[Federal Register Volume 69, Number 69 (Friday, April 9, 2004)]
[Rules and Regulations]
[Pages 19014-19072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7282]



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Part II





Department of Labor





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Employment and Training Administration



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20 CFR Part 641



Senior Community Service Employment Program; Final Rule

  Federal Register / Vol. 69, No. 69 / Friday, April 9, 2004 / Rules 
and Regulations  

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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: Final rule.

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SUMMARY: The Employment and Training Administration (ETA) of the 
Department of Labor (the Department) rescinds the regulations for the 
Senior Community Service Employment Program (SCSEP) and issues these 
new regulations to implement the 2000 amendments to title V of the 
Older Americans Act (OAA Amendments) (Pub. L. 106-501). These 
regulations provide administrative and programmatic guidance and 
requirements for the implementation of the SCSEP.
    The Final Rule contains some modifications to the Proposed Rule in 
response to public comments received during the comment period. The 
comments were thoroughly evaluated and are discussed in the Preamble to 
the Final Rule to clarify ETA's interpretation of the OAA Amendments 
through these final regulations and their application to some of the 
challenges that may arise during the OAA Amendments implementation. 
This Final Rule applies to all grantees and local project operators, 
including subgrantees that provide services under the SCSEP.

DATES: Effective dates: This Final Rule is effective May 10, 2004.
    Compliance dates: Affected parties do not have to comply with the 
information and recordkeeping requirements in Sec.  641.879 until the 
Department publishes in the Federal Register the control numbers 
assigned by the Office of Management and Budget (OMB) to these 
information collection requirements. Publication of the control numbers 
notifies the public that OMB has approved these information collection 
requirements under the Paperwork Reduction Act of 1995.

FOR FURTHER INFORMATION CONTACT: Ms. Ria Moore Benedict, Chief, 
Division of Older Worker Programs. Telephone: (202) 693-3198 (this is 
not a toll-free number). E-mail: [email protected]. Toll free to the 
ETA Help Line: 1-877-US2-JOBS. TTY: 1-877-889-5627. Copies of the Final 
Rule are available in the following formats: electronic file on 
computer disk and audio tape. They may be obtained at the above office.

SUPPLEMENTARY INFORMATION: This document is divided into four sections. 
Section I provides general background information. Section II discusses 
the major changes implemented by the Older Americans Act Amendments of 
2000. Section III summarizes and responds to the comments received in 
response to the Notice of Proposed Rulemaking (NPRM) during the comment 
period and provides the Final Rule. Section IV discusses miscellaneous 
administrative requirements, such as Paperwork Reduction Act 
requirements.

I. Background

    The Senior Community Service Employment Program (SCSEP) was 
originally authorized in 1965 by the Economic Opportunity Act (EOA), 
Public Law 89-73. Under the EOA, the Department established the SCSEP 
in 1973. As authorized by title V of the Older Americans Act Amendments 
of 2000 (OAA Amendments or 2000 Amendments) (42 U.S.C. 3056, et. seq.), 
the SCSEP fosters and promotes useful part-time opportunities in 
community service activities for persons with low incomes who are 55 
years of age or older and assists older workers in transitioning to 
unsubsidized employment.
    The OAA Amendments 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 of the Department of Labor 
administers the program by means of grant agreements with eligible 
organizations, such as governmental entities, and public and private 
agencies and organizations.
    The SCSEP regulations were last revised in 1995 (20 CFR part 641, 
60 FR 26574 (May 17, 1995)). The 2000 Amendments are the first major 
legislative changes to the SCSEP since 1995.
    On April 28, 2003, the Department published in the Federal Register 
(68 FR 22520) an NPRM implementing the OAA Amendments and requested 
comments. The comments submitted in response to the NPRM have been 
fully considered in drafting this Final Rule. This document issues the 
Final Rule to conform to the OAA Amendments and to make technical 
changes based on the Department's experience in administering the 
SCSEP.

II. Changes Implemented by the OAA Amendments of 2000

    Congress amended the SCSEP to combine requirements that were 
formerly in the SCSEP legislation as last amended in 1992 by Public Law 
102-375, the accompanying regulations at 60 FR 26574 (May 17, 1995) 
(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 when appropriations 
exceed 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 (Public 
Law 105-220), the SCSEP became a required partner in the workforce 
investment system. As a result, Congress amended the SCSEP to require 
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 (MOU) 
with the Local Workforce Investment Board (Local Board), which details 
the SCSEP's involvement in the One-Stop Delivery System. Further, 
because of the 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, Public Law 102-375 (1992), and section 203 
of the Job Training Partnership Act, Public Law 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 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 Indian and Asian Pacific aging organizations 
before funds are distributed between the State and national SCSEP 
grantees. From the amounts remaining after the reservation, the 
legislation holds grantees harmless

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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 in excess of the Fiscal Year 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. Amounts over $35 million will be 
divided 50 percent to the 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 Final 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.
    Developing the Final Rule was a multi-stage process that included 
the creation of a Proposed Rule and a request for comments. To assist 
in the development of the Proposed Rule, the Department obtained 
viewpoints of the public, including individuals and members of the 
grantee community, on the new SCSEP provisions, as well as existing 
SCSEP provisions, regulations, or policies. 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 take the ideas of interested individuals 
into account.
    During the public comment period for the Proposed Rule, the 
Department received a number of suggestions. The comments were 
thoroughly evaluated and are discussed below to clarify the 
Department's interpretation of the OAA Amendments through this Final 
Rule and to address some of the challenges that may arise during the 
implementation of the OAA Amendments. Every effort was made to 
incorporate these suggestions into the drafting of the Final Rule to 
the greatest extent practicable and consistent with applicable 
statutory requirements. The following discussion presents a section-by-
section summary of the comments and the Department's responses to them. 
For those sections of the NPRM on which we received no comments and on 
which we made no substantive changes, there is no commentary following 
the listing of the section. We also have made some minor editorial 
changes which are not intended to change the meaning of the regulations 
and which are not discussed in the commentary below. WIA's 
authorization expired on September 30, 2003 but continues to operate 
through continuing appropriations. Since WIA may be reauthorized and 
its regulations may change, citations to the WIA regulations may 
change.
    When publishing a Final Rule following a comment period it is 
customary to publish only changes made to the rule. However, in order 
to be more user friendly, we are publishing the entire rule, including 
those parts that have not been changed. This means that you can consult 
one document which contains all of the regulations and commentary, 
rather than needing to compare various documents.

Subpart A--Purpose and Definitions

What Part Does This Cover? (Sec.  641.100)
What Is the SCSEP? (Sec.  641.110)
What Are the Purposes of the SCSEP? (Sec.  641.120)
    This section listed the SCSEP's purpose, including providing 
employment and self-sufficiency for older Americans.
    The Department received numerous comments on this section. Most of 
them requested that the term ``underemployment'' either be added or 
substituted for the term ``unemployment.'' Additionally, another 
comment noted that ``persons `who have poor employment prospects' were 
excluded.'' One commenter simply disliked any references to 
unemployment or underemployment because they indicate a shift in the 
SCSEP program away from community service and toward unsubsidized 
employment. Another commenter echoed this concern and asserted that 
unsubsidized employment is counterproductive to State agencies that 
rely on community service programs for participants in rural areas. One 
commenter supported the statutory language, and requested that this 
definition be cross-referenced in Sec. Sec.  641.400 and 641.500.
    The Department has no authority to expand the statutory SCSEP 
purpose to include underemployed persons. The commenters were correct, 
however, in pointing out that the statutory statement of purpose, in 
section 502(a)(1), does include persons who have poor employment 
prospects. We have revised the rule accordingly. We note, however, that 
having poor employment prospects is not an alternative criterion to 
being unemployed and low income; rather, it is an additional condition. 
Thus, revised Sec.  641.120 tracks the language of section 502(a)(1) of 
the OAA Amendments. Even with the more narrow statutory purpose, the 
number of persons eligible for the program far exceeds the number of 
available positions. (See subpart G).
    As for the comments that indicate a shift away from community 
service towards the unsubsidized goal, the Department recognizes that 
the 2000 Amendments do, in fact, represent a shift in emphasis for the 
SCSEP. In the 2000 Amendments, Congress has significantly increased the 
program's emphasis on placements into unsubsidized employment 
recognizing that more individuals age 55 and over are seeking 
employment opportunities. Rather than viewing this new focus as 
counterproductive, the Department encourages grantees to view the focus

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on unsubsidized employment as a means to assist individuals age 55 and 
over in their pursuit of self-sufficiency. Encouraging unsubsidized 
placements also increases the number of individuals the program is able 
to serve. While this change in emphasis may require some grantees to 
change the way they administer the program, the Department believes 
that ultimately these changes will provide for better service to older 
workers.
What Is the Scope of This Part? (Sec.  641.130)
What Definitions Apply to This Part? (Sec.  641.140)
    This section provided specific or contextual definitions for the 
terms used in this part.
    The Department received numerous comments on this section with 
suggestions on how to better define, amend, or clarify twelve (12) 
definitions. They were the definitions of community service, 
comprehensive One-Stop, equitable distribution report, greatest social 
need, host agency, other participant (enrollee) cost, participant, 
placement into public or private unsubsidized employment, poor 
employment prospects, retention in public or private unsubsidized 
employment, subgrantee, and training services.
    Generally, commenters were concerned about whether community 
service is considered employment. Commenters discussed whether:
     SCSEP mandatory partners need to maintain a 
physical presence at comprehensive One-Stops;
     Equitable distribution reports address 
underserved counties or States;
     The term greatest social need includes isolation 
caused by racial or ethnic status;
     Host agencies can include faith-based 
organizations and SCSEP grantees;
     Other participant (enrollee) costs include costs 
associated with a community service assignment;
     Participants are those who receive only services 
as opposed to services and wages;
     The phrase ``placement into public or private 
unsubsidized employment'' should consider certain wage rates;
     Poor employment prospects includes limited or a 
lack of transportation; whether the phrase ``retention in public or 
private unsubsidized employment'' is calculated more in accord with the 
Workforce Investment Act or the Older Americans Act;
     The definition of subgrantee should include 
technical changes; and
     Training services should be limited to the 
Workforce Investment Act parameters or expanded.
    Regarding the definition of ``Community service,'' the Department 
has decided not to add a statement here on participant employment 
status. The definition indicates the kinds of activities that are 
considered community services and thus, is not the proper place to 
address other issues.
    Regarding the definition of ``Comprehensive One-Stop Center,'' 
because the regulation does not use the term ``Comprehensive One-Stop 
Center,'' the Department agrees that the defined term should be changed 
to ``One-Stop Center.'' Under WIA's program design, One-Stop Centers 
may be organized in a variety of different ways. All One-Stop systems 
must, however, have at least one comprehensive One-Stop Center through 
which all One-Stop partners must provide applicable core services. We 
have revised the definition to read, ``One-Stop Center means the One-
Stop center system in a WIA Local Area that must include a 
comprehensive One-Stop Center through which One-Stop partners provide 
applicable core services and which provides access to other programs 
and services carried out by the One-Stop partners.''
    Additionally, any SCSEP required One-Stop partner need not maintain 
a physical presence at a comprehensive One-Stop Center. Under WIA, all 
required partners must provide WIA core services, use a portion of 
their funds (not inconsistent with Federal law) to help maintain the 
One-Stop Delivery System, enter into the appropriate MOU, and 
participate in the One-Stop system consistent with the MOU. However, 
these services may be made available by the provision of appropriate 
technology, by collocating personnel, through cross-training staff, or 
other arrangements, as described in the MOU. See WIA Final Rule at 20 
CFR 662.200 through 662.310 for the specific partner requirements.
    Regarding the definition of ``Equitable distribution report,'' the 
Department accepts the commenters' suggestion and clarifies that the 
definition applies to underserved counties.
    Regarding the definition of ``Greatest social need,'' the 
Department will retain the definition as it is based on section 101(28) 
of the OAA. As the use of the word ``include'' in the definition makes 
clear, the factors listed in the definition are not exclusive. Grantees 
may use other reasonable factors in determining if an individual meets 
this criterion. The Department realizes that it is difficult to 
quantify ``greatest social need'' as defined for reporting purposes. 
The Department plans to provide further clarification on how to capture 
these individuals through reporting instructions.
    Regarding the definition of ``Host agency,'' the Department agrees 
that, in appropriate circumstances, SCSEP grantees may serve as host 
agencies. SCSEP grantees may be host agencies as long as they meet the 
criteria (i.e., public agency or private non-profit organization exempt 
from taxation under the provisions of section 501(c)(3) of the Internal 
Revenue Code of 1986) already established in the definition. Therefore, 
the Department sees no need to amend the definition to specifically 
include SCSEP grantees as host agencies. Due to the wording in the 
Proposed Rule some commenters were confused about whether faith-based 
organizations could be host agencies. Faith-based organizations may be 
host agencies, as long as the work of the participant does not involve 
the construction, operation, or maintenance of any facility used or to 
be used as a place for religious worship (OAA section 502(b)(1)(C) . 
The regulation has been amended to more closely track the statutory 
language in order to clear up the confusion. Following the phrase 
``political party'' we have added the phrase: ``and projects involving 
the construction, operation, or maintenance of any facility used or to 
be used as a place for sectarian religious instruction or worship.''
    Regarding the definition of ``Other participant (enrollee) cost,'' 
the Department agrees with the comments. The phrase ``or in conjunction 
with a community service assignment'' is added after ``and which may be 
provided on the job'' and the phrase ``the cost of '' is inserted after 
the word ``means.''
    Regarding the definition of ``Participant,'' the Department 
disagrees with those commenters who suggested that a participant should 
be defined as an individual who receives any services. The Department 
believes that an SCSEP participant is an individual who receives 
services as outlined in subpart E. Thus, a participant may only be an 
individual who is enrolled in the program under subpart E (i.e., has 
been assessed and has been assigned to a community service position, 
etc.) and is legally filling an authorized position. This definition is 
consistent with previous regulations and program policy that require an 
individual to be enrolled in a community service position to be 
considered a participant.
    Regarding the definition of ``Placement into public or private 
unsubsidized employment,'' one

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commenter asked for clarification about whether an individual who 
worked 20 days at a certain wage rate that would exceed $5.15 per hour 
for 20 hours per week would be considered an unsubsidized placement. 
The Department emphasizes that such a situation would not be an 
unsubsidized placement. The 2000 Amendments clearly require employment 
for ``30 days within a 90 day period'' to qualify as a placement in 
public or private unsubsidized employment. (OAA section 513(c)(2)(A))
    A commenter also asked whether participants should be able to 
accept private sector employment for less than 20 hours if they are 
economically better off and the hours fit their individual needs. 
Grantees are permitted to place participants in unsubsidized positions 
for less than 20 hours per week. The figure of 20 hours is only used at 
OAA sec. 515(a)(2) for budgeting purposes. The Department will make 
this position clear in the administrative guidance on performance 
measures.
    Regarding the definition of ``Poor employment prospects,'' the 
Department notes that this definition uses the language ``include, but 
are not limited to.'' This means that the list in the definition is not 
exclusive and that grantees may use other relevant factors in 
determining whether an individual meets this criterion. The Department 
will provide further guidance on this issue in performance reporting 
instructions. We see no need to revise the definition to include other 
suggested factors.
    Regarding the definition of ``Retention in public or private 
unsubsidized employment,'' the regulatory definition mirrors the 
statutory definition (OAA section 513(c)(2)(B)). The Department 
interprets this definition to allow for brief periods of inactivity or 
unemployment. The Department will provide further guidance on this 
issue in performance reporting instructions.
    Regarding the definition of ``Subgrantee,'' the Department deletes 
the word ``which'' after the term ``subcontract.''
    Regarding the definition of ``Training services,'' the Department's 
definition reflects those services authorized by section 134(d)(4) of 
the Workforce Investment Act. This WIA definition, however, is very 
broad. The list of services referenced at section 134(d)(4) of the WIA 
is not intended to be exhaustive. Rather, it only enumerates examples 
of authorized training services. Therefore, SCSEP community service 
assignments and those available through work experience at host 
agencies, are included in the definition and as discussed in subpart E.
    The Department also received several suggestions to add definitions 
of certain terms. These terms included Disability, Dual eligibility, 
Residence, Pre-registration (as it appears in Sec.  641.710(9)), 
Permissible information collection methods, and Part-time.
    The Department agrees that it is appropriate to add some 
definitions that were not included in the Proposed Rule. Consequently, 
we have added certain definitions in the Final Rule, namely Co-
enrollment, Disability, and Residence.
    The term ``Disability'' is defined at section 101(8) of the OAA as 
follows: a disability attributable to mental or physical impairment, or 
a combination of mental and physical impairments, that results in 
substantial functional limitations in one or more of the following 
areas of major life activity: (A) Self-care, (B) receptive and 
expressive language, (C) learning, (D) mobility, (E) self-direction, 
(F) capacity for independent living, (G) economic self-sufficiency, (H) 
cognitive functioning, and (I) emotional adjustment.
    The Department has decided not to define Dual eligibility. However, 
we have added a roughly synonymous term, Co-enrollment. Co-enrollment 
applies to any individual who meets the qualifications for SCSEP 
participation as well as the qualifications for any other relevant 
program as defined in the Individual Employment Plan. The Department 
will provide guidance on reporting for dual enrolled participants in 
performance reporting instructions.
    As used in Sec.  641.710(b)(9), the term ``Pre-registration,'' is 
intended to refer to the value of a participant's earnings before his/
her enrollment in the SCSEP. We did not add this definition to the 
Final Rule because the subject will be covered in performance reporting 
instructions.
    The Department has decided not to define Part-time in this rule; 
however, grantees should note that ``Part-time'' is defined at section 
515(a)(2) of the OAA as a work week of at least 20 hours. We suggest 
that grantees use this statutory definition for budgeting purposes when 
assigning individuals to community service, which is consistent with 
its use in the statute.
    We decided not to include a definition of the term ``Permissible 
information collection methods'' in the Final Rule because the 
Department will provide guidance through performance reporting 
instructions.
    The term ``Residence'' is defined as an individual's declared 
dwelling place or address, as demonstrated by appropriate 
documentation. No requirement for length of residence prior to 
enrollment is imposed. (See also subpart E, Sec.  641.500 and 
discussion of State agreements pertaining to ``cross-border 
registrations.'')

Subpart B--Coordination With the Workforce Investment Act

What Is the Relationship Between the SCSEP and WIA? (Sec.  641.200)
    This section specified that SCSEP grantees are required to follow 
all applicable rules under WIA and its regulations and must ensure that 
they are familiar with the WIA statutory and regulatory provisions, 
especially WIA section 121(b)(1)(B)(vi) (29 U.S.C. 2841(b)(1)(B)(vi) 
and 29 CFR part 662 subpart B (Sec. Sec.  662.200 through 662.280). The 
WIA operational requirements generally do not apply to SCSEP 
operations. As required partners under WIA, grantees are obligated to 
be familiar with the WIA requirements when they are acting as a WIA/
One-Stop partner.
    Several commenters stated that One-Stop Centers are not equipped 
for or interested in meeting the needs of older job seekers, 
particularly those 60 and over. For example, a commenter noted that 
One-Stop Centers are not equipped to address issues such as care 
giving, medication needs, and other health issues often faced by older 
adults. Commenters noted that older individuals often seek part-time 
employment, which would negatively affect One-Stop performance 
measures. One commenter noted the differences between the SCSEP and WIA 
programs, stating that the SCSEP requires a close working relationship 
with the individual, while WIA relies more on the initiative of the job 
seeker. Similarly, a commenter stated that Area Agencies on Aging 
operate on a more encompassing philosophy that meets all the needs of 
the person. Another commenter stated that the title V program must 
maintain individuality in order to best serve older workers and should 
be a part of a focused network of social and community support. One 
commenter noted the importance of educating Local Boards to the needs 
of older populations.
    A few commenters discussed reciprocity between the SCSEP and WIA, 
asking that the Department make WIA aware of the provisions of the 
SCSEP. One commenter specifically discussed the eligibility reciprocity 
between the two programs, noting that the workers in the Dislocated 
Worker Program were not eligible for the SCSEP because of the six-month 
and 12-month

[[Page 19018]]

look back periods for determining income eligibility. Another requested 
that a mechanism be developed to resolve conflicts between the SCSEP 
and WIA regulations. One commenter noted that this section does not 
properly distinguish the SCSEP mission and participants from those of 
WIA and urged the Department to specify which WIA rules apply to the 
SCSEP. Two commenters stated that the expectation of familiarity with 
WIA statutory and regulatory requirements is excessive.
    One commenter suggested that we specify that a One-Stop's failure 
to negotiate MOUs must be presented to the Department for appropriate 
action. Another stated that a title V grantee has no authority to 
require cooperation of the One-Stop system to provide appropriate 
services, to serve the title V priority groups, or to work with 
community service programs. The commenter argued that title V cannot be 
held accountable if the One-Stop system fails to meet expectations for 
older workers.
    The SCSEP is a required WIA partner, as provided in 20 CFR 662.200 
of the WIA regulations. Partner coordination requirements for One-Stops 
are articulated at 20 CFR 662.310(b)-(c) of the WIA regulations. The 
Department acknowledges that there have been substantial differences in 
the degree to which such partnerships have been established in the 
past, and is actively exploring strategies to have One-Stops form more 
inclusive relationships with SCSEP grantees. Failure to coordinate with 
One-Stops may lead to a finding of ineligibility (OAA section 
514(c)(5)). Other consequences for failure to coordinate are 
established at 20 CFR 662.310(b)-(c).
    The comments appear to reflect a concern that the coordination 
requirements of the 2000 Amendments will have the effect of diluting or 
undercutting the focus and mission of the SCSEP. The Department does 
not believe this is true and does not intend the regulations to convey 
this message. WIA envisions a coordinated workforce development system 
in which a variety of programs work more closely together to make 
access to workforce development services easier and more efficient. WIA 
includes as required partners a number of programs that serve special 
populations and is very careful to assure that program boundaries are 
respected. The Department intends that these regulations will enable 
grantees and subgrantees to concentrate better on the core missions of 
the SCSEP, providing community service assignments and unsubsidized 
placements to hard to serve older individuals. The Department intends 
that the One-Stop system be used to provide services both to older 
individuals who are not eligible for the SCSEP and to those who are 
eligible but need the intensive services that the SCSEP is unable to 
provide. The kinds of partnerships that the regulations envision will 
enable SCSEP grantees and subgrantees to focus more of their efforts on 
the core population that the SCSEP is intended to serve.
    As discussed in more detail elsewhere, nothing in WIA or the OAA 
precludes grantees from negotiating MOUs that recognize and use their 
expertise in serving older workers as part of the One-Stop system. 
Thus, grantees are encouraged to negotiate such arrangements in their 
MOU with the One-Stops so that it counts toward their contribution to 
the One-Stop.
    Required partnerships with the One-Stop Delivery System do not 
preclude voluntary relationships with other partners such as Area 
Agencies on Aging. The Department actively encourages such additional 
partnerships.
    The Department does not think that the requirement that SCSEP 
grantees follow applicable WIA rules is excessive. In order to 
effectively play their role as required partners and participants in 
the One-Stop system, SCSEP grantees will have to operate under those 
WIA rules which apply to those WIA partners and to the operation of the 
One-Stops. In order to be able to fully use the WIA system as a source 
for additional services, grantees will have to know how the system 
works. The comments appear to reflect a desire for a more productive 
relationship between the SCSEP and WIA and a desire to make the WIA 
system more responsive to the needs of older workers. The Department 
believes that this goal can best be accomplished if SCSEP grantees 
become knowledgeable about how the WIA system operates.
    There were several funding-related comments. Some questioned 
whether SCSEP funds could be used to support One-Stop operations. One 
commenter stated that the SCSEP should provide for essential 
contributions to WIA, suggesting that the Department make SCSEP funds 
specifically available for WIA through the regular funding process or 
allow the match that grantees provide to be used to support WIA 
activities.
    SCSEP grantees are required One-Stop partners and therefore have 
certain responsibilities as One-Stop Partners. As explained in the WIA 
regulations, at 29 CFR 662.230, SCSEP grantees must assist in creating 
and maintaining the One-Stop Delivery System. This requires negotiating 
financial arrangements, including in-kind contributions when possible, 
in the MOU with their WIA Local Board. Because coordination with the 
WIA system is an SCSEP requirement, grantees are authorized to use 
grant funds for that purpose. However, grantees also may use their non-
Federal resources or cash to support WIA activities as well as a 
portion of their grant funds. The WIA regulations, at 29 CFR 662.230, 
explain these and other responsibilities of required One-Stop partners. 
The extent to which grant funds or in-kind contributions are needed to 
fund the SCSEP partner's share of One-Stop support will depend on the 
MOU and the services that each party provides in the One-Stop setting. 
With regard to the development of MOUs, the Department will follow the 
larger WIA system which makes the development of MOUs a local decision.
    One commenter requested that the Department specify that title V 
host agencies do not need to be co-located to meet the definition of a 
One-Stop partner.
    There is no requirement that grantees, subgrantees or host agencies 
be co-located in the One-Stop. That is a matter to be negotiated in the 
MOU, although the Department believes it is a good practice. SCSEP 
grantees are required to do no more and no less than other required 
One-Stop partners. Section 134(c) of WIA requires that core services be 
provided, at a minimum, at one comprehensive physical One-Stop Center. 
The WIA regulations at Sec.  662.250 require that core services 
applicable to a partner's program must be made available by each 
partner at that comprehensive One-Stop Center. As explained in the 
Preamble to the WIA regulations, at 65 FR 49309 (August 11, 2000), in 
order to avoid duplication of services traditionally provided under the 
Wagner-Peyser Act, this requirement is limited to those applicable core 
services that are in addition to the basic labor exchange services 
traditionally provided in the local area under the Wagner-Peyser 
program. Furthermore, 29 CFR 662.250(c) also provides significant 
flexibility about how the core services are made available at the One-
Stop Center by allowing for services to be provided through appropriate 
technology at the center, through co-location of personnel, cross-
training of staff, or through contractual or other arrangements between 
the partner and the service providers at the center.

[[Page 19019]]

What Services, in Addition to the Applicable Core Services, Must SCSEP 
Grantees Provide Through the One-Stop Delivery System? (Sec.  641.210)
    Section 641.210 provided that SCSEP grantees must provide their 
participants, eligible individuals the grantees are unable to serve, 
and other SCSEP ineligible individuals, with access to services, 
activities, and programs carried out by other One-Stop partners.
    Several commenters stated that it is not practical to make such 
arrangements because One-Stop services are not accessible for all 
individuals in all locations, particularly those in rural areas. 
Another commenter asked that the Department clarify to what extent such 
arrangements need to be made. One commenter asked that the language be 
changed to state ``a referral to access other activities and programs * 
* *.'' Another commenter argued that the Department should promote 
coordination between the SCSEP and local community-based and faith-
based organizations, not only with the One-Stop Centers.
    The Department acknowledges that rural locations may present 
particular challenges and encourages coordination with other 
organizations in addition to One-Stops that may be more accessible and/
or appropriate. Coordination with One-Stops is essential to ensuring a 
seamless, comprehensive workforce development system that identifies 
the service options available to individuals and takes the critical 
next step of facilitating access to these services.
    This provision is simply a reminder of a basic premise of the WIA 
One-Stop system: the broadening of customers' access to a wide variety 
of services. The regulation implements the ``no wrong door'' approach 
of the One-Stop system by reminding grantees and subgrantees that they 
must be part of the One-Stop system and must participate in providing 
access to the other services that the One-Stop partners offer. The 
regulation requires that grantees make arrangements to provide 
``access'' to services; it does not require that the person referred be 
able in every case to use the services. To make it clear that the 
regulation imposes no more than the obligation to be a part of the One-
Stop system and to participate in its efforts to make services more 
widely accessible to customers, we have added the words ``through the 
One-Stop Delivery System'' to the regulation. Of course, the regulation 
does not preclude grantees and subgrantees from establishing other 
partnerships, which will help eligible and ineligible individuals 
access needed services.
    Two commenters questioned the manner in which entities receive 
credit for job placement services. One suggested that referrals be 
tracked so agencies may receive appropriate recognition.
    The allocation of placement credit will be addressed in 
administrative guidance as the performance accountability system is 
further refined.
    One commenter recommended that title V programs be encouraged to 
offer core services through the One-Stop.
    SCSEP grantees are free to negotiate the services to be provided by 
and through the One-Stop Delivery System in their MOU, as described at 
29 CFR 662.300 of the WIA regulations. The Department agrees that 
grantees are required to offer core services applicable to SCSEP 
through the One-Stop; but grantees also may decide whether to offer 
core services in other ways. As to other services, grantees must decide 
which of the One-Stop's services to use and how to use them. The 
Department believes that the One-Stop system can provide additional 
services not otherwise available to the SCSEP because of funding 
constraints and agrees that grantees should be encouraged to make use 
of the One-Stop system and other available sources of services.
Does Title I of WIA Require the 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)
    Section 641.220 provided that grantees should refer individuals who 
are ineligible for the SCSEP to the One-Stop system and to the WIA 
partner programs for services, as agreed to in the MOU.
    Several commenters addressed perceived problems associated with the 
inability of title V to provide funds for ineligible individuals. One 
commenter noted that WIA does not provide services for older workers 
and that only limited WIA funds are available. The commenter also 
stated that the section does not address how ineligible individuals 
will receive services from WIA, if the SCSEP cannot use its resources 
as a full partner. Another commenter recommended that all grantees 
operating in a One-Stop share the responsibility of meeting core 
services, as well as providing for any cash contribution to the One-
Stop system. Another commenter asked whether SCSEP funds will be 
allocated for the cost of providing ineligible individuals with access 
to other activities and programs.
    Title V resources may only be used to provide title V services to 
title V-eligible individuals. Although not considered a ``service,'' 
title V resources may also be used to determine if an individual is 
eligible to participate in the SCSEP program and to a limited extent, 
to provide the individual with referrals or access to other services. 
Such expenditures are considered allowable costs. SCSEP grantees are 
responsible for negotiating services to be provided by the One Stop 
Delivery System to both SCSEP-eligible and SCSEP-ineligible individuals 
in their MOU, as described at 20 CFR 662.300 of the WIA regulations. 
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.
    One commenter recommended that the SCSEP serve all older job 
seekers, stating that many Area Agencies on Aging have established the 
necessary local infrastructure to place SCSEP-ineligible older job 
seekers in unsubsidized jobs.
    The regulation is not intended to govern any services that Area 
Agencies on Aging or similar multi-function groups may provide other 
than SCSEP-funded activities. Area Agencies on Aging remain free to 
provide other services to the elderly and to refer SCSEP-ineligible 
individuals to those services. It would be most beneficial to these 
agencies and to the One-Stop system if this referral system were 
included in the MOU.
    Some commenters suggested that the Department clarify that SCSEP 
participants assigned to work in a One-Stop are not prohibited from 
serving non-SCSEP eligible individuals who are seeking appropriate One-
Stop services.
    Naturally, SCSEP participants assigned to work in a One-Stop are 
allowed to serve non-SCSEP eligible individuals who are seeking 
appropriate One-Stop services. In such an instance, the One-Stop simply 
acts as a host agency and the participants simply provide the services 
ordinarily provided by the host agency.

[[Page 19020]]

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? (Sec.  641.230)
    This section required that an assessment or Individual Employment 
Plan (IEP) completed by the SCSEP satisfies any condition for an 
assessment, service strategy, or IEP completed at the One-Stop and 
vice-versa (OAA sec. 502(b)(4)(A)). These reciprocal arrangements and 
contents of the SCSEP IEP and WIA IEP should be negotiated in the MOU.
    One commenter suggested that the section state that both entities 
must coordinate on the IEP, not that one must be accepted by the other 
entity. Another commenter recommended that the Department clarify that 
we expect One-Stop operators to accept SCSEP IEPs and SCSEP grantees to 
accept One-Stop-originated IEPs.
    Under section 502(b)(4) of the OAA and Sec.  641.230 of the SCSEP 
regulations, SCSEP assessments and service strategies satisfy any 
condition for an assessment and service strategy or IEP for an adult 
participant under title IB of WIA, in order to determine whether such 
individual qualifies for intensive or training services. Similarly, WIA 
assessments must be accepted by SCSEP grantees. As noted in the 
Preamble to the SCSEP Proposed Rule, as a practical matter, this means 
that the SCSEP IEP and the 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. For a more in-depth discussion of this issue, see the 
Preamble to the proposed SCSEP regulations at 65 FR 22522 (April 28, 
2003).
Are SCSEP Participants Eligible for Intensive and Training Services 
Under Title I of WIA? (Sec.  641.240)
    Section 641.240 provided that, although SCSEP participants are not 
automatically eligible for intensive and training services under title 
I of WIA, Local Boards may deem them as satisfying the requirements for 
receiving adult intensive and training services under title I of WIA. 
It also provided that an SCSEP assessment and IEP qualify as an 
intensive service under WIA and that SCSEP participants seeking 
unsubsidized employment may require training to meet their objective 
and may obtain such training through the SCSEP, the WIA program or a 
WIA partner, as negotiated in the MOU. Finally, the regulation provided 
that an SCSEP community service assignment is analogous to work 
experience assignments under WIA. The Preamble to the NPRM suggested 
that SCSEP stipends should not be considered income for WIA income 
eligibility purposes.
    A few commenters recommended that a reciprocal arrangement be 
established between the SCSEP and title I of WIA. The commenters 
suggested that SCSEP-eligible participants who receive intensive and 
training services under title I of WIA, who are placed in unsubsidized 
employment, be counted as placements by the SCSEP.
    The Department agrees that reciprocal arrangements for determining 
eligibility, as well as for establishing how services to older workers 
will be provided, is a good idea and encourages grantees and 
subgrantees to negotiate such arrangements in their MOUs. The 
Department is aware that there have been problems in some areas in 
providing services to older workers and recommends that grantees and 
subgrantees use the negotiation of MOUs to address those problems, 
either by negotiating for additional services through the One-Stop or 
by negotiating a greater role in providing services to older workers as 
a One-Stop partner.
    Two commenters suggested that WIA performance measures be modified 
to address the special needs of older workers. Another commenter stated 
that the Department wrongly assumes that greater coordination with WIA 
One-Stop Centers will result in SCSEP participants being deemed 
eligible for service and having access to a broad range of intensive 
and training opportunities because of performance measures 
disincentives under WIA. We cannot address WIA performance measures in 
this rule, but the Department is aware of these concerns and is 
reviewing this issue.
    One commenter stated that it is unreasonable that most low-income 
older job seekers with poor employment prospects are not automatically 
eligible for WIA intensive and training services.
    The Department is constrained by the language of the statute, which 
provides that SCSEP participants ``may be deemed'' eligible for WIA 
title I services. This is a change from the prior version of the 
statute, which required that SCSEP participants be deemed eligible. 
This change gives the discretion to the Local Board and emphasizes the 
importance of negotiating the MOU with the Local Board.
    One commenter recommended that the Department clarify that title V 
funds can be used to pay wages during participant training. Another 
noted that wages paid to participants are included in their initial 
income if they later seek to enroll in WIA. The commenter argued that 
this makes it more difficult for WIA to meet performance goals.
    The Department agrees that title V funds can be used to pay wages 
to SCSEP participants receiving intensive and training services under 
title I of WIA, provided that SCSEP participants are assigned to a 
community service assignment. The Department has amended Sec.  641.240 
accordingly. Training may be provided as part of the community service 
assignment or in addition to a community service assignment. A 
participant need not be performing the community service assignment 
when the training is provided, i.e., the training may occur before the 
participant begins the community service assignment or the participant 
may take the training while assigned to a community service assignment. 
The Department's intent is to assure that SCSEP funds spent for 
participant training are spent on those participants who most need the 
services available through the SCSEP.
    Finally, because the OAA statute only provides authority for 
regulations governing the SCSEP program, these regulations cannot speak 
to whether SCSEP community service wages will be considered income for 
eligibility purposes in other programs. The Department will only 
address income in Sec.  641.507.

Subpart C--The State Senior Employment Services Coordination Plan

    This entire subpart represents a change from the current 
regulations, as the 2000 Amendments established a new, more thorough 
planning process for the SCSEP in each State.
What Is the State Plan? (Sec.  641.300)
Who Is Responsible for Developing and Submitting the State Plan? (Sec.  
641.305)
    In Sec. Sec.  641.300 and 641.305, the Department reiterated the 
statutory requirement that the Governor is responsible for developing 
and submitting a State Plan to the Department.
    One commenter noted that there is no discussion on what will happen 
to the Governor's recommendations and expressed particular concern that 
the

[[Page 19021]]

distribution of slots be balanced so as not to disadvantage rural 
areas. Another commenter asked who will be responsible for developing 
the State Plan and whether a forum or other method of development will 
be specified.
    The concerns about review of the Governor's recommendations and 
allocation of slots are addressed in the 2000 Amendments, at section 
503(a)(7), which notes that ``each State shall make available for 
public comment its senior employment services coordination plan'' and 
that the Secretary may review ``the distribution of projects and 
services * * * including the distribution between urban and rural areas 
within the State.''
    The State Plan is to be developed by the Governor or his/her 
designee, in consultation with national grantees, State and Local 
Workforce Investment Boards, and the State and Area Agencies on Aging, 
as specified in Sec.  641.315 and in the 2000 Amendments, at section 
503(a)(2), in a manner specified by the Governor. The Department is not 
inclined to set rules to constrain the Governor's discretion in setting 
the procedures for this consultation. The Department may provide 
guidelines for the planning process in an administrative issuance. As 
noted in Sec.  641.300, the purpose of the State Plan is to encourage 
coordination among SCSEP grantees and assist stakeholders to work 
together in furtherance of the SCSEP program's goals.
May the Governor Delegate Responsibility for Developing and Submitting 
the State Plan? (Sec.  641.310)
    Section 641.310 specified that the Governor may delegate 
preparation of the State Plan and also described how this will be done. 
A commenter thought that the Department should define the time period 
during which the Governor should submit a signed statement indicating 
who will submit the State Plan on the Governor's behalf.
    The Department will be issuing instructions about State Plans, 
which will address their administrative requirements, including time 
frames. Any State Plan submitted by a designee for whom a signed 
designation statement has not previously or simultaneously been 
submitted will be considered a non-submission.
Who Participates in Developing the State Plan? (Sec.  641.315)
    Section 641.315 listed the parties from whom the Governor must seek 
advice on the State Plan. One commenter stated that national grantees 
should be required to designate a person to participate in the planning 
process of each State where they have slots, while another commenter 
suggested that the Department include all One-Stop partners in 
developing the State Plan to foster collaboration once the State Plan 
is implemented.
    It is not clear whether the first commenter is suggesting that each 
national grantee designate one person to participate in the planning 
efforts of all States where that national grantee operates an SCSEP 
project or designate one particular person to participate in each 
State's planning process. However, without describing the individual 
who will take this role, section 503(a)(2)(B) of the 2000 Amendments 
requires ``each grantee operating * * * in the State'' to be consulted 
as part of the planning process. Section 641.320 addresses the 
importance of national grantee participation in the planning process, 
and the Department anticipates that grantees will honor both the letter 
and the spirit of the law with respect to collaboration. The precise 
details of how each national grantee will fulfill this role are best 
left to the national grantee and the Governor involved.
    One-Stop partners are included in the planning process through the 
required consultation with the State and Local Workforce Investment 
Boards (also known simply as State and Local Boards), which operate 
under the WIA. To make this relationship clearer, Sec.  641.315(a)(2) 
has been amended to read ``State and Local Boards under the Workforce 
Investment Act (WIA)'' to make this relationship clear.
    Although the Department wishes to allow Governors wide latitude in 
designing the State's planning process, the Department agrees that the 
Governor must provide a reasonable time for consultation and comments.
Must All National Grantees Operating Within a State Participate in the 
State Planning Process? (Sec.  641.320)
    Section 641.320 required all national grantees (except for those 
serving older American Indians) to participate in the planning process. 
One commenter commended this requirement, while another outlined how 
her agency would implement it. Two commenters addressed whether the 
participants need be physically present for these discussions, rather 
than communicate by correspondence or phone, and another commenter 
recommended that the Department require each Governor to provide 
``sufficient written notice of the state planning process to all 
national grantees operating in the state.''
    Each Governor is responsible for setting the parameters of the 
planning process for his or her State, including time frames and 
methods of consultation. Nothing in the law or regulations states, 
however, that participants in this process must be physically present 
for these discussions.
    As noted in the Preamble to the Proposed Rule, the Department 
believes that a coordinated planning process will benefit national 
grantees both in terms of the services they provide to older workers 
and in terms of the grantees' continuing eligibility to provide those 
services. Although the statute does not require grantees serving older 
American Indians to participate in the planning process, they are 
encouraged to do so. (See also Sec.  641.315.)
What Information Must Be Provided in the State Plan? (Sec.  641.325)
    Section 641.325 detailed the information that must be contained in 
the State Plan. Most of the commenters felt that the proposed 
requirements ``entail a huge data collection effort and a significant 
administrative burden for SCSEP grantees' and requested that these 
requirements be simplified. Most of these commenters argued that the 
resources needed to collect this information would negatively impact 
their ability to provide services the to SCSEP participants.
    Section 641.325 listed the minimum requirements of the State Plan 
consistent with section 503(a)(4) of the 2000 Amendments. This 
information includes data on the number and distribution of eligible 
individuals, as well as their employment situations and the locations 
and populations for which community service projects are needed. The 
State Plan also is to define how the activities of SCSEP grantees will 
be coordinated and how and when the planning process will proceed. 
Finally, the State Plan is to explain how disruptions to participants 
will be avoided.
    Depending on the amount of information already available for 
preparation of the respective State Plans, some grantees may be asked 
to supply some of the data required by the statute. While such data 
collection may prove to be challenging, it will benefit the program as 
a whole through more equitable distribution of slots and greater 
coordination among the various parties providing services to older 
workers. The Department believes that most of the data required for the 
State Plan are available from generally available data sources, e.g., 
census data. We anticipate that, to the extent the Governor will seek 
data from national grantees, the grantees will primarily be required to 
provide data on their actual

[[Page 19022]]

activities: Data that the grantees already possess and/or report.
How Should the State Plan Reflect Community Service Needs? (Sec.  
641.330)
    Section 641.330 described the requirements of the State Plans with 
respect to community services: What services are needed, and where they 
are most needed.
    Some commenters thought the State Plan should reflect community 
service needs only in a very general way because specific needs often 
change and thus are best determined locally. The commenters pointed out 
that the SCSEP requires that community service opportunities be 
developed based upon participants' Individual Employment Plans, and the 
training and employment needs of the participants should come first. 
These commenters also noted that there is no established, uniform 
process for identifying and collecting information on community service 
needs, and they believe such effort would require substantial work and 
diminish staff time needed to implement the program. They also believe 
the law does not require collection of information on community service 
needs, but only the documentation of the locations and populations for 
which community service projects are most needed. Other commenters 
stated that local entities such as subgrantees are in a better position 
than the Governor to determine local needs.
    The Department agrees that the needs of the participants must be 
fully considered in developing community service opportunities, and the 
inclusion of these factors in the State Plan is addressed in section 
503(a)(4)(D). However, the OAA also specifically calls for 
identification of community service needs, as described in section 
503(a)(4)(E). The Department anticipates that the State Plans will 
reflect a balance between these complementary factors. Identification 
of community service needs ultimately helps individual older workers 
target the specific skills needed for employment in their particular 
communities, thus affording them greater employability in the future.
    With respect to the documentation issue, the Department does not 
believe that a separate data-collection effort will be necessary to 
obtain information about community service needs. As part of the 
application process, each national grantee will have identified these 
needs in the areas to be served and, through administering services, 
this information will be refined and modified over time. Also, given 
the variety of organizations involved in the SCSEP program, including 
State and Local Boards and Area Agencies on Aging as well as grantees 
and subgrantees, information should be available from a variety of 
sources. For example, national grantees will be able to use the 
experience of local subgrantees with respect to local needs as the 
grantees formulate their contributions to the State Plans. The 
Department believes that this kind of collaboration will lead to a 
better program, one that can address the specific needs of each State 
and locality.
How Should the Governor Address the Coordination of SCSEP Services With 
Activities Funded Under Title I of WIA? (Sec.  641.335)
    Section 641.335 addressed the ways in which the Governor, the 
SCSEP, and WIA must work together. One commenter noted that 
collaborative efforts would foster best practices. Another suggested 
that obtaining this information may be difficult in States that have 
numerous national sponsors.
    The Governor is responsible for consulting each national grantee 
that operates in the State, and all national grantees except those 
serving older American Indians are required to participate in this 
process. Such consultation is necessary to administer an effective 
program, provide services that are most needed and of the best possible 
quality, and avoid duplication of services. Moreover, the OAA 
Amendments, at section 503(a)(2), require the Governor to obtain advice 
and recommendations from a variety of parties, including the Area 
Agencies on Aging, in developing the State Plan. While obtaining 
information on coordination may be a bit more complicated where there 
are several national grantees in a State, we believe that if the 
Governor has set up a good consultation process, obtaining the 
information should not be difficult.
Must the Governor Submit a State Plan Each Year? (Sec.  641.340)
    Proposed Sec.  641.340 provided that the Governor need not submit a 
full Plan each year. However, at a minimum, the Governor must seek 
advice and recommendations about any needed changes from the 
individuals and organizations identified both at OAA Amendments section 
503(a)(2) and Sec.  641.315. The Governor must then publish the changes 
for comment and submit a Plan modification to the Department.
    Two commenters agreed with this interpretation of the statute, 
stating that it allows the Governor to consult with interested parties 
and annually update the Plan as needed, and at the same time provides 
relief from unnecessary burdens.
What Are the Requirements for Modifying the State Plan? (Sec.  641.345)
How Should Public Comments Be Solicited and Collected? (Sec.  641.350)
Who May Comment on the State Plan? (Sec.  641.355)
How Does the State Plan Relate to the Equitable Distribution (ED) 
Report? (Sec.  641.360)
    Section 641.360 addressed how the State Plan will use information 
provided in the equitable distribution (ED) report and how, in turn, 
the ED report will reflect the State Plan. One commenter observed that 
the States do not have enough authority under current legislation to 
truly modify the distribution of slots within the State. Another 
commenter stated that these documents are valuable planning tools that 
foster collaboration among the State and national grantees, but that 
they are not intended as mandates on either grantees or the Department 
regarding the ultimate allocation of positions.
    The OAA Amendments strengthen the role of the Governors in the 
planning process. OAA Amendments section 503(a)(5)(B) and Sec.  641.365 
of this subpart specifically address inclusion of recommendations for 
redistribution of slots in State Plans, while OAA Amendments section 
503(a)(7)(A) describes the process by which the Secretary of Labor will 
review and make decisions about the State Plan. The Department believes 
that this process will allow the States to modify distributions of 
slots as necessary, and that, given its oversight authority, the 
Department must in fact ensure that equitable distribution is 
occurring. As stated in Sec.  641.365, the Department does not intend 
that slots be redistributed while they are encumbered because to do so 
would cause disruption. As slots become unencumbered, however, it is 
appropriate to redistribute them to provide equitable distribution.
    Also, in accordance with its intent that the ED report and the 
State Plan work together to ensure that services are fairly distributed 
in the State, the Department agrees that these documents are valuable 
tools that foster collaboration among the State and national grantees. 
The process is an iterative one in that it allows for transfer of 
authorized positions from overserved to underserved areas over a period 
of time. These documents thus pave the way for efficient transition to 
the most effective use of resources. The Department will issue 
administrative guidance to clarify the relationship

[[Page 19023]]

between the ED report and the State Plan.
How Must the Equitable Distribution Provisions Be Reconciled With the 
Provision That Disruptions to Current Participants Should Be Avoided? 
(Sec.  641.365)
    In Sec.  641.365, the Department discussed how positions should be 
moved due to shifts in populations of eligible individuals. Two 
commenters stated that grantees should not trade or move slots without 
first consulting with the State agency responsible for preparing the 
State Plan and ED report. To do otherwise would undermine the purpose 
of those reports.
    A third commenter stated that the Department, or the State, should 
ensure smooth transitions for participants where slots available from 
previous grantees decrease as new national grantees provide services 
for the program. Another commenter supported the statement that 
participants cannot choose to remain in the program indefinitely and 
recommended that this concept be reiterated in Sec.  641.570 or some 
other appropriate section.
    With respect to the first concern, language has been added to this 
section stating: ``Grantees must submit, in writing, any proposed 
changes in distribution that occur after submissions of the equitable 
distribution report to the Federal Project Officer for approval. All 
grantees are strongly encouraged to coordinate any proposed changes in 
position distribution with the other grantees servicing in the State, 
including the State project director, prior to submitting the proposed 
changes to their Federal Project Officer for approval.''
    With respect to the second concern, the Department has sponsored 
training sessions for new national grantees and consultations with 
grantees that are relinquishing slots in specific locations, to ensure 
smooth transitions for program participants. The Department will 
continue to provide technical assistance to grantees to ensure the 
smoothest transitions possible.
    With respect to the third concern, the Department believes that 
Sec.  641.570 sufficiently addresses the concept of time limitations 
for participants and we will not address it in this section. In 
addition, the Preamble to the Proposed Rule stated that although there 
is no time limit on participation in the SCSEP, most participants will 
receive services for no more than 24 to 36 months, and that a grantee 
may be authorized to set a maximum duration if it specifies how it will 
move participants into unsubsidized employment or other assistance 
before the time limit expires. We reiterate that position here.

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

What Entities Are Eligible To Apply to the Department for Funds To 
Administer SCSEP Community Service Projects? (Sec.  641.400)
    Section 641.400 introduced a new eligibility requirement for 
national grantees that an entity must have the capacity to administer a 
multi-State program. The Department interprets this requirement to mean 
that the organization must have the capacity to operate in more than 
one State even if it only operates within one State. Eligible entities 
that may serve as national grantees are limited to nonprofit 
organizations, Federal public agencies, and Tribal organizations. 
States and political subdivisions are not eligible to apply. However, 
in addition to receiving their SCSEP funding through the formula 
process States are eligible to compete for funds forfeited by a poor 
performing national grantee in a State. (See subpart G.)
    Several commenters expressed concern that allowing States to 
receive the funding of a poor performing national grantee within a 
State would disrupt the established 78/22 percent balance of funds 
between national grantees and States. Other commenters suggested that 
to alleviate this potential imbalance the Department should require the 
successful State grantee to redirect the funds to national grantees. 
Several commenters requested clarification as to whether a poor 
performing entity losing its funds would be allowed to compete for the 
funds it is losing. Another commenter supported the changes to the 
definitions. One commenter supported the requirement that an entity 
must have the capacity to administer a multi-state program even if it 
only operates within one State, but suggested adding the requirement of 
demonstrated effectiveness in serving the employment and training needs 
of SCSEP eligible adults.
    Because the authorization for a State to compete for national grant 
funding when a national grantee has failed its performance standards in 
a State is statutory, the Department can neither forbid a State from 
competing nor require the state to subgrant with a national grantee. 
The Department believes that allowing a State to compete for and 
receive a poor performing national grantee's funding does not change 
the character of the source of the funding. The funding allocations 
will continue to be made based on the 78/22 percent split of Federal 
funds to the national grantees and the State grantees respectively. 
Thus, the State grantee that receives national grantee funding will 
continue to receive its formula allocation and will also receive a 
share of the national funding that is competed.
    Regarding the suggestion to augment the requirement of eligible 
entities to administer multi-State programs with the additional 
requirement of ``demonstrated effectiveness,'' the Department believes 
that this additional requirement is already addressed by the 
eligibility requirements under section 514 of the OAA. Further, Sec.  
641.420, discusses factors considered in full and open grantee 
competitions and specifically mentions ``past performance in any prior 
Federal grants or contract for the past three years.'' The Department 
will list other factors that it deems appropriate in the Solicitation 
for Grant Application or similar instrument.
    Although the regulation is clear that a poor performing national 
grantee in a State would not be permitted to compete for the funds it 
is losing, the Department believes that should be the extent of the 
penalty and that the national grantee in a State may still be allowed 
to compete for other available SCSEP funds. There are two reasons for 
this determination. First, poor performers within a State are not 
necessarily poor performers nationwide. Therefore, precluding such a 
poor performer from competing for other national grant Federal funds 
may be a disservice to the SCSEP. Second, poor performing national 
grantees in a State may be able to cure their shortcomings in time for 
any subsequent competitions.
    With regard to State grantees, the agency that performed poorly 
would be excluded from the competition. As noted in the Preamble to the 
Proposed Rule, the State remains responsible for receiving the grant 
and for selecting an agent or subgrantee to operate the grant in 
accordance with its own procedures.
    A commenter requested several language clarifications, including a 
clarification of the Preamble discussion of ``positions that did not 
receive a proposal.'' The commenter noted that the reference in the 
same Preamble paragraph to ``national in scope'' is a difficult 
concept. Finally, regarding the use of the phrase ``subject of the 
competition,'' in Sec.  641.400(b), the commenter observed that there 
is no previous mention of this concept and suggested that the 
regulation explain the context of this phrase as being a national 
competition for replacing the

[[Page 19024]]

original grantee, in whole or in part and replace the phrase ``If the 
State's funds are competed'' with something else.
    The use of the phrase ``positions that did not receive a proposal'' 
in the Preamble to the Proposed Rule was intended to acknowledge the 
possibility that situations could arise in which applicants for 
national grants did not apply for all the existing positions that are 
available. Because the statute enjoins the Department to minimize 
disruption, the Department would have to negotiate with successful 
grantees to ``take'' those slots. Similarly, the phrase ``national in 
scope'' simply recognizes that a number of current national grantees 
are organizations that provide services to older individuals 
nationwide. The Department has revised the second sentence of Sec.  
641.400(b) to make clear that the poor performing grantee whose funds 
are competed is not eligible to compete for those funds.
How Does an Eligible Entity Apply? (Sec.  641.410)
    Section 641.410 provided that the Department will provide 
application guidelines and instructions which all applicants must 
follow. Additionally, before submitting an application to the 
Department, national grant applicants also must submit their 
applications to the Governors of the States in which they intend to 
operate (except for those grantees serving older American Indians). The 
Preamble to the Proposed Rule encouraged grant applicants intending to 
serve older American Indians to consult with the Secretary of Labor in 
establishing service areas under Sec.  641.320. States that submit an 
SCSEP grant application as part of its WIA Unified Plan must also 
address all of the application requirements published by the 
Department.
    The Department received few comments on this section. One commenter 
disagreed that a national grantee should be required to submit its 
entire application to the Governor(s) of the State(s) in which the 
national grantee will operate when each Governor will only be able to 
comment on a limited portion of the entire application that relates to 
the slots in his/her State. The commenter asserted that the definition 
of ``application'' should be restricted for purposes of a Governor's 
review and suggested that the Department provide any additional 
information to a Governor upon request. Another commenter indicated 
that the application should be limited to the SF-424 and slot 
allocation listing with a brief executive summary in order to limit the 
cost and time involved in providing these applications. Another 
commenter requested that the regulations mention that grantees serving 
older Indians must consult with the Secretary to establish service 
areas. Finally, one commenter suggested adding a statutory or 
regulatory reference to the specific WIA Unified Plan provision that 
applies to State applicants.
    This section is consistent with the requirements of section 
503(a)(5) of the OAA Amendments and accordingly requires grant 
applications be submitted to the Governor of each State in which a 
national grantee intends to operate. The Department is not convinced 
that there is any great benefit to be gained from submitting partial 
applications in various States, which may involve more work than simply 
copying the application several times.
    Regarding the suggestion to mention grantees serving American 
Indians consulting with the Secretary to establish service areas, the 
Department believes that the requirement that Indian-serving grantees 
submit their application to the Department adequately resolves the 
issue.
    The Department agrees that a reference to the specific WIA Unified 
Plan provision would be useful. Therefore we have added a reference to 
WIA section 501. Grantees should note, however, that the Department has 
other guidance on the WIA Unified Plan that is not referenced here.
What Factors Will the Department Consider in Selecting Grantees? (Sec.  
641.420)
    Section 641.420 stated that the factors for selecting grantees are: 
(1) The criteria listed in the OAA at section 514(c)(1)-(7); (2) the 
responsibility tests addressed in OAA at section 514(d); (3) the rating 
criteria in any Solicitation for Grant Application or other instrument; 
and (4) an applicant's past performance in any prior Federal grants or 
contracts for the past 3 years.
    Several commenters agreed with the Department's use of past 
performance as a consideration in a full and open competition. Two 
commenters indicated that past performance should be a heavily weighted 
factor.
    The Department agrees that past performance is necessary to 
determine a potential grantee's ability to administer an SCSEP grant. 
The Department does not, however, believe that past performance should 
be given so much weight that it gives incumbent grantees an unfair 
competitive advantage.
    One commenter suggested that past performance language in Sec.  
641.420 be amended to comport with or refer to Sec.  641.400 which 
speaks to competitions for Federal SCSEP funds ``when a national 
grantee in a State fails to meet its performance measures in the second 
and third year of failure.'' Another commenter suggested a technical 
change to move the first word ``criteria'' from after the word 
``eligibility'' to after the word ``review.''
    The Department does not believe that a reference to Sec.  641.400 
is necessary for two reasons. First, under OAA section 514(e)(3), a 
poor performing national grantee in a State may, in the second year of 
failure, have its funding transferred to another organization. Second, 
the Department does not believe that further reference is necessary. 
The Department agrees with the technical suggestion and modifies the 
section accordingly.
What Are the Eligibility Criteria That Each Applicant Must Meet? (Sec.  
641.430)
    In Sec.  641.430, the Department described what each applicant must 
demonstrate in order to be eligible to receive SCSEP funds. The 
requirements generally mirror the requirements established in the OAA 
Amendments at section 514(c). They are the ability to administer a 
program that: (1) Serves the greatest number of eligible individuals 
with an emphasis on those with the greatest economic need; (2) provides 
employment in communities in which eligible individuals reside or in 
nearby communities that contribute to the welfare of the community; (3) 
moves eligible individuals into unsubsidized employment; (4) moves 
individuals with multiple barriers to employment into unsubsidized 
employment; (5) coordinates with other organizations at the State and 
local levels; (6) effectively plans for the fiscal management of the 
Federal funds received; and (7) any additional criteria the Secretary 
deems appropriate to minimize disruption for current participants. 
Section 641.430(g) added a separate requirement that each applicant 
must demonstrate an ability to ``minimize program disruption for 
current participants if there is a change in project sponsor and/or 
location'' as well as its plan for minimizing disruptions.
    The Department received few comments on this section. Regarding the 
criteria that grant applicants coordinate ``with other organizations at 
the State and local levels,'' one commenter questioned how a grantee 
can effectively coordinate with a One-Stop if the grantee was not 
geographically near a One-Stop. Other commenters suggested that the 
Proposed Rule provides no indication that a grantee operating a program 
that is part of a One-Stop

[[Page 19025]]

should comply with the requirements in 29 CFR part 37.
    This regulation reflects the requirements of OAA section 512. The 
Department requires grantees located great distances from any One-Stop 
or One-Stop Delivery System to, at least, establish some sort of 
relationship or routine communication with the nearest One-Stop. That 
relation will usually be detailed in the MOU. Such activity may include 
the creation of a satellite One-Stop office in the grantee's office or 
linking of the grantee's office and the One-Stop through appropriate 
technology. Despite distances, such coordination can foster positive 
results on behalf of older workers.
    The Department agrees that as partners in the One-Stop system, OAA 
grantees must adhere to the WIA regulations implementing the 
nondiscrimination and equal opportunity provisions of the Workforce 
Investment Act. The Final Rule specifically requires adherence to these 
requirements in Sec.  641.827(b).
What Are the Responsibility Conditions That an Applicant Must Meet? 
(Sec.  641.440)
    Section 641.440 addressed the 14 responsibility tests, such as 
exercising fiscal responsibility, that are found in section 514(d) of 
the OAA Amendments. SCSEP grant applicants must meet these tests in 
order to avoid being disqualified for Federal funds.
    The Department received two comments on this section. The first 
comment suggested that the section was drafted poorly and appeared to 
require each applicant to engage in the listed wrongdoings to meet the 
responsibility conditions. Specifically, the comment referred to Sec.  
641.440(m) as making ``no sense.'' The second comment requested that 
the lead sentence be changed to read ``Each applicant must be able to 
meet the applicable responsibility tests by not having had any of the 
following apply to its operations.'' The second commenter also 
suggested, that in Sec.  641.440(a) the ``whether'' clause be replaced 
with ``whether incurred by the applicant or one of its subgrantees or 
subcontractors.''
    The Department acknowledges that the section does not read well and 
therefore accepts the recommendations to clarify the wording, namely 
the redrafting of the opening sentence. The opening sentence to the 
regulation is revised to read, ``Each applicant must meet each of the 
listed responsibility `tests' by not having committed any of the acts 
of misfeasance or malfeasance described in Sec.  641.440(a)-(n) of this 
section.'' The Department has also revised Sec.  641.440(a) as 
suggested. Otherwise, this section is consistent with the OAA 
Amendments and tracks the statutory language.
Are There Responsibility Conditions That Alone Will Disqualify an 
Applicant? (Sec.  641.450)
    Section 641.450 provided that an applicant may be disqualified 
based solely on either of the first two responsibility conditions 
listed in Sec.  641.440. Those conditions are: (1) The Department's 
inability to recover a debt from the applicant or an applicant's 
failure to comply with a debt repayment plan; and (2) significant fraud 
or criminal activity. The regulation explained that disqualification 
based on the other responsibility conditions listed in Sec.  641.440 
require persistent failure for two or more consecutive years.
    The Department received several comments on this section. Four 
commenters expressed approval and commendation for the implementation 
of these responsibility tests and the increased accountability they 
will bring to the SCSEP program. These commenters also suggested, 
however, that failure to meet the fraud and criminal activity 
responsibility test should not be absolute (automatic disqualification) 
when an applicant has developed appropriate safeguards against fraud or 
criminal activity and ``promptly reports an occurrence that does not 
indicate a significant weakness in internal controls.'' Other 
commenters suggested that the section is unclear; that it can be read 
to say that an applicant may be disqualified if it fails to have an 
unrecoverable debt or engage in fraud or criminal activity.
    This section is clear and consistent with the requirements of 
section 514(d)(3) of the OAA. The purpose of this section is not to 
encourage grantees to report their own fiduciary or other 
responsibility failures, but to assure that grantees will be vigilant 
in keeping them from happening in the first place. The Department 
intends to take a much stricter approach than it has in the past in 
enforcing this provision. Therefore, the section has not been amended 
except to clarify that the Department will determine the existence of 
significant fraud or criminal activity and that typically such 
activities will include willful or grossly negligent disregard for the 
use, handling, or other fiduciary duties of Federal funding where a 
grantee has no effective systems, checks, or safeguards to detect or 
prevent fraud or criminal activity. Additionally, significant fraud or 
criminal activity will typically include coordinated patterns or 
behaviors that pervade a grantee's administration or are focused at the 
higher levels of a grantee's management and authority. To be consistent 
with the OAA section 514(d)(4)(B), this determination will be made on a 
case-by-case basis regardless of what party identifies the alleged 
fraud or criminal activity.
How Will the Department Examine the Responsibility of Eligible 
Entities? (Sec.  641.460)
    In Sec.  641.460, the Department described the general process for 
examining eligible entities' responsibility and listed some of the 
materials it will take into consideration.
    The Department received one comment on this section. The commenter 
agreed with the assessment of applicants' responsibility and the use of 
various related records. The commenter also suggested, however, that 
the Department should specify what is intended by its possible use of 
any other relevant information and indicate whether that information 
may be reviewed by the applicant and whether ``due process'' would 
allow the applicant to ``challenge the information'' and if so, ``by 
what rule.''
    In examining an eligible entity's responsibility, the Department's 
use of ``any other relevant information'' will vary on a case-by-case 
basis. Specifically, the OAA Amendments, at section 514(d)(2), allow 
the Department to consider any other information relevant to 
responsibility, including the applicant's history with managing other 
grant funds. In order to retain its discretion, the Department will not 
exactly define what these materials may be or how the Department may 
use them. To the extent these materials are of a confidential nature or 
proprietary to some other entity, such materials may not be available 
to the entity to which they pertain. In any event, an entity will be 
able to appropriately challenge the Department's actions through the 
grievance procedures in subpart I if the use of the information leads 
to any adverse action.
Under What Circumstances May the Department Reject an Application? 
(Sec.  641.465)
What Happens if an Applicant's Application Is Rejected? (Sec.  641.470)
    The Department reserved Sec.  641.470 to provide a rule and asked 
for comments on the remedies that should be available to a nonselected 
applicant that succeeds on appeal.
    The Department received very few comments on this section. The

[[Page 19026]]

commenters suggested that if a grant applicant successfully appealed a 
Department decision to deny SCSEP funds, the applicant should be 
notified promptly, in writing, with an explanation of the basis of the 
decision. Further, the commenters suggested that the Department offer 
information as to what action the entity may take to correct 
deficiencies and improve its position for future competitions. Another 
commenter suggested that when an incumbent grantee loses its funding 
that it should be given notice of the deficiencies in its application 
and an opportunity to cure.
    The Department agrees that any entity whose application is rejected 
should be provided appropriate and timely notice as well as an 
explanation of the Department's basis for the rejection. An explanation 
for the Department's rejection is consistent with current procedures, 
known as debriefings, which have been the Department's practice for 
many years. Incumbent grantees, however, will not be given an 
opportunity to cure in an open competition because that would defeat 
the purpose of the competitive process. An opportunity to cure would 
create an inequity in favor of incumbents, which may already have had 
opportunities to correct deficiencies through technical assistance 
provided by the Department. Consequently, in accordance with the OAA 
Amendments at section 514(d)(3) and 514(d)(5), entities whose 
applications are rejected will not be selected as grantees but will be 
offered an opportunity for a debriefing which will include an 
explanation of the Department's decision and suggestions as to how to 
improve the applicant's position for future competitions.
    Under an SCSEP competition, grant applicants are not competing for 
a grant with which they will serve Older Americans nationwide or in 
defined areas. Instead, their proposals are specific and seek to 
provide services to Older Americans only in certain areas of the 
country that the applicant has chosen to serve and in some 
circumstances applicants seek to serve certain populations of Older 
Americans, such as Asian and Pacific Islanders or Indians. In order for 
SCSEP grant applicants to provide services where they are most able to 
provide quality services or to serve their target populations, their 
grant awards are tailored to reflect their specific proposals.
    Because this system of awarding grants with disparate service areas 
tailored to the grantee's organization and abilities results in a 
patchwork of projects scattered widely across the country, the 
resulting competition is not for a single defined service area as it is 
in some other Department of Labor programs. An applicant usually 
competes against different applicants in different areas. The result of 
a protest or appeal that results in an Administrative Law Judge's (ALJ) 
decision to award funds to the appellant is that a number of different 
grantees in different areas might be displaced. Depending on the timing 
of the appeal decision, this may have a disruptive effect on current 
participants and more importantly on current grantees, which could lose 
so many slots that they cease to be able to operate a viable program. 
Both because of the nature of the population that the SCSEP serves and 
because of the services it provides, changing grantees must be handled 
carefully to minimize disruption to participants. The SCSEP competition 
is thus unlike the WIA Indian and Native American or Migrant and 
Seasonal Farmworker (MSFW) programs in which grantees compete for 
defined service areas and in which the replacement of one grantee with 
another is less likely to be disruptive because of the nature of the 
services offered. Because of these differences and the complexities 
involved, the Department has decided to provide a remedy that reflects 
the differences in the operations of SCSEP grants. If the Grant Officer 
decides not to make an award, in whole or in part, because of 
feasibility, the successful appellant may recover its bid preparation 
costs, either entirely, if there is no award or proportionately, if the 
decision not to award only involves a portion of the contested slots.
    Section 641.470(c) provides that when an ALJ decides that an 
appellant should have been selected, in whole or in part, the matter 
must be remanded to the Grant Officer to decide, within 10 days, 
whether to award the contested slots to the successful appellant and 
the timing of the transition, if the Grant Officer decides to make an 
award. In making this decision, the Grant Officer must take into 
account the factors of disruption to participants, disruption to 
grantees, particularly whether the award will leave another grantee 
with so few slots that it becomes non-viable, and must balance these 
against the Department's intent to select the best available grantees. 
The Department has determined that a minimum of approximately 800 slots 
is necessary for viability; that is, the 800-slot level is necessary to 
have funding sufficient to properly perform the administrative 
functions of the grant. Thus, if the effect to an ALJ's decision would 
be to reduce a continuing grantee's award below the 800-slot level, the 
Grant Officer may refuse to award those slots to the successful 
appellant. This situation can occur because of the patchwork nature of 
the grants, discussed above, so that an appeal may only involve a 
portion of the slots awarded to a number of different grantees. The 
Grant Officer must also take into consideration the timing of the 
decision and assure that any transition minimizes disruption. The Grant 
Officer's decision will be immediately reviewable by the ALJ. In the 
event of an award after a successful appeal, the successful appellant 
is entitled only to the unspent funds remaining in the grant after 
operational and closeout costs of the prior grantee.
    The Department has also added a new paragraph (d), similar to 20 
CFR 667.825(c), that puts grantees on notice that the possibility of a 
successful appeal and a new award is a condition of the grant and that 
in case of a new award, the Grant Officer will issue transition and 
closeout instructions.
May the Governor Make Recommendations to the Department on Grant 
Applications? (Sec.  641.480)
    Section 641.480 provided that each Governor must have a reasonable 
opportunity to provide comments on the anticipated effect of each grant 
applicant's proposal on the distribution of positions within the State 
and provide recommendations regarding the distribution of positions. A 
Governor's comments should be consistent with the State Plan. Further, 
the Governor may comment on all the proposals in noncompetitive 
conditions and may choose whether to comment on certain aspects of all 
the proposals in competitive conditions before the Department's rating 
process or afterward only on those proposals that have completed the 
Department's rating process.
    The Department received a few comments on this section. The 
commenters suggested that the Department should create a clearly 
defined process for Governors to review and make recommendations on 
grant applications. Other comments echoed this suggestion by requesting 
a definition of the term ``reasonable opportunity'' and wanted it made 
clear that the Governor's review of an application or proposal is 
limited to commenting on the proposal's distribution of positions 
within the State.
    The OAA Amendments, at section 503(a)(5), afford Governors who will 
have SCSEP national grants operating in their States a reasonable 
opportunity to submit recommendations to the

[[Page 19027]]

Secretary. This section is consistent with the statutory requirement 
and appropriately limits the scope of the Governor's recommendations. 
The Department sees no need to create a formalized process in this 
Final Rule for the Governor to develop and submit recommendations. The 
process will be limited by the Department's timeline in reviewing 
applications and awarding grants in any given Program Year. The 
Department may, however, provide additional details in an 
administrative issuance at the time of any Solicitation for Grant 
Applications (SGA).
When May SCSEP Grants Be Awarded Competitively? (Sec.  641.490)
    Section 641.490 provided that the Department must hold a 
competition, as required by OAA section 514, when a grantee fails to 
meet its performance measures, eligibility requirements, or 
responsibility tests. Other full and open competitions may occur before 
the beginning of a new grant period or if additional grantees are 
funded. The details of the competition will be provided in the 
Solicitation for Grant Applications announcing the competition.
    The Department received many comments on this section. Several 
commenters disagreed with this section and asserted that, according to 
the OAA Amendments, the only times an incumbent grantee can lose its 
SCSEP funding is when it fails to meet the OAA Amendments' 
responsibility test or fails to meet specified performance goals after 
implementation of a corrective action plan and technical assistance 
from the Department. Another commenter indicated that the second 
portion of this section sounded too much like a policy statement rather 
than a regulation and suggested that it be eliminated.
    The OAA Amendments prescribe a competition when a grantee fails to 
meet performance measures, but does not limit competitions to that 
case. The Department is also reserving its right to provide for a 
competition generally before the beginning of the grant period, and it 
is not prohibited under the statute from doing so. The Department 
appreciates the commenter that noted that this section sounded like a 
policy statement and suggested its elimination, but the Department 
believes that it is appropriate to discuss the extent of the 
Department's discretion to provide for competition. 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 to become part of the grantee 
community and results in better services to the participants.
    Another commenter recommended replacing the word ``organization'' 
with the word ``grantee'' in the Preamble and replacing the term ``full 
and open competition'' with the term ``competitive selection of 
(national) grantees.''
    The Department disagrees that the term ``full and open 
competition'' should be replaced with the term ``competitive selection 
of (national) grantees.'' The Department retains this language because 
it is standard language to describe the competitive process. It is too 
late to amend the Preamble to the NPRM.
    A commenter noted that ``[a]lthough the Proposed Rule makes several 
references to a three-year grant, no information is provided in the 
Proposed Rule as to how, and under what circumstances, a three-year 
grant would be awarded'' and requested more information in this regard.
    The Department does not believe that it is appropriate to have a 
regulation on when it will award grants for 3 year periods since the 
decision on the length of the grant is discretionary. Section 514(a) of 
the OAA provides that the Department may award grants not to exceed 
three years once regulations have been promulgated and performance 
measures are established. The Department reserves the right to 
determine whether it will award grants in excess of one Program Year 
and will make grantees aware of its decision at the appropriate time.

Subpart E--Services to Participants

Who Is Eligible To Participate in the SCSEP? (Sec.  641.500)
    In Sec.  641.500, the Department stipulated, in accordance with the 
2000 Amendments (OAA sec. 516(2)), that 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 defined in the Federal 
poverty guidelines is eligible to participate in the SCSEP. The 
Department indicated that a person with a disability may be treated as 
a ``family of one'' for income eligibility determination purposes.
    There were several comments on this section. Several comments 
requested clarification of participant residence requirements for 
eligibility--i.e., are participants still required to live in the State 
where they are enrolled since ``border'' residents might be more easily 
served in a State adjacent to their resident State.
    The regulation is based on the statutory eligibility criteria, 
which do not mention residence. However, the commenters have raised an 
issue about residence, which needs to be resolved. Because the formula 
for the distribution of funds among the States is based, in part, on 
the number of potentially eligible individuals in the State, the basic 
presumption must be that eligible individuals must be served in their 
State of residence. In the interests of customer service and in order 
to more closely align with the WIA system, however, the Department has 
revised the regulation to authorize States to enter into agreements 
between themselves to permit cross-border enrollment. Such agreements 
should cover both State grantee and national grantee slots and must be 
submitted to the Department.
    One commenter noted that the distinction between ``enrolled'' and 
``eligible for,'' although clear enough in regard to any specific 
individual, is not consistently clear in terms of the services that can 
be offered by SCSEP staff.
    The differences in the services available to those enrolled and 
those eligible is discussed elsewhere in the regulations and in this 
Preamble, in particular in Sec. Sec.  641.535 and 641.550.
    Another commenter recommended that all applicants be considered a 
``family of one'' for eligibility purposes, as provided for disabled 
persons, since ``many older persons experience a variety of 
disabilities as a result of the aging process.''
    The general rule in determining individual eligibility is to 
consider family income. The exception for considering a disabled 
individual a ``family of one'' is one that is used in many government 
programs to recognize the barriers that disabled individuals face in 
the labor market. The Department does not believe it has the authority 
to extend that exception to all older workers.
    Another commenter noted that the 125 percent of family income 
levels eligibility requirement was ``excessively restrictive.''
    The 125 percent limitation is provided in section 516(2) of the 
OAA. The Department does not have the authority to increase it.
When Is Eligibility Determined? (Sec.  641.505)
    In Sec.  641.505, the Department indicated that once individuals 
become SCSEP participants, the grantee/subgrantee is responsible for 
verifying their continued income eligibility at

[[Page 19028]]

least once every 12 months. The Department also noted that grantees may 
also verify an individual's eligibility as circumstances require.
    There were a number of comments on this section. Most recommended 
that eligibility be re-verified once in a grant year rather than at the 
anniversary date of each participant. They indicated that this would 
permit all participants to be notified simultaneously, would lead to 
other streamlined procedures, and is supported by findings that only a 
miniscule number of participants are determined ineligible upon 
recertification. One commenter noted that this procedure is an enormous 
amount of extra work for a minimal number of changes.
    The Department agrees with the commenters that recertifying 
eligibility once a grant year should be an option for those grantees 
that wish to use it. The Department believes that the language of the 
current regulation can be read to permit that option. In fact, the 
intent of this provision is to permit grantees to choose either to re-
verify income on or near a participant's anniversary date or to re-
verify all participants at one time during the grant period. Therefore, 
there will be no change to the regulation.
    While there may be some validity in the comment that annual income 
verification is a lot of work for little result, it is important that 
the SCSEP serve the people for whom the program was designed: Low-
income seniors with barriers to employment. Failing to re-verify income 
could mean that the program serves ineligibles for potentially long 
periods of time. The Department believes that the work involved in 
annual recertification of income is a necessary price to pay for 
keeping the program focused on providing services to eligible seniors.
What Types of Income Are Included and Excluded for Participant 
Eligibility Determinations? (Sec.  641.507)
    The Department reserved Sec.  641.507 and sought comments on the 
types of income that grantees must consider when determining a 
participant's eligibility. Older Worker (OW) Bulletin 95-5 lists the 
current inclusions and exclusions for determining a participant's 
income. The Department specifically sought comments on whether certain 
categories should be consolidated or eliminated, or if certain rules 
should be revised or eliminated,--i.e., elimination of the exclusion of 
the first $500 of a participant's income for recertification purposes, 
limits on the amount of assets a participant may have to be eligible 
for the program, and limits on the amount of one-time unearned income 
that may be excluded.
    The Department received many comments about the $500 exclusion. 
Some commenters said that they rarely used the $500 exclusion and that 
they did not oppose its elimination. However, the Department received 
many comments protesting the possibility that the exclusion of the 
first $500 of a participant's income for initial eligibility or 
recertification purposes might be eliminated. Many indicated that 
eliminating the $500 for current and re-enrolled participants would be 
counterproductive, if not punitive. They argued that the exclusion 
serves as an incentive for participants to exit the program for 
unsubsidized employment because it allows them to return if the 
employment is unsuccessful. Thus, they suggested that without the 
exclusion, fewer participants would leave the program, which would be 
contrary to the new emphasis on unsubsidized employment. A number of 
commenters suggested that if the exclusion is eliminated, that it only 
apply to new participants, and that current participants be 
``grandfathered'' in. Another commenter suggested more than a 30-day 
notice period for termination under these circumstances. Several 
commenters argued that the $500 exclusion permitted grantees to serve 
individuals who had serious multiple barriers to employment. They said 
that grantees needed the flexibility to meet the SCSEP's goal of 
serving those most in need. One commenter said that the $500 exclusion 
was needed because the area in which its program operated was a high 
cost area.
    The law clearly states, at section 516(2), that the income 
threshold for SCSEP eligibility is not more than 125 percent of the 
poverty guidelines established by OMB. The Department must enforce the 
law as written. Nothing in the statute gives the Department the 
authority to waive the clear statutory income eligibility limit, no 
matter how arguably worthy the purpose of the waiver. This applies to 
current participants as well as new applicants.
    The Department received many comments relating to the other 
inclusions and exclusions for determining eligibility. A number of 
commenters opposed the inclusion of one-time unearned income from the 
income eligibility criteria, indicating that it would penalize those 
who had taken lump sum annuities, had received modest inheritances, or 
had sold their lifelong residences. A number of commenters opposed 
including savings and assets. Many noted that older workers should not 
be penalized for having ``nest egg'' income resulting from a lifetime 
of savings to cover burial or catastrophic situations. One commenter 
suggested that the Department should clarify what it considers assets, 
noting that depending upon the definition, a large number of people the 
program is supposed to serve could be excluded. There were also 
comments on the impact of government entitlement programs on income 
eligibility. A number of comments recommended that a work group of 
SCSEP practitioners be established to discuss issues related to income 
inclusions and exclusions.
    The Department did not receive any comments proposing the use of 
established criteria for income eligibility. As specified in OAA 
section 516(2), eligible individuals are those who have an income not 
more that 125 percent of the poverty guidelines established by the 
Office of Management and Budget. The Department has decided to use the 
U.S. Census Bureau's Current Population Survey (CPS) as the standard 
for determining income eligibility for the SCSEP. The Department will 
issue administrative guidance detailing the definitions for the 
categories of income sources included in the CPS standard, and 
specifying which of these sources will be included and excluded for 
purposes of determining SCSEP eligibility.
    The Department received a number of comments on the time period to 
be used to calculate income. All urged the Department to calculate 
income eligibility by counting applicant income for the most recent 
three-month period instead of six months. The basis for this 
recommendation was that this time period ``recognizes the severe impact 
of recent economic conditions and allows the program to intervene 
before individuals become completely destitute.''
    The Department will consider these comments as it develops the 
income guidance.
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)
    In Sec.  641.510, the Department stipulated that upon determination 
of ineligibility, the participant must be given written notice within 
30 days, and terminated within 30 days of receipt of the notice. The 
regulation further stated that such individuals must be referred to the 
One-Stop or other appropriate partner program and that they may file a 
grievance under the grantee's grievance procedure.

[[Page 19029]]

    Some commenters related the requirement that grantees refer 
ineligibles to the One-Stop system to the coordination requirements in 
Sec.  641.210 and suggested that more Department of Labor guidance to 
the WIA system on how to work with SCSEP grantees is needed to enable 
the systems to work together. One commenter suggested that the language 
be clarified to specify that the participant will not be terminated 
until 30 days after receiving the written notice consistent with Sec.  
641.580. Another commenter asked that the Department add ``to the 
extent possible'' to the language for those areas that cannot be served 
by the One-Stop system. One commenter praised the Department for 
clarifying the former regulations on this issue.
    Although the Department appreciates grantees' desire to provide 
good outcomes to all seniors with whom they come in contact, the 
funding and eligibility limitations on the SCSEP simply do not permit 
grantees to provide significant services to ineligible individuals. 
Thus, under this section, referral to the One-Stop system under which 
core services, including job referrals for those who are job ready, are 
available to all who seek them discharges the grantee's responsibility 
to the ineligible former participant. If grantees have other 
partnerships, for example, with Area Agencies on Aging, they may 
provide additional referrals as well.
    The Department agrees that Sec. Sec.  641.510 and 641.580 should 
provide the same rule. We have revised Sec.  641.510 to read the same 
as Sec.  641.580(b) and (c)--i.e., ``30 days after the participant 
receives the notice.'' To be sure that the regulation is entirely 
clear, we have added an exception requiring the immediate termination 
for those found ineligible for providing false information to Sec.  
641.510.
    The Department acknowledges that referrals to the One-Stop system 
are more difficult if it is not located in their area, and encourages 
grantees to work as partners by establishing satellite services in 
areas without current One-Stop access and to establish other 
partnerships with organizations that may be able to provide services in 
the area to referred individuals.
How Must Grantees/Subgrantees Recruit and Select Eligible Individuals 
for Participation in the SCSEP? (Sec.  641.515)
    In Sec.  641.515, the Department required that grantees, to the 
extent feasible, seek to enroll individuals who are eligible 
minorities, limited English speakers, Indians, or who have greatest 
economic needs at least in proportion to the incidence in the 
population, taking into account their rates of poverty and 
unemployment. For the purposes of these regulations, these individuals 
are considered ``preference'' applicants, consistent with the 
requirements of section 502(b)(1)(M) of the OAA. The Department views 
the ``preferences'' as a way of assuring that certain groups which 
often face severe barriers to employment are served in proportion to 
their incidence in the population, taking into account their rates of 
poverty and unemployment. The requirement to serve preference 
individuals is not absolute. As made clear in Sec.  641.530, grantees 
have discretion in selecting non-preference participants. The 
regulation further provided that grantees 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.
    The Department received a number of comments on this section. Many 
commenters recommended that it is not appropriate to require grantees 
to notify the State Workforce Agency of all SCSEP community service 
opportunities because participants are selected based on priority and 
community service assignments are then developed to meet their needs, 
not the other way around. One commenter suggested that this requirement 
is more stringent than section 502(b)(1)(H) of the statute. Two 
commenters suggested clarification of the final sentence in Sec.  
641.515(a) by ending the sentence after the word ``unemployment.'' The 
remaining comments objected to the mandatory use of the One-Stop system 
for recruitment, especially in rural areas, and suggested that the term 
``must'' be softened to ``should.''
    The Department believes the intent of the requirement is to list 
all community service assignments with the State Workforce Agency and 
all appropriate local offices and to assist with recruitment efforts in 
locations that have difficulty finding eligible participants. The 
Department has revised this section to more closely track the statute's 
requirements, specifically the requirements of section 502(b)(1)(H) of 
the OAA and more generally with the statute's emphasis on coordination 
with the One-Stop system. Grantees must bear in mind that the 2000 
Amendments require much closer coordination with the WIA system than 
was previously the case. The nature of this coordination is, of course, 
subject to negotiation in MOUs. 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, 
especially in rural areas. The Department has revised the final 
sentence in Sec.  641.515(a) as recommended. We have retained the word 
``must'' in paragraph (b) because it is consistent with the 
coordination requirements of the Act.
Are There Any Priorities That Grantees/Subgrantees Must Use in 
Selecting Eligible Individuals for Participation in the SCSEP? (Sec.  
641.520)
    In Sec.  641.520, the Department delineated the order of priorities 
that grantees must use in selecting eligible individuals consistent 
with the requirements of OAA section 516(2) and the Jobs for Veterans 
Act, Public Law 107-288 (2002).
    The Department received several comments on this section. All were 
concerned about the interplay between these priorities and the 
preferences delineated at Sec. Sec.  641.515 and 641.525. Some 
commenters recommended the elimination of priorities and preferences, 
stating that they were an administrative burden, that they 
discriminated against their primarily female (non-veteran) population, 
and that priority should be given to those having the greatest need, 
regardless of how they fit into particular categories. One commenter 
suggested that there may be situations in which non-veterans and/or 55-
year olds who are not eligible for Federal benefits are needier than 
veterans and/or those who are 60 or older. Another commenter asked that 
the distinctions between priorities and preferences be more clearly 
defined. Other commenters asked for further guidance and clarification 
to help design application and information collection methodologies 
that might conflict with ADA requirements. The remaining commenters 
stated that the priority and preference requirements were contrary to 
the new unsubsidized employment performance measures.
    These priorities are statutory requirements. Grantees must abide by 
them. Grantees must apply the preferences delineated in Sec. Sec.  
641.515 and 641.525, to the extent feasible, when selecting individuals 
within or outside the priority groups. 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. Grantees 
concerned about the effect of the priorities and preferences on 
performance measures also should be aware that ``the number of persons 
served, with particular consideration

[[Page 19030]]

given to those in the preference categories'' is also a mandatory 
performance measure. As will be discussed in more detail in subpart G, 
the Department intends to design the performance measures to take 
operational realities into account. In designing the performance 
measure, the Department will take into account the statutory 
instructions that preference groups be served ``at least in proportion 
to their numbers in the State'' and that in deciding how to serve these 
preference groups grantees ``take into consideration their rates of 
poverty and unemployment.''
    Some commenters asked for more detailed guidance on the operation 
of the priorities and preferences. The Department believes that the 
operation of the priorities is fairly clear in the regulation, but will 
consider issuing administrative guidance on the operation of the 
preferences if needed.
    Some guidance can be supplied in response to some specific 
comments. One commenter asked whether a person with a high priority 
gets served first even if the individual has no access to 
transportation, has little ``job interests'' or desire to comply with 
program requirements.
    There is no absolute answer to this question. A grantee is not 
required to provide service to a person who cannot take advantage of 
the available service or who is not interested in receiving the service 
or who will not abide by the program's rules. On the other hand, the 
SCSEP, through the assessment and IEP process, focuses on helping 
individuals with barriers to employment to overcome those barriers. 
Transportation is a supportive service that grantees may provide to 
assist participants who live in remote places to participate in the 
program. In the process of developing a participant's IEP, a grantee 
should work with the participant to develop possible assignments to 
meet the participant's interests and to refine those interests. 
Similarly, the IEP process should clearly explain to a participant what 
the rules are and work with the participant to help him or her adhere 
to the rules.
    Another commenter said that it served all individuals who sought 
service and that it has no waiting lists.
    If the grantee is making reasonable outreach efforts to recruit 
those individuals who are in the eligible population and it provides 
services to all individuals who are eligible for the program, there is 
no need to apply the priorities and preferences.
Are There Any Other Groups of Individuals Who Should Be Given Special 
Consideration When Selecting SCSEP Participants? (Sec.  641.525)
    In this section, the Department delineated categories of persons to 
whom special consideration must be given, to the extent feasible, in 
selecting eligible participants.
    The Department received several comments on this section. Most 
asked for clarification of the term ``poor employment prospects.'' One 
comment noted that the first sentence of Sec.  641.525 should be 
corrected to eliminate the word ``to'' immediately before ``special 
consideration.''
    The Department provides a definition of ``poor employment 
prospects'' in Sec.  641.140. The definition is derived from the prior 
regulation. The Department will issue administrative guidance on how to 
calculate the number of persons served with poor employment prospects 
for performance standards purposes. The Department has made the 
editorial correction in Sec.  641.525. We also added a reference back 
to Sec.  641.515 for ``preference'' individuals.
Must the Grantee/Subgrantee Always Select Priority or Preference 
Individuals? (Sec.  641.530)
    This section provided that grantees must adhere to the priorities 
in Sec.  641.520 and must apply the preferences in Sec.  641.525 to the 
extent feasible but may in certain circumstances select a non-
preference individual over a preference individual. The regulation also 
provides that the Department may ask for evidence that the grantee is 
adhering to the priorities and preferences when examining participant 
characteristics. There was one comment on this section that asserted 
that ``preferences to be applied within priority groups should not be 
qualified to the extent feasible,'' and that ``available community 
service employment opportunities'' should play no part in the 
application of preferences.
    It is the Department's intent to provide grantees with the 
flexibility to exercise their judgment when they determine that a non-
preference individual receives services over a preference individual, 
factoring in the characteristics of the individual and the availability 
of appropriate community service opportunities. The Department believes 
that the language of the regulation properly communicates the existence 
of and extent of the discretion available to grantees and has not 
changed the regulation as suggested. The phrase ``to the extent 
feasible'' comes from the statute. It is generally true that grantees 
should seek to create community service opportunities to meet the needs 
of eligible individuals. However, from a recruitment perspective, 
grantees may also seek to match the needs and abilities of eligible 
individuals to those community service opportunities that are 
available.
What Services Must Grantees/Subgrantees Provide to Participants? (Sec.  
641.535)
    In proposed Sec.  641.535, the Department outlined the various 
services that grantees and subgrantees must provide to participants. 
The Department received a large number of comments on this section, 
which focused on the following three issues: Paragraph (a)(2), which 
proposed quarterly assessments by providers, and paragraph (a)(3), 
which proposed corresponding quarterly updates of participants' IEPs; 
paragraph (a)(14), which required follow-up with participants who have 
transitioned into unsubsidized employment to make sure they receive any 
needed follow-up services; and paragraph (c), which prohibited using 
SCSEP funds on stand-alone job clubs or job search activities.
    In their comments on the paragraphs (a)(2) and (a)(3), the 
commenters were virtually unanimous in opposing quarterly assessments 
and updating of IEPs, though one commenter noted that it is an 
excellent objective. Various commenters stated that quarterly reviews 
will serve no practical purpose; they will not increase the quality of 
participant services; they will be more costly; and they will require 
more resources in staff and transportation time, especially where 
participants are scattered across wide geographical areas. One 
commenter stated that the logical time for assessments and updating of 
IEPs is at the beginning of the participant's enrollment and just 
before the job search begins in earnest. Several commenters stated that 
paragraph (a)(13), which requires assessment of the participant's 
progress in meeting the goals of the IEP as necessary, provides 
adequate regulatory guidance, eliminating the need for paragraphs 
(a)(2) and (a)(3).
    A number of commenters stated that annual reviews at a minimum are 
adequate, and several suggested that the Department encourage periodic 
reviews as necessary when participant needs change, stating that this 
would provide needed flexibility to the process. As one commenter 
noted, ``Short term goals might require reassessment within a month, 
while longer term goals might

[[Page 19031]]

not be fulfilled for several months.'' Several other commenters 
suggested a six-month reevaluation, if closer spacing between 
evaluations is desired, and one commenter noted that developmental 
steps for many participants are often not completed in three months.
    Several comments spoke to the differences between participants who 
only wish to stay in their community service assignments and those for 
whom unsubsidized employment is a goal. One commenter suggested that 
assessments and IEPs should be updated more frequently for participants 
whose goal is unsubsidized employment. Another said that specific 
language is needed with respect to whether community service is an 
acceptable IEP employment goal; if so, the commenter believed that 
there is no need for IEPs.
    A commenter inquired about the purpose of quarterly assessments, 
and another stated the opinion that updating IEPs quarterly is based on 
standardizing the regulations with WIA. A commenter stated that 
quarterly updates are not in the best interests of the people served, 
and another expressed the view that time spent on quarterly assessments 
could be better spent on job development, recruitment and placement 
efforts. Another commenter stated that a requirement for quarterly 
assessments ``increases pressure to simplify and shorten assessments in 
order to reduce the time and expense needed to administer them 
resulting in a reduction in overall quality and effectiveness'' and 
``increases pressure to eliminate assessment tools and services 
currently used, but too costly if done for each participant 
quarterly.''
    The Department agrees with the commenters that an absolute 
requirement for a reassessment every quarter may be too costly and of 
little benefit. The Department remains concerned that the participant's 
IEP be a living document that is changed as the participant's needs and 
circumstances change and as the goals of the IEP are reached. We have, 
therefore, revised paragraphs (a)(2) and (a)(3) to make clear that 
grantees are expected to treat the assessment/IEP process as a living 
process and must conduct assessments and update the IEP as necessary 
but no less frequently than twice in a 12 month period. We have revised 
paragraph (a)(13) to more closely track OAA section 502(b)(1)(M)(iii). 
In addition, we strongly encourage the good practice of updating 
assessments as necessary, as a standard time for conducting an 
assessment may not meet the needs of certain individuals. More frequent 
assessments also foster better relationships with participants.
    In Sec.  641.535(a)(14), the Department proposed that grantees must 
follow up with participants placed into unsubsidized employment during 
the first six months of placement to ensure that they receive any 
necessary services.
    Two commenters stated their appreciation at being able to spend 
program funds to foster job retention, while another noted that there 
are not sufficient funds in the program to do so. The latter commenter 
also expressed concern that some participants might consider the six-
month time period an entitlement, whether the participant needed 
services or not. Finally, a commenter asked whether SCSEP funds could 
be expended to ensure that a participant is still employed at the six-
month mark and that any identified services are being provided.
    The Department recognizes that, given the funding limitations in 
the SCSEP, grantees will not be able to provide all needed supportive 
services, whether for current participants or for follow-up services, 
from grant funds. The Department does not view these services as a 
requirement or an entitlement. Rather, they are an important adjunct to 
obtaining successful results for participants. Grantees must be 
creative in using their connections to the One-Stop and to other 
programs to arrange for needed support or follow-up services. The issue 
of expending SCSEP funds to ensure that a participant is still employed 
at the six-month mark and that any identified services are being 
provided is addressed below in Sec.  641.555.
    In Sec.  641.535(c), the Department proposed that ``Grantees may 
not use SCSEP funds for individuals who only need job search assistance 
or job referral services.'' A number of commenters opposed this change, 
while two supported it.
    Several commenters noted that it is difficult for seniors to look 
for work, due to such factors as depression, lack of self-confidence, 
and lack of motivation. On a practical note, a commenter asserted that 
it is hard to identify job-ready individuals before they are enrolled 
because they will not yet have been assessed. Two commenters stated 
that they do not favor requiring participants to take community service 
assignments just so they can obtain job club/job search services.
    Two commenters stated that job clubs and soft skills training 
should be considered training since they include classroom instruction, 
lectures, and seminars. They argued that such soft skills training, 
which is tailored to seniors, is not provided by the One-Stops. Other 
commenters stated that often One-Stops depend on SCSEP to provide soft 
skills training to seniors, and that which entity provides such 
training in a given locale can be the subject of negotiations and the 
resulting MOU. Several commenters noted that the effects of not 
providing stand-alone job search/job referral assistance would be 
magnified in rural areas, where One-Stop services are often at great 
distances. One commenter recommended expansion of counseling and job 
readiness training.
    With respect to interactions with potential employers, one 
commenter noted that networking and word-of-mouth are the sources of 
many referrals. This provision will ``negatively impact our ability to 
help older workers obtain jobs and employers from obtaining suitable 
help.'' Another commenter stated that ``[w]ith the emphasis on placing 
older workers into unsubsidized jobs, losing this valuable service 
would be not only detrimental to the participants, it would be counter 
to the goals'' of the SCSEP program. Another commenter noted that job 
search and job club activities provide the flexibility needed to bridge 
gaps between workers and employers.
    One commenter stated that this provision should be removed or the 
unsubsidized placement goals for SCSEP should be lowered to reflect 
this change, while another recommended deletion of this provision 
because its inclusion makes the work of the grantees more challenging 
with respect to meeting performance measures and makes it impossible to 
meet unsubsidized placement goals, thus risking sanctions and loss of 
funds. Another commenter recommended that ``DOL allow SCSEP, in some 
limited way, to provide job search and referral assistance and be able 
to count it.'' Another commenter stated that it would impair her 
agency's role as advocate of all older workers if it can't help all 
older workers get unsubsidized jobs and take credit for successes.
    Of those who agreed with the proposal, one suggested ``that the 
Department provide some latitude regarding this restriction,'' 
especially where One-Stops are geographically inaccessible. Another 
commenter recommended that the Department include in Sec.  641.560 
language similar to that in Sec.  641.535(c).
    The intent of this rule is to assure that grantees concentrate 
their efforts and limited funds on providing community service work 
assignments to those older workers who are most in need and who are 
enrolled in the program. The Department does not consider job search

[[Page 19032]]

and job referral activities to be training per se. Job search, job 
club, and job referral activities are available from a variety of 
sources in the One-Stop system. The Department sees no need for SCSEP 
grantees to duplicate those services.
    A number of SCSEP providers are offering job search and job 
referral services to seniors based on agreements with One-Stops. As 
noted in the Preamble to the NPRM, SCSEP providers who are working 
within the One-Stop framework can continue providing the agreed-upon 
services, both to SCSEP participants and to those who are not enrolled 
in the SCSEP. Those SCSEP providers that wish to address services to 
rural populations in particular may wish to address this issue in their 
MOUs with the One-Stops. If SCSEP grantees take on these activities, 
particularly if they do so for older workers generally, they should 
make appropriate financial arrangements in the MOUs. They should be 
compensated for their services by reducing their contributions to the 
One-Stops.
    Finally, grantees are not prohibited from conducting job club and 
job referral activities for enrolled participants. We have added a 
sentence to Sec.  641.535(c) to make this clear. However, individuals 
who are not enrolled (i.e., are not assigned to community service 
positions) cannot be counted as unsubsidized placements. This is 
because unsubsidized placements are based on authorized positions, 
which require legitimately enrolled individuals. This policy is a long-
standing element of program operations.
    With respect to the recommendation that the Department add language 
similar to that in Sec.  641.535(c) to Sec.  641.560, we believe that 
the language in Sec.  641.535 is sufficient.
What Types of Training May Grantees/Subgrantees Provide to SCSEP 
Participants? (Sec.  641.540)
    In proposed Sec.  641.540, the Department outlined the kinds of 
training that may be provided to SCSEP participants. Commenters raised 
five main issues. The first issue was whether community service in and 
of itself is to be considered training.
    Historically, grantees have framed community service in terms of 
training to encourage participants to look beyond community service 
assignments toward unsubsidized employment. That is a valid approach 
when feasible and is strongly encouraged. The training aspects of a 
community service assignment should be reflected in a participant's 
IEP. The kinds of training envisioned in this section, however, are 
those that occur outside of the community service assignment. For 
clarity, a second sentence has been added to paragraph (a): ``This 
section does not apply to training provided as part of a community 
service assignment.''
    Several commenters raised a second issue. They recommended 
modifying the language of Sec.  641.540(a) to say that training 
``should, when feasible'' rather than ``must'' be provided, given 
limited resources and the difficulty of providing training in a rural 
location.
    The Department believes that these commenters misunderstand the 
intent of the Proposed Rule. The rule requires that when grantees 
provide training, the training be ``realistic and consistent with the 
participants' IEP,'' not that grantees provide training in all cases. 
The rule is intended to reinforce the program's assessment and IEP 
requirements. We have added language in paragraph (a) to make clear 
that the rule applies when grantees are providing training to a 
participant.
    Commenters suggested that training also be permitted as part of 
private employment, and not just community service, to allow for 
greater flexibility and better service to participants.
    The Department is developing guidance on innovative ways to expand 
the permissible on-the-job training and work experience activities 
listed in the rule at Sec.  641.540(c).
    Commenters raised an issue about whether wages may be paid while 
participants are in training.
    The answer to this question is yes. We have added the statement 
``Participants may be paid wages while in training'' to paragraph (f).
    Several commenters asked if participants are limited with respect 
to the number of hours they may engage in training.
    There are no limitations on the number of hours in which 
participants may engage in training other than those that may be 
imposed by needs reflected in the IEP.
    Finally, one commenter asked whether training provided by other 
sources than grantees or subgrantees could be considered required 
training, or whether that term must be reserved for training provided 
through the SCSEP.
    Training provided by a One-Stop Center or any other source would be 
considered required training and Sec.  641.540(e) encourages grantees 
to seek training from the One-Stop and other locally available 
resources. In addition, paragraph (h) allows for ``self development 
training available through other sources during hours when not assigned 
to community service activities.''
    We also have substituted the word ``pay'' for ``reimburse'' in 
Sec.  641.540(g) to make it clear that grantees are not expected to 
make participants initially pay the costs of travel or room and board 
themselves.
What Supportive Services May Grantees/Subgrantees Provide to 
Participants? (Sec.  641.545)
    Proposed Sec.  641.545 listed various supportive services that may 
be provided to participants. Commenters noted that funds for supportive 
services are quite limited and another noted that at least some of the 
specified services are quite expensive. One commenter also inquired to 
what extent a project is required to provide these services, and to 
what extent this decision should be made at the project level. Other 
commenters questioned how funds can be spent to support employees 
placed in unsubsidized employment and, more specifically, how auditors 
would view such expenditures.
    To meet the needs of the seniors the SCSEP serves, grantees must 
make every effort to provide them the supportive services they need to 
be able to participate in their community service assignments. The 
Department recognizes that SCSEP grantees will not be able to provide 
all needed or desirable supportive services with grant funds. This 
regulation addresses this concern in two ways. First, it states that 
such supportive services may be provided. Secondly, paragraph (b) 
states that, where possible, grantees should use other resources to 
provide these services first. The Department agrees that the decision 
about what kind of supportive services to provide and how to provide 
them in a decision to be made on a case-by-case basis by the grantee or 
subgrantee. But the Department expects grantees and subgrantees to make 
every reasonable effort to provide participants with the supportive 
services provided for in their IEPs. To the extent that it is possible 
for a grantee to provide supportive services through other programs or 
resources, concerns about expenses and audits would not arise, as the 
costs would be borne by other organizations and thus no auditable SCSEP 
funds would be involved. As to funds spent by grantees for follow-up 
services, the statute permits such expenditures in section 
502(c)(6)(A)(iv) as allowable services which should resolve any 
questions that auditors may raise. Grantees may provide follow-up for 
up to 6 months

[[Page 19033]]

after an unsubsidized placement, which allows grantees to ensure 
retention in the program as required in subpart G of this part.
What Responsibility Do Grantees/Subgrantees Have To Place Participants 
in Unsubsidized Employment? (Sec.  641.550)
    In Sec.  641.550, the Department proposed that grantees ``make 
every reasonable effort to prepare participants who desire unsubsidized 
employment for such employment.''
    Several commenters addressed this section. Two commenters stated 
that some participants will want to remain in community service 
assignments indefinitely, and one noted that participants may have 
barriers that will make unsubsidized employment difficult if not 
impossible to obtain. A commenter recommended that ``[i]f participants 
can elect community service as their goal, they should not be factored 
into the placement goal population.''
    Two commenters stated that the goal for all participants should be 
unsubsidized employment. One commenter noted the omission in the 
Proposed Rule of Sec.  641.314 of the prior regulations, which states 
that ``grantees shall employ reasonable means to place each enrollee 
into unsubsidized employment,'' and recommended that this language be 
inserted in the Proposed Rule.
    As to the question of whether unsubsidized employment should always 
be a goal, it is the Department's view that the statute provides for 
the dual goals of community service and unsubsidized employment. While 
we acknowledge that some participants may desire to remain in community 
service placements indefinitely, the Department believes it to be the 
best practice to inform participants when they enter the program that 
the community service position is a not a job, but rather a training 
opportunity to obtain skills towards placement in an unsubsidized job. 
Should grantees wish to make unsubsidized employment a goal for each 
participant or move participants out of the program after a specified 
period of time, they must obtain the Department's approval as required 
in Sec.  641.570.
    As to whether participants whose goal is community service and 
participants whose goal is unsubsidized employment should be tracked 
separately for purposes of performance evaluation and time limitations 
in the program, the Department believes that it would be very difficult 
to maintain two tracking and reporting systems. Participants may well 
move from one group to the other, complicating record-keeping 
considerably.
    A commenter asked whether participants without a goal of 
unsubsidized employment could be exempted from the time limit in Sec.  
641.570.
    Since Sec.  641.570 does not establish a time limit, but merely 
authorizes grantees to do so with the Department's approval, the 
Department sees no need to exempt participants from it.
    A commenter observed that employer education and job development 
are crucial to placements in unsubsidized employment, and urged that 
the regulation further emphasize the need for collaboration with the 
One-Stop Center. Another commenter suggested that the proposed 
regulations ``[p]romote the increase of coordination with employers and 
private businesses in the area to increase the ratio of applicants to 
jobs.''
    The Department agrees that employer education and job development 
are crucial to placements in unsubsidized employment. We believe that 
the regulation adequately addresses this issue and have made no changes 
in the Final Rule.
    The Department also is engaged in outreach activities to employers 
to make them aware of our program and the benefits of utilizing older 
workers.
What Responsibility Do Grantees Have to Participants Who Have Been 
Placed in Unsubsidized Employment? (Sec.  641.555)
    Proposed Sec.  641.555 required grantees to contact participants 
within the first six months of unsubsidized placement to ascertain if 
they need supportive services, and at the six-month mark to determine 
whether the participant is still employed.
    One commenter commended the six-month follow up requirement. Two 
commenters stated that they consider this requirement an unfunded 
administrative burden, and another asked how program money (for 
supportive services) can be spent on individuals who have left the 
SCSEP program.
    Two other commenters stated that this section is redundant and 
should be removed on the basis of their comments on Sec. Sec.  641.140 
and 641.525, which address the propriety of information collection and 
administrative burdens imposed by such requirements.
    Two commenters noted the difficulty of obtaining information from 
employers. One commenter observed that ``[i]f the grantees are going to 
be allowed to use wage records to verify continued employment, the 
reporting agencies should be mandated to provide this information to 
the grantees.''
    With regard to the concern about administrative burden, the 
Department believes that the burden--which in most instances will 
consist of making one or two telephone calls--to be minimal. Neither of 
the comments discussing redundancy addresses the information that is 
the subject of this section. With respect to obtaining information from 
employers, the Department notes that no data collection beyond 
verification of unsubsidized employment is contemplated. We will 
provide additional guidance on how to determine retention in 
unsubsidized employment in the reporting instructions for the 
performance measures.
    The Department also recognized that grantees may have other follow-
up requirements deriving from the performance measures, such as the 
earnings increase measure, or other reporting requirements. Therefore, 
the Department has added the following sentence at Sec.  641.555(c): 
``Grantees may have other follow-up requirements under subparts G and 
H.''
    Supportive services, which are described in Sec.  641.545, may be 
provided to individuals who have left the program. Section 
502(c)(6)(A)(iv) of the OAA allows grantees to provide supportive 
services for follow-up activities. Also, the Department believes that 
the introduction of a 6-month retention performance measure provides 
the authority for grantees to spend grant funds to assist participants 
who have been placed in unsubsidized employment to retain that 
employment and to determine whether they meet the retention measure. 
Grantees may pay for these services through use of program funding 
under the ``other participant costs'' category. Decisions to pay for 
such services should be made locally and on a case-by-case basis, 
depending on the needs of the participant. Since funds in this category 
will be limited, grantees should be judicious in their spending for 
this purpose and clear in their criteria for making such expenditures.
May Grantees Place Participants Directly Into Unsubsidized Employment? 
(Sec.  641.560)
    In Sec.  641.560, the Department proposed that participants who are 
ready for placement in unsubsidized employment be referred to One-Stop 
Centers for appropriate services. This provision furthers the 
regulations' overall emphasis on the SCSEP's mission to serve those who 
are most

[[Page 19034]]

difficult to place and to coordinate with the One-Stop System. 
Commenters raised a variety of issues that centered on the relative 
merits of One-Stops and SCSEP grantees with respect to older workers; 
customer service considerations with respect to both participants and 
employers; and performance measures.
    With respect to the One-Stops, some commenters see them as variable 
in quality, and as not always considering service to seniors a 
priority, which results in the older workers having difficulty 
accessing the necessary services. A commenter noted that referring 
rural candidates to distant One-Stops would represent a hardship for 
the participants.
    A commenter noted that in some cases the One-Stops refer seniors to 
the SCSEP program for services, as the SCSEP providers will have the 
``time, patience, and knowledge'' to provide the necessary services, 
and if the One-Stops are to fill this role, they will need education 
about the special characteristics and needs of seniors. Commenters 
suggested that referrals to One-Stops be made in situations where the 
SCSEP is unable to meet the needs of the participants.
    Other commenters expressed the view that placement by the SCSEP in 
an unsubsidized slot would be quicker and represent better customer 
service for both the participant and the business than referral to a 
One-Stop, and that seeing such placements occur within the SCSEP 
program can also be a morale-booster for other participants. They noted 
that SCSEP providers often work hand-in-hand with potential employers 
to develop unsubsidized placements benefiting both parties as well as 
the participants in a complementary process that will be lost if this 
section is implemented. One commenter pointed out that referring 
participants to private sector jobs and counting the referrals as 
placements ``makes good business sense, is cost effective, and gets 
results. This is good use of taxpayer dollars.''
    Some commenters were concerned with the effect of the rule on 
performance results. They stated that the grantee should be able to 
take credit for those referrals as placements, especially given the 
emphasis on serving those most difficult to place. They cautioned that 
the emphasis on serving the hardest to serve would put grantees at a 
disadvantage in meeting performance standards, since the remaining 
participants would have the lowest skills and the greatest need for 
training.
    One commenter suggested that dual enrollment might be used in some 
cases, allowing both the One-Stop and the SCSEP to take credit for the 
placement, and another suggested that credit be given under ``other 
services provided.'' The commenter also stated that ``this regulation 
could result in an increased workload for title V providers in that it 
seems to require a much more intensive intake process than normal just 
to determine initial eligibility and make appropriate referrals. Also, 
this regulation does not allow title V providers to work with 
participant (sic) who need training, but not community placements.''
    The 2000 Amendments changed the SCSEP in a number of ways. One of 
the most important changes was the requirement for coordination between 
the SCSEP and the WIA and the One-Stop system. This requirement appears 
in several places in the OAA, in sections 502(b)(1)(O), 502(b)(4), 
502(c)(4), 503(b)(2), 505(c)(1), 510, 512, and 515(c)(5). Section 
641.560 acknowledges the coordination requirement. It also 
reemphasizes, as do several of the other provisions of this rule, the 
SCSEP's focus on serving those most in need. It is important to 
recognize that the SCSEP is not a general-purpose employment program 
for seniors. Rather, it is a program to place seniors who have serious 
barriers to employment in community service assignments which, combined 
with training and supportive services, may lead to unsubsidized 
employment.
    For these reasons, the Department believes that Sec.  641.560 
places a proper emphasis on coordination and service to the intended 
beneficiaries of the SCSEP. It is important to note, however, that the 
regulation is not phrased in mandatory terms. It is intended to serve 
as a reminder to grantees and subgrantees of the need to coordinate 
with the One-Stop system and to assign each its proper role. The 
regulation does not forbid SCSEP grantees from providing placement 
services for participants. Because of the limited funding available for 
placement services, the regulation encourages grantees to use the 
services already available from the One-Stop to provide these services. 
The Department recommends that the assignment of placement 
responsibilities be set out in the MOU with the Local Board. As 
provided in Sec.  641.220, however, grantees may not spend SCSEP grant 
funds to provide services, including placement services, to ineligible 
individuals.
    A number of commenters were concerned about the effect of Sec.  
641.560 on performance measures. As discussed previously and in subpart 
G, the Department intends to design the performance measures to take 
into account any changes in grantee operations that the new statutory 
requirements may engender. Whether by providing dual credit for 
referrals, by defining the cohort of participants against whom the 
placement is measured, or by some other means, the Department intends 
to design the performance measures to reflect, as closely as possible, 
actual grantee experience and performance. However, the practice of 
counting the placement of ineligibles or individuals who have not been 
enrolled in SCSEP as placements will not be continued in the 
performance measures.
What Policies Govern the Provision of Wages and Fringe Benefits to 
Participants? (Sec.  641.565)
    In Sec.  641.565, the Department described the policies governing 
the payment of wages and the provision of fringe benefits in this 
section of the regulation.
    The Department received several comments on this section. A number 
related to situations in which the State's minimum wage exceeds the 
Federal minimum wage. Some commenters commended the Department for 
acknowledging in the Preamble to the NPRM that grantees cannot fill the 
authorized level of positions allotted to them when their State minimum 
wage exceeds the Federal minimum wage and for stating that it would 
adjust performance measures to take that factor into account. 
Commenters suggested that the allocation of positions among the States 
be based on the State minimum wage in such instances or that additional 
funding be provided to States with higher minimum wages.
    As stated in the Preamble to the NPRM, it is the Department's 
intent to take a higher State minimum wage into account when setting 
performance measures. The formula for allocating funds among the States 
is set in section 506 of the OAA and is based on the ``cost per 
authorized position,'' which is defined by reference to the Federal 
minimum wage. Because of that definition, the Department cannot adjust 
the allotment of funds or positions among the States because of 
differing minimum wages. What it can do is take the higher minimum wage 
into account when setting the levels for performance measures. The 
Department appreciates commenters' support of the regulation on the 
uses of SCSEP funds for unemployment insurance or pension 
contributions.

[[Page 19035]]

    A commenter commended the Department's position on restrictions on 
using grant funds to pay the cost of unemployment insurance for 
participants or to contribute to retirement funds; another commenter 
asked for a complete prohibition against such uses of funds. The 
Department concurs with the comments relating to the use of grant funds 
to contribute to retirement funds, and has changed the rule to indicate 
that grant funds may not be used for this purpose under any 
circumstances. Given that the SCSEP is more focused on unsubsidized 
employment rather than long-term participation in community service, 
providing retirement benefits is inconsistent with the new goals of the 
program. In addition, the Department believes that the cost benefit 
ratio no longer favors this kind of expenditure with limited funds.
    The Department does not have the authority to override State 
unemployment compensation laws and so cannot prohibit the use of grant 
funds for unemployment compensation in States that require coverage.
    There were comments on Sec.  641.565(b)(1)(ii)(A), relating to 
physical examinations for participants and compliance with the Health 
Insurance Portability and Accountability Act (HIPAA) requirements, and 
asking the Department to recognize that it was appropriate to ask a 
participant returning from worker's compensation to obtain a ``fitness 
to work'' release from his or her personal physician.
    SCSEP grantees would not be constrained by the requirements of 
HIPAA. The physical examination provision presents no issue concerning 
voluntary disclosures to grantees by participants. The results of the 
physical examination are to be reported to the participant and are not 
required to be disclosed to the grantee. Also, grantees are not HIPAA-
covered entities.
    The Department has no authority to require participants returning 
from workers' compensation to obtain a ``fitness to work'' release. 
That is a matter to be resolved by grantees' and host agencies' 
policies, taking into account applicable antidiscrimination laws.
Is There a Time Limit for Participation in the Program? (Sec.  641.570)
    Section 641.570 provided that, although there is no time limit on 
participation in SCSEP, grantees may establish one with the 
Department's approval. If the grantee chooses to establish a time 
limit, it must provide for a system to transition the participant into 
unsubsidized employment or other assistance before the end of the 
specified period. In the Preamble to proposed Sec.  641.570, the 
Department stated that the regulation provides that there is no time 
limit for participation in the SCSEP program, but it anticipates that 
most participants will spend no longer than two to three years in the 
program.
    The Department received a variety of comments, with several 
organizations opposing the Department having any expectations about 
time frames. One commenter thought that time limits are unreasonable 
because assistance other than unsubsidized employment is not likely to 
be forthcoming. Another thought that the two-to-three-year expectation 
should be removed because some individuals will never be able to move 
on to unsubsidized employment and it is not fair to treat differently 
those who can from those who cannot. Still another commenter was wary 
of stating expectations at all for fear they would be considered 
entitlements.
    One commenter felt that an SCSEP provider would lose the respect of 
the participants if it imposed ``arbitrary'' time frames and 
recommended that ``[i]f time limits are truly beneficial, they should 
be mandatory. However, the time limit should be five to seven years 
rather than two or three years.'' Another advocated a time limit for 
those under 70 years old, but not for those older, since the older 
group faces discrimination barriers that the younger group does not.
    Another commenter noted that some individuals are quite content 
with their subsidized placements and that a rotation system and time 
frame would be useful for those who are capable of moving into 
unsubsidized employment, with waivers available for those who need more 
time or who cannot make the transition. Another commenter suggested 
exemptions for participants who are assigned to work with/for the 
grantee itself.
    Finally, one commenter noted that this provision does not address 
how much time must elapse before a former participant of one program 
may be ``picked up'' by another SCSEP in the area.
    The regulation is clear that there is no requirement for grantees 
to establish time limits on enrollment. Whether to establish time 
limits, and the duration of and conditions under which the time limits 
will be administered, is a matter for the grantee to determine. The 
Department must, however, approve any time limit policy. The 
``expectation'' stated in the Preamble to the NPRM is just a guideline. 
The Department believes that the language of this section provides 
sufficient flexibility for grantees to adopt or not adopt time 
limitations that fit their circumstances.
    The regulation neither prohibits nor imposes any time limit for an 
SCSEP provider from picking up a former participant of another SCSEP 
provider in the same area.
May a Grantee Establish a Limit on the Amount of Time Its Participants 
May Spend at Each Host Agency? (Sec.  641.575)
    In Sec.  641.575, the Department proposed that a grantee may set 
limits on how long participants may remain at a host agency, as long as 
the Department approves and the limits are noted in participants' IEPs.
    All but one commenter opposed this provision. The commenter that 
favored this provision stated that grantees must set a fair policy and 
participants should be made fully aware of the parameters before they 
begin participation.
    One commenter stated that ``[i]t would be better to establish 
separate tracks for participants choosing community service and for 
those choosing employment. Slots should be reserved (perhaps on a 50/50 
basis) for each track and new enrollments would be based on the 
applicant's goal.'' This commenter also predicted that terminations of 
enrollment based on time frames would lead unemployment insurance costs 
to rise, and suggested funding that extends beyond the Program Year for 
this purpose.
    Section 641.575 is simply an authorization for grantees to adopt a 
rotation policy; it is not a requirement. Several commenters who 
opposed this provision seem to have interpreted it more generally than 
intended, i.e., as relating to participation in the SCSEP program as a 
whole, rather than to the amount of time spent at a particular host 
agency. Many grantees find that setting time limits at host agencies is 
advantageous because participants thus do not become comfortable in 
their community service assignments and do not view their community 
service assignments as an entitlement. Also, rotation to various host 
agencies may help an individual acquire new and/or marketable skills 
that will also lead to an unsubsidized placement. It also serves to 
prevent maintenance of effort violations with host agencies. As with 
the previous section, however, this provision represents an option, not 
a mandate. The Department does not believe that any changes to this 
section are needed. Grantees should take unemployment insurance costs 
into account in deciding whether to adopt a rotation policy.

[[Page 19036]]

Under What Circumstances May a Grantee Terminate a Participant? (Sec.  
641.580)
    This section delineated rules for terminating participants: (1) The 
bases for termination; (2) the procedures for informing the participant 
of the reasons for termination; (3) the requirement to be consistent 
with the Department's administrative guidelines, including appeal 
rights, and (4) the prohibition against termination solely on the basis 
of age.
    We received several comments on this section. Several commenters 
recommended that additional examples be cited. Another suggested that 
the Department identify benchmarks (i.e., specific numbers) to define 
the term ``reasonable'' as applied to refusal of job offers. One 
commenter suggested that in the circumstances defined under Sec.  
641.580(a), the grantee or subgrantee must immediately terminate the 
participant.
    Additional examples of circumstances that warrant termination will 
be provided in administrative guidance. The Department chooses to defer 
to the discretion of the grantee to determine what constitutes a 
``reasonable'' number for refusals of job offers. The Department has 
modified Sec.  641.510 to provide that grantees or subgrantees must 
immediately terminate participants who provided false information for 
eligibility purposes and has added the word ``immediately'' to Sec.  
641.580(a) as well.
Are Participants Employees of the Federal Government? (Sec.  641.585)
    Proposed Sec.  641.585 provided that SCSEP participants are not 
Federal employees, but that where a grantee or host agency is a Federal 
agency, Sec.  641.590 applies. One commenter opposed this provision on 
the basis that the definition of employee status should derive from 
Federal law for the sake of uniformity.
    The OAA, at section 504(a), clearly states that SCSEP participants 
are not to be considered Federal employees.
Are Participants Employees of the Grantee, the Local Project and/or the 
Host Agency? (Sec.  641.590)
    Proposed Sec.  641.590 provided that the grantee must consult with 
an attorney to determine whether its workers are employees of the 
grantee, the local project, or the host agency.
    Commenters had a variety of objections to this provision. One 
commenter opposed classifying participants as employees of the grantee, 
since grantees cannot provide the level of supervision normally 
envisioned in an employer-employee relationship, and another opposed 
classifying participants as employees of either the grantee or the host 
agency. One commenter noted that participants are employees in some 
respects (e.g., payroll matters) but not in other respects (e.g., 
employment discrimination). Another commenter argued that, if 
participants are classified as employees, State employment laws may be 
brought to bear, and this perspective is not appropriate for SCSEP 
participants.
    Two commenters stated that hiring attorneys is too costly and 
suggested that the Department obtain a blanket determination from the 
Internal Revenue Service (IRS) regarding whether SCSEP participants are 
employees. A commenter suggested that the Department make ``an 
affirmative statement that enrollee participants are not employees of 
SCSEP grantees,'' and another commenter noted that in the past, 
appropriations language has addressed this ongoing issue.
    The statute is silent on participants' status as employees, with 
the exception of stating that participants are not Federal employees. 
The Department's primary concern is to assure that participants are 
protected in cases of injury and potential tort liability for 
activities that occur within the scope of the participant's duties in a 
community service assignment. Generally, participants will be covered 
by the workers' compensation provision in section 504(b) of the OAA. 
Should participants become involved in work-related incidents that 
injure others, however, there is no similar provision for liability 
coverage. To the extent that a participant is considered an employee, 
either of the grantee or of the host agency, the participant will have 
that same liability coverage as other employees. It may be that the 
best solution is for grantees to adopt policies to assure that 
participants receive this kind of liability coverage, from whatever 
source, regardless of whether the participants are considered employees 
for other purposes.
    As at least one commenter pointed out there are some indicia that 
participants are employees of the grantees and others that they are 
not. We believe this is a matter of State law and perhaps a matter best 
resolved in reauthorization. In the meantime, with respect to the 
question of liability in case of employee negligence while in a 
community service assignment, we do not have a single Federal answer. 
For this reason is it not possible for the Department to issue a 
blanket statement, as requested. Grantees will have to either adopt a 
policy to provide liability protection or determine the status of 
participants as employees. We have revised the Final Rule to delete the 
requirement to ``consult with an attorney.''

Other Issues

    The Department received several other comments on issues covered in 
subpart E and which were not discussed in the Proposed Rule. These 
comments concerned the average number of hours of work per week to be 
offered to participants and the maximum number of hours per grant year 
per participant.
    The Department did not regulate the average number of hours per 
week to be offered to participants because there is a statutory 
definition at OAA section 515(2)(a) that defines part-time employment 
within a workweek as at least 20 hours. In addition, the Department 
thought that this was an area in which some flexibility could be 
provided to grantees, given that there will be a community service 
performance measure and because grantees will need to balance this 
measure with the unsubsidized placement performance measures, as 
discussed in Subpart G. That being said, grantees should ensure that 
participants work on a part-time basis and should monitor the hours so 
that they do not become full-time employees.
    As to the issue of the maximum number of hours per year that a 
participant can work in a community service assignment, the Department 
chose to allow a reasonable level of flexibility. The prior 1300-hour 
requirement is still a benchmark and good practice that the Department 
strongly encourages grantees to follow.

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

What Is the Purpose of the Private Sector Training Projects Authorized 
Under Section 502(e) of the OAA? (Sec.  641.600)
    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. In Sec.  
641.600, the Department proposed to provide more funding for the 
section 502(e) program and to select the grantees through a full and 
open competition for 502(e) funds. Before the enactment of the 2000 
Amendments, SCSEP grantees had been allowed to routinely set aside a 
portion of their own funds to underwrite most 502(e) activities. There 
was a limited

[[Page 19037]]

competition among the grantees only for a small section 502(e) set-
aside.
    Many commenters protested that the elimination of the set-aside 
practice would impede their ability to meet placement performance 
measures. Many commenters objected to limiting 502(e) funds to the 
winners of a competition, some questioned the Department's authority to 
do so, and others questioned whether small grantees could fairly 
compete against national organizations. A number of commenters 
suggested a pro-rated equitable distribution of funds, providing for a 
recapture of refused funds that could be reallocated or competed. 
Several commenters said State budget cutbacks limited the ability of 
host agencies to provide unsubsidized placements to ``compensate'' for 
the new 502(e) requirements. One commenter expressed concern for 
participants in current 502(e) projects who have not completed their 
training.
    The practice of allowing 502(e) projects to be funded out of the 
general SCSEP grants is not permitted by the 2000 Amendments. Section 
502(e) sets up a specific set aside program with different rules from 
``primary'' SCSEP grants.
    To provide for maximum flexibility in the award of 502(e) funds in 
subsequent Program Years, however, the Department agrees to eliminate 
the phrase ``through an open competition'' in Sec.  641.600 of the 
Final Rule. This will enable the Department to explore other award 
mechanisms in any given Program Year. However, full and open 
competition is consistent with the intent of the OAA and Department 
policy, and ensures the selection of the best providers, thus 
contributing to the betterment of the SCSEP overall. It provides an 
opportunity for private business concerns to compete, as specified in 
the OAA. The Department also believes that competing this program 
strengthens the unsubsidized placement goals of the program as a whole.
    Commenters expressed concern that awarding section 502(e) grants 
through competition will prevent their use of funds set aside under 
their grants to promote private sector placements. The Department 
believes that this concern can be addressed through innovative use of 
funds in their existing grants. Nothing in the statute forbids the use 
of funds in the ``other participant costs'' cost category or in the 
``wages and fringe benefits'' cost category for appropriate training 
expenditures. However, grantees using SCSEP funds for such activities 
are not exempted from normal SCSEP requirements--e.g., non-Federal 
share--as are actual 502(e) recipients. The Department will issue 
administrative guidance that expands on innovative ways to expand on 
permissible on-the-job training and work experience activities listed 
in the rule at Sec.  641.540(c).
How Are Section 502(e) Activities Administered? (Sec.  641.610)
    In this section, the Department described who may apply for section 
502(e) projects, what private sector activities should be emphasized, 
and the need to coordinate 502(e) activities with WIA title I and SCSEP 
projects operating in the area whenever possible. In the past, private 
businesses were not permitted to apply for 502(e) projects.
    There were several comments on paragraph (a) of this section, most 
of which were concerned about allowing private businesses to compete. 
The commenters were concerned that private businesses would be too 
narrowly focused in their implementation of the section 502(e) 
program--would only train for specific jobs they needed and would not 
meet the needs of many older workers for training in other kinds of 
jobs which might use their previous skills. Some commenters argued that 
existing grantees could do a better job of providing private sector 
placements because of their ability to focus on both the employer and 
the participant's needs. The commenters were also concerned that the 
regulations did not make clear that the priority requirements of the 
OAA applied to section 502(e) projects and that providing section 
502(e) grants to private businesses would undermine the community 
service aims of the SCSEP.
    One commenter suggested adding a paragraph (d): ``Private sector 
grantees must coordinate section 502(e) training activities with SCSEP 
grantees operating in the service delivery area, with particular regard 
to participant recruitment and co-enrollment, and must adhere to the 
Governor's State Senior Employment Services Coordination Plan and 
equitable distribution.''
    The Department believes that the inclusion of ``private business 
concerns'' as entities with which the Department is authorized to enter 
into agreements is in accord with Congressional direction to include 
private businesses in the section 502(e) program. This is particularly 
clear when the language of section 502(e) is contrasted with the 
language of section 502(b)(1) which does not mention private businesses 
as potential grantees for primary SCSEP grants. Although the Department 
has not in the past included private businesses as grantees in the 
section 502(e) program, the Department thinks that their inclusion is 
more consistent with the statute, with Departmental polices favoring 
competition, and with the 2000 Amendments' increased emphasis on 
placements in unsubsidized employment.
    The Department does not intend, nor does it believe, that enabling 
private business concerns to apply for 502(e) funds will necessarily 
disadvantage current grantees. If, as suggested by the comments, 
current grantees have good programs for training and placing older 
workers for placement in private sector jobs, there is no reason why 
their proposals to perform those services should not be successful in a 
502(e) competition. The Department intends that the same standards for 
using innovative work modes and for emphasizing second career training 
will apply to all applicants.
    The Department agrees that section 502(e) grantees should 
coordinate with the grantees in the areas in which they operate and 
that they are subject to the same requirements as other grantees. We 
think, however, that the regulations, especially Sec. Sec.  641.610(c) 
and 641.660, already so provide.
How May an Organization Apply for Section 502(e) Funding? (Sec.  
641.620)
    We did not receive any comments on this section. Nevertheless, in 
light of our decision, discussed above, to retain flexibility in the 
method by which section 502(e) funds will be awarded, we have revised 
the rule to delete the reference to a Solicitation for Grant 
Applications and to remove the phrase ``or other similar instrument'' 
at the end of the section. The section now provides that organizations 
may apply for section 502(e) grants by following instructions that the 
Department will publish in the Federal Register or in another 
appropriate medium.
What Private Sector Training Activities Are Allowable Under Section 
502(e)? (Sec.  641.630)
    This section listed the activities that are authorized for private 
sector training under section 502(e). In particular, paragraph (a)(7) 
indicated that job clubs or job search assistance are only allowable in 
combination with other listed services or in conjunction with the local 
One-Stop Delivery System.
    Many commenters believed that grantees should have the flexibility 
to provide job clubs or job search assistance as stand-alone 
activities. Some suggested this restriction would

[[Page 19038]]

have a negative effect on achievement of unsubsidized placements.
    One of the key priorities of the SCSEP is to serve the hardest-to-
serve of the eligible population. Consistent with that focus and given 
the limited funds that are available, eligible individuals who are 
essentially job-ready should be referred to the One-Stop Delivery 
System. Section 502(e) funds, which are limited to no more than 1.5 
percent of the appropriation, can then be targeted to prepare 
participants most in need for unsubsidized employment. Section 502(e) 
specifically focuses on providing ``second career training'' leading to 
placement in private sector jobs. The Department does not view stand-
alone job clubs or job search activities, which are essentially aimed 
at individuals who are already job ready, as fitting within the type of 
training Congress envisioned for section 502(e) projects. Where job 
clubs or job search assistance are used to assist someone who has 
received or is receiving second career training to successfully find a 
job, they are allowable section 502(e) activities. The Department 
addresses this issue in more detail in Sec.  641.535(c).
    The Department acknowledges that focusing on the hardest-to-serve 
presents challenges. We address the negotiation and establishment of 
performance measures in Subpart G and later administrative issuances.
How Do Private Sector Training Activities Aauthorized Under Section 
502(e) Differ From Other SCSEP Activities? (Sec.  641.640)
    Section 641.640 listed the differences between activities under 
section 502(e) grants and other SCSEP activities. These differences 
include that section 502(e) projects are not required to have a 
community service component, that they focus solely on second career 
training leading to private sector employment, that non-Federal share 
is not required, and that private businesses are eligible for 502(e) 
grants.
    The Department received several comments on this section. One 
commenter urged the Department to preserve the historical balance 
between unsubsidized employment and community service.
    The purpose of the SCSEP is to provide both community service and 
unsubsidized employment opportunities. The Department views the section 
502(e) program as being primarily related to the unsubsidized 
employment focus of the program. However, 502(e) participants must also 
be co-enrolled in a community service SCSEP project.
    Another recommended that the 10 percent non-Federal share 
requirement apply to 502(e) activities as it does to regular SCSEP 
grants.
    The Department is authorized to pay all of the costs of section 
502(e) activities. The Department believes that Congress' authorization 
to pay the entire costs of section 502(e) grants and its expectation 
that section 502(e) grants will involve some activities unique to the 
SCSEP suggests an intent that the Department not impose a non-Federal 
share requirement. Thus, the Department will not require a non-Federal 
share from any section 502(e) grantee; but such recipients may choose 
to provide non-Federal share funds and are encouraged to do so. We have 
revised the regulation to include the option to provide a non-Federal 
share.
    One commenter recommended that if the Department contracts directly 
with private businesses for section 502(e) projects, that it let the 
SCSEP grantees in the area know who the successful 502(e) applicant is 
so that they can refer eligible individuals for 502(e) services. This 
commenter further recommended that if a referral by an SCSEP grantee to 
a private business 502(e) grantee results in an unsubsidized placement, 
then that placement should also be counted for the SCSEP grantee.
    The Department agrees to identify all section 502(e) awardees and 
will post the names and locations of all such awardees on the SCSEP 
website. The Department also agrees that a referral from an SCSEP 
grantee to a different 502(e) grantee that results in an unsubsidized 
placement will also be credited to the SCSEP grantee. We have added 
language in Sec.  641.680 to indicate that placement credit for a 
referred participant may also be credited to the referring SCSEP 
grantee. However, if the SCSEP grantee is also a 502(e) grantee, the 
unsubsidized placement of the participant may only be counted once.
Does the Requirement That Not Less Than 75 Percent of the Funds Used To 
Pay Participant Wages and Fringe Benefits Apply to Section 502(e) 
Activities? (Sec.  641.650)
    Section 641.650 provided that the requirement that not less than 75 
percent of SCSEP grant funds be expended for wages and fringe benefits, 
either to the 502(e) grant if the grantee receives only a 502(e) grant 
or to the entire grant if the 502(e) grantee is also an SCSEP grantee.
    The Department received several comments on this section. 
Commenters thought that the application of the 75 percent requirement 
to section 502(e) grants, as stand-alone grants was impractical. One 
commenter said that that it would make coordination between a 502(e) 
grantee and an SCSEP grantee more difficult since both programs would 
want to spend wage funding to meet the 75 percent requirement. Another 
commenter asked that the requirement for enrollee wages should be 
reduced to at least 65 percent to free up more funds for more intensive 
training that will help ensure a successful transition into 
unsubsidized employment. That commenter suggested that more 502(e) 
funds be awarded in the competitive process to those that already have 
SCSEP grants to mitigate the burden of the 75 percent requirement.
    The Department interprets section 502(c)(6)(B) of the Act, which 
requires that ``[n]ot less than 75 percent of the funds made available 
through a grant under this title shall be used to pay wages and fringe 
benefits,'' to mean that when the 75 percent requirement applies to all 
grants made with title V funds, including section 502(e) grants. The 
Department will continue to permit SCSEP grantees receiving 502(e) 
funds to apply the 75 percent requirement to the combined total of its 
funds. While we recognize that the requirement may cause operational 
problems, there is no authority in the OAA to waive the 75 percent 
requirement for entities that only receive a 502(e) grant.
    One commenter asked for more flexibility in 502(e) grants, 
suggesting that limiting placements to private business makes it too 
difficult for grantees to use the funds to best serve older workers.
    Section 502(e) placements cannot be with public agencies or non-
profits. Section 502(e) specifies that placements must be made with 
private business concerns. In addition to for-profit organizations, we 
interpret private business concerns to also include any for-profit 
component of a non-profit organization.
Who Is Eligible to Participate in Section 502(e) Private Sector 
Training Activities? (Sec.  641.660)
When Is Eligibility Determined? (Sec.  641.665)
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 provided that an eligible individual may be 
simultaneously enrolled in a section 502(e) and a community service 
SCSEP

[[Page 19039]]

project operated by two different SCSEP grantees. (All section 502(e) 
participants must also be co-enrolled in a community service SCSEP 
project, whether the projects are operated by a single grantee or by 
two different grantees.) Under these circumstances, the Department 
expects grantees to work together to ensure that they are providing 
complementary and not duplicative services.
    The Department received two comments on this section, both of which 
commended it for this clarification. The regulation is unchanged.
How Should Grantees Report on Participants Who Are Co-Enrolled? (Sec.  
641.680)
    We have revised this section to reflect our earlier-stated 
agreement that credit for the placement of a referred SCSEP participant 
may be shared by both the section 502(e) grantee and the referring 
SCSEP grantee. However, if the SCSEP grantee is also the section 502(e) 
grantee, the placement of the participant may only be counted once.
How Is the Performance of Section 502(e) Grantees Measured? (Sec.  
641.690)

Subpart G--Performance Accountability

What Performance Measures Apply to SCSEP Grantees? (Sec.  641.700)
    Section 641.700 described the four SCSEP performance accountability 
indicators listed in section 513 of the OAA: Number of persons served; 
community services provided; placement into and retention in 
unsubsidized employment; and satisfaction of participants, employers, 
and host agencies. In addition, this section adds the new earnings 
increase common performance measure.
    Several commenters had suggestions and questions about the 
structure, cost and burden, clarity, and removal of the performance 
measures.
    Structure of Performance Indicators. Commenters addressed the 
structure of the proposed performance definitions. Although many 
commenters agreed that performance indicators are essential to ensure 
SCSEP grantee accountability, many commenters also believed that the 
indicators as defined will promote ``creaming,'' by enrolling 
individuals who will be easier to serve and produce positive program 
outcomes. One commenter believed that changing the definition for 
unsubsidized placement and retention would increase the emphasis on 
these performance measures, effectively deterring the original intent 
of the program to serve those with the poorest employment prospects. 
Other commenters suggested that the definitions take into consideration 
the older population that the SCSEP is serving by including incentives 
for grantees to provide services to those participants most difficult 
to place. One commenter suggested that because the structure of the 
performance measures is an effort to closely align the SCSEP with the 
WIA system, the alignment of SCSEP and WIA definitions, and more 
specifically the definition for unsubsidized placement, would be a more 
accurate comparison of program performance.
    One commenter urged that the rules not be implemented, unless 
approved by OMB for paperwork reduction requirements. Another commenter 
questioned the validity of the definitions carrying equal weight 
without taking into consideration the retention rates, wage increases, 
and unemployment rates in rural areas. Finally, one commenter believed 
applying common performance measures to the SCSEP will not 
appropriately measure the performance because of the dual purposes of 
the program, which are job training and employment, and community 
service.
    Cost and Burden of Performance Indicators. Commenters addressed the 
issue of the cost and burden of implementing the performance measures. 
Some commenters believed the new responsibility that accompanies the 
change in performance measure definitions will increase the 
administrative cost for all SCSEP sponsors and employers. Another 
commenter was concerned about the impact of reporting and data 
collection requirements on staff time. One commenter suggested the 
Department provide forms or a software program and training. Three 
commenters suggested an increase in other enrollee costs and 
administrative funding. Commenters asked if grantees will be provided 
with alternative means of securing information in cases of non-
cooperation. Finally, one commenter questioned the burden of asking an 
employer to fill out a satisfaction survey, especially when the 
employer has never heard of the agency or organization from which the 
survey came.
    Clarification of Indicators. Commenters believed that the 
performance measure definitions, or portions of the definitions, needed 
clarification. Some commenters asked for further clarification of 
``total number of participants served'' under ``the number of 
individuals served'' performance indicator. Another commenter asked for 
clarification of both the difference in the State's minimum wage as a 
factor in determining the number of persons served, and whether income 
on an initial application is compared to income at the point of 
unsubsidized job placement when determining earnings increase. Two 
commenters asked for an explanation of the difference between the 
proposed placement measure, participants placed to the total number of 
participants, and the current placement measure, participants placed to 
the authorized slots. Finally, with regard to ``customer satisfaction 
of participants,'' one commenter asked when customer satisfaction 
surveys are to be completed and at what frequency should they be 
conducted.
    Removal of Indicators. A few commenters believed that some 
performance measures, or portions of the measures, should be removed 
from the Final Rule. Most of these commenters urged the Department to 
reject the proposed definition comparing both the number of 
participants placed into and number of participants retained in 
unsubsidized employment to the total number of participants. Commenters 
asserted that the proposed placement and retention measure limits the 
options available to achieve goals that are inconsistent with the 
program goal of placing more participants, and that the end result will 
hurt the older workers, especially those with health limitations or who 
live in remote areas. Three commenters believed the six-month retention 
factor for unsubsidized employment is far too stringent for the 
population that the SCSEP serves. Some commenters believed the earnings 
increase indicator is not an accurate measure, because many individuals 
retire from full-time employment and seek part-time employment, which 
would cause the earnings increase to be negative. One commenter 
believed the employment entrance and retention measures are 
duplicative. Further, the commenter believed community service does not 
seem to apply to 502(e) grants, which are a required project activity 
for the regular SCSEP projects.
    The measures listed in Sec.  641.700(a) are statutory and cannot be 
changed. While the Department has some discretion about the adoption of 
the earnings increase measure in Sec.  641.700(b), the Department has 
made a policy decision in consultation with OMB to implement the common 
measures to the extent possible in all Department-funded workforce 
development programs. As explained in the Preamble to the NPRM, the 
definitions for two of the common measures cannot be adopted because of

[[Page 19040]]

different definitions in OAA section 513(c)(2).
    The Department recognizes that administering a performance 
measurement system will increase administrative costs for grantees. 
Since the statute limits the amount of administrative funds available 
to grantees, the Department cannot accede to requests to provide 
additional administrative funding beyond those limitations. The 
Department will, however, recognize that the increased costs occasioned 
by the performance measurement are a legitimate reason for requesting 
an increase in administrative funds to the 15 percent limit permitted 
by OAA section 502(c)(3)(B)(1). The Department will also make every 
effort to reduce the costs of administering the performance measurement 
system through the provision of technical assistance and training and 
through the development, in consultation with grantees and other 
stakeholders, of data collection and reporting methods that will reduce 
the costs of the performance measurement system to the extent possible. 
The Department will, of course, follow the requirements of the 
Paperwork Reduction Act before requiring the use of forms or other data 
collection methods.
    The Department also recognizes that the implementation of a 
performance measurement system has the potential to change the way 
grantees operate. There may be, as some commenters suggested, a 
tendency toward ``creaming'' occasioned by the placement and retention 
and participants served measures. On the other hand, the community 
service and greatest economic and social need measures emphasize the 
community service and service to those most in need goals of the SCSEP 
and will have some offsetting effect on any tendency to cream. Other 
provisions of these regulations, like the limitation on stand alone job 
clubs and job referral services, will also have the effect of reducing 
creaming. The Department intends to work with the SCSEP community to 
shape the performance measures in ways which will recognize and reward 
attainment of all of the SCSEP goals and will recognize the operational 
changes that the 2000 Amendments will require, and will issue more 
detailed administrative guidance.
How Are These Performance Indicators Defined? (Sec.  641.710)
    OAA section 513(b) lists four performance indicators with multiple 
subparts for several of the indicators. The Proposed Rule clarified the 
indicators by severing many of the indicators. This section provides 
definitions for determining each of the measures along with the 
additional indicator of earnings increase.
    The Department received a significant number of comments on these 
definitions. Many of the comments requested more details on the 
definitions and, in some cases, requested that the Department issue 
Older Worker Bulletins with more detailed information. Other commenters 
raised concerns that the performance measures recognize the differences 
in the population served by the SCSEP and the geographic isolation of 
some participants, particularly in rural areas.
    The Department's intent in structuring the performance measurement 
regulations was to provide only basic definitions in the regulations. 
The details of the system's implementation will be developed in 
consultation with the SCSEP community and provided in an Older Worker 
Bulletin and/or Federal Register Notice. As stated elsewhere in this 
Preamble, the Department intends to work with the SCSEP community to 
make sure that the performance measures system accurately measures the 
actual operations of the program and that the system is administered in 
a way that recognizes and encourages the goals of the SCSEP.
    Commenters raised specific issues on the definitions themselves. We 
address these comments below.
    Number of Persons Served (Sec.  641.710(b)(1)). Several commenters 
agreed with the proposed definition and thanked the Department for its 
critical adjustment to the definition, which accounts for differences 
in the wage rates paid to participants as required by State law. The 
Department appreciates those comments.
    Community Services Provided (Sec.  641.710(b)(3)). Some commenters 
raised concerns about whether the definition of community service 
includes particular kinds of activities, including administrative work 
and job development for the grantee or subgrantees and whether such 
activities would be counted in determining this measure.
    The definition of community service at Sec.  641.140 and at OAA 
section 516(1) is intended to be illustrative. The Department will 
resolve these issues as we consultatively develop the details of the 
performance measurement system.
    Placement into Unsubsidized Employment (Sec.  641.710(b)(4)). A 
number of commenters disagreed with the proposed regulation's use of 
total number of participants as the denominator in the definition of 
the placement into unsubsidized employment measure. They pointed out 
that this definition differs from the current practice of measuring 
placements against the number of authorized positions (slots). Several 
commenters argued that the new definition would substantially reduce 
placement rates, bringing many grantees below the statutorily required 
20 percent placement rate and substantially below the Department's 35 
percent Government Performance and Results Act of 1993 (GPRA) goal. 
Commenters suggested either retaining the current definition or 
aligning the definition with WIA and measuring against total exiters.
    The Department agrees and will collect data consistent with the 
current practice for calculating unsubsidized placements. Therefore, 
the language of Sec.  641.710(b)(4) has been modified to replace ``the 
total number of participants'' with ``the total number of authorized 
positions.''
    Retention in Unsubsidized Employment (Sec.  641.710(b)(5)). All 
comments received on this provision asserted that the measure of 
retention that makes sense is the number of participants still in 
unsubsidized employment divided by the number of participants placed in 
unsubsidized employment. Some commenters questioned how the rate of 
retention will be measured for participants placed in the second six 
months of the grant.
    The Department agrees with the comments about the definition. The 
retention denominator has been changed to ``those who are employed in 
the first quarter after exit''--i.e., the number placed.
    Although grants are only for one year, the one-year grants may be 
extended for up to three years once this Final Rule is published. Thus, 
the program will continue, as will many grantees and subgrantees. The 
process of measuring retention rates will be ongoing and all placements 
will count toward the measure.
    Earnings Increase (Sec.  641.610(b)(9)). The Department proposed to 
add the additional performance measure of earnings increase which 
measures the percentage change in earnings from pre-registration to 
post-program, and between the first and third quarters after exiting 
the program. Several comments addressed this proposed performance 
measure. Some commenters believed the earnings increase measure worked 
against the older population the SCSEP is meant to serve. Because the 
SCSEP is supposed to work with the hardest-to-serve and most-difficult-
to-place, the commenters asserted that the earnings

[[Page 19041]]

increase measure is not feasible. One commenter believed the vast 
majority of participants who are attracted to community service remain 
satisfied with minimum wage and are highly unlikely to post significant 
earnings increases. Another commenter asserted that part-time workers 
frequently do not receive a salary increase until after 12 months of 
employment. Two commenters believed that many older workers need to 
work part-time because of health, transportation, and social service 
needs, and it would be difficult to measure benefits. One commenter 
believed gathering wage and benefit increase information could be a 
violation of privacy. Finally, one commenter suggested expanding the 
definition of earnings increase to include such non-wage factors as 
increases in fringe benefits and reduction in transportation costs.
    OAA section 513(b)(5) authorizes the Secretary to add performance 
indicators. The Department has chosen to add earnings increase, one of 
the Common Measures, as an additional performance indicator. The 
Department will retain this measure consistent with its decision to 
implement the Common Measures across all employment and training 
programs. The Department recognizes that the commenters have raised 
legitimate concerns and will work with the SCSEP community to address 
them during the performance measures implementation process.
What Are the Common Performance Measures? (Sec.  641.715)
How Do the Common Performance Measures Affect Grantees and the OAA 
Performance Measures? (Sec.  641.720)
    The SCSEP is part of the Department's common performance measures 
initiative. This initiative has identified performance indicators that 
will be applied across Federal job training programs and has a common 
set of definitions and data sets. Those common performance measures are 
``entered employment,'' ``retention in employment,'' and ``earnings 
increase.'' Some commenters thought the proposed measures were not 
feasible because of the dual purpose of SCSEP, job training and 
employment, and community service. The commenters also asserted that 
the unique population served by the SCSEP cannot be measured 
appropriately by the application of common performance standards, 
particularly by the earnings increase measure.
    Several commenters highlighted a Government Accounting Office 
report that found older workers had different needs than other 
populations served by employment, and had different goals for career 
advancement. A few commenters believed the definitions for the 
performance measures, such as earnings increase, were too restrictive 
and hard to implement because they measure only one possible positive 
outcome from employment and, therefore, are not feasible. Several 
commenters recommended that the common performance measures be 
calculated in a more simplified manner and suggested using the 
definitions for placement into unsubsidized employment or retention in 
subsidized employment, as outlined in Sec.  641.710. Some suggested 
that performance measurements be adjusted based on factors enumerated 
in the Proposed Rule, such as unemployment, poverty or welfare rates, 
and proportion of participants served. Finally, some commenters asked 
for guidance on methods to track and collect the data for common 
performance measures.
    As discussed above, the Department is committed to adopting the 
Administration's new common performance measures initiative for 
employment and job training programs. In the case of the SCSEP, two of 
the measures, entered employment and retention in employment, are 
already required by the OAA, although the measures are defined slightly 
differently. The Department is committed to adopting the common 
performance measures' definitions for these two measures when the SCSEP 
is reauthorized. The common performance measures serve two useful 
purposes. They reduce the burden of data collection on workforce 
development program grantees and they permit a degree of comparison 
among various workforce development programs. The Department 
recognizes, however, that there are differences in the population 
served by the SCSEP, as there are in other workforce development 
programs, and will take these into account in administering the 
performance measurement system.
How Will the Department Set and Adjust Performance Levels? (Sec.  
641.730)
    The Department proposed to set levels of performance using a method 
similar to the WIA method of negotiating performance levels. The 
negotiations will occur before the beginning of each Program Year. The 
placement into unsubsidized employment measure has a statutory floor of 
20 percent, and may be negotiated with the grantees to establish a 
higher level. In negotiating levels with grantees, the Department 
proposed to set baseline goals. Adjustments to these negotiated levels 
of performance may be made only if they are based on the factors 
described in section 513(a)(2)(B) of the OAA. Grantees may propose 
adjustments to those levels at the beginning of, and during, the 
Program Year.
    Some commenters were concerned about how the performance levels 
would be set in negotiations. Some commenters suggested that the 
performance levels should not be set based on past performance because 
of the changes in the program. Some commenters thought that performance 
levels for all grantees should be set at the same level so as not to 
punish good performers. Many of the commenters were particularly 
concerned about the placement measure, and, in particular, the 
possibility that the Department might set the rate at more than 20 
percent. These comments variously argued that the proposed prohibition 
on stand alone job clubs and job referral activities and the proposed 
change in the baseline for measuring the placement rate to total 
positions and in the allocation of section 502(e) funds would make it 
more difficult to attain even the 20 percent placement rate. Other 
commenters argued that the program's focus on the hardest to serve and 
the characteristics of the population served make it very difficult to 
place participants. Some commenters said that there were disincentives 
to accepting unsubsidized employment, including loss of other benefits, 
specifically citing HUD housing benefits.
    One commenter believed the Department should look at the difference 
in participants' age and experience when comparing the performance 
measures of WIA to the SCSEP. The commenter believed that a higher 
placement goal, as proposed, would restrict the ability of the program 
to serve the population in rural areas and smaller communities, where 
sufficient employment opportunities do not exist. Some commenters 
believed that the SCSEP program mandate to target individuals who are 
elderly, low-income, and hardest to serve, makes setting performance 
levels difficult or impossible. In addition, barriers to employment and 
economic conditions should be taken into consideration. Finally, some 
commenters believed that an additional condition for performance level 
adjustment should be allowed for those States with a minimum wage 
higher than the Federal minimum wage, because the higher minimum wage 
in some States will limit the number of positions available and the 
placement targets may need to be adjusted.

[[Page 19042]]

    The Department agrees that performance baselines will have to take 
into account the changes in the program wrought by the 2000 Amendments 
and these regulations, as well as the different challenges faced by 
different grantees in serving particular areas and populations. For 
that reason, the Department will ask grantees to collect data in 
Program Year, PY 2004, to serve as the basis for setting the initial 
performance levels in PY 2005. The Department also realizes that the 
performance measures are new and will consider this in negotiating 
performance levels in the early years of implementing the system.
    While the Department appreciates the commenters' concerns about the 
difficulty of placing some SCSEP participants, the SCSEP community must 
realize that Congress, in the 2000 Amendments, required a new emphasis 
on placement into unsubsidized employment while retaining the program 
goals of serving the most in need and of providing community service. 
This new emphasis may require some adjustments in the way grantees and 
subgrantees operate. In any event, the 20 percent placement rate is 
required by the statute and the Department cannot change it. The 
Department continues to believe that many grantees will be able to do 
much better than that rate and thus will retain the option to set 
placement rates above 20 percent. In addition, exceeding the 20 percent 
goal is important because there is an additional goal of 35 percent 
overall placement for the entire program based on the Department's GPRA 
goal.
    The Department believes it is entirely appropriate to negotiate 
different performance levels with different grantees. Because of varied 
circumstances, many discussed by the commenters, it is unrealistic to 
expect the same performance level of all grantees. The Department will 
take such differences into account in negotiating performance levels. 
In addition, one purpose of the performance measurement system is to 
promote continuous improvement. Setting identical performance levels 
regardless of their actual performance undercuts that purpose. Fair and 
appropriately tailored performance levels will enable good performers 
to meet and exceed their performance measures and be recognized and 
rewarded appropriately.
    The three adjustment factors listed in Sec.  641.730(d) are the 
only ones allowed by section 513(a)(2)(B) of the Act. Thus, the 
Department cannot add an additional factor as suggested. As discussed 
earlier, the Department will account for higher State minimum wages in 
the implementation and negotiation of the performance measures.
    Finally, as discussed previously, the Department will monitor 
actual performance under the new measures in order to set realistic 
expected performance levels.
How Will the Department Determine Whether a Grantee Fails, Meets, or 
Exceeds Negotiated Levels of Performance? (Sec.  641.740)
    Section 641.740 stated the rules for negotiating the performance 
status of each grantee. The Department proposed to evaluate each 
performance indicator to determine the level of success that a grantee 
has achieved and aggregate the measures 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. A grantee fails to meet its 
performance measures when it is unable to meet 80 percent of the 
negotiated level of performance for the aggregate of all of the 
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.
    In addition, each national grantee in a State must meet the 
measures negotiated for the State in which the national grantee serves. 
The Department will impose the sanctions outlined in section 514 of the 
OAA when a grantee fails to meet overall negotiated levels of 
performance or the levels of performance for its projects in a State.
    When a grantee fails one or more measures, but does meet its 
performance measures in the aggregate, the Department will provide 
technical assistance on the particular failed measures but will not 
impose other sanctions. The Department will provide further guidance 
through administrative issuances.
    Some commenters urged that these provisions not be included in 
regulations, but instead be transmitted through Older Worker Bulletins. 
Because this is the first year in which the Department is implementing 
performance standards, ``DOL may need the flexibility to make 
adjustments in order to drive desired results.''
    One commenter was of the opinion that it is not equitable or valid 
to apply an 80 percent pass/fail standard when the performance levels 
are negotiable. In addition, the commenter believed that ``these 
performance measures are unnecessarily complicated'' and will make it 
difficult for grantees ``to monitor their programs and make adjustments 
throughout the year.'' This commenter doubted that the Department will 
be able to provide sufficient technical assistance: ``with the 
decreased flexibility to use 502(e) and the increased focus on hard-to-
hire individuals, it is highly likely that there will be a large number 
of grantees that fail individual measures. DOL does not have the 
capacity to provide this level of technical assistance or they will 
have to spend additional funds contracting for technical assistance.''
    As discussed above, the Department will use the Older Worker 
Bulletin system and/or a Federal Register Notice to further explain the 
measures and requirements and to delineate the Department's approach.
    The Department believes that it is equitable to apply the same 
standards for passing or failing performance measures to all grantees. 
The fact that the levels of performance are negotiable simply assures 
that each grantee's circumstances will be taken into account in setting 
performance levels and promotes continuous improvement. Performance 
levels may be adjusted if the factors listed in section 513(a)(2)(B) 
exist. The Department believes that this system is fair to all grantees 
and that it is equitable to apply the same pass/fail standards to each 
grantee. The Department disagrees that significant numbers of grantees 
will fail their performance measures and intends to provide all 
technical assistance that grantees may need.
What Sanctions Will the Department Impose if a Grantee Fails To Meet 
Negotiated Levels of Performance? (Sec.  641.750)
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)
    The Department received no comments on this section. For clarity, 
however, we have added: ``The poor performing grantee that had its 
funds competed is not eligible to compete for the same funds.''
What Sanctions Will the Department Impose if a National Grantee Fails 
To Meet Negotiated Levels of Performance in any State it Serves? (Sec.  
641.770)
    Section 641.770 listed the sanctions that will be imposed if a 
national grantee fails to meet its negotiated performance level in a 
State. The test of failure is different in this case than it is for 
national grants generally. A national

[[Page 19043]]

grantee is considered to have failed its performance measures in a 
State if its levels of performance are 20 percent or more below its 
national performance measures and it has failed to meet the performance 
levels set for the State. The failure to meet performance measures for 
State projects may be justified using factors such as size of the 
project and the factors listed in OAA section 513(a)(2)(B).
    Three comments were virtually identical: ``[b]ased on our 
experience, size of project is not a valid consideration in measuring 
success. Some of our most successful projects have been our smallest, 
while some of our poorest performers have been extremely large. 
Mitigating factors should include only those factors identified by 
Congress in section 513 of the OAA, as cited above.''
    Because program size is mentioned in the OAA, at section 
514(e)(3)(A), the Department cannot remove the reference to program 
size from the regulation.

When Will the Department Assess the Performance of a National Grantee 
in a State? (Sec.  641.780)

    Section 641.780 detailed the circumstances under which the 
Department will assess the performance of a national grantee in any 
State. Commenters recommended adding the phrase ``or his/her designee'' 
after ``State'' in Sec.  641.780(b)(2).
    The Department accepts this addition.
What Sanctions Will the Department Impose If the State Grantee Fails To 
Meet Negotiated Levels of Performance? (Sec.  641.790)
    Section 641.790 details the sanctions that will be imposed if a 
State grantee fails to meet negotiated levels of performance. One 
commenter said it does not seem fair that programs may be financially 
sanctioned as a result of not meeting the outplacement ratios. If a 
program can document its efforts to achieve outplacement goals, those 
efforts should be rewarded. A second commenter pointed out that grantee 
performance is evaluated within 120 days of the end of the program 
year, but one of the measures, retention in the job for 6 months, would 
not be established that early for any end-of-the-year placements.
    Regarding giving credit for efforts to achieve outplacement goals, 
the Department believes that time spent documenting such efforts would 
not be the best use of grantee resources. Grantees may seek adjustments 
of their placement goals based on the criteria enumerated in section 
513(a)(2)(B) of the OAA.
    The question of how to address the incompatibility of the retention 
measure and 120-day reporting deadline will be discussed in a 
forthcoming Federal Register Notice or in forthcoming administrative 
guidance.
Will There be Incentives for Exceeding Performance Measures? (Sec.  
641.795)
    Section 641.795 indicated that 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.
    Three commenters complimented the Department for providing 
incentives for exceeding performance measures, saying these are ``long 
overdue.'' One commenter, however, urged the Department to reverse the 
proposal to recover all grantee carryover funds. High performing 
grantees should be allowed to retain these funds, the commenter said, 
as an added incentive.
    A representative of a contractor specializing in customer 
satisfaction studies called for using customer satisfaction as an 
incentive rather than a sanctionable measure. The commenter suggested 
that high customer satisfaction scores be used as an additional 
consideration for grantees that perform well on other measures. This 
would give grantees a reason to take customer service seriously but 
would not penalize them for substandard performance.
    As to the issue of recapturing funds, 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 two succeeding Program Years to be used for incentive 
grants, technical assistance, or grants or contracts for any other 
SCSEP program. Unless those funds are recaptured and reobligated, they 
will lapse. The Department will issue administrative guidance to 
provide SCSEP recipients with additional details on how recapture will 
be implemented. The Department will retain its discretionary authority 
to determine the best use of the funds. To the extent that high 
performing grantees have excess funds, they may be able to recoup those 
funds through incentive awards.
    Regarding the use of customer satisfaction as an incentive, the 
2000 Amendments, section 513(b)(4), lists customer satisfaction as a 
required indicator. It cannot, therefore, be used merely as an 
incentive. However, the Department will not use customer satisfaction 
as a sanctionable measure until baseline rates can be established.

Subpart H--Administrative Requirements

What Uniform Administrative Requirements Apply to the Use of SCSEP 
Funds? (Sec.  641.800)
    Section 641.800 listed the various uniform administrative 
requirements and allowable cost principles that apply to the various 
kinds of SCSEP grantees and subgrantees. One commenter suggested that 
the references to allowable cost requirements in paragraphs (b) and (c) 
should be removed because they are covered in 641.847, and because 
administrative requirements shouldn't be confused with allowable cost 
requirements. The commenter also suggested that the language ``OMB 
Circular A-102'' should be inserted before ``common rule.''
    The references to allowable cost requirements in paragraphs (b) and 
(c) of Sec.  641.806 have been removed. The rest of the paragraph 
language, relating to uniform administrative requirements, has been 
retained. The reference to ``OMB Circular A-102'' has been added to 
paragraph (b).
What Is Program Income? (Sec.  641.803)
How Is SCSEP Program Income To Be Used? (Sec.  641.806)
    Section 641.806 provided for the use of program income for program 
purposes in various situations. Several commenters agreed that programs 
should be able to continue using program income if their grants are 
renewed; if not, then the program income should be remitted to the 
Department for ``reprogramming.'' Under 29 CFR parts 95 and 97 and this 
regulation, continuing and terminated grantees may continue to use 
program income for SCSEP-related purposes without any time limitation. 
The grantee is not required to remit to the Department income that is 
earned after the termination of the SCSEP grant relationship between 
the grantee and the Department. If a grantee has unexpended program 
income on hand at the time its grant terminates, paragraph (c) requires 
that the program income be remitted to the Department.
    A commenter suggested that Sec.  641.806(b), which deals with 
income earned after the grant period, either should be removed because 
it is inconsistent with the generally applicable program income 
requirements or clarified as to continuing grant relationships. The 
program income requirements for governmental grantees (29 CFR 97.25(h))

[[Page 19044]]

provide that grantees are not accountable for income earned after the 
end of the grant period unless program regulations or grant agreements 
provide otherwise. The related regulation for non-profit and other non-
governmental organizations (29 CFR 95.24(b)) is substantially similar 
but does not contain an exception for grant agreements and regulations 
that provide otherwise. The commenter also suggested that if the 
provision is retained, the regulation should explain when liability 
ends, or what ``continue'' means as used in the regulation.
    The Department does not agree that Sec.  641.806(b) should be 
removed. Most SCSEP grantees have a continuing grant relationship with 
the Department and earn substantial amounts of program income. Although 
grant terminations will punctuate these relationships at least once 
every three years, many of the relationships are likely to continue for 
much longer periods under new SCSEP grants, and program income will 
continue to be earned. Consequently, the Department has applied to the 
Office of Management and Budget (OMB) for an exception to 29 CFR 
95.24(b), in accordance with 29 CFR 95.4, and has obtained OMB's 
approval of the exception and of Sec.  641.806(b).
What Non-Federal Share (Matching) Requirements Apply to the Use of 
SCSEP Funds? (Sec.  641.809)
    In Sec.  641.809, the Department set out the rules for the 
situations in which non-Federal share funds are and are not required 
and what kinds of funding qualifies as match. One commenter said that 
it would be useful for DOL to add a requirement that funds be accounted 
for in the same way Federal funds are audited.
    The commenter was referring to the fact that the uniform 
administrative requirements require all non-Federal contributions to 
project costs, including cash and third party in-kind contributions, to 
be allowable under the applicable allowable cost requirements. We agree 
that it would be useful to clearly state this principle in this 
regulation by: substituting the word ``determine'' for ``calculate'' in 
paragraph (c) of Sec.  641.809; by redesignating paragraphs (e) and (f) 
as paragraphs (f) and (g); and by making the second sentence of 
paragraph (d) into a new paragraph (e). As changed, paragraphs (c) and 
(d) more clearly indicate that the determination of the non-Federal 
share of costs is subject to all the non-Federal share requirements in 
the uniform administrative regulations, not just those pertaining to 
calculation of the non-Federal share of costs. The Department believes 
it is inappropriate and unnecessary to re-state the non-Federal share 
requirements that are referred to in 29 CFR 95.23 and 29 CFR 97.24. The 
generally applicable administrative requirements referred to paragraphs 
(c) and (d) are not related to the prohibition now separately set out 
in new paragraph (e).
What Is the Period of Availability of SCSEP Funds? (Sec.  641.812)
May the Period of Availability Be Extended? (Sec.  641.815)
    Section 641.815 outlined the circumstances under which grantees may 
request and the Department may approve an extension of the period of 
fund availability. One commenter suggested allowing for the use of a 
carryover of prior grant year funds, if any money is left since States 
may be losing funding under section 502(e) of the Act.
    The Act permits the Secretary to extend the period for the 
obligation and expenditure of SCSEP funds where ``necessary to ensure 
the effective use of such funds.'' The Secretary may also recapture 
unexpended funds and take one of the three reobligation actions 
indicated in Sec.  641.818. It is the Department's policy to encourage 
recipients to fully obligate and expend all available funds within the 
Program Year in which they are awarded. Thus, the Department will not 
amend the regulation to permit carryover.
What Happens to Funds That Are Unexpended at the End of the Program 
Year? (Sec.  641.818)
    Section 641.815 indicated several options the Department has for 
redistributing funds that are unexpended at the end of a program year. 
Several commenters, while supporting the recapture and redistribution 
features of this provision, recommended that the Department should 
continue to allow recipients to request short-term extensions at the 
end of the year so that they can ``make most effective use of the 
funds.'' One commenter suggested that carried over funds should retain 
their original cost category identification in the carryover period.
    The extension issue is fully discussed in the Department's response 
to comments on Sec.  641.815. With regard to the suggestion that cost 
category identification be retained, we believe the comment is directed 
to spending plans, i.e., budgets, not cost categories, since SCSEP 
funds have no cost category identification until they are expended. The 
Department considers imposing expenditure limitations based on original 
budget estimates in addition to the cost limitations imposed by the Act 
to be an unnecessary added burden to affected grantees. Funds that are 
expended in an extension period are subject to the same cost 
limitations that apply to the original grant.
What Audit Requirements Apply to the Use of SCSEP Funds? (Sec.  
641.821)
    Section 641.821 listed the generally applicable Single Audit Act 
requirements that SCSEP grantees must follow and established audit 
requirements for commercial organizations. One commenter suggested 
changing the references in Sec.  641.821(c)(2) from OMB Circular A-133 
to 29 CFR part 99.
    The Department does not agree with this suggestion. It is 
appropriate to refer to the OMB Circular here since the issue addressed 
in this paragraph is the selection of the threshold for single audit 
coverage, an organization-wide issue. However, OMB Circular A-133 was 
recently revised to raise the threshold from $300,000 to $500,000 (68 
FR 38401, June 27, 2003). Accordingly, the reference to the threshold 
in the regulation is being raised to $500,000.
What Lobbying Requirements Apply to the Use of SCSEP Funds? (Sec.  
641.824)
What General Nondiscrimination Requirements Apply to the Use of SCSEP 
Funds? (Sec.  641.827)
    The NPRM contained two sections dealing with nondiscrimination. 
Section 641.827 dealt with general requirements applicable to all grant 
programs; Sec.  641.830 dealt with requirements specific to the SCSEP 
program. In reviewing the comments on the two sections, particularly a 
question asking what non-discrimination protections apply specifically 
to participants in the SCSEP program, the Department has decided that 
the material covered could be more clearly presented by combining 
proposed Sec. Sec.  641.827 and 641.830 into a single section 
containing requirements based on the OAA Amendments and on regulatory 
sources.
    Paragraph 641.827(a) of the combined section remains unchanged. 
This paragraph notifies grantees that, as recipients of Federal 
financial assistance, they are subject to 29 CFR part 31, which 
prohibits discrimination based on race, color, or national origin under 
title VI of the Civil Rights Act of 1964, and 29 CFR part 32, which 
prohibits discrimination based on handicap, under section 504 of the 
Rehabilitation Act of 1973.
    Paragraph 641.827(b) covered the nondiscrimination requirements

[[Page 19045]]

applicable to SCSEP programs and activities provided through the One-
Stop system authorized by the Workforce Investment Act. One commenter 
asked what was intended by the phrase ``operates programs and 
activities through One-Stop'' in Sec.  641.827(b)(1). In this 
connection, the commenter asked whether the Department intended this 
provision to cover an SCSEP participant assigned to a One-Stop or only 
those cases where an SCSEP grantee physically co-located its operations 
in a One-Stop.
    The Department has extensively revised Sec.  641.827(b). It 
notifies grantees of the circumstances under which they may be subject 
to 29 CFR part 37, which implements the nondiscrimination provisions of 
section 188 of WIA. Paragraph (1) States that the WIA nondiscrimination 
regulations apply to One-Stop partners that operate ``programs and 
activities that are part of the One-Stop Delivery System.'' This 
paragraph contains the same requirements as 29 CFR 37.2(a)(2) regarding 
which entities are subject to the WIA nondiscrimination regulations. 
Coverage under this provision is not limited to grantees that co-locate 
their operations in a One-Stop Center. Paragraph (2) is simply intended 
to make grantees aware that there may be additional circumstances under 
which they are subject to 29 CFR part 37. Readers should refer to the 
definition of ``recipient'' in 29 CFR 37.4 for a complete listing of 
the types of entities covered by paragraph (2).
    New Sec.  641.827(c) implements section 503(b)(3) of the Act, which 
relates to providing participants with informational materials on their 
rights under the Age Discrimination in Employment Act of 1975.
    New Sec.  641.827(d) contains the DOL address for questions and 
complaints concerning nondiscrimination violations, which is the same 
material that appeared in Sec.  641.830(b) of the Proposed Rule.
    New Sec.  641.827(e) is a revision of the material that appeared in 
Sec.  641.830(a) of the NPRM. The paragraph omits the list of examples 
of Federal laws that may be applicable to such persons that appeared in 
paragraph 641.830(a) of the NPRM. The list of examples was omitted 
merely to simplify the paragraph; this change is not intended to alter 
the meaning of the paragraph.
    One commenter suggested that the Department should emphasize that 
title VII of the Civil Rights Act, which applies to employees, does not 
cover SCSEP participants because participants are not employees. The 
Department does not take a position on the question of whether 
participants may or must be considered employees. The reason is that 
the only reference to employee status in title V is in section 504 of 
the OAA, which says that participants employed in any project funded 
under title V shall not be considered Federal employees. Accordingly, 
the issue of whether participants are considered employees for any 
other purposes must be decided by entities other than the Department.
    Another commenter was concerned that the wording of proposed Sec.  
641.830(a) could be misinterpreted to cover only SCSEP participants 
whereas the nondiscrimination protections should also apply to 
applicants for participation, employees, and applicants for employment. 
Based on that suggestion, we have added language to clarify that the 
nondiscrimination protections of Federal, State, or local laws may 
apply to applicants for participation in SCSEP programs, or to other 
individuals, as well as to participants.
What Nondiscrimination Requirements Apply Specifically to Participants 
in SCSEP Programs? (Sec.  641.830) [Removed]
What Policies Govern Political Patronage? (Sec.  641.833)
    Section 641.833 contained a prohibition on selecting or not 
selecting SCSEP participants or on funding or not funding subrecipients 
or host agencies based on political affiliation or belief. One 
commenter stated that 29 CFR part 37 governs issues regarding 
``political affiliation or belief,'' and asks that this section be 
amended to indicate that 29 CFR part 37 prohibits discrimination on 
these bases in SCSEP programs and activities that are part of the One-
Stop system.
    The Department agrees that this provision should explicitly 
prohibit the use of ``political affiliation or belief'' as the basis of 
personnel actions involving SCSEP participants in One-Stop system 
programs and activities. Accordingly, we are adding a cross reference 
to the WIA nondiscrimination requirements.
What Policies Govern Political Activities? (Sec.  641.836)
    Section 641.836 describes various requirements and prohibitions on 
political activities involving grantees and participants, including 
those established under the ``Hatch Act.'' Several commenters agreed 
that the Hatch Act restrictions should be posted in grantee 
administrative offices, but questioned whether it is reasonable or 
practical to require the posting of the restrictions in ``every 
workplace in which SCSEP activities are conducted.'' In order to avoid 
the ``burdensome and onerous'' task, they recommend that grantees be 
required to inform participants of Hatch Act restrictions through 
written information provided upon enrollment.
    The notice posting requirement is statutory. It is required by 
section 502(b)(1)(P) of the OAA. Not only must the required notice 
explaining allowable and unallowable political activities be posted in 
every workplace in which SCSEP activities are conducted, but an 
explanation of the law must be made available to each category of 
persons associated with the project. Therefore, the regulation has not 
changed as suggested.
    Commenters also suggested that the Department provide the language 
that it wishes grantees to communicate to their participants so that 
everyone will communicate a consistent message.
    The Department concurs and will provide this information by 
administrative issuance and has revised the regulation accordingly.
What Policies Govern Union Organizing Activities? (Sec.  641.839)
What Policies Govern Nepotism? (Sec.  641.841)
What Maintenance of Effort Requirements Apply to the Use of SCSEP 
Funds? (Sec.  641.844)
What Uniform Allowable Cost Requirements Apply to the Use of SCSEP 
Funds? (Sec.  641.847)
Are There Other Specific Allowable and Unallowable Cost Requirements 
for the SCSEP? (Sec.  641.850)
    Section 641.850 listed several provisions governing allowable and 
unallowable costs that are unique to the SCSEP program or unique to 
grant programs administered by the Department. One commenter suggested 
that Sec.  641.850(e), which discusses ``accessibility and reasonable 
accommodation,'' be amended to permit SCSEP funds/financial assistance 
to be used to meet obligations under ``Section 188 of the Workforce 
Investment Act of 1998, as amended; Section 504 of the Rehabilitation 
Act of 1973, as amended; any other applicable Federal disability 
nondiscrimination laws; and the regulations implementing these laws, to 
provide physical and programmatic accessibility and reasonable 
accommodation/modifications for, and effective communication with, 
individuals with disabilities.''
    The Department agrees and Sec.  641.850 has been amended to permit 
SCSEP resources to be used to provide

[[Page 19046]]

``physical and programmatic accessibility and reasonable accommodation/
modifications for, and effective communication with, individuals with 
disabilities.''
    A second commenter suggested amending Sec.  641.850(e) to provide 
that ``Recipients and subrecipients may use SCSEP funds to meet their 
own obligations (emphasis provided) under section 504.'' The change 
would emphasize that ``scarce'' SCSEP funds ``are not intended to meet 
the obligations of community agencies or others subject to the relevant 
provisions of law.''
    The Department does not agree that it should limit the use of SCSEP 
funds for meeting reasonable accommodation obligations under Federal 
disability nondiscrimination law to recipients' and subrecipients' 
``own'' obligations. While there is no requirement to use SCSEP funds 
to modify host agencies' facilities, SCSEP funds may be used for this 
purpose. Regardless of where participants are placed, Federal 
disability nondiscrimination law requires their host agency to provide 
reasonable accommodations/modifications for qualified participants with 
disabilities.
    One commenter stated ``[a]ccept in kind at One Stops.'' Another 
commenter questioned whether SCSEP funds could be used for One-Stop 
activities.
    The Department's position on both comments is stated in a paper 
entitled Resource Sharing for Workforce Investment Act One-Stop 
Centers; Methodologies for Paying or Funding Each Partner Program's 
Fair Share of Allocable One-Stop Costs, published as a notice in the 
Federal Register (66 FR 29637, May 31, 2001) and available on ETA's Web 
site at http://www.doleta.gov/usworkforce/documents/fr/fr-5-31-2001-a.pdf. As the notice indicates, One-Stop partners, including the SCSEP, 
must use a portion of their funds to support the One-Stop system. One-
Stop costs, like all other SCSEP costs, must be determined in 
accordance with the applicable cost principles, which provide that each 
partner must pay its fair share of allowable and allocable One-Stop 
costs. The Department does not mandate how this is to be accomplished. 
Instead, the One-Stop partners must mutually agree on each partner's 
share of One-Stop costs and on what resources shall be provided by each 
of the partners to defray its fair share of One-Stop costs. Such an 
agreement may include acceptance of in-kind services in satisfaction of 
the SCSEP fair share of One-Stop costs. More information on allocating 
One-Stop costs can be found in Part 1 of the One Stop Comprehensive 
Financial Management Technical Assistance Guide, also available on 
ETA's Web site at: http://wdsc.doleta.gov/sga/pdf/FinalTAG_August_02.pdf. The Department has decided to emphasize and clarify its 
position on the use of SCSEP funds for the support of One-Stop 
activities (see 20 CFR 662.230) by inserting a new paragraph (d) in 
Sec.  641.850 covering One-Stop costs and redesignating paragraphs (d)-
(f) respectively (e)-(g). As discussed in more detail in the Preamble 
discussion of subpart B, grantees may seek to negotiate agreements in 
which they become service providers for older workers in the One-Stop, 
which may lead to a significant reduction of their required 
contribution.
How Are Costs Classified? (Sec.  641.853)
    Section 641.853 provided that costs are classified as program or 
administrative costs and provided rules for the classification of 
participant wage and fringe benefit costs as program costs. Four 
commenters stated that this section does not ``make sense'' and that 
clarification is needed or the section should be deleted because 
enrollee costs are always charged to Enrollee Wages and Fringe Benefits 
(EWFB).
    The Department agrees with the commenters that this provision needs 
to be clarified, especially in presenting the idea that participant 
wages and fringe benefits costs are always treated as program costs, 
regardless of what function is performed by participants in their 
community service assignments. The Department has revised paragraph (b) 
accordingly.
    One commenter requested relief from cost category restrictions due 
to the increased administrative effort required to comply with the 
Older Americans Act Amendments of 2000.
    The Department agrees with the commenter that the OAA Amendments do 
require increased administrative effort. However, the Department cannot 
provide relief from the cost category restrictions since they are 
established by section 502(c)(3), (c)(4), and (c)(6) of the Act. The 
only relief available is the Department's authority, under section 
502(c)(3)(b), to increase the administrative cost limitation from 13.5 
percent to 15 percent. As stated in the Preamble discussion of Sec.  
641.700, the Department will take the possible increased costs of 
administering some of the new requirements of the 2000 Amendments into 
account in reviewing requests for increases in the administrative cost 
limitation. Further, relief from the cost category limitations probably 
is unnecessary since the definitions of Administrative Cost and Program 
Cost under the 2000 Amendments will result in substantial amounts of 
costs that may previously have been charged to the Administrative Cost 
cost category being charged to the Program Cost cost category. For 
example, costs of assessments, IEP preparation, and related data 
collection costs are chargeable to the Program Cost cost category.
What Functions and Activities Constitute Costs of Administration? 
(Sec.  641.856)
What Other Special Rules Govern the Classification of Costs as 
Administrative Costs or Program Costs? (Sec.  641.859)
    Sections 641.856 and 641.859 provided the rules for classifying 
costs as either administrative or program costs. One commenter 
suggested that the Department insert a new paragraph (c) in Sec.  
641.859 which would state: ``All other costs under awards to 
subrecipients are program costs except for awards to first tier 
subrecipients that have comprehensive responsibilities for SCSEP 
program operations in the geographic area covered by their award.'' The 
objective of the proposed change was to reflect Congressional intent to 
make SCSEP administrative cost standards consistent with the WIA 
administrative cost provision at 20 CFR 667.220(a).
    Paragraph (c) of Sec.  641.859 was inadvertently omitted from the 
NPRM. This paragraph applies the following two criteria to costs 
classified as Administrative Cost: (1) The costs must be incurred for 
one of the functions listed in Sec.  641.856(b); and (2) the cost must 
be incurred by a direct recipient of SCSEP funds, a first-tier 
subrecipient (awardee of funds from a direct recipient that has broad 
responsibilities for administering SCSEP programs), a recipient of an 
award from a direct recipient or a covered first tier subrecipient, or 
a vendor which performs administrative functions for recipients or 
first tier subrecipients and must be solely for the performance of 
administrative functions. This change in Sec.  641.859 makes the 
treatment of SCSEP administrative costs consistent with the treatment 
of administrative costs under the WIA. Thus, it furthers the 
integration of SCSEP activities with WIA One-Stop system activities, as 
provided in the 2000 Amendments.
    The Department's intent in applying the WIA cost structure to SCSEP 
is twofold. First, the Department wants to use the same type of cost 
structure for SCSEP as is used for WIA. Both programs offer many of the 
same types

[[Page 19047]]

of activity, and many organizations involved in the SCSEP program also 
are involved in the WIA program. These organizations benefit from the 
use of the same cost structure for both programs due to simplified 
accounting and financial reporting. Second, while every organization 
incurs what it considers administrative costs, the Department is 
interested in measuring only the administrative cost incurred by direct 
recipients and subrecipients that have broad responsibilities for 
successful program outcomes and that provide a broad range of services 
to participants. In the WIA context, States, local workforce areas, and 
One-Stop operators incur such costs. In the SCSEP context, direct 
grantees and first-tier subrecipients incur such costs. First-tier 
subrecipients are subrecipients that conduct three specified SCSEP 
program activities for all participants: eligibility determination; 
participant assessment; and development of and placement of 
participants into community service opportunities. The Department has 
determined that subrecipients that perform all of these functions have 
approximately the same breadth of responsibilities as WIA local grant 
recipients and One-Stop operators. It is therefore appropriate to use 
the same special rules for SCSEP administrative costs as for WIA 
administrative costs.
    In order to effectuate the suggested change, Sec. Sec.  641.856 and 
641.859 have been modified. A new paragraph (c) defining first-tier 
subrecipient has been added to Sec.  641.856 and the description of 
administrative costs in paragraph (a) has been modified to limit its 
coverage of subrecipients to first-tier subrecipients. Paragraph (b) of 
Sec.  641.859 has been modified to fully describe administrative costs 
in terms of what types of entities can incur them and paragraph (e) has 
been incorporated in the revised paragraph (b).
Must SCSEP Recipients Provide Funding for the Administrative Costs of 
Subrecipients? (Sec.  641.861)
What Functions and Activities Constitute Program Costs? (Sec.  641.864)
    Section 641.864 listed some of the activities that are counted as 
program costs. We have added language to Sec.  641.864(d) to reflect 
the prohibition on stand alone job search assistance and job referral 
activities in Sec.  641.535(c).
What Are the Limitations on the Amount of SCSEP Administrative Costs? 
(Sec.  641.867)
Under What Circumstances May the Administrative Cost Limitation Be 
Increased? (Sec.  641.870)
What Minimum Expenditure Levels Are Required for Participant Wages and 
Fringe Benefits? (Sec.  641.873)
    Section 641.873 set forth the rule that 75 percent of grant 
expenditures must be made for participant wages and fringe benefits and 
explained how that rule would be applied. Three commenters took issue 
with the requirement that 75 percent of SCSEP funds be expended on 
participant wages and fringe benefits. They pointed out that this 
requirement makes it more difficult to achieve the Act's objectives 
relating to other allowable activities such as training for 
unsubsidized employment.
    The Act, at section 502(c)(6)(B), requires that 75 percent of funds 
be expended on participant wages and fringe benefits. Since the 
Department has no discretion to alter this requirement, recipients must 
design their SCSEP-funded programs and activities to maximize 
coordination with the One-Stop system and other programs that can train 
and place SCSEP participants in unsubsidized jobs.
When Will Compliance With Cost Limitations and Minimum Expenditure 
Levels Be Determined? (Sec.  641.876)
What Are the Fiscal and Performance Reporting Requirements for 
Recipients? (Sec.  641.879)
    This section established the reporting requirements for the program 
and indicated areas in which the Department may administratively issue 
supplemental reporting instructions. Several commenters stated that the 
proposed 45 days to submit a final Quarterly Progress Report (QPR) does 
not give sufficient time to submit accurate year-end reports, and 
suggested that a minimum of 60 to 120 days is needed to account for 
final placement, retention, and wage information. One commenter pointed 
out that Sec.  641.879 of the proposed regulation and the Preamble 
discussing that section are inconsistent; the regulation requires that 
final financial and non-financial reports are due within 45 days while 
the Preamble states that they are due within 90 days.
    The Department concurs with the commenters and the regulation has 
been changed to require submission of the QPR and quarterly financial 
status reports 30 days after the end of each quarter and final 
financial and non-financial reports 90 days after the end of the grant 
period.
    One commenter noted that the language in paragraph (a) indicating 
that data that cannot be validated or verified may be treated as not 
reported only applies to the QPR non-financial report and suggested 
that it should refer to both performance and financial reports. One 
commenter suggested replacing the term ``demographics'' to 
``demographic characteristics'' in Sec.  641.879(f).
    The Department agrees with the other comments and has incorporated 
them into the Final Rule.
What Are the SCSEP Recipient's Responsibilities Relating to Awards to 
Subrecipients? (Sec.  641.881)
What Are the Grant Closeout Procedures? (Sec.  641.884)

Subpart I--Grievance Procedures and Appeals Process

What Appeal Process Is Available to an Applicant That Does Not Receive 
a Grant? (Sec.  641.900)
    In Sec.  641.900, the Department reserved its opportunity to 
provide a rule on an administrative appeal process for grantees that do 
not receive a grant and asked for advice and guidance on this issue. 
The Proposed Rule requested comments on whether there should be an 
administrative appeal process and how it should be structured given the 
complexities of fashioning a remedy. Additionally, the Department 
requested suggestions on how to operate such an appeals process. For 
example, could such a SCSEP appeals process be modeled after the 
appeals process in the WIA Indian and Native American program? Finally, 
the Department sought feedback on whether it should create an appeals 
process for one-year grant applicants and 502(e) projects and if so 
whether and how such a process should differ from a process established 
for multi-year project appeals.
    In this section, the Department establishes a formal appeals 
process for SCSEP grant applicants that feel they have been 
inappropriately denied a grant. This section should be read in 
conjunction with Sec.  641.470, ``What happens if an applicant's 
application is rejected?''
    The Department received several comments on this section. Some 
comments suggested procedures for protesting the content or form of a 
Solicitation for Grant Applications (SGA) and appeals therein as well 
as procedures for protesting the rejection of a grant application and 
appeals

[[Page 19048]]

therein. None, however, addressed a separate appeals process for one-
year grant applicants and section 502(e) projects.
    The comments suggested that to protest the content of an SGA, a 
formal protest be submitted to the Department's Grant Officer by an 
interested party or potential grant applicant in a timely manner. The 
Grant Officer would be required to make a determination within ten 
days, in writing, stating factual findings and conclusions. If the 
protesting party found the determination adverse, it may appeal the 
determination to the Department's Office of Administrative Law Judge 
(ALJ). The ALJ would try to render a decision before the application 
submission deadline in order to provide time to implement a remedy. 
Remedies would include amendment to the SGA, reissuance of the SGA and/
or extension of the deadline for submission of applications.
    The comments also recommended the right to protest the award 
decision. To do so, the protesting party would, again, file a protest 
with the Grant Officer. Adverse decisions would be appealable to the 
ALJ and ultimately to the Department's Administrative Review Board.
    The commenters suggested that the initial protest to the Grant 
Officer would need to be filed within ten days of the grant decision. 
In doing so, the protesting party may request, and receive within five 
days, a debriefing about the justification of the grant denial. The 
protest must also include a factual basis for the complaint and the 
specific issues contested. Furthermore, the protesting party would be 
given two working days following the debriefing to amend the protest 
document. The Grant Officer would then have thirty days to provide a 
determination of the protest. The final determination would contain 
findings of fact, conclusions or law, and in the event of an adverse 
decision for the protesting party, the Grant Officer would also inform 
the party of the opportunity to appeal the Grant Officer's 
determination to the ALJ. In the event the Grant Officer or the ALJ 
found in favor of the protesting party, the Grant Officer would have 
the authority to provide the following remedies: Retroactive award, 
reallocation or distribution of authorized positions, resolicitation or 
recompetition of the grant funds, or any other appropriate remedy.
    The Department has decided not to institute a protest and appeal 
procedure for challenges to the SGA. The Department believes that the 
process could become too complicated and take too long to be 
worthwhile. The absence of a formal appeals process does not preclude 
applicants from raising questions about the contents of an SGA nor 
preclude the Grant Officer from making changes in response to such 
questions.
    The Department believes that grant applicants dissatisfied with an 
award decision should have the opportunity to protest/appeal the award 
decision. The process, which places a strong emphasis on timeliness of 
appeals and decisions, will be as follows:
    (a) An applicant for financial assistance under title V of the OAA 
that is dissatisfied because the Department has issued a determination 
not to award financial assistance, in whole or in part, to such 
applicant, may request that the Grant Officer provide the reasons for 
not awarding financial assistance to that applicant (a debriefing). The 
request must be made within 10 days of the date of notification 
indicating that the grant would not be awarded. The Grant Officer must 
provide the protesting applicant with a debriefing and a written 
decision stating the reasons for the decision not to award the grant 
within 20 days of receipt of the protest. Applicants may appeal to the 
U.S. Department of Labor, Office of Administrative Law Judges, within 
21 days of the date of the Grant Officer's notice providing reasons for 
not awarding financial assistance. The appeal may be for a part or the 
whole of a denial of funding. This appeal will not in any way interfere 
with the Department's decisions to fund other organizations to provide 
services during the appeal period.
    (b) Failure to either request a debriefing within the 10 day 
requirement or to file an appeal within 21 days as provided in 
paragraph (a) of this section constitutes a waiver of the right to a 
hearing.
    (c) A request for a hearing under this section must state 
specifically those issues in the Grant Officer's notification upon 
which review is requested. Those provisions of the Grant Officer's 
notification not specified for review, or the entire final 
determination when no hearing has been requested within the 21 days, 
are considered resolved and not subject to further review.
    (d) A request for a hearing must be transmitted by certified mail, 
return receipt requested, to the Chief Administrative Law Judge, U.S. 
Department of Labor, Suite 400, 800 K Street, NW., Washington, DC 
20001, with one copy to the Departmental official who issued the 
determination.
    (e) The decision of the ALJ constitutes final agency action unless, 
within 21 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, published at 61 FR 19978 (May 3, 1996)), 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.
    (f) The Rules of Practice and Procedure 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:
    (1) The appeal is not considered as a complaint; and
    (2) 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 the 
Administrative Law Judge conducting the hearing considers them 
reasonably necessary. 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.
    (g) The Administrative Law Judge should render a written decision 
no later than 90 days after the closing of the record.
    (h) The remedies available are provided in Sec.  641.470.
    (i) This section only applies to multi-year grant awards.
    The Department does not believe that there is a generally effective 
way to provide an appeal for a single-year award because of the time it 
takes to perfect and try a case, and the time it takes to effectuate a 
remedy. However, such appellants protest basic review of the 
Department's decision in Federal District Court.

[[Page 19049]]

What Grievance Procedures Must Grantees Make Available to Applicants, 
Employees, and Participants? (Sec.  641.910)
    In Sec.  641.910, the Department required State and national 
grantees to establish grievance procedures for handling employee, 
participant, and applicant complaints. These procedures must be 
described in the grant agreement. Paragraph (c) allowed complaints that 
a grantee had not complied with applicable Federal laws to be filed 
with the Department if these grievances are not resolved within 60 days 
under the grantee's procedures. Paragraph (d) provided special 
procedures for complaints of discrimination under title VI of the Civil 
Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, and 
where applicable, the WIA.
    The Department received several comments on this section. Two 
comments suggested that the section, in general, be reorganized and 
that the appeal process for participants should actually be moved to 
Sec.  641.580, which addresses the termination of participants. The 
commenter then asserted that the ``grantee appeal process'' could 
remain listed in Sec.  641.910. The commenter also suggested that the 
term ``employees'' be deleted from the section.
    One comment suggested concern about language in Sec.  641.910(d), 
which states, ``[Q]uestions about or complaints alleging discrimination 
may be directed or mailed to CRC.'' The commenter asserted that this 
language may be misinterpreted as signifying that all discrimination 
complaints must be filed with CRC, when in fact, under the WIA 
nondiscrimination regulations, complainants have the option of filing 
at the recipient level. The comment also requested that the language be 
amended to state that questions about ``the requirements for complaint-
processing procedures'' may be directed to CRC and that the Preamble 
discussion of this paragraph be amended to make this point clear.
    We agree and have revised the Final Rule to reflect these 
suggestions.
    Two commenters questioned the omission of a reference to 29 CFR 
part 31 and one of the comments requested that employment 
antidiscrimination laws not be applied to SCSEP participants' relations 
to grantees because the participants are not employees of the grantees.
    Grantees must have grievance procedures in place for resolving 
complaints arising between the grantee and its employees, subgrantees, 
applicants, or participants in the SCSEP program. There may be separate 
grievance processes for applicants and participants and for employees 
or subgrantees. A grievance procedure should cover applicants who wish 
to dispute a determination of non-eligibility for the SCSEP program and 
participants who wish to grieve other complaints with the grantee. 
There should also be clear easily understood steps for the applicant/
participant to take in attempting to resolve an issue.
    The Department will not investigate a grantee's final determination 
regarding a grievance except to determine whether the grantee's 
grievance procedures were followed. When the grievance has alleged a 
violation of Federal law (other than Federal nondiscrimination law), 
and has not been resolved within 60 days under the grantee's grievance 
procedures, the grievant may file the grievance with the Department as 
described in paragraph (c).
    Complaints alleging discrimination under title VI or section 504 
must be filed at the Federal level with the Department's Civil Rights 
Center (CRC) at the address listed in Sec.  641.910(d). If the grantee 
is subject to the WIA nondiscrimination regulations, discrimination 
complaints under section 188 of WIA may be filed either with the 
grantee or directly with CRC. The grantee may attempt to resolve 
discrimination complaints by using the same procedures it uses to 
process grievances, if those procedures meet the requirements in 29 CFR 
37.70 and 37.80. In such cases, if the complaint is not resolved to the 
complainant's satisfaction at the grantee level, the complainant may 
refile the complaint with CRC. Questions about grantee-level complaint-
processing procedures may also be addressed to CRC.
    The nondiscrimination provisions of 29 CFR parts 31, 32 and 37 
apply to the relationship of grantees and participants whether or not 
the participants are considered employees of the grantees. As 
recipients of Federal financial assistance, grantees assume the 
obligation not to discriminate against participants.
What Actions of the Department May a Grantee Appeal and What Procedures 
Apply to Those Appeals? (Sec.  641.920)
    In Sec.  641.920, the Department prescribed rules for appealing 
certain grant decisions and the rules of procedure and timing of 
decisions for the Office of the Administrative Law Judge hearings. This 
section should be read in conjunction with the rule established in 
Sec.  641.900--``What appeal process is available to an applicant that 
does not receive a grant?''
    The Department received a few comments on this section. Some 
comments overlapped with the comments on Sec.  641.900 in that they 
focus on the protest and appeal of Solicitation of Grant Application 
terms and grant decisions, specifically the denial of grant 
applications. Others proposed a procedure for protesting and appealing 
decisions about the grant and suggested procedures for such appeals. 
The comments suggested the following procedure:
    Within 21 days of receipt of the final determination, an applicant 
may appeal a Grant Officer's decision by requesting a hearing before 
the OALJ. Such a hearing shall be requested in writing and transmitted 
by certified mail, return receipt requested, to the Chief 
Administrative Law Judge, United States Department of Labor, with a 
copy to the Grant Officer.
    (i) Failure to request a hearing within 21 days of receipt of the 
final determination constitutes the waiver of a right to a hearing.
    (ii) A request for a hearing under this section must state 
specifically those issues in the final determination upon which review 
is requested. Those provisions of the final determination not specified 
for review are considered resolved and not subject to further review.
    (iii) The rules of practice and procedure promulgated by the OALJ 
govern the conduct of hearings under this section.
    (iv) In ordering relief, the ALJ may provide remedies and other 
redress with the full authority of the Secretary under the Act.
    (v) The ALJ should render a written decision within 60 days 
following the closing of the record. The ALJ's decision constitutes a 
final agency action unless a petition for review by the ARB is properly 
made within 21 days thereof, specifically identifying the procedure, 
fact, law or policy to which exception is taken.
    The ALJ's decision will not constitute a final agency action if the 
ARB, within 15 days of the filing of a petition for review, notifies 
the interested parties that the case has been accepted for review. Any 
case accepted by the ARB must be decided within 60 days of acceptance. 
If not so decided, the decision of the ALJ constitutes final agency 
action under the Administrative Procedure Act (APA).
    The ALJ's decision with regard to grant decision protests shall be 
reviewable at the discretion of the Secretary who may issue a final 
order on the contested matter.

[[Page 19050]]

    Regarding other legal remedies, a party to a proceeding which 
resulted in a final agency action either by ARB decision or Secretary's 
final order may either pursue an appeal to the United States Court of 
Appeals having jurisdiction over the applicant by filing a review 
petition with in 30 days thereof; or in the alternative, a party to a 
proceeding resulting in final agency action may seek de novo review of 
the ARB decision or Secretary's final order in an appropriate district 
court. Nothing contained in this section prejudices the separate 
exercise of other legal rights in pursuit of other available remedies 
and sanctions.
    The commenters' suggestions generally parallel the proposed 
regulation, with some difference in time limits. We have retained the 
proposed regulation as written but have added the imposition of 
sanctions as a ground for appeal and have accepted the commenters' 
suggestion to specify the ALJ's authority to order relief. We did not 
adopt the commenters' suggestion to create a protest procedure. The 
kinds of decisions that are appealable under this section are those in 
which written final determinations are routinely made, obviating the 
need for an additional procedural layer. We did not adopt the 
commenters' suggestion that the OALJ's rules of practice and procedure 
be adopted without exceptions. We have found that the two exceptions 
listed in the Proposed Rule in Sec.  641.920(c)(3) have worked well in 
other Department programs, making the hearing process less formal. We 
did not adopt the suggestion that appears to create a second level of 
discretionary review by the Secretary. The Secretary has delegated her 
review authority to the ARB, making that suggestion redundant. We did 
not adopt the suggestion on appeal rights because it misstates the 
rights available. Since, unlike WIA, the OAA does not provide for 
review in the Court of Appeals, the only available avenue for review 
would be in the District Courts under the APA. The standard of review 
under the APA is whether the agency action was arbitrary, capricious or 
otherwise not in accordance with law. It is not a de novo review.
Is There an Alternative Dispute Resolution Process That May Be Used in 
Place of an ALJ Hearing? (Sec.  641.930)
    In Sec.  641.930, the Department provided for an alternative 
dispute resolution system in lieu of requesting a hearing with an ALJ. 
Any decision rendered through this process would be considered a final 
determination.
    The Department received several comments on this section. The 
commenters made three suggestions for changes to the rule.
    First, the commenters suggested that a written decision should be 
issued within 30 days, not 60. Second, the commenters suggested that 
any waiver to an administrative hearing should be revoked or become 
void if a settlement has not been reached or a decision has not been 
issued within 30 days. Finally, the commenters suggested that any final 
decision reached through this informal process be treated as a decision 
from an ALJ and that it be appealed accordingly.
    Considering the amount of time it necessarily takes to prepare and 
present arguments and for the mediator to evaluate evidence and 
arguments, the Department believes that 60 days for the issuance of a 
decision in an alternative dispute resolution case is a reasonable time 
limit. Since we have decided to retain the 60-day time limit for 
resolution, the time for automatic revocation of the election to use 
alternative dispute resolution also needs to remain at 60 days. The 
Proposed Rule already provided that the decision in the alternative 
dispute resolution procedure would be treated as a final decision of 
the ALJ, and would constitute final agency action. The Department 
believes that not having a decision in the alternate dispute resolution 
procedures be appealable is consistent with the intent of alternate 
dispute resolution to create quick and inexpensive ways to resolve 
disputes and is more consistent with the deference that is given to 
arbitral and other alternate dispute resolution decisions.
    A commenter requested that the reference to ``641.920'' in 
paragraph (a) be amended to ``641.920(a).''
    We agree with the commenter that the regulation should make clear 
that the complaints involving discrimination are not subject to this 
alternate dispute resolution process. We have revised the regulation to 
change the reference to Sec.  641.920 to Sec.  641.920(a), (c), and 
(d).
    Section 641.630(b) has been revised to provide an option for the 
parties to agree, in writing, to extend the alternative dispute 
resolution period.

IV. Administrative Information

A. Paperwork Reduction Act

    Under the Paperwork Reduction Act, information collection 
requirements, which must be imposed as a result of this regulation have 
been submitted to the Office of Management and Budget. Public reporting 
burden for the collection of information is estimated to average 55 
hours per response, including the time for reviewing instructions, 
searching existing data sources, gathering and maintaining the data 
needed, and completing and reviewing the collection of information. The 
required reports described at Sec.  641.879 are as follows: the 
Quarterly and Final Progress Report, the Quarterly and Final Financial 
Status Report, the Quarterly Report of Federal Cash Transaction, the 
Annual Equitable Distribution Report; a 502(e) Activity Report; reports 
related to the Common Performance Measure; and reports related to 
demographic characteristics.
    Send comments regarding this burden estimate or any other aspect of 
this collection of information, including suggestions for reducing this 
burden, to the Office of Management and Budget, Paperwork Reduction 
Project (1205-0040), Washington, DC 20503: Attention: Desk Officer for 
Employment and Training Administration.

B. Executive Order 13132 (Federalism)

    The Employment and Training Administration (ETA) has reviewed this 
rule in accordance with Executive Order 13132 on Federalism, and has 
determined that it does not have ``Federalism implications.'' A rule 
has implications for federalism under Executive Order 13132, 
Federalism, if it has a substantial direct effect on State or local 
governments and would either preempt State law or impose a substantial 
direct cost of compliance on them. We have analyzed this rule under 
that Order and have determined that it does not have implications for 
federalism. The rule establishes the administrative requirements for 
the Senior Community Service Employment Program, a grant program to 
assist older workers. The rule includes the process for applying for 
and receiving federal grants. If a State chooses to participate in the 
program, it receives grant funds from ETA for the cost of the program. 
The rule involves no preemption of State law nor does it limit State 
policymaking discretion.
    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;

[[Page 19051]]

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 non-
profit 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 affects those national organizations and host agencies 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). While these rules govern the distribution and administration of 
funds appropriated by Congress, the rules themselves do not result in 
an annual effect on the economy of $100,000,000 or more; a major 
increase in costs or prices for consumers, individual industries, 
Federal, state, or local government agencies, or geographic regions; or 
significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
enterprises. Accordingly, 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(2).
    The Department certifies that the rule has been assessed in 
accordance with Public Law 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.
    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 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 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 
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 
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.
    The Department has determined that the Final Rule will not require 
the expenditure by State, local, or Tribal 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 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.

    Signed at Washington, DC, this 25th day of March, 2004.
Emily Stover DeRocco,
Assistant Secretary, Employment and Training Administration.


0
For the reasons stated in the Preamble, 20 CFR part 641 is revised to 
read as follows:

[[Page 19052]]

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 the 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 the 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, Eligibility, and Award 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?
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?
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?
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?

[[Page 19053]]

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?
641.833 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 the 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?
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?

    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), Public Law 
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 and older and who 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 and who have poor 
employment prospects; 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.

[[Page 19054]]

    Co-enrollment applies to any individual who meets the 
qualifications for SCSEP participation as well as the qualifications 
for any other relevant program as defined in the Individual Employment 
Plan.
    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)).
    Core Services means those services described in section 134(d)(2) 
of WIA.
    Department or DOL means the United States Department of Labor, 
including its agencies and organizational units.
    Disability is defined at section 101(8) of the OAA as follows: a 
disability attributable to mental or physical impairment, or a 
combination of mental and physical impairments, that results in 
substantial functional limitations in one or more of the following 
areas of major life activity: (A) Self-care, (B) receptive and 
expressive language, (C) learning, (D) mobility, (E) self-direction, 
(F) capacity for independent living, (G) economic self-sufficiency, (H) 
cognitive functioning, and (I) emotional adjustment.
    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 counties 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 includes 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, 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 
religious organization as long as the projects do not involve the 
construction, operation, or maintenance of any facility used or to be 
used as a place for religious instruction or worship.
    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. (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 
Public Law 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 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 Center means the One-Stop Center system in a WIA Local 
Area which must include a comprehensive One-Stop Center through which 
One-Stop partners provide applicable core services and which provides 
access to other programs and services carried out by the One-Stop 
partners. (See WIA sec. 134(c)(2)).
    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

[[Page 19055]]

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 the cost of 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 or in conjunction with a community 
service assignment, 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 the 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.
    Residence means an individual's declared dwelling place or address 
as demonstrated by appropriate documentation.
    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 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, 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 
Public Law 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 (Public Law 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 the SCSEP and the 
Workforce Investment Act?

    The 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 WIA and its 
regulations. (WIA section 121(b)(1)(B)(vi) (29 U.S.C. 
2841(b)(1)(B)(vi)) and the 29 CFR part 662 subpart B (Sec. Sec.  
662.200 through 662.280))


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 through the One-Stop Delivery System to provide eligible 
and ineligible individuals with access to other activities and programs 
carried out by other One-Stop partners.


Sec.  641.220  Does title I of WIA require the 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 the SCSEP to eligible individuals. Title 
V funds can be used to pay wages to SCSEP participants receiving 
intensive and training services under title I of WIA provided that the 
SCSEP participants are functioning in a community service assignment. 
All other individuals who are in need of the

[[Page 19056]]

services provided under the SCSEP, but who do not meet the eligibility 
criteria to enroll in the 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 the 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 the 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) The 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.
    (d) SCSEP participants may be paid wages while receiving intensive 
or training services provided that the participant is functioning in a 
community service assignment.

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 to the Department 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 under the Workforce Investment Act 
(WIA);
    (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. 503(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 recommendations 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
    (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;

[[Page 19057]]

    (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 
recommendations 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 that 
substantially change 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 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 are 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. Grantees shall not transfer positions from one 
geographic area to another without first notifying the State agency 
responsible for preparing the State Plan and equitable distribution 
report. Grantees must submit, in writing, any proposed changes in 
distribution that occur after submissions of the equitable distribution 
report to the Federal Project Officer for approval. All grantees are 
strongly encouraged to coordinate any proposed changes in position 
distribution with the other grantees servicing in the State, including 
the State project director, prior to submitting the proposed changes to 
their Federal Project Officer for approval.

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.

[[Page 19058]]

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. The poor 
performing grantee that had its funds competed is not eligible to 
compete for the same 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 
section 501 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 and responsibility review criteria 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 or other instrument 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 of Labor 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 meet each of the listed responsibility 
``tests'' by not having committed any of the acts of misfeasance or 
malfeasance described in Sec.  641.440(a)-(n) of this section.
    (a) The Department has been unable to recover a debt from the 
applicant, whether incurred by the applicant or by one of its 
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).

[[Page 19059]]

    (c) The second responsibility test addresses ``fraud or criminal 
activity of a significant nature.'' The existence of significant fraud 
or criminal activity will be determined by the Department and typically 
will include willful or grossly negligent disregard for the use, 
handling, or other fiduciary duties of Federal funding where the 
grantee has no effective systems, checks, or safeguards to detect or 
prevent fraud or criminal activity. Additionally, significant fraud or 
criminal activity will typically include coordinated patterns or 
behaviors that pervade a grantee's administration or are focused at the 
higher levels of a grantee's management or authority. To be consistent 
with the OAA section 514(d)(4)(B), this determination will be made on a 
case-by-case basis regardless of what party identifies the alleged 
fraud or criminal activity.


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 sec. 514(d)(1) and (d)(2)).


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?

    (a) Any entity whose application is rejected in whole or in part 
will be provided a timely notice as well as an explanation, or 
debriefing, of the Department's basis for its rejection. Notifications 
will include an explanation of the Department's decision and 
suggestions as to how to improve the applicant's position for future 
competitions.
    (b) Incumbent grantees will not have an opportunity to cure in an 
open competition because that will create an inequity in favor of 
incumbents which already have opportunities to correct deficiencies 
through technical assistance, provided by the Department, under OAA 
sec. 514(e)(2)(A).
    (c) If the Administrative Law Judge (ALJ) rules that the 
organization should have been selected, in whole or in part, and the 
organization continues to meet the requirements of this part, the 
matter must be remanded to the Grant Officer. The Grant Officer must, 
within 10 working days, determine whether the slots which are the 
subject of the ALJ's decision will be awarded, in whole or in part, to 
the organization and the timing of the award. In making this 
determination, the Grant Officer must take into account disruption to 
participants, disruption to grantees and the operational needs of the 
SCSEP. The Grant Officer must return the decision to the ALJ for 
review. In the event that the Grant Officer determines that it is not 
feasible, the successful appellant will be awarded its bid preparation 
costs or a pro rata share of those costs if Grant Officer's finding 
applies to only a portion of the funds that would be awarded to the 
successful appellant. An applicant so selected is not entitled to the 
full grant amount but will only receive the funds remaining in the 
grant that have not been expended by the current grantee through its 
operation of the grant and its subsequent closeout. The available 
remedy in an SCSEP non-selection appeal is the right to be selected in 
the future as an SCSEP grantee for the remainder of the current grant 
cycle. Neither retroactive nor immediately effective selection status 
may be awarded as relief in a non-selection appeal under this section 
and Sec.  641.900.
    Any organization selected and/or funded as an SCSEP grantee is 
subject to having its slots reduced or to being removed as an SCSEP 
grantee of an ALJ decision so orders. The Grant Officer provides 
instructions on transition and closeout to both the newly designated 
grantee and to the grantee whose slots are affected or which is being 
removed. All parties must agree to the provisions of this paragraph as 
a condition of being an SCSEP grantee.


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 only on those 
applications proposed for award 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?

    (a) 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 (OMB) (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

[[Page 19060]]

income eligibility determination purposes. The Department will issue 
administrative guidance on the procedures for computing family income 
for purposes of determining SCSEP eligibility.
    (b) States may enter into agreements between themselves to permit 
cross-border enrollment of eligible participants. Such agreements 
should cover both State and national grantee slots and must be 
submitted to the Department.


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?

    (a) The prior practice of excluding the first $500 of a 
participant's income for eligibility purposes is contrary to the 
section 516(2) of the OAA, which limits SCSEP eligibility to no more 
than 125 percent of the poverty guidelines established by OMB. 
Therefore, this practice will no longer be permitted, either for 
current participants or new applicants.
    (b) The Department will use the U.S. Census Bureau's Current 
Population Survey (CPS) as the standard for determining income 
eligibility for the SCSEP. The Department will issue administrative 
guidance regarding income definitions and income inclusion and 
exclusion standards for determining eligibility.


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 30 days after the participant receives 
the notice. The only exception is for participants found ineligible 
because of providing false information who must be terminated 
immediately with written notification of the reason therefore. 
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. (OAA sec. 502(b)(1)(M)).
    (b) Grantees and subgrantees must list all community service 
opportunities with the State Workforce Agency and all appropriate local 
offices 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, Public Law 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 
eligible, 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 to individuals who are eligible minorities, limited English 
speakers, or Indians, as further defined in Sec.  641.515. (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.  641.515, 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 as necessary, but no less frequently that 
two times during a twelve month period;
    (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

[[Page 19061]]

gathered during the 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) Providing counseling on participants' progress in meeting the 
goals and objectives identified in their IEPs, and in meeting their 
supportive service needs (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. Grantees may provide 
job search assistance and job club activities to participants who are 
enrolled in the SCESEP and are assigned to community service 
assignments.


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

    (a) Grantees and subgrantees must arrange skill training that is 
realistic and consistent with the participants' IEP, and that makes the 
most effective use of their skills and talents. This section does not 
apply to training provided as part of a community service assignment.
    (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. Participants may be paid wages while in 
training. (OAA sec. 502(c)(6)(A)(ii)).
    (g) Grantees/subgrantees may pay 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.


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)).
    (c) Grantees may have other follow-up requirements under subparts G 
and H.


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

[[Page 19062]]

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 participants 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.
    (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 grantee may establish a maximum duration of enrollment 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 
immediately 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 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 grievance procedures described in Sec.  641.910.
    (h) Participants may not be terminated from the program solely on 
the basis of their age. Grantees and 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 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 to develop and operate 
projects designed to provide SCSEP participants with second career 
training and placement

[[Page 19063]]

opportunities with private business concerns. 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 which will be published in the 
Federal Register, or in another appropriate medium.


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. 
However, 502(e) participants must also be co-enrolled in a community 
service assignment in a SCSEP project.
    (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 non-Federal share requirement). 
However section 502(e) grantees may choose to provide a non-Federal 
share and are encouraged to do so.
    (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 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, and 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 must 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.


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

    Referrals from a regular SCSEP grantee to a 502(e) only grantee 
that result in an unsubsidized placement may also be credited to the 
referring SCSEP grantee. However, if the SCSEP grantee is also a 502(e) 
grantee, the unsubsidized placement of the participant may only be 
counted once. The Department will issue administrative guidance on 
additional requirements.


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

    (a) The following performance measures apply to section 502(e) 
grantees. The common performance measures that apply to this program 
are:
    (1) Entered employment;
    (2) Retention in employment; and
    (3) Earnings increase.
    (b) These measures are defined in 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.

[[Page 19064]]

Subpart G--Performance Accountability


Sec.  641.700  What performance measures apply to SCSEP grantees?

    (a) The OAA, at section 513(b), enumerates 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 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 served to the total 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 authorized positions. (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 those who are 
employed in the first quarter after exit--i.e., the number placed. (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 DOL-funded 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 the common performance measures as 
required under Sec.  641.879. The common performance measure indicators 
are:
    (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.
    (d) Program efficiency is defined as the cost per participant.


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. Sec.  641.700 and 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 for the 
SCSEP. 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)).

[[Page 19065]]

    (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 levels 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 levels for the performance measures. 
Performance in excess of 100 percent constitutes exceeding the levels 
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.
    (d) The Department will impose the sanctions outlined in section 
514 of the OAA and in Sec. Sec.  541.750, 541.760, 541.770 and 541.790 
when a grantee fails to meet overall negotiated levels of performance.
    (e) 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.
    (f) 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 grant funds, to a 
competition of all of the grant funds.
    (b) Until the Department establishes baseline levels for customer 
satisfaction measures, 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. The 
poor performing grantee that had its funds competed is not eligible to 
compete for the same funds.
    (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)). The poor performing grantee that had its funds competed 
is not eligible to compete for the same funds.
    (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) whose positions were the 
subject of the competition. (OAA sec. 514(e)(2)(D)).


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, taking into consideration the 
adjustments permitted under section 513(a)(2)(B) of the OAA, or size of 
the project. (OAA sec. 514(e)(3)(A)).
    (b) If the Department determines that there has been a failure to 
meet negotiated levels of performance within a State, 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 project(s) 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 an 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

[[Page 19066]]

    (2) The Governor of a State, or his or her designee, 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 
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 Organizations that 
receive SCSEP funds under grants or cooperative agreements must follow 
the common rule implementing OMB Circular A-102, ``Grants and 
Cooperative Agreements with State and Local Governments'' (10/07/1994) 
(further amended 08/29/1977), codified at 29 CFR part 97.
    (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.


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 an 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 an SCSEP grant from 
the Department must remit unexpended program income earned or generated 
during the grant period from SCSEP funded activities to the Department 
after the end of the grant period.


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 a 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 paragraphs (e) and (f) of this section.
    (c) Recipients must determine 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)).
    (e) A recipient may not require a subgrantee or host agency to 
provide non-Federal resources for the use of the SCSEP project as a 
condition of entering into a subrecipient or host relationship.
    (f) The Department may pay all of the costs of activities carried 
out under section 502(e) of the OAA. (OAA sec. 502(e)).
    (g) 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)).


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

    (a) Except as provided in 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 sub-agreement 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.

[[Page 19067]]

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 ($500,000, for fiscal years ending after December 31, 
2003) 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 and subrecipients 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:
    (i) is a One-Stop partner listed in section 121(b) of WIA, and
    (ii) operates programs and activities that are part of the One-Stop 
Delivery System established under the Workforce Investment Act; or
    (2) The recipient otherwise satisfies the definition of 
``recipient'' in 29 CFR 37.4.
    (c) Recipients must ensure that participants are provided 
informational materials relating to age discrimination and/or their 
rights under the Age Discrimination in Employment Act of 1975 that are 
distributed to recipients by the Department pursuant to section 
503(b)(3) of the OAA.
    (d) Questions about, or complaints alleging a violation of the 
nondiscrimination requirements cited in 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)).
    (e) The specification of any right or protection against 
discrimination in paragraphs (a) through (d) of this section must not 
be interpreted to exclude or diminish any other right or protection 
against discrimination in connection with an SCSEP program that may be 
available to any participant, applicant for participation, or other 
individual under any applicable Federal, State, or local laws 
prohibiting discrimination, or their implementing regulations.


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. In 
addition, as indicated in Sec.  641.827(b), certain recipients and 
subrecipients of SCSEP funds are required to comply with the Workforce 
Investment Act nondiscrimination regulations in 29 CFR part 37. These 
regulations prohibit discrimination on the basis of political 
affiliation or belief.
    (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 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. The Department will 
provide the form and content of the notice and explanatory material by 
administrative issuance. (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.

[[Page 19068]]

    (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 an 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 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's 
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 the SCSEP?

    (a) Yes, in addition to the generally applicable cost principles in 
Sec.  641.847(b), the cost principles in paragraphs (b) through (g) 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) One-Stop Costs. Costs of participating as a required partner in 
the One-Stop delivery system established in accordance with section 
134(c) of the Workforce Investment Act of 1998 are allowable, provided 
that SCSEP services and funding are provided in accordance with the 
Memorandum of Understanding required by the Workforce Investment Act 
and section 502(b)(1)(O) of the Older Americans Act, and costs are 
determined in accordance with the applicable cost principles.
    (e) Building repairs and acquisition costs. Except as provided in 
paragraph (e) of this section 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.
    (f) 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 and any other applicable 
Federal disability nondiscrimination laws to provide

[[Page 19069]]

physical and programmatic accessibility and reasonable accommodation/
modifications for, and effective communications with, individuals with 
disabilities. (29 U.S.C. 794).
    (g) 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 cost category. (See Sec.  
641.864). When participants' community service assignments involve 
functions whose costs are normally classified as Administrative Cost, 
compensation provided to the participants shall be charged as program 
costs instead of administrative costs, since participant wage and 
fringe benefit costs are always charged to the Program 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 first-tier 
subrecipients (as defined in paragraph (c) of this section) 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)).
    (c) First-tier subrecipients are those subrecipients that receive 
SCSEP funds directly from an SCSEP recipient and perform the following 
activities for all participants:
    (1) Eligibility determination;
    (2) Participant assessment;
    (3) Development of and placement into community service 
opportunities.


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 (e) of this section.
    (b)(1) Costs of awards by recipients and first-tier subrecipients 
that are solely for the performance of their own administrative 
functions are classified as administrative costs.
    (2) Costs incurred by recipients and first tier subrecipients for 
administrative functions listed in Sec.  641.856(b) are classified as 
administrative costs.
    (3) Costs incurred by vendors performing administrative functions 
for recipients and first tier subrecipients are classified as 
administrative costs.
    (4) Except as provided in paragraph (b)(1), all costs incurred by 
subrecipients other than first-tier subrecipients are classified as 
program costs.
    (5) Except as provided in paragraph (b)(3) of this section (i.e., 
costs that are incurred to perform administrative functions for 
recipients and first tier subrecipients), all costs incurred by vendors 
are program costs. (See 29 CFR 99.210 for a discussion of factors 
differentiating subrecipients from vendors.)
    (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) 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;
    (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) Subject to the restrictions in Sec.  641.535(c), job placement 
assistance,

[[Page 19070]]

including job development and job search assistance, job fairs, job 
clubs, and job referrals; and
    (e) Participant supportive services, as described in Sec.  641.545. 
(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 both 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 90 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 90 days after the ending date of the grant. The Department will 
provide instructions 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 an 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 90 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 90 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 are 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 about the demographic characteristics 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 section. Federal recipients must maintain the 
necessary records that support required reports according to 
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)).
    (i) 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 Sec.  641.440 and section 514(d) of the OAA.

[[Page 19071]]

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?

    (a) An applicant for financial assistance under title V of the OAA 
that is dissatisfied because the Department has issued a determination 
not to award financial assistance, in whole or in part, to such 
applicant, may request that the Grant Officer provide the reasons for 
not awarding financial assistance to that applicant (debriefing). The 
request must be filed within 10 days of the date of notification 
indicating that it would not be awarded. The Grant Officer must provide 
the protesting applicant with a debriefing and with a written decision 
stating the reasons for the decision not to award the grant within 20 
days of the protest. Applicants may appeal to the U.S. Department of 
Labor, Office of Administrative Law Judges, within 21 days of the date 
of the Grant Officer's notice providing reasons for not awarding 
financial assistance. The appeal may be for a part or the whole of a 
denial of funding. This appeal will not in any way interfere with the 
Department's decisions to fund other organizations to provide services 
during the appeal period.
    (b) Failure to either request a debriefing within 10 days or to 
file an appeal within 21 days provided in paragraph (a) of this section 
constitutes a waiver of the right to a hearing.
    (c) A request for a hearing under this section must state 
specifically those issues in the Grant Officer's notification upon 
which review is requested. Those provisions of the Grant Officer's 
notification not specified for review, or the entire final 
determination when no hearing has been requested within the 21 days, 
are considered resolved and not subject to further review.
    (d) A request for a hearing must be transmitted by certified mail, 
return receipt requested, to the Chief Administrative Law Judge, U.S. 
Department of Labor, Suite 400, 800 K Street, NW., Washington, DC 
20001, with one copy to the Departmental official who issued the 
determination.
    (e) 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, published at 61 FR 19978 (May 3, 1996)), 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.
    (f) 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:
    (1) The appeal is not considered as a complaint; and
    (2) 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 the 
Administrative Law Judge conducting the hearing considers them 
reasonably necessary. 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.
    (g) The Administrative Law Judge should render a written decision 
no later than 90 days after the closing of the record.
    (h) The remedies available are provided in Sec.  641.470.
    (i) This section only applies to multi-year grant awards.


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) Questions about, or complaints alleging a violation of, the 
nondiscrimination requirements of Title VI of the Civil Rights Act of 
1964, Section 504 of the Rehabilitation Act of 1973, Section 188 of the 
Workforce Investment Act of 1998 (WIA), or their implementing 
regulations 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. In the alternative, complaints alleging 
violations of WIA section 188 may be filed initially at the grantee 
level. See 29 CFR 37.71, 37.76. In such cases, the grantee must use 
complaint processing procedures meeting the requirements of 29 CFR 
37.70 through 37.80 to resolve the complaint.


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 suspension or termination actions taken on the 
grounds of discrimination are processed under 29 CFR part 31 or 37, as 
appropriate.
    (c) Protests and appeals of decisions not to award a grant, in 
whole or in part, will be handled under Sec.  641.900.

[[Page 19072]]

    (d) 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 or the imposition of sanctions, 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 the 
Administrative Law Judge conducting the hearing considers them 
reasonably necessary. 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. In ordering 
relief, the ALJ may exercise the full authority of the Secretary under 
the OAA.
    (5) The decision of the ALJ constitutes final agency action unless, 
within 21 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 (a), (c), and (d) 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) Unless the parties agree in writing to extend the period, 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.
    (c) The decision rendered under this informal review process will 
be treated as the final agency decision.

[FR Doc. 04-7282 Filed 4-8-04; 8:45 am]
BILLING CODE 4510-30-P