Archived Information

Number range CHAPTERUNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF SPECIAL EDUCATION AND

REHABILITATIVE SERVICES

REHABILITATION SERVICES ADMINISTRATION

WASHINGTON, DC 20202

[POLICY DIRECTIVE]{.underline}

RSA-PD-94-05

RSM-1050 [1]{.underline}/

DATE: August 10, 1994

TO : STATE VOCATIONAL REHABILITATION AGENCIES (GENERAL)

STATE VOCATIONAL REHABILITATION AGENCIES (BLIND)

CLIENT ASSISTANCE PROGRAMS

PROTECTION AND ADVOCACY OF INDIVIDUAL RIGHTS

STATE SERVICES FOR INDEPENDENT LIVING

CENTERS FOR INDEPENDENT LIVING

REGIONAL REHABILITATION CONTINUING EDUCATION

PROGRAMS (RRCEPs)

SENIOR MANAGEMENT TEAM

SUBJECT : OBLIGATION REQUIREMENTS FOR FORMULA GRANTS

PREFACE : This Policy Directive supersedes Policy Directive RSA-PD-94-04
with respect to the carryover provision for programs with a matching
requirement; otherwise, this Directive is identical to RSA-PD-94-04.

This Directive clarifies RSA\'s policy on the matching requirement for
carryover funds. For programs with a matching requirement, a grantee may
carry over that portion of Federal funds that has been earned in the
year of the appropriation. To be considered earned, the matching (State
and local) funds must be obligated in the year of the appropriation.

BACKGROUND: Section 19 of the Rehabilitation Act (the Act), as amended,
permits unobligated and unexpended formula grant funds appropriated for
one Federal fiscal year, to be carried over for obligation and
expenditure by the end of the next Federal fiscal year provided that any
applicable matching requirement for the carryover funds has been met

in the year of the appropriation. Section 19 also permits any program
income that is received during the fiscal year and that is not obligated
within that year to be carried over for obligation during the succeeding
fiscal year.

[1]{.underline} / Under Development

The formula grant programs and related citations to which the carryover
provision applies are as follows: (1) State Vocational Rehabilitation
Services (VR) Program\--Section 110; (2) Client Assistance Program
(CAP)\--Section 112; (3) Innovation and Expansion (I & E)
Program\--Section 124; (4) Protection and Advocacy of Individual Rights
(PAIR)\--Section 509; (5) Supported Employment (SE) Program\--Section
632; (6) Independent Living (IL), Part B\--Section 711; (7) Independent
Living (IL), Part C, Centers for Independent Living (CIL)\--Section 721;
and (8) Independent Living, Chapter 2, Independent Living Services for
Older Individuals Who are Blind\--Section 752, when the appropriation
reaches \$13.0 million.

Matching requirements only apply to the vocational rehabilitation,
innovation and expansion, and independent living services (Title VII,
Chapter 1, Part B, and Chapter 2) programs. Matching requirements must
be met in the year of the appropriation: In order to carry over
unobligated and unexpended Federal funds, a grantee must earn those
Federal funds by obligating State and local matching funds in the year
of the appropriation. Unearned (unmatched) Federal funds can not be
carried over into the succeeding fiscal year.

The uniform administrative requirements for determining costs and
obligating funds for all grantees are contained in the Education
Department General Administrative Regulations (EDGAR). In general, State
agencies follow Parts 76 and 80 and nonprofit agencies follow Parts 74
and 75. With respect to obligating Federal funds (allotted and
reallotted funds) and program income, the rules governing what
constitutes an obligation and when it arises are detailed in EDGAR (34
CFR 74.71 and 34 CFR 75.707 or 34 CFR 76.707 and 34 CFR 80.3).

[Reallotted Funds]{.underline}

Reallotted funds are considered to be an increase to the State\'s
allotment. The Act (Sections 110(c)(3), 632(b), and 711(c)) states that
reallotted funds are to be considered part of the grantee\'s allotment.

[Program Income]{.underline}

Program income is defined in EDGAR. The specific reference is dependent
on the type of grantee organization. For State agencies, the
requirements for program income are stated in 34CFR 80.25 and 34 CFR
80.31(c), 80.32(e), 80.33(b), and 80.34 and for nonprofit organizations,
it is 34 CFR 74.40-74.46.

POLICY

STATEMENT : This policy directive sets forth the requirements for
carrying over to the subsequent fiscal year unobligated and unexpended
Federal grant funds (allotted and reallotted funds) and program income
for the following programs: (1) VR Program\--Section 110; (2)
CAP\--Section 112; (3) I & E Program\--Section 124; (4) PAIR\--Section
509; (5) SE Program\--Section 632; (6) IL, Part B\--Section 711; (7) IL,
Part C, CIL\--Section 721; and (8) Independent Living, Chapter 2,
Independent Living Services for Older Individuals Who are
Blind\--Section 752.

To carry over any unobligated and unexpended Federal grant funds, the
grantee must fully meet the applicable matching requirements for the
Federal funds being carried over through the [obligation or
expenditure]{.underline} of State and local funds in the Federal fiscal
year for which the Federal funds were appropriated. To be considered
obligated, funds must be obligated in accordance with the standards set
forth in 34 CFR 76.707. Furthermore, any Federal funds which are carried
over from the year of appropriation must be obligated by the end of the
succeeding Federal fiscal year.

Required non-Federal funds, obligated in the year of the appropriation
and used as match, must subsequently be liquidated in order for the
matching requirement to be considered met for purposes of carryover.

Unliquidated non-Federal obligations reported in the year of the
appropriation and subsequently canceled will not qualify as valid
non-Federal expenditures for match and therefore cannot meet match for
carryover purposes. The failure to liquidate sufficient first year
non-Federal obligations will invalidate a grantee\'s authority to
carryover Federal funds, and RSA will seek recovery of the Federal funds
carried over.

Obligations incurred with Federal funds in the year of the appropriation
which are canceled after the end of the year of the appropriation, may
be reobligated in the carryover year as long as the

matching requirement for those Federal funds was met in the year of the
appropriation. Federal funds must be matched in the year of the
appropriation in order to be carried over.

All obligations must be liquidated within 90 days after the end of the
funding period or the termination of the grant, as required in EDGAR (34
CFR 74.73(d) or 34 CFR 80.23(b)), unless the grantee carries over grant
funds for obligation in the succeeding year. In that case the grantee
must liquidate within 90 days after the end of the carryover period.

[Reallotted Funds]{.underline}

Section 19 stipulates that reallotted funds are subject to the same
obligation requirements as allotted funds.

[Program Income]{.underline}

This policy directive sets forth the requirements for obligating program
income earned by State VR agencies and other grantees under the formula
grant programs listed above. Regardless of the type of program income
generated by the grantees, program income, whenever earned, is accounted
for in the Federal fiscal year (FFY) in which it is received. For
example, program income received in FFY 1994 is reported on the FFY 1994
SF-269 as undisbursed program income whether obligated or unobligated
and is reported on the FFY 1994 SF-269 as disbursed program income when
used in the program.

Section 19 of the Act permits unobligated and unexpended program income
to be carried over to the next fiscal year. All program income received
but not used by a grant recipient during any Federal fiscal year may be
carried over to the following fiscal year.

Program income may be used in the year in which it is received or in the
subsequent year (the carryover year), whether or not Federal funds have
been carried over during that same time period. However, by the close of
that carryover year, the carried-over program income must be either
deducted from total outlays to be claimed under the formula grant for
the fiscal year that generated the income or obligated for additional
program expenditures, whichever alternative applies. All program income
obligations and expenditures must be reported in the program in which it
is used.

There is one exception to the EDGAR requirement that program income be
used in the program in which it is received. Section 108 of the Act
permits reimbursements provided to States under the Social Security Act
for expenditures from Section 110 funds for basic vocational
rehabilitation services to be used to carry out programs for which the
States receive financial assistance under Parts B and C of Title I (VR,
CAP, and I & E), Part C of Title VI (Supported Employment); and Title
VII (IL, Part B, IL, Part C, and Chapter 2).

If the State VR agency elects to use these section 110 reimbursements
for any program specified in Section 108 other than the VR program, the
program income in question can only be used for additional allowable
expenditures. Because the program income is received but not used in the
VR program, the deduction alternative is not available.

CITATIONS

IN LAW : Sections 7(7), 19, 108, 110(b) and (c), 632(b), and 711(c) of
the Rehabilitation Act of 1973, as amended.

CITATIONS

IN

REGULATIONS: 34 CFR 74.40 through 74.46, 74.61, 74.71, and 74.73; 34 CFR
75.703 and 75.707; 34 CFR 76.705(b) and 76.707; and 34 CFR 80.3, 80.20,
80.23, 80.25, 80.31(c), 80.32(e), 80.33(b), and 80.34

EFFECTIVE

DATE : Date Issued

EXPIRATION

DATE : None

INQUIRIES : RSA Regional Commissioners

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Acting Commissioner

> Rehabilitation Services Administration