[Federal Register Volume 81, Number 154 (Wednesday, August 10, 2016)]
[Rules and Regulations]
[Pages 52770-52778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18721]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 21

RIN 2900-AP72


Veterans Employment Pay for Success Grant Program

AGENCY: Department of Veterans Affairs.

ACTION: Interim final rule.

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SUMMARY: The Department of Veterans Affairs (VA) is establishing a 
grant program (Veterans Employment Pay for Success (VEPFS)) under the 
authority of the U.S.C. to award grants to eligible entities to fund 
projects that are successful in accomplishing employment rehabilitation 
for Veterans with service-connected disabilities. VA will award grants 
on the basis of an eligible entity's proposed use of a Pay for Success 
(PFS) strategy to achieve goals. This interim final rule establishes 
regulations for awarding a VEPFS grant, including the general process 
for awarding the grant, criteria and parameters for evaluating grant 
applications, priorities related to the award of a grant, and general 
requirements and guidance for administering a VEPFS grant program.

DATES: Effective Date: This rule is effective on August 10, 2016.
    Comment Date: Comments must be received on or before October 11, 
2016.

ADDRESSES: Written comments may be submitted through 
www.Regulations.gov; by mail or hand-delivery to Director, Regulation 
Policy and Management (02REG), Department of Veterans Affairs, 810 
Vermont Avenue NW., Room 1068, Washington, DC 20420; or by fax to (202) 
273-9026. Comments should indicate that they are submitted in response 
to ``RIN 2900-AP72--Veterans Employment Pay for Success Grant 
Program.'' Copies of comments received will be available for public 
inspection in the Office of Regulation Policy and Management, Room 
1068, between the hours of 8:00 a.m. and 4:30 p.m., Monday through 
Friday (except holidays). Please call (202) 461-4902 for an 
appointment. (This is not a toll-free number.) In addition, during the 
comment period, comments may be viewed online through the Federal 
Docket Management System (FDMS) at www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Patrick Littlefield, Director, VA 
Center for Innovation, Department of Veterans Affairs, (08), 810 
Vermont Ave. NW., Washington, DC, (202) 256-7176. (This is not a toll-
free number.)

SUPPLEMENTARY INFORMATION: VA's Vocational Rehabilitation & Employment 
(VR&E) Service provides services and assistance necessary to enable 
Veterans with compensable service-connected disabilities and employment 
barriers to achieve maximum independence in daily living and, to the 
maximum extent feasible, to become employable and to obtain and 
maintain suitable employment. (A Veteran with a noncompensable service-
connected disability is not entitled to vocational rehabilitation 
services and assistance under chapter 31 of title 38, United States 
Code. See 38 U.S.C. 3102.) Section 3119 of title 38, United States 
Code, authorizes the Secretary of Veterans Affairs (Secretary) to make 
grants to or contract with public or nonprofit agencies, including 
institutions of higher learning, to advance ``the knowledge, methods, 
techniques, and resources available for use in rehabilitation programs 
for veterans.'' Section 3119 specifically authorizes the Secretary to 
make grants to such agencies to conduct or provide support for projects 
which are ``designed to increase the resources and potential for 
accomplishing the rehabilitation of disabled veterans.'' (See also 
implementing regulation at 38 CFR 21.390.)
    PFS is a strategy for successfully attaining positive social or 
environmental outcomes by paying for

[[Page 52771]]

an intervention to achieve such outcomes only after the intervention 
produces these outcomes. Using a PFS strategy, a party to an agreement 
agrees to pay for services for specific people or communities in need 
of particular services only if and when an agreed-upon set of outcomes 
related to meeting the people's or communities' needs has been achieved 
or a level of impact has been verified. Instead of funding services 
regardless of the results, payments are made only if interventions 
achieve the outcomes agreed upon in advance. For example, instead of 
paying for the provision of job training without knowing whether such 
training will have a successful result, an entity might use a PFS 
strategy to pay for the provision of job training only when individuals 
gain stable employment in good jobs. When the party committed to pay 
for outcomes is a Government entity, taxpayers will not have to pay for 
ineffective services. However, the party that provides services may not 
have the funding for the services before outcomes are measured. PFS 
agreements can incorporate PFS financing, sometimes referred to as 
``social impact bonds,'' to cover the costs of the services until 
success is achieved and payments are due. PFS financing involves third-
party, independent investors that provide the financing necessary to 
carry out the intervention. In addition, a PFS model typically involves 
a project coordinator or intermediary to facilitate and manage the 
project, a service provider to deliver the intervention, and an 
independent evaluator to determine whether the intervention achieves 
the desired outcomes.
    There is a need to find new, innovative methods for rehabilitating 
Veterans with compensable service-connected disabilities (as defined in 
38 CFR 3.1(k)) who qualify for benefits under VA's VR&E program so that 
they become employable and are ultimately able to obtain and maintain 
suitable employment. Through PFS grant programs, which may serve 
various Veteran populations including those Veterans with 
noncompensable service-connected disabilities who do not qualify for 
VR&E benefits, we hope to obtain information to establish new, 
innovative methods for rehabilitating Veterans who qualify for VR&E 
benefits. PFS offers an economical mechanism, which can save taxpayers' 
money, for exploring the resources and techniques that are available 
for rehabilitating Veterans with service-connected disabilities with 
regard to employment. We interpret the authority in Sec. 3119 to award 
grants to conduct or provide support for projects which are designed to 
increase the potential for accomplishing the rehabilitation of disabled 
Veterans broadly, to allow for the funding of projects that serve 
Veterans with either compensable or noncompensable service-connected 
disabilities. By funding projects that serve Veterans with either 
compensable or noncompensable service-connected disabilities, there is 
increased potential to discover new techniques and resources for use in 
VA's VR&E program to enable Veterans who qualify for VR&E services to 
become employable and to obtain and maintain suitable employment.
    Accordingly, under the authority of Sec. 3119, VA will award grants 
to eligible entities that will become ``outcomes payors,'' to 
administer payment for outcomes of interventions that are successful in 
accomplishing employment rehabilitation for Veterans with service-
connected disabilities. In other words, VA will fund outcomes of 
projects that achieve favorable employment outcomes related to success 
in the ability or potential to secure or sustain stable employment or 
to achieve increased earnings of Veterans with service-connected 
disabilities. The funding will be referred to as ``outcomes payments'' 
and the grant known as the ``Veterans Employment Pay for Success 
(VEPFS)'' grant. This interim final rule establishes regulations for 
awarding a VEPFS grant, including the general process for awarding the 
grant, criteria and parameters for evaluating grant applications, 
priorities related to the award of a grant, and general requirements 
and guidance for administering a VEPFS grant program.

Sec.  21.440 Purpose and Scope.

    Section 21.440 sets forth the purpose of a VEPFS grant program and 
explains what the program provides. This section indicates that VA may 
provide a grant to an eligible entity to fund outcomes payments for a 
project that achieves favorable employment outcomes for Veterans with 
service-connected disabilities. There is a need to find new and 
innovative methods for rehabilitating Veterans with compensable 
service-connected disabilities with regard to employment and, as noted 
above, the VEPFS grant program offers an economical mechanism, which 
can save taxpayers' money, for exploring the resources and techniques 
that may be available to address that need.

Sec.  21.441 Definitions.

    Section 21.441 defines terms used in Sec. Sec.  21.440-21.449 and 
any Notices of Funding Availability (NOFA) issued pursuant to 
Sec. Sec.  21.440-21.449. The definitions are set out in the regulatory 
text, but we elaborate on some of them as follows:
    ``Eligible entity'' is defined as a public or nonprofit agency, to 
include institutions of higher learning. Section 3119 of title 38, 
United States Code, provides authorization to make grants to public or 
nonprofit agencies, including institutions of higher learning. We 
interpret the term ``nonprofit agency,'' as used in Sec. 3119, to 
include tax-exempt, incorporated or unincorporated organizations that 
serve the public interest and generally have a charitable, educational, 
scientific, religious, or literary goal. We interpret the term ``public 
agency'', as used in Sec. 3119, to include the government of the United 
States or of a State or political subdivision of a State.
    ``Employment outcome'' is defined as the employment or earnings of 
a participant in the intervention or control group member after the 
service period. The VEPFS program will measure certain outcomes, 
including competitive employment, skill development, achieving a 
sustained period of employment, wage-earnings, and achieving employment 
that aligns with the interests and aptitude of the job seeker. 
Improving employment outcomes means creating positive impact in terms 
of these outcomes, where the results for individuals that receive the 
intervention are better than the results for a valid control group that 
did not receive the intervention.
    ``Intervention'' is defined as a service or technology that is 
provided to individuals and intended to achieve certain results. 
Examples of service interventions or technological interventions to 
improve Veteran employment outcomes include, but are not limited to, 
support services, employment coaching, mental health treatment, 
vocational training, occupational therapy, community engagement, and 
outreach.
    ``Project partnership'' is defined as a collaboration among 
entities that negotiate an agreement and execute a project to improve 
employment outcomes for Veterans with service-connected disabilities. 
For the purpose of the VEPFS grant program, a project partnership is 
not a distinct legal entity. Section 21.441 includes definitions for 
the entities that may be involved in a project partnership.

[[Page 52772]]

    ``Social finance strategy'' is defined as a method for securing 
financial resources using an investment approach that focuses on 
achieving positive social and/or environmental impact with some form of 
financial return. Examples of social finance strategies include: (1) 
Matching taxpayer dollars with non-government contributions to extend 
the impact of not-for-profit organizations; (2) simplifying access to 
government funding for community organizations and institutions of 
higher learning.
    ``Strong evidence'' is defined as results from previous studies, 
the designs of which can support causal conclusions (i.e., studies with 
high internal validity), which include enough of the range of 
participants and settings to support scaling up to the state, regional, 
or national level (i.e., studies with high external validity). The 
following are examples of strong evidence: (1) More than one well-
designed and well-implemented experimental study or well-designed and 
well-implemented quasi-experimental study that supports the 
effectiveness of the practice, strategy, or program; or (2) one large, 
well-designed and well-implemented randomized controlled, multisite 
trial that supports the effectiveness of the practice, strategy, or 
program.
    ``Work-plan'' is defined as a document that articulates tasks and 
milestones with regard to a particular project. A work plan contains a 
detailed overview of all activities that will be undertaken to complete 
a project, and the goals, objectives, outcomes, responsible parties, 
and timeline for each task of a project, which collectively serve as 
the roadmap for execution of project tasks.

Sec.  21.442 VEPFS Grants--General.

    Section 21.442 provides general information pertaining to VEPFS 
grants. Section 21.442(a) establishes that only an eligible entity may 
receive a VEPFS grant. Section 21.442(b) establishes that the available 
grant funding amount will be specified in the NOFA. The amount of 
funding VA may provide in a VEPFS grant is not limited by or otherwise 
specified in statute. In addition, VA may combine its funds with funds 
of another Federal entity to increase the amount available for a VEPFS 
project. VA will determine the amount of funding available for an 
individual VEPFS project, including any contributions from another 
Federal agency, on a case-by-case basis and will announce the amount of 
available grant funding for that VEPFS project in the applicable NOFA. 
Section 21.442(c) states that the period for a VEPFS grant will be a 
minimum of 5 years and a pre-determined maximum number of years, as 
specified in the NOFA, beginning on the date on which the VEPFS grant 
is awarded, with the availability of no-cost extensions. At the end of 
the pre-determined maximum period, the effectiveness of the project 
will be assessed to determine the project's success. Five years is the 
minimum length of time necessary to maximize the effectiveness of a 
project and obtain meaningful data on a project's success through 
periodic reporting. This timeframe allows 1 year to develop, refine and 
launch the project, 3 years for service delivery to produce outcomes 
and data, and 1 year for a thorough evaluation of outcomes. Section 
21.442(d) specifies that a recipient must provide matching funds from 
non-Federal sources that are at least equal to or greater than the 
amount of Federal grant funds awarded, which will be combined with the 
amount of Federal grant funds awarded to be used to fund the proposed 
PFS project as a condition of receiving a VEPFS grant. Requiring 
matching funds increases the amount of available funding for VEPFS 
projects. Section 21.442(e) specifies that a VEPFS grant is not a 
Veterans' benefit, and, therefore, any decisions of the Secretary as to 
whether to award a VEPFS grant are final and not subject to the same 
rights of appeal as decisions related to Veterans' benefits.

Sec.  21.443 Permissible Uses of VEPFS Grant Funds.

    Section 21.443(a) specifies that VEPFS grant funds may be used to 
make outcomes payments only if an intervention achieves outcomes at a 
pre-set level that has been agreed to in a PFS agreement before service 
delivery begins for a PFS project with a goal to improve employment 
outcomes for Veterans with service-connected disabilities. As stated 
above, the reason for using a PFS strategy is to avoid using taxpayer 
dollars for ineffective services and therefore save taxpayer money. VA 
is specifically funding PFS projects that aim to improve employment 
outcomes for Veterans with service-connected disabilities to carry out 
Congress' intention that VA ``advance the knowledge, methods, 
techniques, and resources available for use in rehabilitation programs 
for veterans'' and increase the ``potential for accomplishing the 
rehabilitation of disabled veterans.''
    In addition, to cover the indirect costs of administering the grant 
(costs associated with general administration and expenses), Sec.  
21.443(b) allows a recipient to use a Federally approved indirect cost 
rate (a rate already negotiated with the Federal Government), use a 10% 
de minimis rate of modified total direct costs, negotiate an indirect 
cost rate for the first time, or claim certain costs directly following 
2 CFR 200.413 so as to not limit the pool of eligible applicants to 
entities that will use a particular permissible option. This is 
consistent with regulatory guidance to Federal agencies that provide 
grant awards to non-Federal entities, including States, local 
governments, Indian tribes, institutions of higher education, and non-
profit organizations issued by the Office of Management and Budget 
(OMB) and codified in in part 200 of title 2 of the Code of Federal 
Regulations. 2 CFR 200.414; see also 2 CFR 200.69. These administrative 
costs may be claimed before outcomes are measured and regardless of 
whether outcomes are achieved at pre-set levels.

Sec.  21.444 Notice of Funding Availability.

    Section 21.444 states that when funds are available to award a 
VEPFS grant, VA will publish a NOFA announcing the funding opportunity 
in the Federal Register and on Grants.gov (http://www.grants.gov) 
providing specific details about the opportunity. Section 21.444, in 
paragraphs (a)-(f), lists generally the information the NOFA will 
include. Section 200.203 of title 2, Code of Federal Regulations, 
requires the issuance of a NOFA, which includes specific identifying 
information, information describing the funding opportunity, and 
information regarding the award, eligibility, application, application 
review, and Federal award administration. OMB requires the issuance of 
a NOFA and publication of this information to ensure that eligible 
entities have the information required to apply for grants.

Sec.  21.445 Application.

    Section 21.445 identifies VEPFS grant application procedures and 
the information required to constitute a complete application package. 
This section requires eligible entities to submit a complete grant 
application package, in accordance with instructions provided in the 
NOFA through Grants.gov (http://www.grants.gov) to apply for a VEPFS 
grant. Use of this Web site is the easiest and most efficient way to 
process grant applications. Furthermore, eligible entities submitting 
an application for a VEPFS grant will likely be familiar with this Web 
site. In describing the information a complete application package must 
contain, paragraph (a)

[[Page 52773]]

requires the complete application to contain a project description, 
including a description of the intervention, the Veteran population to 
be served, and anticipated employment outcomes. VA needs this 
information to determine whether the project proposed has a reasonable 
chance of providing positive employment outcomes for Veterans with 
service-connected disabilities. Paragraph (b) requires the complete 
application to contain a description of the anticipated project 
partnership(s), including the responsibilities of each of the partner 
entities, the experience of any involved entities with serving Veteran 
populations, and other qualifications of the involved entities that may 
be relevant in carrying out responsibilities of the project 
partnership. VA needs this information to assess the likelihood of 
success an applicant will have carrying out a VEPFS project. In 
addition, paragraph (b) informs applicants that, in procuring partners 
such as the project coordinator and investor, procurement standards set 
forth in 2 CFR 200.317-200.326 must be followed. Paragraph (c) requires 
the complete application to include a work plan with a budget and 
timelines. These disclosures will help reviewers assess how close the 
project is to beginning to provide services and the extent to which an 
applicant has considered all aspects of planning. Paragraph (d) 
requires the complete application to contain a description of 
applicant's expertise or experience with PFS or other social finance 
strategies or experience administering programs that serve Veterans 
with disabilities. Paragraph (e) requires the complete application to 
include documentation of an applicant's ability and capacity to 
administer the project. Having the information obtained from the 
requirements of paragraphs (d) and (e) will also allow VA to assess the 
likelihood of success of a VEPFS project. Paragraph (f) requires the 
complete application to include proof of matching funds already 
secured, the applicant's ability to secure matching funds, or 
commitments of matching funds the applicant has received. Reviewers 
need this documentation to confirm an applicant's ability to meet the 
VEPFS grant funding requirements. Paragraph (g) requires that the 
complete application contain any additional information VA deems 
appropriate and sets out in the NOFA so that VA can tailor the NOFA as 
necessary.

Sec.  21.446 Scoring and Selection.

    Section 21.446(a) states that VA will score only complete 
applications received from eligible entities by the deadline 
established in the NOFA and identifies the criteria to be used in 
selecting a recipient. Selection of a recipient will be based on the 
likelihood of successful implementation of the project and the 
likelihood that the project will meet objectives. The information 
described in Sec.  21.446(a) will allow VA to make such determination 
regarding the likelihood of project success.
    Section 21.446(b) indicates that NOFA announcements may clarify the 
selection criteria in paragraph (a) and will specify the relative 
weight (point value) assigned for each selection criterion according to 
the criterion's importance in ensuring the successful development and 
implementation of a VEPFS project and that eligible entities will be 
ranked in order from highest to lowest total score. This section also 
indicates that VA will award any VEPFS grant on the primary basis of 
scores but will also consider a risk assessment evaluation.

Sec.  21.447 VEPFS Grant Agreement.

    Section 21.447 states that VA will draft a grant agreement for 
execution between VA and the applicant selected to receive a VEPFS 
grant, and VA will obligate the grant funds to cover the amount of the 
approved grant, subject to the availability of funding, upon execution 
of the agreement. This section also states that the VEPFS grant 
agreement will provide that the recipient agrees (and will ensure that 
any subcontractors agree) to: Operate the program in accordance with 
the provisions of Sec. Sec.  21.440-21.449, 2 CFR part 200, and the 
applicant's VEPFS grant application; comply with such other terms and 
conditions, including recordkeeping and reports for program monitoring 
and evaluation purposes, as VA may establish for purposes of carrying 
out the VEPFS program in an effective and efficient manner; and provide 
any additional information VA requests in the manner and timeframe VA 
specifies. Part 200 provides uniform guidance and government-wide terms 
and conditions for the management of awards and the administration of 
Federal grants, and this rulemaking provides additional guidance and 
conditions for the administration of VEPFS grants in particular. 
Adherence to the government-wide rules is mandatory and compliance with 
the additional rules specific to VEPFS grants will ensure program 
integrity across any VEPFS grants VA awards. In addition, timely and 
accurate reporting is critical to allow VA to evaluate the VEPFS 
program.

Sec.  21.448 Recipient Reporting Requirements.

    Section 21.448 requires recipients to submit a quarterly report 30 
days after the close of each Federal fiscal quarter of the grant period 
that includes a detailed record of the time involved and resources 
expended administering the VEPFS program; the number of Veterans 
served, including demographics of this population; the types of 
employment assistance provided; a full accounting of VEPFS grant funds 
used or unused during the quarter; a comparison of accomplishments 
related to the objectives of the award; an explanation for any goals 
not met; and an analysis and explanation for any cost overruns. With 
such information, VA can effectively analyze program performance and 
ensure that a recipient is using grant funds in accordance with the 
grant agreement. In addition, Sec.  21.448 requires recipients to 
provide additional reports if necessary to allow VA to assess program 
accountability and effectiveness on an ongoing basis.

Sec.  21.449 Recovery of Funds.

    Section 21.449 specifies that VA can impose additional conditions 
as specified in 2 CFR 200.207 if a recipient fails to comply with any 
Federal statutes or regulations or the terms and conditions of an award 
made under Sec. Sec.  21.440-21.449. Section 21.449 also allows VA to 
take any appropriate actions specified in 2 CFR part 200 as remedies 
for non-compliance if non-compliance cannot be remedied. These measures 
help safeguard Federal funds and ensure appropriate use of the VEPFS 
grant funds awarded.

Administrative Procedure Act

    In accordance with 5 U.S.C. 553(b)(B) and (d)(3), the Secretary 
finds that there is good cause to dispense with the opportunity for 
prior notice and comment and good cause to publish this rule with an 
immediate effective date. The Secretary finds that it is impracticable 
and contrary to the public interest to delay this rule for the purpose 
of soliciting prior public comment or to have a delayed effective date. 
As stated above, the Secretary is issuing this rule because there is a 
need to find new methods for rehabilitating Veterans with service-
connected disabilities so that they become employable and are able to 
obtain and maintain suitable employment. This rulemaking provides the 
opportunity for the discovery of new methods for rehabilitating 
Veterans with service-connected disabilities with regard to employment 
using a strategy that will

[[Page 52774]]

save taxpayer money. However, the funding for a grant which would be 
awarded based on a NOFA to be published concurrently with this interim 
final rule, and which will be used to fund a project that achieves 
favorable employment outcomes for Veterans with a service-connected 
disability of post-traumatic stress disorder, is available only in this 
current fiscal year and must be obligated by September 30, 2016, if it 
is to be used for such purpose. To provide sufficient time to obligate 
the funds by September 30, 2016, the regulations established by this 
rulemaking must be in effect by August 9, 2016. Failure to obligate the 
funds by September 30, 2016, will cause the funds to expire.
    Because this interim final rule will serve an important Veterans' 
need in an economical way, which would not be possible if publication 
were to be delayed, the Secretary finds that it is impracticable and 
contrary to the public interest to delay this rule for the purpose of 
soliciting advance public comment or to have a delayed effective date. 
Accordingly, VA is issuing this rule as an interim final rule with an 
immediate effective date. We will consider and address any comments 
received within 60 days of the date this interim final rule is 
published in the Federal Register.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, when 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, and other advantages; distributive impacts; 
and equity). Executive Order 13563 (Improving Regulation and Regulatory 
Review) emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
Executive Order 12866 (Regulatory Planning and Review) defines a 
``significant regulatory action'' requiring review by OMB, unless OMB 
waives such review, as ``any regulatory action that is likely to result 
in a rule that may: (1) Have an annual effect on the economy of $100 
million or more or adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
governments or communities; (2) Create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) Materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.''
    The economic, interagency, budgetary, legal, and policy 
implications of this regulatory action have been examined, and it has 
been determined not to be a significant regulatory action under 
Executive Order 12866. VA's impact analysis can be found as a 
supporting document at http://www.regulations.gov, usually within 48 
hours after the rulemaking document is published. Additionally, a copy 
of the rulemaking and its impact analysis are available on VA's Web 
site at http://www.va.gov/orpm/, by following the link for ``VA 
Regulations Published From FY 2004 Through Fiscal Year to Date.''

Paperwork Reduction Act

    This interim final rule includes provisions constituting 
collections of information under the Paperwork Reduction Act of 1995 
(44 U.S.C. 3501-3521) that require approval by OMB. Specifically, 
sections 21.445, 21.447, and 21.448 contain collections of information 
under the Paperwork Reduction Act of 1995. VA has submitted the 
following information collection request to OMB for review and 
clearance in accordance with the emergency review procedures of the 
Paperwork Reduction Act of 1995. The proposed information collection is 
published to obtain comments from the public and affected agencies. An 
emergency approval under the Paperwork Reduction Act is only valid for 
180 days. Comments should be directed to OMB, Office of Information and 
Regulatory Affairs, Attention: Department of Veterans Affairs Desk 
Officer, Washington, DC 20530, with copies sent by mail or hand 
delivery to the Director, Regulation Policy and Management (02REG), 
Department of Veterans Affairs, 810 Vermont Avenue NW., Room 1068, 
Washington, DC 20420; fax to (202) 273-9026; email to 
www.Regulations.gov. Comments should indicate that they are submitted 
in response to ``RIN 2900-AP72.''
    A regular review of this information collection will also be 
undertaken and announced in a future Federal Register notice indicating 
approval of this collection of information under the emergency review 
procedures of the Paperwork Reduction Act. All comments and 
suggestions, or questions regarding additional information, including 
obtaining a copy of the proposed information collection instrument with 
instructions, should be directed to Patrick Littlefield, Director, VA 
Center for Innovation, Department of Veterans Affairs, (08), 810 
Vermont Ave. NW., Washington, DC, (202) 256-7176. We request written 
comments and suggestions from the public and affected agencies 
concerning the proposed emergency collection of information.
    The Department considers comments by the public on proposed 
collections of information in--
     Evaluating whether the proposed collections of information 
are necessary for the proper performance of the functions of the 
Department, including whether the information will have practical 
utility;
     Evaluating the accuracy of the Department's estimate of 
the burden of the proposed collections of information, including the 
validity of the methodology and assumptions used;
     Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
     Minimizing the burden of the collections of 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, e.g., permitting 
electronic submission of responses.
    The collections of information contained in 38 CFR 21.445, 21.447, 
and 21.448 are described immediately following this paragraph, under 
their respective titles.
    Title: Grant Applications.
     Summary of collection of information: The new collection 
of information in proposed 38 CFR 21.445 would require applicants to 
submit a complete VEPFS grant application.
     Description of need for information and proposed use of 
information: The collection of information is necessary to award grants 
to eligible entities. VA will use this information to decide whether an 
applicant meets the requirements and satisfies the scoring criteria for 
award of VEPFS grants under 38 U.S.C. 3119.
     Description of likely respondents: Public and non-profit 
entities, including institutions of higher learning, that have an 
interest in serving Veterans with service-connected disabilities.
     Estimated number of respondents: 25 in FY 2016; 25 in FY 
2017; 25 in FY 2018.
     Estimated frequency of responses: This is a one-time 
collection.
     Estimated average burden per response: 80 hours.

[[Page 52775]]

     Estimated total annual reporting and recordkeeping burden: 
2,000 hours in FY 2016; 2,000 hours in FY 2017; 2,000 hours in 2018.
    Title: Quarterly Fiscal Reports.
     Summary of collection of information: The new collection 
of information in proposed 38 CFR 21.447(a)(1) and 21.448(a) would 
require each recipient to agree in the grant agreement to submit 
quarterly reports, which would include detailed records of the time 
expended and employment outcomes accomplished in the provision of VEPFS 
activities, accounting of how the grant funds were used.
     Description of need for information and proposed use of 
information: The collection of information is necessary to determine 
compliance with the requirements for a grant.
     Description of likely respondents: Public and non-profit 
entities, including institutions of higher learning, that have an 
interest in serving Veterans with service-connected disabilities.
     Estimated number of respondents: 1 in FY 2017, up to 10 in 
FY 2018, up to 10 in FY 2019.
     Estimated frequency of responses: 4 quarterly reports per 
year for 5 years.
     Estimated average burden per response: 1 hour.
     Estimated total annual reporting and recordkeeping burden: 
4 hours in FY 2017, 44 hours in FY 2018, 84 hours in FY 2019, 84 hours 
in 2020, 84 hours in 2021, 80 hours in 2022, 40 hours in 2023.
    The regulatory terms also authorize VA to impose additional 
recordkeeping or reporting requirements as defined in the Terms and 
Conditions of the grant agreement (38 CFR 21.447(a)(2)), request 
additional information as defined in the Terms and Conditions of the 
grant agreement (38 CFR 21.447(a)(3)), and request additional reports 
in the Terms and Conditions of the grant agreement if necessary to 
fully and effectively assess program accountability and effectiveness 
(38 CFR 21.448(b)). Because these information collection requirements 
will depend on the terms and conditions of the grant agreement for a 
particular funding opportunity, VA is not seeking emergency approval 
for these regulatory provisions at this time. Rather, VA will more 
clearly define and articulate these potential record-keeping and 
reporting requirements when it submits the PRA package when it 
undertakes a regular review of this collection.

Regulatory Flexibility Act

    The Secretary hereby certifies that this interim final rule will 
not have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory Flexibility Act, 5 
U.S.C. 601-612. The Secretary estimates that, for any VEPFS grant 
program, no more than ten non-renewable grants will be awarded. For 
each grant awarded, usually one of each, but no more than a few, 
outcomes payors, project coordinators, evaluators, investors, and 
service providers will be involved with the grant program. The goal of 
these grants is to rehabilitate Veterans with service-connected 
disabilities with regard to employment. Thus, an insubstantial number 
of small entities will be affected by this interim final rule and, 
accordingly, there will not be a significant economic impact on such 
affected entities. Therefore, pursuant to 5 U.S.C. 605(b), this rule is 
exempt from the initial and final regulatory flexibility analysis 
requirements of sections 603 and 604.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule 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 (adjusted annually for 
inflation) in any one year. This interim final rule will have no such 
effect on State, local, and tribal governments, or on the private 
sector.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number and title for the 
program affected by this document is 64.116, Vocational Rehabilitation 
for Disabled Veterans.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. Robert D. 
Snyder, Chief of Staff, Department of Veterans Affairs, approved this 
document on July 11, 2016, for publication.

    Dated: August 3, 2016.
Jeffrey Martin,
Office Program Manager, Office of Regulation Policy & Management Office 
of the Secretary, Department of Veterans Affairs.

List of Subjects in 38 CFR Part 21

    Administrative practice and procedure, Armed forces, Civil rights, 
Claims, Colleges and universities, Conflict of interests, Education, 
Employment, Grant programs--education, Grant programs--veterans, Health 
care, Loan programs--education, Loan programs--veterans, Manpower 
training programs, Reporting and recordkeeping requirements, Schools, 
Travel and transportation expenses, Veterans, Vocational education, 
Vocational rehabilitation.

    For the reasons stated in the preamble, VA amends 38 CFR part 21, 
subpart A as follows:

PART 21--VOCATIONAL REHABILITATION AND EDUCATION

Subpart A--Vocational Rehabilitation and Employment Under 38 U.S.C. 
Chapter 31

0
1. The authority citation for part 21, subpart A, continues to read as 
follows:

    Authority: 38 U.S.C. 501(a), chs. 18, 31, and as noted in 
specific sections.


0
2. Add an undesignated center heading and Sec. Sec.  21.440 through 
21.449 to subpart A to read as follows:
Veterans Employment Pay for Success Grant Program
Sec.
21.440 Purpose and scope.
21.441 Definitions.
21.442 VEPFS grants--general.
21.443 Permissible uses of VEPFS grant funds.
21.444 Notice of funding availability.
21.445 Application.
21.446 Scoring and selection.
21.447 VEPFS grant agreement.
21.448 Recipient reporting requirements.
21.449 Recovery of funds.


Sec.  21.440  Purpose and scope.

    Sections 21.440 through 21.449 establish and implement the Veterans 
Employment Pay for Success (VEPFS) grant program, which provides grants 
to eligible entities to fund outcomes payments for projects that are 
successful in accomplishing employment rehabilitation for Veterans with 
service-connected disabilities. These sections apply only to the 
administration of the VEPFS grant program, unless specifically provided 
otherwise.

(Authority: 38 U.S.C. 501(d), 3119)

Sec.  21.441  Definitions.

    For the purposes of Sec. Sec.  21.440 through 21.449, and any 
Notices of Funding Availability (NOFA) issued pursuant to Sec. Sec.  
21.440 through 21.449, the following definitions apply:
    Applicant is an eligible entity that submits an application for a 
VEPFS grant announced in a NOFA.

[[Page 52776]]

    Eligible entity is a public or nonprofit agency, to include 
institutions of higher learning.
    Employment outcome is the employment or earnings of a participant 
in the intervention or control group member after the service period. 
Improving employment outcomes means creating positive impact in terms 
of these outcomes, where the results for individuals that receive the 
intervention are better than the results for a valid control group that 
did not receive the intervention.
    Intervention is a service or technology that is provided to 
individuals and is intended to achieve certain results.
    Outcomes payments are funds that are paid to an investor or service 
provider and that are released only for the achievement of outcomes, as 
compared to those of a control group, that meet target levels that have 
been agreed to in advance of the provision of intervention (i.e., if 
positive impact has been created by the intervention in terms of these 
outcomes). When investors have provided the upfront capital for the 
project, these payments generally cover repayment of the principal 
investment and provide a modest return on investment for any associated 
risks of paying for the intervention upfront.
    Pay for Success (PFS) agreement is a multi-party agreement to 
deliver an innovative or evidence-based intervention intended to 
improve outcomes for a targeted population signed by the entities that 
constitute the project partnership.
    Project partnership is a collaboration among entities that 
negotiate an agreement and execute a project to improve employment 
outcomes for Veterans with service-connected disabilities. The entities 
that may be involved in a project partnership include:
    (1)(i) Outcomes payor. Entity that receives a VEPFS grant and pays 
for outcomes of services that meet target levels that have been agreed 
to in advance of the provision of the intervention.
    (ii) Project coordinator. Facilitates, coordinates, and executes a 
PFS agreement to improve employment outcomes for Veterans with service-
connected disabilities. With respect to other PFS projects, project 
coordinators are sometimes referred to as intermediaries.
    (iii) Evaluator. Independent entity that determines the impact of 
the services provided, including whether the services have resulted in 
employment outcomes that meet target levels that have been agreed to in 
advance of the provision of the intervention.
    (iv) Investor. Person or entity that provides upfront capital to 
cover costs of providing services/delivering an intervention and other 
associated costs before a determination has been made as to whether 
certain employment outcomes have been achieved at pre-set target 
levels.
    (v) Service provider. Entity that delivers an intervention designed 
to achieve improved employment outcomes for Veterans with service-
connected disabilities.
    (2) A full project partnership is a project partnership that 
includes an outcomes payor, evaluator, investor (if the PFS agreement 
involves PFS financing), and service provider. A partial project 
partnership includes an outcomes payor and at least one of the 
following: Evaluator, investor (if the PFS agreement involves PFS 
financing), or service provider.
    Recipient is the entity that receives a VEPFS grant under 
Sec. Sec.  21.440 through 21.449. The recipient is also the outcomes 
payor.
    Secretary refers to the Secretary of Veterans Affairs.
    Service-connected disability is a disability that is ``service-
connected'' as defined in 38 CFR 3.1.
    Social finance strategy is a method for securing financial 
resources using an investment approach that focuses on achieving 
positive social and/or environmental impact with some form of financial 
return.
    Strong evidence constitutes results from previous studies, the 
designs of which can support causal conclusions (i.e., studies with 
high internal validity), that include enough of the range of 
participants and settings to support scaling up to the state, regional, 
or national level (i.e., studies with high external validity).
    Veteran has the same definition as provided in 38 CFR 3.1.
    Veterans Employment Pay for Success (VEPFS) agreement is a PFS 
agreement to deliver an innovative, evidence-based intervention 
intended to improve Veteran employment outcomes.
    Veterans Employment Pay for Success (VEPFS) project is a project 
with a strategy for delivering a service with a goal to significantly 
improve a current condition with respect to unemployment of a target 
Veteran population and sufficient evidence to support the theory behind 
the project using a financial model that includes cost savings by 
funding the project only if it is successful.
    Work-plan is a document that articulates tasks and milestones with 
regard to a particular project.

(Authority: 38 U.S.C. 3119)

Sec.  21.442  VEPFS grants--general.

    (a) VA may award a VEPFS grant only to an eligible entity selected 
under Sec.  21.446.
    (b) The amount of Federal funding available to be awarded in a 
VEPFS grant will be specified in the NOFA.
    (c) A VEPFS grant will be awarded for a minimum of 5 years and a 
pre-determined maximum number of years, beginning on the date on which 
the VEPFS grant is awarded, with the availability of no-cost 
extensions.
    (d) As a condition of receiving a VEPFS grant, a recipient will be 
required to provide matching funds from non-Federal sources equal to or 
greater than the amount of Federal grant funds awarded, to be combined 
with the amount of Federal grant funds awarded and used as specified in 
Sec.  21.443.
    (e) A VEPFS grant award is not a Veterans' benefit. Decisions of 
the Secretary are final and not subject to the same appeal rights as 
decisions related to Veterans' benefits.

(Authority: 38 U.S.C. 3119)

Sec.  21.443  Permissible uses of VEPFS grant funds.

    (a) VEPFS grant funds may be used only to fund outcomes payments if 
an intervention achieves outcomes at a pre-set target level that has 
been agreed to in a PFS agreement before service delivery begins for a 
PFS project with a goal to improve employment outcomes for Veterans 
with service-connected disabilities.
    (b) To pay for the indirect costs of administering a grant, 
regardless of whether an intervention achieves outcomes at a pre-set 
target level, a recipient may:
    (1) Use a Federally approved indirect cost rate (a rate already 
negotiated with the Federal Government);
    (2) Use a 10% de minimis rate of modified total direct costs;
    (3) Negotiate an indirect cost rate for the first time; or
    (4) Claim certain costs directly following 2 CFR 200.413.

(Authority: 38 U.S.C. 3119, 2 CFR 200.414)

Sec.  21.444  Notice of funding availability.

    When funds are available for a VEPFS grant, VA will publish a NOFA 
in the Federal Register and on Grants.gov (http://www.grants.gov). The 
NOFA will identify:
    (a) The location for obtaining grant applications and the specific 
forms that will be required;

[[Page 52777]]

    (b) The date, time, and place for submitting completed grant 
applications;
    (c) The total amount and type of funds available and the maximum 
amount available to a single applicant;
    (d) Information regarding eligibility and the scoring process;
    (e) Any timeframes and manner for payments under the grant; and
    (f) Other information necessary for the VEPFS grant application 
process, as determined by VA, including contact information for the VA 
office that will oversee the VEPFS grant.

(Authority: 38 U.S.C. 501(d), 3119)

Sec.  21.445  Application.

    To apply for a VEPFS grant, eligible entities must submit to VA a 
complete application package in accordance with the instructions in the 
NOFA and include the forms specified in the NOFA. Applications will be 
accepted only through Grants.gov (http://www.grants.gov). A complete 
grant application package, as further described in the NOFA, includes 
standard forms specified in the NOFA and the following:
    (a) Project description, including a description of the 
intervention, the Veteran population to be served, and anticipated 
employment outcomes;
    (b) Description of anticipated project partnership(s), including 
the responsibilities of each of the partner entities, the experience of 
any involved entities with serving Veteran populations, and other 
qualifications of the involved entities that may be relevant in 
carrying out responsibilities of the project partnership. In procuring 
partners such as the project coordinator and investor, procurement 
standards set forth in 2 CFR 200.317 through 200.326 must be followed;
    (c) A work plan, including a budget and timelines;
    (d) Description of applicant's expertise or experience with PFS or 
other social finance strategies or experience administering programs 
that serve Veterans with disabilities;
    (e) Documentation of applicant's ability and capacity to administer 
the project;
    (f) Proof of matching funds already secured, ability to secure 
matching funds, or commitments received; and
    (g) Any additional information as deemed appropriate by VA and set 
forth in the NOFA.

(Authority: 38 U.S.C. 3119)

Sec.  21.446  Scoring and selection.

    (a) Scoring. VA will score only complete applications received from 
eligible entities by the deadline established in the NOFA. VA will 
score applications using the following criteria:
    (1) Project description. Applicant identifies and describes an 
intervention that is designed to improve employment outcomes for 
Veterans with service-connected disabilities through a PFS agreement 
and demonstrates with strong evidence the ability of the intervention 
to meet objectives. Project description should explain and justify the 
need for the intervention, and include concept, size and scope of the 
project, and the Veteran population to be served.
    (2) Project partnership. Applicant provides a description of the 
partnership and the level of partnership (full, partial, or none) 
attained at the time of application.
    (3) Work plan and budget. Applicant provides a work plan that 
describes in detail the timeline for the tasks outlined in the project 
description and proposed milestones. Applicant provides a budget that 
specifies amount of outcome payments and indirect and other relevant 
costs.
    (4) Expertise and capacity. Applicant provides evidence of its past 
experience with PFS or other social finance strategies or experience 
administering programs that serve Veterans with disabilities, and of 
its ability and capacity to successfully administer the project.
    (5) Match. Applicant provides evidence of secured cash matching 
(1:1) funds or of its ability to secure or commitments to receive such 
funds.
    (b) Selection of recipients. All complete applications from 
eligible entities will be scored using the criteria in paragraph (a) of 
this section and ranked in order from highest to lowest total score. 
NOFA announcements may also clarify the selection criteria in paragraph 
(a). The relative weight (point value) for each selection criterion 
will be specified in the NOFA. Point values will be assigned according 
to the criterion's importance in ensuring the successful development 
and implementation of a VEPFS project. VA will award any VEPFS grant on 
the primary basis of scores but will also consider a risk assessment 
evaluation.

(Authority: 38 U.S.C. 3119)

Sec.  21.447  VEPFS grant agreement.

    After an applicant is selected to receive a VEPFS grant in 
accordance with Sec.  21.446, VA will draft a grant agreement to be 
executed by VA and the applicant. Upon execution of the VEPFS grant 
agreement, VA will obligate grant funds to cover the amount of the 
approved grant, subject to the availability of funding. The VEPFS grant 
agreement will provide that the recipient agrees, and will ensure that 
each subcontractor (if applicable) agrees, to:
    (a) Operate the program in accordance with the provisions of 
Sec. Sec.  21.440 through 21.449, 2 CFR part 200, and the applicant's 
VEPFS grant application;
    (b) Comply with such other terms and conditions, including 
recordkeeping and reports for program monitoring and evaluation 
purposes, as VA may establish in the Terms and Conditions of the grant 
agreement for purposes of carrying out the VEPFS program in an 
effective and efficient manner; and
    (c) Provide additional information that VA requests with respect 
to:
    (1) Program effectiveness, as defined in the Terms and Conditions 
of the grant agreement;
    (2) Compliance with the Terms and Conditions of the grant 
agreement; and
    (3) Criteria for evaluation, as defined in the Terms and Conditions 
of the grant agreement.

(Authority: 38 U.S.C. 501(d), 3119)

Sec.  21.448  Recipient reporting requirements.

    (a) Recipients must submit to VA a quarterly report 30 days after 
the close of each Federal fiscal quarter of the grant period. The 
report must include the following information:
    (1) A detailed record of the time involved and resources expended 
administering the VEPFS program.
    (2) The number of Veterans served, including demographics of this 
population.
    (3) The types of employment assistance provided.
    (4) A full accounting of VEPFS grant funds used or unused during 
the quarter.
    (5) A comparison of accomplishments related to the objectives of 
the award.
    (6) An explanation for any goals not met.
    (7) An analysis and explanation for any cost overruns.
    (b) VA may request additional reports in the Terms and Conditions 
of the grant agreement if necessary to allow VA to fully and 
effectively assess program accountability and effectiveness.

(Authority: 38 U.S.C. 501(d), 3119, 2 CFR 200.327-200.328)

Sec.  21.449  Recovery of funds.

    If a recipient fails to comply with any Federal statutes or 
regulations or the terms and conditions of an award made under 
Sec. Sec.  21.440 through 21.449, VA may impose additional conditions 
as specified in 2 CFR 200.207 or, if non-compliance cannot be remedied, 
take any appropriate actions specified in 2

[[Page 52778]]

CFR part 200 as remedies for non-compliance.

(Authority: 38 U.S.C. 501(d), 3119, 2 CFR 200.338 through 200.342)


[FR Doc. 2016-18721 Filed 8-9-16; 8:45 am]
BILLING CODE 8320-01-P