**HIGHER EDUCATION ACT OF 1965**

**PART B --- STRENGTHENING HISTORICALLY BLACK COLLEGES AND**

**UNIVERSITIES**

**SEC. 321. FINDINGS AND PURPOSES**.

The Congress finds that---

\(1\) the historically Black colleges and universities have

contributed significantly to the effort to attain equal opportunity

through postsecondary education for Black, low-income,

and educationally disadvantaged Americans;

\(2\) States and the Federal Government have discriminated

in the allocation of land and financial resources to support

Black public institutions under the Morrill Act of 1862 and its

progeny, and against public and private Black colleges and universities

in the award of Federal grants and contracts, and the

distribution of Federal resources under this Act and other Federal

programs which benefit institutions of higher education;

\(3\) the current state of Black colleges and universities is

partly attributable to the discriminatory action of the States

and the Federal Government and this discriminatory action re-quires

the remedy of enhancement of Black postsecondary institutions

to ensure their continuation and participation in fulfilling

the Federal mission of equality of educational opportunity;

and

\(4\) financial assistance to establish or strengthen the physical

plants, financial management, academic resources, and

endowments of the historically Black colleges and universities are

appropriate methods to enhance these institutions and facilitate

a decrease in reliance on governmental financial support

and to encourage reliance on endowments and private sources.

**SEC. 322. DEFINITIONS.**

For the purpose of this part:

\(1\) The term ''graduate'' means an individual who has at-tended

an institution for at least three semesters and fulfilled

academic requirements for undergraduate studies in not more

than 5 consecutive school years.

\(2\) The term ''part B institution'' means any historically

Black college or university that was established prior to 1964,

whose principal mission was, and is, the education of Black

Americans, and that is accredited by a nationally recognized

accrediting agency or association determined by the Secretary

to be a reliable authority as to the quality of training offered

or is, according to such an agency or association, making reasonable

progress toward accreditation, except that any branch

campus of a southern institution of higher education that prior

to September 30, 1986, received a grant as an institution with

special needs under section 321 of this title and was formally

recognized by the National Center for Education Statistics as

a Historically Black College or University but was determined

not to be a part B institution on or after October 17, 1986,

shall, from the date of enactment of this exception, be considered

a part B institution.

January 6, 1999

**SEC. 322. DEFINITIONS. (Continued)**

\(3\) The term ''Pell Grant recipient'' means a recipient of financial

aid under subpart 1 of part A of title IV of this Act.

\(4\) The term ''professional and academic areas in which

Blacks are underrepresented'' shall be determined by the Secretary

and the Commissioner of the Bureau of Labor Statistics,

on the basis of the most recent available satisfactory data, as

professional and academic areas in which the percentage of

Black Americans who have been educated, trained, and employed

is less than the percentage of Blacks in the general population.

\(5\) The term ''school year'' means the period of 12 months

beginning July 1 of any calendar year and ending June 30 of

the following calendar year.

**SEC. 323. GRANTS TO INSTITUTIONS.**

**(a) GENERAL AUTHORIZATION; USES OF FUNDS.---** From amounts

available under section 360(a)(2) in any fiscal year the Secretary

shall make grants (under section 324) to institutions which have

applications approved by the Secretary (under section 325) for any

of the following uses:

\(1\) Purchase, rental, or lease of scientific or laboratory

equipment for educational purposes, including instructional

and research purposes.

\(2\) Construction, maintenance, renovation, and improvement

in classroom, library, laboratory, and other instructional

facilities, including purchase or rental of telecommunications

technology equipment or services.

\(3\) Support of faculty exchanges, and faculty development

and faculty fellowships to assist in attaining advanced degrees

in their field of instruction.

\(4\) Academic instruction in disciplines in which Black

Americans are underrepresented.

\(5\) Purchase of library books, periodicals, microfilm, and

other educational materials, including telecommunications pro-gram

materials.

\(6\) Tutoring, counseling, and student service programs de-signed

to improve academic success.

\(7\) Funds and administrative management, and acquisition

of equipment for use in strengthening funds management.

\(8\) Joint use of facilities, such as laboratories and libraries.

\(9\) Establishing or improving a development office to

strengthen or improve contributions from alumni and the private

sector.

\(10\) Establishing or enhancing a program of teacher education

designed to qualify students to teach in a public elementary

or secondary school in the State that shall include, as part

of such program, preparation for teacher certification.

\(11\) Establishing community outreach programs which will

encourage elementary and secondary students to develop the

academic skills and the interest to pursue postsecondary education.

\(12\) Other activities proposed in the application submitted

pursuant to section 325 that---

\(A\) contribute to carrying out the purposes of this

part; and

\(B\) are approved by the Secretary as part of the re-view

and acceptance of such application.

**SEC. 323. GRANTS TO INSTITUTIONS. (Continued)**

**(b) ENDOWMENT FUND.---**

**(1) IN GENERAL.---**An institution may use not more than 20

percent of the grant funds provided under this part to establish

or increase an endowment fund at the institution.

**(2) MATCHING REQUIREMENT.---** In order to be eligible to use

grant funds in accordance with paragraph (1), the eligible institution

shall provide matching funds from non-Federal

sources, in an amount equal to or greater than the Federal

funds used in accordance with paragraph (1), for the establishment

or increase of the endowment fund.

**(3) COMPARABILITY.---**The provisions of part C regarding

the establishment or increase of an endowment fund, that the

Secretary determines are not inconsistent with this subsection,

shall apply to funds used under paragraph (1).

**(c) LIMITATIONS.---** (1) No grant may be made under this Act for

any educational program, activity, or service related to sectarian

instruction or religious worship, or provided by a school or department

of divinity. For the purpose of this subsection, the term

''school or department of divinity'' means an institution whose pro-gram

is specifically for the education of students to prepare them

to become ministers of religion or to enter upon some other religious

vocation, or to prepare them to teach theological subjects.

\(2\) Not more than 50 percent of the allotment of any institution

may be available for the purpose of constructing or maintaining

a classroom, library, laboratory, or other instructional facility.

**SEC. 324. ALLOTMENTS TO INSTITUTIONS**.

**(a) ALLOTMENT; PELL GRANT BASIS.---** From the amounts appropriated

to carry out this part for any fiscal year, the Secretary shall

allot to each part B institution a sum which bears the same ratio

to one-half that amount as the number of Pell Grant recipients in

attendance at such institution at the end of the school year preceding

the beginning of that fiscal year bears to the total number of

Pell Grant recipients at all part B institutions.

**(b) ALLOTMENT; GRADUATES BASIS.---** From the amounts appropriated

to carry out this part for any fiscal year, the Secretary shall

allot to each part B institution a sum which bears the same ratio

to one-fourth that amount as the number of graduates for such

school year at such institution bears to the total number of grad-uates

for such school year at all part B institutions.

**(c) ALLOTMENT; GRADUATE AND PROFESSIONAL STUDENT**

**BASIS.---** From the amounts appropriated to carry out this part for

any fiscal year, the Secretary shall allot to each part B institution

a sum which bears the same ratio to one-fourth of that amount as

the percentage of graduates per institution, who are admitted to

and in attendance at, within 5 years of graduation with a baccalaureate

degree, a graduate or professional school in a degree pro-gram

in disciplines in which Blacks are underrepresented, bears to

the percentage of such graduates per institution for all part B
insti-tutions.

**(d) MINIMUM ALLOTMENT.---** (1) Notwithstanding subsections

(a), (b), and (c), the amount allotted to each part B institution

under this section shall not be less than \$500,000.

\(2\) If the amount appropriated pursuant to section 360(a)(2)(A)

for any fiscal year is not sufficient to pay the minimum allotment

**SEC. 324. ALLOTMENTS TO INSTITUTIONS**. **(Continued)**

required by paragraph (1) of this subsection to all part B institutions,

the amount of such minimum allotments shall be ratably reduced.

If additional sums become available for such fiscal year,

such reduced allocation shall be increased on the same basis as

they were reduced (until the amount allotted equals the minimum

allotment required by paragraph (1)).

**(e) REALLOTMENT.---** The amount of any part B institution's allotment

under subsection (a), (b), (c), or (d) for any fiscal year

which the Secretary determines will not be required for such institution

for the period such allotment is available shall be available

for reallotment from time to time on such date during such period

as the Secretary may determine to other part B institutions in
pro-portion

to the original allotment to such other institutions under

this section for such fiscal year.

**(f) SPECIAL MERGER RULE.---** (1) The Secretary shall permit any

eligible institution for a grant under part B in any fiscal year prior

to the fiscal year 1986 to apply for a grant under this part if the

eligible institution has merged with another institution of higher

education which is not so eligible or has merged with an eligible

institution.

\(2\) The Secretary may establish such regulations as may be

necessary to carry out the requirement of paragraph (1) of this
sub-section.

**(g) SPECIAL RULE FOR CERTAIN DISTRICT OF COLUMBIA ELIGIBLE**

**INSTITUTIONS.---** In any fiscal year that the Secretary deter-mines

that Howard University or the University of the District of

Columbia will receive an allotment under subsections (b) and (c) of

this section which is not in excess of amounts received by Howard

University under the Act of March 2, 1867 (14 Stat. 438; 20 U.S.C.

123), relating to annual authorization of appropriations for Howard

University, or by the University of the District of Columbia under

the District of Columbia Self-Government and Governmental Reorganization

Act (87 Stat. 774) for such fiscal year, then Howard University

and the University of the District of Columbia, as the case

may be, shall be ineligible to receive an allotment under this sec-tion.

**SEC. 325. APPLICATIONS**.

**(a) CONTENTS.---** No part B institution shall be entitled to its
allotment

of Federal funds for any grant under section 324 for any

period unless that institution meets the requirements of subparagraphs

(C), (D), and (E) of section 312(b)(1) and submits an application

to the Secretary at such time, in such manner, and containing

or accompanied by such information, as the Secretary may reason-ably

require. Each such application shall---

\(1\) provide that the payments under this Act will be used

for the purposes set forth in section 323; and

\(2\) provide for making an annual report to the Secretary

and provide for---

\(A\) conducting, except as provided in subparagraph

(B), a financial and compliance audit of an eligible institution,

with regard to any funds obtained by it under this

title at least once every 2 years and covering the period

since the most recent audit, conducted by a qualified, independent

organization or person in accordance with standards

established by the Comptroller General for the audit

**SEC. 325. APPLICATIONS** **(Continued)**

of governmental organizations, programs, and functions,

and as prescribed in regulations of the Secretary, the results

of which shall be submitted to the Secretary; or

\(B\) with regard to an eligible institution which is audited

under chapter 75 of title 31, United States Code,

deeming such audit to satisfy the requirements of subparagraph

\(A\) for the period covered by such audit.

**(b) APPROVAL.---** The Secretary shall approve any application

which meets the requirements of subsection (a) and shall not disapprove

any application submitted under this part, or any modification

thereof, without first affording such institution reasonable

notice and opportunity for a hearing.

**(c) GOALS FOR FINANCIAL MANAGEMENT AND ACADEMIC PROGRAMS.---**

Any application for a grant under this part shall describe

measurable goals for the institution's financial management and

academic programs and include a plan of how the applicant intends

to achieve those goals.

**SEC. 326. PROFESSIONAL OR GRADUATE INSTITUTIONS.**

**(a) GENERAL AUTHORIZATION.---** (1) Subject to the availability of

funds appropriated to carry out this section, the Secretary shall

award program grants to each of the postgraduate institutions listed

in subsection (e) that is determined by the Secretary to be making

a substantial contribution to the legal, medical, dental, veterinary,

or other graduate education opportunities in mathematics,

engineering, or the physical or natural sciences for Black Americans.

\(2\) No grant in excess of \$1,000,000 may be made under this

section unless the postgraduate institution provides assurances

that 50 percent of the cost of the purposes for which the grant is

made will be paid from non-Federal sources, except that no institution

shall be required to match any portion of the first \$1,000,000

of the institution's award from the Secretary. After funds are made

available to each eligible institution under the funding rules
de-scribed

in subsection (f ), the Secretary shall distribute, on a pro

rata basis, any amounts which were not so made available (by reason

of the failure of an institution to comply with the matching
requirements

of this paragraph) among the institutions that have

complied with such matching requirement.

**(b) DURATION.---** Grants shall be made for a period not to exceed 5
years.

**(c) USES OF FUNDS.---** A grant under this section may be used

for---

\(1\) purchase, rental or lease of scientific or laboratory

equipment for educational purposes, including instructional

and research purposes;

\(2\) construction, maintenance, renovation, and improvement

in classroom, library, laboratory, and other instructional

facilities, including purchase or rental of telecommunications

technology equipment or services;

\(3\) purchase of library books, periodicals, technical and

other scientific journals, microfilm, microfiche, and other educational

materials, including telecommunications program materials;

\(4\) scholarships, fellowships, and other financial assistance

for needy graduate and professional students to permit the enrollment

of the students in and completion of the doctoral degree

**SEC. 326. PROFESSIONAL OR GRADUATE INSTITUTIONS. (Continued)**

in medicine, dentistry, pharmacy, veterinary medicine,

law, and the doctorate degree in the physical or natural

sciences, engineering, mathematics, or other scientific disciplines

in which African Americans are underrepresented;

\(5\) establish or improve a development office to strengthen

and increase contributions from alumni and the private sector;

\(6\) assist in the establishment or maintenance of an institutional

endowment to facilitate financial independence pursuant

to section 331; and

\(7\) funds and administrative management, and the acquisition

of equipment, including software, for use in strengthening

funds management and management information systems.

**(d) APPLICATION.---** Any institution eligible for a grant under

this section shall submit an application which---

\(1\) demonstrates how the grant funds will be used to im-prove

graduate educational opportunities for Black and low-in-come

students, and lead to greater financial independence; and

\(2\) provides, in the case of applications for grants in excess

of \$1,000,000, the assurances required by subsection (a)(2) and

specifies the manner in which the eligible institution is going

to pay the non-Federal share of the cost of the application.

**(e) ELIGIBILITY.---**

**(1) IN GENERAL.---** Independent professional or graduate institutions

and programs eligible for grants under subsection (a)

are the following 1

\(A\) Morehouse School of Medicine;

\(B\) Meharry Medical School;

\(C\) Charles R. Drew Postgraduate Medical School;

\(D\) Clark-Atlanta University;

\(E\) Tuskegee University School of Veterinary Medicine

and other qualified graduate programs;

\(F\) Xavier University School of Pharmacy and other

qualified graduate programs;

\(G\) Southern University School of Law and other

qualified graduate programs;

\(H\) Texas Southern University School of Law and

School of Pharmacy and other qualified graduate pro-grams;

\(I\) Florida A&M University School of Pharmaceutical

Sciences and other qualified graduate programs;

\(J\) North Carolina Central University School of Law

and other qualified graduate programs;

\(K\) Morgan State University qualified graduate pro-gram;

\(L\) Hampton University qualified graduate program;

\(M\) Alabama A&M qualified graduate program;

\(N\) North Carolina A&T State University qualified

graduate program;

\(O\) University of Maryland Eastern Shore qualified

graduate program;

\(P\) Jackson State University qualified graduate pro-gram;

\(Q\) Norfolk State University qualified graduate pro-grams;

and

\(R\) Tennessee State University qualified graduate pro-grams.

**326 HIGHER EDUCATION ACT OF 1965 (Continued)**

**(2) QUALIFIED GRADUATE PROGRAM.---**

(A) For the purposes of this section, the term ''qualified graduate

program'' means a graduate or professional program that provides

a program of instruction in the physical or natural sciences,

engineering, mathematics, or other scientific discipline in which

African Americans are underrepresented and has students enrolled in

such program at the time of application for a grant under this

section.

\(B\) Notwithstanding the enrollment requirement contained

in subparagraph (A), an institution may use an amount equal

to not more than 10 percent of the institution's grant under

this section for the development of a new qualified graduate

program.

**(3) SPECIAL RULE.---** Institutions that were awarded grants

under this section prior to October 1, 1998, shall continue to

receive such grants, subject to the availability of appropriated

funds, regardless of the eligibility of the institutions described

in subparagraphs (Q) and (R) of paragraph (1).

**(4) ONE GRANT PER INSTITUTION.---** The Secretary shall not

award more than 1 grant under this section in any fiscal year

to any institution of higher education or university system.

**(5) INSTITUTIONAL CHOICE.---** The president or chancellor of

the institution may decide which graduate or professional

school or qualified graduate program will receive funds under

the grant in any 1 fiscal year, if the allocation of funds among

the schools or programs is delineated in the application for

funds submitted to the Secretary under this section.

**(f) FUNDING RULE.---** Subject to subsection (g), of the amount

appropriated to carry out this section for any fiscal year---

\(1\) the first \$26,600,000 (or any lesser amount appropriated)

shall be available only for the purposes of making

grants to institutions or programs described in subparagraphs

\(A\) through (P) of subsection (e)(1);

\(2\) any amount in excess of \$26,600,000, but not in excess

of \$28,600,000, shall be available for the purpose of making

grants to institutions or programs described in subparagraphs

\(Q\) and (R) of subsection (e)(1); and

\(3\) any amount in excess of \$28,600,000, shall be made

available to each of the institutions or programs identified in

subparagraphs (A) through (R) pursuant to a formula developed

by the Secretary that uses the following elements:

\(A\) The ability of the institution to match Federal

funds with non-Federal funds.

\(B\) The number of students enrolled in the programs

for which the eligible institution received funding under

this section in the previous year.

\(C\) The average cost of education per student, for all

full-time graduate or professional students (or the equivalent)

enrolled in the eligible professional or graduate

school, or for doctoral students enrolled in the qualified

graduate programs.

\(D\) The number of students in the previous year who

received their first professional or doctoral degree from the

programs for which the eligible institution received funding

**326 HIGHER EDUCATION ACT OF 1965 (Continued)**

under this section in the previous year.

\(E\) The contribution, on a percent basis, of the pro-grams

for which the institution is eligible to receive funds

under this section to the total number of African Americans

receiving graduate or professional degrees in the professions

or disciplines related to the programs for the previous

year.

**(g) HOLD HARMLESS RULE.---** Notwithstanding paragraphs (2)

and (3) of subsection (f ), no institution or qualified program
identified

in subsection (e)(1) that received a grant for fiscal year 1998

and that is eligible to receive a grant in a subsequent fiscal year

shall receive a grant amount in any such subsequent fiscal year

that is less than the grant amount received for fiscal year 1998,
un-less

the amount appropriated is not sufficient to provide such grant

amounts to all such institutions and programs, or the institution

cannot provide sufficient matching funds to meet the requirements

of this section.

**SEC. 327. REPORTING AND AUDIT REQUIREMENTS.**

**(a) RECORDKEEPING.---** Each recipient of a grant under this part

shall keep such records as the Secretary shall prescribe, including

records which fully disclose---

\(1\) the amount and disposition by such recipient of the

proceeds of such assistance;

\(2\) the cost of the project or undertaking in connection

with which such assistance is given or used;

\(3\) the amount of that portion of the cost of the project or

undertaking supplied by other sources; and

\(4\) such other records as will facilitate an effective audit.

**(b) REPAYMENT OF UNEXPENDED FUNDS.---** Any funds paid to an

institution and not expended or used for the purposes for which the

funds were paid within 10 years following the date of the initial

grant awarded to an institution under part B of this title shall be

repaid to the Treasury of the United States.

**PART C--- ENDOWMENT CHALLENGE GRANTS FOR INSTITUTIONS**

**ELIGIBLE FOR ASSISTANCE UNDER PART A OR PART B**

**SEC. 331. ENDOWMENT CHALLENGE GRANTS.**

**(a) PURPOSE; DEFINITIONS.---**(1) The purpose of this section is

to establish a program to provide matching grants to eligible
institutions

in order to establish or increase endowment funds at such

institutions, to provide additional incentives to promote fund raising

activities by such institutions, and to foster increased independence

and self-sufficiency at such institutions.

\(2\) For the purpose of this section:

\(A\) The term ''endowment fund'' means a fund established

by State law, by an institution of higher education, or by a

foundation which is exempt from taxation and is maintained

for the purpose of generating income for the support of the institution,

but which shall not include real estate.

\(B\) The term ''endowment fund corpus'' means an amount

equal to the grant or grants awarded under this section plus

an amount equal to such grant or grants provided by the institution.

**SEC. 331. ENDOWMENT CHALLENGE GRANTS.** **(Continued)**

\(C\) The term ''endowment fund income'' means an amount

equal to the total value of the endowment fund established

under this section minus the endowment fund corpus.

(D)(i) The term ''eligible institution'' means an institution

that is an---

\(I\) eligible institution under part A or would be considered

to be such an institution if section 312(b)(1)(C) referred

to a postgraduate degree rather than a bachelor's

degree;

\(II\) institution eligible for assistance under part B or

would be considered to be such an institution if section 324

referred to a postgraduate degree rather than a baccalaureate

degree; or

\(III\) institution of higher education that makes a substantial

contribution to postgraduate medical educational

opportunities for minorities and the economically disadvantaged.

\(ii\) The Secretary may waive the requirements of sub-clauses

\(I\) and (II) of clause (i) with respect to a postgraduate

degree in the case of any institution otherwise eligible under

clause (i) for an endowment challenge grant upon determining

that the institution makes a substantial contribution to medical

education opportunities for minorities and the economically

disadvantaged.

**(b) GRANTS AUTHORIZED.---** (1) From sums available for this section

under section 399, the Secretary is authorized to award endowment

challenge grants to eligible institutions to establish or in-crease

an endowment fund at such institution. Such grants shall

be made only to eligible institutions described in paragraph (4)

whose applications have been approved pursuant to subsection (g).

(2)(A) Except as provided in subparagraph (B), no institution

shall receive a grant under this section, unless such institution has

deposited in its endowment fund established under this section an

amount equal to the amount of such grant. The source of funds for

this institutional match shall not include Federal funds or funds

from an existing endowment fund.

\(B\) The Secretary may make a grant under this part to an eligible

institution in any fiscal year if the institution---

\(i\) applies for a grant in an amount not exceeding \$500,000; and

\(ii\) has deposited in the eligible institution's endowment

fund established under this section an amount which is equal

to ¤2 of the amount of such grant.

\(C\) An eligible institution of higher education that is awarded

a grant under subparagraph (B) shall not be eligible to receive an

additional grant under subparagraph (B) until 10 years after the

date on which the grant period terminates.

\(3\) The period of a grant under this section shall be not more

than 10 years. During the grant period, an institution may not

withdraw or expend any of the endowment fund corpus. After the

termination of the grant period, an institution may use the endowment

fund corpus plus any endowment fund income for any educational

purpose.

(4)(A) An institution of higher education is eligible to receive

a grant under this section if it is an eligible institution as described

in subsection (a)(2)(D) of this section.

**SEC. 331. ENDOWMENT CHALLENGE GRANTS.** **(Continued)**

\(B\) No institution shall be ineligible for an endowment challenge

grant under this section for a fiscal year by reason of the previous

receipt of such a grant but no institution shall be eligible to

receive such a grant for more than 2 fiscal years out of any period

of 5 consecutive fiscal years.

\(5\) An endowment challenge grant awarded under this section

to an eligible institution shall be in an amount which is not less

than \$50,000 in any fiscal year.

(6)(A) An eligible institution may designate a foundation,

which was established for the purpose of raising money for the
institution,

as the recipient of the grant awarded under this section.

\(B\) The Secretary shall not award a grant to a foundation on

behalf of an institution unless---

\(i\) the institution assures the Secretary that the foundation

is legally authorized to receive the endowment fund corpus

and is legally authorized to administer the fund in accordance

with this section and any implementing regulation;

\(ii\) the foundation agrees to administer the fund in accordance

with the requirements of this section and any implementing

regulation; and

\(iii\) the institution agrees to be liable for any violation by

the foundation of the provisions of this section and any implementing

regulation, including any monetary liability that may

arise as a result of such violation.

**(c) GRANT AGREEMENT; ENDOWMENT FUND PROVISIONS.---**

\(1\) An institution awarded a grant under this section shall enter into

an agreement with the Secretary containing satisfactory assurances

that it will (A) immediately comply with the matching requirements

of subsection (b)(2), (B) establish an endowment fund

independent of any other such fund of the institution, (C) invest

the endowment fund corpus, and (D) meet the other requirements

of this section.

(2)(A) An institution shall invest the endowment fund corpus

and endowment fund income in low-risk securities in which a regulated

insurance company may invest under the law of the State in

which the institution is located such as a federally insured bank

savings account or comparable interest-bearing account, certificate

of deposit, money market fund, mutual fund, or obligations of the

United States.

\(B\) The institution, in investing the endowment fund established

under this section, shall exercise the judgment and care,

under the circumstances then prevailing, which a person of prudence,

discretion, and intelligence would exercise in the management

of such person's own affairs.

(3)(A) An institution may withdraw and expend the endowment

fund income to defray any expenses necessary to the operation

of such college, including expenses of operations and maintenance,

administration, academic and support personnel, construction

and renovation, community and student services programs,

and technical assistance.

(B)(i) Except as provided in clause (ii), an institution may not

spend more than 50 percent of the total aggregate endowment fund

income earned prior to the time of expenditure.

\(ii\) The Secretary may permit an institution to spend more

**Sec. 331 HIGHER EDUCATION ACT OF 1965 (Continued)**

than 50 percent of the endowment fund income notwithstanding

clause (i) if the institution demonstrates such an expenditure is

necessary because of (I) a financial emergency, such as a pending

insolvency or temporary liquidity problem; (II) a life-threatening

situation occasioned by a natural disaster or arson; or (III) any

other unusual occurrence or exigent circumstance.

**(d) REPAYMENT PROVISIONS.---** (1) If at any time an institution

withdraws part of the endowment fund corpus, the institution shall

repay to the Secretary an amount equal to 50 percent of the with-drawn

amount, which represents the Federal share, plus income

earned thereon. The Secretary may use such repaid funds to make

additional challenge grants, or to increase existing endowment

grants, to other eligible institutions.

\(2\) If an institution expends more of the endowment fund in-come

than is permitted under subsection (c), the institution shall

repay the Secretary an amount equal to 50 percent of the amount

improperly expended (representing the Federal share thereof). The

Secretary may use such repaid fund to make additional challenge

grants, or to increase existing challenge grants, to other eligible
institutions.

**(e) AUDIT INFORMATION.---** An institution receiving a grant

under this section shall provide to the Secretary (or a designee

thereof) such information (or access thereto) as may be necessary

to audit or examine expenditures made from the endowment fund

corpus or income in order to determine compliance with this section.

**(f) SELECTION CRITERIA.---** In selecting eligible institutions for

grants under this section for any fiscal year, the Secretary shall---

\(1\) give priority to an applicant that is receiving assistance

under part A or part B or has received a grant under part A

or part B of this title within the 5 fiscal years preceding the

fiscal year in which the applicant is applying for a grant under

this section;

\(2\) give priority to an applicant with a greater need for

such a grant, based on the current market value of the appli-cant's

existing endowment in relation to the number of full-time

equivalent students enrolled at such institution; and

\(3\) consider---

\(A\) the effort made by the applicant to build or main-tain

its existing endowment fund; and

\(B\) the degree to which an applicant proposes to

match the grant with nongovernmental funds.

**(g) APPLICATION.---** Any institution which is eligible for assistance

under this section may submit to the Secretary a grant application

at such time, in such form, and containing such information

as the Secretary may prescribe, including a description of the long-and

short-term plans for raising and using the funds under this

part. Subject to the availability of appropriations to carry out this

section and consistent with the requirement of subsection (f), the

Secretary may approve an application for a grant if an institution,

in its application, provides adequate assurances that it will comply

with the requirements of this section.

(**h) TERMINATION AND RECOVERY PROVISIONS.---** (1) After notice

and an opportunity for a hearing, the Secretary may terminate and

recover a grant awarded under this section if the grantee institution---

(January 6, 1998)

**Sec. 331 HIGHER EDUCATION ACT OF 1965 (Continued)**

\(A\) expends portions of the endowment fund corpus or expends

more than the permissible amount of the endowment

funds income as prescribed in subsection (c)(3);

\(B\) fails to invest the endowment fund in accordance with

the investment standards set forth in subsection (c)(2); or

\(C\) fails to properly account to the Secretary concerning

the investment and expenditures of the endowment funds.

\(2\) If the Secretary terminates a grant under paragraph (1),

the grantee shall return to the Secretary an amount equal to the

sum of each original grant under this section plus income earned

thereon. The Secretary may use such repaid funds to make additional

endowment grants, or to increase existing challenge grants,

to other eligible institutions under this part.

PART D---HISTORICALLY BLACK COLLEGE AND

UNIVERSITY CAPITAL FINANCING

**SEC. 341. FINDINGS.**

The Congress finds that---

\(1\) a significant part of the Federal mission in education

has been to attain equal opportunity in higher education for

low-income, educationally disadvantaged Americans and African

Americans;

\(2\) the Nation's historically Black colleges and universities

have played a prominent role in American history and have an

unparalleled record of fostering the development of African

American youth by recognizing their potential, enhancing their

academic and technical skills, and honing their social and political

skills through higher education;

\(3\) the academic and residential facilities on the campuses

of all historically Black colleges and universities have suffered

from neglect, deferred maintenance and are in need of capital

improvements in order to provide appropriate settings for

learning and social development through higher education;

\(4\) due to their small enrollments, limited endowments

and other financial factors normally considered by lenders in

construction financing, historically Black colleges and universities

often lack access to the sources of funding necessary to

undertake the necessary capital improvements through borrowing

and bond financing;

\(5\) despite their track record of long-standing and remark-able

institutional longevity and viability, historically Black colleges

and universities often lack the financial resources necessary

to gain access to traditional sources of capital financing

such as bank loans and bond financing; and

\(6\) Federal assistance to facilitate low-cost capital basis for

historically Black colleges and universities will enable such colleges

and universities to continue and expand their educational

mission and enhance their significant role in American higher

education.

January 6, 1999