[Federal Register Volume 68, Number 81 (Monday, April 28, 2003)]
[Proposed Rules]
[Pages 22520-22561]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-9579]



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Part III





Department of Labor





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Employment and Training Administration



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20 CFR Part 641



Senior Community Service Employment Program; Proposed Rule

  Federal Register / Vol. 68, No. 81 / Monday, April 28, 2003 / 
Proposed Rules  

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DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Part 641

RIN 1205-AB28


Senior Community Service Employment Program

AGENCY: Employment and Training Administration (ETA), Labor.

ACTION: Notice of proposed rulemaking with request for comments.

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SUMMARY: The Employment and Training Administration (ETA) of the 
Department of Labor (Department or DOL) is issuing a Notice of Proposed 
Rulemaking with request for comments to implement reforms to the Senior 
Community Service Employment Program (SCSEP) due to the enactment of 
the 2000 amendments to title V of the Older Americans Act of 1965 
(OAA), Pub. L. 106-501 (2000). This proposed rule provides 
administrative and programmatic guidance, as well as requirements for 
the implementation of the SCSEP. Key components of this reform include 
coordination between SCSEP and the One-Stop Delivery System, increased 
responsibility of State grantees to collaborate with other SCSEP 
stakeholders, and increased accountability for performance.

DATES: All comments must be received by June 12, 2003.

ADDRESSES: All comments received during the comment period following 
the publication of this Notice of Proposed Rulemaking should be 
submitted in writing to Mr. Gale Gibson, Division of Older Worker 
Programs, U.S. Department of Labor, 200 Constitution Avenue, NW., Room 
N5306, Washington, DC 20210.
    All comments will be available for public inspection and copying 
during normal business hours at the Division of Older Worker Programs, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Room N5306, 
Washington, DC 20210. Copies of the proposed rule are available in 
alternate formats of large print and electronic file on computer disk, 
which may be obtained at the above-stated address. The proposed rule is 
also available on the Division of Older Worker Programs' Web site at 
http://wdsc.doleta.gov/seniors.

FOR FURTHER INFORMATION CONTACT: Mr. Gale Gibson, Division of Older 
Worker Programs, U.S. Department of Labor, 200 Constitution Avenue, 
NW., Washington, DC 20210, Telephone: (202) 693-3758 (this is not a 
toll-free number).

SUPPLEMENTARY INFORMATION: The preamble is divided into four sections. 
Section I provides general background information. Section II discusses 
the implementing changes to the Older Americans Act. Section III 
discusses the proposed rule. Section IV discusses miscellaneous 
administrative requirements, such as Paperwork Reduction Act 
requirements. In drafting these regulations, the Department consulted 
with interested parties through a series of Town Hall Meetings and work 
groups, and received written suggestions in response to the Federal 
Register notices published at 66 FR 6678 (Jan. 22, 2001), 66 FR 10919 
(Feb. 20, 2001), 66 FR 15596 (Mar. 19, 2001), 66 FR 16068 (Mar. 22, 
2001), and 66 FR 20334 (Apr. 20, 2001).

I. Background

    Since its inception in 1965, the purpose of the Senior Community 
Service Employment Program (SCSEP) has been to foster and promote 
useful part-time employment opportunities in community service 
activities for persons with low incomes who are 55 years old or older. 
The 2000 amendments to this legislation expand the program's purpose to 
include increasing participants' economic self-sufficiency and 
increasing the number of persons who may benefit from unsubsidized 
employment. The Employment and Training Administration (ETA) of the 
Department of Labor (DOL or Department) administers the program by 
means of grant agreements with eligible organizations, such as 
governmental entities and public and private nonprofit agencies and 
organizations. The SCSEP regulations were last revised in 1995, at 20 
CFR part 641; 60 FR 26574 (May 17, 1995).
    The 2000 amendments are the first major legislative changes to the 
SCSEP in many years. This document issues a proposed rule to conform to 
the new changes in the Older Americans Act due to the enactment of the 
2000 amendments. The Department developed these regulations in 
consultation with program stakeholders, including State agencies, 
national organizations, interested individuals, and public and private 
nonprofit organizations.

II. Implementing Changes

    Congress amended SCSEP to combine requirements that were formerly 
in the SCSEP legislation as last amended in 1992 by Pub. L. 102-375, 
the accompanying regulations at 60 FR 26574 (May 17, 1995) (formerly 
codified at 20 CFR part 641), and SCSEP program administration 
materials provided to the grantee community as bulletins, or training 
and employment information notices. New provisions of the OAA include 
requirements for: greater coordination with the Workforce Investment 
Act (WIA); a greater proportion of funds for States for appropriations 
above current funding levels; the submission of State plans; grants for 
a period up to 3 years; new performance measures; and corrective action 
and sanctions for poor performance.
    With the enactment of the Workforce Investment Act of 1998, title V 
became a required partner in the workforce investment system. As a 
result, Congress amended SCSEP to include greater coordination with the 
One-Stop Delivery System, including reciprocal use of Individual 
Employment Plans and other assessment mechanisms.
    Under both WIA and the OAA, any grantee operating an SCSEP project 
in a local area must now negotiate a Memorandum of Understanding with 
the Local Workforce Investment Board, which details SCSEP's involvement 
in the One-Stop Delivery System. Further, because of SCSEP's closer 
coordination with the One-Stop Delivery System, the ``joint program'' 
language contained in section 510 of the 1992 amendments to the OAA, 
Pub. L. 102-375 (1992), and section 203 of the Job Training Partnership 
Act, Pub. L. 97-300 (1982) (29 U.S.C. 1603 et seq.) for 
``automatically'' qualifying participants for training or intensive 
services has been replaced with language that permits Local Boards to 
deem SCSEP participants eligible for those services.
    The 2000 Amendments to the OAA require a different distribution of 
funding between State and national SCSEP grantees if the SCSEP 
appropriation increases. The legislation requires the Department to 
reserve amounts for section 502(e) (authorizing second career training 
projects), the territories, and the Native American and Asian Pacific 
aging organizations before funds are distributed between the States and 
national SCSEP grantees. From the amounts remaining after the 
reservation, the legislation holds grantees harmless at the 2000 level 
of activity, which requires the Department to allocate 22 percent of 
funding to State grantees and 78 percent of funding to national 
grantees. Funding remaining after 2000 level of activity distribution 
must be divided as follows: up to $35 million will be divided to 
provide 75 percent to the States and 25 percent to the national 
grantees. Excess amounts over $35

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million will be divided 50 percent to States and 50 percent to the 
national grantees.
    The 2000 Amendments require Governors to submit an annual plan that 
discusses the number and distribution of eligible individuals in the 
State, the employment opportunities, the skills of the local eligible 
population, the locations and populations for which community service 
projects are most needed and plans for coordinating with WIA. As part 
of the planning process, the legislation requires the Governor to 
obtain the advice of title V stakeholders in developing a plan that 
addresses the equitable distribution of positions in each State. The 
legislation also allows the Governor to make recommendations on grant 
proposals to the Department related to the proposed distribution of 
positions within the State.
    Another new provision of the legislation is the establishment of 
performance measures. The performance measures are designed to monitor 
the performance of each grantee and provide a mechanism to assist those 
grantees that need technical assistance to perform better. The 
performance measures are based on the required indicators listed in 
section 513(b) of the OAA. For grantees that do not meet the 
established performance measures, section 514 of the OAA provides for 
corrective action and sanctions. Section 514 of the OAA also codifies 
prior regulatory eligibility and responsibility criteria that grantees 
must meet before receiving SCSEP funds. Finally, section 514 authorizes 
the Department to fund grants for up to 3 years after the establishment 
of the regulations and performance measures.

III. Summary and Explanation of the Proposed Rule

    This section discusses and explains the specific provisions of the 
proposed rule. As this legislation has many new provisions, the 
Department has drafted regulations that respond both to the SCSEP 
community's concerns and to the Department's interpretation of the 
statute. The Department obtained viewpoints of the public, including 
individuals and members of the grantee community, on the new provisions 
and any other SCSEP provision (regulatory or statutory) or policy. Five 
work groups were established that included representatives from the 
national grantee organizations and several States. The work groups 
addressed the following areas: Performance accountability; operational 
and policy issues; grant and administrative issues; the State Senior 
Employment Services Coordination Plan; and technical assistance and 
consultation. These work groups provided the Department with issue 
papers and recommendations. Further, the Department held a series of 
Town Hall Meetings and requested comments through Federal Register 
notices to ensure that the regulations reflect the ideas of interested 
individuals. The Department has received a number of suggestions 
through this process. Every effort has been made to incorporate these 
suggestions to the extent practicable and consistent with applicable 
statutory requirements.

Subpart A--Purpose and Definitions

    This subpart provides a section-by-section overview of the 
regulations. This subpart also includes a number of definitions that 
are intended to familiarize the reader with basic elements of the One-
Stop Delivery System established under WIA, such as ``core services,'' 
``individual employment plan,'' ``local workforce investment area.'' 
Other definitions such as ``recipient,'' ``subrecipient,'' and 
``vendor'' are provided to clarify the use of terminology in Subpart H 
of these regulations, which is based on uniform administrative 
requirements, audit requirements, and allowable cost requirements 
generally applicable to Federal financial assistance programs, 
including SCSEP. A number of definitions that are well known to those 
familiar with SCSEP are provided for the benefit of readers who may be 
less familiar with the program. These include such terms as 
``authorized position level'' and ``host agency.''
    The Department added a definition of ``national grantee'' for the 
first time by regulation, although it is supported by a long-standing 
Department practice. This definition clarifies the list of those 
entities eligible to receive SCSEP national grant funds. For this 
purpose, the regulation defines ``public agencies'' as meaning Federal 
agencies in order to maintain the statutory distinction between 
national grants and grants to States. Thus, under this definition, 
State and local public agencies are not permitted to serve as national 
grantees.
    The definition of national grantee in Sec.  641.140, also contains 
a requirement that the organization must be capable of administering 
multi-State programs. An organization does not have to operate in more 
than one State, but must be structured to have the capacity to 
administer multi-State programs. This requirement provides the 
Department with the flexibility to negotiate with grantees to ensure 
that all SCSEP participant slots are covered with no disruptions to the 
participants. It is the Department's experience that such organizations 
will be able to run a successful SCSEP program and also meet the 
statutory administrative cost limitations. Further, it aligns with the 
current practice of awarding SCSEP funds to organizations that are 
``national'' in scope and further distinguishes these grants from 
grants to States.
    Finally, the term ``State grantee'' has been defined for purposes 
of this regulation to include not only the 50 States, Puerto Rico, and 
the District of Columbia, but also to include the following 
territories: Guam, American Samoa, the U.S. Virgin Islands, and the 
Commonwealth of the Northern Mariana Islands. ``State'' is defined in 
section 506(g)(6) of the OAA to specifically exclude the territories. 
The Department interprets this definition as applying only to section 
506 of the OAA, which governs the distribution of funds. In section 
506, where the OAA discusses ``State,'' it does so in terms of a State 
receiving its portion of SCSEP funds. Under section 506, the 
territories receive a reservation of funds and therefore, do not 
receive funds as part of the formula distribution among the States. The 
Department distinguishes this use of the word ``State'' in the funding 
context from its use in the regulations. Therefore, to ensure that the 
title V provisions are administered equitably, the Department has 
defined ``State grantee'' as including the territories. Thus, 
territories will be held to the same requirements regarding State 
plans, coordination with the Workforce Investment Act, services to 
participants, section 502(e), eligibility review, responsibility 
review, performance measures, sanctions, administrative costs, and 
appeal procedures as the States.

Subpart B--Coordination With the Workforce Investment Act

    This subpart incorporates those provisions of the 2000 Amendments 
to the Older Americans Act that require coordination with the Workforce 
Investment Act of 1998 (WIA). This subpart does not cover every WIA 
provision relevant to SCSEP.
What Is the Relationship Between SCSEP and the Workforce Investment 
Act? (Sec.  641.200)
    SCSEP is a required partner under the Workforce Investment Act. As 
such, SCSEP grantees and subgrantees must ensure that they are familiar 
with the WIA statutory and regulatory provisions. WIA is due to be 
reauthorized by September 30, 2003. Reauthorization may bring changes 
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the law. SCSEP grantees and subgrantees must ensure that they keep 
current on any changes in the law.
What Services, in Addition to the Applicable Core Services, Must SCSEP 
Grantees Provide Through the One-Stop Delivery System? (Sec.  641.210)
    The underlying notion of the One-Stop is the coordination of 
programs, services and governance structures so that the customer has 
access to a seamless system of workforce investment services. The 
success of the reformed workforce investment system is dependent on the 
development of true partnerships and honest collaboration at all levels 
and among all stakeholders. The Department envisions that a variety of 
programs could use common intake, case management, and job development 
systems in order to take full advantage of the One-Stop Delivery 
System's potential for efficiency and effectiveness. A wide range of 
services from a variety of training and employment programs can, 
therefore, be available through the One-Stop. The proposed regulation 
requires SCSEP grantees to make arrangements to provide their 
participants, eligible individuals the grantees are unable to serve, as 
well as other SCSEP ineligible individuals with access to other 
services available in the One-Stop.
Does Title I of WIA Require SCSEP To Use OAA Funds for Individuals Who 
Are Not Eligible for SCSEP Services or for Services That Are Not 
Authorized Under the OAA? (Sec.  641.220)
    This proposed provision clarifies that in the One-Stop environment, 
OAA funds may only be used to provide title V services to individuals 
eligible for SCSEP. Some eligible participants may not be able to 
receive all of the services he or she requires through SCSEP. Such 
individuals must be referred to programs under WIA that may assist the 
SCSEP eligible participant in obtaining a job. The Department 
encourages grantees to enroll or refer those individuals who do not 
meet the income eligibility criteria to programs under WIA. Grantees 
may want to negotiate how these individuals will be served in the 
Memorandum of Understanding.
Must the Individual Assessment Conducted by the SCSEP Grantee and the 
Assessment Performed by the One-Stop Delivery System Be Accepted for 
Use by Either Entity To Determine the Individual's Need for Services in 
SCSEP and Adult Programs Under Title IB of WIA? (Sec.  641.230)
    There was much discussion during the Town Hall Meetings about 
whether the One-Stop Delivery System would accept and use SCSEP IEPs as 
part of the assessment process. This proposed regulation mirrors the 
statutory requirement at section 502(b)(4) of the OAA and clarifies 
that the SCSEP IEP and the WIA title I IEP have similar purposes--to 
determine what services individuals need to meet their employability 
objectives, which may include transition into appropriate unsubsidized 
employment. The information collected by each must be sufficient to 
assist in making an informed judgment between the staff and the 
individual about the specific service strategy for that individual. The 
specific activities that may be provided by each program differ. In the 
SCSEP program, beyond core services, intensive services (such as 
creation of a SCSEP IEP) and community service activity are the major 
program components. Some other training services may be provided. 
Placement in a full-time unsubsidized job is a goal for some 
participants; others would prefer to have part-time employment, while 
still others would prefer to continue in a community service activity. 
The WIA title I program, on the other hand, is aimed at job placement 
through core services, intensive services, and training. As a practical 
matter, the SCSEP IEP and WIA IEP must be sufficiently comprehensive to 
provide the information needed to place a participant who is eligible 
for both programs in the correct service mix. This may well require 
modifying existing SCSEP IEP and WIA IEP information collection 
practices, which should be negotiated during the development of the 
local MOU.
    There was also much related discussion that demonstrated concern 
that the SCSEP IEP would not be accepted at the One-Stop, especially if 
WIA developed a more extensive IEP than the SCSEP IEP, when the 
participant was assessed through SCSEP and not at the One-Stop. This 
outcome is clearly not intended and the Department expects One-Stop 
operators to accept SCSEP IEPs and SCSEP grantees to accept One-Stop 
originated IEPs. Both SCSEP's IEP and WIA's IEP are meant to be 
``living documents,'' updated on a continuing basis as part of an 
ongoing assessment process. The intent of the provision authorizing WIA 
and SCSEP grantees to use each other's IEPs is simply to avoid 
unnecessary duplication and to reduce the burden on participants.
Are SCSEP Participants Eligible for Intensive and Training Services 
Under Title I of WIA? (Sec.  641.240)
    Under the OAA, although SCSEP participants are not automatically 
eligible to receive intensive and training services under WIA, Local 
Boards now have the authority to deem SCSEP participants eligible to 
receive intensive and training services under title I of WIA. WIA 
eligibility is not based on income except in the adult program where a 
local area determines that funds are insufficient; rather, WIA 
eligibility is based on the need for and utility of intensive and 
training services to obtain employment. SCSEP participants who seek 
unsubsidized employment may need training services, which may be 
provided by the SCSEP grantee, subgrantee, host agency, or by another 
provider, like the WIA adult program, as agreed to in the MOU. The 
SCSEP IEP itself is an intensive service.
    The issue of eligibility for WIA title I adult services has been 
raised by some SCSEP partners, who are concerned that the WIA title I 
grantees would refuse to provide intensive or training services to 
SCSEP participants because their income, including their OAA title V 
payments, would be too high to meet the WIA title I local priority of 
service policies. The Department does not believe that title V payments 
should be considered income when determining an individual's 
eligibility for intensive or training services for two reasons. First, 
the individual's income level is already considered at the time of 
enrollment in SCSEP for initial eligibility purposes. Second, SCSEP 
provides work opportunities that are analogous to work experience 
activities under 20 CFR 663.200 of the WIA regulations, which are not 
counted against the individual's income. This type of income 
historically has not been included as wages for eligibility 
determination purposes. If work experience payments were to be 
considered as income, it could mean that the individual might be 
precluded from other program activities, which is clearly not intended.

Subpart C--The State Senior Employment Services Coordination Plan

    This subpart of the regulations implements the new provisions in 
section 503 of the OAA, which direct the Governor of each State to 
submit a State Senior Employment Services Coordination Plan (State 
Plan) to the Department annually. State Plan development is a 
participatory process that includes Governors, State and area agencies 
on aging, State and Local

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Boards, national grantees, and stakeholders in the aging network. It is 
intended to ensure a participatory planning process and to provide an 
opportunity for public comment on the State Plan for SCSEP services 
within the State. The State planning process requirements do, however, 
provide an exemption for national grantees serving older American 
Indians at section 503(8). Under this provision, national grantees 
serving older American Indians are not required to be a part of the 
State planning process, although the Department encourages them to 
participate. These national grantees are required to collaborate with 
the Department in developing a plan for projects and services to older 
American Indians. The Department will provide instructions on how and 
when this collaboration will occur.
    The State Plan is separate and distinct from the SCSEP grant 
application and the plan required under WIA. The Department will 
provide instructions on how these three types of plans relate to each 
other in an administrative issuance.
    Section 503 also allows the Governor to submit recommendations to 
the Department on any application for SCSEP funds that proposes a 
project in his or her State. This provision is limited to 
recommendations on the proposed distribution of positions and may 
impact the Department's decision to award or not award SCSEP funds to a 
particular applicant.
What Is the State Plan? (Sec.  641.300)
    This proposed section defines the State Plan and emphasizes that it 
is intended to foster collaboration among SCSEP stakeholders.
Who Is Responsible for Developing and Submitting the State Plan? (Sec.  
641.305)
    Although developing the State Plan is a participatory process 
involving SCSEP grantees operating programs within the State, the OAA 
assigns the responsibility for developing the Plan to the Governor.
May the Governor Delegate Responsibility for Developing and Submitting 
the State Plan? (Sec.  641.310)
    This section permits the Governor to delegate responsibility for 
the State Plan. The Department recognizes that the State Plan requires 
a sizable time commitment to make certain that stakeholders are 
consulted, to collect and publish comments, and submit a well-drafted 
State Plan for Department review. Therefore, the Department is allowing 
Governors to utilize their resources that are best suited for 
developing the State Plan, consistent with any applicable State laws or 
regulations. A Governor who chooses to delegate his or her State Plan 
responsibility will be required to submit a signed statement to the 
Department indicating such intent. The Department will issue the 
required format for this statement in an administrative bulletin. The 
Department will also accept the signature of the Governor's delegate 
for the State plan as long as there is a valid statement on file 
indicating the Governor's intent.
Who Participates in Developing the State Plan? (Sec.  641.315)
    This provision lists the stakeholders and others that the Governor 
is required to consult for advice and recommendations related to the 
State Plan. It is important that all SCSEP grantees operating programs 
within the State, including national grantees serving older American 
Indians, the State and Local Boards, and the State and area agencies on 
aging have an opportunity to actively participate in developing the 
State Plan. The development of the State Plan is a participatory 
process that is designed to allow for comments from all interested 
organizations and individuals.
Must all National Grantees Operating Within a State Participate in the 
State Planning Process? (Sec.  641.320)
    Section 503(a)(2) of the OAA requires the Governor to seek the 
advice and recommendations of a number of different parties for 
providing SCSEP services in the State, but does not require national 
grantees to participate in the State planning process. Proposed Sec.  
641.320 places a requirement on national grantees to collaborate with 
the Governors of each State where they operate a SCSEP program 
consistent with the intent of the statute. The Department strongly 
believes that it is in the best interest of all national grantees to 
work with the Governors in this process. Not only will national 
grantees be a part of the planning process for serving SCSEP 
participants, but the decisions made as a result of this consultation 
help national grantees meet the eligibility criteria at section 
514(c)(5) of the OAA. Further, any national grantee that fails to 
collaborate for State Plan purposes may be deemed ineligible for SCSEP 
funds in the following Program Year under section 514(c)(5).
    The proposed regulation exempts national grantees serving older 
American Indians, who may choose not to participate in the State 
planning process, consistent with the statute, although the Department 
encourages American Indian grantees to participate in the State 
planning process. These national grantees must collaborate with the 
Department to develop a plan for projects and services to older 
American Indians in the locations that they serve.
What Information Must Be Provided in the State Plan? (Sec.  641.325)
    This section lists the minimum requirements of the State Plan 
consistent with section 503(a)(4) of the OAA. The Department will issue 
more detailed instructions about what must be included in the State 
Plan. Governors are encouraged to use the equitable distribution report 
that State grantees submit to the Department each year in preparing 
their State plans. The Department will also provide more detailed 
information about the collaboration efforts to grantees serving older 
American Indians.
How Should the State Plan Reflect Community Service Needs? (Sec.  
641.330)
    This proposed provision expands on section 503(a)(4)(E) of the OAA, 
which requires the State Plan to identify and address the localities 
and populations for which community service projects of the type 
authorized by this title are most needed.
How Should the Governor Address the Coordination of SCSEP Services With 
Activities Funded Under Title I of WIA? (Sec.  641.335)
    Proposed Sec.  641.335 expands on the State Plan requirement found 
in section 503(a)(4)(F) of the OAA, which requires coordination of 
SCSEP activities in the State with WIA activities carried out in the 
State.
Must the Governor Submit a State Plan Each Year? (Sec.  641.340)
    The Department received suggestions through the Town Hall Meetings 
that the State Plans and the SCSEP grants cover the same time period, 
with an annual modification process to allow for any necessary 
revisions. The Department recognizes the merits of these suggestions. 
In addition, the Department recognizes that the data used in developing 
State Plans may not be updated annually and that a substantial amount 
of staff time is required to fully carry out the State planning 
requirements. Therefore, the Department is not requiring each State to 
develop and submit a completely new State Plan each year. However, the 
Department will require States to seek the advice and recommendations 
of the individuals and organizations identified in the statute at 
section 503(a)(2) about

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what changes are needed, if any, and to publish the changes to the 
State Plan for public comment. States will then submit a modification 
to the Department based on any updated information, including any new 
comments received and a summary of those comments. This slightly 
abbreviated process allows States to comply with the legislative 
requirements, but reduces the burden of the requirement.
What Are the Requirements for Modifying the State Plan? (Sec.  641.345)
    Section 641.345 discusses when modifications to the State Plan are 
required. In general, modifications are required when there is a major 
change affecting the underlying basis for the State Plan. This section 
mirrors the WIA regulations at 20 CFR 662.230.
How Should Public Comments Be Solicited and Collected? (Sec.  641.350)
    Because State procedures vary, the Department recommends that 
Governors use established methods for soliciting and collecting public 
comments. In general, however, soliciting and collecting public 
comments should ensure that the title V planning process is coordinated 
with other related State planning processes, such as the WIA 5-year 
plan and the title III OAA plan. The process should be open and 
inclusive in order to provide a meaningful opportunity for the public 
to review the proposed plan and offer comments.
Who May Comment on the State Plan? (Sec.  641.355)
    This section clarifies that any individual or organization may 
comment on the State Plan, which is consistent with section 503(a)(2) 
of the OAA.
How Does the State Plan Relate to the Equitable Distribution (ED) 
Report? (Sec.  641.360)
    The equitable distribution report is a report that shows where 
positions are located throughout a State on a grantee-by-grantee basis 
and is required by section 508 of the OAA. State agencies are 
responsible for preparing it at the beginning of each fiscal year. 
SCSEP grantees use the equitable distribution report to improve on the 
distribution of SCSEP positions within the State.
    The information contained in the ED report is used in preparing the 
State Plan; however, the State Plan requires additional information, 
such as plans for facilitating the coordination of activities of 
grantees in the State under WIA, and consultation with individuals and 
organizations in the State. The State Plan is submitted annually. The 
Department intends for these documents to work together to ensure that 
services are fairly distributed in the State.
How Must the Equitable Distribution Provisions Be Reconciled With the 
Provision That Disruptions to Current Participants Should Be Avoided? 
(Sec.  641.365)
    The Department recognizes the difficulty of balancing these 
provisions in the daily operation of SCSEP projects. Section 508 of the 
OAA requires the State agency for each State receiving funds to prepare 
and submit a report to the Department each year on how the State is 
allocating its SCSEP funds in an equitable manner taking the priorities 
established in the State Plan into consideration. Section 503(a)(6) of 
the OAA provides that when developing the State Plan, disruptions to 
current participants must be avoided to the greatest extent possible. 
The Department proposes, in Sec.  641.325(h) to require Governors to 
include a description of the steps that are being taken to comply with 
section 503(a)(6) on avoiding disruptions in the State Plan. When there 
is new census data indicating that there has been a shift in the 
location of the eligible population or when there is over-enrollment 
for any other reason, the Department recommends a gradual shift that 
encourages current participants in subsidized community service 
positions to move into unsubsidized jobs to make positions available 
for eligible individuals in areas where there has been an increase in 
the eligible population. The Department encourages interested 
organizations and individuals to use the State Plan review and comment 
process to make recommendations for how their State can achieve an 
equitable distribution of SCSEP positions while avoiding disruptions to 
current participants. The Department does not define disruptions to 
mean that participants are entitled to permanently remain in their 
current subsidized community service employment positions. As discussed 
in Sec. Sec.  641.570 and 641.575, grantees may, under certain 
circumstances, place time limits on an SCSEP community service 
assignment, thus permitting positions to be transferred over time.

Subpart D--Grant Application, Eligibility, and Award Requirements

    This subpart covers the grant application, eligibility, and award 
requirements for all SCSEP grants under section 506 of the OAA. The 
procedures in this subpart support increased emphasis on the grantees' 
accountability for results in order to achieve enhanced program 
performance. Relevant sections describe organizations eligible to apply 
for SCSEP grants, application requirements, eligibility criteria, 
responsibility reviews, and how the Department will select grantees. 
The OAA contains a new requirement that the Department arrange for 
competition should grantees fail to meet performance measures, which 
are discussed in Subpart G. The OAA also reinforces the responsibility 
tests that were established in the former regulations. Should a grantee 
fail one or more of these tests, the Department is required to compete 
the funds of such grantee. This subpart provides procedures that the 
Department will use when awarding SCSEP funds under competitive and 
noncompetitive conditions.
What Entities Are Eligible To Apply to the Department for Funds To 
Administer SCSEP Community Service Projects? (Sec.  641.400)
    The OAA, at section 502(b)(1), authorizes the Secretary to enter 
into agreements with State and national public and private nonprofit 
agencies and organizations, agencies of a State government or a 
political subdivision of a State (having elected or duly appointed 
governing officials), or a combination of such political subdivisions, 
or tribal organizations.
    This proposed rule clarifies the Department's policy on how these 
entities may apply for SCSEP funds. The proposed rule clarifies the 
list of eligible entities that may apply for SCSEP funds to preserve 
the balance of funds established in section 506 of the OAA, as well as 
the definitions of ``national grants'' and ``State'' in section 
506(g)(5) and 506(g)(6). Entities that are eligible to apply for 
national grants are: nonprofit organizations, Federal public agencies, 
and tribal organizations. These entities must be capable of 
administering a multi-State grant. States, agencies of a State, 
political subdivisions of a State, and combinations of political 
subdivisions of a State are not eligible to apply for national grant 
funds. The Department has defined ``public agencies'' as Federal 
agencies in order to maintain the statutory distinction between 
national grants and grants to States and to give effect to the use of 
the separate terms ``national public and private nonprofit agencies and 
organizations'' and ``agencies of a State government or a political 
subdivision of a State * * * or a combination of such political 
subdivisions' in section 502(b)(1) of the OAA. The definition of 
national grantee is expanded in Sec.  641.140 to mean an organization 
that

[[Page 22525]]

is capable of administering multi-State programs. An organization does 
not have to operate in more than one State, but must have the capacity 
to administer multi-State programs. This requirement allows the 
Department to negotiate with successful applicants to ensure that 
positions that did not receive a proposal continue to be served in an 
effort to minimize disruptions to participants. This requirement also 
aligns with the current practice of awarding SCSEP funds to 
organizations that are ``national'' in scope and further distinguishes 
these grants from grants to States. As such, State and local public 
agencies are not permitted to serve as national grantees.
    Section 514(e)(3) of the OAA lists the eligible entities that can 
apply for national grant funds in a State, but as a result of poor 
performance. Under section 514(e)(3), States, nonprofit organizations, 
and public agencies are eligible for a transfer or competition of funds 
when a national grantee in a State fails to meet its performance 
measures. This list of eligible entities is discussed further at Sec.  
641.760 of Subpart G (performance measures).
    In the case of grants to States, the Department is required to 
allocate SCSEP funds to each State under section 506(e) of the OAA. 
However, it is often an agency of the State, such as the State agency 
on aging, that operates SCSEP projects for the State. The Department 
will continue the practice of allocating funds to each State or the 
State's designee (such as the State agency on aging). Other entities, 
such as, political subdivisions, a combination of political 
subdivisions, or a national grantee operating in the State may operate 
SCSEP projects on the State's behalf if State policy permits; however, 
these entities may only apply independently for the State's funds as a 
result of a competition under section 514(f) of the OAA. The Department 
believes that this list of eligible applicants is a common sense 
approach to managing the State portion of the SCSEP funds. It also 
aligns with current State practice of selecting an agency, local 
government, or national grantee operating in the State as agents or 
subgrantees to administer its SCSEP projects. However, as discussed in 
Sec.  641.881, the Department will not negotiate with or directly fund 
such entities. The State remains responsible for receiving the grant 
and for selecting an agent or subgrantee to operate the grant in 
accordance with its own procurement procedures.
How Does an Eligible Entity Apply? (Sec.  641.410)
    Proposed Sec.  641.410 directs interested applicants, including 
States, to follow instructions in administrative issuances to apply for 
a SCSEP grant. The Department decided not to include more specific 
information in this section because the parameters for applying for a 
SCSEP grant may change from Program Year to Program Year. Also, the 
instructions for State applications may vary from the application 
instructions for national grants.
    Proposed paragraph (b) of this section reiterates the statutory 
requirement that applicants for national grants, with the exception of 
organizations applying to serve older American Indians, must submit a 
copy of their applications to the Governor of each State where a 
project is proposed prior to submission to the Department. This 
provision is intended to allow the Governor to make recommendations on 
position distributions in the State only and not on the quality of an 
application or whether the Department should fund a particular 
applicant. In the case of a full and open competition, Governors may 
elect to only review the applications of successful applicants to 
reduce the burden on the States and applicants.
    Organizations proposing to serve older American Indians do not have 
to meet this requirement because they are exempt from State planning 
under section 503(a)(8) of the OAA. The Department encourages such 
entities to submit applications to the Governors in the State(s) they 
propose to serve so that the Governors may better plan the activities 
in their State.
    Paragraph (c) of this section allows the States to apply for State 
grant funds as a part of its WIA State Unified Plan.
What Factors Will the Department Consider in Selecting Grantees? (Sec.  
641.420)
    This section describes the selection criteria to be used on a 
program-wide basis for the selection of all SCSEP grantees, whether 
selected competitively or on a noncompetitive basis. This proposed rule 
identifies the eligibility and responsibility requirements in section 
514 of the OAA. The selection criteria must also be used to replace any 
grantee that fails to meet the performance measures listed in section 
513 of the OAA and when new or additional grantees are funded.
What Are the Eligibility Criteria That Each Applicant Must Meet? (Sec.  
641.430)
    The eligibility criteria listed in this proposed section reflect 
the statutory language at section 514(c) of the OAA dealing with 
eligibility criteria, which must be reviewed each time an applicant 
applies for SCSEP funds. The OAA codified the provisions of the 
previous regulations. Proposed Sec.  641.430(e) clarifies the statutory 
language to include the One-Stop center in the coordination requirement 
so that applicants understand that such coordination is mandated. The 
OAA, at section 514(c)(7), permit the Department to add additional 
criteria as appropriate to minimize disruptions to current 
participants. The Department has added proposed Sec.  641.430(g)--a 
requirement to minimize disruptions. The Department must conduct an 
eligibility review each time an applicant applies for SCSEP funds.
What Are the Responsibility Conditions That an Applicant Must Meet? 
(Sec.  641.440)
    This section contains the responsibility review provisions codified 
in section 514(d) of the OAA. These provisions were published in the 
previous regulations. The responsibility review provisions in this 
section address such matters as debt recovery deficiencies, significant 
fraud or criminal activity, serious administrative deficiencies such as 
failure to maintain a financial management system, maintaining excess 
cash or having deficient internal controls, willful obstruction of 
auditing or monitoring or failure to correct deficiencies, failure to 
provide services to applicants or to meet applicable performance 
measures, failure to return outstanding cash advances, failure to 
submit required reports, failure to ensure subgrantee compliance with 
applicable audit requirements, and final disallowed costs in excess of 
five percent of the grant or contract award.
    The Department understands that Congress' intent was to make the 
SCSEP program more performance-oriented and to assure that the SCSEP 
was well managed. Consistent with that intent, the Department intends 
to enforce the responsibility tests more strictly than it has in the 
past.
    The Department is interpreting the first criterion to mean that if 
an applicant fails to make payments on a debt owed to the Department, 
whether incurred on its own or through subgrantees or subcontractors, 
after the grantee has received three demand letters from the 
Department, it will no longer be eligible to receive SCSEP funds. This 
interpretation is consistent with the former SCSEP regulations, as well 
as the Department's requirements for finding any grantee or contractor

[[Page 22526]]

responsible as outlined in 29 CFR 95.14 and 97.12.
    The Department will determine whether an applicant for SCSEP funds 
has met the responsibility requirements before awarding funds.
Are There Responsibility Conditions That Alone Will Disqualify an 
Applicant? (Sec.  641.450)
    The OAA defines two criteria that will automatically disqualify an 
applicant. They are: (1) Efforts by the organization to recover debts, 
after three demand letters have been sent, that are established by 
final agency action and have been unsuccessful, or that there has been 
failure to comply with an approved repayment plan; and (2) established 
fraud or criminal activity of a significant nature within the 
organization.
    As discussed in Sec.  641.440, the Department is interpreting the 
first criterion to mean that if an applicant fails to make payments on 
a debt owed to the Department, whether incurred on its own or through 
subgrantees or subcontractors, after the grantee has received three 
demand letters from the Department, it will no longer be eligible to 
receive SCSEP funds. The Department interprets the second criterion 
strictly. A plain reading of the statute indicates that whenever there 
is fraud or criminal activity within an organization of a significant 
nature, the entity must be deemed non-responsible. Under this 
interpretation, the entity could be deemed non-responsible even if the 
act was done by an individual within the organization without the 
approval or knowledge of the organization. The remaining responsibility 
tests require a substantial or persistent (for 2 or more years) finding 
before the applicant is found ineligible.
How Will the Department Examine the Responsibility of Eligible 
Entities? (Sec.  641.460)
    This proposed regulation addresses how the Department will examine 
applicants to determine if they are responsible as required by section 
514 of the OAA. Section 514(d)(1) specifically requires the Department 
to review available records to assess an applicant's overall 
responsibility to administer Federal funds. Additionally, section 
514(d)(2) allows the Department to consider any other information 
relevant to responsibility, including the applicant's history with 
managing other grant funds.
Under What Circumstances May the Department Reject an Application? 
(Sec.  641.465)
    Once an application has been submitted, whether competitively or 
non-competitively, the Department may question any proposed project 
component if it believes that the component will not serve the purposes 
of SCSEP. The Department may reject the application if the applicant 
does not submit or negotiate an acceptable alternative. The Department 
may also reject an application, if in the Grant Officer's opinion, the 
application does not serve the program well, or if the applicant does 
not meet the eligibility or responsibility criteria. Where grants are 
competitively selected, the Department may reject an application that 
is determined to be less advantageous to the Department than another 
competitive application, even if the application is out of rank order.
What Happens if an Applicant's Application Is Rejected? (Sec.  641.470)
    This section is reserved for the Department's policy on providing 
remedies for applicants that are not selected to receive a SCSEP grant 
and that are successful in appealing the Department's decision.
    The Department is particularly interested in receiving comments on 
this section. The Department is particularly interested in comments on 
available remedies and the timing of those remedies.
    Competitions for SCSEP projects will not necessarily be ``one-on-
one'' competitions. Because applicants may seek to operate projects 
scattered all over the country, applications may not necessarily 
compete against each other on a one-on-one basis. An applicant might 
propose projects in 10 different States, and compete against one of 
more other applications for each of the 10 projects. An applicant that 
proposes to serve one area may compete against several applicants, each 
of which seeks only a portion of that area. In addition, the Department 
may negotiate a grant award that differs somewhat from the original 
application. The Department also has an obligation to minimize 
disruption to existing participants. Finally, the Department's 
experience is that there is a certain minimum size grant needed to give 
a grantee a good chance at success within the program's administrative 
cost limits (which is a grant size of approximately $6 million or 
approximately 840 positions), and to adhere to the required level of 
activities in section 506 of the OAA.
    These factors can lead to some complications in fashioning a remedy 
that will meet the Department's obligations to minimize disruptions and 
that will ensure that programs are successful. How should a remedy be 
fashioned that will take these factors into account? For example, how 
should the remedy be fashioned if an appeal succeeds only in part and 
the resulting award would be below the minimum standards for a grant or 
if the result would leave an existing grantee below that standard? How 
should the remedy take into account the results of negotiations? If, as 
a result of negotiations, a grantee has acquired additional projects 
that neither it nor its competitor applied for, should the remedy take 
that into account? If an appeal is successful, to what extent should 
the Department be able to negotiate the grant agreement that will 
result? May the Department propose a different configuration of 
projects than was applied for in order to minimize disruptions or 
optimize results for the successful appellant and other existing 
grantees? If the Department can negotiate with the successful 
appellant, what happens if the negotiations are not successful? In 
cases where the applicant to jurisdiction relationship is not one-on-
one, complexities of arranging a grant that will both minimize 
disruption and provide both the successful appellant and the grantee(s) 
that lose projects with grants that can be successfully operated, 
should the remedy be limited to recovering the cost of creating a 
proposal or something else? Are the remedies currently available under 
the Workforce Investment Act (WIA), Migrant and Seasonal Farmworker 
Program (see 20 CFR 633.205) appropriate for this program and why or 
why not? What remedy should be available for one-year grants?
    Another important issue is the timing of the remedy. How long is an 
appropriate transition period? What factors associated with the 
complexity of the transition involved should affect the length of an 
appropriate transition period? Should a period of time for negotiations 
be built in? How should the Department remedy an applicant when the 
decision was rendered in close proximity to the next program year? 
Should there be a cut off point after which a grant will not be awarded 
as there is in the WIA Migrant and Seasonal Farmworker Program? What 
should that cut-off point be?

[[Page 22527]]

May the Governor Make Recommendations to the Department on Grant 
Applications? (Sec.  641.480)
    Proposed Sec.  641.480 clarifies the Governor's statutory authority 
under section 503(a)(5) of the OAA to make recommendations to the 
Department on grant applications before funds are awarded. The 
Governor's recommendations must relate to the distribution of positions 
in the State. Any comments received relating to the quality of a 
particular application will not be considered. Under non-competitive 
conditions, the Governor may make recommendations on all submitted 
applications. Under competitive conditions, the Governor has the option 
of either making recommendations on every proposal that will be 
submitted to the Department or providing recommendations on the 
applications of successful applicants. It is incumbent on each Governor 
to inform the Department whether he or she wishes to review all 
applications or only successful applications. As stated in Sec.  
641.410, organizations applying to serve older American Indian 
participants are exempt, but are encouraged to submit applications to 
the Governor in the State(s) they are proposing to serve.
When May SCSEP Grants Be Awarded Competitively? (Sec.  641.490)
    Proposed Sec.  641.490 outlines the circumstances under which the 
Department may compete SCSEP funds. Section 514 of the OAA requires a 
competition for national grantee, national grantee in a State, or State 
funds if the organization fails to meet its performance measures or 
fails to meet the eligibility or responsibility tests of section 514(c) 
and (d) of the OAA.
    The Department may also compete national grant funds through a full 
and open competition. The details of such competition will be issued 
through a Solicitation for Grant Application and published in the 
Federal Register. The Department favors full and open competition 
because it provides the Department with an opportunity to ensure that 
the best applicants are awarded grants and the program is administered 
to its full potential. It also allows new and different entities, 
including faith-based and community-based organizations, to become a 
part of the grantee community.

Subpart E--Services to Participants

    This subpart covers services to SCSEP participants. More 
specifically, it covers who is eligible to receive services, priorities 
in enrollment of participants, the types of services and benefits that 
participants may receive, termination from the program, and the 
grantee's responsibility to participants.
Who Is Eligible To Participate in the SCSEP? (Sec.  641.500)
    Proposed Sec.  641.500 establishes the statutorily defined 
eligibility criteria. According to section 516(2) of the OAA, only 
those individuals who are at least 55 years of age and a member of a 
family with an income 125 percent or less of the poverty guidelines are 
eligible to receive SCSEP services. Participant income eligibility 
criteria was the area that received the most attention in Town Hall 
Meetings and recommendations submitted in response to Federal Register 
notices. Individuals offered various suggestions, all directed at 
providing greater flexibility in the income eligibility criteria. More 
specifically, some individuals suggested a higher income threshold to 
serve those individuals who may be just above the 125 percent income 
threshold issued by the Department of Health and Human Services and 
approved by the Office of Management and Budget. The Department has 
decided not to increase the income eligibility threshold because SCSEP 
currently serves only a small percentage of individuals who are within 
the 125 percent income threshold. Individuals who are in need of the 
services provided under the SCSEP but who do not meet the income 
eligibility requirement, should be referred to or enrolled in WIA.
When Is Eligibility Determined? (Sec.  641.505)
    This section discusses when the eligibility of a participant is 
determined. Clearly, the first time eligibility is determined is when 
an individual applies to participate in SCSEP. Once an individual 
becomes a SCSEP participant, however, grantees are responsible for 
verifying the individual's income eligibility at least once every 12 
months. Grantees are encouraged to verify a participant's income more 
frequently, however, when circumstances dictate.
What Types of Income Are Included and Excluded for Participant 
Eligibility Determinations? (Sec.  641.507)
    The Department is seeking comments on the types of income that 
grantees must consider when determining a participant's eligibility. 
Older Worker Bulletin 95-5 lists the current inclusions and exclusions 
for determining a participant's income. The Department is specifically 
seeking comments on whether certain provisions should be consolidated 
or eliminated, or if other new categories should apply. The Department 
is considering eliminating the exclusion of the first $500.00 of a 
participant's income for re-certification purposes because this 
provision is not consistent with the income eligibility requirements 
under the 2000 Amendments. See OW Bulletin 95-5, section 2(g) under the 
Exclusions. Further, in order to serve the populations that the program 
is intended to serve, (i.e., those most in need), the Department is 
also considering placing limitations on the amount of assets a 
participant may have to be eligible for the program. See OW Bulletin 
95-5, section 2(h) under the Exclusions. Similarly, the Department is 
considering placing limitations on the amount of one-time unearned 
income that may be excluded. See OW Bulletin 95-5, section 2(j) under 
the Exclusions. The Department intends to provide additional guidance 
on the calculations through an administrative issuance.
What Happens if a Grantee/Subgrantee Determines That a Participant Is 
No Longer Eligible for the SCSEP Due to an Increase in Family Income? 
(Sec.  641.510)
    Grantees are required to terminate participants who are no longer 
income eligible for the program according to Sec.  641.580. 
Participants who are no longer income eligible for SCSEP must receive a 
written notification of termination within 30 days of the termination 
date. Grantees must assist these individuals by referring them to the 
WIA One-Stop or to another appropriate partner program. (See Sec.  
641.255). Any participant who disagrees with a termination on the basis 
of income may grieve the decision according to the grantee's grievance 
procedures in accordance with Subpart I of this regulation.
How Must Grantees/Subgrantees Recruit and Select Eligible Individuals 
for Participation in the SCSEP? (Sec.  641.515)
    Proposed Sec.  641.515 outlines the general statutorily required 
means for recruiting and selecting eligible individuals for 
participation in SCSEP. Generally, grantees are required to develop a 
method for recruiting and selecting eligible individuals. To the extent 
possible, grantees must meet the statutory requirement at section 
502(b)(1)(M) to develop methods of recruitment and selection that offer 
services to minorities, limited English-speaking, and Indian eligible 
individuals, and eligible individuals who have the greatest economic 
need, in proportion to their numbers in the State

[[Page 22528]]

and based on the rates of poverty and unemployment.
    Grantees are also required by section 502(b)(1)(H) of the OAA, to 
list job vacancies with the State Workforce Agencies and utilize 
existing methods of recruitment and selection, including by 
participating in the One-Stop.
    Beyond these requirements, grantees have a great deal of 
flexibility to determine how to recruit and select individuals and are 
encouraged to be as creative as possible.
Are There Any Priorities That Grantees/Subgrantees Must Use in 
Selecting Eligible Individuals for Participation in the SCSEP? (Sec.  
641.520)
    This section emphasizes the statutory requirement at section 516(2) 
of the OAA, which requires that priority of services be given to 
individuals who are at least 60 years old, as well as the veterans' 
priority requirement in the Jobs for Veterans Act, Pub. L. 107-288 
(2002). The latter requirement provides a priority of services for 
veterans and for certain spouses: Spouses of a veteran who died of a 
service-connected disability; spouses of a member of the Armed Forces 
on active duty, who has been listed for a total of more than 90 days as 
missing in action, or who has been captured in the line of duty by a 
hostile force, or forcibly detained by a foreign government or power; 
spouses of any veteran who has a total disability resulting from a 
service-connected disability; and spouses of any veteran who died while 
a disability so evaluated was in existence. To receive the priority, 
the veteran or qualified spouse must meet program eligibility 
requirements.
    The Department interprets the Jobs for Veterans Act so as to 
harmonize the two priority provisions. Under this interpretation, both 
priorities would apply. That is, within the group of eligible 
individuals age 60 and over, the veteran or qualified spouse would 
receive SCSEP services before non-veterans within that age group. 
Within the group of individuals who are age 55 to 59, veterans and 
qualified spouses would again receive a priority over other eligible 
individuals.
Are There Any Other Groups of Individuals Who Should Be Given Special 
Consideration When Selecting SCSEP Participants? (Sec.  641.525)
    In addition to the priorities outlined in Sec.  641.520, the OAA 
also require grantees to give special consideration to individuals who 
have income below the poverty level, who have poor employment 
prospects, who have the greatest social and/or economic need, or who 
are minorities, limited English speaking, or who are Indians, to the 
extent feasible. The addition of the priority under the Jobs for 
Veterans Act does not alter this preference. These preferences operate 
within the context of the two priorities (age and status under the Jobs 
for Veterans Act); that is, grantees should apply the priority in 
selecting among individuals who are eligible, and then provide services 
within the priority to those who meet the preference first.
Must the Grantee/Subgrantee Always Select Priority or Preference 
Individuals? (Sec.  641.530)
    The statutory priorities must always be applied first. However, the 
Department understands that there may be a limited number of 
individuals who fall outside of the prescribed statutory preference 
characteristics, but who may still be in need of SCSEP services. The 
Department is providing grantees/subgrantees with the flexibility to 
exercise their judgment when they determine that a non-preference 
eligible individual should receive services over a preference eligible 
individual described above. For example, grantees/subgrantees may 
choose to serve former SCSEP participants who left the program due to 
illness and now seek to return to the program, or they may choose to 
serve a former SCSEP participant who was placed in an unsubsidized job 
and who seeks to return to the program, over the preference 
individuals. The flexibility to serve these individuals reassures 
participants who leave the program under these circumstances and can be 
used as a motivator to encourage them to take unsubsidized jobs. 
Grantees should take care to document why a particular participant who 
is not entitled to a preference has received services. Grantees must 
balance the use of this discretion with the performance measures in 
subpart G that require grantees to service those of greatest economic 
need, greatest social need, or poor employment history or prospects and 
must not use this discretion to avoid applying the statutory 
priorities. The Department intends to monitor these requirements 
through the quarterly reports as well as when determining whether a 
grantee has met its performance measures.
What Services Must Grantees/Subgrantees Provide to Participants? (Sec.  
641.535)
    This section sets forth those services that grantees/subgrantees 
must provide to all SCSEP participants. It includes a listing of what 
each participant assessment must include and clarifies that the 
information gathered during the participant assessment must be used as 
the basis for preparing the SCSEP IEP. It is particularly important 
that grantees thoroughly assess each participant and ensure that all of 
the required information is included in the SCSEP IEP, since it is 
considered an intensive service under title I of WIA. Assessments must 
be updated on a quarterly basis so that the SCSEP IEP is a ``living 
document.'' The information gathered during the assessment and recorded 
in the IEP serves as the basis for determining the services that a 
participant needs, most appropriate host agency assignments/
reassignments for participants and for ensuring that participants are 
getting the training necessary to achieve their unsubsidized placement 
goals.
    The listing of services in proposed Sec.  641.535 is not intended 
to be all-inclusive. Grantees should refer to operating procedures and 
guidelines issued by the Department, such as Older Worker Bulletins and 
technical assistance guides, for additional requirements. Participants 
may not be enrolled in SCSEP solely for the purpose of receiving job 
search assistance and job referral services. SCSEP staff working in a 
One-Stop Delivery System, however, may provide these services to 
individuals who are not being enrolled in the SCSEP, as long as the 
staff time is appropriately charged to the appropriate program under 
the WIA cost allocation principles or the SCSEP staff may refer such 
individuals to appropriate One-Stop partners.
What Types of Training May Grantees/Subgrantees Provide to SCSEP 
Participants? (Sec.  641.540)
    Training may take many forms, including skills training, on-the-job 
training, work experience, community service training, job search and 
job referral services. Training may be provided through lectures, 
seminars, classroom instruction, individual instruction, or other 
arrangements, including, arrangements with other workforce development 
programs. The Department also encourages participants to continue to 
self-develop by engaging in training through other programs or sources 
when they are not working in a community service activity. The 
Department believes that self-development training is beneficial to 
participants because it facilitates their placement into unsubsidized 
employment.
    Also, the Department expects grantees to review regulations 
outlining the limitations on the use of funds and the OMB cost 
principles when proposing to

[[Page 22529]]

use funds for travel or room and board associated with training.
    Only a limited amount of SCSEP funds are available for training 
purposes. SCSEP grantees/subgrantees should look to other resources, 
such as those available under title I of WIA, for training of SCSEP 
participants.
What Supportive Services May Grantees/Subgrantees Provide to 
Participants? (Sec.  641.545)
    Section 641.545 lists some of the supportive services that 
grantees/subgrantees may provide to participants. Supportive services 
may be provided while a participant is enrolled in the SCSEP and until 
a participant has been retained by an employer for 6 months. This list 
of supportive services is not intended to be all-inclusive. Grantees/
subgrantees should seek to ensure that participants receive those 
supportive services necessary for them to participate in the program 
and to realize the goals set forth in their SCSEP IEPs. Grantees are 
especially encouraged to ensure that individuals who are placed in 
unsubsidized positions have the necessary supportive services to enable 
them to retain those positions. Since only a limited amount of SCSEP 
funds are available to provide supportive services, grantees/
subgrantees should seek to obtain such services from other sources.
What Responsibility Do Grantees/Subgrantees Have To Place Participants 
in Unsubsidized Employment? (Sec.  641.550)
    Because a major purpose of SCSEP is to increase the number of 
individuals who may participate in the program, grantees/subgrantees 
should make every reasonable effort to prepare participants who desire 
unsubsidized employment for such employment, in accordance with the 
employability goals listed in their SCSEP IEPs. In offering 
participants unsubsidized employment, grantees/subgrantees must take 
into account whether the job will allow participants to achieve 
economic self-sufficiency. Grantees must also strive to match the 
participant with the best job instead of just filling jobs with 
participants. The objective of the program is to place participants in 
positions that will maximize the use of their skills, based on their 
job readiness, skills, and preferences. Thus, grantees must contact 
private and public employers directly or through the One-Stop to 
develop or identify suitable unsubsidized employment opportunities. 
Also, grantees and subgrantees must encourage host agencies to assist 
participants in their transition to unsubsidized employment by hiring 
the participants who are placed there through the community service 
component of the SCSEP.
What Responsibility Do Grantees Have to Participants Who Have Been 
Placed in Unsubsidized Employment? (Sec.  641.555)
    This proposed section outlines a grantee's responsibilities to 
participants after they have been placed in unsubsidized positions. 
This section requires grantees to contact placed participants within 6 
months of the starting date to determine whether the employer has 
retained them. This provision is consistent with the statute, at 
section 513, which uses retention in unsubsidized positions after 6 
months as a performance measure. (Refer also to subpart G on 
performance measures). Therefore, grantees must contact participants 6 
months after placement to ensure that participants are still employed. 
Grantees/subgrantees are encouraged to conduct follow-up before 6 
months when possible, to ensure that the placement is successful. 
Grantees/subgrantees may also want to check with the employer at this 
time to see if it has other positions that may be offered to SCSEP 
participants.
    During this period of follow-up grantees are permitted to provide 
supportive services to participants to the extent possible. The 
Department encourages grantees to provide supportive services to 
participants during this time because it ensures that participants are 
able to remain in the unsubsidized position. The Department 
distinguishes supportive services from wages, and these services are 
therefore not considered a subsidy. Supportive services are discussed 
at Sec.  641.545.
May Grantees Place Participants Directly Into Unsubsidized Employment? 
(Sec.  641.560)
    This proposed rule emphasizes the importance that grantees serve 
the most difficult seniors to place. Grantees are encouraged to work 
with individuals who are in need of skills training, etc., and develop 
those individuals through the assessment and IEP so that ultimately 
they may be placed in an unsubsidized position. Individuals who already 
have employable skills and who may be directly placed in an 
unsubsidized position without further development should be referred to 
the services provided under the One-Stop Delivery System.
What Policies Govern the Provision of Wages and Fringe Benefits to 
Participants? (Sec.  641.565)
    This provision requires grantees to pay participants the highest 
applicable minimum wage for time spent in orientation, required 
training, and for work in community service assignments. The applicable 
minimum wage may be the highest of the Federal minimum wage, the State 
or local minimum wage, or the prevailing rate of pay for persons 
employed in similar public occupations by the same employer. The 
Department is aware that because funding calculations are statutorily 
based on the Federal minimum wage, when a particular grantee is 
required to pay at a higher minimum wage for its location, the result 
is that the program is under-funded for its activities.
    A number of stakeholders asked that the Department address the 
situation of States that have a higher minimum wage than the Federal 
minimum wage. The two main suggestions were that either grantees in 
those States should receive additional funding to cover their 
additional expenses for wages, or that the Department should reduce the 
number of positions for which grantees in those States will be held 
accountable, particularly in light of the new emphasis on performance 
measures.
    The Department agrees that grantees in States with a higher-than-
Federal minimum wage, or similarly, grantees in areas where the 
prevailing rate of pay for persons employed in similar public 
occupations by the same employer is higher than the Federal minimum 
wage, will not be able to fully fill the authorized level of positions 
allotted to them. If the Department receives additional appropriations 
that are not required to create more positions, the funding gap will 
decrease. Also, it is not the Department's intent for this issue to 
negatively impact grantees when reviewing whether grantees have met 
their performance measures. The Department will address this issue and 
its impact on the number of positions that may be filled through the 
performance accountability process in subpart G.
    Paragraph (b) of this section addresses fringe benefits. With some 
exceptions, discussed in the regulation, grantees must assure that 
participants receive the fringe benefits required by law. Fringe 
benefits must also be administered uniformly among participants of a 
grantee's projects, unless the Department waives this requirement 
because it is in the best interest of the participants. Physical 
examinations are

[[Page 22530]]

a fringe benefit that grantees/subgrantees must offer annually to each 
participant. Physicians commonly recommend annual physical examinations 
for people over the age of 50 as a means of early identification of any 
serious medical problems. The Department's policy is to actively 
promote this program benefit for each participant. Grantees/subgrantees 
should encourage participants to take advantage of this important 
benefit.
    Grantees may not provide physical examinations to determine a 
participant's ``fitness to work.'' Physicals can be useful, however, in 
helping participants make informed judgments about their ability to 
perform certain work assignments. After an individual is enrolled (on 
the payroll) and the grantee/subgrantee is developing a suitable 
assignment, job-related medical inquiries are permissible to assist in 
matching the participant with an assignment. These inquiries, if made, 
should be made of every participant to ensure that each participant is 
receiving the same level of service.
    The Department continues the policy of discouraging the use of 
title V funds for unemployment insurance and retirement fund 
contributions.
Is There a Time Limit on Participation in the Program? (Sec.  641.570)
    There is no time limit on participation in the SCSEP because the 
Department recognizes that some participants may never transition to 
unsubsidized employment. It is expected, however, that most SCSEP 
participants will receive services for only a reasonable period of 
time, i.e., not more than 24 to 36 months. Due to the increased 
emphasis in the OAA for unsubsidized employment placements, and the 
Government Performance and Results Act goals, grantees/subgrantees 
should work to place as many participants as feasible in unsubsidized 
jobs in order to create additional community service opportunities. 
Grantees/subgrantees may also require that participants rotate to 
different host agency assignments after specified periods of time.
    The Department may authorize the establishment of a maximum 
duration of enrollment in the grantee's grant agreement, on the 
condition that the grantees provide a process for transitioning 
participants into unsubsidized employment or other assistance before 
the maximum duration period has expired.
May a Grantee Establish a Limit on the Amount of Time Its Participants 
May Spend at Each Host Agency? (Sec.  641.575)
    Some grantees have found that they have been able to increase their 
unsubsidized placement rate by limiting the amount of time their 
participants can spend at each host agency. The regulations clarify 
that this is an allowable practice, provided that the time limit is 
established in the grant agreement and included in the participants' 
IEPs. Grantees that intend to establish a limit on the amount of time a 
participant may spend at a host agency must submit this plan in their 
application proposal. If the Department approves the grant application, 
this process will become part of the grant agreement.
Under What Circumstances May a Grantee Terminate a Participant? (Sec.  
641.580)
    Grantees/subgrantees may serve only those individuals who are 
eligible for the SCSEP. Should a grantee/subgrantee learn that an 
individual is no longer eligible for the program, the grantee/
subgrantee must terminate the participant from the program.
    Grantees/subgrantees may terminate participants for cause, 
including behavior that is inconsistent with their SCSEP IEP, or for 
refusing to accept a reasonable number of referrals to jobs or 
training. The Department expects grantees to inform participants of the 
conditions that could lead to a termination from the program in writing 
and review the requirements with each participant in person at the time 
of enrollment.
    As provided in Sec.  641.570, grantees may terminate participants 
based on an approved maximum duration of enrollment provision in the 
grant agreement approved by the Department as long as they provide 
appropriate services to help the participants transition to other 
available programs.
    Grantees/subgrantees may not terminate a participant because of 
age, nor may they impose an upper age limit for participation in the 
SCSEP.
Are Participants Employees of the Federal Government? (Sec.  641.585)
    This regulation clarifies that participants are not Federal 
employees. If, however, the grantee or host agency of a participant is 
a Federal agency, whether or not the participant qualifies as an 
employee depends on the laws defining an employer/employee 
relationship. (See Sec.  641.590).
Are Participants Employees of the Grantee, the Local Project, and/or 
the Host Agency? (Sec.  641.590)
    Proposed Sec.  641.590 addresses the issue of whether a participant 
is an employee of the grantee, local project, or host agency. The 
Department is unable to concretely answer this question because whether 
a participant is an ``employee'' depends on the laws defining an 
employee/employer relationship. Thus, grantees and participants should 
consult with an attorney to determine if there are circumstances that 
qualify a participant as an employee.

Subpart F--Private Sector Training Projects Under Section 502(e) of the 
OAA

    This section describes private sector training projects authorized 
under section 502(e) of the OAA, including information on allowable 
activities, eligibility, co-enrollment, and administration. The 
Department received many suggestions for changing the section 502(e) 
program, particularly to allow for more flexibility in the use of the 
funds, and two suggestions to eliminate the program altogether due to 
the additional reporting and budgeting requirements. The section 502(e) 
program is required by the OAA, which authorizes the Department to 
reserve up to 1.5 percent of the total appropriation to place 
individuals into private sector job opportunities. The Department 
believes that the section 502(e) program will complement grantee 
efforts to promote training for older individuals and move participants 
into unsubsidized employment in the general SCSEP program. The 
Department recognizes the need for improved technical assistance, 
however, and will work to help section 502(e) grantees and subgrantees 
better implement and take advantage of the program.
    One of the biggest changes to the administration of the section 
502(e) program, is the Department's decision to sponsor a full and open 
competition for the funds so that all eligible entities may apply. The 
Department has made this change to be more in line with the statutory 
requirements, as well as Department policy on having full and open 
competition. The Department believes that competing this program will 
strengthen the unsubsidized placement goals of the program as a whole 
and will integrate private industry into the SCSEP community.

[[Page 22531]]

What Is the Purpose of the Private Sector Training Activities 
Authorized Under Section 502(e) of the OAA? (Sec.  641.600)
    The purpose of section 502(e) is to facilitate the unsubsidized 
employment of program participants in the private sector, particularly 
in different work modes such as job sharing, flex-time, flex-place, and 
to encourage the development of arrangements related to reduced 
physical exertion, and innovative work modes with a focus on second 
career training and placement in growth industries in jobs requiring 
new technological skills.
    The amendments to the OAA eliminated the reference to 
``experimental'' activities under section 502(e). The Department 
interprets this action to mean that section 502(e) funds may be used to 
fund private sector training activities whether or not they are 
experimental in nature; however, the Department encourages section 
502(e) grantees to be innovative.
How Are Section 502(e) Activities Administered? (Sec.  641.610)
    This section discusses how the Department administers section 
502(e) projects. It generally provides that the Department may enter 
into agreements with States, public agencies, private nonprofit 
organizations, and private businesses to fund proposed projects. It 
also emphasizes the types of activities that should occur, such as job 
sharing, flex-time, flex-place, etc. Finally, this section reiterates 
the importance of coordinating section 502(e) activities with programs 
carried out under WIA and with other SCSEP projects in the area.
How May an Organization Apply for Section 502(e) Funding? (Sec.  
641.620)
    This proposed section provides that eligible organizations may 
apply for section 502(e) funds through a full and open competitive 
process. If the Department competes these funds through a full and open 
competition it will issue a Solicitation for Grant Applications for 
these funds for each Program Year in which a competition is held.
What Private Sector Training Activities Are Allowable Under Section 
502(e)? (Sec.  641.630)
    Proposed Sec.  641.630 lists the activities that are authorized for 
private sector training under section 502(e). This list in not intended 
to be exhaustive. Section 502(e) grantees should note that many of 
these activities align with activities under WIA. Section 502(e) 
grantees are statutorily required to coordinate section 502(e) projects 
with the WIA programs.
How Do the Private Sector Training Activities Authorized Under Section 
502(e) Differ From Other SCSEP Activities? (Sec.  641.640)
    Generally, the provisions in subpart E also apply to private sector 
training activities, including equitably distributing positions by 
region of the country. Because most participants work at a private 
sector worksite, however, section 502(e) activities are not required to 
have a community service component. One major difference between the 
general SCSEP program and the section 502(e) program is the list of 
applicants that are eligible to receive section 502(e) funds. For 
section 502(e) only, the Department is authorized to enter into 
agreements with private business concerns, in addition to nonprofit 
organizations, States, and public agencies. Also, where in the general 
SCSEP program participants may be placed with a nonprofit organization, 
State agency (when permissible), or Federal agency (when permissible), 
section 502(e) specifically requires participants to be placed in 
employment opportunities with private business concerns. Section 502(e) 
organizations that serve as training sites (on-the-job or other), or 
provide work experience that lead to unsubsidized employment do not 
have to be designated as section 501(c)(3) organizations as defined in 
the Internal Revenue Code. Finally, the Department may pay all of the 
costs of a 502(e) project, which is not authorized for the general 
SCSEP program.
Does the Requirement That Not Less Than 75 Percent of the Funds Be Used 
To Pay Participant Wages and Fringe Benefits Apply to Section 502(e) 
Activities? (Sec.  641.650)
    This proposed rule clarifies that the requirement to use 75 percent 
of funds for wages and fringe benefits applies to all grants awarded 
under title V of the OAA. Section 502(c)(6)(B) of the OAA specifically 
requires that 75 percent of the grant funds be used to pay wages and 
benefits for older individuals who are employed under SCSEP projects. 
The Department has interpreted this section to mean that when a SCSEP 
grantee receives section 502(e) funds and funds for community service 
projects under a single grant, the 75 percent requirement will apply to 
the total amount of SCSEP funds that the grantee received. The 
Department is not authorized to waive this requirement.
Who Is Eligible To Participate in Section 502(e) Private Sector 
Training Activities? (Sec.  641.660)
    This rule adopts the eligibility criteria used in subpart E to 
determine an eligible participant. According to subpart E, section 
502(e) grantees are required to serve low-income individuals who are 
age 55 and over. Priority must also be given to those eligible 
individuals who are age 60 or over and to veterans and qualified 
spouses under the Jobs for Veterans Act. Section 502(e) grantees must 
also give special consideration to those individuals who have incomes 
below the poverty level, who have poor employment prospects and who 
have the greatest social and/or economic need or who are minorities, 
limited English speaking, or who are Indians. Preference may also be 
given to former SCSEP participants who reapply after having left the 
program because of illness or to take an unsubsidized job.
When Is Eligibility Determined? (Sec.  641.665)
    This provision mirrors the requirements at Sec.  641.505, however, 
it has been modified to address the nature of this program as a job 
placement program. As such, grantees are not required to verify a 
participant's income every 12 months since it is a single Program Year 
project, but grantees may verify income as often as circumstances 
require verification.
May an Eligible Individual Be Enrolled Simultaneously in Section 502(e) 
Private Sector Training Activities Operated by One Grantee and a 
Community Service SCSEP Project, Operated by a Different SCSEP Grantee? 
(Sec.  641.670)
    This proposed rule clarifies that an eligible individual may be 
simultaneously enrolled in section 502(e) and a community service SCSEP 
project operated by two different SCSEP grantees. The Department 
encourages co-enrollment when participants can benefit from services 
provided by two different grantees. For example, participants may 
receive training from a section 502(e) activity while they continue to 
receive wages, benefits, and supportive services from a community 
service project. Under these circumstances, the Department expects 
grantees to work jointly to ensure that they are providing 
complementary and not duplicative services.

[[Page 22532]]

How Should Section 502(e) Grantees Report on Participants Who Are Co-
Enrolled? (Sec.  641.680)
    This provision establishes that the Department's reporting 
instructions, which are used for the general SCSEP program, should also 
be used to report on section 502(e) participants.
How Is the Performance of Section 502(e) Grantees Measured? (Sec.  
641.690)
    This provision establishes the performance measures that section 
502(e) grantees will be responsible for meeting. These measures 
incorporate the common performance measures. The common performance 
measures that will apply to this program are: (1) Entered employment; 
(2) retention in employment; and (3) earnings increase. These measures 
are defined at proposed Sec.  641.715.
    Section 502(e) grantees must follow the definitions and rules that 
apply to the general SCSEP program in Subpart G of this regulation 
(with the exception of sanctions) and any Department administrative 
issuances relating to performance accountability as they specifically 
apply to these measures. In this case, if a section 502(e) program 
grantee fails to meet its performance measures, the Department may 
require corrective action and provide technical assistance, or it may 
decline to fund that grantee in the next Program Year.

Subpart G--Performance Accountability

    This subpart covers the requirements for performance accountability 
established by the OAA, including performance indicators, the provision 
of technical assistance, and the imposition of sanctions. The 
Department is strongly committed to a system-wide continuous 
improvement approach, grounded upon proven quality principles and 
practices. The development and establishment of these performance 
accountability provisions reflect the commitment of the broad range of 
organizations and entities involved with the implementation of the OAA, 
as well as the continuous effort of SCSEP to align itself with the WIA 
performance measures to the extent possible. They are intended to apply 
to national grantees as well as State grantees unless otherwise 
distinguished. These areas are covered in general in the regulations, 
and will be supplemented by administrative issuances providing greater 
detail.
    The OAA established a new performance accountability process for 
SCSEP. Sections 513(a)(1) and 513(c)(1) of the OAA call for a broad 
consultation process in establishing and defining performance measures. 
The Department relied upon Town Hall Meetings, Federal Register notices 
soliciting comments, and the recommendations of a workgroup of entities 
interested in SCSEP to address the consultation requirements. 
Intergovernmental organizations representing the general WIA community 
were also consulted and participated in workgroup activities.
    Most notably different about the SCSEP performance system is the 
distinction that is made among the grantees. Section 514 of the OAA 
establishes a technical assistance and sanction scheme that addresses 
national grantees, national grantees in a State, and State grantees. 
The concept ``national grantee in a State'' addresses the 
individualized performance that a national grantee must meet within 
each State in which it operates. It is another means to ensure that 
national grantees are performing well on all levels.
    In addition, SCSEP is part of the Administration's new common 
performance measures initiative for employment and job training 
programs. This initiative has identified new indicators that will be 
applied across Federal job training programs and have a common set of 
definitions and data sets. Adoption of these common measures across 
government will help implement the President's Management Agenda for 
budget and performance integration as well as reduce barriers to 
integrated service delivery through the local One-Stop Career Centers.
    Adoption of these common measures across Government will help to 
integrate service delivery through the One-Stop Career Centers at the 
local level. The Department will seek to amend title V of the Older 
Americans Act when it is reauthorized to conform the SCSEP performance 
measures to the new common performance measures. The Department cannot 
fully adopt the common measures at this time because the definitions 
for the two performance measures that are part of both the common 
measures and the SCSEP statutory measures, entered employment and 
retention in employment differ. These regulations represent an interim 
step in which grantees will be required to collect performance 
measurement information based on the current OAA, as well as on the new 
common measures that will be proposed as part of the Older Americans 
Act reauthorization.
What Performance Measures Apply to SCSEP Grantees? (Sec.  641.700)
    Section 513(b) lists the required indicators that form the basis 
for SCSEP performance measures. This list includes: (1) The number of 
persons served, with particular consideration given to individuals with 
greatest economic need, greatest social need, or poor employment 
history or prospects, and individuals who are over the age of 60; (2) 
community services provided; (3) placement into and retention in 
unsubsidized public or private employment; (4) satisfaction of the 
participants, employers, and host agencies with the experiences and the 
services provided; and (5) any additional indicators of performance 
that the Department determines to be appropriate to evaluate services 
and performance. The Department has added the earnings increase common 
performance measures as an additional indicator of performance. This 
measure is discussed further at proposed Sec.  641.710 and Sec.  
641.715. Grantees will report on the additional common performance 
measures as discussed at Sec.  641.720.
How Are the Performance Indicators Defined? (Sec.  641.710)
    The OAA, at section 513, lists four indicators of performance. 
Several of the indicators have multiple subparts. Thus, the Department 
has severed many of the indicators so that grantees are clearly 
accountable for each part of each indicator and so that the indicators 
are easier to implement. For example, the first indicator is ``the 
number of persons served, with particular attention given to 
individuals with the greatest economic need, greatest social need, or 
poor employment history or prospects, and individuals who are over the 
age of 60.'' Conceivably this one indicator could be divided into 
multiple parts and result in several different measures. The Department 
decided to divide this measure into two parts. The first indicator 
measures the number of persons served, and the second indicator 
measures the characteristics of those who are served. For the number 
served portion of the indicator, the Department will continue the past 
practice of establishing a minimum performance level of 140 percent of 
a grantee's authorized positions. This is a measure that has been in 
place for some time as a goal. The regulations address the second 
portion of the indicator in part through the statutory definitions 
provided for greatest economic need and greatest social need; and in 
part through a common sense approach to defining poor employment 
history or prospects and individuals over the age of 60. The OAA, at 
section 101(27), defines ``greatest economic need'' as the need that 
results from an income level at or below the poverty line. Section

[[Page 22533]]

101(28) of the OAA defines ``greatest social need'' as the need caused 
by non-economic factors, which include: physical and mental 
disabilities; language barriers; and cultural, social, or geographical 
isolation, including isolation caused by racial or ethnic status, that 
restricts the ability of an individual to perform normal daily tasks, 
or threatens the capacity of the individual to live independently. The 
definition also includes individuals with a poor employment history or 
prospects and individuals over age 60. Grantees may identify 
individuals with poor employment history or prospects from the 
information participants provide during the initial assessment process.
    The second indicator in the OAA is ``community services provided.'' 
This indicator has not been previously used in SCSEP. However 
challenging it is to measure, it is important because it recognizes the 
dual purpose of the SCSEP program and provides a tracking measurement 
in furtherance of the community benefit goal. The Department considered 
several variations on how it should measure community services provided 
to participants. Some of these variations include: Reviewing the 
accomplishments (i.e., ``SCSEP participants helped more than 750 
children to read over the past year''); hours of community services 
provided (i.e., ``SCSEP mentors provided more than 6,000 hours of 
tutoring''); value added to the community expressed as a dollar amount 
(i.e., multiply the hours of service by an appropriate wage level); 
some way of looking at or comparing general services to the community 
with services to the elderly community or aging network; and adding 
questions on the American Customer Satisfaction Index (ACSI) survey 
that relate to community service. The Department decided that the 
number of hours of community services provided was a good measure for 
this indicator because it represents the most accurate way of capturing 
this information and also allows the Department to establish a level of 
performance. The OAA defines ``community services,'' at section 516(1), 
as social, health, welfare, and educational services (including 
literacy tutoring), legal and other counseling services and assistance, 
including tax counseling and assistance and financial counseling, and 
library, recreational, and other similar services; conservation, 
maintenance, or restoration of natural resources; community betterment 
or beautification; antipollution and environmental quality efforts; 
weatherization activities; economic development; and such other 
services essential and necessary to the community as the Department may 
prescribe. At this time, we have not prescribed any services in 
addition to those specified in the OAA.
    The placement and retention measure is the third statutory 
indicator and is found at section 513(b)(3) of the OAA. The Department 
intends to divide this measure into two measures: one measure that 
captures placement into unsubsidized employment, and one measure that 
captures retention in unsubsidized employment. The placement indicator 
is defined in the OAA, at section 513(c)(2)(A), as full-or part-time 
paid employment in the public or private sector by a participant under 
this title for 30 days within a 90-day period without the use of funds 
under this title or any other Federal or State employment subsidy 
program, or the equivalent of such employment as measured by the 
earning of a participant through the use of wage records or other 
appropriate methods. Therefore, the placement indicator will stand 
alone and be measured based on the number of participants who move into 
unsubsidized employment during each year, compared to the total number 
of participants. Unsubsidized employment includes both full- and part-
time jobs consistent with the definition found in section 513(c)(2)(A) 
of the OAA. Part-time is defined as at least 20 hours of workweek 
employment. (OAA sec. 515(a)).
    Retention 6 months after placement is a new measure for SCSEP and 
is defined in the OAA, at section 513(c)(2)(B). It requires grantees to 
evaluate the retention of participants in an unsubsidized position 6 
months after the starting date of placement into the unsubsidized 
employment in the public or private sector, without the use of Federal 
or State employment subsidy program funds, not to include supportive 
services.
    The fourth indicator, ``customer satisfaction of participants, 
employers and host agencies,'' is a required measure under section 
513(b)(4) of the OAA. The Department interprets this provision as 
requiring 3 separate and distinct measures of customer satisfaction: 
one measure for participant satisfaction; one measure for employer 
satisfaction; and one measure for host agency satisfaction. Since these 
three groups vary in size, focus, and expectations, measuring them 
separately will give equal weight to the needs of each group and ensure 
that program operators are attending to their diverse needs. Customer 
satisfaction for all three groups will be determined using the American 
Customer Satisfaction Index (ACSI). The ACSI is the most widely used 
indicator of general customer satisfaction. It captures common customer 
satisfaction information that can be aggregated and compared at 
different levels. The ACSI will allow the SCSEP program to not only 
look at its performance, but also to benchmark its performance against 
other entities within and outside of the employment and training 
system. It is the methodology used to measure customer satisfaction 
under WIA, and was recently adopted by the U.S. Employment Service. The 
ACSI also has a history of usefulness in tracking changes over time, 
making it an ideal way to gauge progress in continuously improving 
performance--one of the essential tenets of the 2000 Amendments of the 
OAA. Through the ACSI, the Department will collect national samples 
from each of the three populations. Each sample will be large enough to 
collect statistically valid results for each State grantee and each 
national grantee. Grantees will be responsible for distributing written 
survey instruments using the methodology established by the Department 
in administrative guidance. Completed surveys will be sent to a central 
collection point for collation and analysis. The Department will 
publish administrative guidance in the Federal Register that provides 
more information about the licensing of ACSI and the responsibility of 
grantees to this process, and about how information will be collected 
for this indicator. Customer satisfaction data collection and analysis 
are costly. Data will be collected for performance measures purposes 
for States, national grantees, and national grantees in a State, and 
the territories. According to the OAA, at section 513(b)(5), the 
Department may create any additional indicators of performance that it 
determines are appropriate to evaluate services and performance. The 
Department has decided to add the earnings increase common performance 
measures as an additional performance measure. This measure is defined 
as the percentage change in earnings pre-registration to post-program; 
and between the first quarter after exit and the third quarter. The 
methodology for determining this measure is calculated in two parts. 
The first part measures the change pre-registration to post-program. 
The second part measures the earning increase from the start of 
employment to 6 months after.

[[Page 22534]]

    The Department will issue further administrative guidance, to be 
published in the Federal Register, implementing the performance 
indicators and explaining the timing and specific definitions of data 
elements to be collected, and the methods used to calculate each 
indicator.
What Are the Common Performance Measures? (Sec.  641.715)
    Proposed Sec.  641.715 outlines the indicators of the common 
performance measures. The first measure, entered employment, is defined 
as the percentage employed in the first quarter after program exit. 
This measure identifies those individuals who are not employed at 
registration, but who have entered employment by the end of the first 
quarter. Retention in employment is the second measure. It is defined 
as the percentage of those employed in the first quarter after exit 
that were still employed in the second and third quarter after program 
exit. This measure is similar to the retention measures under the OAA, 
however, it tracks a participant's retention with an employer for an 
additional three months. The third measure, earnings increase, has been 
added as a program performance measures in Sec.  641.700 and defined in 
Sec.  641.710. Grantees will be required to report on all three common 
performance measures as identified in Sec.  641.879.
How Do the Common Performance Measures Affect Grantees and the OAA 
Performance Measures? (Sec.  641.720)
    Proposed Sec.  641.720 discusses the common performance measures 
and how they relate to grantees and the OAA performance and competition 
scheme. SCSEP is part of the Department's new common performance 
measures initiative for employment and job training programs. This 
initiative has identified new indicators that will apply across Federal 
job training programs and have a common set of definitions and data 
sets. Adoption of these common measures across government will help 
implement the President's Management Agenda for budget and performance 
integration as well as reduce barriers to integrated service delivery 
through the local One-Stop Career Centers. The Department will seek to 
amend title V of the Older Americans Act when it is reauthorized to 
conform the SCSEP performance measures to the new common performance 
measures. As this legislation will not be introduced until after 
completion of these regulations, these regulations represent an interim 
step in which grantees will be required to collect performance 
measurement information based on the current statute as well as on the 
new common measures that will be proposed as part of the Older 
Americans Act reauthorization. The Department will provide instructions 
on how the information will be collected through an administrative 
issuance. See Sec.  641.879 on reporting requirements.
How Will the Department Set and Adjust Performance Levels? (Sec.  
641.730)
    The proposed rule establishes the method that the Department will 
use to set and adjust negotiated levels of performance. In setting 
negotiated performance levels, the Department is adopting a method 
similar to the WIA method of negotiating levels of performance. For 
SCSEP, levels of performance will be negotiated before the beginning of 
each Program Year. Under section 513(a)(2)(C) of the OAA, the 
``placement into unsubsidized public or private employment'' measure 
has a statutory ``floor'' of 20 percent; however, the Department may 
negotiate with grantees to establish a higher level.
    In negotiating levels with grantees, the Department will first 
establish baseline goals. The end result levels are the adjustments 
made to those goals for each grantee. Adjustments to the established 
negotiated levels of performance, including the ``placement into 
unsubsidized public or private employment'' measure, may be made only 
if they are based on those factors delineated in section 513(a)(2)(B). 
Those factors are: (1) High rates of unemployment, poverty, or welfare 
recipiency in the areas served by a grantee, relative to other areas of 
the State or Nation; (2) significant downturns in the areas served by 
the grantee or in the national economy; and (3) significant numbers or 
proportions of enrollees with one or more barriers to employment served 
by a grantee relative to grantees serving other areas of the State or 
Nation. As part of the process of negotiating with grantees to set 
baseline levels of negotiated performance, the Department will offer 
grantees the opportunity to propose adjustments to those levels based 
on the conditions specified in the OAA. Since many of the factors 
enumerated in the OAA can change dramatically during the program year, 
grantees will have the opportunity to request adjustments both at the 
beginning of the program year and during the program year. The 
Department will issue administrative guidance outlining the parameters 
for claiming one or more of the three permissible adjustments of 
performance levels.
How Will the Department Determine Whether a Grantee Meets, Exceeds, or 
Fails To Meet Negotiated Levels of Performance? (Sec.  641.740)
    The OAA requires the Department to determine whether a grantee has 
met its performance measures overall (i.e., in the aggregate). Under 
proposed Sec.  641.740, overall performance is calculated by combining 
the ``percentage results'' achieved on each of the individual measures 
to obtain an average score. If this average score for the total of all 
measures is between 80 and 100 percent, the grantee has performed 
satisfactorily, or is meeting performance. Grantees with an average 
above 100 percent are exceeding on the performance measures. Grantees 
that fall below 80 percent, however, are considered to have failed to 
meet negotiated levels of performance and, thus, are subject to the 
sanctions outlined in section 514 of the OAA. This approach aligns the 
SCSEP program with WIA and ensures that very low performance on any 
single indicator has full weight when assessing overall performance. A 
national grantee serving in a State, however, is required by section 
514(e)(3)(A) of the OAA to meet both 80 percent of the negotiated 
national measures and the levels established for the State in which it 
serves. The Department will evaluate each performance indicator to 
determine the level of success that a grantee has achieved and take the 
aggregate to determine if, on the whole, the grantee met its 
performance objectives. Grantees will also receive the results for each 
individual performance indicator. The advantage of grantees having this 
information is two-fold--grantees will know about any performance 
indicator on which they need to improve; and the Department can provide 
technical assistance to the grantee on a specific indicator to improve 
performance.
    One indicator that is distinct among the performance measures is 
the ``placement into unsubsidized employment'' measure. This measure 
has a statutory ``floor'' of 20 percent before the allowable 
adjustments are made; however the Department may negotiate higher, but 
not lower, levels with individual grantees. Thus, if the negotiated 
performance indicator remains at the floor, performance levels between 
80 and 100 percent will require grantees to place 20 percent to 25 
percent of their participants into unsubsidized employment, unless one 
or more adjustment factor applies. A placement rate of more than 25 
percent would mean that a grantee is exceeding

[[Page 22535]]

on this measure, and a placement rate of less than 20 percent would be 
a failure on that measure, unless one of more adjustment factor 
applies. All of the levels will be negotiated with the Department on a 
grantee-by-grantee basis, which will then become the basis for 
determining the range for each indicator as discussed in proposed Sec.  
641.740.
What Sanctions Will the Department Impose if a Grantee Fails To Meet 
Negotiated Levels of Performance? (Sec.  641.750)
    Grantees that fail to meet negotiated levels of performance will be 
subject to the sanctions established in section 514 of the OAA. These 
sanctions range from requiring the grantee to submit a corrective 
action plan and receive technical assistance, to competition of part of 
the funds, to a competition of all of the funds. Technical assistance 
may take many forms depending on the needs of the grantee and the 
availability of resources within the Department. In some cases, review 
of reports and discussions with a grantee may be sufficient. In other 
cases, recommending participation in formal training may be warranted, 
and in still other cases, direct on-site assistance provided by 
Department staff, peers, or contractors may be necessary. The degree of 
assistance available will largely be determined by the nature of the 
problem, the extent of the failure, and the resources available to 
address it.
    The statutory scheme for applying sanctions is grantee specific 
(i.e., national grantee, national grantee in a State, or State 
grantee). (See proposed Sec. Sec.  641.760-641.790). The Department 
will determine if sanctions should be applied not later than 120 days 
after the end of each Program Year. (See OAA sec. 514). Therefore, 
grantees and the Department will not know if a grantee has failed its 
performance measures until the grantee has already begun the next 
Program Year. As a result, the Department strongly encourages all 
grantees to regularly monitor their performance and seek technical 
assistance when problems arise.
    Additionally, if a grantee fails only the customer satisfaction 
performance measure, that failure will not in itself trigger the 
imposition of sanctions if the grantee has met its other performance 
measures and the failure to meet the customer satisfaction measure 
causes a grantee to fail to meet its performance measures in the 
aggregate. The Department is taking this position in recognition of the 
difficulty it understands grantees may face in obtaining this 
information and because of the potential difficulties in obtaining 
response rates high enough to assure survey accuracy at an acceptable 
level. The Department will provide additional instructions for how 
customer satisfaction will be measured.
What Sanctions Will the Department Impose if a National Grantee Fails 
To Meet Negotiated Levels of Performance Under the Total SCSEP Grant? 
(Sec.  641.760)
    Proposed Sec.  641.760 outlines the sanctions required under 
section 514(e) of the OAA that apply when a national grantee fails to 
meet its performance measures for its entire SCSEP grant. In the first 
year of failure, the Department will provide technical assistance and 
the national grantee must submit a corrective action plan no later than 
160 days after the end of the Program Year. If a grantee fails to meet 
the national performance measures for a second consecutive Program 
Year, the Department will have a national competition in the next 
Program Year for 25 percent of the funds that were awarded to the 
grantee, while also minimizing disruptions to current participants to 
the extent possible. Thus, the failing grantee will receive only 75 
percent of its former grant award. The Department reserves the right to 
specify the locations of the positions that will be subject to 
competition. Further, the Department may explore a number of options to 
determine how this competition will be conducted. The Department will 
establish the parameters of a competition through a Solicitation for 
Grant Application or comparable instrument.
    If a grantee fails to meet its performance measures for a third 
consecutive Program Year, the Department will conduct a national 
competition for the full amount of the reduced grant in the following 
Program Year. Any new national grantee selected through this process 
must serve the geographic areas served by the former grantee. Any 
entity eligible to apply for national grants may compete for such 
funds, including Federal public agencies and organizations, private 
nonprofit organizations, and tribal organizations. (See proposed Sec.  
641.400 on eligible entities).
What Sanctions Will the Department Impose if a National Grantee Fails 
To Meet Negotiated Levels of Performance in Any State That It Serves? 
(Sec.  641.770)
    Proposed Sec.  641.770 outlines the sanctions that apply to a 
national grantee that fails to meet its performance measures in any 
State that it serves. This provision is required under section 
514(e)(3) of the OAA and is intended to monitor those national grantees 
that may be meeting national performance goals but are failing their 
goals in a particular State. In any Program Year that a national 
grantee attains levels of 20 percent or more below the national 
performance measures and fails to meet the State's performance levels 
for a project carried out in the State, the Department will take 
corrective action. The Department interprets this requirement as 
applying when the Department determines that there is a failure, and 
there are no justifications that the national grantee can provide, such 
as the size of the project or the adjustment factors described in Sec.  
641.730. Thus, national grantees in a State must perform at 80 percent 
of the national performance measures and meet the State's level of 
performance to meet performance objectives, unless there is a 
justification for lower performance. The Department proposes to monitor 
national grantee State-by-State performance each Program Year or at the 
Governor's request. (See OAA Sec. Sec.  514(e)(3)-514(e)(4) and 
proposed Sec.  641.780). The Department interprets the phrase ``project 
carried out in a State'' to mean all of a grantee's projects in a State 
so that no single project in a State will provide a basis to initiate a 
review or sanctions.
    The first Program Year in which a national grantee fails to meet 
its performance measures in a State, the Department will require a 
corrective action plan and may require the transfer of the 
responsibility for the project to other grantees, provide technical 
assistance, and take other appropriate actions. After a second 
consecutive year of failure to meet the performance criteria, the 
Department will either transfer all or part of the responsibility for a 
project to a State, public agency, or private nonprofit agency or 
organization, or compete all or a portion of the funds. After a third 
consecutive year of failure to meet the performance criteria, the 
Department will conduct a competition for the remaining funds. Any 
entity eligible to receive a SCSEP grant may apply for these funds, 
with the exception of the grantee that is subject to the sanction.
When Will the Department Assess the Performance of a National Grantee 
in a State? (Sec.  641.780)
    Proposed Sec.  641.780 provides the Department's interpretation of 
the requirements in section 514(e)(3)-(e)(4) of the OAA. These 
provisions require the Department to assess the

[[Page 22536]]

performance of a national grantee in every State in which it has 
projects. The Department will monitor national grantee performance in a 
State every Program Year. Grantees will submit such information as part 
of their national performance information. The Department will also 
conduct a review of any national grantee's project performance in a 
State upon request of the Governor, as required under section 514(e)(4) 
of the OAA.
What Sanctions Will the Department Impose if a State Grantee Fails To 
Meet Negotiated Levels of Performance? (Sec.  641.790)
    Proposed Sec.  641.790 outlines the requirements for imposing 
sanctions on States that fail to meet negotiated levels of performance, 
as required by section 514(f) of the OAA. The Department will determine 
if a State has met its performance measures no later than 120 days 
after the end of a Program Year. In the first year of failure, the 
Department will provide technical assistance and require the State to 
submit a corrective action plan no later than 160 days after the end of 
the Program Year. After a second consecutive year of failure, the 
Department will require the State to conduct a competition to award 25 
percent of the funds available to the State to another eligible 
organization. The Department reserves the right to specify the 
locations of the positions that will be subject to competition. After a 
third consecutive year of failure, the State must compete its entire 
SCSEP award. Any eligible entity, except the entity that caused the 
failure, may compete for such funds, including other agencies of the 
State, or public and private nonprofit organizations.
Will There Be Incentives for Exceeding Performance Measures? (Sec.  
641.795)
    Proposed Sec.  641.795 addresses incentives for grantees that 
exceed their performance measures. It clarifies that the Department is 
committed to providing incentives to grantees that exceed performance 
when possible. These incentives may take the form of a non-financial 
incentive, which will be addressed in administrative guidance, or it 
may be in the form of an incentive grant. The Department is authorized 
under section 515(c)(1) of the OAA to award incentive grants from 
recaptured unexpended funds at the end of the Program Year, among other 
permissible uses of such funds. The Department may exercise this 
authority at its discretion.

Subpart H--Administrative Requirements

    Subpart H covers the administrative requirements that apply to all 
SCSEP grantees. Throughout this subpart, the regulations refer to 
``recipient'' and ``subrecipient'' rather than to the terms ``grantee'' 
and ``subgrantee,'' which are generally used elsewhere in this Part to 
refer to the same types of entities. The terms ``recipient'' and 
``subrecipient'' are used in this subpart in order to be consistent 
with the style of the Government-wide requirements from which these 
provisions were derived. Grantees and recipients receive grant awards 
directly from the Department. Subgrantees and subrecipients receive 
financial assistance subawards from grantees and other recipients of 
direct awards from the Department, or higher tier subgrantees or 
subrecipients.
What Uniform Administrative Requirements Apply to the Use of SCSEP 
Funds? (Sec.  641.800)
    Section 503(f)(2) of the OAA is a new provision requiring title V 
grantees to comply with the uniform allowable cost principles and 
administrative requirements applicable to most Federal financial 
assistance programs. The former regulations included similar 
requirements. This subpart includes requirements relating to lobbying 
as well as subjects covered by the Department's regulatory 
administrative requirements at 29 CFR 95.2(bb) and 29 CFR 97.25(b). 
Recipients also must ensure that their subrecipients follow these 
uniform requirements.
What Is Program Income? (Sec.  641.803)
    This section describes program income as income earned or generated 
by the recipient or subrecipient during the grant period that is 
generated by an allowable activity under the grant. The term ``grant 
period'' as used here is consistent with the Department's regulations 
at 29 CFR parts 95 and 97. Grantees are accountable for program income 
earned or generated during the grant period, which may exceed the 
period of availability of the funds used to generate the income (see 
Sec.  641.812). This regulation also identifies license fees and 
royalties as program income. This requirement is a permissible 
modification under 29 CFR 95.24(e) and 29 CFR 97.25(e). As provided in 
Sec.  641.806, any organization that continues to receive SCSEP grant 
funds is required to use program income earned or generated after the 
Program Year for program purposes.
How Must SCSEP Program Income Be Used? (Sec.  641.806)
    The program income provisions of the proposed rule clarify the 
application of the Department's uniform administrative requirements to 
SCSEP activities by indicating what types of income earned or generated 
by recipients and subrecipients are considered program income, how the 
costs of producing program income are to be treated, and by directing 
recipients to follow the addition method described in 29 CFR 95.24 and 
29 CFR 97.25 and add program income to Federal and non-Federal 
resources provided for SCSEP activities. More specifically, paragraph 
(b) requires all recipients/grantees with a continuous relationship 
with the Department--that is organizations that continue to be funded 
with SCSEP funds for succeeding grant periods--to use such income for 
SCSEP purposes in the Program Year it is received. Paragraph (c) 
requires all recipients/grantees that do not continue to receive a 
SCSEP grant after the grant period to remit all program income earned 
or generated to the Department. These sections are permissible 
modifications under 29 CFR 95.24 and 29 CFR 97.25. The purpose of this 
requirement is to leverage Federal funds for the benefit of the 
program, which will enhance the services provided to SCSEP 
participants. This requirement would also apply to income earned or 
generated through copyrighted material or other intellectual property 
as provided in Sec.  641.803.
What Non-Federal Share (Matching) Requirements Apply to the Use of 
SCSEP Funds? (Sec.  641.809)
    The regulations underscore the 10 percent non-Federal share 
requirement in section 502(c) of the OAA, which applies even to other 
Federal agencies that may receive SCSEP funds, unless such entity has a 
statutory exemption from the requirement. Section 502(c)(1) allows the 
Department to pay all of the costs of only those projects that are 
emergency or disaster projects, or located in an economically depressed 
area. Additionally, the amendments to the OAA did not alter the 
Department's authority in section 502(e) of the OAA, to pay for all of 
the costs of private employment projects. Therefore, the Department 
expects to continue the present practice of using this authority for 
section 502(e) projects, when applicable. Also, proposed Sec.  
641.809(d) defines the non-Federal share as cash or in-kind. It further 
provides that if a recipient (grantee) plans to obtain its non-Federal 
share from a subgrantee or

[[Page 22537]]

host agency, it may not make providing the funds a condition of 
becoming a subgrantee or host agency.
What Is the Period of Availability of SCSEP Funds? (Sec.  641.812)
    Proposed Sec.  641.812 details the period of availability of SCSEP 
funds. According to section 515(b), SCSEP funds are available for 
obligation on a Program Year basis (July 1-June 30). Under no 
circumstances, however, is an SCSEP recipient permitted to obligate 
SCSEP funds before July 1. Also, the Department may extend the period 
of availability of SCSEP funds beyond June 30 as discussed in proposed 
Sec.  641.815.
May the Period of Availability Be Extended? (Sec.  641.815)
    Proposed Sec.  641.815 permits SCSEP recipients to receive an 
extension beyond June 30 to expend funds. The Department will provide 
instructions each year on how and when SCSEP recipients must request an 
extension. In general, however, SCSEP recipients must justify the 
necessity of the extension either by submitting a letter to the 
Department with the request and the justification, or by submitting a 
proposed SF-424 to the Department. The Department will process the 
request and notify the SCSEP recipients in writing of the Department's 
approval or disapproval. Any approval of a grant extension will be 
accomplished through a modification to the grant. However, SCSEP 
recipients are strongly encouraged to spend funds throughout the 
Program Year to minimize the need for an extension.
    The former authorization to extend funds for one year and two 
months (through August 31st) no longer applies. This provision was 
replaced by section 515(b), which authorizes the Secretary to extend 
the period of the grant as necessary to assure the effective obligation 
expenditure of the funds. Thus, grant extensions may be made for a 
longer period, if justified.
What Happens to Funds That Are Unexpended at the End of the Program 
Year? (Sec.  641.818)
    Section 515(c) of the OAA gives the Department the authority to 
recapture unexpended funds from SCSEP recipients at the end of the 
Program Year and reobligate those funds within the 2 succeeding Program 
Years to be used for incentive grants, technical assistance, or grants 
or contracts for any other SCSEP program. The Department intends to 
issue administrative guidance to provide SCSEP recipients with 
additional details.
What Audit Requirements Apply to the Use of SCSEP Funds? (Sec.  
641.821)
    Proposed Sec.  641.821 details the general audit requirements that 
apply to all recipients of Federal funds. This section provides that 
recipients and subrecipients, including entities receiving Federal 
awards of SCSEP funds under cost-reimbursement contracts, must follow 
the Department's uniform audit requirements. The Department is 
responsible for audits of commercial organizations that are recipients 
for SCSEP funds as well. Commercial organizations that are 
subrecipients must either have an organization-wide audit or a program 
specific financial and compliance audit that meets OMB Circular A-133 
standards, if they expend $300,000 or more (as of July 1, 2001).
What Lobbying Requirements Apply to the Use of SCSEP Funds? (Sec.  
641.824)
    This proposed rule continues the Department's policy in the former 
regulations concerning lobbying. There are two provisions relating to 
lobbying. The proposed rule requires recipients to report on their 
lobbying activities, under the uniform administrative rule on lobbying 
codified at 29 CFR part 93. Proposed Sec.  641.850(c) prohibits the use 
of grant funds for lobbying State or Federal legislators.
What General Nondiscrimination Requirements Apply to the Use of SCSEP 
Funds? (Sec.  641.827)
    Recipients, subrecipients, and host agencies must comply with the 
Department's generally applicable nondiscrimination requirements for 
recipients at 29 CFR parts 31 and 32. The WIA nondiscrimination 
requirements at 29 CFR part 37 apply to SCSEP activities that are 
administered in conjunction with the One-Stop Delivery System.
What Nondiscrimination Protections Apply Specifically To Participants 
in SCSEP Programs? (Sec.  641.830)
    The proposed rule establishes nondiscrimination protections to 
participants in SCSEP programs. Specifically, the proposed rule lists 
the Federal programs on nondiscrimination that apply to SCSEP, such as, 
the Age Discrimination Act of 1975, section 504 of the Rehabilitation 
Act of 1973, the Americans with Disabilities Act of 1990, and title VI 
of the Civil Rights Act of 1964. The proposed rule also provides 
information to participants about how and where to file a complaint 
alleging discrimination or to whom they may address questions.
What Policies Govern Political Patronage? (Sec.  641.833)
    The proposed rule provides the Department's policy on political 
patronage. This provision existed in the former regulations. Generally, 
recipients and subrecipients are prohibited from selecting, rejecting, 
promoting, or terminating an individual based on political services 
provided by the individual, or based on the individual's political 
affiliations or beliefs. Further, recipients and subrecipients are 
prohibited from providing funds to any entity based on political 
affiliation.
What Policies Govern Political Activities? (Sec.  641.836)
    Proposed Sec.  641.836 outlines the Department's policies governing 
political activities. In general, recipients are prohibited from using 
SCSEP funds for political activities. The proposed rule also requires 
SCSEP recipients to provide participants with a written explanation 
about allowable and unallowable political activities under the Hatch 
Act (5 U.S.C. 1501 et seq.), and to post this explanation in every 
workplace where SCSEP activities are conducted. Also, all such notices 
must be approved by the Department and must contain the address and 
telephone number of the Department of Labor Inspector General, as 
required by section 502(b)(1)(P) of the OAA. Further, it is prohibited 
for any participant or staff person to engage in political activities 
during hours paid with by SCSEP funds. The regulation also prohibits 
the placement of participants in certain offices and positions that 
might involve political activities. It prohibits placement of SCSEP 
participants in the offices of elected legislators. It also prohibits 
placements in the offices of other elected officials unless the grantee 
provides safeguards to assure that such position performs no political 
activities.
What Policies Govern Union Organizing Activities? (Sec.  641.839)
    The proposed rule emphasizes the Department's policy that no 
Federal funds may be used to assist, promote, or deter union 
organizing. This provision existed in the former regulations and is 
aligned with the WIA regulations.
What Policies Govern Nepotism? (Sec.  641.841)
    This proposed rule outlines the Department's policy on nepotism. 
Specifically, the Department's policy prohibits recipients from hiring 
and participants from working in an SCSEP position if the participant 
is a member of the decision-maker's immediate

[[Page 22538]]

family. The Department's goal is to decrease the opportunities for a 
recipient to show ``favoritism'' to a relative. ``Immediate family'' is 
defined as a wife, husband, son, daughter, mother, father, brother, 
sister, son-in-law, daughter-in-law, mother-in-law, father-in-law, 
brother-in-law, sister-in-law, aunt, uncle, niece, nephew, stepparent, 
stepchild, grandparent, or grandchild. The Department may waive this 
provision, however, for worksites on Indian reservations and in rural 
areas if it can be documented that no other persons are eligible and 
available for participation in the program. If a State or local 
nepotism rule is stricter, it must be followed.
What Maintenance of Effort Requirements Apply to the Use of SCSEP 
Funds? (Sec.  641.844)
    The proposed rule outlines the responsibilities of recipients when 
they accept SCSEP funds. For instance, recipients that receive SCSEP 
funds have a duty to ensure that: Currently employed workers are not 
displaced, existing contracts are not impaired or result in the 
substitution of Federal funds for other funds in connection with work 
that would otherwise be performed, positions are not filled that were 
occupied by a person who is on layoff, and SCSEP funded positions are 
not substituted for existing federally assisted jobs, as required by 
sections 502(b)(1)(F) and 502(b)(1)(G) of the OAA. The purpose of this 
requirement is to ensure that there will be an increase in employment 
opportunities over those opportunities that would otherwise be 
available, as discussed in section 502(b)(1)(F) of the OAA.
What Uniform Allowable Cost Requirements Apply to the Use of SCSEP 
Funds? (Sec.  641.847)
    As previously mentioned, section 503(f)(2) of the OAA requires 
grantees to comply with the applicable uniform allowable cost 
principles under the OMB Circulars, according to the type of 
organization that incurs SCSEP costs (e.g., governmental units, 
nonprofit organizations). This section codifies the previous 
regulations on administrative cost principles. The allowable cost 
principles establish requirements for the treatment of costs generally, 
rules as to what types of costs are allowable, unallowable, or 
allowable under certain circumstances, and acceptable methodologies for 
allocating costs among Federal grant programs. An example of a general 
cost principle is the requirement to treat refunds and rebates as 
reductions in previously charged costs whenever possible, rather than 
treating them as program income or as revenue for which the recipient 
is not accountable under Federal financial management principles. An 
example of a cost allowable under certain circumstances is the cost of 
claims against the Federal government. Such costs are generally 
unallowable (see, for example, OMB Circular A-122, Attachment B, item 
7.g.), but Federal agencies differ on whether they consider an appeal 
from a Grant Officer's determination to be a claim against the 
Government. Proposed Sec.  641.850(b) indicates that costs incurred in 
connection with appeals to Administrative Law Judges are unallowable 
costs.
    The Department received several suggestions relating to allowable 
cost issues in response to the March 19, 2001, Federal Register notice 
and Town Hall Meetings. The principal issue involved the distribution 
of costs among the participating programs in One-Stop centers. The 
uniform cost principles that apply to SCSEP activities require costs to 
be allocated to Federal programs in proportion to the benefits received 
from goods and services for which the costs were incurred. This 
requirement aligns with the WIA statutory and regulatory requirements 
for required partners to the One-Stop, which includes SCSEP. Thus, 
SCSEP recipients and subrecipients are responsible for their fair share 
of the costs of operating One-Stop centers.
    Cost allocation, however, is only one of the issues involved in 
providing SCSEP financial support to a One-Stop center. Another issue 
is resource allocation. Several of the responses supported the idea of 
SCSEP recipients making in-kind contributions in payment of their fair 
share of One-Stop center costs. In-kind contributions are acceptable 
forms of payment if the other partners are agreeable. A local One-Stop 
MOU may include a resource allocation arrangement that permits some of 
the partners to make cash contributions toward center costs, permit 
others to donate paid office space, and allow still others to 
contribute volunteer services, and so on. The resource allocation 
arrangement should indicate what costs and non-cash charges need to be 
allocated, what resources are available to pay for or otherwise absorb 
the costs and charges, and describe each partner's fair share based on 
the benefits-received principle.
Are There Other Specific Allowable and Unallowable Cost Requirements 
for SCSEP? (Sec.  641.850)
    The proposed rule supplements the generally applicable allowable 
cost provisions with requirements relating to costs of claims against 
the Government, lobbying, premises, and participants' fringe benefits 
to reflect provisions of applicable legislation and Departmental 
policies. The lobbying costs provision is based on a requirement 
included in Department of Labor Appropriation Acts for many years. The 
limitation on costs of purchasing or constructing buildings reflects 
the Department's policy of discouraging the use of grant funds for 
major capital expenditures in order to conserve scarce resources for 
other costs. If the limitations did not exist, each such expenditure 
would require prior approval by the Department.
How Are Costs Classified? (Sec.  641.853)
    The proposed rule discusses whether costs are classified as 
administrative costs or program costs, and how grantees must categorize 
participant wages and fringe benefit costs within that framework. For 
instance, program costs may include participant wages and fringe 
benefits and other enrollee costs, such as training and supportive 
services. Administrative costs, such as salaries, equipment, etc., 
expended for administrative functions continue to be attributed to 
administrative costs. (See Sec. Sec.  641.856 and 641.864). When 
participants perform an administrative function for a grantee or 
subgrantee, the cost of the function is charged to the administrative 
cost category. The cost of the participant's wages and fringe benefits, 
however, are charged to the program cost category.
What Functions and Activities Constitute Costs of Administration? 
(Sec.  641.856)
    The proposed rule discusses the functions and activities that 
constitute the costs of administration. It provides a detailed list of 
those costs that are administrative as permitted under section 
502(c)(4) of the OAA. This section of the OAA aligns the WIA 
administrative cost provisions.
What Other Special Rules Govern the Classification of Costs as 
Administrative Costs or Program Costs? (Sec.  641.859)
    The OAA imports the WIA cost classification scheme into the SCSEP 
program. This includes the division of costs into administrative costs 
and program costs, and the WIA definitions of administrative cost 
components. This has the effect of making it easier to operate title V 
activities within the One-Stop Delivery System established under WIA. 
In addition to the material on cost classification, the proposed rule 
contains additional requirements for allocating costs to the 
``administrative

[[Page 22539]]

costs'' or ``program costs'' categories. The proposed rule is based on 
the same principles used in the WIA and Welfare-to-Work programs for 
determining how to allocate particular types of cost and how to 
classify costs incurred by particular types of organizations. However, 
when participants are assigned to functions normally classified as 
administrative costs, recipient charges to the ``administrative cost'' 
category are reduced from levels that would exist if such functions 
were performed by regular staff members since all participant wage and 
fringe benefit costs must be charged to the ``program costs'' cost 
category.
Must SCSEP Recipients Provide Funding for the Administrative Costs of 
Subrecipients? (Sec.  641.861)
    Section 502(b)(1)(R) of the OAA requires that each project ensure 
that sufficient funding is provided for the administrative costs of 
entities below the recipient level. The Department has determined to 
implement this requirement by requiring each SCSEP recipient to 
indicate in its grant application how it will achieve compliance. The 
Department has chosen this course in order to avoid prescribing 
needlessly detailed requirements while enabling recipients and 
subrecipients to achieve the objectives of the law by establishing 
arrangements consistent with their own unique funding and 
organizational structures.
What Functions and Activities Constitute Program Costs? (Sec.  641.864)
    The OAA also includes a description of programmatic functions and 
activities that may be performed with SCSEP funds and charged to the 
program cost category in section 502(c)(6)(A). Except for participant 
wages and fringe benefits provided in connection with community service 
assignments, the services comprising all of the described functions and 
activities are available through the One-Stop Delivery System for WIA 
participants. The Department believes that SCSEP participants will have 
easier access to these services through the One-Stop Delivery System 
than they had before its development.
What Are the Limitations on the Amount of SCSEP Administrative Costs? 
(Sec.  641.867)
    The proposed rule outlines the administrative cost limitations 
found in section 502(c)(3) of the OAA. Under this provision, SCSEP 
administrative costs are limited to 13.5 percent. The Department is 
authorized to increase the limit, but only up to 15 percent.
Under What Circumstances Can the Administrative Cost Limitation Be 
Increased? (Sec.  641.870)
    This section continues the Department's previous regulations 
concerning administrative cost limitations. The Department will 
continue to allow increases in administrative cost limits as permitted 
under section 502(c)(3) of the OAA, if the recipient demonstrates that 
such an increase is necessary to carry out the project and if the 
recipient demonstrates that major administrative cost increases are 
being incurred in necessary program components, such as liability 
insurance, workers' compensation, etc.; that the number of employment 
positions in the project or the number of minority eligible individuals 
participating in the project will decline if the amount available for 
paying the cost of the administration is not increased; or that the 
size of the project is so small that the amount of administrative 
expenses incurred to carry out the project exceeds 13.5 percent of the 
amount for such project. The burden of justification is on the 
recipient requesting an increase in administrative costs. A request for 
an increase in administrative costs may be submitted at any time.
What Minimum Expenditure Levels Are Required for Participant Wages and 
Fringe Benefits? (Sec.  641.873)
    Section 502(c)(6)(B) of the OAA provides that participant wages and 
fringe benefit costs must comprise not less than 75 percent of the 
funds made available for community service projects under title V. The 
proposed regulation clarifies that the statute applies to community 
service projects conducted by a recipient in the aggregate and not to 
each such project or subproject. Funds used for programs and activities 
under section 502(e) are also covered by this requirement. (See 
proposed Sec.  641.650). If a recipient receives a regular title V 
SCSEP grant as well as a section 502(e) grant, the 75 percent 
requirement applies to the total of both grants.
When Will Compliance With Cost Limitations and Minimum Expenditure 
Levels Be Determined? (Sec.  641.876)
    This proposed rule establishes that a recipient's compliance with 
cost limitations and minimum expenditures levels will be determined 
under the standard used in other Department-funded financial assistance 
programs. Thus, the Department will assess a recipient's compliance 
with cost limitations on the earlier of the date when all funds are 
expended or the end of the availability period.
What Are the Fiscal and Performance Reporting Requirements for 
Recipients? (Sec.  641.879)
    Section 503(f)(3) of the OAA establishes reporting requirements 
that were required by the previous regulation. The proposed regulation 
requires electronic submission to the Department via the Internet of a 
quarterly financial status report, a final financial status report, a 
non-financial progress report, and a final progress report. Final 
financial status reports and progress reports are due 90 days after the 
end of the Program Year. The Department will issue reporting 
instructions indicating whether progress reports must be submitted 
quarterly or semiannually. Quarterly financial status reports are due 
30 days after the end of each quarter. Progress reports, other than the 
final progress report, will be due 30 days after the end of each 
reporting period. The proposed rule requires recipients to develop 
their financial status reports on an accrual basis. The proposed rule 
also requires submission of an annual equitable distribution report, a 
report on section 502(e) activities, reports for the common performance 
measures, and reports from Federal agencies operating SCSEP programs 
and activities. The Department will hold grantees accountable for 
accurate reporting. Any report that cannot be validated or verified as 
accurate may be considered a failure to submit reports, which is a 
factor to be considered in applying the responsibility test at section 
514(d) of the OAA.
What Are the SCSEP Recipient's Responsibilities Relating to Awards to 
Subrecipients? (Sec.  641.881)
    The proposed rule clarifies that the recipient is responsible for 
all SCSEP activities performed with SCSEP funds and for ensuring that 
subrecipients comply with SCSEP requirements. Any recipient that fails 
to recover debts to the Federal government, including all debts owed to 
the recipient by a subrecipient, will be in violation of the 
responsibility tests in section 514(d) of the OAA. Also, recipients 
must follow the organization or State procedures for allocating funds 
to other entities. At no time, however, will the Department grant funds 
to another entity on the recipient's behalf. Each entity must follow 
its own procedures for subgranting/subcontracting with other entities 
to administer its SCSEP projects. (See also 29 CFR 95.21 and 29 CFR 
95.41).

[[Page 22540]]

What Are the Grant Closeout Procedures? (Sec.  641.884)
    The proposed rule continues the requirement of the previous 
regulation concerning closeout procedures. The Department requires all 
recipients to follow the grant closeout procedures at 29 CFR 97.50 or 
29 CFR 95.71. The Department will also issue supplementary closeout 
instructions to all SCSEP recipients as necessary.

Subpart I--Grievance Procedures and Appeals Process

    Subpart I describes the grievance procedure requirements and the 
Department's appeals process for grant applicants, SCSEP State grantees 
and national grantees. These provisions are similar to equivalent 
provisions in previous regulations.
What Appeal Process Is Available to an Applicant That Does Not Receive 
a Grant? (Sec.  641.900)
    The Department is considering having an appeals process for 
applicants that believe the Department has inappropriately denied them 
a grant. The Department is seeking comments on whether there should be 
an administrative appeal process and how an appeals process should be 
structured given the complexities of fashioning a remedy for an 
applicant. The Department encourages comments that demonstrate how to 
successfully appeal the grant decisions.
    The Department also seeks comments on procedures for operating an 
appeals process, should the Department decide to adopt one. Under one 
scenario, the Department could model the appeals process after the 
Indian and Native American Program under WIA (see 20 CFR 667.800). 
Under that process, there are time limits on when an entity could file 
an appeal and it allows an appeal of an Administrative Law Judge's 
opinion to an Administrative Review Board. The Department would like 
comments on whether this process would work, including your reasons why 
or why not. If you do not think this process would work, the Department 
would like comments on other suggestions for a process that it could 
use, including how the process would work for this program. The 
Department also seeks comments on whether it should make available an 
appeals process for one-year grant applicants, including applicants for 
section 502(e) projects and any supporting justifications for having an 
appeals process for these applicants. Specifically include comments on 
how the appeal rights should differ from one-year grants to multi-year 
grants, if applicable.
What Grievance Procedures Must Grantees Make Available to Applicants, 
Employees, and Participants? (Sec.  641.910)
    Section 641.910(a) requires State and national grantees to 
establish grievance procedures for handling employee, participant, and 
applicant complaints, and requires that the procedures be described in 
the grant agreement. The Department will not review final decisions 
reached under the grantees' grievance procedures, except to assure that 
the grantee's procedures were followed. Under paragraph (c), 
individuals may file allegations that an SCSEP grantee has not complied 
with applicable Federal law (except for allegations of discrimination, 
which are handled under Sec.  641.910(d)) with the Chief of the 
Division of Older Worker Programs. The Department will only accept such 
a filing when the individual has first sought resolution through the 
grantee's grievance procedures and has not reached resolution within 60 
days. Allegations determined to be substantial and credible will be 
investigated. Section 641.910(d) specifies that allegations of 
discrimination will be handled under the WIA nondiscrimination 
regulations at 29 CFR 37.70-37.80. Questions, or complaints alleging 
discrimination, may be directed or mailed to the Director, Civil Rights 
Center, U.S. Department of Labor, Room N-4123, 200 Constitution Avenue, 
NW., Washington, DC 20210.
What Actions of the Department May a Grantee Appeal and What Procedures 
Apply to Those Appeals? (Sec.  641.920)
    Section 641.920 describes those actions that may be appealed to the 
Department and the rules of procedure and timing of decisions for 
Office of Administrative Law Judge (OALJ) hearings. These rules are 
similar to those that were in effect under the previous regulations. 
Appeals from a disallowance of costs as a result of an audit are 
discussed at 29 CFR 96.6, and appeals of suspensions or terminations of 
grants on the grounds of discrimination are discussed in 29 CFR parts 
31 or 37, as appropriate. Other Grant Officer final determinations 
relating to costs, payment, suspension, or termination may be appealed 
to the OALJ under the procedures described in Sec.  641.920(c). The 
decision of the ALJ is final, unless the grantee files a petition for 
review with the Administrative Review Board within 20 days under the 
requirements of Sec.  641.920(d).
Is There an Alternative Dispute Resolution Process That May Be Used in 
Place of an OALJ Hearing? (Sec.  641.930)
    This proposed rule allows grantees to use the alternative dispute 
resolution system in lieu of requesting a hearing with an ALJ. Any 
decision rendered through this process will be considered a final 
determination.

IV. Administrative Information

A. Paperwork Reduction Act

    The proposed rule establishes new information collection 
requirements that did not previously exist. Currently, grantees are 
required to submit and a collection is approved for: Quarterly and 
Final Progress Reports; Quarterly and Final Financial Status Reports 
(SF 269); annual Equitable Distribution Reports; Budget Information (SF 
424 and SF 424-A); demographic information; participant characteristic 
information; and the political activity poster notice under section 
502(b)(1)(P). The proposed rule would extend this requirement to 
include additional collections as required by the 2000 Amendments to 
the Older Americans Act, and therefore, would increase the reporting 
burden. The additional collections are as follows: the State Senior 
Employment Services Coordination Plan (State Plan) described in section 
503 of the Act and proposed subpart C (641.300-641.365) of this 
proposed rule; a section 502(e) activity report to accompany the 
activities described in subpart F (641.600-641.690) and listed in 
proposed section 641.879 for reporting requirements; and additional 
information under the Quarterly and Final Progress/Status Reports, 
including the new performance measures and common performance measures 
at subpart G (641.700-642.795). Other information collections subject 
to the Paperwork Reduction Act are: the Solicitation for Grant 
Applications or comparable instrument used to make funding 
determinations for National grants and under the section 502(e) 
program; and the orientation information that grantees are required to 
provide each participant, including, but not limited to, notices of 
termination, assessments, Hatch Act information, and complaint 
resolution procedures. In order to provide a coherent reporting 
package, these requirements, including those that have already been 
approved and those that are new and contained in this proposed rule, 
have been submitted to the Office of Management and Budget (OMB) as one 
reporting package for review under the Paperwork Reduction Act of 1980 
(44 U.S.C. 3501 et seq.). The reporting

[[Page 22541]]

burden for these collections of information is estimated to average 450 
hours per year, per respondent, including the time to review the 
instructions, search existing data sources, gather and maintain the 
data needed, and complete and review the information for submission to 
the Department.
    Comments about these burden estimates or any other aspect of this 
collection of information, including suggestions for reducing this 
burden, should be sent directly to the Office of Information 
Management, Department of Labor, Room N-1301, 200 Constitution Avenue, 
NW., Washington, DC 20210; and to the Office of Information and 
Regulatory Affairs, Office of Management Budget, Washington, DC 20503. 
The Department welcomes suggestions on all aspects of the burden 
associated with this NPRM.

B. Executive Order 13132 (Federalism)

    The Employment and Training Administration (ETA) has reviewed this 
proposed rule in accordance with Executive Order 13132 on Federalism, 
and has determined that it does not have ``federalism implications.'' 
After the enactment of the 2000 amendments to the OAA, the Department 
consulted with public interest groups and intergovernmental groups on 
the development of regulations necessary to implement the amendments to 
the OAA. Included in the consultation process were the 
Intergovernmental Organizations; interested individuals; and 
representatives of the grantee community, including State 
representatives and representatives from the U.S. Forest Service; 
National Senior Citizens Education and Research Center; National 
Council on the Aging; AARP Foundation; Green Thumb, Inc.; National 
Urban League, Inc.; National Center and Caucus for the Black Aged, 
Inc.; Asociacion Nacional Por Personas Mayores; National Asian Pacific 
Center on Aging; and National Indian Council on Aging.

C. Regulatory Flexibility and Regulatory Impact Analysis, SBREFA; 
Family Well-Being

    The Regulatory Flexibility Act (5 U.S.C. chapter 6) requires the 
Federal government to anticipate and reduce the impact of rules and 
paperwork requirements on small businesses and other small entities. 
``Small entities'' are defined as small businesses (those with fewer 
than 500 employees, except where otherwise provided) and small 
nonprofit organizations (those with fewer than 500 employees, except 
where otherwise provided) and small governmental entities (those in 
areas with fewer than 50,000 residents). This rule will affect 
primarily the 50 States, the District of Columbia, and certain 
Territories; however it also affects those national organizations and 
any subgrantees that have fewer than 500 employees. As described in 
this preamble, ETA has taken a variety of measures to consult with 
grant recipients of this program. The Department has assessed the 
potential impact of the proposed rule in order to identify any areas of 
concern. Based on that assessment, the Department certifies that these 
Rules, as promulgated, will not have a significant impact on a 
substantial number of small entities.
    In addition, under the Small Business Regulatory Enforcement 
Fairness Act (SBREFA) (5 U.S.C. chapter 8), the Department has 
determined that these are not ``major rules,'' as defined in 5 U.S.C. 
804(s). The Department certifies that the proposed rule has been 
assessed in accordance with Pub. L. 105-277, 112 Stat. 2681, for its 
effect on family well-being. The purpose of SCSEP is to provide 
community service activities and employment opportunities to 
individuals age 55 and over who are low income and have poor employment 
prospects. This program is designed at the State and local level to 
fulfill this purpose with the effect of enhancing family well-being 
through increased skills and earnings and to promote self-sufficiency 
for older individuals.

D. Executive Order 12866

    Executive Order 12866 requires that regulations be drafted to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. The Department has determined that these 
rules are consistent with these priorities and principles. This 
rulemaking implements statutory authority based on broad consultation 
and coordination. It reflects the Department's response to suggestions 
received in writing and through work groups.
    The Executive Order encourages agencies, as appropriate, to provide 
the public with meaningful participation in the regulatory process. The 
Department consulted with the Department of Health and Human Services, 
as well as with State and local officials and their representative 
organizations, in addition to a broad range of stakeholder groups and 
others to obtain their views before the publication of this proposed 
rule. The Department also considered the numerous suggestions received 
in writing and through work groups. The Department has responded to 
some of the suggestions received in the ``Summary and Explanation'' 
section of the preamble.
    To a considerable degree, these rules reflect the suggestions 
received. They also reflect the intent of the Act to improve the SCSEP 
by integrating SCSEP into the One-Stop Delivery System and improving 
the performance of the grantee community. The Department has determined 
that the proposed rule will not have an adverse effect in a material 
way on the nation's economy.
    However, this rule is a significant regulatory action under section 
(3)(f)(1) of Executive Order 12866 because it includes many provisions 
that are new to SCSEP and, therefore, the proposed rule has been 
reviewed by OMB in accordance with that Order.

E. Executive Order 13211 (Energy Effects)

    Executive Order 13211 requires all agencies to provide a Statement 
of Energy Effects for regulatory actions that effect energy supply, 
energy distribution, or energy use. The Department has analyzed this 
proposed rule and determined that it is not a ``significant energy 
action'' under that order because it is not a ``significant regulatory 
action'' under Executive Order 12866 and is not likely to have a 
significant adverse effect on the supply, distribution, or use of 
energy. It has not been designated by the Administrator of the Office 
of Information and Regulatory Affairs as a significant energy action. 
Therefore, this proposed rule does not require a Statement of Energy 
Effects under Executive Order 13211.

F. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1501 et seq.) requires that a covered agency prepare a budgetary impact 
statement before promulgating a rule that includes any Federal mandate 
that may result in the expenditure by State, local, and Tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year.
    If a covered agency must prepare a budgetary impact statement, 
section 205 further requires that it select the most cost-effective and 
least burdensome alternative that achieves the objectives of the rule 
and is consistent with the statutory requirements. In addition, section 
203 requires a plan for informing and advising any small government 
that may be significantly or uniquely impacted by the rule.
    The Department has determined that the proposed rule will not 
require the expenditure by State, local, or Tribal

[[Page 22542]]

governments, in the aggregate, or by the private sector, of more than 
$100 million in any one year. Accordingly, the Department has not 
prepared a budgetary impact statement specifically addressing the 
regulatory alternatives considered, or prepared a plan for informing 
and advising any significantly or uniquely affected small government.

G. Executive Order 12988 (Civil Justice Reform)

    The Department drafted and reviewed this rule according to 
Executive Order 12988, and determined that it will not unduly burden 
the Federal court system. The rule has been written to minimize 
litigation and provide a clear legal standard for affected conduct, and 
has been reviewed carefully to eliminate drafting errors and 
ambiguities.

H. Executive Order 13175 (Tribal Summary Impact Statement)

    Executive Order 13175 requires consultation and coordination with 
Indian Tribal Governments and also requires a tribal summary impact 
statement in the preamble of the regulation, which describes the extent 
of the agency's prior consultation with tribal officials, a summary of 
nature of their concerns and the agency's position supporting the need 
to issue the regulation, and a statement of the extent to which the 
concerns of tribal officials have been met. The Department has reviewed 
this regulation for tribal impact and has determined that no provision 
preempts tribal law or the ability of tribes to self-govern. The 
Department has encouraged input from members of tribal organizations as 
well as other individuals through a series of Town Hall meetings.

List of Subjects in 20 CFR Part 641

    Aged, Employment, Government contracts, Grant programs--labor, 
Reporting and recordkeeping requirements.

    For the reasons stated in the Preamble, 20 CFR Part 641 is proposed 
to be revised to read as follows:

PART 641--PROVISIONS GOVERNING THE SENIOR COMMUNITY SERVICE 
EMPLOYMENT PROGRAM

Subpart A--Purpose and Definitions
Sec.
641.100 What does this Part cover?
641.110 What is the SCSEP?
641.120 What are the purposes of the SCSEP?
641.130 What is the scope of this Part?
641.140 What definitions apply to this Part?
Subpart B--Coordination with the Workforce Investment Act
641.200 What is the relationship between SCSEP and the Workforce 
Investment Act?
641.210 What services, in addition to the applicable core services, 
must SCSEP grantees provide through the One-Stop Delivery System?
641.220 Does title I of WIA require SCSEP to use OAA funds for 
individuals who are not eligible for SCSEP services or for services 
that are not authorized under the OAA?
641.230 Must the individual assessment conducted by the SCSEP 
grantee and the assessment performed by the One-Stop Delivery System 
be accepted for use by either entity to determine the individual's 
need for services in the SCSEP and adult programs under title IB of 
WIA?
641.240 Are SCSEP participants eligible for intensive and training 
services under title I of WIA?
Subpart C--The State Senior Employment Services Coordination Plan
641.300 What is the State Plan?
641.305 Who is responsible for developing and submitting the State 
Plan?
641.310 May the Governor delegate responsibility for developing and 
submitting the State Plan?
641.315 Who participates in developing the State Plan?
641.320 Must all national grantees operating within a State 
participate in the State planning process?
641.325 What information must be provided in the State Plan?
641.330 How should the State Plan reflect community service needs?
641.335 How should the Governor address the coordination of SCSEP 
services with activities funded under title I of WIA?
641.340 Must the Governor submit a State Plan each year?
641.345 What are the requirements for modifying the State Plan?
641.350 How should public comments be solicited and collected?
641.355 Who may comment on the State Plan?
641.360 How does the State Plan relate to the equitable distribution 
(ED) report?
641.365 How must the equitable distribution provisions be reconciled 
with the provision that disruptions to current participants should 
be avoided?
Subpart D--Grant Application and Responsibility Review Requirements
641.400 What entities are eligible to apply to the Department for 
funds to administer SCSEP community service projects?
641.410 How does an eligible entity apply?
641.420 What factors will the Department consider in selecting 
grantees?
641.430 What are the eligibility criteria that each applicant must 
meet?
641.440 What are the responsibility conditions that an applicant 
must meet?
641.450 Are there responsibility conditions that alone will 
disqualify an applicant?
641.460 How will the Department examine the responsibility of 
eligible entities?
641.465 Under what circumstances may the Department reject an 
application?
641.470 What happens if an applicant's application is rejected? 
[Reserved]
641.480 May the Governor make recommendations to the Department on 
grant applications?
641.490 When may SCSEP grants be awarded competitively?
Subpart E--Services to Participants
641.500 Who is eligible to participate in the SCSEP?
641.505 When is eligibility determined?
641.507 What types of income are included and excluded for 
participant eligibility determinations? [Reserved]
641. 510 What happens if a grantee/subgrantee determines that a 
participant is no longer eligible for the SCSEP due to an increase 
in family income?
641.515 How must grantees/subgrantees recruit and select eligible 
individuals for participation in the SCSEP?
641.520 Are there any priorities that grantees/subgrantees must use 
in selecting eligible individuals for participation in the SCSEP?
641.525 Are there any other groups of individuals who should be 
given special consideration when selecting SCSEP participants?
641.530 Must the grantee/subgrantee always select priority or 
preference individuals?
641.535 What services must grantees/subgrantees provide to 
participants?
641.540 What types of training may grantees/subgrantees provide to 
SCSEP participants?
641.545 What supportive services may grantees/subgrantees provide to 
participants?
641.550 What responsibility do grantees/subgrantees have to place 
participants in unsubsidized employment?
641.555 What responsibility do grantees have to participants who 
have been placed in unsubsidized employment?
641.560 May grantees place participants directly into unsubsidized 
employment?
641.565 What policies govern the provision of wages and fringe 
benefits to participants?
641.570 Is there a time limit for participation in the program?
641.575 May a grantee establish a limit on the amount of time its 
participants may spend at each host agency?
641.580 Under what circumstances may a grantee terminate a 
participant?
641.585 Are participants employees of the Federal Government?
641.590 Are participants employees of the grantee, the local project 
and/or the host agency?
Subpart F--Private Sector Training Projects Under Section 502(e) of the 
OAA
641.600 What is the purpose of the private sector training projects 
authorized under section 502(e) of the OAA?
641.610 How are section 502(e) activities administered?

[[Page 22543]]

641.620 How may an organization apply for section 502(e) funding?
641.630 What private sector training activities are allowable under 
section 502(e)?
641.640 How do the private sector training activities authorized 
under section 502(e) differ from other SCSEP activities?
641.650 Does the requirement that not less than 75 percent of the 
funds be used to pay participant wages and fringe benefits apply to 
section 502(e) activities?
641.660 Who is eligible to participate in section 502(e) private 
sector training activities?
641.665 When is eligibility determined?
641.670 May an eligible individual be enrolled simultaneously in 
section 502(e) private sector training activities operated by one 
grantee and a community service SCSEP project operated by a 
different SCSEP grantee?
641.680 How should grantees report on participants who are co-
enrolled?
641.690 How is the performance of section 502(e) grantees measured?
Subpart G--Performance Accountability
641.700 What performance measures apply to SCSEP grantees?
641.710 How are these performance indicators defined?
641.715 What are the common performance measures?
641.720 How do the common performance measures affect grantees and 
the OAA performance measures?
641.730 How will the Department set and adjust performance levels?
641.740 How will the Department determine whether a grantee fails, 
meets, or exceeds negotiated levels of performance?
641.750 What sanctions will the Department impose if a grantee fails 
to meet negotiated levels of performance?
641.760 What sanctions will the Department impose if a national 
grantee fails to meet negotiated levels of performance under the 
total SCSEP grant?
641.770 What sanctions will the Department impose if a national 
grantee fails to meet negotiated levels of performance in any State 
it serves?
641.780 When will the Department assess the performance of a 
national grantee in a State?
641.790 What sanctions will the Department impose if a State grantee 
fails to meet negotiated levels of performance?
641.795 Will there be incentives for exceeding performance measures?
Subpart H--Administrative Requirements
641.800 What uniform administrative requirements apply to the use of 
SCSEP funds?
641.803 What is program income?
641.806 How must SCSEP program income be used?
641.809 What non-Federal share (matching) requirements apply to the 
use of SCSEP funds?
641.812 What is the period of availability of SCSEP funds?
641.815 May the period of availability be extended?
641.818 What happens to funds that are unexpended at the end of the 
Program Year?
641.821 What audit requirements apply to the use of SCSEP funds?
641.824 What lobbying requirements apply to the use of SCSEP funds?
641.827 What general nondiscrimination requirements apply to the use 
of SCSEP funds?
641.830 What nondiscrimination protections apply specifically to 
participants in SCSEP programs?
641.833 What policies govern political patronage?
641.836 What policies govern political activities?
641.839 What policies govern union organizing activities?
641.841 What policies govern nepotism?
641.844 What maintenance of effort requirements apply to the use of 
SCSEP funds?
641.847 What uniform allowable cost requirements apply to the use of 
SCSEP funds?
641.850 Are there other specific allowable and unallowable cost 
requirements for SCSEP?
641.853 How are costs classified?
641.856 What functions and activities constitute costs of 
administration?
641.859 What other special rules govern the classification of costs 
as administrative costs or program costs?
641.861 Must SCSEP recipients provide funding for the administrative 
costs of subrecipients?
641.864 What functions and activities constitute program costs?
641.867 What are the limitations on the amount of SCSEP 
administrative costs?
641.870 Under what circumstances may the administrative cost 
limitation be increased?
641.873 What minimum expenditure levels are required for participant 
wages and fringe benefits?
641.876 When will compliance with cost limitations and minimum 
expenditure levels be determined?
641.879 What are the fiscal and performance reporting requirements 
for recipients?
641.881 What are the SCSEP recipient's responsibilities relating to 
awards to subrecipients?
641.884 What are the grant closeout procedures?
Subpart I--Grievance Procedures and Appeals Process
641.900 What appeal process is available to an applicant that does 
not receive a grant? [Reserved]
641.910 What grievance procedures must grantees make available to 
applicants, employees, and participants?
641.920 What actions of the Department may a grantee appeal and what 
procedures apply to those appeals?
641.930 Is there an alternative dispute resolution process that may 
be used in place of an OALJ hearing?

    Authority: 42 U.S.C. 3056 et.seq.

Subpart A--Purpose and Definitions


Sec.  641.100  What does this Part cover?

    This Part 641 contains the Department of Labor's regulations for 
the Senior Community Service Employment Program (SCSEP), authorized 
under the title V of the Older Americans Act, 42 U.S.C. 3056 et seq., 
as amended by the Older Americans Act Amendments of 2000 (OAA), Pub. L. 
106-501. This Part, and other pertinent regulations expressly 
incorporated by reference, set forth the regulations applicable to the 
SCSEP.
    (a) Subpart A of this part contains introductory provisions and 
definitions that apply to this Part.
    (b) Subpart B of this part describes the required relationship 
between the OAA and the Workforce Investment Act of 1998 (WIA), 29 
U.S.C. 2801 et seq. These provisions discuss the coordinated efforts to 
provide services through the integration of the SCSEP within the One-
Stop Delivery System.
    (c) Subpart C of this part sets forth the requirements for the 
State Senior Employment Services Coordination Plan (State Plan), such 
as required coordination efforts, public comments, and equitable 
distribution.
    (d) Subpart D of this part establishes grant planning and 
application requirements, including grantee eligibility, and 
responsibility review.
    (e) Subpart E of this part details SCSEP participant services.
    (f) Subpart F of this part provides the rules for projects designed 
to assure second career training and the placement of eligible 
individuals into unsubsidized jobs in the private sector.
    (g) Subpart G of this part outlines the performance accountability 
requirements. This subpart establishes requirements for performance 
measures, defines such measures, and establishes corrective actions, 
including the imposition of sanctions for failure to meet performance 
measures.
    (h) Subpart H of this part sets forth the administrative 
requirements for SCSEP grants.
    (i) Subpart I of this part describes the grievance and appeals 
processes and requirements.


Sec.  641.110  What is the SCSEP?

    The Senior Community Service Employment Program or the SCSEP is a 
program administered by the Department of Labor that serves low-income 
persons who are 55 years of age

[[Page 22544]]

and older and have poor employment prospects by placing them in part-
time community service positions and by assisting them to transition to 
unsubsidized employment.


Sec.  641.120  What are the purposes of the SCSEP?

    The purposes of the SCSEP are to foster and promote useful part-
time opportunities in community service activities for unemployed low-
income persons who are 55 years of age or older; to foster individual 
economic self-sufficiency; and to increase the number of older persons 
who may enjoy the benefits of unsubsidized employment in both the 
public and private sectors.


Sec.  641.130  What is the scope of this Part?

    The regulations in this Part address the requirements that apply to 
the SCSEP. More detailed policies and procedures are contained in 
administrative guidelines issued by the Department. Throughout this 
Part, phrases such as, ``according to instructions (procedures) issued 
by the Department'' or ``additional guidance will be provided through 
administrative issuance'' refer to the SCSEP Bulletins, technical 
assistance guides, and other SCSEP directives.


Sec.  641.140  What definitions apply to this Part?

    The following definitions apply to this Part:
    Authorized position level means the number of SCSEP enrollment 
opportunities that can be supported for a 12-month period based on the 
average national unit cost. The authorized position level is derived by 
dividing the total amount of funds appropriated for a Program Year by 
the national average unit cost per participant for that Program Year as 
determined by the Department. The national average unit cost includes 
all costs of administration, other participant costs, and participant 
wage and fringe benefit costs as defined in section 506(g) of the OAA. 
A grantee's total award is divided by the national unit cost to 
determine the authorized position level for each grant agreement.
    Community service includes, but is not limited to, social, health, 
welfare, and educational services (including literacy tutoring); legal 
assistance, and other counseling services, including tax counseling and 
assistance and financial counseling; library, recreational, and other 
similar services; conservation, maintenance, or restoration of natural 
resources; community betterment or beautification; anti-pollution and 
environmental quality efforts; weatherization activities; and economic 
development. (OAA sec. 516(1)).
    Comprehensive One-Stop Center means a facility located in each 
Local Workforce Investment Area that provides core services, and 
provides access to other programs and activities carried out by the 
One-Stop partners. (See WIA sec. 134(c)(2)).
    Core Services means those services described in section 134(d)(2) 
of WIA.
    Department or DOL mean the United States Department of Labor, 
including its agencies and organizational units.
    Equitable distribution report means a report based on the latest 
available Census data, which lists the optimum number of participant 
positions in each designated area in the State, and the number of 
authorized participant positions each grantee serves in that area, 
taking the needs of underserved States into account. This report 
provides a basis for improving the distribution of SCSEP positions.
    Grant period means the time period between the effective date of 
the grant award and the ending date of the award, which reflects any 
modifications extending the period of performance, whether by the 
Department's exercise of options contained in the grant agreement or 
otherwise. Also referred to as ``project period'' or ``award period.''
    Grantee means an entity receiving financial assistance directly 
from the Department to carry out SCSEP activities. The grantee is the 
legal entity that receives the award and is legally responsible for 
carrying out the SCSEP, even if only a particular component of the 
entity is designated in the grant award document. Grantees include 
States, tribal organizations, territories, public and private nonprofit 
organizations, agencies of a State government or a political 
subdivision of a State, or a combination of such political subdivisions 
that receive SCSEP grants from the Department. (OAA sec. 502). In the 
case of the section 502(e) projects, grantee may be used to include 
private business concerns. As used here, ``grantees'' include 
``grantees'' as defined in 29 CFR 97.3 and ``recipients'' as defined in 
29 CFR 95.2(g).
    Greatest economic need means the need resulting from an income 
level at or below the poverty guidelines established by the Department 
of Health and Human Services and approved by the Office of Management 
and Budget. (OAA sec. 101(27)).
    Greatest social need means the need caused by non-economic factors, 
which include: physical and mental disabilities; language barriers; and 
cultural, social, or geographical isolation, including isolation caused 
by racial or ethnic status, that restricts the ability of an individual 
to perform normal daily tasks, or threatens the capacity of the 
individual to live independently. (OAA sec. 101(28)).
    Host agency means a public agency or a private nonprofit 
organization exempt from taxation under the provisions of section 
501(c)(3) of the Internal Revenue Code of 1986, other than a political 
party or any facility used or to be used as a place for sectarian 
religious instruction or worship, which provides a work site and 
supervision for one or more participants. (See also OAA sec. 
502(b)(1)(C)). A host agency may be a place of sectarian worship or 
instruction as long as the work experience provided for the participant 
is not for sectarian purposes.
    Indian means a person who is a member of an Indian tribe. (OAA sec. 
101(5)).
    Indian tribe means any tribe, band, nation, or other organized 
group or community of Indians (including Alaska Native village or 
regional or village corporation as defined in or established pursuant 
to the Alaska Native Claims Settlement Act) which:
    (1) Is recognized as eligible for the special programs and services 
provided by the United States to Indians because of their status as 
Indians; or
    (2) Is located on, or in proximity to, a Federal or State 
reservation or rancheria. (OAA sec. 101(6)).
    Individual employment plan or IEP means a plan for a participant 
that includes an employment goal, achievement of objectives, and 
appropriate sequence of services for the participant based on an 
assessment conducted by the grantee or subgrantee and jointly agreed 
upon by the participant. (See OAA sec. 502(b)(1)(N)).
    Intensive services means those services authorized by section 
134(d)(3) of the Workforce Investment Act.
    Jobs for Veterans Act means the program established in section 2 of 
Pub. L. 107-288 (2002) (38 U.S.C. 4215), that provides a priority for 
veterans and the spouse of a veteran who died in a service-connected 
disability, the spouse of a member of the Armed Forces on active duty 
who has been listed for a total of more than 90 days as missing in 
action, captured in the line of duty by a hostile force, or forcibly 
detained by a foreign government or power, the spouse of any veteran 
who has a total disability resulting from a service-connected 
disability, and the spouse of any veteran who died while a disability 
so evaluated was in existence, who meet program eligibility 
requirements to receive services in any Department of

[[Page 22545]]

Labor-funded workforce development program.
    Local Workforce Investment Area or local area means an area 
established by the Governor of a State under section 116 of the 
Workforce Investment Act.
    Local Board means a Local Workforce Investment Board established 
under section 117 of the Workforce Investment Act.
    National grantee means Federal public agencies and organizations, 
private nonprofit agencies and organizations, or tribal organizations 
that operate under title V of the OAA that are capable of administering 
multi-State projects under a national grant from the Department. (See 
OAA sec. 506(g)(5)).
    OAA means the Older Americans Act as amended by the Older Americans 
Act Amendments of 2000 (Pub. L. 106-501; 42 U.S.C. 3056 et seq.).
    One-Stop Delivery System means a system under which employment and 
training programs, services, and activities are available through a 
network of eligible One-Stop partners, which assures that information 
about and access to core services is available regardless of where the 
individuals initially enter the statewide workforce investment system. 
(WIA sec. 134(c)(2)).
    One-Stop partner means an entity described in section 121(b)(1) of 
the Workforce Investment Act; i.e., required partners, and an entity 
described in section 121(b)(2) of the Workforce Investment Act, i.e., 
additional partners.
    Other participant (enrollee) cost means participant training, 
including the payment of reasonable costs to instructors, classroom 
rental, training supplies, materials, equipment, and tuition, and which 
may be provided on the job, in a classroom setting, or under other 
appropriate arrangements; job placement assistance, including job 
development and job search assistance; participant supportive services 
to assist a participant to successfully participate in a project, 
including the payment of reasonable costs of transportation, health 
care and medical services, special job-related or personal counseling, 
incidentals (such as work shoes, badges, uniforms, eyeglasses, and 
tools), child and adult care, temporary shelter, and follow-up 
services; and outreach, recruitment and selection, intake orientation, 
and assessments. (OAA sec. 502(c)(6)(A)).
    Participant means an individual who is eligible for the SCSEP, has 
been enrolled and is receiving services as prescribed under subpart E 
of this part.
    Placement into public or private unsubsidized employment means 
full-or part-time paid employment in the public or private sector by a 
participant for 30 days within a 90-day period without the use of funds 
under title V or any other Federal or State employment subsidy program, 
or the equivalent of such employment as measured by the earnings of a 
participant through the use of wage records or other appropriate 
methods. (OAA sec. 513(c)(2)(A)).
    Poor employment prospects means the likelihood that an individual 
will not obtain employment without the assistance of SCSEP or any other 
workforce development program. Persons with poor employment prospects 
include, but are not limited to, those without a substantial employment 
history, basic skills, and/or English-language proficiency; displaced 
homemakers, school dropouts, persons with disabilities, including 
disabled veterans, homeless individuals, and individuals residing in 
socially and economically isolated rural or urban areas where 
employment opportunities are limited.
    Program year means the one-year period beginning July 1 and ending 
on June 30. (OAA sec. 515(b)).
    Project means an undertaking by a grantee or subgrantee according 
to a grant agreement that provides community service, training, and 
employment opportunities to eligible individuals in a particular 
location within a State.
    Recipient means grantee. As used here, ``recipients'' include 
``recipients'' as defined in 29 CFR 95.2(g) and ``grantees'' as defined 
in 29 CFR 97.3.
    Retention in public or private unsubsidized employment means full-
or part-time paid employment in the public or private sector by a 
participant for 6 months after the starting date of placement into 
unsubsidized employment without the use of funds under title V or any 
other Federal or State employment subsidy program. (OAA sec. 
513(c)(2)(B)).
    SCSEP means the Senior Community Service Employment Program 
authorized under title V of the OAA.
    Service area means the geographic area served by a local SCSEP 
project.
    State Workforce Agency means the State agency that administers the 
State Wagner-Peyser program.
    State Board means a State Workforce Investment Board established 
under section 111 of the Workforce Investment Act.
    State grantee means the entity designated by the Governor to enter 
into a grant with the Department to administer a State or territory 
SCSEP project under the OAA. Except as applied to funding distributions 
under section 506 of the OAA, this definition applies to the 50 States, 
Puerto Rico, the District of Columbia and the following territories: 
Guam, American Samoa, U.S. Virgin Islands, and the Commonwealth of the 
Northern Mariana Islands.
    State Plan means the State Senior Employment Services Coordination 
Plan as required under section 503(a) of the OAA.
    Subgrantee means the legal entity to which a subaward of financial 
assistance, which may include a subcontract, which is made by the 
grantee (or by a higher tier subgrantee or recipient), and that is 
accountable to the grantee for the use of the funds provided. As used 
here, ``subgrantee'' includes ``subgrantees'' as defined in 29 CFR 97.3 
and ``subrecipients'' as defined in 29 CFR 95.2(kk).
    Subrecipient means a subgrantee.
    Title V of the OAA means 42 U.S.C. 3056 et seq. or title V of Pub. 
L. 106-501.
    Training Services means those services authorized by section 
134(d)(4) of the Workforce Investment Act.
    Tribal organization means the recognized governing body of any 
Indian tribe, or any legally established organization of Indians which 
is controlled, sanctioned, or chartered by such governing body. (OAA 
sec. 101(7)).
    Workforce Investment Act or WIA means the Workforce Investment Act 
of 1998 (Pub. L. 105-220--Aug. 7, 1998; 112 Stat. 936); 29 U.S.C. 2801 
et seq.
    Workforce Investment Act regulations or WIA regulations means 
regulations at 20 CFR part 652 and parts 660-671.

Subpart B--Coordination With the Workforce Investment Act


Sec.  641.200  What is the relationship between SCSEP and the Workforce 
Investment Act?

    SCSEP is a required partner under the Workforce Investment Act. As 
such, it is a part of the One-Stop Delivery System. SCSEP grantees are 
required to follow all applicable rules under the WIA and its 
regulations.


Sec.  641.210  What services, in addition to the applicable core 
services, must SCSEP grantees provide through the One-Stop Delivery 
System?

    In addition to providing core services, SCSEP grantees must make 
arrangements to provide eligible and ineligible individuals with access 
to other activities and programs carried out by other One-Stop 
partners.

[[Page 22546]]

Sec.  641.220  Does title I of WIA require SCSEP to use OAA funds for 
individuals who are not eligible for SCSEP services or for services 
that are not authorized under the OAA?

    No, SCSEP requirements continue to apply. Title V resources may 
only be used to provide title V services to title V-eligible 
individuals. The Workforce Investment Act creates a seamless service 
delivery system for individuals seeking workforce development services 
by linking the One-Stop partners in the One-Stop Delivery System. 
Although the overall effect is to provide universal access to core 
services, SCSEP resources may only be used to provide services that are 
authorized and provided under SCSEP to eligible individuals. All other 
individuals who are in need of the services provided under the SCSEP, 
but who do not meet the eligibility criteria to enroll in SCSEP, should 
be referred to or enrolled in WIA or other appropriate partner 
programs. (WIA sec. 121(b)(1)). These arrangements should be negotiated 
in the MOU.


Sec.  641.230  Must the individual assessment conducted by the SCSEP 
grantee and the assessment performed by the One-Stop Delivery System be 
accepted for use by either entity to determine the individual's need 
for services in SCSEP and adult programs under title IB of WIA?

    Yes, section 502(b)(4) of the OAA provides that an assessment or 
IEP completed by SCSEP satisfies any condition for an assessment, 
service strategy, or IEP completed at the One-Stop and vice-versa. 
These reciprocal arrangements and the contents of the SCSEP IEP and WIA 
IEP should be negotiated in the MOU. (OAA sec. 502(b)(4)).


Sec.  641.240  Are SCSEP participants eligible for intensive and 
training services under title I of WIA?

    (a) Yes, although SCSEP participants are not automatically eligible 
for intensive and training services under title I of WIA, Local Boards 
may deem SCSEP participants, either individually or as a group, as 
satisfying the requirements for receiving adult intensive and training 
services under title I of WIA.
    (b) SCSEP participants who have been assessed through an SCSEP IEP 
have received an intensive service according to 20 CFR 663.240(a) of 
the WIA regulations. SCSEP participants who seek unsubsidized 
employment as part of their SCSEP IEP, may require training to meet 
their objectives. The SCSEP grantee/subgrantee, the host agency, the 
WIA program, or another One-Stop partner may provide training as 
appropriate and as negotiated in the MOU.
    (c) SCSEP provides opportunities for eligible individuals to engage 
in part-time community service activities for which they are 
compensated. These assignments are analogous to work experience 
activities or intensive service under 20 CFR 663.200 of the WIA 
regulations.

Subpart C--The State Senior Employment Services Coordination Plan


Sec.  641.300  What is the State Plan?

    The State Senior Employment Services Coordination Plan (the State 
Plan) is a plan, submitted by the Governor in each State, as an 
independent document or as part of the WIA Unified Plan, that describes 
the planning and implementation process for SCSEP services in the 
State, taking into account the relative distribution of eligible 
individuals and employment opportunities within the State. The State 
Plan is intended to foster coordination among the various SCSEP 
grantees operating within the State and to facilitate the efforts of 
stakeholders, including State and Local Boards under WIA, to work 
collaboratively through a participatory process to accomplish the SCSEP 
program's goals. (OAA sec. 503(a)(1)). The State Plan provisions are 
listed at proposed Sec.  641.325.


Sec.  641.305  Who is responsible for developing and submitting the 
State Plan?

    The Governor of each State is responsible for developing and 
submitting the State Plan to the Department.


Sec.  641.310  May the Governor delegate responsibility for developing 
and submitting the State Plan?

    Yes, the Governor may delegate responsibility for developing and 
submitting the State Plan, provided that any such delegation is 
consistent with State law and regulations. To delegate responsibility, 
the Governor must submit a signed statement indicating the individual 
and/or organization that will be submitting the State Plan on his or 
her behalf.


Sec.  641.315  Who participates in developing the State Plan?

    (a) In developing the State Plan the Governor must obtain the 
advice and recommendations of representatives from:
    (1) The State and area agencies on aging;
    (2) State and Local Boards;
    (3) Public and private nonprofit agencies and organizations 
providing employment services, including each grantee operating an 
SCSEP project within the State, except as provided for in Sec.  
641.320(b);
    (4) Social service organizations providing services to older 
individuals;
    (5) Grantees under title III of the OAA;
    (6) Affected communities;
    (7) Underserved older individuals;
    (8) Community-based organizations serving older individuals;
    (9) Business organizations; and
    (10) Labor organizations
    (b) The Governor may also obtain the advice and recommendations of 
other interested organizations and individuals, including SCSEP program 
participants, in developing the State Plan. (OAA sec. 305(a)(2)).


Sec.  641.320  Must all national grantees operating within a State 
participate in the State planning process?

    (a) Yes, although section 503(a)(2) requires the Governor to obtain 
the advice and recommendation of SCSEP national grantees with no 
reciprocal provision requiring the national grantees to participate in 
the State planning process, the eligibility provision at section 
514(c)(5) requires grantees to coordinate with other organizations at 
the State and local level. Therefore, any national grantee that does 
not participate in the State planning process may be deemed ineligible 
to receive SCSEP funds in the following Program Year.
    (b) National grantees serving older American Indians are exempted 
from participating in the planning requirements under section 503(a)(8) 
of the OAA. These national grantees may choose not to participate in 
the State planning process, however, the Department encourages 
participation. If a national grantee serving older American Indians 
does not participate in the State planning process, it must describe 
its plans for serving older American Indians in its application for 
SCSEP grant funds.


Sec.  641.325  What information must be provided in the State Plan?

    The Department issues instructions detailing the information that 
must be provided in the State Plan. At a minimum, the State Plan must 
include information on the following:
    (a) The ratio of eligible individuals in each service area to the 
total eligible population in the State;
    (b) The relative distribution of:
    (1) Eligible individuals residing in urban and rural areas within 
the State;
    (2) Eligible individuals who have the greatest economic need;
    (3) Eligible individuals who are minorities; and

[[Page 22547]]

    (4) Eligible individuals who have the greatest social need;
    (c) The employment situations and the types of skills possessed by 
eligible individuals;
    (d) The localities and populations for which community service 
projects of the type authorized by title V are most needed;
    (e) Actions taken or planned to coordinate activities of SCSEP 
grantees with the activities being carried out in the State under title 
I of WIA;
    (f) A description of the State's procedures and time line for 
ensuring an open and inclusive planning process that provides 
meaningful opportunity for public comment;
    (g) Public comments received, and a summary of the comments;
    (h) A description of the steps taken to avoid disruptions to the 
greatest extent possible (see Sec.  641.365); and
    (i) Such other information as the Department may require in the 
State Plan instructions. (OAA sec. 503(a)(3)-(4), (6)).


Sec.  641.330  How should the State Plan reflect community service 
needs?

    The Governor must ensure that the State Plan identifies the types 
of community services that are needed and the places where these 
services are most needed. The State Plan should specifically identify 
the needs and locations of those individuals most in need of community 
services and the groups working to meet their needs. (OAA sec. 
503(a)(4)(E)).


Sec.  641.335  How should the Governor address the coordination of 
SCSEP services with activities funded under title I of WIA?

    The Governor must seek the advice and recommendations from 
representatives of the State and area agencies on aging in the State 
and the State and Local Boards established under title I of WIA. (OAA 
sec. 503(a)(2)). The State Plan must describe the steps that are being 
taken to coordinate SCSEP activities within the State with activities 
being carried out under title I of WIA. (OAA sec. 503(a)(4)(F)). The 
State Plan must describe the steps being taken to ensure that the SCSEP 
is an active partner in each One-Stop Delivery System and the steps 
that will be taken to encourage and improve coordination with the One-
Stop Delivery System.


Sec.  641.340  Must the Governor submit a State Plan each year?

    The Governor is not required to submit a full State Plan each year; 
however, at a minimum, the Governor must seek the advice and 
recommendation of the individuals and organizations identified in the 
statute at section 503(a)(2) about what, if any, changes are needed, 
and publish the changes to the State Plan for public comment each year 
and submit a modification to the Department.


Sec.  641.345  What are the requirements for modifying the State Plan?

    (a) Modifications are required when:
    (1) There are changes in Federal or State law or policy 
substantially changes the assumptions upon which the State Plan is 
based;
    (2) There are changes in the State's vision, strategies, policies, 
performance indicators, or organizational responsibilities;
    (3) The State has failed to meet performance goals and must submit 
a corrective action plan; or
    (4) There is a change in a grantee or grantees.
    (b) Modifications to the State Plan are subject to the same public 
review and comment requirements that apply to the development of the 
State Plan under Sec. Sec.  641.325 and 641.350.
    (c) The Department will issue additional instructions for the 
procedures that must be followed when requesting modifications to the 
State Plan. (OAA sec. 503(a)(1)).


Sec.  641.350  How should public comments be solicited and collected?

    The Governor should follow established State procedures to solicit 
and collect public comments. The State Plan must include a description 
of the State's procedures and schedule for ensuring an open and 
inclusive planning process that provides meaningful opportunity for 
public comment.


Sec.  641.355  Who may comment on the State Plan?

    Any individual or organization may comment on the Plan.


Sec.  641.360  How does the State Plan relate to the equitable 
distribution (ED) report?

    The two documents address some of the same areas, and are prepared 
at different points in time. The ED report is prepared by State 
agencies at the beginning of each fiscal year and provides a 
``snapshot'' of the actual distribution of all of the authorized 
positions within the State, grantee-by-grantee, and the optimum number 
of participant positions in each designated area based on the latest 
available Census data. It provides a basis for improving the 
distribution of SCSEP positions within the State. (See OAA sec. 508). 
The State plan is prepared by the Governor and covers many areas in 
addition to equitable distribution, as discussed in proposed Sec.  
641.325, and sets forth a proposed plan for distribution of authorized 
positions in the State. Any distribution or redistribution of positions 
made as a result of a State Plan proposal will be reflected in the 
subsequent year's ED report, which then forms the basis for the 
proposed distribution in the next year's State plan. This process is 
iterative in that it moves the authorized positions from over-served 
areas to underserved areas over a period of time.


Sec.  641.365  How must the equitable distribution provisions be 
reconciled with the provision that disruptions to current participants 
should be avoided?

    Governors must describe the steps that are being taken to comply 
with the statutory requirement to avoid disruptions in the State Plan. 
(OAA sec. 503(a)(6)). When there is new census data indicating that 
there has been a shift in the location of the eligible population or 
when there is over-enrollment for any other reason, the Department 
recommends a gradual shift that encourages current participants in 
subsidized community service positions to move into unsubsidized 
employment to make positions available for eligible individuals in the 
areas where there has been an increase in the eligible population. The 
Department does not define disruptions to mean that participants are 
entitled to remain in a subsidized community service employment 
position indefinitely. As discussed in Sec. Sec.  641.570 and 641.575, 
grantees may, under certain circumstances, place time limits on an 
SCSEP community service assignment, thus permitting positions to be 
transferred over time.

Subpart D--Grant Application, Eligibility, and Award Requirements


Sec.  641.400  What entities are eligible to apply to the Department 
for funds to administer SCSEP community service projects?

    (a) National Grants. Entities eligible to apply for national grants 
include nonprofit organizations, Federal public agencies, and tribal 
organizations. These entities must be capable of administering a multi-
State program. State and local agencies may not apply for these funds.
    (b) National Grants in a State. Section 514(e)(3) of the OAA 
permits nonprofit organizations, public agencies, and States to receive 
SCSEP funds when a national grantee in a State fails to meet its 
performance measures in the second and third year of failure. Any 
entity that

[[Page 22548]]

was the subject of the competition is not eligible to receive SCSEP 
funds.
    (c) State Grants. Section 506(e) of the OAA requires the Department 
to enter into agreements with each State to provide SCSEP services. 
States may use individual State agencies, political subdivisions of a 
State, a combination of such political subdivisions, or a national 
grantee operating in the State to administer SCSEP funds. If the 
State's funds are competed under section 514(f) of the OAA, other 
agencies within the State, political subdivisions of a State, a 
combination of political subdivisions of a State, and national grantees 
operating in the State are eligible to apply for funds. Other States 
may not apply for this funding.


Sec.  641.410  How does an eligible entity apply?

    (a) General. An eligible entity must follow the application 
guidelines issued by the Department. The Department will issue 
application guidelines announcing the availability of State and 
national SCSEP funds whether they are awarded on a competitive or 
noncompetitive basis. The guidelines will contain application due 
dates, application instructions, and other necessary information. All 
entities must submit applications in accordance with the Department's 
instructions.
    (b) National Grant Applicants. All applicants for SCSEP national 
grant funds, except organizations proposing to serve older American 
Indians, must submit their applications to the Governor of each State 
in which projects are proposed before submitting the application to the 
Department. (OAA sec. 503(a)(5)).
    (c) State Applicants. A State that submits a Unified Plan under WIA 
may include the State's SCSEP community service project grant 
application in its Unified Plan. Any State that submits an SCSEP grant 
application as part of its WIA Unified Plan must address all of the 
application requirements as published in the Department's instructions. 
State plan applications, and modifications are addressed in Sec. Sec.  
641.340 and 641.345.


Sec.  641.420  What factors will the Department consider in selecting 
grantees?

    The Department will select grantees from among applicants that are 
able to meet the eligibility criteria and responsibility review at 
section 514 of the OAA. (Section 641.430 contains the eligibility 
criteria and Sec. Sec.  641.440 and 641.450 contain the responsibility 
criteria). If there is a full and open competition, the Department also 
will take the rating criteria described in the Solicitation for Grant 
Application into consideration, including the applicant's/grantee's 
past performance in any prior Federal grants or contracts for the past 
3 years.


Sec.  641.430  What are the eligibility criteria that each applicant 
must meet?

    To be eligible to receive SCSEP funds, each applicant must be able 
to demonstrate:
    (a) An ability to administer a program that serves the greatest 
number of eligible participants, giving particular consideration to 
individuals with greatest economic need, greatest social need, poor 
employment history or prospects, and over the age of 60;
    (b) An ability to administer a program that provides employment for 
eligible individuals in communities in which they reside, or in nearby 
communities, that will contribute to the general welfare of the 
community;
    (c) An ability to administer a program that moves eligible 
participants into unsubsidized employment;
    (d) An ability to move participants with multiple barriers to 
employment into unsubsidized employment;
    (e) An ability to coordinate with other organizations at the State 
and local levels, including the One-Stop Delivery System;
    (f) An ability to properly manage the program, including its plan 
for fiscal management of the SCSEP program;
    (g) An ability to minimize program disruption for current 
participants if there is a change in project sponsor and/or location, 
and its plan for minimizing disruptions; and
    (h) Any additional criteria that the Secretary deems appropriate in 
order to minimize disruptions for current participants.


Sec.  641.440  What are the responsibility conditions that an applicant 
must meet?

    Each applicant must be able to meet the following responsibility 
tests:
    (a) The Department has been unable to recover a debt from the 
applicant, whether incurred on its own or through subgrantees or 
subcontractors, or the applicant has failed to comply with a debt 
repayment plan to which it agreed. In this context, a debt is 
established by final agency action, followed by three demand letters to 
the applicant, without payment in full by the applicant.
    (b) Established fraud or criminal activity of a significant nature 
within the applicant's organization.
    (c) Serious administrative deficiencies identified by the 
Department, such as failure to maintain a financial management system 
as required by Federal regulations.
    (d) Willful obstruction of the auditing or monitoring process.
    (e) Failure to provide services to applicants as agreed to in a 
current or recent grant or to meet applicable performance measures.
    (f) Failure to correct deficiencies brought to the grantee's 
attention in writing as a result of monitoring activities, reviews, 
assessments, or other activities.
    (g) Failure to return a grant closeout package or outstanding 
advances within 90 days after the grant expiration date or receipt of 
closeout package, whichever is later, unless an extension has been 
requested and granted.
    (h) Failure to submit required reports.
    (i) Failure to properly report and dispose of Government property 
as instructed by the Department.
    (j) Failure to have maintained effective cash management or cost 
controls resulting in excess cash on hand.
    (k) Failure to ensure that a subgrantee complies with applicable 
audit requirements, including OMB Circular A-133 audit requirements 
specified at 20 CFR 667.200(b) and Sec.  641.821.
    (l) Failure to audit a subgrantee within the period required under 
Sec.  641.821.
    (m) Final disallowed costs in excess of five percent of the grant 
or contract award if, in the judgment of the grant officer, the 
disallowances are egregious findings.
    (n) Failure to establish a mechanism to resolve a subgrantee's 
audit in a timely fashion.


Sec.  641.450  Are there responsibility conditions that alone will 
disqualify an applicant?

    (a) Yes, an applicant may be disqualified if either of the first 
two responsibility tests listed in Sec.  641.440 is not met.
    (b) The remainder of the responsibility tests listed in Sec.  
641.440 require a substantial or persistent failure (for 2 or more 
consecutive years).


Sec.  641.460  How will the Department examine the responsibility of 
eligible entities?

    The Department will conduct a review of available records to assess 
each applicant's overall fiscal and administrative ability to manage 
Federal funds. The Department's responsibility review may consider any 
available information, including the organization's history with regard 
to the management of other grants awarded by the Department or by other 
Federal agencies. (OAA secs. 514(d)(1) and (d)(2)).

[[Page 22549]]

Sec.  641.465  Under what circumstances may the Department reject an 
application?

    (a) The Department may question any proposed project component of 
an application if it believes that the component will not serve the 
purposes of the SCSEP program. The Department may reject the 
application if the applicant does not submit or negotiate an acceptable 
alternative.
    (b) The Department may reject any application that the Grant 
Officer determines unacceptable based on the content of the 
application, rating score, past performance, fiscal management, or any 
other factor the Grant Officer believes serves the best interest of the 
program, including the application's comparative rating in a 
competition.


Sec.  641.470  What happens if an applicant's application is rejected?

    [Reserved].


Sec.  641.480  May the Governor make recommendations to the Department 
on grant applications?

    (a) Yes, each Governor will have a reasonable opportunity to make 
comments on any application to operate a SCSEP project located in the 
Governor's State before the Department makes a final decision on a 
grant award. The Governor's comments should be directed to the 
Department and may include the anticipated effect of the proposal on 
the overall distribution of program positions within the State; 
recommendations for redistribution of positions to underserved areas as 
vacancies occur in previously encumbered positions in other areas; and 
recommendations for distributing any new positions that may become 
available as a result of an increase in funding for the State. The 
Governor's recommendations should be consistent with the State Plan.
    (b) Under noncompetitive conditions, the Governor may make the 
authorized recommendations on all applications. However, under 
competitive conditions, the Governor has the option of making the 
authorized recommendations on all applications or following the rating 
process. It is incumbent on each Governor to inform the Department of 
his or her intent to review the applications before or after the rating 
process.


Sec.  641.490  When may SCSEP grants be awarded competitively?

    (a) The Department must hold a competition for SCSEP funds when a 
grantee (national grantee, national grantee in a State, or State 
grantee) fails to meet its performance measures; the eligibility 
requirements; or the responsibility tests established by section 514 of 
the OAA.
    (b) The Department may hold a full and open competition before the 
beginning of a new grant period, or if additional grantees are funded. 
The details of the competition will be provided in a Solicitation for 
Grant Applications published in the Federal Register. The Department 
believes that full and open competition is the best way to assure the 
highest quality of services to eligible participants.

Subpart E--Services to Participants


Sec.  641.500  Who is eligible to participate in the SCSEP?

    Anyone who is at least 55 years old and who is a member of a family 
with an income that is not more than 125 percent of the family income 
levels prepared by the Department of Health and Human Services and 
approved by the Office of Management and Budget (poverty guidelines) is 
eligible to participate in the SCSEP. (OAA sec. 516(2)). A person with 
a disability may be treated as a ``family of one'' for income 
eligibility determination purposes. The Department will issue 
administrative guidance on the procedures for computing family income 
for purposes of determining SCSEP eligibility.


Sec.  641.505  When is eligibility determined?

    Initial eligibility is determined at the time individuals apply to 
participate in the SCSEP. Once individuals become SCSEP participants, 
the grantee/subgrantee is responsible for verifying their continued 
income eligibility at least once every 12 months. Grantees may also 
verify an individual's eligibility as circumstances require.


Sec.  641.507  What types of income are included and excluded for 
participant eligibility determinations?

    [Reserved].


Sec.  641.510  What happens if a grantee/subgrantee determines that a 
participant is no longer eligible for the SCSEP due to an increase in 
family income?

    If a grantee/subgrantee determines that a participant is no longer 
eligible for the SCSEP, the grantee/subgrantee must give the 
participant written notification of termination within 30 days, and the 
participant must be terminated within 30 days of receiving the written 
notification. Grantees/subgrantees must refer such individuals to the 
services provided under the One-Stop Delivery System or other 
appropriate partner program. Participants may file a grievance 
according to the grantee's procedures and subpart I.


Sec.  641.515  How must grantees/subgrantees recruit and select 
eligible individuals for participation in the SCSEP?

    (a) Grantees and subgrantees must develop methods of recruitment 
and selection that assure that the maximum number of eligible 
individuals have an opportunity to participate in the program. To the 
extent feasible, grantees should seek to enroll individuals who are 
eligible minorities, limited English speakers, Indians, or who have the 
greatest economic need at least in proportion to their numbers in the 
area, taking into consideration their rates of poverty and 
unemployment, should be afforded community service opportunities. (OAA 
sec. 502(b)(1)(M)).
    (b) Grantees and subgrantees must notify the State Workforce Agency 
of all SCSEP community service opportunities and must use the One-Stop 
Delivery System in the recruitment and selection of eligible 
individuals. (OAA sec. 502(b)(1)(H)).


Sec.  641.520  Are there any priorities that grantees/subgrantees must 
use in selecting eligible individuals for participation in the SCSEP?

    (a) Yes, in selecting eligible individuals for participation in the 
SCSEP, priority must be given to:
    (1) individuals who are at least 60 years old (OAA sec. 516(2)); 
and
    (2) a veteran, or the spouse of a veteran who died of a service-
connected disability, a member of the Armed Forces on active duty, who 
has been listed for a total of more than 90 days as missing in action, 
captured in the line of duty by a hostile force, or forcibly detained 
by a foreign government or power, the spouse of any veteran who has a 
total disability resulting from a service-connected disability, and the 
spouse of any veteran who died while a disability so evaluated was in 
existence, who meet program eligibility requirements under section 2 of 
the Jobs for Veterans Act, Pub. L. 107-288 (2002).
    (b) Grantees must apply these priorities in the following order:
    (1) Veterans and qualified spouses at least 60 years old;
    (2) Other individuals at least 60 years old;
    (3) Veterans and qualified spouses aged 55-59; and
    (4) Other individuals aged 55-59.


Sec.  641.525  Are there any other groups of individuals who should be 
given special consideration when selecting SCSEP participants?

    Yes, in selecting participants from among those individuals who are

[[Page 22550]]

eligible, to special consideration must be given, to the extent 
feasible, to individuals who have incomes below the poverty level, who 
have poor employment prospects and who have the greatest social and/or 
economic need and who are eligible minorities, limited English 
speakers, or Indians. (OAA sec. 502(b)(1)(M)).


Sec.  641.530  Must the grantee/subgrantee always select priority or 
preference individuals?

    Grantees must always select qualified individuals in accordance 
with Sec.  641.520. Grantees must apply the preference, to the extent 
feasible, when selecting individuals within the priority groups, unless 
the grantee determines based on an assessment of their circumstances 
and the available community service employment opportunities, that a 
non-preference individual should receive services over a preference 
individual. When the Department examines the characteristics of a 
grantee's participant population, the grantee may be asked to provide 
evidence that it is adhering to the enrollment priorities and 
preferences set forth in Sec. Sec.  641.520 and 641.525.


Sec.  641.535  What services must grantees/subgrantees provide to 
participants?

    (a) When individuals are selected for participation in the SCSEP, 
the grantee/subgrantee is responsible for:
    (1) Providing orientation to the SCSEP, including information on 
project goals and objectives, community service assignments, training 
opportunities, available supportive services, the availability of a 
free physical examination, participant rights and responsibilities, and 
permitted and prohibited political activities (OAA sec. 502);
    (2) Assessing participants' work history, skills and interests, 
talents, physical capabilities, aptitudes, needs for supportive 
services, occupational preferences, training needs, potential for 
performing community service assignments, and potential for transition 
to unsubsidized employment at least once each quarter;
    (3) Using the information gathered during the assessment to develop 
IEPs for participants; except that if an assessment has already been 
performed and an IEP developed under title I of WIA, the WIA IEP will 
satisfy the requirement for an SCSEP assessment and IEP (see Sec.  
641.260) and updating the IEPs as necessary to reflect information 
gathered during the quarterly participant assessments (OAA sec. 
502(b)(1)(N));
    (4) Placing participants in appropriate community service 
activities in the community in which they reside, or in a nearby 
community (OAA sec. 502(b)(1)(B));
    (5) Providing or arranging for necessary training specific to the 
participants' community service assignments (OAA sec. 502(b)(1)(I));
    (6) Assisting participants in arranging for other training 
identified in their SCSEP IEPs (OAA sec. 502(b)(1)(N));
    (7) Assisting participants in arranging for needed supportive 
services identified in their SCSEP IEPs (OAA sec. 502(b)(1)(N));
    (8) Providing participants with wages and fringe benefits for time 
spent working in the assigned community service employment activity 
(OAA sec. 502(c)(6)(A)(i));
    (9) Ensuring that participants have safe and healthy working 
conditions at their community service worksites (OAA sec. 
502(b)(1)(J));
    (10) Verifying participant income eligibility at least once every 
12 months;
    (11) Assisting participants in obtaining unsubsidized employment, 
including providing or arranging for employment counseling in support 
of their IEPs;
    (12) Providing appropriate services for participants through the 
One-Stop Delivery System established under WIA (OAA sec. 502(b)(1)(O));
    (13) Assessing participants' progress in meeting the goals and 
objectives identified in their IEPs, and meeting with participants to 
reevaluate their community service assignments, training needs, 
supportive service needs and potential for transitioning to 
unsubsidized employment, making appropriate revisions to the SCSEP IEPs 
as necessary (OAA sec. 502(b)(1)(N)(iii));
    (14) Following-up with participants placed into unsubsidized 
employment during the first 6 months of placement to make certain that 
participants receive any follow-up services they may need to ensure 
successful placements; and
    (15) Following-up at 6 months with participants who are placed in 
unsubsidized employment to determine whether they are still employed 
(OAA sec. 513(c)(2)(B));
    (b) In addition to the services listed in paragraph (a) of this 
section, grantees and subgrantees must provide service to participants 
according to administrative guidelines that may be issued by the 
Department.
    (c) Grantees may not use SCSEP funds for individuals who only need 
job search assistance or job referral services.


Sec.  641.540  What types of training may grantees/subgrantees provide 
to SCSEP participants?

    (a) Grantees and subgrantees must arrange skill training for 
participants that is realistic and consistent with the participants' 
IEP, and that makes the most effective use of their skills and talents.
    (b) Training may be provided before or after placement in a 
community service activity.
    (c) Training may be in the form of lectures, seminars, classroom 
instruction, individual instruction, on-the-job experiences or other 
arrangements, including but not limited to, arrangements with other 
workforce development programs such as WIA. (OAA sec. 
502(c)(6)(A)(ii)).
    (d) Grantees and subgrantees are encouraged to place a major 
emphasis on training available through on-the-job experience.
    (e) Grantees/subgrantees are encouraged to obtain training through 
locally available resources, including host agencies, at no cost or 
reduced cost to the SCSEP.
    (f) Grantees/subgrantees may pay reasonable costs for instructors, 
classroom rental, training supplies and materials, equipment, tuition 
and other costs of training. (OAA sec. 502(c)(6)(A)(ii)).
    (g) Grantees/subgrantees may reimburse participants for costs 
associated with travel and room and board necessary to participate in 
training.
    (h) Nothing in this section prevents or limits participants from 
engaging in self-development training available through other sources 
during hours when not assigned to community service activities.


Sec.  641.545  What supportive services may grantees/subgrantees 
provide to participants?

    (a) Grantees/subgrantees may provide or arrange for supportive 
services to assist participants in successfully participating in SCSEP 
projects, including but not limited to payment of reasonable costs of 
transportation; health care and medical services; special job-related 
or personal counseling; incidentals such as work shoes, badges, 
uniforms, eyeglasses, and tools; child and adult care; temporary 
shelter; and follow-up services. (OAA sec. 502(c)(6)(A)(iv)).
    (b) To the extent practicable, the grantee/subgrantee should 
provide for the payment of these expenses from other resources.

[[Page 22551]]

Sec.  641.550  What responsibility do grantees/subgrantees have to 
place participants in unsubsidized employment?

    Because one goal of the program is to foster economic self-
sufficiency, grantees and subgrantees should make reasonable efforts to 
place as many participants as possible into unsubsidized employment, in 
accordance with each participant's IEP. Grantees are responsible for 
working with participants to ensure that, for those participants whose 
IEPs include an unsubsidized employment goal, the participants are 
receiving services and taking actions designed to help them achieve 
this goal. Grantees and subgrantees must contact private and public 
employers directly or through the One-Stop Delivery System to develop 
or identify suitable unsubsidized employment opportunities. They must 
also encourage host agencies to assist participants in their transition 
to unsubsidized employment, including unsubsidized employment with the 
host agency.


Sec.  641.555  What responsibility do grantees have to participants who 
have been placed in unsubsidized employment?

    (a) Grantees must contact placed participants during the first 6 
months to determine if participants have the necessary supportive 
services to remain in the job.
    (b) Grantees must contact participants 6 months after placement to 
determine if they have been retained by the employer or use wage 
records to verify continued employment. (OAA sec. 513(c)(2)(B)).


Sec.  641.560  May grantees place participants directly into 
unsubsidized employment?

    Grantees are encouraged to refer individuals who may be placed 
directly in an unsubsidized employment position to an employment 
provider, including the One-Stop for job placement assistance under 
WIA. The SCSEP encourages grantees to work closely with participants to 
develop an IEP and assessment to determine what training the individual 
may need. The Department encourages grantees to work with those 
participants who are the most difficult to place to provide them with 
the services necessary to develop the skills needed for job placement.


Sec.  641.565  What policies govern the provision of wages and fringe 
benefits to participants?

    (a) Wages. Grantees must pay participants the highest applicable 
minimum wage for time spent in orientation, training required by the 
grantee/subgrantee, and work in community service assignments. The 
highest applicable minimum wage is either the minimum wage applicable 
under the Fair Labor Standards Act of 1938; the State or local minimum 
wage for the most nearly comparable covered employment; or the 
prevailing rate of pay for persons employed in similar public 
occupations by the same employer.
    (b) Fringe benefits.
    (1) Required fringe benefits. Except as provided in paragraphs 
(b)(3) and (b)(4) of this section, grantees must ensure that enrollees 
receive all fringe benefits required by law.
    (i) Grantees must provide fringe benefits uniformly to all 
participants within a project or subproject, unless the Department 
agrees to waive this provision due to a determination that such a 
waiver is in the best interests of applicants, participants, and 
project administration.
    (ii) Grantees must offer participants the opportunity to receive 
physical examinations annually.
    (A) Physical examinations are a fringe benefit, and not an 
eligibility criterion. The examining physician must provide, to 
participants only, a written report of the results of the examination. 
Participants may, at their option, provide the grantee or subgrantee 
with a copy of the report.
    (B) Participants may choose not to accept the physical examination. 
In that case, the grantee or subgrantee must document this refusal, 
through a signed statement or other means, within 60 workdays after 
commencement of the community service assignment. Each year thereafter, 
grantees and subgrantees must offer the physical examination and 
document the offer and any participant's refusal.
    (iii) When participants are not covered by the State 
workers'compensation law, the grantee or subgrantee must provide 
participants with workers' compensation benefits equal to those 
provided by law for covered employment.
    (2) Allowable fringe benefit costs. Grantees may provide the 
following fringe benefits: annual leave; sick leave; holidays; health 
insurance; social security; and any other fringe benefits approved in 
the grant agreement and permitted by the appropriate Federal cost 
principles found in OMB Circulars A-87 and A-122, except for retirement 
costs. (See subpart H, Sec. Sec.  641.847 and 641.850).
    (3) Retirement. Grantees may not use grant funds to provide 
contributions into a retirement system or plan unless the grantee 
documents the following:
    (i) The costs are allowable under the appropriate cost principles 
indicated at Sec.  641.847; and
    (ii) Such contributions bear a reasonable relationship to the cost 
of providing benefits to participants. A ``reasonable relationship'' 
exists when the benefits vest at the time contributions are made on 
behalf of the participants, or the charges to SCSEP funds are for 
contributions on behalf of participants to a ``defined benefit'' type 
of plan that do not exceed the amounts reasonably necessary to provide 
the specified benefit to participants, as determined under a separate 
actuarial determination.
    (4) Unemployment compensation. Unless required by law, grantees may 
not pay the cost of unemployment insurance for participants.


Sec.  641.570  Is there a time limit for participation in the program?

    No, there is no time limit for participation in the SCSEP; however, 
a maximum duration of enrollment may be established by the grantee in 
the grant agreement, when authorized by the Department. If there is 
such a time limit on enrollment established in the grant agreement, the 
grantee must provide for a system to transition participants to 
unsubsidized employment or other assistance before the maximum 
enrollment duration has expired. Provisions for transition must be 
reflected in the participant's IEP.


Sec.  641.575  May a grantee establish a limit on the amount of time 
its participants may spend at each host agency?

    Yes, grantees may establish limits on the amount of time that its 
participants may spend at a host agency. Such limits should be 
established in the grant agreement, as approved by the Department, and 
reflected in the participants' IEPs.


Sec.  641.580  Under what circumstances may a grantee terminate a 
participant?

    (a) If, at any time, a grantee or subgrantee determines that a 
participant was incorrectly declared eligible as a result of false 
information given by that individual, the grantee or subgrantee must 
terminate the participant and provide the participant with a written 
notice that explains the reason for termination.
    (b) If, during annual income verification, a grantee finds a 
participant to be no longer eligible for enrollment because of changes 
in family income, the grantee may terminate the participant. In order 
to terminate the participant in such a case, the grantee must provide 
the participant with a written notice and terminate the

[[Page 22552]]

participant 30 days after the participant receives the notice. (See 
Sec.  641.505).
    (c) If, at any time, the grantee or subgrantee determines that it 
incorrectly determined a participant to be eligible for the program 
through no fault of the participant, the grantee or subgrantee must 
give the participant immediate written notice explaining the reason(s) 
and must terminate the participant 30 days after the participant 
receives the notice.
    (d) A grantee and subgrantee may terminate a participant for cause. 
In doing so, the grantee or subgrantee must inform the participant, in 
writing, of the reason(s) for termination. Grantees must discuss the 
proposed reasons for such terminations in the grant application, and 
must discuss such reasons with participants and provide each 
participant a written copy of its policies for terminating a 
participant for cause or otherwise at the time of enrollment.
    (e) A grantee or subgrantee may terminate a participant if the 
participant refuses to accept a reasonable number of job offers or 
referrals to unsubsidized employment consistent with the SCSEP IEP and 
there are no extenuating circumstances that would hinder the 
participant from moving to unsubsidized employment.
    (f) When a grantee or subgrantee makes an unfavorable determination 
of enrollment eligibility under paragraphs (a), (b), and (c) of this 
section, it must give the individual a reason for termination and, when 
feasible, should refer the individual to other potential sources of 
assistance, such as the One-Stop Delivery System.
    (g) Any termination, as described in paragraphs (a) through (f) of 
this section, must be consistent with administrative guidelines issued 
by the Department, and the termination must be subject to the 
applicable appeal rights and procedures described in Sec.  641.910.
    (h) Participants may not be terminated from the program solely on 
the basis of their age. Grantees/subgrantees may not impose an upper 
age limit for participation in the SCSEP.


Sec.  641.585  Are participants employees of the Federal Government?

    (a) No, participants are not Federal employees. (OAA sec. 504(a)).
    (b) If a Federal agency is a grantee or host agency, Sec.  641.590 
applies.


Sec.  641.590  Are participants employees of the grantee, the local 
project and/or the host agency?

    Grantees must consult with an attorney to determine if a 
participant is an employee of the grantee, local project, or host 
agency as the definition of an ``employee'' varies depending on the 
laws defining an employer/employee relationship.

Subpart F--Private Sector Training Projects Under Section 502(e) of 
the OAA


Sec.  641.600  What is the purpose of the private sector training 
projects authorized under section 502(e) of the OAA?

    The purpose of the private sector training projects authorized 
under section 502(e) of the OAA is to allow States, public agencies, 
nonprofit organizations, and private businesses through an open 
competition, to develop and operate projects designed to provide SCSEP 
participants with second career training and placement opportunities in 
the private business industry. In addition, the OAA provides section 
502(e) grantees or contractors with opportunities to initiate or 
enhance their relationships with the private sector, fostering 
collaboration with the One-Stop Delivery System, improving their 
ability to meet and exceed performance standards, and broadening the 
range of options available to SCSEP participants.


Sec.  641.610  How are section 502(e) activities administered?

    (a) The Department may enter into agreements with States, public 
agencies, private nonprofit organizations, and private businesses to 
carry out section 502(e) projects.
    (b) To the extent possible, private sector training activities 
should emphasize different work modes, such as job sharing, flex-time, 
flex-place, arrangements relating to reduced physical exertion, and 
innovative work modes with a focus on second career training and 
placement in growth industries in jobs requiring new technological 
skills.
    (c) Grantees must coordinate section 502(e) private sector training 
activities with programs carried out under title I of WIA and with 
SCSEP projects operating in the area whenever possible.


Sec.  641.620  How may an organization apply for section 502(e) 
funding?

    Organizations applying for section 502(e) funding must follow the 
instructions issued by the Department in a Solicitation for Grant 
Applications, which will be published in the Federal Register, or other 
similar instrument.


Sec.  641.630  What private sector training activities are allowable 
under section 502(e)?

    Allowable activities authorized under section 502(e) include:
    (a) Providing participants with services leading to transition to 
private sector employment, including:
    (1) Training in new technological skills;
    (2) On-the-job training with private-for-profit employers;
    (3) Work experience with private-for-profit employers;
    (4) Adult basic education;
    (5) Classroom training;
    (6) Occupational skills training;
    (7) In combination with other services listed in paragraphs (a)(1) 
through (6) of this section or in conjunction with the local One-Stop 
Delivery System, job clubs or job search assistance;
    (8) In combination with other services listed in paragraphs (a)(1) 
through (7) of this section, supportive services, which may include 
counseling, motivational training, and job development; or
    (9) Combinations of the above-listed activities.
    (b) Working with employers to develop jobs and innovative work 
modes including job sharing, flex-time, flex-place and other 
arrangements, including those relating to reduced physical exertion.


Sec.  641.640  How do the private sector training activities authorized 
under section 502(e) differ from other SCSEP activities?

    (a) The private sector training activities authorized under section 
502(e) are not required to have a community service project component.
    (b) The private sector training activities authorized under section 
502(e) focus solely on providing SCSEP-eligible individuals with second 
career training, placement opportunities, and other assistance 
necessary to obtain unsubsidized employment in the private sector.
    (c) The Department is authorized to pay all of the costs of section 
502(e) activities (i.e., there is no ``matching funds'' requirement).
    (d) The Department may enter directly into agreements with private 
businesses for section 502(e) activities.
    (e) Grantees may fund private-for-profit and other organizations 
that do not have the IRS 501(c)(3) designation or are not public 
agencies to conduct section 502(e) activities if provided for in their 
grant or contract agreement with the Department.


Sec.  641.650  Does the requirement that not less than 75 percent of 
the funds be used to pay participant wages and fringe benefits apply to 
section 502(e) activities?

    Yes, under section 502(c)(6)(B) of the OAA, 75 percent of SCSEP 
funds made available through a grant must be used to pay for the wages 
and fringe benefits of participants employed under SCSEP

[[Page 22553]]

projects. This requirement applies to the total grant, and not 
necessarily to individual components of the grant. For entities that 
receive an SCSEP grant for both community service projects and section 
502(e) projects, the requirement applies to the total grant. For 
entities that receive only a section 502(e) grant, the requirement 
applies to that grant.


Sec.  641.660  Who is eligible to participate in section 502(e) private 
sector training activities?

    The same eligibility criteria used in the community service portion 
of the program apply for participation in the private sector training 
activities. (See subpart E, Sec. Sec.  641.500, 641.510, 641.520, 
641.525, 641.530).


Sec.  641.665  When is eligibility determined?

    Eligibility is determined at the time individuals apply to 
participate in the SCSEP. Grantees may also verify an individual's 
eligibility as circumstances require.


Sec.  641.670  May an eligible individual be enrolled simultaneously in 
section 502(e) private sector training activities operated by one 
grantee and a community service SCSEP project operated by a different 
SCSEP grantee?

    Yes, an eligible individual may be enrolled simultaneously in 
section 502(e) private sector training activities and a community 
service SCSEP project, operated by two different SCSEP grantees. This 
is known as co-enrollment. When a participant is co-enrolled, the 
projects that are providing services to the participant must jointly 
work to ensure that they are providing complementary rather than 
duplicative services and that they are providing the participant with 
the services required under Sec.  641.535. Co-enrollment may also 
describe arrangements such as participants receiving services from both 
SCSEP and another One-Stop partner program, such as the WIA title I 
adult program.


Sec.  641.680  How should grantees report on participants who are co-
enrolled?

    The Department's reporting instructions provide information on how 
grantees should report on participants who are co-enrolled.


Sec.  641.690  How is the performance of section 502(e) grantees 
measured?

    (a) The following performance measures apply to section 502(e) 
grantees:
    (1) Entered employment;
    (2) Retention in employment; and
    (3) Earnings increase.
    (b) These measures are defined and governed by Subpart G of this 
Part and the applicable provisions of administrative issuances 
implementing the SCSEP performance standards.
    (c) If a section 502(e) grantee fails to meet its performance 
standards, the Department may require corrective action, may provide 
technical assistance, or may decline to fund the grantee in the next 
Program Year.

Subpart G--Performance Accountability


Sec.  641.700  What performance measures apply to SCSEP grantees?

    (a) The OAA, at section 513(b), enumerate the indicators of 
performance as follows:
    (1) The number of persons served, with particular consideration 
given to individuals with greatest economic need, greatest social need, 
or poor employment history or prospects, and individuals who are over 
the age of 60;
    (2) Community services provided;
    (3) Placement into and retention in unsubsidized public or private 
employment;
    (4) Satisfaction of the participants, employers, and their host 
agencies with their experiences and the services provided; and
    (5) Additional indicators of performance that the Department 
determines to be appropriate to evaluate services and performance.
    (b) The additional indicator of performance is earnings increase.


Sec.  641.710  How are these performance indicators defined?

    (a) For ease of calculation and to make the indicators better 
measures of performance, the Department has divided some of the 
indicators into multiple parts.
    (b) The individual indicators are defined as follows:
    (1) ``The number of persons served'' is defined by comparing the 
total number of participants served to a grantee's authorized number of 
positions adjusted for the differences in wages required to be paid in 
a State or area.
    (2) ``The number of persons served with the greatest economic need, 
greatest social need or with poor employment history or prospects and 
individuals who are over age 60'' is defined by comparing the total 
number of participants to the number of participants who:
    (i) Have an income level at or below the poverty line; (OAA sec. 
101(27))
    (ii) Have physical and mental disabilities; language barriers; and 
cultural, social, or geographical isolation, including isolation caused 
by racial or ethnic status, that restricts the ability of the 
individual to perform normal daily tasks, or threatens the capacity of 
the individual to live independently; or (OAA sec. 101(28))
    (iii) Have poor employment history or prospects; and
    (iv) Are over the age of 60.
    (3) ``Community services provided'' is defined as the number of 
hours of community service provided by SCSEP participants. ``Community 
service'' is defined in the OAA at section 516(1) and in Sec.  641.140.
    (4) ``Placement into unsubsidized public or private employment'' is 
defined by comparing the number of participants placed into 
unsubsidized employment, as defined in Sec.  641.140 to the total 
number of participants. (OAA sec. 513(c)(2)(A)).
    (5) ``Retention in public or private unsubsidized employment'' 
means the number of participants retained in unsubsidized employment, 
as defined in Sec.  641.140, compared to the total number of 
participants. (OAA sec. 513(c)(2)(B)).
    (6) ``Satisfaction of participants'' means the results accumulated 
as the results of surveys of the participant customer group of their 
satisfaction with their experiences and the services provided.
    (7) ``Satisfaction of employers'' means the results accumulated as 
the results of surveys of the employer customer group of their 
satisfaction with their experiences and the services provided.
    (8) ``Satisfaction of host agencies'' means the results accumulated 
as the results of surveys of the host agency customer group of their 
satisfaction with their experiences and the services provided.
    (9) ``Earnings increase'' means the percentage change in earnings 
pre-registration to post-program, and between the first quarter after 
exit and the third quarter after exit.
    (c) The Department will publish administrative issuances that 
elaborate on these definitions and their application.


Sec.  641.715  What are the common performance measures?

    The common performance measures are a Government-wide initiative 
adopted by the Department that apply to employment and job training 
programs. Adoption of these common measures across government will help 
implement the President's Management Agenda for budget and performance 
integration as well as reduce barriers to integrated service delivery 
through the local One-Stop Career Centers. Grantees will be required to 
report on these measures as required under Sec.  641.879. The common 
performance measure indicators are:

[[Page 22554]]

    (a) Entered employment, defined as the percentage employed in the 
first quarter after program exit;
    (b) Retention in employment, defined as the percentage of those 
employed in the first quarter after exit who were still employed in the 
second and third quarter after program exit; and
    (c) Earnings increase defined as the percentage change in earnings 
pre-registration to post program; and between the first quarter after 
exit and the third quarter after exit.


Sec.  641.720  How do the common performance measures affect grantees 
and the OAA performance measures?

    One of the common performance measures, earnings increase, has been 
included as a performance measures under Sec.  641.700 and Sec.  
641.710 under the Secretary's discretionary authority. The two 
additional common performance measures will be used to determine the 
overall success of the program as compared to other programs 
Government-wide. The results will be the basis for making funding 
determinations. The Department will require grantees to collect data 
for the common performance measures as a reporting requirement under 
Sec.  641.879.


Sec.  641.730  How will the Department set and adjust performance 
levels?

    (a) Before the beginning of each Program Year, the Department will 
negotiate and set baseline levels of negotiated performance for each 
measure with each grantee, taking into consideration the need to 
promote continuous improvement in the program overall, past 
performance, and, when applicable, the performance of similar programs.
    (b) The baseline level of negotiated performance for ``placement 
into public or private unsubsidized employment'' is set at 20 percent. 
(OAA sec. 513(a)(2)(C)).
    (c) Grantees may request adjustments from these baseline levels 
before or during the Program Year. Grantees may base such requests only 
on the factors in paragraph (d) of this section. The Department will 
issue guidance for negotiating adjustment requests.
    (d) Adjustments to performance levels may be made based on the 
following conditions only:
    (1) High rates of unemployment, poverty, or welfare recipiency in 
the areas served by a grantee relative to other areas of the State or 
Nation;
    (2) Significant economic downturns in the areas served by the 
grantee or in the national economy; or
    (3) Significantly higher numbers or proportions of participants 
with one or more barriers to employment served by a grantee relative to 
grantees serving other areas of the State or Nation. (OAA sec. 
513(a)(2)(B)).
    (e) Grantees may seek an adjustment to their performance levels, 
based on the factors listed in paragraph (d) of this section, during 
the negotiation process or during the grant period.


Sec.  641.740  How will the Department determine whether a grantee 
fails, meets, or exceeds negotiated levels of performance?

    (a) The Department will evaluate each performance indicator to 
determine the level of success that a grantee has achieved and take the 
aggregate to determine if, on the whole, the grantee met its 
performance objectives. The aggregate is calculated by combining the 
percentage results achieved on each of the individual measures to 
obtain an average score.
    (b) Once the aggregate is determined, if a grantee is unable to 
meet 80 percent of the negotiated level of performance for the 
aggregate of all of the performance measures, that grantee has failed 
to meet its performance measures. Performance in the range of 80 to 100 
percent constitutes meeting the level for the performance measures. 
Performance in excess of 100 percent constitutes exceeding the level 
for the performance measures.
    (c) A national grantee in a State must meet 80 percent of the 
negotiated level of performance for its national measures, and it must 
meet the measures negotiated for the State in which the national 
grantee serves.
    (c) The Department will impose the sanctions outlined in section 
514 of the OAA when a grantee fails to meet overall negotiated levels 
of performance.
    (d) When a grantee fails one or more measures, but does not fail to 
meet its performance measures in the aggregate, the Department will 
provide technical assistance on the particular measures that a grantee 
failed.
    (e) The Department will provide further guidance through 
administrative issuances.


Sec.  641.750  What sanctions will the Department impose if a grantee 
fails to meet negotiated levels of performance?

    (a) Grantees that fail to meet negotiated levels of performance 
will be subject to the sanctions established in section 514 of the OAA. 
The sanctions that apply are grantee specific (i.e., national grantee, 
national grantee in a State, or State grantee). These sanctions range 
from requiring grantees to submit a corrective action plan and receive 
technical assistance, to competition of part of the funds, to a 
competition of all of the funds.
    (b) Grantees that only fail the customer satisfaction performance 
measure, but meet or exceed all other performance measures, will not be 
subject to sanctions. The Department will provide additional 
instructions for how it will measure customer satisfaction.


Sec.  641.760  What sanctions will the Department impose if a national 
grantee fails to meet negotiated levels of performance under the total 
SCSEP grant?

    (a) The Department will annually assess the performance of each 
national grantee no later than 120 days after the end of a Program Year 
to determine if a national grantee has failed to meet its negotiated 
levels of performance. (OAA sec. 514(e)(1)).
    (b) If the Department determines that a national grantee has failed 
to meet its negotiated levels of performance for a Program Year, the 
national grantee must submit a corrective action plan not later than 
160 days after the end of that Program Year. The plan must detail the 
steps the national grantee will take to improve performance. The 
Department will provide technical assistance related to performance 
issue(s). (OAA sec. 514 (e)(2)(A)-(e)(2)(B)).
    (c) If a national grantee fails to meet its negotiated levels of 
performance for a second consecutive Program Year, the Department will 
conduct a national competition to award an amount equal to 25 percent 
of that organization's funds in the following full Program Year. (OAA 
sec. 514(e)(2)(C)). The Department reserves the right to specify the 
locations of the positions that will be subject to competition.
    (d) If a national grantee fails to meet its negotiated levels of 
performance for a third consecutive Program Year, the Department will 
conduct a national competition to award an amount equal to the full 
amount of that organization's remaining grant after deducting the 
amount awarded in paragraph (c) of this section. (OAA sec. 
514(e)(2)(D)).
    (e) To the extent possible, the competitions outlined in paragraphs 
(c) and (d) of this section will be conducted in such a way as to 
minimize the disruption of services to participants. (OAA sec. 
514(e)(2)(C)).
    (f) The organizations selected to receive a grant through the 
national competitions discussed in paragraphs (c) and (d) of this 
section must continue to provide service to the geographic areas 
formerly served by the national grantee(s). (OAA sec. 514(e)(2)(D)).

[[Page 22555]]

Sec.  641.770  What sanctions will the Department impose if a national 
grantee fails to meet negotiated levels of performance in any State it 
serves?

    (a) Each national grantee must be assessed on the performance of 
the projects it operates within any State. Such an assessment may lead 
to a finding that the national grantee has failed to meet negotiated 
levels of performance for its projects in a particular State. A 
national grantee's failure to meet performance measures in a State may 
be mitigated by justifying the failure, such as the size of the project 
or taking into consideration the adjustments permitted under section 
513(a)(2)(B) of the OAA. (OAA sec. 514(e)(3)(A)).
    (b) If the Department determines that there has been a failure to 
meet negotiated levels of performance, the Department will require a 
corrective action plan and may take other appropriate actions, 
including transfer of the responsibility for the project to other 
grantees or providing technical assistance. (OAA sec. 514(e)(3)(B)).
    (c) The Department will take corrective action if there is a second 
consecutive Program Year of failure by a national grantee operating 
within a particular State. Such corrective action may include transfer 
of, or a competition for, all or a portion of the operation of the 
national grantee in the State to another entity. Entities that were the 
subject of this corrective action will not be eligible to receive the 
funds of the transfer or to compete. (OAA sec. 514(e)(3)(C)).
    (d) If there is a third consecutive Program Year of failure, the 
Department will conduct a competition for all of the funds available to 
a national grantee for operations within a particular State. Entities 
that are the subject of this corrective action will not be eligible to 
participate in the competition. (OAA sec. 514(e)(3)(D)).


Sec.  641.780  When will the Department assess the performance of a 
national grantee in a State?

    (a) The Department will assess the performance of a national 
grantee in a State annually.
    (b) The Department may also initiate the assessment of a national 
grantee's performance in a State if:
    (1) The Department receives information indicating that a grantee 
is having difficulty implementing a particular performance indicator; 
or
    (2) The Governor of a State requests the Department to review the 
performance of a particular national grantee serving in the State. (OAA 
sec. 514(e)(4)).


Sec.  641.790  What sanctions will the Department impose if a State 
grantee fails to meet negotiated levels of performance?

    (a) The Department will annually assess the performance of State 
grantees no later than 120 days after the end of a Program Year to 
determine if the State has failed to meet its negotiated levels of 
performance. (OAA sec. 514(f)(1)).
    (b) A State failing to meet its negotiated levels of performance 
must submit a corrective action plan not later than 160 days after the 
end of the Program Year in which the failure occurred. The plan must 
detail the steps the State will take to improve performance. The 
Department will also provide technical assistance. (OAA sec. 514(f)(2) 
and (f)(3)).
    (c) If a State fails to meet its negotiated levels of performance 
after two consecutive years, then the State must conduct a competition 
to award an amount equal to 25 percent of its allotted funds for the 
following year. The Department reserves the right to specify the 
locations of the positions that will be subject to competition.
    (d) In the event that a State fails to meet its negotiated levels 
of performance after three consecutive years, then the State must 
conduct a competition to award an amount equal to 100 percent of its 
allotted funds for the following year.
    (e) Entities that operated any portion of the State's program that 
contributed to the failure will not be eligible to participate in the 
competitions.


Sec.  641.795  Will there be incentives for exceeding performance 
measures?

    Yes, the Department will address non-financial incentives in its 
administrative issuances. The Department is authorized by section 
515(c)(1) of the OAA to use recaptured funds to provide incentive 
grants. The Department will issue administrative guidance detailing how 
incentive grants will be awarded.

Subpart H--Administrative Requirements


Sec.  641.800  What uniform administrative requirements apply to the 
use of SCSEP funds?

    (a) SCSEP recipients and subrecipients must follow the uniform 
administrative requirements and allowable cost requirements that apply 
to their type of organization. (OAA sec. 503(f)(2)).
    (b) Governments. State, local, and Indian tribal government 
organizations that receive SCSEP funds under grants or cooperative 
agreements must follow the common rule ``Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments,'' codified at 29 CFR part 97. The allowable cost 
requirements for governmental recipients and subrecipients are in OMB 
Circular A-87.
    (c) Nonprofit and commercial organizations. Institutions of higher 
education, hospitals, other nonprofit organizations, and commercial 
organizations that receive SCSEP funds under grants or cooperative 
agreements must follow the common rule implementing OMB Circular A-110, 
codified at 29 CFR part 95. The allowable cost requirements for 
recipients and subrecipients subject to 29 CFR part 95 are cited in 29 
CFR 95.27 (Allowable costs).


Sec.  641.803  What is program income?

    Program income, as described in 29 CFR 97.25 (governments) and 29 
CFR 95.2(bb) (nonprofit and commercial organizations), is income earned 
by the recipient or subrecipient during the grant period that is 
directly generated by an allowable activity supported by grant funds or 
earned as a result of the award of grant funds. Program income includes 
income earned from license fees and royalties for copyrighted material, 
patents, patent applications, trademarks, and inventions produced under 
an award. (See 29 CFR 95.24(e) and 29 CFR 97.25(e)). Costs of 
generating SCSEP program income may be deducted from gross income 
received by SCSEP recipients and subrecipients to determine SCSEP 
program income earned or generated provided these costs have not been 
charged to the SCSEP program.


Sec.  641.806  How must SCSEP program income be used?

    (a) SCSEP recipients that earn or generate program income during 
the grant period must add the program income to the Federal and non-
Federal funds committed to the SCSEP program and use it for the 
program, as provided in 29 CFR 95.24(a) or 29 CFR 97.25(g)(2), as 
applicable.
    (b) Recipients that continue to receive a SCSEP grant from the 
Department must spend program income earned or generated from SCSEP 
funded activities after the end of the grant period for SCSEP purposes 
in the Program Year it was received.
    (c) Recipients that do not continue to receive a SCSEP grant from 
the Department must remit program income earned or generated during the 
grant period from SCSEP funded activities to the Department after the 
end of the grant period.

[[Page 22556]]

Sec.  641.809  What non-Federal share (matching) requirements apply to 
the use of SCSEP funds?

    (a) The Department will pay no more than 90 percent of the total 
cost of activities carried out under an SCSEP grant. (OAA sec. 
502(c)(1)).
    (b) All SCSEP recipients, including Federal agencies if there is no 
statutory exemption, must provide or ensure that at least 10 percent of 
the total cost of activities carried out under an SCSEP grant (non-
Federal share of costs) consists of non-Federal funds, except as 
provided in paragraph (e) and (f) of this section.
    (c) Recipients must calculate the non-Federal share of costs in 
accordance with 29 CFR 97.24 for governmental units, or 29 CFR 95.23 
for nonprofit and commercial organizations.
    (d) The non-Federal share of costs may be provided in cash, or in-
kind, or a combination of the two. (OAA sec. 502(c)(2)). If, however, 
recipients plan to obtain the non-Federal share from a subgrantee or 
host agency, they may not require provision of non-Federal resources as 
a condition of such relationship.
    (e) The Department may pay all of the costs of activities carried 
out under section 502(e) of the OAA. (OAA sec. 502(e)).
    (f) The Department may pay all of the costs of activities in an 
emergency or disaster project or a project in an economically 
distressed area. (OAA sec. 502(c)(1)(A) and 502(c)(1)(B)).


Sec.  641.812  What is the period of availability of SCSEP funds?

    (a) Except as provided in proposed Sec.  641.815, recipients must 
expend SCSEP funds during the Program Year for which they are awarded 
(July 1-June 30). (OAA sec. 515(b)).
    (b) SCSEP recipients must ensure that no subagreement provides for 
the expenditure of any SCSEP funds before July 1, or after the end of 
the grant period, except as provided in Sec.  641.815.


Sec.  641.815  May the period of availability be extended?

    SCSEP recipients may request in writing, and the Department may 
grant, an extension of the period during which SCSEP funds may be 
obligated or expended. SCSEP recipients requesting an extension must 
justify that an extension is necessary. (OAA sec. 515(b)). The 
Department will notify recipients in writing of the approval or 
disapproval of any such requests.


Sec.  641.818  What happens to funds that are unexpended at the end of 
the Program Year?

    (a) The Department may recapture any unexpended funds at the end of 
any Program Year and use the recaptured funds during the two succeeding 
Program Years for:
    (1) Incentive grants;
    (2) Technical assistance; or
    (3) Grant and contract awards for any other SCSEP programs and 
activities. (OAA sec. 515(c)).
    (b) The Department will provide the necessary information through 
an administrative issuance.


Sec.  641.821  What audit requirements apply to the use of SCSEP funds?

    (a) Recipients and subrecipients receiving Federal awards of SCSEP 
funds must follow the audit requirements in paragraphs (b) and (c) of 
this section that apply to their type of organization. As used here, 
Federal awards of SCSEP funds include Federal financial assistance and 
Federal cost-reimbursement contracts received directly from the 
Department or indirectly under awards by SCSEP recipients or higher-
tier subrecipients. (OAA sec. 503(f)(2)).
    (b) All governmental and nonprofit organizations that are 
recipients or subrecipients must follow the audit requirements of OMB 
Circular A-133. These requirements are codified at 29 CFR, parts 96 and 
99 and referenced in 29 CFR 97.26 for governmental organizations; and 
in 29 CFR 95.26 for institutions of higher education, hospitals, and 
other nonprofit organizations.
    (c)(1) The Department is responsible for audits of SCSEP recipients 
that are commercial organizations.
    (2) Commercial organizations that are subrecipients under the SCSEP 
program and that expend more than the minimum level specified in OMB 
Circular A-133 ($300,000 as of July 1, 2001) must have either an 
organization-wide audit conducted in accordance with OMB Circular A-133 
or a program-specific financial and compliance audit.


Sec.  641.824  What lobbying requirements apply to the use of SCSEP 
funds?

    SCSEP recipients and subrecipients must comply with the 
restrictions on lobbying codified in the Department's regulations at 29 
CFR part 93. (Also refer to Sec.  641.850(c), ``Lobbying costs.'')


Sec.  641.827  What general nondiscrimination requirements apply to the 
use of SCSEP funds?

    (a) SCSEP recipients, subrecipients, and host agencies are required 
to comply with the nondiscrimination provisions codified in the 
Department's regulations at 29 CFR parts 31 and 32.
    (b) Recipients of SCSEP funds are required to comply with the 
nondiscrimination provisions codified in the Department's regulations 
at 29 CFR part 37 if:
    (1) The recipient operates programs and activities through the One-
Stop Delivery System established under the Workforce Investment Act; or
    (2) The recipient is a State agency that is also a recipient of WIA 
title I financial assistance.


Sec.  641.830  What nondiscrimination protections apply specifically to 
participants in SCSEP programs?

    (a) All participants in SCSEP programs under this Part must have 
such rights as are available under all applicable Federal, State and 
local laws prohibiting discrimination, and their implementing 
regulations, including:
    (1) The Age Discrimination Act of 1975 (42 U.S.C. 6101 et seq.);
    (2) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794);
    (3) The Americans with Disabilities Act of 1990 (42 U.S.C. 12101 et 
seq.); and
    (4) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et 
seq.). (OAA sec. 503(b)(3)).
    (b) Questions about or complaints alleging a violation of the 
nondiscrimination laws in paragraph (a) of this section may be directed 
or mailed to the Director, Civil Rights Center, U.S. Department of 
Labor, Room N-4123, 200 Constitution Avenue, NW., Washington, DC 20210 
for processing. (See Sec.  641.910(d)).


Sec.  641.833  What policies govern political patronage?

    (a) A recipient or subrecipient must not select, reject, promote, 
or terminate an individual based on political services provided by the 
individual or on the individual's political affiliations or beliefs.
    (b) A recipient or subrecipient must not provide funds to any 
subrecipient, host agency or other entity based on political 
affiliation.
    (c) SCSEP recipients must ensure that every entity that receives 
SCSEP funds through the recipient is applying the policies stated in 
paragraphs (a) and (b) of this section.


Sec.  641.836  What policies govern political activities?

    (a) No project under title V of the OAA may involve political 
activities. SCSEP recipients must ensure compliance with the 
requirements and prohibitions involving political

[[Page 22557]]

activities described in paragraphs (b) and (c) of this section.
    (b) State and local employees involved in the administration of 
SCSEP activities may not engage in political activities prohibited 
under the Hatch Act (5 U.S.C. Chapter 15), including:
    (1) Seeking partisan elective office;
    (2) Using official authority or influence for the purpose of 
affecting elections, nominations for office, or fund-raising for 
political purposes. (5 U.S.C. 1502).
    (c) SCSEP recipients must provide all persons associated with SCSEP 
activities with a written explanation of allowable and unallowable 
political activities under the Hatch Act. A notice explaining these 
allowable and unallowable political activities must be posted in every 
workplace in which SCSEP activities are conducted. This notice must be 
approved by the Department of Labor and must contain the address and 
telephone number of the Department of Labor Inspector General. (OAA 
sec. 502(b)(l)(P)).
    (d) SCSEP recipients must ensure that:
    (1) No SCSEP participants or staff persons engage in partisan or 
nonpartisan political activities during hours for which they are being 
paid with SCSEP funds.
    (2) No participants or staff persons engage in partisan political 
activities in which such participants or staff persons represent 
themselves as spokespersons for the SCSEP program.
    (3) No participants are employed or out-stationed in the offices of 
a Member of Congress, a State or local legislator, or on the staff of 
any legislative committee.
    (4) No participants are employed or out-stationed in the immediate 
offices of any elected chief executive officer of a State or unit of 
general government, except that:
    (i) Units of local government may serve as host agencies for 
participants, provided that their assignments are non-political; and
    (ii) While assignments may technically place participants in such 
offices, such assignments actually must be concerned with program and 
service activities and not in any way involved in political functions.
    (5) No participants are assigned to perform political activities in 
the offices of other elected officials. Placement of participants in 
such offices in non-political assignments is permissible, however, 
provided that:
    (i) SCSEP recipients develop safeguards to ensure that participants 
placed in these assignments are not involved in political activities; 
and
    (ii) These safeguards are described in the grant agreement and are 
subject to review and monitoring by the SCSEP recipient and by the 
Department.


Sec.  641.839  What policies govern union organizing activities?

    Recipients must ensure that SCSEP funds are not used in any way to 
assist, promote, or deter union organizing.


Sec.  641.841  What policies govern nepotism?

    (a) SCSEP recipients must ensure that no recipient or subrecipient 
hires, and no host agency serves as a worksite for, a person who works 
in a SCSEP community service position if a member of that person's 
immediate family is engaged in a decision-making capacity (whether 
compensated or not) for that project, subproject, recipient, 
subrecipient or host agency. The Department may exempt this requirement 
from worksites on Native American reservations and in rural areas 
provided that adequate justification can be documented, such as that no 
other persons are eligible and available for participation in the 
program.
    (b) To the extent that an applicable State or local legal 
requirement regarding nepotism is more restrictive than this provision, 
SCSEP recipients must ensure that the more restrictive requirement is 
followed.
    (c) For purposes of this section, ``Immediate family'' means wife, 
husband, son, daughter, mother, father, brother, sister, son-in-law, 
daughter-in-law, mother-in-law, father-in-law, brother-in-law, sister-
in-law, aunt, uncle, niece, nephew, stepparent, stepchild, grandparent, 
or grandchild.


Sec.  641.844  What maintenance of effort requirements apply to the use 
of SCSEP funds?

    (a) Employment of a participant funded under title V of the OAA is 
permissible only in addition to employment that would otherwise be 
funded by the recipient, subrecipient and the host agency without 
assistance under the OAA. (OAA sec. 502(b)(1)(F)).
    (b) Each project funded under title V:
    (1) Must result in an increase in employment opportunities in 
addition to those that would otherwise be available;
    (2) Must not result in the displacement of currently employed 
workers, including partial displacement such as a reduction in hours of 
non-overtime work, wages, or employment benefits;
    (3) Must not impair existing contracts for service or result in the 
substitution of Federal funds for other funds in connection with work 
that would otherwise be performed;
    (4) Must not substitute SCSEP-funded positions for existing 
federally assisted jobs; and
    (5) Must not employ or continue to employ any participant to 
perform work that is the same or substantially the same as that 
performed by any other person who is on layoff. (OAA sec. 
502(b)(1)(G)).


Sec.  641.847  What uniform allowable cost requirements apply to the 
use of SCSEP funds?

    (a) General. Unless specified otherwise in this part or the grant 
agreement, recipients and subrecipients must follow the uniform 
allowable cost requirements that apply to their type of organization. 
For example, a local government subrecipient receiving SCSEP funds from 
a nonprofit organization must use the allowable cost requirements for 
governmental organizations in OMB Circular A-87. The Department 
regulations at 29 CFR 95.27 and 29 CFR 97.22 identify the Federal 
principles for determining allowable costs that each kind of 
organization must follow. The applicable Federal principles for each 
kind of organization are described in paragraphs (b)(1) through (b)(5) 
of this section. (OAA sec. 503(f)(2)).
    (b) Allowable costs/cost principles.
    (1) Allowable costs for State, local, and Indian tribal government 
organizations must be determined under OMB Circular A-87, ``Cost 
Principles for State, Local and Indian Tribal Governments.''
    (2) Allowable costs for nonprofit organizations must be determined 
under OMB Circular A-122, ``Cost Principles for Non-Profit 
Organizations.''
    (3) Allowable costs for institutions of higher education must be 
determined under OMB Circular A-21, ``Cost Principles for Educational 
Institutions.''
    (4) Allowable costs for hospitals must be determined in accordance 
with appendix E of 45 CFR part 74, ``Principles for Determining Costs 
Applicable to Research and Development Under Grants and Contracts with 
Hospitals.''
    (5) Allowable costs for commercial organizations and those 
nonprofit organizations listed in Attachment C to OMB Circular A-122 
must be determined under the provisions of the Federal Acquisition 
Regulation (FAR) at 48 CFR part 31.


Sec.  641.850  Are there other specific allowable and unallowable cost 
requirements for SCSEP?

    (a) Yes, in addition to the generally applicable cost principles in 
Sec.  641.847(b), the cost principles in

[[Page 22558]]

paragraphs (b) through (e) of this section apply to SCSEP grants.
    (b) Claims against the Government. For all types of entities, legal 
expenses for the prosecution of claims against the Federal Government, 
including appeals to an Administrative Law Judge, are unallowable.
    (c) Lobbying costs. In addition to the prohibition contained in 29 
CFR part 93, SCSEP funds must not be used to pay any salaries or 
expenses related to any activity designed to influence legislation or 
appropriations pending before the Congress of the United States or any 
State legislature. (See Sec.  641.824).
    (d) Building repairs and acquisition costs. Except as provided in 
paragraph (e) and as an exception to the allowable cost principles in 
Sec.  641.847(b), no SCSEP funds may be used for the purchase, 
construction, or renovation of any building except for the labor 
involved in:
    (1) Minor remodeling of a public building necessary to make it 
suitable for use for project purposes;
    (2) Minor repair and rehabilitation of publicly used facilities for 
the general benefit of the community; and
    (3) Minor repair and rehabilitation by participants of housing 
occupied by persons with low incomes who are declared eligible for such 
services by authorized local agencies.
    (e) Accessibility and reasonable accommodation. Recipients and 
subrecipients may use SCSEP funds to meet their obligations under 
section 504 of the Rehabilitation Act of 1973, as amended, and the 
Americans with Disabilities Act of 1990 to provide physical and 
programmatic accessibility and reasonable accommodation. (29 U.S.C. 
794).
    (f) Participants' fringe benefit costs. Recipients and 
subrecipients may use SCSEP funds for participant fringe benefit costs 
only under the conditions set forth in Sec.  641.565.


Sec.  641.853  How are costs classified?

    (a) All costs must be classified as ``administrative costs'' or 
``program costs.'' (OAA sec. 502(c)(6)).
    (b) Recipients and subrecipients must assign participants' wage and 
fringe benefit costs and other participant (enrollee) costs, such as 
supportive services, to the ``program cost'' category. (See Sec.  
641.864). When participants are assigned to functions normally 
classified as administrative costs, recipient must charge the 
functions, but not the participants' wages and fringe benefits, to the 
``administrative cost'' category.


Sec.  641.856  What functions and activities constitute costs of 
administration?

    (a) The costs of administration are that allocable portion of 
necessary and reasonable allowable costs of recipients and 
subrecipients that are associated with those specific functions 
identified in paragraph (b) of this section and that are not related to 
the direct provision of programmatic services specified in Sec.  
641.864. These costs may be both personnel and non-personnel and both 
direct and indirect costs.
    (b) The costs of administration are the costs associated with:
    (1) Performing overall general administrative and coordination 
functions, including:
    (i) Accounting, budgeting, financial and cash management functions;
    (ii) Procurement and purchasing functions;
    (iii) Property management functions;
    (iv) Personnel management functions;
    (v) Payroll functions;
    (vi) Coordinating the resolution of findings arising from audits, 
reviews, investigations and incident reports;
    (vii) Audit functions;
    (viii) General legal services functions; and
    (ix) Developing systems and procedures, including information 
systems, required for these administrative functions;
    (2) Oversight and monitoring responsibilities related to 
administrative functions;
    (3) Costs of goods and services used for administrative functions 
of the program, including goods and services such as rental or purchase 
of equipment, utilities, office supplies, postage, and rental and 
maintenance of office space;
    (4) Travel costs incurred for official business in carrying out 
administrative activities or the overall management of the program; and
    (5) Costs of information systems related to administrative 
functions (for example, personnel, procurement, purchasing, property 
management, accounting and payroll systems) including the purchase, 
systems development and operating costs of such systems. (OAA sec. 
502(c)(4)).


Sec.  641.859  What other special rules govern the classification of 
costs as administrative costs or program costs?

    (a) Recipients and subrecipients must comply with the special rules 
for classifying costs as administrative costs or program costs set 
forth in paragraphs (b) through (f) of this section.
    (b) Costs under awards to subrecipients or vendors that are solely 
for the performance of administrative functions are classified as 
administrative costs.
    (c) Personnel and related non-personnel costs of staff who perform 
both administrative functions specified in Sec.  641.856(b) and 
programmatic services or activities must be allocated as administrative 
or program costs to the benefiting cost objectives/categories based on 
documented distributions of actual time worked or other equitable cost 
allocation methods.
    (d) Specific costs charged to an overhead or indirect cost pool 
that can be identified directly as a program cost must be charged as a 
program cost. Documentation of such charges must be maintained.
    (e) Except as provided in paragraph (b) of this section, all costs 
incurred by vendors are program costs. (See 29 CFR 99.210 for a 
discussion of factors differentiating subrecipients from vendors).
    (f) Costs of the following information systems including the 
purchase, systems development and operating (e.g., data entry) costs 
are charged to the ``program cost'' category:
    (1) Tracking or monitoring of participant and performance 
information;
    (2) Employment statistics information, including job listing 
information, job skills information, and demand occupation information; 
and
    (3) Local area performance information.


Sec.  641.861  Must SCSEP recipients provide funding for the 
administrative costs of subrecipients?

    (a) Recipients and subrecipients must obtain funding for 
administrative costs to the extent practicable from non-Federal 
sources. (OAA sec. 502(c)(5)).
    (b) SCSEP recipients must ensure that sufficient funding is 
provided for the administrative activities of subrecipients that 
receive SCSEP funding through the recipient. Each SCSEP recipient must 
describe in its grant application the methodology used to ensure that 
subrecipients receive sufficient funding for their administrative 
activities. (OAA sec. 502(b)(1)(R)).


Sec.  641.864  What functions and activities constitute program costs?

    Program costs include, but are not limited to, the costs of the 
following functions:
    (a) Participant Wages and Fringe Benefits, consisting of wages paid 
and fringe benefits provided to participants for hours of community 
service assignments, as described in Sec.  641.565;
    (b) Outreach, recruitment and selection, intake, orientation, 
assessment, and preparation and updating of IEPs;

[[Page 22559]]

    (c) Participant training provided on the job, in a classroom 
setting, or utilizing other appropriate arrangements, consisting of 
reasonable costs of instructors' salaries, classroom space, training 
supplies, materials, equipment, and tuition;
    (d) Job placement assistance, including job development and job 
search assistance, job fairs, job clubs, and job referrals; and
    (e) Participant supportive services, as described in Sec.  641.573. 
(OAA sec. 502(c)(6)(A)).


Sec.  641.867  What are the limitations on the amount of SCSEP 
administrative costs?

    (a) Except as provided in paragraph (b), no more than 13.5 percent 
of the SCSEP funds received for a Program Year may be used for 
administrative costs.
    (b) The Department may increase the amount available for 
administrative costs to not more than 15 percent, in accordance with 
Sec.  641.870. (OAA sec. 502(c)(3)).


Sec.  641.870  Under what circumstances may the administrative cost 
limitation be increased?

    (a) SCSEP recipients may request that the Department increase the 
amount available for administrative costs. The Department may honor the 
request if:
    (1) The Department determines that it is necessary to carry out the 
project; and
    (2) The recipient demonstrates that:
    (i) Major administrative cost increases are being incurred in 
necessary program components, including liability insurance, payments 
for workers' compensation, costs associated with achieving unsubsidized 
placement goals, and other operation requirements imposed by the 
Department;
    (ii) The number of employment positions in the project or the 
number of minority eligible individuals participating in the project 
will decline if the amount available for paying the cost of 
administration is not increased; or
    (iii) The size of the project is so small that the amount of 
administrative expenses incurred to carry out the project necessarily 
exceeds 13.5 percent of the amount for such project. (OAA sec. 
502(c)(3)).
    (b) A request by a recipient or prospective recipient for an 
increase in the amount available for administrative costs may be 
submitted as part of the grant application or as a separate submission 
at any time after the grant award.


Sec.  641.873  What minimum expenditure levels are required for 
participant wages and fringe benefits?

    (a) Not less than 75 percent of the SCSEP funds provided under a 
grant from the Department must be used to pay for the wages and fringe 
benefits of participants in such projects, including awards made under 
section 502(e) of the OAA. (OAA sec. 502(c)(6)(B)).
    (b) An SCSEP recipient is in compliance with this provision if at 
least 75 percent of the total expenditures of SCSEP funds provided to 
the recipient were for wages and benefits, even if one or more 
subrecipients did not expend at least 75 percent of their SCSEP funds 
for wages and fringe benefits for community service projects.
    (c) Recipients receiving general SCSEP funds and section 502(e) 
funds must meet the 75 percent requirement based on the total of both 
grants.


Sec.  641.876  When will compliance with cost limitations and minimum 
expenditure levels be determined?

    The Department will determine compliance by examining expenditures 
of SCSEP funds. The cost limitations and minimum expenditure level 
requirements must be met at the time all such funds have been expended 
or the period of availability of such funds has expired, whichever 
comes first.


Sec.  641.879  What are the fiscal and performance reporting 
requirements for recipients?

    (a) In accordance with 29 CFR 97.40 or 29 CFR 95.51, as 
appropriate, each SCSEP recipient must submit an SCSEP Quarterly 
Progress Report (QPR) to the Department in electronic format via the 
Internet within 30 days after the end of each quarter of the Program 
Year (PY). The SCSEP recipient must prepare this report to coincide 
with the ending dates for Federal PY quarters. Each SCSEP recipient 
must also submit a final QPR to the Department within 45 days after the 
end of the grant period. If the grant period ends on a date other than 
the last day of a Federal Program Year quarter, the SCSEP recipient 
must submit the final QPR covering the entire grant period no later 
than 45 days after the ending date of the grant. Grantees submitting 
reports that cannot be validated or verified as accurately counting and 
reporting activities in accordance with the reporting instructions may 
be treated as failing to submit reports, which may result in failing 
one of the responsibility tests outlined in proposed Sec.  641.440 and 
section 514(d) of the OAA. The Department will provide instructions, 
including instructions concerning reporting frequency, for the 
preparation of this report. (OAA sec. 503(f)(3)).
    (b) In accordance with 29 CFR 97.41 or 29 CFR 95.52, each SCSEP 
recipient must submit a SCSEP Financial Status Report (FSR) in 
electronic format to the Department via the Internet within 30 days 
after the ending of each quarter of the Program Year. Each SCSEP 
recipient must also submit a final FSR to the Department via the 
Internet within 45 days after the end of the grant period. If the grant 
period ends on a date other than the last day of a Federal PY quarter, 
the SCSEP recipient must submit the final FSR covering the entire grant 
period no later than 45 days after the ending date of the grant. The 
Department will provide instructions for the preparation of this 
report. (OAA sec. 503(f)(3)).
    (1) Financial data is required to be reported on an accrual basis, 
and cumulatively by funding year of appropriation. Financial data may 
also be required on specific program activities.
    (2) If the SCSEP recipient's accounting records are not normally 
kept on the accrual basis of accounting, the SCSEP recipient must 
develop accrual information through an analysis of the documentation on 
hand.
    (c) Each State agency receiving title V funds must annually submit 
an equitable distribution report of SCSEP positions by all recipients 
in the State. The Department will provide instructions for the 
preparation of this report. (OAA sec. 508).
    (d) Each SCSEP recipient that receives section 502(e) funds must 
submit reports on its section 502(e) activities. The Department will 
provide instructions for the preparation of these reports. (OAA sec. 
503(f)(3)).
    (e) Each SCSEP recipient must collect data and submit reports 
regarding the program performance measures and the common performance 
measures. See Sec. Sec.  641.700-641.720. The Department will provide 
instructions detailing these measures and how recipients must prepare 
this report.
    (f) Each SCSEP recipient may be required to collect data and submit 
reports regarding the demographics of program participants. The 
Department will provide instructions detailing these measures and how 
recipients must prepare this report.
    (g) Federal agencies that receive and use SCSEP funds under 
interagency agreements must submit project fiscal and progress reports 
in accordance with this subsection. Federal recipients must maintain 
the necessary records that support required reports according to

[[Page 22560]]

instructions provided by the Department. (OAA sec. 503(f)(3)).
    (h) Recipients may be required to maintain records that contain any 
other information that the Department determines to be appropriate in 
support of any other reports that the Department may require. (OAA sec. 
503(f)(3)).


Sec.  641.881  What are the SCSEP recipient's responsibilities relating 
to awards to subrecipients?

    (a) The SCSEP recipient is responsible for all grant activities, 
including the performance of SCSEP activities by subrecipients, and 
ensuring that subrecipients comply with the OAA and this Part. (See 
also OAA sec. 514 on responsibility tests).
    (b) Recipients must follow their own procedures for allocating 
funds to other entities. The Department will not grant funds to another 
entity on the recipient's behalf.


Sec.  641.884  What are the grant closeout procedures?

    SCSEP recipients must follow the grant closeout procedures at 29 
CFR 97.50 or 29 CFR 95.71, as appropriate. The Department will issue 
supplementary closeout instructions to title V recipients as necessary.

Subpart I--Grievance Procedures and Appeals Process


Sec.  641.900  What appeal process is available to an applicant that 
does not receive a grant?

    [Reserved].


Sec.  641.910  What grievance procedures must grantees make available 
to applicants, employees, and participants?

    (a) Each grantee must establish, and describe in the grant 
agreement, grievance procedures for resolving complaints, other than 
those described by paragraph (d) of this section, arising between the 
grantee, employees of the grantee, subgrantees, and applicants or 
participants.
    (b) The Department will not review final determinations made under 
paragraph (a) of this section, except to determine whether the 
grantee's grievance procedures were followed, and according to 
paragraph (c) of this section.
    (c) Allegations of violations of Federal law, other than those 
described in paragraph (d) of this section, which are not resolved 
within 60 days under the grantee's procedures, may be filed with the 
Chief, Division of Older Worker Programs, Employment and Training 
Administration, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Washington, DC 20210. Allegations determined to be substantial and 
credible will be investigated and addressed.
    (d) Allegations of discrimination must be resolved according to 
complaint processing procedures meeting the requirements of 29 CFR 
37.70 through 37.80 or any other applicable regulation. Questions about 
or complaints alleging discrimination may be directed or mailed to the 
Director, Civil Rights Center, U.S. Department of Labor, Room N-4123, 
200 Constitution Avenue, NW., Washington, DC 20210.


Sec.  641.920  What actions of the Department may a grantee appeal and 
what procedures apply to those appeals?

    (a) Appeals from a final disallowance of costs as a result of an 
audit must be made under 29 CFR 96.63.
    (b) Appeals of suspensions or terminations on the grounds of 
discrimination are processed under 29 CFR parts 31 or 37, as 
appropriate.
    (c) Upon a grantee's receipt of the Department's final 
determination relating to costs (except final disallowance of costs as 
a result of an audit, as described in paragraph (a) of this section), 
payment, suspension or termination, the grantee may appeal the final 
determination to the Department's Office of Administrative Law Judges, 
as follows:
    (1) Within 21 days of receipt of the Department's final 
determination, the grantee may transmit by certified mail, return 
receipt requested, a request for a hearing to the Chief Administrative 
Law Judge, United States Department of Labor, 800 K Street, NW., Room 
400 N, Washington, DC 20001 with a copy to the Department official who 
signed the final determination. The Chief Administrative Law Judge will 
designate an Administrative Law Judge to hear the appeal.
    (2) The request for hearing must be accompanied by a copy of the 
final determination, and must state specifically those issues of the 
determination upon which review is requested. Those provisions of the 
determination not specified for review, or the entire determination 
when no hearing has been requested within the 21 days, are considered 
resolved and not subject to further review.
    (3) The Rules of Practice and Procedures for Administrative 
Hearings Before the Office of Administrative Law Judges, set forth at 
29 CFR part 18, govern the conduct of hearings under this section, 
except that:
    (i) The appeal is not considered as a complaint; and
    (ii) Technical rules of evidence, such as the Federal Rules of 
Evidence and Subpart B of 29 CFR part 18, will not apply to any hearing 
conducted under this section. However, rules designed to assure 
production of the most credible evidence available and to subject 
testimony to test by cross-examination will be applied when they are 
considered reasonably necessary by the Administrative Law Judge 
conducting the hearing. The certified copy of the administrative file 
transmitted to the Administrative Law Judge by the official issuing the 
final determination must be part of the evidentiary record of the case 
and need not be moved into evidence.
    (4) The Administrative Law Judge should render a written decision 
no later than 90 days after the closing of the record.
    (d) The decision of the ALJ constitutes final agency action unless, 
within 20 days of the decision, a party dissatisfied with the ALJ's 
decision, in whole or in part, has filed a petition for review with the 
Administrative Review Board (ARB) (established under Secretary's Order 
No. 2-96), specifically identifying the procedure, fact, law or policy 
to which exception is taken. The Department will deem any exception not 
specifically urged to have been waived. A copy of the petition for 
review must be sent to the opposing party at that time. Thereafter, the 
decision of the ALJ constitutes final agency action unless the ARB, 
within 30 days of the filing of the petition for review, notifies the 
parties that the case has been accepted for review. Any case accepted 
by the ARB must be decided within 180 days of acceptance. If not so 
decided, the decision of the ALJ constitutes final agency action.


Sec.  641.930  Is there an alternative dispute resolution process that 
may be used in place of an OALJ hearing?

    (a) Parties to a complaint that has been filed according to the 
requirements of Sec.  641.920 may choose to waive their rights to an 
administrative hearing before the OALJ. Instead, they may choose to 
transfer the settlement of their dispute to an individual acceptable to 
all parties who will conduct an informal review of the stipulated facts 
and render a decision in accordance with applicable law. A written 
decision must be issued within 60 days after submission of the matter 
for informal review.
    (b) The waiver of the right to request a hearing before the OALJ 
will automatically be revoked if a settlement has not been reached or a 
decision has not been issued within the 60 days provided in paragraph 
(a) of this section.

[[Page 22561]]

    (c) The decision rendered under this informal review process will 
be treated as a final decision of an Administrative Law Judge.

    Signed at Washington, DC this 14th day of April, 2003.
Emily Stover DeRocco,
Assistant Secretary, Employment and Training Administration.
[FR Doc. 03-9579 Filed 4-25-03; 8:45 am]
BILLING CODE 4510-30-P