[Federal Register Volume 75, Number 169 (Wednesday, September 1, 2010)]
[Rules and Regulations]
[Pages 53786-53834]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-21139]



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Part IV





Department of Labor





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Employment and Training Administration



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20 CFR Part 641



Senior Community Service Employment Program; Final Rule

Federal Register / Vol. 75 , No. 169 / Wednesday, September 1, 2010 / 
Rules and Regulations

[[Page 53786]]


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DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Part 641

RIN 1205-AB48 and RIN 1205-AB47


Senior Community Service Employment Program; Final Rule

AGENCY: Employment and Training Administration, Labor.

ACTION: Final rule.

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SUMMARY: The Employment and Training Administration (ETA) of the 
Department of Labor (Department) issues this final rule to implement 
changes in the Senior Community Service Employment Program (SCSEP) 
resulting from the 2006 Amendments to title V of the Older Americans 
Act, and to clarify various policies. These regulations provide 
administrative and programmatic guidance and requirements for the 
implementation of the SCSEP.
    The Department issued an interim final rule (IFR) implementing 
changes in the SCSEP performance accountability regulations. We issued 
a notice of proposed rulemaking (NPRM) proposing changes to the 
remainder of the SCSEP regulations on August 14, 2008. This final rule 
takes into consideration comments received on the IFR and the NPRM.

DATES: Effective date: This final rule is effective October 1, 2010.

FOR FURTHER INFORMATION CONTACT: Judith Gilbert, Team Leader, Division 
of Adult Services, Office of Workforce Investment, U.S. Department of 
Labor, 200 Constitution Avenue, NW., Room S-4209, Washington, DC 20210; 
telephone (202) 693-3046 (this is not a toll-free number).
    Individuals with hearing or speech impairments may access the 
telephone number above via TTY by calling the toll-free Federal 
Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:
    The preamble to this final rule is organized as follows:

I. Background--provides a brief description of the development of 
the rule.
II. Summary of the Comments--provides an overview of the comments 
received.
III. Section-by-Section Review--discusses comments on the SCSEP 
regulations.
IV. Administrative Information--sets forth the applicable regulatory 
requirements.

I. Background

    The Older Americans Act (OAA) Amendments of 2006, Public Law 109-
365 (2006 OAA) were signed into law on October 17, 2006. This law 
amended the statute authorizing the SCSEP and necessitates changes to 
the SCSEP regulations. The 2006 OAA required regulations that address 
performance measures by July 1, 2007. To meet this deadline, the 
Department promulgated an Interim Final Rule on June 29, 2007. 72 FR 
35832. We issued an NPRM on August 14, 2008, to propose changes to the 
remainder of the SCSEP regulations in light of the 2006 OAA. 73 FR 
47770. We invited comments on both the IFR and the NPRM, and thoroughly 
evaluated those comments in the process of developing this final rule.
    The SCSEP, authorized by title V of the OAA, is the only federally-
sponsored employment and training program targeted specifically to low-
income older individuals who want to enter or re-enter the workforce. 
Participants must be unemployed, 55 years of age or older, and have 
incomes no more than 125 percent of the Federal poverty level. The 
program offers participants community service assignments and training 
in public and non-profit agencies. The dual goals of the program are to 
promote useful opportunities in community service activities and to 
also move SCSEP participants into unsubsidized employment, where 
appropriate, so that they can achieve economic self-sufficiency. In the 
2006 OAA, Congress expressed its sense of the benefits of the SCSEP, 
stating, ``placing older individuals in community service positions 
strengthens the ability of the individuals to become self-sufficient, 
provides much-needed support to organizations that benefit from 
increased civic engagement, and strengthens the communities that are 
served by such organizations.'' OAA Sec.  516(2).
    Although some of these regulations remain unchanged from the 2004 
SCSEP final rule, this final rule does include certain significant 
changes to the program. Perhaps most notably, the new 48-month 
limitation on participation (OAA Sec.  518(a)(3)(B); Sec.  641.570 of 
this part), and the increase in available funds for training and 
supportive services (OAA Sec.  502(c)(6)(C); Sec.  641.874 of this 
part).
    The 2006 OAA also increases the accountability of national grantees 
by clearly requiring a competitive process for grant awards. This final 
rule implements the statute's requirement that the national SCSEP 
grants be re-competed regularly, generally every four years. OAA Sec.  
514(a); Sec.  641.490(a) of this part. This final rule also implements 
the statute's requirement that a State compete its SCSEP grant if the 
current State grantee fails to meet its core performance goals for 
three consecutive years. OAA Sec.  513(d)(3)(B)(iii); Sec.  641.490 of 
this part.
    In addition, the 2006 OAA establishes new funding opportunities for 
pilot, demonstration, and evaluation projects (OAA Sec.  502(e); Sec.  
641.600-640 of this part), expands the priority-for-service categories 
(OAA Sec.  518(b); Sec.  641.520 of this part), and modifies how the 
program determines income eligibility (OAA Sec.  518(a)(3)(A); Sec.  
641.510 of this part).
    Coordination between the SCSEP and the programs under the Workforce 
Investment Act of 1998 (WIA), 29 U.S.C. 2801 et seq., continues to be 
an important objective of the 2006 OAA. With the enactment of WIA in 
1998, the SCSEP became a required partner in the workforce investment 
system. 29 U.S.C. 2841(b)(1)(B)(vi). In 2000, Congress amended the 
SCSEP to require coordination with the WIA One-Stop delivery system 
(Pub. L. 106-501, Sec.  505(c)(1)), including reciprocal use of 
assessment mechanisms and Individual Employment Plans (Pub. L. 106-501, 
Sec.  502(b)(4)). In 2006, Congress continued both the requirement to 
coordinate at OAA Sec.  505(c)(1) and the reciprocal use of assessments 
at OAA Sec.  502(b)(3)(B). The underlying notion of the One-Stop 
delivery system is the coordination of programs, services, and 
governance structures, so that the customer has access to a seamless 
system of workforce investment services.
    Consistent with current SCSEP practice, both WIA and the 2006 OAA 
require any grantee operating a SCSEP project in a local area to 
negotiate a Memorandum of Understanding (MOU) with the Local Workforce 
Investment Board. WIA Sec.  121; OAA Sec.  511(b); see also OAA Sec.  
502(b)(1)(O). The MOU must detail the SCSEP project's involvement in 
the One-Stop delivery system. In particular, SCSEP grantees and sub-
recipients must make arrangements to provide their participants, 
eligible individuals the grantees are unable to serve, as well as 
SCSEP-ineligible individuals, with access to services available in the 
One-Stop centers. OAA Sec. Sec.  510, 511; Sec. Sec.  641.210, 641.220, 
and 641.230 of this part.

II. Summary of the Comments

    We have carefully reviewed all of the comments received in response 
to both the IFR and to the NPRM. We received 1,505 comments during the 
comment periods, of which 364 were unique, 959 were duplicates or 
``form'' letters, and one was a petition with 182 signatures. The 
commenters fell into a variety of

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categories that reflect the broad range of constituencies for the SCSEP 
program, including State and national grantees, program non-profit host 
agencies, area agencies on aging, WIA providers, and program 
participants.
    A number of commenters requested additional time to review and 
submit comments on the changes proposed in the NPRM. Many of these 
commenters requested an additional 60 days to determine the impact on 
SCSEP stakeholders and participants. Several commenters mentioned that 
many who will be impacted by the proposed changes are not yet even 
aware of them. Others mentioned that they have had insufficient time to 
contact host agencies and obtain their input. One commenter pointed out 
that the SCSEP system is a diverse and complex network of agencies, and 
said that insufficient time had been allowed to seek input from this 
network. One commenter said additional time was required to evaluate 
the impact of the recent economic downturn on SCSEP participants. A few 
others suggested that the Department put the proposed regulations aside 
and work collaboratively with the grantee community and with the 
Administration on Aging to draft new regulations.
    We reviewed these requests and concluded that they presented no 
novel or difficult issues justifying an extension of the comment period 
or a withdrawal of the proposed rule In this case, the Department 
provided 60 days for notice and comment. We believe the time allotted 
was more than sufficient to review this regulation given that most of 
the rule simply reflects changes required by the 2006 OAA, or is a 
continuation of policies that were published in the 2004 Final Rule. 
Accordingly, the Department did not extend the comment period.
    The more substantive comments touched on almost every section of 
the proposed regulation. These comments are discussed in Section III 
below. In addition, the Department has made technical changes to the 
regulatory text for clarity and consistency. Provisions that were not 
the subject of a comment or that were not revised for technical reasons 
have been adopted as proposed and are not discussed in Section III.

III. Section-by-Section Review

    In this section, we discuss the comments, our responses to them and 
any changes to the regulations that we made as a result of comments. In 
the course of reviewing the NPRM, we have made some technical or 
grammatical changes to the regulatory text, which are not intended to 
change the meaning or intent of the regulatory provisions. Generally, 
we do not discuss these types of changes in this section.

Subpart A--Purpose and Definitions

What is the SCSEP? (Sec.  641.110)
    This section of the final rule describes the SCSEP as it is defined 
by the 2006 OAA. We received several comments on this provision. Those 
commenters expressed concern about using the term ``employment'' in the 
phrase ``community service employment assignment'' as referenced in 
Sec. Sec.  641.110 and 641.120 of the rule. A few commenters found that 
adding the term ``places undue confusion on both grantees and 
participants.'' As a result, these commenters recommended that the 
regulation only refer to ``employment'' in the context of unsubsidized 
employment. Other commenters stated that changing the name would 
reverse grantee efforts to promote SCSEP as a training program rather 
than an employment program.
    The Department accepts this comment. The regulation has been 
revised to use the term ``community service assignment'' throughout. 
The term ``community service employment'' in the rule is consistent 
with the term as it is defined in the 2006 OAA at Sec.  518(a)(2). To 
remedy any potential confusion, the Department notes that the terms 
``community service assignment'' and ``community service employment 
assignment'' are the same in that they both represent part-time, 
temporary job training through a work experience that is paid with 
grant funds. Therefore, the Department recommends that grantees 
continue to clarify the nature of the community service assignment with 
participants, which should alleviate any potential confusion.
    One final comment came from a program participant who stated that 
the program should allow for more than part-time hours so that 
participants are able to further develop and improve their skills. We 
are unable to accommodate the participant's request, because the OAA at 
Sec.  518(a)(2) defines ``community service employment'' as ``part-
time, temporary employment.'' We are pleased to receive comments from 
our program participants, including this commenter, and note that 
developing and improving skills does not have to end with SCSEP. There 
are other no-cost training resources available to seniors (including, 
in some cases, through the One-Stop delivery system) that we hope 
program participants utilize.
What are the purposes of the SCSEP? (Sec.  641.120)
    This section of the rule outlines the purpose of the SCSEP. We 
received a significant number of comments on this section. A majority 
of the commenters expressed concern that the Department is minimizing 
the community service aspects of the program and placing a higher 
priority on the unsubsidized placement goal in this regulation. Many of 
the commenters stated that the NPRM does not conform to the 2006 OAA 
because they perceived the Department as elevating the importance of 
unsubsidized employment at the expense of community service. Several 
commenters referenced the intent of Congress when it passed the 
legislation. Those commenters referenced section 516 of the 2006 OAA, 
which provides:
    It is the sense of Congress that--
    (1) The older American community service employment program 
described in this title was established with the intent of placing 
older individuals in community service positions and providing job 
training; and
    (2) placing older individuals in community service positions 
strengthens the ability of the individuals to become self-sufficient, 
provides much-needed support to organizations that benefit from 
increased civic engagement and strengthens the communities that are 
served by such organizations.

Those commenters relied on the placement of the words ``community 
service'' before ``job training'' to make the case that Congress 
intended for community service to have a higher priority than job 
training. Further, some of these commenters asserted that ``self-
sufficient'' in this context implies emotional and other types of self-
sufficiency, and not just economic self-sufficiency. In support of this 
position, the commenters describe the importance of placing an older 
individual into a community service assignment as a means of improving 
the person's sense of financial as well as emotional and social well-
being, while providing a useful and needed service in the community. 
Therefore, these commenters found that the regulations ignore the value 
of community service both to the participant and to the community at 
large. A few commenters stressed the importance of working with the 
non-profit sector because they rely on the program participants when 
they do not have enough funds to hire staff for their organizations. 
One commenter commended the Department for stressing the importance of 
the

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program's goal to foster economic self-sufficiency.
    In addition, some commenters focused on other language in the 2006 
OAA. In addition to Sec.  516, these commenters referenced Sec.  
502(a), ``Establishment of Program'' and Sec.  518(a), which defines 
``community service employment.'' These commenters stated that these 
provisions ``reinforce[] the primary purpose of community service 
employment, along with its dual purpose of placing workers into 
unsubsidized employment.'' One of the commenters noted that the 
Department misinterpreted the 2006 OAA when it attempted to ``meld 
together'' four disparate provisions ``to support an exclusive focus on 
job placement'' in the proposed rule.
    The Department appreciates the commenters' concern about the 
perceived changes in the program. However, the Department finds that 
the dual purposes of the program--community service and appropriate 
employment objectives for participants--with its related performance 
goals, are not inconsistent. We fully embrace these dual purposes of 
the SCSEP as envisioned by the Congress. We recognize the importance of 
the community service aspect of the SCSEP. But we do not think that the 
regulation should overemphasize either aspect of the program. We have, 
therefore, written this regulation to strike an appropriate balance 
between community service and unsubsidized employment. Therefore, we 
have not changed this section.
What definitions apply to this part? (Sec.  641.140)
    This section provides specific or contextual definitions for the 
terms used in this part. We received numerous comments on this section 
with suggestions on how to better clarify, amend, or define the 
following ten (10) definitions: ``co-enrollment,'' ``employment,'' 
``equitable distribution report,'' ``host agency,'' ``individual 
employment plan,'' ``other participant costs,'' ``state plan,'' ``sub-
recipient,'' ``supportive services,'' and ``unemployed.'' In addition, 
commenters asked the Department to add definitions for ``community 
service employment'' and ``job ready.''
    As indicated in the preamble to the proposed rule, the definition 
of ``co-enrollment'' was eliminated because it related to private 
sector 502(e) projects which are no longer authorized. This definition 
was specific to the 502(e) projects and had no bearing on SCSEP 
participants co-enrolling into other federally funded programs. Upon 
further reflection, however, the Department realized that although this 
definition is no longer applicable to the 502(e) projects from the 2004 
regulation, it is still applicable to define the status of participants 
who are enrolled in WIA or other employment and training programs since 
SCSEP is a mandatory partner in the One-Stop system. Therefore, we have 
reinstated this definition with some changes to reflect that the 
participants must be enrolled in those other programs to be considered 
co-enrolled.
    Commenters suggested two substantial changes to the definition of 
``equitable distribution report.'' First, the commenters suggest the 
Department allow grantees to use other reputable and reliable 
population data in order to determine the optimum number of participant 
positions for equitable distribution purposes. The Department 
understands the limits of census data when determining equitable 
distribution of positions, given that Census data is updated only every 
10 years. The Department also agrees that more timely information would 
help the grantees make better decisions for program efficiencies (i.e., 
equitable distribution of SCSEP positions), which would allow more 
eligible individuals to participate in the program. Furthermore, by 
relaxing the limitations on grantees on the data they may use for 
equitable distribution of positions, grantees will be able to respond 
to major changes in their programs, such as in the case of a natural 
disaster or other unforeseen demographic shifts. Therefore, the 
Department agrees to allow the use of other data for equitable 
distribution purposes, as long as that information is from a reliable 
source, comparable in quality to the Census data, and grantees document 
the source of the information.
    Other commenters took issue with the change of words in the 
definition from ``counties'' to ``jurisdiction.'' We made this change 
to make the definition more inclusive of potentially underserved 
incorporated cities. One commenter specifically suggested that the 
Department reverse the change of wording, and edit the definition to 
include the term ``incorporated cities.'' The Department accepts these 
commenters' suggestions and has expanded the definition of ``equitable 
distribution report'' to include these suggestions.
    One commenter expressed concern with the addition of the word 
``training'' within the definition of ``host agency.'' The commenter 
felt that this term added to the confusion participants experience when 
they accept a community service assignment. Although the Department 
appreciates the sentiments of this commenter, we disagree. We believe 
that the added term ``training'' helps to underscore the fact that the 
community service assignment provides an opportunity to train SCSEP 
participants for unsubsidized employment. Congress indicates in Sec.  
502(a)(1) of the 2006 OAA, that the SCSEP is designed to ``[i]ncrease 
the number of persons who may enjoy the benefits of unsubsidized 
employment in both the public and private sectors.'' Further in Sec.  
516 of the 2006 OAA, Congress indicates that the SCSEP program ``was 
established with the intent of placing older individuals in community 
service positions and providing job training.'' Thus, the Department 
has decided to retain the term ``training'' in the definition of ``host 
agency.''
    We received several comments on the definition of ``individual 
employment plan or IEP.'' One commenter requested that the Department 
include the term ``mandatory'' in place of the term ``appropriate'' to 
describe the employment goal included in the IEP. The Department agrees 
that one of the end goals of an IEP should be unsubsidized employment 
for many participants; however, making this a mandatory function of the 
IEP runs counter to the statutory language in Sec.  502(b)(1)(N)(ii) of 
the 2006 OAA, which provides that the grantee ``will provide training 
and employment counseling to eligible individuals based on strategies 
that identify appropriate employment objectives * * * developed as a 
result of [an] assessment and service strategy.'' Thus, the use of the 
word ``appropriate'' further underscores the need to identify a 
strategy in the IEP that is tailored to the needs of each participant.
    Additionally, commenters stated that the Department did not include 
community service in the definition of IEP. These commenters suggested 
the Department change the term IEP to ``individual service employment 
program'' or ISEP. Other suggestions included ``ISS'' for Individual 
Service Strategy and ``ITP'' for Individual Training Plan. There is no 
doubt that the community service assignment is an important aspect of 
the IEP, since it provides a work environment in which to obtain needed 
job skills. The goal of the IEP is to plot the participant's training 
plan that will lead to an appropriate employment objective, which 
includes more than just community service. Read together, paragraphs 
(i) and (ii) of Sec.  502(b)(1)(N) focus on a strategy aimed at 
employment, and thus the IEP is appropriate. However, there is nothing

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in the definition of IEP or elsewhere that prevents grantees from 
including a variety of other services and strategies not directly 
related to the employment goal as part of the IEP. For the reasons 
provided, the Department therefore finds this change unnecessary and 
did not alter this definition. However, in response to these comments 
we did add language to the definition to make it clear that, while the 
first IEP must contain an employment goal, later IEPs need not, if 
employment is not a feasible outcome for a participant.
    Two commenters found that the term ``other participant costs'' 
contained much the same list of activities defined under ``supportive 
services.'' These commenters are correct. The Department has elected to 
keep both definitions because the definition of ``other participant 
costs'' contains a variety of activities in addition to those listed in 
the definition of ``supportive services.'' In addition, we have 
clarified the definition of ``severely limited employment prospects'' 
by substituting the words ``substantial likelihood'' for the words 
``substantially higher likelihood.''
    One commenter noted that the definition of ``sub-recipient,'' 
caused general confusion by changing from the previously defined term, 
``subgrantee.'' However, the Department was clear about why it changed 
the various definitions and the definition of ``sub-recipient'' in 
particular in the preamble to the proposed rule. The Department 
explained that the previous term, ``subgrantee,'' failed to take other 
recipients into account that may have grant management 
responsibilities. The term ``sub-recipient,'' therefore, is inclusive 
of subgrants as well as other types of funding awards. For this reason, 
the Department did not make any changes to this definition.
    One commenter noted that the cost of incidentals was not included 
in the proposed definition of ``supportive services,'' even though 
incidentals are the most widely used supportive service. Although the 
Department used the definition in the OAA at Sec.  518(a)(7), we have 
now modified the definition to more fully reflect the language on 
supportive services found in section 502(c)(6)(A)(iv).
    We received a few comments on the definition of ``unemployed.'' One 
commenter disagreed with the Department's interpretation and found that 
the definition unnecessarily complicates a grantee's ability to make 
eligibility decisions. This commenter further stated that use of the 
words the ``occasional employment'' works against older individuals and 
particularly those who reside in rural areas who take part-time jobs. 
This definition tracks the statutory language, and it is sufficiently 
clear. Therefore, we have not changed the definition.
    We also received recommendations from commenters to add two 
definitions to this section, and we have adopted both. An overwhelming 
number of commenters suggested that the Department add the term 
``community service employment'' to this regulation. The term 
``community service employment'' is included in Sec.  518(a)(2) of the 
2006 OAA and reads as follows:

    The term ``community service employment'' means part-time, 
temporary employment paid with grant funds in projects described in 
section 502(b)(1)(D), through which eligible individuals are engaged 
in community service and receive work experience and job skills that 
can lead to unsubsidized employment.

    The other definition we adopted in this final rule is ``job ready'' 
which pertains to the rule that prohibits the enrollment of job ready 
participants in Sec. Sec.  641.512 and 641.535(c). The term ``job 
ready'' has been discussed in training and in conversations with 
grantees when the Department has provided technical assistance. The 
Department has generally meant the term to apply to an individual who 
requires no more than just job club or job search assistance to be 
employed. The Department discussed its policy in the 2004 regulations 
at 69 FR 19014 at 19031, 19032, and 19038, Apr. 9, 2004. To reiterate 
the Department's policy as announced in 2004, the purpose of the 
program is to ``assure that grantees concentrate their efforts and 
limited funds on providing community service work assignments to those 
older [individuals] who are most in need'' as opposed to those who are 
job ready. 69 FR 19014 at 19031. Therefore, a simple definition of 
``job ready'' is now provided. It refers to ``individuals who do not 
require further education or training to perform work that is available 
in his or her labor market.'' Thus, it may include an individual who is 
already employed, even if only part-time, or was recently unemployed 
but has a skill set to fill the jobs available in his or her area; or 
who has received sufficient training from SCSEP or some other 
employment and training program to be able to perform work that is 
available in the labor market.

Subpart B--Coordination With the Workforce Investment Act

What is the relationship between the SCSEP and the Workforce Investment 
Act? (Sec.  641.200)
    This section provides that SCSEP grantees are required to follow 
all applicable rules under WIA and its regulations. The WIA operational 
requirements generally do not apply to SCSEP operations. As required 
partners under WIA, grantees are obligated to be familiar with the WIA 
requirements when they are acting as a WIA/One Stop delivery system 
partner. The only proposed changes made in this section are to clarify 
that sub-recipients (and not just grantees) are included in the 
requirement to follow all applicable WIA rules and regulations, and to 
make certain technical corrections to the citations.
    A number of commenters objected to the requirement that SCSEP 
follow all applicable rules under WIA and its regulations. The 
commenters cited various problems and experiences they perceive WIA has 
in serving older workers, and argued that SCSEP is a different type of 
program than WIA and should therefore not be required to comply with 
its rules, which they believe are burdensome on SCSEP grantees. Several 
commenters said that it is unclear which WIA rules and regulations are 
applicable to SCSEP and which are not. Several commenters asked that 
the requirement to follow applicable WIA rules be removed. Since both 
the OAA and WIA require SCSEP to be a One-Stop partner, we cannot make 
the suggested change.
    These commenters also mentioned that WIA performance measures 
create a disincentive to serving older workers, and cited as evidence 
findings of an April 2008 Government Accountability Office report 
entitled ``Most One-Stop Career Centers Are Taking Multiple Actions to 
Link Employers and Older Workers.'' One commenter said the onus seems 
to be on SCSEP to initiate collaborative relationships with WIA. 
Another commenter suggested releasing a Training and Employment 
Guidance Letter (TEGL) to highlight the importance of coordination 
between WIA and SCSEP.
    We appreciate the commenters' concerns about ways to improve SCSEP-
WIA coordination but none of the comments received addressed the 
specific changes to this section proposed by the NPRM. The comments 
appear to reflect a concern that the coordination requirements of the 
2006 OAA and WIA will have the effect of diluting or undercutting the 
focus and

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mission of the SCSEP. As we stated in response to similar comments in 
the preamble to the 2004 Final Rule, we do not intend the regulations 
to convey this message. 69 FR 19017-19019. WIA envisions a coordinated 
workforce development system in which a variety of programs work more 
closely together to make access to workforce development services 
easier and more efficient. WIA includes a number of programs that serve 
special populations to be required partners and is very careful to 
assure that program boundaries are respected. None of the WIA 
requirements on SCSEP grantees have changed from those that applied in 
2004, so we have not changed the SCSEP regulations that govern SCSEP-
WIA coordination. The Department intends that the regulations will 
enable grantees and sub-recipients to concentrate better on the core 
missions of the SCSEP, providing community service assignments to hard-
to-serve older individuals. The Department intends that the One-Stop 
delivery system be used to provide services both to older individuals 
who are not eligible for the SCSEP and to those who are eligible but 
need the intensive services that the SCSEP is unable to provide. The 
kinds of partnerships that the regulations envision will enable SCSEP 
grantees and sub-recipients to focus more of their efforts on the core 
population that the SCSEP is intended to serve. We did, however, add 
language to make it clear that the requirements of the section apply to 
SCSEP grantees and sub-recipients when they are acting in their 
capacities of required One-Stop partners.
What services, in addition to the applicable core services, must SCSEP 
grantees and sub-recipients provide through the One-Stop delivery 
system? (Sec.  641.210)
    This section requires SCSEP grantees and sub-recipients to make 
arrangements to provide their participants, eligible individuals the 
grantees and sub-recipients are unable to serve, as well as SCSEP 
ineligible individuals, with access to other services available at One-
Stop centers. We received comments on the second clarification made to 
this provision that SCSEP grantees and sub-recipients must also make 
arrangements through the One-Stop delivery system to provide eligible 
and ineligible individuals with referrals to WIA intensive and training 
services.
    Several commenters objected to this requirement and asked that it 
be removed, while others noted problems with the requirement. One 
commenter said that it is not always feasible to make referrals to WIA 
intensive or training services because many participants live long 
distances from One-Stop centers and do not have transportation to 
access services. Another commenter noted the absence of One-Stop 
centers in rural areas. Another commenter said that even if referrals 
of older individuals for WIA services are made, the WIA program tends 
not to serve them. Still another commenter said that the One-Stop 
delivery system provides limited or no bi-lingual programs that target 
older workers and in many instances are not located in proximity to 
Hispanic and minority neighborhoods. Finally, a commenter said that the 
2006 OAA does not require SCSEP to provide core services through the 
WIA One-Stop delivery system, but requires potential participants to be 
registered with One-Stop centers.
    The Department acknowledges that access and referral to WIA 
services in rural areas may present particular challenges, as do 
addressing the special needs of older workers who are limited-English 
proficient. To address these challenges, the Department encourages 
coordination with other organizations, in addition to One-Stop centers, 
that may be more appropriate. This provision reminds grantees and sub-
recipients that they are required to be part of the One-Stop delivery 
system and to participate when appropriate in providing access and 
referral to the other services that the One-Stop partners offer. 
Grantees may also decide to provide core services outside the One-Stop 
Career Centers.
Does title I of WIA require the SCSEP to use OAA funds for individuals 
who are not eligible for SCSEP services or for services that are not 
authorized under the OAA? (Sec.  641.220)
    This section states that even in the One-Stop center environment, 
SCSEP projects are limited to serving SCSEP-eligible individuals with 
title V grant funds. The local Workforce Investment Board and the One-
Stop partners, including SCSEP, should negotiate in the Memorandum of 
Understanding (MOU) arrangements for referral of individuals to WIA who 
are not eligible for SCSEP.
    A single comment on this section suggested including language that 
if a Local Workforce Investment Board is a SCSEP sub-grantee, then no 
MOU is necessary because the contract between the grantee and sub-
grantee already stipulates arrangements for administration of the 
SCSEP.
    The Department disagrees that an MOU is not necessary when the 
local board is a SCSEP sub-grantee, although we acknowledge that this 
situation adds a degree of complexity to the relationship. As required 
of all partner relationships with the One-Stop delivery system, the 
requirement to have an MOU is statutory and therefore, still necessary. 
The relationship the local board would have as a sub-recipient only 
mandates services to participants under the grant agreement but does 
not ensure that there is a written policy for how services would be 
coordinated with the One-Stop center. Therefore, we did not make any 
change to this section.
Must the individual assessment conducted by the SCSEP grantee and the 
assessment performed by the One-Stop delivery system be accepted for 
use by either entity to determine the individual's need for services in 
the SCSEP and adult programs under title I-B of WIA? (Sec.  641.230)
    The only proposed changes the Department made to this section were 
of a technical nature. We received two comments recommending the 
Department modify the section to include Aging Disability Resource 
Centers or other organizations that perform assessments in addition to 
WIA, to assist with the data validation requirements.
    This section merely reflects the language of the 2006 OAA on the 
acceptance of each others' assessments by the SCSEP and One-Stop 
delivery system. The Department believes the SCSEP program will be 
better served if the regulations do not specify what other 
organizations perform assessments. The Department emphasizes that 
grantees are responsible for determining whether assessments performed 
by other organizations are sufficient for the grantee's and the 
participant's needs.

Subpart C--The State Plan

    We received a large number of comments on this subpart, although a 
few were outside the scope of this rulemaking because they related to 
subpart G, which had a separate comment period from the proposed rule. 
Most of the comments were related to the 4-year strategy in the State 
Plan, although others discussed participation in developing the State 
Plan, community service needs, modifications to the State Plan, and 
equitable distribution. We received a few comments related to the cost 
and resources needed to complete the State Plan, which are addressed in 
the

[[Page 53791]]

Administrative Section of this final rule under Section D, Unfunded 
Mandates. We also received several comments that generally discussed 
the State Plan requirements or discussed the need for greater 
coordination with aging programs, which the Department has decided to 
address in this subpart on the State Plan requirements.
What is the State Plan? (Sec.  641.300)
    This section describes the purpose and function of the State Plan. 
We made a number of changes to this section to reflect the new 
provision in the 2006 OAA, which requires State grantees to submit a 
four-year strategy to the Department.
    A few commenters asked the Department to consider allowing the 
State grantees to combine the State SCSEP strategic plan with the State 
Unit on Aging strategic plan to further the goals and efforts of its 
SCSEP program. Some of those commenters specifically justified this 
request by stating that the Department allows the State grantees to 
submit the State Plan as a part of the WIA Unified Plan, but since 
SCSEP is an OAA program, submitting the State Plan with the other OAA 
programs should also be acceptable.
    Although we appreciate the logic of these comments, it is not 
possible for the State Plans to be submitted with the other OAA 
strategic plans. According to 20 U.S.C. 9271, ``a State may develop and 
submit to the appropriate Secretaries a State unified plan for 2 or 
more of the activities or programs'' provided in a specific list, and 
the only part of OAA listed is Title V. Therefore, 20 U.S.C. 9271 does 
not authorize States to include a unified plan that includes OAA 
activities or programs that are authorized by a section of OAA other 
than Title V. Such programs are governed by their own planning 
requirements. Furthermore, SCSEP is unique in that it is the only 
program under the OAA that is administered by the Department of Labor. 
Section 503 of the 2006 OAA specifically requires each State to submit 
a State Plan to the Secretary of Labor to be eligible for grant funding 
under this program. The Department shares the State Plans with the 
Administration on Aging in an effort to coordinate with them on older 
American policies. However, if they so desire, we do not prevent State 
grantees from also submitting their SCSEP strategic plan with their OAA 
strategic plan.
    Many commenters suggested that the Department develop regulations 
that require SCSEP grantees to coordinate with other programs under the 
2006 OAA, such as State units and area agencies on aging, and with 
other Federal programs such as Foster Grandparents, Senior Companions, 
Vocational Rehabilitation and several others. A few even requested that 
the Administration on Aging and other SCSEP providers be involved in 
writing the regulations. These commenters did not submit their comments 
on any particular section of the regulation and, in fact, some 
commenters were ``disappointed'' because they found the regulations 
``silent'' on this issue.
    The regulations are not ``silent'' on the coordination requirement 
with other Federal agencies, and especially the other aging programs. 
There are several provisions in this regulation that require 
coordination with aging and other resources. The first is in Sec.  
641.315, which requires the State grantees to seek the advice and 
recommendation of representatives from State and area agencies on 
aging, social service organizations, and community-based organizations 
in Sec.  641.315(a), and permits the State grantee to obtain the advice 
and recommendation of other interested organizations and individuals in 
Sec.  641.315(b). In addition, Sec.  641.302(i) requires the States to 
plan actions that coordinate activities of SCSEP grantees with other 
public and private entities and programs that provide services to older 
Americans. That the Department did not mention a specific social 
service or other program by name does not exclude it from being a 
worthy organization for collaboration. Given the large number of 
comments that addressed this particular concern, the Department hopes 
that grantees will now understand the importance of the State planning 
requirements that grantees will make a genuine effort to include those 
organizations during State planning meetings. The Department expects 
grantees to work with any and as many organizations as will help 
achieve the purpose of the program. The Department emphasizes that the 
grantees do not need explicit permission in the regulations to work 
with these organizations. Finally, at the Federal level, the Department 
will continue to coordinate with the Administration on Aging on State 
planning and other major policy concerns under the MOU that exists 
between the two Federal agencies.
What is the four-year strategy? (Sec.  641.302)
    This section outlines the requirements for the four-year strategy. 
We received many comments on this section, largely in opposition to the 
various requirements. Two comments were of a more general nature.
    One commenter was not in favor of the four-year strategy because he 
felt that ``[p]lanning beyond funding periods exceed[ed] the parameters 
of the grantee'' particularly in light of the requirements to resubmit 
the plans for modification. As discussed below, the State grantee is 
responsible for the higher-level oversight of activities in the State 
required by Sec.  503 of the 2006 OAA. As a practical matter, however, 
a strategy is the pre-planning for what the program will accomplish 
over a period of time based on a forecast of events and not a mere 
short-term snapshot of activities or actual workload action items. The 
reality is that the State program operators provide continuity for the 
program, while other organizations may be transient. Therefore, the 
State grantee is in the best position to develop a thoughtful long-term 
plan for how activities will be provided statewide.
    The other general commenter stated that, unlike their WIA program, 
they do not have an economist or the funds to hire an economist to 
provide the information that is required for a four-year strategy. 
Therefore, this commenter argues that the ``[i]nformation submitted by 
the State SCSEP [grantees] are assumptions and not factual.''
    The Department appreciates the desire to be as precise as possible, 
but it does not believe that an economist is needed to develop the 
four-year strategy for this program. It is true that it is important to 
have certain data, such as information on the growth of the eligible 
population; however, much of this information can already be found on-
line from the Bureau of Labor Statistics or other resources, such as 
from the State workforce agency, which manages SCSEP in a growing 
number of States. One of the requirements of the four-year strategy is 
to describe the planned actions to coordinate with other programs, 
including WIA. The Department suggests that State grantees that are not 
workforce agencies coordinate with their workforce agencies first to 
find out what information is already available. Other information 
requirements are grantee-dependent, such as equitable distribution, 
which requires the type of collaboration with the national grantees 
discussed in Sec. Sec.  641.300 and 641.365.
    Several commenters suggested that the State Plan requirements go 
beyond what Congress intended in Sec.  503 of the 2006 OAA, and found 
many of the requirements duplicative of other Department requirements 
and policies. As an example, these commenters cited Sec.  641.302(f) 
because a ``performance system and sanctions system is already

[[Page 53792]]

in place.'' These commenters also noted that the regulations at Sec.  
641.302(a)(3), (c), and (d) overlapped with certain grant application 
requirements.
    At the outset, the Department would like to point out that the 
State Plan is ``statewide.'' That is to say, it is designed to cover 
all program activities that will occur in the State, both those 
operated by the State and those operated by national grantees. It is 
for that reason that the State grantees, which have this oversight 
responsibility, are required to seek the advice and consultation of 
other organizations in the State, including the national grantees. To 
that extent, there are no other vehicles in the program that would 
provide this higher level of thoughtful planning for the betterment of 
program services in the State. As previously noted, a strategy is the 
pre-planning for what the program will accomplish over a period of time 
based on a forecast of events. The main reason for a State Plan is the 
recognition that the State grantees are in the best position to forge 
relationships that cross programs, communities, and organization silos. 
The best way for any State to provide services to its citizens is by 
working with all of the relevant partners to lead the State in a 
direction that will produce positive outcomes overall. Such 
coordination requires strategic planning. Therefore, a State's 
individual grant application, even if duplicative to some extent, 
represents the more immediate actions the State plans to take, which is 
only one small part of the overall strategy for providing services in 
the State.
    We received a few comments on Sec.  641.302(a) on equitable 
distribution and the requirement to address priority individuals, 
comments on Sec.  641.302(f) on continuous increase in performance, and 
one comment on Sec.  641.302(g) on coordination with WIA. With regard 
to Sec.  641.302(a)(1), one commenter argued that, given the limited 
ability of the State to alter positions between the national grantees 
and the State, creating ``a long range strategy beyond the scope of the 
Older Americans Act * * * reauthorization increases paper work without 
measurable benefits to program participants.'' Another commenter 
mentioned that this paragraph ``exclude[d] any mention of national 
grantees and the key role they play in the distribution process.'' This 
commenter requested that the Department rewrite the section to say: 
``Moves positions from over-served to under-served locations within the 
State by working collaboratively with national grantees through a 
participatory process.''
    In response to the first commenter, we disagree that a long range 
strategy increases paperwork without measurable benefit to program 
participants because of the limited ability of the State to alter 
positions. The four-year State Plan guides the annual adjustments that 
occur with the annual Equitable Distribution report, which itself 
insures positions are moved from over-served to under-served locations. 
This process helps ensure that positions are distributed in the most 
appropriate and least disruptive manner to participants and also to 
grantees. The 4-year plan outlines the principles for determining the 
need for moving positions and when ``swaps'' will occur. As to the 
point about the State's limited ability to alter positions, the 
language in Sec.  641.365(f) gives the State the ability to influence 
the movement of positions. (``All grantees are required to coordinate 
any proposed changes in position distribution with the other grantees 
in the State, including the State project director, before submitting 
the proposed changes to the Department for approval. The request for 
the Department's approval must include the comments of the State 
project director, which the Department will consider in making its 
decision.'') The Department intends to give significant weight to the 
State project director's comments in deciding whether to approve any 
proposed changes in position distribution.
    As to the second commenter, their concern about the exclusion of 
any mention of national grantees is addressed in Sec. Sec.  641.360 and 
641.365 on equitable distribution. As provided in those sections, the 
State grantees are responsible for submitting an equitable distribution 
report at the beginning of each fiscal year and that the report is the 
result of consultations with all the grantees (including the national 
grantees) in the State to discuss the location of their authorized 
positions. In addition to showing where the positions are currently 
located, the equitable distribution report reflects an agreement among 
the grantees for how positions will gradually shift over time to either 
align with changes in the population either through movement of the 
positions to underserved areas by the grantees, or through ``swaps.'' 
Those consultations by their nature already require grantees to do some 
forecasting about where positions should be located. Therefore, the 
four-year strategy is consistent with the goals and current practices 
for equitable distribution. When these provisions are read together, it 
is clear that the Department expects the national grantees to have a 
significant role in the equitable distribution process. Therefore, 
particularly since Sec.  641.302(a)(1) specifically refers to Sec.  
641.365, the Department does not believe the regulation provision needs 
to be revised as suggested.
    We received comments about Sec.  641.302(f) of the proposed rule. 
One commenter stated that because the Department sets the minimum 
levels of performance each year, the States have minimal input in 
determining the performance levels and are not consulted when they are 
established. Another commenter found that the regulation provision, as 
written, implied that State grantees were responsible for performance 
of the national grantees. This commenter suggested that the Department 
amend the provision to read: ``The State strategy, including input from 
national grantees regarding their own performance strategies, for 
continuous increase in the level of performance for entry into 
unsubsidized employment, and to achieve at a minimum, the levels * * 
*.''
    In the Department's opinion, these commenters misunderstood the 
purpose of that provision and the role of the State grantee in 
shepherding the State Plan process. As noted in the preamble to the 
proposed rule, the four-year strategy is a long-term strategy for 
increasing the level of performance in the State. We further stated in 
the NPRM preamble that ``[a]ll grantees should strive to continuously 
improve their performance levels to assist enrollees in becoming self-
sufficient, make available opportunities for other individuals to 
enroll in SCSEP, and better fulfill the objectives of the program.'' 
Therefore, the regulation does not make the State grantees responsible 
for ensuring that every national grantee that operates in the State 
meet its performance goal; rather, the State grantees are responsible 
for planning a strategy in collaboration with the national grantees to 
provide better services to participants overall, which will lead to 
higher performance for the State as a whole. We believe the rule, which 
requires in this section and Sec.  641.315 that the State Plan must be 
developed in consultation with, among others, the national grantees in 
the State, is clear on these purposes and does not need to be amended.
    Some commenters took issue with Sec.  641.302(g) of the proposed 
rule. A few commenters stated that the programs under WIA ``seem to 
focus on the younger generation'' and full-time employment 
opportunities, which makes it difficult to set employment expectations 
for the older workers in

[[Page 53793]]

collaboration with WIA projects. Other commenters did not have an issue 
with the language but echoed these sentiments. These commenters wanted 
to know what the Department was doing to encourage similar 
collaborative efforts with the WIA programs, however, rather than 
leaving the onus on SCSEP to initiate partnering efforts.
    We believe these commenters are reading the provision too narrowly. 
The point of the coordination requirement is no different from the 
expectations and requirements established in subpart B of this final 
rule. The type and degree of coordination will vary depending on the 
geographic location. This provision requires the State grantees to 
develop a long-term strategic plan for how those activities will be 
coordinated over a period of time for the benefit of the program. The 
Department further notes that WIA grantees have a responsibility to 
coordinate with the SCSEP program as well, but these regulations are 
not intended to apply to WIA-funded recipients. For example, State 
Workforce Investment Boards are required to develop linkages among One-
Stop Partner programs such as SCSEP in order to assure coordination and 
avoid duplication of activities. 20 CFR 661.205(b)(1). For a more in 
depth discussion on the coordination requirements, see the discussion 
of subpart B of this final rule.
    Finally, one commenter argued that Sec.  641.302(k) is ``overly 
prescriptive'' in requiring the State to provide a long-term strategy 
because it ``presumes the necessity for every state to make long-term 
program design changes in order to improve services to participants and 
communities.'' The commenter argued that instead, the State ``should 
have the latitude to plan strategically, within the framework of the 
OAA, for what works best * * *.'' There is nothing in Sec.  641.302(k) 
that prevents a State from planning strategically for what works best. 
Indeed, that is precisely what this provision assumes that the States 
will do. This provision does not require change for change's sake, 
rather, it requires that a State take a hard look at the SCSEP in the 
State, determine whether changes in the program will improve it and 
develop a plan to move toward those changes. Therefore, we disagree 
that Sec.  641.302(k) is overly prescriptive, because as explained 
above, we believe that long-term, 4-year planning will improve services 
overall in the State.
May the Governor, or the highest government official, delegate 
responsibility for developing and submitting the State Plan? (Sec.  
641.310)
    Although we did not receive any comments on this section, we made 
technical amendments to this section by breaking it into paragraphs to 
make it easier to read.
Who participates in developing the State Plan? (Sec.  641.315)
    This section describes the required participants to the State 
planning process. We received a few comments on this section.
    One commenter stated that the requirement to seek the advice and 
recommendation of representatives of the various organizations involved 
too many people, and that it ``would take an entire year just to 
coordinate those efforts.'' This commenter requested that the 
Department limit the number of organizations required to provide input 
to the development of the State Plan.
    This part of the proposed rule did not change from the 2004 
regulations. In addition, the list of organizations and individuals is 
consistent with the Sec.  503(a)(2) of the 2006 OAA. The Department 
commented on this issue in the 2004 regulations. At that time the 
Department stated: ``[Although] obtaining information on coordination 
may be a bit more complicated whe[n] there are several national 
grantees in a State, we believe that if the Governor has set up a good 
consultation process, obtaining the information should not be 
difficult.'' 69 FR 19014, 19022, Apr. 9, 2004.
    Other commenters found this section to be inadequate as written 
because it does not address coordination requirements with aging 
programs. Specifically, one commenter noted that the SCSEP regulation 
should ``enforce and reflect section 503(b) of the 2006 OAA, requiring 
coordination of SCSEP with other programs under the Older Americans 
Act, such as state units and area agencies on aging, and with other 
Federal programs such as Foster Grandparents, Senior Companions, and 
Vocational Rehabilitation.'' We did not make any changes to these 
sections because the regulation lists aging organizations in paragraphs 
(1), (4), (5) and (7) and thus clearly requires coordination with aging 
organizations.
Must all national grantees operating within a State participate in a 
State planning process? (Sec.  641.320)
    This provision explains that all national grantees are required to 
participate in the State planning process with the exception of 
grantees serving older American Indians or Pacific Island and Asian 
Americans. One commenter disagreed with this provision and stated that 
these entities should not be exempt from participation. As noted in the 
regulation text at paragraph (b), however, that exclusion is mandated 
by Congress at Sec.  503(a)(8) of the 2006 OAA. That being said, the 
Department agrees that it would be helpful for these organizations to 
participate in the development of the State Plan, which is designed to 
improve services, and we believe they have done so in the past. 
Therefore, as noted in the regulation provision, the Department will 
continue to encourage these national grantees to participate in the 
State Plan process.
How should the State Plan reflect community service needs? (Sec.  
641.330)
    We received one comment on this section; however, because the 
substance of the comment was related to a lack of resources, it will be 
addressed in the Administrative section of the preamble under Section 
D, Unfunded Mandates.
How should the Governor, or the highest government official, address 
the coordination of SCSEP services with activities funded under title I 
of WIA? (Sec.  641.335)
    We received several comments on this section. These commenters 
found this section inadequate as drafted to address coordination 
requirements with aging programs but failed to provide any specific 
regulatory suggestions other than to draft more regulations. The 
Department did not make any changes to these sections because, as 
mentioned in the discussion of Sec.  641.315, the requirements to 
coordinate with aging groups are clear.
How often must the Governor, or the highest government official, update 
the State Plan? (Sec.  641.340)
    This section discusses the situations when the State is required or 
encouraged to update the State Plan. We received one comment on this 
section. This commenter stated that requiring updates more frequently 
than every two years as specified by the 2006 OAA, would convert a long 
range strategy into an annual plan, which is the current requirement. 
Although updates are not required more frequently than every two years, 
they are encouraged and should be done when circumstances warrant, as 
noted in Sec.  641.345. The State Plan process is not an exercise that 
should be done as an item on a ``to do'' list. Rather, it is a 
thoughtful instrument that is designed to lead the State forward to 
achieve positive outcomes. In order for

[[Page 53794]]

any plan to be effective, it must align with current circumstances. 
Over the course of two or four years, it is reasonable to think that 
there could be some major shifts in policy, local or national economy, 
employers, performance, or community social service organizations that 
may alter the State's direction described in the State Plan. Therefore, 
without monitoring and adjusting the State Plan, it would be easy for 
the State Plan to become obsolete. Therefore, the Department did not 
make any changes based on this comment. However, as a technical 
amendment, we did divide the section into two paragraphs to make it 
easier to read.
What are the requirements for modifying the State Plan? (Sec.  641.345)
    We received several comments on this section. One commenter stated 
that modifying the State Plan according to Sec.  641.345(b)(3) would 
require grantees to modify the State Plan every year, which is contrary 
to the four-year strategic planning document. This commenter stated 
that almost every State and national grantee failed to meet at least 
one goal, and because the Department requires grantees to submit a 
performance improvement plan each year when one or more goal is not 
met, that effectively results in annual modifications.
    We appreciate this comment and upon further reflection have decided 
to delete this provision from the final rule. Although the assertions 
that most grantees fail to meet at least one goal each year and that 
they are required to submit a performance improvement plan each year is 
inaccurate, the Department does agree that the requirement is 
unnecessary for continuous improvement. As a consequence, proposed 
Sec.  641.345(b)(3) has been deleted and Sec.  641.345(b)(4) will be 
renumbered as Sec.  641.345(b)(3).
    Two other commenters reported contradictions: One found that 
paragraphs (c) and (d) contradicted each other and the other found that 
paragraph (d) contradicted OAA Sec.  503(a)(3). We do not find a 
contradiction in either case.
    Paragraph (c) requires the modified State Plan to be published for 
public comment, while paragraph (d) allows the grantees to make 
modifications to the plan without seeking the advice and recommendation 
of those entities and individuals listed in Sec.  641.315. Paragraph 
(d) addresses the development of the modification while paragraph (c) 
addresses the post-development, pre-submission phase of the planning 
process. However, it appears that some State grantees have used the 
public comment period as the main mechanism for seeking the advice and 
recommendation of those organizations and individuals, which is not the 
intent of the statute. Section 503(a)(2) of the 2006 OAA requires State 
grantees to seek the advice and recommendations of those organizations 
and individuals while developing the plan. The public comment period 
occurs after the State Plan is developed. Although it is a time 
consuming process, as we have stated elsewhere in this preamble, the 
State Plan process is not an item on a ``to do'' list. The State Plan 
process requires the grantee to identify and assess the resources 
available in the State, to engage the key members of organizations 
providing those resources in the planning process, and to provide a 
roadmap for how the State will reach overall projected outcomes. 
Therefore, it is a critical document for helping the State provide 
continuously improving services to as many eligible individuals 
possible in that State. Thus, if the plan development or modification 
processes are being run correctly, there is no contradiction in the 
provisions on consultation and public comment.
    The second commenter further stated that paragraph (d) negates the 
role of the national grantees in the modification process. This 
commenter recommended that the Department strike this provision and 
replace it with a provision that reads: ``the Governor, or the highest 
[S]tate official, must seek advice and recommendations from each 
grantee operating a SCSEP within the State.''
    The Department agrees with this comment and has modified the 
language to require the Governor or the highest State official to 
consult with the national grantees. In addition, given the commenter's 
rationale, the Department also considered whether this provision should 
be revised to require the full consultation of those entities listed at 
Sec.  641.315 as well. The purpose of the State Plan is to draft a plan 
that will improve services across the State and this provision relates 
to major changes that will impact services to participants statewide, 
which suggests the importance of full consultation even when modifying 
the plan. On the other hand, we recognize that the State may need some 
flexibility about which organizations it seeks advice from during the 
modification planning process because the need for advice from 
particular organizations may vary, depending on the event that gave 
rise to the need for a modification. Therefore, while the Department 
strongly encourages State grantees to seek the advice and 
recommendation of each entity listed in Sec.  641.315 when or if 
modifying the State Plan becomes necessary, we have decided not to 
require it except for the national grantees in the state.
How does the State Plan relate to the equitable distribution report? 
(Sec.  641.360)
    This section describes the connection between the State Plan and 
the equitable distribution report. The Department made one substantive 
change to this section. The Department changed ``Census data'' to 
``Census or other reliable data'' to be consistent with the changes 
made to the definition of ``Equitable Distribution Report'' in Sec.  
641.140.
    A commenter stated that the State Plan should address competition 
and the authorized positions that could change. That commenter further 
argued that the Department should require a plan to involve State 
grantees in the finalization of the authorized positions to avoid 
disruptions, or the ability to make recommendations to better serve 
areas proportionately.
    We agree with these concerns and it is for that reason that the 4-
year strategy and the meetings on equitable distribution are so vitally 
important to the program, as discussed in other sections of this final 
rule. Further, Sec.  641.480 addresses the commenter's other concern 
that States should have a role in determining where positions are 
located during a competitive process. Since the commenter's concerns 
are addressed in that provision, we did make any changes to this 
section.
How must the equitable distribution provisions be reconciled with the 
provision that disruptions to current participants should be avoided? 
(Sec.  641.365)
    This section describes the Department's policy on the movement of 
positions for equitable distribution in the context of minimizing 
disruptions to participants. One commenter supported the proposed 
regulation because it included language that emphasized the 
coordination of all grantees within the State. Another commenter 
requested that the Department require national grantees to report to 
the State when they move positions within the State, and wanted us to 
allow the States to authorize these changes. This commenter felt that 
this change would ensure that ``the maximum number of eligible 
individuals will have an opportunity to participate in the program and 
will allow States to demonstrate that they are making good

[[Page 53795]]

faith efforts to correct slot inequities and are on track to meet their 
state plan goals.''
    We appreciate the comment in support of this proposed section as 
well as the sentiments of the commenter, who would like to see more 
State authority over any position movement within the State. Section 
641.365(d) requires that national grantees notify the State of any 
position transfers before the transfers may be made. Not only are 
national grantees required to participate in the equitable distribution 
and State Plan processes, but they are also required to notify the 
State before any positions are transferred within the State. Sec.  
641.365(f). However, to ensure that national grantees coordinate with 
the State grantee before submitting a request to the Department to move 
positions, we are revising this section to require that the national 
grantee's request to DOL include a recommendation from the State 
grantee in which the affected positions are located and to indicate 
that the Department will consider those comments in reviewing the 
application. As a matter of practice, since the 2004 regulations, the 
Department has looked for the State's comments on any position 
relocation request from a national grantee and will continue to do so. 
This revision conforms the regulation to our established practice and 
ensures that the State's comment on the proposed transfer will be 
considered by the Department in the decision making process. Approval 
authority, however, will continue to remain with the Department 
consistent with the 2006 OAA.
    The Department recognizes that it may have been difficult to follow 
this provision and, therefore, has divided the section into 
subparagraphs to make it easier to read. The requirements discussed 
above are now reflected in new Sec. Sec.  641.365(a)-(f). The 
Department also made a few technical changes, which included changing 
``Federal Project Officer'' to ``the Department'' to be more consistent 
with the statutory language; and editing ``Census data'' to read 
``Census or other reliable data'' to be consistent with the changes to 
the definition of ``Equitable Distribution Report'' in Sec.  641.140.

Subpart D--Grant Application and Responsibility Review Requirements for 
State and National SCSEP Grants

    We received several comments on this subpart. Those comments were 
related to State competition, the use of past performance for selecting 
grantees, State involvement in the national competition, and the timing 
of a national competition.
What entities are eligible to apply to the Department for funds to 
administer SCSEP projects? (Sec.  641.400)
    This section describes the entities that are eligible to apply for 
SCSEP grants. We received one comment on this proposed section on the 
funding to the State for conducting a competition. The commenter stated 
that the regulations do not address the funding provided to the State 
to conduct a competition. This commenter also stated that the 
Department ``appear[ed] to define the State in two distinctly different 
definitions.''
    The Department does not provide additional funding for the States 
to compete their grant program. States that compete their programs will 
have plenty of advance notice that they will have to compete because it 
takes a failure to meet performance standards for three consecutive 
years to trigger the competition requirement. States therefore will 
have time to plan for the possibility of competition and to set money 
aside to fund it. The Department suggests that grantees work with their 
Federal Project Officer to determine a sufficient amount for 
administrative management of a competitive process for State grantees 
that are required or desire to compete their programs.
    In addition, we have amended Sec.  641.420(d) to cross reference 
Sec.  641.460, which provides that relevant past participation will be 
used as scoring criteria, as well as a factor for determining an 
applicant's eligibility.
How will the Department examine the responsibility of eligible 
entities? (Sec.  641.450)
    We have amended this section to state that in reviewing records, 
the Department may consider ``all relevant'' information including the 
organization's history in ``managing'' other grants. These changes 
merely reflect the Department's standard practice in reviewing 
competitive grants.
What factors will the Department consider in selecting national 
grantees? (Sec.  641.460)
    This section describes the factors the Department will consider 
when it competes the national grant funds. We received several comments 
on this proposed section. One commenter stated that Sec.  641.460 
appeared to be at odds with Sec.  514(c)(4) of the 2006 OAA because the 
statutory language was intended ``to prevent selection bias where past 
performance was meritorious.'' The commenter compared the OAA to the 
NPRM language, in which the Department ``propose[d] to drop the 
reference to past performance among the rating criteria [it] will 
consider.'' That same commenter went on to request that the Department 
propose more comprehensive regulations to address the interrelated 
issues of past performance and the manner and timing of the competition 
for SCSEP grants. The commenter based this argument on his 
organization's experience with prior competitions and the 2006 
Solicitation for Grant Applications. See 71 FR 10798, Mar. 2, 2006. 
This commenter stated that his organization believed the statute only 
provided the Department the authority to re-allocate positions from 
grantees that failed to meet national performance goals. Another 
commenter stated that written comments should be sought on this 
provision from the Governor or designee of the State.
    We do not agree that the statute only provides the Department the 
authority to reallocate positions from grantees that failed to meet 
national performance goals. While OAA Sec.  513(d)(2)(B)(iii) bars 
grantees which have failed to meet their performance goals for four 
consecutive years from participating in the next competition, we 
interpret OAA Sec.  514(a)(1) to require an open competition; a 
competition in which all funds and slots available to national grantees 
are competed. As discussed in the preamble to the proposed rule, at 73 
FR 47770, 47780, Aug. 14, 2008, the proposed change merely took past 
performance out of the rating criteria in the Solicitation for Grant 
Applications requirements because it is included already as an 
eligibility criterion under Sec.  514(c)(4), as the commenters point 
out. However, upon further consideration, we believe that using past 
performance merely as an eligibility criterion is inadequate to give 
effect to the Congressional requirement. Grantees that fail to meet 
their aggregate level of performance for four consecutive years are 
precluded by statute from participating in the competition. This would 
still allow a grantee with totally unacceptable performance in the last 
three years to compete. Therefore, we have concluded that consideration 
of all relevant past performance should be part of the scoring 
mechanism and of the awarding criteria. Considering all relevant 
experience, and not just SCSEP experience, will protect against 
selection bias. What constitutes relevant experience and the specific 
weight given to past performance will be addressed in the Solicitation 
for Grant Applications published in the Federal

[[Page 53796]]

Register or other appropriate instrument.
    Finally, written comments from the Governor or highest elected 
official are provided for under Sec.  641.480, which outlines the 
process by which the Governor or highest elected official may 
participate in the national competition process.
When will the Department compete SCSEP grant awards? (Sec.  641.490)
    This section outlines the circumstances that govern the 
Department's decision to compete the national grant funds. We received 
one comment on this section.
    The commenter expressed concern that having an additional grant 
year for some grantees but not for all would create a complicated 
competitive grant cycle. The commenter also thought that such a process 
would remove the opportunity for new and incumbent organizations to 
compete with all the national organizations and ``would only serve to 
exacerbate the difficulties of SCSEP participant transition [from] one 
provider to another.'' The commenter recommended that the Department 
make a decision to hold a national SCSEP competition ``using the 
national baseline for all organizations.''
    The Department takes this comment to mean that a competition should 
be for all available national grant positions and that the extension of 
the grants for an additional year as permitted by Sec.  514(a)(2) of 
the 2006 OAA, should be determined by how well all grantees are 
performing at the end of the four-year period referenced in Sec.  
514(a)(1).
    Although we appreciate the commenter's concerns, we decline to 
address this issue in a regulation, but will take it under advisement. 
The 2006 OAA requires us to compete the program every four years but 
permits us to grant a one-year extension to any national grantee that 
has met its performance goals for each year of the four-year grant 
period. Although we cannot extend the grants of grantees that have 
failed to meet their expected levels of performance, the extension is 
otherwise discretionary. It is discretionary in the sense that we could 
decide to compete all of the grants after the fourth year, extend all 
of the grants if all the national grantees have met their expected 
levels of performance, or compete the funds of only those grantees that 
have failed to meet their expected levels of performance. We will 
decide how to structure the future competition after reviewing program 
performance toward the end of the four-year period, and will make the 
decision based on the best interests of the participants and our policy 
of avoiding disruptions to the extent possible.

Subpart E--Services to Participants

Who is eligible to participate in the SCSEP? (Sec.  641.500)
    This section describes the eligible population for participation in 
the program. We received one comment on this section. That commenter 
recommended the Department lower the age limit of participants to 50 
with continued priority to those who meet the most-in-need 
characteristics. We did not make this change because the requirement to 
serve individuals age who are at least 55 years of age is statutory. 
OAA Sec.  502(a)(1). For clarity, the Department has added the phrase 
``at the option of the applicant'' to the sentence about treating a 
person with a disability as a family of one at the end of this section. 
This change is consistent with the intent of the statutory provision, 
and conforms to the Department's long-standing interpretation of the 
provision.
How is applicant income computed? (Sec.  641.507)
    This section describes the procedures grantees must follow when 
making income determinations for enrolling participants. Most of these 
requirements were previously in administrative guidance and were 
adopted with the 2006 OAA.
    We received one comment on this section related to using either a 
12-month period of income or a 6-month period of annualized income to 
determine participant eligibility. This commenter stated that the 
regulation appeared to require the grantee to use one or the other and 
requested that the Department allow grantees the flexibility to use 
whichever method was most favorable to the participant on a case-by-
case basis.
    The Department previously stated that grantees should use which 
method of calculating income is most favorable to the participant and 
for that reason, the preamble to the proposed rule acknowledged that we 
were adopting the procedures that were published in TEGL No. 12-06 
(Dec. 28, 2006), which went into effect on January 1, 2007. See 73 FR 
47770, 47781, Aug. 14, 2008. That section of the preamble specifically 
allowed grantees to calculate income based on either 12 months or 6 
months annualized. Further, in that section, the Department encouraged 
grantees to ``choose the computation method that is most favorable to 
each participant, on a case-by-case basis, for the broadest possible 
inclusion of the eligible applicants.'' 73 FR at 47781. To reinforce 
this interpretation, the Department is changing the language of the 
regulation to remove the word ``encourages'' and to track the language 
of TEGL 12-06, which requires the grantee to use whichever period is 
more favorable to the participant.
What types of income are included and excluded for participant 
eligibility determinations? (Sec.  641.510)
    This section generally describes what does and does not constitute 
income for purposes of determining participant eligibility. We received 
a few comments on this section expressing agreement with the provision. 
One of the commenters further stated that the regulation should 
specifically reference other income exclusions, such as income from 
training programs, SSI, Veterans benefits, and any other publicly 
subsidized program where the goal is self-sufficiency.
    The Department declines to make the suggested change to this 
provision for the reasons stated in the preamble to the proposed rule 
at 73 FR 47781-47782, Aug. 14, 2008. The Department encourages grantees 
to read TEGL No. 12-06 (Dec. 28, 2007) for the most recent information 
on excludable income. The Department also notes that that TEGL includes 
the exclusions referenced by this commenter and is located on the SCSEP 
Web site at http://www.doleta.gov/seniors under Grantee Information, 
Technical Assistance. The income exclusions included in the regulation 
were only those exclusions required in the 2006 OAA. The issue of 
includable and excludable income is one that requires some measure of 
flexibility for good program management. It is for that reason that the 
details of the income requirements have always been in an 
administrative guidance, as authorized by Sec.  641.510(c).
May grantees and sub-recipients enroll otherwise eligible job ready 
individuals and place them directly into unsubsidized employment? 
(Sec.  641.512)
    This section prohibits grantees from enrolling job ready 
individuals, who can be directly placed into unsubsidized employment, 
as SCSEP participants. One commenter suggested the Department add a 
definition or criteria for ``job ready,'' which would help the 
providers determine the type of individual that is not eligible for 
SCSEP services. The Department agrees and has included a definition of 
``job ready'' in Sec.  641.140. As noted in that section of the 
preamble, in general terms, it is an individual who requires no more 
than

[[Page 53797]]

just job club or job search assistance to be employed. Therefore, the 
definition of ``job ready,'' as now defined at Sec.  641.140, refers to 
an individual who does not require further education or training to 
perform work that is available in his or her labor market. For further 
clarity, we have added the word ``job-ready'' to the text of Sec.  
641.512 to describe those individuals ``who can be directly placed into 
unsubsidized employment'' and thus cannot be enrolled in SCSEP but 
should be directly referred to the One-Stop system.
How must grantees and sub-recipients recruit and select eligible 
individuals for participation in the SCSEP? (Sec.  641.515)
    This section describes the criteria grantees must use when 
determining the eligibility of an individual to receive program 
services. We received a few comments on this section specifically 
related to proposed paragraph (b), on using the One-Stop delivery 
system for recruiting participants.
    One commenter acknowledged the essential relationship that must 
exist between the One-Stop delivery system and the SCSEP. However, that 
commenter further stated that transferring the responsibility of 
recruitment and selection of all eligible participants to the One-Stop 
appears duplicative and eliminates the role of SCSEP in participant 
selection. Several other commenters stated that the provision is 
inconsistent with Sec.  502(b)(1)(H). Those commenters reasoned that 
the statutory language did not require grantees to use the One-Stop 
delivery system to recruit or select eligible individuals because of 
the use of ``will'' rather than ``must.'' They wanted the regulation to 
reflect that there are other means to recruit and select participants.
    We believe these commenters misinterpreted that section of the 
statute and the proposed rule. In the context of OAA Sec.  502(b), the 
Department interprets the use of the word ``will,'' to be synonymous 
with the words ``shall,'' or ``must.'' Section 502(b)(1) requires the 
Secretary not to fund programs unless she determines that the programs 
``will'' do all of the things listed in paragraphs (A)-(R). In that 
context, ``will'' means that the 18 activities listed in Sec.  
502(b)(1) must be done for a program to be funded. That being said, 
however, we do not believe the statute or the regulation implies a 
requirement for an exclusive use of the One-Stop delivery system as the 
means to recruit eligible participants, as required by Sec.  
641.515(b). Rather, it is one method that grantees must use to recruit 
eligible participants. Moreover, this requirement in the regulation is 
not new to SCSEP; it appeared in the 2004 regulations at 20 CFR 
641.515(b). Therefore, the Department's interpretation is consistent 
with the 2006 OAA and the 2004 regulations and accompanying preamble 
discussion at 69 FR 19014, at 19029.
What services must grantees and sub-recipients provide to participants? 
(Sec.  641.535)
    This section describes the types of services that are required, 
permitted, and prohibited in the program. We received a few comments on 
this section. One commenter requested language in proposed paragraph 
(a)(1)(ii), to ensure grantees have the flexibility to determine when a 
participant needed to be reassessed. The Department does not agree that 
additional language is necessary. The regulation text, as written, as 
well as the preamble discussion in the proposed rule, already allows 
for such flexibility so long as participants are assessed upon entry, 
and for a total of at least two times in a 12-month period.
    In addition, two commenters stated that proposed Sec.  
641.535(a)(9), as well as Sec. Sec.  641.540(f) and 641.565(a), 
appeared to require projects to pay participants for time spent in such 
training and orientation. In particular, one commenter stated that 
orientation activities can occur as part of the initial assessment 
process which may be before a community service assignment. The 
commenter notes that under the proposed rule, such a participant would 
not be required to receive wages, which appeared inconsistent with the 
proposed Sec.  641.540(h), and therefore, disagreed with the proposed 
change.
    We do not read this provision as narrowly as this commenter. 
Paragraph (a) of Sec.  641.535 specifically states: ``When individuals 
are selected for participation in the SCSEP'' the grantee is 
responsible for the activities listed at paragraphs (1) through (11) of 
that section. Included on that list is paragraph (9) ``Providing 
participants with wages and benefits for time spent in the community 
service employment assignment, orientation, and training.'' The 
Department believes that the operative words in this paragraph are 
``selected for participation.'' The point of the regulation is that 
when a person is formally enrolled in the program the enrollee must 
receive paid services. Therefore, it is possible, as the commenter 
described, that an individual may attend a general overview of the 
program or participate in a general assessment for eligibility before 
the individual is enrolled in the program. In that case, the 
individual, who is not yet a SCSEP participant, is not required to be 
paid SCSEP wages for attending that overview or assessment. However, 
once a participant is enrolled in the program, which means the 
individual has been found eligible, has been given a community service 
assignment, and is receiving a service, paragraph (a)(9) requires that 
the grantee must pay wages for time spent in orientation, training, 
assessment, or in receiving any other service. This requirement applies 
even if the participant has yet to start his or her assigned community 
service assignment at the host agency.
    Further, as one commenter noted, participants may continue to 
receive self-development training outside of their participation in the 
SCSEP as provided in Sec.  641.540(h). However, the regulation does not 
require grantees to pay wages when the participants are participating 
in training that they have selected and that is not identified in their 
IEP.
    Another commenter stated that proposed paragraph (b) allows the 
Department to increase programmatic costs without funding and that, 
``utilizing the administrative guidelines appears to circumvent the 
rule making process.'' The Department disagrees with this commenter for 
a number of reasons. Proposed paragraph (b) states that ``[t]he 
Department may issue administrative guidance that clarifies the 
requirements of paragraph (a).'' The Department is fully compliant with 
the notice and comment procedures for rulemaking under the 
Administrative Procedure Act (5 U.S.C. 551 et seq.). The administrative 
guidance discussed in paragraph (b) will merely clarify the 
requirements of paragraph (a) and is not intended to create new rules 
or regulations. Such guidance would provide further explanation, as 
necessary, of the meaning and parameters of the various activities 
required by the regulation and functions as a type of technical 
assistance to grantees that sometime struggle to understand how they 
are expected to satisfy a regulation. The portion of the comment that 
is related to increasing programmatic costs without funding is 
addressed in the Administrative section of this preamble under Section 
D, Unfunded Mandates. However we also note that rather than increase 
programmatic costs, we anticipate that such guidance will actually 
decrease programmatic costs.
    We have also changed the language in paragraph (a)(3) by adding a 
new subparagraph (iii) to clarify that the

[[Page 53798]]

requirement that an appropriate unsubsidized employment goal be part of 
the IEP for all participants applies only for the first IEP. 
Thereafter, if it becomes apparent that unsubsidized employment is not 
feasible for the participant, the IEP should be adjusted to reflect 
other appropriate goals for increased self-sufficiency, including the 
transition to other services, as required by Sec.  641.570(a)(2). Since 
it is possible that some SCSEP participants will not achieve 
unsubsidized employment during or immediately following their 
enrollment in SCSEP, grantees must have the flexibility to design an 
IEP that will lead to maximum self-sufficiency for the participant and 
an enhanced quality of life after participation in SCSEP has ended.
    Finally, we have removed the citation in paragraph (a)(1) to the 
2006 OAA, since OAA Sec.  502 does not specifically require a grantee 
or sub-recipient to provide orientation to the SCSEP. However, it is 
the Department's position that requiring the provision of orientation 
is consistent with the purpose of title V. Orientation adds great value 
to the participants' experience. Orientation is the ideal forum in 
which to provide participants with important information on the 
program; to address expectations and desired outcomes; and explain 
participant's rights and obligations, grievance procedures, safety 
issues, and any other information deemed necessary to ensure a positive 
experience.
What types of training may grantees and sub-recipients provide to SCSEP 
participants in addition to the training received at the community 
service assignment? (Sec.  641.540)
    The purpose of this section is to describe the types and the timing 
of training services grantees may provide to participants. We received 
several comments on this section about on-line training and the 
Department's interpretation of training.
    One commenter requested that the Department revise paragraph (b) to 
be more consistent with the 2006 OAA. That commenter interpreted Sec.  
502(c)(6)(A)(ii) of the 2006 OAA to allow training before or after an 
unsubsidized placement.
    We understand how a reader could interpret the provision to allow 
training after a participant is placed in unsubsidized employment 
because that provision may not be clear; however, we do not agree with 
that interpretation. The relevant provision states: ``participant 
training * * * which may be provided prior to or subsequent to 
placement and which may be provided on the job, in a classroom setting, 
or pursuant to other appropriate arrangements.'' We interpret the term 
``placement'' here to mean a placement in a community service 
assignment. We base our interpretation on the latter part of that 
provision, which indicates that the training may be provided on the 
job, in a classroom, or through other appropriate arrangements. In the 
Department's opinion, the examples listed go hand-in-hand with the 
types of training a grantee would provide while a participant is in a 
community service assignment, given that the community service 
assignment is an on-the-job type of training. The commenter's reading 
is not only inconsistent with the SCSEP's policy on services to exited 
participants, but is also inconsistent with the intent of the program 
to help most-in-need, older individuals find employment.
    Given the program's limited resources, it is important that 
grantees use grant funds to help current participants achieve self-
sufficiency. Grantees have a responsibility to provide training for the 
participants that will make them job ready. In appropriate cases, the 
grantees have an obligation to provide or assist participants to obtain 
supportive services to make sure the participant keeps that job, as the 
commenter notes. We do not, however, define supportive services to 
include training for a participant once he or she has exited the 
program. Although there is government support for incumbent worker 
training in WIA and TAA, SCSEP's funds cannot be used to provide 
training after unsubsidized employment has been attained. SCSEP's goal 
is to help participants become job-ready through community service and 
approved training; therefore, training may occur during enrollment but 
not after completion of the program. We have revised this provision to 
clarify that training may be provided ``before or during'' a community 
service assignment.
    Other comments were about on-line training. One commenter expressed 
support for the approval to use on-line instruction for training as 
discussed in the preamble to the proposed rule at 73 FR 47770, 47784, 
Aug. 14, 2008. Another commenter questioned how the Department expected 
grantees to calculate the participant's time toward on-line training 
for wage purposes and who would validate the time spent in this 
activity.
    The Department does not expect on-line training to be handled any 
differently than any other training. On-line training is not new to 
SCSEP; it is not required, but is one of several options for how 
training may be provided. It has long been recognized as an approved 
training activity, although not expressly mentioned in the regulations. 
Grantees that have questions about how to implement on-line training 
should contact their Federal Project Officer for technical assistance.
    Another commenter requested that the Department add the language 
``and any other costs deemed necessary'' to the end of Sec.  
641.540(e). We decline to make this suggested change. The language 
follows the statutory language at 502(c)(6)(A)(ii) of the 2006 OAA and 
is sufficiently inclusive of all costs the Department considers part of 
training. Any allowable cost associated with training that is not 
included in Sec.  641.540(e) will fall within the wages and other 
benefits listed in Sec.  502(c)(6)(A)(i) of the 2006 OAA and 
participant supportive services costs which are addressed in Sec.  
641.540(g). Making the suggested change would likely lead to 
unnecessary confusion over whether the ``other costs'' associated with 
training fall within Sec.  641.540(e) or Sec.  641.540(g). Such 
confusion would be especially problematic because the statute excludes 
the cost of activities listed in Sec.  641.540(e) from its general rule 
that 75% of costs go to wages, while the statute includes costs listed 
in Sec.  641.540(g) within the ``75% of grant funds go to wages'' rule. 
OAA Sec.  502(c)(6)(B)(i).
    We make one technical change in paragraph (a) to clarify that the 
grantee ``may'' pay for appropriate skill training, in addition to that 
provided through the community service assignment, ``that is realistic 
and consistent with the participant's IEP, that makes the most 
effective use of the participant's skills and talents, and that 
prepares them for unsubsidized employment.'' The prior mandatory 
language, ``must,'' was meant to apply to the criteria that have to be 
met before the grantee may pay for such skill training. It was not 
meant to require the grantee to pay for such training for all 
participants. Grantees are encouraged to arrange or provide for such 
training when appropriate, but given the limited funds available for 
this purpose, they are not required to provide or pay for training when 
it is not appropriate.
What supportive services may grantees and sub-recipients provide to 
participants? (Sec.  641.545)
    This section describes the types of supportive services grantees 
may provide to participants. We received a few comments on this section 
about the

[[Page 53799]]

proposed rule language that limits supportive services to those 
services that support an employment goal. Those commenters asserted 
that there are times when a participant may need services in order to 
be able to participate in the SCSEP, and therefore, providing those 
services should not be tied specifically to an employment goal. One 
other commenter requested that the Department add ``temporary shelter'' 
to the list of supportive services.
    The regulation as drafted is consistent with the historical 
practice of providing supportive services in the program and 
specifically refers to supportive services ``that are necessary to 
enable an individual to successfully participate in a SCSEP project.'' 
The regulation's language is consistent with the comments about using 
supportive services to assist participants during their enrollment in 
the program. In the preamble discussion of 20 CFR 641.545 of the 2003 
Notice of Proposed Rulemaking, the Department stated: ``Grantees/
subgrantees should seek to ensure that participants receive those 
supportive services necessary for them to participate in the program 
and to realize the goals set forth in their SCSEP IEPs.'' 68 FR 22520, 
22529, Apr. 28, 2003. The Department's position was later restated in 
the 2004 Final Rule preamble for 20 CFR 641.545:

    To meet the needs of the seniors the SCSEP serves, grantees must 
make every effort to provide them the supportive services they need 
to be able to participate in their community service assignments. 
The Department recognizes that SCSEP grantees will not be able to 
provide all needed or desirable supportive services with grant funds 
* * *. But the Department expects grantees and subgrantees to make 
every reasonable effort to provide participants with the supportive 
services provided for in their IEPs. 69 FR 19014, 19032, Apr. 9, 
2004.

    We believe the commenters' concerns arise from the requirement in 
Sec.  641.535(a)(6) for the supportive services to be consistent with 
the participant's IEP. Commenters seem to interpret that requirement to 
mean that grantees may not provide supportive services during a 
participant's community service assignment. The fact that the IEP, and 
particularly the initial IEP, is tied to an employment goal does not 
mean that the IEP is limited to only those services that advance the 
employment goal. The IEP may and should assess and consider all of the 
services the participant needs to successfully participate in SCSEP, 
and should address supportive services that may be required before 
assignment to community service, during assignment, and during the 
first 12 months of unsubsidized employment.
    For all these reasons, we find no inconsistency between the rule 
and the way the commenters want to provide supportive services and thus 
have not changed the final rule.
    On the issue of temporary shelter, we agree with the commenter. 
Accordingly, we are revising the regulatory text to be more inclusive 
by saying ``housing, including temporary shelter.''
    We have also changed the language of paragraph (a) to reinforce the 
idea that grantees must assess participants' need for supportive 
services and must assist participants in meeting those needs and 
grantees may directly pay for or arrange for supportive services as 
necessary. This change reconciles Sec.  641.545(a) with Sec.  
641.535(a)(2) and (a)(6), and clarifies that, while paying for 
supportive services directly is optional, grantees must assess 
participants' supportive services needs and must make every effort to 
help participants to meet the needs so identified.
What responsibilities do grantees and sub-recipients have to place 
participants in unsubsidized employment? (Sec.  641.550)
    This provision identifies the steps that grantees must take to 
assist participants to obtain unsubsidized employment. We received two 
comments about the emphasis on unsubsidized placements. The first 
commenter found the proposed rule's increased emphasis on placement in 
unsubsidized employment in conflict with self-directed job searches 
which, when appropriate, should ``be an acceptable alternative for 
promoting placement in unsubsidized employment.''
    The Department does not construe this change in emphasis to 
restrict the grantees from providing this type of assistance when it is 
appropriate. The grantees are still required to assess participants and 
to ensure they are following their IEP. If a grantee or sub-recipient 
determines that self-directed job searches are a reasonable method for 
seeking unsubsidized employment for certain participants, the grantee 
or sub-recipient may encourage or assist in such efforts in place of 
more intensive placement assistance, but they must still document it in 
the IEP and follow-up with the participant. In some cases, grantees may 
need to use a combination of methods to help participants locate and 
apply for unsubsidized employment. The regulation was not meant to 
prescribe how grantees may help participants find employment but rather 
to make it clear that they are expected to work with participants to 
help them find unsubsidized employment.
    Another commenter disliked the changes from ``reasonable'' effort 
to ``every reasonable effort'' as it relates to a grantee's 
responsibility to place participants in unsubsidized employment. The 
commenter argued that a participant could claim that every effort was 
not provided to help him or her achieve unsubsidized placement. Thus, 
the commenter, argued, the participant could wait for the perfect 
unsubsidized placement and refuse the other opportunities. Therefore, 
the commenter concluded that ``[r]easonable should be the standard.''
    We agree that the language of Sec.  641.550 could be read as 
imposing an obligation on grantees to provide unsubsidized employment 
for all participants, even those for whom unsubsidized employment is 
not a goal in their IEP, and could be interpreted as overstating the 
extent of reasonable effort required. Moreover, helping participants 
find unsubsidized employment is not required or possible until 
participants become job-ready. Therefore, consistent with the change in 
the language to Sec.  641.535(a)(3), we agree with the recommendation. 
We have eliminated the requirement to ``make every reasonable effort'' 
and section 641.550 now provides that the obligation to help 
participants achieve unsubsidized employment only applies to those 
participants who have unsubsidized employment as a goal.
What policies govern the provision of wages and benefits to 
participants? (Sec.  641.565)
    This section provides the requirements for wages and benefits that 
participants may receive. This section was updated from the 2004 
regulations to reflect new statutory provisions. The Department 
received several comments on this section, largely related to 
compensation for Federal holidays. One commenter, however, noted that 
the acronym ``WIA'' was missing before the word intensive services in 
proposed paragraph (a)(1)(ii). The Department appreciates this comment 
and made the change to the regulation so it is now consistent with the 
rule as we described it in the preamble to the proposed rule.
    One commenter noted that the limitation in proposed paragraph 
(b)(ii)(A) that the results of a physical examination be provided only 
to the participant hindered the grantee's ability to meet the 
Department's data validation requirements for determining disability if 
they were unable to require the physical examination results. The

[[Page 53800]]

commenter misunderstands the data validation requirement. Grantees 
merely need to document that a physical was offered. That can easily be 
accomplished without having the results of the physical. (If the offer 
is declined, grantees must obtain a written waiver from the 
participant.)
    Furthermore, grantees should not use the physical examination 
results to document disability for the most-in-need performance 
requirement. The certification of the attending physician or official 
documentation of a disability is sufficient. To the extent that a 
participant declines to provide that information, the grantee will not 
be able to take credit for it. However, participants have an incentive 
to provide that information because documentation is required if a 
participant claims family of one status for eligibility purposes. To 
avoid any confusion about the use of the results of the physical and to 
clarify that the physical itself is a fringe benefit meant solely for 
the benefit of the participant, we have deleted the last sentence of 
subparagraph (b)(1)(ii)(A), which stated that the participant could 
provide the grantee a copy of the physical examination results. There 
are circumstances under which a grantee may request documentation of a 
disability or may even require all participants assigned to a 
particular community service position to take a physical examination. 
For example, documentation is required for family of one status, as 
well as where a participant claims an accommodation. A physical also 
can be required of all participants who are assigned to community 
service positions that require certain physical capability. However, 
those circumstances are entirely unrelated to the physical examination 
that must be offered to the participant as a fringe benefit under the 
statute.
    The remainder of the comments related to the requirement that 
grantees provide compensation for participants when the scheduled 
workday in the program falls on a Federal holiday for the host agency. 
Almost all of these commenters requested that the Department allow 
flexibility in the regulation text to allow participants to make up the 
time. One commenter specifically requested that the language in the 
regulation more closely track the language of the 2006 OAA, which 
provides for ``employer'' closure for Federal holidays. Another 
commenter stated that having the flexibility to allow participants to 
make up the hours posed concerns when program policies could vary from 
grantee to grantee. This commenter was concerned that in one instance, 
a program may pay the participant for the Federal holiday and in 
another, the program may require the participant to make up the hours. 
This commenter also raised a concern about adjusting the timesheets and 
the difficulties it would cause for validating community service hours. 
The commenter did not address how the adjustment of timesheets would be 
a problem. Other commenters approved of the flexibility described in 
the preamble of the NPRM that allows the participants to make up the 
time rather than pay them for a day off. They believe it helps to 
distinguish the participants from being considered employees of the 
host agency.
    The Department appreciates these commenters' concerns, which 
reflect a desire to maintain the participants' status as ``trainees'' 
rather than ``employees'' at the host agency. Upon further reflection, 
we find that the NPRM's regulation text provision of only two 
categories of participant benefits (required and prohibited) failed to 
reflect the flexibility the Department intended to provide for Federal 
holiday leave and sick leave. For both of these benefits, as indicated 
in the preamble to the NPRM, ``(t)he Department broadly interprets the 
word `compensation' * * * to allow for a variety of practices * * * The 
intent of the Department here is to allow flexibility in administering 
the SCSEP * * *'' Unlike the other benefits listed in the NPRM 
regulation text as ``required,'' the NPRM preamble noted that Federal 
holiday and sick leave benefits need not be paid in cash but must be 
provided in some fashion. Accordingly we have amended the regulation to 
clearly indicate that Federal holiday leave and sick leave ``may be 
paid or in the form of rescheduled work time.''
    These modifications and clarifications address the concern of 
perceived inequity mentioned by one commenter. It is not uncommon for 
programs to offer different services and benefits. We have written 
these regulations to permit each grantee to have the maximum available 
flexibility in the design of its benefit programs, as long as each 
grantee consistently applies the rules to all of its program 
participants as required in Sec.  641.565(b)(1). We also do not see any 
issues with validating timesheets for program accuracy or data 
validation purposes. The timesheets are always based on the actual 
hours the participant spends in a community service assignment at the 
host agency. To the extent a participant makes up hours at the host 
agency, it will be reflected in the total number of hours the 
participant worked at the host agency in his or her assignment.
    Finally, we interpret the word ``employer'' as meaning a ``host 
agency'' since that is the only context in which this provision would 
apply. Therefore, the Department has not made the change the commenter 
requested.
Is there a time limit for participation in the program? (Sec.  641.570)
    The Department received a large number of comments about this 
section. The NPRM implemented the 48-month limitation on individual 
participation in the program as required by Sec.  518(a)(3)(B) of the 
2006 OAA. Paragraph (c) of this section addressed the average 
participation cap created by Sec.  502(b)(1)(C) of the 2006 OAA. 
Paragraphs (d), (e), and (f) further implemented these limits on 
program participation.
    The majority of comments on this section pertain to paragraph (b). 
The statute provides for increased periods of participation for 
individuals who meet one of the criteria listed in the statute. As 
explained in the NPRM, the Department proposed to implement the 
extension as a one-time, one-year extension to ensure that SCSEP 
participation is not indefinitely extended, thus preventing other 
eligible individuals from benefiting from the SCSEP, and to be 
generally consistent with the possible extension of the average 
participation cap which extends up to a maximum of only nine additional 
months.
    Most commenters asserted that the limit on the extension of the 
individual participation limit to one-time and one-year ``is both 
contrary to Congressional intent and counterproductive to assisting the 
most vulnerable older adults.'' The commenters noted that Congress did 
not place an absolute time limit on individual participation. The 
commenters also argued that limiting the potential extension in this 
way is unnecessary to reduce the number of long-term SCSEP participants 
because there are several other program features, such as the 
performance measurement system, that effectively achieve that goal. The 
commenters also contended that restricting the extension to one-year, 
one-time would result in involuntary terminations from the program for 
older adults who are benefiting from the SCSEP and may be unable to 
find any other meaningful employment and training assistance from other 
programs. One commenter requested that the Department delay the 
implementation of this provision in order to consult with other Federal 
and State agencies on alternative programs

[[Page 53801]]

and resources for terminated participants. A few comments, including 
those from participants, noted that the time limit could be more costly 
to the government in the long-run and would create a financial hardship 
on participants who are on the verge of obtaining employment. A few 
commenters agreed generally with time limits in the program but 
disagreed with applying it to all participants.
    After considering these comments, the Department has decided not to 
impose the proposed one-time, one-year restriction on the increased 
period of individual participation. We agree that Congress could have 
included an absolute limit on SCSEP participation in the 2006 OAA, but 
did not do so. We also are sympathetic to the assertion that grantees 
are in the best position to manage their programs to satisfy the 
various aspects of the 2006 OAA and this final rule, some of which 
impose other limitations on participation. Therefore, we agree that 
grantees require the flexibility to determine the needs of individuals, 
which necessarily means that some individuals may be in the program 
longer provided they meet one of the waiver factors listed in Sec.  
641.570(b), and will continue to receive services consistent with their 
IEP. As noted in paragraph (e), the Department will issue 
administrative guidance that describes the process for grantees to 
request increased periods of individual participation. We expect that 
grantees will make their determinations for requesting extensions for 
individual participants who meet the eligibility factors in a fair and 
equitable manner and in accordance with applicable civil rights laws. 
This process developed in the administrative guidance will reflect this 
expectation.
    Given that the average participation in the program is 
approximately two years and that there are other requirements designed 
to limit participation in the program, we agree that it is not 
necessary to retain this requirement. However, as some commenters 
pointed out, grantees are cautioned that they are nevertheless 
responsible for satisfying the average participation cap described in 
paragraph (c) of this section as well as the expected levels of 
performance for the core performance measures.
    In addition, we received a number of comments on the 27 month cap 
in paragraph (c). One commenter requested that the Department edit this 
regulation provision to more accurately reflect the law as written. 
Thus, this commenter requested that we revise the rule to read: ``each 
grantee must comply with an average participation cap for eligible 
individuals (in the aggregate) of 27 months.'' Other commenters 
requested that the grantees be consulted on the method used to 
determine the 27 month average participation cap. One commenter asked 
for clarification on whether the 27 month cap, like the 48 month time 
limit, was intended to be consecutive or not.
    The Department does not agree that the language in the proposed 
rule paragraph (c) requires additional clarification. The Department 
opted to draft the language in this way to make it more reader-
friendly. We do not believe there are any inconsistencies between the 
regulatory provision and the 2006 OAA, and therefore, did not make any 
changes to this section. Finally, the Department will work with 
grantees to implement the participation limits.
May a grantee or sub-recipient establish a limit on the amount of time 
its participants may spend at each host agency? (Sec.  641.575)
    This section authorizes grantees to adopt a policy under which 
participants are rotated among community service assignments. We 
received several comments on this section. One commenter stated that 
moving participants around from host agency to host agency every 12 
months has a negative impact on the program and considered it to be an 
arbitrary rule. This commenter further claimed that this provision did 
not consider the needs of the workers (participants). Other commenters 
echoed this concern in one way or another, mostly opposing the 
provision because they find it disruptive to the host agency when a 
participant leaves and then they are understaffed.
    The Department appreciates these commenters' concerns; however, the 
rule does not require a grantee to adopt a rotation policy. Rather, it 
allows grantees to implement a rotation policy when the grantee 
believes it will make the program more effective and help program 
participants achieve economic self-sufficiency consistent with their 
IEP. This provision has been helpful to an increasing number of grantee 
organizations over the years, who find it difficult to persuade host 
agencies that they should not expect the SCSEP to augment their 
workforce. More importantly, grantee rotation policies have allowed 
participants to acquire more job skills, which increase their 
opportunities to find unsubsidized employment. However, we do agree 
that rotation of participants among host agencies may be disruptive and 
counter-productive if the participant is still effectively acquiring 
needed skills at his or her assignment. Therefore, we are revising the 
regulation to provide that no rotation policy will be approved that 
does not require an individualized determination that rotation is in 
the best interest of the participant and will further the acquisition 
of skills listed in the IEP.
Is there a limit on community service assignment hours? (Sec.  641.577)
    We received a significant number of comments on this section. In 
the NPRM, the Department proposed a limit of 1,300 hours per year on 
participants' community service hours. The proposed limit is similar to 
a previous 1,300 hours per year limit on all participant paid hours.
    Several commenters criticized the proposed 1,300 hour limit as 
``another example of an unnecessary restriction on a SCSEP grantee's 
capacity to meet the needs of individual participants and to respond to 
local conditions.'' Although commenters acknowledged that participation 
in SCSEP is part-time, they asserted that the proposed 1,300 hour limit 
``sets an arbitrary cap on participation'' and ``disregards the * * * 
particular needs of a community (such as responding to a natural 
disaster).'' The commenters further asserted that although the 1,300 
hours is still a good benchmark, the restriction limits their ability 
to address the backgrounds, life challenges and other circumstances 
that make providing services to each participant a unique experience. 
Still other commenters found that a majority of participants work less 
than 1,100 hours because their higher State minimum wage prevents them 
from overspending their budget. One commenter stated that if 
participant staff are not allowed to exceed the 20-25 hours per week, 
the grantees' performance measures will suffer.
    The Department has considered these comments and has decided to 
eliminate the 1,300 hour limit, as suggested by the commenters. We 
agree that the grantees need the flexibility to respond to downturns in 
the economy or natural disasters, for example. Therefore, we have 
changed this provision to read that the 1,300-hour requirement is not 
required but is still a benchmark and good practice that the Department 
strongly encourages grantees to follow. This language is consistent 
with the Department's position on this issue published in the preamble 
to the 2004 Final Rule, at 69 FR 19014, 19036, Apr. 9, 2004. The 
statute defines ``community service employment'' as ``part-time'' work 
and grantees must ensure that community service assignments are part-
time positions. In addition, the

[[Page 53802]]

Department cautions grantees about allowing participant staff to exceed 
the part-time requirements, which is not permitted.
Under what circumstances may a grantee or sub-recipient terminate a 
participant? (Sec.  641.580)
    This section describes a variety of circumstances in which a 
participant may or must be terminated from the program and the 
procedures by which terminations must be accomplished. We received 
several comments on this section. One commenter asked for an 
explanation of what ``knowingly'' means in paragraph (a). The common 
legal definition of ``knowingly'' is ``[w]ith knowledge; consciously; 
intelligently; willfully; intelligently.'' Black's Law Dictionary 4th 
Ed. (1957) West Publishing. The Department recommends a common-sense 
application of this definition. For example, if a participant provided 
false information in order to meet the eligibility requirements for the 
program and either knew or should have known that the information was 
false, then such provision was done ``knowingly.''
    We received two comments on paragraph (e) of this proposed section 
which deals with terminations when a participant has refused a 
reasonable number of job offers or referrals. One commenter requested 
that the Department add language to paragraph (e) allowing the grantee 
to terminate the participant for refusal to accept a reasonable number 
of job searches or job offers. The other commenter reminded the 
Department that in some cases, local, State, or Federal law and/or 
agency policy requires immediate termination for cause as described in 
the proposed rule at paragraph (e).
    As to the first comment, the Department does not believe the 
commenter's proposed language is necessary. Paragraph (e) already 
states that if a participant refuses to accept a reasonable number of 
job offers or referrals to unsubsidized employment, the grantee may 
terminate the participant. The only word that appears to be different 
between the comment and the regulation is the word ``searches.'' It is 
the Department's opinion that ``job searches'' are included as part of 
the ``job referral'' process. Therefore, the Department did not make 
this change in the regulation.
    The commenter that disagreed with ``for cause terminations 30 days 
after written notice'' may have confused this provision with another 
paragraph in this section. Paragraphs (a) and (d) did not contain the 
30-day termination requirement that is found in paragraphs (b), (c), 
and (e) of this final rule. However, upon reconsideration, we believe 
that paragraphs (a) and (d) should also require 30 days notice before a 
termination for cause may be effective. Notice allows a participant 
time to contest the grantee's determination and to offer factors in 
mitigation. Notice is inherent in fundamental notions of fairness and 
is arguably more necessary in cases of alleged misconduct than in cases 
where a participant was mistakenly determined eligible. We already 
require notice in the case of terminations under paragraph (e), which 
is a type of termination for cause. We see no reason not to expand the 
notice to all cause terminations.
    We note that the requirement for 30 days notice before termination 
does not require the grantee to permit a participant to remain assigned 
to the host agency where the offense is alleged to have occurred. In 
those cases where a statute or regulation requires the immediate 
removal of a participant for certain specified offenses, the grantee 
may remove the participant from the host agency and may assign the 
participant to another host agency (including the local project office) 
or to no host agency, depending on the circumstance, during the notice 
period.
    We have made an additional change in the notice language in 
paragraphs (a), (d) and (e) to provide that the termination after 
notice is not required if additional facts or evidence shows that the 
basis for the termination is incorrect. The original intent of this 
provision was that termination could not be effected until 30 days had 
elapsed, not that termination was always required once 30 days had 
elapsed. Indeed, the notice requirement would be rendered largely 
meaningless if the grantee were required to terminate the participant 
at the end of the notice period regardless of what information the 
participant might have produced in the interval. We thus have added 
language to paragraphs (a)-(e) to make it clear that a grantee is not 
required to terminate a participant if the evidence shows that the 
grounds for termination were incorrect. We remind grantees, however, 
that if a participant has finally been determined to be ineligible 
(after being given 30 days to provide evidence of eligibility), the 
grantee must terminate the participant.
    Another commenter questioned how the organization would know when a 
participant receives a written notice of termination as suggested by 
paragraphs (b), (c), and (e). This commenter requested that the 
language in the proposed rule only require grantees to provide written 
notice explaining the reasons for termination when the termination is 
the result of an adverse action.
    Again, we believe the commenter is misreading the intention of 
these regulatory provisions. Each of these situations represents 
circumstances where a termination is necessary. However, the Department 
has made a change to the regulation to clarify the notice requirement. 
The purpose of the notice requirement is that the participant would be 
terminated in 30 days after either the day notice was provided to the 
participant in person, or the day the grantee mailed the termination 
notice. Given the propensity for confusion with the current language, 
the Department has revised paragraphs (b), (c), and (e) to read ``and 
may terminate the participant 30 days after it has provided the 
participant with written notice.''
    Another commenter criticized the termination process as 
``indicative of micromanagement.'' This commenter further expressed 
disagreement with the single national approach to termination because 
it limited the discretion of grantees and sub-recipients.
    In response, the Department notes that there are certain 
requirements to which grantees must adhere to in order to receive 
Federal funds. Uniform policies are necessary in some cases for a 
program of national scope to ensure all participants are treated in a 
fair and consistent manner. The issue of termination is one of those 
necessary policies. Grantees may not continue to spend grant funds on 
ineligible participants. The rule does allow for some flexibility, such 
as determining what constitutes cause for termination, which we 
recognize may vary among grantee organizations. Grantees also have 
flexibility to determine whether they want to terminate participants 
for failure to accept a reasonable number of job offers or referrals 
and, if they do, what constitutes a reasonable number.
    One final commenter raised the issue of termination in the context 
of the performance measures and how terminations impact a grantee's 
ability to meet the performance measures. This comment is outside the 
scope of this rulemaking as it does not relate to the proposed rule.
What is the employment status of SCSEP participants? (Sec.  641.585)
    This section discusses the employment status of program 
participants given that they receive work experience training. The 
Department received one comment on this section. This commenter 
requested

[[Page 53803]]

a ruling on the responsibility of the grantees and sub-recipients to 
conduct background checks on SCSEP applicants as part of the 
application process if they are not employees of the grantee or sub-
recipient.
    Although this comment is outside the scope of this rulemaking, the 
Department will reiterate its policy here. Grantees may take the 
responsibility of providing background checks before placing 
participants in community service assignments, provided that the 
background check is conducted because of the requirements of a specific 
community service assignment, rather than based on a particular 
participant, and is consistently applied to all applicants considered 
for that position. We stress that background checks are relevant to the 
assignment of participants to particular host agency positions only and 
cannot be used as a basis for denying eligibility. In addition, 
grantees should be careful to comply with EEOC and any state or local 
rules regarding the use of background checks.

Subpart F--Pilot, Demonstration, and Evaluation Projects

What is the purpose of the pilot, demonstration, and evaluation 
projects authorized under Sec.  502(e) of the OAA? (Sec.  641.600)
    This section describes the purpose of the new provisions 
implementing Sec.  502(e) of the 2006 OAA. The Department received one 
comment that asked the Department to clarify whether On-the-Job 
Experience (OJE) projects would continue under the new section and 
whether the Department plans to introduce new pilot projects or expand 
and improve existing projects.
    The Department is pleased that grantees have found the OJE program 
useful and will take that under advisement as we explore how best to 
exercise this new flexible authority, as we noted in the preamble to 
the NPRM. See 73 FR 47770, 47789, Aug. 14, 2008.
Should pilot, demonstration, and evaluation project entities coordinate 
with SCSEP grantees and sub-recipients, including area agencies on 
aging? (Sec.  641.640)
    This section provides that the Department will collaborate with 
appropriate aging organizations when developing projects under this 
section and grantees of these projects must also consult with 
appropriate organizations. We received several comments related to this 
section. The comments mostly suggested that Sec.  641.640, in concert 
with Sec. Sec.  641.315 and 641.335, were inadequate to address the 
type of coordination that should occur between SCSEP and other aging 
programs. One commenter stated that the regulation should be written to 
``requir[e] coordination of SCSEP with other programs under the Older 
Americans Act, such as state units and area agencies on aging, and with 
other Federal programs.'' Another commenter ``suggest[ed] that the 
regulations reflect additional coordination requirements with 
disability networks, in order to better incorporate person-centered 
planning, Americans with Disability Act compliance, and independent 
living philosophy concepts into the provision of services.'' Yet 
another commenter expressed a concern about where the funding for these 
projects would come from given that the revised funding allocations 
appear to decrease services to participants. That commenter cited 
recent Department actions to reserve $5,000,000 for program support 
activities under the Secretary's discretionary authority.
    Section 641.640 has been written to follow the statutory language, 
with the addition of a clarification that SCSEP grantees and sub-
grantees are among the entities that must be consulted with. To be more 
prescriptive in this section would limit the Department's and the 
grantees' ability to use the flexibility granted by the statute. 
Finally, comments about the possible effect of funding for the pilot, 
demonstration and evaluation projects on the funding of the ``regular'' 
program are outside the scope of this rulemaking.

Subpart G--Performance Accountability

    On June 29, 2007, the Department published an IFR that implemented 
changes in the SCSEP performance measurement system in light of the 
OAA. This section discusses comments on the performance measurement 
system.
    The OAA requires the SCSEP to track six \1\ core indicators of 
performance \2\ (also called ``core performance indicators,'' or just 
``core indicators''): (1) Hours (in the aggregate) of community service 
employment; (2) entry into unsubsidized employment; (3) retention in 
unsubsidized employment for six months; (4) earnings; (5) the number of 
eligible individuals served; and (6) most-in-need (the number of 
barriers per participant as listed in subsection (a)(3)(B)(ii) or 
(b)(2) of Sec.  518 of the OAA. Core indicators are subject to goal-
setting and corrective action. The statute also requires two additional 
indicators of performance (also called ``additional performance 
indicators,'' or just ``additional indicators''): Retention in 
unsubsidized employment for one year; and satisfaction of participants, 
employers, and host agencies with their experiences and the services 
provided. Additional indicators are not subject to goal-setting and 
corrective action. The OAA gives the Department the authority to add 
other additional indicators that it determines to be appropriate to 
evaluate services and performance, but we are not adding any other 
additional indicators at this time.
---------------------------------------------------------------------------

    \1\ Section 513(b)(1) of the 2006 OAA lists, ``[t]he number of 
eligible individuals served, including the number of participating 
individuals described in subsection (a)(3)(B)(ii) or (b)(2) of 
section 518,'' on performance, as a single core indicator. However, 
as discussed in the IFR, 72 FR 35836, June 29, 2007, the Department 
chose to divide it into two separate indicators--number of eligible 
individuals served, and number of most-in-need participants.
    \2\ We use the terms ``indicator'' and ``measure'' 
interchangeably throughout this rule.
---------------------------------------------------------------------------

    Under authority of the IFR, grantees have been using the common 
measures definitions for the three core indicators addressing 
unsubsidized employment. We received a number of comments raising 
concerns about whether the common measures are an appropriate way to 
measure participation in SCSEP. Changes in the core indicator 
definitions at this point will muddle the data we have collected for 
three program years using the existing definitions. The Department 
wants to have a consistent body of data over a multiyear period through 
which to be able to evaluate both the overall performance of the SCSEP, 
and the utility of the performance indicators. In addition, any changes 
would not be fully implemented until PY 2011.
    As a result, the Department has concluded that to change the 
definitions of the core indicators at this time would create a 
significant administrative burden for grantees, which would outweigh 
any benefit of changing those definitions. With reauthorization of the 
SCSEP also on the horizon for 2011, it would be difficult to conduct 
evaluations of the program and collect data for doing so if the 
definitions were changed at this late stage. Moreover, a change in the 
measures at this late date would deprive the grantees of valuable 
baseline data that they are using for program management and 
improvement. The Department intends to maintain the existing 
definitions for the three core indicators on unsubsidized employment, 
under which grantees have been working for three years already.
Overview of Comments Received on Subpart G
    The Department received eleven comments in response to the

[[Page 53804]]

performance accountability IFR. Some commenters urged changes to 
particular performance measures and/or asked specific questions about 
one or more of the measures. Such comments commonly expressed the view 
that the SCSEP is unique among workforce programs primarily because of 
its community service element, and therefore use of the common measures 
is neither appropriate nor desirable.
    A second theme common to several of the comments is that an 
emphasis on performance accountability may lead to unintended 
consequences. In this view, SCSEP grantees and sub-recipients may feel 
pressure to serve individuals who are relatively easy to place in 
unsubsidized employment to meet performance goals. Such a focus, it was 
argued, would thwart a consistent tenet of the SCSEP, reflected in the 
2006 OAA, that the program should prioritize individuals with multiple 
barriers to employment. Further, several commenters expressed concern 
that this pressure to attain good performance outcomes could result in 
fewer minorities being served by the SCSEP.
    Because the definition of the most-in-need indicator changed 
significantly from the 2004 SCSEP final rule, the Department treated 
the 2007 Program Year as a baseline year for that indicator and did not 
set sanctionable goals for the most-in-need measure. Some commenters 
thought that the 2007 Program Year should be treated as a baseline year 
for all indicators; that is, they thought no goals should be set for 
any of the core indicators for the Program Year 2007.
    Other commenters expressed concern with one or more of the 
indicators. One commenter requested that the Department decrease the 
number of core indicators and increase the number of additional 
indicators. A few commenters urged the Department to develop the 
remainder of the regulations before finalizing the performance 
accountability requirements. Finally, some commenters supported the 
creation of an interagency group to provide input on the SCSEP 
regulations.
    We will discuss all of the comments below, beginning with the 
comments that broadly address the performance measurement system 
overall.
Broad Comments on the Performance Measurement System Overall
    A few commenters urged the Department to develop the remainder of 
the regulations before finalizing the performance accountability 
requirements. Some commenters requested that we convene meetings on the 
performance measurement regulations before finalizing them. Several 
commenters supported the creation of an interagency group to provide 
input on the SCSEP regulations.
    We agree with the commenters who urged the Department to develop 
the remainder of the regulations before finalizing the performance 
accountability requirements. To that end, we published an NPRM on 
August 14, 2008, that addressed all aspects of the SCSEP regulations 
other than performance measures. We were able to carefully consider the 
comments from both the IFR and the NPRM before proceeding with this 
final rule.
    We also received some comments requesting that we convene meetings 
with grantees and other interested parties as we developed final 
regulations on the performance measurement system. We considered this 
suggestion but chose not to adopt it. All interested persons were 
invited to participate in the regulatory process by submitting comments 
on the IFR and the NPRM, and we considered those comments very 
seriously as we developed this rule.
    In the IFR, we stated that we had ``implemented an interagency 
group to oversee the strategy for implement[ing]'' the performance 
measurement system required by the 2006 OAA. 72 FR 35845, June 29, 
2007. Some commenters interpreted this to mean that the Department had 
convened a group that included the Administration on Aging, and those 
commenters applauded such efforts. In fact, the group to which we were 
referring was comprised of representatives from different agencies 
within the Department. Nevertheless, we acknowledge that several 
commenters urged greater coordination between the Department and the 
Administration on Aging. The 2006 OAA already requires the SCSEP to 
coordinate with area agencies on aging at the local level, and the 
Department endeavors to mirror that coordination at the national level. 
However, it is clear from these comments that some in the SCSEP network 
think that we have not done enough coordinating at the Federal level. 
We appreciate that even closer coordination may aid the SCSEP overall 
and its participants in particular. To that end, we will pursue 
strengthening our relationship with the Administration on Aging as we 
move forward.
    We now respond to the comments on the IFR that pertain to 
particular regulatory sections within subpart G.
What performance measures/indicators apply to SCSEP grantees? (Sec.  
641.700)
    Several commenters criticized the performance measurement system 
implemented in the IFR generally, and the common measures in 
particular. Some of the commenters asserted that the SCSEP is unique 
among workforce programs primarily because of its community service 
element, and that use of the common measures is therefore neither 
appropriate nor desirable for the SCSEP. Other commenters maintained 
that an emphasis on performance accountability may lead to unintended, 
adverse consequences. These commenters argued that, in an effort to 
achieve the expected levels of performance for the core indicators, 
SCSEP grantees and sub-recipients may feel pressure to serve 
individuals who are relatively easy to place in unsubsidized 
employment. This incentive to ``cream'' from applicants contravenes a 
consistent and central theme of the SCSEP, reflected in the 2006 OAA, 
that the program serves individuals with barriers to employment. Of 
particular concern to some commenters was that a focus on performance 
outcomes would result in a reduction of services to disadvantaged and 
minority older adults.
    In the IFR, as well as the NPRM, the Department specifically 
requested that the public submit comments addressing concerns that the 
performance measurement system implemented by the IFR compromises the 
ability of grantees to serve minority individuals. We particularly 
appreciate the comments we received on that topic.
    The Department does not, however, view the performance measurement 
system required by the 2006 OAA and implemented in the IFR as 
inappropriate or undesirable for the SCSEP, or as adverse to the 
SCSEP's traditional focus on serving persons with barriers to 
employment or minority individuals. We hold a different view from the 
commenters who argued that this performance measurement system will 
lead to a reduction in services to persons with barriers to employment, 
including minority individuals. We will address these points in turn.
    The Department fully acknowledges that community service is 
integral to the SCSEP. Congress gave voice to the importance of this 
aspect of the SCSEP in its ``[s]ense of the Congress'' provision in the 
2006 OAA: ``placing older individuals in community service positions 
strengthens the ability of the individuals to become self-sufficient, 
provides much-needed support to organizations that benefit from

[[Page 53805]]

increased civic engagement, and strengthens the communities that are 
served by such organizations.'' OAA Sec.  516(2). We also acknowledge 
that the 2006 OAA's requirement that grantees spend a minimum of 65-75 
percent of their funds on participant wages and benefits is a unique 
program feature, and one that clearly assists persons with otherwise 
low incomes. Providing an opportunity for low-income older adults in 
need of job training to work at community service organizations that 
need operational support is a ``win-win'' situation.
    Some commenters asserted that the SCSEP should not align with other 
workforce programs in its use of common measures because the SCSEP 
retains this unique community service element, and that the common 
measures are limited in providing full evidence of the SCSEP's 
performance. We also received comments noting that initially there were 
plans for common performance measures to be applied across a wide array 
of Federal agencies and programs. These commenters suggest that the 
scope of the common measures has been reduced to ``[F]ederal job 
training and employment programs that share similar goals'' (emphasis 
omitted), and that the SCSEP does not share sufficiently similar goals 
with other Federal job training and employment programs to make the 
common measures appropriate.
    Other commenters claimed that Congress ``overwhelmingly rejected'' 
a focus by the SCSEP on unsubsidized employment outcomes. These 
commenters argued that the Department is contravening Congressional 
intent by requiring performance measures that focus on unsubsidized 
employment outcomes.
    Congress made both community service and its potential to lead to 
unsubsidized employment important goals. Congress required the use of 
specified core indicators in the 2006 OAA, including the entry into 
employment, retention in employment for six months, and earnings 
indicators. Along with providing valuable community service, then, the 
SCSEP is a training program for low-income persons who have not been 
able to obtain employment on their own. Congress was well aware of the 
unique nature of the SCSEP, and could have chosen separate outcome 
measures unique to the SCSEP as it did in the 2000 Amendments to the 
OAA. Instead, it specifically mandated that the program report on 
certain core indicators, three of which measure employment outcomes; 
therefore, the Department must implement those indicators as stated in 
the 2006 OAA to achieve the dual purpose of ensuring community service 
opportunities, but also making unsubsidized employment possible where 
appropriate for exiting SCSEP participants. Furthermore, the language 
Congress used in the 2006 OAA to mandate the implementation of the 
three core indicators on employment outcomes mirrored the common 
measures. It therefore seemed sensible to define these three core 
indicators using common measures definitions.
    The 2006 OAA requires the Department to implement the three core 
indicators on employment outcomes. This requires us to gather 
consistent data on program performance to inform reauthorization. 
Without a body of consistent performance data over a reasonable number 
of years, we will not be able to determine whether those indicators as 
defined are or are not effective performance measures. In addition, 
grantees would be deprived of meaningful baseline data for making 
improvements in services, which is the primary purpose behind 
measurement. As discussed above, therefore, the administrative burden 
of changing these definitions would outweigh the policy value of 
changing them before a good body of consistent data has been gathered 
to inform the program reauthorization anticipated in 2011. This is 
particularly so since the Department anticipates proposing another 
SCSEP additional indicator for volunteer work performed after exit from 
the program, which would further reinforce the Department's support for 
community service and volunteer work.
    In addition, several commenters asserted that the common measures 
are limited in providing full evidence of the SCSEP's performance, and 
we agree. The common measures do not accurately portray the entirety of 
the SCSEP program or its successes. These three core measures, which 
currently use common measures definitions (entry, six-month retention, 
and earnings), relate most closely to the SCSEP's goal of unsubsidized 
employment. However, Congress also required three other core measures 
(number of persons served, most-in-need, and community service), and 
they relate most closely to the community service goal of the SCSEP. 
Accordingly, we acknowledge that the common measures do not ``tell the 
whole SCSEP story.'' However, we remain convinced that in light of the 
need to gather data for reauthorization and our consideration of 
another additional indicator, for now these definitions are most 
sensibly kept as a method to capture important data on the success of 
participants in meeting the goals deemed appropriate for their personal 
circumstances, as laid out in their IEPs.
    We turn now to the commenters' argument that implementing the 
performance measurement system described in the IFR will lead to a 
reduction in services to persons with barriers to employment, including 
minority individuals. Some of these commenters asserted that the 
introduction of common measures in other workforce programs has led to 
a decrease in the number of low-income participants and participants 
with barriers to employment in those programs. These commenters claim 
that such programs have selected participants based on the 
participants' potential to achieve positive indicator outcomes. They 
contend that, faced with the same common measures, SCSEP program 
operators will ``cream'' by selecting those participants who are 
easiest to serve. In this view, persons with barriers to employment, 
including minority individuals, will be disfavored by SCSEP program 
operators. Some commenters asserted that ``creaming'' is contrary to 
Congressional intent, because in the 2006 OAA Congress intended the 
SCSEP to serve low-income persons and persons with other barriers to 
employment. Several commenters cited a study of WIA indicating that, 
following the introduction of common measures in WIA, there was a 
decline in the number of WIA participants with low incomes or who had 
barriers to employment, and suggested that implementing the common 
measures in the SCSEP would lead to similar results.
    For reasons discussed already, the Department will continue to 
implement the core indicators of performance. We take the commenters' 
argument to be effectively limited to the core indicators, as 
additional indicators of performance are not subject to sanctionable 
goal-setting. The Department is required to implement the indicators 
mandated in the 2006 OAA; we disagree that such indicators will lead to 
``creaming,'' or a reduction in SCSEP services to low-income 
individuals or individuals with barriers to employment. We agree with 
the commenters' assertion that Congress clearly intended for the SCSEP 
to serve low-income individuals and to prioritize persons most-in-need. 
Moreover, Congress designed the SCSEP to have two goals--community 
service and an appropriate employment objective for participants whose 
experience in the SCSEP may lead to unsubsidized employment. But it is 
not possible for SCSEP program operators to reduce the numbers of low-
income

[[Page 53806]]

participants in the SCSEP because, unlike WIA, only low-income persons 
are eligible for the SCSEP. Regardless of the population 
characteristics of other workforce programs, the SCSEP is specifically 
designed to serve lower income older persons with barriers to 
employment. The 2006 OAA requires program operators to prioritize 
persons who have barriers to employment such as those who have a 
disability, low employment prospects, or limited English proficiency. 
Moreover, SCSEP has a counter-balance to any creaming that the 
employment indicators might engender because another of the core 
indicators measures, the average number of most-in-need characteristics 
per participant. The Department's view is that the SCSEP performance 
measurement system will not disfavor people with barriers to employment 
when one of the measures is designed to give effect to the statute's 
requirement that program operators prioritize those most in need of 
SCSEP services. In fact, studies for PY 2006 and PY 2007 show that 
minorities are served by SCSEP in greater proportions than their 
incidence in the population and have employment outcomes no different 
from those of non-minority participants.
    Finally, one commenter requested that the Department switch several 
of the core indicators to become additional indicators. We are bound by 
the 2006 OAA to implement the core and additional indicators of 
performance required in the statute; we do not have the discretion to 
reclassify core indicators as additional indicators.
How are the performance indicators defined? (Sec.  641.710)
    In this section the Department defines each of the indicators. A 
few commenters suggested that the Department use data available from 
unemployment insurance wage records to capture data for such indicators 
as entry, retention, and earnings. Some commenters stated that it can 
be difficult to obtain this data from employers and exited 
participants.
    The Department agrees that unemployment insurance wage records are 
a potentially advantageous method of collecting performance data, and 
we are actively pursuing the use of such records by the SCSEP. For the 
reasons already stated, however, we have decided to retain the 
performance indicator definitions in their current form.
Entry Into Unsubsidized Employment
    One commenter disagreed with the existing definition of entry into 
unsubsidized employment as each participant who is employed during the 
first quarter after the exit quarter. The traditional SCSEP entry 
indicator treated as entered employment any participant who worked 30 
days within the 90 days following their program exit. This commenter 
argued that the current definition will make it harder to count an 
exited participant as having entered employment because of the later 
qualifying period (the first 90 days after exit versus the quarter 
following the exit quarter).
    It is clear that using this definition over the past six years has 
not resulted in fewer exited participants being counted as having 
entered unsubsidized employment. While the qualifying period under the 
current definition occurs later in time than the qualifying period 
under the traditional SCSEP entry measure, the former SCSEP entry 
indicator required 30 days of employment, but this definition does not 
specify an employment period. A participant could be employed for 
significantly fewer than 30 days during the relevant quarter, and that 
person would be counted as having entered unsubsidized employment under 
the existing definition of entry. In this way, the existing definition 
actually makes it more likely that an exited participant will be 
counted as a positive entry outcome. Indeed, during each of the three 
years when outcomes for both the SCSEP placement measure and the 
existing entry indicator were reported, the average entry outcome under 
the existing definition was higher than the average SCSEP placement 
outcome.
Retention in Unsubsidized Employment for Six Months
    We received one comment proposing that we revert to the former, 
SCSEP-specific retention indicator, which measured retention for six 
months at 180 days after program exit. The current definition measures 
retention for six months based on employment in the second and third 
quarters after the exit quarter. This commenter asserted that the 
longer qualifying period for this indicator increases the difficulty of 
obtaining the information.
    We do not question the commenter's assertion that it can sometimes 
be difficult to obtain this retention information. Nevertheless, 
grantees and sub-recipients have been submitting data using the current 
definition since the first quarter of Program Year 2005, although as an 
additional rather than a core indicator in the early years. We are 
confident that grantees and sub-recipients will be able to continue 
obtaining those data in the future. Also, as noted previously, we are 
actively pursuing the use of unemployment insurance wage records; these 
records would provide significant retention data.
Earnings
    We received one comment on the definition of the earnings 
indicator. This commenter urged the use of a simpler indicator that 
captured wages at the time of program exit rather than the current 
indicator definition which averages the earnings received during the 
second and third quarters after the exit quarter. However, this always 
has been a core indicator and the current definition is that used by 
all of ETA. The commenter also asked a few questions about the 
description of the earnings indicator in TEGL 17-05. This commenter 
asked whether the term ``exited participants'' refers to all exited 
participants, or only those who achieved unsubsidized employment. If 
the term ``exited participants'' refers to all exited participants, the 
commenter wondered whether that would dilute the average earnings 
figure.
    The term, ``exited participants,'' refers to the pool of 
individuals who satisfy the six months retention indicator, not the 
entire pool of persons who left the SCSEP for a variety of reasons 
during the relevant quarter. As implemented, the three core indicators 
may be viewed as building upon each other. To arrive at the entry 
outcome, one considers how many persons, of the total number who exited 
the SCSEP during the relevant exit quarter, were employed during the 
first quarter after the exit quarter. To arrive at the retention in six 
months outcome, one considers how many persons, of those who satisfied 
the entry indicator, were employed during the second and third quarters 
after the exit quarter. To arrive at the earnings outcome, one 
considers what was earned by those persons who were included the six 
months retention indicator.
    The previous earnings measures counted the earnings of exiters who 
achieved entered employment, whether or not they were employed in the 
reporting period, and that did have the effect of distorting the 
outcomes of the measure. By including those who were not employed in 
the earnings measure, it was difficult to determine how much those who 
were employed were actually earning. Under this final rule, however, 
only the wages of exiters who entered employment and who were employed 
during both quarters of the reporting period are included in the 
earnings measure.

[[Page 53807]]

Most-in-Need
    We received several comments about the definition of most-in-need. 
The ``most-in-need'' population is based on the fifth core indicator in 
2006 OAA Sec.  513(b): ``the number of eligible individuals served, 
including the number of participating individuals described in 
subsection (a)(3)(B)(ii) or (b)(2) of section 518.'' One commenter 
advocated reducing and simplifying the list of most-in-need 
characteristics. The regulatory definition cannot be reduced or 
simplified any more than it already is, because it is taken directly 
from the statute.
    Several commenters were distressed that the revised definition of 
most-in-need ``no longer includes any reference to racial minority 
status.'' Another commenter took issue with the characteristic, ``has 
failed to find employment after utilizing services provided under title 
I of [WIA].'' This commenter asserted that most SCSEP participants are 
not even considered for services under title I of WIA, and proposed 
that instead the characteristic should be, ``[w]ere not considered for 
services under [t]itle I of WIA and/or failed to find employment after 
utilizing services under [t]itle I of WIA.''
    The 2006 OAA omitted the characteristic of ``greatest social need'' 
from the list of characteristics that comprise the ``most-in-need'' 
indicator. OAA Sec. Sec.  513(b)(1)(E), 518(a)(3)(B)(ii), and 
518(b)(2). Whatever the relative merits of considering other groups to 
be most in need, Congress defined most in need with great specificity, 
and we have no authority to change the statutory definition.
    The 2006 OAA does require the Department to annually report to 
Congress on the levels of participation and performance outcomes of 
minority individuals by grantees, by service area and in the aggregate. 
OAA Sec.  515. The analyses conducted for both PY 2006 and PY 2007 
indicate that minorities are served in greater numbers than their 
incidence in the population and that minorities achieve employment 
outcomes equal to those of non-minorities. Therefore, we have not 
changed the definition of the most-in-need indicator.
Retention for One Year
    We received one comment on the definition of retention for one 
year. In the IFR, we defined this indicator to align with the WIA one-
year retention indicator, which measures retention at the end of the 
fourth quarter after the exit quarter. This commenter recommended that 
we instead capture retention data at 360 days following program exit.
    The Department has considered this comment but has decided to 
retain the definition of retention for one-year as published in the IFR 
for the reasons already stated.
Satisfaction of the Participants, Employers, and Host Agencies With 
Their Experiences and the Services Provided
    We received one comment on this indicator. The commenter asserted 
that sub-recipients should not have to be involved in gathering data 
for this indicator, including mailing cover letters to encourage survey 
participation.
    The Department already provides very substantial assistance in 
obtaining the data for this indicator. We request that program 
operators--whether a grantee or a sub-recipient--deliver the employer 
survey, which we supply, and which ideally is done in person. For the 
participant and host agency surveys, we create the survey instrument as 
well as a cover letter explaining the survey and requesting its 
completion; draw the samples of those who will be asked to complete the 
survey; and mail it to those persons. We ask program operators to mail 
pre-survey letters to those participants selected to complete the 
survey to request cooperation with the survey, and we provide the pre-
survey letter text and the mailing list. We have considered the 
commenter's request and have decided not to make any changes to the 
customer satisfaction survey process at this time. Given the 
substantial amount of the burden that we already shoulder, we ask very 
little of grantees, sub-recipients and host agencies. The work we ask 
them to perform is work that we cannot do and that we need grantees, 
sub-recipients, and host agencies to manage.
How will the Department and grantees initially determine and then 
adjust expected levels of performance for the core performance 
measures? (Sec.  641.720)
    We received several comments about the expected levels of 
performance that were set for Program Year 2007. In general, such 
concerns must be raised during the process of setting the expected 
levels of performance and are not appropriate for the regulatory 
comment process as they relate to the specifics of each grantee's 
situation. We will, however, respond to those aspects of these comments 
that have general applicability.
    One commenter asserted that the statutorily-mandated minimum 
expected level of performance for the entry indicator would be 
difficult for sub-grantees to achieve using the current definition of 
entry. The Department does not have the discretion to set the expected 
levels of performance below those required by statute. Further, we hold 
grantees accountable for achieving the expected levels of performance, 
but we do not set goals at the sub-recipient level. Having said that, 
we do conduct training sessions that are open to all program operators 
and offer technical assistance to both grantees and sub-recipients that 
are experiencing difficulty in any aspect of program administration. 
Finally, we note that the nationally-averaged outcome for the entry 
indicator at the end of Program Year 2007 was 52.4 percent, greatly in 
excess of the statutorily-mandated goal. Only three individual grantees 
with adequate data to permit accurate measurement failed to meet at 
least 80% of their negotiated goal, and 62 grantees exceeded 100% of 
their negotiated goal.
    Other commenters suggested that the expected levels of performance 
for the entry and earnings indicators for Program Year 2007 were too 
high. These commenters noted that the median expected level of 
performance for the entry indicator was higher than the statutory 
minimum. They also asserted that the earnings and entry indicator 
levels were set so high that program operators would be encouraged to 
``cream,'' which would lead to fewer minority participants.
    Although the Sec.  513(a)(2)(E)(ii) of the statute sets a minimum 
percentage for the entry indicator, it is in fact merely a minimum, and 
the Department has the authority to set expected levels of performance 
above that minimum. The Department bases a grantee's expected levels of 
performance in part on the prior performance of the grantee. The 
statute requires that the expected levels of performance for the core 
indicators be designed to promote continuous improvement in 
performance. OAA Sec.  513(a)(2)(B). And, as we explained in the IFR, 
the Department has consistently established a performance level higher 
than the minimum required by statute for many grantees, and expects to 
continue to do so.
    In response to the assertion that the expected levels of 
performance are set so high that the Department is encouraging 
``creaming,'' we disagree. As noted, a grantee's expected levels of 
performance for a new program year are based in part on the prior 
performance of the grantee, so sudden large increases in performance 
goals generally do not occur. The expected levels of performance are 
designed to promote

[[Page 53808]]

continuous improvement; however, the Department also takes into account 
such factors as unemployment rates, relative poverty levels, and 
whether the grantee is serving a disproportionate share of most-in-need 
individuals. Negotiating expected levels of performance is a data-
driven process; when a grantee presents the Department with relevant 
data, we take that into consideration when setting the performance 
goals. Also, expected levels of performance may be adjusted during the 
Program Year if circumstances warrant. See Sec.  641.720(b).
    The Department is making three technical corrections to this 
section of the regulations none of which are intended to change the 
meaning of the section. First, we are removing the word ``baseline'' 
from the first sentence of paragraph (a)(1). The word was mistakenly 
included in this paragraph in the IFR; the expected level of 
performance initially proposed by the Department is more commonly 
called a goal or target, not a baseline. Second, we are adding the word 
``a'' at the beginning of the third sentence in paragraph (a)(3); it 
was inadvertently omitted from the IFR. Finally, we updated the 
citation format in paragraph (a)(2).
How will the Department assist grantees in the transition to the new 
core performance indicators? (Sec.  641.730)
    In paragraph (a) of this section, the Department explained that we 
would be providing technical assistance to help certain grantees meet 
the expected levels of performance for the core indicators in Program 
Year 2007. Technical assistance was provided to those grantees whose 
performance outcomes during Program Year 2006 did not achieve the 
levels expected during Program Year 2007. In paragraph (b) of this 
section we created an exception from sanctionable goal-setting for 
Program Year 2007 for the most-in-need measure because the 2006 OAA so 
changed the list of most-in-need characteristics that we determined 
that a year was needed to gather baseline data before meaningful goals 
could be established. Some commenters thought that Program Year 2007 
should have been treated as a baseline year for all of the indicators; 
they suggested that no sanctionable goals should have been set for 
Program Year 2007.
    Five of the indicators now classified as ``core'' are indicators 
that the SCSEP was already using before the IFR (i.e., hours of 
community service, number of individuals served, entry into employment, 
six-month retention in employment, and earnings), although some of 
these had been classified as additional measures previously. The most-
in-need indicator was the only indicator that changed so significantly 
that we determined that we did not have sufficient data to set 
meaningful goals. Therefore, goals were set for the other core 
indicators for Program Year 2007.

Subpart H--Administrative Requirements

    We received several comments on this section about non-Federal 
share, participant wages and fringe benefits, and performance reporting 
requirements.
How must SCSEP program income be used? (Sec.  641.806)
    We have inserted clarifying language in paragraph (b) of this 
section to provide for a distinction in the expenditure of program 
income for grantees with continuing relationships with the Department 
of Labor and allow program income to be expended for 1 additional 
program year.
What non-Federal share (matching) requirements apply to the use of 
SCSEP funds? (Sec.  641.809)
    This section describes the requirements grantees have to contribute 
a 10 percent match to the program. We received one comment on this 
section of the proposed rule that disagreed with the provision that 
prohibits grantees from requiring sub-recipients to contribute 
financially to the program to meet their match requirement. This 
commenter stated that he believed that a financial investment from a 
sub-recipient encourages ownership and responsibility for the program. 
This commenter suggested that a State's inability to require a sub-
recipient to provide a 10 percent match shifts all the responsibility 
to the State grantee and reduces the commitment of the sub-recipient to 
meet performance goals.
    Although the Department appreciates this concern, this requirement 
was added in the 2004 regulations to prevent abuses in the program 
where some grantees permitted only those organizations with cash 
contributions to be sub-recipients. The fact remains that the grantees 
are the organizations responsible for program operations and services 
as evidenced by the grant agreement with the Department. Further, the 
Department does not believe this limitation is onerous to meet. As 
provided in Sec.  641.809(d), the match may be cash, in-kind, or a 
combination of the two. Program data indicates that with this 
flexibility, most grantees tend to exceed the match requirement for the 
program. Also, paragraph (e) of this section allows sub-recipients to 
voluntarily provide a contribution to the program.
What minimum expenditure levels are required for participant wages and 
benefits? (Sec.  641.873)
    This section outlines the financial requirements for wages and 
fringe benefits and expressly adds the new statutory provisions that 
permit grantees to reduce the 75 percent requirement to 65 percent for 
the wages and fringe benefits cost category. We received one comment on 
this section. This commenter expressed concern with the change that in 
the past required 75 percent of grant funds to be spent on participant 
wages and fringe benefits (PWFB) based on final expenditures to now 
being 75 percent of the grant funds. This commenter noted that there 
was no change from the 2000 OAA to the 2006 OAA and the Department did 
not provide a rationale in the proposed rule to justify this change. 
The commenter noted that ``[t]rying to reach the goal based on the 
award amount changes the emphasis from using resources to effectively 
benefit the program to just incurring PWFB cost to meet the goal.''
    The commenter is correct that the OAA did not change the language 
at Sec.  502(c)(6)(B)(i) from the 2000 Amendments to the 2006 
Amendments. The Department made the change in the proposed rule to more 
closely follow the statutory language, which requires ``75 percent of 
the grant funds [be used] to pay for wages, benefits, and other 
costs.'' However, the Department has reconsidered its position and has 
decided not to depart from its established practice of measuring 
compliance with this requirement for the grantee as a whole, at the 
conclusion of the grant, based upon the total amount expended. 
Accordingly, we are withdrawing the proposed revision to the 
regulation, and are retaining the existing text of Sec.  641.873(b).
How will compliance with cost limitations and minimum expenditure 
levels be determined? (Sec.  641.876)
    For clarity, we changed the first word in the title for this 
section. It originally asked ``When will compliance with cost 
limitations and minimum expenditure levels be determined?'' Because the 
content of the section does not actually discuss a time period but 
instead the method of determining compliance, we replaced ``When'' with 
``How.''
What are the financial and performance reporting requirements for 
recipients? (Sec.  641.879)
    This section describes the financial and reporting requirements 
that grantees

[[Page 53809]]

must submit to the Department. We received one comment on this section 
that argued that the financial and performance reporting requirements 
conflict with Sec.  514(f) of the 2006 OAA. This commenter cited this 
section of the statute, which states the Secretary of Labor may not 
promulgate rules or regulations that would significantly compromise the 
ability of the grantees to serve their target population of minority 
older individuals. The commenter suggested the Department add the 
following language in a new Sec.  641.879(i): ``Collection and 
validation of data should in no way compromise the ability of grantees 
to serve the targeted population of most-in-need individuals, and 
significant attention should be paid to the unintended consequences 
that documentation may cause for minority older individuals, 
particularly those with specific language and culture limitations.''
    The Department agrees that the collection and validation of data 
should not compromise the ability of grantees to serve the target 
population. Although it may take more time to obtain the required 
information due to language barriers, the statute requires that we 
collect a variety of information on program performance, including 
information on the populations and subpopulations served. This is 
information that grantees must collect and have on file for program 
management and auditing purposes anyway. Although collecting 
information may be a burden, it is a required part of program 
management and is necessary to show that the program meets its 
statutory goals effectively.
    Furthermore, the Department monitors services to minorities 
closely, as required by the 2006 OAA. According to PY 2006 and PY 2007 
data, minorities are served by SCSEP in substantially greater numbers 
than their incidence in the population and show no differences in 
employment outcomes from non-minority participants. Therefore, there is 
no evidence that minorities are underserved in the program. Given that 
this commenter did not provide more specific information on how she 
believed minorities would be affected, we are not persuaded that any 
such injury would occur from these regulations to diminish services to 
this population.
    We are, however, making technical changes in paragraphs (b), (d) 
and (e) to clarify that SPARQ is the vehicle by which all grantees must 
report information on participants, host agencies, and employers, 
including demographic and performance information. All grantees are 
required to report the required information in a format specified by 
the Department. We have also clarified that grantees may be required to 
report additional demographic and performance information through means 
other than SPARQ if required by the Department.

Subpart I--Grievance Procedures and Appeals Process

What grievance procedures must grantees make available to applicants, 
employees, and participants? (Sec.  641.910)
    This section describes the grievance procedures that must be in 
place for grantees and that those grantees must have in place for 
program participants. We received one comment on this section. That 
commenter stated that he found the Department's requirement to submit a 
copy of the grantee's appeal process with the grant application 
micromanaging.
    As a recipient of Federal funds, however, there are certain 
requirements that grantees must adhere to in order to receive those 
funds. See Sec. Sec.  641.420 and 430. Prior program experience has 
indicated that the grantees do not always have the most up-to-date 
policies, and sometimes, do not have policies on file at all. This 
requirement ensures that grantees are meeting their obligation without 
the Department having to go to each program office to check for these 
documents.

IV. Administrative Information

A. Regulatory Flexibility Analysis, Executive Order 13272, Small 
Business Regulatory Enforcement Fairness Act

    The Regulatory Flexibility Act (RFA) at 5 U.S.C. 603 requires 
agencies to prepare a regulatory flexibility analysis to determine 
whether a regulation will have a significant economic impact on a 
substantial number of small entities. Section 605(b) of the RFA allows 
an agency to certify a rule in lieu of preparing an analysis if the 
regulation is not expected to have a significant economic impact on a 
substantial number of small entities. Section 601 of the RFA defines 
small entities to include small businesses, small organizations, 
including not-for-profit organizations, and small governmental 
jurisdictions.
    There are approximately 970 SCSEP grantees and sub-recipients. Of 
these, more than 50 are States, State agencies, or territories and are 
not small entities as defined by the RFA. The vast majority of the rest 
are non-profit organizations, many of which may be categorized as small 
entities for RFA purposes. The Department does not have a precise 
number of small entities that may be impacted by this rulemaking, but 
it requested comments on the possible impact of the rule in the NPRM. 
The Department did not receive any comments on this section.
    Although there may be a substantial number of small entities 
impacted by this rulemaking, the Department has determined that the 
economic impact of this final rule is not significant because these 
regulations will not result in any additional costs to grantees and 
sub-recipients. The SCSEP is designed so that SCSEP funds cover the 
vast majority of the costs of implementing this program. Subpart H of 
this final rule provides detailed information to grantees on what costs 
are proper program expenditures, how to properly categorize those 
costs, etc. The SCSEP statute does require a 10 percent non-Federal 
match (see Sec.  641.809); however, the 10 percent match requirement 
has been in effect in previous SCSEP regulations and, therefore, does 
not constitute a new economic burden on grantees. Furthermore, the 
Department's allowance of in-kind contributions in lieu of monetary 
payments significantly moderates the economic impact of the match 
requirement. Accordingly, the Department certifies that this final rule 
will not have a significant economic impact on a substantial number of 
small entities.
    The Department has also determined that this rule is not a ``major 
rule'' for purposes of the Small Business Regulatory Enforcement 
Fairness Act (SBREFA), Public Law 104-121 (1996) (codified in scattered 
sections at 5 U.S.C.). SBREFA requires agencies to take certain actions 
when a ``major rule'' is promulgated. 5 U.S.C. 801. SBREFA defines a 
``major rule'' as one that will have an annual effect on the economy of 
$100,000,000 or more; that will result in a major increase in costs or 
prices for, among other things, State or local government agencies; or 
that will significantly and adversely affect the business climate, 
including competition, employment, investment, and innovation. 5 U.S.C. 
804(2).
    This final rule will not significantly or adversely affect the 
business climate. First, the rule will not create a significant impact 
on the business climate at all because, as discussed above, SCSEP 
grantees are governmental jurisdictions and not-for-profit enterprises. 
Moreover, any secondary impact of the program on the business community 
would not be adverse. To the contrary, the SCSEP functions to assist 
the business community by training older Americans to participate in 
the workforce.

[[Page 53810]]

    This final rule will also not result in a major increase in costs 
or prices for States or local government agencies. The SCSEP has no 
impact on prices, and as discussed above, the only costs that could 
potentially be borne by governmental jurisdictions are limited to the 
10 percent matching share. Finally, this final rule will not have an 
annual effect on the economy of $100,000,000 or more.
    Therefore, because none of the definitions of ``major rule'' apply 
in this instance, we determine that this final rule is not a ``major 
rule'' for SBREFA purposes.

B. Executive Order 12866

    Executive Order 12866 requires that for each ``significant 
regulatory action'' taken by the Department, the Department conduct an 
assessment of the regulatory action and provide OMB with the regulation 
and the requisite assessment prior to publishing the regulation. A 
significant regulatory action is defined to include an action that will 
have an annual effect on the economy of $100 million or more, as well 
as an action that raises a novel legal or policy issue.
    As discussed in the SBREFA analysis above, this final rule will not 
have an annual effect on the economy of $100,000,000 or more. However, 
the rule does raise novel policy issues concerning implementing the 
2006 OAA in the SCSEP. The key policy changes being implemented include 
the introduction of a 48-month limit on participation, institution of a 
regular competition for national grants, and an increase in the 
proportion of grant funds that can be used for participant training and 
supportive services. Therefore, the Department has submitted this final 
rule to the OMB.

C. Paperwork Reduction Act

    The purposes of the Paperwork Reduction Act of 1995 (PRA), 44 
U.S.C. 3501 et seq., include minimizing the paperwork burden on 
affected entities. The PRA requires certain actions before an agency 
can adopt or revise the collection of information, including publishing 
a summary of the collection of information and a brief description of 
the need for and proposed use of the information. 44 U.S.C. 3507.
    Because the 2006 OAA necessitated changes in many of the SCSEP 
forms used by grantees before the effective date of the Act, in July 
2007 the Department submitted to OMB for review and approval in 
accordance with Sec.  3507(d) of the PRA a modification to the SCSEP 
information collection requirements. The four-year strategy newly 
required by the 2006 OAA (see Sec.  641.302) was accounted for in that 
PRA submission. The SCSEP PRA submission was assigned OMB control 
number 1205-0040 and was approved by OMB in October 2007. The approval 
expires October 31, 2010. This final rule neither introduces new nor 
revises any existing information collection requirements.

D. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act (UMRA) of 1995 (Pub. L. 104-4, 2 
U.S.C. 1501 et seq.) requires an agency to ``prepare a written 
statement'' providing specific information before ``promulgating any 
final rule for which a general notice of proposed rulemaking was 
published.'' The Department has done this and, as required by 2 U.S.C. 
1523(b), it includes a summary of the statement. For purposes of the 
UMRA, this final rule does not include any Federal mandate that may 
result in increased expenditure by State, local, and tribal governments 
in the aggregate of more than $100 million, or increased expenditures 
by the private sector of more than $100 million. We did, however, 
receive some comments on the costs of the rule, to which we respond 
here.
    We received several comments on this section from State agencies 
related to the responsibilities in the State Plan requirements at 
subpart C of this rule, State competition requirements, and 
administrative guidance related to required services to participants. 
The programmatic aspects of these comments are discussed in the related 
sections of the preamble. This section is limited to a discussion that 
addresses the impact of this rule as an unfunded mandate.
    One commenter generally noted that its jurisdiction was neither 
financially nor functionally prepared to take on this added workload. 
Several States specifically stated that the Department was imposing 
additional requirements on State grantees without providing additional 
funding. A few commenters stated that they did not have funds to hire 
an economist to provide the data required for the State four-year 
strategy as provided in the State WIA program; and one commenter said 
that it did not have the funds to obtain the data to meet the 
requirement that State grantees identify the types of community 
services that are needed and their location statewide. Some commenters 
requested that the Department provide additional resources to help 
States develop a comprehensive four-year State Plan. Another commenter 
protested that the Department did not provide funding for States to 
conduct a competition if, under Sec.  641.400, the State fails to meet 
its expected levels of performance for the core indicators for three 
consecutive years. That same commenter also stated that the requirement 
in Sec.  641.535(b) (additional guidance) has the potential to increase 
program costs without providing funding to cover such requirements.
    The Department disagrees that any of these requirements impose an 
unfunded mandate. The requirements in this final rule are funded by 
SCSEP grant funds and fall under the category of either administrative 
costs or programmatic costs. Section 502(c)(3) allows grantees to 
request an increase in administrative costs from 13.5 percent to 15 
percent, if the grantee demonstrates that such increase is necessary to 
carry out the program. There are several States that take advantage of 
this provision by submitting applications meeting the criteria listed 
in Sec.  641.870. We have no evidence that the additional 
administrative funds they receive are insufficient to oversee sub-
recipient operations and perform the requirements of subpart B for 
State Planning. Further, to the extent that the Department has always 
expected grantees to take the State planning process seriously and 
formulate a projection for how services would be provided, the 
requirements in this final rule are not new. They are merely more 
descriptive and now in regulations where before the requirements were 
listed in a Training and Employment Guidance Letter (TEGL No. 16-07): 
http://www.doleta.gov/Seniors/pdf/TEGL16-07.pdf.
    Finally, the catch-all provision in Sec.  641.535 that informs 
grantees that they may be expected to provide services to participants 
according to administrative guidelines does not impose more 
responsibilities that require additional grant funds. The 
administrative guidance discussed in that section relates to further 
explanation or clarification for how the services listed in that 
section or in the 2006 OAA can be carried out. For example, past 
guidance has provided the Federal poverty levels which are adjusted 
each year. This guidance is important because it provides the framework 
for determining participant eligibility in the program. Other past 
guidance has allowed grantees the option of providing On-the-Job 
Experience or OJE training and established the parameters for using 
that training option.
    Department-issued guidance is designed to inform the grantees about 
ways to serve participants within program parameters and do not rise to

[[Page 53811]]

the level of creating an unfunded mandate for the program. To avoid 
ambiguity, we changed the regulatory text in Sec.  641.535(b) to 
reflect that further guidance may be issued to clarify existing 
requirements. The Department may also from time-to-time request that 
grantees provide certain information to program participants, such as 
information about Earned Income Tax Credit program services. We have 
found that as a general matter, grantees are eager to provide 
information to the participants when it is in the participants' best 
interest, and do so willingly. Furthermore, although carrying out the 
obligations of the statute and regulations may require careful 
management, the duties imposed by the regulations flow from the 
specific requirements of the statute as well as the Congressional 
purposes expressed in the statute. Although the regulations may provide 
more specifics on how those duties and purposes are to be carried out, 
the regulations do not do anything more than flesh out the requirements 
on how to properly implement and manage the SCSEP. Therefore, for the 
reasons described above, the Department believes that the requirements 
of this final rule do not impose any unfunded mandates.

E. Executive Order 13132

    The Department has reviewed this final rule in accordance with 
Executive Order 13132 on federalism and has determined that the Final 
Rule does not have ``policies that have federalism implications.'' As 
explained at Sec.  1(a) of the Order, `` `Policies that have federalism 
implications' refers to regulations, legislative comments or proposed 
legislation, and other policy statements or actions that have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.'' This 
rule does not ``have substantial direct effects on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government'' because the requirements in this final rule flow directly 
from the 2006 OAA. Whatever federalism implications these regulations 
have on the States is merely indirect. Moreover, these grants are, by 
definition, voluntary. States are not required to take the grant funds 
if they do not approve of the conditions attached to the funds. 
Therefore, the rule does not have a ``substantial direct effect'' on 
the States, nor will it alter the relationship, power, or 
responsibilities between the Federal and State governments. The 
relationship, power, or responsibilities were already established in 
the authorizing legislation.
    Finally, the Department received no comments on this provision. 
Accordingly, we conclude that this rule does not have federalism 
implications for the purposes of Executive Order 13132.

F. Executive Order 13045

    Executive Order 13045 concerns the protection of children from 
environmental health risks and safety risks. This final rule addresses 
the SCSEP, a program for older Americans, and has no impact on safety 
or health risks to children.

G. Executive Order 13175

    Executive Order 13175 addresses the unique relationship between the 
Federal Government and Indian tribal governments. The order requires 
Federal agencies to take certain actions when regulations have ``tribal 
implications.'' Required actions include consulting with tribal 
governments prior to promulgating a regulation with tribal implications 
and preparing a tribal impact statement. The Order defines regulations 
as having ``tribal implications'' when they have substantial direct 
effects on one or more Indian tribes, on the relationship between the 
Federal Government and Indian tribes, or on the distribution of power 
and responsibilities between the Federal Government and Indian tribes.
    The Department has reviewed this final rule and concludes that it 
does not have tribal implications. Although tribes are sub-recipients 
of national SCSEP grant funds, this final rule will not have a 
substantial direct effect on those tribes, because, as outlined in the 
Regulatory Flexibility section of the preamble, there are no new costs 
associated with implementing this final rule. This regulation does not 
affect the relationship between the Federal Government and the tribes, 
nor does it affect the distribution of power and responsibilities 
between the Federal Government and tribal governments. These grants 
are, by definition, voluntary and tribes are not required to take the 
grant funds if they do not approve of the conditions attached to the 
funds.
    Finally, the Department received no comments on this issue. 
Accordingly, we conclude that this rule does not have tribal 
implications for the purposes of Executive Order 13175.

H. Environmental Impact Assessment

    The Department has reviewed this final rule in accordance with the 
requirements of the National Environmental Policy Act (NEPA) of 1969 
(42 U.S.C. 4321 et seq.), the regulations of the Council on 
Environmental Quality (40 CFR part 1500), and the Department's NEPA 
procedures (29 CFR part 11). The rule will not have a significant 
impact on the quality of the human environment, and, thus, the 
Department has not prepared an environmental assessment or an 
environmental impact statement.

I. Assessment of Federal Regulations and Policies on Families

    Section 654 of the Treasury and General Government Appropriations 
Act, enacted as part of the Omnibus Consolidated and Emergency 
Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112 Stat. 
2681), requires the Department to assess the impact of this rule on 
family well-being. A rule that is determined to have a negative effect 
on families must be supported with an adequate rationale.
    The Department has assessed this final rule and determines that it 
will not have a negative effect on families. Indeed, we believe the 
SCSEP strengthens families by providing job training and support 
services to low-income older Americans.

J. Executive Order 12630

    Executive Order 12630, Governmental Actions and Interference with 
Constitutionally Protected Property Rights, is not relevant to this 
Final Rule because the rule does not involve implementation of a policy 
with takings implications.

K. Executive Order 12988

    This final rule has been drafted and reviewed in accordance with 
Executive Order 12988, Civil Justice Reform, and will not unduly burden 
the Federal court system. The Department has written the regulation so 
as to minimize litigation and provide a clear legal standard for 
affected conduct, and has carefully reviewed it to eliminate drafting 
errors and ambiguities.

L. Executive Order 13211

    This final rule is not subject to Executive Order 13211 because the 
rule will not have a significant adverse effect on the supply, 
distribution, or use of energy.

M. Plain Language

    The Department drafted this rule in plain language.

[[Page 53812]]

List of Subjects in 20 CFR Part 641

    Aged, Employment, Government contracts, Grant programs--Labor, 
Reporting and recordkeeping requirements.

0
For the reasons discussed in the preamble, the Department of Labor 
amends 20 CFR part 641 as follows:

PART 641--PROVISIONS GOVERNING THE SENIOR COMMUNITY SERVICE 
EMPLOYMENT PROGRAM

Subpart A--Purpose and Definitions
Sec.
641.100 What does this part cover?
641.110 What is the SCSEP?
641.120 What are the purposes of the SCSEP?
641.130 What is the scope of this part?
641.140 What definitions apply to this part?
Subpart B--Coordination With the Workforce Investment Act
641.200 What is the relationship between the SCSEP and the Workforce 
Investment Act?
641.210 What services, in addition to the applicable core services, 
must SCSEP grantees and sub-recipients provide through the One-Stop 
delivery system?
641.220 Does title I of WIA require the SCSEP to use OAA funds for 
individuals who are not eligible for SCSEP services or for services 
that are not authorized under the OAA?
641.230 Must the individual assessment conducted by the SCSEP 
grantee or sub-recipient and the assessment performed by the One-
Stop delivery system be accepted for use by either entity to 
determine the individual's need for services in the SCSEP and adult 
programs under title I-B of WIA?
641.240 Are SCSEP participants eligible for intensive and training 
services under title I of WIA?
Subpart C--The State Plan
641.300 What is the State Plan?
641.302 What is a four-year strategy?
641.305 Who is responsible for developing and submitting the State 
Plan?
641.310 May the Governor, or the highest government official, 
delegate responsibility for developing and submitting the State 
Plan?
641.315 Who participates in developing the State Plan?
641.320 Must all national grantees operating within a State 
participate in the State planning process?
641.325 What information must be provided in the State Plan?
641.330 How should the State Plan reflect community service needs?
641.335 How should the Governor, or the highest government official, 
address the coordination of SCSEP services with activities funded 
under title I of WIA?
641.340 How often must the Governor, or the highest government 
official, update the State Plan?
641.345 What are the requirements for modifying the State Plan?
641.350 How should public comments be solicited and collected?
641.355 Who may comment on the State Plan?
641.360 How does the State Plan relate to the equitable distribution 
report?
641.365 How must the equitable distribution provisions be reconciled 
with the provision that disruptions to current participants should 
be avoided?
Subpart D--Grant Application and Responsibility Review Requirements for 
State and National SCSEP Grants
641.400 What entities are eligible to apply to the Department for 
funds to administer SCSEP projects?
641.410 How does an eligible entity apply?
641.420 What are the eligibility criteria that each applicant must 
meet?
641.430 What are the responsibility conditions that an applicant 
must meet?
641.440 Are there responsibility conditions that alone will 
disqualify an applicant?
641.450 How will the Department examine the responsibility of 
eligible entities?
641.460 What factors will the Department consider in selecting 
national grantees?
641.465 Under what circumstances may the Department reject an 
application?
641.470 What happens if an applicant's application is rejected?
641.480 May the Governor, or the highest government official, make 
recommendations to the Department on national grant applications?
641.490 When will the Department compete SCSEP grant awards?
641.495 When must a State compete its SCSEP award?
Subpart E--Services to Participants
641.500 Who is eligible to participate in the SCSEP?
641.505 When is eligibility determined?
641.507 How is applicant income computed?
641.510 What types of income are included and excluded for 
participant eligibility determinations?
641.512 May grantees and sub-recipients enroll otherwise eligible 
job ready individuals and place them directly into unsubsidized 
employment?
641.515 How must grantees and sub-recipients recruit and select 
eligible individuals for participation in the SCSEP?
641.520 Are there any priorities that grantees and sub-recipients 
must use in selecting eligible individuals for participation in the 
SCSEP?
641.535 What services must grantees and sub-recipients provide to 
participants?
641.540 What types of training may grantees and sub-recipients 
provide to SCSEP participants in addition to the training received 
at the community service assignment?
641.545 What supportive services may grantees and sub-recipients 
provide to participants?
641.550 What responsibility do grantees and sub-recipients have to 
place participants in unsubsidized employment?
641.565 What policies govern the provision of wages and benefits to 
participants?
641.570 Is there a time limit for participation in the program?
641.575 May a grantee or sub-recipient establish a limit on the 
amount of time its participants may spend at a host agency?
641.577 Is there a limit on community service assignment hours?
641.580 Under what circumstances may a grantee or sub-recipient 
terminate a participant?
641.585 What is the employment status of SCSEP participants?
Subpart F--Pilot, Demonstration, and Evaluation Projects
641.600 What is the purpose of the pilot, demonstration, and 
evaluation projects authorized under Sec.  502(e) of the OAA?
641.610 How are pilot, demonstration, and evaluation projects 
administered?
641.620 How may an organization apply for pilot, demonstration, and 
evaluation project funding?
641.630 What pilot, demonstration, and evaluation project activities 
are allowable under Sec.  502(e)?
641.640 Should pilot, demonstration, and evaluation project entities 
coordinate with SCSEP grantees and sub-recipients, including area 
agencies on aging?
Subpart G--Performance Accountability
641.700 What performance measures/indicators apply to SCSEP 
grantees?
641.710 How are the performance indicators defined?
641.720 How will the Department and grantees initially determine and 
then adjust expected levels of performance for the core performance 
measures?
641.730 How will the Department assist grantees in the transition to 
the new core performance indicators?
641.740 How will the Department determine whether a grantee fails, 
meets, or exceeds the expected levels of performance for the core 
indicators and what will be the consequences of failing to meet 
expected levels of performance?
641.750 Will there be performance-related incentives?
Subpart H--Administrative Requirements
641.800 What uniform administrative requirements apply to the use of 
SCSEP funds?
641.803 What is program income?
641.806 How must SCSEP program income be used?
641.809 What non-Federal share (matching) requirements apply to the 
use of SCSEP funds?
641.812 What is the period of availability of SCSEP funds?
641.815 May the period of availability be extended?
641.821 What audit requirements apply to the use of SCSEP funds?
641.824 What lobbying requirements apply to the use of SCSEP funds?

[[Page 53813]]

641.827 What general nondiscrimination requirements apply to the use 
of SCSEP funds?
641.833 What policies govern political patronage?
641.836 What policies govern political activities?
641.839 What policies govern union organizing activities?
641.841 What policies govern nepotism?
641.844 What maintenance of effort requirements apply to the use of 
SCSEP funds?
641.847 What uniform allowable cost requirements apply to the use of 
SCSEP funds?
641.850 Are there other specific allowable and unallowable cost 
requirements for the SCSEP?
641.853 How are costs classified?
641.856 What functions and activities constitute administrative 
costs?
641.859 What other special rules govern the classification of costs 
as administrative costs or programmatic activity costs?
641.861 Must SCSEP recipients provide funding for the administrative 
costs of sub-recipients?
641.864 What functions and activities constitute programmatic 
activity costs?
641.867 What are the limitations on the amount of SCSEP 
administrative costs?
641.870 Under what circumstances may the administrative cost 
limitation be increased?
641.873 What minimum expenditure levels are required for participant 
wages and benefits?
641.874 What conditions apply to a SCSEP grantee request to use 
additional funds for training and supportive service costs?
641.876 When will compliance with cost limitations and minimum 
expenditure levels be determined?
641.879 What are the financial and performance reporting 
requirements for recipients?
641.881 What are the SCSEP recipient's responsibilities relating to 
awards to sub-recipients?
641.884 What are the grant closeout procedures?
Subpart I--Grievance Procedures and Appeals Process
641.900 What appeal process is available to an applicant that does 
not receive a grant?
641.910 What grievance procedures must grantees make available to 
applicants, employees, and participants?
641.920 What actions of the Department may a grantee appeal and what 
procedures apply to those appeals?
641.930 Is there an alternative dispute resolution process that may 
be used in place of an OALJ hearing?

    Authority:  42 U.S.C. 3056 et seq.; Pub. L. 109-365.

Subpart A--Purpose and Definitions


Sec.  641.100  What does this part cover?

    Part 641 contains the Department of Labor's regulations for the 
Senior Community Service Employment Program (SCSEP), authorized under 
title V of the Older Americans Act (OAA), 42 U.S.C. 3056 et seq., as 
amended by the Older Americans Act Amendments of 2006, Public Law 109-
365. This part and other pertinent regulations set forth the 
regulations applicable to the SCSEP.
    (a) Subpart A of this part contains introductory provisions and 
definitions that apply to this part.
    (b) Subpart B of this part describes the required relationship 
between the OAA and the Workforce Investment Act of 1998 (WIA), 29 
U.S.C. 2801 et seq. These provisions discuss the coordinated efforts to 
provide services through the integration of the SCSEP within the One-
Stop delivery system.
    (c) Subpart C of this part sets forth the requirements for the 
State Plan, such as the four-year strategy, required coordination 
efforts, public comments, and equitable distribution.
    (d) Subpart D of this part establishes grant planning and 
application requirements, including grantee eligibility and 
responsibility review provisions that apply to the Department's award 
of SCSEP funds for State and national grants.
    (e) Subpart E of this part details SCSEP participant services.
    (f) Subpart F of this part provides the rules for pilot, 
demonstration, and evaluation projects.
    (g) Subpart G of this part outlines the performance accountability 
requirements. This subpart establishes requirements for performance 
measures, defines such measures, and establishes corrective actions for 
failure to meet core performance measures.
    (h) Subpart H of this part sets forth the administrative 
requirements for SCSEP funds.
    (i) Subpart I of this part describes the grievance and appeals 
processes and requirements.


Sec.  641.110  What is the SCSEP?

    The Senior Community Service Employment Program (SCSEP) is a 
program administered by the Department of Labor that serves unemployed 
low-income persons who are 55 years of age and older and who have poor 
employment prospects by training them in part-time community service 
assignments and by assisting them in developing skills and experience 
to facilitate their transition to unsubsidized employment.


Sec.  641.120  What are the purposes of the SCSEP?

    The purposes of the SCSEP are to foster individual economic self-
sufficiency and promote useful part-time opportunities in community 
service assignments for unemployed low-income persons who are 55 years 
of age or older, particularly persons who have poor employment 
prospects, and to increase the number of older persons who may enjoy 
the benefits of unsubsidized employment in both the public and private 
sectors. (OAA Sec.  502(a)(1)).


Sec.  641.130  What is the scope of this part?

    The regulations in this part address the requirements that apply to 
the SCSEP. More detailed policies and procedures are contained in 
administrative guidelines issued by the Department. Throughout this 
part, phrases such as, ``according to instructions (procedures) issued 
by the Department'' or ``additional guidance will be provided through 
administrative issuance'' refer to the documents issued under the 
Secretary's authority to administer the SCSEP, such as Training and 
Employment Guidance Letters (TEGLs), Training and Employment Notices 
(TENs), previously issued SCSEP Older Worker Bulletins that are still 
in effect, technical assistance guides, and other SCSEP guidance.


Sec.  641.140  What definitions apply to this part?

    The following definitions apply to this part:
    Additional indicators mean retention in unsubsidized employment for 
one year; satisfaction of participants, employers and their host 
agencies with their experiences and the services provided; and any 
other indicators of performance that the Secretary determines to be 
appropriate to evaluate services and performance. (OAA Sec.  
513(b)(2)).
    At risk for homelessness means an individual is likely to become 
homeless and the individual lacks the resources and support networks 
needed to obtain housing.
    Authorized position level means the number of SCSEP enrollment 
opportunities that can be supported for a 12-month period based on the 
average national unit cost. The authorized position level is derived by 
dividing the total amount of funds appropriated for a Program Year by 
the national average unit cost per participant for that Program Year as 
determined by the Department. The national average unit cost includes 
all costs of administration, other participant costs, and participant 
wage and benefit costs as defined in Sec.  506(g) of the OAA.
    Co-enrollment applies to any individual who meets the 
qualifications for SCSEP participation and is also

[[Page 53814]]

enrolled as a participant in WIA or another employment and training 
program, as provided in the Individual Employment Plan.
    Community service means:
    (1) Social, health, welfare, and educational services (including 
literacy tutoring), legal and other counseling services and assistance, 
including tax counseling and assistance and financial counseling, and 
library, recreational, and other similar services;
    (2) Conservation, maintenance, or restoration of natural resources;
    (3) Community betterment or beautification;
    (4) Antipollution and environmental quality efforts;
    (5) Weatherization activities;
    (6) Economic development; and
    (7) Other such services essential and necessary to the community as 
the Secretary determines by rule to be appropriate. (OAA Sec.  
518(a)(1)).
    Community service assignment means part-time, temporary employment 
paid with grant funds in projects at host agencies through which 
eligible individuals are engaged in community service and receive work 
experience and job skills that can lead to unsubsidized employment. 
(OAA Sec.  518(a)(2)).
    Core indicators means hours (in the aggregate) of community service 
employment; entry into unsubsidized employment; retention in 
unsubsidized employment for six months; earnings; the number of 
eligible individuals served; and most-in-need (the number of 
individuals described in Sec.  518 (a)(3)(B)(ii) or (b)(2) of the OAA). 
(OAA Sec.  513(b)(1)).
    Core Services means those services described in Sec.  134(d)(2) of 
WIA.
    Department or DOL means the United States Department of Labor, 
including its agencies and organizational units.
    Disability means a disability attributable to a mental or physical 
impairment, or a combination of mental and physical impairments, that 
results in substantial functional limitations in one or more of the 
following areas of major life activity:
    (1) Self-care;
    (2) Receptive and expressive language;
    (3) Learning;
    (4) Mobility;
    (5) Self-direction;
    (6) Capacity for independent living;
    (7) Economic self-sufficiency;
    (8) Cognitive functioning; and
    (9) Emotional adjustment.
    (42 U.S.C. 3002(13)).
    Equitable distribution report means a report based on the latest 
available Census or other reliable data, which lists the optimum number 
of participant positions in each designated area in the State, and the 
number of authorized participant positions each grantee serves in that 
area, taking into account the needs of underserved counties and 
incorporated cities as necessary. This report provides a basis for 
improving the distribution of SCSEP positions.
    Frail means an individual 55 years of age or older who is 
determined to be functionally impaired because the individual--
    (1)(i) Is unable to perform at least two activities of daily living 
without substantial human assistance, including verbal reminding, 
physical cueing, or supervision; or
    (ii) At the option of the State, is unable to perform at least 
three such activities without such assistance; or
    (2) Due to a cognitive or other mental impairment, requires 
substantial supervision because the individual behaves in a manner that 
poses a serious health or safety hazard to the individual or to another 
individual. (42 U.S.C. 3002(22)).
    Grant period means the time period between the effective date of 
the grant award and the ending date of the award, which includes any 
modifications extending the period of performance, whether by the 
Department's exercise of options contained in the grant agreement or 
otherwise. This is also referred to as ``project period'' or ``award 
period.''
    Grantee means an entity receiving financial assistance directly 
from the Department to carry out SCSEP activities. The grantee is the 
legal entity that receives the award and is legally responsible for 
carrying out the SCSEP, even if only a particular component of the 
entity is designated in the grant award document. Grantees include 
public and nonprofit private agencies and organizations, agencies of a 
State, tribal organizations, and Territories, that receive SCSEP grants 
from the Department. (OAA Sec. Sec.  502(b)(1), 506(a)(2)). As used 
here, ``grantee'' includes ``grantee'' as defined in 29 CFR 97.3 and 
``recipient'' as defined in 29 CFR 95.2(gg).
    Greatest economic need means the need resulting from an income 
level at or below the poverty guidelines established by the Department 
of Health and Human Services and approved by the Office of Management 
and Budget (OMB). (42 U.S.C. 3002(23)).
    Greatest social need means the need caused by non-economic factors, 
which include: Physical and mental disabilities; language barriers; and 
cultural, social, or geographical isolation, including isolation caused 
by racial or ethnic status, which restricts the ability of an 
individual to perform normal daily tasks or threatens the capacity of 
the individual to live independently. (42 U.S.C. 3002(24)).
    Homeless includes:
    (1) An individual who lacks a fixed, regular, and adequate 
nighttime residence; and
    (2) An individual who has a primary nighttime residence that is:
    (i) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing for the mentally ill);
    (ii) An institution that provides a temporary residence for 
individuals intended to be institutionalized; or
    (iii) A public or private place not designed for, or ordinarily 
used as, regular sleeping accommodations for human beings. (42 U.S.C. 
11302(a)).
    Host agency means a public agency or a private nonprofit 
organization exempt from taxation under Sec.  501(c)(3) of the Internal 
Revenue Code of 1986 which provides a training work site and 
supervision for one or more participants. Political parties cannot be 
host agencies. A host agency may be a religious organization as long as 
the projects in which participants are being trained do not involve the 
construction, operation, or maintenance of any facility used or to be 
used as a place for sectarian religious instruction or worship. (OAA 
Sec.  502(b)(1)(D)).
    Indian means a person who is a member of an Indian tribe. (42 
U.S.C. 3002(26)).
    Indian tribe means any tribe, band, nation, or other organized 
group or community of Indians (including Alaska Native village or 
regional or village corporation as defined in or established pursuant 
to the Alaska Native Claims Settlement Act, 43 U.S.C. 1601 et seq.) 
which: (1) Is recognized as eligible for the special programs and 
services provided by the United States to Indians because of their 
status as Indians; or (2) is located on, or in proximity to, a Federal 
or State reservation or Rancheria. (42 U.S.C. 3002(27)).
    Individual employment plan (IEP) means a plan for a participant 
that is based on an assessment of that participant conducted by the 
grantee or sub-recipient, or a recent assessment or plan developed by 
another employment and training program, and a related service 
strategy. The IEP must include an appropriate employment goal (except 
that after the first IEP, subsequent IEPs need not contain an 
employment goal if such a goal is not feasible), objectives that lead 
to the goal, a timeline for the achievement of the objectives; and be

[[Page 53815]]

jointly agreed upon with the participant. (OAA Sec.  502(b)(1)(N)).
    Intensive services means those services authorized by Sec.  
134(d)(3) of the Workforce Investment Act.
    Jobs for Veterans Act means Public Law 107-288 (2002). Section 2(a) 
of the Jobs for Veterans Act, codified at 38 U.S.C. 4215(a), provides a 
priority of service for Department of Labor employment and training 
programs for veterans, and certain spouses of veterans, who otherwise 
meet the eligibility requirements for participation. Priority is 
extended to veterans. Priority is also extended to the spouse of a 
veteran who died of a service-connected disability; the spouse of a 
member of the Armed Forces on active duty who has been listed for a 
total of more than 90 days as missing in action, captured in the line 
of duty by a hostile force, or forcibly detained by a foreign 
government or power; the spouse of any veteran who has a total 
disability resulting from a service-connected disability; and the 
spouse of any veteran who died while a disability so evaluated was in 
existence. (See Sec.  641.520(b)).
    Job ready refers to individuals who do not require further 
education or training to perform work that is available in their labor 
market.
    Limited English proficiency means individuals who do not speak 
English as their primary language and who have a limited ability to 
read, speak, write, or understand English.
    Local Workforce Investment Area or local area means an area 
designated by the Governor of a State under Sec.  116 of the Workforce 
Investment Act.
    Local Board means a Local Workforce Investment Board established 
under Sec.  117 of the Workforce Investment Act.
    Low employment prospects means the likelihood that an individual 
will not obtain employment without the assistance of the SCSEP or 
another workforce development program. Persons with low employment 
prospects have a significant barrier to employment. Significant 
barriers to employment may include but are not limited to: Lacking a 
substantial employment history, basic skills, and/or English-language 
proficiency; lacking a high school diploma or the equivalent; having a 
disability; being homeless; or residing in socially and economically 
isolated rural or urban areas where employment opportunities are 
limited.
    Low literacy skills means the individual computes or solves 
problems, reads, writes, or speaks at or below the 8th grade level or 
is unable to compute or solve problems, read, write, or speak at a 
level necessary to function on the job, in the individual's family, or 
in society.
    Most-in-need means participants with one or more of the following 
characteristics: Have a severe disability; are frail; are age 75 or 
older; are age-eligible but not receiving benefits under title II of 
the Social Security Act; reside in an area with persistent unemployment 
and have severely limited employment prospects; have limited English 
proficiency; have low literacy skills; have a disability; reside in a 
rural area; are veterans; have low employment prospects; have failed to 
find employment after using services provided under title I of the 
Workforce Investment Act of 1998 (29 U.S.C. 2801 et seq.); or are 
homeless or at risk for homelessness. (OAA Sec.  513(b)(1)(E)).
    National grantee means a public or non-profit private agency or 
organization, or Tribal organization, that receives a grant under title 
V of the OAA (42 U.S.C. 3056 et seq.) to administer a SCSEP project. 
(See OAA Sec.  506(g)(5)).
    OAA means the Older Americans Act, 42 U.S.C. 3001 et seq., as 
amended.
    One-Stop Center means the One-Stop Center system in a WIA local 
area which must include a comprehensive One-Stop Center through which 
One-Stop partners provide applicable core services and which provides 
access to other programs and services carried out by the One-Stop 
partners. (See WIA Sec.  134(c)(2)).
    One-Stop delivery system means a system under which employment and 
training programs, services, and activities are available through a 
network of eligible One-Stop partners, which assures that information 
about and access to core services is available regardless of where the 
individuals initially enter the workforce investment system. (See WIA 
Sec.  134(c)(2)).
    One-Stop partner means an entity described in Sec.  121(b)(1) of 
the Workforce Investment Act, i.e., required partners, or an entity 
described in Sec.  121(b)(2) of the Workforce Investment Act, i.e., 
additional partners.
    Other participant (enrollee) costs means the costs of participant 
training, including the payment of reasonable costs to instructors, 
classroom rental, training supplies, materials, equipment, and tuition, 
and which may be provided before or during a community service 
assignment, in a classroom setting, or under other appropriate 
arrangements; job placement assistance, including job development and 
job search assistance; participant supportive services to enable a 
participant to successfully participate in a project, including the 
payment of reasonable costs of transportation, health care and medical 
services, special job-related or personal counseling, incidentals (such 
as work shoes, badges, uniforms, eyeglasses, and tools), child and 
adult care, temporary shelter, and follow-up services; and outreach, 
recruitment and selection, intake orientation, and assessments. (OAA 
Sec.  502(c)(6)(A)(ii)-(v)).
    Pacific Island and Asian Americans means Americans having origins 
in any of the original peoples of the Far East, Southeast Asia, the 
Indian Subcontinent, or the Pacific Islands. (OAA Sec.  518(a)(5)).
    Participant means an individual who is determined to be eligible 
for the SCSEP, is given a community service assignment, and is 
receiving any service funded by the program as described in subpart E.
    Persistent unemployment means that the annual average unemployment 
rate for a county or city is more than 20 percent higher than the 
national average for two out of the last three years.
    Poor employment prospects means the significant likelihood that an 
individual will not obtain employment without the assistance of the 
SCSEP or another workforce development program. Persons with poor 
employment prospects have a significant barrier to employment; 
significant barriers to employment include but are not limited to: 
lacking a substantial employment history, basic skills, and/or English-
language proficiency; lacking a high school diploma or the equivalent; 
having a disability; being homeless; or residing in socially and 
economically isolated rural or urban areas where employment 
opportunities are limited.
    Program operator means a grantee or sub-recipient that receives 
SCSEP funds from a SCSEP grantee or a higher-tier SCSEP sub-recipient 
and performs the following activities for all its participants: 
Eligibility determination, participant assessment, and development of 
and placement into community service assignments.
    Program Year means the one-year period beginning on July 1 and 
ending on June 30.
    Project means an undertaking by a grantee or sub-recipient in 
accordance with a grant or contract agreement that provides service to 
communities and training and employment opportunities to eligible 
individuals.
    Recipient means grantee. As used here, ``recipient'' includes 
``recipient'' as defined in 29 CFR 95.2(gg) and ``grantee'' as defined 
in 29 CFR 97.3.
    Residence means an individual's declared dwelling place or address 
as

[[Page 53816]]

demonstrated by appropriate documentation.
    Rural means an area not designated as a metropolitan statistical 
area by the Census Bureau; segments within metropolitan counties 
identified by codes 4 through 10 in the Rural Urban Commuting Area 
(RUCA) system; and RUCA codes 2 and 3 for census tracts that are larger 
than 400 square miles and have population density of less than 30 
people per square mile.
    SCSEP means the Senior Community Service Employment Program 
authorized under title V of the OAA.
    Secretary means the Secretary of the U.S. Department of Labor.
    Service area means the geographic area served by a local SCSEP 
project in accordance with a grant agreement.
    Severe disability means a severe, chronic disability attributable 
to mental or physical impairment, or a combination of mental and 
physical impairments, that--
    (1) Is likely to continue indefinitely; and
    (2) Results in substantial functional limitation in 3 or more of 
the following areas of major life activity:
    (i) Self-care;
    (ii) Receptive and expressive language;
    (iii) Learning;
    (iv) Mobility;
    (v) Self-direction;
    (vi) Capacity for independent living;
    (vii) Economic self-sufficiency.
    (42 U.S.C. 3002(48)).
    Severely limited employment prospects means the substantial 
likelihood that an individual will not obtain employment without the 
assistance of the SCSEP or another workforce development program. 
Persons with severely limited employment prospects have more than one 
significant barrier to employment; significant barriers to employment 
may include but are not limited to: Lacking a substantial employment 
history, basic skills, and/or English-language proficiency; lacking a 
high school diploma or the equivalent; having a disability; being 
homeless; or residing in socially and economically isolated rural or 
urban areas where employment opportunities are limited.
    State Board means a State Workforce Investment Board established 
under WIA Sec.  111.
    State grantee means the entity designated by the Governor, or the 
highest government official, to enter into a grant with the Department 
to administer a State or Territory SCSEP project under the OAA. Except 
as applied to funding distributions under Sec.  506 of the OAA, this 
definition applies to the 50 States, Puerto Rico, the District of 
Columbia and the following Territories: Guam, American Samoa, U.S. 
Virgin Islands, and the Commonwealth of the Northern Mariana Islands.
    State Plan means a plan that the Governor, or the highest 
government official, of a State must submit to the Secretary that 
outlines a four-year strategy, and describes the planning and 
implementation process, for the statewide provision of community 
service employment and other authorized activities for eligible 
individuals under SCSEP. (See Sec.  641.300).
    Sub-recipient means the legal entity to which a sub-award of 
financial assistance is made by the grantee (or by a higher-tier sub-
recipient), and that is accountable to the grantee for the use of the 
funds provided. As used here, ``sub-recipient'' includes ``sub-
grantee'' as defined in 29 CFR 97.3 and ``sub-recipient'' as defined in 
29 CFR 95.2(kk).
    Supportive services means services, such as transportation, health 
and medical services, special job-related or personal counseling, 
incidentals (such as work shoes, badges, uniforms, eye-glasses, and 
tools), child and adult care, housing, including temporary shelter, 
follow up services, and needs-related payments, which are necessary to 
enable an individual to participate in activities authorized under the 
SCSEP. (OAA Sec.  502(c)(6)(A)(iv) and 518(a)(7)).
    Title V of the OAA means 42 U.S.C. 3056 et seq., as amended.
    Training services means those services authorized by WIA Sec.  
134(d)(4).
    Tribal organization means the recognized governing body of any 
Indian tribe, or any legally established organization of Indians which 
is controlled, sanctioned, or chartered by such governing body. (42 
U.S.C. 3002(54)).
    Unemployed means an individual who is without a job and who wants 
and is available for work, including an individual who may have 
occasional employment that does not result in a constant source of 
income. (OAA 518(a)(8)).
    Veteran means an individual who is a ``covered person'' for 
purposes of the Jobs for Veterans Act, 38 U.S.C. 4215(a)(1).
    Workforce Investment Act (WIA) means the Workforce Investment Act 
of 1998 (Pub. L. 105-220 (Aug. 7, 1998)), 29 U.S.C. 2801 et seq., as 
amended.
    Workforce Investment Act (WIA) regulations means regulations at 20 
CFR part 652, subpart D and parts 660-671.

Subpart B--Coordination With the Workforce Investment Act


Sec.  641.200  What is the relationship between the SCSEP and the 
Workforce Investment Act?

    The SCSEP is a required partner under the Workforce Investment Act. 
As such, it is a part of the One-Stop delivery system. When acting in 
their capacity as WIA partners, SCSEP grantees and sub-recipients are 
required to follow all applicable rules under WIA and its regulations. 
(29 U.S.C. 2841(b)(1)(B)(vi) and 20 CFR 662.200 through 662.280).


Sec.  641.210  What services, in addition to the applicable core 
services, must SCSEP grantees and sub-recipients provide through the 
One-Stop delivery system?

    In addition to providing core services, as defined at 20 CFR 
662.240 of the WIA regulations, SCSEP grantees and sub-recipients must 
make arrangements through the One-Stop delivery system to provide 
eligible and ineligible individuals with referrals to WIA intensive and 
training services and access to other activities and programs carried 
out by other One-Stop partners.


Sec.  641.220  Does title I of WIA require the SCSEP to use OAA funds 
for individuals who are not eligible for SCSEP services or for services 
that are not authorized under the OAA?

    No, SCSEP requirements continue to apply. Title V resources may not 
be used to serve individuals who are not SCSEP-eligible. The Workforce 
Investment Act creates a seamless service delivery system for 
individuals seeking workforce development services by linking the One-
Stop partners in the One-Stop delivery system. Although the overall 
effect is to provide universal access to core services, SCSEP resources 
may only be used to provide services that are authorized and provided 
under the SCSEP to eligible individuals. Note, however, that one 
allowable SCSEP cost is a SCSEP project's proportionate share of One-
Stop costs. See Sec.  641.850(d). Title V funds can be used to pay 
wages to SCSEP participants receiving intensive and training services 
under title I of WIA provided that the SCSEP participants have each 
received a community service assignment. All other individuals who are 
in need of the services provided under the SCSEP, but who do not meet 
the eligibility criteria to enroll in the SCSEP, should be referred to 
or enrolled in WIA or other appropriate partner programs. WIA Sec.  
121(b)(1). These arrangements should be negotiated in the Memorandum of 
Understanding (MOU), which is an agreement developed and executed

[[Page 53817]]

between the Local Workforce Investment Board, with the agreement of the 
chief local elected official, and the One-Stop partners relating to the 
operation of the One-Stop delivery system in the local area. The MOU is 
further described in the WIA regulations at 20 CFR Sec. Sec.  662.300 
and 662.310.


Sec.  641.230  Must the individual assessment conducted by the SCSEP 
grantee or sub-recipient and the assessment performed by the One-Stop 
delivery system be accepted for use by either entity to determine the 
individual's need for services in the SCSEP and adult programs under 
title I-B of WIA?

    Yes, Sec.  502(b)(3) of the OAA provides that an assessment or IEP 
completed by the SCSEP satisfies any condition for an assessment, 
service strategy, or IEP completed at the One-Stop and vice-versa. (OAA 
Sec.  502(b)(3)). These reciprocal arrangements and the contents of the 
SCSEP IEP and WIA IEP should be negotiated in the MOU.


Sec.  641.240  Are SCSEP participants eligible for intensive and 
training services under title I of WIA?

    (a) Although SCSEP participants are not automatically eligible for 
intensive and training services under title I of WIA, local boards may 
deem SCSEP participants, either individually or as a group, as 
satisfying the requirements for receiving adult intensive and training 
services under title I of WIA.
    (b) SCSEP participants who have been assessed and for whom an IEP 
has been developed have received an intensive service under 20 CFR 
663.240(a) of the WIA regulations. In order to enhance skill 
development related to the IEP, it may be necessary to provide training 
beyond the community service assignment to enable participants to meet 
their unsubsidized employment objectives. The SCSEP grantee or sub-
recipient, the host agency, the WIA program, or another One-Stop 
partner may provide training as appropriate and as negotiated in the 
MOU. (See Sec.  641.540 for a further discussion of training for SCSEP 
participants.)

Subpart C--The State Plan


Sec.  641.300  What is the State Plan?

    The State Plan is a plan, submitted by the Governor, or the highest 
government official, in each State, as an independent document or as 
part of the WIA Unified Plan, that outlines a four-year strategy for 
the statewide provision of community service employment and other 
authorized activities for eligible individuals under the SCSEP as 
described in Sec.  641.302. The State Plan also describes the planning 
and implementation process for SCSEP services in the State, taking into 
account the relative distribution of eligible individuals and 
employment opportunities within the State. The State Plan is intended 
to foster coordination among the various SCSEP grantees and sub-
recipients operating within the State and to facilitate the efforts of 
stakeholders, including State and local boards under WIA, to work 
collaboratively through a participatory process to accomplish the 
SCSEP's goals. (OAA Sec.  503(a)(1)). The State Plan provisions are 
listed in Sec.  641.325.


Sec.  641.302  What is a four-year strategy?

    The State Plan must outline a four-year strategy for the statewide 
provision of community service employment and other authorized 
activities for eligible individuals under the SCSEP program. (OAA Sec.  
503(a)(1)). The four-year strategy must specifically address the 
following:
    (a) The State's long-term strategy for achieving an equitable 
distribution of SCSEP positions within the State that:
    (1) Moves positions from over-served to underserved locations 
within the State, under Sec.  641.365;
    (2) Equitably serves rural and urban areas; and
    (3) Serves individuals afforded priority for service, pursuant to 
Sec.  641.520;
    (b) The State's long-term strategy for avoiding disruptions to the 
program when new Census or other reliable data become available, or 
when there is over-enrollment for any other reason;
    (c) The State's long-term strategy for serving minority older 
individuals under SCSEP;
    (d) Long-term projections for job growth in industries and 
occupations in the State that may provide employment opportunities for 
older workers, and how those relate to the types of unsubsidized jobs 
for which SCSEP participants will be trained, and the types of skill 
training to be provided;
    (e) The State's long-term strategy for engaging employers to 
develop and promote opportunities for the placement of SCSEP 
participants in unsubsidized employment;
    (f) The State's strategy for continuous improvement in the level of 
performance for entry into unsubsidized employment, and to achieve, at 
a minimum, the levels specified in Sec.  513(a)(2)(E)(ii) of the OAA;
    (g) Planned actions to coordinate activities of SCSEP grantees with 
the activities being carried out in the State under title I of WIA, 
including plans for using the WIA One-Stop delivery system and its 
partners to serve individuals aged 55 and older;
    (h) Planned actions to coordinate activities of SCSEP grantees with 
the activities being carried out in the State under other titles of the 
OAA;
    (i) Planned actions to coordinate the SCSEP with other public and 
private entities and programs that provide services to older Americans, 
such as community and faith-based organizations, transportation 
programs, and programs for those with special needs or disabilities;
    (j) Planned actions to coordinate the SCSEP with other labor market 
and job training initiatives; and
    (k) The State's long-term strategy to improve SCSEP services, 
including planned longer-term changes to the design of the program 
within the State, and planned changes in the use of SCSEP grantees and 
program operators to better achieve the goals of the program; this may 
include recommendations to the Department, as appropriate.


Sec.  641.305  Who is responsible for developing and submitting the 
State Plan?

    The Governor, or the highest governmental official, of each State 
is responsible for developing and submitting the State Plan to the 
Department.


Sec.  641.310  May the Governor, or the highest government official, 
delegate responsibility for developing and submitting the State Plan?

    (a) Yes, the Governor, or the highest governmental official of each 
State, may delegate responsibility for developing and submitting the 
State Plan, provided that any such delegation is consistent with State 
law and regulations.
    (b) To delegate responsibility, the Governor, or the highest 
government official, must submit to the Department a signed statement 
indicating the individual and/or organization that will be submitting 
the State Plan on his or her behalf.


Sec.  641.315  Who participates in developing the State Plan?

    (a) In developing the State Plan the Governor, or the highest 
government official, must seek the advice and recommendations of 
representatives from:
    (1) The State and area agencies on aging;
    (2) State and local boards under the Workforce Investment Act 
(WIA);
    (3) Public and private nonprofit agencies and organizations 
providing employment services, including each grantee operating a SCSEP 
project within the State, except as provided in Sec.  641.320(b);

[[Page 53818]]

    (4) Social service organizations providing services to older 
individuals;
    (5) Grantees under title III of the OAA;
    (6) Affected communities;
    (7) Unemployed older individuals;
    (8) Community-based organizations serving older individuals;
    (9) Business organizations; and
    (10) Labor organizations.
    (b) The Governor, or the highest government official, may also 
obtain the advice and recommendations of other interested organizations 
and individuals, including SCSEP program participants, in developing 
the State Plan. (OAA Sec.  503(a)(2)).


Sec.  641.320  Must all national grantees operating within a State 
participate in the State planning process?

    (a) The eligibility provision at OAA Sec.  514(c)(6) requires 
national grantees to coordinate activities with other organizations at 
the State and local levels. Therefore, except as provided in paragraph 
(b) of this section, any national grantee that does not participate in 
the State planning process may be deemed ineligible to receive SCSEP 
funds in the following Program Year.
    (b) National grantees serving older American Indians, or Pacific 
Island and Asian Americans, with funds reserved under OAA Sec.  
506(a)(3), are exempted from the requirement to participate in the 
State planning processes under Sec.  503(a)(8) of the OAA. Although 
these national grantees may choose not to participate in the State 
planning process, the Department encourages their participation. Only 
those grantees using reserved funds are exempt; if a grantee is awarded 
one grant with reserved funds and another grant with non-reserved 
funds, the grantee is required under paragraph (a) of this section to 
participate in the State planning process for purposes of the non-
reserved funds grant.


Sec.  641.325  What information must be provided in the State Plan?

    The Department issues instructions detailing the information that 
must be provided in the State Plan. At a minimum, the State Plan must 
include the State's four-year strategy, as described in Sec.  641.302, 
and information on the following:
    (a) The ratio of eligible individuals in each service area to the 
total eligible population in the State;
    (b) The relative distribution of:
    (1) Eligible individuals residing in urban and rural areas within 
the State;
    (2) Eligible individuals who have the greatest economic need;
    (3) Eligible individuals who are minorities;
    (4) Eligible individuals who are limited English proficient; and
    (5) Eligible individuals who have the greatest social need;
    (c) The current and projected employment opportunities in the State 
(such as by providing information available under Sec.  15 of the 
Wagner-Peyser Act (29 U.S.C. 491-2) by occupation), and the types of 
skills possessed by eligible individuals;
    (d) The localities and populations for which projects of the type 
authorized by title V are most needed;
    (e) Actions taken and/or planned to coordinate activities of SCSEP 
grantees in the State with activities carried out in the State under 
title I of WIA;
    (f) A description of the process used to obtain advice and 
recommendations on the State Plan from representatives of organizations 
and individuals listed in Sec.  641.315, and advice and recommendations 
on steps to coordinate SCSEP services with activities funded under 
title I of WIA from representatives of organizations listed in Sec.  
641.335;
    (g) A description of the State's procedures and time line for 
ensuring an open and inclusive planning process that provides 
meaningful opportunity for public comment as required by Sec.  641.350;
    (h) Public comments received, and a summary of the comments;
    (i) A description of the steps taken to avoid disruptions to the 
greatest extent possible as provided in Sec.  641.365; and
    (j) Such other information as the Department may require in the 
State Plan instructions. (OAA Sec.  503(a)).


Sec.  641.330  How should the State Plan reflect community service 
needs?

    The Governor, or the highest government official, must ensure that 
the State Plan identifies the types of community services that are 
needed and the places where these services are most needed. The State 
Plan should specifically identify the needs and locations of those 
individuals most in need of community services and the groups working 
to meet their needs. (OAA Sec.  503(a)(4)(E)).


Sec.  641.335  How should the Governor, or the highest government 
official, address the coordination of SCSEP services with activities 
funded under title I of WIA?

    The Governor, or the highest government official, must seek the 
advice and recommendations from representatives of the State and area 
agencies on aging in the State and the State and local boards 
established under title I of WIA. (OAA Sec.  503(a)(2)). The State Plan 
must describe the steps that are being taken to coordinate SCSEP 
activities within the State with activities being carried out under 
title I of WIA. (OAA Sec.  503(a)(4)(F)). The State Plan must describe 
the steps being taken to ensure that the SCSEP is an active partner in 
each One-Stop delivery system and the steps that will be taken to 
encourage and improve coordination with the One-Stop delivery system.


Sec.  641.340  How often must the Governor, or the highest government 
official, update the State Plan?

    (a) Under instructions issued by the Department, the Governor, or 
the highest government official, must review the State Plan and submit 
an update to the State Plan to the Secretary for consideration and 
approval not less often than every two years. OAA Sec.  503(a)(1). 
States are encouraged to review their State Plan more frequently than 
every two years, however, and make modifications as circumstances 
warrant, under Sec.  641.345.
    (b) Before development of the update to the State Plan, the 
Governor, or the highest government official, must seek the advice and 
recommendations of the individuals and organizations identified in 
Sec.  641.315 about what, if any, changes are needed, and must publish 
the State Plan, showing the changes, for public comment. OAA Sec.  
section 503(a)(2), 503(a)(3).


Sec.  641.345  What are the requirements for modifying the State Plan?

    (a) Modifications may be submitted anytime circumstances warrant.
    (b) Modifications to the State Plan are required when:
    (1) There are changes in Federal or State law or policy that 
substantially change the assumptions upon which the State Plan is 
based;
    (2) There are significant changes in the State's vision, four-year 
strategy, policies, performance indicators, or organizational 
responsibilities; or
    (3) There is a change in a grantee or grantees.
    (c) Modifications to the State Plan are subject to the same public 
comment requirements that apply to the development of the State Plan 
under Sec.  641.350.
    (d) States are not required to seek the advice and recommendations 
of the individuals and organizations identified in Sec.  641.315 when 
modifying the State Plan, except that States must seek the advice and 
recommendations of any national grantees operating in the State. While 
not required, states are strongly encouraged to seek the advice and 
recommendation of the relevant entities listed in Sec.  641.315 when or 
if modifying the State Plan becomes necessary.

[[Page 53819]]

    (e) The Department will issue additional instructions for the 
procedures that must be followed when requesting modifications to the 
State Plan.


Sec.  641.350  How should public comments be solicited and collected?

    The Governor, or the highest government official, should follow 
established State procedures to solicit and collect public comments. 
The State Plan must include a description of the State's procedures and 
schedule for ensuring an open and inclusive planning process that 
provides meaningful opportunity for public comment.


Sec.  641.355  Who may comment on the State Plan?

    Any individual or organization may comment on the Plan.


Sec.  641.360  How does the State Plan relate to the equitable 
distribution report?

    The two documents address some of the same areas, but are prepared 
at different points in time. The equitable distribution report is 
prepared by State grantees at the beginning of each fiscal year and 
provides a ``snapshot'' of the actual distribution of all of the 
authorized positions within the State, grantee-by-grantee, and the 
optimum number of participant positions in each designated area based 
on the latest available Census or other reliable data. The State Plan 
is prepared by the Governor, or the highest government official, and 
covers many areas in addition to equitable distribution, as discussed 
in Sec.  641.325, and sets forth a proposed plan for distribution of 
authorized positions in the State. Any distribution or redistribution 
of positions made as a result of a State Plan proposal will be 
reflected in the next equitable distribution report, which then forms 
the basis for the proposed distribution in the next State Plan update. 
This process is iterative in that it moves the authorized positions 
from overserved areas to underserved areas over a period of time.


Sec.  641.365  How must the equitable distribution provisions be 
reconciled with the provision that disruptions to current participants 
should be avoided?

    (a) Governors, or highest government officials, must describe in 
the State Plan the steps that are being taken to comply with the 
statutory requirement to avoid disruptions in the provision of services 
for participants. (OAA Sec.  503(a)(6)).
    (b) When there is new Census or other reliable data indicating that 
there has been a shift in the location of the eligible population or 
when there is over-enrollment for any other reason, the Department 
recommends a gradual shift in positions as they become vacant to areas 
where there has been an increase in the eligible population.
    (c) The Department does not define disruptions to mean that 
participants are entitled to remain in a subsidized community service 
assignment indefinitely. As discussed in Sec.  641.570, there is a time 
limit on SCSEP participation, thus permitting positions to be 
transferred over time.
    (d) Grantees and sub-recipients must not transfer positions from 
one geographic area to another without first notifying the State agency 
responsible for preparing the State Plan and equitable distribution 
report.
    (e) Grantees must submit, in writing, any proposed changes in 
distribution that occur after submission of the equitable distribution 
report to the Department for approval.
    (f) All grantees are required to coordinate any proposed changes in 
position distribution with the other grantees in the State, including 
the State project director, before submitting the proposed changes to 
the Department for approval. The request for the Department's approval 
must include the comments of the State project director, which the 
Department will consider in making its decision.

Subpart D--Grant Application and Responsibility Review Requirements 
for State and National SCSEP Grants


Sec.  641.400  What entities are eligible to apply to the Department 
for funds to administer SCSEP projects?

    (a) National Grants. Entities eligible to apply for national grants 
include nonprofit organizations, Federal public agencies, and tribal 
organizations. These entities must provide information to establish 
that they are capable of administering a multi-State program, as 
required by the Secretary. State and local agencies may not apply for 
these funds.
    (b) State Grants.
    (1) Section 506(e) of the OAA requires the Department to award each 
State a grant to provide SCSEP services. Governors, or highest 
government officials, designate an individual State agency as the 
organization to administer SCSEP funds.
    (2) If the State fails to meet its expected levels of performance 
for the core indicators for three consecutive years, it is not eligible 
to designate an agency to administer SCSEP funds in the following year. 
Instead, the State must conduct a competition to select an organization 
as the grantee of the funds allotted to the State under Sec.  506(e). 
Public and nonprofit private agencies and organizations, State agencies 
other than the previously designated, failed agency, and tribal 
organizations, are eligible to be selected as a grantee for the funds. 
Other States may not be selected as a grantee for this funding.


Sec.  641.410  How does an eligible entity apply?

    (a) General. An eligible entity must follow the application 
guidelines issued by the Department. The Department will issue 
application guidelines announcing the availability of national funds 
and State funds, whether they are awarded on a competitive or 
noncompetitive basis. The guidelines will contain application due 
dates, application instructions, evaluation criteria, and other 
necessary information.
    (b) National Grant Applicants. All applicants for SCSEP national 
grant funds, except for applications for grants proposing to serve 
older Indians and Pacific Island and Asian Americans with funds 
reserved under OAA Sec.  506(a)(3), must submit their applications to 
the Governor, or the highest government official, of each State in 
which projects are proposed so that he or she has a reasonable 
opportunity to make the recommendations described in Sec.  641.480, 
before submitting the application to the Department. (OAA Sec.  
503(a)(5)).
    (c) State Applicants. A State that submits a Unified Plan under 
Sec.  501 of WIA may include the State's SCSEP grant application in its 
Unified Plan. Any State that submits a SCSEP grant application as part 
of its WIA Unified Plan must address all of the application 
requirements as published in the Department's instructions. Sections 
641.300 through 641.365 address State Plans and modifications.


Sec.  641.420  What are the eligibility criteria that each applicant 
must meet?

    To be eligible to receive SCSEP funds, each applicant must 
demonstrate:
    (a) An ability to administer a program that serves the greatest 
number of eligible participants, giving particular consideration to 
individuals with greatest economic need, individuals with greatest 
social need, and individuals described in Sec.  641.570(b) or Sec.  
641.520(a)(2) through (a)(8).
    (b) An ability to administer a program that provides employment in 
community service assignments for eligible individuals in communities 
in which they reside, or in nearby communities, that will contribute to 
the general welfare of the community;

[[Page 53820]]

    (c) An ability to administer a program that moves eligible 
participants into unsubsidized employment;
    (d) Where the applicant has previously received a SCSEP grant, the 
applicant's prior performance in meeting SCSEP core measures of 
performance and addressing SCSEP additional measures of performance; 
and where the applicant has not received a SCSEP grant, the applicant's 
prior performance under other Federal or State programs; relevant past 
performance will also be used for scoring criterion and will be set 
forth more fully in the Solicitation for Grant Applications (see Sec.  
641.460);
    (e) An ability to move participants with multiple barriers to 
employment, including individuals described in Sec.  641.570(b) or 
Sec.  641.520(a)(2) through (a)(8), into unsubsidized employment;
    (f) An ability to coordinate activities with other organizations at 
the State and local levels, including the One-Stop delivery system;
    (g) An ability to properly manage the program, as reflected in its 
plan for fiscal management of the SCSEP;
    (h) An ability to administer a project that provides community 
service;
    (i) An ability to minimize program disruption for current 
participants and in community services provided if there is a change in 
project sponsor and/or location, and its plan for minimizing 
disruptions;
    (j) Any additional criteria that the Department deems appropriate 
to minimize disruptions for current participants. (OAA Sec.  514(c)).


Sec.  641.430  What are the responsibility conditions that an applicant 
must meet?

    Subject to Sec.  641.440, each applicant must meet the listed 
responsibility ``tests'' by not having committed the following acts:
    (a) The Department has been unable to recover a debt from the 
applicant, whether incurred by the applicant or by one of its sub-
recipients, or the applicant has failed to comply with a debt repayment 
plan to which it agreed. In this context, a debt is established by 
final agency action, followed by three demand letters to the applicant, 
without payment in full by the applicant.
    (b) Established fraud or criminal activity of a significant nature 
within the applicant's organization.
    (c) Serious administrative deficiencies identified by the 
Department, such as failure to maintain a financial management system 
as required by Federal regulations.
    (d) Willful obstruction of the auditing or monitoring process.
    (e) Failure to provide services to applicants as agreed to in a 
current or recent grant or to meet applicable core performance measures 
or address other applicable indicators of performance.
    (f) Failure to correct deficiencies brought to the grantee's 
attention in writing as a result of monitoring activities, reviews, 
assessments, or other activities.
    (g) Failure to return a grant closeout package or outstanding 
advances within 90 days after the grant expiration date or receipt of 
closeout package, whichever is later, unless an extension has been 
requested and granted.
    (h) Failure to submit required reports.
    (i) Failure to properly report and dispose of Government property 
as instructed by the Department.
    (j) Failure to have maintained effective cash management or cost 
controls resulting in excess cash on hand.
    (k) Failure to ensure that a sub-recipient complies with applicable 
audit requirements, including OMB Circular A-133 and the audit 
requirements specified at Sec.  641.821.
    (l) Failure to audit a sub-recipient within the period required 
under Sec.  641.821.
    (m) Final disallowed costs in excess of five percent of the grant 
or contract award if, in the judgment of the Grant Officer, the 
disallowances are egregious findings.
    (n) Failure to establish a mechanism to resolve a sub-recipient's 
audit in a timely fashion. (OAA Sec.  514(d)(4)).


Sec.  641.440  Are there responsibility conditions that alone will 
disqualify an applicant?

    (a) Yes, an applicant may be disqualified if
    (1) Either of the first two responsibility tests, a or b, listed in 
Sec.  641.430 is not met, or
    (2) The applicant substantially, or persistently for two or more 
consecutive years, fails one of the other responsibility tests listed 
in Sec.  641.430.
    (b) The second responsibility test addresses ``fraud or criminal 
activity of a significant nature.'' The Department will determine the 
existence of significant fraud or criminal activity which typically 
will include willful or grossly negligent disregard for the use or 
handling of, or other fiduciary duties concerning, Federal funding, 
where the grantee has no effective systems, checks, or safeguards to 
detect or prevent fraud or criminal activity. Additionally, significant 
fraud or criminal activity will typically include coordinated patterns 
or behaviors that pervade a grantee's administration or are committed 
by the higher levels of a grantee's management or authority. The 
Department will determine whether ``fraud or criminal activity of a 
significant nature'' has occurred on a case-by-case basis, regardless 
of what party identifies the alleged fraud or criminal activity.


Sec.  641.450  How will the Department examine the responsibility of 
eligible entities?

    The Department will review available records to assess each 
applicant's overall fiscal and administrative ability to manage Federal 
funds. The Department's responsibility review may consider all relevant 
information, including the organization's history of managing other 
grants awarded by the Department or by other Federal agencies. (OAA 
Sec.  514(d)(1) and (d)(2)).


Sec.  641.460  What factors will the Department consider in selecting 
national grantees?

    The Department will select national grantees from among applicants 
that are able to meet the eligibility and responsibility review 
criteria at Sec.  514 of the OAA. (Section 641.420 contains the 
eligibility criteria and Sec. Sec.  641.430 and 641.440 contain the 
responsibility criteria.) The Department also will take the rating 
criteria described in the Solicitation for Grant Applications or other 
instrument into consideration. These rating criteria will include 
relevant past performance.


Sec.  641.465  Under what circumstances may the Department reject an 
application?

    (a) The Department may question any proposed project component of 
an application if it believes that the component will not serve the 
purposes of the SCSEP. The Department may reject the application if the 
applicant does not submit or negotiate an acceptable alternative.
    (b) The Department may reject any application that the Grant 
Officer determines unacceptable based on the content of the 
application, rating score, past performance, fiscal management, or any 
other factor the Grant Officer believes serves the best interest of the 
program, including the application's comparative rating in a 
competition.


Sec.  641.470  What happens if an applicant's application is rejected?

    (a) Any entity whose application is rejected in whole or in part 
will be informed that it has not been selected. The non-selected entity 
may request an explanation of the Department's basis for its rejection. 
If requested, the Department will provide the entity with feedback on 
its proposal. The non-selected entity may follow the procedures in 
Sec.  641.900.

[[Page 53821]]

    (b) Incumbent grantees will not have an opportunity to obtain 
technical assistance provided by the Department under OAA Sec.  
513(d)(2)(B)(i) to cure, in an open competition, any deficiency in a 
proposal because that will create inequity in favor of incumbents. Nor, 
during an open competition, will the Department provide assistance to 
any applicant to improve its application.
    (c) If the Administrative Law Judge (ALJ) rules, under Sec.  
641.900, that the organization should have been selected, in whole or 
in part, the matter must be remanded to the Grant Officer. The Grant 
Officer must, within 10 working days, determine whether the 
organization continues to meet the requirements of this part, and 
whether the positions which are the subject of the ALJ's decision will 
be awarded, in whole or in part, to the organization and the timing of 
the award. In making this determination, the Grant Officer must take 
into account disruption to participants, disruption to grantees, and 
the operational needs of the SCSEP.
    (d) In the event that the Grant Officer determines that it is not 
feasible to award any positions to the appealing applicant, the 
applicant will be awarded its bid preparation costs, or a pro rata 
share of those costs if the Grant Officer's finding applies to only a 
portion of the funds that would be awarded. If positions are awarded to 
the appealing applicant, that applicant is not entitled to the full 
grant amount but will only receive the funds remaining in the grant 
that have not been expended by the current grantee through its 
operation of the grant and its subsequent closeout. The available 
remedy in a SCSEP non-selection appeal is neither retroactive nor 
immediately effective selection; rather it is the potential to be 
selected as a SCSEP grantee as quickly as administratively feasible in 
the future, for the remainder of the grant cycle.
    (e) In the event that any party notifies the Grant Officer that it 
is not satisfied with the Grant Officer's decision, the Grant Officer 
must return the decision to the ALJ for review.
    (f) Any organization selected and/or funded as a SCSEP grantee is 
subject to having its positions reduced or to being removed as a SCSEP 
grantee if an ALJ decision so orders. The Grant Officer provides 
instructions on transition and closeout to both the newly designated 
grantee and to the grantee whose positions are affected or which is 
being removed. All parties must agree to the provisions of this 
paragraph as a condition of being a SCSEP grantee.


Sec.  641.480  May the Governor, or the highest government official, 
make recommendations to the Department on national grant applications?

    (a) Yes, in accordance with Sec.  641.410(b), each Governor, or 
highest government official, will have a reasonable opportunity to make 
comments on any application to operate a SCSEP project located in the 
Governor's, or the highest government official's, State before the 
Department makes a final decision on a grant award. The Governor's, or 
the highest government official's, comments should be directed to the 
Department and may include the anticipated effect of the proposal on 
the overall distribution of program positions within the State; 
recommendations for redistribution of positions to underserved areas as 
vacancies occur in previously encumbered positions in other areas; and 
recommendations for distributing any new positions that may become 
available as a result of an increase in funding for the State. The 
Governor's, or the highest government official's, recommendations 
should be consistent with the State Plan. (OAA Sec.  503(a)(5)).
    (b) The Governor, or the highest government official, has the 
option of making the authorized recommendations on all applications or 
only on those applications proposed for award following the rating 
process. It is incumbent on each Governor, or the highest government 
official, to inform the Department of his or her intent to review the 
applications before or after the rating process.


Sec.  641.490  When will the Department compete SCSEP grant awards?

    (a)(1) The Department will hold a full and open competition for 
national grants every four years. (OAA Sec.  514(a)(1)).
    (2) If a national grantee meets the expected level of performance 
for each of the core indicators for each of the four years, the 
Department may provide an additional one-year grant to the national 
grantee. (OAA Sec.  514(a)(2)).


Sec.  641.495  When must a State compete its SCSEP award?

    If a State grantee fails to meet its expected levels of performance 
for three consecutive Program Years, the State must hold a full and 
open competition, under such conditions as the Secretary may provide, 
for the State SCSEP funds for the full Program Year following the 
determination of consecutive failure. (OAA Sec.  513(d)(3)(B)(iii)). 
The incumbent (failed) grantee is not eligible to compete. Other states 
are also not eligible to compete for these funds. Sec.  641.400(b)(2).

Subpart E--Services to Participants


Sec.  641.500  Who is eligible to participate in the SCSEP?

    Anyone who is at least 55 years old, unemployed (as defined in 
Sec.  641.140), and who is a member of a family with an income that is 
not more than 125 percent of the family income levels prepared by the 
Department of Health and Human Services and approved by OMB (Federal 
poverty guidelines) is eligible to participate in the SCSEP. (OAA Sec.  
518(a)(3), (8)). A person with a disability may be treated as a 
``family of one'' for income eligibility determination purposes at the 
option of the applicant.


Sec.  641.505  When is eligibility determined?

    Initial eligibility is determined at the time individuals apply to 
participate in the SCSEP. Once individuals become SCSEP participants, 
the grantee or sub-recipient is responsible for verifying their 
continued eligibility at least once every 12 months. Grantees and sub-
recipients may also verify an individual's eligibility as circumstances 
require, including instances when enrollment is delayed.


Sec.  641.507  How is applicant income computed?

    An applicant's income is computed by calculating the includable 
income received by the applicant during the 12-month period ending on 
the date an individual submits an application to participate in the 
SCSEP, or the annualized income for the 6-month period ending on the 
application date. The Department requires grantees to use whichever 
method is more favorable to the individual. (OAA Sec.  518(a)(4)).


Sec.  641.510  What types of income are included and excluded for 
participant eligibility determinations?

    (a) With certain exceptions, the Department will use the definition 
of income from the U.S. Census Bureau's Current Population Survey (CPS) 
as the standard for determining SCSEP applicant income eligibility.
    (b) Any income that is unemployment compensation, a benefit 
received under title XVI of the Social Security Act (42 U.S.C. 1381 et 
seq.), a payment made to or on behalf of veterans or former members of 
the Armed Forces under the laws administered by the Secretary of 
Veterans Affairs, or 25 percent of a benefit received under title II of 
the Social Security Act (42 U.S.C. 401 et seq.), must be excluded from 
SCSEP income eligibility determinations. (OAA Sec.  518(a)(3)(A)).
    (c) The Department has issued administrative guidance on income

[[Page 53822]]

inclusions and exclusions and procedures for determining SCSEP income 
eligibility. This guidance may be updated periodically.


Sec.  641.512  May grantees and sub-recipients enroll otherwise 
eligible job ready individuals and place them directly into 
unsubsidized employment?

    No, grantees and sub-recipients may not enroll as SCSEP 
participants job-ready individuals who can be directly placed into 
unsubsidized employment. Such individuals should be referred to an 
employment provider, such as the One-Stop Center for job placement 
assistance under WIA or another employment program.


Sec.  641.515  How must grantees and sub-recipients recruit and select 
eligible individuals for participation in the SCSEP?

    (a) Grantees and sub-recipients must develop methods of recruitment 
and selection that assure that the maximum number of eligible 
individuals have an opportunity to participate in the program. To the 
extent feasible, grantees and sub-recipients should seek to enroll 
minority and Indian eligible individuals, eligible individuals with 
limited English proficiency, and eligible individuals with greatest 
economic need, at least in proportion to their numbers in the area, 
taking into consideration their rates of poverty and unemployment. (OAA 
Sec.  502(b)(1)(M)).
    (b) Grantees and sub-recipients must use the One-Stop delivery 
system as one method in the recruitment and selection of eligible 
individuals to ensure that the maximum number of eligible individuals 
have an opportunity to participate in the project. (OAA Sec.  
502(b)(1)(H)).
    (c) States may enter into agreements among themselves to permit 
cross-border enrollment of eligible participants. Such agreements 
should cover both State and national grantee positions and must be 
submitted to the Department for approval in the grant application or a 
modification of the grant.


Sec.  641.520  Are there any priorities that grantees and sub-
recipients must use in selecting eligible individuals for participation 
in the SCSEP?

    (a) Yes, in selecting eligible individuals for participation in the 
SCSEP, priority must be given to individuals who have one or more of 
the following characteristics:
    (1) Are 65 years of age or older;
    (2) Have a disability;
    (3) Have limited English proficiency or low literacy skills;
    (4) Reside in a rural area;
    (5) Are veterans (or, in some cases, spouses of veterans) for 
purposes of Sec.  2(a) of the Jobs for Veterans Act, 38 U.S.C. 4215(a) 
as set forth in paragraph (b) of this section;
    (6) Have low employment prospects;
    (7) Have failed to find employment after using services provided 
through the One-Stop delivery system; or
    (8) Are homeless or are at risk for homelessness.
    (OAA Sec.  518(b)).
    (b) Section 2(a) of the Jobs for Veterans Act creates a priority 
for service for veterans (and, in some cases, spouses of veterans) who 
otherwise meet the program eligibility criteria for the SCSEP. 38 
U.S.C. 4215(a). Priority is extended to veterans. Priority is also 
extended to the spouse of a veteran who died of a service-connected 
disability; the spouse of a member of the Armed Forces on active duty 
who has been listed for a total of more than 90 days as missing in 
action, captured in the line of duty by a hostile force, or forcibly 
detained by a foreign government or power; the spouse of any veteran 
who has a total disability resulting from a service-connected 
disability; and the spouse of any veteran who died while a disability 
so evaluated was in existence.
    (c) Grantees and sub-recipients must apply these priorities in the 
following order:
    (1) Persons who qualify as a veteran or qualified spouse under 
Sec.  2(a) of the Jobs for Veterans Act, 38 U.S.C. 4215(a), and who 
possess at least one of the other priority characteristics;
    (2) Persons who qualify as a veteran or qualified spouse under 
Sec.  2(a) of the Jobs for Veterans Act, 38 U.S.C. 4215(a), who do not 
possess any other of the priority characteristics;
    (3) Persons who do not qualify as a veteran or qualified spouse 
under Sec.  2(a) of the Jobs for Veterans Act (non-veterans), and who 
possess at least one of the other priority characteristics.


Sec.  641.535  What services must grantees and sub-recipients provide 
to participants?

    (a) When individuals are selected for participation in the SCSEP, 
the grantee or sub-recipient is responsible for:
    (1) Providing orientation to the SCSEP, including information on 
project goals and objectives, community service assignments, training 
opportunities, available supportive services, the availability of a 
free physical examination, participant rights and responsibilities, and 
permitted and prohibited political activities;
    (2) (i) Assessing participants' work history, skills and interests, 
talents, physical capabilities, aptitudes, needs for supportive 
services, occupational preferences, training needs, potential for 
performing community service assignments, and potential for transition 
to unsubsidized employment;
    (ii) Performing an initial assessment upon program entry, unless an 
assessment has already been performed under title I of WIA as provided 
in Sec.  641.230. Subsequent assessments may be made as necessary, but 
must be made no less frequently than two times during a twelve month 
period (including the initial assessment);
    (3)(i) Using the information gathered during the initial assessment 
to develop an IEP that includes an appropriate employment goal for each 
participant, except that if an assessment has already been performed 
and an IEP developed under title I of WIA, the WIA assessment and IEP 
will satisfy the requirement for a SCSEP assessment and IEP as provided 
in Sec.  641.230;
    (ii) Updating the IEP as necessary to reflect information gathered 
during the subsequent participant assessments (OAA Sec.  502(b)(1)(N));
    (iii) The initial IEP should include an appropriate employment goal 
for each participant. Thereafter, if the grantee determines that the 
participant is not likely to obtain unsubsidized employment, the IEP 
must reflect other approaches to help the participant achieve self-
sufficiency, including the transition to other services or programs.
    (4) Placing participants in appropriate community service 
assignments in the community in which they reside, or in a nearby 
community (OAA Sec.  502(b)(1)(B));
    (5) Providing or arranging for training identified in participants' 
IEPs and consistent with the SCSEP's goal of unsubsidized employment 
(OAA Sec.  502(a)(1), 502(b)(1)(B), 502(b)(1)(I), 502(b)(1)(N)(ii));
    (6) Assisting participants in obtaining needed supportive services 
identified in their IEPs (OAA Sec.  502(b)(1)(N));
    (7) Providing appropriate services for participants, or referring 
participants to appropriate services, through the One-Stop delivery 
system established under WIA (OAA Sec.  502(b)(1)(O));
    (8) Providing counseling on participants' progress in meeting the 
goals and objectives identified in their IEPs, and in meeting their 
supportive service needs (OAA Sec.  502(b)(1)(N)(iii));
    (9) Providing participants with wages and benefits for time spent 
in the community service assignment, orientation, and training (OAA 
Sec.  502(b)(1)(I), 502(b)(1)(J), 502(c)(6)(A)(i)) (see also Sec. Sec.  
641.565 and 641.540(f), addressing wages and benefits);
    (10) Ensuring that participants have safe and healthy working 
conditions at

[[Page 53823]]

their community service employment worksites (OAA Sec.  502(b)(1)(J));
    (11) Assisting participants in obtaining unsubsidized employment, 
including providing or arranging for employment counseling in support 
of their IEPs;
    (b) The Department may issue administrative guidance that clarifies 
the requirements of paragraph (a).
    (c) Grantees may not use SCSEP funds for job ready individuals who 
only need job search assistance or job referral services. Grantees may 
provide job search assistance and job club activities to participants 
who are enrolled in the SCSEP and are assigned to community service 
assignments. (See also Sec.  641.512).


Sec.  641.540  What types of training may grantees and sub-recipients 
provide to SCSEP participants in addition to the training received at a 
community service assignment?

    (a) In addition to the training provided in a community service 
assignment, grantees and sub-recipients may arrange skill training 
provided that it:
    (1) Is realistic and consistent with the participants' IEP;
    (2) Makes the most effective use of the participant's skills and 
talents; and
    (3) Prepares the participant for unsubsidized employment.
    (b) Training may be provided before or during a community service 
assignment.
    (c) Training may be in the form of lectures, seminars, classroom 
instruction, individual instruction, online instruction, on-the-job 
experiences. Training may be provided by the grantee or through other 
arrangements, including but not limited to, arrangements with other 
workforce development programs such as WIA. (OAA Sec.  
502(c)(6)(A)(ii)).
    (d) Grantees and sub-recipients are encouraged to obtain training 
through locally available resources, including host agencies, at no 
cost or reduced cost to the SCSEP.
    (e) Grantees and sub-recipients may pay for participant training, 
including the payment of reasonable costs of instructors, classroom 
rental, training supplies, materials, equipment, and tuition. (OAA 
Sec.  502(c)(6)(A)(ii)).
    (f) Participants must be paid wages while in training, as described 
in Sec.  641.565(a). (OAA Sec.  502(b)(1)(I)).
    (g) As provided in Sec.  641.545, grantees and sub-recipients may 
pay for costs associated with supportive services, such as 
transportation, necessary to participate in training. (OAA Sec.  
502(b)(1)(L)).
    (h) Nothing in this section prevents or limits participants from 
engaging in self-development training available through other sources, 
at their own expense, during hours when not performing their community 
service assignments.


Sec.  641.545  What supportive services may grantees and sub-recipients 
provide to participants?

    (a) Grantees and sub-recipients are required to assess all 
participants' need for supportive services and to make every effort to 
assist participants in obtaining needed supportive services. Grantees 
and sub-recipients may provide directly or arrange for supportive 
services that are necessary to enable an individual to successfully 
participate in a SCSEP project, including but not limited to payment of 
reasonable costs of transportation; health and medical services; 
special job-related or personal counseling; incidentals such as work 
shoes, badges, uniforms, eyeglasses, and tools; dependent care; 
housing, including temporary shelter; needs-related payments; and 
follow-up services. (OAA Sec. Sec.  502(c)(6)(A)(iv), 518(a)(7)).
    (b) To the extent practicable, the grantee or sub-recipient should 
arrange for the payment of these expenses from other resources.
    (c) Grantees and sub-recipients are encouraged to contact placed 
participants throughout the first 12 months following placement to 
determine if they have the necessary supportive services to remain in 
the job and to provide or arrange to provide such services if feasible.


Sec.  641.550  What responsibility do grantees and sub-recipients have 
to place participants in unsubsidized employment?

    For those participants whose IEPs include a goal of unsubsidized 
employment, grantees and sub-recipients are responsible for working 
with participants to ensure that the participants are receiving 
services and taking actions designed to help them achieve this goal. 
Grantees and sub-recipients must contact private and public employers 
directly or through the One-Stop delivery system to develop or identify 
suitable unsubsidized employment opportunities. They must also 
encourage host agencies to assist participants in their transition to 
unsubsidized employment, including unsubsidized employment with the 
host agency.


Sec.  641.565  What policies govern the provision of wages and benefits 
to participants?

    (a) Wages.
    (1)(i) Grantees and sub-recipients must pay participants the 
highest applicable required wage for time spent in orientation, 
training, and community service assignments.
    (ii) SCSEP participants may be paid the highest applicable required 
wage while receiving WIA intensive services.
    (2) The highest applicable required wage is either the minimum wage 
applicable under the Fair Labor Standards Act of 1938; the State or 
local minimum wage for the most nearly comparable covered employment; 
or the prevailing rate of pay for persons employed in similar public 
occupations by the same employer.
    (3) Grantees and sub-recipients must make any adjustments to 
minimum wage rates payable to participants as may be required by 
Federal, State, or local statute during the grant term.
    (b) Benefits.
    (1) Required benefits. Except as provided in paragraph (b)(2) of 
this section, grantees and sub-recipients must ensure that participants 
receive such benefits as are required by law.
    (i) Grantees and sub-recipients must provide benefits uniformly to 
all participants within a project or subproject, unless the Department 
agrees to waive this provision due to a determination that such a 
waiver is in the best interests of applicants, participants, and 
project administration.
    (ii) Grantees and sub-recipients must offer participants the 
opportunity to receive physical examinations annually.
    (A) Physical examinations are a benefit, and not an eligibility 
criterion. The examining physician must provide, to the participant 
only, a written report of the results of the examination.
    (B) Participants may choose not to accept the physical examination. 
In that case, the grantee or sub-recipient must document this refusal, 
through a signed statement, within 60 workdays after commencement of 
the community service assignment. Each year thereafter, grantees and 
sub-recipients must offer the physical examination and document the 
offer and any participant's refusal.
    (C) Grantees and sub-recipients may use SCSEP funds to pay the 
costs of physical examinations.
    (iii) When participants are not covered by the State workers' 
compensation law, the grantee or sub-recipient must provide 
participants with workers' compensation benefits equal to those 
provided by law for covered employment. OAA Sec.  504(b).
    (iv) If required by State law, grantees/sub-recipients must provide 
unemployment compensation coverage for participants.

[[Page 53824]]

    (v) Grantees and sub-recipients must provide compensation for 
scheduled work hours during which a host agency's business is closed 
for a Federal holiday, which may be paid or in the form of rescheduled 
work time.
    (vi) Grantees and sub-recipients must provide necessary sick leave 
that is not part of an accumulated sick leave program, which may be 
paid or in the form of rescheduled work time.
    (2) Prohibited wage and benefits costs.
    (i) Participants may not carry over allowable benefits from one 
Program Year to the next;
    (ii) Grantees and sub-recipients may not provide payment or 
otherwise compensate participants for unused benefits such as sick 
leave or holidays;
    (iii) Grantees and sub-recipients may not use SCSEP funds to cover 
costs associated with the following participant benefits:
    (A) Retirement. Grantees and sub-recipients may not use SCSEP funds 
to provide contributions into a retirement system or plan, or to pay 
the cost of pension benefits for program participants.
    (B) Annual leave.
    (C) Accumulated sick leave.
    (D) Bonuses.
    (OAA Sec.  502(c)(6)(A)(i)).


Sec.  641.570  Is there a time limit for participation in the program?

    (a) Individual time limit. (1) Eligible individuals may participate 
in the program for a maximum duration of 48 months in the aggregate 
(whether or not consecutive), from the later of July 1, 2007, or the 
date of the individual's enrollment in the program.
    (2) At the time of enrollment, the grantee or sub-recipient must 
inform the participant of this time limit and the possible extension 
available under paragraph (b) of this section, and the grantee or sub-
recipient must provide for a system to transition participants to 
unsubsidized employment or other assistance before the maximum 
enrollment duration has expired. Provisions for transition must be 
reflected in the participant's IEP.
    (3) If requested by a grantee or sub-recipient, the Department will 
authorize an extension for individuals who meet the criteria in 
paragraph (b) of this section. Notwithstanding any individual 
extensions granted, grantees and sub-recipients must ensure that 
projects do not exceed the overall average participation cap for all 
participants, as described in paragraph (c) of this section.
    (b) Increased periods of individual participation. If requested by 
a grantee, the Department will authorize increased periods of 
participation for individuals who:
    (1) Have a severe disability;
    (2) Are frail or are age 75 or older;
    (3) Meet the eligibility requirements related to age for, but do 
not receive, benefits under title II of the Social Security Act (42 
U.S.C. 401 et seq.);
    (4) Live in an area with persistent unemployment and are 
individuals with severely limited employment prospects; or
    (5) Have limited English proficiency or low literacy skills.
    (c) Average grantee participation cap. (1) Notwithstanding any 
individual extension authorized under paragraph (b) of this section, 
each grantee must manage its SCSEP project in such a way that the 
grantee does not exceed an average participation cap for all 
participants of 27 months (in the aggregate).
    (2) A grantee may request, and the Department may authorize, an 
extended average participation period of up to 36 months (in the 
aggregate) for a particular project area in a given Program Year if the 
Department determines that extenuating circumstances exist to justify 
an extension, due to one more of the following factors:
    (i) High rates of unemployment or of poverty or of participation in 
the program of block grants to States for temporary assistance for 
needy families established under part A of title IV of the Social 
Security Act, in the areas served by a grantee, relative to other areas 
of the State involved or the Nation;
    (ii) Significant downturns in the economy of an area served by the 
grantee or in the national economy;
    (iii) Significant numbers or proportions of participants with one 
or more barriers to employment, including ``most-in-need'' individuals 
described in Sec.  641.710(a)(6), served by a grantee relative to such 
numbers or proportions for grantees serving other areas of the State or 
Nation;
    (iv) Changes in Federal, State, or local minimum wage requirements; 
or
    (v) Limited economies of scale for the provision of community 
service employment and other authorized activities in the areas served 
by the grantee.
    (3) For purposes of the average participation cap, each grantee 
will be considered to be one project.
    (d) Authorized break in participation. On occasion a participant 
takes an authorized break in participation from the program, such as a 
formal leave of absence necessitated by personal circumstances or a 
break caused because a suitable community service assignment is not 
available. Such an authorized break, if taken under a formal grantee 
policy allowing such breaks and formally entered into the SCSEP 
Performance and Results Quarterly Performance Reporting (SPARQ) system, 
will not count toward the individual time limit described in paragraph 
(a) or the average participation cap described in paragraph (c) of this 
section.
    (e) Administrative guidance. The Department will issue 
administrative guidance detailing the process by which a grantee may 
request increased periods of individual participation, and the process 
by which a grantee may request an extension of the average 
participation cap. The process will require that the determination of 
individual participant extension requests is made in a fair and 
equitable manner.
    (f) Grantee authority. Grantees may limit the time of participation 
for individuals to less than the 48 months described in paragraph (a) 
of this section, if the grantee uniformly applies the lower 
participation limit, and if the grantee submits a description of the 
lower participation limit policy in its grant application or 
modification of the grant and the Department approves the policy. (OAA 
Sec. Sec.  502(b)(1)(C), 518(a)(3)(B)).


Sec.  641.575  May a grantee or sub-recipient establish a limit on the 
amount of time its participants may spend at a host agency?

    Yes, grantees and sub-recipients may establish limits on the amount 
of time that participants spend at a particular host agency, and are 
encouraged to rotate participants among different host agencies, or to 
different assignments within the same host agency, as such rotations 
may increase participants' skills development and employment 
opportunities. Such limits must be established in the grant agreement 
or modification of the grant, and approved by the Department. The 
Department will not approve any limit that does not require an 
individualized determination that rotation is in the best interest of 
the participant and will further the acquisition of skills listed in 
the IEP. Host agency rotations have no effect on either the individual 
participation limit or the average participation cap.


Sec.  641.577  Is there a limit on community service assignment hours?

    While there is no specific limit on the number of hours that may be 
worked in a community service assignment, a community service 
assignment must be a part-time position. However, the Department 
strongly encourages grantees to use 1,300 hours as a

[[Page 53825]]

benchmark and good practice for monitoring community service hours.


Sec.  641.580  Under what circumstances may a grantee or sub-recipient 
terminate a participant?

    (a) If, at any time, a grantee or sub-recipient determines that a 
participant was incorrectly declared eligible as a result of false 
information knowingly given by that individual, the grantee or sub-
recipient must give the participant immediate written notice explaining 
the reason(s) for termination and may terminate the participant 30 days 
after it has provided the participant with written notice.
    (b) If, during eligibility verification under Sec.  641.505, a 
grantee or sub-recipient finds a participant to be no longer eligible 
for enrollment, the grantee or sub-recipient must give the participant 
written notice explaining the reason(s) for termination and may 
terminate the participant 30 days after it has provided the participant 
with written notice.
    (c) If, at any time, the grantee or sub-recipient determines that 
it incorrectly determined a participant to be eligible for the program 
through no fault of the participant, the grantee or sub-recipient must 
give the participant immediate written notice explaining the reason(s) 
for termination and may terminate the participant 30 days after it has 
provided the participant with written notice.
    (d) A grantee or sub-recipient may terminate a participant for 
cause. Grantees must include their policies concerning for-cause 
terminations in the grant application and obtain the Department's 
approval. The grantee or sub-recipient must give the participant 
written notice explaining the reason(s) for termination and may 
terminate the participant 30 days after it has provided the participant 
with written notice.
    (e) A grantee or sub-recipient may terminate a participant if the 
participant refuses to accept a reasonable number of job offers or 
referrals to unsubsidized employment consistent with the IEP and there 
are no extenuating circumstances that would hinder the participant from 
moving to unsubsidized employment. The grantee or sub-recipient must 
give the participant written notice explaining the reason(s) for 
termination and may terminate the participant 30 days after it has 
provided the participant with written notice.
    (f) When a grantee or sub-recipient makes an unfavorable 
determination of enrollment eligibility under paragraph (b) or (c) of 
this section, it should refer the individual to other potential sources 
of assistance, such as the One-Stop delivery system. When a grantee or 
sub-recipient terminates a participant under paragraph (d) or (e) of 
this section, it may refer the individual to other potential sources of 
assistance, such as the One-Stop delivery system.
    (g) Grantees and sub-recipients must provide each participant at 
the time of enrollment with a written copy of its policies for 
terminating a participant for cause or otherwise, and must verbally 
review those policies with each participant.
    (h) Any termination, as described in paragraphs (a) through (e) of 
this section, must be consistent with administrative guidelines issued 
by the Department and the termination notice must inform the 
participant of the grantee's grievance procedure, and the termination 
must be subject to the applicable grievance procedures described in 
Sec.  641.910.
    (i) Participants may not be terminated from the program solely on 
the basis of their age. Grantees and sub-recipients may not impose an 
upper age limit for participation in the SCSEP.


Sec.  641.585  What is the employment status of SCSEP participants?

    (a) Participants are not considered Federal employees solely as a 
result of their participation in the SCSEP. (OAA Sec.  504(a)).
    (b) Grantees must determine whether or not a participant qualifies 
as an employee of the grantee, sub-recipient, local project, or host 
agency, under applicable law. Responsibility for this determination 
rests with the grantee even when a Federal agency is a grantee or host 
agency.

Subpart F--Pilot, Demonstration, and Evaluation Projects


Sec.  641.600  What is the purpose of the pilot, demonstration, and 
evaluation projects authorized under Sec.  502(e) of the OAA?

    The purpose of the pilot, demonstration, and evaluation projects 
authorized under Sec.  502(e) of the OAA is to develop and implement 
techniques and approaches, and to demonstrate the effectiveness of 
these techniques and approaches, in addressing the employment and 
training needs of individuals eligible for SCSEP.


Sec.  641.610  How are pilot, demonstration, and evaluation projects 
administered?

    The Department may enter into agreements with States, public 
agencies, nonprofit private organizations, or private business 
concerns, as may be necessary, to conduct pilot, demonstration, and 
evaluation projects.


Sec.  641.620  How may an organization apply for pilot, demonstration, 
and evaluation project funding?

    Organizations applying for pilot, demonstration, and evaluation 
project funding must follow the instructions issued by the Department. 
Instructions for these unique funding opportunities are published in 
TEGLs available at http://www.doleta.gov/Seniors.


Sec.  641.630  What pilot, demonstration, and evaluation project 
activities are allowable under Sec.  502(e)?

    Allowable pilot, demonstration and evaluation projects include:
    (a) Activities linking businesses and eligible individuals, 
including activities providing assistance to participants transitioning 
from subsidized activities to private sector employment;
    (b) Demonstration projects and pilot projects designed to:
    (1) Attract more eligible individuals into the labor force;
    (2) Improve the provision of services to eligible individuals under 
One-Stop delivery systems established under title I of WIA;
    (3) Enhance the technological skills of eligible individuals; and
    (4) Provide incentives to SCSEP grantees for exemplary performance 
and incentives to businesses to promote their participation in the 
SCSEP;
    (c) Demonstration projects and pilot projects, as described in 
paragraph (b) of this section, for workers who are older individuals 
(but targeted to eligible individuals) only if such demonstration 
projects and pilot projects are designed to assist in developing and 
implementing techniques and approaches in addressing the employment and 
training needs of eligible individuals;
    (d) Provision of training and technical assistance to support a 
SCSEP project;
    (e) Dissemination of best practices relating to employment of 
eligible individuals; and
    (f) Evaluation of SCSEP activities.


Sec.  641.640  Should pilot, demonstration, and evaluation project 
entities coordinate with SCSEP grantees and sub-recipients, including 
area agencies on aging?

    (a) To the extent practicable, the Department will provide an 
opportunity, before the development of a demonstration or pilot 
project, for the appropriate area agency on aging and SCSEP grantees 
and sub-grantees to submit comments on the project in order to ensure 
coordination of SCSEP activities with activities carried out under this 
subpart.
    (b) To the extent practicable, entities carrying out pilot, 
demonstration, and evaluation projects must consult with

[[Page 53826]]

appropriate area agencies on aging, SCSEP grantees and sub-grantees, 
and other appropriate agencies and entities to promote coordination of 
SCSEP and pilot, demonstration, and evaluation activities. (OAA Sec.  
502(e)).

Subpart G--Performance Accountability


Sec.  641.700  What performance measures/indicators apply to SCSEP 
grantees?

    (a) Indicators of performance. There are currently eight 
performance measures, of which six are core indicators and two are 
additional indicators. Core indicators (defined in Sec.  641.710) are 
subject to goal-setting and corrective action (described in Sec.  
641.720); that is, performance level goals for each core indicator must 
be agreed upon between the Department and each grantee before the start 
of each program year, and if a grantee fails to meet the performance 
level goals for the core indicators, that grantee is subject to 
corrective action. Additional indicators (defined in Sec.  641.710) are 
not subject to goal-setting and are, therefore, also not subject to 
corrective action.
    (b) Core Indicators. Section 513(b)(1) of the 2006 OAA establishes 
the following core indicators of performance:
    (1) Hours (in the aggregate) of community service employment;
    (2) Entry into unsubsidized employment;
    (3) Retention in unsubsidized employment for six months;
    (4) Earnings;
    (5) The number of eligible individuals served; and
    (6) The number of most-in-need individuals served (the number of 
participating individuals described in Sec.  518(a)(3)(B)(ii) or (b)(2) 
of the OAA).
    (c) Additional indicators. Section 513(b)(2) of the 2006 OAA 
establishes the following additional indicators of performance:
    (1) Retention in unsubsidized employment for one year; and
    (2) Satisfaction of the participants, employers, and their host 
agencies with their experiences and the services provided.
    (3) Any other indicators of performance that the Secretary 
determines to be appropriate to evaluate services and performance.
    (d) Affected entities. The core indicators of performance and 
additional indicators of performance are applicable to each grantee 
without regard to whether the grantee operates the program directly or 
through sub-contracts, sub-grants, or agreements with other entities. 
Grantees must assure that their sub-grantees and lower-tier sub-
grantees are collecting and reporting program data.
    (e) Required evaluation and reporting. An agreement to be evaluated 
on the core indicators of performance and to report information on the 
additional indicators of performance is a requirement for application 
for, and is a condition of, all SCSEP grants.


Sec.  641.710  How are the performance indicators defined?

    (a) The core indicators are defined as follows:
    (1) ``Hours of community service employment'' is defined as the 
total number of hours of community service provided by SCSEP 
participants divided by the number of hours of community service funded 
by the grantee's grant, after adjusting for differences in minimum wage 
among the States and areas. Paid training hours are excluded from this 
measure.
    (2) ``Entry into unsubsidized employment'' is defined by the 
formula: Of those who are not employed at the date of participation: 
The number of participants who are employed in the first quarter after 
the exit quarter divided by the number of adult participants who exit 
during the quarter.
    (3) ``Retention in unsubsidized employment for six months'' is 
defined by the formula: Of those who are employed in the first quarter 
after the exit quarter: The number of adult participants who are 
employed in both the second and third quarters after the exit quarter 
divided by the number of adult participants who exit during the 
quarter.
    (4) ``Earnings'' is defined by the formula: Of those participants 
who are employed in the first, second and third quarters after the exit 
quarter: Total earnings in the second quarter plus total earnings in 
the third quarter after the exit quarter divided by the number of 
participants who exit during the quarter.
    (5) ``The number of eligible individuals served'' is defined as the 
total number of participants served divided by a grantee's authorized 
number of positions, after adjusting for differences in minimum wage 
among the States and areas.
    (6) ``Most-in-need'' or the number of participating individuals 
described in Sec.  518(a)(3)(B)(ii) or (b)(2) is defined by counting 
the total number of the following characteristics for all participants 
and dividing by the number of participants served. Participants are 
characterized as most-in-need if they:
    (i) Have a severe disability;
    (ii) Are frail;
    (iii) Are age 75 or older;
    (iv) Meet the eligibility requirements related to age for, but do 
not receive, benefits under title II of the Social Security Act (42 
U.S.C. 401 et seq.);
    (v) Live in an area with persistent unemployment and are 
individuals with severely limited employment prospects;
    (vi) Have limited English proficiency;
    (vii) Have low literacy skills;
    (viii) Have a disability;
    (ix) Reside in a rural area;
    (x) Are veterans;
    (xi) Have low employment prospects;
    (xii) Have failed to find employment after utilizing services 
provided under title I of the Workforce Investment Act of 1998 (29 
U.S.C. 2801 et seq.); or
    (xiii) Are homeless or at risk for homelessness.
    (b) The additional indicators are defined as follows:
    (1) ``Retention in unsubsidized employment for 1 year'' is defined 
by the formula: Of those who are employed in the first quarter after 
the exit quarter: The number of participants who are employed in the 
fourth quarter after the exit quarter divided by the number of 
participants who exit during the quarter.
    (2) ``Satisfaction of the participants, employers, and their host 
agencies with their experiences and the services provided'' is defined 
as the results of customer satisfaction surveys administered to each of 
these three customer groups. The Department will prescribe the content 
of the surveys.


Sec.  641.720  How will the Department and grantees initially determine 
and then adjust expected levels of performance for the core performance 
measures?

    (a) Initial agreement. Before the beginning of each Program Year, 
the Department and each grantee will undertake to agree upon expected 
levels of performance for each core indicator, except as provided in 
paragraph (b) of Sec.  641.730.
    (1) As a first step in this process, the Department proposes a 
performance level for each core indicator, taking into account any 
statutory performance requirements, the need to promote continuous 
improvement in the program overall and in each grantee, the grantee's 
past performance, and the statutory adjustment factors articulated in 
paragraph (b) of this section.
    (2) A grantee may request a revision to the Department's initial 
performance level goal determination. The request must be based on data 
that supports the revision request. The data supplied by the grantee at 
this stage may concern the statutory adjustment factors articulated in 
paragraph (b) of this section, but is not limited to those factors; it 
is permissible for a grantee to supply data

[[Page 53827]]

on ``other appropriate factors as determined by the Secretary.'' (OAA 
Sec.  513(a)(2)(C)).
    (3) The Department may revise the performance level goal in 
response to the data provided. The Department then sets the expected 
levels of performance for the core indicators. At this point, agreement 
is reached by the parties and funds may be awarded. If a grantee does 
not agree with the offered expected level of performance, agreement is 
not reached and no funds may be awarded. A grantee may submit comments 
to the Department about the grantee's satisfaction with the expected 
levels of performance.
    (4) Funds may not be awarded under the grant until such agreement 
is reached.
    (5) At the conclusion of performance level negotiations with all 
grantees, the Department will make available for public review the 
final negotiated expected levels of performance for each grantee, 
including any comments submitted by the grantee about the grantee's 
satisfaction with the negotiated levels.
    (6) The minimum percentage for the expected level of performance 
for the entry into unsubsidized employment core indicator is:
    (i) 21 percent for Program Year 2007;
    (ii) 22 percent for Program Year 2008;
    (iii) 23 percent for Program Year 2009;
    (iv) 24 percent for Program Year 2010; and
    (v) 25 percent for Program Year 2011.
    (b) Adjustment during the Program Year. After the Department and 
grantees reach agreement on the core indicator levels, those levels may 
only be revised in response to a request from a grantee based on data 
supporting one or more of the following statutory adjustment factors:
    (1) High rates of unemployment or of poverty or of participation in 
the program of block grants to States for temporary assistance for 
needy families established under part A of title IV of the Social 
Security Act (42 U.S.C. 601 et seq.), in the areas served by a grantee, 
relative to other areas of the State involved or Nation.
    (2) Significant downturns in the economy of the areas served by the 
grantee or in the national economy.
    (3) Significant numbers or proportions of participants with one or 
more barriers to employment, including individuals described in Sec.  
518(a)(3)(B)(ii) or (b)(2) of the 2006 OAA (most-in-need), served by a 
grantee relative to such numbers or proportions for grantees serving 
other areas of the State or Nation.
    (4) Changes in Federal, State, or local minimum wage requirements.
    (5) Limited economies of scale for the provision of community 
service employment and other authorized activities in the areas served 
by the grantee.


Sec.  641.730  How will the Department assist grantees in the 
transition to the new core performance indicators?

    (a) General transition provision. As soon as practicable after July 
1, 2007, the Department will determine if a SCSEP grantee has, for 
Program Year 2006, met the expected levels of performance for the 
Program Year 2007. If the Department determines that the grantee failed 
to meet Program Year 2007 goals in Program Year 2006, the Department 
will provide technical assistance to help the grantee meet those 
expected levels of performance in Program Year 2007.
    (b) Exception for most-in-need for Program Year 2007. Because the 
2006 OAA Amendments expanded the list of most-in-need characteristics, 
neither the Department nor the grantees have sufficient data to set a 
goal for measuring performance. Accordingly, Program Year 2007 will be 
treated as a baseline year for the most-in-need indicator so that the 
grantees and the Department may collect sufficient data to set a 
meaningful goal for this measure for Program Year 2008.


Sec.  641.740  How will the Department determine whether a grantee 
fails, meets, or exceeds the expected levels of performance for the 
core indicators and what will be the consequences of failing to meet 
expected levels of performance?

    (a) Aggregate calculation of performance. Not later than 120 days 
after the end of each Program Year, the Department will determine if a 
national grantee has met the expected levels of performance (including 
any adjustments to such levels) by aggregating the grantee's core 
indicators. The aggregate is calculated by combining the percentage of 
goal achieved on each of the individual core indicators to obtain an 
average score. A grantee will fail to meet its performance measures 
when it is does not meet 80 percent of the agreed-upon level of 
performance for the aggregate of all the core indicators. Performance 
in the range of 80 to 100 percent constitutes meeting the level for the 
core performance measures. Performance in excess of 100 percent 
constitutes exceeding the level for the core performance measures.
    (b) Consequences--
    (1) National grantees. (i) If the Department determines that a 
national grantee fails to meet the expected levels of performance in a 
Program Year, the Department, after each year of such failure, will 
provide technical assistance and will require such grantee to submit a 
corrective action plan not later than 160 days after the end of the 
Program Year.
    (ii) The corrective action plan must detail the steps the grantee 
will take to meet the expected levels of performance in the next 
Program Year.
    (iii) Any national grantee that has failed to meet the expected 
levels of performance for 4 consecutive years (beginning with Program 
Year 2007) will not be allowed to compete in the subsequent grant 
competition, but may compete in the next grant competition after that 
subsequent competition.
    (2) State Grantees. (i) If the Department determines that a State 
fails to meet the expected levels of performance, the Department, after 
each year of such failure, will provide technical assistance and will 
require the State to submit a corrective action plan not later than 160 
days after the end of the Program Year.
    (ii) The corrective action plan must detail the steps the State 
will take to meet the expected levels of performance in the next 
Program Year.
    (iii) If the Department determines that the State fails to meet the 
expected levels of performance for 3 consecutive Program Years 
(beginning with Program Year 2007), the Department will require the 
State to conduct a competition to award the funds allotted to the State 
under Sec.  506(e) of the OAA for the first full Program Year following 
the Department's determination. The new grantee will be responsible for 
administering the SCSEP in the State and will be subject to the same 
requirements and responsibilities as had been the State grantee.
    (c) Evaluation. The Department will annually evaluate, publish and 
make available for public review, information on the actual performance 
of each grantee with respect to the levels achieved for each of the 
core indicators of performance, compared to the expected levels of 
performance, and the actual performance of each grantee with respect to 
the levels achieved for each of the additional indicators of 
performance. The results of the Department's annual evaluation will be 
reported to Congress.


Sec.  641.750  Will there be performance-related incentives?

    The Department is authorized by Sec. Sec.  502(e)(2)(B)(iv) and 
517(c)(1) of the 2006 OAA to use recaptured SCSEP funds to provide 
incentive awards. The Department will exercise this authority at its 
discretion.

[[Page 53828]]

Subpart H--Administrative Requirements


Sec.  641.800  What uniform administrative requirements apply to the 
use of SCSEP funds?

    (a) SCSEP recipients and sub-recipients must follow the uniform 
administrative requirements and allowable cost requirements that apply 
to their type of organization. (OAA Sec.  503(f)(2)).
    (b) Governments, State, local, and Indian tribal organizations that 
receive SCSEP funds under grants or cooperative agreements must follow 
the common rule implementing OMB Circular A-102, ``Grants and 
Cooperative Agreements with State and Local Governments'' (10/07/1994) 
(further amended 08/29/1997), codified at 29 CFR part 97.
    (c) Nonprofit and commercial organizations, institutions of higher 
education, hospitals, other nonprofit organizations, and commercial 
organizations that receive SCSEP funds under grants or cooperative 
agreements must follow the common rule implementing OMB Circular A-110, 
codified at 29 CFR part 95.


Sec.  641.803  What is program income?

    Program income, as described in 29 CFR 97.25 (State and local 
governments) and 29 CFR 95.2(bb) (non-profit and commercial 
organizations), is income earned by the recipient or sub-recipient 
during the grant period that is directly generated by an allowable 
activity supported by grant funds or earned as a result of the award of 
grant funds. Program income includes income earned from license fees 
and royalties for copyrighted material, patents, patent applications, 
trademarks, and inventions produced under an award. (See 29 CFR 
95.24(e) (non-profit and commercial organizations) and 29 CFR 97.25(e) 
(State and local governments)). Costs of generating SCSEP program 
income may be deducted from gross income received by SCSEP recipients 
and sub-recipients to determine SCSEP program income earned or 
generated provided these costs have not been charged to the SCSEP.


Sec.  641.806  How must SCSEP program income be used?

    (a) SCSEP recipients that earn or generate program income during 
the grant period must add the program income to the Federal and non-
Federal funds committed to the SCSEP and must use it to further the 
purposes of the program and in accordance with the terms and conditions 
of the grant award. Program income may only be spent during the grant 
period in which it was earned (except as provided for in paragraph 
(b)), as provided in 29 CFR 95.24(a) (non-profit and commercial 
organizations) or 29 CFR 97.25(g) (2) (State and local governments), as 
applicable.
    (b)(1) Except as provided for in paragraph (b)(2), recipients that 
continue to receive a SCSEP grant from the Department must spend 
program income earned from SCSEP-funded activities in the Program Year 
in which the earned income was received.
    (b)(2) Any program income remaining at the end of the Program Year 
in which it was earned will remain available for expenditure in the 
subsequent Program Year only. Any program income remaining after the 
second Program Year must be remitted to the Department.
    (c) Recipients that do not continue to receive a SCSEP grant from 
the Department must remit unexpended program income earned during the 
grant period from SCSEP funded activities to the Department at the end 
of the grant period. These recipients have no obligation to the 
Department for program income earned after the end of the grant period.


Sec.  641.809  What non-Federal share (matching) requirements apply to 
the use of SCSEP funds?

    (a) The Department will pay no more than 90 percent of the total 
cost of activities carried out under a SCSEP grant. (OAA sec. 
502(c)(1)).
    (b) All SCSEP recipients, including Federal agencies if there is no 
statutory exemption, must provide or ensure that at least 10 percent of 
the total cost of activities carried out under a SCSEP grant (non-
Federal share of costs) consists of allowable costs paid for with non-
Federal funds, except as provided in paragraphs (e) and (f) of this 
section.
    (c) Recipients must determine the non-Federal share of costs in 
accordance with 29 CFR 97.24 for governmental units, or 29 CFR 95.23 
for nonprofit and commercial organizations.
    (d) The non-Federal share of costs may be provided in cash, or in-
kind, or a combination of the two. (OAA Sec.  502(c)(2)).
    (e) A recipient may not require a sub-recipient or host agency to 
provide non-Federal resources for the use of the SCSEP project as a 
condition of entering into a sub-recipient or host agency relationship. 
This does not preclude a sub-recipient or host agency from voluntarily 
contributing non-Federal resources for the use of the SCSEP project.
    (f) The Department may pay all of the costs of activities in an 
emergency or disaster project or a project in an economically 
distressed area. (OAA Sec.  502(c)(1)(B)).


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

    (a) Except as provided in Sec.  641.815, recipients must expend 
SCSEP funds during the Program Year for which they are awarded (July 1-
June 30). (OAA Sec.  517(b)).
    (b) SCSEP recipients must ensure that no sub-agreement provides for 
the expenditure of any SCSEP funds before the start of the grant year, 
or after the end of the grant period, except as provided in Sec.  
641.815.


Sec.  641.815  May the period of availability be extended?

    SCSEP recipients may request in writing, and the Department may 
grant, an extension of the period during which SCSEP funds may be 
obligated or expended. SCSEP recipients requesting an extension must 
justify that an extension is necessary. (OAA Sec.  517(b)). The 
Department will notify recipients in writing of the approval or 
disapproval of any such requests.


Sec.  641.821  What audit requirements apply to the use of SCSEP funds?

    (a) Recipients and sub-recipients receiving Federal awards of SCSEP 
funds must follow the audit requirements in paragraphs (b) and (c) of 
this section that apply to their type of organization. As used here, 
Federal awards of SCSEP funds include Federal financial assistance and 
Federal cost-reimbursement contracts received directly from the 
Department or indirectly under awards by SCSEP recipients or higher-
tier sub-recipients. (OAA Sec.  503(f)(2)).
    (b) All governmental and nonprofit organizations that are 
recipients or sub-recipients must follow the audit requirements of OMB 
Circular A-133. These requirements are codified at 29 CFR parts 96 and 
99 and referenced in 29 CFR 97.26 for governmental organizations and in 
29 CFR 95.26 for institutions of higher education, hospitals, and other 
nonprofit organizations.
    (c) (1) The Department is responsible for audits of SCSEP 
recipients that are commercial organizations.
    (2) Commercial organizations that are sub-recipients under the 
SCSEP and that expend more than the minimum level specified in OMB 
Circular A-133 ($500,000, for fiscal years ending after December 31, 
2003) must have either an organization-wide audit or a program-specific 
financial and compliance audit

[[Page 53829]]

conducted in accordance with OMB Circular A-133.


Sec.  641.824  What lobbying requirements apply to the use of SCSEP 
funds?

    SCSEP recipients and sub-recipients must comply with the 
restrictions on lobbying codified in the Department's regulations at 29 
CFR part 93. (Also refer to Sec.  641.850(c), ``Lobbying costs.'')


Sec.  641.827  What general nondiscrimination requirements apply to the 
use of SCSEP funds?

    (a) SCSEP recipients, sub-recipients, and host agencies are 
required to comply with the nondiscrimination provisions codified in 
the Department's regulations at 29 CFR parts 31 and 32 and the 
provisions on the equal treatment of religious organizations at 29 CFR 
part 2 subpart D.
    (b) Recipients and sub-recipients of SCSEP funds are required to 
comply with the nondiscrimination provisions codified in the 
Department's regulations at 29 CFR part 37 if:
    (1) The recipient:
    (i) Is a One-Stop partner listed in Sec.  121(b) of WIA, and
    (ii) Operates programs and activities that are part of the One-Stop 
delivery system established under WIA; or
    (2) The recipient otherwise satisfies the definition of 
``recipient'' in 29 CFR 37.4.
    (c) Recipients must ensure that participants are provided 
informational materials relating to age discrimination and/or their 
rights under the Age Discrimination in Employment Act of 1975 that are 
distributed to recipients by the Department as required by Sec.  
503(b)(3) of the OAA.
    (d) Questions about or complaints alleging a violation of the 
nondiscrimination requirements cited in this section may be directed or 
mailed to the Director, Civil Rights Center, U.S. Department of Labor, 
Room N-4123, 200 Constitution Avenue, NW., Washington, DC, 20210, for 
processing. (See Sec.  641.910(d)).
    (e) The specification of any right or protection against 
discrimination in paragraphs (a) through (d) of this section must not 
be interpreted to exclude or diminish any other right or protection 
against discrimination in connection with a SCSEP project that may be 
available to any participant, applicant for participation, or other 
individual under any applicable Federal, State, or local laws 
prohibiting discrimination, or their implementing regulations.


Sec.  641.833  What policies govern political patronage?

    (a) A recipient or sub-recipient must not select, reject, promote, 
or terminate an individual based on political services provided by the 
individual or on the individual's political affiliations or beliefs. In 
addition, as provided in Sec.  641.827(b), certain recipients and sub-
recipients of SCSEP funds are required to comply with WIA 
nondiscrimination regulations in 29 CFR part 37. These regulations 
prohibit discrimination on the basis of political affiliation or 
belief.
    (b) A recipient or sub-recipient must not provide, or refuse to 
provide, funds to any sub-recipient, host agency, or other entity based 
on political affiliation.
    (c) SCSEP recipients must ensure that every entity that receives 
SCSEP funds through the recipient is applying the policies stated in 
paragraphs (a) and (b) of this section.


Sec.  641.836  What policies govern political activities?

    (a) No project under title V of the OAA may involve political 
activities. SCSEP recipients must ensure compliance with the 
requirements and prohibitions involving political activities described 
in paragraphs (b) and (c) of this section.
    (b) State and local employees involved in the administration of 
SCSEP activities may not engage in political activities prohibited 
under the Hatch Act (5 U.S.C. chapter 15), including:
    (1) Seeking partisan elective office;
    (2) Using official authority or influence for the purpose of 
affecting elections, nominations for office, or fund-raising for 
political purposes. (5 U.S.C. 1502).
    (c) SCSEP recipients must provide all persons associated with SCSEP 
activities with a written explanation of allowable and unallowable 
political activities under the Hatch Act. A notice explaining these 
allowable and unallowable political activities must be posted in every 
workplace in which SCSEP activities are conducted. The Department will 
provide the form and content of the notice and explanatory material by 
administrative issuance. (OAA Sec.  502(b)(l)(P)).
    (d) SCSEP recipients must ensure that:
    (1) No SCSEP participants or staff persons engage in partisan or 
nonpartisan political activities during hours for which they are being 
paid with SCSEP funds.
    (2) No participants or staff persons engage in partisan political 
activities in which such participants or staff persons represent 
themselves as spokespersons for the SCSEP.
    (3) No participants are employed or out-stationed in the offices of 
a Member of Congress, a State or local legislator, or on the staff of 
any legislative committee.
    (4) No participants are employed or out-stationed in the immediate 
offices of any elected chief executive officer of a State or unit of 
general government, except that:
    (i) Units of local government may serve as host agencies for 
participants, provided that their assignments are non-political; and
    (ii) While assignments may place participants in such offices, such 
assignments actually must be concerned with program and service 
activities and not in any way involved in political functions.
    (5) No participants are assigned to perform political activities in 
the offices of other elected officials. Placement of participants in 
such offices in non-political assignments is permissible, however, 
provided that:
    (i) SCSEP recipients develop safeguards to ensure that participants 
placed in these assignments are not involved in political activities; 
and
    (ii) These safeguards are described in the grant agreement and are 
approved by the Department and are subject to review and monitoring by 
the SCSEP recipient and by the Department.


Sec.  641.839  What policies govern union organizing activities?

    Recipients must ensure that SCSEP funds are not used in any way to 
assist, promote, or deter union organizing.


Sec.  641.841  What policies govern nepotism?

    (a) SCSEP recipients must ensure that no recipient or sub-recipient 
hires, and no host agency serves as a worksite for, a person who works 
in a SCSEP community service assignment if a member of that person's 
immediate family is engaged in a decision-making capacity (whether 
compensated or not) for that project, subproject, recipient, sub-
recipient, or host agency. The Department may exempt worksites on 
Native American reservations and in rural areas from this requirement 
provided that adequate justification can be documented, such as that no 
other persons are eligible and available for participation in the 
program.
    (b) To the extent that an applicable State or local legal nepotism 
requirement is more restrictive than this provision, SCSEP recipients 
must ensure that the more restrictive requirement is followed.
    (c) For purposes of this section, ``immediate family'' means wife, 
husband, son, daughter, mother, father, brother, sister, son-in-law, 
daughter-in-law, mother- in-law, father-in-law, brother-in-law, sister-
in-law, aunt,

[[Page 53830]]

uncle, niece, nephew, stepparent, stepchild, grandparent, or 
grandchild.


Sec.  641.844  What maintenance of effort requirements apply to the use 
of SCSEP funds?

    (a) A community service assignment for a participant under title V 
of the OAA is permissible only when specific maintenance of effort 
requirements are met.
    (b) Each project funded under title V:
    (1) Must not reduce the number of employment opportunities or 
vacancies that would otherwise be available to individuals not 
participating in the program;
    (2) Must not displace currently employed workers (including partial 
displacement, such as a reduction in the hours of non-overtime work, 
wages, or employment benefits);
    (3) Must not impair existing contracts or result in the 
substitution of Federal funds for other funds in connection with work 
that would otherwise be performed; and
    (4) Must not employ or continue to employ any eligible individual 
to perform the same work or substantially the same work as that 
performed by any other individual who is on layoff. (OAA Sec.  
502(b)(1)(G)).


Sec.  641.847  What uniform allowable cost requirements apply to the 
use of SCSEP funds?

    (a) General. Unless specified otherwise in this part or the grant 
agreement, recipients and sub-recipients must follow the uniform 
allowable cost requirements that apply to their type of organization. 
For example, a local government sub-recipient receiving SCSEP funds 
from a nonprofit organization must use the allowable cost requirements 
for governmental organizations in OMB Circular A-87. The Department's 
regulations at 29 CFR 95.27 (non-profit and commercial organizations) 
and 29 CFR 97.22 (State and local governments) identify the Federal 
principles for determining allowable costs that each kind of 
organization must follow. The applicable Federal principles for each 
kind of organization are described in paragraphs (b)(1) through (b)(5) 
of this section. (OAA Sec.  503(f)(2)).
    (b) Allowable costs/cost principles.
    (1) Allowable costs for State, local, and Indian tribal government 
organizations must be determined under OMB Circular A-87, ``Cost 
Principles for State, Local and Indian Tribal Governments.''
    (2) Allowable costs for nonprofit organizations must be determined 
under OMB Circular A-122, ``Cost Principles for Non-Profit 
Organizations.''
    (3) Allowable costs for institutions of higher education must be 
determined under OMB Circular A-21, ``Cost Principles for Educational 
Institutions.''
    (4) Allowable costs for hospitals must be determined in accordance 
with appendix E of 45 CFR part 74, ``Principles for Determining Costs 
Applicable to Research and Development Under Grants and Contracts with 
Hospitals.''
    (5) Allowable costs for commercial organizations and those 
nonprofit organizations listed in Attachment C to OMB Circular A-122 
must be determined under the provisions of the Federal Acquisition 
Regulation (FAR), at 48 CFR part 31.


Sec.  641.850  Are there other specific allowable and unallowable cost 
requirements for the SCSEP?

    (a) Yes, in addition to the generally applicable cost principles in 
Sec.  641.847(b), the cost principles in paragraphs (b) through (g) of 
this section apply to SCSEP grants.
    (b) Claims against the Government. For all types of entities, legal 
expenses for the prosecution of claims against the Federal Government, 
including appeals to an Administrative Law Judge, are unallowable.
    (c) Lobbying costs. In addition to the prohibition contained in 29 
CFR part 93, SCSEP funds must not be used to pay any salaries or 
expenses related to any activity designed to influence legislation or 
appropriations pending before the Congress of the United States or any 
State legislature. (See Sec.  641.824).
    (d) One-Stop Costs. Costs of participating as a required partner in 
the One-Stop delivery system established in accordance with Sec.  
134(c) of the WIA are allowable, provided that SCSEP services and 
funding are provided in accordance with the MOU required by the WIA and 
OAA Sec.  502(b)(1)(O), and costs are determined in accordance with the 
applicable cost principles. The costs of services provided by the 
SCSEP, including those provided by participants/enrollees, may comprise 
a portion or the total of a SCSEP project's proportionate share of One-
Stop costs.
    (e) Building repairs and acquisition costs. Except as provided in 
this paragraph and as an exception to the allowable cost principles in 
Sec.  641.847(b), no SCSEP funds may be used for the purchase, 
construction, or renovation of any building except for the labor 
involved in:
    (1) Minor remodeling of a public building necessary to make it 
suitable for use for project purposes;
    (2) Minor repair and rehabilitation of publicly used facilities for 
the general benefit of the community; and
    (3) Repair and rehabilitation by participants of housing occupied 
by persons with low incomes who are declared eligible for such services 
by authorized local agencies.
    (f) Accessibility and reasonable accommodation. Recipients and sub-
recipients may use SCSEP funds to meet their obligations under Sec.  
504 of the Rehabilitation Act of 1973, as amended, and the Americans 
with Disabilities Act of 1990, as amended, and any other applicable 
Federal disability nondiscrimination laws, to provide physical and 
programmatic accessibility and reasonable accommodation/modifications 
for, and effective communications with, individuals with disabilities. 
(29 U.S.C. 794).
    (g) Participants' benefit costs. Recipients and sub-recipients may 
use SCSEP funds for participant benefit costs only under the conditions 
set forth in Sec.  641.565.


Sec.  641.853  How are costs classified?

    (a) All costs must be classified as ``administrative costs'' or 
``programmatic activity costs.'' (OAA Sec.  502(c)(6)).
    (b) Recipients and sub-recipients must assign participants' wage 
and benefit costs and other participant (enrollee) costs such as 
supportive services to the programmatic activity cost category. (See 
Sec.  641.864). When a participant's community service assignment 
involves functions whose costs are normally classified as 
administrative costs, compensation provided to the participants must be 
charged as programmatic activity costs instead of administrative costs, 
since participant wage and benefit costs are always charged to the 
programmatic activity cost category.


Sec.  641.856  What functions and activities constitute administrative 
costs?

    (a) Administrative costs are that allocable portion of necessary 
and reasonable allowable costs of recipients and program operators that 
are associated with those specific functions identified in paragraph 
(b) of this section and that are not related to the direct provision of 
programmatic activities specified in Sec.  641.864. These costs may be 
both personnel and non-personnel and both direct and indirect costs.
    (b) Administrative costs are the costs associated with:
    (1) Performing general administrative and coordination functions, 
including:
    (i) Accounting, budgeting, financial, and cash management 
functions;

[[Page 53831]]

    (ii) Procurement and purchasing functions;
    (iii) Property management functions;
    (iv) Personnel management functions;
    (v) Payroll functions;
    (vi) Coordinating the resolution of findings arising from audits, 
reviews, investigations, and incident reports;
    (vii) Audit functions;
    (viii) General legal services functions;
    (ix) Developing systems and procedures, including information 
systems, required for these administrative functions;
    (x) Preparing administrative reports; and
    (xi) Other activities necessary for general administration of 
government funds and associated programs.
    (2) Oversight and monitoring responsibilities related to 
administrative functions;
    (3) Costs of goods and services used for administrative functions 
of the program, including goods and services such as rental or purchase 
of equipment, utilities, office supplies, postage, and rental and 
maintenance of office space;
    (4) Travel costs incurred for official business in carrying out 
administrative activities or the overall management of the program;
    (5) Costs of information systems related to administrative 
functions (for example, personnel, procurement, purchasing, property 
management, accounting, and payroll systems) including the purchase, 
systems development, and operating costs of such systems and;
    (6) Costs of technical assistance, professional organization 
membership dues, and evaluating results obtained by the project 
involved against stated objectives.
    (OAA Sec.  502(c)(4)).


Sec.  641.859  What other special rules govern the classification of 
costs as administrative costs or programmatic activity costs?

    (a) Recipients and sub-recipients must comply with the special 
rules for classifying costs as administrative costs or programmatic 
activity costs set forth in paragraphs (b) through (e) of this section.
    (b)(1) Costs of awards by recipients and program operators that are 
solely for the performance of their own administrative functions are 
classified as administrative costs.
    (2) Costs incurred by recipients and program operators for 
administrative functions listed in Sec.  641.856(b) are classified as 
administrative costs.
    (3) Costs incurred by vendors and sub-recipients performing the 
administrative functions of recipients and program operators are 
classified as administrative costs. (See 29 CFR 99.210 for a discussion 
of factors differentiating sub-recipients from vendors.)
    (4) Except as provided in paragraph (b)(3) of this section, all 
costs incurred by all vendors, and only those sub-recipients below 
program operators, are classified as programmatic activity costs. (See 
29 CFR 99.210 for a discussion of factors differentiating sub-
recipients from vendors.)
    (c) Personnel and related non-personnel costs of staff who perform 
both administrative functions specified in Sec.  641.856(b) and 
programmatic services or activities must be allocated as administrative 
or programmatic activity costs to the benefiting cost objectives/
categories based on documented distributions of actual time worked or 
other equitable cost allocation methods.
    (d) The allocable share of indirect or overhead costs charged to 
the SCSEP grant are to be allocated to the administrative and 
programmatic activity cost categories in the same proportion as the 
costs in the overhead or indirect cost pool are classified as 
programmatic activity or administrative costs.
    (e) Costs of the following information systems including the 
purchase, systems development and operating (e.g., data entry) costs 
are charged to the programmatic activity cost category:
    (1) Tracking or monitoring of participant and performance 
information;
    (2) Employment statistics information, including job listing 
information, job skills information, and demand occupation information; 
and
    (3) Local area performance information.


Sec.  641.861  Must SCSEP recipients provide funding for the 
administrative costs of sub-recipients?

    (a) Recipients and sub-recipients must obtain funding for 
administrative costs to the extent practicable from non-Federal 
sources. (OAA Sec.  502(c)(5)).
    (b) SCSEP recipients must ensure that sufficient funding is 
provided for the administrative activities of sub-recipients that 
receive SCSEP funding through the recipient. Each SCSEP recipient must 
describe in its grant application the methodology used to ensure that 
sub-recipients receive sufficient funding for their administrative 
activities. (OAA Sec.  502(b)(1)(R)).


Sec.  641.864  What functions and activities constitute programmatic 
activity costs?

    Programmatic activity costs include, but are not limited to, the 
costs of the following functions:
    (a) Participant wages, such benefits as are required by law (such 
as workers' compensation or unemployment compensation), the costs of 
physical examinations, compensation for scheduled work hours during 
which a host agency is closed for a Federal holiday, and necessary sick 
leave that is not part of an accumulated sick leave program, except 
that no amounts provided under the grant may be used to pay the cost of 
pension benefits, annual leave, accumulated sick leave, or bonuses, as 
described in Sec.  641.565;
    (b) Outreach, recruitment and selection, intake, orientation, 
assessment, and preparation and updating of IEPs;
    (c) Participant training, as described in Sec.  641.540, which may 
be provided before commencing or during a community service assignment, 
and which may be provided at a host agency, in a classroom setting, or 
using other appropriate arrangements, which may include reasonable 
costs of instructors' salaries, classroom space, training supplies, 
materials, equipment, and tuition;
    (d) Subject to the restrictions in Sec.  641.535(c), job placement 
assistance, including job development and job search assistance, job 
fairs, job clubs, and job referrals; and
    (e) Participant supportive services, to enable an individual to 
successfully participate in a SCSEP project, as described in Sec.  
641.545.
    (OAA Sec.  502(c)(6)(A)).


Sec.  641.867  What are the limitations on the amount of SCSEP 
administrative costs?

    (a) Except as provided in paragraph (b), no more than 13.5 percent 
of the SCSEP funds received for a Program Year may be used for 
administrative costs.
    (b) The Department may increase the amount available for 
administrative costs to not more than 15 percent, in accordance with 
Sec.  641.870.
    (OAA Sec.  502(c)(3)).


Sec.  641.870  Under what circumstances may the administrative cost 
limitation be increased?

    (a) SCSEP recipients may request that the Department increase the 
amount available for administrative costs. The Department may honor the 
request if:
    (1) The Department determines that it is necessary to carry out the 
project; and
    (2) The recipient demonstrates that:
    (i) Major administrative cost increases are being incurred in 
necessary program components, such as liability insurance, payments for 
workers' compensation for staff, costs associated with achieving 
unsubsidized placement goals, and

[[Page 53832]]

other operation requirements imposed by the Department;
    (ii) The number of community service assignment positions in the 
project or the number of minority eligible individuals participating in 
the project will decline if the amount available for paying the cost of 
administration is not increased; or
    (iii) The size of the project is so small that the amount of 
administrative costs incurred to carry out the project necessarily 
exceeds 13.5 percent of the grant amount.
    (OAA Sec.  502(c)(3)).
    (b) A request by a recipient or prospective recipient for an 
increase in the amount available for administrative costs may be 
submitted as part of the grant application or as a separate submission 
at any time after the grant award.


Sec.  641.873  What minimum expenditure levels are required for 
participant wages and benefits?

    (a) Except as provided in Sec.  641.874 or in paragraph (c) of this 
section, not less than 75 percent of the SCSEP funds provided under a 
grant from the Department must be used to pay for wages and benefits of 
participants as described in Sec.  641.864(a). (OAA Sec.  
502(c)(6)(B)).
    (b) A SCSEP recipient is in compliance with this provision if at 
least 75 percent of the total expenditure of SCSEP funds provided to 
the recipient was for wages and benefits, even if one or more sub-
recipients did not expend at least 75 percent of their SCSEP sub-
recipient award for wages and benefits.
    (c) A SCSEP grantee may submit to the Department a request for 
approval to use not less than 65 percent of the grant funds to pay 
wages and benefits under Sec.  641.874.


Sec.  641.874  What conditions apply to a SCSEP grantee request to use 
additional funds for training and supportive service costs?

    (a) A grantee may submit to the Department a request for approval--
    (1) To use not less than 65 percent of the grant funds to pay the 
wages and benefits described in Sec.  641.864(a);
    (2) To use the percentage of grant funds specified in Sec.  641.867 
to pay for administrative costs as described in Sec.  641.856;
    (3) To use the 10 percent of grant funds that would otherwise be 
devoted to wages and benefits under Sec.  641.873 to provide 
participant training (as described in Sec.  641.540(e)) and participant 
supportive services to enable participants to successfully participate 
in a SCSEP project (as described in Sec.  641.545), in which case the 
grantee must provide (from the funds described in this paragraph) the 
wages for those individual participants who are receiving training from 
the funds described in this paragraph, but may not use the funds 
described in this paragraph to pay for any administrative costs; and
    (4) To use the remaining grant funds to provide participant 
training, job placement assistance, participant supportive services, 
and outreach, recruitment and selection, intake, orientation and 
assessment.
    (b) In submitting the request the grantee must include in the 
request--
    (1) A description of the activities for which the grantee will 
spend the grant funds described in paragraphs (a)(3) and (a)(4) of this 
section;
    (2) An explanation documenting how the provision of such activities 
will improve the effectiveness of the project, including an explanation 
of whether any displacement of eligible individuals or elimination of 
positions for such individuals will occur, information on the number of 
such individuals to be displaced and of such positions to be 
eliminated, and an explanation of how the activities will improve 
employment outcomes for the individuals served, based on the assessment 
conducted under Sec.  641.535(a)(2); and
    (3) A proposed budget and work plan for the activities, including a 
detailed description of how the funds will be spent on the activities 
described in paragraphs (a)(3) and (a)(4) of this section.
    (c)(1) If a grantee wishes to amend an existing grant agreement to 
use additional funds for training and supportive service costs, the 
grantee must submit such a request not later than 90 days before the 
proposed date of implementation contained in the request. Not later 
than 30 days before the proposed date of implementation, the Department 
will approve, approve as modified, or reject the request, on the basis 
of the information included in the request.
    (2) If a grantee submits a request to use additional funds for 
training and supportive service costs in the grant application, the 
request will be accepted and processed as a part of the grant review 
process.
    (d) Grantees may apply this provision to individual sub-recipients 
but need not provide this opportunity to all their sub-recipients.


Sec.  641.876  How will compliance with cost limitations and minimum 
expenditure levels be determined?

    The Department will determine compliance by examining expenditures 
of SCSEP funds. The cost limitations and minimum expenditure level 
requirements must be met at the time all such funds have been expended 
or the period of availability of such funds has expired, whichever 
comes first.


Sec.  641.879  What are the financial and performance reporting 
requirements for recipients?

    (a) In accordance with 29 CFR 97.41 (State and local governments) 
or 29 CFR 95.52 (non-profit and commercial organizations), each SCSEP 
recipient must submit a SCSEP Financial Status Report (FSR, ETA Form 
9130) in electronic format to the Department via the Internet within 45 
days after the ending of each quarter of the Program Year. Each SCSEP 
recipient must also submit a final closeout FSR to the Department via 
the Internet within 90 days after the end of the grant period. The 
Department will provide instructions for the preparation of this 
report. (OAA Sec.  503(f)(3)).
    (1) Financial data must be reported on an accrual basis, and 
cumulatively by funding year of appropriation. Financial data may also 
be required on specific program activities as required by the 
Department.
    (2) If the SCSEP recipient's accounting records are not normally 
kept on the accrual basis of accounting, the SCSEP recipient must 
develop accrual information through an analysis of the documentation on 
hand.
    (b) In accordance with 29 CFR 97.40 (State and local governments) 
or 29 CFR 95.51 (non-profit and commercial organizations), each SCSEP 
recipient must submit updated data on participants (including data on 
demographic characteristics and data regarding the performance 
measures), host agencies, and employers in an electronic format 
specified by the Department via the Internet within 30 days after the 
end of each of the first three quarters of the Program Year, on the 
last day of the fourth quarter of the Program Year, and within 90 days 
after the last day of the Program Year. Recipients wishing to correct 
data errors or omissions for their final Program Year report must do so 
within 90 days after the end of the Program Year. The Department will 
generate SCSEP Quarterly Progress Reports (QPRs), as well as the final 
QPR, as soon as possible after receipt of the data. (OAA Sec.  
503(f)(3)).

[[Page 53833]]

    (c) Each State agency receiving title V funds must annually submit 
an equitable distribution report of SCSEP positions by all recipients 
in the State. The Department will provide instructions for the 
preparation of this report. (OAA Sec.  508).
    (d) In addition to the data required to be submitted under 
paragraph (b) of this section, each SCSEP recipient may be required to 
collect data and submit reports on the performance measures. See 
subpart G. The Department will provide instructions detailing these 
measures and how recipients must prepare this report.
    (e) In addition to the data required to be submitted under 
paragraph (b) of this section, each SCSEP recipient may be required to 
collect data and submit reports about the demographic characteristics 
of program participants. The Department will provide instructions 
detailing these measures and how recipients must prepare these reports.
    (f) Federal agencies that receive and use SCSEP funds under 
interagency agreements must submit project financial and progress 
reports in accordance with this section. Federal recipients must 
maintain the necessary records that support required reports according 
to instructions provided by the Department. (OAA Sec.  503(f)(3)).
    (g) Recipients may be required to maintain records that contain any 
other information that the Department determines to be appropriate in 
support of any other reports that the Department may require. (OAA 
Sec.  503(f)(3)).
    (h) Grantees submitting reports that cannot be validated or 
verified as accurately counting and reporting activities in accordance 
with the reporting instructions may be treated as failing to submit 
reports, which may result in failing one of the responsibility tests 
outlined in Sec.  641.430 and OAA Sec.  514(d).


Sec.  641.881  What are the SCSEP recipient's responsibilities relating 
to awards to sub-recipients?

    (a) Recipients are responsible for ensuring that all awards to sub-
recipients are conducted in a manner to provide, to the maximum extent 
practicable, full and open competition in accordance with the 
procurement procedures in 29 CFR 95.43 (non-profit and commercial 
organizations) and 29 CFR 97.36 (State and local governments).
    (b) The SCSEP recipient is responsible for all grant activities, 
including the performance of SCSEP activities by sub-recipients, and 
ensuring that sub-recipients comply with the OAA and this part. (See 
also OAA Sec.  514(d) and Sec.  641.430 of this part on responsibility 
tests).
    (c) Recipients must follow their own procedures for allocating 
funds to other entities. The Department will not grant funds to another 
entity on the recipient's behalf.
    (d)(1) National grantees that receive grants to provide services in 
an area where a substantial population of individuals with barriers to 
employment exists must, in selecting sub-recipients, give special 
consideration to organizations (including former national grant 
recipients) with demonstrated expertise in serving such individuals. 
(OAA Sec.  514(e)(2)).
    (2) For purposes of this section, the term ``individuals with 
barriers to employment'' means minority individuals, Indian 
individuals, individuals with greatest economic need, and most-in-need 
individuals. (OAA Sec.  514(e)(1)).


Sec.  641.884  What are the grant closeout procedures?

    SCSEP recipients must follow the grant closeout procedures at 29 
CFR 97.50 (State and local governments) or 29 CFR 95.71 (non-profit and 
government organizations), as appropriate. The Department will issue 
supplementary closeout instructions to OAA title V recipients as 
necessary.

Subpart I--Grievance Procedures and Appeals Process


Sec.  641.900  What appeal process is available to an applicant that 
does not receive a multi-year grant?

    (a) An applicant for financial assistance under title V of the OAA 
that is dissatisfied because it was not awarded financial assistance in 
whole or in part may request that the Grant Officer provide an 
explanation for not awarding financial assistance to that applicant. 
The request must be filed within 10 days of the date of notification 
indicating that financial assistance would not be awarded. The Grant 
Officer must provide the protesting applicant with feedback concerning 
its proposal within 21 days of the protest. Applicants may appeal to 
the U.S. Department of Labor, Office of Administrative Law Judges 
(OALJ), within 21 days of the date of the Grant Officer's feedback on 
the proposal, or within 21 days of the Grant Officer's notification 
that financial assistance would not be awarded if the applicant does 
not request feedback on its proposal. The appeal may be for a part or 
the whole of the denied funding. This appeal will not in any way 
interfere with the Department's decisions to fund other organizations 
to provide services during the appeal period.
    (b) Failure to file an appeal within the 21 days provided in 
paragraph (a) of this section constitutes a waiver of the right to a 
hearing.
    (c) A request for a hearing under this section must state 
specifically those issues in the Grant Officer's notification upon 
which review is requested. Those provisions of the Grant Officer's 
notification not specified for review are considered resolved and not 
subject to further review.
    (d) A request for a hearing must be transmitted by certified mail, 
return receipt requested, to the Chief Administrative Law Judge, U.S. 
Department of Labor, Suite 400 North, 800 K Street, NW., Washington, DC 
20001, with one copy to the Departmental official who issued the 
determination.
    (e) The decision of the ALJ constitutes final agency action unless, 
within 21 days of the decision, a party dissatisfied with the ALJ's 
decision, in whole or in part, has filed a petition for review with the 
Administrative Review Board (ARB) (established under Secretary's Order 
No. 2-96, published at 61 FR 19978, May 3, 1996), specifically 
identifying the procedure, fact, law, or policy to which exception is 
taken. The mailing address for the ARB is 200 Constitution Ave., NW., 
Room N5404, Washington, DC 20210. The Department will deem any 
exception not specifically urged to have been waived. A copy of the 
petition for review must be sent to the grant officer at that time. If, 
within 30 days of the filing of the petition for review, the ARB does 
not notify the parties that the case has been accepted for review, then 
the decision of the ALJ constitutes final agency action. Any case 
accepted by the ARB must be decided within 180 days of acceptance. If 
not so decided, the decision of the ALJ constitutes final agency 
action.
    (f) The Rules of Practice and Procedures for Administrative 
Hearings Before the Office of Administrative Law Judges, at 29 CFR part 
18, govern the conduct of hearings under this section, except that:
    (1) The appeal is not considered a complaint; and
    (2) Technical rules of evidence, such as the Federal Rules of 
Evidence and subpart B of 29 CFR part 18, will not apply to any hearing 
conducted under this section. However, rules designed to assure 
production of the most credible evidence available and to subject 
testimony to test by cross-examination will be applied when the ALJ 
conducting the hearing considers them reasonably necessary. The 
certified copy

[[Page 53834]]

of the administrative file transmitted to the ALJ by the official 
issuing the notification not to award financial assistance must be part 
of the evidentiary record of the case and need not be moved into 
evidence.
    (g) The ALJ should render a written decision no later than 90 days 
after the closing of the record.
    (h) The remedies available are provided in Sec.  641.470.


Sec.  641.910  What grievance procedures must grantees make available 
to applicants, employees, and participants?

    (a) Each grantee must establish, and describe in the grant 
agreement, grievance procedures for resolving complaints, other than 
those described by paragraph (d) of this section, arising between the 
grantee, employees of the grantee, sub-recipients, and applicants or 
participants.
    (b) The Department will not review final determinations made under 
paragraph (a) of this section, except to determine whether the 
grantee's grievance procedures were followed, and according to 
paragraph (c) of this section.
    (c) Allegations of violations of Federal law, other than those 
described in paragraph (d) of this section, which are not resolved 
within 60 days under the grantee's procedures, may be filed with the 
Chief, Division of Adult Services, Employment and Training 
Administration, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Washington, DC 20210. Allegations determined to be substantial and 
credible will be investigated and addressed.
    (d) Questions about, or complaints alleging a violation of, the 
nondiscrimination requirements of title VI of the Civil Rights Act of 
1964, Sec.  504 of the Rehabilitation Act of 1973, Sec.  188 of the 
Workforce Investment Act of 1998 (WIA), or their implementing 
regulations, may be directed or mailed to the Director, Civil Rights 
Center, U.S. Department of Labor, Room N-4123, 200 Constitution Avenue, 
NW., Washington, DC 20210. In the alternative, complaints alleging 
violations of WIA Sec.  188 may be filed initially at the grantee 
level. See 29 CFR 37.71, 37.76. In such cases, the grantee must use 
complaint processing procedures meeting the requirements of 29 CFR 
37.70 through 37.80 to resolve the complaint.


Sec.  641.920  What actions of the Department may a grantee appeal and 
what procedures apply to those appeals?

    (a) Appeals from a final disallowance of costs as a result of an 
audit must be made under 29 CFR 96.63.
    (b) Appeals of suspension or termination actions taken on the 
grounds of discrimination are processed under 29 CFR 31 or 29 CFR 37, 
as appropriate.
    (c) Protests and appeals of decisions not to award a grant, in 
whole or in part, will be handled under Sec.  641.900.
    (d) Upon a grantee's receipt of the Department's final 
determination relating to costs (except final disallowance of costs as 
a result of an audit, as described in paragraph (a) of this section), 
payment, suspension or termination, or the imposition of sanctions, the 
grantee may appeal the final determination to the Department's Office 
of Administrative Law Judges, as follows:
    (1) Within 21 days of receipt of the Department's final 
determination, the grantee may transmit by certified mail, return 
receipt requested, a request for a hearing to the Chief Administrative 
Law Judge, United States Department of Labor, Suite 400 North, 800 K 
Street, NW., Washington, DC 20001 with a copy to the Department 
official who signed the final determination.
    (2) The request for hearing must be accompanied by a copy of the 
final determination, and must state specifically those issues of the 
determination upon which review is requested. Those provisions of the 
determination not specified for review, or the entire determination 
when no hearing has been requested within the 21 days, are considered 
resolved and not subject to further review.
    (3) The Rules of Practice and Procedures for Administrative 
Hearings Before the Office of Administrative Law Judges, at 29 CFR part 
18, govern the conduct of hearings under this section, except that:
    (i) The appeal is not considered as a complaint; and
    (ii) Technical rules of evidence, such as the Federal Rules of 
Evidence and subpart B of 29 CFR part 18, will not apply to any hearing 
conducted under this section. However, rules designed to assure 
production of the most credible evidence available and to subject 
testimony to test by cross-examination will be applied when the 
Administrative Law Judge conducting the hearing considers them 
reasonably necessary. The certified copy of the administrative file 
transmitted to the Administrative Law Judge by the official issuing the 
final determination must be part of the evidentiary record of the case 
and need not be moved into evidence.
    (4) The Administrative Law Judge should render a written decision 
no later than 90 days after the closing of the record. In ordering 
relief, the ALJ may exercise the full authority of the Secretary under 
the OAA.
    (5) The decision of the ALJ constitutes final agency action unless, 
within 21 days of the decision, a party dissatisfied with the ALJ's 
decision, in whole or in part, has filed a petition for review with the 
ARB (established under Secretary's Order No. 2-96), specifically 
identifying the procedure, fact, law, or policy to which exception is 
taken. The mailing address for the ARB is 200 Constitution Ave., NW., 
Room N5404, Washington, DC 20210. The Department will deem any 
exception not specifically argued to have been waived. A copy of the 
petition for review must be sent to the grant officer at that time. If, 
within 30 days of the filing of the petition for review, the ARB does 
not notify the parties that the case has been accepted for review, then 
the decision of the ALJ constitutes final agency action. Any case 
accepted by the ARB must be decided within 180 days of acceptance. If 
not so decided, the decision of the ALJ constitutes final agency 
action.


Sec.  641.930  Is there an alternative dispute resolution process that 
may be used in place of an OALJ hearing?

    (a) Parties to a complaint that has been filed according to the 
requirements of Sec.  641.920 (a), (c), and (d) may choose to waive 
their rights to an administrative hearing before the OALJ. Instead, 
they may choose to transfer the settlement of their dispute to an 
individual acceptable to all parties who will conduct an informal 
review of the stipulated facts and render a decision in accordance with 
applicable law. A written decision must be issued within 60 days after 
submission of the matter for informal review.
    (b) Unless the parties agree in writing to extend the period, the 
waiver of the right to request a hearing before the OALJ will 
automatically be revoked if a settlement has not been reached or a 
decision has not been issued within the 60 days provided in paragraph 
(a) of this section.
    (c) The decision rendered under this informal review process will 
be treated as the final agency decision.

    Signed at Washington, DC, this 19th day of August 2010.
Jane Oates,
Assistant Secretary, Employment and Training Administration.
[FR Doc. 2010-21139 Filed 8-31-10; 8:45 am]
BILLING CODE 4510-FN-P