[Federal Register Volume 62, Number 144 (Monday, July 28, 1997)]
[Rules and Regulations]
[Pages 40422-40425]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19761]



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Part III





Department of Education





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34 CFR Part 75



Direct Grant Programs; Final Rule

  Federal Register / Vol. 62, No. 144 / Monday, July 28, 1997 / Rules 
and Regulations  

[[Page 40422]]



DEPARTMENT OF EDUCATION

34 CFR Part 75

RIN: 1880-AA76


Direct Grant Programs

AGENCY: Department of Education.

ACTION: Final rule.

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SUMMARY: The Secretary amends Part 75, Education Department General 
Administrative Regulations (EDGAR), which governs the administration of 
the Department's discretionary grant programs. These amendments revise 
certain sections of Part 75 to remove conflicts with Part 74, which was 
revised in July 1994. These amendments provide virtually all 
discretionary grantees the greater administrative flexibility to take 
certain actions without the prior approval of the Department that is 
permitted under the revised Part 74 for grantees subject to that part. 
Special Projects and Centers funded by the National Institute on 
Disability and Rehabilitation Research will continue to need prior 
approval to extend their projects due to unique circumstances 
associated with those programs. The Secretary retains discretion under 
these amendments to require prior approval for any of the actions 
permitted under the revised regulations if needed in appropriate 
circumstances.

EFFECTIVE DATES: These regulations take effect on August 27, 1997. 
These regulations apply to direct grants outstanding on the effective 
date of the regulations and to all grants made on or after the 
effective date of the regulations. With respect to the following NIDRR 
programs, these regulations become applicable on October 1, 1997:
    The Knowledge Dissemination and Utilization Centers and Disability 
and Technical Assistance Centers programs under 34 CFR Part 350, 
Subpart B, Secs. 350.17-350.19;
    The Rehabilitation Research and Training Centers program under 34 
CFR Part 350, Subpart C;
    The Rehabilitation Engineering Research Centers program under 34 
CFR Part 350, Subpart D;
    The Special Projects and Demonstrations for Spinal Cord Injuries 
programs under 34 CFR Part 359.

ADDRESSES: While the Secretary is publishing these procedural rules as 
final regulations, the Secretary is interested in comments on the 
effect of these changes and ways to improve the discretionary grant 
administration process of the Department. Written comments should be 
sent to: Greg Vick, U.S. Department of Education, Grants Policy and 
Oversight Staff, Mail Stop 4248, Washington, DC 20202. Copies of 
comments submitted to the Department will be available for public 
inspection, until the regulations become effective, in Room 3652, GSA 
National Capital Region Building, 7th and D Streets, SW., Washington, 
DC between the hours of 9:00 a.m. and 4:30 p.m., Monday through Friday 
of each week except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Greg Vick, (202) 708-8199. Individuals 
who use a telecommunications device for the deaf (TDD) may call the 
Federal Information Relay Service (FIRS) at 1-800-877-8339 between 8 
a.m. and 5 p.m., Eastern time, Monday through Friday.

SUPPLEMENTARY INFORMATION:

Background

    On November 29, 1993 (58 FR 62992), the Office of Management and 
Budget (OMB) published a revised version of OMB Circular A-110, which 
establishes uniform administrative requirements for Federal grants and 
cooperative agreements awarded to institutions of higher education, 
hospitals, and other non-profit organizations. On July 6, 1994 (59 FR 
34722), the Secretary revised Part 74 (Administration of Grants) of 
EDGAR to apply the provisions of the revised circular to Department of 
Education grantees that are members of the covered groups.
    The revised Part 74 gave the Secretary discretion to dispense with 
certain prior approval procedures in Part 74 and various OMB circulars, 
in order to permit a grantee: (1) To extend its grant automatically at 
the end of a project period for a period of up to one year without 
prior approval if the Department obligated no additional funds; (2) to 
carry funds over from one budget period to the next without limitation; 
(3) to obligate funds up to 90 days before the effective date of the 
grant award without prior approval; and (4) to make transfers of funds 
between direct cost budget categories for certain kinds of grants. 
However, because regulations in Part 80, which applies to governments, 
and Part 75, which applies to direct grants to any kind of 
organization, conflict with the new rules in Part 74, these amendments 
are needed to remove the barriers to use of the discretion authorized 
in Part 74. Under the amendments, virtually all direct grantees of the 
Department can benefit from the reduced burden in Part 74.

Extending a Project Period

    As currently written, Sec. 75.261, binding on all classes of 
grantees, requires them to take certain steps before the Department 
will consider extending the end date of a project period. This 
regulation conflicts with the Secretary's discretion under 
Sec. 74.25(e). The new language for Sec. 75.261 provides that grantees 
of the Department may extend their grants as provided in Part 74 unless 
a statute, certain regulations or a grant condition prohibits that 
discretion.
    There are situations in which the Secretary might prohibit a 
grantee from exercising the no-prior-approval discretion otherwise 
available under the revised Sec. 75.261 by including conditions in the 
notification of grant award. For example, some grants that support 
programs for training teachers include funds for both salaries for 
professors and scholarships for students. If a grantee does not receive 
new funding for its program, the grantee may try to extend the project 
period of the award and use any remaining funds to pay salaries for 
professors without paying stipends to students so they could benefit 
from the program. To avoid such a result, the Secretary might require 
prior approval for an extension.
    The Secretary also would refuse to permit a grantee to extend its 
project period if, pursuant to statute, the funds would not be 
available for expenditure (liquidation of obligations) during the 
extended period. Under the account closing provisions of Public Law 
101-510, funds must be obligated and expended within five years after 
their availability for obligation by ED expired. If funds are not 
obligated and expended by a grantee within this period, they revert 
automatically to the U.S. Treasury. If a grantee were to unilaterally 
extend its project period so that the funds were no longer available 
for expenditure, the grantee would suffer from the automatic withdrawal 
of its authority to liquidate obligations at the start of or in the 
middle of a budget period.
    The Secretary does not expect this unanticipated consequence in the 
future because the Department is in the process of converting to a new 
financial management system that will track all funds by the fiscal 
year they were made available for obligation by the Department. Under 
this new financial management system, grantees would be required to 
expend funds from earlier budget periods of their grants before drawing 
on funds from later budget periods. Budget periods for discretionary 
grants are not exactly

[[Page 40423]]

synchronous with the period funds are available for obligation by ED. 
However, requiring grantees to obligate funds from earlier budget 
periods will ensure that, when a grantee gets to its last budget 
period, the funds obligated during that last period will not have been 
available to the grantee more than five years after the end of the 
availability for obligation by the Department. During the period of 
transition to the new financial system, ED will monitor expenditures 
closely and might include conditions in some grants that would require 
prior approval for extensions. Thus, ED could check its records to be 
sure that the grantee would have funds available for expenditure under 
the account-closing provisions of Public Law 101-510 before permitting 
any extension.
    Certain programs of NIDRR require special treatment regarding the 
authority of grantees to extend their grants. As a result, the 
regulations require grantees to request prior approval to extend their 
projects under the Knowledge Dissemination and Utilization Centers and 
Disability and Technical Assistance Centers programs, Rehabilitation 
Research and Training Centers program, the Rehabilitation Engineering 
Research Centers program, and the Special Projects and Demonstrations 
for Spinal Cord Injuries programs. The special regulation for these 
NIDRR programs is necessary to prevent confusion among constituents 
that could result if there were more than one center or special project 
in a given topical or geographical area. Also, if some of the grantees 
under these programs lost competitions for the next centers or special 
projects grants and extended their projects, the Assistant Secretary 
might be unable to ensure that each of these grantees would have access 
to the required ED information and expertise or to the multi-center 
databases required for many rehabilitation research grantees.
    The Secretary has established a delayed effective date for the 
regulations as applied to these programs because their regulations were 
recently amended, changing many of the citations to the relevant 
subparts and sections. The program amendments become effective on 
October 1, 1997. Thus, to avoid the confusion of multiple citations in 
the regulations, these amendments are made effective for these programs 
on the same date as the program regulations become effective. The end 
result of the delayed effective date is that the current regulation, 
requiring prior approval for extension of grants past the end of the 
project period, will be continued under the new program and EDGAR 
regulations that become effective on October 1, 1997.

Carrying Funds Forward

    Section 75.253(c) provides that the Secretary considers funds 
remaining unused by the grantee at the end of a budget period in 
deciding how much new money to make available to a project for the next 
budget period. Under the current regulation, if the unused funds are 
needed to complete activities from the prior budget period, the 
Secretary adds those unused funds to the funds to be granted for the 
next budget period, with the result that the grantee gets funds 
sufficient to complete the unfinished activities and to carry out all 
new activities as well.
    However, if the funds are not needed to complete unfinished 
activities, the Secretary reduces the amount of new funds made 
available to the grant by the amount of remaining funds that are 
carried into the next budget period. Thus the Department's current 
regulation--in the same manner as the new Part 74--has traditionally 
provided for carrying over unused funds from a previous budget period 
but requires the Secretary to consider those funds in deciding how much 
new money to make available to a grantee.
    The Secretary sees the value in many or most cases of letting 
grantees carry all of their unused funds forward automatically and 
making all of the remaining funds from the previous budget period 
available for obligation during the next budget period, especially 
since doing so will eliminate a significant paperwork burden for the 
many grantees who otherwise would have to write to the Department to 
request specific authorization for carrying over unused funds to the 
following budget period.
    Therefore, the Secretary amends Sec. 75.253(c) so that it clearly 
provides that grantees may carry over unused funds from the previous 
budget period into a new budget period and gives the Secretary 
discretion to consider those funds in determining whether to reduce the 
amount of new funds made available to the grant for the next budget 
period. Examples of cases where the Secretary might use this discretion 
include grants to ``high-risk'' grantees, grants that do not show a 
sufficient rate of expenditure to indicate substantial progress had 
been made by the grantee, as required by Sec. 75.253(a)(2)(i), or 
awards where the grantee has completed the activities of the budget 
period and does not need extra funds to cover the activities planned 
for the next budget period. The conditions of a continuation award will 
alert the grantee in those specific instances where the Department has 
either reduced the amount of new funds made available for a new budget 
period or might reduce the amount of new funds, depending on what 
information the Department gets from regular grantee reports or, in 
limited circumstances, from information provided under 
Sec. 75.253(c)(2)(i).

Spending Grant Funds Before Getting an Award

    Both Part 74 and Part 80 incorporate by reference OMB circulars A-
21, A-87, and A-122, which govern allowable expenditures under most 
grant awards, thus giving them the force of law. The relevant circulars 
allow grantees to expend funds before the effective date of the award 
only with the prior approval of the awarding agency (so-called ``pre-
agreement'' or ``pre-award'' costs). Section 74.25(e)(1) now allows a 
grantee to incur certain pre-award costs under the conditions specified 
in that section. However, no similar authority exists in Part 80 for 
grantees subject to that Part. The Secretary adds a new Sec. 75.263, 
which permits all types of grantees to expend funds before the 
effective date of the grant as permitted in Sec. 74.25, unless a 
statute, regulations other than Part 80 regulations, or, in rare 
circumstances, grant conditions prohibit those expenditures.

Cumulative Transfers Among Budget Categories

    Under Part 80 recipients of grants in excess of $100,000 are 
required to obtain the approval of the Department before making 
cumulative cost transfers among categories in a project budget that 
would exceed ten percent of the current total approved budget 
(Sec. 80.30(c)(1)(ii)). By contrast, the revised Part 74 authorizes 
grantees to make these transfers unless the Secretary imposes a 
limitation on transfers in a particular case. Thus, Part 80 grantees 
and those subject to Part 74 are subject to inconsistent treatment in 
regard to this matter. To resolve this discrepancy, the Secretary adds 
a new Sec. 75.264, which has the effect of applying the rule in Part 74 
to all grantees, including those covered by Part 80.

Conclusion

    These amendments reduce regulatory and administrative burden on 
discretionary grantees and give them more flexibility in planning and 
implementing their program activities. These regulations also reduce 
paperwork burden.

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Waiver of Proposed Rulemaking

    In accordance with the Administrative Procedure Act (5 U.S.C. 553), 
it is the practice of the Secretary to offer interested parties the 
opportunity to comment on proposed regulations. However, these 
amendments make procedural changes only and do not establish new 
substantive policy. Therefore, under 5 U.S.C. 553(b)(A), proposed 
rulemaking is not required.

Regulatory Flexibility Act Certification

    These regulations would not have a significant economic impact on a 
substantial number of small entities.
    These regulations could affect State agencies, nonprofit 
organizations, institutions of higher education and individuals. State 
agencies, and individuals, however, are not defined as ``small 
entities'' in the Regulatory Flexibility Act.
    The small entities that could be affected by these regulations are 
institutions of higher education, local educational agencies, 
community-based organizations, hospitals, and nonprofit organizations 
receiving Federal funds under a direct grant program. The final 
regulations, however, would not have a significant economic impact on 
these entities because the amendments relieve regulatory burden.

Paperwork Reduction Act of 1995

    The amendments have been examined under the Paperwork Reduction Act 
of 1995 and have been found to contain no information collection 
requirements. These regulations reduce paperwork burden.

Intergovernmental Review

    Some of the programs that would be affected by these regulations 
are subject to the requirements of Executive Order 12372 and the 
regulations in 34 CFR Part 79. The objective of the Executive order is 
to foster an intergovernmental partnership and a strengthened 
federalism by relying on processes developed by States and local 
governments for coordination and review of proposed Federal financial 
assistance.
    In accordance with the order, this document is intended to provide 
early notification of the Department's specific plans and actions for 
these programs.

Assessment of Education Impact

    Based on its own review, the Department has determined that the 
regulations in this document would not require transmission of 
information that is being gathered by or is available from any other 
agency or authority of the United States.

List of Subjects in 34 CFR Part 75

    Administrative practice and procedure, Continuation funding, 
Education, Grant programs--education, Grants administration, 
Incorporation by reference, Performance reports, Reporting and record 
keeping requirements, Unobligated funds.

(Catalog of Federal Domestic Assistance Number does not apply)

    Dated: July 21, 1997.
Richard W. Riley,
Secretary of Education.

    The Secretary amends part 75 of title 34 of the Code of Federal 
Regulations as follows:

PART 75--DIRECT GRANT PROGRAMS

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

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

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


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

* * * * *
    (c)(1) Notwithstanding any regulatory requirements in 34 CFR part 
80, a grantee may expend funds that have not been obligated at the end 
of a budget period for obligations of the subsequent budget period if--
    (i) The obligation is for an allowable cost that falls within the 
scope and objectives of the project; and
    (ii) ED regulations other than 34 CFR part 80, statutes, or the 
conditions of the grant do not prohibit the obligation.

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

    (2) The Secretary may--
    (i) Require the grantee to send a written statement describing how 
the funds made available under this section will be used; and
    (ii) Determine the amount of new funds that the Department will 
make available for the subsequent budget period after considering the 
statement the grantee provides under paragraph (c)(2)(i) of this 
section or any other information available to the Secretary about the 
use of funds under the grant.
    (3) In determining the amount of new funds to make available to a 
grantee under this section, the Secretary considers whether the 
unobligated funds made available are needed to complete activities that 
were planned for completion in the prior budget period.
* * * * *
    3. Section 75.261 is amended by redesignating the current 
paragraphs (a) and (b) as paragraphs (c) and (d); adding new paragraphs 
(a) and (b); revising the introductory text of the newly designated 
paragraph (c); amending newly designated paragraph (c)(4)(ii)(C) by 
removing ``(a)(4)(ii)(A)'' and adding, in its place, ``(c)(4)(ii)(A)''; 
and adding ``Waiver.'' at the beginning of newly designated paragraph 
(d) to read as follows:


Sec. 75.261  Extension of a project period.

    (a) General rule. A grantee may, notwithstanding any regulatory 
requirement in 34 CFR part 80, extend the project period of an award 
one time for a period up to twelve months without the prior approval of 
the Secretary, if--
    (1) The grantee meets the requirements for extension of 34 CFR 
74.25(e)(2); and
    (2) ED regulations other than the regulations in 34 CFR part 80, 
statutes or the conditions of an award do not prohibit the extension.
    (b) Specific rule for certain programs of the National Institute on 
Disability and Rehabilitation Research. Notwithstanding paragraph (a) 
of this section, grantees under the following programs of NIDRR must 
request prior approval to extend their grants under paragraph (c) of 
this section:
    (1) The Knowledge Dissemination and Utilization Centers and 
Disability and Technical Assistance Centers authorized under 29 U.S.C. 
761a(b)(2), (4), (5), (6), and (11) and implemented at 34 CFR part 350, 
subpart B, Secs. 350.17-350.19.
    (2) The Rehabilitation Research and Training Centers program 
authorized under 29 U.S.C. 762(b) and implemented at 34 CFR part 350, 
subpart C.
    (3) The Rehabilitation Engineering Research Centers authorized 
under 29 U.S.C. 762(b)(3) and implemented at 34 CFR part 350, subpart 
D.
    (4) The Special Projects and Demonstrations for Spinal Cord 
Injuries authorized under 29 U.S.C. 762(b)(4) and implemented at 34 CFR 
part 359.
    (c) Other regulations. If ED regulations, other than the 
regulations in 34 CFR part 80, or the conditions of the award require 
the grantee to get prior approval to extend the project period, the 
Secretary may permit the grantee to extend the project period if--
* * * * *
    4. A new Sec. 75.263 is added to subpart D to read as follows:

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

    A grantee may, notwithstanding any requirement in 34 CFR part 80, 
incur pre-award costs as specified in 34 CFR 74.25(e)(1) unless--
    (a) ED regulations other than 34 CFR part 80 or a statute prohibit 
these costs; or
    (b) The conditions of the award prohibit these costs.

(Authority: 20 U.S.C. 1221e-3 and 3474; OMB Circulars A-21, A-87, 
and A-122)

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


Sec. 75.264  Transfers among budget categories.

    A grantee may, notwithstanding any requirement in 34 CFR part 80, 
make transfers as specified in 34 CFR 74.25 unless--
    (a) ED regulations other than 34 CFR part 80 or a statute prohibit 
these transfers; or
    (b) The conditions of the grant prohibit these transfers.

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

[FR Doc. 97-19761 Filed 7-25-97; 8:45 am]
BILLING CODE 4000-01-P