmental entities to secure 
assessments or charges for municipal type services and facilities 
clearly within the public purpose doctrine may be disregarded. In 
determining whether a loan for the purchase or construction of a home is 
secured by a first lien the Secretary may also disregard a superior lien 
created by a duly recorded covenant running with the realty in favor of 
a private entity to secure an obligation to such entity for the 
homeowner's share of the costs of the management, operation, or 
maintenance of property, services or programs within and for the benefit 
of the development or community in which the veteran's realty is 
located, if the Secretary determines that the interests of the veteran-
borrower and of the Government will not be prejudiced by the operation 
of such covenant. In respect to any such superior lien to be created 
after June 6, 1969, the Secretary's determination must have been made 
prior to the recordation of the covenant.

[40 FR 34594, Aug. 18, 1975, as amended at 61 FR 28059, June 4, 1996]



Sec. 36.4353  Combination residential and business property.

    If otherwise eligible, a loan for the purchase or construction of a 
combination of residential property and business property which the 
veteran proposes to occupy in part as a home will be eligible under 38 
U.S.C. 3710, if the property is primarily for residential purposes and 
no more than one business unit is included in the property.

[40 FR 34594, Aug. 18, 1975]



Sec. 36.4354  [Reserved]



Sec. 36.4355  Supplemental loans.

    (a) Any loan for the alteration, repair, improvement, extension, 
replacement, or expansion of a home, with respect to which a guaranteed 
or insured obligation of the borrower is currently outstanding, may be 
reported for guaranty or insurance coverage, if such loan is made by the 
holder of the currently outstanding obligation, notwithstanding the fact 
no guaranty entitlement remains available to the borrower;

Provided, That if no entitlement remains available the maximum amount 
payable on the revised guaranty shall not exceed the amount payable on 
the original guaranty on the date of closing the supplemental loan, and 
the percentage of guaranty shall be based upon the proportion the said 
maximum amount bears to the aggregate indebtedness, or, in the case of 
an insured loan, no additional credit to the holder's insurance account 
may be made:

[[Page 669]]

Provided further, That the prior approval of the Secretary shall be 
required if
    (1) The loan will be made by a lender who is not the holder of the 
currently guaranteed or insured obligation; or
    (2) The loan will be made by a lender not of a class specified in 38 
U.S.C. 3702(d); or
    (3) An obligor liable on the currently outstanding obligation will 
be released from personal liability.

In any case in which the unpaid balance of the prior loan currently 
outstanding is combined or consolidated with the amount of the 
supplemental loan, the entire aggregate indebtedness shall be repayable 
in full within the maximum maturity currently prescribed by statute for 
the original loan. No supplemental loan for the repair, alteration, or 
improvement of residential property will be eligible for guaranty or 
insurance unless such repair, alteration, or improvement substantially 
protects or improves the basic livability or utility of the property 
involved.
    (b) Such loans shall be secured as required in Sec. 36.4351: 
Provided, That a lien of lesser dignity than therein specified will 
suffice if the lien obtained is immediately junior to the lien of the 
original guaranteed or insured obligation: Provided further, The liens 
of successive supplemental loans may be of lesser dignity so long as 
they are immediately junior to the lien of the last previous guaranteed 
or insured obligation having a lien of required dignity.
    (c) Upon providing or extending guaranty or insurance coverage in 
respect to any such supplemental loan, the rights of the Secretary to 
the proceeds of the sale of security shall be subordinate to the right 
of the holder to satisfy therefrom the indebtedness outstanding on the 
original and supplemental loans.

[13 FR 7742, Dec. 15, 1948, as amended at 19 FR 4003, July 1, 1954; 21 
FR 5015, July 6, 1956; 24 FR 2656, Apr. 7, 1959; 40 FR 34594, Aug. 18, 
1975]



Sec. 36.4356  Condominium loans--general.

    (a) Authority--applicability of other loan guaranty regulations, 38 
CFR Part 36. A loan to an eligible veteran to purchase a one-family 
residential unit in a condominium housing development or project shall 
be eligible for guaranty or insurance to the same extent and on the same 
terms as other loans under 38 U.S.C. 3710 provided the loan conforms to 
the provisions of chapter 37, title 38 U.S.C., except for sections 1811 
(direct loans), and 1827 (structural defects). The loan must also 
conform to the otherwise applicable provisions of the regulations 
concerning the guaranty or insurance of loans to veterans. Sections 
36.4353, 36.4355, and 36.4364 shall not be applicable.
    (b) Definitions. On and after July 1, 1979, the following 
definitions shall be applicable to each condominium loan entitled to be 
guaranteed or insured, and shall be applicable to such loans previously 
guaranteed or insured to the extent that no legal rights vested 
thereunder are impaired. Whenever used in 38 U.S.C. chapter 37 or the 
Sec. 36.4300 series, unless the context otherwise requires, the terms 
defined in this paragraph shall have the meaning stated.
    (1) Affiliate of declarant. Affiliate of declarant means any person 
or entity which controls, is controlled by, or is under common control 
with, a declarant.
    (i) A person or entity shall be considered to control a declarant if 
that person or entity is a general partner, officer, director, or 
employee of the declarant who:
    (a) Directly or indirectly or acting in concert with one or more 
persons, or through one or more subsidiaries, owns, controls, or holds 
with power to vote, or holds proxies representing, more than 20 percent 
of the voting shares of the declarant;
    (b) Controls in any manner the election of a majority of the 
directors of the declarant; or
    (c) Has contributed more than 20 percent of the capital of the 
declarant.
    (ii) A person or entity shall be considered to be controlled by a 
declarant if the declarant is a general partner, officer, director, or 
employee of that person or entity who:
    (a) Directly or indirectly or acting in concert with one or more 
persons or through one or more subsidiaries, owns, controls, or holds 
with power to

[[Page 670]]

vote, or holds proxies representing, more than 20 percent of the voting 
shares of that person or entity;
    (b) Controls in any manner the election of a majority of the 
directors of that person or entity; or
    (c) Has contributed more than 20 percent of the capital of that 
person or entity.
    (2) Condominium. Unless otherwise provided by State law, a 
condominium is a form of ownership in which the buyer receives title to 
a three dimensional air space containing the individual living unit 
together with an undivided interest or share in the ownership of common 
elements (restatement of Sec. 36.4301, Condominium).
    (3) Conversion condominium. Condominium projects not originally 
built and sold as condominiums but subsequently converted to the 
condominium form of ownership.
    (4) Declarant. Any person who has executed a declaration or an 
amendment to a declaration to add additional real estate to the project 
or any successors or assigns of the declarant who offers to sell or 
sells units in the condominium project and who assumes declarant rights 
in the project including the right to: Add, convert or withdraw real 
estate from the condominium project; maintain sales offices, management 
offices and rental units; exercise easements through the common elements 
for the purpose of making improvements within the condominium; or 
exercise control of the owner's association. Declarant is further 
defined as any sponsor of a project or affiliate of the declarant who is 
acting on behalf of or exercising the rights of the declarant.
    (5) Existing--declarant in control or marketing units. A condominium 
in which all onsite or offsite improvements were completed or the 
conversion was completed prior to appraisal by the Department of 
Veterans Affairs, but the declarant is in control of the owners' 
association and/or is currently marketing units for initial transfer to 
individual unit owners.
    (6) Existing--resale. A condominium in which all onsite or offsite 
improvements were completed, or the conversion was completed prior to 
appraisal by the Department of Veterans Affairs, and the declarant is no 
longer in control of the owners' association and /or marketing units for 
initial transfer to individual unit owners.
    (7) Expandable condominium. A project which may be increased in size 
by the declarant. An expandable condominium is constructed in phases (or 
stages). After each phase is completed and constituted, the common 
estates are merged. Each unit owner, thereby, gains an individual 
interest in all of the facilities of the common estate.
    (8) Foreclosure. Foreclosure shall mean the termination of a lien by 
either judicial or nonjudicial procedures in accordance with local law 
or the voluntary transfer of property by a deed-in-lieu of foreclosure 
or similar procedures.
    (9) High rise condominium. A condominium project which is a multi-
story elevator building.
    (10) Horizontal condominium. A condominium project in which 
generally no part of a living unit extends over or under another living 
unit.
    (11) Low rise condominium. A condominium project in which all or a 
part of a living unit extends over or under another living unit, e.g., 
garden apartment or walk-up project.
    (12) Proposed condominium. A condominium project that is to be 
constructed or is under construction. In the case of a condominium 
conversion, the declarant proposes to convert a building or buildings to 
the condominium form of ownership, or the declarant is in the process of 
converting the building or buildings to the condominium form of 
ownership.
    (13) Series condominium. A number of adjoining but separately 
constituted condominiums. An association of owners is established for 
each project, and each association is responsible for maintenance and 
upkeep of the common elements in its own project. Cross-easements 
between the separate condominiums may be created to permit members of 
the separate condominiums to use the common areas of the other 
condominiums.
    (c) Project approval. Prior to Department of Veterans Affairs 
guaranty of an individual unit loan in a condominium, the legal 
documentation establishing the condominium project or

[[Page 671]]

development must be approved by the Secretary.


(Authority: 38 U.S.C. 501, 3703(c)(1), 3710(a)(6))

[44 FR 47338, Aug. 13, 1979, as amended at 50 FR 5978, Feb. 13, 1985]



Sec. 36.4357  Acceptable ownership arrangements and documentation.

    (a) Types of condominium ownership. The following types of basic 
ownership arrangements are generally acceptable provided they are 
established in compliance with the applicable condominium law of the 
jurisdiction(s) in which the condominium is located:
    (1) Ownership of units by individual owners coupled with an 
undivided interest in all common elements.
    (2) Ownership of units by individual owners coupled with an 
undivided interest in general common elements and specified limited 
common elements.
    (3) Individual ownership of units coupled with an undivided interest 
in the general common elements and/or limited common elements, with 
title to additional property for common use vested in an association of 
unit owners, with mandatory membership by unit owners or owners' 
associations. Any such arrangement must not be precluded by applicable 
State law.


(Authority: 38 U.S.C. 501, 3710(a)(6))

    (b) Estate of unit owner. The legal estate of each unit owner must 
comply with the provisions of Sec. 36.4350. The declaration or 
equivalent document shall allocate an undivided interest in the common 
elements to each unit. Such interest may be allocated equally to each 
unit, may be proportionate to that unit's relative size or value, or may 
be allocated according to any other specified criteria provided that the 
method chosen is equitable and reasonable for that condominium.


(Authority: 38 U.S.C. 501(1), 1803(c)(1), (d)(3), 1810(a)(6))

    (c) Condominium documentation--(1) Compliance with applicable law. 
The declaration, bylaws and other enabling documentation shall conform 
to the laws governing the establishment and maintenance of condominium 
regimes within the jurisdiction in which the condominium is located, and 
to all other laws which apply to the condominium.
    (2) Recordation. The declaration and all amendments or modifications 
thereof shall be placed of record in the manner prescribed by the 
appropriate jurisdiction. If recording of plats, plans, or bylaws or 
equivalent documents and all amendments or modifications thereof is the 
prevailing practice or is required by law within the jurisdiction where 
the project is located, then such documents shall be placed of record. 
If the bylaws are not recorded, then covenants, restrictions and other 
matters requiring record notice should be contained in the declaration 
or equivalent document.
    (3) Availability. The owner's association shall be required to make 
available to unit owners, lenders and the holders, insurers and 
guarantors of the first mortgage on any unit, current copies of the 
declaration, bylaws and other rules governing the condominium, and other 
books, records and financial statements of the owners' association. The 
owners' association also shall be required to make available to 
prospective purchasers current copies of the declaration, bylaws, other 
rules governing the condominium, and the most recent annual audited 
financial statement, if such is prepared. ``Available'' as used in this 
paragraph (c)(3) shall at least mean available for inspection, upon 
request, during normal business hours or under other reasonable 
circumstances.
    (4) Amendments to documents after Department of Veterans Affairs 
project approval. While the declarant is in control of the owners' 
association, amendments to the declaration, bylaws or other enabling 
documentation must be approved by the Secretary. The declarant should 
have proposed amendments reviewed prior to recordation. This provision 
does not apply to amendments which annex additional phases to the 
condominium regime in accordance with a general plan of development 
(Sec. Sec. 36.4360(a)(3) and 36.4360a(b)(6)).


(Authority: 38 U.S.C. 501, 3703(c)(1), 3710(a)(6))

    (d) Real property descriptions in the declaration--(1) Clarity--
conformity with the law of the jurisdiction. The description of the 
units, common elements,

[[Page 672]]

any recreational facilities and other related amenities, and any limited 
common elements shall be clear and in conformity with the law of the 
jurisdiction where the project is located. Responsibility for 
maintenance and repair of all portions of the condominium shall be set 
forth clearly.
    (2) Developmental plan--proposed condominiums. The declaration or 
other legally enforceable and binding document must state in a 
reasonable manner the overall development plan of the condominium, 
including building types, architectural style and the size of the units 
for those phases of the condominium which are required to be built. 
Under the applicable provisions of the declaration or such other legally 
enforceable and binding document, the development of the required 
portion of the condominium must be consistent with the overall plan, 
except that the declarant may reserve the right to change the overall 
plan or decide not to construct planned units or improvements to the 
common elements if the declaration sets forth the conditions required to 
be satisfied prior to the exercise of that right the time within which 
the right may be exercised, and any other limitations and criteria that 
would be necessary or appropriate under the particular circumstances. 
Such conditions, time restraints and other limitations must be 
reasonable in light of the overall plan for the condominium. In an 
expandable project, additional phases which are not required to be built 
may be described in the development plan in very general terms, or the 
declaration may provide that the declarant makes no assurances 
concerning the construction, building types, architectural style and 
size of the units, etc. of these phases. However, the minimum number of 
units to be built should be that which would be adequate to reasonably 
support the common elements. (See Sec. 36.4360(a)(6).)

(Approved by the Office of Management and Budget under control number 
2900-0448)


(Authority: 38 U.S.C. 501, 3703(c)(1), 3710(a)(6))

[44 FR 47339, Aug. 13, 1979, as amended at 50 FR 5979, Feb. 13, 1985; 50 
FR 26359, June 26, 1985]



Sec. 36.4358  Rights and restrictions.

    (a) Declarant's rights and restrictions--(1) Disclosure and 
reasonableness of reserved rights. Any right reserved by the declarant 
must be reasonable and set forth in the declaration.
    (2) Examples of reserved rights of declarant, sponsor, or affiliate 
of declarant which are usually unacceptable. Binding the owners' 
association either directly or indirectly to any of the following 
agreements is not acceptable unless the owner's association shall have a 
right of termination thereof which is exercisable without penalty at any 
time after transfer of control, upon not more than 90 days' notice to 
the other party thereto:
    (i) Any management contract, employment contract or lease of 
recreational or parking areas or facilities;
    (ii) Any contract or lease, including franchises and licenses, to 
which a declarant is a party.

The requirements of paragraphs (a)(2)(i) and (ii) of this section do not 
apply to acceptable ground leases.
    (3) Examples of reserved rights which are usually acceptable. The 
following rights in the common elements may usually be reserved by the 
declarant for a reasonable period of time, subject to a concomitant 
obligation to restore:
    (i) Easement over and upon the common elements and upon lands 
appurtenant to the condominium for the purpose of completing 
improvements for which provision is made in the declaration, but only if 
access thereto is otherwise not reasonably available.
    (ii) Easement over and upon the common elements for the purpose of 
making repairs required pursuant to the declaration or contracts of sale 
made with unit purchasers.
    (iii) Right to maintain facilities in the common areas which are 
identified in the declaration and which are reasonably necessary to 
market the units. These may include sales and management offices, model 
units, parking areas, and advertising signs.


(Authority: 38 U.S.C. 501, 3703(c)(1), 3710(a)(6))

    (b) Owners' association's rights and restrictions--(1) Right of 
entry upon units and limited common elements. The owners' association 
shall be granted a right

[[Page 673]]

of entry upon unit premises and any limited common elements to effect 
emergency repairs, and a reasonable right of entry thereupon to effect 
other repairs, improvements, replacement or maintenance as necessary.
    (2) Power to grant rights and restrictions in common elements. The 
owners' association should be granted other rights, such as the right to 
grant utility easements under, through or over the common elements, 
which are reasonably necessary to the ongoing development and operation 
of the project.
    (3) Responsibility for damage to common elements and units. A 
provision may be made in the declaration or bylaws for allocation of 
responsibility for damages resulting from the exercise of any of the 
above rights.
    (4) Assessments--(i) Levy and collection. The declaration or its 
equivalent shall describe the authority of the owners' association to 
levy and enforce the collection of general and special assessments for 
common expenses and shall describe adequate remedies for failure to pay 
such common expenses. The common expenses assessed against any unit, 
with interest, late charges, costs and a reasonable attorney's fee shall 
be a lien upon such unit in accordance with applicable law. Each such 
assessment, together with interest, late charges, costs, and attorney's 
fee, shall also be the personal obligation of the person who was the 
owner of such unit at the time the assessment fell due. The personal 
obligation for delinquent assessments shall not pass to successors in 
title or interest unless assumed by them, or required by applicable law. 
Common expenses as used in this subdivision shall mean expenditures made 
or liabilities incurred by or on behalf of the owners' association, 
together with any assessments for the creation and maintenance of 
reserves.
    (ii) Reserves and working capital. There shall be in new or proposed 
condominium projects (including conversions) a provision for an adequate 
reserve fund for the periodic maintenance, repair and replacement of the 
common elements, which fund shall be maintained out of regular 
assessments for common expenses. Additionally, a working capital fund 
must be established for the initial months of the project operations 
equal to at least a 2 months' estimated common area charge for each 
unit.
    (iii) Priority of lien. Any assessment lien must be subordinate to 
any Department of Veterans Affairs guaranteed mortgage except as 
provided in Sec. 36.4352. A lien for common expense charges and 
assessments shall not be affected by any sale or transfer of a unit 
except that a sale or transfer pursuant to a foreclosure of a first 
mortgage shall extinguish a subordinate lien for common expense charges 
and assessments which became payable prior to such sale or transfer. Any 
such sale or transfer pursuant to a foreclosure shall not relieve the 
purchaser or transferee of a unit from liability for, nor the unit so 
sold or transferred from the lien of, any common expense charges 
thereafter becoming due.


(Authority: 38 U.S.C. 501, 3703(c)(1), (d)(3), 3710(a)(6))

    (c) Unit owners' rights and restrictions--(1) Obligation to pay 
expenses. The declaration or equivalent document shall establish a duty 
on each unit owner, including the declarant, to pay a proportionate 
share of common expenses upon being assessed therefor by the owners' 
association. Such share may be allocated equally to each unit, may be 
proportionate to that unit's common element interest, relative size or 
value, or may be allocated according to any other specified criteria 
provided that the method chosen is equitable and reasonable for that 
condominium.
    (2) Voting rights. The declaration or equivalent document shall 
allocate a portion of the votes in the association to each unit. Such 
portion may be allocated equally to each unit, may be proportionate to 
that unit's common expense liability, common element interest, relative 
size or value, or may be allocated according to any other specified 
criteria provided that the method is equitable and reasonable for that 
condominium. The declaration may provide different criteria for 
allocations of votes to the units on particular specified matters and 
may also provide different percentages of required unit owner approvals 
for such particular specified matters.

[[Page 674]]

    (3) Ingress and egress of unit owners. There may not be any 
restriction upon any unit owner's right of ingress and egress to his or 
her unit.
    (4) Encroachments--units and common elements--(i) Easements for 
encroachments. In the event any portion of the common elements 
encroaches upon any unit or any unit encroaches upon the common elements 
or another unit as a result of the construction, reconstruction, repair, 
shifting, settlement, or movement of any portion of the improvements, a 
valid easement for the encroachment and for the maintenance of the same 
shall exist so long as the encroachment exists. The declaration may 
provide, however, reasonable limits on the extent of any easement 
created by the overlap of units, common elements, and limited common 
elements resulting from such encroachments; or
    (ii) Monuments as boundaries. If permitted by the governing law 
within the jurisdiction where the project is located, the existing 
physical boundaries of a unit or a common element or the physical 
boundaries of a unit or a common element reconstructed in substantial 
accordance with the original plats and plans thereof become its 
boundaries rather than the metes and bounds expressed in the deed, plat 
or plan, regardless of settling or lateral movement of the building, or 
minor variance between boundaries shown on the plats, plans or in the 
deed and those of the building. The declaration should provide 
reasonable limits on the extent of any such revised boundary(ies) 
created by the overlap of units, common elements, and limited common 
elements resulting from such encroachments.
    (5) Right of first refusal. The right of a unit owner to sell, 
transfer, or otherwise convey his or her unit in a condominium shall not 
be subject to any right of first refusal or similar restriction if the 
declaration or similar document is recorded on or after December 1, 
1976. If the declaration was recorded prior to December 1, 1976, the 
right of first refusal must comply with Sec. 36.4350(b)(5)(ii); 
Provided, however, restrictions on the basis of age or restrictions 
established by a State, Territorial, or local government agency as part 
of a program for providing assistance to low- and moderate-income 
purchasers shall be governed by Sec. 36.4350(b)(5)(iv).


(Authority: 38 U.S.C. 3703(c))

    (6) Leasing restrictions. Except as provided in this paragraph, 
there shall be no prohibition or restriction on a condominium unit 
owner's right to lease his or her unit. The following restrictions are 
acceptable:
    (i) A requirement that leases have a minimum initial term of up to 1 
year, or
    (ii) Age restrictions or restrictions imposed by State or local 
housing authorities which are allowable under Sec. 36.4308(e) or Sec.  
36.4350(b)(5)(iv).
    (d) Rights of action. The owners' association and any aggrieved unit 
owner should be granted a right of action against unit owners for 
failure to comply with the provisions of the declaration, bylaws, or 
equivalent documents, or with decisions of the owners' association which 
are made pursuant to authority granted the owners' association in such 
documents. Unit owners should have similar rights of action against the 
owners' association.


(Authority: 38 U.S.C. 501, 3703(c)(1), 3710(a)(6))

[44 FR 47339, Aug. 13, 1979, as amended at 47 FR 49394, Nov. 1, 1982; 50 
FR 5979, Feb. 13, 1985]



Sec. 36.4359  Miscellaneous legal requirements.

    (a) Declarant transfer of control of owners' association--(1) 
Standards for transfer of control. The declarant shall relinquish all 
special rights, expressed or implied, through which the declarant may 
directly or indirectly control, direct, modify, or veto any action of 
the owners' association, its executive board, or a majority of unit 
owners, and control of the owners' association shall pass to the owners 
of units within the project, not later than the earlier of the 
following:
    (i) 120 days after the date by which 75 percent of the units have 
been conveyed to unit purchasers, or
    (ii) The last date of a specified period of time following the first 
conveyance to a unit purchaser; such period of time is to be reasonable 
for the particular

[[Page 675]]

project. The maximum acceptable period usually will be from 3 to 5 years 
for single-phased condominium regimes and 5 to 7 years for expandable 
condominiums.
    (iii) On a case basis, modifications or variations of the 
requirements of paragraphs (a)(1)(i) and (ii) of this section will be 
acceptable, particularly in circumstances involving very large 
condominium developments.
    (2) Declarant's unit votes after transfer of control. The 
requirements of paragraph (a)(1) of this section shall not affect the 
declarant's rights, as a unit owner, to exercise the votes allocated to 
units which declarant owns.
    (3) Unit owners' participation in management. Declarants should 
provide for and foster early participation of unit owners in the 
management of the project.
    (b) Taxes. Unless otherwise provided by State law, real estate taxes 
must be assessed and be lienable only against the individual units, 
together with their undivided interests in the common elements, and not 
against the multifamily structure. The owners' association usually owns 
no real estate, so it has no obligation concerning ad valorem taxes. 
Unless taxes are assessed only against the individual units, a tax lien 
could amount to more than the value of any particular unit in the 
structure.
    (c) [Reserved]
    (d) Policies for bylaws. The bylaws of the condominium should be 
sufficiently detailed for the successful governance of the condominium 
by unit owners. Among other things, such documents should contain 
adequate provisions for the election and removal of directors and 
officers.
    (e) Insurance and related requirements--(1) Insurance. The holder 
shall require hazard and flood insurance policies to be procured and 
maintained in accordance with Sec. 36.4326. Because of the nature of 
condominiums, additional types of insurance coverages--such as tort 
liability insurance for injuries sustained on the premises, personal 
liability insurance for directors and officers managing association 
affairs, boiler insurance, etc.--should be considered in appropriate 
circumstances.
    (2) Fidelity bond coverage. The securing of appropriate fidelity 
bond coverage is recommended but not required, for any person or entity 
handling funds of the owners' association, including, but not limited 
to, employees of the professional managers. Such fidelity bonds should 
name the association as an obligee, and be written in an amount equal to 
at least the estimated maximum of funds, including reserve funds, in the 
custody of the owners' association or the management agent at any given 
time during the term of the fidelity bond. However, the bond should not 
be less than a sum equal to 3 months' aggregate assessments on all units 
plus reserve funds.

(Authority: 38 U.S.C. 501, 3703(c)(1), 3710(a)(6))

[44 FR 47340, Aug. 13, 1979, as amended at 50 FR 5979, Feb. 13, 1985]



Sec. 36.4360  Documentation and related requirements--flexible 
condominiums and condominiums with offsite facilities.

    (a) Expandable condominiums. The following policies apply to 
condominium regimes which may be increased in size by the declarant:
    (1) The declarant's right to expand the regime must be fully 
described in the declaration. The declaration must contain provisions 
adequate to ensure that future improvements to the condominium will be 
consistent with initial improvements in terms of quality of 
construction. The declarant must build each phase in accordance with an 
approved general plan for the total development (Sec. 36.4357(d)(2)) 
supported by detailed plats and plans of each phase prior to the 
construction of the particular phase.
    (2) The reservation of a right to expand the condominium regime, the 
method of expansion and the result of an expansion must not affect the 
statutory validity of the condominium regime or the validity of title to 
the units.
    (3) The declaration or equivalent document must contain a convenant 
that the condominium regime may not be amended or merged with a 
successor condominium regime without prior written approval of the 
Secretary. The declarant may have the proposed legal documentation to 
accomplish the

[[Page 676]]

merger reviewed prior to recordation. However, the Secretary's final 
approval of the merger will not be granted until the successor 
condominium has been legally established and construction completed. The 
declarant may add phases to an expandable condominium regime without the 
prior approval of the Secretary if the phasing implements a previously 
approved general plan for the total development. A copy of the amendment 
to the declaration or other annexation document which adds each phase 
must be submitted to the Secretary in accordance with Sec. 
36.4360a(b)(6).
    (4) Liens arising in connection with the declarant's ownership of, 
and construction of improvements upon, the property to be added must not 
adversely affect the rights of existing unit owners, or the priority of 
first mortgages on units in the existing condominium property. All 
taxes, assessments, mechanic's liens, and other charges affecting such 
property, covering any period prior to the addition of the property, 
must be paid or otherwise satisfactorily provided for by the declarant.
    (5) The declarant must purchase (at declarant's own expense) a 
general liability insurance policy in an amount not less than $1 million 
for each occurrence, to cover any liability which owners of previously 
sold units are exposed to as a result of further condominium project 
development.
    (6) Each expandable project shall have a specified maximum number of 
units which will give each unit owner a minimum percentage of interest 
in the common elements. Each project shall also have a specified minimum 
number of units which will give each unit owner a maximum percentage of 
interest in the common elements. The minimum number of units to be built 
should be that which would be adequate to reasonably support the common 
elements. The maximum number of units to be built should be that which 
would not overload the capacity of the common facilities. The maximum 
possible percentage(s) and the minimum possible percentage(s) of 
undivided interest in the common elements for each type of unit must be 
stated in the declaration or equivalent document.
    (7) The declaration or equivalent document shall set forth clearly 
the basis for reallocation of unit owner's ownership interests, common 
expense liabilities and voting rights in the event the number of units 
in the condominium is increased. Such reallocation shall be according to 
the applicable criteria set forth in Sec. Sec. 36.4357(b) and 
36.4358(c)(1) and (2).
    (8) The declarant's right to expand the condominium must be for a 
reasonable period of time with a specific ending date. The maximum 
acceptable period will usually be from 5 to 7 years after the date of 
recording the declaration. On a case basic, longer periods of expansion 
rights will be acceptable, particularly in circumstances involving 
sizable condominium developments.
    (b) Series projects. (1) Each phase in the series approach is to be 
considered as a separate project. A separate set of legal documents must 
be filed for each phase or project that relates to the condominium 
within its own boundary. The declaration for each phase must describe 
the particular project as a part of the whole development area, but 
subject only the one phase to the condominium regime. A separate unit 
ratio must be established that would relate each unit to all units of 
the particular condominium for purposes of ownership in the common 
areas, voting rights and assessment liability. A separate association 
may be created to govern the affairs of each condominium. Each phase is 
subject to a separate presale requirement.
    (2) In the case of proposed projects, or projects under 
construction, the declaration should state the number of total units 
that the developer intends to build on other sections of the development 
area.
    (c) Other flexible condominiums. Condominiums containing 
withdrawable real estate (contractable condominiums) and condominiums 
containing convertible real estate (portions of the condominium within 
which additional units or limited common elements, or both, may be 
created) will be considered acceptable provided the flexible

[[Page 677]]

condominium complies with the Sec. 36.4300 series.

(Authority: 38 U.S.C. 501, 3703(c)(1), 3710(a)(6))

(Approved by the Office of Management and Budget under control number 
2900-0448)

[44 FR 47341, Aug. 13, 1979, as amended at 50 FR 5980, Feb. 13, 1985; 50 
FR 26359, June 26, 1985]



Sec. 36.4360a  Appraisal requirements.

    (a) Existing resale condominiums. Upon acceptance by the local 
office of the organizational documents, the project and unit(s) proposed 
as security for guaranteed financing shall be appraised to ensure that 
they meet MPR's (Minimum Property Requirements) and are safe, sanitary, 
and structurally sound. The Department of Veterans Affairs MPR's for 
existing construction apply to all existing resale condominiums 
including conversions, except that water, heating, ventilating, air 
conditioning and sewer service may be supplied from a central source.


(Authority: 38 U.S.C. 501, 3703(c)(1), 3710(a)(6), (b)(5))

    (b) Proposed condominiums or existing condominiums with declarant in 
control or marketing units--(1) Low rise and high rise condominiums. Low 
rise and high rise condominiums shall comply with local building codes. 
Only the alterations, improvements, or repairs to low rise and high rise 
buildings proposed to be converted to the condominium form of ownership 
must comply with current local building codes, unless local authorities 
require total code compliance on the entire structure when a building is 
being converted to the condominium form of ownership. In those areas 
where local standards are nonexistent, inferior to, or in conflict with 
Department of Veterans Affairs objectives, a certification will be 
required from a registered professional architect and/or registered 
engineer certifying that the plans and specifications conform to one of 
the national building codes which is typical of similar construction 
methods and standards for condominiums used in the area. Those portions 
of the condominium conversion which are not being altered, improved or 
repaired must be appraised in accordance with paragraph (a) of this 
section.
    (2) Horizontal condominiums. Department of Veterans Affairs policies 
and procedures applicable to single-family residential construction 
shall also apply to horizontal condominiums. Proposed or existing 
(declarant in control or marketing units) horizontal condominium 
conversions shall comply with current local building codes for 
alterations and improvements or repairs made to convert the building to 
the condominium form of ownership unless local authorities require total 
code compliance on the entire structure when a building is being 
converted to the condominium form of ownership. In those areas where 
local standards are nonexistent, inferior to, or in conflict with 
Department of Veterans Affairs objectives, a certification will be 
required from a professional architect and/or registered engineer 
certifying that the plans and specifications conform to one of the 
national building codes which is typical of similar construction methods 
and standards for condominiums used in the area. Those portions of the 
condominium conversion which are not being altered, improved or repaired 
must be appraised in accordance with paragraph (a) of this section.


(Authority: 38 U.S.C. 501, 3703(c)(1))

    (3) Unit completion. All units in the individual project or phase 
must be substantially completed except for customer preference items, 
such as interior finishes, appliances or equipment.
    (4) Common element completion. All amenities of the condominium (to 
include offsite community facilities), that are to be considered in the 
unit value, must be bound legally to the condominium regime. All such 
amenities as well as the common elements of the project, must be 
substantially completed and available for use by the unit owners. In 
large multi-phase projects, the declarant should construct common 
elements in a manner consistent with the addition of units to support 
the entire development. The Secretary, in appropriate cases, may approve 
the placement of adequate funds by the declarant in an escrow or 
otherwise earmarked account or accept

[[Page 678]]

a letter of credit or surety bond to assure completion of amenities and 
allow closing of VA-guaranteed (or insured) loans. Such funds must be 
adequate to assure completion of the amenities free and clear of all 
liens.


(Authority: 38 U.S.C. 501, 3703(c)(1), 3710(a)(6))

    (5) Information brochure/public offering statement. When units are 
being sold by the declarant (not applicable to resales), an information 
brochure/public offering statement must be given to veteran buyers prior 
to the time a downpayment is received and an agreement is signed, unless 
State law authorized receipt of the downpayment and delivery of the 
information brochure followed by a period in which purchasers may cancel 
the purchase agreement without penalty for a specified number of days. 
Information brochures must be written in simple terms to inform buyers 
that the association does not provide owner's contents and personal 
liability policies which are the owner's responsibility. In the event 
the development is expandable, series, etc., there must be full 
disclosure of the impact of the total development plan. In expandable, 
series or other projects with more than one phase, the information 
brochure must disclose fully later development rights, and the general 
plans of the declarant for additional phases. If the declarant makes no 
assurance concerning phases which are not required to be built, the 
declarant should state that no assurances are given concerning 
construction, unit sizes, building types, architectural styles, etc. In 
condominium conversions, the information brochure must list the major 
structural and mechanical components and the estimated remaining useful 
life of the components. A brief explanation must be furnished in the 
brochure explaining that certain major structural or mechanical 
components may require replacement within a specified time period. If 
the declarant has elected to place funds into a condominium reserve fund 
for replacement of a major component under the provisions of Sec. 
36.4360a(b)(7), the amount of the contribution into the reserve fund 
must be specified in the information brochure.
    (6) Evidence of proper phasing. In an expandable or flexible 
condominium, evidence of the addition of each phase in accordance with a 
previously approved general plan of development must be submitted to the 
Secretary prior to the guaranty of the first loan in the added area.
    (7) Additional condominum conversion requirements. (i) The declarant 
of a condominium project, which is (A) proposed, (B) under construction, 
or (C) an existing project with a declarant in control or marketing 
units not previously occupied, must furnish structural and mechanical 
common element component statements on the present condition of all 
accessible structural and mechanical components material to the use and 
enjoyment of the condominium. These statements must be completed by a 
registered professional engineer and/or architect prior to the guaranty 
of the first unit loan in the project. Each statement must also give an 
estimate of the expected useful life of the roof, elevators, heating and 
cooling, plumbing and electrical systems assuming normal maintenance. A 
minimum of 10 years estimated remaining useful life is required on all 
structural and mechanical components. In the alternative, the declarant 
may contribute an amount of funds to the condominium reserve fund equal 
to a minimum of \1/10\ (one-tenth) of the estimated costs of replacement 
of a major structural or mechanical component (as determined by an 
independent registered professional architect or engineer) for each year 
of estimated remaining useful life less than 10 years, e.g. 7 years 
remaining useful life equals a \3/10\ required declarant contribution to 
the reserve fund of the component's estimated replacement cost. The 
noted statements and remaining useful life requirement are not 
applicable to existing resale conversion projects when the declarant is 
no longer marketing units and/or in control of the association. 
Expandable or series condominium conversions require engineering and 
architectural statements on each stage or phase.
    (ii) In declarant controlled projects, a statement(s) by the local 
authority(ies) of the adequacy of offsite utilities servicing the site 
(e.g., sanitary or

[[Page 679]]

water) is required. If a local authority(ies) declines to issue such a 
statement(s), a statement(s) may be obtained from a registered 
professional engineer. If local authority(ies) declines to issue such a 
statement(s), a statement(s) may be obtained from a registered 
professional engineer.
    (c) Presale requirements--(1) Proposed construction or existing 
declarant in control. Bona fide agreements of sale must have been 
executed by purchasers other than the declarant (who are obligated 
contractually to complete the purchase) of 70 percent of the total 
number of units in the project. Lenders shall certify as to satisfaction 
of the presale requirement prior to VA guaranty of the first unit loan. 
When a declarant can demonstrate that a lower percentage would be 
justified, the Secretary, on an individual case basis, may approve a 
presale requirement of less than 70 percent. Reduction of the 70 percent 
presale requirement will be considered when:
    (i) Strong initial sales demonstrate a ready market, or
    (ii) The declarant will provide cash assests or acceptable bonds for 
payment of full common area assessments to the owners' association until 
such assessments are assumed by unit purchasers, or
    (iii) Subsequent phases of an overall development are being 
undertaken in a proven market area, or
    (iv) Previous experience in similar projects in the same market area 
indicates strong market acceptance, or
    (v) The development is in a market area that has repeatedly 
indicated acceptance of such projects.
    (2) Multiphase--proposed or existing declarant in control. The 
requirements of paragraph (c)(1) of this section shall apply to each 
individual phase of a multiphase development, taking into consideration 
that each individual phase must be capable of self-support in the event 
that the developer does not complete all planned phases.
    (d) Warranty. Except in condominium conversion projects, each CRV 
(Certificate of Reasonable Value) issued by the Secretary relating to a 
proposed or existing not previously occupied dwelling unit in a 
condominium project shall be subject to the express condition that the 
builder, seller, or the real party in interest in the transaction shall 
deliver to the veteran purchasing the dwelling unit with the aid of a 
guaranteed or insured loan a warranty against defects for the unit and 
common elements. The unit shall be warranted for 1 year from the date of 
settlement or the date of occupancy (whichever first occurs). The common 
elements shall be warranted for 2 years from the date each of the common 
elements is completed and available for use by the unit owners, or 2 
years from the date the first unit is conveyed to a unit owner other 
than the declarant, whichever is later, in the particular phase of the 
condominium containing the common element. For these purposes, defects 
shall be those items reasonably requiring the repair, renovation, 
restoration, or replacement of any of the components constituting the 
unit or common elements. Items of maintenance relating to the unit or 
common elements are not covered by the warranty. No certificate of 
guaranty or insurance credit shall be issued unless a copy of such 
warranty, duly receipted by the purchaser, is submitted with the loan 
papers.
    (e) Ownership and operation of offsite facilities--(1) Title 
requirements. Evidence must be presented that the offsite facility owned 
by an owners' association with mandatory membership by condominium unit 
owners or condominium unit owners' associations has been completed and 
conveyed free of encumbrances by the declarant for the benefit of the 
unit owners with title insured by an owner's title policy or other 
acceptable title evidence. Offsite facilities conveyed to a nonprofit 
corporation are the preferred method of offsite facilities ownership; 
however, the Secretary will consider other forms of ownership on an 
individual case basis.
    (2) Mandatory membership. The declaration of the condominium (each 
condominium in a series development) and the legal documentation of the 
corporation or association which owns the offsite facility must provide 
the following:
    (i) The owner of a condominium unit is automatically a member of the 
offsite facility corporation or association

[[Page 680]]

and that upon the sale of the unit, membership is transferred 
automatically to the new owner/purchaser. It is also acceptable if each 
condominium owners' association (in lieu of each individual unit owner) 
is automatically a member of the offsite facility corporation or 
association coupled with use rights for each of the unit owners or 
residents. If membership in an offsite owners' association is voluntary, 
no credit in the CRV valuation may be given for such offsite amenities.
    (ii) Each member of the offsite facility corporation or association 
must be entitled to a representative vote at meetings of the offsite 
facility corporation or association. If the individual condominium 
owners' association is a member of the offsite facility corporation or 
association, each condominium owners' association must be entitled to a 
representative vote at meetings of the offsite facility corporation or 
association.
    (iii) Each member must agree by acceptance of the unit deed to pay a 
share of the expenses of the offsite facility corporation or association 
as assessed by the corporation or association for upkeep, insurance, 
reserve fund for replacements, maintenance and operation of the offsite 
facility. The share of said expenses shall be determined equitably. 
Failure to pay such assessment must result in a lien against the 
individual unit in the same manner as unpaid assessments by the 
association of owners of the condominium. If each condominium owners' 
association is a member of the offsite facility in lieu of individual 
unit owners, failure of the condominium owners' association to pay its 
equitable assessment to the offsite facility must result in an 
enforceable lien.
    (3) Declarant payment of offsite facility in a series project. Until 
the declarant has completed all of the intended condominium phases in a 
total condominium development or established each condominium regime by 
filing a separate declaration in a series development, the balance of 
the total sum of the expenses of the offsite facility not covered by the 
assessment against the unit owners should be assessed against and be 
payable by the declarant commencing on the first day of the first month 
after the first unit is conveyed to a homeowner in the first phase. If 
this balance is not paid, it must become a lien against those parcels of 
land in the development area which are owned by the declarant. The 
collection of such debt and enforcement of such lien may be by 
foreclosure or such other remedies afforded the corporation or 
association under local law.
    (f) Professional management. Many condominiums are small enough and 
their common areas so minimal that professional management is not 
necessary. VA does not have a requirement for professional management of 
condominiums. The powers given to the owners' association by the 
declaration and bylaws are fundamentally for ``use control'' and 
maintenance of the undivided interest all of the owners have in the 
common areas. These powers normally include management which may, if 
desired, be delegated to a professional manager. However, if the board 
of directors wants professional management, the management agreement 
must be terminable for cause upon 30 days' notice, and run for a 
reasonable period of from 1 to 3 years and be renewable for consent of 
the association and the management. (Management contracts negotiated by 
the declarant should not exceed 2 years.)
    (g) Commercial areas. With respect to existing and proposed 
condominiums, commercial areas within condominium developments are 
acceptable, but such interests will be considered in value.


(Authority: 38 U.S.C. 501, 3703(c)(1), 3710(a)(6))

(Approved by the Office of Management and Budget under control number 
2900-0448)

[44 FR 47342, Aug. 13, 1979, as amended at 50 FR 5980, Feb. 13, 1985; 50 
FR 26359, June 26, 1985; 55 FR 34913, Aug. 27, 1990]



Sec. 36.4362  Requirement of construction warranty.

    Each certificate of reasonable value issued by the Secretary 
relating to a proposed or newly constructed dwelling unit, except those 
covering one-family residential units in condominium housing 
developments or projects within the purview of Sec. Sec. 36.4356 
through 36.4360a, shall be subject to the express condition that the 
builder, seller, or

[[Page 681]]

the real party in interest in the transaction shall deliver to the 
veteran constructing or purchasing such dwelling with the aid of a 
guaranteed or insured loan a warranty, in the form prescribed by the 
Secretary, that the property has been completed in substantial 
conformity with the plans and specifications upon which the Secretary 
based the valuation of the property, including any modifications 
thereof, or changes or variations therein, approved in writing by the 
Secretary, and no certificate of guaranty or insurance credit shall be 
issued unless a copy of such warranty duly receipted by the purchaser is 
submitted with the loan papers.

[40 FR 34595, Aug. 18, 1975, as amended at 44 FR 47343, Aug. 13, 1979]



Sec. 36.4363  Nondiscrimination and equal opportunity in housing 
certification requirements.

    (a) Any request for a master certificate of reasonable value on 
proposed or existing construction, and any request for appraisal of 
individual existing housing not previously occupied, which is received 
on or after November 21, 1962, will not be assigned for appraisal prior 
to receipt of a certification from the builder, sponsor or other seller, 
in the form prescribed by the Secretary, that neither it nor anyone 
authorized to act for it will decline to sell any property included in 
such request to a prospective purchaser because of his or her race, 
color, religion, sex or national origin.
    (b) On requests for appraisal of individual proposed construction 
received on or after November 21, 1962, the prescribed nondiscrimination 
certification will be required if the builder is to sell the veteran the 
lot on which the dwelling is to be constructed, but will not be required 
if:
    (1) The veteran owns the lot; or
    (2) The lot is being acquired by the veteran from a seller other 
than the builder and there is no identity of interest between the 
builder and the seller of the lot.
    (c) Each builder, sponsor or other seller requesting approval of 
site and subdivision planning shall be required to furnish a 
certification, in the form prescribed by the Secretary, that neither it 
nor anyone authorized to act for it will decline to sell any property 
included in such request to a prospective purchaser because of his or 
her race, color, religion, sex or national origin. Site and subdivision 
analysis will not be commenced by the Department of Veterans Affairs 
prior to receipt of such certification.
    (d) No commitment shall be issued and no loan shall be guaranteed or 
insured under 38 U.S.C. Chapter 37 unless the veteran certifies, in such 
form as the Secretary shall prescribe, that
    (1) Neither he/she, nor anyone authorized to act for him/her, will 
refuse to sell or rent, after the making of a bona fide offer, or refuse 
to negotiate for the sale or rental of, or otherwise make unavailable or 
deny the dwelling or property covered by this loan to any person because 
of race, color, religion, sex, or national origin;
    (2) He/she recognizes that any restrictive covenant on the property 
relating to race, color, religion, sex or national origin is illegal and 
void and any such covenant is specifically disclaimed; and
    (3) He/she understands that civil action for preventive relief may 
be brought by the Attorney General of the United States in any 
appropriate U.S. District Court against any person responsible for a 
violation of the applicable law.

[28 FR 7673, July 27, 1963, as amended at 36 FR 13032, July 13, 1971; 40 
FR 34595, Aug. 18, 1975]



Sec. 36.4364  Correction of structural defects.

    (a) The purpose of this section is to specify the types of 
assistance that the Secretary may render pursuant to 38 U.S.C. 1827 to 
an eligible borrower who has been unable to secure satisfactory 
correction of structural defects in a dwelling encumbered by a mortgage 
securing a guaranteed, insured or direct loan, and the terms and 
conditions under which such assistance will be rendered.
    (b) A written application for assistance in the correction of 
structural defects shall be filed by a borrower under a guaranteed, 
insured or direct loan with the Director of the Department of Veterans 
Affairs office having loan jurisdiction over the area in which the

[[Page 682]]

dwelling is located. The application must be filed not later than 4 
years after the date on which the first direct, guaranteed or insured 
mortgage loan on the dwelling was made, guaranteed or insured by the 
Secretary. A borrower under a direct, guaranteed or insured mortgage 
loan on the same dwelling which was made, guaranteed or insured 
subsequent to the first such loan shall be entitled to file an 
application if it is filed within 4 years of the date on which such 
first loan was made, guaranteed or insured by the Secretary.
    (c) An applicant for assistance under this section must establish 
that:
    (1) The applicant is the owner of a one- to four-family dwelling 
which was inspected during construction by the Department of Veterans 
Affairs or the Federal Housing Administration.
    (2) The applicant is an original veteran-borrower on an outstanding 
guaranteed, insured or direct loan secured by a mortgage on such 
dwelling which was made, guaranteed or insured on or after May 8, 1968. 
The Secretary may, however, recognize an applicant who is not the 
original veteran-borrower but who contracted to assume such borrower's 
personal obligation thereunder, if the Secretary determines that such 
recognition would be in the best interests of the Government in the 
particular case.
    (3) There exists in such dwelling a structural defect, not the 
result of fire, earthquake, flood, windstorm, or waste, which seriously 
affects the livability of the dwelling.
    (4) The applicant has made reasonable efforts to obtain correction 
of such structural defect by the builder, seller, or other person or 
firm responsible for the construction of the dwelling.
    (d) In those instances in which the Secretary determines that 
assistance under this section is appropriate and necessary the Secretary 
may take any of the following actions:
    (1) Pay such amount as is reasonably necessary to correct the 
defect, or
    (2) Pay the claim of the borrower for reimbursement of the 
borrower's expenses for correcting or obtaining correction of the 
defect, or
    (3) Acquire title to the property upon terms acceptable to the 
borrower and the holder of the guaranteed or insured loan.
    (e) To the extent of any expenditure made by the Secretary pursuant 
to paragraph (d) of this section the Secretary shall be subrogated to 
any legal rights the borrower or applicant described in paragraph (c)(2) 
of this section may have against the builder, seller, or other persons 
arising out of the structural defect or defects.
    (f) The borrower shall not be entitled, as a matter of right, to 
receive the assistance in the correction of structural defects provided 
in this section. Any determination made by the Secretary in connection 
with a borrower's application for assistance shall be final and 
conclusive and shall not be subject to judicial or other review. 
Authority to act for the Secretary under this section is delegated to 
the Under Secretary for Benefits.
    (g) For the purpose of this section, the term ``structural defects 
seriously affecting livability'' shall in no event be deemed to include 
(1) defects of any nature in a dwelling in respect to which the 
applicant for assistance under this section was the builder or general 
contractor, or (2) structural features, improvements, amenities, or 
equipment which were not taken into account in the Secretary's 
determination of reasonable value.

[33 FR 16088, Nov. 1, 1968, as amended at 36 FR 321, Jan. 9, 1971; 40 FR 
34595, Aug. 18, 1975; 61 FR 28059, June 4, 1996]



Sec. 36.4365  Advertising and Solicitation Requirements.

    Any advertisement or solicitation in any form (e.g., written, 
electronic, oral) from a private lender concerning housing loans to be 
guaranteed or insured by the Secretary:
    (a) Must not include information falsely stating or implying that it 
was issued by or at the direction of VA or any other department or 
agency of the United States, and
    (b) Must not include information falsely stating or implying that 
the

[[Page 683]]

lender has an exclusive right to make loans guaranteed or insured by VA.

(Authority: 38 U.S.C. 3703, 3704)

[67 FR 9402, Mar. 1, 2002]

                       loans under 38 U.S.C. 3703

    Source: Sections 36.4370 through 36.4375 appear at 13 FR 7281, Nov. 
27, 1948, unless otherwise noted.



Sec. 36.4370  Insured loan and insurance account.

    (a) Loans otherwise eligible may be insured when purchased by a 
lender eligible under 38 U.S.C. 3703(a) if the purchaser (lender) 
submits with the loan report evidence of an agreement, general or 
special, made prior to the closing of the loan, to purchase such loan 
subject to its being insured.
    (b) A current account shall be maintained in the name of each 
insured lender or purchaser. The account shall be credited with the 
appropriate amounts available for the payment of losses on insured loans 
made or purchased. The account shall be debited with appropriate amounts 
on account of transfers, purchases under Sec. 36.4318, or payment of 
losses. The Secretary may on 6 months' notice close any lender's 
insurance account. Such account after expiration of the 6-month period 
shall be available only as to loans embraced therein.
    (c) Amounts received or recovered by the Secretary or the holder 
with respect to a loan after payment of an insured claim thereon will 
not restore any amount to the holder's insurance account.

[13 FR 7281, Nov. 27, 1948, as amended at 24 FR 2657, Apr. 7, 1959]



Sec. 36.4372  Transfer of insured loans.

    (a) In cases involving the transfer from one insured financial 
institution to another insured institution of loans which are 
transferred without recourse, guaranty, or repurchase agreement, if no 
payment on any loan included in the transfer is past due more than one 
calendar month at the time of transfer there shall be transferred from 
the insurance account of the transferor to the insurance account of the 
transferee an amount equal to the original percentage credited to the 
insurance account in respect to each loan being transferred applied to 
the unpaid balance of such loans, or to the purchase price, whichever is 
the lesser.
    (b) Transfers between insurance accounts in a manner or under 
conditions not provided in paragraph (a) of this section must have the 
prior approval of the Secretary.
    (c) Where loans are transferred with recourse or under a guaranty or 
repurchase agreement no insurance credit will be transferred or 
insurance account affected and no reports will be required.
    (d) In all cases of transfer of loans from one insured financial 
institution to another insured institution, except as provided in 
paragraph (c) of this section, a report on a prescribed form executed by 
the parties and showing their agreement with regard to the transfer of 
insurance credits shall be made to the Secretary.



Sec. 36.4373  Debits and credits to insurance account under Sec.  36.4318.

    In the event that an insured loan is transferred under the 
provisions of Sec. 36.4318, there shall be charged to the insurance 
account of the transferor a sum equal to the amount paid transferor on 
account of the indebtedness less the current market value of the 
property transferred as security therefor as determined by an appraiser 
designated by the Secretary, or the amount chargeable to such insurance 
account in the event of a transfer under Sec. 36.4372, whichever sum is 
the greater. The credit to the insurance account of the transferee will 
be computed in accordance with Sec. 36.4372(a).



Sec. 36.4374  Payment of insurance.

    (a) Upon the continuance of a default for the period specified in 
Sec. 36.4316, the holder may proceed to establish the net loss, after 
giving the notice prescribed in Sec. 36.4317 if security is available. 
The net loss shall be reported to the Secretary with proper claim, 
whereupon the holder shall be entitled to payment of the claim within 
the amount then available for such payment under the payee's related 
insurance account. Subject to the provisions of the paragraph (b) of 
this section and to Sec. 36.4370(b) a

[[Page 684]]

supplemental claim for any balance of an insurance loss may be filed at 
any time within 5 years after the date of the original claim.
    (b) The basis of the claim for an insured loss shall consist in the 
unrealized principal or the amount paid for the obligation, if less, 
plus unrealized interest to the date of claim or the date of sale 
whichever is earlier, and those expenses, if any, allowable under Sec. 
36.4313, but subject to proper credits because of payments, set-off, 
proceeds of security or otherwise, provided that if there is no 
liquidation of security the claim shall not include an accrual of 
interest for a period in excess of 6 months from the date of the first 
uncured default.

[13 FR 7742, Dec. 15, 1948]



Sec. 36.4375  Reports of insured institutions.

    An insured financial institution shall make such reports respecting 
its insurance accounts as the Secretary may from time to time require, 
not more frequently than semiannually.

    Federally Assisted Construction Contracts--Nondiscrimination in 
              Employment--Executive Orders 11246 and 11375

    Authority: Sections 36.4390 to 36.4393 issued under 72 Stat. 1114 
(38 U.S.C. 501).



Sec. 36.4390  Purpose.

    Sections 36.4390 through 36.4393 are promulgated to achieve the aims 
of the applicable provisions of Executive Orders 11246 and 11375 and the 
regulations of the Secretary of Labor with respect to federally assisted 
construction contracts.

[40 FR 34595, Aug. 18, 1975]



Sec. 36.4391  Applicability.

    (a) For the purposes of the home loan guaranty and insurance and 
direct loan programs of the Department of Veterans Affairs, the term 
``applicant for Federal assistance'' or ``applicant'' in Part III of 
Executive Order 11246, shall mean the builder, sponsor or developer of 
land to be improved by such builder, sponsor or developer for the 
purpose of constructing housing thereon for sale to eligible veterans 
with financing which is to be guaranteed or insured or made under the 
provisions of 38 U.S.C. chapter 37, or the builder, sponsor or developer 
of housing to be constructed for sale to eligible veterans with 
financing which is to be guaranteed or insured or made under the 
provisions of 38 U.S.C. chapter 37.
    (b) The provisions of Executive Orders 11246 and 11375 and the rules 
and regulations of the Secretary of Labor are applicable to:
    (1) Each Master Certificate of Reasonable Value or extension or 
modification thereof relating to proposed construction issued on or 
after July 22, 1963;
    (2) Each individual Certificate of Reasonable Value or extension or 
modification thereof relating to proposed construction issued on or 
after July 22, 1963, except as provided in paragraph (c)(2) of this 
section;
    (3) Each Special Conditions Letter or modification thereof issued on 
or after July 22, 1963, in respect to site approval of land to be 
improved by a builder, sponsor or developer for the construction of 
housing thereon;
    (4) Each direct loan fund reservation commitment or extension 
thereof issued to builders on or after July 22, 1963;
    (c) The provisions of Executive Orders 11246 and 11375 and the rules 
and regulations of the Secretary of Labor are not applicable to:
    (1) Grants under chapter 21, title 38, U.S.C.;
    (2) Individual Certificates of Reasonable Value issued on or after 
July 22, 1963, if:
    (i) The certificate relates to existing properties, either 
previously occupied or unoccupied; or
    (ii) The certificate relates to proposed construction and
    (a) A veteran was named in the request for appraisal, or
    (b) A veteran contracted for the construction or purchase of the 
home prior to issuance of the certificate, or
    (c) The property was listed in the Schedule of Reasonable Values on 
an outstanding Master Certificate of Reasonable Value issued prior to 
July 22, 1963;

[[Page 685]]

    (3) Any contract or subcontract for construction work not exceeding 
$10,000;
    (4) Any other contract or subcontract which is exempted or excepted 
by the regulations of the Secretary of Labor.

[29 FR 2862, Feb. 29, 1964, as amended at 31 FR 8745, June 24, 1966; 40 
FR 34595, Aug. 18, 1975]



Sec. 36.4392  Certification requirements.

    In any case in which Sec. Sec. 36.4390 through 36.4393 are 
applicable, as set forth in Sec. 36.4391, no action will be taken by 
the Department of Veterans Affairs on any request for appraisal relating 
to proposed construction, site approval of land to be improved by a 
builder, sponsor or developer for the construction of housing thereon, 
or for a direct loan fund reservation commitment unless the builder, 
sponsor or developer has furnished the Department of Veterans Affairs a 
signed certification in form as follows:

    To induce the Department of Veterans Affairs to act on any request 
submitted by or on behalf of the undersigned for site approval of land 
to be improved for the construction of housing thereon to be financed 
with loans guaranteed, insured or made by the Department of Veterans 
Affairs, or for establishment by the Department of Veterans Affairs of 
reasonable value relating to proposed construction or for direct loan 
fund reservation commitments, the undersigned hereby agrees that it will 
incorporate or cause to be incorporated into any contract for 
construction work or modification thereof, as defined in the rules and 
regulations of the Secretary of Labor relating to the land or housing 
included in its request to the Department of Veterans Affairs the 
following equal opportunity clause:
    During the performance of this contract the contractor agrees as 
follows:
    (1) The contractor will not discriminate against any employee or 
applicant for employment because of race, color, religion, sex or 
national origin. The contractor will take affirmative action to ensure 
that applicants are employed, and that employees are treated during 
employment without regard to their race, color, religion, sex or 
national origin. Such action shall include, but not be limited to the 
following: Employment, upgrading, demotion or transfer; recruitment or 
recruitment advertising; layoff or termination; rates of pay or other 
forms of compensation; and selection for training, including 
apprenticeship. The contractor agrees to post in conspicuous places, 
available to employees and applicants for employment, notices to be 
provided setting forth the provisions of this nondiscrimination clause.
    (2) The contractor will, in all solicitations or advertisements for 
employees placed by or on behalf of the contractor, state that all 
qualified applicants will receive consideration for employment without 
regard to race, color, religion, sex or national origin.
    (3) The contractor will send to each labor union or representative 
of workers with which he has a collective bargaining agreement or other 
contract or understanding, a notice to be provided advising the said 
labor union or workers' representative of the contractor's commitments 
under section 202 of Executive Order 11246 of September 24, 1965, and 
shall post copies of the notice in conspicuous places available to 
employees and applicants for employment.
    (4) The contractor will comply with all provisions of Executive 
Order 11246 of September 24, 1965, and of the rules, regulations and 
relevant orders of the Secretary of Labor.
    (5) The contractor will furnish all information and reports required 
by Executive Order 11246 of September 24, 1965, and by the rules, 
regulations and orders of the Secretary of Labor, or pursuant thereto, 
and will permit access to his books, records and accounts by the 
administering agency and the Secretary of Labor for purposes of 
investigation to ascertain compliance with such rules, regulations and 
orders.
    (6) In the event of the contractor's noncompliance with the 
nondiscrimination clauses of this contract or with any of the said 
rules, regulations or orders, this contract may be canceled, terminated 
or suspended in whole or in part and the contractor may be declared 
ineligible for further Government contracts or federally assisted 
construction contracts in accordance with procedures authorized in 
Executive Order 11246 of September 24, 1965, and such other sanctions 
may be imposed and remedies invoked as provided in Executive Order 11246 
of September 24, 1965, or by rule, regulation or order of the Secretary 
of Labor, or as otherwise provided by law.
    (7) The contractor will include the provisions of paragraphs (1) 
through (7) in every subcontract or purchase order unless exempted by 
rules, regulations or orders of the Secretary of Labor issued pursuant 
to section 204 of Executive Order 11246 of September 24, 1965, so that 
such provisions will be binding upon each subcontractor or vendor. The 
contractor will take such action with respect to any subcontract or 
purchase order as the administering agency may direct as a means of 
enforcing such provisions, including sanctions for noncompliance: 
Provided, however, That in the event a contractor becomes involved in, 
or is threatened

[[Page 686]]

with, litigation with a subcontractor or vendor as a result of such 
direction by the agency, the contractor may request the United States to 
enter into such litigation to protect the interests of the United 
States.
    Except in special cases and in subcontracts for the performance of 
construction work at the site of construction, the clause is not 
required to be inserted in subcontracts below the second tier. 
Subcontracts may incorporate by reference the equal opportunity clause.
    The undersigned further agrees that it will be bound by the above 
equal opportunity clause in any federally assisted construction work 
which it performs itself other than through the permanent work force 
directly employed by an agency of Government.
    The undersigned agrees that it will cooperate actively with the 
administering agency and the Secretary of Labor in obtaining the 
compliance of contractors and subcontractors with the equal opportunity 
clause and the rules, regulations and relevant orders of the Secretary 
of Labor, that it will furnish the administering agency and the 
Secretary of Labor such information as they may require for the 
supervision of such compliance, and that it will otherwise assist the 
administering agency in the discharge of the agency's primary 
responsibility for securing compliance. The undersigned further agrees 
that it will refrain from entering into any contract or contract 
modification subject to Executive Order 11246 with a contractor debarred 
from, or who has not demonstrated eligibility for, Government contracts 
and federally assisted construction contracts pursuant to Part II, 
Subpart D of Executive Order 11246 and will carry out such sanctions and 
penalties for violation of the equal opportunity clause as may be 
imposed upon the contractors and subcontractors by the administering 
agency or the Secretary of Labor pursuant to Part II, Subpart D of 
Executive Order 11246.
    In addition, the undersigned agrees that if it fails or refuses to 
comply with these undertakings such failure or refusal shall be a proper 
basis for cancellation by the Department of Veterans Affairs of any 
outstanding master certificates of reasonable value or individual 
certificates of reasonable value relating to proposed construction, 
except in respect to cases in which an eligible veteran has contracted 
to purchase a property included on such certificates, and for the 
rejection of future requests submitted by the undersigned or on his or 
her behalf for site approval, appraisal services, and direct loan fund 
reservation commitments until satisfactory assurance of future 
compliance has been received from the undersigned, and for referral of 
the case to the Department of Justice for appropriate legal proceedings.

[31 FR 8745, June 24, 1966, as amended at 40 FR 34596, Aug. 18, 1975]



Sec. 36.4393  Complaint and hearing procedure.

    (a) Upon receipt of a written complaint signed by the complainant to 
the effect that any person, firm or entity has violated the undertakings 
referred to in Sec. 36.4392, such person, firm or other entity shall be 
invited to discuss the matter in an informal hearing with the Director 
of the Department of Veterans Affairs regional office or center.
    (b) If the existence of a violation is denied by the person, firm or 
other entity against which a complaint has been made, the Director or 
designee shall conduct such inquiries and hearings as may be deemed 
appropriate for the purpose of ascertaining the facts.
    (c) If it is found that the person, firm or other entity against 
which a complaint has been made has not violated the undertakings 
referred to in Sec. 36.4392, the parties shall be so notified.
    (d) If it is found that there has been a violation of the 
undertakings referred to in Sec. 36.4392, the person, firm or other 
entity in violation shall be requested to attend a conference for the 
purpose of discussing the matter. Failure or refusal to attend such a 
conference shall be proper basis for the application of sanctions.
    (e) The conference arranged for discussing a violation shall be 
conducted in an informal manner and shall have as its primary objective 
the elimination of the violation. If the violation is eliminated and 
satisfactory assurances are received that the person, firm or other 
entity in violation will comply with the undertakings pursuant to Sec. 
36.4392 in the future, the parties concerned shall be so notified.
    (f) Failure or refusal to comply and give satisfactory assurances of 
future compliance with the equal employment opportunity requirements 
shall be proper basis for applying sanctions. The sanctions shall be 
applied in accordance with the provisions of Executive Order 11246 as 
amended and the regulations of the Secretary of Labor.

[[Page 687]]

    (g) Upon written application, a complainant or a person, firm or 
other entity against which a complaint has been filed may apply to the 
Under Secretary for Benefits for a review of the action taken by a 
Director. Upon receiving such application, the Under Secretary for 
Benefits may designate a representative or representatives to conduct an 
informal hearing and to make a report of findings. The Under Secretary 
for Benefits may, after a review of such report, modify or reverse an 
action taken by a Director.
    (h) Reinstatement of restricted persons, firms or other entities 
shall be within the discretion of the Under Secretary for Benefits and 
under such terms as the Under Secretary for Benefits may prescribe.

[29 FR 2862, Feb. 29, 1964, as amended at 40 FR 34596, Aug. 18, 1975; 61 
FR 28059, June 4, 1996]

 Assistance to Certain Disabled Veterans in Acquiring Specially Adapted 
                                 Housing

    Authority: Sections 36.4400 to 36.4411 issued under 72 Stat. 1114, 
1168, as amended (38 U.S.C. 501, 2101).
    Note: Those requirements, conditions, or limitations expressly set 
forth in 38 U.S.C. Chapter 21 and not restated herein must be taken into 
consideration in conjunction with the regulations in Sec. Sec. 36.4401 
to 36.4410.

[24 FR 2657, Apr. 7, 1959]



Sec. 36.4400  Applicability.

    References in the regulations pertaining to assistance to certain 
disabled veterans in acquiring specially adapted housing to 38 U.S.C. 
chapters 21 and 37, shall where applicable, be deemed to refer also to 
the prior corresponding provision of the law.

[24 FR 2657, Apr. 7, 1959]



Sec. 36.4401  Definitions.

    Wherever used in 38 U.S.C. Chapter 21 or Sec. Sec. 36.4401 through 
36.4410, unless the context otherwise requires, the terms defined in 
this section shall have the meaning herein stated; namely:
    (a) Secretary: The Secretary of Veterans Affairs or any employee of 
the Department of Veterans Affairs authorized to act in the Secretary's 
stead.
    (b) Chapter 21: chapter 21 of title 38, U.S.C.
    (c) Movable facilities: Such exercising equipment and other aids as 
may be allowed or required by the Chief Medical Director or designee.
    (d) Necessary land: Any plot of land the cost and area of which are 
not disproportionate to the type of improvements thereon and which is in 
keeping with the locality.
    (e) Special fixtures and necessary adaptations. Construction 
features which are specially designed to overcome the physical 
limitations of the individual beneficiary and which are allowed or 
required by the Chief Medical Director or designee as necessary by 
nature of the qualifying disability.
    (f) Housing unit: A family dwelling or unit approved by the Veterans 
Health Services and Research Administration as medically feasible for 
occupancy as a home by the individual beneficiary, including the land, 
improvements, and all appurtenances, together with such movable 
facilities or special features as are authorized under the definitions 
of those terms in Sec. Sec. 36.4401 through 36.4410.
    (g) Remodeling: Any alterations, repairs, or improvements necessary 
or desirable to the housing unit, as defined in Sec. Sec. 36.4401 
through 36.4410.
    (h) Veteran's family. Persons related by blood, marriage, or 
adoption.

(Authority: 38 U.S.C. 2101(b))

[24 FR 2657, Apr. 7, 1959, as amended at 46 FR 43673, Aug. 31, 1981]



Sec. 36.4402  Eligibility.

    (a) Eligibility, housing grants. No beneficiary shall be eligible 
for assistance under section 2101(a) of Chapter 21 for the purpose of 
reimbursing the veteran for the cost of an existing structure acquired 
by the veteran prior to applying for assistance or for constructing or 
remodeling a dwelling or for otherwise acquiring a suitable housing 
unit, unless it is determined pursuant to Sec. Sec. 36.4401 through 
36.4410 that:
    (1) It is medically feasible for such beneficiary to reside in the 
existing or proposed housing unit and in the locality where such is or 
will be situated;
    (2) The nature and condition of the proposed housing unit are such 
as to be

[[Page 688]]

suitable to the veteran's needs for dwelling purposes;
    (3) Such unit bears a proper relation to the veteran's present and 
anticipated income and expenses;
    (4) The veteran has or will acquire an interest in the housing unit 
which is:
    (i) A fee simple estate, or
    (ii) A leasehold estate, the unexpired term of which, including 
renewals at the option of the lessee, is not less than 50 years, or
    (iii) An interest in a residential unit in a cooperative or a 
condominium type development which in the judgment of the Under 
Secretary for Benefits or the Director, Loan Guaranty Service, provides 
a right of occupancy for a period of not less than 50 years, or
    (iv) A beneficial interest in a revocable Family Living Trust that 
ensures that the veteran, or veteran and spouse, have an equitable life 
estate, provided the trust arrangement is valid under State law;

Provided, The title to such estate or interest is or shall be such as is 
acceptable to prudent lending institutions, informed buyers, title 
companies, and attorneys, generally, in the community;
    (5) The veteran has certified, in such form as the Secretary shall 
prescribe, that
    (i) Neither the veteran, nor anyone authorized to act for the 
veteran, will refuse to sell or rent, after the making of a bona fide 
offer, or refuse to negotiate for the sale or rental of, or otherwise 
make unavailable or deny the dwelling or property acquired by this 
benefit to any person because of race, color, religion, sex, or national 
origin;
    (ii) The veteran recognizes that any restrictive covenant on the 
property relating to race, color, religion, sex, or national origin is 
illegal and void and any such covenant is specifically disclaimed;
    (iii) The veteran understands that civil action for preventive 
relief may be brought by the Attorney General of the United States in 
any appropriate U.S. District Court against any person responsible for a 
violation of the applicable law; and
    (6) The housing unit, if it is located or becomes located in an area 
identified by the Federal Emergency Management Agency as having special 
flood hazards and in which flood insurance has been made available under 
the National Flood Insurance Act, as amended, is or will be covered by 
flood insurance. The amount of flood insurance must be at least equal to 
the lesser of the full insurable value of the property or the maximum 
limit of coverage available for the particular type of property under 
the National Flood Insurance Act, as amended. The Secretary cannot 
approve any financial assistance for the acquisition or construction of 
property located in an area identified by the Federal Emergency 
Management Agency as having special flood hazards unless the community 
in which such area is situated is then participating in the National 
Flood Insurance Program.


(Authority: 42 U.S.C. 4012a, 4106(a))

    (b) Eligibility, adaptations grants. No beneficiary shall be 
eligible for assistance under section 2101(b) of chapter 21, for the 
cost of reasonably necessary adaptations to an existing structure or for 
the inclusion of such adaptations in proposed construction or for the 
purchase of a structure already including such adaptations unless it is 
determined pursuant to Sec. Sec. 36.4401 through 36.4410 of this part 
that:
    (1) The veteran has not been declared eligible for assistance under 
section 2101(a) of chapter 21;
    (2) The veteran has not been provided the particular type of 
adaptation, improvement, or structural alteration under section 1712(a) 
of title 38 U.S.C.;
    (3) The veteran is or will be residing in and reasonably intends to 
continue residing in a residence owned by such veteran or by a member of 
such veteran's family;
    (4) The adaptations are reasonably necessary because of the 
veteran's disability; and
    (5) If the veteran is the owner or part-owner of the housing unit, 
the veteran must comply with paragraphs (a)(5) and (6) of this section.


(Authority: 38 U.S.C. 2101(b), 2104)

[46 FR 43673, Aug. 31, 1981, as amended at 56 FR 9862, Mar. 8, 1991; 61 
FR 28059, June 4, 1996; 62 FR 5531, Feb. 6, 1997]

[[Page 689]]



Sec. 36.4403  Joint ownership of housing unit.

    The construction or remodeling of a housing unit, or reimbursement 
to a veteran who has acquired a suitable unit at the veteran's own 
expense pursuant to section 2101(a) of chapter 21, shall be permissible 
notwithstanding that title to the home is or will be vested in an 
eligible veteran and spouse. If an undivided interest is or will be 
owned by a person other than the spouse of the veteran the cost of the 
unit to the veteran shall be computed to be such part of the total cost 
of the unit as is proportionate to the undivided interest of the veteran 
in the entire property, and the percentages and amounts prescribed in 
section 2101(a) of chapter 21 shall be calculated only upon such cost to 
the veteran.

[46 FR 43674, Aug. 31, 1981]



Sec. 36.4404  Computation of cost.

    (a) Computation of cost of housing unit. Under section 2101(a) of 
chapter 21, for the purpose of computing the amount of benefits payable 
to a veteran-beneficiary, there may be included in the total cost to the 
veteran the following amount, not to exceed $50,000.
    (1) The cost of the necessary land and the grading, landscaping, and 
improvement thereof for use for residential purposes.
    (2) The cost of the improvement erected thereon and the 
appurtenances thereto, including such heating, cooking, laundry, and 
refrigeration equipment as may be suitable to equip a housing unit for 
residential use.
    (3) The cost of remodeling a housing unit.
    (4) The cost of movable facilities and special fixtures.
    (5) Reasonable architects' and attorneys' fees for services rendered 
to the veteran which are necessary to and are in connection with the 
transaction.
    (6) Any charges for the customary necessary connections to or 
extensions of public facilities and improvements.
    (7) Such other reasonable costs or expenses incurred in closing a 
loan or financing the aquisition of the housing and land, including 
unpaid taxes, ground rents, or assessments, which are normally required 
to be paid by a lienor or a purchaser.
    (b) Computation of cost of adaptations. Under section 2101(b) of 
Chapter 21, for the purpose of computing the amount of benefits payable 
to a veteran-beneficiary, the assistance is limited to the lesser of:
    (1) The actual cost, or in the case of a veteran acquiring a 
residence already adapted with special features, the fair market value 
of the adaptations, including installation costs, determined to be 
reasonably necessary, or
    (2) $10,000.

(Authority: 38 U.S. C. 2102)

[46 FR 43674, Aug. 31, 1981, as amended at 50 FR 13021, Apr. 2, 1985; 56 
FR 9862, Mar. 8, 1991; 61 FR 28059, June 4, 1996; 68 FR 6627, Feb. 10, 
2003; 70 FR 3893, Jan. 27, 2005]



Sec. 36.4405  Submission of proof to the Secretary.

    As a condition precedent to the grant the Secretary may require 
submission of such proof of costs and other matters as the Secretary may 
deem necessary.

[13 FR 7282, Nov. 27, 1948, as amended at 46 FR 43674, Aug. 31, 1981]



Sec. 36.4406  Disbursement of benefit authorized.

    After approval of an application for a grant, the Secretary shall 
decide upon a method of disbursement which in the Secretary's opinion is 
appropriate and advisable in the interest of the veteran and the 
Government and disburse the benefit payable accordingly. Disbursements 
may be made to the veteran or to third parties who have contracted with 
the veteran, or to an escrow agent under conditions imposed by the 
Secretary.

[14 FR 5780, Sept. 22, 1949, as amended at 46 FR 43674, Aug. 31, 1981]



Sec. 36.4407  Supplementary administrative action.

    Notwithstanding any requirement, condition, or limitation stated in 
or imposed by Sec. Sec. 36.4401 through 36.4410, the Secretary, within 
the limitations and conditions prescribed in 38 U.S.C. chapters 3 and 
21, may take such action as may be necessary or appropriate to relieve 
undue prejudice to a

[[Page 690]]

veteran or a third party contracting or dealing with such veteran which 
might otherwise result.

[24 FR 2657, Apr. 7, 1959]



Sec. 36.4408  Delegation of authority.

    (a) Except as hereinafter provided, each employee of the Department 
of Veterans Affairs heretofore or hereafter appointed to, or lawfully 
filling, any position designated in paragraph (b) of this section is 
hereby delegated authority, within the limitations and conditions 
prescribed by law, to exercise the powers and functions of the Secretary 
with respect to assisting eligible veterans to acquire specially adapted 
housing.
    (b) Designated positions:

Under Secretary for Benefits.
Director, Loan Guaranty Service.
Assistant Director for Construction and Valuation.
Chief, Specially Adapted Housing Unit, Loan Guaranty Service.
Director, Medical and Regional Office Center.
Director, VA Regional Office and Insurance Center.
Director, VA Regional Office.
Loan Guaranty Officer.
Assistant Loan Guaranty Officer.

    (c) Nothing in this section shall be construed to authorize any 
employee designated in paragraph (b) of this section to determine basic 
eligibility or medical feasibility, except as otherwise authorized.

[13 FR 7282, Nov. 27, 1948, as amended at 19 FR 3225, June 2, 1954; 46 
FR 43674, Aug. 31, 1981; 61 FR 28059, June 4, 1996]



Sec. 36.4409  Guaranteed or insured loans under 38 U.S.C. chapter 37.

    In any case where, in addition to the benefits of chapter 21, the 
veteran will utilize the veteran's entitlement to the loan guaranty or 
insurance benefits of 38 U.S.C. chapter 37, the complete transaction 
must be in accord with applicable regulations promulgated thereunder 
excepting Sec. 36.4306 thereof.

[24 FR 2657, Apr. 7, 1959, as amended at 46 FR 43674, Aug. 31, 1981]



Sec. 36.4410  Allocation of the funds of the grant.

    Any amount payable as a grant under section 2101(a), chapter 21 may 
be required by the Secretary to be utilized as the Secretary deems 
advisable for payment of any of the following costs or debts which are 
obligations of the veteran before any part of the grant may be paid to 
the veteran directly:
    (a) Cost of necessary land,
    (b) Cost of constructing, adapting, or remodeling a housing unit.
    (c) Delinquent taxes secured by a lien on the housing unit,
    (d) Reduction or retirement of any indebtedness incurred in 
connection with the purchase, construction, or remodeling of a housing 
unit on which the grant is made.

[13 FR 7283, Nov. 27, 1948, as amended at 46 FR 43674, Aug. 31, 1981]



Sec. 36.4411  Geographical limits.

    Any real property purchased, constructed, altered, improved, 
repaired, or specially adapted, in whole or in part, with the proceeds 
of any specially adapted housing grant, shall be situated in the United 
States, which, for purposes of 38 U.S.C. chapter 21, is defined as the 
several States, Territories, and possessions, including the District of 
Columbia, the Commonwealth of Puerto Rico, Guam, American Samoa, the 
Commonwealth of the Northern Mariana Islands, and any other area over 
which the United States may, at some future date, acquire sovereignty.

(Authority: 38 U.S.C. 501, 2101 (a) and (b))

[47 FR 29231, July 6, 1982]

                              Direct Loans

    Authority: Sections 36.4500 through 36.4600 issued under 38 U.S.C. 
501.
    Note: Those requirements, conditions, or limitations which are 
expressly set forth in 38 U.S.C. chapter 37 are not restated herein and 
must be taken into consideration in the interpretation or application of 
the regulations concerning direct loans to veterans.

[24 FR 2658, Apr. 7, 1959]



Sec. 36.4500  Applicability.

    (a) The regulations concerning direct loans to veterans shall be 
applicable to loans made by Department of Veterans Affairs pursuant to 
38 U.S.C. 3711.
    (b) Sections 36.4501, 36.4512, and 36.4527, which concern direct 
loans to

[[Page 691]]

Native American veterans shall be applicable to loans made by the 
Secretary pursuant to 38 U.S.C. 3761 through 3764.


(Authority: 42 U.S.C. 4012a)

    (c) Title 38, U.S.C. chapter 37 is a continuation and restatement of 
the provisions of title III of the Servicemen's Readjustment Act of 
1944, and may be considered to be an amendment to such title III. 
References in the regulations concerning direct loans to veterans to the 
sections or chapters of title 38, United States Code, shall, where 
applicable, be deemed to refer to the prior corresponding provisions of 
the law.

[24 FR 2658, Apr. 7, 1959, as amended at 58 FR 59660, Nov. 10, 1993; 62 
FR 5531, Feb. 6, 1997]



Sec. 36.4501  Definitions.

    Wherever used in 38 U.S.C. 3711, 3762 or the regulations concerning 
direct loans to veterans, unless the context otherwise requires, the 
terms defined in this section shall have the meaning herein stated, 
namely:
    Cost means the entire consideration paid or payable for or on 
account of the application of materials and labor to tangible property.
    Default means failure of a borrower to comply with the terms of a 
loan agreement.
    Dwelling means a building designed primarily for use as a home, 
consisting of one residential unit only and not containing any business 
unit.
    Energy conservation improvement. An improvement to an existing 
dwelling'or farm residence through the installation of a solar heating 
system, a solar heating and cooling system, or a combined solar heating 
and cooling system, or through application of a residential energy 
conservation measure as prescribed in 38 U.S.C. 3710(d) or by the 
Secretary.
    Farm residence means a dwelling located on a farm which is to be 
occupied by the veteran as the veteran's home.
    Guaranty means the obligation of the United States, incurred 
pursuant to 38 U.S.C. chapter 37, to repay a specified percentage of a 
loan upon the default of the primary debtor.
    Home means a place of residence.
    Improvement means any addition or alteration which enhances the 
utility of the property for residential purposes.
    Indebtedness means the unpaid principal and interest plus any other 
sums a borrower is obligated to pay Department of Veterans Affairs under 
the terms of the loan instruments or of the regulations concerning 
direct loans to veterans.
    Loan means a loan made to a veteran by Department of Veterans 
Affairs pursuant to the provisions of 38 U.S.C. 3711 or 3762 and the 
regulations concerning direct loans to veterans.
    Meaningful interest means a leasehold estate or other interest in 
trust land and any improvements thereon which permits the use, occupancy 
and enjoyment of that land and any improvements by the grantee. This 
interest must be capable of being conveyed (1) as security for a loan 
made under 38 CFR 36.4527, (2) by the grantee to a third party subject 
to the approval of the tribal organization and the Secretary or 
designee, and (3) by the Secretary or other foreclosing mortgagee, 
subject to the provisions of a memorandum of understanding entered into 
by the Secretary or designee, the tribal organization, and the Bureau of 
Indian Affairs.
    Native American means:
    (1) An Indian, as defined in section 4(d) of the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 450b(d));
    (2) A native Hawaiian, as defined in section 201(a)(7) of the 
Hawaiian Homes Commission Act of 1920, (Public Law 67-34, 42 Stat. 108);
    (3) An Alaska Native within the meaning provided for the term 
'Native' in section 3(b) of the Alaska Native Claims Settlement Act (43 
U.S.C. 1602(b)); and
    (4) A Pacific Islander, within the meaning of the Native American 
Programs Act of 1974 (42 U.S.C. 2991 et seq.)
    Native American veteran means any veteran who is a Native American.
    Period of more than 180 days means 181 or more calendar days of 
continuous active duty.
    Purchase price means the entire legal consideration paid or payable 
upon or

[[Page 692]]

on account of the sale of property, exclusive of acquisition costs, or 
for the cost of materials and labor to be applied thereto.
    Reasonable value means that figure which represents the amount a 
reputable and qualified appraiser, unaffected by personal interest, 
bias, or prejudice, would recommend to a prospective purchaser as proper 
price or cost in the light of prevailing conditions.
    Repairs means any alteration of existing realty which is necessary 
or advisable for protective, safety, or restorative purposes.
    Secretary means the Secretary of Veterans Affairs, or any employee 
of the Department of Veterans Affairs authorized to act in the 
Secretary's stead.
    Tribal organization has the same meaning given in section 4(l) of 
the Indian Self-Determination and Education Assistance Act (25 U.S.C. 
450b(1)) and includes the Department of Hawaiian Homelands, in the case 
of native Hawaiians, and such other organizations as the Secretary may 
prescribe.
    Trust land means any land that:
    (1) Is held in trust by the United States for Native Americans;
    (2) Is subject to restrictions on alienation imposed by the United 
States on Indian lands (including native Hawaiian homelands);
    (3) Is owned by a Regional Corporation or a Village Corporation, as 
such terms are defined in section 3(g) and 3(j) of the Alaska Native 
Claims Settlement Act, respectively (43 U.S.C. 1602(g), (j)); or
    (4) Is on any island in the Pacific Ocean if such land is, by 
cultural tradition, communally-owned land, as determined by the 
Secretary.

    Department of Veterans Affairs means the Secretary of Veterans 
Affairs, or any employee of the Department of Veterans Affairs 
authorized to act in the Secretary's stead.


(Authority: 38 U.S.C. 3761-3764)

[24 FR 2658, Apr. 7, 1959, as amended at 31 FR 16713, Dec. 30, 1966; 35 
FR 17180, Nov. 7, 1970; 40 FR 4143, Jan. 28, 1975; 41 FR 32218, Aug. 2, 
1976; 41 FR 44859, Oct. 13, 1976; 45 FR 20472, Mar. 28, 1980; 46 FR 
43674, Aug. 31, 1981; 58 FR 59660, Nov. 10, 1993]



Sec. 36.4502  Use of guaranty entitlement.

    The guaranty entitlement of the veteran obtaining a direct loan 
which is closed on or after February 1, 1988, shall be charged with the 
lessor of the loan amount or an amount which bears the same ratio to 
$36,000 as the amount of the loan bears to $33,000. The charge against 
entitlement of a veteran who obtained a direct loan which was closed 
prior to the aforesaid date, shall be the amount which would have been 
charged had the loan been closed subsequent to such date.

(Authority: 38 U.S.C. 3711(d)(2)(A))

[55 FR 40657, Oct. 4, 1990]



Sec. 36.4503  Amount and amortization.

    (a) The original principal amount of any loan made on or after 
February 1, 1988, shall not exceed an amount which bears the same ratio 
to $33,000 as the amount of the guaranty to which the veterans is 
entitled under 38 U.S.C. 3710 at the time the loan is made bears to 
$36,000. This limitation shall not preclude the making of advances, 
otherwise proper, subsequent to the making of the loan pursuant to the 
provisions of Sec. 36.4511. Except as to home improvement loans, loans 
made by VA shall near interest at the rate of 7\1/2\ percent per annum. 
Loans solely for the purposes of energy conservation improvements or 
other alterations, improvements, or repairs shall bear interest at the 
rate of 9 percent per annum.


(Authority: 38 U.S.C. 3711(d)(2)(A))

    (b) Each loan shall be repayable on the basis of approximately equal 
monthly installments; except that in the case of loans made for any of 
the purposes described in clause (2), (3), or (4) of subsection (a) of 
38 U.S.C. 3710, such loans may provide for repayment in quarterly, 
semiannual, or annual installments, provided that such plan of repayment 
corresponds to the present and anticipated income of the veteran.
    (c) The first installment payment on a loan to construct, alter or 
improve a farm residence or other dwelling may be postponed for a period 
not exceeding 12 months from the date of the loan instruments. The first 
installment payment for a loan for the purchase of a dwelling or farm on 
which there is a

[[Page 693]]

farm residence may not be postponed more than 60 days from the date of 
loan closing: Provided, That if the loan is repayable in quarterly, 
semi-annual or annual installments, the first installment payment date 
may be postponed for not more than 12 months from the date of the loan 
instruments.
    (d) The final installment on any loan shall not be in excess of two 
times the average of the preceding installments, except that on a 
construction loan the final installment may be for an amount not in 
excess of 5 percent of the original principal amount of the loan. The 
limitations imposed by this paragraph on the amount of the final 
installment shall not apply in the case of any loan extended or recast 
pursuant to Sec. 36.4505 or 36.4506.


(Authority: 38 U.S.C. 501, 3703(c)(1), 3711(d)(1), 3712 (f) and (g))

[15 FR 6288, Sept. 20, 1950, as amended at 24 FR 2658, Apr. 7, 1959; 52 
FR 12382, Apr. 16, 1987; 52 FR 18357, May 15, 1987; 53 FR 18983, May 26, 
1988; 53 FR 44401, Nov. 3, 1988; 53 FR 51551, Dec. 22, 1988; 54 FR 
24557, June 8, 1989; 54 FR 30384, July 20, 1989; 55 FR 6983, Feb. 28, 
1990; 55 FR 40657, Oct. 4, 1990; 57 FR 37713, Aug. 20, 1992]



Sec. 36.4504  Loan closing expenses.

    (a) Department of Veterans Affairs will designate a loan closer to 
represent the Department of Veterans Affairs at the closing and in 
advance thereof will agree with the loan closer upon the fee to be paid 
by the Department of Veterans Affairs for preparing the loan closing 
instruments and attending at the closing of the loan. The loan closer as 
such is neither an agent nor employee of the Department of Veterans 
Affairs.
    (b) With respect to a loan made to a veteran-borrower pursuant to an 
application (VA Form 26-1802a, received by the Department of Veterans 
Affairs on or after March 3, 1966, the borrower shall pay the Department 
of Veterans Affairs the following:
    (1) $50, or one percent (1%) of the loan amount, whichever is 
greater, which charge shall be in lieu of the loan closer's fee, credit 
report, and cost of appraisal: Provided, That if the loan is to finance 
the cost of construction, repairs, alterations, or improvements 
necessitating disbursements of the loan proceeds as the construction or 
other work progresses, the charge to the veteran-borrower shall be two 
percent (2%) of the loan amount, but not less than $50 in any event.
    (2)(i) A loan fee of one percent of the total loan amount. All or 
part of such fee may be paid in cash at loan closing or all or part of 
the fee may be included in the loan without regard to the reasonable 
value of the property. In computing the fee, the Department of Veterans 
Affairs will disregard any amount included in the loan to enable the 
borrower to pay such fee. If all or part of the fee is included in the 
loan, the amount of the loan as increased may not exceed $33,000.


(Authority: 38 U.S.C. 3729(a))

    (ii) The fee described in paragraph (b)(2)(i) of this section shall 
not be collected from a veteran who is receiving compensation (or who 
but for the receipt of retirement pay would be entitled to receive 
compensation) or from a surviving spouse described in section 3701(b)(2) 
of title 38 U.S.C.


(Authority: 38 U.S.C. 3729(b))

    (iii) Collection of the loan fee described in this paragraph (b)(2) 
of this section shall not apply to loans closed prior to August 17, 
1984, or to loans closed after September 30, 1987.


(Authority: 38 U.S.C. 3729(d))

    (3) Costs or expenses normally paid by a purchaser or lienor 
incident to loan closing including but not limited to the following:
    (i) Fee of Department of Veterans Affairs designated compliance 
inspector;
    (ii) Recording fees and recording taxes or other charges incident to 
recordation;
    (iii) That portion of taxes, assessments, and other similar items 
for the current year chargeable to the borrower and the initial deposit 
(lump-sum payment) for the tax and insurance account;
    (iv) Hazard insurance as required by Sec. 36.4512,
    (v) Survey, if any;
    (vi) Title examination and title evidence.

[[Page 694]]


Charges or costs payable by the veteran-borrower, except as to the 
payment of the loan fee described in paragraph (b)(2)(i) of this 
section, shall be paid in cash and may not be paid out of the proceeds 
of the loan. No service or brokerage fee shall be charged against the 
veteran-borrower by any third party for procuring a direct loan or in 
connection therewith.
    (c) With respect to a loan to construct, repair, alter, or improve a 
farm residence or other dwelling, the Department of Veterans Affairs may 
require the veteran to deposit with the Department of Veterans Affairs, 
or in an escrow satisfactory to the Department of Veterans Affairs, 10 
percent of the estimated cost thereof or such alternative sum, in cash 
or its equivalent, as the Department of Veterans Affairs may determine 
to be necessary in order to afford adequate assurance that sufficient 
funds will be available, from the proceeds of the loan or from other 
sources, to assure completion of the construction, repair, alteration, 
or improvement in accordance with the plans and specifications upon 
which the Department of Veterans Affairs based its loan commitment.


(Authority: 38 U.S.C. 501, 3724, and 3729)

[15 FR 6288, Sept. 20, 1950, as amended at 23 FR 2339, Apr. 10, 1958; 33 
FR 6976, May 9, 1968; 35 FR 17180, Nov. 7, 1970; 41 FR 32218, Aug. 2, 
1976; 47 FR 46700, Oct. 20, 1982; 50 FR 5755, Feb. 12, 1985]



Sec. 36.4505  Maturity of loan.

    (a) The maturity of a loan shall not exceed 25 years and 32 days. If 
the Department of Veterans Affairs determines the income and expenses of 
a veteran-applicant under customary credit standards would prevent the 
veteran from making the required loan payments for a loan which matures 
in 25 years and 32 days, but the veteran would be able to make the loan 
payments over a longer period of time, the loan may be made with a 
maturity not in excess of 30 years and 32 days.
    (b) Every loan shall be repayable within the estimated economic life 
of the property securing the loan.
    (c) Nothing in this section shall preclude extension of the loan 
pursuant to the provisions of Sec. 36.4506.

(Authority: 38 U.S.C. 3703 (c)(1), (d)(1))

[46 FR 43675, Aug. 31, 1981]



Sec. 36.4506  Recasting.

    In the event of default or to avoid imminent default, the Department 
of Veterans Affairs may at any time enter into an agreement with the 
borrower which will permit the latter temporarily to repay the 
obligation on a basis appropriate to the borrower's apparent current 
ability to pay or may enter into an appropriate recasting or extension 
agreement: Provided, That no such agreement shall extend the ultimate 
repayment of a loan beyond the expiration of 30 years and 32 days from 
the date of the loan. Provided further, That nothing in this section 
shall be deemed to limit the forbearance or indulgence which the 
Secretary may extend in an individual case pursuant to the provisions of 
38 U.S.C. 3720(f).

[46 FR 43675, Aug. 31, 1981]



Sec. 36.4507  Refinancing of mortgage or other lien indebtedness.

    (a) Loans may be made for the purpose of refinancing (38 U.S.C. 
3710(a)(5)) an existing mortgage loan or other indebtedness secured by a 
lien of record on a dwelling or farm residence owned and occupied by an 
eligible veteran as the veteran's home, provided that:
    (1) The amount of the loan does not exceed the sum due the holder of 
the mortgage or other lien indebtedness on such dwelling or farm 
residence, and also is not more than the reasonable value of the 
dwelling or farm residence, and
    (2) The loan is otherwise eligible.
    (b) A refinancing loan for an amount which exceeds the sum due the 
holder of the mortgage or other lien indebtedness (the excess proceeds 
to be paid to the veteran) may also be made, Provided, That:
    (1) The loan is otherwise eligible, and
    (2) The issuance of a commitment to make any such loan for an amount 
which exceeds eighty (80) percent of the reasonable value of the 
veteran's dwelling or farm residence shall require, unless the Under 
Secretary for Benefits

[[Page 695]]

otherwise directs, the approval of the Director, Loan Guaranty Service.
    (c) Nothing shall preclude making a loan pursuant to the provisions 
of 38 U.S.C. 3710(a)(5) to an eligible veteran having home loan guaranty 
entitlement to refinance a loan previously guaranteed insured or made by 
the Secretary which is outstanding on the dwelling or farm residence 
owned and occupied or to be reoccupied after the completion of major 
alterations, repairs, or improvements to the property, by the veteran as 
the veteran's home.


(Authority: 38 U.S.C. 3711)

    (d) A refinancing loan may include contractual prepayment penalties, 
if any, due the holder of the mortgage or other lien indebtedness to be 
refinanced.
    (e) Nothing in this section shall preclude the refinancing of the 
balance due for the purchase of land on which new construction is to be 
financed through the proceeds of the loan, or the refinancing of the 
balance due on an existing land sale contract relating to a veteran's 
dwelling or farm residence.

[35 FR 18872, Dec. 11, 1970, as amended at 46 FR 43675, Aug. 31, 1981; 
49 FR 42571, Oct. 23, 1984; 61 FR 28059, June 4, 1996]



Sec. 36.4508  Transfer of property by borrower.

    (a) Direct loans for which commitments are made on or after March 1, 
1988, are not assumable without the prior approval of the Department of 
Veterans Affairs or its authorized agent. The following shall apply:
    (1) The Department of Veterans Affairs shall include in the mortgage 
or deed of trust and the promissory note or bond on any loan for which a 
commitment was made on or after March 1, 1988, the following warning in 
a conspicuous position in capital letters on the first page of the 
document in type at least 2\1/2\ times larger than the regular type on 
such page: ``THIS LOAN IS NOT ASSUMABLE WITHOUT THE APPROVAL OF THE 
DEPARTMENT OF VETERANS AFFAIRS OR ITS AUTHORIZED AGENT''. Due to the 
difficulty in obtaining some commercial type sizes which are exactly 
2\1/2\ times larger in height than other sizes, minor deviations in size 
will be permitted based on commercially available type sizes nearest to 
2\1/2\ times the size of the print on the document.
    (2) The instrument securing a direct loan for which a commitment is 
made on or after March 1, 1988, shall include:
    (i) A provision that the Department of Veterans Affairs or other 
holder may declare the loan immediately due and payable upon transfer of 
the property securing such loan to any transferee unless the 
acceptability of the assumption of the loan is established pursuant to 
section 3714. This option may not be exercised if the transfer is the 
result of:
    (A) The creation of a lien or other encumbrance subordinate to the 
lender's security instrument which does not relate to a transfer of 
rights of occupancy in the property;
    (B) The creation of a purchase money security interest for household 
appliances;
    (C) A transfer by devise, descent, or operation of law on the death 
of a joint tenant or tenant by the entirety;
    (D) The granting of a leasehold interest of three years or less not 
containing an option to purchase;
    (E) A transfer to a relative resulting from the death of a borrower;
    (F) A transfer where the spouse or children of the borrower become a 
joint owner of the property with the borrower;
    (G) A transfer resulting from a decree of a dissolution of marriage, 
legal separation agreement, or from an incidental property settlement 
agreement by which the spouse of the borrower becomes the sole owner of 
the property. In such a case the borrower shall have the option of 
applying directly to the Department of Veterans Affairs regional office 
of jurisdiction for a release of liability under 1813(a); or
    (H) A transfer into an inter vivos trust in which the borrower is 
and remains a beneficiary and which does not relate to a transfer of 
rights of occupancy in the property.
    (ii) A provision that a funding fee equal to one-half of one percent 
of the loan balance as of the date of transfer shall be payable to the 
Department of Veterans Affairs or its authorized

[[Page 696]]

agent. Furthermore, this provision shall provide that if this fee is not 
paid it shall constitute an additional debt to that already secured by 
the instrument; and,
    (iii) A provision authorizing an assumption processing charge, not 
to exceed the lesser of $300 and the actual cost of a credit report or 
any maximum prescribed by applicable State law.


(Authority: 38 U.S.C. 3714)

    (b) Whenever any veteran disposes of residential property securing a 
direct loan obtained under 38 U.S.C. chapter 37, the Department of 
Veterans Affairs, upon application made by such borrower, shall issue to 
the borrower a release relieving the borrower of all further liability 
to the Department of Veterans Affairs on account of such loan (including 
liability for any loss resulting from any default of the transferee or 
any subsequent purchaser of such property) if the Department of Veterans 
Affairs has determined, after such investigation as it deems 
appropriate, that there has been compliance with the conditions 
prescribed in 38 U.S.C. 3713(a) or 1814, as appropriate. The assumption 
of full liability for repayment of the loan by the transferee of the 
property must be evidenced by an agreement in writing in such form as 
the Department of Veterans Affairs may require. Any release of liability 
granted to a veteran by the Department of Veterans Affairs shall inure 
to the spouse of such veteran.
    (c) If, on or after July 1, 1972, any veteran disposes of the 
property securing a direct loan obtained under 38 U.S.C. chapter 37, 
without receiving a release from liability with respect to such loan 
under 38 U.S.C. 3713(a) and a default subsequently occurs which results 
in liability of the veteran to the Secretary on account of the loan, the 
Secretary may relieve the veteran of such liability if the Secretary 
determines that:
    (1) A transferee either immediate or remote is legally liable to the 
Secretary for the debt of the original veteran-borrower established 
after the termination of the loan, and
    (2) The original loan was current at the time such transferee 
acquired the property, and
    (3) The transferee who is liable to the Secretary is found to have 
been a satisfactory credit risk at the time the transferee acquired the 
property.

(Approved by the Office of Management and Budget under control number 
2900-0516)

[15 FR 6289, Sept. 29, 1950, as amended at 33 FR 5362, Apr. 4, 1968; 37 
FR 24034, Nov. 11, 1972; 46 FR 43675, Aug. 31, 1981; 55 FR 37477, Sept. 
12, 1990]



Sec. 36.4509  Joint loans.

    (a) No loan will be made unless an eligible veteran is the sole 
principal obligor, or such veteran and spouse or eligible veteran co-
applicant are the principal obligors thereon, nor unless such veteran 
alone, or together with a spouse or eligible veteran co-applicant, 
acquire the entire fee simple or other permissible estate in the realty 
for the acquisition of which the loan was obtained. Nothing in this 
section shall preclude other parties from becoming liable as comaker, 
endorser, guarantor, or surety.
    (b) Notwithstanding that an applicant and spouse or other co-
applicant are both eligible veterans and will be jointly and severally 
liable as borrowers, the original principal amount of the loan may not 
exceed the maximum permissible under Sec. 36.4503(a). In any event the 
loan may not exceed $33,000.


(Authority: 38 U.S.C. 3711(d)(2)(A) and (3))

[43 FR 60460, Dec. 28, 1978]



Sec. 36.4510  Prepayment, acceleration, and liquidation.

    (a) Any credit on the loan not previously applied in satisfaction of 
matured installments, other than the gratuity credit required by prior 
provisions of law to be credited to principal, may be reapplied by the 
Department of Veterans Affairs at the request of the borrower for the 
purpose of curing or preventing a default.
    (b) The Department of Veterans Affairs shall include in the 
instruments evidencing or securing the indebtedness provisions relating 
to the following:
    (1) The right of the borrower to prepay at any time without premium 
or fee, the entire indebtedness or any part

[[Page 697]]

thereof: Provided, That any such prepayment, other than payment in full, 
may not be made in any amount less than the amount of one installment, 
or $100, whichever is less: And provided further, That any prepayment 
made on other than an installment due date will not be credited until 
the next following installment due date, but not later than 30 days 
after such prepayment.
    (2) The right of the Department of Veterans Affairs to accelerate 
the maturity of the entire indebtedness in the event of default.
    (3) The right of the Department of Veterans Affairs to foreclose or 
otherwise proceed toliquidate or acquire property which is the security 
for the loan in the event of the borrower's delinquency in the repayment 
of the obligation or in the event of default in any other provisions of 
the loan contract.
    (c) The Department of Veterans Affairs shall have the right to 
accelerate the entire indebtedness and to foreclose or otherwise proceed 
to liquidate, or acquire the security for the loan, in the event the 
veteran is adjudged a bankrupt, or if the property has been abandoned by 
the borrower or subjected to waste or hazard, or in the event conditions 
exist which warrant the appointment of a receiver by court.

[15 FR 6289, Sept. 20, 1950, as amended at 20 FR 6260, Aug. 26, 1955; 24 
FR 2658, Apr. 7, 1959; 41 FR 44859, Oct. 13, 1976; 61 FR 28059, June 4, 
1996]



Sec. 36.4511  Advances after loan closing.

    (a) The Department of Veterans Affairs may at any time advance any 
sum or sums as are reasonably necessary and proper for the maintenance, 
repair, alteration, or improvement of the security for a loan or for the 
payment of taxes, assessments, ground or water rights, or casualty 
insurance thereon: Provided, That no advance shall be made for 
alterations or improvements which are not necessary for the maintenance 
or repair of the security if such advance will increase the indebtedness 
to an amount in excess of $33,000.
    (b) All sums disbursed incident to the making of advances under this 
section shall be added to the indebtedness. Department of Veterans 
Affairs may require any such advances to be secured ratably and on a 
parity with the principal indebtedness, or otherwise secured. The sum so 
advanced shall be evidenced by a supplemental note or otherwise as may 
be required by Department of Veterans Affairs.
    (c) Department of Veterans Affairs may pay and charge against the 
indebtedness, or against the proceeds of the sale of any security 
therefor, any expense which is reasonably necessary for collection of 
the debt, protection, repossession, preservation, or liquidation of the 
security or of the lien thereon, including a reasonable amount for 
trustees' and legal fees.
    (d) The Department of Veterans Affairs may treat as an advance and 
add to the mortgage balance the one-half of one percent funding fee due 
on a transfer under 38 U.S.C. 3714 when this is not paid at the time of 
transfer.

(Authority: 38 U.S.C. 3714)

[15 FR 6289, Sept. 20, 1950, as amended at 38 FR 33772, Dec. 7, 1973; 41 
FR 44859, Oct. 13, 1976; 55 FR 37478, Sept. 12, 1990]



Sec. 36.4512  Taxes and insurance.

    (a) In addition to the monthly installment payments of principal and 
interest payable under the terms of the loan agreement, the borrower 
will be required to make payments monthly to the Secretary in such 
amounts as may be determined by the Secretary from time to time to be 
necessary for the purpose of accumulating funds sufficient for the 
payment of taxes and assessments, ground rents, insurance premiums, and 
similar levies or charges on the security property. The borrower at loan 
closing shall pay in cash to the Secretary such sum as it estimates may 
be necessary as the initial deposit to the borrower's tax and insurance 
reserve account.


(Authority: 38 U.S.C. 3720)

    (b) The borrower shall procure and maintain insurance of a type or 
types and in such amounts as may be required by the Secretary to protect 
the security against fire and other hazards. The Secretary cannot make a 
loan for the acquisition or construction of property located in an area 
identified by the Federal Emergency Management Agency as having special 
flood hazards

[[Page 698]]

unless the community in which such area is situated is then 
participating in the National Flood Insurance Program. The Secretary 
shall not make, increase, extend, or renew a loan secured by a building 
or manufactured home that is located or to be located in an area 
identified by the Federal Emergency Management Agency as having special 
flood hazards and in which flood insurance has been made available under 
the National Flood Insurance Act, as amended, unless the building or 
manufactured home and any personal property securing the loan is covered 
by flood insurance for the term of the loan. The amount of flood 
insurance must be at least equal to the lesser of the outstanding 
principal balance of the loan or the maximum limit of coverage available 
for the particular type of property under the National Flood Insurance 
Act, as amended. The requirements of 38 CFR 36.4700 through 36.4709 
shall apply to direct loans made pursuant to 38 U.S.C. 3711 and 3761 
through 3764. All hazard and flood insurance shall be carried with a 
company or companies satisfactory to the Secretary and the policies and 
renewals thereof shall be held in the possession of the Secretary and 
contain a mortgagee loss payable clause in favor of and in a form 
satisfactory to the Secretary.


(Authority: 42 U.S.C. 4012a, 4106(a))

[62 FR 5531, Feb. 6, 1997]



Sec. 36.4513  Foreclosure and liquidation.

    In the event of a foreclosure sale or other liquidation of the 
security for a loan, the Department of Veterans Affairs shall credit 
upon the indebtedness the greater of:
    (a) The net proceeds of the sale, or
    (b) The current market value of the property as determined by the 
Department of Veterans Affairs, less the costs and expenses of 
liquidation.

In no event shall the credit pursuant to paragraph (b) of this section 
exceed the amount of the gross indebtedness, nor shall such credit be 
less than the amount legally required to be credited to the indebtedness 
under local law. If a deed in lieu of foreclosure is accepted, the 
consideration will be a full and complete release of liability of the 
obligors, or such lesser amount as may be agreed upon between the 
obligors and the Department of Veterans Affairs.

[23 FR 2340, Apr. 10, 1958]



Sec. 36.4514  Eligibility requirements.

    Prior to making a loan, or a commitment therefor, the Department of 
Veterans Affairs shall determine that:
    (a) The applicant is an eligible veteran.
    (b) The applicant has full capacity under local law to enter into 
binding contracts.
    (c) The applicant is a satisfactory credit risk and has the ability 
to repay the obligation proposed to be incurred and that the proposed 
payments on such obligation bear a proper relationship to present and 
anticipated income and expenses as determined by use of the credit 
standards in Sec. 36.4337 of this part.


(Authority: 38 U.S.C. 501)

    (d) Private capital is not available in the area at an interest rate 
not in excess of the rate authorized for guaranteed home loans for a 
loan for which the veteran is qualified under 38 U.S.C. 3710.
    (e) The applicant is unable to obtain a loan for such purpose from 
the Secretary of Agriculture, under the Bankhead-Jones Farm Tenant Act, 
as amended, or under the Housing Act of 1949.
    (f) In respect to a loan application received on or after September 
15, 1956, there has been compliance by the applicant with the 
certification requirements prescribed in 38 U.S.C. 3704(c).
    (g) The applicant has certified, in such form as the Secretary shall 
prescribe, that
    (1) Neither the applicant nor anyone authorized to act for the 
applicant, will refuse to sell or rent, after the making of a bonafide 
offer, or refuse to negotiate for the sale or rental of, or otherwise 
make unavailable or deny the dwelling or property covered by this loan 
to any person because of race, color, religion, sex, handicap, familial 
status, or national origin;
    (2) The applicant recognizes that any restrictive convenant on the 
property relating to race, color, religion, sex,

[[Page 699]]

handicap, familial status, or national origin is illegal and void and 
any such covenant is specifically disclaimed; and
    (3) The applicant understands that civil action for preventive 
relief may be brought by the Attorney General of the United States in 
any appropriate U.S. District Court against any person responsible for a 
violation of the applicable law.

[15 FR 6290, Sept. 20, 1950, as amended at 20 FR 6260, Aug. 26, 1955; 24 
FR 2658, Apr. 7, 1959; 36 FR 13032, July 13, 1971; 56 FR 9862, Mar. 8, 
1991]



Sec. 36.4515  Estate of veteran in real property.

    (a) The estate in the realty acquired by the veteran, wholly or 
partly with the proceeds of a loan hereunder, or owned by the veteran 
and on which improvements on a farmhouse are to be financed by such 
loan, shall be not less than:
    (1) A fee simple estate therein, legal or equitable; or
    (2) A leasehold estate running or renewable at the option of the 
lessee for a period of not less than 14 years from the maturity of the 
loan, or to any earlier date at which the fee simple title will vest in 
the lessee, which is assignable or transferable, if the same be 
subjected to the lien; however, a leasehold estate which is not freely 
assignable and transferable will be considered an acceptable estate if 
it is determined by the Under Secretary for Benefits, or the Director, 
Loan Guaranty Service, (i) that such type of leasehold is customary in 
the area where the property is located; (ii) that a veteran or veterans 
will be prejudiced if the requirement for free assignability is adhered 
to and (iii) that the assignability and other provisions applicable to 
the leasehold estate are sufficient to protect the interests of the 
veteran and the Government and are otherwise acceptable; or
    (3) A life estate, provided that the remainder and reversionary 
interests are subjected to the lien. The title to such estate shall be 
such as is acceptable to informed buyers, title companies, and 
attorneys, generally, in the community in which the property is 
situated, except as modified by paragraph (b) of this section; or
    (4) A beneficial interest in a revocable Family Living Trust that 
ensures that the veteran, or veteran and spouse, have an equitable life 
estate, provided the lien attaches to any remainder interest and the 
trust arrangement is valid under State law.
    (b) Any such property or estate will not fail to comply with the 
requirements in paragraph (a) of this section by reason of the 
following:
    (1) Encroachments;
    (2) Easements;
    (3) Servitudes;
    (4) Reservations for water, timber, or subsurface rights;
    (5) Right in any grantor or cotenant in the chain of title, or a 
successor of either, to purchase for cash, which right by the terms 
thereof is exercisable only if:
    (i) An owner elects to sell,
    (ii) The option price is not less than the price at which the then 
owner is willing to sell to another, and
    (iii) Exercised within 30 days after notice is mailed by registered 
mail to the address of optionee last known to the then owner, of the 
then owner's election to sell, stating the price and the identity of the 
proposed vendee;
    (6) Building and use restrictions whether or not enforceable by a 
reverter clause if there has been no breach of the conditions affording 
a right to an exercise of the reverter;
    (7) Any other covenant, condition, restriction, or limitation 
approved by the Department of Veterans Affairs in the particular case.

The limitations on the quantum or quality of the estate or property that 
are indicated in this paragraph, insofar as they may materially affect 
the value of the property for the purpose for which it is used, shall be 
taken into account in the appraisal of reasonable value.

[15 FR 6290, Sept. 20, 1950, as amended at 24 FR 2658, Apr. 7, 1959; 28 
FR 11506, Oct. 29, 1963; 33 FR 18027, Dec. 4, 1968; 34 FR 11095, July 1, 
1969; 45 FR 20472, Mar. 28, 1980; 56 FR 9862, Mar. 8, 1991; 61 FR 28059, 
June 4, 1996]



Sec. 36.4516  Lien requirements.

    (a) Loans for the purchase of a dwelling or for the purchase of a 
farm on which there is a farm residence shall be secured by a first lien 
on the property

[[Page 700]]

or estate. Loans for the construction of a farm residence or other 
dwelling shall also be secured by a first lien.
    (b) Loans solely for the purpose of energy conservation improvements 
or other alterations, improvements, or repairs shall be secured in the 
following manner:
    (1) Loans for $1,500 or less need not be secured, and in lieu of the 
title examination a statement may be accepted from the borrower that he 
or she has an interest in the property not less than that prescribed in 
Sec. 36.4515(a).
    (2) Loans for more than $1,500 but 40 percent or less of the prior 
to the improved reasonable value of the property shall be secured by a 
lien reasonable and customary in the community for the type of 
alteration, improvement, or repair financed.
    (3) Loans for more than $1,500 and for more than 40 percent of the 
prior to the improved reasonable value of such property shall be secured 
by a first lien on the property or estate. However, such a home 
improvement loan may be secured by a lien immediately subordinate to the 
lien securing the previous loan extended by the Secretary, if the 
Department of Veterans Affairs is the holder of all liens of superior 
priority on the property.


(Authority: 38 U.S.C. 3711(d)(1))

    (c) Tax liens, special assessment liens, and ground rent shall be 
disregarded with respect to any requirement that loans shall be secured 
by a lien of specified dignity. With the prior approval of the 
Secretary, Under Secretary for Benefits, or Director, Loan Guaranty 
Service, liens retained by nongovernmental entities to secure 
assessments or charges for municipal type services and facilities 
clearly within the public purpose doctrine may be disregarded. In 
determining whether a loan for the purchase or construction of a home is 
secured by a first lien the Secretary may also disregard a superior lien 
created by a duly recorded covenant running with the realty in favor of 
a private entity to secure an obligation to such entity for the 
homeowner's share of the costs of the management, operation, or 
maintenance of property, services or programs within and for the benefit 
of the development or community in which the veteran's realty is 
located, if the Secretary determines that the interests of the veteran-
borrower and of the Government will not be prejudiced by the operation 
of such covenant. In respect to any such superior lien to be created 
after June 6, 1969, the Secretary's determination must have been made 
prior to the recordation of the covenant.

[20 FR 6261, Aug. 26, 1955, as amended at 20 FR 9180, Dec. 10, 1955; 23 
FR 2340, Apr. 10, 1958; 34 FR 9561, June 18, 1969; 45 FR 20472, Mar. 28, 
1980; 61 FR 28059, June 4, 1996]



Sec. 36.4517  Incorporation by reference.

    The regulations concerning direct loans to veterans in effect on the 
date a loan is closed shall govern the rights, duties, and liabilities 
of the parties to such loan during the period the Department of Veterans 
Affairs is the holder thereof, and any provisions of the loan 
instruments inconsistent with such regulations are hereby amended and 
supplemented to conform thereto.

[15 FR 6290, Sept. 20, 1950]



Sec. 36.4518  Supplementary administrative action.

    Notwithstanding any requirement condition, or limitation stated in 
or imposed by the regulations in this part concerning direct loans to 
veterans, the Under Secretary for Benefits, or the Director, Loan 
Guaranty Service, within the limitations and conditions prescribed by 
the Secretary, may take such action as may be necessary or appropriate 
to relieve any undue prejudice to a debtor, or other person, which might 
otherwise result, provided such action shall not impair the vested 
rights of any person affected thereby. If such requirement, condition, 
or limitation is of an administrative or procedural nature, such action 
may be taken by any employee authorized to act under Sec. 36.4520.

[23 FR 2340, Apr. 10, 1958, as amended at 61 FR 28059, June 4, 1996]



Sec. 36.4519  Eligible purposes and reasonable value requirements.

    (a) A loan may be made only for the purpose hereinafter set forth in 
this

[[Page 701]]

paragraph, and the loan may not exceed the reasonable value of the 
property as established by the Department of Veterans Affairs:
    (1) To purchase or construct a dwelling to be owned and occupied by 
the veteran as a home;
    (2) To purchase a farm on which there is a farm residence to be 
occupied by the veteran as a home;
    (3) To construct on land owned by the veteran a farm residence to be 
occupied by the veteran as a home;
    (4) To repair, alter, or improve a farm residence or other dwelling 
owned and occupied or to be reoccupied after the completion of major 
alterations, repairs, or improvements to the property, by the veteran as 
his or her home;
    (5) To make energy conservation improvements to a dwelling owned and 
occupied or to be occupied after the completion of major alterations, 
repairs, or improvements to the property, by the veteran as his or her 
home;
    (6) To refinance (38 U.S.C. 3710(a)(5)) existing mortgage loans or 
other lines which are secured of record on a dwelling or farm residence 
owned and occupied or to be reoccupied after the completion of major 
alterations, repairs or improvements to the property, by the veteran as 
the veteran's home;

Provided, The veteran certifies, in such form as the Secretary may 
prescribe, that he or she has paid in cash from his or her own resources 
on account of such purchase, construction, alteration, repair, or 
improvement a sum equal to the difference, if any, between the purchase 
price or cost of the property and its reasonable value.
    (b) In the case of a loan for the construction of a farm residence 
or other dwelling on land owned by the veteran, a portion of the loan 
proceeds may be expended to liquidate an indebtedness secured by a lien 
against such land, but only if the reasonable value of the land is equal 
to or in excess of the amount of the indebtedness secured by such lien 
and if the liquidation of such indebtedness will permit the loan to be 
secured by a first lien. Except as provided in Sec. 36.4507, no portion 
of the proceeds of a loan for repairs, alterations or improvements to a 
farm residence or other dwelling may be expended to liquidate a prior 
lien against the property.
    (c) No direct loan may be made for the purpose of an interest rate 
reduction refinancing loan pursuant to 38 U.S.C. 3710(a)(8).


(Authority: 38 U.S.C. 3711(b))

[20 FR 6261, Aug. 26, 1955, as amended at 43 FR 60461, Dec. 28, 1978; 46 
FR 43675, Aug. 31, 1981; 49 FR 42571, Oct. 23, 1984]



Sec. 36.4520  Delegation of authority.

    (a) Except as hereinafter provided, each employee of the Department 
of Veterans Affairs heretofore or hereafter appointed to, or otherwise 
lawfully filling, any position designated in paragraph (b) of this 
section is hereby delegated authority, within the limitations and 
conditions prescribed by law, to exercise the powers and functions of 
the Secretary with respect to the making of loans and the rights and 
liabilities arising therefrom, including but not limited to the 
collection or compromise of amounts due, in money or other property, the 
extension, rearrangement, or sale of loans, the management and 
disposition of secured or unsecured notes and other property. In 
connection with direct loans made and held by the Department of Veterans 
Affairs, such designated employees may take any action which they are 
authorized to consent to or approve in respect to guaranteed or insured 
loans under the regulations prescribed therefor by the Secretary. 
Incidental to the exercise and performance of the powers and functions 
hereby delegated, each such employee is authorized to execute and 
deliver (with or without acknowledgment) for, and on behalf of, the 
Secretary evidence of guaranty and such certificates, forms, 
conveyances, and other instruments as may be appropriate in connection 
with the acquisition, ownership, management, sale, transfer, assignment, 
encumbrance, rental, or other disposition of real or personal property 
or of any right, title, or interest therein, including, but not limited 
to, contracts of sale, installment contracts, deeds, leases, bills of 
sale, assignments, and releases; and to approve disbursements to be made 
for any purpose authorized by 38 U.S.C. chapter 37.

[[Page 702]]

    (b) Designated positions:

Under Secretary for Benefits
Director, Loan Guaranty Service
Director, Medical and Regional Office Center
Director, VA Regional Office and Insurance Center
Director, Regional Office
Loan Guaranty Officer
Assistant Loan Guaranty Officer


The authority hereby delegated to employees of the positions designated 
in this paragraph may, with the approval of the Under Secretary for 
Benefits, be redelegated.
    (c) Nothing in this section shall be construed to authorize any such 
employee to exercise the authority vested in the Secretary under 38 
U.S.C. 501 or 3703(a)(2) or to sue or enter appearance for and on behalf 
of the Secretary or confess judgment against the Secretary in any court 
without the Secretary's prior authorization.
    (d) Each Regional Office, regional office and insurance center, and 
Medical and Regional Office Center shall maintain and keep current a 
cumulative list of all employees of that Office or Center who, since May 
1, 1980, have occupied the positions of Director, Loan Guaranty Officer, 
and Assistant Loan Guaranty Officer. This list will include each 
employee's name, title, date the employee assumed the position, and the 
termination date, if applicable, of the employee's tenure in such 
position. The list shall be available for public inspection and copying 
at the Regional Office, or Center, during normal business hours.

(Authority: 38 U.S.C. 501, 3720(a)(5))

[23 FR 2340, Apr. 10, 1958, as amended at 43 FR 60461, Dec. 28, 1978; 45 
FR 21243, Mar. 1, 1980; 46 FR 43675, Aug. 31, 1981; 54 FR 34988, Aug. 
23, 1989; 61 FR 28059, June 4, 1996]



Sec. 36.4521  Minimum property and construction requirements.

    No loan for the purchase or construction of residential property 
shall be made unless such property complies or conforms with those 
standards of planning, construction, and general acceptability 
applicable thereto which have been prescribed by the Secretary.

[23 FR 2340, Apr. 10, 1958]



Sec. 36.4522  Waivers, consents, and approvals.

    No waiver, consent, or approval required or authorized by the 
regulations concerning direct loans to veterans shall be valid unless in 
writing signed by Department of Veterans Affairs.

[15 FR 6291, Sept. 20, 1950]



Sec. 36.4523  Geographical limits.

    Any real property purchased, constructed, or improved with the 
proceeds of a loan under 38 U.S.C. 3711 shall be situated in the United 
States, which for purposes of 38 U.S.C. Chapter 37 is here defined as 
the several States, Territories, and possessions, and the District of 
Columbia, the Commonwealth of Puerto Rico, and the Commonwealth of the 
Northern Mariana Islands: Provided. That no loan shall be made pursuant 
to 38 U.S.C. 3711 unless the real property is located in one of the 
areas designated from time to time by the Department of Veterans Affairs 
as an area in which private capital is not available under 38 U.S.C. 
chapter 37 to eligible veterans for financing of the purchase, 
construction, repairs, alterations, or improvement of a farm residence 
or other dwelling, as the case may be.

[46 FR 43675, Aug. 31, 1981]



Sec. 36.4524  Sale of loans.

    In the event a direct loan is purchased from the Department of 
Veterans Affairs at any time pursuant to the provisions of 38 U.S.C. 
3711(g), the Department of Veterans Affairs may issue a guaranty in 
connection therewith within the maximums applicable to loans guaranteed 
under 38 U.S.C. 3710 and such loans shall thereafter be subject to the 
applicable provisions of the regulations governing the guaranty or 
insurance of loans to veterans, and such part of the regulations 
concerning direct loans to veterans as may be inconsistent therewith or 
variant therefrom shall no longer govern the subsequent disposition of 
the rights and liabilities of any interested parties.

[24 FR 2659, Apr. 7, 1959]

[[Page 703]]



Sec. 36.4525  Requirement of a construction warranty.

    Any commitment to make a direct loan and any approval of a direct 
loan application issued or made on or after May 2, 1955, shall, if the 
purpose of the loan is to finance the construction of a dwelling or 
farmhouse or to finance the purchase of a newly constructed dwelling, be 
subject to the express condition that the builder, seller, or the real 
party in interest in the transaction shall deliver to the veteran 
constructing or purchasing such dwelling with the aid of a direct loan a 
warranty, in the form prescribed by the Secretary, that the property has 
been completed in substantial conformity with the plans and 
specifications upon which the Secretary based the valuation of the 
property, including any modifications thereof, or changes or variations 
therein, approved in writing by the Secretary, and no direct loan shall 
be disbursed in full unless a copy of such warranty duly receipted by 
the purchaser is submitted to the Department of Veterans Affairs.

[20 FR 2463, Apr. 14, 1955, as amended at 46 FR 43676, Aug. 31, 1981]



Sec. 36.4526  Issuance of fund reservation commitments.

    (a) Any builder or sponsor proposing to construct one or more 
dwellings in an area designated as eligible for direct loans may apply 
for a commitment for the reservation of direct loan funds to be used for 
the making of loans to eligible veterans for the purchase or 
construction of such dwellings. Such commitment may be issued on such 
conditions as the Department of Veterans Affairs determines to be proper 
in the particular case and will be valid for a period of 3 months;

Provided, That the Department of Veterans Affairs may, for good and 
sufficient reasons, extend the period of the commitment. No commitment 
shall be issued unless the builder or sponsor shall have paid an amount 
equivalent to 2 percent of the funds being reserved, which amount shall 
be nonrefundable. The commitment shall be nontransferable except with 
the written approval of the Department of Veterans Affairs.
    (b) Notwithstanding that direct loan funds may be available for 
reservation when issuance of a reservation commitment is requested by a 
builder or sponsor, the Department of Veterans Affairs may withhold 
issuance of such commitment in any case in which it determines that the 
experience or technical qualifications of the builder in respect to home 
construction are not acceptable, or that other factors bearing on the 
likelihood of the success of the proposed project are such as to justify 
withholding issuance of a fund reservation commitment.

[23 FR 2340, Apr. 10, 1958]



Sec. 36.4527  Direct housing loans to Native American veterans on trust 
lands.

    (a) The Secretary may make a direct housing loan to a Native 
American veteran if:
    (1) The Secretary has entered into a memorandum of understanding 
with respect to such loans with the tribal organization that has 
jurisdiction over the veteran; or
    (2) The tribal organization that has jurisdiction over the veteran 
has entered into a memorandum of understanding with any department or 
agency of the United States with respect to such loans and the 
memorandum complies with the requirements of paragraph (b) of this 
section.


(Authority: 38 U.S.C. 3762(a))

    (3) The memorandum is in effect when the loan is made and will 
remain in effect until the maturity of the subject loan.
    (b)(1) Subject to paragraph (b)(2) of this section, each memorandum 
of understanding entered into by the Secretary with a tribal 
organization shall provide for the following:
    (i) That each Native American veteran who is under the jurisdiction 
of the tribal organization and to whom the Secretary makes a direct loan 
under this section
    (A) Holds, possesses, or acquires using the proceeds of the loan a 
meaningful interest in a lot and/or dwelling that is located on trust 
land; and
    (B) Will purchase, construct, or improve a dwelling on the lot using 
the proceeds of the loan.

[[Page 704]]

    (ii) That each Native American veteran obtaining a direct loan under 
this section will convey to the Secretary by an appropriate instrument 
the interest referred to in paragraph (A) as security for the direct 
loan or, if the laws of the tribal organization do not allow the veteran 
to convey the meaningful interest to the Secretary, the memorandum of 
understanding may authorize the tribe to serve as Trustee for the 
Secretary for purposes of protecting the interest of the Secretary as 
lender.
    (iii) That the tribal organization and each Native American veteran 
obtaining a direct loan under this section will permit the Secretary or 
his or her designee to enter upon the trust land of that organization or 
veteran for the purposes of carrying out such actions as the Secretary 
or his or her designee determines may be necessary:
    (A) To evaluate the advisability of the loan; and
    (B) To monitor any purchase, construction, or improvements carried 
out using the proceeds of the loan.
    (C) To protect the improvements from vandalism and the elements,
    (D) To make property inspections in conjunction with loan servicing, 
financial counseling, foreclosure, acquisition, management, repair, and 
resale of the secured interest.
    (iv) That the tribal organization has established standards and 
procedures that authorize the grantee to legally establish the interest 
conveyed by a Native American veteran pursuant to subsection (B) and 
terminate all interest of the veteran in the land and improvements, 
including:
    (A) Procedures for foreclosing the loan in the event of a default;
    (B) Procedures for acquiring possession of the veteran's interest in 
the property; and
    (C) Procedures for the resale of the property interest and/or the 
dwelling purchased, constructed, or improved using the proceeds of the 
loan.
    (v) That the tribal organization agrees to such other terms and 
conditions with respect to the making of direct loans to Native American 
veterans under the jurisdiction of the tribal organization as the 
Secretary and the tribal organization may negotiate in order to ensure 
that direct loans made under this section are made in a responsible and 
prudent manner.
    (2) The Secretary, or his or her designee, may only enter into a 
memorandum of understanding with a tribal organization under this 
section if the Secretary, or designee, determines that the memorandum 
provides for standards and procedures necessary to reasonably protect 
the financial interests of the United States.
    (c)(1) Except as otherwise provided in this paragraph, and 
notwithstanding the provisions of section 36.4503 of this title, the 
principal amount of any loan made under this section may not exceed 
$80,000. The original principal amount of any loan made under this 
section shall not exceed an amount which bears the same ratio to $80,000 
as the amount of the guaranty to which the veteran would be entitled 
under 38 U.S.C. 3710 at the time the loan is made bears to $36,000.
    (2) The Secretary may make loans which exceed the amount specified 
in paragraph (c)(1) of this section in geographic areas in which the 
Secretary has determined that housing costs are significantly higher 
than average housing costs nationwide. The Secretary shall determine the 
maximum loan amounts in such areas. The original principal amount of any 
such loan shall not exceed an amount which bears the same ratio to the 
maximum loan amount established by the Secretary as the amount of the 
guaranty to which the veteran would be entitled under 38 U.S.C. 3710 at 
the time the loan is made bears to $36,000.
    (3) Loans made under this section shall bear interest at a rate 
determined by the Secretary after considering yields on comparable 
mortgages in the secondary market, including bid and ask prices on 
mortgage-backed securities guaranteed by the Government National 
Mortgage Association (GNMA).
    (4) The minimum requirements for planning, construction, 
improvement, and general acceptability relating to any direct loan made 
under this section shall be consistent with the administrative property 
standards established for loans made or guaranteed under title 38, 
U.S.C., chapter 37.
    (d) Notwithstanding the provisions of Sec. 36.4504(b), for loans 
made under this

[[Page 705]]

section, the Native American veteran-borrower shall pay the following 
loan closing costs to the parties indicated:
    (1) A loan fee of 1.25 percent of the total loan amount (2 percent 
for Reservists who qualify under the provisions of 38 U.S.C. 3701(b)(5)) 
to the Department of Veterans Affairs. All or part of such fee may be 
paid in cash at loan closing or all or part of the fee may be included 
in the loan without regard to the reasonable value of the property or 
the maximum loan amount. In computing the fee, the Department of 
Veterans Affairs will disregard any amount included in the loan to 
enable the borrower to pay such fee.
    (2) The fee described in paragraph (d)(1) of this section shall not 
be collected from a veteran who is receiving compensation (or who but 
for the receipt of retirement pay would be entitled to receive 
compensation) or from a surviving spouse described in Sec. 3701(b)(2) 
of title 38 U.S.C.
    (3) If the Secretary designates a third party to process the loan 
package on VA's behalf, a processing fee to that third party not to 
exceed $300 plus the actual cost of any credit report required.
    (4) Costs or expenses normally paid by a purchaser or mortgagee 
incident to loan closing including but not limited to the following:
    (i) Fees of the Department of Veterans Affairs designated appraisers 
and compliance inspectors;
    (ii) Recording fees or other charges incident to recordation;
    (iii) That portion of assessments and other similar items for the 
current year chargeable to the borrower; and
    (iv) Hazard insurance premiums, if such insurance is available.
    (5) Charges or costs payable by the Native American veteran-
borrower, except for the loan fee described in paragraph (d)(1) of this 
section, shall be paid in cash and may not be paid out of the proceeds 
of the loan. No service or brokerage fee shall be charged against the 
Native American veteran-borrower by any third party for procuring a 
direct loan.
    (e)(1) The credit underwriting standards of 38 CFR 36.4337 shall 
apply to loans made under this section except to the extent the 
Secretary determines that they should be modified on account of the 
purpose of the program to make available housing to Native American 
veterans living on trust lands.
    (2) The Secretary shall determine the reasonable value of the 
leasehold or other property interest that will serve as security for a 
loan made under this section in accordance with Sec. 37.4519, of this 
chapter, unless the Secretary determines that such requirements are 
impractical to implement in a geographic area, on particular trust 
lands, or under circumstances specified by the Secretary.
    (f) In connection with the origination of any loan under this 
section, the Secretary may make advances in cash to provide for repairs, 
alterations, and improvements and to meet incidental expenses of the 
loan transaction.
    (g) Loans made under this section shall be amortized under a 
generally recognized plan which provides for equal monthly installments 
consisting of principal and interest, except for the final installment, 
which may not be in excess of two times the regular monthly installment. 
The limitation on the amount of the final installment shall not apply in 
the case of any loan extended, ballooned and/or reamortized.
    (h) The Secretary may:
    (1) Take any action that the Secretary determines to be necessary 
for the custody, management, and protection of properties and the 
realization or sale of investments under the VA Native American Direct 
Loan Program;
    (2) Determine any necessary expenses and expenditures and the manner 
in which such expenses and expenditures shall be incurred, allowed, and 
paid;
    (3) Employ, utilize, and compensate persons, organizations, or 
departments or agencies (including departments and agencies of the 
United States) designated by the Secretary to carry out necessary 
functions, including but not limited to loan processing and servicing 
activities, appraisals, and property inspections.
    (i) Notwithstanding any requirement, condition, or limitation stated 
in or imposed by any provision of this regulation, the Under Secretary 
for Benefits, or the Director, Loan Guaranty Service, within the 
limitations and

[[Page 706]]

conditions prescribed by the Secretary, may execute memoranda of 
understanding, make determinations concerning the maximum direct loan 
amount as provided in paragraph (c) of this section, and take such 
supplementary administrative action as may be necessary or appropriate 
to relieve any undue prejudice to a debtor, or other person, which might 
otherwise result, provided such action shall not impair the vested 
rights of any person affected thereby. If such a requirement, condition, 
or limitation is of an administrative or procedural nature, such action 
may be taken by any employee authorized to act under paragraph (j) of 
this section.
    (j)(1) Except as hereinafter provided, each employee of the 
Department of Veterans Affairs appointed to, or otherwise lawfully 
filling, any position designated in paragraph (j)(2) of this section is 
hereby delegated authority, within the limitations and conditions 
prescribed by law, to exercise the powers and functions of the Secretary 
with respect to the making of loans and the rights and liabilities 
arising therefrom, including, but not limited to the collection or 
compromise of amounts due, in money or other property, the extension, 
rearrangement, or sale of loans, and the management and disposition of 
secured or unsecured notes and other property. In connection with direct 
loans made and held by the Department of Veterans Affairs, such 
designated employees may take any action which they are authorized to 
consent to or approve in respect to guaranteed loans under Sec. 
36.4342. Incidental to the exercise and performance of the powers and 
functions hereby delegated, each such employee is authorized to execute 
and deliver (with or without acknowledgment) for, and on behalf of, the 
Secretary such certificates, forms, conveyances, and other instruments 
as may be appropriate in connection with the acquisition, ownership, 
management, sale, transfer, assignment, encumbrance, rental, or other 
disposition of real or personal property or of any right, title, or 
interest therein, including, but not limited to, contracts of sale, 
installment contracts, deeds, leases, bills of sale, assignments, and 
releases; and to approve disbursements to be made for any purpose 
authorized by 38 U.S.C. chapter 37.
    (2) Designated positions:

Under Secretary for Benefits
Deputy Under Secretary for Benefits
Director, Loan Guaranty Service
Director, Medical and Regional Office Center
Director, VA Regional Office and Insurance Center
Director, Regional Office
Loan Guaranty Officer
Assistant Loan Guaranty Officer


The authority hereby delegated to employees of the positions designated 
in this paragraph may, with the approval of the Under Secretary for 
Benefits, be redelegated.
    (3) Nothing in this section shall be construed to authorize any such 
employee to exercise the authority vested in the Secretary under 38 
U.S.C. 501(a) or 3703(a)(2) or to sue or enter appearance for and on 
behalf of the Secretary or confess judgment against the Secretary in any 
court without the Secretary's prior authorization.
    (4) Each Regional Office, Regional Office and Insurance Center, and 
Medical and Regional Office Center shall maintain and keep current a 
cumulative list of all employees of that Office or Center who, since May 
1, 1980, have occupied the positions of Director, Loan Guaranty Officer, 
and Assistant Loan Guaranty Officer. This list will include each 
employee's name, title, date the employee assumed the position, and the 
termination date, if applicable, of the employee's tenure in such 
position. The list shall be available for public inspection and copying 
at the Regional Office, or Center, during normal business hours.

(Authority: 38 U.S.C. 3761-3764)

[58 FR 59660, Nov. 10, 1993, as amended at 68 FR 6627, Feb. 10, 2003]

                   Sale of Loans, Guarantee of Payment



Sec. 36.4600  Sale of loans, guarantee of payment.

    (a) Whenever loans are sold by the Department of Veterans Affairs, 
they will be clearly identified as loans sold with or without recourse.
    (b) The payment of all loans sold with recourse shall be guaranteed 
in

[[Page 707]]

accordance with the provisions of this section.
    (c) Wherever the term ``holder'' appears in this section it shall 
mean the purchaser of a loan sold by the Secretary and any subsequent 
transferee or assignee of such loan. The holder of each loan sold 
subject to guaranty shall be deemed to have agreed with the Secretary as 
follows:


(Authority: 38 U.S.C. 501, 3720):

    (1) To furnish the Secretary with notice of default within 60 days 
after a loan has become two full installments in default.


(Authority: 38 U.S.C. 501, 3720)

    (2) To maintain on the real estate a lien of the dignity assigned or 
transferred to the purchaser by the Secretary.
    (3) To maintain insurance in an amount sufficient to protect the 
security against risks or hazards to which it may be subjected to the 
extent customary in the locality, and to apply the proceeds of loss 
payments to the loan balance or the restoration of the security, as the 
holder may in the holder's discretion deem proper. Flood insurance will 
be required on any building or personal property securing a loan at any 
time during the term of the loan that such security is located in an 
area identified by the Federal Emergency Management Agency as having 
special flood hazards and in which flood insurance has been made 
available under the National Flood Insurance Act, as amended. The amount 
of flood insurance must be at least equal to the lesser of the 
outstanding principal balance of the loan or the maximum limit of 
coverage available for the particular type of property under the 
National Flood Insurance Act, as amended. The notice requirements of 38 
CFR 36.4709 shall apply to loans sold pursuant to this section.


(Authority: 42 U.S.C. 4012a, 4104a)

    (4) To obtain a consideration equal to the fair market value of any 
real estate released from the first lien securing the loan, except where 
the loan will be paid in full, and to apply the entire consideration in 
reduction of the principal balance of the loan.
    (5) To maintain the tax and insurance account as provided for in the 
loan instruments and to pay accrued taxes, special assessments, ground 
or water rents and premiums on fire or other insurance properly 
chargeable to the tax and insurance account.
    (6) To submit to the Secretary notice of any suit or action or other 
legal or equitable proceeding to which the holder is a party (including 
a copy of every procedural paper filed on behalf of the holder or served 
on the holder), brought on or in connection with a loan sold under this 
section or involving title to, or other lien on, the property securing 
the loan, within the time that would be required if the Secretary were a 
party to the proceeding.
    (7) To submit to the Secretary for prior approval any proposal to 
recast or extend the repayment terms of the loan.
    (8) To take no action to accelerate the indebtedness or terminate 
the debtor's interest in the property without the prior approval of the 
Secretary.
    (9) To make advances only for the maintenance and repairs reasonably 
necessary for the preservation of the security, or for the payment of 
accrued taxes, special assessments, ground or water rents, premiums on 
fire or other insurance against loss or damage to the property, or for 
other purposes approved in advance by the Secretary.
    (10) To furnish the Secretary prompt notice of the cancellation of 
any repurchase endorsement or notice on the note or bond upon the 
payment in full of any loan sold pursuant to this section or of the 
release of the Secretary from liability to repurchase the loan.
    (11) To maintain adequate accounting records and to provide the 
Secretary with such data relating to the loan as the Secretary may 
request incident to the Secretary's determination of the amount payable 
in connection with a request for the repurchase of the loan.
    (12) To service the loans properly in accordance with established 
practices.
    (13) To permit the Secretary to inspect, examine or audit at 
reasonable times and places the records of loans which are subject to 
repurchase under this section.

[[Page 708]]

    (14) To sell any loan to the Secretary for the amount specified in 
paragraph (e)(1) of this section upon request of the Secretary if the 
loan is six (6) full installments or more in default.
    (15) To dispose of partial payments in accordance with the 
provisions of this paragraph. A partial payment is a remittance on a 
loan in default of any amount less than the full amount due under the 
terms of the loan and security instruments at the time the remittance is 
tendered; a default is a failure of a borrower to comply with the terms 
of a loan agreement.
    (i) Except as provided in paragraph (c)(15)(ii) of this section, or 
upon the express waiver of the Secretary, the mortgage holder shall 
accept any partial payment and either apply it to the mortgagor's 
account or identify it with the mortgagor's account and hold it in a 
special account pending disposition. When partial payments held for 
disposition aggregate a full monthly installment, including escrow, they 
shall be applied to the mortgagor's account.
    (ii) A partial payment may be returned to the mortgagor, within 10 
calendar days from date of receipt of such payment, with a letter of 
explanation only if one or more of the following conditions exist:
    (a) The property is wholly or partially tenant-occupied and rental 
payments are not being remitted to the holder for application to the 
loan account;
    (b) The payment is less than one full monthly installment, including 
escrows and late charge, if applicable, unless the lesser payment amount 
has been agreed to under a written repayment plan;
    (c) The payment is less than 50 percent of the total amount then 
due, unless the lesser payment amount has been agreed to under a written 
repayment plan;
    (d) The payment is less than the amount agreed to in a written 
repayment plan;
    (e) The amount tendered is in the form of personal check and the 
holder has previously notified the mortgagor in writing that only cash 
or certified remittances are acceptable;
    (f) A delinquency of any amount has continued for at least 6 months 
since the account first became delinquent and no written repayment plan 
has been arranged.
    (g) The loan has been submitted to the Department of Veterans 
Affairs for repurchase;
    (h) The lien position of the security instrument would be 
jeopardized by acceptance of the partial payment.
    (iii) A failure by the holder to comply with the provisions of this 
paragraph may result in a deduction from the repurchase price pursuant 
to paragraph (e)(1) of this section.


(Authority: 38 U.S.C. 3720)

    Note: In any instance in which the holder desires Department of 
Veterans Affairs prior approval to a proposed action the holder may 
submit the facts to the Loan Guaranty Officer as provided in paragraph 
(i) of this section.
    (16) To obtain and forward a current credit report(s) on the 
debtor(s) to the Secretary when requesting that the Secretary repurchase 
the loan.


(Authority: 38 U.S.C. 3703(c)(1) and 3720)

    (d) The Secretary's guaranty liability under this section shall 
consist of and be limited solely to liability to repurchase the loan 
from the holder thereof whenever,
    (1) The debtor is in default by reason of nonpayment of not less 
than two full installments and default has continued for three months or 
more on the date the holder submits its written request for repurchase 
by the Secretary; or
    (2) The property securing the loan has been abandoned by the debtor; 
or
    (3) The debtor has failed to comply with any other covenant or 
obligation of the loan contract and on the date of the holder's request 
for repurchase such failure has continued for more than 90 days after 
the holder's demand for compliance with the covenant or obligation, 
except that if the failure is due to nonpayment of real estate taxes the 
failure to pay when due has persisted for a continuing period of 180 
days; or
    (4) The Secretary determines, upon request of the holder to 
repurchase any loan, that such repurchase is in the

[[Page 709]]

best interests of the Government notwithstanding that the account is 
ineligible for repurchase under paragraphs (d) (1) through (3) of this 
section.
    (e)(1) A cash payment shall be made to the holder upon the 
repurchase of a loan by the Secretary and shall be an amount equal to 
the price paid by the purchaser when the loan was sold by the Secretary, 
less repayments received by the holder which are properly applicable to 
the principal balance of the loan, plus any advances made for the 
purposes described in paragraph (c)(9) of this section, but no payments 
shall be made for accrued unpaid interest, except that with respect to 
loans sold by the Secretary after July 15, 1970, payment will be made 
for unpaid accured interest from the date of the first uncured default 
to the date of the claim for repurchase, but not in excess of interest 
for 120 days. If, however, there has been a failure of any holder to 
comply with the provisions of paragraph (c) of this section the 
Secretary shall be entitled to deduct from the repurchase price 
otherwise payable such amount as the Secretary determines to be 
necessary to restore the Secretary to the position the Secretary would 
have occupied upon repurchase of the loan in the absence of any such 
failure. Incident to the repurchase by the Secretary, the holder will 
pay to the Secretary an amount equal to the balance, if any, remaining 
in the tax and insurance account.
    (2) The holder shall be deemed to have received as trustee for the 
benefit of the Secretary any amounts received on account of the loan 
indebtedness subsequent to submitting its request to repurchase and 
shall pay such amounts to the Department of Veterans Affairs upon the 
assignment and delivery of the note, bond and security instruments to 
the Department of Veterans Affairs.
    (3) The holder may be reimbursed for the cost of a current credit 
report(s) on the debtor(s) which is (are) forwarded to the Secretary 
along with the request for repurchase and for any other costs or 
expenses incurred which are approved in advance by the Secretary as 
being necessary to protect the Government's interest.
    (f) Notwithstanding any other provision of this section, the 
Secretary shall be released from liability and shall not be obligated to 
repurchase any loan in respect to which:
    (1) An obligor has been released from personal liability by any act 
or omission of the holder without the prior approval of the Secretary, 
except that a holder shall not be under any duty to establish the debt 
as a valid claim against the assets of the estate of any deceased or 
bankrupt obligor when such failure will not impair the validity or 
effectiveness of the lien securing the loan; or
    (2) The holder has instituted foreclosure action against the 
property securing the loan without the prior approval of the Secretary, 
and such action has proceeded to the point where the judicial sale or 
sale under the power in the deed of trust has been held or the owner's 
interest in the property has been terminated by the holder by strict 
foreclosure, acceptance of a voluntary deed, or by other liquidation 
action; or
    (3) Any material alteration has been made to the note, bond, 
security instrument, or installment sale contract after sale and 
delivery of the instruments by the Secretary to the purchaser.
    (g)(1) Each employee of the Department of Veterans Affairs 
heretofore or hereafter appointed to or lawfully filling, any position 
designated in paragraph (g)(2) of this section is hereby delegated 
authority within the limitations and conditions prescribed by law to 
exercise the powers and functions of the Secretary with respect to the 
sale, assignment, transfer, and repurchase of loans, including, but not 
limited to the offering of such loans for sale, the acceptance of 
purchase offers, the assignment or transfer of notes or bonds and 
security instruments evidencing the loans sold, granting the prior 
approval of the Secretary under this section, determining the 
eligibility of the loans for repurchase and to calculate and pay the sum 
due the holder upon repurchase of the loan by the Department of Veterans 
Affairs.
    (2) Designated positions:

Under Secretary for Benefits.
Director, Loan Guaranty Service.

[[Page 710]]

Director, Regional Office.
Director, Medical and Regional Office Center.
Director, VA Center.
Loan Guaranty Officer.
Assistant Loan Guaranty Officer.

    (h) No waiver, consent, or approval required or authorized by this 
section shall be valid unless in writing signed by an employee of the 
Department of Veterans Affairs authorized in this section to act for the 
Secretary.
    (i) Whenever prior approval or consent of the Secretary is desired 
in respect to an action to be taken by a holder of a loan, the holder 
may address such request to the Loan Guaranty Officer in the Regional 
Office or Center having jurisdiction over the area in which the real 
estate security is located.
    (j) Notwithstanding any requirement, condition, or limitation stated 
in or imposed by this section concerning the sale and repurchase of 
loans, the Under Secretary for Benefits, or the Director, Loan Guaranty 
Service, within the limitations and conditions prescribed by the 
Secretary may take such action as may be necessary or appropriate to 
relieve undue prejudice to a holder, debtor or other person, which might 
otherwise result, as long as such action shall not impair the vested 
rights of any person affected thereby. If such requirement, condition, 
or limitation is of an administrative or procedural nature, such action 
may be taken by an employee authorized to act under paragraph (g) of 
this section.
    (k) This section will apply to all loans sold by the Department of 
Veterans Affairs after the effective date of this section which were 
originated or acquired by the Secretary of Veterans Affairs under 
chapter 37, title 38, U.S.C., or title III of the Servicemen's 
Readjustment Act of 1944, as amended, except that it shall not apply to 
direct loans sold pursuant to section 3711(g) of chapter 37, title 38, 
U.S.C.


(Authority: 38 U.S.C. 3703(c)(1) and 3720)

(Information collection requirements contained in paragraphs (c) and (e) 
were approved by the Office of Management and Budget under control 
number 2900-0840.)

[27 FR 2686, Mar. 22, 1962, as amended at 39 FR 7785, Feb. 28, 1974; 44 
FR 25839, May 3, 1979; 45 FR 31065, May 12, 1980; 51 FR 4596, Feb. 6, 
1986; 52 FR 6548, Mar. 4, 1987; 53 FR 34296, Sept. 6, 1988; 61 FR 28059, 
June 4, 1996; 62 FR 5532, Feb. 6, 1997]



Sec. 36.4700  Authority, purpose, and scope.

    (a) Authority. Sections 36.4700 through 36.4709 of this part are 
issued pursuant to 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.
    (b) Purpose. The purpose of sections 36.4700 through 36.4709 of this 
part is to implement the requirements of the National Flood Insurance 
Act of 1968 and the Flood Disaster Protection Act of 1973, as amended 
(42 U.S.C. 4001-4129).
    (c) Scope. Sections 36.4700 through 36.4709 of this part, except for 
Sec. Sec. 36.4705 and 36.4707, apply to loans secured by buildings or 
mobile homes located or to be located in areas determined by the 
Director of the Federal Emergency Management Agency to have special 
flood hazards. Sections 36.4705 and 36.4707 apply to loans secured by 
buildings or mobile homes, regardless of location.

(Authority: 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128)

[62 FR 5532, Feb. 6, 1997]



Sec. 36.4701  Definitions.

    (a) Act means the National Flood Insurance Act of 1968, as amended 
(42 U.S.C. 4001-4129).
    (b) Secretary means the Secretary of Veterans Affairs.
    (c) Building means a walled and roofed structure, other than a gas 
or liquid storage tank, that is principally above ground and affixed to 
a permanent site, and a walled and roofed structure while in the course 
of construction, alteration, or repair.
    (d) Community means a State or a political subdivision of a State 
that has zoning and building code jurisdiction

[[Page 711]]

over a particular area having special flood hazards.
    (e) Designated loan means a loan secured by a building or mobile 
home that is located or to be located in a special flood hazard area in 
which flood insurance is available under the Act.
    (f) Director of FEMA means the Director of the Federal Emergency 
Management Agency.
    (g) Mobile home means a structure, transportable in one or more 
sections, that is built on a permanent chassis and designed for use with 
or without a permanent foundation when attached to the required 
utilities. The term mobile home does not include a recreational vehicle. 
For purposes of this part, the term mobile home means a mobile home on a 
permanent foundation. The term mobile home includes a manufactured home 
as that term is used in the NFIP.
    (h) NFIP means the National Flood Insurance Program authorized under 
the Act.
    (i) Residential improved real estate means real estate upon which a 
home or other residential building is located or to be located.
    (j) Servicer means the person responsible for:
    (1) Receiving any scheduled, periodic payments from a borrower under 
the terms of a loan, including amounts for taxes, insurance premiums, 
and other charges with respect to the property securing the loan; and
    (2) Making payments of principal and interest and any other payments 
from the amounts received from the borrower as may be required under the 
terms of the loan.
    (k) Special flood hazard area means the land in the flood plain 
within a community having at least a one percent chance of flooding in 
any given year, as designated by the Director of FEMA.

(Authority: 42 U.S.C. 4012a, 4104a, 4104b, 4106 and 4128)

[62 FR 5532, Feb. 6, 1997]



Sec. 36.4702  Requirement to purchase flood insurance where available.

    In general. The Secretary shall not make, increase, extend, or renew 
any designated loan unless the building or mobile home and any personal 
property securing the loan is covered by flood insurance for the term of 
the loan. The amount of insurance must be at least equal to the lesser 
of the outstanding principal balance of the designated loan or the 
maximum limit of coverage available for the particular type of property 
under the Act. Flood insurance coverage under the Act is limited to the 
overall value of the property securing the designated loan minus the 
value of the land on which the property is located.

(Authority: 42 U.S.C. 4012a)

[62 FR 5532, Feb. 6, 1997]



Sec. 36.4703  Exemptions.

    The flood insurance requirement prescribed by 38 CFR 36.4702 does 
not apply with respect to:
    (a) Any State-owned property covered under a policy of self-
insurance satisfactory to the Director of FEMA, who publishes and 
periodically revises the list of States falling within this exemption; 
or
    (b) Property securing any loan with an original principal balance of 
$5,000 or less and a repayment term of one year or less.

(Authority: 42 U.S.C. 4012a(c))

[62 FR 5533, Feb. 6, 1997]



Sec. 36.4704  Escrow requirement.

    If the Secretary requires the escrow of taxes, insurance premiums, 
fees, or any other charges for a loan secured by residential improved 
real estate or a mobile home that is made, increased, extended, or 
renewed on or after October 1, 1996, the Secretary shall also require 
the escrow of all premiums and fees for any flood insurance required 
under 38 CFR 36.4702. The Secretary, or a servicer acting on behalf of 
the Secretary, shall deposit the flood insurance premiums on behalf of 
the borrower in an escrow account. This escrow account will be subject 
to escrow requirements adopted pursuant to section 10 of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2609) (RESPA), which 
generally limits the amount that may be maintained in escrow accounts 
for certain types of loans and requires escrow account statements for 
those accounts, only if

[[Page 712]]

the loan is otherwise subject to RESPA. Following receipt of a notice 
from the Director of FEMA or other provider of flood insurance that 
premiums are due, the Secretary, or a servicer acting on behalf of the 
Secretary, shall pay the amount owed to the insurance provider from the 
escrow account by the date when such premiums are due.

(Authority: 42 U.S.C. 4012a(d))

[62 FR 5533, Feb. 6, 1997]



Sec. 36.4705  Required use of standard flood hazard determination form.

    (a) Use of form. The Secretary shall use the standard flood hazard 
determination form developed by the Director of FEMA (as set forth in 
appendix A of 44 CFR part 65) when determining whether the building or 
mobile home offered as collateral security for a loan is or will be 
located in a special flood hazard area in which flood insurance is 
available under the Act. The standard flood hazard determination form 
may be used in a printed, computerized, or electronic manner.
    (b) Retention of form. The Secretary shall retain a copy of the 
completed standard flood hazard determination form, in either hard copy 
or electronic form, for the period of time the Secretary owns the loan.

(Authority: 42 U.S.C. 4104b)

[62 FR 5533, Feb. 6, 1997]



Sec. 36.4706  Forced placement of flood insurance.

    If the Secretary, or a servicer acting on behalf of the Secretary, 
determines at any time during the term of a designated loan that the 
building or mobile home and any personal property securing the 
designated loan is not covered by flood insurance or is covered by flood 
insurance in an amount less than the amount required under 38 CFR 
36.4702, then the Secretary or a servicer acting on behalf of the 
Secretary, shall notify the borrower that the borrower should obtain 
flood insurance, at the borrower's expense, in an amount at least equal 
to the amount required under 38 CFR 36.4702, for the remaining term of 
the loan. If the borrower fails to obtain flood insurance within 45 days 
after notification, then the Secretary or a servicer acting on behalf of 
the Secretary, shall purchase insurance on the borrower's behalf. The 
Secretary or a servicer acting on behalf of the Secretary, may charge 
the borrower for the cost of premiums and fees incurred in purchasing 
the insurance.

(Authority: 42 U.S.C. 4012a(e))

[62 FR 5533, Feb. 6, 1997]



Sec. 36.4707  Determination fees.

    (a) General. Notwithstanding any Federal or State law other than the 
Flood Disaster Protection Act of 1973 as amended (42 U.S.C. 4001-4129), 
the Secretary, or a servicer acting on behalf of the Secretary, may 
charge a reasonable fee for determining whether the building or mobile 
home securing the loan is located or will be located in a special flood 
hazard area. A determination fee may also include, but is not limited 
to, a fee for life-of-loan monitoring.
    (b) Borrower fee. The determination fee authorized by paragraph (a) 
of this section may be charged to the borrower if the determination:
    (1) Is made in connection with a making, increasing, extending, or 
renewing of the loan that is initiated by the borrower;
    (2) Reflects the Director of FEMA's revision or updating of 
floodplain areas or flood-risk zones;
    (3) Reflects the Director of FEMA's publication of a notice or 
compendium that:
    (i) Affects the area in which the building or mobile home securing 
the loan is located; or
    (ii) By determination of the Director of FEMA, may reasonably 
require a determination whether the building or mobile home securing the 
loan is located in a special flood hazard area; or
    (4) Results in the purchase of flood insurance coverage by the 
Secretary or a servicer acting on behalf of the Secretary, on behalf of 
the borrower under 38 CFR 36.4706.
    (c) Purchaser or transferee fee. The determination fee authorized by 
paragraph (a) of this section may be charged to the purchaser or 
transferee

[[Page 713]]

of a loan in the case of the sale or transfer of the loan.

(Authority: 42 U.S.C. 4012a(h))

[62 FR 5533, Feb. 6, 1997]



Sec. 36.4708  Notice of special flood hazards and availability of Federal 
disaster relief assistance.

    (a) Notice requirement. When the Secretary makes, increases, 
extends, or renews a loan secured by a building or a mobile home located 
or to be located in a special flood hazard area, the Secretary shall 
mail or deliver a written notice to the borrower and to the servicer in 
all cases whether or not flood insurance is available under the Act for 
the collateral securing the loan.
    (b) Contents of notice. The written notice must include the 
following information:
    (1) A warning, in a form approved by the Director of FEMA, that the 
building or the mobile home is or will be located in a special flood 
hazard area;
    (2) A description of the flood insurance purchase requirements set 
forth in section 102(b) of the Flood Disaster Protection Act of 1973, as 
amended (42 U.S.C. 4012a(b));
    (3) A statement, where applicable, that flood insurance coverage is 
available under the NFIP and may also be available from private 
insurers; and
    (4) A statement whether Federal disaster relief assistance may be 
available in the event of damage to the building or mobile home caused 
by flooding in a Federally declared disaster.
    (c) Timing of notice. The Secretary shall provide the notice 
required by paragraph (a) of this section to the borrower within a 
reasonable time before the completion of the transaction, and to the 
servicer as promptly as practicable after the Secretary provides notice 
to the borrower and in any event no later than the time the Secretary 
provides other similar notices to the servicer concerning hazard 
insurance and taxes. Notice to the servicer may be made electronically 
or may take the form of a copy of the notice to the borrower.
    (d) Record of receipt. The Secretary shall retain a record of the 
receipt of the notices by the borrower and the servicer for the period 
of time the Secretary owns the loan.
    (e) Alternate method of notice. Instead of providing the notice to 
the borrower required by paragraph (a) of this section, the Secretary 
may obtain satisfactory written assurance from a seller or lessor that, 
within a reasonable time before the completion of the sale or lease 
transaction, the seller or lessor has provided such notice to the 
purchaser or lessee. The Secretary shall retain a record of the written 
assurance from the seller or lessor for the period of time the Secretary 
owns the loan.
    (f) Use of prescribed form of notice. The Secretary will be 
considered to be in compliance with the requirement for notice to the 
borrower of this section by providing written notice to the borrower 
containing the language presented in appendix A to this part within a 
reasonable time before the completion of the transaction. The notice 
presented in appendix A to this part satisfies the borrower notice 
requirements of the Act.

(Authority: 42 U.S.C. 4104a)

[62 FR 5533, Feb. 6, 1997]



Sec. 36.4709  Notice of servicer's identity.

    (a) Notice requirement. When the Secretary makes, increases, 
extends, renews, sells, or transfers a loan secured by a building or 
mobile home located or to be located in a special flood hazard area, the 
Secretary shall notify the Director of FEMA (or the Director's designee) 
in writing of the identity of the servicer of the loan. The Director of 
FEMA has designated the insurance provider to receive the Secretary's 
notice of the servicer's identity. This notice may be provided 
electronically if electronic transmission is satisfactory to the 
Director of FEMA's designee.
    (b) Transfer of servicing rights. The Secretary shall notify the 
Director of FEMA (or the Director's designee) of any change in the 
servicer of a loan described in paragraph (a) of this section within 60 
days after the effective date of the change. This notice may be provided 
electronically if electronic transmission is satisfactory to the 
Director of FEMA's designee. Upon any change in the servicing of a loan 
described in

[[Page 714]]

paragraph (a) of this section, the duty to provide notice under this 
paragraph (b) shall transfer to the transferee servicer.

(Authority: 42 U.S.C. 4104a)

[62 FR 5534, Feb. 6, 1997]

 Appendix A to Part 36--Sample Form of Notice of Special Flood Hazards 
         and Availability of Federal Disaster Relief Assistance

    We are giving you this notice to inform you that:
    The building or mobile home securing the loan for which you have 
applied is or will be located in an area with special flood hazards. The 
area has been identified by the Director of the Federal Emergency 
Management Agency (FEMA) as a special flood hazard area using FEMA's 
Flood Insurance Rate Map or the Flood Hazard Boundary Map for the 
following community: --------. This area has at least a one percent (1%) 
chance of a flood equal to or exceeding the base flood elevation (a 100-
year flood) in any given year. During the life of a 30-year mortgage 
loan, the risk of a 100-year flood in a special flood hazard area is 26 
percent (26%).
    Federal law allows a lender and borrower jointly to request the 
Director of FEMA to review the determination of whether the property 
securing the loan is located in a special flood hazard area. If you 
would like to make such a request, please contact us for further 
information.
    ---- The community in which the property securing the loan is 
located participates in the National Flood Insurance Program (NFIP). 
Federal law will not allow us to make you the loan that you have applied 
for if you do not purchase flood insurance. The flood insurance must be 
maintained for the life of the loan. If you fail to purchase or renew 
flood insurance on the property, Federal law authorizes and requires us 
to purchase the flood insurance for you at your expense.
     Flood insurance coverage under the NFIP may be 
purchased through an insurance agent who will obtain the policy either 
directly through the NFIP or through an insurance company that 
participates in the NFIP. Flood insurance also may be available from 
private insurers that do not participate in the NFIP.
     At a minimum, flood insurance purchased must 
cover the lesser of:
    (1) the outstanding principal balance of the loan; or
    (2) the maximum amount of coverage allowed for the type of property 
under the NFIP.
    Flood insurance coverage under the NFIP is limited to the overall 
value of the property securing the loan minus the value of the land on 
which the property is located.
     Federal disaster relief assistance (usually in 
the form of a low-interest loan) may be available for damages incurred 
in excess of your flood insurance if your community's participation in 
the NFIP is in accordance with NFIP requirements.
    ---- Flood insurance coverage under the NFIP is not available for 
the property securing the loan because the community in which the 
property is located does not participate in the NFIP. In addition, if 
the non-participating community has been identified for at least one 
year as containing a special flood hazard area, properties located in 
the community will not be eligible for Federal disaster relief 
assistance in the event of a Federally-declared flood disaster.

(Authority: 42 U.S.C. 4104a)

[62 FR 5534, Feb. 6, 1997]



PART 38_NATIONAL CEMETERIES OF THE DEPARTMENT OF VETERANS AFFAIRS--Table 
of Contents




Sec.
38.600 Definitions.
38.601 Advisory Committee on Cemeteries and Memorials.
38.602 Names for national cemeteries and features.
38.603 Gifts and donations.
38.617 Prohibition of interment or memorialization of persons who have 
          been convicted of Federal or State capital crimes.
38.618 Findings concerning commission of a capital crime where a person 
          has not been convicted due to death or flight to avoid 
          prosecution.
38.620 Persons eligible for burial.
38.621 Disinterments.
38.629 Outer burial receptacle allowance.
38.630 Headstones and markers.
38.631 Graves marked with a private headstone or marker.
38.632 Headstone and marker application process.
38.633 Group memorial monuments.

    Authority: 38 U.S.C. 107, 501, 512, chapter 24, 7105, and as noted 
in specific sections.

    Source: 70 FR 4769, Jan. 31, 2005, unless otherwise noted.



Sec. 38.600  Definitions.

    (a) [Reserved]
    (b) Definitions. For purposes of Sec. Sec. 38.617 and 38.618:
    Appropriate State official means a State attorney general or other 
official with statewide responsibility for law enforcement or penal 
functions.

[[Page 715]]

    Clear and convincing evidence means that degree of proof which 
produces in the mind of the fact-finder a firm belief regarding the 
question at issue.
    Convicted means a finding of guilt by a judgment or verdict or based 
on a plea of guilty, by a Federal or State criminal court.
    Federal capital crime means an offense under Federal law for which 
the death penalty or life imprisonment may be imposed.
    Interment means the burial of casketed remains or the placement or 
scattering of cremated remains.
    Life imprisonment means a sentence of a Federal or State criminal 
court directing confinement in a penal institution for life.
    Memorialization means any action taken to honor the memory of a 
deceased individual.
    Personal representative means a family member or other individual 
who has identified himself or herself to the National Cemetery 
Administration cemetery director as the person responsible for making 
decisions concerning the interment of the remains of or memorialization 
of a deceased individual.
    State capital crime means, under State law, the willful, deliberate, 
or premeditated unlawful killing of another human being for which the 
death penalty or life imprisonment without parole may be imposed.

(Authority: 38 U.S.C. 2408, 2411)



Sec. 38.601  Advisory Committee on Cemeteries and Memorials.

    Responsibilities in connection with Committee authorized by 38 
U.S.C. chapter 24 are as follows:
    (a) The Under Secretary for Memorial Affairs will schedule the 
frequency of meetings, make presentations before the Committee, 
participate when requested by the Committee, evaluate Committee reports 
and recommendations and make recommendations to the Secretary based on 
Committee actions.
    (b) The Committee will evaluate and study cemeterial, memorial and 
burial benefits proposals or problems submitted by the Secretary or 
Under Secretary for Memorial Affairs, and make recommendations as to 
course of action or solution. Reports and recommendations will be 
submitted to the Secretary for transmission to Congress.



Sec. 38.602  Names for national cemeteries and features.

    (a) Responsibility. The Secretary is responsible for naming national 
cemeteries. The Under Secretary for Memorial Affairs, is responsible for 
naming activities and features therein, such as drives, walks, or 
special structures.
    (b) Basis for names. The names of national cemetery activities may 
be based on physical and area characteristics, the nearest important 
city (town), or a historical characteristic related to the area. Newly 
constructed interior thoroughfares for vehicular traffic in national 
cemetery activities will be known as drives. To facilitate location of 
graves by visitors, drives will be named after cities, counties or 
States or after historically notable persons, places or events.



Sec. 38.603  Gifts and donations.

    (a) Gifts and donations will be accepted only after it has been 
determined that the donor has a clear understanding that title thereto 
passes to, and is vested in, the United States, and that the donor 
relinquishes all control over the future use or disposition of the gift 
or donation, with the following exceptions:
    (1) Carillons will be accepted with the condition that the donor 
will provide the maintenance and the operator or the mechanical means of 
operation. The time of operation and the maintenance will be coordinated 
with the superintendent of the national cemetery.
    (2) Articles donated for a specific purpose and which are usable 
only for that purpose may be returned to the donor if the purpose for 
which the articles were donated cannot be accomplished.
    (3) If the donor directs that the gift is donated for a particular 
use, those directions will be carried out insofar as they are proper and 
practicable and not in violation of Department of Veterans Affairs 
policy.
    (4) When considered appropriate and not in conflict with the purpose 
of the national cemetery, the donor may be recognized by a suitable 
inscription on

[[Page 716]]

those gifts. In no case will the inscription give the impression that 
the gift is owned by, or that its future use is controlled by, the 
donor. Any tablet or plaque, containing an inscription will be of such 
size and design as will harmonize with the general nature and design of 
the gift.
    (b) Officials and employees of the Department of Veterans Affairs 
will not solicit contributions from the public nor will they authorize 
the use of their names, the name of the Secretary, or the name of the 
Department of Veterans Affairs by an individual or organization in any 
campaign or drive for money or articles for the purpose of making a 
donation to the Department of Veterans Affairs. This restriction does 
not preclude discussion with the individual offering the gift relative 
to the appropriateness of the gift offered.



Sec. 38.617  Prohibition of interment or memorialization of persons who 
have been convicted of Federal or State capital crimes.

    (a) Prohibition. The interment in a national cemetery under the 
control of the National Cemetery Administration of the remains, or the 
memorialization, of any of the following persons is prohibited:
    (1) Any person identified to the Secretary of Veterans Affairs by 
the United States Attorney General, prior to approval of interment or 
memorialization, as an individual who has been convicted of a Federal 
capital crime and sentenced to death or life imprisonment as a result of 
such crime.
    (2) Any person identified to the Secretary of Veterans Affairs by an 
appropriate State official, prior to approval of interment or 
memorialization, as an individual who has been convicted of a State 
capital crime and sentenced to death or life imprisonment without parole 
as a result of such crime.
    (3) Any person found under procedures specified in Sec. 38.618 to 
have committed a Federal or State capital crime but have avoided 
conviction of such crime by reason of unavailability for trial due to 
death or flight to avoid prosecution.
    (b) Notice. The prohibition referred to in paragraph (a)(3) of this 
section is not contingent on receipt by the Secretary of Veterans 
Affairs or any other VA official of notice from any Federal or State 
official.
    (c) Receipt of notification. The Under Secretary for Memorial 
Affairs is delegated authority to receive from the United States 
Attorney General and appropriate State officials on behalf of the 
Secretary of Veterans Affairs the notification of conviction of capital 
crimes referred to in paragraphs (a)(1) and (2) of this section.
    (d) Decision where notification previously received. Upon receipt of 
a request for interment or memorialization, where the Secretary of 
Veterans Affairs has received the notification referred to in paragraph 
(a)(1) or (2) of this section with regard to the deceased, the cemetery 
director will make a decision on the request for interment or 
memorialization pursuant to 38 U.S.C. 2411.
    (e) Inquiry. (1) Upon receipt of a request for interment or 
memorialization, where the Secretary of Veterans Affairs has not 
received the notification referred to in paragraph (a)(1) or (a)(2) of 
this section with regard to the deceased, but the cemetery director has 
reason to believe that the deceased may have been convicted of a Federal 
or State capital crime, the cemetery director will initiate an inquiry 
to either:
    (i) The United States Attorney General, in the case of a Federal 
capital crime, requesting notification of whether the deceased has been 
convicted of a Federal capital crime for which the deceased was 
sentenced to death or life imprisonment; or
    (ii) An appropriate State official, in the case of a State capital 
crime, requesting notification of whether the deceased has been 
convicted of a State capital crime for which the deceased was sentenced 
to death or life imprisonment without parole.
    (2) The cemetery director will defer decision on whether to approve 
interment or memorialization until after a response is received from the 
Attorney General or appropriate State official.
    (f) Decision after inquiry. Where an inquiry has been initiated 
under paragraph (e) of this section, the cemetery

[[Page 717]]

director will make a decision on the request for interment or 
memorialization pursuant to 38 U.S.C. 2411 upon receipt of the 
notification requested under that paragraph, unless the cemetery 
director initiates an inquiry pursuant to Sec. 38.618(a).
    (g) Notice of decision. Written notice of a decision under paragraph 
(d) or (f) of this section will be provided by the cemetery director to 
the personal representative of the deceased, along with written notice 
of appellate rights in accordance with Sec. 19.25 of this title. This 
notice of appellate rights will include notice of the opportunity to 
file a notice of disagreement with the decision of the cemetery 
director. Action following receipt of a notice of disagreement with a 
denial of eligibility for interment or memorialization under this 
section will be in accordance with Sec. Sec. 19.26 through 19.38 of 
this title.

(Authority: 38 U.S.C. 512, 2411, 7105)



Sec. 38.618  Findings concerning commission of a capital crime where 
a person has not been convicted due to death or flight to avoid prosecution.

    (a) Inquiry. With respect to a request for interment or 
memorialization, if a cemetery director has reason to believe that a 
deceased individual who is otherwise eligible for interment or 
memorialization may have committed a Federal or State capital crime, but 
avoided conviction of such crime by reason of unavailability for trial 
due to death or flight to avoid prosecution, the cemetery director, with 
the assistance of the VA regional counsel, as necessary, will initiate 
an inquiry seeking information from Federal, State, or local law 
enforcement officials, or other sources of potentially relevant 
information. After completion of this inquiry and any further measures 
required under paragraphs (c), (d), (e), and (f) of this section, the 
cemetery director will make a decision on the request for interment or 
memorialization in accordance with paragraph (b), (e), or (g) of this 
section.
    (b) Decision approving request without a proceeding or termination 
of a claim by personal representative without a proceeding. (1) If, 
after conducting the inquiry described in paragraph (a) of this section, 
the cemetery director determines that there is no clear and convincing 
evidence that the deceased committed a Federal or State capital crime of 
which he or she was not convicted due to death or flight to avoid 
prosecution, and the deceased remains otherwise eligible, the cemetery 
director will make a decision approving the interment or 
memorialization.
    (2) If the personal representative elects for burial at a location 
other than a VA national cemetery, or makes alternate arrangements for 
burial at a location other than a VA national cemetery, the request for 
interment or memorialization will be considered withdrawn and action on 
the request will be terminated.
    (c) Initiation of a proceeding. (1) If, after conducting the inquiry 
described in paragraph (a) of this section, the cemetery director 
determines that there appears to be clear and convincing evidence that 
the deceased has committed a Federal or State capital crime of which he 
or she was not convicted by reason of unavailability for trial due to 
death or flight to avoid prosecution, the cemetery director will provide 
the personal representative of the deceased with a written summary of 
the evidence of record and a written notice of procedural options.
    (2) The notice of procedural options will inform the personal 
representative that he or she may, within 15 days of receipt of the 
notice:
    (i) Request a hearing on the matter;
    (ii) Submit a written statement, with or without supporting 
documentation, for inclusion in the record;
    (iii) Waive a hearing and submission of a written statement and have 
the matter forwarded immediately to the Under Secretary for Memorial 
Affairs for a finding; or
    (iv) Notify the cemetery director that the personal representative 
is withdrawing the request for interment or memorialization, thereby, 
closing the claim.
    (3) The notice of procedural options will also inform the personal 
representative that, if he or she does not exercise one or more of the 
stated options within the prescribed period, the matter will be 
forwarded to the Under Secretary for Memorial Affairs for a finding 
based on the existing record.

[[Page 718]]

    (d) Hearing. If a hearing is requested, the Director, Memorial 
Services Network will conduct the hearing. The purpose of the hearing is 
to permit the personal representative of the deceased to present 
evidence concerning whether the deceased committed a crime which would 
render the deceased ineligible for interment or memorialization in a 
national cemetery. Testimony at the hearing will be presented under 
oath, and the personal representative will have the right to 
representation by counsel and the right to call witnesses. The VA 
official conducting the hearing will have the authority to administer 
oaths. The hearing will be conducted in an informal manner and court 
rules of evidence will not apply. The hearing will be recorded on 
audiotape and, unless the personal representative waives transcription, 
a transcript of the hearing will be produced and included in the record.
    (e) Decision of approval or referral for a finding after a 
proceeding. Following a hearing or the timely submission of a written 
statement, or in the event a hearing is waived or no hearing is 
requested and no written statement is submitted within the time 
specified:
    (1) If the cemetery director determines that it has not been 
established by clear and convincing evidence that the deceased committed 
a Federal or State capital crime of which he or she was not convicted 
due to death or flight to avoid prosecution, and the deceased remains 
otherwise eligible, the cemetery director will make a decision approving 
interment or memorialization; or
    (2) If the cemetery director believes that there is clear and 
convincing evidence that the deceased committed a Federal or State 
capital crime of which he or she was not convicted due to death or 
flight to avoid prosecution, the cemetery director will forward a 
request for a finding on that issue, together with the cemetery 
director's recommendation and a copy of the record to the Under 
Secretary for Memorial Affairs.
    (f) Finding by the Under Secretary for Memorial Affairs. Upon 
receipt of a request from the cemetery director under paragraph (e) of 
this section, the Under Secretary for Memorial Affairs will make a 
finding concerning whether the deceased committed a Federal or State 
capital crime of which he or she was not convicted by reason of 
unavailability for trial due to death or flight to avoid prosecution. 
The finding will be based on consideration of the cemetery director's 
recommendation and the record supplied by the cemetery director.
    (1) A finding that the deceased committed a crime referred to in 
paragraph (f) of this section must be based on clear and convincing 
evidence.
    (2) The cemetery director will be provided with written notification 
of the finding of the Under Secretary for Memorial Affairs.
    (g) Decision after finding. Upon receipt of notification of the 
finding of the Under Secretary for Memorial Affairs, the cemetery 
director will make a decision on the request for interment or 
memorialization pursuant to 38 U.S.C. 2411. In making that decision, the 
cemetery director will be bound by the finding of the Under Secretary 
for Memorial Affairs.
    (h) Notice of decision. The cemetery director will provide written 
notice of the finding of the Under Secretary for Memorial Affairs and of 
a decision under paragraph (b), (e)(1), or (g) of this section. With 
notice of any decision denying a request for interment or 
memorialization, the cemetery director will provide written notice of 
appellate rights to the personal representative of the deceased, in 
accordance with Sec. 19.25 of this title. This will include notice of 
the opportunity to file a notice of disagreement with the decision of 
the cemetery director and the finding of the Under Secretary for 
Memorial Affairs. Action following receipt of a notice of disagreement 
with a denial of eligibility for interment or memorialization under this 
section will be in accordance with Sec. Sec. 19.26 through 19.38 of 
this title.

(Authority: 38 U.S.C. 512, 2411)



Sec. 38.620  Persons eligible for burial.

    The following is a list of those individuals who are eligible for 
burial in a national cemetery:
    (a) Any veteran (which for purposes of this section includes a 
person who

[[Page 719]]

died in the active military, naval, or air service).
    (b) Any member of a Reserve component of the Armed Forces, and any 
member of the Army National Guard or the Air National Guard, whose death 
occurs under honorable conditions while such member is hospitalized or 
undergoing treatment, at the expense of the United States, for injury or 
disease contracted or incurred under honorable conditions while such 
member is performing active duty for training, inactive duty training, 
or undergoing that hospitalization or treatment at the expense of the 
United States.
    (c) Any Member of the Reserve Officers' Training Corps of the Army, 
Navy, or Air Force whose death occurs under honorable conditions while 
such member is--
    (1) Attending an authorized training camp or on an authorized 
practice cruise;
    (2) Performing authorized travel to or from that camp or cruise; or
    (3) Hospitalized or undergoing treatment, at the expense of the 
United States, for injury or disease contracted or incurred under 
honorable conditions while such member is--
    (i) Attending that camp or on that cruise;
    (ii) Performing that travel; or
    (iii) Undergoing that hospitalization or treatment at the expense of 
the United States.
    (d) Any person who, during any war in which the United States is or 
has been engaged, served in the armed forces of any government allied 
with the United States during that war, whose last such service 
terminated honorably, and who was a citizen of the United States at the 
time of entry on such service and at the time of his or her death.
    (e) The spouse, surviving spouse, minor child, or unmarried adult 
child of a person eligible under paragraph (a), (b), (c), (d), or (g) of 
this section. For purposes of this section--
    (1) A surviving spouse includes a surviving spouse who had a 
subsequent remarriage;
    (2) A minor child means an unmarried child under 21 years of age, or 
under 23 years of age if pursuing a full-time course of instruction at 
an approved educational institution; and
    (3) An unmarried adult child means a child who became permanently 
physically or mentally disabled and incapable of self-support before 
reaching 21 years of age, or before reaching 23 years of age if pursuing 
a full-time course of instruction at an approved educational 
institution.
    (f) Such other persons or classes of persons as may be designated by 
the Secretary.
    (g) Any person who at the time of death was entitled to retired pay 
under chapter 1223 of title 10, United States Code, or would have been 
entitled to retired pay under that chapter but for the fact that the 
person was under 60 years of age.
    (h) Any person who:
    (1) Was a citizen of the United States or an alien lawfully admitted 
for permanent residence in the United States at the time of their death; 
and
    (2) Resided in the United States at the time of their death; and
    (3) Either was a--
    (i) Commonwealth Army veteran or member of the organized guerillas--
a person who served before July 1, 1946, in the organized military 
forces of the Government of the Commonwealth of the Philippines, while 
such forces were in the service of the Armed Forces of the United States 
pursuant to the military order of the President dated July 26, 1941, 
including organized guerilla forces under commanders appointed, 
designated, or subsequently recognized by the Commander in Chief, 
Southwest Pacific Area, or other competent authority in the Army of the 
United States, and who died on or after November 1, 2000; or
    (ii) New Philippine Scout--a person who enlisted between October 6, 
1945, and June 30, 1947, with the Armed Forces of the United States with 
the consent of the Philippine government, pursuant to section 14 of the 
Armed Forces Voluntary Recruitment Act of 1945, and who died on or after 
December 16, 2003.

(Authority: 38 U.S.C. 107, 501, 2402)



Sec. 38.621  Disinterments.

    (a) Interments of eligible decedents in national cemeteries are 
considered

[[Page 720]]

permanent and final. Disinterment will be permitted only for cogent 
reasons and with the prior written authorization of the National 
Cemetery Area Office Director or Cemetery Director responsible for the 
cemetery involved. Disinterment from a national cemetery will be 
approved only when all living immediate family members of the decedent, 
and the person who initiated the interment (whether or not he or she is 
a member of the immediate family), give their written consent, or when a 
court order or State instrumentality of competent jurisdiction directs 
the disinterment. For purposes of this section, ``immediate family 
members'' are defined as surviving spouse, whether or not he or she is 
remarried; all adult children of the decedent; the appointed guardian(s) 
of minor children; and the appointed guardian(s) of the surviving spouse 
or of the adult child(ren) of the decedent. If the surviving spouse and 
all of the children of the decedent are deceased, the decedent's parents 
will be considered ``immediate family members.''
    (b) All requests for authority to disinter remains will be submitted 
on VA Form 40-4970, Request for Disinterment, and will include the 
following information:
    (1) A full statement of reasons for the proposed disinterment.
    (2) Notarized statement(s) by all living immediate family members of 
the decedent, and the person who initiated the interment (whether or not 
he or she is a member of the immediate family), that they consent to the 
proposed disinterment.
    (3) A notarized statement, by the person requesting the disinterment 
that those who supplied affidavits comprise all the living immediate 
family members of the deceased.

(Authority: 38 U.S.C. 2404)
    (c) In lieu of the documents required in paragraph (b) of this 
section, an order of a court of competent jurisdiction will be 
considered.
    (d) Any disinterment that may be authorized under this section must 
be accomplished without expense to the Government.


(The reporting and recordkeeping requirements contained in paragraph (b) 
have been approved by the Office of Management and Budget under OMB 
control number 2900-0365)



Sec. 38.629  Outer Burial Receptacle Allowance.

    (a) Definitions--Outer burial receptacle. For purposes of this 
section, an outer burial receptacle means a graveliner, burial vault, or 
other similar type of container for a casket.
    (b) Purpose. This section provides for payment of a monetary 
allowance for an outer burial receptacle for any interment in a VA 
national cemetery where a privately-purchased outer burial receptacle 
has been used in lieu of a Government-furnished graveliner.
    (c) Second interments. In burials where a casket already exists in a 
grave with or without a graveliner, placement of a second casket in an 
outer burial receptacle will not be permitted in the same grave unless 
the national cemetery director determines that the already interred 
casket will not be damaged.
    (d) Payment of monetary allowance. VA will pay a monetary allowance 
for each burial in a VA national cemetery where a privately-purchased 
outer burial receptacle was used on and after October 9, 1996. For 
burials on and after January 1, 2000, the person identified in records 
contained in the National Cemetery Administration Burial Operations 
Support System as the person who privately purchased the outer burial 
receptacle will be paid the monetary allowance. For burials during the 
period October 9, 1996 through December 31, 1999, the allowance will be 
paid to the person identified as the next of kin in records contained in 
the National Cemetery Administration Burial Operations Support System 
based on the presumption that such person privately purchased the outer 
burial receptacle (however, if a person who is not listed as the next of 
kin provides evidence that he or she privately purchased the outer 
burial receptacle, the allowance will be paid instead to that person). 
No application is required to receive payment of a monetary allowance.

[[Page 721]]

    (e) Amount of the allowance. (1) For calendar year 2000 and each 
calendar year thereafter, the allowance will be the average cost, as 
determined by VA, of Government-furnished graveliners, less the 
administrative costs incurred by VA in processing and paying the 
allowance.
    (i) The average cost of Government-furnished graveliners will be 
based upon the actual average cost to the Government of such graveliners 
during the most recent fiscal year ending prior to the start of the 
calendar year for which the amount of the allowance will be used. This 
average cost will be determined by taking VA's total cost during that 
fiscal year for single-depth graveliners which were procured for 
placement at the time of interment and dividing it by the total number 
of such graveliners procured by VA during that fiscal year. The 
calculation shall exclude both graveliners procured and pre-placed in 
gravesites as part of cemetery gravesite development projects and all 
double-depth graveliners.
    (ii) The administrative costs incurred by VA will consist of those 
costs that relate to processing and paying an allowance, as determined 
by VA, for the calendar year ending prior to the start of the calendar 
year for which the amount of the allowance will be used.
    (2) For calendar year 2000 and each calendar year thereafter, the 
amount of the allowance for each calendar year will be published in the 
``Notices'' section of the Federal Register. The Federal Register notice 
will also provide, as information, the determined average cost of 
Government-furnished graveliners and the determined amount of the 
administrative costs to be deducted.
    (3) The published allowance amount for interments which occur during 
calendar year 2000 will also be used for payment of any allowances for 
interments which occurred during the period from October 9, 1996 through 
December 31, 1999.

(Authority: 38 U.S.C. 2306(d))



Sec. 38.630  Headstones and markers.

    (a) Types of Government headstones and markers and inscriptions will 
be in accordance with policies approved by the Secretary.
    (b) Inscriptions on Government headstones, markers, and private 
monuments will be in accordance with policies and specifications of the 
Under Secretary for Memorial Affairs.
    (c) A memorial headstone or marker furnished for a deceased veteran 
by the Government may be erected in a private cemetery or in a national 
cemetery section established for this purpose. The headstones or markers 
for national cemeteries will be of the standard design authorized for 
the cemetery in which they are to be erected. In addition to the 
authorized inscription, the words ``In Memory Of'' are mandatory.

(Authority: 38 U.S.C. 501)



Sec. 38.631  Graves marked with a private headstone or marker.

    (a) VA will furnish an appropriate Government marker for the grave 
of a decedent described in paragraph (b) of this section, but only if 
the individual requesting the marker certifies on VA Form 40-1330 that 
it will be placed on the grave for which it is requested or, if 
placement on the grave is impossible or impracticable, as close to the 
grave as possible within the grounds of the private cemetery where the 
grave is located.
    (b) The decedent referred to in paragraph (a) of this section is one 
who:
    (1) Died on or after September 11, 2001;
    (2) Is buried in a private cemetery; and
    (3) Was eligible for burial in a national cemetery, but is not an 
individual described in 38 U.S.C. 2402(4), (5), or (6).
    (c) VA will deliver the marker directly to the cemetery where the 
grave is located or to a receiving agent for delivery to the cemetery.
    (d) VA will not pay the cost of installing a Government marker in a 
private cemetery.
    (e) The applicant must obtain certification on VA Form 40-1330 from 
a cemetery representative that the type and placement of the marker 
requested adheres to the policies and guidelines of the selected private 
cemetery.

[[Page 722]]

    (f) VA will furnish its full product line of Government markers for 
private cemeteries.
    (g) The authority to furnish a marker under this section expires on 
December 31, 2006.

(Authority: 38 U.S.C. 501, 2306)


(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0222.)



Sec. 38.632  Headstone and marker application process.

    (a) Headstones and markers for graves in national cemeteries shall 
be ordered from the Record of Interment (VA Form 40-4956) prepared by 
the national cemetery superintendent at the time of interment. No 
further application is required.
    (b) Submission of VA Form 40-1330, Application for Headstone or 
Marker, is required for the purpose of:
    (1) Ordering a Government headstone or marker for any unmarked grave 
of any eligible veteran buried in a private or local cemetery.
    (2) Ordering a Government headstone or marker for any unmarked grave 
in a post cemetery of the Armed Forces.
    (3) Ordering a Government memorial headstone or marker for placement 
in a national cemetery, in a private or local cemetery and any post 
cemetery of the Armed Forces.



Sec. 38.633  Group memorial monuments.

    (a) Definitions of terms. For the purpose of this section, the 
following definitions apply:
    (1) Group--all the known and unknown dead who perished in a common 
military event.
    (2) Memorial Monument--a monument commemorating veterans, whose 
remains have not been recovered or identified. Monuments will be 
selected in accordance with policies established under 38 CFR 38.630.
    (3) Next of kin--recognized in order: Surviving spouse; children, 
according to age; parents, including adoptive, stepparents, and foster 
parents; brothers or sisters, including half or stepbrothers and 
stepsisters; grandparents; grandchildren; uncles or aunts; nephews or 
nieces; cousins; and/or other lineal descendent.
    (4) Documentary evidence--Official documents, records, or 
correspondence signed by an Armed Services branch historical center 
representative attesting to the accuracy of the evidence.
    (b) The Secretary may furnish at government expense a group memorial 
monument upon request of next of kin. The group memorial monument will 
commemorate two or more identified members of the Armed Forces, 
including their reserve components, who died in a sanctioned common 
military event, (e.g., battle or other hostile action, bombing or other 
explosion, disappearance of aircraft, vessel or other vehicle) while in 
active military, naval or air service, and whose remains were not 
recovered or identified, were buried at sea, or are otherwise 
unavailable for interment.
    (c) A group memorial monument furnished by VA may be placed only in 
a national cemetery in an area reserved for such purpose. If a group 
memorial monument has already been provided under this regulation or by 
any governmental body, e.g., the American Battle Monuments Commission, 
to commemorate the dead from a common military event, an additional 
group memorial monument will not be provided by VA for the same purpose.
    (d) Application for a group memorial monument shall be submitted in 
a manner specified by the Secretary. Evidence used to establish and 
determine eligibility for a group memorial monument will conform to 
paragraph (a)(4) of this section.

(Authority: 38 U.S.C. 501, 2403)



PART 39_AID TO STATES FOR ESTABLISHMENT, EXPANSION, AND IMPROVEMENT OF 
VETERANS' CEMETERIES--Table of Contents




                      Subpart A_General Provisions

Sec.
39.1 Purpose.
39.2 Definitions.
39.3 Decisionmakers, notifications, and additional information.
39.4 Submissions of information and documents to VA.

[[Page 723]]

               Subpart B_Grant Requirements and Procedures

39.5 General requirements for a grant.
39.6 Preapplication requirements.
39.7 Priority list.
39.8 Plan preparation.
39.9 Conferences.
39.10 Application requirements.
39.11 Final review and approval of application.
39.12 Hearings.
39.13 Amendments to application.
39.14 Withdrawal of application.

                        Subpart C_Award of Grant

39.15 Amount of grant.
39.16 Line item adjustment to grant.
39.17 Payment of grant award.
39.18 Recapture provisions.

            Subpart D_Standards and Requirements for Project

39.19 General requirements for site selection and construction of 
          veterans' cemeteries.
39.20 Site planning standards.
39.21 Space criteria for support facilities.
39.22 Architectural design standards.

 Subpart E_Responsibilities, Inspections, and Reports Following Project 
                               Completion

39.23 Responsibilities following project completion.
39.24 State to retain control of operations.
39.25 Inspections, audits, and reports.

                             Subpart F_Forms

39.26 Forms.

    Authority: 38 U.S.C. 101, 501, 2408.

    Source: 69 FR 16346, Mar. 29, 2004, unless otherwise noted.



                      Subpart A_General Provisions



Sec. 39.1  Purpose.

    This part sets forth the mechanism for a State to obtain a grant to 
establish, expand, or improve veterans' cemeteries that are or will be 
owned by the State.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.2  Definitions.

    For the purpose of this part:
    (a) Establishment means the process of site selection, land 
acquisition, design and planning, earthmoving, landscaping, construction 
and provision of initial operating equipment necessary to convert a 
tract of land to an operational veterans' cemetery.
    (b) Expansion means an increase in the burial capacity or acreage of 
an existing cemetery through the addition of gravesites and other 
cemeterial facilities.
    (c) Improvement means the enhancement of a cemetery through 
landscaping, nonrecurring maintenance, or addition of other features 
appropriate to cemeteries.
    (d) Establishment, expansion and improvement include the 
installation of facilities necessary for the functioning of the 
cemetery, such as committal-service shelters, crypts (preplaced grave 
liners), and columbaria.
    (e) Time-phased development plan means a detailed, narrative 
description of the proposed site's characteristics, schedule for 
development, and estimates of costs by phases of construction.
    (f) Project means an undertaking to establish, expand, or improve a 
specific site for use as a State-owned veterans' cemetery.
    (g) State means each of the States, Territories, and possessions of 
the United States, the District of Columbia, and the Commonwealth of 
Puerto Rico.
    (h) Veteran means a person who served in the active military, naval, 
or air service and who died while in service or was discharged or 
released under conditions other than dishonorable.
    (i) Secretary means the Secretary of the United States Department of 
Veterans Affairs.
    (j) VA means the United States Department of Veterans Affairs.
    (k) State Cemetery Grants Service (SCGS) means the State Cemetery 
Grants Service within VA's National Cemetery Administration.

(Authority: 38 U.S.C. 101, 501, 2408.)



Sec. 39.3  Decisionmakers, notifications, and additional information.

    Decisions required under this part will be made by the Director, 
State Cemetery Grants Service, National Cemetery Administration, unless 
otherwise specified in this part. The VA

[[Page 724]]

decisionmaker will provide written notice to affected States of 
approvals, denials, or requests for additional information under this 
part.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.4  Submissions of information and documents to VA.

    All information and documents required to be submitted to VA must be 
submitted, unless otherwise specified under this part, to the Director 
of State Cemetery Grants Service, National Cemetery Administration, 
Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 
20420.

(Authority: 38 U.S.C. 501, 2408.)



               Subpart B_Grant Requirements and Procedures



Sec. 39.5  General requirements for a grant.

    (a) In order to qualify for a grant, a State veterans' cemetery must 
be operated solely for the interment of veterans, their spouses, 
surviving spouses, minor children, and unmarried adult children who were 
physically or mentally disabled and incapable of self-support.
    (b) For a State to obtain a grant under this part for the 
establishment, expansion, or improvement of a State veterans' cemetery:
    (1) Its preapplication for the grant must be approved under Sec. 
39.6;
    (2) Its project must be ranked sufficiently high on the priority 
list in Sec. 39.7 for the current fiscal year so that funds are 
available for the project;
    (3) Its plans and specifications for the project must be approved 
under Sec. 39.8;
    (4) The State must meet the application requirements in Sec. 39.10; 
and
    (5) Other requirements specified in Sec. Sec. 39.9 and 39.13 must 
be satisfied.
    (c) VA may approve under Sec. 39.11 any application up to the 
amount of the grant requested once the requirements under paragraph (b) 
of this section have been satisfied, provided that sufficient funds are 
available. In determining whether sufficient funds are available, VA 
shall consider the project's priority ranking, the total amount of funds 
available for cemetery grant awards during the applicable fiscal year, 
and the prospects of higher ranking projects being ready for the award 
of a grant before the end of the applicable fiscal year.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.6  Preapplication requirements.

    (a) A State seeking a grant for the establishment, expansion, or 
improvement of a veterans' cemetery must submit a preapplication if the 
State seeks more than $100,000.
    (b) No detailed drawings, plans, or specifications are required with 
the preapplication. As a part of the preapplication, the State must 
submit each of the following:
    (1) Standard Form 424 (``Face Sheet'') and Standard Form 424C 
(``Budget Information'') signed by the authorized representative of the 
State. These forms document the amount of the grant requested, which may 
not exceed 100 percent of the estimated cost of the project to be funded 
with the grant.
    (2) A program narrative describing the objectives of the project, 
the need for a grant, the method of accomplishment, the projected 
interment rate, and the results or benefits expected to be obtained from 
the assistance requested.
    (3) If a site has been selected, a description of the geographic 
location of the project (i.e., a map showing the location of the project 
and all appropriate geographic boundaries, and any other supporting 
documentation, as needed).
    (4) A design concept describing the major features of the project 
including the number and types of gravesites, such as columbarium 
niches.
    (5) Any comments or recommendations made by the State's ``Single 
Point of Contact'' reviewing agency.
    (c) In addition, the State must submit written assurance that:
    (1) Any cemetery established, expanded, or improved through a grant 
will be used exclusively for the interment of eligible persons as set 
forth in Sec. 39.5(a).
    (2) Title to the site is or will be vested solely in the State.
    (3) It possesses legal authority to apply for the grant, and to 
finance and construct the proposed facilities; i.e.,

[[Page 725]]

legislation or similar action has been duly adopted or passed as an 
official act of the applicant's governing body, authorizing the filing 
of the application, including all understandings and assurances 
contained therein, and directing and authorizing the person identified 
as the official representative of the State to act in connection with 
the application and to provide such additional information as may be 
required.
    (4) Any cemetery established, expanded, or improved through a grant 
will be maintained and operated in accordance with the operational 
standards and measures of the National Cemetery Administration.
    (5) It will assist VA in assuring that the grant complies with 
section 106 of the National Historic Preservation Act of 1966, as 
amended (16 U.S.C. 470), Executive Order 11593 (identification and 
protection of historic properties), and the Archaeological and Historic 
Preservation Act of 1974 (16 U.S.C. 469a-1 et seq.).
    (6) It will obtain approval by VA of the final construction drawings 
and specifications before the project is advertised or placed on the 
market for bidding; it will construct the project, or cause it to be 
constructed, to completion in accordance with the application and 
approved plans and specifications; it will submit to the Director of the 
State Cemetery Grants Service, for prior approval, changes that alter 
the costs of the project, use of space, or functional layout; and it 
will not enter into a construction contract(s) for the project or 
undertake other activities until the conditions of the grant program 
have been met.
    (7) It will comply with the Federal requirements in 38 CFR parts 43 
and 44 and submit Standard Form 424D (``Assurances--Construction 
Programs'').
    (8) It will prepare an Environmental Assessment to determine whether 
an Environmental Impact Statement is necessary, and certify that funds 
are available to finance any costs related to preparation of the 
Environmental Assessment.
    (d) The State must submit a copy of the legislation, as enacted into 
law, authorizing the establishment, maintenance and operation of the 
facility as a veterans' cemetery in accordance with 38 CFR 39.5(a).
    (e) Upon receipt of a preapplication for a grant, including all 
necessary assurances and all required supporting documentation, VA shall 
determine whether the preapplication conforms to all requirements listed 
in paragraphs (a) through (d) of this section, including whether it 
contains sufficient information necessary to establish the project's 
priority. VA will notify the State of any nonconformity. If the 
preapplication does conform, VA shall notify the State that the 
preapplication has been found to meet the preapplication requirements, 
and the proposed project will be included in the next scheduled ranking 
of projects, as indicated in Sec. 39.7(d).

(Authority: 38 U.S.C. 501, 2408.)

(The Office of Management and Budget has approved the information 
collection requirements in this section under control numbers 0348-0043, 
0348-0041; 0348-0042.)



Sec. 39.7  Priority list.

    (a) The priority groups, with Priority Group 1 having the highest 
priority and Priority Group 4 the lowest priority, are:
    (1) Priority Group 1--Projects needed to avoid disruption in burial 
service that would otherwise occur at existing veterans' cemeteries 
within 4 years of the date of the preapplication. Such projects would 
include expansion projects as well as improvement projects (such as 
construction of additional or replacement facilities) when such 
improvements are required to continue interment operations.
    (2) Priority Group 2--Projects for the establishment of new 
veterans' cemeteries.
    (3) Priority Group 3--Expansion projects at existing veterans' 
cemeteries when a disruption in burial service due to the exhaustion of 
existing gravesites is not expected to occur within 4 years of the date 
of the preapplication.
    (4) Priority Group 4--Other improvement projects to cemetery 
infrastructure such as building expansion and upgrades to roads and 
irrigation systems that are not directly related to the development of 
new gravesites.

[[Page 726]]

    (b) Within Priority Groups 1, 2, and 3, highest priority will be 
given to projects in geographical locations with the greatest number of 
veterans who will benefit from the project as determined by VA. This 
prioritization system, based on veteran population data, will assist VA 
in maintaining and improving access to burial in a veterans cemetery to 
more veterans and their eligible family members. Within Priority Group 
1, at the discretion of VA, higher priority may be given to a project 
that must be funded that fiscal year to avoid disruption in burial 
service.
    (c) Within Priority Group 4, projects will be ranked in priority 
order based upon VA's determination of the relative importance and 
necessity to operations of the proposed improvements.
    (d) By August 15 of each year, VA will make a list prioritizing the 
preapplications that were received on or before July 1 of that year and 
that were approved under Sec. 39.6, ranking them in their order of 
priority for funding during the fiscal year that begins the following 
October 1. Preapplications from previous years will be re-prioritized 
each year.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.8  Plan preparation.

    The State must prepare plans and specifications in accordance with 
the requirements of this section for review by the SCGS. The plans and 
specifications must be approved by the SCGS prior to the State's 
solicitation for construction bids. Once SCGS grants approval, the State 
must obtain construction bids and determine the successful bidder prior 
to submission of the application. The State must establish procedures 
for determining that costs are reasonable, necessary and allocable in 
accordance with the provisions of Office of Management and Budget (OMB) 
Circular No. A-87. Once the preapplication and the project's plans and 
specifications have been approved, an application for assistance must be 
submitted in compliance with the uniform requirements for grants-in-aid 
to State and local governments prescribed by Office of Management and 
Budget Circular No. A-102, Revised.
    (a) General. These requirements have been established for the 
guidance of the State agency and the design team to provide a standard 
for preparation of drawings, specifications and estimates.
    (b) Technical requirements. The State should meet these technical 
requirements as soon as possible after VA approves the preapplication.
    (1) Boundary and site survey. The State agency shall provide a 
survey of the site and furnish a legal description of the site. A 
boundary and site survey need not be submitted if one was submitted for 
a previously approved project and there have been no changes. Relevant 
information may then be shown on the site plan. If required, the survey 
shall show:
    (i) The outline and location referenced to boundaries, of all 
existing buildings, streets, alleys (whether public or private), block 
boundaries, easements, encroachments, the names of streets, railroads 
and streams, and other information as specified. If there is nothing of 
this character affecting the property, the Surveyor shall so state on 
the drawings.
    (ii) The point of beginning, bearing, distances, and interior 
angles. Closure computations shall be furnished with the survey and 
error of closure shall not exceed 1 foot for each 10,000 feet of lineal 
traverse. Boundaries of an unusual nature (curvilinear, off-set, or 
having other change or direction between corners) shall be referenced 
with curve data (including measurement chord) and other data sufficient 
for replacement and such information shall be shown on the map. For 
boundaries of such nature, coordinates shall be given for all angles and 
other pertinent points.
    (iii) The area of the parcel in acres or in square feet.
    (iv) The location of all monuments.
    (v) Delineation of 100-year floodplain and source.
    (vi) The signature and certification of the Surveyor.
    (2) Soil investigation. The State shall provide a soil investigation 
of the scope necessary to ascertain site characteristics for 
construction and burial or to determine foundation requirements and 
utility service connections. A new soil investigation is not required

[[Page 727]]

if one was done for a previously approved project on the same site and 
information contained is adequate and unchanged. Soil investigation, 
when done, shall be documented in a signed report. Adequate 
investigation shall be made to determine the subsoil conditions. The 
investigation shall include a sufficient number of test pits or test 
borings as will determine, in the judgment of the architect, the true 
conditions. The following information will be covered in the report:
    (i) Thickness, consistency, character, and estimated safe bearing 
value where needed for structural foundation design of the various 
strata encountered in each pit or boring.
    (ii) Amount and elevation of ground water encountered in each pit or 
boring, its probable variation with the seasons, and effect on the 
subsoil.
    (iii) The elevation of rock, if known, and the probability of 
encountering quicksand.
    (iv) If the site is under laid with mines, the elevations and 
location of the tops of the mine workings relative to the site, or old 
workings located in the vicinity.
    (3) Topographical survey. A topographical survey in 1-foot contour 
intervals shall be prepared for projects establishing new cemeteries and 
for significant expansion projects in previously undeveloped land.
    (c) Master plan. A master plan showing the proposed layout of all 
facilities--including buildings, roadways and burial sections--on the 
selected site shall be prepared for all new cemetery establishment 
projects for approval by the SCGS. If the project is to be phased into 
different year programs, the phasing shall be indicated. The master plan 
shall analyze all factors affecting the design, including climate, soil 
conditions, site boundaries, topography, views, hydrology, environmental 
constraints, transportation access, etc. It should provide a discussion 
of alternate designs that were considered. In the case of an expansion 
or improvement project, the work contemplated should be consistent with 
the VA-approved master plan or a justification for the deviation should 
be provided.
    (d) Preliminary or ``design development'' drawings. Following VA 
approval of the master plan, the State must submit design development 
drawings that show all current phase construction elements to be funded 
by the grant. The drawings must comply with the following requirements:
    (1) Site development and environmental plans must include locations 
of structures, demolition, parking, roads, service areas, walks, plazas, 
memorial paths, other paved areas, landscape buffer and major groupings, 
interment areas (including quantity of gravesites in each area). A 
grading plan including existing and proposed contours at 1-foot 
intervals of the entire area affected by the site work must be 
submitted. A site plan of the immediate area around each building shall 
be drawn to a convenient scale and shall show the building floor plan, 
utility connections, walks, gates, walls or fences, flagpoles, drives, 
parking areas, indication of handicapped provisions, landscaping, north 
arrow and any other appropriate items.
    (2) Floor plans of all levels at a convenient scale shall be double 
line drawings and shall show overall dimensions, construction materials, 
door swings, names and square feet for each space, toilet room fixtures 
and interior finish schedule.
    (3) Elevations of the exteriors of all buildings shall be drawn to 
the same scale as the plan and shall include all material indications.
    (4) Preliminary mechanical and electrical layout plans shall be 
drawn at a convenient scale and shall have an equipment and plumbing 
fixture schedule.
    (e) Final construction drawings and specifications. Funds for the 
construction of any project being assisted under this program will not 
be released until VA approves the final construction drawings and 
specifications. If VA approves them, VA shall send the State a written 
letter of approval indicating the project complies with the terms and 
conditions as prescribed by VA, but this does not constitute approval of 
the contract documents. It is the responsibility of the State to 
ascertain that all State and Federal requirements have been met and that 
the drawings and specifications are acceptable for bid purposes.

[[Page 728]]

    (1) The State shall prepare final working drawings so that clear and 
distinct prints may be obtained. These drawings must be accurately 
dimensioned to include all necessary explanatory notes, schedules and 
legends. Working drawings shall be complete and adequate for VA review 
and comment. The State shall prepare separate drawings for each of the 
following types of work: architectural, equipment, layout, structural, 
heating and ventilating, plumbing, and electrical.
    (2) Architectural drawings. The State shall submit drawings which 
include: All structures and other work to be removed; all floor plans if 
any new work is involved; all elevations, which are affected by the 
alterations; building sections; demolition drawings; all details to 
complete the proposed work and finish schedules; and fully dimensioned 
floor plans at \1/8\ or \1/4\ scale.
    (3) Equipment drawings. The State shall submit a list of all 
equipment to be provided under terms of the grant in the case of an 
establishment project. Large-scale drawings of typical special rooms 
indicating all fixed equipment and major items of furniture and moveable 
equipment shall be included.
    (4) Layout drawings. The State shall submit a layout plan that 
shows:
    (i) All proposed features such as roads, buildings, walks, utility 
lines, burial layout, etc.
    (ii) Contours, scale, north arrow, legend showing existing trees.
    (iii) A graphic or keyed method of showing plant types as well as 
quantities of each plant.
    (iv) Plant list with the following: Key, quantity, botanical name, 
common name, size and remarks.
    (v) Typical tree and shrub planting details.
    (vi) Areas to be seeded or sodded.
    (vii) Areas to be mulched.
    (viii) Gravesite section layout with permanent section monument 
markers and lettering system.
    (ix) Individual gravesite layout and numbering system. If the 
cemetery is existing and the project is expansion or renovation, show 
available, occupied, obstructed and reserved gravesites.
    (x) Direction the headstone faces.
    (5) Structural drawings. The State shall submit complete foundation 
and framing plans and details, with general notes to include: Governing 
code, material strengths, live loads, wind loads, foundation design 
values, and seismic zone.
    (6) Mechanical drawings. The State shall submit:
    (i) Heating and ventilation drawings showing complete systems and 
details of air conditioning, heating, ventilation and exhaust; and
    (ii) Plumbing drawings showing sizes and elevations of soil and 
waste systems, sizes of all hot and cold water piping, drainage and vent 
systems, plumbing fixtures, and riser diagrams.
    (7) Electrical drawings. The State shall submit separate drawings 
for lighting and power, including drawings of:
    (i) Service entrance, feeders and all characteristics;
    (ii) All panel, breaker, switchboard and fixture schedules;
    (iii) All lighting outlets, receptacles, switches, power outlets and 
circuits; and
    (iv) Telephone layout, fire alarm systems and emergency lighting.
    (8) Final specifications (to be used for bid purposes) shall be in 
completed format. Specifications shall include the invitations for bids, 
cover or title sheet, index, general requirements, form of bid bond, 
form of agreement, performance and payment bond forms, and sections 
describing materials and workmanship in detail for each class of work.
    (9) The State shall show in convenient form and detail the estimated 
total cost of the work to be performed under the contract including 
provisions of fixed equipment shown by the plans and specifications, if 
applicable, to reflect the changes of the approved financial plan. 
Estimates shall be summarized and totaled under each trade or type of 
work. Estimates shall also be provided for each building structure and 
other important features such as the assembly area and include burial 
facilities.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.9  Conferences.

    (a) Predesign conference. A predesign conference is required for all 
major construction projects primarily to ensure that the State agency 
becomes

[[Page 729]]

oriented to VA procedures and requirements plus any technical comments 
pertaining to the project. These conferences will take place at an 
appropriate location near the proposed site and should include a site 
visit to ensure that all parties to the process, including NCA staff, 
are familiar with the site and its characteristics.
    (b) Additional conferences. At any time, VA may recommend an 
additional conference (such as a design development conference) be held 
in VA Central Office in Washington, DC, to provide an opportunity for 
the State and its architects to discuss requirements for a grant with VA 
officials.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.10  Application requirements.

    (a) For a project to be considered for grant funding under this 
part, the State must submit an application (as opposed to a 
preapplication) consisting of the following:
    (1) Standard Form 424 (``Face Sheet'') with the box labeled 
``application'' marked;
    (2) Standard Form 424C (``Budget Information''), which documents the 
amount of funds requested based on the construction costs as estimated 
by the successful construction bid;
    (3) A copy of itemized bid tabulations (If there are non-VA 
participating areas, these shall be itemized separately.); and
    (4) Standard Form 424D (``Assurances--Construction Program'').

(Authority: 38 U.S.C. 501, 2408)
    (b) Prior to submission of the application, the State must submit a 
copy of an Environmental Assessment to determine if an Environmental 
Impact Statement is necessary for compliance with section 102(2)(C) of 
the National Environmental Policy Act of 1969, as amended (42 U.S.C. 
4332). The Environmental Assessment must briefly describe the project's 
possible beneficial and harmful effects on the following impact 
categories:
    (1) Transportation,
    (2) Air quality,
    (3) Noise,
    (4) Solid waste,
    (5) Utilities,
    (6) Geology (Soils/Hydrology/Floodplains),
    (7) Water quality,
    (8) Land use,
    (9) Vegetation, Wildlife, Aquatic, Ecology/Wetlands, etc.,
    (10) Economic activities,
    (11) Cultural resources,
    (12) Aesthetics,
    (13) Residential population,
    (14) Community services and facilities,
    (15) Community plans and projects, and
    (16) Other.
    (c) If an adverse environmental impact is anticipated, the State 
must explain what action will be taken to minimize the impact. The 
assessment shall comply with the requirements of the National 
Environmental Policy Act of 1969, as amended (42 U.S.C. 4321 et seq.).

(The Office of Management and Budget has approved the information 
collection requirements in this section under control numbers 0348-0043; 
0348-0041; 0348-0042.)



Sec. 39.11  Final review and approval of application.

    Following VA approval of bid tabulations and cost estimates, the 
complete grant application will be reviewed for approval in accordance 
with the requirements of Sec. 39.5. If the application is approved, the 
grant will be awarded by a Notification of Award of Federal Grant Funds.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.12  Hearings.

    (a) No application for a grant to establish, expand, or improve a 
State veterans' cemetery shall be disapproved until the applicant has 
been afforded an opportunity for a hearing.
    (b) Whenever a hearing is requested under this section, notice of 
the hearing, procedure for the conduct of such hearing, and procedures 
relating to decisions and notices shall accord with the provisions of 
Sec. Sec. 18.9 and 18.10 of this chapter. Failure of an applicant to 
request a hearing under this section or to appear at a hearing for which 
a date has been set shall be deemed to be a

[[Page 730]]

waiver of the right to be heard and constitutes consent to the making of 
a decision on the basis of such information as is available.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.13  Amendments to application.

    Any amendment of an application that changes the scope of the 
application or increases the cost of the grant requested, whether or not 
the application has already been approved, shall be subject to approval 
in the same manner as an original application.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.14  Withdrawal of application.

    A State representative may withdraw an application by submitting to 
VA a written document requesting withdrawal.

(Authority: 38 U.S.C. 501, 2408.)



                        Subpart C_Award of Grant



Sec. 39.15  Amount of grant.

    (a) The amount of a grant awarded under this part may not exceed 100 
percent of the total cost of the project, but may be less than that 
amount.
    (b) The total cost of a project under this part may include:
    (1) Administration and design costs, e.g., architectural and 
engineering fees, inspection fees, and printing and advertising cost.
    (2) The cost of cemetery features, e.g., entry features, flag plaza 
and assembly areas, columbarium, preplaced liners or crypts, irrigation, 
committal-service shelters, and administration/maintenance buildings.
    (3) In the case of an establishment grant, the cost of equipment 
necessary for the operation of the State cemetery. This may include the 
cost of non-fixed equipment such as grounds maintenance equipment, 
burial equipment, and office equipment.
    (4) In the case of an improvement or expansion grant, the cost of 
equipment necessary for operation of the State cemetery, but only if:
    (i) Included in the construction contract;
    (ii) Installed during construction; and
    (iii) Permanently affixed to a building or connected to the heating, 
ventilating, air conditioning, or other service distributed through a 
building via ducts, pipes, wires, or other connecting device, such as 
kitchen and intercommunication equipment, built-in cabinets, and 
equipment lifts.
    (5) A contingency allowance not to exceed five percent of the total 
cost of the project for new construction or eight percent for renovation 
projects.
    (c) The total cost of a project under this part may not include the 
cost of:
    (1) Land acquisition;
    (2) Building space that exceeds the space guidelines specified in 
this part;
    (3) Improvements not on cemetery land, such as access roads or 
utilities;
    (4) Maintenance or repair work;
    (5) Office supplies or consumable goods (such as fuel and 
fertilizer) which are routinely used in a cemetery; or
    (6) Fully enclosed, climate-controlled, committal-service 
facilities, freestanding chapels or chapels that are part of an 
administrative building or information center.
    (d) VA shall certify approved applications to the Secretary of the 
Treasury in the amount of the grant, and shall designate the 
appropriation from which it shall be paid. Funds paid for the 
establishment, expansion, or improvement of a veterans' cemetery must be 
used solely for carrying out approved projects.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.16  Line item adjustment to grant.

    After a grant has been awarded, upon request from the State 
representative, VA may approve a change in a line item (line items are 
identified in Standard Form 424C, which is set forth in Sec. 39.26(c)) 
of up to 10 percent (increase or decrease) of the cost of the line item 
if the change would be within the scope or objective of the project and 
would not change the amount of the grant.

(Authority: 38 U.S.C. 501, 2408.)

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 0348-0041.)

[[Page 731]]



Sec. 39.17  Payment of grant award.

    The amount of the grant award will be paid to the State or, if 
designated by the State representative, the State veterans' cemetery for 
which such project is being carried out, or any other State agency or 
instrumentality. Such amount shall be paid by way of reimbursement, and 
in such installments consistent with the progress of the project, as the 
Director of State Cemetery Grants Service may determine and certify for 
payment to the appropriate Federal institution. Funds paid under this 
section for an approved project shall be used solely for carrying out 
such project as so approved. As a condition for the final payment, the 
State representative must submit to VA the following:
    (a) Standard Form 271 (``Outlay Report and Request for Reimbursement 
for Construction Programs'') (The form is set forth at Sec. 39.26(a)).
    (b) A request in writing for the final architectural/engineering 
inspection, including the name and telephone number of the local point 
of contact for the project;
    (c) The written statement ``It is hereby agreed that the monetary 
commitment of the federal government will have been met and the project 
will be considered terminated upon payment of this voucher,'' and
    (d) Evidence that the State has met its responsibility for an audit 
under the Single Audit Act of 1984 (31 U.S.C. 7501 et seq.) and Sec. 
39.19, if applicable.

(Authority: 38 U.S.C. 501, 2408.)

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 0348-0002.)



Sec. 39.18  Recapture provisions.

    (a) If a State which has received a grant to establish, expand, or 
improve a veterans' cemetery ceases to own such cemetery, ceases to 
operate such cemetery as a veterans' cemetery in accordance with Sec. 
39.5(a), or uses any part of the funds provided through such grant for a 
purpose other than that for which the grant was made, the United States 
shall be entitled to recover from the State the total of all grants made 
to the State in connection with the establishment, expansion or 
improvement of such cemetery.
    (b) If all funds from a grant have not been used by a State for the 
purpose for which the grant was made within 3 years after the VA has 
certified the approved application for such grant to the Department of 
the Treasury, the United States shall be entitled to recover any unused 
grant funds from the State.

(Authority: 38 U.S.C. 501, 2408.)



            Subpart D_Standards and Requirements for Project



Sec. 39.19  General requirements for site selection and construction of 
veterans' cemeteries.

    (a) The various codes, requirements, and recommendations of State 
and local authorities or technical and professional organizations, to 
the extent and manner in which those codes, requirements, and 
recommendations are referenced in this subpart, are applicable to grants 
for construction of veterans' cemeteries. Additional information 
concerning these codes, requirements, and recommendations may be 
obtained from the Department of Veterans Affairs, National Cemetery 
Administration, 810 Vermont Avenue, NW., Washington, DC 20420.
    (b) The standards in Sec. Sec. 39.19 through 39.22 constitute 
general design and construction criteria and shall apply to all projects 
for which Federal assistance is requested under 38 U.S.C. 2408.
    (c) In developing these standards, no attempt has been made to 
comply with all of the various State and local codes and regulations. 
The standards contained in Sec. Sec. 39.19 through 39.22 shall be 
followed where they exceed State or local codes and regulations. 
Departure will be permitted, however, when alternate standards are 
demonstrated to provide equivalent or better design criteria than the 
standards in these sections. Conversely, compliance is required with 
State and local codes where such requirements provide a standard higher 
than those in these sections. The additional cost, if any, in using 
standards that are higher than those of VA should be documented and 
justified in the application.

[[Page 732]]

    (d) The space criteria and area requirements referred to in these 
standards shall be used as a guide in planning. Additional area and 
facilities beyond those specified as basic may be included if found to 
be necessary to meet the functional requirements of the project but are 
subject to approval by VA. Substantial deviation from the space or area 
standards shall be carefully considered and justified. Failing to meet 
the standards or exceeding them by more than 10 percent in the completed 
plan would be regarded as evidence of inferior design or as exceeding 
the boundaries of professional requirements. In those projects that 
unjustifiably exceed maximum space or area criteria, VA funding may be 
subject to proportionate reduction in proportion to the amount by which 
the space or area of the cemetery exceeds the maximum specified in these 
standards.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.20  Site planning standards.

    (a) Site selection--(1) Location. The land should be located as 
close as possible to the densest veteran population in the area under 
consideration.
    (2) Size. Sufficient acreage shall be available to provide 
gravesites for estimated needs for at least 20 years. More acreage 
should be provided where feasible. Acreage could vary depending on the 
State veteran population and national cemetery availability.
    (3) Accessibility. The site should be readily accessible by highway. 
Offsite improvements shall not be funded by the grant.
    (4) Topography. The land should range from comparatively level to 
rolling and moderately hilly terrain. Natural rugged contours are 
suitable only if development and maintenance costs would not be 
excessive and burial areas would be accessible to elderly or infirm 
visitors. The land shall not be subject to flooding.
    (5) Water table. The water table should be lower than the maximum 
proposed depth of burial.
    (6) Soil requirements. The soil should be free from rock, muck, 
unstable composition, and other materials that would hamper the 
economical excavation of graves by normal methods. In general, the soil 
should meet the standards of good agricultural land that is capable of 
supporting turf and trees, with normal care and without the addition of 
topsoil.
    (7) Utilities. Electricity and gas, if required, should be 
available. Offsite improvements shall not be funded by the grant.
    (8) Water supply. An adequate supply of water should be available. 
Offsite improvements shall not be funded by the grant.
    (9) Sewerage. An approved means to dispose of storm flow and sewage 
from the facility should be available. Offsite improvements shall not be 
funded by the grant.
    (b) Site development requirements--(1) General. The development plan 
shall provide for adequate hard surfaced roads, walks, parking areas, 
public rest rooms, flag circle, and a main gate.
    (2) Parking. All parking facilities shall include provisions to 
accommodate the physically handicapped. A minimum of one space shall be 
set aside and identified with signage in each parking area with 
additional spaces provided in the ratio of 1 handicapped space to every 
20 regular spaces. Handicapped spaces shall not be placed between two 
conventional diagonal or head-on parking spaces. Each of the handicapped 
parking spaces shall not be less than 9 feet wide; in addition, a clear 
space 4 feet wide shall be provided between the adjacent conventional 
parking spaces and also on the outside of the end spaces. Parking is not 
provided for large numbers of people attending ceremonial events such as 
Memorial Day services.
    (3) Roads. Roads should generally follow the topography of the 
cemetery, and allow pedestrian access to burial sections on both sides. 
Roads should generally not be used as ``boundaries'' outlining burial 
sections. Extensive bridging should be avoided. The grant program 
funding cannot be used to build access roads on property that is not 
part of the cemetery. Road widths shall be compatible with proposed 
traffic flows and volumes. Primary roads are generally 24 feet wide.
    (4) Pavement design. The pavement section of all roads, service 
areas and parking areas shall be designed for the

[[Page 733]]

maximum anticipated traffic loads and existing soil conditions and in 
accordance with local and State design criteria.
    (5) Curbs. Bituminous roads may be provided with integral curbs and 
gutters constructed of portland cement concrete. Freestanding curbs may 
be substituted when the advantage of using them is clearly indicated. 
All curbs shall have a ``roll-type'' cross section for vehicle and 
equipment access to lawn areas except as may be necessary for traffic 
control. The radii of curbs at road intersections shall not be less than 
20 feet-0 inches. Curb ramps shall be provided to accommodate the 
physically handicapped and maintenance equipment. Curb ramps shall be 
provided at all intersections of roads and walks. The curb ramps shall 
not be less than 4 feet wide; they shall not have a slope greater than 8 
percent, and preferably not greater than 5 percent. The vertical angle 
between the surface of a curb ramp and the surface of a road or gutter 
shall not be less than 176 degrees; the transition between the two 
surfaces shall be smooth. Curb ramps shall have nonskid surfaces.
    (6) Walks. Walks shall be designed with consideration for the 
physically handicapped and elderly. Walks and ramps designed on an 
incline shall have periodic level platforms. All walks, ramps and 
platforms shall have nonskid surfaces. Any walk shall be ramped if the 
slope exceeds 3 percent. Walks that have gradients from 2 to 3 percent 
shall be provided with level platforms at 200-foot intervals and at 
intersections with other walks. Ramps shall not have a slope greater 
than 8 percent, and preferably not greater than 5 percent. The ramps 
shall have handrails on both sides unless other protective devices are 
provided; every handrail shall have clearance of not less than 1\1/2\ 
inches between the back of the handrail and the wall or any other 
vertical surface behind it. Ramps shall not be less than 4 feet wide 
between curbs; curbs shall be provided on both sides. The curbs shall 
not be less than 4 inches high and 4 inches wide. A level platform in a 
ramp shall not be less than the full width of the ramp and not less than 
5 feet long. Entrance platforms and ramps shall be provided with 
protective weather barriers to shield them against hazardous conditions 
resulting from inclement weather.
    (7) Steps. Exterior steps may be included in the site development as 
long as provisions are also provided for use by physically handicapped 
persons.
    (8) Grading. Minimum lawn slopes shall be 2 percent; critical spot 
grade elevations shall be shown on the contract drawings. Insofar as 
practicable, lawn areas shall be designed without steep slopes.
    (9) Landscaping. The landscaping plan should provide for a park-like 
setting of harmonious open spaces balanced with groves of indigenous and 
cultivated deciduous and evergreen trees. Shrubbery should be kept to a 
minimum. Steep slopes that are unsuitable for interment areas should be 
kept in their natural state.
    (10) Surface drainage. Surface grades shall be determined in 
coordination with the architectural, structural and mechanical design of 
buildings and facilities so as to provide proper surface drainage.
    (11) Burial areas. A site plan of the cemetery shall include a 
burial layout. If appropriate, the burial layout should reflect the 
phases of development in the various sections. The first phase of 
construction should contain sufficient burial sites to meet the 
foreseeable demand for at least 10 years. All applicable dimensions to 
roadways, fences, utilities or other structures shall be indicated on 
the layout.
    (12) Gravesites. Gravesites shall be laid out in uniform pattern. 
There shall be a minimum of 10 feet from the edge of roads and drives 
and a minimum of 20 feet from the boundaries or fence lines. Maximum 
distance from the edge of a permanent road to any gravesite shall not be 
over 275 feet. Temporary roads may be provided to serve areas in phase 
developments.
    (13) Monumentation. Each grave shall be marked with an appropriate 
marker and each cemetery shall maintain a register of burials setting 
forth the name of each person buried and the designation of the grave in 
which he/she is buried. Permanent gravesite control markers shall be 
installed based on

[[Page 734]]

a grid system throughout the burial area unless otherwise specified. 
This will facilitate the gravesite layout, placement of utility lines, 
and alignment of headstones.
    (14) Entrance. The entrance should be an architectural or landscape 
feature that creates a sense of arrival.
    (15) Memorial walkway. Each cemetery should have an area for the 
display of memorials donated by veterans groups and others. Such areas 
may take the form of a path or walkway and should provide a 
contemplative setting for visitors.
    (16) Donation items. Family members and others often wish to donate 
items such as benches and trees. Acceptable items of donation should be 
specified in the cemetery plan. The plan should also designate 
appropriate locations for such items.
    (17) Flag/assembly area. There shall be one primary flagpole for the 
United States flag. This flag shall be lighted. A turf assembly area 
should be developed for major gatherings such as Memorial Day. The 
assembly area may be focused on the flag. The area may also incorporate 
an architectural or a landscape feature that functions as a platform or 
backdrop for speakers.
    (18) Site furnishings. Site furnishings include signage, trash 
receptacles, benches, and flower containers. These items should be 
coordinated and complement each other, the architectural design and the 
cemetery as a whole. They should be simple, durable, standardized and 
properly scaled.
    (19) Carillons. The cemetery development plan should include a 
location for a carillon tower. Carillons are normally donated. They are 
not provided for in the grant.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.21  Space criteria for support facilities.

    These criteria are based on a projected average burial rate of one 
to six per day, staffing by position, and a defined complement of 
maintenance and service equipment. For cemeteries with less than one or 
more than six burials per day, support facilities are considered on an 
individual basis in accordance with Sec. 39.19(d). In converting Net 
Square Feet (NSF) to Gross Square Feet (GSF), a conversion factor of 1.5 
is the maximum allowed. The applicant shall, in support of the design, 
include the following as an attachment to the application: a list of all 
grounds maintenance supplies and equipment and the number of Full Time 
Employees (FTE) by job assignment for the next 10 years.
    (a) Administrative building. The administrative building should be 
approximately 1,600 NSF in total, providing space, as needed, for the 
following functions:
    (1) Cemetery director's office;
    (2) Other offices (as needed);
    (3) Administrative staff (lobby/office area);
    (4) Operations (file/office/equipment/work area);
    (5) Family/conference room;
    (6) Military honors team;
    (7) Refreshment unit;
    (8) Housekeeping aide's closet; and
    (9) Restroom facilities.
    (b) Maintenance/service building. The maintenance/service building 
may be combined with the administrative building. The maintenance/
service building should be approximately 2,200 NSF in total, providing 
heated and air conditioned space, as needed, for the following 
functions:
    (1) Foreman's office;
    (2) Lunch room;
    (3) Kitchen unit;
    (4) Toilet and locker room facilities;
    (5) Housekeeping aide's closet; and
    (6) Vehicle and equipment maintenance and storage.
    (c) Vehicle and equipment storage. Approximately 275 NSF/Bay as 
needed. Not all types of vehicles and equipment require storage in 
heated space. Based on climatic conditions, it may be justified to rely 
completely on open structures rather than heated structures to protect 
the following types of vehicles and equipment: Dump Trucks, Pickup 
Trucks, Cemetery Automobiles, Gang and Circular Mowers.
    (d) Interment/committal service shelter. One permanent shelter is 
authorized for every five interments per day. The shelter may include a 
covered area to provide seating for approximately 20 people and an 
uncovered paved area to provide space for approximately 50 additional 
people. The shelter may also

[[Page 735]]

include a small, enclosed equipment/storage area. Provisions must be 
made for the playing of Taps by recorded means.
    (e) Public Information Center. One permanent Public Information 
Center is authorized per facility. A Public Information Center is used 
to provide orientation to visitors and funeral corteges. It should 
include the gravesite locator. The public restrooms may also be combined 
with this structure. Space determinations for separate structures for 
public restrooms shall be considered on an individual basis. The Public 
Information Center, including public restrooms, may be combined with the 
administrative building.
    (f) Other interment structures. Space determinations for other 
support facilities such as columbaria, preplaced graveliners (or 
crypts), garden niches, etc., will be considered on an individual basis 
in accordance with Sec. 39.19(d).

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.22  Architectural design standards.

    The publications listed in this section are incorporated by 
reference. The Director of the Federal Register approves this 
incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR 
part 51. Copies of these publications may be inspected at the office of 
the State Cemetery Grants Service, National Cemetery Administration, 
Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 
20420 or at the Office of the Federal Register, 800 North Capitol 
Street, NW., Suite 700, Washington, DC. Copies of the 2003 edition of 
the National Fire Protection Association Life Safety Code and Errata 
(NFPA 101), the 2003 edition of the NFPA 5000, Building Construction and 
Safety Code, and the 2002 edition of the National Electrical Code, NFPA 
70, may be obtained from the National Fire Protection Association, Inc. 
(NFPA), 1 Batterymarch Park, P.O. Box 9101, Quincy, MA 02269-9101. 
Copies of the 2003 edition of the Uniform Mechanical Code, and the 2003 
edition of the Uniform Plumbing Code, may be obtained from the 
International Association of Plumbing and Mechanical Officials, 5001 E. 
Philadelphia Street, Ontario, CA 91761-2816.
    (a) Architectural and structural requirements--(1) Life Safety Code. 
Standards must be in accordance with the 2003 edition of the National 
Fire Protection Association Life Safety Code, NFPA 101. Fire safety 
construction features not included in NFPA 101 shall be designed in 
accordance with the requirements of the 2003 edition of the NFPA 5000, 
Building Construction and Safety Code. Where the adopted codes state 
conflicting requirements, the NFPA National Fire Codes shall govern.
    (2) State and local codes. In addition to compliance with the 
standards set forth in this section, all applicable local and State 
building codes and regulations must be observed. In areas not subject to 
local or State building codes, the recommendations contained in the 2003 
edition of the NFPA 5000, Building Construction and Safety Code shall 
apply.
    (3) Occupational safety and health standards. Applicable standards 
as contained in the Occupational Safety and Health Act of 1970 (29 
U.S.C. 651 et seq.) must be observed.
    (b) Mechanical requirements. The heating system, boilers, steam 
system, ventilation system and air-conditioning system shall be 
furnished and installed to meet all requirements of the local and State 
codes and regulations. Where no local or State codes are in force, the 
2003 edition of the Uniform Mechanical Code shall apply.
    (c) Plumbing requirements. Plumbing systems shall comply with all 
applicable local and State codes, the requirements of the State 
Department of Health, and the minimum general standards as set forth in 
this part. Where no local or State codes are in force, the 2003 edition 
of the Uniform Plumbing Code shall apply.
    (d) Electrical requirements. The installation of electrical work and 
equipment shall comply with all local and State codes and laws 
applicable to electrical installations and the minimum general 
standards, as set forth in the NFPA 70, National Electrical Code, 2002 
edition (NEC 2002 Code). The regulations of the local utility company 
shall govern service connections. Aluminum

[[Page 736]]

bus ways shall not be used as a conducting medium in the electrical 
distribution system.

(Authority: 38 U.S.C. 501, 2408.)



 Subpart E_Responsibilities, Inspections, and Reports Following Project 
                               Completion



Sec. 39.23  Responsibilities following project completion.

    (a) States shall monitor use of the cemetery by various subgroups 
and minority groups, including women veterans. To the extent that under-
utilization by any of these groups is determined to exist, a program 
shall be established to inform members of these groups about benefits 
available to them. The information regarding the benefits shall be 
available in a language other than English where a significant number or 
portion of the population eligible to be served or likely to be directly 
affected by the grant program needs such service or information.
    (b) State veterans' cemeteries established, expanded, or improved 
with assistance under the grant program shall be operated and maintained 
as follows:
    (1) Buildings, grounds, roads, walks, and other structures shall be 
kept in reasonable repair to prevent undue deterioration and hazards to 
users.
    (2) The cemetery shall be kept open for public use at reasonable 
hours based on the time of the year.
    (c) VA, in coordination with the State, shall inspect the project at 
completion for compliance with the standards set forth in Sec. Sec. 
39.19 through 39.22 and at least once in every 3-year period following 
completion of the project throughout the period the facility is operated 
as a State veterans' cemetery. A copy of the inspection report shall be 
forwarded to the Director, State Cemetery Grants Service, giving the 
date and location the inspection was made and citing any deficiencies 
and corrective action taken or proposed.
    (d) Failure of a State to comply with any of paragraphs (a) through 
(c) of this section shall be considered cause for the Department of 
Veterans Affairs to suspend any payments due the State on any or all 
projects until the situation involved is corrected.

(Authority: 38 U.S.C. 501, 2408; and issued under authority of the 
President by E.O. 13166, 65 FR 50121)



Sec. 39.24  State to retain control of operations.

    Neither the Secretary nor any employee of the Department of Veterans 
Affairs shall exercise any supervision or control over the 
administration, personnel, maintenance, or operation of any State 
veterans' cemetery established, expanded, or improved with assistance 
received under this program except as prescribed in this part.

(Authority: 38 U.S.C. 501, 2408.)



Sec. 39.25  Inspections, audits, and reports.

    (a) A State will allow VA inspectors and auditors to conduct 
inspections as necessary to ensure compliance with the provisions of 
this part. The State will provide to VA evidence that it has met its 
responsibility under the Single Audit Act of 1984 (see part 41 of this 
chapter).
    (b) A State will make an annual report on VA Form 40-0241 (``State 
Cemetery Data'') signed by the authorized representative of the State. 
These forms document current burial activity at the cemetery, use of 
gravesites, remaining gravesites, and additional operational information 
intended to answer questions about the status of the grant program.

(Authority: 38 U.S.C. 501, 2408.)

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0559.)



                             Subpart F_Forms



Sec. 39.26  Forms.

    All forms set forth in this part are available on the Internet at 
http://www.va.gov/forms.

    (a) Standard Form 271--Outlay Report and Request for Reimbursement 
for Construction Programs

[[Page 737]]

[GRAPHIC] [TIFF OMITTED] TR29MR04.000


[[Page 738]]


[GRAPHIC] [TIFF OMITTED] TR29MR04.001


[[Page 739]]



(Authority: 38 U.S.C. 501, 2408.)

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 0348-0002.)
    (b) Standard Form 424--Application for Federal Assistance.
    [GRAPHIC] [TIFF OMITTED] TR29MR04.002
    

[[Page 740]]


[GRAPHIC] [TIFF OMITTED] TR29MR04.003


(Authority: 38 U.S.C. 501, 2408)

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 0348-0041.)
    (c) Standard Form 424C--Instructions for the SF-424C.

[[Page 741]]

[GRAPHIC] [TIFF OMITTED] TR29MR04.004


[[Page 742]]


[GRAPHIC] [TIFF OMITTED] TR29MR04.005


(Authority: 38 U.S.C. 501, 2408.)

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 0348-0041.)

    (d) Standard Form 424D--Assurances--Construction Programs.


[[Page 743]]


[GRAPHIC] [TIFF OMITTED] TR29MR04.006


[[Page 744]]


[GRAPHIC] [TIFF OMITTED] TR29MR04.007


(Authority: 38 U.S.C. 501, 2408.)

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 0348-0042.)
    (e) VA Form 10-0148c--Certification Regarding Debarment, Suspension, 
and Other Responsibility Matters--Primary Covered Transactions.


[[Page 745]]


[GRAPHIC] [TIFF OMITTED] TR29MR04.008


[[Page 746]]


[GRAPHIC] [TIFF OMITTED] TR29MR04.009


(Authority: 38 U.S.C. 501, 2408.)
    (f) VA Form 40-0241--State Cemetery Data.

[[Page 747]]

[GRAPHIC] [TIFF OMITTED] TR29MR04.010


(Authority: 38 U.S.C. 501, 2408.)

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0559.)



PART 40_INTERGOVERNMENTAL REVIEW OF DEPARTMENT OF VETERANS AFFAIRS 
PROGRAMS AND ACTIVITIES--Table of Contents




Sec.
40.1 Purpose.

[[Page 748]]

40.2 Definitions.
40.3 Programs and activities.
40.4 General.
40.5 Federal interagency coordination.
40.6 Selection of programs and activities.
40.7 Communicating with State and local officials concerning VA's 
          programs and activities.
40.8 Commenting on proposed Federal financial assistance and direct 
          Federal development.
40.9 Comment receipt and response to comments.
40.10 Making efforts to accommodate intergovernmental concerns.
40.11 Interstate.
40.12 [Reserved]
40.13 Waiver.

    Authority: E.O. 12372, July 14, 1982 (47 FR 30959), as amended April 
8, 1983 (48 FR 15887): section 401 of the Intergovernmental Cooperation 
Act of 1968, as amended (31 U.S.C. 6506); sec. 204 of the Demonstration 
Cities and Metropolitan Development Act of 1966, as amended (42 U.S.C. 
3334).

    Source: 48 FR 29413, June 24, 1983; 48 FR 31854, July 12, 1983, 
unless otherwise noted.



Sec. 40.1  Purpose.

    (a) The regulations in this part implement Executive Order 12372, 
``Intergovernmental Review of Federal Programs'', issued on 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 and direct Federal development.
    (c) These regulations are intended to improve the internal 
management of the VA, and are not intended to create any right or 
benefit enforceable at law by a party against the VA or its officers.

(Authority: 42 U.S.C. 4231(b))



Sec. 40.2  Definitions.

    For the purposes of Sec. Sec. 40.1 through 40.13, the following 
definitions apply:
    (a) VA means the Department of Veterans Affairs.
    (b) Order means Executive Order 12372, issued July 14, 1982, and 
amended April 8, 1983, and titled ``Intergovernmental Review of Federal 
Programs.''
    (c) Secretary means the Secretary of Veterans Affairs of the 
Department of Veterans Affairs or an official or employee of VA acting 
for the Secretary under delegation of authority.
    (d) 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.
    (e) Emergency means a sudden, urgent, unforeseen situation in which 
immediate action is needed to prevent or respond to significant harm to 
life or property. Harm to property would include damage to the 
environment.
    (f) Unusual circumstances means the end of a fiscal year, a 
statutory deadline or any other circumstance making it impracticable for 
the agency to provide 60 days for comment.
    (g) Affected means for purposes of interstate situations those 
States physically affected by the specific plans and projects.

(Authority: 42 U.S.C. 4231(b))



Sec. 40.3  Programs and activities.

    The Secretary publishes in the Federal Register a list of VA'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.

(Authority: 42 U.S.C. 4231(b))



Sec. 40.4  General.

    (a) The Secretary provides opportunities for consultation by elected 
officials of those State and local governments that would provide the 
non-Federal funds for, or that would be directly affected by, proposed 
Federal financial assistance from, or direct Federal development by, VA.
    (b) If a State adopts a process under the order to review and 
coordinate proposed Federal financial assistance and direct Federal 
development, the Secretary, to the extent permitted by law:

[[Page 749]]

    (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 officials' 
concerns with proposed Federal financial assistance and direct Federal 
development that are communicated through the State process;
    (4) 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 or direct Federal development has an impact 
on interstate metropolitan urban centers or other interstate areas; and
    (5) 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: 42 U.S.C. 4231(b))



Sec. 40.5  Federal interagency coordination.

    The Secretary, to the 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 VA regarding programs and activities covered under these 
regulations.

(Authority: 42 U.S.C. 4231(b))



Sec. 40.6  Selection of programs and activities.

    (a) A State may select any program or activity published in the 
Federal Register in accordance with Sec. 40.3 of this part, 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 VA'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 VA 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: 42 U.S.C. 4231(b))



Sec. 40.7  Communicating with State and local officials concerning VA's 
programs and activities.

    The Secretary provides notice to directly affected State, areawide, 
regional, and local entities in a State of proposed Federal financial 
assistance or direct Federal development if:
    (a) The State has not adopted a process under the order; or
    (b) The assistance or development involves a program or activity not 
selected for the State process.

This notice may be made by publication in the Federal Register or other 
appropriate means, which VA in its discretion deems appropriate.

(Authority: 42 U.S.C. 4231(b))



Sec. 40.8  Commenting on proposed Federal financial assistance and direct 
Federal development.

    (a) Except in unusual circumstances, the Secretary gives State 
processes or State, areawide, regional and local officials and entities 
at least 60 days from the date established by the Secretary to comment 
on proposed direct Federal development or Federal financial assistance.
    (b) This section also applies to comments in cases in which the 
review, coordination, and communication with VA have been delegated.
    (c) 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: 42 U.S.C. 4231(b))

[[Page 750]]



Sec. 40.9  Comment receipt and response to comments.

    (a) The Secretary follows the procedures in Sec. 40.10 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 
for a program selected under Sec. 40.6.
    (b)(1) The single point of contact is not obligated to transmit 
comments from State, areawide, regional or local officials and entities 
where 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 either to the applicant or to 
VA.
    (d) If a program or activity is not selected for a State process, 
State, areawide, regional and local officials and entities may submit 
comments either to the applicant or to VA. In addition, if a State 
process recommendation for a nonselected program or activity is 
transmitted to VA by the single point of contact, the Secretary follows 
the procedures of Sec. 40.10 of this part.
    (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. 40.10 of 
this part, when such comments are provided by a single point of contact, 
by the applicant, or directly to the VA by a commenting party.

(Authority: 42 U.S.C. 4231(b))



Sec. 40.10  Making efforts to accommodate intergovernmental concerns.

    (a) If a State process provides a State process recommendation to VA 
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 such written 
explanation of the decision, as the Secretary in his or her discretion 
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 VA 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 five days after the date of mailing of 
such notification.

(Authority: 42 U.S.C. 4231(b))



Sec. 40.11  Interstate.

    (a) The Secretary is responsible for:
    (1) Identifying proposed Federal financial assistance and direct 
Federal development that have an impact on interstate areas;
    (2) Notifying appropriate officials and entities in States which 
have adopted a process and which select VA'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 VA's 
program or activity;
    (4) Responding pursuant to Sec. 40.10 of this part 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 VA have been delegated, or
    (b) The Secretary uses the procedures in Sec. 40.10 if a State 
process provides a

[[Page 751]]

State process recommendation to VA through a single point of contact.

(Authority: 42 U.S.C. 4231(b))



Sec. 40.12  [Reserved]



Sec. 40.13  Waiver.

    In an emergency, the Secretary may waive any provision of these 
regulations.

(Authority: 42 U.S.C. 4231(b))



PART 41_AUDITS OF STATES, LOCAL GOVERNMENTS, AND NON-PROFIT ORGANIZATIONS
--Table of Contents




                            Subpart A_General

Sec.
41.100 Purpose.
41.105 Definitions.

                            Subpart B_Audits

41.200 Audit requirements.
41.205 Basis for determining Federal awards expended.
41.210 Subrecipient and vendor determinations.
41.215 Relation to other audit requirements.
41.220 Frequency of audits.
41.225 Sanctions.
41.230 Audit costs.
41.235 Program-specific audits.

                           Subpart C_Auditees

41.300 Auditee responsibilities.
41.305 Auditor selection.
41.310 Financial statements.
41.315 Audit findings follow-up.
41.320 Report submission.

          Subpart D_Federal Agencies and Pass-Through Entities

41.400 Responsibilities.
41.405 Management decision.

                           Subpart E_Auditors

41.500 Scope of audit.
41.505 Audit reporting.
41.510 Audit findings.
41.515 Audit working papers.
41.520 Major program determination.
41.525 Criteria for Federal program risk.
41.530 Criteria for a low-risk auditee.

Appendix A to Part 41--Data Collection Form (Form SF-SAC)
Appendix B to Part 41--OMB Circular A-133 Compliance Supplement

    Authority: 5 U.S.C. 301; 31 U.S.C. 7501 et seq.; 38 U.S.C. 501, OMB 
Circular A-133, and as noted in specific sections.

    Source: 70 FR 52249, Sept. 1, 2005, unless otherwise noted.



                            Subpart A_General



Sec. 41.100  Purpose.

    This part sets forth standards for obtaining consistency and 
uniformity among Federal agencies for the audit of non-Federal entities 
expending Federal awards.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.105  Definitions.

    Audit finding means deficiencies which the auditor is required by 
Sec. 41.510(a) to report in the schedule of findings and questioned 
costs.
    Auditee means any non-Federal entity that expends Federal awards 
which must be audited under this part.
    Auditor means an auditor, that is a public accountant or a Federal, 
State or local government audit organization, which meets the general 
standards specified in generally accepted government auditing standards 
(GAGAS). The term auditor does not include internal auditors of non-
profit organizations.
    CFDA number means the number assigned to a Federal program in the 
Catalog of Federal Domestic Assistance (CFDA).
    Cluster of programs means a grouping of closely related programs 
that share common compliance requirements. The types of clusters of 
programs are research and development (R&D), student financial aid 
(SFA), and other clusters. ``Other clusters'' are as defined by the 
Office of Management and Budget (OMB) in the compliance supplement or as 
designated by a State for Federal awards the State provides to its 
subrecipients that meet the definition of a cluster of programs. When 
designating an ``other cluster,'' a State shall identify the Federal 
awards included in the cluster and advise the subrecipients of 
compliance requirements applicable to the cluster, consistent with Sec. 
41.400(d)(1) and Sec. 41.400(d)(2), respectively. A cluster of programs 
shall be

[[Page 752]]

considered as one program for determining major programs, as described 
in Sec. 41.520, and, with the exception of R&D as described in Sec.  
41.200(c), whether a program-specific audit may be elected.
    Cognizant agency for audit means the Federal agency designated to 
carry out the responsibilities described in Sec. 41.400(a).
    Compliance supplement refers to the Circular A-133 Compliance 
Supplement, included as Appendix B to Circular A-133, or such documents 
as OMB or its designee may issue to replace it. This document is 
available from the Government Printing Office, Superintendent of 
Documents, Washington, DC 20402-9325.
    Corrective action means action taken by the auditee that:
    (1) Corrects identified deficiencies;
    (2) Produces recommended improvements; or
    (3) Demonstrates that audit findings are either invalid or do not 
warrant auditee action.
    Federal agency has the same meaning as the term agency in section 
551(1) of title 5, United States Code.
    Federal award means Federal financial assistance and Federal cost-
reimbursement contracts that non-Federal entities receive directly from 
Federal awarding agencies or indirectly from pass-through entities. It 
does not include procurement contracts, under grants or contracts, used 
to buy goods or services from vendors. Any audits of such vendors shall 
be covered by the terms and conditions of the contract. Contracts to 
operate Federal Government owned, contractor operated facilities (GOCOs) 
are excluded from the requirements of this part.
    Federal awarding agency means the Federal agency that provides an 
award directly to the recipient.
    Federal financial assistance means assistance that non-Federal 
entities receive or administer in the form of grants, loans, loan 
guarantees, property (including donated surplus property), cooperative 
agreements, interest subsidies, insurance, food commodities, direct 
appropriations, and other assistance, but does not include amounts 
received as reimbursement for services rendered to individuals as 
described in Sec. 41.205(h) and Sec.  41.205(i).
    Federal program means:
    (1) All Federal awards to a non-Federal entity assigned a single 
number in the CFDA.
    (2) When no CFDA number is assigned, all Federal awards from the 
same agency made for the same purpose should be combined and considered 
one program.
    (3) Notwithstanding paragraphs (1) and (2) of this definition, a 
cluster of programs. The types of clusters of programs are:
    (i) Research and development (R&D);
    (ii) Student financial aid (SFA); and
    (iii) ``Other clusters,'' as described in the definition of cluster 
of programs in this section.
    GAGAS means generally accepted government auditing standards issued 
by the Comptroller General of the United States, which are applicable to 
financial audits.
    Generally accepted accounting principles has the meaning specified 
in generally accepted auditing standards issued by the American 
Institute of Certified Public Accountants (AICPA).
    Indian tribe means any Indian tribe, band, nation, or other 
organized group or community, including any Alaskan Native village or 
regional or village corporation (as defined in, or established under, 
the Alaskan Native Claims Settlement Act) that is recognized by the 
United States as eligible for the special programs and services provided 
by the United States to Indians because of their status as Indians.
    Internal control means a process, effected by an entity's management 
and other personnel, designed to provide reasonable assurance regarding 
the achievement of objectives in the following categories:
    (1) Effectiveness and efficiency of operations;
    (2) Reliability of financial reporting; and
    (3) Compliance with applicable laws and regulations.
    Internal control pertaining to the compliance requirements for 
Federal programs (Internal control over Federal programs) means a 
process--effected by an entity's management and other personnel--
designed to provide reasonable assurance regarding the achievement of 
the

[[Page 753]]

following objectives for Federal programs:
    (1) Transactions are properly recorded and accounted for to:
    (i) Permit the preparation of reliable financial statements and 
Federal reports;
    (ii) Maintain accountability over assets; and
    (iii) Demonstrate compliance with laws, regulations, and other 
compliance requirements;
    (2) Transactions are executed in compliance with:
    (i) Laws, regulations, and the provisions of contracts or grant 
agreements that could have a direct and material effect on a Federal 
program; and
    (ii) Any other laws and regulations that are identified in the 
compliance supplement; and
    (3) Funds, property, and other assets are safeguarded against loss 
from unauthorized use or disposition.
    Loan means a Federal loan or loan guarantee received or administered 
by a non-Federal entity.
    Local government means any unit of local government within a State, 
including a county, borough, municipality, city, town, township, parish, 
local public authority, special district, school district, intrastate 
district, council of governments, and any other instrumentality of local 
government.
    Major program means a Federal program determined by the auditor to 
be a major program in accordance with Sec. 41.520 or a program 
identified as a major program by a Federal agency or pass-through entity 
in accordance with Sec. 41.215(c).
    Management decision means the evaluation by the Federal awarding 
agency or pass-through entity of the audit findings and corrective 
action plan and the issuance of a written decision as to what corrective 
action is necessary.
    Non-Federal entity means a State, local government, or non-profit 
organization.
    Non-profit organization means:
    (1) Any corporation, trust, association, cooperative, or other 
organization that:
    (i) Is operated primarily for scientific, educational, service, 
charitable, or similar purposes in the public interest;
    (ii) Is not organized primarily for profit; and
    (iii) Uses its net proceeds to maintain, improve, or expand its 
operations; and
    (2) The term non-profit organization includes non-profit 
institutions of higher education and hospitals.
    OMB means the Executive Office of the President, Office of 
Management and Budget.
    Oversight agency for audit means the Federal awarding agency that 
provides the predominant amount of direct funding to a recipient not 
assigned a cognizant agency for audit. When there is no direct funding, 
the Federal agency with the predominant indirect funding shall assume 
the oversight responsibilities. The duties of the oversight agency for 
audit are described in Sec. 41.400(b). A Federal agency with oversight 
for an auditee may reassign oversight to another Federal agency, which 
provides substantial funding and agrees to be the oversight agency for 
audit. Within 30 days after any reassignment, both the old and the new 
oversight agency for audit shall notify the auditee, and, if known, the 
auditor of the reassignment.
    Pass-through entity means a non-Federal entity that provides a 
Federal award to a subrecipient to carry out a Federal program.
    Program-specific audit means an audit of one Federal program as 
provided for in Sec. 41.200(c) and Sec.  41.235.
    Questioned cost means a cost that is questioned by the auditor 
because of an audit finding:
    (1) Which resulted from a violation or possible violation of a 
provision of a law, regulation, contract, grant, cooperative agreement, 
or other agreement or document governing the use of Federal funds, 
including funds used to match Federal funds;
    (2) Where the costs, at the time of the audit, are not supported by 
adequate documentation; or
    (3) Where the costs incurred appear unreasonable and do not reflect 
the actions a prudent person would take in the circumstances.
    Recipient means a non-Federal entity that expends Federal awards 
received directly from a Federal awarding agency to carry out a Federal 
program.

[[Page 754]]

    Research and development (R&D) means all research activities, both 
basic and applied, and all development activities that are performed by 
a non-Federal entity. Research is defined as a systematic study directed 
toward fuller scientific knowledge or understanding of the subject 
studied. The term research also includes activities involving the 
training of individuals in research techniques where such activities 
utilize the same facilities as other research and development activities 
and where such activities are not included in the instruction function. 
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.
    Single audit means an audit, which includes both the entity's 
financial statements, and the Federal awards as described in Sec. 
41.500.
    State means any State of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, 
American Samoa, the Commonwealth of the Northern Mariana Islands, and 
the Trust Territory of the Pacific Islands, any instrumentality thereof, 
any multi-State, regional, or interstate entity, which has governmental 
functions, and any Indian tribe as defined in this section.
    Student Financial Aid (SFA) includes those programs of general 
student assistance, such as those authorized by Title IV of the Higher 
Education Act of 1965, as amended, (20 U.S.C. 1070 et seq.) which is 
administered by the U.S. Department of Education, and similar programs 
provided by other Federal agencies. It does not include programs which 
provide fellowships or similar Federal awards to students on a 
competitive basis, or for specified studies or research.
    Subrecipient means a non-Federal entity that expends Federal awards 
received from a pass-through entity to carry out a Federal program, but 
does not include an individual that is a beneficiary of such a program. 
A subrecipient may also be a recipient of other Federal awards directly 
from a Federal awarding agency. Guidance on distinguishing between a 
subrecipient and a vendor is provided in Sec. 41.210.
    Types of compliance requirements refers to the types of compliance 
requirements listed in the compliance supplement. Examples include: 
Activities allowed or unallowed; allowable costs/cost principles; cash 
management; eligibility; matching, level of effort, earmarking; and, 
reporting.
    Vendor means a dealer, distributor, merchant, or other seller 
providing goods or services that are required for the conduct of a 
Federal program. These goods or services may be for an organization's 
own use or for the use of beneficiaries of the Federal program. 
Additional guidance on distinguishing between a subrecipient and a 
vendor is provided in Sec. 41.210.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



                            Subpart B_Audits



Sec. 41.200  Audit requirements.

    (a) Audit required. Non-Federal entities that expend $500,000 or 
more in a year in Federal awards shall have a single or program-specific 
audit conducted for that year in accordance with the provisions of this 
part. Guidance on determining Federal awards expended is provided in 
Sec. 41.205.
    (b) Single audit. Non-Federal entities that expend $500,000 or more 
in a year in Federal awards shall have a single audit conducted in 
accordance with Sec. 41.500 except when they elect to have a program-
specific audit conducted in accordance with paragraph (c) of this 
section.
    (c) Program-specific audit election. When an auditee expends Federal 
awards under only one Federal program (excluding R&D) and the Federal 
program's laws, regulations, or grant agreements do not require a 
financial statement audit of the auditee, the auditee may elect to have 
a program-specific audit conducted in accordance with Sec. 41.235. A 
program-specific audit may not be elected for R&D unless all of the 
Federal awards expended were received from the same Federal agency, or 
the same Federal agency and the same pass-through entity, and that 
Federal agency, or pass-through entity

[[Page 755]]

in the case of a subrecipient, approves in advance a program-specific 
audit.
    (d) Exemption when Federal awards expended are less than $500,000. 
Non-Federal entities that expend less than $500,000 a year in Federal 
awards are exempt from Federal audit requirements for that year, except 
as noted in Sec. 41.215(a), but records must be available for review or 
audit by appropriate officials of the Federal agency, pass-through 
entity, and General Accounting Office (GAO).
    (e) Federally Funded Research and Development Centers (FFRDC). 
Management of an auditee that owns or operates a FFRDC may elect to 
treat the FFRDC as a separate entity for purposes of this part.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.205  Basis for determining Federal awards expended.

    (a) Determining Federal awards expended. The determination of when 
an award is expended should be based on when the activity related to the 
award occurs. Generally, the activity pertains to events that require 
the non-Federal entity to comply with laws, regulations, and the 
provisions of contracts or grant agreements, such as: expenditure/
expense transactions associated with grants, cost-reimbursement 
contracts, cooperative agreements, and direct appropriations; the 
disbursement of funds passed through to subrecipients; the use of loan 
proceeds under loan and loan guarantee programs; the receipt of 
property; the receipt of surplus property; the receipt or use of program 
income; the distribution or consumption of food commodities; the 
disbursement of amounts entitling the non-Federal entity to an interest 
subsidy; and, the period when insurance is in force.
    (b) Loan and loan guarantees (loans). Since the Federal Government 
is at risk for loans until the debt is repaid, the following guidelines 
shall be used to calculate the value of Federal awards expended under 
loan programs, except as noted in paragraphs (c) and (d) of this 
section:
    (1) Value of new loans made or received during the fiscal year; plus
    (2) Balance of loans from previous years for which the Federal 
Government imposes continuing compliance requirements; plus
    (3) Any interest subsidy, cash, or administrative cost allowance 
received.
    (c) Loan and loan guarantees (loans) at institutions of higher 
education. When loans are made to students of an institution of higher 
education but the institution does not make the loans, then only the 
value of loans made during the year shall be considered Federal awards 
expended in that year. The balance of loans for previous years is not 
included as Federal awards expended because the lender accounts for the 
prior balances.
    (d) Prior loan and loan guarantees (loans). Loans, the proceeds of 
which were received and expended in prior-years, are not considered 
Federal awards expended under this part when the laws, regulations, and 
the provisions of contracts or grant agreements pertaining to such loans 
impose no continuing compliance requirements other than to repay the 
loans.
    (e) Endowment funds. The cumulative balance of Federal awards for 
endowment funds, which are federally restricted, are considered awards 
expended in each year in which the funds are still restricted.
    (f) Free rent. Free rent received by itself is not considered a 
Federal award expended under this part. However, free rent received as 
part of an award to carry out a Federal program shall be included in 
determining Federal awards expended and subject to audit under this 
part.
    (g) Valuing non-cash assistance. Federal non-cash assistance, such 
as free rent, food stamps, food commodities, donated property, or 
donated surplus property, shall be valued at fair market value at the 
time of receipt or the assessed value provided by the Federal agency.
    (h) Medicare. Medicare payments to a non-Federal entity for 
providing patient care services to Medicare eligible individuals are not 
considered Federal awards expended under this part.
    (i) Medicaid. Medicaid payments to a subrecipient for providing 
patient care services to Medicaid eligible individuals are not 
considered Federal awards expended under this part unless a State

[[Page 756]]

requires the funds to be treated as Federal awards expended because 
reimbursement is on a cost-reimbursement basis.
    (j) Certain loans provided by the National Credit Union 
Administration. For purposes of this part, loans made from the National 
Credit Union Share Insurance Fund and the Central Liquidity Facility 
that are funded by contributions from insured institutions are not 
considered Federal awards expended.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.210  Subrecipient and vendor determinations.

    (a) General. An auditee may be a recipient, a subrecipient, and a 
vendor. Federal awards expended as a recipient or a subrecipient would 
be subject to audit under this part. The payments received for goods or 
services provided as a vendor would not be considered Federal awards. 
The guidance in paragraphs (b) and (c) of this section should be 
considered in determining whether payments constitute a Federal award or 
a payment for goods and services.
    (b) Federal award. Characteristics indicative of a Federal award 
received by a subrecipient are when the organization:
    (1) Determines who is eligible to receive what Federal financial 
assistance;
    (2) Has its performance measured against whether the objectives of 
the Federal program are met;
    (3) Has responsibility for programmatic decision making;
    (4) Has responsibility for adherence to applicable Federal program 
compliance requirements; and
    (5) Uses the Federal funds to carry out a program of the 
organization as compared to providing goods or services for a program of 
the pass-through entity.
    (c) Payment for goods and services. Characteristics indicative of a 
payment for goods and services received by a vendor are when the 
organization:
    (1) Provides the goods and services within normal business 
operations;
    (2) Provides similar goods or services to many different purchasers;
    (3) Operates in a competitive environment;
    (4) Provides goods or services that are ancillary to the operation 
of the Federal program; and
    (5) Is not subject to compliance requirements of the Federal 
program.
    (d) Use of judgment in making determination. There may be unusual 
circumstances or exceptions to the listed characteristics. In making the 
determination of whether a subrecipient or vendor relationship exists, 
the substance of the relationship is more important than the form of the 
agreement. It is not expected that all of the characteristics will be 
present and judgment should be used in determining whether an entity is 
a subrecipient or vendor.
    (e) For-profit subrecipient. Since this part does not apply to for-
profit subrecipients, the pass-through entity is responsible for 
establishing requirements, as necessary, to ensure compliance by for-
profit subrecipients. The contract with the for-profit subrecipient 
should describe applicable compliance requirements and the for-profit 
subrecipient's compliance responsibility. Methods to ensure compliance 
for Federal awards made to for-profit subrecipients may include pre-
award audits, monitoring during the contract, and post-award audits.
    (f) Compliance responsibility for vendors. In most cases, the 
auditee's compliance responsibility for vendors is only to ensure that 
the procurement, receipt, and payment for goods and services comply with 
laws, regulations, and the provisions of contracts or grant agreements. 
Program compliance requirements normally do not pass through to vendors. 
However, the auditee is responsible for ensuring compliance for vendor 
transactions, which are structured such that the vendor is responsible 
for program compliance or the vendor's records must be reviewed to 
determine program compliance. Also, when these vendor transactions 
relate to a major program, the scope of the audit shall include 
determining whether these transactions are in compliance with laws, 
regulations, and the provisions of contracts or grant agreements.

(Authority: Pub. L. 104-156; 110 Stat. 1396)

[[Page 757]]



Sec. 41.215  Relation to other audit requirements.

    (a) Audit under this part in lieu of other audits. An audit made in 
accordance with this part shall be in lieu of any financial audit 
required under individual Federal awards. To the extent this audit meets 
a Federal agency's needs, it shall rely upon and use such audits. The 
provisions of this part neither limit the authority of Federal agencies, 
including their Inspectors General, or GAO to conduct or arrange for 
additional audits (e.g., financial audits, performance audits, 
evaluations, inspections, or reviews) nor authorize any auditee to 
constrain Federal agencies from carrying out additional audits. Any 
additional audits shall be planned and performed in such a way as to 
build upon work performed by other auditors.
    (b) Federal agency to pay for additional audits. A Federal agency 
that conducts or contracts for additional audits shall, consistent with 
other applicable laws and regulations, arrange for funding the full cost 
of such additional audits.
    (c) Request for a program to be audited as a major program. A 
Federal agency may request an auditee to have a particular Federal 
program audited as a major program in lieu of the Federal agency 
conducting or arranging for the additional audits. To allow for 
planning, such requests should be made at least 180 days prior to the 
end of the fiscal year to be audited. The auditee, after consultation 
with its auditor, should promptly respond to such request by informing 
the Federal agency whether the program would otherwise be audited as a 
major program using the risk-based audit approach described in Sec. 
41.520 and, if not, the estimated incremental cost. The Federal agency 
shall then promptly confirm to the auditee whether it wants the program 
audited as a major program. If the program is to be audited as a major 
program based upon this Federal agency request, and the Federal agency 
agrees to pay the full incremental costs, then the auditee shall have 
the program audited as a major program. A pass-through entity may use 
the provisions of this paragraph for a subrecipient.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.220  Frequency of audits.

    Except for the provisions for biennial audits provided in paragraphs 
(a) and (b) of this section, audits required by this part shall be 
performed annually. Any biennial audit shall cover both years within the 
biennial period.
    (a) A State or local government that is required by constitution or 
statute, in effect on January 1, 1987, to undergo its audits less 
frequently than annually, is permitted to undergo its audits pursuant to 
this part biennially. This requirement must still be in effect for the 
biennial period under audit.
    (b) Any non-profit organization that had biennial audits for all 
biennial periods ending between July 1, 1992, and January 1, 1995, is 
permitted to undergo its audits pursuant to this part biennially.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.225  Sanctions.

    No audit costs may be charged to Federal awards when audits required 
by this part have not been made or have been made but not in accordance 
with this part. In cases of continued inability or unwillingness to have 
an audit conducted in accordance with this part, Federal agencies and 
pass-through entities shall take appropriate action using sanctions such 
as:
    (a) Withholding a percentage of Federal awards until the audit is 
completed satisfactorily;
    (b) Withholding or disallowing overhead costs;
    (c) Suspending Federal awards until the audit is conducted; or
    (d) Terminating the Federal award.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.230  Audit costs.

    (a) Allowable costs. Unless prohibited by law, the cost of audits 
made in accordance with the provisions of this part is allowable charges 
to Federal awards. The charges may be considered a direct cost or an 
allocated indirect cost, as determined in accordance with the provisions 
of applicable OMB cost

[[Page 758]]

principles circulars, the Federal Acquisition Regulation (FAR) (48 CFR 
parts 30 and 31), or other applicable cost principles or regulations.
    (b) Unallowable costs. A non-Federal entity shall not charge the 
following to a Federal award:
    (1) The cost of any audit under the Single Audit Act Amendments of 
1996 (31 U.S.C. 7501 et seq.) not conducted in accordance with this 
part.
    (2) The cost of auditing a non-Federal entity, which has Federal 
awards, expended of less than $500,000 per year and is thereby exempted 
under Sec. 41.200(d) of this chapter from having an audit conducted 
under this part. However, this does not prohibit a pass-through entity 
from charging Federal awards for the cost of limited scope audits to 
monitor its subrecipients in accordance with Sec. 41.400(d)(3), 
provided the subrecipient does not have a single audit. For purposes of 
this part, limited scope audits only include agreed-upon procedures 
engagements conducted in accordance with either the AICPA's generally 
accepted auditing standards or attestation standards, that are paid for 
and arranged by a pass-through entity and address only one or more of 
the following types of compliance requirements: activities allowed or 
unallowed; allowable costs/cost principles; eligibility; matching, level 
of effort, earmarking; and, reporting.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.235  Program-specific audits.

    (a) Program-specific audit guide available. In many cases, a 
program-specific audit guide will be available to provide specific 
guidance to the auditor with respect to internal control, compliance 
requirements, suggested audit procedures, and audit reporting 
requirements. The auditor should contact the Office of Inspector General 
of the Federal agency to determine whether such a guide is available. 
When a current program-specific audit guide is available, the auditor 
shall follow GAGAS and the guide when performing a program-specific 
audit.
    (b) Program-specific audit guide not available. (1) When a program-
specific audit guide is not available, the auditee and auditor shall 
have basically the same responsibilities for the Federal program as they 
would have for an audit of a major program in a single audit.
    (2) The auditee shall prepare the financial statement(s) for the 
Federal program that includes, at a minimum, a schedule of expenditures 
of Federal awards for the program and notes that describe the 
significant accounting policies used in preparing the schedule, a 
summary schedule of prior audit findings consistent with the 
requirements of Sec. 41.315(b), and a corrective action plan consistent 
with the requirements of Sec. 41.315(c).
    (3) The auditor shall:
    (i) Perform an audit of the financial statement(s) for the Federal 
program in accordance with GAGAS;
    (ii) Obtain an understanding of internal control and perform tests 
of internal control over the Federal program consistent with the 
requirements Sec. 41.500(c) for a major program;
    (iii) Perform procedures to determine whether the auditee has 
complied with laws, regulations, and the provisions of contracts or 
grant agreements that could have a direct and material effect on the 
Federal program consistent with the requirements of Sec. 41.500(d) for 
a major program; and
    (iv) Follow up on prior audit findings, perform procedures to assess 
the reasonableness of the summary schedule of prior audit findings 
prepared by the auditee, and report, as a current year audit finding, 
when the auditor concludes that the summary schedule of prior audit 
findings materially misrepresents the status of any prior audit finding 
in accordance with the requirements of Sec. 41.500(e).
    (4) The auditor's report(s) may be in the form of either combined or 
separate reports and may be organized differently from the manner 
presented in this section. The auditor's report(s) shall state that the 
audit was conducted in accordance with this part and include the 
following:
    (i) An opinion (or disclaimer of opinion) as to whether the 
financial statement(s) of the Federal program is presented fairly in all 
material respects in conformity with the stated accounting policies;

[[Page 759]]

    (ii) A report on internal control related to the Federal program, 
which shall describe the scope of testing of internal control and the 
results of the tests;
    (iii) A report on compliance which includes an opinion (or 
disclaimer of opinion) as to whether the auditee complied with laws, 
regulations, and the provisions of contracts or grant agreements which 
could have a direct and material effect on the Federal program; and
    (iv) A schedule of findings and questioned costs for the Federal 
program that includes a summary of the auditor's results relative to the 
Federal program in a format consistent with Sec. 41.505(d)(1) and 
findings and questioned costs consistent with the requirements of Sec. 
41.505(d)(3).
    (c) Report submission for program-specific audits. (1) The audit 
shall be completed and the reporting required by paragraph (c)(2) or 
(c)(3) of this section submitted within the earlier of 30 days after 
receipt of the auditor's report(s), or nine months after the end of the 
audit period, unless a longer period is agreed to in advance by the 
Federal agency that provided the funding or a different period is 
specified in a program-specific audit guide. (However, for fiscal years 
beginning on or before June 30, 1998, the audit shall be completed and 
the required reporting shall be submitted within the earlier of 30 days 
after receipt of the auditor's report(s), or 13 months after the end of 
the audit period, unless a different period is specified in a program-
specific audit guide.) Unless restricted by law or regulation, the 
auditee shall make report copies available for public inspection.
    (2) When a program-specific audit guide is available, the auditee 
shall submit to the Federal clearinghouse designated by OMB the data 
collection form prepared in accordance with Sec. 41.320(b), as 
applicable to a program-specific audit, and the reporting required by 
the program-specific audit guide to be retained as an archival copy. 
Also, the auditee shall submit to the Federal awarding agency or pass-
through entity the reporting required by the program-specific audit 
guide.
    (3) When a program-specific audit guide is not available, the 
reporting package for a program-specific audit shall consist of the 
financial statement(s) of the Federal program, a summary schedule of 
prior audit findings, and a corrective action plan as described in 
paragraph (b)(2) of this section, and the auditor's report(s) described 
in paragraph (b)(4) of this section. The data collection form prepared 
in accordance with Sec. 41.320(b), as applicable to a program-specific 
audit, and one copy of this reporting package shall be submitted to the 
Federal clearinghouse designated by OMB to be retained as an archival 
copy. Also, when the schedule of findings and questioned costs disclosed 
audit findings or the summary schedule of prior audit findings reported 
the status of any audit findings, the auditee shall submit one copy of 
the reporting package to the Federal clearinghouse on behalf of the 
Federal awarding agency, or directly to the pass-through entity in the 
case of a subrecipient. Instead of submitting the reporting package to 
the pass-through entity, when a subrecipient is not required to submit a 
reporting package to the pass-through entity, the subrecipient shall 
provide written notification to the pass-through entity, consistent with 
the requirements of Sec. 41.320(e)(2). A subrecipient may submit a copy 
of the reporting package to the pass-through entity to comply with this 
notification requirement.
    (d) Other sections of this part may apply. Program-specific audits 
are subject to Sec. 41.100 through Sec.  41.215(b), Sec.  41.220 
through Sec. 41.230, Sec.  41.300 through Sec.  41.305, Sec.  41.315, 
Sec. 41.320(f) through Sec.  41.320(j), Sec.  41.400 through Sec.  
41.405, Sec. 41.510 through Sec.  41.515, and other referenced 
provisions of this part unless contrary to the provisions of this 
section, a program-specific audit guide, or program laws and 
regulations.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



                           Subpart C_Auditees



Sec. 41.300  Auditee responsibilities.

    The auditee shall:
    (a) Identify, in its accounts, all Federal awards received and 
expended and

[[Page 760]]

the Federal programs under which they were received. Federal program and 
award identification shall include, as applicable, the CFDA title and 
number, award number and year, name of the Federal agency, and name of 
the pass-through entity.
    (b) Maintain internal control over Federal programs that provides 
reasonable assurance that the auditee is managing Federal awards in 
compliance with laws, regulations, and the provisions of contracts or 
grant agreements that could have a material effect on each of its 
Federal programs.
    (c) Comply with laws, regulations, and the provisions of contracts 
or grant agreements related to each of its Federal programs.
    (d) Prepare appropriate financial statements, including the schedule 
of expenditures of Federal awards in accordance with Sec. 41.310.
    (e) Ensure that the audits required by this part are properly 
performed and submitted when due. When extensions to the report 
submission due date required by Sec. 41.320(a) are granted by the 
cognizant or oversight agency for audit, promptly notify the Federal 
clearinghouse designated by OMB and each pass-through entity providing 
Federal awards of the extension.
    (f) Follow up and take corrective action on audit findings, 
including preparation of a summary schedule of prior audit findings and 
a corrective action plan in accordance with Sec. 41.315(b) and Sec.  
41.315(c), respectively.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.305  Auditor selection.

    (a) Auditor procurement. In procuring audit services, auditees shall 
follow the procurement standards prescribed by part 43 of this chapter, 
OMB Circular A-110 (codified at 2 CFR part 215), ``Uniform 
Administrative Requirements for Grants and Agreements with Institutions 
of Higher Education, Hospitals and Other Non-Profit Organizations,'' or 
the FAR (48 CFR part 42), as applicable (OMB Circulars are available 
from the Office of Administration, Publications Office, room 2200, New 
Executive Office Building, Washington, DC 20503). Whenever possible, 
auditees shall make positive efforts to utilize small businesses, 
minority-owned firms, and women's business enterprises, in procuring 
audit services as stated in part 43 of this chapter, OMB Circular A-110 
(codified at 2 CFR part 215), or the FAR (48 CFR part 42), as 
applicable. In requesting proposals for audit services, the objectives 
and scope of the audit should be made clear. Factors to be considered in 
evaluating each proposal for audit services include the responsiveness 
to the request for proposal, relevant experience, availability of staff 
with professional qualifications and technical abilities, the results of 
external quality control reviews, and price.
    (b) Restriction on auditor preparing indirect cost proposals. An 
auditor who prepares the indirect cost proposal or cost allocation plan 
may not also be selected to perform the audit required by this part when 
the indirect costs recovered by the auditee during the prior year 
exceeded $1 million. This restriction applies to the base year used in 
the preparation of the indirect cost proposal or cost allocation plan 
and any subsequent years in which the resulting indirect cost agreement 
or cost allocation plan is used to recover costs.
    (c) Use of Federal auditors. Federal auditors may perform all or 
part of the work required under this part if they comply fully with the 
requirements of this part.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.310  Financial statements.

    (a) Financial statements. The auditee shall prepare financial 
statements that reflect its financial position, results of operations or 
changes in net assets, and, where appropriate, cash flows for the fiscal 
year audited. The financial statements shall be for the same 
organizational unit and fiscal year that is chosen to meet the 
requirements of this part. However, organization-wide financial 
statements may also include departments, agencies, and other 
organizational units that have separate audits in accordance with Sec. 
41.500(a) and prepare separate financial statements.
    (b) Schedule of expenditures of Federal awards. The auditee shall 
also prepare a schedule of expenditures of Federal awards for the period 
covered by the auditee's financial statements. While not required, the 
auditee may choose

[[Page 761]]

to provide information requested by Federal awarding agencies and pass-
through entities to make the schedule easier to use. For example, when a 
Federal program has multiple award years, the auditee may list the 
amount of Federal awards expended for each award year separately. At a 
minimum, the schedule shall:
    (1) List individual Federal programs by Federal agency. For Federal 
programs included in a cluster of programs, list individual Federal 
programs within a cluster of programs. For R&D, total Federal awards 
expended shall be shown either by individual award or by Federal agency 
and major subdivision within the Federal agency. For example, the 
National Institutes of Health is a major subdivision in the Department 
of Health and Human Services.
    (2) For Federal awards received as a subrecipient, the name of the 
pass-through entity and identifying number assigned by the pass-through 
entity shall be included.
    (3) Provide total Federal awards expended for each individual 
Federal program and the CFDA number or other identifying number when the 
CFDA information is not available.
    (4) Include notes that describe the significant accounting policies 
used in preparing the schedule.
    (5) To the extent practical, pass-through entities should identify 
in the schedule the total amount provided to subrecipients from each 
Federal program.
    (6) Include, in either the schedule or a note to the schedule, the 
value of the Federal awards expended in the form of non-cash assistance, 
the amount of insurance in effect during the year, and loans or loan 
guarantees outstanding at year-end. While not required, it is preferable 
to present this information in the schedule.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.315  Audit findings follow-up.

    (a) General. The auditee is responsible for follow-up and corrective 
action on all audit findings. As part of this responsibility, the 
auditee shall prepare a summary schedule of prior audit findings. The 
auditee shall also prepare a corrective action plan for current year 
audit findings. The summary schedule of prior audit findings and the 
corrective action plan shall include the reference numbers the auditor 
assigns to audit findings under Sec. 41.510(c). Since the summary 
schedule may include audit findings from multiple years, it shall 
include the fiscal year in which the finding initially occurred.
    (b) Summary schedule of prior audit findings. The summary schedule 
of prior audit findings shall report the status of all audit findings 
included in the prior audit's schedule of findings and questioned costs 
relative to Federal awards. The summary schedule shall also include 
audit findings reported in the prior audit's summary schedule of prior 
audit findings except audit findings listed as corrected in accordance 
with paragraph (b)(1) of this section, or no longer valid or not 
warranting further action in accordance with paragraph (b)(4) of this 
section.
    (1) When audit findings were fully corrected, the summary schedule 
need only list the audit findings and state that corrective action was 
taken.
    (2) When audit findings were not corrected or were only partially 
corrected, the summary schedule shall describe the planned corrective 
action as well as any partial corrective action taken.
    (3) When corrective action taken is significantly different from 
corrective action previously reported in a corrective action plan or in 
the Federal agency's or pass-through entity's management decision, the 
summary schedule shall provide an explanation.
    (4) When the auditee believes the audit findings are no longer valid 
or do not warrant further action, the reasons for this position shall be 
described in the summary schedule. A valid reason for considering an 
audit finding as not warranting further action is that all of the 
following have occurred:
    (i) Two years have passed since the audit report in which the 
finding occurred was submitted to the Federal clearinghouse;
    (ii) The Federal agency or pass-through entity is not currently 
following up with the auditee on the audit finding; and
    (iii) A management decision was not issued.

[[Page 762]]

    (c) Corrective action plan. At the completion of the audit, the 
auditee shall prepare a corrective action plan to address each audit 
finding included in the current year auditor's reports. The corrective 
action plan shall provide the name(s) of the contact person(s) 
responsible for corrective action, the corrective action planned, and 
the anticipated completion date. If the auditee does not agree with the 
audit findings or believes corrective action is not required, then the 
corrective action plan shall include an explanation and specific 
reasons.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.320  Report submission.

    (a) General. The audit shall be completed and the data collection 
form described in paragraph (b) of this section and reporting package 
described in paragraph (c) of this section shall be submitted within the 
earlier of 30 days after receipt of the auditor's report(s), or nine 
months after the end of the audit period, unless a longer period is 
agreed to in advance by the cognizant or oversight agency for audit. 
Unless restricted by law or regulation, the auditee shall make copies 
available for public inspection.
    (b) Data Collection. (1) The auditee shall submit a data collection 
form, which states whether the audit was completed in accordance with 
this part and provides information about the auditee, its Federal 
programs, and the results of the audit. The form shall be approved by 
OMB, available from the Federal clearinghouse designated by OMB, and 
include data elements similar to those presented in this paragraph. A 
senior level representative of the auditee (e.g., State controller, 
director of finance, chief executive officer, or chief financial 
officer) shall sign a statement to be included as part of the form 
certifying that: the auditee complied with the requirements of this 
part, the form was prepared in accordance with this part (and the 
instructions accompanying the form), and the information included in the 
form, in its entirety, are accurate and complete.
    (2) The data collection form shall include the following data 
elements:
    (i) The type of report the auditor issued on the financial 
statements of the auditee (i.e., unqualified opinion, qualified opinion, 
adverse opinion, or disclaimer of opinion).
    (ii) Where applicable, a statement that reportable conditions in 
internal control were disclosed by the audit of the financial statements 
and whether any such conditions were material weaknesses.
    (iii) A statement as to whether the audit disclosed any 
noncompliance, which is material to the financial statements of the 
auditee.
    (iv) Where applicable, a statement that reportable conditions in 
internal control over major programs were disclosed by the audit and 
whether any such conditions were material weaknesses.
    (v) The type of report the auditor issued on compliance for major 
programs (i.e., unqualified opinion, qualified opinion, adverse opinion, 
or disclaimer of opinion).
    (vi) A list of the Federal awarding agencies, which will receive a 
copy of the reporting package pursuant to Sec. 41.320(d)(2).
    (vii) A yes or no statement as to whether the auditee qualified as a 
low-risk auditee under Sec. 41.530.
    (viii) The dollar threshold used to distinguish between Type A and 
Type B programs as defined in Sec. 41.520(b).
    (ix) The Catalog of Federal Domestic Assistance (CFDA) number for 
each Federal program, as applicable.
    (x) The name of each Federal program and identification of each 
major program. Individual programs within a cluster of programs should 
be listed in the same level of detail as they are listed in the schedule 
of expenditures of Federal awards.
    (xi) The amount of expenditures in the schedule of expenditures of 
Federal awards associated with each Federal program.
    (xii) For each Federal program, a yes or no statement as to whether 
there are audit findings in each of the following types of compliance 
requirements and the total amount of any questioned costs:
    (A) Activities allowed or unallowed.
    (B) Allowable costs/cost principles.
    (C) Cash management.
    (D) Davis-Bacon Act.
    (E) Eligibility.

[[Page 763]]

    (F) Equipment and real property management.
    (G) Matching, level of effort, earmarking.
    (H) Period of availability of Federal funds.
    (I) Procurement and suspension and debarment.
    (J) Program income.
    (K) Real property acquisition and relocation assistance.
    (L) Reporting.
    (M) Subrecipient monitoring.
    (N) Special tests and provisions.
    (xiii) Auditee name, employer identification number(s), name and 
title of certifying official, telephone number, signature, and date.
    (xiv) Auditor name, name and title of contact person, auditor 
address, auditor telephone number, signature, and date.
    (xv) Whether the auditee has either a cognizant or oversight agency 
for audit.
    (xvi) The name of the cognizant or oversight agency for audit 
determined in accordance with Sec. 41.400(a) and Sec.  41.400(b), 
respectively.
    (3) Using the information included in the reporting package 
described in paragraph (c) of this section, the auditor shall complete 
the applicable sections of the form. The auditor shall sign a statement 
to be included as part of the data collection form that indicates, at a 
minimum, the source of the information included in the form, the 
auditor's responsibility for the information, that the form is not a 
substitute for the reporting package described in paragraph (c) of this 
section, and that the content of the form is limited to the data 
elements prescribed by OMB.
    (c) Reporting package. The reporting package shall include the:
    (1) Financial statements and schedule of expenditures of Federal 
awards discussed in Sec. 41.310(a) and Sec.  41.310(b), respectively;
    (2) Summary schedule of prior audit findings discussed in Sec. 
41.315(b);
    (3) Auditor's report(s) discussed in Sec. 41.505; and
    (4) Corrective action plan discussed in Sec. 41.315(c).
    (d) Submission to clearinghouse. All auditees shall submit to the 
Federal clearinghouse designated by OMB the data collection form 
described in paragraph (b) of this section and one copy of the reporting 
package described in paragraph (c) of this section for:
    (1) The Federal clearinghouse to retain as an archival copy; and
    (2) Each Federal awarding agency when the schedule of findings and 
questioned costs disclosed audit findings relating to Federal awards 
that the Federal awarding agency provided directly or the summary 
schedule of prior audit findings reported the status of any audit 
findings relating to Federal awards that the Federal awarding agency 
provided directly.
    (e) Additional submission by subrecipients. (1) In addition to the 
requirements discussed in paragraph (d) of this section, auditees that 
are also subrecipients shall submit to each pass-through entity one copy 
of the reporting package described in paragraph (c) of this section for 
each pass-through entity when the schedule of findings and questioned 
costs disclosed audit findings relating to Federal awards that the pass-
through entity provided or the summary schedule of prior audit findings 
reported the status of any audit findings relating to Federal awards 
that the pass-through entity provided.
    (2) When a subrecipient is not required to submit a reporting 
package to a pass-through entity pursuant to paragraph (e)(1) of this 
section, the subrecipient shall provide written notification to the 
pass-through entity that: an audit of the subrecipient was conducted in 
accordance with this part (including the period covered by the audit and 
the name, amount, and CFDA number of the Federal award(s) provided by 
the pass-through entity); the schedule of findings and questioned costs 
disclosed no audit findings relating to the Federal award(s) that the 
pass-through entity provided; and, the summary schedule of prior audit 
findings did not report on the status of any audit findings relating to 
the Federal award(s) that the pass-through entity provided. A 
subrecipient may submit a copy of the reporting package described in 
paragraph (c) of this section to a pass-through entity to comply with 
this notification requirement.

[[Page 764]]

    (f) Requests for report copies. In response to requests by a Federal 
agency or pass-through entity, auditees shall submit the appropriate 
copies of the reporting package described in paragraph (c) of this 
section and, if requested, a copy of any management letters issued by 
the auditor.
    (g) Report retention requirements. Auditees shall keep one copy of 
the data collection form described in paragraph (b) of this section and 
one copy of the reporting package described in paragraph (c) of this 
section on file for three years from the date of submission to the 
Federal clearinghouse designated by OMB. Pass-through entities shall 
keep subrecipients' submissions on file for three years from date of 
receipt.
    (h) Clearinghouse responsibilities. The Federal clearinghouse 
designated by OMB shall distribute the reporting packages received in 
accordance with paragraph (d)(2) of this section and Sec. 41.235(c)(3) 
to applicable Federal awarding agencies, maintain a data base of 
completed audits, provide appropriate information to Federal agencies, 
and follow up with known auditees which have not submitted the required 
data collection forms and reporting packages.
    (i) Clearinghouse address. The address of the Federal clearinghouse 
currently designated by OMB is Federal Audit Clearinghouse, Bureau of 
the Census, 1201 E. 10th Street, Jeffersonville, IN 47132.
    (j) Electronic filing. Nothing in this part shall preclude 
electronic submissions to the Federal clearinghouse in such manner as 
may be approved by OMB. With OMB approval, the Federal clearinghouse may 
pilot test methods of electronic submissions.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



          Subpart D_Federal Agencies and Pass-Through Entities



Sec. 41.400  Responsibilities.

    (a) Cognizant agency for audit responsibilities. Recipients 
expending more than $50 million a year in Federal awards shall have a 
cognizant agency for audit. The designated cognizant agency for audit 
shall be the Federal awarding agency that provides the predominant 
amount of direct funding to a recipient unless OMB makes a specific 
cognizant agency for audit assignment. The determination of the 
predominant amount of direct funding shall be based upon direct Federal 
awards expended in the recipient's fiscal years ending in 2004, 2009, 
2014, and every fifth year thereafter. For example, audit cognizance for 
periods ending in 2006 through 2010 will be determined based on Federal 
awards expended in 2004. (However, for 2001 through 2005, cognizant 
agency for audit is determined based on the predominant amount of direct 
Federal awards expended in the recipient's fiscal year ending in 2000). 
Notwithstanding the manner in which audit cognizance is determined, a 
Federal awarding agency with cognizance for an auditee may reassign 
cognizance to another Federal awarding agency which provides substantial 
direct funding and agrees to be the cognizant agency for audit. Within 
30 days after any reassignment, both the old and the new cognizant 
agency for audit shall notify the auditee, and, if known, the auditor of 
the reassignment. The cognizant agency for audit shall:
    (1) Provide technical audit advice and liaison to auditees and 
auditors.
    (2) Consider auditee requests for extensions to the report 
submission due date required by Sec. 41.320(a). The cognizant agency 
for audit may grant extensions for good cause.
    (3) Obtain or conduct quality control reviews of selected audits 
made by non-Federal auditors, and provide the results, when appropriate, 
to other interested organizations.
    (4) Promptly inform other affected Federal agencies and appropriate 
Federal law enforcement officials of any direct reporting by the auditee 
or its auditor of irregularities or illegal acts, as required by GAGAS 
or laws and regulations.
    (5) Advise the auditor and, where appropriate, the auditee of any 
deficiencies found in the audits when the deficiencies require 
corrective action by the auditor. When advised of deficiencies, the 
auditee shall work with the auditor to take corrective action. If 
corrective action is not taken, the

[[Page 765]]

cognizant agency for audit shall notify the auditor, the auditee, and 
applicable Federal awarding agencies and pass-through entities of the 
facts and make recommendations for follow-up action. Major inadequacies 
or repetitive substandard performance by auditors shall be referred to 
appropriate State licensing agencies and professional bodies for 
disciplinary action.
    (6) Coordinate, to the extent practical, audits or reviews made by 
or for Federal agencies that are in addition to the audits made pursuant 
to this part, so that the additional audits or reviews build upon audits 
performed in accordance with this part.
    (7) Coordinate a management decision for audit findings that affect 
the Federal programs of more than one agency.
    (8) Coordinate the audit work and reporting responsibilities among 
auditors to achieve the most cost-effective audit.
    (9) For biennial audits permitted under Sec. 41.220, consider 
auditee requests to qualify as a low-risk auditee under Sec. 41.530(a).
    (b) Oversight agency for audit responsibilities. An auditee, which 
does not have a designated cognizant agency for audit, will be under the 
general oversight of the Federal agency determined in accordance with 
Sec. 41.105. The oversight agency for audit:
    (1) Shall provide technical advice to auditees and auditors as 
requested.
    (2) May assume all or some of the responsibilities normally 
performed by a cognizant agency for audit.
    (c) Federal awarding agency responsibilities. The Federal awarding 
agency shall perform the following for the Federal awards it makes:
    (1) Identify Federal awards made by informing each recipient of the 
CFDA title and number, award name and number, award year, and if the 
award is for R&D. When some of this information is not available, the 
Federal agency shall provide information necessary to clearly describe 
the Federal award.
    (2) Advise recipients of requirements imposed on them by Federal 
laws, regulations, and the provisions of contracts or grant agreements.
    (3) Ensure that audits are completed and reports are received in a 
timely manner and in accordance with the requirements of this part.
    (4) Provide technical advice and counsel to auditees and auditors as 
requested.
    (5) Issue a management decision on audit findings within six months 
after receipt of the audit report and ensure that the recipient takes 
appropriate and timely corrective action.
    (6) Assign a person responsible for providing annual updates of the 
compliance supplement to OMB.
    (d) Pass-through entity responsibilities. A pass-through entity 
shall perform the following for the Federal awards it makes:
    (1) Identify Federal awards made by informing each subrecipient of 
CFDA title and number, award name and number, award year, if the award 
is R&D, and name of Federal agency. When some of this information is not 
available, the pass-through entity shall provide the best information 
available to describe the Federal award.
    (2) Advise subrecipients of requirements imposed on them by Federal 
laws, regulations, and the provisions of contracts or grant agreements 
as well as any supplemental requirements imposed by the pass-through 
entity.
    (3) Monitor the activities of subrecipients as necessary to ensure 
that Federal awards are used for authorized purposes in compliance with 
laws, regulations, and the provisions of contracts or grant agreements 
and that performance goals are achieved.
    (4) Ensure that subrecipients expending $500,000 or more in Federal 
awards during the subrecipient's fiscal year have met the audit 
requirements of this part for that fiscal year.
    (5) Issue a management decision on audit findings within six months 
after receipt of the subrecipient's audit report and ensure that the 
subrecipient takes appropriate and timely corrective action.
    (6) Consider whether subrecipient audits necessitate adjustment of 
the pass-through entity's own records.
    (7) Require each subrecipient to permit the pass-through entity and 
auditors to have access to the records and financial statements as 
necessary for

[[Page 766]]

the pass-through entity to comply with this part.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.405  Management decision.

    (a) General. The management decision shall clearly state whether or 
not the audit finding is sustained, the reasons for the decision, and 
the expected auditee action to repay disallowed costs, make financial 
adjustments, or take other action. If the auditee has not completed 
corrective action, a timetable for follow-up should be given. Prior to 
issuing the management decision, the Federal agency or pass-through 
entity may request additional information or documentation from the 
auditee, including a request for auditor assurance related to the 
documentation, as a way of mitigating disallowed costs. The management 
decision should describe any appeal process available to the auditee.
    (b) Federal agency. As provided in Sec. 41.400(a)(7), the cognizant 
agency for audit shall be responsible for coordinating a management 
decision for audit findings that affect the programs of more than one 
Federal agency. As provided in Sec. 41.400(c)(5), a Federal awarding 
agency is responsible for issuing a management decision for findings 
that relate to Federal awards it makes to recipients. Alternate 
arrangements may be made on a case-by-case basis by agreement among the 
Federal agencies concerned.
    (c) Pass-through entity. As provided in Sec. 41.400(d)(5), the 
pass-through entity shall be responsible for making the management 
decision for audit findings that relate to Federal awards it makes to 
subrecipients.
    (d) Time requirements. The entity responsible for making the 
management decision shall do so within six months of receipt of the 
audit report. Corrective action should be initiated within six months 
after receipt of the audit report and proceed as rapidly as possible.
    (e) Reference numbers. Management decisions shall include the 
reference numbers the auditor assigned to each audit finding in 
accordance with Sec. 41.510(c).

(Authority: Pub. L. 104-156; 110 Stat. 1396)



                           Subpart E_Auditors



Sec. 41.500  Scope of audit.

    (a) General. The audit shall be conducted in accordance with GAGAS. 
The audit shall cover the entire operations of the auditee; or, at the 
option of the auditee, such audit shall include a series of audits that 
cover departments, agencies, and other organizational units which 
expended or otherwise administered Federal awards during such fiscal 
year, provided that each such audit shall encompass the financial 
statements and schedule of expenditures of Federal awards for each such 
department, agency, and other organizational unit, which shall be 
considered to be a non-Federal entity. The financial statements and 
schedule of expenditures of Federal awards shall be for the same fiscal 
year.
    (b) Financial statements. The auditor shall determine whether the 
financial statements of the auditee are presented fairly in all material 
respects in conformity with generally accepted accounting principles. 
The auditor shall also determine whether the schedule of expenditures of 
Federal awards is presented fairly in all material respects in relation 
to the auditee's financial statements taken as a whole.
    (c) Internal control. (1) In addition to the requirements of GAGAS, 
the auditor shall perform procedures to obtain an understanding of 
internal control over Federal programs sufficient to plan the audit to 
support a low assessed level of control risk for major programs.
    (2) Except as provided in paragraph (c)(3) of this section, the 
auditor shall:
    (i) Plan the testing of internal control over major programs to 
support a low assessed level of control risk for the assertions relevant 
to the compliance requirements for each major program; and
    (ii) Perform testing of internal control as planned in paragraph 
(c)(2)(i) of this section.
    (3) When internal control over some or all of the compliance 
requirements for a major program are likely to be ineffective in 
preventing or detecting

[[Page 767]]

noncompliance, the planning and performing of testing described in 
paragraph (c)(2) of this section are not required for those compliance 
requirements. However, the auditor shall report a reportable condition 
(including whether any such condition is a material weakness) in 
accordance with Sec. 41.510, assess the related control risk at the 
maximum, and consider whether additional compliance tests are required 
because of ineffective internal control.
    (d) Compliance. (1) In addition to the requirements of GAGAS, the 
auditor shall determine whether the auditee has complied with laws, 
regulations, and the provisions of contracts or grant agreements that 
may have a direct and material effect on each of its major programs.
    (2) The principal compliance requirements applicable to most Federal 
programs and the compliance requirements of the largest Federal programs 
are included in the compliance supplement.
    (3) For the compliance requirements related to Federal programs 
contained in the compliance supplement, an audit of these compliance 
requirements will meet the requirements of this part. Where there have 
been changes to the compliance requirements and the changes are not 
reflected in the compliance supplement, the auditor shall determine the 
current compliance requirements and modify the audit procedures 
accordingly. For those Federal programs not covered in the compliance 
supplement, the auditor should use the types of compliance requirements 
contained in the compliance supplement as guidance for identifying the 
types of compliance requirements to test, and determine the requirements 
governing the Federal program by reviewing the provisions of contracts 
and grant agreements and the laws and regulations referred to in such 
contracts and grant agreements.
    (4) The compliance testing shall include tests of transactions and 
such other auditing procedures necessary to provide the auditor 
sufficient evidence to support an opinion on compliance.
    (e) Audit follow-up. The auditor shall follow-up on prior audit 
findings, perform procedures to assess the reasonableness of the summary 
schedule of prior audit findings prepared by the auditee in accordance 
with Sec. 41.315(b), and report, as a current year audit finding, when 
the auditor concludes that the summary schedule of prior audit findings 
materially misrepresents the status of any prior audit finding. The 
auditor shall perform audit follow-up procedures regardless of whether a 
prior audit finding relates to a major program in the current year.
    (f) Data Collection Form. As required in Sec. 41.320(b)(3), the 
auditor shall complete and sign specified sections of the data 
collection form.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.505  Audit reporting.

    The auditor's report(s) may be in the form of either combined or 
separate reports and may be organized differently from the manner 
presented in this section. The auditor's report(s) shall state that the 
audit was conducted in accordance with this part and include the 
following:
    (a) An opinion (or disclaimer of opinion) as to whether the 
financial statements are presented fairly in all material respects in 
conformity with generally accepted accounting principles and an opinion 
(or disclaimer of opinion) as to whether the schedule of expenditures of 
Federal awards is presented fairly in all material respects in relation 
to the financial statements taken as a whole.
    (b) A report on internal control related to the financial statements 
and major programs. This report shall describe the scope of testing of 
internal control and the results of the tests, and, where applicable, 
refer to the separate schedule of findings and questioned costs 
described in paragraph (d) of this section.
    (c) A report on compliance with laws, regulations, and the 
provisions of contracts or grant agreements, noncompliance with which 
could have a material effect on the financial statements. This report 
shall also include an opinion (or disclaimer of opinion) as to whether 
the auditee complied with laws, regulations, and the provisions of 
contracts or grant agreements which could have a direct and material 
effect on each major program, and, where applicable,

[[Page 768]]

refer to the separate schedule of findings and questioned costs 
described in paragraph (d) of this section.
    (d) A schedule of findings and questioned costs, which shall include 
the following three components:
    (1) A summary of the auditor's results, which shall include:
    (i) The type of report the auditor issued on the financial 
statements of the auditee (i.e., unqualified opinion, qualified opinion, 
adverse opinion, or disclaimer of opinion);
    (ii) Where applicable, a statement that reportable conditions in 
internal control were disclosed by the audit of the financial statements 
and whether any such conditions were material weaknesses;
    (iii) A statement as to whether the audit disclosed any 
noncompliance, which is material to the financial statements of the 
auditee;
    (iv) Where applicable, a statement that reportable conditions in 
internal control over major programs were disclosed by the audit and 
whether any such conditions were material weaknesses;
    (v) The type of report the auditor issued on compliance for major 
programs (i.e., unqualified opinion, qualified opinion, adverse opinion, 
or disclaimer of opinion);
    (vi) A statement as to whether the audit disclosed any audit 
findings, which the auditor is required to report under Sec. 41.510(a);
    (vii) An identification of major programs;
    (viii) The dollar threshold used to distinguish between Type A and 
Type B programs, as described in Sec. 41.520(b); and
    (ix) A statement as to whether the auditee qualified as a low-risk 
auditee under Sec. 41.530.
    (2) Findings relating to the financial statements, which are 
required to be reported in accordance with GAGAS.
    (3) Findings and questioned costs for Federal awards which shall 
include audit findings as defined in Sec. 41.510(a).
    (i) Audit findings (e.g., internal control findings, compliance 
findings, questioned costs, or fraud) which relate to the same issue 
should be presented as a single audit finding. Where practical, audit 
findings should be organized by Federal agency or pass-through entity.
    (ii) Audit findings which relate to both the financial statements 
and Federal awards, as reported under paragraphs (d)(2) and (d)(3) of 
this section, respectively, should be reported in both sections of the 
schedule. However, the reporting in one section of the schedule may be 
in summary form with a reference to a detailed reporting in the other 
section of the schedule.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.510  Audit findings.

    (a) Audit findings reported. The auditor shall report the following 
as audit findings in a schedule of findings and questioned costs:
    (1) Reportable conditions in internal control over major programs. 
The auditor's determination of whether a deficiency in internal control 
is a reportable condition for the purpose of reporting an audit finding 
is in relation to a type of compliance requirement for a major program 
or an audit objective identified in the compliance supplement. The 
auditor shall identify reportable conditions, which are individually or 
cumulatively material weaknesses.
    (2) Material noncompliance with the provisions of laws, regulations, 
contracts, or grant agreements related to a major program. The auditor's 
determination of whether a noncompliance with the provisions of laws, 
regulations, contracts, or grant agreements is material for the purpose 
of reporting an audit finding is in relation to a type of compliance 
requirement for a major program or an audit objective identified in the 
compliance supplement.
    (3) Known questioned costs, which are greater than $10,000, for a 
type of compliance requirement for a major program. Known questioned 
costs are those specifically identified by the auditor. In evaluating 
the effect of questioned costs on the opinion on compliance, the auditor 
considers the best estimate of total costs questioned (likely questioned 
costs), not just the questioned costs specifically identified (known 
questioned costs). The auditor shall also report known questioned costs 
when likely questioned costs are

[[Page 769]]

greater than $10,000 for a type of compliance requirement for a major 
program. In reporting questioned costs, the auditor shall include 
information to provide proper perspective for judging the prevalence and 
consequences of the questioned costs.
    (4) Known questioned costs, which are greater than $10,000, for a 
Federal program, which is not audited as a major program. Except for 
audit follow-up, the auditor is not required under this part to perform 
audit procedures for such a Federal program; therefore, the auditor will 
normally not find questioned costs for a program, which is not audited 
as a major program. However, if the auditor does become aware of 
questioned costs for a Federal program which is not audited as a major 
program (e.g., as part of audit follow-up or other audit procedures) and 
the known questioned costs are greater than $10,000, then the auditor 
shall report this as an audit finding.
    (5) The circumstances concerning why the auditor's report on 
compliance for major programs is other than an unqualified opinion, 
unless such circumstances are otherwise reported as audit findings in 
the schedule of findings and questioned costs for Federal awards.
    (6) Known fraud affecting a Federal award, unless such fraud is 
otherwise reported as an audit finding in the schedule of findings and 
questioned costs for Federal awards. This paragraph does not require the 
auditor to make an additional reporting when the auditor confirms that 
the fraud was reported outside of the auditor's reports under the direct 
reporting requirements of GAGAS.
    (7) Instances where the results of audit follow-up procedures 
disclosed that the summary schedule of prior audit findings prepared by 
the auditee in accordance with Sec. 41.315(b) materially misrepresents 
the status of any prior audit finding.
    (b) Audit finding detail. Audit findings shall be presented in 
sufficient detail for the auditee to prepare a corrective action plan 
and take corrective action and for Federal agencies and pass-through 
entities to arrive at a management decision. The following specific 
information shall be included, as applicable, in audit findings:
    (1) Federal program and specific Federal award identification 
including the CFDA title and number, Federal award number and year, name 
of Federal agency, and name of the applicable pass-through entity. When 
information, such as the CFDA title and number or Federal award number, 
is not available, the auditor shall provide the best information 
available to describe the Federal award.
    (2) The criteria or specific requirement upon which the audit 
finding is based, including statutory, regulatory, or other citation.
    (3) The condition found, including facts that support the deficiency 
identified in the audit finding.
    (4) Identification of questioned costs and how they were computed.
    (5) Information to provide proper perspective for judging the 
prevalence and consequences of the audit findings, such as whether the 
audit findings represent an isolated instance or a systemic problem. 
Where appropriate, instances identified shall be related to the universe 
and the number of cases examined and be quantified in terms of dollar 
value.
    (6) The possible asserted effect to provide sufficient information 
to the auditee and Federal agency, or pass-through entity in the case of 
a subrecipient, to permit them to determine the cause and effect to 
facilitate prompt and proper corrective action.
    (7) Recommendations to prevent future occurrences of the deficiency 
identified in the audit finding.
    (8) Views of responsible officials of the auditee when there is 
disagreement with the audit findings, to the extent practical.
    (c) Reference numbers. Each audit finding in the schedule of 
findings and questioned costs shall include a reference number to allow 
for easy referencing of the audit findings during follow-up.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.515  Audit working papers.

    (a) Retention of working papers. The auditor shall retain working 
papers and reports for a minimum of three years after the date of 
issuance of the

[[Page 770]]

auditor's report(s) to the auditee, unless the auditor is notified in 
writing by the cognizant agency for audit, oversight agency for audit, 
or pass-through entity to extend the retention period. When the auditor 
is aware that the Federal awarding agency, pass-through entity, or 
auditee is contesting an audit finding, the auditor shall contact the 
parties contesting the audit finding for guidance prior to destruction 
of the working papers and reports.
    (b) Access to working papers. Audit working papers shall be made 
available upon request to the cognizant or oversight agency for audit or 
its designee, a Federal agency providing direct or indirect funding, or 
GAO at the completion of the audit, as part of a quality review, to 
resolve audit findings, or to carry out oversight responsibilities 
consistent with the purposes of this part. Access to working papers 
includes the right of Federal agencies to obtain copies of working 
papers, as is reasonable and necessary.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.520  Major program determination.

    (a) General. The auditor shall use a risk-based approach to 
determine which Federal programs are major programs. This risk-based 
approach shall include consideration of: Current and prior audit 
experience, oversight by Federal agencies and pass-through entities, and 
the inherent risk of the Federal program. The process in paragraphs (b) 
through (i) of this section shall be followed.
    (b) Step 1. (1) The auditor shall identify the larger Federal 
programs, which shall be labeled Type A programs. Type A programs are 
defined as Federal programs with Federal awards expended during the 
audit period exceeding the larger of:
    (i) $300,000 or three percent (.03) of total Federal awards expended 
in the case of an auditee for which total Federal awards expended equal 
or exceed $300,000 but are less than or equal to $100 million.
    (ii) $3 million or three-tenths of one percent (.003) of total 
Federal awards expended in the case of an auditee for which total 
Federal awards expended exceed $100 million but are less than or equal 
to $10 billion.
    (iii) $30 million or 15 hundredths of one percent (.0015) of total 
Federal awards expended in the case of an auditee for which total 
Federal awards expended exceed $10 billion.
    (2) Federal programs not labeled Type A under paragraph (b)(1) of 
this section shall be labeled Type B programs.
    (3) The inclusion of large loan and loan guarantees (loans) should 
not result in the exclusion of other programs as Type A programs. When a 
Federal program providing loans significantly affects the number or size 
of Type A programs, the auditor shall consider this Federal program as a 
Type A program and exclude its values in determining other Type A 
programs.
    (4) For biennial audits permitted under Sec. 41.220, the 
determination of Type A and Type B programs shall be based upon the 
Federal awards expended during the two-year period.
    (c) Step 2. (1) The auditor shall identify Type A programs, which 
are low-risk. For a Type A program to be considered low-risk, it shall 
have been audited as a major program in at least one of the two most 
recent audit periods (in the most recent audit period in the case of a 
biennial audit), and, in the most recent audit period, it shall have had 
no audit findings under Sec. 41.510(a). However, the auditor may use 
judgment and consider that audit findings from questioned costs under 
Sec. 41.510(a)(3) and Sec.  41.510(a)(4), fraud under Sec.  
41.510(a)(6), and audit follow-up for the summary schedule of prior 
audit findings under Sec. 41.510(a)(7) do not preclude the Type A 
program from being low-risk. The auditor shall consider: the criteria in 
Sec. 41.525(c), Sec.  41.525(d)(1), Sec.  41.525(d)(2), and Sec.  
41.525(d)(3); the results of audit follow-up; whether any changes in 
personnel or systems affecting a Type A program have significantly 
increased risk; and apply professional judgment in determining whether a 
Type A program is low-risk.
    (2) Notwithstanding paragraph (c)(1) of this section, OMB may 
approve a Federal awarding agency's request that a Type A program at 
certain recipients

[[Page 771]]

may not be considered low-risk. For example, it may be necessary for a 
large Type A program to be audited as major each year at particular 
recipients to allow the Federal agency to comply with the Government 
Management Reform Act of 1994 (31 U.S.C. 3515). The Federal agency shall 
notify the recipient and, if known, the auditor at least 180 days prior 
to the end of the fiscal year to be audited of OMB's approval.
    (d) Step 3. (1) The auditor shall identify Type B programs, which 
are high-risk, using professional judgment and the criteria in Sec. 
41.525. However, should the auditor select Option 2 under Step 4 
(paragraph (e)(2)(i)(B) of this section), the auditor is not required to 
identify more high-risk Type B programs than the number of low-risk Type 
A programs. Except for known reportable conditions in internal control 
or compliance problems as discussed in Sec. 41.525(b)(1), Sec.  
41.525(b)(2), and Sec. 41.525(c)(1), a single criteria in Sec.  41.525 
would seldom cause a Type B program to be considered high-risk.
    (2) The auditor is not expected to perform risk assessments on 
relatively small Federal programs. Therefore, the auditor is only 
required to perform risk assessments on Type B programs that exceed the 
larger of:
    (i) $100,000 or three-tenths of one percent (.003) of total Federal 
awards expended when the auditee has less than or equal to $100 million 
in total Federal awards expended.
    (ii) $300,000 or three-hundredths of one percent (.0003) of total 
Federal awards expended when the auditee has more than $100 million in 
total Federal awards expended.
    (e) Step 4. At a minimum, the auditor shall audit all of the 
following as major programs:
    (1) All Type A programs, except the auditor may exclude any Type A 
programs identified as low-risk under Step 2 (paragraph (c)(1) of this 
section).
    (2) (i) High-risk Type B programs as identified under either of the 
following two options:
    (A) Option 1. At least one half of the Type B programs identified as 
high-risk under Step 3 (paragraph (d) of this section), except this 
paragraph (e)(2)(i)(A) does not require the auditor to audit more high-
risk Type B programs than the number of low-risk Type A programs 
identified as low-risk under Step 2.
    (B) Option 2. One high-risk Type B program for each Type A program 
identified as low-risk under Step 2.
    (ii) When identifying which high-risk Type B programs to audit as 
major under either Option 1 or 2 in paragraph (e)(2)(i)(A) or (B) of 
this section, the auditor is encouraged to use an approach which 
provides an opportunity for different high-risk Type B programs to be 
audited as major over a period of time.
    (3) Such additional programs as may be necessary to comply with the 
percentage of coverage rule discussed in paragraph (f) of this section. 
This paragraph (e)(3) may require the auditor to audit more programs as 
major than the number of Type A programs.
    (f) Percentage of coverage rule. The auditor shall audit as major 
programs Federal programs with Federal awards expended that, in the 
aggregate, encompass at least 50 percent of total Federal awards 
expended. If the auditee meets the criteria in Sec. 41.530 for a low-
risk auditee, the auditor need only audit as major programs Federal 
programs with Federal awards expended that, in the aggregate, encompass 
at least 25 percent of total Federal awards expended.
    (g) Documentation of risk. The auditor shall document in the working 
papers the risk analysis process used in determining major programs.
    (h) Auditor's judgment. When the major program determination was 
performed and documented in accordance with this part, the auditor's 
judgment in applying the risk-based approach to determine major programs 
shall be presumed correct. Challenges by Federal agencies and pass-
through entities shall only be for clearly improper use of the guidance 
in this part. However, Federal agencies and pass-through entities may 
provide auditors guidance about the risk of a particular Federal program 
and the auditor shall consider this guidance in determining major 
programs in audits not yet completed.
    (i) Deviation from use of risk criteria. For first-year audits, the 
auditor may elect to determine major programs as all Type A programs 
plus any Type B

[[Page 772]]

programs as necessary to meet the percentage of coverage rule discussed 
in paragraph (f) of this section. Under this option, the auditor would 
not be required to perform the procedures discussed in paragraphs (c), 
(d), and (e) of this section.
    (1) A first-year audit is the first year the entity is audited under 
this part or the first year of a change of auditors.
    (2) To ensure that a frequent change of auditors would not preclude 
audit of high-risk Type B programs, this election for first-year audits 
may not be used by an auditee more than once in every three years.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.525  Criteria for Federal program risk.

    (a) General. The auditor's determination should be based on an 
overall evaluation of the risk of noncompliance occurring, which could 
be material to the Federal program. The auditor shall use auditor 
judgment and consider criteria, such as described in paragraphs (b), 
(c), and (d) of this section, to identify risk in Federal programs. 
Also, as part of the risk analysis, the auditor may wish to discuss a 
particular Federal program with auditee management and the Federal 
agency or pass-through entity.
    (b) Current and prior audit experience. (1) Weaknesses in internal 
control over Federal programs would indicate higher risk. Consideration 
should be given to the control environment over Federal programs and 
such factors as the expectation of management's adherence to applicable 
laws and regulations and the provisions of contracts and grant 
agreements and the competence and experience of personnel who administer 
the Federal programs.
    (i) A Federal program administered under multiple internal control 
structures may have higher risk. When assessing risk in a large single 
audit, the auditor shall consider whether weaknesses are isolated in a 
single operating unit (e.g., one college campus) or pervasive throughout 
the entity.
    (ii) When significant parts of a Federal program are passed through 
to subrecipients, a weak system for monitoring subrecipients would 
indicate higher risk.
    (iii) The extent to which computer processing is used to administer 
Federal programs, as well as the complexity of that processing, should 
be considered by the auditor in assessing risk. New and recently 
modified computer systems may also indicate risk.
    (2) Prior audit findings would indicate higher risk, particularly 
when the situations identified in the audit findings could have a 
significant impact on a Federal program or have not been corrected.
    (3) Federal programs not recently audited as major programs may be 
of higher risk than Federal programs recently audited as major programs 
without audit findings.
    (c) Oversight exercised by Federal agencies and pass-through 
entities. (1) Oversight exercised by Federal agencies or pass-through 
entities could indicate risk. For example, recent monitoring or other 
reviews performed by an oversight entity, which disclosed no significant 
problems, would indicate lower risk. However, monitoring which disclosed 
significant problems would indicate higher risk.
    (2) Federal agencies, with the concurrence of OMB, may identify 
Federal programs, which are higher risk. OMB plans to provide this 
identification in the compliance supplement.
    (d) Inherent risk of the Federal program. (1) The nature of a 
Federal program may indicate risk. Consideration should be given to the 
complexity of the program and the extent to which the Federal program 
contracts for goods and services. For example, Federal programs that 
disburse funds through third party contracts or have eligibility 
criteria may be of higher risk. Federal programs primarily involving 
staff payroll costs may have a high-risk for time and effort reporting, 
but otherwise be at low-risk.
    (2) The phase of a Federal program in its life cycle at the Federal 
agency may indicate risk. For example, a new Federal program with new or 
interim regulations may have higher risk than an established program 
with time-tested regulations. Also, significant changes in Federal 
programs, laws, regulations, or the provisions of contracts or grant 
agreements may increase risk.

[[Page 773]]

    (3) The phase of a Federal program in its life cycle at the auditee 
may indicate risk. For example, during the first and last years that an 
auditee participates in a Federal program, the risk may be higher due to 
start-up or closeout of program activities and staff.
    (4) Type B programs with larger Federal awards expended would be of 
higher risk than programs with substantially smaller Federal awards 
expended.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 41.530  Criteria for a low-risk auditee.

    An auditee, which meets all of the following conditions for each of 
the preceding two years (or, in the case of biennial audits, preceding 
two audit periods), shall qualify as a low-risk auditee and be eligible 
for reduced audit coverage in accordance with Sec. 41.520:
    (a) Single audits were performed on an annual basis in accordance 
with the provisions of this part. A non-Federal entity that has biennial 
audits does not qualify as a low-risk auditee, unless agreed to in 
advance by the cognizant or oversight agency for audit.
    (b) The auditor's opinions on the financial statements and the 
schedule of expenditures of Federal awards were unqualified. However, 
the cognizant or oversight agency for audit may judge that an opinion 
qualification does not affect the management of Federal awards and 
provide a waiver.
    (c) There were no deficiencies in internal control, which were 
identified as material weaknesses under the requirements of GAGAS. 
However, the cognizant or oversight agency for audit may judge that any 
identified material weaknesses do not affect the management of Federal 
awards and provide a waiver.
    (d) None of the Federal programs had audit findings from any of the 
following in either of the preceding two years (or, in the case of 
biennial audits, preceding two audit periods) in which they were 
classified as Type A programs:
    (1) Internal control deficiencies which were identified as material 
weaknesses;
    (2) Noncompliance with the provisions of laws, regulations, 
contracts, or grant agreements which have a material effect on the Type 
A program; or
    (3) Known or likely questioned costs that exceed five percent of the 
total Federal awards expended for a Type A program during the year.

(Authority: Pub. L. 104-156; 110 Stat. 1396)

        Appendix A to Part 41--Data Collection Form (Form SF-SAC)

    Note: Data Collection Form SF-SAC and instructions for its 
completion may be obtained from the following Web page: http://
harvester.census.gov/fac/collect/sfsac--01.pdf. It is also available 
from the address provided in Sec. 41.320(i).

     Appendix B to Part 41--OMB Circular A-133 Compliance Supplement

    Note: OMB Circular A-133 Compliance is available on the OMB home 
page at http://www.whitehouse.gov/ omb/grants/ grants--circulars.html.



PART 42_STANDARDS IMPLEMENTING THE PROGRAM FRAUD CIVIL REMEDIES ACT
--Table of Contents




Sec.
42.1 Basis and purpose.
42.2 Definitions.
42.3 Basis for civil penalties and assessments.
42.4 Investigation.
42.5 Review by the reviewing official.
42.6 Prerequisites for issuing a complaint.
42.7 Complaint.
42.8 Service of complaint.
42.9 Answer.
42.10 Default upon failure to file an answer.
42.11 Referral of complaint and answer to the Administrative Law Judge 
          (ALJ).
42.12 Notice of hearing.
42.13 Parties to the hearing.
42.14 Separation of functions.
42.15 Ex parte contacts.
42.16 Disqualification of reviewing official or ALJ.
42.17 Rights of parties.
42.18 Authority of the ALJ.
42.19 Prehearing conferences.
42.20 Disclosure of documents.
42.21 Discovery.
42.22 Exchange of witness lists, statements, and exhibits.
42.23 Subpoenas for attendance at hearing.
42.24 Protective order.
42.25 Fees.
42.26 Form, filing and service of papers.
42.27 Computation of time.
42.28 Motions.

[[Page 774]]

42.29 Sanctions.
42.30 The hearing and burden of proof.
42.31 Determining the amount of penalties and assessments.
42.32 Location of hearing.
42.33 Witnesses.
42.34 Evidence.
42.35 The record.
42.36 Post-hearing briefs.
42.37 Initial decision.
42.38 Reconsideration of initial decision.
42.39 Appeal to the Secretary of Veterans Affairs.
42.40 Stays ordered by the Department of Justice.
42.41 Stay pending appeal.
42.42 Judicial review.
42.43 Collection of civil penalties and assessments.
42.44 Right to administrative offset.
42.45 Deposit in Treasury of United States.
42.46 Compromise and settlement.
42.47 Limitations.

    Authority: Pub. L. 99-509, secs. 6101-6104, 100 Stat. 1874, to be 
codified at 31 U.S.C. 3801-3812.

    Source: 53 FR 16710, May 11, 1988, unless otherwise noted.



Sec. 42.1  Basis and purpose.

    (a) Basis. This part implements the Program Fraud Civil Remedies Act 
of 1986, Pub. L. 99-509, 6101-6104, 100 Stat. 1874 (October 21, 1986), 
to be codified at 31 U.S.C. 3801-3812. Section 3809 of title 31 U.S.C., 
requires each authority head, such as the Secretary of Veterans Affairs, 
to promulgate regulations necessary to implement the provisions of the 
statute.
    (b) Purpose. This part:
    (1) Establishes and provides the only administrative procedures and 
actions 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 
authorities or to their agents, and
    (2) Specifies the hearing and appeal rights of persons subject to 
allegations of liability for such penalties and assessments.



Sec. 42.2  Definitions.

    For the purposes of this part, the following definitions apply:
    ALJ means an Administrative Law Judge in the Department of Veterans 
Affairs pursuant to 5 U.S.C. 3105 or detailed to the Department of 
Veterans Affairs pursuant to 5 U.S.C. 3344.
    Benefit means, in the context of statement, anything of value, 
including, but not limited to, any advantage, preference, privilege, 
license, permit, favorable decision, ruling, status, or loan guarantee.
    Claim means any request, demand, or submission--
    (a) Made to the Department of Veterans Affairs for property, 
services, or money (including money representing grants, loans, 
insurance, or benefits);
    (b) Made to a recipient of property, services, or money from the 
Department of Veterans Affairs or to a party to a contract with the 
Department of Veterans Affairs--
    (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, 
loans, insurance, or benefits) if the United States--
    (i) Provided any portion of the money requested or demanded; or
    (ii) Will reimburse the recipient or party for any portion of the 
money paid on the request or demand; or
    (iii) Made to the Department of Veterans Affairs which has the 
effect of decreasing an obligation to pay or account for property, 
services, or money.
    Complaint means the administrative complaint served by the reviewing 
official on the defendant under Sec. 42.7 of this part.
    Defendant means any person alleged in a complaint under Sec. 42.7 
of this part to be liable for a civil penalty or assessment under Sec. 
42.3 of this part.
    Government means the United States Government.
    Individual means a natural person.
    Initial Decision means the written decision of the ALJ required by 
Sec. 42.10 or Sec.  42.37 of this part, and includes a revised initial 
decision issued following a remand or a motion for reconsideration.

[[Page 775]]

    Investigating official means the Inspector General of the Department 
of Veterans Affairs or an officer or employee of the Office of 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.
    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.
    Makes, wherever it appears, shall include the terms presents, 
submits, and causes to be made, presented, or submitted. As the context 
requires, making or made, shall likewise include the corresponding forms 
of such terms.
    Person means any individual, partnership, corporation, association 
or private organization and includes the plural of that term.
    Representative means any person designated by a party in writing.
    Reviewing official means the General Counsel of the Department of 
Veterans Affairs or designee who is--
    (a) Not subject to supervision by, or required to report to, the 
investigating official;
    (b) Not employed in the organization unit of the Department of 
Veterans Affairs 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.
    Secretary means the Secretary of Veterans Affairs.
    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, loan, or benefit from, the Department of Veterans 
Affairs, 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, or benefit, or if 
the Government will reimburse such State, political subdivision, or 
party for any portion of the money or property under the contract or for 
the grant, loan, or benefit.

[53 FR 16710, May 11, 1988, as amended at 54 FR 34988, Aug. 23, 1989]



Sec. 42.3  Basis for civil penalties and assessments.

    (a) Claims. (1) Except as provided in paragraph (c) of this section, 
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 the statement has a 
duty to include the material fact; or
    (iv) Is for payment for the provision of property or services which 
the person has not provided as claimed,

shall be subject, in addition to any other remedy that may be prescribed 
by law, to a civil penalty of not more than $5,500 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 shall be considered made to the Department of Veterans 
Affairs, or to a recipient or party when such claim is actually made to 
an agency, fiscal intermediary, or other entity, including any State or 
political subdivision thereof, acting for or on behalf of the Department 
of Veterans Affairs, recipient, or party.

[[Page 776]]

    (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 shall also be subject to 
an assessment of not more than twice the amount of the claim or that 
portion thereof that is determined to be in violation of paragraph 
(a)(1) of this section. Such assessment shall be in lieu of damages by 
the Government because of the claim.
    (b) Statements. (1) Except as provided in paragraph (c) of this 
section, 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 $5,500 for each statement.
    (2) Each written representation, certification, or affirmation 
constitutes a separate statement, except that a certification or 
affirmation of the truthfulness and accuracy of the contents of a 
statement is not a separate statement.
    (3) A statement shall be considered made to the Department of 
Veterans Affairs 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 of 
Veterans Affairs.
    (c) Applications for certain benefits. (1) In the case of any claim 
or statement made by an individual relating to any of the benefits 
listed in paragraph (c)(2) of this section received by the individual, 
the individual may be held liable for penalties and assessments under 
this section only if such claim or statement is made by the individual 
in making application for such benefits with respect to any element 
required to establish the individual's initial eligibility to receive or 
continue to receive the benefits.
    (2) For purposes of paragraph (c) of this section, the term benefits 
means benefits under chapters 11, 13, 15, 17, and 21 of title 38 which 
are intended for the personal use of the individual who receives the 
benefits or for a member of the individual's family.
    (3) For purposes of this paragraph, the term application shall 
include, but is not limited to, any report or statement made or 
submitted by or for applicant or recipient of a benefit under chapters 
11, 13, or 15 of title 38, United States Code, to establish eligibility 
or to remain eligible for the benefit.
    (4) This paragraph is not applicable to an individual receiving 
benefits in a fiduciary capacity in behalf of an individual eligible for 
any of the benefits listed in paragraph (c)(2) of this section.
    (d) No proof of specific intent to defraud is required to establish 
liability under this section.
    (e) 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 
person making the claim or statement may be held liable for a civil 
penalty under this section.
    (f) In any case in which it is determined that more than one person 
is liable for making a claim under this section on which the Government 
has made a payment (including transferred property or provided 
services), an assessment may be imposed against any of these persons or 
jointly and severally against any combination of these persons.

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

[53 FR 16710, May 11, 1988, as amended at 61 FR 56449, Nov. 1, 1996]



Sec. 42.4  Investigation.

    (a) All allegations of liability under Sec. 42.3 shall be promptly 
referred to the investigating official.
    (b) If an investigating official concludes that a subpoena pursuant 
to the

[[Page 777]]

authority conferred by 31 U.S.C. 3804(a) is warranted--
    (1) The subpoena so issued shall notify the person to whom it is 
addressed of the authority under which the subpoena is issued and shall 
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 shall be 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 therefor, or 
that the documents, suitably identified, have been withheld based upon 
the assertion of an identified privilege.
    (c) 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.
    (d) Nothing in this section shall preclude or limit 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.
    (e) Nothing in this section modifies any responsibility of an 
investigating official to report violations of criminal law to the 
Attorney General.



Sec. 42.5  Review by the reviewing official.

    (a) The report of the investigating official will be examined by the 
reviewing official to determine if there is adequate evidence to believe 
a person is liable under Sec. 42.3 of this part. The review will be 
completed within 90 days.
    (b) If, based on the report of the investigating official under 
Sec. 42.4(b) of this part, the reviewing official determines that there 
is adequate evidence to believe that a person is liable under Sec. 42.3 
of this part, the reviewing official shall transmit to the Attorney 
General a written notice of the reviewing official's intention to issue 
a complaint under Sec. 42.7 of this part.
    (c) The notice shall 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. 
42.3 of this part;
    (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.
    (d) If the reviewing official finds that there is not adequate 
evidence that a person is liable, the reviewing official will inform the 
department or office of the Department of Veterans Affairs concerned 
with the claim or statement and the investigating official.



Sec. 42.6  Prerequisites for issuing a complaint.

    (a) The reviewing official may issue a complaint under Sec. 42.7 of 
this part 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. 42.3 of this 
part with respect to a claim, the reviewing official determines that, 
with respect to the claim or a group of related claims submitted at the 
same time such claim is submitted (as defined in paragraph (b) of this 
section), the amount of money or the value of property or services, or 
both, demanded or requested in violation of Sec. 42.3(a) of this part 
does not exceed $150,000.
    (b) For the purposes of this section, a related group of claims 
submitted at the same time shall include only those claims arising from 
the same transaction (e.g., grant, loan, application, or

[[Page 778]]

contract) that are submitted simultaneously as part of a single request, 
demand, or submission.
    (c) Nothing in this section shall be construed to limit the 
reviewing official's authority to join in a single complaint against a 
person's 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.



Sec. 42.7  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. 42.8 of this part.
    (b) The complaint shall state--
    (1) The allegations of liability against the defendant, including 
the statutory basis for liability, an identification of the claims or 
statements that are the basis for the alleged liability, and the reasons 
why liability allegedly arises from the 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. 
42.10 of this part.
    (c) The reviewing official shall serve the defendant with a copy of 
these regulations at the same time as service of the complaint.



Sec. 42.8  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) A United States Postal Service return receipt card acknowledging 
receipt; or
    (3) Written acknowledgment of receipt by the defendant or his or her 
representative.



Sec. 42.9  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 
shall be 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. 
42.11 of this part. 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.



Sec. 42.10  Default upon failure to file an answer.

    (a) If the defendant does not file an answer within the time 
prescribed in

[[Page 779]]

Sec. 42.9(a) of this part, the reviewing official may refer the 
complaint to the ALJ.
    (b) Upon the referral of the complaint, the ALJ shall promptly serve 
on the defendant in the manner prescribed in Sec. 42.8 of this part, 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 such facts establish liability under Sec. 42.3 of this 
part, 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 shall become final and binding upon the parties 
30 days after it is issued.
    (e) If, before the initial decision becomes final, the defendant 
files a motion with the ALJ seeking to reopen on the grounds that 
extraordinary circumstances prevented the defendant from filing an 
answer, the initial decision shall be stayed pending the ALJ's decision 
on the motion.
    (f) If, on such motion, the defendant can demonstrate extraordinary 
circumstances excusing the failure to file a timely answer, the ALJ 
shall withdraw the initial decision in paragraph (c) of this section, if 
the 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. 42.38 of this part.
    (h) The defendant may appeal to the Secretary the decision denying a 
motion to reopen by filing a notice of appeal with the Secretary within 
15 days after the ALJ denies the motion. The timely filing of a notice 
of appeal shall stay the initial decision until the Secretary decides 
the issue.
    (i) If the defendant files a timely notice of appeal with the 
Secretary, the ALJ shall forward the record of the proceeding to the 
Secretary.
    (j) The Secretary shall decide 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 Secretary decides that extraordinary circumstances excuse 
the defendant's failure to file a timely answer, the Secretary shall 
remand the case to the ALJ with instructions to grant the defendant an 
opportunity to answer.
    (l) If the Secretary decides that the defendant's failure to file a 
timely answer is not excused, the Secretary shall reinstate the initial 
decision of the ALJ, which shall become final and binding upon the 
parties 30 days after the authority head issues such decision.



Sec. 42.11  Referral of complaint and answer to the Administrative Law 
Judge (ALJ).

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



Sec. 42.12  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. 42.8 of this part. At the same time, the ALJ shall 
send a copy of such notice to the representative for the Government.
    (b) The notice shall 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 the defendant, if any; and
    (6) Other matters the ALJ deems appropriate.



Sec. 42.13  Parties to the hearing.

    (a) The parties to the hearing shall be the defendant and the 
Department of Veterans Affairs.

[[Page 780]]

    (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.



Sec. 42.14  Separation of functions.

    (a) The investigating official, the reviewing official, and any 
employee or agent of the Department of Veterans Affairs who takes part 
in investigating, preparing, or presenting a particular case may not, in 
the 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 Secretary, except as a witness or a 
representative in public proceedings; or
    (3) Make the collection of penalties and assessments under 31 U.S.C. 
3806.
    (b) The ALJ shall 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 of Veterans Affairs, including in the offices of either the 
investigating official or the reviewing official.



Sec. 42.15  Ex parte contacts.

    No party or person (except employees of the ALJ's office) shall 
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.



Sec. 42.16  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. The motion shall be accompanied by an 
affidavit alleging personal bias or other reason for disqualification.
    (c) The motion and affidavit shall be filed promptly upon the 
party's discovery of reasons requiring disqualification, or such 
objections shall be deemed waived.
    (d) The affidavit shall 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 the 
facts. It shall 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 
proceed no further in the case until the ALJ 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 shall be 
reassigned promptly to another ALJ.
    (3) If the ALJ denies a motion to disqualify, the Secretary may 
determine the matter only as part of the review of the initial decision 
upon appeal, if any.



Sec. 42.17  Rights of parties.

    Except as otherwise limited by this part, all parties may--
    (a) Be accompanied, represented, and advised by a representative;
    (b) Participate in any conference held by the ALJ;
    (c) Conduct discovery;
    (d) Agree to stipulations of fact or law, which shall be made part 
of the record;
    (e) Present evidence relevant to the issue 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.



Sec. 42.18  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--

[[Page 781]]

    (1) Set and change the date, time, and place of the hearing upon 
reasonable notice to the parties;
    (2) Continue or recess the hearing in whole or in part for a 
reasonable period of time;
    (3) Hold conference to identify or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the proceeding;
    (4) Administer oaths and affirmations;
    (5) Issue subpoenas requiring the attendance of witnesses and the 
production of documents at deposition or at hearings;
    (6) Rule on motions and other procedural matters;
    (7) Regulate the scope and timing of discovery;
    (8) Regulate the course of the hearing and the conduct of 
representatives and parties;
    (9) Examine witnesses;
    (10) Receive, rule on, exclude, or limit evidence;
    (11) Upon motion of a party, take official notice of facts;
    (12) Upon motion of a party, decide cases, in whole or in part, by 
summary judgment where there is no disputed issue of material fact;
    (13) Conduct any conference, argument, or hearing on motions in 
person or by telephone; and
    (14) Exercise any 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 invalid Federal 
statutes or regulations.



Sec. 42.19  Prehearing conferences.

    (a) The ALJ may schedule prehearing conferences as appropriate.
    (b) Upon the motion of any party, the ALJ shall schedule at least 
one prehearing 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 and 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; and
    (10) Other matters that 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.



Sec. 42.20  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. 42.4(b) of this part are based, 
unless the 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. 42.5 of this part is not discoverable 
under any circumstances.
    (d) The defendant may file a motion to compel disclosure of the 
documents subject to the provision of this section. The motion may only 
be filed with the

[[Page 782]]

ALJ following the filing of an answer pursuant to Sec. 42.9 of this 
part.



Sec. 42.21  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 the truth of any relevant fact;
    (3) Written interrogatories; and
    (4) Depositions.
    (b) For the purpose of this section and Sec. Sec. 42.22 and 42.23 
of this part, the term ``documents'' includes information, documents, 
reports, answers, records, accounts, papers, and other data and 
documentary evidence. Nothing contained herein shall 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. The 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 and/or a motion for protective order as provided in Sec. 
42.24 of this part.
    (3) The ALJ may grant a motion for discovery only if the ALJ finds 
that the discovery sought--
    (i) Is necessary for the expeditious, fair, and reasonable 
consideration 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. 42.24 of this part.
    (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 shall 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. 42.8 of this part.
    (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 of a 
verbatim transcript of the deposition, which it shall make available to 
all other parties for inspection and copying.
    (f) Each party shall bear its own costs of discovery.



Sec. 42.22  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. 42.33(b) of this part. At the time the above documents are 
exchanged, any party that intends to rely on the transcript of 
deposition testimony in lieu of live testimony at the hearing, if 
permitted by the ALJ, shall provide each party with a copy of the 
specific pages of the transcript it intends to introduce into evidence.
    (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 above 
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 
shall be deemed to be authentic for the purpose of admissibility at the 
hearing.



Sec. 42.23  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 783]]

    (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 shall 
specify any documents to be produced and shall designate the witnesses 
and describe the address and location thereof with sufficient 
particularity to permit the witnesses to be found.
    (d) The subpoena shall specify the time and place at which the 
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. 42.8 of this part. 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 it is less than ten days after service.



Sec. 42.24  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 make 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 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 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 only be 
disclosed in a designated way; or
    (9) That the parties simultaneously file specified documents or 
information enclosed in sealed envelopes to be opened as directed by the 
ALJ.



Sec. 42.25  Fees.

    The party requesting a subpoena shall pay the cost of the fees and 
mileage of any witnesses 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 shall accompany the subpoena when served, 
except that when a subpoena is issued on behalf of the Department of 
Veterans Affairs, a check for witness fees and mileage need not 
accompany the subpoena.



Sec. 42.26  Form, filing and service of papers.

    (a) Form. (1) Documents filed with the ALJ shall include an original 
and two copies.
    (2) Every pleading and paper filed in the proceeding shall contain a 
caption setting forth 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 shall be signed by, and shall 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 
representative or by proof that the document was sent by certified or 
registered mail.

[[Page 784]]

    (b) Service. A party filing a document with the ALJ shall, at the 
time of filing, serve a copy of such document on every other party. 
Service upon any party of any document other than those required to be 
served as prescribed in Sec. 42.8 of this part 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. When a party is represented by a representative, service shall 
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, shall be proof of service.



Sec. 42.27  Computation of time.

    (a) In computing any period of time under this part or in an order 
issued thereunder, the time begins with the date 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) When the period of time allowed is less than seven days, 
intermediate Saturdays, Sundays, and legal holidays observed by the 
Federal government shall be excluded from the computation.
    (c) Where a document has been served or issued by placing it in the 
mail, an additional five days will be added to the time permitted for 
any response.



Sec. 42.28  Motions.

    (a) Any application to the ALJ for an order or ruling shall be by 
motion. Motions shall state the relief sought, the authority relied 
upon, and the facts alleged, and shall 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 shall 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 part may file a response to such 
motion.
    (d) The ALJ may not grant a written motion before the time for 
filing responses thereto 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.



Sec. 42.29  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, shall reasonably relate to 
the severity and nature of the failure or misconduct.
    (c) When 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.
    (e) The ALJ may refuse to consider any motion, request, response, 
brief or other document which is not filed in a timely fashion.

[[Page 785]]



Sec. 42.30  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. 42.3 of this part and, if so, the appropriate 
amount of any civil penalty or assessment considering any aggravating or 
mitigating factors.
    (b) The Department of Veterans Affairs shall prove 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 shall be open to the public unless otherwise ordered 
by the ALJ for good cause shown.



Sec. 42.31  Determining the amount of penalties and assessments.

    (a) In determining an appropriate amount of civil penalties and 
assessments, the ALJ and the Secretary of Veterans Affairs, upon appeal, 
should evaluate any circumstances that mitigate or aggravate the 
violation and should 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 the conduct, and 
the need to deter others who might be similarly tempted, ordinarily 
double damages and a significant civil penalty should be imposed.
    (b) Although not exhaustive, the following factors are among those 
that may influence the ALJ and the Secretary or Veterans Affairs 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 the claims or statements were made;
    (3) The degree of the defendant'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 the programs;
    (8) Whether the defendant has engaged in a pattern of the same or 
similar misconduct;
    (9) Whether the defendant attempted to conceal the miscounduct;
    (10) The degree to which the defendant has involved others in the 
misconduct or in concealing it;
    (11) Where the misconduct of employees or agents is imputed to the 
defendant, the extent to which the defendant's practices fostered or 
attempted to preclude such misconduct;
    (12) Whether the defendant cooperated in or obstructed an 
investigation of the misconduct;
    (13) Whether the defendant assisted in identifying or 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; and
    (16) The need to deter the defendant and others from engaging in the 
same or similar misconduct.



Sec. 42.32  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

[[Page 786]]

    (3) Any place as may be agreed upon by the defendant and the ALJ.
    (b) Each party shall have the opportunity to present argument with 
respect to the location of the hearing.
    (c) The hearing shall be held at a place and time orderd by the ALJ.



Sec. 42.33  Witnesses.

    (a) Except as provided in paragraph (b) of this section, testimony 
at the hearing shall 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 written statement must be 
provided to all other parties along with the last known address of such 
witness, in a manner which 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 shall be exchanged as provided in Sec. 42.22(a) 
of this part.
    (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 the 
direct examination. To the extent permitted by the ALJ, cross-
examination on matters outside the scope of direct examination shall 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 the 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 entity 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.



Sec. 42.34  Evidence.

    (a) The ALJ shall determine the admissibility of evidence.
    (b) Except as provided in this part, the ALJ shall not be bound by 
the Federal Rules of Evidence. However, the ALJ may apply the Federal 
Rules of Evidence where 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 outweighed 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 shall be 
inadmissible to the extent 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 
shall be open to examination by all parties, unless otherwise ordered by 
the ALJ pursuant to Sec. 42.24 of this part.



Sec. 42.35  The record.

    (a) The hearing will 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.
    (b) The transcription of testimony, exhibits and other evidence 
admitted

[[Page 787]]

at the hearing, and all papers and requests filed in the proceeding 
constitute the record for the decision by the ALJ and the Secretary of 
Veterans Affairs.
    (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. 42.24 of this part.



Sec. 42.36  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 the 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.



Sec. 42.37  Initial decision.

    (a) The ALJ shall issue an initial decision based only on the 
record, which shall contain findings of fact, conclusions of law, and 
the amount of any penalties and assessments imposed.
    (b) The findings of fact shall include a finding on each of the 
following issues:
    (1) Whether the claims or statements identified in the complaint, or 
any portions thereof, violate Sec. 42.3 of this part;
    (2) If the person is liable for penalties or assessments, the 
appropriate amount of the penalties or assessments considering any 
mitigating or aggravating factors that the ALJ finds in the case, such 
as those described in Sec. 42.31 of this part.
    (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 
Secretary. If the ALJ fails to meet the deadline contained in this 
paragraph, the ALJ shall notify the parties of the reason for the delay 
and shall set a new deadline.
    (d) Unless the initial decision of the ALJ is timely appealed to the 
Secretary, or a motion for reconsideration of the initial decision is 
timely filed, the initial decision shall constitute the final decision 
of the Secretary and shall be final and binding on the parties 30 days 
after it is issued by the ALJ.



Sec. 42.38  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 will be presumed to be five days from the mailing in the absence 
of contrary proof.
    (b) Every motion must set forth the matters claimed to have been 
erroneously decided and the nature of the alleged errors. The motion 
shall be accompanied by a supporting brief.
    (c) Responses to the motions shall be allowed only upon request of 
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.
    (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 Secretary 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 Secretary 
in accordance with Sec. 42.39 of this part.
    (g) If the ALJ issues a revised initial decision, that decision 
shall constitute the final decision of the Secretary and shall be final 
and binding on the parties 30 days after it is issued, unless it is 
timely appealed to the Secretary in accordance with Sec. 42.39 of this 
part.



Sec. 42.39  Appeal to the Secretary of Veterans Affairs.

    (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

[[Page 788]]

the decision to the Secretary of Veterans Affairs by filing a notice of 
appeal with the Secretary in accordance with this section.
    (b)(1) A notice of appeal may be filed at any time within 30 days 
after the ALJ issues an initial decision. However, if another party 
files a motion for reconsideration under Sec. 42.8 of this part, 
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 Secretary may extend the initial 30 day period for an 
additional 30 days if the defendant files with the Secretary 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 
Secretary, and the time for filing motions for reconsideration under 
Sec. 42.38 of this part has expired, the ALJ shall forward the record 
of the proceeding to the Secretary.
    (d) A notice of appeal shall 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 Secretary.
    (g) There is no right to appeal any interlocutory ruling by the ALJ.
    (h) In reviewing the initial decision, the Secretary shall 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 Secretary 
that additional evidence not presented at the hearing is material and 
that there were reasonable grounds for the failure to present the 
evidence at the hearing, the Secretary shall remand the matter to the 
ALJ for consideration of such additional evidence.
    (j) The Secretary may affirm, reduce, reverse, compromise, remand, 
or settle any penalty or assessment, determined by the ALJ in any 
initial decision.
    (k) The Secretary shall promptly serve each party to the appeal with 
a copy of the decision of the Secretary and a statement describing the 
right of any person to seek judicial review.
    (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 Secretary 
serves the defendant with a copy of the Secretary's decision, a 
determination that a defendant is liable under Sec. 42.3 of this part 
is final and is not subject to judicial review.



Sec. 42.40  Stays ordered by the Department of Justice.

    If at any time the Attorney General or Assistant Attorney General 
designated by the Attorney General transmits to the Secretary 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 the claim or 
statement, the Secretary shall stay the process immediately. The 
Secretary may order the process resumed only upon receipt of the written 
authorization of the Attorney General.



Sec. 42.41  Stay pending appeal.

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



Sec. 42.42  Judicial review.

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

[[Page 789]]



Sec. 42.43  Collection of civil penalties and assessments.

    Sections 3806 and 3808(b) of title 31 U.S.C., authorizes actions for 
collection of civil penalties and assessments imposed under this part 
and specify the procedures for the action.



Sec. 42.44  Right to administrative offset.

    The amount of any penalty or assessment which has become final, or 
for which a judgment has been entered under Sec. 42.42 or Sec.  42.43 
of this part, or any amount agreed upon in a compromise or settlement 
under Sec. 42.46 of this part, may be collected by administrative 
offset under 31 U.S.C. 3716, except that an administrative offset may 
not be made under this subsection against a refund of an overpayment of 
Federal taxes, then or later owing by the United States to the 
defendant.



Sec. 42.45  Deposit in Treasury of United States.

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



Sec. 42.46  Compromise and settlement.

    (a) Parties may make offers of compromise or settlement at any time.
    (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.
    (c) The Secretary 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. 42.42 of this part or during the pendency of any action to collect 
penalties and assessments under Sec. 42.43 of this part.
    (d) The Attorney General has exclusive authority to compromise or 
settle a case under this part during the pendency of any review under 
Sec. 42.42 of this part, or of any action to recover penalties and 
assessments under 31 U.S.C. 3806.
    (e) The investigating official may recommend settlement terms to the 
reviewing official, the Secretary, or the Attorney General, as 
appropriate. The reviewing official may recommend settlement terms to 
the Secretary, or the Attorney General, as appropriate.
    (f) Any compromise or settlement must be in writing.



Sec. 42.47  Limitations.

    (a) The notice of hearing with respect to a claim or statement must 
be served in the manner specified in Sec. 42.8 of this part within 6 
years after the date on which such claim or statement is made.
    (b) If the defendant fails to file a timely answer, service of a 
notice under Sec. 42.10(b) of this part shall be deemed a notice of 
hearing of purposes of this section.
    (c) The statute of limitations may be extended by agreement of the 
parties.



PART 43_UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND COOPERATIVE 
AGREEMENTS TO STATE AND LOCAL GOVERNMENTS--Table of Contents




                            Subpart A_General

Sec.
43.1 Purpose and scope of this part.
43.2 Scope of subpart.
43.3 Definitions.
43.4 Applicability.
43.5 Effect on other issuances.
43.6 Additions and exceptions.

                    Subpart B_Pre-Award Requirements

43.10 Forms for applying for grants.
43.11 State plans.
43.12 Special grant or subgrant conditions for ``high-risk'' grantees.

                    Subpart C_Post-Award Requirements

                        Financial Administration

43.20 Standards for financial management systems.
43.21 Payment.
43.22 Allowable costs.
43.23 Period of availability of funds.
43.24 Matching or cost sharing.
43.25 Program income.
43.26 Non-Federal audit.

                    Changes, Property, and Subawards

43.30 Changes.
43.31 Real property.
43.32 Equipment.

[[Page 790]]

43.33 Supplies.
43.34 Copyrights.
43.35 Subawards to debarred and suspended parties.
43.36 Procurement.
43.37 Subgrants.

              Reports, Records, Retention, and Enforcement

43.40 Monitoring and reporting program performance.
43.41 Financial reporting.
43.42 Retention and access requirements for records.
43.43 Enforcement.
43.44 Termination for convenience.

                 Subpart D_After-the-Grant Requirements

43.50 Closeout.
43.51 Later disallowances and adjustments.
43.52 Collection of amounts due.

Subpart E--Entitlements [Reserved]

    Authority: 38 U.S.C. 501, 1712.

    Source: 53 FR 8073 and 8087, Mar. 11, 1988, unless otherwise noted.



                            Subpart A_General



Sec. 43.1  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.



Sec. 43.2  Scope of subpart.

    This subpart contains general rules pertaining to this part and 
procedures for control of exceptions from this part.



Sec. 43.3  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, 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

[[Page 791]]

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 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.

[[Page 792]]

    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.
    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 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.



Sec. 43.4  Applicability.

    (a) General. Subparts A-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. 43.6, or:

[[Page 793]]

    (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;
    (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 to States at per diem rates for veterans receiving 
care in recognized State homes.


(Authority: 38 U.S.C. 1741-1743)

    (b) Entitlement programs. Entitlement programs enumerated above in 
Sec. 43.4(a) (3)-(8) are subject to subpart E.

[53 FR 8073 and 8087, Mar. 11, 1988, as amended at 53 FR 8073, Mar. 11, 
1988]



Sec. 43.5  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. 43.6.

[[Page 794]]



Sec. 43.6  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 OMB.
    (c) Exceptions on a case-by-case basis and for subgrantees may be 
authorized by the affected Federal agencies.



                    Subpart B_Pre-Award Requirements



Sec. 43.10  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. Previously 
submitted pages with information that is still current need not be 
resubmitted.



Sec. 43.11  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.

[[Page 795]]



Sec. 43.12  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.



                    Subpart C_Post-Award Requirements

                        Financial Administration



Sec. 43.20  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

[[Page 796]]

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.



Sec. 43.21  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 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)

[[Page 797]]

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. 43.43(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 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.



Sec. 43.22  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) Applicable cost principles. For each kind of organization, there 
is a set of Federal principles for determining allowable costs. 
Allowable costs will be determined in accordance with the cost 
principles applicable to the organization incurring the costs. The 
following chart lists the kinds of organizations and the applicable cost 
principles.

------------------------------------------------------------------------
           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 OMB   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.
------------------------------------------------------------------------



Sec. 43.23  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.

[[Page 798]]

    (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.



Sec. 43.24  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 
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. 43.25, 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. 43.25(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:

[[Page 799]]

    (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.
    (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. 43.22, 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

[[Page 800]]

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.



Sec. 43.25  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 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. 43.34.)
    (f) Property. Proceeds from the sale of real property or equipment 
will be handled in accordance with the requirements of Sec. Sec.  43.31 
and 43.32.
    (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)

[[Page 801]]

of this section), unless the terms of the agreement or the Federal 
agency regulations provide otherwise.



Sec. 43.26  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 
governments are not required to have a single audit performed. State and 
local governments should use their own procedures to ensure that the 
contractor has complied with laws and regulations affecting the 
expenditure 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, Circular A-110, 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. 43.36 
shall be followed.

[53 FR 8073 and 8087, Mar. 11, 1988, as amended at 62 FR 45939, 45943, 
Aug. 29, 1997]

                    Changes, Property, and Subawards



Sec. 43.30  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. 43.22) 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).

[[Page 802]]

    (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.
    (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. 43.36 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. 43.22) 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.



Sec. 43.31  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

[[Page 803]]

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.



Sec. 43.32  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. 43.25(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

[[Page 804]]

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.
    (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 43.32(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.



Sec. 43.33  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.



Sec. 43.34  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.



Sec. 43.35  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.''



Sec. 43.36  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 and their implementing 
regulations. Other grantees and subgrantees will

[[Page 805]]

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
    (ii) If the contract includes a ceiling price that the contractor 
exceeds at its own risk.

[[Page 806]]

    (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. 43.36. 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 factors to be used in evaluating bids or proposals.

[[Page 807]]

    (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. 43.36(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 cannot be used to purchase other types

[[Page 808]]

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 809]]

    (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. 43.22). 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 810]]

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).

[53 FR 8073 and 8087, Mar. 11, 1988, as amended at 60 FR 19639, 19644, 
Apr. 19, 1995]



Sec. 43.37  Subgrants.

    (a) States. States shall follow state law and procedures when 
awarding and administering subgrants (whether on a

[[Page 811]]

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 Section 43.42 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) 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 43.10;
    (2) Section 43.11;
    (3) The letter-of-credit procedures specified in Treasury 
Regulations at 31 CFR part 205, cited in Sec. 43.21; and
    (4) Section 43.50.

              Reports, Records, Retention, and Enforcement



Sec. 43.40  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.

[[Page 812]]

    (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 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.



Sec. 43.41  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 paragraph Sec. 43.41(e)(2)(iii) of this section.
    (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

[[Page 813]]

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 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. 43.41(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. 43.41(d), instead of this form.
    (ii) The frequency for submitting reimbursement requests is treated 
in Sec. 43.41(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.

[[Page 814]]

However, frequency and due date shall be governed by Sec. 43.41(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. 43.41(d).
    (iii) The Federal agency may substitute the Financial Status Report 
specified in Sec. 43.41(b) for the Outlay Report and Request for 
Reimbursement for Construction Programs.
    (3) Accounting basis. The accounting basis for the Outlay Report and 
Request for Reimbursement for Construction Programs shall be governed by 
Sec. 43.41(b)(2).



Sec. 43.42  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. 43.36(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.
    (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 supporting records starts from the date of 
such submission.

[[Page 815]]

    (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.



Sec. 43.43  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 being subject to 
``Debarment and Suspension'' under E.O. 12549 (see Sec. 43.35).



Sec. 43.44  Termination for convenience.

    Except as provided in Sec. 43.43 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

[[Page 816]]

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. 43.43 
or paragraph (a) of this section.



                 Subpart D_After-The-Grant Requirements



Sec. 43.50  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. 43.32(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.



Sec. 43.51  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. 43.42;
    (d) Property management requirements in Sec. 43.31 and Sec.  43.32; 
and
    (e) Audit requirements in Sec. 43.26.



Sec. 43.52  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 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 44_GOVERNMENTWIDE DEBARMENT AND SUSPENSION (NONPROCUREMENT)--Table 
of Contents




Sec.
44.25 How is this part organized?
44.50 How is this part written?

[[Page 817]]

44.75 Do terms in this part have special meanings?

                            Subpart A_General

44.100 What does this part do?
44.105 Does this part apply to me?
44.110 What is the purpose of the nonprocurement debarment and 
          suspension system?
44.115 How does an exclusion restrict a person's involvement in covered 
          transactions?
44.120 May we grant an exception to let an excluded person participate 
          in a covered transaction?
44.125 Does an exclusion under the nonprocurement system affect a 
          person's eligibility for Federal procurement contracts?
44.130 Does exclusion under the Federal procurement system affect a 
          person's eligibility to participate in nonprocurement 
          transactions?
44.135 May the Department of Veterans Affairs exclude a person who is 
          not currently participating in a nonprocurement transaction?
44.140 How do I know if a person is excluded?
44.145 Does this part address persons who are disqualified, as well as 
          those who are excluded from nonprocurement transactions?

                     Subpart B_Covered Transactions

44.200 What is a covered transaction?
44.205 Why is it important to know if a particular transaction is a 
          covered transaction?
44.210 Which nonprocurement transactions are covered transactions?
44.215 Which nonprocurement transactions are not covered transactions?
44.220 Are any procurement contracts included as covered transactions?
44.225 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

44.300 What must I do before I enter into a covered transaction with 
          another person at the next lower tier?
44.305 May I enter into a covered transaction with an excluded or 
          disqualified person?
44.310 What must I do if a Federal agency excludes a person with whom I 
          am already doing business in a covered transaction?
44.315 May I use the services of an excluded person as a principal under 
          a covered transaction?
44.320 Must I verify that principals of my covered transactions are 
          eligible to participate?
44.325 What happens if I do business with an excluded person in a 
          covered transaction?
44.330 What requirements must I pass down to persons at lower tiers with 
          whom I intend to do business?

            Disclosing Information--Primary Tier Participants

44.335 What information must I provide before entering into a covered 
          transaction with the Department of Veterans Affairs?
44.340 If I disclose unfavorable information required under Sec. 
          44.335, will I be prevented from participating in the 
          transaction?
44.345 What happens if I fail to disclose the information required under 
          Sec. 44.335?
44.350 What must I do if I learn of the information required under Sec. 
          44.335 after entering into a covered transaction with the 
          Department of Veterans Affairs?

             Disclosing Information--Lower Tier Participants

44.355 What information must I provide to a higher tier participant 
          before entering into a covered transaction with that 
          participant?
44.360 What happens if I fail to disclose the information required under 
          Sec. 44.355?
44.365 What must I do if I learn of information required under Sec. 
          44.355 after entering into a covered transaction with a higher 
          tier participant?

 Subpart D_Responsibilities of Department of Veterans Affairs Officials 
                         Regarding Transactions

44.400 May I enter into a transaction with an excluded or disqualified 
          person?
44.405 May I enter into a covered transaction with a participant if a 
          principal of the transaction is excluded?
44.410 May I approve a participant's use of the services of an excluded 
          person?
44.415 What must I do if a Federal agency excludes the participant or a 
          principal after I enter into a covered transaction?
44.420 May I approve a transaction with an excluded or disqualified 
          person at a lower tier?
44.425 When do I check to see if a person is excluded or disqualified?
44.430 How do I check to see if a person is excluded or disqualified?
44.435 What must I require of a primary tier participant?

[[Page 818]]

44.440 What method do I use to communicate those requirements to 
          participants?
44.445 What action may I take if a primary tier participant knowingly 
          does business with an excluded or disqualified person?
44.450 What action may I take if a primary tier participant fails to 
          disclose the information required under Sec. 44.335?
44.455 What may I do if a lower tier participant fails to disclose the 
          information required under Sec. 44.355 to the next higher 
          tier?

                 Subpart E_Excluded Parties List System

44.500 What is the purpose of the Excluded Parties List System (EPLS)?
44.505 Who uses the EPLS?
44.510 Who maintains the EPLS?
44.515 What specific information is in the EPLS?
44.520 Who places the information into the EPLS?
44.525 Whom do I ask if I have questions about a person in the EPLS?
44.530 Where can I find the EPLS?

   Subpart F_General Principles Relating to Suspension and Debarment 
                                 Actions

44.600 How do suspension and debarment actions start?
44.605 How does suspension differ from debarment?
44.610 What procedures does the Department of Veterans Affairs use in 
          suspension and debarment actions?
44.615 How does the Department of Veterans Affairs notify a person of a 
          suspension and debarment action?
44.620 Do Federal agencies coordinate suspension and debarment actions?
44.625 What is the scope of a suspension or debarment action?
44.630 May the Department of Veterans Affairs impute the conduct of one 
          person to another?
44.635 May the Department of Veterans Affairs settle a debarment or 
          suspension action?
44.640 May a settlement include a voluntary exclusion?
44.645 Do other Federal agencies know if the Department of Veterans 
          Affairs agrees to a voluntary exclusion?

  Subpart G_Suspension 44.700 When may the suspending official issue a 
                               suspension?

44.705 What does the suspending official consider in issuing a 
          suspension?
44.710 When does a suspension take effect?
44.715 What notice does the suspending official give me if I am 
          suspended?
44.720 How may I contest a suspension?
44.725 How much time do I have to contest a suspension?
44.730 What information must I provide to the suspending official if I 
          contest a suspension?
44.735 Under what conditions do I get an additional opportunity to 
          challenge the facts on which the suspension is based?
44.740 Are suspension proceedings formal?
44.745 How is fact-finding conducted?
44.750 What does the suspending official consider in deciding whether to 
          continue or terminate my suspension?
44.755 When will I know whether the suspension is continued or 
          terminated 44.760 How long may my suspension last?

      Subpart H_Debarment 44.800 What are the causes for debarment?

44.805 What notice does the debarring official give me if I am proposed 
          for debarment?
44.810 When does a debarment take effect?
44.815 How may I contest a proposed debarment?
44.820 How much time do I have to contest a proposed debarment?
44.825 What information must I provide to the debarring official if I 
          contest a proposed debarment?
44.830 Under what conditions do I get an additional opportunity to 
          challenge the facts on which the proposed debarment is based?
44.835 Are debarment proceedings formal?
44.840 How is fact-finding conducted?
44.845 What does the debarring official consider in deciding whether to 
          debar me?
44.850 What is the standard of proof in a debarment action?
44.855 Who has the burden of proof in a debarment action?
44.860 What factors may influence the debarring official's decision?
44.865 How long may my debarment last?
44.870 When do I know if the debarring official debars me?
44.875 May I ask the debarring official to reconsider a decision to 
          debar me?
44.880 What factors may influence the debarring official during 
          reconsideration?
44.885 May the debarring official extend a debarment?

                          Subpart I_Definitions

44.900 Adequate evidence.
44.905 Affiliate.
44.910 Agency.
44.915 Agent or representative.
44.920 Civil judgment.
44.925 Conviction.
44.930 Debarment.
44.935 Debarring official.
44.940 Disqualified.
44.945 Excluded or exclusion.

[[Page 819]]

44.950 Excluded Parties List System.
44.955 Indictment.
44.960 Ineligible or ineligibility.
44.965 Legal proceedings.
44.970 Nonprocurement transaction.
44.975 Notice.
44.980 Participant.
44.985 Person.
44.990 Preponderance of the evidence.
44.995 Principal.
44.1000 Respondent.
44.1005 State.
44.1010 Suspending official.
44.1015 Suspension.
44.1020 Voluntary exclusion or voluntarily excluded.

                Subpart J_Limited Denial of Participation

44.1100 General.
44.1105 Cause for a limited denial of participation.
44.1110 Scope and period of a limited denial of participation.
44.1111 Notice.
44.1112 Conference.
44.1113 Appeal.

Appendix to Part 44--Covered Transactions

    Authority: 38 U.S.C. 501 and 38 U.S.C. 3703(c); Sec. 2455, Pub. L. 
103-355, 108 Stat. 3327 (31 U.S.C. 6101 note); E.O. 11738 (3 CFR, 1973 
Comp., p.799); E.O. 12549 (3 CFR 1986 comp., p.189) E.O. 12689 (3 CFR 
1989 Comp., p. 235.)

    Source: 68 FR 66544, 66618, 66619, Nov. 26, 2003, unless otherwise 
noted.



Sec. 44.25  How is this part organized?

    (a) This part is subdivided into ten subparts. Each subpart contains 
information related to a broad topic or specific audience with special 
responsibilities, as shown in the following table:

------------------------------------------------------------------------
                                             You will find provisions
            In subpart . . .                     related to . . .
------------------------------------------------------------------------
A......................................  general information about this
                                          rule.
B......................................  the types of Department of
                                          Veterans Affairs transactions
                                          that are covered by the
                                          Governmentwide nonprocurement
                                          suspension and debarment
                                          system.
C......................................  the responsibilities of persons
                                          who participate in covered
                                          transactions.
D......................................  the responsibilities of
                                          Department of Veterans Affairs
                                          officials who are authorized
                                          to enter into covered
                                          transactions.
E......................................  the responsibilities of Federal
                                          agencies for the Excluded
                                          Parties List System
                                          (Disseminated by the General
                                          Services Administration).
F......................................  the general principles
                                          governing suspension,
                                          debarment, voluntary exclusion
                                          and settlement.
G......................................  suspension actions.
H......................................  debarment actions.
I......................................  definitions of terms used in
                                          this part.
J......................................  [Reserved]
------------------------------------------------------------------------

    (b) The following table shows which subparts may be of special 
interest to you, depending on who you are:

------------------------------------------------------------------------
             If you are . . .                   See subpart(s) . . .
------------------------------------------------------------------------
(1) a participant or principal in a         A, B, C, and I.
 nonprocurement transaction.
(2) a respondent in a suspension action...  A, B, F, G and I.
(3) a respondent in a debarment action....  A, B, F, H and I.
(4) a suspending official.................  A, B, D, E, F, G and I.
(5) a debarring official..................  A, B, D, E, F, H and I.
(6) a (n) Department of Veterans Affairs    A, B, D, E and I.
 official authorized to enter into a
 covered transaction.
(7) Reserved..............................  J.
------------------------------------------------------------------------



Sec. 44.50  How is this part written?

    (a) This part uses a ``plain language'' format to make it easier for 
the general public and business community to use. The section headings 
and text, often in the form of questions and answers, must be read 
together.
    (b) Pronouns used within this part, such as ``I'' and ``you,'' 
change from subpart to subpart depending on the audience being 
addressed. The pronoun ``we'' always is the Department of Veterans 
Affairs.
    (c) The ``Covered Transactions'' diagram in the appendix to this 
part shows the levels or ``tiers'' at which the Department of Veterans 
Affairs enforces an exclusion under this part.



Sec. 44.75  Do terms in this part have special meanings?

    This part uses terms throughout the text that have special meaning. 
Those terms are defined in Subpart I of this part. For example, three 
important terms are--
    (a) Exclusion or excluded, which refers only to discretionary 
actions taken by a suspending or debarring official under this part or 
the Federal Acquisition Regulation (48 CFR part 9, subpart 9.4);
    (b) Disqualification or disqualified, which refers to prohibitions 
under specific statutes, executive orders (other than Executive Order 
12549 and Executive Order 12689), or other authorities. 
Disqualifications frequently are not subject to the discretion of an 
agency

[[Page 820]]

official, may have a different scope than exclusions, or have special 
conditions that apply to the disqualification; and
    (c) Ineligibility or ineligible, which generally refers to a person 
who is either excluded or disqualified.



                            Subpart A_General



Sec. 44.100  What does this part do?

    This part adopts a governmentwide system of debarment and suspension 
for Department of Veterans Affairs nonprocurement activities. It also 
provides for reciprocal exclusion of persons who have been excluded 
under the Federal Acquisition Regulation, and provides for the 
consolidated listing of all persons who are excluded, or disqualified by 
statute, executive order, or other legal authority. This part satisfies 
the requirements in section 3 of Executive Order 12549, ``Debarment and 
Suspension'' (3 CFR 1986 Comp., p. 189), Executive Order 12689, 
``Debarment and Suspension'' (3 CFR 1989 Comp., p. 235) and 31 U.S.C. 
6101 note (Section 2455, Public Law 103-355, 108 Stat. 3327).



Sec. 44.105  Does this part apply to me?

    Portions of this part (see table at Sec. 44.25(b)) apply to you if 
you are a(n)--
    (a) Person who has been, is, or may reasonably be expected to be, a 
participant or principal in a covered transaction;
    (b) Respondent (a person against whom the Department of Veterans 
Affairs has initiated a debarment or suspension action);
    (c) Department of Veterans Affairs debarring or suspending official; 
or
    (d) Department of Veterans Affairs official who is authorized to 
enter into covered transactions with non-Federal parties.



Sec. 44.110  What is the purpose of the nonprocurement debarment and 
suspension system?

    (a) To protect the public interest, the Federal Government ensures 
the integrity of Federal programs by conducting business only with 
responsible persons.
    (b) A Federal agency uses the nonprocurement debarment and 
suspension system to exclude from Federal programs persons who are not 
presently responsible.
    (c) An exclusion is a serious action that a Federal agency may take 
only to protect the public interest. A Federal agency may not exclude a 
person or commodity for the purposes of punishment.



Sec. 44.115  How does an exclusion restrict a person's involvement in 
covered transactions?

    With the exceptions stated in Sec. Sec. 44.120, 44.315, and 44.420, 
a person who is excluded by the Department of Veterans Affairs or any 
other Federal agency may not:
    (a) Be a participant in a(n) Department of Veterans Affairs 
transaction that is a covered transaction under subpart B of this part;
    (b) Be a participant in a transaction of any other Federal agency 
that is a covered transaction under that agency's regulation for 
debarment and suspension; or
    (c) Act as a principal of a person participating in one of those 
covered transactions.



Sec. 44.120  May we grant an exception to let an excluded person 
participate in a covered transaction?

    (a) The Secretary may grant an exception permitting an excluded 
person to participate in a particular covered transaction. If the 
Secretary grants an exception, the exception must be in writing and 
state the reason(s) for deviating from the governmentwide policy in 
Executive Order 12549.
    (b) An exception granted by one agency for an excluded person does 
not extend to the covered transactions of another agency.



Sec. 44.125  Does an exclusion under the nonprocurement system affect 
a person's eligibility for Federal procurement contracts?

    If any Federal agency excludes a person under its nonprocurement 
common rule on or after August 25, 1995, the excluded person is also 
ineligible to participate in Federal procurement transactions under the 
FAR. Therefore, an exclusion under this part has reciprocal effect in 
Federal procurement transactions.

[[Page 821]]



Sec. 44.130  Does exclusion under the Federal procurement system affect 
a person's eligibility to participate in nonprocurement transactions?

    If any Federal agency excludes a person under the FAR on or after 
August 25, 1995, the excluded person is also ineligible to participate 
in nonprocurement covered transactions under this part. Therefore, an 
exclusion under the FAR has reciprocal effect in Federal nonprocurement 
transactions.



Sec. 44.135  May the Department of Veterans Affairs exclude a person who 
is not currently participating in a nonprocurement transaction?

    Given a cause that justifies an exclusion under this part, we may 
exclude any person who has been involved, is currently involved, or may 
reasonably be expected to be involved in a covered transaction.



Sec. 44.140  How do I know if a person is excluded?

    Check the Excluded Parties List System (EPLS) to determine whether a 
person is excluded. The General Services Administration (GSA) maintains 
the EPLS and makes it available, as detailed in subpart E of this part. 
When a Federal agency takes an action to exclude a person under the 
nonprocurement or procurement debarment and suspension system, the 
agency enters the information about the excluded person into the EPLS.



Sec. 44.145  Does this part address persons who are disqualified, as 
well as those who are excluded from nonprocurement transactions?

    Except if provided for in Subpart J of this part, this part--
    (a) Addresses disqualified persons only to--
    (1) Provide for their inclusion in the EPLS; and
    (2) State responsibilities of Federal agencies and participants to 
check for disqualified persons before entering into covered 
transactions.
    (b) Does not specify the--
    (1) Department of Veterans Affairs transactions for which a 
disqualified person is ineligible. Those transactions vary on a case-by-
case basis, because they depend on the language of the specific statute, 
Executive order, or regulation that caused the disqualification;
    (2) Entities to which the disqualification applies; or
    (3) Process that the agency uses to disqualify a person. Unlike 
exclusion, disqualification is frequently not a discretionary action 
that a Federal agency takes.



                     Subpart B_Covered Transactions



Sec. 44.200  What is a covered transaction?

    A covered transaction is a nonprocurement or procurement transaction 
that is subject to the prohibitions of this part. It may be a 
transaction at--
    (a) The primary tier, between a Federal agency and a person (see 
appendix to this part); or
    (b) A lower tier, between a participant in a covered transaction and 
another person.



Sec. 44.205  Why is it important if a particular transaction is a covered 
transaction?

    The importance of a covered transaction depends upon who you are.
    (a) As a participant in the transaction, you have the 
responsibilities laid out in Subpart C of this part. Those include 
responsibilities to the person or Federal agency at the next higher tier 
from whom you received the transaction, if any. They also include 
responsibilities if you subsequently enter into other covered 
transactions with persons at the next lower tier.
    (b) As a Federal official who enters into a primary tier 
transaction, you have the responsibilities laid out in subpart D of this 
part.
    (c) As an excluded person, you may not be a participant or principal 
in the transaction unless--
    (1) The person who entered into the transaction with you allows you 
to continue your involvement in a transaction that predates your 
exclusion, as permitted under Sec. 44.310 or Sec.  44.415; or
    (2) A(n) Department of Veterans Affairs official obtains an 
exception from the Secretary to allow you to be involved in the 
transaction, as permitted under Sec. 44.120.

[[Page 822]]



Sec. 44.210  Which nonprocurement transactions are covered transactions?

    All nonprocurement transactions, as defined in Sec. 44.970, are 
covered transactions unless listed in Sec. 44.215. (See appendix to 
this part.)



Sec. 44.215  Which nonprocurement transactions are not covered 
transactions?

    The following types of nonprocurement transactions are not covered 
transactions:
    (a) A direct award to--
    (1) A foreign government or foreign governmental entity;
    (2) A public international organization;
    (3) An entity owned (in whole or in part) or controlled by a foreign 
government; or
    (4) Any other entity consisting wholly or partially of one or more 
foreign governments or foreign governmental entities.
    (b) A benefit to an individual as a personal entitlement without 
regard to the individual's present responsibility (but benefits received 
in an individual's business capacity are not excepted). For example, if 
a person receives social security benefits under the Supplemental 
Security Income provisions of the Social Security Act, 42 U.S.C. 1301 et 
seq., those benefits are not covered transactions and, therefore, are 
not affected if the person is excluded.
    (c) Federal employment.
    (d) A transaction that the Department of Veterans Affairs needs to 
respond to a national or agency-recognized emergency or disaster.
    (e) A permit, license, certificate, or similar instrument issued as 
a means to regulate public health, safety, or the environment, unless 
the Department of Veterans Affairs specifically designates it to be a 
covered transaction.
    (f) An incidental benefit that results from ordinary governmental 
operations.
    (g) Any other transaction if the application of an exclusion to the 
transaction is prohibited by law.



Sec. 44.220  Are any procurement contracts included as covered 
transactions?

    (a) Covered transactions under this part--
    (1) Do not include any procurement contracts awarded directly by a 
Federal agency; but
    (2) Do include some procurement contracts awarded by non-Federal 
participants in nonprocurement covered transactions (see appendix to 
this part).
    (b) Specifically, a contract for goods or services is a covered 
transaction if any of the following applies:
    (1) The contract is awarded by a participant in a nonprocurement 
transaction that is covered under Sec. 44.210, and the amount of the 
contract is expected to equal or exceed $25,000.
    (2) The contract requires the consent of a(n) Department of Veterans 
Affairs official. In that case, the contract, regardless of the amount, 
always is a covered transaction, and it does not matter who awarded it. 
For example, it could be a subcontract awarded by a contractor at a tier 
below a nonprocurement transaction, as shown in the appendix to this 
part.
    (3) The contract is for federally-required audit services.



Sec. 44.225  How do I know if a transaction in which I may participate 
is a covered transaction?

    As a participant in a transaction, you will know that it is a 
covered transaction because the agency regulations governing the 
transaction, the appropriate agency official, or participant at the next 
higher tier who enters into the transaction with you, will tell you that 
you must comply with applicable portions of this part.



    Subpart C_Responsibilities of Participants Regarding Transactions

                    Doing Business With Other Persons



Sec. 44.300  What must I do before I enter into a covered transaction 
with another person at the next lower tier?

    When you enter into a covered transaction with another person at the 
next lower tier, you must verify that the

[[Page 823]]

person with whom you intend to do business is not excluded or 
disqualified. You do this by:
    (a) Checking the EPLS; or
    (b) Collecting a certification from that person if allowed by this 
rule; or
    (c) Adding a clause or condition to the covered transaction with 
that person.



Sec. 44.305  May I enter into a covered transaction with an excluded 
or disqualified person?

    (a) You as a participant may not enter into a covered transaction 
with an excluded person, unless the Department of Veterans Affairs 
grants an exception under Sec. 44.120.
    (b) You may not enter into any transaction with a person who is 
disqualified from that transaction, unless you have obtained an 
exception under the disqualifying statute, Executive order, or 
regulation.



Sec. 44.310  What must I do if a Federal agency excludes a person with 
whom I am already doing business in a covered transaction?

    (a) You as a participant may continue covered transactions with an 
excluded person if the transactions were in existence when the agency 
excluded the person. However, you are not required to continue the 
transactions, and you may consider termination. You should make a 
decision about whether to terminate and the type of termination action, 
if any, only after a thorough review to ensure that the action is proper 
and appropriate.
    (b) You may not renew or extend covered transactions (other than no-
cost time extensions) with any excluded person, unless the Department of 
Veterans Affairs grants an exception under Sec. 44.120.



Sec. 44.315  May I use the services of an excluded person as a principal 
under a covered transaction?

    (a) You as a participant may continue to use the services of an 
excluded person as a principal under a covered transaction if you were 
using the services of that person in the transaction before the person 
was excluded. However, you are not required to continue using that 
person's services as a principal. You should make a decision about 
whether to discontinue that person's services only after a thorough 
review to ensure that the action is proper and appropriate.
    (b) You may not begin to use the services of an excluded person as a 
principal under a covered transaction unless the Department of Veterans 
Affairs grants an exception under Sec. 44.120.



Sec. 44.320  Must I verify that principals of my covered transactions 
are eligible to participate?

    Yes, you as a participant are responsible for determining whether 
any of your principals of your covered transactions is excluded or 
disqualified from participating in the transaction. You may decide the 
method and frequency by which you do so. You may, but you are not 
required to, check the EPLS.



Sec. 44.325  What happens if I do business with an excluded person 
in a covered transaction?

    If as a participant you knowingly do business with an excluded 
person, we may disallow costs, annul or terminate the transaction, issue 
a stop work order, debar or suspend you, or take other remedies as 
appropriate.



Sec. 44.330  What requirements must I pass down to persons at lower 
tiers with whom I intend to do business?

    Before entering into a covered transaction with a participant at the 
next lower tier, you must require that participant to--
    (a) Comply with this subpart as a condition of participation in the 
transaction. You may do so using any method(s), unless Sec. 44.440 
requires you to use specific methods.
    (b) Pass the requirement to comply with this subpart to each person 
with whom the participant enters into a covered transaction at the next 
lower tier.

            Disclosing Information--Primary Tier Participants



Sec. 44.335  What information must I provide before entering into a 
covered transaction with the Department of Veterans Affairs?

    Before you enter into a covered transaction at the primary tier, you 
as

[[Page 824]]

the participant must notify the Department of Veterans Affairs office 
that is entering into the transaction with you, if you know that you or 
any of the principals for that covered transaction:
    (a) Are presently excluded or disqualified;
    (b) Have been convicted within the preceding three years of any of 
the offenses listed in Sec. 44.800(a) or had a civil judgment rendered 
against you for one of those offenses within that time period;
    (c) Are presently indicted for or otherwise criminally or civilly 
charged by a governmental entity (Federal, State or local) with 
commission of any of the offenses listed in Sec. 44.800(a); or
    (d) Have had one or more public transactions (Federal, State, or 
local) terminated within the preceding three years for cause or default.



Sec. 44.340  If I disclose unfavorable information required under 
Sec. 44.335, will I be prevented from participating in the transaction?

    As a primary tier participant, your disclosure of unfavorable 
information about yourself or a principal under Sec. 44.335 will not 
necessarily cause us to deny your participation in the covered 
transaction. We will consider the information when we determine whether 
to enter into the covered transaction. We also will consider any 
additional information or explanation that you elect to submit with the 
disclosed information.



Sec. 44.345  What happens if I fail to disclose information required 
under Sec. 44.335?

    If we later determine that you failed to disclose information under 
Sec. 44.335 that you knew at the time you entered into the covered 
transaction, we may--
    (a) Terminate the transaction for material failure to comply with 
the terms and conditions of the transaction; or
    (b) Pursue any other available remedies, including suspension and 
debarment.



Sec. 44.350  What must I do if I learn of information required under 
Sec. 44.335 after entering into a covered transaction with the 
Department of Veterans Affairs?

    At any time after you enter into a covered transaction, you must 
give immediate written notice to the Department of Veterans Affairs 
office with which you entered into the transaction if you learn either 
that--
    (a) You failed to disclose information earlier, as required by Sec. 
44.335; or
    (b) Due to changed circumstances, you or any of the principals for 
the transaction now meet any of the criteria in Sec. 44.335.

             Disclosing Information--Lower Tier Participants



Sec. 44.355  What information must I provide to a higher tier 
participant before entering into a covered transaction with that 
participant?

    Before you enter into a covered transaction with a person at the 
next higher tier, you as a lower tier participant must notify that 
person if you know that you or any of the principals are presently 
excluded or disqualified.



Sec. 44.360  What happens if I fail to disclose the information required 
under Sec. 44.355?

    If we later determine that you failed to tell the person at the 
higher tier that you were excluded or disqualified at the time you 
entered into the covered transaction with that person, we may pursue any 
available remedies, including suspension and debarment.



Sec. 44.365  What must I do if I learn of information required under 
Sec. 44.355 after entering into a covered transaction with a higher 
tier participant?

    At any time after you enter into a lower tier covered transaction 
with a person at a higher tier, you must provide immediate written 
notice to that person if you learn either that--
    (a) You failed to disclose information earlier, as required by Sec. 
44.355; or
    (b) Due to changed circumstances, you or any of the principals for 
the transaction now meet any of the criteria in Sec. 44.355.

[[Page 825]]



 Subpart D_Responsibilities of Department of Veterans Affairs Officials 
                         Regarding Transactions



Sec. 44.400  May I enter into a transaction with an excluded or 
disqualified person?

    (a) You as an agency official may not enter into a covered 
transaction with an excluded person unless you obtain an exception under 
Sec. 44.120.
    (b) You may not enter into any transaction with a person who is 
disqualified from that transaction, unless you obtain a waiver or 
exception under the statute, Executive order, or regulation that is the 
basis for the person's disqualification.



Sec. 44.405  May I enter into a covered transaction with a participant 
if a principal of the transaction is excluded?

    As an agency official, you may not enter into a covered transaction 
with a participant if you know that a principal of the transaction is 
excluded, unless you obtain an exception under Sec. 44.120.



Sec. 44.410  May I approve a participant's use of the services of an 
excluded person?

    After entering into a covered transaction with a participant, you as 
an agency official may not approve a participant's use of an excluded 
person as a principal under that transaction, unless you obtain an 
exception under Sec. 44.120.



Sec. 44.415  What must I do if a Federal agency excludes the participant 
or a principal after I enter into a covered transaction?

    (a) You as an agency official may continue covered transactions with 
an excluded person, or under which an excluded person is a principal, if 
the transactions were in existence when the person was excluded. You are 
not required to continue the transactions, however, and you may consider 
termination. You should make a decision about whether to terminate and 
the type of termination action, if any, only after a thorough review to 
ensure that the action is proper.
    (b) You may not renew or extend covered transactions (other than no-
cost time extensions) with any excluded person, or under which an 
excluded person is a principal, unless you obtain an exception under 
Sec. 44.120.



Sec. 44.420  May I approve a transaction with an excluded or disqualified 
person at a lower tier?

    If a transaction at a lower tier is subject to your approval, you as 
an agency official may not approve--
    (a) A covered transaction with a person who is currently excluded, 
unless you obtain an exception under Sec. 44.120; or
    (b) A transaction with a person who is disqualified from that 
transaction, unless you obtain a waiver or exception under the statute, 
Executive order, or regulation that is the basis for the person's 
disqualification.



Sec. 44.425  When do I check to see if a person is excluded or 
disqualified?

    As an agency official, you must check to see if a person is excluded 
or disqualified before you--
    (a) Enter into a primary tier covered transaction;
    (b) Approve a principal in a primary tier covered transaction;
    (c) Approve a lower tier participant if agency approval of the lower 
tier participant is required; or
    (d) Approve a principal in connection with a lower tier transaction 
if agency approval of the principal is required.



Sec. 44.430  How do I check to see if a person is excluded or disqualified?

    You check to see if a person is excluded or disqualified in two 
ways:
    (a) You as an agency official must check the EPLS when you take any 
action listed in Sec. 44.425.
    (b) You must review information that a participant gives you, as 
required by Sec. 44.335, about its status or the status of the 
principals of a transaction.



Sec. 44.435  What must I require of a primary tier participant?

    You as an agency official must require each participant in a primary 
tier covered transaction to--

[[Page 826]]

    (a) Comply with subpart C of this part as a condition of 
participation in the transaction; and
    (b) Communicate the requirement to comply with Subpart C of this 
part to persons at the next lower tier with whom the primary tier 
participant enters into covered transactions.



Sec. 44.440  What method do I use to communicate those requirements to 
participants?

    To communicate the requirement, you must include a term or condition 
in the transaction requiring the participants' compliance with subpart C 
of this part and requiring them to include a similar term or condition 
in lower-tier covered transactions.

[68 FR 66619, Nov. 26, 2003]



Sec. 44.445  What action may I take if a primary tier participant 
knowingly does business with an excluded or disqualified person?

    If a participant knowingly does business with an excluded or 
disqualified person, you as an agency official may refer the matter for 
suspension and debarment consideration. You may also disallow costs, 
annul or terminate the transaction, issue a stop work order, or take any 
other appropriate remedy.



Sec. 44.450  What action may I take if a primary tier participant fails 
to disclose the information required under Sec. 44.335?

    If you as an agency official determine that a participant failed to 
disclose information, as required by Sec. 44.335, at the time it 
entered into a covered transaction with you, you may--
    (a) Terminate the transaction for material failure to comply with 
the terms and conditions of the transaction; or
    (b) Pursue any other available remedies, including suspension and 
debarment.



Sec. 44.455  What may I do if a lower tier participant fails to disclose 
the information required under Sec. 44.355 to the next higher tier?

    If you as an agency official determine that a lower tier participant 
failed to disclose information, as required by Sec. 44.355, at the time 
it entered into a covered transaction with a participant at the next 
higher tier, you may pursue any remedies available to you, including the 
initiation of a suspension or debarment action.



                 Subpart E_Excluded Parties List System



Sec. 44.500  What is the purpose of the Excluded Parties List System 
(EPLS)?

    The EPLS is a widely available source of the most current 
information about persons who are excluded or disqualified from covered 
transactions.



Sec. 44.505  Who uses the EPLS?

    (a) Federal agency officials use the EPLS to determine whether to 
enter into a transaction with a person, as required under Sec. 44.430.
    (b) Participants also may, but are not required to, use the EPLS to 
determine if--
    (1) Principals of their transactions are excluded or disqualified, 
as required under Sec. 44.320; or
    (2) Persons with whom they are entering into covered transactions at 
the next lower tier are excluded or disqualified.
    (c) The EPLS is available to the general public.



Sec. 44.510  Who maintains the EPLS?

    In accordance with the OMB guidelines, the General Services 
Administration (GSA) maintains the EPLS. When a Federal agency takes an 
action to exclude a person under the nonprocurement or procurement 
debarment and suspension system, the agency enters the information about 
the excluded person into the EPLS.



Sec. 44.515  What specific information is in the EPLS?

    (a) At a minimum, the EPLS indicates--
    (1) The full name (where available) and address of each excluded or 
disqualified person, in alphabetical order, with cross references if 
more than one name is involved in a single action;
    (2) The type of action;
    (3) The cause for the action;
    (4) The scope of the action;
    (5) Any termination date for the action;

[[Page 827]]

    (6) The agency and name and telephone number of the agency point of 
contact for the action; and
    (7) The Dun and Bradstreet Number (DUNS), or other similar code 
approved by the GSA, of the excluded or disqualified person, if 
available.
    (b)(1) The database for the EPLS includes a field for the Taxpayer 
Identification Number (TIN) (the social security number (SSN) for an 
individual) of an excluded or disqualified person.
    (2) Agencies disclose the SSN of an individual to verify the 
identity of an individual, only if permitted under the Privacy Act of 
1974 and, if appropriate, the Computer Matching and Privacy Protection 
Act of 1988, as codified in 5 U.S.C. 552(a).



Sec. 44.520  Who places the information into the EPLS?

    Federal officials who take actions to exclude persons under this 
part or officials who are responsible for identifying disqualified 
persons must enter the following information about those persons into 
the EPLS:
    (a) Information required by Sec. 44.515(a);
    (b) The Taxpayer Identification Number (TIN) of the excluded or 
disqualified person, including the social security number (SSN) for an 
individual, if the number is available and may be disclosed under law;
    (c) Information about an excluded or disqualified person, generally 
within five working days, after--
    (1) Taking an exclusion action;
    (2) Modifying or rescinding an exclusion action;
    (3) Finding that a person is disqualified; or
    (4) Finding that there has been a change in the status of a person 
who is listed as disqualified.



Sec. 44.525  Whom do I ask if I have questions about a person in the 
EPLS?

    If you have questions about a person in the EPLS, ask the point of 
contact for the Federal agency that placed the person's name into the 
EPLS. You may find the agency point of contact from the EPLS.



Sec. 44.530  Where can I find the EPLS?

    (a) You may access the EPLS through the Internet, currently at 
http://epls.arnet.gov.
    (b) As of November 26, 2003, you may also subscribe to a printed 
version. However, we anticipate discontinuing the printed version. Until 
it is discontinued, you may obtain the printed version by purchasing a 
yearly subscription from the Superintendent of Documents, U.S. 
Government Printing Office, Washington, DC 20402, or by calling the 
Government Printing Office Inquiry and Order Desk at (202) 783-3238.



   Subpart F_General Principles Relating to Suspension and Debarment 
                                 Actions



Sec. 44.600  How do suspension and debarment actions start?

    When we receive information from any source concerning a cause for 
suspension or debarment, we will promptly report and investigate it. We 
refer the question of whether to suspend or debar you to our suspending 
or debarring official for consideration, if appropriate.



Sec. 44.605  How does suspension differ from debarment?

    Suspension differs from debarment in that--

------------------------------------------------------------------------
        A suspending official . . .          A debarring official . . .
------------------------------------------------------------------------
(a) Imposes suspension as a temporary       Imposes debarment for a
 status of ineligibility for procurement     specified period as a final
 and nonprocurement transactions, pending    determination that a person
 completion of an investigation or legal     is not presently
 proceedings.                                responsible.
(b) Must--................................  Must conclude, based on a
(1) Have adequate evidence that there may    preponderance of the
 be a cause for debarment of a person; and.  evidence, that the person
(2) Conclude that immediate action is        has engaged in conduct that
 necessary to protect the Federal interest.  warrants debarment.
(c) Usually imposes the suspension first,   Imposes debarment after
 and then promptly notifies the suspended    giving the respondent
 person, giving the person an opportunity    notice of the action and an
 to contest the suspension and have it       opportunity to contest the
 lifted.                                     proposed debarment.
------------------------------------------------------------------------


[[Page 828]]



Sec. 44.610  What procedures does the Department of Veterans Affairs use 
in suspension and debarment actions?

    In deciding whether to suspend or debar you, we handle the actions 
as informally as practicable, consistent with principles of fundamental 
fairness.
    (a) For suspension actions, we use the procedures in this subpart 
and subpart G of this part.
    (b) For debarment actions, we use the procedures in this subpart and 
subpart H of this part.



Sec. 44.615  How does the Department of Veterans Affairs notify a person 
of a suspension or debarment action?

    (a) The suspending or debarring official sends a written notice to 
the last known street address, facsimile number, or e-mail address of--
    (1) You or your identified counsel; or
    (2) Your agent for service of process, or any of your partners, 
officers, directors, owners, or joint venturers.
    (b) The notice is effective if sent to any of these persons.



Sec. 44.620  Do Federal agencies coordinate suspension and debarment 
actions?

    Yes, when more than one Federal agency has an interest in a 
suspension or debarment, the agencies may consider designating one 
agency as the lead agency for making the decision. Agencies are 
encouraged to establish methods and procedures for coordinating their 
suspension and debarment actions.



Sec. 44.625  What is the scope of a suspension or debarment?

    If you are suspended or debarred, the suspension or debarment is 
effective as follows:
    (a) Your suspension or debarment constitutes suspension or debarment 
of all of your divisions and other organizational elements from all 
covered transactions, unless the suspension or debarment decision is 
limited--
    (1) By its terms to one or more specifically identified individuals, 
divisions, or other organizational elements; or
    (2) To specific types of transactions.
    (b) Any affiliate of a participant may be included in a suspension 
or debarment action if the suspending or debarring official--
    (1) Officially names the affiliate in the notice; and
    (2) Gives the affiliate an opportunity to contest the action.



Sec. 44.630  May the Department of Veterans Affairs impute conduct of 
one person to another?

    For purposes of actions taken under this rule, we may impute conduct 
as follows:
    (a) Conduct imputed from an individual to an organization. We may 
impute the fraudulent, criminal, or other improper conduct of any 
officer, director, shareholder, partner, employee, or other individual 
associated with an organization, to that organization when the improper 
conduct occurred in connection with the individual's performance of 
duties for or on behalf of that organization, or with the organization's 
knowledge, approval or acquiescence. The organization's acceptance of 
the benefits derived from the conduct is evidence of knowledge, approval 
or acquiescence.
    (b) Conduct imputed from an organization to an individual, or 
between individuals. We may impute the fraudulent, criminal, or other 
improper conduct of any organization to an individual, or from one 
individual to another individual, if the individual to whom the improper 
conduct is imputed either participated in, had knowledge of, or reason 
to know of the improper conduct.
    (c) Conduct imputed from one organization to another organization. 
We may impute the fraudulent, criminal, or other improper conduct of one 
organization to another organization when the improper conduct occurred 
in connection with a partnership, joint venture, joint application, 
association or similar arrangement, or when the organization to whom the 
improper conduct is imputed has the power to direct, manage, control or 
influence the activities of the organization responsible for the 
improper conduct. Acceptance of the benefits derived from the conduct is 
evidence of knowledge, approval or acquiescence.

[[Page 829]]



Sec. 44.635  May the Department of Veterans Affairs settle a debarment 
or suspension action?

    Yes, we may settle a debarment or suspension action at any time if 
it is in the best interest of the Federal Government.



Sec. 44.640  May a settlement include a voluntary exclusion?

    Yes, if we enter into a settlement with you in which you agree to be 
excluded, it is called a voluntary exclusion and has governmentwide 
effect.



Sec. 44.645  Do other Federal agencies know if the Department of Veterans 
Affairs agrees to a voluntary exclusion?

    (a) Yes, we enter information regarding a voluntary exclusion into 
the EPLS.
    (b) Also, any agency or person may contact us to find out the 
details of a voluntary exclusion.



                          Subpart G_Suspension



Sec. 44.700  When may the suspending official issue a suspension?

    Suspension is a serious action. Using the procedures of this subpart 
and subpart F of this part, the suspending official may impose 
suspension only when that official determines that--
    (a) There exists an indictment for, or other adequate evidence to 
suspect, an offense listed under Sec. 44.800(a), or
    (b) There exists adequate evidence to suspect any other cause for 
debarment listed under Sec. 44.800(b) through (d); and
    (c) Immediate action is necessary to protect the public interest.



Sec. 44.705  What does the suspending official consider in issuing a 
suspension?

    (a) In determining the adequacy of the evidence to support the 
suspension, the suspending official considers how much information is 
available, how credible it is given the circumstances, whether or not 
important allegations are corroborated, and what inferences can 
reasonably be drawn as a result. During this assessment, the suspending 
official may examine the basic documents, including grants, cooperative 
agreements, loan authorizations, contracts, and other relevant 
documents.
    (b) An indictment, conviction, civil judgment, or other official 
findings by Federal, State, or local bodies that determine factual and/
or legal matters, constitutes adequate evidence for purposes of 
suspension actions.
    (c) In deciding whether immediate action is needed to protect the 
public interest, the suspending official has wide discretion. For 
example, the suspending official may infer the necessity for immediate 
action to protect the public interest either from the nature of the 
circumstances giving rise to a cause for suspension or from potential 
business relationships or involvement with a program of the Federal 
Government.



Sec. 44.710  When does a suspension take effect?

    A suspension is effective when the suspending official signs the 
decision to suspend.



Sec. 44.715  What notice does the suspending official give me if I am 
suspended?

    After deciding to suspend you, the suspending official promptly 
sends you a Notice of Suspension advising you--
    (a) That you have been suspended;
    (b) That your suspension is based on--
    (1) An indictment;
    (2) A conviction;
    (3) Other adequate evidence that you have committed irregularities 
which seriously reflect on the propriety of further Federal Government 
dealings with you; or
    (4) Conduct of another person that has been imputed to you, or your 
affiliation with a suspended or debarred person;
    (c) Of any other irregularities in terms sufficient to put you on 
notice without disclosing the Federal Government's evidence;
    (d) Of the cause(s) upon which we relied under Sec. 44.700 for 
imposing suspension;
    (e) That your suspension is for a temporary period pending the 
completion of an investigation or resulting legal or debarment 
proceedings;

[[Page 830]]

    (f) Of the applicable provisions of this subpart, Subpart F of this 
part, and any other Department of Veterans Affairs procedures governing 
suspension decision making; and
    (g) Of the governmentwide effect of your suspension from procurement 
and nonprocurement programs and activities.



Sec. 44.720  How may I contest a suspension?

    If you as a respondent wish to contest a suspension, you or your 
representative must provide the suspending official with information in 
opposition to the suspension. You may do this orally or in writing, but 
any information provided orally that you consider important must also be 
submitted in writing for the official record.



Sec. 44.725  How much time do I have to contest a suspension?

    (a) As a respondent you or your representative must either send, or 
make rrangements to appear and present, the information and argument to 
the suspending official within 30 days after you receive the Notice of 
Suspension.
    (b) We consider the notice to be received by you--
    (1) When delivered, if we mail the notice to the last known street 
address, or five days after we send it if the letter is undeliverable;
    (2) When sent, if we send the notice by facsimile or five days after 
we send it if the facsimile is undeliverable; or
    (3) When delivered, if we send the notice by e-mail or five days 
after we send it if the e-mail is undeliverable.



Sec. 44.730  What information must I provide to the suspending official 
if I contest a suspension?

    (a) In addition to any information and argument in opposition, as a 
respondent your submission to the suspending official must identify--
    (1) Specific facts that contradict the statements contained in the 
Notice of Suspension. A general denial is insufficient to raise a 
genuine dispute over facts material to the suspension;
    (2) All existing, proposed, or prior exclusions under regulations 
implementing E.O. 12549 and all similar actions taken by Federal, state, 
or local agencies, including administrative agreements that affect only 
those agencies;
    (3) All criminal and civil proceedings not included in the Notice of 
Suspension that grew out of facts relevant to the cause(s) stated in the 
notice; and
    (4) All of your affiliates.
    (b) If you fail to disclose this information, or provide false 
information, the Department of Veterans Affairs may seek further 
criminal, civil or administrative action against you, as appropriate.



Sec. 44.735  Under what conditions do I get an additional opportunity to 
challenge the facts on which the suspension is based?

    (a) You as a respondent will not have an additional opportunity to 
challenge the facts if the suspending official determines that--
    (1) Your suspension is based upon an indictment, conviction, civil 
judgment, or other finding by a Federal, State, or local body for which 
an opportunity to contest the facts was provided;
    (2) Your presentation in opposition contains only general denials to 
information contained in the Notice of Suspension;
    (3) The issues raised in your presentation in opposition to the 
suspension are not factual in nature, or are not material to the 
suspending official's initial decision to suspend, or the official's 
decision whether to continue the suspension; or
    (4) On the basis of advice from the Department of Justice, an office 
of the United States Attorney, a State attorney general's office, or a 
State or local prosecutor's office, that substantial interests of the 
government in pending or contemplated legal proceedings based on the 
same facts as the suspension would be prejudiced by conducting fact-
finding.
    (b) You will have an opportunity to challenge the facts if the 
suspending official determines that--
    (1) The conditions in paragraph (a) of this section do not exist; 
and
    (2) Your presentation in opposition raises a genuine dispute over 
facts material to the suspension.
    (c) If you have an opportunity to challenge disputed material facts

[[Page 831]]

under this section, the suspending official or designee must conduct 
additional proceedings to resolve those facts.



Sec. 44.740  Are suspension proceedings formal?

    (a) Suspension proceedings are conducted in a fair and informal 
manner. The suspending official may use flexible procedures to allow you 
to present matters in opposition. In so doing, the suspending official 
is not required to follow formal rules of evidence or procedure in 
creating an official record upon which the official will base a final 
suspension decision.
    (b) You as a respondent or your representative must submit any 
documentary evidence you want the suspending official to consider.



Sec. 44.745  How is fact-finding conducted?

    (a) If fact-finding is conducted--
    (1) You may present witnesses and other evidence, and confront any 
witness presented; and
    (2) The fact-finder must prepare written findings of fact for the 
record.
    (b) A transcribed record of fact-finding proceedings must be made, 
unless you as a respondent and the Department of Veterans Affairs agree 
to waive it in advance. If you want a copy of the transcribed record, 
you may purchase it.



Sec. 44.750  What does the suspending official consider in deciding 
whether to continue or terminate my suspension?

    (a) The suspending official bases the decision on all information 
contained in the official record. The record includes--
    (1) All information in support of the suspending official's initial 
decision to suspend you;
    (2) Any further information and argument presented in support of, or 
opposition to, the suspension; and
    (3) Any transcribed record of fact-finding proceedings.
    (b) The suspending official may refer disputed material facts to 
another official for findings of fact. The suspending official may 
reject any resulting findings, in whole or in part, only after 
specifically determining them to be arbitrary, capricious, or clearly 
erroneous.



Sec. 44.755  When will I know whether the suspension is continued or 
terminated?

    The suspending official must make a written decision whether to 
continue, modify, or terminate your suspension within 45 days of closing 
the official record. The official record closes upon the suspending 
official's receipt of final submissions, information and findings of 
fact, if any. The suspending official may extend that period for good 
cause.



Sec. 44.760  How long may my suspension last?

    (a) If legal or debarment proceedings are initiated at the time of, 
or during your suspension, the suspension may continue until the 
conclusion of those proceedings. However, if proceedings are not 
initiated, a suspension may not exceed 12 months.
    (b) The suspending official may extend the 12 month limit under 
paragraph (a) of this section for an additional 6 months if an office of 
a U.S. Assistant Attorney General, U.S. Attorney, or other responsible 
prosecuting official requests an extension in writing. In no event may a 
suspension exceed 18 months without initiating proceedings under 
paragraph (a) of this section.
    (c) The suspending official must notify the appropriate officials 
under paragraph (b) of this section of an impending termination of a 
suspension at least 30 days before the 12 month period expires to allow 
the officials an opportunity to request an extension.



                           Subpart H_Debarment



Sec. 44.800  What are the causes for debarment?

    We may debar a person for--
    (a) Conviction of or civil judgment for--
    (1) Commission of fraud or a criminal offense in connection with 
obtaining, attempting to obtain, or performing a public or private 
agreement or transaction;

[[Page 832]]

    (2) Violation of Federal or State antitrust statutes, including 
those proscribing price fixing between competitors, allocation of 
customers between competitors, and bid rigging;
    (3) Commission of embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, tax 
evasion, receiving stolen property, making false claims, or obstruction 
of justice; or
    (4) Commission of any other offense indicating a lack of business 
integrity or business honesty that seriously and directly affects your 
present responsibility;
    (b) Violation of the terms of a public agreement or transaction so 
serious as to affect the integrity of an agency program, such as--
    (1) A willful failure to perform in accordance with the terms of one 
or more public agreements or transactions;
    (2) A history of failure to perform or of unsatisfactory performance 
of one or more public agreements or transactions; or
    (3) A willful violation of a statutory or regulatory provision or 
requirement applicable to a public agreement or transaction;
    (c) Any of the following causes:
    (1) A nonprocurement debarment by any Federal agency taken before 
October 1, 1988, or a procurement debarment by any Federal agency taken 
pursuant to 48 CFR part 9, subpart 9.4, before August 25, 1995;
    (2) Knowingly doing business with an ineligible person, except as 
permitted under Sec. 44.120;
    (3) Failure to pay a single substantial debt, or a number of 
outstanding debts (including disallowed costs and overpayments, but not 
including sums owed the Federal Government under the Internal Revenue 
Code) owed to any Federal agency or instrumentality, provided the debt 
is uncontested by the debtor or, if contested, provided that the 
debtor's legal and administrative remedies have been exhausted;
    (4) Violation of a material provision of a voluntary exclusion 
agreement entered into under Sec. 44.640 or of any settlement of a 
debarment or suspension action; or
    (5) Violation of the provisions of the Drug-Free Workplace Act of 
1988 (41 U.S.C. 701); or
    (d) Any other cause of so serious or compelling a nature that it 
affects your present responsibility.



Sec. 44.805  What notice does the debarring official give me if I am 
proposed for debarment?

    After consideration of the causes in Sec. 44.800 of this subpart, 
if the debarring official proposes to debar you, the official sends you 
a Notice of Proposed Debarment, pursuant to Sec. 44.615, advising you--
    (a) That the debarring official is considering debarring you;
    (b) Of the reasons for proposing to debar you in terms sufficient to 
put you on notice of the conduct or transactions upon which the proposed 
debarment is based;
    (c) Of the cause(s) under Sec. 44.800 upon which the debarring 
official relied for proposing your debarment;
    (d) Of the applicable provisions of this subpart, Subpart F of this 
part, and any other Department of Veterans Affairs procedures governing 
debarment; and
    (e) Of the governmentwide effect of a debarment from procurement and 
nonprocurement programs and activities.



Sec. 44.810  When does a debarment take effect?

    A debarment is not effective until the debarring official issues a 
decision. The debarring official does not issue a decision until the 
respondent has had an opportunity to contest the proposed debarment.



Sec. 44.815  How may I contest a proposed debarment?

    If you as a respondent wish to contest a proposed debarment, you or 
your representative must provide the debarring official with information 
in opposition to the proposed debarment. You may do this orally or in 
writing, but any information provided orally that you consider important 
must also be submitted in writing for the official record.

[[Page 833]]



Sec. 44.820  How much time do I have to contest a proposed debarment?

    (a) As a respondent you or your representative must either send, or 
make arrangements to appear and present, the information and argument to 
the debarring official within 30 days after you receive the Notice of 
Proposed Debarment.
    (b) We consider the Notice of Proposed Debarment to be received by 
you--
    (1) When delivered, if we mail the notice to the last known street 
address, or five days after we send it if the letter is undeliverable;
    (2) When sent, if we send the notice by facsimile or five days after 
we send it if the facsimile is undeliverable; or
    (3) When delivered, if we send the notice by e-mail or five days 
after we send it if the e-mail is undeliverable.



Sec. 44.825  What information must I provide to the debarring official 
if I contest a proposed debarment?

    (a) In addition to any information and argument in opposition, as a 
respondent your submission to the debarring official must identify--
    (1) Specific facts that contradict the statements contained in the 
Notice of Proposed Debarment. Include any information about any of the 
factors listed in Sec. 44.860. A general denial is insufficient to 
raise a genuine dispute over facts material to the debarment;
    (2) All existing, proposed, or prior exclusions under regulations 
implementing E.O. 12549 and all similar actions taken by Federal, State, 
or local agencies, including administrative agreements that affect only 
those agencies;
    (3) All criminal and civil proceedings not included in the Notice of 
Proposed Debarment that grew out of facts relevant to the cause(s) 
stated in the notice; and
    (4) All of your affiliates.
    (b) If you fail to disclose this information, or provide false 
information, the Department of Veterans Affairs may seek further 
criminal, civil or administrative action against you, as appropriate.



Sec. 44.830  Under what conditions do I get an additional opportunity 
to challenge the facts on which a proposed debarment is based?

    (a) You as a respondent will not have an additional opportunity to 
challenge the facts if the debarring official determines that--
    (1) Your debarment is based upon a conviction or civil judgment;
    (2) Your presentation in opposition contains only general denials to 
information contained in the Notice of Proposed Debarment; or
    (3) The issues raised in your presentation in opposition to the 
proposed debarment are not factual in nature, or are not material to the 
debarring official's decision whether to debar.
    (b) You will have an additional opportunity to challenge the facts 
if the debarring official determines that--
    (1) The conditions in paragraph (a) of this section do not exist; 
and
    (2) Your presentation in opposition raises a genuine dispute over 
facts material to the proposed debarment.
    (c) If you have an opportunity to challenge disputed material facts 
under this section, the debarring official or designee must conduct 
additional proceedings to resolve those facts.



Sec. 44.835  Are debarment proceedings formal?

    (a) Debarment proceedings are conducted in a fair and informal 
manner. The debarring official may use flexible procedures to allow you 
as a respondent to present matters in opposition. In so doing, the 
debarring official is not required to follow formal rules of evidence or 
procedure in creating an official record upon which the official will 
base the decision whether to debar.
    (b) You or your representative must submit any documentary evidence 
you want the debarring official to consider.



Sec. 44.840  How is fact-finding conducted?

    (a) If fact-finding is conducted--
    (1) You may present witnesses and other evidence, and confront any 
witness presented; and
    (2) The fact-finder must prepare written findings of fact for the 
record.

[[Page 834]]

    (b) A transcribed record of fact-finding proceedings must be made, 
unless you as a respondent and the Department of Veterans Affairs agree 
to waive it in advance. If you want a copy of the transcribed record, 
you may purchase it.



Sec. 44.845  What does the debarring official consider in deciding 
whether to debar me?

    (a) The debarring official may debar you for any of the causes in 
Sec. 44.800. However, the official need not debar you even if a cause 
for debarment exists. The official may consider the seriousness of your 
acts or omissions and the mitigating or aggravating factors set forth at 
Sec. 44.860.
    (b) The debarring official bases the decision on all information 
contained in the official record. The record includes--
    (1) All information in support of the debarring official's proposed 
debarment;
    (2) Any further information and argument presented in support of, or 
in opposition to, the proposed debarment; and
    (3) Any transcribed record of fact-finding proceedings.
    (c) The debarring official may refer disputed material facts to 
another official for findings of fact. The debarring official may reject 
any resultant findings, in whole or in part, only after specifically 
determining them to be arbitrary, capricious, or clearly erroneous.



Sec. 44.850  What is the standard of proof in a debarment action?

    (a) In any debarment action, we must establish the cause for 
debarment by a preponderance of the evidence.
    (b) If the proposed debarment is based upon a conviction or civil 
judgment, the standard of proof is met.



Sec. 44.855  Who has the burden of proof in a debarment action?

    (a) We have the burden to prove that a cause for debarment exists.
    (b) Once a cause for debarment is established, you as a respondent 
have the burden of demonstrating to the satisfaction of the debarring 
official that you are presently responsible and that debarment is not 
necessary.



Sec. 44.860  What factors may influence the debarring official's 
decision?

    This section lists the mitigating and aggravating factors that the 
debarring official may consider in determining whether to debar you and 
the length of your debarment period. The debarring official may consider 
other factors if appropriate in light of the circumstances of a 
particular case. The existence or nonexistence of any factor, such as 
one of those set forth in this section, is not necessarily determinative 
of your present responsibility. In making a debarment decision, the 
debarring official may consider the following factors:
    (a) The actual or potential harm or impact that results or may 
result from the wrongdoing.
    (b) The frequency of incidents and/or duration of the wrongdoing.
    (c) Whether there is a pattern or prior history of wrongdoing. For 
example, if you have been found by another Federal agency or a State 
agency to have engaged in wrongdoing similar to that found in the 
debarment action, the existence of this fact may be used by the 
debarring official in determining that you have a pattern or prior 
history of wrongdoing.
    (d) Whether you are or have been excluded or disqualified by an 
agency of the Federal Government or have not been allowed to participate 
in State or local contracts or assistance agreements on a basis of 
conduct similar to one or more of the causes for debarment specified in 
this part.
    (e) Whether you have entered into an administrative agreement with a 
Federal agency or a State or local government that is not governmentwide 
but is based on conduct similar to one or more of the causes for 
debarment specified in this part.
    (f) Whether and to what extent you planned, initiated, or carried 
out the wrongdoing.
    (g) Whether you have accepted responsibility for the wrongdoing and 
recognize the seriousness of the misconduct that led to the cause for 
debarment.

[[Page 835]]

    (h) Whether you have paid or agreed to pay all criminal, civil and 
administrative liabilities for the improper activity, including any 
investigative or administrative costs incurred by the government, and 
have made or agreed to make full restitution.
    (i) Whether you have cooperated fully with the government agencies 
during the investigation and any court or administrative action. In 
determining the extent of cooperation, the debarring official may 
consider when the cooperation began and whether you disclosed all 
pertinent information known to you.
    (j) Whether the wrongdoing was pervasive within your organization.
    (k) The kind of positions held by the individuals involved in the 
wrongdoing.
    (l) Whether your organization took appropriate corrective action or 
remedial measures, such as establishing ethics training and implementing 
programs to prevent recurrence.
    (m) Whether your principals tolerated the offense.
    (n) Whether you brought the activity cited as a basis for the 
debarment to the attention of the appropriate government agency in a 
timely manner.
    (o) Whether you have fully investigated the circumstances 
surrounding the cause for debarment and, if so, made the result of the 
investigation available to the debarring official.
    (p) Whether you had effective standards of conduct and internal 
control systems in place at the time the questioned conduct occurred.
    (q) Whether you have taken appropriate disciplinary action against 
the individuals responsible for the activity which constitutes the cause 
for debarment.
    (r) Whether you have had adequate time to eliminate the 
circumstances within your organization that led to the cause for the 
debarment.
    (s) Other factors that are appropriate to the circumstances of a 
particular case.



Sec. 44.865  How long may my debarment last?

    (a) If the debarring official decides to debar you, your period of 
debarment will be based on the seriousness of the cause(s) upon which 
your debarment is based. Generally, debarment should not exceed three 
years. However, if circumstances warrant, the debarring official may 
impose a longer period of debarment.
    (b) In determining the period of debarment, the debarring official 
may consider the factors in Sec. 44.860. If a suspension has preceded 
your debarment, the debarring official must consider the time you were 
suspended.
    (c) If the debarment is for a violation of the provisions of the 
Drug-Free Workplace Act of 1988, your period of debarment may not exceed 
five years.



Sec. 44.870  When do I know if the debarring official debars me?

    (a) The debarring official must make a written decision whether to 
debar within 45 days of closing the official record. The official record 
closes upon the debarring official's receipt of final submissions, 
information and findings of fact, if any. The debarring official may 
extend that period for good cause.
    (b) The debarring official sends you written notice, pursuant to 
Sec. 44.615 that the official decided, either--
    (1) Not to debar you; or
    (2) To debar you. In this event, the notice:
    (i) Refers to the Notice of Proposed Debarment;
    (ii) Specifies the reasons for your debarment;
    (iii) States the period of your debarment, including the effective 
dates; and
    (iv) Advises you that your debarment is effective for covered 
transactions and contracts that are subject to the Federal Acquisition 
Regulation (48 CFR chapter 1), throughout the executive branch of the 
Federal Government unless an agency head or an authorized designee 
grants an exception.



Sec. 44.875  May I ask the debarring official to reconsider a decision 
to debar me?

    Yes, as a debarred person you may ask the debarring official to 
reconsider the debarment decision or to reduce the time period or scope 
of the debarment. However, you must put your request in writing and 
support it with documentation.

[[Page 836]]



Sec. 44.880  What factors may influence the debarring official during 
reconsideration?

    The debarring official may reduce or terminate your debarment based 
on--
    (a) Newly discovered material evidence;
    (b) A reversal of the conviction or civil judgment upon which your 
debarment was based;
    (c) A bona fide change in ownership or management;
    (d) Elimination of other causes for which the debarment was imposed; 
or
    (e) Other reasons the debarring official finds appropriate.



Sec. 44.885  May the debarring official extend a debarment?

    (a) Yes, the debarring official may extend a debarment for an 
additional period, if that official determines that an extension is 
necessary to protect the public interest.
    (b) However, the debarring official may not extend a debarment 
solely on the basis of the facts and circumstances upon which the 
initial debarment action was based.
    (c) If the debarring official decides that a debarment for an 
additional period is necessary, the debarring official must follow the 
applicable procedures in this subpart, and subpart F of this part, to 
extend the debarment.



                          Subpart I_Definitions



Sec. 44.900  Adequate evidence.

    Adequate evidence means information sufficient to support the 
reasonable belief that a particular act or omission has occurred.



Sec. 44.905  Affiliate.

    Persons are affiliates of each other if, directly or indirectly, 
either one controls or has the power to control the other or a third 
person controls or has the power to control both. The ways we use to 
determine control include, but are not limited to--
    (a) Interlocking management or ownership;
    (b) Identity of interests among family members;
    (c) Shared facilities and equipment;
    (d) Common use of employees; or
    (e) A business entity which has been organized following the 
exclusion of a person which has the same or similar management, 
ownership, or principal employees as the excluded person.



Sec. 44.910  Agency.

    Agency means any United States executive department, military 
department, defense agency, or any other agency of the executive branch. 
Other agencies of the Federal government are not considered ``agencies'' 
for the purposes of this part unless they issue regulations adopting the 
governmentwide Debarment and Suspension system under Executive orders 
12549 and 12689.



Sec. 44.915  Agent or representative.

    Agent or representative means any person who acts on behalf of, or 
who is authorized to commit, a participant in a covered transaction.



Sec. 44.920  Civil judgment.

    Civil judgment means the disposition of a civil action by any court 
of competent jurisdiction, whether by verdict, decision, settlement, 
stipulation, other disposition which creates a civil liability for the 
complained of wrongful acts, or a final determination of liability under 
the Program Fraud Civil Remedies Act of 1988 (31 U.S.C. 3801-3812).



Sec. 44.925  Conviction.

    Conviction means--
    (a) A judgment or any other determination of guilt of a criminal 
offense by any court of competent jurisdiction, whether entered upon a 
verdict or plea, including a plea of nolo contendere; or
    (b) Any other resolution that is the functional equivalent of a 
judgment, including probation before judgment and deferred prosecution. 
A disposition without the participation of the court is the functional 
equivalent of a judgment only if it includes an admission of guilt.



Sec. 44.930  Debarment.

    Debarment means an action taken by a debarring official under 
subpart H of this part to exclude a person from participating in covered 
transactions and transactions covered under the Federal

[[Page 837]]

Acquisition Regulation (48 CFR chapter 1). A person so excluded is 
debarred.



Sec. 44.935  Debarring official.

    (a) Debarring official means an agency official who is authorized to 
impose debarment. A debarring official is either--
    (1) The agency head; or
    (2) An official designated by the agency head.
    (b) For the Department of Veterans Affairs the debarring official 
is:
    (1) For the Veterans Health Administration, the Under Secretary for 
Health;
    (2) For the Veterans Benefits Administration, the Under Secretary 
for Benefits; and
    (3) For the National Cemetery Administration, the Deputy Under 
Secretary for Operations.



Sec. 44.940  Disqualified.

    Disqualified means that a person is prohibited from participating in 
specified Federal procurement or nonprocurement transactions as required 
under a statute, Executive order (other than Executive Orders 12549 and 
12689) or other authority. Examples of disqualifications include persons 
prohibited under--
    (a) The Davis-Bacon Act (40 U.S.C. 276(a));
    (b) The equal employment opportunity acts and Executive orders; or
    (c) The Clean Air Act (42 U.S.C. 7606), Clean Water Act (33 U.S.C. 
1368) and Executive Order 11738 (3 CFR, 1973 Comp., p. 799).



Sec. 44.945  Excluded or exclusion.

    Excluded or exclusion means--
    (a) That a person or commodity is prohibited from being a 
participant in covered transactions, whether the person has been 
suspended; debarred; proposed for debarment under 48 CFR part 9, subpart 
9.4; voluntarily excluded; or
    (b) The act of excluding a person.



Sec. 44.950  Excluded Parties List System

    Excluded Parties List System (EPLS) means the list maintained and 
disseminated by the General Services Administration (GSA) containing the 
names and other information about persons who are ineligible. The EPLS 
system includes the printed version entitled, ``List of Parties Excluded 
or Disqualified from Federal Procurement and Nonprocurement Programs,'' 
so long as published.



Sec. 44.955  Indictment.

    Indictment means an indictment for a criminal offense. A 
presentment, information, or other filing by a competent authority 
charging a criminal offense shall be given the same effect as an 
indictment.



Sec. 44.960  Ineligible or ineligibility.

    Ineligible or ineligibility means that a person or commodity is 
prohibited from covered transactions because of an exclusion or 
disqualification.



Sec. 44.965  Legal proceedings.

    Legal proceedings means any criminal proceeding or any civil 
judicial proceeding, including a proceeding under the Program Fraud 
Civil Remedies Act (31 U.S.C. 3801-3812), to which the Federal 
Government or a State or local government or quasi-governmental 
authority is a party. The term also includes appeals from those 
proceedings.



Sec. 44.970  Nonprocurement transaction.

    (a) Nonprocurement transaction means any transaction, regardless of 
type (except procurement contracts), including, but not limited to the 
following:
    (1) Grants.
    (2) Cooperative agreements.
    (3) Scholarships.
    (4) Fellowships.
    (5) Contracts of assistance.
    (6) Loans.
    (7) Loan guarantees.
    (8) Subsidies.
    (9) Insurances.
    (10) Payments for specified uses.
    (11) Donation agreements.
    (b) A nonprocurement transaction at any tier does not require the 
transfer of Federal funds.



Sec. 44.975  Notice.

    Notice means a written communication served in person, sent by 
certified mail or its equivalent, or sent electronically by e-mail or 
facsimile. (See Sec. 44. 615.)

[[Page 838]]



Sec. 44.980  Participant.

    Participant means any person who submits a proposal for or who 
enters into a covered transaction, including an agent or representative 
of a participant.



Sec. 44.985  Person.

    Person means any individual, corporation, partnership, association, 
unit of government, or legal entity, however organized.



Sec. 44.990  Preponderance of the evidence.

    Preponderance of the evidence means proof by information that, 
compared with information opposing it, leads to the conclusion that the 
fact at issue is more probably true than not.



Sec. 44.995  Principal.

    Principal means--
    (a) An officer, director, owner, partner, principal investigator, or 
other person within a participant with management or supervisory 
responsibilities related to a covered transaction; or
    (b) A consultant or other person, whether or not employed by the 
participant or paid with Federal funds, who--
    (1) Is in a position to handle Federal funds;
    (2) Is in a position to influence or control the use of those funds; 
or,
    (3) Occupies a technical or professional position capable of 
substantially influencing the development or outcome of an activity 
required to perform the covered transaction.
    (c) In the Department of Veterans Affairs loan guaranty program, 
principals include, but are not limited to the following:
    (1) Loan officers.
    (2) Loan solicitors,
    (3) Loan processors.
    (4) Loan servicers.
    (5) Loan supervisors.
    (6) Mortgage brokers.
    (7) Office managers.
    (8) Staff appraisers and inspectors.
    (9) Fee appraisers and inspectors.
    (10) Underwriters.
    (11) Bonding companies.
    (12) Real estate agents and brokers.
    (13) Management and marketing agents.
    (14) Accountants, consultants, investments bankers, architects, 
engineers, attorneys, and others in a business relationship with 
participants in connection with a covered transaction under the 
Department of Veterans Affairs loan guaranty program.
    (15) Contractors involved in the construction, improvement or repair 
of properties financed with Department of Veterans Affairs guaranteed 
loans.
    (16) Closing Agents.



Sec. 44.1000  Respondent.

    Respondent means a person against whom an agency has initiated a 
debarment or suspension action.



Sec. 44.1005  State.

    (a) State means--
    (1) Any of the states of the United States;
    (2) The District of Columbia;
    (3) The Commonwealth of Puerto Rico;
    (4) Any territory or possession of the United States; or
    (5) Any agency or instrumentality of a state.
    (b) For purposes of this part, State does not include institutions 
of higher education, hospitals, or units of local government.



Sec. 44.1010  Suspending official.

    (a) Suspending official means an agency official who is authorized 
to impose suspension. The suspending official is either:
    (1) The agency head; or
    (2) An official designated by the agency head.
    (b) For the Department of Veterans Affairs the suspending official 
is:
    (1) For the Veterans Health Administration, the Under Secretary for 
Health;
    (2) For the Veterans Benefits Administration, the Under Secretary 
for Benefits; and
    (3) For the National Cemetery Administration, the Deputy Under 
Secretary for Operations.



Sec. 44.1015  Suspension.

    Suspension is an action taken by a suspending official under subpart 
G of this part that immediately prohibits a person from participating in 
covered

[[Page 839]]

transactions and transactions covered under the Federal Acquisition 
Regulation (48 CFR chapter 1) for a temporary period, pending completion 
of an agency investigation and any judicial or administrative 
proceedings that may ensue. A person so excluded is suspended.



Sec. 44.1020  Voluntary exclusion or voluntarily excluded.

    (a) Voluntary exclusion means a person's agreement to be excluded 
under the terms of a settlement between the person and one or more 
agencies. Voluntary exclusion must have governmentwide effect.
    (b) Voluntarily excluded means the status of a person who has agreed 
to a voluntary exclusion.



                Subpart J_Limited Denial of Participation

    Source: 71 FR 27203, May 10, 2006, unless otherwise noted.



Sec. 44.1100  General.

    Field Facility Directors are authorized to order a limited denial of 
participation affecting any participant or contractor and its affiliates 
except lenders and manufactured home manufacturers. In each case, even 
if the offense or violation is of a criminal, fraudulent or other 
serious nature, the decision to order a limited denial of participation 
shall be discretionary and in the best interests of the Government.



Sec. 44.1105  Cause for a limited denial of participation.

    (a) Causes. A limited denial of participation shall be based upon 
adequate evidence of any of the following causes:
    (1) Irregularities in a participant's or contractor's performance in 
the VA loan guaranty program;
    (2) Denial of participation in programs administered by the 
Department of Housing and Urban Development or the Department of 
Agriculture, Rural Housing Service;
    (3) Failure to satisfy contractual obligations or to proceed in 
accordance with contract specifications;
    (4) Failure to proceed in accordance with VA requirements or to 
comply with VA regulations;
    (5) Construction deficiencies deemed by VA to be the participant's 
responsibility;
    (6) Falsely certifying in connection with any VA program, whether or 
not the certification was made directly to VA;
    (7) Commission of an offense or other cause listed in Sec. 44.800;
    (8) Violation of any law, regulation, or procedure relating to the 
application for guaranty, or to the performance of the obligations 
incurred pursuant to a commitment to guaranty;
    (9) Making or procuring to be made any false statement for the 
purpose of influencing in any way an action of the Department;
    (10) Imposition of a limited denial of participation by any other VA 
field facility;
    (b) Indictment. A criminal indictment or information shall 
constitute adequate evidence for the purpose of limited denial of 
participation actions.
    (c) Limited denial of participation. Imposition of a limited denial 
of participation by a VA field facility shall, at the discretion of any 
other VA field facility, constitute adequate evidence for a concurrent 
limited denial of participation. Where such a concurrent limited denial 
of participation is imposed, participation may be restricted on the same 
basis without the need for an additional conference or further hearing.



Sec. 44.1110  Scope and period of a limited denial of participation.

    (a) Scope and period. The scope of a limited denial of participation 
shall be as follows:
    (1) A limited denial of participation extends only to participation 
in the VA Loan Guaranty Program and shall be effective only within the 
geographic jurisdiction of the office or offices imposing it.
    (2) The sanction may be imposed for a period not to exceed 12 months 
except for unresolved construction deficiencies. In cases involving 
construction deficiencies, the builder may be excluded for either a 
period not to exceed 12 months or for an indeterminate period which ends 
when the deficiency

[[Page 840]]

has been corrected or otherwise resolved in a manner acceptable to VA.
    (b) Effectiveness. The sanction shall be effective immediately upon 
issuance and shall remain effective for the prescribed period. If the 
cause for the limited denial of participation is resolved before the 
expiration of the prescribed period, the official who imposed the 
sanction may terminate it. The imposition of a limited denial of 
participation shall not affect the right of the Department to suspend or 
debar any person under this part.
    (c) Affiliates. An affiliate or organizational element may be 
included in a limited denial of participation solely on the basis of its 
affiliation, and regardless of its knowledge of or participation in the 
acts providing cause for the sanction. The burden of proving that a 
particular affiliate or organizational element is capable of meeting VA 
requirements and is currently a responsible entity and not controlled by 
the primary sanctioned party (or by an entity that itself is controlled 
by the primary sanctioned party) is on the affiliate or organizational 
element.



Sec. 44.1111  Notice.

    (a) Generally. A limited denial of participation shall be initiated 
by advising a participant or contractor, and any specifically named 
affiliate, by certified mail, return receipt requested:
    (1) That the sanction is effective as of the date of the notice;
    (2) Of the reasons for the sanction in terms sufficient to put the 
participant or contractor on notice of the conduct or transaction(s) 
upon which it is based;
    (3) Of the cause(s) relied upon under Sec. 44.1105 for imposing the 
sanction;
    (4) Of the right to request in writing, within 30 days of receipt of 
the notice, a conference on the sanction, and the right to have such 
conference held within 10 business days of receipt of the request;
    (5) Of the potential effect of the sanction and the impact on the 
participant's or contractor's participation in Departmental programs, 
specifying the program(s) involved and the geographical area affected by 
the action.
    (b) Notification of action. After 30 days, if no conference has been 
requested, the official imposing the limited denial of participation 
will notify VA Central Office of the action taken and of the fact that 
no conference has been requested. If a conference is requested within 
the 30-day period, VA Central Office need not be notified unless a 
decision to affirm all or a portion of the remaining period of exclusion 
is issued. VA Central Office will notify all VA field offices of 
sanctions imposed and still in effect under this subpart.



Sec. 44.1112  Conference.

    Upon receipt of a request for a conference, the official imposing 
the sanction shall arrange such a conference with the participant or 
contractor and may designate another official to conduct the conference. 
The participant shall be given the opportunity to be heard within 10 
business days of receipt of the request. This conference precedes, and 
is in addition to, the formal hearing provided if an appeal is taken 
under Sec. 44.1113. Although formal rules of procedure do not apply to 
the conference, the participant or contractor may be represented by 
counsel and may present all relevant information and materials to the 
official or designee. After consideration of the information and 
materials presented, the official shall, in writing, advise the 
participant or contractor of the decision to withdraw, modify or affirm 
the limited denial of participation. If the decision is made to affirm 
all or a portion of the remaining period of exclusion, the participant 
shall be advised of the right to request a formal hearing in writing 
within 30 days of receipt of the notice of decision. This decision shall 
be issued promptly, but in no event later than 20 days after the 
conference and receipt of materials.



Sec. 44.1113  Appeal.

    Where the decision is made to affirm all or a portion of the 
remaining period of exclusion, any participant desiring an appeal shall 
file a written request for a hearing with the Under Secretary for 
Benefits, Department of Veterans Affairs, 810 Vermont Avenue, NW., 
Washington, DC 20420. This request shall be filed within 30 days of 
receipt

[[Page 841]]

of the decision to affirm. If a hearing is requested, it shall be held 
in accordance with the procedures set forth at Sec. Sec. 44.825 through 
44.855. Where a limited denial of participation is followed by a 
suspension or debarment, the limited denial of participation shall be 
superseded and the appeal shall be heard solely as an appeal of the 
suspension or debarment.

                Appendix to Part 44--Covered Transactions
[GRAPHIC] [TIFF OMITTED] TR26NO03.000



PART 45_NEW RESTRICTIONS ON LOBBYING--Table of Contents




                            Subpart A_General

Sec.
45.100 Conditions on use of funds.
45.105 Definitions.
45.110 Certification and disclosure.

                  Subpart B_Activities by Own Employees

45.200 Agency and legislative liaison.
45.205 Professional and technical services.
45.210 Reporting.

            Subpart C_Activities by Other Than Own Employees

45.300 Professional and technical services.

                   Subpart D_Penalties and Enforcement

45.400 Penalties.
45.405 Penalty procedures.
45.410 Enforcement.

[[Page 842]]

                          Subpart E_Exemptions

45.500 Secretary of Defense.

                        Subpart F_Agency Reports

45.600 Semi-annual compilation.
45.605 Inspector General report.

Appendix A to Part 45--Certification Regarding Lobbying
Appendix B to Part 45--Disclosure Form to Report Lobbying

    Authority: Section 319, Pub. L. 101-121 (31 U.S.C. 1352); 38 U.S.C. 
501.

    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. 45.100  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. 45.105  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,

[[Page 843]]

including those subject to the Federal Acquisition Regulation (FAR), and 
any other acquisition contract for real or 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.C., including a position under a temporary 
appointment;
    (2) A member of the uniformed services as defined in section 101(3), 
title 37, U.S.C.;
    (3) A special Government employee as defined in section 202, title 
18, U.S.C.; 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.C., 
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

[[Page 844]]

agency consideration of such person for 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. 45.110  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.C.
    (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 845]]

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. 45.200  Agency and legislative liaison.

    (a) The prohibition on the use of appropriated funds, in Sec. 
45.100(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. 45.205  Professional and technical services.

    (a) The prohibition on the use of appropriated funds, in Sec. 
45.100(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 846]]

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. 45.210  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. 45.300  Professional and technical services.

    (a) The prohibition on the use of appropriated funds, in Sec. 
45.100(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. 45.110(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 847]]

    (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. 45.400  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. 45.405  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. 45.410  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. 45.500  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. 45.600  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 848]]

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. 45.605  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 45--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 849]]

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 850]]

        Appendix B to Part 45--Disclosure Form to Report Lobbying
[GRAPHIC] [TIFF OMITTED] TC21OC91.022


[[Page 851]]


[GRAPHIC] [TIFF OMITTED] TC21OC91.023


[[Page 852]]


[GRAPHIC] [TIFF OMITTED] TC21OC91.024


[[Page 853]]





PART 46_POLICY REGARDING PARTICIPATION IN NATIONAL PRACTITIONER DATA BANK
--Table of Contents




                      Subpart A_General Provisions

Sec.
46.1 Definitions.
46.2 Purpose.

           Subpart B_National Practitioner Data Bank Reporting

46.3 Malpractice payment reporting.
46.4 Clinical privileges actions reporting.

           Subpart C_National Practitioner Data Bank Inquiries

46.5 National Practitioner Data Bank inquiries.

                         Subpart D_Miscellaneous

46.6 Medical quality assurance records confidentiality.
46.7 Prohibitions concerning negotiations.
46.8 Independent contractors.

    Authority: 38 U.S.C. 501; 42 U.S.C. 11101-11152.

    Source: 67 FR 19679, Apr. 23, 2002, unless otherwise noted.



                      Subpart A_General Provisions



Sec. 46.1  Definitions.

    (a) Act means The Health Care Quality Improvement Act of 1986, as 
amended (42 U.S.C. 11101-11152).
    (b) Claim of medical malpractice means a written claim or demand for 
payment based on an act or omission of a physician, dentist, or other 
health care practitioner in furnishing (or failing to furnish) health 
care services, and includes the filing of a complaint or administrative 
tort claim under the Federal Tort Claims Act, 28 U.S.C. 1346(b), 2671-
2680.
    (c) Clinical privileges means privileges granted by a health care 
entity to individuals to furnish health care.
    (d) Dentist means a doctor of dental surgery or dental medicine 
legally authorized to practice dental surgery or dentistry by a State 
(or any individual who holds himself or herself out to be so 
authorized).
    (e) Director means the duly appointed director of a Department of 
Veterans Affairs health care facility or any individual with 
authorization to act for that person in the director's absence.
    (f) Gross negligence is materially worse than substandard care, and 
consists of an entire absence of care, or an absence of even slight care 
or diligence; it implies a thoughtless disregard of consequences or 
indifference to the rights of others.
    (g) Health care facility means a hospital, domiciliary, outpatient 
clinic, or any other entity that provides health care services.
    (h) Other health care practitioner means an individual other than a 
physician or dentist who is licensed or otherwise authorized by a State 
to provide health care services.
    (i) Physician means a doctor of medicine or osteopathy authorized to 
practice medicine or surgery by a State (or any individual who holds 
himself or herself out to be so authorized).
    (j) Professional review action means a recommendation by a 
professional review panel (with at least a majority vote) to affect 
adversely the clinical privileges of a physician or dentist taken as a 
result of a professional review activity based on the competence or 
professional conduct of an individual physician or dentist in cases in 
which such conduct affects or could affect adversely the health or 
welfare of a patient, or patients. An action is not considered to be 
based on the competence or professional conduct of a physician or 
dentist, if the action is primarily based on:
    (1) A physician's or dentist's association with, administrative 
supervision of, delegation of authority to, support for, or training of, 
a member or members of a particular class of health care practitioner or 
professional, or
    (2) Any other matter that does not relate to the competence or 
professional conduct of a physician or dentist in his/her practice at a 
Department of Veterans Affairs health care facility.
    (k) Professional review activity means an activity with respect to 
an individual physician or dentist to establish a recommendation 
regarding:
    (1) Whether the physician or dentist may have clinical privileges 
with respect to the medical staff of the facility;

[[Page 854]]

    (2) The scope or conditions of such privileges or appointment; or
    (3) Change or modification of such privileges.
    (l) State means the fifty States, the District of Columbia, Puerto 
Rico, the Virgin Islands, Guam, American Samoa, the Northern Mariana 
Islands, and any other territories or possessions of the United States.
    (m) State Licensing Board means, with respect to a physician, 
dentist, or other health care practitioner in a State, the agency of the 
State, which is primarily responsible for the licensing of the 
physician, dentist, or practitioner to furnish health care services.
    (n) Willful professional misconduct means worse than mere 
substandard care, and contemplates the intentional doing of something 
with knowledge that it is likely to result in serious injuries or in 
reckless disregard of its probable consequences.



Sec. 46.2  Purpose.

    The National Practitioner Data Bank, authorized by the Act and 
administered by the Department of Health and Human Services, was 
established for the purpose of collecting and releasing certain 
information concerning physicians, dentists, and other health care 
practitioners. The Act mandates that the Department of Health and Human 
Services seek to enter into a Memorandum of Understanding with the 
Department of Veterans Affairs (VA) for the purpose of having VA 
participate in the National Practitioner Data Bank. Such a Memorandum of 
Understanding has been established. Pursuant to the Memorandum of 
Understanding, VA will obtain information from the Data Bank concerning 
physicians, dentists, and other health care practitioners who provide or 
seek to provide health care services at VA facilities and also report 
information regarding malpractice payments and adverse clinical 
privileges actions to the Data Bank. This part essentially restates or 
interprets provisions of that Memorandum of Understanding and 
constitutes the policy of VA for participation in the National 
Practitioner Data Bank.



           Subpart B_National Practitioner Data Bank Reporting



Sec. 46.3  Malpractice payment reporting.

    (a) VA will file a report with the National Practitioner Data Bank, 
in accordance with regulations at 45 CFR part 60, subpart B, as 
applicable, regarding any payment for the benefit of a physician, 
dentist, or other licensed health care practitioner which was made as 
the result of a settlement or judgment of a claim of medical 
malpractice. The report will identify the physician, dentist, or other 
licensed health care practitioner for whose benefit the payment is made. 
It is intended that the report be filed within 30 days of the date 
payment is made. This may not be possible in all cases; e.g., sometimes 
notification of payment is delayed, and sometimes the malpractice 
payment review process cannot be completed within the timeframe. The 
report will provide the following information:
    (1) With respect to the physician, dentist, or other licensed health 
care practitioner for whose benefit the payment is made--
    (i) Name;
    (ii) Work address;
    (iii) Home address, if known;
    (iv) Social Security number, if known, and if obtained in accordance 
with section 7 of the Privacy Act of 1974;
    (v) Date of birth;
    (vi) Name of each professional school attended and year of 
graduation;
    (vii) For each professional license: the license number, the field 
of licensure, and the State in which the license is held;
    (viii) Drug Enforcement Administration registration number, if 
applicable and known;
    (ix) Name of each health care entity with which affiliated, if 
known.
    (2) With respect to the reporting VA entity--
    (i) Name and address of the reporting entity;
    (ii) Name, title and telephone number of the responsible official 
submitting the report on behalf of the Federal government; and

[[Page 855]]

    (iii) Relationship of the entity to the physician, dentist, or other 
health care practitioner being reported.
    (3) With respect to the judgment or settlement resulting in the 
payment--
    (i) Where an action or claim has been filed with an adjudicative 
body, identification of the adjudicative body and the case number;
    (ii) Date or dates on which the act(s) or omission(s), which gave 
rise to the action or claim occurred;
    (iii) Date of judgment or settlement;
    (iv) Amount paid, date of payment, and whether payment is for a 
judgment or a settlement;
    (v) Description and amount of judgment or settlement and any 
conditions attached thereto, including terms of payment;
    (vi) A description of the acts or omissions and injuries or 
illnesses upon which the action or claim was based; and
    (vii) Classification of the acts or omissions in accordance with a 
reporting code adopted by the Secretary of Health and Human Services.
    (b) Payment will be considered to have been made for the benefit of 
a physician, dentist, or other licensed health care practitioner only if 
(at least a majority of) a malpractice payment review panel concludes 
that payment was related to substandard care, professional incompetence, 
or professional misconduct on the part of the physician, dentist, or 
other licensed health care practitioner. For purposes of this part, a 
panel shall have a minimum of three individuals appointed by the 
Director, Medical-Legal Affairs (including at least one member of the 
profession/occupation of the practitioner(s) whose actions are under 
review). The conclusions of the panel shall, at a minimum, be based on 
review of documents pertinent to the care that led to the claim. These 
documents include the medical records of the patient whose care led to 
the claim, any report of an administrative investigation board appointed 
to investigate the care, and the opinion of any consultant which the 
panel may request in its discretion. These documents do not include 
those generated primarily for consideration or litigation of the claim 
of malpractice. In addition, to the extent practicable, the documents 
shall include written statements of the individual(s) involved in the 
care which led to the claim. The practitioner(s) whose actions are under 
review will receive a written notice, hand-delivered or sent to the 
practitioner's last known address (return receipt requested), from the 
VA facility director at the time the VA facility director receives the 
Notice of Payment. That notice from the VA facility director will 
indicate that VA is considering whether to report the practitioner to 
the National Practitioner Data Bank because of a specified malpractice 
payment made, and provide the practitioner the opportunity, within 60 
days of receipt, to submit a written statement concerning the care that 
led to the claim. Inability to notify or non-response from the 
identified practitioner(s) will not preclude completion of the review 
and reporting process. The panel, at its discretion, may request 
additional information from the practitioner or the VA facility where 
the incident occurred. The review panel's notification to the VA 
facility Director shall include the acts or omissions considered, the 
reporting conclusion, and the rationale for the conclusion.
    (c) Attending staff (including contract employees, such as scarce 
medical specialists providing care pursuant to a contract under 38 
U.S.C. 7409) are responsible for actions of licensed trainees assigned 
under their supervision. Notwithstanding the provisions of paragraph (b) 
of this section, actions of a licensed trainee (intern or resident) 
acting within the scope of his or her training program that otherwise 
would warrant reporting for substandard care, professional incompetence, 
or professional misconduct under the provisions of paragraph (b) of this 
section, will be reported only if the panel, by at least a majority, 
concludes that such actions constitute gross negligence or willful 
professional misconduct. For purposes of paragraph (b) of this section, 
payment will be considered to be made for the benefit of a physician, 
dentist, or other health care practitioner, in their supervisory 
capacity, if the panel concludes, by at least a majority, that the 
physician,

[[Page 856]]

dentist or other health care practitioner was acting in a supervisory 
capacity; that the payment was related to substandard care, professional 
incompetence, or professional misconduct of the trainee and not the 
supervisor; and that the trainee did not commit gross negligence or 
willful professional misconduct. Such report will note that the 
physician, dentist, or other health care practitioner is being reported 
in a supervisory capacity.
    Note to paragraph (c):
    Licensed trainees acting outside the scope of their training program 
(e.g. acting as admitting officer of the day) will be reported under the 
provisions of paragraph (b) of this section.
    (d) The Director of the facility at which the claim arose has the 
primary responsibility for submitting the report to the National 
Practitioner Data Bank and for providing a copy to the practitioner, to 
the State Licensing Board in each State where the practitioner holds a 
license, and to the State Licensing Board in which the facility is 
located. However, the Chief Patient Care Services Officer is also 
authorized to submit the report to the National Practitioner Data Bank 
and provide copies to the practitioner and State Licensing Boards in 
cases where the Chief Patient Care Services Officer deems it appropriate 
to do so. The Director of the facility also shall provide to the 
practitioner a copy of the review panel's notification to the Director.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0621.)



Sec. 46.4  Clinical privileges actions reporting.

    (a) VA will file an adverse action report with the National 
Practitioner Data Bank in accordance with regulations at 45 CFR part 60, 
subpart B, as applicable, regarding any of the following actions:
    (1) An action of a Director after consideration of a professional 
review action that, for a period longer than 30 days, adversely affects 
(by reducing, restricting, suspending, revoking, or failing to renew) 
the clinical privileges of a physician or dentist relating to possible 
incompetence or improper professional conduct.
    (2) Acceptance of the surrender of clinical privileges, including 
the surrender of clinical privileges inherent in resignation or 
retirement, or any restriction of such privileges by a physician or 
dentist either while under investigation by the health care entity 
relating to possible incompetence or improper professional conduct, or 
in return for not conducting such an investigation or proceeding whether 
or not the individual remains in VA service.
    (b) The report specified in paragraph (a) of this section will 
provide the following information--
    (1) With respect to the physician or dentist:
    (i) Name;
    (ii) Work address;
    (iii) Home address, if known;
    (iv) Social Security number, if known (and if obtained in accordance 
with section 7 of the Privacy Act of 1974);
    (v) Date of birth;
    (vi) Name of each professional school attended and year of 
graduation;
    (vii) For each professional license: the license number, the field 
of licensure, and the name of the State in which the license is held;
    (viii) Drug Enforcement Administration registration number, if 
applicable and known;
    (ix) A description of the acts or omissions or other reasons for 
privilege loss, or, if known, for surrender; and
    (x) Action taken, date action was made final, length of action and 
effective date of the action.
    (2) With respect to the VA facility--
    (i) Name and address of the reporting facility; and
    (ii) Name, title, and telephone number of the responsible official 
submitting the report.
    (c) A copy of the report referred to in paragraph (a) of this 
section will also be filed with the State Licensing Board in the 
State(s) in which the practitioner is licensed and in which the facility 
is located. It is intended that the report be filed within 15 days of 
the date the action is made final, that is, subsequent to any internal 
(to the facility) appeal.
    (d) As soon as practicable after it is determined that a report 
shall be filed with the National Practitioner Data

[[Page 857]]

Bank and State Licensing Boards under paragraphs (a)(2) and (c) of this 
section, VA shall provide written notice to the practitioner that a 
report will be filed with the National Practitioner Data Bank with a 
copy to the State Licensing Board in each State in which the 
practitioner is licensed and in the State in which the facility is 
located.



           Subpart C_National Practitioner Data Bank Inquiries



Sec. 46.5  National Practitioner Data Bank inquiries.

    VA will request information from the National Practitioner Data 
Bank, in accordance with the regulations published at 45 CFR part 60, 
subpart C, as applicable, concerning a physician, dentist, or other 
licensed health care practitioner as follows:
    (a) At the time a physician, dentist, or other health care 
practitioner applies for a position at VA Central Office, any of its 
regional offices, or on the medical staff, or for clinical privileges at 
a VA hospital or other health care entity operated under the auspice of 
VA;
    (b) No less often than every 2 years concerning any physician, 
dentist, or other health care practitioner who is on the medical staff 
or who has clinical privileges at a VA hospital or other health care 
entity operated under the auspice of VA; and
    (c) At other times pursuant to VA policy and needs and consistent 
with the Act and Department of Health and Human Services Regulations (45 
CFR part 60).



                         Subpart D_Miscellaneous



Sec. 46.6  Medical quality assurance records confidentiality.

    Note that medical quality assurance records that are confidential 
and privileged under the provisions of 38 U.S.C. 5705 may not be used as 
evidence for reporting individuals to the National Practitioner Data 
Bank.



Sec. 46.7  Prohibitions concerning negotiations.

    Reporting under this part (including the submission of copies) may 
not be the subject of negotiation in any settlement agreement, employee 
action, legal proceedings, or any other negotiated settlement.



Sec. 46.8  Independent contractors.

    Independent contractors acting on behalf of the Department of 
Veterans Affairs are subject to the National Practitioner Data Bank 
reporting provisions of this part. In the following circumstances, VA 
will provide the contractor with notice that a report of a clinical 
privileges action will be filed with the National Practitioner Data Bank 
with a copy with the State Licensing Board in the State(s) in which the 
contractor is licensed and in which the facility is located: where VA 
terminates a contract for possible incompetence or improper professional 
conduct, thereby automatically revoking the contractor's clinical 
privileges, or where the contractor terminates the contract, thereby 
surrendering clinical privileges, either while under investigation 
relating to possible incompetence or improper professional conduct or in 
return for not conducting such an investigation or proceeding.

(Authority: 38 U.S.C. 5705)



PART 47_POLICY REGARDING REPORTING HEALTH CARE PROFESSIONALS TO STATE 
LICENSING BOARDS--Table of Contents




Sec.
47.1 Definitions.
47.2 Reporting to State Licensing Boards.

    Authority: Pub. L. 99-166, 99 Stat. 941; 38 U.S.C. 501.

    Source: 58 FR 48455, Sept. 16, 1993, unless otherwise noted.



Sec. 47.1  Definitions.

    (a) Dentist means a doctor of dental surgery or dental medicine 
legally authorized to practice dental surgery or medical dentistry by a 
State (or any individual who, without authority, holds himself or 
herself out to be so authorized).
    (b) Other health care professional means an individual other than a 
physician or dentist who is licensed or otherwise authorized by a State 
to provide health care services (or any individual

[[Page 858]]

who, without authority, holds himself or herself out to be so licensed 
or authorized).
    (c) Physician means a doctor of medicine or osteopathy legally 
authorized to practice medicine or surgery by a State (or any individual 
who, without authority, holds himself or herself out to be so 
authorized).
    (d) State means the fifty States, the District of Columbia, Puerto 
Rico, the Virgin Islands, Guam, American Samoa, the Northern Mariana 
Islands and any other territories or possessions of the United States.
    (e) State Licensing Board means, with respect to a physician, 
dentist or other health care practitioner in a State, the agency of the 
State which is primarily responsible for the licensing of the physician, 
dentist or practitioner to provide health care services.
    (f) Generally accepted standards of clinical practice means 
reasonable competence in the clinical aspects of one's responsibilities, 
as well as the moral and ethical behavior necessary to carry out those 
responsibilities.
    (g) Separated licensed health care professional means a licensed 
health care professional who is no longer on VA rolls, regardless of 
whether the individual left voluntarily or involuntarily and regardless 
of the reason why the individual left.
    (h) Currently employed licensed health care professional means a 
licensed health care professional who is on VA rolls.
    (i) On VA rolls means on VA rolls, regardless of the status of the 
professional, such as full-time, part-time, contract service, fee-basis, 
or without compensation.

(Authority: 38 U.S.C. 501, 7401-7405; Section 204(b) of Pub. L. 99-166, 
99 Stat. 952-953; Pub. L. 99-660, 100 Stat. 3743)

[58 FR 48455, Sept. 16, 1993, as amended at 63 FR 23665, Apr. 30, 1998]



Sec. 47.2  Reporting to State Licensing Boards.

    It is the policy of VA to report to State Licensing Boards any 
currently employed licensed health care professional or separated 
licensed health care professional whose clinical practice during VA 
employment so significantly failed to meet generally accepted standards 
of clinical practice as to raise reasonable concern for the safety of 
patients. The following are examples of actions that meet the criteria 
for reporting:
    (a) Significant deficiencies in clinical practice such as lack of 
diagnostic or treatment capability; errors in transcribing, 
administering or documenting medication; inability to perform clinical 
procedures considered basic to the performance of one's occupation; 
performing procedures not included in one's clinical privileges in other 
than emergency situations;
    (b) Patient neglect or abandonment;
    (c) Mental health impairment sufficient to cause the individual to 
behave inappropriately in the patient care environment;
    (d) Physical health impairment sufficient to cause the individual to 
provide unsafe patient care;
    (e) Substance abuse when it affects the individual's ability to 
perform appropriately as a health care provider or in the patient care 
environment;
    (f) Falsification of credentials;
    (g) Falsification of medical records or prescriptions;
    (h) Theft of drugs;
    (i) Inappropriate dispensing of drugs;
    (j) Unethical behavior or moral turpitude;
    (k) Mental, physical, sexual, or verbal abuse of a patient (examples 
of patient abuse include intentional omission of care, willful violation 
of a patient's privacy, willful physical injury, intimidation, 
harassment, or ridicule); and
    (l) Violation of research ethics.

(Authority: 38 U.S.C. 501; 7401-7405; Section 204(b) of Pub. L. 99-166, 
99 Stat. 952-953; Pub. L. 99-660, 100 Stat. 3743)

[63 FR 23665, Apr. 30, 1998]



PART 48_GOVERNMENTWIDE REQUIREMENTS FOR DRUG-FREE WORKPLACE (FINANCIAL 
ASSISTANCE)--Table of Contents




                     Subpart A_Purpose and Coverage

Sec.
48.100 What does this part do?
48.105 Does this part apply to me?
48.110 Are any of my Federal assistance awards exempt from this part?

[[Page 859]]

48.115 Does this part affect the Federal contracts that I receive?

      Subpart B_Requirements for Recipients Other Than Individuals

48.200 What must I do to comply with this part?
48.205 What must I include in my drug-free workplace statement?
48.210 To whom must I distribute my drug-free workplace statement?
48.215 What must I include in my drug-free awareness program?
48.220 By when must I publish my drug-free workplace statement and 
          establish my drug-free awareness program?
48.225 What actions must I take concerning employees who are convicted 
          of drug violations in the workplace?
48.230 How and when must I identify workplaces?

        Subpart C_Requirements for Recipients Who Are Individuals

48.300 What must I do to comply with this part if I am an individual 
          recipient?
48.301 [Reserved]

    Subpart D_Responsibilities of the Department of Veterans Affairs 
                           Awarding Officials

48.400 What are my responsibilities as a Department of Veterans Affairs 
          awarding official?

           Subpart E_Violations of This Part and Consequences

48.500 How are violations of this part determined for recipients other 
          than individuals?
48.505 How are violations of this part determined for recipients who are 
          individuals?
48.510 What actions will the Federal Government take against a recipient 
          determined to have violated this part?
48.515 Are there any exceptions to those actions?

                          Subpart F_Definitions

48.605 Award.
48.610 Controlled substance.
48.615 Conviction.
48.620 Cooperative agreement.
48.625 Criminal drug statute.
48.630 Debarment.
48.635 Drug-free workplace.
48.640 Employee.
48.645 Federal agency or agency.
48.650 Grant.
48.655 Individual.
48.660 Recipient.
48.665 State.
48.670 Suspension.

    Authority: 41 U.S.C. 701, et seq.; 38 U.S.C 501

    Source: 68 FR 66557, 66619, 66620, Nov. 26, 2003, unless otherwise 
noted.



                     Subpart A_Purpose and Coverage



Sec. 48.100  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.



Sec. 48.105  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 
Veterans Affairs; or
    (2) A(n) Department of Veterans Affairs awarding official. (See 
definitions of award and recipient in Sec. Sec. 48.605 and 48.660, 
respectively.)
    (b) The following table shows the subparts that apply to you:

------------------------------------------------------------------------
             If you are . . .                    see subparts . . .
------------------------------------------------------------------------
(1) A recipient who is not an individual..  A, B and E.
(2) A recipient who is an individual......  A, C and E.
(3) A(n) Department of Veterans Affairs     A, D and E.
 awarding official.
------------------------------------------------------------------------



Sec. 48.110  Are any of my Federal assistance awards exempt from this 
part?

    This part does not apply to any award that the Secretary 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.



Sec. 48.115  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. 48. 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

[[Page 860]]

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).



      Subpart B_Requirements for Recipients Other Than Individuals



Sec. 48.200  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. 48.205 through 
48.220); and
    (2) Take actions concerning employees who are convicted of violating 
drug statutes in the workplace (see Sec. 48.225).
    (b) Second, you must identify all known workplaces under your 
Federal awards (see Sec. 48.230).



Sec. 48.205  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.



Sec. 48.210  To whom must I distribute my drug-free workplace statement?

    You must require that a copy of the statement described in Sec. 
48.205 be given to each employee who will be engaged in the performance 
of any Federal award.



Sec. 48.215  What must I include in my drug-free awareness program?

    You must establish an ongoing drug-free awareness program to inform 
employees about--
    (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.



Sec. 48.220  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. 48.205 and an ongoing awareness program 
as described in Sec. 48.215, 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 is  must have the policy
 less than 30 days.                          statement 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 is  must have the policy
 30 days or more.                            statement and program in
                                             place within 30 days after
                                             award.
(c) You believe there are extraordinary     may ask the Department of
 circumstances that will require more than   Veterans Affairs awarding
 30 days for you to publish the policy       official to give you more
 statement and establish the awareness       time to do so. The amount
 program.                                    of additional time, if any,
                                             to be given is at the
                                             discretion of the awarding
                                             official.
------------------------------------------------------------------------



Sec. 48.225  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:

[[Page 861]]

    (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. 48.205(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.



Sec. 48.230  How and when must I identify workplaces?

    (a) You must identify all known workplaces under each Department of 
Veterans Affairs award. A failure to do so is a violation of your drug-
free workplace requirements. You may identify the workplaces--
    (1) To the Department of Veterans Affairs 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 Department of Veterans Affairs 
officials or their designated representatives.
    (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 Department of Veterans 
Affairs 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 Department of Veterans Affairs awarding official.



        Subpart C_Requirements for Recipients Who Are Individuals



Sec. 48.300  What must I do to comply with this part if I am an 
individual recipient?

    As a condition of receiving a(n) Department of Veterans Affairs 
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 Department of Veterans Affairs awarding official or other 
designee for each award that you currently have, unless Sec. 48.301 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.

[[Page 862]]



Sec. 48.301  [Reserved]



 Subpart D_Responsibilities of Department of Veterans Affairs Awarding 
                                Officials



Sec. 48.400  What are my responsibilities as a(n) Department of Veterans 
Affairs awarding official?

    As a(n) Department of Veterans Affairs 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.



           Subpart E_Violations of this Part and Consequences



Sec. 48.500  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 Secretary 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.



Sec. 48.505  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 Secretary 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.



Sec. 48.510  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. 48.500 or Sec.  48.505, the Department of Veterans 
Affairs 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 38 CFR Part 44, 
for a period not to exceed five years.



Sec. 48.515  Are there any exceptions to those actions?

    The Secretary 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 Secretary determines that such a waiver would be in the public 
interest. This exception authority cannot be delegated to any other 
official.



                          Subpart F_Definitions



Sec. 48.605  Award.

    Award means an award of financial assistance by the Department of 
Veterans Affairs 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 38 
CFR Part 43 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).

[[Page 863]]



Sec. 48.610  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.



Sec. 48.615  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.



Sec. 48.620  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. 48.650), 
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.



Sec. 48.625  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.



Sec. 48.630  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.



Sec. 48.635  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.



Sec. 48.640  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).



Sec. 48.645  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.



Sec. 48.650  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.

[[Page 864]]



Sec. 48.655  Individual.

    Individual means a natural person.



Sec. 48.660  Recipient.

    Recipient means any individual, corporation, partnership, 
association, unit of government (except a Federal agency) or legal 
entity, however organized, that receives an award directly from a 
Federal agency.



Sec. 48.665  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.



Sec. 48.670  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.



PART 49_UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS 
WITH INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, AND OTHER NON-PROFIT 
ORGANIZATIONS--Table of Contents




                            Subpart A_General

Sec.
49.1 Purpose.
49.2 Definitions.
49.3 Effect on other issuances.
49.4 Deviations.
49.5 Subawards.

                    Subpart B_Pre-Award Requirements

49.10 Purpose.
49.11 Pre-award policies.
49.12 Forms for applying for Federal assistance.
49.13 Debarment and suspension.
49.14 Special award conditions.
49.15 Metric system of measurement.
49.16 Resource Conservation and Recovery Act.
49.17 Certifications and representations.

                    Subpart C_Post-Award Requirements

                    Financial and Program Management

49.20 Purpose of financial and program management.
49.21 Standards for financial management systems.
49.22 Payment.
49.23 Cost sharing or matching.
49.24 Program income.
49.25 Revision of budget and program plans.
49.26 Non-Federal audits.
49.27 Allowable costs.
49.28 Period of availability of funds.
49.29 Conditional exemptions.

                           Property Standards

49.30 Purpose of property standards.
49.31 Insurance coverage.
49.32 Real property.
49.33 Federally-owned and exempt property.
49.34 Equipment.
49.35 Supplies and other expendable property.
49.36 Intangible property.
49.37 Property trust relationship.

                          Procurement Standards

49.40 Purpose of procurement standards.
49.41 Recipient responsibilities.
49.42 Codes of conduct.
49.43 Competition.
49.44 Procurement procedures.
49.45 Cost and price analysis.
49.46 Procurement records.
49.47 Contract administration.
49.48 Contract provisions.

                           Reports and Records

49.50 Purpose of reports and records.
49.51 Monitoring and reporting program performance.
49.52 Financial reporting.
49.53 Retention and access requirements for records.

                       Termination and Enforcement

49.60 Purpose of termination and enforcement.
49.61 Termination.
49.62 Enforcement.

[[Page 865]]

                 Subpart D_After-the-Award Requirements

49.70 Purpose.
49.71 Closeout procedures.
49.72 Subsequent adjustments and continuing responsibilities.
49.73 Collection of amounts due.

Appendix A to Part 49--Contract Provisions

    Authority: 5 U.S.C. 301; 38 U.S.C. 501, OMB Circular A-110 (2 CFR 
part 215), and as noted in specific sections.

    Source: 70 FR 52261, Sept. 1, 2005, unless otherwise noted.



                            Subpart A_General



Sec. 49.1  Purpose.

    This part establishes uniform administrative requirements for 
Federal grants and agreements awarded to institutions of higher 
education, hospitals, and other non-profit organizations. Federal 
awarding agencies shall not impose additional or inconsistent 
requirements, except as provided in Sec. Sec. 49.4, and 49.14 or unless 
specifically required by Federal statute or executive order. Non-profit 
organizations that implement Federal programs for the States are also 
subject to State requirements.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.2  Definitions.

    (a) 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.
    (b) 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.
    (c) 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.
    (d) 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.
    (e) 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: technical assistance, which provides services instead of money; 
other assistance in the form of loans, loan guarantees, interest 
subsidies, or insurance; direct payments of any kind to individuals; 
and, contracts which are required to be entered into and administered 
under procurement laws and regulations.
    (f) Cash contributions means the recipient's cash outlay, including 
the outlay of money contributed to the recipient by third parties.
    (g) Closeout means the process by which a Federal awarding agency 
determines that all applicable administrative actions and all required 
work of the award have been completed by the recipient and Federal 
awarding agency.
    (h) Contract means a procurement contract under an award or 
subaward, and a procurement subcontract under a recipient's or 
subrecipient's contract.
    (i) Cost sharing or matching means that portion of project or 
program costs not borne by the Federal Government.
    (j) 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

[[Page 866]]

amendment thereto, on which Federal sponsorship ends.
    (k) Disallowed costs means those charges to an award that the 
Federal awarding agency determines to be unallowable, in accordance with 
the applicable Federal cost principles or other terms and conditions 
contained in the award.
    (l) 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 $5000 or more per 
unit. However, consistent with recipient policy, lower limits may be 
established.
    (m) Excess property means property under the control of any Federal 
awarding agency that, as determined by the head thereof, is no longer 
required for its needs or the discharge of its responsibilities.
    (n) Exempt property means tangible personal property acquired in 
whole or in part with Federal funds, where the Federal awarding agency 
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.
    (o) Federal awarding agency means the Federal agency that provides 
an award to the recipient.
    (p) 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 agency regulations or agency 
implementing instructions.
    (q) 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.
    (r) Funding period means the period of time when Federal funding is 
available for obligation by the recipient.
    (s) 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.
    (t) 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.
    (u) 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.
    (v) 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.
    (w) Prior approval means written approval by an authorized official 
evidencing prior consent.
    (x) 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. 49.24 (e) and (h)). Program income 
includes, but is not limited to, income from fees for services 
performed, the use or rental of real or personal property acquired under 
federally-funded projects, the sale of

[[Page 867]]

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 Federal awarding agency 
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.
    (y) Project costs means all allowable costs, as set forth 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.
    (z) Project period means the period established in the award 
document during which Federal sponsorship begins and ends.
    (aa) Property means, unless otherwise stated, real property, 
equipment, intangible property and debt instruments.
    (bb) Real property means land, including land improvements, 
structures and appurtenances thereto, but excludes movable machinery and 
equipment.
    (cc) Recipient means an organization receiving financial assistance 
directly from Federal awarding agencies 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 Federal awarding 
agency. 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.
    (dd) 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 such activities utilize the 
same facilities as other research and development activities and where 
such activities are not included in the instruction function.
    (ee) Small awards means a grant or cooperative agreement not 
exceeding the small purchase threshold fixed at 41 U.S.C. 403(11) 
($100,000).
    (ff) 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'' in paragraph (e) of this section.
    (gg) 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 
Federal awarding agency.
    (hh) 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 401.2(d)

[[Page 868]]

    (ii) Suspension means an action by a Federal awarding agency that 
temporarily withdraws Federal sponsorship under an award, pending 
corrective action by the recipient or pending a decision to terminate 
the award by the Federal awarding agency. Suspension of an award is a 
separate action from suspension under Federal agency regulations 
implementing E.O.s 12549 and 12689, ``Debarment and Suspension.''
    (jj) Termination means the cancellation of Federal sponsorship, in 
whole or in part, under an agreement at any time prior to the date of 
completion.
    (kk) 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.
    (ll) 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.
    (mm) Unobligated balance means the portion of the funds authorized 
by the Federal awarding agency that has not been obligated by the 
recipient and is determined by deducting the cumulative obligations from 
the cumulative funds authorized.
    (nn) 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.
    (oo) Working capital advance means a procedure where by funds are 
advanced to the recipient to cover its estimated disbursement needs for 
a given initial period.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.3  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 shall be superseded, except to the extent they are required by 
statute, or authorized in accordance with the deviations provision in 
Sec. 49.4.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.4  Deviations.

    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 
shall be permitted only in unusual circumstances. Federal awarding 
agencies may apply more restrictive requirements to a class of 
recipients when approved by OMB. Federal awarding agencies 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 Federal awarding agencies.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.5  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 such subrecipients are institutions of 
higher education, hospitals or other non-profit organizations. State and 
local government subrecipients are subject to the provisions of 
regulations in part 43 of this chapter.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



                    Subpart B_Pre-Award Requirements



Sec. 49.10  Purpose.

    Sections 49.11 through 49.17 prescribes forms and instructions and 
other pre-award matters to be used in applying for Federal awards.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.11  Pre-award policies.

    (a) Use of grants and cooperative agreements, and contracts. In each 
instance,

[[Page 869]]

the Federal awarding agency shall decide 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 the executive agency and 
the State, local government, or other 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. Federal awarding agencies 
shall notify the public of its intended funding priorities for 
discretionary grant programs, unless funding priorities are established 
by Federal statute.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.12  Forms for applying for Federal assistance.

    (a) Federal awarding agencies shall comply with the applicable 
report clearance requirements of 5 CFR part 1320, ``Controlling 
Paperwork Burdens on the Public,'' with regard to all forms used by the 
Federal awarding agency 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 Federal awarding agency.
    (c) For Federal programs covered by E.O. 12372, ``Intergovernmental 
Review of Federal Programs,'' 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 Federal awarding agency or the 
Catalog of Federal Domestic Assistance. The SPOC shall advise the 
applicant whether the program for which application is made has been 
selected by that State for review.
    (d) Federal awarding agencies that do not use the SF-424 form should 
indicate whether the application is subject to review by the State under 
E.O. 12372.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.13  Debarment and suspension.

    Federal awarding agencies and recipients shall comply with part 44 
of this chapter, which 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: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.14  Special award conditions.

    If an applicant or recipient has a history of poor performance, is 
not financially stable, has a management system that does not meet the 
standards prescribed in this part, has not conformed to the terms and 
conditions of a previous award, or is not otherwise responsible, Federal 
awarding agencies may impose additional requirements as needed, provided 
that such applicant or recipient is notified in writing as to: the 
nature of the additional requirements, the reason why the additional 
requirements are being imposed, the nature of the corrective action 
needed, the time allowed for completing the corrective actions, and the 
method for requesting reconsideration of the additional requirements 
imposed. Any special conditions shall be promptly removed once the 
conditions that prompted them have been corrected.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.15  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

[[Page 870]]

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. Federal awarding agencies shall follow the provisions of 
E.O. 12770, ``Metric Usage in Federal Government Programs.''

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.16  Resource Conservation and Recovery Act (RCRA).

    Under the 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. 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, State and local institutions of higher 
education, hospitals, and non-profit organizations 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: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.17  Certifications and representations.

    Unless prohibited by statute or codified regulation, each Federal 
awarding agency is authorized and encouraged to allow 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 the agency. Annual certifications and 
representations shall be signed by responsible officials with the 
authority to ensure recipients' compliance with the pertinent 
requirements.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



                    Subpart C_Post-Award Requirements

                    Financial and Program Management



Sec. 49.20  Purpose of financial and program management.

    Sections 49.21 through 49.28 prescribe standards for financial 
management systems, methods for making payments and rules for: 
satisfying cost sharing and matching requirements, accounting for 
program income, budget revision approvals, making audits, determining 
allowability of cost, and establishing fund availability.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.21  Standards for financial management systems.

    (a) Federal awarding agencies shall require recipients to relate 
financial data to performance data and develop unit cost information 
whenever practical.
    (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 or program in accordance 
with the reporting requirements set forth in Sec. 49.52. If a Federal 
awarding agency 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 such 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 Federal 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 
such assets and assure they are used solely for authorized purposes.
    (4) Comparison of outlays with budget amounts for each award. 
Whenever appropriate, financial information

[[Page 871]]

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 Federal awarding agency, at its 
discretion, 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 Federal awarding agency may require adequate fidelity bond 
coverage where the recipient lacks sufficient coverage to protect the 
Federal Government's interest.
    (e) Where bonds are required in the situations described in 
paragraphs (a) through (d) 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.''

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.22  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) Recipients are to be paid in advance, provided they maintain or 
demonstrate the willingness to maintain written procedures that minimize 
the time elapsing between the transfer of funds and disbursement by the 
recipient, and financial management systems that meet the standards for 
fund control and accountability as established in Sec. 49.21. Cash 
advances to a recipient organization shall be limited to the minimum 
amounts needed and be timed to be in accordance with the actual, 
immediate cash requirements of the recipient organization in carrying 
out the purpose of the approved program or project. The timing and 
amount of cash advances shall be 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 shall be consolidated to cover 
anticipated cash needs for all awards made by the Federal awarding 
agency to the recipient.
    (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 shall be 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 special 
Federal awarding agency instructions for electronic funds transfer.
    (e) Reimbursement is the preferred method when the requirements in 
paragraph (b) of this section cannot be met. Federal awarding agencies 
may also use this method on any construction

[[Page 872]]

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 Federal awarding 
agency shall make payment within 30 days after receipt of the billing, 
unless the billing is improper.
    (2) Recipients shall be 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 Federal awarding agency has determined that reimbursement is not 
feasible because the recipient lacks sufficient working capital, the 
Federal awarding agency may provide cash on a working capital advance 
basis. Under this procedure, the Federal awarding agency shall advance 
cash to the recipient to cover its estimated disbursement needs for an 
initial period generally geared to the awardee's disbursing cycle. 
Thereafter, the Federal awarding agency shall reimburse the recipient 
for its actual cash disbursements. The working capital advance method of 
payment shall not be 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 such funds before requesting additional cash 
payments.
    (h) Unless otherwise required by statute, Federal awarding agencies 
shall not withhold payments for proper charges made by recipients at any 
time during the project period unless either of the following conditions 
apply.
    (1) A recipient has failed to comply with the project objectives, 
the terms and conditions of the award, or Federal reporting 
requirements.
    (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 such conditions, the Federal awarding agency 
may, upon reasonable notice, inform the recipient that payments shall 
not be made for obligations incurred after a specified date until the 
conditions are corrected or the indebtedness to the Federal Government 
is liquidated.
    (i) 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, Federal awarding agencies shall 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.
    (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 any of the following conditions apply.
    (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.
    (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

[[Page 873]]

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 Federal 
awarding agency, it waives its right to recover the interest under CMIA.
    (m) Except as noted elsewhere in this part, only the following forms 
shall be authorized for the recipients in requesting advances and 
reimbursements. Federal agencies shall not require more than an original 
and two copies of these forms.
    (1) SF-270, Request for Advance or Reimbursement. Each Federal 
awarding agency shall adopt the SF-270 as a standard form for all 
nonconstruction programs when electronic funds transfer or predetermined 
advance methods are not used. Federal awarding agencies, however, have 
the option of using 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. Each Federal awarding agency shall adopt the SF-
271 as the standard form to be used for requesting reimbursement for 
construction programs. However, a Federal awarding agency may substitute 
the SF-270 when the Federal awarding agency determines that it provides 
adequate information to meet Federal needs.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.23  Cost sharing or matching.

    (a) All contributions, including cash and third party in-kind, shall 
be accepted as part of the recipient's cost sharing or matching when 
such contributions meet all of 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 
Federal awarding agency.
    (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 Federal awarding 
agency.
    (c) Values for recipient contributions of services and property 
shall be established in accordance with the applicable cost principles. 
If a Federal awarding agency 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 the following.
    (1) The certified value of the remaining life of the property 
recorded in the recipient's accounting records at the time of donation.
    (2) The current fair market value. However, when there is sufficient 
justification, the Federal awarding agency may approve the use of the 
current fair market value of 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 shall 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 shall 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

[[Page 874]]

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, if either of 
the following conditions apply.
    (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 Federal 
awarding agency has approved the charges.
    (h) The value of donated property shall be determined in accordance 
with the usual accounting policies of the recipient, with the following 
qualifications.
    (1) The value of donated land and buildings shall 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 shall 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 shall 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 shall 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 shall be documented.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.24  Program income.

    (a) Federal awarding agencies shall apply the standards set forth 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 shall be retained by the 
recipient and, in accordance with Federal awarding agency regulations or 
the terms and conditions of the award, shall be used in one or more of 
the ways listed in the following:
    (1) Added to funds committed to the project by the Federal awarding 
agency 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 an agency 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 Federal awarding agency does not specify 
in its regulations or the terms and conditions of the award how program 
income is to be used, paragraph (b)(3) of this section shall apply 
automatically to all projects or programs except research. For awards 
that support research, paragraph (b)(1) of this section shall apply 
automatically unless the

[[Page 875]]

awarding agency indicates in the terms and conditions another 
alternative on the award or the recipient is subject to special award 
conditions, as indicated in Sec. 49.14.
    (e) Unless Federal awarding agency regulations or the terms and 
conditions of the award provide otherwise, recipients shall have no 
obligation to the Federal Government regarding program income earned 
after the end of the project period.
    (f) If authorized by Federal awarding agency regulations 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. 49.30 through 49.37).
    (h) Unless Federal awarding agency regulations or the terms and 
condition of the award provide otherwise, recipients shall 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: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.25  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 
Federal awarding agency 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 Federal awarding agencies 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 
Federal awarding agency.
    (6) The inclusion, unless waived by the Federal awarding agency, of 
costs that require prior approval in accordance with OMB Circular A-21, 
``Cost Principles for Educational Institutions,'' 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.
    (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 may be 
imposed unless a deviation has been approved by OMB.
    (e) Except for requirements listed in paragraphs (c)(1) and (c)(4) 
of this section, Federal awarding agencies are authorized, at their 
option, to waive cost-related and administrative prior written approvals 
required by this part and OMB Circulars A-21 and A-122. Such waivers may 
include authorizing recipients to do any one or more of the following.

[[Page 876]]

    (1) Incur pre-award costs 90 calendar days prior to award or more 
than 90 calendar days with the prior approval of the Federal awarding 
agency. All pre-award costs are incurred at the recipient's risk (i.e., 
the Federal awarding agency is under no obligation to reimburse such 
costs if for any reason the recipient does not receive an award or if 
the award is less than anticipated and inadequate to cover such costs).
    (2) 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. For one-time extensions, the recipient must notify the Federal 
awarding agency 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.
    (i) The terms and conditions of award prohibit the extension.
    (ii) The extension requires additional Federal funds.
    (iii) The extension involves any change in the approved objectives 
or scope of the project.
    (3) Carry forward unobligated balances to subsequent funding 
periods.
    (4) For awards that support research, unless the Federal awarding 
agency provides otherwise in the award or in the agency's regulations, 
the prior approval requirements described in paragraph (e) of this 
section are automatically waived (i.e., recipients need not obtain such 
prior approvals) unless one of the conditions included in paragraph 
(e)(2) of this section applies.
    (f) The Federal awarding agency may, at its option, 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 such transfers exceeds or 
is expected to exceed 10 percent of the total budget as last approved by 
the Federal awarding agency. No Federal awarding agency shall 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 Federal awarding agencies for budget revisions 
whenever any of the following conditions apply.
    (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.
    (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. 49.27.
    (i) No other prior approval requirements for specific items may be 
imposed unless a deviation has been approved by OMB.
    (j) When a Federal awarding agency makes an award that provides 
support for both construction and nonconstruction work, the Federal 
awarding agency may require the recipient to request prior approval from 
the Federal awarding agency before making any fund or budget transfers 
between the two types of work supported.
    (k) For both construction and nonconstruction awards, Federal 
awarding agencies shall require recipients to notify the Federal 
awarding agency in writing promptly whenever the amount of Federal 
authorized funds is expected to exceed the needs of the recipient for 
the project period by more than $5000 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 
Federal awarding agency indicates a letter of request suffices.
    (m) Within 30 calendar days from the date of receipt of the request 
for budget revisions, Federal awarding agencies 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 Federal awarding

[[Page 877]]

agency shall inform the recipient in writing of the date when the 
recipient may expect the decision.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.26  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 shall be subject to the audit 
requirements of the Federal awarding agency or the prime recipient as 
incorporated into the award document.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.27  Allowable costs.

    For each kind of recipient, there is a set of Federal principles for 
determining allowable costs. Allowability of costs shall be determined 
in accordance with the cost principles applicable to the entity 
incurring the costs. Thus, allowability of costs incurred by State, 
local or federally-recognized Indian tribal governments is determined in 
accordance with the provisions of OMB Circular A-87, ``Cost Principles 
for State, Local, and Indian Tribal Governments.'' The allowability of 
costs incurred by non-profit organizations is determined in accordance 
with the provisions of OMB Circular A-122, ``Cost Principles for Non-
Profit Organizations.'' The allowability of costs incurred by 
institutions of higher education is determined in accordance with the 
provisions of OMB Circular A-21, ``Cost Principles for Educational 
Institutions.'' The allowability of costs incurred by hospitals is 
determined in accordance with the provisions of Appendix E of 45 CFR 
part 74, ``Principles for Determining Costs Applicable to Research and 
Development Under Grants and Contracts with Hospitals.'' The 
allowability of costs incurred by commercial organizations and those 
non-profit organizations listed in Attachment C to Circular A-122 is 
determined in accordance with the provisions of the Federal Acquisition 
Regulation (FAR) at 48 CFR part 31.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.28  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 Federal 
awarding agency.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.29  Conditional exemptions.

    (a) OMB authorizes conditional exemption from OMB administrative 
requirements and cost principles circulars for certain Federal programs 
with statutorily-authorized consolidated planning and consolidated 
administrative funding, that are identified by a Federal agency and 
approved by the head of the Executive department or establishment. A 
Federal agency shall consult with OMB during its consideration of 
whether to grant such an exemption.
    (b) To promote efficiency in State and local program administration, 
when Federal non-entitlement programs with common purposes have specific 
statutorily-authorized consolidated planning and consolidated 
administrative funding and where most of the State agency's resources 
come from non-Federal sources, Federal agencies may exempt these covered 
State-administered, non-entitlement grant programs from certain OMB 
grants management requirements. The exemptions would be from all but the 
allocability of costs provisions of OMB Circulars A-87 (Attachment A, 
subsection C.3), ``Cost Principles for State, Local, and Indian Tribal 
Governments,'' A-21 (Section C, subpart 4),

[[Page 878]]

``Cost Principles for Educational Institutions,'' and A-122 (Attachment 
A, subsection A.4), ``Cost Principles for Non-Profit Organizations,'' 
and from all of the administrative requirements provisions of OMB 
Circular A-110, ``Uniform Administrative Requirements for Grants and 
Agreements with Institutions of Higher Education, Hospitals, and Other 
Non-Profit Organizations,'' and part 43 of this chapter.
    (c) When a Federal agency provides this flexibility, as a 
prerequisite to a State's exercising this option, a State must adopt its 
own written fiscal and administrative requirements for expending and 
accounting for all funds, which are consistent with the provisions of 
OMB Circular A-87, and extend such policies to all subrecipients. These 
fiscal and administrative requirements must be sufficiently specific to 
ensure that: Funds are used in compliance with all applicable Federal 
statutory and regulatory provisions, costs are reasonable and necessary 
for operating these programs, and funds are not be used for general 
expenses required to carry out other responsibilities of a State or its 
subrecipients.

(Authority: Pub. L. 104-156; 110 Stat. 1396)

                           Property Standards



Sec. 49.30  Purpose of property standards.

    Sections 49.31 through 49.37 set forth uniform standards governing 
management and disposition of property furnished by the Federal 
Government whose cost was charged to a project supported by a Federal 
award. Federal awarding agencies shall require recipients to observe 
these standards under awards and shall 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. 49.31 through 49.37.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.31  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: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.32  Real property.

    Each Federal awarding agency shall prescribe requirements for 
recipients concerning the use and disposition of real property acquired 
in whole or in part under awards. Unless otherwise provided by statute, 
such requirements, at a minimum, shall contain the following:
    (a) Title to real property shall 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 Federal awarding agency.
    (b) The recipient shall obtain written approval by the Federal 
awarding agency 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) or programs that have purposes consistent with those 
authorized for support by the Federal awarding agency.
    (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 the Federal awarding agency or its 
successor Federal awarding agency. The Federal awarding agency shall 
observe 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 Federal awarding agency and pay the Federal 
Government for that percentage of the current fair market value of the 
property attributable to the Federal participation in

[[Page 879]]

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 
shall 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 provided that, 
in such cases, the recipient shall be entitled to compensation for its 
attributable percentage of the current fair market value of the 
property.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.33  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 Federal awarding agency. Upon completion of the award or 
when the property is no longer needed, the recipient shall report the 
property to the Federal awarding agency for further Federal agency 
utilization.
    (2) If the Federal awarding agency has no further need for the 
property, it shall be declared excess and reported to the General 
Services Administration, unless the Federal awarding agency 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 Federal awarding agency.
    (b) Exempt property. When statutory authority exists, the Federal 
awarding agency has the option to vest title to property acquired with 
Federal funds in the recipient without further obligation to the Federal 
Government and under conditions the Federal awarding agency considers 
appropriate. Such property is ``exempt property.'' Should a Federal 
awarding agency not establish conditions, title to exempt property upon 
acquisition shall vest in the recipient without further obligation to 
the Federal Government.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.34  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 shall 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 shall not 
encumber the property without approval of the Federal awarding agency. 
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, 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 such other use will not interfere with 
the work on the project or program for which the equipment was 
originally acquired. First preference for such 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

[[Page 880]]

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 Federal awarding agency.
    (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.
    (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 the Federal awarding agency for its share.
    (2) Equipment owned by the Federal Government shall be identified to 
indicate Federal ownership.
    (3) A physical inventory of equipment shall 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 shall 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 shall 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 Federal awarding agency.
    (5) Adequate maintenance procedures shall be implemented to keep the 
equipment in good condition.
    (6) Where the recipient is authorized or required to sell the 
equipment, proper sales procedures shall 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. 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 the original Federal awarding 
agency 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. If the recipient has no need for the equipment, the recipient 
shall request disposition instructions from the Federal awarding agency. 
The Federal awarding agency shall determine whether the equipment can be 
used to meet the agency's requirements. If no requirement exists within 
that agency, the availability of the equipment shall be reported to the 
General Services Administration by the Federal awarding agency to 
determine whether a requirement for the equipment exists in other 
Federal agencies. The Federal awarding agency shall issue instructions 
to the recipient no later than 120 calendar days after the recipient's 
request and the following procedures shall govern.
    (1) 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 the Federal awarding agency an 
amount computed

[[Page 881]]

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.
    (2) If the recipient is instructed to ship the equipment elsewhere, 
the recipient shall be reimbursed by the Federal Government 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.
    (3) If the recipient is instructed to otherwise dispose of the 
equipment, the recipient shall be reimbursed by the Federal awarding 
agency for such costs incurred in its disposition.
    (4) The Federal awarding agency may reserve the right to transfer 
the title to the Federal Government or to a third party named by the 
Federal Government when such third party is otherwise eligible under 
existing statutes. Such transfer shall be subject to the following 
standards.
    (i) The equipment shall be appropriately identified in the award or 
otherwise made known to the recipient in writing.
    (ii) The Federal awarding agency shall issue disposition 
instructions within 120 calendar days after receipt of a final 
inventory. The final inventory shall list all equipment acquired with 
grant funds and federally-owned equipment. If the Federal awarding 
agency fails to issue disposition instructions within the 120 calendar 
day period, the recipient shall apply the standards of this section, as 
appropriate.
    (iii) When the Federal awarding agency exercises its right to take 
title, the equipment shall be subject to the provisions for federally-
owned equipment.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.35  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 $5000 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 shall 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: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.36  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. The Federal awarding agency(ies) 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.

[[Page 882]]

    (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, the 
Federal awarding agency 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 the Federal awarding agency obtains the research data solely in 
response to an 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. 522(a)(4)(A)).
    (2) The following definitions apply for purposes of paragraph (d) of 
this section:
    (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 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 Federal awarding agency. When no longer needed for the originally 
authorized purpose, disposition of the intangible property shall occur 
in accordance with the provisions of Sec. 49.34(g).

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.37  Property trust relationship.

    Real property, equipment, intangible property and debt instruments 
that are acquired or improved with Federal funds shall 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. Agencies 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: Pub. L. 104-156; 110 Stat. 1396)

                          Procurement Standards



Sec. 49.40  Purpose of procurement standards.

    Sections 49.41 through 49.48 set forth 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 furnished to ensure 
that such materials and services are obtained in an effective manner and 
in compliance with the provisions of applicable Federal statutes and 
executive orders. No additional procurement standards or requirements 
shall

[[Page 883]]

be imposed by the Federal awarding agencies upon recipients, unless 
specifically required by Federal statute or executive order or approved 
by OMB.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.41  Recipient responsibilities.

    The standards contained in Sec. Sec. 49.41 through 49.48 do not 
relieve the recipient of the contractual responsibilities arising under 
its contract(s). The recipient is the responsible authority, without 
recourse to the Federal awarding agency, 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 such Federal, State or local authority as 
may have proper jurisdiction.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.42  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. Such 
a conflict would arise when the employee, officer, or agent, any 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 such standards by officers, employees, or 
agents of the recipient.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.43  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 and/or requests 
for proposals shall be excluded from competing for such procurements. 
Awards shall 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 set forth 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: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.44  Procurement procedures.

    (a) All recipients shall establish written procurement procedures. 
These procedures shall provide for, at a minimum, that all of the 
following conditions apply.
    (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.
    (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, such a description shall not contain features, which 
unduly restrict competition.

[[Page 884]]

    (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 such 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.
    (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 such 
organizations 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 shall 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 shall not 
be used.
    (d) Contracts shall be made only with responsible contractors who 
possess the potential ability to perform successfully under the terms 
and conditions of the proposed procurement. Consideration shall be given 
to such 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 agencies' implementation of E.O.s 12549 and 12689, 
``Debarment and Suspension.''
    (e) Recipients shall, on request, make available for the Federal 
awarding agency, 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 the Federal awarding agency's 
implementation of 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

[[Page 885]]

than the amount of the small purchase threshold.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.45  Cost and price analysis.

    Some form of cost or price analysis shall 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.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.46  Procurement records.

    Procurement records and files for purchases in excess of the small 
purchase threshold shall 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, and
    (c) Basis for award cost or price.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.47  Contract administration.

    A system for contract administration shall 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.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.48  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 shall 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 a 
contractor violates or breaches the contract terms, and provide for such 
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, such contracts shall 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 shall 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 Federal 
awarding agency may accept the bonding policy and requirements of the 
recipient, provided the Federal awarding agency has made a determination 
that the Federal Government'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 shall, 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 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 statute of all persons 
supplying labor and

[[Page 886]]

material in the execution of the work provided for in the contract.
    (4) Where bonds are required in the situations described herein, the 
bonds shall 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 shall include a provision to 
the effect that the recipient, the Federal awarding agency, the 
Comptroller General of the United States, or any of their duly 
authorized representatives, shall 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 shall contain the procurement provisions of 
Appendix A to this part, as applicable.

(Authority: Pub. L. 104-156; 110 Stat. 1396)

                           Reports and Records



Sec. 49.50  Purpose of reports and records.

    Sections 49.51 through 49.53 set forth the procedures for monitoring 
and reporting on the recipient's financial and program performance and 
the necessary standard reporting forms. They also set forth record 
retention requirements.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.51  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 as delineated in Sec. 49.26.
    (b) The Federal awarding agency shall prescribe the frequency with 
which the performance reports shall be submitted. Except as provided in 
Sec. 49.51(f) of this section, performance reports shall not be 
required more frequently than quarterly or, less frequently than 
annually. Annual reports shall be due 90 calendar days after the grant 
year; quarterly or semi-annual reports shall be due 30 days after the 
reporting period. The Federal awarding agency 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 shall 
not be required after completion of the project.
    (d) When required, performance reports shall 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, such 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 shall not be required to submit more than the 
original and two copies of performance reports.
    (f) Recipients shall immediately notify the Federal awarding agency 
of developments that have a significant impact on the award-supported 
activities. Also, notification shall 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 shall include a 
statement of the action taken or contemplated, and any assistance needed 
to resolve the situation.
    (g) Federal awarding agencies may make site visits, as needed.
    (h) Federal awarding agencies shall comply with clearance 
requirements of 5 CFR part 1320 when requesting performance data from 
recipients.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.52  Financial reporting.

    (a) The following forms or such other forms as may be approved by 
OMB are

[[Page 887]]

authorized for obtaining financial information from recipients.
    (1) SF-269 or SF-269A, Financial Status Report.
    (i) Each Federal awarding agency shall require recipients to use the 
SF-269 or SF-269A to report the status of funds for all nonconstruction 
projects or programs. A Federal awarding agency may, however, have the 
option of not requiring the SF-269 or SF-269A when the SF-270, Request 
for Advance or Reimbursement, or SF-272, Report of Federal Cash 
Transactions, is determined to provide adequate information to meet its 
needs, except that a final SF-269 or SF-269A shall be required at the 
completion of the project when the SF-270 is used only for advances.
    (ii) The Federal awarding agency shall prescribe whether the report 
shall be on a cash or accrual basis. If the Federal awarding agency 
requires accrual information and the recipient's accounting records are 
not normally kept on the accrual basis, the recipient shall not be 
required to convert its accounting system, but shall develop such 
accrual information through best estimates based on an analysis of the 
documentation on hand.
    (iii) The Federal awarding agency shall determine 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 shall not be required more frequently than quarterly or less 
frequently than annually. A final report shall be required at the 
completion of the agreement.
    (iv) The Federal awarding agency shall require 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 
Federal awarding agency upon request of the recipient.
    (2) SF-272, Report of Federal Cash Transactions.
    (i) When funds are advanced to recipients the Federal awarding 
agency shall require each recipient to submit the SF-272 and, when 
necessary, its continuation sheet, SF-272a. The Federal awarding agency 
shall use this report to monitor cash advanced to recipients and to 
obtain disbursement information for each agreement with the recipients.
    (ii) Federal awarding agencies may require forecasts of Federal cash 
requirements in the ``Remarks'' section of the report.
    (iii) When practical and deemed necessary, Federal awarding agencies 
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 Federal awarding agencies may require a monthly 
report from those recipients receiving advances totaling $1 million or 
more per year.
    (v) Federal awarding agencies 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 such advances are monitored through other forms contained 
in this section;
    (B) If, in the Federal awarding agency'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 Federal awarding agency needs additional information or 
more frequent reports, the following shall be observed.
    (1) When additional information is needed to comply with legislative 
requirements, Federal awarding agencies shall issue instructions to 
require recipients to submit such information under the ``Remarks'' 
section of the reports.
    (2) When a Federal awarding agency determines that a recipient's 
accounting system does not meet the standards in Sec. 49.21, additional 
pertinent information to further monitor awards may be obtained upon 
written notice to the recipient until such time as the system is

[[Page 888]]

brought up to standard. The Federal awarding agency, in obtaining this 
information, shall comply with report clearance requirements of 5 CFR 
part 1320.
    (3) Federal awarding agencies are encouraged to shade out any line 
item on any report if not necessary.
    (4) Federal awarding agencies may accept the identical information 
from the recipients in machine readable format or computer printouts or 
electronic outputs in lieu of prescribed formats.
    (5) Federal awarding agencies may provide computer or electronic 
outputs to recipients when such expedites or contributes to the accuracy 
of reporting.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.53  Retention and access requirements for records.

    (a) This section sets forth requirements for record retention and 
access to records for awards to recipients. Federal awarding agencies 
shall 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 Federal awarding agency. 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 Federal 
awarding agency, the 3-year retention requirement is not applicable to 
the recipient.
    (4) Indirect cost rate proposals, cost allocations plans, etc. as 
specified in Sec. 49.53(g) of this section.
    (c) Copies of original records may be substituted for the original 
records if authorized by the Federal awarding agency.
    (d) The Federal awarding agency shall request 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, a Federal awarding agency may make arrangements 
for recipients to retain any records that are continuously needed for 
joint use.
    (e) The Federal awarding agency, 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 such documents. This right also 
includes timely and reasonable access to a recipient's personnel for the 
purpose of interview and discussion related to such 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, no Federal awarding agency shall 
place restrictions on recipients that limit public access to the records 
of recipients that are pertinent to an award, except when the Federal 
awarding agency can demonstrate that such records shall 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 the Federal awarding agency.
    (g) Indirect cost rate proposals, cost allocations plans, etc. 
Paragraphs (g)(1) and (g)(2) of this section apply 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).

[[Page 889]]

    (1) If submitted for negotiation. If the recipient submits to the 
Federal awarding agency 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 such submission.
    (2) If not submitted for negotiation. If the recipient is not 
required to submit to the Federal awarding agency 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.

(Authority: Pub. L. 104-156; 110 Stat. 1396)

                       Termination and Enforcement



Sec. 49.60  Purpose of termination and enforcement.

    Sections 49.61 and 49.62 set forth uniform suspension, termination 
and enforcement procedures.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.61  Termination.

    (a) Awards may be terminated in whole or in part only if paragraphs 
(a)(1), (a)(2) or (a)(3) of this section apply.
    (1) By the Federal awarding agency, if a recipient materially fails 
to comply with the terms and conditions of an award.
    (2) By the Federal awarding agency 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 Federal awarding agency 
written notification setting forth the reasons for such termination, the 
effective date, and, in the case of partial termination, the portion to 
be terminated. However, if the Federal awarding agency 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 paragraphs (a)(1) 
or (2) of this section.
    (b) If costs are allowed under an award, the responsibilities of the 
recipient referred to in Sec. 49.71(a), including those for property 
management as 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: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.62  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 Federal awarding agency may, in addition to imposing any of the 
special conditions outlined in Sec. 49.14, 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 
Federal awarding agency.
    (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 
awarding agency shall provide 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 awarding 
agency expressly authorizes them in the notice

[[Page 890]]

of suspension or termination or subsequently. Other recipient costs 
during suspension or after termination, which are necessary and not 
reasonably avoidable, are allowable if the following conditions apply.
    (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.
    (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 a recipient from being subject to debarment 
and suspension under E.O.s 12549 and 12689 and the Federal awarding 
agency implementing regulations (see Sec. 49.13).

(Authority: Pub. L. 104-156; 110 Stat. 1396)



                 Subpart D_After-the-Award Requirements



Sec. 49.70  Purpose.

    Sections 49.71 through 49.73 contain closeout procedures and other 
procedures for subsequent disallowances and adjustments.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.71  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 
Federal awarding agency may approve extensions when requested by the 
recipient.
    (b) Unless the Federal awarding agency 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 
agency implementing instructions.
    (c) The Federal awarding agency shall make 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 Federal awarding agency 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 
Federal awarding agency shall make 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. 49.31 through 49.37.
    (g) In the event a final audit has not been performed prior to the 
closeout of an award, the Federal awarding agency shall retain the right 
to recover an appropriate amount after fully considering the 
recommendations on disallowed costs resulting from the final audit.

(Authority: Pub. L. 104-156, OMB Circular A-110)



Sec. 49.72  Subsequent adjustments and continuing responsibilities.

    (a) The closeout of an award does not affect any of the following.
    (1) The right of the Federal awarding agency 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. 49.26.
    (4) Property management requirements in Sec. Sec. 49.31 through 
49.37.
    (5) Records retention as required in Sec. 49.53.
    (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 Federal awarding agency and the recipient, provided the 
responsibilities of the recipient referred to in Sec. 49.73(a), 
including those for property management as

[[Page 891]]

applicable, are considered and provisions made for continuing 
responsibilities of the recipient, as appropriate.

(Authority: Pub. L. 104-156; 110 Stat. 1396)



Sec. 49.73  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 
Federal awarding agency may reduce the debt by any of the following 
methods.
    (1) Making an administrative offset against other requests for 
reimbursements.
    (2) Withholding advance payments otherwise due to the recipient.
    (3) Taking other action permitted by statute.
    (b) Except as otherwise provided by law, the Federal awarding agency 
shall charge interest on an overdue debt in accordance with 4 CFR 
Chapter II, ``Federal Claims Collection Standards.''

(Authority: Pub. L. 104-156; 110 Stat. 1396)

               Appendix A to Part 49--Contract Provisions

    All contracts, awarded by a recipient including small purchases, 
shall contain the following provisions as applicable:
    1. Equal Employment Opportunity--All contracts shall 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 $2000 for construction 
or repair awarded by recipients and subrecipients shall 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.
    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 $2000 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 
$2000 for construction contracts and in excess of $2500 for other 
contracts that involve the employment of mechanics or laborers shall 
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 shall 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

[[Page 892]]

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 the 
Federal awarding agency 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. 
Such disclosures are forwarded from tier to tier up to the recipient.
    8. Debarment and Suspension (E.O.s 12549 and 12689)--No contract 
shall 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.s 12549 and 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 
shall provide the required certification regarding its exclusion status 
and that of its principal employees.



PART 51_PER DIEM FOR NURSING HOME CARE OF VETERANS IN STATE HOMES--Table 
of Contents




                            Subpart A_General

Sec.
51.1 Purpose.
51.2 Definitions.

    Subpart B_Obtaining Per Diem for Nursing Home Care in State Homes

51.10 Per diem based on recognition and certification.
51.20 Application for recognition based on certification.
51.30 Recognition and certification.
51.31 Automatic recognition.

                       Subpart C_Per Diem Payments

51.40 Monthly payment.
51.50 Eligible veterans.

                           Subpart D_Standards

51.60 Standards applicable for payment of per diem.
51.70 Resident rights.
51.80 Admission, transfer and discharge rights.
51.90 Resident behavior and facility practices.
51.100 Quality of life.
51.110 Resident assessment.
51.120 Quality of care.
51.130 Nursing services.
51.140 Dietary services.
51.150 Physician services.
51.160 Specialized rehabilitative services.
51.170 Dental services.
51.180 Pharmacy services.
51.190 Infection control.
51.200 Physical environment.
51.210 Administration.

    Authority: 38 U.S.C. 101, 501, 1710, 1741-1743.

    Source: 65 FR 968, Jan. 6, 2000, unless otherwise noted.



                            Subpart A_General



Sec. 51.1  Purpose.

    This part sets forth the mechanism for paying per diem to State 
homes providing nursing home care to eligible veterans and is intended 
to ensure that veterans receive high quality care in State homes.



Sec. 51.2  Definitions.

    For purposes of this part:
    Clinical nurse specialist means a licensed professional nurse with a 
master's degree in nursing with a major in a clinical nursing specialty 
from an academic program accredited by the National League for Nursing 
and at least 2 years of successful clinical practice in the specialized 
area of nursing practice following this academic preparation.

[[Page 893]]

    Facility means a building or any part of a building for which a 
State has submitted an application for recognition as a State home for 
the provision of nursing home care or a building or any part of a 
building which VA has recognized as a State home for the provision of 
nursing home care.
    Nurse practitioner means a licensed professional nurse who is 
currently licensed to practice in the State; who meets the State's 
requirements governing the qualifications of nurse practitioners; and 
who is currently certified as an adult, family, or gerontological nurse 
practitioner by the American Nurses' Association.
    Nursing home care means the accommodation of convalescents or other 
persons who are not acutely ill and not in need of hospital care, but 
who require skilled nursing care and related medical services.
    Physician means a doctor of medicine or osteopathy legally 
authorized to practice medicine or surgery in the State.
    Physician assistant means a person who meets the applicable State 
requirements for physician assistant, is currently certified by the 
National Commission on Certification of Physician Assistants (NCCPA) as 
a physician assistant, and has an individualized written scope of 
practice that determines the authorization to write medical orders, 
prescribe medications and other clinical tasks under appropriate 
physician supervision which is approved by the primary care physician.
    Primary physician or primary care physician means a designated 
generalist physician responsible for providing, directing and 
coordinating all health care that is indicated for the residents.
    State means each of the several States, territories, and possessions 
of the United States, the District of Columbia, and the Commonwealth of 
Puerto Rico.
    State home means a home approved by VA which a State established 
primarily for veterans disabled by age, disease, or otherwise, who by 
reason of such disability are incapable of earning a living. A State 
home may provide domiciliary care, nursing home care, adult day health 
care, and hospital care. Hospital care may be provided only when the 
State home also provides domiciliary and/or nursing home care.
    VA means the U.S. Department of Veterans Affairs.



    Subpart B_Obtaining Per Diem for Nursing Home Care in State Homes



Sec. 51.10  Per diem based on recognition and certification.

    VA will pay per diem to a State for providing nursing home care to 
eligible veterans in a facility if the Under Secretary for Health 
recognizes the facility as a State home based on a current certification 
that the facility and facility management meet the standards of subpart 
D of this part. Also, after recognition has been granted, VA will 
continue to pay per diem to a State for providing nursing home care to 
eligible veterans in such a facility for a temporary period based on a 
certification that the facility and facility management provisionally 
meet the standards of subpart D.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.20  Application for recognition based on certification.

    To apply for recognition and certification of a State home for 
nursing home care, a State must:
    (a) Send a request for recognition and certification to the Under 
Secretary for Health (10), VA Headquarters, 810 Vermont Avenue, NW., 
Washington, DC 20420. The request must be in the form of a letter and 
must be signed by the State official authorized to establish the State 
home;
    (b) Allow VA to survey the facility as set forth in Sec. 51.30(c); 
and
    (c) Upon request from the director of the VA medical center of 
jurisdiction, submit to the director all documentation required under 
subpart D of this part.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.30  Recognition and certification.

    (a)(1) The Under Secretary for Health will make the determination 
regarding recognition and the initial determination regarding 
certification, after receipt of a tentative determination from the 
director of the VA medical center

[[Page 894]]

of jurisdiction regarding whether, based on a VA survey, the facility 
and facility management meet or do not meet the standards of subpart D 
of this part. The Under Secretary for Health will notify the official in 
charge of the facility, the State official authorized to oversee 
operations of the State home, the VA Network Director (10N 1-22), Chief 
Network Officer (10N), and the Chief Consultant, Geriatrics and Extended 
Care Strategic Healthcare Group (114) of the action taken.
    (2) For each facility recognized as a State home, the director of 
the VA medical center of jurisdiction will certify annually whether the 
facility and facility management meet, provisionally meet, or do not 
meet the standards of subpart D of this part (this certification should 
be made every 12 months during the recognition anniversary month or 
during a month agreed upon by the VA medical care center director and 
officials of the State home facility). A provisional certification will 
be issued by the director only upon a determination that the facility or 
facility management does not meet one or more of the standards in 
subpart D, that the deficiencies do not jeopardize the health or safety 
of the residents, and that the facility management and the director have 
agreed to a plan of correction to remedy the deficiencies in a specified 
amount of time (not more time than the VA medical center of jurisdiction 
director determines is reasonable for correcting the specific 
deficiencies). The director of the VA medical center of jurisdiction 
will notify the official in charge of the facility, the State official 
authorized to oversee the operations of the State home, the VA Network 
Director (10N 1-22), Chief Network Officer (10N) and the Chief 
Consultant, Geriatrics and Extended Care Strategic Healthcare Group 
(114) of the certification, provisional certification, or 
noncertification.
    (b) Once a facility has achieved recognition, the recognition will 
remain in effect unless the State requests that the recognition be 
withdrawn or the Under Secretary for Health makes a final decision that 
the facility or facility management does not meet the standards of 
subpart D. Recognition of a facility will apply only to the facility as 
it exists at the time of recognition; any annex, branch, enlargement, 
expansion, or relocation must be separately recognized.
    (c) Both during the application process for recognition and after 
the Under Secretary for Health has recognized a facility, VA may survey 
the facility as necessary to determine if the facility and facility 
management comply with the provisions of this part. Generally, VA will 
provide advance notice to the State before a survey occurs; however, 
surveys may be conducted without notice. A survey, as necessary, will 
cover all parts of the facility, and include a review and audit of all 
records of the facility that have a bearing on compliance with any of 
the requirements of this part (including any reports from State or local 
entities). For purposes of a survey, at the request of the director of 
the VA medical center of jurisdiction, the State home facility 
management must submit to the director a completed VA Form 10-3567, 
Staffing Profile, set forth at Sec. 58.10 of this chapter. The director 
of the VA medical center of jurisdiction will designate the VA officials 
to survey the facility. These officials may include physicians; nurses; 
pharmacists; dietitians; rehabilitation therapists; social workers; 
representatives from health administration, engineering, environmental 
management systems, and fiscal officers.
    (d) If the director of the VA medical center of jurisdiction 
determines that the State home facility or facility management does not 
meet the standards of this part, the director will notify the State home 
facility in writing of the standards not met. The director will send a 
copy of this notice to the State official authorized to oversee 
operations of the facility, the VA Network Director (10N 1-22), the 
Chief Network Officer (10N), and the Chief Consultant, Geriatrics and 
Extended Care Strategic Healthcare Group (114). The letter will include 
the reasons for the decision and indicate that the State has the right 
to appeal the decision.
    (e) The State must submit the appeal to the Under Secretary for 
Health in writing, within 30 days of receipt of the notice of failure to 
meet the standards.

[[Page 895]]

In its appeal, the State must explain why the determination is 
inaccurate or incomplete and provide any new and relevant information 
not previously considered. Any appeal that does not identify a reason 
for disagreement will be returned to the sender without further 
consideration.
    (f) After reviewing the matter, including any relevant supporting 
documentation, the Under Secretary for Health will issue a written 
determination that affirms or reverses the previous determination. If 
the Under Secretary for Health decides that the facility does not meet 
the standards of subpart D of this part, the Under Secretary for Health 
will withdraw recognition and stop paying per diem for care provided on 
and after the date of the decision. The decision of Under Secretary for 
Health will constitute a final VA decision. The Under Secretary for 
Health will send a copy of this decision to the State home facility and 
to the State official authorized to oversee the operations of the State 
home.
    (g) In the event that a VA survey team or other VA medical center 
staff identifies any condition that poses an immediate threat to public 
or patient safety or other information indicating the existence of such 
a threat, the director of VA medical center of jurisdiction will 
immediately report this to the VA Network Director (10N 1-22), Chief 
Network Officer (10N), Chief Consultant, Geriatrics and Extended Care 
Strategic Healthcare Group (114) and State official authorized to 
oversee operations of the State home.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.31  Automatic recognition.

    Notwithstanding other provisions of this part, a facility that 
already is recognized by VA as a State home for nursing home care at the 
time this part becomes effective, automatically will continue to be 
recognized as a State home for nursing home care but will be subject to 
all of the provisions of this part that apply to facilities that have 
achieved recognition, including the provisions requiring that the 
facility meet the standards set forth in subpart D and the provisions 
for withholding per diem payments and withdrawal of recognition.



                       Subpart C_Per Diem Payments



Sec. 51.40  Monthly payment.

    (a)(1) VA will pay per diem monthly for nursing home care provided 
to an eligible veteran in a facility recognized as a State home for 
nursing home care. During Fiscal Year 2000, VA will pay the lesser of 
the following:
    (i) One-half of the cost of the care for each day the veteran is in 
the facility; or
    (ii) $50.55 for each day the veteran is in the facility.
    (2) Per diem will be paid only for the days that the veteran is a 
resident at the facility. For purposes of paying per diem, VA will 
consider a veteran to be a resident at the facility during each full day 
that the veteran is receiving care at the facility. VA will not deem the 
veteran to be a resident at the facility if the veteran is receiving 
care outside the State home facility at VA expense. Otherwise, VA will 
deem the veteran to be a resident at the facility during any absence 
from the facility that lasts for no more than 96 consecutive hours. This 
absence will be considered to have ended when the veteran returns as a 
resident if the veteran's stay is for at least a continuous 24-hour 
period.
    (3) As a condition for receiving payment of per diem under this 
part, the State must submit a completed VA Form 10-5588, State Home 
Report and Statement of Federal Aid Claimed. This form is set forth in 
full at Sec. 58.11 of this chapter.
    (4) Initial payments will not be made until the Under Secretary for 
Health recognizes the State home. However, payments will be made 
retroactively for care that was provided on and after the date of the 
completion of the VA survey of the facility that provided the basis for 
determining that the facility met the standards of this part.
    (5) As a condition for receiving payment of per diem under this 
part, the State must submit to the VA medical center of jurisdiction for 
each veteran the following completed VA Forms 10-10EZ, Application for 
Medical Benefits, and 10-10SH, State Home Program Application for Care--
Medical Certification, at the time of admission and with any request for 
a change in the

[[Page 896]]

level of care (domiciliary, hospital care or adult day health care). 
These forms are set forth in full at Sec. Sec. 58.12 and 58.13 of this 
chapter, respectively, of this part. If the facility is eligible to 
receive per diem payments for a veteran, VA will pay per diem under this 
part from the date of receipt of the completed forms required by this 
paragraph, except that VA will pay per diem from the day on which the 
veteran was admitted to the facility if the completed forms are received 
within 10 days after admission.
    (b) Total per diem costs for an eligible veteran's nursing home care 
consist of those direct and indirect costs attributable to nursing home 
care at the facility divided by the total number of patients at the 
nursing home. Relevant cost principles are set forth in the Office of 
Management and Budget (OMB) Circular number A-87, dated May 4, 1995, 
``Cost Principles for State, Local, and Indian Tribal Governments.''

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.50  Eligible veterans.

    A veteran is an eligible veteran under this part if VA determines 
that the veteran needs nursing home care and the veteran is within one 
of the following categories:
    (a) Veterans with service-connected disabilities;
    (b) Veterans who are former prisoners of war;
    (c) Veterans who were discharged or released from active military 
service for a disability incurred or aggravated in the line of duty;
    (d) Veterans who receive disability compensation under 38 U.S.C. 
1151;
    (e) Veterans whose entitlement to disability compensation is 
suspended because of the receipt of retired pay;
    (f) Veterans whose entitlement to disability compensation is 
suspended pursuant to 38 U.S.C. 1151, but only to the extent that such 
veterans' continuing eligibility for nursing home care is provided for 
in the judgment or settlement described in 38 U.S.C. 1151;
    (g) Veterans who VA determines are unable to defray the expenses of 
necessary care as specified under 38 U.S.C. 1722(a);
    (h) Veterans of the Mexican border period or of World War I;
    (i) Veterans solely seeking care for a disorder associated with 
exposure to a toxic substance or radiation or for a disorder associated 
with service in the Southwest Asia theater of operations during the 
Persian Gulf War, as provided in 38 U.S.C. 1710(e);
    (j) Veterans who agree to pay to the United States the applicable 
co-payment determined under 38 U.S.C. 1710(f) and 1710(g).

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



                           Subpart D_Standards



Sec. 51.60  Standards applicable for payment of per diem.

    The provisions of this subpart are the standards that a State home 
and facility management must meet for the State to receive per diem for 
nursing home care.



Sec. 51.70  Resident rights.

    The resident has a right to a dignified existence, self-
determination, and communication with and access to persons and services 
inside and outside the facility. The facility management must protect 
and promote the rights of each resident, including each of the following 
rights:
    (a) Exercise of rights. (1) The resident has the right to exercise 
his or her rights as a resident of the facility and as a citizen or 
resident of the United States.
    (2) The resident has the right to be free of interference, coercion, 
discrimination, and reprisal from the facility management in exercising 
his or her rights.
    (3) The resident has the right to freedom from chemical or physical 
restraint.
    (4) In the case of a resident determined incompetent under the laws 
of a State by a court of jurisdiction, the rights of the resident are 
exercised by the person appointed under State law to act on the 
resident's behalf.
    (5) In the case of a resident who has not been determined 
incompetent by the State court, any legal-surrogate designated in 
accordance with State law may exercise the resident's rights to the 
extent provided by State law.

[[Page 897]]

    (b) Notice of rights and services. (1) The facility management must 
inform the resident both orally and in writing in a language that the 
resident understands of his or her rights and all rules and regulations 
governing resident conduct and responsibilities during the stay in the 
facility. Such notification must be made prior to or upon admission and 
periodically during the resident's stay.
    (2) The resident or his or her legal representative has the right:
    (i) Upon an oral or written request, to access all records 
pertaining to himself or herself including current clinical records 
within 24 hours (excluding weekends and holidays); and
    (ii) After receipt of his or her records for review, to purchase at 
a cost not to exceed the community standard photocopies of the records 
or any portions of them upon request and with 2 working days advance 
notice to the facility management.
    (3) The resident has the right to be fully informed in language that 
he or she can understand of his or her total health status;
    (4) The resident has the right to refuse treatment, to refuse to 
participate in experimental research, and to formulate an advance 
directive as specified in paragraph (b)(7) of this section; and
    (5) The facility management must inform each resident before, or at 
the time of admission, and periodically during the resident's stay, of 
services available in the facility and of charges for those services to 
be billed to the resident.
    (6) The facility management must furnish a written description of 
legal rights which includes:
    (i) A description of the manner of protecting personal funds, under 
paragraph (c) of this section;
    (ii) A statement that the resident may file a complaint with the 
State (agency) concerning resident abuse, neglect, misappropriation of 
resident property in the facility, and non-compliance with the advance 
directives requirements.
    (7) The facility management must have written policies and 
procedures regarding advance directives (e.g., living wills) that 
include provisions to inform and provide written information to all 
residents concerning the right to accept or refuse medical or surgical 
treatment and, at the individual's option, formulate an advance 
directive. This includes a written description of the facility's 
policies to implement advance directives and applicable State law. If an 
individual is incapacitated at the time of admission and is unable to 
receive information (due to the incapacitating conditions) or articulate 
whether or not he or she has executed an advance directive, the facility 
may give advance directive information to the individual's family or 
surrogate in the same manner that it issues other materials about 
policies and procedures to the family of the incapacitated individual or 
to a surrogate or other concerned persons in accordance with State law. 
The facility management is not relieved of its obligation to provide 
this information to the individual once he or she is no longer 
incapacitated or unable to receive such information. Follow-up 
procedures must be in place to provide the information to the individual 
directly at the appropriate time.
    (8) The facility management must inform each resident of the name 
and way of contacting the primary physician responsible for his or her 
care.
    (9) Notification of changes. (i) Facility management must 
immediately inform the resident; consult with the primary physician; and 
if known, notify the resident's legal representative or an interested 
family member when there is--
    (A) An accident involving the resident which results in injury and 
has the potential for requiring physician intervention;
    (B) A significant change in the resident's physical, mental, or 
psychosocial status (i.e., a deterioration in health, mental, or 
psychosocial status in either life-threatening conditions or clinical 
complications);
    (C) A need to alter treatment significantly (i.e., a need to 
discontinue an existing form of treatment due to adverse consequences, 
or to commence a new form of treatment); or
    (D) A decision to transfer or discharge the resident from the 
facility as specified in Sec. 51.80(a) of this part.

[[Page 898]]

    (ii) The facility management must also promptly notify the resident 
and, if known, the resident's legal representative or interested family 
member when there is--
    (A) A change in room or roommate assignment as specified in Sec. 
51.100(f)(2); or
    (B) A change in resident rights under Federal or State law or 
regulations as specified in paragraph (b)(1) of this section.
    (iii) The facility management must record and periodically update 
the address and phone number of the resident's legal representative or 
interested family member.
    (c) Protection of resident funds. (1) The resident has the right to 
manage his or her financial affairs, and the facility management may not 
require residents to deposit their personal funds with the facility.
    (2) Management of personal funds. Upon written authorization of a 
resident, the facility management must hold, safeguard, manage, and 
account for the personal funds of the resident deposited with the 
facility, as specified in paragraphs (c)(3) through (c)(6) of this 
section.
    (3) Deposit of funds. (i) Funds in excess of $100. The facility 
management must deposit any residents' personal funds in excess of $100 
in an interest bearing account (or accounts) that is separate from any 
of the facility's operating accounts, and that credits all interest 
earned on resident's funds to that account. (In pooled accounts, there 
must be a separate accounting for each resident's share.)
    (ii) Funds less than $100. The facility management must maintain a 
resident's personal funds that do not exceed $100 in a non-interest 
bearing account, interest-bearing account, or petty cash fund.
    (4) Accounting and records. The facility management must establish 
and maintain a system that assures a full and complete and separate 
accounting, according to generally accepted accounting principles, of 
each resident's personal funds entrusted to the facility on the 
resident's behalf.
    (i) The system must preclude any commingling of resident funds with 
facility funds or with the funds of any person other than another 
resident.
    (ii) The individual financial record must be available through 
quarterly statements and on request from the resident or his or her 
legal representative.
    (5) Conveyance upon death. Upon the death of a resident with a 
personal fund deposited with the facility, the facility management must 
convey within 30 days the resident's funds, and a final accounting of 
those funds, to the individual or probate jurisdiction administering the 
resident's estate; or other appropriate individual or entity, if State 
law allows.
    (6) Assurance of financial security. The facility management must 
purchase a surety bond, or otherwise provide assurance satisfactory to 
the Under Secretary for Health, to assure the security of all personal 
funds of residents deposited with the facility.
    (d) Free choice. The resident has the right to--
    (1) Be fully informed in advance about care and treatment and of any 
changes in that care or treatment that may affect the resident's well-
being; and
    (2) Unless determined incompetent or otherwise determined to be 
incapacitated under the laws of the State, participate in planning care 
and treatment or changes in care and treatment.
    (e) Privacy and confidentiality. The resident has the right to 
personal privacy and confidentiality of his or her personal and clinical 
records.
    (1) Residents have a right to personal privacy in their 
accommodations, medical treatment, written and telephone communications, 
personal care, visits, and meetings of family and resident groups. This 
does not require the facility management to give a private room to each 
resident.
    (2) Except as provided in paragraph (e)(3) of this section, the 
resident may approve or refuse the release of personal and clinical 
records to any individual outside the facility;
    (3) The resident's right to refuse release of personal and clinical 
records does not apply when--
    (i) The resident is transferred to another health care institution; 
or
    (ii) Record release is required by law.

[[Page 899]]

    (f) Grievances. A resident has the right to--
    (1) Voice grievances without discrimination or reprisal. Residents 
may voice grievances with respect to treatment received and not 
received; and
    (2) Prompt efforts by the facility to resolve grievances the 
resident may have, including those with respect to the behavior of other 
residents.
    (g) Examination of survey results. A resident has the right to--
    (1) Examine the results of the most recent VA survey with respect to 
the facility. The facility management must make the results available 
for examination in a place readily accessible to residents, and must 
post a notice of their availability; and
    (2) Receive information from agencies acting as client advocates, 
and be afforded the opportunity to contact these agencies.
    (h) Work. The resident has the right to--
    (1) Refuse to perform services for the facility;
    (2) Perform services for the facility, if he or she chooses, when--
    (i) The facility has documented the need or desire for work in the 
plan of care;
    (ii) The plan specifies the nature of the services performed and 
whether the services are voluntary or paid;
    (iii) Compensation for paid services is at or above prevailing 
rates; and
    (iv) The resident agrees to the work arrangement described in the 
plan of care.
    (i) Mail. The resident must have the right to privacy in written 
communications, including the right to--
    Send and promptly receive mail that is unopened; and
    (2) Have access to stationery, postage, and writing implements at 
the resident's own expense.
    (j) Access and visitation rights. (1) The resident has the right and 
the facility management must provide immediate access to any resident by 
the following:
    (i) Any representative of the Under Secretary for Health;
    (ii) Any representative of the State;
    (iii) Physicians of the resident's choice (to provide care in the 
nursing home, physicians must meet the provisions of Sec. 51.210(j));
    (iv) The State long term care ombudsman;
    (v) Immediate family or other relatives of the resident subject to 
the resident's right to deny or withdraw consent at any time; and
    (vi) Others who are visiting subject to reasonable restrictions and 
the resident's right to deny or withdraw consent at any time.
    (2) The facility management must provide reasonable access to any 
resident by any entity or individual that provides health, social, 
legal, or other services to the resident, subject to the resident's 
right to deny or withdraw consent at any time.
    (3) The facility management must allow representatives of the State 
Ombudsman Program, described in paragraph (j)(1)(iv) of this section, to 
examine a resident's clinical records with the permission of the 
resident or the resident's legal representative, subject to State law.
    (k) Telephone. The resident has the right to reasonable access to 
use a telephone where calls can be made without being overheard.
    (l) Personal property. The resident has the right to retain and use 
personal possessions, including some furnishings, and appropriate 
clothing, as space permits, unless to do so would infringe upon the 
rights or health and safety of other residents.
    (m) Married couples. The resident has the right to share a room with 
his or her spouse when married residents live in the same facility and 
both spouses consent to the arrangement.
    (n) Self-Administration of Drugs. An individual resident may self-
administer drugs if the interdisciplinary team, as defined by Sec. 
51.110(d)(2)(ii) of this part, has determined that this practice is 
safe.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.80  Admission, transfer and discharge rights.

    (a) Transfer and discharge. (1) Definition: Transfer and discharge 
includes movement of a resident to a bed outside of the facility whether 
that bed is in the same physical plant or not. Transfer and discharge 
does not refer to movement of a resident to a bed within the same 
facility.

[[Page 900]]

    (2) Transfer and discharge requirements. The facility management 
must permit each resident to remain in the facility, and not transfer or 
discharge the resident from the facility unless--
    (i) The transfer or discharge is necessary for the resident's 
welfare and the resident's needs cannot be met in the nursing home;
    (ii) The transfer or discharge is appropriate because the resident's 
health has improved sufficiently so the resident no longer needs the 
services provided by the nursing home;
    (iii) The safety of individuals in the facility is endangered;
    (iv) The health of individuals in the facility would otherwise be 
endangered;
    (v) The resident has failed, after reasonable and appropriate notice 
to pay for a stay at the facility; or
    (vi) The nursing home ceases to operate.
    (3) Documentation. When the facility transfers or discharges a 
resident under any of the circumstances specified in paragraphs 
(a)(2)(i) through (a)(2)(vi) of this section, the primary physician must 
document this in the resident's clinical record.
    (4) Notice before transfer. Before a facility transfers or 
discharges a resident, the facility must--
    (i) Notify the resident and, if known, a family member or legal 
representative of the resident of the transfer or discharge and the 
reasons for the move in writing and in a language and manner they 
understand.
    (ii) Record the reasons in the resident's clinical record; and
    (iii) Include in the notice the items described in paragraph (a)(6) 
of this section.
    (5) Timing of the notice. (i) The notice of transfer or discharge 
required under paragraph (a)(4) of this section must be made by the 
facility at least 30 days before the resident is transferred or 
discharged, except when specified in paragraph (a)(5)(ii) of this 
section,
    (ii) Notice may be made as soon as practicable before transfer or 
discharge when--
    (A) The safety of individuals in the facility would be endangered;
    (B) The health of individuals in the facility would be otherwise 
endangered;
    (C) The resident's health improves sufficiently so the resident no 
longer needs the services provided by the nursing home;
    (D) The resident's needs cannot be met in the nursing home;
    (6) Contents of the notice. The written notice specified in 
paragraph (a)(4) of this section must include the following:
    (i) The reason for transfer or discharge;
    (ii) The effective date of transfer or discharge;
    (iii) The location to which the resident is transferred or 
discharged;
    (iv) A statement that the resident has the right to appeal the 
action to the State official designated by the State; and
    (v) The name, address and telephone number of the State long term 
care ombudsman.
    (7) Orientation for transfer or discharge. A facility management 
must provide sufficient preparation and orientation to residents to 
ensure safe and orderly transfer or discharge from the facility.
    (b) Notice of bed-hold policy and readmission.--(1) Notice before 
transfer. Before a facility transfers a resident to a hospital or allows 
a resident to go on therapeutic leave, the facility management must 
provide written information to the resident and a family member or legal 
representative that specifies--
    (i) The duration of the facility's bed-hold policy, if any, during 
which the resident is permitted to return and resume residence in the 
facility; and
    (ii) The facility's policies regarding bed-hold periods, which must 
be consistent with paragraph (b)(3) of this section, permitting a 
resident to return.
    (2) Bed-hold notice upon transfer. At the time of transfer of a 
resident for hospitalization or therapeutic leave, facility management 
must provide to the resident and a family member or legal representative 
written notice which specifies the duration of the bed-hold policy 
described in paragraph (b)(1) of this section.
    (3) Permitting resident to return to facility. A nursing facility 
must establish and follow a written policy under which a resident, whose 
hospitalization

[[Page 901]]

or therapeutic leave exceeds the bed-hold period is readmitted to the 
facility immediately upon the first availability of a bed in a semi-
private room, if the resident requires the services provided by the 
facility.
    (c) Equal access to quality care. The facility management must 
establish and maintain identical policies and practices regarding 
transfer, discharge, and the provision of services for all individuals 
regardless of source of payment.
    (d) Admissions policy. The facility management must not require a 
third party guarantee of payment to the facility as a condition of 
admission or expedited admission, or continued stay in the facility. 
However, the facility may require an individual who has legal access to 
a resident's income or resources available to pay for facility care to 
sign a contract to pay the facility from the resident's income or 
resources.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.90  Resident behavior and facility practices.

    (a) Restraints. (1) The resident has a right to be free from any 
chemical or physical restraints imposed for purposes of discipline or 
convenience. When a restraint is applied or used, the purpose of the 
restraint is reviewed and is justified as a therapeutic intervention.
    (i) Chemical restraint is the inappropriate use of a sedating 
psychotropic drug to manage or control behavior.
    (ii) Physical restraint is any method of physically restricting a 
person's freedom of movement, physical activity or normal access to his 
or her body. Bed rails and vest restraints are examples of physical 
restraints.
    (2) The facility management uses a system to achieve a restraint-
free environment.
    (3) The facility management collects data about the use of 
restraints.
    (4) When alternatives to the use of restraint are ineffective, a 
restraint must be safely and appropriately used.
    (b) Abuse. The resident has the right to be free from mental, 
physical, sexual, and verbal abuse or neglect, corporal punishment, and 
involuntary seclusion.
    (1) Mental abuse includes humiliation, harassment, and threats of 
punishment or deprivation.
    (2) Physical abuse includes hitting, slapping, pinching, or kicking. 
Also includes controlling behavior through corporal punishment.
    (3) Sexual abuse includes sexual harassment, sexual coercion, and 
sexual assault.
    (4) Neglect is any impaired quality of life for an individual 
because of the absence of minimal services or resources to meet basic 
needs. Includes withholding or inadequately providing food and hydration 
(without physician, resident, or surrogate approval), clothing, medical 
care, and good hygiene. May also include placing the individual in 
unsafe or unsupervised conditions.
    (5) Involuntary seclusion is a resident's separation from other 
residents or from the resident's room against his or her will or the 
will of his or her legal representative.
    (c) Staff treatment of residents. The facility management must 
develop and implement written policies and procedures that prohibit 
mistreatment, neglect, and abuse of residents and misappropriation of 
resident property.
    (1) The facility management must:
    (i) Not employ individuals who--
    (A) Have been found guilty of abusing, neglecting, or mistreating 
individuals by a court of law; or
    (B) Have had a finding entered into an applicable State registry or 
with the applicable licensing authority concerning abuse, neglect, 
mistreatment of individuals or misappropriation of their property; and
    (ii) Report any knowledge it has of actions by a court of law 
against an employee, which would indicate unfitness for service as a 
nurse aide or other facility staff to the State nurse aide registry or 
licensing authorities.
    (2) The facility management must ensure that all alleged violations 
involving mistreatment, neglect, or abuse, including injuries of unknown 
source, and misappropriation of resident property are reported 
immediately to the administrator of the facility and to other officials 
in accordance with State law through established procedures.

[[Page 902]]

    (3) The facility management must have evidence that all alleged 
violations are thoroughly investigated, and must prevent further 
potential abuse while the investigation is in progress.
    (4) The results of all investigations must be reported to the 
administrator or the designated representative and to other officials in 
accordance with State law within 5 working days of the incident, and 
appropriate corrective action must be taken if the alleged violation is 
verified.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.100  Quality of life.

    A facility management must care for its residents in a manner and in 
an environment that promotes maintenance or enhancement of each 
resident's quality of life.
    (a) Dignity. The facility management must promote care for residents 
in a manner and in an environment that maintains or enhances each 
resident's dignity and respect in full recognition of his or her 
individuality.
    (b) Self-determination and participation. The resident has the right 
to--
    (1) Choose activities, schedules, and health care consistent with 
his or her interests, assessments, and plans of care;
    (2) Interact with members of the community both inside and outside 
the facility; and
    (3) Make choices about aspects of his or her life in the facility 
that are significant to the resident.
    (c) Resident Council. The facility management must establish a 
council of residents that meet at least quarterly. The facility 
management must document any concerns submitted to the management of the 
facility by the council.
    (d) Participation in resident and family groups. (1) A resident has 
the right to organize and participate in resident groups in the 
facility;
    (2) A resident's family has the right to meet in the facility with 
the families of other residents in the facility;
    (3) The facility management must provide the council and any 
resident or family group that exists with private space;
    (4) Staff or visitors may attend meetings at the group's invitation;
    (5) The facility management must provide a designated staff person 
responsible for providing assistance and responding to written requests 
that result from group meetings;
    (6) The facility management must listen to the views of any resident 
or family group, including the council established under paragraph (c) 
of this section, and act upon the concerns of residents, families, and 
the council regarding policy and operational decisions affecting 
resident care and life in the facility.
    (e) Participation in other activities. A resident has the right to 
participate in social, religious, and community activities that do not 
interfere with the rights of other residents in the facility. The 
facility management must arrange for religious counseling by clergy of 
various faith groups.
    (f) Accommodation of needs. A resident has the right to--
    (1) Reside and receive services in the facility with reasonable 
accommodation of individual needs and preferences, except when the 
health or safety of the individual or other residents would be 
endangered; and
    (2) Receive notice before the resident's room or roommate in the 
facility is changed.
    (g) Patient Activities. (1) The facility management must provide for 
an ongoing program of activities designed to meet, in accordance with 
the comprehensive assessment, the interests and the physical, mental, 
and psychosocial well-being of each resident.
    (2) The activities program must be directed by a qualified 
professional who is a qualified therapeutic recreation specialist or an 
activities professional who--
    (i) Is licensed or registered, if applicable, by the State in which 
practicing; and
    (ii) Is certified as a therapeutic recreation specialist or as an 
activities professional by a recognized accrediting body.
    (h) Social Services. (1) The facility management must provide 
medically related social services to attain or maintain the highest 
practicable mental and psychosocial well-being of each resident.

[[Page 903]]

    (2) A nursing home with 100 or more beds must employ a qualified 
social worker on a full-time basis.
    (3) Qualifications of social worker. A qualified social worker is an 
individual with--
    (i) A bachelor's degree in social work from a school accredited by 
the Council of Social Work Education (Note: A master's degree social 
worker with experience in long-term care is preferred), and
    (ii) A social work license from the State in which the State home is 
located, if offered by the State, and
    (iii) A minimum of one year of supervised social work experience in 
a health care setting working directly with individuals.
    (4) The facility management must have sufficient support staff to 
meet patients' social services needs.
    (5) Facilities for social services must ensure privacy for 
interviews.
    (i) Environment. The facility management must provide--
    (1) A safe, clean, comfortable, and homelike environment, allowing 
the resident to use his or her personal belongings to the extent 
possible;
    (2) Housekeeping and maintenance services necessary to maintain a 
sanitary, orderly, and comfortable interior;
    (3) Clean bed and bath linens that are in good condition;
    (4) Private closet space in each resident room, as specified in 
Sec. 51.200(d)(2)(iv) of this part;
    (5) Adequate and comfortable lighting levels in all areas;
    (6) Comfortable and safe temperature levels. Facilities must 
maintain a temperature range of 71-81 degrees Fahrenheit; and
    (7) For the maintenance of comfortable sound levels.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.110  Resident assessment.

    The facility management must conduct initially, annually and as 
required by a change in the resident's condition a comprehensive, 
accurate, standardized, reproducible assessment of each resident's 
functional capacity.
    (a) Admission orders. At the time each resident is admitted, the 
facility management must have physician orders for the resident's 
immediate care and a medical assessment, including a medical history and 
physical examination, within a time frame appropriate to the resident's 
condition, not to exceed 72 hours after admission, except when an 
examination was performed within five days before admission and the 
findings were recorded in the medical record on admission.
    (b) Comprehensive assessments. (1) The facility management must make 
a comprehensive assessment of a resident's needs:
    (i) Using the Health Care Financing Administration Long Term Care 
Resident Assessment Instrument Version 2.0; and
    (ii) Describing the resident's capability to perform daily life 
functions, strengths, performances, needs as well as significant 
impairments in functional capacity.
    (iii) All nursing homes must be in compliance with the use of the 
Health Care Financing Administration Long Term Care Resident Assessment 
Instrument Version 2.0 by no later than January 1, 2000.
    (2) Frequency. Assessments must be conducted--
    (i) No later than 14 days after the date of admission;
    (ii) Promptly after a significant change in the resident's physical, 
mental, or social condition; and
    (iii) In no case less often than once every 12 months.
    (3) Review of assessments. The nursing facility management must 
examine each resident no less than once every 3 months, and as 
appropriate, revise the resident's assessment to assure the continued 
accuracy of the assessment.
    (4) Use. The results of the assessment are used to develop, review, 
and revise the resident's individualized comprehensive plan of care, 
under paragraph (d) of this section.
    (c) Accuracy of assessments. (1) Coordination--
    (i) Each assessment must be conducted or coordinated with the 
appropriate participation of health professionals.
    (ii) Each assessment must be conducted or coordinated by a 
registered nurse that signs and certifies the completion of the 
assessment.

[[Page 904]]

    (2) Certification. Each person who completes a portion of the 
assessment must sign and certify the accuracy of that portion of the 
assessment.
    (d) Comprehensive care plans. (1) The facility management must 
develop an individualized comprehensive care plan for each resident that 
includes measurable objectives and timetables to meet a resident's 
physical, mental, and psychosocial needs that are identified in the 
comprehensive assessment. The care plan must describe the following--
    (i) The services that are to be furnished to attain or maintain the 
resident's highest practicable physical, mental, and psychosocial well-
being as required under Sec. 51.120; and
    (ii) Any services that would otherwise be required under Sec. 
51.120 of this part but are not provided due to the resident's exercise 
of rights under Sec. 51.70, including the right to refuse treatment 
under Sec. 51.70(b)(4) of this part.
    (2) A comprehensive care plan must be--
    (i) Developed within 7 calendar days after completion of the 
comprehensive assessment;
    (ii) Prepared by an interdisciplinary team, that includes the 
primary physician, a registered nurse with responsibility for the 
resident, and other appropriate staff in disciplines as determined by 
the resident's needs, and, to the extent practicable, the participation 
of the resident, the resident's family or the resident's legal 
representative; and
    (iii) Periodically reviewed and revised by a team of qualified 
persons after each assessment.
    (3) The services provided or arranged by the facility must--
    (i) Meet professional standards of quality; and
    (ii) Be provided by qualified persons in accordance with each 
resident's written plan of care.
    (e) Discharge summary. Prior to discharging a resident, the facility 
management must prepare a discharge summary that includes--
    (1) A recapitulation of the resident's stay;
    (2) A summary of the resident's status at the time of the discharge 
to include items in paragraph (b)(2) of this section; and
    (3) A post-discharge plan of care that is developed with the 
participation of the resident and his or her family, which will assist 
the resident to adjust to his or her new living environment.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.120  Quality of care.

    Each resident must receive and the facility management must provide 
the necessary care and services to attain or maintain the highest 
practicable physical, mental, and psychosocial well-being, in accordance 
with the comprehensive assessment and plan of care.
    (a) Reporting of Sentinel Events--(1) Definition. A sentinel event 
is an adverse event that results in the loss of life or limb or 
permanent loss of function.
    (2) Examples of sentinel events are as follows:
    (i) Any resident death, paralysis, coma or other major permanent 
loss of function associated with a medication error; or
    (ii) Any suicide of a resident, including suicides following 
elopement (unauthorized departure) from the facility; or
    (iii) Any elopement of a resident from the facility resulting in a 
death or a major permanent loss of function; or
    (iv) Any procedure or clinical intervention, including restraints, 
that result in death or a major permanent loss of function; or
    (v) Assault, homicide or other crime resulting in patient death or 
major permanent loss of function; or
    (vi) A patient fall that results in death or major permanent loss of 
function as a direct result of the injuries sustained in the fall.
    (3) The facility management must report sentinel events to the 
director of VA medical center of jurisdiction within 24 hours of 
identification. The VA medical center of jurisdiction must report 
sentinel events by calling VA Network Director (10N 1-22) and Chief 
Consultant, Geriatrics and Extended Care Strategic Healthcare Group 
(114) within 24 hours of notification.
    (4) The facility management must establish a mechanism to review and

[[Page 905]]

analyze a sentinel event resulting in a written report no later than 10 
working days following the event. The purpose of the review and analysis 
of a sentinel event is to prevent injuries to residents, visitors, and 
personnel, and to manage those injuries that do occur and to minimize 
the negative consequences to the injured individuals and facility.
    (b) Activities of daily living. Based on the comprehensive 
assessment of a resident, the facility management must ensure that--
    (1) A resident's abilities in activities of daily living do not 
diminish unless circumstances of the individual's clinical condition 
demonstrate that diminution was unavoidable. This includes the 
resident's ability to--
    (i) Bathe, dress, and groom;
    (ii) Transfer and ambulate;
    (iii) Toilet;
    (iv) Eat; and
    (v) Talk or otherwise communicate.
    (2) A resident is given the appropriate treatment and services to 
maintain or improve his or her abilities specified in paragraph (b)(1) 
of this section; and
    (3) A resident who is unable to carry out activities of daily living 
receives the necessary services to maintain good nutrition, hydration, 
grooming, personal and oral hygiene, mobility, and bladder and bowel 
elimination.
    (c) Vision and hearing. To ensure that residents receive proper 
treatment and assistive devices to maintain vision and hearing 
abilities, the facility must, if necessary, assist the resident--
    (1) In making appointments, and
    (2) By arranging for transportation to and from the office of a 
practitioner specializing in the treatment of vision or hearing 
impairment or the office of a professional specializing in the provision 
of vision or hearing assistive devices.
    (d) Pressure sores. Based on the comprehensive assessment of a 
resident, the facility management must ensure that--
    (1) A resident who enters the facility without pressure sores does 
not develop pressure sores unless the individual's clinical condition 
demonstrates that they were unavoidable; and
    (2) A resident having pressure sores receives necessary treatment 
and services to promote healing, prevent infection and prevent new sores 
from developing.
    (e) Urinary and Fecal Incontinence. Based on the resident's 
comprehensive assessment, the facility management must ensure that--
    (1) A resident who enters the facility without an indwelling 
catheter is not catheterized unless the resident's clinical condition 
demonstrates that catheterization was necessary;
    (2) A resident who is incontinent of urine receives appropriate 
treatment and services to prevent urinary tract infections and to 
restore as much normal bladder function as possible; and
    (3) A resident who has persistent fecal incontinence receives 
appropriate treatment and services to treat reversible causes and to 
restore as much normal bowel function as possible.
    (f) Range of motion. Based on the comprehensive assessment of a 
resident, the facility management must ensure that--
    (1) A resident who enters the facility without a limited range of 
motion does not experience reduction in range of motion unless the 
resident's clinical condition demonstrates that a reduction in range of 
motion is unavoidable; and
    (2) A resident with a limited range of motion receives appropriate 
treatment and services to increase range of motion and/or to prevent 
further decrease in range of motion.
    (g) Mental and Psychosocial functioning. Based on the comprehensive 
assessment of a resident, the facility management must ensure that a 
resident who displays mental or psychosocial adjustment difficulty, 
receives appropriate treatment and services to correct the assessed 
problem.
    (h) Enteral Feedings. Based on the comprehensive assessment of a 
resident, the facility management must ensure that--
    (1) A resident who has been able to adequately eat or take fluids 
alone or with assistance is not fed by enteral feedings unless the 
resident's clinical condition demonstrates that use of enteral feedings 
was unavoidable; and

[[Page 906]]

    (2) A resident who is fed by enteral feedings receives the 
appropriate treatment and services to prevent aspiration pneumonia, 
diarrhea, vomiting, dehydration, metabolic abnormalities, nasal-
pharyngeal ulcers and other skin breakdowns, and to restore, if 
possible, normal eating skills.
    (i) Accidents. The facility management must ensure that--
    (1) The resident environment remains as free of accident hazards as 
is possible; and
    (2) Each resident receives adequate supervision and assistance 
devices to prevent accidents.
    (j) Nutrition. Based on a resident's comprehensive assessment, the 
facility management must ensure that a resident--
    (1) Maintains acceptable parameters of nutritional status, such as 
body weight and protein levels, unless the resident's clinical condition 
demonstrates that this is not possible; and
    (2) Receives a therapeutic diet when a nutritional deficiency is 
identified.
    (k) Hydration. The facility management must provide each resident 
with sufficient fluid intake to maintain proper hydration and health.
    (l) Special needs. The facility management must ensure that 
residents receive proper treatment and care for the following special 
services:
    (1) Injections;
    (2) Parenteral and enteral fluids;
    (3) Colostomy, ureterostomy, or ileostomy care;
    (4) Tracheostomy care;
    (5) Tracheal suctioning;
    (6) Respiratory care;
    (7) Foot care; and
    (8) Prostheses.
    (m) Unnecessary drugs--(1) General. Each resident's drug regimen 
must be free from unnecessary drugs. An unnecessary drug is any drug 
when used:
    (i) In excessive dose (including duplicate drug therapy); or
    (ii) For excessive duration; or
    (iii) Without adequate monitoring; or
    (iv) Without adequate indications for its use; or
    (v) In the presence of adverse consequences which indicate the dose 
should be reduced or discontinued; or
    (vi) Any combinations of the reasons above.
    (2) Antipsychotic Drugs. Based on a comprehensive assessment of a 
resident, the facility management must ensure that--
    (i) Residents who have not used antipsychotic drugs are not given 
these drugs unless antipsychotic drug therapy is necessary to treat a 
specific condition as diagnosed and documented in the clinical record; 
and
    (ii) Residents who use antipsychotic drugs receive gradual dose 
reductions, and behavioral interventions, unless clinically 
contraindicated, in an effort to discontinue these drugs.
    (n) Medication Errors. The facility management must ensure that--
    (1) Medication errors are identified and reviewed on a timely basis; 
and
    (2) strategies for preventing medication errors and adverse 
reactions are implemented.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.130  Nursing services.

    The facility management must provide an organized nursing service 
with a sufficient number of qualified nursing personnel to meet the 
total nursing care needs, as determined by resident assessment and 
individualized comprehensive plans of care, of all patients within the 
facility 24 hours a day, 7 days a week.
    (a) The nursing service must be under the direction of a full-time 
registered nurse who is currently licensed by the State and has, in 
writing, administrative authority, responsibility, and accountability 
for the functions, activities, and training of the nursing services 
staff.
    (b) The facility management must provide registered nurses 24 hours 
per day, 7 days per week.
    (c) The director of nursing service must designate a registered 
nurse as a supervising nurse for each tour of duty.
    (1) Based on the application and results of the case mix and 
staffing methodology, the director of nursing may serve in a dual role 
as director and as an onsite-supervising nurse only when the facility 
has an average daily occupancy of 60 or fewer residents in nursing home.

[[Page 907]]

    (2) Based on the application and results of the case mix and 
staffing methodology, the evening or night supervising nurse may serve 
in a dual role as supervising nurse as well as provides direct patient 
care only when the facility has an average daily occupancy of 60 or 
fewer residents in nursing home.
    (d) The facility management must provide nursing services to ensure 
that there is direct care nurse staffing of no less than 2.5 hours per 
patient per 24 hours, 7 days per week in the portion of any building 
providing nursing home care.
    (e) Nurse staffing must be based on a staffing methodology that 
applies case mix and is adequate for meeting the standards of this part.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.140  Dietary services.

    The facility management must provide each resident with a 
nourishing, palatable, well-balanced diet that meets the daily 
nutritional and special dietary needs of each resident.
    (a) Staffing. The facility management must employ a qualified 
dietitian either full-time, part-time, or on a consultant basis.
    (1) If a dietitian is not employed, the facility management must 
designate a person to serve as the director of food service who receives 
at least a monthly scheduled consultation from a qualified dietitian.
    (2) A qualified dietitian is one who is qualified based upon 
registration by the Commission on Dietetic Registration of the American 
Dietetic Association.
    (b) Sufficient staff. The facility management must employ sufficient 
support personnel competent to carry out the functions of the dietary 
service.
    (c) Menus and nutritional adequacy. Menus must--
    (1) Meet the nutritional needs of residents in accordance with the 
recommended dietary allowances of the Food and Nutrition Board of the 
National Research Council, National Academy of Sciences;
    (2) Be prepared in advance; and
    (3) Be followed.
    (d) Food. Each resident receives and the facility provides--
    (1) Food prepared by methods that conserve nutritive value, flavor, 
and appearance;
    (2) Food that is palatable, attractive, and at the proper 
temperature;
    (3) Food prepared in a form designed to meet individual needs; and
    (4) Substitutes offered of similar nutritive value to residents who 
refuse food served.
    (e) Therapeutic diets. Therapeutic diets must be prescribed by the 
primary care physician.
    (f) Frequency of meals. (1) Each resident receives and the facility 
provides at least three meals daily, at regular times comparable to 
normal mealtimes in the community.
    (2) There must be no more than 14 hours between a substantial 
evening meal and the availability of breakfast the following day, except 
as provided in (f)(4) of this section.
    (3) The facility staff must offer snacks at bedtime daily.
    (4) When a nourishing snack is provided at bedtime, up to 16 hours 
may elapse between a substantial evening meal and breakfast the 
following day.
    (g) Assistive devices. The facility management must provide special 
eating equipment and utensils for residents who need them.
    (h) Sanitary conditions. The facility must--
    (1) Procure food from sources approved or considered satisfactory by 
Federal, State, or local authorities;
    (2) Store, prepare, distribute, and serve food under sanitary 
conditions; and (3) Dispose of garbage and refuse properly.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.150  Physician services.

    A physician must personally approve in writing a recommendation that 
an individual be admitted to a facility. Each resident must remain under 
the care of a physician.
    (a) Physician supervision. The facility management must ensure 
that--
    (1) The medical care of each resident is supervised by a primary 
care physician;
    (2) Each resident's medical record lists the name of the resident's 
primary physician, and

[[Page 908]]

    (3) Another physician supervises the medical care of residents when 
their primary physician is unavailable.
    (b) Physician visits. The physician must--
    (1) Review the resident's total program of care, including 
medications and treatments, at each visit required by paragraph (c) of 
this section;
    (2) Write, sign, and date progress notes at each visit; and
    (3) Sign and date all orders.
    (c) Frequency of physician visits. (1) The resident must be seen by 
the primary physician at least once every 30 days for the first 90 days 
after admission, and at least once every 60 days thereafter, or more 
frequently based on the condition of the resident.
    (2) A physician visit is considered timely if it occurs not later 
than 10 days after the date the visit was required.
    (3) Except as provided in paragraphs (c)(4) of this section, all 
required physician visits must be made by the physician personally.
    (4) At the option of the physician, required visits in the facility 
after the initial visit may alternate between personal visits by the 
physician and visits by a physician assistant, nurse practitioner, or 
clinical nurse specialist in accordance with paragraph (e) of this 
section.
    (d) Availability of physicians for emergency care. The facility 
management must provide or arrange for the provision of physician 
services 24 hours a day, 7 days per week, in case of an emergency.
    (e) Physician delegation of tasks. (1) Except as specified in 
paragraph (e)(2) of this section, a primary physician may delegate tasks 
to:
    (i) a certified physician assistant or a certified nurse 
practitioner, or
    (ii) a clinical nurse specialist who--
    (A) Is acting within the scope of practice as defined by State law; 
and
    (B) Is under the supervision of the physician.

    Note to paragraph (e):
    An individual with experience in long term care is preferred.

    (2) The primary physician may not delegate a task when the 
regulations specify that the primary physician must perform it 
personally, or when the delegation is prohibited under State law or by 
the facility's own policies.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.160  Specialized rehabilitative services.

    (a) Provision of services. If specialized rehabilitative services 
such as but not limited to physical therapy, speech therapy, 
occupational therapy, and mental health services for mental illness are 
required in the resident's comprehensive plan of care, facility 
management must--
    (1) Provide the required services; or
    (2) Obtain the required services from an outside resource, in 
accordance with Sec. 51.210(h) of this part, from a provider of 
specialized rehabilitative services.
    (b) Specialized rehabilitative services must be provided under the 
written order of a physician by qualified personnel.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.170  Dental services.

    (a) A facility must provide or obtain from an outside resource, in 
accordance with Sec. 51.210(h) of this part, routine and emergency 
dental services to meet the needs of each resident;
    (b) A facility may charge a resident an additional amount for 
routine and emergency dental services; and
    (c) A facility must, if necessary, assist the resident--
    (1) In making appointments;
    (2) By arranging for transportation to and from the dental services; 
and
    (3) Promptly refer residents with lost or damaged dentures to a 
dentist.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.180  Pharmacy services.

    The facility management must provide routine and emergency drugs and 
biologicals to its residents, or obtain them under an agreement 
described in Sec. 51.210(h) of this part. The facility management must 
have a system for disseminating drug information to medical and nursing 
staff.
    (a) Procedures. The facility management must provide pharmaceutical 
services (including procedures that assure the accurate acquiring, 
receiving, dispensing, and administering of all

[[Page 909]]

drugs and biologicals) to meet the needs of each resident.
    (b) Service consultation. The facility management must employ or 
obtain the services of a pharmacist licensed in a State in which the 
facility is located or a VA pharmacist under VA contract who--
    (1) Provides consultation on all aspects of the provision of 
pharmacy services in the facility;
    (2) Establishes a system of records of receipt and disposition of 
all controlled drugs in sufficient detail to enable an accurate 
reconciliation; and
    (3) Determines that drug records are in order and that an account of 
all controlled drugs is maintained and periodically reconciled.
    (c) Drug regimen review. (1) The drug regimen of each resident must 
be reviewed at least once a month by a licensed pharmacist.
    (2) The pharmacist must report any irregularities to the primary 
physician and the director of nursing, and these reports must be acted 
upon.
    (d) Labeling of drugs and biologicals. Drugs and biologicals used in 
the facility management must be labeled in accordance with currently 
accepted professional principles, and include the appropriate accessory 
and cautionary instructions, and the expiration date when applicable.
    (e) Storage of drugs and biologicals. (1) In accordance with State 
and Federal laws, the facility management must store all drugs and 
biologicals in locked compartments under proper temperature controls, 
and permit only authorized personnel to have access to the keys.
    (2) The facility management must provide separately locked, 
permanently affixed compartments for storage of controlled drugs listed 
in Schedule II of the Comprehensive Drug Abuse Prevention and Control 
Act of 1976 and other drugs subject to abuse.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.190  Infection control.

    The facility management must establish and maintain an infection 
control program designed to provide a safe, sanitary, and comfortable 
environment and to help prevent the development and transmission of 
disease and infection.
    (a) Infection control program. The facility management must 
establish an infection control program under which it--
    (1) Investigates, controls, and prevents infections in the facility;
    (2) Decides what procedures, such as isolation, should be applied to 
an individual resident; and
    (3) Maintains a record of incidents and corrective actions related 
to infections.
    (b) Preventing spread of infection. (1) When the infection control 
program determines that a resident needs isolation to prevent the spread 
of infection, the facility management must isolate the resident.
    (2) The facility management must prohibit employees with a 
communicable disease or infected skin lesions from engaging in any 
contact with residents or their environment that would transmit the 
disease.
    (3) The facility management must require staff to wash their hands 
after each direct resident contact for which hand washing is indicated 
by accepted professional practice.
    (c) Linens. Personnel must handle, store, process, and transport 
linens so as to prevent the spread of infection.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.200  Physical environment.

    The facility management must be designed, constructed, equipped, and 
maintained to protect the health and safety of residents, personnel and 
the public.
    (a) Life safety from fire. The facility must meet the applicable 
provisions of the National Fire Protection Association's NFPA 101, Life 
Safety Code (1997 edition) and the NFPA 99, Standard for Health Care 
Facilities (1996 edition). Incorporation by reference of these materials 
was approved by the Director of the Federal Register in accordance with 
5 U.S.C. 552(a) and 1 CFR part 51. These materials incorporated by 
reference are available for inspection at the Department of Veterans 
Affairs, Office of Regulations Management (02D), Room 1154, 810 Vermont 
Avenue, NW., Washington, DC 20420 or at the

[[Page 910]]

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/ibr--locations.html. Copies may be obtained from the 
National Fire Protection Association, 1 Batterymarch Park, P.O. Box 
9101, Quincy, MA 02269-9101. (For ordering information, call toll-free 
1-800-344-3555.)
    (b) Emergency power. (1) An emergency electrical power system must 
be provided to supply power adequate for illumination of all exit signs 
and lighting for the means of egress, fire alarm and medical gas alarms, 
emergency communication systems, and generator task illumination.
    (2) The system must be the appropriate type essential electrical 
system in accordance with the applicable provisions of the National Fire 
Protection Association's NFPA 101, Life Safety Code (1997 edition) and 
the NFPA 99, Standard for Health Care Facilities (1996 edition). 
Incorporation by reference of these materials was approved by the 
Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 
1 CFR part 51. The availability of these materials is described in 
paragraph (a) of this section.
    (3) When electrical life support devices are used, an emergency 
electrical power system must also be provided for devices in accordance 
with NFPA 99, Standard for Health Care Facilities (1996 edition).
    (4) The source of power must be an on-site emergency standby 
generator of sufficient size to serve the connected load or other 
approved sources in accordance with the National Fire Protection 
Association's NFPA 101, Life Safety Code (1997 edition) and the NFPA 99, 
Standard for Health Care Facilities (1996 edition). Incorporation by 
reference of these materials was approved by the Director of the Federal 
Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. The 
availability of these materials is described in paragraph (a) of this 
section.
    (c) Space and equipment. Facility management must--
    (1) Provide sufficient space and equipment in dining, health 
services, recreation, and program areas to enable staff to provide 
residents with needed services as required by these standards and as 
identified in each resident's plan of care; and
    (2) Maintain all essential mechanical, electrical, and patient care 
equipment in safe operating condition.
    (d) Resident rooms. Resident rooms must be designed and equipped for 
adequate nursing care, comfort, and privacy of residents:
    (1) Bedrooms must--
    (i) Accommodate no more than four residents;
    (ii) Measure at least 115 net square feet per resident in multiple 
resident bedrooms;
    (iii) Measure at least 150 net square feet in single resident 
bedrooms;
    (iv) Measure at least 245 net square feet in small double resident 
bedrooms; and
    (v) Measure at least 305 net square feet in large double resident 
bedrooms used for spinal cord injury residents. It is recommended that 
the facility have one large double resident bedroom for every 30 
resident bedrooms.
    (vi) Have direct access to an exit corridor;
    (vii) Be designed or equipped to assure full visual privacy for each 
resident;
    (viii) Except in private rooms, each bed must have ceiling suspended 
curtains, which extend around the bed to provide total visual privacy in 
combination with adjacent walls and curtains;
    (ix) Have at least one window to the outside; and
    (x) Have a floor at or above grade level.
    (2) The facility management must provide each resident with--
    (i) A separate bed of proper size and height for the safety of the 
resident;
    (ii) A clean, comfortable mattress;
    (iii) Bedding appropriate to the weather and climate; and
    (iv) Functional furniture appropriate to the resident's needs, and 
individual closet space in the resident's bedroom with clothes racks and 
shelves accessible to the resident.
    (e) Toilet facilities. Each resident room must be equipped with or 
located near toilet and bathing facilities. It is

[[Page 911]]

recommended that public toilet facilities be also located near the 
resident's dining and recreational areas.
    (f) Resident call system. The nurse's station must be equipped to 
receive resident calls through a communication system from--
    (1) Resident rooms; and
    (2) Toilet and bathing facilities.
    (g) Dining and resident activities. The facility management must 
provide one or more rooms designated for resident dining and activities. 
These rooms must--
    (1) Be well lighted;
    (2) Be well ventilated;
    (3) Be adequately furnished; and
    (4) Have sufficient space to accommodate all activities.
    (h) Other environmental conditions. The facility management must 
provide a safe, functional, sanitary, and comfortable environment for 
the residents, staff and the public. The facility must--
    (1) Establish procedures to ensure that water is available to 
essential areas when there is a loss of normal water supply;
    (2) Have adequate outside ventilation by means of windows, or 
mechanical ventilation, or a combination of the two;
    (3) Equip corridors with firmly secured handrails on each side; and
    (4) Maintain an effective pest control program so that the facility 
is free of pests and rodents.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743)



Sec. 51.210  Administration.

    A facility must be administered in a manner that enables it to use 
its resources effectively and efficiently to attain or maintain the 
highest practicable physical, mental, and psychosocial well being of 
each resident.
    (a) Governing body. (1) The State must have a governing body, or 
designated person functioning as a governing body, that is legally 
responsible for establishing and implementing policies regarding the 
management and operation of the facility; and
    (2) The governing body or State official with oversight for the 
facility appoints the administrator who is--
    (i) Licensed by the State where licensing is required; and
    (ii) Responsible for operation and management of the facility.
    (b) Disclosure of State agency and individual responsible for 
oversight of facility. The State must give written notice to the Chief 
Consultant, Geriatrics and Extended Care Strategic Healthcare Group 
(114), VA Headquarters, 810 Vermont Avenue, NW, Washington, DC 20420, at 
the time of the change, if any of the following change:
    (1) The State agency and individual responsible for oversight of a 
State home facility;
    (2) The State home administrator; and
    (3) The State employee responsible for oversight of the State home 
facility if a contractor operates the State home.
    (c) Required Information. The facility management must submit the 
following to the director of the VA medical center of jurisdiction as 
part of the application for recognition and thereafter as often as 
necessary to be current or as specified:
    (1) The copy of legal and administrative action establishing the 
State-operated facility (e.g., State laws);
    (2) Site plan of facility and surroundings;
    (3) Legal title, lease, or other document establishing right to 
occupy facility;
    (4) Organizational charts and the operational plan of the facility;
    (5) The number of the staff by category indicating full-time, part-
time and minority designation (annual at time of survey);
    (6) The number of nursing home patients who are veterans and non-
veterans, the number of veterans who are minorities and the number of 
non-veterans who are minorities (annual at time of survey);
    (7) Annual State Fire Marshall's report;
    (8) Annual certification from the responsible State Agency showing 
compliance with Section 504 of the Rehabilitation Act of 1973 (Public 
Law 93-112) (VA Form 10-0143A set forth at Sec. 58.14 of this chapter);
    (9) Annual certification for Drug-Free Workplace Act of 1988 (VA 
Form 10-0143 set forth at Sec. 58.15 of this chapter);

[[Page 912]]

    (10) Annual certification regarding lobbying in compliance with 
Public Law 101-121 (VA Form 10-0144 set forth at Sec. 58.16 of this 
chapter); and
    (11) Annual certification of compliance with Title VI of the Civil 
Rights Act of 1964 as incorporated in Title 38 CFR 18.1-18.3 (VA Form 
10-0144A located at Sec. 58.17 of this chapter).
    (d) Percentage of Veterans. The percent of the facility residents 
eligible for VA nursing home care must be at least 75 percent veterans 
except that the veteran percentage need only be more than 50 percent if 
the facility was constructed or renovated solely with State funds. All 
non-veteran residents must be spouses of veterans or parents all of 
whose children died while serving in the armed forces of the United 
States.
    (e) Management Contract Facility. If a facility is operated by an 
entity contracting with the State, the State must assign a State 
employee to monitor the operations of the facility on a full-time onsite 
basis.
    (f) Licensure. The facility and facility management must comply with 
applicable State and local licensure laws.
    (g) Staff qualifications. (1) The facility management must employ on 
a full-time, part-time or consultant basis those professionals necessary 
to carry out the provisions of these requirements.
    (2) Professional staff must be licensed, certified, or registered in 
accordance with applicable State laws.
    (h) Use of outside resources. (1) If the facility does not employ a 
qualified professional person to furnish a specific service to be 
provided by the facility, the facility management must have that service 
furnished to residents by a person or agency outside the facility under 
a written agreement described in paragraph (h)(2) of this section.
    (2) Agreements pertaining to services furnished by outside resources 
must specify in writing that the facility management assumes 
responsibility for--
    (i) Obtaining services that meet professional standards and 
principles that apply to professionals providing services in such a 
facility; and
    (ii) The timeliness of the services.
    (i) Medical director. (1) The facility management must designate a 
primary care physician to serve as medical director.
    (2) The medical director is responsible for--
    (i) Participating in establishing policies, procedures, and 
guidelines to ensure adequate, comprehensive services;
    (ii) Directing and coordinating medical care in the facility;
    (iii) Helping to arrange for continuous physician coverage to handle 
medical emergencies;
    (iv) Reviewing the credentialing and privileging process;
    (v) Participating in managing the environment by reviewing and 
evaluating incident reports or summaries of incident reports, 
identifying hazards to health and safety, and making recommendations to 
the administrator; and
    (vi) Monitoring employees' health status and advising the 
administrator on employee-health policies.
    (j) Credentialing and Privileging. Credentialing is the process of 
obtaining, verifying, and assessing the qualifications of a health care 
practitioner, which may include physicians, podiatrists, dentists, 
psychologists, physician assistants, nurse practitioners, licensed 
nurses to provide patient care services in or for a health care 
organization. Privileging is the process whereby a specific scope and 
content of patient care services are authorized for a health care 
practitioner by the facility management, based on evaluation of the 
individual's credentials and performance.
    (1) The facility management must uniformly apply credentialing 
criteria to licensed practitioners applying to provide resident care or 
treatment under the facility's care.
    (2) The facility management must verify and uniformly apply the 
following core criteria: current licensure; current certification, if 
applicable, relevant education, training, and experience; current 
competence; and a statement that the individual is able to perform the 
services he or she is applying to provide.

[[Page 913]]

    (3) The facility management must decide whether to authorize the 
independent practitioner to provide resident care or treatment, and each 
credentials file must indicate that these criteria are uniformly and 
individually applied.
    (4) The facility management must maintain documentation of current 
credentials for each licensed independent practitioner practicing within 
the facility.
    (5) When reappointing a licensed independent practitioner, the 
facility management must review the individual's record of experience.
    (6) The facility management systematically must assess whether 
individuals with clinical privileges act within the scope of privileges 
granted.
    (k) Required training of nursing aides. (1) Nurse aide means any 
individual providing nursing or nursing-related services to residents in 
a facility who is not a licensed health professional, a registered 
dietitian, or a volunteer who provide such services without pay.
    (2) The facility management must not use any individual working in 
the facility as a nurse aide whether permanent or not unless:
    (i) That individual is competent to provide nursing and nursing 
related services; and
    (ii) That individual has completed a training and competency 
evaluation program, or a competency evaluation program approved by the 
State.
    (3) Registry verification. Before allowing an individual to serve as 
a nurse aide, facility management must receive registry verification 
that the individual has met competency evaluation requirements unless 
the individual can prove that he or she has recently successfully 
completed a training and competency evaluation program or competency 
evaluation program approved by the State and has not yet been included 
in the registry. Facilities must follow up to ensure that such an 
individual actually becomes registered.
    (4) Multi-State registry verification. Before allowing an individual 
to serve as a nurse aide, facility management must seek information from 
every State registry established under HHS regulations at 42 CFR 483.156 
which the facility believes will include information on the individual.
    (5) Required retraining. If, since an individual's most recent 
completion of a training and competency evaluation program, there has 
been a continuous period of 24 consecutive months during none of which 
the individual provided nursing or nursing-related services for monetary 
compensation, the individual must complete a new training and competency 
evaluation program or a new competency evaluation program.
    (6) Regular in-service education. The facility management must 
complete a performance review of every nurse aide at least once every 12 
months, and must provide regular in-service education based on the 
outcome of these reviews. The in-service training must--
    (i) Be sufficient to ensure the continuing competence of nurse 
aides, but must be no less than 12 hours per year;
    (ii) Address areas of weakness as determined in nurse aides' 
performance reviews and may address the special needs of residents as 
determined by the facility staff; and
    (iii) For nurse aides providing services to individuals with 
cognitive impairments, also address the care of the cognitively 
impaired.
    (l) Proficiency of Nurse aides. The facility management must ensure 
that nurse aides are able to demonstrate competency in skills and 
techniques necessary to care for residents' needs, as identified through 
resident assessments, and described in the plan of care.
    (m) Level B Requirement Laboratory services. (1) The facility 
management must provide or obtain laboratory services to meet the needs 
of its residents. The facility is responsible for the quality and 
timeliness of the services.
    (i) If the facility provides its own laboratory services, the 
services must meet all applicable certification standards, statutes, and 
regulations for laboratory services.
    (ii) If the facility provides blood bank and transfusion services, 
it must meet all applicable certification standards, statutes, and 
regulations.
    (iii) If the laboratory chooses to refer specimens for testing to 
another laboratory, the referral laboratory must

[[Page 914]]

be certified in the appropriate specialities and subspecialties of 
services and meet certification standards, statutes, and regulations.
    (iv) The laboratory performing the testing must have a current, 
valid CLIA number (Clinical Laboratory Improvement Amendments of 1988). 
The facility management must provide VA surveyors with the CLIA number 
and a copy of the results of the last CLIA inspection.
    (v) Such services must be available to the resident seven days a 
week, 24 hours a day.
    (2) The facility management must--
    (i) Provide or obtain laboratory services only when ordered by the 
primary physician;
    (ii) Promptly notify the primary physician of the findings;
    (iii) Assist the resident in making transportation arrangements to 
and from the source of service, if the resident needs assistance; and
    (iv) File in the resident's clinical record laboratory reports that 
are dated and contain the name and address of the testing laboratory.
    (n) Radiology and other diagnostic services. (1) The facility 
management must provide or obtain radiology and other diagnostic 
services to meet the needs of its residents. The facility is responsible 
for the quality and timeliness of the services.
    (i) If the facility provides its own diagnostic services, the 
services must meet all applicable certification standards, statutes, and 
regulations.
    (ii) If the facility does not provide its own diagnostic services, 
it must have an agreement to obtain these services. The services must 
meet all applicable certification standards, statutes, and regulations.
    (iii) Radiologic and other diagnostic services must be available 24 
hours a day, seven days a week.
    (2) The facility must--
    (i) Provide or obtain radiology and other diagnostic services when 
ordered by the primary physician;
    (ii) Promptly notify the primary physician of the findings;
    (iii) Assist the resident in making transportation arrangements to 
and from the source of service, if the resident needs assistance; and
    (iv) File in the resident's clinical record signed and dated reports 
of x-ray and other diagnostic services.
    (o) Clinical records. (1) The facility management must maintain 
clinical records on each resident in accordance with accepted 
professional standards and practices that are--
    (i) Complete;
    (ii) Accurately documented;
    (iii) Readily accessible; and
    (iv) Systematically organized.
    (2) Clinical records must be retained for--
    (i) The period of time required by State law; or
    (ii) Five years from the date of discharge when there is no 
requirement in State law.
    (3) The facility management must safeguard clinical record 
information against loss, destruction, or unauthorized use;
    (4) The facility management must keep confidential all information 
contained in the resident's records, regardless of the form or storage 
method of the records, except when release is required by--
    (i) Transfer to another health care institution;
    (ii) Law;
    (iii) Third party payment contract;
    (iv) The resident or;
    (v) The resident's authorized agent or representative.
    (5) The clinical record must contain--
    (i) Sufficient information to identify the resident;
    (ii) A record of the resident's assessments;
    (iii) The plan of care and services provided;
    (iv) The results of any pre-admission screening conducted by the 
State; and
    (v) Progress notes.
    (p) Quality assessment and assurance. (1) Facility management must 
maintain a quality assessment and assurance committee consisting of--
    (i) The director of nursing services;
    (ii) A primary physician designated by the facility; and
    (iii) At least 3 other members of the facility's staff.
    (2) The quality assessment and assurance committee--

[[Page 915]]

    (i) Meets at least quarterly to identify issues with respect to 
which quality assessment and assurance activities are necessary; and
    (ii) Develops and implements appropriate plans of action to correct 
identified quality deficiencies; and
    (3) Identified quality deficiencies are corrected within an 
established time period.
    (4) The VA Under Secretary for Health may not require disclosure of 
the records of such committee unless such disclosure is related to the 
compliance with requirements of this section.
    (q) Disaster and emergency preparedness. (1) The facility management 
must have detailed written plans and procedures to meet all potential 
emergencies and disasters, such as fire, severe weather, and missing 
residents.
    (2) The facility management must train all employees in emergency 
procedures when they begin to work in the facility, periodically review 
the procedures with existing staff, and carry out unannounced staff 
drills using those procedures.
    (r) Transfer agreement. (1) The facility management must have in 
effect a written transfer agreement with one or more hospitals that 
reasonably assures that--
    (i) Residents will be transferred from the nursing home to the 
hospital, and ensured of timely admission to the hospital when transfer 
is medically appropriate as determined by the primary physician; and
    (ii) Medical and other information needed for care and treatment of 
residents, and, when the transferring facility deems it appropriate, for 
determining whether such residents can be adequately cared for in a less 
expensive setting than either the nursing home or the hospital, will be 
exchanged between the institutions.
    (2) The facility is considered to have a transfer agreement in 
effect if the facility has an agreement with a hospital sufficiently 
close to the facility to make transfer feasible.
    (s) Compliance with Federal, State, and local laws and professional 
standards. The facility management must operate and provide services in 
compliance with all applicable Federal, State, and local laws, 
regulations, and codes, and with accepted professional standards and 
principles that apply to professionals providing services in such a 
facility. This includes the Single Audit Act of 1984 (Title 31, Section 
7501 et seq.) and the Cash Management Improvement Acts of 1990 and 1992 
(Public Laws 101-453 and 102-589, see 31 USC 3335, 3718, 3720A, 6501, 
6503)
    (t) Relationship to other Federal regulations. In addition to 
compliance with the regulations set forth in this subpart, facilities 
are obliged to meet the applicable provisions of other Federal laws and 
regulations, including but not limited to those pertaining to 
nondiscrimination on the basis of race, color, national origin, 
handicap, or age (38 CFR part 18); protection of human subjects of 
research (45 CFR part 46), section 504 of the Rehabilitation Act of 
1993, Public Law 93-112; Drug-Free Workplace Act of 1988, 38 CFR part 
44, section 44.100 through 44.420; section 319 of Public Law 101-121; 
Title VI of the Civil Rights Act of 1964, 38 CFR 18.1-18.3. Although 
these regulations are not in themselves considered requirements under 
this part, their violation may result in the termination or suspension 
of, or the refusal to grant or continue payment with Federal funds.
    (u) Intermingling. A building housing a facility recognized as a 
State home for providing nursing home care may only provide nursing home 
care in the areas of the building recognized as a State home for 
providing nursing home care.
    (v) VA Management of State Veterans Homes. Except as specifically 
provided by statute or regulations, VA employees have no authority 
regarding the management or control of State homes providing nursing 
home care.

(Authority: 38 U.S.C. 101, 501, 1710, 1741-1743, 8135)



PART 52_PER DIEM FOR ADULT DAY HEALTH CARE OF VETERANS IN STATE HOMES
--Table of Contents




                            Subpart A_General

Sec.
52.1 Purpose.
52.2 Definitions.

[[Page 916]]

  Subpart B_Obtaining Per Diem for Adult Day Health Care in State Homes

52.10 Per diem based on recognition and certification.
52.20 Application for recognition based on certification.
52.30 Recognition and certification.

                       Subpart C_Per Diem Payments

52.40 Monthly payment.
52.50 Eligible veterans.

                           Subpart D_Standards

52.60 Standards applicable for payment of per diem.
52.61 General requirements for adult day health care program.
52.70 Participant rights.
52.71 Participant and family caregiver responsibilities.
52.80 Enrollment, transfer and discharge rights.
52.90 Participant behavior and program practices.
52.100 Quality of life.
52.110 Participant assessment.
52.120 Quality of care.
52.130 Nursing services.
52.140 Dietary services.
52.150 Physician services.
52.160 Specialized rehabilitative services.
52.170 Dental services.
52.180 Administration of drugs.
52.190 Infection control.
52.200 Physical environment.
52.210 Administration.
52.220 Transportation.

    Authority: 38 U.S.C. 101, 501, 1741-1743, unless otherwise noted.

    Source: 67 FR 662, Jan. 7, 2002, unless otherwise noted.



                            Subpart A_General



Sec. 52.1  Purpose.

    This part sets forth the mechanism for paying per diem to State 
homes providing adult day health care to eligible veterans and includes 
quality assurance requirements that are intended to ensure that veterans 
receive high quality care in State homes.



Sec. 52.2  Definitions.

    For purposes of this part--
    Activities of daily living (ADLs) means the functions or tasks for 
self-care usually performed in the normal course of a day, i.e., 
mobility, bathing, dressing, grooming, toileting, transferring, and 
eating.
    Clinical nurse specialist means a licensed professional nurse with a 
master's degree in nursing and a major in a clinical nursing specialty 
from an academic program accredited by the National League for Nursing.
    Facility means a building or any part of a building for which a 
State has submitted an application for recognition as a State home for 
the provision of adult day health care or a building, or any part of a 
building, which VA has recognized as a State home for the provision of 
adult day health care.
    Instrumental activities of daily living (IADLs) means functions or 
tasks of independent living, i.e., shopping, housework, meal preparation 
and cleanup, laundry, taking medication, money management, 
transportation, correspondence, and telephone use.
    Nurse practitioner means a licensed professional nurse who is 
currently licensed to practice in the State; who meets the State's 
requirements governing the qualifications of nurse practitioners; and 
who is currently certified as an adult, family, or gerontological nurse 
practitioner by the American Nurses Association.
    Physician means a doctor of medicine or osteopathy legally 
authorized to practice medicine or surgery in the State.
    Physician assistant means a person who meets the applicable State 
requirements for physician assistant, is currently certified by the 
National Commission on Certification of Physician Assistants (NCCPA) as 
a physician assistant, and has an individualized written scope of 
practice that determines the authorization to write medical orders, 
prescribe medications and to accomplish other clinical tasks under the 
appropriate supervision by the primary care physician.
    Primary physician or Primary care physician means a designated 
generalist physician responsible for providing, directing and 
coordinating health care that is indicated for the residents.
    State means each of the several States, territories, and possessions 
of the United States, the District of Columbia, and the Commonwealth of 
Puerto Rico.

[[Page 917]]

    State home means a home approved by VA which a State established 
primarily for veterans disabled by age, disease, or otherwise, who by 
reason of such disability are incapable of earning a living. A State 
home may provide domiciliary care, nursing home care, adult day health 
care, and hospital care. Hospital care may be provided only when the 
State home also provides domiciliary and/or nursing home care.
    VA means the U.S. Department of Veterans Affairs.

(Authority: 38 U.S.C. 101, 501, 1741-1743)



  Subpart B_Obtaining Per Diem for Adult Day Health Care in State Homes



Sec. 52.10  Per diem based on recognition and certification.

    VA will pay per diem to a State for providing adult day health care 
to eligible veterans in a facility if the Under Secretary for Health 
recognizes the facility as a State home based on a current certification 
that the facility management meet the standards of subpart D of this 
part.

(Authority: 38 U.S.C. 101, 501, 1741-1743)



Sec. 52.20  Application for recognition based on certification.

    To apply for recognition and certification of a State home for adult 
day health care, a State must:
    (a) Send a request for recognition and certification to the Under 
Secretary for Health (10), VA Central Office, 810 Vermont Avenue, NW, 
Washington, DC 20420. The request must be in the form of a letter and 
must be signed by the State official authorized to establish the State 
home;
    (b) Allow VA to survey the facility as set forth in Sec. 52.30(c); 
and
    (c) Upon request from the director of the VA medical center of 
jurisdiction, submit to the director all documentation required under 
subpart D of this part.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.30  Recognition and certification.

    (a)(1) The Under Secretary for Health will make the determination 
regarding recognition and the initial determination regarding 
certification, after receipt of a tentative determination from the 
director of the VA medical center of jurisdiction, regarding whether the 
facility and program management meet or do not meet the standards of 
subpart D of this part. The Under Secretary for Health will notify the 
official in charge of the program, the State official authorized to 
oversee operations of the State home, the VA Network Director (10N1-22), 
Assistant Deputy Under Secretary for Health (10N), and the Chief 
Consultant, Geriatrics and Extended Care Strategic Healthcare Group 
(114), of the action taken.
    (2) For each facility recognized as a State home, the director of 
the VA medical center of jurisdiction will certify annually whether the 
facility and program management meet, provisionally meet, or do not meet 
the standards of subpart D of this part (this certification should be 
made every 12 months during the recognition anniversary month or during 
a month agreed upon by the VA medical center director and officials of 
the State home facility). A provisional certification will be issued by 
the director only upon a determination that the facility or program 
management does not meet one or more of the standards in subpart D of 
this part, that the deficiencies do not jeopardize the health or safety 
of the residents, and that the program management and the director have 
agreed to a plan of correction to remedy the deficiencies in a specified 
amount of time (not more time than the VA medical center of jurisdiction 
director determines is reasonable for correcting the specific 
deficiencies). The director of the VA medical center of jurisdiction 
will notify the official in charge of the program, the State official 
authorized to oversee the operations of the State home, the VA Network 
Director (10N1-22), Assistant Deputy Under Secretary for Health (10N) 
and the Chief Consultant, Geriatrics and Extended Care Strategic 
Healthcare Group (114), of the certification, provisional certification, 
or noncertification.

[[Page 918]]

    (b) Once a program has achieved recognition, the recognition will 
remain in effect unless the State requests that the recognition be 
withdrawn or the Under Secretary for Health makes a final decision that 
the facility or program management does not meet the standards of 
subpart D of this part. Recognition of a program will apply only to the 
facility as it exists at the time of recognition; any annex, branch, 
enlargement, expansion, or relocation must be separately recognized.
    (c) Both during the application process for recognition and after 
the Under Secretary for Health has recognized a facility, VA may survey 
the facility as necessary to determine if the facility and program 
management comply with the provisions of this part. Generally, VA will 
provide advance notice to the State before a survey occurs; however, 
surveys may be conducted without notice. A survey, as necessary, will 
cover all parts of the facility, and include a review and audit of all 
records of the program that have a bearing on compliance with any of the 
requirements of this part (including any reports from State or local 
entities). For purposes of a survey, at the request of the director of 
the VA medical center of jurisdiction, the State home adult day care 
health program management must submit to the director a completed VA 
Form 10-3567, ``Staffing Profile'', set forth at 38 CFR 58.10. The 
director of the VA medical center of jurisdiction will designate the VA 
officials to survey the facility. These officials may include 
physicians; nurses; pharmacists; dietitians; rehabilitation therapists; 
social workers; and representatives from health administration, 
engineering, environmental management systems, and fiscal officers.
    (d) If the director of the VA medical center of jurisdiction 
determines that the State home facility or program management does not 
meet the standards of this part, the director will notify the State home 
program manager in writing of the standards not met. The director will 
send a copy of this notice to the State official authorized to oversee 
operations of the facility, the VA Network Director (10N1-22), the 
Assistant Deputy Under Secretary for Health (10N), and the Chief 
Consultant, Geriatrics and Extended Care Strategic Healthcare Group 
(114). The letter will include the reasons for the decision and indicate 
that the State has the right to appeal the decision.
    (e) The State must submit an appeal to the Under Secretary for 
Health in writing within 30 days of receipt of the notice of failure to 
meet the standards. In its appeal, the State must explain why the 
determination is inaccurate or incomplete and provide any new and 
relevant information not previously considered. Any appeal that does not 
identify a reason for disagreement will be returned to the sender 
without further consideration.
    (f) After reviewing the matter, including any relevant supporting 
documentation, the Under Secretary for Health will issue a written 
determination that affirms or reverses the previous determination. If 
the Under Secretary for Health decides that the State home facility or 
program management does not meet the standards of subpart D of this 
part, the Under Secretary for Health will withdraw recognition and stop 
paying per diem for care provided on and after the date of the decision. 
The decision of the Under Secretary for Health will constitute a final 
VA decision. The Under Secretary for Health will send a copy of this 
decision to the State home facility and to the State official authorized 
to oversee the operations of the State home.
    (g) In the event that a VA survey team or other VA medical center 
staff identifies any condition at the State home facility that poses an 
immediate threat to public or patient safety or other information 
indicating the existence of such a threat, the director of the VA 
medical center of jurisdiction will immediately report this to the VA 
Network Director (10N1-22), Assistant Deputy Under Secretary for Health 
(10N), Chief Consultant, Geriatrics and Extended Care Strategic 
Healthcare Group (114), and State official authorized to oversee 
operations of the State home.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)

[[Page 919]]



                       Subpart C_Per Diem Payments



Sec. 52.40  Monthly payment.

    (a)(1) During Fiscal Year 2002, VA will pay monthly one-half of the 
total cost of each eligible veteran's adult day health care for each day 
the veteran is in a facility recognized as a State home for adult day 
health care, not to exceed $34.64 per diem.
    (2) Per diem will be paid only for a day that the veteran is under 
the care of the facility at least six hours. For purposes of this 
paragraph a day means
    (i) Six hours or more in one calendar day; or
    (ii) Any two periods of at least 3 hours each (but each less than 
six hours) in any two calendar days in a calendar month.
    (3) As a condition for receiving payment of per diem under this 
part, the State must submit a completed VA Form 10-5588, ``State Home 
Report and Statement of Federal Aid Claimed.'' This form is set forth in 
full at 38 CFR 58.11.
    (4) Initial payments will not be made until the Under Secretary for 
Health recognizes the State home. However, payments will be made 
retroactively for care that was provided on and after the date of the 
completion of the VA survey of the facility that provided the basis for 
determining that the facility met the standards of this part.
    (5) As a condition for receiving payment of per diem under this 
part, the State must submit to the VA medical center of jurisdiction for 
each veteran the following completed VA forms: 10-10EZ, ``Application 
for Medical Benefits'', and 10-10SH, ``State Home Program Application 
for Care--Medical Certification'', at the time of enrollment and with 
any request for a change in the level of care (nursing home, domiciliary 
or hospital care). These forms are set forth in full at 38 CFR 58.12 and 
58.13, respectively. If the program is eligible to receive per diem 
payments for adult day health care for a veteran, VA will pay per diem 
under this part from the date of receipt of the completed forms required 
by this paragraph (a)(5), except that VA will pay per diem from the day 
on which the veteran was enrolled in the program if VA receives the 
completed forms within 10 days after enrollment.
    (b) For determining ``the one-half of the total cost'' under 
paragraph (a)(1) of this section, total per diem costs for an eligible 
veteran's adult day health care consist of those direct and indirect 
costs attributable to adult day health care at the facility divided by 
the total number of participants enrolled in the adult day health care 
program. Relevant cost principles are set forth in the Office of 
Management and Budget (OMB) Circular number A-87, dated May 4, 1995, 
``Cost Principles for State, Local, and Indian Tribal Governments'' (OMB 
Circulars are available at the addresses in 5 CFR 1310.3).

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.50  Eligible veterans.

    A veteran is an eligible veteran under this part if VA determines 
that the veteran meets the definition of a veteran in 38 U.S.C. 101, is 
not barred from receiving this VA care under 38 U.S.C. 5303-5303A, needs 
adult day health care, and is within one of the following categories:
    (a) Veterans with service-connected disabilities;
    (b) Veterans who are former prisoners of war;
    (c) Veterans who were discharged or released from active military 
service for a disability incurred or aggravated in the line of duty;
    (d) Veterans who receive disability compensation under 38 U.S.C. 
1151;
    (e) Veterans whose entitlement to disability compensation is 
suspended because of the receipt of retired pay;
    (f) Veterans whose entitlement to disability compensation is 
suspended pursuant to 38 U.S.C. 1151, but only to the extent that such 
veterans' continuing eligibility for adult day health care is provided 
for in the judgment or settlement described in 38 U.S.C. 1151;
    (g) Veterans who VA determines are unable to defray the expenses of 
necessary care as specified under 38 U.S.C. 1722(a);
    (h) Veterans of the Mexican Border period or of World War I;

[[Page 920]]

    (i) Veterans solely seeking care for a disorder associated with 
exposure to a toxic substance or radiation or for a disorder associated 
with service in the Southwest Asia theater of operations during the Gulf 
War, as provided in 38 U.S.C. 1710(e);
    (j) Veterans who agree to pay to the United States the applicable 
co-payment determined under 38 U.S.C. 1710(f) and 1710(g), if they seek 
VA (U.S. Department of Veterans Affairs) hospital, nursing home, or 
outpatient care.

(Authority: 38 U.S.C. 101, 501, 1741-1743)



                           Subpart D_Standards



Sec. 52.60  Standards applicable for payment of per diem.

    The provisions of this subpart are the standards that a State home 
and program management must meet for the State to receive per diem for 
adult day health care provided at that facility.



Sec. 52.61  General requirements for adult day health care program.

    Adult day health care must be a therapeutically-oriented outpatient 
day program, which provides health maintenance and rehabilitative 
services to participants. The program must provide individualized care 
delivered by an interdisciplinary health care team and support staff, 
with an emphasis on helping participants and their caregivers to develop 
the knowledge and skills necessary to manage care requirements in the 
home. Adult day health care is principally targeted for complex medical 
and/or functional needs of geriatric patients.

(Authority: 38 U.S.C. 101, 501, 1741-1743)



Sec. 52.70  Participant rights.

    The participant has a right to a dignified existence, self-
determination, and communication with and access to persons and services 
inside and outside the facility. The program management must protect and 
promote the rights of each participant, including each of the following 
rights:
    (a) Exercise of rights. (1) The participant has the right to 
exercise his or her rights as a participant of the program and as a 
citizen or resident of the United States.
    (2) The participant has the right to be free of interference, 
coercion, discrimination, and reprisal from the program management in 
exercising his or her rights.
    (3) The participant has the right to freedom from chemical or 
physical restraint.
    (4) In the case of a participant determined incompetent under the 
laws of a State by a court of jurisdiction, the rights of the 
participant are exercised by the person appointed under State law to act 
on the participant's behalf.
    (b) Notice of rights and services. (1) The program management must 
inform the participant both orally and in writing in a language that the 
participant understands of his or her rights and all rules and 
regulations governing participant conduct and responsibilities during 
enrollment in the program. Such notification must be made prior to or 
upon enrollment and periodically during the participant's enrollment.
    (2) Participants or their legal representatives have the right--
    (i) Upon an oral or written request, to access all records 
pertaining to them including current participant records within 24 hours 
(excluding weekends and holidays); and
    (ii) After receipt of their records for review, to purchase, at a 
cost not to exceed the community standard, photocopies of the records or 
any portions of them upon request and with two working days advance 
notice to the facility management.
    (3) Participants have the right to be fully informed in language 
that they can understand of their total health status.
    (4) Participants have the right to refuse treatment, to refuse to 
participate in patient activities, to refuse to participate in 
experimental research, and to formulate an advance directive as 
specified in paragraph (a)(7) of this section.
    (5) The program management must inform each participant before, or 
at the time of enrollment, and periodically during the participant's 
stay, of services available in the facility and of charges for those 
services to be billed to the participant.
    (6) The program management must furnish a written description of 
legal

[[Page 921]]

rights which includes a statement that the participant may file a 
complaint with the State (agency) concerning participant abuse and 
neglect.
    (7) The program management must have written policies and procedures 
regarding advance directives (e.g., living wills). These requirements 
include provisions to inform and provide written information to all 
participants concerning the right to accept or refuse medical or 
surgical treatment and, at the individual's option, formulate an advance 
directive. This includes a written description of the facility's 
policies to implement advance directives and applicable State law.
    (8) Notification of changes. (i) Program management must immediately 
inform the participant; consult with the primary physician; and notify 
the participant's legal representative or an interested family member 
when there is--
    (A) An accident involving the participant which results in injury 
and has the potential for requiring physician intervention;
    (B) A significant change in the participant's physical, mental, or 
psychosocial status (e.g., a deterioration in health, mental, or 
psychosocial status in either life-threatening conditions or clinical 
complications);
    (C) A need to alter treatment significantly (i.e., a need to 
discontinue an existing form of treatment due to adverse consequences, 
or to commence a new form of treatment); or
    (D) A decision to transfer or discharge the participant from the 
program.
    (ii) The program management must also promptly notify the 
participant and the participant's legal representative or interested 
family member when there is a change in resident rights under Federal or 
State law or regulations as specified in paragraph (b)(1) of this 
section.
    (iii) The program management must record and periodically update the 
address and phone number of the participant's legal representative, or 
interested family member, and the primary physician.
    (c) Free choice. (1) The participant has the right to--
    (i) Be fully informed in advance about care and treatment and of any 
changes in that care or treatment that may affect the participant's 
well-being; and
    (ii) Unless determined incompetent or otherwise determined to be 
incapacitated under the laws of the State, participate in planning care 
and treatment or changes in care and treatment.
    (2) If the participant is determined incompetent or otherwise 
determined to be incapacitated under the laws of the State, the 
participant's legal representative or interested family member(s) has 
the right to participate in planning care and treatment or changes in 
care and treatment.
    (d) Privacy and confidentiality. Participants have the right to 
privacy and confidentiality of their personal and clinical records.
    (1) Participants have a right to privacy in their medical treatment 
and personal care.
    (2) Except as provided in paragraph (d)(3) of this section, 
participants may approve or refuse the release of personal and clinical 
records to any individual outside the facility.
    (3) The participant's right to refuse release of personal and 
clinical records does not apply when--
    (i) The participant is transferred to another health care 
institution; or
    (ii) The release is required by law.
    (e) Grievances. A participant has the right to--
    (1) Voice grievances without discrimination or reprisal. 
Participants may voice grievances with respect to treatment received and 
not received; and
    (2) Prompt efforts by facility management to resolve grievances the 
participant may have, including those with respect to the behavior of 
other participants.
    (f) Examination of survey results. A participant has the right to--
    (1) Examine the results of the most recent VA survey with respect to 
the program. The program management must make the results available for 
examination in a place readily accessible to participants, and must post 
a notice of their availability; and
    (2) Receive information from agencies acting as client advocates, 
and be

[[Page 922]]

afforded the opportunity to contact these agencies.
    (g) Work. The participant has the right to--
    (1) Refuse to perform services for the facility;
    (2) Perform services for the facility, if he or she chooses, when--
    (i) The facility has documented the need or desire for work therapy 
in the plan of care;
    (ii) The plan specifies the nature of the services performed and 
whether the services are voluntary or paid;
    (iii) Compensation for (work therapy) paid services is at or above 
prevailing rates; and
    (iv) The participant agrees to the work therapy arrangement 
described in the plan of care.
    (h) Access and visitation rights. (1) The program management must 
provide immediate access to any participant by the following:
    (i) Any representative of the Under Secretary for Health;
    (ii) Any representative of the State;
    (iii) The State long-term care ombudsman;
    (iv) Immediate family or other relatives of the participant subject 
to the participant's right to deny or withdraw consent at any time; and
    (v) Others who are visiting subject to reasonable restrictions and 
the participant's right to deny or withdraw consent at any time.
    (2) The program management must provide reasonable access to any 
participant by any entity or individual that provides health, social, 
legal, or other services to the participant, subject to the 
participant's right to deny or withdraw consent at any time.
    (3) The program management must allow representatives of the State 
Ombudsman Program to examine a participant's clinical records with the 
permission of the participant or the participant's legal representative, 
subject to State law.
    (i) Telephone. The participant has the right to reasonable access to 
use a telephone where calls can be made without being overheard.
    (j) Personal property. The participant has the right to have at 
least one change of personal clothing.
    (k) Self-administration of drugs. An individual participant may 
self-administer drugs if the interdisciplinary team has determined that 
this practice is safe for the individual and is a part of the care plan.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.71  Participant and family caregiver responsibilities.

    The program management has a written statement of participant and 
family caregiver responsibilities that are posted in the facility and 
provided to the participant and caregiver at the time of the intake 
screening. The Statement of responsibilities must include the following:
    (a) Treat personnel with respect and courtesy;
    (b) Communicate with staff to develop a relationship of trust;
    (c) Make appropriate choices and seek appropriate care;
    (d) Ask questions and confirm understanding of instructions;
    (e) Share opinions, concerns, and complaints with the program 
director;
    (f) Communicate any changes in the participant's condition;
    (g) Communicate to the program director about medications and 
remedies used by the participant;
    (h) Let the program director know if the participant decides not to 
follow any instructions or treatment; and
    (i) Communicate with the adult day health care staff if the 
participant is unable to attend the adult day health care program.

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.80  Enrollment, transfer and discharge rights.

    (a) Participants in the adult day health care program must meet the 
provisions of this part that apply to participants and--
    (1) Must meet at least two of the following indicators:
    (i) Dependence in two or more activities of daily living (ADLs).

[[Page 923]]

    (ii) Dependence in three or more instrumental activities of daily 
living (IADLs).
    (iii) Advanced age, i.e., 75 years old or over.
    (iv) High use of medical services, i.e., three or more 
hospitalizations in past 12 months; or 12 or more hospitalizations, 
outpatient clinic visits; or emergency evaluation unit visits, in the 
past 12 months.
    (v) Diagnosis of clinical depression.
    (vi) Recent discharge from nursing home or hospital.
    (vii) Significant cognitive impairment, particularly when 
characterized by multiple behavior problems;
    (2) Must have a supportive living arrangement sufficient to meet 
their health care needs when not participating in the adult day health 
care program; and
    (3) Must be able to benefit from the adult day health care program.
    (b) Transfer and discharge--(1) Definition. Transfer and discharge 
includes movement of a participant to a program outside of the adult day 
health care program whether or not that program or facility is in the 
same physical plant.
    (2) Transfer and discharge requirements. All participants' 
preparedness for discharge from adult day health care must be a part of 
a comprehensive care plan. The possible reasons for discharge must be 
discussed with the participant and family members at the time of intake 
screening. Program management must permit each participant to remain in 
the program, and not transfer or discharge the participant from the 
program unless--
    (i) The transfer or discharge is necessary for the participant's 
welfare and the participant's needs cannot be met in the adult day 
health care setting;
    (ii) The transfer or discharge is appropriate because the 
participant's health has improved sufficiently so the participant no 
longer needs the services provided in the adult day health care setting;
    (iii) The safety of individuals in the program is endangered;
    (iv) The health of individuals in the program would otherwise be 
endangered;
    (v) The participant has failed, after reasonable and appropriate 
notice, to pay for participation in the adult day health care program; 
or
    (vi) The adult day health care program ceases to operate.
    (3) Documentation. When the facility transfers or discharges a 
participant under any of the circumstances specified in paragraphs 
(b)(2)(i) through (vi) of this section, the primary physician must 
document the reason for such action in the participant's clinical 
record.
    (4) Notice before transfer. Before a facility transfers or 
discharges a participant, the program management must--
    (i) Notify the participant and a family member or legal 
representative of the participant of the transfer or discharge and the 
reasons for the move in writing and in a language and manner they can 
understand;
    (ii) Record the reasons in the participant's clinical record; and
    (iii) Include in the notice the items described in paragraph (a)(6) 
of this section.
    (5) Timing of the notice. (i) The notice of transfer or discharge 
required under paragraph (b)(4) of this section must be made by program 
management at least 30 days before the participant is transferred or 
discharged, except when specified in paragraph (b)(5)(ii) of this 
section.
    (ii) Notice may be made as soon as practicable before transfer or 
discharge when--
    (A) The safety of individuals in the program would be endangered;
    (B) The health of individuals in the program would be otherwise 
endangered;
    (C) The participant's health improves sufficiently so the 
participant no longer needs the services provided by the adult day 
health care program;
    (D) The resident's needs cannot be met in the adult day health care 
program.
    (6) Contents of the notice. The written notice specified in 
paragraph (b)(4) of this section must include the following:
    (i) The reason for transfer or discharge;
    (ii) The effective date of transfer or discharge;

[[Page 924]]

    (iii) The location to which the participant is transferred or 
discharged, if any;
    (iv) A statement that the participant has the right to appeal the 
action to the State official responsible for the oversight of State 
Veterans Home programs; and
    (v) The name, address and telephone number of the State long-term 
care ombudsman.
    (7) Orientation for transfer or discharge. The program management 
must provide sufficient preparation and orientation to participants to 
ensure safe and orderly transfer or discharge from the program.
    (c) Equal access to quality care. The program management must 
establish and maintain identical policies and practices regarding 
transfer, discharge, and the provision of services for all individuals 
regardless of source of payment.
    (d) Enrollment policy. The program management must not require a 
third party guarantee of payment to the program as a condition of 
enrollment or expedited enrollment, or continued enrollment in the 
program. However, program management may require a participant or an 
individual who has legal access to a participant's income or resources 
to pay for program care from the participant's income or resources, when 
available.
    (e) Hours of operation. Each adult day health care program must 
provide at least 8 hours of operation five days a week. The hours of 
operation must be flexible and responsive to caregiver needs.
    (f) Caregiver support. The adult day health care program must 
develop a Caregiver Program which offers mutual support, information and 
education.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.90  Participant behavior and program practices.

    (a) Restraints. (1) The participant has a right to be free from any 
chemical or physical restraints imposed for purposes of discipline or 
convenience. When a restraint is applied or used, the purpose of the 
restraint is reviewed and is justified as a therapeutic intervention and 
documented in the participant's clinical record.
    (i) Chemical restraint is the inappropriate use of a sedating 
psychotropic drug to manage or control behavior.
    (ii) Physical restraint is any method of physically restricting a 
person's freedom of movement, physical activity or normal access to his 
or her body.
    (2) The program management uses a system to achieve a restraint-free 
environment.
    (3) The program management collects data about the use of 
restraints.
    (4) When alternatives to the use of restraint are ineffective, 
restraint is safely and appropriately used.
    (b) Abuse. (1) The participant has the right to be free from mental, 
physical, sexual, and verbal abuse or neglect, corporal punishment, and 
involuntary seclusion.
    (i) Mental abuse includes humiliation, harassment, and threats of 
punishment or deprivation.
    (ii) Physical abuse includes hitting, slapping, pinching, kicking or 
controlling behavior through corporal punishment.
    (iii) Sexual abuse includes sexual harassment, sexual coercion, and 
sexual assault.
    (iv) Neglect is any impaired quality of life for an individual 
because of the absence of minimal services or resources to meet basic 
needs. Neglect may include withholding or inadequately providing food 
and hydration, clothing, medical care, and good hygiene. It also 
includes placing the individual in unsafe or unsupervised conditions.
    (v) Involuntary seclusion is a participant's separation from other 
participants against his or her will or the will of his or her legal 
representative.
    (2) [Reserved]
    (c) Staff treatment of participants. The program management must 
develop and implement written policies and procedures that prohibit 
mistreatment, neglect, and abuse of participants and misappropriation of 
participant property.
    (1) The program management must--
    (i) Not employ individuals who--

[[Page 925]]

    (A) Have been found guilty of abusing, neglecting, or mistreating 
individuals by a court of law; or
    (B) Have had a finding entered into an applicable State registry or 
with the applicable licensing authority concerning abuse, neglect, 
mistreatment of individuals or misappropriation of their property; and
    (ii) Report any knowledge it has of actions by a court of law 
against an employee, which would indicate unfitness for service as a 
program assistant or other program staff to the State oversight agency 
director and licensing authorities.
    (2) The program management must ensure that all alleged violations 
involving mistreatment, neglect, or abuse, including injuries of unknown 
source, and misappropriation of participant property are reported 
immediately to the State oversight agency director and to other 
officials in accordance with State law through established procedures.
    (3) The program management must have evidence that all alleged 
violations are thoroughly investigated, and must prevent potential abuse 
while the investigation is in progress.
    (4) The results of all investigations must be reported to the State 
oversight agency director or the designated representative and to other 
officials in accordance with State law within five working days of the 
incident, and appropriate corrective action must be taken if the alleged 
violation is verified.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.100  Quality of life.

    Program management must provide an environment and provide or 
coordinate care that supports the quality of life of each participant by 
maximizing the individual's potential strengths and skills.
    (a) Dignity. The program management must promote care for 
participants in a manner and in an environment that maintains or 
enhances each participant's dignity and respect in full recognition of 
his or her individuality.
    (b) Self-determination and participation. The participant has the 
right to--
    (1) Choose activities, schedules, and health care consistent with 
his or her interests, assessments, and plans of care;
    (2) Interact with members of the community both inside and outside 
the program; and
    (3) Make choices about aspects of his or her life in the program 
that are significant to the participant.
    (c) Participant and family concerns. The program management must 
document any concerns submitted to the management of the program by 
participants or family members.
    (1) A participant's family has the right to meet with families of 
other participants in the program.
    (2) Staff or visitors may attend participant or family meetings at 
the group's invitation.
    (3) The program management must respond to written requests that 
result from group meetings.
    (4) The program management must listen to the views of any 
participant or family group and act upon the concerns of participants 
and families regarding policy and operational decisions affecting 
participant care in the program.
    (d) Participation in other activities. A participant has the right 
to participate in social, religious, and community activities that do 
not interfere with the rights of other participants in the program.
    (e) Therapeutic participant activities. (1) The program management 
must provide for an ongoing program of activities designed to meet, in 
accordance with the comprehensive assessment, the interests and the 
physical, mental, and psychosocial well being of each participant.
    (2) The activities program must be directed by a qualified 
professional who is a qualified therapeutic recreation specialist or an 
activities professional who--
    (i) Is licensed, if applicable, by the State in which practicing; 
and
    (ii) Is certified as a therapeutic recreation specialist or an 
activities professional by a recognized certifying body.

[[Page 926]]

    (3) A critical role of the adult day health care program is to build 
relationships and create a culture that supports, involves, and 
validates the participant. Therapeutic activity refers to that 
supportive culture and is a significant aspect of the individualized 
plan of care. A participant's activity includes everything the 
individual experiences during the day, not just arranged events. As part 
of effective therapeutic activity the adult day health care program 
must:
    (i) Provide direction and support for participants, including 
breaking down activities into small, discrete steps or behaviors, if 
needed by a participant;
    (ii) Have alternative programming available for any participant 
unable or unwilling to take part in group activity;
    (iii) Design activities that promote personal growth and enhance the 
self-image and/or improve or maintain the functioning level of 
participants to the extent possible;
    (iv) Provide opportunities for a variety of involvement (social, 
intellectual, cultural, economic, emotional, physical, and spiritual) at 
different levels, including community activities and events;
    (v) Emphasize participants' strengths and abilities rather than 
impairments and contribute to participant feelings of competence and 
accomplishment; and
    (vi) Provide opportunities to voluntarily perform services for 
community groups and organizations.
    (f) Social services. (1) The facility management must provide 
medically-related social services to participants and their families.
    (2) An adult day health care program must employ or contract for a 
qualified social worker to provide social services.
    (3) Qualifications of social worker. A qualified social worker is an 
individual with--
    (i) A bachelor's degree in social work from a school accredited by 
the Council of Social Work Education (Note: A master's degree social 
worker with experience in long-term care is preferred);
    (ii) A social work license from the State in which the State home is 
located, if license is offered by the State; and
    (iii) A minimum of one year of supervised social work experience in 
a health care setting working directly with individuals.
    (4) The facility management must have sufficient social worker and 
support staff to meet participant and family social services needs. The 
adult day health care social services must:
    (i) Provide counseling to participants and families/caregivers;
    (ii) Facilitate the participant's adaptation to the adult day health 
care program and active involvement in the plan of care, if appropriate;
    (iii) Arrange for services not provided by the adult day health care 
program and work with these resources to coordinate services;
    (iv) Serve as participant advocate by asserting and safeguarding the 
human and civil rights of the participants;
    (v) Assess signs of mental illness and/or dementia and make 
appropriate referrals;
    (vi) Provide information and referral for persons not appropriate 
for adult day health care program;
    (vii) Provide family conferences and serve as liaison between 
participant, family/caregiver and program staff;
    (viii) Provide individual or group counseling and support to 
caregivers and participants;
    (ix) Conduct support groups or facilitate participant or family/
caregiver participation in support groups;
    (x) Assist program staff in adapting to changes in participants' 
behavior; and
    (xi) Provide or arrange for individual, group, or family 
psychotherapy for participants' with significant psychosocial needs.
    (5) Space for social services must be adequate to ensure privacy for 
interviews.
    (g) Environment. The program management must provide--
    (1) A safe, clean, comfortable, and homelike environment, and 
support the participants' ability to function as independently as 
possible and to engage in program activities;
    (2) Housekeeping and maintenance services necessary to maintain a 
sanitary, orderly, and comfortable interior;

[[Page 927]]

    (3) Private storage space for each participant sufficient for a 
change of clothes;
    (4) Interior signs to facilitate participants' ability to move about 
the facility independently and safely;
    (5) A clean bed available for acute illness, when indicated;
    (6) A shower for resident's need, when indicated;
    (7) Adequate and comfortable lighting levels in all areas;
    (8) Comfortable and safe temperature levels; and
    (9) Comfortable sound levels.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.110  Participant assessment.

    The program management must conduct initially, semi-annually and as 
required by a change in the participant's condition a comprehensive, 
accurate, standardized, reproducible assessment of each participant's 
functional capacity.
    (a) Intake screening. An intake screening must be completed to 
determine the appropriateness of the adult day health care program for 
each participant.
    (b) Enrollment orders. The program management must have physician 
orders for the participant's immediate care and a medical assessment, 
including a medical history and physical examination, within a time 
frame appropriate to the participant's condition, not to exceed 72 hours 
after enrollment, except when an examination was performed within five 
days before enrollment and the findings were provided and placed in the 
clinical record on enrollment.
    (c) Comprehensive assessments--(1) The program management must make 
a comprehensive assessment of a participant's needs using (on and after 
January 1, 2002) the Minimum Data Set for Home Care (MSD-HC) Instrument 
Version 2.0, August 2, 2000.
    (2) Frequency. Participant assessments must be completed--
    (i) No later than 14 calendar days after the date of enrollment; and
    (ii) Promptly after a significant change in the participant's 
physical, mental, or social condition.
    (3) Review of assessments. Program management must review each 
participant no less than once every six months and as appropriate and 
revise the participant's assessment to assure the continued accuracy of 
the assessment.
    (4) Use. The results of the assessment are used to develop, review, 
and revise the participant's individualized comprehensive plan of care, 
under paragraph (e) of this section.
    (d) Accuracy of assessments--(1) Coordination. (i) Each assessment 
must be conducted or coordinated with the appropriate participation of 
health professionals.
    (ii) Each assessment must be conducted or coordinated by a 
registered nurse who signs and certifies the completion of the 
assessment.
    (2) Certification. Each person who completes a portion of the 
assessment must sign and certify the accuracy of that portion of the 
assessment.
    (e) Comprehensive care plans--(1) The program management must 
develop an individualized comprehensive care plan for each participant 
that includes measurable objectives and timetables to meet a 
participant's physical, mental, and psychosocial needs that are 
identified in the comprehensive assessment. The care plan must describe 
the following--
    (i) The services that are to be provided by the program and by other 
sources to attain or maintain the participant's highest physical, 
mental, and psychosocial well-being as required under Sec. 52.120;
    (ii) Any services that would otherwise be required under Sec. 
52.120 but are not provided due to the participant's exercise of rights 
under Sec. 52.70, including the right to refuse treatment under Sec.  
52.70(b)(4);
    (iii) Type and scope of interventions to be provided in order to 
reach desired, realistic outcomes;
    (iv) Roles of participant and family/caregiver; and
    (v) Discharge or transition plan, including specific criteria for 
discharge or transfer.

[[Page 928]]

    (2) A comprehensive care plan must be--
    (i) Developed within 21 calendar days from the date of the adult day 
care enrollment and after completion of the comprehensive assessment;
    (ii) Assigned to one team member for the accountability of 
coordinating the completion of the interdisciplinary plan;
    (iii) Prepared by an interdisciplinary team that includes the 
primary physician, a registered nurse with responsibility for the 
participant, social worker, recreational therapist and other appropriate 
staff in disciplines as determined by the participant's needs, the 
participation of the participant, and the participant's family or the 
participant's legal representative; and
    (iv) Periodically reviewed and revised by a team of qualified 
persons after each assessment.
    (3) The services provided or arranged by the facility must--
    (i) Meet professional standards of quality; and
    (ii) Be provided by qualified persons in accordance with each 
participant's written plan of care.
    (f) Discharge summary. Prior to discharging a participant, the 
program management must prepare a discharge summary that includes--
    (1) A recapitulation of the participant's care;
    (2) A summary of the participant's status at the time of the 
discharge to include items in paragraph (c)(2) of this section; and
    (3) A discharge/transition plan related to changes in service needs 
and changes in functional status that prompted another level of care.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.120  Quality of care.

    Each participant must receive, and the program management must 
provide, the necessary care and services to attain or maintain the 
highest practicable physical, mental, and psychosocial well-being, in 
accordance with the comprehensive assessment and plan of care.
    (a) Reporting of sentinel events. (1) Definition. A sentinel event 
is an adverse event that results in the loss of life or limb or 
permanent loss of function.
    (2) Examples of sentinel events are as follows:
    (i) Any participant death, paralysis, coma or other major permanent 
loss of function associated with a medication error; or
    (ii) Any suicide or attempted suicide of a participant, including 
suicides following elopement (unauthorized departure) from the program; 
or
    (iii) Any elopement of a participant from the program resulting in a 
death or a major permanent loss of function; or
    (iv) Any procedure or clinical intervention, including restraints, 
that result in death or a major permanent loss of function; or
    (v) Assault, homicide or other crime resulting in a participant's 
death or major permanent loss of function; or
    (vi) A participant's fall that results in death or major permanent 
loss of function as a direct result of the injuries sustained in the 
fall; or
    (vii) A serious injury requiring hospitalization.
    (3) The program management must report sentinel events to the 
director of the VA medical center of jurisdiction within 24 hours of 
identification. The director of the VA medical center of jurisdiction 
must report sentinel events to the VA Network Director (10N1-22), 
Assistant Deputy Under Secretary for Health (10N), and Chief Consultant, 
Geriatrics and Extended Care Strategic Healthcare Group (114), within 24 
hours of identification and/or notification by the State home.
    (4) The program management must establish a mechanism to review and 
analyze a sentinel event resulting in a written report no later than 10 
working days following the event. The purpose of the review and analysis 
of a sentinel event in an adult day health care program is to prevent 
future injuries to residents, visitors, and personnel.
    (b) Activities of daily living. Based on the comprehensive 
assessment of a resident, the program management must ensure that--

[[Page 929]]

    (1) A participant's abilities in activities of daily living do not 
diminish unless circumstances of the individual's clinical condition 
demonstrate that diminution was unavoidable. This includes the 
participant's ability to--
    (i) Bathe, dress, and groom;
    (ii) Transfer and ambulate;
    (iii) Toilet; and
    (iv) Eat.
    (2) A participant is given the appropriate treatment and services to 
maintain or improve his or her abilities specified in paragraph (b)(1) 
of this section.
    (3) A participant who is unable to carry out activities of daily 
living receives the necessary services to maintain good nutrition, 
hydration, grooming, personal and oral hygiene, mobility, and bladder 
and bowel elimination.
    (c) Vision and hearing. To ensure that participants receive proper 
treatment and assistive devices to maintain vision and hearing 
abilities, the program management must, if necessary, assist the 
participant and family--
    (1) In making appointments; and
    (2) Arranging for transportation to and from the office of a 
practitioner specializing in the treatment of vision or hearing 
impairment or the office of a professional specializing in the provision 
of vision or hearing assistive devices.
    (d) Pressure ulcers. Based on the comprehensive assessment of a 
participant, the program management must ensure that--
    (1) A participant who enters the program without pressure ulcers 
does not develop pressure ulcers unless the individual's clinical 
condition demonstrates that they were unavoidable; and
    (2) A participant having pressure ulcers receives necessary 
treatment and services to promote healing, prevent infection and prevent 
new ulcers from developing.
    (e) Urinary and fecal incontinence. Based on the participant's 
comprehensive assessment, the program management must ensure that--
    (1) A participant who enters the program without an indwelling 
catheter is not catheterized unless the participant's clinical condition 
demonstrates that catheterization was necessary;
    (2) A participant who is incontinent of urine receives appropriate 
treatment and services to prevent urinary tract infections and to 
restore as much normal bladder function as possible; and
    (3) A participant who has persistent fecal incontinence receives 
appropriate treatment and services to treat reversible causes and to 
restore as much normal bowel function as possible.
    (f) Range of motion. Based on the comprehensive assessment of a 
participant, the program management must ensure that--
    (1) A participant who enters the program without a limited range of 
motion does not experience reduction in range of motion unless the 
participant's clinical condition demonstrates that a reduction in range 
of motion is unavoidable; and
    (2) A participant with a limited range of motion receives 
appropriate treatment and services to increase range of motion and/or to 
prevent further decrease in range of motion.
    (g) Mental and psychosocial functioning. Based on the comprehensive 
assessment of a participant, the program management must ensure that a 
participant who displays mental or psychosocial adjustment difficulty, 
receives appropriate treatment and services to correct the assessed 
problem.
    (h) Accidents. The program management must ensure that--
    (1) The participant environment remains as free of accident hazards 
as is possible; and
    (2) Each participant receives adequate supervision and assistance 
devices to prevent accidents.
    (i) Nutrition. Based on a participant's comprehensive assessment, 
the program management must ensure, by working with the family, that a 
participant--
    (1) Maintains acceptable parameters of nutritional status, such as 
body weight and protein levels, unless the participant's clinical 
condition demonstrates that this is not possible; and
    (2) Receives a therapeutic diet when a nutritional deficiency is 
identified.
    (j) Hydration. The program management must provide each participant 
with sufficient fluid intake during the day to maintain proper hydration 
and health.

[[Page 930]]

    (k) Unnecessary drugs--(1) General. Each participant's drug regimen 
must be free from unnecessary drugs. An unnecessary drug is any drug 
when used:
    (i) In excessive dose (including duplicate drug therapy); or
    (ii) For excessive duration; or
    (iii) Without adequate monitoring; or
    (iv) Without adequate indications for its use; or
    (v) In the presence of adverse consequences which indicate the dose 
should be reduced or discontinued; or
    (vi) Any combinations of the reasons in paragraphs (k)(1)(i) through 
(v) of this section.
    (2) Antipsychotic drugs. Based on a comprehensive assessment of a 
participant, the program management must ensure that--
    (i) Participants who have not used antipsychotic drugs are not given 
these drugs unless antipsychotic drug therapy is necessary to treat a 
specific condition as diagnosed by the primary physician and documented 
in the clinical record; and
    (ii) Participants who use antipsychotic drugs receive gradual dose 
reductions, and behavioral interventions, unless clinically 
contraindicated, in an effort to discontinue these drugs.
    (l) Medication errors. The program management must ensure that--
    (1) Medication errors are identified and reviewed on a timely basis; 
and
    (2) Strategies for preventing medication errors and adverse 
reactions are implemented.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.130  Nursing services.

    The program management must provide an organized nursing service 
with a sufficient number of qualified nursing personnel to meet the 
total nursing care needs, as determined by participant assessment and 
individualized comprehensive plans of care, of all participants in the 
program.
    (a) There must be at least one registered nurse on duty each day of 
operation of the adult day health care program. This nurse must be 
currently licensed by the State and must have, in writing, 
administrative authority, responsibility, and accountability for the 
functions, activities, and training of the nursing and program 
assistants. VA recommends that this nurse be a geriatric nurse 
practitioner or a clinical nurse specialist.
    (b) The number and level of nursing staff is determined by the 
authorized capacity of participants and the nursing care needs of the 
participants.
    (c) Nurse staffing must be adequate for meeting the standards of 
this part.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.140  Dietary services.

    The program management must provide each participant with a 
nourishing, palatable, well-balanced meal that proportionally meets the 
daily nutritional and special dietary needs of each participant.
    (a) Food and nutritional services. The program management provides 
and/or contracts with a food service entity and provides and/or 
contracts sufficient support personnel competent to carry out the 
functions of the food service.
    (1) The program management must employ a qualified dietitian either 
part-time or on a contract consultant basis to provide nutritional 
guidance.
    (2) A qualified dietitian is one who is qualified based upon 
registration by the Commission on Dietetic Registration of the American 
Dietetic Association.
    (3) The dietitian must--
    (i) Conduct participant nutritional assessments and recommend 
nutritional intervention as appropriate.
    (ii) Consult and provide nutrition education to participants, 
family/caregivers, and program staff as needed.
    (iii) Consult and provide education and training to the food service 
staff.
    (iv) Monitor and evaluate participants receiving enteral tube 
feedings and parenteral line solutions, and recommend changes as 
appropriate.
    (b) Menus and nutritional adequacy. (1) The participant's total 
dietary intake is of concern but is not the adult day health care 
program's responsibility.

[[Page 931]]

    (2) The program is responsible for the meals served in the facility.
    (c) Food. Each participant receives and the program provides--
    (1) Food prepared by methods that conserve nutritive value, flavor, 
and appearance;
    (2) Food that is palatable, attractive, and at the proper 
temperature;
    (3) Food prepared in a form designed to meet individual needs; and
    (4) Substitutes offered of similar nutritive value to participants 
who refuse food served.
    (d) Therapeutic diets. (1) Therapeutic diets must be prescribed by 
the primary care physician.
    (2) Special, modified, or therapeutic diets must be provided as 
necessary for participants with medical conditions or functional 
impairments.
    (3) An adult day health care program must not admit nor continue to 
serve a participant whose dietary requirements cannot be accommodated by 
the program.
    (e) Frequency of meals. (1) At regular times comparable to normal 
mealtimes in the community, each participant may receive and program 
management must provide at least two meals daily for those veterans 
staying more than four hours and at least one meal for those staying 
less than four hours.
    (2) The program management must offer snacks and fluids as 
appropriate to meet the participants' nutritional and fluid needs.
    (f) Assistive devices. The program management must provide special 
eating equipment and utensils for participants who need them.
    (g) Sanitary conditions. The program must--
    (1) Procure food from sources approved or considered satisfactory by 
Federal, State, or local authorities;
    (2) Store, prepare, distribute, and serve food under sanitary 
conditions; and
    (3) Dispose of garbage and refuse properly.

(Authority: 38 U.S.C. 101, 501, 1741-1743)



Sec. 52.150  Physician services.

    As a condition of enrollment in adult day health care program, a 
participant must obtain a written physician order for enrollment. Each 
participant must remain under the care of a physician.
    (a) Physician supervision. The program management must ensure that--
    (1) The medical care of each participant is supervised by a primary 
care physician;
    (2) Each participant's medical record must contain the name of the 
participant's primary physician; and
    (3) Another physician is available to supervise the medical care of 
participants when their primary physician is unavailable.
    (b) Frequency of physician reviews. (1) The participant must be seen 
by the primary physician at least annually and as indicated by a change 
of condition.
    (2) The program management must have a policy to help ensure that 
adequate medical services are provided to the participant.
    (3) At the option of the primary physician, required reviews in the 
program after the initial review may alternate between personal 
physician reviews and reviews by a physician assistant, nurse 
practitioner, or clinical nurse specialist in accordance with paragraph 
(e) of this section.
    (c) Availability of acute care. The program management must provide 
or arrange for the provision of acute care when it is indicated.
    (d) Availability of physicians for emergency care. In case of an 
emergency, the program management must provide or arrange for the 
provision of physician services when the program has participants under 
its care.
    (e) Physician delegation of tasks. (1) A primary physician may 
delegate tasks to:
    (i) A certified physician assistant or a certified nurse 
practitioner, or
    (ii) A clinical nurse specialist who--
    (A) Is acting within the scope of practice as defined by State law; 
and
    (B) Is under the supervision of the physician.
    (2) The primary physician may not delegate a task when the 
provisions of this part specify that the primary physician must perform 
it personally, or when the delegation is prohibited

[[Page 932]]

under State law or by the facility's own policies.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.160  Specialized rehabilitative services.

    (a) Provision of services. If specialized rehabilitative services 
such as, but not limited to, physical therapy, speech therapy, 
occupational therapy, and mental health services for mental illness are 
required in the participant's comprehensive plan of care, program 
management must--
    (1) Provide the required services; or
    (2) Obtain the required services and equipment from an outside 
resource, in accordance with Sec. 52.210(h), from a provider of 
specialized rehabilitative services.
    (b) Specialized rehabilitative services must be provided under the 
written order of a physician by qualified personnel.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.170  Dental services.

    (a) Program management must, if necessary, assist the participant 
and family/caregiver--
    (1) In making appointments; and
    (2) By arranging for transportation to and from the dental services.
    (b) Program management must promptly assist and refer participants 
with lost or damaged dentures to a dentist.

(Authority: 38 U.S.C. 101, 501, 1741-1743)



Sec. 52.180  Administration of drugs.

    The program management must assist with the management of medication 
and have a system for disseminating drug information to participants and 
program staff.
    (a) Procedures. (1) The program management must provide reminders or 
prompts to participants to initiate and follow though with self-
administration of medications.
    (2) The program management must establish a system of records to 
document the administration of drugs by participants and/or staff.
    (3) The program management must ensure that drugs and biologicals 
used by participants are labeled in accordance with currently accepted 
professional principles, and include the appropriate accessory and 
cautionary instructions, and the expiration dates when applicable.
    (4) The program management must store all drugs, biologicals, and 
controlled schedule II drugs listed in 21 CFR 1308.12 in locked 
compartments under proper temperature controls, permit only authorized 
personnel to have access, and otherwise comply with all applicable State 
and Federal laws.
    (b) Service consultation. The program management must employ or 
contract for the services of a pharmacist licensed in the State in which 
the program is located who provides consultation, as needed, on all the 
provision of drugs.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.190  Infection control.

    The program management must establish and maintain an infection 
control program designed to prevent the development and transmission of 
disease and infection.
    (a) Infection control program. The program management must--
    (1) Investigate, control, and prevent infections in the program 
participants and staff; and
    (2) Maintain a record of incidents and corrective actions related to 
infections.
    (b) Preventing spread of infection. (1) The program management must 
prevent participants or staff with a communicable disease or infected 
skin lesions from attending the adult day health care program if direct 
contact will transmit the disease.
    (2) The program management must require staff to wash their hands 
after each direct participant contact for

[[Page 933]]

which hand washing is indicated by accepted professional practice.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.200  Physical environment.

    The physical environment must be designed, constructed, equipped, 
and maintained to protect the health and safety of participants, 
personnel and the public.
    (a) Life safety from fire. The facility must meet the applicable 
provisions of the National Fire Protection Association's NFPA 101, Life 
Safety Code, 2000 edition. Incorporation by reference this document was 
approved by the Director of the Federal Register in accordance with 5 
U.S.C. 552(a) and 1 CFR part 51. The document incorporated by reference 
is available for inspection at the Department of Veterans Affairs, 
Office of Regulations Management (02D), Room 1154, 810 Vermont Avenue, 
NW., Washington, DC 20420 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/ibr--locations.html. 
Copies may be obtained from the National Fire Protection Association, 
Battery March Park, Quincy, MA 02269. (For ordering information, call 
toll-free 1-800-344-3555.)
    (b) Space and equipment. (1) Program management must--
    (i) Provide sufficient space and equipment in dining, health 
services, recreation, and program areas to enable staff to provide 
participants with needed services as required by these standards and as 
identified in each participant's plan of care; and
    (ii) Maintain all essential mechanical, electrical, and patient care 
equipment in safe operating condition.
    (2) Each adult day health care program, when it is co-located in a 
nursing home, domiciliary, or other care facility, must have its own 
separate designated space during operational hours.
    (3) The indoor space for an adult day health care program must be at 
least 100 square feet per participant including office space for staff 
and must be 60 square feet per participant excluding office space for 
staff.
    (4) Each program will need to design and partition its space to meet 
its own needs, but a minimal number of functional areas must be 
available. These include:
    (i) A dividable multipurpose room or area for group activities, 
including dining, with adequate table-setting space.
    (ii) Rehabilitation rooms or an area for individual and group 
treatments for occupational therapy, physical therapy, and other 
treatment modalities.
    (iii) A kitchen area for refrigerated food storage, the preparation 
of meals and/or training participants in activities of daily living.
    (iv) An examination and/or medication room.
    (v) A quiet room (with at least one bed), which functions to isolate 
participants who become ill or disruptive, or who require rest, privacy, 
or observation, must include a bed. It should be separate from activity 
areas, near a restroom, and supervised.
    (vi) Bathing facilities adequate to facilitate bathing of 
participants with functional impairments.
    (vii) Toilet facilities and bathrooms easily accessible to people 
with mobility problems, including participants in wheelchairs. There 
must be at least one toilet for every eight participants. The toilets 
must be equipped for use by persons with limited mobility, easily 
accessible from all programs areas, i.e., preferably within 40 feet from 
that area, designed to allow assistance from one or two staff, and 
barrier-free.
    (viii) Adequate storage space. There should be space to store arts 
and crafts materials, personal clothing and belongings, wheelchairs, 
chairs, individual handiwork, and general supplies. Locked cabinets must 
be provided for files, records, supplies, and medications.
    (ix) An individual room for counseling and interviewing participants 
and family members.
    (x) A reception area.
    (xi) An outside space that is used for outdoor activities that is 
safe, accessible to indoor areas, and accessible to those with a 
disability. This space may include recreational space and garden

[[Page 934]]

area. It should be easily supervised by staff.
    (c) Furnishings must be available for all participants. This must 
include functional furniture appropriate to the participants' needs. 
Furnishings must be attractive, comfortable, and homelike, while being 
sturdy and safe.
    (d) Participant call system. The coordinator's station must be 
equipped to receive participant calls through a communication system 
from--
    (1) Clinic rooms; and
    (2) Toilet and bathing facilities.
    (e) Other environmental conditions. The program management must 
provide a safe, functional, sanitary, and comfortable environment for 
the participants, staff and the public. The program management must--
    (1) Establish procedures to ensure that water is available to 
essential areas if there is a loss of normal water supply;
    (2) Have adequate outside ventilation by means of windows, or 
mechanical ventilation, or a combination of the two;
    (3) Equip corridors, when available, with firmly-secured handrails 
on each side; and
    (4) Maintain an effective pest control program so that the facility 
is free of pests and rodents.

(Authority: 38 U.S.C. 101, 501, 1741-1743)



Sec. 52.210  Administration.

    An adult day health care program must be administered in a manner 
that enables it to use its resources effectively and efficiently to 
attain or maintain the highest practicable physical, mental, and 
psychosocial well being of each participant.
    (a) Governing body. (1) The State must have a governing body, or 
designated person functioning as a governing body, that is legally 
responsible for establishing and implementing policies regarding the 
management and operation of the program; and
    (2) The governing body or State official with oversight for the 
program appoints the adult day health care program administrator who is:
    (i) A qualified heath care professional experienced in clinical 
program management and, if required by the State, certified as a 
Certified Administrator in Adult Day Health Care; and
    (ii) Responsible for the operation and management of the program 
including:
    (A) Documentation of current credentials for each licensed 
independent practitioner employed by the program;
    (B) Review of the practitioner's record of experience;
    (C) Assessment of whether practitioners with clinical privileges act 
within the scope of privileges granted; and
    (iii) Awareness of local trends in community adult day health care 
and other services, and participation in area adult day health care 
organizations.
    (b) Disclosure of State agency and individual responsible for 
oversight of facility. The State must give written notice to the Chief 
Consultant, Geriatrics and Extended Care Strategic Healthcare Group 
(114), VA Central Office, 810 Vermont Avenue, NW, Washington, DC 20420, 
at the time of the change, if any of the following change:
    (1) The State agency and individual responsible for oversight of a 
State home facility;
    (2) The State adult day health care program administrator; or
    (3) The State employee responsible for oversight of the State home 
adult day health care program if a contractor operates the State 
program.
    (c) Required information. The program management must submit the 
following to the director of the VA medical center of jurisdiction as 
part of the application for recognition and thereafter as often as 
necessary to be current:
    (1) The copy of the legal and administrative action establishing the 
State-operated facility (e.g., State laws);
    (2) Site plan of facility and surroundings;
    (3) Legal title, lease, or other document establishing the right to 
occupy the facility;
    (4) Organizational charts and the operational plan of the adult day 
health care program;
    (5) The number of the staff by category indicating full-time, part-
time and minority designation, annually;
    (6) The number of adult day health care participants who are 
veterans and

[[Page 935]]

non-veterans, the number of veterans who are minorities and the number 
of non-veterans who are minorities, annually;
    (7) Annual State Fire Marshall's report;
    (8) Annual certification from the responsible State home showing 
compliance with Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 
794) (VA Form 10-0143A set forth at 38 CFR 58.14);
    (9) Annual certification for Drug-Free Workplace Act of 1988 (41 
U.S.C. 701-707) (VA Form 10-0143 set forth at 38 CFR 58.15);
    (10) Annual certification regarding lobbying in compliance with 31 
U.S.C. 1352 (VA Form 10-0144 set forth at 38 CFR 58.16);
    (11) Annual certification of compliance with Title VI of the Civil 
Rights Act of 1964 (42 U.S.C. 2000d-1) as effectuated in 38 CFR part 18 
(VA Form 10-0144A located at 38 CFR 58.17);
    (d) Percentage of veterans. At least 75 percent of the program 
participants must be eligible veterans except that the veteran 
percentage need only be more than 50 percent if the facility was 
acquired, constructed, or renovated solely with State funds. All non-
veteran participants must be veteran-related family members or gold star 
parents of veterans.
    (e) Management contract facility. If a program is operated by an 
entity contracting with the State, the State must assign a State 
employee to monitor the operations of the facility. The State employee 
may also monitor other levels of care at a colocated facility, but must 
monitor the adult day health care facility and any colocated facility on 
a full-time onsite basis.
    (f) Licensure. The facility and program management must comply with 
applicable State and local licensure laws.
    (g) Staff qualifications. (1) The program management must employ on 
a full-time, part-time or consultant basis those professionals necessary 
to carry out the provisions of these requirements. Professional 
disciplines involved in participant care must include registered nurses, 
program assistants, physicians, social workers, rehabilitation 
therapists, dietitians, and therapeutic activity therapists and 
pharmacists. Other disciplines may be considered depending upon the 
participant and/or program needs.
    (2) Professional staff must be licensed, certified, or registered in 
accordance with applicable State laws.
    (3) The staff-participant ratio must be sufficient in number and 
skills (at least one staff to 4 to 6 participants) to ensure compliance 
with the standards of this part. There must be at least two responsible 
persons (paid staff members) at the adult day health care center at all 
times when there are two or more participants in attendance.
    (4) Persons counted in the staff to participant ratio must spend at 
least 70 percent of their time in direct service with participants.
    (5) All professional team members will serve in the role of case 
manager for designated participants.
    (6) All personnel, paid and volunteer, will be provided appropriate 
training to maintain the knowledge and skills required for the 
participant needs.
    (h) Use of outside resources. (1) If the facility does not employ a 
qualified professional person to furnish a specific service to be 
provided by the facility, the program management must have that service 
furnished to participants by a person or agency outside the facility 
under a written agreement described in paragraph (h)(2) of this section.
    (2) Agreements pertaining to services furnished by outside resources 
must specify in writing that the program management assumes 
responsibility for--
    (i) Obtaining services that meet professional standards and 
principles that apply to professionals providing services in such a 
program; and
    (ii) The timeliness of the services.
    (i) Medical director. (1) The program management must provide a 
primary care physician to serve as medical director and a consultant to 
the interdisciplinary program team.
    (2) The medical director is responsible for:
    (i) Participating in establishing policies, procedures, and 
guidelines to ensure adequate, comprehensive services;
    (ii) Directing and coordinating medical care in the program;

[[Page 936]]

    (iii) Ensuring continuous physician coverage to handle medical 
emergencies;
    (iv) Participating in managing the environment by reviewing and 
evaluating incident reports or summaries of incident reports, 
identifying hazards to health and safety, and making recommendations to 
the adult day health care program administrator; and
    (v) Monitoring employees' health status and advising the program 
administrator on employee health policies.
    (3) The medical director may also provide hands-on assessment and/or 
treatment if authorized by the participant's primary care provider. In 
programs where a medical director is available to act as a member of the 
team and authorizes care, information concerning the care provided must 
be shared with the primary care physician who continues to provide the 
ongoing medical care.
    (4) The program management must have written procedures for handling 
medical emergencies. The procedures must include, at least:
    (i) Procedures for notification of the family;
    (ii) Procedures for transportation arrangements;
    (iii) Provision for an escort, if necessary; and
    (iv) Procedures for maintaining a portable basic emergency 
information file for each participant that includes:
    (A) Hospital preference;
    (B) Physician of record and telephone number;
    (C) Emergency contact (family);
    (D) Insurance information;
    (E) Medications/allergies;
    (F) Current diagnosis and history; and
    (G) Photograph for participant identification.
    (j) Required training of program assistants. (1) Program assistants 
must have a high school diploma, or the equivalent, and must have at 
least one year of experience in working with adults in a health care 
setting. Program assistants also must complete the National Adult Day 
Services Association training course or complete equivalent training.
    (2) The program management must not use any individual working in 
the program as a program assistant whether permanent or not unless:
    (i) That individual is competent to provide appropriate services; 
and
    (ii) That individual has completed training or is certified by the 
National Adult Day Services Association as a certified Program Assistant 
in Adult Day Services.
    (3) Verification. Before allowing an individual to serve as a nurse 
aide or program assistant, program management must verify that the 
individual has successfully completed a training and competency 
evaluation program. Facilities must follow up to ensure that such an 
individual actually becomes certified, if available in the State.
    (4) Multi-State registry verification. Before allowing an individual 
to serve as a nurse aide or program assistant, program management must 
seek information from every State registry established under HHS 
regulations at 42 CFR 483.156 which the facility believes may include 
information on the individual.
    (5) Required retraining. If, since an individual's most recent 
completion of a training and competency evaluation program, there has 
been a continuous period of 24 consecutive months during none of which 
the individual provided nursing or nursing-related services for monetary 
compensation, the individual must complete a new training and competency 
evaluation program or a new competency evaluation program.
    (6) Regular in-service education. The program management must 
complete a performance review of every nurse aide or program assistant 
at least once every 12 months, and must provide regular in-service 
education based on the outcome of these reviews. The in-service training 
must--
    (i) Be sufficient to ensure the continuing competence of nurse aides 
or program assistants, but must be no less than 12 hours per year;
    (ii) Address areas of weakness as determined in program assistants' 
performance reviews and address the special needs of participants as 
determined by the program staff; and
    (iii) For program assistants or nurse aides providing services to 
individuals

[[Page 937]]

with cognitive impairments, address the care of the cognitively 
impaired.
    (k) Proficiency of program assistants. The program management must 
ensure that program assistants or nurse aides are able to demonstrate 
competency in skills and techniques necessary to care for participants' 
needs, as identified through participant assessments, and described in 
the plan of care.
    (l) Laboratory and radiology results. The program management must--
    (1) Obtain laboratory or radiology results from the participant's 
primary physician to support the needs of its participants.
    (2) Assist the participant and/or family/caregiver in making 
transportation arrangements to and from the source of laboratory or 
radiology services, if the participant needs assistance.
    (3) File in the participant's clinical record laboratory or 
radiology reports that are dated and contain the name and address of the 
testing laboratory or radiology service.
    (m) Participant records. (1) The facility management must maintain 
clinical records on each participant in accordance with accepted 
professional standards and practices that are--
    (i) Complete;
    (ii) Accurately documented;
    (iii) Readily accessible; and
    (iv) Systematically organized.
    (2) Clinical records must be retained for--
    (i) The period of time required by State law; or
    (ii) Five years from the date of discharge if there is no 
requirement in State law.
    (3) The program management must safeguard clinical record 
information against loss, destruction, or unauthorized use.
    (4) The program management must keep confidential all information 
contained in the participant's records, regardless of the form or 
storage method of the records, except when release is required by--
    (i) Transfer to another health care institution;
    (ii) Law;
    (iii) A third-party payment contract;
    (iv) The participant; or
    (v) The participant's legal representative.
    (5) The clinical record must contain--
    (i) Sufficient information to identify the participant;
    (ii) A record of the participant's assessments;
    (iii) The plan of care and services provided;
    (iv) The results of any pre-enrollment screening conducted by the 
State; and
    (v) Progress notes.
    (n) Quality assessment and assurance. (1) Program management must 
maintain a quality improvement program and a quality improvement 
committee consisting of--
    (i) A registered nurse;
    (ii) A medical director designated by the program; and
    (iii) At least three other members of the program's staff.
    (2) The quality improvement committee--
    (i) Must implement a quality improvement plan for the evaluation of 
its operation and services and review and revise annually; and
    (ii) Must meet at least quarterly to identify quality of care 
issues; and
    (iii) Must develop and implement appropriate plans of action to 
correct identified quality deficiencies; and
    (iv) Must ensure that identified quality deficiencies are corrected 
within an established time period.
    (3) The VA Under Secretary for Health may not require disclosure of 
the records of such committee unless such disclosure is related to the 
compliance with the requirements of this section.
    (o) Disaster and emergency preparedness. (1) The program management 
must have detailed written plans and procedures to meet all potential 
emergencies and disasters, such as fire, severe weather, bomb threats, 
and missing participants.
    (2) The program management must train all employees in emergency 
procedures when they begin to work in the program, periodically review 
the procedures with existing staff, and carry out unannounced staff 
drills using those procedures.
    (p) Transfer procedure. (1) The program management must have in 
effect a written transfer procedure that reasonably assures that--

[[Page 938]]

    (i) Participants will be transferred from the adult day health care 
program to the hospital, and ensured of timely admission to the hospital 
when transfer is medically appropriate as determined by a physician; and
    (ii) Medical and other information needed for care and treatment of 
participants will be exchanged between the institutions.
    (2) The transfer must be with a hospital sufficiently close to the 
adult day health care program to make transfer feasible.
    (q) Compliance with Federal, State, and local laws and professional 
standards. The program management must operate and provide services in 
compliance with all applicable Federal, State, and local laws, 
regulations, and codes, and with accepted professional standards and 
principles that apply to professionals providing services in such a 
facility. This includes the Single Audit Act of 1984 (31 U.S.C. 7501 et 
seq.) and the Cash Management Improvement Acts of 1990 and 1992 (31 
U.S.C. 3335, 3718, 3720A, 6501, 6503).
    (r) Relationship to other Federal regulations. In addition to 
compliance with the regulations set forth in this subpart, the program 
must meet the applicable provisions of other Federal laws and 
regulations, including but not limited to, those pertaining to 
nondiscrimination on the basis of race, color, national origin, 
handicap, or age (38 CFR part 18); protection of human subjects of 
research (45 CFR part 46), section 504 of the Rehabilitation Act of 1993 
(29 U.S.C. 794); Drug-Free Workplace Act of 1988 (41 U.S.C. 701-707); 
restrictions regarding lobbying (31 U.S.C. 1352); Title VI of the Civil 
Rights Act of 1964 (42 U.S.C. 2000d-1). Although these regulations are 
not in themselves considered requirements under this part, their 
violation may result in the termination or suspension of, or the refusal 
to grant or continue payment with Federal funds.
    (s) Intermingling. A facility recognized as a State home for 
providing adult day health care may only provide adult day health care 
in the areas of the facility recognized as a State home for providing 
adult day health care.
    (t) VA management of State veterans homes. Except as specifically 
provided by statute or regulations, VA employees have no authority 
regarding the management or control of State homes providing adult day 
health care.

(Authority: 38 U.S.C. 101, 501, 1741-1743)

(The Office of Management and Budget has approved the information 
collection requirements in this paragraph under control number 2900-
0160.)



Sec. 52.220  Transportation.

    Transportation of participants to and from the adult day health care 
facility must be a component of the overall program.
    (a)(1) Except as provided in paragraph (a)(2) of this section, the 
adult day health care program management must provide or contract for 
transportation to enable participants, including persons with 
disabilities, to attend the program and to participate in facility-
sponsored outings.
    (2) The veteran or the family of a veteran may decline 
transportation offered by the adult day health care program management 
and make their own arrangements for the transportation.
    (b) The adult day health care program management must have a 
transportation policy that includes routine and emergency procedures, 
with a copy of the relevant procedures located in all program vehicles.
    (c) All vehicles transporting participants to and from adult day 
health care must be equipped with a device for two-way communication.
    (d) All facility-provided and contracted transportation systems must 
meet local, State and federal regulations.
    (e) The time to transport participant to or from the facility must 
not be more than 60 minutes except under unusual conditions, e.g., bad 
weather.

(Authority: 38 U.S.C. 101, 501, 1741-1743)



PART 58_FORMS--Table of Contents




Sec.
58.10 VA Form 10-3567--State Home Inspection: Staffing Profile.
58.11 VA Form 10-5588--State Home Report and Statement of Federal Aid 
          Claimed.
58.12 VA Form 10-10EZ--Application for Health Benefits.

[[Page 939]]

58.13 VA Form 10-10SH--State Home Program Application for Veteran Care--
          Medical Certification.
58.14 VA Form 10-0143A--Statement of Assurance of Compliance with 
          Section 504 of The Rehabilitation Act of 1973.
58.15 VA Form 10-0143--Department of Veterans Affairs Certification 
          Regarding Drug-Free Workplace Requirements for Grantees Other 
          Than Individuals.
58.16 VA Form 10-0144--Certification Regarding Lobbying.
58.17 VA Form 10-0144A--Statement of Assurance of Compliance with Equal 
          Opportunity Laws.

    Authority: 38 U.S.C. 101, 501, 1710, 1741-1743.

    Source: 65 FR 981, Jan. 6, 2000, unless otherwise noted.

[[Page 940]]

Sec. 58.10    VA Form 10-3567--State Home Inspection Staffing Profile.
[GRAPHIC] [TIFF OMITTED] TR06JA00.000


[[Page 941]]


[GRAPHIC] [TIFF OMITTED] TR06JA00.001


[[Page 942]]


[GRAPHIC] [TIFF OMITTED] TR06JA00.002


[[Page 943]]




Sec. 58.11    VA Form 10-5588--State Home Report and Statement of 
        Federal Aid Claimed.
        [GRAPHIC] [TIFF OMITTED] TR06JA00.003
        

[[Page 944]]


[GRAPHIC] [TIFF OMITTED] TR06JA00.004


[[Page 945]]




Sec. 58.12    VA Form 10-10EZ--Application for Health Benefits
[GRAPHIC] [TIFF OMITTED] TR06JA00.005


[[Page 946]]


[GRAPHIC] [TIFF OMITTED] TR06JA00.006


[[Page 947]]




Sec. 58.13    VA Form 10-10SH--State Home Program Application for 
        Veteran Care Medical Certification.
        [GRAPHIC] [TIFF OMITTED] TR06JA00.007
        

[[Page 948]]


[GRAPHIC] [TIFF OMITTED] TR06JA00.008


[[Page 949]]


[GRAPHIC] [TIFF OMITTED] TR06JA00.009


[[Page 950]]




Sec. 58.14    VA Form 10-0143A--Statement of Assurance of Compliance 
        with Section 504 of The Rehabilitation Act of 1973.
        [GRAPHIC] [TIFF OMITTED] TR06JA00.010
        

[[Page 951]]




Sec. 58.15    VA Form 10-0143--Department of Veterans Affairs 
        Certification Regarding Drug-Free Workplace Requirements for 
        Grantees Other Than Individuals.
        [GRAPHIC] [TIFF OMITTED] TR06JA00.011
        

[[Page 952]]


[GRAPHIC] [TIFF OMITTED] TR06JA00.012


[[Page 953]]




Sec. 58.16    VA Form 10-0144--Certification Regarding Lobbying.
[GRAPHIC] [TIFF OMITTED] TR06JA00.013


[[Page 954]]




Sec. 58.17    VA Form 10-0144A--Statement of Assurance of Compliance 
        with Equal Opportunity Laws.
        [GRAPHIC] [TIFF OMITTED] TR06JA00.014
        

[[Page 955]]





PART 59_GRANTS TO STATES FOR CONSTRUCTION OR ACQUISITION OF STATE HOMES
--Table of Contents




Sec.
59.1 Purpose.
59.2 Definitions.
59.3 Federal Application Identifier.
59.4 Decisionmakers, notifications, and additional information.
59.5 Submissions of information and documents to VA.
59.10 General requirements for a grant.
59.20 Initial application requirements.
59.30 Documentation.
59.40 Maximum number of nursing home care and domiciliary care beds for 
          veterans by State.
59.50 Priority list.
59.60 Additional application requirements.
59.70 Award of grants.
59.80 Amount of grant.
59.90 Line item adjustments to grants.
59.100 Payment of grant award.
59.110 Recapture provisions.
59.120 Hearings.
59.121 Amendments to application.
59.122 Withdrawal of application.
59.123 Conference.
59.124 Inspections, audits, and reports.
59.130 General requirements for all State home facilities.
59.140 Nursing home care requirements.
59.150 Domiciliary care requirements.
59.160 Adult day health care requirements.
59.170 Forms.

    Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137).

    Source: 66 FR 33847, June 26, 2001, unless otherwise noted.



Sec. 59.1  Purpose.

    This part sets forth the mechanism for a State to obtain a grant:
    (a) To construct State home facilities (or to acquire facilities to 
be used as State home facilities) for furnishing domiciliary or nursing 
home care to veterans, and
    (b) To expand, remodel, or alter existing buildings for furnishing 
domiciliary, nursing home, adult day health, or hospital care to 
veterans in State homes.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.2  Definitions.

    For the purpose of this part:
    Acquisition means the purchase of a facility in which to establish a 
State home for the provision of domiciliary and/or nursing home care to 
veterans.
    Adult day health care is a therapeutically-oriented outpatient day 
program, which provides health maintenance and rehabilitative services 
to participants. The program must provide individualized care delivered 
by an interdisciplinary health care team and support staff, with an 
emphasis on helping participants and their caregivers to develop the 
knowledge and skills necessary to manage care requirements in the home. 
Adult day health care is principally targeted for complex medical and/or 
functional needs of elderly veterans.
    Construction means the construction of new domiciliary or nursing 
home buildings, the expansion, remodeling, or alteration of existing 
buildings for the provision of domiciliary, nursing home, or adult day 
health care, or hospital care in State homes, and the provision of 
initial equipment for any such buildings.
    Domiciliary care means providing shelter, food, and necessary 
medical care on an ambulatory self-care basis (this is more than room 
and board). It assists eligible veterans who are suffering from a 
disability, disease, or defect of such a degree that incapacitates 
veterans from earning a living, but who are not in need of 
hospitalization or nursing care services. It assists in attaining 
physical, mental, and social well-being through special rehabilitative 
programs to restore residents to their highest level of functioning.
    Nursing home care means the accommodation of convalescents or other 
persons who are not acutely ill and not in need of hospital care, but 
who require skilled nursing care and related medical services.
    Secretary means the Secretary of the United States Department of 
Veterans Affairs.
    State means each of the several States, the District of Columbia, 
the Virgin Islands, and the Commonwealth of Puerto Rico.
    State representative means the official designated in accordance 
with State authority with responsibility for matters relating to the 
request for a grant under this part.

[[Page 956]]

    VA means the United States Department of Veterans Affairs.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.3  Federal Application Identifier.

    Once VA has provided the State representative with a Federal 
Application Identifier Number for a project, the number must be included 
on all subsequent written communications to VA from the State, or its 
agent, regarding a request for a grant for that project under this part.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.4  Decisionmakers, notifications, and additional information.

    The decisionmaker for decisions required under this part will be the 
Chief Consultant, Geriatrics and Extended Care, unless specified to be 
the Secretary or other VA official. The VA decisionmaker will provide 
written notice to affected States of approvals, denials, or requests for 
additional information under this part.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.5  Submissions of information and documents to VA.

    All submissions of information and documents required to be 
presented to VA must be made, unless otherwise specified under this 
part, to the Chief Consultant, Geriatrics and Extended Care (114), VA 
Central Office, 810 Vermont Avenue, NW., Washington, DC 20420.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.10  General requirements for a grant.

    For a State to obtain a grant under this part and grant funds, its 
initial application for the grant must be approved under Sec. 59.20, 
and the project must be ranked sufficiently high on the priority list 
for the current fiscal year so that funding is available for the 
project. It must meet the additional application requirements in Sec. 
59.60, and it must meet all other requirements under this part for 
obtaining a grant and grant funds.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.20  Initial application requirements.

    (a) For a project to be considered for inclusion on the priority 
list in Sec. 59.50 of this part for the next fiscal year, a State must 
submit to VA an original and one copy of a completed VA Form 10-0388 and 
all information, documentation, and other forms specified by VA form 10-
0388 (these forms are set forth at Sec. 59.170 of this part).
    (b) The Secretary, based on the information submitted for a project 
pursuant to paragraph (a) of this section, will approve the project for 
inclusion on the priority list in Sec. 59.50 of this part if the 
submission includes all of the information requested under paragraph (a) 
of this section and if the submission represents a project that, if 
further developed, could meet the requirements for a grant under this 
part.
    (c) The information requested under paragraph (a) of this section 
should be submitted to VA by April 15, and must be received by VA by 
August 15, if the State wishes an application to be included on the 
priority list for the award of grants during the next fiscal year.
    (d) If a State representative believes that VA may not award a grant 
to the State for a grant application during the current fiscal year and 
wants to ensure that VA includes the application on the priority list 
for the next fiscal year, the State representative must, prior to August 
15 of the current fiscal year,
    (1) Request VA to include the application in those recommended to 
the Secretary for inclusion on the priority list, and
    (2) Send any updates to VA.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.30  Documentation.

    For a State to obtain a grant and grant funds under this part, the 
State must submit to VA documentation

[[Page 957]]

that the site of the project is in reasonable proximity to a sufficient 
concentration and population of veterans that are 65 years of age and 
older and that there is a reasonable basis to conclude that the facility 
when complete will be fully occupied. This documentation must be 
included in the initial application submitted to VA under Sec. 59.20.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.40  Maximum number of nursing home care and domiciliary care 
beds for veterans by State.

    (a) Except as provided in paragraph (b) of this section, a State may 
not request a grant for a project to construct or acquire a new State 
home facility, to increase the number of beds available at a State home 
facility, or to replace beds at a State home facility if the project 
would increase the total number of State home nursing home and 
domiciliary beds beyond the maximum number designated for that State. 
The maximum number of State home nursing home and domiciliary beds 
designated for each State is (for maximum numbers see VA website at 
http://www.va.gov/About--VA/Orgs/VHA/VHAProg.htm). the number in the 
following chart for the State, minus the sum of the number of nursing 
home and domiciliary beds already in operation at State home facilities, 
and the number of State home nursing home and domiciliary beds not yet 
in operation but for which a grant has either been requested or awarded 
under this part (the availability of VA and community nursing home beds 
in each State will also be considered at the time of grant application 
for bed-producing projects):

------------------------------------------------------------------------
                                                             State home
                                                            nursing home
                           State                                 and
                                                             domiciliary
                                                                beds
------------------------------------------------------------------------
Alabama...................................................           883
Alaska....................................................            79
Arizona...................................................         1,068
Arkansas..................................................           557
California................................................         5,754
Colorado..................................................           717
Connecticut...............................................           738
Delaware..................................................           165
District of Columbia......................................           104
Florida...................................................         4,471
Georgia...................................................         1,202
Hawaii....................................................           216
Idaho.....................................................           233
Illinois..................................................         2,271
Indiana...................................................         1,209
Iowa......................................................           632
Kansas....................................................           542
Kentucky..................................................           759
Louisiana.................................................           785
Maine.....................................................           301
Maryland..................................................         1,020
Massachusetts.............................................         1,348
Michigan..................................................         1,896
Minnesota.................................................           932
Mississippi...............................................           500
Missouri..................................................         1,230
Montana...................................................           198
Nebraska..................................................           355
Nevada....................................................           428
New Hampshire.............................................           264
New Jersey................................................         1,683
New Mexico................................................           344
New York..................................................         3,220
North Carolina............................................         1,454
North Dakota..............................................           121
Ohio......................................................         2,530
Oklahoma..................................................           747
Oregon....................................................           804
Pennsylvania..............................................         3,173
Puerto Rico...............................................           350
Rhode Island..............................................           254
South Carolina............................................           750
South Dakota..............................................           155
Tennessee.................................................         1,050
Texas.....................................................         3,226
Utah......................................................           304
Vermont...................................................           124
Virginia..................................................         1,312
Virgin Islands............................................             8
Washington................................................         1,215
West Virginia.............................................           455
Wisconsin.................................................         1,070
Wyoming...................................................            93
------------------------------------------------------------------------

    Note to paragraph (a): The provisions of 38 U.S.C. 8134 require VA 
to prescribe for each State the number of nursing home and domiciliary 
beds for which grants may be furnished. This is required to be based on 
the projected demand for nursing home and domiciliary care on November 
30, 2009 (10 years after the date of enactment of the Veterans 
Millennium Health Care and Benefits Act (Pub. L. 106-117)), by veterans 
who at such time are 65 years of age or older and who reside in that 
State. In determining the projected demand, VA must take into account 
travel distances for veterans and their families.
    (b) A State may request a grant for a project that would increase 
the total number of State nursing home and domiciliary beds beyond the 
maximum number for that State, if the State submits to VA, documentation 
to establish a need for the exception based on travel distances of at 
least two hours (by land transportation or any other usual mode of 
transportation if land

[[Page 958]]

transportation is not available) between a veteran population center 
sufficient for the establishment of a State home and any existing State 
home. The determination regarding a request for an exception will be 
made by the Secretary.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.50  Priority list.

    (a) The Secretary will make a list prioritizing the applications 
that were received on or before August 15 and that were approved under 
Sec. 59.20 of this part. Except as provided in paragraphs (b) and (c) 
of this section, applications will be prioritized from the highest to 
the lowest in the following order:
    (1) Priority group 1. An application from a State that has made 
sufficient funds available for the project for which the grant is 
requested so that such project may proceed upon approval of the grant 
without further action required by the State (such as subsequent 
issuance of bonds) to make such funds available for the project. To meet 
this criteria, the State must provide to VA a letter from an authorized 
State budget official certifying that the State funds are, or will be, 
available for the project, so that if VA awards the grant, the project 
may proceed without further State action to make such funds available 
(such as further action to issue bonds). If the certification is based 
on an Act authorizing the project and making available the State's 
matching funds for the project, a copy of the Act must be submitted with 
the certification.
    (i) Priority group 1--subpriority 1. An application for a project to 
remedy a condition, or conditions, at an existing facility that have 
been cited as threatening to the lives or safety of the residents in the 
facility by a VA Life Safety Engineer, a State or local government 
agency (including a Fire Marshal), or an accrediting institution 
(including the Joint Commission on Accreditation of Healthcare 
Organizations). This priority group does not include applications for 
the addition or replacement of building utility systems, such as heating 
and air conditioning systems or building features, such as roof 
replacements. Projects in this subpriority will be further prioritized 
in the following order: seismic; building construction; egress; building 
compartmentalization (e.g., smoke barrier, fire walls); fire alarm/
detection; asbestos/hazardous materials; and all other projects. 
Projects in this subpriority will be further prioritized based on the 
date the application for the project was received in VA (the earlier the 
application was received, the higher the priority given).
    (ii) Priority group 1--subpriority 2. An application from a State 
that has not previously applied for a grant under 38 U.S.C. 8131-8137 
for construction or acquisition of a State nursing home. Projects in 
this subpriority will be further prioritized based on the date the 
application for the project was received in VA (the earlier the 
application was received, the higher the priority given).
    (iii) Priority group 1--subpriority 3. An application for 
construction or acquisition of a nursing home or domiciliary from a 
State that has a great need for the beds that the State, in that 
application, proposes to establish. Projects in this subpriority will be 
further prioritized based on the date the application for the project 
was received in VA (the earlier the application was received, the higher 
the priority given).
    (iv) Priority group 1--subpriority 4. An application from a State 
for renovations to a State Home facility other than renovations that 
would be included in subpriority 1 of Priority group 1. Projects will be 
further prioritized in the following order: adult day health care 
construction; nursing home construction (e.g., patient privacy); code 
compliance under the Americans with Disabilities Act; building systems 
and utilities (e.g., electrical; heating, ventilation, and air 
conditioning (HVAC); boiler; medical gasses; roof; elevators); clinical-
support facilities (e.g., for dietetics, laundry, rehabilitation 
therapy); and general renovation/upgrade (e.g., warehouse, storage, 
administration/office, multipurpose). Projects in this subpriority will 
be further prioritized based on the date the application for the project 
was received in VA (the earlier the application was received, the higher 
the priority given).

[[Page 959]]

    (v) Priority group 1--subpriority 5. An application for construction 
or acquisition of a nursing home or domiciliary from a State that has a 
significant need for the beds that the State in that application 
proposes to establish. Projects in this subpriority will be further 
prioritized based on the date the application for the project was 
received in VA (the earlier the application was received, the higher the 
priority given).
    (vi) Priority group 1--subpriority 6. An application for 
construction or acquisition of a nursing home or domiciliary from a 
State that has a limited need for the beds that the State, in that 
application, proposes to establish. Projects in this subpriority will be 
further prioritized based on the date the application for the project 
was received in VA (the earlier the application was received, the higher 
the priority given).

    Note to paragraph (a)(1): The following chart is intended to provide 
a graphic aid for understanding Priority group 1 and its subpriorities.

[[Page 960]]

[GRAPHIC] [TIFF OMITTED] TR26JN01.000

    (2) Priority group 2. An application not meeting the criteria of 
paragraph (a)(1) of this section but meeting the criteria of paragraph 
(a)(1)(i) of this section. Projects within this priority group will be 
further prioritized the same as in paragraph (a)(1)(i) of this section.
    (3) Priority group 3. An application not meeting the criteria of 
paragraph (a)(1) of this section but meeting the criteria of paragraph 
(a)(1)(ii) of this section. Projects within this priority group will be 
further prioritized the same as in paragraph (a)(1)(ii) of this section.
    (4) Priority group 4. An application not meeting the criteria of 
paragraph (a)(1) of this section but meeting the criteria of paragraph 
(a)(1)(iii) of this

[[Page 961]]

section. Projects within this priority group will be further prioritized 
the same as in paragraph (a)(1)(iii) of this section.
    (5) Priority group 5. An application not meeting the criteria of 
paragraph (a)(1) of this section but meeting the criteria of paragraph 
(a)(1)(iv) of this section. Projects within this priority group will be 
further prioritized the same as in paragraph (a)(1)(iv) of this section.
    (6) Priority group 6. An application not meeting the criteria of 
paragraph (a)(1) of this section but meeting the criteria of paragraph 
(a)(1)(v) of this section. Projects within this priority group will be 
further prioritized the same as in paragraph (a)(1)(v) of this section.
    (7) Priority group 7. An application not meeting the criteria of 
paragraph (a)(1) of this section but meeting the criteria of paragraph 
(a)(1)(vi) of this section. Projects within this priority group will be 
further prioritized the same as in paragraph (a)(1)(vi) of this section.
    (b) An application will be given highest priority on the priority 
list for the next fiscal year within the priority group to which it is 
assigned in paragraph (a) of this section (without consideration of 
subpriorities) if:
    (1) During the current fiscal year the State accepted a grant for 
that application that was less than the amount that would have been 
awarded if VA had sufficient appropriations to award the full amount of 
the grant requested; and
    (2) The application was the lowest-ranking application on the 
priority list for the current fiscal year for which grant funds were 
available.
    (c) An application will be given priority on the priority list 
(after applications described in paragraph (b) of this section) for the 
next fiscal year ahead of all applications that had not been approved 
under Sec. 59.20 on the date that the application was approved under 
Sec. 59.20, if:
    (1) During the current fiscal year VA would have awarded a grant 
based on the application except for the fact that VA determined that the 
State did not, by July 1, provide evidence that it had its matching 
funds for the project, and
    (2) The State was notified prior to July 1 that VA had funding 
available for this grant application.
    (d) The priority list will not contain any project for the 
construction or acquisition of a hospital or hospital beds.
    (e) For purposes of establishing priorities under this section:
    (1) A State has a great need for nursing home and domiciliary beds 
if the State:
    (i) Has no State homes with nursing home or domiciliary beds, or
    (ii) Has an unmet need of 2,000 or more nursing home and domiciliary 
beds;
    (2) A State has a significant need for nursing home and domiciliary 
beds if the State has an unmet need of 1,000 to 1,999 nursing home and 
domiciliary beds; and
    (3) A State has a limited need for nursing home and domiciliary beds 
if the State has an unmet need of 999 or fewer nursing home and 
domiciliary beds.
    (f) Projects that could be placed in more than one subpriority will 
be placed in the subpriority toward which the preponderance of the cost 
of the project is allocated. For example, under priority group 1--
subpriority 1, if a project for which 25 percent of the funds needed 
would concern seismic and 75 percent of the funds needed would concern 
building construction, the project would be placed in the subpriority 
for building construction.
    (g) Once the Secretary prioritizes the applications in the priority 
list, VA will not change the priorities unless a change is necessary as 
a result of an appeal.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.60  Additional application requirements.

    For a project to be eligible for a grant under this part for the 
fiscal year for which the priority list was made, during that fiscal 
year the State must submit to VA an original and a copy of the 
following:
    (a) Complete, updated Standard Forms 424 (mark the box labeled 
application and submit the information requested for an application), 
424C, and

[[Page 962]]

424D (the forms are set forth at Sec. 59.170 of this part), and
    (b) A completed VA Form 10-0388 and all information and 
documentation specified by VA Form 10-0388 (the form is set forth at 
Sec. 59.170h).

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.70  Award of grants.

    (a) The Secretary, during the fiscal year for which a priority list 
is made under this part, will:
    (1) Award a grant for each application that has been approved under 
Sec. 59.20, that is sufficiently high on the priority list so that 
funding is available for the application, that meets the additional 
application requirements in Sec. 59.60, and that meets all other 
requirements under this part for obtaining a grant, or
    (2) Conditionally approve a grant for a project for which a State 
has submitted an application that substantially meets the requirements 
of this part if the State representative requests conditional approval 
and provides written assurance that the State will meet all requirements 
for a grant not later than 180 calendar days after the date of 
conditional approval. If a State that has obtained conditional approval 
for a project does not meet all of the requirements within 180 calendar 
days after the date of conditional approval, the Secretary will rescind 
the conditional approval and the project will be ineligible for a grant 
in the fiscal year in which the State failed to fully complete the 
application. The funds that were conditionally obligated for the project 
will be deobligated.
    (b) As a condition of receiving a grant, a State must make 
sufficient funds available for the project for which the grant is 
requested so that such project may proceed upon approval of the grant 
without further action required by the State (such as subsequent 
issuance of bonds) to make such funds available for such purpose. To 
meet this criteria, the State must provide to VA a letter from an 
authorized State budget official certifying that the State funds are, or 
will be, available for the project, so that if VA awards the grant, the 
project may proceed without further State action to make such funds 
available (such as further action to issue bonds). If the certification 
is based on an Act authorizing the project and making available the 
State's matching funds for the project, a copy of the Act must be 
submitted with the certification. To be eligible for inclusion in 
priority group 1 under this part, a State must make such funds available 
by August 15 of the year prior to the fiscal year for which the grant is 
requested. To otherwise be eligible for a grant and grant funds based on 
inclusion on the priority list in other than priority group 1, a State 
must make such funds available by July 1 of the fiscal year for which 
the grant is requested.
    (c) As a condition of receiving a grant, the State representative 
and the Secretary will sign three originals of the Memorandum of 
Agreement documents (one for the State and two for VA). A sample is in 
Sec. 59.170.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.80  Amount of grant.

    (a) The total cost of a project (VA and State) for which a grant is 
awarded under this part may not be less than $400,000 and, except as 
provided in paragraph (i) of this section, the total cost of a project 
will not exceed the total cost of new construction. The amount of a 
grant awarded under this part will be the amount requested by the State 
and approved in accordance with this part, not to exceed 65 percent of 
the total cost of the project except that:
    (1) The total cost of a project will not include the cost of space 
that exceeds the maximum allowable space specified in this part, and
    (2) The amount of the grant may be less than 65 percent of the total 
cost of the project if the State accepts less because VA did not have 
sufficient funds to award the full amount of the grant requested.
    (b) The total cost of a project under this part for acquisition of a 
facility may also include construction costs.
    (c) The total cost of a project under this part will not include any 
costs incurred before the date VA sent the State written notification 
that the application in Sec. 59.20 was approved.

[[Page 963]]

    (d) The total cost of a project under this part may include 
administration and production costs, e.g., architectural and engineering 
fees, inspection fees, and printing and advertising costs.
    (e) The total cost of a project under this part may include the cost 
of projects on the grounds of the facility, e.g., parking lots, 
landscaping, sidewalks, streets, and storm sewers, only if they are 
inextricably involved with the construction of the project.
    (f) The total cost of a project under this part may include the cost 
of equipment necessary for the operation of the State home facility. 
This may include the cost of:
    (1) Fixed equipment included in the construction or acquisition 
contract. Fixed equipment must be permanently affixed to the building or 
connected to the heating, ventilating, air conditioning, or other 
service distributed through the building via ducts, pipes, wires, or 
other connecting device. Fixed equipment must be installed during 
construction. Examples of fixed equipment include kitchen and 
intercommunication equipment, built-in cabinets, and cubicle curtain 
rods; and
    (2) Other equipment not included in the construction contract 
constituting no more than 10 percent of the total construction contract 
cost of the project. Other equipment includes: furniture, furnishings, 
wheeled equipment, kitchen utensils, linens, draperies, blinds, electric 
clocks, pictures and trash cans.
    (g) The contingency allowance may not exceed five percent of the 
total cost of the project for new construction or eight percent for 
renovation projects.
    (h) The total cost of a project under this part may not include the 
cost of:
    (1) Land acquisition;
    (2) Maintenance or repair work; or
    (3) Office supplies or consumable goods (such as food, drugs, 
medical dressings, paper, printed forms, and soap) which are routinely 
used in a State home.
    (i) A grant for expansion, remodeling, or alteration of an existing 
State home, which is on or eligible for inclusion in the National 
Register of Historic Places, for furnishing domiciliary, nursing home, 
or adult day health care to veterans may not be awarded for the 
expansion, remodeling, or alteration of such building if such action 
does not comply with National Historic Preservation Act procedures or if 
the total cost of remodeling, renovating, or adapting such building or 
facility exceeds the cost of comparable new construction by more than 
five percent. If demolition of an existing building or facility on, or 
eligible for inclusion in, the National Register of Historic Places is 
deemed necessary and such demolition action is taken in compliance with 
National Historic Preservation Act procedures, any mitigation cost 
negotiated in the compliance process and/or the cost to professionally 
record the building or facility in the Historic American Buildings 
Survey (HABS), plus the total cost for demolition and site restoration, 
shall be included by the State in calculating the total cost of new 
construction.
    (j) The cost of demolition of a building cannot be included in the 
total cost of construction unless the proposed construction is in the 
same location as the building to be demolished or unless the demolition 
is inextricably linked to the design of the construction project.
    (k) With respect to the final award of a conditionally-approved 
grant, the Secretary may not award a grant for an amount that is 10 
percent more than the amount conditionally-approved.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.90  Line item adjustments to grants.

    After a grant has been awarded, upon request from the State 
representative, VA may approve a change in a line item (line items are 
identified in Form 424C which is set forth in Sec. 59.170(o) of this 
part) of up to 10 percent (increase or decrease) of the cost of the line 
item if the change would be within the scope or objective of the project 
and would not change the amount of the grant.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)

[[Page 964]]



Sec. 59.100  Payment of grant award.

    The amount of the grant award will be paid to the State or, if 
designated by the State representative, the State home for which such 
project is being carried out, or any other State agency or 
instrumentality. Such amount shall be paid by way of reimbursement, and 
in such installments consistent with the progress of the project, as the 
Chief Consultant, Geriatrics and Extended Care, may determine and 
certify for payment to the appropriate Federal institution. Funds paid 
under this section for an approved project shall be used solely for 
carrying out such project as so approved. As a condition for the final 
payment, the State must comply with the requirements of this part based 
on an architectural and engineering inspection approved by VA, must 
obtain VA approval of the final equipment list submitted by the State 
representative, and must submit to VA a completed VA Form 10-0388 (see 
Sec. 59.170(i)). The equipment list and the completed VA form 10-0388 
must be submitted to the Chief Consultant, Geriatrics and Extended Care 
(114), VA Central Office, 810 Vermont Avenue, NW., Washington, DC 20420.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.110  Recapture provisions.

    If a facility for which a grant has been awarded ceases to be 
operated as a State home for the purpose for which the grant was made, 
the United States shall be entitled to recover from the State which was 
the recipient of the grant or from the then owner of such construction 
as follows:
    (a) If less than 20 years has lapsed since the grant was awarded, 
and VA provided 65 percent of the estimated cost to construct, acquire 
or renovate a State home facility principally for furnishing domiciliary 
care, nursing home care, adult day health care, hospital care, or non-
institutional care to veterans, VA shall be entitled to recover 65 
percent of the current value of such facility (but in no event an amount 
greater than the amount of assistance provided for such under these 
regulations), as determined by agreement of the parties or by action 
brought in the district court of the United States for the district in 
which the facility is situated.
    (b) Based on the time periods for grant amounts set forth below, if 
VA provided between 50 and 65 percent of the estimated cost of 
expansion, remodeling, or alteration of an existing State home facility, 
VA shall be entitled to recover the amount of the grant as determined by 
agreement of the parties or by action brought in the district court of 
the United States for the district in which the facility is situated:

------------------------------------------------------------------------
                                                               Recovery
            Grant amount  (dollars in thousands)             period  (in
                                                                years)
------------------------------------------------------------------------
0-250......................................................            7
251-500....................................................            8
501-750....................................................            9
751-1,000..................................................           10
1,001-1,250................................................           11
1,251-1,500................................................           12
1,501-1,750................................................           13
1,751-2,000................................................           14
2,001-2,250................................................           15
2,251-2,500................................................           16
2,501-2,750................................................           17
2,751-3,000................................................           18
Over 3,000.................................................           20
------------------------------------------------------------------------

    (c) If the magnitude of the VA contribution is below 50 percent of 
the estimated cost of the expansion, remodeling, or alteration of an 
existing State home facility recognized by the Department of Veterans 
Affairs, the Under Secretary for Health may authorize a recovery period 
between 7 and 20 years depending on the grant amount involved and the 
magnitude of the project.
    (d) This section does not apply to any portion of a State home in 
which VA has established and operates an outpatient clinic.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.120  Hearings.

    If the Secretary determines that a submission from a State does not 
meet the requirements of this part, the Secretary will advise the State 
by letter that a grant is tentatively denied, explain the reasons for 
the tentative denial, and inform the State of the opportunity to appeal 
to the Board of Veterans' Appeals pursuant to 38 U.S.C. 7105. Decisions 
under this part are not

[[Page 965]]

subject to the provisions of Sec. 17.133 of this order.

(Authority: 38 U.S.C. 101, 501, 511, 1710, 1742, 7101-7298, 8105, 8131-
8137)



Sec. 59.121  Amendments to application.

    Any amendment of an application that changes the scope of the 
application or changes the cost estimates by 10 percent or more shall be 
subject to approval in the same manner as an original application.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.122  Withdrawal of application.

    A State representative may withdraw an application by submitting to 
VA a written document requesting withdrawal.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.123  Conference.

    At any time, VA may recommend that a conference (such as a design 
development conference) be held in VA Central Office in Washington, DC, 
to provide an opportunity for the State and its architects to discuss 
requirements for a grant with VA officials.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.124  Inspections, audits, and reports.

    (a) A State will allow VA inspectors and auditors to conduct 
inspections and audits as necessary to ensure compliance with the 
provisions of this part. The State will provide evidence that it has met 
its responsibility under the Single Audit Act of 1984 (see part 41 of 
this chapter) and submit that evidence to VA.
    (b) A State will make such reports in such form and containing such 
information as the Chief Consultant, Geriatrics and Extended Care, may 
from time to time reasonably require and give the Chief Consultant, 
Geriatrics and Extended Care, upon demand, access to the records upon 
which such information is based.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.130  General requirements for all State home facilities.

    As a condition for receiving a grant and grant funds under this 
part, States must comply with the requirements of this section.
    (a) The physical environment of a State home must be designed, 
constructed, equipped, and maintained to protect the health and safety 
of participants, personnel and the public.
    (b) A State home must meet the general conditions of the American 
Institute of Architects, or other general conditions required by the 
State, for awarding contracts for State home grant projects. Facilities 
must meet all Federal, State, and local requirements, including the 
Uniform Federal Accessibility Standards (UFAS) (24 CFR part 40, appendix 
A), during the design and construction of projects subject to this part. 
If the State or local requirements are different from the Federal 
requirements, compliance with the most stringent provisions is required. 
A State must design and construct the project to provide sufficient 
space and equipment in dining, health services, recreation, and program 
areas to enable staff to provide residents with needed services as 
required by this part and as identified in each resident's plan of care.
    (c) State homes should be planned to approximate the home atmosphere 
as closely as possible. The interior and exterior should provide an 
attractive and home-like environment for elderly residents. The site 
will be located in a safe, secure, residential-type area that is 
accessible to acute medical care facilities, community activities and 
amenities, and transportation facilities typical of the area.
    (d)(1) State homes must meet the applicable provisions of the 
National Fire Protection Association's NFPA 101, Life Safety Code (2000 
edition) and the NFPA 99, Standard for Health Care Facilities (1999 
edition). Incorporation by reference of these materials was approved by 
the Director of the Federal Register in accordance with 5 U.S.C. 552(a) 
and 1 CFR part 51. These materials, incorporated by reference, are 
available for inspection at the Department of Veterans Affairs, Office 
of Regulations Management (02D), Room 1154,

[[Page 966]]

810 Vermont Avenue, NW, Washington, DC 20420 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/ibr--
locations.html. Copies may be obtained from the National Fire Protection 
Association, 1 Batterymarch Park, P.O. Box 9101, Quincy, MA 02269-9101. 
(For ordering information, call toll free 1-800-344-3555.)
    (2) Facilities must also meet the State and local fire codes.
    (e) State homes must have an emergency electrical power system to 
supply power adequate to operate all exit signs and lighting for means 
of egress, fire and medical gas alarms, and emergency communication 
systems. The source of power must be an on-site emergency standby 
generator of sufficient size to serve the connected load or other 
approved sources.
    (f) The nurse's station must be equipped to receive resident calls 
through a communication system from resident rooms, toilet and bathing 
facilities, dining areas, and activity areas.
    (g) The State home must have one or more rooms designated for 
resident dining and activities. These rooms must be:
    (1) Well lighted;
    (2) Well ventilated; and
    (3) Adequately furnished.
    (h) The facility management must provide a safe, functional, 
sanitary, and comfortable environment for the residents, staff and the 
public. The facility must:
    (1) Ensure that water is available to essential areas when there is 
a loss of normal water supply;
    (2) Have adequate outside ventilation by means of windows, or 
mechanical ventilation, or a combination of the two;
    (3) Equip corridors with firmly secured handrails on each side; and
    (4) Maintain an effective pest control program so that the facility 
is free of pests and rodents.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.140  Nursing home care requirements.

    As a condition for receiving a grant and grant funds for a nursing 
home facility under this part, States must comply with the requirements 
of this section.
    (a) Resident rooms must be designed and equipped for adequate 
nursing care, comfort, and privacy of residents. Resident rooms must:
    (1) Accommodate no more than four residents;
    (2) Have direct access to an exit corridor;
    (3) Have at least one window to the outside;
    (4) Be equipped with, or located near, toilet and bathing facilities 
(VA recommends that public toilet facilities also be located near the 
residents dining and recreational areas);
    (5) Be at or above grade level;
    (6) Be designed or equipped to ensure full visual privacy for each 
resident;
    (7) Except in private rooms, each bed must have ceiling suspended 
curtains that extend around the bed to provide total visual privacy in 
combination with adjacent walls and curtains;
    (8) Have a separate bed for each resident of proper size and height 
for the safety of the resident;
    (9) Have a clean, comfortable mattress;
    (10) Have bedding appropriate to the weather and climate;
    (11) Have functional furniture appropriate to the resident's needs, 
and
    (12) Have individual closet space with clothes racks and shelves 
accessible to the resident.
    (b) Unless determined by VA as necessary to accommodate an increased 
quality of care for patients, a nursing home project may propose a 
deviation of no more than 10 percent (more or less) from the following 
net square footage for the State to be eligible for a grant of 65 
percent of the total estimated cost of the project. If the project 
proposes building more than the following net square footage and VA 
makes a determination that it is not needed, the cost of the additional 
net square footage will not be included in the estimated total cost of 
construction.

[[Page 967]]



                  Table to Paragraph (b)--Nursing Home
------------------------------------------------------------------------
 
------------------------------------------------------------------------
I. Support facilities [allowable
 square feet (or metric
 equivalent) per facility for VA
 participation]:
    Administrator.................  200
    Assistant administrator.......  150
    Medical officer, director of    150
     nursing or equivalent.
    Nurse and dictation area......  120
    General administration (each    120
     office/person).
    Clerical staff (each).........  80
    Computer area.................  40
    Conference room (consultation   500 (for each room)
     area, in-service training).
    Lobby/waiting area. (150        3 (per bed)
     minimum/600 maximum per
     facility).
    Public/resident toilets (male/  25 (per fixture)
     female).
    Pharmacy \1\..................
    Dietetic service \1\..........
    Dining area...................  20 (per bed)
    Canteen/retail sales..........  2 (per bed)
    Vending machines (450 max. per  1 (per bed)
     facility).
    Resident toilets (male/female)  25 (per fixture)
    Child day care \1\............
    Medical support (staff offices/ 140 (for each room)
     exam/treatment room/family
     counseling, etc.).
    Barber and/or beauty shops....  140
    Mail room.....................  120
    Janitor's closet..............  40
    Multipurpose room.............  15 (per bed)
    Employee lockers..............  6 (per employee)
    Employee lounge (500 max. per   120
     facility).
    Employee toilets..............  25 (per fixture)
    Chapel........................  450
    Physical therapy..............  5 (per bed)
    Office, if required...........  120
    Occupational therapy..........  5 (per bed).
    Office, if required...........  120
    Library.......................  1.5 (per bed)
    Building maintenance storage..  2.5 (per bed)
    Resident storage..............  6 (per bed)
    General warehouse storage.....  6 (per bed)
    Medical/dietary/pharmacy......  7 (per bed)
    General laundry \1\...........
II. Bed units:
    One...........................  150
    Two...........................  245
    Large two-bed per unit........  305
    Four..........................  460
    Lounge areas (resident lounge   8 (per bed)
     with storage).
    Resident quiet room...........  3 (per bed)
    Clean utility.................  120
    Soiled utility................  105
    Linen storage.................  150
    General storage...............  100
    Nurses station, ward secretary  260
    Medication room...............  75
    Exam/Treatment room...........  140
    Waiting area..................  50
    Unit supply and equipment.....  50
    Staff toilet..................  25 (per fixture)
    Stretcher/wheelchair storage..  100

[[Page 968]]

 
    Kitchenette...................  150
    Janitor's closet..............  40
    Resident laundry..............  125
    Trash collection..............  60
III. Bathing and Toilet
 Facilities:
    (A) Private or shared
     facilities:
        Wheelchair facilities.....  25 (per fixture)
        Standard facilities.......  15 (per fixture)
    (B) Full bathroom.............  75
    (C) Congregate bathing
     facilities:
        First tub/shower..........  80
        Each additional fixture...  25
------------------------------------------------------------------------
\1\ The size to be determined by the Chief Consultant, Geriatrics and
  Extended Care, as necessary to accommodate projected patient care
  needs (must be justified by State in space program analysis).


(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137; Sections 2, 
3, 4, and 4a of the Architectural Barriers Act of 1968, as amended, 
Public Law 90-480, 42 U.S.C. 4151-4157)



Sec. 59.150  Domiciliary care requirements.

    As a condition for receiving a grant and grant funds for a 
domiciliary under this part, the domiciliary must meet the requirements 
for a nursing home specified in Sec. 59.140 of this part.

(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137)



Sec. 59.160  Adult day health care requirements.

    As a condition for receiving a grant and grant funds under this part 
for an adult day health care facility, States must meet the requirements 
of this section.
    (a) Each adult day health care program, when it is co-located in a 
nursing home, domiciliary, or other care facility, must have its own 
separate designated space during operational hours.
    (b) The indoor space for an adult day health care program must be at 
least 100 square feet per participant including office space for staff, 
and must be 60 square feet per participant excluding office space for 
staff.
    (c) Each program will need to design and partition its space to meet 
its own needs, but the following functional areas must be available:
    (1) A dividable multipurpose room or area for group activities, 
including dining, with adequate table setting space.
    (2) Rehabilitation rooms or an area for individual and group 
treatments for occupational therapy, physical therapy, and other 
treatment modalities.
    (3) A kitchen area for refrigerated food storage, the preparation of 
meals and/or training participants in activities of daily living.
    (4) An examination and/or medication room.
    (5) A quiet room (with at least one bed), which functions to isolate 
participants who become ill or disruptive, or who require rest, privacy, 
or observation. It should be separate from activity areas, near a 
restroom, and supervised.
    (6) Bathing facilities adequate to facilitate bathing of 
participants with functional impairments.
    (7) Toilet facilities and bathrooms easily accessible to people with 
mobility problems, including participants in wheelchairs. There must be 
at least one toilet for every eight participants. The toilets must be 
equipped for use by persons with limited mobility, easily accessible 
from all programs areas, i.e. preferably within 40 feet from that area, 
designed to allow assistance from one or two staff, and barrier free.
    (8) Adequate storage space. There should be space to store arts and 
crafts materials, personal clothing and belongings, wheelchairs, chairs, 
individual handiwork, and general supplies. Locked cabinets must be 
provided for files, records, supplies, and medications.

[[Page 969]]

    (9) An individual room for counseling and interviewing participants 
and family members.
    (10) A reception area.
    (11) An outside space that is used for outdoor activities that is 
safe, accessible to indoor areas, and accessible to those with a 
disability. This space may include recreational space and a garden area. 
It should be easily supervised by staff.
    (d) Furnishings must be available for all participants. This must 
include functional furniture appropriate to the participants' needs.
    (e) Unless determined by VA as necessary to accommodate an increased 
quality of care for patients, an adult day health care facility project 
may propose a deviation of no more than 10 percent (more or less) from 
the following net square footage for the State to be eligible for a 
grant of 65 percent of the total estimated cost of the project. If the 
project proposes building more than the following net square footage and 
VA makes a determination that it is not needed, the cost of the 
additional net square footage will not be included in the estimated 
total cost of construction.

              Table to Paragraph (e)--Adult Day Health Care
------------------------------------------------------------------------
 
------------------------------------------------------------------------
I. Support facilities [allowable
 square feet (or metric
 equivalent) per facility for VA
 participation]:
    Program Director..............  200
    Assistant administrator.......  150
    Medical officer, director of    150
     nursing or equivalent.
    Nurse and dictation area......  120
    General administration (each    120
     office/person).
    Clerical staff (each).........  80
    Computer area.................  40
    Conference room (consultation   500 (for each room).
     area, in-service training).
    Lobby/receiving/waiting area    3 (per participant)
     (150 minimum).
    Public/resident toilets (male/  25 (per fixture).
     female).
    Dining area (may be included    20 (per participant).
     in the multipurpose room).
    Vending machines..............  1 (per participant).
    Participant toilets (male/      25 (per fixture).
     female).
    Medical support (staff offices/ 140 (for each room).
     family counseling, etc.).
    Janitor's closet..............  40
    Dividable multipurpose room...  15 (per participant).
    Employee lockers..............  6 (per employee)
    Employee lounge...............  120
    Employee toilets..............  25 (per fixture).
    Physical therapy..............  5 (per participant).
    Office, if required...........  120
    Occupational therapy..........  5 (per participant).
    Office, if required...........  120
    Building maintenance storage..  2.5 (per participant).
    Resident storage..............  6 (per participant).
    General warehouse storage.....  6 (per participant).
    Medical/dietary...............  7 (per participant).
    General laundry \1\...........
II. Other Areas:
    Participant quiet room........  3 (per participant).
    Clean utility.................  120
    Soiled utility................  105
    General storage...............  100
    Nurses station, ward secretary  260
    Medication/exam/treatment       75
     rooms.
    Waiting area..................  50
    Program supply and equipment..  50
    Staff toilet..................  25 (per fixture).

[[Page 970]]

 
    Wheelchair storage............  100
    Kitchen.......................  120
    Janitor's closet..............  40
    Resident laundry..............  125
    Trash collection..............  60
III. Bathing and Toilet
 Facilities:
    (A) Private or shared
     facilities:
        Wheelchair facilities.....  25 (per fixture).
        Standard facilities.......  15 (per fixture).
    (B) Full bathroom.............  75
------------------------------------------------------------------------
\1\ The size to be determined by the Chief Consultant, Geriatrics and
  Extended Care, as necessary to accommodate projected patient care
  needs (must be justified by State in space program analysis).


(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137; Sections 2, 
3, 4, and 4a of the Architectural Barriers Act of 1968, as amended, 
Public Law 90-480, 42 U.S.C. 4151-4157)


Sec. 59.170    Forms.

    All forms set forth in this part are available on the Internet at 
http://www.va.gov/About--VA/Orgs/VHA/VHAProg.htm.

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(Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137; Sections 2, 
3, 4, and 4a of the Architectural Barriers Act of 1968, as amended, 
Public Law 90-480, 42 U.S.C. 4151-4157)



PART 60_FISHER HOUSES AND OTHER TEMPORARY LODGING--Table of Contents




Sec.
60.1 Purpose.
60.2 Definitions.
60.3 Eligible persons.
60.4 Application.
60.5 Travel.
60.6 Condition of veteran.
60.7 Duration of temporary lodging.
60.8 Lodging availability.
60.9 Decisionmaker.
60.10 Costs.

    Authority: 38 U.S.C. 501, 1708.

[[Page 1001]]


    Source: 68 FR 8549, Feb. 24, 2003, unless otherwise noted.



Sec. 60.1  Purpose.

    This part sets forth requirements regarding the use of Fisher Houses 
and other temporary lodging by veterans receiving VA medical care or C&P 
examinations and a family member or other person accompanying the 
veteran to provide the equivalent of familial support.

(Authority: 38 U.S.C. 501, 1708)



Sec. 60.2  Definitions.

    For the purposes of this part:
    C&P examination means an examination requested by VA's Compensation 
and Pension Service to be conducted at a VA health care facility for the 
purpose of evaluating claims by veterans.
    Temporary lodging means:
    (1) Lodging at a Fisher House which is a housing facility that is 
located at or near a VA health care facility, that is available for 
residential use on a temporary basis by eligible persons, and that was 
constructed by and donated to VA by the Zachary and Elizabeth M. Fisher 
Armed Services Foundation or Fisher House Foundation; or
    (2) Lodging at a temporary lodging facility located at a VA health 
care facility (generally referred to as a ``hoptel''), or a temporary 
non-VA lodging facility, such as a hotel or motel, provided by a VA 
health care facility.
    VA means the Department of Veterans Affairs.

(Authority: 38 U.S.C. 501, 1708)



Sec. 60.3  Eligible persons.

    The following are eligible to stay in temporary lodging subject to 
the conditions of this part:
    (a) A veteran with an appointment at a VA health care facility for 
the purpose of receiving health care or a C&P examination; and
    (b) A member of the family of such veteran or another person who 
accompanies such veteran to provide the equivalent of familial support.

(Authority: 38 U.S.C. 501, 1708)



Sec. 60.4  Application.

    To obtain temporary lodging under this part, a veteran must make an 
application to the person responsible for coordinating the temporary 
lodging program at the VA health care facility of jurisdiction. This may 
be done by letter, electronic means (including telephone, e-mail, or 
facsimile), or in person at the VA health care facility of jurisdiction. 
The veteran shall provide the following information:
    (a) Veteran's name;
    (b) Beginning date and time and duration of scheduled care;
    (c) Type of scheduled care;
    (d) Name, gender, and relationship to the veteran of person 
accompanying veteran;
    (e) Requested dates for temporary lodging;
    (f) Distance, time, and means of travel from the veteran's home to 
VA health care facility;
    (g) Circumstances that may affect the time of travel from the 
veteran's home to VA health care facility; and
    (h) A statement that the veteran is medically stable and capable of 
self-care or will be accompanied by a caregiver able to provide the 
necessary care.

(Authority: 38 U.S.C. 501, 1708)

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0630.)



Sec. 60.5  Travel.

    As a condition for receiving temporary lodging under this part, a 
veteran must be required to travel either 50 or more miles, or at least 
two hours from his or her home to the VA health care facility, except 
that the facility Director at the VA health care facility of 
jurisdiction may make an exception to distance or time provisions based 
on exceptional circumstances, such as condition of the veteran, 
inclement weather, road conditions, or the mode of transportation used 
by the veteran.

(Authority: 38 U.S.C. 501, 1708)



Sec. 60.6  Condition of veteran.

    As a condition for receiving temporary lodging under this part, the 
veteran must be medically stable and

[[Page 1002]]

must be capable of self-care or be accompanied by a caregiver able to 
provide the necessary care. Questions regarding these issues will be 
resolved by an appropriate health care provider at the VA health care 
facility of jurisdiction.

(Authority: 38 U.S.C. 501, 1708)



Sec. 60.7  Duration of temporary lodging.

    Temporary lodging may be furnished to eligible persons in connection 
with care or C&P examinations provided at a VA health care facility. 
When a veteran is undergoing extensive treatment or procedures, such as 
an organ transplant or chemotherapy, eligible persons may be furnished 
temporary lodging for the duration of the episode of care subject to 
limitations described in this section. Temporary lodging may be 
available the night before the day of the scheduled care, if the veteran 
leaving home by 8 a.m., would be unable to arrive at the health care 
facility by the time of the scheduled care. Temporary lodging may be 
available the night of the scheduled care if, after the completion of 
the care, the veteran would be unable to return home by 7 p.m.

(Authority: 38 U.S.C. 501, 1708)



Sec. 60.8  Lodging availability.

    Fisher Houses are available solely for temporary lodging under this 
part. Non-utilized beds and rooms at a VA health care facility will be 
made available if not barred by law and if the Director of the VA health 
care facility determines that such action would not have a negative 
impact on patient care. Temporary lodging facilities, such as hotels or 
motels, will be utilized based on availability of local funding as 
determined by the Director of the health care facility of jurisdiction. 
Temporary lodging will be provided on a first-come first-serve basis.

(Authority: 38 U.S.C. 501, 1708)



Sec. 60.9  Decisionmaker.

    Except as otherwise provided in this part, the person responsible 
for coordinating the temporary lodging program at the VA health care 
facility of jurisdiction is responsible for making decisions under this 
part.

(Authority: 38 U.S.C. 501, 1708)



Sec. 60.10  Costs.

    Costs for temporary lodging under this part shall be borne by VA.

(Authority: 38 U.S.C. 501, 1708)



PART 61_VA HOMELESS PROVIDERS GRANT AND PER DIEM PROGRAM--Table of 
Contents




Sec.
61.0 Purpose.
61.1 Definitions.
61.10 Capital grants--general.
61.11 Applications for capital grants.
61.12 Threshold requirements for capital grant applications.
61.13 Rating criteria for capital grant applications.
61.14 Selecting applications for capital grants.
61.15 Obtaining additional information and awarding capital grants.
61.16 Matching funds for capital grants.
61.17 Site control for capital grants.
61.20 Life Safety Code capital grants.
61.30 Per diem--general.
61.31 Application for per diem.
61.32 Ranking non-capital grant recipients for per diem.
61.33 Payment of per diem.
61.40 Special needs grants--general.
61.41 Special needs grants application.
61.42 Threshold requirements for special needs grant applications.
61.43 Rating criteria for special needs grant applications.
61.44 Awarding special needs grants.
61.50 Technical assistance grants--general.
61.51 Applications for technical assistance grants.
61.52 Threshold requirements for technical assistance grant 
          applications.
61.53 Rating criteria for technical assistance grant applications.
61.54 Awarding technical assistance grants.
61.55 Technical assistance reports.
61.60 Notice of Fund Availability.
61.61 Agreement and funding actions.
61.62 Program changes.
61.63 Procedural error.
61.64 Religious organizations.
61.65 Inspections.
61.66 Financial management.
61.67 Recovery provisions.
61.80 General operation requirements for supportive housing and service 
          centers.
61.81 Outreach activities.
61.82 Resident rent for supportive housing.


[[Page 1003]]


    Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note.

    Source: 68 FR 13594, Mar. 19, 2003, unless otherwise noted.



Sec. 61.0  Purpose.

    This part implements the VA Homeless Providers Grant and Per Diem 
Program which consists of the following components: capital grants, per 
diem, special needs grants, and technical assistance grants.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.1  Definitions.

    For purposes of this part:
    Area or community means a political subdivision or contiguous 
political subdivisions (such as precinct, ward, borough, city, county, 
State, Congressional district, etc.) with a separately identifiable 
population of homeless veterans.
    Capital grant means a grant for construction, renovation, or 
acquisition of a facility; or for acquisition of a van.
    Capital lease means a lease that will be in effect for the full 
period in which VA may recover all or portions of the capital grant 
amount under this part.
    Chronically mentally ill means a condition of schizophrenia or major 
affective disorder (including bipolar disorder) or post-traumatic stress 
disorder (PTSD), based on a diagnosis from a licensed mental health 
professional, with at least one documented hospitalization for this 
condition sometime in the last 2 years or with documentation of a formal 
assessment on a standardized scale of any serious symptomology or 
serious impairment in the areas of work, family relations, thinking, or 
mood.
    Fee means a fixed charge for a service offered by a recipient under 
this part, that is in addition to the services that are outlined in the 
recipient's application; and are not paid for by VA per diem or provided 
by VA, (e.g., cable television, recreational outings, professional 
instruction or counseling).
    Fixed site means a physical structure that under normal conditions 
is not capable of readily being moved from one location to another 
location.
    Frail elderly means 65 years of age or older with one or more 
chronic health problems and limitations in performing one or more 
activities of daily living (such as bathing, toileting, transferring 
from bed to chair, etc.)
    Homeless means: (1)(i) Lacking a fixed, regular and adequate 
nighttime residence; or
    (ii) Having a primary nighttime residence that is--
    (A) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing for the mentally ill);
    (B) An institution that provides a temporary residence for persons 
intended to be institutionalized; or
    (C) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (2) The term homeless does not include imprisonment or other 
detainment pursuant to Federal or State law. Imprisonment or other 
detainment does not include probation, parole or electronic custody.
    New construction means the building of a structure where none 
existed or an addition to an existing structure that increases the floor 
area by more than 100 percent.
    Nonprofit organization means a private organization, no part of the 
net earnings of which may inure to the benefit of any member, founder, 
contributor, or individual. The organization must be recognized as a 
501(c)(3) or 501(c)(19) nonprofit organization by the United States 
Internal Revenue Service, and:
    (1) Have a voluntary board;
    (2) Have a functioning accounting system that is operated in 
accordance with generally accepted accounting principles, or designate 
an entity that will maintain a functioning accounting system for the 
organization in accordance with generally accepted accounting 
principles; and
    (3) Practice nondiscrimination in the provision of supportive 
housing and supportive services assistance.
    Operating costs means expenses incurred in operating supportive 
housing, supportive services or service centers with respect to:

[[Page 1004]]

    (1) Administration (including staff salaries; costs associated with 
accounting for the use of grant funds, preparing reports for submission 
to VA, obtaining program audits, and securing accreditation; and similar 
costs related to administering the grant after the award), maintenance, 
repair and security for the supportive housing;
    (2) Van costs or building rent (except under capital leases), e.g., 
fuel, insurance, utilities, furnishings, and equipment;
    (3) Conducting on-going assessments of supportive services provided 
for and needed by participants and the availability of such services;
    (4) Other costs associated with operating the supportive housing.
    Outpatient health services means outpatient health care, outpatient 
mental health services, outpatient alcohol and/or substance abuse 
services, and case management.
    Participant means a person receiving services based on a grant or 
per diem provided under this part.
    Public entity includes:
    (1) 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, and
    (2) 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 the Bureau 
of Indian Affairs.
    Rehabilitation means the improvement or repair of an existing 
structure. Rehabilitation does not include minor or routine repairs.
    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.
    Supportive housing means housing with supportive services provided 
for homeless veterans and is:
    (1) Transitional housing, or
    (2) A part of, a particularly innovative project for, or alternative 
method of, meeting the immediate and long-term needs of homeless 
veterans.
    Supportive services means services, which may be designed by the 
recipient or program participants, that provide appropriate services or 
assist such persons in obtaining appropriate services to address the 
needs of homeless veterans to be served by the project. Supportive 
services does not include inpatient acute hospital care, but does 
include:
    (1) Outreach activities;
    (2) Providing food, nutritional advice, counseling, health care, 
mental health treatment, alcohol and other substance abuse services, 
case management services;
    (3) Establishing and operating child care services for dependents of 
homeless veterans;
    (4) Providing supervision and security arrangements necessary for 
the protection of residents of supportive housing and for homeless 
veterans using supportive housing or services;
    (5) Providing assistance in obtaining permanent housing;
    (6) Providing education, employment counseling and assistance, and 
job training;
    (7) Providing assistance in obtaining other Federal, State and local 
assistance available for such residents including mental health 
benefits, employment counseling and assistance, veterans' benefits, 
medical assistance, and income support assistance; and
    (8) Providing housing assistance, legal assistance, advocacy, 
transportation, and other services essential for achieving and 
maintaining independent living.
    Terminally ill means a prognosis of 9 months or less to live based 
on a written medical diagnosis from a physician.

[[Page 1005]]

    VA means the Department of Veterans Affairs.
    Veteran means a person who served in the active military, naval, or 
air service, and who was discharged or released there from under 
conditions other than dishonorable.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.10  Capital grants--general.

    (a) VA provides capital grants to public or nonprofit private 
entities so they can assist homeless veterans by helping to ensure the 
availability of supportive housing and service centers to furnish 
outreach, rehabilitative services, vocational counseling and training, 
and transitional housing. Specifically, VA provides capital grants for 
up to 65 percent of the cost to:
    (1) Construct structures and purchase the underlying land to 
establish new supportive housing facilities or service centers, or to 
expand existing supportive housing facilities or service centers;
    (2) Acquire structures to establish new supportive housing 
facilities or service centers, or to expand existing supportive housing 
facilities or service centers;
    (3) Renovate existing structures to establish new supportive housing 
facilities or service centers, or to expand existing supportive housing 
facilities or service centers; and
    (4) Procure vans (purchase price, sales taxes, and title and 
licensing fees) to provide transportation or outreach for the purpose of 
providing supportive services.
    (b) Capital grants may not be use for acquiring buildings located on 
VA-owned property. However, capital grants may be awarded for 
construction, expansion, or renovation of buildings located on VA-owned 
property.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.11  Applications for capital grants.

    (a) To apply for a capital grant, an applicant must obtain from VA a 
capital grant application package and submit to VA the information 
called for in the application package within the time period established 
in the Notice of Fund Availability under Sec. 61.60 of this part.
    (b) The capital grant application package includes exhibits to be 
prepared and submitted as part of the application process, including:
    (1) Justification for the capital grant;
    (2) Site description, site design, and site cost estimates;
    (3) Documentation on eligibility to receive a capital grant under 
this part;
    (4) Documentation on matching funds committed to the project;
    (5) Documentation on operating budget and cost sharing;
    (6) Documentation on supportive services committed to the project;
    (7) Documentation on site control and appropriate zoning, and on the 
boundaries of the area or community proposed to be served;
    (8) If capital grant funds are proposed to be used for acquisition 
or rehabilitation, documentation demonstrating that the costs associated 
with acquisition or rehabilitation are less than the costs associated 
with new construction;
    (9) If grant funds are proposed to be used for new construction, 
documentation demonstrating that the costs associated with new 
construction are less than the costs associated with rehabilitation of 
an existing building, that there is a lack of available appropriate 
units that could be rehabilitated at a cost less than new construction, 
and that new construction is less costly than acquisition of an existing 
building, (for purposes of this cost comparison, costs associated with 
rehabilitation or new construction may include the cost of real property 
acquisition);
    (10) If the proposed construction includes demolition, a demolition 
plan, including the extent and cost of existing site features to be 
removed, stored, or relocated and information establishing that the 
proposed construction is in the same location as the building to be 
demolished or that the demolition is inextricably linked to the design 
of the construction project (the cost of demolition of a building cannot 
be included in the cost of construction unless the proposed construction 
is in the same location as the building to be demolished or unless the 
demolition is

[[Page 1006]]

inextricably linked to the design of the construction project);
    (11) Comments or recommendations by appropriate State (and area 
wide) clearinghouses pursuant to E.O. 12372 (3 CFR, 1982 Comp., p. 197), 
if the applicant is a State; and
    (12) Reasonable assurances with respect to receipt of a capital 
grant under this part that:
    (i) The project will be used principally to furnish to veterans the 
level of care for which such application is made; that not more than 25 
percent of participants at any one time will be nonveterans; and that 
such services will meet the requirements of this part;
    (ii) The recipient will continue to operate the project until the 
expiration of the period during which VA could seek recovery under Sec. 
61.67;
    (iii) Title to such site or van will vest solely in the applicant 
and the applicant will insure vans to the same extent they would insure 
a van bought with their own funds;
    (iv) Adequate financial support will be available for the completion 
of the project or for the purchase and maintenance, repair, and 
operation of the van; and
    (v) The recipient will keep records and submit reports as VA may 
reasonably require, within the time frames required; and give VA, upon 
demand, access to the records upon which such information is based.
    (c) Applicants may apply for more than one capital grant.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0554.)

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)

[68 FR 13594, Mar. 19, 2003, as amended at 68 FR 55468, Sept. 26, 2003]



Sec. 61.12  Threshold requirements for capital grant applications.

    To be eligible for a capital grant, an applicant must meet the 
following threshold requirements:
    (a) The application was completed in all parts and included the 
information called for in the application package and was filed within 
the time period established in the Notice of Fund Availability;
    (b) The applicant is a public or nonprofit private entity;
    (c) The population proposed to be served is homeless veterans;
    (d) The activities for which assistance is requested are eligible 
for funding under this part;
    (e) The applicant has demonstrated that adequate financial support 
will be available to carry out the project for which the capital grant 
is sought consistent with the plans, specifications and schedule 
submitted by the applicant;
    (f) The application has demonstrated compliance with the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 1970 
(URA) (42 U.S.C. 4601-4655);
    (g) The applicant has agreed to comply with the requirements of this 
part and has demonstrated the capacity to do so;
    (h) The applicant does not have an outstanding obligation to VA that 
is in arrears, and does not have an overdue or unsatisfactory response 
to an audit; and
    (i) The applicant is not in default, by failing to meet requirements 
for any previous assistance from VA under this part.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.13  Rating criteria for capital grant applications.

    (a) Applicants that meet the threshold requirements in Sec. 61.12 
of this part, will then be rated using the selection criteria listed in 
this section. To be eligible for a capital grant, an applicant must 
receive at least 600 points (out of a possible 1,200) and must receive 
points under criteria in paragraphs (b), (c), (d), (e), and (i) of this 
section.
    (b) Quality of the project. VA will award up to 300 points based on 
the following:
    (1) How program participants will achieve residential stability, 
including how available supportive services will help participants reach 
this goal;
    (2) How program participants will increase their skill level and/or 
income, including how available supportive

[[Page 1007]]

services will help participants reach this goal;
    (3) How program participants will be involved in making project 
decisions that affect their lives so that they achieve greater self-
determination, including how they will be involved in selecting 
supportive services, establishing individual goals and developing plans 
to achieve these goals;
    (4) How permanent affordable housing will be identified and made 
known to participants upon leaving the transitional housing, and how 
participants will be provided necessary follow-up services to help them 
achieve stability in the permanent housing;
    (5) How the service needs of participants will be assessed on an 
ongoing basis;
    (6) How the proposed housing, if any, will be managed and operated;
    (7) How participants will be assisted in assimilating into the 
community through access to neighborhood facilities, activities, and 
services;
    (8) How and when the progress of participants toward meeting their 
individual goals will be monitored, evaluated, and documented;
    (9) How and when the effectiveness of the overall project in 
achieving its goals will be evaluated and documented; and how any needed 
program modifications will be made based on those evaluations; and how 
program modifications will be reported to VA; and
    (10) How the proposed project will be implemented in a timely 
fashion.
    (c) Targeting to persons on streets and in shelters. VA will award 
up to 150 points based on:
    (1) The extent to which the project is designed to serve homeless 
veterans living in places not ordinarily meant for human habitation 
(e.g., streets, parks, abandoned buildings, automobiles, under bridges, 
in transportation facilities) and those who reside in emergency 
shelters; and
    (2) The likelihood that proposed plans for outreach and selection of 
participants will result in these populations being served.
    (d) Ability of applicant to develop and operate a project. VA will 
award up to 200 points based on the extent to which the application 
demonstrates experience in the following areas:
    (1) Engaging the participation of homeless veterans living in places 
not ordinarily meant for human habitation and in emergency shelters;
    (2) Assessing the housing and relevant supportive service needs of 
homeless veterans;
    (3) Accessing housing and relevant supportive service resources;
    (4) If applicable, contracting for and/or overseeing the 
rehabilitation or construction of housing;
    (5) If applicable, administering a rental assistance program;
    (6) Providing supportive services or supportive housing for homeless 
veterans;
    (7) Monitoring and evaluating the progress of persons toward meeting 
their individual goals;
    (8) Evaluating the overall effectiveness of a program and using 
evaluation results to make program improvements, as needed; and
    (9) Maintaining fiscal solvency as evidenced by providing their last 
complete yearly financial statements.
    (e) Need. VA will award up to 150 points based on the extent to 
which the applicant demonstrates:
    (1) Substantial unmet needs, particularly among the target 
population living in places not ordinarily meant for human habitation 
such as the streets, emergency shelters, based on reliable data from 
surveys of homeless populations or other reports or data gathering 
mechanisms that directly support claims made; and
    (2) An understanding of the homeless population to be served and its 
unmet housing and supportive service needs.
    (f) Innovative quality of the proposal. VA will award up to 50 
points based on the innovative quality of the proposal, in terms of:
    (1) Helping homeless veterans or homeless veterans with disabilities 
to reach residential stability, to increase their skill level and/or 
income, and to increase the influence they have over decisions that 
affect their lives;
    (2) Establishing a clear link between the innovation(s) and its 
proposed effect(s); and
    (3) Establishing usefulness as a model for other projects.

[[Page 1008]]

    (g) Leveraging. VA will award up to 50 points based on the extent to 
which the applicant documents resources from other public and private 
sources, including cash and the value of third party contributions, have 
been committed to support the project at the time of application.
    (h) Cost-effectiveness. VA will award up to 100 points for cost-
effectiveness. Projects will be rated based on the cost and number of 
new supportive housing beds made available or the cost, amount, and 
types of supportive services made available, when compared to other 
transitional housing and supportive services projects, and when adjusted 
for high-cost areas. Cost-effectiveness may include using excess 
government properties (local, State, Federal), as well as demonstrating 
site control at the time of application.
    (i) Coordination with other programs. VA will award up to 200 points 
based on the extent to which applicants demonstrate that they have 
coordinated with Federal, State, local, private and other entities 
serving homeless persons in the planning and operation of the project. 
Such entities may include shelter transitional housing, health care, or 
social service providers; providers funded through Federal initiatives; 
local planning coalitions or provider associations; or other program 
providers relevant to the needs of homeless veterans in the local 
community. Applicants are required to demonstrate that they have 
coordinated with the VA medical care facility of jurisdiction and VA 
Regional Offices of jurisdiction in their area. VA will award up to 50 
points of the 200 points based on the extent to which commitments to 
provide supportive services are documented at the time of application. 
Up to 150 points of the 200 points will be given to the extent 
applicants demonstrate that:
    (1) They are part of an ongoing community-wide planning process 
within the framework described above which is designed to share 
information on available resources and reduce duplication among programs 
that serve homeless veterans;
    (2) They have consulted directly with the closest VA Medical Center 
and other providers within the framework described above regarding 
coordination of services for project participants; and
    (3) They have coordinated with the closest VA Medical Center their 
plan to assure access to health care, case management, and other care 
services.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.14  Selecting applications for capital grants.

    (a) Applicants will first be grouped in categories according to the 
funding priorities set forth in the NOFA, if any. Applicants will then 
be ranked, within their respective funding category if applicable. The 
highest-ranked applications for which funding is available, within 
highest priority funding category if applicable, will be conditionally 
selected to receive a capital grant in accordance with their ranked 
order, as determined under Sec. 61.13 of this part. If funding 
priorities have been established and funds are still available after 
selection of those applicants in the highest priority group VA will 
continue to conditionally select applicants in lower priority categories 
in accordance with the selection method set forth in this paragraph 
subject to available funding.
    (b) In the event of a tie between applicants, VA will use the score 
from Sec. 61.13(e) of this part to determine the ranking.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.15  Obtaining additional information and awarding capital grants.

    (a) Each applicant who has been conditionally selected for a capital 
grant will be requested by VA to submit additional information, 
including:
    (1) Documentation to show that the project is feasible, including a 
plan from an architect, contractor, or other building professional that 
provides estimated costs for the proposed design;
    (2) Documentation showing the sources of funding for the project and 
firm financing commitments for the matching requirements described in 
Sec. 61.16 of this part;
    (3) Documentation establishing site control described in Sec. 61.17 
of this part;

[[Page 1009]]

    (4) Documentation establishing compliance with the National Historic 
Preservation Act (16 U.S.C. 470);
    (5) Information necessary for VA to ensure compliance both with 
Uniform Federal Accessibility Standards (UFAS) and the Americans with 
Disabilities Act Accessibility Guidelines;
    (6) Documentation establishing compliance with local and state 
zoning codes;
    (7) Documentation in the form of one set of design development (35 
percent completion) drawings demonstrating compliance with local codes, 
state codes, and the Life Safety Code of the National Fire Protection 
Association.
    (8) Information necessary for VA to ensure compliance with the 
provisions of the National Environmental Policy Act (42 U.S.C. 4321 et 
seq.);
    (9) A site survey performed by a licensed land surveyor; and
    (10) Such other documentation as specified by VA in writing to the 
applicant to confirm or clarify information provided in the application.
    (b) The required additional information must be received by VA in 
acceptable form within the time frame established by VA in a Notice of 
Fund Availability published in the Federal Register.
    (c) Following receipt of the additional information in acceptable 
form, VA will execute an agreement and make payments to the grant 
recipient in accordance with Sec. 61.61 of this part and other 
applicable provisions of this part.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0554.)

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)

[68 FR 13594, Mar. 19, 2003, as amended at 68 FR 55468, Sept. 26, 2003]



Sec. 61.16  Matching funds for capital grants.

    The amount of a capital grant may not exceed 65 percent of the total 
cost of the project for which the capital grant was awarded. The 
recipient must, from sources other than grant funds received under this 
part, match the funds provided by VA to cover the percentage of the 
total cost of the project not funded by the capital grant. This matching 
share shall constitute at least 35 percent of the total cost. If the 
project is for supportive housing, or a service center that would be 
used for purposes under this part and for other purposes, a capital 
grant may be awarded only in proportion to the use under this part. 
Capital grants may include application costs, including site surveys, 
architectural, and engineering fees, but may not include relocation 
costs.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.17  Site control for capital grants.

    (a) As a condition for obtaining a capital grant for supportive 
housing or a fixed site service center, an applicant must demonstrate 
site control through a deed, a capital lease, or an executed contract of 
sale, unless the site is in a building or on land owned by VA. Such site 
control must be demonstrated within 1 year after execution of an 
agreement under Sec. 61.61 of this part.
    (b) A capital grant recipient may change the site to a new site 
meeting the requirements of this part subject to VA approval under Sec. 
61.62 of this part. However, the recipient is responsible for and must 
demonstrate ability to provide for any additional costs resulting from 
the change in site.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0554.)

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)

[68 FR 13594, Mar. 19, 2003, as amended at 68 FR 55468, Sept. 26, 2003]



Sec. 61.20  Life Safety Code capital grants.

    (a) This section sets forth provisions for obtaining a Life Safety 
Code capital grant under 38 U.S.C. 2012(c)(3). To be eligible to receive 
such a capital grant, an applicant already must have received a grant 
under section 3 of the Homeless Veterans Comprehensive Service Programs 
Act of 1992 (Public Law 102-590; 38 U.S.C. 7221 note) for construction, 
renovation, or acquisition of a facility and must obtain the Life Safety 
Code capital grant solely

[[Page 1010]]

for renovations to such facility to comply with the Life Safety Code of 
the National Fire Protection Association. The following sections of this 
part apply to the Life Safety Code grants Sec. Sec. 61.60 through 
61.66; and Sec. 61.80 and Sec.  61.82.
    (b) To apply for a Life Safety Code capital grant under this 
section, an applicant must obtain from VA a Life Safety Code capital 
grant application package and submit to VA the information called for in 
the application package within the time period established in the Notice 
of Fund Availability. The Life Safety Code capital grant application 
package includes exhibits to be prepared and submitted as part of the 
application process, including:
    (1) Justification for the modifications needed to meet the Life 
Safety Code or such other comparable fire and safety requirements;
    (2) Site description, site design, and site cost estimates;
    (3) Reasonable assurances with respect to receipt of a Life Safety 
Code capital grant under this part that:
    (i) The project being renovated is being, and will continue to be, 
used principally to furnish veterans the level of care for which VA 
awarded the applicant a grant under the Homeless Veterans Comprehensive 
Service Program Act of 1992; that not more than 25 percent of 
participants at any one time will be nonveterans; and that such services 
will meet the requirements of this part;
    (ii) The recipient will keep records and submit reports as VA may 
reasonably require, within the time frames required; and give VA, upon 
demand, access to the records upon which such information is based;
    (iii) The applicant has agreed to comply with the applicable 
requirements of this part and has demonstrated the capacity to do so;
    (iv) The applicant does not have an outstanding obligation to VA 
that is in arrears, and does not have an overdue or unsatisfactory 
response to an audit; and
    (v) The applicant is not in default, by failing to meet requirements 
for any previous assistance from VA.
    (c)(1) Cost-effectiveness. VA will award up to 300 points for cost-
effectiveness with adjustments for high-cost areas. Applicants should 
address the following:
    (i) Estimated cost of the renovation and the type of work to be 
done;
    (ii) Estimated cost of any displacement of program participants or 
services due to the renovation; and
    (iii) Cost-benefit analysis addressing the benefit of renovation to 
the structure compared to moving program to another site.
    (2) Coordination. VA will award up to 200 points for a summary 
countersigned by the local VAMC Facilities Management of the discussions 
concerning renovation plans. The summaries should detail the following:
    (i) Urgency of the renovation;
    (ii) Adequacy of the renovation; and
    (iii) Opinion of feasibility and cost benefit.
    (d) The highest-ranked applications for the Life Safety Code capital 
grants for which funding is available will be selected to receive grants 
in accordance with their ranked order. The amount awarded will be 100 
percent of the estimated total cost of the renovation as stated in the 
Life Safety Code application (this may include application costs, 
architectural fees, and engineering fees). VA will execute an agreement 
and make payments to the Life Safety Code capital grant recipient in 
accordance with Sec. 61.61 of this part and other applicable provisions 
of this part. In the event of a tie between applicants, VA will use the 
score from Sec. 61.20(c)(2) of this part to determine the ranking.
    (e) Applicants may apply for more than one Life Safety Code capital 
grant.
    (f) The authority to provide Life Safety Code grants expires on 
December 21, 2006.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0554.)

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)

[68 FR 13594, Mar. 19, 2003, as amended at 68 FR 55468, Sept. 26, 2003]



Sec. 61.30  Per diem-general.

    VA provides per diem funds to capital grant recipients or to 
entities eligible

[[Page 1011]]

to receive a capital grant, which established a program of supportive 
housing or services after November 10, 1992 so they can assist homeless 
veterans by helping to offset operating costs to ensure the availability 
of supportive housing and service centers tasked with furnishing 
outreach, rehabilitative services, vocational counseling and training, 
and transitional housing assistance.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.31  Application for per diem.

    (a) To apply for per diem, a capital grant recipient need only 
indicate the intent to receive per diem on the capital grant application 
or may separately request per diem by submitting to VA a written 
statement requesting per diem.
    (b) To apply for per diem, a non-capital grant recipient must obtain 
from VA a non-capital grant application package and submit to VA the 
information called for in the application package within the time period 
established in the Notice of Fund Availability. The non-capital grant 
application package includes exhibits to be prepared and submitted as 
part of the application process, including:
    (1) Justification for per diem;
    (2) Documentation on eligibility to receive per diem under this 
part;
    (3) Documentation on operating budget and cost sharing;
    (4) Documentation on supportive services committed to the project;
    (5) Comments or recommendations by appropriate State (and area wide) 
clearinghouses pursuant to E.O. 12372 (3 CFR, 1982 Comp., p. 197), if 
the applicant is a State; and
    (6) Reasonable assurances with respect to receipt of per diem under 
this part that:
    (i) The project will be used principally to furnish to veterans the 
level of care for which such application is made; that not more than 25 
percent of participants at any one time will be nonveterans; and that 
such services will meet the requirements of this part;
    (ii) Adequate financial support will be available for the per diem 
program; and
    (iii) The recipient will keep records and submit reports as VA may 
reasonably require, within the time frames required; and give VA, upon 
demand, access to the records upon which such information is based.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0554.)

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)

[68 FR 13594, Mar. 19, 2003, as amended at 68 FR 55468, Sept. 26, 2003]



Sec. 61.32  Ranking non-capital grant recipients for per diem.

    (a) Applications from non-capital grant recipients in response to a 
Notice of Fund Availability will be reviewed and grouped in categories 
according to the funding priorities set forth in the NOFA, if any. Such 
applications will then be ranked within their respective funding 
category according to scores achieved only if the applicant scores at 
least 500 cumulative points from paragraphs (b), (c), (d), (e), and (i) 
of Sec. 61.13 of this part. The highest-ranked applications for which 
funding is available, within highest priority funding category if 
applicable, will be conditionally selected for eligibility to receive 
per diem payments in accordance with their ranked order. If funding 
priorities have been established and funds are still available after 
selection of those applicants in the highest priority group VA will 
continue to conditionally select applicants in lower priority categories 
in accordance with the selection method set forth in this paragraph 
subject to available funding.
    (b) In the event of a tie between applicants, VA will use the score 
from Sec. 61.13(e) of this part to determine the ranking.
    (c) All applicants responding to a NOFA for ``Per Diem Only'' will 
be subject to the ranking method in paragraph (a) of this section.

    Note to Sec. 61.32: Capital grant recipients are not required to be 
ranked, however, continuation of per diem payments to capital grant 
recipients will be subject to limitations set forth in Sec. 61.33 of 
this part.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)

[[Page 1012]]



Sec. 61.33  Payment of per diem.

    (a) A capital grant recipient meeting the application requirements 
as outlined in Sec. 61.31(a) of this part is eligible for per diem 
subject to a site inspection establishing that the applicant continues 
to meet the requirements for a capital grant as outlined in the 
following sections, Sec. Sec. 61.62, 61.64, 61.65, 61.66, 61.80, 61.81, 
and 61.82.
    (b) For non-capital grant recipients who apply for per diem under 
this part, funds will be allocated to the highest-ranked applicants in 
descending order until funds are expended. Payments will be contingent 
upon verification of application information based on an initial site 
inspection and other inspections pursuant to Sec. 61.66 of this part 
and will be made for 3 years or as otherwise specified in the Notice of 
Fund Availability. Non-capital grant recipients may apply again 
thereafter only in response to a Notice of Fund Availability.
    (c) For those applicants selected to receive per diem, VA will 
execute an agreement in accordance with Sec. 61.61of this part and make 
payments to the grant recipient or non-grant recipient for those 
homeless veterans--
    (1) Who VA referred to the grant recipient or non-grant recipient; 
or
    (2) For whom VA authorized the provision of supportive housing or 
supportive service.
    (d)(1) The rate of per diem payments for each veteran in supportive 
housing shall be the lesser of--
    (i) The daily cost of care estimated by the per diem recipient minus 
other sources of payments to the per diem recipient for furnishing 
services to homeless veterans that the per diem recipient certifies to 
be correct (other sources include payments and grants from other 
departments and agencies of the United States, from departments of State 
and local governments, from private entities or organizations, and from 
program participants), or
    (ii) The current VA State Home Program per diem rate for domiciliary 
care.
    (2) The per diem amount for service centers shall be 1/8 of the 
lesser of the amounts in paragraphs (d)(1)(i) and (d)(1)(ii) of this 
section per hour, not to exceed 8 hours in any day.
    (e) Per diem payments may be paid retroactively for services 
provided not more than 3 days before VA approval is given or, where 
through no fault of the recipient, per diem payments should have been 
made but were not made. VA will not pay per diem for any additional days 
of absence when a veteran has already been absent for more than 72 hours 
consecutively (scheduled or unscheduled). In addition, VA will not pay 
per diem payments for supportive housing for any homeless veteran who 
has had three or more episodes (admission and discharge for each 
episode) of supportive housing services paid for under this part. VA may 
waive the episode requirement if the services offered are different from 
those previously provided and may lead to a successful outcome.
    (f) Payment of per diem is subject to availability of funds. When 
necessary due to funding limitations, VA will reduce the rate of per 
diem as necessary.
    (g) Capital grant recipients and non-capital grant recipients may 
continue to receive per diem assistance only so long as they continue to 
meet the minimum eligibility requirements for obtaining a grant. For 
grant recipients this is the minimum 600 points as provided for in Sec. 
61.13(a) of this part. For non-grant recipients this is the minimum 500 
points provided for in Sec. 61.32(a) of this part.
    (h) Per diem payments will not be paid for both supportive housing 
and supportive services provided to the same veteran by the same per 
diem recipient.
    (i) For non-capital grant recipients, only those portions of the 
service center or supportive housing described in the application will 
be considered for per diem assistance.
    (j) At the time of receipt, a per diem recipient must report to VA 
all other sources of income for the project for which per diem was 
awarded. The information in this paragraph provides a basis for 
adjustments to the per diem payment.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)

[68 FR 13594, Mar. 19, 2003; 68 FR 34332, June 9, 2003]

[[Page 1013]]



Sec. 61.40  Special needs grants--general.

    (a) VA provides special needs grants to capital grant and per diem 
recipients under this part to assist with additional operational costs 
that would not otherwise be incurred but for the fact that the recipient 
is providing beds or services in supportive housing and at service 
centers for the following homeless veterans:
    (1) Women, including women who have care of minor dependents;
    (2) Frail elderly;
    (3) Terminally ill; or
    (4) Chronically mentally ill.
    (b) No part of a special needs grant may be used for any purpose 
that would change significantly the scope of the project for which a 
capital grant or per diem was awarded.
    (c) The following sections of this part apply to special needs 
grants: Sec. Sec. 61.60 through 61.66; and Sec.  61.80; Sec.  61.82.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.41  Special needs grants application.

    (a) To apply for a special needs grant, an applicant must obtain 
from VA a special needs grant application package and submit to VA the 
information called for in the application package within the time period 
established in the Notice of Fund Availability.
    (b) The special needs grant application package includes exhibits to 
be prepared and submitted as part of the application process, including:
    (1) Justification for the special needs grant;
    (2) Documentation on eligibility to receive a special needs grant 
under this part;
    (3) Documentation concerning the estimated operating costs for the 
needs of the specific population for which the special needs grant is 
requested;
    (4) Documentation concerning supportive services committed to the 
project;
    (5) Comments or recommendations by appropriate State (and area wide) 
clearinghouses pursuant to E.O. 12372 (3 CFR, 1982 Comp., p. 197), if 
the applicant is a State; and
    (6) Reasonable assurances with respect to receipt of a special needs 
grant under this part that:
    (i) The funds will be used to furnish to veterans the level of care 
for which such application is made; and that the special needs program 
will comply with applicable requirements of this part;
    (ii) The recipient will keep records and submit reports as VA may 
reasonably require, within the time frames required; and give VA, upon 
demand, access to the records upon which such information is based; and
    (iii) Adequate financial support will be available for the special 
needs program.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0554.)

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)

[68 FR 13594, Mar. 19, 2003, as amended at 68 FR 55468, Sept. 26, 2003]



Sec. 61.42  Threshold requirements for special needs grant applications.

    To be eligible for a special needs grant, an applicant must meet the 
following threshold requirements:
    (a) The application included the information called for in the 
application package and was filed within the time period established in 
the Notice of Fund Availability;
    (b) The applicant still meets the requirements for receipt of per 
diem;
    (c) The activities for which assistance is requested are eligible 
for funding under this part;
    (d) The applicant has demonstrated that adequate financial support 
will be available to carry out the project for which the grant is sought 
consistent with the plans, specifications and schedule submitted by the 
applicant;
    (e) The applicant does not have an outstanding obligation to VA that 
is in arrears, and does not have an overdue or unsatisfactory response 
to an audit;
    (f) The applicant is not in default, by failing to meet requirements 
for any previous assistance from VA under this part; and
    (g) The applicant has agreed to comply with applicable requirements 
of this part, to maintain eligibility for

[[Page 1014]]

special need payments and has demonstrated the capacity to do so.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.43  Rating criteria for special needs grant applications.

    (a) Applicants that meet the threshold requirements in Sec. 61.42 
of this part, will then be rated using the selection criteria listed in 
paragraphs (b) and (c) of this section. To be eligible for a special 
needs grant, an applicant must receive at least 300 points (out of a 
possible 500) and must score points in all areas (paragraphs (b)(1) 
through (c)(3)).
    (b) VA will award up to 200 points based on the extent to which the 
applicant demonstrates why the service, operation, or personnel for 
which the special needs grant:
    (1) Is needed for the project;
    (2) Is integral to the project;
    (3) Is appropriate to the population and overall project design; and
    (4) Meets the special needs population provided per diem in the 
previous year.
    (c) VA will award up to 300 points based on the extent the 
applicant's goals, objectives, and measures for the population to be 
served are:
    (1) Appropriate;
    (2) Reasonable; and
    (3) Measurable.
    (d) The information provided under paragraphs (b) and (c) of this 
section for women, including women who have care of minor dependents, 
should demonstrate how the program design will:
    (1) Ensure transportation for women and their children, especially 
for health care and educational needs;
    (2) Provide directly or offer referrals for adequate and safe child 
care;
    (3) Ensure children's health care needs are met especially age 
appropriate wellness visits and immunizations; and
    (4) Address safety and security issues including segregation 
procedures from other program participants if deemed appropriate.
    (e) The information provided under paragraphs (b) and (c) of this 
section for the frail elderly should demonstrate how the program design 
will:
    (1) Ensure the safety of the residents in the facility to include 
preventing harm and exploitation;
    (2) Ensure opportunities to keep residents mentally and physically 
agile to the fullest extent through the incorporation of structured 
activities, physical activity, and plans for social engagement within 
the program and in the community;
    (3) Provide opportunities for participants to address life 
transitional issues and separation and/or loss issues;
    (4) Provide access to assistance devices such as walkers, grippers, 
or other devices necessary for optimal functioning;
    (5) Ensure adequate supervision, including supervision of medication 
and monitoring of medication compliance; and
    (6) Provide opportunities for participants either directly or 
through referral for other services particularly relevant for the frail 
elderly, including services or programs addressing emotional, social, 
spiritual, and generative needs.
    (f) The information provided under paragraphs (b) and (c) of this 
section for the terminally ill should demonstrate how the program design 
will:
    (1) Help participants address life-transition and life-end issues;
    (2) Ensure that participants are afforded timely access to hospice 
services;
    (3) Provide opportunities for participants to engage in ``tasks of 
dying,'' or activities of ``getting things in order'' or other 
therapeutic actions that help resolve end of life issues and enable 
transition and closure;
    (4) Ensure adequate supervision including supervision of medication 
and monitoring of medication compliance; and
    (5) Provide opportunities for participants either directly or 
through referral for other services particularly relevant for terminally 
ill such as legal counsel and pain management.
    (g) The information provided under paragraphs (b) and (c) of this 
section for the chronically mentally ill should demonstrate how the 
program design will:
    (1) Help participants join in and engage with the community;

[[Page 1015]]

    (2) Facilitate reintegration with the community and provide services 
that may optimize reintegration such as life-skills education, 
recreational activities, and follow up case management;
    (3) Ensure that participants have opportunities and services for re-
establishing relationships with family;
    (4) Ensure adequate supervision, including supervision of medication 
and monitoring of medication compliance; and
    (5) Provide opportunities for participants, either directly or 
through referral, to obtain other services particularly relevant for a 
chronically mentally ill population, such as vocational development, 
benefits management, fiduciary or money management services, medication 
compliance, and medication education.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.44  Awarding special needs grants.

    (a) Applicants will first be grouped in categories according to the 
funding priorities set forth in the NOFA, if any. Applicants will then 
be ranked, within their respective funding category if applicable. The 
highest-ranked applications for which funding is available, within 
highest priority funding category if applicable, will be conditionally 
selected to receive a special needs grant in accordance with their 
ranked order, as determined under Sec. 61.43 of this part. If funding 
priorities have been established and funds are still available after 
selection of those applicants in the highest priority group VA will 
continue to conditionally select applicants in lower priority categories 
in accordance with the selection method set forth in this paragraph 
subject to available funding.
    (b) In the event of a tie between applicants, VA will use the score 
from Sec. 61.43(b) of this part to determine the ranking.
    (c) For those applicants selected for a special needs grant, VA will 
execute an agreement and make payments to the grant recipient in 
accordance with Sec. 61.61of this part.
    (d) The amount of the special needs grant will be the estimated 
total operational cost of the special need over the life of the special 
needs grant award as specified in the special needs grant agreement. 
Payments may be made for no more than 3 years. Recipients may apply 
again thereafter only in response to a Notice of Fund Availability.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.50  Technical assistance grants-general.

    VA provides grants to entities or organizations with expertise in 
preparing grant applications relating to the provision of assistance for 
homeless veterans. The recipients are to use the grants to provide 
technical assistance to those nonprofit community-based groups with 
experience in providing assistance to homeless veterans in order to help 
such groups apply for grants under 38 CFR part 61 or apply for other 
grants from any source for addressing the problems of homeless veterans. 
This includes:
    (a) Group or individual seminars providing general instructions 
concerning grant applications;
    (b) Group or individual seminars providing instructions for applying 
for a specific grant; or
    (c) Group or individual instruction for preparing analyses to be 
included in a grant application.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.51  Applications for technical assistance grants.

    (a) To apply for a technical assistance grant under this part, an 
applicant must obtain from VA a technical assistance grant application 
package and submit to VA the information called for in the technical 
assistance grant application package within the time period established 
in the Notice of Fund Availability.
    (b) The technical assistance grant application package includes 
exhibits to be prepared and submitted as part of the application 
process, including
    (1) Justification for the technical assistance grant;
    (2) Documentation on eligibility to receive a technical assistance 
grant under this part;

[[Page 1016]]

    (3) Description of type of technical assistance that would be 
provided (see Sec. 61.50);
    (4) Documentation concerning the estimated operating costs and 
operating budget for the technical assistance program for which a grant 
is sought;
    (5) Documentation concerning expertise in preparing grant 
applications;
    (6) Documentation on resources committed to the provision of 
technical expertise;
    (7) Comments or recommendations by appropriate State (and area wide) 
clearinghouses pursuant to E.O. 12372 (3 CFR, 1982 Comp., p. 197), if 
the applicant is a State; and
    (8) Reasonable assurances with respect to receipt of a technical 
assistance grant under this part that:
    (i) The recipient will provide adequate financial and administrative 
support for providing the services set forth in the technical assistance 
grant application and will actually provide such services; and
    (ii) The recipient will keep records and submit reports as VA may 
reasonably require, within the time frames required; and give VA, upon 
demand, access to the records upon which such information is based.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0554.)

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)

[68 FR 13594, Mar. 19, 2003, as amended at 68 FR 55468, Sept. 26, 2003]



Sec. 61.52  Threshold requirements for technical assistance grant 
applications.

    To be eligible for a technical assistance grant, an applicant must 
meet the following threshold requirements:
    (a) The application included the information called for in the 
application package and was filed within the time period established in 
the Notice of Fund Availability;
    (b) The applicant established expertise in preparing grant 
applications;
    (c) The activities for which assistance is requested are eligible 
for funding under this part;
    (d) The applicant has demonstrated that adequate financial support 
will be available to carry out the project for which the grant is sought 
consistent with the plans, specifications and schedule submitted by the 
applicant;
    (e) The applicant does not have an outstanding obligation to VA that 
is in arrears, and does not have an overdue or unsatisfactory response 
to an audit; and
    (f) The applicant is not in default, by failing to meet requirements 
for any previous assistance from VA under this part.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.53  Rating criteria for technical assistance grant applications.

    (a) Applicants that meet the threshold requirements in Sec. 61.52 
of this part, will then be rated using the selection criteria listed in 
paragraphs (b) and (c) of this section. To be eligible for a technical 
assistance grant, an applicant must receive at least 600 points (out of 
a possible 800) and must score points under paragraphs (b) and (c) of 
this section.
    (b) Quality of the technical assistance. VA will award up to 400 
points based on the following:
    (1) How the recipients of technical training will increase their 
skill level regarding the completion of applications;
    (2) How the recipients of technical training will learn to find 
grant opportunities in a timely manner;
    (3) How the technical assistance provided will be monitored and 
evaluated and changes made, if needed; and
    (4) How the proposed technical assistance programs will be 
implemented in a timely fashion.
    (c) Ability of applicant to demonstrate expertise in preparing grant 
applications develop and operate a technical assistance program. VA will 
award up to 400 points based on the extent to which the application 
demonstrates:
    (1) Ability to find grants available for addressing the needs of 
homeless veterans;
    (2) Ability to find and offer technical assistance to entities 
eligible for such assistance;
    (3) Ability to administer a technical assistance program;

[[Page 1017]]

    (4) Ability to provide grant technical assistance; and
    (5) Ability to evaluate the overall effectiveness of the technical 
assistance program and to make adjustments, if necessary, based on those 
evaluations.



Sec. 61.54  Awarding technical assistance grants.

    (a) Applicants will first be grouped in categories according to the 
funding priorities set forth in the NOFA, if any. Applicants will then 
be ranked, within their respective funding category if applicable. The 
highest-ranked applications for which funding is available, within 
highest priority funding category if applicable, will be conditionally 
selected to receive a technical assistance grant in accordance with 
their ranked order, as determined under Sec. 61.53 of this part. If 
funding priorities have been established and funds are still available 
after selection of those applicants in the highest priority group VA 
will continue to conditionally select applicants in lower priority 
categories in accordance with the selection method set forth in this 
paragraph subject to available funding.
    (b) In the event of a tie between applicants, VA will use the score 
from Sec. 61.53(c) of this part to determine the ranking.
    (c) For those applicants selected to receive a technical assistance 
grant, VA will execute an agreement and make payments to the grant 
recipient in accordance with Sec. 61.61 of this part.
    (d) The amount of the technical assistance grant will be the 
estimated total operational cost of the technical assistance over the 
life of the technical assistance grant award as specified in the 
technical assistance grant agreement. Payments may be made for no more 
than 3 years. Recipients may apply again thereafter only in response to 
a Notice of Fund Availability.
    (e) The amount of a technical assistance grant under this part may 
not exceed the cost of the estimated cost of the provision of technical 
assistance.
    (f) VA will not pay for sustenance or lodging under a technical 
assistance grant.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.55  Technical assistance reports.

    Each recipient of a technical assistance grant must submit to VA, 
quarterly, a report describing the activities for which the technical 
assistance grant funds were awarded, including the type and amount of 
technical assistance provided and the number of nonprofit community-
based groups served.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0554.)

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)

[68 FR 13594, Mar. 19, 2003, as amended at 68 FR 55468, Sept. 26, 2003]



Sec. 61.60  Notice of Fund Availability.

    When funds are made available for capital grants, per diem for non-
capital grant recipients, special needs grants, or technical assistance 
grants, VA will publish a Notice of Fund Availability in the Federal 
Register. The notice will:
    (a) Give the location for obtaining application packages;
    (b) Specify the date, time, and place for submitting completed 
applications;
    (c) State the estimated amount and type of funding available; and
    (d) State any priorities for or exclusions from funding to meet the 
statutory mandate of 38 U.S.C. 2011, to ensure that awards do not result 
in the duplication of ongoing services and to reflect the maximum extent 
practicable appropriate geographic dispersion and an appropriate balance 
between urban and nonurban locations.
    (e) Provide other information necessary for the application process.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.61  Agreement and funding actions.

    (a) When an applicant for a capital grant, per diem, a special needs 
grant, or a technical assistance grant meets all of the requirements 
under this part for the type of assistance requested and VA has funding 
for such assistance, VA will incorporate requirements under this part 
into an agreement to be executed by VA and the applicant. Upon

[[Page 1018]]

execution of the agreement, grant funds are obligated to cover the 
amount of the approved assistance subject to the availability of 
funding. Payments will be for services rendered and are contingent upon 
submission of documentation in the form of invoices or purchase 
agreements and contingent on inspections, as VA deems necessary. VA will 
make payments on its own schedule to reimburse for amounts expended.
    (b) Except for increases in the rate of per diem, VA will not make 
revisions to increase the amount obligated for assistance under this 
part after the initial obligation of funds.
    (c) VA will enforce the obligations under this part through such 
action as may be appropriate, including temporarily withholding cash 
payments pending correction of a deficiency.
    (d) VA may deobligate all or parts of assistance awarded under this 
part:
    (1) If the actual total costs for assistance is less than the total 
cost stated in the application, or
    (2) If the recipient fails to comply with the requirements of this 
part.
    (e) However, before determining whether to deobligate under 
paragraph (d)(2) of this section, VA will issue a notice of intent to 
terminate payments. The recipient will then have 30 days to submit 
documentation demonstrating why payments should not be terminated. After 
review of any such documentation, VA will issue a final decision 
concerning termination of payment.
    (f) VA may also seek recovery under Sec. 61.67 of this part where a 
capital grant recipient fails to provide supportive services and/or 
supportive housing for the minimum period of operation under Sec. 
61.67.
    (g) Where a recipient has no control over causes for delays in 
implementing a project, VA may change the due date, as appropriate.
    (h) Grant recipients that concurrently receive per diem and special 
needs payments shall not be paid more than 100 percent of the cost of 
the bed per day, product, operation, personnel, or service provided.
    (i) No funds provided under this part may be used to replace 
Federal, State or local funds previously used, or designated for use, to 
assist homeless veterans.
    (j) VA may obligate any recovered funds without fiscal year 
limitation.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.62  Program changes.

    (a) Except as provided in paragraphs (b) through (d) of this 
section, a recipient may not make any significant changes to a project 
for which a grant has been awarded without prior VA approval. 
Significant changes include, but are not limited to, a change in the 
recipient, a change in the project site (including relocating, adding an 
annex, a branch, or other expansion), additions or deletions of 
activities, shifts of funds from one approved type of activity to 
another, and a change in the category of participants to be served.
    (b) Recipients of grants exceeding $100,000 for nonconstruction 
projects must receive prior VA approval for cumulative transfers among 
direct cost categories which exceed or are expected to exceed 10 percent 
of the current total approved budget.
    (c) Recipients of grants for projects involving both construction 
and nonconstruction who are State or local governments must receive 
prior VA approval for any budget revision which would transfer funds 
between nonconstruction and construction categories.
    (d) Approval for changes is contingent upon the application ranking 
remaining high enough after the approved change to have been 
competitively selected for funding in the year the application was 
selected.
    (e) Any changes to an approved program must be fully documented in 
the recipient's records.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.63  Procedural error.

    If an application would have been selected but for a procedural 
error committed by VA, VA will select that application for potential 
funding when sufficient funds become available if

[[Page 1019]]

there is no material change in the information that resulted in its 
selection. A new application will not be required for this purpose.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.64  Religious organizations.

    (a) Organizations that are religious or faith-based are eligible, on 
the same basis as any other organization, to participate in VA programs 
under this part. In the selection of service providers, neither the 
Federal Government nor a state or local government receiving funds under 
this part shall discriminate for or against an organization on the basis 
of the organization's religious character or affiliation.
    (b)(1) No organization may use direct financial assistance from VA 
under this part to pay for any of the following:
    (i) Inherently religious activities such as, religious worship, 
instruction, or proselytization; or
    (ii) Equipment or supplies to be used for any of those activities.
    (2) For purposes of this section, ``indirect financial assistance'' 
means Federal assistance in which a service provider receives program 
funds through a voucher, certificate, agreement or other form of 
disbursement, as a result of the independent and private choices of 
individual beneficiaries. ``Direct financial assistance,'' means Federal 
aid in the form of a grant, contract, or cooperative agreement where the 
independent choices of individual beneficiaries do not determine which 
organizations receive program funds.
    (c) Organizations that engage in inherently religious activities, 
such as worship, religious instruction, or proselytization, must offer 
those services separately in time or location from any programs or 
services funded with direct financial assistance from VA, and 
participation in any of the organization's inherently religious 
activities must be voluntary for the beneficiaries of a program or 
service funded by direct financial assistance from VA.
    (d) A religious organization that participates in VA programs under 
this part will retain its independence from Federal, State, or local 
governments and may continue to carry out its mission, including the 
definition, practice and expression of its religious beliefs, provided 
that it does not use direct financial assistance from VA under this part 
to support any inherently religious activities, such as worship, 
religious instruction, or proselytization. Among other things, faith-
based organizations may use space in their facilities to provide VA-
funded services under this part, without removing religious art, icons, 
scripture, or other religious symbols. In addition, a VA-funded 
religious organization retains its authority over its internal 
governance, and it may retain religious terms in its organization's 
name, select its board members and otherwise govern itself on a 
religious basis, and include religious reference in its organization's 
mission statements and other governing documents.
    (e) An organization that participates in a VA program under this 
part shall not, in providing direct program assistance, discriminate 
against a program beneficiary or prospective program beneficiary 
regarding housing, supportive services, or technical assistance, on the 
basis of religion or religious belief.
    (f) If a State or local government voluntarily contributes its own 
funds to supplement Federally funded activities, the State or local 
government has the option to segregate the Federal funds or commingle 
them. However, if the funds are commingled, this provision applies to 
all of the commingled funds.
    (g) To the extent otherwise permitted by Federal law, the 
restrictions on inherently religious activities set forth in this 
section do not apply where VA funds are provided to religious 
organizations through indirect assistance as a result of a genuine and 
independent private choice of a beneficiary, provided the religious 
organizations otherwise satisfy the requirements of this Part. A 
religious organization may receive such funds as the result of a 
beneficiary's genuine and independent choice if, for example, a 
beneficiary redeems a voucher, coupon, or certificate, allowing the 
beneficiary to direct where funds are to be paid, or a similar funding 
mechanism provided to that

[[Page 1020]]

beneficiary and designed to give that beneficiary a choice among 
providers.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note.)

[69 FR 31888, June 8, 2004]



Sec. 61.65  Inspections.

    VA may inspect the facility and any records of an entity applying 
for or receiving assistance under this part at such times as are deemed 
necessary to determine compliance with the provisions of this part. The 
authority to inspect carries with it no authority over the management or 
control of any entity applying for or receiving assistance under this 
part.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.66  Financial management.

    (a) All recipients shall comply with applicable requirements of the 
Single Audit Act Amendments of 1996, as implemented by OMB Circular A-
133.
    (b) All entities receiving assistance under this part must use a 
financial management system that follows generally accepted accounting 
principals and provides accounting records, including cost accounting 
records that are supported by documentation. Such cost accounting must 
be reflected in the entity's fiscal cycle financial statements to the 
extent that the actual costs can be determined for the program for which 
assistance is provided. All entities receiving per diem under this part 
must monitor the accuracy of the costs used to determine payment amounts 
per veteran. Entities receiving assistance must meet the applicable 
requirements of the appropriate OMB Circular for Cost-Principles (A-122 
or A-87).

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.67  Recovery provisions.

    (a) If after 3 years from the date of award of a capital grant, the 
grant recipient has withdrawn from the VA Homeless Providers Grant and 
Per Diem Program (Program); does not establish the project for which the 
grant was made; or has established the project for which the grant was 
made but has not had final inspection, VA would be entitled to recover 
from the grant recipient all of the grant amounts provided for the 
project.
    (b) Where the grant recipient is not subject to recovery under 
paragraph (a) of this section, VA will seek recovery of the grant amount 
on a prorated basis where the grant recipient ceases to provide services 
for which the grant was made or withdraws from the Program prior to the 
expiration of the applicable period of operation, which period shall 
begin on the date of final inspection for which the grant was made. The 
amount to be recaptured equals the total amount of the grant, multiplied 
by the fraction resulting from using the number of years the recipient 
was not operational as the numerator, and using the number of years of 
operation required under the following chart as the denominator.

------------------------------------------------------------------------
                                                               Years of
            Grant amount  (dollars in thousands)              operation
------------------------------------------------------------------------
0-250......................................................            7
251-500....................................................            8
501-750....................................................            9
751-1,000..................................................           10
1,001-1,250................................................           11
1,251-1,500................................................           12
1,501-1,750................................................           13
1,751-2,000................................................           14
2,001-2,250................................................           15
2,251-2,500................................................           16
2,501-2,750................................................           17
2,751-3,000................................................           18
Over 3,000.................................................           20
------------------------------------------------------------------------

    Example A: Grantee A is awarded a grant and does not bring the 
project to operational status within 3 years from the time of award. 
Grantee A may be subject to full recapture of the grant award.
    Example B: Grantee B is awarded a grant in the amount of $300,000 
and brings the project to operational status within 3 years from the 
time of award. Grantee B then provides services to homeless veterans for 
a period of 6 years from the date the program was operationalized, but 
now decides to close the program. As the original award was $300,000 and 
as a condition of receiving the grant funds Grantee B agreed to provide 
services for 8 years. Therefore, Grantee B would be subject to the 
prorated recapture of the grant award for the 2-year period not served 
or in this case 1/4 of the original grant would be subject to recapture.
    Example C: Grantee C is awarded a grant in the amount of $400,000, 
becomes operational within 1 year of the date of the grant award and 
ceases operation 1 year later, 2 years after the date of the grant 
award. After the expiration of the 3-year period beginning on

[[Page 1021]]

the date of the grant award, Grantee C would be subject to prorated 
recapture for the 7 years it did not provide service of the required 8 
years of operation. The amount subject to recapture would thus be 7/8 x 
$400,000 or $350,000.

    (c) VA will seek to recover from the recipient of per diem, a 
special needs grant, or a technical assistance grant any funds that are 
not used in accordance with the requirements of this part.
    (d) Before VA would take action to recover funds, VA will issue to 
the recipient a notice of intent to recover funds. The recipient will 
then have 30 days to submit documentation demonstrating why funds should 
not be recovered. After review of any such documentation, VA will issue 
a decision regarding whether action will be taken to recover funds.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.80  General operation requirements for supportive housing and 
service centers.

    (a) Supportive housing and service centers for which assistance is 
provided under this part must:
    (1) Comply with the Life Safety Code of the National Fire Protection 
Association and all applicable State and local housing codes, licensing 
requirements, fire and safety requirements, and any other requirements 
in the jurisdiction in which the project is located regarding the 
condition of the structure and the operation of the supportive housing 
or service centers.
    (2) Notwithstanding the provisions of paragraph(a)(1) of this 
section, recipients of grants prior to December 21, 2001, are required 
to comply with the Life Safety Code of the National Fire Protection 
Association by December 21, 2006. Such recipients are not excused from 
meeting the other requirements of paragraph (a)(1) of this section, 
including State and local fire and safety requirements.
    (b) Except for such variations as are proposed by the recipient that 
would not affect compliance with paragraph (a) of this section and are 
approved by VA, supportive housing must meet the following requirements:
    (1) The structures must be structurally sound so as not to pose any 
threat to the health and safety of the occupants and so as to protect 
the residents from the elements;
    (2) Entry and exit locations to the structure must be capable of 
being utilized without unauthorized use of other private properties, and 
must provide alternate means of egress in case of fire;
    (3) Buildings constructed or altered with Federal assistance must 
also be accessible to the disabled, as required by section 502 of the 
Americans with Disabilities Act, referred to as the Architectural 
Barriers Act;
    (4) Each resident must be afforded appropriate space and security 
for themselves and their belongings, including an acceptable place to 
sleep that is in compliance with all applicable local, state, and 
federal requirements;
    (5) Every room or space must be provided with natural or mechanical 
ventilation and the structures must be free of pollutants in the air at 
levels that threaten the health of residents;
    (6) The water supply must be free from contamination;
    (7) Residents must have access to sufficient sanitary facilities 
that are in proper operating condition, that may be used in privacy, and 
that are adequate for personal cleanliness and the disposal of human 
waste;
    (8) The housing must have adequate heating and/ or cooling 
facilities in proper operating condition;
    (9) The housing must have adequate natural or artificial 
illumination to permit normal indoor activities and to support the 
health and safety of residents and sufficient electrical sources must be 
provided to permit use of essential electrical appliances while assuring 
safety from fire;
    (10) All food preparation areas must contain suitable space and 
equipment to store, prepare, and serve food in a sanitary manner;
    (11) The housing and any equipment must be maintained in a sanitary 
manner;
    (12) The residents with disabilities must be provided meals or meal 
preparation facilities must be available;
    (13) Residential supervision from a paid staff member, volunteer, or 
senior

[[Page 1022]]

resident participant must be provided 24 hours per day, 7 days per week 
and for those times that a volunteer or senior resident participant is 
providing residential supervision a paid staff member must be on call 
for emergencies 24 hours a day 7 days a week (all supervision must be 
provided by individuals with sufficient knowledge for the position); and
    (14) Residents must be provided a clean and sober (free from illicit 
drugs) environment and those supportive housing or service centers that 
provide medical or social detox at the same site as the supportive 
housing or service must ensure that those residents in detox are clearly 
separated from the general residential population.
    (c) Each recipient of assistance under this part must conduct an 
ongoing assessment of the supportive services needed by the residents of 
the project and the availability of such services, and make adjustments 
as appropriate. The recipient will provide evidence of this ongoing 
assessment to VA at such times as are deemed necessary, but as a 
minimum, once annually in the form of a report that addresses the 
recipient's ability to meet the goals, objectives, measures, and special 
needs as set forth in the recipient's grant proposal.
    (d) A homeless veteran may remain in transitional housing for which 
assistance is provided under this part for a period no longer than 24 
months, except that a veteran may stay longer, if permanent housing for 
the veteran has not been located or if the veteran requires additional 
time to prepare for independent living. However, at any given time, no 
more than one-half of the veterans at such transitional housing facility 
may have resided at the facility for periods longer than 24 months.
    (e) Each recipient of assistance under this part must provide for 
the consultation and participation of not less than one homeless veteran 
or formerly homeless veteran on the board of directors or an equivalent 
policymaking entity of the recipient, to the extent that such entity 
considers and makes policies and decisions regarding any project 
provided under this part. This requirement may be waived if an 
applicant, despite a good faith effort to comply, is unable to meet it 
and presents a plan, subject to VA approval, to otherwise consult with 
homeless or formerly homeless veterans in considering and making such 
policies and decisions.
    (f) Each recipient of assistance under this part must, to the 
maximum extent practicable, involve homeless veterans and families, 
through employment, volunteer services, or otherwise, in constructing, 
rehabilitating, maintaining, and operating the project and in providing 
supportive services for the project.
    (g) Each recipient of assistance under this part shall establish 
procedures for fiscal control and fund accounting to ensure proper 
disbursement and accounting of assistance received under this part.
    (h) The recipient of assistance under this part that provides family 
violence prevention or treatment services must establish and implement 
procedures to ensure:
    (1) The confidentiality of records pertaining to any individual 
provided services, and
    (2) The confidentially of the address or location where the services 
are provided.
    (i) Each recipient of assistance under this part must maintain the 
confidentiality of records kept on homeless veterans receiving services.
    (j) VA may disapprove use of outpatient health services provided 
through the recipient if VA determines that such services are of 
unacceptable quality. Further, VA will not pay per diem where the 
Department concludes that services furnished by the recipient are 
unacceptable.
    (k) A service center for homeless veterans shall provide services to 
homeless veterans for a minimum of 40 hours per week over a minimum of 5 
days per week, as well as provide services on an as-needed, unscheduled 
basis. The calculation of average hours shall include travel time for 
mobile service centers. In addition:
    (1) Space in a service center shall be made available as mutually 
agreeable for use by VA staff and other appropriate agencies and 
organizations to assist homeless veterans;

[[Page 1023]]

    (2) A service center shall be equipped to provide, or assist in 
providing, health care, mental health services, hygiene facilities, 
benefits and employment counseling, meals, and transportation 
assistance;
    (3) A service center shall provide other services as VA determines 
necessary based on the need for services otherwise not available in the 
geographic area; and
    (4) A service center may be equipped and staffed to provide, or to 
assist in providing, job training and job placement services (including 
job readiness, job counseling, and literacy and skills training), as 
well as any outreach and case management services that may be necessary 
to meet the requirements of this paragraph.
    (l) Fixed site service centers will prominently post at or near the 
entrance to the service center their hours of operation and contacts in 
case of emergencies. Mobile service centers must take some action 
reasonably calculated to provide in advance a tentative schedule of 
visits, (e.g., newspapers, fliers, public service announcements on 
television or radio). The schedule should include but is not limited to:
    (1) The region of operation;
    (2) Times of operation;
    (3) Expected services to be provided; and
    (4) Contacts for specific information and changes.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-0554.)

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)

[68 FR 13594, Mar. 19, 2003, as amended at 68 FR 55468, Sept. 26, 2003]



Sec. 61.81  Outreach activities.

    Recipients of capital grants and per diem under this part relating 
to supportive housing or service centers must use their best efforts to 
ensure that eligible hard-to-reach veterans are found, engaged, and 
provided assistance. Accordingly, a recipient should search for homeless 
veterans at places such as shelters, soup kitchens, parks, bus or train 
stations, and the streets. Outreach particularly should be directed 
toward veterans who have a nighttime residence that is an emergency 
shelter or a public or private place not ordinarily used as a regular 
sleeping accommodation for human beings (e.g., cars, streets, or parks).

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)



Sec. 61.82  Resident rent for supportive housing.

    (a) Each resident of supportive housing may be required to pay rent 
in an amount determined by the recipient, except that such rent may not 
exceed 30 percent of the resident's monthly income after deducting 
medical expenses, child care expenses, court ordered child support 
payments, or other court ordered payments.
    (b) Resident rent may be used for costs of operating the supportive 
housing or to assist supportive housing residents move to permanent 
housing.
    (c) In addition to resident rent, recipients may charge residents 
reasonable fees for services not covered by VA per diem funds and not 
otherwise provided by VA.

(Authority: 38 U.S.C. 501, 2002, 2011, 2012, 2061, 2064, 7721 note)

[[Page 1025]]



                              FINDING AIDS




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

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Material Approved for Incorporation by Reference
  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  List of CFR Sections Affected

[[Page 1027]]

            Material Approved for Incorporation by Reference

                      (Revised as of July 1, 2006)

  The Director of the Federal Register has approved under 5 U.S.C. 
552(a) and 1 CFR Part 51 the incorporation by reference of the following 
publications. This list contains only those incorporations by reference 
effective as of the revision date of this volume. Incorporations by 
reference found within a regulation are effective upon the effective 
date of that regulation. For more information on incorporation by 
reference, see the preliminary pages of this volume.


38 CFR (PART 18 TO END)

VETERANS ADMINISTRATION
                                                                  38 CFR


American Insurance Association

  85 John Street, New York, New York 10038, 1976 
  ed. (Rev. 1977
National Building Code............................            39.8(d)(3)


American National Standards Institute

  (This standard is available at the Office of 
  Human Goals, Veterans Administration, Room 900, 
  1425 K St., NW., Washington, DC 20420. Mailing 
  Address: 810 Vermont Ave., NW., Washington, DC 
  20420)
ANSI A117.1-61(R 71)--Specifications for Making      18.423; 39.3(b)(10)
  Buildings and Facilities Accessible to, and 
  Usable by, the Physically Handicapped.


Department of Housing and Urban Development

  (This material is available for public 
  inspection at Veterans Administration field 
  installations; at Information Center Room 1202, 
  Department of Housing and Urban Development, 451 
  Seventh St., SW, Washington, DC 20410; and at 
  HUD Regional, Area, and Insuring Offices)
HUD 4900.1 Minimum Property Standards for One- and               36.4360
  Two-Family Dwellings, Nov. 1980.


International Association of Plumbing and Mechanical Officials

  5001 E. Philadelphia Street, Ontario, Canada 
  91761-2816
Uniform Mechanical Code, 2003 edition.............              39.22(b)
Uniform Plumbing Code, 2003 edition...............              39.22(c)


National Association of Plumbing-Heating-Cabling Contractors

  1016 20 St. NW., Washington, DC 20036
National Standard Plumbing Code, 1978 ed..........            39.8(d)(3)


National Fire Protection Association (NFPA)

  1 Batterymarch Park, P.O. Box 9101, Quincy, MA 
  02269-9101, Telephone: (800) 344-3555
1981 National Electrical Code.....................            39.8(d)(1)
NFPA No. 70; (NFPA 101) Life Safety Code, 1981 ed.            39.8(d)(4)
NFPA No. 70, National Electrical Code, 2002 ed....              39.22(d)
NFPA 101 Life Safety Code, 1997 edition...........                51.200
NFPA 101 Life Safety Code, 2000 edition...........          59.130(d)(1)
NFPA 99, Standard for Health Care Facilities (1996                51.200
  edition).

[[Page 1029]]



                    Table of CFR Titles and Chapters




                      (Revised as of July 1, 2006)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
        IV  Miscellaneous Agencies (Parts 400--500)

                    Title 2--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  Office of Management and Budget Governmentwide 
                Guidance for Grants and Agreements (Parts 100-199)
        II  Office of Management and Budget Circulars and Guidance 
                (200-299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements [Reserved]


                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability Office (Parts 1--99)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Part 2100)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)

[[Page 1030]]

        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Part 3201)
     XXIII  Department of Energy (Part 3301)
      XXIV  Federal Energy Regulatory Commission (Part 3401)
       XXV  Department of the Interior (Part 3501)
      XXVI  Department of Defense (Part 3601)
    XXVIII  Department of Justice (Part 3801)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  Overseas Private Investment Corporation (Part 4301)
      XXXV  Office of Personnel Management (Part 4501)
        XL  Interstate Commerce Commission (Part 5001)
       XLI  Commodity Futures Trading Commission (Part 5101)
      XLII  Department of Labor (Part 5201)
     XLIII  National Science Foundation (Part 5301)
       XLV  Department of Health and Human Services (Part 5501)
      XLVI  Postal Rate Commission (Part 5601)
     XLVII  Federal Trade Commission (Part 5701)
    XLVIII  Nuclear Regulatory Commission (Part 5801)
         L  Department of Transportation (Part 6001)
       LII  Export-Import Bank of the United States (Part 6201)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Part 6401)
        LV  National Endowment for the Arts (Part 6501)
       LVI  National Endowment for the Humanities (Part 6601)
      LVII  General Services Administration (Part 6701)
     LVIII  Board of Governors of the Federal Reserve System (Part 
                6801)
       LIX  National Aeronautics and Space Administration (Part 
                6901)
        LX  United States Postal Service (Part 7001)
       LXI  National Labor Relations Board (Part 7101)
      LXII  Equal Employment Opportunity Commission (Part 7201)
     LXIII  Inter-American Foundation (Part 7301)
       LXV  Department of Housing and Urban Development (Part 
                7501)
      LXVI  National Archives and Records Administration (Part 
                7601)
     LXVII  Institute of Museum and Library Services (Part 7701)
      LXIX  Tennessee Valley Authority (Part 7901)
      LXXI  Consumer Product Safety Commission (Part 8101)
    LXXIII  Department of Agriculture (Part 8301)
     LXXIV  Federal Mine Safety and Health Review Commission (Part 
                8401)
     LXXVI  Federal Retirement Thrift Investment Board (Part 8601)

[[Page 1031]]

    LXXVII  Office of Management and Budget (Part 8701)
     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Part 
                9701)
      XCIX  Department of Defense Human Resources Management and 
                Labor Relations Systems (Department of Defense--
                Office of Personnel Management) (Part 9901)

                      Title 6--Homeland Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 0--99)

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Grain Inspection, Packers and Stockyards 
                Administration (Federal Grain Inspection Service), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)

[[Page 1032]]

     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  Local Television Loan Guarantee Board (Parts 2200--
                2299)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy Policy and New Uses, Department of 
                Agriculture (Parts 2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  Cooperative State Research, Education, and Extension 
                Service, Department of Agriculture (Parts 3400--
                3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)

                    Title 8--Aliens and Nationality

         I  Department of Homeland Security (Immigration and 
                Naturalization) (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

[[Page 1033]]

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XIII  Nuclear Waste Technical Review Board (Parts 1303--
                1399)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Part 1800)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  Office of Thrift Supervision, Department of the 
                Treasury (Parts 500--599)
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  Federal Housing Finance Board (Parts 900--999)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board, Department of 
                Commerce (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board, 
                Department of Commerce (Parts 500--599)

[[Page 1034]]

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--499)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  Technology Administration, Department of Commerce 
                (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399)

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

[[Page 1035]]

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  Bureau of Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Bureau of Immigration and Customs Enforcement, 
                Department of Homeland Security (Parts 400--599)

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Employment Standards Administration, Department of 
                Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training, Department of Labor 
                (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

[[Page 1036]]

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  Broadcasting Board of Governors (Parts 500--599)
       VII  Overseas Private Investment Corporation (Parts 700--
                799)
        IX  Foreign Service Grievance Board Regulations (Parts 
                900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)

[[Page 1037]]

        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--1699)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799)
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--799)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900)
        VI  Office of the Assistant Secretary-Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Part 1200)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--899)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)

[[Page 1038]]

        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--699)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)
      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)
        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Employee Benefits Security Administration, Department 
                of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

[[Page 1039]]

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Minerals Management Service, Department of the 
                Interior (Parts 200--299)
       III  Board of Surface Mining and Reclamation Appeals, 
                Department of the Interior (Parts 300--399)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of International Investment, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Defense Logistics Agency (Parts 1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)

[[Page 1040]]

    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Corps of Engineers, Department of the Army (Parts 
                200--399)
        IV  Saint Lawrence Seaway Development Corporation, 
                Department of Transportation (Parts 400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Vocational and Adult Education, Department 
                of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599)
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
        XI  National Institute for Literacy (Parts 1100--1199)
            Subtitle C--Regulations Relating to Education
       XII  National Council on Disability (Parts 1200--1299)

                         Title 35--[RESERVED]

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Part 1501)

[[Page 1041]]

       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  Copyright Office, Library of Congress (Parts 200--299)
       III  Copyright Royalty Board, Library of Congress (Parts 
                301--399)
        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--499)
         V  Under Secretary for Technology, Department of Commerce 
                (Parts 500--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--99)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Rate Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)

          Title 41--Public Contracts and Property Management

            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 61-1--61-999)
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)

[[Page 1042]]

       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System
       201  Federal Information Resources Management Regulation 
                (Parts 201-1--201-99) [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--499)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1999)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 200--499)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10010)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

[[Page 1043]]

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Office of Human Development Services, Department of 
                Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission on Fine Arts (Parts 2100--2199)
     XXIII  Arctic Research Commission (Part 2301)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)

[[Page 1044]]

        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Defense Acquisition Regulations System, Department of 
                Defense (Parts 200--299)
         3  Department of Health and Human Services (Parts 300--
                399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  United States Agency for International Development 
                (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management, Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees' 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        35  [Reserved]
        44  Federal Emergency Management Agency (Parts 4400--4499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)

[[Page 1045]]

        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399)
        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)
        57  African Development Foundation (Parts 5700--5799)
        61  General Services Administration Board of Contract 
                Appeals (Parts 6100--6199)
        63  Department of Transportation Board of Contract Appeals 
                (Parts 6300--6399)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Pipeline and Hazardous Materials Safety 
                Administration, Department of Transportation 
                (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Homeland Security (Parts 
                400--499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board, Department of 
                Transportation (Parts 1000--1399)
        XI  Research and Innovative Technology Administration, 
                Department of Transportation (Parts 1400--1499)
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)

[[Page 1046]]

        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

                      CFR Index and Finding Aids

            Subject/Agency Index
            List of Agency Prepared Indexes
            Parallel Tables of Statutory Authorities and Rules
            List of CFR Titles, Chapters, Subchapters, and Parts
            Alphabetical List of Agencies Appearing in the CFR

[[Page 1047]]





           Alphabetical List of Agencies Appearing in the CFR




                      (Revised as of July 1, 2006)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Advanced Research Projects Agency                 32, I
Advisory Council on Historic Preservation         36, VIII
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development, United      22, II
     States
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department                            5, LXXIII
  Agricultural Marketing Service                  7, I, IX, X, XI
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Cooperative State Research, Education, and      7, XXXIV
       Extension Service
  Economic Research Service                       7, XXXVII
  Energy, Office of                               7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Grain Inspection, Packers and Stockyards        7, VIII; 9, II
       Administration
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force Department                              32, VII
  Federal Acquisition Regulation Supplement       48, 53
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX

[[Page 1048]]

Architectural and Transportation Barriers         36, XI
     Compliance Board
Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI
Army Department                                   32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase From People Who Are
Broadcasting Board of Governors                   22, V
  Federal Acquisition Regulation                  48, 19
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X
Civil Rights, Commission on                       45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce Department                               44, IV
  Census Bureau                                   15, I
  Economic Affairs, Under Secretary               37, V
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Fishery Conservation and Management             50, VI
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II
  National Marine Fisheries Service               50, II, IV, VI
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Productivity, Technology and Innovation,        37, IV
       Assistant Secretary for
  Secretary of Commerce, Office of                15, Subtitle A
  Technology, Under Secretary for                 37, V
  Technology Administration                       15, XI
  Technology Policy, Assistant Secretary for      37, IV
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Product Safety Commission                5, LXXI; 16, II
Cooperative State Research, Education, and        7, XXXIV
     Extension Service
Copyright Office                                  37, II
Copyright Royalty Board                           37, III
Corporation for National and Community Service    45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Court Services and Offender Supervision Agency    28, VIII
     for the District of Columbia
Customs and Border Protection Bureau              19, I
Defense Contract Audit Agency                     32, I
Defense Department                                5, XXVI; 32, Subtitle A; 
                                                  40, VII

[[Page 1049]]

  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51
  Defense Acquisition Regulations System          48, II
  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  National Imagery and Mapping Agency             32, I
  Navy Department                                 32, VI; 48, 52
  Secretary of Defense, Office of                 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
District of Columbia, Court Services and          28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Under Secretary                 37, V
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
  Vocational and Adult Education, Office of       34, IV
Educational Research and Improvement, Office of   34, VII
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employee Benefits Security Administration         29, XXV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             5, XXIII; 10, II, III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   5, LIV; 40, I, IV, VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Administration, Office of                       5, XV
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                5, III, LXXVII; 14, VI; 
                                                  48, 99
  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II

[[Page 1050]]

  Trade Representative, Office of the United      15, XX
       States
Export-Import Bank of the United States           5, LII; 12, IV
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       11, I
Federal Emergency Management Agency               44, I
  Federal Acquisition Regulation                  48, 44
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Board                     12, IX
Federal Labor Relations Authority, and General    5, XIV; 22, XIV
     Counsel of the Federal Labor Relations 
     Authority
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Fishery Conservation and Management               50, VI
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102

[[Page 1051]]

  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F
  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Accountability Office                  4, I
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          5, XLV; 45, Subtitle A
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Defense Acquisition Regulations System          48, 2
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V; 42, I
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  6, I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection Bureau            19, I
  Federal Emergency Management Agency             44, I
  Immigration and Customs Enforcement Bureau      19, IV
  Immigration and Naturalization                  8, I
  Transportation Security Administration          49, XII
Housing and Urban Development, Department of      5, LXV; 24, Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Human Development Services, Office of             45, XIII
Immigration and Customs Enforcement Bureau        19, IV
Immigration and Naturalization                    8, I
Immigration Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII
Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V; 42, I
Industry and Security, Bureau of                  15, VII
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
   Archives and Records Administration
[[Page 1052]]

Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Interior Department
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  Minerals Management Service                     30, II
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            43, Subtitle A
  Surface Mining and Reclamation Appeals, Board   30, III
       of
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Fishing and Related Activities      50, III
International Investment, Office of               31, VIII
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice Department                                5, XXVIII; 28, I, XI; 40, 
                                                  IV
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration Review, Executive Office for        8, V
  Offices of Independent Counsel                  28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor Department                                  5, XLII
  Benefits Review Board                           20, VII
  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V
  Employment Standards Administration             20, VI
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Public Contracts                                41, 50

[[Page 1053]]

  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Library of Congress                               36, VII
  Copyright Office                                37, II
  Copyright Royalty Board                         37, III
Local Television Loan Guarantee Board             7, XX
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II
Micronesian Status Negotiations, Office for       32, XXVII
Mine Safety and Health Administration             30, I
Minerals Management Service                       30, II
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
National Aeronautics and Space Administration     5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   45, XII, XXV
National Archives and Records Administration      5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Bureau of Standards                      15, II
National Capital Planning Commission              1, IV
National Commission for Employment Policy         1, IV
National Commission on Libraries and Information  45, XVII
     Science
National Council on Disability                    34, XII
National Counterintelligence Center               32, XVIII
National Credit Union Administration              12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           21, III
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute for Literacy                   34, XI
National Institute of Standards and Technology    15, II
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV, VI
National Mediation Board                          29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI
National Security Council and Office of Science   47, II
     and Technology Policy
National Telecommunications and Information       15, XXIII; 47, III
     Administration
National Transportation Safety Board              49, VIII
National Weather Service                          15, IX
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52

[[Page 1054]]

Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Offices of Independent Counsel                    28, VI
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Overseas Private Investment Corporation           5, XXXIII; 22, VII
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
Pipeline and Hazardous Materials Safety           49, I
     Administration
Postal Rate Commission                            5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Procurement and Property Management, Office of    7, XXXII
Productivity, Technology and Innovation,          37, IV
     Assistant Secretary
Public Contracts, Department of Labor             41, 50
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Regional Action Planning Commissions              13, V
Relocation Allowances                             41, 302
Research and Innovative Technology                49, XI
     Administration
Rural Business-Cooperative Service                7, XVIII, XLII
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV
Rural Telephone Bank                              7, XVI
Rural Utilities Service                           7, XVII, XVIII, XLII
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of          32, XXIV
Science and Technology Policy, Office of, and     47, II
     National Security Council
Secret Service                                    31, IV
Securities and Exchange Commission                17, II
Selective Service System                          32, XVI
Small Business Administration                     13, I
Smithsonian Institution                           36, V
Social Security Administration                    20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State Department                                  22, I; 28, XI
  Federal Acquisition Regulation                  48, 6
Surface Mining and Reclamation Appeals, Board of  30, III
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII

[[Page 1055]]

Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
Technology, Under Secretary for                   37, V
Tennessee Valley Authority                        5, LXIX; 18, XIII
Thrift Supervision Office, Department of the      12, V
     Treasury
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     5, L
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 49, V
  Pipeline and Hazardous Materials Safety         49, I
       Administration
  Saint Lawrence Seaway Development Corporation   33, IV
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Surface Transportation Board                    49, X
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury Department                               5, XXI; 12, XV; 17, IV; 
                                                  31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection Bureau            19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Law Enforcement Training Center         31, VII
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  International Investment, Office of             31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
  Thrift Supervision, Office of                   12, V
Truman, Harry S. Scholarship Foundation           45, XVIII
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Vocational and Adult Education, Office of         34, IV
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I
World Agricultural Outlook Board                  7, XXXVIII

[[Page 1057]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations that were 
made by documents published in the Federal Register since January 1, 
2001, are enumerated in the following list. Entries indicate the nature 
of the changes effected. Page numbers refer to Federal Register pages. 
The user should consult the entries for chapters and parts as well as 
sections for revisions.
For the period before January 1, 2001, see the ``List of CFR Sections 
Affected, 1949-1963, 1964-1972, 1973-1985, and 1986-2000'' published in 
11 separate volumes.

                                  2001

38 CFR
                                                                   66 FR
                                                                    Page
Chapter I
Chapter I Nomenclature change......................................44053
19.2 Revised.......................................................13437
19.35 Amended......................................................53339
20.101 (c) revised; (d) and (e) added..............................53339
20.203 Removed.....................................................23340
20.302 (b) revised.................................................50318
20.304 Revised.....................................................50319
20.502 Revised.....................................................60153
20.711 (c), (e) and (h) revised; (f) and (g) amended; (i) added....49538
20.901 (a) revised; interim........................................38159
20.1404 (b) revised; interim.......................................35903
20.1405 (a) revised................................................37151
20.1409 (b) revised; interim.......................................35903
21.3045 (h) revised................................................32227
21.3131 (a) revised................................................32227
21.3300 (c) amended................................................32228
21.3303 Amended....................................................44053
21.3333 (a) and (b)(1) amended.....................................32228
21.4005 Amended....................................................44053
21.4131 (i) removed................................................38938
21.4135 (aa) removed...............................................38938
21.4138 Amended....................................................44053
21.4203 Amended....................................................44053
21.4208 Amended....................................................44053
21.4232 Amended....................................................44053
21.4255 Amended....................................................44053
21.4342 Amended....................................................44053
21.4800--21.4856 (Subpart F-3) Removed.............................38938
21.5701--21.5901 (Subpart H) Authority citation revised............32225
21.5820 Amended....................................................32226
21.5822 Amended....................................................32226
21.6410 Amended....................................................44053
21.7020 (b)(6)(v) and (vi) redesignated as (b)(6)(vi) and (vii); 
        (b)(6)(iv), new (vi), (b)(23)(ii) and (iii) amended; new 
        (b)(6)(v), (23)(iv), (45) and (46) added; (b)(23) 
        authority citation revised.................................39279
21.7050 (a)(1) amended; (d) and (e) redesignated as (e) and (f); 
        new (d) added..............................................39280
21.7131 (j) removed................................................38939
    (d) added......................................................39280
    Corrected......................................................42586
21.7135 (aa) removed...............................................38939
    Corrected......................................................42586
21.7136 (b), (c)(1), (2) and (3) revised; (c)(4) and (5) added.....32228
21.7137 (a), (b) introductory text, (c) introductory text and (2) 
        revised....................................................32229
21.7301 Amended....................................................44053
21.7631 (f) removed................................................38939
21.7635 (w) removed................................................38939
21.7636 (a)(1), (2) introductory text, (i) and (3) revised.........38937
36.4342 (e) added; authority citation revised......................32231
59 Added...........................................................33847

[[Page 1058]]

                                  2002

38 CFR
                                                                   67 FR
                                                                    Page
Chapter I
Chapter I Nomenclature change......................................16023
19.9 Revised........................................................3104
19.31 Revised.......................................................3104
20.3 (n), (o) and (p) redesignated as (o), (p) and (q); new (n) 
        added......................................................36104
20.609 (d)(2), (f), (g) and (i) revised; (j) added.................36104
    (c) revised....................................................49600
20.610 (d) revised; (e) added......................................36105
20.903 Revised......................................................3105
20.1106 Revised....................................................16317
20.1304 (a) amended; (b) revised; (c) removed; (d) redesignated as 
        (c).........................................................3105
20.1404 Regulation at 66 FR 35903 confirmed........................46870
20.1409 Regulation at 66 FR 35903 confirmed........................46870
21.4152 (b) introductory text and (4) amended......................12474
21.4263 (h)(3) added; (h) authority citation removed; OMB number 
                                                                   12474
21.5820 (b)(1), (2)(ii), (A), (B), (3)(ii)introductory text, (A) 
        and (B) amended; (b)(2)(ii)(C) and (3)(ii)(C) revised......34405
21.5822 (b)(1)(i), (ii), (2)(i) and (ii) amended...................34405
21.7636 (a)(1) and (2)(i) revised; (a)(3) amended...................6655
21.7807 Amended....................................................12474
21.8010--21.8410 (Subpart M) Revised...............................72565
36 Technical correction.....................................10619, 62889
36.4227 Added.......................................................9402
36.4301 Amended....................................................62647
36.4323 (e)(1)(v) and (4) amended; (e)(1)(vi) revised..............62647
36.4365 Added.......................................................9402
39.2 (d) added.....................................................62645
39.3 (b)(1) and authority citation added...........................62645
46 Revised.........................................................19679
52 Added.............................................................662

                                  2003

38 CFR
                                                                   68 FR
                                                                    Page
Chapter I
18.2 Amended.......................................................51369
18.3 (b)(1) introductory text amended..............................51369
18.4 (a)(1), (b) introductory text and concluding text amended; 
        (b) heading and (d) revised................................51369
18.6 (b) and (d) amended...........................................51369
18.9 (e) amended...................................................51369
18.10 (f) amended..................................................51369
18.12 (a) amended..................................................51369
18.13 (f) revised; (h) amended.....................................51369
18.401--18.461 (Subpart D) Heading and authority citation revised 
                                                                   51370
18.402 Amended.....................................................51370
18.403 (h)(1) amended; (m) added...................................51370
18.404 (a), (b)(1)(v), (3), (4)(ii), (5)(i), (6), (c) and heading 
        amended....................................................51370
18.405 (a) amended; (c) revised....................................51370
18.406 (a)(3)(i), (ii) and (iii) amended...........................51370
18.408 (a) amended.................................................51370
18.411 (a)(3) and (b)(8) amended...................................51370
18.412 (a), (c) introductory text and (1) amended..................51370
18.421 Undesignated center heading amended.........................51370
18.422 (a) heading revised; (a), (b), (c) and (e)(3) amended.......51370
18.431 Amended.....................................................51370
18.433 (b)(2), (3), (c)(1), (2) and (4) amended....................51370
18.435 (a) and (b) introductory text amended.......................51370
18.437 (a)(1), (b) and (c)(1) amended..............................51370
18.438 Amended; heading revised....................................51370
18.439 Heading revised; (a) and (c) amended........................51370
18.441 Amended.....................................................51370
18.443 (a) and (d) amended.........................................51370
18.444 (a), (c) and (d)(1) amended.................................51370
18.447 (a)(1) amended..............................................51370
18.451 Amended.....................................................51370
18.454 Amended.....................................................51370
18.501 Amended.....................................................51372
18.503 (j), (k) and (l) redesignated as (k), (l) and (m); new (j) 
        added......................................................51371
18.531 Amended.....................................................51372
18.532 Amended.....................................................51372
18.544 (a)(2) amended..............................................51372
18.546 (b) and (c)(2) amended......................................51372

[[Page 1059]]

18.549 (b)(2) amended..............................................51372
18.501--18.550 (Subpart E) Appendix B amended......................51371
19.2 Revised........................................................6625
20.204 Revised.....................................................13236
20.302 (c) amended.................................................64806
20.501 (c) amended.................................................64806
20.900 (c) revised.................................................53683
20.1405 (a)(2) redesignated as (a)(3); new (a)(2) added............53682
21.3045 (h) revised................................................34320
21.3131 (a) revised; (b), (c) and (d) redesignated as (c), (d) and 
        (e); new (b) added.........................................34321
    (a) table and (b) table corrected..............................37206
21.3300 (c) revised................................................34322
21.3333 (a) revised; (b)(1) amended................................34322
    (a)(2) corrected...............................................37206
21.4138 (f) introductory text and (2) introductory text amended; 
        (f)(2)(iii) and (2)(iv) revised; (f)(3) removed; (f)(4) 
        redesignated as (f)(3).....................................34328
    (f)(1)(v) and (vi) amended; (f)(1)(vii) added..................35178
21.4200 (a)(4) and (5) amended; (a)(6) and (aa) through (dd) 
        added; (a) authority citation revised......................35178
21.5820 (b)(1), (2)(ii), (A), (B), (3)(ii) introductory text, (A) 
        and (B) amended; (b)(2)(ii)(C) and (3)(ii)(C) revised......65400
21.5822 (b)(1)(I), (ii), (2)(i) and (ii) amended...................65401
21.7020 (b)(6)(iii) introductory text and (b)(6)(iv) introductory 
        text and (v)(i) amended;...................................34328
    (b)(47) through (b)(51) added..................................35179
21.7042 Introductory text, (a)(2), (a)(3) introductory text and 
        authority citation, (5) authority citation, (b)(2) 
        introductory text revised; (a)(5)(ii), (iv)(A), (B), 
        (b)(6)(ii), (7)(i)(B), (ii)(B), (c)(4) and (d)(1) amended; 
        (a)(6) and (b)(11) removed; (a)(7) redesignated as new 
        (a)(6).....................................................34329
21.7044 Introductory text, (a)(3) and (b)(3) revised; (b)(13) 
        revised....................................................34329
21.7045 Introductory text amended; (e) added.......................34329
21.7050 (a)(1) amended; (e) and (f) redesignated as (f) and (g); 
        new (e) added..............................................34330
21.7072 (a) and (b)(1) introductory text amended; (b)(1)(ii) and 
        (c)(1) revised.............................................34330
21.7076 (a), (b)(1) introductory text and (7) revised..............35179
21.7131 (a)(1)(iii) and authority citation revised; (a)(1)(iv), 
        (v), (vi), (j), (o) and (p) added; (b)(2) amended..........34331
21.7136 (b) and (c)(1) through (5) revised; (c)(6) through (9) 
        added......................................................34322
    (a)(2)(i), (ii), (iii) introductory text, (B) introductory 
text, (c) heading and (f) introductory text amended; (h) added.....34331
    (c)(7) corrected...............................................37206
21.7137 Heading, (a) and (c)(2) revised............................34324
21.7140 (b) through (f) redesignated as (c) through (g); new (b) 
        added; new (c)(1) introductory text revised................35180
21.7142 Redesignated as 21.7143; new 21.7142 added.................35180
21.7143 Redesignated from 21.7142..................................35180
21.7151 Heading revised; (c) added; OMB number.....................35180
21.7154 (a) authority citation revised; (a)(4) and (d) added; OMB 
        number.....................................................35180
21.7540 (b)(3)(iii) and authority citation revised; (b)(3)(iv) 
        through (vii) redesignated as (b)(3)(v) through (viii); 
        new (b)(3)(iv) added.......................................59731
21.7550 (a)(3) and authority citation revised; (d)(1) amended......59731
21.7576 (e)(1)(i) and authority citation revised...................59731
21.7620 (c)(2) revised.............................................59731
21.7636 (a)(1),(2)(i) introductory text and table amended; (a)(3) 
        revised....................................................42978
36.4302 (a)(4), (e)(1)(i), (2)(i) and (3) text and authority 
        citation revised; interim...................................6627
36.4308 Authority citation removed; (c)(2) revised; interim.........6627

[[Page 1060]]

36.4404 (a) introductory text, (b)(2) and authority citation 
        revised; interim............................................6627
36.4527 (a)(1) amended; (a)(2) redesignated as (a)(3); new (a)(2) 
        added; interim..............................................6627
44 Revised..................................................66544, 66618
44.440 Added.......................................................66619
44.935 (b) added...................................................66619
44.995 (c) added...................................................66619
44.1010 (b) added..................................................66619
48 Added....................................................66557, 66619
48.510 (c) amended.................................................66620
48.605 (a)(2) amended..............................................66620
60 Added............................................................8549
61 Added; interim..................................................13594
61.11 OMB number...................................................55468
61.15 OMB number...................................................55468
61.17 OMB number...................................................55468
61.20 OMB number...................................................55468
61.31 OMB number...................................................55468
61.33 (d)(2) corrected; interim....................................34332
61.41 OMB number...................................................55468
61.51 OMB number...................................................55468
61.55 OMB number...................................................55468
61.80 OMB number...................................................55468

                                  2004

38 CFR
                                                                   69 FR
                                                                    Page
19.9 Heading, (a) and (b) revised..................................53808
19.38 Amended......................................................53808
20.3 (a) revised...................................................53808
20.608 (b)(2) amended..............................................21069
20.901 (a) amended.................................................19937
20.903 (b) removed, (c) redesignated as (b); (a) and new (b) 
        amended....................................................53808
20.1304 (c) redesignated as (d); new (c) added; (a), (b)(1)(ii), 
        (2) and new (d) amended....................................53808
20.1405 Regulation at 68 FR 53682 confirmed........................31523
21.3045 (h) revised................................................62207
21.3046 (d)(4)(ii) revised.........................................62207
21.3131 (a) and (b) revised; (c), (d) and (e) redesignated as (d), 
        (e) and (f); new (c) added.................................62207
21.3300 (c) revised................................................62208
21.3333 (a)(1) and (2) amended; (a)(3) added; (b)(1) revised.......62209
21.5820 (b)(1), (2)(ii) introductory text, (A), (B), (C), (3)(ii) 
        introductory text, (A), (B) and (C) amended................62210
21.5822 (b)(1)(i), (ii), (2)(i) and (ii) amended...................62210
21.7136 (b)(4) through (9) and (c)(4) through (9) removed; (b)(1), 
        (2), (3), (c)(1), (2) and (3) revised......................74978
21.7137 (a)(4) through (9) removed; (a)(1), (2), (3) and (c) 
        revised....................................................74978
21.7636 (a)(1) and (2)(i) revised; (a)(3) amended..................62205
36.4342 (f) added; second authority citation removed...............10619
39 Revised.........................................................16346
61.64 Revised; eff. 7-8-04.........................................31888

                                  2005

38 CFR
                                                                   70 FR
                                                                    Page
Chapter I
19.14 (a) and (b) amended...........................................8930
20.102 (a) removed; (b) and (c) redesignated as new (a) and (b); 
        new (a) and (b) amended.....................................8930
20.1106 Revised....................................................72221
21.3135 (j) added..................................................25786
21.4131 (i) added..................................................25786
21.4135 (n) added..................................................25786
21.4200 (kk) and (ll) added........................................25786
21.7020 (b)(56) and (57) added.....................................25787
21.7131 (q) added..................................................25787
21.7135 (aa) added.................................................25787
36.4302 Regulation at 68 FR 6627 confirmed..........................3893
36.4308 Regulation at 68 FR 6627 confirmed..........................3893
36.4311 (d) introductory text, (4) introductory text, (5) 
        introductory text and authority citation revised; (d)(2) 
        amended....................................................22597
36.4404 Regulation at 68 FR 6627 confirmed; (a) introductory text, 
        (b)(2) and authority citation revised.......................3893
36.4527 Regulation at 68 FR 6627 confirmed..........................3893
38 Added............................................................4769
41 Revised.........................................................52249
49 Added...........................................................52261

[[Page 1061]]

                                  2006

   (Regulations published from January 1, 2006, through July 1, 2006)

38 CFR
                                                                   71 FR
                                                                    Page
Chapter I
20.1301 (b) revised................................................18009
21.50 (d) amended..................................................28586
21.1032 (c) introductory text, (1) and (2) amended; (c) authority 
        citation revised............................................1497
21.4009 (d) amended................................................28586
21.6056 (b) amended................................................28586
21.6420 Undesignated center heading and section heading revised; 
        introductory text amended..................................28586
21.6521 (b) amended................................................28587
21.7540 (a) introductory text and authority citation revised; 
        (a)(3) and (4) amended; (a)(5) added........................1497
21.7550 (b), (c) and (d) redesignated as new (c), (d) and (e); new 
        (b) added; (a), new (d) and new (e) revised.................1498
    (e)(2), (3) and (4) added......................................24582
21.7551 (a) introductory text, (1), (b)(1) and (c)(1)(ii) amended 
                                                                    1498
36.4342 (f)(2) revised.............................................30618
44.1100--44.1113 (Subpart J) Added.................................27203


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