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6360 Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Rules and Regulationsexpenditures for the provision ofvocational rehabilitation services,administration of the State plan, and thedevelopment and implementation of thestrategic plan, is 78.7 percent.(2) Construction projects. The Federalshare for expenditures made for theconstruction of a facility for communityrehabilitation program purposes maynot be more than 50 percent of the totalcost of the project.(3) Innovation and expansion grantactivities. The Federal share for the costof innovation and expansion grantactivities funded by appropriationsunder Part C of Title I of the Act is 90percent.(b) Non-Federal share—(1) General.Except as provided in paragraphs (b)(2)and (b)(3) of this section, expendituresmade under the State plan to meet thenon-Federal share under this sectionmust be consistent with the provisionsof 34 CFR 80.24.(2) Third party in-kind contributions.Third party in-kind contributionsspecified in 34 CFR 80.24(a)(2) may notbe used to meet the non-Federal shareunder this section.(3) Contributions by private entities.Expenditures made from contributionsby private organizations, agencies, orindividuals that are deposited in theaccount of the State agency or sole localagency in accordance with State lawand that are earmarked, under acondition imposed by the contributor,may be used as part of the non-Federalshare under this section if the followingrequirements are met:(i) The funds are earmarked formeeting in whole or in part the State’sshare for establishing a communityrehabilitation program or constructing aparticular facility for communityrehabilitation program purposes.(ii) If the funds are earmarked for anyother purpose under the State plan, theexpenditures do not benefit in any waythe donor, an individual to whom thedonor is related by blood or marriage orwith whom the donor has a closepersonal relationship, or an individual,entity, or organization with whom thedonor shares a financial interest. TheSecretary does not consider a donor’sreceipt from the State unit of a grant,subgrant, or contract with funds allottedunder this part to be a benefit for thepurposes of this paragraph if the grant,subgrant, or contract is awarded underthe State’s regular competitiveprocedures.(Authority: Secs. 7(7), 101(a)(3), and 104 ofthe Act; 29 U.S.C. 706(7), 721(a)(3) and 724)Note: The Secretary notes thatcontributions may be earmarked inaccordance with paragraph (b)(3)(ii) of thissection for providing particular services (e.g.,rehabilitation technology services); servingindividuals with certain types of disabilities(e.g., individuals who are blind), consistentwith the State’s order of selection, ifapplicable; providing services to specialgroups that State or Federal law permits tobe targeted for services (e.g., students withdisabilities who are receiving specialeducation services), consistent with theState’s order of selection, if applicable; orcarrying out particular types ofadministrative activities permissible underState law. Contributions also may berestricted to particular geographic areas toincrease services or expand the scope ofservices that are available statewide underthe State plan. However, if a contribution isearmarked for a restricted geographic area,expenditures from that contribution may beused to meet the non-Federal sharerequirement only if the State unit requestsand the Secretary approves a waiver ofstatewideness, in accordance with § 361.26.§ 361.61 Limitation on use of funds forconstruction expenditures.No more than 10 percent of a State’sallotment for any fiscal year undersection 110 of the Act may be spent onthe construction of facilities forcommunity rehabilitation programpurposes.(Authority: Sec. 101(a)(17)(A) of the Act; 29U.S.C. 721(a)(17)(A))§ 361.62 Maintenance of effortrequirements.(a) General requirements. (1) TheSecretary reduces the amount otherwisepayable to a State for a fiscal year by theamount by which the total expendituresfrom non-Federal sources under theState plan for the previous fiscal yearwere less than the total of thoseexpenditures for the fiscal year twoyears prior to the previous fiscal year.For example, for fiscal year 1996, aState’s maintenance of effort level isbased on the amount of its expendituresfrom non-Federal sources for fiscal year1994. Thus, if the State’s non-Federalexpenditures in 1996 are less than theywere in 1994, the State has amaintenance of effort deficit, and theSecretary reduces the State’s allotmentin 1997 by the amount of that deficit.(2) If, at the time the Secretary makesa determination that a State has failedto meet its maintenance of effortrequirements, it is too late for theSecretary to make a reduction inaccordance with paragraph (a)(1) of thissection, then the Secretary recovers theamount of the maintenance of effortdeficit through audit disallowance.(b) Specific requirements forconstruction of facilities. If the Stateplan provides for the construction of afacility for community rehabilitationprogram purposes, the amount of theState’s share of expenditures forvocational rehabilitation services underthe plan, other than for the constructionof a facility for communityrehabilitation program purposes or theestablishment of a facility forcommunity rehabilitation purposes,must be at least equal to theexpenditures for those services for thesecond prior fiscal year. If a State failsto meet the requirements of thisparagraph, the Secretary recovers theamount of the maintenance of effortdeficit through audit disallowance.(c) Separate State agency forvocational rehabilitation services forindividuals who are blind. If there is aseparate part of the State planadministered by a separate State agencyto provide vocational rehabilitationservices for individuals who are blind—(1) Satisfaction of the maintenance ofeffort requirements under paragraphs (a)and (b) of this section are determinedbased on the total amount of a State’snon-Federal expenditures under bothparts of the State plan; and(2) If a State fails to meet anymaintenance of effort requirement, theSecretary reduces the amount otherwisepayable to the State for that fiscal yearunder each part of the plan in directrelation to the amount by whichexpenditures from non-Federal sourcesunder each part of the plan in theprevious fiscal year were less than theywere for that part of the plan for thefiscal year two years prior to theprevious fiscal year.(d) Waiver or modification. (1) TheSecretary may waive or modify themaintenance of effort requirement inparagraph (a)(1) of this section if theSecretary determines that a waiver ormodification is necessary to permit theState to respond to exceptional oruncontrollable circumstances, such as amajor natural disaster or a seriouseconomic downturn, that—(i) Cause significant unanticipatedexpenditures or reductions in revenue;and(ii) Result in—(A) A general reduction of programswithin the State; or(B) The State making substantialexpenditures in the vocationalrehabilitation program for long-termpurposes due to the one-time costsassociated with the construction of afacility for community rehabilitationprogram purposes, the establishment ofa facility for community rehabilitationprogram purposes, or the acquisition ofequipment.(2) The Secretary may waive ormodify the maintenance of effortrequirement in paragraph (b) of thissection or the 10 percent allotmentlimitation in § 361.61 if the Secretary