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6332 Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Rules and Regulationsthe provision of VR services areresolved in a timely fashion.Finally, some commentersrecommended that the regulationsrequire DSUs to inform individuals ateach stage of the rehabilitation processof their right to appeal a counselor’sdetermination.Discussion: The Secretary believesthat it is necessary to clarify in the finalregulations that time extensions forinformally resolving an individual’sappeal of a counselor’s determinationunder paragraph (a) of this section mustbe agreed to by both parties and mustbe specific in length. This change isnecessary to ensure the timelyresolution of disputes through formalreview procedures.Section 102(d)(5) of the Act, which isimplemented by paragraph (b)(2) of thissection, states that the DSU may notinstitute a suspension, reduction, ortermination of services being providedunder the individual’s IWRP pendingfinal resolution of an individual’schallenge to a determination of arehabilitation counselor unless theindividual so requests or the serviceshave been obtained throughmisrepresentation, fraud, collusion, orcriminal conduct on the part of theindividual. This statutory prohibitiondoes not apply to assessment or otherservices that are not included in theIWRP. Similarly, the statutory referenceto services ‘‘being provided under theIWRP’’ means that the DSU isprohibited from suspending only thoseservices in the IWRP that the individualhas begun to receive prior to requestinga review of a counselor’s determination.However, the Secretary notes that theDSU cannot discontinue a serviceduring a regular interruption in thatservice (e.g., between semesters at aninstitution of higher education in whichtraining is provided) as long as theservice is included in the IWRP and hasbeen initiated.The Secretary agrees that any Statepolicy used as a basis for an impartialhearing officer’s decision underparagraph (b)(4) of this section or for amodification of that decision by thedirector of the DSU under paragraph(b)(9) of this section must be consistentwith Federal statutory and regulatoryrequirements.Section 361.57(b)(7) of the proposedand final regulations requires that anydecision by a DSU director to review thedecision of an impartial hearing officermust be based on standards of reviewestablished under written State policy.Although DSUs have the discretion toestablish appropriate standards ofreview, the Secretary intends thatstandards developed under paragraph(b)(7) of this section be consistent withRSA policy, specifically Chapter 0545 ofthe Rehabilitation Services Manual(Clients’’ Rights to Appeal Decisions),which specifies a number offundamental issues that should beaddressed in connection withdetermining whether to review ahearing officer’s decision (e.g., Is theinitial decision arbitrary, capricious, anabuse of discretion or otherwiseunreasonable? Is the initial decisionconsistent with the facts of the case andapplicable Federal and State policies?).Section 361.57(b)(10) of the proposedregulations provided that if the DSUdirector decided to review the decisionof an impartial hearing officer, thedirector would provide to the individuala full report of the director’s finaldecision and of the findings andgrounds for the decision. The Secretaryintended the term ‘‘grounds’’ to includeany applicable law or policy on whichthe decision was based and believes thatchanging that term in the finalregulations to ‘‘statutory, regulatory, andpolicy grounds’’ will clarify thisintention. As stated previously, anyState policy that is used to support thedirector’s decision must be consistentwith Federal statutory and regulatoryrequirements.The proposed regulations would haveafforded DSUs the discretion to developtimelines for the prompt handling ofappeals instead of specifying Federaltimelines for certain stages of theappeals process. However, there wasnear-unanimity among commenters inopposing this change from currentregulations. The commenters stressedthe importance of protecting individualsfrom delays in the resolution of issuesaffecting an individual’s receipt of VRservices and vigorously asserted thatFederal timelines are the best means ofensuring that State appeal proceduresare conducted in a timely fashion.For the reasons stated by thecommenters, the Secretary agrees thatthe current regulatory timelines shouldbe retained in the final regulations. Stateunits have not indicated that the Federaltimelines are unreasonable orunnecessarily burdensome. Moreover,commenters on the proposedregulations indicated that a number ofDSUs have failed to meet the currenttimelines in the past. In light of thesecomments, the Secretary believes that atthis time affording DSUs the additionalflexibility to develop their owntimelines for handling appeals is neitherwarranted nor appropriate and thatretaining the current timelines does notimpose additional costs on DSUs.Finally, the Secretary agrees thatindividuals must be informed of theirappeal rights during key stages of therehabilitation process. Section 361.46(a)(8) and (a)(9) requires that theserights, as well as the availability ofrepresentation through the ClientAssistance Program (CAP) under 34 CFRpart 370, be clearly delineated in theIWRP. Moreover, § 361.43(c) requiresDSUs to provide individuals withinformation concerning the CAPwhenever an individual is foundineligible to receive VR services. TheSecretary believes that these provisionssufficiently ensure that individuals areapprised of their right to challenge anydetermination made by a counselorregarding the provision or denial ofservices.Changes: The Secretary has revised§ 361.57 to clarify that time extensionsfor informally resolving an individual’srequest for review of a counselor’sdetermination under paragraph (a) mustbe specific and agreed upon by bothparties. In addition, paragraphs (b)(4)and (b)(9) of this section have beenrevised to clarify that any State policyon which the decision of an impartialhearing officer or DSU director is basedmust be consistent with applicableFederal requirements. Paragraph (b)(10)of this section also has been amended toclarify that the director’s decision andcorresponding report must specify thestatutory, regulatory, or policy groundsfor the decision. Finally, the Secretaryalso has revised this section by applyingspecific timelines to certain stages of theappeals process. Like the currentregulations, the final regulations requirethat an impartial hearing officer conducta formal hearing within 45 days of anindividual’s request for review; that thehearing officer render a decision within30 days of the completion of thehearing; and that the DSU director issuea final decision within 30 days ofnotifying the individual of the director’sintent to review the initial decision. Therequirement that the individual benotified of the director’s intent to reviewthe initial decision within 20 days of itsissuance is specified in the Act and isimplemented by § 361.57(b)(5) of theregulations. Because the currentregulatory timelines have beenreinserted into this section of the finalregulations, the Secretary has removedfrom the final regulations therequirement under paragraph (c) of theproposed regulations that the DSUdevelop timelines applicable to thesestages of the review process.§ 361.60 Matching RequirementsComments: Two commenters opposedthe prohibition in this section againstusing third party in-kind contributionsto meet the non-Federal share under the
Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Rules and Regulations6333VR program. Another commenterexpressed concern about the impact ofthis prohibition on the use, as non-Federal match, of funds provided byother public agencies under third-partycooperative arrangements.Discussion: ‘‘Third party in-kindcontributions,’’ which are a permissiblesource of State matching funds underthe Education Department GeneralAdministrative Regulations (EDGAR),are defined in 34 CFR 80.3 as ‘‘propertyor services which benefit a <strong>federal</strong>lyassisted project or program and whichare contributed by non-Federal thirdparties without charge to the grantee.* * *’’ However, it is RSA’s policy tonot allow the use of third-party in-kindcontributions to meet the State matchingrequirement under the VR program inthe absence of specific statutoryauthority. Where the Act permits theuse of in-kind expenditures as match forcertain programs, that authority isexpressed (e.g., the State IndependentLiving Program under section 712(b)(2)of the Act). Thus, § 361.60(b)(2)specifies that these contributions maynot be used as part of the DSU’s non-Federal share under the program. Thisprovision is consistent with thedefinition of ‘‘State and local funds’’under § 361.76 of the current regulationsand with the current regulatoryprohibition on the use of in-kindcontributions as match in § 361.24(c).Nevertheless, this prohibition has noeffect on a DSU’s ability to enter intothird-party cooperative arrangementsunder § 361.28 of the regulations forproviding VR services with anotherpublic agency that is furnishing part orall of the non-Federal share under theprogram. As long as the third party iscontributing funds to support VRservices, those dollars may be used aspart of the DSU’s non-Federal share(e.g., staff salaries paid by the thirdparty that are allowable matchingexpenditures). If, on the other hand, theDSU enters into an arrangement underwhich a third party provides equipmentor property used in the administrationof the VR program, the costs associatedwith those items cannot be used as non-Federal matching funds.Changes: None.§ 361.62 Maintenance of EffortRequirementsComments: One commenter suggestedthat recoveries of State maintenance ofeffort deficits should always bededucted from the State’s allotment ina future fiscal year.Discussion: Section 111(a)(2)(B)(ii) ofthe Act, which is implemented by§ 361.62(a)(1) of the regulations,requires the Department to recovermaintenance of effort deficits through adeduction in the State’s allotment forthe following Federal fiscal year.However, there is no statutory authorityto deduct an allotment other than in theyear immediately following amaintenance of effort shortfall. Thus,§ 361.62(a)(2) of the regulationsspecifies that when a maintenance ofeffort deficit is discovered too late toadjust the allotment for the followingyear, then the deficit will be recoveredthrough an audit disallowance.Changes: None.§ 361.71 Procedures for Developing theStrategic PlanComments: Two commentersrecommended that the DSU be requiredto consult the State Client AssistanceProgram prior to developing its strategicplan. Other commenters recommendedthat DSUs be required only to reviewrather than to revise the strategic planon an annual basis under paragraph (c)of this section.Discussion: Section 122(b) of the Actspecifies that, prior to developing thestrategic plan, the DSU shall hold publicforums and solicit recommendationsspecifically from the StateRehabilitation Advisory Council and theStatewide Independent Living Council.The Secretary agrees that the views ofthe CAP also should be considered inconnection with the development of thestrategic plan. The public participationrequirements in § 361.71(a) afford theCAP and other interested parties theopportunity to provide the DSU with itscomments and recommendations. Theannual revision requirement underparagraph (c) of this section is based onsection 122(a) of the Act, which statesthat the strategic plan must be updatedon an annual basis to reflect actualexperience over the previous year andinput from the Council and otherinterested parties. The Secretarybelieves that merely requiring an annualreview would be inconsistent with thisstatutory requirement.Changes: None.Paperwork Reduction Act of 1995Under the Paperwork Reduction Actof 1995, no persons are required torespond to a collection of informationunless it displays a valid OMB controlnumber. The valid OMB control numberassigned to the collections ofinformation in these final regulations isdisplayed at the end of the affectedsections of the regulations.Intergovernmental ReviewThis program is subject to therequirements of Executive Order 12372and the regulations in 34 CFR part 79.The objective of the Executive order isto foster an intergovernmentalpartnership and a strengthened<strong>federal</strong>ism by relying on processesdeveloped by State and localgovernments for coordination andreview of proposed Federal financialassistance.In accordance with the order, thisdocument is intended to provide earlynotification of the Department’s specificplans and actions for this program.Assessment of Educational ImpactIn the notice of proposed rulemaking,the Secretary requested comments onwhether the proposed regulations wouldrequire transmission of information thatis being gathered by or is available fromany other agency or authority of theUnited States.Based on the response to the proposedregulations and on its own review, theDepartment has determined that theregulations in this document do notrequire transmission of information thatis being gathered by or is available fromany other agency or authority of theUnited States.List of Subjects34 CFR Part 361Reporting and recordkeepingrequirements, State-administered grantprogram—education, Vocationalrehabilitation.34 CFR Part 363State-administered grant program—education, Supported employment.34 CFR Part 376Special projects and demonstrations,Transitional rehabilitation services.34 CFR Part 380Special projects and demonstrations,Supported employment, Technicalassistance.Dated: December 1, 1996.Richard W. Riley,Secretary of Education.(Catalog of Federal Domestic AssistanceNumbers: 84.126 The State VocationalRehabilitation Services Program; 84.187 TheState Supported Employment ServicesProgram; 84.235 Special Projects andDemonstrations for Providing TransitionalRehabilitation Services to Youth withDisabilities; 84.128 Special Projects andDemonstrations for Providing SupportedEmployment Services to Individuals with theMost Severe Disabilities and TechnicalAssistance Projects)The Secretary amends Title 34,Chapter III, of the Code of FederalRegulations as follows:1. Part 361 is revised to read asfollows:
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