[Federal Register Volume 69, Number 218 (Friday, November 12, 2004)]
[Proposed Rules]
[Pages 65395-65401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-25233]


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COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR SEVERELY DISABLED

41 CFR Parts 51-2, 51-3, and 51-4

[Docket No. 2004-01-01]
RIN 3037-AA00


Governance Standards for Central Nonprofit Agencies and Nonprofit 
Agencies Participating in the Javits-Wagner-O'Day Program

AGENCY: Committee for Purchase From People Who Are Blind or Severely 
Disabled.

ACTION: Notice of proposed rulemaking; request for comments.

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SUMMARY: The Committee for Purchase From People Who Are Blind or 
Severely Disabled (The Committee), which is responsible for 
administering and overseeing the implementation of the Javits-Wagner-
O'Day (JWOD) Act, proposes to amend its regulations by requiring 
nonprofit agencies awarded Government contracts under the authority of 
the JWOD Act, as well as central nonprofit agencies designated by the 
Committee and nonprofit agencies that would like to qualify for 
participation in the JWOD Program, to comply with new governance 
standards. The proposed governance standards are primarily based on 
standards that are common practice in nonprofit and business 
communities. These new standards would include, among other things, 
standards concerning the practices of boards of directors and the 
reasonableness of executive and other employee compensation. Recent 
accounts alleging, and public concern regarding, isolated instances of 
excessive compensation packages for nonprofit agency executives; a 
perceived lack of full disclosure in the financial reporting of 
nonprofit agencies; and the absence of formal guidelines to establish 
independent boards of directors for JWOD-affiliated central nonprofit 
agencies and nonprofit agencies prompted this proposed change. If fully 
implemented, this change would help promote sound governance procedures 
for central nonprofit agencies and nonprofit agencies participating in 
the JWOD Program, help ensure the effective and transparent 
administration of Government contract funds, and continue to maintain a 
high level of public support for the JWOD Program's employment mission.

DATES: Submit your written comments on this proposed rule on or before 
January 11, 2005. No public meeting will be held.
    Comments on the information collection aspects of this proposed 
rule will be considered if received by January 11, 2005. The Office of 
Management and Budget (OMB) has up to 60 days to approve or disapprove 
information collection but may respond after 30 days. Therefore, to 
ensure maximum consideration, your comments should be received by OMB 
by December 13, 2004.

ADDRESSES: Send your comments on the proposed rule in one of the 
following ways:
     By electronic mail (preferred method) to 
[email protected];
     By fax, to the attention of G. John Heyer, to (703) 603-
0655;
     By postal mail to Committee for Purchase From People Who 
Are Blind or Severely Disabled, 1421 Jefferson Davis Highway, Jefferson 
Plaza 2, Suite 10800, Arlington, VA 22202-3259; or
     Through the Federal eRulemaking Portal at http://www.regulations.gov. Follow the instructions on the site for submitting 
comments.
    For more information on how to submit your comments, please refer 
to the ``Public Comments Solicited'' section below.
    You may submit comments on the information collection aspects of 
the

[[Page 65396]]

proposed rule to the Desk Officer for the Committee for Purchase From 
People Who Are Blind or Severely Disabled, OMB, Office of Information 
and Regulatory Affairs, via facsimile or e-mail using the following fax 
number and e-mail address: 202/395-6566 (fax); [email protected] 
(e-mail). Please provide a copy of your comments to Janet Yandik, 
Information Management Specialist, Committee for Purchase From People 
Who Are Blind or Severely Disabled, 1421 Jefferson Davis Highway, 
Jefferson Plaza 2, Suite 10800, Arlington, VA, 22202-3259; (703) 603-
0655 (fax); or [email protected] (e-mail).
    Comments will be made available for public inspection, from 9 a.m. 
to 4 p.m. on weekdays, at the Committee for Purchase From People Who 
Are Blind or Severely Disabled, 1421 Jefferson Davis Highway, Jefferson 
Plaza 2, Suite 10800, Arlington, VA 22202-3259.

FOR FURTHER INFORMATION CONTACT: G. John Heyer, by telephone at (703) 
603-0665, by fax at (703) 603-0655, by e-mail at [email protected], or by 
postal mail at Committee for Purchase From People Who Are Blind or 
Severely Disabled, 1421 Jefferson Davis Highway, Jefferson Plaza 2, 
Suite 10800, Arlington, VA, 22202-3259.

SUPPLEMENTARY INFORMATION:

Background

    The regulations at 41 CFR Chapter 51, titled ``Committee for 
Purchase From People Who Are Blind or Severely Disabled,'' provide the 
requirements, standards, and procedures for the JWOD Program. The JWOD 
Program creates jobs and training opportunities for people who are 
blind or who have other severe disabilities. Its primary means of doing 
so is by requiring Government agencies to purchase selected products 
and services from nonprofit agencies employing such individuals. As a 
result, JWOD employees are able to lead more productive, independent 
lives.
    Named for its enabling legislation, the Javits-Wagner-O'Day Act of 
1971 (41 U.S.C. 46-48c), the JWOD Program is a mandatory source of 
supply for Federal employees. The JWOD Program is administered by the 
Committee for Purchase From People Who Are Blind or Severely Disabled. 
Two national, independent organizations, National Industries for the 
Blind (NIB) and NISH, have been designated by the Committee as central 
nonprofit agencies, and these organizations help State and private 
nonprofit agencies participate in the JWOD Program.

Governance Standards

    The Committee proposes to require nonprofit agencies awarded 
Government contracts under the authority of the JWOD Act, as well as 
central nonprofit agencies designated by the Committee and nonprofit 
agencies that would like to qualify for participation in the JWOD 
Program, to comply with new governance standards. For the purposes of 
this proposal, the term governance includes, but is not limited to, the 
structure of the central nonprofit agency's or nonprofit agency's 
governing authority, such as its Board of Directors; auditing and 
reporting of the central nonprofit agency's or nonprofit agency's 
finances; executive compensation packages provided by the central 
nonprofit agency or nonprofit agency; and the central nonprofit 
agency's or nonprofit agency's conflict of interest policy. Adopting 
the proposed governance standards would mean adding a new Sec.  51-2.10 
to the regulations to provide the standards for central nonprofit 
agencies, qualified nonprofit agencies participating in the JWOD 
Program, and nonprofit agencies that would like to qualify for 
participation in the JWOD Program; adding two new paragraphs to the 
regulations at Sec.  51-3.2 to provide a reference to the standards and 
reporting requirements for central nonprofit agencies; and adding a new 
paragraph to the regulations at Sec.  51-4.3 to provide a reference to 
the standards for nonprofit agencies.
    To date, the Committee's regulations have not included governance 
standards. While the Committee believes, based on its experience 
managing the JWOD Program, that the overwhelming majority of JWOD-
affiliated central nonprofit agencies and nonprofit agencies operate in 
an ethical and accountable manner, recent accounts alleging (and public 
concern regarding) isolated instances of excessive compensation 
packages for nonprofit agency executives, a perceived lack of full 
disclosure in the financial reporting of nonprofit agencies, and the 
absence of formal guidelines to establish independent boards of 
directors for JWOD-affiliated central nonprofit agencies and nonprofit 
agencies have prompted the need for explicitly stated standards. 
Therefore, in order to help maintain the integrity of the JWOD Program, 
the Committee is proposing to add the governance standards listed below 
to the regulations at 41 CFR 51-2.10.
    Each central nonprofit agency, qualified nonprofit agency 
participating in the JWOD Program, and nonprofit agency that would like 
to qualify for participation in the JWOD Program would have to comply 
with Committee-approved governance standards. In evaluating the 
governance of designated central nonprofit agencies and nonprofit 
agencies, the Committee would consider compliance to be certification, 
as described under the heading ``Certification'' below, by the agency 
that the Board of Directors (or, in the case of noncorporate entities 
such as State and local governments, an equivalent governing 
authority):
     Does not include family members of the central nonprofit 
agency's or nonprofit agency's management team;
     Does not have the Chairperson also serving as the central 
nonprofit agency's or nonprofit agency's Chief Executive Officer (CEO), 
President, Executive Director, or equivalent;
     Has an audit committee to oversee the central nonprofit 
agency's or nonprofit agency's financial affairs, and audits are 
conducted by an independent auditing firm that is overseen by the audit 
committee;
     Reviews and certifies executive compensation packages, and 
develops and implements an annual evaluation process for the Board or 
other governing authority, as well as for the central nonprofit 
agency's or nonprofit agency's CEO, President, Executive Director, or 
equivalent;
     Has adopted a conflict of interest policy, and discloses 
all members' business relationships with the central nonprofit agency 
or nonprofit agency as a part of that policy;
     Turns over Board, or other governing authority, membership 
on a recurring schedule;
     Reviews and validates all Internal Revenue Service (IRS) 
Form 990s and all attachments, and certifies that such filings identify 
all sources of compensation income from the central nonprofit agency or 
nonprofit agency and related entities;
     Has at least one financial expert serving; and
     Publishes and makes public the minutes of Board, or other 
governing authority, meetings.
    Further, in assessing the reasonableness of executive and other 
employee compensation, the Committee would consider:
     The size and complexity of the central nonprofit agency's 
or nonprofit agency's charter or mission;
     The mission area, geographic size, and financial condition 
of the central nonprofit agency or nonprofit agency;
     The technical and professional qualifications required for 
positions in

[[Page 65397]]

the central nonprofit agency or nonprofit agency;
     Compensation packages paid at comparable central nonprofit 
agencies or nonprofit agencies;
     The percentage of the net revenues to the central 
nonprofit agency or nonprofit agency realized from the JWOD Program 
paid to employees and to senior management;
     The extent to which the central nonprofit agency's or 
nonprofit agency's executive compensation packages exceed the total 
compensation offered to the typical, highest paid (excluding any 
retention allowances and Presidential rank awards), senior executive 
service (SES), career Federal government employee, as explained below; 
and
     For only nonprofit agencies (not central nonprofit 
agencies), the median compensation package for the nonprofit agency's 
direct labor hour workers and how that median compares to the 
compensation packages offered to executives.
    Currently, the total compensation package offered to the typical, 
highest paid (excluding any retention allowances and Presidential rank 
awards), SES, career Federal government employee amounts to 
approximately $207,000 per year. This amount changes annually, 
according to adjustments in the salary and benefits for Federal 
government employees. The Committee would generally consider a central 
nonprofit agency's or nonprofit agency's executive compensation package 
unreasonable if it exceeds the total compensation offered to the 
typical, highest paid (excluding any retention allowances and 
Presidential rank awards), SES, career Federal government employee, 
unless the central nonprofit agency or nonprofit agency can provide 
adequate justification for the level of executive compensation to the 
Committee. The basis for comparing a central nonprofit agency's or 
nonprofit agency's executive compensation to a Federal employee's 
compensation lies in the fact that the JWOD Program is a Federal 
program and the funds obtained through the JWOD Program are Federal 
contract funds.
    The proposed standards also include procedures that the Committee 
would follow if a central nonprofit agency or qualified nonprofit 
agency participating in the JWOD Program violates the governance 
standards set forth at 41 CFR 51-2.10. Violation by a qualified 
nonprofit agency participating in the JWOD Program would be handled in 
accordance with established procedures at 41 CFR 51-4.5, ``Violations 
by nonprofit agencies.'' Violation by a central nonprofit agency would 
be investigated by the Committee's staff. The central nonprofit agency 
concerned would be afforded an opportunity to submit a statement of 
facts and evidence. The Committee staff would report its findings to 
the Committee, together with its recommendation. In reviewing the case, 
the Committee may request the submission of additional evidence or may 
conduct its own investigation. If a central nonprofit agency failed to 
correct its violations of the governance standards, the Committee, 
after affording the central nonprofit agency an opportunity to address 
the Committee on the matter, may terminate the central nonprofit 
agency's designation as a central nonprofit agency and its eligibility 
to participate in the JWOD Program.
    Further, if a nonprofit agency that would like to qualify for 
participation in the JWOD Program was in violation of the proposed 
governance standards set forth at 41 CFR 51-2.10, that agency could 
fail to qualify for participation in the JWOD Program.
    These new standards should help promote an environment of sound 
governance and adequate internal controls for JWOD-affiliated central 
nonprofit agencies and nonprofit agencies, as well as help ensure the 
effective and transparent administration of Government contract funds 
obtained through the JWOD Program. Further, these proposed standards 
should not impose an undue burden on central nonprofit agencies, nor on 
nonprofit agencies, because such standards are common practice in 
nonprofit and business communities.

Certification

    Certification by a central nonprofit agency that the governance 
standards set forth in the proposed Sec.  51-2.10 have or have not yet 
been met would occur on a new annual certification form, due to the 
Committee by November 1 of each year. Certification by a qualified 
nonprofit agency participating in the JWOD Program that the governance 
standards set forth in the proposed Sec.  51-2.10 have or have not yet 
been met would occur on the existing annual certification forms 
(Committee Form 403, Annual Certification--Qualified Nonprofit Agencies 
Serving People Who Are Blind, or Committee Form 404, Annual 
Certification--Qualified Nonprofit Agencies Serving People Who Are 
Severely Disabled), due to the Committee by December 1 of each year. 
Certification by a nonprofit agency that would like to qualify for 
participation in the JWOD Program that the governance standards set 
forth in the proposed Sec.  51-2.10 have or have not yet been met would 
occur on the existing initial certification forms (Committee Form 401, 
Initial Certification--Qualified Nonprofit Agency Serving People Who 
Are Blind, or Committee Form 402, Initial Certification--Qualified 
Nonprofit Agency Serving People Who Are Severely Disabled). These 
certifications are explained in more detail below, under the heading 
``Paperwork Reduction Act.''
    As a part of the certification, central nonprofit agencies and 
nonprofit agencies would have to supply information on the total (cash 
and noncash) compensation paid to their key employees during either the 
fiscal year for which they are submitting an annual certification (for 
central nonprofit agencies and qualified nonprofit agencies 
participating in the JWOD Program) or the dates covered by the report 
(for initial certification of nonprofit agencies that would like to 
participate in the JWOD Program). We base our definition of a ``key 
employee'' on the definition provided by the IRS in the instructions to 
the IRS Form 990; a ``key employee'' is any person having 
responsibilities or powers similar to those of officers, directors, or 
trustees. The term includes the chief management and administrative 
officials of an organization (such as a CEO, President, Executive 
Director, or equivalent) but does not include the heads of separate 
departments or smaller units within an organization. A chief financial 
officer and the officer in charge of administration or program 
operations are both key employees if they have the authority to control 
the organization's activities, its finances, or both. The ``heads of 
separate departments'' are managers within their specific areas but not 
for the organization as a whole and, therefore, are not key employees.
    The information we would require would consist of:
     The name, address, and title of each key employee;
     A numerical estimate of the average hours per week each 
key employee worked in his or her position;
     The salary, fees, bonuses, and severance payments paid to 
each key employee;
     All forms of deferred compensation and future severance 
payments and all payments to welfare benefit plans (including, but not 
limited to, medical, dental, life insurance, severance pay, and 
disability plans) paid on behalf of each key employee; and
     All taxable and nontaxable fringe benefits (including, but 
not limited to, payments made under indemnification arrangements, the 
value of personal use

[[Page 65398]]

of housing, automobiles, or other assets owned or leased by the agency 
or provided for the agency's use without charge) provided to each key 
employee.
In summary, the information that central nonprofit agencies and 
nonprofit agencies would provide to us would be the same as what is 
required under Part IV of the IRS Form 990.
    We are proposing to require this information instead of a photocopy 
of an agency's most recently compiled IRS Form 990s because, due to 
differing cycles of fiscal years and filing for extensions of the 
deadline to submit IRS Form 990s, central nonprofit agencies and 
nonprofit agencies may be two or three years behind the current fiscal 
year in filing their IRS Form 990s. Out-of-date information would do 
little to help the Committee determine whether a central nonprofit 
agency or nonprofit agency is currently meeting the requirements of the 
Committee's regulations. Therefore, we would require central nonprofit 
agencies and nonprofit agencies to submit current information on the 
total compensation packages offered to key employees.

Public Comments Solicited

    We invite public comments on this proposed rule. Please submit your 
comments by the date given in the DATES section using one of the 
options offered in the ADDRESSES section. Please mention the docket 
number (2004-01-01) at the top of your comments. As all comments 
received will be made available for public inspection, please do not 
include any information, such as your street address or telephone 
number, that you would prefer to remain private. If you choose to send 
your comments by postal mail, please include a DOS-formatted 3\1/2\-
inch disk with your written comments. If you have any questions about 
how to comment on this proposed rule, please contact the person listed 
under FOR FURTHER INFORMATION CONTACT.
    All comments we receive will be made available for public 
inspection, from 9 a.m. to 4 p.m. on weekdays, at the address listed in 
the ADDRESSES section. To facilitate public inspection of comments, 
please call (703) 603-7740 to notify us of your intention to inspect 
comments before coming to the Committee office.

Certifications and Required Determinations

Regulatory Flexibility Act

    I certify that the changes proposed in this rule would not have a 
significant impact on a substantial number of small entities 
(Regulatory Flexibility Act, 5 U.S.C. 605(b)). The major factors 
considered for this certification were:
    1. If approved, the action will not result in any additional 
reporting, recordkeeping, or compliance requirements for small entities 
other than the small organizations that will furnish the service to the 
Government.
    2. There are no known regulatory alternatives which would 
accomplish the objectives of the Javits-Wagner-O'Day Act (41 U.S.C. 46-
48c).
    We invite comments on this certification. Please submit your 
comments by the date given in the DATES section using one of the 
options offered in the ADDRESSES section. Commenters should identify 
the statement(s) underlying the certification on which they are 
providing additional information.

Executive Order 12866

    The Office of Management and Budget has determined that this 
proposal is ``not significant'' for purposes of Executive Order 12866.
    a. If adopted, this proposal would not have an annual economic 
effect of $100 million or adversely affect an economic sector, 
productivity, jobs, the environment, or other units of government. A 
cost-benefit and economic analysis is not required. This proposal would 
have minimal effects on regulated entities.
    b. If adopted, this proposal would not create inconsistencies with 
other agencies' actions. No other Federal agency has any role in 
managing the JWOD Program.
    c. If adopted, this proposal would not materially affect 
entitlements, grants, user fees, loan programs, or the rights and 
obligations of their recipients.
    d. If adopted, this proposal would not raise novel legal or policy 
issues. This proposal is designed to incorporate standard, high-quality 
business practices into the requirements for central nonprofit agencies 
and nonprofit agencies participating in the JWOD Program.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. If this proposed rule is adopted: (1) It will 
have no preemptive effect on State and local laws and regulations; (2) 
no retroactive effect will be given to this rule; and (3) 
administrative proceedings will not be required before parties may file 
suit in court challenging this rule.

Executive Order 13132

    This proposal does not contain policies with federalism 
implications sufficient to warrant preparation of a Federalism 
Assessment under Executive Order 13132 (August 4, 1999).

Unfunded Mandates Reform Act

    This proposed rule has been reviewed under the Unfunded Mandates 
Reform Act (2 U.S.C. 1501 et seq.). If adopted, this proposed rule 
would not impose an unfunded mandate on State, local, or Tribal 
governments or the private sector of more than $100 million per year, 
nor would it have a significant or unique effect on State, Tribal, or 
local governments or the private sector.

Paperwork Reduction Act

    Office of Management and Budget (OMB) regulations at 5 CFR 1320 
implement provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 et seq.). A Federal agency may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless it displays a currently valid OMB control number.
    The OMB regulations at 5 CFR 1320.3(c) define a ``collection of 
information'' as the obtaining of information by or for an agency by 
means of identical questions posed to, or identical reporting, 
recordkeeping, or disclosure requirements imposed on, 10 or more 
persons. In addition, the OMB regulations at 5 CFR 1320.3(c)(4)(i) 
state that any recordkeeping, reporting, or disclosure requirement 
contained in a rule of general applicability (such as this proposed 
rule) is deemed to involve 10 or more persons. This proposal would 
require a new certification from central nonprofit agencies, qualified 
nonprofit agencies participating in the JWOD Program, and nonprofit 
agencies that would like to qualify for participation in the JWOD 
Program and would require these agencies to supply information on the 
total (cash and noncash) compensation paid to their key employees (as 
explained above under the heading ``Certification''). These new 
information collections would require OMB approval under the Paperwork 
Reduction Act.
    Simultaneous with the publication of this proposed rule, we have 
submitted an application for information collection approval from OMB 
to require a new annual certification from central nonprofit agencies 
that the governance standards in proposed 41 CFR 51-2.10 have or have 
not yet been met. This certification would include a requirement that 
central nonprofit agencies supply information on the total (cash and 
noncash) compensation paid to their key employees during the fiscal 
year for which they are submitting an annual certification. The 
application for

[[Page 65399]]

information collection approval from OMB also requests a revision to 
our existing annual certification forms, which are due to us from 
qualified nonprofit agencies participating in the JWOD Program by 
December 1 of each year. The revised forms would include the new 
certification proposed in this document and a requirement that 
nonprofit agencies supply information on the total (cash and noncash) 
compensation paid to their key employees during the fiscal year for 
which they are submitting an annual certification. In addition, the 
application for information collection approval from OMB requests a 
revision to our existing initial certification forms, which are 
required for nonprofit agencies that would like to participate in the 
JWOD Program. The revised forms would include the new certification 
proposed in this document and a requirement that nonprofit agencies 
supply information on the total (cash and noncash) compensation paid to 
their key employees during the dates covered by the report. We will 
notify the public of OMB's response to our application in the final 
rule for this regulation.
    We are asking OMB to approve, for the first time, a new Committee 
Form 405, which would be the Annual Certification-Central Nonprofit 
Agencies. The new form would be due to the Committee by November 1 of 
each year from the two designated central nonprofit agencies (currently 
NIB and NISH). The new form would require each central nonprofit 
agency's Officer of the Board and Agency Executive to certify, via 
signature, that the governance standards in Sec.  51-2.10 have or have 
not yet been met. If the governance standards have not yet been met, an 
explanation (with relevant documentation attached) would be required. 
The new form would also require central nonprofit agencies to supply, 
and certify the accuracy and completeness of, information on the total 
(cash and noncash) compensation paid to their key employees during the 
fiscal year for which they are submitting an annual certification. 
Lastly, the new form would ask if any changes have been made during the 
past year to the central nonprofit agency's articles of incorporation 
or bylaws. This last piece of information has been offered sporadically 
over the years by central nonprofit agencies; including it on the new 
form would standardize the collection of this information.
    We expect that completing this new certification form would require 
a moderate amount of time for central nonprofit agencies even though 
the certification and any documents to support the certification do not 
exceed the knowledge and information normally possessed by a prudent 
person in the ordinary course of business dealings. We estimate that it 
would take an average of 20 hours for a respondent to complete the 
form, including reading the appropriate instructions; referring to and 
reading the new governance standards (as provided in Sec.  51-2.10, 
below); certifying that the new standards have or have not been met; if 
necessary, providing a brief explanation concerning why the governance 
standards have not yet been met and attaching appropriate 
documentation; gathering and recording information on the total (cash 
and noncash) compensation paid to the agency's key employees during the 
fiscal year for which the agency is submitting an annual certification; 
certifying that the central nonprofit agency's articles of 
incorporation or bylaws have or have not changed during the most recent 
fiscal year; and, if necessary, attaching any changes to the articles 
of incorporation or bylaws. Therefore, for the total number of 
respondents completing this form (2), the new information collection 
requirements would result in a total annual burden of 40 hours.
    Committee Form 403 (Annual Certification--Qualified Nonprofit 
Agencies Serving People Who Are Blind) and Committee Form 404 (Annual 
Certification--Qualified Nonprofit Agencies Serving People Who Are 
Severely Disabled) are already approved by OMB and assigned OMB control 
numbers 3037-0001 and 3037-0002, respectively. Both of these control 
numbers expire on March 31, 2006. We have submitted a revision request 
to OMB to update these two forms to include a new certification 
statement that would require each nonprofit agency's Officer of the 
Board and Agency Executive to certify, via signature, that the 
governance standards in Sec.  51-2.10 have or have not yet been met. If 
the governance standards have not yet been met, an explanation (with 
relevant documentation attached) would be required. In addition, each 
nonprofit agency would have to supply, and certify the accuracy and 
completeness of, information on the total (cash and noncash) 
compensation paid to their key employees during the fiscal year for 
which they are submitting an annual certification.
    We expect the additional certification on Committee Form 403 or 404 
would require a moderate time for respondents even though the 
certification and any documents to support the certification do not 
exceed the knowledge and information normally possessed by a prudent 
person in the ordinary course of business dealings. We estimate that it 
would take an average of 19 hours for a respondent to read the 
appropriate instructions; refer to and read the new standards (as 
provided in Sec.  51-2.10, below); certify that the new standards have 
or have not been met; if necessary, provide a brief explanation 
concerning why the governance standards have not yet been met and 
attach appropriate documentation; and gather and record information on 
the total (cash and noncash) compensation paid to the agency's key 
employees during the fiscal year for which the agency is submitting an 
annual certification. Therefore, for the total number of respondents 
completing both of these forms (642; 77 for Form 403, and 565 for Form 
404), the new information collection requirements would result in an 
additional annual burden of 12,198 hours (1,463 hours for Form 403, and 
10,735 hours for Form 404). In addition, in accordance with 41 CFR 51-
4.3(b)(4), relevant records would have to be made available for 
inspection at any reasonable time to representatives of the Committee 
or the central nonprofit agency representing the nonprofit agency.
    In addition, Committee Form 401 (Initial Certification-Qualified 
Nonprofit Agency Serving People Who Are Blind) and Committee Form 402 
(Initial Certification-Qualified Nonprofit Agency Serving People Who 
Are Severely Disabled) are already approved by OMB and assigned OMB 
control numbers 3037-0004 and 3037-0003, respectively. Both of these 
control numbers expire on March 31, 2005. We have submitted a revision 
request to OMB to update these two forms to include a new certification 
statement that would require each nonprofit agency's Officer of the 
Board and Agency Executive to certify, via signature, that the 
governance standards in Sec.  51-2.10 have or have not yet been met. If 
the governance standards have not yet been met, an explanation (with 
relevant documentation attached) would be required. In addition, each 
nonprofit agency would have to supply, and certify the accuracy and 
completeness of, information on the total (cash and noncash) 
compensation paid to their key employees during the dates covered by 
the report.
    We expect the additional certification on Committee Form 401 or 402 
would require a moderate time for respondents even though the 
certification and any documents to support the certification do not 
exceed the knowledge and

[[Page 65400]]

information normally possessed by a prudent person in the ordinary 
course of business dealings. We estimate that it would take an average 
of 19 hours for a respondent to read the appropriate instructions; 
refer to and read the new standards (as provided in Sec.  51-2.10, 
below); certify that the new standards have or have not been met; if 
necessary, provide a brief explanation concerning why the governance 
standards have not yet been met and attach appropriate documentation; 
and gather and record information on the total (cash and noncash) 
compensation paid to the agency's key employees during the dates 
covered by the report. Therefore, for the total number of respondents 
completing both of these forms (32; 2 for Form 401, and 30 for Form 
402), the new information collection requirements would result in an 
additional annual burden of 608 hours (38 hours for Form 401, and 570 
hours for Form 402).
    OMB regulations at 5 CFR part 1320 require that interested members 
of the public and affected agencies have an opportunity to comment on 
information collection and recordkeeping activities. We invite comments 
on: (1) Whether the collection of information is necessary for the 
proper performance of the functions of the agency, including whether 
the information will have practical utility; (2) the accuracy of the 
agency's estimate of burden, including the validity of the methodology 
and assumptions used; (3) ways to enhance the quality, utility, and 
clarity of the information on those who are to respond, including 
through the use of appropriate automated, electronic, mechanical, or 
other technological collection techniques or other forms of information 
technology; and (4) ways to minimize the burden of the collection of 
information on those who are to respond. See the DATES and ADDRESSES 
sections of this proposed rule for information on submitting your 
comments on this information collection.

List of Subjects

41 CFR Part 51-2

    Organization and functions (Government agencies).

41 CFR Part 51-3

    Government procurement, Handicapped.

41 CFR Part 51-4

    Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Committee proposes 
to amend parts 51-2, 51-3, and 51-4 of title 41, chapter 51 of the Code 
of Federal Regulations as follows:
    1. The authority citation for parts 51-2, 51-3, and 51-4 continues 
to read as follows:

    Authority: 41 U.S.C. 46-48c.

PART 51-2--COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR 
SEVERELY DISABLED

    2. Add a new Sec.  51-2.10 to read as follows:


Sec.  51-2.10  Program participant governance.

    Each central nonprofit agency, qualified nonprofit agency 
participating in the JWOD Program, and nonprofit agency that would like 
to qualify for participation in the JWOD Program must comply with 
Committee-approved governance standards.
    (a) In evaluating the governance of central nonprofit agencies and 
nonprofit agencies, the Committee will consider compliance to be 
certification by the agency, in accordance with paragraph (d) of this 
section, that the Board of Directors (or, in the case of noncorporate 
entities such as State and local governments, an equivalent governing 
authority):
    (1) Does not include family members of the central nonprofit 
agency's or nonprofit agency's management team;
    (2) Does not have the Chairperson also serving as the central 
nonprofit agency's or nonprofit agency's Chief Executive Officer (CEO), 
President, Executive Director, or equivalent;
    (3) Has an audit committee to oversee the central nonprofit 
agency's or nonprofit agency's financial affairs, and audits are 
conducted by an independent auditing firm that is overseen by the audit 
committee;
    (4) Reviews and certifies executive compensation packages, and 
develops and implements an annual evaluation process for the Board or 
other governing authority, as well as for the central nonprofit 
agency's or nonprofit agency's CEO, President, Executive Director, or 
equivalent;
    (5) Has adopted a conflict of interest policy, and discloses all 
members' business relationships with the central nonprofit agency or 
nonprofit agency as a part of that policy;
    (6) Turns over Board, or other governing authority, membership on a 
recurring schedule;
    (7) Reviews and validates all Internal Revenue Service (IRS) Form 
990s and all attachments, and certifies that such filings identify all 
sources of compensation income from the central nonprofit agency or 
nonprofit agency and related entities;
    (8) Has at least one financial expert serving; and
    (9) Publishes and makes public the minutes of Board, or other 
governing authority, meetings.
    (b) In assessing the reasonableness of executive and other employee 
compensation, the Committee will consider:
    (1) The size and complexity of the central nonprofit agency's or 
nonprofit agency's charter or mission;
    (2) The mission area, geographic size, and financial condition of 
the central nonprofit agency or nonprofit agency;
    (3) The technical and professional qualifications required for 
positions in the central nonprofit agency or nonprofit agency;
    (4) Compensation packages paid at comparable central nonprofit 
agencies or nonprofit agencies;
    (5) The percentage of the net revenues to the central nonprofit 
agency or nonprofit agency realized from the JWOD Program paid to 
employees and to senior management;
    (6) The extent to which the central nonprofit agency's or nonprofit 
agency's executive compensation packages exceed the total compensation 
offered to the typical, highest paid (excluding any retention 
allowances and Presidential rank awards), senior executive service, 
career Federal government employee; and
    (7) For only nonprofit agencies, the median compensation package 
for the nonprofit agency's direct labor hour workers and how that 
median compares to the compensation packages offered to executives.
    (c) Certification. (1) A central nonprofit agency must certify that 
the governance standards set forth in paragraphs (a) and (b) of this 
section have or have not yet been met by completing the annual 
certification form (Committee Form 405) and providing the completed 
form to the Committee by November 1 of each year.
    (2) Qualified nonprofit agencies participating in the JWOD Program 
must certify that the governance standards set forth in paragraphs (a) 
and (b) of this section have or have not yet been met on the annual 
certification form required by Sec.  51-4.3(a) of this chapter.
    (3) Nonprofit agencies that would like to qualify for participation 
in the JWOD Program must certify that the governance standards set 
forth in paragraphs (a) and (b) of this section have or have not yet 
been met on the initial certification form required by Sec.  51-4.2(c) 
of this chapter.
    (d) Violations. (1) Violations of the governance standards set 
forth in paragraphs (a) and (b) of this section by

[[Page 65401]]

central nonprofit agencies will be investigated by the Committee's 
staff. The central nonprofit agency concerned will be afforded an 
opportunity to submit a statement of facts and evidence. The Committee 
staff will report its findings to the Committee, together with its 
recommendation. In reviewing the case, the Committee may request the 
submission of additional evidence or may conduct its own investigation. 
If a central nonprofit agency fails to correct its violations of the 
governance standards set forth in paragraphs (a) and (b) of this 
section, the Committee, after affording the central nonprofit agency an 
opportunity to address the Committee on the matter, may terminate the 
central nonprofit agency's designation as a central nonprofit agency 
and its eligibility to participate in the JWOD Program.
    (2) Violations of the governance standards set forth in paragraphs 
(a) and (b) of this section by qualified nonprofit agencies 
participating in the JWOD Program will be handled in accordance with 41 
CFR 51-4.5, ``Violations by nonprofit agencies,'' of this chapter.
    (e) The information collection requirements set forth in this 
section for central nonprofit agencies are included on Committee Form 
405, which has approved by the Office of Management and Budget (OMB) 
under OMB control number 3037-xxxx. The information collection 
requirements set forth in this section for qualified nonprofit agencies 
participating in the JWOD Program are included on Committee Forms 403 
and 404, which have been approved by the Office of Management and 
Budget (OMB) under OMB control numbers 3037-0001 and 3037-0002, 
respectively. The information collection requirements set forth in this 
section for nonprofit agencies that would like to qualify for 
participation in the JWOD Program are included on Committee Forms 401 
and 402, which have been approved by the Office of Management and 
Budget (OMB) under OMB control numbers 3037-0004 and 3037-0003, 
respectively. A Federal agency may not conduct or sponsor, and a person 
is not required to respond to, a collection of information unless it 
displays a currently valid OMB control number.

PART 51-3--CENTRAL NONPROFIT AGENCIES

    3. Amend Sec.  51-3.2 by adding new paragraphs (o) and (p) to read 
as follows:


Sec.  51-3.2  Responsibilities under the JWOD Program.

* * * * *
    (o) Submit to the Committee, by November 1 of each year, a 
completed copy of the Annual Certification--Central Nonprofit Agency 
(Committee Form 405) covering the fiscal year ending the preceding 
September 30.
    (p) Comply with Committee-approved governance standards, as 
provided in Sec.  51-2.10 of this chapter.

PART 51-4--NONPROFIT AGENCIES

    4. Amend Sec.  51-4.3 by adding a new paragraph (b)(10) to read as 
follows:


Sec.  51-4.3  Maintaining qualification.

* * * * *
    (b) * * *
    (10) Comply with Committee-approved governance standards, as 
provided in Sec.  51-2.10 of this chapter.
* * * * *

    Dated: November 5, 2004.
Leon A. Wilson, Jr.,
Executive Director, Committee for Purchase From People Who Are Blind or 
Severely Disabled.
[FR Doc. 04-25233 Filed 11-10-04; 8:45 am]
BILLING CODE 6353-01-P