[Federal Register Volume 60, Number 155 (Friday, August 11, 1995)]
[Rules and Regulations]
[Pages 41286-41296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18064]




[[Page 41285]]

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Part III





Department of Education





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34 CFR Parts 76 and 667



State-administered Programs; State Postsecondary Review Program; Final 
Rule

  Federal Register / Vol. 60, No. 155 / Friday, August 11, 1995 / Rules 
and Regulations   

[[Page 41286]]


DEPARTMENT OF EDUCATION

34 CFR Parts 76 and 667

RIN 1880-AA59


State-administered Programs; State Postsecondary Review Program

AGENCY: Department of Education.

ACTION: Final regulations.

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

SUMMARY: The Secretary amends Part 76 of the Education Department 
General Administrative Regulations (EDGAR) to require a State to file 
its State plan and other related documents under a given program by a 
date certain or face deferral of the date on which the State may begin 
to obligate funds under the program. The Secretary also modifies the 
policy announced in the notice of proposed rulemaking (NPRM) regarding 
pre-award costs incurred after the date funds are available for 
obligation by the Secretary and before the date a State has an approved 
State plan. Under the modified policy, the Secretary will allow pre-
award costs for matching and Maintenance of Effort expenditures because 
these expenditures are not subject to the Cash Management Improvement 
Act of 1990 (CMIA). The Secretary takes these actions to protect the 
Federal Government from interest liabilities under the CMIA when the 
Department is late in making an initial payment under a State-
administered program because the State failed to submit a substantially 
approvable plan or other required document in a timely fashion. The 
Secretary also makes conforming amendments to Part 667.

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

FOR FURTHER INFORMATION CONTACT: Peter Wathen-Dunn, U.S. Department of 
Education, 600 Independence Avenue, S.W., Room 4434, Washington, D.C. 
20202-2243. Telephone: (202) 401-6700. Individuals who use a 
telecommunications device for the deaf (TDD) may call the Federal 
Information Relay Service (FIRS) at 1-800-877-8339 between 8 a.m. and 8 
p.m., Eastern time, Monday through Friday.

SUPPLEMENTARY INFORMATION: The Cash Management Improvement Act of 1990 
(CMIA) was passed by Congress to ensure greater efficiency, 
effectiveness, and equity in the exchange of funds between the Federal 
Government and the States. Under this statute and the Treasury 
Department's implementing regulations at 31 CFR Part 205, the Federal 
Government is liable for interest payments to a State that disburses 
its own funds for Federal program purposes before the date that Federal 
funds are deposited to the State's bank account for those obligations, 
31 U.S.C. 6503(d). Conversely, a State must pay interest to the Federal 
Government from the time Federal funds are deposited to the State's 
account until the time that those funds are paid out by the State, 31 
U.S.C. 6503(c).
    The CMIA applies to ``major Federal assistance programs,'' which 
are determined under a chart in the implementing Treasury regulations 
at 31 CFR 205.4 and Appendix A to Part 205, Subpart A. The chart 
establishes thresholds for CMIA coverage based on a comparison between 
the amount of Federal funds expended in a State under a particular 
program and the total Federal funds expended in the State. The Treasury 
Department negotiates agreements with each of the States that cover a 
number of issues under the CMIA, including which programs of the 
Federal Government are covered by the CMIA in that State. Under the 
Treasury-State agreement, a State may choose to cover more programs 
under the CMIA than would be required under the regulatory chart. Thus, 
to determine whether a program administered by the Department is 
covered by the CMIA in a particular State, contact the CMIA contact 
person for the State. These people are usually located in fiscal 
offices such as a State controller's office. Many of the formula grant 
State-administered programs of the Department meet the threshold for 
coverage in most, if not all, States.
    The Department of Education (Department) published a notice of 
proposed rulemaking (NPRM) in the Federal Register on December 16, 
1993, (58 FR 65856) that proposed regulations to limit the Federal 
Government's interest liability under the CMIA. The Secretary received 
60 comments in response to the NPRM from State educational agencies, 
State fiscal offices, a trust territory, the Treasury Department, and 
three national organizations. In addition to the comments, the 
Department has discussed this rule with the States at various 
conferences and presentations over the past one and one-half years. 
Most States asked the Department to defer the proposed rule so that it 
would not apply to funds made available for obligation by the Secretary 
starting in calendar year 1994. The reason advanced most often to 
support the deferral request was to give States time to adjust their 
schedules to a new clearance process designed to submit State plans to 
the Department on an earlier date. Commenters who were responsible for 
State administration of programs that are current-funded, such as the 
Library Services and Construction Act, suggested that the change in 
submission date would be particularly burdensome for them without 
greater advance notice of the change in the regulations. The commenters 
also asked that the Secretary not apply, in 1994, the decision not to 
grant pre-award costs if a State is late in submitting its State plan.
    In addition to asking for the deferrals, the commenters raised many 
questions that had to be answered before the regulations could become 
effective. The Secretary decided to defer both application of the 
proposed rule and the decision not to grant pre-award costs so that 
States would have additional time to adjust their State plan 
development processes to the timelines in the proposed regulations. 
Thus, the Secretary published a notice in the Federal Register on May 
26, 1994 (59 FR 27404) indicating his decision to defer application of 
the actions proposed in the NPRM until the submission of State plans in 
the spring and summer of 1995. After considering the comments, the 
Secretary has decided to apply this final rule to applications 
submitted in the spring and summer of 1996.
    The NPRM for these regulations discussed the basis for these 
regulations, the history of how the Department treated late State plans 
in past years, the effect of the Treasury regulations implementing the 
Act on the Department's practices, and the Department's proposed 
regulations.
Analysis of Comments and Changes

    An analysis of the comments and of the changes in the regulations 
since publication of the NPRM follows. These regulations are designed 
to cover the full spectrum of the Department's State-administered 
programs. Thus, this preamble uses examples from many programs to 
illustrate the applicability of the final regulations. If you have 
questions about the application of these regulations to a specific 
program of the Department, contact the program office responsible for 
the program.
    Technical changes to the regulations have been made to improve 
their quality. These changes, which do not affect substance, are not 
discussed in this preamble.

General Comments on Interest Liability

    Comment: Several commenters expressed concern over the proposed 
regulatory changes that would limit interest liability to States. Some 
States concurred with the regulations that would require States to 
submit a timely State plan and the Department of 

[[Page 41287]]
Education to respond in a timely manner so interest would not be an 
issue. However, they believed that if the Federal Government was not 
responsive within a specific time frame, interest should be paid to the 
States.
    Discussion: The purpose of the CMIA is to achieve efficient, 
equitable cash management practices so that no interest is exchanged. 
It is prudent for the Department of Education to take action to correct 
past practices regarding the acceptance of State plans that are 
submitted late. The CMIA requires the Secretary of Treasury to regulate 
and enforce timely disbursements of funds by Federal agencies. The 
final regulations require States to submit substantially approvable 
plans by specific dates, and the Department to respond in a timely 
manner, or pay interest to the States in cases where States use their 
own funds to pay for Federal program obligations during a period of 
delay caused by the Department. The Secretary is committed to 
conducting timely reviews of State plans.
    Change: None.
    What does substantially approvable mean?
    Comment: Many commenters asked the Secretary to define 
``substantially approvable,'' stressing the heightened importance of 
its meaning now that the Secretary has decided not to grant pre-award 
costs. Some of the commenters expressed the fear that the term could 
and would be interpreted differently by every program official who 
approves State plans. Others asked that explicit criteria be included 
in a definition of the term or that a term different than substantially 
approvable be used as a test to determine whether funds should flow to 
a State. One commenter suggested that the Department should authorize 
the flow of funds if a State made a ``good faith'' submission.
    One commenter stated that there have been numerous requests to 
reword sections of its State plans that have been approved by other 
staff in past years and that the State had been asked to move sentences 
from one page to another or to repeat sentences that appear on one page 
at a later place in the State plan. To this commenter, it was unclear 
whether the failure to respond to these requests would have rendered 
the plan not substantially approvable.
    Another commenter was concerned that if substantially approvable is 
interpreted to mean not just submission of required components, but 
resolution of disagreements about approvable content, the term must 
mean the same thing as ``fully approvable.'' This commenter believed 
that disagreements over interpretations of content should not delay the 
allocation of funds because these disagreements often take months to 
resolve.
    Some of the commenters asked exactly what documents had to be 
submitted to determine whether a plan was substantially approvable. One 
recommended that the Department establish a regulatory list of required 
documents so that there could be no ambiguity about what was required 
to be submitted.
    One commenter was concerned that minor modifications or submission 
of additional information should not delay the availability of Federal 
funds for obligation by the State.
    Discussion: The Secretary has decided to continue using the term 
``substantially approvable'' as the test for whether a State may begin 
to obligate funds under a program. Most of the programs of the 
Department and its predecessor, the Education Division of the former 
Department of Health, Education, and Welfare, have used this term since 
the early 1970s as the test to determine whether a State may begin to 
obligate funds. Under this standard, the Department decides whether a 
plan is substantially approvable based on whether the plan has met 
substantive requirements under a funding statute and regulations.
    While some commenters expressed concern that the substantially 
approvable standard might be used to defer funding for a State based 
solely on the need for trivial changes to the State plan, the 
Department has always made its determination of whether a State plan is 
substantially approvable based on whether the plan has met substantive 
requirements under a funding statute and regulations. Thus, the need 
for minor modifications of a non-substantive nature will not delay the 
availability of Federal funds for obligation by the State.
    The Secretary is aware that in some cases employees of the 
Department have asked for changes to elements of a State plan that 
might not be deficient under the ``substantially approvable'' test. 
These requests have been motivated by a desire to assist a State in 
improving its State plan and have been made in the context of other 
changes that have been requested as necessary to make a plan 
substantially approvable. In the future, employees of the Department 
will distinguish their requests so that State officials will know which 
requests must be satisfied in order to make a State plan substantially 
approvable.
    The Secretary understands the concern that each employee of the 
Department may interpret the standard differently, subjecting a State 
to arbitrary determinations by the Department. However, the Secretary 
notes that front line employees of the Department who review State 
plans do not make the final decisions about whether a plan is 
substantially approvable. Those decisions are made by senior officials 
in consultation with program managers. Thus, a decision about whether a 
particular plan is substantially approvable is made by officials who 
are exposed to a broad array of plans and who exercise their judgment 
to ensure that States are treated equitably.
    The following examples are taken from past experiences of the 
Department and demonstrate how the term ``substantially approvable'' 
has been applied in the context of various programs.

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

    Under the IDEA, Part B, each participating agency must permit 
parents to inspect and review any education record relating to their 
children which is collected, maintained, or used by the agency under 
Part B. The agency must comply with a parental request to inspect and 
review records without unnecessary delay and before any meeting 
regarding an individualized education program or hearing relating to 
the identification, evaluation, or placement of the child, and in no 
case more than 45 days after the request has been made. In one case, 
the State plan referenced a State statute that required that ``After an 
individual has been shown the private data and informed of its meaning, 
the data need not be disclosed to that individual for six months 
thereafter unless a dispute or action pursuant to this section is 
pending or additional data on the individual has been collected or 
created.'' The State was required to ensure that a parent's right to 
access under the Federal requirement was not limited by State statute 
in order for its plan to be substantially approvable.
Example 2: Rehabilitation Act of 1973

    Section 101(a)(5)(A) of the Rehabilitation Act, as amended in 1992, 
contains the requirements for the order of selection for services. 
Under this section, a State plan must show and provide the 
justification for an order of selection that will be used by the State 
in determining which individuals with disabilities will be served if 
the State cannot serve all individuals eligible for services under the 
Act. The order of selection for the provision of vocational 
rehabilitation services must be 

[[Page 41288]]
determined on the basis of serving first those individuals with the 
most severe disabilities in accordance with criteria established by the 
State. The State plan must also describe the outcomes and service goals 
for the individuals served by the State and the time within which the 
outcomes and service goals may be achieved.
    Several State plans that indicated an inability to serve all 
eligible individuals have been found not to be substantially approvable 
because they failed to contain the State's criteria for determining 
which individuals with disabilities are the individuals with the most 
severe disabilities. In other cases, State plans were found not 
substantially approvable because the plans failed to indicate that the 
State would target its resources to serve individuals with the most 
severe disabilities first.

Example 3: Adult Education Act

    The Adult Education Act and its implementing regulations require 
assurances that public and nonprofit agencies, including correctional 
education agencies, be provided direct and equitable access to all 
Federal funds provided under the State plan program. However, one State 
plan stated ``Correctional agencies will be eligible for any newly 
appropriated federal funding directly from the U.S. Department of 
Education for corrections educational programs.'' This language was 
unacceptable under the requirements of the Act and regulations. The 
State was asked to submit a revision to the plan to correct the 
deficiency. The State plan was found substantially approvable when the 
State revised it to say ``Eligible recipients for adult basic education 
funding include correctional educational agencies.''

Example 4: Library Services and Construction Act (LSCA)

    One State submitted a plan in which a project for strengthening the 
capacity of the State Library Agency and an Administration project both 
included administrative expenses. The plan was not considered 
substantially approvable because activities that would be considered as 
administration of the Act are not allowed in a Strengthening project. 
The State was required to include all administrative expenditures under 
its Administration project before the plan was found substantially 
approvable.
    Under the LSCA, a State must have an approved Long-range Program 
(LRP) on record with the Department, and all annual programs must be 
based on needs, priorities, and plans identified in the LRP. In the 
second year after the passage of amendments to LSCA in 1990, several 
State plans were not found substantially approvable because the States 
had not changed their LRPs to reflect new statutory priorities under 
the LSCA amendments. These plans were found substantially approvable 
when the new priorities were addressed either in a revised or amended 
LRP.
    The examples described above indicate that the kinds of issues that 
must be resolved before a State plan can be found substantially 
approvable are not trivial and the Department's decisions in these 
cases are based on clear mandates in statutes and implementing program 
regulations. The Secretary assures the States that the Department will 
not find a State plan not substantially approvable simply because an 
assurance or other text is misplaced in the plan or there is some other 
non-substantive problem with the plan.
    This preamble discusses the issue of what documents must be 
submitted under the heading ``Should the Department be required to send 
documents, including a list of any other documents required to prove 
eligibility under each program, to States by a date certain and what 
should be the effect of the Department's failure to do so?''
    Change: None.
    How do the regulations affect Maintenance of Effort and Matching 
Requirements?
    Several commenters addressed the discussion in the NPRM regarding 
the effect of the proposed regulations on fiscal maintenance of effort 
requirements (MOE). Some confusion was created by the fact that the 
preamble described the MOE requirement under the Rehabilitation Act as 
if it were an eligibility requirement. However, under that Act, failure 
to meet MOE requirements does not deny eligibility. Instead, the 
allotment for a State is reduced by the amount that the State fails to 
meet the MOE requirement unless a waiver or modification of the MOE 
requirement is granted.
    Comment: One commenter was concerned that the regulations appeared 
to require submission of documents demonstrating that a State had met 
the MOE requirements before a State plan could be considered 
substantially approvable. The commenter noted that this would not be 
workable because the financial report needed to demonstrate that MOE 
had been met was not available until 90 days after the end of the grant 
period and the State plan for a current funded program had to be 
submitted before the end of the prior grant period.
    Discussion: The CMIA and these implementing regulations do not 
independently require submission of any document. The documents that 
must be submitted under a particular program are based on the program 
statute and implementing regulations.
    Most program offices of the Department do not review actual MOE 
data before making a decision that a plan is substantially approvable. 
Instead, these programs require a State to submit an assurance that the 
State has met the MOE requirement based on currently available data. 
Under these programs, the Department relies on financial audits, 
reports, and other information to determine whether a State has met its 
MOE requirement for a particular year. Thus, for these programs, 
submission of MOE documentation, other than an assurance, would not be 
required before the Department made a decision about whether a State 
plan was substantially approvable.
    One program office that does review MOE data as part of the State-
plan review process is the office administering the LSCA program. Under 
the LSCA, the determination of whether a State has met a MOE 
requirement is based on a comparison of the planned expenditures of the 
State and the expenditures of the State from the second preceding year. 
Program officials for this program compare the budget of the State-plan 
submission against the expenditures of the State for the second 
preceding year before the budgeted year to determine if the State has 
budgeted sufficient funds to meet the MOE requirement.
    Change: None.
    Comment: Many commenters wanted the Department to accept, for the 
purpose of meeting MOE and matching requirements, non-federal 
expenditures made after the date that funds are available for 
obligation by the Secretary but before the date a State plan was found 
substantially approvable. Under some programs, the difference of just a 
few thousand dollars made a difference for a State in determining 
whether it met its MOE requirements.
    Discussion: The Secretary has decided to modify the policy 
announced in the NPRM regarding pre-award costs, based on the concerns 
expressed in these comments. Expenditures incurred to meet matching and 
MOE requirements are not expenditures for which the Federal Government 
must deposit funds to the account of a State. Thus, these expenditures 
are not subject to the interest liabilities of the CMIA.
    Given that the CMIA does not apply to non-Federal funds used to 
meet 

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matching and MOE requirements, the Secretary decided that he had more 
flexibility to permit a State to use these expenditures to meet 
matching and MOE requirements even though the period for obligation by 
the Secretary has started and the State does not yet have a 
substantially approvable State plan. Thus, the Secretary has decided to 
permit States to use these expenditures to meet matching and MOE 
requirements before the date a State plan is found substantially 
approvable. However, a State that chooses to use its funds for these 
types of expenditures would risk the possibility that they would be 
found unallowable because they do not comply with the State plan that 
is finally approved. The Secretary decided to change the pre-award cost 
policy so that States managing programs that require matching or MOE 
expenditures would have greater flexibility to keep those programs 
running with matching and MOE expenditures during a period when costs 
would otherwise be unallowable due to the late submission of a State 
plan.
    The Secretary notes that the MOE determination under some programs 
of the Department is not based on State expenditures under the Federal 
program. For example, under the newly reauthorized Title I program of 
the Elementary and Secondary Education Act of 1965, the MOE 
determination is based on whether a State has expended sufficient funds 
on free public education. Another example is one of the MOE 
requirements under the LSCA Title I program under which the MOE 
determination is based on State expenditures under a State program that 
has a similar purpose to the Federal program. Under requirements such 
as these, State expenditures used to meet the MOE requirement do not 
need to be for allowable costs under the Federal program. Thus, for 
these types of MOE requirements, even without the change in policy 
regarding pre-award costs, expenditures made by a State after the start 
of the obligation period but before the State plan is found 
substantially approvable may be used by the State to meet MOE 
requirements.
    Change: No change has been made to the regulations. However, the 
Secretary has modified the policy regarding pre-award costs to permit 
grantees to use expenditures made after the date funds become available 
for obligation by the Secretary and before the date a State plan is 
found substantially approvable to meet matching and MOE requirements.
    When must State plans be submitted?
    Comment: Fourteen comments were received concerning the due date 
specified in proposed Sec. 76.703(a)(1) for submission of State plans. 
One commenter stated that the proposed submission date change for State 
plans would not impact that State. Four commenters were concerned that 
the proposed April 1 submission would be too early: (a) to allow 
planning time; and, (b) because State program requirements for public 
input prohibited early submission. One commenter was concerned that an 
April 1 submission date would not allow sufficient time for 
Departmental review and feedback to States needing to correct their 
plans, and still allow adequate time for States to make these 
corrections before the availability date. Two commenters suggested that 
an already lengthy process would be made still longer. One commenter 
believed that the time frame for receiving a plan in substantially 
approvable form should be 60 days before the start of the obligation 
period rather than 90 days before that date. Two commenters were 
concerned that States received their final allocations prior to plan 
submission in order to provide final financial reports. Three comments 
concerned precedence of statutory deadlines over regulatory deadlines. 
One commenter suggested that the Department issue a formal notification 
to the State when a plan is approved.
    Discussion: The Secretary set the deadline date in 
Sec. 76.703(a)(2) for the submission of State plans as a back-up that 
would be used only if a program office did not establish its own 
deadline for submission of State plans. The administrators for each 
State-administered program are free to set deadlines that are 
appropriate for their programs. Most State-administered programs 
already have deadlines that are set in statute, regulations, or direct 
communications with States. The Secretary is aware that the 
establishment of a deadline three months before the start of the 
obligation period could have caused hardship on some States if it had 
been imposed last spring, before States had time to adjust their State-
plan preparation processes to mesh with the new regulations. As stated 
in the May 26, 1994 (59 FR 27404) document, this consideration was one 
of the factors that the Secretary considered in deciding to defer 
application of the regulations to submissions made during the spring 
and summer of 1995. Therefore, the Secretary has decided to leave the 
deadline in Sec. 76.703(a)(2) as stated in the proposed regulations. If 
a State believes that the submission date for a particular program 
should be adjusted due to conditions particular to that program, the 
issue should be addressed with Department officials responsible for 
that program.
    Change: None.
    When should a plan be considered submitted?
    Comment: Five commenters opposed the proposed change in the test 
under proposed Sec. 76.703(b) that the Department uses to determine 
when a State plan is considered submitted. The proposed regulations 
would change the date of submission from the postmark date to the date 
the State plan is actually received by the Department. The commenters' 
reasons for opposition included: (1) the acceptance by other Federal 
agencies of a postmark date; (2) increased burden on States resulting 
from reduced time frames to complete plans because of having to mail 
them earlier in order to assure receipt by the Department by the 
required date; and (3) lack of control over the mail process, which 
could have negative financial consequences on States. One commenter did 
not present a reason for opposing the change from postmark to receipt 
date.
    Discussion: In the past, the Department frequently received grant 
applications from grantees that had mailed applications on the 
submission date, with receipt by the Department as much as two weeks 
later. The lag time created by ``mail-in-transit'' has resulted in the 
Department having shortened review time frames for grant applicants, 
thereby hampering the Department's ability to complete grant reviews 
within its prescribed time frame. Earlier mailing of a State plan or 
use of an expedited delivery service by grant applicants would assure 
the Department a uniform application review period for all State plans 
under each grant program.
    Change: None.
    Should the Department be required to send documents, including a 
list of any other documents required to prove eligibility under each 
program, to States by a date certain, and what should be the effect of 
the Department's failure to do so?
    Comment: Some commenters expressed the opinion that the Department 
should be required to send to States all State plan submission 
instructions and other relevant materials in a timely manner. 
Commenters stressed the critical importance this issue plays in 
allowing States sufficient time to develop and submit plans by the 
established date, particularly when public input is required. 

[[Page 41290]]

    Specifically, some commenters suggested the Department provide all 
necessary guidance three months before the States' prescribed State 
plan submission date, and other commenters recommended six-, four-, and 
two-month lead times for the receipt of these materials. Other 
commenters did not suggest specific time frames, but called for 
``timely receipt'' of all plan instructions issued by the Department.
    One commenter proposed that the regulations at Sec. 76.703(a)(2) 
include a list of any other documents required to prove eligibility 
under each program subject to this part.
    A related issue addressed by some commenters concerned proposed 
penalties against the Department should it fail to provide all relevant 
State plan materials and instructions by a date certain. Some of these 
commenters suggested that when guidance is late, the deadline for State 
plan submission should be extended by one day for each day the 
Department is late in providing guidance. Other commenters proposed a 
general waiver of the penalty to the State for late submissions if the 
Department transmits the guidance to the States late, and one commenter 
suggested an unspecified extension for the State if this occurs.
    Discussion: The Secretary is committed to providing States 
necessary State plan information and instructions--including a list of 
required documents--in a timely manner. In light of this commitment, 
the regulation has been changed to require each program subject to 
these regulations to provide guidance to the States regarding the 
contents of State plans. The Secretary establishes the date for the 
delivery of guidance so that there are at least as many days between 
that date and the date that State plans must be submitted to the 
Department as there are days between the date that State plans must be 
submitted to the Department and the date that funds are available for 
obligation on July 1, or October 1, as appropriate.
    In the event that the Department fails to deliver guidance as 
required, the deadline for the receipt of State plans will be extended 
one day for each day that the documents are late in being received by 
the State. The Secretary intends that guidance be sent to the States 
far enough in advance of the due date for the guidance that the 
information will be received by the States on or before the due date 
for the guidance. If a State asserts that it has received the guidance 
after the due date, it will have the burden of proving the date that it 
received the guidance. The Secretary is aware of the Department's 
responsibility to deliver State plan guidance on a timely basis, and 
will devote appropriate resources to ensure that guidance documents are 
delivered on a timely basis.
    Change: A new paragraph (b) has been added to Sec. 76.703 to cover 
deferrals of the date that a State plan must be submitted to the 
Department. Paragraph (b)(3) covers deferral of State plan submission 
dates caused by failure of the Department to deliver timely guidance to 
the States regarding State plan requirements.
    Should there be a deadline for the Department's decision and what 
should be the effect of failure to meet such a deadline?
    Comment: Many commenters expressed concern that the proposed 
regulations did not require the Department to complete a timely review 
such that, if State plans and other documents are submitted on time, 
the State has an opportunity to submit any necessary modifications or 
corrections before any delay in the obligation date is imposed. None of 
the examples in the proposed regulations indicate what will happen if 
the State plan is submitted in substantially approvable form, on time, 
but the Department fails to conduct a timely review.
    Some of the commenters cited the following example: the State plan 
is submitted on April 1; the Department completes the review at the end 
of June and finds that the plan is not substantially approvable; 
corrections are requested but insufficient time is allowed for the 
State to make the corrections for an obligation date of July 1.
    Several commenters recommended imposing time limits for the 
Departmental review of the plan. Some of these commenters suggested 
thirty days, while another commenter suggested forty-five days.
    One commenter suggested that, if a time limit on Departmental 
review could not be imposed, resulting in a State agency not receiving 
Federal funds until after the first day the funds are available for 
obligation, then at the very least an appeal process with provisions 
for due process should be established.
    One commenter suggested that if the Department were unable to 
complete a review in a timely manner, the State should be granted pre-
award costs.
    Discussion: The Secretary is committed to conducting timely reviews 
of State plans. If a State submits a State plan in conformance with the 
guidance provided, it should take less than the three months allotted 
for the Department to review the plan. Under these circumstances it is 
anticipated that any changes or corrections needed to make the plan 
substantially approvable will be minor and can be completed in a very 
limited amount of time. On the other hand, if a State submits a plan 
that is not in accord with the guidance provided, then it is possible 
that the resubmission and approval process could extend beyond the date 
funds are first available to the Department for obligation. If the 
Department fails to conduct a timely review of a State plan that is 
submitted in substantially approvable form on the date it is due, the 
State could begin to obligate funds on the date funds are available for 
obligation by the Secretary. Also, States have a responsibility to 
submit plans that are substantially approvable upon submission.
    The Secretary believes that these regulations will result in States 
submitting timely and high quality plans and in efficient and punctual 
review by the various Department program offices. In view of the wide 
variety of content requirements for State plans under Department 
programs and of the number of plans reviewed by various program 
offices, the Secretary declines to impose intermediate time frames for 
Department review of State plans within this three-month period. 
However, the Secretary believes that the Department should be held 
accountable in meeting the timeliness established for review of State 
plans under a program. Thus, the Secretary has decided to modify the 
regulation so that if the Department takes longer to review a plan than 
established in advance, the Secretary will grant pre-award costs to the 
State, regardless of what the regulation would otherwise require.
    Change: A new paragraph (g) has been added to Sec. 76.703 so that 
if the Department takes longer to review a State plan than established 
under the regulation, the Secretary would grant pre-award costs.
    Should the Department establish procedures for notifying the States 
of the results of the Department's review?
    Comment: Several commenters expressed concerns about the 
Department's ability to maintain and review documents and notify States 
of the results of that review in a timely manner.
    One commenter asked whether the grant award would be the indication 
of approval or whether there would also be an accompanying letter.
    Two commenters suggested that the Department should notify the 
State when the initial State plan submission is received.
    Discussion: The Secretary believes that the Department must be 
timely in 

[[Page 41291]]
its response to States concerning the State plan submission. The 
Secretary will ensure that the Department establishes internal 
procedures in order to facilitate the notification process. The 
Department will establish a method of formal notification to States 
when the documents specified in guidance provided by the Department 
have been received for review. If a State submits an incomplete State 
plan, the Department will informally notify the State regarding the 
missing pieces. Also, the Department will develop internal procedures 
to include both formal and informal means (phone and fax messages) of 
notifying the States concerning the status of the review during the 
process. The Department officially notifies a State regarding the 
issuance of its grant through a notification of grant award (NGA). Some 
program offices may provide cover letters prior to or accompanying the 
NGA. It is mutually beneficial to all parties for the Department to 
conduct a timely review which includes periodic contact with the State.
    Change: A new paragraph (c)(3) has been added to Sec. 76.703 that 
will require the Department to inform States when all documents 
specified in Departmental guidance have been received by the 
Department.
    Should the Department change the proposed rule about who may sign 
for changes to a State plan?
    Comment: Two commenters expressed concern about the requirement in 
proposed Sec. 76.703(e)(2) that would require a State that submits 
additional information to bring the State plan into substantially 
approvable form to secure signatures for required changes from the 
original submitter of the plan or an authorized delegate of that 
officer.
    One commenter suggested that since changes to the plan often are 
faxed to the Department for review, the State should be allowed to 
supply the Department with the names of individuals who are authorized 
to sign the State plan.
    One commenter suggested that the Department should consider not 
requiring signatures from other agencies (i.e. Drug Free Communities) 
and allow the State agency receiving the grant to submit its plan 
separately.
    Discussion: The Secretary appreciates the difficulties that arise 
in securing appropriate signatures in a very short turn-around time. 
The Secretary agrees that submitting a list of staff authorized to 
sign-off on changes to the plan would be appropriate. The Department 
does not have the authority to waive the signature required of the 
Governor for the drug-free program.
    The Department will work with States to develop procedures for 
submitting documents by electronic transmittal and appropriate means of 
verifying signatures.
    Change: None
    Should the Department establish a rule permitting waiver of the 
Sec. 76.703 regulation in certain circumstances?
    Comment: Several commenters requested that the regulations provide 
for a waiver authority or other discretion by the Department to allow 
pre-award costs when submission of a State plan is late. The reasons 
commenters felt might justify exceptions to the general rule included 
circumstances beyond a State's control, such as a natural disaster, 
absence of State program personnel due to serious medical problems or 
death and instances when the Federal interest in the timely beginning 
or continuation of a State's program would be adversely affected, or 
when significant impairment to the achievement of a program's 
objectives would result.
    Discussion: The Secretary agrees with commenters that there is a 
need to allow the Department the discretion to allow pre-award costs 
for expenditures under the Federal program in some limited 
circumstances. However, the Secretary believes that instances in which 
pre-award costs are allowed under these regulations should be clear, 
susceptible to consistent application across programs, and narrowly 
tailored to situations that are truly outside the control of the State. 
Some programs may need to permit discretion in granting pre-award costs 
in program-specific situations. This authority should be addressed, as 
appropriate, in individual program regulations.
    Change: A new paragraph (b) has been added to Sec. 76.703 to cover 
deferrals for the date that a State plan must be submitted to the 
Department. Paragraph (b)(1) provides that the Secretary, at a State's 
request, may extend the submission date for a State plan and, if 
necessary, approve pre-award costs for a particular grant based on a 
Presidentially-declared disaster in the State that significantly 
impairs the ability of the State to submit a timely application.
    Should the Department have a special rule when there is a delay in 
program appropriations or implementing regulations?
    Comment: Several commenters noted that there are instances when, 
due to changing Federal statutes and regulations, States do not have 
notice of what the State plan requirements are in enough time to enable 
them to complete the development of the plan and submit it on time. One 
commenter noted that for one program an April 1 submission date would 
mean that they would have to begin preparation of the plan 12 to 15 
months prior to the start of the fiscal year to which the grant 
applies. Commenters indicated that States should not be penalized for 
late submissions in circumstances where there has been a late 
appropriation or the Department has not notified the States in a timely 
manner regarding the State plan requirements for a program.
    Discussion: Regarding late appropriations, the Treasury Department 
regulations at 31 CFR 205.11(b) already provide that if a State pays 
out its own funds for program purposes due to a delay in the passage of 
a Federal appropriations act, the Federal Government will incur an 
interest liability if the appropriations act covers the period of the 
State's expenditure and permits payment for expenditures already 
incurred by the State. The Secretary does not have authority to change 
the result under the Treasury regulations.
    Regarding program regulations, as a general rule, the requirements 
that apply to a grant are the statutes and regulations that are in 
effect on the day that the grant is made. Often, legislation that 
imposes significant new responsibilities on States has a delayed 
effective date so that States have time to make the changes necessary 
for implementation. Similarly, the Federal rulemaking process generally 
incorporates a delayed effective date, although that delay may not be 
sufficient in some cases to allow States to make necessary changes in 
their State plans. Therefore, the Secretary agrees with commenters that 
these regulations should be modified to allow States a reasonable 
period of time to make needed changes in State plans.
    In many instances, under current practice, if new program 
requirements take effect at a time that the Department determines is 
too close to the date on which grants are to be made to allow the State 
to make needed changes, the Department obtains an assurance from the 
State that the State is operating the program consistent with all 
applicable requirements, including those that are newly effective. 
Other assurances and documentation that the new requirements are being 
followed may be required by particular programs. Revisions to the State 
plan to incorporate changes needed as a result of the new requirements 
must be completed as soon as possible but generally not later than the 
expected 

[[Page 41292]]
beginning of the next grant award period. The Secretary believes that 
this practice may continue to be appropriate for situations that can be 
addressed by State assurances and documentation that program 
requirements are being implemented. In other situations, an assurance 
would not be sufficient to address the new State plan requirements, 
even in the short run, and the Secretary may need the discretion to 
give States additional time to submit their applications under a 
program.
    Change: A new Sec. 76.704 has been added that provides that, unless 
the particular program has established an earlier date, the State plan 
must meet the requirements that were in effect for the program three 
months before the State plan due date and any additional requirements 
known on that date that are scheduled to become effective by the 
expected grant award date (July 1 for forward-funded programs or 
October 1 for current-funded programs). If any of these requirements is 
changed after that date (three months before the State plan due date or 
the other date established by the program), the Secretary may require a 
State to submit appropriate assurances and documentation or extend the 
due date for the State plan and, if necessary under an extended due 
date, approve pre-award costs for that program.
    Should States be permitted to waive their right to interest in 
return for the Department's acceptance of late State plans without 
penalty?
    Comment: One commenter suggested that the regulations provide that 
the Secretary could waive these regulations if the State agreed to 
``waive'' its claim to interest on the State funds used for pre-award 
costs under the CMIA. Another commenter recommended that expenditures 
made during a period that a State plan is not substantially approved be 
exempted from the operation of the CMIA.
    Discussion: The Department is without authority to require or even 
permit States to forego claims to interest under the CMIA. Congress 
delegated to the Treasury Department the authority to enforce the CMIA. 
The operation of the CMIA and the programs to which it applies are 
controlled by Treasury's CMIA implementing regulations, 31 CFR part 
205, and the State-Treasury agreements under those regulations.
    Change: None.
    Should certain programs be exempt from the regulations in 76.703?
    Comment: Commenters noted the particular problems of the programs 
that are not forward-funded, such as the LSCA programs and the 
Rehabilitation Act programs. One commenter suggested that these 
programs be exempted from the operation of the proposed regulations.
    Discussion: As explained above, the Secretary cannot control the 
application of the CMIA to these programs. Thus, the Secretary does not 
believe that it would be prudent to exclude these programs from the 
operation of these Department regulations.
    Change: None.
    Should subgrantees be permitted to obligate funds during a period 
before the State may begin to obligate funds?
    Comment: One comment was received regarding the relationship 
between proposed Sec. 76.703 and the current Sec. 76.704 (redesignated 
by this final rulemaking document as Sec. 76.708), which provides that 
a subgrantee may not begin to obligate funds until the State may begin 
to obligate funds. The commenter noted that, under many State-
administered programs, most of the funds flow through to subgrantees 
that are required to provide most of the services required under a 
program. The commenter thought that the proposed regulations should be 
amended so that subgrantees could begin to obligate funds even if the 
State had failed to submit a substantially approvable State plan. 
According to the commenter, this result was appropriate because 
subgrantees have no control over the timely preparation of the State 
plan but would be penalized under the proposed regulations for a 
State's failure to submit a substantially approvable State plan on a 
timely basis.
    Discussion: The Secretary is aware that subgrantees must depend 
upon responsible management of Federal programs by the States in order 
to be able to obligate funds at the start of the obligation period. 
However, the Secretary cannot sever this dependency due to the 
relationship between the Department, the States, and their subgrantees. 
Under the framework established by Congress for State-administered 
programs, the Department makes grants to States and has no direct 
relationship with subgrantees. The Department looks to the States for 
proper administration of the programs. For example, when a subgrantee 
misspends funds under a State-administered program, the Department 
seeks recovery of the funds or takes other action against the State to 
achieve compliance by the subgrantee. In this context, a subgrantee 
derives its entire authority to obligate funds under a program from the 
State. Thus, if a State lacks authority to obligate funds, its 
subgrantees are equally without authority to obligate funds.
    Even if the Secretary had the power to permit obligation by 
subgrantees before the State could obligate funds, there are good 
policy reasons for the Department not to permit such a practice. One of 
the purposes of approving a State plan is to ensure that the State is 
imposing correct requirements upon its subgrantees. If a State 
submitted a plan that was not substantially approvable and subgrantees 
were permitted to submit local applications for flow through funds and 
obligate funds under that plan, serious questions would be raised about 
whether the subgrantees were complying with the Federal requirements 
under the program.
    Change: None.
    What issues are raised under the Library Services and Construction 
Act?
    Comment: One commenter suggested that instead of the proposed 
regulations, the Secretary pro-rate decreases to the grant awards in 
accordance with the days the plan is late.
    Discussion: Under the LSCA statute and GEPA, the Secretary does not 
have the authority to decrease the grant awards due to a State's late 
plan submission.
    Change: None.
    Comment: Two commenters noted that disallowing pre-award costs 
under LSCA, Title II (Construction), would adversely impact on 
communities that need to count the cost of the land and architectural 
fees (both pre-award expenditures) in order to meet the 50 percent 
matching requirement. They recommend that the Title II construction 
program be exempt from these regulatory changes.
    Discussion: It is highly unlikely that the LSCA Title II program 
will ever meet the funding threshold for coverage under the CMIA 
Treasury regulations in subpart A of 31 CFR part 205. The LSCA Title II 
program regulations require that the request for grant award be 
submitted to the Department after the State has approved the final 
working drawings. This, by implication, requires that the land be 
purchased and the architectural drawings be completed before the plan 
is submitted. The LSCA Title II regulations clearly provide that these 
expenditures are allowable. 34 CFR 770.11(a)(5). The Assistant 
Secretary will specifically authorize these pre-award costs in grant 
award notices under the LSCA Title II program so that the costs may be 
allowed to meet the requirements of the program.
    Change: None.
    Comment: Several commenters were concerned that State and/or local 
funds expended between July 1 and the effective date of the program (or 
the date of the acceptance of a substantially approvable plan) would 
not be counted 

[[Page 41293]]
toward the matching required under the LSCA program.
    Discussion: State or local funds expended between July 1 and the 
effective date of the program cannot be counted as matching. The LSCA 
Titles I and III programs begin on October 1 and end on September 30. 
These two programs do not exist before the October 1 effective date 
each year. Therefore, the Secretary notes that funds counted as 
matching under the program must be expended in the same time period as 
the Federal grant program.
    The Secretary also notes that Federal carryover funds may not be 
obligated and expended after September 30th until there is a 
substantially approvable plan received by the Department.
    Change: None.
    Comment: Some commenters asked, given the fact that LSCA is a 
current-funded program and that, in many years, the Congress has not 
appropriated funds for LSCA by the start of the Federal fiscal year, is 
the October 1 date still to be the date on which the Secretary will 
obligate funds under Sec. 76.703(c). They asked how this would affect 
the obligation and expenditure of funds between October 1 and the date 
that Congress actually appropriates funds for LSCA.
    Discussion: Regulations covering Federal interest liabilities are 
found in the Treasury Department regulations implementing the Cash 
Management Improvement Act at 31 CFR Part 205. Specifically, 
Sec. 205.11(b) addresses late appropriations and provides that the 
Federal Government will incur an interest liability if an 
appropriations act, as enacted, covers the period of the State's 
expenditure and permits payment for expenses already incurred by the 
State.
    Change: None.
    Comment: A commenter asked if a substantially approvable plan was 
submitted by April 1, could LSCA funds be obligated on July 1.
    Discussion: The beginning of the obligation period for current 
funded programs is October 1, and, therefore, obligations generally may 
not occur prior to that date.
    Change: None.
    Comment: Many commenters noted that the examples under 
Sec. 76.703(e)(3) of the proposed regulations only referred to forward-
funded programs. They noted that because LSCA is not forward-funded it 
should be exempt from these regulatory changes.
    Discussion: The Secretary will not exempt the LSCA program from 
these regulations because current-funded programs cannot be excluded 
from coverage under the CMIA.
    Change: None.
    Comment: It was feared by one commenter that, in trying to fit a 
current funded program under regulations that the commenter felt were 
clearly intended for forward-funded programs, there might be unforeseen 
problems in the future.
    Discussion: The Secretary does not foresee any issues that are 
unique to current-funded programs. However, these regulations have been 
reviewed by Departmental staff knowledgeable about current-funded 
programs such as the LSCA in order to ensure that issues that may arise 
with regard to these programs are addressed.
    Change: None.
    Comment: Several commenters noted that, unlike forward-funded 
programs, planning for LSCA is done on an unknown Federal allocation. 
Under these regulations, the State budget might also be unknown. In 
addition, the staff of the State agency would be compelled to work on 
the plans for LSCA at the same time they must be effecting closeout of 
the State fiscal year.
    Discussion: The commenters are correct in that State plans prepared 
for submission under this revised regulation would, in many cases, be 
based on unknown funding at either the Federal or State levels or at 
both levels. However, annual plans are considered estimates and are 
expected to be revised to reflect final Federal funding amounts. (See 
next discussion for details.) Submissions prior to the due date are 
acceptable if necessary to decrease impact on State staff.
    Change: None.
    Comment: Some commenters noted that State plans based on estimated 
figures would have to be amended at a later date so that the plan 
proposes activities consistent with the actual funding amounts. This 
would make even more complex planning and might ``* * * create 
confusion at the sub-grantee level, and possible fiscal chaos at the 
state level.'' Such added work was considered by a commenter as a 
violation of the Paperwork Reduction Act.
    Discussion: State plans are expected to be based on an estimation 
of funds. Under 34 CFR 80.30(c)(ii), changes to plans or budgets that 
are within ten percent of the budgeted amount, require no additional 
Federal funding, and make no significant change to the intent of the 
project or plan, need not be submitted to the Department for prior 
approval. Because planning is done on an estimated Federal amount 
currently, grantees are already in the position of amending some 
projects after the start of the grant period. The need to amend grants, 
based upon a submission of actual State funding data, and the 
submission of the supporting data, are considered in the burden when 
the paperwork burden is calculated under the Paperwork Reduction Act of 
1980. Therefore, these revised regulations contain no added information 
collection requirements.
    Change: None.
    Comment: Several commenters expressed concern that the required 
assurances under LSCA would be due prior to the passing of the State's 
budget confirming the availability of such funds.
    Discussion: The assurances may be based on the best available 
information as of the date of the submission.
    Change: None.
    Comment: One commenter noted that the revised Sec. 76.703 would 
require estimated annual expenditure reports (rather than actual report 
of expenditures) be accepted by the Department in order to generate a 
plan by July 1.
    Discussion: Under current law, the Federal fiscal year ends on 
September 30. The report covering expenditures for that period is due 
to the Department at the end of December. The LSCA program plans that 
will use the information from the report, as a prerequisite for 
funding, will not be due until the following July 1, which is nine 
months after the expenditure period. The Secretary does not agree that 
only estimated expenditures and not actual expenditures could be 
verified during this time period. Therefore, there is no allowance for 
estimated annual reports.
    Change: None.
    Comment: Several commenters voiced a concern that some State 
expenditures under MOE requirements occur during the July 1 to October 
1 period, and a failure to receive permission to count these 
expenditures towards MOE would cause a failure to qualify for Federal 
LSCA funding.
    Discussion: MOEs under the LSCA are based on the requirement of a 
State to maintain the support of services of a protected program or to 
a protected population. Some of these expenditures may not be part of 
the expenditures under LSCA (such as State Aid) and only have a tenuous 
relationship to the Federal program. Since many of these programs are 
ongoing State supported efforts, the Secretary agrees that these 
amounts are eligible for counting as MOE from the beginning of the 
State fiscal year, whether or not the State plan is substantially 
approvable.
    Change: None.
    Comment: Many commenters noted that Sec. 76.703(a)(2) establishes a 
due date 

[[Page 41294]]
for State Plans, of three months prior to the date that the Secretary 
may obligate funds for the program. The effective date of current 
programs is October 1, and, therefore, plans are due on the prior July 
1. Some commenters noted that such a proposed change will require new 
timetables at the State and local level. Most commented that the change 
can be implemented if given enough time. Other commenters requested 
that the date of October 1 be retained and cited a number of problems 
associated with this change.
    Discussion: The program staff will have reviewed and accepted all 
timely and substantially approvable plans prior to the effective date 
of the program in order that the Secretary may make obligations in a 
timely manner. The retention of the October due date for the submission 
of State plans is impossible if all reviews are to be accomplished 
prior to October 1. The Department must reserve the three-month period 
for review (including negotiations) of the State Plans.
    Change: None.
    Section 76.711: Should States have to request funds by CFDA number?
    The NPRM proposed to add a new Sec. 76.708. This document adds that 
section as a new Sec. 76.711.
    Comment: One commenter asked why the Department would require 
States to use the CFDA number when the Treasury Department would not 
require Federal agencies to provide the CFDA number to the States for 
funds transmitted to the States. Conversely, the Treasury Department 
suggested in its comments that the Department should require all 
grantees to request the draw down of funds by CFDA number, because all 
programs that are covered in the CFDA are subject to coverage under the 
CMIA. A third commenter stated that a requirement to request funds by 
CFDA number would place an unnecessary administrative burden on States 
which might actually hinder timely payments under the CMIA. This 
commenter asked that the Department stay with the current, single-
request system, which permits grantees to request funds needed under 
all grants to a State in a single request, without having to identify 
the programs for which the funds are being requested.
    Discussion: As the Treasury Department stated in the preamble to 
the final regulations implementing the CMIA, ``CFDA numbers are key to 
the provisions of this rule.'' This statement was made in the context 
of Treasury's discussion of concerns that agencies don't always provide 
CFDA numbers to States when the agencies make their awards. Treasury 
said ``Respondents emphasized the problems created in such situations 
given the fact that [the Treasury regulation implementing the CMIA] 
relies on program CFDA numbers for tracking withdrawals and payments, 
and for calculating interest accruals.''
    This discussion indicates Treasury's understanding that States will 
need to request payments by CFDA number and agencies will have to make 
payments by CFDA number in order to calculate interest liabilities 
under the Act. The Department of Education already identifies the CFDA 
number of a grant program whenever it issues a notification of grant 
award. Thus, the Secretary does not expect any increased burden for a 
State to check the CFDA number on a grant award document in order to 
request funds under a program.
    Change: In response to the Treasury Department's comment, 
Sec. 76.708 will require use of the CFDA number when requesting funds 
for any grant subject to Part 76.
    Change: This final rulemaking document makes technical changes by 
redesignating certain sections that were not affected by the NPRM in 
order to make room for the new Sec. 76.704. Current Secs. 76.704, 
76.705, and 76.706 have been redesignated as Sec. 76.708, 76.709, and 
76.710, respectively. Cross references to these sections in other parts 
of 34 CFR have been amended as appropriate.

Paperwork Reduction Act of 1980

    These regulations have been examined under the Paperwork Reduction 
Act of 1980 and have been found to contain no information collection 
requirements.

List of Subjects

34 CFR Part 76

    Education Department, Grant programs-education, Grant 
administration, Intergovernmental relations, State-administered 
programs.

34 CFR Part 667

    Colleges and universities, Cultural exchange programs, Education, 
Educational study programs, Grant programs--education.

    Dated: April 6, 1995.
Richard Riley,
Secretary of Education.
(Catalog of Federal Domestic Assistance Number does not apply)

    The Secretary amends Parts 76 and 667 of Title 34 of the Code of 
Federal Regulations as follows:

PART 76--STATE-ADMINISTERED PROGRAMS

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

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

    2. Section 76.703 is amended by removing paragraphs (a) and (b), 
redesignating paragraph (c) as paragraph (h), adding new paragraphs (a) 
through (g), and adding notes following new paragraphs (b) and (g), to 
read as follows:


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

    (a) (1) The Secretary may establish, for a program subject to this 
part, a date by which a State must submit for review by the Department 
a State plan and any other documents required to be submitted under 
guidance provided by the Department under paragraph (b)(3) of this 
section.
    (2) If the Secretary does not establish a date for the submission 
of State plans and any other documents required under guidance provided 
by the Department, the date for submission is three months before the 
date the Secretary may begin to obligate funds under the program.
    (b) (1) This paragraph (b) describes the circumstances under which 
the submission date for a State plan may be deferred.
    (2) If a State asks the Secretary in writing to defer the 
submission date for a State plan because of a Presidentially declared 
disaster that has occurred in that State, the Secretary may defer the 
submission date for the State plan and any other document required 
under guidance provided by the Department if the Secretary determines 
that the disaster significantly impairs the ability of the State to 
submit a timely State plan or other document required under guidance 
provided by the Department.
    (3) (i) The Secretary establishes, for a program subject to this 
part, a date by which the program office must deliver guidance to the 
States regarding the contents of the State plan under that program.
    (ii) The Secretary may only establish a date for the delivery of 
guidance to the States so that there are at least as many days between 
that date and the date that State plans must be submitted to the 
Department as there are days between the date that State plans must be 
submitted to the Department and the date that funds are available for 
obligation by the Secretary on July 1, or October 1, as appropriate.
    (iii) If a State does not receive the guidance by the date 
established under 

[[Page 41295]]
paragraph (b)(3)(i) of this section, the submission date for the State 
plan under the program is deferred one day for each day that the 
guidance is late in being received by the State.

    Note: The following examples describe how the regulations in 
Sec. 76.703(b)(3) would act to defer the date that a State would 
have to submit its State plan.

    Example 1. The Secretary decides that State plans under a 
forward-funded program must be submitted to the Department by May 
first. The Secretary must provide guidance to the States under this 
program by March first, so that the States have at least as many 
days between the guidance date and the submission date (60) as the 
Department has between the submission date and the date that funds 
are available for obligation (60). If the program transmits guidance 
to the States on February 15, specifying that State plans must be 
submitted by May first, States generally would have to submit State 
plans by that date. However, if, for example, a State did not 
receive the guidance until March third, that State would have until 
May third to submit its State plan because the submission date of 
its State plan would be deferred one day for each day that the 
guidance to the State was late.
    Example 2. If a program publishes the guidance in the Federal 
Register on March third, the States would be considered to have 
received the guidance on that day. Thus, the guidance could not 
specify a date for the submission of State plans before May second, 
giving the States 59 days between the date the guidance is published 
and the submission date and giving the Department 58 days between 
the submission date and the date that funds are available for 
obligation.
    (c) (1) For the purposes of this section, the submission date of 
a State plan or other document is the date that the Secretary 
receives the plan or document.
    (2) The Secretary does not determine whether a State plan is 
substantially approvable until the plan and any documents required 
under guidance provided by the Department have been submitted.
    (3) The Secretary notifies a State when the Department has 
received the State plan and all documents required under guidance 
provided by the Department.
    (d) If a State submits a State plan in substantially approvable 
form (or an amendment to the State plan that makes it substantially 
approvable), and submits any other document required under guidance 
provided by the Department, on or before the date the State plan 
must be submitted to the Department, the State may begin to obligate 
funds on the date that the funds are first available for obligation 
by the Secretary.
    (e) If a State submits a State plan in substantially approvable 
form (or an amendment to the State plan that makes it substantially 
approvable) or any other documents required under guidance provided 
by the Department after the date the State plan must be submitted to 
the Department, and--
    (1) The Department determines that the State plan is 
substantially approvable on or before the date that the funds are 
first available for obligation by the Secretary, the State may begin 
to obligate funds on the date that the funds are first available for 
obligation by the Secretary; or
    (2) The Department determines that the State plan is 
substantially approvable after the date that the funds are first 
available for obligation by the Secretary, the State may begin to 
obligate funds on the earlier of the two following dates:
    (i) The date that the Secretary determines that the State plan 
is substantially approvable.
    (ii) The date that is determined by adding to the date that 
funds are first available for obligation by the Secretary--
    (A) The number of days after the date the State plan must be 
submitted to the Department that the State plan or other document 
required under guidance provided by the Department is submitted; and
    (B) If applicable, the number of days after the State receives 
notice that the State plan is not substantially approvable that the 
State submits additional information that makes the plan 
substantially approvable.
    (f) Additional information submitted under paragraph 
(e)(2)(ii)(B) of this section must be signed by the person who 
submitted the original State plan (or an authorized delegate of that 
officer).
    (g) (1) If the Department does not complete its review of a 
State plan during the period established for that review, the 
Secretary will grant pre-award costs for the period after funds 
become available for obligation by the Secretary and before the 
State plan is found substantially approvable.
    (2) The period established for the Department's review of a plan 
does not include any day after the State has received notice that 
its plan is not substantially approvable.

    Note: The following examples describe how the regulations in 
Sec. 76.703 would be applied in certain circumstances. For the 
purpose of these examples, assume that the grant program established 
an April 1 due date for the submission of the State plan and that 
funds are first available for obligation by the Secretary on July 1.

    Example 1. Paragraph (d): A State submits a plan in 
substantially approvable form by April 1. The State may begin to 
obligate funds on July 1.
    Example 2. Paragraph (e)(1): A State submits a plan in 
substantially approvable form on May 15, and the Department notifies 
the State that the plan is substantially approvable on June 20. The 
State may begin to obligate funds on July 1.
    Example 3. Paragraph (e)(2)(i): A State submits a plan in 
substantially approvable form on May 15, and the Department notifies 
the State that the plan is substantially approvable on July 15. The 
State may begin to obligate funds on July 15.
    Example 4. Paragraph (e)(2)(ii)(A): A State submits a plan in 
substantially approvable form on May 15, and the Department notifies 
the State that the plan is substantially approvable on August 21. 
The State may begin to obligate funds on August 14. (In this 
example, the plan is 45 days late. By adding 45 days to July 1, we 
reach August 14, which is earlier than the date, August 21, that the 
Department notifies the State that the plan is substantially 
approvable. Therefore, if the State chose to begin drawing funds 
from the Department on August 14, obligations made on or after that 
date would generally be allowable.)
    Example 5. Paragraph (e)(2)(i): A State submits a plan on May 
15, and the Department notifies the State that the plan is not 
substantially approvable on July 10. The State submits changes that 
make the plan substantially approvable on July 20 and the Department 
notifies the State that the plan is substantially approvable on July 
25. The State may begin to obligate funds on July 25. (In this 
example, the original submission is 45 days late. In addition, the 
Department notifies the State that the plan is not substantially 
approvable and the time from that notification until the State 
submits changes that make the plan substantially approvable is an 
additional 10 days. By adding 55 days to July 1, we reach August 24. 
However, since the Department notified the State that the plan was 
substantially approvable on July 25, that is the date that the State 
may begin to obligate funds.)
    Example 6. Paragraph (e)(2)(ii)(B): A State submits a plan on 
May 15, and the Department notifies the State that the plan is not 
substantially approvable on August 1. The State submits changes that 
make the plan substantially approvable on August 20, and the 
Department notifies the State that the plan is substantially 
approvable on September 5. The State may choose to begin drawing 
funds from the Department on September 2, and obligations made on or 
after that date would generally be allowable. (In this example, the 
original submission is 45 days late. In addition, the Department 
notifies the State that the plan is not substantially approvable and 
the time from that notification until the State submits changes that 
make the plan substantially approvable is an additional 19 days. By 
adding 64 days to July 1, we reach September 2, which is earlier 
than September 5, the date that the Department notifies the State 
that the plan is substantially approvable.)
    Example 7. Paragraph (g): A State submits a plan on April 15 and 
the Department notifies the State that the plan is not substantially 
approvable on July 16. The State makes changes to the plan and 
submits a substantially approvable plan on July 30. The Department 
had until July 15 to decide whether the plan was substantially 
approvable because the State was 15 days late in submitting the 
plan. The date the State may begin to obligate funds under the 
regulatory deferral is July 29 (based on the 15 day deferral for 
late submission plus a 14 day deferral for the time it took to 
submit a substantially approvable plan after having received 
notice). However, because the Department was one day late in 
completing its review of the plan, the State would get pre-award 
costs to cover the period of July 1 through July 29.
* * * * *
(Authority: 20 U.S.C. 1221e-3, 6511(a), 3474, 31 U.S.C. 6503)

    3. Sections 76.704, 76.705, and 76.706 are redesignated as 
Secs. 76.708, 76.709, and 76.710, respectively.

[[Page 41296]]

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


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

    (a) This section specifies the State plan requirements that must be 
addressed in a State plan if the State plan requirements established in 
statutes or regulations change on a date close to the date that State 
plans are due for submission to the Department.
    (b)(1) A State plan must meet the following requirements:
    (i) Every State plan requirement in effect three months before the 
date the State plan is due to be submitted to the Department under 34 
CFR 76.703; and
    (ii) Every State plan requirement included in statutes or 
regulations that will be effective on or before the date that funds 
become available for obligation by the Secretary and that have been 
signed into law or published in the Federal Register as final 
regulations three months before the date the State plan is due to be 
submitted to the Department under 34 CFR 76.703.
    (2) If a State plan does not have to meet a new State plan 
requirement under paragraph (b)(1) of this section, the Secretary takes 
one of the following actions:
    (i) Require the State to submit assurances and appropriate 
documentation to show that the new requirements are being followed 
under the program.
    (ii) Extend the date for submission of State plans and approve pre-
award costs as necessary to hold the State harmless.
    (3) If the Secretary requires a State to submit assurances under 
paragraph (b)(2) of this section, the State shall incorporate changes 
to the State plan as soon as possible to comply with the new 
requirements. The State shall submit the necessary changes before the 
start of the next obligation period.

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

    5. A new Sec. 76.711 is added after redesignated Sec. 76.710 and 
before the center heading ``REPORTS'' to read as follows:


Sec. 76.711  Requesting funds by CFDA number.

    If a program is listed in the Catalog of Federal Domestic 
Assistance (CFDA), a State, when requesting funds under the program, 
shall identify that program by the CFDA number.

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

PART 667--STATE POSTSECONDARY REVIEW PROGRAM

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

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

    7. Section 667.1 is amended by revising paragraph (d)(1)(iii) to 
read as follows:


Sec. 667.1  Scope and purpose.

* * * * *
    (d)(1) * * *
    (iii) 34 CFR 76.701, 76.702, 76.703, 76.704, 76.707, 76.720, 
76.730, 76.731, 76.734, 76.760, and 76.761 of subpart G;
* * * * *
[FR Doc. 95-18064 Filed 8-10-95; 8:45 am]
BILLING CODE 4000-01-P