[Code of Federal Regulations]
[Title 20, Volume 3]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 20CFR652.8]

[Page 422-426]
 
                      TITLE 20--EMPLOYEES' BENEFITS
 
 CHAPTER V--EMPLOYMENT AND TRAINING ADMINISTRATION, DEPARTMENT OF LABOR
 
PART 652--ESTABLISHMENT AND FUNCTIONING OF STATE EMPLOYMENT SERVICES--Table of Contents
 
                Subpart A--Employment Service Operations
 
Sec. 652.8  Administrative provisions.

    (a) Administrative Requirements. The Employment Security Manual 
shall not be applicable to funds appropriated under the Wagner-Peyser 
Act. Except as provided for in paragraph (f) of this

[[Page 423]]

section, administrative requirements and cost principles applicable to 
grants under this part 652 are as specified in 29 CFR part 97, Uniform 
Administrative Requirements for Grants and Cooperative Agreements to 
State and Local Governments, and OMB Circular A-87 (Revised).
    (b) Management systems, reporting and recordkeeping. (1) The State 
shall ensure that financial systems provide fiscal control and 
accounting procedures sufficient to permit preparation of required 
reports, and the tracing of funds to a level of expenditure adequate to 
establish that funds have not been expended in violation of the 
restrictions on the use of such funds (section 10(a)).
    (2) The financial management system and the program information 
system shall provide federally required records and reports that are 
uniform in definition, accessible to authorized Federal and State staff, 
and verifiable for monitoring, reporting, audit and evaluation purposes 
(section 10(c)).
    (c) Reports Required. (1) Each State shall make reports pursuant to 
instructions issued by the Secretary and in such format as the Secretary 
shall prescribe.
    (2) The Secretary is authorized to monitor and investigate pursuant 
to section 10 of the Act.
    (d) Special Administrative and Cost Provisions. (1) Neither the 
Department nor the State is a guarantor of the accuracy or truthfulness 
of information obtained from employers or applicants in the process of 
operating a labor exchange activity.
    (2) Prior approval authority, as described in various sections of 29 
CFR part 97, Uniform Administrative Requirements for Grants and 
Cooperative Agreements to State and Local Governments, and OMB Circular 
A-87 (Revised), is delegated to the State except that the Secretary 
reserves the right to require transfer of title on nonexpendable 
Automated Data Processing Equipment (ADPE), in accordance with 
provisions contained in 29 CFR 97.32(g). The Secretary reserves the 
right to exercise prior approval authority in other areas, after 
providing advance notice to the State.
    (3) Application for financial assistance and modification 
requirements shall be as specified under this part.
    (4) Cost of promotional and informational activities consistent with 
the provisions of the Act, describing services offered by employment 
security agencies, job openings, labor market information, and similar 
items are allowable.
    (5) Each State shall retain basic documents for the minimum period 
specified below:
    (i) Work Application: One year.
    (ii) Job Order: One Year.
    (6) Costs of employer contributions and expenses incurred for State 
agency fringe benefit plans that do not meet the requirements in OMB 
Circular A-87 (Revised) are allowable, provided that:
    (i) For retirement plans, on behalf of individuals employed before 
the effective date of this part, the plan is authorized by State law and 
previously approved by the Secretary; the plan is insured by a private 
insurance carrier which is licensed to operate this type of plan; and 
any dividends or similar credits due to participation in the plan are 
credited against the next premium falling due under the contract;
    (ii) For retirement plans on behalf of individuals employed after 
the effective date of this part, and for fringe benefit plans other than 
retirement, the Secretary grants a time extension to cover an interim 
period if State legislative action is required for such employees to be 
covered by plans which meet the requirements of OMB Circular A-87 
(Revised). During this interim period, State agency employees may be 
enrolled in plans open to State agency employees only. No such extension 
may continue beyond the 60th day following the completion of the next 
full session of the State legislature which begins after the effective 
date of this part;
    (iii) For fringe benefit plans other than retirement, the Secretary 
grants a time extension which may continue until such time as they are 
comparable in cost to those fringe benefit plans available to other 
similarly employed employees of the State on the condition that there 
are no benefit improvements. The Secretary may grant this time extension 
if the State agency can

[[Page 424]]

demonstrate that the extension is necessary to prevent loss of benefits 
to current States agency employees, retireees and/or their fringe 
benefit plan beneficiaries, or that it is necessary to avoid 
unreasonable expenditures on behalf of the employee or employer to 
maintain such fringe benefits for current employees and retirees. At 
such time as the cost of these fringe benefit plans becomes equitable 
with those available to other similarly employed State employees, the 
time extension will cease and the requirements of OMB Circular A-87 
(Revised) will apply;
    (iv) Requests for time extensions under this section will include an 
opinion of the State Attorney General, that either legislative action is 
required to accomplish compliance with OMB Circular A-87 (Revised) or, 
for (d)(6)(iii) of this section that such compliance would result in 
either loss of current benefits to State agency employees and retirees 
or unreasonable expenditures to maintain these benefits. Such requests 
will be filed with the Secretary no later than 30 days after the 
effective date of this part; and
    (v) Time extensions granted relative to (d)(6)(iii) of this section 
require a signed statement by the State agency Administrator, that no 
improvements have been made to fringe benefits under the extension and 
that the plan(s) is (are) not consistent with those available to other 
similarly employed State employees, for each year of the extension. 
Documentation supporting the affidavit shall be maintained for audit 
purposes.
    (7) Payments from the State's Wagner-Peyser allotment made into a 
State's account in the Unemployment Trust Fund for the purpose of 
reducing charges against Reed Act funds (section 903(c) of the Social 
Security Act, as amended (42 U.S.C. 1103(c)) are allowable costs, 
provided that:
    (i) The charges against Reed Act funds were for amounts 
appropriated, obligated, and expended for the acquisition of automatic 
data processing installations or for the acquisition or major renovation 
of State owned office building; and
    (ii) With respect to each acquisition of improvement of property 
pursuant to paragraph (d)(7)(i) of this section, the payments are 
accounted for in the State's records as credits against equivalent 
amounts of Reed Act Funds used for administrative expenditures.
    (e) Disclosure of Information. (1) The State shall assure the proper 
disclosure of information pursuant to section 3(b) of the Act.
    (2) The information specified in section 3(b) and other sections of 
the Act, shall also be provided to officers or any employee of the 
Federal Government of a State government lawfully charged with 
administration of unemployment compensation laws, employment service 
activities under the Act or other related legislation, but only for 
purposes reasonably necessary for the proper administration of such 
laws.
    (f) Audits, (1) At least once every 2 years, the State shall prepare 
or have prepared an independent financial and compliance audit covering 
each full program year not covered in the previous audit, except that 
funds expended pursuant to section 7(b) of the Act shall be audited 
annually.
    (2) The Comptroller General and the Inspector General of the 
Department shall have the authority to conduct audits, evaluations or 
investigations necessary to meet their responsibilities under sections 
9(b)(1) and 9(b)(2), respectively, of the Act.
    (3) The audit, conducted pursuant to paragraph (f)(1) or (f)(2) of 
this section, shall be submitted to the Secretary who shall make an 
initial determination. Such determinations shall be based on the 
requirements of the Act, regulations, and State plan.
    (i) The initial determination shall identify the audit findings, 
state the Secretary's proposed determination of the allowability of 
questioned costs and activities, and provide for informal resolution of 
those matters in controversy contained in the initial determination.
    (ii) The Secretary shall not impose sanctions and corrective actions 
without first providing the State with an opportunity to present 
documentation or arguments to resolve informally those matters in 
controversy contained in the Secretary's initial determination. The 
informal resolution period shall be at least 60 days from issuance

[[Page 425]]

of the initial determination and no more that 170 days from the receipt 
by the Secretary of the final approved audit report. If the matters are 
resolved informally, the Secretary shall issue a final determination 
pursuant to paragraph (f)(3)(iii) of this section which notifies the 
parties in writing of the nature of the resolution and may close the 
file.
    (iii) If the matter is not resolved informally, the Secretary shall 
provide each party with a final written determination by certified mail, 
return receipt requested. In the case of audits, the final determination 
shall be issued not later than 180 days after the receipt by the 
Secretary of the final approved audit report. The final determination 
shall:
    (A) Indicate that efforts to resolve informally matters contained in 
the initial determination have been unsuccessful;
    (B) List those matters upon which the parties continue to disagree;
    (C) List any modifications to the factual findings and conclusions 
set forth in the initial determination;
    (D) Establish a debt if appropriate;
    (E) Determine liability, method of restitution of funds and 
sanctions;
    (F) Offer an opportunity for a hearing in accordance with 20 CFR 
658.707 through 658.711 in the case of a final determination imposing a 
sanction or corrective action; and
    (G) Constitute final agency action unless a hearing is requested.
    (g) Sanctions for Violation of the Act. (1) The Secretary may impose 
appropriate sanctions and corrective actions for violation of the Act, 
regulations, or State plan, including the following:
    (i) Requiring repayment, for debts owed the Government under the 
grant, from non-Federal funds;
    (ii) Offsetting debts arising from the misexpenditure of grant 
funds, against amounts to which the State is or may be entitled under 
the Act, provided that debts arising from gross negligence or willful 
misuse of funds shall not be offset against future grants. When the 
Secretary reduces amounts allotted to the State by the amount of the 
misexpenditure, the debt shall be fully satisfied;
    (iii) Determining the amount of Federal cash maintained by the State 
or a subrecipient in excess of reasonable grant needs, establishing a 
debt for the amount of such excessive cash, and charging interest on 
that debt;
    (iv) Imposing other appropriate sanctions or corrective actions, 
except where specifically prohibited by the Act or regulations.
    (2) To impose a sanction or corrective action, the Secretary shall 
utilize the initial and final determination procedures outlined in 
(f)(3) of this section.
    (h) Other violations. Violations or alleged violations of the Act, 
regulations, or grant terms and conditions except those pertaining to 
audits or discrimination shall be determined and handled in accordance 
with 20 CFR part 658, subpart H.
    (i) Fraud and abuse. Any persons having knowledge of fraud, criminal 
activity or other abuse shall report such information directly and 
immediately to the Secretary. Similarly, all complaints involving such 
matters should also be reported to the Secretary directly and 
immediately.
    (j) Nondiscrimination and Affirmative Action Requirements. States 
shall:
    (1) Assure that no individual be excluded from participation in, 
denied the benefits of, subjected to discrimination under, or denied 
employment in the administration or in connection with any services or 
activities authorized under the Act in violation of any applicable 
nondiscrimination law, including laws prohibiting discrimination on the 
basis of age, race, sex, color, religion, national origin, disability, 
political affiliation or belief. All complaints alleging discrimination 
shall be filed and processed according to the procedures in the 
applicable DOL nondiscrimination regulations.
    (2) Assure that discriminatory job orders will not be accepted, 
except where the stated requirement is a bona fide occupational 
qualification (BFOQ). See, generally, 42 U.S.C. 2000(e)-2(e), 29 CFR 
parts 1604, 1606, 1625.
    (3) Assure that employers' valid affirmative action requests will be 
accepted and a significant number of qualified applicants from the 
target group(s) will be included to enable the

[[Page 426]]

employer to meet its affirmative action obligations.
    (4) Assure that employment testing programs will comply with 41 CFR 
part 60-3 and 29 CFR part 32 and 29 CFR 1627.3(b)(iv).
    (5) Nondiscrimination and equal opportunity requirements and 
procedures, including complaint processing and compliance reviews, will 
be governed by the applicable DOL nondiscrimination regulations.

[48 FR 50665, Nov. 2, 1983, as amended at 64 FR 18762, Apr. 15, 1999; 65 
FR 49462, Aug. 11, 2000]