[Federal Register Volume 59, Number 170 (Friday, September 2, 1994)]
[Rules and Regulations]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20871]


[[Page Unknown]]

[Federal Register: September 2, 1994]


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Part II





Department of Labor





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Employment and Training Administration



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20 CFR Part 626, et al.




Job Training Partnership Act; Final Rule

  Federal Register / Vol. 59, No. 170 / Friday, September 2, 1994 / 
Rules and Regulations  

DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Parts 626, 627, 628, 629, 630, 631, and 637

 
Job Training Partnership Act

RIN 1205-AA95
AGENCY: Employment and Training Administration, Labor.

ACTION: Final rule.

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SUMMARY: The Employment and Training Administration (ETA) of the 
Department of Labor (DOL) is amending the Job Training Partnership Act 
(JTPA) regulations to implement the Job Training Reform Amendments of 
1992 and related statutes. Through these final regulations, the 
Department intends to direct the focus of JTPA training and employment 
programs on improving the targeting of JTPA services to those facing 
serious barriers to employment, enhancing the quality of services 
provided and program outcomes, strengthening fiscal and program 
accountability and the linkage between the services provided and local 
labor market needs, and fostering a comprehensive and coherent system 
of human resource services.

EFFECTIVE DATE: June 30, 1995, except that the provisions of 
Sec. 627.201 shall be effective October 3, 1994.

FOR FURTHER INFORMATION CONTACT: Mr. James M. Aaron, Office of 
Employment and Training Programs. Telephone: (202) 219-6825 (this is 
not a toll-free number). Copies of this final rule are available in the 
following formats: electronic file on computer disk and audio tape. 
They may be obtained at the above office.

SUPPLEMENTARY INFORMATION: On October 13, 1982, the President signed 
into law the Job Training Partnership Act, Public Law 97-300. The 
stated purposes of the Act were ``to establish programs to prepare 
youth and unskilled adults for entry into the labor force, and to 
afford job training to those economically disadvantaged individuals and 
others facing serious barriers to employment who are in special need of 
such training to obtain productive employment.''
    Title I of the Act sets forth general requirements for programs, as 
well as some requirements for State and local operation of programs. 
Title II provides requirements for State and local operation of adult 
and youth programs for the economically disadvantaged. Title III of the 
Act provides for operation of State and substate programs of employment 
and training assistance for dislocated workers. Title IV provides 
requirements for special programs for targeted groups, such as Native 
Americans, migrant and seasonal farmworkers, and veterans, as well as 
for the Job Corps and other specialized programs. Title V provides 
incentives to States to reduce welfare dependency and increase self-
sufficiency for absent parents of children receiving aid to families of 
dependent children and blind or disabled individuals receiving 
supplemental security income under title XVI of the Social Security 
Act.
    The final rule, among other things, implements statutory 
requirements under the Job Training Reform Amendments of 1992 (JTPA 
Amendments), Public Law 102-367; the Nontraditional Employment for 
Women Act (NEW), Public Law 102-235; the Department of Defense 
Authorization Act for Fiscal Year 1993 (Defense Authorization Act), 
Public Law 102-484; the Older Americans Act, as amended by Public Law 
103-171; the Clean Air Act, Public Law 101-549; the North American Free 
Trade Agreement (NAFTA) Worker Security Act, title V of Public Law 103-
182 and the Goals 2000: Educate America Act, Public Law 103-227. While 
the programs are modified pursuant to statutory amendments and 
requirements, the delivery system for the JTPA programs under the final 
rule remains essentially the same as in pre-Amendment regulations. It 
does not have the financial or other impact to make it a major rule 
and, therefore, the preparation of a regulatory impact analysis is not 
necessary. See Executive Order 12866, 58 FR 51735, October 4, 1993.
    The Department of Labor (``DOL'' or ``the Department'') has 
certified to the Chief Counsel for Advocacy, Small Business 
Administration, that pursuant to the Regulatory Flexibility Act at 5 
U.S.C. 605(b), the final rule would not have a significant economic 
impact on a substantial number of small entities. No significant 
economic impact would be imposed on such entities by the final rule.

Paperwork Reduction Act

    Pursuant to the Paperwork Reduction Act, information collection 
requirements which would be imposed as a result of the final rule are 
being submitted separately to the Office of Management and Budget.

Prior Actions

    The Department has conducted this rulemaking in an open and public 
manner. Since the enactment of the Amendments, Department officials 
have responded to numerous invitations to discuss the Amendments with 
organizations interested in the Amendments and proposed regulatory 
action. Additionally, a group of technical experts has offered 
suggestions to the Department on the proposed areas for regulatory 
action.
    On September 10, 1992, the Department published an Advance Notice 
of Proposed Rulemaking in the Federal Register and invited comments 
from interested parties regarding proposed or recommended regulatory 
actions to be taken by the Department. 57 FR 41447.
    On December 29, 1992, the Department published an interim final 
rule in the Federal Register, providing the opportunity for comment. 57 
FR 62004. Amendments to the rule were published on June 3, 1993. 58 FR 
31471.
    Over 400 sets of comments were received in response to the interim 
final rule. Sources of comments by the close of the comment period were 
as follows: Private industry councils (99); service delivery areas 
(72); service providers (41); States (39); community-based 
organizations (33); public interest groups (31); State JTPA offices 
(28); private contractors (14); State education agencies (10); Federal 
agencies (8); unions (7); private citizens (7); State job training 
coordinating councils (6); members of Congress (2); and other sources 
(4).
    In addition, on March 24, 1992, the Department published proposed 
rules in the Federal Register for the Clean Air Employment Transition 
Assistance program under JTPA title III, providing the opportunity to 
comment. 57 FR 10232. Thirteen sets of comments were received from 
State, substate entities and other organizations.
    The Department fully considered these comments and other comments 
received in time to consider in the development of this final 
regulation and addresses the issues they raised in the following 
discussion.
    Finally, during the period of May through July, 1994, when this 
final rule was in development, the Department initiated a Dialogue with 
the employment and training community and others interested in the JTPA 
title II program for the disadvantaged. This Dialogue was initiated by 
a Federal Register notice published on May 18, 1994, and consisted 
principally of a series of fifteen small group and town hall meetings 
and a review of research on employment and training programs with a 
view to developing an action plan to improve title II programs.

Approach to Rulemaking

    These regulations continue to provide substantial responsibility 
and discretion to States and local areas in developing policy and in 
implementing procedures for JTPA programs. Thus, in many instances in 
these final regulations, responsibility for certain decisions is vested 
in the State and in the service delivery areas (SDA's) and substate 
grantees (SSG's).
    The Department has attempted in these final regulations to foster 
improved customer services by eliminating or reducing unnecessary 
programmatic requirements wherever possible so that decisions on how to 
best serve JTPA customers will be made, to the maximum extent possible, 
at the level of customer service and based upon customer need. For 
example, some of the restrictions on the duration of certain 
activities, such as work experience and entry employment experience 
where not specifically provided for in the Act, have been eliminated. 
Rather than Federal regulation, the needs of the customer as determined 
in the assessment process and the intervention's likelihood of success 
in enhancing skills and achieving long term employment will dictate how 
the program intervention will be designed.
    This was also a theme from the title II Dialogue. Some of the 
principal themes suggested by the title II Dialogue were the following: 
(1) Greater program flexibility with accountability, (2) Greater 
support for longer-term training interventions, including approaches 
more customized to customer needs and better connections between 
training and jobs, (3) Improved coordination at all levels but with 
special attention to coordination among federal agencies, (4) Increased 
supportive services, (5) More streamlining of eligibility, and (6) 
Better access for community-based organizations to JTPA planning and 
service delivery. To the extent permitted by the rulemaking process, 
the Department considered the major themes from the Dialogue in this 
final rule. In several instances, there are changes in this final rule 
that are consistent with the themes of the Dialogue. For example, as 
noted above, certain prior restrictions have been eliminated; initial 
efforts to achieve greater coordination with the Departments of 
Education, Health and Human Services and Housing and Urban Development 
are reflected in this final rule; the Department has attempted to 
streamline the requirements for providing participants with financial 
assistance; and these final regulations clarify that, as appropriate, 
the new eligibility provisions for youth are applied in the program 
under section 123 and title II-B. In addition, the Department will 
reexamine the Eligibility Documentation Technical Assistance Guide.
    Consistent with Executive Order 12866 (58 FR 51735, October 4, 
1993), these regulations are limited to those areas which are 
specifically required by statute, identified by the Department or the 
public as necessary to provide guidance and clarification, or essential 
to further the purposes of the Act. Additionally, the Department fully 
intends to provide strong oversight and monitoring of JTPA programs in 
conjunction with strengthened State and local oversight and monitoring. 
It is through the monitoring of the implementation of the Amendments 
and these regulations, rather than through promulgation of prescriptive 
regulations, that the Department, working with the States and service 
delivery and substate areas, will ensure effective program operations.
    Of all the consultations and comments the Department has received, 
about half expressed interest in having the Department be more detailed 
in the regulations, and the other half indicated that the Department 
was being overly prescriptive in the interim final rule and preferred 
that the Department provide minimal guidance. The Department reminds 
readers of these regulations that the JTPA Amendments create more 
restrictive operational and programmatic requirements in order to 
address a series of issues that had been identified in connection with 
JTPA. The Department has sought to strike a balance in these final 
regulations in terms of guidance and prescriptiveness. In some 
regulatory areas, such as some of the administrative requirements, the 
Department has carefully specified requirements to set a strong 
foundation for program integrity so that in other regulatory areas, 
such as program design, there can be more flexibility and emphasis on 
outcomes. Finally, the Department has sought to make these regulations 
sufficiently clear, so that all parties with an interest in JTPA 
understand both the requirements and the areas of flexibility in the 
program.
    This final rule is not a stand-alone document; the companion 
document is the JTPA, as amended. In several instances, however, 
portions of the Act are repeated to make the final rule user-friendly 
and to facilitate its use as a reference tool.
    In addition to the 1992 JTPA Amendments, the Clean Air Act, section 
4467 of the Defense Authorization Act and the NAFTA Worker Security Act 
impacted on title III of JTPA. The final regulations in 20 CFR part 631 
provide for limited revisions to existing title III regulations as 
required by these statutes.
    There were a number of comments on specific areas of performance 
standards and related reporting requirements. On July 11, 1994, the 
Department published separately in the Federal Register the final 
performance standards for PY 1994 and PY 1995. The Department 
appreciates the issues raised by commenters on the interim final 
regulations in the area of performance standards and has taken these 
comments into account in developing the performance standards. In 
addition, on June 23, 1994 the Department issued Training and 
Employment Information Notice 5-93, Change 1 with the revised reporting 
instructions.
    The Department also plans to issue separately revisions to the 
regulations for title IV, part A, the Employment and Training Programs 
for Native Americans and Migrant and Seasonal Farmworkers. When it 
does, the contents of the regulations as reflected herein may change. 
The Department has issued revised regulations for title IV, part B, the 
Job Corps. (58 FR 69098 (December 29, 1993)).

Format of These Final Regulations

    The structure, organization, and enumeration of the JTPA 
regulations have been revised to accommodate the Amendments. Throughout 
this document, unless otherwise stated, ``JTPA'' or ``the Act'' refers 
to the Job Training Partnership Act, as amended (29 U.S.C. 1501, et 
seq.); ``Department'' or ``DOL'' refers to the U.S. Department of 
Labor; and ``Secretary'' refers to the Secretary of the U.S. Department 
of Labor or the Secretary's designated representative(s). As used in 
these final regulations, the term ``title'' refers to a title of the 
Job Training Partnership Act, unless the text specifically refers to 
another statute. The terms ``section'', ``part'', and ``subpart'' refer 
to a section, part, and subpart, respectively, of these final 
regulations, unless the text specifically refers to another document.
    As specified at PART 626--Introduction To The Regulations Under The 
Job Training Partnership Act, part 627 applies to all programs under 
titles I, II, and III of the Act, except where noted, and part 628 
generally applies to title II programs. Parts 629 and 630 are reserved 
for future use. Part 631 continues to apply to title III programs and 
part 637 has been revised for the title V Jobs for Employable Dependent 
Individuals (JEDI) program. Therefore, various sections that previously 
appeared in parts 627, 628, 629, and 630 have been redesignated to 
parts 627 and 628.
Definitions

    The interim final rule at Sec. 626.5 added a significant number of 
definitions of terms used throughout the JTPA and regulations. 
Definitions of the terms ``commercially available off-the-shelf 
training package'', ``family'', ``family income'', ``obligations'', 
``stand-in costs'', and ``vendor'' received the most comments.
Commercially available off-the-shelf training package.
    At the outset, the wording of the term being defined is changed. In 
the interim final rule the term was ``commercially available or off-
the-shelf training packages;'' in the final rule, the word ``or'' is 
dropped so that the term being defined reads ``commercially available 
off-the-shelf training packages''. The reason for this change is that 
both the Act and the definition require that a training package be both 
commercially available and available at off-the-shelf prices. 
Practically, availability at off-the-shelf prices is subsumed within 
the broader concept of commercial availability.
    Several commenters submitted comments on the definition of 
``commercially available off-the-shelf training package'', contained in 
Sec. 626.5. The basis of this definition is the definition of a 
commercial product found in part 15 of the Federal Acquisition 
Regulation (FAR). First of all, the Department acknowledges that there 
is a degree of uncertainty regarding which training packages and their 
providers fall within the meaning of commercially available off-the-
shelf. The term, as defined within Sec. 626.5, relies generally upon 
whether the package is provided in a commercial market in which it is 
available to the public. This was the origin of the language ``sold to 
the public'' and that related to ``catalogue or market prices''. These 
business concepts are indicators of the training package's availability 
to the public, e.g., a catalogue available to the public or a public, 
advertised price shows that the entity is seeking to engage in 
commerce. The Department believes that most parties understand the 
basic meaning of whether any package is ``commercially available.'' 
Some related areas of the definition are discussed further below.
    A second area of inquiry pertains to the contents of the package. 
The training will consist of classroom and related practical 
instruction, which may include hands-on experience. It may consist of 
the development of occupational or education-related skills. For 
example, a package may provide occupational training to a participant 
as a nurse practitioner, as a maintenance mechanic, or in computer 
design, in heating, ventilation and air conditioning, or may provide 
basic skills in reading and computation. The package may consist of a 
necessary assessment of interests, aptitudes, and abilities, as well as 
counseling and guidance related to participant progress and employment 
prospects. Such a training package will not normally consist of the 
kind of assistance typically provided within the meaning of a JTPA 
supportive service, but may include fees, books and other materials 
needed for participation and completion of the package. In other words, 
if an organization offers training to the general public which consists 
solely of a practical training course in a particular occupation, it is 
that course, without any other placement or assessment services, which 
may be purchased as a commercially available training package. On the 
other hand, if the organization offers assessment or placement services 
to the public as part of its training course, those services will be a 
part of the commercially available package. A key indicator, however, 
is whether the contents of the package are generally available and 
generally the same for all participants, not just JTPA participants.
    Finally, commenters raised questions about the type of entity that 
might provide the commercially available package. A variety of entities 
may be the source of a commercially available package; however, the 
characteristics of the package, that is, whether they meet the tests of 
commercial availability at off-the-shelf prices, are more of an 
indicator than the entity that provides it. Such entities may include 
those that provide computer-based instruction in a variety of 
occupational and educational topical areas, or they may be public and 
private schools, academies or other entities that offer training that 
is commercially available, as discussed above.
    A few commenters requested that the phrase ``performance criteria'' 
be defined, and the definition now includes language that addresses the 
reference to ``performance criteria''. ``Performance criteria'' may 
generally fall into two or more areas that reflect the necessary 
components and features of the package that is to be delivered, such as 
(1) grade requirements, knowledge, skills, and competencies which may 
be expected to be attained by students, and (2) where appropriate, 
participant attainment as manifested by job placement. This latter 
component is contingent upon whether the service is regularly offered 
and may be reasonably included in the package.
    A few commenters were concerned with the requirement that the 
packages be unmodified. They indicated that, in many instances, a 
commercially available training package may be modified to some degree 
to reflect the special needs of the JTPA population, without changing 
its basic content. A strict reading of the regulation would prohibit 
contracting for commercially available packages which are modified in 
any way, regardless of whether the package remains substantially the 
same. In addition, this strict reading would prohibit the JTPA program 
from taking advantage of a discounted price that might be offered in 
connection with multiple purchases of the package. The Department does 
not intend that a local program be prohibited from purchasing a 
commercially available package at a discounted price.
    In order to respond to this comment, the Department further 
conforms the definition to the concepts in the FAR, and the word 
``unmodified'' is removed. This change recognizes that some 
modifications may be made to a package to meet special JTPA 
requirements, just as a commercial entity would offer to other 
customers, while the package remains substantially similar to that 
regularly offered. A test for whether the package remains substantially 
the same as that regularly offered is whether the modification does not 
involve an increase in the catalogue price. An increase in catalogue 
price would indicate that the package is not substantially the same. 
However, a price decrease due to such things as volume discounts or 
good negotiating is not, in itself, indicative of a modified package.
    Another test is whether the same training components continue to be 
offered in the package. A difference in the training components would 
indicate that the package may not be substantially the same. All of 
these tests should be considered in determining whether a training 
package meets the definition. Further, JTPA funds should not be used to 
make any modification to a training package. Should training packages 
be modified in order to conform to JTPA requirements, they may be 
considered commercially available off-the-shelf only if they comply 
with the remaining requirements listed in the definition. Thus, while 
some modification is possible, the definition is not intended to 
include ``customized training,'' training designed solely to meet the 
special needs of an individual or group of JTPA participants.
    A few commenters asked for a definition of ``substantial'' in 
regard to the quantities sold. In response, the phrase ``in substantial 
quantities'' is removed from the definition because the Department 
believes that the concept is embodied in the idea of ``being sold to 
the general public'' which follows in the definition. For further 
guidance, the FAR indicates, with respect to being sold in 
``substantial quantities'', that ``[N]ominal quantities, such as 
models, samples, prototypes, or experimental units, do not meet this 
requirement.'' Further, there were suggestions that an amount such as 
25 to 30 percent non JTPA sales may be useful to States and SDA's when 
setting policy in this area. The definition that is provided conforms 
to the FAR definition; therefore, it is not being changed.
    A few commenters wondered if community-based organizations (CBO's) 
and non-profit organizations were included within this definition. Such 
organizations may be among the types of organizations that provide a 
``commercially available off-the-shelf'' training package if the 
training packages they provide meet the definition.
    Several comments reflected confusion about the relationship of 
``commercially available off-the-shelf training packages'' to 
``vendors'' and ``subrecipients''. It is important to recognize that 
the definitions of ``vendor'' and ``subrecipient'' and the definition 
of ``commercially available off-the-shelf training package'' exist for 
different purposes and should not be viewed as related. An agreement to 
acquire a commercially available off-the-shelf training package may 
create either a vendor or a subrecipient relationship, depending on the 
content of the package. If the package contains elements that meet some 
of the distinguishing characteristics of a subrecipient (see 
definition), then a subrecipient relationship is created.
    Regardless of whether a vendor or subrecipient relationship is 
created, the costs of the commercially available off-the-shelf training 
package may be charged entirely to the direct training category. 
However, other JTPA requirements such as record retention, audit, etc. 
do apply to a subrecipient.
    The intent of the definition of ``commercially available off-the-
shelf training packages'' is to provide states and SDA's broad 
flexibility to utilize generally available training services and to be 
able to charge those services entirely to the training cost category. 
It will, for example, permit states and SDA's to purchase training from 
a variety of educational institutions at off-the-shelf or catalogue 
prices. It must be recognized, however, that there are limits to the 
flexibility that the definition affords. One important limitation is 
that the definition only applies to the provision of actual training 
services to eligible JTPA participants. It does not apply to 
intermediate administrative entities or entities that pass funds 
through to training providers. Another limitation is that the services 
must actually be available to and provided to significant numbers of 
persons or to entities that procure training for such persons under 
other state or federal programs outside the JTPA system. It will not be 
sufficient for a training provider merely to claim that its services 
are available to the general public or to other training programs (like 
the JOBS program). The state or SDA must be able to show that the 
services actually are available to the public or to other programs and 
that the services are utilized by them. If a training provider has a 
history of providing training only to the JTPA program or to JTPA 
participants, it will not be considered a provider of ``commercially 
available off-the-shelf training packages''.
    Although not a part of the definition, section 141(d)(3)(A) of the 
Act also requires that ``commercially available off the shelf training 
packages'' be purchased competitively. The requirements for competitive 
procurement are covered in the procurement provisions of the 
regulations at Sec. 627.420.
Family
    Several comments were received on the definition of the term 
``family'' at Sec. 626.5 of the interim final regulations. In general, 
the nature of these comments was that: (1) The definition is too 
restrictive and limits the Governor's flexibility in defining the term; 
(2) the definition does not recognize alternative living arrangements 
that do not fit neatly into the ``traditional'' concept of a family; 
and (3) the regulations do not address how to handle other family 
members, including dependent adults, living in the same residence. A 
few of the commenters noted that an apparent conflict exists in how 
``family'' is defined in the interim final regulations and how it is 
treated in the Standardized Program Information Report (SPIR) 
instructions.
    The term ``family'' was statutorily defined in the 1992 Amendments 
for the purposes of income eligibility determination for receipt of 
JTPA services. The interim final regulations provide the Governor with 
flexibility to interpret the term ``family'' concerning how ``dependent 
children'' are defined for JTPA programs. The interim final rule also 
defines the phrase ``living in a single residence''. The statute 
established a standard definition to apply consistently for JTPA 
programs, which, within the three categories, covers the vast majority 
of family configurations and living relationships in the country. The 
definition is not intended to address every possible permutation of 
alternative living arrangements.
    Although the Department believes that the regulations provide the 
Governor with some latitude in defining the term ``family'', the 
comments raised an issue regarding the adverse effect of excluding 
``dependent adults'' from the definition, which warrants further 
consideration. While the Department recognizes that excluding dependent 
adults may impact on the eligibility of some family members, the 
Department does not believe that this circumstance is included in the 
statutory definition. The Department does not believe that it has the 
authority to expand upon the definition of ``family'' beyond the 
categories specifically found at section 4 of the Act. No change is 
made in the final regulations. Other individuals living in the same 
residence, who are not dependent children, would be viewed as 
individuals in applying for and being determined eligible to receive 
JTPA services.
    A few of the commenters accurately noted the difference between the 
definition of ``family'' in the interim final regulations and the SPIR 
instructions regarding the treatment of an individual with a disability 
for the purposes of eligibility determinations. The SPIR reflects the 
definition of ``family'' in the regulations in effect prior to the 
publication of the December 29, 1992, interim final rule. The 
definition contained in the interim final regulations indicate that an 
individual with a disability ``may'', for the purpose of income 
eligibility, be considered to be an unrelated individual who is a 
family unit of one. This change was an administrative error and should 
not have been included in the interim final rule. Accordingly, the 
definition of ``family'' is amended to revise the word ``may'' to 
``shall'' in the final regulations. This amendment is consistent with 
the provisions at section 4(8) of the Act defining the term 
``economically disadvantaged''.
Family Income
    A few comments were received on the change in the definition of 
``family income'' and the method for calculating such income for the 
purposes of determining eligibility for JTPA services. In general, the 
nature of the comments were that: (1) The use of the Department of 
Health and Human Services' (HHS) poverty guidelines appears to conflict 
with the definition of ``economically disadvantaged'' at section 4(8) 
of the Act; (2) the definition does not include certain payments that 
have previously been excluded from family income; and (3) the old 
definition of ``family income'' should be retained, with the Governor 
defining the term for the purposes of income eligibility 
determinations, as has been the case since the inception of JTPA.
    A few commenters accurately noted that certain payments that have 
always been considered to be ``public assistance'' were omitted from 
the interim final rule. This was an inadvertent oversight in developing 
the regulations. The definition of ``family income'' is amended in the 
final rule to reflect that ``public assistance'' still includes Aid to 
Families with Dependent Children (AFDC), Supplemental Security Income, 
Emergency Assistance money payments, and non-Federal funded General 
Assistance or General Relief money payments, which are exclusions from 
income for the purposes of income eligibility determinations. In 
addition, certain other Federal statutes exclude additional types of 
payments from JTPA income eligibility determinations. For example, Pell 
grants are specifically excluded by title IV of the Higher Education 
Act, as is income earned while on active military duty and certain 
other veterans' benefits, identified at 38 U.S.C. 4213. These 
exclusions are incorporated into the final rule. There also has been 
concern expressed regarding the inclusion of Social Security benefit 
payments as income in determining eligibility for older individuals. It 
has been noted that many older individuals fall just above the income 
threshold for JTPA because of the inclusion of Social Security benefits 
and, therefore, are being denied needed JTPA services. The Department 
recognizes that older individuals have special needs which warrant 
consideration for their participation and inclusion in programs under 
JTPA. In the interest of responding to such needs, the Department is 
amending the regulations in the final rule to permit the Governor to 
exclude 25 percent of regular Social Security benefits from family 
income. The Department believes that this change will address the 
concerns of the commenters.
    A few commenters raised the issue that the HHS guidelines include 
scholarships as income. They expressed concern that individuals who may 
receive scholarship assistance based on need, but who are otherwise 
economically disadvantaged, would not be eligible for services if such 
assistance is counted as family income. In addition, they pointed out 
that the inclusion of such needs-based assistance would also impact the 
eligibility of another family member who would otherwise be eligible 
for services, regardless of whether the individual receiving such 
assistance applies for JTPA services. The Department finds merit in the 
comments and is amending the definition of ``family income'' to add 
``needs-based scholarship assistance'' to the exclusions from family 
income. To the extent that existing guidance has been interpreted to 
require the inclusion of needs-based scholarship assistance as family 
income, these regulations supersede any such guidance.
    A few of the commenters noted that the interim final rule appeared 
to indicate that only use of the poverty level applied in determining 
eligibility. This conflicts with section 4(8) of the Act, which 
indicates the use of the higher of the poverty level or 70 percent of 
the Lower Living Standard Income Level in determining economically 
disadvantaged status. The Department acknowledges that the preamble 
language could be misinterpreted. The reference to the use of the HHS 
poverty guidelines as the standard for determining economic 
disadvantage pertained to the use of the HHS guidelines to define 
family income, and not to indicate requirements different from those 
found at section 4(8) of the Act. The HHS guidelines, with the 
exceptions noted in the definition of family income, would be used to 
determine income, and that income figure would apply for the purposes 
of income eligibility determinations under section 4(8) of the Act.
    Of the several comments received on the term ``obligations'', most 
commenters were satisfied with the definition and asked that it not be 
changed. A few commenters wanted it changed as they believed that, as 
defined, very little, if any, funds would be reallotted or reallocated. 
No change is made to the definition, but the issue of reallotment is 
further treated in the discussion of Sec. 627.410.
    One commenter pointed out that the term ``service provider'' was 
defined by statute in section 301(b)(3) of the Act. The definition in 
these regulations is amended to conform to the statutory definition.
    The definition of ``stand-in costs'' is revised, along with the 
regulation at Sec. 627.480(f) (which had been paragraph (g) in the 
interim final regulation), so that both provide the same criteria as to 
the time when such costs were incurred and the cost category to which 
they are chargeable.
    Several other comments were received on the definition of 
``vendor'', most of which generally fell into two groups. One group 
encouraged referencing the definition of this term contained in the 
Office of Management and Budget (OMB) Circulars A-128 and A-133. The 
other group requested more clarification or examples. A few commenters 
raised questions of whether vendor goods or services could be 
customized, or the extent to which they could be altered, and still 
meet the vendor definition.
    The Department is applying the standard Federal Government-wide 
description of the term ``vendor'', as it already exists in the audit 
requirements and related literature of OMB Circulars A-128 and A-133. 
However, A-128 does not contain a definition of the term ``vendor'' and 
the A-133 definition appears to limit the term to providers of 
administrative goods and services. For those reasons, and, as explained 
in the preamble to the interim final rule, the Department draws upon 
the Questions and Answers developed by the President's Council on 
Integrity and Efficiency (PCIE) and OMB for its definition. The PCIE 
document carries the vendor definition beyond administrative goods and 
services and provides examples.
    With regard to the question on whether vendor goods or services 
could be customized or modified, the Department believes that the 
package may be modified to meet JTPA requirements if the vendor 
modifies its goods or services for other customers and if it remains 
substantially the same as those goods or services regularly offered. An 
indication of whether vendor goods or services are substantially the 
same as those regularly offered is whether the price does not increase 
when it is modified. No change is made to the definition in the final 
rule.

The Major Changes in Part 627--General Provisions Governing Programs 
Under Titles I, II, and III of the Act are as follows

Subpart B--Program Requirements

Governor/Secretary Agreement
    Section 627.200 was amended in the interim final rule to require 
that guidelines, interpretations, and definitions adopted by the 
Governor be published. A few commenters raised the question of what 
constituted ``published''.
    The word ``published'' is removed in the final rule and the word 
``issued'' is substituted. Also, language is added to indicate that 
such guidelines, interpretations, and definitions adopted by the 
Governor are to be those that actually have been imposed or utilized, 
consistent with section 124 of the Act. The word ``issued'' is used to 
better reflect the purpose of the requirement that the guidelines, 
interpretations and definitions on which the Governor relies are to be 
made public prior to their effective date and to assure that they are 
actually being used in the administration of the JTPA programs. How the 
Governor chooses to inform the public may vary and may depend upon the 
nature of the action. It may include means such as issuance of written 
directives or letters, inclusion in an electronic network or bulletin 
board, publishing in a newspaper, or other public announcement in which 
the effective date is indicated.
Waivers
    In the interim final rule, the Department requested comments on the 
feasibility of authorizing waivers to the JTPA regulatory requirements. 
Recently, it has been suggested that some of the administrative burden 
or unintended effect of regulatory requirements may be reduced through 
the granting of waivers--specifically waivers of regulatory 
requirements. This was recommended in the recent report of the National 
Performance Review, ``Creating a Government That Works Better and Costs 
Less.'' The Department believes that there is merit in this concept and 
incorporates a waiver provision in these regulations. Therefore, a new 
Sec. 627.201 is added which permits the Governor to request, and the 
Secretary to approve, waivers of the regulations for up to four years. 
The request from the Governor must be consistent with the provisions of 
the Act and demonstrate how the waiver will meet one of the criteria 
listed in the regulation.
    Absent specific statutory authorization, the Secretary has no 
authority to waive statutory requirements. The Secretary may, however, 
waive provisions of the regulations which expand upon, interpret or 
explicate statutory requirements. The new regulation is intended to 
permit waivers of any regulatory provision as long as the waiver does 
not affect the basic statutory requirements and if it is shown that the 
waiver will improve services, increase skill or educational attainment, 
promote coordination or substantially improve the job placement 
outcomes of the JTPA program. For example, a State may seek a waiver of 
the 25% disregard for social security income for older workers since 
that rule is not mandated by the Act. To obtain such a waiver, a state 
would have to demonstrate that it would not reduce services to those 
most in need. On the other hand, a state could not obtain a waiver of 
the regulatory prohibition on using JTPA funds to support employment 
generating activities since that regulation simply repeats a clear 
statutory requirement. In a more complicated situation, a state could 
request a waiver of some of the detailed requirements of the 
procurement regulation (Sec. 617.420) if those requirements conflicted 
with its own procurement system. In order to obtain such a waiver, 
however, the state would have to show that its system adequately 
addresses all of the minimum requirements listed in section 164(a)(3) 
of the Act and that it would promote coordination with other programs 
or would result in either better quality services or better employment 
outcomes if the same procurement system were used by those programs.
    The Department assumes that the States and SDA's/SSG's are more 
aware than is DOL of what waivers they may need. Thus, the Department 
does not intend to provide immediate general guidance on what waivers 
may or may not be requested. As the Department determines which waiver 
requests it will grant and which waivers lead to greater coordination 
or better program results, guidance will be issued to enable the JTPA 
system to better understand the waiver process and to learn about what 
practices work.
Public Service Employment Prohibition
    No comments were received on this section. Section 627.205 remains 
unchanged, except for extending the public service employment 
prohibition to include title II-C funds.
Nondiscrimination and Equal Opportunity
    The JTPA Amendments amended section 167 of the Act to require that 
the Secretary issue final regulations which would clarify the 
application of the nondiscrimination and equal opportunity provisions 
of the JTPA and provide uniform procedures for implementing these 
provisions. On January 15, 1993, the Directorate of Civil Rights (the 
DOL agency responsible for enforcing the various Federal 
nondiscrimination and equal opportunity statutes applicable to 
federally assisted programs) promulgated a final rule to implement the 
nondiscrimination and equal opportunity requirements of the JTPA (29 
CFR part 34; 58 FR 4742). Throughout these final regulations, all of 
the Department's nondiscrimination and equal opportunity regulations 
(29 CFR parts 31, 32, and 34) are cited since they are all applicable 
to JTPA federally assisted programs. In order to eliminate the burden 
of complying with overlapping regulatory requirements, 29 CFR part 34 
provides that compliance by JTPA recipients with part 34 constitutes 
compliance with the Department's Civil Rights Act of 1964, title VI 
regulations (29 CFR part 31) and with specified portions of the 
Department's Rehabilitation Act section 504 federally assisted program 
regulations. 29 CFR part 32, subparts A, C, and E.
    A few commenters, in connection with Sec. 627.210(a)(3), questioned 
the cost category to which expenses for ``accessibility'' and 
``reasonable accommodation'' should be charged. This matter is treated 
in the discussion of Sec. 627.440, Cost classification. In addition, a 
commenter noted that this provision of the regulations should not be 
construed to otherwise relieve a recipient or subrecipient from their 
responsibility under the law to provide for ``accessibility and 
``reasonable accommodation''. The Department agrees and the final rule 
is modified to indicate that the provision applies only with regard to 
needs for the JTPA program.
Relocation
    Section 141(c) of the Act was revised substantially to prohibit the 
use, or proposal for use, of JTPA funds to induce or to encourage the 
relocation of a company when such relocation results in the loss of 
employment of any employee of the company at the original site. That 
section also prohibits certain assistance to any relocating company for 
the first 120 days after the company commences operations at the new or 
expanded location, if the relocation results in an employee's job loss 
at the original site. If the Secretary finds that the State, SDA, or 
substate grantee (SSG) has violated either provision, fines are levied 
equal to twice the amount of funds expended. If the State, SDA, or SSG 
demonstrates that it neither knew nor reasonably could have known 
(after an inquiry undertaken with due diligence) that the funds it 
provided were expended in violation of these provisions, then only the 
amount expended is repaid.
    Some commenters questioned whether these provisions prevent SDA's/
SSG's from placing participants in certain job openings for a set 
period of time. The Department believes that they do under 
circumstances in which there are job losses in other geographic areas 
or in which workers are laid off or experience periods of unemployment. 
By clarifying and standardizing terms, as well as setting the 
prohibition on assistance at 120 days, the Act systematizes the 
administration of this prohibition on relocation. Most of the comments 
on the interim final rule pertaining to these provisions focused on the 
need for clarification of terms such as ``labor market area'', ``loss 
of employment'', ``commercial operations'', ``pre-award review'', 
``induce'' or ``encourage'', and on the extent of an SDA's due 
diligence and local liability.
    Section 627.215(c) defines a ``relocating establishment'' as a 
business entity moving operations ``from a facility in one labor market 
area within the United States and its territories to a new or expanding 
facility in another labor market area.'' Commenters pointed out that 
some rural labor market areas may encompass vast areas and several 
counties. Section 4(13) of the Act provides a definition of ``labor 
market area'' as ``an economically integrated geographic area within 
which individuals can reside and find employment within a reasonable 
distance or can readily change employment without changing their place 
of residence. Such areas shall be identified in accordance with 
criteria used by the Bureau of Labor Statistics of the Department of 
Labor in defining such areas or similar criteria established by a 
Governor.'' The key to the Act's definition is that the labor market 
area be ``an economically integrated geographic area'' where an 
individual can change his or her employment without changing his or her 
place of residence. Thus, for purposes of this relocation provision, a 
large rural SDA could contain more than one labor market area.
    Several commenters asked for a clarification of ``loss of 
employment''. One stated that when employees at the original location 
do not accept relocation job offers and then are laid off, ``loss of 
employment'' has not occurred. The Department believes that, in such a 
situation, loss of employment is presumed when a person no longer has a 
job with the company at the original location or with any other entity 
because of the relocation and the loss of employment at that location 
would not otherwise have occurred. This does not include those who 
would have retired or quit regardless of the relocation, or those who 
were fired for cause.
    Several commenters requested further guidance on commencement (or 
expansion) of commercial operations. The Department added the term 
``commercial'' to the regulations to be consistent with the statutory 
intent that a viable prohibition on JTPA assistance in the day-to-day 
production of goods and services be observed. The term ``commercial'' 
operations is intended to further distinguish between the construction 
and operation stage of a business, as well as to demarcate the stage 
when products are being produced for commercial distribution.
    Similarly, a number of commenters asked whether ongoing JTPA 
contracts with a company must be stopped or interrupted when the 
company relocates work from another facility. The Department believes 
any such contracts with the business within the SDA to which the 
company has relocated must be ended for the duration of the time work 
is being relocated, since ongoing JTPA assistance was not meant to 
accommodate business needs which are the result of work relocation from 
another facility.
    Additional clarification was also requested on the treatment of 
relocation scenarios where large retail store chains close down some 
sites sequentially and then open others in widely dispersed locations. 
The Department believes that the Act only applies to such cases where a 
company closes a retail store in one location in order to move that 
retail store's business to another location.
    Section 627.215(d) requires a pre-award review to be completed to 
document compliance with section 141(c) of the Act. Several commenters 
asked for clarification, and one recommended that the States be 
responsible for developing the standardized pre-award format. Others 
voiced concern about whether SDA's should be held liable if relocation 
occurred despite pre-award assurances to the contrary; several stated 
that a properly completed pre-award review should prove due diligence 
on the part of the SDA and that sanctions otherwise are unduly harsh. 
The Department believes that these reviews are for the protection of 
the State and the SDA/SSG. Section 627.215(d) is revised to provide 
additional guidance for States and SDA's in developing standardized 
pre-award review procedures and to indicate items which should be 
included in a review. Information should include the names under which 
the facility does business, including successors-in-interest, the name, 
title, and address of the employer supplying the information; the name 
and address of the facility in the other geographic area which is being 
closed or from which business is being transferred; the nature of the 
products or business being transferred to the new location; the date 
the facility will commence or expand operations; and a statement from 
the employer about job losses at the old location. The SDA also should 
check with the former location to verify the employer's statements 
about job loss. The Department believes that a review based upon the 
suggestions in the regulations is evidence of due diligence, but does 
not hold the SDA harmless when it is subsequently shown that the 
statute was violated because the Act provides that the Secretary shall 
require repayment.
    It is important to note that assistance to relocating businesses is 
not an entitlement. Once the State complies with the minimum 
requirements set out in these regulations, it may be more restrictive 
in its assessment of the company's situation or its determination of 
policy regarding relocating employers.
    One commenter stressed the importance of monitoring to ensure the 
use of consistent pre-award reviews and also recommended that the SDA/
SSG consult with all affected parties, including union representatives 
at the original and relocated site if relocation is indicated and JTPA 
assistance is sought. Although not required by the regulations, the 
State should consider incorporating such procedures in its guidelines 
for the pre-award review. Before engaging in negotiations with any 
company interested in moving to the area which seeks future JTPA 
assistance, the SDA/SSG should initiate a pre-award review.
    Finally, a few commenters asked what constituted ``inducement'' or 
``encouragement'' to a company to relocate. The Act provides that 
``[N]o funds provided under this Act shall be used or proposed for use 
to encourage or induce the relocation, of an establishment or a part 
thereof, that results in a loss of employment for any employee of such 
establishment at the original location.'' Thus, JTPA funds cannot be 
used in any manner for this purpose. Similarly, JTPA funds cannot be 
used under the prohibitions concerning employment generating activities 
(Section 141(q)). One commenter asked whether written material 
containing a general description of JTPA programs could be distributed 
to the local Chamber of Commerce. The Department does not believe that 
providing material to a Chamber of Commerce which provides a general 
description of JTPA programs would fall within the prohibition of the 
Act unless the purpose of the material were to induce or encourage 
relocation. This regulation is not intended to affect what the Chamber 
of Commerce does, as long as JTPA funds are not used.

Guidance on the Issue of Duplicate and Overlapping Payments Among 
Federal, State, and Local Programs, Including Pell Grants

    Section 627.220 clarifies the interpretation of sections 107(b) and 
141(b) of the Act. This section also highlights the importance of 
coordination with programs under title IV of the Higher Education Act 
of 1965, as amended (HEA), in view of the new coordination provisions 
at sections 205 and 265 of the Act, which require SDA's to enhance the 
provision of services through coordination with other programs.
    The purpose of coordination requirements is to preclude duplicate 
or overlapping payments among Federal, State, and local programs to 
participants and training institutions and to ensure that the best mix 
of programs and funds is available to the JTPA participant. 
Accordingly, Sec. 627.220 assigns responsibility to the SDA's to 
coordinate the sharing of information that affects JTPA-funded programs 
with the school's financial aid officer, provides for contractual 
safeguards to prevent duplication or overlap of services and funding 
among programs, and emphasizes the requirement for assessing the JTPA 
participant's financial needs and available resources as part of the 
individual service strategy (ISS). These matters will also be addressed 
through technical assistance and guidance jointly developed between DOL 
and U.S. Department of Education officials in order to guide both 
systems in the development of constructive working relationships.
    Comments were submitted on a number of issues addressed in this 
section. The issue of whether JTPA funds should pay for tuition or 
supportive services in coordination with other payment programs was 
raised by some who recommended that clearer instructions be provided. 
The exact mix of funds should be determined according to the 
availability of each funding source for either training costs or 
supportive services, with the goal of making the program affordable and 
enabling the participant to successfully complete it.
    In addition, commenters were concerned about the complexity of 
procedures needed to ensure compliance with sections 107(b) and 141(b) 
of the Act. The Department agrees with the need to streamline 
procedures. Accordingly, Sec. 627.220 is revised to reflect the 
following changes: Sec. 627.220(b)(2) is deleted, and 
Sec. 627.220(b)(1) now directs the SDA to assist the participant early 
in the objective assessment, as appropriate, to establish eligibility 
for HEA, title IV financial assistance programs. In addition, 
Sec. 627.220(b)(4) now emphasizes that participants may, but are not 
required to, apply for or access student loans or incur personal debt 
as a condition of JTPA participation. While the use of student loans to 
finance training or education is not prohibited and may be explored in 
the assessment process, loans should only be used if the participant 
agrees and is made fully aware of the responsibilities that the loan 
entails. Participation in a JTPA program may not be conditioned on 
applying for or using a loan. Finally, Sec. 627.220(b)(4) clarifies the 
need for information sharing which must take place for any financial 
aid awarded after the participant enrolls in an agreed-upon program.
    The discussion of HEA student assistance programs in this provision 
raised a concern that title II participants may be required to access 
loans. The Department wishes to stress that this is not the case. 
Section 627.220(b)(4) emphasizes the importance of matching the 
participant with an affordable program. As a general consideration, 
individuals should not be required to incur debts as a condition of 
participating in JTPA programs. Indeed, better identification and 
coordination of funding sources and improved evaluation of the 
participant's ability to complete a program successfully as part of the 
ISS should address the need for personal indebtedness to finance JTPA 
participation. Thus, Sec. 627.220(a) should not be construed to mean 
that loans must be considered resources for the purposes of this 
regulation.
    The reason for including HEA, title IV student loans in the 
information-sharing requirements is that in the past, some JTPA 
participants have been required or encouraged to take out loans to pay 
for their training without the knowledge of the SDA's. However, the new 
requirements for objective assessments and developing ISS's for 
participants mean that SDA's must take responsibility for evaluating 
and documenting the participant's financial needs and coordinated 
ability to pay for an agreed-upon training program before he/she 
enrolls in the program.
    In fact, several commenters stressed the importance of evaluating 
all potential HEA funding sources as part of the development of the ISS 
and that these funding sources be identified and applied for while the 
ISS is being developed. See Sec. 627.220(b)(2).
    Since federal Pell Grant eligibility can be established before a 
student enrolls and a Pell Grant can be used at any participating 
institution that an eligible student attends, SDA's and SSG's should 
expedite the application process by providing application forms to 
individuals and providing assistance, as necessary, in filling out and 
submitting these forms. Although a few commenters were concerned that 
undue delays in the provision of services might result, it is important 
to note that Pell Grant eligibility guidelines are readily available, 
as is the application form for establishing eligibility, and the 
financial information required to complete the application is already 
required to ascertain eligibility for JTPA programs. Furthermore, the 
Department of Education makes funds available to participating schools 
before the start of the school year to pay eligible students. These 
funds can be accessed as soon as eligibility is documented, the cost of 
attendance (COA) is calculated, and enrollment occurs. Although a few 
commenters suggested that establishing Pell Grant eligibility might 
represent an administrative burden, the sequence described herein in 
fact streamlines the funding decision process for the JTPA delivery 
system and permits coordination of funding sources in the context of 
the ISS.
    A number of comments questioned a perceived inconsistency between 
Department of Education and Department of Labor guidance on whether HEA 
title IV or JTPA funds must be used first. The Department does not 
think there is any conflict with Department of Education regulations 
with regard to coordinating with JTPA funding decisions for tuition 
payments because of the flexibility in the use of the Pell Grant for 
tuition or other education related expenses. These JTPA regulations 
only require that, when a Pell Grant is awarded to a JTPA participant, 
JTPA funds cannot be expended on costs that already have been paid by 
federal Pell Grant funds.
    One commenter questioned the need for including the participant's 
agreement to the disposition of the Pell Grant in the contract with the 
school, since it is understood that the participant will sign off on 
the ISS, which includes information to be shared. Another commenter 
raised the issue of the Privacy Act as a reason why schools may not 
share information regarding JTPA participants with SDA's. To clarify 
the issue of participant agreement, the final rule includes the 
participant's agreement to the information-sharing process in 
Sec. 627.220(c).
    Strengthening monitoring provisions was the concern of a few 
commenters, who stated that requiring the school's financial aid 
officer to share financial information on JTPA participants with the 
SDA is key to following up on the participant's ISS and to coordinating 
JTPA funds with other sources of funding. The Department carefully 
considered comments which called for reduced coordination requirements 
but believes that information sharing agreements are necessary to 
ensure compliance with this section; however, the separate sharing of 
students' names may not be necessary since JTPA agreements with 
training institutions will include the names of participants for whom 
payments to the school are being made. Therefore, this requirement is 
removed from the final rule.
    Several commenters reported that schools are holding JTPA 
participants personally liable for payments withheld in accordance with 
the terms of performance-based contracts. Performance-based contracts 
(or any other agreements with service providers) must prohibit schools 
from holding the student liable for outstanding charges. Otherwise, the 
performance-based contract would be undercut because the incentive for 
the school to perform would be removed. This practice is prohibited by 
the U.S. Department of Education as described in the Federal Student 
Financial Aid Handbook, Pell Grant Section. Therefore, JTPA program 
operators should be aware that the use of certain contracting methods, 
particularly contracts for classroom-sized projects and fixed unit 
price, performance-based contracts, affects how educational 
institutions are permitted to calculate the COA, which determines the 
amount of the participant's Pell Grant. An institution can include a 
tuition and fee charge for calculating the federal Pell Grant COA only 
when contracts or agreements specify the tuition and fees (i.e., 
individual referrals), when there is a charge recorded to the student 
(when JTPA or another source pays the tuition and fee charge and the 
student would be required to pay these charges if they were not paid by 
JTPA or another source). Two types of JTPA agreements do not allow 
schools to include tuition and fees in the Pell COA or to make a charge 
to the student for these costs: (1) Blanket agreements that do not 
specify an individual amount to be paid by the SDA for tuition and fees 
but may include a number of students to be trained and an amount of 
compensation to be paid to the school; and (2) performance-based 
contracts (to the extent they are still used).

Employment Generating, Economic Development, and Other Activities

    Section 141(q) of the Act prohibits employment generating 
activities (EGA) with JTPA funds. Included in the prohibition are 
economic development activities, revolving loan funds, capitalization 
of businesses, contract bidding resource centers, and similar 
activities.
    Section 627.225(b) encourages SDA staff to work with economic 
development agencies and to participate on economic development boards 
and commissions to provide information about JTPA. Such participation 
may assist SDA staff in making informed decisions about community job 
training needs and the future direction of local JTPA training. In 
addition, the prohibition of EGA should not be taken to prohibit 
ordinary employer outreach and job development activities.
    Section 141(q) of the Act also includes a prohibition on foreign 
travel. A number of comments were received requesting that the 
prohibition in the interim final regulations on using title I, II, or 
III funds for foreign travel be narrowed. While the Department agrees 
that allowing foreign travel would be beneficial with the 
implementation of NAFTA, it was clearly the intent of the Act to 
restrict the use of funds for economic development and related 
activities. However, other foreign travel necessary to the conduct of 
JTPA program may be allowable; therefore, Sec. 627.225(a) is revised to 
clarify that the prohibition on foreign travel applies to economic 
development and related activities prohibited by the Act.
    A commenter was concerned that a prohibition on foreign travel 
would prohibit staff from Territorial or Freely Associated States 
recipients, such as American Samoa and Micronesia, from traveling to a 
State. While the narrower interpretation of prohibited foreign travel 
described above should resolve this, the Department wants to clarify 
that, under section 4(22), such recipients are considered States for 
JTPA purposes and as such, inter-recipient travel would not be 
considered foreign travel.
    Several commenters requested clarification about what cost 
categories the remaining allowable EGA should be charged. To clarify, 
there are no allowable employment generating activities available under 
JTPA. The allowable activities discussed in this section are otherwise 
authorized activities and should be charged to the category of benefit 
determined with guidance provided by the Governor.

Displacement

    The provisions in the regulations have not been substantially 
changed from the prior Sec. 629.4 and closely reflect the provisions of 
section 143(b) of the Act. No comments were made on this section and no 
changes are made.

General Program Requirements

    Section 627.235 of the interim final rule sets forth some general 
program requirements for the JTPA program, including specific reference 
to the provisions of sections 141, 142, and 143 of the Act, reference 
to the selective service requirements of the Act, continuation of the 
requirement for timely enrollment, and the new requirements of section 
124 of the Act regarding the imposition of State and SDA requirements.
    A few commenters suggested setting forth extensive procedures 
regarding the appropriate consultation and concurrence of organized 
labor. The Department believes that the provisions of the Act, though 
somewhat revised, are clear and that in most instances SDA's and others 
have developed procedures for ensuring that labor is consulted, as 
appropriate, in the development of training programs, and that the 
affected labor organization concurs in writing with training agreements 
when there is a collective bargaining agreement, even if it is not 
impaired. In the years since the inception of JTPA, this has not 
systematically emerged as an issue. Accordingly, the final rule is not 
changed.
    One commenter suggested that the only aliens who should be eligible 
for JTPA participation are permanent resident aliens. The commenter's 
reasoning is that to serve other aliens in the United States on a 
temporary basis would waste scarce JTPA resources. The 
nondiscrimination provisions of section 167 of the Act set forth the 
requirements for the participation of individuals who may not be 
citizens of the United States, including those who are not permanent 
resident aliens. The final rule is not changed.
    A commenter suggested that this section be revised to indicate that 
JTPA is not an entitlement program. The Department believes that the 
provisions of sections 204(c)(5), 264(d)(6) of the Act and Sec. 628.525 
of the interim final rule adequately address this subject by making it 
clear that neither eligibility nor participation in a JTPA program 
creates an entitlement to services. The final rule is not changed.
    Several commenters requested clarification of when the ``45-day 
clock'' in paragraph (c) begins for purposes of enrollment into JTPA, 
particularly in light of the new program requirements for targeting and 
assessment. The Department agrees that such guidance would be helpful 
and the final rule is changed to indicate that the clock begins with 
the date of eligibility determination.
    In connection with the requirements of paragraph (e), some 
commenters questioned the method for determining whether a requirement 
which is a rule, regulation, policy, or performance standard is imposed 
by a State or an SDA. This question is raised particularly when the Act 
or these regulations may require the Governor or SDA to develop such a 
requirement. In general, any requirement that is issued beyond the 
actual text of the Act or these regulations should be identified to the 
source (State or SDA) that issues it. This guidance applies only to 
requirements that are not specifically called for (i.e., ``the Governor 
shall'' or ``the SDA shall'') by the Act or these regulations. Note 
that, for these purposes, the term SDA as used here includes any entity 
empowered to act for the SDA including the grant recipient, 
administrative entity or the private industry council. See also the 
discussion of Sec. 627.200 above. The final rule is changed to indicate 
that it applies to State and SDA requirements that are in addition to 
those of the Act and regulations.

On-the-Job Training (OJT)
    Section 627.240 of the interim final regulations sets out 
requirements pertaining to the on-the-job training (OJT) activity 
authorized at sections 204(b), 253(a), 314(d) and in title IV of the 
Act. The interim final regulations dealt with a few broad areas related 
to OJT, such as the duration of OJT, OJT payments, contracts for OJT, 
employer and participant eligibility, as well as a definition of OJT. 
Many of the commenters observed that the requirements for OJT have 
become so burdensome as to make OJT no longer a viable JTPA training 
option. The 1992 Amendments made a number of changes in the 
requirements for OJT programs which are implemented in these 
regulations. These changes were aimed at eliminating perceived abuses 
in OJT programs. While it is true that these new requirements do limit 
some flexibility in operating OJT programs, the Department does not 
agree that the new requirements in any way make OJT a less desirable or 
feasible training option. Indeed, the Department believes that OJT is 
an important training vehicle for the JTPA program. As demonstrated by 
The National JTPA Study (December 1994) , OJT provided ``the most 
consistent positive program impacts on the earnings of adults * * *. 
Both women and men in this subgroup enjoyed large positive earnings 
gains that were statistically significant and sustained throughout the 
30-month follow-up period.'' The Department believes that entities 
which deliver OJT will find that these final regulations set forth only 
those requirements which are necessary to preserve the integrity of the 
OJT activity and to ensure that it remains an effective training tool.
    With regard to the definition of OJT in paragraph (a), it is 
essential to recognize that by using OJT, the JTPA system is purchasing 
occupational training needed by a participant--often training not 
elsewhere available, which is provided through employment that will 
usually continue with the employer after the training is completed. 
(Note the provisions of paragraph (a)(2) of the final rule regarding 
placement of OJT participants with other employers). The objective of 
OJT is not, as suggested by some commenters, to subsidize wages or to 
reduce an employer's wage costs, but to purchase training and to 
provide an opportunity for JTPA participants that they might not 
otherwise have. The contents of paragraph (a) are reorganized into 
three subordinate paragraphs for better clarity. Language is added in a 
new paragraph (a)(1) to clarify the definition of OJT by: (1) Making 
reference to the ISS as part of the process for determining whether an 
individual should be offered OJT, (2) making specific reference to the 
OJT agreement, and (3) making specific reference to the principle that 
the purpose of the OJT arrangement is to purchase training in exchange 
for reimbursement of the employer's extraordinary costs.
    By far the most prevalent comment on the interim final rule was 
that the Department needed to clarify the provisions relating to the 
limitations on the duration of OJT which were contained in paragraph 
(b) of the interim final rule. The final rule clarifies the durational 
rules for OJT. The basic rule is that OJT is to be for the length of 
time normally needed for training to acquire the skills needed to 
perform the occupation up to a 6-month length of training. OJT may not 
exceed that 6 month maximum training period except in cases in which 
the training is less than full time and the training period will exceed 
6 calendar months. In that case, OJT may not exceed 500 hours. To more 
clearly convey these rules, paragraph (b)(1) is broken into four 
subordinate paragraphs. Paragraph (b) is also reordered for greater 
clarity. Six months of training is defined as the amount of time an 
employee would work on a regular or full-time basis in the occupation 
for which the OJT contract is written in a 6 month period. If the 
training period is shorter, the training time is still considered to be 
the amount of time an employee would work on a regular or full-time 
basis for that period.
    Commenters observed that OJT contracts were usually written in 
terms of hours and wondered how this related to the 6-month limitation. 
The Department wishes to promote local discretion in developing OJT 
contracts; therefore, the regulations do not prescribe a particular 
time category by which SDA's designate the 6-month period, so long as 
the designation is consistent with the purpose of the statutory 
limitation. For example, the 6-month training period may be expressed 
in the number of hours (usually not more than 1,040 working hours), 
days (180 days), or weeks (26 weeks in 6 months) that an individual 
would work full-time in a 6-month period. Contracts for OJT which are 
expressed in any of these ways will be acceptable. In simplest terms, 
an OJT employee who enters employment on May 1 and works continuously 
on a full-time basis on the OJT occupation would complete 6 months of 
training on October 31. Whatever time category the SDA chooses to use 
to designate the duration of the OJT contract, it should treat any 
adjustments (such as those provided for in the discussion below) in the 
same terms, so if there is an adjustment for illness to a contract 
written in working hours, the adjustment will be made in working hours, 
not weeks or days.
    If the OJT period is interrupted for a full day or more by events 
beyond the OJT trainee's or the employer's control, such as holidays, 
illness, plant downtime, or strike, such time may be added to the 
original period. Thus, using the time period of the above example, if 
an OJT participant is in OJT to learn a machine operation but is ill 
for 10 working days (approximately 80 working hours, two working weeks, 
or one-half of a working month) the OJT period may end approximately 
November 11 through November 15 (instead of October 31) depending on 
how duration is designated in the contract. (The employer would not be 
reimbursed for the period in which the participant is not in the OJT 
occupation.) The objective of this rule is to assure that the 
participant receives the full period of training (up to 6 months) in 
the occupation for which the OJT contract is written. This rule, of 
course, applies only to time that a participant was scheduled to spend 
in the actual OJT activity. It does not apply to any of the 
participant's other activities, either in training or outside of their 
OJT employment.
    Several commenters expressed the concern that the regulations were 
too prescriptive in requiring OJT in higher skilled occupations. The 
language of Sec. 627.240(b)(2) of the interim final rule was merely 
intended to encourage the use of OJT in higher skilled occupations. 
Language is added to the redesignated Sec. 627.240(b)(5) to make this 
clear. Other commenters were concerned that the 6-month limitation was 
inconsistent with providing training in very high skilled occupations. 
The Department agrees that there are some higher skilled occupations 
for which OJT training may not be available because of the 6-month 
limitation. Nevertheless, that limitation is statutory and cannot be 
ignored. The Department believes that there are still a number of 
higher skilled occupations for which OJT is appropriate and that it is 
consistent with both the nature of OJT and with the intent of the Act 
that States and SDA's seek to use OJT to provide training in those 
kinds of occupations. Therefore, the language encouraging OJT in higher 
skilled occupations remains in the final regulation. The Department 
wishes to acknowledge several comments by noting that, while it 
encourages OJT in high-skilled occupations, this is not a strict 
requirement. Also, while OJT contracts may recognize training times 
that are longer than 6 months, JTPA reimbursement to the employer is 
limited to 6 training months.
    A number of commenters wanted to know how the 500 hour exception to 
the 6-month limitation works. First of all, it should be repeated that 
the overall limitation on the duration of OJT is 6 months, not 500 
hours. This exception will apply in only a limited number of 
situations, such as in the cases of individuals who are disabled, who 
have limited employment availability due to child-care or other needs, 
or who must work a limited or part-time schedule. The final rule makes 
it clear that individuals who have not received 500 hours of OJT within 
6 months may receive 499 hours of OJT, even if this results in OJT in 
excess of the 6-month duration. The 499 hour figure is used because it 
reflects the ``less than 500 hours'' language contained in the Act. For 
example, if an individual works for 15 hours a week and 6 months later 
has only been in training for about 360 hours (roughly 60 hours a month 
for 6 months), the participant could be continued in OJT for up to 
another 139 hours. The objective is to assure that participants who 
must work limited or part-time schedules receive up to 499 hours of 
OJT, in situations when up to 499 hours of training is appropriate.
    In response to a comment that the interim final rule unnecessarily 
requires that the regular training duration provided for in a standard 
reference be reflected in the participant's ISS, the final rule 
provides that the training time for OJT must be reflected in the ISS 
only when the training time varies from the average training time for 
the occupation, using the methodology adopted for computing training 
time. Thus, when greater or lesser OJT periods than those provided in 
standard reference works are necessary, the variation must be reflected 
in the participant's ISS.
    Several commenters noted that the language in paragraph (c)(1) of 
the interim final rule regarding employer payments is more restrictive 
than the provisions in the Act. In response to these comments, the 
final rule is revised to use the language of the Act, which provides 
that payments shall not average more than 50 percent of the wages paid 
by the employer to such participants. This change provides the SDA with 
some flexibility in structuring OJT contracts with an individual 
employer for multiple participants. Compliance with the statutory 
requirement is based upon the total allowable wage base (i.e., regular 
wages and scheduled increases reflected in the contract) for all JTPA 
participants. Additionally, in response to comments which questioned 
the wage basis for OJT reimbursement, the final rule clarifies in 
paragraph (c)(2)(ii), that OJT reimbursement may be based upon regular 
pay and scheduled increases, and not, as provided in paragraph 
(c)(2)(iii), on overtime, shift differential or other premium pay. The 
Department believes that regular pay and regular scheduled pay 
increases reflect the wages specified in the Act and that overtime and 
shift differential do not imply a greater level of training cost to the 
employer. Finally, to clarify a longstanding issue in regard to OJT, 
paragraph (c)(2)(iv) indicates that payments are not to be based on 
time when the participant is not in training such as on holidays. Such 
time may also be excluded from the calculation of the duration of OJT.
    Section 141(g)(1) of the Act provides that payments to employers 
``are deemed to be'' in compensation for the extraordinary costs 
associated with training JTPA participants. Section 141(g)(3)(A) of the 
Act provides that each contract ``specify the types and duration of on-
the-job training and other services to be provided in sufficient detail 
to allow for a fair analysis of the reasonableness of proposed costs * 
* *.'' This latter requirement was reflected in the interim final rule. 
Some commenters raised a question about the apparent conflict between 
these provisions, and the Department wishes to clarify this area. The 
final rule prohibits the imposition of a requirement on employers to 
document extraordinary costs. The Department believes that payments to 
employers should not produce a recordkeeping burden on employers by 
requiring the documentation of extraordinary costs that would 
unnecessarily make OJT a less desirable training option.
    The purpose of Sec. 627.240(d)(1) of the interim final rule was to 
reflect the requirements of section 141(g)(3) of the Act. It was not 
intended to require specific documentation of an employer's 
extraordinary costs. The Department views the final rule as requiring 
no more recordkeeping of an employer than is already required of the 
employer for other purposes, (e.g., an employer would have to maintain 
payroll records to demonstrate that a participant worked the number of 
hours that were billed, but payroll records are already required to be 
kept for a variety of other federal and state purposes). Rather, the 
Department believes that the intent of this requirement is that the 
contract accurately reflect the basis for the contract costs, including 
the number of participants, occupations, wage rates, training content 
and the duration of training, provisions for adjustment (such as 
scheduled wage increases), and the basis for any other payments (such 
as separately scheduled classroom training as described in paragraph 
(d)(4) of this section).
    The final rule is revised to clarify this requirement by removing 
the confusing language regarding the analysis of the reasonableness of 
costs and by reflecting the minimum criteria that will be necessary to 
make the reasonableness analysis.
    Several commenters thought that the requirements in paragraph 
(d)(2) that the OJT agreement provide information on the training by 
skill area or task was too prescriptive. These requirements have been 
removed in the final rule.
    In addition, in response to a comment seeking clarification of the 
meaning of ``types'' of OJT, this language is removed in the final rule 
to eliminate confusion. The idea behind this language was simply to 
capture other kinds of training, such as classroom training, that will 
be provided in the course of the OJT training period. The more specific 
language in the final rule will capture the same information. Finally, 
this discussion does not affect the requirements for broker contracts 
in which there is to be an adequate reflection of the work performed by 
the broker.
    Section 627.240(f) of the final rule provides that JTPA 
participants must be assessed and that OJT must be determined in the 
ISS to be a suitable training vehicle. This provision is also 
applicable if the participant is referred to JTPA by an employer. If 
the participant is determined not to be suitable for OJT or for the OJT 
slot available from the specific employer, the participant is not 
eligible for OJT with that employer.
    A commenter sought clarification of Sec. 627.240(f)(3) regarding 
OJT with a participant's previous employer, particularly in connection 
with ``upgrading''. This paragraph is intended to address a perceived 
abuse of the OJT activity in which the JTPA program provides OJT 
assistance to an employer to ``train'' a previous employee who had been 
laid off or separated when the proposed participant already has the 
skills required for the job. The training is in the same occupation for 
virtually or nearly the same work. In view of the limited availability 
of JTPA funds and services, individuals previously employed by or 
recently hired by the employer prior to referral to JTPA should not 
normally be enrolled in JTPA-funded OJT. In order to conduct skill 
``upgrading'', which is allowable under section 204(b)(1)(L) of the 
Act, and retraining, conditions for eligibility and participation must 
be met and there must be a demonstrable difference between the job and 
skill requirements of the upgraded job into which the participant is 
being trained and those of the current or prior job. The prohibition 
against using OJT for ``upgrading'' with the participant's employer is 
maintained in the final rule because the Department believes that the 
JTPA program should not unnecessarily subsidize an employer's normal 
workforce training expenses. Paragraph (f)(3) is revised to eliminate 
confusion about whether the rule was intended to address the 
participant's previous employer or the participant's current employer. 
The final rule makes it clear that the prohibition applies to both and 
that it applies only to OJT.
    Many commenters questioned the specific provisions of 
Sec. 627.240(g)(1) of the interim final regulations which require that 
an OJT ``employer who had two or more previous OJT contracts'' and 
exhibited a pattern of failing to provide long term employment would be 
ineligible for other OJT contracts. They pointed out that it is not 
possible to establish a ``pattern'' with two cases. In response to 
these comments, the final rule is revised to reflect Congress' intent 
that employers who fail to offer continued employment, unless there is 
an acceptable reason, should not receive additional OJT contracts and 
that the State must issue procedures to implement this requirement. The 
JTPA program should not be used to underwrite an employer's labor 
turnover. The Department points out that the provision in the interim 
final rule specified two contracts because, by definition, to have a 
pattern there must be more than one. The Department accepts that there 
may be instances in which a policy may use as few as two contracts, or 
more than two, to establish a pattern and will accept reasonable 
interpretations of what constitutes a pattern. The Department chooses 
not to specify what constitutes a pattern and leaves that decision to 
the State. In the final rule, Sec. 627.240(g) is redesignated 
Sec. 627.240(h).
    A number of commenters objected to the provisions in the interim 
final rule that required on-site monitoring of each OJT contract and 
on-site monitoring by an OJT brokering contractor before making 
payments. The Department acknowledges these concerns and revises these 
monitoring requirements. The final rule removes the prescriptive 
requirements for monitoring each contract and specifies that recipients 
and subrecipients are required to conduct periodic on-site monitoring 
of OJT employers. The requirements pertaining to the areas to be 
verified through monitoring remain the same. In addition, the 
monitoring requirements for brokering OJT contractors remain the same 
since they are requirements of the Act.
    In response to several comments which argued in favor of providing 
OJT through employment agencies, the final rule also provides a 
clarification of the conditions under which employment agencies and 
employee leasing agencies may be eligible for OJT agreements. The 
purpose of OJT is to provide training through an employer, not to 
subsidize wages or reduce agency costs. Thus, the final rule indicates 
that OJT agreements with employment and employee leasing agencies are 
to specify the employer that provides the training and the entity to be 
reimbursed the costs of training. Note that the word ``temporary'' is 
deleted from the rule since the term ``employment agency'' includes 
agencies that may arrange employment on less than a full-time basis.
Work Experience

    The provisions of Sec. 627.245 of the interim final rule set forth 
requirements pertaining to work experience. The work experience 
activity is related to other activities in which there is work-based 
training, such as entry employment experience and limited internships, 
but the activities may differ due to the circumstances of the work 
experience assignment. Such circumstances could include whether the 
participant is an adult or a youth, whether the host employer is 
public, private non-profit, or private for-profit, whether an employer-
employee relationship is established, and whether there is an 
expectation of continued employment, or whether the activity is a 
short-term training opportunity. For example, entry employment 
experience and limited internship in the private sector are not 
allowable activities for adults. ``Work experience'' is available only 
in the public or private non-profit sector. The Department acknowledges 
the relationship among these activities but chooses not to provide 
specific definitions beyond that for work experience so as not to 
arbitrarily limit development of types of work-based training 
activities. The Department wishes to encourage a variety of approaches 
to these activities. For that reason, Sec. 627.245(a) is revised by 
deleting the reference to limited internships and entry employment 
experience.
    The definition of work experience clarifies that work experience is 
primarily a training, not an employment, assignment. The words 
``employing agency'' are removed from the interim final rule to address 
the concern that work experience automatically establishes an 
employment relationship.
    A few commenters noted that the provisions of paragraph (b) of the 
interim final rule that dealt with the types of individuals for which 
work experience would be ``suitable'' did not adequately reflect the 
circumstances under which it would be appropriate to use work 
experience. The final rule is revised to delete this characterization 
of the individuals for whom work experience is appropriate. The 
paragraph now only states how work experience is to be designed.
    In response to comments criticizing the limitations on the duration 
of work experience, entry employment experience, and limited 
internships, the Department has decided to remove the limitations. The 
Department believes that this change will permit the development of 
activities that may better meet the individual needs of participants 
and the final rule indicates that this should be reflected in the ISS. 
The Department expects that discrete periods of work experience 
participation will be limited in duration; although, in response to 
comments and in recognition of successful program models, the 
Department acknowledges that an individual may benefit from 
participation in multiple work experience opportunities.
    Many commenters asked for removal or revision of the provision that 
work experience is suitable for individuals who have been ``out of the 
labor force for an extended period of time * * *.'' They pointed out 
that this is difficult to interpret, may vary depending on the previous 
experience and other characteristics of the participant, and is the 
kind of provision that could unnecessarily lead to varying 
interpretations and audit exceptions. The final regulations provide 
only that work experience should promote the development of good work 
habits and basic work skills. In addition, it is the Department's 
belief that the work experience activity provides an excellent 
opportunity to provide non-traditional employment opportunities, in a 
variety of settings, for women and youth.
    Several commenters suggested that the prohibition of work 
experience in title III be removed or revised. Since title III 
dislocated workers generally have, by definition, previous employment 
under which work habits and basic work skills are developed, the 
provision in the interim final rule is not revised.
    Finally, a few commenters asked for clarification of the 
requirement that work experience be combined with basic or occupational 
skills training--particularly in light of one of the examples provided 
in Sec. 628.535. This is addressed in the discussion of Sec. 628.535, 
but by way of general guidance, the prohibition may not be addressed by 
combining work experience with any of the other proscribed stand-alone 
activities such as job search or job club.

Subpart C--Payments, Supportive Services, Benefits, and Working 
Conditions

    A number of comments were received on Subpart C of the interim 
final rule, Payments, Benefits and Working Conditions. The Department 
has rethought its positions in response to these comments and the final 
rule contains a considerable number of changes. Subpart C is revised, 
retitled, and renumbered. The following discussion is intended to 
clarify the Department's position on payments and supportive services 
and identifies the changes from the interim final to the final 
regulations. In keeping with the Amendments' emphasis on targeting 
services to the hardest-to-serve and the need for longer-term 
interventions, these regulations clarify the widened array of payments, 
supportive services, benefits and working conditions available or 
required under the Amendments.
    The Amendments provide for comprehensive supportive services and 
for their allocation to the training-related and supportive service 
cost category. The regulations implement these provisions and also 
provide for clarification of the various types of payments for title II 
programs. Some payments can be allocated to the training-related and 
supportive services cost category while others can be allocated to the 
training cost category. The treatment of specific expenditures is 
provided for at Sec. 627.440 of these regulations.
Service Strategy Overview
    A number of commenters expressed confusion regarding appropriate 
documentation procedures and requested clarification on the 
requirements and the mechanisms for providing payments and supportive 
services to participants. Several commenters suggested that while the 
legislation clearly intended to increase supportive services and 
payments, the requirements in the interim final regulations would 
probably limit their usage. In response, the final rule is revised to 
minimize the amount of documentation necessary to establish an 
individual's need for supportive services and payments while 
maintaining the necessary safeguards to prevent misuse of program 
funds.
    The final rule is revised to permit a simplified service strategy. 
For example, under title II, it is intended that a participant, based 
upon the needs identified in the objective assessment and recorded in 
the ISS, will be provided or the program will arrange for the necessary 
payments and supportive services to enable the participant to meet the 
goals set out in the ISS. The necessary payments and supportive 
services may be provided or paid for in different ways. For example, 
participants may receive a payment from a training activity, such as an 
employer-paid wage for OJT, or work-based training payment for work 
experience which may be counted toward meeting their needs in addition 
to other supportive services like child care. Participants may also 
receive supportive services, such as financial assistance under title 
II that will provide for the participant's general welfare. If the 
participant has additional specific needs not met by the supportive 
services, including a need for financial assistance, title II further 
provides for an individually determined needs-based payment may be made 
to the participant.
    The final regulation provides for significantly different 
documentation requirements than did the interim final rule. An 
individual determination of need, over and above what normally occurs 
in the objective assessment and ISS, is not required to justify the 
provision of any supportive service. When a participant is given money 
rather than a voucher for a supportive service, SDA's and SSG's need 
not ensure that the payment is exactly equal to the participant's 
expenditure. The policy of the SDA or SSG may allow for a fixed 
reimbursement or a schedule of different reimbursement amounts for a 
type of service, however, the policy must provide the rationale for 
such amounts. Under title II, if the objective assessment and the ISS 
indicate that a needs-based payment is also necessary, then that 
determination will be sufficient to make the payment. A payment may 
then be made in accordance with a locally developed policy and recorded 
in the ISS along with the other services provided. Changes to reflect 
this strategy are made throughout Secs. 627.305 and 627.310 of the 
final rule.
    Shifting to more specific recommendations, in response to comments 
that the supportive services section be separated from the benefits and 
working conditions section, the supportive services regulations are now 
found under Sec. 627.310, while benefits and working conditions are now 
addressed under a new Sec. 627.315. Section 627.300 and the title of 
subpart C are also amended to clarify these changes.
    A comment was received regarding the ability to ensure that 
services were provided equitably. This concern is heightened with the 
reduction in documentation required when providing supportive services 
and payments. Therefore, a new provision is added at 
Secs. 627.305(a)(3) and 627.310(d) requiring that SDA's ensure, to the 
extent possible, that similarly situated participants receive similar 
payments or supportive services, as appropriate.
Payments
    A few commenters requested clarification on when payments shall 
count towards the determination of income for other programs that serve 
JTPA participants. To clarify, language from section 142(b) of the Act 
is now included in Sec. 627.305(a)(4). Any payment under JTPA, broadly 
defined for this section as any JTPA funds received by a participant 
except OJT wages (since OJT wages are paid by an employer), shall not 
be counted for purposes of determining income for other Federal or 
federally assisted programs, except as provided under the Social 
Security Act. For example, the Department of Housing and Urban 
Development has issued a policy notice (PIH 92-48, October 16, 1992) 
which states, ``[A]ll payments received under programs funded in whole 
or part under the Job Training Partnership Act are excluded from Annual 
Income'' for purposes of Public and Indian Housing. The major exception 
to disregarding JTPA income is under title IV-A of the Social Security 
Act which governs Aid to Families with Dependent Children (AFDC). The 
AFDC regulations do allow States flexibility in allowing a dependent 
child's JTPA income to be disregarded as income for AFDC purposes (45 
CFR 233.20(a)(11)), but generally, any JTPA payment to an adult AFDC 
recipient, except to cover the cost of child care, transportation, 
work-related expenses or work-related services, is counted as earned 
income. States are encouraged to work with their welfare departments in 
developing State policies specifically for JTPA. SDA's also are 
encouraged to coordinate with their local AFDC agency to determine 
local policies on income disregards and to consider co-enrollment with 
JOBS, where appropriate, so that the participant may be aware of all 
available services.
    Section 627.305(a) is revised to include a new paragraph (a)(6) 
which authorizes SDA's to set fixed levels for payments. Section 
627.305(b) is amended by replacing the words ``formula or procedure'' 
with the word ``policy''. These changes permit SDA's to make needs-
related payments based on a payment schedule without any other 
documentation than that used to develop or support the schedule. Only 
in cases in which a participant's needs exceed the payments available 
under the payment schedule is any other documentation or justification 
necessary. The change in the wording of Sec. 627.305(b) also is 
intended to make it clear that there are no extraordinary documentation 
requirements to support the SDA's system for payments above its payment 
schedule. All that is needed is a reasonable policy based on the 
circumstances of the local community.
    Needs-based payments. Needs-based payments may be made in 
circumstances where fixed or scheduled supportive services fail to meet 
the needs of an individual to participate. For example, if a standard 
transportation reimbursement is $2 a day for participants, but a 
particular participant must spend $10 a day to commute to a training 
program, this need would be identified in the objective assessment and 
recorded in the ISS. Then a needs-based payment of $8 could be made to 
meet that participant's transportation needs. No additional 
documentation other than the transportation need identified in the 
objective assessment and recorded in the ISS is required for the 
initial $2. However, a specific notation of the additional need would 
be identified in the objective assessment and recorded in the ISS for 
the $8 needs-based payment. While this payment should be the amount 
``necessary for participation,'' it also may be a scheduled or fixed 
amount (see the discussion of supportive services, below, for an 
additional discussion on ``scheduled'' or ``fixed amount''), as 
provided for in the SDA policy.
    Incentive and bonus payments. A number of comments were received 
requesting that the ability to use incentive and bonus payments not be 
limited to title II-C. Several commenters indicated they would prefer 
to use incentive and bonus payments rather than a wage or training 
payment to encourage participant performance. Since it is important to 
have tools to reward participant accomplishment, and incentive and 
bonus payments are not prohibited in those titles, the final rule is 
amended to clarify that incentive and bonus payments also may be made 
to participants under titles II-A and II-B.
    Approximately equal numbers of comments were received requesting 
that Sec. 627.305(c) require that incentive and bonus payments be based 
upon attendance and performance as there were comments requesting 
attendance or performance. Several commenters thought that teaching 
life skills, such as good attendance, is an appropriate function of 
JTPA and should be rewardable. Because section 264(c)(2)(D) of the Act 
uses the word ``and'', the final regulation is revised to reflect the 
statutory language. Payments are to be reasonable and commensurate with 
the behavior being rewarded. The policy for such a payment is to be 
included in the SDA job training plan, which is approved by the 
Governor. The provisions of paragraph (c) are amended in the final rule 
by removing paragraphs (c) (2) through (4), to reflect the 
simplification of this topic.
    Training payments. To permit longer term participation, 
Sec. 627.305(d) provides for training payments to be paid for certain 
title II activities, such as work experience and limited internships. 
Section 627.305(e) provides for training payments for participation in 
other activities, such as classroom training, if the concurrent work-
related activity is for more than 50 percent of the training time.
    Several commenters indicated that the work-based training 
requirement for adults in classroom training combined with work 
experience at interim final Sec. 627.305(e)(2) may not always be 
appropriate and was redundant with regard to the requirements of 
section 204(c)(1) of the Act on workplace context and integration. 
Therefore, the Department encourages SDA's to link classroom training 
to the work-based training activity, but the condition for making such 
payments to adults that the classroom training have a workplace context 
is removed.
    The term ``wage'' is replaced with ``training payment'' or 
``training payment for combined activity'' to reflect the rare 
circumstances when a participant may not be in an employee-employer 
relationship as defined by the Internal Revenue Service, and also to 
make clear that the SDA may not be required to make a payment equal to 
the minimum wage. The minimum wage requirement still exists where 
participants are receiving wages as outlined in section 142 of the Act. 
The Department believes that payments in most work-based training 
activities should be equal to or exceed the minimum wage to better 
approximate a work setting. With the exclusion of on-the-job training 
and disaster relief employment, this change from ``wage'' to 
``payment'' runs through the entire payments section.
    Supportive Services. Supportive services are often critical in 
serving those most in need. The use of supportive services is 
encouraged to enable the hard-to-serve population to participate in 
longer term interventions. The objective assessment and, under title 
II, the ISS, is the basis for determination of need for a particular 
supportive service. The major change in Sec. 627.310 is that further 
documentation of need is not required. Supportive services may be 
provided in-kind, through cash assistance, or by arrangement with 
another human service agency when necessary to enable an individual 
eligible for JTPA training, but who cannot afford to pay for such 
services, to participate in JTPA-assisted programs. Several commenters 
indicated that the administrative determination and documentation of 
participants' actual cost, for example, of lunch or transportation, was 
unduly burdensome. Given the generally narrow variance in cost for 
those services, most stated that a single dollar amount, or a schedule 
of dollar amounts, would be equally prudent. The Department agrees that 
such a method is acceptable and should be outlined in the supportive 
services policy of the SDA or SSG. To reduce its administrative burden, 
an SDA or SSG may set fixed levels of benefit for particular supportive 
services; e.g., an SDA or SSG may reimburse participants who incurred 
transportation expenses with identical payments, regardless of actual 
cost to an individual participant, even though some participants may 
receive a payment above their actual cost and others may be underpaid.
    Section 627.310(a) sets forth the parameters for the provision of 
supportive services. The preamble to the interim final rule noted that 
``limited supportive services'' were permitted for applicants. A few 
commenters requested that this be stated in the regulations. This 
provision can now be found at Sec. 627.310(b). A comment was also 
received requesting that the ``limited'' in limited supportive services 
be defined. The Department declines to define ``limited''; rather, the 
final rule is revised to indicate that such payments may be made to 
provide the applicant with an opportunity to complete the application 
process. The Department expects the restriction on the training-related 
supportive services cost category to act as a natural control on SDA's 
and SSG's while still permitting flexibility for local level decisions.
    Section 627.310(g)(1) provides that supportive services may include 
financial assistance under title II. In order to ensure a comprehensive 
system of supportive services and payments, there have been changes to 
the definition and allowable usage of financial assistance. Financial 
assistance is intended for the purpose of general support typical of 
stipends and allowances. A number of commenters indicated that 
requiring additional documentation in order to receive any type of 
financial support was redundant, particularly with JTPA's hard-to-serve 
population. The Department agrees that participants pass through 
significant income eligibility tests upon entering the program and that 
additional eligibility checks are unnecessary, inefficient, and 
discourage the provision of necessary services. Therefore, the final 
regulations state, at Sec. 627.310(g)(2), that financial assistance may 
be deemed to be necessary for eligible participants and, as a 
supportive service, may be a fixed payment or based upon a schedule of 
payments. The SDA shall include financial assistance in its policy on 
supportive services.
    Section 627.305(g) of the interim final rule dealing with needs-
related payments is redesignated Sec. 627.310(h) to reflect the 
similarity of needs-related payments under title III with financial 
assistance under title II. However, needs-related payments are the only 
form of general ``cash'' assistance (excluding cash provided as a 
reimbursement for transportation expenses, etc.) allowable under title 
III.
    A few commenters disagreed with the statement in the preamble to 
the interim final rule that supportive services could not be based on a 
group characteristic, such as welfare. In light of the other changes 
made in the final rule, this statement is no longer applicable. In 
developing the policy called for in the final rule, an SDA may use a 
group characteristic as a basis for determining supportive service 
needs. For example, under title II, a financial assistance payment to a 
participant may be fixed, based upon an income schedule or group 
characteristic (such as welfare recipient) identified in the objective 
assessment and reported in the ISS, or may be determined in accordance 
with another method determined by the SDA.
    The regulations reflect the Department's intent that financial 
assistance be treated as a supportive service for the general welfare 
of the participant. This assistance is to be based upon the financial 
needs of an eligible individual to permit the individual to participate 
in training. With this basic premise, the Department intends that 
financial assistance payments, in addition to not being considered as 
income in accordance with section 142(b) of the Act, should not be 
subject to income and employment taxes. However, all such decisions 
need to be made on a case-by-case basis.
    Benefits and Working Conditions. The provision of Sec. 627.310(b)-
(d) of the interim final rule are redesignated and revised as a new 
Sec. 627.315. One commenter suggested that the regulations should not 
require participants to work for employers that are violating labor 
laws. In response, Sec. 627.315(a) is amended to reflect this concern 
for compliance with applicable labor laws.

    In addressing a number of other comments, redesignated 
Sec. 627.315(b) (Sec. 627.310(b) of the interim final rule) is amended 
to clarify that if a State workers' compensation law is not applicable, 
recipients and subrecipients shall secure insurance coverage for 
injuries suffered by participants in all JTPA work-related activities.

Subpart D--Administrative Standards

    Grant Agreement and Funding. Section 627.405 establishes a new 
annual grant agreement process to facilitate the obligation, 
accounting, and closeout of JTPA funds by year of appropriation. No 
specific comments were received on this section and comments generally 
related to this section and other sections are responded to in other 
sections of this Preamble. No changes are made to this section.

    Reallotment and Reallocation. Section 627.410 implements the new 
section 109 of the Act, which requires the Governor to reallocate, 
among SDA's in the State, unobligated funds in excess of 15 percent of 
any SDA's program year title II allocation.

    A number of commenters responded on the provisions of this section. 
Almost all of them recommended basing reallocations on obligations 
rather than expenditures and questioned whether a State could adopt a 
more restrictive reallocation policy based on expenditures. Most of the 
other comments were requests that the regulations further clarify the 
reallotment and reallocation provisions of the Act including an 
interpretation of section 109(a)(3) of the Act concerning SDA's that 
have the highest rates of unemployment for an extended period of time 
and the highest poverty rates. One commenter pointed out a potential 
conflict between the provisions of section 109 of the Act, which bases 
reallocation on obligations, and section 161(b)(1) of the Act, which 
ties reallocation to expenditures. Another commenter raised the issue 
of whether Title II-B (summer) funds could be reallocated.

    Given the legislative history of the statutory provision, 
particularly the 1991 House Committee Report (H.R. Rep. No. 102-240, 63 
and 64 (1991)), the Department believes that the intent of Congress was 
to ensure effective, timely use of the funds. The Department previously 
suggested that another interpretation, based upon the provisions of 
section 161(b) of the Act, might permit a more rigorous standard, such 
as expenditure. However, upon further review, the Department believes 
that the language in the statute is clear in providing that the basis 
for reallocation is to be the ``obligation'' of funds and the 
Department now believes that an interpretation that is more restrictive 
would be inconsistent with the Act. A new paragraph (a)(2) is added 
that prohibits the Governor from imposing reallocation requirements 
that are based on other than obligations. While it may be true, as some 
commenters suggested, that basing reallocation solely on obligations 
may lead to last minute obligations of funds which have little program 
purpose simply to avoid reallocation, the Department is constrained by 
the statutory language and cannot use that possibility as a basis for 
varying from a clear statutory requirement.
    In regard to further interpretation of section 109(a)(3) of the Act 
concerning SDA's that have the highest rates of unemployment for an 
extended period of time and the highest poverty rates, the Department 
is not expanding on this criterion and is leaving the interpretation of 
this section to each Governor, as provided in the Conference Committee 
Report on the Amendments.
Insurance
    A few commenters responded to the provisions of Sec. 627.415. A few 
other commenters on Sec. 627.435, Allowable costs and cost principles, 
suggested that Sec. 627.435 should include provisions for allowing the 
costs of contributions to reserves for self-insurance to be 
specifically allowed in that section.
    After considering these comments, paragraph (c) of Sec. 627.415 of 
the interim final rule is removed and the substance of the second 
sentence concerning contributions to a reserve for a self-insurance 
program is moved to Sec. 627.435(h). The first sentence of this 
paragraph (c) basically repeated the provisions of Sec. 627.315(b), 
Benefits and working conditions, and is, therefore, unnecessary in this 
provision.

    A few commenters were concerned about the scope of insurance 
coverage required by the rule. Some asked whether the rule required 
them to provide insurance coverage for work-related activities or for 
all training. One thought that the regulation required ``no fault'' 
coverage that could be satisfied through an ordinary comprehensive 
liability policy. Section 627.415 does not address the scope of 
insurance coverage. Section 627.315(b) requires worker's compensation 
or similar insurance coverage for work-related training activities. 
States and SDA's/SSG's should provide such coverage as they deem 
prudent and as are in accordance with their normal insurance 
procedures, both in terms of the types of risks covered and the method 
of coverage (self-insurance or purchase of insurance policies).

    Procurement. Section 627.420 sets forth the procurement 
requirements for titles I, II, and III of JTPA.

    Some commenters thought that the procurement portion of the interim 
final regulations is an example of overregulation, while others 
believed that the regulations did not go far enough. In response to the 
comments concerning overregulation, the Department notes that section 
164(a)(3) of the Act requires the Secretary to take into consideration 
the OMB circulars and that these regulations actually represent a 
pared-down version of the OMB Circulars. As such, they represent less 
federal regulation than is applied to other Federal grant programs. In 
response to the comments concerning underregulation, the Department 
does not agree. The requirements that are established should help 
maximize competition, ensure fiscal accountability, and prevent fraud 
and abuse in JTPA programs. The Department believes that the final 
regulation represents a reasonable balance between providing guidance 
on the issues on which the Secretary is required to set minimum 
requirements under section 164(a)(3) of the Act and recognizing the 
prerogatives of the Governors to develop their own procurement rules, 
which also is recognized in that provision.

    Although at the Federal level there are rules for when to use 
contracts, grants and cooperative agreements, these rules are not 
applicable to the JTPA. As a result, what one State calls a contract, 
another State might call a grant. In order to avoid confusion in these 
regulations, the following terms are being used: ``Award'' or 
``agreement'' means a contract, grant, subcontract, subgrant or other 
type of legal instrument; ``awardee'' means any one of the entities 
receiving the award (e.g., contractors, grantees). There was concern 
expressed over whether buying certain supplies, like floppy disks, at 
office supply stores and other similar businesses constitutes an award. 
Through these regulations, an upper limit for small purchases (which 
can be lowered, but not raised, by the Governor's procurement 
standards) is established. No further breakdowns are delineated in the 
regulations. The Governor can, through the State procurement standards, 
establish other thresholds for the purchasing of consumable materials 
with credit cards and such, and not require a formalized award process 
(e.g., competition or cost/price analysis) or document. As an example, 
the current Federal ceiling is $2,500 per consumable item.

    Section 627.420(a) reiterates the requirement established through 
the Amendments that the Governor establish procurement standards to 
ensure fiscal accountability and prevent fraud and abuse in JTPA 
programs. This section further requires the State and local levels to 
follow procurement policies and procedures used for non-Federal funds, 
with some caveats, and reiterates the non-duplication requirement 
contained in section 107(b) of the Act. A small number of commenters 
were concerned that the requirement that the State and local levels 
follow their own procurement policies and procedures used for non-
Federal funds would result in awards always being made to the lowest 
bidder without other considerations, such as performance. State and 
local rules are to be followed as long as they comply with the minimum 
requirements of the procurement section. One of the requirements for 
the selection of vendors and subrecipients (discussed below) is that 
the awarding agency make a determination of demonstrated performance 
prior to award. If, as a result of this determination, it is apparent 
that the lowest bidder cannot perform the work at an acceptable level 
of quality, SDA's should not make an award to that bidder.

    A few commenters were concerned that the nonduplication requirement 
of Sec. 627.420(a)(5) would make it difficult for SDA's to select 
service providers. This requirement reflects the provisions of section 
107(b) of the Act and is necessary to maximize the use of JTPA funds. 
One of the initial steps in any JTPA procurement should be a 
determination concerning whether or not procuring such services 
(whether competitively or through sole source) would be a duplication. 
The determination of non-duplication need not be exhaustive; it may 
take into account such things as the cost of the existing services, 
waiting lists, the effectiveness of the services to be provided, and 
the likelihood of achieving performance goals. Although there may be 
entities in the geographic area which provide the required services, 
these entities may not provide the necessary customized training or may 
not be able to provide these services in a timely manner.
    A few commenters felt that the vendor/subrecipient distinction (see 
the definitions sections of the preamble and the regulations) found in 
other parts of the regulations was not clear in this section. This 
section is intended to apply to all awards and, for the purposes of 
this section, the same rules apply to the procurement of awards to both 
vendors and subrecipients. Thus, the vendor/subrecipient distinction is 
not treated in this section as it is in other provisions of the 
regulations.
    Section 107(e) of the Act requires that selection of service 
providers include documentation of compliance with procurement 
standards established by the Governor. Section 627.420(a) is expanded 
by adding a definition of procurement to mean the process which leads 
to any award of JTPA funds. Some commenters wondered if the 
requirements for a determination of demonstrated performance, contained 
in Sec. 627.422, Selection of Service Providers, applied to vendors. 
Based on the definition of service providers, this requirement does 
apply to vendors. On its surface it may appear that the requirement for 
a determination of demonstrated performance goes against the 
requirements for full and open competition. Since the overall goal of 
JTPA is to provide high quality services to eligible participants, the 
requirement of the determination of demonstrated performance leads to 
the meeting of this goal by requiring the selection of entities that 
can do the work effectively. This requirement further supports the 
fiscal accountability and prevention of fraud requirements of the Act, 
since demonstrated performance includes such things as a satisfactory 
record of integrity.
    Section 627.420(b) further delineates the Act's requirement of full 
and open competition. A few commenters asked for definitions of certain 
terms, such as ``arbitrary action'' and ``overly restrictive 
specification.'' Since each procurement action and system must be 
looked at on a case-by-case basis, the Department thinks that it would 
be inappropriate to define these terms. If further definition is 
required at the State level, the Governor may do so in the guidelines 
that he/she establishes. A few commenters were concerned that stricter 
State procurement codes could take precedence over Federal regulations. 
These commenters are correct; the Governor has the discretion to make 
the procurement rules more strict. However, the Governor does not have 
the authority, unless indicated in the law or regulations, to make a 
legislative and/or regulatory requirement less strict. One commenter 
felt that paragraph (b)(2)(i) should require an identification of 
quantities to be purchased. This change is made.
    Section 627.420(c) establishes conflict of interest requirements. 
Although there is a separate subsection that addresses PIC conflict of 
interest, PIC's were also included in the subsections that address 
recipient and subrecipient conflict of interest. A few commenters 
correctly pointed out that by inclusion in the latter, it would make it 
impossible for companies for which PIC members work to be awarded JTPA 
funds. This section is amended to remove the reference to PIC members 
in paragraph (c)(2) and is reorganized to increase clarity. Paragraph 
(c)(4), which deals with PIC conflict of interest is redesignated as 
paragraph (c)(3) but remains unchanged. Because of the separate 
treatment of PIC's and recipients/subrecipients, the portions of 
paragraph (c)(2), which provide information on when a conflict of 
interest would arise for either PIC's or recipients/subrecipients, are 
moved into a separate paragraph (c)(4). It should be noted that the 
phrase ``is about to employ'' in paragraph (c)(4)(iv) also applies to 
cases of negotiation for employment. The language is not changed in 
order to maintain consistency with the OMB Circulars. The original 
paragraph (c)(5) is combined with paragraph (c)(1), since both deal 
with standards of conduct.
    Several commenters submitted comments on Sec. 627.420(d). This 
section is based on OMB Circular A-102, and describes the four 
procurement methods that are available to JTPA entities. Language is 
added to Sec. 627.420(d)(1)(i), prohibiting awards from being broken 
down into several purchases merely to be able to use small purchase 
procedures. The Department does not intend that small purchase 
procedures be used improperly to avoid the more formal competitive 
processes.
    The majority of these comments concerned paragraph (d)(4) of the 
interim final rule (redesignated in the final rule as (d)(1)(iv)), 
which provides a listing of the circumstances under which recipients 
and subrecipients may use the sole-source method of procurement. One of 
the circumstances calls for awarding agency approval of noncompetitive 
proposals. The final regulations are changed to state that for SDA's, 
SSG's and subrecipients, the awarding agency provides authorization; 
for States, the noncompetitive proposal is approved through the State's 
normal sole source approval process. Without this change, States would 
have had to submit their proposed sole source awards that do not meet 
one of the circumstances to the Department of Labor, the awarding 
agency.
    The amendments require that all sole source awards be justified and 
documented in writing. When a State or other subrecipient identifies 
specific entities that may be sole-source awardees (e.g., the 
Employment Service for assessment services) by their subrecipients, the 
State or other subrecipient that identifies the specific entity is 
responsible for the justification and documentation that serves as the 
basis for that specific sole source selection.
    In regard to both the OJT and classroom training (CRT) sole source 
exceptions, there was some confusion concerning the requirement that 
not only does the procurement have to meet one of the criteria, but 
also has to be infeasible under small purchase procedures, sealed bids 
or competitive proposals. Clearly, OJT and individual CRT placements 
are unique in the procurement world. Neither is usually procured 
through a competitive Request for Proposal (RFP) process. Although both 
should be procurable under small purchase procedures, some State rules 
may not allow this. As a result, the regulations are revised to allow 
the sole source procurement of OJT (except awards to brokering 
contractors) and individual CRT without having to demonstrate that the 
three other methods of procurement are infeasible. This provision of 
the regulation may be used in the written justification for such sole 
source authority.
    In regard to the sole source exception for procurement of 
``Enrollment of individual participants in classroom training,'' some 
commenters expressed a concern that this would be used to justify sole 
source awards for the referral of a number of individuals to the same 
classroom training. This exception may be used to justify a sole source 
award to place an individual participant in classroom training. If a 
recipient or subrecipient, over the course of a year, makes sufficient 
individual referrals to the point that the small purchase maximum is 
exceeded (either the level established through these regulations or the 
State established level, whichever is lower), they will be expected to 
compete the requirement the following year. If it is necessary to 
procure a class for JTPA participants only, it is not appropriate to 
use this sole source exception. It may, though, be appropriate to use 
small purchase procedures or to justify the sole source procurement of 
the class through other exceptions.
    Several commenters thought that setting up Labor Management 
Committees should be listed as one of the allowable sole source 
criteria. The expenses incurred in the formation of these committees 
promoted by the State's Dislocated Worker Units would be a rapid 
response expense (section 314(b)(1)(B)), subject to the financial 
management and procurement procedures of the States. In most cases, it 
is expected that the costs of setting up a Labor Management Committee 
would not be great and that small purchase procedures may apply. 
Therefore, the regulations are not changed. If a committee were to 
apply to be a service provider, procurement rules would apply. If a 
committee, as a service provider, were to use JTPA monies to procure 
services for participants, procurement rules also apply.
    Section 627.420(d) is reorganized by redesignating the subordinate 
paragraphs and including a new paragraph (d)(2), which authorizes units 
of State or local government or SDA and SSG administrative entities to 
pass through monies to like organizations, e.g., a public housing 
authority, and not have the procurement requirements apply. When monies 
are passed through, the receiving organization must either pass the 
monies through to a similar organization, or procure services in 
accordance with the procurement rules. The passing through of funds is 
a method of transferring monies to the actual entity doing the 
procuring which is practiced at the Federal, State, and local levels. 
The new language reflects this acceptable practice. The Department 
cautions that organizations which may receive pass throughs may also 
receive funds as service providers, in which case procurement rules 
will apply to awards to these entities.
    A number of commenters submitted comments on Sec. 627.420(e). 
Section 164(a)(3)(C) of the Act established the requirement that 
``procurements shall include an appropriate analysis of the 
reasonableness of costs and prices.'' Several of the commenters 
disagreed with the use of the phrase ``cost or price analysis'' (as 
compared to ``cost and price analysis''). The Department interprets the 
requirement of ``an appropriate analysis'' to mean that recipients and 
subrecipients are required to do whatever analysis (price or both cost/
price) is appropriate to their situation. This is supported by OMB 
Circular A-102, which requires a price analysis alone under very 
limited circumstances, and requires a price analysis whenever a cost 
analysis is undertaken. Additionally, the commercial reality is that in 
many cases you either cannot do both a cost and price analysis (when 
there are no market prices or historical contract prices available) or 
it would be superfluous to do both (when what is being bought is 
available at catalogue prices).
    Concern was also expressed over the requirement that recipients and 
subrecipients perform a cost or price analysis in connection with every 
procurement, including modifications. Some commenters believed that the 
paragraph (e)(1) requirement for a cost or price analysis for all 
modifications should be changed to exclude non-monetary modifications. 
After consideration of this concern, paragraph (e)(2) is amended to 
reflect this exclusion. Care should be taken, though, in determining 
which modifications do not have monetary implications. For example, a 
modification to reduce the number of participants may, on its face, 
appear to be non-monetary. This is not the case. A modification to 
reduce the number of participants, without a corresponding reduction in 
funding, results in an increase in the cost per participant. Therefore, 
this type of modification is one which has monetary impact.
    Section 627.420(e)(2) describes cost or price analysis 
requirements. This paragraph is revised in order to make it easier to 
read, but the requirements are not changed. This paragraph requires 
recipients and subrecipients to make independent estimates before 
receiving bids or proposals. This requirement, which also comes from 
OMB Circular A-102, appears to have caused confusion. A number of 
commenters felt that SDA's would not be able to develop such estimates, 
due to the fact that they do not know which specific activities will be 
offered by a service provider until offers are received in response to 
RFP's. In those cases where it is not known what specific services will 
be provided, it will be appropriate for recipients and subrecipients to 
develop ``rough yardsticks,'' such as cost per placement or cost per 
enrollee, for specific types of training. These independent estimates 
are used, in part, as a tool to determine whether or not the proposals 
are correctly responding to the technical requirements of the RFP. The 
estimates are also used to determine the reasonableness of costs/prices 
which are offered. An offer which is priced too low may be indicative 
of, among other things, an offeror who does not understand the 
requirements of the RFP. An offer which is priced too high may contain 
more expensive interventions than are required. Only through the 
comparison of the costs and prices contained in each offer with the 
estimate can these potential problems be identified. It should be 
stressed, however, that the independent estimates are not absolute 
barriers to accepting higher or lower cost proposals; the estimates are 
merely meant for internal guidance. An awarding agency may select for 
award a proposal that is more or less costly than the estimates, if it 
determines that the costs and price(s) are reasonable and that the 
services offered meet program requirements. The level of detail that 
recipients and subrecipients need in developing these estimates may be 
specified by the Governor in the State standards. Several commenters 
indicated that awarding agencies should include the independent 
estimates in the RFP. Under no circumstances is this to be done. Since 
the purpose of developing the estimates is for internal control, 
publicizing them would defeat the purpose for which they are developed 
and might also skew the bidding.
    One of the Sec. 627.420(e)(2) requirements for cost analysis comes 
into play when the offeror is required to submit the elements of the 
estimated cost. This is clarified by indicating that this requirement 
applies in the case of subrecipient relationships. Subrecipients are 
required to allocate costs to the various JTPA cost categories; 
therefore, they are to submit the separate elements of their costs.
    Section 627.420(e)(3) reiterates the requirement of section 
164(a)(3)(D) of the Act that ``procurements shall not provide excess 
program income * * * or excess profit.'' The Act lists some of the 
factors that shall be taken into consideration in determining whether 
program income or profit is excessive. Through the regulations, 
additional factors from OMB Circular A-102 have been added. Further, 
based on this Circular, the instances when profit or program income is 
negotiated are defined.
    A few commenters on this section, as well as Sec. 627.440, 
Classification of Costs, raised questions concerning fixed unit price, 
performance-based contracts (FUPC's), including whether FUPC's could 
continue to be used and, if so, whether costs could be allocated to the 
JTPA cost categories based on budgeted amounts or whether they must be 
charged based on actual costs incurred. Concern also was expressed both 
over the requirement that offerors certify their costs and the 
prohibition of excess program income or profit, in relation to fixed-
price agreements.
    The Department continues to believe that the use of performance 
based awards may be of significant benefit in serving JTPA customers. 
In addition, the use of a total fixed price or ceiling price in making 
awards may also be an effective mechanism. The regulation does not 
prohibit reasonable profits in the context of a fixed-price agreement. 
Fixed-price agreements are instruments that place more risk on the 
awardee than do cost reimbursement agreements. The reason for this is 
that the awardee, under a fixed-price agreement must perform the work, 
regardless of the costs to the awardee. In the case of an awardee under 
a cost reimbursement type of agreement, the awarding agency will 
reimburse the awardee for its allowable costs. If the awardee under a 
fixed-price agreement is able to do the work at a lower cost, due to 
efficiencies in operations, and this increases the level of profit, the 
awardee is due that additional profit. If successful awardees who have 
increased profit due to efficient performance are required to reduce 
their earned profits to the budgeted levels, this would result in a 
disincentive for organizations to perform their work more efficiently, 
quickly, etc. If the additional profit results from cost data that was 
not accurate, complete or current, as certified, then the awarding 
agency may be able to recoup that excess from the awardee. Thus, the 
requirement that costs be certified provides a needed protection to 
awarding agencies. There has been skepticism that fixed price 
contracts, as utilized in JTPA, did not contain risks for the awardee 
or operate as performance/outcome based agreements. The system can 
expect continued high levels of scrutiny by the OIG in the case of 
fixed price agreements.
    In the case of awards to subrecipients, when: (1) The awarding 
agency has done a cost and price analysis; (2) this analysis has been 
documented; (3) the conclusions arrived at are reasonable; and (4) the 
offeror has certified in writing that to the best of its knowledge and 
belief, the cost and pricing data submitted are accurate, complete and 
current at the time of agreement on price, the awarding agency may find 
it appropriate to use a fixed-price type of agreement. The costs of 
such an agreement may be allocated among the benefitting cost 
categories based upon the ratios established in the cost analysis.
    One commenter did not believe that it was the Department's intent 
to require SDA's/SSG's to track profit earned by commercial 
organizations. In point of fact, section 165(g)(1) of the Act requires 
each State, SDA, and SSG to maintain records with respect to 
subrecipients, including commercial organizations, that identify any 
program income or profit earned.
    Section 627.420(e)(4) is amended to correct a miscitation from 
Sec. 627.435(e) to Sec. 627.435(i).
    Section 627.420(e)(5) prohibits the use of the cost-plus percentage 
of cost method. This prohibition comes from both OMB Circular A-102 and 
the FAR. A few commenters indicated that this was an advantageous 
procurement method. This Federal-wide prohibition is being maintained 
in the final regulations due to the fact that these types of agreements 
provide a disincentive to vendors/subrecipients to reduce costs, since 
the higher the overall cost of the agreement, the higher the profit. It 
is recommended that JTPA entities negotiate specific dollar levels of 
profit, or investigate the possible use of other types of agreements, 
such as cost-plus award fee. Further, there appears to be some 
misunderstanding concerning the allowability of using fixed-price 
agreements. Fixed-price agreements are the preferred type of agreement 
when using the sealed bid (Invitation for Bids) process. Fixed-price 
agreements may be performance-based and may be chargeable to a 
benefiting cost category based upon a documented cost analysis, as 
discussed above, the services provided, and whether the agreement is 
for tuition or for a commercially available training package, as 
discussed in connection with Sec. 627.440.
    Section 627.420(g) which reiterates the requirement found in 
section 164(a)(3)(I) of the Act that procurement transactions between 
units of State or local government or entities organized principally as 
the administrative entity for SDA's or SSG's, shall be on a cost-
reimbursable basis. The final rule now clarifies that cost-plus types 
of agreements are not allowable (e.g., cost-plus fixed-fee). Based on 
one comment, language is added concerning the payment of tuition and/or 
entrance fees to schools that are part of a governmental entity. The 
specific instances under which tuition and entrance fees may be paid, 
without breaking them down to their specific cost elements, are listed.
    Several commenters addressed Sec. 627.420(h), which establishes the 
requirement that recipient and subrecipient procurements clearly 
specify deliverables and the basis for payment, and include specified 
clauses. A few comments were received questioning the example that was 
given in the preamble to the interim final regulations of withholding 
final payment to an OJT contractor until the participant has been 
retained on the job for a specified period of time after the completion 
of training. The commenters wondered if the Department has 
predetermined deliverables for OJT. The discussion was intended merely 
as an example and does not set a hard and fast rule for OJT contracts, 
although the Department sees that such a contract provision might 
facilitate retention upon completion of OJT.
    In the final regulations, paragraph (h)(2) on required clauses is 
revised, to break it into three paragraphs: clauses required for 
subrecipient awards; vendor awards; and vendor and subrecipient awards. 
In response to concerns expressed, the applicability of clauses such as 
copyright and rights in data is narrowed. Several commenters correctly 
pointed out that the regulations did not specify what the patent, 
copyright and rights and data clauses should be. The final rule is 
amended to remove the requirement for patent rights (since it is not 
expected that many patentable items will be developed using JTPA funds) 
and to include additional information on copyright and rights in data 
clauses. In the case of the copyrights clause requirement, the 
application of this clause is limited to those awards which involve the 
use or development of copyrighted materials. Also, the breach of award 
and termination clauses are expanded to cover all awards. In the newly 
designated paragraph (h)(4)(i), which relates to breach of agreements, 
this clause is now required to be included in all agreements, rather 
than be limited to those which exceed the small purchase limit. The 
rationale for this change is that a breach in a small purchase 
situation can be as damaging to the JTPA program as those in large 
dollar awards.
    Section 627.420(i) establishes the requirement that recipients and 
subrecipients have written protest procedures. A few comments were 
submitted on this section. One wondered how paragraph (i)(2), the 
referral of violations of law, related to TEGL 6-84 and the incident 
reporting system. This section of the regulations is amended to 
reference Sec. 627.500(b) of the regulations, which establishes the 
referral requirements.
Selection of Service Providers
    Section 627.422 establishes the requirements for the selection of 
service providers. One commenter felt that the selection of service 
providers should be essentially a blind process, in which the specific 
sector of the provider is secondary to the provider's demonstrated 
ability. This is an accurate statement of the general intent of the 
Amendments and of the Department in developing this section of the 
regulations. Given the large amount of funds that are budgeted for JTPA 
titles II and III, it is important to ensure that procurements are done 
in a manner that will not only promote the integrity of the process and 
the efficient expenditure of the monies but will also allow 
organizations an opportunity to fairly compete to provide these 
services. Although it may be administratively easier to sole source the 
bulk of the JTPA monies, this not only is unfair to the other potential 
service providers in a specific geographic area, but it also could 
result in a diminution of the number of organizations that are able to 
provide services to the JTPA system as well as in an increase of costs 
due to the lack of competition.
    One commenter correctly pointed out that the first sentence of 
Sec. 627.422(b) was missing a reference to recipients and 
subrecipients. The final rule is amended accordingly. A small number of 
commenters wondered why the regulations call for the Governor to 
establish guidelines on the selection of service providers, when the 
Act calls for the Secretary to establish guidelines. The Secretary has 
established minimum guidelines through these regulations. The Governor 
is given the authority to expand on these guidelines.
    Section 627.422(c) establishes the requirement that when a State, 
SDA, SSG, or administrative entity determines that it will provide 
services, it must first make a determination, in writing, under the 
standards of Sec. 627.422(d), of the demonstrated performance of its 
staff. A number of commenters expressed concern that this section went 
beyond the intent of the Congress.
    A number of commenters argued that the ``self-determination'' 
requirement is inappropriate because it infringes on the rights of 
PIC's or SDA's to make their own decisions on the mix of services 
according to local considerations. The self-determination requirement 
implements the requirements of sections 107 (a) and (e) and 
164(a)(3)(A) of the Act for competitive selection of service providers. 
These requirements do reduce local discretion to the extent that they 
prevent any SDA/SSG from selecting its service providers without 
adherence to the rules of a competitive selection process. An SDA/SSG 
may not select an ``independent'' service provider without adhering to 
the competitive procurement rules which is as much an intrusion on its 
discretion as is the requirement that it justify its selection of an 
in-house service provider.
    The purpose of the Act's new emphasis on competition in the 
procurement process is to ensure that the JTPA program provides the 
best available services at the most advantageous price. This rationale 
is equally applicable no matter what the identity of the service 
provider. Obtaining services through a competitive selection process 
enables decisionmakers to periodically review the quality of, necessity 
for, and cost of the services that are being used. It would defeat the 
purpose of the competitive selection process if one kind of service or 
one kind of service provider were exempted from this periodic review. 
Thus, it is critical to the integrity of the competitive selection 
process that the selection of all service providers, including in-house 
providers, be subject to periodic review and to regular redetermination 
of the quality and cost effectiveness of the services provided as well 
as their responsiveness to the needs of the participants. For this 
reason, the Department has decided to retain the self-determination 
requirement in the final rule.
    Other commenters thought that this requirement was not needed since 
the sanctions that occur for failure to meet performance standards 
provide all the protection needed against arbitrary decisions to 
perform services in-house. It is true that these available sanctions 
will help lead to a better program, but the earliest that they will 
lead to the increased full and open competition required by the 
Amendments is after two or three years when performance standards are 
not met and the sanctions are imposed. Since it is the Department's 
intent to increase competition immediately, it is appropriate to impose 
the self-determination requirement.
    The comments revealed some confusion over the types of services 
that would be covered by the requirement of paragraph (c). Several 
commenters indicated that intake and assessment should not be included 
as services that should be competitively procured. Covered services, in 
the final regulations, are defined to exclude intake and eligibility 
determination, which are services that are the basic responsibility of 
SDA's/SSG's.
    Another concern expressed was that a vote by a PIC to provide an 
activity in-house will require the PIC to vote on a matter that will 
directly benefit the JTPA agency. Since the enactment of JTPA and the 
formation of PIC's, PIC's have had to make decisions and vote on the 
provision of services internally. This may well be an apparent conflict 
of interest, but the conflict is inherent in the role of the PIC, and 
it is a conflict whether or not the SDA is required to justify the 
decision.
    Further, if the requirement for self-determination had not been 
established in the regulations, States, SDA's, SSG's, and 
administrative entities for SDA's and SSG's would be required to 
compete all of the services. It is not the Department's intent to 
require recipients and subrecipients to go through a full fledged 
competitive process or to impose onerous procedural requirements, but 
merely to assure that they periodically consider whether the methods by 
which the services are provided meet the Act's standards for cost and 
quality. For States, SDA's and SSG's that have already been running 
programs in-house, the determination to keep services in-house will be 
relatively easy. The determination will be more involved for SDA's and 
SSG's that propose to conduct services and activities which have 
traditionally been contracted out and should have a rationale for so 
doing.
    Some commenters provided reasons why they provided services in-
house. These reasons included avoiding brokerage fees for OJT 
development and providing backup capacity if contractors fail. Both 
these reasons for performing these services in-house are legitimate 
ones, which should suffice as part of the justification required by 
this requirement.
    Some commenters wondered where the self-determination of 
demonstrated performance should be documented. Since it is not expected 
that the documentation be voluminous, the Department believes that it 
would be appropriate for recipient and subrecipient administrators to 
address the criteria listed in paragraph (d) in writing, in the JTP, 
GCSSP or EDWAA plan. In the case of the requirement of paragraph (d)(2) 
that the service provider possess, ``[t]he ability to meet the program 
design specifications at a reasonable cost,'' recipients and 
subrecipients need not undertake extensive cost comparisons.
    Section 627.422(d) implements the requirement in section 107(a) of 
the Act that the Secretary develop guidelines on determining 
demonstrated performance. Concern was also expressed that use of CBO's 
might be restricted by the requirement in paragraph (d)(1) that service 
providers have adequate financial resources or the ability to obtain 
them. Comments indicated that many CBO's only support is JTPA programs 
and their financial stability rests with their ability to win JTPA 
contracts. Where the reimbursement method is used, the entity must 
either have the financial resources to cover expenses until reimbursed, 
or must be able to obtain the financial resources through loans, etc. 
In the case of CBO's, many will be placed on an advance method of 
payment. As a result, the financial resources test is considerably less 
stringent. Awarding agencies should, however, check the financial 
stability of all organizations in order to determine that they possess 
the financial wherewithal to adequately undertake a JTPA program and 
whether they are on the verge of bankruptcy.
    Section 627.422 (e) and (f) reiterate the language of section 107 
(a) and (c) of the Act concerning CBO's and educational institutions. 
These provisions must be interpreted in conjunction with the goal of 
the regulations to establish an ``even playing field.'' CBO's and 
educational institutions are to be provided copies of any RFP's, etc. 
Any proposals that are received from CBO's and educational institutions 
are to be reviewed and rated in the same manner as proposals from any 
other organizations. It must be noted that the 90/10 arrangements 
authorized for use with CBO's or non-profits are not to be taken into 
consideration in the rating criteria. Based on the special mention in 
the Act of CBO's, it would be appropriate in instances where competing 
proposals are rated the same, to use as a tie-breaker the status of the 
organization submitting the proposal (i.e., CBO). In the case of 
educational institutions that are providing education services, the 
language in the Act is more prescriptive. Therefore, in the case of a 
tie, the award must go to the educational institution, unless the 
organization does not pass the demonstrated performance test. Further, 
paragraph (e) is clarified in the final rule so that it is easier to 
read.
    Some questions were raised concerning instances where Statewide 
procurement policies call for awarding extra points to proposals 
received from such organizations as minority-business enterprises and 
women-owned businesses. If this is a State, SDA or SSG-wide policy, 
applicable to not only JTPA funds but other funds, the State, SDA or 
SSG may continue applying these policies to JTPA funds. If these 
policies apply only to JTPA funds, States, SDA's or SSG's may not 
continue applying these policies to JTPA funds. This is discussed in a 
new paragraph (l).
    Section 627.422(h) is redesignated as Sec. 627.422(k) and 
reiterates the Act's requirement that awards include appropriate 
amounts necessary for administration and supportive services (section 
108(b)(5)). Several commenters felt that SDA's/SSG's should be allowed 
to continue making awards that do not include administrative funds. It 
is because of this practice that new language was included in the 
Amendments. In the past SDA's have indicated that, given the 15 percent 
limitation on administrative costs, they do not receive sufficient 
administrative funds to operate JTPA programs. It is equally difficult 
for other service providers to provide these same services when they 
are provided either an even lower level of or no administrative funds. 
Some commenters thought that the regulations, as written, will give 
service deliverers the right to claim whatever administrative costs 
they want. This is not the intent of the regulation. While the 
regulation does prevent an SDA from arbitrarily refusing to fund a 
service provider's administrative costs or from arbitrarily 
underfunding them, it creates no right in the service provider to 
demand any particular level or amount of administrative funding. The 
level of administrative funding to be covered by the agreement should 
be determined through negotiations. If either party is dissatisfied 
with the results of the negotiations, they should not sign the 
agreement. Such disagreements may be handled under State and local 
grievance procedures. Some commenters were concerned that awardees that 
fail to perform would argue that insufficient administrative funds were 
provided and, thus, were the cause of the failure. Because the 
agreement should be mutual, it should be difficult for an awardee to 
use this argument to excuse lack of performance. The Department does 
wish to note that it is inappropriate for the SDA to pre-determine that 
it will not provide administrative costs for awardees except in the 
payment of tuition or off-the-shelf prices. Others requested that 
guidance be given on how to determine appropriate amounts of 
administrative funds. The Department thinks this type of clarification 
is more appropriately provided at the State level.
    No comments were received on paragraphs 627.422 (i) and (k). These 
two paragraphs are redesignated as (h) and (j), respectively.
    The redesignated Sec. 627.422(j) (now Sec. 627.422(i)), which 
references back to section 204(d)(2)(B) of the Act, deals with the 
selection of subrecipients for the provision of services to older 
workers. One commenter thought that this section provides the 
justification for sole-sourcing older worker programs at the State 
level. This is not the Department's intent. These programs are to be 
competed just like any other program. Others thought that only the 
Governor has the responsibility for selecting service providers. With 
the addition of the pass-through provision (at Sec. 627.420(d)(2)), 
this does not have to be the case since the Governor can delegate his/
her authority for selection through the pass-through process.
Funding Restrictions for ``High-Risk'' Recipients and Subrecipients
    A number of comments were submitted on Sec. 627.423. Several of the 
commenters thought that this section was in conflict with 
Sec. 627.422(d), which requires a determination of demonstrated 
performance. The intent of this section is not to give preferential 
status to high-risk recipients and subrecipients, but to provide JTPA 
entities with the authority to impose funding restrictions should it be 
necessary to contract with such an entity. There may be instances when 
awarding agencies have to make subrecipient awards to high-risk 
organizations because they are the only entity providing the required 
service. By including this section, awarding entities may do so, but 
are authorized to include restrictions on the award in order to protect 
the Federal funds.
    Other commenters thought that the regulations, as written, would 
give high-risk grantees an argument that they have a right to be 
considered and selected. This is not the case. This section does not 
confer a right of selection to high-risk organizations. Given the 
choice of comparable proposals from an offeror who has demonstrated 
performance and a high-risk recipient/subrecipient, the award should be 
made to the former, unless other factors indicate otherwise. Additional 
language is added to Sec. 627.422(d) to clarify these points. Finally, 
editorial changes are made to clarify that this section applies to all 
awards, not just grants or subgrants.
Prohibition of Subawards to Debarred and Suspended Parties
    Section 627.424 applies the Federal government-wide requirements on 
awards to debarred or suspended parties contained in Executive Orders 
12549 and 12689 and implemented for all Department of Labor grant 
programs in regulations codified at 29 CFR part 98. These requirements 
were previously issued to JTPA Liaisons in a Grant Officer Notice dated 
April 30, 1992. As provided in 29 CFR part 98, certifications are not 
required for the State legislatively required ``pass-through'' of JTPA 
funds to SDA's/SSG's since these are considered ``mandatory awards'' 
and are, therefore, exempt from the 29 CFR part 98 requirements. 
However, any other subaward over $25,000, such as an SDA award with a 
service provider, must meet the ``lower-tier'' certification. These 
``lower-tier'' certifications are to remain with the respective 
awarding agency.
    One commenter requested that language be added to this section that 
tells States and subtier grantees that they may elect to subscribe to 
the List of Parties Excluded from Procurement or Non-Procurement 
Programs. This has not been done, since nothing in these regulations 
prohibits JTPA entities from subscribing to this publication, and using 
it as a resource.
Financial Management Systems and Generally Accepted Accounting 
Principles (GAAP)
    Section 627.425(b) of the interim final rule requires financial 
systems and procedures of recipients and subrecipients to be in 
accordance with GAAP and Sec. 627.435(a) requires costs charged to the 
JTPA program to also be in accordance with GAAP.
    Several commenters raised questions or issues about GAAP, including 
requesting that the Department be more specific about how GAAP must be 
applied by States and SDAs, requesting specification of which GAAP to 
use, and, if GAAP is to be determined by the Governor, if the Governor 
can waive GAAP provisions. A few commenters requested that the 
statutory language of section 164(a)(1) of the Act pertaining to GAAP 
applicable in each State be included in Sec. 627.425(b).
    Language is added to Sec. 627.425(b) to provide for the 
applicability of GAAP in each State. The Department recognizes that 
GAAP vary by type of organization or entity and that, while there is 
great similarity among them, multiple versions of GAAP exist for each 
type of entity. It is the Department's intent, by adding this language, 
in addition to the language in paragraph (a) of Sec. 627.435, to allow 
the Governor to determine which specific versions of GAAP are to be 
used in each State and by which types of entities, should this be at 
issue in any State. It is not intended to give the Governor authority 
to waive GAAP provisions since the Act requires the use of GAAP.
    The word ``liabilities'' is added to the list of financial 
information that financial systems must include at 
Sec. 627.425(b)(1)(i). The inclusion of this term is to make the listed 
items parallel.
    A few commenters indicated that revised financial reporting 
requirements need to be issued by the Department, consistent with 
Sec. 627.455, so that changes to accounting and other financial systems 
could be made that also meet the reporting requirements. Revised 
financial reporting requirements for JTPA title II programs were issued 
by the Department in Training and Employment Information Notice (TEIN) 
No. 6-93 dated July 30, 1993 (OMB No. 1205-0323). Revised financial 
reporting requirements for title III programs were issued by the 
Department in TEIN's Nos. 14-93 and 12-93, dated August 30, 1993, and 
September 8, 1993, respectively (OMB Nos. 1205-0326 and 1205-0318).
    In regard to participant data systems, a few commenters sought 
clarification regarding eligible applicants for whom information must 
be maintained under Sec. 627.425(c). As used in the regulation, a 
``formal'' determination of eligibility refers to a situation in which 
sufficient information has been obtained by the program for a staff 
person to make a determination of eligibility. The Department expects 
that such a determination will be made within a reasonable time after 
the information is obtained.
Grant Payments
    Section 627.430 establishes standards by which the Department will 
make payments to States as well as standards for States, SDA's, SSG's, 
and other subrecipients for making payments to lower tier 
subrecipients. Included within this section are standards for when 
advances to subrecipients are appropriate, when the reimbursement 
method is appropriate, and provision is made for using the working 
capital advance payment method.
    A number of commenters addressed the provisions of this section. A 
few commenters raised concerns related to the Cash Management 
Improvement Act (CMIA) and primarily suggested that the Department 
should delay CMIA requirements since SDA's/SSG's are waiting on the 
Department to publish CMIA standards. One commenter pointed out that at 
the current time, the Treasury Department regulations at 31 CFR part 
205 do not go beyond the State level.
    CMIA applies only to States and does not carry through to 
subrecipients that are not a part of the State government. The Treasury 
Department published final regulations to implement CMIA at 31 CFR Part 
205 on September 24, 1992. The Department does not plan to publish any 
additional CMIA standards applicable to grant funds.
    The Department recognizes that the September 24, 1992, Treasury 
Department regulations dropped the requirements that previously existed 
pertaining to subrecipients of States as well as non-State recipients. 
Therefore, the basic cash management standard of paragraph (b) of this 
section is revised to incorporate the standard that is generally 
applicable to other Federal grant programs. That standard is also 
generally consistent with the standard applicable to the JTPA program 
prior to the publication of the interim final rule. In addition, the 
requirement to maintain procedures as a part of the standard is deleted 
so that the standard is based only on the demonstration of effective 
cash management results.
    A few commenters raised questions of whether subrecipients other 
than CBO's and non-profit entities could receive advances or working 
capital advances. A few commenters wanted clarification on the specific 
requirements for payments to contractors. It is the intent of this 
section to provide for advances to any subrecipient as long as the 
subrecipient is in compliance with the basic cash management 
requirement that cash on hand shall be limited to actual immediate 
disbursement needs for program purposes. A subrecipient that does not 
meet that standard may be paid by either of the other two payment 
methods outlined in this section. The Department recognizes that, given 
the definitions in Sec. 626.5 for subrecipient and contractor and the 
procurement requirements of the Act and these regulations, there is no 
need to establish separate payment requirements applicable to 
contractors. Therefore, paragraph (b)(2) of the interim final rule is 
removed from the final rule and corresponding language adjustments are 
made throughout the remainder of this section.
    A few commenters requested clarification of the requirement, in 
paragraph (f) of this section, which requires disbursement of cash 
received as a result of program income, rebates, refunds, contract 
settlements, audit recoveries, and interest earned on such funds before 
requesting additional cash payments in light of the time frame for the 
use of program income at Sec. 627.450, Program income. The requirement 
in Sec. 627.430(f) is a cash management requirement to ensure that cash 
attributable to JTPA does not remain in a bank account while at the 
same time the entity is drawing additional cash from the Treasury 
Department to meet immediate JTPA disbursement needs. Any cash 
attributable to JTPA should be immediately disbursed for whatever JTPA 
disbursement need exists. That need does not have to be the same as the 
entity's planned use of program income earnings nor does it relieve the 
entity of its liability to provide, within the funding period, an 
amount of program services equivalent to the amount of program income 
earned. At the time cash is needed for disbursement for the purposes 
for which the program income was planned to be used, it can be accessed 
through normal JTPA grant payment processes. Language is added to 
paragraph (f) of Sec. 627.430 to more clearly apply this requirement to 
cash proceeds.
Cost Principles and Selected Items of Cost
    Section 627.435 provides generic cost principles applicable to the 
JTPA program in paragraphs (a) through (d) and provides specific 
treatment for selected items of cost in paragraphs (e) through (h). A 
few commenters stated that the Department should adopt the Circulars 
for cost principles, thereby replacing this section.
    Section 164(a)(2) of the Act requires the Secretary to prescribe 
regulations establishing uniform cost principles substantially 
equivalent to those generally applicable to recipients of Federal grant 
funds. The generic cost principles in this section are intended to be 
substantially the same as the provisions of Attachment A of the OMB 
Circulars that contain cost principles and should generally be 
interpreted the same as the Circulars. The Department has chosen not to 
simply adopt the Circulars because they contain some restrictive 
requirements in areas where the Department thinks that recipients and 
subrecipients should retain operational flexibility.
    A number of commenters recommended that the prohibition on the 
shifting of funds in Sec. 627.435(c) should be changed to clarify that 
it does not cover accounting errors. The Department agrees with this 
comment and language is added to limit this prohibition to costs 
``allocable'' to another Federal grant, program, or category. 
Adjustments should be made for costs inappropriately charged because of 
accounting errors or misclassification so that the costs ultimately 
charged to a cost objective are those properly allocable to that 
objective.
    A few commenters requested revision of the prohibition on 
contributions to contingency reserves at Sec. 627.435(e)(6), 
particularly that they should be allowable if such contributions are 
not made with Federal funds. The language on contingency reserves is 
not changed since only those costs charged to the JTPA program are 
regulated by this section and it does not extend to non-JTPA funds.
    Amended Sec. 627.435(f) provides additional guidance on legal 
costs. A number of commenters recommended changes in this area, with 
most commenters opposed to the specific prohibition on the allowability 
of costs for appeals to an Administrative Law Judge. Several commenters 
suggested that the Department should review the Conference Report 
language on this issue. A few commenters requested more specificity on 
legal expenses, particularly settlement costs.
    In response to the comments received on the specific prohibition on 
the allowability of legal costs for appeals to an Administrative Law 
Judge, the Department has reviewed the Conference Report (H.R. Conf. 
Rep. No. 102-811, 102d Cong., 2d Sess., p. 137 (1992)) and engaged in 
further dialogue on this subject. The discussion in section 221 of the 
Conference Report pertained to title IV special programs for Migrants 
and Seasonal Farmworkers and the Department does not view that language 
as carrying through to the other titles of JTPA. The Department is also 
aware that some Federal agencies are permitting the costs of appeals to 
an ALJ as an allowable grant cost. The Department notes that, unlike 
the process of the Department of Health and Human Services that is 
referred to in the Conference Report, there are several opportunities 
for informal resolution of disputes prior to the issuance of the 
Department of Labor grant officer's final determination. In addition, 
if the grant officer's decision is found, upon appeal, to be 
substantially in error, there may be an opportunity for a grantee to 
recover its legal costs under the provisions of the Equal Access to 
Justice Act. Congress, in passing the Equal Access to Justice Act, has 
set forth the conditions under which it is appropriate for parties in 
contested administrative proceedings to recover their costs from the 
federal government. The rule that is adopted in these regulations 
maintains those conditions. Finally, it is the Department's position 
that, absent any specific statutory direction, Federal taxpayers should 
not bear the costs of both sides of a matter appealed to an ALJ. To do 
so may increase the incidence of such costs and provides no incentive 
for assuring that only matters of substantive merit are appealed.
    With regard to the language on settlement costs, paragraph (f)(1) 
of this section is changed to clarify that settlement costs are 
allowable to the extent that the costs included in the settlement would 
have been allowable if charged to the JTPA program at the time they 
were incurred, e.g., if the settlement costs are for back pay then the 
provisions of Sec. 627.435(e)(2) would control the allowability of the 
settlement costs.
    Section 627.435(h) of the interim final rule basically continued 
the language on construction costs that has existed since the inception 
of JTPA. However, a few commenters recommended changes to this 
paragraph including that construction costs for alterations, 
maintenance, and repairs should be allowable and that there is now a 
conflict with amended Sec. 627.210(a)(3) concerning physical 
accessibility, as required by section 504 of the Rehabilitation Act of 
1973, as amended, and the Americans with Disabilities Act of 1990.
    The Department agrees with these comments and the language on 
construction costs is eliminated. The effect of this change is to allow 
construction costs to the extent that such costs are necessary and 
allocable to JTPA. Paragraph (h) of the final rule now contains 
language on contributions to a reserve for self-insurance, as discussed 
above in the discussion of Sec. 627.415(c), Insurance.
Governor's Guidelines on Allowable Costs
    Section 627.435(i) requires the Governor to prescribe and implement 
guidelines on allowable costs not otherwise treated in Sec. 627.435 and 
contains a listing of selected items of costs in paragraph (i) for 
which the Governor's allowable cost guidelines must, at a minimum, 
prescribe treatment.
    Many commenters responded to the provisions of this subsection. 
Most of them saw it as a requirement for Governors to set actual 
amounts for salaries and other commonly incurred JTPA costs and opposed 
this subsection. One commenter recommended that the Department should 
clarify the intent of this provision and a few commenters asked whether 
the requirements of the regulation would be met if the OMB Circulars on 
cost principles were adopted.
    This provision is not basically different from the requirement, in 
existence since the beginning of JTPA in 1983, that ``[t]he Governor 
shall issue guidelines on allowable costs for * * *.'' Such guidelines 
should set parameters and guidance, rather than actual amounts. The 
Department's intent is simply to ensure that the Governor's guidelines 
cover at least the items included in the list, since issues have been 
raised on each of these items during the past 10 years of JTPA. 
Recognizing that SDA's retain some flexibility, within the Governor's 
guidelines, to establish amounts for allowable costs such as personnel 
compensation and travel, the final rule is changed by replacing the 
words ``and amounts'' with ``or the extent of allowability.'' In 
addition, since other sections of the final rule now provide guidelines 
on item No. 11, the extent of allowability for supportive services 
costs and payments to participants, that item is removed from the list 
in this section of the final rule.
    For most States, the existing allowable cost guidelines of the 
Governor already meet the requirements of this paragraph and few, if 
any, changes are necessary. All States should review their current 
allowable cost guidelines and ensure that each of the 16 listed cost 
items are treated consistently, as well as any other cost items for 
which the Governor thinks consistent treatment is necessary. A 
commenter raised the question about whether the regulatory requirement 
would be met if the OMB Circulars on Cost Principles were adopted. The 
Department agrees that all 16 cost items would be covered if the 
Circulars were adopted. The Department cautions, however, that: (1) It 
does not intend to approve or disapprove any prior approval requests, 
as required by the Circulars, and (2) the OMB Circulars contain 
restrictive requirements in areas in which States, SDA's, and SSG's may 
desire greater flexibility, e.g., staff compensation, fees/profits, 
fund-raising.
Administrative Cost Pools
    Section 627.440(a) is amended in the final rule to add language on 
cost pools. Section 627.440(f) of the interim final rule required that 
costs charged initially to a JTPA administrative cost pool (ACP) be 
allocated, for JTPA Federal reporting purposes, to the benefitting 
programs based on the benefits received by each program. The Department 
recognized that this language represented a departure from previously 
established policy on the manner in which pooled administrative costs 
could be reported. Commenters were requested to identify the impact, if 
any, of the revised requirement to allocate pooled administrative costs 
solely on the basis of ``benefits received''.
    Many commenters responded to the provisions of this paragraph. Most 
of the responses fell into one of three groups. One group viewed the 
ACP language as effectively prohibiting ACP's by requiring detailed 
time distribution or some type of cost allocation process for each item 
of joint administrative cost. These commenters thought the new 
requirements involved too much recordkeeping, were an unreasonable 
burden, inefficient, illogical, and went beyond the requirements of OMB 
Circular A-87.
    A second group expressed concerns about the effect of the ACP 
requirement on the administrative cost limitations for each program and 
that they would lose their ability to ensure cost limits are not 
exceeded. They were also concerned programs would be overexpended. A 
few commenters stated that there are not enough administrative funds 
available for EDWAA at the State level to absorb its share of costs.
    The third group of commenters made suggestions that included going 
back to the old regulatory language, which allowed ``true cost pools'', 
specifying that using direct expenditures was an acceptable 
methodology, and requiring application of A-87 principles. One 
commenter suggested eliminating any mention of ACP's in the regulations 
and, instead, requiring JTPA entities to follow GAAP and section 108(a) 
of the Act. In addition, a few commenters requested guidance on the use 
of intake cost pools. Several commenters raised questions about the 
proper charging of title II-B administrative costs at the State level.
    Several commenters also raised questions about the ``benefits 
received'' language of paragraph (a) in Sec. 627.440, which requires 
all JTPA costs to be charged to the benefitting programs and cost 
categories based on benefits received. That language has been a part of 
the JTPA regulations since the inception of the program. A few 
commenters recommended that this paragraph should specifically allow 
cost pools.
    The ACP language contained in Sec. 627.440(f) of the interim final 
rule was not intended to eliminate the use of ``true cost pools'' in 
accounting for the costs of JTPA programs. It was also not intended to 
go beyond the requirements of section 108(a) of the Act, GAAP, 
paragraph (a) of this section or similar provisions in OMB Circular A-
87. The final rule removes the specific ACP provisions in paragraph (f) 
and adds a new sentence on cost pools within paragraph (a). The new 
sentence is intended to be consistent with the A-87 meaning and 
treatment of cost pools.
    JTPA entities may continue to use ACP's. They may also continue to 
use indirect cost pools, training cost pools, intake cost pools, pools 
for supplies expense, and any other pool they find beneficial to have 
in their accounting system, including intermediate cost pools for the 
recording and temporary accumulation of joint or similar types of 
costs, pending distribution (allocation) at a later date to the 
benefitting cost objectives, e.g., programs and/or JTPA cost 
categories.
    Having, or using, a JTPA ACP has never been an issue and is not one 
now. The issue is how to distribute or allocate those accumulated costs 
back to the benefitting programs and whether allocation methodologies 
other than ``benefits received'' by each of the benefitting programs 
can be used. The ``old'' JTPA regulations did not address this issue. 
Since the 1992 Amendments directly incorporate the requirement to 
follow GAAP, and GAAP requires costs to be charged based on ``benefits 
received,'' the basic issue is whether the Department can waive a 
specific statutory requirement, especially when it affects up to 20 
percent of the funds.
    It is the Department's experience that allocation based on 
``benefits received'' has not added much workload burden and 
alternative methodologies have been developed by most JTPA entities. 
For many JTPA entities, allocating administrative costs based on each 
program's share of total direct costs, salaries and fringe benefits, or 
total program costs compared to the total direct costs, total salaries 
and fringe benefits, or total costs of all programs administered by an 
entity are acceptable methodologies. The Department cautions, however, 
that some of these methodologies may not be acceptable for particular 
JTPA entities. Each organization is different and costs, particularly 
direct costs, are charged differently. It will require a self-
examination by each entity to determine the best approach. Assistance 
can also be obtained from the State's or SDA's auditor. The use of 
financial-based methodologies is encouraged; however, the Department 
will accept any treatment of pooled costs and allocation methodologies 
that are consistent with GAAP applicable in each State. The Department 
cautions that a methodology that is based solely on contribution to the 
pool may be questioned in audits.
    Finally, in response to the questions about the proper charging of 
title II-B administrative costs at the State level, Sec. 627.440(b) 
establishes the JTPA cost objectives for State-administered programs 
and the State's overall administration of title II activities. To 
clarify this issue, however, Sec. 627.440(b)(10) is revised in the 
final rule to specifically include State administrative costs 
associated with title II-B.
Classification of Costs
    Section 627.440 establishes the minimum levels of accountability 
for JTPA funds, provides the Secretary's definitions of the cost 
categories, and provides specific treatment for the classification of 
certain types of costs that have frequently been at issue in the JTPA 
system.
    At Sec. 627.440(c)(2), the regulations provide that incentive 
funds, both title II-A and II-C, received by an SDA may be combined and 
used without regard to cost categories or cost limitations. A number of 
commenters on this provision were pleased with the treatment accorded 
incentive funds, however, several commenters appeared to have missed or 
misread this provision. No change is made to the final rule.
    Within the definitions of the JTPA cost categories, at 
Sec. 627.440(d), a number of comments expressed concern about the 
treatment of tuition, work experience wages, insurance, and the 
difference between public information costs and the costs of outreach. 
Another frequent comment concerned the treatment of project directors 
and other positions that perform both administrative and program 
functions. Commenters on this subject fell into two groups. One group, 
which appeared to have missed the provisions of paragraph (e)(1), 
argued that the costs of such positions should not all be charged to 
administration. Some requested that such positions be charged entirely 
to training. The other group, focusing on paragraph (e)(1), commented 
on the burden and mechanics of time distribution.
    The Department agrees that the language in the preamble of the 
interim final rule concerning tuition was somewhat inconsistent and 
more restrictive than this section of the regulations. The Department's 
intent is to permit costs frequently associated with tuition costs, 
such as entrance fees, to also be charged to the direct training 
category. The Department believes that the regulation adequately 
expresses this intent. In addition, tuition, entrance fees, and other 
usual and customary fees of other educational institutions, such as 
postsecondary vocational institutions specified at section 481(c) of 
the Higher Education Act, are another example of payments to vendors 
that are appropriately charged to the direct training category. The 
final rule removes the reference to section 141(d)(3)(B) of the Act to 
clarify that such payments to any educational institution in a vendor 
relationship that also satisfies the other criteria of paragraph 
(d)(1)(vi)(B), are direct training costs.
    Where tuition is part of a subrecipient agreement, rather than a 
vendor relationship, and the agreement also includes other components, 
the costs of tuition are chargeable to the direct training category.
    A new paragraph (d)(1)(vii) is added to the final rule specifying 
that payments to participants that represent hours spent in a direct 
training activity (such as work experience) are direct training costs. 
In addition, the word ``insurance'' is removed from the definition of 
administration since this is a type of cost that should be charged or 
allocated to each of the benefitting categories.
    Some commenters raised the question of how the costs of curriculum 
development or training materials should be charged. The Department 
believes that these costs are properly charged to the direct training 
cost category.
    A few comments were received on public relations costs versus the 
costs of outreach. These comments tended to view public relations as an 
outreach cost and recommended that it be charged to the training 
related and supportive services category. The Department agrees that 
public relations can be an effective tool that enhances outreach 
activity, but also believes that the costs of general public relations 
is more appropriately a part of the overall costs of administration. No 
change is made in the final rule.
    The Department also agrees with commenters that time distribution 
should be reasonable and not burdensome and that alternative 
distribution bases should be allowable. Language is added to paragraphs 
(d)(1)(i), (d)(3)(i), and (e)(1) to provide that other equitable cost 
allocation methods may be used. Other equitable cost allocation methods 
may be either financial based or non-financial based methods.
Limitations on Certain Costs
    Section 627.445(d) of the interim final rule clarified the 
provision made in section 141(d)(3)(C) of the Act for excluding 
administrative costs incurred by CBO's or non-profit organizations from 
the SDA's administrative cost limitation under certain criteria and 
conditions specified in the Amendments. A number of commenters 
responded to that provision and regulatory clarification. Most of these 
commenters incorrectly perceived the 10-percent limitation as an 
absolute ceiling on administrative costs for CBO's and other non-profit 
service providers and requested relief from that ceiling. Other 
commenters raised questions of whether the 90/10 provisions were based 
on budget or actual expenditures and the effect on the 90/10 provision 
if more than 10 percent is expended by the CBO or other non-profit 
service provider for administrative costs.
    The Department emphasizes that the provisions of section 
141(d)(3)(C) of the Act and paragraph (d) of the regulations do not 
constitute a mandatory ceiling on administrative costs for CBO's and 
other non-profit service providers. The relief provisions apply to the 
SDA's administrative cost limitation and are only applicable for those 
situations in which the SDA and the CBO or other non-profit service 
provider agree to the 90/10 arrangement. Where such agreement is 
reached, the SDA may avail itself of the relief to total administrative 
costs only if the actual expenditures of the CBO or other non-profit 
service provider conforms to the 90/10 provisions. Costs charged to the 
JTPA program for the costs of a CBO or other non-profit service 
provider that are for less than 90 percent for direct training and 
training-related and supportive services costs or for more than 10 
percent for administrative costs negate the applicability of this 
provision.
    No changes other than grammar and deletion of the word ``private'' 
are made to this section.
Program Income
    Section 627.450 contains a definition of what is and what is not 
program income for JTPA purposes, including the incorporation of the 
new provisions of section 141(m) of the Act, and establishes timeframes 
and requirements for the treatment and use of program income. The JTPA 
cost categories and the administrative cost limitations are also made 
applicable to program income.
    A number of commenters responded to the provisions of this section. 
The comments contained a number of suggestions, including: That the 
Department should adopt the OMB Circular A-102 definition of program 
income; that program income should not be subject to the cost 
categories or administrative cost limitation; and that the regulations 
should eliminate the presumption that a contractor is entitled to the 
earned revenues by law, especially a contractor with whom the State or 
SDA is no longer contracting. Other commenters raised the question of 
whether earned program income must be used for the same program or 
subtitle that earned it and still others requested clarification of the 
time frame for use of program income.
    It is the Department's intent to adopt the basic A-102 definition 
of program income and to add to that definition the specific provisions 
of section 141(m) of the Act. In addition, the Department recognizes 
that the potential to earn significant amounts of program income exists 
within the Act and these regulations. To avoid the possibility of 
creating windfalls of administrative funds available to entities that 
choose to use the new provisions in such a manner, the Department is 
imposing the administrative cost limitation on program income.
    Section 141(m) of the Act specifies that program income may be 
retained by the entity that earned it and used for program purposes. 
The Department believes that the regulations, as written, are 
consistent with the statutory provision and that there is no authority 
to empower any other entity to use the funds, as long as the entity 
that earned the program income uses the funds for program purposes.
    In response to the questions about whether program income must be 
used for the same program or subtitle that earned it, or if it may be 
used for any JTPA program or title, the Department agrees that 
clarification is needed. While the interim final regulations limited 
the use of program income to the particular JTPA grant or subgrant 
under which it was earned, it is recognized that particular grants or 
subgrants may provide funds for multiple programs or subtitles. 
Therefore, paragraph (c) of this section of the final rule is amended 
to also limit its use to the JTPA title under which it was earned. In 
addition, language is added to paragraph (c)(3) to clarify that the 
time period for the use of program income is the funding period, 
usually up to three years.
    It was brought to the Department's attention that section 141(m) of 
the Act does not exempt interest earnings by States from the provisions 
applicable to income under the Act and, therefore, the regulations 
could not either. The Department agrees, however, the State is required 
by the CMIA, codified at 31 U.S.C. 6503(c), to pay interest on advanced 
funds from the time that the funds are deposited by the United States 
to the State's account until the time that the funds are paid out by 
the State for program purposes.
    The Department believes that it is equitable that the State be able 
to use the interest it may earn on these funds towards satisfying the 
interest debt created by the CMIA and does not desire to cause States 
to both meet any interest liability under the CMIA and provide 
additional JTPA program services with the same interest earnings. 
Therefore, paragraph (a)(v) is revised in the final rule to eliminate 
the exception for interest earnings by States and paragraph (c), Use of 
program income, is revised to permit the State's use of such income to 
meet its CMIA liability. In addition, the application of the 
administrative cost limitations in paragraph (c) is also revised to 
exempt program income used by States to meet its CMIA liability from 
the administrative cost limitation.
Reports Required
    Section 627.455 requires financial reporting to be on a quarterly 
basis and costs to be reported on an accrual basis by year of 
appropriation. A few commenters asked whether participants must also be 
reported by year of appropriation and several commenters asked whether 
costs may be charged to the oldest available appropriation, i.e., 
first-in, first-out (FIFO) basis.
    As specified in Sec. 627.455(a), reporting instructions are to be 
issued by the Secretary. The statutory requirement to report by year of 
appropriation is limited to financial data. With regard to FIFOing of 
costs, the Department has no objections to an entity FIFOing costs it 
incurs itself as long as obligational authority exists for multiple 
years and the costs are for the same purposes and under the same terms 
and conditions that accompanied each year's obligational authority. 
This approach limits FIFOing to each individual JTPA entity and does 
not include one entity FIFOing costs incurred by another entity, even 
if the other entity is a subrecipient of the original one. Restated, 
once a JTPA cost is recorded by any subrecipient, it must be recorded 
against a given year of funds and remains a cost charged to that year 
of funds. It may not be recorded or reported by another entity against 
a different year of funds. No changes are made to the final rule.
Requirements for Records
    Section 627.460(a) imposes the record retention requirements of 
section 165(e) of the Act on State records and provides the State two 
options for subrecipient records. A few commenters encouraged the 
Department to drop the option for subrecipient records and require all 
subrecipients to comply with the record retention provisions imposed on 
subrecipients by the Act.
    Since the Act is unclear about its effect on subrecipient records, 
it is the Department's intent, by providing an option for retention of 
subrecipient records, to allow each State to determine if subrecipients 
of the State should each have its own clock for the starting point for 
record retention, rather than having all records of all subrecipients 
throughout a State controlled by the one State clock. This option 
avoids requiring all subrecipients in a State to maintain records 
beyond the prescribed period just because a claim, audit, or litigation 
has started that affects only one or a few subrecipients. It also 
enables JTPA subrecipients to maintain and dispose of JTPA records in 
the same timeframes that apply to other records of the subrecipient 
that are covered by applicable OMB Circulars. It is expected that 
either approach will result in most JTPA records, other than property 
records, being maintained for the same total 5-year period of time. 
Subrecipients that are opposed to this approach should encourage their 
State to not adopt the option provided.
    Paragraph (a)(2) of this section is changed in the final rule to 
add the statutory requirement for property records to be retained for 
three years after final disposition.
    Section 627.460(d) of the interim final regulations authorizes the 
substitution of copies made by microfilming for original records. A few 
commenters raised questions about the allowability of retaining records 
in forms other than microfilming, such as computer imaging or scanning, 
and other types of computer generated data and electronic files. In 
response to these comments, the Department has revised this provision. 
Instead of authorizing a particular medium for record retention, the 
revised provision sets a standard that the method of retention must be 
sufficient to assure that the record is useable as evidence in an audit 
or any other JTPA proceeding. As before, the substitution of 
microfilmed or photocopied records can continue to be used since these 
media are generally accepted as admissible for evidentiary purposes. 
The Department takes no position on the use of records stored on 
electronic media and the revised regulation neither authorizes nor 
specifically forbids their use. If electronic storage media were to be 
considered for use, the user would have to be certain that there are 
sufficient security safeguards and protections against tampering so 
that a court would accept the record as evidence in a proceeding. As in 
any case where a record is maintained, the burden of producing and 
authenticating it is on the custodian of the record and the failure to 
authenticate the record will lead to the custodian's being unable to 
use the record for any evidentiary purpose. Thus, if an SDA maintains 
its participant eligibility records on computer files and is unable to 
show that the records were secure or were tamperproof, the records 
could not be used to prove that participants were eligible for JTPA 
services.
Public Access to Records
    Section 165(a)(4) of the Act requires recipients to make available 
to the public upon request certain records which are maintained by the 
recipients pursuant to section 165(a)(1) of the Act. Section 637.463 of 
the interim final rule was intended to merely reflect the statutory 
requirement.
    A number of comments were received expressing concerns that such 
disclosure would result in the invasion of personal privacy and would 
breach basic notions of customer confidentiality. In this same regard, 
some comments contended that this requirement conflicts with State 
privacy laws and that the statement in the regulation with this 
requirement applied ``notwithstanding the provisions of state or local 
law'' goes beyond the plain meaning of section 165(a)(4) of the Act. 
Another comment asked for a definition of the word ``clearly'' in the 
term ``clearly unwarranted invasion of privacy''. One comment 
questioned the provision in the regulation ``excepting'' recipient and 
subrecipient records from the Freedom of Information Act (5 U.S.C. 
552). Several comments requested that the regulations place reasonable 
time and place restrictions on the right of access.
    Section 627.463 is revised to follow more closely the statutory 
language. There is no intent to modify or expand on the plain meaning 
of the statute.
    It is clear that reasonable conditions can be placed on the 
mechanics of providing access, including time and place restrictions. 
It is preferable that such management details be developed at the State 
and local levels and not in these regulations.
    The statute and the regulations permit customer confidentiality by 
excluding from mandatory disclosure information which would constitute 
a clearly unwarranted invasion of personal privacy. A Federal 
definition of that phrase is unnecessary since it is a term best 
defined in local situations by State or local law. A State or local 
privacy law or requirement which prohibits or restricts the disclosure 
of information which constitutes an unwarranted invasion of personal 
privacy would not be in conflict with the JTPA public access 
requirement. On the other hand, the Act's requirement of public access 
is a statutory condition to the receipt of grant funds and a 
conflicting State requirement does not excuse a failure to comply. In 
other words, if a State or local law applicable to all records exempts 
certain specific kinds of identifying information (e.g., name, address, 
social security number or other personal identifying information), it 
could be applied to restrict the disclosure of some of the information 
in a JTPA applicant's or participant's file. On the other hand, a State 
or local law which prohibited disclosure of all employment and training 
records would sweep so broadly that it would conflict with the Act's 
disclosure requirement. In order to emphasize that requirement, the 
informational provision in the regulation that the public access 
requirement applies ``notwithstanding the provision of the State or 
local law'' is retained in the final regulation.
    The ``informational'' statement regarding the Freedom of 
Information Act produced some confusion and is removed from the final 
regulation. The only reason this statement was put into the interim 
final regulation was that the coverage, or non-coverage, of the Federal 
Freedom of Information Act has been a recurring subject of inquiry. The 
Freedom of Information Act applies to the disclosure of records in the 
custody of Federal agencies. In like manner, the Privacy Act (5 U.S.C. 
552a) applies to records described in section 165 of the Act. Section 
627.460 records are not Federal records until submitted to the 
Secretary. Until then, they are not covered by federal ``freedom of 
information'' or ``privacy'' requirements.
Property Management Standards
    Section 627.465 reflects the requirements of section 141(r) of the 
Act, which provides that the Federal requirements generally applicable 
to Federal grants to States and local governments are the requirements 
governing the title, use, and disposition of real property, equipment, 
and supplies purchased with JTPA funds.
    The Federal requirements generally applicable to Federal grants to 
States and local governments are codified for Department of Labor grant 
programs at 29 CFR part 97. Therefore, the provisions of those 
regulations applicable to property requirements are incorporated into 
this section for governmental recipients and subrecipients.
    The Federal requirements generally applicable to Federal grants to 
States and local governments provide that subrecipients that are 
institutions of higher education, hospitals, and other nonprofit 
organizations will follow the Federal agency regulations that implement 
OMB Circular A-110, as codified in DOL regulations at 29 CFR part 95 
(59 FR 38270 (July 27, 1994), therefore, those requirements are also 
incorporated into this section for those types of entities. It is 
expected that this approach will provide administrative relief for such 
subrecipients since it will prevent an organization administering other 
Federal grants or subgrants from having to follow two different sets of 
requirements. In addition, the Federal requirements applicable to 
intangible personal property have been incorporated into this section.
    There are no Federal requirements generally applicable to 
commercial subrecipients; therefore, Sec. 627.465(c) provides specific 
JTPA requirements for these organizations.
    A small number of commenters raised the question of whether prior 
approval by the Department of Labor is necessary for property 
acquisitions. Language is added to paragraphs (a) and (b) of this 
section to waive any Department of Labor prior approvals relative to 
property acquisitions.
    Section 627.465 specifically provides that the new rules apply only 
to property acquired after July 1, 1993. Several commenters inquired 
about the rules applicable to property acquired prior to July 1, 1993. 
It was the Department's intent in the interim final rule that such 
property would continue to be governed by the rules in effect at the 
time the property was acquired. To ensure that this intent is explicit, 
the previous JTPA regulations on property are added as a new paragraph 
(e) in the final rule. The only change is the citation for records 
retention requirements.
    The JTPA regulations in effect prior to July 1, 1993, provided that 
the Governor was to maintain accountability for property in accordance 
with State procedures, but applied three specific Federal requirements: 
(1) A reservation of the Secretary's rights to such property; (2) 
record retention requirements; and (3) either reimbursement to the JTPA 
program of the fair-market value for any unneeded JTPA acquired 
property retained for use in a non-JTPA program or the use of proceeds 
from the sale of such property used for JTPA purposes.
    It is recognized that the Department has no rights in property 
acquired with title II or III funds awarded to States from the 
inception of JTPA in 1983 through July 1, 1993, but that the Department 
does have rights in property transferred to JTPA from CETA. Therefore, 
as long as the proceeds from the sale of JTPA acquired property or the 
fair-market value of such property transferred to other uses are 
expended for JTPA purposes and records maintained accordingly, the 
Department views any further requirements governing such property to be 
the responsibility of the Governor. For CETA-acquired property 
transferred to JTPA, the Department's rights in such property are 
specified in the current Department regulations implementing the 
applicable OMB Circulars. Recipients and subrecipients are expected to 
follow those regulations in disposing of CETA-acquired property.
Performance Standards
    In addition to adult and youth programs under title II-A and II-C 
and dislocated workers under title III, Sec. 627.470 provides for the 
establishment of performance standards for older worker programs under 
section 204(d) of the Act. The standards for both adults and youth may 
include standards for employment competencies which are to be based on 
such factors as entry-level skills and other hiring requirements. The 
purpose of the performance standards guidance set forth in these 
regulations is to establish the general requirements for implementing 
title II-A, title II-C, and title III performance standards. Specific 
policy requirements will be developed in consultation with the JTPA 
system and will be subject to a formal public comment process.
    Several commenters asked when the new performance standards 
requirements would take effect. Current performance standards measures 
and implementing provisions, as specified in TEGL's 10-89, 7-91, and 
11-92, will remain in effect through Program Year (PY) 1993. In 
accordance with the transition provision of section 701(b) of the JTPA 
Amendments, revised performance standards were published July 11, 1994 
(59 FR 35381 (July 11, 1994); standards pertaining to 6-month retention 
in unsubsidized employment shall not take effect before July 1, 1995.
    In regard to setting 6-month retention standards, several 
commenters advised the Department to conduct a study to identify and 
address technical issues related to using Unemployment Insurance (UI) 
wage records to document placement and retention of participants. In 
preparation for developing and implementing policy in this regard, the 
Department of Labor has already undertaken a study to examine the 
technical and operational issues associated with the use of UI wage 
records for the purpose of implementing performance standards related 
to employment retention. The study was conducted in 16 States and 
focused on such issues as quality of data, timing for incentives, and 
out-of-State and uncovered employment. The results of the study will be 
available in the fall of 1994 and will provide important input into the 
decisionmaking process and guidelines for implementing the 6-month 
retention standard. The Department recognizes that there will be a 
variety of issues to be addressed in developing and implementing a 
retention standard. When the results of the study are available, the 
Department will work with State and local staff to introduce, wherever 
feasible, alternative post-program measures.
    In addition, it is important to note that interim credit, which a 
few commenters believed should be incorporated in the performance 
standards, will be considered in the development process. The 
Department emphasizes, however, that there is no maximum participation 
limit and no Department-imposed requirement that everyone be terminated 
at the end of a given program year. Performance standards are based 
only on those individuals who do, in fact, terminate.
    A number of commenters provided advice on implementing the 
performance standards required under section 204(d) of the Act, which 
implies that these standards are to parallel those developed for title 
II programs. While the specifics of older worker performance standards 
will not be addressed in the regulations, the process for developing 
these standards began in the summer of 1993. Program experts and 
advocate groups for older workers were consulted in developing 
performance standards for older workers programs.
    In addition, in response to other comments recommending adoption of 
performance standards for adults based on competency attainment, it is 
important to note that skill acquisition for adults is included among 
several possible performance standards factors identified in section 
106(b)(3)(E) of the Act. In order to insure that any standards 
established for skill acquisition are fair and practical, the 
Department has begun to collect relevant administrative data and also 
to examine experience with youth employment competencies and 
initiatives, such as the Secretary's Commission on Achieving Necessary 
Skills (SCANS) and apprenticeship programs. In addition, beginning in 
1994 the Department will consult with academics and program 
practitioners to determine practical approaches to defining adult 
competencies. Performance standards for adult skill acquisition will be 
issued in PY 1996, at the earliest.
    With the exception of the older worker program, the Governor is 
responsible for establishing an incentive policy that rewards 
performance in title II programs and for: (1) Establishing a process 
for adjusting performance standards to account for local conditions, 
and (2) providing technical assistance to SDA's which fail to meet 
performance standards for a given program year.
    Several commenters voiced concern that a performance standard 
relating to costs might be required. Accordingly, Sec. 627.470(c)(2) is 
amended to clarify that Governors may not tie standards relating gross 
program expenditures to performance measures in making incentive 
awards. Governors are encouraged to make full use of available 
expenditure and participant data in monitoring SDA fiscal practices; at 
the same time, SDA's should closely monitor local service providers. 
States and SDA's are encouraged to explore ways of relating overall 
costs of job training to long-term employment, earnings and reductions 
in welfare.
    The final regulation also incorporates the requirement, in section 
106(j) of the Act, for the imposition of a reorganization plan on SDA's 
failing for 2 consecutive years to meet an appropriate proportion of 
the performance standards, with the exception of the older worker 
programs. The Governor is to notify the Secretary and the SDA of the 
continued failure and to impose a reorganization plan within 90 days of 
the end of the second program year; otherwise, the Secretary will 
develop and impose the reorganization plan. As mentioned before, with 
regard to the 90-day deadline for imposing sanctions, a few commenters 
believed that 90 days was insufficient time for States to evaluate and 
implement an effective reorganization plan. In addition, a few 
commenters sought clarification of what might constitute the imposition 
of a reorganization plan. The Department acknowledges that there may be 
some difficulty in timing but points to the language in section 
106(j)(5)(A) of the Act. In response to the latter comments and in an 
attempt to alleviate the level of concern about the imposition of a 
reorganization plan, the final rule is amended by adding a new 
paragraph (c)(4)(iv) to Sec. 627.470 which provides the minimum 
requirements for the imposition of a reorganization plan. The Secretary 
will give the Governor and the SDA 30 days in which to comment to the 
Secretary on the proposed reorganization plan prior to its imposition. 
Further, the Secretary will recapture or withhold up to one-fifth of 
the State's administration set-aside to provide technical assistance to 
an SDA where the Secretary has imposed the reorganization plan or where 
the Governor has not provided appropriate technical assistance.
Reorganization Plan Appeals
    No comments were received on the provisions of this section and no 
changes are made in the final rule.
Oversight and Monitoring
    Several comments were received on oversight and monitoring. Section 
627.475 summarizes the roles of each administrative level in a 
comprehensive monitoring and oversight system. The monitoring 
provisions are expanded to require the Governor to develop a monitoring 
plan which requires that each SDA and SSG be monitored at least once 
annually. The plan must also require the collection and review of 
sufficient information to enable the Governor to determine whether 
substate entities have demonstrated substantial compliance with the 
oversight requirement to permit a waiver of the imposition of sanctions 
authorized under section 164(e) of the Act, or to determine whether a 
job training plan should be disapproved pursuant to section 105 of the 
Act. The regulations also require the Governor to be responsible for 
issuing standards to SDA's and SSG's for the development of a local 
monitoring plan. Additionally, the regulations require the Governor to 
develop general standards for PIC oversight responsibility for 
inclusion in the Governor's coordination and special services plans.
    One commenter requested that the Department of Labor provide 
greater details regarding its own monitoring responsibilities as well 
as those of the States. The Department is in the process of developing 
guidance in this area and, when completed, will provide more detailed 
information on monitoring and oversight through administrative 
issuances.
    One commenter observed that the emphasis in paragraph (b)(3) was 
unnecessarily on criteria for disapproval of the plan when, in fact, 
the Act called for the Governor to approve a plan unless it did not 
meet certain criteria. The commenter suggested that paragraph (b)(3) be 
revised to read ``Determines that a job training plan shall be 
disapproved if the plan does not meet the criteria established in 
section 105(b)(1) of the Act which states in part, the Governor shall 
approve the job training plan or modification thereof unless he finds 
that the plan does meet the criteria found in section 105(b)(1)''. The 
Department concurs with this comment and, although the Department did 
not adopt the suggestion in toto, paragraph (b)(3) is revised to better 
reflect the statutory criteria for disapproval of the job training 
plan.
    A few commenters requested clarification of what elements of an 
SDA's and SSG's operation must be monitored not less than once 
annually. The Department believes that an effective monitoring program 
is important to improving or maintaining high levels of program 
performance. The Department wishes to provide states with flexibility 
in designing the nature and extent of their monitoring programs while 
assuring that monitoring is thorough. Paragraph (b)(5) is revised to 
indicate that all aspects of the SDA and SSG program must be reviewed 
annually, although the Department wishes to clarify that the degree of 
emphasis placed upon the review of each area of a program may vary from 
year to year.
    A few commenters expressed concern with the PIC responsibility for 
oversight as it relates to the Governor and the chief elected official. 
The commenters suggested that the PIC should be allowed flexibility to 
determine the type and amount of PIC oversight. Section 103(a) of the 
Act states that it shall be the responsibility of the PIC to provide 
policy guidance for, and exercise oversight with respect to, activities 
under the job training plan for its SDA in partnership with the unit or 
units of local government within its SDA. The Department agrees that it 
is primarily the responsibility of the PIC to determine its monitoring 
and oversight role. While the regulations give the Governor a role in 
PIC oversight in an overall context, the Department does not expect any 
guidelines issued by the Governor to be overly prescriptive. Therefore, 
the PIC should have a great deal of flexibility in setting its 
monitoring role. No change is made to the final regulation.
Governor's Authority to Remedy Violations
    In reviewing the interim final regulations, the Department realized 
that it had not fully implemented section 164(b) of the Act in the 
regulations. Sections 627.477 and 627.607 are added to complete the 
regulatory implementation of section 164(b) regarding the Governor's 
actions where there are substantial violations of the Act or the 
regulations and corrective actions have not been taken. Conforming 
changes have been made in Secs. 627.601(b), 627.471(a) and 627.702. 
These added provisions and changes are not intended to modify or expand 
on the plain meaning of the statute.
Audits and Audit Resolution
    Because there are both non-profit and commercial organizations 
which are direct recipients of JTPA Title III program funds, the 
language at Sec. 627.480(a)(2) and (3) is modified by the addition of 
the term ``recipients'', as well as by substituting the term 
``organizations'' for ``subrecipient'' in paragraph (a)(2). The interim 
final regulations implied that non-profit and commercial organizations 
can only be subrecipients.
Audits of Commercial Organizations
    Several commenters raised questions concerning the audit 
requirement for ``commercial organizations''.
    A few commenters wanted clarification concerning whether or not the 
audits of proprietary schools, which are required by the U.S. 
Department of Education because of their involvement with Pell grants 
and other subsidies, would satisfy the JTPA audit requirement. One 
commenter was concerned that the regulation did not provide a timeframe 
within which these audits were to be completed, and another expressed 
concern that the requirement for an annual audit was more frequent than 
that for non-profit institutions. The regulation, at 
Sec. 627.480(a)(3), is amended to provide for audit timeframes and 
frequencies that are consistent with the OMB Circular A-133 
requirements for non-profit organizations. This provision also provides 
the option of either a Federal funds audit or an organization-wide 
audit as long as the audit includes financial and compliance coverage 
of the JTPA program within its scope. The option of a Federal funds 
audit should be satisfied by the audit required by the U.S. Department 
of Education so long as it includes financial and compliance coverage 
of the JTPA program within its scope.
    A few commenters requested clarification concerning the audit 
requirement for OJT employers, commercial off-the-shelf training 
packages, tuition-based individual referral contracts, and other 
``vendor'' type arrangements. The regulation imposes an audit 
requirement only on organizations that are ``subrecipients'' and not on 
those that are ``vendors''.
    A few commenters asked if the regulation prohibited a Governor 
(this would also apply to any awarding agency) from procuring a program 
specific audit for commercial organizations and directing them to 
exclude JTPA from their organization-wide audit. The regulation only 
talks to the requirement to have an audit done, not to who will procure 
and/or conduct the audit. If the awarding agency and its subrecipient 
agree that the awarding agency will procure and/or conduct the audit, 
the requirement of the regulation would be satisfied.
Responsibility for Subrecipient Audits
    A few commenters had difficulty with the language at 
Sec. 627.480(d). One of these commenters thought that the regulation 
went beyond OMB Circular A-128 and required that debt collection be 
completed within the 6-month resolution period. This is not the case. 
When costs are disallowed and debt collection is the appropriate 
sanction, those efforts should be initiated or started within the 6 
month period. This often is accomplished by including appropriate 
language in a final determination. However, the actual repayment most 
often occurs after the 6-month resolution period. Also, debt collection 
efforts are often put on hold when a final determination is appealed.
    To address these concerns, the parenthetical reference in paragraph 
(d)(2) is moved to the end, and the phrase ``where appropriate,'' is 
inserted. Paragraph (d)(3) is divided into two sentences.
Waivers of Liability
    One commenter pointed out a conflict between Sec. 627.480(f) and 
Sec. 627.704(a). Paragraph (f) is removed from this section and added 
to Sec. 627.704. The remaining paragraphs of Sec. 627.480 are 
redesignated.
Stand-in Costs
    There were a number of commenters who raised concerns and questions 
about Sec. 627.480(g), which is now redesignated as paragraph (f). 
Several of these commenters were among those who commented on the 
definition of ``stand-in costs''.
    A few commenters indicated that stand-in costs should not have to 
be from the same cost category as the unallowable costs. Others pointed 
out the discrepancy between the definition and this regulation 
concerning the time when such costs were incurred. As a result, the 
last sentence of redesignated paragraph (f) is revised so that both it 
and the definition at Sec. 626.5 state that the costs are to be from 
the same program year and that the substitution cannot result in a 
violation of the applicable cost limitations.
    Several commenters stated that ``stand-in costs'' should be allowed 
as substitutes regardless of the year or program/title that generates 
them. Such an interpretation runs counter to the intuitive concept of 
substituting to make whole the program that bore the cost of the 
misexpenditures. It is also contrary to ETA's interpretation of the 
General Accounting Office (GAO) Comptroller General decision which is 
the basis for the position on ``stand-in'' costs. The GAO-decision 
indicates that, when an audit reveals total allowable program costs 
which exceed the total amount authorized and paid with program funds, 
the resolving agency is obligated to accept those program costs as 
substitutes for disallowed costs. This is true because funds which 
become available due to the disallowance of costs should be treated as 
funds never expended by the auditee. Thus, the stand-in process 
constitutes a part of the totality of allowed and disallowed costs 
which occurs at the audit resolution stage before a collectible debt is 
established. The regulation, at Sec. 627.480(f), is written to 
incorporate this concept of substitution for unallowable costs incurred 
by the auditee when the stand-in costs are reported (on the JTPA 
quarterly financial report form) and accounted for in the auditee's 
financial system, and are included within the scope of the auditee's 
audit report. Although potential stand-in costs are aggregated for 
reporting purposes only, this does not create a pool of stand-in costs 
at the higher tier when funds are merely passed through from one level 
to the next (e.g., State to SDA or other government entity). When 
``stand-in'' costs are reported on the JTPA quarterly financial report 
and included within the scope of an entity's audit, they are readily 
identifiable and available to substitute for unallowable costs 
identified in the same report. This is important because by the time an 
audit report is finally resolved, the three-year availability period 
for the costs disallowed has often lapsed or is nearing its end. By 
having contemporaneous allowable JTPA costs incurred (but paid for with 
local resources) during the same period as the unallowable costs, there 
is no question about the propriety of the substitution.
    A few commenters raised questions concerning the requirement to 
report ``stand-in costs''. A few asked if they needed to be reported on 
the quarterly reports required by the Department. One asked if these 
costs could be reported after the fact only when needed, instead of 
being reported whether or not an SDA is permitted to and/or needs use 
them. Others suggested that they should be allowed even if not 
reported. One suggested that the requirement to report exceeded the 
statutory requirement that they be recorded. As explained above, it is 
ETA's position that ``stand-in costs'' must be subjected to audit 
coverage in order to be accepted. Imposing the requirement that the 
costs be reported and providing a line for these costs on the JTPA 
quarterly financial report(s), insures that these costs are included 
within the scope of the audit report.
    A few commenters suggested that the JTPA compliance supplements for 
OMB Circulars A-128 and A-133 audits be revised to require that such 
audits include a separate schedule for ``stand-in costs'' and to 
specify the documentation requirements for same. The documentation 
requirements, including retention requirements, are the same as for all 
JTPA costs incurred. While the Department is not in a position to 
dictate whether A-128 and A-133 audits include an additional schedule, 
when the compliance supplements are revised, it may be possible to 
suggest how ``stand-in costs'' should be treated in such audits.
Direct Appeals by SDA's
    Several commenters suggested that Sec. 627.480(h) should be revised 
to provide the right of a direct appeal by an SDA, especially in those 
instances when a State chooses not to appeal. However, the initial and 
final determination process utilized by the ETA Grant Officer imposes a 
sanction on the direct recipient of funds from ETA, and it is that 
recipient that ETA holds liable for the sanction. If the entity upon 
whom the sanction is imposed chooses not to appeal, there is no dispute 
between that entity and ETA. If an appeal of a Grant Officer's final 
determination is taken, affected subrecipients are permitted to 
intervene in the proceedings. An SDA has the right to appeal any 
adverse determination against it within the State appeal system.
Audit Resolution
    Section 627.481 is not changed from the interim final regulations. 
One commenter suggested that Sec. 627.481(a)(1) should permit direct 
recipients to have 6 months within which to submit their resolution 
report. The Department believes that to do so would mean that the 
recipient's audit would not be resolved with its awarding agency within 
the 6 months required by the OMB Circulars. Another commenter suggested 
that the title for the paragraph at Sec. 627.481(c) should be State 
level audit resolution. However, this paragraph also applies to 
resolution beyond the State level (e.g., the resolution of a service 
provider audit by an SDA). A third commenter suggested that the 
regulation at Sec. 627.481(c) should mandate that audit work papers be 
accessible to the auditee. Since these audits are procured by the 
auditee, it is within their purview, and not the Department's, to 
include requirements concerning work papers in their agreement with the 
auditors.
Closeout
    One commenter suggested that waiting 3 years (the full period 
during which funds are available for expenditure) to close out a grant 
that can be closed in 1 to 1\1/2\ years is confusing and unnecessary. 
It was also stated that this provision should allow closeout to occur 
as soon as all of the funds are expended or within 90 days after the 
end of the funding period. A second commenter suggested that the word 
``timely'' is a subjective term and that the provision should require 
closeout to occur within 90 days after the end of the funding period, 
unless the deadline is extended. This same commenter indicated that the 
regulation should be clear that closeouts are based on year of 
appropriation. Several of the comments indicated an apparent 
misunderstanding that Sec. 627.485 applies to subrecipient awards. In 
fact, this provision is intended to inform the direct recipients of the 
Department's intention to close out each annual grant agreement within 
a short period after the availability of the funds has lapsed. The 
Department has determined that it is much more appropriate and less 
confusing to close out all of the annual JTPA grant agreements 
(described at Sec. 627.405 as the funding document for an individual 
program year's funds) at the same time.
    One commenter suggested that the language in the last sentence of 
paragraph (b) should allow for additional revisions, as long as there 
is a good reason that is adequately documented; further, the commenter 
suggested such revisions could be handled through an increase or 
decrease in the ``carryover'' amount. The first sentence of the 
paragraph allows for a 90-day period within which revisions may be made 
without a requirement for justification. The second sentence allows the 
Grant Officer to extend the period for revisions if the recipient 
requests an extension and provides a justification for same. The 
Department sees no need for any change to this provision. Also, at the 
end of the three-year funding period, there are no ``carryover'' funds, 
only funds for which the three-year availability has lapsed. These 
funds must be returned in accordance with paragraph (c) if they have 
been drawn down, and will be deobligated by ETA.
Later Disallowances and Adjustments
    One commenter stated that the final rule should identify the period 
within which the Grant Officer has the authority to disallow costs. 
Such an action is not necessary. If an audit or review is conducted 
while the records are still available in accordance with the 
requirements of Sec. 627.460 (i.e., 3 years after submittal of the 
final expenditure report for the funding period) and there are 
unallowable costs, then the Grant Officer can disallow those costs.
Collection of Amounts Due
    One commenter indicated that this provision must acknowledge that 
there are processes at the local level which impede collection of 
disallowed costs and which prohibit collection efforts by the Federal 
Government (or State) during the time when the State (or local) 
collection actions are in process. Other sections of these regulations 
(e.g., Sec. 627.485) contain provisions which allow recipients to 
request additional time to complete such a process. However, once a 
Federal debt is established against a recipient, it is that direct 
recipient which the Department holds liable. The provision is not 
changed.
Grievances and Sanctions
    The interim final rule revised, redesignated, and reordered the 
regulatory provisions formerly found at 20 CFR part 29, Subpart D--
``Grievances, Investigations, and Hearings'' in a new part 627, 
subparts E, F, G, and H. The interim final regulations more clearly 
defined the various JTPA grievance procedures required to be 
established by section 144 of the Act. The procedures applicable to a 
particular grievance process level were consolidated into discrete 
subparts.

Subpart E--Grievance Procedures at the State and Local Level

    The new part 627, subpart E, sets forth the grievance procedures 
required at the State and SDA and SSG levels, including State review, 
that were generally found at 20 CFR 629.52.
    A commenter suggested that the reference to the handling of 
complaints alleging discrimination in Sec. 627.500(a) be made a 
separate paragraph.
    The Department agrees with the suggestion and Sec. 627.500 is 
revised to redesignate the last sentence in paragraph (a) as a new 
paragraph (b), Handling of discrimination complaints. In addition, 
paragraphs (b) and (c) are redesignated as paragraphs (c) and (d), 
respectively.
    A commenter observed that under the previous regulations, 
complaints involving fraud, waste, abuse, or criminal activity were to 
be reported to the Secretary, and that Sec. 627.500(b) of the interim 
final regulations now provides that such complaints are to be reported 
to the DOL OIG. The commenter's concern was that ETA might not be aware 
of, but had a need to know of, such complaints, and recommended that 
the regulations be amended to also include notification to ETA for such 
complaints. Another commenter suggested that complaints be reported 
concurrently to ETA and the OIG.
    The purpose of the interim final regulations was to ensure that 
criminal activity was directed to the OIG for resolution. Other 
processes set forth in the regulations for the handling of complaints 
are designed for non-criminal JTPA complaints. The provision at 
Sec. 627.500(b) is amended to provide for reporting criminal activity 
to the OIG, Office of Investigations through the Department's Incident 
Reporting System, with a copy simultaneously provided to ETA. Other 
non-criminal complaints will continue to be handled under the 
procedures set forth at part 627, subparts E and F, and through the 
Department's Incident Reporting System.
    A commenter recommended deleting Sec. 627.500(c)(2) concerning a 
private right of action with respect to alleged violations of JTPA 
statute or regulations in pursuing non-JTPA remedies since there is no 
statutory authority for the provision.
    The provision at Sec. 627.500(c)(2) is not a new provision. Prior 
to the interim final rule, it was set forth at 20 CFR 629.51(b)(3) 
since the March 15, 1983 regulations implementing JTPA. It does not 
preclude a private right of action if one exists, but rather indicates 
that nothing in the Act or in the regulations creates such a right. No 
change is made to the final rule.
    A commenter recommended that States, SDA's, and SSG's be required 
to develop their grievance procedures in such a way as to broadly 
inform participants under the JTPA system of their rights.
    The Department believes that the Act and regulations clearly set 
out the broad outlines of the grievance, hearings, and appeal rights 
under JTPA for interested parties. The specific complaint and grievance 
procedures to be followed are appropriately developed at the State and 
local level in accordance with the provisions of the Act and these 
regulations. Such procedures are routinely made available to 
participants upon entering the program, and to subrecipients and other 
interested parties. No change is made to the final rule.
    A commenter recommended that States should be required to establish 
timeframes for resolving complaints and recommended a 60-day time 
period.
    The Department expects that State, SDA and SSG grievance procedures 
already address this issue as an integral and necessary part of their 
procedures. In any case, the regulations already include a 60-day time 
period at Secs. 627.502(c) and 627.503 (a) and (c) of the interim final 
rule. Therefore, no change is made to the final rule.
    A commenter recommended that a neutral third party be included in 
the grievance processes at the State level under Sec. 627.501, and the 
SDA and SSG level under Sec. 627.502, to hear and act upon complaints. 
In addition, the commenter suggested that programs should be encouraged 
to take advantage of recent Federal initiatives related to mediation of 
disputes.
    The interim final regulations already provide for the use of 
neutrals in the JTPA grievance process in certain situations. For 
instance, such use is included in binding arbitration proceedings under 
the alternate procedure for handling labor standards violation under 
section 144 of the Act, and the alternative dispute resolution 
provisions at Sec. 627.805 available to parties to a complaint under 
Sec. 627.801, Procedures for filing a request for hearing. The 
regulations also provide for an independent review of complaints at the 
State level pursuant to the provisions at Sec. 627.503. No change is 
made to the final rule.
    A commenter recommended increased DOL participation in monitoring 
and handling complaint processes at the State and SDA and SSG levels, 
including regular participation in grievance hearings.
    The grievance procedures established pursuant to section 144 of the 
Act, and set forth at Secs. 627.501 and 627.502 of the interim final 
rule, are intended to ensure due process and to provide for the timely 
and orderly processing of JTPA complaints at the State and local 
levels. The regulations also provide for a State-level review of local 
grievances, as set forth at Sec. 627.503. There is also provision for 
Federal-level review of State and local-level complaints without 
decision at Secs. 627.601(a) and 627.605. It would be premature and 
improper to interject the Department into a State or local grievance 
process before it is completed. It would also create problems in the 
event that the Department was subsequently requested to review a 
complaint in which it had participated. The Department believes that 
the regulations set forth in the interim final rule are appropriate and 
consistent with the legislative provisions. Therefore, no change is 
made to the final rule.
    A commenter recommended that the time period for requesting a 
State-level review of a local complaint, provided under Sec. 627.503(c) 
of the interim final rule, be increased from 10 and 15 days to 30 days.
    Under the statutory provisions at section 144, and the regulatory 
provisions at part 627, subparts E, F, G and H, the grievance 
procedures established at the various levels are intended to provide 
the speedy processing of filed complaints. The Department believes that 
the timeframes established in the regulations are consistent with the 
statutory scheme. No change is made to the final rule.
    A commenter recommended including examples of independent reviewers 
at Sec. 627.503(b) pertaining to State level review of complaints.
    The Department does not believe that it is appropriate to include a 
laundry list of examples of possible independent reviewers in the 
regulations, but agrees that some clarification in this area is 
warranted. Section 627.503(b) is amended in the final rule to indicate 
that independent review should be conducted by a reviewer who is not 
connected with the JTPA program.
    A commenter recommended amending the employer-level grievance 
provisions at Sec. 627.504 to indicate that if an employer is required 
to use grievance procedures under a covered collective bargaining 
agreement, then those should be the operative procedures for the 
handling of JTPA complaints at that level. In addition, it was 
recommended that if no collective bargaining agreement exists, 
participants should be made fully aware of their rights to file a 
grievance either by using the employer's grievance procedures or the 
SDA's JTPA grievance procedures.
    The Department agrees that where the employer is required to follow 
a certain grievance procedure under the provisions of a collective 
bargaining agreement, those procedures should be followed for 
complaints pertaining to the terms and conditions of employment of JTPA 
participants, therefore, Sec. 627.504(b) is revised accordingly. The 
regulations provide that recipients, SDA's and SSG's shall ensure that 
employers have grievance procedures available to their JTPA 
participants. Some commenters suggested that participants be permitted 
to choose a grievance procedure under which to process a complaint. The 
regulations indicate that employers of JTPA participants may elect to 
operate their own grievance procedures or use the recipient's, SDA's or 
SSG's grievance procedures established pursuant to section 144 of the 
Act. The employer must inform participants of the procedures they are 
to follow when they begin employment. The choice of which grievance 
procedure to follow does not extend to the individual participants. 
Since the relationship exists between the employer and the JTPA entity 
in the first instance, it is important that all of the procedures and 
provisions applicable to a given employer, including grievance 
procedures, are clearly established in the agreement. The Department 
believes that the existing regulatory provision is consistent with the 
provisions of the Act, avoids potential confusion that could result 
from the recommended change, and provides for the consistent treatment 
and processing of JTPA complaints at the employer level. No change is 
made to the final rule.
Subpart F--Federal Handling of Non-criminal Complaints and Other 
Allegations

    A commenter recommended that the reference to the handling of 
discrimination complaints at 20 CFR 627.600 be made a separate 
paragraph. The Department agrees with this recommendation and is 
amending the final regulations to redesignate the first two sentences 
of Sec. 627.600 as paragraph (a), and the last sentence, pertaining to 
discrimination complaints, as paragraph (b).
    A commenter recommended revising Sec. 627.601, noting that section 
authorizes the receipt of complaints at the Federal level without 
mention of the statutory preconditions for such acceptance that are 
partially explained in paragraphs (a)(2), (a)(3) and (a)(5) of that 
section. Further, the commenter argued that although some of the 
preconditions for acceptance of a complaint at the Federal level appear 
in later sections of the regulations, Sec. 627.601, as written, is 
unauthorized by the Act and is misleading.
    The provisions at Sec. 627.601 are not intended, by themselves, to 
spell out all of the preconditions that apply to the various complaints 
and allegations that may be filed at the Federal level, but rather are 
intended to indicate the types of such complaints that may be received 
and the options available to the Secretary for the handling of such 
complaints. The provisions that apply to the Federal handling of non-
criminal complaints and other allegations are set out in all of subpart 
F and must be viewed in their entirety to determine how they apply. The 
various sections in subpart F either include the preconditions for 
filing a complaint or cite other provisions of the Act and/or JTPA 
regulations which spell out such preconditions. The Department believes 
that the regulatory provisions are consistent with, and accurately 
reflect, the provisions of the Act. No change is made to the final 
rule.
    A commenter suggested that, under the provision at Sec. 627.601, 
the Governor does not have final determination authority in any 
complaint because the regulations specify that Federal level reviews 
may include all of paragraph (a), which includes any violation of the 
Act, and recommended that the final rule provide clarification in this 
area.
    The regulations, at Sec. 627.503(d), provide that, with the 
exception of complaints alleging violations of the labor standards at 
section 143 of the Act, the Governor's decision is final unless the 
Secretary exercises the authority for Federal-level review set forth at 
Sec. 627.601 of the interim final regulations. The provisions at 
Sec. 627.601(a) reserve the Secretary's authority to receive and review 
complaints alleging a specific violation of the Act and/or JTPA 
regulations, notwithstanding resolution of a complaint under procedures 
at a lower level. Upon receipt, the Secretary may handle such 
complaints, as set forth at paragraph (b) of that section. The 
Department believes that the regulations accurately reflect the 
Secretary's and Governor's authority in this area and that further 
clarification in the regulations is not needed. No change is made to 
the final rule.
    A commenter noted that, in the remedies available for labor 
standards violations, Sec. 627.603(c)(3) refers to ``back pay,'' and 
paragraph (d)(2) of that section refers to ``lost wages'' and asked for 
a definition of these terms.
    The interim final regulations incorporated the statutory language 
pertaining to remedies for labor standards violations at section 143(f) 
of the Act, which includes these two terms. The Department believes 
that, from a practical standpoint, there is no difference in these two 
terms. Both terms refer generically to ``compensation'' in the context 
of appropriate remedies; under paragraph (c)(3), wages are not an 
available remedy, while they are an available remedy under paragraph 
(d)(2). In applying a remedy, these terms would refer to the amount of 
compensation (excluding benefits which are separately provided for) 
that a person would have received had the violation not occurred. The 
Department believes that the regulations are sufficiently clear and 
that further clarification is not needed. No change is made to the 
final regulations.
    A commenter disagreed with the provision at Sec. 627.603(b)(4) 
which provides that there is no ALJ review of the Secretary's decision 
upholding the Governor's decision in complaints alleging section 143 
labor standard violations.
    The Act, at section 144(d)(2), specifically provides that the 
Secretary may modify or reverse the Governor's decision on a complaint 
alleging a labor standards violation, or issue a decision if no 
decision has been issued, only after an opportunity for a hearing 
before an administrative law judge of the Department of Labor. The 
opportunity for an ALJ hearing is limited to actions by the Secretary 
to change a Governor's decision or to issue a decision as provided for 
at section 144(d)(2) of the Act. The provisions at section 144(d)(3), 
pertaining to the Secretary upholding the Governor's decision, 
specifically state that the Secretary's decision ``shall become the 
final decision of the Secretary.'' The Department believes that the 
regulations accurately reflect, and implement, the provisions at 
section 144(d) of the Act. No change is made to the final regulations.
    No comments were received on Sec. 627.604 and no change is made to 
the final rule.
    A commenter recommended that under the provisions at Sec. 627.605, 
Special Federal review of SDA and SSG-level complaints without 
decision, where there has been no action on a complaint at the local 
level the Department should not only act on the individual complaint, 
but also conduct a thorough review of the administrative capabilities 
of the SDA/SSG. In addition, the Secretary should be prepared to impose 
more than just a sanction for failing to issue a complaint decision, 
but also impose corrective actions up to and including reorganization 
of the SDA/SSG.
    The provision at Sec. 627.605 pertains to actions that may be taken 
against the Governor for failing to provide a decision as required at 
Sec. 627.503(a) of the regulations. These actions may include imposing 
a sanction for failing to issue a decision pursuant to the provisions 
at Sec. 627.605(b). The right of the Secretary to review SDA/SSG 
operations for compliance with the Act and applicable JTPA regulations 
is reserved at Sec. 627.601(b) of the regulations. The Department 
believes that the regulations provide adequate and appropriate 
procedures for the handling of complaints alleging violations of the 
Act and JTPA regulations at the Federal, State, and SDA/SSG levels, 
consistent with implementing the provisions of the Act. No change is 
made to the final rule.
    A commenter indicated that there were two paragraphs (d) in 
Sec. 627.606. The second is now redesignated as paragraph (e). Another 
commented that the correct reference in Sec. 627.606(d)(2)(vii) should 
be subpart H. The final rule is corrected. Also, the heading of 
Sec. 627.606(c) is changed to read, ``Informal resolution''.
Subpart G--Sanctions for Violations of the Act Liability of Units of 
Local Government

    A few commenters objected to the Department's singling out units of 
local government for bearing liability for funds misexpended by their 
SDA/SSG. It is not the Department's intent to single out units of local 
government to bear liability, but it is the Department's intent to make 
clear that neither a separately incorporated administrative entity 
(e.g., a PIC) nor a local unit of government can insulate (liability-
proof) itself from responsibility for misexpended funds. This is a more 
clearly expressed statement of the Department's position, and does not 
constitute a change in policy or position. One commenter expressed full 
support for the provision while another thought it should be made even 
stronger by requiring local government units to be held liable. The 
provision is not changed. The Department encourages incorporated PIC's 
to be active participants in the delivery of JTPA services. To this 
end, the provisions of Sec. 628.415(b) indicate that the Governor's 
requirements on responsibility for JTPA funds may not, on their face, 
preclude the selection of an incorporated PIC as the grant recipient.
Waiver of State Liability
    As a result of a comment concerning Sec. 627.480(f), discussed 
above, the second sentence of Sec. 627.704(a) is removed. It is 
replaced with two new paragraphs, (b)(1) and (b)(2), which address the 
timing of requests for waiver of State liability. The remaining two 
paragraphs are redesignated as paragraphs (c) and (d), respectively.
    A few commenters suggested that SDA's should be allowed to request 
waivers. Some indicated that such requests should be made in 
conjunction with States, while others seemed to imply that such 
requests could be made directly, bypassing the State. However, as 
indicated at Sec. 627.702(e), it is the recipient that is held liable 
by ETA. Therefore, the only liability that ETA can waive is the 
recipient's liability for the sanction imposed on it.
    Several commenters suggested that the provision should be revised 
to permit a waiver in those instances where the fraud was perpetrated 
against the recipient/subrecipient so as to avoid penalizing entities 
which discover, report, investigate and prosecute the perpetrator of 
such fraud. Both this provision at Sec. 627.704 and the provision at 
Sec. 627.706 Process for advance approval of a recipient's contemplated 
corrective actions are revised for such situations.
Offset Process
    A few commenters expressed the belief that States would not request 
``offset'' if it were limited to State-level administrative funding. A 
commenter also indicated that most misexpenditures occur at the 
subrecipient level and that, if it is not a section 164(e)(1) 
violation, offset should be allowed at the level where the 
misexpenditure occurred. Another suggested the need to be flexible 
after considering all of the circumstances in the individual case. 
Section 164(d) of the Act indicates that offset may be ``against any 
other amounts to which the recipient is or may be entitled * * *.'' 
(Emphasis added) Under title II, the recipient must allocate 77 percent 
of the funds to SDA's and is entitled to retain 23 percent of the funds 
allotted for specifically identified activities. It is the Department's 
position that a reduction in the funds available through the ``offset'' 
process should not adversely impact the delivery of training and 
services to participants, nor the incentive grant and capacity building 
activities. Therefore, the Department believes that only the title II 
five percent (5 percent) administrative funds to which the recipient is 
entitled should be available for offset. Similar reasoning applies to 
the Department's restriction for title III funds. The Department fully 
expects that recipients will seriously consider their options, and the 
consequences thereof, and will not make frivolous use of this 
provision.
    A commenter indicated that use of the phrase, ``amounts 
chargeable'', in Sec. 627.708(b), conveys the implication that the 
administrative costs must be incurred before they can be ``offset''. 
This was not the Department's intent. The provision is rewritten to 
indicate that ``offset'' may be against amounts allotted that are 
expected to be used for recipient-level administrative costs.

Subpart H--Hearings by the Office of Administrative Law Judges

    A commenter recommended amending the regulations at Sec. 627.800(a) 
to include Grant Officer Final Determinations made pursuant to 
Sec. 627.606 under the ALJ hearing process in addition to those 
specified at section 166(a) arising in connection with alleged 
violations of sections 141(c), 144 (d) and (e), 164(f) and 167 of the 
Act.
    Section 166(a) of the Act provides that an ALJ hearing may be 
requested by any recipient upon whom a corrective action or sanction 
has been imposed by the Secretary. By definition this would include 
final determinations made by the Grant Officer. The Department believes 
that the general provision included in section 166(a) of the Act is 
sufficiently clear in establishing the jurisdiction of the ALJ and that 
further clarification is not needed. No change is made to the final 
regulations.
    A commenter objected to the restrictions placed on the jurisdiction 
of the OALJ regarding specific sections of the law which the commenter 
believes will reduce the opportunity for complainants to have full 
redress of their grievances at the highest levels.
    The OALJ coverage is as provided for at section 166 of the Act, and 
set forth at Sec. 627.800 of the interim final regulations. As noted in 
the response to the preceding comment, the OALJ's jurisdiction includes 
more than just the specific sections cited at section 166(a) of the 
Act. No change is made to the final rule.
    A commenter raised some concerns regarding the entities specified 
at Sec. 627.801(a) that may request an ALJ hearing based on a Grant 
Officer's final determination which imposes a sanction, a corrective 
action, or denies financial assistance. It was correctly suggested that 
the Grant Officer might issue a sanction upon a ``vendor'' and 
paragraph (a) is amended to cover such situations. A commenter 
recommended that the provisions at Sec. 627.801(a) pertaining to 
procedures for filing a request for an ALJ hearing could be made clear 
that a request for a hearing must be submitted by certified mail, by 
changing the words ``may transmit by certified mail'' to ``must 
transmit by certified mail.''
    The Department agrees that the provision at Sec. 627.801(a) of the 
interim final regulations seems to indicate that the use of certified 
mail to transmit a request for a ALJ hearing is discretionary, which 
was not intended. The provision at Sec. 627.801(a) is amended to 
indicate that the Grant Officer's final determination to impose a 
sanction or corrective action, or to deny financial assistance may be 
appealed to the OALJ within 21 days of receipt of the final 
determination, and that a request for a hearing shall be transmitted by 
certified mail, return receipt requested to the Chief Administrative 
Law Judge.
    The Department has reviewed Sec. 627.802(e) in light of the recent 
Supreme Court decision in Director, Office of Workers' Compensation 
Programs v. Greenwich Collieries, 114 S.Ct. 2251, 62 U.S.L.W. 4543 
(June 20, 1994) which addresses the allocation of burden of proof in 
cases governed by Sec. 7(c) of the Administrative Procedure Act and has 
concluded that no change in this section is required. In Greenwich 
Collieries, the Supreme Court concluded that a claimant for benefits 
under the Black Lung Benefits Act was the ``proponent of a rule or 
order'' under section 7(c) of the APA and, as such, carried the burden 
of persuasion. Section 627.802(e) of these regulations is predicated on 
the fact that in appeals from Grant Officer Final Determinations the 
grantee is the proponent of the rule since, in the absence of an 
appeal, the Final Determination would represent a final debt due and 
owing the United States. The grantee seeking to avoid this outcome is 
clearly the ``proponent of the rule or order.'' This construction is 
also consistent with section 165 of the Act which places on grantees 
the affirmative obligation to maintain adequate documentation to prove 
the allowability of costs incurred. While the grantee has the burden of 
persuasion, in our desire to ensure orderly presentation of evidence, 
the Grant Officer retains the obligation to prepare and present the 
administrative file.
    In addition, a few of the commenters noted typographical errors or 
incorrect statutory and/or regulatory citations in part 627, subparts 
E, F, G, and H which are corrected in the final rule.

Subpart I--Transition and Implementation

    On June 3, 1993, the interim final rule was amended to revise the 
transition provisions at part 627, subpart I (58 FR 31471). Those 
requirements are restated in the final rule, along with the addition of 
a definition of ``initiation of procurement'' (Sec. 627.904(e)) and a 
provision for the transfer of summer program funds 
(Sec. 627.904(k)(2)).
    A number of general comments were received on the difficulties and 
uncertainties of the transition to the new program to be implemented on 
July 1, 1993 and whether the contents of the interim final rule 
adequately addressed a range of questions on the transition. Subsequent 
to the publication of the interim final rule on December 29, 1992, the 
Department conducted implementation training for the States in February 
and March of 1992, provided transition guidance in Training and 
Employment Guidance Letter 7-92 on March 8, 1993, and issued two sets 
of questions and answers on the transition and interim final rule to 
the Department of Labor regional offices by Field Memorandum that were 
widely circulated throughout the JTPA system. The Department believes 
that these mechanisms with the additional guidance reflected in the 
June 3, 1993 Federal Register document, referenced above, substantially 
answered the various transition questions and issues that were raised 
and that a further discussion here is not required.

Part 628--Programs under Title II of the Job Training Partnership 
Act

Nontraditional Employment for Women (NEW) Act (Pub. L. 102-235)

    The Nontraditional Employment for Women (NEW) Act includes a series 
of amendments to the JTPA. NEW's purposes are to provide a wider range 
of training opportunities for women under existing JTPA programs; to 
provide incentives for the establishment of programs that train, place, 
and retain women in nontraditional fields; and to facilitate 
coordination of JTPA and vocational education resources available for 
training and placing women in nontraditional employment. Further, the 
NEW Act is consistent with the overall goal of JTPA programs to 
increase participants' employment, earnings, educational and 
occupational skills. This separate discussion of the NEW Act is 
provided as a reminder to States and SDAs of the importance of efforts 
to train and place women in nontraditional employment and the emphasis 
the Department places on such efforts. There are contained in the final 
rule various references to the requirements pertaining to 
nontraditional employment for women, especially as they pertain to 
planning and setting goals, the assessment process and development of 
the individual service strategy, and to the various reports required by 
the Act.
    ``Nontraditional employment'' is defined in the NEW Act as 
occupations or fields of work where women comprise less than 25 percent 
of the individuals employed in such occupation or field of work. 
Although nontraditional occupations are usually thought of only as 
construction or skilled trades, these occupations encompass a much 
broader spectrum of jobs, including those in technical and other 
fields.
    Nontraditional occupations have the potential for greatly improving 
the economic status of women, particularly when they are growth 
occupations with increased wage potential. Nontraditional training for 
women also provides benefits for the States and the SDA's. The 
Department believes that this kind of training expands the occupational 
mix available to all customers, and can enhance coordination with other 
education and training programs, as well as with labor and 
apprenticeship programs. It helps advance efforts by the States and/or 
SDA's to be a valuable source of trained individuals for employers and 
unions. Through the implementation of NEW, it is the Department's 
intent that changes will occur throughout the job training system so 
that training in nontraditional occupations becomes institutionalized 
in each State. The GCSSP and the job training plan prepared by each SDA 
were required to include goals, actions, and accomplishments for the 
training and placement of women in nontraditional employment for the 2-
year period beginning July 1, 1992 and beyond. NEW does not establish 
specific numerical goals by SDA or State. However, using General 
Accounting Office data (GAS/HRD-89-152FS, September 1989), the 
Department estimates that the proportion of women currently trained by 
JTPA in nontraditional occupations nationwide is about 9 percent. 
Therefore, at their option, States and SDA's may use this figure as a 
substitute for a particular State's baseline until they can collect 
data specific to that State. States should strive for a goal for 
training and placing more than 9 percent of women participants in 
nontraditional occupations.
    The Department expects that the GCSSP and the SDA's job training 
plan will reflect specific measurable activities to train and to place 
women in nontraditional employment and apprenticeships, as required by 
the statute. As mentioned earlier, SDA's may wish to consider using the 
national figure of 9 percent as an indication of the pre-NEW level of 
nontraditional training until geographic-specific data becomes 
available. Sections 104(b)(6) and (13), 121(b)(3) and 122(b)(5)-(7) of 
the Act require the States and SDA's to set goals and report on program 
accomplishments. The Department intends to look closely at these 
activities to ensure compliance with requirements of NEW.
    Further, the Department expects that each State's and SDA's plans 
and activities will reflect the development of outreach and promotional 
materials and/or activities aimed at making women aware of the programs 
and the services available through JTPA, particularly of nontraditional 
training and placement opportunities. Examples of outreach materials 
include, but are not limited to, nontraditional career information 
modules, video and print materials on nontraditional career options 
(for counselors), recruitment brochures targeted at both the customer 
and the employer, and dissemination of preexisting resource materials 
and/or model curricula. States may also wish to undertake statewide 
public education campaigns, similar to those conducted for literacy 
programs, on nontraditional training and employment opportunities. The 
Department expects statewide dissemination of model programs/approaches 
to serve as a method of encouraging the replication and 
institutionalization of nontraditional training in the State. The 
Department encourages the States to disseminate to SDA's and service 
providers the SJTCC's summary report on promising programs funded by 
JTPA or the Carl Perkins Vocational Education and Applied Technology 
Act.
    Most of the comments that pertained to NEW sought to add to the 
regulations a number of specific requirements regarding services to 
women and focussed on nontraditional employment. These suggested 
requirements ranged from language to requiring OJT goals for women in 
nontraditional employment, as well as standards for OJT contracts, to 
specific procurement requirements as they pertain to women-owned 
businesses, and specific monitoring requirements. The Department 
believes that many of these ideas have merit but does not believe that 
it is appropriate to establish them as Federal regulatory requirements 
beyond that which would otherwise be required by the provisions of the 
Act--particularly as the Federal Government looks to reduce 
administrative requirements. On the other hand, a commenter suggested 
that the regulations ought to reflect the statutory requirements. The 
Department is persuaded that the NEW's requirements should be 
emphasized by referencing them, as appropriate, in the regulations and 
has done so in appropriate sections, including: Sec. 627.455, for the 
annual report to the Governor that is to be described in the job 
training plan; Sec. 628.205, pertaining to the State goals for the 
training and training-related placement of women in nontraditional 
employment and apprenticeships; Sec. 628.210, for the responsibility of 
the SJTCC to review and analyze the annual reports of SDA's and to 
distribute them in the State and to the Secretary; and Sec. 628.420, 
for the SDA's local goals for the training and training-related 
placement of women in nontraditional employment. These are not new 
regulatory requirements; rather they are reflections of statutory 
requirements.
    Specific changes in PART 628--Programs under Title II of the Job 
Training Partnership Act are as follows:

Governor's Coordination and Special Services Plans

    Several comments were received on the Governor's coordination and 
special services plans. Section 628.205(c) of the interim final 
regulations required the States to provide their respective SDA's prior 
to December 31 of the year preceding the program years for which the 
plan is developed, information on its plans to undertake State 
activities in program areas, including education coordination and 
services to older workers, and capacity building.
    Several commenters requested removal of the December 31 date. The 
commenters suggested the language be revised to say that the State 
should issue this information to SDA's in sufficient time for them to 
be able to take it into consideration in developing plans. The 
Department agrees with the commenters and this change is made to the 
final regulations in a new paragraph (c)(2).
State Job Training Coordinating Council

    One commenter suggested that there should be a representative of 
the JOBS program on the Council. The Department agrees that this would 
be a good step. However, since JOBS representatives can be included 
within the meaning of ``representatives of state public assistance 
agencies'', as set forth at section 122(a)(3)(b)(i) of the Act, no 
change is made in the final regulations.

State Human Resource Investment Council

    Several commenters were concerned that the regulations did not 
require, or at least encourage, that membership on the SJTCC or the 
HRIC include the State Agency on Aging or a designee to ensure that the 
needs of older workers are addressed. It was stressed that such 
representation on these councils would improve the commitment to older 
workers and promote the development of integrated service systems for 
older workers. The Department agrees that the needs of older 
individuals should be addressed in the provision of JTPA services; 
however, in interpreting requirements of the Act at sections 
122(a)(3)(B)(i)(SJTCC) and 702(b)(5)(HRIC), the Department believes 
there is already sufficient latitude and flexibility for the Governor 
to appoint a representative from the State Agency on Aging and further 
regulation is not necessary.
    A commenter noted that it would be helpful to clarify in paragraph 
(a) of the regulation that, when the State Council on Vocational 
Education (SCOVE) is incorporated in the HRIC, the HRIC is responsible 
for carrying out the functions of the SCOVE. The Department believes 
that this is clear in the provisions of the Act and in Sec. 628.215(e) 
of the regulations. No change is made to the final rule.
    A commenter suggested that, when the SCOVE is included within the 
HRIC, it would be beneficial to include the State Director of 
vocational education on the HRIC since the State Director plays an 
important role in education within each State, especially in 
coordination and improvement of educational services. The Department 
agrees and the final rule at Sec. 628.215(c) encourages the Governor to 
consider appointment of the State Director to the HRIC.
    A few commenters questioned the accounting basis for funds that are 
made available to the HRIC. Some wished to ensure that when funds are 
made available to the council the statutory activities for which they 
are intended are accomplished. Another commenter pointed out that the 
requirement to allocate funds on the basis of ``benefits received'' 
goes beyond the requirements of the Act and the Conference Report, 
which simply specified that State agencies were encouraged to provide 
funds in a manner consistent with their representation on the council 
and that no agency's contribution be disproportionate. The Department 
has examined this issue and believes that the Act contemplates some 
flexibility in terms of how the costs of the activities of the Council 
relate to the various applicable programs. This is particularly true 
under circumstances in which there is a reasonable contribution on 
behalf of an applicable program. The Department has determined that, as 
specified in the Conference Report, the costs of the Council may be 
allocated upon the basis of the relationship of each funding source to 
the total funding of all applicable sources or programs that are 
represented on the Council. Finally, on the condition that there is a 
reasonable contribution from other involved Federal and State programs, 
the various activities of the council fall within the overall 
coordination mandates of the Act and the related costs are allowable 
JTPA costs to the extent that JTPA funds are available from applicable 
JTPA sources. The final rule is revised accordingly in paragraph (d).
    In order to clarify the requirement of paragraph (g) regarding the 
certification of the HRIC by the Governor, the final rule is changed to 
indicate that the certification is to be in writing with a copy 
provided to the Secretary of Education.

Education Coordination and Grants

    A number of comments were received on State education coordination 
and grants found at Sec. 628.315 of the interim final regulations. In 
addition to the specific areas discussed below, the comments suggested 
confusion about the administrative framework for the development of the 
section 123 program and the need for a general description of the 
program. The section 123 program is to be a partnership between the 
JTPA program and the education system in the State. The Act provides a 
strong role for the State education agency by requiring that funds be 
allocated to the agency, and that the agency have a central role in 
planning and in the operation of the program. In order to foster 
coordination at the State level, the Act requires that the Governor and 
the State education agency agree on the use of funds as part of the 
joint development of the education part of the GCSSP. If there is no 
agreement, the regulations provide that neither party may use the 
funds. To foster coordination at the local level, the Act requires the 
State education agency to enter into agreements with the JTPA SDA 
administrative entities. If there is no agreement with the 
administrative entity, the Act indicates that the amount of funds 
specified for the SDA in the State-level agreement may be unilaterally 
used by the Governor for meeting the goals of section 123(c).
    Several commenters raised concerns regarding the definition of 
State education agency. The commenters requested that the final 
regulations specify that the Governor may allocate the 8 percent funds 
only to the State Education Agency, as defined by the Elementary and 
Secondary Education Act of 1965. The Department believes that 
clarification is needed. The commenters argued that the definition of 
``state educational agency'' in section 4(23) of the Act specifically 
refers to the agency defined in the Elementary and Secondary Education 
Act as the state education agency for JTPA purposes. The Department 
interprets the Act differently. The term ``state educational agency'' 
is a different term from the term ``state education agency,'' which is 
used in section 123(a) of the Act. The term defined in section 4 of the 
Act is used in section 122(a)(3)(B)(1) of the Act to describe 
membership on the SJTCC. Support for the view that the terms used in 
sections 4 and 123 of the Act are intended to be different is found in 
the use of the phrase ``any State education agency'' in section 123(a). 
If the Department were to read this phrase to mean a single agency, the 
reading would render the word ``any'' redundant. The Department reads 
section 123(a) to mean that, at a minimum, the Governor may consider as 
the State education agency that agency responsible for primary and 
secondary education, or responsible for vocational education programs 
under the Carl Perkins Vocational and Applied Technology Education Act 
and the Adult Education Act. In addition, the Department finds that a 
number of States have consolidated a number of education functions and 
agencies into various cabinet arrangements. For this reason, the 
Department has determined that the regulations should retain the 
statutory language ``any education agency,'' but some changes are made 
in Sec. 628.315(a) of the final rule. The phrase ``or agencies'' is 
removed from the final rule because the Department does not intend to 
cause confusion or appear to encourage the designation of multiple 
agencies; however, the rule should not be read to absolutely prohibit 
this practice under justifiable circumstances when significant parts of 
the education function are not within one agency. As previously 
reflected in the interim final rule, the Governor is not permitted to 
designate any agency for which ``education'' is not the primary and 
operational function, which means that the entity must actually be 
responsible for the operation of educational programs.
    A commenter questioned the conditions under which the State JTPA 
entity can be found eligible to be a subrecipient of the 8-percent 
monies. The Act envisions the state education agency as receiving and 
using the section 123 funds. The State JTPA entity is only eligible to 
be a subrecipient if the agreement with the Governor and State 
education agency stipulates this as a part of the agreement. In 
response to the question of whether a portion of the funds may be used 
for certain administrative functions (i.e., audit, oversight) the 
Department has stated in previous guidance that limited funds may be 
set aside for this purpose. This would be described in the joint 
agreement.
    A commenter raised a concern regarding the time limit for 
negotiation between the Governor and the State education agency when 
negotiating the joint agreement in accordance with the provisions found 
at Sec. 628.315(b) of the interim final regulations. While there is no 
specific time limit, the Department expects that the agreement would be 
in place in time to allow for the expenditure of funds allotted for the 
designated program period. No change is made to the final rule.
    A few commenters questioned whether the State JTPA entity or the 
State education agency was responsible for the development of the plan 
for the use of funds. The Department believes that the State education 
agency has the primary role in development of the plan, but that the 
plan is to be developed jointly or in consultation. In practice, most 
arrangements for development of the plan which are satisfactory to the 
parties will be accepted by the Department, so long as there is joint 
agreement.
    Several commenters raised concerns about the provision of the 
interim final rule that stipulates that when the Governor and the State 
education agency fail to agree to develop a joint plan for use of the 
Education Coordination and Grants funds ``the Governor shall not 
allocate funds under section 123(a)(1) to such education agency, nor 
shall such funds be available for expenditure by the Governor''. The 
purpose of the rule is to indicate that neither party should benefit 
from a failure to agree on the use of education coordination funds. The 
Department believes that this position is consistent with the 
provisions of the Act that call for joint agreement between the 
Governor and the State education agency and, therefore, no change is 
made to this section of the regulations. The Department wishes to 
clarify that this agreement between the Governor and the State 
education agency is not the same as specified in section 123(e) between 
the State education agency and the SDA.
    A commenter requested that the barriers discussed in 
Sec. 628.315(d) be defined. The barriers discussed in this section are 
the same barriers that are specified under title II-A and II-C of the 
Act or any additional barriers the Governor may specify. No changes are 
made to this section.
    A commenter pointed out that Sec. 628.315(d)(1)(i) of the interim 
final rule did not contain a citation to the provision of title II-C 
authorizing funds for section 123 programs. The Department agrees and 
the final rule contains that citation.
    Some commenters inquired whether youth who are in compensatory 
education programs under chapter I of title I of the Elementary and 
Secondary Education Act of 1965, who are found to meet the eligibility 
requirements for free lunch under the National School Lunch Act, or who 
are in school-wide projects would fall within the meaning of 
economically disadvantaged to satisfy the requirement to serve the 
disadvantaged. The Department believes that they do, and has drafted 
the regulations to reflect the applicability of the eligibility 
criteria from one section or part of the Act to other parts wherever 
practicable. So, for example, the final rule is revised, in 
Sec. 628.315(d)(1)(ii), to indicate that the criteria discussed above 
apply to the education coordination grant program.
    A few commenters questioned whether Sec. 628.315(d)(1)(iii) should 
refer directly to the non-economically disadvantaged. Additionally, the 
commenters expressed concern that priority for these funds should be 
given to in-school projects as opposed to Title III eligible 
participants. The interim final rule referenced non-economically 
disadvantaged. The final rule is revised to reflect the statutory 
language, although the meaning is not changed. No change is made to the 
regulations regarding the priority for Title III eligible participants 
since that priority is statutory.
    Several commenters thought that the regulations should allow for 
direct allocation of State education coordination and grants funds to 
the SDA. No change is made in the regulations since the Act is specific 
as it relates to the Governor allocating funds to the State education 
agency and the State education agency being the entity that determines 
how and where the funds will be distributed.
    Several commenters were concerned with the State matching 
requirements which changed the requirement from an 80 percent to a 100 
percent match for Federal funds received for the State education 
coordination grants. These comments do not appear to have recognized 
the change in statutory language wrought by the amendments. Prior to 
the amendments, section 123(c) of the Act required only that matching 
funds be provided for three of the four kinds of projects specified in 
section 123(a). The amended law, in section 123(a)(3), requires 
matching funds for all the kinds of projects specified. Thus, while the 
matching requirement originally applied only to the kinds of projects 
to which 80 percent of the funds available under section 123 were 
allotted, the law has been changed so that all funds are required to be 
matched. Similarly, the language in section 123 describing the ``20%'' 
projects has been changed. The original language was that Federal funds 
could be used to pay the cost of ``20%'' projects based on JTPA section 
123(c)(2)(A). The new language is that Federal funds may be used to pay 
the Federal share of ``20%'' projects based on JTPA section 
123(d)(2)(A). The final rule is revised to clarify that the matching 
requirement for the State is for an amount equal to the total of 
section 123 funds. Further, the rule clarifies that if there is no 
agreement between the State education agency and the administrative 
entity in the SDA, the matching requirement does not apply.
Services to Older Individuals

    The State set-aside program for older workers was incorporated into 
section 204(d) of the Act. Requirements for the older workers program 
are set forth in Sec. 628.320 of the interim final rule. The Governor 
continues to be responsible for carrying out these programs pursuant to 
agreements with public agencies, PIC's, SDA's, non-profits or private 
businesses. The Amendments require that, in entering into these 
agreements, the Governor is to give priority to organizations which 
have a record of demonstrated effectiveness in serving older 
individuals.
    During the development of the final rule, the Older Americans Act 
was amended by Public Law 103-171 to revise the eligibility criteria as 
they pertain to older workers served in JTPA programs. It provides, as 
had been the case for the regular title II program (and as is reflected 
at Sec. 628.605(e) of this rule), that older individuals participating 
in joint programs with sponsors under title V of the Older Americans 
Act who are eligible under title V are deemed to satisfy the 
requirements of section 203(a) of the Act. A new paragraph (d)(2) is 
added to Sec. 628.320 to reflect this amendment. It is important to 
recognize that a purpose of the Older Americans Act Amendments is to 
enable Senior Community Service Employment Program participants who are 
in joint programs to participate in JTPA activities. In response to 
questions concerning the nature of an agreement for a joint program 
between JTPA and the title V program sponsor, the Department notes 
that, for purposes of both Secs. 628.320(d)(2) and 628.605(e), the 
written agreement that sets forth the joint program should be 
structured so that both the JTPA and the title V program provide 
services to participants consistent with the objective of the 
participant and the resources of the participating program. For JTPA 
participants, services will be provided under the ISS.
    Several commenters were concerned that the inclusion of Social 
Security and Supplemental Security Income in the definition of ``family 
income'' severely limits the number of older individuals who are 
eligible for the program. This issue is addressed under the definition 
of ``family income'' in Sec. 626.5 of the final rule. The revised 
definition clarifies the treatment of Social Security income and that 
Supplemental Security Income is not considered in the calculation of 
family income. No change is made in this section of the final rule.
    A few commenters recommended the removal of limitations on job 
search assistance in Sec. 628.535 as they might apply to older workers. 
Job search assistance, including the application of the job search 
limitation restrictions as they apply to older workers, is covered in 
the discussion of the job search limitations under Sec. 628.535 
elsewhere in this preamble.
    A few commenters recommended that the Department define ``equitable 
basis'' as it relates to fund availability for older worker services. 
The Department's view is that the definition of ``equitable basis'' 
will vary from State to State based upon local circumstances and, 
therefore, the Governor should determine the basis upon which funds 
will be distributed, taking into account the population of eligible 
older workers, their distribution throughout the State, and the 
availability of resources for this population. However, in considering 
the question of whether funds are distributed on an ``equitable 
basis'', the Department does not believe that all circumstances require 
that each SDA or area within the State receive funds under this set-
aside. Each State is to develop some reasonable measure, including 
older individuals' share of the population or share of the labor force, 
in determining how these funds and services will be provided throughout 
the State. No change is made to the final rule.
    Several commenters expressed concern that the performance standards 
for the older worker set-aside should be specifically tailored to the 
unique needs of this population. As noted earlier in the discussion of 
the performance standards section, the Department has convened a 
technical work group on the development of the new performance 
standards which includes representatives of older workers, and will 
take these and other comments under consideration in developing 
performance standards.

Capacity Building and Technical Assistance

    The JTPA has been amended to include capacity building and 
technical assistance as priorities at the national, State and local 
levels for JTPA and other related human service programs. Section 453 
of the Act calls for the creation of a national Capacity Building and 
Information and Dissemination Network and a Replication Grant Program. 
State and local priorities are established through sections 
202(c)(2)(A) and 262(c)(2)(A) of the Act, which make available up to 33 
percent of the 5 percent incentive funds for capacity building and 
technical assistance activities. Section 121(a)(3) of the Act, requires 
that capacity building and technical assistance plans be included in 
the GCSSP. Greater emphasis is placed on general technical assistance 
activities for the development and training of State, SDA, and service 
provider staff.
    The majority of comments received on the interim final regulations 
supported the use of incentive funds for capacity building and 
technical assistance activities and supported the need to develop the 
capacity of JTPA personnel at all levels.
    Commenters requested that Private Industry Councils and other job 
training councils, as well as those who administer JTPA, be included in 
capacity building activities. It was also requested that the inclusion 
of front-line staff be made more evident. It is the Department's intent 
that capacity building and technical assistance activities be targeted 
to all personnel who staff and administer JTPA at all level of the 
system. Section 628.325(c)(1) is revised to include PIC's and other 
councils, as well as other related human service systems provided for 
in section 205(a) of the Act. The word ``administer'' is added to the 
definition of capacity building at Sec. 626.5, and ``front-line'' staff 
are included in Sec. 628.325(c)(2)(ii).
    Comments were received requesting further clarification on the use 
of funds for the upgrade of Management Information Systems (MIS). 
Section 628.325(c)(2)(iii) provides for the use of the 33 percent of 
the 5-percent incentive funds authorized under the JTPA amendments for 
the purchase of hardware and/or software only if directly related to 
capacity building and technical assistance activities of the National 
Capacity Building and Information Dissemination Network (Network). 
These 5-percent funds may not be used exclusively for MIS; 
Sec. 628.325(c)(2)(iii) sets forth specific guidance on the purchase of 
hardware/ software. Funding for MIS redesign is addressed in Training 
and Employment Information Notice 2-92, which provides for the use of 
PY 1992 6-percent incentive funds for MIS upgrading and re-design.
    Some commenters continued to express concern that the non-
duplication provision in section 202(c)(3)(B) of the Act could 
seriously hamper State and local flexibility in developing products and 
delivering training. Section 628.325(c)(2)(iv) of the final regulations 
specifies that State and local capacity building efforts are to be 
coordinated and integrated with the National Capacity Building 
Information Dissemination Network (Network), pursuant to sections 
202(c)(3)(B) and 262(c)(3)(B) of the Act. In order to maximize funds 
available, the Network will build, to the extent possible, on what 
already exists in the system. Through its clearinghouse, it will make 
information accessible to the JTPA system on current and planned 
Network products so that duplication of effort may be avoided as States 
and SDA's plan their capacity building agendas. Non-duplication should 
be viewed by the system as a means for maximizing scarce resources and 
not as limiting the flexibility of States and SDA's to tailor Network 
products to their own needs and/or to produce and train on similar or 
related products when local circumstances so dictate.
    Some commenters requested that the regulations mandate that the 33 
percent of 5 percent incentive grant funds available to the States for 
capacity building be passed to the SDA level for capacity building and 
technical assistance activities. The final regulations continue to 
strongly encourage Governors to use these funds for the development of 
staff capabilities at all levels, and particularly for front-line 
staff, through a comprehensive capacity building and technical 
assistance strategy. While neither the Act nor the regulations require 
that funds be passed directly to the SDA's, the final regulations, at 
Sec. 628.325(c)(2)(ii), offer a variety of State options for ensuring 
coverage of SDA and front-line staff. Section 628.205 encourages 
Governors to share capacity building plans in advance with SDA's and 
requires that capacity building plans be included in the GCSSP.
    More specific information was requested as to what related human 
service programs are covered under section 453 of the Act. Section 
628.325 (c)(1) and (d) includes those programs listed in section 205(a) 
of the Act among those human service programs.
    Several commenters requested clarification on the allowable uses 
for incentive funds by SDA's, specifically asking if there is any limit 
on the amount of incentive funds used for capacity building and if 
incentive funds can be used solely for administration. One commenter 
suggested a maximum limit of 30% on the use of incentive funds for 
administration in order to insure that their primary use focuses on 
training and capacity building. The Department intends to allow the 
SDA's flexibility in determining how their incentive funds are best 
utilized. Section 627.440(c)(2) specifies that incentive funds may be 
used without regard to cost limitations. However, a new paragraph (5) 
is added to Sec. 628.325(b) specifying that SDA's should use incentive 
funds for capacity building, technical assistance and services to 
eligible participants. The former paragraphs (3) and (6) in 
Sec. 628.325(b) which dealt with this topic are removed; the remaining 
paragraphs are redesignated accordingly. Further clarification on SDA 
capacity building responsibilities is also found in Sec. 628.420, the 
Job Training Plan.
    A technical correction is made at Sec. 628.325(c)(1) to include the 
citation of section 262(c)(1)(B) of the Act.

SDA Designation Process

    The interim final regulations, at Sec. 628.405, clarified the SDA 
designation process. The language in the supplementary information 
section indicated that SDA designations are to occur every 2 years, 
consistent with the preparation of the 2-year GCSSP and the SDA job 
training plan. This information is incorrect and will be addressed in 
the context of discussing the comments received in this area.
    The regulations also: established minimum criteria to be used by 
the Governor in considering discretionary SDA designation requests 
under the provisions at section 101(a)(4)(B) of the Act; provided 
clarification on the handling of competing SDA designation requests 
under section 101(a)(4)(A) of the Act; and defined the terms 
``substantial portion'' and ``substantial part'' of a labor market area 
for the purposes of SDA designations under section 101(a)(4) (A)(ii) 
and (B) of the Act.
    A few commenters noted that there was nothing at section 101 of the 
Act nor Sec. 628.405(a) that indicates that SDA designations are 
required to occur every two years, as indicated in the preamble of the 
interim final rule. The concerns expressed in the comments were that to 
mandate that SDA's be designated every two years would be disruptive 
and would serve to increase the number of SDA's rather than decrease 
them as intended.
    The commenters are correct that there is nothing in the Act nor the 
regulations that requires that SDA's be designated by the Governor 
every two years. The preamble did not clearly convey the intent of the 
interim final regulations. The intent of the preamble was to indicate 
that SDA designations, when they occurred, were to coincide with the 2-
year cycle for the GCSSP and the local job training plan. This was to 
clarify that SDA designations could not be made for an off year of a 2-
year period covered by the approved GCSSP and local job training plans. 
Section 628.405 is amended to more clearly convey this requirement.
    A commenter indicated that SDA designation, under 
Sec. 628.405(a)(3) of the interim final rule, should not be required 
for a previously designated SDA which has complied with all of the JTPA 
mandates and has successfully operated good training programs.
    There is nothing in the Act or interim final regulations that 
requires existing SDA's to formally apply for designation or 
redesignation by the Governor when such designations are to be made 
within the State. Section 628.405(a)(3) only indicates that the 
Governor should address the treatment of existing SDA's in the 
procedures developed to govern the SDA designation process within the 
State. Thus, the Governor may choose to require reapplication for each 
designation cycle or to permit existing SDA's to continue without the 
need for a new application. Section 628.405(a)(2) of the interim final 
regulations is redesignated, in part, as (a)(3), and is amended to 
clarify this issue.
    A few commenters took exception to the requirement that the 
Governor establish standards by which to evaluate discretionary SDA 
designation requests under section 101(a)(4)(B) of the Act which, at a 
minimum, must include the criteria set forth at Sec. 628.405(d). These 
requirements are viewed as overly prescriptive, limiting the Governor's 
discretion in making SDA designations and establishing a higher 
standard than that provided for in the Act.
    The Department believes that neither the provisions of the Act nor 
the interim final regulations, at Sec. 628.405(d), inhibit the Governor 
from making discretionary SDA designations, pursuant to section 
101(a)(4)(B) of the Act. The Department does not believe that the 
regulatory provisions are overly prescriptive in establishing some 
uniform minimum standards for the Governor to evaluate such designation 
requests. With approximately one-third of the over 640 current SDA's 
being discretionary designations, it is necessary to ensure the 
viability of such SDA's to adequately administer and promote effective 
delivery of JTPA services to a substantial portion of the eligible 
population in the area to be served. The regulations simply formalize 
the minimum standards that Governors would need to consider and, in 
most instances, probably already have established, in making 
discretionary SDA designations consistent with the provisions at 
section 101 of the Act. The Department believes that the regulations in 
this area are consistent with the provisions at section 101 of the Act 
and the Secretary's authority to promulgate regulations to implement 
the provisions of the Act. No change is made to the final regulations.
    Several commenters took exception to defining ``substantial part'' 
and ``substantial portion'' of a labor market area (LMA) for the 
purposes of SDA designations under section 101(a)(4) (A)(ii) and (B) of 
the Act, respectively. These commenters argue that the requirement that 
the prospective SDA serve 10 percent of the population of an LMA is 
arbitrary, artificial and exceeds the language in the Act, unduly 
limiting the Governor's flexibility to determine SDA's for the State. 
The commenters recommended that the 10-percent provision be withdrawn 
from the final rule. A few of the commenters suggested including a 
``grandfather'' provision for existing SDA's in the regulations, if the 
10-percent provision is not removed in the final rule.
    The Act provides that prospective entities seeking SDA status under 
the provisions of section 101(a)(4) (A)(ii) and (B) of the Act serve a 
substantial portion/part of an LMA as a statutory criteria for 
designation. In the past, the Department has deferred to the Governor's 
definition of ``substantial'' for the purposes of such designations, 
which has resulted in a wide range of thresholds being established, 
from levels significantly below the 10 percent provided for in the 
regulations, to a majority of an LMA. The Department reached the 10-
percent figure taking into consideration the need for a rational figure 
which would assist the Governors in the SDA designation process and 
still ensure the statutory mandate for serving a substantial portion or 
part of an LMA, as appropriate. The regulations still provide that the 
Governor defines these terms, with the 10 percent floor as a minimum 
requirement. The Department believes that the 10-percent figure is 
reasonable and consistent with the provisions of the Act and the 
Secretary's authority to promulgate regulations implementing the Act, 
while still maintaining the Governor's flexibility in designating 
SDA's. No change is made to the final rule.
    On the suggestion that existing SDA's be ``grandfathered'' 
notwithstanding the 10-percent requirement, part 627, Subpart I, 
Transition Provisions, of the interim final rule addresses this issue. 
The regulation, at Sec. 627.904(l), indicates that, at the Governor's 
discretion, SDA's designated prior to July 1, 1992, need not be subject 
to the provisions at Sec. 628.405. The Department does not believe that 
further clarification is needed. No change is made to the final rule.

Private Industry Council

    Section 628.410 of the interim final rule set forth requirements 
relating to the establishment and functioning of the PIC. Comments on 
the provisions of this section fell mainly into three areas: PIC 
recertification, joint agreement on the plan for Wagner-Peyser 
activities of the employment service and PIC representation.
    A number of commenters questioned the requirement of 
Sec. 628.410(a)(2) that the Governor recertify the PIC biennially, one 
year prior to the date of submission of the job training plan. The 
commenters indicated that this requirement was an undue administrative 
burden and appeared to go beyond the provisions of section 102(g) of 
the Act, which states: ``The Governor shall certify a private industry 
council if the Governor determines that its composition and 
appointments are consistent with this subsection.'' In response to this 
concern, Sec. 628.410(a)(2) is amended to require the Governor to 
review the PIC certification biennially rather than to formally 
recertify the PIC. The review process is intended to afford the 
Governor a continuing role in ensuring that the PIC is an effective 
local policy making body. The requirements specified in 
Sec. 628.410(a)(3) encompass three areas: the PIC membership and the 
nomination process, the PIC/chief elected official agreement, and the 
responsibilities of the PIC to carry out its role.
    Several commenters indicated that the requirement for a new PIC/CEO 
agreement was beyond the requirements of the Act and was potentially 
disruptive of agreements and arrangements that had been carefully and 
delicately worked out at the inception of JTPA. There is no requirement 
to negotiate or renegotiate an otherwise satisfactory agreement which 
is in place. The regulations only require the Governor to review the 
sufficiency of the PIC/CEO agreement in terms of the requirements of 
the Act.
    In response to comments on Sec. 628.410(a)(3) of the interim final 
rule which requested clarification of the meaning of paragraph 
(a)(3)(iv), this paragraph is removed in the final rule, since it is 
largely redundant of the contents of the PIC/CEO agreement and the 
material that follows in paragraph (b) which the Governor may review in 
the course of normal oversight.
    A few commenters asked for clarification on the components of the 
Wagner-Peyser plan which were applicable to SDA's. The SESA agreement 
requirements are set forth in the Wagner-Peyser Act, at section 
8(b)(1). These requirements generally deal with employment service 
operational plans for carrying out the provisions of the Wagner-Peyser 
Act which must be developed jointly with the PIC and local chief 
elected official.
    Regarding PIC membership selection, a few comments touched on the 
selection process for representatives of organized labor. One comment 
asked that the regulations define ``labor federation'' to mean the AFL-
CIO at the State and local levels and that a process be instituted for 
the Chief Elected Official (CEO) to ensure PIC representation by the 
local AFL-CIO rather than by individual workers. As provided in section 
102(c)(3) of the Act, CEO's are to consult recognized State and local 
labor federations for recommendations for the labor representatives to 
the PIC and not an individual labor organization. For this reason, a 
description of the nomination process is specifically required to be 
included in the PIC certification to be reviewed by the Governor. The 
Department agrees, however, that there is a need for clarification as 
to what constitutes a labor federation and is adding language in the 
final rule, at Sec. 628.410(a)(3), to indicate that a labor federation 
is an alliance of two or more labor unions, an example of which is the 
AFL-CIO.
    With respect to PIC representation in general, several commenters 
stressed the importance of ensuring that the nomination process is 
opened up to balance important interests in the community, including 
the interests of older individuals and women. The Department recognizes 
the importance of balanced demographic and community interest 
representation and sensitivity to the diverse populations being served. 
This sensitivity is best displayed at the local level where the 
composition of the community is known. While the Department strongly 
encourages CEO's and PIC's to make every effort to assure that PIC 
membership is broadly representative of the community, the Department 
does not believe it is appropriate to require this result through 
national rules. Thus, the Department has decided not to impose 
membership requirements beyond those enumerated in section 102 of the 
Act. In communities with public housing agencies, given the 
similarities in target populations, the Department does, however, 
encourage chief elected officials to include such representation in 
their PIC membership under the category of ``public assistance 
agency''.
    A few commenters were concerned that appointing representatives of 
certain kinds of organizations to the PIC would represent an inherent 
conflict of interest. Conflict of interest rules for PIC members are 
discussed in Procurement (Sec. 627.420(c)(4)).

Selection of SDA Grant Recipient and Administrative Entity

    One commenter indicated that the intent of this section was 
unclear. The Department believes that the lack of clarity may pertain 
to the kinds of criteria that the Governor may establish that would 
affect the PIC's and CEO's selection of a grant recipient and 
administrative entity. The Act, at section 103(b)(1)(B), specifies 
entities that may be selected as grant recipient and administrative 
entity, which may be the PIC, a unit of local government or a non-
profit organization. While the Governor may establish criteria for the 
selection of grant recipients and administrative entities, the criteria 
may not specifically exclude a type of entity specified in the Act from 
being selected.

Job Training Plan

    Sections 628.420 through 628.430 deal with the submission, review 
and approval of the job training plan. There were a few comments 
regarding the contents of the job training plan which are addressed in 
Sec. 628.420(b)(1), through a reference to the requirements of section 
104(b) of the Act. There were requests for certain specific references 
in the text of the regulation. One comment requested that the 
requirements of the NEW Act be specifically referenced. As previously 
discussed in this supplementary information section, the Department 
agrees and has added a reference to the requirements of section 
104(b)(7) in Sec. 628.420(b)(1). Another commenter requested that a 
specific reference be made to consultation with public housing 
agencies. While these agencies are not specifically referenced in 
section 104 of the Act, they are included among those agencies with 
which the SDA is to develop the coordination and linkage arrangements 
that would be described pursuant to section 104(b)(4) of the Act.
    A few commenters raised concerns about the requirement in paragraph 
(e) of Sec. 628.420 that modifications are to be submitted jointly by 
the PIC and chief elected officials (CEO's) to the Governor. These 
commenters appear to be confusing modifications to the SDA job training 
plan with contract modifications. The commenters stated that the 
procurement regulations in Sec. 627.420 require that every contract 
change order, such as a decrease of one participant, necessitates a 
contract modification. The procurement process requirements in 
Sec. 627.420 do not apply to the plan and plan modification process, 
and Sec. 628.420(e) addresses the requirements for the modification of 
the job training plan, not contract modifications. Language is added to 
paragraph (e) to clarify that a ``major'' modification is to be 
specified by the Governor. In so specifying, the Department suggests 
that the Governor consider conditions which result in a variance of 20 
percent from the approved plan in the budget, level of participant 
services, number of participants served, participant outcomes, or other 
core elements.
    Further, there was an inadvertent oversight in the interim final 
rule in Sec. 628.420(d) and (e), concerning the submission of local 
plans or plan modifications to the Governor. The interim final rule 
indicated that the plan or plan modifications must be jointly submitted 
but omitted the statutory requirement that such plans or plan 
modifications also must be jointly approved as a condition for 
submittal to the Governor. Paragraphs (d) and (e) of Sec. 628.420 are 
amended to more accurately reflect the statutory provisions of section 
103(d) of the Act.
    One commenter requested that the time limit provided in 
Sec. 628.426(b) for chief elected officials and the PIC to correct any 
deficiencies the Governor identifies in disapproving a job training 
plan be changed from 20 days to 30 days to allow SDA's adequate time. 
This change is incorporated into the final rule.
    Finally, a commenter requested that the final rule clarify that the 
references in the Act and regulations refer to ``working days''. In 
fact, this is not the case and the references, as is the practice, 
refer to consecutive calendar days. No change is made in the final 
rule.

Subpart E--Program Design Requirements for Programs Under Title II of 
the Job Training Partnership Act

    In response to a few comments, the final rule is revised in a few 
introductory statements to clarify that references to title I refer to 
programs undertaken pursuant to sections 121 or 123.
General Program Design Requirement
    The Act contains significant requirements in the front-end 
operations for most SDA's, which will cause major alterations in the 
intake structure and will necessitate revisions in the appraisal of 
each participant's capabilities, needs, and occupational goals. In the 
final regulations, the Department has provided necessary direction 
based on the Amendments and has clarified and highlighted significant 
changes from the ``old'' statute.
Eligibility Determination and Intake
    Two major criteria must be considered in the process of determining 
which applicants are eligible for title II JTPA program services. As 
set forth in Sec. 628.505, the first criterion is age. The second is 
economic disadvantage. The standard for determining economic 
disadvantage will be income as described in the annual Department of 
Health and Human Services poverty guidelines. The use of these 
guidelines provides a standardized income determination across 
federally funded programs. The Department's approach to the eligibility 
determination process has been to attempt to minimize the amount of 
documentation necessary to establish an individual's eligibility for 
services, while maintaining the necessary safeguards to prevent misuse 
of program funds.
    A number of commenters encouraged a streamlining of the eligibility 
documentation process, including use of self-attestation. Several 
requested guidance on what documentation would be required for 
barriers. The Department has issued, in February 1993, and provided 
training on an eligibility documentation TAG to be used by SDA's in the 
eligibility determination process. This should provide clarification of 
these issues. The procedures in this title II, Eligibility 
Documentation TAG, if followed by the SDA's, will protect them from 
audit disallowances based on inadequate documentation. In response to 
several comments that the Department should stick by its guidance, the 
final rule clarifies the intent of the interim final rule that when it 
is determined that the State, SDA or service provider followed the 
Department's written guidance, the Grant Officer will not disallow 
costs related to required documentation of an individual's eligibility.
    Section 628.510 describes the requirements for intake, targeting 
and referral of applicants. During the intake process, personal data on 
individuals are collected and a preliminary determination regarding 
suitability for title II services is made. A number of commenters 
expressed the need for clarification of the suitability issue. 
Suitability for program participation is a determination, based on 
preliminary information, of which eligible applicants should be 
considered for JTPA program services. This determination is made 
against the backdrop of the limited availability of JTPA resources and 
services and the practical necessity that the JTPA program must decide 
which individuals fall within the 5 to 10 percent of the eligible 
population that can be served. It includes a determination whether an 
individual falls within a category targeted for service by virtue of 
having a ``barrier'' to employment and whether there are other programs 
and services reasonably available to an individual within the 
community. The JTPA title II program is not intended or structured to 
remove all barriers to employment that applicants for services may 
have. Therefore, the suitability determination also should consider 
which eligible applicants, with the provision of locally available 
supportive services, can best be served and benefit from JTPA 
participation by acquisition of educational and occupational skills or 
competencies and eventual employment. The regulations provide that some 
limited assessment activities may be undertaken, the results of which 
may be used in connection with a determination of suitability. A 
determination that an individual may be eligible but not suitable 
results in referrals to other sources of assistance, provision of 
information on other programs, or in the case of a service provider, in 
referral to the SDA for further consideration. In making suitability 
determinations, SDA's should keep in mind their obligations under 
applicable civil rights and equal opportunity laws. SDA's should 
consider advising applicants of the process and possible results of 
intake, assessment and suitability determinations and, particularly, 
that not all eligible applicants can be served.
    In order to focus program services on harder to serve individuals, 
not less than 65 percent of participants must have one or more barriers 
to employment, as specified at section 203(b) of the Act. SDA's may 
also specify an additional barrier for each of the title II-A and II-C 
programs. An example of an appropriate ``additional barrier'' under 
section 203(b)(7) of the Act was requested. In response to this 
request, the Department is providing several examples, however, SDA's 
are not limited to these and are encouraged to develop ``additional 
barrier'' guidelines tailored to local population and labor market 
needs. For communities with public housing, the Department believes 
that ``public housing assistance recipients'' who are otherwise income 
eligible would constitute an appropriate ``additional barrier''. An 
employment-authorized refugee might be included, as well as a displaced 
homemaker, or substance abuser. Finally, the Department counsels that a 
member of a group protected under the civil rights statutes may not be 
designated as having a barrier to employment solely on the basis of the 
characteristics that cause them to fall under the civil rights 
legislation. So, for example, a racial group could not be designated 
under the additional barrier provisions.
    Several commenters requested clarification of the documentation 
requirements for referrals in Sec. 628.510(d). The Department describes 
the minimum required documentation at Sec. 628.510(d) and at 
Sec. 628.530(c). The Department expects that SDA's will develop 
standardized information on programs and services available in the 
community. This information may be provided in written form to the 
eligible applicant. A record of the referral will be maintained and may 
take the form of an incomplete ISS. No further followup is required 
beyond referral. Section 628.510(d) is revised to incorporate this 
principle. The idea is that the SDA must assume some limited 
responsibility to eligible applicants who come for services even though 
the Act recognizes that not all will be served. The SDA should be in a 
better position than an individual applicant to be aware of the 
services available within the community and to make referrals so that 
the applicant can benefit from these other sources. In part, this is a 
principle behind recent initiatives by States, SDA's and the Department 
to facilitate a concept of ``one-stop'' service.
    In addition, Sec. 628.510(d) is amended to specifically mention 
referrals to Job Corps to parallel the amendment to Sec. 628.803(d)(2). 
This change is made to foster JTPA/Job Corps coordination.
    Section 628.510(e) describes the requirement for service providers 
to refer eligible applicants or participants who cannot be served by 
its program back to the SDA for further assessment, if necessary, and 
suitable referral to other appropriate programs. Several commenters 
questioned whether there is a requirement for centralized intake. There 
is no such requirement. The requirement is that the SDA put in place a 
system that works independently of an individual service provider. This 
``system'' would also cover situations described by commenters in which 
the SDA administrative entity does not perform intake. In other words, 
an SDA must have some mechanism by which an eligible applicant or 
participant can be considered for enrollment in all of the services 
available through the SDA, not just those of a single service provider. 
The Department believes that this is a program design issue for local 
discretion and that there will be a number of effective approaches to 
meet these requirements. The intent of the regulation is simply to 
assure that participants will be exposed to the full range of available 
services and that they will have a fair opportunity to receive services 
appropriate to their individual needs.
    The States and/or SDA's will establish procedures to ensure 
compliance with the targeting requirements of sections 203 and 263 of 
the Act and to determine actions to address noncompliance with the 
requirements. Many commenters questioned how compliance would be 
calculated. Some noted that a strict reading of the Act would provide 
that any ``participant'' (i.e., any individual who has been determined 
eligible and received a service, including objective assessment) could 
be included in the calculation to meet the targeting requirement. 
Others observed that while assessment was an important activity, it did 
not necessarily constitute a training or employment service that would 
result in a measurable outcome of the effectiveness of the program. In 
considering the comments, the Department recognizes that, at the 
suggestion of individuals identifying implementation issues, it was 
determined that only individuals enrolled in an activity subsequent to 
objective assessment would be included in performance standards 
calculations. The rationale for that decision was that many individuals 
had not made a final decision to participate in the program and have 
dropped out before any meaningful intervention. Therefore, for 
consistency, the Department has determined that the 65-percent 
requirement also is to be calculated on those participants who receive 
services or training subsequent to the objective assessment. Section 
628.510 is revised to add a new paragraph (f)(2) to this effect.
Objective Assessment
    Objective assessment should be a continuous, customer-centered and 
flexible process. The objective assessment should not be viewed as a 
discrete activity that begins and ends early in the stages of program 
participation, but rather as one that will continue throughout 
participation in JTPA.
    Several comments received on the front-end design of the JTPA 
program discussed the assessment process. All supported the concept and 
the intent of individualized program services. A few commenters 
expressed concern over staff development needs for implementing 
assessment. Many commenters requested guidance in the development of 
assessment and service strategies. While the Department expects that 
States and SDA's will retain authority for program design, technical 
assistance has and will continue to be provided on assessment and 
development of the ISS. The Department encourages use of funds for the 
capacity building of staff (see Sec. 628.325), including staff training 
in objective assessment techniques; however, the Department declines to 
establish credentialing standards as one commenter suggested. The 
Department believes that staffing and standards should be a State and 
local decision.
    A few commenters addressed confidentiality issues arising in the 
intake, assessment and referral processes. The same kinds of concerns 
over disclosure of information were expressed in connection with the 
discussion of Sec. 627.463. The Department has not addressed 
confidentiality in Sec. 627.515 because confidentiality issues are not 
new. The Department thinks that traditional standards of professional 
conduct on confidentiality issues should be continued. Further, the 
Department expects that protections against the disclosure of 
information that would constitute a clearly unwarranted invasion of 
personal privacy, as permitted by section 165(a)(4)(B)(i) of the Act, 
will protect the confidentiality of customer information.
    A number of commenters expressed confusion over the determination 
of when an applicant becomes a participant, how much assessment could 
be provided at the intake/ eligibility stage prior to enrollment of an 
eligible applicant and to which cost category this would be charged. 
Costs incurred on behalf of an applicant, including intake, eligibility 
and suitability determination (which may include some limited 
assessment of an applicant), and any assessment necessary to facilitate 
the eligibility determination, consistent with the provisions of 
Sec. 627.440(d)(3)(i) are to be charged to the training-related and 
supportive services cost category. Once an applicant is determined to 
be eligible and the decision made to enroll the applicant, a full 
objective assessment may begin and the applicant may receive other 
program services. As specified in Sec. 627.440(d)(1)(i), assessment at 
this stage may be charged to the direct training cost category. Receipt 
of objective assessment or other services would confer participant 
status consistent with the definition of participant in section 4(37) 
of the Act. The Department believes that the preoccupation with 
participant status may be misplaced because the principal issue of 
program credit has been addressed in the context of when the 
performance standards are to be applied.
    The Department expects assessment of eligible applicants to be used 
only in those cases when an eligible applicant's suitability for 
enrollment is unclear. While the regulations afford an opportunity to 
charge the costs of preliminary assessment functions to the training-
related and supportive services cost category to aid in the 
determination of an applicant's suitability, the Department expects the 
restriction on the cost categories to act as a natural control on SDA's 
while still allowing the flexibility for individual decisions. The 
Department would like to emphasize that the limited availability of 
funds will restrict over-use of preliminary assessment as part of the 
decision to enroll. SDA's are expected to finance intensive services 
expected to enable participants to complete successfully the longer 
term JTPA service strategies within this cost category.
    Section 628.515 sets forth the requirements of the objective 
assessment. The scope of the objective assessment should not be limited 
to only services or training programs already available in an SDA.
    A few commenters questioned whether basic skills evaluation was 
required as part of the objective assessment. The Department intends 
the evaluation to be of both basic and occupational skills. The 
definition of ``objective assessment'' in Sec. 628.515(b)(1) is 
revised, therefore, to include basic as well as occupational skills 
evaluation.
    The objective assessment is ongoing and should not be viewed as a 
one-time event. It should be a multi-faceted process which includes a 
full array of options including items such as structured interviews, 
paper and pencil tests, performance tests, behavioral observations, 
interest inventories, career guidance instruments, aptitude tests, and 
basic skills tests. From these options, and others, assessment staff 
may select the most appropriate tools for each participant to measure 
skills, abilities, aptitudes, interests, supportive service and 
financial needs, and to counsel participants on how their assessment 
results relate to local labor market demands.
    SDA's are strongly encouraged to prudently select appropriate 
measuring tools that will provide necessary information for the 
reasonable development of an individual service strategy leading to a 
realistic employment goal. JTPA resources are limited and JTPA is not 
an entitlement program. The Department expects SDA's to develop 
practical applications for career counseling and assessments for basic 
skills and occupational training.
    The objective assessment process should be sensitive to the testing 
and evaluation environment and the comfort and confidence level of the 
participant. The temptation to over-test or over-evaluate, providing 
excess information for which there is no immediate application, does 
not serve the customer's best interest, is detrimental to the customer/ 
counselor relationship, and is costly to the SDA. The objective 
assessment is to be revisited regularly and the resulting information 
used to amend the ISS, as appropriate, when additional needs are 
identified or goals achieved.
    Assessments recently conducted by other human service programs or 
schools are viable options and their use is encouraged, where 
appropriate, rather than requiring the customer to undergo additional 
assessments that duplicate information already obtained.
    Finally, the Department notes that the objective assessment process 
for title II-B may be different in scope than that for the regular 
title II-A and II-C program, as indicated in Sec. 628.515(b)(2). This 
may also be the case for limited function programs (such as literacy 
programs) mounted under section 123, although this is clearly an 
exception to the normal expectation in conducting an assessment.
Individual Service Strategy
    Section 628.520 establishes the requirements for the Individual 
Service Strategy (ISS). The ISS is an individual plan that is developed 
based on information obtained through the objective assessment. It is 
the framework within which decisions regarding individual participants 
are recorded. It should be considered a living document that reflects 
decisions concerning the appropriate mix and sequence of services to be 
provided leading to, and including, a realistic employment goal. 
Several commenters requested clarification of the outcomes to be sought 
in the development of the ISS for youth. The Department agrees that 
there is a need to focus on youth returning to or remaining in school 
and, thus, that the ISS should focus more on education as it relates to 
a long term career. In title II-B and II-C, the employment goal should 
be interpreted broadly for those individuals returning to school and 
may reflect long-term career goals.
    A few commenters asked for clarification of what had to be listed 
in the ISS. The ISS should briefly note any need for financial 
resources or supportive services and record the amount of each. The 
expected outcome of each activity should be indicated with a notation 
of the provision and schedule for each. Referral to other programs, and 
referral out of title II must be noted on the ISS. The rationale or 
justification for other decisions may be referenced in the ISS, but 
need not be recorded there. The Department provides further 
clarification of the use of the ISS for recording referrals out of 
title II by revising Sec. 628.530(c), as was requested by several 
commenters. This section now states that further tracking or follow-up 
is not required for referrals out of title II. This section is also 
revised to correct language in the interim final regulations that 
indicated referrals out of title II would not be calculated in 
performance standards only if an ISS had not been completed. Since, as 
commenters noted, an ISS is to be developed for each participant, this 
section now allows recording the referral in a partial ISS without any 
effect on performance standards.
    Several commenters indicated confusion over counseling and the 
development of the job goal in the ISS. The provisions of this section 
reflect the need for program-related application of career counseling, 
but the Department cautions program operators to prudently provide 
career counseling related to the realistic goals of the JTPA program. 
While the objective assessment/individual service strategy process is 
customer-centered, JTPA services are expected to guide participants 
toward realistic employment goals for which training and job demand are 
available in the community. Pure career counseling for its own sake 
should be left to other, more appropriate, sources. Development of a 
final employment goal may be delayed where the objective assessment 
indicates a need for further career exploration or assessment. In this 
case, a career cluster should temporarily be indicated in place of the 
employment goal. The ISS should be revised to reflect the employment 
goal prior to the start of specific occupational skills training. The 
employment goal may be revised if the continuing objective assessment 
indicates a need to do so.
    A number of comments were received concerning participant 
signatures on the ISS. This requirement was perceived as an unnecessary 
administrative burden. Section 628.520(c) is revised to indicate that 
there is not a requirement for a participant signature. However, the 
decisions reflected in the service strategy about goals, objectives and 
services to be provided are to be made in partnership with the 
participant and are to be determined in conformance with applicable 
civil rights provisions.
Participant signatures on the ISS may be requested, but are not 
required to indicate the joint development of the document.
    The Department encourages communication with participants and 
reminds program operators, especially program monitors and auditors, 
that the intent of the ISS is to be a program tool and not a compliance 
document that forms the basis for cost disallowance. The Department 
does not doubt that participant records, including the ISS, will be 
reviewed to determine whether SDA's and others have adhered to certain 
requirements of the Act. This is unavoidable. However, for the ISS to 
have the anticipated value as a program tool, it must not be developed 
and used with compliance in mind, but rather with the needs of the 
customer as its focus. One commenter suggested that if documentation is 
required, e.g., to document a payment decision, that it be recorded 
elsewhere in the participant record so that the ISS and compliance 
documentation can be kept separate. While somewhat artificial, if this 
concept helps, the Department has no objection to using it. Ultimately, 
however, the decision on how much detailed information to record on the 
ISS is one for States and SDA's.
    The final rule is revised by adding a new paragraph (h) in 
Sec. 628.520 to emphasize that the ISS is a working record of progress 
and references to ``documentation'' are revised to read ``record.''
    The ISS, to be effective, must be regularly reviewed and adjusted 
to reflect the progress and to meet the continuing needs of each 
participant. The ISS will serve as the basis for the entire case 
management strategy. Case management is an allowable direct training 
activity and the Department encourages its use as an effective strategy 
for providing quality services to the participant.
    A few commenters indicated confusion over the application of case 
management to the JTPA program. The Department encourages application 
of case management principles to participant services. In section 4(32) 
of the Act, the term case management is defined to mean the provision 
of a customer-centered approach in the delivery of services, designed 
to prepare and coordinate comprehensive employment plans to ensure 
access to the necessary training and supportive services, and to 
provide job and career counseling during program participation and 
after job placement. The Department expects SDA's to make every 
reasonable effort to provide the services and training indicated by the 
assessment and ISS and, where possible, to apply standard case 
management principles. The Department recognizes, however, that JTPA is 
not an entitlement program and that not all services and training will 
be available regardless of the level of coordination in an area. Case 
management is an administrative management tool, not an individual 
service to be delivered to participants. There is no change in the 
final rule.
    A few commenters expressed concern over the ability to provide all 
services indicated by the objective assessment and the ISS. Section 
628.520(e) recognizes that an SDA may not always be able to provide the 
full array of services indicated by the objective assessment and 
recorded in the ISS. In arranging for the mix and sequence of 
appropriate services, it is fully expected that SDA's will refer 
participants to other programs for certain specified activities as part 
of the JTPA service strategy. In those cases, particularly in rural 
areas, where services required are indicated on the ISS and not 
available from any source in the SDA, such information is to be 
recorded in the ISS and an alternate plan developed which may include 
referral to another program. SDA's are expected to make every 
reasonable effort to make available the recommended training or 
services to each participant; however, consistent with Sec. 628.525, it 
is understood that the objective assessment and ISS do not give legal 
or entitlement rights to participants for services. JTPA is not an 
entitlement program and available resources are limited.
    Some commenters thought that language in the preamble to the 
interim final regulations authorized States and SDA's not to serve the 
disabled or other hard-to-serve persons, if they needed substantial 
supportive services. The Department acknowledges that it may have 
inadvertently suggested that an individual, with excessive supportive 
service needs, such as a person with a disability, could automatically 
be referred out of the program to other sources. This is not the case. 
Such decisions must be made on the basis of the individual's and the 
program's circumstances. While JTPA is not required to directly serve 
every person, including every person with a disability, it is intended 
to focus more on the hard-to-serve. The fact that an individual may be 
difficult or costly to serve should not, in itself, preclude serving 
that person.
    Consistent with Sec. 628.520(f), service providers and contractors 
may conduct the objective assessment and develop the ISS. It is the 
responsibility of the SDA administrative entity to ensure that the 
objective assessment and the development of the ISS reflect the 
customer-centered approach required by law are provided to each 
participant whether they are provided in-house or by service providers.
Limitations
    In response to comments on the provisions of Sec. 628.510 and 
Sec. 628.530, Sec. 628.525 is also revised for further clarity to 
indicate that neither eligibility nor participation create a right to 
JTPA services.
Referrals of Eligible Applicants and Participants to Other Programs
    The final regulations further clarify the subject of referrals of 
both eligible applicants and participants due to confusion expressed by 
a number of commenters. The regulations, at Sec. 628.510(d) and at 
Sec. 628.530(c), specify the requirements for referral of eligible 
applicants and participants for whom available title II services are 
not deemed suitable or adequate to appropriate human service programs 
in the community. Section 628.510(d) deals with the situation in which 
an eligible applicant is referred to non-title II services during the 
intake process. Section 628.530 refers to referrals of participants, 
those individuals who have been determined to be eligible and have 
begun to receive objective assessment or other services. In the final 
regulations, both provisions are revised for clarity and to reduce the 
burden of documenting the referrals. Section 628.510(d) allows the SDA 
to conduct limited assessment of eligible applicants as a part of a 
determination of suitability, before they are enrolled as participants. 
The purpose of this pre-participation assessment is to enable SDA's to 
make more precise judgments as to the suitability of the applicant for 
participation in JTPA and/or additional services.
    The responsibility of the SDA at this point in the intake process 
is to assure that eligible applicants not suitable for title II 
participation are ``provided information on the full array of 
applicable or appropriate services that are available.'' (Section 
204(a)(2)(A) of the Act) and that necessary arrangements are made for 
individuals to make contact with those services.
    Section 628.530(c) addresses referral of participants out of title 
II services. A number of commenters indicated concern over burdensome 
paperwork requirements for referral of participants to other than title 
II programs. The Department has addressed these concerns by amending 
Sec. 628.320(c) to permit referral decisions for participants with whom 
there will be no continuing relationship to be recorded in a partial 
ISS. No further tracking of such referred participants is required. Of 
course, where there will be a continuing relationship with the referred 
participant, Sec. 628.530(a) provides that the referral decision should 
be recorded in the ISS and that the participant's progress should be 
tracked.
    In the case of service providers who discover that an eligible 
applicant cannot be served by its program, Sec. 628.510(e) requires 
that service providers refer such individuals to the SDA for further 
assessment and referral.
    Clarification of referral responsibilities was requested by a 
number of commenters. In addition to the above explanations, 
Sec. 628.510(d) and Sec. 628.530(c) are revised to specify that no 
follow-up is required for referrals of eligible applicants or 
participants with whom there will not be a continuing relationship. 
Further, the Department wishes to point out that either an applicant or 
a participant may be referred out of JTPA at any time, if warranted by 
customer need or preference. Some commenters seemed to think that both 
an objective assessment and ISS ``must be completed'' prior to referral 
outside the program. Since both assessment and the ISS are presumed to 
be continually reviewed and evolving during participation, this 
assumption is not warranted.
Job Search Limitations
    A fundamental change in section 204(c)(2) of the Act regarding 
program design is the requirement that job search, job clubs, and work 
experience activities be accompanied by other services that increase a 
participant's educational and occupational skills. This change reflects 
evidence that, in some cases, suggests that quick turnaround placement 
programs have minimal long-term impact when provided in isolation from 
other more comprehensive and intensive services. The Department's 
Inspector General, in a 1988 report, concluded that the number of JTPA 
participants on public assistance was only slightly reduced after 
completion of JTPA programs. On the other hand, The National JTPA Study 
found a 39% earnings gain for adult women from the provision of stand 
alone job search services. This new limitation reflects an overall 
thrust of JTPA to provide quality services to participants. For 
example, short-term job search assistance alone might result in a job 
placement for low-skilled individuals, but job retention is not likely 
without concomitant services aimed at increasing participants' needed 
basic or occupational skills. Accordingly, Sec. 628.535 codifies 
section 204(c)(2)(B) of the Act which limits the provision of stand-
alone job search assistance, job search skills training, and job club 
activities to title II participants. ``Job search assistance'' itself 
is defined in Sec. 626.5.
    Comments generally addressed two issues: Interfacing with the 
Employment Service (ES), and the preference of older individuals for 
immediate job placement. With regard to the Employment Service, many 
questioned the ability of the local ES office to provide adequate 
services to JTPA participants. They were concerned that ES may lack in-
house expertise to provide sufficient assistance for groups with 
special needs. Citing the provisions in the Act governing the 
determination of duplicative services, several commenters believed that 
the ability of the ES office to provide assistance to special needs 
groups should be a criterion for this determination. Others pointed out 
that, since job search activities are a critical part of any ISS, and 
service providers have already established successful networks of 
employer contacts, ES offices should not be the presumptive deliverer 
for providing adequate job search activities for all participants. 
These commenters suggested that Sec. 628.535(d) be either deleted or 
revised to permit SDA's to determine whether to use the ES to provide 
job search services.
    On the other hand, several commenters stated that allowing SDA's to 
determine unilaterally whether adequate job search assistance is 
available through the local ES office (Sec. 628.535(c)(2)) defeats one 
of the basic goals of the Amendments: To focus JTPA on providing more 
training and less stand-alone job placement. Unless there is a 
mechanism for ES input into the determination as to whether job search 
services are available, the concern is that an SDA could simply assert 
that services are not available to avoid coordinating with the ES, 
leading to duplication. One suggestion was that the Governor decide the 
criteria for the availability of job search assistance. Another 
commenter stated that any requirement to document that job search 
services are unavailable from the ES for each participant or training 
program should be done only once per program year or Job Training Plan 
cycle.
    Another commenter pointed out that because job search assistance 
was defined as a service ``designed to give a participant skills in 
acquiring full-time employment,'' and the local job service office was 
considered the appropriate purveyor of these skills (Sec. 628.535(d)), 
this provision should be removed because ES offices may not always be 
able to provide such services.
    The Department decided not to remove Sec. 628.535(d) because it 
interprets section 204(c)(2)(B)(ii) of the Act to accord the employment 
service a special status in terms of providing job search. Also, this 
provision of the Act is not substantially different from the provisions 
of sections 107 and 141 of the Act which prohibit duplication of 
services. It remains to be determined whether job search assistance is 
universally available within each community from the Employment 
Service. The SDA may look at whether local employment service resources 
are sufficient to provide the job search assistance for all potential 
JTPA referrals.
    The final rule, at Sec. 628.535(d), is amended to indicate that a 
determination is to be made by the SDA in active consultation with the 
employment service and other public agencies. These determinations must 
be documented in the SDA's job training plan since the employment 
service is on the PIC and coordination with the employment service is 
among the topics to be included in the plan. Standardized inquiries 
regarding local job search assistance availability from the employment 
service may be developed by the Governor in consultation with the State 
ES Director.
    A number of commenters representing older workers recommended 
either a waiver of the stand-alone job search limitations for this 
population or a provision allowing the Governor to request a waiver 
when sufficient evidence demonstrates that the interests of older 
workers would not be well served by these limitations. These commenters 
recognized the priority placed on training for younger individuals but 
expressed doubts that career training was a realistic and relevant goal 
for older workers who, generally are not attracted to long-term 
assistance that mandates skills training, who do not thrive in 
classroom training designed for youth and young adults, and who do not 
tend to seek assistance from the ES or other public agency 
environments. For these reasons, several commenters asked that older 
workers, or the older worker set-aside program, be exempted from this 
section altogether and that job search assistance be a service strategy 
for this population without justification in the ISS.
    The Department considered these comments carefully and has decided 
that, like all title II-A participants, older worker participants 
require assessment and need a justification in the ISS for stand-alone 
job search activities. However, a new Sec. 628.535(e) is added in the 
final regulations to recognize the preference of older individuals for 
immediate job placement and to provide some flexibility in recognition 
of the special characteristics of older workers. The Department's view 
is that this provision should not establish a routine practice to avoid 
the provision of needed training services. The intent of the JTPA 
program remains to provide needed services to the hard to serve, 
including older workers.
    A few commenters noted an ambiguity in the interim final 
regulations, that Sec. 628.804(d) and (e) limit the provision of 
preemployment and work maturity skills training and work experience, in 
addition to job search assistance, unless they are accompanied by 
additional services; while Sec. 628.535(b)(2) states, as an example, 
that work experience can be combined with job search training. 
Accordingly, Sec. 628.535(b)(2) is revised to specifically exclude this 
example as well as other services which may not be used to meet the 
combination requirement. Additional services which may be provided in 
conjunction with job search may include the training services specified 
in JTPA section 204(b)(1), except stand-alone skill assessment, 
counseling, work experience and case management, and the direct 
training services listed in 264(b) of the Act excluding tutoring, 
stand-alone skill assessment, counseling, work experience and case 
management. Commenters also pointed out that the title II-C program 
does not contain an ``exceptions'' provision to this requirement as 
section 204(c)(2)(B)(ii) of the Act does for the title II-A program. To 
address this inconsistency, Sec. 628.535(c) is amended to state that 
the exceptions are not applicable to title II-C. On the other hand, it 
is important to note that, for the purposes of this section, because 
title II-C in-school youth are enrolled in educational programs, they 
meet the requirement of being enrolled in ``other additional services'' 
(Sec. 628.804(d) and (e)).
The Volunteer Program
    Several commenters felt that the requirements at Sec. 628.540 were 
too restrictive and burdensome. In response, and in consideration of 
the principle that a volunteer program should, in fact, be voluntary 
for former participants, the Department is removing the goals, 
objectives and documentation requirements in the final rule. Section 
628.540, as revised, merely repeats the statutory requirement which the 
Department believes is self-explanatory. The Department encourages the 
SDA's to work with former participants to have them share their 
experiences in the program and in the workplace with current 
participants. The Department also advises the SDA's to document any use 
of JTPA funds for this volunteer program.
Linkages and Coordination
    Sections 205 and 265 of the Act require that SDA's operating adult 
and year-round youth programs establish appropriate linkages with other 
Federal human resource programs, including Department of Health and 
Human Services' (HHS) JOBS program, the Department of Housing and Urban 
Development's (HUD) Comprehensive Modernization Program, the Department 
of Energy's (DOE) Low Income Weatherization Grant program and programs 
under the National Service Act. Other linkages may also be established 
with appropriate State and local educational, social service, and 
public housing agencies, including CBO's, business and labor 
organizations, volunteer groups and others, such as women and older 
worker organizations, to avoid duplication and to enhance the delivery 
of services. In addition, youth programs are required to establish 
linkages with appropriate educational agencies which include formal 
agreements for procedures for referring and serving in-school youth, 
methods of assessment, notification when students drop out of school, 
and arrangements with educational agencies for services for in-school 
and out-of-school youth. These provisions are reflected in 
Sec. 628.545.
    Several commenters urged that coordination should begin at the 
Federal level. The Department agrees and has begun discussions with a 
number of other Federal agencies to increase coordination at the 
Federal level and, as the commenters requested, to seek ways to develop 
common definitions and procedures applicable across program lines. The 
commenters were concerned that all the responsibility for coordination 
rests on the JTPA system. It is, of course, true that the Act and these 
regulations, since they focus on the JTPA system place a burden on the 
system to be a prime mover in the process of developing coordinated 
program relationships. A State or SDA is required to make good faith 
efforts to seek coordination and cooperation where it is possible to do 
so.
    Several commenters questioned the ability of SDA's to establish 
appropriate linkages if other agencies are not operating under similar 
mandates. Some comments recommended that the Governor encourage 
coordination efforts through the SJTCC and, where feasible, develop 
agreements at the State level which would provide the basis and 
authority for local agreements and ensure the best utilization of funds 
between agencies. The Department agrees that these recommendations are 
a good way to establish effective and systematic coordination and 
language to this effect is added to Sec. 628.545(a). The new language 
recognizes both the SJTCC and the HRIC, whichever is in place in a 
State, as useful focus points for coordination efforts. In addition, a 
few comments referred to the importance of the SDA's documenting 
instances of attempted coordination efforts and of sharing this 
information with the Governor's office. This provision also is included 
in Sec. 628.545(a) to link State coordination agreements with local 
achievements by means of the job training plans.
    In addition, to emphasize the importance of ``one-stop shop'' 
career centers and seamless ``single point of contact'' delivery 
systems, which was the concern of several commenters, a new 
Sec. 628.545(b) is added. SDA's are encouraged to facilitate such 
delivery systems in coordination with other agencies, which may include 
both the development of ISS plans and of a common program application, 
as well as a unified job development effort and comprehensive program 
design. Such linkages may provide for a JTPA entity jointly funding or 
administering a program with funds from another agency, such as an SDA 
jointly funding aspects of a public housing agency's Comprehensive 
Modernization Program or the local JOBS program. Alternatively, when 
appropriate, the SDA could earmark funds to be spent within public 
housing areas for services to residents.
    Other coordination issues discussed were the difficulty of defining 
and receiving information on dropouts from some local educational 
agencies and the fact that agreements should be limited to those 
education agencies which plan in-school activities. With regard to 
obtaining information on school dropouts, the Department has initiated 
discussions with the Department of Education with the goal of working 
out a common definition and systematic approach for identifying and 
serving dropouts. In the meantime, States are encouraged to negotiate 
agreements with State educational agencies to facilitate this task. 
With regard to limiting the agreements required at the local level with 
educational agencies, Sec. 628.545(c) is amended to reflect these 
concerns by the addition of the qualifying terms ``appropriate'' and 
``which participate in JTPA programs.''
Transfer of Funds
    A few commenters raised questions concerning timing issues not 
addressed in Sec. 628.550 of the interim final rule: whether transfers 
must occur at the beginning of the program year; whether they may occur 
at any time during the 3-year funding period; and whether the 
provisions are applicable to the 1993 title II-B program. The 
Department does not address these issues in the final rule, leaving the 
first two issues to be addressed at the Governor's discretion. In 
response to the third issue, the provisions are applicable to the 1993 
title II-B program; this issue is addressed in the transition 
provisions at Sec. 627.904(k)(2) of the final rule.
    In addition, paragraph (b) is revised to permit transfers of up to 
20% of the title II B funds allocated to an SDA under section 252(b) of 
the Act to title II C. This change is consistent with the amendment 
made to section 256 of the Act by the Goals 2000: Educate America Act, 
Pub. L. 103-227.
Title II-A--The Adult Program
    Most of the general requirements of title II-A appear in subpart E 
of part 628 of the interim final rule. There are a few specific 
requirements of title II-A which appear in part 628, subpart F. These 
include sections on eligibility; requirements to assist hard-to-serve 
individuals; types of training services, counseling and supportive 
services; and linkages and coordination.
    In response to commenters who were confused about whether the 
provisions of the formula for allocation of funds set a maximum age of 
participation at 72 years, Sec. 628.605(a) is amended to clarify that 
there is no maximum age of participation.
    A few commenters asked for clarification on the determination of 
the 65-percent threshold of serving the hard-to-serve. Section 
628.605(c)(1) is amended to clarify that all participants, including 
the non-disadvantaged (10 percent window), are considered in 
determining the 65 percent who are hard-to-serve. Section 628.605(c)(2) 
now addresses the question of when, in the service continuum, an 
individual is counted for determining compliance with the 65-percent 
barrier requirement by clarifying, as discussed earlier, that it is 
calculated upon participants who have received a service subsequent to 
objective assessment.
    Several commenters questioned the inconsistency in the provisions 
regarding the ten-percent window in section 204(d) of the Act and the 
provisions for eligibility in the basic title II-A program, set forth 
in Sec. 628.605(e), when an older worker is in a joint program between 
JTPA and title V of the Older Americans Act. As discussed in connection 
with the provisions of Sec. 628.320, this inconsistency has been 
addressed by the Congress in amendments to the Older Americans Act.
    Finally, on the regulatory provisions of Sec. 628.605(c) and 
Sec. 628.803(d) addressing the 65-percent requirement, several 
commenters asked what would be the ramifications of non-compliance. Of 
course, the Department does not expect difficulty in meeting these 
requirements. Since the Act imposes these percentage service 
requirements, as well as the requirement on the in-school, out-of-
school 50/50-percent ratio, on participants and not to funds, the 
Department believes that they would be the subject of administrative 
corrective action by the SDA and, subsequent action by the Governor 
under the provisions of section 164(b)(1) of the Act and part 628, 
subpart G of the final rule, as appropriate.
Summer Youth Employment and Training Program
    Subpart G of part 628 covers the Summer Youth Employment and 
Training Program (SYETP under title II-B, effective with calendar year 
1994. It reflects the policy of closer integration for youth between 
academic fundamentals (such as reading and mathematics) and work 
requirements.
    A number of commenters raised issues related to the SYETP 
authorized under title II-B. Several commenters requested broad 
flexibility in the scope of the objective assessment and ISS required 
for summer program participants. Some expressed the fear that these 
requirements will result in a reduction of the number of SYETP 
participants due to the increased burden on current staff. The 
Department recognizes that the achievement objectives and resulting 
service strategies for summer youth differ from what might be expected 
in the adult program and that the corresponding assessment processes 
would vary accordingly. Section 253(c)(1)(A) of the Act states that 
SYETP programs shall include objective assessment of the basic skills 
and the supportive service needs of each participant. The SDA may use 
school records on math and reading levels to determine basic skills. 
Similarly, the fully developed ISS, described in subpart E, is not 
required for a participant who is enrolled only in the SYETP, as is 
reflected in Sec. 628.515(b)(2). For those participants transferring to 
the year-round program under title II-C, the full objective assessment 
and ISS would be required. The results of any post-title II-B 
participation test should be used as part of the assessment process 
when transferring the individual to a program under title II-C. Within 
the limits imposed by any applicable state or local privacy laws or 
rules, SDA's are encouraged to make as much use as possible of existing 
information from schools and from title II-B participation in 
developing the full objective assessment for a transferring 
participant, as well as sharing available JTPA information with school 
counselors and other appropriate school officials.
    A few commenters addressed the inability of SDA's to provide the 
required basic and remedial education services without reducing the 
number of youth served or other services to youth. While this is a 
difficult tradeoff in some areas, the Department is bound by the 
emphasis in the amendments to provide educational services to 
participants. In some instances, it may be necessary to reduce the 
number of participants served in order to get high-quality experiences 
under title II-B. Coordination and leveraging of resources is 
recommended to allow more participants to receive educational services.
    In order to more closely conform to sections 251 and 253(a) of the 
Act, Sec. 628.701(a), on Program Goals and Objectives, is amended. The 
``enhancement of basic educational skills'' is added to the list of 
possible SDA goals and objectives. Other additions include 
``encouragement of school completion or enrollment in supplementary or 
alternative school programs'' and ``improvement of employability skills 
including provision of vocational exploration opportunities and 
exposure to the world of work, and enhancement of youth citizenship 
skills.''
    A few commenters spoke of various difficulties involved with the 
determination and documentation of eligibility under the National 
School Lunch Act. Guidance on eligibility verification pertaining to 
the determination and documentation of eligibility under the National 
School Lunch Act will be developed in consultation with the Department 
of Agriculture and will be provided outside of these regulations. See 
the further discussion of this subject in the section pertaining to 
programs under title II-C.
    For the reasons discussed previously, in connection with 
eligibility for the education coordination grant program, the 
Department has determined that the criteria for eligibility, as they 
relate to the ``economically disadvantaged'' eligibility criterion and 
alternatives for in-school youth, should be consistently applied across 
programs under parts A, B, and C of title II of the Act. Therefore, in 
addition to eligibility for free lunch under the National School Lunch 
Act, the Department adds participation in a compensatory education 
program under title I chapter I of the Elementary and Secondary 
Education Act and in a schoolwide program, as specified at section 
263(g) of the Act, to the criteria at Sec. 628.702 of the final rule.
    In response to commenters who raised the issue of the perceived 
limitation of 500 hours on the duration of work experience for youth 
and its effect on the summer program, the Department refers to the 
discussion of work experience that appears in connection with 
Sec. 627.245 and the fact that the limitations on duration of work 
experience are removed.
    Section 628.705(d), dealing with concurrent enrollment, is amended 
to clarify that 65 percent of the total number of title II-C 
participants shall have one or more barriers to employment. This is 
necessary because no such additional barrier to employment requirement 
exists in title II-B. The SDA must decide who is enrolled in title II-C 
programs from title II-B or elsewhere.
    A new paragraph (e) on follow-up services is added to Sec. 628.705. 
Section 253(d) of the Act requires that followup services be provided 
for participants if the ISS indicates that such services are 
appropriate. Title II-B funds may be used such follow-up services up to 
one year after program participation, including when this coincides 
with title II-C participation when determined appropriate during 
participation in the title II-B program and recorded in the participant 
record. All supportive services in section 4(24), except financial 
assistance, are included in followup services. Appropriate followup 
activities for title II-B participants include counseling, mentoring, 
or tutoring.
    Finally, with the enactment of the Goals 2000: Educate America Act, 
there were amendments to the program under Title II-B. The Department 
believes that these are important changes and wishes to call attention 
to them in this rulemaking process. Therefore, some of the statutory 
provisions have been directly included in this final rule at Sec. 628.
Subpart H--Youth Training Program

    A number of commenters suggested that the term ``out-of-school 
youth'' be clarified or defined in Sec. 628.803(h). Several commenters 
specifically cited attendance in an alternative school or education 
program as a criterion. A few commenters specifically said that the 
Congressional Conference Committee Report makes clear that this 
definition encompasses youth enrolled in alternative education 
programs. They encouraged the inclusion of alternative education 
programs in the definition of ``out-of-school youth''. Other comments 
stressed a combination of options including students attending area 
learning centers, adult basic education classes, general educational 
development (GED) preparation, vocational schools, or colleges. Others 
wanted truants, dropouts, and those on suspension status specifically 
included. One recommended that the State define out-of-school.
    A few commenters wanted the term ``in-school youth'' clarified or 
defined. Some commenters had specific suggestions such as leaving the 
definition up to the Governor or placing it in Sec. 625.5, Definitions.
    In an earlier attempt to provide administrative clarification in 
this area, the Department had provided guidance to the Regional Offices 
on the definition of ``in-school youth'' and out-of-school youth'' in 
Field Memorandum No. 34-93. This guidance indicated that an in-school 
youth was a youth who had not received a high school degree and was 
attending school on a full-time compulsory basis. An out-of-school 
youth was a youth who was not in school, or as suggested by the report 
of the Conferees, was attending alternative school or was habitually 
truant.
    In comments to the Department, it was indicated that the interim 
guidance was problematic for two reasons. First, a 14 or 15-year-old 
youth attending alternative school would not be eligible to participate 
if defined as out-of-school since a 14 or 15-year-old could only be 
eligible as in-school youth. Second, if a youth was in alternative 
school and considered in-school by the school system, but defined as 
out-of-school for JTPA, the eligibility criteria of participation in a 
compensatory education program or eligibility for free lunch could not 
be applied.
    The issue is of some interest to the JTPA system, especially in 
light of the requirement that at least 50 percent of the youth served 
be out-of-school youth. The Department has given careful consideration 
to this matter and has determined to take a slightly different course. 
The regulations define ``in-school youth'' at Sec. 628.803(b). The 
Department has not included the concept of being subject to compulsory 
attendance requirements because in some States these requirements end 
at an age before a youth has attained a diploma and the Department 
believes that attainment of a diploma is key to the criteria for being 
in school. The word ``diploma'' is substituted for ``degree'' to 
distinguish from post-secondary attainment. Any other youth is out-of-
school. Rather than further define ``out-of-school'' in a way that 
would create the problems noted above or create a number of unnecessary 
exceptions, the Department has decided to adopt, in Sec. 628.803(h), 
the exceptions suggested in the Conference Report which set forth the 
requirement that 50-percent of youth served must be out-of-school. The 
Conference Report indicates that youth in alternative schools or who 
are ``habitually truant'' may be considered as out-of-school for 
purposes of meeting the statutory requirement. ``Alternative school'' 
also is defined. Section 628.803(h) is revised accordingly so that 
paragraph (h)(2) is redesignated as paragraph (h)(3) and a new 
paragraph (h)(2) is added.
    Several commenters were concerned that the status of high school 
graduates was unclear. The intent of the revision of the definitions in 
the final rule is to make it clear that all youth who are not in-school 
are out-of-school. Thus, high school graduates or GED recipients, who 
are not enrolled in post-secondary education programs, would qualify as 
out-of-school youth. It should be stressed, however, that the primary 
intent of including the ``out-of-school'' eligibility category in title 
II-C was to stress services to high school dropouts. SDA's should focus 
their services on this group.
    A few commenters noted the problems with documenting the free lunch 
program as an eligibility criterion for youth. That program has strict 
confidentiality provisions. One urged the Department to work with the 
appropriate agency to improve the existing process. While section 9 of 
the National School Lunch Act assures confidentiality, schools may 
release summary information such as the number of eligible children in 
a school. Parents may sign waivers of confidentiality for specific 
programs. Households may voluntarily provide evidence of eligibility. 
The U.S. Department of Agriculture (USDA) is requesting that their 
regional offices notify State agencies of these regulations and suggest 
they share this information with local school administrators. The 
Department plans to work with USDA staff to coordinate this effort. 
Section 628.803(c) is amended to reflect that the Department will 
provide further guidance on the verification of documentation regarding 
the free lunch program.
    Regarding the requirement to serve hard-to-serve individuals, 
Sec. 628.803(d)(2) is amended to state that all Job Corps participants 
shall be considered as out-of-school and shall be automatically 
considered to have a barrier to employment. This change is made to 
foster JTPA/Job Corps coordination. SDA's now will have an incentive to 
provide job development and placement services for Job Corps 
participants. All positive program terminations will be enjoyed by both 
systems.
    A commenter sought clarification as to whether non-economically 
disadvantaged youth enrolled as a part of a schoolwide project are to 
be counted as part of the 10 percent non-economically disadvantaged 
stated in Sec. 628.803(f). As stated in Sec. 628.803(h)(2), these youth 
do not count against the 10-percent window.
    Commenters sought clarification of the provisions of the 
regulations regarding title II-C eligibility based on schoolwide 
project participation. Section 628.803 is amended to add a paragraph 
(g)(3) to restate the provisions of the Act on the criteria for schools 
that qualify for schoolwide projects, and a paragraph (g)(4) which 
states that the SDA determines its schoolwide projects and provides a 
list of examples of possible projects.
    One commenter pointed out that section 263(g)(1)(C) of the Act 
requires that projects be in schools in which not less than 70 per cent 
are hard-to-serve and that the regulations should define a reasonable 
standard to determine this. This is addressed in DOL's Technical 
Assistance Guide on Eligibility which specifies that the school makes 
the certification that 70 percent of its students meet the criteria. 
The SDA may rely upon the school's certification for purposes of 
compliance.
    A few commenters suggested that for a school-wide project, an 
entire school district should be allowed to qualify and not just an 
individual school. The Department believes that the provisions of the 
Act clearly apply to an individual school. No change is made to the 
final rule.
    Several commenters sought clarification of when SDAs would be 
required to have complied with the requirement to serve 50-percent 
youth who are out-of-school. Section 628.803(h)(1) is amended to state 
that the Governor has the responsibility to determine the period for 
which the 50 percent out-of-school requirement will be calculated based 
either on the period covered by the job training plan or on a program 
year.
    A few commenters maintained that the term ``dropout'' needed 
clarification. ``School dropout'' is defined at section 4(38) of the 
Act as an individual who is no longer attending any school and who has 
not received a secondary school diploma or a certificate from a program 
of equivalency for such a diploma. That definition is now referenced at 
Sec. 628.804(c).
    There were many comments on title II-C authorized services 
including limited internships, entry employment experiences, 
cooperative education, tryout employment, youth work experience, youth 
OJT, and others. Most of these comments indicated confusion and asked 
for clarification in a variety of ways.
    A few commenters wanted limited internships clarified. A few 
commenters expressed surprise at how open limited internships were 
compared to OJT with 100-percent wage reimbursement at a private-for-
profit employer and no classroom training component. A few commenters 
thought the provision on entry employment experience was poorly written 
and confusing. Some wanted clarification on cooperative education. 
Entry employment experience, cooperative education, and limited 
internship offer work-based training experiences in a work setting. The 
Department believes that the particulars of how they are designed and 
carried out should be a matter of State and local policy, so long as 
they are consistent with general provisions of the regulations. The 
Department encourages the development of such work-based training 
programs in conjunction with education components that reinforce the 
experience. The 500-hour limitation on entry employment experience and 
limited internship is removed and Sec. 628.804(h)(2) of the final rule 
is amended accordingly. With regard to cooperative education programs, 
the Department wishes to emphasize that, as has been the practice, no 
subsidized wages may be paid to participants in this activity.
    In response to commenters who sought clarification of what 
constituted an alternative course of study, the Sec. 628.803(h)(2) 
includes examples of an alternative school program including an 
alternative course of study in connection with the in-school, out-of-
school ratio. Section 628.804(b) indicates that the alternative course 
of study shall be approved by the local educational authority and may 
be delivered by a CBO. The Department believes that the JTPA rules 
should not specify the characteristics of an alternative course of 
study when, in almost all instances, this falls within the 
responsibility of the local educational authorities.
    A commenter asked whether tryout employment is allowable under 
title II-C. Tryout employment previously was described in section 205 
of the Act. If conducted under the provisions of title II-C, it would 
be a kind of entry employment experience. The design of such an 
activity and the decision to use it is made at the local level.
    A few commenters stressed that youth work experience should not be 
limited to 500 hours. As previously discussed, the final rule is 
revised to clarify that work experience has no duration limitation.
    Several commenters expressed alarm over the title II-C OJT 
requirement that the youth OJT wage equal or exceed the average wage at 
placement of title II-A wage. Commenters stated, in various ways, that 
the new provisions on OJT for youth will eliminate youth OJT as a 
program option and that JTPA will lose its ability to serve this 
special needs population. There were several recommendations on how to 
compute wage. Several wanted the wage to be computed based totally on 
youth wages. It is clear that the language at section 
264(d)(3)(C)(i)(I) of the Act intends the youth OJT wage to be based on 
the adult wage in title II-A. Section 628.804(j)(1)(i) is amended to 
clarify that wages for OJT positions meet or exceed the average wage at 
placement in the SDA for participants under title II-A ``based on the 
most recent available data.'' This replaces the language in the interim 
final rule of ``in the preceding program year.'' Some may still view 
these provisions as eliminating private sector work for youth. The Act, 
however, provides other opportunities for youth in the private sector, 
such as entry employment experience, limited internships, and 
cooperative education. A few commenters expressed concern that disabled 
youth will be hurt by the new wage restrictions for youth OJT. These 
new training options may be developed with the disabled in mind. These 
options can be used to provide sheltered or supported work experiences 
for disabled youth similar to those available under OJT.
    Section 628.804(k) is amended to clarify that supportive services 
may be provided after termination. They include the full range of 
supportive services defined at section 4(24) of the Act, except for 
financial assistance, for up to a year after termination. In the title 
II-B section of this Preamble, ``follow-up services'' that would help 
bring JTPA closer to the goal of a year round program for youth are 
discussed.

Part 631--Programs Under Title III of the Job Training Partnership 
Act

    A number of comments received by the Department in response to the 
December 29, 1992, interim final rule specifically addressed title III 
issues and concerns. The revisions to the regulations for part 631, 
Programs under Title III of the Job Training Partnership Act, were 
driven by changes to the legislative provisions contained in the Job 
Training Amendments of 1992 and the Defense Authorization Act for 
Fiscal Year 1993. Only those comments pertaining to the proposed 
regulatory revisions stemming from the legislative changes were 
considered. After the issuance of the interim final rule, the enactment 
of the NAFTA Worker Security Act required additional revisions to the 
regulations.
    Several commenters recommended editorial changes to the proposed 
regulatory language. These suggestions were incorporated depending on 
their accuracy and usefulness. Major comments on the proposed revisions 
to Part 631, the Department's analysis of and reaction to those 
comments, and major changes to the final rule are discussed below.

Definitions
    The interim final rule at Sec. 631.2 added an additional definition 
of ``substantial layoff (for rapid response assistance)'', which 
establishes a minimum threshold for the provision of rapid response 
assistance. This minimum threshold cannot be waived, but a new 
provision, at Sec. 631.30(b)(6), which provides the Governor with 
alternatives for complying with the threshold and providing rapid 
response assistance in exceptional circumstances has been clarified. In 
addition, that provision has been expanded to reflect a requirement of 
the NAFTA Worker Security Act.
    A few commenters questioned whether the ``employment loss'' in this 
new definition relates to a single business or to the geographic area. 
To maintain consistency with the Worker Adjustment and Retraining 
Notification (WARN) Act, ``employment loss'' in this context relates to 
a single site of employment .
    Regarding the new definition of ``substantial layoff'', another 
commenter stated that employers periodically lay off, temporarily, 50 
or more employees during a 30-day period and then recall these 
individuals. Therefore, the commenter recommends that rapid response 
assistance should only be authorized if the duration of a layoff is 
expected to last for 6 months or more. The Department believes that, 
after determining a layoff meets the definition of substantial layoff 
for rapid response assistance purposes, a State is still required to 
determine, among other things, the expected duration of the layoff, the 
level of need of the affected individuals and their individual 
eligibility for services. Ascertaining their need for assistance should 
include contacting the employer and a representative of the workers. 
The State should then decide whether or not to offer services based on 
these determinations.
    A few commenters believed the new definition would exclude rapid 
response assistance for numerous small scale reductions and stated 
that, if the definition could not be altered, more latitude should be 
given to the States under the ``exceptional circumstances'' provision 
to respond to smaller layoffs. A commenter suggested expanding 
``exceptional circumstances'' to include other situations, and another 
commenter suggested alternative language for Sec. 631.30(b)(6) to allow 
the Governor to establish a threshold below 50 for rapid response 
assistance purposes. Finally, one commenter thought Sec. 631.30(b)(6) 
directly contradicted the definition of ``substantial layoff (for rapid 
response assistance)'' and questioned the legislative basis for this 
new provision.
    As a statutory provision, the minimum threshold of 50 employees 
established by the new definition of substantial layoff cannot be 
waived. However, through Sec. 631.30(b)(6), the regulations do provide 
flexibility to States to establish policies that allow rapid response 
assistance to be provided to layoffs of less than 50 workers at a 
single site. The Governor must establish guidelines defining parameters 
for ``impact on a local community.'' The only limitation is that States 
must maintain a capability to respond to single site layoffs of 50 
workers or more. In other words, States cannot establish policies which 
would exhaust their ability to provide effective and timely rapid 
response to layoffs of at least 50 workers.
    A few comments reflected concerns with both definitions of 
substantial layoff or with having two separate definitions. One 
commenter believed the Governor should have the discretion to reduce 
the worker threshold below 50, while another believed the definitions 
must be flexible enough to accommodate local circumstances. A few 
commenters stated that having two different definitions was 
administratively confusing and could lead to disallowed costs as a 
result of the difficulty of ascertaining if the 33 percent threshold 
had been met. To promote consistency, they recommended using the 
definition of ``substantial layoff for rapid response purposes'' as the 
sole definition of the term. Other commenters believed having two 
distinct definitions established a possible conflict (i.e., individuals 
who receive services through rapid response assistance may not meet the 
title III eligibility criteria), and indicated that a single definition 
of rapid response was preferable.
    The definitions of ``substantial layoff for participant 
eligibility'' and of ``substantial layoff for rapid response purposes'' 
are different as a result of responsive title III policy evolution. 
Originally, the Department used the WARN definition of ``mass layoff'' 
to establish a linkage between title III programs and WARN, and to set 
forth a minimum threshold for the provision of State rapid response 
services. To provide greater flexibility for State rapid response 
assistance, Congress provided an additional definition of substantial 
layoff, but clearly made it exclusively for rapid response purposes. 
Therefore, the two definitions of substantial layoff will remain 
intact.

Participant Eligibility

    Broader eligibility rules (criteria) are established in
    Sec. 631.3(b) for the receipt of selected readjustment and 
retraining services in instances where an employer makes a public 
announcement of a plant closure, pursuant to section 314(h) of the Act.
    A few commenters asked what constitutes a public announcement of a 
planned closure. One commenter specifically asked what constitutes a 
public announcement for the State, and if a WARN notice or a letter to 
the Governor or locally elected official from the employer would 
suffice.
    Section 631.3(b)(4) states that ``the Governor shall establish 
criteria defining `public announcement'. Such criteria shall include 
provisions that the public announcement shall be made by the employer 
and shall indicate a planned closure date for the facility (section 
314(h) of the Act).'' The Department believes a WARN notice, and most 
likely a less formal declaration by an employer, would meet these 
criteria. However, within the parameters established in the 
regulations, the Governor ultimately determines what constitutes a 
public announcement of a planned closure.
    A few commenters questioned what would happen if a decision to 
close a plant was changed. A few commenters specifically asked what 
would occur if a decision was reversed (e.g., Would the project be 
canceled? What happens to the workers who were determined eligible and 
enrolled? Are they terminated? What impact would a reversal have on 
cost category limitation, performance standards and outcomes?). They 
recommended the institution of a hold harmless provision. One commenter 
asked if an individual would remain eligible for retraining should a 
closure date be delayed or if an individual in classroom training never 
received a notice of layoff. Finally, another commenter stated that the 
participants should not be denied service or experience an interruption 
in enrollment due to delays in closing dates.
    The determination of EDWAA eligibility for any of the program's 
services and activities is determined based on the best information 
available at the time. If the circumstances upon which the eligibility 
decision(s) were based change, a reevaluation of the continued need for 
the services/activities is appropriate. It is expected that 
consideration would be given to such factors as the exact nature of the 
employer action (postponement or reversal), where the participant is in 
the system (e.g., whether the participant is enrolled and participating 
in a retraining activity), and the impact of a termination on the 
individual. However, title III expenditures for services/activities to 
a participant who was correctly determined to be eligible are not, in 
and of themselves, disallowed costs.
    A commenter asked how States should define ``plant or facility 
closing'' within the context of Sec. 631.3(b). Specifically, they asked 
if WARN rules should be used in defining these terms (i.e., whether 
line closings within a plant or the elimination of a shift should be 
considered a plant closing). While the Department believes the WARN 
rules provide helpful guidance, this determination is left to the 
discretion of the Governor.
    Another commenter requested the addition of language requiring the 
availability of ``rapid response-like activities'' to a firm entering 
bankruptcy, whether or not a formal public announcement has been made. 
Section 631.3(b)(1) provides for participant eligibility in the event 
of a formal public announcement of a plant closure. While no change is 
made in the final rule, a State may, pursuant to section 314(b) of the 
Act, provide rapid response assistance after becoming aware of a 
current or projected permanent closure or substantial layoff. Moreover, 
the firm's employees may receive the services authorized in section 314 
of the Act if they meet the eligibility criteria established at section 
301. In assessing the circumstances of an impending bankruptcy, it is 
expected that the Governor would determine whether the filing would 
result in a closing, a layoff, or a Chapter 11 restructuring with no 
contemplated change in manpower.
    A commenter questioned whether or not a participant had to be 
enrolled to receive basic readjustment services and if limited basic 
readjustment services could be provided to eligible workers prior to 
enrollment into a title III program. Section 314(c) of the Act (Basic 
Readjustment Services), of course, includes outreach and intake. The 
Department believes that outreach and intake services include limited 
assessment of an eligible applicant to allow service providers to 
evaluate an applicant's suitability for JTPA training and services. The 
definition of ``participant'' at section 4 of the Act provides that: 
``Participation shall be deemed to commence on the first day, following 
determination of eligibility, on which the participant began receiving 
subsidized employment, training or other services.''
    A few commenters felt that Sec. 631.3(b)(3) inappropriately 
excluded certain groups from consideration as ``eligible dislocated 
workers'' pursuant to Sec. 631.3(b). A few believed involuntary, forced 
and early retirements should be excepted from this provision, since 
many individuals falling into this category have lost jobs through no 
fault of their own. Stating that individuals are often forced or 
``seduced'' into early retirement, another commenter wished to except 
any individual who is likely to retire.
    The exclusion of individuals ``likely to retire instead of seeking 
new employment'' is statutorily required at section 314(h)(1) of the 
Act and, therefore, will remain. The Department interprets the Act to 
preclude services to those who are unlikely to need them because they 
will remain employed with the employer or because they will retire. The 
decision about whether any individual who has ``voluntarily'' retired 
does, in fact, intend to remain unemployed must be made on a case-by-
case basis. This decision is best made at the state or local level. 
Therefore, the Governor is responsible for the interpretation of this 
phrase and its subsequent application.
    Another commenter questioned what was acceptable documentation that 
a person is ``likely to remain employed with the employer or to 
retire'' when no individual notice is provided. It is within the 
Governor's discretion to determine what would be acceptable 
documentation.
    A new Sec. 631.3(j) is added to set forth the requirements of 
section 250(b)(2)(C) of the Trade Act of 1974 (19 U.S.C. 2271, et 
seq.), as amended by the NAFTA Worker Security Act (Title V of Pub. L. 
103-182).

Approved Training Rule

    Section 314(f)(2) of the Act states that eligible individuals 
participating in title III programs may receive unemployment 
compensation benefits consistent with State policies under the Approved 
Training Rule and defines eligible workers as those ``participating in 
training (except on-the-job training).'' The language in the final rule 
at Sec. 631.4 is revised from participation in ``any of the programs'' 
to ``any retraining activity, except on-the-job training.''
    One commenter thought that limiting the receipt of unemployment 
compensation benefits to only those trainees participating in a 
retraining activity was inappropriate. Specifically, the commenter 
believed trainees in a class providing assessment and the preparation 
of an individual service strategy (ISS) are not available and looking 
for work, and they too need compensation.
    Objective assessment and preparation of an individual readjustment 
plan are defined in section 314(c) of the Act as basic readjustment 
services and, therefore, individuals participating solely in these 
activities fail to meet the criteria established under section 
314(f)(2) of the Act and Sec. 631.4.

Classification of Costs at State and Substate Levels

    Section 631.13 was not altered in the interim final regulations. 
However, a few commenters suggested redefining ``retraining'' to be 
consistent with ``direct training services'' under titles II-A and II-C 
and ``basic readjustment services'' to be consistent with ``training-
related services'' under titles II-A and II-C.
    While the Department acknowledges that statutory requirements often 
present barriers to coordination, it must be pointed out that titles 
II-A and II-C and title III authorize separate programs with distinct 
goals, structures, services and requirements. For example, objective 
assessment is defined in titles II-A and II-C as a direct training 
service while it is defined in title III as a basic readjustment 
service. The statute and, in turn, the regulations reflect this fact. 
Therefore, the different terms with their distinct definitions remain 
intact in the final rule.

Limitations on Certain Costs
    The basis for computing the cost limitations which apply to 
expenditures of title III funds has been changed from annual 
expenditures to program year allocation (for substate grantees), or to 
funds reserved by the Governor from the program year allotment (for 
States). This change reflects the amendments to section 315 and 
recognizes that grantees are permitted to have up to 3 years in which 
to spend allotted funds, subject to certain adjustments applied through 
the reallotment process for under-expenditure. Other major changes to 
this subject area include the addition of Sec. 631.14(i) to clarify 
that the funds allocated (or distributed) to a substate grantee under 
the provisions of section 302(c)(1)(E) of the Act shall be included in 
the substate areas formula allocation for purposes of applying the cost 
limits, and the addition of Sec. 631.14(h) to allow neighboring 
substate grantees to combine funds to serve dislocated workers from two 
or more substate areas.
    A few commenters asked if it is allowable to provide funds to 
substate grantees under the provisions of section 302(c)(1)(A)-(D) of 
the Act and, if so, whether these funds must be considered funds 
allocated to a substate grantee for the program year of the funds' 
initial allotment to the State and included in the cost limitations of 
Sec. 631.14(a)-(c).
    While funds reserved by a State for activities under section 
302(c)(1)(A)-(D) of the Act may be expended through a subgrant or 
contract with a substate grantee, these funds would still be considered 
funds allocated to the Governor, as defined at Sec. 631.14(i)(3), for 
the program year of the funds' initial allotment to the State and 
included in the cost limitations applicable to the Governor. As the 
statute allocates these funds to the Governor for the explicit purpose 
of carrying out responsibilities assigned to the State, expenditures of 
these funds are to be treated as State-level expenditures, regardless 
of the operator incurring those expenses.
    One commenter asked whether TEGL No. 1-90, Change 1, which 
specified that cost limitations would be calculated based on ``total 
maximum allowable expenditures'', would remain in effect after July 1, 
1993 and if new guidelines would be issued for calculating/determining 
title III cost limitation compliance.
    TEGL 1-90, Change 1 was issued on June 18, 1991, and its content 
was based on the statutory and regulatory provisions effective at that 
time. The Department will review this TEGL and issue appropriate 
guidance.
    This same commenter also asked if the minimum/maximum percentage 
requirements would be applied to the total final expenditures for each 
cost category to determine the minimum/maximum amounts after July 1, 
1993. In a separate issuance, the Department will issue reporting 
requirements which will clarify the application of the cost 
limitations.
    One commenter discussed the inconsistency between the 15 percent 
cap on administrative costs under the title III program and the 20 
percent cap on administrative costs under the title II-A and II-C 
programs.
    For titles II-A and II-C, section 108 of the Act established a 
revised limit of 20 percent of funds that may be expended for 
administration. However, as noted above, while the basis for computing 
the cost limitations which apply to expenditures of title III funds has 
changed, the statutory provision requiring a 15 percent cap on 
administrative cost has not. Therefore, this difference between the 
programs shall remain.
    Questioning the application of Sec. 631.14(g), one commenter asked 
if cost limitations must be complied with immediately if funds are 
deobligated and, therefore, are no longer available. Cost limitations 
are applied at the time funds are no longer available for expenditure, 
in other words, when the 3-year availability period ends. When funds 
are deobligated, the total pool of funds which is available for 
expenditure is reduced and becomes the new base on which cost 
limitations will be applied. However, a State or substate grantee still 
has the entire period of fund availability to comply with the cost 
limitations as they apply to this new base.

Federal Reporting Requirements

    A new provision was added in the interim final regulations, at 
Sec. 631.15, requiring the State to provide a breakdown of all 
administrative expenditures by the dislocated worker unit, pursuant to 
section 311(b)(11) of the Act.
    A few commenters asked what cost breakdowns and line items are 
required in the reports. As indicated in Sec. 631.15, the specifics 
regarding the reports' content and format will be addressed through 
instructions to be issued by the Secretary. These were included in the 
reporting instructions for title III programs for PY 1993.

Federal Monitoring and Oversight

    A new provision is added, at Sec. 631.17, clarifying the 
Secretary's authority to oversee the State's provision of rapid 
response assistance and to require corrective action as necessary, as 
provided for in section 314(b)(3) of the Act.
    One commenter questioned why the word ``may'' was used in 
Sec. 631.17 in lieu of the word ``shall'' which is found in the 
language of section 314(b)(3) of the Act. This section is revised to 
reflect the language of the Act.
    By prescribing how rapid response is to occur, another commenter 
thought this new provision, along with other sections of the 
regulations, resulted in ``micro-management by the Department'' and 
reduced the flexibility available to the States and local areas. The 
Amendments direct the Secretary to conduct oversight of rapid response 
to ensure the ``effectiveness, efficiency and timeliness'' of these 
actions. It remains the responsibility of the State to manage its 
program in accordance with the Act and the regulations.

Needs-Related Payments

    An amended provision in section 314(e)(1) regarding eligibility for 
needs-related payments requires that a participant be unemployed, and 
this requirement is incorporated in Sec. 631.20(c).
    One commenter disapproved of the change since it denies needs-
related payments to participants working any number of hours. This 
commenter indicated that not only were they able to keep the costs of 
these payments down by having participants work part-time, but full-
time students could work part-time and have these earnings supplemented 
by the payments to allow them to complete their program.
    As stated above, section 314(e)(1) of the Act clearly states that a 
participant must be unemployed to receive needs-related payments. As a 
result, the final rule remains unchanged.

Designation or Creation and Functions of a State Dislocated Worker Unit 
or Office, and Rapid Response Assistance
    A provision at Sec. 631.30(a)(8) requires the State to immediately 
(within 48 hours) notify the substate grantee of current or projected 
layoffs and closures in the local area for the purpose of continuing 
and expanding upon the services initiated by the rapid response team, 
as required in section 311(b)(3)(D) of the Act. Moreover, section 
311(b)(12) of the Act stipulates that accountability for rapid response 
assistance resides in the dislocated worker unit (DWU), although the 
DWU may contract with other entities for the provision of these 
services. This is reflected in the provisions at Sec. 631.30(b).
    One commenter questioned whether 48 hours meant 48 working hours 
and what would happen if the information was made available on a Friday 
afternoon. The Department believes the Governor is responsible for the 
interpretation and application of the term ``48 hours.''
    Another commenter indicated stronger language needed to be 
incorporated into the regulations to ensure that the State did not pass 
off its rapid response responsibilities to the substate grantees. After 
reviewing Sec. 631.30(b), the Department feels the language adequately 
addresses this concern. The regulatory provision remains unchanged.

Allocation of Funds by the Governor

    In the Interim Final Regulations, a provision was added to 
Sec. 631.32(b)(2) to clarify that Governors must give consideration to 
each of the substate allocation formula factors required by section 
302(d) of the Act unless the factor is not relevant to economic 
dislocation conditions of the State.
    A few commenters had questions regarding the formula for making 
substate allocations. One commenter indicated that Sec. 631.32(b)(3) 
should also allow a zero weight factor to be used where data are not 
adequate or not provided or funded by a Federal partner. Specifically, 
they mentioned that plant closing and mass layoff data are no longer 
funded and farmer-rancher economic hardship data have never been 
provided by the Department and the USDA.
    The Mass Layoff Statistics program was temporarily suspended by the 
Bureau of Labor Statistics. The Department intends to resume the Mass 
Layoff Statistics Program early in 1995. During the interim period, 
however, States will have to develop their own data and proxies for 
mass layoffs. Similarly, States have been responsible for developing 
their own data and proxies for farmer-rancher economic hardship data. 
It is inconceivable that a State government would have no idea as to 
economic circumstances in its own State. If ``a review of the available 
data indicates that the factor is not relevant to determining the 
incidence of need for worker dislocation assistance within the State'', 
then a zero weight may be assigned (Sec. 631.32(b)(3)). However, 
current lack of data is not an adequate reason for invalidating a 
factor which is relevant to dislocation activity in the State.
    Another commenter wondered if the Governor had an obligation beyond 
the requirements of Sec. 627.463 (public access to records) to 
publicize the elements of the formula or describe the rationales for 
them.
    The Department requires each State Plan to include a description of 
the State's substate allocation formula methodology, including the data 
elements and allocation formula to be used. Moreover, pursuant to 
section 311(b)(9) of the Act, the Plan must be made available to the 
State job training coordinating council to review and comment on prior 
to its submittal to the Department. Therefore, through this process, 
both the State Council and the Department will have an opportunity to 
examine the within-State distribution formula.

Substate Plan

    While no significant revisions were made to Sec. 631.50 of the 
regulations, one commenter stated that the interim final rule omits any 
requirement for SSG's to meet program goals, develop an oversight plan 
and build capacity and noted that comparable provisions for SDA's are 
at Sec. 628.420(b)(2), (3) and (c).
    As stated earlier, the proposed revisions to the regulations for 
part 631 were driven by changes to the legislative provisions contained 
in the Job Training Amendments of 1992 and the Defense Authorization 
Act for Fiscal Year 1993. The Department has chosen not to regulate in 
areas unaffected by statutory change. Only those comments pertaining to 
the proposed regulatory revisions stemming from the legislative changes 
were considered for incorporation into the final rule. Therefore, 
Sec. 631.50 remains unchanged.

Cost Limitations

    Section 631.62 of the interim final rule stipulated that the cost 
limitations under part A of title III will apply to projects operated 
under part B of title III, except when waived or altered by the 
application guidelines, or by the Grant Officer in the terms of the 
grant. In response to comments, the Department has modified this 
provision in the final rule. The Department still intends to use the 
title III-A cost limitations in cases where applicants for grants do 
not ask for a different allocation of costs among the cost categories, 
but the Department does not wish to discourage applicants from 
designing their programs in the manner that will best serve the 
affected population. The final rule is revised to make it clear that 
applicants for grants can propose costs and that the Grant Officer has 
the discretion to accept them. It is the Department's intent to provide 
grant applicants flexibility in designing the mix of services in their 
programs. However, the Department will agree to proposals with 
administrative cost in excess of 15% only in extraordinary 
circumstances.
    One commenter asked if this provision will apply to the Defense 
Conversion Adjustment (DCA) Program projects currently in operation or 
whether these projects will continue to operate under the regulations 
in effect at the time of award. Each discretionary project is subject 
to the grant agreement and modifications as approved by the Grant 
Officer. Modifications to an existing grant may be requested by the 
grantee and agreed to by the Grant Officer according to the provisions 
of this final rule.
    Finally, three commenters discussed the difficulty of applying the 
Act's section 315 cost limitations to Clean Air Employment Transition 
Assistance projects. As stated above, the cost limitations in the grant 
agreement control, however, modifications to existing grants may be 
requested. For future grants, applicants are free to apply for other 
cost limits that fit their programs.

Reporting

    A provision was added at Sec. 631.63 of the interim final rule, 
setting forth the Federal reporting requirements for recipients of 
title III discretionary grants, consistent with section 322(a)(4) of 
the Act.
    One commenter thought the process for notifying the Secretary 
regarding significant developments concerning the grant or subgrant was 
too complicated and could delay the implementation of the project and 
workers' access to services.
    Section 631.63(b) simply requires the grantees to provide 
information to the Department on any significant developments that 
impact the project. This reporting requirement should not affect or 
delay the project's execution.

Special Provisions for CAETA and DDP Programs

    Section 631.60 has been clarified to state that Subpart G relates 
to programs and funds reserved to the Secretary for use under part B of 
title III of the Act: Including section 323 (20% discretionary funds); 
section 324 (Demonstration Programs); section 325 (Defense Conversion 
Adjustment Program); section 325A (Defense Diversification Program); 
and section 326 (Clean Air Employment Transition Assistance).
    The National Defense Authorization Act for 1993 authorized the 
Defense Diversification Program (DDP) as an amendment to JTPA, at 
section 325A. Its purpose is to provide retraining and readjustment 
assistance to workers and military personnel dislocated by defense 
cutbacks and closures of military facilities; and to provide planning 
support and conversion assistance for diversification of affected 
facilities within an area impacted by reductions in military 
expenditures or closure of military facilities. Section 631.65(c) of 
this final rule prescribes the needs-related payments procedure in 
accordance with the requirements in section 326(f) of the Act, as 
required by section 325A(i) of the Act.
    The Clean Air Act is administered by the Environmental Protection 
Agency; however, the Clean Air Act Amendments of 1990, Pub. L. 101-549, 
at section 110(a), amended the Job Training Partnership Act by adding a 
new section 326, establishing the Clean Air Employment Transition 
Assistance (CAETA) program. Section 326 is designed to assure the 
establishment of programs to provide assistance to workers dislocated 
as a result of a firm's compliance with the Clean Air Act. The purpose 
of these programs is to provide readjustment and retraining assistance 
to eligible workers to enable such workers to return to work.
    The Department published proposed CAETA regulations for comment on 
March 24, 1992 (57 FR 10232). Thirteen State, substate entities and 
other organizations submitted comments. Upon review, the Department has 
determined that there is no programmatic justification to have separate 
regulations for Clean Air. It is necessary, however, to make specific 
provision in the JTPA regulations for specific statutory requirements 
applicable to the CAETA program. The specific statutory requirements 
for that program are implemented herein at Sec. 631.65.
    Most of the comments received pursuant to the proposed regulations 
requested clarification of general JTPA title III areas that were 
subsequently addressed in the Interim Final Regulations on December 29, 
1992 (57 FR 62004). The following discussion relates to comments on 
issues specific to the Clean Air Act.
Administration of Clean Air Act
    One commenter suggested including a statement that the Clean Air 
Act is administered by the Environmental Protection Agency. DOL agrees 
with this comment and has added this statement in the preamble.
Needs-Related Payments
    Several comments were received on the provisions of needs-related 
payments. One commenter indicated that the language in the proposed 
regulations might discourage grant applicants from serving those 
eligible for payments so they can conserve funds for training, and that 
applicants could perceive ETA as biased toward proposed grants with 
limited needs-related payments (NRP's). It was also believed that grant 
applicants should be encouraged to seek eligible dislocated workers 
most-in-need, particularly those requiring income support during 
training. The language at Sec. 631.65(c) of the final rule is intended 
to reflect the statutory requirement that CAETA programs provide for 
adequate needs-related payments. The language is not intended to permit 
a programmatic restriction against those dislocated workers who are 
eligible to receive NRP's.
    Another commenter raised a question about when grantees should 
start using family income to determine eligibility for needs-related 
payments. The Department agrees that there should be a time frame; it 
is only upon actual enrollment in a training and/or education program 
that one becomes eligible for consideration to receive needs-related 
payments. Individual or family income for the six-month period 
immediately prior to a participant's enrollment in training and 
education programs is to be annualized to determine eligibility for 
needs-related payments.
    One commenter stated that the determination of family income at the 
time of eligibility determination, and that the three-month re-
determination requirement in the proposed rule would create 
administrative burdens. The determination of family income only applies 
to those dislocated workers who (1) have been determined eligible 
pursuant to section 326(a) of the Act, (2) have exhausted or are not 
eligible for unemployment compensation benefits, and (3) have been 
enrolled in training and education programs pursuant to section 326(f) 
of the Act. Section 326(f)(4) of the Act requires adjustments 
reflecting changes in family income. The final rule is revised to 
require that eligibility determinations ``shall be reviewed 
periodically;'' however, it is expected that an equitable system would 
be outlined in a grant application. It is expected that a grantee's 
system would be sensitive to participants' probable decreasing family 
income (depending upon the date of layoff) under the six-month income 
determination rule.
    Another commenter suggested clarifying restrictions on needs-
related payments to participants when relocation, out-of-area job 
search, or TAA allowances have ceased, or when OJT has been completed. 
The statute requires that needs-related payments be available to enable 
participants to complete training or education programs. Relocation and 
out-of-area job search allowances would normally be provided to 
participants who possess marketable skills, and, therefore, are not 
enrolled in training or education. If TAA allowances were being 
provided for training or education, needs-related payments may be used 
when TAA allowances are exhausted (if a participant is otherwise 
eligible for and enrolled in an education or training program under 
CAETA). After OJT, a participant ordinarily is employed and receives 
wages from the employer. If the participant is not employed, NRP's 
could only be made if the participant is enrolled in other training.
    Two commenters asked what constitutes ``satisfactory progress'' in 
order for a participant to continue to receive NRP's, and how often 
this determination must be made. The Department expects a grant 
application to define a system to address this issue, based upon the 
training to be provided.
    A commenter believed that the wording in the proposed rule, that 
grantees must provide needs-related payments, seemed less definitive 
and suggested stating whether the projects will be funded without 
providing for payments to any participant. Another commenter suggested 
having States check the needs-related payment policies of SDA's before 
initiating the needs-related payments requirement. Two commenters 
suggested using the same eligibility criteria for needs-related 
payments for CAETA as are used in other title III programs. Two 
commenters suggested allowing State or local flexibility in determining 
who receives payments and payments policy. Another commenter suggested 
that it would be confusing to make the needs-related payment rate 
applicable to the weekly unemployment compensation payment level or to 
the poverty level, which the commenter believed would limit the number 
of eligible individuals in classroom training.
    The Department is unable to accede to the requests of these 
commenters. Needs-related payments are discretionary under title III of 
JTPA, and grantees have some flexibility in providing such payments. 
However, under section 326(c)(2) of the Act, CAETA funds must be used 
to provide needs-related payments in accordance with the requirements 
set forth at section 326(f) of the Act. Similarly, section 325A(i) of 
the Act provides that in DDP programs, needs-related payments must be 
made in accordance with section 326(f). The Act requires that the 
Secretary prescribe regulations with respect to needs-related payments 
for CAETA and DDP. The needs-related payments regulations at 
Sec. 631.65(c) follow the statutory requirements at section 326(f) of 
the Act. Because of these statutory requirements of CAETA and DDP, 
grantees have little discretion and must provide needs-related payments 
in the manner set forth in Sec. 631.65(c).
    One commenter suggested developing regulations that require 
grantees to document reasons for denial of payments and give 
opportunities for participants who had payments suspended to seek 
redress up to and including the federal level. The Department agrees 
that grantees should include descriptions of systems in grant 
applications which document payments, reasons for denial of payments 
and suspensions. In addition, the regulations at Sec. 631.64 require 
each grantee to establish and to maintain a grievance procedure which, 
among other things, would handle grievances related to needs-related 
payments. The regulations at subpart F of 20 CFR part 627 provide 
procedures for the federal handling of allegations of violations of the 
Act or regulations.
Participant Eligibility
    Nine commenters raised questions regarding participant eligibility 
provisions for dislocated workers under CAETA. One commenter suggested 
expanding the eligible population to workers needing skills upgrading 
or retraining on new or modified equipment. Sections 301 and 326(a) of 
the Act establish eligibility criteria for CAETA. Dislocated workers 
may receive skills training in the same occupation in which they were 
previously employed if their current skills are obsolete, and such 
training is required for them to meet the local labor market hiring 
requirements for that occupation.
    Two commenters suggested including a statement regarding the 
eligibility of workers who had been laid off from mines that supply 
coal to plants. The Department agrees that workers dislocated from 
mines as a result of compliance with the Clean Air Act would be 
eligible.
    Another commenter raised the question of how one determines that an 
individual's dislocation is the consequence of compliance with the Act 
if the layoff notice does not specifically mention the impact of the 
Clean Air Act, and whether the grantee has to assure verification is 
done for each applicant. The CAETA grantee must determine and document 
that a layoff is Clean Air Act-related and must verify that each 
applicant was a part of such layoff. The application guidelines will 
provide for reasonable documentation which could establish that the 
layoff was related to the Clean Air Act.
    Another commenter suggested allowing temporary employment with the 
employer from which the worker was dislocated. Participant eligibility 
for enrollment in CAETA is specified at section 326(a) of the Act. The 
Department believes that temporary employment with the same employer is 
inconsistent with the definition of dislocation and is restricted at 
Sec. 631.3(i)(2).
Eligible Grantees
    The Department received seven comments regarding entities eligible 
to apply for grants under CAETA. Three commenters indicated that 
submitting applications directly to the Department of Labor, rather 
than through the State, could lead to such problems as a lack of 
coordination, and duplication. Another commenter suggested that 
recipients should provide assurances that they are administratively 
capable of operating the program. Two commenters suggested that 
limiting eligible grantees to States and territories of the United 
States would ensure coordination with State entities and SSGs. Section 
326(b) of the Act permits the Secretary to recognize five types of 
eligible grantees, and it does not require applicants to apply through 
the State. The Department recognizes that there would be benefits to 
submitting all applications through the States, and encourages such 
action. It should be noted, however, that an ``eligible grantee'' may 
not be an appropriate applicant for a particular project. The nature 
and extent of the proposed project, and the capacity of an applicant, 
will be factors in evaluating an application and an applicant's ability 
to perform the work.
Subpart I--Disaster Relief Employment Assistance

    A new Subpart I, to be administered under the title III National 
Reserve Grants program, provides for Disaster Relief Employment 
Assistance, as authorized by the new Amendments to title IV-J of the 
Act.
    Section 631.84(a) discusses the projects that a unit of general 
local government in a disaster area may operate under this subpart. One 
commenter suggested substituting the phrase, ``Davis-Bacon provisions 
shall apply on all projects related to demolition, cleanup, repair * * 
*'' for ``on projects regarding demolition, cleanup, repair * * *.''
    While Davis-Bacon does apply to Federal programs, the inclusion of 
this phrase does not change or clarify the meaning of this provision. 
Therefore, the section will remain unchanged.
    Section 631.85 outlines the participant eligibility criteria under 
the Disaster Relief Employment Assistance Program. The statutory 
language regarding eligibility is not accurately reflected in this 
section. The final rule is revised to correct this problem. In 
addition, one commenter thought the Department should have the 
authority to declare persons who are eligible for titles II-A and II-C 
programs eligible for title III Disaster Relief Programs. Since the 
statute does not grant the Department this blanket authority, expansion 
of participant eligibility criteria will not occur.
    Section 631.86 limits the length of disaster relief employment. One 
commenter questioned the difference between this type of employment and 
public service employment which is prohibited under titles II and III.
    Although the statute prohibits public service employment funded 
under title II-A and C and title III-A, public service employment is 
contemplated under title IV-J of the Act. Disaster relief employment is 
narrowly defined and exclusively limited to the activities described 
under Sec. 631.84. Allowable activities will not be expanded beyond the 
statutorily established parameters.
    This same commenter asked how costs incurred for disaster relief 
employment should be classified and what criteria should be used in 
determining the monetary extent to which a cost category has benefited. 
The Department has chosen not to issue detailed regulations for this 
program. Specific information regarding Disaster Relief Employment 
Assistance projects, including any guidance on cost classification 
issues, will be contained in application guidelines published by the 
Secretary. Until they are issued, an applicant for these funds should 
follow the guidelines and information published in the July 9, 1992 
Federal Register regarding Emergency Dislocated Worker Projects.

PART 637--JOBS FOR EMPLOYABLE DEPENDENT INDIVIDUALS (JEDI)

    Several commenters addressed this section of the interim final 
regulations.
    The majority of the comments addressed inconsistencies in the 
numbering of the sections and in the cross-references. The part has 
been revised to correct the numbering.
    In addition, several of the commenters raised questions concerning 
how the program can be implemented in the absence of any Congressional 
appropriation. While bonuses will not be awarded under title V of the 
Act until funds are appropriated by Congress, individuals who are 
eligible to be counted for title V purposes may be served under other 
titles of the Act. Since those individuals who would be eligible to be 
counted for the incentive bonuses under title V must also be eligible 
for, and have participated in, other activities under the Act, the 
costs associated with their participation in these activities would be 
charged to the appropriate program(s) and title(s) of the Act. If a 
State wishes to participate in the title V bonus program, if it is ever 
funded, the State may wish to keep track of the outcomes of training 
for individuals eligible to be counted for bonus purposes.

Effective Date

    The Department recognizes that the regulations are being issued 
after the beginning of a program year. To avoid administrative 
difficulties, the Department has made the effective date of the 
regulations June 30, 1995, the beginning of Program Year 1995. This 
will give states and SDA's/SSG's time to plan for the changes that may 
result from the amendments made in this final rule. States or SDA's/
SSG's are, of course, free to implement any of the changes that they 
find will benefit their programs earlier than the effective date and 
the Department will treat those changes as legally effective when 
adopted in any subsequent monitoring or audit resolution activity. 
Consistent with the Department's desire to enable states and SDAs to 
implement the beneficial changes in the final rule as quickly as they 
choose, the provisions of Sec. 627.210, authorizing the Department to 
grant waivers of regulatory requirements are made effective within 30 
days of publication to enable states to apply for waivers to be 
effective before the beginning of PY 1995.

Catalog of Federal Domestic Assistance Number

    These programs are listed in the Catalog of Federal Domestic 
Assistance at No. 17-246, ``Employment and Training Assistance--
Dislocated Workers'' (JTPA Title III Programs); and No.17-250, ``Job 
Training Partnership Act (JTPA)'' (JTPA Titles I, II, and V Programs).

List of Subjects in 20 CFR Parts 626 Through 631 and 637

    Dislocated worker programs, Grant programs, Labor, Manpower 
training programs.

Final Rule

    Accordingly, chapter V of title 20, Code of Federal Regulations is 
amended, as follows:
    1. Part 626 is revised to read as follows:

PART 626--INTRODUCTION TO THE REGULATIONS UNDER THE JOB TRAINING 
PARTNERSHIP ACT

Sec.
626.1  Scope and purpose of the Job Training Partnership Act.
626.2  Format of the Job Training Partnership Act regulations.
626.3  Purpose, scope, and applicability of the Job Training 
Partnership Act regulations.
626.4  Table of contents for the Job Training Partnership Act 
regulations.
626.5  Definitions.

    Authority: 29 U.S.C. 1579(a); Sec. 6305(f), Pub. L. 100-418, 102 
Stat. 1107; 29 U.S.C. 1791i(e).
Sec. 626.1  Scope and purpose of the Job Training Partnership Act.

    It is the purpose of the Job Training Partnership Act (JTPA or the 
Act) to establish programs to prepare youth and adults facing serious 
barriers to employment for participation in the labor force by 
providing job training and other services that will result in increased 
employment and earnings, increased educational and occupational skills, 
and decreased welfare dependency, thereby improving the quality of the 
work force and enhancing the productivity and competitiveness of the 
Nation (section 2).


Sec. 626.2  Format of the Job Training Partnership Act regulations.

    (a) Regulations promulgated by the Department of Labor to implement 
the provisions of the Act are set forth in parts 626 through 638 of 
title 20, chapter V, of the Code of Federal Regulations, with the 
exception of the veterans' employment program's chapter IX regulations 
of the Office of the Assistant Secretary for Veterans' Employment and 
Training, which are set forth at part 1005 of title 20.
    (b) Nondiscrimination and equal opportunity requirements and 
procedures, including complaint processing and compliance reviews, will 
be governed by the provisions of 29 CFR part 34 and will be 
administered by the Department of Labor (Department or DOL) Directorate 
of Civil Rights.
    (c) General authority for the JTPA regulations is found at section 
169 of the Act. Specific statutory authorities other than section 169 
are noted throughout the JTPA regulations.


Sec. 626.3  Purpose, scope, and applicability of the Job Training 
Partnership Act regulations.

    (a) Parts 626 through 638 of this chapter and part 1005 of chapter 
IX (Veterans' employment programs under title IV, part C of the Job 
Training Partnership Act) establish the Federal programmatic and 
administrative requirements for JTPA grants awarded by the Department 
of Labor to eligible grant recipients.
    (b) Parts 626 through 638 of this chapter and part 1005 of chapter 
IX apply to recipients and subrecipients of JTPA funds.


Sec. 626.4  Table of contents for the Job Training Partnership Act 
regulations.

    The table of contents for the regulations under the Job Training 
Partnership Act, 20 CFR parts 626-638 and 1005, is as follows:

PART 626--INTRODUCTION TO THE REGULATIONS UNDER THE JOB TRAINING 
PARTNERSHIP ACT

Sec.
626.1  Scope and purpose of the Job Training Partnership Act.
626.2  Format of the Job Training Partnership Act regulations.
626.3  Purpose, scope and applicability of the Job Training 
Partnership Act regulations.
626.4  Table of contents for the Job Training Partnership Act 
regulations.
626.5  Definitions.

PART 627--GENERAL PROVISIONS GOVERNING PROGRAMS UNDER THE ACT

Subpart A--Scope and Purpose

627.100  Scope and Purpose of Part 627.

Subpart B--Program Requirements

627.200  Governor/Secretary agreement.
627.205  Public service employment prohibition.
627.210  Nondiscrimination and nonsectarian activities.
627.215  Relocation.
627.220  Coordination with programs under title IV of the Higher 
Education Act including the Pell grant program.
627.225  Employment generating activities.
627.230  Displacement.
627.235  General program requirements.
627.240  On-the-job training.
627.245  Work experience.
627.250  Interstate agreements.

Subpart C--Payments, Supportive Services and Benefits and Working 
Conditions

627.300  Scope and purpose.
627.305  Payments.
627.310  Supportive Services.
627.315  Benefits and working conditions.

Subpart D--Administrative Standards

627.400  Scope and purpose.
627.405  Grant agreement and funding.
627.410  Reallotment and reallocation.
627.415  Insurance.
627.420  Procurement.
627.422  Selection of service providers.
627.423  Funding restrictions for ``high-risk'' recipients and 
subrecipients.
627.424  Prohibition of subawards to debarred and suspended parties.
627.425  Standards for financial management and participant data 
systems.
627.430  Grant payments.
627.435  Cost principles and allowable costs.
627.440  Classification of costs.
627.445  Limitations on certain costs.
627.450  Program income.
627.455  Reports required.
627.460  Requirements for records.
627.463  Public access to records.
627.465  Property management standards.
627.470  Performance standards.
627.471  Reorganization plan appeals.
627.475  Oversight and monitoring.
627.477  Governor's determination of substantial violation.
627.480  Audits.
627.481  Audit resolution.
627.485  Closeout.
627.490  Later disallowances and adjustments after closeout.
627.495  Collection of amounts due.

Subpart E--Grievances Procedures at the State and Local Level

627.500  Scope and purpose.
627.501  State grievance and hearing procedures for noncriminal 
complaints at the recipient level.
627.502  Grievance and hearing procedures for noncriminal complaints 
at the SDA and SSG levels.
627.503  Recipient-level review.
627.504  Noncriminal grievance procedure at employer level.

Subpart F--Federal Handling of Noncriminal Complaints and other 
Allegations

627.600  Scope and purpose.
627.601  Complaints and allegations at the Federal level.
627.602  Resolution of investigative findings.
627.603  Special handling of labor standards violations under 
section 143 of the Act.
627.604  Alternative procedure for handling labor standards 
violations under section 143--Binding arbitration.
627.605  Special Federal review of SDA and SSG-level complaints 
without decision.
627.606  Grant officer resolution.
627.607  Grant Officer resolution of Governor's failure to promptly 
take action.

Subpart G--Sanctions for Violations of the Act

627.700  Scope and purpose.
627.702  Sanctions and corrective actions.
627.703  Failure to comply with procurement provisions.
627.704  Process for waiver of State liability.
627.706  Process for advance approval of a recipient's contemplated 
corrective actions.
627.708  Offset process.

Subpart H--Hearings by the Office of Administrative Law Judges

627.800  Scope and purpose.
627.801  Procedures for filing request for hearing.
627.802  Rules of procedure.
627.803  Relief.
627.804  Timing of decisions.
627.805  Alternative dispute resolution.
627.806  Other authority.

Subpart I--Transition Provisions

627.900  Scope and purpose.
627.901  Transition period.
627.902  Governor's actions.
627.903  Actions which are at the discretion of the Governor.
627.904  Transition and implementation.
627.905  Guidance on contracts and other agreements.
627.906  Determinations on State and SDA implementation.

PART 628--PROGRAMS UNDER TITLE II OF THE JOB TRAINING PARTNERSHIP ACT

Subpart A--Scope and Purpose

628.100  Scope and purpose of part 628.

Subpart B--State Planning

628.200  Scope and purpose.
628.205  Governor's coordination and special services plan.
628.210  State Job Training Coordinating Council.
628.215  State Human Resource Investment Council.

Subpart C--State Programs

628.300  Scope and purpose.
628.305  State distribution of funds.
628.310  Administration.
628.315  Education coordination and grants.
628.320  Services for older individuals.
628.325  Incentive grants, capacity building and technical 
assistance.

Subpart D--Local Service Delivery System

628.400  Scope and purpose.
628.405  Service delivery areas.
628.410  Private Industry Council.
628.415  Selection of SDA grant recipient and administrative entity.
628.420  Job training plan.
628.425  Review and approval.
628.426  Disapproval or revocation of the plan.
628.430  State SDA submission.
Subpart E--Program Design Requirements for Programs Under Title II of 
the Job Training Partnership Act

628.500  Scope and purpose.
628.505  Eligibility.
628.510  Intake, referrals, and targeting.
628.515  Objective assessment.
628.520  Individual service strategy.
628.525  Limitations.
628.530  Referrals of participants to non-title II programs.
628.535  Limitations on job search assistance.
628.540  Volunteer program.
628.545  Linkages and coordination.
628.550  Transfer of funds.

Subpart F--The Adult Program

628.600  Scope and purpose.
628.605  Eligibility.
628.610  Authorized services.

Subpart G--The Summer Youth Employment and Training Program

628.700  Scope and purpose.
628.701  Program goals and objectives.
628.702  Enriched Educational Component.
638.703  Private Sector Summer Jobs.
628.704  Eligibility.
628.705  SYETP authorized services.
628.710  Period of program operation.

Subpart H--Youth Training Program

628.800  Scope and purpose.
628.803  Eligibility.
628.804  Authorized services.

PART 629--[RESERVED]

PART 630--[RESERVED]

PART 631--PROGRAMS UNDER TITLE III OF THE JOB TRAINING PARTNERSHIP ACT

Subpart A--General Provisions

631.1  Scope and purpose.
631.2  Definitions.
631.3  Participant eligibility.
631.4  Approved training rule.
Subpart B--Additional Title III Administrative Standards and Procedures
631.11  Allotment and obligation of funds by the Secretary.
631.12  Reallotment of funds by the Secretary.
631.13  Classification of costs at State and substate levels.
631.14  Limitations on certain costs.
631.15  Federal reporting requirements.
631.16  Complaints, investigations, and penalties.
631.17  Federal monitoring and oversight.
631.18  Federal by-pass authority.
631.19  Appeals.

Subpart C--Needs-Related Payments

631.20  Needs-related payments.

Subpart D--State Administration

631.30  Designation or creation and functions of a State dislocated 
worker unit or office and rapid response assistance.
631.31  Monitoring and oversight.
631.32  Allocation of funds by the Governor.
631.33  State procedures for identifying funds subject to mandatory 
Federal reallotment.
631.34  Designation of substate areas.
631.35  Designation of substate grantees.
631.36  Biennial State plan.
631.37  Coordination activities.
631.38  State by-pass authority.

Subpart E--State Programs

631.40  State program operational plan.
631.41  Allowable State activities.

Subpart F--Substate Programs

631.50  Substate plan.
631.51  Allowable substate program activities.
631.52  Selection of service providers.
631.53  Certificate of continuing eligibility.

Subpart G--Federal Delivery of Dislocated Worker Services Through 
National Reserve Account Funds

631.60  General.
631.61  Application for funding and selection criteria.
631.62  Cost limitations.
631.63  Reporting.
631.64  General Administrative Requirements.
631.65  Special Provisions for CAETA and DDP.

Subpart H--[Reserved]

Subpart I--Disaster Relief Employment Assistance

631.80  Scope and Purpose.
631.81  Availability of funds.
631.82  Substate allocation.
631.83  Coordination.
631.84  Allowable projects.
631.85  Participant eligibility.
631.86  Limitations on disaster relief employment.
631.87  Definitions.

PART 632--INDIAN AND NATIVE AMERICAN EMPLOYMENT AND TRAINING PROGRAMS

Subpart A--Introduction

632.1  [Reserved]
632.2  Scope and purpose.
632.3  Format for these regulations.
632.4  Definitions.

Subpart B--Designation Procedures for the Native American Grantees

632.10  Eligibility requirements for designation as a Native 
American grantee.
632.11  Designation of Native American grantees.
632.12  Alternative arrangements for the provision of services, 
nondesignation.
632.13  Review of denial of designation as a Native American 
grantee, or rejection of a comprehensive annual plan.

Subpart C--Program Planning, Application and Modification Procedures

632.17  Planning process.
632.18  Regional and national planning meetings.
632.19  Grant application content.
632.20  Submission of grant applications.
632.21  Application disapproval.
632.22  Modification of a Comprehensive Annual Plan (CAP) and/or 
Master Plan.
632.23  Termination and corrective action of a CAP and/or Master 
Plan.

Subpart D--Administrative Standards and Procedures

632.31  General.
632.32  Financial management systems.
632.33  Audits.
632.34  Program income.
632.35  Native American grantee contracts and subgrants.
632.36  Procurement standards.
632.37  Allowable costs.
632.38  Classification of costs.
632.39  Administrative cost plan.
632.40  Administrative staff and personnel standards.
632.41  Reporting requirements.
632.42  Grant closeout procedures.
632.43  Reallocation of funds.
632.44  Sanctions for violation of the Act.

Subpart E--Program Design and Management

632.75  General responsibilities of Native American grantees.
632.76  Program management systems.
632.77  Participant eligibility determination.
632.78  Training activities.
632.79  Employment activities.
632.80  Other activities.
632.81  Payments to participants.
632.82  Benefits and working conditions for participants.
632.83  FICA.
632.84  Non-Federal status of participants.
632.85  Participant limitations.
632.86  Nondiscrimination and nonsectarian activities.
632.87  Equitable provision of services to the eligible population 
and significant segments.
632.88  General responsibilities of the Department.
632.89  Performance standards.

Subpart F--Prevention of Fraud and Program Abuse

632.115  General.
632.116  Conflict of interest.
632.117  Kickbacks.
632.118  Nepotism.
632.119  Political patronage.
632.120  Political activities.
632.121  Lobbying activities.
632.122  Unionization and antiunionization activities; work 
stoppages.
632.123  Maintenance of effort.
632.124  Theft or embezzlement from employment and training funds; 
improper inducement; obstruction of investigations and other 
criminal provisions.
632.125  Responsibilities of Native American grantees, subgrantees 
and contractors for preventing fraud and program abuse and for 
general program management.

Subpart G--[Reserved]

Subpart H--Job Training Partnership Act Programs Under Title IV, 
Section 401
632.170  Eligibility for funds.
632.171  Allocation of funds.
632.172  Eligibility for participation in Title IV, Section 401.
632.173  Allowable program activities.
632.174  Administrative costs.

Subpart I--Summer Youth Employment and Training Programs

632.250  General.
632.251  Eligibility for funds.
632.252  Allocation of funds.
632.253  Special operating provision.
632.254  Program startup.
632.255  Program planning.
632.256  Submission of applications.
632.257  Eligibility for participation.
632.258  Allowable activities.
632.259  Vocational exploration program.
632.260  Worksite standards.
632.261  Reporting requirements.
632.262  Termination date for the summer program.
632.263  Administrative costs.

PART 633--MIGRANT AND SEASONAL FARMWORKER PROGRAMS

Subpart A--Introductory Provisions

633.102  Scope and purpose of Title IV, Section 402 programs.
633.103  Format for these regulations.
633.104  Definitions.
633.105  Allocation of funds.
633.106  Eligibility for allocable funds.
633.107  Eligibility for participation in Section 402 programs.

Subpart B--Grant Planning and Application Procedures

633.201  Grant planning and application procedures in general.
633.202  Announcement of State planning estimates and invitation to 
submit a grant application.
633.203  Review of funding request.
633.204  Responsibility review.
633.205  Notification of selection.

Subpart C--Program Design and Administrative Procedures

633.301  General responsibilities.
633.302  Training activities and services.
633.303  Allowable costs.
633.304  Section 402 cost allocation.
633.305  General benefits and working conditions for program 
participants.
633.306  Retirement benefits.
633.307  Packages of benefits.
633.308  Non-Federal status of participants.
633.309  Recordkeeping requirements.
633.310  Bonding.
633.311  Management information systems.
633.312  Grantee contracts and subgrants.
633.313  Administrative staff and personnel standards.
633.314  Reports required.
633.315  Replacement, corrective action, termination.
633.316  Closeout procedures.
633.317  Reallocation of funds.
633.318  Nondiscrimination and nonsectarian activities.
633.319  Lobbying, political activities and unionization.
633.320  Nepotism.
633.321  Performance standards for Section 402 programs.
633.322  Sanctions for violation of the Act.
PART 634--LABOR MARKET INFORMATION PROGRAMS UNDER TITLE IV, PART E OF 
THE JOB TRAINING PARTNERSHIP ACT

Comprehensive Labor Market Information System

634.1  General.
634.2  Availability of funds.
634.3  Eligible recipients.
634.4  Statistical standards.
634.5  Federal oversight.

PART 635--[RESERVED]

PART 636--COMPLAINTS, INVESTIGATIONS, AND HEARINGS

636.1  Scope and purpose.
636.2  Protection of informants.
636.3  Complaint and hearing procedures at the grantee level.
636.4  Grievance procedures at the employer level.
636.5  Exhaustion of grantee level procedure.
636.6  Complaints and investigations at the Federal level.
636.7  Subpoenas.
636.8  Initial and final determination; request for hearing at the 
Federal level.
636.9  Opportunity for informal review.
636.10  Hearings before the Office of Administrative Law Judges.
636.11  Final action.

PART 637--PROGRAMS UNDER TITLE V OF THE JOB TRAINING PARTNERSHIP ACT

Subpart A--General Provisions

Sec.
637.100  Scope and purpose.
637.105  Definitions.

Subpart B--Program Planning and Operation

637.200  Allotments to States.
637.205  Notice of intent to participate.
637.210  Incentive bonus program applications.
637.215  Review and approval of applications for incentive bonus 
payments.
637.220  Eligibility criteria for individuals to be counted in 
determining incentive bonuses.
637.225  Determination of incentive bonus.
637.230  Use of incentive bonuses.

Subpart C--Additional Title V Administrative Standards and Procedures

637.300  Management systems, reporting and recordkeeping.
637.305  Federal monitoring and oversight.
637.310  Audits.

Subpart D--Data Collection [Reserved]

PART 638--JOB CORPS PROGRAM UNDER TITLE IV-B OF THE JOB TRAINING 
PARTNERSHIP ACT

Subpart A--Purpose and Scope

638.100  General.

Subpart B--Definitions

638.200  Definitions.

Subpart C--Funding, Site Selection, and Facilities Management

638.300  Eligibility for funds and eligible deliverers.
638.301  Funding procedures.
638.302  Center performance measurement.
638.303  Site selection and facilities management.
638.304  Historical preservation.
638.305  Capital improvements.
638.306  Protection and maintenance of contract center facilities 
owned or leased by Job Corps.
638.307  Facilities surveys.
Subpart D--Enrollment, Transfers, Terminations, and Placements in the 
Job Corps
638.400  Eligibility for participation.
638.401  Outreach and screening of participants.
638.402  Enrollment by readmission.
638.403  Selective service.
638.404  Transfers.
638.405  Extensions of enrollment.
638.406  Federal status of students.
638.407  Terminations.
638.408  Transportation.
638.409  Placement and job development.

Subpart E--Center Operations

638.500  Orientation program.
694.501  Student handbook.
638.502  Job Corps basic education program.
638.503  Vocational training.
638.504  Occupational exploration programs.
638.505  Scheduling of training.
638.506  Purchase of vocational supplies and equipment.
638.507  Work experience.
638.508  Sale of services or objects.
638.509  Leisure-time employment.
638.510  Health care and services.
638.511  Drug use and abuse.
638.512  Sexual behavior and harassment.
638.513  Death.
638.514  Residential support services.
638.515  Recreation/avocational program.
638.516  Laundry, mail, and telephone service.
638.517  Counseling.
638.518  Intergroup relations program.
638.519  Incentives system.
638.520  Student government and leadership program.
638.521  Student welfare associations.
638.522  Evaluation of student progress.
638.523  Food service.
638.524  Allowances and allotments.
638.525  Clothing.
638.526  Tort and other claims.
638.527  Federal employees' compensation.
638.528  Social Security.
638.529  Income taxes.
638.530  Emergency use of personnel, equipment, and facilities.
638.531  Limitations on the use of students in emergency projects.
638.532  Annual leave.
638.533  Other student absences.
638.534  Legal services to corpsmembers.
638.535  Voting rights.
638.536  Religious rights.
638.537  Disclosure of information.
694.538  Disciplinary procedures and appeals.
638.539  Complaints and disputes.
638.540  Cooperation with agencies and institutions.
638.541  Job Corps training opportunities.
638.542  Child care services.
638.543  Community relations program.

Subpart F--Applied Vocational Skills Training (VST)

638.600  Applied vocational skills training (VST) through work 
projects.
638.601  Applied VST budgeting.

Subpart G--Experimental, Research, and Demonstration Projects

638.710  Experimental, research, and demonstration projects.

Subpart H--Administrative Provisions

638.800  Program management.
638.801  Staff training.
638.802  Student records management.
638.803  Safety.
638.804  Environmental health.
638.805  Security and law enforcement.
638.806  Property management and procurement.
638.807  Imprest and petty cash funds.
638.808  Center financial management and reporting.
638.809  Audit.
638.810  Reporting requirements.
638.811  Review and evaluation.
638.812  State and local taxation of Job Corps deliverers.
638.813  Nondiscrimination, nonsectarian activities.
638.814  Lobbying; political activities; unionization.
638.815  Charging fees.
PART 1005--VETERANS' EMPLOYMENT PROGRAMS UNDER THE TITLE IV, PART C OF 
THE JOB TRAINING PARTNERSHIP ACT

Subpart A--General Provisions

1005.1  Scope and purpose.
1005.2  Program administration.
1005.3  Participant eligibility.

Subpart B--Program Funding

1005.11  Availability of funds.
1005.12  Eligibility for funds.
1005.13  Application for funding.
1005.14  Review of application for funding.
1005.15  Approval of funding requests.

Subpart C--Program Design and Management

1005.21  General.
1005.22  Allowable activities.
1005.23  Program management and performance standards.
1005.24  Recordkeeping and reporting requirements.
1005.25  Monitoring and oversight.
1005.26  Grievance procedures.


Sec. 626.5  Definitions.

    In addition to the definitions contained in section 4 of the Act, 
the following definitions of terms used in the Act or parts 626-631 of 
this chapter apply as appropriate to programs under titles I, II, and 
III of the Act:
    Accrued expenditures means charges made to the JTPA program. 
Expenditures are the sum of actual cash disbursements, the amount of 
indirect expense incurred, and the net increase (or decrease) in the 
amounts owed by the recipient for the 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.
    Act means the Job Training Partnership Act.
    ALJ means an administrative law judge in the Office of 
Administrative Law Judges of the U.S. Department of Labor.
    Awarding agency means: (1) With respect to a grant, the Department 
of Labor; and (2) with respect to a subgrant or contract, the party 
that awarded the subgrant or contract.
    Capacity building means the systematic improvement of job 
functions, skills, knowledge, and expertise of the personnel who staff 
and administer employment and training and other closely related human 
service systems. Capacity building is designed to enhance the 
effectiveness, to strengthen the caliber of customer services provided 
under the Act and other Federal, State, and local employment and 
training programs, and improve coordination among them. Capacity 
building includes curriculum development, appropriate training, 
technical assistance, staff development, and other related activities.
    Chief elected official (CEO) means the official or officials, or 
their representatives, of the jurisdiction or jurisdictions which 
requested designation by the Governor as a service delivery area.
    Commercial organizations means private for-profit entities.
    Commercially available off-the-shelf training package means a 
training package sold or traded to the general public in the course of 
normal business operations, at prices based on established catalog or 
market prices. To be considered as ``sold to the general public,'' the 
package must be regularly sold in sufficient quantities to constitute a 
real commercial market to buyers that must include other than JTPA 
programs. The package must include performance criteria pertaining to 
the delivery of the package which may include participant attainment of 
knowledge, skills or a job.
    Contractor means the organization, entity, or individual that is 
awarded a procurement contract under the recipient's or subrecipient's 
procurement standards and procedures.
    Cost means accrued expenditure.
    Department means the U.S. Department of Labor.
    DOL means the U.S. Department of Labor.
    ETA means the Employment and Training Administration of the U.S. 
Department of Labor.
    Family is defined at section 4(34) of the Act. An ``individual with 
a disability'' shall, for the purposes of income eligibility 
determination, be considered to be an unrelated individual who is a 
family unit of one, consistent with the definition of ``economically 
disadvantaged'' at section 4(8) of the Act. The Governor may provide 
interpretations of the term ``family'' related to how ``dependent 
children'' are defined for programs within a State, consistent with the 
Act, and all applicable rules and regulations, and State or local law. 
Such interpretations by the Governor may address the treatment of 
certain individuals who may need to be viewed discretely in the income 
eligibility determination process, such as runaways, emancipated youth, 
and court adjudicated youth separated from the family.
    The phrase ``living in a single residence'' with other family 
members includes temporary, voluntary residence elsewhere (e.g., 
attending school or college, or visiting relatives). It does not 
include involuntary temporary residence elsewhere (e.g., incarceration, 
or placement as a result of a court order).
    Family income means ``income'' as defined by the Department of 
Health and Human Services in connection with the annual poverty 
guidelines. Such income shall not include unemployment compensation, 
child support and public assistance (including Aid to Families with 
Dependent Children, Supplemental Security Income, Emergency Assistance 
money payments, and non-federally funded General Assistance or General 
Relief money payments), as provided for at section 4(8) of the Act. In 
addition, such income shall also exclude foster child care payments, 
educational financial assistance received under title IV of the Higher 
Education Act (20 U.S.C. 1087), as amended by section 479(B) of the 
Higher Education Act Amendments of 1992), needs-based scholarship 
assistance, and income earned while on active military duty and other 
benefit payments specified at 38 U.S.C. 4213, items (1) and (3). The 
Governor may, for the purposes of determining income eligibility for 
services to older individuals under section 204(d)(5) of the Act, 
exclude up to 25 percent of Social Security and Old Age Survivors' 
Insurance benefit payments under title II of the Social Security Act, 
(42 U.S.C., section 401, et seq.) from the definition of family income. 
In addition, when a Federal statute specifically provides that income 
or payments received under such statute shall be excluded in 
determining eligibility for and the level of benefits received under 
any other federal statute, such income or payments shall be excluded in 
JTPA eligibility determinations.
    Funding period means the period of time when JTPA funds are 
available for expenditure. Unless a shorter period of time is specified 
in a title III discretionary award, the JTPA funding period is the 3-
year period specified in JTPA section 161(b); the program year in which 
Federal funds are obligated to the recipient, and the two succeeding 
program years.
    Governor means, in addition to the definition at section 4(9) of 
the Act, the recipient of JTPA funds awarded to the State under titles 
I through III.
    Grant means an award of JTPA financial assistance by the U.S. 
Department of Labor to an eligible JTPA recipient. (Also, see 
Secs. 627.405 and 627.430 of these regulations).
    Grantee means the recipient.
    Individual service strategy (ISS) is defined in Sec. 628.520 of 
this chapter.
    Job search assistance (also including job search skills training 
and job club activities) means the provision of instruction and support 
to a participant to give the participant skills in acquiring full time 
employment. The services provided may include, but are not limited to, 
resume writing, interviewing skills, labor market guidance, telephone 
techniques, information on job openings, and job acquisition 
strategies, as well as the provision of office space and supplies for 
the job search.
    Job Training Partnership Act means Public Law (Pub. L.) 97-300, as 
amended, 29 U.S.C. 1501, et seq.
    JTPA means the Job Training Partnership Act.
    Nontraditional employment, as applied to women, means occupations 
or fields of work where women comprise less than 25 percent of the 
individuals employed in such occupation or field of work as provided 
periodically by the Department in the Federal Register. (Pub. L. 102-
235, Nontraditional Employment for Women Act).
    OALJ means the Office of Administrative Law Judges of the U.S. 
Department of Labor.
    Obligations means the amounts of orders placed, contracts and 
subgrants awarded, goods and services received, and similar 
transactions during a funding period that will require payment by the 
recipient or subrecipient during the same or a future period.
    OIG means the Office of Inspector General of the U.S. Department of 
Labor.
    PIC means a private industry council.
    Participant means an individual who has been determined to be 
eligible to participate in and who is receiving services (except post-
termination services authorized under sections 204(c)(4) and 264(d)(5) 
and followup services authorized under section 253(d)) under a program 
authorized by the JTPA. Participation shall be deemed to commence on 
the first day, following determination of eligibility, on which the 
participant began receiving subsidized employment, training, or other 
services provided under the JTPA. (section 4(37)).
    Program year means the 12-month period beginning July 1 of the 
indicated year.
    Recipient means the entity to which a JTPA grant is awarded 
directly from the Department of Labor to carry out the JTPA program. 
The recipient is the entire legal entity that received the award and is 
legally responsible for carrying out the JTPA program, even if only a 
particular component of the entity is designated in the grant award 
document. For JTPA grants under titles I, II and III, except for 
certain discretionary grants awarded under title III, part B, the State 
is the recipient.
    SDA means a service delivery area designated by the Governor 
pursuant to section 101(a)(4) of the Act. As used in these regulations, 
SDA may also refer to the entity that administers the JTPA program 
within the designated area.
    SDA grant recipient means the entity that receives JTPA funds for a 
service delivery area directly from the recipient.
    Secretary means the Secretary of Labor.
    Section, as used in this chapter, means a section of the Act unless 
the text specifically indicates otherwise.
    Service provider means a public agency, private nonprofit 
organization, or private-for-profit entity that delivers educational, 
training, employment or supportive services to JTPA participants. 
Awards to service providers may be made by subgrant, contract, 
subcontract, or other legal agreement.
    Stand-in costs means costs paid from non-Federal sources that a 
recipient proposes to substitute for Federal costs that have been 
disallowed as a result of an audit or other review. In order to be 
considered as valid substitutions, the costs (1) shall have been 
reported by the grantee as uncharged program costs under the same title 
and in the same program year in which the disallowed costs were 
incurred (2) shall have been incurred in compliance with laws, 
regulations, and contractual provisions governing JTPA, and (3) shall 
not result in a violation of the applicable cost limitations.
    State is defined at section 4(22) of the Act. For cash payment 
purposes, the definition of ``State'' contained in the Department of 
the Treasury regulations at 31 CFR 205.3 shall apply to JTPA programs.
    State council means the State Job Training Coordinating Council 
(SJTCC) or, in a State with a Human Resource Investment Council (HRIC) 
pursuant to Sec. 628.215 of this chapter, the HRIC.
    Subgrant means an award of JTPA financial assistance in the form of 
money, or property in lieu of money, made under a grant by a recipient 
to an eligible subrecipient. It also means a subgrant award of JTPA 
financial assistance 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 purchases from vendors nor does it include any form 
of assistance received by program participants.
    Subgrantee means a subrecipient.
    Subrecipient means the legal entity to which a subgrant is awarded 
and which is accountable to the recipient (or higher tier subrecipient) 
for the use of the funds provided. For JTPA purposes, distinguishing 
characteristics of a subrecipient include items such as determining 
eligibility of applicants, enrollment of participants, performance 
measured against meeting the objectives of the program, responsibility 
for programmatic decisionmaking, responsibility for compliance with 
program requirements, and use of the funds awarded to carry out a JTPA 
program or project, as compared to providing goods or services for a 
JTPA program or project (vendor). Depending on local circumstances, the 
PIC, local elected official, or administrative entity may be a 
subrecipient. SDA grant recipients and JTPA title III substate grantees 
are particular types of subrecipients.
    Substate grantee (SSG) means that agency or organization selected 
to administer programs pursuant to section 312(b) of the Act. The 
substate grantee is the entity that receives JTPA title III funds for a 
substate area directly from the Governor.
    Technical assistance is a facet of capacity building which may 
include but is not limited to information sharing, dissemination and 
training on program models and job functions; peer-to-peer networking 
and problem solving; guides; and interactive communication 
technologies.
    Title, as used in this chapter, means a title of the Act, unless 
the text of the regulation specifically indicates otherwise.
    Vendor means an entity responsible for providing generally required 
goods or services to be used in the JTPA program. These goods or 
services may be for the recipient's or subrecipient's own use or for 
the use of participants in the program. Distinguishing characteristics 
of a vendor include items such as: Providing the goods and services 
within normal business operations; providing similar goods or services 
to many different purchasers, including purchasers outside the JTPA 
program; and operating in a competitive environment. A vendor is not a 
subrecipient and does not exhibit the distinguishing characteristics 
attributable to a subrecipient, as defined above. Any entity directly 
involved in the delivery of program services not available to the 
general public, with the exception of an employer providing on-the-job 
training, shall be considered a subrecipient rather than a vendor.
    Wagner-Peyser Act means 29 U.S.C. 49, et seq.

    2. Part 627 is revised to read as follows:

PART 627--GENERAL PROVISIONS GOVERNING PROGRAMS UNDER TITLES I, II, 
AND III OF THE ACT

Subpart A--Scope and Purpose

627.100  Scope and purpose of this Part 627.

Subpart B--Program Requirements

627.200  Governor/Secretary agreement.
627.201  Waivers.
627.205  Public service employment prohibition.
627.210  Nondiscrimination and nonsectarian activities.
627.215  Relocation.
627.220  Coordination with programs under title IV of the Higher 
Education Act including the Pell grant program.
627.225  Employment generating activities.
627.230  Displacement.
627.235  General program requirements.
627.240  On-the-job training.
627.245  Work experience.
627.250  Interstate agreements.

Subpart C--Payments, Supportive Services, and Benefits and Working 
Conditions

627.300  Scope and purpose.
627.305  Payments.
627.310  Supportive services.
627.315  Benefits and working conditions.

Subpart D--Administrative Standards

627.400  Scope and purpose.
627.405  Grant agreement and funding.
627.410  Reallotment and reallocation.
627.415  Insurance.
627.420  Procurement.
627.422  Selection of service providers.
627.423  Funding restrictions for ``high-risk'' recipients and 
subrecipients.
627.424  Prohibition of subawards to debarred and suspended parties.
627.425  Standards for financial management and participant data 
systems.
627.430  Grant payments.
627.435  Cost principles and allowable costs.
627.440  Classification of costs.
627.445  Limitations on certain costs.
627.450  Program income.
627.455  Reports required.
627.460  Requirements for records.
627.463  Public access to records.
627.465  Property management standards.
627.470  Performance standards.
627.471  Reorganization plan appeals.
627.475  Oversight and monitoring.
627.477  Governor's determination of substantial violation.
627.480  Audits.
627.481  Audit resolution.
627.485  Closeout.
627.490  Later disallowances and adjustments after closeout.
627.495  Collection of amounts due.

Subpart E--Grievances Procedures at the State and Local Level

627.500  Scope and purpose.
627.501  State grievance and hearing procedures for noncriminal 
complaints at the recipient level.
627.502  Grievance and hearing procedures for noncriminal complaints 
at the SDA and SSG levels.
627.503  Recipient-level review.
627.504  Noncriminal grievance procedure at employer level.

Subpart F--Federal Handling of Noncriminal Complaints and Other 
Allegations

627.600  Scope and purpose.
627.601  Complaints and allegations at the Federal Level.
627.602  Resolution of investigative findings.
627.603  Special handling of labor standards violations under 
section 143 of the Act.
627.604  Alternative procedure for handling labor standards 
violations under section 143--Binding arbitration.
627.605  Special Federal review of SDA- and SSG-level complaints 
without decision.
627.606  Grant officer resolution.
627.607  Grant Officer resolution of Governor's failure to promptly 
take action.

Subpart G--Sanctions for Violations of the Act

627.700  Scope and purpose.
627.702  Sanctions and corrective actions.
627.703  Failure to comply with procurement provisions.
627.704  Process for waiver of State liability.
627.706  Process for advance approval of a recipient's contemplated 
corrective actions.
627.708  Offset process.

Subpart H--Hearings by the Office of Administrative Law Judges

627.800  Scope and purpose.
627.801  Procedures for filing request for hearing.
627.802  Rules of procedure.
627.803  Relief.
627.804  Timing of decisions.
627.805  Alternative dispute resolution.
627.806  Other authority.

Subpart I--Transition Provisions

627.900  Scope and purpose.
627.901  Transition period.
627.902  Governor's actions.
627.903  Actions which are the discretion of the Governor.
627.904  Transition and implementation.
627.905  Guidance on contracts and other agreements.
627.906  Determinations on state and SDA implementation.

    Authority: 29 U.S.C. 1579(a); Sec. 6305(f), Pub. L. 100-418, 102 
Stat. 1107; 29 U.S.C. 1791i(e).

Subpart A--Scope and Purpose


Sec. 627.100  Scope and purpose of this part 627.

    (a) This part sets forth requirements for implementation of 
programs under titles I, II, and III of the Job Training Partnership 
Act.
    (b) Subpart B provides general program requirements that apply to 
all programs under the titles I, II, and III of the Act, except as 
provided elsewhere in the Act or this chapter. These requirements 
include the Governor/Secretary agreement, the nondiscrimination and 
nonsectarian activity provisions, coordination provisions with Higher 
Education Act programs, and the prohibitions on public service 
employment, relocation assistance, displacement, and employment 
generating activities. This subpart also sets forth comprehensive rules 
for on-the-job training for JTPA participants as well as for work 
experience.
    (c) Subpart C sets forth requirements for allowable payments to 
JTPA participants.
    (d) Subpart D establishes the administrative and financial 
standards and requirements that apply to funds received under the Act.
    (e) Subpart E establishes the procedures that apply to the handling 
of noncriminal complaints under the Act at the Governor, the SDA, and 
title III SSG levels.
    (f) Subpart F establishes the procedures that apply to the filing, 
handling, and review of complaints at the Federal level.
    (g) Subpart G sets forth the provisions that apply to the sanctions 
and corrective actions that may be imposed by the Secretary for 
violations of the Act, regulations, or grant terms and conditions.
    (h) Subpart H sets forth procedures that apply to hearing by the 
Office of the Administrative Law Judges.

Subpart B--Program Requirements


Sec. 627.200  Governor/Secretary agreement.

    (a)(1) To establish a continuing relationship under the Act, the 
Governor and the Secretary shall enter into a Governor/Secretary 
agreement. The agreement shall consist of a statement assuring that the 
State shall comply with (i) the Job Training Partnership Act and all 
applicable rules and regulations and (ii) the Wagner-Peyser Act and all 
applicable rules and regulations. The agreement shall specify that 
guidelines, interpretations, and definitions, adopted and issued by the 
Governor and identified pursuant to section 124 of the Act, shall, to 
the extent that they are consistent with the Act and applicable rules 
and regulations, be accepted by the Secretary.
    (2) Either the Governor or the Secretary may seek a modification, 
revision, or termination of the agreement at any time, to be effective 
at the end of a program year.
    (b) Except as provided at part B of title III of the Act and part 
631, subpart G, of this chapter, the State shall be the grant recipient 
of JTPA funds awarded under titles I, II, and III.


Sec. 627.201  Waivers.

    (a)(1) The Governor may request, and the Secretary may grant, a 
waiver of specific provisions of these regulations to the extent that 
such request is consistent with the provisions of the Act.
    (2) In requesting a waiver under paragraph (a)(1) of this section, 
the Governor shall demonstrate how it will either improve the targeting 
of services to the hard to serve, increase the level of basic and 
occupational skills training provided by the JTPA program in the State, 
contribute to the provision of academic enrichment services to youth, 
promote coordination of JTPA programs with other human resource 
programs, or substantially improve the job placement outcomes of the 
JTPA program.
    (3) Waivers granted by the Secretary shall be effective for no more 
than four years from the date the waiver is granted.
Sec. 627.205  Public service employment prohibition.

    No funds available under titles I, II-A, II-C, or III-A of the Act 
may be used for public service employment (sections 141(p) and 
314(d)(2)).


Sec. 627.210  Nondiscrimination and nonsectarian activities.

    (a)(1) Recipients, SDA grant recipients, title III substate 
grantees, and other subrecipients shall comply with the 
nondiscrimination provisions of section 167 of the Act.
    (2) Nondiscrimination and equal opportunity requirements and 
procedures, including complaint processing and compliance reviews, are 
governed by the provisions of 29 CFR part 34 and are administered and 
enforced by the DOL Directorate of Civil Rights.
    (3) Funds may be used to meet a recipient's or subrecipient's 
obligation to provide physical and programmatic accessibility and 
reasonable accommodation in regard to the JTPA program as required by 
Section 504 of the Rehabilitation Act of 1973, as amended, and the 
Americans with Disabilities Act of 1990.
    (b) The employment or training of participants in sectarian 
activities is prohibited.


Sec. 627.215  Relocation.

    (a) No funds provided under the Act shall be used, or proposed for 
use, to encourage or to induce the relocation of an establishment, or 
part thereof, that result in the loss of employment for any employee or 
such establishment at the original location.
    (b) For 120 days after the commencement or the expansion of 
commercial operations of a relocating establishment, no funds provided 
under this Act shall be used for customized or skill training, on-the-
job training, or company-specific assessments of job applicants or 
employees, for any relocating establishment or part thereof at a new, 
or expanded location, if the relocation of such establishment or part 
thereof results in a loss of employment for any employee of such 
establishment at the original location.
    (c) For the purposes of this section, relocating establishment 
means a business entity, including a successor-in-interest, which is 
moving any operations from a facility in one labor market area within 
the United States and its territories to a new or expanding facility in 
another labor market area. For the purposes of this section, a labor 
market area is an area within which individuals can readily change 
employment without changing their place of residence.
    (d) Pre-award review. To verify that an establishment which is new 
or expanding is not, in fact, relocating employment from another area, 
standardized pre-award review procedures developed by the State shall 
be completed and documented jointly by the service delivery area or 
substate grantee and the establishment as a prerequisite to JTPA 
assistance. The review should include names under which the 
establishment does business, including successors-in-interest; the 
name, title, and address of the company official certifying the 
information; the name and address of the facility in the other 
geographic location which is being closed or from which business is 
being transferred; a statement from the employer about job losses at 
that location; the nature of the products or business being 
transferred; the date the facility will commence or expand operations, 
and whether JTPA assistance is sought in connection with past or 
impending job losses at other facilities.
    (e) Violations and sanctions. The Department will promptly review 
and take appropriate action with regard to alleged violations of the 
provisions of paragraphs (a) and (b) of this section. Procedures for 
the investigation and resolution of the violations are provided for 
under subpart F of this part. Sanctions and remedies are provided for 
under subpart G of this part.


Sec. 627.220  Coordination with programs under title IV of the Higher 
Education Act including the Pell grant program.

    (a) Coordination. Financial assistance programs under title IV of 
the Higher Education Act of 1965, as amended (HEA) (the Pell Grant 
program, the Supplemental Education Opportunity Grant program, the 
Work-study program, and Federal loan programs such as Federal Perkins 
Loans. Federal Stafford Loans and Federal Direct Stafford Loans) 
provide student financial aid and are available to JTPA participants 
enrolling in postsecondary level education programs. SDA's and title 
III SSG's shall establish coordination procedures and contractual 
safeguards to ensure that JTPA funds are used in addition to funds 
otherwise available in the area and are coordinated with these funding 
sources.
    (b) Affordable programs. (1) The SDA shall assist the participant 
early in the objective assessment, as appropriate, to establish 
eligibility for Pell Grants, student loans and other forms of financial 
aid.
    (2) The SDA or SSA shall record in the ISS or participant record 
the participant's training-related financial assistance needs and the 
mix of JTPA and other funds, including Pell Grant funds (sections 
141(b), 107(b), 205(b) and 265(b)).
    (3) The SDA shall ensure, to the extent practicable, that available 
Federal, State, and local resources are coordinated sufficiently to 
meet the training and education-related costs of services, so that the 
participant can afford to complete the agreed-upon program 
successfully.
    (4) Participants shall not be required to apply for or access 
student loans, or incur personal debt as a condition of JTPA 
participation.
    (c) Information sharing. To prevent duplication of funding and to 
streamline the tracking of the participant's financial needs and use of 
funds when HEA, title IV programs are involved, contracts and 
agreements with educational institutions shall require the educational 
institution's financial aid officer to inform the SDA's/SSG's of the 
amounts and disposition of any HEA, title IV awards and other types of 
financial aid to each JTPA participant awarded after the enrollment of 
the participant, as part of a continuing, regular information sharing 
process (section 141(b)).


Sec. 627.225  Employment generating activities.

    (a)(1) No funds available under the Act shall be used for 
employment generating activities, economic development activities, 
investment in revolving loan funds, capitalization of businesses, 
investment in contract bidding resource centers, or similar activities.
    (2) No funds available under titles I, II, or III of the Act shall 
be used for foreign travel for employment generating activities, 
economic development activities, or similar activities.
    (b) JTPA funds may be used for normal employer outreach and job 
development activities including, but not limited to: contacts with 
potential employers for the purpose of placement of JTPA participants; 
participation in business associations (such as chambers of commerce); 
JTPA staff participation on economic development boards and 
commissions, and work with economic development agencies, to provide 
information about JTPA and to assist in making informed decisions about 
community job training needs; subscriptions to relevant publications; 
general dissemination of information on JTPA programs and activities; 
labor market surveys; and development of on-the-job training (OJT) 
opportunities, as defined in Sec. 627.240; and other allowable JTPA 
activities in the private sector.


Sec. 627.230  Displacement.

    (a) No currently employed worker shall be displaced by any 
participant (including partial displacement such as a reduction in the 
hours of nonovertime work, wages, or employment benefits).
    (b) No participant shall be employed or job opening filled: (1) 
When any other individual is on layoff from the same or any 
substantially equivalent job, or
    (2) When the employer has terminated any regular employee without 
cause or otherwise reduced its workforce with the intention of filling 
the vacancy so created by hiring a participant whose wages are 
subsidized under the Act.
    (c) Violations and sanctions. The Department will promptly review 
and take appropriate action with regard to alleged violations of the 
provisions of paragraphs (a) and (b) of this section. Procedures for 
the investigation and resolution of violations are provided for under 
subpart F of this part. Sanctions and remedies are provided for under 
subpart G of this part.


Sec. 627.235  General program requirements.

    (a) The requirements set forth in sections 141, 142 and 143 of the 
Act apply to all programs under titles I, II, and III of the Act, 
except as provided elsewhere in the Act.
    (b) Recipients shall ensure that an individual enrolled in a JTPA 
program meets the requirements of section 167(a)(5) of the Act, Section 
3 of the Military Selective Service Act (50 U.S.C. App. 453) and other 
requirements applicable to programs funded under the specific section 
or title of the Act under which the participant is enrolling (section 
604).
    (c) Recipients shall ensure that individuals are enrolled within 45 
days of the date of eligibility determination or a new eligibility 
determination (including new application, if necessary) shall be made, 
except that eligible summer program applicants under title II-B may be 
enrolled within 45 days into a summer youth enrollee pool, and no 
subsequent eligibility determination need be made prior to 
participation during the period of that summer program. In addition, 
the 45-day enrollment requirement shall not apply for individuals who 
have a valid certificate of continuing eligibility under the title III 
program, as described in Sec. 631.3 and Sec. 631.53 of this chapter.
    (d) Programs operated under titles I, II, and III of the Act are 
not subject to the provisions of 29 CFR part 97, ``Uniform 
Administrative Requirements for Grants and Cooperative Agreements to 
State and Local Governments,'' except as otherwise explicitly provided 
in this chapter.
    (e) If a recipient or SDA imposes a requirement that is in addition 
to the provisions of the Act and these regulations relating to the 
administration and operation of programs funded by the Act, the 
recipient or SDA shall identify the requirement as a State- or SDA-
imposed requirement (section 124).


Sec. 627.240  On-the-job training.

    (a) General--(1) On-the-job training (OJT) means training by an 
employer in the private or public sector given to a participant who, 
after objective assessment, and in accordance with the ISS, has been 
referred to and hired by the employer following the development of an 
agreement with the employer to provide occupational training in 
exchange for reimbursement of the employer's extraordinary costs. On-
the-job training occurs while the participant is engaged in productive 
work which provides knowledge and skills essential to the full and 
adequate performance of the job.
    (2) This does not preclude a participant who has been trained by 
one employer from ultimately being placed in a comparable training-
related position with another employer.
    (3) On-the-job training may be sequenced with or accompanied by 
other types of training such as classroom training or literacy 
training.
    (b) Duration of OJT.--(1) OJT authorized for a participant shall be 
limited to a period not in excess of that required for the participant 
to acquire the skills needed for the OJT position. Except as described 
in paragraph (b) (3) of this section, the period of reimbursement to 
the employer under an OJT agreement shall not exceed 6 months of 
training.
    (2) The 6-month duration of OJT may be expressed as a number of 
hours, days, or weeks the participant is expected to work in a 6-month 
period if the participant works full-time.
    (3) In the event that a participant's regular employment is less 
than full-time and less than 500 hours of OJT has occurred by the end 
of 6 months, that participant may remain in OJT until 499 hours OJT 
hours have occurred.
    (4)(i) Recipients shall develop policies and procedures for 
determining the average training duration for occupations including to 
reflect an individual participant's need for additional training time, 
or reduction in training time to reflect the individual participant's 
partial acquisition of needed skills. (In no case should an individual 
who is fully skilled in an occupation be placed in OJT in that 
occupation.)
    (ii) In determining the average training time, consideration should 
be given to recognized reference materials, such as the ``Dictionary of 
Occupational Titles'' (DOT) and employer training plans. Such materials 
need not be limited to the DOT, however.
    (5) On-the-job training is encouraged, but not required, in all 
occupations with significant training content, particularly in higher-
skill occupations appropriate to the participant's needs. Training 
plans may be developed that recognize the full duration of the OJT 
period necessary for the full and adequate performance of the job, but 
the period of reimbursement may not exceed the duration in paragraph 
(a)(1) or (a)(2) of this section.
    (6) When the OJT period in a given occupation for a participant for 
whom the ISS identifies OJT as appropriate varies from the average for 
that occupation, the basis for the variation shall be recorded in the 
ISS.
    (c) On-the-job training payments to employers. (1) On-the-job 
training payments to employers are deemed to be in compensation for the 
extraordinary costs associated with training participants and in 
compensation for the costs associated with the lower productivity of 
such participants. Employers shall not be required to document such 
extraordinary costs or lower productivity (section 141(g)(1)).
    (2)(i) On-the-job training payments to employers shall not, during 
the period of such training, average more than 50 percent of the wages 
paid by the employer to OJT participants.
    (ii) On-the-job training payments to employers may be based upon 
scheduled raises or regular pay increases.
    (iii) On-the-job training payments may not be based on overtime, 
shift differential, premium pay and other nonregular wages paid by the 
employer to participants.
    (iv) On-the-job training payments may not be based upon periods of 
time such as illness, holidays, plant downtime or other events in which 
no training occurs.
    (3) Employers which provide classroom or vestibule training to meet 
the specific training needs of JTPA participants to equip them with 
education and knowledge necessary to the OJT occupation may be 
separately reimbursed for training costs, such as instructors and 
training material.
    (d) On-the-job training agreements. (1) Each OJT agreement shall, 
at a minimum, specify the occupation(s) for which training is to be 
provided, the duration of the training, the number of participants to 
be trained in each occupation, wage rates to be paid, the rate of 
reimbursement, the maximum amount of reimbursement, a job description 
or training outline that reflects what the participant will learn, and 
any other separate classroom training that may be provided.
    (2) The agreement shall provide that the employer will maintain and 
make available time and attendance, payroll and other records to 
support amounts reimbursed under OJT contracts.
    (e) Labor standards. OJT participants shall be compensated by the 
employer at the same rates, including periodic increases, as similarly 
situated employees, but in no event less than the higher of the minimum 
wage specified under the Fair Labor Standards Act of 1938, as amended 
or the applicable State or local minimum wage. Participants must 
receive the same benefits and have the same working conditions as 
similarly situated employees.
    (f) Suitability of participants. (1) Only those participants who 
have been assessed and for whom OJT has been determined as an 
appropriate activity in the participant's ISS may be referred to an 
employer for participation in OJT.
    (2) An individual referred to the JTPA program by an employer may 
be enrolled in an OJT program with such employer only upon completion 
of the objective assessment and individual service strategy in which 
OJT with such employer has been determined to be an appropriate 
activity and only if the employer has not already hired such 
individual.
    (3) OJT with the participant's previous or current employer in the 
same, a similar, or an upgraded job is not permitted.
    (g) Monitoring. (1) OJT agreements shall be monitored periodically 
on-site by the entity issuing the contract to assure that the validity 
and propriety of amounts claimed for reimbursement are substantiated by 
payroll and time and attendance records and that the training is being 
provided as specified in the agreement.
    (2) Brokering contractors shall conduct on-site monitoring of the 
OJT employers and other subcontractors to verify compliance with 
subcontract terms before making payments.
    (3) Nothing in this paragraph (g) shall relieve recipients and 
SDA's from responsibility for monitoring expenditures under the Act.
    (h) Employer eligibility. (1) OJT agreements shall not be entered 
into with employers which, under previous agreements, have exhibited a 
pattern of failing to provide OJT participants with continued long-term 
employment as regular employees with wages, benefits and working 
conditions at the same level and to the same extent as similarly 
situated employees. This prohibition does not apply to OJT agreements 
for youth in the program under title II-B who are returning to school.
    (2) Governors shall issue procedures and criteria to implement the 
requirement in paragraph (h)(1) of this section, which shall specify 
the duration of the period of loss of eligibility. The procedures and 
criteria shall provide that situations in which OJT participants quit 
voluntarily, are terminated for cause, or are released due to 
unforeseeable changes in business conditions will not necessarily 
result in termination of employer eligibility.
    (i) Brokered OJT. Each agreement with an OJT employer that is 
written by a brokering contractor (not written directly by the SDA/SSA 
or recipient) shall specify and clearly differentiate the services to 
be provided by the brokering contractor (including but not limited to 
outreach, recruitment, training, counseling, assessment, placement, 
monitoring, and followup), the employer and other agencies and 
subcontractors, including services provided with or without cost by 
other agencies or subcontractors.
    (j) Youth OJT. OJT conducted under title II-C shall meet the 
requirements of subpart H of part 628 of this chapter (628.804), as 
well as the requirements of this section. Where OJT is provided to 
youth concurrently enrolled under titles II-B and II-C, the source of 
funding for the OJT shall govern which requirements apply.
    (k) Employment and employee leasing agencies.
    (1) Definition. The terms employment agency and employee leasing 
agency mean an employer that provides regular, on-going employment 
(i.e., not probationary, temporary, or intermittent employment) in a 
specific occupation and, for a fee, places employees at the worksite of 
another employer to perform work for such employer.
    (2) Employment and employee leasing agencies that meet the other 
requirements of this section may be eligible for OJT agreements when 
the agreement specifies the source of training and specifies that the 
payments are for the extraordinary training costs of the entity 
providing the training.


Sec. 627.245  Work experience.

    (a) Definition.--Work Experience means a short-term or part-time 
training assignment with a public or private nonprofit organization for 
a participant who needs assistance in becoming accustomed to basic work 
requirements. It is prohibited in the private for-profit sector.
    (b) Suitability. Work experience should be designed to promote the 
development of good work habits and basic work skills.
    (c) Duration of work experience. Participation in work experience 
shall be for a reasonable length of time, based on the needs of the 
participant. The duration of work experience shall be recorded in the 
participant's ISS.
    (d) Combination with other services. Work experience under titles 
II-A and C shall be accompanied either concurrently or sequentially by 
other services designed to increase the basic education and/or 
occupational skills of the participant, as recorded in the ISS.
    (e) Work experience is not an allowable activity under title III of 
the Act. (Sections 204(b) and (c), 253(a), and 264 (c) and (d).)


Sec. 627.250  Interstate agreements.

    The Secretary hereby grants authority to the several States to 
enter into interstate agreements and compacts in accordance with 
section 127 of the Act and, as specified in Sec. 627.420(g), 
Procurement.

Subpart C--Payments, Supportive Services, and Benefits and Working 
Conditions


Sec. 627.300  Scope and purpose.

    This subpart sets forth requirements for allowable payments to JTPA 
participants under titles I and II. These include needs-based payments 
under title II, incentive and bonus payments under title II, work-based 
training payments under title II, and payments for combined activities 
under title II. Requirements for supportive services under titles I, 
II, and III, including financial assistance and needs-related payments, 
are also included in this subpart. This subpart also sets forth rules 
for benefits and working conditions for JTPA participants. These 
include requirements for: Compliance with applicable labor laws; 
workers' compensation coverage or medical and accident insurance where 
there is no State workers' compensation coverage; and working 
conditions which are not detrimental to the participant's health and 
safety.


Sec. 627.305  Payments.

    (a)(1) General. Allowable types of payments which may be made to 
participants are: Needs-based payments for eligible individuals in 
programs under title II; incentive and bonus payments for participants 
in title II programs; work-based training payments for work experience, 
entry employment experience, internships and other work-based training 
activities; payments for participants in title II-B activities; and 
training payments for combined activities in title II programs. These 
payments shall be made in accordance with paragraphs (b) through (f) of 
this section.
    (2) A participant shall receive no payments for training activities 
in which the participant fails to participate without good cause 
(section 142(a)(1)).
    (3) The SDA shall ensure to the extent possible that similarly 
situated participants receive similar payments.
    (4) Payments to participants, broadly defined for this subsection 
as all funds distributed to participants except OJT wages, shall not be 
considered as income for the purposes of determining eligibility for 
and the amount of income transfer and in-kind aid furnished under any 
Federal or federally assisted program based on need, other than as 
provided under the Social Security Act (section 142(b)).
    (5) The SDA is responsible for meeting any applicable Internal 
Revenue Service and Fair Labor Standards Act requirements (section 
142(a)(3)).
    (6) An SDA may set fixed levels for any non-wage payment.
    (b) Needs-based payments. (1) Participants in programs funded under 
title II may receive needs-based payments when such payments are 
necessary to enable the individual to participate in training programs. 
Payments shall be made in accordance with a locally developed policy 
which is included in the job training plan approved by the Governor.
    (2) The individual determination of participants' needs-based 
payments and the amount of such payments shall be based upon the 
results of the continuing objective assessment and determined in 
accordance with a locally developed policy. The provisions and amount 
of such payments shall be recorded in the ISS.
    (c) Incentive and bonus payments. Participants in programs funded 
under title II may receive incentive and bonus payments based on their 
attendance and performance in accordance with a locally developed 
policy. The policy shall be described in the job training plan approved 
by the Governor and shall include a specification of the requirements 
for the receipt of such payments and the level of payments.
    (d) Work-based training payments. Individuals participating in work 
experience, in entry employment experience programs, in limited 
internships for youth in the private sector, or in other work-based 
training activities under title II of the Act may receive work-based 
training payments which may be wages.
    (e) Summer participants may receive training payments for 
participation in activities under title II-B.
    (f) Training payments for combined activities. For title II 
programs, participants in one of the activities described in paragraph 
(d) of this section for which work-based training payments are payable 
for more than 50 percent of the participant's time, including classroom 
training, may also receive training payments for hours of participation 
in classroom training.


Sec. 627.310  Supportive services.

    (a)(1) The SDA or SSG shall develop a policy on supportive services 
in accordance with the definition at section 4(24) of the Act. This 
policy shall be included in the job training plan approved by the 
Governor (section 4(24)). Supportive services may be provided to 
participants through in-kind or cash assistance, or by arrangement with 
another human service agency when necessary to enable an individual who 
is eligible for training under a JTPA assisted program, but who cannot 
afford to pay for such services, to participate in such JTPA-assisted 
program.
    (2) In the event that an SDA or SSG adopts a policy of providing a 
fixed reimbursement for a particular supportive service to all 
participants, it shall, as part of its policy, state the rationale for 
its choice and the fixed amounts it has adopted.
    (b) Limited supportive services may be provided to applicants in 
order to permit them to complete the application process.
    (c) Necessary supportive services shall be recorded in a 
participant's ISS under title II or should be recorded in a 
participant's individual readjustment plan under title III. When 
supportive services are provided in accordance with paragraph (b) of 
this section, information on any supportive service provided may be 
maintained for future inclusion in an ISS.
    (d) The SDA or SSG shall ensure, to the extent possible, that 
similarly situated participants receive similar supportive services.
    (e) For title II participants, necessary supportive services (with 
the exception of financial assistance) may be provided for up to one 
year following termination as post-termination or followup services 
(sections 4(24), 204(b)(2)(J), and 204(c)(4)). For title III 
participants, the provisions at section 314(c)(15) of the Act shall 
apply.
    (f) An SDA or SSG may set fixed levels of benefit for any 
supportive service.
    (g)(1) For purposes of title II, financial assistance is defined as 
a general supportive service payment for the purpose of retaining 
participants in training.
    (2) Financial assistance payments may be considered to be necessary 
for participation in training for title II participants, i.e., a 
separate, individual determination of need is not necessary.
    (h) Needs-related payments. The requirements pertaining to needs-
related payments provided for under section 315(b) under title III of 
the Act, are described in part 631 of this chapter.


Sec. 627.315  Benefits and working conditions.

    (a) In the development and conduct of programs funded under the 
Act, SDA's and SSG's shall ensure that participants are not assigned to 
work for employers which do not comply with applicable labor laws, 
including wage and hour, occupational health and safety, and child 
labor laws (29 CFR part 570).
    (b) To the extent that a State workers' compensation law is 
applicable, workers' compensation benefits in accordance with such law 
shall be available with respect to injuries suffered by participants. 
Where a State's workers' compensation law is not applicable, recipients 
and subrecipients shall secure insurance coverage for injuries suffered 
by such participants in all JTPA work-related activities. Income 
maintenance coverage (e.g., contributions for unemployment 
compensation), is not required for participants (section 143(a)(3)).
    (c) Where a participant is engaged in activities not covered under 
the Occupational Safety and Health Act of 1970, as amended, the 
participant shall not be required or permitted to work, be trained, or 
receive services in buildings or surroundings or under working 
conditions which are unsanitary, hazardous, or dangerous to the 
participant's health or safety. A participant employed or trained for 
inherently dangerous occupations, e.g., fire or police jobs, shall be 
assigned to work in accordance with reasonable safety practices 
(section 143(a)(2)).

Subpart D--Administrative Standards


Sec. 627.400  Scope and purpose.

    This subpart establishes the administrative and financial standards 
and requirements that apply to funds received under the Act.


Sec. 627.405  Grant agreement and funding.

    (a)(1) Pursuant to Sec. 627.200 of this part and the Governor/
Secretary agreement, each program year there will be executed a grant 
agreement signed by the Governor or the Governor's designated 
representative and the Secretary or the Secretary's designated 
representative (Grant Officer).
    (2) The grant agreement described in paragraph (a)(1) of this 
section shall be the basis for Federal obligation of funds for the 
program year for programs authorized by titles I, II, and III, 
including any title III discretionary projects awarded to the State, 
and such other funds as the Secretary may award under the grant.
    (b) Funding. The Secretary shall allot funds to the States in 
accordance with sections 162, 202, 252, 262, and 302 of the Act. The 
Secretary shall obligate such allotments through Notices of Obligation.
    (c) Pursuant to instructions issued by the Secretary, additional 
funds may be awarded to States for the purpose of carrying out the 
administrative activities described in section 202(c)(1)(A) when a 
State receives an amount under such section that is less than $500,000 
(section 453(d)).
    (d) Termination. Each grant shall terminate when the period of 
availability for expenditure (funding period), as specified in section 
161(b) of the Act, has expired and shall be closed in accordance with 
Sec. 627.485, of this part, Closeout.


Sec. 627.410  Reallotment and reallocation.

    (a)(1) The Governor shall reallocate title II-A and II-C funds 
among service delivery areas within the State in accordance with the 
provisions of section 109(a) of the Act. The amount to be reallocated, 
if any, shall be based on SDA obligations of the funds allocated 
separately to each SDA for title II-A or II-C programs.
    (2) The Governor shall not establish reallocation requirements that 
are inconsistent with the provisions of section 109(a) of the Act.
    (b) The Secretary shall reallot title II-A and II-C funds among the 
States in accordance with the provisions of section 109(b) of the Act. 
The amounts to be reallotted, if any, shall be based on State 
obligations of the funds allotted separately to each State for title 
II-A or II-C programs, excluding funds allotted under section 
202(c)(1)(D) and the State's obligation of such funds.
    (c) Title III funds shall be reallotted by the Secretary in 
accordance with section 303 of the Act.


Sec. 627.415  Insurance.

    (a) General. Each recipient and subrecipient shall follow its 
normal insurance procedures except as otherwise indicated in this 
section and Sec. 627.465, Property Management Standards.
    (b) DOL assumes no liability with respect to bodily injury, 
illness, or any other damages or losses, or with respect to any claims 
arising out of any activity under a JTPA grant or agreement whether 
concerning persons or property in the recipient's or any subrecipient's 
organization or that of any third party.


Sec. 627.420  Procurement.

    (a) General. (1) For purposes of this section, the term procurement 
means the process which leads to any award of JTPA funds.
    (2) The Governor, in accordance with the minimum requirements 
established in this section, shall prescribe and implement procurement 
standards to ensure fiscal accountability and prevent waste, fraud, and 
abuse in programs administered under this Act.
    (3) When procuring property and services, a State shall follow the 
same policies and procedures it uses for procurements from its non-
Federal funds, provided that the State's procurement procedures also 
comply with the minimum requirements of this section.
    (4) Each subrecipient shall use its own procurement procedures 
which reflect applicable State and local laws and regulations, provided 
that the subrecipient's procurement procedures also comply with the 
requirements of this section and the standards established by the 
Governor, pursuant to paragraph (a)(2) of this section.
    (5) States and subrecipients shall not use funds provided under 
JTPA to duplicate facilities or services available in the area (with or 
without reimbursement) from Federal, State, or local sources, unless it 
is demonstrated that the JTPA-funded alternative services or facilities 
would be more effective or more likely to achieve performance goals 
(sections 107(b) and 141(h)).
    (6) Awards are to be made to responsible organizations possessing 
the demonstrated ability to perform successfully under the terms and 
conditions of a proposed subgrant or contract. A determination of 
demonstrated ability shall be done in accordance with the requirements 
contained in Sec. 627.422 (b) and (d).
    (b) Competition. (1) Each State and subrecipient shall conduct 
procurements in a manner which provides full and open competition. Some 
of the situations considered to be restrictive of competition include, 
but are not limited to:
    (i) Placing unreasonable requirements on firms or organizations in 
order for them to qualify to do business;
    (ii) Requiring unnecessary experience and excessive bonding;
    (iii) Noncompetitive pricing practices between firms or 
organizations or between affiliated companies or organizations;
    (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;
    (vii) Overly restrictive specifications; and
    (viii) Any arbitrary action in the procurement process.
    (2) Each State and subrecipient shall have written procedures for 
procurement transactions. These procedures shall ensure that all 
solicitations:
    (i) Incorporate a clear and accurate description of the technical 
requirements for the material, product, or service to be procured 
(including quantities). Such description shall not, in competitive 
procurements, contain features which unduly restrict competition; and
    (ii) Identify all requirements which the offerors must fulfill and 
all other factors to be used in evaluating bids or proposals.
    (3) Each State and subrecipient shall ensure that all prequalified 
lists of persons, firms, or other organizations which are used in 
acquiring goods and services are current and include sufficient numbers 
of qualified sources to ensure maximum open and free competition.
    (c) Conflict of interest. (1) Each recipient and subrecipient shall 
maintain a written code of standards of conduct governing the 
performance of persons engaged in the award and administration of JTPA 
contracts and subgrants. To the extent permitted by State or local law 
or regulation, such standards of conduct will provide for penalties, 
sanctions, or other disciplinary actions for violations of such 
standards by the awarding agency's officers, employees, or agents, or 
by awardees or their agents.
    (2) Staff conflict of interest. Each recipient and subrecipient 
shall ensure that no individual in a decisionmaking capacity shall 
engage in any activity, including participation in the selection, 
award, or administration of a subgrant or contract supported by JTPA 
funds if a conflict of interest, real or apparent, would be involved.
    (3) PIC conflict of interest. (i) A PIC member shall not cast a 
vote, nor participate in any decisionmaking capacity, on the provision 
of services by such member (or any organization which that member 
directly represents), nor on any matter which would provide any direct 
financial benefit to that member.
    (ii) Neither membership on the PIC nor the receipt of JTPA funds to 
provide training and related services shall be construed, by itself, to 
violate provisions of section 141(f) of the Act or Sec. 627.420.
    (4) A conflict of interest under paragraphs (c) (2) and (3) of this 
section would arise when:
    (i) The individual,
    (ii) Any member of the individual's immediate family,
    (iii) The individual's 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 or 
organization selected for award.
    (5) The officers, employees, or agents of the agency and PIC 
members making the award will neither solicit nor accept gratuities, 
favors, or anything of monetary value from awardees, potential 
awardees, or parties to subagreements. States and subrecipients may set 
minimum rules where the financial interest is not substantial or the 
gift is an unsolicited item of nominal intrinsic value.
    (d) Methods of procurement. (1) Each State and subrecipient shall 
use one of the following methods of procurement, as appropriate for 
each procurement action:
    (i) Small purchase procedures--simple and informal procurement 
methods for securing services, supplies, or other property that do not 
cost more than $25,000 in the aggregate. Recipients and subrecipients 
shall not break down one purchase into several purchases merely to be 
able to use small purchase procedures. The Governor shall establish 
standards for small purchase procedures to ensure that price or rate 
quotations will be documented from an adequate number of qualified 
sources.
    (ii) Sealed bids (formal advertising)--bids are publicly solicited 
procurements for which a firm-fixed-price award (lump sum or unit 
price) or other fixed-price arrangement 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 Governor shall 
establish standards for sealed bids which include requirements that 
invitations for bids be publicly advertised, and that bids be solicited 
from an adequate number of organizations.
    (iii) Competitive proposals--normally conducted with more than one 
source submitting an offer and either a fixed-price or cost-
reimbursement type award is made. The Governor shall establish 
standards for competitive proposals which include requirements for the 
establishment of a documented methodology for technical evaluations and 
award to the responsible offeror whose proposals are most advantageous 
to the program with price, technical, and other factors considered.
    (iv) Noncompetitive proposals (sole source)--procurement through 
solicitation of a proposal from only one source, the funding of an 
unsolicited proposal, or when, after solicitation of a number of 
sources, competition is determined inadequate. Each State and 
subrecipient shall minimize the use of sole source procurements to the 
extent practicable, but in every case the use of sole source 
procurements shall be justified and documented. On-the-job training 
(OJT) awards (except OJT brokering awards, which shall be selected 
competitively) and the enrollment of individual participants in 
classroom training may be sole sourced. For all other awards, 
procurement by noncompetitive proposals may be used only when the award 
is infeasible under small purchase procedures, sealed bids, or 
competitive proposals and one of the following circumstances applies:
    (A) The item or service is available only from a single source;
    (B) The public exigency or emergency need for the item or service 
does not permit a delay resulting from competitive solicitation;
    (C) For SDAs, SSGs and subrecipients, the awarding agency 
authorizes noncompetitive proposals; for States, the noncompetitive 
proposal is approved through the State's normal sole source approval 
process;
    (D) After solicitation of a number of sources, competition is 
determined inadequate;
    (2) Pass Throughs--The procurement rules do not apply to pass 
throughs of monies from any unit of State or local government (or SDA 
or SSG administrative entities) to other such units, such as a local 
educational agency or public housing authority. To qualify as a pass 
through, the receiving entity must either further pass through the 
monies to another such entity or procure services in accordance with 
the procurement rules.
    (e) Cost or price analysis. (1) Each recipient, in accordance with 
the minimum requirements established in this section, shall establish 
standards on the performance of cost or price analysis.
    (2) Each recipient and subrecipient shall perform a cost or price 
analysis in connection with every procurement action, including 
modifications (except for modifications where a determination has been 
made that they do not have a monetary impact). The method and degree of 
analysis depends on the facts surrounding the particular procurement 
and pricing situation. At a minimum, the awarding agency shall make 
independent estimates before receiving bids or proposals. A cost 
analysis is necessary when the offeror is required to submit the 
elements of the estimated cost (e.g., as in the case of subrecipient 
relationships), when adequate price competition is lacking, and for 
sole source procurements, including modifications or change orders. A 
price analysis shall be used when price reasonableness 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 (including situations involving 
inadequate price competition and sole source procurements where a price 
analysis may be used in lieu of a cost analysis). When a cost analysis 
is necessary and there is inadequate price competition, the offeror 
shall certify that to the best of its knowledge and belief, the cost 
data are accurate, complete, and current at the time of agreement on 
price. Awards or modifications negotiated in reliance on such data 
should provide the awarding agency a right to a price adjustment to 
exclude any significant sum by which the price was increased because 
the awardee had knowingly submitted data that were not accurate, 
complete, or current as certified.
    (3) JTPA procurements shall not permit excess program income (for 
nonprofit and governmental entities) or excess profit (for private for-
profit entities). If profit or program income is included in the price, 
the awarding agency shall negotiate profit or program income as a 
separate element of the price for each procurement in which there is no 
price competition and in all cases where cost analysis is performed. To 
establish a fair and reasonable profit or program income, consideration 
shall be given to:
    (i) The complexity of the work to be performed;
    (ii) The risk borne by the awardee;
    (iii) The offeror's investment;
    (iv) The amount of subcontracting/subgranting;
    (v) The quality of the offeror's record of past performance;
    (vi) Industry profit rates in the surrounding geographical area for 
similar work; and
    (vii) Market conditions in the surrounding geographical area.
    (4) Each recipient and subrecipient may charge to the agreement 
only those costs which are consistent with the allowable cost 
provisions of Sec. 627.435 of this part, including the guidelines 
issued by the Governor, as required at Sec. 627.435(i) of this part.
    (5) The cost plus a percentage of cost method shall not be used.
    (f) Oversight. (1) Each recipient and subrecipient shall conduct 
and document oversight to ensure compliance with the procurement 
standards, in accordance with the requirements of Sec. 627.475 of this 
part, Oversight and monitoring.
    (2) Each recipient and subrecipient shall maintain an 
administration system which ensures that vendors and subrecipients 
perform in accordance with the terms, conditions, and specifications of 
their awards.
    (g) Transactions between units of government. (1) Except as 
provided in paragraph (g)(2) of this section, procurement transactions 
between units of State or local governments, or any other entities 
organized principally as the administrative entity for service delivery 
areas or substate areas, shall be conducted on a cost reimbursable 
basis. Cost plus type awards are not allowable.
    (2) In the case of procurement transactions with schools that are a 
part of these entities, such as State universities and secondary 
schools, when tuition charges or entrance fees are not more than the 
educational institution's catalogue price, necessary to receive 
specific training, charged to the general public to receive the same 
training, and for training of participants, the tuition and/ or 
entrance fee does not have to be broken out by items of cost.
    (h) Award provisions. Each recipient and subrecipient agreement 
shall:
    (1) Clearly specify deliverables and the basis for payment; and
    (2) In the case of awards to subrecipients, contain clauses that 
provide for:
    (i) Compliance with the JTPA regulations;
    (ii) Assurance of nondiscrimination and equal opportunity as found 
in 29 CFR 34.20, Assurance required; duration of obligation; covenants.
    (3) In the case of awards to vendors, contain clauses that provide 
for:
    (i) Access by the recipient, the subrecipient, the Department of 
Labor, the Comptroller General of the United States, or any of their 
duly authorized representatives to any books, documents, papers, and 
records (including computer records) of the contractor or subcontractor 
which are directly pertinent to charges to the program, in order to 
conduct audits and examinations and to make excerpts, transcripts, and 
photocopies; this right also includes timely and reasonable access to 
contractor's and subcontractor's personnel for the purpose of 
interviews and discussions related to such documents;
    (4) In the case of awards to both subrecipients and vendors, 
contain clauses that provide for:
    (i) Administrative, contractual, or legal remedies in instances 
where contractors/subgrantees violate or breach agreement terms, which 
shall provide for such sanctions and penalties as may be appropriate;
    (ii) Notice of 29 CFR 97.34 requirements pertaining to copyrights 
(agreements which involve the use of copyrighted materials or the 
development of copyrightable materials);
    (iii) Notice of requirements pertaining to rights to data. 
Specifically, the awarding agency and the Department of Labor shall 
have unlimited rights to any data first produced or delivered under the 
agreement (agreements which involve the use/development of computer 
programs/ applications, or the maintenance of databases or other 
computer data processing program, including the inputing of data);
    (iv) Termination for cause and for convenience by the awarding 
agency, including the manner by which the termination will be effected 
and the basis for settlement;
    (v) Notice of awarding agency requirements and regulations 
pertaining to reporting;
    (vi) Audit rights and requirements;
    (vii) Payment conditions and delivery terms;
    (viii) Process and authority for agreement changes; and
    (ix) Provision against assignment;
    (5) The Governor may establish additional clauses, as deemed 
appropriate, for State and subrecipient procurements.
    (i) Disputes. (1) The Governor shall ensure that the recipient and 
each subrecipient have protest procedures to handle and resolve 
disputes relating to their procurements. A protester shall exhaust all 
administrative remedies with the subrecipient before pursuing a protest 
at a higher level.
    (2) Violations of law will be handled in accordance with the 
requirements contained in Sec. 627.500(c).
    (j) Each recipient and subrecipient shall maintain records 
sufficient to detail the significant history of a procurement. These 
records shall include, but are not necessarily limited to, the 
following: rationale for the method of procurement, selection of 
agreement type, awardee selection or rejection, and the basis for the 
agreement price.


Sec. 627.422  Selection of service providers.

    (a) Service providers selected under titles I, II, and III of the 
Act shall be selected in accordance with the provisions of section 107 
of the Act, except that section 107(d) shall not apply to training 
under title III.
    (b) Consistent with the requirements of this section, the Governor 
shall establish standards to be followed by recipients and 
subrecipients in making determinations of demonstrated performance, 
prior to the award of all agreements under titles I, II, and III of the 
Act. These standards shall comply with the requirements of this 
section, Sec. 627.420, of this part, Procurement, and section 164(a)(3) 
of the Act. The standards shall require that determinations of 
demonstrated performance will be in writing, and completed prior to the 
award of an agreement.
    (c) Each recipient and subrecipient, to the extent practicable, 
shall select service providers on a competitive basis, in accordance 
with the standards established in Sec. 627.420(b) of this part, 
Procurement. When a State, SDA, SSG, or administrative entity 
determines that services other than intake and eligibility 
determination will be provided by its own staff, a determination shall 
be made of the demonstrated performance of the entity to provide the 
services. This determination: Shall be in writing; shall take into 
consideration the matters listed in paragraph (d) of this section; and 
may, if appropriate, be documented and described in the Job Training 
Plan, GCSSP, or EDWAA plan.
    (d) Awards are to be made to organizations possessing the 
demonstrated ability to perform successfully under the terms and 
conditions of a proposed subgrant or contract. Where comparable 
proposals have been received from an offeror which has demonstrated 
performance and a high-risk recipient/subrecipient, and a determination 
has been made that both proposals are fundable, the award should be 
made to the offeror which has demonstrated performance, unless other 
factors dictate a contrary result. Determinations of demonstrated 
performance shall be in writing, and take into consideration such 
matters as whether the organization has:
    (1) Adequate financial resources or the ability to obtain them;
    (2) The ability to meet the program design specifications at a 
reasonable cost, as well as the ability to meet performance goals;
    (3) A satisfactory record of past performance (in job training, 
basic skills training, or related activities), including demonstrated 
quality of training; reasonable drop-out rates from past programs; 
where applicable, the ability to provide or arrange for appropriate 
supportive services as specified in the ISS, including child care; 
retention in employment; and earning rates of participants;
    (4) For title II programs, the ability to provide services that can 
lead to the achievement of competency standards for participants with 
identified deficiencies;
    (5) A satisfactory record of integrity, business ethics, and fiscal 
accountability;
    (6) The necessary organization, experience, accounting and 
operational controls; and
    (7) The technical skills to perform the work.
    (e) In selecting service providers to deliver services in a service 
delivery area/substate area, proper consideration shall be given to 
community-based organizations (section 107(a)). These community-based 
organizations, including women's organizations with knowledge about or 
experience in nontraditional training for women, shall be organizations 
which are recognized in the community in which they are to provide 
services. Where proposals are evenly rated, and one of these proposals 
has been submitted by a CBO, the tie breaker may go to the CBO.
    (f) Appropriate education agencies in the service delivery area/
substate area shall be provided the opportunity to provide educational 
services, unless the administrative entity demonstrates that 
alternative agency(ies) or organization(s) would be more effective or 
would have greater potential to enhance the participants' continued 
educational and career growth (section 107(c)). Where proposals are 
evenly rated, and one of these proposals has been submitted by an 
educational institution, the tie breaker shall go to the educational 
institution.
    (g) In determining demonstrated performance of institutions/
organizations which provide training, such performance measures as 
retention in training, training completion, job placement, and rates of 
licensure shall be taken into consideration.
    (h) Service providers under agreements to conduct projects under 
section 123(a)(2) shall be selected in accordance with the requirements 
of this section.
    (i) The requirements of section 204(d)(2)(B) shall be followed in 
entering into agreements to provide services for older individuals 
funded under title II, part A.
    (j) Additional requirements for selection of service providers by 
substate grantees are described at section 313(b)(6) of the Act and 
Sec. 631.52 of this chapter.
    (k) Amounts for service providers. Each SDA/SSG shall ensure that, 
for all services provided to participants through contracts, grants, or 
other agreements with a service provider, such contract, grant, or 
agreement shall include appropriate amounts necessary for 
administration and supportive services (section 108(b)(5)).
    (l) When a State, SDA or SSG has a policy of awarding additional 
points to proposals received from such organizations as minority 
business enterprises and women-owned businesses, and this policy is 
generally applicable to its other funds, the State, SDA or SSG may 
apply this policy to the JTPA funds.


Sec. 627.423  Funding restrictions for ``high-risk'' recipients and 
subrecipients.

    (a) A recipient or subrecipient may be considered ``high-risk'' if 
an awarding agency determines that the recipient or subrecipient is 
otherwise responsible, but:
    (1) Has a history of unsatisfactory performance;
    (2) Is not financially stable;
    (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 a previously 
awarded grant or subgrant.
    (b) If the awarding agency determines that an award will be made to 
a ``high-risk'' recipient or subrecipient, then special funding 
restrictions that address the ``high-risk'' status may be included in 
the award. Funding restrictions may include, but are not limited to:
    (1) Payment on a reimbursement basis;
    (2) Requiring additional and/or more detailed financial or 
performance reports;
    (3) Additional monitoring;
    (4) Requiring the recipient or subrecipient to obtain specific 
technical or management assistance; and/or
    (5) Establishing additional prior approvals.
    (c) If an awarding agency decides to impose such funding 
restrictions, the awarding official will notify the recipient or 
subrecipient as early as possible, in writing, of:
    (1) The nature of the funding 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 restrictions 
imposed.
Sec. 627.424  Prohibition of subawards to debarred and suspended 
parties.

    (a) No recipient or subrecipient shall make any awards or permit 
any awards at any tier to any party which is debarred or suspended or 
is otherwise excluded from or ineligible for participation in Federal 
assistance programs in accordance with the Department of Labor 
regulations at 29 CFR part 98.
    (b) Recipients and subrecipients shall comply with the applicable 
requirements of the Department of Labor regulations at 29 CFR part 98.


Sec. 627.425  Standards for financial management and participant data 
systems.

    (a)(1) General. The financial management system and the participant 
data system of each recipient and subrecipient shall provide federally 
required records and reports that are uniform in definition, accessible 
to authorized Federal and State staff, and verifiable for monitoring, 
reporting, audit, program management, and evaluation purposes (sections 
165(a)(1) and (2), and 182).
    (2) An awarding agency may review the adequacy of the financial 
management system and participant data system of any recipient/
subrecipient as part of a preaward review or at any time subsequent to 
award.
    (b) Financial systems. Recipients and subrecipients shall ensure 
that their own financial systems as well as those of their 
subrecipients provide fiscal control and accounting procedures that 
are:
    (1) In accordance with generally accepted accounting principles 
applicable in each State including:
    (i) Information pertaining to subgrant and contract awards, 
obligations, unobligated balances, assets, liabilities, expenditures, 
and income;
    (ii) Effective internal controls to safeguard assets and assure 
their proper use;
    (iii) A comparison of actual expenditures with budgeted amounts for 
each subgrant and contract;
    (iv) Source documentation to support accounting records; and
    (v) Proper charging of costs and cost allocation; and
    (2) Sufficient to:
    (i) Permit preparation of required reports;
    (ii) Permit the tracing of funds to a level of expenditure adequate 
to establish that funds have not been used in violation of the 
applicable restrictions on the use of such funds;
    (iii) As required by section 165(g), permit the tracing of program 
income, potential stand-in costs and other funds that are allowable 
except for funding limitations, as defined in Sec. 627.480(f) of this 
part, Audits; and
    (iv) Demonstrate compliance with the matching requirement of 
section 123(b)(2).
    (c) Applicant and participant data systems. Each recipient and 
subrecipient shall ensure that records are maintained:
    (1) Of each applicant for whom an application has been completed 
and a formal determination of eligibility or ineligibility made;
    (2) Of each participant's enrollment in a JTPA-funded program in 
sufficient detail to demonstrate compliance with the relevant 
eligibility criteria attending a particular activity and with the 
restrictions on the provision and duration of services and specific 
activities imposed by the Act; and
    (3) Of such participant information as may be necessary to develop 
and measure the achievement of performance standards established by the 
Secretary.


Sec. 627.430  Grant payments.

    (a) Except as provided in paragraph (h)(2) of this section, JTPA 
grant payments shall be made to the Governor in accordance with the 
Cash Management Improvement Act of 1990 (31 U.S.C. 6501, et seq.), 
Department of Treasury regulations at 31 CFR part 205, and the State 
Agreement entered into with the Department of the Treasury.
    (b) Basic standard. Except as provided in paragraphs (d) and (e) of 
this section, each recipient and subrecipient shall be paid in advance, 
provided it demonstrates the willingness and ability to limit advanced 
funds to the actual immediate disbursement needs in carrying out the 
JTPA program.
    (c) Advance payments. To the maximum extent feasible, each 
subrecipient shall be provided advance payments via electronic funds 
transfer, following the procedures of the awarding agency.
    (d) Reimbursement. (1) Reimbursement is the preferred method when 
the requirements in paragraph (b) of this section are not met.
    (i) Each recipient shall submit requests for reimbursement in 
accordance with the provisions at 31 CFR part 205.
    (ii) Each subrecipient shall submit requests for reimbursement in 
accordance with requirements established by the awarding agency.
    (2) Each subrecipient shall be paid as promptly as possible after 
receipt of a proper request for reimbursement.
    (e) Working capital advance payments. If a subrecipient cannot meet 
the criteria for advance payments described in paragraph (b) of this 
section, and the awarding agency has determined that reimbursement is 
not feasible because the subrecipient lacks sufficient working capital, 
the awarding agency may provide cash on a working capital advance 
payment basis. Under this procedure, the awarding agency shall advance 
cash to the subrecipient to cover its estimated disbursement needs for 
an initial period, generally geared to the subrecipient's disbursing 
cycle. In no event may such an advance exceed 20 percent of the award 
amount. Thereafter, the awarding agency shall reimburse the 
subrecipient for its actual cash disbursements. The working capital 
advance method of payment shall not be used by recipients or 
subrecipients if the reason for using such method is the unwillingness 
or inability of the recipient or subrecipient to provide timely 
advances to the subrecipient to meet the subrecipient's actual cash 
disbursements.
    (f) Effect of program income, refunds, and audit recoveries on 
payment. Each recipient and subrecipient shall disburse cash received 
as a result of program income, rebates, refunds, contract settlements, 
audit recoveries, and interest earned on such funds before requesting 
additional cash payments.
    (g) Cash depositories. (1) Consistent with the national goal of 
expanding the opportunities for minority business enterprises, each 
recipient and subrecipient is encouraged to use minority-owned banks (a 
bank which is at least 50 percent owned by minority group members). 
Additional information may be obtained from the Minority Business 
Development Agency, Department of Commerce, Washington, DC 20230.
    (2) A recipient or subrecipient shall not be required to maintain a 
separate bank account but shall separately account for Federal funds on 
deposit.
    (h) Interest earned on advances. (1) An interest liability shall 
accrue on advance payments between Federal agencies and State 
governments, as provided by the Cash Management Improvement Act (31 
U.S.C. 6501, et seq.) and implementing regulations at 31 CFR part 205.
    (2) Each recipient and subrecipient shall account for interest 
earned on advances of Federal funds as program income, as provided at 
Sec. 627.450 of this part, Program income.


Sec. 627.435  Cost principles and allowable costs.

    (a) General. To be allowable, a cost shall be necessary and 
reasonable for the proper and efficient administration of the program, 
be allocable to the program, and, except as provided herein, not be a 
general expense required to carry out the overall responsibilities of 
the Governor or a governmental subrecipient. Costs charged to the 
program shall be accorded consistent treatment through application of 
generally accepted accounting principles appropriate to the JTPA 
program, as determined by the Governor.
    (b) Whether a cost is charged as a direct cost or as an indirect 
cost shall be determined in accordance with the descriptions of direct 
and indirect costs contained in the OMB Circulars identified in DOL's 
regulations at 29 CFR 97.22(b).
    (c) Costs allocable to another Federal grant, JTPA program, or cost 
category may not be shifted to a JTPA grant, subgrant, program, or cost 
category to overcome fund deficiencies, avoid restrictions imposed by 
law or grant agreements, or for other reasons.
    (d) Applicable credits such as rebates, discounts, refunds, and 
overpayment adjustments, as well as interest earned on any of them, 
shall be credited as a reduction of costs if received during the same 
funding period that the cost was initially charged. Credits received 
after the funding period shall be returned to the Department as 
provided for at Sec. 627.490(b).
    (e) The following costs are not allowable charges to the JTPA 
program:
    (1) Costs of fines and penalties resulting from violations of, or 
failure to comply with, Federal, State, or local laws and regulations;
    (2) Back pay, unless it represents additional pay for JTPA services 
performed for which the individual was underpaid;
    (3) Entertainment costs;
    (4) Bad debts expense;
    (5) Insurance policies offering protection against debts 
established by the Federal Government;
    (6) Contributions to a contingency reserve or any similar provision 
for unforeseen events;
    (7) Costs prohibited by 29 CFR part 93 (Lobbying Restrictions) or 
costs of any salaries or expenses related to any activity designed to 
influence legislation or appropriations pending before the Congress of 
the United States; and
    (8) Costs of activities prohibited in Sec. 627.205, Public service 
employment prohibition; Sec. 627.210, Nondiscrimination and 
nonsectarian activities; Sec. 627.215, Relocation; Sec. 627.225, 
Employment generating activities; and Sec. 627.230, Displacement, of 
this part.
    (f)(1) The cost of legal expenses required in the administration of 
grant programs is allowable. Legal expenses include the expenses 
incurred by the JTPA system in the establishment and maintenance of a 
grievance system, including the costs of hearings and appeals, and 
related expenses such as lawyers' fees. Legal expenses does not include 
costs resulting from, and after, the grievance process such as fines 
and penalties, which are not allowable, and settlement costs, which are 
allowable to the extent that such costs included in the settlement 
would have been allowable if charged to the JTPA program at the time 
they were incurred.
    (2) Legal services furnished by the chief legal officer of a State 
or local government or staff solely for the purpose of discharging 
general responsibilities as a legal officer are unallowable.
    (3) Legal expenses for the prosecution of claims against the 
Federal Government, including appeals to an Administrative Law Judge, 
are unallowable.
    (g) Costs of travel and incidental expenses incurred by volunteers 
are allowable provided such costs are incurred for activities that are 
generally consistent with section 204(c)(6) of the Act.
    (h) Contributions to a reserve for a self-insurance program, to the 
extent that the type and extent of coverage and the rates and premiums 
would have been allowed had insurance been purchased to cover the 
risks, are allowable.
    (i) The Governor shall prescribe and implement guidelines on 
allowable costs for SDA, SSG, and statewide programs that are 
consistent with the cost principles and allowable costs provisions of 
paragraphs (a) through (h) of this section and that include, at a 
minimum, provisions that specify the extent to which the following cost 
items are allowable or unallowable JTPA costs and, if allowable, 
guidelines on conditions or the extent of allowability, documentation 
requirements, and any prior approval requirements applicable to such 
cost items:
    (1) Compensation for personal services of staff, including wages, 
salaries, supplementary compensation, and fringe benefits;
    (2) Costs incurred by the SJTCC, HRIC, PIC's, and other advisory 
councils or committees;
    (3) Advertising costs;
    (4) Depreciation and/or use allowances;
    (5) Printing and reproduction costs;
    (6) Interest expense;
    (7) Expenditures for transportation and travel;
    (8) Payments to OJT employers, training institutions, and other 
vendors;
    (9) Fees or profits;
    (10) Insurance costs, including insurance coverage for injuries 
suffered by participants who are not covered by existing workers' 
compensation, and personal liability insurance for PIC members;
    (11) Acquisitions of capital assets;
    (12) Building space costs, including rent, repairs, and 
alterations;
    (13) Pre-agreement costs;
    (14) Fund-raising activities;
    (15) Professional services, including organizational management 
studies conducted by outside individuals or firms; and
    (16) Taxes.


Sec. 627.440  Classification of costs.

    (a) Allowable costs for programs under title II and title III shall 
be charged (allocated) to a particular cost objective/category to the 
extent that benefits are received by such cost objective/category. 
Joint and similar types of costs may be charged initially to a cost 
pool used for the accumulation of such costs pending distribution in 
due course to the ultimate benefitting cost objective/category. The 
classification of costs for programs under title III of the Act are set 
forth at Sec. 631.13 of this chapter, Classification of costs at State 
and substate levels.
    (b) For State-administered programs under Title II, the State is 
required to plan, control, and charge expenditures against the 
following cost objectives/categories:
    (1) Titles II-A and II-C (combined)--capacity building and 
technical assistance (sections 202(c)(1)(B) and 262(c)(1)(B) of the Act 
to carry out activities pursuant to sections 202(c)(3)(A) and 
262(c)(3)(A) of the Act);
    (2) Titles II-A and II-C (combined)--8 percent coordination 
(sections 202(c)(1)(C) and 262(c)(1)(C) of the Act to carry out 
activities pursuant to section 123(d)(2)(A) of the Act);
    (3) Titles II-A and II-C (combined)--8 percent services/direct 
training (sections 202(c)(1)(C) and 262(c)(1)(C) of the Act to carry 
out activities pursuant to section 123(d)(2)(B) of the Act);
    (4) Titles II-A and II-C (combined)--8 percent services/training-
related and supportive services (sections 202(c)(1)(C) and 262(c)(1)(C) 
of the Act to carry out activities pursuant to section 123(d)(2)(B) of 
the Act);
    (5) Titles II-A and II-C (combined)--8 percent services/
administration (sections 202(c)(1)(C) and 262(c)(1)(C) of the Act to 
carry out activities pursuant to section 123(d)(2)(B) of the Act);
    (6) Titles II-A and II-C (combined)--8 percent services to 
disadvantaged (section 202(c)(1)(C) and 262(c)(1)(C) of the Act to 
carry out activities pursuant to section 123(d)(2)(C) of the Act);
    (7) Title II-A--older individuals/direct training (section 
202(c)(1)(D) of the Act to carry out activities pursuant to section 
204(d) of the Act);
    (8) Title II-A--older individuals/training-related and supportive 
services (section 202(c)(1)(D) of the Act to carry out activities 
pursuant to section 204(d) of the Act);
    (9) Title II-A--older individuals/administration (section 
202(c)(1)(D) of the Act to carry out activities pursuant to section 
204(d) of the Act); and
    (10) Title II--administration (sections 202(c)(1)(A) and 
262(c)(1)(A) of the Act to carry out activities pursuant to Title II of 
the Act, including Title II-B).
    (c)(1) SDA grant recipients and their subrecipients shall plan, 
control, and charge expenditures, excluding incentive funds received 
pursuant to sections 202(c)(1)(B) and 262(c)(1)(B) of the Act, against 
the following cost objectives/categories:
    (i) Title II-A--direct training services;
    (ii) Title II-C--direct training services;
    (iii) Title II-A--training-related and supportive services;
    (iv) Title II-C--training-related and supportive services;
    (v) Title II-B--training and supportive services;
    (vi) Title II-A--administration;
    (vii) Title II-B--administration; and
    (viii) Title II-C--administration.
     (2) Incentive funds received pursuant to sections 202(c)(1)(B) and 
262(c)(1)(B) of the Act, may be combined and accounted for in total, 
without regard to cost categories or cost limitations.
    (d) States and subrecipients shall use the following definitions in 
assigning costs to the cost categories contained in paragraphs (b) and 
(c) of this section:
    (1) Direct training services--title II-A. Costs for direct training 
services that may be charged to the title II-A program are:
    (i) The personnel and non-personnel costs directly related to 
providing those services to participants specified in section 204(b)(1) 
of the Act and which can be specifically identified with one or more of 
those services. Generally, such costs are limited to:
    (A) Salaries, fringe benefits, equipment, supplies, space, staff 
training, transportation, and other related costs of personnel directly 
engaged in providing training; and
    (B) Salaries, fringe benefits, and related non-personnel costs of 
program component supervisors and/or coordinators as well as clerical 
staff, provided such staff work exclusively on activities or functions 
specified in section 204(b)(1) of the Act or allocations of such costs 
are made based on actual time worked or other equitable cost allocation 
methods;
    (ii) Books, instructional materials, and other teaching aids used 
by or for participants;
    (iii) Equipment and materials used in providing training to 
participants;
    (iv) Classroom space and utility costs;
    (v) Costs of insurance coverage of participants as specified at 
Sec. 627.315(b) of this part, Benefits and Working Conditions;
    (vi) Payments to vendors for goods or services procured for the use 
or benefit of program participants for direct training services, 
including:
    (A) Payments for commercially available training packages purchased 
competitively pursuant to section 141(d)(3) of the Act;
    (B) Tuition charges, entrance fees, and other usual and customary 
fees of an educational institution when such tuition charges, entrance 
fees, or other fees are not more than the educational institution's 
catalogue price, necessary to receive specific training, charged to the 
general public to receive the same training, and are for training of 
participants; and
    (C) Payments to OJT employers, but not brokering contractors. Costs 
incurred under brokering arrangements shall be allocated to all of the 
benefitting cost categories, and
    (vii) Payments to JTPA participants that represent hours spent in a 
direct training activity (e.g., wages, work-based training payments, 
training payments for combined activities), including work experience, 
vocational exploration, limited internships, and entry employment.
    (2) Direct training services--title II-C. Costs for direct training 
services that may be charged to the title II-C program are the costs 
identified in paragraph (d)(1) of this section as well as costs 
directly related to providing those services to participants specified 
in section 264(c)(1) of the Act and which can be specifically 
identified with one or more of those services.
    (3) Training-related and supportive services--title II-A. Costs for 
training-related and supportive services that may be charged to the 
title II-A program are:
    (i) The personnel and non-personnel costs directly related to 
providing outreach, intake, and eligibility determination, as well as 
those services to participants specified in section 204(b)(2) of the 
Act, and which can be specifically identified with one or more of those 
services. Generally, such costs are limited to:
    (A) Salaries, fringe benefits, equipment, supplies, space, staff 
training, transportation, and other related costs of personnel directly 
engaged in providing training-related and/or supportive services; and
    (B) Salaries, fringe benefits, and related non-personnel costs of 
program component supervisors and/or coordinators as well as clerical 
staff, provided such staff work exclusively on activities or functions 
specified in section 204(b)(2) of the Act or allocations of such costs 
are made based on actual time worked or another equitable allocation 
method.
    (ii) Needs-based payments, cash incentives and bonuses, other 
financial assistance and supportive services to participants and 
applicants, where applicable.
    (4) Training-related and supportive services--title II-C. Costs for 
training-related and supportive services that may be charged to the 
title II-C program are the costs identified in paragraph (d)(3) of this 
section, as well as costs directly related to providing those services 
to participants specified in section 264(c)(2) of the Act and which can 
be specifically identified with one or more of those services.
    (5) Administration. The costs of administration are those portions 
of necessary and allowable costs associated with the overall management 
and administration of the JTPA program and which are not directly 
related to the provision of services to participants or otherwise 
allocable to the program cost objectives/categories in paragraphs 
(b)(1)-(8) or (c)(1) (i)-(v) of this section. These costs can be both 
personnel and non-personnel and both direct and indirect. Costs of 
administration shall include:
     (i) Except as provided in paragraph (e)(1) of this section, costs 
of salaries, wages, and related costs of the recipient's or 
subrecipient's staff or PIC staff engaged in:
    (A) Overall program management, program coordination, and general 
administrative functions, including the salaries and related costs of 
the executive director, JTPA director, project director, personnel 
officer, fiscal officer/bookkeeper, purchasing officer, secretary, 
payroll/insurance/property clerk and other costs associated with 
carrying out administrative functions;
    (B) Preparing program plans, budgets, schedules, and amendments 
thereto;
    (C) Monitoring of programs, projects, subrecipients, and related 
systems and processes;
    (D) Procurement activities, including the award of specific 
subgrants, contracts, and purchase orders;
    (E) Providing State or local officials and the general public with 
information about the program (public relations);
    (F) Developing systems and procedures, including management 
information systems, for assuring compliance with program requirements;
    (G) Preparing reports and other documents related to the program 
requirements;
    (H) Coordinating the resolution of audit findings;
    (I) Evaluating program results against stated objectives; and
    (J) Performing such administrative services as general legal 
services, accounting services, audit services; and managing purchasing, 
property, payroll, and personnel;
    (ii) Costs for goods and services required for administration of 
the program, including such goods and services as rental or purchase of 
equipment, utilities, office supplies, postage, and rental and 
maintenance of office space;
    (iii) The costs of organization-wide management functions; and
    (iv) Travel costs incurred for official business in carrying out 
program management or administrative activities, including travel costs 
incurred by PIC members.
    (e) Other cost classification guidance. (1) Personnel and related 
non-personnel costs of the recipient's or subrecipient's staff, 
including project directors, who perform services or activities that 
benefit two or more of the cost objectives/categories identified in 
this section may be allocated to the benefitting cost objectives/
categories based on documented distributions of actual time worked or 
other equitable cost allocation methods.
    (2) Indirect or overhead costs normally shall be charged to 
administration, except that specific costs charged to an overhead or 
indirect cost pool that can be identified directly with a JTPA cost 
objective/category other than administration may be charged to the JTPA 
cost objective/category directly benefitted. Documentation of such 
charges shall be maintained.
    (3) Where an award to a subrecipient is for a ``commercially 
available off-the-shelf training package,'' as defined at Sec. 626.5 of 
this chapter, the subrecipient may charge all costs of such package to 
the direct training services cost category.
    (4) Profits, fees, and other revenues earned by a subrecipient that 
are in excess of actual costs incurred, to the extent allowable and 
consistent with the guidelines on allowable costs prescribed by the 
Governor in accordance with Sec. 627.435(i). Cost principles and 
allowable costs, may be allocated to all three cost categories based on 
the proportionate share of actual costs incurred attributable to each 
category.


Sec. 627.445  Limitations on certain costs.

    (a) State-administered programs.--(1) Services for older 
individuals. Of the funds allocated for any program year for section 
202(c)(1)(D) of the Act to carry out activities pursuant to section 
204(d) of the Act--
    (i) Not less than 50 percent shall be expended for the cost of 
direct training services; and
    (ii) Not more than 20 percent shall be expended for the cost of 
administration.
    (2) State education services. Of the funds allocated for any 
program year for sections 202(c)(1)(C) and 262(c)(1)(C) of the Act to 
carry out activities pursuant to section 123(d)(2)(B) of the Act--
    (i) Not less than 50 percent shall be expended for the cost of 
direct training services; and
    (ii) Not more than 20 percent shall be expended for the cost of 
administration.
    (3) The limitations specified in paragraph (a)(2) of this section 
shall apply to the combined total of funds allocated for sections 
202(c)(1)(C) and 262(c)(1)(C) of the Act.
    (b) SDA allocations. (1) In applying the title II-A and II-C cost 
limitations specified in section 108(b)(4) of the Act, the funds 
allocated to a service delivery area shall be net of any:
    (i) Transfers made in accordance with sections 206, 256, and 266 of 
the Act; and
    (ii) Reallocations made by the Governor in accordance with section 
109(a) of the Act.
    (2) The limitations specified in paragraph (b)(1) of this section 
shall apply separately to the funds allocated for title II-A and title 
II-C programs.
    (3) The title II-B administrative cost limitation of 15 percent 
shall be 15 percent of the funds allocated for any program year to a 
service delivery area, excluding any funds transferred to title II-C in 
accordance with section 256 of the Act (section 253(a)(3)).
    (c)(1) The State shall establish a system to regularly assess 
compliance with the cost limitations including periodic review and 
corrective action, as necessary.
    (2) States and service delivery areas shall have the 3-year period 
of fund availability to comply with the cost limitations in section 108 
of the Act and paragraphs (a) and (b) of this section (section 161(b)).
    (d) Administrative costs incurred by a community-based organization 
or non-profit service provider shall not be included in the limitation 
described in section 108(b)(4)(A) of the Act if:
    (1) Such costs are incurred under an agreement that meets the 
requirements of section 141(d)(3)(C) (i) and (ii) of the Act;
    (2) The total administrative expenditures of the service delivery 
area, including the administrative expenditures of such community-based 
organizations or non-profit service providers, do not exceed 25 percent 
of the funds allocated to the service delivery area for the program 
year of allocation; and
    (3) The total direct training expenditures of the service delivery 
area, including the direct training expenditures of such community-
based organizations or non-profit service providers, is equal to or 
exceeds 50 percent of the funds allocated to the service delivery area 
for the program year less one-half of the percentage by which the total 
administrative expenditures of the service delivery area exceeds 20 
percent. For example, if the total administrative expenditures of the 
service delivery area is 24 percent, then the total direct training 
expenditures of the service delivery area must be at least 48 percent.
    (e) The provisions of this section do not apply to any title III 
programs.
    (f) The provisions of this section do not apply to any designated 
SDA which served as a concentrated employment program grantee for a 
rural area under the Comprehensive Employment and Training Act (section 
108(d)).


Sec. 627.450  Program income.

    (a) Definition of program income. (1) Program income means income 
received by the recipient or subrecipient that is directly generated by 
a grant or subgrant supported activity, or earned only as a result of 
the grant or subgrant. Program income includes:
    (i) Income from fees for services performed and from conferences;
    (ii) Income from the use or rental of real or personal property 
acquired with grant or subgrant funds;
    (iii) Income from the sale of commodities or items fabricated under 
a grant or subgrant;
    (iv) Revenues earned by a governmental or non-profit service 
provider under either a fixed-price or reimbursable award that are in 
excess of the actual costs incurred in providing the services; and
    (v) Interest income earned on advances of JTPA funds.
    (2) Program income does not include:
    (i) Rebates, credits, discounts, refunds, etc., or interest earned 
on any of them, which shall be credited in accordance with 
Sec. 627.435(d), Cost principles and allowable costs;
    (ii) Taxes, special assessments, levies, fines, and other such 
governmental revenues raised by a recipient or subrecipient; or
    (iii) Income from royalties and license fees for copyrighted 
material, patents, patent applications, trademarks, and inventions 
developed by a recipient or subrecipient.
    (3) Property. Proceeds from the sale of property shall be handled 
in accordance with the requirements of Sec. 627.465 of this part, 
Property management standards.
    (b) Cost of generating program income. Costs incidental to the 
generation of program income may be deducted, if not already charged to 
the grant, from gross income to determine program income.
    (c) Use of program income. (1)(i) A recipient or subrecipient may 
retain any program income earned by the recipient or subrecipient only 
if such income is added to the funds committed to the particular JTPA 
grant or subgrant and title under which it was earned and such income 
is used for that title's purposes and under the terms and conditions 
applicable to the use of the grant funds.
    (ii) A State may use interest it earns on JTPA funds, deposited by 
the United States to the State's account, to satisfy the requirement at 
31 U.S.C. 6503(c) that the State pay interest on such deposits.
    (iii) The classification of costs in Secs. 627.440 and 631.13 shall 
apply to the use of program income.
    (iv) The administrative cost limitation in Secs. 627.445 and 631.14 
shall apply to the use of program income, except that program income 
used in accordance with paragraph (c)(1)(ii) of this section shall be 
exempt from the administrative cost limitations.
     (2) Program income generated under title II may also be used to 
satisfy the matching requirement of section 123(b) of the Act.
    (3) Program income shall be used prior to the submission of the 
final report for the funding period of the program year of funds to 
which the earnings are attributable.
    (4) If the subrecipient that earned program income cannot use such 
income for JTPA purposes, the recipient may permit another entity to 
use the program income for JTPA purposes.
    (5) Program income not used in accordance with the requirements of 
this section shall be remitted to the Department of Labor.
    (d) Program and other income after the funding period. Rental 
income and user fees on real and personal property acquired with JTPA 
funds shall continue to be JTPA program income in subsequent funding 
periods. There are no Federal requirements governing the disposition of 
all other income that is earned after the end of the funding period.


Sec. 627.455  Reports required.

    (a) General. The Governor shall report to DOL pursuant to 
instructions issued by DOL. Reports shall be submitted no more 
frequently than quarterly, in accordance with section 165(f) of the 
Act, and within 45 calendar days after the end of the report period. 
Additional reporting requirements for title III are set forth at 
Sec. 631.15 of this chapter.
    (b) A recipient may impose different forms or formats, shorter due 
dates, and more frequent reporting requirements on subrecipients, 
however, the recipient is required to meet the reporting requirements 
imposed on it by DOL.
    (c) DOL may provide computer outputs to recipients to expedite or 
contribute to the accuracy of reporting. DOL may accept the required 
information from recipients in electronically reported format or 
computer printouts instead of prescribed forms.
    (d) Financial reports. (1) Financial reports for programs under 
titles I, II, and III shall be submitted to DOL by each State quarterly 
and by program year of appropriation.
    (2) Each recipient shall report program outlays on an accrual 
basis. If the recipient's accounting records are not normally kept on 
the accrual basis, the recipient shall develop such accrual information 
through an analysis of the documentation on hand.
    (3) A final financial report is required 90 days after the 
expiration of a funding period (see Sec. 627.485 of this part, 
Closeout).
    (4) Pursuant to section 104(b)(13) of the Act, the SDA shall 
annually report to the Governor. Among other items, this report shall 
include information on the extent to which the SDA has met the goals 
for the training and training-related placement of women in 
nontraditional employment.


Sec. 627.460  Requirements for records.

     (a) Records, including the records identified in section 165(g) of 
the Act, shall be retained in accordance with section 165(e) of the 
Act. In establishing the time period of record retention requirements 
for records of subrecipients, the State may either:
    (1) Impose the time limitation requirement of section 165(e) of the 
Act; or
    (2) Require that subrecipient records for each funding period be 
retained for 3 years after the subrecipient submits to the awarding 
agency its final expenditure report for that funding period. Records 
for nonexpendable property shall be retained for a period of three 
years after final disposition of the property.
    (b) The Governor shall ensure that the records under this section 
shall be retained beyond the prescribed period if any litigation or 
audit is begun or if a claim is instituted involving the grant or 
agreement covered by the records. In these instances, the Governor 
shall ensure that the records shall be retained until the litigation, 
audit, or claim has been finally resolved.
    (c) In the event of the termination of the relationship with a 
subrecipient, the Governor or SDA or title III SSG shall be responsible 
for the maintenance and retention of the records of any subrecipient 
unable to retain them.
    (d) Record storage. Records shall be retained and stored in a 
manner which will preserve their integrity and admissibility as 
evidence in any audit or other proceeding. The burden of production and 
authentication of the records shall be on the custodian of the records.
    (e) Federal and awarding agencies' access to records--(1) Records 
of recipients and subrecipients. The awarding agency, the Department of 
Labor (including the Department of Labor's Office of Inspector 
General), and the Comptroller General of the United States, or any of 
their authorized representatives, have the right of timely and 
reasonable access to any books, documents, papers, computer records, or 
other records of recipients and subrecipients that are pertinent to the 
grant, in order to conduct audits and examinations, and to make 
excerpts, transcripts, and photocopies of such documents. This right 
also includes timely and reasonable access to recipient and 
subrecipient personnel for the purpose of interview and discussion 
related to such documents.
     (2) Expiration of right of access. The right of access in this 
section is not limited to the required retention period but shall last 
as long as the records are retained.


Sec. 627.463  Public access to records.

    (a) Public access. Except as provided in paragraph (b) of this 
section, records maintained by recipients or subrecipients pursuant to 
Sec. 627.460 shall be made available to the public upon request, 
notwithstanding the provisions of State or local law.
    (b) Exceptions. This requirement does not apply to:
    (1) Information, the disclosure of which would constitute a clearly 
unwarranted invasion of personal privacy; or
    (2) Trade secrets, or commercial or financial information, obtained 
from a person and privileged or confidential.
    (c) Fees. For processing of a request for a record under this 
section, a fee may be charged to the extent sufficient to recover the 
cost applicable to processing such request (section 165(a)(4)).


Sec. 627.465  Property management standards.

    (a) States and governmental subrecipients. Real property, 
equipment, supplies, and intangible property acquired or produced after 
July 1, 1993, by States and governmental subrecipients with JTPA funds 
shall be governed by the definitions and property requirements in the 
DOL regulations at 29 CFR part 97, except that prior approval by the 
Department of Labor to acquire property is waived.
    (b) Nongovernmental subrecipients. Except as provided in paragraph 
(c) of this section, real and personal property, including intangible 
property, acquired or produced after July 1, 1993, by nongovernmental 
subrecipients with JTPA funds shall be governed by the definitions and 
property management standards of OMB Circular A-110, as codified by 
administrative regulations of the Department of Labor in 29 CFR Part 
95, except that prior approval by the Department of Labor to acquire 
property is waived.
    (c) Special provisions for property acquired under subgrants to 
commercial organizations.--(1) Scope. This paragraph (c) applies to 
real and personal property other than supplies that are acquired or 
produced after July 1, 1993, under a JTPA subgrant to a commercial 
organization.
    (2) Property acquired by commercial subrecipients. Title to 
property acquired or produced by a subrecipient that is a commercial 
organization shall vest in the awarding agency, provided such agency is 
a governmental entity or nongovernmental organization that is not a 
commercial organization. Property so acquired or produced shall be 
considered to be acquired or produced by the awarding agency and 
paragraph (a) or (b) of this section, as appropriate, shall apply to 
that property. If the awarding agency is also a commercial 
organization, title shall vest in the higher level, non-commercial 
awarding agency that made the subaward to the commercial subrecipient.
     (3) Approval for acquisition. A subrecipient that is a commercial 
organization shall not acquire property subject to this section without 
the prior approval of the awarding agency.
     (d) Notification to the Secretary of real property acquisitions. 
Recipients shall notify the Secretary immediately upon acquisition of 
real property with JTPA funds, including acquisitions by subrecipients. 
Such notification shall include the location of the real property and 
the Federal share percentage.
    (e) Property procured before July 1, 1993. (1) Personal or real 
property procured with JTPA funds or transferred from programs under 
the Comprehensive Employment and Training Act must be used for purposes 
authorized by the Act. Subject to the Secretary's rights to such 
property, the Governor shall maintain accountability for property in 
accordance with State procedures and the records retention requirements 
of Sec. 627.460 of this part.
    (2) The JTPA program must be reimbursed the fair market value of 
any unneeded property retained by the Governor for use in a non-JTPA 
program. The proceeds from the sale of any property or transfer of 
property to a non-JTPA program must be used for purposes authorized 
under the Act.


Sec. 627.470  Performance standards.

     (a) General. The Secretary shall prescribe performance standards 
for adult programs under title II-A, for youth programs under title II-
C, for dislocated worker programs under title III, and for older worker 
programs under section 204(d) of the Act. Any performance standards 
developed for employment competencies shall be based on such factors as 
entry level skills and other hiring requirements.
    (b) Pursuant to instructions and time lines issued by the 
Secretary, the Governor shall:
    (1) Collect the data necessary to set performance standards 
pursuant to section 106 of the Act; and
    (2) Maintain records and submit reports required by sections 
106(j)(3), 165(a)(3), (c)(1), and (d) and 121(b)(6) of the Act.
    (c) Title II performance standards. (1) The Governor shall 
establish SDA performance standards for title II within the parameters 
set by the Secretary pursuant to sections 106(b) and (d) of the Act and 
apply the standards in accordance with section 202(c)(1)(B) of the Act.
    (2) The Governor shall establish incentive award policies pursuant 
to section 106(b)(7) of the Act, except for programs operated under 
section 204(d) of the Act. Pursuant to section 106(b)(8) of the Act, 
Governors may not consider standards relating gross program 
expenditures to performance measures in making such incentive awards.
    (3) The Governor shall provide technical assistance to SDA's 
failing to meet performance standards established by the Secretary for 
a given program year (section 106(j)(2)).
    (4)(i) If an SDA fails to meet a prescribed number of the 
Secretary's performance standards for 2 consecutive years, the Governor 
shall notify the Secretary and the service delivery area of the 
continued failure and impose a reorganization plan (section 106(j)(4)).
    (ii) The number of standards deemed to constitute failure shall be 
specified by the Secretary biennially and shall be based on an 
appropriate proportion of the total number established by the Secretary 
for that performance cycle. In determining failure, the specified 
proportion shall be applied separately to each year of the two year 
cycle.
    (iii) A reorganization plan shall not be imposed for a failure to 
meet performance standards other than those established by the 
Secretary.
    (iv) A reorganization plan shall be considered to be imposed when, 
at a minimum:
    (A) The problem or deficiency is identified,
    (B) The problem is communicated to the SDA, and
    (C) The SDA is provided an initial statement of the actions or 
steps required and the timeframe within which they are to be initiated. 
A final statement of required steps and actions is to be issued within 
30 days.
    (d)(1) If the Governor does not impose a reorganization plan, 
required by paragraph (c)(4) of this section, within 90 days of 
notifying the Grant Officer of an SDA's continued failure to meet 
performance standards, the Grant Officer shall develop and impose such 
a plan (section 106(j)(5)).
    (2) Before imposing a reorganization plan, the Grant Officer shall 
notify the Governor and SDA in writing of the intent to impose the plan 
and provide both parties the opportunity to submit comments within 30 
days of receipt of the Grant Officer's notice.
    (e) An SDA subject to a reorganization plan under paragraphs (c)(4) 
or (d) of this section may, within 30 days of receiving notice of such 
action, appeal to the Secretary to revise or rescind the reorganization 
plan under the procedures set forth at Sec. 627.471 of this subpart, 
Reorganization plan appeals (section 106(j)(6)(A)).
    (f) Secretarial action to recapture or withhold funds. (1) The 
Grant Officer shall recapture or withhold an amount not to exceed one-
fifth of the State administration set-aside allocated under sections 
202(c)(1)(A) and 262(c)(1)(A) of the Act when:
    (i) The Governor has failed to impose a reorganization plan under 
paragraph (c)(4) of this section, for the purposes of providing 
technical assistance under a reorganization plan imposed by the 
Secretary (section 106(j)(5)(B)); or
    (ii) The Secretary determines in an appeal provided for at 
paragraph (e) of this section, and set forth at Sec. 627.471 of this 
subpart, that the Governor has not provided appropriate technical 
assistance as required at section 106(j)(2) (section 106(j)(6)(B)).
    (2)(i) A Governor of a State that is subject to recapture or 
withholding under paragraph (f)(1) of this section may, within 30 days 
of receipt of such notice, appeal such recapture or withholding to the 
Secretary.
    (ii) The Secretary may consider any comments submitted by the 
Governor and shall make a decision within 45 days after the appeal is 
received.
    (g) Title III performance standards. (1) The Governor shall 
establish SSG performance standards for programs under title III within 
the parameters set annually by the Secretary pursuant to section 106(c) 
and (d) of the Act.
    (2) Any performance standard for programs under title III shall 
make appropriate allowances for the difference in cost resulting from 
serving workers receiving needs-related payments authorized under 
Sec. 631.20 of this chapter (section 106(c)(2)).
    (3) The Secretary annually shall certify compliance, if the program 
is in compliance, with the title III performance standards established 
pursuant to paragraph (a) of section 322(a)(4) of the Act.
    (4) The Governor shall not establish standards for the operation of 
programs under title III that are inconsistent with the performance 
standards established by the Secretary under provisions of section 
106(c) of the Act (section 311(b)(8)).
    (5) When an SSG fails to meet performance standards for 2 
consecutive years, the Governor may institute procedures pursuant to 
the Governor's by-pass authority in accordance with Sec. 631.38(b) of 
this chapter or require redesignation of the substate grantee in 
accordance with Sec. 631.35 of this chapter, as appropriate.


Sec. 627.471  Reorganization plan appeals.

    (a) A reorganization plan imposed by the Governor, as provided for 
at Secs. 627.470(c)(4) or 627.477(b)(2) of this part, or by the 
Secretary, as provided for at Sec. 627.470(d) of this part, may be 
appealed directly to the Secretary without prior exhaustion of local 
remedies.
    (b)(1) Appeals shall be submitted to the Secretary, U.S. Department 
of Labor, Washington, DC 20210, ATTENTION: ASET. A copy of the appeal 
shall be provided simultaneously to the Governor.
    (2) The Secretary shall not accept an appeal dated later than 30 
days after receipt of written notification from the Governor or the 
Secretary.
    (3) The appealing party shall explain why it believes the decision 
to impose the reorganization plan is contrary to the provisions of 
section 106 of the Act.
    (4) The Secretary shall accept the appeal and make a decision only 
with regard to determining whether or not the decision to impose the 
reorganization plan is inconsistent with section 106 of the Act. The 
Secretary may consider any comments submitted by the Governor or the 
SDA, as appropriate. The Secretary shall make a final decision within 
60 days after this appeal is received (section 106(j)).
Sec. 627.475  Oversight and monitoring.

    (a) The Secretary may monitor all recipients and subrecipients of 
financial assistance pursuant to section 163 of the Act.
    (b) The Governor is responsible for oversight of all SDA and SSG 
activities and State-supported programs. The Governor shall develop and 
make available for review a State monitoring plan. The plan shall 
specify the mechanism which:
    (1) Ensures that established policies to achieve program quality 
and outcomes meet the objectives of the Act and regulations promulgated 
thereunder;
    (2) Enables the Governor to determine if SDA's and SSG's have 
demonstrated substantial compliance with the requirements for 
oversight;
    (3) Determines whether the Job Training Plan shall be disapproved 
consistent with the criteria contained in section 105(b)(1) of the Act;
    (4) Regularly examines expenditures against the cost categories and 
cost limitations specified in the Act and these regulations;
    (5) Ensures that all areas of SDA and SSG operations are monitored 
onsite regularly, but not less than once annually; and
    (6) Provides for corrective action to be imposed if conditions in 
paragraphs (b)(1)-(4) of this section are not met.
    (c) The Governor shall issue instructions to SDA's and title III 
SSG's on the development of a substate monitoring plan. The 
instructions for development of the monitoring plan, at a minimum, 
shall address the monitoring scope and frequency, and the Secretary's 
emphasis and direction. The substate monitoring plan shall be part of 
the job training plan.
    (d) The Governor shall establish general standards for PIC 
oversight responsibilities. The required PIC standards shall be 
included in the Governor's Coordination and Special Services Plan 
(GCSSP).
    (e)(1) The PIC, pursuant to standards established by the Governor, 
shall establish specific policies for monitoring and oversight of SDA 
performance which shall be described in the job training plan.
    (2) The PIC shall exercise independent oversight over activities 
under the job training plan which shall not be circumscribed by 
agreements with the appropriate chief elected official(s) of the SDA.
    (f) The PIC and chief elected official(s) may conduct such 
oversight as they, individually or jointly, deem necessary or delegate 
oversight responsibilities to an appropriate entity pursuant to their 
mutual agreement.


Sec. 627.477  Governor's determination of substantial violation.

    (a) Except as provided at paragraph (d) of this section, if, as a 
result of financial and compliance audits or otherwise, the Governor 
determines that there is a substantial violation of a specific 
provision of this Act or the regulations under this Act, and corrective 
action has not been taken, the Governor shall
    (1) Issue a notice of intent to revoke approval of all or part of 
the plan affected; or
    (2) Impose a reorganization plan, which may include
    (i) Restructuring the private industry council involved;
    (ii) Prohibiting the use of designated service providers;
    (iii) Selecting an alternative entity to administer the program for 
the service delivery area involved;
    (iv) Merging the service delivery area into 1 or more other 
existing service delivery areas; or
    (v) Other such changes as the Secretary or Governor determines 
necessary to secure compliance (section 164(b)(1)).
    (b)(1) The actions taken by the Governor pursuant to paragraph 
(a)(1) of this section may be appealed to the Secretary as provided at 
Sec. 628.426 of this chapter (section 164(b)(2)(A)).
    (2) The actions taken by the Governor pursuant to paragraph (a)(2) 
of this section may be appealed to the Secretary, as provided at 
Sec. 627.471 of this part (section 164(b)(2)(B)).
    (c) Allegations that the Governor failed to promptly take the 
actions required under paragraph (a) of this section shall be handled 
under Sec. 627.607 of this part (section 164(b)(3)).
    (d) This section does not apply to remedial actions for SDA 
failures to meet performance standards, which are provided for at 
Sec. 627.470 of this part, and do not apply to remedial actions for the 
failure to comply with procurement standards, which are provided for at 
Sec. 627.703 of this part.


Sec. 627.480  Audits.

    (a) Non-Federal Audits.--(1) Governments. Each recipient and 
governmental subrecipient is responsible for complying with the Single 
Audit Act of 1984 (31 U.S.C. 7501-7) and 29 CFR part 96, the Department 
of Labor regulations which implement Office of Management and Budget 
(OMB) Circular A-128, ``Audits of State and Local Governments''.
    (2) Non-governmental organizations. Each non-governmental recipient 
or subrecipient shall comply with OMB Circular A-133, ``Audits of 
Institutions of Higher Education and Other Nonprofit Institutions'', as 
implemented by the Department of Labor regulations at 29 CFR part 96. 
The provisions of this paragraph (a)(2) do not apply to any non-
governmental organization that is:
    (i) A commercial organization; or
    (ii) A hospital or an institution of higher education for which 
State or local governments choose to apply OMB Circular A-128.
    (3) Commercial organizations. A commercial organization which is a 
recipient or subrecipient and which receives $25,000 or more a year in 
Federal financial assistance to operate a JTPA program shall have an 
audit that:
    (i) Is usually performed annually, but not less frequently than 
every two years;
    (ii) Is completed within one year after the end of the period 
covered by the audit and submitted to the awarding agency within one 
month after completion;
    (iii) Is either:
    (A) An independent financial and compliance audit of Federal funds 
that includes coverage of the JTPA program within its scope, and is 
conducted and prepared in accordance with generally accepted government 
auditing standards; or
    (B) An organization-wide audit that includes financial and 
compliance coverage of the JTPA program within its scope.
    (b) Federal audits. The notice of audits conducted or arranged by 
the Office of Inspector General or the Comptroller General shall be 
provided in advance, as required by section 165(b) of the Act.
    (c) Audit reports. (1) Audit reports of recipient-level entities 
and other organizations which receive JTPA funds directly from the U.S. 
Department of Labor shall be submitted to the Office of Inspector 
General.
    (2) Audit reports of organizations other than those described in 
paragraph (c)(1) of this section shall be submitted to the entity which 
provided the JTPA funds.
    (d) Each entity that receives JTPA program funds and awards a 
portion of those funds to one or more subrecipients shall:
    (1) Ensure that each subrecipient complies with the applicable 
audit requirements;
    (2) Resolve all audit findings that impact the JTPA program with 
its subrecipient and ensure that corrective action for all such 
findings is instituted within 6 months after receipt of the audit 
report (where appropriate, corrective action shall include debt 
collection action for all disallowed costs); and
    (3) Maintain an audit resolution file documenting the disposition 
of reported questioned costs and corrective actions taken for all 
findings. The ETA Grant Officer may request that an audit resolution 
report, as specified in paragraph (e)(2) of this section, be submitted 
for such audits or may have the audit resolution reviewed through the 
compliance review process.
    (e)(1) Audits of recipient-level entities and other organizations 
which receive JTPA funds directly from DOL and all audits conducted by 
or under contract for the Office of Inspector General shall be issued 
by the OIG to the Employment and Training Administration after 
acceptance by OIG.
    (2) After receipt of the audit report, the ETA Grant Officer shall 
request that the State submit an audit resolution report documenting 
the disposition of the reported questioned costs, i.e., whether allowed 
or disallowed, the basis for allowing questioned costs, the method of 
repayment planned or required, and corrective actions, including debt 
collection efforts, taken or planned.
    (f) If the recipient intends to propose the use of ``stand-in'' 
costs as substitutes for otherwise unallowable costs, the proposal 
shall be included with the audit resolution report. To be considered, 
the proposed ``stand-in'' costs shall have been reported as uncharged 
JTPA program costs, included within the scope of the audit, and 
accounted for in the auditee's financial system, as required by 
Sec. 627.425 of this part, Standards for financial management and 
participant data systems. To be accepted, stand-in costs shall be from 
the same title, and program year as the costs which they are proposed 
to replace, and shall not result in a violation of the applicable cost 
limitations.
    (g) After receiving the audit resolution report, the ETA Grant 
Officer shall review the report, the recipient's disposition, and any 
liability waiver request submitted in accordance with Sec. 627.704 of 
this part. If the Grant Officer agrees with all aspects of the 
recipient's disposition of the audit, the Grant Officer shall so notify 
the recipient. If the Grant Officer disagrees with the recipient's 
conclusion on specific points in the audit, the Grant Officer shall 
resolve the audit through the initial and final determination process 
described in Sec. 627.606 of this part.


Sec. 627.481  Audit resolution.

    (a) Federal audit resolution. When the OIG issues an audit report 
to the Employment and Training Administration for resolution, the ETA 
Grant Officer shall provide a copy of the report to the recipient (if 
it does not already have the report), along with a request that the 
recipient submit its audit resolution report as specified in 
Sec. 627.480(e)(2) of this part, unless the Grant Officer chooses to 
proceed directly against the recipient pursuant to Sec. 627.601 of this 
part.
    (1) For audits of recipient-level entities and other organizations 
which receive JTPA funds directly from DOL, the Grant Officer shall 
request that the audit resolution report be submitted within 60 days 
from the date that the audit report is issued by the OIG.
    (2) For audits of subrecipient organizations, the Grant Officer 
shall provide the recipient with a 180-day period within which to 
resolve the audit with its subrecipient(s), and shall request that the 
audit resolution report be submitted at the end of that 180-day period.
    (b) After receiving the audit resolution report, the ETA Grant 
Officer shall review the report, the recipient's disposition, any 
liability waiver request, and any proposed ``stand-in'' costs. If the 
Grant Officer agrees with all aspects of the recipient's disposition of 
the audit, the Grant Officer shall so notify the recipient, 
constituting final agency action on the audit. If the Grant Officer 
disagrees with the recipient's conclusion on specific points in the 
audit, or if the recipient fails to submit its audit resolution report, 
the Grant Officer shall resolve the audit through the initial and final 
determination process described in Sec. 627.606 of this part. Normally, 
the Grant Officer's notification of agreement (a concurrence letter) or 
disagreement (an initial determination) with the recipient's audit 
resolution report will be provided within 180 days of the Grant 
Officer's receipt of the report.
    (c) Non-Federal audit resolution. (1) To ensure timely and 
appropriate resolution for audits of all subrecipients, including SDA 
grant recipients and title III SSG's, and to ensure recipient-wide 
consistency, the Governor shall prescribe standards for audit 
resolution and debt collection policies and procedures that shall be 
included in each job training plan in accordance with section 
104(b)(12) of the Act.
    (2) The Governor shall prescribe an appeals procedure for audit 
resolution disputes which, at a minimum, provides for:
    (i) The period of time, not less than 15 days nor more than 30 
days, after the issuance of the final determination in which an appeal 
may be filed;
    (ii) The rules of procedure;
    (iii) Timely submission of evidence;
    (iv) The timing of decisions; and
    (v) Further appeal rights, if any.


Sec. 627.485  Closeout.

    (a) General. The Grant Officer shall close out each annual JTPA 
grant agreement within a timely period after the funding period covered 
by the award has expired.
    (b) Revisions to the reported expenditures for a program year of 
funds may be made until 90 days after the time limitation for 
expenditure of JTPA funds, as set forth in section 161(b) of the Act, 
has expired. The Grant Officer may extend this deadline if the 
recipient submits a written request with justification. After that 
time, the Grant Officer shall consider all reports received as final 
and no additional revisions may be made.
    (c) When closing out a JTPA grant, the Grant Officer shall notify 
the recipient, by certified mail, that, since the time limitation for 
expenditure of funds covered by the grant award has expired, it is the 
Department of Labor's intent to close the annual grant as follows:
    (1) Cost adjustment. Based on receipt of reports in paragraph (b) 
of this section, the Grant Officer shall make upward or downward 
adjustments to the allowable costs; and
    (2) Cash adjustment. DOL shall make prompt payment to the recipient 
for allowable reimbursable costs; the recipient shall promptly refund 
to DOL any balance of cash advanced that is in excess of allowable 
costs for the grant award being closed.
    (d) The recipient shall have an additional 60 days after the date 
of the notice described in paragraph (c) of this section in which to 
provide the Grant Officer with information as to the reason(s) why 
closeout should not occur.
    (e) At the end of the 60-day period described in paragraph (d) of 
this section, the Grant Officer shall notify the recipient that 
closeout has occurred, unless information provided by the recipient, 
pursuant to paragraph (d) of this section, indicates otherwise.


Sec. 627.490  Later disallowances and adjustments after closeout.

    The closeout of a grant does not affect:
    (a) The Grant Officer's right to disallow costs and recover funds 
on the basis of a later audit or other review;
    (b) The recipient's obligation to return any funds due as a result 
of later refunds, corrections, subrecipient audit disallowances, or 
other transactions;
    (c) Records retention requirements in Sec. 627.460 of this part, 
Requirements for records, and Sec. 627.463 of this part, Public access 
to records;
    (d) Property management requirements in Sec. 627.465 of this part, 
Property management standards; and
    (e) Audit and audit resolution requirements in Sec. 627.480 of this 
part, Audits and Sec. 627.481 of this part, Audit resolution.


Sec. 627.495  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 of 
the grant constitute a debt to the Federal Government. If not paid 
within a reasonable period after demand, the Secretary may take any 
actions permitted by law to recover the funds.
    (b) The Secretary shall charge interest on an overdue debt in 
accordance with the Federal Claims Collection Standards (4 CFR ch. II).

Subpart E--Grievances Procedures at the State and Local Level


Sec. 627.500  Scope and purpose.

    (a) General. This subpart establishes the procedures which apply to 
the handling of noncriminal complaints under the Act at the Governor, 
the SDA, and the SSG levels. Nothing contained in this subpart shall be 
deemed to prejudice the separate exercise of other legal rights in 
pursuit of remedies and sanctions available outside the Act.
    (b) Handling of discrimination complaints. Complaints of 
discrimination pursuant to section 167(a) of the Act shall be handled 
under 29 CFR part 34.
    (c) Complaints and reports of criminal fraud, waste, and abuse. 
Information and complaints involving criminal fraud, waste, abuse or 
other criminal activity shall be reported through the Department's 
Incident Reporting System, directly and immediately to the DOL Office 
of Inspector General, Office of Investigations, 200 Constitution Avenue 
NW., Room S5514, Washington, DC 20210, or to the corresponding Regional 
Inspector General for Investigations, with a copy simultaneously 
provided to the Employment and Training Administration. The Hotline 
number is 1-800-347-3756. Other complaints of a noncriminal nature will 
continue to be handled under the procedures set forth in this part, 
subparts E and F, and through the Department's Incident Reporting 
System.
    (d) Non-JTPA remedies. Whenever any person, organization, or agency 
believes that a recipient, an SDA, an SSG, or other subrecipient has 
engaged in conduct that violates the Act and that such conduct also 
violates a Federal statute other than JTPA, or a State or local law, 
that person, organization, or agency may, with respect to the non-JTPA 
cause of action, institute a civil action or pursue other remedies 
authorized under such other Federal, State, or local law against the 
recipient, the SDA, the SSG, or other subrecipient, without first 
exhausting the remedies in this subpart. Nothing in the Act or this 
chapter shall:
    (1) Allow any person or organization to file a suit which alleges a 
violation of JTPA or regulations promulgated thereunder without first 
exhausting the administrative remedies described in this subpart; or
    (2) Be construed to create a private right of action with respect 
to alleged violations of JTPA or the regulations promulgated 
thereunder.


Sec. 627.501  State grievance and hearing procedures for noncriminal 
complaints at the recipient level.

    (a)(1) Each recipient shall maintain a recipient-level grievance 
procedure and shall ensure the establishment of procedures at the SDA 
level and the SSG level for resolving any complaint alleging a 
violation of the Act, regulations promulgated thereunder, grants, or 
other agreements under the Act. The procedures shall include procedures 
for handling complaints and grievances arising in connection with JTPA 
programs operated by each SDA, SSG, and subrecipient under the Act 
(section 144(a)).
    (2) The procedures described in paragraph (a)(1) of this section 
shall also provide for resolution of complaints arising from actions 
taken by the recipient with respect to investigations or monitoring 
reports.
    (b) The recipient's grievance hearing procedure shall require 
written notice to interested parties of the date, time, and place of 
the hearing; an opportunity to present evidence; and a written 
decision. For matters under paragraph (a)(2) of this section, the 
notice of hearing shall indicate the nature of the violation(s) which 
the hearing covers.


Sec. 627.502  Grievance and hearing procedures for noncriminal 
complaints at the SDA and SSG levels.

    (a) Each SDA and SSG, pursuant to guidelines established by the 
recipient, shall establish procedures for resolving complaints and 
grievances arising in connection with JTPA programs operated by the 
SDA, the SSG, and other subrecipients under the Act. The procedures 
also shall provide for resolution of complaints arising from actions 
taken by the SDA or the SSG with respect to investigations or 
monitoring reports of their subgrantees, contractors, and other 
subrecipients (section 144(a)).
    (b) Each SDA and SSG grievance hearing procedure shall include 
written notice of the date, time, and place of the hearing; an 
opportunity to present evidence; a written decision; and a notice of 
appeal rights.
    (c) The SDA and SSG procedures shall provide for a decision within 
60 days of the filing of the complaint.


Sec. 627.503  Recipient-level review.

    (a) If a complainant does not receive a decision at the SDA or the 
SSG level within 60 days of filing the complaint or receives a decision 
unsatisfactory to the complainant, the complainant shall have the right 
to request a review of the complaint by the recipient. The recipient 
shall issue a decision within 30 days of receipt of the complaint.
    (b) The recipient shall also provide for an independent review, by 
a reviewer who is independent of the JTPA program, of a complaint 
initially filed at the recipient level on which a decision was not 
issued within 60 days of receipt of a complaint or on which the 
complainant has received an adverse decision. A decision shall be made 
within 30 days of receipt by the recipient.
    (c) A request for review under the provisions of paragraphs (a) or 
(b) of this section shall be filed within 10 days of receipt of the 
adverse decision or, if no timely decision is rendered, within 15 days 
from the date on which the complainant should have received a timely 
decision.
    (d) With the exception of complaints alleging violations of the 
labor standards under section 143 of the Act, the recipient's decision 
is final unless the Secretary exercises the authority for Federal-level 
review in accordance with the provisions at Sec. 627.601 of this part, 
Complaints and grievances at the Federal level. Complaints alleging 
violations of section 143 of the Act shall be handled under the 
procedures set forth at Sec. 627.603 of this part, special handling of 
labor standards violations under section 143.


Sec. 627.504  Noncriminal grievance procedure at employer level.

    (a) Recipients, SDA's, SSG's, and other subrecipients shall assure 
that other employers, including private-for-profit employers of 
participants under the Act, have a grievance procedure relating to the 
terms and conditions of employment available to their participants 
(section 144(b)).
    (b)(1) Employers under paragraph (a) of this section may operate 
their own grievance system or may utilize the grievance system 
established by the recipient, the SDA, or the SSG under this subpart, 
except as provided for in paragraph (b)(2) of this section. Employers 
shall inform participants of the grievance procedures they are to 
follow when the participant begins employment.
    (2) If an employer is required to use a certain grievance procedure 
under a covered collective bargaining agreement, then those procedures 
should be followed for the handling of JTPA complaints under this 
section.
    (c) An employer grievance system shall provide for, upon request by 
the complainant, a review of an employer's decision by the SDA, or the 
SSG and the recipient if necessary, in accordance with Secs. 627.501 
and 627.502 of this part.

Subpart F--Federal handling of noncriminal complaints and other 
allegations.


Sec. 627.600  Scope and purpose.
    (a) This subpart establishes the procedures which apply to the 
filing, handling, and reviewing of complaints at the Federal level. 
Nothing in the Act or this chapter shall be construed to allow any 
person or organization to join or sue the Secretary with respect to the 
Secretary's responsibilities under JTPA except after exhausting the 
remedies in subpart E of this part and this subpart F.
    (b) Complaints of discrimination pursuant to section 167(a) of the 
Act shall be handled under 29 CFR part 34.


Sec. 627.601  Complaints and allegations at the Federal level.

    (a) The types of complaints and allegations that may be received at 
the Federal level for review include:
    (1) Complaints for which the recipient has failed to issue a timely 
decision as required by Sec. 627.503 of this part;
    (2) Alleged violations of the Act and/or the regulations 
promulgated thereunder resulting from Federal, State, and/or SDA and 
SSG monitoring and oversight reviews;
    (3) Alleged violations of the labor standards provisions at section 
143 of the Act;
    (4) Alleged violations of the relocation provisions in section 
141(c) of the Act; and
    (5) Other allegations of violations of the Act or the regulations 
promulgated thereunder.
    (b) Upon receipt of a complaint or allegation alleging any of the 
violations listed in paragraph (a) of this section, the Secretary may:
    (1) Direct the recipient to handle a complaint through local 
grievance procedures established under Sec. 627.502 of this part; or
    (2) Investigate and determine whether the recipient or 
subrecipient(s) are in compliance with the Act and regulations 
promulgated thereunder (section 163(b) and (c)).
    (3) Allegations of violations of sections 141(c) or 143 of the Act 
and Sec. 627.503 of this part shall be handled under paragraph (b)(2) 
of this section.


Sec. 627.602  Resolution of investigative findings.

    (a)(1) As a result of an investigation or monitoring by the 
Department, or of the actions specified in paragraph (b)(2) of 
Sec. 627.601 of this part, the Grant Officer shall notify the recipient 
of the findings of the investigation and shall give the recipient a 
period of time, not to exceed 60 days, depending on the nature of the 
findings, to comment and to take appropriate corrective actions.
    (2) The Grant Officer shall review the complete file of the 
investigation and the recipient's actions. The Grant Officer's review 
shall take into account the sanction provisions of subpart G of this 
part. If the Grant Officer agrees with the recipient's handling of the 
situation, the Grant Officer shall so notify the recipient. This 
notification shall constitute final agency action.
    (3) If the Grant Officer disagrees with the recipient's handling of 
the matter, the Grant Officer shall proceed pursuant to Sec. 627.606 of 
this part, Grant officer resolution.


Sec. 627.603  Special handling of labor standards violations under 
Section 143 of the Act.

    (a) A complaint alleging JTPA section 143 violations may be 
submitted to the Secretary by either party to the complaint when:
    (1) The complainant has exhausted the grievance procedures set 
forth at subpart E of this part, or
    (2) The 60-day time period specified for reaching a decision under 
a procedure set forth at subpart E of this part has elapsed without a 
decision (section 144(a) and (d)(1)).
    (b)(1) The Secretary shall investigate the allegations contained in 
a complaint alleging violations of JTPA section 143, make a 
determination whether a violation has occurred, and issue a decision 
within 120 days of receipt by the Secretary of the complaint (section 
144(c) and (d)).
    (2) If the results of the Secretary's investigation indicate that a 
decision by a recipient under a procedure set forth at subpart E of 
this part requires modification or reversal, or that the 60-day time 
period for decision under section 144(a) has elapsed, the Secretary 
shall modify, reverse, or issue such decision.
    (3) If the Secretary modifies or reverses a decision made under a 
procedure set forth at subpart E of this part, or issues a decision 
where the 60-day time period has elapsed without a decision, the 
Secretary shall offer an opportunity for a hearing, in accordance with 
the procedures under section 166 of the Act and subpart H of this part 
(sections 144(d)(2) and 166(a)).
    (4) If the Secretary upholds a recipient's decision, the 
determination is the final decision of the Secretary (section 
144(d)(3)). This decision is not appealable to the Office of 
Administrative Law Judges.
    (c) Except as provided in paragraph (d) of this section, remedies 
available under this section to a grievant for violations of section 
143 of the Act shall be limited to:
    (1) Suspension or termination of payments under the Act;
    (2) Prohibition of placement of a participant, for an appropriate 
period of time, in a program under the Act with an employer that has 
violated section 143 of the Act, as determined under section 144(d) or 
(e) of the Act; and/or
    (3) Appropriate equitable relief (other than back pay) (section 
144(f)(1)).
    (d) Available remedies for violations of section 143(a)(4), (b)(1), 
(b)(3), and (d) of the Act include the remedies listed in paragraph (c) 
of this section, and may include the following:
    (1) Reinstatement of the grievant to the position held prior to 
displacement;
    (2) Payment of lost wages and benefits; and/or
    (3) Reestablishment of other relevant terms, conditions, and 
privileges of employment.
    (e) Nothing in this section shall be construed to prohibit a 
grievant from pursuing a remedy authorized under another Federal, 
State, or local law for a violation of section 143 of the Act (section 
144(g)).


Sec. 627.604  Alternative procedure for handling labor standards 
violations under section 143 of the Act--binding arbitration.

    (a) A person alleging a violation of section 143 of the Act, as an 
alternative to processing the grievance under a procedure described at 
section 144 of the Act, may submit the grievance to a binding 
arbitration procedure, if a collective bargaining agreement covering 
the parties to the grievance so provides (section 144(e)(1)).
    (b) A person electing to have her/his complaint on JTPA section 143 
labor standard violations processed under binding arbitration 
provisions--
    (1) Shall choose binding arbitration before, and in lieu of, 
initiating a complaint under other grievance procedures established 
pursuant to section 144 of the Act, and
    (2) May not elect binding arbitration for a complaint that 
previously has been or is subject to any other grievance procedure 
established under the Act.
    (c) Binding arbitration decisions under the provisions of section 
144(e) of the Act are not reviewable by the Secretary.
    (d) The remedies available to a grievant under binding arbitration 
are limited to those set forth at section 144(f)(1)(C) and (f)(2) of 
the Act (section 144(e)(2)).
    (e) Nothing in this section shall be construed to prohibit a 
grievant from pursuing a remedy authorized under another Federal, 
State, or local law for a violation of section 143 of the Act (section 
144(g)).


Sec. 627.605  Special Federal review of SDA- and SSG-level complaints 
without decision.

    (a) Should the recipient fail to provide a decision as required in 
Sec. 627.503 of this part, the complainant may then request from the 
Secretary a determination whether reasonable cause exists to believe 
that the Act or regulations promulgated thereunder have been violated.
    (b) The Secretary shall act within 90 days of receipt of a request 
made pursuant to paragraph (a) of this section. Where there is 
reasonable cause to believe the Act or regulations promulgated 
thereunder have been violated, the Secretary shall direct the recipient 
to issue a decision adjudicating the dispute pursuant to recipient and 
local procedures. The Secretary's action does not constitute final 
agency action and is not appealable under the Act (sections 166(a) and 
144(c)). If the recipient does not comply with the Secretary's order 
within 60 days, the Secretary may impose a sanction upon the recipient 
for failing to issue a decision.
    (c) A request pursuant to paragraph (a) of this section shall be 
filed no later than 15 days from the date on which the complainant 
should have received a decision as required in Sec. 627.503 of this 
part. The complaint shall contain the following:
    (1) The full name, telephone number (if any), and address (if any) 
of the person making the complaint;
    (2) The full name and address of the respondent against whom the 
complaint is made;
    (3) A clear and concise statement of the facts, including pertinent 
dates, constituting the alleged violation;
    (4) The provisions of the Act, regulations promulgated thereunder, 
grant, or other agreement under the Act believed to have been violated;
    (5) A statement disclosing whether proceedings involving the 
subject of the request have been commenced or concluded before any 
Federal, State, or local authority, and, if so, the date of such 
commencement or conclusion, the name and address of the authority, and 
the style of the case; and
    (6) A statement of the date the complaint was filed with the 
recipient, the date on which the recipient should have issued decision, 
and an attestation that no decision was issued.
    (d)(1) A request pursuant to paragraph (a) of this section will be 
considered to have been filed when the Secretary receives from the 
complainant a written statement sufficiently precise to evaluate the 
complaint and the grievance procedure used by the recipient, the SDA, 
or the SSG.
    (2) When an imprecise request is received within the 15-day period 
prescribed in paragraph (a) of this section, the Secretary may extend 
the period for submission.


Sec. 627.606  Grant Officer resolution.

    (a) When the Grant Officer is dissatisfied with the State's 
disposition of an audit, as specified in Sec. 627.481 of this part, or 
other resolution of violations (including those arising out of incident 
reports or compliance reviews), with the recipient's response to 
findings resulting from investigations pursuant to Sec. 627.503 of this 
part, or if the recipient fails to comply with the Secretary's decision 
pursuant to Sec. 627.605(b) of this part, the initial and final 
determination process shall be used to resolve the matter.
    (b) Initial determination. The Grant Officer shall make an initial 
determination on the findings for both those matters where there is 
agreement and those where there is disagreement with the recipient's 
resolution, including the allowability of questioned costs or 
activities. Such initial determination shall be based upon the 
requirements of the Act, regulations promulgated thereunder, grants, 
contracts, or other agreements under the Act.
    (c) Informal resolution. The Grant Officer shall not revoke a 
recipient's grant in whole or in part, nor institute corrective actions 
or sanctions, without first providing the recipient with an opportunity 
to present documentation or arguments to resolve informally those 
matters in controversy contained in the initial determination. The 
initial determination shall provide for an informal resolution period 
which shall be at least 60 days from issuance of the initial 
determination. If the matters are resolved informally, the Grant 
Officer shall issue a final determination pursuant to paragraph (d) of 
this section which notifies the parties in writing of the nature of the 
resolution and may close the file.
    (d) Grant Officer's final determination. (1) If the matter is not 
fully resolved informally, the Grant Officer shall provide each party 
with a written final determination by certified mail, return receipt 
requested. For audits of recipient-level entities and other recipients 
which receive JTPA funds directly from DOL, ordinarily the final 
determination will be issued not later than 180 days from the date that 
the OIG issues the final approved audit report to the Employment and 
Training Administration. For audits of subrecipients conducted by the 
OIG, ordinarily the final determination will be issued not later than 
360 days from the date the OIG issues the final approved audit report 
to ETA.
    (2) A final determination under this paragraph (d) shall:
    (i) Indicate that efforts to informally resolve matters contained 
in the initial determination have been unsuccessful;
    (ii) List those matters upon which the parties continue to 
disagree;
    (iii) List any modifications to the factual findings and 
conclusions set forth in the initial determination;
    (iv) Establish a debt, if appropriate;
    (v) Require corrective action when needed;
    (vi) Determine liability, method of restitution of funds and 
sanctions; and
    (vii) Offer an opportunity for a hearing in accordance with subpart 
H of this part.
    (3) Unless a hearing is requested, a final determination under this 
paragraph (d) constitutes final agency action and is not subject to 
further review.
    (e) Nothing in this section shall preclude the Grant Officer from 
issuing an initial determination and/or final determination directly to 
a subrecipient, in accordance with section 164(e)(3) of the Act. In 
such a case, the Grant Officer shall inform the recipient of such 
action.


627.607  Grant Officer resolution of Governor's failure to promptly 
take action.

    (a) An allegation, whether arising from a complaint, from 
monitoring or other information available to the Department, that a 
Governor failed to promptly take remedial action of a substantial 
violation of the Act or the regulations under this Act, as required by 
Sec. 627.477 of this part, shall be promptly investigated by the 
Department.
    (b) The Grant Officer shall notify the Governor of the findings of 
the investigation or monitoring and shall give the Governor a period of 
time, not to exceed 30 days, to comment on the nature of the findings 
and to take appropriate corrective actions.
    (c) The Grant Officer shall review the complete file of the 
investigation, monitoring, and the Governor's actions.
    (d) If the Grant Officer determines that, (1) as a result financial 
and compliance audits or otherwise, the Governor determined that there 
was a substantial violation of a specific provision of the Act or the 
regulations under this Act, and corrective action had not been taken 
and, (2) the Grant Officer determines that the Governor has not taken 
the actions required by Sec. 627.477(a), the Grant Officer shall take 
such actions required by Sec. 627.477(a).
    (e) The Grant Officer's determination, unless a hearing is 
requested, constitutes final agency action and is not subject to 
further review. (Section 164(b)(3)).

Subpart G--Sanctions for Violations of the Act.


Sec. 627.700  Purpose and scope.

    This subpart describes the sanctions and appropriate corrective 
actions that may be imposed by the Secretary for violations of the Act, 
regulations promulgated thereunder, or grant terms and conditions 
(sections 106(j)(5), 164 (b), (d), (e), (f), (g), and (h)).


Sec. 627.702  Sanctions and corrective actions.

    (a) Except for actions under sections 106(j), 164 (b) and (f), and 
167 of the Act and the funding restrictions specified at Sec. 627.423 
of this part, Funding restrictions for ``high-risk'' recipients and 
subrecipients, the Grant Officer shall utilize initial and final 
determination procedures outlined in Sec. 627.606, Grant Officer 
resolution, of this part to impose a sanction or corrective action.
    (b) To impose a sanction or corrective action regarding a violation 
of section 167 of the Act, the Department shall utilize the procedures 
of 29 CFR part 34.
    (c) To impose a sanction or corrective action for failure to meet 
performance standards, where the recipient has not acted as required at 
section 106(j)(4), the Grant Officer shall utilize the procedures set 
forth at Sec. 627.470 (d) and (f).
    (d) To impose a sanction or corrective action for noncompliance 
with the procurement standards provisions set forth at Secs. 627.420 
and 627.703 of this part, where the recipient has not acted, the Grant 
Officer may utilize the procedures set forth at section 164(b) of the 
Act.
    (e) To impose a sanction or corrective action for the Governor's 
failure to promptly take remedial action of a substantial violation as 
required by Sec. 627.477 of this part, the Grant Officer shall utilize 
the procedure set forth in Sec. 627.607 of this part.
    (f) The recipient shall be held responsible for all funds under its 
grant(s). The recipient shall hold subrecipients, including SDA's and 
SSG's, responsible for JTPA funds received through the grant, and may 
ultimately hold the units of local government which constitute the SDA 
or the SSG responsible for such funds.
    (g) Nothing in this section shall preclude the Grant Officer from 
imposing a sanction directly against a subrecipient, as authorized in 
section 164(e)(3) of the Act. In such a case, the Grant Officer shall 
inform the recipient of such action.


Sec. 627.703  Failure to comply with procurement provisions.

    (a) If, as part of the recipient's annual on-site monitoring of its 
SDA's/SSG's, the recipient determines that an SDA/SSG is not in 
compliance with the procurement requirements established in accordance 
with the provisions at section 164(a)(3) of the Act and Sec. 627.420, 
of this part, Procurement, and Sec. 627.422 of this part, Selection of 
service providers, the recipient shall:
    (1) Require corrective action to secure prompt compliance; and
    (2) Impose the sanctions provided for under the provisions at 
section 164(b) if the recipient finds that the SDA/SSG has failed to 
take timely corrective action under paragraph (a)(1) of this section 
(section 164(a) (4) and (5)).
    (b) An action by the recipient to impose a sanction against either 
an SDA or SSG, in accordance with this section, may be appealed to the 
Secretary under the same terms and conditions as the disapproval of the 
respective plan, or plan modification, as set forth at Sec. 628.426(e), 
Review and approval (section 164(b)(2)).
    (c) If, upon a determination under paragraph (a)(2) of this section 
to impose a sanction under section 164(b) of the Act, the recipient 
fails to promptly take the actions required under paragraph (a)(2) of 
this section, the Secretary shall take such actions against the 
recipient or the SDA/SSG as appropriate (section 164(b)(3)).


Sec. 627.704  Process for waiver of State liability.

    (a) A recipient may request a waiver of liability as described in 
section 164(e)(2) of the Act.
    (b)(1) When the debt for which a waiver of liability is desired was 
established in a non-Federal resolution, such requests shall be 
accompanied by a resolution report.
    (2) When the ETA Grant Officer is resolving the finding(s) for 
which a waiver of liability is desired, such request shall be made no 
later than the informal resolution period described in Sec. 627.606(c) 
of this part.
    (c) A waiver of the recipient's liability can only be considered by 
the Grant Officer when the misexpenditure of JTPA funds:
    (1) Occurred at a subrecipient level;
    (2) Was not a violation of section 164(e)(1) of the Act, or did not 
constitute fraud; or
    (3) If fraud did exist, it was perpetrated against the recipient/
subrecipient; and:
    (i) The recipient/subrecipient discovered, investigated, reported, 
and prosecuted the perpetrator of said fraud; and
    (ii) After aggressive debt collection action, it can be documented 
that there is no likelihood of collection from the perpetrator of the 
fraud.
    (4) The recipient has issued a final determination which disallows 
the misexpenditure, the recipient's appeal process has been exhausted, 
and a debt has been established; and
    (5) The recipient requests such a waiver and provides documentation 
to demonstrate that it has substantially complied with the requirements 
of section 164(e)(2)(A), (B), (C), and (D) of the Act.
    (d) The recipient shall not be released from liability for misspent 
funds under the determination required by section 164(e) of the Act 
unless the Grant Officer determines that further collection action, 
either by the recipient or subrecipient, would be inappropriate or 
would prove futile.


Sec. 627.706  Process for advance approval of a recipient's 
contemplated corrective actions.

    (a) The recipient may request advance approval from the Grant 
Officer for contemplated corrective actions, including debt collection 
actions, which the recipient plans to initiate or to forego. The 
recipient's request shall include a description and an assessment of 
all actions taken by the subrecipient to collect the misspent funds.
    (b) Based on the recipient's request, the Grant Officer may 
determine that the recipient may forego certain collection actions 
against a subrecipient where:
    (1) The subrecipient was not at fault with respect to the liability 
criteria set forth in section 164(e)(2)(A), (B), (C), and (D) of the 
Act;
    (2) The misexpenditure of funds:
    (i) Was not made by that subrecipient but by an entity that 
received JTPA funds from that subrecipient;
    (ii) Was not a violation of section 164(e)(1) of the Act, or did 
not constitute fraud; or
    (iii) If fraud did exist, it was perpetrated against the 
subrecipient, and:
    (A) The subrecipient discovered, investigated, reported, and 
prosecuted the perpetrator of said fraud; and
    (B) After aggressive debt collection action, it can be documented 
that there is no likelihood of collection from the perpetrator of the 
fraud.
    (3) A final determination which disallows the misexpenditure and 
establishes a debt has been issued at the appropriate level;
    (4) Final action within the recipient's appeal system has been 
completed; and
    (5) Further debt collection action by that subrecipient or the 
recipient would be either inappropriate or futile.


Sec. 627.708  Offset process.

    (a) In accordance with section 164(d) of the Act, the primary 
sanction for misexpenditure of JTPA funds is repayment.
    (b) A recipient may request that a debt, or a portion thereof, be 
offset against amounts allotted to the recipient, and retained at the 
recipient level for administrative costs, under the current or a future 
JTPA entitlement.
    (1) For title II grants, any offset shall be applied against the 
recipient level 5 percent administrative cost set-aside only and may 
not be distributed by the recipient among its subrecipients.
    (2) For title III grants, any such offset must be applied against 
that portion of funds reserved by the recipient for recipient level 
administration only and may not be distributed by the recipient among 
its subrecipients.
    (c) The Grant Officer may approve an offset request, under section 
164(d) of the Act, if the misexpenditures were not in violation of 
section 164(e)(1) of the Act.
    (d) If offset is granted, the debt shall not be fully satisfied 
until the Grant Officer reduces amounts allotted to the State by the 
amount of the misexpenditure.
    (e) The recipient shall not have the authority to reduce 
allocations to an SDA or SSG for misexpenditure of JTPA funds under 
section 164(d) of the Act.

Subpart H--Hearings by the Office of Administrative Law Judges


Sec. 627.800  Scope and Purpose.

    (a) The jurisdiction of the Office of the Administrative Law Judges 
(OALJ) extends only to those complainants identified in sections 
141(c), 144(d), 164(f), and 166(a) of the Act.
    (b) Actions arising under section 167 of the Act shall be handled 
under 29 CFR part 34.
    (c) All other disputes arising under the Act shall be adjudicated 
under the appropriate recipient or subrecipient grievance procedures or 
other applicable law.


Sec. 627.801  Procedures for filing request for hearing.

    (a) Within 21 days of receipt of a final determination imposing a 
sanction or corrective action or denying financial assistance, the 
applicant, the recipient, the SDA, the SSG, or other subrecipient, or a 
vendor against which the Grant Officer has imposed a sanction or 
corrective action may appeal the Grant Officer's determination to the 
OALJ. A request for a hearing shall be transmitted by certified mail, 
return receipt requested, to the Chief Administrative Law Judge, U.S. 
Department of Labor, 800 K Street, NW., Suite 400, Washington, DC 
20001, with one copy to the departmental official who issued the 
determination.
    (b) The 21-day filing requirement in paragraph (a) of this section 
is jurisdictional. Failure to timely request a hearing acts as a waiver 
of the right to hearing.
    (c) A request for a hearing under this section shall state 
specifically those issues of the final determination upon which review 
is requested. Those provisions of the final determination not specified 
for review, or the entire final determination when no hearing has been 
requested within the 21 days, shall be considered resolved and not 
subject to further review. Only alleged violations of the Act, 
regulations promulgated thereunder, grant or other agreement under the 
Act fairly raised in the determination and the request for hearing are 
subject to review.
    (d) The procedures set forth in this subpart apply in the case of a 
complainant who has not had a dispute adjudicated under the alternative 
dispute resolution process set forth in Sec. 627.805 of this part 
within 60 days, except that the request for hearing before the OALJ 
must be filed within 15 days of the conclusion of the 60-day period. In 
addition to including the final determination upon which review is 
requested, the complainant shall include a copy of any Stipulation of 
Facts and a brief summary of proceedings.


Sec. 627.802  Rules of procedure.

    (a) The rules of practice and procedure promulgated by the OALJ, at 
subpart A of 29 CFR part 18, shall govern the conduct of hearings under 
this section, except that a request for hearing under this section 
shall not be considered a complaint to which the filing of an answer by 
DOL or a DOL agency or official is required. Technical rules of 
evidence shall not apply to hearings conducted pursuant to this part; 
however, rules or principles designed to assure production of the most 
credible evidence available and to subject testimony to cross-
examination shall apply.
    (b) Prehearing procedures. In all cases, the ALJ should encourage 
the use of prehearing procedures to simplify and to clarify facts and 
issues.
    (c) Subpoenas. Subpoenas necessary to secure the attendance of 
witnesses and the production of documents or things at hearings shall 
be obtained from the ALJ and shall be issued pursuant to the authority 
contained in section 163(b) of the Act, incorporating 15 U.S.C. 49.
    (d) Timely submission of evidence. The ALJ shall not permit the 
introduction at the hearing of any documentation if such documentation 
has not been made available for review by the other parties to the 
proceeding either at the time ordered for any prehearing conference, 
or, in the absence of such an order, at least 3 weeks prior to the 
hearing date.
    (e) Burden of production. The Grant Officer shall have the burden 
of production to support her or his decision. To this end, the Grant 
Officer shall prepare and file an administrative file in support of the 
decision which shall be made part of the record. Thereafter, the party 
or parties seeking to overturn the Grant Officer's decision shall have 
the burden of persuasion.


Sec. 627.803  Relief.

    In ordering relief, the ALJ shall have the full authority of the 
Secretary under section 164 of the Act.


Sec. 627.804  Timing of decisions.

    The ALJ should render a written decision not later than 90 days 
after the closing of the record.


Sec. 627.805  Alternative dispute resolution.

    (a) Parties to a complaint under Sec. 627.801 of this part, 
Procedures for filing a request for hearing, may choose to waive their 
rights to an administrative hearing before the OALJ by choosing to 
transfer the settlement of their dispute to an individual acceptable to 
all parties for the purpose of conducting an informal review of the 
stipulated facts and rendering a decision in accordance with applicable 
law. A written decision will be issued within 60 days after the matter 
is submitted for informal review.
    (b) The waiver of the right to request a hearing before the OALJ 
may be revoked if a settlement has not been reached or a decision has 
not been issued within the 60 days provided in paragraph (a) of this 
section.
    (c) The decision rendered under this informal review process shall 
be treated as a final decision of an Administrative Law Judge pursuant 
to section 166(b) of the Act.


Sec. 627.806  Other authority.

    Nothing contained in this subpart shall be deemed to prejudice the 
separate exercise of other legal rights in pursuit of remedies and 
sanctions available outside the Act.

Subpart I--Transition Provisions


Sec. 627.900  Scope and purpose.
    (a) Regulations set forth at parts 626, 627, 628, 629, 630, 631, 
and 637 of 20 CFR chapter V (1993) were amended, effective December 29, 
1992, and were published as an interim final rule to provide planning 
guidance for States and SDA's on the changes made to the JTPA program 
as a result of the 1992 JTPA amendments (See 57 FR 62004 (December 29, 
1992)). The transition provisions of the regulations were amended on 
June 3, 1992 (see 58 FR 31472, June 3, 1993). Those regulations and the 
statutory amendments were effective for the program year beginning July 
1, 1993 (PY 1993), and succeeding program years. For PY 1992, JTPA 
programs and activities shall continue under the regulations set forth 
at 20 CFR parts 626, 627, 628, 629, 630, 631, and 637 (1992).
    (b) In order to provide for the orderly transition to and 
implementation of the provisions of JTPA, as amended by the 1992 
amendments, this subpart I applies to the use of JTPA title II and 
title III funds allotted by formula to the States. Additional guidance 
on transition matters may be provided in administrative issuances. The 
provisions in this subpart are operational during the transition period 
for implementing the 1992 JTPA amendments.


Sec. 627.901  Transition period.

    The transition period ended June 30, 1993 unless otherwise stated. 
The intent of the transition period is to complete, to the extent 
possible, activity begun on or before June 30, 1993 under current 
policy and regulations and to ensure that all requirements mandated by 
the 1992 JTPA amendments have been implemented.


Sec. 627.902  Governor's actions.

    The following are actions required to be taken prior to July 1, 
1993:
    (a) Review current policies, practices, procedures, and delivery 
systems to ensure that they conform to the requirements of the 
amendments;
    (b) Modify the Governor's coordination and special services plan in 
accordance with instructions issued by the Secretary;
    (c) Ensure that SDAs modify job training plans as necessary;
    (d) Execute a new Governor/Secretary agreement and a new grant 
agreement;
    (e) Issue procurement standards that comply with the Act and these 
regulations, as described in Sec. 627.420 of this part, Procurement;
    (f) Issue instructions necessary to implement program year 1993 
cost categories pursuant to Sec. 627.440 of this part, Classification 
of costs;
    (g) Issue instructions necessary for SDAs to report program 
expenditures by year of appropriation pursuant to Sec. 627.455 of this 
part, Reports required;
    (h) Certify private industry councils pursuant to Sec. 628.410 of 
this chapter, Private Industry Council.


Sec. 627.903  Actions which are at the discretion of the Governor.

    (a) Establish a State Human Resource Investment Council (HRIC);
    (b) Issue instructions to ``grandparent'' participants in JTPA 
programs as of June 30, 1993 for purposes of completing training;
    (c) Issue instructions for use of PY 1992 and prior year 6 percent 
performance standards incentive funds to further develop and implement 
data collection and management information systems to track the program 
experience of participants. PY 1993 and subsequent performance 
standards incentive funds may not to be used for this purpose;
    (d) Of the Title II and Title III unobligated balance of funds 
available as of June 30, 1993, any amount may be reprogrammed into PY 
1993 activity. The Department believes these amounts will be minimal 
and not represent a significant proportion of the funds available. Such 
reprogrammed funds will be subject to requirements contained in JTPA 
regulations effective July 1, 1993.


Sec. 627.904  Transition and implementation.

    (a) Review. The Governor shall conduct a comprehensive review of 
the current policies, procedures, and delivery systems relating to 
programs authorized under the Job Training Partnership Act for the 
purpose of ensuring the effective implementation of the amendments. 
Such a review shall include consideration of the appropriateness of 
current SDA designations, the representation on current State and local 
councils, the adequacy of current administrative systems, the 
effectiveness of current outreach, service delivery, and coordination 
activities, and other relevant matters.
    (b) Governor's Coordination and Special Services Plan (GCSSP). The 
GCSSP requires modification to assure conformance to the requirements 
of the amendments. The plan was to be modified pursuant to instructions 
issued by the Secretary and shall be submitted to the Secretary for 
review by May 15, 1993.
    (c) Job training plans. Service delivery area job training plans 
will require modification to comply with Sec. 628.420 of this chapter, 
Job training plan.
    (d) Governor/Secretary agreement and grant agreement. A new 
Governor/Secretary agreement is required to assure that the State shall 
comply with JTPA, as amended, and the applicable rules and regulations; 
the Wagner-Peyser Act, as amended, and the applicable rules and 
regulations. A new grant agreement is needed to provide the basis for 
Federal obligation of funds for programs authorized by Titles I, II, 
and III, and such other funds as the Secretary may award under the 
grant.
    (e) Procurement standards. In order to ensure fiscal accountability 
and prevent waste, fraud, and abuse in programs administered under 
JTPA, as amended, the Governor shall prescribe and implement 
procurement standards meeting the requirements of Sec. 627.420 of this 
part, Procurement. All procurements initiated on or after July 1, 1993 
shall be governed by and follow the requirements in Sec. 627.420 of 
this part. Initiation of procurement means any sole source or small 
purchase awarded on or after July 1, 1993 and any Invitation for Bid or 
Request for Proposal issued on or after July 1, 1993.
    (f) Participants. In order to have the least possible disruption to 
program participants, during PY 1993, Governors and SDAs have the 
flexibility to grandfather participants already enrolled in JTPA 
programs up to and including June 30, 1993 under existing rules and 
regulations. All participants in programs on June 30, 1993, will be 
eligible for transfer to programs operated under the new provisions at 
any time beginning on July 1, 1993. ``Hard to serve'' barriers to 
participation, assessment and Individual Service Strategy provisions of 
the amendments will not apply to participants enrolled prior to July 1, 
1993 or to 1993 Title II-B participants.
    (g) Cost categories. (1) Cost categories applicable to PY 1992 and 
earlier funds will be subject to prior regulations either until the 
funds have been exhausted or program activity has been completed. In 
order to assist the orderly transition to and implementation of the new 
requirements of the 1992 JTPA amendments, an increase is allowed in the 
administrative cost limitation for PY 1992 funds from 15 percent to 20 
percent, with a corresponding adjustment to cost limitations for 
training and participant support. Specifically, not less than 80 
percent of the title II-A funds shall be expended for training and 
participant support, and not less than 65 percent shall be expended for 
training.
    (2) Any prior year's carryover funds made available for use in PY 
1993 will be subject to the reporting requirements and cost categories 
applicable to PY 1993 funds.
    (3) In determining compliance with the JTPA cost limitations for PY 
1992, Governors may either:
    (i) Determine cost limitation compliance separately for funds 
expended in accordance with paragraphs (g)(1) and (g)(2) of this 
section; or
    (ii) Determine compliance for each cost category against the total 
PY 1992 funds, whether expended in accordance with the Act and 
regulations in effect prior to the 1992 amendments to JTPA or in 
accordance with the amended Act and these regulations. Using this 
option, the total combined funds expended for training and direct 
training should be at least 65 percent of PY 1992 SDA allocations.
    (4) In addition to the institutions specified in 
Sec. 627.440(d)(1)(vi)(B), the costs of tuition and entrance fees of a 
postsecondary vocational institution specified at section 481(c) of the 
Higher Education Act (20 U.S.C. 1088(c)) may be charged to direct 
training services through June 30, 1995, when such tuition charges or 
entrance fees are not more than the educational institution's catalog 
price, are necessary to receive specific training, are charged to the 
general public to receive such training, and are for the training of 
participants.
    (h) Financial reporting. Notwithstanding reprogramming, 
expenditures must be recorded separately by year of appropriation.
    (i) Private Industry Council. The private industry councils shall 
be certified pursuant to Sec. 628.410 of this chapter, Private Industry 
Council.
    (j) Grievances, investigations, and hearings. Generally, all 
grievances, investigations and hearings pending on or before June 30, 
1993 should be resolved and settled under prior rules and procedures. 
Grievances, investigations, and hearings occurring on or after July 1, 
1993 will be governed by the procedures described in subparts E, F, and 
H of this part 627.
    (k) Summer program. (1) The Title II-B Summer Youth Employment 
Program for 1993 shall be governed by the Act and regulations in effect 
prior to the Amendments (prior to September 7, 1992).
    (2) Up to 10 percent of the 1993 title II-B funds available may be 
transferred to the title II-C program.
    (l) SDA designation. At the Governor's discretion, SDA's designated 
prior to July 1, 1992 need not be subject to the provisions of 
Sec. 628.405, Service delivery areas.
    (m) Program implementation. The implementation by the States and 
SDA's of certain new program design requirements, particularly 
objective assessment and development of individual service strategies 
(ISS), may require additional time to fully implement beyond July 1, 
1993. Reasonable efforts to implement the provisions of Secs. 628.515, 
628.520, and 628.530. as soon as possible after July 1, 1993, are 
expected to be made. However, it is not expected that every new 
participant will initially receive objective assessment, ISS, and 
referral to non-title II services for a period of 6 months, or until 
January 1, 1994.
    (n) Out-of-school youth ratio. The 50-percent out-of-school 
participants requirement for title II-C will be phased in during PY 
1993 and will not be the subject of compliance review until PY 1994, 
beginning July 1, 1994. During PY 1993, however, SDA's must show 
significant improvement in the proportion of out-of-school youth being 
served and performance in increasing the service ratio will be 
monitored by the States and DOL during this implementation period.
    (o) Administrative issuances. Other implementation issues may be 
handled by administrative issuance. ETA will transmit such guidance 
directly to all Governors via a Training and Employment Guidance Letter 
(TEGL). Such TEGL's will be published as Notices in the Federal 
Register (section 701(i)).


Sec. 627.905  Guidance on contracts and other agreements.

    The Department does not intend for contracts, agreements, inter-
agency agreements, retainers, and similar arrangements to be negotiated 
and/or entered into for the sole purpose of applying previously 
existing rules and regulations. The 1992 JTPA amendments were effective 
July 1, 1993. The Department intends that contracts, awards and 
agreements entered into on or before June 30, 1993 are to be used to 
serve and/or train participants enrolled on or before June 30, 1993, 
unless the contracts and agreements are modified to comply with the new 
amendments and regulations.


Sec. 627.906  Determinations on State and SDA implementation.

    (a) The Department expects that the States and SDA's will fully 
implement the provisions of the Act and these regulations regarding 
procurement, cost principles, cost categories, cost limitations, 
participant service requirements and eligibility beginning July 1, 
1993.
    (b) The Department expects that the implementation by the States 
and SDA's of the program design features in these regulations, 
particularly objective assessment and development of the ISS, may 
require additional time beyond July 1, 1993 to fully implement.
    (c) In deciding to allow or disallow questioned costs related to 
the implementation of the provisions described in paragraph (b) of this 
section, the Grant Officer will consider the extent to which the 
State's and SDA's have made good faith efforts in properly implementing 
such provisions in the period July 1, 1993 through June 30, 1994.
    2. Part 628 is revised to read as follows:

PART 628--PROGRAMS UNDER TITLE II OF THE JOB TRAINING PARTNERSHIP 
ACT

Subpart A--Scope and Purpose

Sec.
628.100  Scope and purpose of part 628.

Subpart B--State Planning

628.200  Scope and purpose.
628.205  Governor's coordination and special services plan.
628.210  State Job Training Coordinating Council.
628.215  State Human Resource Investment Council.

Subpart C--State Programs

628.300  Scope and purpose.
628.305  State distribution of funds.
628.310  Administration.
628.315  Education coordination and grants.
628.320  Services for older individuals.
628.325  Incentive grants, capacity building and technical 
assistance.

Subpart D--Local Service Delivery System

628.400  Scope and purpose.
628.405  Service delivery areas.
628.410  Private Industry Council.
628.415  Selection of SDA grant recipient and administrative entity.
628.420  Job training plan.
628.425  Review and approval.
628.426  Disapproval or revocation of the plan.
628.430  State SDA submission.

Subpart E--Program Design Requirements for Programs Under Title II of 
the Job Training Partnership Act

628.500  Scope and purpose.
628.505  Eligibility.
628.510  Intake, referrals, and targeting.
628.515  Objective assessment.
628.520  Individual service strategy.
628.525  Limitations.
628.530  Referrals of participants to non-title II programs.
628.535  Limitations on job search assistance.
628.540  Volunteer program.
628.545  Linkages and coordination.
628.550  Transfer of funds.

Subpart F--The Adult Program

628.600  Scope and purpose.
628.605  Eligibility.
628.610  Authorized services.

Subpart G--The Summer Youth Employment and Training Program

628.700  Scope and purpose.
628.701  Program goals and objectives.
628.702  Enriched Educational Component.
628.703  Private Sector Summer Jobs.
628.704  Eligibility.
628.705  SYETP authorized services.
628.710  Period of program operation.

Subpart H--Youth Training Program

628.800  Scope and purpose.
628.803  Eligibility.
628.804  Authorized services.

    Authority: 29 U.S.C. 1579(a).

Subpart A--Scope and Purpose


Sec. 628.100  Scope and purpose of part 628.

    (a) This part sets forth requirements for implementation of 
programs under title II of the Job Training Partnership Act, and 
includes the councils described in subpart B that have responsibilities 
under titles I, II, and III. In this part, the provisions generally 
pertaining to title II are covered in subparts B, C, D, and E. Matters 
specific to titles IIA, II-B, or II-C are addressed in subparts F, G, 
or H, respectively.
    (b) Title II-A Adult Training programs are to prepare adults for 
participation in the labor force by providing job training and other 
services that will result in increased employment and earnings, 
increased occupational and educational skills, reduced welfare 
dependency, and result in improved long-term employability.
    (c) Title II-B Summer Youth Employment and Training programs are to 
provide eligible youth with exposure to the world of work, to enhance 
the basic education skills of youth, to encourage school completion or 
enrollment in supplemental or alternative school programs and to 
enhance the citizenship skills of youth.
    (d) Title II-C Youth Training programs are to improve the long-term 
employability of youth; to enhance the educational, occupational and 
citizenship skills of youth; to encourage school completion or 
enrollment in alternative school programs; to increase the employment 
and earnings of youth; to reduce welfare dependency; and to assist 
youth in addressing problems that impair their ability to make 
successful transition from school to work, to apprenticeship, to the 
military or to postsecondary education and training.

Subpart B--State Planning


Sec. 628.200  Scope and Purpose.

    This subpart provides requirements for the submission of the 
Governor's Coordination and Special Services Plan, as well as the 
procedures for plan review. This subpart also contains requirements for 
the composition and responsibilities of the State Job Training 
Coordinating Council and the State Human Resource Investment Council.
Sec. 628.205  Governor's coordination and special services plan.

     (a)(1) Submittal. By a date established by the Secretary, each 
State seeking financial assistance under the Act shall submit to the 
Secretary, biennially, the Governor's coordination and special services 
plan (GCSSP) encompassing two program years (section 121(a)).
    (2) The GCSSP shall address the requirements of section 121(b) of 
the Act, including a description of the Governor's coordination 
criteria; the measures taken by the State to ensure coordination and 
prevent duplication with the Job Opportunities and Basic Skills (JOBS) 
program; the certification of the implementation of the procurement 
system, as required at section 164(a)(6) of the Act; the technical 
assistance and training plan; goals, and the efforts to accomplish such 
goals, for the training and placement of women in nontraditional 
employment and apprenticeship; the projected use of resources, 
including oversight of program performance; program administration; 
program financial management and audit resolution procedures; capacity 
building; priorities and criteria for State incentive grants; and 
performance goals for State supported programs (section 121(b)).
    (b) GCSSP review. The Secretary shall review the GCSSP for overall 
compliance with the provisions of the Act. If the GCSSP is disapproved, 
the Secretary shall notify the Governor, in writing, within 45 days of 
submission of the reasons for disapproval so that the Governor may 
modify the plan to bring it into compliance with the Act (section 
121(d)).
    (c) Information to SDA's. (1) In the year preceding the program 
years for which the plan is developed, the State shall make available 
to the SDA's in the State information on its plans to undertake State 
activities in program areas including education coordination grants, 
services to older workers, and capacity building.
    (2) The information described in paragraph (c)(1) of this section 
shall be provided to SDA's in sufficient time for SDA's to take it into 
consideration in developing local job training plans.


Sec. 628.210  State Job Training Coordinating Council.

    (a) The Governor shall appoint a State Job Training Coordinating 
Council (SJTCC) pursuant to section 122 of the Act. In lieu of a SJTCC, 
the Governor may establish and utilize a State Human Resource 
Investment Council (HRIC) pursuant to section 701 of the Act and in 
accordance with Sec. 628.215 of this part.
    (b) Consistent with section 122(a)(3) of the Act, the SJTCC shall 
be composed as follows: 30 percent, business and industry 
representatives; 30 percent, State and local government and local 
education agency representatives; 30 percent, organized labor and 
community-based organization representatives; and 10 percent, 
representatives from the general public. The SJTCC shall have the 
specific functions and responsibilities outlined in sections 122, 317, 
and 501 of the Act.
    (c) Funding for the SJTCC shall be provided pursuant to sections 
202(c)(1)(A) and 262(c)(1)(A) of the Act.
    (d) The SJTCC shall:
    (1) Analyze the SDAs' reports made pursuant to section 104(b)(13) 
of the Act and make recommendations for technical assistance and 
corrective action, and
    (2) Prepare a summary of such reports and disseminate them to SDA's 
and service providers in the State and to the Secretary (section 
122(a)(5) and (6)).


Sec. 628.215  State Human Resource Investment Council.

    (a) Establishment and responsibilities. The State may, in 
accordance with sections 701, 702, and 703 of the Act, establish a 
State Human Resource Investment Council (HRIC). The HRIC's 
responsibilities are described at section 701(a) of the Act. The HRIC 
shall carry out the following responsibilities:
    (1) Review the provision of services and the use of funds and 
resources under applicable Federal human resource programs and advise 
the Governor on methods of coordinating such provision of services and 
use of funds and resources consistent with the laws and regulations 
governing such programs;
    (2) Advise the Governor on the development and implementation of 
State and local standards and measures relating to applicable Federal 
human resource programs and coordination of such standards and 
measures; and
    (3) Carry out the duties and functions prescribed for existing 
State councils described under the laws relating to the applicable 
Federal human resource programs, including the responsibilities of the 
State Council on Vocational Education (SCOVE) under Section 112 of the 
Carl D. Perkins Vocational and Applied Technology Education Act.
    (4) Perform other functions as specified by the Governor (section 
701).
    (b) Applicable Programs. For the purposes of this section, the 
programs included are those listed at section 701(b)(2) of the Act. A 
program shall be included only if the Governor and the head of the 
State agency responsible for the administration of the program jointly 
agree to include such program. In addition, programs under the Carl 
Perkins Vocational and Applied Technology Act shall require the 
agreement of the State council on vocational education (section 
701(b)(1)(B)).
    (c) Composition. (1) The Governor shall establish procedures to 
ensure appropriate representation on the HRIC from among the categories 
of representation specified in section 702 of the Act.
    (2) In addition, when the functions and responsibilities of the 
SCOVE are included on the HRIC, the Governor is encouraged to consider 
appointing the State Director for Vocational Education as a 
representative on the HRIC.
    (d) Funding. (1) Funding to carry out the functions of the HRIC 
shall be available pursuant to section 703(a) of the Act.
    (i) The costs associated with the operation of the HRIC should be 
allocated among the various funding sources based on the relationship 
of each funding source or program to total spending of all applicable 
funding sources and programs (section 703(d)).
    (ii) Costs of the HRIC that are in excess of costs paid by funds 
from participating State agencies are, subject to the availability of 
funds from applicable JTPA sources, allowable JTPA costs (section 
703(a) and (d)).
    (2) A HRIC which meets the requirements of title VII and includes 
each of the programs listed at section 701(b)(2)(A) of the Act shall be 
authorized to use JTPA State Education Coordination and Grants funds 
(section 123(a)(2)(D)(ii)).
    (e) Replacement of other councils. A HRIC meeting the requirements 
of title VII of the Act shall replace the councils of the participating 
programs listed at section 701(b)(2)(A) of the Act.
    (f) Expertise. The Governor shall ensure that in the composition of 
the HRIC and the staff of the HRIC there exists the proper expertise to 
carry out the functions of the HRIC and the council(s) it replaces 
(sections 702(c)(2) and 703(b)).
    (g) Certification. Each State, as part of the certification process 
to the Secretary, shall ensure that the council meets the requirements 
of sections 701, 702, and 703. This certification shall be made in 
writing and submitted to the Secretary, with a copy provided to the 
Secretary of Education, at least 90 days before the beginning of each 
period of 2 program years for which a job training plan is submitted 
under the Act.

Subpart C--State Programs


Sec. 628.300  Scope and purpose.

    This subpart provides requirements for the State-operated programs 
including the education coordination and grants, services to older 
workers, and incentive grants to SDA's and grants to SDA's for capacity 
building and technical assistance.


Sec. 628.305  State distribution of funds.
    (a) The funds made available to the Governor under sections 202(c) 
and 262(c) of the Act shall be used to carry out activities and 
services under this subpart.


Sec. 628.310  Administration.

    Funds provided to the Governor under sections 202(c)(1)(A) and 
262(c)(1)(A) of the Act may be used for overall administration, 
management, oversight of program performance; technical assistance to 
SDA's failing to meet performance standards, as described in section 
106(j)(1) of the Act; auditing; and activities under sections 121 and 
122 of the Act.


Sec. 628.315  Education coordination and grants.

    (a) Governor's responsibilities. The Governor shall allocate funds 
available pursuant to sections 202(c)(1)(C) and 262(c)(1)(C) of the Act 
to any State education agency. For the purposes of this section, 
``State education agency'' shall not include the State agency which 
administers the JTPA program within the State or other agencies which 
do not have education as a primary and operational function, such as 
correctional agencies, although this limitation shall not preclude such 
an agency from being an ultimate subrecipient of funds (section 
123(a)(1)).
    (b) Agreements. (1) The State education agency to be allocated 
funds under section 123(a)(1) of the Act shall participate in joint 
planning activities with the Governor in order to develop a plan which 
shall be submitted in the GCSSP (section 123(c)).
    (2) The Governor and the State education agency shall jointly agree 
on the plan required in paragraph (b)(1) of this section, which shall 
include a description of the agreements described in paragraph (b)(3) 
of this section (section 123(c)).
    (3) Projects to undertake the activities set forth in section 
123(a)(2) shall be conducted in accordance with agreements between the 
State education agency(ies) and administrative entities in service 
delivery areas in the State. The agreements may include other entities 
such as State agencies, local education agencies and alternative 
service providers (section 123(b)(1)(B)).
    (4)(i) When there is a failure by the State education agency and 
the Governor to develop the joint plan described in paragraph (b)(2) of 
this section, the Governor shall not allocate funds under section 
123(a)(1) to such education agency nor shall such funds be available 
for expenditure by the Governor (section 123(c)).
    (ii) When no State education agency accepts the allocation of funds 
under section 123(a)(1), or when there is a failure to reach the 
agreement(s) specified in paragraph (b)(3) of this section, the funds 
may only be used by the Governor pursuant to section 123(e) and in 
accordance with the GCSSP (section 123(e)).
    (c) Allowable activities. (1) Funds made available for education 
coordination and grants under section 123 of the Act shall be used to 
pay the Federal share of education coordination and grants projects 
(section 123(a)(2)).
    (2) Projects, as defined at section 123(a)(2)(A), (B), and (C) of 
the Act shall be conducted for eligible individuals and should include 
those which:
    (i) Provide school-to-work services of demonstrated effectiveness, 
including youth apprenticeship programs;
    (ii) Provide literacy and lifelong learning opportunities and 
services of demonstrated effectiveness, including basic education and 
occupational skills training; and
    (iii) Provide statewide coordinated approaches to education and 
training services, including model programs, designed to train, place, 
and retain women in nontraditional employment (section 123(a)).
    (3) Projects for coordination of education and training may also be 
conducted which may include support activities pertaining to the HRIC 
which meets the requirements of title VII.
    (d) Expenditure requirements. (1)(i) At least 80 percent of the 
funds allocated under section 202(c)(1)(C) and section 262(c)(1)(C) of 
the Act shall be expended to pay for the Federal share of projects 
described in paragraph (c)(2) of this section (section 123(d)(2)(B)).
    (ii) The Governor shall assure that not less than 75 percent of the 
funds expended for such projects are expended for projects for eligible 
economically disadvantaged participants who experience barriers to 
employment. For purposes of meeting this requirement, participants 
meeting the conditions of section 263(a)(2)(B) and (C) and (g) of the 
Act may be considered economically disadvantaged (section 
123(d)(2)(C)).
    (iii) Priority for funds not expended for the economically 
disadvantaged shall be given to title III participants and persons with 
barriers to employment.
    (iv) The Governor may assure compliance with the requirement to 
serve participants with barriers to employment by targeting projects to 
particular barrier groups (e.g., school dropouts).
    (2) Not more than 20 percent of funds allocated under section 
202(c)(1)(C) of the Act may be expended to:
    (i) Facilitate coordination of education and training services for 
participants in the projects described in section 123(a)(2)(A), (B) and 
(C), or
    (ii)(A) Support activities pertaining to a HRIC that meets the 
requirements of Sec. 628.215 of this part, or
    (B) Support activities pertaining to a State council which carries 
out functions similar to those of a HRIC if such council was 
established prior to July 1, 1992.
    (e) Contribution. (1) Except as provided in paragraph (e)(3) of 
this section, the State shall provide for the contribution of funds, 
other than the funds made available under this Act, of a total amount 
equal to the amounts allotted under Section 123;
    (2) The Governor shall define and assure the provision of adequate 
resources by the State to meet the requirements of paragraph (e)(1) of 
this section. Such amount may include the direct cost of employment and 
training services provided by other Federal programs or agencies if 
such use for matching is in accordance with the applicable Federal law 
governing the use of such funds.
    (3) When there is a failure to reach agreement between the State 
education agency and the administrative entity in the service delivery 
area, as set forth in paragraph (b)(3) of this section, the requirement 
for the contribution of funds shall not apply.
    (f) Eligible youth, age 14 through 15, may be served in the program 
under this section to the extent set forth in the agreements under 
paragraph (b)(3) of this section.


Sec. 628.320  Services for older individuals.

    (a) Consultation. (1) The Governor shall consult with the 
appropriate PIC's and chief elected official(s) prior to entering into 
agreements to provide services under section 204(d) and to assure that 
services provided to participants under section 204(d) are consistent 
with the programs and activities provided in the SDA to eligible older 
participants.
    (2) The GCSSP shall specify the process for accomplishing the 
consultation required by paragraph (a)(2) of this section.
    (b) Funds available under section 204(d) shall be used by the 
Governor to provide services on an equitable basis throughout the 
State, taking into account the relative share of the population of 
eligible older individuals residing in each SDA and the participation 
of such older individuals in the labor force.
    (c) Delivery of services. (1) Services to participants eligible 
under section 204(d) shall be delivered through agreements with SDA's, 
private industry councils, public agencies, private nonprofit 
organizations (including veterans organizations) and private-for-profit 
organizations.
    (2) Priority for delivery of services under this section shall be 
given to agencies and organizations which have a demonstrated 
effectiveness in providing training and employment services to such 
older individuals.
    (d) Eligibility. (1) Individuals provided services under section 
204(d) of the Act shall be economically disadvantaged, based on 
criteria applicable in the SDA in which they reside, and shall be age 
55 or older. However, each program year not more than 10 percent of 
participants enrolled under section 204(d) may be individuals who are 
not economically disadvantaged but have serious barriers to employment 
as identified by the Governor and have been determined within the last 
12 months to meet the income eligibility requirements for title V of 
the Older Americans Act of 1965 (section 204(d)(5)(B)(i)).
    (2) The following criteria shall apply to joint programs for older 
workers.
    (i) In order to carry out a joint program with operators of 
programs under title V of the Older Americans Act, there shall be a 
written financial or non-financial agreement, or written joint program 
description when the entity which operates the JTPA and title V program 
are the same.
    (ii) Joint programs under this paragraph (d)(2) may include 
referrals between programs, co-enrollment and provision of services.
    (iii) Under agreements pursuant to this paragraph (d)(2), 
individuals eligible under title V of the Older Americans Act shall be 
deemed to satisfy the requirements of section 203(a)(2) of the Act 
(Older Americans Act, Pub. L. 103-171, section 510).
    (e) Applicable requirements. Except as provided in the Act, the 
provisions of title II-A shall apply to programs conducted under 
section 204(d) (section 204(d)(6)).
    (f) The Governor shall make efforts to coordinate the delivery of 
services under section 204(d) with the delivery of services under title 
V of the Older Americans Act of 1965. Such coordination may include 
coenrollment, coordination of a continuum of services between this 
section and title V of the Older Americans Act and other appropriate 
linkages.
    (g) The Governor shall give consideration to assisting programs 
involving training for jobs in growth industries and jobs reflecting 
the use of new technological skills (section 204(d)(3)).


Sec. 628.325  Incentive grants, capacity building, and technical 
assistance.

    (a) Funds available to the Governor under sections 202(c)(1)(B) and 
262(c)(1)(B) of the Act shall be used to provide incentive grants to 
SDA's and for capacity building and technical assistance.
    (b) Incentive grants. (1) Not less than 67 percent of the funds 
available under sections 202(c)(1)(B) and 262(c)(1)(B) of the Act shall 
be used by the Governor to provide incentive grants for programs, 
except programs under section 204(d) of the Act, exceeding title II 
performance standards (section 106(b)(7)).
    (2) Incentive grant funds under this section shall be distributed 
by the Governor among SDA's within the State pursuant to section 
106(b)(7) of the Act.
    (3) The Governor shall, as part of the annual statement of goals 
and objectives required by section 121(a)(1) of the Act, provide SDA's 
with the specific policies and procedures to implement section 
106(b)(7) of the Act.
    (4) In a State which is the service delivery area, incentive grant 
funds shall be distributed in a manner determined by the Governor and 
described in the GCSSP. The Governor shall give consideration to 
recognizing the performance of service providers within the State.
    (5) SDA's should use incentive grant funds for capacity building 
and technical assistance activities and/or for the conduct of allowable 
Title II activities for eligible youth, eligible adults, or both, at 
the discretion of the SDA.
    (c) Capacity building and technical assistance. (1) Up to 33 
percent of the funds available under sections 202(c)(1)(B) and 
262(c)(1)(B) of the Act may be used by the Governor to provide capacity 
building and technical assistance efforts aimed at improving the 
competencies of the personnel who staff and administer JTPA including 
SDA's, service providers, State staff, private industry councils, other 
job training councils and related human service systems provided for in 
section 205(a) of the Act.
    (2) In providing capacity building and technical assistance 
activities, the Governor shall:
    (i) Consult with SDA's concerning capacity building and technical 
assistance activities consistent with the process specified in the 
GCSSP;
    (ii) Ensure that the use of funds will assist front line staff 
providing services to participants by directing resources to SDA and 
service provider staff for capacity building efforts, building a 
statewide capacity building strategy based on an assessment of local 
capacity building needs developed in cooperation with the SDA's, and/or 
delivering training and technical assistance directly to the local 
level;
    (iii) Ensure that expenditures for the purchase of hardware/
software are only for the development of Statewide communications and 
training mechanisms involving computer-based communication technologies 
that directly facilitate interaction with the National Capacity 
Building and Information Dissemination Network (National Network) 
described in section 453 of the Act and that facilitate the use of 
computer-based training techniques in capacity building and technical 
assistance activities;
    (iv) Ensure that State and local capacity building efforts are 
coordinated and integrated with the National Network, pursuant to 
sections 202(c)(3)(B) and 262(c)(3)(B) of the Act, and that materials 
developed with funds under this section are made available to be shared 
with other States, SDA's and the National Network. States and SDA's 
retain the flexibility to tailor Network products to their own needs 
and/or to produce and train on similar or related products when local 
circumstances so dictate and;
    (v) Provide technical assistance to service delivery areas failing 
to meet performance standards pursuant to section 106(j)(2) of the Act.
    (d) Cost sharing. (1) Cost sharing approaches are encouraged among 
States, SDA's and/or among other Federal, State, and local human 
service programs, including those listed in section 205(a) of the Act, 
in developing electronic communications, training mechanisms and/or 
contributing to the National Network.
    (2) All shared costs shall be allocated among the contributing 
funding sources on the basis of benefits received.

Subpart D--Local Service Delivery System


Sec. 628.400  Scope and purpose.

    This subpart sets forth requirements for the selection of service 
delivery areas, the establishment and responsibilities of the private 
industry council, and the selection of the SDA grant recipient and 
administrative entity. This subpart also contains the requirements for 
the local job training plan as well as the procedures for its review 
and approval by the State.


Sec. 628.405  Service delivery areas.

    (a)(1) The Governor, after receiving recommendations from the 
SJTCC, shall designate SDA's within the State in accordance with the 
provisions of section 101 of the Act.
    (2) SDA's may not be designated by the Governor more frequently 
than once every two years, and such designations shall be made to 
coincide with the two-year plan cycle for the GCSSP and local job 
training plans (i.e., the designation cannot be made for an off-year in 
this cycle).
    (3) Each request for designation as an SDA shall be submitted in a 
form and by a date established by the Governor. The procedures 
established by the Governor shall provide for the treatment of existing 
SDA's for the purposes of submitting SDA designation requests.
    (b)(1) The Governor shall approve SDA designation requests from 
entities with a population of 200,000 or more that satisfy the criteria 
specified in section 101(a)(4)(A) of the Act.
    (2) When there are competing applications under paragraph (b)(1) of 
this section for the same geographic area, the Governor shall designate 
the entity with the population closest to 200,000, if the remaining 
reduced area also continues to satisfy the criteria specified in 
section 101(a)(4)(A) of the Act. The Governor shall offer to designate 
the remaining reduced area as an SDA as well.
    (3) When there are competing applications under paragraph (b)(1) of 
this section for the same geographic area and the designation of the 
entity with the population closest to 200,000 would have the effect of 
reducing the population of the competing entity to below a population 
of 200,000, the Governor has the discretion to determine which request 
to honor.
    (d) The Governor may, in accordance with section 101(a)(4)(B) of 
the Act, approve a request to be a SDA from any unit, or contiguous 
units, of general local government, without regard to population, which 
serves a substantial portion of a labor market area. In making such 
designations, the Governor shall evaluate the degree to which a 
proposed service delivery area meets criteria established by the 
Governor which, at a minimum, shall include:
    (1) The capability to effectively deliver job training services;
    (2) The capacity to administer the job training program in 
accordance with the Act, applicable rules and regulations and State 
standards; and
    (3) The portion of a labor market to be served.
    (e) For the purposes of SDA designations under section 101(a)(4)(A) 
and (B) of the Act, the term ``substantial part'' and ``substantial 
portion'' of a labor market area shall be defined by the Governor, but 
shall not be less than 10% of the population of a labor market area.
    (f) All areas within the State shall be covered by designated 
SDA's. After honoring all requests for designation from eligible 
entities under section 101(a)(4)(A) of the Act, and making any 
qualified discretionary designations under section 101(a)(4)(B) of the 
Act, the Governor shall include uncovered areas in the State within 
other designated SDA's willing to accept them or within a State 
administered SDA.
    (g) Appeals. (1) Only an entity which meets the requirements of 
section 101(a)(4)(A) of the Act for designation as a service delivery 
area, but which has had its request to be an SDA denied, may appeal the 
Governor's denial of service delivery area designation to the Secretary 
of Labor.
    (2) Appeals made pursuant to paragraph (g)(1) of this section shall 
be submitted by certified mail, return receipt requested, to the 
Secretary, U.S. Department of Labor, Washington, DC 20210, Attention: 
ASET. A copy of the appeal shall simultaneously be provided to the 
Governor.
    (3) The Secretary shall not accept an appeal dated later than 30 
days after receipt of written notification of the denial from the 
Governor.
    (4) The appealing party shall explain why it believes the denial is 
contrary to the provisions of section 101 of the Act.
    (5) The Secretary shall accept the appeal and make a decision only 
with regard to whether or not the denial is inconsistent with section 
101 of the Act. The Secretary may consider any comments submitted by 
the Governor. The Secretary shall make a final decision within 30 days 
after receipt of the appeal (section 101(a)(4)(C)).
    (6) The Secretary shall notify the Governor and the appellant in 
writing of the Secretary's decision.


Sec. 628.410  Private Industry Council.

    (a) Certification of the PIC. (1) The chief elected official(s) of 
the SDA shall establish and the Governor shall certify the private 
industry council (PIC) pursuant to section 102 of the Act.
    (2) The Governor shall review the certification of the PIC 
biennially, one year prior to the effective date of the 2-year SDA job 
training plan to the Governor. The Governor's review shall include:
    (i) The PIC composition, which shall be consistent with section 
102(a), (b), (c), and (d) of the Act and shall include the names of 
individuals nominated and their qualifications;
    (ii) The nomination process;
    (iii) The written agreement(s) among the appropriate chief elected 
official(s) and the PIC, including procedures for the development of 
the SDA job training plan and the selection of the grant recipient and 
administrative entity.
    (3) The chief elected official shall select labor representatives 
for the PIC from individuals recommended by recognized State and local 
labor federations. For purposes of this section, a labor federation is 
an alliance of two or more organized labor unions for the purpose of 
mutual support and action. An example of a recognized labor federation 
is the AFL-CIO.
    (b) Responsibilities of the PIC. Pursuant to section 103 of the 
Act, the PIC shall:
    (1) Provide policy and program guidance for all activities under 
the job training plan for the SDA;
    (2) In accordance with agreements negotiated with the appropriate 
chief elected official(s), determine the procedures for development of 
the job training plan and select the grant recipient and administrative 
entity for the SDA;
    (3) Independent oversight. As specified in subpart D of part 627 of 
this chapter, the PIC shall exercise independent oversight over 
programs and activities under the job training plan, which oversight 
shall not be circumscribed by agreements with the appropriate chief 
elected official(s) of the SDA;
    (4) Be a party to the designation of substate grantees under title 
III, as set forth in Sec. 631.35 of this chapter;
    (5) Establish guidelines for the level of skills to be provided in 
occupational skills training programs funded by the administrative 
entity;
    (6) Consult with the Governor on agreements to provide services for 
older individuals under section 204(d) of the Act;
    (7) Establish youth and adult competency levels consistent with 
performance standards established by the Secretary, based on such 
factors as entry level skills and other hiring requirements, in 
consultation with educational agencies and, where appropriate, with 
representatives of business, organized labor and community-based 
organizations pursuant to section 106(b)(5) and 107(d); and
    (8) Identify occupations for which there is a demand in the area 
served.
    (c) Substate plan. The PIC shall be provided the opportunity to 
review and comment on a substate grantee plan under title III of the 
Act prior to the submission of such plan to the Governor (section 
313(a)).
    (e) The State Employment Service agency shall develop jointly with 
each appropriate PIC and chief elected official(s) for the SDA those 
components of the plans required under the Wagner-Peyser Act which are 
applicable to the SDA. (See part 652 of this chapter).
    (f) Single SDA States. (1) In any case in which the service 
delivery area is a State, the SJTCC or a portion of the SJTCC may be 
reconstituted as a PIC if the PIC meets the requirements of section 
102(a) of the Act.
    (2) When the service delivery area is a State and the functions of 
the SJTCC are embodied in the HRIC, the HRIC or a portion of the HRIC 
may be reconstituted as a PIC if the requirements for private sector 
business representation at section 102(a)(1) of the Act are met 
(section 102(h)).


Sec. 628.415  Selection of SDA grant recipient and administrative 
entity.

    (a) Selection of SDA grant recipient. (1) The SDA grant recipient 
and the entity to administer the SDA's job training plan for title II, 
developed pursuant to section 104 of the Act, shall be selected by 
agreement of the PIC and chief elected official(s) of the SDA. These 
may be the same or different entities.
    (2) The specific functions and responsibilities of the entities 
described in paragraph (a)(1) of this section shall be spelled out in 
the agreement between the PIC and the chief elected official(s), and 
shall specifically address the provisions of section 141(i) of the Act 
(section 103(b)(1)).
    (b) Subrecipient requirements. (1) The Governor may establish 
requirements pertaining to subrecipient, including SDA grant recipient, 
responsibility for JTPA funds.
    (2) The requirements of paragraph (b)(1) of this section shall not 
preclude the selection of any entity identified in section 103(b) of 
the Act as SDA grant recipient.


Sec. 628.420  Job training plan.

    (a) The Governor shall issue instructions and schedules to assure 
that job training plans and plan modifications for SDA's within the 
State conform to all requirements of the Act.
    (b) The Governor's instructions for development of the SDA's job 
training plan shall require that the plan contain the following 
information:
    (1) A complete and detailed discussion of the elements found in 
section 104(b) of the Act, including goals for the training and 
training related placement of women in nontraditional employment and 
apprenticeships;
    (2) A discussion of the SDA's compliance with the Secretary's 
program goals, as outlined in the planning guidance provided to the 
Governor; and
    (3) An oversight plan for the SDA which includes: (i) A description 
of the oversight activities of the PIC and the chief elected 
official(s), and (ii) the SDA administrative entity's monitoring plan 
which includes the Governor's monitoring requirements for service 
providers.
    (c) The Governor may also require that the SDA job training plan 
contain a capacity building and technical assistance strategy that 
includes plans for designating capacity building as a staff function, 
assessing local capacity building needs, and developing and 
participating in computerized communication mechanisms.
    (d) The SDA job training plan shall be jointly approved and jointly 
submitted to the Governor by the PIC and the chief elected official(s) 
(section 103(d)).
    (e) Modifications. (1) Any major modification to the SDA job 
training plan shall be jointly approved and jointly submitted by the 
PIC and chief elected official(s) of the SDA to the Governor for 
approval.
    (2) For the purposes of this section, the circumstances which 
constitute a ``major'' modification shall be specified by the Governor.


Sec. 628.425  Review and approval.

    (a) Standards and procedures. The Governor shall establish 
standards and procedures for the review and approval or disapproval of 
the SDA job training plan and plan modifications that shall be provided 
to the SDA's at the same time as the instructions and schedules for 
preparation of the plans are provided.
    (b) Plan approval. Except when the Governor makes a finding under 
the provisions of section 105(b)(1) of the Act, the Governor shall 
approve the SDA job training plan or plan modification. The notice of 
approval shall be provided in writing to the chief elected official(s) 
and to the private industry council.


Sec. 628.426  Disapproval or revocation of the plan.

    (a) If the Governor disapproves the SDA job training plan or plan 
modification for any reason, the Governor shall notify the PIC and 
chief elected official(s) for the SDA in writing as provided in section 
105(b)(2) of the Act.
    (b) If the Governor disapproves the SDA job training plan or plan 
modification, the Governor shall provide the PIC and the chief elected 
official(s) for the SDA 30 days to correct the deficiencies and 
resubmit the plan or plan modification. Within 15 days after the plan 
or plan modification is resubmitted, the Governor shall make a final 
decision and shall notify the PIC and the appropriate chief elected 
official(s) of the SDA in writing of the final disapproval or approval.
    (c) Governor mediation. If the PIC and the appropriate chief 
elected official(s) of an SDA are unable to reach an agreement under 
the provisions of section 103 (b)(1) or (d) of the Act, any such party 
may request the Governor to mediate.
    (d) Failure to reach agreement. If the PIC and the chief elected 
official(s) fail to reach the required agreements in section 103 (b)(1) 
or (d) of the Act, funds may not be made available to an SDA under 
section 104 of the Act and the Governor shall merge the affected area 
into one or more other existing service delivery areas (section 
105(c)(1)).
    (e) Appeals. (1) In accordance with section 105(b)(2) of the Act, 
any final disapproval by the Governor of the SDA job training plan or 
modification may be appealed by the PIC and chief elected official(s) 
of the SDA to the Secretary.
    (2) The Secretary shall not accept an appeal dated later than 30 
days after receipt by the PIC and chief elected official(s) of the 
final disapproval of the SDA job training plan or modification from the 
Governor.
    (3) The Secretary shall accept an appeal under paragraph (e)(1) of 
this section and shall determine only whether the disapproval is 
clearly erroneous under section 105(b)(1) of the Act. The Secretary may 
consider any comments submitted by the Governor. In accordance with 
section 105(b)(2) of the Act, the Secretary shall make a final decision 
within 45 days after the appeal is received by the Secretary.
    (4) The Secretary shall notify the Governor and the appellant in 
writing of the Secretary's decision.
    (f) Appeals of plan revocations. Pursuant to section 164(b)(1) of 
the Act, a notice of intent to revoke approval of all or part of a plan 
may be appealed to the Secretary. Such appeals shall be treated as a 
disapproval under paragraphs (c) and (e) of this section, except that 
the revocation shall not become effective until the later of:
    (1) The time for appeal under paragraph (e) of this section has 
expired; or
    (2) The date on which the Secretary issues a decision affirming the 
revocation.
    (g) In the event that a plan is disapproved and the Governor's 
decision is upheld upon appeal, the Governor shall merge the affected 
area into other designated SDA's willing to accept it or include it in 
another SDA within the State.


Sec. 628.430  State SDA Submission.

    (a) Pursuant to section 105(d) of the Act, when the SDA is the 
State, the Governor shall submit to the Secretary, not less that 60 
days before the beginning of the first of the two program years covered 
by the job training plan and in accordance with instructions issued by 
the Secretary, an SDA job training plan covering two program years. 
When the SDA is the State, modifications to the plan shall be submitted 
to the Secretary for approval.
    (b) When a State submits an SDA job training plan or plan 
modification pursuant to paragraph (a) of this section, the Secretary 
shall review the plan or plan modification for overall compliance with 
the provisions of the Act. The State's plan shall be considered 
approved unless, within 45 days of receipt of the submission described 
in paragraph (a) of this section, the Secretary notifies the Governor 
in writing of inconsistencies between the submission and requirements 
of specific provisions of the Act. If the plan or plan modification is 
disapproved, the Governor may appeal the decision by requesting a 
hearing before an administrative law judge pursuant to subpart H of 
part 627 of this chapter.

Subpart E--Program Design Requirements for Programs Under Title II 
of the Job Training Partnership Act


Sec. 628.500  Scope and purpose.

    This subpart contains the regulations pertaining to the program 
design requirements common to all programs conducted under titles I 
(i.e., sections 121 and 123) and II of the Act. Regulations 
specifically pertaining to the Adult Program can be found in subpart F 
of this part. Regulations pertaining to the Summer Youth Employment and 
Training Program can be found in subpart G of this part. Regulations 
pertaining to the Youth Training Program can be found in subpart H of 
this part.


Sec. 628.505  Eligibility.

    (a) Eligibility criteria. (1) Individuals who apply to participate 
in a program under title II shall be evaluated for eligibility based on 
age and economic disadvantage. Specific eligibility criteria for 
programs under title II, parts A, B, and C are described in this part.
    (2) Individuals served under title II shall be residents of the 
SDA, as determined by local government policy, except for the limited 
exceptions described in the job training plan, including joint programs 
operated by SDA's (section 141(e)).
    (b) Eligibility documentation. (1) In order to promote the uniform 
and standard application of eligibility criteria for participation in 
the JTPA program, the Department has issued an Eligibility 
Documentation TAG that provides guidance on acceptable documentation.
    (2) SDA utilization of eligibility guidance. When it is determined 
that the SDA or service provider has followed the guidance contained in 
the Eligibility Documentation TAG, the Grant Officer will not disallow 
questioned costs related to the required documentation concerning an 
individual's eligibility.


Sec. 628.510  Intake, referrals and targeting.

    (a) Collection of personal data. In addition to determining an 
applicant's eligibility, the intake process shall include a preliminary 
review of information relating to whether an applicant is included in 
one or more of the categories listed in section 203(b) of the Act.
    (b) Information on services. Upon application, an eligible 
individual shall be provided information by the SDA or its service 
providers on the full array of services available through the SDA and 
its service providers, including information for women about the 
opportunities for nontraditional training and employment.
    (c) Assessment during intake. Some limited assessment activities 
may be conducted during the intake process in order to determine an 
eligible applicant's suitability for title II program services. This 
assessment should be a method, in difficult cases, to finalize 
determinations for enrollment. The amount of assessment provided during 
intake is not restricted, however, assessment during intake shall be 
charged in accordance with Sec. 627.440(d)(3).
    (d) Referral of eligible applicants. During the intake process, 
determinations may be made prior to enrollment to refer an eligible 
applicant to another human service, training or education program 
deemed more suitable for the individual, including the Job Corps 
program. In these cases, information on the full array of services 
available in the SDA may be provided in written form with 
recommendations and written referrals to other appropriate programs. 
Copies of or notations of referrals will be maintained as documentation 
and may be recorded in an incomplete ISS. Further tracking or follow-up 
of referrals out of title II is not required.
    (e) Referrals from service providers to service delivery areas for 
additional assessment. (1) Each service provider shall ensure that an 
eligible applicant who cannot be served by its particular program shall 
be referred to the SDA for assessment, as necessary, and suitable 
referral to other appropriate programs. Each service provider shall 
also ensure that a participant who cannot be served by its particular 
program shall be referred to the SDA for further assessment, as 
necessary, and suitable referral to other appropriate programs, 
consistent with Sec. 628.515.
    (2) Each SDA shall take the appropriate steps (e.g., contract 
provisions, local administrative issuances, and/or PIC policies) to 
ensure that its service providers adhere to the provisions of this 
section and that they maintain documentation of referrals.
    (3) Each SDA shall develop an appropriate mechanism to ensure 
suitability screening for eligible applicants or to apply the 
provisions of Sec. 628.530 for participants referred by service 
providers and describe such mechanism in its SDA job training plan.
    (f)(1) ``Most in need.'' SDA's that satisfy the requirements of 
sections 203(b) and 263 (b) and (d) pertaining to hard to serve 
individuals shall be deemed to meet the ``most in need'' criteria at 
section 141(a) of the Act.
    (2) The requirements referred to in paragraph (h)(1) of this 
section shall be calculated on the basis of new participants for whom 
services or training have been provided subsequent to the objective 
assessment.
    (g) The SDA's method of meeting the requirements of sections 203(b) 
and 263(b) pertaining to hard to serve individuals shall be implemented 
consistent with the equal opportunity provisions of 29 CFR part 34.


Sec. 628.515  Objective assessment.

    (a) General. The requirements of this section shall apply to 
programs conducted under title I (i.e., sections 121 and 123) and title 
II, parts A, B, and C.
    (b) Definition. (1) For purposes of this part, an objective 
assessment means an examination of the capabilities, needs, and 
vocational potential of a participant and is to be used to develop an 
individual service strategy and employment goal. Such assessment is 
customer-centered and a diagnostic evaluation of a participant's 
employment barriers taking into account the participant's family 
situation, work history, education, basic and occupational skills, 
interests, aptitudes (including interests and aptitudes for 
nontraditional occupations), attitude towards work, motivation, 
behavior patterns affecting employment potential, financial resources 
and needs, supportive service needs, and personal employment 
information as it relates to the local labor market.
    (2) For the program under title II-B, the objective assessment 
shall include an examination of the basic skills and supportive service 
needs of each participant and may include the other areas listed in 
paragraph (b)(1) of this section (sections 204(a)(1)(A), 253(c)(1) and 
264(b)(1)(A)).
    (c) Methods of objective assessment. (1) The SDA shall choose the 
most appropriate means to measure skills, abilities, attitudes, and 
interests of the participants. The methods used in conducting the 
objective assessment may include, but are not limited to, structured 
interviews, paper and pencil tests, performance tests (e.g., skills, 
and/or work samples, including those that measure interest and 
capability to train in nontraditional employment), behavioral 
observations, interest and/or attitude inventories, career guidance 
instruments, aptitude tests, and basic skills tests.
    (2) Instruments used for objective assessment may be developed at 
the local level; however, any formalized instruments nationally 
available should be used only for the specific populations for which 
they are normed.
    (d) Updating of assessments. Objective assessment should be treated 
as an ongoing process. As additional relevant information relating to a 
participant becomes available, it should be reviewed and considered for 
inclusion in the individual service strategy.
    (e) Other sources of objective assessment. Other non-JTPA 
assessments (e.g., through the Job Opportunities and Basic Skills 
(JOBS) program under title IV of the Social Security Act, or through 
schools) which have been completed within one year of application for 
services, and which meet the requirements of this section, may be used 
to comply with the requirement to assess each participant.


Sec. 628.520  Individual service strategy.

    (a) General. The requirements of this section shall apply to 
programs conducted under title I (i.e., sections 121 and 123) and title 
II, parts A, B and C.
    (b) Definition.--(1) Individual service strategy (ISS) means an 
individual plan for a participant, which shall include an employment 
goal (including, for women, consideration of nontraditional 
employment), appropriate achievement objectives, and the appropriate 
combination of services for the participant based on the objective 
assessment conducted pursuant to Sec. 628.515 of this part, Objective 
assessment. In developing the ISS, the participant shall be counseled 
regarding required loan repayments if the participant chooses to incur 
personal indebtedness to participate in an education program. The 
participant shall also be apprised of the requirements for self-
sufficiency and the occupational demands within the labor market.
    (2) Decisions concerning appropriate services shall be customer-
centered, and ensure that the participant is not excluded from training 
or career options consistent with the provisions of 29 CFR part 34 
concerning nondiscrimination and equal opportunity.
    (3) For the title II-B program, the ISS may include the components 
specified in paragraph (b)(1) of this section (sections 204(a)(1)(B), 
253(c)(2) and 264(b)(1)(B)). For purposes of titles II-B and II-C, the 
employment goal may be interpreted broadly and based on long-term 
career guidance.
    (c) Joint Development of ISS. The ISS shall be developed in 
partnership with the participant and reflect the needs indicated by the 
objective assessment and the expressed interests and desires of the 
participant. It is not a formal contract and signatures are not a 
requirement.
    (d) Review of ISS. The ISS shall be reviewed periodically to 
evaluate the progress of each participant in meeting the objectives of 
the service strategy, including an evaluation of the participant's 
progress in acquiring basic skills, and occupational skills, as 
appropriate, and the adequacy of the supportive services provided.
    (e) Provision of services. If JTPA resources are not sufficient to 
provide the full range of training or supportive services which might 
be identified in the ISS, the SDA shall make every reasonable effort to 
arrange for, through other community resources, basic and occupational 
skills training and supportive services identified as needed in the ISS 
for participants under titles II-A and II-C and, in addition, 
preemployment and work maturity skills training and work experience 
combined with skills training for participants under title II-C 
(sections 204(a)(1)(D) and 264(b)(1)(D).
    (f) SDA review of objective assessment and ISS. (1) The objective 
assessment and development of the ISS may be conducted by service 
providers.
    (2) The SDA administrative entity shall ensure that development of 
the ISS and the services provided, respond to the individual needs of 
the participant and that the combination of services to the participant 
is indicated by the results of the objective assessment.
    (g) ISS record of decisions. The ISS shall be used as the basic 
instrument for the SDA to record the results of decisions made about 
the combination and sequence of services for the participant based on 
the objective assessment. Justification for decisions may be referenced 
but need not be recorded in the ISS. These decisions shall include, but 
are not limited to, the employment goal and/or career cluster; 
referrals to other programs for specified activities; the provision and 
amount of supportive services; and the delivery agents and schedules 
for training and supportive services activities. The decisions for time 
and duration of OJT (Sec. 627.240 of this chapter) shall be briefly 
recorded in the ISS and may not reference other documents.
    (h) The ISS is a customer-centered case management tool and shall 
not be used as a compliance document.


Sec. 628.525  Limitations.

    Neither eligibility for nor participation in a JTPA program creates 
an entitlement to services, and nothing in the Act or this part shall 
be construed to establish a private right of action for a participant 
to obtain services described in the objective assessment or ISS.


Sec. 628.530  Referrals of participants to non-title II programs.

    (a) When it is determined, through the objective assessment and the 
ISS, that a participant would be better served by a program other than 
one under title II (e.g., Job Corps, Vocational Rehabilitation, State 
or local education, substance abuse treatment center, and/or dislocated 
worker programs), the participant shall be referred to the appropriate 
program. Such referral shall be recorded in the ISS.
    (b) In cases where there will be a continuing relationship with a 
participant, a referral to another program(s) for specific services 
will be part of the participant's title II program strategy and will be 
recorded in the ISS.
    (c) When there will not be a continuing relationship with a 
participant as the result of a referral to a program other than title 
II, and an assessment but no training component has been provided, the 
referral should be recorded in a partial ISS and the individual shall 
not be counted for purposes of calculating performance against the 
SDA's performance standards. Further tracking or follow-up of referrals 
out of title II is not required.


Sec. 628.535  Limitations on job search assistance.

    (a) General. Job search assistance is designed to give a 
participant skills in acquiring full time employment. (See Sec. 626.5 
of this chapter, Definitions.)
    (b) Conditions. Job search activities may be conducted only:
    (1) For participants when specified as appropriate in the ISS; and
    (2) When delivered in conjunction with other training or 
educational services designed to increase the participant's ability to 
acquire employment. Additional services which may be provided in 
conjunction with job search include the direct training services listed 
in JTPA section 204(b)(1) of the Act, excluding standalone skill 
assessment, counseling, work experience and case management and the 
direct training services listed in 264(b) of the Act excluding 
tutoring, standalone skill assessment, counseling, work experience and 
case management. (See Sec. 627.245 of this chapter, ``Work 
Experience,'' especially Sec. 627.245(d) regarding combination of other 
services.)
    (c) Exceptions. (1) Job search assistance activities, including job 
search skills, training, and job clubs may be provided without the 
accompanying services specified in paragraph (b) of this section only 
when:
    (i) The objective assessment and the ISS indicate that the 
additional services are not appropriate; and
    (ii) The activities are not available or accessible through other 
public agencies, including the Employment Service.
    (2) The exceptions in paragraph (c)(1) of this section apply to 
Title II-A and II-B and are not applicable to Title II-C programs (see 
Sec. 628.804 (d) and (e)).
    (d) Determination of job search availability. For purposes of this 
section, a determination of the availability of the job search 
assistance activity will be made by the SDA, in consultation with the 
employment service and documented in the local job training plan.
    (e) Older individuals. For purposes of this section, when an 
individual aged 55 or older indicates in the assessment a preference 
for immediate job placement, job search assistance may be provided on a 
stand-alone basis. The individual's preference shall be recorded in the 
ISS.


Sec. 628.540  Volunteer program.

    Pursuant to sections 204(c)(6) and 264(d)(7) of the Act, the SDA 
shall make opportunities available for individuals who have 
successfully participated in programs under this part to volunteer 
assistance, in the form of mentoring, tutoring, and other activities.


Sec. 628.545  Linkages and coordination.

    (a) General requirements. (1) To the extent practicable, and as 
permitted by law and regulations, the Governor shall, at the State 
level, facilitate coordination among the programs set forth at section 
205(a) and 265(b) of the Act, including, but not limited to, the 
establishment of State-level coordination agreements. The Governor may 
focus coordination through the SJTCC or the HRIC.
    (2) The SDA, in conducting programs under this part, shall 
establish appropriate linkages and coordination procedures with other 
Federal programs and appropriate State and local educational, social 
service, and public housing agencies, including with CBO's, business 
and labor organizations, volunteer groups and others, such as women and 
older worker organizations, and with appropriate education and training 
agencies, such as local JOBS programs, Employment Service offices which 
provide services for JTPA participants, and the local agencies on 
aging, to avoid duplication and to enhance the delivery of services, 
which shall be described in the SDA job training plan. Where a local 
agency declines to complete such a linkage with an SDA, the SDA shall 
reflect this information in its job training plan (section 104(b)).
    (b) SDA's are encouraged to facilitate effective ``one stop shop 
career centers'' and ``single point of contact'' delivery systems which 
may include:
    (1) The development of individual service strategy plans and of a 
common program application; and
    (2) A unified job development effort and comprehensive programmatic 
design (sections 104(b) (3) and (4), 205 (a) and (b) and 265).
    (c) Requirements for youth. For the youth programs under this part, 
formal agreements shall be established with appropriate local 
educational agencies which participate in JTPA programs which, at a 
minimum, shall specify:
    (1) The procedures for referring and serving in-school youth;
    (2) The methods of assessment of in-school youth; and
    (3) Procedures for notifying the SDA when a youth drops out of the 
school system.
    (d) Schoolwide projects. (1) In conducting a schoolwide project for 
low income individuals under sections 263(g) and 265(d) of the Act, the 
SDA shall establish a cooperative agreement with the appropriate local 
educational agency.
    (2) In addition to the requirements listed in paragraphs (a) and 
(b) of this section, the cooperative agreement shall include:
    (i) A description of the ways in which the JTPA schoolwide project 
will supplement the educational program of the school;
    (ii) Identification of measurable goals to be achieved by the 
schoolwide project and a provision for assessing the extent to which 
such goals are met;
    (iii) A description of the ways in which the program will use 
available JTPA and other education program resources;
    (iv) A description of the number of individuals to be served by the 
schoolwide project; and
    (v) Assurances that JTPA resources shall be used in coordination 
with existing sources of funds to supplement and not supplant them 
(section 107(b)).
    (3) In areas where there is more than one local educational agency, 
cooperative agreements for schoolwide projects are required only with 
those local education agencies that will participate in programs under 
schoolwide projects (section 263(g)).


Sec. 628.550  Transfer of funds.

    If described in the job training plan and approved by the Governor:
    (a) An amount up to 10 percent of the funds allocated to the SDA 
under section 202(b) of the Act for title II-A may be transferred to 
the program under title II-C of the Act;
    (b) An amount up to 20 percent of the funds allocated to the SDA 
under section 252(b) of the Act for title II-B may be transferred to 
the program under title II-C of the Act; and
    (c) An amount up to 10 percent of the funds allocated to the SDA 
under section 262(b) of the Act for title II-C may be transferred to 
the program under title II-A of the Act.
Subpart F--The Adult Program


Sec. 628.600  Scope and purpose.

    This subpart contains the regulations for the Adult Program under 
part A of Title II of the Act. The regulations in part 627 of this 
chapter and subpart E of this part apply to the Adult Program to the 
extent that they do not conflict with the provisions of this subpart.


Sec. 628.605  Eligibility.

    (a) Age and economic disadvantage. Except as provided in paragraph 
(b) of this section, an individual shall be eligible to participate 
under this part only if he or she is economically disadvantaged and 22 
years of age or older. There is no maximum age for eligibility.
    (b) Non-economically disadvantaged individuals. Up to 10 percent of 
the individuals served under this subpart in each SDA may be 
individuals who are not economically disadvantaged, if such individuals 
face serious barriers to employment in accordance with section 203(c) 
of the Act.
    (c) Requirement to assist hard-to-serve individuals. (1) Not less 
than 65 percent of adults who participate in the program under this 
subpart, including those who are not economically disadvantaged, shall 
have one or more of the additional barriers to employment as described 
in section 203(b) of the Act.
    (2) The 65 percent barrier requirement in paragraph (c)(1) of this 
section shall be calculated on the basis of participants for whom 
services or training have been provided subsequent to an objective 
assessment on July 1, 1993 or later.
    (d) Addition of barrier. An SDA may identify and add one additional 
serious barrier to employment to the categories listed at section 
203(b) of the Act, in accordance with the specific procedures and 
requirements in section 203(d) of the Act.
    (e) Criteria for older workers under joint programs. (1) The SDA 
may establish written financial or non-financial agreements with 
sponsors of programs under title V of the Older Americans Act to carry 
out joint programs.
    (2) Joint programs under this paragraph (e) may include referrals 
between programs, co-enrollment and provision of services.
    (3) Under agreements entered into pursuant to this paragraph (e), 
individuals eligible under title V of the Older Americans Act shall be 
deemed to satisfy the requirements of section 203(a)(2) of the JTPA 
(Older Americans Act, Pub. L. 102-375, section 510).


Sec. 628.610  Authorized services.

    (a) The services that may be provided under this subpart are those 
described at section 204(b) of the Act.
    (b) Counseling and supportive services. Counseling and supportive 
services provided under this subpart may be provided to a participant 
for a period of up to 1 year after the date on which the participant 
completes the program.

Subpart G--The Summer Youth Employment and Training Program


Sec. 628.700  Scope and purpose.

    This subpart contains the regulations for the Summer Youth 
Employment and Training Program (SYETP) under part B of title II of the 
Act. The regulations in part 627 of this chapter and subpart E of this 
part apply to the SYETP to the extent that they do not conflict with 
the provisions of this subpart.


Sec. 628.701  Program Goals and Objectives.

    (a) Each SDA shall establish written goals and objectives that 
shall be used in evaluating the effectiveness of its SYETP activities. 
Such goals and objectives may include enhancement of basic educational 
skills through improvement in school retention or academic performance 
(including mathematics and reading comprehension); encouragement of 
school completion or enrollment in supplementary or alternative school 
programs; improvement of employability skills, including provision of 
vocational exploration opportunities and exposure to the world of work; 
enhancement of youth citizenship skills; and demonstrated coordination 
with other appropriate community organizations.
    (b) Each SDA shall ensure that the activities and services offered 
under the SYETP are consistent with and will contribute to the 
achievement of the goals and objectives developed pursuant to paragraph 
(a) of this section.


Sec. 628.702  Eligibility.

    (a) Age and economic disadvantage. An individual is eligible to 
participate in programs funded under title II-B of the Act, if such 
individual is
    (1) Age 14 through 21; and
    (2)(i) Economically disadvantaged; or
    (ii) Has been determined to meet the eligibility requirements for 
free meals under the National School Lunch Act during the most recent 
school year. Most recent school year means the current school year 
unless the eligibility determination is made during an interim period 
between school terms, in which case the term means the preceding school 
year; or
    (iii) Is participating in a compensatory education program under 
Chapter I of title I of the Elementary and Secondary Education Act of 
1965; or
    (iv) Is participating in a schoolwide project as set forth at 
section 263(g) of the Act.
    (b) Eligibility determination verification. The SDA may accept the 
same documentation utilized by the local educational agency for 
approving free lunch meals or an assurance by school officials 
concerning the students' participation in the free school lunch program 
under the National School Lunch Act.


Sec. 628.705  SYETP Authorized services.

    (a) The services that may be provided under this subpart are those 
described at section 253 of the Act.
    (b) Basic and remedial education and preemployment and work 
maturity skills training. The SDA shall ensure the availability of 
basic or remedial education and preemployment and work maturity skills 
training for SYETP participants pursuant to the assessment process 
described in Sec. 628.515 of this part from funds available to the SDA 
or by other education and training programs, including, but not limited 
to, the Job Corps, the JOBS program, youth corps programs or 
alternative or secondary schools.
    (c) Work experience. (1) Work experience shall be conducted 
consistent with the provisions of Sec. 627.245 of this chapter.
    (2) Work experience provided under this subpart, to the extent 
feasible, shall include contextual learning opportunities which 
integrate the development of general competencies with the development 
of academic skills.
    (d) Concurrent enrollment. (1) Youth being served under the SYETP 
or the Youth Training Program authorized under title II-C of the Act 
(see subpart H of this part) are not required to be terminated from 
participation in one program to enroll in the other. The SDA may enroll 
such youth concurrently in programs under this subpart and subpart H of 
this part, pursuant to guidance to be issued by the Secretary, in order 
to promote continuity and coordination of services.
    (2) The requirement that not less than 65 percent of the total 
number of title II-C participants shall have one or more barriers to 
employment pursuant to section 263(c) and (d) of the Act shall apply to 
youth who are concurrently enrolled and will participate in the program 
under title II-C.
    (e) Followup services. (1) The SDA shall make followup services 
available for participants if the ISS indicates that such services are 
appropriate (section 253(d)).
    (2) Title II-B funds may be used for such followup services for one 
year after program participation, which may be concurrent with a period 
of any subsequent participation in the Title II-C program.
    (3) Followup services include the full array of supportive services 
described in section 4(24) of the Act, except for financial assistance, 
and may include such followup services as counseling, mentoring, or 
tutoring.
    (f) Classroom training. Classroom training provided under this 
subpart shall, to the extent feasible, include opportunities to apply 
knowledge and skills relating to academic subjects to the world of 
work.
    (g) Educational linkages. (1) In conducting the program assisted 
under this subpart, service delivery areas shall establish linkages 
with the appropriate educational agencies responsible for service to 
participants.
    (2) Such linkages shall include arrangements to ensure that there 
is a regular exchange of information relating to the progress, problems 
and needs of participants, including the results of assessments of the 
skill levels of participants.


Sec. 628.710  Period of program operation.

    (a) Except as provided under paragraph (b) of this section, the 
SYETP shall be conducted during the school vacation period occurring 
during the summer months.
    (b) An SDA operating within the jurisdiction of one or more local 
educational agencies that operate schools on a year-round full-time 
basis may offer SYETP activities to participants in such a jurisdiction 
during the school vacation period(s) treated as the period(s) 
equivalent to a school summer vacation.

Subpart H--Youth Training Program


Sec. 628.800  Scope and purpose.

    This subpart contains the regulations for the Year-round Youth 
Program under part C of title II of the Act. The regulations in part 
627 of this chapter and subpart E of this part apply to the Year-round 
Youth program to the extent that they do not conflict with the 
provisions of this subpart.


Sec. 628.803  Eligibility.

    (a) Out-of-school youth. An out of school youth is a youth who does 
not meet the definition of in-school youth as set forth in paragraph 
(b) of this section. An out-of-school youth shall be eligible to 
participate in programs under this subpart, if such individual is:
    (1) Age 16 through 21, and
    (2) Economically disadvantaged.
    (b) In-school youth. Definition. In-school youth means a youth who 
has not yet attained a high school diploma and is attending school full 
time. An in-school youth shall be eligible to participate in programs 
under this subpart, if such individual is:
    (1)(i) Age 16 through 21, or
    (ii) If provided in the job training plan, age 14 through 21 
inclusive; and
    (2)(i) Economically disadvantaged; or
    (ii) Participating in a compensatory education program under 
Chapter I of title I of the Elementary and Secondary Education Act of 
1965; or
    (iii) Has been determined to meet the eligibility requirements for 
free meals under the National School Lunch Act during the most recent 
school year. Most recent school year means the current school year 
unless the eligibility determination is made during an interim period 
between school terms, in which case the term means the preceding school 
year.
    (c) Eligibility determination verification. The SDA may accept the 
same documentation utilized by the local educational agency for 
approving free lunch meals or an assurance by school officials 
concerning the students' participation in the free school lunch program 
under the National School Lunch Act. The Department shall provide 
guidance on this verification separate from these regulations.
    (d) Requirement to serve hard-to-serve individuals. (1) Not less 
than 65 percent of the in-school youth who participate in the program 
under this subpart, including those who are not economically 
disadvantaged, shall have one or more additional barriers to 
employment, as described in section 263(b) of the Act.
    (2)(i) Not less than 65 percent of the out-of-school youth who 
participate in the program under this subpart, including those who are 
not economically disadvantaged, shall have one or more barriers to 
employment, as described in section 263(d) of the Act, in addition to 
any criterion listed in paragraph (b)(2) of this section.
    (ii) All Job Corps participants shall be considered out-of-school 
and as having a barrier to employment.
    (3) The requirement of paragraphs (d)(1) and (2) of this section 
shall be calculated on the basis of participants for whom services or 
training have been provided subsequent to the objective assessment on 
July 1, 1993 or later.
    (e) Addition of barrier. An SDA may identify and add one additional 
serious barrier to employment to the categories listed at sections 
263(b) and (d) of the Act in accordance with the specific procedures 
and requirements in section 263(h) of the Act.
    (f) Services to non-economically disadvantaged individuals. Up to 
10 percent of the youth served by an SDA under this subpart may be 
individuals who are not economically disadvantaged, but such 
individuals shall face one or more serious barriers to employment in 
accordance with section 263(e) of the Act.
    (g) Eligibility based on schoolwide project participation. (1) In 
addition to the individuals who meet the conditions described in 
Sec. 628.803 of this part, individuals who are not economically 
disadvantaged may participate in programs under this subpart if they 
are enrolled in a schoolwide project pursuant to section 263(g) of the 
Act.
    (2) For purposes of paragraph (g)(1) of this section, the term 
school means an individual building, facility, campus or a portion of 
the school such as the 11th or 12th grade.
    (3) A schoolwide project may be operated in a public school located 
in an urban census tract or non-metropolitan county with a poverty rate 
of 30 percent or above, and in which 70 percent or more of the students 
have at least one barrier to employment. The school shall make the 
determination on whether its students meet the barrier requirements.
    (4) The SDA shall determine which will be its schoolwide projects. 
Examples of schoolwide projects include, but are not limited to, 
school-to-work programs; college awareness and application assistance 
programs; school restructuring to make the schools career academies or 
magnet schools; mentoring programs; business-education compacts; 
integration of work and learning; year-round extensions of summer STEP 
programs; community service programs, including linkages with youth 
service corps; programs to encourage teen parents to stay in school, 
including establishing child care centers; and work experience slots 
provided as incentives to stay in school.
    (h)(1) Out-of-school ratio. Not less than 50 percent of the total 
title II-C participants in each SDA shall be out-of-school youth 
(section 263(f)(1) of the Act). The Governor shall be responsible for 
determining the period for which the 50 percent requirement will be 
calculated based either on the period covered by the job training plan 
or on a program year basis.
    (2) For purposes of paragraph (h)(1) of this section, a youth who 
has attained a high school diploma or an equivalency, is habitually 
truant, as defined by State law, or is attending an alternative school 
program may be considered out of school. An alternative school program 
includes an alternative high school, an alternative course of study 
approved by the local educational agency, or a high school equivalency 
program. Such programs may be operated either within or outside of the 
local public school system, and can offer either a high school diploma 
or equivalency.
    (3) Schoolwide project ratios. Those in-school participants who are 
served under a schoolwide project shall not be counted in determining 
the ratio of in-school to out-of-school youth in paragraph (h)(1) of 
this section.


Sec. 628.804  Authorized services.
    (a) The SDA and the PIC shall take into consideration exemplary 
program strategies and services, including those selected for 
replication pursuant to section 453(c) of the Act concerning capacity 
building, in the development of services for programs under this 
subpart.
    (b) Except as provided in paragraph (c) of this section, in order 
to participate in programs under this part an individual who is under 
the age of 18 and a school dropout, as defined in section 4(38) of the 
Act, shall enroll in and attend a school, course or program described 
in section 264(d)(2)(B)(ii) and (iii). An alternative course of study 
shall be approved by the LEA and may include educational programs 
provided by community-based organizations.
    (c) An individual who is a school dropout, as defined in section 
4(38) of the Act, and under the age of 18 may participate in programs 
under this part without meeting the requirements of paragraph (b) of 
this section for a limited interim period which may be during the 
summer months, during periods between school terms, or when a course of 
study is not immediately available.
    (d) The provision of preemployment and work maturity skills 
training shall be accompanied either by work experience or by other 
additional services which are designed to increase the basic education 
or occupational skills of the participant (section 264(d)(3)(A)).
    (e) The provision of work experience, job search assistance, job 
search skills training, and job club activities under programs 
conducted under this subpart shall be accompanied by other additional 
services which are designed to increase the basic education or 
occupational skills of the participant (section 264(d)(3)(B)).
    (f) The additional services offered pursuant to paragraphs (d) and 
(e) of this section may be provided concurrently or sequentially with 
services provided under other education and training programs (e.g., 
Job Opportunities and Basic Skills programs under title IV of the 
Social Security Act, Job Corps (see part 638 of this chapter), or 
schools).
    (g) Schoolwide projects for low-income schools shall meet the 
conditions in sections 263(g)(1) and (2) of the Act.
    (h) Entry employment experience is a training activity which may be 
conducted in public or private agencies. In all cases, this training 
activity shall increase or develop the long term employability of 
eligible in-school and out-of-school youth. Entry employment 
experiences may include, but are not limited to:
    (1) Work experience as described in Sec. 627.245 of this chapter; 
and
    (2) Cooperative education programs that coordinate educational 
programs with work in the private sector. Subsidized wages are not 
permitted in cooperative education programs.
    (i) Limited internships in the private sector under this subpart 
shall be designed to enhance the long-term employability of youth.
    (1) A limited internship shall be conducted pursuant to an 
agreement with an employer to provide structured on-site private sector 
exposure to work and the requirements for successful job retention.
    (2) A limited internship should be combined with classroom 
instruction relating to a particular position, occupation, industry or 
the basic skills and abilities to successfully compete in the local 
labor market.
    (j)(1) On-the-job (OJT) training activities approved under this 
subpart shall be consistent with the provisions of subpart B of part 
627 of this chapter and shall:
    (i) Be for positions that pay the participant a wage that equals or 
exceeds on the average wage at placement based on the most recent 
available data in the SDA for participants under title II-A;
    (ii) Be for positions that have career advancement potential; and
    (iii) Include a formal, written program of structured job training 
that will provide the participant with an orderly combination of 
instruction in work maturity skills, general employment competencies, 
and occupational specific skills.
    (2) In those cases where the OJT participant is a school dropout, 
the participant shall participate in an education program in accordance 
with paragraph (b) of this section.
    (k) Counseling and supportive services provided under this subpart 
may be provided to a participant for a period of up to 1 year after the 
date on which the participant completes the program. These include the 
full array of supportive services described in section 4(24) of the Act 
except for financial assistance.
    (l) Year-round operations. Programs for youth under this subpart 
shall:
    (1) Provide for a year-round education and training program that is 
coordinated with the appropriate local educational agencies, service 
providers, and other programs; and
    (2) As appropriate, ensure services for youth are available on a 
multiyear basis, consistent with the determined needs and goals of the 
youth served.
    (3) The year-round program delivery requirement of this paragraph 
does not prohibit schools on a 9-month operations schedule from 
providing services for programs under this part.
PART 629--[REMOVED AND RESERVED]

    4. Part 629 is removed and reserved.

PART 630--[REMOVED AND RESERVED]

    5. Part 630 is removed and reserved.
    6. Part 631 is revised to read as follows:

PART 631--PROGRAMS UNDER TITLE III OF THE JOB TRAINING PARTNERSHIP 
ACT

Subpart A--General Provisions

Sec.
631.1  Scope and purpose.
631.2  Definitions.
631.3  Participant eligibility.
631.4  Approved training rule.

Subpart B--Additional Title III Administrative Standards and Procedures

631.11 Allotment and obligation of funds by the Secretary.
631.12  Reallotment of funds by the Secretary.
631.13  Classification of costs at State and substate levels.
631.14  Limitations on certain costs.
631.15  Federal reporting requirements.
631.16  Complaints, investigations, and penalties.
631.17  Federal monitoring and oversight.
631.18  Federal by-pass authority.
631.19  Appeals.

Subpart C--Needs-Related Payments

631.20  Needs-related payments.

Subpart D--State Administration

631.30  Designation or creation and functions of a State dislocated 
worker unit or office and rapid response assistance.
631.31  Monitoring and oversight.
631.32  Allocation of funds by the Governor.
631.33  State procedures for identifying funds subject to mandatory 
Federal reallotment.
631.34  Designation of substate areas.
631.35  Designation of substate grantees.
631.36  Biennial State plan.
631.37  Coordination activities.
631.38  State by-pass authority.

Subpart E--State Programs

631.40  State program operational plan.
631.41  Allowable State activities.

Subpart F--Substate Programs

631.50  Substate plan.
631.51  Allowable substate program activities.
361.52   Selection of service providers.
631.53   Certificate of continuing eligibility.

Subpart G--Federal Delivery of Dislocated Worker Services through 
National Reserve Account Fund

631.60  General.
631.61  Application for funding and selection criteria.
631.62  Cost limitations.
631.63  Reporting.
631.64  General administrative requirements.
631.65  Special Provisions for CAETA and DDP.

Subpart H--[Reserved]

Subpart I--Disaster Relief Employment Assistance

631.80  Scope and purpose.
631.81  Availability of funds.
631.82  Substate allocation.
631.83  Coordination.
631.84  Allowable projects.
631.85  Participant eligibility.
631.86  Limitations on disaster relief employment.
631.87  Definitions.

    Authority: 29 U.S.C. 1579(a); Sec. 6305(f), Pub. L. 100-418, 102 
Stat 1107; Sec. 631.30(d)(7) also issued under 29 U.S.C. 2107(a); 
Sec. 631.37(e) also issued under Sec. 402, Pub. L. 100-689, 102 
Stat. 4178-4179 (29 U.S.C. 1751 note).

Subpart A--General Provisions


Sec. 631.1  Scope and purpose.

    This part implements Title III of the Act. Title III programs seek 
to establish an early readjustment capacity for workers and firms in 
each State; to provide comprehensive coverage to workers regardless of 
the cause of dislocation; to provide early referral from the 
unemployment insurance system to adjustment services as an integral 
part of the adjustment process; to foster labor, management and 
community partnerships with government in addressing worker 
dislocation; to emphasize retraining and reemployment services rather 
than income support; to create an on-going substate capacity to deliver 
adjustment services; to tailor services to meet the needs of 
individuals; to improve accountability by establishing a system of 
mandated performance standards; to improve financial management by 
monitoring expenditures and reallotting available funds; and to provide 
the flexibility to target funds to the most critical dislocation 
problems.


Sec. 631.2  Definitions.
    In addition to the definitions contained in sections 4, 301, and 
303(e) of the Act and Part 626 of this chapter, the following 
definitions apply to programs under Title III of the Act and this part:
    Substantial layoff (for participant eligibility) means any 
reduction-in-force which is not the result of a plant closing and which 
results in an employment loss at a single site of employment during any 
30 day period for:
    (a)(1) At least 33 percent of the employees (excluding employees 
regularly working less than 20 hours per week); and
    (2) At least 50 employees (excluding employees regularly working 
less than 20 hours per week); or
    (b) At least 500 employees (excluding employees regularly working 
less than 20 hours per week).
    Substantial layoff (for rapid response assistance) means any 
reduction-in-force which is not the result of a plant closing and which 
results in an employment loss at a single site of employment during any 
30 day period for at least 50 employees (excluding employees regularly 
working less than 20 hours per week) (section 314(b)(4)).


Sec. 631.3  Participant eligibility.

     (a) Eligible dislocated workers, as defined in section 301 of the 
Act, may participate in programs under this part. For the purposes of 
determining eligibility under section 301(a)(1)(A) of the Act, the term 
``eligible for'' unemployment compensation includes any individual 
whose wages from employment would be considered in determining 
eligibility for unemployment compensation under Federal or State 
unemployment compensation laws.
    (b)(1) Except as provided in paragraph (b)(3) of this section, 
workers who have not received an individual notice of termination but 
who are employed at a facility for which the employer has made a public 
announcement of planned closure shall be considered eligible dislocated 
workers with respect to the provision of basic readjustment services 
specifically identified in section 314(c) of the Act with the exception 
of supportive services and relocation assistance.
    (2) Individuals identified in paragraph (b)(1) of this section 
shall be eligible to receive all services authorized in sections 314 of 
the Act after a date which is 180 days prior to the scheduled closure 
date of the facility, subject to the provisions of Sec. 631.20 of this 
part and other applicable provisions regarding receipt of supportive 
services.
    (3) Paragraphs (b)(1) and (b)(2) of this section shall not apply to 
individuals who are likely to remain employed with the employer or to 
retire instead of seeking new employment.
    (4) For the purposes of paragraph (b)(1) of this section, the 
Governor shall establish criteria for defining public announcement. 
Such criteria shall include provisions that the public announcement 
shall be made by the employer and shall indicate a planned closure date 
for the facility (section 314(h)).
    (c) Eligible dislocated workers include individuals who were self-
employed (including farmers and ranchers) and are unemployed:
    (1) Because of natural disasters, subject to the provisions of 
paragraph (e) of this section; or
    (2) As a result of general economic conditions in the community in 
which they reside.
    (d) For the purposes of paragraph (c) of this section, categories 
of economic conditions resulting in the dislocation of a self-employed 
individual may include, but are not limited to:
    (1) Failure of one or more businesses to which the self-employed 
individual supplied a substantial proportion of products or services;
    (2) Failure of one or more businesses from which the self-employed 
individual obtained a substantial proportion of products or services;
    (3) Substantial layoff(s) from, or permanent closure(s) of, one or 
more plants or facilities that support a significant portion of the 
State or local economy.
    (e) The Governor is authorized to establish procedures to determine 
the eligibility to participate in programs under this part of the 
following categories of individuals:
    (1) Self-employed farmers, ranchers, professionals, independent 
tradespeople and other business persons formerly self-employed but 
presently unemployed.
    (2) Self-employed individuals designated in paragraph (d)(1) of 
this section who are in the process of going out of business, if the 
Governor determines that the farm, ranch, or business operations are 
likely to terminate.
    (3) Family members and farm or ranch hands of individuals 
identified under paragraphs (d)(1) and (2) of this section, to the 
extent that their contribution to the farm, ranch, or business meets 
minimum requirements as established by the Governor.
    (f) The Governor is authorized to establish procedures to identify 
individuals permanently dislocated from their occupations or fields of 
work, including self-employment, because of natural disasters. For the 
purposes of this paragraph (f), categories of natural disasters 
include, but are not limited to, any hurricane, tornado, storm, flood, 
high water, wind-driven water, tidal wave, tsunami, earthquake, 
volcanic eruption, landslide, mudslide, drought, fire, or explosion.
    (g) The State may provide services to displaced homemakers (as 
defined in section 4 of the Act) under this part only if the Governor 
determines that such services may be provided without adversely 
affecting the delivery of such services to eligible dislocated workers 
(section 311(b)(4)).
    (h) An eligible dislocated worker issued a certificate of 
continuing eligibility, as provided in Sec. 631.53 of this part, shall 
remain eligible for assistance under this part for the period specified 
in the certificate, not to exceed 104 weeks. The 45-day enrollment 
provisions described in subpart B of part 627 of this chapter shall be 
waived for eligible individuals who possess a valid certificate under 
this paragraph and it is not required that a new application be taken 
prior to participation.
    (i) An eligible dislocated worker who does not possess a valid 
certificate shall remain eligible if such individual:
    (1) Remains unemployed, or
    (2) Accepts temporary employment for the purpose of income 
maintenance prior to and/or during participation in a training program 
under this part with the intention of ending such temporary employment 
at the completion of the training and entry into permanent unsubsidized 
employment as a result of the training. Such temporary employment must 
be with an employer other than that from which the individual was 
dislocated. This provision applies to eligible individuals both prior 
to and subsequent to enrollment.
    (j) The Governor shall ensure that rapid response and basic 
readjustment services under Title III of JTPA are made available to 
workers who, under the NAFTA Worker Security Act (Pub. L. 103-182), are 
members of a group of workers (including workers in any agricultural 
firm or subdivision of an agricultural firm) for which the Governor has 
made a finding that (1) the sales or production, or both, of such firm 
or subdivision have decreased absolutely, and (2) imports from Mexico 
or Canada of articles like or directly competitive with articles 
produced by such firm or subdivision have increased; or (3) there has 
been a shift in production by such workers' firm or subdivision to 
Mexico or Canada of articles which are produced by the firm or 
subdivision.


Sec. 631.4  Approved training rule.

    An eligible dislocated worker who is participating in any 
retraining activity, except on-the-job training, under Title III of the 
Act or this part shall be deemed to be in training with the approval of 
the State agency for purposes of section 3304(a)(8) of the Internal 
Revenue Code of 1986. Participation in the approved training shall not 
disqualify the individual from receipt of unemployment benefits to 
which the individual is otherwise entitled (section 314(f)(2)).

Subpart B--Additional Title III Administrative Standards and 
Procedures


Sec. 631.11  Allotment and obligation of funds by the Secretary.

    (a) Funds shall be allotted among the various States in accordance 
with section 302(b)(1) of the Act, subject to paragraph (b) of this 
section.
    (b) Funds shall be allotted among the various States in accordance 
with section 302(b)(2)(A) and (B) of the Act as soon as satisfactory 
data are available under section 462(e) of the Act.
    (c) Allotments for the Commonwealth of the Northern Mariana Islands 
and other territories and possessions of the United States shall be 
made by the Secretary in accordance with the provisions of section 
302(e) of the Act.


Sec. 631.12  Reallotment of funds by the Secretary.

    (a) Based upon reports submitted by States pursuant to Sec. 631.15 
of this part, the Secretary shall make determinations regarding total 
expenditures of funds within the State with reference to the amount 
required to be reallotted pursuant to section 303(b) of the Act. For 
purposes of this paragraph (a)--
    (1) The funds to be reallotted will be an amount equal to the sum 
of:
    (i) Unexpended funds in excess of 20 percent of the prior program 
year's formula allotment to the State, and
    (ii) All unexpended funds from the formula allotment for the 
program year preceding the prior program year.
    (2)(i) The current program year is the year in which the 
determination is made; and
    (ii) The prior program year is the year immediately preceding the 
current program year.
    (3) Unexpended funds shall mean the remainder of the total funds 
made available by formula that were available to the State for the 
prior program year minus total accrued expenditures at the end of the 
prior program year.
    (4) Reallotted funds will be made available from current year 
allotments made available by formula.
    (b) Based upon the most current and satisfactory data available, 
the Secretary shall identify eligible States, pursuant to the 
definitions in section 303(e) of the Act.
    (c) The Secretary shall recapture funds from States identified in 
paragraph (a) of this section and reallot and reobligate such funds by 
a Notice of Obligation (NOO) adjustment to current year funds to 
eligible States as identified in paragraph (b) of this section, as set 
forth in section 303(a), (b), and (c) of the Act.
    (d) Reallotted funds shall be subject to allocation pursuant to 
Sec. 631.32 of this part, and to the cost limitations at Sec. 631.14 of 
this part.


Sec. 631.13  Classification of costs at State and substate levels.

    (a)(1) Allowable costs under Title III shall be planned, 
controlled, and charged by either the State or the substate grantee 
against the following cost categories: rapid response services, basic 
readjustment services, retraining services, needs-related payments and 
supportive services, and administration. Costs shall be reported to the 
Secretary of Labor in accordance with the reporting requirements 
established pursuant to Sec. 631.15 of this part.
    (2) All costs shall be allocable to a particular cost category to 
the extent that benefits are received by such category; and no costs 
shall be chargeable to a cost category except to the extent that 
benefits are received by such category.
    (b) Rapid response services shall include the cost of rapid 
response activities identified at section 314(b) of the Act.
    (1) Staff salary and benefit costs are chargeable to the rapid 
response services cost category only for that portion of staff time 
actually spent on rapid response activities.
    (2) All other costs are chargeable to the rapid response services 
cost category only to the extent that they are for rapid response 
purposes.
    (c) Basic readjustment services shall include the cost of basic 
readjustment services identified at section 314(c) of the Act, except 
that the cost of supportive services under section 314(c)(15) of the 
Act shall be charged to the needs-related payments and supportive 
services cost category, as provided in paragraph (e) of this section.
    (d) Retraining services shall include the cost of retraining 
services identified at section 314(d) of the Act.
    (e) Needs-related payments and supportive services shall include 
the cost of needs-related payments identified in section 314(e) of the 
Act, and supportive services identified in section 4(24) of the Act and 
provided for in section 314(c)(15) of the Act.
    (f)(1) Administration shall include the costs incurred by 
recipients and subrecipients in the administration of programs under 
Title III of the Act, and shall be that portion of necessary and 
allowable costs which is not directly related to the provision of 
services and otherwise allocable to the cost categories in paragraphs 
(b) through (e) of this section. The description of administrative 
costs in subpart D of part 627 of this chapter shall be used by States 
and substate grantees as guidance in charging administration costs to 
Title III programs.
    (2) Administration does not include the costs of activities under 
section 314(b) of the Act and which are provided for in paragraph (b) 
of this section.
    (3) Administration shall include Title III funds used for 
coordination of worker adjustment programs with the Federal-State 
unemployment compensation system and with Chapter 2 of Title II of the 
Trade Act of 1974 (19 U.S.C. 2271, et seq.) and part 617 of this 
chapter (sections 311(b)(10) and 314(f)).


Sec. 631.14  Limitations on certain costs.

    (a) Retraining services. Of the funds allocated to a substate 
grantee under part A of Title III for any program year, not less than 
50 percent shall be expended for retraining services specified under 
section 314(d) of the Act, unless a waiver of this requirement is 
granted by the Governor. The Governor shall prescribe criteria that 
will allow substate grantees to apply in advance for a waiver of this 
requirement, pursuant to section 315(a)(2) of the Act. The Governor 
shall prescribe the time and form for the submission of an application 
for such a waiver, as provided for at section 315(a)(3) of the Act. The 
Governor shall not grant a waiver that allows less than 30 percent of 
the funds expended by a substate grantee to be expended for retraining 
activities.
    (b) Needs-related payments and supportive services. Of the funds 
allocated to the Governor, or allocated to any substate grantee, under 
part A of Title III for any program year, not more than 25 percent may 
be expended to provide needs-related payments and other supportive 
services.
    (c) Administrative cost. Of the funds allocated to the Governor, or 
allocated to any substate grantee, under part A of Title III for any 
program year, not more than 15 percent may be expended to cover the 
administrative cost of programs.
    (d) Reallotted funds are subject to the cost limitations in 
paragraphs (a), (b) and (c) of this section.
    (e) Funds allocated (or distributed) to substate areas under the 
provisions of section 302(c)(1)(E) of the Act shall be considered funds 
allocated to a substate grantee for the program year of the funds' 
initial allotment to the State, and included in the cost limitations in 
paragraphs (a), (b) and (c) of this section.
    (f) Funds reserved by the Governor under the provisions of Section 
302(c)(1) of the Act, other than funds distributed to substate grantees 
under the provisions of JTPA section 302(c)(1)(E), shall be considered 
funds allocated to the Governor for the program year of the funds' 
initial allotment to the State and included in the cost limitations 
applicable to the Governor.
    (g) States and substate grantees shall have the full period of time 
that the funds are available to them to comply with the cost 
limitations described in JTPA section 315 and paragraphs (a), (b), and 
(c) of this section.
    (h) Combination of funds. (1) Substate grantees within a State may 
combine funds allocated under part A of Title III for provision of 
services to eligible dislocated workers from two or more substate 
areas. Funds contributed by the substate grantees under this section 
remain subject to the cost limitations which apply to each substate 
grantee's total allocation (section 315(d)).
    (2) To combine funds under this provision, substate grantees must 
be in contiguous substate areas or part of the same labor market area.
    (i) For the purposes of this section:
    (1) Allotment to the State means allotted by the formula described 
in section 302(b) of the Act, as adjusted by reallotments among the 
States, in accordance with section 303 of the Act. For purposes of 
determining availability and of applying cost limitations, funds will 
retain the identity of the program year in which they were initially 
allotted to a State, irrespective of subsequent reallotments.
    (2) Allocated to the substate grantee means allocated by the 
formula prescribed by the Governor under section 302(b) of the Act, and 
allocated (or distributed) under the provisions of section 
302(c)(1)(E), as adjusted by within State reallocations implemented by 
the Governor through procedures established pursuant to section 303(d) 
of the Act. For purposes of determining availability and of applying 
cost limitations, funds will retain the identity of the program year in 
which they were initially allotted to the State.
    (3) Allocated to the Governor refers to funds reserved by the 
Governor for use in accordance with the provisions of section 302(c)(1) 
of the Act, exclusive of any such funds which are distributed or 
allocated to substate grantees pursuant to section 302(c)(1)(E).
    (j) The cost limitations described in this section do not apply to 
any designated substate grantee which served as a concentrated 
employment program grantee for a rural area under the Comprehensive 
Employment and Training Act (section 108(d)).


Sec. 631.15  Federal reporting requirements.

    Notwithstanding the requirements in subpart D of part 627 of this 
chapter, the Governor shall report to the Secretary pursuant to 
instructions issued by the Secretary for programs and activities funded 
under this part. Such reports shall include a cost breakdown of all 
funds made available under this part used by the State Dislocated 
Worker Unit for administrative expenditures. Reports shall be provided 
to the Secretary within 45 calendar days after the end of the report 
period (sections 165(a)(2) and 311(b)(11)).
Sec. 631.16  Complaints, investigations, and penalties.

    The provisions of this section apply in addition to the sanctions 
provisions in subpart G of part 627 of this chapter.
    (a) The Secretary shall investigate a complaint or report received 
from an aggrieved party or a public official which alleges that a State 
is not complying with the provisions of the State plan required under 
section 311(a) of the Act (section 311(e)(1)).
    (b) Where the Secretary determines that a State has failed to 
comply with its State plan, and that other remedies under the Act and 
part 627 of this chapter are not available or are not adequate to 
achieve compliance, the Secretary may withhold an amount not to exceed 
10 percent of the allotment to the State for the program year in which 
the determination is made for each such violation (section 
311(e)(2)(A)).
    (c) The Secretary will not impose the penalty provided for under 
paragraph (b) of this section until all other remedies under the Act 
and part 627 of this chapter for achieving compliance have been 
exhausted or are determined to be unavailable or inadequate to achieve 
State compliance with the terms of the State plan.
    (d) The Secretary will make no determination under this section 
until the affected State has been afforded adequate written notice and 
an opportunity to request and to receive a hearing before an 
administrative law judge pursuant to the provisions of subpart H of 
part 627 of this chapter (section 311(e)(2)(B)).


Sec. 631.17  Federal monitoring and oversight.

    The Secretary shall conduct oversight of State administration of 
programs under this part, including the administration by each State of 
the rapid response assistance services provided in such State. The 
Secretary shall take the appropriate actions to ensure the 
effectiveness, efficiency and timeliness of services conducted by the 
State in accordance with Sec. 631.30(b) of this part (section 
314(b)(3)).


Sec. 631.18  Federal by-pass authority.

    (a) In the event that a State fails to submit a biennial State plan 
that is approved under Sec. 631.36 of this part, the Secretary shall 
make arrangements to use the amount that would be allotted to that 
State for the delivery in that State of the programs, activities, and 
services authorized under Title III of the Act and this part.
    (b) No determination may be made by the Secretary under this 
section until the affected State is afforded written notification of 
the Secretary's intent to exercise by-pass authority and an opportunity 
to request and to receive a hearing before an administrative law judge 
pursuant to the provisions of subpart H of part 627 of this chapter.
    (c) The Secretary will exercise by-pass authority only until such 
time as the affected State has an approved plan under the provisions of 
Sec. 631.36 of this part (section 321(b)).


Sec. 631.19  Appeals.

    Except as provided in this part, disputes arising in programs under 
this part shall be adjudicated under the appropriate State or local 
grievance procedures required by subpart E of part 627 of this chapter 
or other applicable law. Complaints alleging violations of the Act or 
this part may be filed with the Secretary, pursuant to subpart F of 
part 627 of this chapter. Paragraphs (a) through (e) of this section 
refer to appeal rights set forth in this part.
    (a) Section 628.405(g) of this chapter (appeals of denial of SDA 
designation) shall apply to denial of substate area designations under 
Sec. 631.34(c)(1) and (3) of this part.
    (b) Section 628.426(e) of this chapter (appeals of final 
disapproval of SDA job training plans or modifications) shall apply to 
final disapproval of substate plans under Sec. 631.50(f) of this part.
    (c) Section 628.426(f) of this chapter (appeals of a Governor's 
notice of intent to revoke approval of all or part of a plan) shall 
apply to a Governor's notice of intent to exercise by-pass authority 
under Sec. 631.38 of this part.
    (d) Section 628.430(b) of this chapter (appeals of the Secretary's 
disapproval of a plan when the SDA is the State) shall apply to plan 
disapproval when the substate area is the State, as set forth in 
Sec. 631.50(g) and (h) of this part.
    (e) Decisions pertaining to designations of substate grantees under 
Sec. 631.35 of this part are not appealable to the Secretary.

Subpart C--Needs-related payments


Sec. 631.20  Needs-related payments.

    (a) Title III funds available to States and substate grantees may 
be used to provide needs-related payments to participants in accordance 
with the approved State or substate plan, as appropriate.
    (b) In accordance with the approved substate plan, needs-related 
payments shall be provided to an eligible dislocated worker only in 
order to enable such worker to participate in training or education 
programs under this part. To be eligible for needs-related payments:
    (1) An eligible worker who has ceased to qualify for unemployment 
compensation must have been enrolled in a training or education program 
by the end of the thirteenth week of the worker's initial unemployment 
compensation benefit period, or, if later, by the end of the eighth 
week after an employee is informed that a short-term layoff will in 
fact exceed 6 months.
    (2) For purposes of paragraph (b)(1) of this section, the term 
enrolled in a training or education program means that the worker's 
application for training has been approved and the training institution 
has furnished written notice that the worker has been accepted in the 
approved training program beginning within 30 calendar days.
    (3) An eligible worker who does not qualify for unemployment 
compensation must be participating in a training or education program 
(section 314(e)(1)).
    (c) Needs-related payments shall not be provided to any participant 
for the period that such individual is employed, enrolled in, or 
receiving on-the-job training, out-of-area job search, or basic 
readjustment services in programs under the Act, nor to any participant 
receiving trade readjustment allowances, on-the-job training, out-of-
area job search allowances, or relocation allowances under Chapter 2 of 
Title II of the Trade Act of 1974 (19 U.S.C. 2271, et seq.) or part 617 
of this chapter (section 314(e)(1)).
    (d) The level of needs-related payments to an eligible dislocated 
worker in programs under this part shall not exceed the higher of:
    (1) The applicable level of unemployment compensation; or
    (2) The poverty level (as by the published by the Secretary of 
Health and Human Services) (section 314(e)(2)).

Subpart D--State Administration


Sec. 631.30  Designation or creation and functions of a State 
dislocated worker unit or office, and rapid response assistance.

    (a) Designation or creation of State dislocated worker unit or 
office. The State shall designate or create an identifiable State 
dislocated worker unit or office with the capabilities and functions 
identified in paragraph (b) of this section. Such unit or office may be 
an existing organization or new organization formed for this purpose 
(section 311(b)(2)). The State dislocated worker unit or office shall:
    (1) Make appropriate retraining and basic adjustment services 
available to eligible dislocated workers through substate grantees, and 
in statewide, regional or industrywide projects;
    (2) Work with employers and labor organizations in promoting labor-
management cooperation to achieve the goals of this part;
    (3) Operate a monitoring, reporting, and management system to 
provide adequate information for effective program management, review, 
and evaluation;
    (4) Provide technical assistance and advice to substate grantees;
    (5) Exchange information and coordinate programs with the 
appropriate economic development agency, State education and training 
and social services programs;
    (6) Coordinate with the unemployment insurance system, the Federal-
State Employment Service system, the Trade Adjustment Assistance 
program and other programs under this chapter;
    (7) Receive advance notice of plant closings and mass layoffs as 
provided at section 3(a)(2) of the Worker Adjustment and Retraining 
Notification Act (29 U.S.C. 2102(a)(2) and part 639 of this chapter);
    (8) Immediately notify (within 48 hours) the appropriate substate 
grantees following receipt of an employer notice of layoff or plant 
closing or of any other information that indicates a projected layoff 
or plant closing by an employer in the grantee's substate area, in 
order to continue and expand the services initiated by the rapid 
response team (section 311(b)(3)(D));
    (9) Fully consult with labor organizations where substantial 
numbers of their members are to be served; and
    (10) Disseminate throughout the State information on the 
availability of services and activities under Title III of the Act and 
this part.
    (b) Rapid response capability. The dislocated worker unit shall 
have one or more rapid response specialists, and the capability to 
provide rapid response assistance, on-site, for dislocation events such 
as permanent closures and substantial layoffs throughout the State. The 
State shall not transfer the responsibility for the rapid response 
assistance functions of the State dislocated worker unit to another 
entity, but the State may contract with another entity to perform rapid 
response assistance services. Nothing in this paragraph shall remove or 
diminish the dislocated worker unit's accountability for ensuring the 
effective delivery of rapid response assistance services throughout the 
State (section 311(b)(12)).
    (1) State rapid response specialists should be knowledgeable about 
the resources available through programs under this part and all other 
appropriate resources available through public and private sources to 
assist dislocated workers. The expertise required by this part includes 
knowledge of the Federal, State, and local training and employment 
systems; labor-management relations and collective bargaining 
activities; private industry and labor market trends; programs and 
services available to veterans; and other fields necessary to carry out 
the rapid response requirements of the Act.
    (2) The rapid response specialists should have:
    (i) The ability to organize a broad-based response to a dislocation 
event, including the ability to coordinate services provided under this 
part with other State-administered programs available to assist 
dislocated workers, and the ability to involve the substate grantee and 
local service providers in the assistance effort;
    (ii) The authority to provide limited amounts of immediate 
financial assistance for rapid response activities, including, where 
appropriate, financial assistance to labor-management committees formed 
under paragraph (c)(2) of this section;
    (iii) Credibility among employers and in the employer community in 
order to effectively work with employers in difficult situations; and
    (iv) Credibility among employee groups and in the labor community, 
including organized labor, in order to effectively work with employees 
in difficult situations.
    (3) The dissemination of information on the State dislocated worker 
unit's services and activities should include efforts to ensure that 
major employers, organized labor, and groups of employees not 
represented by organized labor, are aware of the availability of rapid 
response assistance. The State dislocated worker unit should make equal 
effort in responding to dislocation events without regard to whether 
the affected workers are represented by a union.
    (4) In a situation involving an impending permanent closure or 
substantial layoff, a State may provide funds, where other public or 
private resources are not expeditiously available, for a preliminary 
assessment of the advisability of conducting a comprehensive study 
exploring the feasibility of having a company or group, including the 
workers, purchase the plant and continue it in operation.
    (5) Rapid response specialists may use funds available under this 
part:
    (i) To establish on-site contact with employer and employee 
representatives within a short period of time (preferably 48 hours or 
less) after becoming aware of a current or projected permanent closure 
or substantial layoff in order to--
    (A) Provide information on and facilitate access to available 
public programs and services; and
    (B) Provide emergency assistance adapted to the particular 
permanent closure or substantial layoff; such emergency assistance may 
include financial assistance for appropriate rapid response activities, 
such as arranging for the provision of early intervention services and 
other appropriate forms of immediate assistance in response to the 
dislocation event;
    (ii) To promote the formation of labor-management committees as 
provided for in paragraph (c) of this section, by providing:
    (A) Immediate assistance in the establishment of the labor-
management committee, including providing immediate financial 
assistance to cover the start-up costs of the committee;
    (B) A list of individuals from which the chairperson of the 
committee may be selected;
    (C) Technical advice as well as information on sources of 
assistance, and liaison with other public and private services and 
programs; and
    (D) Assistance in the selection of worker representatives in the 
event no union is present;
    (iii) To provide ongoing assistance to labor-management committees 
described in paragraph (c) of this section by:
    (A) Maintaining ongoing contact with such committees, either 
directly or through the committee chairperson;
    (B) Attending meetings of such committees on an ex officio basis; 
and
    (C) Ensuring ongoing liaison between the committee and locally 
available resources for addressing the dislocation, including the 
establishment of linkages with the substate grantee or with the service 
provider designated by the substate grantee to act in such capacity;
    (iv) To collect information related to:
    (A) Economic dislocation (including potential closings or layoffs); 
and
    (B) All available resources within the State for serving displaced 
workers, which information shall be made available on a regular basis 
to the Governor and the State Council to assist in providing an 
adequate information base for effective program management, review, and 
evaluation;
    (v) To provide or obtain appropriate financial and technical advice 
and liaison with economic development agencies and other organizations 
to assist in efforts to avert worker dislocations;
    (vi) To disseminate information throughout the State on the 
availability of services and activities carried out by the dislocated 
worker unit or office; and
    (vii) To assist the local community in developing its own 
coordinated response and in obtaining access to State economic 
development assistance.
    (6) Notwithstanding the definition of ``substantial layoff (for 
rapid response assistance)'' at Sec. 631.2 of this part;
    (i) The Governor shall provide rapid response and basic 
readjustment services to members of a group of workers under the NAFTA 
Worker Security Act for which the Governor has made a finding under 
Sec. 631.3(j); and
    (ii) The Governor may, under exceptional circumstances, authorize 
rapid response assistance provided by a State dislocated worker unit 
when the layoff is less than 50 or more individuals, is not at a single 
site of employment, or does not take place during a single 30 day 
period. For purposes of this provision, exceptional circumstances 
include those situations which would have a major impact upon the 
community(ies) in which they occur (section 314(b)).
    (c) Labor-management committees. As provided in sections 301(b)(1) 
and 314(b)(1)(B) of the Act, labor-management committees are a form of 
rapid response assistance which may be voluntarily established to 
respond to actual or prospective worker dislocation.
    (1) Labor management committees ordinarily include (but are not 
limited to) the following:
    (i) Shared and equal participation by workers and management, with 
members often selected in an informal fashion;
    (ii) Shared financial participation between the company and the 
State, using funds provided under Title III of the Act, in paying for 
the operating expenses of the committee; in some instances, labor union 
funds may help to pay committee expenses;
    (iii) A chairperson, to oversee and guide the activities of the 
committee who--
    (A) Shall be jointly selected by the labor and management members 
of the committee;
    (B) Is not employed by or under contract with labor or management 
at the site; and
    (C) Shall provide advice and leadership to the committee and 
prepare a report on its activities;
    (iv) The ability to respond flexibly to the needs of affected 
workers by devising and implementing a strategy for assessing the 
employment and training needs of each dislocated worker and for 
obtaining the services and assistance necessary to meet those needs;
    (v) A formal agreement, terminable at will by the workers or the 
company management, and terminable for cause by the Governor; and
    (vi) Local job identification activities by the chairperson and 
members of the committee on behalf of the affected workers.
    (2) Because they include employee representatives, labor-management 
committees typically provide a channel whereby the needs of eligible 
dislocated workers can be assessed, and programs of assistance 
developed and implemented, in an atmosphere supportive to each affected 
worker. As such, committees must be perceived to be representative and 
fair in order to be most effective.


Sec. 631.31  Monitoring and oversight.

    The Governor is responsible for monitoring and oversight of all 
State and substate grantee activities under this part. In such 
monitoring and oversight of substate grantees, the Governor shall 
ensure that expenditures and activities are in accordance with the 
substate plan or modification thereof, and with the cost limitations 
described in Sec. 631.14 of this part.


Sec. 631.32  Allocation of funds by the Governor.

    Of the funds allotted to the Governor by the Secretary under 
Sec. Sec. 631.11 and 631.12 of this part:
    (a) The Governor shall issue allocations to substate grantees, the 
sum of which shall be no less than 50 percent of the State's allotment 
(section 302(d)).
    (b)(1) The Governor shall prescribe the formula to be used in 
issuing substate allocations required under paragraph (a) of this 
section to substate grantees.
    (2) The formula prescribed pursuant to paragraph (b)(1) of this 
section shall utilize the most appropriate information available to the 
Governor. In prescribing the formula, the Governor shall include (but 
need not be limited to) the following information:
    (i) Insured unemployment data;
    (ii) Unemployment concentrations;
    (iii) Plant closing and mass layoff data;
    (iv) Declining industries data;
    (v) Farmer-rancher economic hardship data; and
    (vi) Long-term unemployment data.
    (3) The Governor may allow for an appropriate weight for each of 
the formula factors set forth in paragraph (b)(2) of this section. A 
weight of zero for any of the factors required in section 302(d) of the 
Act and identified in paragraph (b)(2) of this section shall only be 
made when a review of available data indicates that the factor is not 
relevant to determining the incidence of need for worker dislocation 
assistance within the State. The formula may be amended no more 
frequently than once each program year (section 302(d)).
    (c) The Governor may reserve an amount equal to not more than 40 
percent of the funds allotted to the State under Sec. 631.11 and 
Sec. 631.12 of this part for State activities and for discretionary 
allocations to substate grantees (section 302(c)(1)).
    (d) The Governor may reserve an additional amount equal to not more 
than 10 percent of the funds allotted to the State under Sec. 631.11 of 
this part. The Governor shall allocate such funds, subject to the SJTCC 
or HRIC review and comment, during the first three quarters of the 
program year among substate grantees on the basis of need. Such funds 
shall be allocated to substate grantees and shall not be used for 
statewide activities. Such funds shall be included in each substate 
grantee's allocation for purposes of cost limitations, as described in 
Sec. 631.14 of this part (sections 302(c)(2) and 317(1)(B)).


Sec. 631.33  State procedures for identifying funds subject to 
mandatory Federal reallotment.

    The Governor shall establish procedures to assure the equitable 
identification of funds required to be reallotted pursuant to section 
303(b) of the Act. Funds so identified may be funds reserved by the 
State pursuant to section 302(c)(1)(A) through (D) of the Act and/or 
allocated to substate grantees pursuant to section 302(c)(1)(E), (c)(2) 
and/or (d) of the Act (section 303(d)). Such procedures may not exempt 
either State or substate funds from reallotment.


Sec. 631.34  Designation of substate areas.

    (a) The Governor, after receiving recommendations from the SJTCC or 
HRIC, shall designate substate areas for the State (section 312(a)).
    (b) In designating substate areas, the Governor shall:
    (1) Ensure that each service delivery area within the State is 
included within a substate area and that no SDA is divided among two or 
more substate areas; and
    (2) Consider the availability of services throughout the State, the 
capability to coordinate the delivery of services with other human 
services and economic development programs, and the geographic 
boundaries of labor market areas within the State.
    (c) Subject to paragraph (b) of this section, the Governor shall 
designate as a substate area:
    (1) Any single SDA that has a population of 200,000 or more;
    (2) Any two or more contiguous SDA's that:
    (i) In the aggregate have a population of 200,000 or more; and
    (ii) Request such designation; and
    (3) Any concentrated employment program grantee for a rural area as 
described in section 101(a)(4)(A)(iii) of the Act.
    (d) In addition to the entities identified in paragraph (c) of this 
section, the Governor may, without regard to the 200,000 population 
requirement, designate SDAs with smaller populations as substate areas.
    (e) The Governor may deny a request for substate area designation 
from a consortium of two or more SDAs that meets the requirements of 
paragraph (c)(2) of this section only upon a determination that the 
request is not consistent with the effective delivery of services to 
eligible dislocated workers in the relevant labor market area, or would 
otherwise not be appropriate to carry out the purposes of title III. 
The Governor will give good faith consideration to all such requests by 
a consortium of SDAs to be a substate area. In denying a consortium's 
request for substate area designation, the Governor shall set forth the 
basis and rationale for the denial (section 312(a)(5)).
    (f) In the case where the service delivery area is the State, the 
entire State shall be designated as a single substate area.
    (g)(1) Entities described in paragraphs (c)(1) and (3) of this 
section may appeal the Governor's denial of substate area designation 
to the Secretary of Labor. The procedures that apply to such appeals 
shall be those set forth at Sec. 628.405(g) for appeals of the 
Governor's denial of SDA designation.
    (2) An entity described in paragraph (c)(2) of this section that 
has been denied substate area designation may utilize the State-level 
grievance procedures required by section 144(a) of the Act and subpart 
E of part 627 of this chapter for the resolution of disputes arising 
from such a denial.
    (h) Designation of substate areas shall not be revised more 
frequently than once every two years. All such designations must be 
completed no later than four months prior to the beginning of any 
program year (section 312(a)(6)).


Sec. 631.35  Designation of substate grantees.

    The Governor may establish procedures for the designation of 
substate grantees.
    (a) Designation of the substate grantee for each substate area 
shall be made on a biennial basis.
    (b) Entities eligible for designation as substate grantees include:
    (1) Private industry councils in the substate area;
    (2) Service delivery area grant recipients or administrative 
entities designated under Title II of the Act;
    (3) Private non-profit organizations;
    (4) Units of general local government in the substate area, or 
agencies thereof;
    (5) Local offices of State agencies; and
    (6) Other public agencies, such as community colleges and area 
vocational schools.
    (c) Substate grantees shall be designated in accordance with an 
agreement among the Governor, the local elected official or officials 
of such area, and the private industry council or councils of such 
area. Whenever a substate area is represented by more than one such 
official or council, the respective officials and councils shall each 
designate representatives, in accordance with procedures established by 
the Governor (after consultation with the SJTCC or HRIC), to negotiate 
such agreement.
    (d) The agreement specified in paragraph (c) of this section shall 
set forth the conditions, considerations, and other factors related to 
the selection of substate grantees in accordance with section 312(b) of 
the Act.
    (e) The Governor shall negotiate in good faith with the parties 
identified in paragraph (c) of this section and shall make a good faith 
effort to reach agreement. In the event agreement cannot be reached on 
the selection of a substate grantee, the Governor shall select the 
substate grantee.
    (f) Decisions under paragraphs (c), (d), and (e) of this section 
are not appealable to the Secretary (section 312(b) and (c)).


Sec. 631.36  Biennial State plan.

    (a) In order to receive an allotment of funds under Secs. 631.11 
and 631.12 of this part, the State shall submit to the Secretary, in 
accordance with instructions issued by the Secretary, on a biennial 
basis, a biennial State plan (section 311). Such plan shall include:
    (1) Assurances that--
    (i) The State will comply with the requirements of Title III of the 
Act and this part;
    (ii) Services will be provided only to eligible displaced workers, 
except as provided in paragraph (a)(2) of this section;
    (iii) Services will not be denied on the basis of State of 
residence to eligible dislocated workers displaced by a permanent 
closure or substantial layoff within the State; and may be provided to 
other eligible dislocated workers regardless of the State of residence 
of such workers;
    (2) Provision that the State will provide services under this part 
to displaced homemakers only if the Governor determines that the 
services may be provided to such workers without adversely affecting 
the delivery of services to eligible dislocated workers;
    (3) A description of the substate allotment and reallotment 
procedures and assurance that they meet the requirements of the Act and 
this part;
    (4) A description of the State procurement system and procedures to 
be used under Title III of the Act and this part which are consistent 
with the provisions in subpart D of part 627 of this chapter; and
    (5) Assurance that the State will not prescribe any performance 
standard which is inconsistent with Sec. 627.470 of this chapter.
    (b) The State biennial plan shall be submitted to the Secretary on 
or before the May 1 immediately preceding the first of the two program 
years for which the funds are to be made available.
    (c) Any plan submitted under paragraph (a) of this section may be 
modified to describe changes in or additions to the programs and 
activities set forth in the plan. No plan modification shall be 
effective unless reviewed pursuant to paragraph (d) of this section and 
approved pursuant to paragraph (e) of this section.
    (d) The Secretary shall review State biennial plans and plan 
modifications, including any comments thereon submitted by the SJTCC or 
HRIC, for overall compliance with the provisions of the Act, this part, 
and the instructions issued by the Secretary.
    (e) A State biennial plan or plan modification is submitted on the 
date of its receipt by the Secretary. The Secretary shall approve a 
plan or plan modification within 45 days of submission unless, within 
30 days of submission, the Secretary notifies the Governor in writing 
of any deficiencies in such plan or plan modification.
    (f) The Secretary shall not finally disapprove the State biennial 
plan or plan modification of any State except after written notice and 
an opportunity to request and to receive a hearing before an 
administrative law judge pursuant to the provisions of subpart H of 
part 627 of this chapter.


Sec. 631.37  Coordination activities.

    (a) Services under this part shall be integrated or coordinated 
with services and payments made available under Chapter 2 of Title II 
of the Trade Act of 1974 (19 U.S.C. 2271, et seq.) and part 617 of this 
chapter and programs provided by any State or local agencies designated 
under section 239 of the Trade Act of 1974 (19 U.S.C. 2311) or part 617 
of this chapter (section 311(b)(10)). Such coordination shall be 
effected under provisions of an interagency agreement when the State 
agency responsible for administering programs under this part is 
different from the State agency administering Trade Act programs.
    (b) States may use funds allotted under Secs. 631.11 and 631.12 of 
this part for coordination of worker readjustment programs, (i.e., 
programs under this part and trade adjustment assistance under part 617 
of this chapter) and the unemployment compensation system consistent 
with the limitation on administrative expenses (see Sec. 631.14(a)(1) 
of this part). Each State shall be responsible for coordinating the 
unemployment compensation system and worker readjustment programs 
(section 314(f)).
    (c) Services under this part shall be coordinated with dislocated 
worker services under Title III of the Carl D. Perkins Vocational 
Education Act (20 U.S.C. 2351, et seq.) (section 311(b)(5)).
    (d) In promoting labor management cooperation, including the 
formation of labor-management committees under this part, the 
dislocated worker unit shall consider cooperation and coordination with 
labor-management committees established under other authorities 
(section 311(b)(3)(B)).
    (e) In accordance with section 402 of the Veterans' Benefits and 
Programs Improvement Act of 1988 (29 U.S.C. 1751 note) services under 
this part shall be coordinated with programs administered by the 
Department of Veterans Affairs and with other veterans' programs such 
as the Veterans' Job Training Act (29 U.S.C. 1721 note), title IV-C of 
the Job Training Partnership Act (29 U.S.C. 1721, et seq.), part 635 of 
this chapter, and the Transition Assistance Program.


Sec. 631.38  State by-pass authority.

    (a)(1) In the event that a substate grantee fails to submit a plan, 
or submits a plan which is not approved by the Governor (see 
Sec. 631.50(f) of this part), the Governor may direct the expenditure 
of funds allocated to the substate area.
    (2) The Governor's authority under this paragraph (a) to direct the 
expenditure of funds remains in effect only until such time as a plan 
is submitted and approved, or a new substate grantee is designated 
(section 313(c)).
    (3) The Governor shall not direct the expenditure of funds under 
this paragraph (a) until after the affected substate grantee has been 
afforded advance written notice of the Governor's intent to exercise 
such authority and an opportunity to appeal to the Secretary pursuant 
to the provisions of Sec. 628.426(e) of this chapter.
    (b)(1) If a substate grantee fails to expend funds allocated to it 
in accordance with its plan, the Governor, subject to appropriate 
notice and opportunity for comment in the manner required by section 
105(b)(1), (2), and (3) of the Act, may direct the expenditure of funds 
only in accordance with the substate plan.
    (2) The Governor's authority under this paragraph (b) to direct the 
expenditure of funds shall remain in effect only until:
    (i) The substate grantee corrects the failure;
    (ii) The substate grantee submits an acceptable modification; or
    (iii) A new substate grantee is designated (section 313(a) and 
(d)).
    (3) The Governor shall not direct the expenditure of funds under 
this paragraph (b) until after the affected substate grantee has been 
afforded advance written notice of the Governor's intent to exercise 
such authority and an opportunity to appeal to the Secretary pursuant 
to the provisions of Sec. 628.426(e) of this chapter.
    (c) When the substate area is the State, the Secretary shall have 
the same authority as the Governor under paragraphs (a) and (b) of this 
section.

Subpart E--State Programs


Sec. 631.40  State program operational plan.

    (a) The Governor shall submit to the Secretary biennially, in 
accordance with instructions issued by the Secretary, a State program 
operational plan describing the specific activities, programs and 
projects to be undertaken with the funds reserved by the Governor under 
Sec. 631.32(c) of this part.
    (b) The State program operational plan shall include a description 
of the mechanisms established between the Federal-State Unemployment 
Compensation System, the Trade Adjustment Assistance Program, the State 
Employment service and programs authorized under title III of the Act 
and this part to coordinate the identification and referral of 
dislocated workers and the exchange of information.


Sec. 631.41  Allowable State activities.

    (a) States may use funds reserved under Sec. 631.32(c) of this 
part, subject to the provisions of the State biennial and program 
operational plans, for:
    (1) Rapid response assistance;
    (2) Basic readjustment services when undertaken in Statewide, 
regional or industrywide projects, or, initially, as part of rapid 
response assistance;
    (3) Retraining services, including (but not limited to) those in 
section 314(d) of the Act when undertaken in Statewide, industrywide 
and regional programs;
    (4) Coordination with the unemployment compensation system, in 
accordance with Sec. 631.37(b) of this part;
    (5) Discretionary allocation for basic readjustment and retraining 
services to provide additional assistance to substate areas that 
experience substantial increases in the number of dislocated workers, 
to be expended in accordance with the substate plan or a modification 
thereof;
    (6) Incentives to provide training of greater duration for those 
who require it; and
    (7) Needs-related payments in accordance with section 315(b) of the 
Act.
    (b) Activities shall be coordinated with other programs serving 
dislocated workers, including training under Chapter 2 of Title II of 
the Trade Act of 1974 (19 U.S.C. 2271, et seq.) and part 617 of this 
chapter.
    (c) Where appropriate, State-level activities should be coordinated 
with activities and services provided by substate grantees.
    (d) Retraining services provided to individuals with funds 
available to a State should be limited to those individuals who can 
most benefit from and are in need of such services.
    (e) Other than basic and remedial education, literacy and English 
for non-English speakers training, retraining services provided with 
funds available to a State shall be limited to those for occupations in 
demand in the area or another area to which the participant is willing 
to relocate, or in sectors of the economy with a high potential for 
sustained demand or growth.
    (f) Services provided to displaced homemakers should be part of 
ongoing programs and activities under Title III and this part and not 
separate and discrete programs.
    (g) Basic readjustment services described in Sec. 631.3(b)(1), 
provided to individuals who have not received a specific notice of 
termination or layoff and who work at a facility at which the employer 
has made a public announcement that such facility will close shall, to 
the extent practicable be funded by the State with funds reserved under 
Sec. 631.32(c) (section 314(h)).
    (h) The provisions of section 107(a), (b) and (e) of the Act (but 
not subsections (c) and (d) of section 107) and Sec. 627.422 of this 
chapter apply to State selection of service providers for funded 
activities authorized in Sec. 631.32(c) of this part.

Subpart F--Substate Programs


Sec. 631.50  Substate plan.

     (a) In order to receive an allocation of funds under Sec. 631.32 
of this part, the substate grantee shall submit to the Governor a 
substate plan, in accordance with instructions issued by the Governor. 
Such plan shall meet the requirements of this section and shall be 
approved by the Governor prior to funds being allocated to a substate 
grantee.
    (b) The Governor shall issue instructions and schedules that assure 
that substate plans and plan modifications conform to all requirements 
of the Act and this part and contain the statement required by section 
313(b) of the Act.
    (c) Substate plans shall provide for compliance with the cost 
limitation provisions of Sec. 631.14 of this part.
    (d) The SJTCC or HRIC shall review and submit to the Governor 
written comments on substate plans.
    (e) Prior to the submission of the substate plan to the Governor, 
the substate grantee shall submit the plan to the parties to the 
agreement described in Sec. 631.35(c) of this part for review and 
comment (section 313(a)).
    (f) The Governor's review and approval (or disapproval) of a 
substate plan or plan modification, and appeals to the Secretary from 
disapprovals thereof, shall be conducted according to the provisions of 
section 105 of the Act and Sec. 628.426 of this chapter (section 
313(c)).
    (g) If a substate grantee fails to meet the requirements for plan 
submission and approval found in this section, the Governor may 
exercise the by-pass authority set forth at Sec. 631.38 of this part.
    (h) When the substate area is the State, the substate plan (and 
plan modification(s)) shall be submitted by the Governor to the 
Secretary. The dates for submission and consideration and the 
Secretary's review and approval (or disapproval) of the plan or plan 
modification, and appeals to administrative law judges from disapproval 
thereof, shall be conducted according to the provisions of Sec. 628.430 
of this chapter.


Sec. 631.51  Allowable substate program activities.

    (a) The substate grantee may use JTPA section 302(c)(1), (c)(2), 
and (d) funds allocated by the Governor under Sec. 631.32 of this part 
for basic readjustment services, retraining services, supportive 
services and needs-related payments.
    (b) The provisions of Secs. 627.420 and 627.435 of this chapter 
(Procurement, Cost principles and allowable costs) apply to funds 
allocated to substate grantees under this part unless otherwise 
specifically provided for.
    (c) Other than basic and remedial education, literacy and English 
for non-English speakers training, retraining services provided with 
funds available to a substate area shall be limited to those for 
occupations in demand in the area or another area to which the 
participant is willing to relocate, or in sectors of the economy with a 
high potential for sustained demand or growth.
    (d) Retraining services provided to individuals with funds 
available to a substate area should be limited to those individuals who 
can most benefit from and are in need of such services (sections 312(e) 
and 141(a)).


Sec. 631.52  Selection of service providers.

    (a) The substate grantee shall provide authorized JTPA Title III 
services within the substate area, pursuant to an agreement with the 
Governor and in accordance with the approved State plan and substate 
plan, including the selection of service providers.
    (b) The substate grantee may provide authorized JTPA Title III 
services directly or through contract, grant, or agreement with service 
providers (section 312(d)).
    (c) Services provided to displaced homemakers should be part of 
ongoing programs and activities under Title III of the Act and this 
part and not separate and discrete programs.
    (d) The provisions of section 107(a), (b), (c) and (e) of the Act 
and Sec. 627.422 of this chapter apply to substate grantee selection of 
service providers as specified in this section.


Sec. 631.53  Certificates of continuing eligibility.

    (a) A substate grantee may issue to any eligible dislocated worker 
who has applied for the program authorized in this part a certificate 
of continuing eligibility. Such a certificate of continuing 
eligibility:
    (1) May be effective for periods not to exceed 104 weeks;
    (2) Shall not include any reference to any specific amount of 
funds;
    (3) Shall state that it is subject to the availability of funds at 
the time any such training services are to be provided; and
    (4) Shall be non-transferable.
    (b) Acceptance of a certificate of continuing eligibility shall not 
be deemed to be enrollment in training.
    (c) Certificates of continuing eligibility may be used, subject to 
the conditions included on the face of the certificate, in two distinct 
ways:
    (1) To defer the beginning of retraining: any individual to whom a 
certificate of continuing eligibility has been issued under paragraph 
(a) of this section shall remain eligible for retraining and education 
services authorized under this part for the period specified in the 
certificate, notwithstanding the definition of ``eligible dislocated 
worker'' in section 301(a) of the Act or the participant eligibility 
provisions in Sec. 631.3 of this part, and may use the certificate in 
order to receive retraining services, subject to the limitations 
contained in the certificate; or
    (2) To permit eligible dislocated workers to seek out and arrange 
their own retraining with service providers approved by the substate 
grantee; retraining provided pursuant to the certificate shall be in 
accord with requirements and procedures established by the substate 
grantee and shall be conducted under a grant, contract, or other 
arrangement between the substate grantee and the service provider.
    (d) Substate grantees shall ensure that records are maintained 
showing to whom such certificates of continuing eligibility have been 
issued, the dates of issuance, and the number redeemed by substate 
grantees.

Subpart G--Federal Delivery of Dislocated Worker Services Through 
National Reserve Account Funds


Sec. 631.60  General.

    This subpart provides for the use of funds reserved to the 
Secretary for use under part B of title III of the Act. These funds may 
be used for the allowable activities, described in section 323 of the 
Act; demonstration programs, described in section 324 of the Act; the 
Defense Conversion Adjustment Program (DCAP), described in section 325 
of the Act; the Defense Diversification Program (DDP), described in 
section 325A of the Act; Clean Air Employment Transition Assistance 
(CAETA), described in section 326 of the Act; and similar uses and 
programs which may be added to part B of title III of the Act.


Sec. 631.61  Application for funding and selection criteria.

    To qualify for consideration for funds reserved by the Secretary 
for activities under section 323 of the Act, applications shall be 
submitted to the Secretary pursuant to instructions issued by the 
Secretary specifying application procedures, selection criteria, and 
approval process. Separate instructions will be issued for each 
category of grant awards, as determined by the Secretary.


Sec. 631.62  Cost limitations.

    The expenditure of funds provided to grantees under this subpart 
shall be consistent with the cost limitations specified in the grant. 
Applicants for grants under this subpart may propose, in their grant 
applications, reasonable costs to be incorporated into the grant. The 
Grant Officer may accept or modify such proposals at his/her 
discretion. Where proposals do not adequately justify to the Grant 
Officer's satisfaction the costs to be incorporated into the grant, the 
cost limitations that shall be applied shall be those specified in 
section 315 of the Act and described in paragraphs (a), (b) and (c) of 
Sec. 631.14 of this part.


Sec. 631.63  Reporting.
    (a) Grantees under part B of title III of the Act shall submit 
reports as prescribed by the Secretary.
     (b) Significant developments. Grantees shall notify the Secretary 
of developments that have a significant impact on the grant or subgrant 
supported activities, including problems, delays, or adverse conditions 
which may materially impair the ability to meet the objectives of the 
project. This notification shall include a statement of the action 
taken, or contemplated, and any assistance needed to resolve the 
situation.


Sec. 631.64  General administrative requirements.

     (a) Activities under this subpart may be carried out and funding 
provided directly to grantees other than States.
     (b) All grantees and subgrantees under this subpart that are 
States or substate grantees are subject to the provisions in part 627 
of this chapter.
     (c) For grantees other than States and substate grantees, the 
following provisions shall apply to grants under this subpart.
     (1) Grievance procedures. (i) Each grantee shall establish and 
maintain a grievance procedure for grievances or complaints about its 
programs and activities from participants, subgrantees, subcontractors, 
and other interested persons. Hearings on any grievance shall be 
conducted within 30 days of filing of a grievance and decisions shall 
be made not later than 60 days after the filing of a grievance. Except 
for complaints alleging fraud or criminal activity, complaints shall be 
made within one year of the alleged occurrence.
     (ii) Grantees shall be subject to the provisions of section 144 of 
the Act, and 29 CFR part 95 or 97, as appropriate.
     (iii) If the grantee is already subject to the grievance procedure 
process and requirements established by the Governor (i.e., through 
another JTPA grant, subgrant, or contract), its adherence to that 
procedure shall meet the requirements of this paragraph (c)(1).
     (2) Uniform Administrative Standards. Grantees shall be subject to 
the standards and requirements described in 29 CFR part 95 or 97, as 
appropriate, as well as any additional standards prescribed in grant 
documents or Secretarial guidelines. If the grantee/ subgrantee is 
already subject to additional standards established by the Governor 
(i.e., through another JTPA grant, subgrant, or contract), its 
adherence to those standards shall meet the requirements of this 
paragraph (c)(2).


Sec. 631.65  Special provisions for CAETA and DDP.

     (a) Allowances for Job Search Outside the Commuting Area under 
CAETA. Allowances for job search outside the commuting area shall be an 
allowable activity under CAETA, only where it has been determined that 
the dislocated worker cannot reasonably be expected to secure suitable 
employment within the commuting area in which the worker resides. 
Procedures for determining whether a dislocated worker cannot 
reasonably be expected to secure suitable employment within the 
commuting area in which the dislocated worker resides shall be 
described in the grant application and shall be subject to approval by 
the Grant Officer. The cost of job search outside the commuting area 
shall be an allowable cost, but shall not provide for more than 90 
percent of the cost of necessary job search expenses, and may not 
exceed a total of $800, unless the need for a greater amount is 
justified in the grant application and approved by the Grant Officer.
     (b) Relocation Allowances under CAETA. Relocation allowances under 
CAETA shall be allowable only where the eligible dislocated worker 
cannot reasonably be expected to secure suitable employment in the 
commuting area in which the worker resides and has obtained suitable 
employment affording a reasonable expectation of long-term duration in 
the area in which the worker wishes to relocate, or has obtained a bona 
fide offer of such employment, provided that the worker is totally 
separated from employment at the time relocation commences. The cost of 
relocation for an eligible dislocated worker shall not exceed an amount 
which is equal to the sum of the reasonable and necessary expenses 
incurred in transporting the dislocated worker and the dislocated 
worker's family, if any, and household effects, and a lump sum 
relocation allowance, equivalent to three times such worker's average 
weekly wage. The maximum relocation allowance, however, shall not 
exceed $800, unless a greater amount is justified in the grant 
application and approved by the Grant Officer. Necessary expenses shall 
be travel expenses for the dislocated worker and the dislocated 
worker's family and for the transfer of household effects. Reasonable 
costs for such travel and transfer expenses shall be by the least 
expensive, most reasonable form of transportation.
     (c) Needs-related payments under CAETA and DDP. Funds from grants 
for CAETA and DDP shall be available for needs-related payments to 
enable participants to participate in and complete training or 
education programs under those grants, subject to the following:
    (1) Needs-related payments shall be provided to the participant 
only if the participant:
     (i) Does not qualify or has ceased to qualify for unemployment 
compensation;
     (ii) Has been enrolled in training programs by the end of the 13th 
week of an individual's initial unemployment benefit period following 
the layoff or termination, or, if later, the end of the 8th week after 
an individual is informed that a short-term layoff will exceed six 
months;
    (iii) Is making satisfactory progress in training or education 
programs under this section, except that an individual shall not be 
disqualified pursuant to this clause for a failure to participate that 
is not the fault of the individual; and
    (iv) Currently receives, or is a member of a family which currently 
receives, a total family income (exclusive of unemployment 
compensation, child support payments, and welfare payments) which, in 
relation to family size, is not in excess of the lower living standard 
income level.
    (2) Needs-related payments shall be equal to the higher of:
     (i) The applicable level of unemployment compensation; or
     (ii) The poverty level determined in accordance with the criteria 
established by the Director of the Office of Management and Budget.
    (3) Total family income shall be reviewed periodically, based upon 
information obtained from participants with respect to such income and 
changes therein, to determine continued eligibility, or to begin 
payments to individuals previously found ineligible for needs-related 
payments under this section.
Subpart H--[Reserved]

Subpart I--Disaster Relief Employment Assistance


Sec. 631.80  Scope and purpose.

     This subpart establishes a Disaster Relief Employment Assistance 
program under title IV, part J of JTPA which shall be administered in 
conjunction with the title III National Reserve Grants Programs.


Sec. 631.81  Availability of funds.

     Funds appropriated to carry out this subpart may be made available 
by grant to the Governor of any State within which is located an area 
that has suffered an emergency or a major disaster as defined in 
paragraphs (1) and (2), respectively, of section 102 of the Disaster 
Relief Act of 1974 (42 U.S.C. 5122(1) and (2)) (referred to in this 
subpart as the ``disaster area''). The Secretary shall prescribe 
procedures for applying for funds.


Sec. 631.82  Substate allocation.

     (a) Not less than 80 percent of the grant funds available to any 
Governor under Sec. 631.81 of this part shall be allocated by the 
Governor to units of general local government located, in whole or in 
part, within such disaster areas. The remainder of such funds may be 
reserved by the Governor for use, in concert with State agencies, in 
cleanup, rescue, repair, renovation, and rebuilding activities 
associated with such major disaster.
    (b) The JTPA title III program substate grantee for the disaster 
area shall be the designated local entity for administration of the 
grant funds under this subpart.


Sec. 631.83  Coordination.

     Funds made available under this subpart to Governors and units of 
general local government shall be expended in consultation with--
    (a) Agencies administering programs for disaster relief provided 
under the Disaster Relief Act of 1974; and
     (b) The JTPA title II administrative entity and the private 
industry council in each service delivery area within which disaster 
employment programs will be conducted under this subpart.


Sec. 631.84  Allowable projects.

     Funds made available under this subpart to any unit of general 
local government in a disaster area--
    (a) Shall be used exclusively to provide employment on projects 
that provide food, clothing, shelter and other humanitarian assistance 
for disaster victims; and on projects involving demolition, cleanup, 
repair, renovation, and reconstruction of damaged and destroyed 
structures, facilities, and lands located within the disaster area; and
    (b) May be expended through public and private non-profit agencies 
and organizations engaged in such projects.


Sec. 631.85 Participant eligibility.

     An individual shall be eligible for disaster employment under this 
subpart if such individual is--
    (a)(1) Eligible to participate or enroll, or is a participant or 
enrolled, under Title III of the Act, other than an individual who is 
actively engaged in a training program; or
     (2) Eligible to participate in programs or activities assisted 
under Native American and Migrant Programs; and
     (3) Unemployed as a consequence of the disaster.
    (b) [Reserved].


Sec. 631.86  Limitations on disaster relief employment.

     No individual shall be employed under this subpart for more than 6 
months for work related to recovery from a single natural disaster 
(described in Sec. 631.3(f) of this part).


Sec. 631.87  Definitions.

     As used in this subpart, the term unit of general local government 
includes:
    (a) In the case of a community conducting a project in an Indian 
reservation or Alaska Native village, the grantee designated under the 
JTPA section 401 Indian and Native American Program (see part 632 of 
this chapter), or a consortium of such grantees and the State; and
    (b) In the case of a community conducting a project in a migrant or 
seasonal farmworker community, the grantee designated under the JTPA 
section 402 Migrant and Seasonal Farmworker Program (see part 633 of 
this chapter), or a consortium of such grantees and the State.
    7. Part 637 is revised to read as follows:

PART 637--PROGRAMS UNDER TITLE V OF THE JOB TRAINING PARTNERSHIP 
ACT

Subpart A--General Provisions

637.100  Scope and purpose.
637.105  Definitions.

Subpart B--Program Planning and Operation

637.200  Allotments to States.
637.205  Notice of intent to participate.
637.210  Incentive bonus program applications.
637.215  Review and approval of applications for incentive bonus 
payments.
637.220  Eligibility criteria for individuals to be counted in 
determining incentive bonuses.
637.225  Determination of incentive bonus.
637.230  Use of incentive bonuses.

Subpart C--Additional Title V Administrative Standards and Procedures

637.300  Management systems, reporting and recordkeeping.
637.305  Federal monitoring and oversight.
637.310  Audits.

Subpart D--Data Collection [Reserved]

    Authority: 29 U.S.C 1579(a); 29 U.S.C. 1791i(e).

Subpart A--General Provisions


Sec. 637.100  Scope and purpose.

     (a) This part implements Title V of the Act which creates a 
program to provide incentive bonuses to States for providing certain 
employable dependent individuals with job training to reduce welfare 
dependency, to promote self-sufficiency, to increase child support 
payments, and to increase employment and earnings (section 501).
     (b) This part applies to programs operated with funds under Title 
V of the Job Training Partnership Act.


Sec. 637.105  Definitions.
    In addition to the definitions contained in sections 4, 301, 
303(e), and in Sec. 626.4 of this chapter, the following definitions 
apply to the administration of Title V of the Act and this part:
    Absent parent means an individual who is continuously absent from 
the household and who is a non-custodial parent of a dependent child 
receiving aid to families with dependent children (AFDC) under part A 
of title IV of the Social Security Act (42 U.S.C. 601, et seq.).
    Disability assistance means benefits offered pursuant to Title XVI 
of the Social Security Act, relating to the supplemental security 
income program.
    Federal contribution means the amount of the Federal component of 
cash payments to individuals within the participating State under 
welfare and/or disability assistance programs, including Part A of 
Title IV of the Social Security Act.

Subpart B--Program Planning and Operation


Sec. 637.200  Allotments to States.

    (a) For each program year for which funds are appropriated to carry 
out programs under this part, the Secretary shall pay to each 
participating State the amount the State is eligible to receive in 
accordance with this part. No payments shall be made for any years for 
which funds are not appropriated and/or not available (section 502(a)).
    (b) If the appropriation is not sufficient to pay to each State the 
amount it is eligible to receive in accordance with this part, the 
State shall receive a percentage of the total available funds equal to 
the percentage of its bonus compared to the national total of bonuses 
(section 502(b)).
    (c) If an additional amount is made available after the application 
of paragraph (b) of this section, such additional amount shall be 
allocated among the States by increasing payment in the same manner as 
was used to reduce payment, except that no State shall be paid an 
amount which exceeds the amount to which it is eligible (section 
502(c)).


Sec. 637.205  Notice of intent to participate.

    (a) Any State seeking to participate in the incentive bonus program 
shall notify the Secretary of its intent to do so no later than 30 days 
before the beginning of its first program year of participation (i.e., 
June 1) (section 505(a)).
    (b) Pursuant to instructions issued by the Secretary, the 
notification referenced in paragraph (a) of this section shall be in 
the form of a letter from the Governor to the Secretary advising the 
Secretary of the State's intention to apply for, receive and expend 
bonuses under this program in a manner consistent with this part 
(section 505(b)).
    (c) After the State's submission of a notice of intent to 
participate, incentive bonuses may be claimed by a State for any 
individual who:
    (1)(i) Was an absent parent of any child receiving AFDC at the time 
such individual was determined to be eligible for participation in 
programs under the Act;
    (ii) Has participated in education, training, or other activities 
(including the Job Corps) funded under the Act; and
    (iii) Pays child support for a child specified in paragraph (c)(1) 
of this section following termination from activities funded under the 
Act; or
    (2)(i) Is blind or disabled;
    (ii) Was receiving disability assistance at the time such 
individual was determined to be eligible for participation in programs 
under the Act;
    (iii) Has participated in education, training, or other activities 
(including the Job Corps) funded under the Act; and
    (iv) Earns from employment a wage or an income (section 506).
    (d) A Governor may withdraw the State's participation in the 
incentive bonus program in any program year by submitting a written 
notice of withdrawal.
Sec. 637.210  Incentive bonus program applications.

    (a) Any State seeking to receive an incentive bonus under this 
title shall submit an Incentive Bonus Program application pursuant to 
instructions issued by the Secretary that will contain the criteria for 
approval of such application. Each application shall contain, at a 
minimum, the following information:
    (1) A list of eligible individuals who met the requirements of 
Sec. 637.220 of this part during the program year;
    (2) The amount of the incentive bonus attributable to each eligible 
individual who is claimed by the State; and
    (3) A statement certifying the availability of documentation to 
verify the eligibility of participants and the amount of the incentive 
bonus claimed by the State (section 505(b)).
    (b) The application for any program year shall be submitted by the 
State to the Secretary no later than August 31 following the end of the 
program year for which the bonus is being claimed. A copy of such 
application shall also be submitted at the same time to the appropriate 
DOL Employment and Training Administration Regional Office.


Sec. 637.215  Review and approval of applications for incentive bonus 
payments.

    (a) The Secretary shall review all applications for overall 
compliance with JTPA, the requirements of this part, and the 
instructions issued by the Secretary.
    (b) The Secretary shall inform a State within 30 days after receipt 
of the application whether or not its application has been approved.
    (c) If the application is not approved, the Department shall issue 
an initial notice of denial of payment indicating the reasons for such 
denial. The Governor will then have 30 days to respond to the reasons 
for the denial before a final decision is made.
    (d) If the Department determines that the additional information 
provided does not adequately respond to the questions raised in the 
initial review process, a final denial of payment shall be issued. The 
Governor may then appeal the decision in accordance with the procedures 
at subpart H of part 627 of this chapter (sections 504(c) and 505(c)).


Sec. 637.220  Eligibility criteria for individuals to be counted in 
determining incentive bonuses.

    An individual shall be eligible to be counted as part of the 
State's request for an incentive bonus payment under this part if the 
individual:
    (a)(1) Was an absent parent of any child receiving AFDC at the time 
such individual was determined to be eligible for participation in 
programs under the Act;
    (2) Has participated in education, training, or other activities 
(including the Job Corps) funded under the Act; and
    (3) Pays child support for a child specified in paragraph (a)(1) of 
this section following termination from activities funded under the 
Act; or
    (b)(1) Is blind or disabled;
    (2) Was receiving disability assistance at the time such individual 
was determined to be eligible for participation in programs under the 
Act;
    (3) Has participated in education, training, or other activities 
(including the Job Corps) funded under the Act; and
    (4) Earns a wage or an income from employment (section 506).


Sec. 637.225  Determination of incentive bonus.

    The amount of the incentive bonus to be paid to each State shall be 
the total of the incentive bonuses claimed for each eligible individual 
within the State. The amount of the incentive bonus to be paid each 
State shall be determined by the sum of:
    (a) An amount equal to the total of the amounts of child support 
paid by each individual who is eligible under Sec. 637.220(a) of this 
part, for up to 2 years after such individual's termination from JTPA; 
and
    (b) An amount equal to the total reduction in the Federal 
contribution to the amounts received under title XVI of the Social 
Security Act (42 U.S.C. 1381, et seq.) by each individual who is 
eligible under Sec. 637.220(b) of this part, for up to 2 years after 
such individual's termination from JTPA (section 503).


Sec. 637.230  Use of incentive bonuses.

    (a) During any program year, the Governor may use an amount not to 
exceed 5 percent of the State's total bonus payment for the 
administrative costs incurred under this program, including data and 
information collection and compilation, recordkeeping, or the 
preparation of applications for incentive bonuses (section 
504(a)(1)(A)).
    (b) The remainder, not less than 95 percent of the incentive 
bonuses received, shall be distributed to SDAs and Job Corps Centers 
within the State in a manner consistent with an agreement between the 
Governor and these SDA's and centers. This agreement shall reflect an 
equitable method of distribution which is based on the degree to which 
the effort of the SDA and/or Center contributed to the State's 
qualification for incentive bonus funds under title V (section 
504(a)(1)(B)).
    (c) Not more than 10 percent of the incentive bonus received in any 
program year by each SDA and/or Job Corps Center may be used for the 
administrative costs of establishing and maintaining systems necessary 
for operation of programs under title V, including the costs of 
providing incentive payments described in paragraph (d) of this 
section, technical assistance, data and information collection and 
compilation, management information systems, post-program followup 
activities, and research and evaluation activities (section 504(a)(2)).
    (d) Each SDA and/or Job Corps Center may make incentive payments to 
service providers, including participating State and local agencies, 
and community-based organizations, that demonstrate effectiveness in 
delivering employment and training services to eligible individuals 
under this title (section 504(b)).
    (e) All remaining funds received by each SDA shall be used for 
activities described in sections 204 and 264 of JTPA and shall be 
subject to the regulations governing the operation of programs under 
titles II-A and II-C of JTPA. All remaining funds received by each Job 
Corps Center shall be used for activities authorized under part B of 
title IV (section 504(a)(2).

Subpart C--Additional Title V Administrative Standards and 
Procedures


Sec. 637.300  Management systems, reporting and recordkeeping.

    (a) The Governor shall ensure that the State's financial management 
system and recordkeeping system comply with subpart D of part 627 of 
this chapter.
    (b) Notwithstanding the provisions of Sec. 629.455 of this chapter, 
the Governor shall report to the Secretary pursuant to instructions 
issued by the Secretary regarding activities funded under this part. 
Reports shall be required semi-annually and annually. Reports shall be 
provided to the Secretary within 45 calendar days after the end of the 
report period.
    (c) The Governor shall assure that appropriate and adequate records 
are maintained for the required time period to support all incentive 
bonus payment applications. Such records shall include documentation to 
support individuals' eligibility under this part.


Sec. 637.305  Federal monitoring and oversight.

    The Secretary shall conduct oversight of the programs and 
activities conducted in accordance with this part.


Sec. 637.310  Audits.

    The Governor shall ensure that the State complies with the audit 
provisions at Sec. 629.480 of this chapter.

Subpart D--Data Collection [Reserved]

    Signed at Washington, DC, this 18th day of August, 1994.
Robert B. Reich,
Secretary of Labor.
[FR Doc. 94-20871 Filed 9-1-94; 8:45 am]
BILLING CODE 4510-30-P