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Job Training Partnership Act (JTPA) regulatory amendments, 59 Fed. Reg. 45815 (Sept. 2, 1994) (Summary, Discussion of major changes and comments (I))

[Federal Register / Vol. 59, No. 170 / Friday, September 2, 1994 / 45815] ______________________________________________________________________ DEPARTMENT OF LABOR Employment and Training Administration 20 CFR Parts 626, 627, 628, 629, 630, 631, and 637 Job Training Partnership Act RIN 1205-AA95 AGENCY: Employment and Training Administration, Labor. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The Employment and Training Administration (ETA) of the Department of Labor (DOL) is amending the Job Training Partnership Act (JTPA) regulations to implement the Job Training Reform Amendments of 1992 and related statutes. Through these final regulations, the Department intends to direct the focus of JTPA training and employment programs on improving the targeting of JTPA services to those facing serious barriers to employment, enhancing the quality of services provided and program outcomes, strengthening fiscal and program accountability and the linkage between the services provided and local labor market needs, and fostering a comprehensive and coherent system of human resource services. EFFECTIVE DATE: June 30, 1995, except that the provisions of Sec. 627.201 shall be effective October 3, 1994. FOR FURTHER INFORMATION CONTACT: Mr. James M. Aaron, Office of Employment and Training Programs. Telephone: (202) 219-6825 (this is not a toll-free number). Copies of this final rule are available in the following formats: electronic file on computer disk and audio tape. They may be obtained at the above office. SUPPLEMENTARY INFORMATION: On October 13, 1982, the President signed into law the Job Training Partnership Act, Public Law 97-300. The stated purposes of the Act were ``to establish programs to prepare youth and unskilled adults for entry into the labor force, and to afford job training to those economically disadvantaged individuals and others facing serious barriers to employment who are in special need of such training to obtain productive employment.'' Title I of the Act sets forth general requirements for programs, as well as some requirements for State and local operation of programs. Title II provides requirements for State and local operation of adult and youth programs for the economically disadvantaged. Title III of the Act provides for operation of State and substate programs of employment and training assistance for dislocated workers. Title IV provides requirements for special programs for targeted groups, such as Native Americans, migrant and seasonal farmworkers, and veterans, as well as for the Job Corps and other specialized programs. Title V provides incentives to States to reduce welfare dependency and increase self- sufficiency for absent parents of children receiving aid to families of dependent children and blind or disabled individuals receiving supplemental security income under title XVI of the Social Security Act. The final rule, among other things, implements statutory requirements under the Job Training Reform Amendments of 1992 (JTPA Amendments), Public Law 102-367; the Nontraditional Employment for Women Act (NEW), Public Law 102-235; the Department of Defense Authorization Act for Fiscal Year 1993 (Defense Authorization Act), Public Law 102-484; the Older Americans Act, as amended by Public Law 103-171; the Clean Air Act, Public Law 101-549; the North American Free Trade Agreement (NAFTA) Worker Security Act, title V of Public Law 103- 182 and the Goals 2000: Educate America Act, Public Law 103-227. While the programs are modified pursuant to statutory amendments and requirements, the delivery system for the JTPA programs under the final rule remains essentially the same as in pre-Amendment regulations. It does not have the financial or other impact to make it a major rule and, therefore, the preparation of a regulatory impact analysis is not necessary. See Executive Order 12866, 58 FR 51735, October 4, 1993. The Department of Labor (``DOL'' or ``the Department'') has certified to the Chief Counsel for Advocacy, Small Business Administration, that pursuant to the Regulatory Flexibility Act at 5 U.S.C. 605(b), the final rule would not have a significant economic impact on a substantial number of small entities. No significant economic impact would be imposed on such entities by the final rule. Paperwork Reduction Act Pursuant to the Paperwork Reduction Act, information collection requirements which would be imposed as a result of the final rule are being submitted separately to the Office of Management and Budget. Prior Actions The Department has conducted this rulemaking in an open and public manner. Since the enactment of the Amendments, Department officials have responded to numerous invitations to discuss the Amendments with organizations interested in the Amendments and proposed regulatory action. Additionally, a group of technical experts has offered suggestions to the Department on the proposed areas for regulatory action. On September 10, 1992, the Department published an Advance Notice of Proposed Rulemaking in the Federal Register and invited comments from interested parties regarding proposed or recommended regulatory actions to be taken by the Department. 57 FR 41447. On December 29, 1992, the Department published an interim final rule in the Federal Register, providing the opportunity for comment. 57 FR 62004. Amendments to the rule were published on June 3, 1993. 58 FR 31471. Over 400 sets of comments were received in response to the interim final rule. Sources of comments by the close of the comment period were as follows: Private industry councils (99); service delivery areas (72); service providers (41); States (39); community-based organizations (33); public interest groups (31); State JTPA offices (28); private contractors (14); State education agencies (10); Federal agencies (8); unions (7); private citizens (7); State job training coordinating councils (6); members of Congress (2); and other sources (4). In addition, on March 24, 1992, the Department published proposed rules in the Federal Register for the Clean Air Employment Transition Assistance program under JTPA title III, providing the opportunity to comment. 57 FR 10232. Thirteen sets of comments were received from State, substate entities and other organizations. The Department fully considered these comments and other comments received in time to consider in the development of this final regulation and addresses the issues they raised in the following discussion. Finally, during the period of May through July, 1994, when this final rule was in development, the Department initiated a Dialogue with the employment and training community and others interested in the JTPA title II program for the disadvantaged. This Dialogue was initiated by a Federal Register notice published on May 18, 1994, and consisted principally of a series of fifteen small group and town hall meetings and a review of research on employment and training programs with a view to developing an action plan to improve title II programs. Approach to Rulemaking These regulations continue to provide substantial responsibility and discretion to States and local areas in developing policy and in implementing procedures for JTPA programs. Thus, in many instances in these final regulations, responsibility for certain decisions is vested in the State and in the service delivery areas (SDA's) and substate grantees (SSG's). The Department has attempted in these final regulations to foster improved customer services by eliminating or reducing unnecessary programmatic requirements wherever possible so that decisions on how to best serve JTPA customers will be made, to the maximum extent possible, at the level of customer service and based upon customer need. For example, some of the restrictions on the duration of certain activities, such as work experience and entry employment experience where not specifically provided for in the Act, have been eliminated. Rather than Federal regulation, the needs of the customer as determined in the assessment process and the intervention's likelihood of success in enhancing skills and achieving long term employment will dictate how the program intervention will be designed. This was also a theme from the title II Dialogue. Some of the principal themes suggested by the title II Dialogue were the following: (1) Greater program flexibility with accountability, (2) Greater support for longer-term training interventions, including approaches more customized to customer needs and better connections between training and jobs, (3) Improved coordination at all levels but with special attention to coordination among federal agencies, (4) Increased supportive services, (5) More streamlining of eligibility, and (6) Better access for community-based organizations to JTPA planning and service delivery. To the extent permitted by the rulemaking process, the Department considered the major themes from the Dialogue in this final rule. In several instances, there are changes in this final rule that are consistent with the themes of the Dialogue. For example, as noted above, certain prior restrictions have been eliminated; initial efforts to achieve greater coordination with the Departments of Education, Health and Human Services and Housing and Urban Development are reflected in this final rule; the Department has attempted to streamline the requirements for providing participants with financial assistance; and these final regulations clarify that, as appropriate, the new eligibility provisions for youth are applied in the program under section 123 and title II-B. In addition, the Department will reexamine the Eligibility Documentation Technical Assistance Guide. Consistent with Executive Order 12866 (58 FR 51735, October 4, 1993), these regulations are limited to those areas which are specifically required by statute, identified by the Department or the public as necessary to provide guidance and clarification, or essential to further the purposes of the Act. Additionally, the Department fully intends to provide strong oversight and monitoring of JTPA programs in conjunction with strengthened State and local oversight and monitoring. It is through the monitoring of the implementation of the Amendments and these regulations, rather than through promulgation of prescriptive regulations, that the Department, working with the States and service delivery and substate areas, will ensure effective program operations. Of all the consultations and comments the Department has received, about half expressed interest in having the Department be more detailed in the regulations, and the other half indicated that the Department was being overly prescriptive in the interim final rule and preferred that the Department provide minimal guidance. The Department reminds readers of these regulations that the JTPA Amendments create more restrictive operational and programmatic requirements in order to address a series of issues that had been identified in connection with JTPA. The Department has sought to strike a balance in these final regulations in terms of guidance and prescriptiveness. In some regulatory areas, such as some of the administrative requirements, the Department has carefully specified requirements to set a strong foundation for program integrity so that in other regulatory areas, such as program design, there can be more flexibility and emphasis on outcomes. Finally, the Department has sought to make these regulations sufficiently clear, so that all parties with an interest in JTPA understand both the requirements and the areas of flexibility in the program. This final rule is not a stand-alone document; the companion document is the JTPA, as amended. In several instances, however, portions of the Act are repeated to make the final rule user-friendly and to facilitate its use as a reference tool. In addition to the 1992 JTPA Amendments, the Clean Air Act, section 4467 of the Defense Authorization Act and the NAFTA Worker Security Act impacted on title III of JTPA. The final regulations in 20 CFR part 631 provide for limited revisions to existing title III regulations as required by these statutes. There were a number of comments on specific areas of performance standards and related reporting requirements. On July 11, 1994, the Department published separately in the Federal Register the final performance standards for PY 1994 and PY 1995. The Department appreciates the issues raised by commenters on the interim final regulations in the area of performance standards and has taken these comments into account in developing the performance standards. In addition, on June 23, 1994 the Department issued Training and Employment Information Notice 5-93, Change 1 with the revised reporting instructions. The Department also plans to issue separately revisions to the regulations for title IV, part A, the Employment and Training Programs for Native Americans and Migrant and Seasonal Farmworkers. When it does, the contents of the regulations as reflected herein may change. The Department has issued revised regulations for title IV, part B, the Job Corps. (58 FR 69098 (December 29, 1993)). Format of These Final Regulations The structure, organization, and enumeration of the JTPA regulations have been revised to accommodate the Amendments. Throughout this document, unless otherwise stated, ``JTPA'' or ``the Act'' refers to the Job Training Partnership Act, as amended (29 U.S.C. 1501, et seq.); ``Department'' or ``DOL'' refers to the U.S. Department of Labor; and ``Secretary'' refers to the Secretary of the U.S. Department of Labor or the Secretary's designated representative(s). As used in these final regulations, the term ``title'' refers to a title of the Job Training Partnership Act, unless the text specifically refers to another statute. The terms ``section'', ``part'', and ``subpart'' refer to a section, part, and subpart, respectively, of these final regulations, unless the text specifically refers to another document. As specified at PART 626--Introduction To The Regulations Under The Job Training Partnership Act, part 627 applies to all programs under titles I, II, and III of the Act, except where noted, and part 628 generally applies to title II programs. Parts 629 and 630 are reserved for future use. Part 631 continues to apply to title III programs and part 637 has been revised for the title V Jobs for Employable Dependent Individuals (JEDI) program. Therefore, various sections that previously appeared in parts 627, 628, 629, and 630 have been redesignated to parts 627 and 628. Definitions The interim final rule at Sec. 626.5 added a significant number of definitions of terms used throughout the JTPA and regulations. Definitions of the terms ``commercially available off-the-shelf training package'', ``family'', ``family income'', ``obligations'', ``stand-in costs'', and ``vendor'' received the most comments. Commercially available off-the-shelf training package. At the outset, the wording of the term being defined is changed. In the interim final rule the term was ``commercially available or off- the-shelf training packages;'' in the final rule, the word ``or'' is dropped so that the term being defined reads ``commercially available off-the-shelf training packages''. The reason for this change is that both the Act and the definition require that a training package be both commercially available and available at off-the-shelf prices. Practically, availability at off-the-shelf prices is subsumed within the broader concept of commercial availability. Several commenters submitted comments on the definition of ``commercially available off-the-shelf training package'', contained in Sec. 626.5. The basis of this definition is the definition of a commercial product found in part 15 of the Federal Acquisition Regulation (FAR). First of all, the Department acknowledges that there is a degree of uncertainty regarding which training packages and their providers fall within the meaning of commercially available off-the- shelf. The term, as defined within Sec. 626.5, relies generally upon whether the package is provided in a commercial market in which it is available to the public. This was the origin of the language ``sold to the public'' and that related to ``catalogue or market prices''. These business concepts are indicators of the training package's availability to the public, e.g., a catalogue available to the public or a public, advertised price shows that the entity is seeking to engage in commerce. The Department believes that most parties understand the basic meaning of whether any package is ``commercially available.'' Some related areas of the definition are discussed further below. A second area of inquiry pertains to the contents of the package. The training will consist of classroom and related practical instruction, which may include hands-on experience. It may consist of the development of occupational or education-related skills. For example, a package may provide occupational training to a participant as a nurse practitioner, as a maintenance mechanic, or in computer design, in heating, ventilation and air conditioning, or may provide basic skills in reading and computation. The package may consist of a necessary assessment of interests, aptitudes, and abilities, as well as counseling and guidance related to participant progress and employment prospects. Such a training package will not normally consist of the kind of assistance typically provided within the meaning of a JTPA supportive service, but may include fees, books and other materials needed for participation and completion of the package. In other words, if an organization offers training to the general public which consists solely of a practical training course in a particular occupation, it is that course, without any other placement or assessment services, which may be purchased as a commercially available training package. On the other hand, if the organization offers assessment or placement services to the public as part of its training course, those services will be a part of the commercially available package. A key indicator, however, is whether the contents of the package are generally available and generally the same for all participants, not just JTPA participants. Finally, commenters raised questions about the type of entity that might provide the commercially available package. A variety of entities may be the source of a commercially available package; however, the characteristics of the package, that is, whether they meet the tests of commercial availability at off-the-shelf prices, are more of an indicator than the entity that provides it. Such entities may include those that provide computer-based instruction in a variety of occupational and educational topical areas, or they may be public and private schools, academies or other entities that offer training that is commercially available, as discussed above. A few commenters requested that the phrase ``performance criteria'' be defined, and the definition now includes language that addresses the reference to ``performance criteria''. ``Performance criteria'' may generally fall into two or more areas that reflect the necessary components and features of the package that is to be delivered, such as (1) grade requirements, knowledge, skills, and competencies which may be expected to be attained by students, and (2) where appropriate, participant attainment as manifested by job placement. This latter component is contingent upon whether the service is regularly offered and may be reasonably included in the package. A few commenters were concerned with the requirement that the packages be unmodified. They indicated that, in many instances, a commercially available training package may be modified to some degree to reflect the special needs of the JTPA population, without changing its basic content. A strict reading of the regulation would prohibit contracting for commercially available packages which are modified in any way, regardless of whether the package remains substantially the same. In addition, this strict reading would prohibit the JTPA program from taking advantage of a discounted price that might be offered in connection with multiple purchases of the package. The Department does not intend that a local program be prohibited from purchasing a commercially available package at a discounted price. In order to respond to this comment, the Department further conforms the definition to the concepts in the FAR, and the word ``unmodified'' is removed. This change recognizes that some modifications may be made to a package to meet special JTPA requirements, just as a commercial entity would offer to other customers, while the package remains substantially similar to that regularly offered. A test for whether the package remains substantially the same as that regularly offered is whether the modification does not involve an increase in the catalogue price. An increase in catalogue price would indicate that the package is not substantially the same. However, a price decrease due to such things as volume discounts or good negotiating is not, in itself, indicative of a modified package. Another test is whether the same training components continue to be offered in the package. A difference in the training components would indicate that the package may not be substantially the same. All of these tests should be considered in determining whether a training package meets the definition. Further, JTPA funds should not be used to make any modification to a training package. Should training packages be modified in order to conform to JTPA requirements, they may be considered commercially available off-the-shelf only if they comply with the remaining requirements listed in the definition. Thus, while some modification is possible, the definition is not intended to include ``customized training,'' training designed solely to meet the special needs of an individual or group of JTPA participants. A few commenters asked for a definition of ``substantial'' in regard to the quantities sold. In response, the phrase ``in substantial quantities'' is removed from the definition because the Department believes that the concept is embodied in the idea of ``being sold to the general public'' which follows in the definition. For further guidance, the FAR indicates, with respect to being sold in ``substantial quantities'', that ``[N]ominal quantities, such as models, samples, prototypes, or experimental units, do not meet this requirement.'' Further, there were suggestions that an amount such as 25 to 30 percent non JTPA sales may be useful to States and SDA's when setting policy in this area. The definition that is provided conforms to the FAR definition; therefore, it is not being changed. A few commenters wondered if community-based organizations (CBO's) and non-profit organizations were included within this definition. Such organizations may be among the types of organizations that provide a ``commercially available off-the-shelf'' training package if the training packages they provide meet the definition. Several comments reflected confusion about the relationship of ``commercially available off-the-shelf training packages'' to ``vendors'' and ``subrecipients''. It is important to recognize that the definitions of ``vendor'' and ``subrecipient'' and the definition of ``commercially available off-the-shelf training package'' exist for different purposes and should not be viewed as related. An agreement to acquire a commercially available off-the-shelf training package may create either a vendor or a subrecipient relationship, depending on the content of the package. If the package contains elements that meet some of the distinguishing characteristics of a subrecipient (see definition), then a subrecipient relationship is created. Regardless of whether a vendor or subrecipient relationship is created, the costs of the commercially available off-the-shelf training package may be charged entirely to the direct training category. However, other JTPA requirements such as record retention, audit, etc. do apply to a subrecipient. The intent of the definition of ``commercially available off-the- shelf training packages'' is to provide states and SDA's broad flexibility to utilize generally available training services and to be able to charge those services entirely to the training cost category. It will, for example, permit states and SDA's to purchase training from a variety of educational institutions at off-the-shelf or catalogue prices. It must be recognized, however, that there are limits to the flexibility that the definition affords. One important limitation is that the definition only applies to the provision of actual training services to eligible JTPA participants. It does not apply to intermediate administrative entities or entities that pass funds through to training providers. Another limitation is that the services must actually be available to and provided to significant numbers of persons or to entities that procure training for such persons under other state or federal programs outside the JTPA system. It will not be sufficient for a training provider merely to claim that its services are available to the general public or to other training programs (like the JOBS program). The state or SDA must be able to show that the services actually are available to the public or to other programs and that the services are utilized by them. If a training provider has a history of providing training only to the JTPA program or to JTPA participants, it will not be considered a provider of ``commercially available off-the-shelf training packages''. Although not a part of the definition, section 141(d)(3)(A) of the Act also requires that ``commercially available off the shelf training packages'' be purchased competitively. The requirements for competitive procurement are covered in the procurement provisions of the regulations at Sec. 627.420. Family Several comments were received on the definition of the term ``family'' at Sec. 626.5 of the interim final regulations. In general, the nature of these comments was that: (1) The definition is too restrictive and limits the Governor's flexibility in defining the term; (2) the definition does not recognize alternative living arrangements that do not fit neatly into the ``traditional'' concept of a family; and (3) the regulations do not address how to handle other family members, including dependent adults, living in the same residence. A few of the commenters noted that an apparent conflict exists in how ``family'' is defined in the interim final regulations and how it is treated in the Standardized Program Information Report (SPIR) instructions. The term ``family'' was statutorily defined in the 1992 Amendments for the purposes of income eligibility determination for receipt of JTPA services. The interim final regulations provide the Governor with flexibility to interpret the term ``family'' concerning how ``dependent children'' are defined for JTPA programs. The interim final rule also defines the phrase ``living in a single residence''. The statute established a standard definition to apply consistently for JTPA programs, which, within the three categories, covers the vast majority of family configurations and living relationships in the country. The definition is not intended to address every possible permutation of alternative living arrangements. Although the Department believes that the regulations provide the Governor with some latitude in defining the term ``family'', the comments raised an issue regarding the adverse effect of excluding ``dependent adults'' from the definition, which warrants further consideration. While the Department recognizes that excluding dependent adults may impact on the eligibility of some family members, the Department does not believe that this circumstance is included in the statutory definition. The Department does not believe that it has the authority to expand upon the definition of ``family'' beyond the categories specifically found at section 4 of the Act. No change is made in the final regulations. Other individuals living in the same residence, who are not dependent children, would be viewed as individuals in applying for and being determined eligible to receive JTPA services. A few of the commenters accurately noted the difference between the definition of ``family'' in the interim final regulations and the SPIR instructions regarding the treatment of an individual with a disability for the purposes of eligibility determinations. The SPIR reflects the definition of ``family'' in the regulations in effect prior to the publication of the December 29, 1992, interim final rule. The definition contained in the interim final regulations indicate that an individual with a disability ``may'', for the purpose of income eligibility, be considered to be an unrelated individual who is a family unit of one. This change was an administrative error and should not have been included in the interim final rule. Accordingly, the definition of ``family'' is amended to revise the word ``may'' to ``shall'' in the final regulations. This amendment is consistent with the provisions at section 4(8) of the Act defining the term ``economically disadvantaged''. Family Income A few comments were received on the change in the definition of ``family income'' and the method for calculating such income for the purposes of determining eligibility for JTPA services. In general, the nature of the comments were that: (1) The use of the Department of Health and Human Services' (HHS) poverty guidelines appears to conflict with the definition of ``economically disadvantaged'' at section 4(8) of the Act; (2) the definition does not include certain payments that have previously been excluded from family income; and (3) the old definition of ``family income'' should be retained, with the Governor defining the term for the purposes of income eligibility determinations, as has been the case since the inception of JTPA. A few commenters accurately noted that certain payments that have always been considered to be ``public assistance'' were omitted from the interim final rule. This was an inadvertent oversight in developing the regulations. The definition of ``family income'' is amended in the final rule to reflect that ``public assistance'' still includes Aid to Families with Dependent Children (AFDC), Supplemental Security Income, Emergency Assistance money payments, and non-Federal funded General Assistance or General Relief money payments, which are exclusions from income for the purposes of income eligibility determinations. In addition, certain other Federal statutes exclude additional types of payments from JTPA income eligibility determinations. For example, Pell grants are specifically excluded by title IV of the Higher Education Act, as is income earned while on active military duty and certain other veterans' benefits, identified at 38 U.S.C. 4213. These exclusions are incorporated into the final rule. There also has been concern expressed regarding the inclusion of Social Security benefit payments as income in determining eligibility for older individuals. It has been noted that many older individuals fall just above the income threshold for JTPA because of the inclusion of Social Security benefits and, therefore, are being denied needed JTPA services. The Department recognizes that older individuals have special needs which warrant consideration for their participation and inclusion in programs under JTPA. In the interest of responding to such needs, the Department is amending the regulations in the final rule to permit the Governor to exclude 25 percent of regular Social Security benefits from family income. The Department believes that this change will address the concerns of the commenters. A few commenters raised the issue that the HHS guidelines include scholarships as income. They expressed concern that individuals who may receive scholarship assistance based on need, but who are otherwise economically disadvantaged, would not be eligible for services if such assistance is counted as family income. In addition, they pointed out that the inclusion of such needs-based assistance would also impact the eligibility of another family member who would otherwise be eligible for services, regardless of whether the individual receiving such assistance applies for JTPA services. The Department finds merit in the comments and is amending the definition of ``family income'' to add ``needs-based scholarship assistance'' to the exclusions from family income. To the extent that existing guidance has been interpreted to require the inclusion of needs-based scholarship assistance as family income, these regulations supersede any such guidance. A few of the commenters noted that the interim final rule appeared to indicate that only use of the poverty level applied in determining eligibility. This conflicts with section 4(8) of the Act, which indicates the use of the higher of the poverty level or 70 percent of the Lower Living Standard Income Level in determining economically disadvantaged status. The Department acknowledges that the preamble language could be misinterpreted. The reference to the use of the HHS poverty guidelines as the standard for determining economic disadvantage pertained to the use of the HHS guidelines to define family income, and not to indicate requirements different from those found at section 4(8) of the Act. The HHS guidelines, with the exceptions noted in the definition of family income, would be used to determine income, and that income figure would apply for the purposes of income eligibility determinations under section 4(8) of the Act. Of the several comments received on the term ``obligations'', most commenters were satisfied with the definition and asked that it not be changed. A few commenters wanted it changed as they believed that, as defined, very little, if any, funds would be reallotted or reallocated. No change is made to the definition, but the issue of reallotment is further treated in the discussion of Sec. 627.410. One commenter pointed out that the term ``service provider'' was defined by statute in section 301(b)(3) of the Act. The definition in these regulations is amended to conform to the statutory definition. The definition of ``stand-in costs'' is revised, along with the regulation at Sec. 627.480(f) (which had been paragraph (g) in the interim final regulation), so that both provide the same criteria as to the time when such costs were incurred and the cost category to which they are chargeable. Several other comments were received on the definition of ``vendor'', most of which generally fell into two groups. One group encouraged referencing the definition of this term contained in the Office of Management and Budget (OMB) Circulars A-128 and A-133. The other group requested more clarification or examples. A few commenters raised questions of whether vendor goods or services could be customized, or the extent to which they could be altered, and still meet the vendor definition. The Department is applying the standard Federal Government-wide description of the term ``vendor'', as it already exists in the audit requirements and related literature of OMB Circulars A-128 and A-133. However, A-128 does not contain a definition of the term ``vendor'' and the A-133 definition appears to limit the term to providers of administrative goods and services. For those reasons, and, as explained in the preamble to the interim final rule, the Department draws upon the Questions and Answers developed by the President's Council on Integrity and Efficiency (PCIE) and OMB for its definition. The PCIE document carries the vendor definition beyond administrative goods and services and provides examples. With regard to the question on whether vendor goods or services could be customized or modified, the Department believes that the package may be modified to meet JTPA requirements if the vendor modifies its goods or services for other customers and if it remains substantially the same as those goods or services regularly offered. An indication of whether vendor goods or services are substantially the same as those regularly offered is whether the price does not increase when it is modified. No change is made to the definition in the final rule. The Major Changes in Part 627--General Provisions Governing Programs Under Titles I, II, and III of the Act are as follows Subpart B--Program Requirements Governor/Secretary Agreement Section 627.200 was amended in the interim final rule to require that guidelines, interpretations, and definitions adopted by the Governor be published. A few commenters raised the question of what constituted ``published''. The word ``published'' is removed in the final rule and the word ``issued'' is substituted. Also, language is added to indicate that such guidelines, interpretations, and definitions adopted by the Governor are to be those that actually have been imposed or utilized, consistent with section 124 of the Act. The word ``issued'' is used to better reflect the purpose of the requirement that the guidelines, interpretations and definitions on which the Governor relies are to be made public prior to their effective date and to assure that they are actually being used in the administration of the JTPA programs. How the Governor chooses to inform the public may vary and may depend upon the nature of the action. It may include means such as issuance of written directives or letters, inclusion in an electronic network or bulletin board, publishing in a newspaper, or other public announcement in which the effective date is indicated. Waivers In the interim final rule, the Department requested comments on the feasibility of authorizing waivers to the JTPA regulatory requirements. Recently, it has been suggested that some of the administrative burden or unintended effect of regulatory requirements may be reduced through the granting of waivers--specifically waivers of regulatory requirements. This was recommended in the recent report of the National Performance Review, ``Creating a Government That Works Better and Costs Less.'' The Department believes that there is merit in this concept and incorporates a waiver provision in these regulations. Therefore, a new Sec. 627.201 is added which permits the Governor to request, and the Secretary to approve, waivers of the regulations for up to four years. The request from the Governor must be consistent with the provisions of the Act and demonstrate how the waiver will meet one of the criteria listed in the regulation. Absent specific statutory authorization, the Secretary has no authority to waive statutory requirements. The Secretary may, however, waive provisions of the regulations which expand upon, interpret or explicate statutory requirements. The new regulation is intended to permit waivers of any regulatory provision as long as the waiver does not affect the basic statutory requirements and if it is shown that the waiver will improve services, increase skill or educational attainment, promote coordination or substantially improve the job placement outcomes of the JTPA program. For example, a State may seek a waiver of the 25% disregard for social security income for older workers since that rule is not mandated by the Act. To obtain such a waiver, a state would have to demonstrate that it would not reduce services to those most in need. On the other hand, a state could not obtain a waiver of the regulatory prohibition on using JTPA funds to support employment generating activities since that regulation simply repeats a clear statutory requirement. In a more complicated situation, a state could request a waiver of some of the detailed requirements of the procurement regulation (Sec. 617.420) if those requirements conflicted with its own procurement system. In order to obtain such a waiver, however, the state would have to show that its system adequately addresses all of the minimum requirements listed in section 164(a)(3) of the Act and that it would promote coordination with other programs or would result in either better quality services or better employment outcomes if the same procurement system were used by those programs. The Department assumes that the States and SDA's/SSG's are more aware than is DOL of what waivers they may need. Thus, the Department does not intend to provide immediate general guidance on what waivers may or may not be requested. As the Department determines which waiver requests it will grant and which waivers lead to greater coordination or better program results, guidance will be issued to enable the JTPA system to better understand the waiver process and to learn about what practices work. Public Service Employment Prohibition No comments were received on this section. Section 627.205 remains unchanged, except for extending the public service employment prohibition to include title II-C funds. Nondiscrimination and Equal Opportunity The JTPA Amendments amended section 167 of the Act to require that the Secretary issue final regulations which would clarify the application of the nondiscrimination and equal opportunity provisions of the JTPA and provide uniform procedures for implementing these provisions. On January 15, 1993, the Directorate of Civil Rights (the DOL agency responsible for enforcing the various Federal nondiscrimination and equal opportunity statutes applicable to federally assisted programs) promulgated a final rule to implement the nondiscrimination and equal opportunity requirements of the JTPA (29 CFR part 34; 58 FR 4742). Throughout these final regulations, all of the Department's nondiscrimination and equal opportunity regulations (29 CFR parts 31, 32, and 34) are cited since they are all applicable to JTPA federally assisted programs. In order to eliminate the burden of complying with overlapping regulatory requirements, 29 CFR part 34 provides that compliance by JTPA recipients with part 34 constitutes compliance with the Department's Civil Rights Act of 1964, title VI regulations (29 CFR part 31) and with specified portions of the Department's Rehabilitation Act section 504 federally assisted program regulations. 29 CFR part 32, subparts A, C, and E. A few commenters, in connection with Sec. 627.210(a)(3), questioned the cost category to which expenses for ``accessibility'' and ``reasonable accommodation'' should be charged. This matter is treated in the discussion of Sec. 627.440, Cost classification. In addition, a commenter noted that this provision of the regulations should not be construed to otherwise relieve a recipient or subrecipient from their responsibility under the law to provide for ``accessibility and ``reasonable accommodation''. The Department agrees and the final rule is modified to indicate that the provision applies only with regard to needs for the JTPA program. Relocation Section 141(c) of the Act was revised substantially to prohibit the use, or proposal for use, of JTPA funds to induce or to encourage the relocation of a company when such relocation results in the loss of employment of any employee of the company at the original site. That section also prohibits certain assistance to any relocating company for the first 120 days after the company commences operations at the new or expanded location, if the relocation results in an employee's job loss at the original site. If the Secretary finds that the State, SDA, or substate grantee (SSG) has violated either provision, fines are levied equal to twice the amount of funds expended. If the State, SDA, or SSG demonstrates that it neither knew nor reasonably could have known (after an inquiry undertaken with due diligence) that the funds it provided were expended in violation of these provisions, then only the amount expended is repaid. Some commenters questioned whether these provisions prevent SDA's/ SSG's from placing participants in certain job openings for a set period of time. The Department believes that they do under circumstances in which there are job losses in other geographic areas or in which workers are laid off or experience periods of unemployment. By clarifying and standardizing terms, as well as setting the prohibition on assistance at 120 days, the Act systematizes the administration of this prohibition on relocation. Most of the comments on the interim final rule pertaining to these provisions focused on the need for clarification of terms such as ``labor market area'', ``loss of employment'', ``commercial operations'', ``pre-award review'', ``induce'' or ``encourage'', and on the extent of an SDA's due diligence and local liability. Section 627.215(c) defines a ``relocating establishment'' as a business entity moving operations ``from a facility in one labor market area within the United States and its territories to a new or expanding facility in another labor market area.'' Commenters pointed out that some rural labor market areas may encompass vast areas and several counties. Section 4(13) of the Act provides a definition of ``labor market area'' as ``an economically integrated geographic area within which individuals can reside and find employment within a reasonable distance or can readily change employment without changing their place of residence. Such areas shall be identified in accordance with criteria used by the Bureau of Labor Statistics of the Department of Labor in defining such areas or similar criteria established by a Governor.'' The key to the Act's definition is that the labor market area be ``an economically integrated geographic area'' where an individual can change his or her employment without changing his or her place of residence. Thus, for purposes of this relocation provision, a large rural SDA could contain more than one labor market area. Several commenters asked for a clarification of ``loss of employment''. One stated that when employees at the original location do not accept relocation job offers and then are laid off, ``loss of employment'' has not occurred. The Department believes that, in such a situation, loss of employment is presumed when a person no longer has a job with the company at the original location or with any other entity because of the relocation and the loss of employment at that location would not otherwise have occurred. This does not include those who would have retired or quit regardless of the relocation, or those who were fired for cause. Several commenters requested further guidance on commencement (or expansion) of commercial operations. The Department added the term ``commercial'' to the regulations to be consistent with the statutory intent that a viable prohibition on JTPA assistance in the day-to-day production of goods and services be observed. The term ``commercial'' operations is intended to further distinguish between the construction and operation stage of a business, as well as to demarcate the stage when products are being produced for commercial distribution. Similarly, a number of commenters asked whether ongoing JTPA contracts with a company must be stopped or interrupted when the company relocates work from another facility. The Department believes any such contracts with the business within the SDA to which the company has relocated must be ended for the duration of the time work is being relocated, since ongoing JTPA assistance was not meant to accommodate business needs which are the result of work relocation from another facility. Additional clarification was also requested on the treatment of relocation scenarios where large retail store chains close down some sites sequentially and then open others in widely dispersed locations. The Department believes that the Act only applies to such cases where a company closes a retail store in one location in order to move that retail store's business to another location. Section 627.215(d) requires a pre-award review to be completed to document compliance with section 141(c) of the Act. Several commenters asked for clarification, and one recommended that the States be responsible for developing the standardized pre-award format. Others voiced concern about whether SDA's should be held liable if relocation occurred despite pre-award assurances to the contrary; several stated that a properly completed pre-award review should prove due diligence on the part of the SDA and that sanctions otherwise are unduly harsh. The Department believes that these reviews are for the protection of the State and the SDA/SSG. Section 627.215(d) is revised to provide additional guidance for States and SDA's in developing standardized pre-award review procedures and to indicate items which should be included in a review. Information should include the names under which the facility does business, including successors-in-interest, the name, title, and address of the employer supplying the information; the name and address of the facility in the other geographic area which is being closed or from which business is being transferred; the nature of the products or business being transferred to the new location; the date the facility will commence or expand operations; and a statement from the employer about job losses at the old location. The SDA also should check with the former location to verify the employer's statements about job loss. The Department believes that a review based upon the suggestions in the regulations is evidence of due diligence, but does not hold the SDA harmless when it is subsequently shown that the statute was violated because the Act provides that the Secretary shall require repayment. It is important to note that assistance to relocating businesses is not an entitlement. Once the State complies with the minimum requirements set out in these regulations, it may be more restrictive in its assessment of the company's situation or its determination of policy regarding relocating employers. One commenter stressed the importance of monitoring to ensure the use of consistent pre-award reviews and also recommended that the SDA/ SSG consult with all affected parties, including union representatives at the original and relocated site if relocation is indicated and JTPA assistance is sought. Although not required by the regulations, the State should consider incorporating such procedures in its guidelines for the pre-award review. Before engaging in negotiations with any company interested in moving to the area which seeks future JTPA assistance, the SDA/SSG should initiate a pre-award review. Finally, a few commenters asked what constituted ``inducement'' or ``encouragement'' to a company to relocate. The Act provides that ``[N]o funds provided under this Act shall be used or proposed for use to encourage or induce the relocation, of an establishment or a part thereof, that results in a loss of employment for any employee of such establishment at the original location.'' Thus, JTPA funds cannot be used in any manner for this purpose. Similarly, JTPA funds cannot be used under the prohibitions concerning employment generating activities (Section 141(q)). One commenter asked whether written material containing a general description of JTPA programs could be distributed to the local Chamber of Commerce. The Department does not believe that providing material to a Chamber of Commerce which provides a general description of JTPA programs would fall within the prohibition of the Act unless the purpose of the material were to induce or encourage relocation. This regulation is not intended to affect what the Chamber of Commerce does, as long as JTPA funds are not used. Guidance on the Issue of Duplicate and Overlapping Payments Among Federal, State, and Local Programs, Including Pell Grants Section 627.220 clarifies the interpretation of sections 107(b) and 141(b) of the Act. This section also highlights the importance of coordination with programs under title IV of the Higher Education Act of 1965, as amended (HEA), in view of the new coordination provisions at sections 205 and 265 of the Act, which require SDA's to enhance the provision of services through coordination with other programs. The purpose of coordination requirements is to preclude duplicate or overlapping payments among Federal, State, and local programs to participants and training institutions and to ensure that the best mix of programs and funds is available to the JTPA participant. Accordingly, Sec. 627.220 assigns responsibility to the SDA's to coordinate the sharing of information that affects JTPA-funded programs with the school's financial aid officer, provides for contractual safeguards to prevent duplication or overlap of services and funding among programs, and emphasizes the requirement for assessing the JTPA participant's financial needs and available resources as part of the individual service strategy (ISS). These matters will also be addressed through technical assistance and guidance jointly developed between DOL and U.S. Department of Education officials in order to guide both systems in the development of constructive working relationships. Comments were submitted on a number of issues addressed in this section. The issue of whether JTPA funds should pay for tuition or supportive services in coordination with other payment programs was raised by some who recommended that clearer instructions be provided. The exact mix of funds should be determined according to the availability of each funding source for either training costs or supportive services, with the goal of making the program affordable and enabling the participant to successfully complete it. In addition, commenters were concerned about the complexity of procedures needed to ensure compliance with sections 107(b) and 141(b) of the Act. The Department agrees with the need to streamline procedures. Accordingly, Sec. 627.220 is revised to reflect the following changes: Sec. 627.220(b)(2) is deleted, and Sec. 627.220(b)(1) now directs the SDA to assist the participant early in the objective assessment, as appropriate, to establish eligibility for HEA, title IV financial assistance programs. In addition, Sec. 627.220(b)(4) now emphasizes that participants may, but are not required to, apply for or access student loans or incur personal debt as a condition of JTPA participation. While the use of student loans to finance training or education is not prohibited and may be explored in the assessment process, loans should only be used if the participant agrees and is made fully aware of the responsibilities that the loan entails. Participation in a JTPA program may not be conditioned on applying for or using a loan. Finally, Sec. 627.220(b)(4) clarifies the need for information sharing which must take place for any financial aid awarded after the participant enrolls in an agreed-upon program. The discussion of HEA student assistance programs in this provision raised a concern that title II participants may be required to access loans. The Department wishes to stress that this is not the case. Section 627.220(b)(4) emphasizes the importance of matching the participant with an affordable program. As a general consideration, individuals should not be required to incur debts as a condition of participating in JTPA programs. Indeed, better identification and coordination of funding sources and improved evaluation of the participant's ability to complete a program successfully as part of the ISS should address the need for personal indebtedness to finance JTPA participation. Thus, Sec. 627.220(a) should not be construed to mean that loans must be considered resources for the purposes of this regulation. The reason for including HEA, title IV student loans in the information-sharing requirements is that in the past, some JTPA participants have been required or encouraged to take out loans to pay for their training without the knowledge of the SDA's. However, the new requirements for objective assessments and developing ISS's for participants mean that SDA's must take responsibility for evaluating and documenting the participant's financial needs and coordinated ability to pay for an agreed-upon training program before he/she enrolls in the program. In fact, several commenters stressed the importance of evaluating all potential HEA funding sources as part of the development of the ISS and that these funding sources be identified and applied for while the ISS is being developed. See Sec. 627.220(b)(2). Since federal Pell Grant eligibility can be established before a student enrolls and a Pell Grant can be used at any participating institution that an eligible student attends, SDA's and SSG's should expedite the application process by providing application forms to individuals and providing assistance, as necessary, in filling out and submitting these forms. Although a few commenters were concerned that undue delays in the provision of services might result, it is important to note that Pell Grant eligibility guidelines are readily available, as is the application form for establishing eligibility, and the financial information required to complete the application is already required to ascertain eligibility for JTPA programs. Furthermore, the Department of Education makes funds available to participating schools before the start of the school year to pay eligible students. These funds can be accessed as soon as eligibility is documented, the cost of attendance (COA) is calculated, and enrollment occurs. Although a few commenters suggested that establishing Pell Grant eligibility might represent an administrative burden, the sequence described herein in fact streamlines the funding decision process for the JTPA delivery system and permits coordination of funding sources in the context of the ISS. A number of comments questioned a perceived inconsistency between Department of Education and Department of Labor guidance on whether HEA title IV or JTPA funds must be used first. The Department does not think there is any conflict with Department of Education regulations with regard to coordinating with JTPA funding decisions for tuition payments because of the flexibility in the use of the Pell Grant for tuition or other education related expenses. These JTPA regulations only require that, when a Pell Grant is awarded to a JTPA participant, JTPA funds cannot be expended on costs that already have been paid by federal Pell Grant funds. One commenter questioned the need for including the participant's agreement to the disposition of the Pell Grant in the contract with the school, since it is understood that the participant will sign off on the ISS, which includes information to be shared. Another commenter raised the issue of the Privacy Act as a reason why schools may not share information regarding JTPA participants with SDA's. To clarify the issue of participant agreement, the final rule includes the participant's agreement to the information-sharing process in Sec. 627.220(c). Strengthening monitoring provisions was the concern of a few commenters, who stated that requiring the school's financial aid officer to share financial information on JTPA participants with the SDA is key to following up on the participant's ISS and to coordinating JTPA funds with other sources of funding. The Department carefully considered comments which called for reduced coordination requirements but believes that information sharing agreements are necessary to ensure compliance with this section; however, the separate sharing of students' names may not be necessary since JTPA agreements with training institutions will include the names of participants for whom payments to the school are being made. Therefore, this requirement is removed from the final rule. Several commenters reported that schools are holding JTPA participants personally liable for payments withheld in accordance with the terms of performance-based contracts. Performance-based contracts (or any other agreements with service providers) must prohibit schools from holding the student liable for outstanding charges. Otherwise, the performance-based contract would be undercut because the incentive for the school to perform would be removed. This practice is prohibited by the U.S. Department of Education as described in the Federal Student Financial Aid Handbook, Pell Grant Section. Therefore, JTPA program operators should be aware that the use of certain contracting methods, particularly contracts for classroom-sized projects and fixed unit price, performance-based contracts, affects how educational institutions are permitted to calculate the COA, which determines the amount of the participant's Pell Grant. An institution can include a tuition and fee charge for calculating the federal Pell Grant COA only when contracts or agreements specify the tuition and fees (i.e., individual referrals), when there is a charge recorded to the student (when JTPA or another source pays the tuition and fee charge and the student would be required to pay these charges if they were not paid by JTPA or another source). Two types of JTPA agreements do not allow schools to include tuition and fees in the Pell COA or to make a charge to the student for these costs: (1) Blanket agreements that do not specify an individual amount to be paid by the SDA for tuition and fees but may include a number of students to be trained and an amount of compensation to be paid to the school; and (2) performance-based contracts (to the extent they are still used). Employment Generating, Economic Development, and Other Activities Section 141(q) of the Act prohibits employment generating activities (EGA) with JTPA funds. Included in the prohibition are economic development activities, revolving loan funds, capitalization of businesses, contract bidding resource centers, and similar activities. Section 627.225(b) encourages SDA staff to work with economic development agencies and to participate on economic development boards and commissions to provide information about JTPA. Such participation may assist SDA staff in making informed decisions about community job training needs and the future direction of local JTPA training. In addition, the prohibition of EGA should not be taken to prohibit ordinary employer outreach and job development activities. Section 141(q) of the Act also includes a prohibition on foreign travel. A number of comments were received requesting that the prohibition in the interim final regulations on using title I, II, or III funds for foreign travel be narrowed. While the Department agrees that allowing foreign travel would be beneficial with the implementation of NAFTA, it was clearly the intent of the Act to restrict the use of funds for economic development and related activities. However, other foreign travel necessary to the conduct of JTPA program may be allowable; therefore, Sec. 627.225(a) is revised to clarify that the prohibition on foreign travel applies to economic development and related activities prohibited by the Act. A commenter was concerned that a prohibition on foreign travel would prohibit staff from Territorial or Freely Associated States recipients, such as American Samoa and Micronesia, from traveling to a State. While the narrower interpretation of prohibited foreign travel described above should resolve this, the Department wants to clarify that, under section 4(22), such recipients are considered States for JTPA purposes and as such, inter-recipient travel would not be considered foreign travel. Several commenters requested clarification about what cost categories the remaining allowable EGA should be charged. To clarify, there are no allowable employment generating activities available under JTPA. The allowable activities discussed in this section are otherwise authorized activities and should be charged to the category of benefit determined with guidance provided by the Governor. Displacement The provisions in the regulations have not been substantially changed from the prior Sec. 629.4 and closely reflect the provisions of section 143(b) of the Act. No comments were made on this section and no changes are made. General Program Requirements Section 627.235 of the interim final rule sets forth some general program requirements for the JTPA program, including specific reference to the provisions of sections 141, 142, and 143 of the Act, reference to the selective service requirements of the Act, continuation of the requirement for timely enrollment, and the new requirements of section 124 of the Act regarding the imposition of State and SDA requirements. A few commenters suggested setting forth extensive procedures regarding the appropriate consultation and concurrence of organized labor. The Department believes that the provisions of the Act, though somewhat revised, are clear and that in most instances SDA's and others have developed procedures for ensuring that labor is consulted, as appropriate, in the development of training programs, and that the affected labor organization concurs in writing with training agreements when there is a collective bargaining agreement, even if it is not impaired. In the years since the inception of JTPA, this has not systematically emerged as an issue. Accordingly, the final rule is not changed. One commenter suggested that the only aliens who should be eligible for JTPA participation are permanent resident aliens. The commenter's reasoning is that to serve other aliens in the United States on a temporary basis would waste scarce JTPA resources. The nondiscrimination provisions of section 167 of the Act set forth the requirements for the participation of individuals who may not be citizens of the United States, including those who are not permanent resident aliens. The final rule is not changed. A commenter suggested that this section be revised to indicate that JTPA is not an entitlement program. The Department believes that the provisions of sections 204(c)(5), 264(d)(6) of the Act and Sec. 628.525 of the interim final rule adequately address this subject by making it clear that neither eligibility nor participation in a JTPA program creates an entitlement to services. The final rule is not changed. Several commenters requested clarification of when the ``45-day clock'' in paragraph (c) begins for purposes of enrollment into JTPA, particularly in light of the new program requirements for targeting and assessment. The Department agrees that such guidance would be helpful and the final rule is changed to indicate that the clock begins with the date of eligibility determination. In connection with the requirements of paragraph (e), some commenters questioned the method for determining whether a requirement which is a rule, regulation, policy, or performance standard is imposed by a State or an SDA. This question is raised particularly when the Act or these regulations may require the Governor or SDA to develop such a requirement. In general, any requirement that is issued beyond the actual text of the Act or these regulations should be identified to the source (State or SDA) that issues it. This guidance applies only to requirements that are not specifically called for (i.e., ``the Governor shall'' or ``the SDA shall'') by the Act or these regulations. Note that, for these purposes, the term SDA as used here includes any entity empowered to act for the SDA including the grant recipient, administrative entity or the private industry council. See also the discussion of Sec. 627.200 above. The final rule is changed to indicate that it applies to State and SDA requirements that are in addition to those of the Act and regulations. On-the-Job Training (OJT) Section 627.240 of the interim final regulations sets out requirements pertaining to the on-the-job training (OJT) activity authorized at sections 204(b), 253(a), 314(d) and in title IV of the Act. The interim final regulations dealt with a few broad areas related to OJT, such as the duration of OJT, OJT payments, contracts for OJT, employer and participant eligibility, as well as a definition of OJT. Many of the commenters observed that the requirements for OJT have become so burdensome as to make OJT no longer a viable JTPA training option. The 1992 Amendments made a number of changes in the requirements for OJT programs which are implemented in these regulations. These changes were aimed at eliminating perceived abuses in OJT programs. While it is true that these new requirements do limit some flexibility in operating OJT programs, the Department does not agree that the new requirements in any way make OJT a less desirable or feasible training option. Indeed, the Department believes that OJT is an important training vehicle for the JTPA program. As demonstrated by The National JTPA Study (December 1994) , OJT provided ``the most consistent positive program impacts on the earnings of adults * * *. Both women and men in this subgroup enjoyed large positive earnings gains that were statistically significant and sustained throughout the 30-month follow-up period.'' The Department believes that entities which deliver OJT will find that these final regulations set forth only those requirements which are necessary to preserve the integrity of the OJT activity and to ensure that it remains an effective training tool. With regard to the definition of OJT in paragraph (a), it is essential to recognize that by using OJT, the JTPA system is purchasing occupational training needed by a participant--often training not elsewhere available, which is provided through employment that will usually continue with the employer after the training is completed. (Note the provisions of paragraph (a)(2) of the final rule regarding placement of OJT participants with other employers). The objective of OJT is not, as suggested by some commenters, to subsidize wages or to reduce an employer's wage costs, but to purchase training and to provide an opportunity for JTPA participants that they might not otherwise have. The contents of paragraph (a) are reorganized into three subordinate paragraphs for better clarity. Language is added in a new paragraph (a)(1) to clarify the definition of OJT by: (1) Making reference to the ISS as part of the process for determining whether an individual should be offered OJT, (2) making specific reference to the OJT agreement, and (3) making specific reference to the principle that the purpose of the OJT arrangement is to purchase training in exchange for reimbursement of the employer's extraordinary costs. By far the most prevalent comment on the interim final rule was that the Department needed to clarify the provisions relating to the limitations on the duration of OJT which were contained in paragraph (b) of the interim final rule. The final rule clarifies the durational rules for OJT. The basic rule is that OJT is to be for the length of time normally needed for training to acquire the skills needed to perform the occupation up to a 6-month length of training. OJT may not exceed that 6 month maximum training period except in cases in which the training is less than full time and the training period will exceed 6 calendar months. In that case, OJT may not exceed 500 hours. To more clearly convey these rules, paragraph (b)(1) is broken into four subordinate paragraphs. Paragraph (b) is also reordered for greater clarity. Six months of training is defined as the amount of time an employee would work on a regular or full-time basis in the occupation for which the OJT contract is written in a 6 month period. If the training period is shorter, the training time is still considered to be the amount of time an employee would work on a regular or full-time basis for that period. Commenters observed that OJT contracts were usually written in terms of hours and wondered how this related to the 6-month limitation. The Department wishes to promote local discretion in developing OJT contracts; therefore, the regulations do not prescribe a particular time category by which SDA's designate the 6-month period, so long as the designation is consistent with the purpose of the statutory limitation. For example, the 6-month training period may be expressed in the number of hours (usually not more than 1,040 working hours), days (180 days), or weeks (26 weeks in 6 months) that an individual would work full-time in a 6-month period. Contracts for OJT which are expressed in any of these ways will be acceptable. In simplest terms, an OJT employee who enters employment on May 1 and works continuously on a full-time basis on the OJT occupation would complete 6 months of training on October 31. Whatever time category the SDA chooses to use to designate the duration of the OJT contract, it should treat any adjustments (such as those provided for in the discussion below) in the same terms, so if there is an adjustment for illness to a contract written in working hours, the adjustment will be made in working hours, not weeks or days. If the OJT period is interrupted for a full day or more by events beyond the OJT trainee's or the employer's control, such as holidays, illness, plant downtime, or strike, such time may be added to the original period. Thus, using the time period of the above example, if an OJT participant is in OJT to learn a machine operation but is ill for 10 working days (approximately 80 working hours, two working weeks, or one-half of a working month) the OJT period may end approximately November 11 through November 15 (instead of October 31) depending on how duration is designated in the contract. (The employer would not be reimbursed for the period in which the participant is not in the OJT occupation.) The objective of this rule is to assure that the participant receives the full period of training (up to 6 months) in the occupation for which the OJT contract is written. This rule, of course, applies only to time that a participant was scheduled to spend in the actual OJT activity. It does not apply to any of the participant's other activities, either in training or outside of their OJT employment. Several commenters expressed the concern that the regulations were too prescriptive in requiring OJT in higher skilled occupations. The language of Sec. 627.240(b)(2) of the interim final rule was merely intended to encourage the use of OJT in higher skilled occupations. Language is added to the redesignated Sec. 627.240(b)(5) to make this clear. Other commenters were concerned that the 6-month limitation was inconsistent with providing training in very high skilled occupations. The Department agrees that there are some higher skilled occupations for which OJT training may not be available because of the 6-month limitation. Nevertheless, that limitation is statutory and cannot be ignored. The Department believes that there are still a number of higher skilled occupations for which OJT is appropriate and that it is consistent with both the nature of OJT and with the intent of the Act that States and SDA's seek to use OJT to provide training in those kinds of occupations. Therefore, the language encouraging OJT in higher skilled occupations remains in the final regulation. The Department wishes to acknowledge several comments by noting that, while it encourages OJT in high-skilled occupations, this is not a strict requirement. Also, while OJT contracts may recognize training times that are longer than 6 months, JTPA reimbursement to the employer is limited to 6 training months. A number of commenters wanted to know how the 500 hour exception to the 6-month limitation works. First of all, it should be repeated that the overall limitation on the duration of OJT is 6 months, not 500 hours. This exception will apply in only a limited number of situations, such as in the cases of individuals who are disabled, who have limited employment availability due to child-care or other needs, or who must work a limited or part-time schedule. The final rule makes it clear that individuals who have not received 500 hours of OJT within 6 months may receive 499 hours of OJT, even if this results in OJT in excess of the 6-month duration. The 499 hour figure is used because it reflects the ``less than 500 hours'' language contained in the Act. For example, if an individual works for 15 hours a week and 6 months later has only been in training for about 360 hours (roughly 60 hours a month for 6 months), the participant could be continued in OJT for up to another 139 hours. The objective is to assure that participants who must work limited or part-time schedules receive up to 499 hours of OJT, in situations when up to 499 hours of training is appropriate. In response to a comment that the interim final rule unnecessarily requires that the regular training duration provided for in a standard reference be reflected in the participant's ISS, the final rule provides that the training time for OJT must be reflected in the ISS only when the training time varies from the average training time for the occupation, using the methodology adopted for computing training time. Thus, when greater or lesser OJT periods than those provided in standard reference works are necessary, the variation must be reflected in the participant's ISS. Several commenters noted that the language in paragraph (c)(1) of the interim final rule regarding employer payments is more restrictive than the provisions in the Act. In response to these comments, the final rule is revised to use the language of the Act, which provides that payments shall not average more than 50 percent of the wages paid by the employer to such participants. This change provides the SDA with some flexibility in structuring OJT contracts with an individual employer for multiple participants. Compliance with the statutory requirement is based upon the total allowable wage base (i.e., regular wages and scheduled increases reflected in the contract) for all JTPA participants. Additionally, in response to comments which questioned the wage basis for OJT reimbursement, the final rule clarifies in paragraph (c)(2)(ii), that OJT reimbursement may be based upon regular pay and scheduled increases, and not, as provided in paragraph (c)(2)(iii), on overtime, shift differential or other premium pay. The Department believes that regular pay and regular scheduled pay increases reflect the wages specified in the Act and that overtime and shift differential do not imply a greater level of training cost to the employer. Finally, to clarify a longstanding issue in regard to OJT, paragraph (c)(2)(iv) indicates that payments are not to be based on time when the participant is not in training such as on holidays. Such time may also be excluded from the calculation of the duration of OJT. Section 141(g)(1) of the Act provides that payments to employers ``are deemed to be'' in compensation for the extraordinary costs associated with training JTPA participants. Section 141(g)(3)(A) of the Act provides that each contract ``specify the types and duration of on- the-job training and other services to be provided in sufficient detail to allow for a fair analysis of the reasonableness of proposed costs * * *.'' This latter requirement was reflected in the interim final rule. Some commenters raised a question about the apparent conflict between these provisions, and the Department wishes to clarify this area. The final rule prohibits the imposition of a requirement on employers to document extraordinary costs. The Department believes that payments to employers should not produce a recordkeeping burden on employers by requiring the documentation of extraordinary costs that would unnecessarily make OJT a less desirable training option. The purpose of Sec. 627.240(d)(1) of the interim final rule was to reflect the requirements of section 141(g)(3) of the Act. It was not intended to require specific documentation of an employer's extraordinary costs. The Department views the final rule as requiring no more recordkeeping of an employer than is already required of the employer for other purposes, (e.g., an employer would have to maintain payroll records to demonstrate that a participant worked the number of hours that were billed, but payroll records are already required to be kept for a variety of other federal and state purposes). Rather, the Department believes that the intent of this requirement is that the contract accurately reflect the basis for the contract costs, including the number of participants, occupations, wage rates, training content and the duration of training, provisions for adjustment (such as scheduled wage increases), and the basis for any other payments (such as separately scheduled classroom training as described in paragraph (d)(4) of this section). The final rule is revised to clarify this requirement by removing the confusing language regarding the analysis of the reasonableness of costs and by reflecting the minimum criteria that will be necessary to make the reasonableness analysis. Several commenters thought that the requirements in paragraph (d)(2) that the OJT agreement provide information on the training by skill area or task was too prescriptive. These requirements have been removed in the final rule. In addition, in response to a comment seeking clarification of the meaning of ``types'' of OJT, this language is removed in the final rule to eliminate confusion. The idea behind this language was simply to capture other kinds of training, such as classroom training, that will be provided in the course of the OJT training period. The more specific language in the final rule will capture the same information. Finally, this discussion does not affect the requirements for broker contracts in which there is to be an adequate reflection of the work performed by the broker. Section 627.240(f) of the final rule provides that JTPA participants must be assessed and that OJT must be determined in the ISS to be a suitable training vehicle. This provision is also applicable if the participant is referred to JTPA by an employer. If the participant is determined not to be suitable for OJT or for the OJT slot available from the specific employer, the participant is not eligible for OJT with that employer. A commenter sought clarification of Sec. 627.240(f)(3) regarding OJT with a participant's previous employer, particularly in connection with ``upgrading''. This paragraph is intended to address a perceived abuse of the OJT activity in which the JTPA program provides OJT assistance to an employer to ``train'' a previous employee who had been laid off or separated when the proposed participant already has the skills required for the job. The training is in the same occupation for virtually or nearly the same work. In view of the limited availability of JTPA funds and services, individuals previously employed by or recently hired by the employer prior to referral to JTPA should not normally be enrolled in JTPA-funded OJT. In order to conduct skill ``upgrading'', which is allowable under section 204(b)(1)(L) of the Act, and retraining, conditions for eligibility and participation must be met and there must be a demonstrable difference between the job and skill requirements of the upgraded job into which the participant is being trained and those of the current or prior job. The prohibition against using OJT for ``upgrading'' with the participant's employer is maintained in the final rule because the Department believes that the JTPA program should not unnecessarily subsidize an employer's normal workforce training expenses. Paragraph (f)(3) is revised to eliminate confusion about whether the rule was intended to address the participant's previous employer or the participant's current employer. The final rule makes it clear that the prohibition applies to both and that it applies only to OJT. Many commenters questioned the specific provisions of Sec. 627.240(g)(1) of the interim final regulations which require that an OJT ``employer who had two or more previous OJT contracts'' and exhibited a pattern of failing to provide long term employment would be ineligible for other OJT contracts. They pointed out that it is not possible to establish a ``pattern'' with two cases. In response to these comments, the final rule is revised to reflect Congress' intent that employers who fail to offer continued employment, unless there is an acceptable reason, should not receive additional OJT contracts and that the State must issue procedures to implement this requirement. The JTPA program should not be used to underwrite an employer's labor turnover. The Department points out that the provision in the interim final rule specified two contracts because, by definition, to have a pattern there must be more than one. The Department accepts that there may be instances in which a policy may use as few as two contracts, or more than two, to establish a pattern and will accept reasonable interpretations of what constitutes a pattern. The Department chooses not to specify what constitutes a pattern and leaves that decision to the State. In the final rule, Sec. 627.240(g) is redesignated Sec. 627.240(h). A number of commenters objected to the provisions in the interim final rule that required on-site monitoring of each OJT contract and on-site monitoring by an OJT brokering contractor before making payments. The Department acknowledges these concerns and revises these monitoring requirements. The final rule removes the prescriptive requirements for monitoring each contract and specifies that recipients and subrecipients are required to conduct periodic on-site monitoring of OJT employers. The requirements pertaining to the areas to be verified through monitoring remain the same. In addition, the monitoring requirements for brokering OJT contractors remain the same since they are requirements of the Act. In response to several comments which argued in favor of providing OJT through employment agencies, the final rule also provides a clarification of the conditions under which employment agencies and employee leasing agencies may be eligible for OJT agreements. The purpose of OJT is to provide training through an employer, not to subsidize wages or reduce agency costs. Thus, the final rule indicates that OJT agreements with employment and employee leasing agencies are to specify the employer that provides the training and the entity to be reimbursed the costs of training. Note that the word ``temporary'' is deleted from the rule since the term ``employment agency'' includes agencies that may arrange employment on less than a full-time basis. Work Experience The provisions of Sec. 627.245 of the interim final rule set forth requirements pertaining to work experience. The work experience activity is related to other activities in which there is work-based training, such as entry employment experience and limited internships, but the activities may differ due to the circumstances of the work experience assignment. Such circumstances could include whether the participant is an adult or a youth, whether the host employer is public, private non-profit, or private for-profit, whether an employer- employee relationship is established, and whether there is an expectation of continued employment, or whether the activity is a short-term training opportunity. For example, entry employment experience and limited internship in the private sector are not allowable activities for adults. ``Work experience'' is available only in the public or private non-profit sector. The Department acknowledges the relationship among these activities but chooses not to provide specific definitions beyond that for work experience so as not to arbitrarily limit development of types of work-based training activities. The Department wishes to encourage a variety of approaches to these activities. For that reason, Sec. 627.245(a) is revised by deleting the reference to limited internships and entry employment experience. The definition of work experience clarifies that work experience is primarily a training, not an employment, assignment. The words ``employing agency'' are removed from the interim final rule to address the concern that work experience automatically establishes an employment relationship. A few commenters noted that the provisions of paragraph (b) of the interim final rule that dealt with the types of individuals for which work experience would be ``suitable'' did not adequately reflect the circumstances under which it would be appropriate to use work experience. The final rule is revised to delete this characterization of the individuals for whom work experience is appropriate. The paragraph now only states how work experience is to be designed. In response to comments criticizing the limitations on the duration of work experience, entry employment experience, and limited internships, the Department has decided to remove the limitations. The Department believes that this change will permit the development of activities that may better meet the individual needs of participants and the final rule indicates that this should be reflected in the ISS. The Department expects that discrete periods of work experience participation will be limited in duration; although, in response to comments and in recognition of successful program models, the Department acknowledges that an individual may benefit from participation in multiple work experience opportunities. Many commenters asked for removal or revision of the provision that work experience is suitable for individuals who have been ``out of the labor force for an extended period of time * * *.'' They pointed out that this is difficult to interpret, may vary depending on the previous experience and other characteristics of the participant, and is the kind of provision that could unnecessarily lead to varying interpretations and audit exceptions. The final regulations provide only that work experience should promote the development of good work habits and basic work skills. In addition, it is the Department's belief that the work experience activity provides an excellent opportunity to provide non-traditional employment opportunities, in a variety of settings, for women and youth. Several commenters suggested that the prohibition of work experience in title III be removed or revised. Since title III dislocated workers generally have, by definition, previous employment under which work habits and basic work skills are developed, the provision in the interim final rule is not revised. Finally, a few commenters asked for clarification of the requirement that work experience be combined with basic or occupational skills training--particularly in light of one of the examples provided in Sec. 628.535. This is addressed in the discussion of Sec. 628.535, but by way of general guidance, the prohibition may not be addressed by combining work experience with any of the other proscribed stand-alone activities such as job search or job club. Subpart C--Payments, Supportive Services, Benefits, and Working Conditions A number of comments were received on Subpart C of the interim final rule, Payments, Benefits and Working Conditions. The Department has rethought its positions in response to these comments and the final rule contains a considerable number of changes. Subpart C is revised, retitled, and renumbered. The following discussion is intended to clarify the Department's position on payments and supportive services and identifies the changes from the interim final to the final regulations. In keeping with the Amendments' emphasis on targeting services to the hardest-to-serve and the need for longer-term interventions, these regulations clarify the widened array of payments, supportive services, benefits and working conditions available or required under the Amendments. The Amendments provide for comprehensive supportive services and for their allocation to the training-related and supportive service cost category. The regulations implement these provisions and also provide for clarification of the various types of payments for title II programs. Some payments can be allocated to the training-related and supportive services cost category while others can be allocated to the training cost category. The treatment of specific expenditures is provided for at Sec. 627.440 of these regulations. Service Strategy Overview A number of commenters expressed confusion regarding appropriate documentation procedures and requested clarification on the requirements and the mechanisms for providing payments and supportive services to participants. Several commenters suggested that while the legislation clearly intended to increase supportive services and payments, the requirements in the interim final regulations would probably limit their usage. In response, the final rule is revised to minimize the amount of documentation necessary to establish an individual's need for supportive services and payments while maintaining the necessary safeguards to prevent misuse of program funds. The final rule is revised to permit a simplified service strategy. For example, under title II, it is intended that a participant, based upon the needs identified in the objective assessment and recorded in the ISS, will be provided or the program will arrange for the necessary payments and supportive services to enable the participant to meet the goals set out in the ISS. The necessary payments and supportive services may be provided or paid for in different ways. For example, participants may receive a payment from a training activity, such as an employer-paid wage for OJT, or work-based training payment for work experience which may be counted toward meeting their needs in addition to other supportive services like child care. Participants may also receive supportive services, such as financial assistance under title II that will provide for the participant's general welfare. If the participant has additional specific needs not met by the supportive services, including a need for financial assistance, title II further provides for an individually determined needs-based payment may be made to the participant. The final regulation provides for significantly different documentation requirements than did the interim final rule. An individual determination of need, over and above what normally occurs in the objective assessment and ISS, is not required to justify the provision of any supportive service. When a participant is given money rather than a voucher for a supportive service, SDA's and SSG's need not ensure that the payment is exactly equal to the participant's expenditure. The policy of the SDA or SSG may allow for a fixed reimbursement or a schedule of different reimbursement amounts for a type of service, however, the policy must provide the rationale for such amounts. Under title II, if the objective assessment and the ISS indicate that a needs-based payment is also necessary, then that determination will be sufficient to make the payment. A payment may then be made in accordance with a locally developed policy and recorded in the ISS along with the other services provided. Changes to reflect this strategy are made throughout Secs. 627.305 and 627.310 of the final rule. Shifting to more specific recommendations, in response to comments that the supportive services section be separated from the benefits and working conditions section, the supportive services regulations are now found under Sec. 627.310, while benefits and working conditions are now addressed under a new Sec. 627.315. Section 627.300 and the title of subpart C are also amended to clarify these changes. A comment was received regarding the ability to ensure that services were provided equitably. This concern is heightened with the reduction in documentation required when providing supportive services and payments. Therefore, a new provision is added at Secs. 627.305(a)(3) and 627.310(d) requiring that SDA's ensure, to the extent possible, that similarly situated participants receive similar payments or supportive services, as appropriate. Payments A few commenters requested clarification on when payments shall count towards the determination of income for other programs that serve JTPA participants. To clarify, language from section 142(b) of the Act is now included in Sec. 627.305(a)(4). Any payment under JTPA, broadly defined for this section as any JTPA funds received by a participant except OJT wages (since OJT wages are paid by an employer), shall not be counted for purposes of determining income for other Federal or federally assisted programs, except as provided under the Social Security Act. For example, the Department of Housing and Urban Development has issued a policy notice (PIH 92-48, October 16, 1992) which states, ``[A]ll payments received under programs funded in whole or part under the Job Training Partnership Act are excluded from Annual Income'' for purposes of Public and Indian Housing. The major exception to disregarding JTPA income is under title IV-A of the Social Security Act which governs Aid to Families with Dependent Children (AFDC). The AFDC regulations do allow States flexibility in allowing a dependent child's JTPA income to be disregarded as income for AFDC purposes (45 CFR 233.20(a)(11)), but generally, any JTPA payment to an adult AFDC recipient, except to cover the cost of child care, transportation, work-related expenses or work-related services, is counted as earned income. States are encouraged to work with their welfare departments in developing State policies specifically for JTPA. SDA's also are encouraged to coordinate with their local AFDC agency to determine local policies on income disregards and to consider co-enrollment with JOBS, where appropriate, so that the participant may be aware of all available services. Section 627.305(a) is revised to include a new paragraph (a)(6) which authorizes SDA's to set fixed levels for payments. Section 627.305(b) is amended by replacing the words ``formula or procedure'' with the word ``policy''. These changes permit SDA's to make needs- related payments based on a payment schedule without any other documentation than that used to develop or support the schedule. Only in cases in which a participant's needs exceed the payments available under the payment schedule is any other documentation or justification necessary. The change in the wording of Sec. 627.305(b) also is intended to make it clear that there are no extraordinary documentation requirements to support the SDA's system for payments above its payment schedule. All that is needed is a reasonable policy based on the circumstances of the local community. Needs-based payments. Needs-based payments may be made in circumstances where fixed or scheduled supportive services fail to meet the needs of an individual to participate. For example, if a standard transportation reimbursement is $2 a day for participants, but a particular participant must spend $10 a day to commute to a training program, this need would be identified in the objective assessment and recorded in the ISS. Then a needs-based payment of $8 could be made to meet that participant's transportation needs. No additional documentation other than the transportation need identified in the objective assessment and recorded in the ISS is required for the initial $2. However, a specific notation of the additional need would be identified in the objective assessment and recorded in the ISS for the $8 needs-based payment. While this payment should be the amount ``necessary for participation,'' it also may be a scheduled or fixed amount (see the discussion of supportive services, below, for an additional discussion on ``scheduled'' or ``fixed amount''), as provided for in the SDA policy. Incentive and bonus payments. A number of comments were received requesting that the ability to use incentive and bonus payments not be limited to title II-C. Several commenters indicated they would prefer to use incentive and bonus payments rather than a wage or training payment to encourage participant performance. Since it is important to have tools to reward participant accomplishment, and incentive and bonus payments are not prohibited in those titles, the final rule is amended to clarify that incentive and bonus payments also may be made to participants under titles II-A and II-B. Approximately equal numbers of comments were received requesting that Sec. 627.305(c) require that incentive and bonus payments be based upon attendance and performance as there were comments requesting attendance or performance. Several commenters thought that teaching life skills, such as good attendance, is an appropriate function of JTPA and should be rewardable. Because section 264(c)(2)(D) of the Act uses the word ``and'', the final regulation is revised to reflect the statutory language. Payments are to be reasonable and commensurate with the behavior being rewarded. The policy for such a payment is to be included in the SDA job training plan, which is approved by the Governor. The provisions of paragraph (c) are amended in the final rule by removing paragraphs (c) (2) through (4), to reflect the simplification of this topic. Training payments. To permit longer term participation, Sec. 627.305(d) provides for training payments to be paid for certain title II activities, such as work experience and limited internships. Section 627.305(e) provides for training payments for participation in other activities, such as classroom training, if the concurrent work- related activity is for more than 50 percent of the training time. Several commenters indicated that the work-based training requirement for adults in classroom training combined with work experience at interim final Sec. 627.305(e)(2) may not always be appropriate and was redundant with regard to the requirements of section 204(c)(1) of the Act on workplace context and integration. Therefore, the Department encourages SDA's to link classroom training to the work-based training activity, but the condition for making such payments to adults that the classroom training have a workplace context is removed. The term ``wage'' is replaced with ``training payment'' or ``training payment for combined activity'' to reflect the rare circumstances when a participant may not be in an employee-employer relationship as defined by the Internal Revenue Service, and also to make clear that the SDA may not be required to make a payment equal to the minimum wage. The minimum wage requirement still exists where participants are receiving wages as outlined in section 142 of the Act. The Department believes that payments in most work-based training activities should be equal to or exceed the minimum wage to better approximate a work setting. With the exclusion of on-the-job training and disaster relief employment, this change from ``wage'' to ``payment'' runs through the entire payments section. Supportive Services. Supportive services are often critical in serving those most in need. The use of supportive services is encouraged to enable the hard-to-serve population to participate in longer term interventions. The objective assessment and, under title II, the ISS, is the basis for determination of need for a particular supportive service. The major change in Sec. 627.310 is that further documentation of need is not required. Supportive services may be provided in-kind, through cash assistance, or by arrangement with another human service agency when necessary to enable an individual eligible for JTPA training, but who cannot afford to pay for such services, to participate in JTPA-assisted programs. Several commenters indicated that the administrative determination and documentation of participants' actual cost, for example, of lunch or transportation, was unduly burdensome. Given the generally narrow variance in cost for those services, most stated that a single dollar amount, or a schedule of dollar amounts, would be equally prudent. The Department agrees that such a method is acceptable and should be outlined in the supportive services policy of the SDA or SSG. To reduce its administrative burden, an SDA or SSG may set fixed levels of benefit for particular supportive services; e.g., an SDA or SSG may reimburse participants who incurred transportation expenses with identical payments, regardless of actual cost to an individual participant, even though some participants may receive a payment above their actual cost and others may be underpaid. Section 627.310(a) sets forth the parameters for the provision of supportive services. The preamble to the interim final rule noted that ``limited supportive services'' were permitted for applicants. A few commenters requested that this be stated in the regulations. This provision can now be found at Sec. 627.310(b). A comment was also received requesting that the ``limited'' in limited supportive services be defined. The Department declines to define ``limited''; rather, the final rule is revised to indicate that such payments may be made to provide the applicant with an opportunity to complete the application process. The Department expects the restriction on the training-related supportive services cost category to act as a natural control on SDA's and SSG's while still permitting flexibility for local level decisions. Section 627.310(g)(1) provides that supportive services may include financial assistance under title II. In order to ensure a comprehensive system of supportive services and payments, there have been changes to the definition and allowable usage of financial assistance. Financial assistance is intended for the purpose of general support typical of stipends and allowances. A number of commenters indicated that requiring additional documentation in order to receive any type of financial support was redundant, particularly with JTPA's hard-to-serve population. The Department agrees that participants pass through significant income eligibility tests upon entering the program and that additional eligibility checks are unnecessary, inefficient, and discourage the provision of necessary services. Therefore, the final regulations state, at Sec. 627.310(g)(2), that financial assistance may be deemed to be necessary for eligible participants and, as a supportive service, may be a fixed payment or based upon a schedule of payments. The SDA shall include financial assistance in its policy on supportive services. Section 627.305(g) of the interim final rule dealing with needs- related payments is redesignated Sec. 627.310(h) to reflect the similarity of needs-related payments under title III with financial assistance under title II. However, needs-related payments are the only form of general ``cash'' assistance (excluding cash provided as a reimbursement for transportation expenses, etc.) allowable under title III. A few commenters disagreed with the statement in the preamble to the interim final rule that supportive services could not be based on a group characteristic, such as welfare. In light of the other changes made in the final rule, this statement is no longer applicable. In developing the policy called for in the final rule, an SDA may use a group characteristic as a basis for determining supportive service needs. For example, under title II, a financial assistance payment to a participant may be fixed, based upon an income schedule or group characteristic (such as welfare recipient) identified in the objective assessment and reported in the ISS, or may be determined in accordance with another method determined by the SDA. The regulations reflect the Department's intent that financial assistance be treated as a supportive service for the general welfare of the participant. This assistance is to be based upon the financial needs of an eligible individual to permit the individual to participate in training. With this basic premise, the Department intends that financial assistance payments, in addition to not being considered as income in accordance with section 142(b) of the Act, should not be subject to income and employment taxes. However, all such decisions need to be made on a case-by-case basis. Benefits and Working Conditions. The provision of Sec. 627.310(b)- (d) of the interim final rule are redesignated and revised as a new Sec. 627.315. One commenter suggested that the regulations should not require participants to work for employers that are violating labor laws. In response, Sec. 627.315(a) is amended to reflect this concern for compliance with applicable labor laws. In addressing a number of other comments, redesignated Sec. 627.315(b) (Sec. 627.310(b) of the interim final rule) is amended to clarify that if a State workers' compensation law is not applicable, recipients and subrecipients shall secure insurance coverage for injuries suffered by participants in all JTPA work-related activities. [click on ''Back'' to return to Index; then click on ''Continuation of discussion of comments (II)'' to continue]